Originating from modest beginning, Allied Bank has

transformed into a dynamic and innovative organization,

overcoming a multitude of challenges with resolve and
fortitude over its illustrious history. The Year 2017 marked a
historic event for the Bank, as the entire ABL team celebrated
the successful completion of providing 75 years of banking
services to the nation, and being recognized as ‘Bank of
the Year – Pakistan 2017’ by the prestigious ‘The Banker
Magazine, UK’. With the initiation of digital transformation that
will assist in shaping the future for decades to come, Allied
Bank is proud to celebrate its evolution for a new age.
 Allied Bank Limited 01

AWARDS AND
ACCOLADES

Bank of the Year 2017 (Pakistan) – The Banker Magazine (UK)

A B C D E F G

A Top Issuer of PayPak Cards - 1 Link

B Best Corporate and Investment Bank (Pakistan) - Asia Money Magazine
C Corporate Excellence Award - Management Association of Pakistan
D Best Emerging Bank in Islamic Finance - Global Forum on Islamic Finance
E 2nd Position Best Corporate Report Awards - ICAP & ICMAP
F Best Corporate and Institutional Bank (Domestic, Pakistan) & Best Loan Adviser - The Asset Magazine
G Ranked Amongst Top 25 Companies - Pakistan Stock Exchange
02 Annual Report 2017

1942 Establishment of Australasia Bank at 1991 26% shares of ABP disinvested

Lahore with Rs. 0.12 million Share by the Government.
Capital Management, control and

1947
administration transferred
Partition of India and Pakistan to employees backed Allied
Management Group (AMG)

1993 51% shareholding by AMG

Recapitalization of Allied Bank

1971
of Pakistan Limited and handing
Separation of East
over of Management to Ibrahim
Pakistan (now
Group
Bangladesh) resulted
in loss of 51 branches

1974 Nationalized and

renamed as Allied
Bank of Pakistan
Limited (ABP) with
a Network of 353
branches
1940S

1970S

1990S

2004
YEARS
1950-60S

1980S

2000-03

2005
JOURNEY

2000 State Bank of Organizational

Pakistan took over the re-structuring and
management of ABP re-branding to “Allied

2003
Bank Limited”
State Bank of
Pakistan initiated Listing on all
restructuring of ABP the three Stock
Exchanges of
Pakistan
ABP started
Merger of Ibrahim
operations in United
Leasing Limited with
Kingdom and opened
Allied Bank Limited
4 branches
First Dividend payout
after recapitalization
at Rs. 2.5/share
Bank continued
to grow with new
branches being opened
in both West and East
Pakistan

Background: Head Office of Australasia Bank; Aiwan Shah Chiragh Building, Lahore
 Allied Bank Limited 03

Ranked amongst top

Implemented Oracle Implemented in-house
3 Primary Dealers by
Financials Enterprise work-flow based Loan
State Bank of Pakistan
General Ledger Origination System
License to establish
Merger of First Allied Upgradation of Allied
representative office in
Bank Modaraba with Direct – Internet
Beijing, China
Allied Bank Limited Banking
Achieved milestone Partnership with
Agreement with Launch of Pay Anyone of opening 1,000th Mobilink to promote
Temenos for domestic remittance branch during the financial inclusion
acquisition of “T-24” service year through enabling of
banking solution
domestic remittance
Launched Islamic
Introduced internet services
Banking
banking “Allied Direct”
Achieved milestone
Successful
of Rs. 1,000 billion in
migration of all
terms of Total Assets
branches to state
Established branch Start of of the art Temenos Pioneer launch of
in Export Processing Operations of T24 core banking Pakistan’s first PayPak
Zone-Karachi “Wholesale software Debit Card
Banking Branch – First Bank in the
AMC launched its first
Bahrain” industry to have EMV
Open Ended Mutual
Fund, ABL Income Establishment of capability on both
Fund Islamic Banking acceptance and
Group issuance of chip based
debit cards
2006

2008

2010

2012

2014

2016
2007

2009

2011

2013

2015

2017

Rebranded personal
internet banking
platform to ‘myABL’
Dedicated
Upgradation of from ‘Allied Direct’
“Customer Care”
Oracle Financials
& “Complaint Launched Allied
Enterprise (Version
Management” Units EZCash prepaid debit
R-12)
established card
Implementation of Achieved Primary
Installation of five Dealer status Launch of “Business
Oracle Hyperion
Cash Deposits for dealing in Internet Banking”
Planning (EPM/BI)
Machine government for institutional and
Launched “Allied commercial customers
securities from
SMS Banking”
State Bank of Relaunched
Services
Pakistan Bancassurance
Established Asset Established Corporate motto
Management representative Achieved Launched Allied Car
envisioned
Company Limited office in Dubai, milestone of Finance
(AMC) - Wholly owned UAE surpassing
1,000 ATMs with Established
subsidiary
License from industry leading representative office in
Launched Visa Debit Central Bank up-time Beijing, China
Card of Bahrain for
Re-branding of Islamic
“Wholesale Bank
Ranked among the Banking
Branch”
Top 1,000 banks of
the world by “The
Banker”, UK

Background: Existing Head Office of Allied Bank

04 Annual Report 2017

75 YEARS
CELEBRATION
Allied Bank Limited 05
06 Annual Report 2017

HIGHLIGHTS
2017

17% GROWTH 10% GROWTH 25% GROWTH 18% GROWTH

TOTAL TOTAL TOTAL TOTAL

ASSETS DEPOSITS CURRENT INVESTMENTS
DEPOSITS
2017: 1,246 2017: 884 2017: 316 2017: 698
2016: 1,069 2016: 805 2016: 254 2016: 590
Rs. in Billion Rs. in Billion Rs. in Billion Rs. in Billion

13% GROWTH 6% GROWTH -12% DECLINE 12.73

TOTAL TOTAL NON PROFIT
ADVANCES EQUITY PERFORMING AFTER TAX
LOANS
2017: 372 2017: 107 2017: 18 2016: 14.43
2016: 330 2016: 101 2016: 20 Rs. in Billion
Rs. in Billion Rs. in Billion Rs. in Billion

17% 11.12 100 NEW 91 NEW

RETURN EARNING PER BRANCHES ATMS

ON EQUITY SHARE

2016: 20% 2016: 12.60 2017: 1,250 2017: 1,241

Rupees 2016: 1,150 2016: 1,150
Number Number
 Allied Bank Limited 07

HUMAN
RESOURCES

10,637 85:15 10,246 1,326

Total Permanent Staff Male to Female Ratio Number of Graduates New Recruitments

1,489 892 7,652 91%

Training Days Training Programs Staff Trained in Service Employee Retention

Ratio

SERVICE
DELIVERY
97% Up 25% Up 17% EMV
(21.5 million) COMPLIANT

ATM Uptime ATM POS Based No. of ATM ATM Card Security
Spent Acquired
Transactions

513,000 257,000 308,377 160,168

New to Bank No. of Asaan No. of Debit Cards No. of PayPak

Customers Accounts Opened Issued Cards

121,953 97% 5,044,116 746,090

(12,168)

myABL Registered Number of Customer Website Visits Social Media Fan/

Users Complaint Resolutions Followers
08 Annual Report 2017

CONTENTS
10 Corporate Profile 68 Horizontal Analysis 95 Managing Conflict of Interest
12 Board of Directors 70 Vertical Analysis 96 Business at Last AGM
16 Board Committees 72 Statement of Value Addition 97 Notice of 72nd AGM
18 Corporate Structure 73 Cash Flow 98 Statement of Compliance
19 Management Committees 74 Maturities & Concentration with Code of Corporate
20 Chairman’s Message Profile Governance (CCG)
24 Director’s Report 75 Quarterly Financial Results 99 Review Report to the Members
32 Management Team 76 Graphical Presentation on Statement of Compliance
34 CEO’s Review (BS & PL) with CCG
48 Group’s Review 77 Share Price Sensitivity Analysis 100 Statement of Ethics & Business
58 Information Technology 78 Products & Services Practices
Governance 83 Corporate Sustainability 102 Statement of Internal Controls
60 Key Performance Indicators 93 Corporate Social 103 Whistle Blowing Policy
61 Risk & Opportunity Report Responsibility Policy 104 Report of the Audit Committee
63 Stakeholder’s Engagement 94 Investor Grievance
64 Performance Highlights 94 Record Management

Unconsolidated Financial Statements Consolidated Financial Statements

107 Auditors’ Report to the Members 217 Directors’ Report on Consolidated
108 Statement of Financial Position Financial Statements
109 Profit & Loss Account 218 Auditors’ Report to the Members
110 Statement of Comprehensive Income 219 Statement of Financial Position
111 Statement of Cash Flow 220 Profit & Loss Account
112 Statement of Changes in Equity 221 Statement of Comprehensive Income
113 Notes to the Financial Statements 222 Statement of Cash Flow
194 Annexure I 223 Statement of Changes in Equity
196 Annexure II 224 Notes to the Financial Statements
199 Annexure III
205 Annexure IV

302 Pattern of Shareholding 308 Glossary 313 Form of Proxy

FINANCIAL
CALENDAR
2016 2017
1st Quarter results issued on April 26, 2016 1st Quarter results issued on April 26, 2017

2nd Quarter results issued on August 10, 2016 2nd Quarter results issued on August 17, 2017

3rd Quarter results issued on October 21, 2016 3rd Quarter results issued on October 24, 2017

Recommendation of Annual Results by the BOD February 09, 2017 Recommendation of Annual Results by the BOD February 21, 2018

71st AGM approved the Annual Results March 28, 2017 72nd AGM scheduled for approval of Annual Results April 09, 2018
 Allied Bank Limited 09

VISION
To become a dynamic and efficient bank providing integrated solutions in order to be the first choice bank for the
customers.

MISSION
»» To provide value added services to our customers
»» To provide high tech innovative solutions to meet customers’ requirements
»» To create sustainable value through growth, efficiency and diversity for all stakeholders
»» To provide a challenging work environment and reward dedicated team members according to their abilities and
performance
»» To play a proactive role in contributing towards the society

STRATEGIC OBJECTIVES
»» Enhancing brand image and creating shareholders’ value through sustainable performance, while optimizing return
against acceptable risk appetite.
»» Augmenting financial inclusion of unbanked population through innovative and diversified technologies, building
customers’ confidence through convenient delivery channels and product designs.
»» Continuous re-engineering of policies, procedures, SOPs, SLAs and TATs, ensuring operational efficiencies through
effective management of key resources.
»» Instilling a culture of ethics and responsibility among human resource and becoming an ‘Employer of Choice’ for the
Top Professionals.

CORE VALUES

Integrity High Performance

Excellence in Service Innovation and Growth

10 Annual Report 2017

CORPORATE
PROFILE
Who We Are Board of Directors Registered & Head Office
Allied Bank Limited started its Mohammad Naeem Mukhtar (Chairman) 3 Tipu Block, New Garden Town,
operations in Lahore by the Sheikh Mukhtar Ahmad Lahore - Pakistan Postal Code 54000
Muhammad Waseem Mukhtar
name Australasia Bank before
Abdul Aziz Khan
independence in 1942; upon
nationalization in 1974, it was
Mubashir A. Akhtar Company Secretary
Dr. Muhammad Akram Sheikh
merged with 3 other banks Zafar Iqbal
Muhammad Raffat
(Sarhad Bank Limited, Lahore Tahir Hassan Qureshi (CEO)
Commercial Bank Limited and
Pak Bank Limited) and the name Auditors
was changed to Allied Bank Audit Committee of the Board KPMG Taseer Hadi & Co.
of Pakistan Limited. In August Chartered Accountants
Zafar Iqbal (Chairman)
2004, SBP under Scheme of Dr. Muhammad Akram Sheikh
Reconstruction transferred its Mubashir A. Akhtar
Legal Adviser
ownership to a consortium of
Ibrahim Group; consequently the Mandviwalla & Zafar Advocates
Human Resource
new management renamed the
& Remuneration Committee
entity as Allied Bank Limited in Shares Registrar
Abdul Aziz Khan (Chairman)
2005. Central Depository Company of Pakistan
Muhammad Waseem Mukhtar
Limited (CDCPL)
Tahir Hassan Qureshi

Parent Company Shariah Board Website & Email

Ibrahim Holdings (Private) Limited Mufti Ehsan Waquar (Chairman)
Mufti Mahmood Ahmad
Subsidiary Company Mufti Muhammad Iftikhar Baig
ABL Asset Management Company Limited

www.abl.com
info@abl.com

Entity Credit Rating Telephone Number

AA+ Long Term (+92-42) 35880043
A1+ Short Term UAN: 111-225-225

Social Media Links

Corporate Governance Rating
twitter.com/ablpk
CGR9+
www.facebook.com/alliedbankpk
www.youtube.com/user/alliedbankltd
 Allied Bank Limited 11

EXPANDING
OUTREACH

Serving our valued customers across

127
Districts
& 492
Cities/Towns

Domestic Branches (Conventional) 1,131 Province-wise Network: Branches ATMs

Domestic Branches (Islamic) 117 Punjab 648 680

Sindh 269 278

Overseas Branches 2
Khyber Pakhtun Khawa 145 121
Bahrain-Wholesale Banking Branch
Balochistan 42 28
Karachi-Export Processing Zone Branch
Federal Capital 63 90
Representative Offices 2
Azad Jammu and Kashmir 62 38
United Arab Emirates-Dubai
FATA & PATA 11 -
People’s Republic of China-Beijing
Northern Areas 9 6
Sub-branch 1 Overseas (Bahrain) 1 -

Booths 19 Total 1,250 1,241

12 Annual Report 2017

BOARD OF
DIRECTORS

Sitting from Left to Right

Sheikh Mukhtar Ahmad Mohammad Naeem Mukhtar Abdul Aziz Khan
 Allied Bank Limited 13

Standing from Left to Right

Mubashir A. Akhtar Muhammad Waseem Mukhtar Tahir Hassan Qureshi Dr. Muhammad Akram Sheikh Zafar Iqbal
14 Annual Report 2017

BOARD OF
DIRECTORS

Mohammad Sheikh Muhammad Abdul

Naeem Mukhtar Mukhtar Ahmad Waseem Mukhtar Aziz Khan
Chairman / Non-Executive Sponsor Director Non-Executive Sponsor Director Non-Executive Sponsor Director Non-Executive Director

He is Chairman of the Board of He started his business career He is MBA from the University He has enriched and
Allied Bank since 2004. He has immediately after migrating of Chicago Booth School of diversified experience of
completed MBA from Cardiff from India at the time of Business, Illinois, USA. He more than 54 years in the
Business School UK, Post independence of Pakistan also holds a Master’s degree fields of General Banking,
Graduate diploma in Textiles in 1947 and contributed to in Total Quality Management Credit, Lease Finance,
from UK and Chartered Textile the industrial and business (TQM) from University of Business Development and
Engineer (CText ATI) from The growth of Pakistan through Glamorgan, Wales, UK, and Administration including 9
Textile Institute in Manchester his entrepreneurship skills and has 20 years of diversified years of international banking;
UK. He has over 32 years of business acumen. He has experience of Finance, IT holding key positions in
experience of finance and over 56 years of experience in and Industry. His strategic different countries including
industrial manufacturing. establishing and successfully guidance played a vital role Switzerland. He also remained
Besides Chairman of Board managing various industrial in technological up-gradation CEO of M/s. Ibrahim Leasing
of Directors of Allied Bank and financial companies. of the Bank. He has been on for 11 years. He is on the
Limited, he is also Chief He has been on the Board the Board of Directors of Allied Board of Allied Bank Limited
Executive Officer/ Director of of Directors of Allied Bank Bank Limited since 2004 and since 2004.
M/s. Ibrahim Fibres Limited Limited since 2005 and is is a “Certified Director” from
and M/s. Ibrahim Holdings a “Certified Director” from Pakistan Institute of Corporate
(Pvt.) Limited, Director on Pakistan Institute of Corporate Governance. He is also
the boards of M/s. Ibrahim Governance. He is also Director on the Boards of M/s.
Agencies (Pvt.) Limited, ABL Chairman of the Board of Ibrahim Fibres Limited, Ibrahim
Asset Management Company Directors of M/s. Ibrahim Holdings (Pvt.) Limited, Ibrahim
Limited, Karachi Education Fibres Limited, Ibrahim Agencies (Pvt.) Limited, ABL
Initiative, Pakistan German Holdings (Pvt.) Limited, Ibrahim Asset Management Company
Business Forum and Member Agencies (Pvt.) Limited and Limited, HUB Power Company
Board of Governors of National ABL Asset Management Limited and Arabian Sea
Management Foundation, Company Limited. Country Club.
the parent body of Lahore
University of Management
Sciences (LUMS),
Representative of Pakistan
Business Council. He is also
Industry Co-Chair Banking
Sector of NUST Corporate
Advisory Council (CAC) and
Senior Fellow of NUST Global
Think Tank Network (GTTN).
 Allied Bank Limited 15

Mubashir Dr. Muhammad Zafar Tahir

A. Akhtar Akram Sheikh Iqbal Hassan Qureshi
Non-Executive Director Independent Director Independent Director Chief Executive Officer

He is a law graduate and Dr. Muhammad Akram Sheikh He has 32 years’ experience He is a seasoned professional
has 51 years of banking (Hilale-Imtiaz) has over 52 in senior management banker and Fellow member
experience in local and years of work experience in positions in financial and (FCA) of the Institute of
international markets. His the public and private sectors. power generation sector. Chartered Accountants
extensive international At present, he is associated He was the Managing of Pakistan (ICAP) with a
banking experience includes with National University of Director/ CEO of Pak Oman diversified experience of more
key assignments in Turkey, Sciences and Technology Investment Company Limited, than 29 years including over
Qatar and UK. He is a (NUST) as Professor Emeritus, a DFI owned jointly by the 24 years of experience in the
Financial Consultant of Asian Founder and Co-Chair of Governments of Pakistan banking industry where he
Development Bank (ADB) and Global Think Tank Network and Sultanate of Oman. has held senior management
remained actively involved in (GTTN), Founding Co-Chair of During his 8 years stay at Pak positions. He has served on
various assignments of ADB Corporate Advisory Council Oman he led the company in various Committees of the
especially on capital markets (CAC), Director on the Boards becoming the leading DFI in ICAP and Pakistan Banks’
development and reforms of of Quality School Foundation its peer group. Over the past Association. Before Joining
NBFIs in Pakistan. and Tricon Boston Consulting 25 years, he has served on Allied Bank Limited he held
(Pvt.) Limited (a subsidiary of the Boards of number of listed senior management positions
He is also fellow member Sapphire Textile Mills Limited). and non-listed companies and in The Bank of Punjab,
of Institute of Bankers in financial institutions. He is a Habib Bank Limited and
Pakistan (1989), Institute of He has held prestigious Fellow member of Institute MCB Bank Ltd. He joined
Chartered Secretaries and senior positions like Federal of Chartered Accountants Allied Bank Limited in 2008
Managers (1993) and Institute Minister/Head of Planning in England & Wales (ICAEW) and served as Chief, Audit
of Marketing Management Commission, Federal and the Institute of Chartered & Risk Review (A&RR), Chief
(1999). He has been on the Secretary of the Ministries Accountants of Pakistan Financial Officer and Chief
Board of Directors of Allied of Communication, Water (ICAP). He is a “Certified Operating Officer (COO).
Bank Limited since 2006 and & Power and Industries & Director” from Pakistan Apart from attending various
is a “Certified Director” from Production, Managing Director Institute of Corporate seminars and conferences
Pakistan Institute of Corporate and Chairman of some of the Governance. He specialized in locally and internationally, he
Governance. largest public sector industrial Investment Banking, Corporate also represented Allied Bank
establishments. During the Finance, Capital Markets, Limited on World Economic
period from 1998 to 2008, Leasing, Aircraft Financing and Forum’s annual meetings of
he also spearheaded many Energy & Power Generation. the New Champions. He is
strategic policy initiatives Presently, he is associated ‘‘Certified Director’’ from the
including Medium Term in advisory business and ICAP and is Bank’s nominee
Development Framework and extensively travels within on the Board of Directors of
Vision 2030 which lays down Middle East, South Asia, Habib Allied Holding Limited -
strategic directions for the Europe and North America for UK, ABL Asset Management
future of the Country. He is on business negotiation. He is on Company Limited and Council
the Board of Directors of Allied the Board of Directors of Allied of the Institute of Bankers
Bank Limited since February Bank Limited since August Pakistan. He is serving as
2015. 2015. CEO Allied Bank Limited since
January 2017.
16 Annual Report 2017

BOARD
COMMITTEES
Audit Committee of the Board
Terms of Reference: Primary responsibilities of Audit Committee of the Board (ACOB) Constitution:
are to determine appropriateness of measures taken by the Management to safeguard
Bank’s assets, review financial statements focusing on major judgemental areas, Zafar Iqbal
significant adjustments, going concern assumption, any change in accounting policies, Chairman
compliance with applicable statutory and regulatory requirements and related party
Dr. Muhammad Akram Sheikh
transactions. Recommend appointment of the external auditors and also coordinate with Member
them to fulfill statutory and Code of Corporate Governance requirements. The Committee
is inter-alia responsible to ascertain the effectiveness of the Internal Control System Mubashir A. Akhtar
Member
including financial and operational controls, ensuring adequate and effective accounting
and reporting structure and monitoring compliance with the best practices of the
corporate governance. ACOB is also responsible for keeping an oversight and quarterly
review of the Internal Controls over Financial Reporting and review of all findings of SBP
Inspection Report, Management Letter by external auditors and weaknesses identified
in internal controls by Audit & Risk Review along with review of Bank’s Statement of
Internal Controls prior to endorsement by the Board. The other function of the Committee
includes assurance that an independent and effective internal audit function is in place.

Board Risk Management Committee

Terms of Reference: The primary functions of Board Risk Management Committee Constitution:
(BRMC) includes monitoring of Management’s adherence to prudent and sound risk
policies, assessing the ever changing risk profile and determining risk appetite of
Sheikh Mukhtar Ahmad
the Bank. BRMC also ensures development of risk management principles to build Chairman
stakeholders confidence, safeguard and enhance reputation. BRMC also monitors
quality of asset portfolio and suggest measures to keep the infected portfolio at the Muhammad Waseem Mukhtar
minimum level. The Committee approves risk limits for credit, market and operational Member
risks, credit approval grid and proposals regarding write-offs above certain limits. In term
of Bank’s recovery policy, BRMC considers and approves Debt-Asset-Swap proposals.
Abdul Aziz Khan
Member
It also monitors Bank’s Basel initiatives including capital adequacy requirements and
up-gradation of Risk Management Systems. The Committee also reviews information Tahir Hassan Qureshi
security governance initiatives and periodical risk assessments. Overseeing of Asset Member

Liability Committee (ALCO), Risk Management, Special Asset Management and

Compliance functions is also undertaken by BRMC.

e-Vision Committee
Terms of Reference: One of the key functions of the e-Vision Committee is to provide Constitution:
strategic direction for e-banking and adoption of evolving technologies for providing
new products and better services to its customers and to improve internal control Mohammad Naeem Mukhtar
environment. Review of strategic plans to improve IT infrastructure and automation of Chairman
processes and systems including alternate delivery channels are within the scope of the
responsibilities of the e-Vision Committee. The Committee provides assistance to the Dr. Muhammad Akram Sheikh
Board with insights regarding international developments and evolving technologies in Member
the field of e-banking for adoption; keeping in view the Bank’s strategic direction. Besides
Mubashir A. Akhtar
the above, the Committee also oversees major technology, software and hardware Member
acquisitions / initiatives. It also oversees performance of Information Technology function.
Tahir Hassan Qureshi
Member
 Allied Bank Limited 17

Strategic Planning & Monitoring Committee

Terms of Reference: Strategic Planning & Monitoring Committee (SPMC) is responsible Constitution:
to review rolling long term strategic plans, operational plan and budget of the Bank before
Board’s consideration / approval. The Committee also monitors progress against above Muhammad Waseem Mukhtar
referred plans and budget. SPMC is also responsible to approve capital expenditure Chairman
over Rs.15 million and donations of over Rs.1 million up to Rs.5 million. SPMC is also
responsible to assist the Board on corporate development activities and new initiatives Abdul Aziz Khan
Member
including, but not limited to acquisitions, mergers, alliances, joint ventures and divestitures
etc. SPMC also oversees performance of management committee (MANCO), Corporate Mubashir A. Akhtar
Investment Banking, Commercial and Retail Banking, Islamic Banking, Treasury, Finance, Member
Banking Services, Corporate Affairs, General Services and Real-estate, Engineering &
Infrastructure functions of the Bank.
Tahir Hassan Qureshi
Member

Human Resource & Remuneration Committee

Terms of Reference: Human Resource & Remuneration Committee (HRRC) defines the Constitution:
organizational structure and functional responsibilities of all areas of the Bank. It approves
staff strength, key appointments, salary revisions, bonuses and special allowances and Abdul Aziz Khan
recommends to the Board appointment, remuneration bonuses / performance awards, Chairman
terms and conditions of employment and other benefits of the key position holders.
HRRC also monitors the utilization of training & development budget and implementation Muhammad Waseem Mukhtar
Member
of approved training & development policy. The Committee nominates the Bank’s
directors and management personnel on the board of other companies / subsidiaries. Tahir Hassan Qureshi
HRRC also recommends Remuneration Policy and other Human Resource related Member
policies to the Board, besides monitoring performance of Human Resource Committee
and Human Resource function.

Board of Directors and Board’s Committees Attendance during 2017

Strategic
Board Risk Human Resource
Board of Audit Committee Planning &
Name Management e-Vision Committee & Remuneration
Directors of the Board Monitoring
Committee Committee
Committee

Mohammad Naeem Mukhtar 7/7 × × 4/4 × ×

Sheikh Mukhtar Ahmad 6/7 × 5/5 × × ×

Muhammad Waseem Mukhtar 7/7 × 5/5 × 10/10 8/8

Abdul Aziz Khan 7/7 × 5/5 × 10/10 8/8

Mubashir A. Akhtar 7/7 5/5 × 4/4 10/10 ×

Dr. Muhammad Akram Sheikh 7/7 5/5 × 4/4 × ×

Zafar Iqbal 6/7 5/5 × × × ×

Tahir Hassan Qureshi (CEO) 7/7 × 4/5 3/4 10/10 8/8

Total Number of meetings

7 5 5 4 10 8
held during 2017

None of the Board meeting held outside Pakistan during the year.

Note: Denominator showed total number of meetings entitled to attend. l x Not a Member.
18 Annual Report 2017

CORPORATE
STRUCTURE
BOARD OF DIRECTORS

Shariah Board*

Chief Executive Officer

Audit Committee of
the Board (ACOB)

Audit & Risk Review

Corporate & Business Planning &

Compliance
Investment Banking New Initiatives

Commercial & Retail

Banking (South) Risk Management

Commercial & Retail

Banking (North) Banking Services Service Standards
& Quality

Islamic Banking Information

Technology

Digital Banking
Finance
Marketing
& Corporate
Treasury Communication
Human Resources

Special Asset
Management General Services &
Security

Real Estate, Engineering

& Infrastructure
Development

Corporate Affairs

* Independent Shariah Board oversees Islamic banking operations

 Allied Bank Limited 19

MANAGEMENT
COMMITTEES

Management Human Central

Committee Resource Administrative
(MANCOM) Committee Action
(HRC) Committee
(CAAC)

2 4
1 3 5
Asset Liability Anti-
Committee Harassment
Risk Management (ALCO) Committee
Committee (RMC) (AHC)

IT Steering
Committee (ITSC)

Fair Treatment of
Customers
Committee (FTC)
20 Annual Report 2017

CHAIRMAN’S
MESSAGE
 Allied Bank Limited 21

Year 2017 was a historic year for the Bank; as the entire ABL team celebrated the
successful completion of 75 years of banking services to the nation. Originating
from modest beginnings, Your Bank has transformed into a dynamic and innovative
organization; overcoming multitude of challenges with resolve and fortitude. Recognition
by the prestigious Banker Magazine, UK as ‘Bank of the Year – Pakistan 2017’ made this
anniversary year more fulfilling for the entire team. Your Bank has now initiated digital
transformation which shall assist in shaping the future for decades to come.

Technology is rapidly changing the the Balance of Payment of oil importing Foreign Direct Investment inflows during
dynamics of banking. Despite technology countries like Pakistan. 2017 remained encouraging at US$ 2,691
driven advancements, according to World million primarily related to CPEC related
Bank, still two billion people around Domestically, sustaining a population projects. However, foreign investors in the
the world do not have a bank account. of approximately 208 million requires equity market remained disenfranchised
In order to enhance financial inclusion overcoming barriers to growth which have due to brewing uncertainty over the
and boost sustainability in a business hindered progress historically. Lackluster political climate as well as the fluctuating
environment engulfed with disruptive pace of structural and macroeconomic exchange rate outlook. Resultantly, positive
forces, Banks need to embrace a reforms especially with reference to fiscal sentiments in equity market from achieving
decisive and forward-looking technology revenue collection, absence of long term MSCI Emerging Market status in 2016
driven strategy striving towards reducing dynamic strategic planning and its follow- were wiped away and benchmark index fell
operating costs and risks in the digital up, one of the lowest private sector credit by 15% to close at 40,471 points.
era; while facilitating agility and deeper to GDP ratio in the world, high unbanked
penetration in existing and untapped population levels, lack of cost effective As a result of uptick in momentum in
markets. factors of production and secure operating existing infrastructure projects and new
environment remain key challenges in projects being initiated, Large Scale
After protracted periods of depressed accomplishing the desired growth targets. Manufacturing remained robust during
growth and subdued macroeconomic the year with 4.9% growth in FY2016-17
fundamentals, global economic activity With rising young population and rapid and 7.2% growth in first four month of FY
displayed stable performance during technology driven advancements in a 2017-18.
2017. IMF projects global growth at highly competitive global environment;
3.7% in 2017; 0.1% higher than earlier creation of jobs cannot be accomplished Managing Public Debt and Liabilities
projections and 0.5% higher than 2016. without broad based and planned largely stemming from borrowings from
Global growth forecasts for 2018 and expansion in manufacturing sector multilateral donors, foreign and local
2019 have also been revised upward by and industrial parks with simultaneous banks remain a key challenge for the
0.2% to 3.9%; reflective of higher growth enhancement in skillset levels of the economy. The overall debt surpassed
momentum and the expected impact domestic labour force. Rs.24,000 billion or 75.3% of GDP during
of the recently approved U.S. tax policy FY 2016-17; including USD borrowing
changes. The gradual progress made during 2017 of approximately US$ 5 billion acquired
to address the adverse exports trend during 2017 to support rising trade
Major support to recovery came from which declined by 3% during the last five deficit. With limited growth in exports
global trade, favorable financial conditions, years, yielded results whereby exports of and stagnant remittance position; debt
stabilized commodity prices and improved goods and services registered a growth of servicing going forward remains a
business sentiments. 7% during the year. fundamental challenge ahead.

The pickup in growth has been broad On the contrary, despite measures by Despite accommodative monetary policy
based, with notable upside surprises the government through imposition stance by SBP, Private Sector Credit as
in Europe and Asia. Key emerging and of regulatory duties on import of non- a percentage of GDP remains one of the
developing economies, including Brazil, essential items, growth in imports failed to lowest in the world at 15% from a high of
China, and South Africa, also posted relent with overall increase of 21% during 28% in 2007. Repercussions of this dreary
growth stronger than originally forecasted. the year. This mismatch in exports and state of private sector credit have been
imports growth resulted in burgeoning overwhelming for the economy, in the
Driven by improvement in global growth trade deficit. form of financial and social exclusion of
outlook, extension of the OPEC agreement a large segment of the population, lower
to limit oil production and geopolitical Home Remittances another historically than projected GDP growth rate, subdued
tensions in the Middle East, crude oil reliable source of funding remained exports performance and lack of growth in
prices rebounded towards US$ 70 per constrained during the year with 1% tax revenues.
barrel mark from US$ 53 at the start of decline to US$ 19,591 million on account
the year; providing fiscal relief to the oil of adverse economic conditions in Middle The size of undocumented economy
exporting countries while pressurizing East; largest contributor to domestic continues to grow in the wake of
remittances. aversion by the business community
22 Annual Report 2017

CHAIRMAN’S
MESSAGE
to withholding tax imposed on banking highlighting the role of private sector base remain imperative to reap benefits
transactions. Recent impact analysis by credit in achieving growth in tax revenues from growing economy. Achievement of
SBP in its Annual Report FY 2016-17 also and broad based economic growth. In these objectives, rest upon successful
highlighted this fact “While the WHT on addition, awareness sessions on SME, implementation of economic reforms,
non-cash banking transactions seems to Agriculture and Islamic Banking were also instilling fiscal discipline and improving
have had a negligible impact on revenue held across Pakistan; actively attended access to factors of production.
collections and incentivizing tax filing, it by obligors, regulators and potential
instead led to an increase in currency customers. While the undocumented segment of
in circulation and a decline in private the economy continues to grow thereby
business deposits.” In this transforming business environment discouraging SME financing growth,
of Artificial Intelligence, Cognitive documented formal sector continues to
The challenges emanating from these Computing and Machine Learning; bear the brunt of tax burden. Therefore,
hindrances along with change witnessed employees in an organization need to formalizing the informal sector on
in earning asset mix and continuation of be well-versed with latest technology war footing is the need of the hour to
Super tax, adversely impacted banking trends. Your Bank has placed immense create fiscal breathing room through
sector bottom line performance. emphasis on these learning aspects accumulation of higher tax revenues and
through e-Learning and purpose-built reducing the burden on already heavily
Your Bank while remaining cognizant of the Management Development Centers. Your taxed segments.
aforementioned challenges and associated Bank views this investment in technology
risks adopted a prudent approach and people as the foundation of future Legislative reforms to facilitate businesses
to achieve stable performance while success. in reducing costs and enhancing ease
continuing to strengthen the balance sheet. of doing business while improving the
Your Bank’s sound business, compliance quality of information presented by the
During the year, the overall Balance Sheet and governance practices safeguards businesses can potentially assist in efforts
and total Equity size of the Bank crossed against any oversights locally and to corporatize the informal sector and
the significant milestone of Rs.1,246 billion internationally and as a result, translating further improve the formal sector.
and Rs.107 billion mark respectively. in to robust entity rating by Pakistan Credit
Rating Agency (PACRA); which maintained Recently promulgated Companies Act
The contribution by Your Bank to enhance the long-term rating of Allied Bank at 2017 is the right step in such direction
access to financial services by country’s “AA+” and short-term rating at “A1+”. and further similar reforms pertaining to
population remained on course during credit bureaus, bankruptcy, foreclosure
the year with addition of 100 branches During 2017, JCR-VIS Credit Rating etc. can further strengthen the functioning
during the year, expanding overall branch Company Limited maintained Your Bank’s of economy.
network to 1,250 branches including 117 Corporate Governance rating to “CGR-
Islamic Banking branches. Similarly, the 9+” indicating very high level of corporate There remains a distinct lack of long
vast ATM network by the Bank increased governance; the only Bank in industry to term strategic vision to develop local
from 1,150 ATMs to 1,239 ATMs including be rated on Corporate Governance. businesses into globally competitive large
249 off-site ATMs. conglomerates. Accordingly, majority
of businesses in Pakistan operate at
Committed to gradually introducing Digital
Future Outlook the periphery of the official and legal
Banking initiatives, Your Bank initiated pilot The growth in real economic activity is frameworks.
project through launch of digital branches expected to maintain the momentum in
in Lahore and Karachi. FY 2017-18. However, elevated levels Lack of corporatization in country is clearly
of external and fiscal accounts deficit, demonstrated by the continuous growth
Your Bank believes that commercial enhanced rates of imports growth and in informal credit avenues, which are not
success is intrinsically linked with progress increased public spending in order to only expensive source of funding but also
of all our stakeholders. Recognizing Your achieve completion of development a major cause of lack of growth in SME
Bank’s role as an enabler of sustainable projects before the upcoming general businesses and in tax revenues for the
progress in society the Bank generously elections in the country may diminish government.
contributed towards Corporate Social chances of achieving the targeted GDP
Responsibility projects through active growth of 6%. Addressing the Real Estate valuation
assistance in community building, shall remain another key area of concern
healthcare, education and environment Recent adjustment of Policy rate by SBP for the authorities. Undervalued real
related projects. using monetary policy tool; keeping in estate valuations as compared to market
view the PKR depreciation, increasing oil prices; limits the revenue streams for the
Acknowledging the role in nation building, prices, PKR interest rate differential and tax authorities. In addition, the sector
Your Bank arranged series of awareness buildup of demand pressure is positive has since long been a mainstay for
sessions across Pakistan to facilitate omen, depicting real time adjustment of undocumented cash based economy
SBP’s National Financial Inclusion Strategy the economy. proving more detrimental to nation’s
initiative. Highlight of these sessions was development in general and hindering
seminar in Lahore on “Private Sector Sustainable development, jobs creation credit growth in particular.
Credit and Growth in Tax Revenue”; and equitable broadening of the tax
 Allied Bank Limited 23

Investment inflows from China Pakistan channels will determine the success for Your Bank has achieved tremendous
Economic Corridor (CPEC) have started the banks. successes through hard work, dedication
to materialize with initiation of energy and and commitment. With strong balance
infrastructure projects. Going forward, Adherence to progressive supervisory sheet and capital adequacy levels,
focus must be given to capitalizing on framework developed in consultation robust risk management, high focus
these opportunities and ensure favorable with all stakeholders shall assist in on compliance with domestic and
value creation for domestic entrepreneurs further enriching the Digital Banking Age international applicable regulatory
and labour force. experience. Heightened compliance will requirements, high standards of
shape digital banking of the future and corporate governance, transparency
Predicting the future of evolving business expedite its arrival. and commitment to globally accepted
environment is becoming more and best business practices, Your Bank has
more uncertain with the passage of time. Your Bank remains fully cognizant of these achieved a position of strength which is
However, the only certainty about future complex global developments along with recognized internationally as well as locally.
remains that banking shall perform as a intricacies associated with local banking Domestic accolades during 2017 included
function of variables including customer scenario. the prestigious “Corporate Excellence
aspirations, application of appropriate Award” by the Management Association of
technology, digital currency, blockchain, Your Bank intends to remain at the Pakistan and selection as one of “Top 25
machine learning and predictive forefront for improving access to quality Companies of the Year awards” given by
analysis. Data protection and information financial services to the vast unbanked the Pakistan Stock Exchange.
governance have become imperative population in the country. Expansion
to gaining customers’ trust and remain in outreach through hybrid mix of The Bank profoundly acknowledges the
a key enabling factor in the digital era. conventional brick and mortar branches, co-operation extended by regulatory
Therefore, focus on ensuring robust ‘Smart Branches’ and digital kiosks shall bodies including State Bank of Pakistan,
information security, strengthening of assist in further improving the outreach. Securities and Exchange Commission of
controls and compliance functions remain Initiation of “Branchless Banking” Pakistan and Federal Board of Revenue.
a cornerstone of Your Bank’s strategy. going forward shall further facilitate in
accomplishing financial inclusion strategy Our 75-year journey is nothing short of
Understanding and continuously adapting of the Bank. being remarkable; positively impacting
business model and how value is delivered lives of our valued customers as their
to key stakeholders through a dynamic In addition, through enrichment of digital trusted financial advisor and partner. We
strategy shall determine the success of banking operations, Your Bank intends to are constantly striving towards our goal
banks in future. further enhance experience of customers of building a more robust Allied Bank and
by providing full suite of services for as a facilitator of change in our beloved
Proactive mitigation of risks associated individuals through ‘MyABL’ and for homeland towards higher economic
with evolving business environment Corporates through ‘Business Internet growth and social engagement. We shall
shall remain at the forefront for banks Bank’ solution respectively. continue our aspirations towards value
sustainability. creation for our stakeholders and positively
Similarly, regular seminars on financial serving our valued customers, Bank’s staff
Domestic banking landscape, already awareness which have received positive and the communities we serve.
having been consolidated from 49 response from obligors, regulators and
operational banks in 2000 to just 34 banks public shall further assist in enhancing the
in 2017, shall continue to transform. Going financial acumen of the general public.
forward, provision of quality services at the
convenience of customer through multiple Mohammad Naeem Mukhtar
Chairman
24 Annual Report 2017

DIRECTOR’S
REPORT
Dear Shareholders,
On behalf of the Board, I am pleased to present the Annual Report of Your Bank for the year ended December 31, 2017. The operating
results and appropriations, as recommended by the Board are included in the appended table:

Year ended December 31,

2017 2016 Growth

Rs. In Million (%)

Profit after tax for the year 12,734 14,427 (12)

Accumulated profits brought forward 46,490 41,416 12

Effect of re-measurement of defined benefit plans-net of tax (966) 289 (434)

Transfer from surplus on revaluation of non-banking assets to un-appropriated profit-net of tax 188 45 318

Transfer from surplus on revaluation of fixed assets to un-appropriated profit-net of tax 55 58 (5)

Profit available for appropriation 58,501 56,235 4

Final cash dividend for the year ended December 31, 2016 at Rs. 1.75 per ordinary share (2016: Year ended December 31, 2015 at Rs. 1.75 per share) (2,004) (2,004) -

1st interim cash dividend for the year ended December 31, 2017 at Rs. 1.75 per ordinary share (2016: Rs. 1.75 per share) (2,004) (2,004) -

2nd interim cash dividend for the year ended December 31, 2017 at Rs. 1.75 per share (2016: Rs. 1.75 per share) (2,004) (2,004) -

3rd interim cash dividend for the year ended December 31, 2017 at Rs. 1.75 per share (2016: Rs. 2.00 per share) (2,004) (2,290) (12)

Transfer to statutory Reserves (1,273) (1,443) (12)

Accumulated profits carried forward 49,212 46,490 6

Earnings Per Share (EPS) (Rs.) 11.12 12.60 (12)

The Board of Directors has proposed a final cash dividend of Rs. 1.75 per share (aggregate cash dividend of Rs. 7.00
per share including interim dividends). This, together with the interim dividends declared during 2017, will be approved in
the forthcoming Annual General Meeting.

Macroeconomic Developments respectively from previous estimates depreciation, uptick in inflation and PKR
of 3.6% and 3.7% on the backdrop of interest rate differential; SBP has adjusted
FY 2016-17 witnessed a broad based broad based synchronized global growth the Policy Rate upwards by 25bps in
domestic economic growth of 5.3% as upsurge and rising oil prices. January 2018.
compared to 4.7% in FY 2015-16; being
highest during the last ten years. Lead by The manifold challenges engulfing the
services sector; growth in industry and domestic economy overshadowed
Financial Performance
agriculture sectors assisted the economy the growth in banking sector as well. During the year under review, Your Bank’s
to cross US$ 300 billion mark. However, Historically low benchmark rates and primary strategic priorities were driven
expanding economy has witnessed a falling spreads leading to intense price- towards quality balance sheet growth, risk
surge in imports, together with stagnant driven competition within industry for optimization, expansion in customer base,
remittances and export volumes, resulting tapping quality credit avenues, further enrichment of existing and introduction
in widening of current account deficit; maturity of high yielding Government of new products with focus on providing
leading to higher external borrowings, bonds and higher taxation compared to digital services while ensuring operational
pressure on foreign exchange reserves other corporate businesses added further efficiencies across the Bank.
and declining exchange rates against US$. pressure on industry bottom line.
Expansion in outreach through
Although, gradual resolution in persistent Going forward, in order to cater to rapidly conventional and alternative delivery
energy shortages along with de- evolving and continuously rising customer channels continued during 2017; with
escalation in security situation has been expectations, the banking sector requires 1,250 branches including 117 Islamic
accomplished. However, renewed impetus concurrent focus on adopting latest Banking branches. The Bank’s strategically
is required for overcoming impediments technology based innovative products located ATM network across the country
hindering long term sustainable growth and services and broad based penetration was further augmented to reach 1,241
including rationalization of overall tax in underserved and unserved areas to ATMs including 249 off-site ATMs. Launch
structure, low tax base, promotion of facilitate financial inclusion growth. of pilot digital self-service branches in
ease of doing business and holistic Lahore and Karachi remained the key
implementation of structural reforms State Bank of Pakistan maintained credit highlight of the year.
agenda. expansionary monitory policy stance and
kept Policy Rate unchanged at 5.75% In line with banking industry’s
IMF’s global GDP projections inched during the year. However, considering PKR expectations, margins during the year
to 3.7% and 3.9% for 2017 and 2018 remained constrained due to changing
 Allied Bank Limited 25

earning assets mix, prevailing low interest

rate regime, high liquidity levels and
intense competition within the sector for
securing quality assets.

Under the challenging business

environment Your Bank achieved the
sustainable level of earning net revenue
from customers through attaining
volumetric growth in average earning
assets funded by improved average
CASA mix in deposits along with realizing
recovery from non-performing obligors.
The Bank posted a stable Net markup
income after provisions of Rs. 33,536
million against Rs. 33,508 million in 2016.
delivery channels, ongoing investment achievement during the year remained
Investments in new technology driven in technological infrastructure along substantial growth in non-remunerative
products and services remained key with training and development of the current deposits which surpassed Rs. 300
feature of the year under review. Launch human resource; growth in Non–markup billion and reached to Rs. 316,335 million
of Prepaid Cards, Auto loans, BANCA expenses was curtailed to 3% at Rs. at December 31, 2017 demonstrating
insurance along with Business Internet 21,530 million. growth of 25%. As a result, CASA as a
Banking and revamping of Allied Direct percentage of total deposits improved to
Internet banking to “MyABL” remained Your Bank achieved Profit after Tax of 79% at end-December 2017.
the significant highlights of the year. Rs.12,734 million as against Rs. 14,427
Accordingly, Fee, commission and million during 2016. Super Tax, which Your Bank’s Balance Sheet sustainable
brokerage income stood at a healthy level was initially levied vide Finance Act growth momentum was maintained during
of Rs. 3,917 million; with new initiatives 2015 continued for the year. Resultantly, the year, with total assets increasing to Rs.
expected to further contribute towards the effective tax rate stood at 39%. The EPS 1,246 billion or 17% from end-December
growth in fee based income going forward. of Your Bank stood at Rs.11.12 per share 2016. Total Equity of the Bank also
Concurrent focus was also made on as compared to Rs.12.60 per share in remained robust and stood at Rs.106,716
further enrichment of information security 2016. million as at December 31, 2017; an
set-up through adoption of biometric increase of 6% over 2016.
verification technology, introduction of During 2017, Return on Assets (ROA) and
chip-based / contactless cards and Return on Equity (ROE) stood at 1.1% Your Bank’s robust technology driven Risk
enhanced security features embedded in and 17% respectively. The Bank’s ROA Management Framework continues to
internet banking services, to facilitate our and ROE remained well-above September yield results; with reduction of NPLs by
valued customers. 2017 industry’s average of 0.9% and Rs. 2,379 million during 2017 to close at
13.2% respectively. Rs.18,052 million. No FSV benefit was
The Pakistan Stock Exchange index taken into account while determining the
remained volatile during the year and Private sector credit appetite showed provision against NPLs. Coverage Ratio
started to gradually move in the bullish signs of recovery as economic activity of the Bank increased to 92.6% as at
territory post year end 2017; validating started to gain pace. Your Bank fully December 31, 2017 against 91.9% at
Bank’s stance of holding its strategic capitalized on quality credit growth December 31, 2016. Infection ratio was
blue-chip equity portfolio; yielding Dividend opportunities and expanded Gross reduced to 4.6% as at December 2017
income of Rs. 3,226 million during the Advances portfolio by 12% to reach as compared to 6.4% at December 2016.
year. Rs. 388,752 million as compared to Rs. Both infection and coverage ratio of the
348,346 million in the previous year. Bank remains well above the September
Income from dealing in foreign currency 2017 industry average of 9.2% and 85.3%
depicted a growth of 18% and amounted In the wake of possible increase in respectively.
to Rs. 762 million against Rs. 645 million benchmark rates, Your Bank re-profiled
in 2016. Robust recoveries against investment mix towards mainly shorter Your Bank’s Capital Adequacy ratio (CAR)
written-off loans contributed significantly in tenor market treasury bills; overall also stood at a healthy level of 22.39%;
Other income’s growth to Rs. 323 million investments increased to Rs. 698,082 adequately meeting the requirement of the
as against Rs. 102 million in 2016. million at end-December 2017. SBP. The standalone and consolidated
CAR under Basel III stood at 22.39% and
During the year, Capital Gain of Rs. 641 Accumulation of no/low-cost deposits 22.38% respectively. Common Equity Tier
million was realised from fixed income remained key objective of Your bank ratio (CET) and Tier 1 ratio (CET1) posted
securities as against Rs. 2,674 million during the year. The Bank’s overall at 16.91% against the requirement of
during 2016. deposits grew to Rs. 883,741 million 6.0% and 7.5% respectively; depicting a
at December 31, 2017 as compared to well-capitalized position of the Bank.
Despite continued investment and Rs. 805,110 in previous year; posting
improvement in conventional and alternate a double digit growth of 10%. Key
26 Annual Report 2017

DIRECTOR’S
REPORT
Fund is Rs. 5,227 million, Rs. 7,231 of business, working under the guidance
million and Rs. 1,776 respectively, as of Board’s Risk Management Committee
per audited accounts of these funds (BRMC). RM under took following major
for the year ended December 31, initiatives in 2017 to further strengthen the
2017. risk management framework:
»» Pattern of Shareholding, complying
»» Implemented the Market Risk
with the requirements prescribed by
Module of Oracle Risk Management
the code is annexed.
Solution. Through this state of the
»» Statement of Compliance with Code art system, the Bank has automated
of Corporate Governance is included calculation of Value at Risk (VaR).
in the Annual Report. Further, monitoring reports have been
»» Nomination of Bank’s executives developed to capture and report the
on the Boards of other companies multi-dimensional aspects of market
where Allied Bank is an investor risk.
company is approved by the »» Launched an automated workflow
Human Resource & Remuneration for issuance of Disbursement
Statement under Code of Committee of the Board. Authorization Certificates in Risk
Corporate Governance »» The Committees of Board of Assessment & Management System
The Board of Directors is aware of Directors along with their terms of (RAMS). Through this initiative the
its responsibilities under the Code of reference have been separately Bank has endeavored to further
Corporate Governance and is pleased to disclosed in the Annual Report. enhance the efficiency of the credit
report that: disbursement process.
»» The detail of the meetings held
during the year for the Board and its »» The Bank has continued its initiative
»» The financial statements, prepared for managed warehouses for pledge
respective Committees along with
by the management of the Bank, financing in selected locations. The
attendance record of each director
present fairly its state of affairs, the Bank has completed construction/
has been separately disclosed in the
result of its operations, cash flows renovation of two new warehouses
Annual Report.
and changes in equity. during the year and is now
»» Proper books of account of the Bank operating six warehouses in Mandi
have been maintained.
Chief Executive Officer’s Review Faizabad, Kamoke, Gakkhar Mandi,
The Board of Directors fully endorses the Jahangirabad Multan, Munirabad
»» Appropriate accounting policies for Multan and Atthara Hazari Jhang;
Chief Executive Officer’s Review on the
conventional and Islamic Banking enabling obligors to access free of
Bank’s operational performance for the
have been consistently applied in cost warehouse space along modern
year ended December 31, 2017.
preparation of financial statements lines.
Accounting estimates are based on
reasonable and prudent judgment. Statement of Internal Controls »» Bank implemented Liquidity
Standards of Basel III Framework
»» International Accounting Standards, The Board is pleased to endorse the and incorporated it in the Bank’s Risk
as applicable in Pakistan, have been statement made by management Management approach in line with
followed in preparation of financial relating to internal controls including regulatory requirements.
statements and any departure there management’s evaluation of ICFR. The
from has been adequately disclosed Management’s Statement on Internal »» In continuance of Bank’s distinctive
and explained in the Annual Control is included in the Annual Report. initiative of engaging with the obligors
Accounts. to provide them with latest insight on
business management & strategies;
»» The system of internal control is Corporate Sustainability 3 interactive seminars for corporate,
sound in design and has been The Board is pleased to endorse the commercial & SME obligors on the
effectively implemented and Corporate Sustainability initiatives taken by topics “Challenges and Opportunities
monitored. Your Bank, as disclosed separately in the for Pakistan’s Business Growth”
»» There are no significant doubts upon Annual Report. and “Transition from Family Owned
the Bank’s ability to continue as a Business Structure to Corporate
Structure” were organized during
going concern. Risk Management Framework 2017.
»» There has been no material departure The Bank manages risk through a
from the best practices of corporate The Bank devotes considerable
framework of sound risk principles which
governance. resources in managing the risks to which
includes an optimum organizational
it is exposed. The momentum attained
»» Performance highlights for the last six structure, risk assessment and monitoring
thus far will be continued in the future
year are attached. processes. The risk management (RM) is
through significant investments in human
mandated to implement this framework as
»» The value of investment of Pension resources, technology and training.
a function independent of commercial lines
Fund, Provident Fund and Gratuity
 Allied Bank Limited 27

The Bank is also in process of revamping detailed Guidelines on Performance judicial discretion and fixed the minimum
its remuneration policy by introducing Evaluation of Board of Directors. As per pension at Rs. 8,000 per month from a
risk based compensation mechanism these Guidelines, Board decided to opt prospective date and with 5% indexation
as stipulated under “Guidelines on for in-house approach with quantitative on an annual basis. The detailed judgment
Remuneration Practices” by SBP. technique; and accordingly evaluated has not been issued by the Honorable
performance of overall Board, Board Supreme Court to date, and therefore the
Committees and Individual Board Management is not in a position to work
Entity Ratings Members as per the following categories: out the financial impact.
Allied Bank Limited’s long term rating
stood at “AA+”(Double A Plus) and short i. Chairman. The unconsolidated financial statements
term rating at “A1+”(A One Plus) assigned ii. Sponsor Directors. of the Bank for the year ended December
by Pakistan Credit Rating Agency(PACRA). iii. Independent Directors. 31, 2017 do not include the effect of this
These ratings reflect a sound equity base iv. Individual Directors (other than adjustment which will be accounted for in
and robust liquidity profile of the Bank. Chairman, Sponsors, Independent the year ending December 31, 2018 as
Directors and CEO). past service cost; once the plan is formally
Corporate Governance Rating v. Chief Executive Officer. amended and approved upon receipt of
aforementioned detailed judgement and
JCR-VIS Credit Rating Company Limited As per the approved mechanism, the related actuarial valuation.
maintained Allied Bank’s Corporate Responses/Feedback from the directors
Governance Rating of ‘CGR-9+’. The on each of the above-mentioned
rating indicates a ‘high level of corporate categories (except Chairman) is compiled
Acknowledgements
governance’; thus depicting a strong and submitted to the Chairman. The On behalf of the Board and the
commitment towards governance Chairman discusses the results/findings Management, I would like to express my
framework by the Board and Management with each individual Board Member. gratitude to our shareholders and valuable
of Your Bank. The authorized independent director customers for placing their trust in Allied
communicates the feedback in respect Bank; State Bank of Pakistan, Securities
Board of Directors of the Chairman for incorporation in the and Exchange Commission of Pakistan
consolidated Performance Report. and other regulatory bodies for their
As explained in the Director profiles, five consistent direction and oversight. I would
members of the Board of Directors are Accordingly, the Report comprises of also like to extend my appreciation to our
‘Certified Directors’ from Pakistan Institute consolidated evaluation results and Action colleagues for their diligent work towards
of Corporate Governance / Institute of Plan forwarded by the Chairman to further meeting customer expectations and their
Chartered Accountants of Pakistan, strengthen comparatively weaker areas dedication towards achieving the Banks’
remaining three Directors are exempted and submitted to the Board of Directors goals and objectives.
from directors’ training program pursuant for consideration in its meeting.
to clause xi of CCG on account of having
prescribed education / experience.
Auditors For and on behalf of the Board of
Performance evaluation The present auditors Messrs. KPMG Directors,
Taseer Hadi & Co., Chartered Accountants
Mechanism for the Board retire and being eligible offer themselves
The Board of Directors (BOD), while for re-appointment.
ensuring regulatory compliance, is also
vested with fiduciary responsibility on The Board of Directors on the Mohammad Naeem Mukhtar
behalf of the shareholders to protect recommendation of the Audit Committee, Chairman Board of Directors
Bank’s interests, provide strategic has recommended Messrs. KPMG Taseer
direction and monitor the achievement of Hadi & Co., Chartered Accountants, as
strategic objectives. The Companies Act statutory auditors for the next term.
2017, Banking Companies Ordinance
Tahir Hassan Qureshi
1962, SBP’s Prudential Regulations and Events after the Chief Executive Officer
Code of Corporate Governance (The
Code) describes the role of Board of Balance Sheet date
Directors along with its responsibilities and The Bank is party to a Suo Moto case Lahore
functions. SMC No. 20/2016 in the Honorable Dated: February 21, 2018
Supreme Court of Pakistan. Through this
To comply with the requirement of Code, case, the Honorable Supreme Court has
the Board, in the year 2014, put in taken up the matter relating to pension
place an effective mechanism for Board arrangements of certain privatized banks.
Evaluation. Despite the banks’ submission of being
legally compliant, the Honorable Supreme
Subsequently, SBP vide BPRD Circular Court of Pakistan concluded the Suo
No. 11 dated August 22, 2016, issued Moto case on February 13, 2018, by using
28 Annual Report 2017
Allied Bank Limited 29
30 Annual Report 2017
Allied Bank Limited 31
32 Annual Report 2017

MANAGEMENT
TEAM

Tahir Hassan Qureshi

Chief Executive Officer

Owais Shahid Asif Bashir Shahid Aamir

Chief Corporate & Investment Banking Chief Commercial & Retail Banking South Chief Commercial & Retail Banking North

Muhammad Idrees Sohail Aziz Awan Ahmad Faheem Khan

Chief Islamic Banking Chief Digital Banking Chief Treasury
 Allied Bank Limited 33

Abid Anwar Muhammad Shahzad Sadiq Aizid Gill

Chief Special Asset Management Chief Compliance Chief Risk Management

Tariq Javed Ghumman Mujahid Ali Muhammad Farhanullah Khan

Chief Banking Services Chief Information Technology Chief Financial Officer

Saira Shahid Hussain Mohammad Tabrayz Agha Muhammad Mohsin

Chief Human Resource Chief Real Estate, Eng. & Infrastructure Chief General Services & Security
Development

Muhammad Raffat Imran Maqsood

Company Secretary Chief Audit & Risk Review (ARR)

Chief ARR reports directly to Audit Committee

of the Bank.
34 Annual Report 2017

CEO’S
REVIEW
 Allied Bank Limited 35

Economic Review GDP Growth

Gradual upswing, according to IMF, 2018 E* 6.0%
in global economy has pushed the
2017 5.3%
projected growth outlook to 3.7%
2016 4.7%
in 2017. Major impetus in growth
originating from rising confidence 2015 4.2%

levels, uptick in investments, higher 2014 4.1%

consumer demand, augmented 2013 3.6%
manufacturing output and growing
2012 3.7%
trade.
* Source: State Bank of Pakistan
Growth in advanced economies
including, US, Euro area, Japan,
and UK was higher than previously during 2017 with increase of However, these positive
projected. Similarly, emerging and 5.7% during FY 2016-17. Major developments were overshadowed by
developing economies including contribution in LSM came from lack of progress on reforms agenda
Russia, China, India, Brazil and Automobile, Cement, Petroleum, Iron reflective from Pakistan slipping
Mexico have also posted stronger and Steel sectors. three places in the World Bank’s
than expected growth outlook. The Ease of Doing Business Index from
effect of US tax policy change also Increased domestic consumption, 144th to 147th position. Moreover,
contributed majorly to the revised accommodative monetary policy, capital market ended the year with
estimates. comparatively stable security situation dismal performance of 15% drop in
and higher foreign direct investments benchmark index during 2017.
Amidst gradually rising International inflows in the backdrop infrastructure
oil prices recovering to approximately and energy related projects also Current account deficit ballooned
US$ 70 per barrel; the global contributed to the GDP growth. to an alarmingly high level of US$
economic outlook remains prone 12,439 million during FY 2016-17 as
to substantial downside risks In efforts to overcome country’s compared to US$ 4,867 million in FY
including the possibility of financial persistent energy shortages, first LNG 2015-16; reaching 4.1% of GDP as
stress, higher protectionism and terminal became operational during compared to 1.7% in corresponding
rising geopolitical tensions along 2017; with injection of 7.4 million period.
with possible higher than expected tons of LNG in national transmission
increase in inflation and interest rates. estimated to generate savings of US$ Growth in exports by 7% reaching
1.2 billion per year. US$ 28,693 million during 2017
On the domestic front, Pakistan’s after decline of 3% in previous five
economy surpassed US$ 300 billion Aimed at handling of and delivery of years, although augurs well for the
mark, registering a growth rate of coal to power and cement plants by future, but remained much below
5.3% in GDP during FY 2016-17 as utilizing rail, road and sea networks par to the potential growth required
compared to 4.7% during FY 2015- the country’s first coal, clinker and to address the 21% increase in
16. The upward movement in growth cement terminal at Port Qasim was imports which jumped to US$ 62,819
rate was attributable to improved also inaugurated during 2017 and million; resulting in trade and overall
agriculture and services sector expected to halve the vessel handling current account deficit. Imposition of
performance; which grew by 3.5% time at port. regulatory duty on import of non-
and 6% respectively, while Industrial essential items during 2017 may
sector also depicted a healthy growth Successful completion of census assist in curtailing further growth in
rate of 5.0%. during 2017 was another key imports.
statistical milestone accomplished
Although, industrial sector’s growth during the year; paving way for Remittances remained under pressure
lagged behind the target of 7% insightful research towards country- during 2017 as well; on account of
during FY 2016-17; Large Scale wide demographics and ensuring adverse business environment in
Manufacturing (LSM) gained pace judicious distribution of resources primary Middle Eastern markets and
across the country. overshadowing the growth in US and
36 Annual Report 2017

CEO’S
REVIEW
UK markets. As a result, remittances
posted a drop of 1% to US$ 19,951
million.

Foreign Direct Investment (FDI) inched

up during the calendar year 2017
with an increase of 9% to US$ 2,691
million. Major contributions came
from investments in CPEC related
energy and infrastructure projects.

Foreign exchange reserves remained

under pressure and dropped
from US$ 23,202 million at end
December’16 to US$ 20,177 million During the year, Private sector credit Withholding tax regime on banking
at end December’17; floatation of appetite, on the back of gradually transactions continues to adversely
government bonds in international improving economic situation, affect industry deposits as Currency
market worth US$ 2.5 billion during registered a growth of 14%. Overall in circulation increased to Rs. 3,949
2017 assisted to shore up the industry advances increased to Rs. billion at end-December 2017,
reserves position, but burgeoning 6,530 registering growth of 17%. an increase of 16% indicative of
trade deficit and impending loan At end-September 2017, Non- continuous growth in undocumented
payments in near to medium term Performing Loans (NPLs) of banking economy.
highlights the gravity of the situation. sector increased to Rs. 612 billion
with infection ratio at 9.2% and Continuous Super Tax of 4% on
Pakistan’s total debt soared to Rs. coverage ratio at 85.3%. preceding year’s income sustained
25,820 billion or 72% of GDP by Q1 pressure on banking sector bottom
FY2017-18. With YoY increase of Investments in the banking sector line during 2017. Moreover, rising
14% and 7% in External and Internal reached Rs. 8,542 billion at end cost to income ratio of 56.5% at end
debt respectively; debt servicing December 2017 as compared to September 2017 as compared to
going forward without compromising Rs. 7,233 billion at end December 52.2% at end September 2016 also
on public sector development 2016. In wake of expected bottoming unfavorably impacted profitability of
spending shall remain challenging. out of interest rates and maturity the banking sector. Banking sector’s
of high yielding bonds, investment focus on improving outreach was
Circular debt including Power Holding mix in Government Securities by depicted by increase in number of
(Pvt.) Limited receivables surpassed Banks reverted from longer tenor branches from 12,993 branches
approximately Rs.800 billion at end- Government bonds to shorter tenor to 13,532 branches by September
December 2017. The chronic nature Treasury Bills. The proportion of 2017. Similarly, number of ATMs
of circular debt depicts a combination Banking sectors’ investment in T-Bills increased from 11,381 at December
of financial and operational and PIBs in overall government 2016 to 12,846 by September 2017.
inefficiencies; without overcoming securities stood at 59% and 36%
these inefficiencies provision of cost respectively as against 48% and 46% After sustained period of muted
effective energy supply may not be at the beginning of the year. inflation, upsurge in CPI inflation
accomplished. witnessed towards the end of 2017
Overall industry deposits increased registering growth of 4.6% year-on-
Efforts to improve country’s to Rs.12,362 billion at end- year in December’17 albeit within
lackluster tax-to-GDP ratio remained December’17; registering a growth SBP’s target of 6%. Resurgence in
unsuccessful as tax-to-GDP ratio of 10%. Bulk of growth was driven oil and non-food items contributing
declined to 12.5% in FY 2016-17 from by Public sector deposits which to rebound in inflation. In view of
12.6% in the corresponding period of increased by 24% while Private and growth in real sector and rising
last year despite growth in tax revenue Personal deposits managed growth inflation levels, State Bank of Pakistan
by 8% to Rs. 3,969 billion. of 5% and 8% respectively. maintained accommodative monetary
policy stance by keeping the Policy
 Allied Bank Limited 37

Rate stable at 5.75% during 2017;

with reversal in policy trend in January
2018 when the policy rate was
revised upwards to 6%. TOTAL TOTAL
Land Mark Year marking the ACCOUNTS ASAAN
completion of 75 Years of OPENED (NTB) ACCOUNTS
banking operations
2017 was a landmark year in the
Bank’s history, as it marked the
513,000 257,000
completion of 75 years of operations.
To mark this auspicious milestone,
celebratory events were held at all
securities and evolving regulatory objective of “to set national vision for
branches across the Bank along with
framework posed additional short- achieving universal financial inclusion
functions in all the major commercial
term bottom line challenges for the in Pakistan.”
cities of Pakistan. These celebrations
banking sector. While emerging
provided an excellent opportunity
disruptions in the form of non- Focus towards augmentation of
to review the past performance,
conventional payment channels account opening run-rates during
particularly the strategic goals including Telcos and Fin-Techs, 2017 resulted in addition of record
achieved since recapitalization of concurrently pose an additional 513,000+ new to bank accounts.
Your Bank in 2004, while renewing long-term challenge for the banks; Special emphasis was maintained on
the entire team’s resolve to continue necessitating the urgency to mould opening of Asaan Accounts requiring
striving towards accomplishing even strategic business models from no minimum balance and minimal
higher goals ahead. Therefore, at the traditional banking service provider to account opening requirements, as
outset, I would like to congratulate technology driven dynamic banks fit a result number of Asaan accounts
and extend my sincere appreciation for the Digital Age. more than doubled during the year
to the Board and the dedicated assisted by biometric verification and
Allied Bank team on this significant During the year under review, the bulk account opening to 257,000
accomplishments in the last 13 years. Bank maintained its steady growth accounts. The augmentation in
trajectory despite the aforementioned accounts opened translated in to
Business Performance challenging operating environment, overall deposits growth of 10%;
elucidated by the long term strategic highlight achievement being current
Banking sector outlook remains goals set by the Board of Directors. accounts which surpassed Rs. 300
beset with multi-pronged challenges Your Bank continued its focus billion with a growth of 24% during
emanating primarily from domestic towards achieving operational 2017.
macro-economic bottlenecks efficiencies, growth in no and low cost
including rising fiscal and current deposit funding base, augmenting Your Bank continuously following
account deficit, gradually rising risk management framework, further outreach expansion strategy and
inflationary pressures, one of the enrichment in Bank’s technology opened 100 branches including 40
lowest private sector credit to platform for gearing up towards Islamic Banking branches during
GDP ratio, declining ease of doing gradual transformation to digital 2017. Hybrid mix of expansion
business index, high unemployment banking, continuous enhancement in in rural and urban localities was
rate with continuously increasing the Bank’s service quality standards, maintained to maximize availability
population levels, burgeoning circular consistently developing the Bank’s of financial services to all segments
debt, pressure on foreign exchange human resource; thereby deriving of society. As a result, overall branch
reserves and domestic bourses along stable profitability along with robust network increased to 1,250 branches
with an unfavorable tax regime. balance sheet growth. including 1,133 conventional and 117
Islamic Banking branches.
The prevailing low interest rates Your Bank remains fully cognizant
scenario along with floor on minimum of playing role in implementing State
savings deposit rate, significant Bank of Pakistan’s National Financial
maturities of high yielding government Inclusion Strategy with the stated
38 Annual Report 2017

CEO’S
REVIEW

During 2017, Your Bank inaugurated Market’ department for exploiting remained proactive in remittance
two Self Service Banking branches banking avenues in this profitable and other relevant business-
in Packages Mall, Lahore and mid-tier corporate/commercial related opportunities in the Gulf
Lucky One Mall, Karachi equipped segment. Capitalizing on existing region. Through establishment of
with modern equipment, enabling corporate relationships as their Representative Office in Beijing,
customers to address their banking value chain partners in the capacity People’s Republic of China during
needs while interfacing with diverse of vendors, producers, suppliers, 2017, Your Bank undertook
range of digital touch points i.e. distributors, retailers and service major step in establishing trade
tablets, interactive tables, video providers, Middle Market segment and investment flows between
conferencing and digital kiosks, shall prove to be a source of entering China and Pakistan expected to
eliminating the need of hefty paper in to vast untapped lucrative vendor yield significant results in years to
work and long wait in queues. financing market going forward, while come. In line with SBP’s objective
ensuring lending quality. to enhance flow of remittances
Concurrent focus was also through banking channels, Your
maintained in enhancing Alternate Despite limited quality credit avenues Bank utilized existing international
Delivery Channels by enhancing ATM and fine pricing margins on offer, presence and correspondent banking
network to 1,241 ATMs including 253 Your Bank utilized the robust risk relationships to further augment flow
off-site ATMs along with maintaining management framework to identify of remittances; thereby increasing its
industry leading ATM uptime of 97%. and capitalize on potential credit market share in terms of remittance
The Bank through strategic alliance opportunities; accordingly, prudently business handled.
with Shell Pakistan and Pakistan enhanced the overall advances
State Oil has successfully installed portfolio while reducing the associate Capitalizing on Your Bank’s sound
32 and 26 off-site ATMs at respective credit cost. compliance and governance culture,
service stations providing customers robust risk management and strategy
with ease of access. The international operations of to derive stable growth, Your Bank
Your Bank through Wholesale posted sound Balance Sheet growth
During 2017, Your Bank also Banking Branch Bahrain and of 17% to surpass Rs. 1,200 billion
established a dedicated ‘Middle Dubai Representative Office mark during the year. Strong equity
 Allied Bank Limited 39

level was also maintained during the Card base during the year. Total Transactions. Issuance of over 18,000
year to reach at Rs.107 billion. debit cards in circulation increased cards signifies the encouraging
by 10% to over 1.4 million cards in response to the product, which
Gradual expansion of our digital circulation. Empowering customers to launched towards the end of 2017.
product suite remained a key conduct transactions locally, with no
strategic priority. In this regard, dependency on international payment In order to reward the trust
launch of ‘Business Internet Banking’ schemes issuance of PayPak cards placed in Bank’s products and
was a major achievement during remained a key objective during the services, Your Bank entered into
2017, exclusively designed and year. Your Bank was the first in the promotion agreements with leading
developed for entrepreneurial and industry to introduce PayPak cards. food, consumer goods, home
institutional obligors. Geared towards With issuance of over 100,000 cards improvements providers and offered
customer convenience, key features during the year Allied Bank remained handsome discounts for using Allied
of this real time online tool include industry leader in promoting SBP’s Visa Debit cards; which was well
ability to execute all facets of cash NFIS vision for financial inclusion. appreciated by our valued customers.
management, general banking and This feat was duly acknowledged as
trade finance related transactions Your Bank was awarded “Top Issuer Highlight of these campaigns which
from the respective premises of of PayPak Debit Cards” by 1LINK ran throughout the year, were
valued obligors. (Guarantee) Limited. week-long collaborations with two
of the leading e-commerce websites
in the country offering additional
discounts on the sale items.
This was the first time Your Bank
In-line with upcoming digital banking developed and deployed the ability
trend, Your Bank also successfully Launch of Allied EZCash prepaid to directly use Allied Bank’s debit
revamped personal internet banking cards during the year further enriched cards on merchant’s website making
platform to “MyABL” app from the the suite of debit card products e-commerce a more convenient
previous “Allied Direct”, compatible of Your Bank. Allied EZCash is a experience for the customers.
with both android and iPhone re-loadable Prepaid Card equipped The encouraging response from
platforms; offering full suite of deposit with the convenience of easy reload customers and e-commerce
related services. Now our valued from all ABL branches. EZCash card platforms also gave us the confidence
customers can enjoy the convenience is primarily targeted towards existing to further penetrate in this developing
of utilizing all the services of a branch; and unbanked customers and can platform, going forward.
from where ever they are through be used on ATM for cash withdrawal,
access by smart phones, tablets, bill payment, mobile top-ups and During the year, the Bank as part of
laptop and desk top computers. purchasing goods from merchants product innovation and unparalleled
at Point of Sale (POS) machines service excellence, re-launched
To complement vast ATM network where PayPak Cards are accepted. Bancassurance Business for both
across the country, Your Bank Allied EZCash offers greater security conventional and Islamic banking
further enhanced the ATM Debit with PIN for Point-of-Sale (POS) customers; with a vision to transform
40 Annual Report 2017

CEO’S
REVIEW

Your Bank into a complete one stop Promoting Islamic Banking amongst corporate governance framework,
financial institution offering multiple vast potential customer base professional management team and
full suite of financial services and remained part of Your Bank’s strategy balanced board composition. ABL
products under one roof. during 2017, with expansion in AMCL is the only ISO/IEC 27001:
branch network to 117 branches. 2013 certified AMC in Pakistan and
Shariah board is in place consisting has also adopted Global Investment
of distinguished scholars and banking Performance Standards (GIPS). ABL
professionals providing oversight AMC established two new retail
and guidance. Your Bank’s Islamic branches in Peshawar and Sialkot
Banking operations have been during the year.
Keeping the requirements of branded as “Aitebaar” representing
expanding customer base in customer perception and gearing up Robust risk management practices
consideration, Your Bank successfully gradually to serve the needs of this in a business environment
launched Allied Car Finance in top tier niche segment. encompassed with industry specific
cities during 2017. Attractive features and macro level challenges has
including low mark up, flexible The Bank’s wholly owned subsidiary attained paramount importance in
repayment period and no processing ABL Asset Management Company both domestic and global markets.
fee made Allied Car Finance an offers array of conventional and Your Bank’s technology enabled
attractive proposition for customers Islamic funds closed the year with state of the art risk management
for meeting their car financing needs. asset under management (AUM) size framework remains continuous
For ease of customers Your Bank also of Rs. 46 billion displaying a strong source of competitive advantage.
embedded Car Finance Calculator YoY growth of 24% and maintained Continuous refinement of Your Bank’s
on its website enabling customers to its 6th position amongst private fund in-house developed Risk Assessment
calculate estimated finance rentals. management companies, with a and Management System (RAMS)
market share of 7%. remained on course during the
Through active participation in year. Implementation of Market Risk
dealing in government securities, JCR-VIS Credit Rating Company Module of Oracle Risk Management
Your Bank maintained Primary Limited upgraded the Management Solution during the year enabled
Dealer status during the year. While Quality Rating of ABL Asset Your Bank to automate calculation of
safeguarding against the interest rate Management Company Limited (ABL Value-at-Risk (VaR). Moreover, various
risks associated with bottoming out AMCL) from AM2+ (AM Two Plus) to Monitoring Reports were developed
of Policy Rate, Your Bank re-profiled AM2++ (Asset manager exhibit very to capture and report multi-
significant portion of exposure in Good management characteristics). dimensional aspects of market risk.
government securities to Treasury Outlook on the assigned rating Your Bank also continues to benefit
Bills from longer tenor Pakistan is ‘Stable’. This was 4th rating from core competencies driven from
Investment Bonds. upgrade of ABL AMCL in the past in-house developed Early Warning
seven years. The rating also takes System which highlights any potential
into account ABL AMC’s effective red flags well in advance enabling
 Allied Bank Limited 41

timely corrective measures. Moreover, banking trends and technology. Information technology remained
Your Bank’s extensive defaulter During 2017, Your Bank revamped at the heart of Your Bank’s effective
database available since 1980s ‘Management Trainee Officer (MTO) operational performance. Concerted
onwards which remains an invaluable Program’ curriculum, placing efforts were made during the year
source of credit risk mitigation. renewed emphasis on digital banking, to utilize technology for provision
technology awareness, productivity of better services to customers
Your Bank continued to expand its and ethical behavior; utilizing the and attain operational efficiencies.
unique initiatives of bank owned Bank’s e-Learning and purpose built During 2017, Your Bank remained
warehouses providing obligors Management Development Centres. focus on upgrading the core banking
access free of cost warehouse During 2017, total of 7,652 staff software Temenos T-24 to latest R16
space along modern lines with the members were trained in different version. The Bank has already been
construction of two new warehouses, aspects of assigned tasks ranging recognized for largest implementation
covering six (6) locations at Mandi from awareness of compliance to of T-24 in the region.
Faizabad, Kamoke, Gakkhar Mandi, improving soft skills necessary for
Jahangirabad Multan, Islamia Rice service excellence. The gradual progress made to
Mill Multan and Atthara Hazari Jhang. augment risk management framework
Keeping up with the expansion plans resulted in Your Bank further
2017 saw renewed need for strong of Your Bank total of 1,326 new improving NPLs ratio, coverage ratio
compliance culture within banking staff members were inducted during while concurrently realizing one of
industry to safeguard against local 2017. Increasing overall staff strength the highest recoveries against non-
and international non-compliances. to 11,075 permanent employees performing advances during the year.
Your Bank further strengthened including over 1,600 female staff Despite legal recourse challenges,
the Anti-Money Laundering and giving a female gender ratio of 15%. the Special Asset Management
KYC function by capitalizing on Group played a pivotal role in this
Compliance Risk Management Your Bank also established an in- tremendous performance.
Solution – Risk Nucleus implemented house assessment – ‘ABL CARE’.
in 2016; thereby further strengthening This center being first of its kind The Bank’s core operational team’s
the functioning of Compliance within Pakistan’s banking landscape, support in pursuit of business
function. The investment in assesses the personality traits, work objectives, assisting in launch of value
technology enabled generation of attitudes and leadership potential added services, facilitating bank’s
95,819 automated alerts during the through psychometric analysis, to account holders/customers through
year; with resolution rate of 97%. determine the psychological fitness efficient delivery of Bank’s wider
and suitability of candidates for product range remained invaluable
Your Bank recognizing the digital employment and promotion. part of achieving success during the
banking era’s unique requirements year.
for the human capacity building, During 2017, Your Bank also
continued on the path of revamping developed an online suggestion box Aimed at improving financial acumen,
its workforce equipped with to facilitate flow of ideas between financial inclusion and exploring
knowledge and application of latest management and staff members.
42 Annual Report 2017

CEO’S
REVIEW
»» Best Corporate & Institutional
Bank, Pakistan
»» Best Loan Advisor, Pakistan
- The Asset Triple A Country
Awards Hong Kong
»» Best Emerging Bank in Islamic
Finance - COMSATS

Financial Analysis
Balance Sheet Growth Mix
2017 was another challenging year
for the global economy, showing
moderate signs of recovery. Domestic
previously untapped sectors with Similarly, aligning with SBP’s economy while gradually resurging
special focus on the unbanked areas objective to promote access to continues to be challenged due
of Pakistan, Your Bank organized financial services in remote parts of to structural, regulatory and fiscal
various seminars throughout the the country, Your Bank developed impediments, simultaneously
year. Highlight of these seminars was dedicated business plans for far impacting the banking industry.
seminar in Lahore on “Private Sector flung areas of Khyber Pakhtunkhwa Your Bank, remaining fully cognizant
Credit and Growth in Tax Revenue” and Baluchistan. The plan envisions of rapidly changing domestic and
for assisting authorities in finding setting up of branches in remote international operating environment
ways of achieving growth in tax areas, identifying potential customers fostering new competitors and
revenue through private sector credit to assist in their banking needs and diverse customer needs, adopted a
growth and leading to broad based raising awareness about benefits of broad based multi-pronged strategy
economic growth. This new initiative banking. geared towards overcoming these
by Allied Bank was well appreciated critical challenges.
throughout wide spectrum of During the year, Your Bank hosted
business circles and tax authorities an event in Quetta, Baluchistan, During the year, the Bank successfully
alike. which was graced by the Governor maintained focus on robust balance
SBP along with all the senior banking sheet growth, strategic expansion
In sync with SBP’s vision to promote fraternity; being a prelude to SBP’s in all banking channels, introduction
agriculture and SME financing, Your Agriculture Advisory Committee’s of technology savvy and innovative
Bank organized Financial Awareness meeting the following day; focused on product offerings, customized
Seminar on SME and Agri Financing promotion of financial inclusion in the banking solutions, strengthening of
in Quetta, Sukkur, Peshawar and key agriculture sector. core deposit base, augmentation
Faisalabad. Interactive seminars on of risk management framework
“Customer Awareness Program on It gives me an immense pleasure and optimization of operational
Islamic Banking” was arranged at that Your Bank’s aforementioned efficiencies.
Mirpur Azad Jammu & Kashmir, Kot efforts were duly acknowledged by
Abdul Malik and Multan by the Bank acclaimed publications/regulators, The total asset base of Your Bank
for promoting Islamic Banking. both domestically as well as increased by 17% to close at
internationally, in 2017: Rs. 1,245 billion as at end December
In continued efforts to enhance 31, 2017 as compared to Rs. 1,069
»» Bank of the Year Pakistan 2017 –
corporatization of businesses in the billion as at December 31, 2016.
Bankers Magazine UK
country, Your Bank also organized The equity base of Your Bank grew
seminar on “Transition from family »» Top 25 Companies Award - by 6% to reach Rs. 107 billion as
owned business structure to Pakistan Stock Exchange at December 31, 2017. The Capital
Corporate Structure” in Islamabad »» Top Issuer of PayPak Card – Adequacy Ratio (CAR) of Your Bank
and Lahore to encourage more State Bank of Pakistan stood at 22.4% at December 31,
corporate setups in family owned 2017; thus being above the industry
»» Corporate Excellence Award average of 15.4% (Sep’17) and the
businesses.
– Management Association of regulatory requirement of 10.65%.
Pakistan
 Allied Bank Limited 43

Investments (Cost) Segmental Advances

Average Deposit Compostion
– Performing (Net)

22%
34%
92%
2%
3%
4% 8%
1%
90%
18%
26%

Market Treasury Bills & PIBS Shares

TFC and Sukuk Others CIBG CRBG & IBG Others
Current Saving Current Remunerative Term

Aimed at gauging short-term 2016. Like-wise Savings deposit also

resilience of liquidity risk profile and showed a growth of 10% and closed Your Bank’s robust Risk Management
reduce funding risk over a longer at Rs. 233,494 million. Your Bank Framework driven by technology
time horizon, Your Bank implemented accordingly improved its CASA share enabled proactive monitoring and
Liquidity Standards of Basel III to 79% despite the aforementioned sustained recovery efforts resulted
Framework. State Bank of Pakistan operational challenges. in decline of Non-Performing Loans
introduced Net Stable Funding Ratio by Rs. 2,379 million to reach at Rs.
(NFSR) and Liquidity Coverage Ratio Investments increased by 18% 18,052 million at the close of the
(LCR) vide Circular No.08 of 2016 to close at Rs. 698,082 million in year; as against Rs. 20,432 million
in order to implement these liquidity 2017 as compared to Rs. 589,864 in 2016. The Bank’s infection ratio
standards. Your Bank’s NSFR stood million in 2016; primarily driven by also declined to 4.6% while the
at 187% and LCR at 142% as at limited quality lending avenues. Your coverage ratio increased to 93%
December 31, 2017 against SBP Bank adopting a prudent approach as at December 31,2017. These
requirement of 100% and 90% successfully re-profiled the investment infection and coverage ratios of the
respectively; fully reflecting the strong mix towards higher exposure in Bank significantly outperformed the
liquidity profile of Your Bank. short-term Treasury Bills; in view of industry average of 9.2% and 85% as
the bottoming out of the benchmark at September 30, 2017 respectively.
Deposit base of Your Bank grew by interest rates. No FSV benefit was considered
a healthy 10% and reached to Rs. while determining the provision
883,740 million as at December 31, Rising pace of economic activity against NPLs as permissible under
2017 in comparison to Rs. 805,111 facilitated in slight recovery of the BSD Circular No. 01 of 2011 dated
million last year despite immense overall private sector credit appetite. October 21, 2011.
competition for low cost deposit in The gross advances of Your Bank
the industry together with the stifling grew to Rs. 388,751 million as at Profitability
effect of withholding tax regime for December 31,2017 as compared
non-filers of Income Tax returns. to Rs. 348,346 million in 2016; thus Growth in average earning assets by
The sustained efforts of Your Bank registering an increase of 12%. 13% and decline in cost of deposits
resulted in the improved deposit mix In sync with the industry; Power, from 3.3% last year to 3.0% during
with 25% growth recorded in the Cement, Chemical and Commodities 2017, assisted Your Bank to partially
no cost current deposits; enabling sectors remained key area of focus offset the drop in Net Interest Margins
the accomplishment of crossing during the year. Average ADR of Your (NIM) owing to declining lending
significant milestone of Rs. 300 billion Bank was registered at 48% during spreads and maturity of high yielding
mark at Rs. 316,335 million at the the year ended December 31, 2017 government bonds during the year.
end of December 2017 from Rs. compared with the Industry’s ADR of Net interest income of Your Bank
254,033 million as at December 31, 51% at the close of the year. stood at Rs. 31,578 million, whereas
44 Annual Report 2017

CEO’S
REVIEW
accelerated recovery efforts, yielded Total Assets
results with net provision reversal of (Rs. in Billion)
Rs. 1,967 million as compared to
Rs. 335 million last year fully offset 2017 1,246
the negative impact on spreads.
2016 1,069
Resultantly Net Mark-up income
after provision stood at a level of Rs. 2015 992

33,536 million as at December 31, 2014 842

2017 as against Rs. 33,508 million at
the end of corresponding year. 2013 734

2012 634
Your Bank continued to enrich its fee
based product portfolio during the
period under review by introduction
of new products such as Banca Profit Before & After Tax
assurance, Auto loans, Prepaid cards, (Rs. in Million)
launch of “MyABL” app and Branch
Internet Banking solution along with 2017 12,734
20,879
introduction of Paywave cards. These 14,427
2016
products shall assist in growth of 23,831

Your Bank’s fee based income going 2015

15,120
25,503
forward. 15,015
2014
22,202

Despite tough operating environment, 2013 14,643

14,761
Your Bank’s non-markup income and 11,641
2012
15,836
other income together increased by
3% and stood at Rs. 4,240 million Profit Before Tax Profit After Tax

during 2017 in comparison to Rs.

4,116 million during 2016.
Income Composition
(Rs. in Million)
Despite declining payouts by the
power sector, dividend income 2017 65,709 8,871

realized during the year amounted 2016 64,592 11,210

to Rs. 3,226 million; thus affirming
the strategic holding of blue-chip 2015 72,116 9,755

equity portfolio. In spite of under 2014 67,001 12,736

pressure capital markets, with 15%
drop in PSX-100 index during 2017, 2013 54,222 9,603

Your Bank’s equity portfolio showed 2012 49,503 13,794

resilience to potential impairment
charge which was restricted to a Interest Income Non-Interest Income
minimal Rs. 9 million during 2017
compared to Rs. 75 million last year. to Rs. 21,423 million during 2017, aggregated to Rs. 12,734 million as
despite continued investments at December 31, 2017.
Income from dealing in foreign towards technological uplift for the
currencies posted a solid growth of digital age, footprint expansion in EPS of Your Bank stood at Rs.11.12
18% and amounted to Rs. 762 million both conventional and alternate per share, while Bank’s Return on
in 2017 against Rs. 645 million in delivery channels and continuous Asset (ROA) and Return on Equity
2016. Resultantly, overall non-interest development of the human capital. (ROE) stood at 1.1% and 17%
income stood at Rs. 8,871 million respectively during 2017; compared
during the period under review. Resultantly, Your Bank’s Profit Before to the industry’s average ROA and
Tax stood at Rs. 20,878 million during ROE of 0.9% and 13% respectively
Your Bank’s administrative expenses 2017. Despite retention of Super tax as at September 2017.
registered a modest increase of 6% of 4% during 2017, Profit after tax
 Allied Bank Limited 45

It is important here to clarify an (A One Plus). These ratings indicate Amidst changing geo-political
important post balance sheet Your Bank’s ability to meet its financial scenario, Pakistan’s economy is
event. Your Bank is party to a Suo commitments and ensuring steady expected to maintain its growth
Moto case SMC No. 20/2016 in profitability without compromising the trajectory with GDP growth rate
the Honorable Supreme Court of character of other key variables. to be around 6% in FY 2017-18.
Pakistan. Through this case, the However, evolving relationship with
Honorable Supreme Court has Moody’s Investors Service maintained key international coalition partners,
taken up the matter relating to Your Bank’s deposit rating at B3. limited cost efficient energy supply,
pension arrangements of certain There is an upward revision from dual challenges from fiscal deficit and
privatized banks. Despite Your ‘Negative’ to ‘Stable’ and is at par deteriorating current account situation
Banks’ submission of being legally with the ratings of Tier-I banks in the are anticipated to pose key threats to
compliant, the Honorable Supreme country. this challenging target.
Court of Pakistan concluded the Suo
Moto case on February 13, 2018, Corporate Governance Rating Gradual progression in exports
by using judicial discretion and fixed needs to be continued with deeper
the minimum pension at Rs. 8,000 JCR-VIS Credit Rating Company penetration in existing and new
per month from a prospective date Limited (JCR-VIS) reaffirmed the markets. As CPEC related projects
and with 5% indexation on an annual corporate governance rating of start gaining foothold, capitalizing
basis. The detailed judgment has Your Bank to “CGR 9+”. This on infrastructure development by
not been issued by the Honorable rating indicates a very high level of ancillary upstream and downstream
Supreme Court till the approval corporate governance practices industry, formalization of special
of the financial statements by the implemented by Your Bank through economic zones, shifting towards
Board of Directors, and therefore the strong internal control environment, investment led GDP growth model
Management is not in a position to regulatory compliance and rather than consumption led growth
work out the financial impact. transparent financial framework. The and sustenance of improving
ratings range from CGR-1 to CGR-10 security situation remains imperative
The unconsolidated financial where 1 is lowest and 10 is highest. to achieve sustainable growth
statements of Your Bank for the year momentum.
ended December 31, 2017 do not Future Outlook
include the effect of this judgement; The future of banking shall Improving the country’s ease of doing
which will be accounted for in the encompass higher focus on business index rating through broad-
year ending December 31, 2018 understanding changing customer based reforms aimed at efficient
as past service cost; once the plan preferences, appropriate technology functioning of Public Sector Entities,
is formally amended and approved usage in terms of artificial intelligence, corporatization of local businesses,
upon receipt of aforementioned machine learning, Big Data, Internet simplifying and broadening taxation
detailed judgement and related of things (IoT) and robotics along regime and developing manpower
actuarial valuation. Your Bank with continuous enrichment in equipped with right skills to deliver
remains well positioned to absorb the skill-set levels of the Bank’s human desired growth are fundamental
potential impact of this judgement. resources to thrive in the ‘digital requirements for the next growth
age’; under the watchful supervisory phase. In this regard, recent
Analysis delineating actual framework continuously evolved by incremental Investments flows in to
performance against Key the regulators. LNG and Automobile segments is a
Performance Indicators (KPIs) is welcome development.
separately appended in the Annual While the global economic growth
Report is projected to pick up to 3.9% in Current account deficit is projected to
2018; possibility of a financial market remain within range of 4-5% of GDP
Ratings correction triggered by rise in core as growth in imports are expected to
inflation in advanced economy sustain at similar levels on account
Entity Rating leading to faster than anticipated of high demand for machinery, raw
The Pakistan Credit Rating Agency hike in interest rates, could dampen material as well as consumer goods.
(PACRA) has kept long term rating growth prospects and business Recovery in exports initiated in 2017
of Your Bank at “AA+” (Double A confidence across the globe. after prolonged downwards trend is
Plus) and short term rating at “A1+” not expected to be material enough
46 Annual Report 2017

CEO’S
REVIEW
to stem the trade account deficit
expected at around US$ 30 billion in
FY 2017-18.

Net flow of Foreign Direct Investment

(FDI) is forecasted to reach US$
3.7 billion with China to remain as
the lead investor, accounting for
more than half of the total FDI in the
country.

In a bid to facilitate remittances

and attract receipts through official/
banking channel, State Bank of
Pakistan in collaboration with
Pakistan Remittance Initiative (PRI)
has recently launched ‘Asaan
Remittance Account’ to be opened
by banks with simplified procedures;
focused towards enhancing outreach remain imperative to attain long term costs deposit mobilization and quality
of basic financial services to sustainable growth. credit expansion.
unbanked or underserved segment
of the population. Your Bank’s Allied During 2018, focus shall remain on Capitalizing on the upgradation of
Express product is already catering to persisting with the gradual digital state of the art Temenos T-24 (R-16
this niche segment. transformation journey of Your version) is expected to significantly
Bank. Improving access to financial boost customer service experience
Inflation is expected to rebound services for the large unbanked and and facilitate in quicker launch of
in 2018 in the face of increasing underbanked segments of our society customer centric innovative products
international oil prices and requires sustained efforts towards and services. The newer version
depreciation of PKR; expected expansion in outreach through all is expected to further enhance
to hover within 5-6% range. This conventional, alternate and digital information flow within Your Bank and
rebound in inflation may necessitate delivery channels, while playing active facilitate timely decision making for
review of credit expansionary role in enhancing financial literacy and the benefit of valued customers.
monetary policy stance of SBP and nation building.
lead to upwards revision in Policy It is imperative to note here that
Rate which began in January 2018 Your Bank intends to place greater Your Bank remains fully aware
with an upward movement of 25 bps focus on augmenting recently of information security threats
in benchmark ‘Policy rate’. established Middle Market segment associated with implementation
by establishing new to bank of new systems. Information and
Banking sector is gradually relationships and improving Trade privacy safety measures are being
transforming to cater to the Finance through strengthening of constantly updated to ensure data
aforementioned challenges. However, dedicated Trade branches; facilitating protection. Your Bank is continuously
limited quality credit expansion quality obligors while augmenting strengthening its software driven
opportunities, maturing government contribution towards fee income in Compliance and fraud detection
securities portfolio, low interest overall earnings. mechanism to reduce any potential
rates environment, rising costs of instances of misrepresentation within
doing business and complex tax Your Bank would be evaluating any local and international business
regime shall continue to strain the opportunities that may arise with the relationships.
bottom line margins. Mobilization expected economic growth amidst
of low cost deposits to support the completion of CPEC related projects. Venturing further in to branchless
falling margins along with provision Sustained efforts shall be continued banking avenues along with launch
of technology driven customer towards augmentation of account of and augmentation of mobile apps
centric products and services shall opening run-rates, enhancing low shall open new avenues to interact
 Allied Bank Limited 47

with our traditional and more tech

savvy customers. A new mobile
application exclusively designed to
cater wide range of mobile payments
is currently being developed and will
be launched during 2018 with key
features like “QR Retail Payments”,
“Login through Biometric Touch
ID” and ability to “Locate Nearby
Merchants”.

Your Bank intends to initiate various

new services during 2018 in a phased
manner including launch of digital
lockers, expansion in self-service
branches, mortgage financing, mobile encompassing part of Bank’s on developing long term customer
ATMs, alliances with service providers strategy. relations through providing superior
and other major collaborating service experience to customers.
vendors and e-commerce platforms Your Bank shall continue to invest in I would also like to put on record our
along with products designed for Human Capital Development in order gratitude to State Bank of Pakistan,
all segments of society including to build a workforce equipped with Securities & Exchange Commission
Youth, Senior Citizens and Females knowledge, experience and insight and other regulatory authorities for
shall provide new areas to derive into Digital Banking Age. their continued support and guidance
growth. Furthermore, Your Bank is Your Bank is also revamping its during this ongoing journey of
instilling new impetus to its service performance evaluation criteria by success.
quality standards by introducing putting in place a progressive all-
top 100 flagship branches with encompassing Key Performance
the placement of well-trained and Indicators mechanism to monitor
dedicated Customer Service Officers. the progress; in line with the stated
Continuation of Mystery Shopping objectives and guidelines issued on
across the Bank’s selected branches Tahir Hassan Qureshi
risk-based remuneration practices by
is also expected to further boost State Bank of Pakistan. Chief Executive Officer
Bank’s customer service standards.
Dated: February 21, 2018
Acknowledgement
Focusing on further expansion in
Islamic Banking during 2018, Your I would like to express my gratitude
Bank intends to introduce Islamic to our Board of Directors for the
Banking windows concept within vast leadership and guidance extended
conventional banking network; which for the Bank’s success. I would
is expected to provide additional also like to acknowledge the hard
support to our growing Islamic work and devotion manifested our
Banking business. team members who concentrated

Compliance with local and

international regulatory requirements,
transparency and adoption
of international best practices
shall continue to remain an all-
48 Annual Report 2017

GROUP’S
REVIEW
Corporate & Investment Banking rates and surplus liquidity which exposure reduction in our stressed
further intensified competition on portfolio through proactive measures
During 2017, Corporate and
lending and consequently impacted and active cash recovery. Additionally,
Investment Banking Group (CIBG)
the pricing on advances. CIBG focus on augmenting trade finance
continued to capitalize on its strategic
remained steadfast and continued portfolio was also maintained to serve
positioning as one of the leading
to deepen relationships with premier the trade finance requirements of
wholesale banking service providers
corporate entities and business customers.
in Pakistan. CIBG’s focus remained
conglomerates for growth with
on highly customer-centric approach,
enhanced focus on non-funded With a view to serve lucrative and
strong understanding of business
and ancillary income by diversifying largely underserved middle market
dynamics and catering to evolving
revenue streams. sector, Your Bank established a
needs of obligors, competency to
dedicated Middle Market (MM)
provide tailor-made and structured
Corporate Banking (CB) continued to division within CIBG for exploring
financial solutions and comprehensive
harness the long standing corporate bankable avenues in mid-tier
relationship coverage to ensure
relationships for sustainable portfolio corporate segment. MM division
consistent level of service excellence.
growth and business generation primarily covers top tier category
with the primary objective of meeting commercial entities, with varied
CIBG continues to offer a wide range
all business requirements of our market dynamics and banking
of products and services covering all
corporate and institutional customers requirements. MM intends to
types of funding and trade facilities,
with highly personalized services. CB also capitalize on CB’s corporate
cash management, remittance
remained focused on top tier obligors relationships and target entities in
business and customized investment
having sound future prospects, strong business relationships with corporate
banking solutions. CIBG is also
business fundamentals and proven clientele as value chain partners
maintaining a well-diversified and
account history; leading to consistent in capacity of vendors, producers,
profitable capital markets portfolio
addition of high quality assets to suppliers, distributors, retailers
comprising of high dividend yielding
loan portfolio thereby augmenting and service providers; and further
blue chip securities. Furthermore,
overall quality of Bank’s advances. penetrate in this untapped MM
CIBG also synergizes with other
During 2017, Corporate Banking’s segment.
business groups for capitalizing on
performing loan portfolio increased
cross sell opportunities for the Bank.
by Rs.39,810 million as against Investment Banking (IB) remained
December 2016. Moreover, continued engaged with a broad range of
During the year, banking sector
vigilance in monitoring of credit corporations and institutions enabling
continued to face major challenges
portfolio culminated in significant them in realizing sustainable growth
including persistently low interest
 Allied Bank Limited 49

and achieving strategic and financial The Bahrain Wholesale Banking exchange houses. During 2017, Your
goals that are channelled through Branch and Dubai Representative Bank sponsored the First Pakistan
long-term relationships, in-depth Office remained instrumental in Remittance Summit organized in
understanding of structured finance, harnessing opportunities for business UAE, in collaboration with SBP, to
local regulations, rich experience of in the Gulf region. Your Bank through raise awareness regarding benefits
transactions across various market prudent business strategies, while of utilizing banking channels for
cycles and innovative solutions remaining fully compliant with local remittance flows.
tailored to suit financing needs regulatory framework under Central
of these valued clientele. The IB Bank of Bahrain, posted a profit The CIBG’s stellar performance was
team continued its momentum of before tax of US$5.9 million, posting also acknowledged by prestigious
past years in 2017, driven by Debt a growth of 20%. Global outreach international publications; as Your
Syndications & Advisory, Project further expanded during 2017 with Bank was awarded with the “Best
Financing, advising and financing establishment of a Representative Corporate & Institutional Bank –
client requirements in diversified Office in Beijing, People’s Republic Domestic, 2017” and “Best Loan
sectors including power, financial of China. Your Bank has a strong Adviser, 2017” awards by The Asset
institutions, cement, food, leasing, focus on the significant trade and Magazine, Hong Kong and the
fertilizers and telecommunication. investment flows between China “Best Corporate and Investment
The CIBG transaction fee income and Pakistan, and look forward to Bank – Pakistan, 2017” award by
accordingly crossed Rs 500 million extracting maximum synergies from the Asiamoney Banking Awards, UK.
mark; posting an increase of 24%. the relationship between the two Additionally, Your Bank also received
countries, going forward. the Runner-Up award for “Corporate
The Capital Markets division Finance House of the Year 2016 –
continued to realize steady dividend Cash Management Division extended Fixed Income” from CFA Society of
income from its well diversified its outreach through new client Pakistan.
investment portfolio of blue chip acquisition, product development
securities.  Investment Portfolio of and marketing efforts. With an Going forward, CIBG’s focus shall
the Bank is being prudently managed objective to embrace digitization and remain on top-tier/blue chip corporate
by investing in companies having automation of banking processes, relationships for enhancing portfolio
successful track record of stable Your Bank successfully launched while improving the overall quality
profitability and dividend payout. Payment Hub and Business Internet of portfolio. While simultaneously
Despite slightly low payout by the Banking solutions; providing our enhancing penetration in mid-tier
power sector, dividend income for customers excellent platforms for corporate and MM segment to
the year remained robust at Rs.3,226 present and future transactional diversify and generate sustainable
million. banking requirements. business and diversifying revenue
stream. CIBG seeks to maintain its
The Financial Institutions, International Home Remittance Division (HRD), contribution towards Your Bank’s
and Cash Management Division continued to enhance remittance overall profitability through cross
continued to enhance global inflows by strengthening relationships selling of cash management and
institutional banking relationship with existing correspondent financial institutions products and
base with leading and highly partners and adding new-tie- digital banking solutions while
reputed financial institutions ups globally. Through more than capitalizing upon established
globally, to support trade, treasury, 100 correspondent relationships corporate relationships and
foreign exchange and payments worldwide, and large network of international operations to capitalize
requirements. In addition, our country-wide 1,250 branches, HRD on CPEC related opportunities.
partnerships with International delivers services for the overseas Moreover, accelerated efforts are
Finance Corporation (IFC), Asian Pakistanis to remit funds effectively being made to explore new corridors
Development Bank (ADB) and Islamic and efficiently to beneficiaries through for remittance business; maximizing
Development Bank (IDB) continued multiple channels. During 2017, Bank’s synergies across its domestic
to facilitate smooth execution of new correspondent partners were and international network.
customers’ growing and diversifying added from Oman, UAE, UK and
international banking requirements. Australia with the focused strategy
to bring digital-online potential
50 Annual Report 2017

GROUP’S
REVIEW

Commercial and Retail Banking of high growth in current accounts issuance of over 18,000 cards in a
not only improved the overall deposits short span since launch.
Commercial and Retail Banking
but also assisted in improving Your
Group (CRBG) encompasses
Bank’s overall CASA mix to 79%; Targeted at expanding consumer
enriched suite of technology driven
simultaneously assisting in reducing finance segment across country, Your
products and services. Major focus
cost of deposits by 26 bps. Bank launched “Allied Car Finance”
areas remained cost effective
during 2017. Attractive features like
deposits, quality loans and payment
Concurrent focus was also competitive mark-up, swift application
solutions, delivered through vast
maintained on enhancing the processing and flexibility to choose
network which expanded by 60 new
number of debit cards in circulation the repayment period has made this
branches to reach 1,126 branches
which increased by issuance of product an attractive proposition and
across Pakistan and various alternate
261,745 new cards. In line with CRBG intends to expand offering
delivery channels.
Your Bank’s vision to support SBP’s of this product in more cities across
initiative of reducing dependency Pakistan going forward.
CRBG’s key focus remained on
on international payment schemes
enhancing outreach through
while simultaneously enhancing CRBG maintained focus on utilizing
establishing new to bank relationships
financial Inclusion of unbanked and Alternate Delivery Channels to cater
and further deepening of existing
underbanked population, issuance to the customer requirements; key
relationships. Highlight of the year
of PayPak debit cards with attractive initiatives including revamp of MyABL
remained phenomenal growth in
features like annual fee waiver on Internet Banking and launch Business
number of new accounts opened
issuance, minimum account opening Internet Banking facilitated CRBG
during the year; as CRBG played
requirements and no minimum customers in utilizing Your Bank’s
pivotal role in accomplishing over
balance requirements remained key broadening Digital Banking products
500,000 new to bank (NTB) account
focus area. Through issuance of over suite.
opening;. A great positive for the
100,000 PayPak debit cards, CRBG
Bank is the share of 30% Asaan
remained instrumental in Your Bank During 2017, aimed at enhancing
NTB accounts in this overall growth;
receiving the award for “Top issuer of presence in SME and agriculture
reflecting towards Bank’s continuous
PayPak Debit Cards by 1-Link”. segments, CRBG arranged 8
focus towards the enhancing financial
seminars related to promotion of
inclusion.
During 2017, launch of Allied EZ financial literacy and financial inclusion
Prepaid Debit Card was another in the underserved areas of the
As a result of sustained focus on
major initiative undertaken by CRBG. country. Development of dedicated
deepening of core deposit base of
Allied EZ Cash Prepaid Debit Card is business plans for underserved areas
the Bank, CRBG achieved robust
a re-loadable card embedded with with focus on expansion in outreach
growth in overall deposits while
the convenience of top-up from any and deposits growth highlights Your
playing a pivotal role in Your Bank’s
ABL branch. PIN based security Bank’s commitment to improving
surpassing Rs.300 billion current
features enhances the acceptability access to financial services in these
accounts landmark. The achievement
amongst customers reflected by areas.
 Allied Bank Limited 51

Reinforcing the CSR philosophy of Digital Banking Group (DBG) has customers to execute wide range
the Bank, with substantial focus on been established with the vision to of banking transactions online from
education, healthcare, philanthropy, keep up with the pace of rapidly their workstation/offices. BIB is an
sports promotion and environment evolving digital innovations in the indispensable tool in today’s 24/7
preservation; CRBG donated banking industry. During 2017, DBG fast paced business world. Business
computers to various colleges in focused on the progress of existing entities can initiate specialized
Loralai, Khuzdar, Zhob and Turbat. digital products and services and also Trade Finance transactions (Letter
This initiative reiterated the Bank’s commenced new initiatives aligned of Credits (LCs), Guarantees and
support for the development with the long term strategy of Your Export Collections, Term Deposit
of education in general and in Bank to enrich the digital banking issuance and encashment, perform
Baluchistan in particular. products suite. General Banking Transactions
(Funds Transfers, Bill Payments,
Going forward, CRBG aims to remain During the year, DBG launched Allied Bankers Cheque Printing etc.)
focused on volumetric deposit growth EZ Cash Prepaid Card to facilitate and can perform Bulk Payment
through augmentation of account existing customers and un-banked/ transactions in Allied Bank Accounts.
opening run-rates, low costs deposit walk-in customers. This card provides Enhanced security feature of Mobile
mobilization, quality credit expansion an easy solution to the financial Authenticator application has also
and introduction of innovative needs of individuals with PayPak card been introduced for the first time
offerings. Launch of new initiatives acceptability nationwide. in this solution whereby the user
during 2018, including mobile ATM, will be able to generate the Soft
Automated Lockers at selected Furthermore, online internet Token on their Mobile phone without
locations and products related to banking interface “Allied Direct” dependency on the traditional
cross section of the society are was significantly transformed during physical hard token devices.
expected to attract new customers 2017, with the launch of “myABL”
during the year. mobile apps for Apple iOS and With the aim of gradually expanding
Google Android based users. myABL the digital banking landscape, two
Digital Banking Personal Internet Banking offers a Self-service banking branches were
seamless product offering usable launched in Karachi and Lahore. The
Banking in the Digital Age requires
across multiple devices including branches are equipped with modern
a paradigm shift in how banks react
desktop computer, laptop, tablet or devices and technologies to provide
to customers’ changing needs. The
smart phones all possible digital touch points to the
journey to Digital Banking involves
customer. The “self-service banking”
utilization of advanced data analytics
Similarly, myABL Business Internet concept enables customers to visit
with simultaneous transformation of
Banking, exclusively designed the branch and perform banking
the core processes and integrating
for business and institutional functions on their own without having
them in to highly responsive customer
customers, was also launched during to wait in queue for banking staff’s
centric technology driven products
the year. This user-friendly and assistance. The functions include
and services.
device-responsive facility enables Account Opening, cash deposit/
52 Annual Report 2017

GROUP’S
REVIEW
withdrawal, funds transfer and bill
payments.

The year also marked the

inauguration of a first of its kind
‘Innovation Lab’ within Your Bank’s
Head Office premises. Innovation
Lab is developed with the aim to
serve as a platform for both research
and development of latest digital
banking products and services by
making use of rapidly evolving market
technologies. It will also serve as a
hub for encouraging collaborative
partnerships with Fin-Techs, to further
enhance DBG’s product and services
suite.

Interaction with customers through

corporate website was further
enhanced through user friendly tools
and accessibility by incorporating a
more efficient and latest Auto-Finance
Calculator. Moreover, social media
presence was maintained through
various promotional campaigns;
actively engaging with our existing
and potential customers.

DBG also launched various mega

campaigns during 2017 to enhance
retail transactions and promote
cashless economy which received signed a strategic alliance for the assisted in further enhancing EMV
tremendous response from our Blessed Friday event. Through compliance standards to protect its
valued customers. The campaigns this strategic partnership, ABL customers from potential ATM fraud
were launched with conjunction VISA Card holders were able to through EMV compliance on 73%
with the leading players in market use their debit and credit cards ATM network.
including following major alliances for making online payments
signed during 2017: on Yayvo.com with exciting In view of future trends, DBG is
discounts. geared towards continuous pursuit
i. Strategic Alliance with Daraz of developing innovative products
for Blessed Friday With the purpose of facilitating and services designed to serve the
Your Bank signed a partnership vendors through secure and evolving demands of the customers;
agreement with the leading automated processes, DBG signed a thereby playing a critical role in
e-commerce website www. MoU with Punjab Food Authority for Your Bank’s gradual transition
daraz.pk for Pakistan’s biggest issuance of e-License Smart Cards to into the digital era. Going forward,
online shopping sale event of food operators and implementation of introduction of latest technologies, in
the year – Daraz Blessed Friday. Digital Cash Collection Management. sync with domestic market dynamics,
During the week-long sale Allied DBG collaborated for the provision along with uplift of existing products
Bank VISA Card Holders were of real time cash collection and are expected to have marked impact
able to enjoy an additional 15% management services solutions to on traditional banking processes
discount during the sale. 6,000 plus vendors of 27 Model including payment methods,
Bazaars. credit expansion, low cost funding
ii. Strategic Alliance with Yayvo. mobilization, risk management,
com for Blessed Friday Being a pioneer of EMV technology operations and sales along with
compliance in the industry, DBG regulatory framework.
Your Bank and Yayvo.com
 Allied Bank Limited 53

Human Resource Group

Human Resource Group (HRG)
continues to play a pivotal role as
an effective business partner for all
functions of Your Bank. HRG aims
to inculcate a culture of positive
thinking along with clear focus within
Your Bank enabling conducive work
environment.

During 2017, HRG focused on

inculcating efficiencies across the
network, capitalizing on the robust
technology platform of Your Bank.
Branch KPIs were re-aligned to on cross functional exposure for the tools for candidate’s psychological
enhance performance in line with Senior Management positions. assessment.
industry’s rapidly changing dynamics,
without compromising on the Optimum human resource planning Strong industry-academia linkages
customer service quality. resulted in 236 cadre change remain crucial for nurturing future
promotions for the tellers to fulfill the talent. In this context, ABL became
HRG revised and updated Human requirements of Banking Services the first bank in Pakistan to be
Resource (HR) Policy of Your Officers (BSOs), while 1,326 awarded Trainee Organization
Bank assisting the employees employees were recruited in 2017. outside Practice status by Institute
in establishing and maintaining of Chartered Accountants Pakistan
consistent practices in the workplace Further 952 grade promotions were (ICAP). Under this status, the
with better understanding of the undertaken. As per Bank’s policy of Bank offers ICAP students a
underlying policies and procedures. providing ample growth opportunities comprehensive ‘outside practice’
Similarly, Job Descriptions (JDs) within the organization, Human training program. Accordingly, the
up to managerial level have been Resource introduced BDOs Career Bank inducted the first batch of
formalized and implemented across Path to build a pool of motivated and (15) ICAP trainee students who are
the bank; providing higher clarity enthusiastic young employees geared currently working in different functions
level and better understanding of the towards branch manager roles. of the Bank as per approved
respective roles. Concurrent focus mentorship plan.
was maintained in developing a During the 2017, HRG established an
female inclusive workforce whereby in-house assessment center named Employee entitlement policies/rules
gender ratio of 15% was achieved as ‘ABL CARE’. The center assesses such as ‘employee auto finance/
during the year. the personality traits, work attitudes lease rules’ and ‘medical benefit
and leadership potential through rules’ were revised to bring them at
Career growth opportunities were psychometrics to determine the par with the market trends. Under the
offered to employees at all hierarchical psychological fitness and suitability Islamic banking mode, employee car
levels. Adequate succession planning of candidates for employment and finance facility (Ijarah) and employee
at senior and mid-management level promotion. This unique initiative by home finance facility (Diminishing
was implemented through merit Allied Bank Limited is first such step Musharakah) have also been
based elevations from within Your in industry which uses scientific implemented.
Bank’s internal resources; with focus
54 Annual Report 2017

GROUP’S
REVIEW
For enhanced provision of quality
health facilities to staff members,
HRG expanded list of panel hospitals,
by including healthcare institutions
equipped with quality healthcare
facilities across the country.

Training and Development of

employees remained a primary
focus of HR initiatives during 2017.
Technology awareness, productivity,
ethics, regulatory compliance, design
thinking and personal effectiveness
are few critical areas that were
targeted through the aforementioned
training programs. The year marked
a complete revamp of Management remain the basis of all future Human 2018. Temenos, a Switzerland based
Trainee Officer Program with special Resource initiatives. During 2018, core banking system provider, has
attention to digital banking and Fin- compliance with SBP’s guidance on acknowledged the implementation
Techs. Whereas, new specialization risk based remuneration practices at ABL as the largest implementation
modules encompassing trade, credits shall further align the overall robust in terms of number of branches
and Islamic banking were introduced remuneration framework of Your Bank connected with T24 System.
in MTOs Training program in line with international best practices.
with Bank’s business goals and Online branches, multitier
expansion strategy. Keeping in view datacenters, fiber optics and satellite
Information Technology
the importance of self-paced learning, links to deliver uninterrupted banking
new computer based training (CBTs) Global banking industry is now services remained the pre-requisite
programs were also developed and catering to customers who demand for smooth banking experience for
added to the in-house developed smarter, faster and easier experiences our valued customers.
e-learning portal.  in all their banking transactions. As
customers become increasingly During the year 2017, ITG also
In line with SBP directives for training technologically knowledgeable, they established effective real time
initiatives in the under privileged are expecting continuous innovation monitoring mechanism to handle any
areas for financial inclusion, the Bank towards highly personalized and outages proactively. Furthermore,
also arranged trainings focused on efficient services. This, combined ITG upgraded in-house developed
capacity building of our employee with a disruption from Fin-Tech portal with latest technology enabling
based in Baluchistan, FATA and Gilgit competitors, has driven banks to the employees to use electronic
Baltistan. revamp their business strategies workflows effectively and efficiently.
for the digital era. This paradigm
As part of sustained focus on training shift from product-centric towards Business continuity and disaster
and development 892 training customer centric transformation recovery remained a high priority
programs were conducted during is being led by the Information to ensure availability of round the
2017 with participation from 18,292 Technology Group (ITG). clock services. For this purpose,
participants, ITG developed an alternate disaster
recovery site equipped with identical
Going forward, Human Resource hardware and software infra-structure
Group shall continue its concerted to maintain near real time data
efforts towards augmenting backups.
capabilities of the Bank’s Human
Capital thereby enabling the Bank ITG undertook various initiatives In view of dedicated focus of Your
to thrive in the digital era. The during the year with key highlight Bank towards the growth of Digital
Bank’s commitment on being being the ongoing work on the Banking, ITG also successfully
an equal opportunity employer planned upgradation of Temenos T24 facilitated the launch of Business
providing growth prospects and core banking software from version Internet Banking for corporate and
fair remuneration shall continue to R8 to R16; successfully culminated in institutional customers. For personal
users, Your Bank revamped and
 Allied Bank Limited 55

rebranded the Internet Banking Islamic Banking Group: IBG continued to introduce asset
application, MyABL, with enhanced products including Islamic Export
security features and enhanced According to World Bank, the growth Refinance, Staff Financing (HBF and
functionalities. Going forward, further of Islamic finance has been rapid at Auto) and liability products including
enrichment of MyABL App to facilitate 10-12% annually over the past two Allied Islamic Express Account.
Master-pass QR retail payments will decades, with the industry surpassing The Bank also approved Allied Car
provide added services to our valued approximately US$ 2,000 billion in Ijarah as well as Musawama mode
customers. size by 2016. Islamic finance has of financing, which will be officially
emerged as an effective tool for launched during 2018. During the
Collaboration with a Telco lead financing development worldwide, year, IBG also introduced Islamic
Microfinance bank to utilize agent including in non-Muslim countries. Banca Insurance product offering
network for branchless banking Accordingly, Islamic financial their niche customers another avenue
activities with biometric authentication institutions are gradually becoming an to develop a savings culture.
mechanism was also undertaken in integral part of the financial system.
2017. Growth is expected to be maintained IBG entered into Project Financing
by the banking needs of over 1.5 arrangements with blue-chip obligors;
During the year under review, billion muslim customers globally as with highlight being the bilateral
ITG further assisted in delivering an alternate to conventional banking. financing arrangement with Sui
enhanced Customer Relationship Northern Gas Pipeline Limited for
Management (CRM) software aimed Islamic Banking Industry assets in financing ‘System Augmentation in
at providing superior service quality to Pakistan during the year grew to Nowshera-Mardan-Swat Segment’
customers. In this context call center over Rs. 2,000 billion, while deposits amounting to Rs.2,321 Million.
services are also being upgraded surpassed Rs. 1,800 billion. The Moreover, IBG entered into another
using industry leading Software Market share of Islamic banking hallmark agreement with Lahore
Intrinsic Technologies. assets and deposits in overall Development Authority (LDA) for
banking industry was recorded at provision of Cash Management
ITG, in line with Your Bank’s go- 12% and 14% respectively. Islamic solutions and Fee Collection solution
green approach, replaced its entire Banking outreach increased to 2,368 for LDA schools.
conventional infrastructure with the branches at end-September 2017.
energy efficient technologies across In recognition of strides made by
the data centers and back offices to Since the commencement of Islamic IBG since launch, Allied Bank was
reduce the use of excessive energy. banking operations in 2014 the awarded ‘Best Emerging Bank in
Islamic Banking Group (IBG) has Islamic Finance’ by Global Forum on
During the year, ITG also deployed an expanded to 117 branches with asset Islamic Finance (GFIF) recognizing the
engineered Business Intelligence layer business centres simultaneously Bank’s efforts for the promotion of
to supplement the decision making established in Lahore, Islamabad and Islamic Finance.
capabilities of Your Bank. In addition Multan during 2017.
to this, ITG completed planning IBG in line with Bank’s commitment
phase to embark upon Big Data IBG’s Total Assets as at December to enhance financial inclusion and
Technology to augment its Decision 2017 almost doubled to Rs.17,350 encourage use of formal banking
Support System. million. Similarly, overall deposits channels conducted seminars in
grew significantly to reach Rs.15,547 multiple cities on Islamic Banking with
Going forward, continuous emphasis Million as at December 31, 2017; the objective of creating awareness
and investment in technology as with sustained focus on continuously among the masses about the
a strategic priority shall enable the improving mix of low cost deposits in practical concepts of Islamic Banking.
Bank to reduce costs, comply with overall deposits.
regulatory requirements and create
value to satisfy digitally empowered
customers.
56 Annual Report 2017

GROUP’S
REVIEW
Going forward, IBG intends to
increase footprint expansion through
establishing Islamic Window within
Conventional Branches; thus
serving the valuable customers
with innovative and technology
driven Shariah compliant products
and services under the guidance
and supervision of Your Bank’s
knowledgeable Shariah Board.

RISK MANAGEMENT
Risk Management (RM) continuously
strives towards managing risk
through an augmented framework
of sound risk principles supported
by optimum organizational structure, report the multi-dimensional »» In continuance of Bank’s
robust risk assessment models and aspects of market risk. distinctive initiative of engaging
effective monitoring systems in an IT with the obligors to provide
»» Launched an automated
enabled environment to safeguard latest insight on business
workflow for issuance of
the strength of the capital base of management & strategies;
Disbursement Authorization
the Bank while achieving maximum 3 interactive seminars for
Certificates in Risk Assessment
shareholders’ value. corporate, commercial &
& Management System (RAMS).
SME obligors on the topics
Through this initiative the Bank
Specialized functions of RM include “Challenges & Opportunities For
has endeavored to make the
Corporate and Financial Institution Pakistan’s Business Growth” and
credit disbursement process
Risk, Commercial, SME and “Transition From Family Owned
transparent, efficient and
Consumer Risk, Credit Administration Business Structure To Corporate
automated.
and Monitoring, Technical Appraisal, Structure” were organized during
Information Security and Governance »» The Bank continued its unique 2017.
and Enterprise Risk which operate initiative of providing managed
»» The Bank organized various
cohesively to continuously enrich warehouses for pledge
sessions involving borrowers and
the risk monitoring and assessment financing obligors in selected
tax authorities for reform in the
architecture, ensuring superior quality locations. The Bank completed
tax system that would facilitate
of asset portfolio while keeping the construction/ renovation of
documentation in economy
aggregate risks well within the Bank’s two new warehouses during
and attracting obligors currently
overall risk appetite. the year. Currently the Bank
resorting to financing from
is operating six warehouses
informal sector.
During the year 2017, RMG in Mandi Faizabad, Kamoke,
continued to refine and innovate Gakkhar Mandi, Janhangirabad
Risk Management practices through Multan, Islamia Rice Mill Multan Risk Management aims to continue
use of latest technology and took and Atthara Hazari Jhang. This the pace of initiatives in 2018 with
following key initiatives to further unique initiative enables obligors ongoing implementation of Oracle
strengthen the risk monitoring and to access free of cost warehouse risk management solutions; as well as
assessment processes: space along modern lines. enhancement in RAMS
through significant investments in
»» RMG implemented Liquidity
»» Implemented Market Risk technology and human resource
Standards of Basel III Framework
Module of Oracle Risk development to maintain an effective
and incorporated the same in
Management Solution. Through risk management framework across
the Bank’s Risk Management
this state of the art system, the the Bank.
approach to promote short-term
bank has automated calculation resilience of liquidity risk profile
of Value at Risk (VaR). Further, and reduced funding risk over a
various other Monitoring Reports longer time horizon.
were developed to capture and
 Allied Bank Limited 57

Treasury
World economy had started to show
signs of gradual recovery towards the
end of 2017. This was manifested
by gradually rising oil and other
commodity prices coupled with
encouraging GDP growth in major
economies.

During the year under review,

Pakistan’s economy continued with
the momentum gained in 2016 and
posted healthy growth statistics
on the back of growth in Large
Scale Manufacturing. Towards the
last quarter of 2017, amid bouts
of volatility, domestic currency
depreciated owing to widening
current account deficit.

Anticipating the fallout of high GDP

growth on aggregate demand and
balance of payments, Treasury Group
remained vigilant in managing the
duration of government securities’
portfolio avoiding major exposure in
long term bonds and realizing capital
gains without significantly impacting
the Net Interest Income (NII) of the
Bank. towards bank’s interest rate and
exchange rate outlook.
During 2017, Treasury Group
continued to make its presence felt in Treasury Group shall continue to
fixed income and FX markets through monitor key macroeconomic variables
aggressive pricing. As a result, Your and assist Your Bank’s ALCO in
Bank was ranked among the top 5 devising a pragmatic portfolio
Primary Dealers in the industry. strategy. Capitalizing on opportunities
and developing a balance between
Treasury Group simultaneously current and future interest income
remained active in the domestic and contribute to the bottom line, on
FX market; positioning under an sustainable basis, shall remain a key
effective strategy and competitive objective during 2018.
pricing enabled Your Bank to increase
volume of trade, home remittance
and FCY deposits respectively.

Going forward, global and domestic

economic performance are expected
to remain on positive trajectory.
Economic growth along with gradually
rising oil prices, may continue to
have spillover effect on inflation
and balance of payments position
domestically. Though manageable,
demand pressures will contribute
58 Annual Report 2017

INFORMATION TECHNOLOGY (IT)

GOVERNANCE
IT Governance framework ensures
e-VIsion that Your Bank’s significant
BOARD OF DIRECTORS Committee investment in IT infrastructure is duly
aligned with the long-term strategies
and objectives of Your Bank; while
Chief ensuring conformity with industry’s
Executive MANCO ITSC best practices.
Officer
IT Governance of Your Bank focuses
on ensuring that:
»» IT strategic plan fits with the
current and evolving needs of
Chief Risk Your Bank and customers.
Information Security & Governance
Management »» IT based policies and procedures
conform to the Banks, statutory
and regulatory requirements.
»» ITG designs, specifies and
maintains systems for optimal
utilization by Your Bank.
Chief
Technology Compliance »» IT acquisitions follow the
Compliance
necessary approvals ensuring
that there is appropriate balance
between cost, risks, short term
and long term benefits.
»» Roles and responsibilities are
Chief
clearly defined for smooth
Information
delivery of business requirements
Technology
and services.
Core-Banking & BSDI
IT Governance of Your Bank
comprises monitoring by:
ACOB Digital Banking & Business Intelligence e-Vision Committee of Board
supervises the IT Governance in Your
Bank and provides strategic direction
for adoption/upgrading of evolving
IT System & Infrastructure
technologies in order to provide
new customer centric products and
services and to improve internal
Chief Audit and IT Operations control environment. The Committee
Risk Review reviews the strategic plan of Your
Bank to improve IT infrastructure and
Software Quality Assurance & automation of processes and systems
IT Compliance including alternate delivery channels.
The Committee extends assistance
to the Board with insights regarding
Information evolving technologies in the field of
System Audit e-banking and digital platforms. It also
oversees performance of Information
Technology Group of Your Bank.
 Allied Bank Limited 59

IT Steering Committee (ITSC) of Your Bank is entrusted to provide strategic guidance for IT related initiatives, prioritize
projects for their implementation along with recommendation for required infrastructure and monitor their performance.
ITSC reviews the annual and long term Strategic IT plan before its recommendation to Board’s e-Vision Committee for
review and approval of the Board of Directors. ITSC oversees Bank’s Information Security Initiatives as well as IT security
processes and procedures. ITSC also reviews all related policies before recommendation to e-Vision Committee of the
Board.

Information Technology Group (ITG) is headed by Chief ITG, reporting to Chief Executive Officer of Your Bank. ITG
is responsible for development and delivery of technology driven services in line with directions of the Board and its
committees under the strategic guidance of ITSC. Chief ITG is responsible to:

»» Develop and implement IT policies and procedures with best practices.

»» Ensure maintenance of Bank’s IT infrastructure including online business services for smooth transactions
processing.
»» Validate IT processes through testing and oversee quality control throughout the IT infrastructure.
»» Devise security policies and ensure that arrangements for disaster recovery plan are in place.
»» Keep the e-Vision Committee and ITSC informed of emerging trends and developments in IT and put forth
necessary recommendations.
»» Maintain a requisite professional IT staff strength with sufficient knowledge, skills, experience and professional
qualifications to meet the expectations along with regular training to keep up with the latest technologies and
concepts.

ITG of Your Bank is strengthened by the following functions which are headed by committed professionals, providing
innovative and efficient solutions to achieve organizational objectives.

Software
Core-Banking Digital Banking IT System Quality
IT
& & Business & Assurance & IT
Operations
BSDI Intelligence Infrastructure Compliance

Information Security & Governance functioning under the umbrella of Risk Management Group, is primarily
responsible to develop and implement information security guidelines through a set of policies, procedures and
frameworks and conduct Technical Risk Assessment as per policy guidelines. The function is also mandated to develop
information security policies in line with regulatory requirements and based on best industry practices. This function also
manages the information security awareness campaign across the Bank.

Technology Compliance under Compliance Group performs technology compliance review of Information Security
Policies and Procedures to ensure that they are compliant with SBP guidelines/regulations. Furthermore, it also ensures
compliance against the recommendations of SBP inspection report, external auditors’ management letter and internal
audit report of Audit and Risk Review Group (A&RRG).

Information System Audit function under A&RRG is entrusted to perform systems audit across the Bank; testing
desired functionality and integrity while providing recommendations where necessary.
60 Annual Report 2017

KEY PERFORMANCE
INDICATORS
Long Term Key Performance Significance
Analysis
Objectives Indicators Going Forward

Maintain Overall Earnings Despite challenging environment including historically low benchmark rates, maturity of KPI shall remain
profitability high yielding government securities, squeezing of lending spreads, continued investment relevant for
trend enabling towards expansion in multiple touchpoints with gradual transformation for digital age; the future
continuous long term multi-pronged strategy enabled continuity of steady performance. Profit before
recognition taxation for the year ended Dec 31, 2017 stood at a Rs. 20,879 million. Continuation of
among the top Super tax of 4% on prior year’s taxable income for another year resulted in effective tax rate
tier profitable of 39% and accordingly Profit after tax stood at Rs.12,734 million.
banks of the
country The Bank’s profitability stemmed from posting a double digit growth (13%) in average
earning assets. The Balance Sheet footing and equity stood at Rs.1,245,712 million and at
Rs.106,716 million respectively. In addition, growth in CASA deposits which grew by 11%
along with robust Risk Management Framework enabled Your Bank to reduce NPLs by Rs.
2,380 million and reversal of provision against advances by Rs. 1,967 million; assisted in
maintaining quality of assets & liabilities to earn stable profitability.

Despite the tough business circumstances, ABL’s Return on Equity (ROE) stood at a level of
17% in 2017 which was in line with top 10 banks average ROE of 17% and remained well
above average industry ROE of 13% as at September 2017.
Continuous Deposits Continuous focus on deposits mobilization yielded results; as total deposits stood at Rs. KPI shall remain
growth in Mobilization 883,741 million, reflecting a growth of 10% compared to 2016; while average deposits also relevant for
Balance sheet grew by 10%. future
primarily through
no/low costs ABL also maintained its focus on curtailing costs of deposits, which was reduced from
deposits 3.28% in 2016 to 3.02% in 2017. This was primarily driven by growth in healthy CASA mix
which stood at 79% at the end of 2017; with substantial growth of 25% in non-remunerative
current deposits which surpassed Rs. 300 billion mark to close at Rs. 316,335 million at
December 31,2017.

The Bank having a CA ratio of 36% , remained at par with top 10 bank’s average CA ratio
of 36% as at September 30, 2017. ABL’s maintained its market share which stood slightly
over 7%.
Consistently Quality of Assets Your Bank continued to capitalize on its robust technology-based risk management KPI shall remain
augment Risk systems enabling continuous augmentation of Bank’s risk profile. relevant for
Management future
culture resulting Despite accomplishing growth of 12% in gross advances of the Bank, Infection ratio was
in superior asset brought down to slightly less than 5% as at December 31, 2017; from 6%as at December
quality 31, 2016. Top 10 banks’ NPL Ratio stood at 9%, while the industry NPL Ratio stood slightly
over 9% as at September 30, 2017.

Adopting a prudent approach, Loan loss coverage ratio increased to 93% as at December
31, 2017 from 92% as at December 31, 2016; against industry average of 85 % as at
September 30, 2017.

Your Bank has not been taking any benefit of Forced Sale Value of collaterals, while
calculating the provision against non-performing loans.
Inculcate Effective and Bank’s focus on expanding distribution channels was maintained during the year under KPI shall remain
operational efficient cost review. With the opening 100 new branches including 40 Islamic banking branches, total relevant for
efficiencies controls network stood at close at 1,250. The Bank also installed 91 new ATMs to close the year at future
through 1,241.
innovative and
viable cost Besides continuous investment on human capital, various initiatives undertaken during
controlling the year included launch of Prepaid Cards, Auto loans in strategically selected main cities,
measures BANCA insurance along with Business Internet Banking and revamping of Allied Direct
Internet banking to “MyABL” app. Despite these major growth initiatives of Your Bank,
efficient cost management through budgetary controls, automation and centralization of key
processes enabled to manage intermediation cost at 2.6% in 2017 as compared to 2.7%
in 2016.

This is below average intermediation cost of top 10 banks at 3.0% as at September 30, 2017.
Strengthen Capital Adequacy Your Bank remained align to capital requirements with the underlying business strategy as KPI shall remain
capital base to Status. well as the minimum requirements of the State Bank of Pakistan (SBP). relevant for
support business Compliance future
development with regulatory Common Equity Tier (CET) and Tier-1 Capital Ratio stood at 17% against SBP’s minimum
minimum capital requirement of 6% and 7.5% respectively as at December 31, 2017.
requirements
Capital Adequacy Ratio as per Basel III requirements was stood at 22.4% during 2017. This
is well above the regulatory requirement of 11.275% and banking sector’s CAR of 15.4% as
at September 30, 2017.

Your Bank remains well positioned to reap benefit from any potential credit expansion
opportunities in future as well as resilient to weather impact of unforeseen economic
downturns.

Liquidity Coverage Ratio (LCR) of the Bank remained at 142 % which is well above the
minimum requirement of 90%, while Net Stable Funding Ratio (NSFR) was 187 % against
the minimum requirement of 100%; fully reflecting the strong liquidity profile of the Bank.
Sustainable Return to Despite facing multi-faceted challenges, Your Bank continues to maintain steady dividend KPI shall remain
payout to our Shareholders streams. Cash Dividend of Rs. 7.00 per share was declared in 2017 with payout ratio of relevant for
Shareholders 63% in 2017. future
 Allied Bank Limited 61

RISK & OPPORTUNITY

REPORT
Allied Bank Limited (the Bank) has comprehensive risk management system covering
entire spectrum of business operations, while ensuring compliance with regulatory
requirements. Furthermore, the management of risks and opportunities forms
an integral part of the Bank’s strategic planning process. The Risk Management
system is based on the underlying risk appetite forming part of the overall business
strategies and approved by the Board of Directors. Efficient management and
technology driven risk mitigating control tools are used in all areas of risk; which are
upgraded and modified according to evolving land scape.

Risk and opportunities and the related mitigating factors are summarized below.

Plans and Strategies for Mitigating Risks & Capitalizing

Risk Type Description
Opportunities
Capital adequacy The risk that the Bank The Bank remains well-capitalized with a capital base well above the regulatory
risk has insufficient capital limits. Bank’s Total Capital inclusive of the Capital Conservation Buffer to Risk
to support its growth or Weighted Assets ratio, stood at a robust level of 22.39% against the requirement
is not able to meet the of 11.275% for 2017; reflecting Bank’s strong position to avail all future growth
statutory defined capital opportunities.
requirements.
Liquidity risk The risk that the Bank is The Bank’s stable base of rising customer deposits supplemented by Bank’s
unable to meet its financial strong capital base enabled adequate liquidity position throughout the year. Bank
liabilities as they fall due. also has a substantial portfolio of marketable securities providing immediate buffer
against possible liquidity stresses. Bank’s liquidity coverage ratio and net stable
funding ratio are also well above the regulatory limits.
The liquidity levels are being monitored regularly under well-defined ALM triggers,
limit exposures, gap analysis, stress testing scenarios on standalone and
systematic stress conditions.
Credit risk The risk that the Bank Bank’s credit risk function operates within an integrated framework of credit
will incur losses owing to policies, guidelines and processes; duly identifying, measuring, managing and
the failure of an obligor mitigating credit risk. The strong technology driven risk management platform
or counterparty to meet extensively covers both pre-disbursement controls and post disbursement
its obligation to settle monitoring.
outstanding amounts. The Bank has well diversified lending portfolio along with one of the lowest NPL
ratio of 4.6% and highest coverage ratio of 92.6% in the industry.
Market risk The risk arising from The Bank has adopted a balanced approach towards market risk; supplemented
fluctuations in interest by a robust risk management architecture ensuring that the exposures are within
rates, foreign currency, the defined risk acceptance criteria. A number of metrics like VaR methodologies
credit spreads, equity complemented by sensitivity measures, notional limits, loss triggers at a detailed
prices, commodity prices portfolio level, and extensive stress testing on an ongoing basis, enables
and risk related factors comprehensive monitoring and control over the multi-dimensional aspects of
such as market volatilities. market risk.
62 Annual Report 2017

RISK & OPPORTUNITY

REPORT
Plans and Strategies for Mitigating Risks & Capitalizing
Risk Type Description
Opportunities
Operational risk The risk of loss resulting In accordance with the BoD approved Operational Risk Management Policy,
from inadequate or failed Bank maintains a system of internal controls designed to keep operational risk at
processes, people, appropriate levels. These internal controls are periodically updated to conform to
systems or from external industry best practice. Further, the various techniques/tools used by the Bank for
events. ORM include RCSAs (Risk Control Self Assessment), loss data management and
KRIs (Key Risk Indicators).
Bank has also implemented a business continuity plan for all critical functional
areas to ensure smooth continuity of operations.
Reputational Risk The risk of possible Reputational risk management is inextricably linked with overall risk management
damage to Bank’s framework. Effective identification and management of major threats to reputation
brand and reputation, and entity level controls ensure reduction to an acceptable level.
and the associated risk
to earnings, capital or
liquidity arising from any
association, action or
inaction which could be
perceived by stakeholders
to be inappropriate,
unethical or inconsistent
with Bank’s values and
believes.
Regulatory risk The risk arising from non- Management of regulatory risk entails early identification and effective
compliance with regulatory management of changes in legislative and regulatory requirements that may
requirements, regulatory affect the Bank. A dedicated compliance group is working diligently to assist in
change or regulators’ accomplishment of this important task.
expectations

Opportunities
The assessment of opportunities in the Bank is integrated into the annual strategic planning process. Strategic planning enables the
Bank to identify and analyze changing market dynamics at the domestic and global levels. These major opportunities and future outlook
have been covered in detail in the CEO’s review.
 Allied Bank Limited 63

STAKEHOLDER’S
ENGAGEMENT
Stakeholder’s Engagement Shareholders / Institutional Regulators & Government
Allied Bank Limited (ABL) believes
Investors / Analysts These include regular meetings and
in achieving sustainability through
Your Bank values the trust placed interaction with representative of
maximum interaction and
in by our valuable shareholders, regulators and Government officials;
collaboration by all its stakeholders,
therefore Your Bank always thrives to with strong emphasis on compliance.
thus giving value to their inputs. Your
Bank regards its stakeholders as deliver relevant and timely information
partners and makes every effort to to our existing and potential Employees
use all possible mediums to ensure shareholders thought the following:
Your Bank aim’s to provide
that they are abreast with latest challenging work environment and
developments. The key stakeholders »» Annual General Meeting.
reward dedicated team members
and related engagements are noted »» Annual and quarterly financial according to their abilities and
below: statements. performance; driven to retain the
»» Investor presentation and “Employer of Choice” status for the
Customers conference call following top professionals by undertaking
announcement of quarterly following initiatives:
ABL’s customers include individuals,
and business entities including Sole financial results.
»» E- Learning portal for continuous
proprietors, Partnerships, SME, »» Adherence to PSX requirements learning/ development; focus on
Commercial, Middle Market and for disclosure of key information. extensive staff trainings.
Corporate obligors; both in the private
and public sector. Your Bank focuses »» Investor relations section on »» Employee Self-service portal.
on providing value added services corporate website.
»» Online appraisal management.
and innovative solutions to meet »» Press releases.
evolving customers’ requirements »» Staff get-together and team
»» Mechanism in place to address building activities.
through convenient delivery channels;
Shareholders’ grievances.
augmenting financial inclusion of high »» Allied family festival and cricket
unbanked population. Your Bank »» Mechanism in place to monitor: tournament.
regularly conducts following activities: »» Movement in shareholding »» Quarterly electronic and printed
of major shareholders. newsletters.
»» Branch managers and
»» Movement in shareholding »» Regular fire and evacuation drills.
relationship managers meeting
of beneficial owner and
with customers. »» Equal employment opportunities
executives.
»» Customer awareness seminars with female gender ratio of 15%.
»» Insider trading.
to inculcate insight and strategies »» Anti-Harassment committee
in managing businesses. overseeing dignified and healthy
»» Active participation in various work environment.
external events promoting
financial literacy. Communities
»» Encourage customer feedback ABL plays a proactive role in
through Call center/ Allied Phone contributing towards the society.
Banking. Detailed CSR report is included in the
»» Social Media interactions through Annual Report.
Facebook and Twitter.
»» Branch opening events.
»» Advertising activities
»» Communication with customers
through SMS/emails.
»» Interactive and secured
corporate website.
64 Annual Report 2017

PERFORMANCE
HIGHLIGHTS Rs. in Million
December 31, 2017 2016 2015 2014 2013 2012

STATEMENT OF FINANCIAL POSITION

ASSETS
Cash and balances with treasury and other banks 86,016 73,884 60,789 42,129 45,775 44,381
Lending to financial institutions 8,694 10,513 3,356 2,030 12,461 10,721
Investments- Gross 700,787 592,561 547,127 429,597 364,966 269,351
Advances - Gross 388,752 348,347 340,769 325,825 285,376 288,889
Operating fixed assets 48,327 32,757 28,850 27,250 22,084 19,871
Other assets 32,555 32,365 32,716 36,055 23,496 20,245
Total assets - Gross 1,265,131 1,090,427 1,013,607 862,886 754,158 653,458
Provisions against non-performing advances (16,714) (18,784) (19,164) (19,811) (18,375) (17,805)
Provisions against diminution in value of investment (2,705) (2,697) (2,778) (806) (1,587) (1,948)
Total assets - net of provision 1,245,712 1,068,946 991,665 842,269 734,196 633,705

LIABILITIES
Customer deposits 883,741 805,111 734,596 667,878 608,412 514,707
Inter bank borrowings 223,556 126,369 137,960 66,096 32,952 38,916
Bills payable 7,836 9,849 4,942 4,832 4,879 6,203
Other liabilities 23,863 26,943 24,911 19,579 17,513 16,351
Sub-ordinated loans – – – 2,994 4,242 5,490
Total Liabilities 1,138,996 968,272 902,409 761,379 667,998 581,667

Net Assets 106,716 100,674 89,256 80,890 66,198 52,038

REPRESENTED BY
Share capital 11,451 11,451 11,451 11,451 10,410 9,463
Reserves 17,980 16,533 15,102 13,549 12,438 10,899
Un - appropriated profit / (loss) 49,212 46,490 41,415 37,053 30,855 23,688
Equity - Tier I 78,643 74,474 67,968 62,053 53,703 44,050
Surplus on revaluation of assets 28,073 26,200 21,288 18,837 12,495 7,988
Total Equity 106,716 100,674 89,256 80,890 66,198 52,038

PROFIT & LOSS ACCOUNT
Markup / Return / Interest earned 65,709 64,592 72,116 67,001 54,222 49,503
Markup / Return / Interest expensed (34,130) (31,345) (35,977) (38,815) (32,552) (31,142)
Net Markup / Interest income 31,579 33,247 36,139 28,186 21,670 18,361
Fee, commission, brokerage and exchange income 4,679 4,660 4,409 3,758 3,711 3,169
Capital gain, Dividend income and Unrealized gain / (loss) 3,869 6,448 4,360 7,850 4,645 10,353
Other income 323 102 986 1,128 1,247 272
Non interest income 8,871 11,210 9,755 12,736 9,603 13,794
Gross income 40,450 44,457 45,894 40,922 31,273 32,155
Operating expenses (21,884) (20,783) (18,603) (17,390) (15,804) (14,853)
Profit before provisions 18,566 23,674 27,291 23,532 15,469 17,302
Donations (54) (42) (139) (76) (80) (104)
Provisions - reversal / (charge) 2,367 199 (1,649) (1,254) (628) (1,362)
Profit before taxation 20,879 23,831 25,503 22,202 14,761 15,836
Taxation (8,145) (9,404) (10,383) (7,187) (118) (4,195)
Profit after taxation 12,734 14,427 15,120 15,015 14,643 11,641

CASH FLOW STATEMENT - SUMMARY
Cash Flow from Operating Activities 119,790 63,803 148,505 57,504 96,332 75,479
Cash Flow from Investing Activities (99,885) (42,388) (118,571) (53,293) (87,993) (62,854)
Cash Flow from Financing Activities (7,987) (8,271) (11,257) (7,950) (7,019) (6,379)

Cash & Cash equivalent at the Beginning of the Year 74,527 60,671 41,980 45,948 44,240 37,944
Effect of Exchange Rate changes on Cash & Cash equivalent (534) 5 30 (230) 215 191
Cash & Cash equivalent at the End of the Year 85,911 73,820 60,687 41,979 45,775 44,381
 Allied Bank Limited 65

December 31, 2017 2016 2015 2014 2013 2012

FINANCIAL RATIOS
Return on equity % 16.63% 20.26% 23.26% 25.94% 29.96% 28.44%
Return on assets % 1.10% 1.40% 1.65% 1.90% 2.14% 2.03%
Profit before tax ratio (PBT/Net markup + non markup income) % 51.62% 53.61% 55.57% 54.25% 47.20% 49.25%
Gross spread ratio (Net markup income / Gross markup income) % 48.06% 51.47% 50.11% 42.07% 39.97% 37.09%
Return on Capital employed ((PAT + Int on sub) / Avg
Cap employed) % 16.63% 20.26% 22.93% 24.87% 27.91% 26.08%
Current & Quick / Acid Test Ratio % 79.39% 65.42% 65.84% 49.17% 87.29% 89.26%
Cash to Current Liabilities % 0.01% 0.01% 0.01% 0.01% 0.01% 0.01%
Advances to deposits ratio (ADR) - Gross % 43.99% 43.27% 46.39% 48.79% 46.91% 56.13%
Advances to deposits ratio (ADR) - Net % 42.10% 40.93% 43.78% 45.82% 43.88% 52.67%
Income / Expense ratio Times 1.85 2.14 2.47 2.35 1.98 2.16
Cost / Income ratio % 54.10% 46.75% 40.53% 42.50% 50.54% 46.19%
Growth in gross income % -9.01% -3.13% 12.15% 30.85% -2.74% 0.10%
Growth in net profit after tax % -11.74% -4.58% 0.70% 2.54% 25.79% 13.43%
Total assets to shareholders’ funds (Tier 1) Times 16.27 15.01 15.25 14.55 15.02 15.48
Total assets to shareholders’ funds (Tier 2) Times 12.01 11.26 11.66 11.45 12.42 13.26
Intermediation cost ratio % 2.59% 2.70% 2.65% 2.73% 2.81% 3.25%
NPL ratio % 4.64% 5.87% 6.43% 7.03% 6.81% 7.15%
Net infection ratio % 0.36% 0.52% 0.87% 1.05% 0.44% 1.08%
Weighted average cost of debt % 3.54% 4.56% 4.56% 5.84% 5.66% 6.39%
Capital Adequacy ratio % 22.39% 20.84% 20.85% 19.75% 17.85% 16.17%
Breakup value per share without Surplus on Revaluation
of Fixed Assets Rs. 77.84 80.81 71.93 64.53 54.78 42.37
Breakup value per share including the effect of Surplus on
Revaluation of Fixed Assets * Rs. 93.20 87.92 77.95 70.64 57.81 45.45
Weighted Average cost of deposit % 3.02% 3.28% 3.94% 5.18% 5.07% 5.39%
Earning assets to total assets ratio % 86.60% 87.00% 87.66% 87.48% 87.56% 86.67%
Gross Yield on Earning Assets % 6.09% 6.95% 8.30% 9.09% 8.43% 9.01%
Cash flow from Operations to Sales % 182.30% 98.78% 205.92% 85.83% 177.66% 152.47%
Fixed Assets turnover ratio % 26.35% 44.04% 52.41% 55.10% 66.31% 58.58%

Duo Pont Analysis
Profit Margin (Net Profit/ Markup and Non Mark up Income) % 17.07% 19.03% 18.47% 18.83% 22.94% 18.39%
Assets Turnover (Mark up plus Non Markup/ Total Assets) % 6% 7.09% 8.26% 9.47% 8.69% 9.99%
Equity Multiplier ( Total Assets/ Equity) Times 16.27 15.01 15.25 14.55 15.02 15.48

SHARE INFORMATION
Cash Dividend Per Share % 70.00% 72.50% 70.00% 65.00% 52.50% 65.00%
Bonus Shares issues % 0.00% 0.00% 0.00% 0.00% 10.00% 10.00%
Dividend Yield Ratio (based on cash dividend) % 8.24% 6.08% 7.44% 5.75% 5.83% 8.84%
Dividend payout ratio (Total payout) % 62.95% 57.54% 53.01% 49.57% 41.05% 63.94%
Dividend Cover ratio % 158.86% 173.78% 188.64% 201.73% 243.58% 156.40%
Earning Per Share (EPS) * Rs. 11.12 12.60 13.20 13.11 12.79 10.17
Price to earning ratio * (PE x) Times 7.64 9.46 7.13 8.63 7.04 7.23
Price to book value ratio Times 0.91 1.36 1.21 1.60 1.56 1.62
Market value per share - at the end of the year Rs. 84.98 119.21 94.07 113.12 90.00 73.49
Market value per share - highest / lowest during the year Rs. 122.89/76 121/82 117/89 138/83 93.5/54.92 76.00 / 52.00
Net assets per share Rs. 93.20 87.92 77.95 70.64 57.81 45.44
Market Capitalisation Rs. In Million 97,308 136,504 107,717 129,531 103,057 84,151

INDUSTRY SHARE
Deposits % 7.15% 7.19% 7.59% 8.01% 8.10% 7.72%
Advances % 5.95% 6.25% 6.95% 7.31% 7.01% 7.49%
Total Assets % 7.08% 7.07% 7.41% 7.43% 7.72% 7.07%
Trade Share
Import & Export Volume USD Million 2,650 2,601 2,783 3,359 3,400 2,852
Market Share % 2.90% 4.18% 4.50% 5.20% 5.46% 4.74%
Home Remittance
Remittances handled USD Million 1,817 1,584 1,661 1,386 994 904
Market Share % 9.27% 8.00% 8.61% 8.05% 6.81% 6.47%

OTHER INFORMATION
Non - performing loans (NPLs) Rs. In Million 18,052 20,432 21,904 22,922 19,424 20,668
Number of employees - Permanent Nos. 10,637 10,430 9,792 9,654 9,675 9,291
Number of employees - Total Nos. 11,394 11,011 10,244 10,121 10,213 9,932
Number of branches Nos. 1,250 1,150 1,050 1,000 950 875
Number of ATMs Nos. 1,239 1,150 1,011 890 794 618

* Restated
66 Annual Report 2017

PERFORMANCE
HIGHLIGHTS
Profitability Ratios

55.57%
54.25%

54.10%
53.61%
51.47%

51.62%
50.54%
49..25%

50.11%

48.06%
47.20%

46.75%
46.19%

42.50%
42.07%

40.53%
39.97%
37.09%

29.96%
28.44%

27.91%
26.08%

25.94%
24.87%

23.26%
22.93%

20.26%
20.26%

16.63%
16.63%
9.09%
9.01%

8.43%

8.30%

6.95%

6.09%
2.03%

2.14%

1.90%

1.65%

1.10%
1.40%
2012 2013 2014 2015 2016 2017
Return on Assets Return on Capital Employed Return on Equity Cost / Income Ratio Gross Spread Ratio Gross Yield on Earning Assets Profit Before Tax Ratio

Liquidity Ratios
89.26%

87.29%

79.39%
65.84%

65.42%
56.13%

49.17%
46.91%

48.79%

46.39%

43.99%
43.27%

2012 2013 2014 2015 2016 2017

Advances to Deposits Ratio (ADR) - Gross Current & Quick / Acid Test Ratio

Investment / Market Ratios

72.50%
70.00%

70.00%
65.00%
65.00%

63.94%

62.95%
57.54%
52.50%

53.01%
49.57%
41.05%

6.08%
10.00%

10.00%

8.24%
8.84%

7.44%
5.83%

5.75%

0.00%
0.00%

0.00%

0.00%

2012 2013 2014 2015 2016 2017

Cash Dividend Per Share Stock Dividend Per Share Dividend Yield Ratio Dividend Payout Ratio
 Allied Bank Limited 67

Investment / Market Ratios

(Rupees & Time)

13.20
13.11
12.79

12.60

11.12
10.17

9.46
8.63

7.64
7.23

7.04

7.13
1.62

1.56

1.60

1.36
1.21

0.91
2012 2013 2014 2015 2016 2017
EPS (Rs.) Price to Earning Ratio (Times) Price to Book Value Ratio (Times)

Share Price Movement Cash Flow Analysis

(Rupees) (Rs. in Million)

150

119,790
148,505
119.21

96,332
138.00
113.12

75,479

120

63,803
122.89
94.07
117.00

84.98

57,504
121.00
90.00

111.54

103.10

101.50

99.45

90
93.50
73.49

89.00
83.00

82.00
76.00

76.00
73.95

60
66.53

(7,987)
(6,379)

(11,257)

(8,271)
(7,019)

(7,950)
54.92
52.00

(42,388)
(62,854)

30

(99,885)
(53,293)

(118,571)
(87,993)

0
2012 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017

Highest Lowest Average Share Price Operating Activities Investing Activities Financing Activities

Capital Structure Ratios

100%
100 86.67% 87.56% 87.48% 87.66% 87.00% 86.60%

80%
87.92

93.20

80
77.95
70.64

60%
60
57.81

40%
45.44

40

16.17% 17.85% 19.75% 20.85% 20.84% 20%

20 22.39%
5.07% 5.18% 3.94% 3.28% 3.02%
5.39% 0
0
2012 2013 2014 2015 2016 2017
Net Assets Per Share (Rs.) Capital Adequacy Ratio (%) Earning Assets to Total Assets (%) Weighted Average Cost of Deposits (%)
68 Annual Report 2017

HORIZONTAL
ANALYSIS
2017 17 Vs 16 2016 16 Vs 15 2015 15 Vs 14 2014 14 Vs 13 2013 13 Vs 12 2012 12 Vs 11
Rs. M % Rs. M % Rs. M % Rs. M % Rs. M % Rs. M %

STATEMENT OF FINANCIAL POSITION

ASSETS
Cash and balances with treasury
and other banks 86,016 16% 73,884 22% 60,789 44% 42,129 -8% 45,775 3% 44,381 16%
Lending to financial institutions 8,694 -17% 10,513 213% 3,356 65% 2,030 -84% 12,461 16% 10,721 687%
Investments - Net 698,082 18% 589,865 8% 544,349 27% 428,791 18% 363,379 36% 267,403 37%
Advances - Net 372,038 13% 329,562 2% 321,605 5% 306,014 15% 267,001 -2% 271,084 11%
Operating fixed assets 48,327 48% 32,757 14% 28,850 6% 27,250 23% 22,084 11% 19,871 10%
Other assets 32,555 1% 32,365 -1% 32,716 -9% 36,055 53% 23,496 16% 20,245 11%
Total assets 1,245,712 17% 1,068,946 8% 991,665 18% 842,269 15% 734,196 16% 633,705 23%

LIABILITIES
Customer deposits 883,741 10% 805,111 10% 734,596 10% 667,878 10% 608,412 18% 514,707 29%
Inter bank borrowings 223,556 77% 126,369 -8% 137,960 109% 66,096 101% 32,952 -15% 38,916 -22%
Bills payable 7,835 -20% 9,849 99% 4,942 2% 4,832 -1% 4,879 -21% 6,203 54%
Other liabilities 23,863 -11% 26,943 8% 24,911 27% 19,579 12% 17,513 7% 16,351 23%
Sub-ordinated loans - 0% - 0% - -100% 2,994 -29% 4,242 -23% 5,490 0%
Total Liabilities 1,138,995 18% 968,272 7% 902,409 19% 761,379 14% 667,998 15% 581,667 23%

Net Assets 106,716 6% 100,674 13% 89,256 10% 80,890 22% 66,198 27% 52,038 20%

REPRESENTED BY
Share capital 11,451 0% 11,451 0% 11,451 0% 11,451 10% 10,410 10% 9,463 10%
Reserves 17,980 9% 16,533 9% 15,102 11% 13,549 9% 12,438 14% 10,899 24%
Un - appropriated profit 49,212 6% 46,490 12% 41,415 12% 37,053 20% 30,855 30% 23,688 16%
Equity - Tier I 78,643 6% 74,474 10% 67,968 10% 62,053 16% 53,703 22% 44,050 16%
Surplus on revaluation of assets 28,073 7% 26,200 23% 21,288 13% 18,837 51% 12,495 56% 7,988 40%
Total Equity 106,716 6% 100,674 13% 89,256 10% 80,890 22% 66,198 27% 52,038 20%

PROFIT & LOSS ACCOUNT
INTEREST / RETURN / NON INTEREST INCOME EARNED
Markup / Return / Interest earned 65,709 2% 64,593 -10% 72,116 8% 67,001 24% 54,222 10% 49,503 -4%
Fee, commission, brokerage and exchange income 4,679 0% 4,660 6% 4,409 17% 3,758 1% 3,711 17% 3,169 -7%
Capital gain & Dividend income 3,869 -40% 6,449 48% 4,360 -44% 7,850 69% 4,645 -55% 10,353 195%
Other income 323 217% 102 -90% 986 -13% 1,128 -10% 1,247 358% 272 472%
Total Income 74,580 -2% 75,804 -7% 81,871 3% 79,737 25% 63,825 1% 63,297 8%

MARKUP / RETURN / NON INTEREST EXPENSE
Markup / Return / Interest expensed (34,130) 9% (31,345) -13% (35,977) -7% (38,815) 19% (32,552) 5% (31,142) 17%
Operating expenses (21,884) 5% (20,783) 12% (18,603) 7% (17,390) 10% (15,804) 6% (14,853) 9%
Donations (54) 29% (42) -70% (139) 83% (76) -5% (80) -23% (104) 69%
Provisions 2,367 1089% 199 -112% (1,649) 31% (1,254) 100% (628) -54% (1,362) -58%
Taxation (8,145) -13% (9,404) -9% (10,383) 44% (7,187) 6014% (118) -97% (4,195) -16%
Total expense - percentage of total income (61,846) 1% (61,375) -8% (66,751) 3% (64,722) 32% (49,182) -5% (51,656) 6%

Profit / (Loss) after taxation 12,734 -12% 14,427 -5% 15,120 1% 15,015 3% 14,643 26% 11,641 15%
 Allied Bank Limited 69

Statement of Financial Position Horizontal Analysis

(Percentage) Compounded average growth rate for the last five years - annualized

Cash and balances with treasury and other banks 14.15%

Lending to financial institutions (4.10%)
Investments - Net 21.16%
Advances - Net 6.54%
Operating Fixed assets 19.45%
Other assets 9.97%
Total assets 14.47%
Customer deposits 11.42%
Inter bank borrowings 41.86%
Bills payable 4.78%
Other liabilities 7.85%
Sub-ordinated loans (100.00%)
Total Liabilities 14.39%
Net Assets 15.45%
Share capital 3.89%
Reserves 10.53%
Un - appropriated profit / (loss) 15.75%
Equity - Tier I 12.29%
Surplus on revaluation of assets 28.58%
Total Equity 15.45%

Profit and Loss Horizontal Analysis

(Percentage) Compounded average growth rate for the last five years - annualized

Markup / Return / Interest earned 5.83%

Fee, Commission, Brokerage and Exchange income 8.11%
Capital gain & Dividend income (17.87%)
Other income 3.47%
Total Income 3.34%
Markup / Return / Interest expensed
1.85%
Operating expenses
8.06%
Donations
(12.20%)
Provisions
(211.68%)
Taxation
14.19%
Total expense - percentage of total income
3.67%
Profit / (Loss) after taxation
1.81%
70 Annual Report 2017

VERTICAL
ANALYSIS
2017 17 Vs 16 2016 16 Vs 15 2015 15 Vs 14 2014 14 Vs 13 2013 13 Vs 12 2012 12 Vs 11
Rs. M % Rs. M % Rs. M % Rs. M % Rs. M % Rs. M %

STATEMENT OF FINANCIAL POSITION

ASSETS
Cash and balances with treasury
and other banks 86,016 7% 73,884 7% 60,789 6% 42,129 5% 45,775 6% 44,381 7%
Lending to financial institutions 8,694 1% 10,513 1% 3,356 1% 2,030 1% 12,461 2% 10,721 2%
Investments - Net 698,082 56% 589,865 55% 544,349 55% 428,791 51% 363,379 50% 267,403 42%
Advances - Net 372,038 30% 329,562 31% 321,605 32% 306,014 36% 267,001 36% 271,084 43%
Operating fixed assets 48,327 4% 32,757 3% 28,850 3% 27,250 3% 22,084 3% 19,871 3%
Other assets 32,555 3% 32,365 3% 32,716 3% 36,055 4% 23,496 3% 20,245 3%
Total assets 1,245,712 100% 1,068,946 100% 991,665 100% 842,269 100% 734,196 100% 633,705 100%

LIABILITIES
Customer deposits 883,741 71% 805,111 75% 734,596 74% 667,878 79% 608,412 83% 514,707 81%
Inter bank borrowings 223,556 18% 126,369 12% 137,960 14% 66,096 7% 32,952 4% 38,916 6%
Bills payable 7,835 1% 9,849 1% 4,942 0% 4,832 1% 4,879 1% 6,203 1%
Other liabilities 23,863 2% 26,943 3% 24,911 3% 19,579 2% 17,513 2% 16,351 3%
Sub-ordinated loans - 0% - 0% - 0% 2,994 1% 4,242 1% 5,490 1%
Total Liabilities 1,138,996 91% 968,272 91% 902,409 91% 761,379 90% 667,998 91% 581,667 92%

Net assets 106,716 9% 100,674 9% 89,256 9% 80,890 10% 66,198 9% 52,038 8%

REPRESENTED BY
Share capital 11,451 1% 11,451 1% 11,451 1% 11,451 2% 10,410 1% 9,463 1%
Reserves 17,980 1% 16,533 2% 15,102 2% 13,549 2% 12,438 2% 10,899 2%
Un - appropriated profit 49,212 4% 46,490 4% 41,415 4% 37,053 4% 30,855 4% 23,688 4%
Equity - Tier I 78,643 6% 74,474 7% 67,968 7% 62,053 8% 53,703 7% 44,050 7%
Surplus on revaluation of assets 28,073 2% 26,200 2% 21,288 2% 18,837 2% 12,495 2% 7,988 1%
Total Equity 106,716 9% 100,674 9% 89,256 9% 80,890 10% 66,198 9% 52,038 8%

PROFIT & LOSS ACCOUNT
INTEREST / RETURN / NON INTEREST INCOME EARNED
Markup / Return / Interest earned 65,709 88% 64,593 85% 72,116 88% 67,001 84% 54,222 85% 49,503 78%
Fee, commission, brokerage and exchange income 4,679 6% 4,660 6% 4,409 6% 3,758 5% 3,711 6% 3,169 5%
Capital gain, Dividend income and Unrealized loss 3,869 5% 6,449 8% 4,360 5% 7,850 10% 4,645 7% 10,353 17%
Other income 323 0% 102 1% 986 1% 1,128 1% 1,247 2% 272 0%
Total Income 74,580 100% 75,804 100% 81,871 100% 79,737 100% 63,825 100% 63,297 100%

MARKUP / RETURN / INTEREST AND NON INTEREST EXPENSE
Markup / Return / Interest expensed (34,130) 46% (31,345) 41% (35,977) 44% (38,815) 48% (32,552) 51% (31,142) 49%
Operating expenses (21,884) 29% (20,783) 27% (18,603) 23% (17,390) 22% (15,804) 25% (14,853) 24%
Donations (54) 0% (42) 0% (139) 0% (76) 0% (80) 0% (104) 0%
Provisions 2,367 -3% 199 0% (1,649) 2% (1,254) 2% (628) 1% (1,362) 2%
Taxation (8,145) 11% (9,404) 12% (10,383) 13% (7,187) 9% (118) 0% (4,195) 7%
Total expense - percentage of total income (61,846) -83% (61,375) 81% (66,751) 82% (64,722) 81% (49,182) 77% (51,656) 82%

Profit / (Loss) after taxation 12,734 17% 14,427 19% 15,120 18% 15,015 19% 14,643 23% 11,641 18%
 Allied Bank Limited 71

Statement of Financial Position Vertical Analysis - Assets

(Percentage) - Composition for the last six years

2017

2016

2015

2014

2013

2012

0.00% 20.00% 40.00% 60.00% 80.00% 100.00%

Cash and balances with treasury and other banks Lending to financial institutions Investments - Net Advances - Net
Operating Fixed assets Other assets

Statement of Financial Position Vertical Analysis - Liabilities & Equity

(Percentage) - Composition for the last six years

2017

2016

2015

2014

2013

2012

0.00% 20.00% 40.00% 60.00% 80.00% 100.00%

Customer deposits Inter bank borrowings Bills payable Other liabilities Sub-ordinated loans
Share capital Reserves Un-appropriated profit Surplus on revaluation of assets

Profit and Loss Vertical Analysis - Income

(Percentage) - Composition for the last six years

2017

2016

2015

2014

2013

2012

0.00% 20.00% 40.00% 60.00% 80.00% 100.00%

Markup / Return / Interest earned Fee, Commission, Brokerage and Exchange income
Capital gain, Dividend income and Unrealized gain Other income

Profit and Loss Vertical Analysis - Expense

(Percentage) - Composition for the last six years

2017

2016

2015

2014

2013

2012

0.00% 20.00% 40.00% 60.00% 80.00% 100.00%

Markup / Return / Interest expensed Operating expenses Donations Provisions Taxation
72 Annual Report 2017

STATEMENT OF
VALUE ADDITION
Rupees in ‘000
2017 % 2016 %

VALUE ADDED

Income from banking services 40,309,853 44,403,960

Cost of services (7,943,099) (7,512,026)
Value added by banking services 32,366,754 36,891,934
Non - banking income 140,211 53,772
Provision against non-performing assets 2,366,608 198,726

Total Value Added 34,873,573 37,144,432

VALUE ALLOCATED:

to employees
Salaries, allowances and other benefits 11,427,991 32.7% 11,077,790 29.8%

to Government
Income tax 10,383,073 29.8% 9,404,168 25.3%

to providers of capital
as dividends 8,015,156 23.0% 8,301,785 22.4%

to Society
as donation 54,209 0.2% 41,878 0.1%

to expansion and growth
Depreciation / Amortization 2,512,678 7.2% 2,193,546 5.9%
Retained in business 2,480,466 7.1% 6,125,265 16.5%
4,993,144 14.3% 8,318,811 22%
34,873,573 100% 37,144,432 100%

2017 2016

14.3%
22.4% 29.8%
0.2%
32.7%

0.1%

23.0% 22.4%

29.8% 25.3%

Employees Government Providers of capital Employees Government Providers of capital

Society Expansion and growth Society Expansion and growth
 Allied Bank Limited 73

CASH
FLOW
Rupees in ‘000
2017 2016

CASH FLOW FROM OPERATING ACTIVITIES

Mark-up / return / interest and commission receipts 71,739,487 72,163,854
Mark-up / return / interest payments (34,235,893) (31,345,347)
Cash payments to employees, suppliers and others (19,249,604) (18,302,245)
18,253,990 22,516,262
(Increase) / decrease in operating assets
Lendings to financial institutions 1,818,353 (7,156,661)
Held for trading securities (24,723,578) (102,531)
Advances (40,655,347) (8,290,351)
Other assets (excluding advance taxation) (187,614) 4,258,053
(63,748,186) (11,291,490)
Increase / (decrease) in operating liabilities
Bills payable (2,013,328) 4,906,606
Borrowings 97,146,144 (11,552,534)
Deposits 78,629,875 70,514,668
Other liabilities (excluding current taxation) 582,061 (256,631)
174,344,752 63,612,109
Cash flow from operating activities before tax 128,850,556 74,836,881

Income tax paid (9,060,752) (11,033,569)
Net cash flow from operating activities 119,789,804 63,803,311

CASH FLOW FROM INVESTING ACTIVITIES
Net investments in ‘available-for-sale’ securities (106,561,084) (147,043,339)
Net investments in ‘held-to-maturity’ securities 11,429,857 107,180,271
Dividend income received 3,402,747 3,539,613
Investments in operating fixed assets (8,219,650) (6,114,657)
Proceeds from sale of fixed assets 63,318 49,957
Net cash used in investing activities (99,884,812) (42,388,155)

CASH FLOW FROM FINANCING ACTIVITIES
Repayment of sub-ordinated loan – –
Dividends paid (7,987,116) (8,271,033)
Net cash used in financing activities (7,987,116) (8,271,033)
Effect of translation of net investment in foreign wholesale branch 173,267 (11,246)
Increase in cash and cash equivalents during the year 12,091,143 13,132,878
Cash and cash equivalents at beginning of the year 74,527,584 60,670,624
Effect of exchange rate changes on opening cash and cash equivalents (707,403) 16,679
CASH AND CASH EQUIVALENTS AT END OF THE YEAR 85,911,324 73,820,181
74 Annual Report 2017

MATURITIES OF ASSETS
AND LIABILITIES
Maturities of Assets (2012-2017) Maturities of Liabilities (2012-2017)
(Rs. in Billion) (Rs. in Billion)

653

449
390

389
371
352

343
333
340

316

311
285

279
276
258
241

216

221

213

205

210
195

200
192

189
184
177

171
164

166

149
93,242

132
8,786 127

122

105
124

3,297 101

113

104
114

102

91
87

86
86
10,726

71
77
73
66

74

59

8,786
53
54
42

4
5

3
8
2012 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017
Upto 3M 3M to 1Y 1Y to 3Y 3Y to 5Y 5Y & above Upto 3M 3M to 1Y 1Y to 3Y 3Y to 5Y 5Y & above

CONCENTRATION OF ADVANCES, NPLS,

DEPOSITS AND OFF - BALANCE SHEET ITEMS
Gross Advances (2012-2017) Classified Advances (2012-2017)
(Rs. in Billion) (Rs. in Billion)

400 25

350
20
300

250 15
200

150 10

100
5
50
0 0
2012 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017
Agriculture, Forestry, hunting & Fishing Basic metals (iron, steel) Agriculture, Forestry, hunting & Fishing Basic metals (iron, steel)
Grains, Sugar and Food Related Construction, Cement / clay & ceramics Grains, Sugar and Food Related Construction, Cement / clay & ceramics
Chemical, Petroleum & pharmaceuticals Financial Chemical, Petroleum & pharmaceuticals Financial
Textile Machinery & Manufacture of transport equipment Textile Machinery & Manufacture of transport equipment
Power, gas, water & sanitary Real estate, renting, and business activities Power, gas, water & sanitary Real estate, renting, and business activities
Transport, storage & communication Wholesale & retail trade Transport, storage & communication Wholesale & retail trade
Individuals Others Individuals Others

Deposits (2012-2017) Contingencies and Commitments (2012-2017)

(Rs. in Billion) (Rs. in Billion)
1000 300

250
800

200
600
150
400
100

200
50

0 0
2012 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017
Agriculture, Forestry, hunting & Fishing Basic metals (iron, steel) Agriculture, Forestry, hunting & Fishing Basic metals (iron, steel)
Grains, Sugar and Food Related Construction, Cement / clay & ceramics Grains, Sugar and Food Related Construction, Cement / clay & ceramics
Chemical, Petroleum & pharmaceuticals Financial Chemical, Petroleum & pharmaceuticals Financial
Textile Machinery & Manufacture of transport equipment Textile Machinery & Manufacture of transport equipment
Power, gas, water & sanitary Real estate, renting, and business activities Power, gas, water & sanitary Real estate, renting, and business activities
Transport, storage & communication Wholesale & retail trade Transport, storage & communication Wholesale & retail trade
Individuals Others Individuals others
 Allied Bank Limited 75

QUARTERLY COMPARISON OF
FINANCIAL RESULTS
2017 2016
4th 3rd 2nd 1st 4th 3rd 2nd 1st
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
Rs. in Million

STATEMENT OF FINANCIAL POSITION

ASSETS

Cash and balances with treasury banks 85,367 81,316 89,227 72,844 73,204 77,168 63,974 53,135
Balances with other banks 649 2,777 1,474 535 680 1,231 863 531
Lendings to financial institutions 8,694 1,715 12,394 2,143 10,513 1,000 2,324 -
Investments 698,082 601,024 547,923 606,019 589,865 561,315 556,444 606,851
Advances 372,038 374,316 388,956 350,545 329,562 334,011 341,039 304,336
Operating fixed assets 48,327 35,845 33,526 33,026 32,757 30,443 29,822 29,265
Deferred tax assets - - - - - - - -
Other assets 32,555 26,586 34,330 27,732 32,365 24,406 35,619 25,128
1,245,712 1,123,579 1,107,830 1,092,844 1,068,946 1,029,574 1,030,085 1,019,246

LIABILITIES

Bills payable 7,836 7,040 7,267 6,415 9,849 6,109 6,803 5,907
Borrowings 223,556 161,289 121,008 144,090 126,368 138,168 126,247 157,584
Deposits and other accounts 883,741 828,378 852,583 810,221 805,111 758,005 772,345 734,484
Sub-ordinated loans - - - - - - - -
Deferred tax liabilities 6,942 8,648 9,101 10,463 10,987 10,170 10,418 9,173
Other liabilities 16,921 17,682 17,739 20,149 15,957 18,013 16,191 18,435
1,138,996 1,023,037 1,007,698 991,272 968,940 930,465 932,005 925,583
Net assets 106,716 100,542 100,132 101,506 100,674 99,109 98,080 93,663

REPRESENTED BY:

Share Capital 11,451 11,451 11,451 11,451 11,451 11,451 11,451 11,451
Reserves 17,980 17,523 17,186 16,901 16,533 16,316 15,958 15,462
Unappropriated profit 49,212 49,470 48,337 47,742 46,490 46,003 45,222 43,735
Surplus on revaluation of assets - net of tax 28,073 22,098 23,158 25,412 26,200 25,339 25,449 23,015
106,716 100,542 100,132 101,506 100,674 99,109 98,080 93,663

PROFIT AND LOSS ACCOUNT

Mark-up earned 17,504 15,843 16,616 15,746 14,615 15,394 17,494 17,103
Mark-up expensed (9,506) (8,556) (8,321) (7,747) (7,300) (7,152) (8,287) (8,605)
Net mark-up income 7,998 7,287 8,295 7,999 7,315 8,242 9,207 8,498
(Provision) / Write off 722 532 310 394 (5) 484 8 (288)
Non mark-up income 2,566 1,903 2,334 2,069 2,386 1,854 3,181 3,789
Non mark-up expenses (6,684) (4,714) (5,221) (4,911) (6,209) (4,941) (5,065) (4,623)
Profit before taxation 4,602 5,008 5,718 5,551 3,487 5,639 7,331 7,376
Taxation (1,603) (1,747) (2,846) (1,949) (1,288) (2,013) (3,517) (2,587)
Profit after taxation 2,999 3,261 2,872 3,602 2,199 3,626 3,814 4,789

SUMMARY OF CASH FLOWS

Cash flows from operating activities 114,377 21,531 (24,261) 8,143 97,783 (47,923) (25,865) 39,808
Cash flows from investing activities (110,624) (26,019) 43,847 (7,089) (32,071) (4,297) 39,475 (45,495)
Cash flows from financing activities (2,004) (1,993) (2,221) (1,769) (2,291) (1,996) (2,272) (1,712)
76 Annual Report 2017

GRAPHICAL
PRESENTATION
Statement of Financial Position Assets
(Rs. in Million) (Rs. in Million)

698,082
106,716
8,694

86,016

32,555

48,327

372,038
1,245,712

1,138,996

Cash & Bank balances Advances

Lendings Operating Fixed assets
Assets Liabilities Net Assets/Equity Investments Other assets

Liabilities Equity
(Rs. in Million) (Rs. in Million)

49,212

883,741
17,980

23,863
7,836
11,451

223,556
28,073

Customer Deposits Bills payable Share capital Un - appropriated profit

Borrowings Other liabilities Reserves Surplus on revaluation of assets

Profit and loss

(Rs. in Million)

Markup Earned 65,709

Markup Expensed 34,130
Net income 31,579
Provision reversal 2,367
Net income after prov. 33,946
Non Markup Income 8,871
Non Markup Expense 21,938
Profit before tax 20,879
Taxation 8,145
Profit after tax 12,734
 Allied Bank Limited 77

SHARE PRICE
SENSITIVITY ANALYSIS
Allied Bank Limited Share Price Movement
140
120
100
80
60
40
20
0

Nov-16

Nov-17
May-16

May-17
Jan-16

Jun-16

Jul-16

Sep-16

Dec-16

Jan-17

Jun-17

Jul-17

Sep-17

Dec-17
Mar-16

Mar-17
Apr-16

Apr-17
Aug-16

Oct-16

Aug-17

Oct-17
Feb-16

Feb-17
High Low Closing Share Turnover Market Capitalization
2017 Capital Value
PKR Number %
(Million) (Million)
December 31, 2017 85.00 84.50 84.98 1,136,000 0.0992% 11,450 97,308
September 30, 2017 87.49 86.00 87.49 4,500 0.0004% 11,450 100,183
June 30, 2017 91.00 88.50 89.62 7,500 0.0007% 11,450 102,622
March 31, 2017 95.50 93.52 94 .00 1,154,000 0.1008% 11,450 107,637

High Low Closing Share Turnover Market Capitalization

2016 Capital Value
PKR Number %
(Million) (Million)
December 31, 2016 121.00 119.00 119.21 43,000 0.0038% 11,450 136,504
September 30, 2016 98.50 97.07 98.17 41,500 0.0036% 11,450 112,412
June 30, 2016 91.00 87.00 89.96 1,010,500 0.0882% 11,450 103,011
March 31, 2016 92.00 90.50 92.00 105,500 0.0092% 11,450 105,347

2017 2016
Dividend paid:
In Million Per Share In Million Per Share
Final cash dividend 2,004 1.75 2,004 1.75
3rd interim dividend 2,004 1.75 2,290 2.00
2nd interim dividend 2,004 1.75 2,004 1.75
1st interim dividend 2,004 1.75 2,004 1.75
Total Dividend 8,016 7.00 8,302 7.25

Factors that can affect the share price of consequent effect on the bottom line of the economic development. This in turn reposes
Allied Bank Limited are: Bank. Any impact to profitability may have a investor confidence in Pakistan, making
direct impact on share prices. our corporates a potential investment
Regularly recurring matters (such as
opportunity. However, any act of terrorism
financial results and dividends): Cost of Deposit:
or political instability can negatively impact
Announcement of financial result and Any upward or downward shift in Monetary the equity market and share prices of
expected dividends have a temporary Policy Rate and Minimum Rate of Return traded stocks.
impact on the share price. on Deposits affect the cost of deposit. This
Inflation:
shall affect the profitability of the bank;
Government/ Regulatory Policies:
further depicted in market share price. Inflation is considered as key determinant
Monetary Policy Rate: for monetary policy rate change; which
Political and Security Environment:
Changes in monetary policy rate directly further impacts the share price.
Political stability and controlled law &
impacts the net interest income and
order situation is a pre-requisite for any
78 Annual Report 2017

PRODUCTS &
SERVICES
Allied Bank Limited (the Bank) offers a wide range of products and services, designed to
cater to requirements of each segment of its customer base, ranging from a simple bank
account to more sophisticated banking products.

Branch Banking Allied Business Allied Rising Star with ease and convenience
of technologically advanced
With a vast network of over Account – Youth’s 1st Bank banking. ABL offers quick and
1,250 branches and 1,241
ATMs, Bank is committed to
Allied Business Account is meant Account efficient payroll service with
for growing business proprietors instant credit of salaries and
provide real time online banking Allied Rising Star Account is offers Allied Salary Management
looking for exceptional value
solutions. a great way to accumulate Account for company employees
and services, packed with
children’s savings for their future with a number of free features.
multiple free of cost features. It
while inculcating saving habits
Banking on Saturday is a cost-effective to consolidate
amongst children with exclusive
& Extended Hours business and personal banking
free features like Welcome Allied Asaan Account
needs into one tailored package.
Pack, Birthday Gift, accidental
Banking There is no minimum balance
insurance coverage up to Rs.
Allied Asaan Account is tailored
requirement. to cater to the banking needs
ABL is amongst few banks 500,000, ATM / VISA Debit card of unbanked/common people
in Pakistan offering added PLS Saving Account and cheque book. of society with simplified
convenience of “full service” account opening requirement/
Bank offers savings accounts
Saturday Banking to its
customers. The extended
offering free features on Allied Term Plus procedures. Customers can
maintenance of certain minimum open current or saving account
week of banking operations,
monthly average balance.
Deposit according to their needs with a
is currently available at 339 number of free facilities offered.
Allied Term Plus is a regular
branches from 10:00 AM to
term deposit with the flexibility
02:00 PM. Extended Hours Allied Express Account
Banking facility is also offered at
of tenure and frequency of Allied Khanum Assan
Allied Express Account is profit payment which allows the
select branches.
exclusively crafted for remitting customers to opt for investment Account
money in Pakistan. Customers plan which suites their choice. Access to a bank account is
Allied Easy Current can remit funds to their own
Salary Management essential for women’s economic
account or accounts of their
Account loved ones in Pakistan through Account
empowerment as it provides
a safe place to save money
Allied Easy current account Allied Express Account and and opens up a channel to
Fast, easy and convenient
covers everyday banking needs enjoy free of cost banking credit which can be used for
services are just some of
with no monthly fee. Financial services. Remittances can be investing in education, property
the benefits of Allied Salary
transactions can also be originated from different time or business along with bundle
Management Account.
managed with mobile, online, zones / countries in multiple of free of cost services including
Organizations can enjoy one
branch and ATM access, instant currencies. lower locker fee.
of the largest branch networks
SMS balance updates, fast cash
deposits and transfers etc.
 Allied Bank Limited 79

range of features to our valued

Personal and Business Banking
customers.

myABL Personal
Internet Banking
myABL Personal Internet
Banking is the new face of Allied
Direct Internet Banking. It is
the latest internet and mobile
banking platform which offers
Third Party Products: transactions made through Allied customers become more
a more secure, reliable and
PayPak Debit Card are PIN technology savvy, Allied
Mutual Funds & BANCA based; thus, ensuring greater Bank delivers services that fit efficient digital banking service.
Products security. customers’ lifestyles and offers

ABL offers distinctive third

more choice as to where, when myABL Business
and how customers conduct
party products; Mutual Debit Card Variants transactions. Allied Bank Internet Banking
Funds (investment plans and Various Debit Card variants differentiate not just by offering With Business Internet Banking,
competitive return oriented funds allow customers to choose multi-dimensional channels to customers can significantly cut
of Allied Asset Management from a variety of ‘Sapphire’ customer but also by enhancing paperwork, and enjoy the triple
Company-a wholly owned packages offering wide-ranging their experience from utilization benefits of “Efficiency, Ease of
subsidiary of ABL) and BANCA transactional limits on debit of the new and innovative use and Economy”. Business
products in collaboration with cards to pay for everyday channels. Internet Banking (BIB) is Allied
EFU and Jubilee Insurance shopping or get access to funds Bank’s online/ internet banking
partners. at ATMs in Pakistan and abroad.
Jazz Cash Domestic service exclusively designed and
developed for non-individual
Theme Branches EZ Cash Prepaid Card Remittance Services customers. The internet banking
In line with the Financial platform has a User-friendly and
In the quest to evolve into a Allied EZCash is a re-loadable
Inclusion Strategy set by SBP, device-responsive facility, allows
customer friendly bank in the Prepaid Card which comes
Allied Bank collaborated with users to online track account(s)
retail industry, ABL is adopting with the convenience of easy
JazzCash [a Branchless Banking and relationships maintained
modern technology and load/reload/top-up from any
Brand of Jazz (Mobilink) & with the bank and enables
signature themes. Accordingly, ABL branch. This is the first
Mobilink Microfinance Bank customers to execute complex
the Bank launched Women Prepaid Card launched on Local
Limited (MMBL)] to provide banking transactions from their
branches, Youth branches and Payment Scheme PayPak. This
domestic remittance services to workstation/offices.
Village branches. card is instantly issued from all
prospective customers. Through
ABL branches and can be used
this initiative the beneficiary
Allied Cash+Shop on ATM for cash withdrawal,
of Jazz Cash Domestic
bill payment, mobile top-ups
VISA Debit Card and purchasing goods from
Remittances can send and
collect their remittances from any
Allied Cash+Shop Visa Debit merchants at Point of Sale
ABL Branch in addition to the
Card is Allied Bank’s flagship (POS) machines where PayPak
existing network of Jazz Cash
product that gives our customers Cards are accepted. Allied
agents.
access to their bank accounts EZCash offers greater security
and convenience to use it at over with PIN for Point-of-Sale (POS)
34,000 retailers in Pakistan and Transactions as well i.e. use myABL Digital Banking
millions of retailers worldwide. It of Prepaid Card for shopping
A premium Digital Banking
also gives cardholders access to requires cardholders to enter
service that caters to Personal
over 1.9 million ATMs worldwide PIN to authorize their purchase
and Business Banking needs.
and over 10,000 ATMs in transactions.
myABL Digital Banking platform
Pakistan. is supported with international
E-commerce standards of information security
Allied PayPak Debit Transactions on VISA and 24/7 availability that makes
banking safer and accessible
Card Debit Card from any location with improved
It allows customer ATM Allied Bank Visa Debit Card performance. With a dynamic
transactions as well as retail/ holders can now use their new user friendly and device
purchase anywhere within VISA Debit cards for online/e- responsive interface, myABL
Pakistan. All purchase- commerce transactions. As offer great convenience and wide
80 Annual Report 2017

PRODUCTS &
SERVICES

ABL Self Service Digital Allied Business Finance Allied Car Finance Hari Bhari Agriculture
Branch (ABF) In the year 2017 ABL also Revolving Credit
launched Car financing scheme
ABL has introduced Self Allied Business Finance is
as “Allied Car Finance”. The
Scheme
Service Banking facility at Lucky designed for SME sector to meet
product is mainly to cater bank’s This financing facility is designed
One and Packages Mall with liquidity requirements against
depositors and the employees to facilitate farmers in obtaining
state of the art digital banking non-cash securities. The Bank
of institutional customers of Agriculture Production Loans to
channels. Allied Bank’s self- offers evergreen line in shape
the bank. With a competitive meet working capital needs of
service banking branches are of Running Finance, Letter of
mark-up rate the product has farming. Credit is available on
one of its kind, offering a blend Guarantee, Finance for Exports
been taken well by the Bank revolving basis against one time
of “Conventional” and “Self- (working Capital)& Letter of
customers. documentation for 3 years.
Service Banking” facilities to Credit as well as Term Loans.
its account holders as well as
walk-in customers. Equipped
Allied Fast Finance Allied Visa Credit Card Tractor Financing
with modern equipment, which
enables ABL customers to (AFF) (Pay wave – Chip Tractor financing is designed
to facilitate farmers in obtaining
address their banking needs Allied Fast Finance is a product
Based) Agriculture Development Loans
while interfacing with diverse secured against cash backed Allied Visa Gold and Platinum (Term Finance) for purchase of
range of digital touch points i.e. securities i.e. Lien on TDR & Credit Cards are exclusively brand new Tractor.
tablets, interactive tables, video Account designed to meet being offered to the bank’s
conferencing and digital kiosks, liquidity requirements of obligors valued branch customers in
eliminating the need of hefty without disturbing their core major cities of Pakistan. Allied
Agriculture Finance for
paper work and long waits in savings. This product offers Visa Credit Card offers a host of Dairy farming
queues. evergreen line in shape of RF, LG privileges, benefits and savings, This product is designed to
& LC as well as Term Loan. together with attractive service support dairy farmers in meeting
ATMs and CCDMs charges and a free credit period working capital needs of
of up to 50 days.
(Cash & Cheque Prime Minister Youth businesses as well as purchase
of assets and construction of
Deposit Machines) Business Loan (PMYBL) Allied Personal Finance sheds for extension of their dairy
The vast network of 1,241 ATMs A long-term loan scheme, farms for enhanced productivity.
all over the country gives 24/7 specifically launched for
(APF)
unemployed youth under the Allied Personal Finance is a term
access to cash withdrawals,
directives of GOP/SBP. The loan facility targeting Employees
Agriculture Finance
mini statement, bill payments,
fund transfers and much more. scheme especially targets of Corporate under corporate for Poultry Farming &
ABL has 4 CCDMs installed at startups of both genders. Loans arrangement, Salaried Individuals Allied Activities
select branches offering facility are being offered to obligors at fall under Cross-Sell Criteria and
to deposit cash & cheques subsidized rates. Affluent Individual of the Bank Bank has developed this product
anytime. With a low mark-up rate, product program for poultry farmers to
offers smart financial solutions cater to working capital needs
to customers for their immediate as well as long term investment
personal financial needs. for purchase of new equipment/
 Allied Bank Limited 81

machinery for farm/hatchery service kiosk placed in a secure become a preferred and prudent Investment Banking
incubators, generators, farms room at our branch that can provider of a “Total Banking
equipment and construction of be entered through electronic Solution”. The Bank offers a wide Investment Banking (IB) wing
sheds for extension of current verification only. range of funded and non-funded of the Bank strives to meet
poultry farms products and services to meet complex financing needs of
needs of various types of SME its clientele by providing a full
Allied Commercial Allied Bank Call Center businesses under the umbrella of suite of financing solutions to
Lease Customers no longer have to Allied Hunarmand, Allied Tijarat corporate clients including debt
take time out to visit branches and Allied Seasonal Support syndications, capital markets,
Allied Bank offers leasing
for everyday banking needs. Financing, project financing and advisory
products to meet the business
Self-service banking offers services.
needs of its customers with Middle Market
flexible terms & conditions based
assistance in all transactions Home Remittances
by Interactive Voice Response Middle Market caters to all
on customer’s choice of assets, Home Remittances provide
System (IVR). business requirements of our
repayment, pricing, and tenures. a seamless inflow of foreign
top tier commercial obligors with
wide range of products including remittance credited in the
Allied Bank Lockers Allied Pay Anyone Working Capital Facilities, Term beneficiary accounts in minutes.
A unique product in which the Loans, Trade Finance Facilities,
Bank Lockers provide
high-security protection for
Bank’s customers can send Letters of Guarantee, Letters of Cash Management
cash /cheque to any individual in Credit and Export Financing.
customers’ valuables. Lockers of Cash Management is a state-
Pakistan even if the beneficiary
different capacities are available of-the art real- time product
doesn’t have a bank account.
nationwide at conveniently
This is done at the click of a
Corporate Banking providing customers with
located branches. efficient Liquidity Management
button through Allied Direct. Corporate Banking provides
a single point within the Solutions, across the entire
Digital Lockers Interactive Touch-point Bank to cater to all business network of the Bank.

First ever bank in Pakistan to requirements of our corporate

bring an innovative, secure and
https://www.abl.com- is an and institutional customers, Treasury Products
interactive electronic touch-point including public sector
customer-friendly technology Bank offers fixed income treasury
that further improves end-user enterprises, with the primary
in the form of Digital Lockers. products, having attractive
experience and provides a objective of enhancing customer
Digital Lockers are fully returns, to its institutional and
wealth of information as well as service. Bank offers full suite
automated version of traditional retail clients. ABL’s treasury is an
online assistance through facility of products including Working
lockers operational 24/7 round active participant in the interbank
called “Allied Live Chat”. Capital Facilities, Term Loans,
the clock (even on weekends securities trading and FX trading,
and non-banking hours). Structured Trade Finance
having attained primary dealer
These lockers are powered by SME Financing Facilities, Letters of Guarantee,
status, providing competitive
revolutionary robotic technology Letters of Credit, Fund Transfers
The Bank continues to focus / Remittances, Bill Discounting, pricing.
enabling access of your locker
on SME Business with a vision Export Financing and Receivable
24/7 at any time of your
to capitalize on the bank’s Discounting.
convenience. Digital lockers
countrywide footprint and
are made accessible vide self-
longstanding customer loyalty to
82 Annual Report 2017

PRODUCTS &
SERVICES
Allied Islamic Premium
Account
A Shariah compliant deposit
product for higher saving
customers particularly for high
net-worth individuals, business
entities, pension / benevolent
funds, Govt. / semi-Govt. bodies
which is based on Mudharabah.
Profit is calculated on average
balance of the month and paid
monthly.

Allied Islamic Express

Account
A Shariah compliant banking
solution especially designed for
Home Remittance Beneficiaries
ISLAMIC number of free services on
maintaining a minimum average
Allied Islamic Sahulat to facilitate hassle free transfer
Account of home remittances. This
BANKING monthly balance.
The product is designed
Pak Rupee based product is
developed on the concept of
Allied Islamic Current Allied Islamic Anmol to facilitate allocation of Mudharabah and operated like
complimentary safe deposit
Account Plus Account lockers upon maintaining of
normal chequeing account(s) on
profit / loss sharing basis.
Based on principles of “Qard”, This is a “Mudharabah” deposit certain balance in account. The
it provides convenience product for individuals available account is offered in Pak Rupees
of conducting day-to-day in local currency. Profit is only and profit is paid semi- Allied Islamic Notice
transactions available both in calculated on monthly average annually. Period Certificate
local and foreign currencies. balance and credited on six
This product is designed to
There is no restriction on monthly basis. The customers Allied Islamic cater to the requirements of the
withdrawals or numbers of can avail a large number of free
transactions. services by maintaining a certain Investment Certificates customers who want to place
their deposit for short tenure like
average monthly balance as per Islamic Investment Certificates 7 days, 30 days etc. The profit
specifications. are Term Deposit certificates for
Allied Islamic Asaan investment periods ranging from
is calculated on daily basis and
paid at maturity.
Account Allied Islamic Business period of 1 month to 5 years
with profit payment options of
Developed on the guidelines Plus Account monthly, quarterly, half yearly Financing Products
provided by SBP for Pakistani
Nationals only with simplified This is a savings account with or at maturity. Investment Various Islamic Financing
account opening procedure, several unique features that certificates are issued with Products based on the following
initial deposit requirement of make it very suitable for use investment of Rs.25,000 with modes of finance are being
Rs.100. The product is available as a business account. On no maximum limit. Pre-mature offered by the Bank
both in Current and Saving maintaining minimum monthly withdrawal can be made as per
categories. average balance, as per product features. »» Murabaha
sepcification, the customer »» Salam

Allied Islamic Saving

can avail a large number of Allied Islamic »» Istisna
free services. Account can be »» Islamic Export Refinance
Account opened in local currency only. Institutions Account Scheme
This is a “Mudharabah” deposit »» Ijarah
Regular chequing account,
offered in local and foreign Allied Islamic Khalis product for Financial Institutions »» Diminishing Musharakah
and Non-Banking Financial »» Business Musharakah
currencies, on the basis of Munafa Account Institutions available in local
“Mudharabah” with no minimum
balance requirement. Profit is This is a tier based savings currency. Profit is calculated
calculated on monthly average account specially designed to on daily balance and paid on
balance and credited on six encourage and promote savings. monthly basis.
monthly basis, offering a large Minimum deposit required for
opening an account is Rupees
1,000 only.
 Allied Bank Limited 83

CORPORATE
SUSTAINABILITY
Allied Bank Limited (the Bank) is privileged to provide innovative financial products and
services across the communities we serve. Being the fourth largest private commercial
bank in Pakistan; it is imperative to maintain high trust levels of all stakeholders including
customers, staff and society at large; while simultaneously creating long-term value for the
shareholders.

OUR PHILOSOPHY OF CSR

The Bank focuses on multi-faceted dimensions of sustainability to play its role in creating economic activities,
environmental stability and social value for all the stakeholders. CSR vision of the Bank – To be a socially responsible
corporate citizen – has evolved into its CSR policy which clearly outlines Corporate Social Responsibility objectives of the
Bank, and is integrated with policies, procedures and long term strategic plan of the Bank.

CSR Policy stipulates that CSR is a concept whereby companies integrate social and environmental concerns in their
business operations and in their interaction with their stakeholders on a voluntary basis.

In line with CSR objectives during the year, the Bank’s contributions towards these areas are as follows:

Customer Relations Workplace Environment Society

Rs. 142 Million Rs. 383 Million Rs. 257 Million Rs. 16,490 Million
Serving Customers well is Building an engaged, Meeting our wider social When we consider
at the core of our vision to healthy and inclusive obligations and contributing sustainability, Bank looks at
be the first choice Bank for workplace remains a towards more sustainable what takes place not just
the customer. crucial strategic growth; with no adverse within our walls, but also
objective. impact on throughout society
the environment. we serve.

Total contribution towards CSR: Rs. 17,272 Million

84 Annual Report 2017

CORPORATE
SUSTAINABILITY
CUSTOMER RELATIONS
This is at the core of our vision to be the first choice Bank for the customers by providing integrated solutions dynamically
and efficiently to our valued customers.

New to Bank Accounts Digital Banking

• Allied Asaan Accounts – 153,250 • Launch of myABL
• Khanum Accounts – 16,311 • Self service branches – 2
• Other Accounts – 343,439 • Digital Signage – 275

Total Accounts – 513,000 Rs 114 Million

Branch Network
• Branches (Urban/Rural:
998/252) No of Transactions
• Branches (Banked/Un-
banked: 1163/87) • Counter Transactions – 48%
• Sub Branch - 1 • Alternate Delivery Channels
• Booths - 19 (ADC) – 52%

Total Branches - 1250 Total –111 Million

Complaints
ATM Management
• ATM Uptime - 97 %
• Complaints Resolution
• EMV Compliant
Rate - 97%
ATMs – 1006
• Average TAT - 4.25 Days
• Onsite ATMs - 992
• CRM & Phone Banking
• Offsite ATMs - 249
Software Upgrade

Rs 10 Million Rs 11 Million

Customer Awareness
Mystery Shopping
• No. of Customer Awareness
• No of Branches Selected – 355 Seminars - 11
• No. of Participants - 1,149
Rs 1 Million
Rs 6 Million

Total contribution: Rs. 142 Million

Focusing on high-tech services, the Bank achieved an outstanding 98%+ ATM uptime during the occasions of Eid-ul-
Fitr and Eid-ul Adha, and handled around 1.2 Million transaction involving Cash Withdrawals of over Rs. 11,600 million.
Further, in order to facilitate convenience, special purpose temporary Offsite ATMs were installed at two cattle markets in
Lahore during Eid-ul-Adha.
 Allied Bank Limited 85

The Bank further strengthened

customer relations through the
following initiatives:

Customer Awareness Seminars

To promote financial inclusion by
exploring the untapped sectors with
special focus on the unbanked areas
of Pakistan, ABL organized various
seminars throughout the year.

For assisting in finding ways of

Mirpur, Azad Jammu & Kashmir, Kot ATM screens and digital signage in
achieving growth in tax revenue
Abdul Malik and Multan by the Bank both English and Urdu languages,
through private sector credit growth
for promoting Islamic Banking. and playing voice messages at Allied
and leading to broad based economic
Phone Banking.
growth, the Bank arranged a seminar
in Lahore on “Private Sector Credit The Bank has also organized the
Islamic Banking awareness sessions Through newly introduced complaint
and Growth in Tax Revenue, which
at various levels of interactions with management system, customers
was attended by senior FBR officials,
our valued customers and general can post their feedback and
valued Obligors of the Bank and their
public, thereby playing its constructive lodge any complaint relating to
CFOs and leading tax and audit firm
role in the advancement of Shariah the Bank’s service directly into the
professionals.
compliant banking within the country. system by visiting their nearest
branch. In addition, the Bank is also
In line with SBP’s vision to promote
Customer protection and quality continuously upgrading its Customer
agriculture and SME financing, ABL
Relationship Management System to
organized four Financial Awareness assurance improve customer services.
Seminars on SME and Agri Financing
in Quetta, Sukkur, Peshawar and Our passion for excellence has
transformed our ability to solve During the year 2017, 12,168
Faisalabad respectively.
customers’ problems and deliver complaints were received and the
innovative solutions in a timely Bank taking appropriate measures
The Bank continued the efforts
manner. Customers’ feedback is vital promptly achieved 97% resolution
towards enhancing corporatization of
in understanding their needs, devising rate with average Turnaround Time
businesses in the country; organizing
innovative solutions and continuous (TAT) of 4.25 working days.
two seminars on “Transition from
Family Owned Business Structure to improvement in service quality.
Corporate Structure” in Islamabad Understanding the significance
and Lahore, encouraging more formal During the year under review, the of evolving technology platforms,
business set-ups in family owned Bank introduced various channels for the Bank has launched extensive
businesses. the customers to create awareness activities on social media and
on posting their feedback directly actively interacts with internet users
Three Interactive seminars on in the system. The customers were on a variety of topics to increase
“Customer Awareness Program on educated by placing placard in engagement. One key reflection of
Islamic Banking’’ were arranged at branches, displaying message on these efforts is that visit on the Bank’s
86 Annual Report 2017

CORPORATE
SUSTAINABILITY
Facebook page has increased to
739,000 in 2017 from 538,000 in
2016.

Contribution towards financial

inclusion
During the year under review, the
Bank continued to endeavor towards
development of rural areas, financial
inclusion and providing quality
financial services at grass root level.

The Bank continued to expand

its flourishing rural and unbanked
branch network. As a special initiative
towards far flung under privileged
areas in Balochistan and KPK,
Your Bank opened 3 branches in
Baluchistan Province in Awaran, Kalat
and Turbat areas and 2 branches
in Miran Shah and Ghalani areas of
Federally Administered Tribal Areas. has greatly facilitated in reducing The Bank also inaugurated two
During the year, the Bank opened the related TATs and is expected to self-service branches at Lucky One
total 26 additional rural branches to further expedite the Bank’s vision Mall, Karachi and Packages Mall,
increase the total number to 252 rural of contributing towards reducing Lahore, offering innovative banking
branches. unbanked population of the country. services with Cash Deposit Machines,
Tablets and Kiosks. In addition to
In order to play an effective role in the Digital Innovation experiencing MyABL services and
development of agrarian economy depositing Cash and Cheque; walk-in
Our long-term success is dependent customers can also open bio-metric
of the country, the Bank is also on our ability to generate value for
extending agricultural financing Allied Asaan Account as noted above
society by providing technology instantly.
across the country and offers vast driven products, services and
range of agricultural finance products facilities; catering to broad spectrum
through Agri designated branches. During the year, the Bank also took a
of requirements of the communities unique initiative of facilitation of small
in which we operate. The Bank is obligors in automation of their book
The Bank also launched Allied continuously exploring new avenues
EZCash Prepaid Card to target keeping and accounting functions; by
to gradually provide relevant digital shifting them towards an ERP system,
unbanked customers. This re- products and services to our valued
loadable easy to use card is instantly with off-the-shelf features geared
customers. towards automated streamlining of
issued and offers greater security
with PIN for Point-of-Sale (POS) accounting, finance and decision
During the year, Allied Bank has making processes. A professional
Transactions. launched ‘MyABL’ app, a more firm is engaged by the Bank in this
secure, reliable and efficient Digital initial pilot project to implement ERP
Allied Asaan Account and Allied Banking service that caters to
Khanum Account are two main for four obligors; with initial software
all personal banking needs; by set-up cost being borne by the Bank.
products of the Bank which have revamping the existing ‘Allied Direct’
been designed with focus on financial The implementation is in testing
services. Its responsive design phase and expected to be completed
inclusion of the unbanked persons. works seamlessly across wide array
The total number of Allied Asaan and in 2018.
of interfaces including desktop
Allied Khanum accounts have been computers, laptops, tablets or smart
increased to 213,827 and 18,972 phones.
respectively. The introduction of
Bio-metric based account opening,
 Allied Bank Limited 87

WORKPLACE
Building an engaged, healthy and
inclusive human resource is crucial Workplace Safety Staff Welfare Fund

to our strategy. The Bank strives • Fire Extinguishers • Employees Benefited

installed – 1,281 – 76
for instilling a culture of ethics and
responsibility and establishing a Amount – Rs 12 million Amount – Rs 28 million
workplace which promotes balanced
work life along with provision of
healthcare facilities; provides equal
employment opportunities while Equal Opportunity
Staff Engagement
encouraging employment of special Employer • No of Cricket
Tournaments – 4
persons; maintains high ethical • No of Female Staff –
• No of Hajj Employees
standards and support social 1,663
– 28
interaction among employees. (15%)
Amount – Rs 20 million

Employees’ engagement plays an

important role in creating a great Staff Development
Medical Facility
workplace culture which is vital for • No of Employees
• No of Current
shaping the future of an organization. Education – 443
Employees – 1,934
The CEO convened interactive • No of Employees
• No of Ex Employees
Trained – 7,652
sessions with branch staff across – 756
• No of Trainings – 892
the country to have their first hand Amount – Rs 246 million
Amount – Rs 77 million
feedback. These sessions were well
appreciated by all the field staff and
significantly contributed towards
boosting motivation, team spirit and
inclusiveness among all the staff of
the Bank. Total contribution: Rs. 383 Million
Equal opportunity employer and ABL being equal opportunity 1,934 staff members availed medical
employer, encourages employment facility.
employment of special persons of special persons and currently 53
The Bank continued to accomplish special persons are honorably earning Adhering to responsibility towards
progress towards increasing the their livelihood while contributing eligible ex-employees, during the
diversity of our human capital; towards the growth of the Bank year, from the platform of “Post-
reinforcing the inclusive culture of the and society. Simultaneously 1,663 retirement Medical Fund”, the Bank
Bank. The Bank aim to ensure that females, representing 15% of total contributed Rs.125 million towards
employees of all backgrounds are permanent staff members, are the health of its 756 persons as per
treated equally and have an equal diligently performing their duties. their respective entitlements.
opportunity to be successful.
Occupational Health and Safety
Over the years, the Bank has
generated direct and indirect Health and safety of the employees
employment which is currently is of paramount importance to the
exceeding 11,000 permanent and Bank.
contractual employees, employed
from diverse areas of Pakistan; During the year 2017, the Bank
thereby positively impacting the broad spent Rs.121 million through Bank’s
based economy and society at large. medical expense policy and over all
88 Annual Report 2017

CORPORATE
SUSTAINABILITY
The Bank ensures that maximum
safety standards are met at all
premises and encourages employees
to promote the safety of their
fellow team members. Provision
of emergency lights, fire and
smoke detection equipment, alarm
system, portable fire extinguishers,
periodic evacuation/safety drills and
emergency exit doors are some of the
measures that have been taken by
the Bank. During the year, incremental
expense on provision of the Fire
Extinguishers was Rs.12 Million.

The Bank also believes in

engagement of staff and their family
members through social interaction
and healthy activities. Hence, Rs.5
million was spent by the Bank on staff
cricket tournaments held at Lahore,
Karachi, Islamabad and Multan
respectively.

Education and well being of the

staff
Employees are driving force of the
organization. The Bank is committed
towards investing in human resource
and creating leaders who inspire and
empower their teams resulting in and to groom as Banking Industry for clerical and non-clerical staff
value creation for the all stakeholders. specialists. members and education subsidy
for executive employees. Apart
The Bank introduced apprenticeship Cognizant of the importance of from providing financial assistance
programs for trainee students of the education, the Bank has spent for formal education programs,
Institute of Chartered Accounts of Rs.31 million towards employee’s the Bank has also invested in the
Pakistan, thus providing a platform to education during the year 2017, employees by way of arranging their
trainees for polishing their potential comprising of education allowance participation in both in-house and
external trainings courses. During the
year, the Bank spent Rs.46 Million on
Trainings expenses; including foreign
trainings as well. During the year, 37
employees received certification on
Islamic Banking from NIBAF and 87
employees received cash award on
passing IBP examinations.

The Bank also provides a helping

hand to clerical and non-clerical staff
members having humble financial
backgrounds, in their hour of need,
whether it is a time of festivity or
sorrow. During the year the Bank
 Allied Bank Limited 89

through its platform of “Staff Welfare practices, so that the interests of all Energy conservation and
Fund” has spent Rs.28 million to stakeholders are protected. Code environment protection
assist 76 employees by financially of Ethics and Conduct signed by all
enabling them in important social employees acts as a guide for them As a responsible corporate citizen,
events like marriage ceremony of in discharging their duties and sets the Bank is keen to conserve the
their daughters or to meet the burial out the standards of good practice. precious energy resources; continuing
expense of their departed loved ones. Management’s Central Administration to increase number of solar branches
Action Committee (CAAC) takes and installation of invertors to reduce
Keeping in view the religious action on any violation of policies and carbon emission and use of fossil fuel.
sentiments of our employees, the procedures, act of fraud and forgery, During the year, the Bank contributed
Bank sponsored its clerical, non- breach of discipline, code of conduct, toward energy saving solutions
clerical and executive staff totalling ethics and business practices. Appeal by investing Rs.5 million towards
28 to perform Hajj by spending Rs.15 of the staff against whom CAAC installation of solar panels and Rs.139
million. has already taken disciplinary action million towards installation inverters.
is reviewed by Human Resource The total solar branches became 52
Business ethics and anti- Committee. and total number of inverter based
corruption measures branches reached 657, being 53% of
The Bank nurtures a culture of ENVIRONMENT the total network.
excellence, good governance,
To meet Bank’s wider social Various administrative measures
transparency, integrity and
obligations, and contribute towards including budgetary controls and
accountability. Controls and
more sustainable growth while playing proper maintenance of electrical
Compliance being an integral
function of the Bank encourages a positive role in the creation of a equipment carried out during the year
high business ethics while promoting healthier environment, the Bank aims resulted in reduced consumption in
positive compliance culture. The to promote green banking, paperless electricity, and reduction in spending
Bank is committed to the best culture, renewable energy sources, on fossil fuel by 19%.
industry practices for compliance reduction of carbon emissions and
with all regulatory frameworks increasing plantation.
including anti-money laundering

Solar Installations Total Installations - 52

• Amount – Rs. 5 Million
• No of Installations in 2017– 2

Inverter Installations Total Installations - 657

• Amount – Rs. 139 Million
• No of Installations in 2017 – 190

Energy Efficient Inverter Split ACs Amount – Rs. 113 Million

• No of Installations in 2017 – 1,322

Continuous Focus on Paper Less Banking

Decrease in Spending on Consumption of Fossil Fuel 19%

90 Annual Report 2017

CORPORATE
SUSTAINABILITY
COMMUNITY
The Bank endeavors to establish its presence not only by business interactions but also by contributing towards
social development and extending its helping hand to the society, especially during the times of adversities and natural
calamities.

• No of Organizations – 7
Amount Spent – Rs. 14 Million
Healthcare

• No of Organizations – 15
Amount Spent – Rs. 36 Million Education

• No of Organizations – 47
Amount Spent – Rs. 45 Million Sponsorship

• Outsourced Security Staff

Amount Spent – Rs. 49 Million
Financia
l
Assistan
ce
• Income Tax – Rs. 9,061 Million
• Withholding Tax Collected – Rs. 6,322 Million
• Sales Tax & FED – Rs. 582 Million
• Zakat Collected – Rs. 381 Million Nation
al
Exche
quer

Total contribution: Rs. 16,490 Million

Education, Health and community welfare

Education
Education is the only way to create a civilized society and forms the basis of nation building. The Bank is supporting
leading educational institutions at all the levels (schooling, higher education, vocational and professional education
institutions/universities) which play pivotal role in the enlightenment of our future generations.

This is age of information technology

(IT). IT literacy plays an important
role in preparing the students for
number of careers in today’s modern
world. Recognizing this importance,
the Bank has adopted a policy to
donate its used but properly working
personal computers to educational
institutions; especially targeting under
privileged segments of the society.
The Bank has donated a total of
77 computers to such educational
institutions during 2017.
 Allied Bank Limited 91

Universities – Rs. 31 Million

Professional education is important for Pakistan’s progress. Despite recent
achievements, the country still faces numerous challenges to raise the education of its
population to the required standards.

Colleges – Rs. 3 Million

Higher education has great importance in the development of a country.

Schools – Rs. 2 Million

Primary education is the basic bedrock upon which whole building of education and
human development stands.

Total contribution: Rs. 36 Million

The Bank also donated Rs.32
million and spent Rs.4 Million on
sponsorships to various educational
institutions including:

Health
Limited Healthcare access for the
less privileged persons is another
area of concern within the country.
During the year, the Bank contributed
Rs.14 million in the shape of direct
donations and sponsorships,
towards seven healthcare institutions
thereby playing its role in easing
the predicament of underprivileged
patients.

General Welfare
During the year, the Bank spent
Rs.45 million on general welfare
of the community. These included
contributions in shape of donations
towards poor feeding, rehabilitation of
special persons and sports activities
and sponsorships for organizing
social events, conferences and
awareness programs.
(Rs. in Million)

Notable highlight for the year is Poor Feeding 5

the Bank’s contribution towards Special Person’s Rehabilitation 6
‘Center for Mentally Challenged Professional / Awareness Seminars 10
Children (Chaman) - an institution for
Social Welfare 11
care and rehabilitation of mentally
Sports
retarded children’. Meeting its 13

CSR objectives, the Bank donated

for the upgradation of building Total contribution: Rs. 45 Million
92 Annual Report 2017

CORPORATE
SUSTAINABILITY
and payment of honorarium for
Psychologist and speech therapist;
enabling significant improvement in
the upkeep of the premises while
boosting psychological care and
general education level for these Income Tax

underprivileged special children. Rs 9,061 Million

During the year, the Bank also spent

Rs.49 Million towards financial
Withholding Taxes
assistance to the outsourced Security
Rs 6,322 Million
Guards deployed at the Bank; as an
additional incentive.
Total contribution
to National
Contribution to national Exchequer
exchequer Rs. 16,346 Million
The Bank is one of the leading Sales Tax & FED

institutions in its contribution towards Rs 582 Million

the national exchequer. During the
year, the Bank paid Rs. 9,061 million
as Income Tax, contributed Rs. 6,322
million as withholding tax agent and Zakat Collected
deposited Rs. 582 million on account Rs 381 Million
of Federal Excise duty and Sales Tax
to the national exchequer. Further, the
Bank collected Rs. 381 Million Zakat
from 74,201 account holders and
deposited to the national exchequer.
 Allied Bank Limited 93

CORPORATE SOCIAL
RESPONSIBILITY (CSR) POLICY
OUR PHILOSOPHY
CSR vision of Your Bank – “To be a socially responsible corporate citizen” – has evolved into its CSR policy which clearly
outlines Corporate Social Responsibility objectives of Your Bank. CSR Policy stipulates that CSR is a concept whereby
companies integrate social and environmental concerns in their business operations and in their interaction with their
stakeholders on a voluntary basis.

POLICY OBJECTIVES
Objective of this policy is to provide guideline, so that business objectives and entity’s roles as responsible corporate
citizen are aligned together.

The objectives of CSR policy primarily focused at Workplace, Environment, Community, Customer Relations and Brand
Image are stipulated as follows:

»» Establish a WORKPLACE environment to maintain balanced work life, have healthcare facilities, maintain high
ethical standards, have equal employment opportunities, aid social interaction among employees and encourage
employment of disabled.
»» Our working style should have positive impact on ENVIRONMENT, use of renewable energy sources, reducing
carbon omissions, promoting trees and plants and change of working style, on best effort basis, from paper based
to computer based.
»» Make our COMMUNITY feel our presence not only by our business interactions but also by sharing and caring,
specially during the times of adversities and natural calamities.
»» Strengthen CUSTOMER RELATIONS by ensuring satisfaction and privacy.
»» Our BRAND and slogans such as, “Aap kai dil main hamara account” should be known as community caring
organization and not just for profit.
Bank’s contributions towards these areas have been mentioned in Corporate Sustainability Report.
94 Annual Report 2017

INVESTOR
GRIEVANCE
Allied Bank has put in place comprehensive guidelines for investors/shareholders to address their grievances. The
guidelines conform to ABL’s internal policy to address the investor grievances as well as statutory requirements as
stipulated under SECP SRO 634 (1)/2014.

For all shares related issues, Shareholders are advised to contact Shares Registrar of the Bank with contact details
available on Bank’s corporate website.

In order to facilitate the investors/shareholders who intend to register a complaint, the contact details of the focal person
of Shares Department is given on the Bank’s corporate website for this purpose.

In addition, if Investors/Shareholders grievances are not resolved by the Shares Registrar of the Bank, as well as Shares
Department, they may escalate their complaints to the Company Secretary of the Bank.

If any complainant still remains unsatisfied, the same can be forwarded to SECP; using links of related SECP website
which are available in investor grievance section of Bank’s Corporate website.

RECORD
MANAGEMENT
Allied Bank has a bank-wide records management program that ensures maintenance, protection, retention and disposal
of records in accordance with applicable regulations, operational needs and fiscal/legal requirements.
 Allied Bank Limited 95

MANAGING CONFLICT
OF INTEREST
Overview Confidentiality
The Board and the Management of Allied Bank Limited »» Maintain the privacy and confidentiality of all the
(“the Bank”) is committed towards transparent disclosure, information acquired being Member of Board of
management and constant monitoring of potential conflicts Directors of the Bank or come into their knowledge
of interest to ensure that no undue benefit is passed on. and refrain from disclosing the same unless otherwise
The Board recognizes the responsibility to adhere to the required by statutory authorities/law and Bank’s own
defined policies / procedures and avoid perceived conflicts policies. All such information will remain with them
of interest that may arise during the course of business. as a trust and will only be used for the purpose for
which it is intended and will not be used for personal
Disclosure of Interest by Director benefits. Inside information about ABL’s affairs shall
not be used for their own gains or for that of others
»» Every director (including spouse and minor children) either directly or indirectly.
of the Bank who is in any way, whether directly or
indirectly, concerned or interested in any contract or »» Directors of the Bank are strictly prohibited to disclose
arrangement entered into, or to be entered into, by or the fact (comes into their knowledge) to the customer
on behalf of the Bank shall disclose the nature of his or any other quarter that a suspicious transaction or
concern or interest at a meeting of the directors. related information is being or has been reported to
any authority, except if required under the law.
»» Directors are required to disclose existing or perceived
conflicts of interest at the Board meeting as per
the requirements of prevailing law. Where a conflict Insider Trading
of interest or potential conflict of interest has been »» Directors shall not deal directly or indirectly in the
disclosed, the concerned Board member shall not securities of the Bank whether on their own account
take part in the Board discussion on that agenda or their relative’s account, if they are in possession
item. The member who has disclosed the conflict of any unpublished price sensitive information
cannot vote on that agenda item. concerning the Bank. Directors who are in possession
of any unpublished price sensitive information shall
Abidance of Laws / Rules not communicate directly or indirectly the said
information to others who trade on such information.
»» Conform to and abide by all the legal and standing
requirements and Code of Corporate Governance »» Where any director or his/her spouse sells, buys
while performing their duties and obey all lawful orders or takes any beneficial position, whether directly or
and directives. All Board members shall comply indirectly, in the shares of the Bank, he/ she shall
with and observe all applicable related statutory immediately notify the Company Secretary in writing.
requirements, regulatory directives and ABL policies. Such director shall also deliver a written record of the
price, number of shares, form of share certificates,
(i.e., whether physical or electronic within the Central
Integrity Depository System), and nature of transaction to the
Company Secretary. Further, no director shall, directly
»» Conduct themselves with the highest standards or indirectly, deal in the shares of the Bank, in any
of ethics, professional integrity and dignity in all manner, during the closed period as determined by
dealings with all stakeholders and not engage in acts the Board of Directors.
discreditable to ABL, their profession and the nation.
If they become aware of any irregularity that might
affect the interests of ABL, they shall inform the Board Related Party Transaction
immediately. »» The Bank has devised a mechanism for identification
»» Maximum utilization of their abilities, experience of related parties and execution of related party
and expertise for achieving set goals, maintain high transactions. Based on the statutory requirements,
standards of professional conduct, protect the Bank’s complete transactional details of related parties are
assets and respect interest of all the stakeholders. presented before the Audit Committee for review
Practice transparency in all acts and deeds related to and deliberations. The Audit Committee reviews and
the business of the Bank. recommends the related party transactions to the
Board for its approval.
»» Moreover, as a statutory requirement, a
comprehensively prepared return is submitted on half
yearly interval to State Bank of Pakistan that primarily
covers every related party transaction executed
during the said period.
96 Annual Report 2017

BUSINESS AT
LAST AGM

The Company Secretary informed the participants that a presentation on various guidelines issued by the SECP, from
time to time, along with certain suggestions for convenience and education of the shareholders was being run on the
multimedia screen placed in the Meeting hall for their information and awareness. The participants appreciated this
initiative.

The Company Secretary shared key areas of the presentation which included:

»» Necessity for provision of copy of the valid CNIC by shareholders having physical shareholding.
»» Payment of cash dividend electronically (Bank Mandate/e-Dividend).
»» Benefits of Bank Mandate Option.
»» Deposit of the physical shares into CDC Account.
»» Merger of different folios of same person into one folio.
»» Electronic transmission of financial statements and notices.
»» Deduction of withholding tax from dividends.
»» Deduction of withholding tax in case of joint shareholders.

On the Financial Statements, shareholders while appreciating the overall growth in the Bank’s balance sheet for year
ended December 31, 2016 particularly growth in investments and advances and decline in non-performing loans,
enquired about the reasons for major variances which were appropriately responded by the management.
 Allied Bank Limited 97

NOTICE OF 72nd ANNUAL

GENERAL MEETING
Notice is hereby given that 72nd Annual General Meeting of Allied Bank NOTES:
Limited will be held at Pearl Continental Hotel Lahore on Monday, April 9,
i) All members are entitled to attend and vote at the Meeting.
2018 at 11:00 a.m. to transact the following business:
ii) A member entitled to attend and vote can appoint a proxy under his
Ordinary Business: / her own hand or through his/ her duly authorized attorney to attend
and vote instead of himself / herself and the proxy must be a member
1. To confirm minutes of 71st Annual General Meeting of Allied Bank
of Allied Bank Limited.
Limited held on March 28, 2017.
iii) The instrument of proxy and the power of attorney or other authority
2. To receive, consider and adopt the Annual Audited Accounts of
(if any) under which it is signed, or a notarized certified copy of
the Bank (consolidated and unconsolidated) for the year ended
that power of attorney or authority in order to be effective must be
December 31, 2017 together with the Directors’ and Auditors’
deposited at the Registered Office of Allied Bank Limited not less
Reports thereon. As required under SECP SRO 634(I)/2014, Financial
than 48 hours before the time for holding the Meeting. In calculating
Statement of the Bank have been uploaded on the website of the
the 48 hours, no account shall be taken of any part of the day that is
Bank which can be downloaded from the following link:
not a working day.
https://www.abl.com/services/downloads/financial-reports/
iv) Share Transfer Books of Allied Bank Limited will remain closed
3. To consider and approve Final Cash Dividend @ 17.50% (i.e. Rs.1.75 from Tuesday, 3rd April, 2018 to Monday, 9th April 2018 (both
per share) as recommended by the Board of Directors. This Final days inclusive). Share transfers requests received at M/s Central
Cash Dividend would be in addition to 52.5% Interim Cash Dividends Depository Company of Pakistan, CDC House, 99-B, S.M.C.H
(aggregating Rs.5.25 per share) already paid to the shareholders for Society, Main Shahrah-e-Faisal Karachi, the Shares Registrar of the
the year ended December 31, 2017. Bank, before the close of business on Monday 2nd April, 2018 will
be treated as being in time for the purpose of entitlement of cash
4. To appoint Statutory Auditors of the Bank for the year ending
dividend to the transferees.
December 31, 2018 and fix their remuneration. The retiring auditors
M/s. KPMG Taseer Hadi & Co. Chartered Accountants, being eligible v) Members are requested to immediately notify the changes in their
has offered themselves for reappointment. The audit firm appointed registered addresses, if any, to the Bank’s Shares Registrar M/s
will hold office till conclusion of the next AGM to be held in 2019. Central Depository Company of Pakistan, before book closure so
that entitlement, if any, be dispatched at the correct address.
5. To consider and approve the following transactions on post facto
basis: vi) CDC Account Holders will have to follow the under mentioned
guidelines as laid down by the Securities and Exchange Commission
a) Payment of professional fee to External Auditor M/s. KPMG
of Pakistan.
Taseer Hadi & Co. Chartered Accountants to perform External
Shariah Audit for the year ended December 31, 2016 against a A. For Attending the Meeting:
cost of Rs. 1,512,500/- inclusive of out of pocket expenses.
i) In case of individuals, the Account Holder or Sub-account
b) Payment of professional fee to the External Auditor M/s. KPMG Holder and / or the person whose securities are in group
Taseer Hadi & Co. Chartered Accountants, to perform special account and their registration details are uploaded as per the
audit regarding Related Party Transactions of the Bank for the Regulations, shall authenticate his /her identity by showing
year ended December 31, 2016 against a cost of Rs. 52,500/- his/her original Computerized National Identity Card (CNIC) or
inclusive of sales tax. original passport at the time of attending the Meeting.

c) To ratify appointment of M/s. KPMG Taseer Hadi & Co., ii) In case of corporate entity, the Board of Directors’ resolution /
Chartered Accountants as approved audit firm for inspection power of attorney with specimen signature of the nominee shall
of records of Allied Bank Limited related to CDS transactions be produced (if it has not been submitted earlier) at the time of
against a fee of Rs. 450,000/- plus out of pocket expenses at the Meeting.
actual.
B. For Appointing Proxies:

i) In case of individuals, CDC Account Holder or Sub-account

Other Business:
Holder and / or the person whose securities are in CDC group
account and their registration details are uploaded as per the
6. To transact any other business with permission of the Chair. Regulations, shall submit the proxy form as per the above
requirement.

ii) The proxy form shall be witnessed by two persons whose

names, addresses and CNIC numbers shall be mentioned on
Date: March 19, 2018 the form.

iii) Attested copies of valid CNIC or the passport of the beneficial

By Order of the Board
owners and the proxy shall be furnished with the proxy form.

iv) The proxy shall produce his / her original CNIC or original
passport at the time of the Meeting.
Muhammad Raffat
v) In case of corporate entity, the Board of Directors’ resolution /
Company Secretary
power of attorney with specimen signature shall be submitted
(if it has not been submitted earlier) along with the proxy form of
the Company.
98 Annual Report 2017

STATEMENT OF COMPLIANCE WITH

CODE OF CORPORATE GOVERNANCE
This statement is being presented to comply with the terms of the Code of Corporate Governance as contained in Regulation No. 5.19.24 of Rule Book of
Pakistan Stock Exchange Limited for the purpose of establishing a framework of good governance, whereby a listed company is managed in compliance
with the best practices of Corporate Governance.

The Bank has applied the principles contained in the Code of Corporate Governance (CCG) in the following manner:

1. The Bank encourages representation of independent non-executive directors and directors representing minority interests on its board of directors, in
case anyone from that class desire to contest the election he would be facilitated by the Bank as per detail given in clause 5.19.1. (a) of the CCG. At
present the board includes:
13. The directors, CEO and executives do not hold any interest in
Category Names the shares of the Bank other than that disclosed in the pattern of
shareholding.
Independent Directors Dr. Muhammad Akram Sheikh
14. The Bank has complied with all the corporate and financial reporting
Zafar Iqbal requirements of the CCG.
Non-Executive Directors Mohammad Naeem Mukhtar 15. The Board has formed an Audit Committee which it comprises of
three members, one of them is non-executive director whereas
Sheikh Mukhtar Ahmed remaining two are independent directors including the Chairman of
Muhammad Waseem Mukhtar the Committee.

Abdul Aziz Khan 16. The meetings of the Audit Committee were held at least once in
every quarter prior to approval of interim and final results of the Bank
Mubashir A. Akhtar and as required by the CCG. The terms of reference (Charter) of the
Committee have been formed and advised to the Committee for
Executive Director / CEO Tahir Hassan Qureshi
compliance.
The independent directors meet the criteria of independence under clause 17. The Board has formed Human Resource & Remuneration Committee
5.19.1. (b) of the Code of Corporate Governance. which comprises of three members including the CEO, remaining two
including the Chairman are non- executive directors.
2. The directors have confirmed that none of them is serving as a
director in more than seven listed companies including the Allied 18. The Board has set up an effective internal audit function under the
Bank Limited. supervision of Audit Committee.

3. All the resident directors of the Bank are registered tax payers and 19. The statutory auditors of the Bank have confirmed that they have
none of them has defaulted in payment of any loan to a banking been given a satisfactory rating under the quality control review
company, a DFI and NBFC or being a broker of a stock exchange, program of the ICAP, that they or any of the partners of the firm,
has been declared as a defaulter by the Stock Exchanges. their spouses and minor children do not hold shares of the Bank and
that the firm and all its partners are in compliance with International
4. No casual vacancy occurred on the Board during the period under Federation of Accountants (IFAC) guidelines on code of ethics as
review. adopted by the ICAP.
5. The Bank has prepared a “Code of Conduct” and has ensured that 20. The statutory auditors or the persons associated with them have not
appropriate steps have been taken to disseminate it throughout the been appointed to provide other services except in accordance with
Bank along with its supporting policies and procedures. the listing regulations and the auditors have confirmed that they have
6. The Board has developed Vision/Mission statement, overall corporate observed IFAC guidelines in this regard.
strategy and significant policies of the Bank. A complete record of the 21. The “closed period”, prior to the announcement of interim / final
particulars of significant policies along with the dates on which they results, and business decisions, which may materially affect the
were approved or amended has been maintained. market price of Bank‘s securities, was determined and intimated to
7. All the powers of the board have been duly exercised and decisions directors, executives and stock exchange.
on material transactions, including appointment and determination of 22. Material / price sensitive information has been disseminated amongst
remuneration and terms and conditions of employment of the CEO, all market participants at once through stock exchange.
other executive and non-executive directors, have been taken by the
Board/shareholders. 23. The Bank has complied with the requirements relating to
maintenance of register of persons having access to inside
8. The meetings of the board were presided over by the Chairman and, information by designated senior management officer in a timely
in his absence, by a director elected by the board for this purpose manner and maintained proper record including basis for inclusion or
and the board met at least once in every quarter. Written notices of exclusion of names of persons from the said list.
the board meetings, along with agenda and working papers, were
circulated at least seven days before the meetings. The minutes of 24. We confirm that all other material principles enshrined in the CCG
the meetings were appropriately recorded and circulated. have been complied with
9. Appropriate arrangements were made for Orientation of Directors to
acquaint them with their duties and responsibilities. Five members of
the Board of Directors (Including the CEO) are Certified Directors from
The Pakistan Institute of Corporate Governance (PICG) and Institute
of Chartered Accountants of Pakistan (ICAP). Whereas three directors For and on behalf of the Board.
are exempted from such course on account of the experience and
qualification. The Bank also encourages participation of members of
Board to attend seminars / workshops conducted by various forums.
10. The Board has approved appointment of CFO, Company Secretary Mohammad Naeem Mukhtar Tahir Hassan Qureshi
and Head of Internal Audit, including their remuneration and terms
and conditions of employment. Chairman Board of Directors Chief Executive Officer

11. The directors’ report for this year has been prepared in compliance
with the requirements of the CCG and fully describes the salient Lahore
matters required to be disclosed. Dated: February 21, 2018
12. The financial statements of the Bank were duly endorsed by CEO and
CFO before approval of the Board.
 Allied Bank Limited 99

REVIEW REPORT TO THE MEMBERS

ON THE STATEMENT OF COMPLIANCE WITH THE
CODE OF CORPORATE GOVERNANCE
KPMG Taseer Hadi & Co.
Chartered Accountants
2nd Floor,
Servis House
2-Main Gulberg Jail Road,
Lahore, Pakistan

We have reviewed the enclosed Statement of Compliance with the best practices contained in the Code of Corporate
Governance (the Code) prepared by the Board of Directors of Allied Bank Limited for the year ended 31 December 2017
to comply with the requirements of Rulebook of Pakistan Stock Exchange Limited .

The responsibility for compliance with the Code is that of the Board of Directors of the Bank. Our responsibility is to
review, to the extent where such compliance can be objectively verified, whether the Statement of Compliance reflects
the status of the Bank’s compliance with the provisions of the Code and report if it does not and to highlight any non-
compliance with the requirements of the Code. A review is limited primarily to inquiries of the Bank’s personnel and
review of various documents prepared by the Bank to comply with the Code.

As a part of our audit of the financial statements we are required to obtain an understanding of the accounting and
internal control systems sufficient to plan the audit and develop an effective audit approach. We are not required to
consider whether the Board of Directors’ statement on internal control covers all risks and controls or to form an opinion
on the effectiveness of such internal controls, the Bank’s corporate governance procedures and risks.

The Code requires the Bank to place before the Audit Committee, and upon recommendation of the Audit Committee,
place before the Board of Directors for their review and approval its related party transactions distinguishing between
transactions carried out on terms equivalent to those that prevail in arm’s length transactions and transactions which
are not executed at arm’s length price and recording proper justification for using such alternate pricing mechanism.
We are only required and have ensured compliance of this requirement to the extent of the approval of the related party
transactions by the Board of Directors upon recommendation of the Audit Committee. We have not carried out any
procedures to determine whether the related party transactions were undertaken at arm’s length price or not.

The Bank has continued to present the details of all related party transactions before the Audit Committee and upon their
recommendation to the Board for review and approval. The definition of related party used is in accordance with repealed
Companies Ordinance, 1984 and applicable financial reporting frame work, as the regulations under Section 208 of the
Companies Act, 2017 have not yet been announced.

Based on our review, nothing has come to our attention which causes us to believe that the Statement of Compliance
does not appropriately reflect the Bank’s compliance, in all material respects, with the best practices contained in the
Code as applicable to the Bank for the year ended 31 December 2017.

KPMG Taseer Hadi & Co.

Chartered Accountants
(Kamran Iqbal Yousafi)

Lahore
Date: 21 February 2018
100 Annual Report 2017

STATEMENT OF ETHICS AND

BUSINESS PRACTICES
Code of Ethics or elsewhere, or indulge in any wilful insubordination; breach of
activity detrimental to the ideology of confidential material; use of drugs or
All employees of Allied Bank Limited (ABL), Pakistan. alcohol; falsification of documents;
are required to follow a Code of Ethics violation of safety/health rules; insider
and Business Practices in all areas of »» All full-time employees must devote
trading; parallel banking; money
professional conduct. They must abide by their entire business day to their
laundering and any act detrimental to
the following: work; avoid any outside activity
the Bank’s business.
that interferes with their judgment
in the best interest of the Bank and
Laws and Rules its clients. The Human Resource
Workplace Environment
»» All the employees are required to Group must be informed in case an »» The Bank is committed to creating
comply with all the laws, rules and employee: and maintaining a working, learning
regulations governing ABL, including and customer care environment,
»» Holds an outside directorship;
the Bank’s policies, procedures which is free from violence and has
carries on business activity
and standards, the State Bank zero tolerance for violence against
outside; holds majority
of Pakistan and the Security and any employee or its property.
shares / interest in a public or
Exchange Commission of Pakistan’s private business; takes direct »» Employees are not allowed to play
regulations applicable to the Bank. advantage of securities of practical jokes or pranks on each
»» All employees must function with a public listed company, or other, indulge in horseplay, or share
integrity within the scope of their serves as a client’s personal immoral jokes with other employees,
authorities and follow directives representative. or the outside world, through Allied
given by the person(s) under whose Bank email server or computer, or
»» No employee shall bring political or
jurisdiction they are deputed with cell phones.
other outside pressure / influence
complete honesty. to bear on the authorities / superior »» Employees are prohibited to use,
»» Core value of ‘Integrity’ must be officers or use the media with intent exchange, or sell intoxicants or drugs
promoted by upholding fairness, to induce them to act in a manner in the work place or come to work
equality and respect for all inconsistent with rules in any matter under their influence. Smoking is
team members. Discrimination, relating to the Bank. allowed only in designated areas.
harassment of all types, intimidation »» Employees are prohibited from »» Employees are required to maintain
and other negative practices are any engagement outside the Bank proper dress code, appear well
strictly prohibited. without prior approval from the groomed and presentable at all the
»» Harassment includes any unwanted, Human Resource Group. Employees time. Livery staff should be in their
immoral act or attitude, including with financial or other interest in proper uniform. High standards of
abuse of authority, creating a hostile any family business must declare behavior and tidy work areas are to
environment and retaliation to non- in advance by writing and seek no be maintained at all times.
compliance with unethical demands, objection.
which is demeaning or detrimental
to work performance or the career of
»» Employees shall not borrow from Responsibilities towards
or lend personal funds or property
any employee in any capacity. to any Client or Vendor who has a Employer (ABL)
»» Adherence to designated time relationship with the Bank except on »» Employees must raise concerns and
schedules is imperative. The Bank is market terms and conditions from suspicions, in confidence, about any
entitled to take disciplinary action in financial institutions. Borrowing or actual or potential illegal activity or
case of unauthorized absences. lending in personal capacity within misconduct according to the Bank’s
the Bank is prohibited. approved Whistle Blowing Policy and
»» Employees in workmen cadre (clerical
»» Employees shall be alert and vigilant the Anti-Harassment Policy. Failure
/ non-clerical) are not authorized to
with respect to frauds, thefts or to do so will result in employee being
indulge into unfair labour practices.
significant illegal activity committed deemed a party to the irregularity.
»» Employees are not authorized to within the office, reporting them »» Guidance must be sought from
use Bank’s facilities to promote immediately in writing to higher relevant Group in case any employee
trade union or officer’s association authority for appropriate action to receives any demand or request
activities, or carry weapons into Bank be taken. Employment or Internship for information from outside party
premises unless so authorized. They Certificates can only be issued by the including law enforcement agencies.
must not carry on above mentioned Human Resource Group. Receipts
activities during office hours. of funds can only be issued on »» Every employee must protect
prescribed forms. the Bank’s assets, physical and
»» No employee shall indulge in any
intellectual, and adhere to its Email
political activity, including forming »» Disciplinary action may be and Internet Usage Policy and
or joining a political, ethnic or taken in case of misconduct or Acceptable Use Policy.
linguistic association; get elected unsatisfactory performance including
to a legislative body, in Pakistan breach of above mentioned rules;
 Allied Bank Limited 101

»» Employees must maintain all records »» Treasury Dealers should not relay »» Employees of Treasury are strongly
accurately and are prohibited from any information which they know to cautioned against making frivolous
making any false or misleading be false and should take great care quotes which they have no
entries, forging or tampering with when discussing unsubstantiated intention of honoring and which are
signatures to compromise integrity of information which they suspect to be designed merely to mislead market
Bank’s record. inaccurate and refrain from passing participants.
on any information which they know
»» Employees are required to identify
all conflicts of interest and declare
to be untrue. Other Key Legal / Compliance
them immediately, including all
Relationship with and Rules and Issues
matters expected to interfere with »» Employees are strictly prohibited to
their duty to the Bank or ability Responsibilities to Customers, engage in insider trading, buying or
to make unbiased and objective Prospects and other External selling company common stocks or
recommendations. otherwise benefitting from sharing
Constituencies inside information, whether obtained
Information Management »» Employees must always act fairly, through workplace or outside
»» All employees shall regard as equitably and objectively with all sources.
strictly confidential any information customers, prospects, suppliers
»» ABL fully supports the intended
concerning the business of the Bank and other external constituencies.
drive against serious crime and is
which is not intended to be made Highest degree of integrity, honesty,
committed to assisting the authorities
public unless required to do so proprietary and loyalty, towards the
to identify money laundering
under the law, consulting the Human interest of the Bank, its customers
transactions and where appropriate
Resource Group in case of ambiguity and regulators is a must.
to confiscate the proceeds of
about a required disclosure. »» Employees are not authorized to crime. Employees must follow the
Confidential information must only be accept or agree to accept any gifts Anti-Money Laundering Policy and
shared with employees on a need to or conveyance of anything beyond Procedures.
know basis consistent with their job prescribed value from any current or
assignments as set out in Information »» Violation of any of the clauses of this
prospective Allied Bank customers
Security and Governance Policies. ‘Code of Ethics’ by any employee,
or vendors or any person who has a
may lead to disciplinary proceedings
»» All customers’ related information business relationship with the Bank
culminating in punishment as per
should be kept secret, used for with exception of the following:
merits of the case.
intended purpose only and any »» Gifts that relate to commonly
further use should be allowed only recognized events or occasions
after prior consent of the concerned such as a promotion, new
customer. job, wedding, retirement etc.
»» Employees should protect the privacy provided those gifts are of
and confidentiality of personnel reasonable value.
records, not sharing them inside »» Gifts from a person who has a
or outside the Bank except after business relationship with the
approval by Human Resource Group. Bank, provided the acceptance
»» Employees should not use Bank’s is based on relationship existing
facilities to access, download independent of the business of
or distribute personal or social the Bank and reported to the
information, including any material Human Resource Group.
that may pose reputational risk to the »» Benefits available to the
Bank. Secrecy of passwords must be general public e.g. advertising
maintained to prevent unauthorized or promotional materials,
access to Bank’s systems. Personal and discount or rebates on
use of internet and email is deemed merchandise or services.
inappropriate in the workplace.
Private telephone conversations must »» Civic, charitable, educational or
be kept at a minimum during office religious organizational awards
hours. for recognition of service or
accomplishment.
»» Only officially designated
spokesperson, as provided under »» Gambling / Betting between market
the Bank’s Media Policy, may provide participants is prohibited.
comments about the Bank to the
media.
102 Annual Report 2017

STATEMENT OF
INTERNAL CONTROLS
The Management of the Bank is aforementioned audits is reported controls, identified gaps and
responsible for establishing the to ACOB, while other significant requisite recommendations,
Internal Control System with the main compliance matters are reported to developed remediation initiatives
objectives of ensuring effectiveness Board Risk Management Committee and management testing plans. In
and efficiency of operations, reliability (BRMC). The Anti-Money Laundering addition, the Bank is formulating
of financial reporting, safeguarding (AML) function ensures compliance guidelines for adherence to
of assets and compliance with of local and international AML Integrated Framework on Internal
applicable laws and regulations. regulations. Controls issued by the Committee of
The Internal Control System is being Sponsoring Organizations (COSO)
constantly evolved and continuously Concerted efforts are made by all of the Treadway Commission on
reviewed, refined and improved on an functions of the Bank to improve continuing basis. In view of SBP
ongoing basis to minimize risks which the Control Environment at grass directives in OSED Circular No.1
are inherent in banking business and root level by continuous review and of 2014 dated February 07, 2014
operations. streamlining of procedures to prevent Long Form Report for the year
and rectify control lapses. ended December 31, 2016 has
Audit and Risk Review (ARR), works been submitted to SBP. The few
under direct supervision of Audit The Bank’s Internal Control System deficiencies identified in LFR 2016
Committee of the Board (ACOB). ARR has been designed to provide have been duly rectified subsequently.
assists ACOB and Board of Directors reasonable assurance to the
in discharge of their responsibility in Bank’s Management and Board of The Management considers that
respect of Internal Control System i.e. Directors about the aforementioned the Bank’s existing Internal Control
ARR reviews, assesses adequacy and objectives. While the Internal Control System is adequate and has
monitors the ongoing effectiveness System is effectively implemented been effectively implemented and
of control systems. All significant and and monitored, there are inherent monitored; based upon the results
material findings of the auditors, both limitations in the effectiveness of derived through ongoing testing
internal and external, are reported to any system, including the possibility of financial reporting controls and
the ACOB; which actively monitors of human error or system failure internal audits carried out during the
that the identified risks are properly and circumvention or overriding of year. However, the Management
mitigated to safeguard the interest of controls. In addition, projections of would be continuously evaluating
the Bank. The Board, acting through effective evaluation pertaining to processes to enhance and further
ACOB, provides supervision and future periods are subject to the risk strengthen the Internal Control
overall guidance in improving the that controls may become inadequate System.
effectiveness of the Internal Control because of changes in conditions
System. or that the degree of compliance Based on the above, the Board of
with the policies or procedures may Directors has duly endorsed the
The Compliance function of the Bank deteriorate. However, control activities Management’s evaluation of internal
is entrusted with the responsibility are an ongoing process that includes controls including ICFR in the
to minimize compliance risk with continuous identification, evaluation attached Director’s report.
reference to regulatory framework, and management of significant risks
internal / external and regulatory audit faced by the Bank.
compliance, control self-assessment, Tahir Hassan Qureshi
monitoring completeness and up-to As part of Internal Control Framework Chief Executive Officer
date inventory of Bank’s policies relating to financial reporting,
and procedures. Compliance status the Bank has documented and Lahore.
of all irregularities identified during mapped As-Is processes and Dated: February 21, 2018
 Allied Bank Limited 103

WHISTLE
BLOWING POLICY (WBP)
Preamble Scope Incentives for Whistle Blowing
The purpose of WBP Policy is to The scope of this policy includes, On the recommendation of the
create a channel at Allied Bank without limitation all types of unlawful ACOB, the Whistle blower will be
Limited (the Bank) whereby the acts / orders, fraud, corruption, suitably awarded according to the
Bank’s staff is encouraged to report, misconduct, collusive practices or significance of the information he
without any fear, any malicious activity any other activity which undermines / she had provided and impact of
or conduct of employees, which may the Bank’s operations, financial losses averted as a result.
cause financial or reputational loss to position, reputation and mission.
the Bank. Process of Whistle Blowing
Independence of Whistle The Bank has established the
Bank’s WBP provides assurance to
Blowing Unit following communication channels for
the Whistleblowers about secrecy
An operationally independent Whistle whistle blowing complaints:
and protection of their legitimate
personal interests. It also provides Blowing Unit has been established »» A dedicated e-mail address
incentives for the Whistleblowers on under supervision of ACOB, for for whistle blowing (whistle.
reporting of suspicious activities. handling and monitoring allegations, blowing@abl.com) accessible by
complaints and concerns raised by the Chairman ACOB.
the complainant /whistleblower under
Objectives »» Whistle blowing forms available
the WBP.
The intended objectives of this policy on the Bank’s corporate website.
are: »» Post / courier addressed to
Protection of Whistleblowers
Chairman ACOB, Allied Bank
»» Develop a culture of openness, All matters are dealt with Limited, Head Office, 3 Tipu
accountability and integrity; confidentiality and the identification of Block, New Garden Town,
the Whistleblower is not be disclosed Lahore.
»» Provide an environment whereby
except for inevitable situations,
employees of the Bank blow
where disclosure of identity of the
whistle where they know or Number of instances reported
Whistleblower is essential.
suspect any immoral, unethical,
fraudulent act of any current
to ACOB
The Bank stands committed to
or former employees, vendors, Number of whistle blowing incidences
protect Whistle blowers for Whistle
contractors, service providers reported to ACOB in Year 2017: Ten
Blowing and any subsequent
and customers which may cause (10).
harassment or victimization of the
financial or reputational risk to
Whistleblower is not be tolerated. If
the Bank;
the Whistleblower feels that at his /
»» Create awareness amongst her existing place of posting, he / she
employees and stakeholders might be subjected to victimization
regarding the Whistle Blowing or harassment by the alleged
Function; and officials after blowing the Whistle,
»» Enable Management to be the management may consider
informed at an early stage about transferring him / her to another
aforementioned activities or suitable place on his / her request.
misconduct and take appropriate
actions.
104 Annual Report 2017

REPORT OF
THE AUDIT COMMITTEE
Audit Committee
The Audit Committee of Board comprises of three members, two independent directors and one non-executive director,
with the Chairperson being an independent director. At Allied Bank the members of the Audit Committee bring years
of diversified rich experience at senior management positions and strategic roles in commercial banking, investment
banking, energy & power generation, manufacturing and engineering sectors. The profile of the respective member is
given in the Annual Report.

The Committee discharges its responsibilities in accordance with provisions of Prudential Regulations, Code of Corporate
Governance and its own Terms of Reference as approved by the Board of Directors (BOD). The Committee oversees the
functions of the Audit and Risk Review Group (ARRG) and ensures that ARRG has adequate resources, training, acumen
and authorities available to perform its responsibilities independently and objectively. The Chief ARRG reports directly to
the Audit Committee.

Among others, following issues were discussed in the meetings of the Audit Committee during the year under review:

»» Review of the Bank’s periodic financial statements, including disclosure of related party transactions prior to their
approval by the Board of Directors (BOD).
»» Review of significant issues highlighted by ARRG during audits / reviews of branches and other functions of the
Bank.
»» Review of status of compliance against observations highlighted by internal and external auditors, including regular
updates on the rectification actions taken by the management in response to the audit findings.
»» Monitoring of compliance status of observations highlighted in State Bank of Pakistan’s inspection reports.
»» Review of analysis related to frauds and forgery incidents in the Bank; with specific focus on nature and reasons
along with Management action(s) thereof.
»» Review, approval and oversight of Annual Audit Plan and related enablers / budget along with resource requirements
of ARRG.
»» Review of resolution status of complaints lodged under the Bank’s Whistle Blowing Policy along with resolutions
thereof.
»» Consider and recommend to the Board, appointment of Chief ARRG, including promotion, increment, transfer,
replacement, reassignment and dismissal.
»» Recommendation of scope and appointment of external auditors, including finalization of audit and other fees.
»» Review of Statement on Internal Control, prior to endorsement by the BOD.

Internal Control Framework and Role of ARRG

The Bank’s internal control structure comprises of the Board of Directors, Audit Committee of the Board, Management,
Audit & Risk Review Group and Compliance Group. Roles of all the functionaries have been defined in the Management’s
Statement of Internal Control, a part of the Annual Report which is duly endorsed by the Board of Directors.

Zafar Iqbal
Chairman Audit Committee

Lahore
Dated: February 20, 2018
UNCONSOLIDATED
FINANCIAL STATEMENTS
for the year ended December 31, 2017
 Allied Bank Limited 107

KPMG Taseer Hadi & Co.

Chartered Accountants
2nd Floor,
Servis House
2-Main Gulberg Jail Road,
Lahore, Pakistan

Auditors’ Report
to the Members on Unconsolidated Financial Statements

We have audited the annexed unconsolidated statement of 1984), and are in agreement with the books of
financial position of Allied Bank Limited (“the Bank”) as at 31 accounts and are further in accordance with
December 2017 and the related unconsolidated profit and loss the accounting policies consistently applied;
account, unconsolidated statement of comprehensive income,
ii) the expenditure incurred during the year was
unconsolidated statement of cash flow and unconsolidated
for the purpose of the Bank’s business; and
statement of changes in equity, together with the notes forming
part thereof (here-in-after referred to as the ‘financial statements’) iii) the business conducted, investments made

for the year then ended, in which are incorporated the unaudited and the expenditure incurred during the year

certified returns from the branches except for forty seven were in accordance with the objects of the

branches, which have been audited by us and we state that Bank and the transactions of the Bank which

we have obtained all the information and explanations which, have come to our notice have been within the

to the best of our knowledge and belief, were necessary for the powers of the Bank;

purposes of our audit. c) in our opinion and to the best of our information
and according to the explanations given to us, the
It is the responsibility of the Bank’s Board of Directors to establish unconsolidated statement of financial position,
and maintain a system of internal control, and prepare and unconsolidated profit and loss account, unconsolidated
present the financial statements in conformity with the approved statement of comprehensive income, unconsolidated
accounting standards and the requirements of the Banking statement of cash flow and unconsolidated statement of
Companies Ordinance, 1962 (LVII of 1962), and the Companies changes in equity together with the notes forming part
Ordinance, 1984 (XLVII of 1984). Our responsibility is to express thereof conform with approved accounting standards as
an opinion on these financial statements based on our audit. applicable in Pakistan, and give the information required
by the Banking Companies Ordinance, 1962 (LVII of
We conducted our audit in accordance with the International 1962), and the Companies Ordinance, 1984 (XLVII of
Standards on Auditing as applicable in Pakistan. These standards 1984), in the manner so required and give a true and fair
require that we plan and perform the audit to obtain reasonable view of the state of the Bank’s affairs as at 31 December
assurance about whether the financial statements are free of any 2017 and its true balance of profit, its cash flows and its
material misstatement. An audit includes examining, on a test basis, changes in equity for the year then ended; and
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting d) in our opinion Zakat deductible at source, under the
policies and significant estimates made by management, as well Zakat and Ushr Ordinance, 1980 (XVIII of 1980), was
as, evaluating the overall presentation of the financial statements. deducted by the Bank and deposited in the Central
We believe that our audit provides a reasonable basis for our Zakat Fund established under section 7 of that
opinion and, after due verification, which in the case of loans and Ordinance.
advances covered more than sixty percent of the total loans and
advances of the Bank, we report that:

a) in our opinion, proper books of account have been kept

by the Bank as required by the Companies Ordinance,
1984 (XLVII of 1984), and the returns referred to above
received from the branches have been found adequate
for the purposes of our audit;

b) in our opinion:
i) the unconsolidated statement of financial KPMG Taseer Hadi & Co.
position and unconsolidated profit and loss Chartered Accountants
account together with the notes thereon have (Kamran Iqbal Yousafi)
been drawn up in conformity with the Banking
Companies Ordinance, 1962 (LVII of 1962), Lahore
and the Companies Ordinance, 1984 (XLVII of Date: 21 February, 2018
108 Annual Report 2017

Unconsolidated Statement of Financial Position

as at December 31, 2017

December 31, December 31, Note December 31, December 31,

2017 2016 2017 2016
US $ in ‘000 Rupees in ‘000

ASSETS
773,135 662,974 Cash and balances with treasury banks 6 85,367,382 73,203,717
5,876 6,158 Balances with other banks 7 648,765 679,923
78,741 95,209 Lendings to financial institutions 8 8,694,399 10,512,752
6,322,222 5,342,143 Investments 9 698,082,066 589,864,548
3,369,381 2,984,700 Advances 10 372,037,714 329,562,191
437,677 296,668 Operating fixed assets 11 48,327,029 32,757,221
– – Deferred tax assets – –
294,834 293,119 Other assets 12 32,554,758 32,365,396
11,281,866 9,680,971 1,245,712,113 1,068,945,748

LIABILITIES
70,962 89,196 Bills payable 14 7,835,467 9,848,795
2,024,652 1,144,468 Borrowings 15 223,556,383 126,368,875
8,003,651 7,291,535 Deposits and other accounts 16 883,740,709 805,110,834
– – Sub-ordinated loans – –
– – Liabilities against assets subject to finance lease – –
62,869 99,503 Deferred tax liabilities 17 6,941,804 10,986,887
153,250 144,511 Other liabilities 18 16,921,397 15,956,529
10,315,384 8,769,213 1,138,995,760 968,271,920
966,482 911,758 NET ASSETS 106,716,353 100,673,828

REPRESENTED BY
103,704 103,704 Share capital 19 11,450,739 11,450,739
162,838 149,736 Reserves 17,980,116 16,533,485
445,695 421,042 Unappropriated profit 49,212,447 46,490,244
712,237 674,482 78,643,302 74,474,468
254,245 237,276 Surplus on revaluation of assets - net of tax 20 28,073,051 26,199,360
966,482 911,758 106,716,353 100,673,828

CONTINGENCIES AND COMMITMENTS 21

The annexed notes 1 to 44 and annexures I to IV form an integral part of these unconsolidated financial statements.

Chief Financial Officer President and Chief Executive Director

Director Chairman
 Allied Bank Limited 109

Unconsolidated Profit and Loss Account

for the year ended December 31, 2017

December 31, December 31, Note December 31, December 31,

2017 2016 2017 2016
US $ in ‘000 Rupees in ‘000

595,095 584,986 Mark-up / return / interest earned 23 65,708,757 64,592,588

309,105 283,881 Mark-up / return / interest expensed 24 34,130,494 31,345,347
285,990 301,105 Net mark-up / interest income 31,578,263 33,247,241

Net reversal of provision against non-performing
(17,814) (3,037) loans and advances 10.4 (1,966,938) (335,359)
80 678 Provision for diminution in the value of investments 9.3 8,804 74,906
– – Bad debts written off directly 10.6 – –
(17,734) (2,359) (1,958,134) (260,453)
303,724 303,464 Net mark-up / interest income after provisions 33,536,397 33,507,694

NON MARK-UP / INTEREST INCOME
35,478 36,354 Fee, commission and brokerage income 25 3,917,402 4,014,135
29,218 34,196 Dividend income 3,226,146 3,775,793
6,902 5,846 Income from dealing in foreign currencies 762,059 645,444
5,806 24,214 Gain on sale of securities 26 641,043 2,673,615
Unrealized gain /(loss) on revaluation of investments
16 (6) classified as ‘held-for-trading’ - net 9.9 1,782 (713)
2,929 926 Other income 27 323,369 102,217
80,349 101,530 Total non-markup / interest income 8,871,801 11,210,491
384,073 404,994 42,408,198 44,718,185

NON MARK-UP / INTEREST EXPENSES
194,024 183,809 Administrative expenses 28 21,423,547 20,295,643
(1,421) 679 (Reversal) / provision against other assets 12.2 (156,858) 75,000
(2,279) (120) Reversal against off-balance sheet obligations - net 18.1 (251,616) (13,273)
4,659 4,796 Other charges 29 514,430 529,597
194,983 189,164 Total non-markup / interest expenses 21,529,503 20,886,967

– – Extra-ordinary / unusual items – –
189,090 215,830 PROFIT BEFORE TAXATION 20,878,695 23,831,218

Taxation
66,069 77,101 Current 7,295,083 8,513,243
8,721 8,601 Prior year 962,923 949,657
(1,023) (532) Deferred (112,947) (58,732)
73,767 85,170 30 8,145,059 9,404,168
115,323 130,660 PROFIT AFTER TAXATION 12,733,636 14,427,050

421,042 375,085 Unappropriated profit brought forward 46,490,244 41,415,882
445,695 421,042 PROFIT AVAILABLE FOR APPROPRIATION 49,212,447 46,490,244

In US$ In Rupees

0.10 0.11 Earnings per share - Basic and Diluted 31 11.12 12.60

The annexed notes 1 to 44 and annexures I to IV form an integral part of these unconsolidated financial statements.

Chief Financial Officer President and Chief Executive Director

Director Chairman
110 Annual Report 2017

Unconsolidated Statement of Comprehensive Income

for the year ended December 31, 2017

December 31, December 31, December 31, December 31,

2017 2016 2017 2016
US $ in ‘000 Rupees in ‘000

115,323 130,660 Profit after taxation for the year 12,733,636 14,427,050


Other comprehensive income:


Items to be reclassified to profit and loss account
in subsequent periods

Exchange differences on translation of net investment
1,569 (102) in foreign operating branches 173,267 (11,246)


Items not to be reclassified to profit and loss account
in subsequent periods

(13,458) 4,022 Actuarial (loss) / gain relating to defined benefit plans (1,485,955) 444,154
4,710 (1,408) Related deferred tax 520,085 (155,454)
(8,748) 2,614 (965,870) 288,700

108,144 133,172 Comprehensive income transferred to equity 11,941,033 14,704,504

Components of comprehensive income not reflected in equity

Items to be reclassified to profit and loss account
in subsequent periods

(105,337) 50,944 Net change in fair value of ‘available-for-sale’ securities (11,630,976) 5,625,078
36,868 (17,831) Related deferred tax 4,070,842 (1,968,778)
(68,469) 33,113 (7,560,134) 3,656,300
39,675 166,285 Total Comprehensive Income 4,380,899 18,360,804

The annexed notes 1 to 44 and annexures I to IV form an integral part of these unconsolidated financial statements.

Chief Financial Officer President and Chief Executive Director

Director Chairman
 Allied Bank Limited 111

Unconsolidated Statement of Cash Flow

for the year ended December 31, 2017

ecember 31,
D December 31, Note December 31, December 31,
2017 2016 2017 2016
US $ in ‘000 Rupees in ‘000

CASH FLOW FROM OPERATING ACTIVITIES

189,090 215,830 Profit before taxation 20,878,695 23,831,218
(29,218) (34,196) Less: Dividend income (3,226,146) (3,775,793)
159,872 181,634 17,652,549 20,055,425
Adjustments for non-cash items
24,257 20,044 Depreciation / amortization 2,678,379 2,213,242
(17,814) (3,037) Reversal against non-performing loans and advances (1,966,938) (335,359)
80 678 Provision for diminution in the value of investments 8,804 74,906
(16) 6 Unrealized (gain) / loss on revaluation of ‘held-for-trading’ securities (1,782) 713
(2,279) (120) Reversal of provision against off-balance sheet obligations (251,616) (13,273)
(1,420) 679 (Reversal) / provision against other assets (156,858) 75,000
3,782 4,345 Provision for workers’ welfare fund 417,574 479,803
(480) (330) Gain on sale of operating fixed assets (53,012) (36,489)
(662) 21 (Gain) / loss on sale of non-banking asset / other assets (73,110) 2,294
5,448 22,286 601,441 2,460,837
165,320 203,920 18,253,990 22,516,262
(Increase) / decrease in operating assets
16,468 (64,815) Lendings to financial institutions 1,818,353 (7,156,661)
(223,911) (929) Net investments in ‘held-for-trading’ securities (24,723,578) (102,531)
(368,197) (75,081) Advances (40,655,347) (8,290,351)
(1,699) 38,563 Other assets (excluding advance taxation) (187,614) 4,258,053
(577,339) (102,262) (63,748,186) (11,291,490)
Increase / (decrease) in operating liabilities
(18,234) 44,437 Bills payable (2,013,328) 4,906,606
879,810 (104,626) Borrowings 97,146,144 (11,552,534)
712,116 638,620 Deposits and other accounts 78,629,875 70,514,668
5,271 (2,324) Other liabilities 582,061 (256,631)
1,578,963 576,107 174,344,752 63,612,109
1,166,944 677,765 128,850,556 74,836,881
(82,059) (99,926) Income tax paid (9,060,752) (11,033,569)
1,084,885 577,839 Net cash flows generated from operating activities 119,789,804 63,803,312

CASH FLOW FROM INVESTING ACTIVITIES
(965,077) (1,331,707) Net investments in ‘available-for-sale’ securities (106,561,084) (147,043,339)
103,515 970,685 Net realizations from ‘held-to-maturity’ securities 11,429,857 107,180,271
30,817 32,057 Dividend received 3,402,747 3,539,613
(74,442) (55,378) Investments in operating fixed assets (8,219,650) (6,114,657)
573 452 Proceeds from sale of operating fixed assets 63,318 49,957
(904,614) (383,891) Net cash flows used in investing activities (99,884,812) (42,388,155)

CASH FLOW FROM FINANCING ACTIVITIES
(72,336) (74,907) Dividend paid (7,987,116) (8,271,033)
(72,336) (74,907) Net cash flows used in financing activities (7,987,116) (8,271,033)
1,569 (102) Effect of translation of net investment in foreign operating branches 173,267 (11,246)
109,504 118,939 Increase in cash and cash equivalents during the year 12,091,143 13,132,878
674,964 549,467 Cash and cash equivalents at beginning of the year 74,527,584 60,670,624
(6,407) 151 Effect of exchange rate changes on opening cash and cash equivalents (707,403) 16,679

778,061 668,557 CASH AND CASH EQUIVALENTS AT END OF THE YEAR 32 85,911,324 73,820,181


The annexed notes 1 to 44 and annexures I to IV form an integral part of these unconsolidated financial statements.

Chief Financial Officer President and Chief Executive Director

Director Chairman
112 Annual Report 2017

Unconsolidated Statement of Changes in Equity

for the year ended December 31, 2017

Capital Reserve Revenue Reserve

Share Exchange Statutory General Un-

Capital Translation Reserve Reserve appropriated Total
Reserve Profit

Rupees in ‘000

Balance as at January 01, 2016 11,450,739 68,933 15,027,093 6,000 41,415,882 67,968,647
Changes in equity during the year ended December 31, 2016:

Total comprehensive income for the year ended December 31, 2016
Net profit for the year ended December 31, 2016 – – – – 14,427,050 14,427,050
Effect of re-measurement of defined benefit
plan-net of deferred tax – – – – 288,700 288,700
Effect of translation of net investment in
foreign operating branches – (11,246) – – – (11,246)
– (11,246) – – 14,715,750 14,704,504
Transactions with owners recognized directly in equity
Final cash dividend for the year ended
December 31, 2015 (Rs. 1.75 per ordinary share) – – – – (2,003,879) (2,003,879)
First interim cash dividend for the year ended
December 31, 2016 (Rs. 1.75 per ordinary share) – – – – (2,003,879) (2,003,879)
Second interim cash dividend for the year ended
December 31, 2016 (Rs. 1.75 per ordinary share) – – – – (2,003,879) (2,003,879)
Third interim cash dividend for the year ended
December 31, 2016 (Rs. 2.00 per ordinary share) – – – – (2,290,148) (2,290,148)
– – – – (8,301,785) (8,301,785)
Transferred from surplus on revaluation of operating fixed assets
to un-appropriated profit-net of tax – – – – 57,830 57,830
Transferred from surplus on revaluation of non-banking assets
to un-appropriated profit-net of tax – – – – 45,272 45,272
Transfer to statutory reserve – – 1,442,705 – (1,442,705) –
Balance as at December 31, 2016 11,450,739 57,687 16,469,798 6,000 46,490,244 74,474,468

Changes in equity during the year ended December 31, 2017:

Total comprehensive income for the year ended December 31, 2017
Net profit for the year ended December 31, 2017 – – – – 12,733,636 12,733,636
Effect of re-measurement of defined benefit
plan-net of deferred tax – – – – (965,870) (965,870)
Effect of translation of net investment in foreign operating branches – 173,267 – – – 173,267
– 173,267 – – 11,767,766 11,941,033
Transactions with owners recognized directly in equity
Final cash dividend for the year ended
December 31, 2016 (Rs. 1.75 per ordinary share) – – – – (2,003,879) (2,003,879)
First interim cash dividend for the year ended
December 31, 2017 (Rs. 1.75 per ordinary share) – – – – (2,003,879) (2,003,879)
Second interim cash dividend for the year ended
December 31, 2017 (Rs. 1.75 per ordinary share) – – – – (2,003,879) (2,003,879)
Third interim cash dividend for the year ended
December 31, 2017 (Rs. 1.75 per ordinary share) – – – – (2,003,879) (2,003,879)
– – – – (8,015,516) (8,015,516)
Transferred from surplus on revaluation of operating fixed assets
to un-appropriated profit-net of tax – – – – 54,937 54,937
Transferred from surplus on revaluation of non-banking assets
to un-appropriated profit-net of tax – – – – 188,380 188,380
Transfer to statutory reserve – – 1,273,364 – (1,273,364) –
Balance as at December 31, 2017 11,450,739 230,954 17,743,162 6,000 49,212,447 78,643,302

The annexed notes 1 to 44 and annexures I to IV form an integral part of these unconsolidated financial statements.

Chief Financial Officer President and Chief Executive Director

Director Chairman
 Allied Bank Limited 113

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

1 STATUS AND NATURE OF BUSINESS

Allied Bank Limited (“the Bank”), incorporated in Pakistan, is a scheduled bank, engaged in commercial banking and related
services. The Bank is listed on Pakistan Stock Exchange Limited. The Bank operates a total of 1,248 (2016: 1,148) branches
in Pakistan including 117 (2016: 77) Islamic banking branches, 1 branch (2016:1) in Karachi Export Processing Zone and 1
Wholesale banking branch (2016: 1) in Bahrain. The long term credit rating of the Bank assigned by the Pakistan Credit Rating
Agency Limited (PACRA) is ‘AA+’. Short term rating of the Bank is ‘A1+’.

Ibrahim Holdings (Private) Limited is the parent company of the Bank and it’s registered office is in Pakistan.

The Bank is the holding company of ABL Asset Management Company Limited.

The registered office of the Bank is situated at 3 - Tipu Block, Main Boulevard, New Garden Town, Lahore.

2 a) BASIS OF PRESENTATION
These unconsolidated financial statements represent separate financial statements of the Bank. The consolidated
financial statements of the Bank are being issued separately.

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. Permissible forms of trade-
related modes of financing include purchase of goods by banks from their customers and immediate resale to
them at appropriate mark-up in price on deferred payment basis. The purchases and sales arising under these
arrangements are not reflected in these unconsolidated financial statements as such but are restricted to the amount
of facility actually utilized and the appropriate portion of mark-up thereon.

The financial results of the Islamic banking branches have been consolidated in these financial statements for
reporting purposes, after eliminating inter-branch transactions / balances. Key financial figures of the Islamic banking
branches are disclosed in Annexure IV to these financial statements.

These unconsolidated financial statements have been presented in Pakistan Rupees (PKR), which is the currency
of the primary economic environment in which the Bank operates and functional currency of the Bank, in that
environment as well. The amounts are rounded to nearest thousand.

The US Dollar amounts reported in the statement of financial position, profit and loss account, statement of
comprehensive income and statement of cash flow are stated as additional information, solely for the convenience of
the users of financial statements. For the purpose of translation to US Dollar, spot rate of Rs. 110.4172 per US Dollar
has been used for 2017 and 2016, as it was the prevalent rate on reporting date.

b) BASIS OF MEASUREMENT

These unconsolidated financial statements have been prepared under the historical cost convention except for the
following which are stated at revalued amounts / fair values / present values:

– Investments (Note 5.3);

– Certain operating fixed assets (Note 5.5);
– Staff retirement and other benefits (Note 5.7);
– Non-banking assets acquired in satisfaction of claims (Note 5.8); and
– Derivative financial instruments (Note 5.14.2).

3 STATEMENT OF COMPLIANCE

3.1 These unconsolidated financial statements have been prepared in accordance with approved accounting standards as applicable
in Pakistan. Approved Accounting Standards comprise of such International Financial Reporting Standards (IFRSs) issued by
the International Accounting Standards Board (IASB) and Islamic Financial Accounting Standards (IFASs) issued by The Institute
of Chartered Accountants of Pakistan (ICAP) as are notified under the repealed Companies Ordinance, 1984, provisions of and
directives issued under the Banking Companies Ordinance, 1962 and the directives issued by State Bank of Pakistan (SBP) &
Securities and Exchange Commission of Pakistan (SECP). In case requirements of provisions and directives issued under the
Banking Companies Ordinance, 1962, repealed Companies Ordinance, 1984 and the directives issued by SBP and SECP differ
from requirements of IFRSs and IFASs, the provisions of and directives issued under the Banking Companies Ordinance, 1962,
repealed Companies Ordinance, 1984 and the directives issued by SBP and SECP shall prevail.

114 Annual Report 2017

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

3.2 During the year on May 30, 2017, the Companies Act, 2017 (the Act) was enacted which replaced the Companies Ordinance,
1984. However, the Securities and Exchange Commission of Pakistan (SECP) through its Circular No. 23 of 2017 dated
October 04, 2017 has advised that the companies whose financial year closes on or before December 31, 2017 shall prepare
their financial statements in accordance with the provisions of the repealed Companies Ordinance, 1984.

3.3 The SBP, vide BSD Circular No. 10, dated August 26, 2002 has deferred the applicability of International Accounting Standard
39, Financial Instruments: Recognition and Measurement (IAS 39) and International Accounting Standard 40, Investment
Property (IAS 40) for banking companies till further instructions. Further, according to a notification of Securities and Exchange
Commission of Pakistan (SECP) dated April 28, 2008, International Financial Reporting Standard (IFRS 7) ‘Financial Instruments
Disclosure’, has not been made applicable for banks. Accordingly, the requirements of these standards have not been
considered in the preparation of these unconsolidated financial statements. However, investments have been classified and
disclosed in accordance with the requirements prescribed by SBP through various circulars.

3.4 IFRS 8 ‘Operating Segments’ is effective for the Bank’s accounting period beginning on or after January 1, 2009. All banking
companies in Pakistan are required to prepare their annual financial statements in line with the format prescribed under BSD
Circular No. 4 dated February 17, 2006, ‘Revised Forms of Annual Financial Statements’, effective from the accounting year
ended December 31, 2006. The management of the Bank believes that as the SBP has defined the segment categorisation in
the above mentioned circular, the SBP requirements prevail over the requirements specified in IFRS 8. Accordingly, segment
information disclosed in these unconsolidated financial statements is based on the requirements laid down by SBP.

3.5 The Securities and Exchange Commission of Pakistan (SECP) vide SRO 56 (1) / 2016 dated January 28, 2016, has notified that
the requirements of IFRS10 (Consolidated Financial Statements) and section 237 of the repealed Companies Ordinance 1984
will not be applicable with respect to the investment in mutual funds established under Trust structure.

3.6 The State Bank of Pakistan through BPRD Circular No. 04 of 2015 dated February 25, 2015 has deferred applicability of Islamic
Financial Accounting Standard-3 for Profit & Loss Sharing on Deposits (IFAS-3) issued by the Institute of Chartered Accountants
of Pakistan and notified by the Securities & Exchange Commission of Pakistan (SECP), vide their SRO No. 571 of 2013 dated
June 12, 2013 for Institutions offering Islamic Financial Services (IIFS). The standard will result in certain new disclosures in the
financial statements of the Bank.

3.7 New and amended standards and interpretations became effective during the year

During the year, certain amendments to standards, interpretations and improvements to accounting standards became effective,
however, the amendments, interpretations and improvements did not have any material effect on the unconsolidated financial
statements of the Bank.

3.8 New Companies Act, 2017 and new Accounting Standards, Interpretations and Amendments to Published Approved
Accounting Standards that are not yet effective

3.8.1 The Companies Act, 2017 applicable for period beginning on January 01, 2018 requires certain additional disclosures and
section 235 of the repealed Companies Ordinance, 1984 relating to treatment of surplus arising out of revaluation of assets has
not been carried forward in the Companies Act, 2017. This would require change in accounting policy relating to surplus on
revaluation of land and building to bring it in line with the requirements of IAS 16 - Property, plant and equipment.

3.8.2 The State Bank of Pakistan has issued BPRD Circular No. 02 of 2018 dated January 25, 2018 ‘Revised Forms of Annual
Financial Statements’ effective from the accounting year ended December 31, 2018. The ‘Revised Forms of Annual Financial
Statements’ have changed / added certain disclosures.

3.8.3 The following standards, amendments and interpretations of approved accounting standards will be effective for accounting
periods beginning on or after January 01, 2018:

– Classification and Measurement of Share-based Payment Transactions - amendments to IFRS 2 clarify the
accounting for certain types of arrangements and are effective for annual periods beginning on or after January 1,
2018. The amendments cover three accounting areas (a) measurement of cash-settled share-based payments; (b)
classification of share-based payments settled net of tax withholdings; and (c) accounting for a modification of a
share-based payment from cash-settled to equity-settled. The new requirements could affect the classification and/
 Allied Bank Limited 115

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

or measurement of these arrangements and potentially the timing and amount of expense recognized for new and
outstanding awards. The amendments are not likely to have an impact on Bank’s financial statements.

– Annual Improvements to IFRSs 2014-2016 Cycle [Amendments to IAS 28 ‘Investments in Associates and Joint
Ventures’] (effective for annual periods beginning on or after January 1, 2018) clarifies that a venture capital
organization and other similar entities may elect to measure investments in associates and joint ventures at fair value
through profit or loss, for each associate or joint venture separately at the time of initial recognition of investment.
Furthermore, similar election is available to non-investment entity that has an interest in an associate or joint venture
that is an investment entity, when applying the equity method, to retain the fair value measurement applied by
that investment entity associate or joint venture to the investment entity associate’s or joint venture’s interests in
subsidiaries. This election is made separately for each investment entity associate or joint venture. The amendments
are not likely to have an impact on Bank’s financial statements.

– IFRIC 22 ‘Foreign Currency Transactions and Advance Consideration’ (effective for annual periods beginning on or
after January 1, 2018) clarifies which date should be used for translation when a foreign currency transaction involves
payment or receipt in advance of the item it relates to. The related item is translated using the exchange rate on the
date the advance foreign currency is received or paid and the prepayment or deferred income is recognized. The date
of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset,
expense or income (or part of it) would remain the date on which receipt of payment from advance consideration was
recognized. If there are multiple payments or receipts in advance, the entity shall determine a date of the transaction
for each payment or receipt of advance consideration. The application of interpretation is not likely to have an impact
on Bank’s financial statements.

– IFRIC 23 ‘Uncertainty over Income Tax Treatments’ (effective for annual periods beginning on or after January 1,
2019) clarifies the accounting for income tax when there is uncertainty over income tax treatments under IAS 12. The
interpretation requires the uncertainty over tax treatment be reflected in the measurement of current and deferred
tax.

– IFRS 15 ‘Revenue from contracts with customers’ (effective for annual periods beginning on or after July 1, 2018). IFRS
15 establishes a comprehensive framework for determining whether, how much and when revenue is recognized.
It replaces existing revenue recognition guidance, including IAS 18 ‘Revenue’, IAS 11 ‘Construction Contracts’ and
IFRIC 13 ‘Customer Loyalty Programmes’. The Bank is assessing the potential impact on its financial statements
resulting from the adoption of IFRS 15.

– IFRS 9 ‘Financial Instruments’ and amendment – Prepayment Features with Negative Compensation (effective for
annual periods beginning on or after 1 July 2018 and 1 January 2019 respectively). IFRS 9 replaces the existing
guidance in IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 includes revised guidance on the
classification and measurement of financial instruments, a new expected credit loss model for calculating impairment
on financial assets, and new general hedge accounting requirements. It also carries forward the guidance on
recognition and derecognition of financial instruments from IAS 39. The Bank is currently awaiting instructions from
SBP as applicability of IAS 39 (as explained in note 3.3) was deferred by SBP till further instructions.

– Amendment to IAS 28 ‘Investments in Associates and Joint Ventures’ - Long Term Interests in Associates and Joint
Ventures (effective for annual period beginning on or after January 1, 2019). The amendment will affect companies
that finance such entities with preference shares or with loans for which repayment is not expected in the foreseeable
future (referred to as long-term interests or ‘LTI’). The amendment and accompanying example state that LTI are in
the scope of both IFRS 9 and IAS 28 and explain the annual sequence in which both standards are to be applied.
The amendments are not likely to have an impact on Bank’s financial statements.

Annual Improvements to IFRS Standards 2015–2017 Cycle - the improvements address amendments to following approved
accounting standards:

– IFRS 3 Business Combinations and IFRS 11 Joint Arrangement - the amendment aims to clarify the accounting
treatment when a company increases its interest in a joint operation that meets the definition of a business. A
116 Annual Report 2017

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

company remeasures its previously held interest in a joint operation when it obtains control of the business. A
company does not remeasure its previously held interest in a joint operation when it obtains joint control of the
business.

– IAS 12 Income Taxes - the amendment clarifies that all income tax consequences of dividends (including payments
on financial instruments classified as equity) are recognized consistently with the transaction that generates the
distributable profits.

– IAS 23 Borrowing Costs - the amendment clarifies that a company treats as part of general borrowings any (specific)
borrowing originally made to develop an asset when the asset is ready for its intended use or sale.

The above amendments are effective from annual period beginning on or after January 1, 2019 and are not likely to have an
impact on Bank’s financial statements.

4 CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

The preparation of these financial statements in conformity with the approved accounting standards requires the use of certain
critical accounting estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses. It
also requires the management to exercise its judgment in the process of applying the Bank’s accounting policies. Estimates,
underlying assumptions and judgments are continually evaluated and are based on historical experience, including expectations
of future events that are believed to be reasonable under the circumstances. The areas where various assumptions and estimates
are significant to the Bank’s financial statements or where judgment was exercised in application of accounting policies are as
follows:

i) Classification of investments

– In classifying investments as ‘held-for-trading’ the Bank has determined securities which are acquired
with the intention to trade by taking advantage of short term market / interest rate movements and are to
be sold within 90 days.

– In classifying investments as ‘held-to-maturity’ the Bank follows the guidance provided in SBP circulars
on classifying non-derivative financial assets with fixed or determinable payments and fixed maturity. In
making this judgment, the Bank evaluates its intention and ability to hold such investments to maturity.

– The investments, other than those in subsidiary, which are not classified as ‘held-for-trading’ or ‘held-to-
maturity’ are classified as ‘available-for-sale’.

ii) Provision against non-performing loans and advances and debt securities classified as investments

The Bank reviews its loan portfolio and debt securities classified as investments to assess amount of non-performing
loans and advances and debt securities and provision required there-against. While assessing this requirement
various factors including the delinquency in the account, financial position of the borrower and the requirements of
the Prudential Regulations are considered. The amount of general provision is determined in accordance with the
requirements set out in Prudential Regulations.

iii) Valuation and impairment of ‘available-for-sale’ equity investments

The Bank determines that ‘available-for-sale’ equity investments are impaired when there has been a significant and
prolonged decline in the fair value below its cost. This determination of what is significant and prolonged requires
judgment. In making this judgment, the Bank evaluates among other factors, the normal volatility in share price. In
addition, impairment may be appropriate when there is evidence of deterioration in the financial health of the investee,
industry and sector performance, changes in technology and operational and financing cash flows.

iv) Income taxes

In making the estimates for income taxes currently payable by the Bank, the management looks at the current income
tax laws and the decisions of appellate authorities. In determination of deferred taxes, estimates of the Bank’s future
taxable profits are taken into account.

 Allied Bank Limited 117

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

v) Fair value of derivatives

The fair values of derivatives which are not quoted in active markets are determined by using valuation techniques.
The valuation techniques take into account the relevant interest rates in effect at the reporting date and the rates
contracted.

vi) Depreciation / amortization

In making estimates of the depreciation / amortization, the management uses method which reflects the pattern
in which economic benefits are expected to be consumed by the Bank and estimates the useful life. The method
applied and useful lives estimated are reviewed at each financial year end and if there is a change in the expected
pattern or timing of consumption of the future economic benefits embodied in the assets, the estimate would be
changed to reflect the change in pattern. Such a change is accounted for as change in accounting estimates in
accordance with International Accounting Standard 8 - Accounting Policies, ‘Changes in Accounting Estimates and
Errors’.

vii) Defined benefits plan

Liability is determined on the basis of actuarial advice using the Projected Unit Credit Method. The actuarial
assumptions used to determine the liability and related expense are disclosed in note 34.

viii) Fair value hierarchy of assets and liabilities

The fair value of the assets and liabilities is the amount at which the instrument could be exchanged in a current
transaction between willing parties, other than in a forced or liquidation sale. The Bank categorizes fair value
measurements within the following fair value hierarchy:

a) Level 1

These are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Bank can access
at the measurement date.

b) Level 2
These are inputs other than quoted prices included within Level 1 that are observable for asset or liability,
either directly or indirectly.

c) Level 3
These are input for the assets or liability that are not based on observable market data (unobservable
Inputs).

5 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies adopted in the preparation of these unconsolidated financial statements have been applied consistently
to all periods presented in these unconsolidated financial statements of the Bank. Significant accounting policies are enumerated
as follows:

5.1 Cash and cash equivalents

For the purpose of cash flow statement, cash and cash equivalents include cash and balances with treasury banks and
balances with other banks (net of overdrawn nostro balances) in current and deposit accounts.

5.2 Lendings to / borrowings from financial institutions

The Bank enters into transactions of borrowing (re-purchase) from and lending (reverse re-purchase) to financial institutions, at
contracted rates for a specified period of time. These are recorded as under:

(a) Sale under re-purchase agreements

Securities sold subject to a re-purchase agreement are retained in the financial statements as investments and the
counter party liability is included in borrowings from financial institutions. The differential in sale and re-purchase value
is accrued on a prorata basis and recorded as mark-up expense.
118 Annual Report 2017

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

(b) Purchase under resale agreements

Securities purchased under agreement to resell (reverse re-purchase) are included in lendings to financial institutions.
The differential between the contracted price and resale price is amortized over the period of the contract and
recorded as mark-up income.

Securities held as collateral are not recognized in the financial statements, unless these are sold to third parties, in
which case the obligation to return them is recorded at fair value as a trading liability under borrowings from financial
institutions.

In Bai Muajjal, the Bank sells Sukuk on credit to other financial institutions. The credit price is agreed at the time of sale and such
proceeds are received at the end of the credit period. Profit is recognized on accrual basis.

In Musharaka / Mudaraba, the Bank invests in the Shariah compliant business pools of the financial institutions at the agreed
profit and loss sharing ratio. Profit is recognized on accrual basis

Other borrowings including borrowings from SBP are recorded at the proceeds received. Mark-up on such borrowings is
charged to the profit and loss account on a time proportion basis.

Lendings are stated net of provision. Return on such lending is accrued to the profit and loss account on a time proportion basis
except mark-up on impaired/ delinquent lendings, which is recognized on receipt basis.

5.3 Investments

5.3.1 The Bank at the time of purchase classifies its investment portfolio, other than investment in subsidiary, into the following
categories:

a) Held-for-trading

These are securities which are either acquired for generating a profit from short-term fluctuations in market prices,
interest rate movements and dealer’s margin.

b) Held-to-maturity

These are debt securities with fixed or determinable payments and fixed maturity that the Bank has the positive intent
and ability to hold to maturity.

c) Available-for-sale

These are investments, other than those in subsidiary, that do not fall under the ‘held-for-trading’ or ‘held-to-maturity’
categories.

5.3.2 Investments are initially recognized at fair value which, in case of investments other than ‘held-for-trading’, includes transaction
cost associated with the investments. Transaction cost on ‘held-for-trading’ investments are expensed as incurred.

All ‘regular way’ purchases and sales of investments are recognized on the trade date, i.e., the date that the Bank commits to
purchase or sell the asset. Regular way purchases or sales are purchases or sales of investments that require settlement within
the time frame generally established by regulation or convention in the market place.


5.3.3 In accordance with the requirements of the SBP, quoted securities, other than those classified as ‘held-to-maturity’ and
investments in subsidiaries, are carried at market value. Investments classified as ‘held-to-maturity’ are carried at amortized
cost.

Unrealized surplus / (deficit) arising on revaluation of the Bank’s ‘held-for-trading’ investment portfolio is taken to the profit and
loss account. Surplus / (deficit) arising on revaluation of quoted securities classified as ‘available-for-sale’ is kept in a separate
account shown in the statement of financial position below equity. The surplus / (deficit) arising on these securities is taken to
the profit and loss account when actually realized upon disposal or when the investment is considered to be impaired.
 Allied Bank Limited 119

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

Unquoted equity securities are valued at the lower of cost and break-up value. The break-up value of these securities is
calculated with reference to the net assets of the investee company as per the latest available audited financial statements. A
decline in the carrying value is charged to the profit and loss account. A subsequent increase in the carrying value, upto the
cost of the investment, is credited to the profit and loss account. Investments in other unquoted securities are valued at cost
less impairment, if any.

Provision for diminution in the value of securities (except for debentures, participation term certificates, sukuks and term
finance certificates) is made after considering impairment, if any, in their value. Provision for diminution in value of debentures,
participation term certificates, sukuks and term finance certificates are made in accordance with the requirements of Prudential
Regulations issued by SBP.

5.3.4 Investments in subsidiaries are stated at cost less impairment.

5.4 Advances

a) Loans and advances

Loans and advances are stated net of general and specific provisions. Specific provision against loans is determined
in accordance with the requirements of the Prudential Regulations and other directives issued by SBP and charged
to the profit and loss account. General provision is maintained in accordance with the requirements of Prudential
Regulations issued by SBP and charged to the profit and loss account. Advances are written off when there are no
realistic prospects of recovery.

b) Net investment in finance lease

Leases, where the Bank transfers substantially all the risks and rewards incidental to the ownership of an asset to
the lessee are classified as finance leases. A receivable is recognized at an amount equal to the present value of the
minimum lease payments, including un-guaranteed residual value, if any. Finance lease receivables are included in
advances to the customers.

c) Islamic financing and related assets

The Bank provides Islamic financing and related assets mainly through Business Musharakah, Murabaha, Ijarah,
Diminishing Musharakah and Salam. The purchases and sales arising under these arrangements are not reflected in
these financial statements as such but are restricted to the amount of facility actually utilised and the appropriate portion
of profit thereon. The profit on such financings is recognised in accordance with the principles of Islamic Shariah.
The Bank determines specific and general provisions against Islamic financing and related assets in accordance with
the requirements of the Prudential Regulations issued by the SBP. The net provision made / reversed during the year
is charged to profit and loss account and accumulated provision is netted off against Islamic financing and related
assets. Islamic financing and related assets are written off when there are no realistic prospects of recovery.

5.5 Operating fixed assets and depreciation

a) Tangible assets

Property and equipment owned by the Bank, other than land which is not depreciated, are stated at cost or revalued
amount less accumulated depreciation and impairment losses, if any. Land is carried at revalued amount.

Depreciation is calculated using the straight line method, except buildings which are depreciated using the reducing
balance method, to write down the cost of property and equipment to their residual values over their estimated useful
lives. The rates at which the fixed assets are depreciated are disclosed in note 11.2. The residual values, useful lives
and depreciation methods are reviewed and adjusted, if required. Adjustments in residual values, useful lives and
depreciation methods are treated as change in accounting estimates.

Depreciation on additions is charged from the month the assets are available for use, while no depreciation is charged
in the month in which the assets are disposed off.

Surplus arising on revaluation of fixed assets is credited to surplus on revaluation of fixed assets account. Deficit
arising on subsequent revaluation of fixed assets is adjusted against the balance in surplus account as allowed
under the provisions of the Companies Ordinance, 1984. The surplus on revaluation of fixed assets to the extent
of incremental depreciation charged on the related assets, is transferred directly to unappropriated profit (net of
deferred tax).
120 Annual Report 2017

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

Revaluation by independent professionally qualified valuers, is carried out with sufficient regularity to ensure that the
carrying amount of assets does not differ materially from their fair value.

An item of property and equipment is derecognized upon disposal or when no future economic benefits are expected
from its use or disposal. Any gain or loss arising on derecognition of the asset is recognized in the profit and loss
account in the year the asset is derecognized, except that the related surplus on revaluation of fixed assets (net of
deferred tax) is transferred directly to unappropriated profit.

Subsequent costs are included in the asset’s carrying amount only when it is probable that future economic benefits
associated with the item will flow to the Bank and the cost of the item can be measured reliably. All other repairs and
maintenance are charged to the profit and loss account.

b) Intangible assets

Intangible assets are carried at cost less any accumulated amortization and impairment losses, if any. The cost of
intangible assets is amortized over their estimated useful lives, using the straight line method. Amortization is charged
from the month the assets are available for use at the rate stated in note 11.3. The useful lives are reviewed and
adjusted, if appropriate, at each reporting date.

c) Capital work-in-progress

Capital work-in-progress is stated at cost less impairment losses, if any.

5.6 Taxation

a) Current

Provision for current taxation is based on taxable income for the year determined in accordance with the prevailing
laws for taxation. The charge for current tax is calculated using the prevailing tax rates or tax rates expected to apply
to the profits for the year. The charge for current tax also includes adjustments, where considered necessary relating
to prior years, including those arising from assessments finalized during the year.

b) Deferred

Deferred tax is recognized using the balance sheet liability method on all temporary differences, at the reporting date
between the amounts attributed to assets and liabilities for financial reporting purpose and amounts used for taxation
purposes. Deferred tax is calculated at the rates that are expected to apply to the periods when the difference will
reverse, based on tax rates that have been enacted or substantially enacted at the reporting date.

Deferred tax assets are recognized only to the extent that it is probable that future taxable profits will be available
against which the assets can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable
that the related tax benefit will be realized.

The Bank also recognizes a deferred tax asset / liability on deficit / surplus on revaluation of fixed assets, non-banking
assets and securities which is adjusted against the related deficit / surplus in accordance with the requirements of
IAS-12 ‘Income Taxes’.

5.7 Staff retirement and other benefits

5.7.1 Staff retirement schemes

a) For employees who opted for the 2002 scheme introduced by the management

An approved pension scheme (defined benefit scheme) under which the benefits on the basis of frozen basic salary,
service length and age as on June 30, 2002 are payable to all employees whose date of joining the Bank is on or
before July 01, 1992, i.e., who have completed ten years of continuous service as on June 30, 2002.

During the year, the pensioners were given an option to settle their monthly pension with a lump sum payment. Those
who will not opt for the lump sum option, will continue to receive monthly pension (defined benefit scheme).

An approved gratuity scheme (defined benefit scheme) under which the benefits are payable as under:

 Allied Bank Limited 121

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

i. For members whose date of joining the Bank is on or before July 01, 1992, their services would be
calculated starting from July 01, 2002 for gratuity benefit purposes.

ii. For members whose date of joining the Bank is after July 01, 1992 their services would be taken at actual
for the purpose of calculating the gratuity benefit. This rule will be applicable upon retirement or in service
death only, in case of resignation gratuity will be payable from July 01, 2002, even if he or she had joined
the Bank before July 01, 2002.

A contributory provident fund scheme to which equal contributions are made by the bank and the employees (defined
contribution scheme).

b) For employees who did not opt for 2002 scheme

An approved pension scheme (defined benefit scheme) under which the benefits on the basis of frozen basic salary
as on June 30, 2002 are payable to all employees opting continuation of the previous scheme and whose date of
joining the Bank is on or before July 01, 1992, i.e., who had completed ten years of continuous service as on June
30, 2002.

c) Benevolent Fund

Until December 31, 2008 the bank operated a contributory benevolent fund, which was discontinued for active
employees. The beneficiaries as on that date were also given an option to settle their monthly grant with a lump
sum payment. Those who have not opted for the lump sum option will continue to receive benevolent grant (defined
benefit scheme).

d) Post-retirement medical benefits

The Bank provides post-retirement medical benefits to eligible retired employees. Provision is made annually to
meet the cost of such medical benefits on the basis of actuarial valuation carried out using the Projected Unit Credit
Method.

Annual contributions towards the defined benefit schemes are made on the basis of actuarial valuation carried out
using the Projected Unit Credit Method. Actuarial gains / losses arising from experience adjustments and changes in
actuarial assumptions are recognized in Other Comprehensive Income in the period of occurrence.

5.7.2 Other long term benefit

Employees’ compensated absences

Employees’ entitlement to annual leave is recognized when they accrue to employees. A provision is made for estimated liability
for annual leaves as a result of services rendered by the employee against un-availed leaves, as per terms of service contract,
up to the reporting date, based on actuarial valuation using Projected Unit Credit Method. Actuarial gains / losses arising from
experience adjustments and changes in actuarial assumptions are recognized in Profit and Loss account in the period of
occurrence.

5.8 Non-banking assets acquired in satisfaction of claims

Non-banking assets (NBA) acquired in satisfaction of claims are carried at revalued amounts less accumulated depreciation
(excluding land). Revaluation by independent professionally qualified valuers, is carried out with sufficient regularity to ensure
that their net carrying value does not differ materially from their fair value. Surplus arising on revaluation of NBA is credited to the
‘surplus on revaluation of assets’ account and any deficit arising on revaluation is taken to profit and loss account directly. Legal
fees, transfer costs and direct costs of acquiring title to property are charged to profit and loss account and not capitalised.

5.9 Deposits

Deposits are initially recorded at the amount of proceeds received. Mark-up accrued on deposits is recognized separately as
part of other liabilities and is accrued to the profit and loss account on accrual basis. Deposits mobilized under Islamic Banking
operations are generated under two modes i.e. “Qard” and “Modaraba”. Deposits taken on Qard basis are classified as ‘Current
accounts’ and Deposits generated on Modaraba basis are classified as ‘Saving deposits / Fixed deposits’.

122 Annual Report 2017

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

5.10 Impairment

a) Available-for-sale equity securities

The Bank determines that ‘available-for-sale’ equity investments are impaired when there has been a significant and
prolonged decline in the fair value of these investments below their cost. The determination of what is significant
and prolonged requires judgment. In making this judgment, the Bank evaluates, among other factors, the normal
volatility in share price in the case of listed equity securities. In addition, impairment may be appropriate when there
is evidence of deterioration in the financial condition of the investee, industry and sector performance and changes in
technology.

b) Non-financial assets

The carrying amount of the Bank’s assets (other than deferred tax assets) are reviewed at each statement of financial
position date to determine whether there is any indication of impairment. If such indication exists, the recoverable
amount of the relevant asset is estimated. An impairment loss is recognized whenever the carrying amount of an
asset exceeds its recoverable amount. Impairment losses are recognized in the profit and loss account except for
an impairment loss on revalued assets which is adjusted against the related revaluation surplus to the extent that
the impairment loss does not exceed the revaluation surplus. An impairment loss is reversed if the reversal can be
objectively related to an event occurring after the impairment loss was recognized.

5.11 Provisions

Provisions are recognized when the Bank has a present obligation (legal or constructive) 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 can be made.

Provision against identified losses on non-funded exposure is recognized when intimated and reasonable certainty exists for the
Bank to settle the obligation. The loss is charged to the profit and loss account net of expected recovery and is classified under
other liabilities.

Provisions are reviewed at the reporting date and are adjusted to reflect the current best estimate.

5.12 Dividend distribution and appropriations

Bonus and cash dividend and other appropriations (except for the appropriations required by law), declared / approved
subsequent to the reporting date are considered as non-adjusting event and are not recorded in unconsolidated financial
statements of the current year. These are recognized in the period in which these are declared / approved.

5.13 Foreign currencies

a) Foreign currency transactions

Transactions in foreign currencies are translated into rupees at the foreign exchange rates ruling on the transaction
date. Monetary assets and liabilities in foreign currencies are expressed in rupee terms at the rates of exchange ruling
on the reporting date. Foreign bills purchased are valued at spot rate and forward foreign exchange contracts are
valued at forward rates applicable to their respective maturities.

b) Foreign operations

The assets and liabilities of foreign operating branches are translated to Pakistan Rupee (PKR) at exchange rates
prevailing at reporting date. The results of foreign operations are translated at the average exchange rate for the
period.

c) Translation gains and losses

Translation gains and losses arising on revaluation of net investments in foreign operations are taken to equity under
“Exchange Translation Reserve” through Other Comprehensive Income and on disposal are recognised in profit and
loss account. Regular translation gains and losses are taken to profit and loss account.
 Allied Bank Limited 123

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

d) Commitments

Commitments for outstanding forward contracts disclosed in these financial statements are translated at forward
rates applicable to their respective maturities. Contingent liabilities / commitments for letters of credit and letters of
guarantee denominated in foreign currencies are expressed in rupee terms at the rates of exchange prevailing on the
reporting date.

5.14 Financial instruments

5.14.1 Financial assets and liabilities

Financial assets and financial liabilities are recognised at the time when the Bank becomes a party to the contractual provision
of the instrument. Financial assets are de-recognised when the contractual right to future cash flows from the asset expires
or is transferred along with the risk and reward of the asset. Financial liabilities are de-recognised when obligation specific in
the contract is extinguished. Any gain or loss on de-recognition of the financial asset and liability is recognised in the profit and
loss account of the current period. The particular recognition and subsequent measurement methods adopted for significant
financial assets and financial liabilities are disclosed in the individual policy statements associated with them.

5.14.2 Derivative financial instruments

Derivative financial instruments are initially recognized at fair value on the date on which the derivative contract is entered into
and are subsequently re-measured at fair value using appropriate valuation techniques. All derivative financial instruments are
carried as assets when fair value is positive and liabilities when fair value is negative. Any change in the fair value of derivative
financial instruments is taken to the profit and loss account.

5.15 Off setting

Financial assets and financial liabilities are off set and the net amount is reported in the financial statements when there is a
legally enforceable right to off set and the Bank intends to either settle on a net basis, or to realize the assets and to settle the
liabilities simultaneously.

5.16 Revenue recognition

Revenue is recognized to the extent that the economic benefits will flow to the Bank and the revenue can be reliably measured.
These are recognised as follows:

a) Advances and investments

Mark-up / return on regular loans / advances and investments is recognized on a time proportion basis. Where debt
securities are purchased at premium or discount, the same is amortized through the profit and loss account using the
effective interest rate method.

Interest or mark-up recoverable on classified loans, advances and investments is recognized on receipt basis. Interest
/ return / mark-up on classified rescheduled / restructured loans and advances and investments is recognized as
permitted by the regulations of the SBP.

Dividend income is recognized when the right to receive the dividend is established.

Gains and losses on sale of investments are recognized in the profit and loss account.

b) Lease financing

Financing method is used in accounting for income from lease financing. Under this method, the unearned lease
income (excess of the sum of total lease rentals and estimated residual value over the cost of leased assets) is
deferred and taken to income over the term of the lease period so as to produce a constant periodic rate of return on
the outstanding net investment in lease. Unrealised income on classified leases is recognized on receipt basis.

Gains / losses on termination of lease contracts and other lease income are recognized when realized.

124 Annual Report 2017

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

c) Islamic financing and related assets

Profit on Business Musharakah financing is booked on accrual basis and is adjusted upon declaration of profit by
Musharakah partners.

Ijarah and Diminishing Musharakah income is recognised on an accrual basis as and when the rental becomes due.

Murabaha and Salam income is recognised on deferred income basis.

d) Fees, commission and brokerage

Fee, commission and brokerage income is recognized on an accrual basis except where, in the opinion of
management, it would not be prudent to do so.

5.17 Segment reporting

A segment is a distinguishable component of the Bank that is subject to risks and rewards that are different from those of other
segments. A business segment is one that is engaged either in providing certain products or services, whereas a geographical
segment is one engaged in providing certain products or services within a particular economic environment. Segment information
is presented as per the Bank’s functional and management reporting structure. The Bank’s primary segment reporting is based
on following business segments:

Business segments

a) Corporate & investment banking

This segment offers a wide range of financial services to medium and large sized public and private sector entities
and also covers overseas operation of the Bank. These services include, providing and arranging tenured financing,
corporate advisory, underwriting, cash management, trade products, corporate finance products and customer
services on all bank related matters.

b) Trading and sales (Treasury)

This segment undertakes the Bank’s treasury and money market activities.

c) Commercial & retail banking

Commercial and retail banking provides services to commercial and retail customers including agriculture sector. It
includes loans, deposits and other transactions with commercial and retail (conventional and islamic) customers.

d) Others

Others includes functions which cannot be classified in any of the above segments.

5.18 Earnings per share

The Bank presents basic and diluted earnings per share (EPS) for its shareholders. Basic EPS is calculated by dividing the profit
or loss attributable to ordinary shareholders of the Bank by the weighted average number of ordinary shares outstanding during
the year. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average
number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, if any.
 Allied Bank Limited 125

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

Note December 31, December 31,

2017 2016
Rupees in ‘000

6 CASH AND BALANCES WITH TREASURY BANKS

In hand
Local currency 12,281,484 11,886,845
Foreign currencies 881,144 1,061,186
13,162,628 12,948,031

Remittances in transit 513,673 291,364

With State Bank of Pakistan (SBP) in
Local currency current accounts 6.1 37,791,773 32,998,864
Foreign currency current account 6.2 1,247 9,620
37,793,020 33,008,484
Foreign currency deposit accounts
Non-remunerative 6.1 3,898,776 2,813,207
Remunerative 6.3 11,667,460 8,435,565
15,566,236 11,248,772

With National Bank of Pakistan in
Local currency current accounts 18,156,411 15,439,067

175,414
National Prize Bonds 267,999
85,367,382 73,203,717

6.1 Deposits with SBP are maintained to comply with the cash reserve requirement, under section 22 of the Banking Companies
Ordinance, 1962 and SBP statutory requirements issued from time to time.

6.2 This represents US Dollar settlement account maintained with SBP.

6.3 This represents special cash reserve maintained with SBP. The return on this account is declared by SBP on a monthly basis
and as at December 31, 2017 carries mark-up at the rate of 0.37% (2016: 0%).

December 31, December 31,
2017 2016
Rupees in ‘000

7 BALANCES WITH OTHER BANKS

Outside Pakistan
On current accounts 326,579 271,111
On deposit accounts 322,186 408,812
648,765 679,923
126 Annual Report 2017

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

Note December 31, December 31,

2017 2016
Rupees in ‘000

8. LENDINGS TO FINANCIAL INSTITUTIONS

Call money lending 8.1 1,000,000 2,091,970

Repurchase agreement lendings (Reverse Repo) 8.2 & 8.8 5,779,431 7,220,782
Musharaka lendings 8.3 1,100,000 700,000
Mudaraba lending 8.4 600,000 500,000
Bai muajjal placement 8.5 214,968 –
Certificates of investment 8.6 70,000 70,000
8.7 8,764,399 10,582,752
Provision against lendings to financial institutions 8.6 & 8.9 (70,000) (70,000)
8,694,399 10,512,752

8.1 This represents local currency call money lending at the mark-up rate of 5.90% (2016: foreign currency lending at the rate of
0.65%) per annum, maturing on January 02, 2018.

8.2 These are short-term local currency lendings to financial institutions against government securities as shown in note 8.8 below.
These carry mark-up at the rate of 5.95% to 6.10% (2016: 5.90% to 6.20%) per annum, maturing on January 02, 2018.

8.3 These represent local currency lendings by Islamic banking business under Musharaka agreement at profit of 5.83% to 5.85%
(2016: 5.00%) per annum, maturing on various dates, latest by January 05, 2018.

8.4 This represents local currency lending by Islamic banking business under Mudaraba agreement at profit of 5.80% (2016: 5.55%)
per annum, maturing on January 12, 2018.

8.5 This represents local currency lending by Islamic banking business under Bai Muajjal agreement with the State Bank of Pakistan
at profit of 5.46% (2016: Nil) per annum, maturing on June 21, 2018.

8.6 This represent local currency classified certificates of investment and related provisioning, amounting to Rs. 70 million (2016: Rs.
70 million).
December 31, December 31,
2017 2016
Rupees in ‘000

8.7 Particulars of lendings

In local currency 8,764,399 8,490,782
In foreign currencies – 2,091,970
8,764,399 10,582,752

December 31, 2017 December 31, 2016

Further Further
Held by given as Held by given as
Bank collateral Total Bank collateral Total

Rupees in ‘000

8.8 Securities held as collateral against lending to Financial Institutions

Market Treasury Bills 800,000 – 800,000 1,220,782 – 1,220,782
Pakistan Investment Bonds 5,000,000 – 5,000,000 6,000,000 – 6,000,000
5,800,000 – 5,800,000 7,220,782 – 7,220,782

December 31, December 31,
2017 2016
Rupees in ‘000

8.9 Particulars of provision

Opening balance 70,000 70,000
Charge for the year – –
Reversal – –
Net charge – –
Closing balance 70,000 70,000
 Allied Bank Limited 127

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

Note December 31, 2017 December 31, 2016

Held by Given as Held by Given as

Bank collateral Total Bank collateral Total

Rupees in ‘000

9. INVESTMENTS

9.1 Investments by types

Held-for-trading securities
Market Treasury Bills 24,706,169 – 24,706,169 – – –
Pakistan Investment Bonds 119,940 – 119,940 102,531 – 102,531
24,826,109 – 24,826,109 102,531 – 102,531
Available-for-sale securities
Market Treasury Bills 290,064,860 75,614,442 365,679,302 202,224,770 23,995,274 226,220,044
Pakistan Investment Bonds 63,758,497 100,297,935 164,056,432 144,961,948 53,343,313 198,305,261
Ordinary shares of listed companies /
certificates of close–ended mutual funds 14,815,012 – 14,815,012 14,493,083 – 14,493,083
Ordinary shares of unlisted companies 2,500,169 – 2,500,169 2,500,169 – 2,500,169
Investment in related parties
Listed shares 8,142,520 – 8,142,520 8,142,520 – 8,142,520
Unlisted shares 1,093,449 – 1,093,449 997,894 – 997,894
Sukuk bonds 5,465,894 – 5,465,894 5,423,031 – 5,423,031
GOP Sukuk 9,562,817 1,543,073 11,105,890 10,550,356 – 10,550,356
GOP Ijara Sukuk 2,845,696 – 2,845,696 2,148,084 – 2,148,084
Foreign Currency Bonds (US$) 4,996,009 – 4,996,009 4,734,946 – 4,734,946
Term finance certificates (TFCs) 3,707,217 – 3,707,217 4,340,267 – 4,340,267
406,952,140 177,455,450 584,407,590 400,517,068 77,338,587 477,855,655
Held-to-maturity securities
Pakistan Investment Bonds 73,454,137 – 73,454,137 83,222,932 – 83,222,932
GOP Sukuk 1,108,143 – 1,108,143 1,051,562 – 1,051,562
GOP Ijara Sukuk – – – 100,000 – 100,000
Foreign Currency Bonds (US$) – – – 1,595,719 – 1,595,719
TFCs and Sukuk Bonds 346,102 – 346,102 358,879 – 358,879
74,908,382 – 74,908,382 86,329,092 – 86,329,092
Subsidiary
ABL Asset Management Company
Limited 500,000 – 500,000 500,000 – 500,000
Investment at cost 507,186,631 177,455,450 684,642,081 487,448,691 77,338,587 564,787,278
Provision for diminution in the
value of investments 9.3 (2,705,403) – (2,705,403) (2,696,599) – (2,696,599)
Investment (cost net of provisions) 504,481,228 177,455,450 681,936,678 484,752,092 77,338,587 562,090,679

Surplus / (deficit) on revaluation of
‘held-for-trading’ securities - net 9.9 1,782 – 1,782 (713) – (713)

Surplus on revaluation of
‘available-for-sale’ securities - net 20.3 15,803,706 339,900 16,143,606 25,895,586 1,878,996 27,774,582

Total investments at market value 520,286,716 177,795,350 698,082,066 510,646,965 79,217,583 589,864,548
128 Annual Report 2017

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

Note December 31, December 31,

2017 2016
Rupees in ‘000

9.2 Investments by segments

Federal Government Securities

Market Treasury Bills 9.2.1 - 9.2.3 390,385,471 226,220,044
Pakistan Investment Bonds 9.2.1 & 9.2.2 237,630,509 281,630,724
Foreign Currency Bonds (US$) 9.2.1 & 9.2.4 4,996,009 6,330,665
GOP Ijara Sukuk 9.2.1 2,845,696 2,248,084
GOP Sukuk 9.2.1 12,214,033 11,601,918

Fully paid up ordinary shares of listed companies /
certificates of close-ended mutual funds 9.4 22,957,532 22,635,603

Fully paid up ordinary shares of unlisted companies 9.5 3,593,618 3,498,063

Term Finance Certificates (TFCs) and Sukuk Bonds
Term Finance Certificates
Listed 9.6 2,399,462 2,455,310
Unlisted 9.6 1,453,857 2,043,836
Sukuk Bonds 9.7 5,665,894 5,623,031

Subsidiary 9.5 500,000 500,000
Investments at cost 684,642,081 564,787,278
Provision for diminution in the value of investments 9.3 (2,705,403) (2,696,599)

Investments (cost net of provisions) 681,936,678 562,090,679
Surplus / (deficit) on revaluation of ‘held-for-trading’ securities 9.9 1,782 (713)
Surplus on revaluation of ‘available-for-sale’ securities 20.3 16,143,606 27,774,582

Total investments at market value 698,082,066 589,864,548

9.2.1 Principal terms of investments in Federal Government Securities

Name of investment Maturity Coupon Rate / Redemption Frequency

Yield Period

Market Treasury Bills January, 2018 5.70% - 6.19% On maturity At maturity

to April, 2018
Pakistan Investment Bonds March, 2018 to 7.00% - 13.00% On maturity Half Yearly
August, 2031
Foreign Currency Bonds (US$) September, 2025 8.25% On maturity Half Yearly
GOP Ijara Sukuk December, 2018 to 6M MTB minus 0.50% On maturity Half Yearly
June, 2020
GOP Sukuk December, 2019 to 5.50% - 6.75% On maturity Half Yearly
October, 2021

9.2.2 Included herein are Market Treasury Bills having a book value of Rs. 75,442.036 million (2016: Rs. 23,816.042 million) and
Pakistan Investment Bonds having a book value of Rs. 100,297.935 million (2016: Rs. 53,343.313 million), given as collateral
against repurchase agreement borrowings from financial institutions.

9.2.3 Included herein are Market Treasury Bills having a book value of Rs. 172.406 million (2016: Rs. 179.232 million), held by the SBP
against Demand Loan and TT/DD discounting facilities sanctioned to the Bank.
 Allied Bank Limited 129

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

Name of Bond Coupon Rate Date of Date of Coupon Redemption December 31, December 31,
Issue Maturity Due Period 2017 2016
Rupees in ‘000

9.2.4 Investment in Foreign Currency Bonds

Euro Dollar Bond ($45,000,000) 8.250% 30-Sep-15 30-Sep-25 01-Apr-18 10 Years 4,996,009 4,734,946
Euro Dollar Bond ($10,500,000) 6.875% 01-Jun-07 01-Jun-17 30-May-17 10 Years – 1,083,920
Euro Dollar Bond ($5,000,000) 6.875% 01-Jun-07 01-Jun-17 30-May-17 10 Years – 511,799
4,996,009 6,330,665

Note December 31, December 31,

2017 2016
Rupees in ‘000

9.3 Particulars of provision

Opening balance 2,696,599 2,777,721
Charge for the year 22,581 78,582
Reversals (13,777) (3,676)
Net charge 8,804 74,906
Net reversal on disposal of shares – (156,028)
Closing balance 9.3.1 2,705,403 2,696,599

9.3.1 Particulars of provision in respect of type and segment

By type:
Available-for-sale securities
Ordinary shares / certificates of mutual funds 2,264,790 2,264,790
Ordinary shares of unlisted companies 71,563 49,982
Sukuk Bonds 22,948 22,948
2,359,301 2,337,720
Held-to-maturity securities
TFCs and Sukuk Bonds 346,102 358,879
2,705,403 2,696,599
By Segment:
Fully Paid up Shares
Ordinary shares of listed companies 2,264,790 2,264,790
Ordinary shares of unlisted companies 71,563 49,982
2,336,353 2,314,772

Term Finance Certificates and
Sukuk Bonds
Sukuk Bonds 222,948 222,948
Term Finance Certificates 146,102 158,879
369,050 381,827
2,705,403 2,696,599
130 Annual Report 2017

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

Name of Company / Mutual Fund 2017 2016

Cost
per share / No. of shares / No. of shares /
certificates certificates Total Cost certificates Total Cost

Rupees Rupees in ‘000 Rupees in ‘000

9.4 Investments in Listed Ordinary Shares / Certificates of Mutual Funds

Available for Sale

Agritech Limited 16.16 16,601,113 268,289 16,601,113 268,289
Attock Petroleum Limited 419.20 1,338,450 561,076 1,338,450 561,076
Dolmen City REIT 11.00 41,441,000 455,851 41,441,000 455,851
Engro Fertilizer Limited 69.80 8,150,000 568,831 8,150,000 568,831
Fatima Fertilizer Company Limited 24.39 62,700,000 1,528,975 62,700,000 1,528,975
Fauji Fertilizer Company Limited 103.62 15,481,600 1,604,159 15,481,600 1,604,159
Habib Bank Limited 168.01 6,622,992 1,112,707 6,622,992 1,112,707
Habib Metropolitan Bank Limited 27.96 10,000,000 279,598 10,000,000 279,598
Hub Power Company Limited - related party 36.51 112,000,000 4,089,011 112,000,000 4,089,011
Kot Addu Power Co. Limited - related party 46.06 88,000,000 4,053,509 88,000,000 4,053,509
MCB Bank Limited 199.83 1,125,500 224,907 – –
Nishat Chunian Power Limited 10.00 30,000,000 300,000 30,000,000 300,000
Nishat Power Limited 10.00 30,000,000 300,000 30,000,000 300,000
Orix Leasing Pakistan Limited 35.00 2,772,062 97,022 – –
Pakistan Oil Field Limited 404.83 9,106,350 3,686,501 9,106,350 3,686,501
Pakistan Petroleum Limited 208.66 9,562,740 1,995,359 9,562,740 1,995,359
Pakistan State Oil Company Limited 270.43 1,783,800 482,384 1,486,500 482,384
PICIC Growth Mutual Fund 13.54 6,677,717 90,436 6,677,717 90,436
Pioneer Cement Limited 5.97 106,784 638 106,784 638
Saif Power Limited 18.00 13,889,000 250,002 13,889,000 250,002
Trust Invstment Bank Limited 10.00 5,000,000 50,000 5,000,000 50,000
United Bank Limited 158.01 6,064,800 958,277 6,064,800 958,277
22,957,532 22,635,603

Name of Company Percentage of No. of Break-up Value Paid up Value Dec. 31, 2017 Based on audited Name of Chief
Holding shares per share per share Cost accounts as at Executive/Managing Agent

Rupees Rupees Rupees ‘000

9.5 Investment in Un-Listed Shares
Arabian Sea Country Club Limited - related party 6.45% 500,000 0.70 10 5,000 30-Jun-14 Mr. Arif Ali Khan Abbasi
Atlas Power Limited 7.49% 35,500,000 21.48 10 355,000 30-Jun-17 Mr. Maqsood Ahmed Basraa
Central Depository Company of Pakistan Limited 1.00% 1,060,900 36.72 10 40,300 30-Jun-17 Mr. Aftab Ahmed Diwan
Eastern Capital Limited – 500,000 – – 5,000 – Under liquidation
First Women Bank Limited 2.21% 7,734,927 9.96 10 21,200 31-Dec-16 Ms. Tahira Raza
Habib Allied Holding Limited - related party 9.50% 5,874,525 179.09 £1 1,035,922 31-Dec-16 Mr. Abbas Hasan
ISE Towers REIT Management Company Limited* 0.83% 3,034,603 12.13 10 30,346 30-Jun-17 Mr. Mian Ayyaz Afzal
LSE Financial Services Limited* 0.66% 843,975 18.29 10 8,440 30-Jun-17 Mr. Farid Malik
National Institutional Facilitation Technologies
(Pvt) Limited (NIFT) - related party 9.07% 2,266,609 24.62 10 1,527 30-Jun-17 Mr. Haider Wahab
Nishat Hotels and Properties Limited 9.84% 94,497,049 9.60 10 944,970 30-Jun-17 Mr. Mian Hassan Mansha
Pakistan Agricultural Storage and Services
Corporation Limited (PASSCO) - related party 3.33% 1,000 228,378 1,000 1,000 31-Mar-17 Mr.Muhammad Khan Khichi
Pakistan Mortgage Refinancing Company Limited – – – – 12,240 31-Dec-16 Mr. N.K. Rupan
Security General Insurance Company Limited 18.22% 12,401,871 140.51 10 1,075,653 31-Dec-16 Mr. Farrukh Aleem
SME Bank Limited 0.32% 774,351 0.09 10 5,250 31-Dec-16 Mr. Ihsan ul Haq Khan
Society for Worldwide Interbank
Financial Telecommunication 0.01% 10 499,351 € 125 1,770 31-Dec-16 Mr. Gottfried Leibbrandt
1 Link (Guarantee) Limited - related party – – – – 50,000 – –
3,593,618
ABL Assets Management Company Limited- subsidiary 100.00% 50,000,000 36.67 10 500,000 31-Dec-17 Mr. Alee Khalid Ghaznavi
4,093,618

*These shares have been transferred as per the requirements of The Stock Exchanges (Corporation, Demutualization and
integration) Act, 2012.
 Allied Bank Limited 131

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

Name of Company No. of Units Paid-up Total Cost

value per
2017 2016 Certificate 2017 2016
Rupees Rupees in ‘000

9.6 Detail of investment in TFCs

Listed
Habib Bank Limited 15,000 15,000 100,000 1,499,100 1,499,700
Bank Al Falah Limited TFC V 64,618 64,618 5,000 322,508 322,638
JS TFC II 37,500 37,500 5,000 89,063 131,250
MCB Bank Limited TFC
(Formerly NIB Bank Limited TFC II) 76,800 76,800 5,000 383,462 383,616
Telecard Limited 75,888 75,888 5,000 105,329 118,106
2,399,462 2,455,310
Unlisted
Faysal Bank Limited – 70,000 5,000 – 174,650
(Chief Executive: Mr. Yousaf Hussain)
Dewan Farooque Spinning Mills Limited 25,000 25,000 5,000 30,274 30,274
(Chief Executive: Mr. Ishtiaq Ahmed)
Khairpur Sugar Mills Limited 13 13 55,536
(Chief Executive: Muhammad Mubeen Jumani) 1 1 55,538
5 5 337,000
1 1 337,077 454 454

Bachani Sugar Mills Limited 23 23 135,227
(Chief Executive: Mr. Najmuddin Ansari) 1 1 135,236
14 14 1,526,874
13 13 655,656
1 1 655,657 10,044 10,044

Bank Al-Habib TFC V 107,000 107,000 5,000 534,679 534,894
(Chief Executive: Mr. Mansoor Ali Khan)
Standard Chartered Bank TFC III – 75,000 5,000 – 375,000
(Chief Executive: Mr. Shazad Dada)
Askari Bank Limited TFC V 120,000 120,000 5,000 599,281 599,520
(Chief Executive: Mr. Syed M. Husaini)
Jahangir Siddiqi & Company Limited 63,800 63,800 5,000 279,125 319,000
(Chief Executive: Mr. Suleman Lalani)
1,453,857 2,043,836

Name of Sukuk Bond Coupon Rate Date of Date of Coupon Coupon Cost
Issue Maturity Due Date Frequency 2017 2016

Rupees in ‘000

9.7 Detail of Investment in Sukuk Bonds

Liberty Power Tech. Limited I 3 MK+3% 18-Mar-09 01-Apr-21 01-Apr-18 Quarterly 1,198,582 1,485,408
Liberty Power Tech. Limited II 3 MK+3% 30-Nov-10 31-Dec-21 01-Apr-18 Quarterly 134,329 166,199
Quetta Textile Mills Limited* 6 MK+1.75% 26-Sep-08 20-Mar-20 25-Mar-16 Quarterly 22,948 22,948
Shahraj Fabrics Pvt Limited* 6 MK +2.10% 08-Mar-08 08-Mar-13 08-Mar-13 Half Yearly 200,000 200,000
K- Electric Limited 3 MK + 1.00% 17-Jun-15 17-Jun-22 16-Mar-18 Quarterly 223,035 248,476
Neelam Jhelum Hydropower Company (Pvt) Limited 6 MK+1.75% 29-Jun-16 29-Jun-26 29-Jun-18 Half Yearly 1,200,000 1,200,000
Neelam Jhelum Hydropower Company (Pvt) Limited 6 MK+1.75% 27-Oct-16 29-Jun-26 27-Apr-18 Half Yearly 1,400,000 1,400,000
Meezan Bank’s Sukuk 6 MK+0.5% 22-Sep-16 22-Sep-26 01-Mar-18 Half Yearly 900,000 900,000
Dubai Islamic Bank Pakistan 6 MK+0.5% 14-Jul-17 14-Jul-27 14-Jul-18 Half Yearly 387,000 –
5,665,894 5,623,031

*These Sukuk Bonds have been classified as loss and fully provided.
132 Annual Report 2017

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

2017 2016
Market Market
Name of Security value / Book Rating value / Book Rating
Value Value
Rupees ‘000 Rupees ‘000

9.8 Quality of ‘available-for-sale’ Securities

Government Securities
Market treasury bills 365,643,722 Un Rated 226,247,239 Un Rated
Pakistan Investment Bonds 166,864,554 Un Rated 203,533,463 Un Rated

Listed TFCs
Habib Bank Limited 1,485,849 AA+ 1,503,449 AAA
MCB Bank Limited TFC (Formerly NIB Bank Limited TFC II) 389,427 AAA 387,972 A+
Bank Alfalah Limited - TFC V 328,246 AA 331,119 AA–
JS TFC II 89,416 AA+ 131,329 AA+

Unlisted TFCs
Faysal Bank Limited – – 174,650 AA–
Bank Al-Habib Limited TFC V 534,679 AA 534,893 AA
Standard Chartered Bank – – 375,000 AAA
Askari Bank Limited TFC V 599,281 AA– 599,520 AA–
Jahangir Siddiqi & Company Limited 279,125 ** 319,000 **

Unlisted Shares
Arabian Sea Country Club Limited* - related party 5,000 ** 5,000 **
Atlas Power Limited* 355,000 AA–&A1+ 355,000 AA–&A1+
Central Depository Company of Pakistan Limited 40,300 ** 40,300 **
Eastern Capital Limited* 5,000 ** 5,000 **
First Women Bank Limited* 21,200 A–&A2 21,200 A–&A2
Habib Allied Holding Limited* - related party 1,035,922 ** 990,367 **
ISE Towers REIT Management Company Limited 30,346 ** 30,346 **
LSE Financial Services Limited 8,440 ** 8,440 **
NIFT* - related party 1,527 ** 1,527 **
Nishat Hotels and Properties Limited* 531,545 A–&A2 531,545 A–&A2
Nishat Hotels and Properties Limited 413,425 A–&A2 413,425 A–&A2
Pakistan Mortgage Refinance Company Limited 12,240 ** 12,240 **
PASSCO* - related party 1,000 ** 1,000 **
Security General Insurance Company Limited 1,075,653 AA– 1,075,653 AA–
SME Bank Limited* 5,250 B&B 5,250 B&B
SWIFT 1,770 ** 1,770 **
1 Link (Guarantee) Limited - related party 50,000 ** – **

Listed Shares / Certificates
Agritech Limited 80,847 ** 210,502 **
Attock Petroleum Limited 700,116 ** 916,330 **
Dolmen City REIT 455,851 RR1 450,464 RR1
Fatima Fertilizer Company Limited 1,936,176 AA–&A1+ 2,313,003 AA–&A1+
Fauji Fertilizer Company Limited 1,224,749 AA&A1+ 1,615,815 AA&A1+
Habib Bank Limited 1,106,636 AAA&A1+ 1,809,733 AAA&A1+
Hub Power Company Limited* - related party 5,541,900 AA+&A1+ 7,519,932 AA+&A1+
Hub Power Company Limited - related party 4,650,100 AA+&A1+ 6,309,828 AA+&A1+
Kot Addu Power Co. Limited.* - related party 4,743,200 AA+&A1+ 6,934,400 AA+&A1+
MCB Bank Limited 238,966 AAA&A1+ – –
Nishat Chunian Power Limited* 987,300 ** 1,664,400 **
Nishat Power Limited* 1,020,000 A+&A1 1,922,700 A+&A1
Orix Leasing Pakistan Limited 115,068 AA+&A1+ – –
Pakistan Oilfield Limited* 2,097,144 ** 1,886,674 **
Pakistan Oilfield Limited 3,314,396 ** 2,981,763 **
Pakistan Petroleum Limited* 1,969,064 ** 1,799,516 **
 Allied Bank Limited 133

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

2017 2016
Market Market
Name of Security value / Book Rating value / Book Rating
Value Value
Rupees ‘000 Rupees ‘000
Pakistan State Oil Company Limited 522,850 AA&A1+ 645,453 AA&A1+
PICIC Growth Mutual Fund 189,313 ** 203,403 **
Pioneer Cement Limited 6,740 ** 15,173 **
Saif Power Limited 401,809 A+&A1 493,893 A+&A1
United Bank Limited 1,140,000 AAA&A1+ 1,448,881 AAA&A1+
Trust Investment Bank Limited 7,150 ** 18,700 **
Habib Metropolitan Bank Limited 345,000 AA+&A1+ 370,000 AA+&A1+
Engro Fertilizer Limited 551,918 AA–&A1+ 554,037 AA–&A1+

Sukuk Bonds
Liberty Power Tech Limited I 1,198,582 A+ 1,485,408 A+
Liberty Power Tech Limited II 134,329 A+ 166,199 A+
Quetta Textile Mills Limited 22,948 ** 22,948 **
K– Electric Limited 222,501 AA+ 250,988 AA+
Neelam Jhelum Hydropower Company (Pvt) Limited 2,600,000 AAA 2,600,000 AAA
Meezan Bank’s Sukuk 900,000 AA– 900,000 AA–
Dubai Islamic Bank Pakistan 387,000 A+ – –
GOP Ijara Sukuk 2,861,151 ** 2,196,404 **
GOP Sukuk 11,290,159 ** 10,858,893 **

Foreign Currency Bonds (US$)
Euro Bonds 5,515,525 ** 5,177,620 **
* Strategic Investments of the Bank
** Ratings are not available

Note December 31, December 31,

2017 2016
Rupees in ‘000

9.9 Unrealized (loss) / gain on revaluation of investments classified as held-for-trading

Market Treasury Bills (1,691) –
Pakistan Investment Bonds 3,473 (713)
1,782 (713)
10 ADVANCES

Loans, cash credits, running finances, etc.

In Pakistan 373,157,869 334,047,662
Outside Pakistan 4,499,177 7,876,267
377,657,046 341,923,929
Islamic financing and related assets A-IV. 2 4,662,326 605,138
Net investment in finance lease - in Pakistan 10.2 2,380,573 2,131,845
Bills discounted and purchased (excluding treasury bills)
Payable in Pakistan 2,466,333 1,997,152
Payable outside Pakistan 1,585,373 1,687,999
4,051,706 3,685,151
Advances - gross 10.1 388,751,651 348,346,063
Provision for non-performing advances 10.3 & 10.4 (16,702,236) (18,720,563)
General provision 10.4 (11,701) (63,309)
(16,713,937) (18,783,872)
Advances - net of provision 372,037,714 329,562,191

134 Annual Report 2017

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

December 31, December 31,

2017 2016
Rupees in ‘000

10.1 Particulars of advances (Gross)

10.1.1 In local currency 378,173,382 321,381,700
In foreign currencies 10,578,269 26,964,363
388,751,651 348,346,063

10.1.2 Short term (for up to one year) 134,497,900 183,305,141
Long term (for over one year) 254,253,751 165,040,922
388,751,651 348,346,063

December 31, 2017 December 31, 2016

Not later Later than one Not later Later than one
than one and less than Over five than one and less than Over five
year five years years Total year five years years Total

Rupees in ‘000

10.2 Net investment in finance lease

Lease rentals receivable 548,697 1,335,126 194,666 2,078,489 548,277 1,191,271 123,062 1,862,610
Residual value 63,787 375,705 178,991 618,483 66,446 319,475 164,983 550,904
Minimum lease payments 612,484 1,710,831 373,657 2,696,972 614,723 1,510,746 288,045 2,413,514
Financial charges for future periods (37,398) (142,759) (136,242) (316,399) (28,902) (117,424) (135,343) (281,669)
Present value of minimum lease payments 575,086 1,568,072 237,415 2,380,573 585,821 1,393,322 152,702 2,131,845

10.3 Advances include Rs. 18,051.749 million (2016: Rs. 20,431.609 million) which have been placed under non-performing status
as detailed below:

December 31, 2017

Category of Classified Advances Provision Required Provision Held

Classification
Domestic Overseas Total Domestic Overseas Total Domestic Overseas Total

Rupees in ‘000

Other assets especially

mentioned 39,805 – 39,805 1,054 – 1,054 1,054 – 1,054
Substandard 492,961 – 492,961 122,297 – 122,297 122,297 – 122,297
Doubtful 107,934 – 107,934 53,967 – 53,967 53,967 – 53,967
Loss 17,411,049 – 17,411,049 16,524,918 – 16,524,918 16,524,918 – 16,524,918
18,051,749 – 18,051,749 16,702,236 – 16,702,236 16,702,236 – 16,702,236

December 31, 2016

Category of Classified Advances Provision Required Provision Held

Classification
Domestic Overseas Total Domestic Overseas Total Domestic Overseas Total

Rupees in ‘000

Other assets especially

mentioned 60,180 – 60,180 1,804 – 1,804 1,804 – 1,804
Substandard 636,905 – 636,905 156,972 – 156,972 156,972 – 156,972
Doubtful 473,854 – 473,854 236,927 – 236,927 236,927 – 236,927
Loss 19,260,670 – 19,260,670 18,324,860 – 18,324,860 18,324,860 – 18,324,860
20,431,609 – 20,431,609 18,720,563 – 18,720,563 18,720,563 – 18,720,563

10.3.1 No benefit of forced sale value of the collaterals held by the Bank has been taken while determining the provision against non-
performing loans as allowed under BSD circular No. 01 dated October 21, 2011.

10.3.2 The Bank has participated in government guaranteed syndicated long term loan facilities, granted to Power Holding (Pvt.)
Limited, with the Bank’s share being Rs. 9,348 million and rs. 5,000 million. State bank of Pakistan has extended relaxation
against classification of these exposures vide Letter no. BPRD/ BRD (Policy)/ 2017/26852 dated November 16, 2017 till
December 31, 2017; with instructions to recognize mark-up on receipt basis.
 Allied Bank Limited 135

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

Note December 31, 2017 December 31, 2016

Specific General Total Specific General Total

Rupees in ‘000

10.4 Particulars of provision against non-performing advances

Opening balance 18,720,563 63,309 18,783,872 19,092,777 71,489 19,164,266
Charge for the year 365,854 – 365,854 1,841,422 – 1,841,422
Reversals 10.5 (2,281,184) (51,608) (2,332,792) (2,168,601) (8,180) (2,176,781)
Net reversal (1,915,330) (51,608) (1,966,938) (327,179) (8,180) (335,359)
Amounts written off 10.6 (102,997) – (102,997) (45,035) – (45,035)
Closing balance 16,702,236 11,701 16,713,937 18,720,563 63,309 18,783,872

10.4.1 In local currency 16,442,940 11,701 16,454,641 18,474,931 63,309 18,538,240
In foreign currencies 259,296 – 259,296 245,632 – 245,632
16,702,236 11,701 16,713,937 18,720,563 63,309 18,783,872

10.5 This includes reversal of provision on account of a non performing loan, classified as loss, settled against Debt Property Swap
amounting to Rs. 32.5 million (2016: Rs. 188.472 million).

Note December 31, December 31,

2017 2016
Rupees in ‘000

10.6 Particulars of write-offs

10.6.1 Against provisions 102,997 45,035
Directly charged to Profit and Loss account – –
102,997 45,035

10.6.2 Write-offs of Rs. 500,000 and above 10.7 102,997 44,637

Write-offs of below Rs. 500,000 – 398
102,997 45,035

10.7 Details of loan write-off of Rs. 500,000/- and above
In terms of sub-section (3) of Section 33A of the Banking Companies Ordinance, 1962, the Statement in respect of written-
off loans or any other financial relief of five hundred thousand rupees and above allowed to a person(s) during the year ended
December 31, 2017 is given in Annexure-’I’. However, these write-offs do not affect the Bank’s right to recover debts from these
customers.

10.8 Particulars of loans and advances to directors, related parties, etc.
Details of loans and advances to associates, subsidiary and other related parties are given in note 39.

Note December 31, December 31,
2017 2016
Rupees in ‘000

11 OPERATING FIXED ASSETS

Capital work-in-progress 11.1 3,061,424 3,290,221
Property and equipment 11.2 43,904,506 28,475,682
Intangible assets 11.3 1,361,099 991,318
48,327,029 32,757,221

11.1 Capital work-in-progress
Civil works 2,530,114 2,381,725
Equipment 72,255 683,215
Advances to suppliers and contractors 459,055 225,281
3,061,424 3,290,221
 136

11.2 Property and equipment

Note Cost / Revaluation Accumulated Depreciation

Charge /
(Reversal) /
Exchange Net book Value
Annual Report 2017

At Addition / Revaluation At At and Revaluation At At

January 1, (Deletions) Surplus / Write–off December 31, January 1, other Surplus / Write-off December 31, December 31, Annual rate of
Description 2017 Adjustments 2017 2017 adjustments Adjustments 2017 2017 depreciation %
Rupees in ‘000

Land-Freehold 11.4
12,157,409 2,146,874 976,787 – 15,281,070 – – – – – 15,281,069 –
–

Land–Leasehold 11.4 3,303,825 716,833 7,047,978 – 11,068,636 – – – – – 11,068,636 –
–

for the year ended December 31, 2017

Buildings–Freehold 11.4 5,514,533 980,765 – – 6,260,977 873,444 256,493 (895,616) – – 6,260,977 5

– (234,321)
(234,321)

Buildings–Leasehold 11.4 3,097,922 639,744 523,975 – 4,261,641 285,426 143,361 (428,787) – – 4,261,641 5
–

Building improvements 2,622,036 880,062 – – 3,501,922 1,613,646 383,625 – – 1,997,095 1,504,827 20
(rented premises) (176) (176)

Furniture and fixtures 1,400,514 284,548 – – 1,675,822 714,654 168,474 – – 874,675 801,147 10
(9,240) (8,467)
Notes to the Unconsolidated Financial Statements

14
Electrical, office and computer 9,818,440 2,055,662 – – 11,631,268 6,321,899 1,112,411 – – 7,194,647 4,436,621 14.28 – 50
equipments (242,834)
(239,691)
28
Vehicles 819,019 66,427 – – 824,980 448,947 140,568 – – 535,393 289,587 20
(60,466) (54,122)

38,733,698 7,770,915
Total 8,548,740 – 54,506,316 10,258,016 2,204,932 (1,324,403) – 10,601,810 43,904,506
(312,716) (234,321) (302,456) (234,321)
42


Note Cost / Revaluation Accumulated Depreciation

Charge /
(Reversal)
Exchange Net book Value
At Addition/ Revaluation At At and Revaluation At At
January 1, (Deletions) Surplus Write–off December 31, January 1, other Surplus Write-off December 31, December 31, Annual rate of
Description 2016 2016 2016 adjustments 2016 2016 depreciation %
Rupees in ‘000

Land–Freehold 11.4 10,485,685 1,671,724 – – 12,157,409 – – – – – 12,157,409 –

–
Land–Leasehold 11.4 3,250,052 53,773 – – 3,303,825 – – – – – 3,303,825 –
–
Buildings-Freehold 11.4 5,093,176 421,357 – – 5,514,533 643,107 230,337 – – 873,444 4,641,089 5
–
Buildings-Leasehold 11.4 2,917,601 180,321 – – 3,097,922 142,119 143,307 – – 285,426 2,812,496 5
–
for the year ended December 31, 2017

Building improvements 2,171,449 450,764 – – 2,622,036 1,335,598 278,225 – – 1,613,646 1,008,390 20

(rented premises) (177) (177)

Furniture and fixtures 1,201,410 203,125 – (425) 1,400,514 579,899 138,631 – (380) 714,654 685,860 10
(3,596) (3,496)

Electrical, office and computer 8,323,806 1,578,492 – (3,277) 9,818,440 5,403,067 1,001,165 – (3,273) 6,321,899 3,496,541 14.28 – 50
equipments (80,581) (79,060)

Vehicles 722,522 148,912 – – 819,019 345,186 144,379 – – 448,947 370,072 20
(52,415) (40,618)

Total 34,165,701 4,708,468 – (3,702) 38,733,698 8,448,976 1,936,044 – (3,653) 10,258,016 28,475,682
Notes to the Unconsolidated Financial Statements

(136,769) (123,351)

11.3 Intangible assets

Cost Accumulated Amortization

Net book
At Addition At At At value at Annual Rate of
Description January 1, (Deletions) December 31, January 1, Amortization December 31, December 31, amortization
2017 2017 2017 2017 2017 %

Rupees in ‘000

Computer software 2,012,378 677,527 2,689,905 1,021,060 307,746 1,328,806 1,361,099 14.28

Cost Accumulated Amortization

At Addition At At At Net book value at Annual Rate of

Description January 1, (Deletions) December 31, January 1, Amortization December 31, December 31, amortization
2016 2016 2016 2016 2016 %

Rupees in ‘000
Allied Bank Limited

Computer software 1,550,810 461,568 2,012,378 763,558 257,502 1,021,060 991,318 14.28
137
138 Annual Report 2017

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

11.4 Bank arranged for valuation of Land and Building as at December 31, 2017 from four independent valuers {Sadruddin Associates
(Pvt.) Ltd, Unicorn International Surveyors, Indus Surveyors (Pvt.) Limited and Harvester Services (Pvt). Ltd.}. The revalued
amounts of properties have been determined on the basis of market value. Had there been no revaluation, the carrying amount
of revalued assets would have been as follows:


Rupees in ‘000

- Land (Freehold and leasehold) 12,590,895

- Building 7,037,227

11.5 Fair value of property and equipment excluding land and buildings is not expected to be materially different from their carrying
amount.

Note December 31, December 31,
2017 2016

Rupees in ‘000

11.6 Incremental depreciation charged during the year

transferred to profit & loss account 20.1 84,520 88,968

11.7 Restriction / discrepancy in the title of property
having a net book value of 59,131 45,401


11.8 The gross carrying amount of fully depreciated / amortized assets
that are still in use:

Furniture and fixtures 286,863 224,775
Electrical, office and computer equipments 4,464,328 3,804,924
Vehicles 285,809 46,122
Intangible assets - software 282,187 209,492
Leasehold Improvements 1,200,646 1,033,016

Amount of fully depreciated assets includes depreciation of Rs. 145.56 million (2016: Rs. 106.12 million) of under Rs.10,000
items which are fully depreciated in the month of purchase.


December 31, December 31,
2017 2016

Rupees in ‘000

11.9 The carrying amount of property and equipment
that have retired from active use 353,461 361,307

11.10 The details of disposals of assets whose original cost or book value exceeds one million rupees or two hundred and fifty
thousand rupees respectively, whichever is lower, are given in Annexure “II”.

11.11 Information relating to sale of operating fixed assets (otherwise than through a regular auction) made to chief executive or a
director or an executive or a shareholder holding not less than ten percent of the voting shares of the Bank or any related party,
as required by SBP’s BSD Circular No. 4 dated February 17, 2006, is given in Annexure “II”.
 Allied Bank Limited 139

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

Note December 31, December 31,

2017 2016
Rupees in ‘000

12 OTHER ASSETS

Mark-up / return / interest receivable

in local currency 15,530,697 17,621,002
in foreign currencies 266,574 289,597
Advances, deposits, advance rent and other prepayments 943,391 832,110
Advance taxation (payments less provisions) 4,752,964 3,956,145
Stationery and stamps in hand 196,230 184,587
Unrealized gain on forward foreign exchange contracts 2,227,080 –
Due from the employees’ retirement benefit schemes
benevolent fund 34.4 112,061 106,116
pension fund 34.4 3,692,032 4,614,727
Receivable from SBP - customers encashments 15,476 9,979
ATM / POS settlement account 1,331,063 1,161,359
Non-banking assets acquired in satisfaction of claims 12.1 3,584,030 3,476,351
Suspense account 517,113 922,303
Excise duty 11 11
Others 133,098 118,060
33,301,820 33,292,347
Provision held against other assets 12.2 (747,062) (926,951)

Other assets (net of provision) 32,554,758 32,365,396

12.1 These assets are stated at revalued amount in accordance with accounting policy mentioned in note 5.8.

December 31, 2017 December 31, 2016

Specific General Total Specific General Total

Rupees in ‘000

12.2 Provision against Other Assets

Opening balance 695,044 231,907 926,951 1,250,830 186,858 1,437,688
Charge for the year 23,620 44,000 67,620 29,951 45,049 75,000
Reversals (20,189) (204,289) (224,478) – – –
Net charge / (reversal) 3,431 (160,289) (156,858) 29,951 45,049 75,000
Written off / adjusted (19,645) (3,386) (23,031) (585,737) – (585,737)
Closing balance 678,830 68,232 747,062 695,044 231,907 926,951

13 CONTINGENT ASSETS

There were no contingent assets of the Bank as at December 31, 2017 and December 31, 2016.

December 31, December 31,

2017 2016
Rupees in ‘000

14 BILLS PAYABLE

In Pakistan 7,835,467 9,848,795

140 Annual Report 2017

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

Note December 31, December 31,

2017 2016

Rupees in ‘000

15 BORROWINGS

In Pakistan 206,150,246 103,487,046

Outside Pakistan 17,406,137 22,881,829
223,556,383 126,368,875
15.1 Particulars of borrowings with respect to currencies

In local currency 206,150,246 103,487,046

In foreign currencies 17,406,137 22,881,829
223,556,383 126,368,875

15.2 Details of borrowings (Secured / Unsecured)

Secured
Borrowings from State Bank of Pakistan
Repurchase agreement borrowings 15.3 169,225,901 55,099,808
Under export refinance scheme 15.4 13,583,114 11,334,860
Long term financing facility 15.5 10,597,665 6,149,320
Financing Facility for Storage of Agriculture Produce (FFSAP) 15.6 5,477 16,430
193,412,157 72,600,418

Repurchase agreement borrowings from Financial Institutions 15.7 7,674,798 23,803,676

Unsecured
Call borrowings 15.8 20,246,997 29,873,171
Trading liability 1,976,436 –
Overdrawn nostro accounts 104,823 63,459
Musharaka Borrowing 15.9 100,000 –
Other borrowings 41,172 28,151
22,469,428 29,964,781
223,556,383 126,368,875

15.3 These represent local currency borrowings from the SBP against government securities, carrying mark-up at the rate of 5.82%
to 5.86% (2016: 5.90%) per annum, maturing on January 05, 2018.

15.4 The Bank has entered into various agreements for financing with the State Bank of Pakistan (SBP) for extending export finance
to customers. As per agreements, the Bank has granted to SBP the right to recover the outstanding amount from the Bank at
the date of maturity of the finance by directly debiting the current account maintained by the Bank with the SBP. The borrowing
carries mark-up at the rate of 1.00% to 2.00% (2016: 1.00% to 2.00%) per annum. These borrowings are repayable within six
months from the deal date.

15.5 This represents Long Term Financing facility availed by the Bank for further extending the same to its customers, for a maximum
period of 10 years. The borrowing repayments to SBP correspond the respective repayment from customers. The borrowing
carries mark-up at the rate of 4.50%, 3.50% and 3.00% (2016: 4.50%, 3.50% and 3.00%) per annum for financing upto
3 years, 5 years & 10 years respectively.

15.6 These represent borrowings from the SBP under scheme of financing facility for storage of agricultural products. The financing
is available for a maximum period of 10 years. The borrowing carries mark-up rate at the rate of 2.00% (2016: 2.50% to 3.50%)
per annum.

15.7 These represent borrowings in local and foreign currency from local and foreign interbank markets against government securities,
carrying mark-up at the rate of 5.60% to 5.80% (2016: 5.50% to 5.85%) per annum for local currency borrowings, and at the
rate of 2.80% to 2.85% (2016: Nil) per annum for foreign currency borrowings. These borrowings are maturing on various dates,
latest by February 27, 2018.


 Allied Bank Limited 141

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

15.8 These represent unsecured borrowings in local and foreign currency from the local and foreign interbank markets, carrying mark-
up at the rate of 5.71% (2016: 5.55% to 6%) per annum for local currency borrowings, and at the rate of 1.92% to 4.39% (2016:
1.50% to 4.15%) per annum for foreign currency borrowings. These borrowings are maturing on various dates, latest by August
13, 2018.

15.9 This represents unsecured local currency borrowing by Islamic banking business under Musharaka agreement at profit of 5.85%
(2016: Nil) per annum, maturing on January 02, 2018.

Note December 31, December 31,

2017 2016

Rupees in ‘000

16 DEPOSITS AND OTHER ACCOUNTS

Customers
Fixed deposits 185,545,256 176,919,972
Savings deposits 233,494,351 212,372,097
Current accounts - remunerative 107,441,601 97,923,756
- non - remunerative 303,716,739 248,775,260
830,197,947 735,991,085
Financial Institutions
Remunerative deposits 40,924,068 63,861,798
Non - remunerative deposits 12,618,694 5,257,951
883,740,709 805,110,834
16.1 Particulars of deposits
In local currency 805,097,680 747,297,221
In foreign currencies 78,643,029 57,813,613
883,740,709 805,110,834

17 DEFERRED TAX (LIABILITY) / ASSET - NET

Deferred debits arising in respect of

Provision against:
Investments 19,093 19,093
Other assets 38,959 38,959
Off-balance sheet obligations 14,824 14,824
Advances 46,869 55,572
Post retirement medical benefits 42,980 42,980
Worker’s welfare fund 1,183,246 915,389
1,345,971 1,086,817
Deferred credits arising due to
Surplus on revaluation of operating fixed assets 20.1 (1,208,989) (591,639)
Surplus on revaluation of non-banking assets 20.2 (25,789) (13,930)
Surplus on revaluation of investments 20.3 (5,650,262) (9,721,104)
Actuarial gains (93,888) (613,973)
Accelerated tax depreciation / amortization (1,295,641) (1,119,852)
Excess of investment in finance lease over written down
value of leased assets (13,206) (13,206)
(8,287,775) (12,073,704)
17.1 (6,941,804) (10,986,887)
142 Annual Report 2017

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

Balance as at Recognised in Recognised in Balance as at Recognised in Recognised in Balance as at

January 01, Profit and Loss Other Comprehensive December 31, Profit and Loss Other Comprehensive December 31,
2016 Account Income / Equtiy 2016 Account Income / Equtiy 2017

Rupees in ‘000

17.1 Reconciliation of deferred tax

Deferred debits arising in respect of
Provision against:
Investments 19,093 – – 19,093 – – 19,093
Other assets 38,959 – – 38,959 – – 38,959
Off-balance sheet obligations 14,824 – – 14,824 – – 14,824
Advances 149,497 (93,925) – 55,572 (8,703) – 46,869
Post retirement medical benefits 42,980 – – 42,980 – – 42,980
Worker’s welfare fund 747,457 167,932 – 915,389 267,857 – 1,183,246
1,012,810 74,007 – 1,086,817 259,154 – 1,345,971
Deferred credits arising due to
Surplus on revaluation of operating
fixed assets (622,777) 31,138 – (591,639) 29,582 (646,932) (1,208,989)
Surplus on revaluation of non-banking
assets – – (13,930) (13,930) – (11,859) (25,789)
Surplus on revaluation of investments (7,752,326) – (1,968,778) (9,721,104) – 4,070,842 (5,650,262)
Actuarial gains (458,519) – (155,454) (613,973) – 520,085 (93,888)
Accelerated tax depreciation /
amortization (1,073,439) (46,413) – (1,119,852) (175,789) – (1,295,641)
Excess of investment in finance
lease over written down
value of leased assets (13,206) – – (13,206) – – (13,206)
(9,920,267) (15,275) (2,138,162) (12,073,704) (146,207) 3,932,136 (8,287,775)
Deferred Tax (Liability) / Asset - Net (8,907,457) 58,732 (2,138,162) (10,986,887) 112,947 3,932,136 (6,941,804)

17.2 Through Finance Act 2007, a new section 100A read with the 7th Schedule (the Schedule) was inserted in the Income Tax Ordi-
nance, 2001 for the taxation of banking companies. The Schedule simplifies the taxation of banking companies and is applicable
from the tax year 2009 (financial year ended on December 31, 2008).

The deferred tax asset on the deductible temporary differences disallowed as a deduction in the past up to December 31, 2007,
for which transitory provisions are not available, is being kept as an asset as the Bank is confident that transitory provisions
would be introduced to set out the mechanism of claiming where benefit of these allowances can be claimed.

Note December 31, December 31,

2017 2016

Rupees in ‘000

18 OTHER LIABILITIES
Mark-up / return / interest payable
in local currency 2,269,141 2,471,163
in foreign currencies 264,305 167,682
Accrued expenses 1,690,887 2,259,926
Branch adjustment account 272,344 150,070
Unrealized loss on forward foreign exchange contracts – 308,138
Provision for:
gratuity 34.4 511,919 255,291
employees’ medical benefits 34.4 1,240,250 1,298,380
employees’ compensated absences 34.4 570,128 698,964
Unclaimed dividends 246,259 215,914
Dividend payable 18,292 20,237
Provision against off-balance sheet obligations 18.1 306,342 557,958
Retention money payable 264,520 191,657
Security deposits 662,862 554,178
Sundry deposits 2,064,111 2,125,685
Workers’ welfare fund payable 18.2 3,380,704 2,630,712
Others 3,159,333 2,050,574
16,921,397 15,956,529
 Allied Bank Limited 143

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

December 31, December 31,

2017 2016

Rupees in ‘000

18.1 Provision against off-balance sheet obligations

Opening balance 557,958 571,231
Charge for the year 12,459 11,113
Reversals (264,075) (24,386)
Net reversal (251,616) (13,273)
Closing balance 306,342 557,958

The above provision includes provisions made against letters of guarantee issued by the Bank.

18.2 The Supreme Court of Pakistan vide its order dated November 10, 2016 has held that the amendments made in the law
introduced by the Federal Government for the levy of Workers’ Welfare Fund (WWF) were not lawful. The Federal Board of
Revenue has filed review petitions against this order, which are currently pending.

Legal advice obtained on the matter indicates that consequent to filing of these review petitions the judgment may not currently
be treated as conclusive. Accordingly, the Bank maintains its provision in respect of WWF and shall revisit the position on
periodic basis.

December 31, December 31,

2017 2016

Rupees in ‘000

18.3 Particulars of other liabilities

In local currency 16,552,269 15,763,637
In foreign currencies 369,128 192,892
16,921,397 15,956,529

19 SHARE CAPITAL

19.1 Authorized capital

December 31, December 31, December 31, December 31,

2017 2016 2017 2016

No. of shares Rupees in ‘000

1,500,000,000 1,500,000,000 Ordinary shares of Rs.10/- each 15,000,000 15,000,000

19.2 Issued, subscribed and paid-up capital

Fully paid-up Ordinary shares of Rs. 10/- each

December 31, December 31, Ordinary shares December 31, December 31,
2017 2016 2017 2016

No. of shares Rupees in ‘000

406,780,094 406,780,094 Fully paid in cash 4,067,801 4,067,801

720,745,186 720,745,186 Issued as bonus shares 7,207,452 7,207,452
1,127,525,280 1,127,525,280 11,275,253 11,275,253
18,348,550 Ordinary shares of Rs. 10 each, determined
pursuant to the Scheme of Amalgamation in accordance
with the swap ratio stipulated therein less 9,200,000 ordinary
shares of Rs. 10 each, held by Ibrahim Leasing Limited on the
9,148,550 9,148,550 cut-off date (September 30, 2004) 91,486 91,486
8,400,000 Ordinary shares of Rs. 10 each, determined
pursuant to the Scheme of Amalgamation of First Allied Bank
Modaraba with Allied Bank Limited in accordance with the
8,400,000 8,400,000 share swap ratio stipulated therein. 84,000 84,000
1,145,073,830 1,145,073,830 11,450,739 11,450,739

Ibrahim Holdings (Private) Limited (holding company of the Bank), holds 965,879,110 (84.35%) [2016: 965,879,110 (84.35%)]
ordinary shares of Rs. 10 each respectively, as at reporting date.
144 Annual Report 2017

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

Note December 31, December 31,

2017 2016

Rupees in ‘000

20 SURPLUS ON REVALUATION OF ASSETS - NET OF TAX

Surplus arising on revaluation of:
operating fixed assets 20.1 16,004,075 6,832,802
non-banking assets 20.2 1,575,632 1,313,080
investments 20.3 10,493,344 18,053,478
Surplus on revaluation of assets - net of tax 28,073,051 26,199,360

20.1 Surplus on revaluation of operating fixed assets
Surplus as at January 1, 2017 7,424,441 7,513,409
Surplus on revaluation during the year 9,873,143 –

Transferred to unappropriated profit in respect of incremental
depreciation charged during the year - net of deferred tax (54,938) (57,830)
Related deferred tax liability (29,582) (31,138)
11.6 (84,520) (88,968)
Surplus on revaluation as at December 31, 2017 17,213,064 7,424,441
Related deferred tax liability:
Revaluation surplus as at January 1, 2017 (591,639) (622,777)
Deferred tax liability on revaluation surplus (646,932) –
Deferred tax on incremental depreciation transferred
to profit and loss account 29,582 31,138
17 (1,208,989) (591,639)
16,004,075 6,832,802

20.2 Surplus on revaluation of non-banking assets
Surplus as at January 1, 2017 1,327,010 –
Surplus on revaluation during the year 463,489 1,373,016
Surplus realised on disposal (187,088) (43,911)

Transferred to unappropriated profit in respect of incremental
depreciation charged during the year - net of deferred tax (1,294) (1,361)
Related deferred tax liability (696) (734)
(1,990) (2,095)
Surplus on revaluation as at December 31, 2017 1,601,421 1,327,010
Related deferred tax liability:
Revaluation surplus as at January 1, 2017 (13,930) –
Deferred tax liability on revaluation surplus (12,555) (14,903)
Deferred tax on surplus on disposal – 239
Deferred tax on incremental depreciation transferred
to profit and loss account 696 734
17 (25,789) (13,930)
1,575,632 1,313,080

20.3 Surplus / (deficit) on revaluation of ‘available-for-sale’ securities
Federal Government Securities
Market Treasury Bills (35,580) 27,195
Pakistan Investment Bonds 2,808,122 5,214,810
Term Finance Certificates (1,194) 16,666
Sukuk Bonds 199,191 359,452
Shares / Certificates - Listed 12,653,552 21,713,786
Foreign Currency Bonds (US$) 519,515 442,673
9.1 16,143,606 27,774,582
Related deferred tax liability 17 (5,650,262) (9,721,104)
10,493,344 18,053,478
 Allied Bank Limited 145

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

December 31, December 31,

2017 2016

Rupees in ‘000

21 CONTINGENCIES AND COMMITMENTS

21.1 Direct credit substitutes

Guarantees in favor of:
Banks and financial institutions 6,187,865 5,397,846

21.2 Transaction-related contingent liabilities
Guarantees in favor of:
Government 96,140 341,738
Others 19,427,128 20,555,816
19,523,268 20,897,554

21.3 Trade-related contingent liabilities 59,545,681 65,473,604

21.4 Claims against the Bank not acknowledged as debt 8,638,605 6,815,687

21.5 The Bank makes commitments to extend credit in the normal course of its business but these being revocable commitments do
not attract any significant penalty or expense if the facility is unilaterally withdrawn.

December 31, December 31,
2017 2016

Rupees in ‘000

21.6 Commitments in respect of forward foreign exchange contracts

Purchase 95,038,705 63,017,979
Sale 41,580,643 38,469,943

21.7 Commitments in respect of:
Civil works 1,350,056 704,903
Acquisition of operating fixed assets 1,713,991 885,447
3,064,047 1,590,350

21.8 Commitments in respect of operating lease

Not later than one year 1,120,394 972,962
Later than one year and not later than five years 3,405,724 3,027,123
Later than five years 1,753,793 2,062,169

21.9 Other Contingencies

21.9.1 The income tax assessments of the Bank have been finalized upto and including tax year 2017 for local, Azad Kashmir and
Gilgit Baltistan operations. While finalizing income tax assessments upto tax year 2017, income tax authorities made certain
add backs with aggregate tax impact of Rs. 24,332 million (2016: 21,223 million). As a result of appeals filed by the Bank
before appellate authorities, most of the add backs have been deleted. However, the Bank and Tax Department are in appeals
/ references before higher forums against unfavorable decisions. Pending finalization of appeals / references no provision has
been made by the Bank on aggregate sum of Rs. 24,332 million (2016: 21,223 million). The management is confident that the
outcome of these appeals / references will be in favor of the Bank.

Tax Authorities have conducted proceedings of withholding tax audit under section 161/205 of Income Tax Ordinance, 2001 for
tax year 2003 to 2006 and tax year 2008 to 2016 and created an arbitrary demand of Rs. 1,326 million (2016: 1,429 million).
The Bank’s appeals before CIR(A)/Appellate Tribunal Inland Revenue (ATIR) are pending for adjudication. The management
is confident that these appeals will be decided in favor of the Bank; therefore, no provision has been made against the said
demand of Rs. 1,326 million (2016: 1,429 million).

Tax authorities have also issued orders under Federal Excise Act, 2005 / Sales Tax Act, 1990 and Sindh Sales Tax on Services
Act, 2011 for the year 2008 to 2014 thereby creating arbitrary aggregate demand of Rs. 893 million (2016: 890 million). The
Bank’s appeals before CIR(A)/Appellate Tribunal Inland Revenue (ATIR) are pending for adjudication. The management is
146 Annual Report 2017

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

confident that aforesaid demand will be deleted by appellate authorities and therefore no provision has been made against the
said demand of Rs. 893 million (2016: 890 million).

21.9.2 As a result of default by Fateh Textile Mills to terms of compromise decree passed in August 2002 by the Honourable High
Court of Sindh, 16,376,106 shares of ABL were sold in accordance with section 19 (3) of the Financial Institutions (Recovery
of Finances) Ordinance, 2001, after complying with the due and complete transparent process. Sealed bids were invited from
interested parties. The bidding process was scheduled for July 23, 2004 and the Rs. 25 per share was fixed reserve price. On
the bid date, the highest offer for these shares was received at a rate of Rs. 25.51 per share. The bid was approved and the
successful bidder had deposited an amount of Rs. 417.75 million with the Bank.

Fateh Textile Mills Limited filed suit in the High Court of Sindh challenging the above sale of shares. The High Court had not
granted a stay order against the said sale. The sale of shares was, therefore; concluded.

21.9.3 While adjudicating foreign exchange repatriation cases of exporter namely: Fateh Textile Mills Limited, the Foreign Exchange
Adjudicating Court (FEAC) of the State Bank of Pakistan (SBP) has arbitrarily adjudicated penalties against various banks
including Rs. 2,173 million in aggregate against Allied Bank Limited (the Bank). Against the said judgments, the Bank has filed
appeals before the Appellate Board and Constitutional Petitions in the High Court of Sindh, Karachi. The Honourable High Court
has granted relief to the Bank by way of interim orders. Based on merits of the appeals, the management is confident that these
appeals shall be decided in favor of the Bank and therefore no provision has been made against the impugned penalty.

22 DERIVATIVE INSTRUMENTS

The Bank at present does not offer structured derivative products such as Interest Rate Swaps, Forward Rate Agreements or
FX Options. However, the Bank buys and sells derivative instruments such as:

Forward Exchange Contracts

Foreign Exchange Swaps

Equity Futures

Forward Contracts for Government Securities

Forward Exchange Contracts

Forward Exchange Contract (FEC) is a product which is offered to the obligors who transact internationally. These obligors use
this product to hedge themselves from unfavorable movements in a foreign currency, however, by agreeing to fix the exchange
rate, they do not benefit from favorable movements in that currency.

An FEC is a contract between the obligors and the Bank in which both agree to exchange an amount of one currency for another
currency at an agreed forward exchange rate for settlement over more than two business days after the FEC is entered into (the
day on which settlement occurs is called the value date). FEC is entered with those Obligors whose credit worthiness has already
been assessed, and they have underlined trade transactions.

If the relevant exchange rate moves un-favorably, Obligors will benefit from that movement because the Bank must exchange
currencies at the FEC rate. In order to mitigate this risk of adverse exchange rate movement, the Bank hedges its exposure by
taking opposite forward position in inter-bank FX.

Foreign Exchange Swaps

A Foreign Exchange Swap (FX Swap) is used by the Bank if it has a need to exchange one currency for another currency on one
day and then re-exchange those currencies at a later date. Exchange rates and forward margins are determined in the “inter-
bank” market and fluctuate according to supply and demand.

An FX Swap prevents the Bank from gaining any benefit resulting from a favorable exchange rate movement in the relevant
currency pair between the time Bank enters into the transaction deal and when settlement occurs. Cancellation of the swap
may also result in exposure to market movements. The key advantage of an FX swap is that it provides the Bank with protection
against unfavorable currency movements between the time it enters into the transaction and settlement. The term and amounts
for FX Swap can also be tailored to suit the Bank’s particular needs.

 Allied Bank Limited 147

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

Equity Futures

An equity futures contract is a standardized contract, traded on a futures counter of the stock exchange, to buy or sell a certain
underlying script at a certain date in the future, at a specified price.

The Bank may use equity futures as a hedging instrument to hedge its equity portfolio, in both ‘held-for-trading’ and ‘available-
for-sale’, against equity price risk. Only selected shares are allowed to be traded on futures exchange. Equity futures give
flexibility to the Bank either to take delivery on the future settlement date or to settle it by adjusting the notional value of the
contract based on the current market rates. Maximum exposure limit to the equity futures is 10% of Tier I Capital of the Bank,
based on prevailing SBP regulations.

The accounting policies used to recognize and disclose derivatives are given in Note 5.14.2. The risk management framework
of derivative instruments is given in note 41.

December 31, December 31,

2017 2016

Rupees in ‘000

23 MARK-UP / RETURN / INTEREST EARNED

On loans and advances:

Customers 23,721,333 21,332,160

On investments in:
Available-for-sale securities 34,616,633 27,447,249
Held-to-maturity securities 6,158,839 15,129,288
Held-for-trading securities 840,195 399,575
41,615,667 42,976,112

On deposits with financial institutions 26,889 9,648
On securities purchased under resale agreements 221,763 147,324
On certificates of investment 2,675 –
On call money lendings 93,088 63,639
On wakala lendings 4,189 28,045
On mudaraba lendings 5,634 21,328
On bai muajjal placement 5,916 –
On musharaka lendings 11,603 14,332
65,708,757 64,592,588

24 MARK-UP / RETURN / INTEREST EXPENSED

Deposits 23,924,732 23,609,425

Long term borrowings 277,636 240,637
Securities sold under repurchase agreements 7,256,991 5,022,492
Call money borrowings 898,155 763,764
Brokerage and commission 165,393 174,305
Other short term borrowings 1,607,587 1,534,724
34,130,494 31,345,347

25 FEE, COMMISSION AND BROKERAGE INCOME

Core fees, commission and brokerage 3,820,556 3,907,989

Account maintenance charges 96,846 106,146
3,917,402 4,014,135
148 Annual Report 2017

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

Note December 31, December 31,

2017 2016

Rupees in ‘000

26 GAIN / (LOSS) ON SALE OF SECURITIES

Shares - listed – 31,323

- unlisted – (20,374)
Open Ended Mutual Funds – 63,572
Market Treasury Bills 10,143 (37,115)
Pakistan Investment Bonds 631,201 2,635,029
Sukuk Bonds (301) 1,180
641,043 2,673,615

27 OTHER INCOME

Rent received on Bank’s property 6,780 5,179

Gain on sale of operating fixed assets 53,012 36,489
Gain on sale of non-banking asset / other assets 27.1 80,419 12,104
Recovery from written off loans / others 183,158 48,445
323,369 102,217

27.1 This includes gain on sale of a non-banking asset, amounting to Rs. 73.350 million (2016: net loss of Rs. 15.994 million).

Note December 31, December 31,

2017 2016

Rupees in ‘000

28 ADMINISTRATIVE EXPENSES

Salaries, allowances, etc. 28.1 11,055,549 10,655,942

Charge for defined benefit plan - net 28.1 & 34 57,796 135,858
Contribution to defined contribution plan - provident fund 297,696 272,490
Non-executive directors’ fees, allowances and other expenses 16,950 13,500
Rent, taxes, insurance, electricity, etc. 2,719,922 2,478,410
Legal and professional charges 115,305 105,275
Communications 371,256 357,206
Repairs and maintenance 542,354 533,774
Stationery and printing 248,987 230,250
Advertisement and publicity 586,254 467,054
Auditors’ remuneration 28.2 17,563 16,483
Depreciation / amortization 11.2 & 11.3 2,512,678 2,193,546
Security service charges 1,179,531 1,180,029
Travelling, conveyance and fuel expenses 182,785 198,365
Entertainment 136,585 113,112
Computer expenses 1,104,976 1,129,657
Subscription 195,128 151,804
Donations 28.3 54,209 41,878
Others 28.4 28,023 21,010
21,423,547 20,295,643

28.1 The Bank announced the Voluntary Retirement Scheme (VRS) for its employees. Fifty nine (59) employees (2016: 78) of the Bank
opted for retirement under this scheme. In accordance with the actuary recommendations, the Bank has recognized an amount
of Rs. 141 million (2016: Rs. 157 million) to cover additional retirement benefits in respect of such employees.

 Allied Bank Limited 149

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

December 31, December 31,

2017 2016

Rupees in ‘000

28.2 Auditors’ remuneration

Annual audit 6,110 5,850

Annual audit overseas business unit* 1,629 1,535
Half year review 2,535 2,360
Special certifications and miscellaneous services 5,024 4,577
Sales tax 653 1,210
Out-of-pocket expenses 1,612 951
17,563 16,483

*This includes audit fee amounting to Bahraini Dinar 4,350 (2016: 4,250) relating to Wholesale Bahrain Branch.

28.3 None of the directors, executives and their spouses had any interest in the donees, except Mr. Naeem Mukhtar (Chairman/
Non-Executive Sponsor Director) and Dr. Muhammad Akram Sheikh are directors in National Management Foundation (LUMS)
and Quality School Foundation, respectively.

Note December 31, December 31,

2017 2016

Rupees in ‘000

Acumen Fund Pakistan – 10,000

Agha Khan Hospital & Medical College Foundation – 1,000
Altaf Mahmood Foundation 1,000 500
Anjuman Himayat-i-Islam 28.3.1 4,577 4,900
Bakhtawar Amin Memorial Trust Hospital – 1,000
Baluchistan Residential Colleges 989 –
Chaman (Center for Mentally Challenged Children) 1,695 –
Command Improvement Fund
(Pakistan Navy - for Abdul Sattar Edhi Hockey Stadium) 1,000 –
Deaf and Dumb Welfare Association – 5,763
DHQ Teaching Hospital Sargodha – 1,375
Fountain House Mental Health Association – 500
Government Hospital Gawadar 923 –
International Islamic University – 4,000
Liver Foundation Trust 1,000 –
Markaz-e-Umeed – 500
Muhammad Usman Zafar (Surgical Treatment in United
Kingdom for Cerebral Diplegia) – 1,000
National Management Foundation (LUMS) 30,000 –
Bolan Cricket Stadium 500 –
Punjab Food Authority 4,500 –
Quality Schools Foundation – 10,000
Saleem Memorial Hospital 5,000 –
Sukkur Institute of Business Administration 1,000 –
Taj Medical Complex & Hamdard University 25 –
Tamir Welfare Organization 2,000 1,000
Vocational Training Institute (VTI), Chiniot – 340
54,209 41,878

28.3.1 This represents charitable expenses on account of sadqa & feeding to under privileged.

28.4 This includes canteen expenses amounting to Rs. 25.114 million (2016: Rs. 20.264 million).
150 Annual Report 2017

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

Note December 31, December 31,

2017 2016

Rupees in ‘000

29 OTHER CHARGES
Penalties imposed by SBP 41,642 437
Workers’ welfare fund 417,574 479,803
Education cess 31,022 29,610
Depreciation - non-banking assets 18,938 19,696
Other assets written off 5,254 51
514,430 529,597

30 TAXATION
Current - for the year 7,295,083 8,513,243
- for prior year 30.1 962,923 949,657
8,258,006 9,462,900
Deferred - current (112,947) (58,732)
8,145,059 9,404,168

30.1 The amount represents super tax levied on taxable income of the Bank for tax year 2017 vide Finance Act, 2017 (2016: for the
tax year 2016 vide Finance Act, 2016).

December 31, December 31,
2017 2016

Rupees in ‘000

30.2 Relationship between tax expense and accounting profit

Accounting profit for the year 20,878,695 23,831,218

Tax on income @ 35% (2016: 35%) 7,307,543 8,340,926
Effect of permanent differences – (2,711)
Prior year charge 962,923 949,657
Others (125,407) 116,296
Tax charge for the year 8,145,059 9,404,168

31 EARNINGS PER SHARE - BASIC AND DILUTED
Profit after taxation 12,733,636 14,427,050

Number of Shares

Weighted average number of ordinary shares outstanding during the year 1,145,073,830 1,145,073,830

Rupees

Earnings per share - basic and diluted 11.12 12.60

There is no dilution effect on basic earnings per share.

Note December 31, December 31,

2017 2016

Rupees in ‘000

32 CASH AND CASH EQUIVALENTS

Cash and balances with treasury banks 6 85,367,382 73,203,717
Balances with other banks 7 648,765 679,923
Overdrawn nostro accounts 15.2 (104,823) (63,459)
85,911,324 73,820,181

32.1 Reconciliation of movement of liabilities to cash flows arising from financing activities:
 Allied Bank Limited 151

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

Liabilities Equity

Dividend Unclaimed Share Capital Reserves Unappropriated Total

payable dividends profit

Rupees in ‘000

Balance as at January 01, 2017 20,237 215,914 11,450,739 16,533,485 46,490,244 74,710,619
Changes from Financing cash flows
Dividend paid (7,980,807) (6,309) – – – (7,987,116)
Total changes from financing cash flows (7,980,807) (6,309) – – – (7,987,116)
Liability related
Dividend accrued 8,015,516 – – – – 8,015,516
Unclaimed dividend (36,654) 36,654 – – – –
Total liability related changes 7,978,862 36,654 – – – 8,015,516
Total equity related other changes – – – 1,446,631 2,722,203 4,168,834
Balance as at December 31, 2017 18,292 246,259 11,450,739 17,980,116 49,212,447 78,907,853

Note December 31, December 31,

2017 2016

Numbers

33 STAFF STRENGTH

Permanent 10,637 10,430

Temporary / on contractual basis / trainee 438 286
Bank’s own staff strength at the end of the year 11,075 10,716
Outsourced 33.1 319 295
Total staff strength 11,394 11,011
Average number of employees 11,203 10,628

33.1 This excludes outsourced security guards, janitorial and tea service staff.

34 DEFINED BENEFIT PLANS

34.1 General description

The Bank operates a funded gratuity scheme for all employees who opted for the staff retirement benefit scheme introduced by
the management with effect from July 1, 2002. For those employees who did not opt for the new scheme, the Bank continues
to operate a funded pension scheme.

The Bank also operates a contributory benevolent fund (defined benefit scheme – funded) and provides post retirement medical
benefits (unfunded scheme) to eligible retired employees.

34.2 Number of employees and beneficiaries under the schemes

The number of employees covered under the following defined benefit scheme / plans are:

December 31, December 31,
2017 2016

Numbers

Pension fund 1,193 1,262

Gratuity fund 10,686 10,715
Benevolent fund 88 95
Post retirement medical benefits 10,637 10,430
Employees’ compensated absences 10,637 10,782
In addition, the number of beneficiaries covered under the following
defined benefit scheme / plans are:
Pension fund 2,022 1,926
Post retirement medical benefits 2,017 2,017
152 Annual Report 2017

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

34.3 Principal actuarial assumptions

The actuarial valuations were carried out for December 31, 2017 based on the Projected Unit Credit Method, using the following
significant assumptions:

Sources of estimation December 31, December 31,
2017 2016

Withdrawal rate
Pension fund Low Low
Gratuity fund High High
Benevolent fund High High
Post retirement medical benefits High High
Employees’ compensated absences High High

Mortality rate Adjusted SLIC Adjusted SLIC
2001-2005 2001-2005

Discount rate Yield on investments in Government Bonds 8.25% 8.00%
Expected rate of return on plan assets
Pension fund Yield on investments in Government Bonds 8.25% 8.00%
Gratuity fund Yield on investments in Government Bonds 8.25% 8.00%
Benevolent fund Yield on investments in Government Bonds 8.25% 8.00%

Expected rate of salary increase Rate of salary increase 6.25% 6.00%

The expected return on plan assets is based on the market expectations and depends on the asset portfolio of the Bank, at the
beginning of the period, for returns over the entire life of the related obligation.

Note
December 31, 2017

Pension Gratuity Benevolent Post Employees’

fund fund fund retirement compensated
medical absences

Rupees in ‘000

34.4 Reconciliation of (receivable from) / payable to defined benefit plans / other long term benefits

Present value of defined benefit obligations 34.6 1,979,453 2,531,300 8,036 1,240,250 570,128
Fair value of plan’s / scheme’s assets 34.7 (5,671,485) (2,019,381) (232,158) – –
Net (asset) / liability (3,692,032) 511,919 (224,122) 1,240,250 570,128
Benefit of the surplus not available to
the Bank – – 112,061 – –
Net (asset) / liability (3,692,032) 511,919 (112,061) 1,240,250 570,128

Note
December 31, 2016

Pension Gratuity Benevolent Post Employees’

fund fund fund retirement compensated
medical absences

Rupees in ‘000

Present value of defined benefit obligations 34.6 2,001,618 2,285,523 8,776 1,298,380 698,964
Fair value of plan’s / scheme’s assets 34.7 (6,616,345) (2,030,232) (221,007) – –
Net (asset) / liability (4,614,727) 255,291 (212,231) 1,298,380 698,964
Benefit of the surplus not available to the Bank – – 106,115 – –
Net (asset) / liability (4,614,727) 255,291 (106,116) 1,298,380 698,964
 Allied Bank Limited 153

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

Note
December 31, 2017

Pension Gratuity Benevolent Post Employees’

fund fund fund retirement compensated
medical absences

Rupees in ‘000

34.5 Movement in (receivable from) / payable to defined benefit plans

Opening balance (4,614,727) 255,291 (106,116) 1,298,380 698,964

(Reversal) / charge for the year 34.9 (363,776) 306,687 (16,978) 129,178 37,189
Other comprehensive losses / (income) 1,286,471 250,516 11,033 (62,068) –
Contribution to the fund / benefits paid – (300,575) – (125,240) (166,025)
Closing balance (3,692,032) 511,919 (112,061) 1,240,250 570,128

Note
December 31, 2016

Pension Gratuity Benevolent Post Employees’

fund fund fund retirement compensated
medical absences

Rupees in ‘000

Opening balance (3,799,170) 561,455 (96,406) 1,217,945 761,498

(Reversal) / charge for the year 34.9 (328,106) 279,051 (17,353) 125,283 123,480
Other comprehensive losses / (income) (487,451) (62,336) 7,643 97,990 –
Contribution to the fund / benefits paid – (522,879) – (142,838) (186,014)
Closing balance (4,614,727) 255,291 (106,116) 1,298,380 698,964

December 31, 2017

Pension Gratuity Benevolent Post Employees’

fund fund fund retirement compensated
medical absences

Rupees in ‘000

34.6 Reconciliation of present value of defined benefit obligations

Opening balance 2,001,618 2,285,523 8,776 1,298,380 698,964

Current service cost – 280,153 – 29,182 37,697
Interest cost 149,272 173,464 604 98,861 49,276
Benefits paid (271,434) (234,443) (2,455) (125,240) (166,025)
VRS / settlement loss 5,402 6,111 – 1,135 21,856
Actuarial loss / (gain) 94,595 20,492 1,111 (62,068) (71,640)
Closing balance 1,979,453 2,531,300 8,036 1,240,250 570,128

December 31, 2016

Pension Gratuity Benevolent Post Employees’

fund fund fund retirement compensated
medical absences

Rupees in ‘000

Opening balance 1,971,233 2,043,833 12,355 1,217,945 761,498

Current service cost – 258,156 – 25,602 37,270
Interest cost 163,046 176,572 950 103,187 68,535
Benefits paid (319,203) (163,849) (3,598) (142,838) (186,014)
VRS / settlement loss / (gain) 13,820 6,847 – (3,506) 29,337
Actuarial loss / (gain) 172,722 (36,036) (931) 97,990 (11,662)
Closing balance 2,001,618 2,285,523 8,776 1,298,380 698,964
154 Annual Report 2017

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

December 31, 2017

Pension Gratuity Benevolent Post Employees’

fund fund fund retirement compensated
medical absences

Rupees in ‘000

34.7 Reconciliation of fair value of plan assets

Opening balance 6,616,345 2,030,232 221,007 – –

Expected return on plan assets 518,450 153,041 17,582 – –
Bank’s contribution – 300,576 – – –
Benefits paid (271,434) (234,443) (2,455) – –
Actuarial loss (1,191,876) (230,025) (3,976) – –
Closing balance 5,671,485 2,019,381 232,158 – –

December 31, 2016

Pension Gratuity Benevolent Post Employees’

fund fund fund retirement compensated
medical absences

Rupees in ‘000

Opening balance 5,770,403 1,482,378 205,166 – –

Expected return on plan assets 504,972 162,523 18,303 – –
Bank’s contribution – 522,879 – – –
Benefits paid (319,203) (163,849) (3,598) – –
Actuarial gain 660,173 26,301 1,136 – –
Closing balance 6,616,345 2,030,232 221,007 – –

December 31, 2017

Pension Gratuity Benevolent Post Employees’

fund fund fund retirement compensated
medical absences

Rupees in ‘000

34.8 Composition of fair value of plan assets

Equity securities 2,827,493 517,952 23,561 – –

Government securities – 304,383 – – –
Cash and cash equivalents 2,843,992 1,197,046 208,597 – –
5,671,485 2,019,381 232,158 – –
34.8.1 Fair value of Bank’s financial instruments
included in plan assets
Shares of ABL 2,827,493 517,952 23,561 – –
Term deposit receipts 2,408,733 972,064 164,907 – –
Bank balances with ABL 435,259 224,982 43,690 – –
5,671,485 1,714,998 232,158 – –
 Allied Bank Limited 155

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

December 31, 2016

Pension Gratuity Benevolent Post Employees’

fund fund fund retirement compensated
medical absences

Rupees in ‘000

Equity securities 3,904,747 726,584 33,051 – –

Cash and cash equivalents 2,711,598 1,303,648 187,956 – –
6,616,345 2,030,232 221,007 – –

Fair value of Bank’s financial instruments
included in plan assets
Shares of ABL 3,635,454 726,584 33,051 – –
Term deposit receipts 2,351,708 1,268,030 161,045
Bank balances with ABL 359,890 35,618 26,911 – –
6,347,052 2,030,232 221,007 – –

December 31, 2017

Pension Gratuity Benevolent Post Employees’

fund fund fund retirement compensated
medical absences

Rupees in ‘000

34.9 Charge for defined benefit plan

Current service cost – 280,153 – 29,182 37,697

Interest cost – 20,423 – 98,861 49,276
Net interest (369,178) – (16,978) – –
VRS loss 5,402 6,111 _ 1,135 21,856
Actuarial gain recognised – – – – (71,640)
(363,776) 306,687 (16,978) 129,178 37,189

December 31, 2016

Pension Gratuity Benevolent Post Employees’

fund fund fund retirement compensated
medical absences

Rupees in ‘000

Current service cost – 258,156 – 25,602 37,270
Interest cost – 14,048 – 103,187 68,535
Net interest (341,926) – (17,353) – –
VRS loss / (gain) 13,820 6,847 – (3,506) 29,337
Actuarial gain recognised – – – – (11,662)
(328,106) 279,051 (17,353) 125,283 123,480

December 31, 2017

Pension Gratuity Benevolent Post Employees’

fund fund fund retirement compensated
medical absences

Rupees in ‘000

34.10 Actuarial gain/(losses) recognized in other comprehensive income

Actuarial (loss) / gain on obligations (94,594) (20,491) (1,112) 62,068 –

Actuarial loss on assets (1,191,877) (230,025) (3,976) – –
Asset ceiling adjustment – – (5,945) –
Actuarial (loss) / gain in OCI (1,286,471) (250,516) (11,033) 62,068 –
156 Annual Report 2017

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

December 31, 2016

Pension Gratuity Benevolent Post Employees’

fund fund fund retirement compensated
medical absences

Rupees in ‘000

Actuarial (loss) / gain on obligations (172,722) 36,035 931 (97,990) –

Actuarial gain on assets 660,173 26,301 1,136 – –
Asset ceiling adjustment – – (9,710) –
Actuarial gain / (loss) in OCI 487,451 62,336 (7,643) (97,990) –

December 31, December 31,

2017 2016

Numbers

34.11 Actual (loss) / return on plan assets

Pension fund (673,427) 1,165,145

Gratuity fund (76,984) 188,824
Benevolent fund 13,607 19,439

Pension fund

2017 2016 2015 2014 2013

Rupees in ‘000

34.12 Five year data of defined benefit plan and experience adjustments

Present value of defined benefit obligation 1,979,453 2,001,618 1,971,233 2,877,345 2,810,086
Fair value of plan assets (5,671,485) (6,616,345) (5,770,403) (7,252,046) (6,591,550)
Surplus (3,692,032) (4,614,727) (3,799,170) (4,374,701) (3,781,464)
Experience adjustments on plan obligations / assets
Actuarial loss on obligation (94,595) (172,722) (152,852) (316,213) (25,739)
Actuarial (loss) / gain on assets (1,191,876) 660,173 (854,480) 478,030 340,760

Gratuity fund

2017 2016 2015 2014 2013

Rupees in ‘000

Present value of defined benefit obligation 2,531,300 2,285,523 2,043,833 1,725,573 1,486,417
Fair value of plan assets (2,019,381) (2,030,232) (1,482,378) (1,727,942) (1,438,351)
Deficit / (surplus) 511,919 255,291 561,455 (2,369) 48,066
Experience adjustments on plan obligations / assets
Actuarial (loss) / gain on obligation (20,492) 36,036 (167,783) (93,984) 92,014
Actuarial (loss) / gain on assets (230,025) 26,301 (168,935) 137,284 15,526

Benevolent fund

2017 2016 2015 2014 2013

Rupees in ‘000

Present value of defined benefit obligation 8,036 8,776 12,355 10,469 10,894
Fair value of plan assets (232,158) (221,007) (205,166) (197,461) (174,403)
Surplus (224,122) (212,231) (192,811) (186,992) (163,509)
Experience adjustments on plan obligations / assets
Actuarial (loss) / gain on obligation (1,111) 931 (4,376) (2,203) (6,973)
Actuarial (loss) / gain on assets (3,976) 1,136 (10,841) 5,247 4,593
 Allied Bank Limited 157

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

Post retirement medical

2017 2016 2015 2014 2013

Rupees in ‘000

Present value of defined benefit obligation 1,240,250 1,298,380 1,217,945 970,060 951,480
Fair value of plan assets – – – – –
Deficit 1,240,250 1,298,380 1,217,945 970,060 951,480
Experience adjustments on plan obligations
Actuarial gain / (loss) on obligation 62,068 (97,990) (243,936) (21,931) 483,192

Employees’ compensated absences

2017 2016 2015 2014 2013

Rupees in ‘000

Present value of defined benefit obligation 570,128 698,964 761,498 755,785 820,067
Fair value of plan assets – – – – –
Deficit 570,128 698,964 761,498 755,785 820,067
Experience adjustments on plan obligations
Actuarial gain / (loss) on obligation 71,640 11,662 (45,712) (47,308) 186,066

34.13 Expected contributions to be paid to the funds in the next financial year
The Bank contributes to the gratuity fund as per actuarial expected charge for the next financial year. No contributions are being
made to pension / benevolent fund due to surplus of fair value of plan’s assets over present value of defined obligation. Based
on actuarial advice, management estimates that the charge / (reversal) in respect of defined benefit plans for the year ending
December 31, 2018 would be as follows, subject to Note 42.2:

Pension Gratuity Benevolent Post Employees’
fund fund fund retirement compensated
medical absences

Rupees in ‘000

Expected (reversal) / charge for the next year (299,954) 386,040 (18,490) 156,432 98,359

+1% -1% +1% Salary -1% Salary +10% -10% 1 Year 1 Year
Description Discount Discount Increase Increase withdrawal withdrawal Mortality age Mortality age
Rate Rate Rate Rate Rate Rate set back set forward

Rupees in 000’

34.14 Sensitivity analysis

Pension fund 2,122,754 1,854,112 – – 1,979,544 1,979,362 1,980,905 1,978,007

Gratuity fund 2,373,809 2,709,990 2,721,886 2,360,944 2,544,727 2,516,687 2,530,129 2,532,464
Benevolent fund 7,535 8,607 – – – – 7,285 8,787
Post retirement medical 1,157,857 1,332,850 1,294,657 1,184,859 1,233,364 1,246,745 1,240,595 1,238,996
Leave compensated absences 539,492 604,789 607,962 536,143 564,009 576,546 568,098 572,152

The above sensitivity analysis are based on a change in an assumption while holding all other assumptions constant. In practice,
this is unlikely to occur, and changes in assumptions may be correlated. When calculating the sensitivity of the defined benefit
obligation to significant actuarial assumptions the same method (present value of defined benefit obligation calculated with the
projected unit credit method at the end of the reporting period) has been applied when calculating the defined benefit obligation
recognized within the statement of financial position.
158 Annual Report 2017

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

34.15 Risk associated with defined benefit plans

The defined benefit plans may expose the bank to actuarial risks such as longevity risk, investment risk, salary increase risk and
withdrawal rate risk as described below;

Longevity risks:

The risk arises when the actual lifetime of retirees is longer than expectation. This risk is measured at the plan level over the entire
retiree population.

Investment risks:

The risk arises when the actual performance level of investment levels is lower than expectation and thus creating a shortfall in
the funding objectives.

Salary increase risk:

The most common type of retirement benefit is one where the final benefit is linked with final salary. The risk arises when the
actual increases are higher than expectations and impact the liability accordingly.

Withdrawal Rate:

The risk of actual withdrawals varying with the actuarial assumptions can impose a risk to the benefit obligation. The movement
of the liability can go either way.

35 DEFINED CONTRIBUTION PLAN

The Bank has maintained an employee provident fund trust and investments out of provident fund have been made in accordance
with the provisions of section 227 of the repealed Companies Ordinance 1984, and the rules formulated for this purpose. The
salient information of the fund is as follows:

Note December 31, December 31,

2017 2016

Rupees in ‘000

35.1 Employee provident fund

Size of the fund 7,357,060 7,786,324
Investments made (cost) 35.2 6,316,994 6,221,275
Percentage of investment made 85.86% 79.90%
Fair value of investment 7,231,275 7,714,681

35.2 Breakup of investment - Cost
Investment in shares (Listed securities) 1,435,991 1,435,991
Market treasury bills 4,561,832 4,475,025
Pakistan investment bonds 298,719 289,807
Open ended mutual funds 20,452 20,452
6,316,994 6,221,275

35.3 Number of employees - Employees provident fund Numbers

Number of employees at the end of the year 10,236 9,369

Average number of employees during the year 10,105 9,299
 Allied Bank Limited 159

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

Note President / Chief Non-Executive Executives

Executive Directors

2017 2016 2017 2016 2017 2016

Rupees in ‘000

36 COMPENSATION OF DIRECTORS AND EXECUTIVES

Fees 36.1 – – 16,950 13,500 – –

Managerial remuneration 11,400 13,519 – – 1,481,874 1,307,858
Charge for defined
benefit plans 928 4,922 – – 190,727 190,813
Contribution to defined
contribution plan 950 1,126 – – 123,440 107,712
Rent and house
maintenance 6,840 8,128 – – 843,943 714,313
Utilities 2,280 2,526 – – 295,507 259,039
Medical 2,362 2,526 – – 325,071 280,775
Bonus 36.2 17,000 22,000 – – 549,803 525,589
Conveyance and others 3,293 3,163 – – 780,849 705,354
45,053 57,910 16,950 13,500 4,591,214 4,091,453
Number of persons 1 1 5 5 1,628 1,370

36.1 This represents meeting fee paid to directors (other than two sponsor directors) for attending meetings of the Board of Directors
and Board Committees held during the year.

36.2 Excluding the retiring President/ CEO, whose term completed on December 31, 2016, was paid bonus of Rs. 35 million.

37 FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of traded investments is based on quoted market prices, except for tradable securities classified by the Bank as
‘Held-to-Maturity’. Quoted securities classified as ‘Held-to-Maturity’ are carried at amortized cost. Fair value of unquoted equity
investments other than investment in subsidiary is determined on the basis of break up value of these investments as per the
latest available audited financial statements.

Fair value of fixed term loans, other assets, other liabilities, fixed term deposits and borrowings cannot be calculated with
sufficient reliability due to absence of current and active market for such assets and liabilities and reliable data regarding market
rates for similar instruments. The provision / reversal for impairment of loans and advances has been calculated in accordance
with the Bank’s accounting policy as stated in note 5.4 to these financial statements.

The maturity and repricing profile and effective rates are stated in notes 41.2.4 and 41.3.

In the opinion of the management, the fair values of the remaining financial assets and liabilities are not significantly different from
their carrying values since assets and liabilities are either short-term in nature or in the case of customer loans and deposits are
frequently re-priced.

The table below presents, by valuation methods, the financial and non-financial assets carried at fair values. Valuation of
investments and non-banking assets is carried out as per guidelines specified by the SBP. The Bank has adopted revaluation
model (as per IAS 16) in respect of land and building.


160 Annual Report 2017

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

December 31, 2017 December 31, 2016

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

Rupees in ‘000

37.1 FAIR VALUE HIERARCHY OF ASSETS AND LIABILITIES

On balance sheet financial instruments

Financial assets measured at fair value
Held-for-trading securities
Market Treasury Bills – 24,704,478 – 24,704,478 – – – –
Pakistan Investment Bonds – 123,415 – 123,415 – 101,819 – 101,819
– 24,827,893 – 24,827,893 – 101,819 – 101,819
Available–for–sale securities
Market Treasury Bills – 365,643,722 – 365,643,722 – 226,247,239 – 226,247,239
Pakistan Investment Bonds – 166,864,554 – 166,864,554 – 203,520,070 – 203,520,070
Ordinary shares of listed companies /
certificates of close–ended mutual funds 33,346,294 – – 33,346,294 42,084,599 – – 42,084,599
Ordinary shares of unlisted companies – – 3,522,055 3,522,055 – – 3,448,081 3,448,081
Sukuk Bonds – 14,373,811 5,219,911 19,593,722 – 13,306,369 5,151,607 18,457,976
Foreign Currency Bonds (US$) – 5,515,525 – 5,515,525 – 5,177,620 – 5,177,620
Term Finance Certificates – 2,292,939 1,413,084 3,706,023 – 2,353,869 2,003,063 4,356,932
33,346,294 554,690,551 10,155,050 598,191,895 42,084,599 450,605,167 10,602,751 503,292,517
Financial liabilities measured at fair value
Held-for-trading securities
Pakistan Investment Bonds – 1,976,436 – 1,976,4368 – – – –
Non – financial assets measured at fair value
Operating fixed assets – 36,872,324 – 36,872,324 – 22,914,819 – 22,914,819
Non–banking assets – 3,584,030 – 3,584,030 – 3,476,351 – 3,476,351
Off balance sheet financial instruments
Foreign exchange contracts – Purchase – 95,038,705 – 95,038,705 – 63,017,979 – 63,017,979
Foreign exchange contracts – Sale – 41,580,643 – 41,580,643 – 38,469,943 – 38,469,943

The valuation techniques used for above assets are same as disclosed in note 5.3, 5.5, 5.8 and 5.14.2 of these financial
statements.

Level 3
December 31, December 31,
2017 2016

Rupees in ‘000

37.1.1 Reconciliation of Investments measured at fair value

Opening balance 10,602,751 7,091,019

Total (losses) for the period:
Included in profit or loss (21,582) (37,097)
Purchases 482,555 4,523,735
Settlements (908,674) (974,906)
Closing balance 10,155,050 10,602,751

 Allied Bank Limited 161

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

38 SEGMENT DETAILS WITH RESPECT TO BUSINESS ACTIVITIES

The segment analysis with respect to business activity is as follows:-

For the year ended December 31, 2017

Corporate & Trading & Commercial

Investment Sale and Retail
Banking (Treasury) Banking Other Elimination Total

Rupees in ‘000

Total income 27,541,596 41,357,556 50,150,587 748,614 (45,217,794) 74,580,559

Total expenses (23,153,530) (35,358,023) (42,836,573) (5,716,591) 45,217,794 (61,846,923)
Net income / (loss) 4,388,066 5,999,533 7,314,014 (4,967,977) – 12,733,636
Segment assets (gross) 400,890,640 692,542,154 898,771,802 143,752,585 (870,008,666) 1,265,948,515
Segment non performing loans 1,955,663 – 519,333 15,576,753 – 18,051,749
Segment provision required 720,077 – 417,106 15,576,754 – 16,713,937
Segment liabilities 397,834,210 692,542,154 897,377,822 21,250,240 (870,008,666) 1,138,995,760
Segment return on net assets (ROA) (%)* 6.51% 6.93% 5.82% – – –
Segment cost of funds (%)* 5.56% 5.45% 3.07% – – –

For the year ended December 31, 2016

Corporate & Trading & Commercial

Investment Sale and Retail
Banking (Treasury) Banking Other Elimination Total

Rupees in ‘000

Total income 25,948,197 44,559,811 41,608,990 1,529,790 (37,843,709) 75,803,079

Total expenses (21,585,449) (34,224,417) (37,123,994) (6,285,878) 37,843,709 (61,376,029)
Net income / (loss) 4,362,748 10,335,394 4,484,996 (4,756,088) – 14,427,050
Segment assets (gross) 371,284,006 572,327,815 822,485,324 138,227,090 (812,901,066) 1,091,423,169
Segment non performing loans 3,220,882 – 1,557,545 15,653,182 – 20,431,609
Segment provision required 1,917,869 – 1,216,565 15,649,438 – 18,783,872
Segment liabilities 367,051,366 572,327,815 820,893,276 20,900,529 (812,901,066) 968,271,920
Segment return on net
assets (ROA) (%)* 7.04% 8.38% 5.03% – – –
Segment cost of funds (%)* 5.59% 5.43% 2.26% – – –

* The segment return on net assets and cost of funds are based on average assets and average liabilities for the year.

39 RELATED PARTY TRANSACTIONS

The Bank has related party relationships with its parent, subsidiary, companies with common directorship, directors, employee
benefit plans and key management personnel including their associates

Contributions to the accounts in respect of staff retirement benefits are made in accordance with actuarial valuation / terms of
the contribution plan. Remuneration of the key management personnel are in accordance with the terms of their employment.
Other transactions are at agreed terms.
162 Annual Report 2017

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

December 31, 2017 December 31, 2016

Key
Other Key
Other
Nature of related party transactions Associated Management related Associated Management related
Parent Directors
Companies* Subsidiary personnel parties Parent Directors
Companies* Subsidiary personnel parties

Rupees in ‘000

Loans:
Loans at the beginning of the year – 24,137 4,383,200 – 253,417 17,991,914 – 36,637 1,774,626 – 264,941 5,379,463
Loans given during the year – 63,948 – – 155,728 66,822,844 – 27,681 5,642,759 – 80,198 71,307,904
Loans repaid / adjustment during the year – (71,056) (841,450) – (156,471) (78,849,569) – (40,181) (3,034,185) – (91,722) (58,695,453)
Loans at the end of the year – 17,029 3,541,750 – 252,674 5,965,189 – 24,137 4,383,200 – 253,417 17,991,914
Deposits:
Deposits at the beginning of the year 403 53,177 258,264 25,508 42,152 13,249,519 – 40,868 102,902 57,482 22,837 9,572,394
Deposits received during the year 6,779,403 491,942 41,648,556 884,938 569,875 157,490,029 654 5,505,258 10,566,219 965,420 406,337 94,959,394
Deposits repaid during the year (6,778,604) (210,530) (41,807,971) (871,793) (550,138) (157,458,644) (251) (5,492,949) (10,410,857) (997,394) (387,022) (91,282,269)
Deposits at the end of the year 1,202 334,589 98,849 38,653 61,889 13,280,904 403 53,177 258,264 25,508 42,152 13,249,519
Nostro balances – – – – – – – – 35,968 – – –
Investments in shares – – 4,836,429 500,000 – 4,106,035 – – 4,790,874 500,000 – 4,055,035
Other receivables – 12,631 27,810 1,908 81,472 95,567 – 6,363 37,246 1,553 81,029 243,311
Net receivable from staff retirement benefit funds – – – – – 3,255,453 – – – – – 4,419,506
Non funded exposure – – 423,881 – – 6,416 – – 550 – – 17,421

December 31, 2017 December 31, 2016

Key
Other Key
Other
Nature of related party transactions Associated Management related Associated Management related
Parent Directors
Companies* Subsidiary personnel parties Parent Directors
Companies* Subsidiary personnel parties

Rupees in ‘000

Mark–up earned – 1,115 280,274 – 13,037 559,400 – 1,535 232,676 – 15,889 806,191
Dividend Income – – 840,000 – – 817,253 – – 1,400,000 – – 792,637
Capital gain – – – – – – – – – – – 25,362
Sales commission – – – 7,887 – – – – – 6,441 – –
Fee commission / bank charges 2 17 1,029 370 64 733 – 36 1,969 299 76 413
Other income** – – 4,036 3,443 – 706 – – 3,709 1,939 – 180
Mark-up expense on deposits – 2,457 3,184 1,204 512 381,989 – 1,259 10,569 1,332 553 369,984
Directors’ meeting fee – 16,950 – – – – – 13,500 – – – –
Remuneration – 43,175 – – 359,911 – – 58,137 – – 343,659 –
Other charges*** – – 31,082 – – 103,364 – – 11,368 – – 93,898
Rent expense**** – – 11,193 – – – – – 8,893 – – –
Charge / (reversal) in respect of staff
retirement benefit funds – – – – – 212,116 – – – – – 185,416

Shares held by the holding company, outstanding at the end of year are included in note 19 to these unconsolidated financial
statements.

* Associated companies are on the basis of common directorship.

**Other income includes rental income from two offices located at Pakistan Stock Exchange (Islamabad) building rented out to
Associated Company (Ibrahim Fibers Limited ) at market value and with prior permission of State Bank of Pakistan.

*** Other charges with Associated Companies include donation to National Management Foundation amounting to Rs. 30 million
and with Other related parties include payments to NIFT amounting to Rs. 99.48 Million.

**** Rent sharing expense of ABL Branch with associated company (Ibrahim Fibers Limited ) was carried out on terms other
than that of arm’s length with prior permission of State Bank of Pakistan.

- During the year ended December 31, 2017; Movable assets were disposed of for Rs.166,000 to the key management
personnel of the Bank. The assets were fully depreciated.
 Allied Bank Limited 163

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

40 CAPITAL ASSESSMENT AND ADEQUACY

40.1 Capital Adequacy

40.1.1 Objectives of Managing Capital

Capital Management aims to ensure that there is sufficient capital to meet the capital requirements of the Bank as determined by
the underlying business strategy and the minimum requirements of the SBP. The Capital Management process is governed by
the Bank’s Asset & Liability Committee (ALCO), Risk Management Committee (RMC) and Management Committee (MANCO).
Further, capital adequacy and management is overseen by the Board’s Risk Management Committee (BRMC) and Strategic
Planning and Monitoring Committee (SPMC).

Bank’s capital management seeks:

-   to comply with the capital requirements set by the regulators and comparable to the peers;

-   to actively manage the supply of capital costs and increase capital velocity;

-   to increase strategic and tactical flexibility in the deployment of capital to allow for the timely reallocation of capital;

-   to improve the liquidity of the Bank’s assets to allow for an optimal deployment of the Bank’s resources;

-   to protect the Bank against unexpected events and maintain strong ratings;

-   to safeguard the Bank’s ability to continue as a going concern so that it can continue to provide adequate return to
shareholders;

-    availability of adequate capital (including the quantum) at a reasonable cost so as to enable the Bank to expand; and

-    to achieve low overall cost of capital with appropriate mix of capital elements.

Bank through Internal Capital Adequacy Assessment Process (ICAAP) and Advance Stress Testing assesses overall capital
adequacy on a periodic basis in relation to Bank’s risk profile. Utilizing sensitivity and stress analysis techniques, bank assesses
adequacy of Bank’s total capital against adverse shocks with respect to credit risk, market risk, operational risk, concentration
risk, interest rate risk, liquidity risk, country risk, reputational risk and strategic risk. Further, Bank formulates its strategy, including
need assessment for raising additional capital for maintaining adequate capital under stressed conditions.

40.1.2 Externally Imposed Capital Requirements

In order to strengthen the solvency of Banks / Development Financial Institutions (DFI), SBP through its BSD Circular No. 07 of
2009 dated April 15, 2009 has asked the Banks to raise their minimum paid up capital to Rs. 10 billion free of losses.

SBP through its BPRD Circular # 6 of 2013 dated August 15, 2013 has asked banks to maintain the minimum Capital Adequacy
Ratio (CAR) of 11.275% on standalone as well as on consolidated basis till December 31, 2017. Subsequently, a phase in
arrangement has been put in place whereby the banks are required to maintain the following ratios on an ongoing basis:

Year end as of December, 31

2015 2016 2017 2018 2019

Common Equity Tier-1 - CET1 6.00% 6.00% 6.00% 6.00% 6.00%

Additional Tier-1 1.50% 1.50% 1.50% 1.50% 1.50%
Tier 1 7.50% 7.50% 7.50% 7.50% 7.50%
Total Capital 10.00% 10.00% 10.00% 10.00% 10.00%
*Capital Conservation Buffer - CCB 0.25% 0.65% 1.275% 1.90% 2.50%
Total Capital plus CCB 10.25% 10.65% 11.275% 11.90% 12.50%

* Consisting of CET1 only.

The paid up capital and CAR of the Bank stands at Rs. 11.451 billion and 22.39% respectively as at December 31, 2017.

The Bank has complied with all externally imposed capital requirements as at year end.
164 Annual Report 2017

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

40.1.3 Scope of Applications

The Basel Framework is applicable to the Bank both at the consolidated level (comprising of wholly owned subsidiary - ABL
Asset Management Company Limited) and also on a stand alone basis.

40.1.4 Capital Structure - Basel III transition

State Bank of Pakistan vide BPRD circular # 6 dated August 15, 2013 revised and updated Basel II Framework in accordance
with Basel III capital reforms and clarifications to further strengthen capital related rules. These instructions form part of transitional
arrangement leading to full implementation of Basel III in 2019.

Bank’s regulatory capital is analyzed into two tiers:

Tier 1 capital, which includes fully issued, subscribed and paid up capital, balance in share premium account, reserve for bonus
issue, general reserves as per the financial statements and net un-appropriated profits, etc. after regulatory deductions.

Tier 2 capital, which includes general provisions for loan losses (up to a maximum of 1.25 % of risk weighted assets), reserves
on the revaluation of fixed assets and equity investments (up to a maximum of 45% of the balance in the related revaluation
reserves) and subordinated debt (up to a maximum of 50% of Tier 1 capital). Bank has also implemented transitional standards
of Basel III up to the extent of 80% as at December 31, 2017 as per road map laid down by SBP through BPRD Circular #6
dated August 15, 2013.

The required capital is achieved by the Bank through:

(a)    enhancement in the risk profile of asset mix at the existing volume level;

(b)   ensuring better recovery management; and

(c)    maintain acceptable profit margins.

40.1.5 Leverage Ratio

The leverage ratio of the Bank as on December 31, 2017 is 4.68% (2016: 5.13%). The ratio has been computed as prescribed
by State Bank of Pakistan through Instructions for Basel III Implementation in Pakistan.

As on December 31, 2017; Total Tier 1 capital of the Bank amounts to Rs. 71,682,627 thousands (2016: Rs. 67,785,376
thousands) whereas the total exposure measure amounts to Rs. 1,532,543,176 thousands (2016: Rs. 1,321,677,834
thousands).

Shift in leverage ratio is mainly due to increase in assets as of December 31, 2017.
 Allied Bank Limited 165

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

Detail of the Bank’s eligible capital is as follows:

December 31, December 31,
2017 2016
Rupees in ‘000

40.2 CAPITAL ADEQUACY RETURN AS OF DECEMBER 31, 2017

Common Equity Tier 1 capital (CET1): Instruments and reserves

Fully Paid-up Capital/ Capital deposited with SBP 11,450,739 11,450,739
Balance in Share Premium Account – –
Reserve for issue of Bonus Shares – –
General/ Statutory Reserves 17,749,162 16,475,798
Gain/(Losses) on derivatives held as Cash Flow Hedge – –
Unappropriated/unremitted profits/ (losses) 49,212,447 46,490,244
Minority Interests arising from CET1 capital instruments issued to third
party by consolidated bank subsidiaries (amount allowed in CET1
capital of the consolidation group) – –
CET 1 before Regulatory Adjustments 78,412,348 74,416,781
Common Equity Tier 1 capital: Regulatory adjustments
Total regulatory adjustments applied to CET1 (Note 40.2.1) (6,729,721) (6,631,405)
Common Equity Tier 1 a 71,682,627 67,785,376
Additional Tier 1 (AT 1) Capital
Qualifying Additional Tier-1 instruments plus any related share premium
of which: Classified as equity – –
of which: Classified as liabilities – –
Additional Tier-1 capital instruments issued by consolidated subsidiaries
and held by third parties (amount allowed in group AT 1) of which:
instrument issued by subsidiaries subject to phase out – –
AT1 before regulatory adjustments – –
Total regulatory adjustment applied to AT1 capital (Note 40.2.2) – –
Additional Tier 1 capital after regulatory adjustments – –
Additional Tier 1 capital recognized for capital adequacy b – –
Tier 1 Capital (CET1 + admissible AT1) (c=a+b) 71,682,627 67,785,376
Tier 2 Capital
Qualifying Tier 2 capital instruments under Basel III
Capital instruments subject to phase out arrangement from
tier 2 (Pre-Basel III instruments) – –

Tier 2 capital instruments issued to third party by consolidated
subsidiaries (amount allowed in group tier 2) of which:
instruments issued by subsidiaries subject to phase out – –
General Provisions or general reserves for loan losses-up to maximum
of 1.25% of Credit Risk Weighted Assets 11,701 63,309
Revaluation Reserves 23,582,703 19,411,299
of which: Revaluation reserves on Property 14,243,627 5,329,586
of which: Unrealized Gains/losses on AFS 9,339,076 14,081,713
Foreign Exchange Translation Reserves 230,954 57,687
Undisclosed/Other Reserves (if any) – –
T2 before regulatory adjustments 23,825,358 19,532,295
Total regulatory adjustment applied to T2 capital (Note 40.2.3) (594,970) (1,008,517)
Tier 2 capital (T2) after regulatory adjustments 23,230,388 18,523,778
Tier 2 capital recognized for capital adequacy 23,230,388 18,523,778
Portion of Additional Tier 1 capital recognized in Tier 2 capital – –
Total Tier 2 capital admissible for capital adequacy (d) 23,230,388 18,523,778
TOTAL CAPITAL (T1 + admissible T2) (e=c+d) 94,913,015 86,309,154
Total Risk Weighted Assets (f) 423,992,718 414,229,849
Capital Ratios and buffers (in percentage of risk weighted assets)
CET1 to total RWA (a/f) 16.91% 16.36%
Tier-1 capital to total RWA (c/f) 16.91% 16.36%
Total capital to RWA (e/f) 22.39% 20.84%
166 Annual Report 2017

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

December 31, December 31,

2017 2016
Rupees in ‘000

Bank specific buffer requirement (minimum CET1 requirement plus

capital conservation buffer plus any other buffer requirement) 7.28% 6.65%
of which: capital conservation buffer requirement 1.275% 0.65%
of which: countercyclical buffer requirement – –
of which: D-SIB or G-SIB buffer requirement – –
CET1 available to meet buffers (as a percentage of risk weighted assets) 9.63% 9.71%

National minimum capital requirements prescribed by SBP
CET1 minimum ratio 6.00% 6.00%
Tier 1 minimum ratio 7.50% 7.50%
Total capital Minimum Ratio (Inclusive of 1.275% CCB for 2017) 11.275% 10.65%

December 31, 2017 December 31, 2016
Amounts subject Amounts subject
Regulatory Adjustments and Additional Information Amount to pre-basel III Amount to pre-basel III
treatment treatment
Rupees in ‘000

40.2.1 Common Equity Tier 1 capital: Regulatory adjustments

1 Goodwill (net of related deferred tax liability) – – – –
2 All other intangibles (net of any associated deferred tax liability) (1,451,469) – (1,348,895) –
3 Shortfall in provisions against classified assets (886,726) – (936,149) –
4 Deferred tax assets that rely on future profitability excluding those
arising from temporary differences (net of related tax liability) – – – –
5 Defined-benefit pension fund net assets (2,953,626) (738,406) (2,768,836) (1,845,891)
6 Reciprocal cross holdings in CET1 capital instruments of banking,
financial and insurance entities (960,911) – (694,412) –
7 Cash flow hedge reserve – – – –
8 Investment in own shares/ CET1 instruments – – – –
9 Securitization gain on sale – – – –
10 Capital shortfall of regulated subsidiaries – – – –
11 Deficit on account of revaluation from bank’s holdings of fixed assets/ AFS – – – –
12 Investments in the capital instruments of banking, financial and
insurance entities that are outside the scope of regulatory
consolidation, where the bank does not own more than 10%
of the issued share capital (amount above 10% threshold) (426,989) (106,747) (783,113) (522,075)
13 Significant investments in the common stocks of banking,
financial and insurance entities that are outside the scope of
regulatory consolidation (amount above 10% threshold) – – – –
14 Deferred Tax Assets arising from temporary differences
(amount above 10% threshold, net of related tax liability) – – – –
15 Amount exceeding 15% threshold – – – –
16 of which: significant investments in the common stocks of financial entities – – – –
17 of which: deferred tax assets arising from temporary differences – – – –
18 National specific regulatory adjustments applied to CET1 capital – – – –
19 Investments in TFCs of other banks exceeding the prescribed limit – – – –
20 Any other deduction specified by SBP (mention details) – – – –
21 Adjustment to CET1 due to insufficient AT1 and Tier 2 to cover deductions (50,000) – (100,000) -
22 Total regulatory adjustments applied to CET1 (sum of 1 to 21) (6,729,721) – (6,631,405) -

40.2.2 Additional Tier-1 & Tier-1 Capital: regulatory adjustments
23 Investment in mutual funds exceeding the prescribed limit
[SBP specific adjustment] – – – –
24 Investment in own AT1 capital instruments – – – –
25 Reciprocal cross holdings in Additional Tier 1 capital instruments of
banking, financial and insurance entities – – – –
 Allied Bank Limited 167

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

December 31, 2017 December 31, 2016

Amounts subject Amounts subject
Regulatory Adjustments and Additional Information Amount to pre-basel III Amount to pre-basel III
treatment treatment
Rupees in ‘000

26 Investments in the capital instruments of

banking, financial and insurance entities that are outside the scope of
regulatory consolidation, where the bank does not own more than 10%
of the issued share capital (amount above 10% threshold) – – – –
27 Significant investments in the capital instruments of
banking, financial and insurance entities that are outside
the scope of regulatory consolidation – – – –
28 Portion of deduction applied 50:50 to Tier-1 and Tier-2 capital based on
pre-Basel III treatment which, during transitional period, remain subject
to deduction from additional tier-1 capital (50,000) – (100,000) –
29 Adjustments to Additional Tier 1 due to insufficient Tier 2 to cover deductions – – – –
30 Total regulatory adjustment applied to AT1 capital (sum of 23 to 29) (50,000) – (100,000) –

40.2.3 Tier 2 Capital: regulatory adjustments

31 Portion of deduction applied 50:50 to Tier-1 and Tier-2 capital based on
pre-Basel III treatment which, during transitional period, remain
subject to deduction from tier-2 capital (50,000) – (100,000) –
32 Reciprocal cross holdings in Tier 2 instruments of banking, financial
and insurance entities – – – –
33 Investment in own Tier 2 capital instrument – – – –
34 Investments in the capital instruments of banking, financial and insurance
entities that are outside the scope of regulatory consolidation, where
the bank does not own more than 10% of the issued share
capital (amount above 10% threshold) (544,970) (136,243) (908,517) (605,678)
35 Significant investments in the capital instruments issued by banking,
financial and insurance entities that are outside the scope
of regulatory consolidation – – – –
36 Total regulatory adjustment applied to T2 capital (sum of 31 to 35) (594,970) – (1,008,517) –

Note December 31, December 31,

2017 2016
Rupees in ‘000

40.2.4 Additional Information

Risk Weighted Assets subject to pre-Basel III treatment
37 Risk weighted assets in respect of deduction items (which during
the transitional period will be risk weighted subject to Pre-Basel III Treatment) 40.5 309,897,584 290,905,734
(i) of which: deferred tax assets
(ii) of which: Defined-benefit pension fund net assets 738,406 1,845,891
(iii) of which: Recognized portion of investment in capital of banking,
financial and insurance entities where holding is less than 10%
of the issued common share capital of the entity – –
(iv) of which: Recognized portion of investment in capital of banking,
financial and insurance entities where holding is more than 10%
of the issued common share capital of the entity – –
Amounts below the thresholds for deduction (before risk weighting) – –
38 Non-significant investments in the capital of other financial entities 8,353,070 9,501,642
39 Significant investments in the common stock of financial entities 1,575,653 1,575,653
40 Deferred tax assets arising from temporary differences (net of related tax liability) – –
Applicable caps on the inclusion of provisions in Tier 2
41 Provisions eligible for inclusion in Tier 2 in respect of exposures subject
to standardized approach (prior to application of cap) 11,701 63,309
42 Cap on inclusion of provisions in Tier 2 under standardized approach – –
43 Provisions eligible for inclusion in Tier 2 in respect of exposures subject
to internal ratings-based approach (prior to application of cap) – –
44 Cap for inclusion of provisions in Tier 2 under internal ratings-based approach – –
168 Annual Report 2017

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

Balance sheet as in Under regulatory

published financial scope of Reference
statements consolidation
December 31, 2017
Rupees in ‘000
40.3 Capital Structure Reconciliation
40.3.1 Step 1
Assets
Cash and balances with treasury banks 85,367,382 85,367,382
Balances with other banks 648,765 648,765
Lendings to financial institutions 8,694,399 8,694,399
Investments 698,082,066 698,082,066
Advances 372,037,714 372,037,714
Operating fixed assets 48,327,029 48,327,029
Deferred tax assets – –
Other assets 32,554,758 32,554,758
Total assets 1,245,712,113 1,245,712,113

Liabilities & Equity
Bills payable 7,835,467 7,835,467
Borrowings 223,556,383 223,556,383
Deposits and other accounts 883,740,709 883,740,709
Sub-ordinated loans – –
Liabilities against assets subject to finance lease – –
Deferred tax liabilities 6,941,804 6,941,804
Other liabilities 16,921,397 16,921,397
Total liabilities 1,138,995,760 1,138,995,760

Share capital/ Head office capital account 11,450,739 11,450,739
Reserves 17,980,116 17,980,116
Unappropriated/ Unremitted profit/ (losses) 49,212,447 49,212,447
Minority Interest – –
Surplus on revaluation of assets 28,073,051 28,073,051
Total Equity 106,716,353 106,716,353
Total liabilities & equity 1,245,712,113 1,245,712,113

40.3.2 Step 2
Assets
Cash and balances with treasury banks 85,367,382 85,367,382
Balanced with other banks 648,765 648,765
Lending to financial institutions 8,694,399 8,694,399
Investments 698,082,066 698,082,066
of which: Non-significant capital investments in capital of other
financial institutions exceeding 10% threshold – 971,959 a
of which: significant capital investments in financial sector
entities exceeding regulatory threshold – – b
of which: Mutual Funds exceeding regulatory threshold – – c
of which :Reciprocal cross holdings in CET1 – 960,911 d
of which :Reciprocal cross holdings in Tier2 – – e
of which: others (mention details) – – f
Advances 372,037,714 372,037,714
shortfall in provisions / excess of total EL amount over
eligible provisions under IRB” – 886,726 g
general provisions reflected in Tier 2 capital – 11,701 h
Fixed Assets 48,327,029 48,327,029
of which: Intangibles – 1,459,094 i
Deferred Tax Assets – –
of which: DTAs excluding those arising from temporary differences – – j
of which: DTAs arising from temporary differences exceeding
regulatory threshold – – k
Other assets 32,554,758 32,554,758
of which: Goodwill – – l
of which: Defined-benefit pension fund net assets – 3,692,032 m
Total assets 1,245,712,113 1,245,712,113
 Allied Bank Limited 169

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

Balance sheet as in Under regulatory

published financial scope of Reference
statements consolidation
December 31, 2017
Rupees in ‘000

Liabilities & Equity

Bills payable 7,835,467 7,835,467
Borrowings 223,556,383 223,556,383
Deposits and other accounts 883,740,709 883,740,709
Sub-ordinated loans – –
of which: eligible for inclusion in AT1 – – n
of which: eligible for inclusion in Tier 2 – – o
Liabilities against assets subject to finance lease – –
Deferred tax liabilities 6,941,804 6,941,804
of which: DTLs related to goodwill – – p
of which: DTLs related to intangible assets – 7,625 q
of which: DTLs related to defined pension fund net assets – – r
of which: other deferred tax liabilities – – s
Other liabilities 16,921,397 16,921,397
Total liabilities 1,138,995,760 1,138,995,760

Share capital 11,450,739 11,450,739

of which: amount eligible for CET1 – 11,450,739 t
of which: amount eligible for AT1 – – u
Reserves 17,980,116 17,980,116
of which: portion eligible for inclusion in CET1:Share Premium – – v
of which: portion eligible for inclusion in CET1 General/ Statutory Reserve – 17,749,162 w
of which: portion eligible for inclusion in Tier 2 – 230,954 x
Unappropriated profit / (losses) 49,212,447 49,212,447 y
Minority Interest – –
of which: portion eligible for inclusion in CET1 – – z
of which: portion eligible for inclusion in AT1 – – aa
of which: portion eligible for inclusion in Tier 2 – – ab
Surplus on revaluation of assets 28,073,051 28,073,051
of which: Revaluation reserves on Property – 14,243,627 ac
of which: Unrealized Gains / Losses on AFS – 9,339,076
In case of Deficit on revaluation (deduction from CET1) – – ad
Total liabilities & Equity 106,716,353 106,716,353

Component of Source
regulatory capital reference number
reported by bank from step 2
Rupees in ‘000
40.3.3 Step 3
Common Equity Tier 1 capital (CET1): Instruments and reserves
1 Fully Paid-up Capital / Capital deposited with SBP 11,450,739 (t)
2 Balance in Share Premium Account – (v)
3 Reserve for issue of Bonus Shares –
4 General / Statutory Reserves 17,749,162 (w)
5 Gain / (losses) on derivatives held as Cash Flow Hedge –
6 Unappropriated / unremitted profits/(losses) 49,212,447 (y)
7 Minority Interests arising from CET1 capital instruments issued to third party
by consolidated bank subsidiaries (amount allowed in CET1 capital
of the consolidation group) – (z)
8 CET 1 before Regulatory Adjustments
78,412,348
Common Equity Tier 1 capital: Regulatory adjustments
170 Annual Report 2017

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

Component of Source
regulatory capital reference number
reported by bank from step 2
Rupees in ‘000

9 Goodwill (net of related deferred tax liability) – (l) - (p)

10 All other intangibles (net of any associated deferred tax liability) 1,451,469 (i) - (q)
11 Shortfall of provisions against classified assets 886,726 (g)
12 Deferred tax assets that rely on future profitability excluding those arising from
temporary differences (net of related tax liability) – {(j) - (s} * x%
13 Defined-benefit pension fund net assets 2,953,626 {(m) - (r)} * x%
14 Reciprocal cross holdings in CET1 capital instruments 960,911 (d)
15 Cash flow hedge reserve –
16 Investment in own shares/ CET1 instruments –
17 Securitization gain on sale –
18 Capital shortfall of regulated subsidiaries –
19 Deficit on account of revaluation from bank’s holdings of property/ AFS – (ad)
20 Investments in the capital instruments of banking, financial and insurance
entities that are outside the scope of regulatory consolidation, where
the bank does not own more than 10% of the issued share capital
(amount above 10% threshold) 426,989 (a) - (ae) - (ah)
21 Significant investments in the capital instruments issued by banking,
financial and insurance entities that are outside the scope of
regulatory consolidation (amount above 10% threshold) – (b) - (af) - (ai)
22 Deferred Tax Assets arising from temporary differences (amount above 10%
threshold, net of related tax liability) – (k)
23 Amount exceeding 15% threshold –
24 of which: significant investments in the common stocks of financial entities –
25 of which: deferred tax assets arising from temporary differences –
26 National specific regulatory adjustments applied to CET1 capital –
27 Investment in TFCs of other banks exceeding the prescribed limit –
28 Any other deduction specified by SBP (mention details) –
29 Regulatory adjustment applied to CET1 due to insufficient
AT1 and Tier 2 to cover deductions 50,000
30 Total regulatory adjustments applied to CET1 (sum of 9 to 25) 6,729,721
71,682,627
Common Equity Tier 1

Additional Tier 1 (AT 1) Capital

31 Qualifying Additional Tier-1 instruments plus any related share premium –
32 of which: Classified as equity – (u)
33 of which: Classified as liabilities – (n)
34 Additional Tier-1 capital instruments issued by consolidated subsidiaries and
held by third parties (amount allowed in group AT 1) – (x)
35 of which: instrument issued by subsidiaries subject to phase out –
36 AT1 before regulatory adjustments
–
Additional Tier 1 Capital: regulatory adjustments –
37 Investment in mutual funds exceeding the prescribed limit (SBP specific adjustment) –
38 Investment in own AT1 capital instruments –
39 Reciprocal cross holdings in Additional Tier 1 capital instruments –
40 Investments in the capital instruments of banking, financial and insurance
entities that are outside the scope of regulatory consolidation, where
the bank does not own more than 10% of the issued share capital
(amount above 10% threshold) – (ae)
41 Significant investments in the capital instruments issued by banking,
financial and insurance entities that are outside the scope of regulatory consolidation – (af)
42 Portion of deduction applied 50:50 to core capital and supplementary capital
based on pre-Basel III treatment which, during transitional period, remain
subject to deduction from Tier-1 capital –
 Allied Bank Limited 171

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

Component of Source
regulatory capital reference number
reported by bank from step 2
Rupees in ‘000

43 Regulatory adjustments applied to Additional Tier 1 due to

insufficient Tier 2 to cover deductions –
44 Total of Regulatory Adjustment applied to AT1 capital –
45 Additional Tier 1 capital –
46 Additional Tier 1 capital recognized for capital adequacy –

Tier 1 Capital (CET1 + admissible AT1)
71,682,627

Tier 2 Capital

47 Qualifying Tier 2 capital instruments under Basel III –

48 Capital instruments subject to phase out arrangement from
tier 2 (Pre-Basel III instruments) – (o)
49 Tier 2 capital instruments issued to third party by consolidated
subsidiaries (amount allowed in group tier 2) – (ab)
50 of which: instruments issued by subsidiaries subject to phase out –
51 General Provisions or general reserves for loan losses-up to maximum
of 1.25% of Credit Risk Weighted Assets 11,701 (h)
52 Revaluation Reserves eligible for Tier 2
53 of which: portion pertaining to Property 14,243,627 portion of (ac)
54 of which: portion pertaining to AFS securities 9,339,076
55 Foreign Exchange Translation Reserves 230,954 (x)
56 Undisclosed / Other Reserves (if any) –
57 T2 before regulatory adjustments 23,825,358
Tier 2 Capital: regulatory adjustments
58 Portion of deduction applied 50:50 to core capital and supplementary
capital based on pre-Basel III treatment which, during transitional
period, remain subject to deduction from tier-2 capital 50,000
59 Reciprocal cross holdings in Tier 2 instruments – (e)
60 Investment in own Tier 2 capital instrument –
61 Investments in the capital instruments of banking, financial and
insurance entities that are outside the scope of regulatory
consolidation, where the bank does not own more than 10%
of the issued share capital (amount above 10% threshold) 544,970 (ah)
62 Significant investments in the capital instruments issued by banking,
financial and insurance entities that are outside the scope of
regulatory consolidation – (ai)
63 Amount of Regulatory Adjustment applied to T2 capital 594,970
64 Tier 2 capital (T2) 23,230,388
65 Tier 2 capital recognized for capital adequacy 23,230,388
66 Excess Additional Tier 1 capital recognized in Tier 2 capital –
67 Total Tier 2 capital admissible for capital adequacy 23,230,388
TOTAL CAPITAL (T1 + admissible T2) 94,913,015
 172

40.4 Main Features of Regulatory Capital Instruments

Sr. No. Main Features Common Shares
1 Issuer Allied Bank Limited
2 Unique identifier (eg PSX Symbol or Bloomberg identifier etc.) ABL
Annual Report 2017

3 Governing law(s) of the instrument Laws applicable in Pakistan

Regulatory treatment
4 Transitional Basel III rules Common Equity Tier 1
5 Post-transitional Basel III rules Common Equity Tier 1
6 Eligible at solo/ group/ group & solo Group and standalone
7 Instrument type Ordinary Shares
8 Amount recognized in regulatory capital (Currency in PKR thousands, as of reporting date) 11,450,739
9 Par value of instrument 10
10 Accounting classification Shareholders equity
11 Original date of issuance N/A
for the year ended December 31, 2017

12 Perpetual or dated Perpetual

13 Original maturity date N/A
14 Issuer call subject to prior supervisory approval No
15 Optional call date, contingent call dates and redemption amount N/A
16 Subsequent call dates, if applicable N/A
Coupons / dividends
17 Fixed or floating dividend/ coupon N/A
18 Coupon rate and any related index/ benchmark N/A
19 Existence of a dividend stopper N/A
20 Fully discretionary, partially discretionary or mandatory Fully discretionary
21 Existence of step up or other incentive to redeem No
Notes to the Unconsolidated Financial Statements

22 Noncumulative or cumulative Noncumulative

23 Convertible or non-convertible Non Convertible
24 If convertible, conversion trigger (s) N/A
25 If convertible, fully or partially N/A
26 If convertible, conversion rate N/A
27 If convertible, mandatory or optional conversion N/A
28 If convertible, specify instrument type convertible into N/A
29 If convertible, specify issuer of instrument it converts into N/A
30 Write-down feature N/A
31 If write-down, write-down trigger(s) N/A
32 If write-down, full or partial N/A
33 If write-down, permanent or temporary N/A
34 If temporary write-down, description of write-up mechanism N/A
35 Position in subordination hierarchy in liquidation (specify instrument type immediately senior to instrument) Rank inferior to all creditors including depositors.
36 Non-compliant transitioned features No
37 If yes, specify non-compliant features N/A

 Allied Bank Limited 173

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

40.5 Risk Weighted Exposures

The capital requirements for the Bank as per the major risk categories are indicated below:
Capital Requirements Risk Weighted Assets

December 31, December 31, December 31, December 31,

2017 2016 2017 2016
Rupees in ‘000

CREDIT RISK
On-Balance sheet
Portfolios subject to standardized approach (Simple)
Claims on other sovereigns and on Government of Pakistan or provincial
governments or SBP denominated in currencies other than PKR 2,413,170 1,394,047 21,402,839 13,089,649
Claims on Bank for International Settlements, International Monetary Fund,
European Central Bank, and European Community – – – –
Claims on Multilateral Development Banks – – – –
Claims on Public Sector Entities in Pakistan 447,347 775,219 3,967,597 7,279,047
Claims on Banks 768,523 682,757 6,816,165 6,410,863
Claims, denominated in foreign currency, on banks with original maturity
of 3 months or less 21,038 20,842 186,587 195,700
Claims on banks with original maturity of 3 months or less denominated
in PKR and funded in PKR 193,091 224,911 1,712,559 2,111,838
Claims on Corporates (excluding equity exposures) 16,348,644 14,589,448 144,999,059 136,990,123
Claims categorized as retail portfolio 1,243,911 971,387 11,032,471 9,121,009
Claims fully secured by residential property 299,487 270,475 2,656,201 2,539,676
Past Due loans: 54,431 85,671 482,757 804,423
Investments in premises, plant and equipment and all other fixed assets 5,284,360 3,344,987 46,867,935 31,408,326
All other assets 795,843 942,128 7,058,471 8,846,274
27,869,845 23,301,872 247,182,641 218,796,928
Off- Balance Sheet
Non Market related Exposures
Direct Credit Substitutes / Lending of securities or posting
of securities as collateral 2,105,645 2,981,216 18,675,343 27,992,640
Performance related contingencies 780,418 616,547 6,921,670 5,789,172
Trade Related contingencies/Other Commitments with original
maturity of one year or less 939,669 557,430 8,334,091 5,234,088
3,825,732 4,155,193 33,931,104 39,015,900
Market related Exposures 153,116 82,354 1,358,017 773,275

Equity Exposure Risk in the Banking Book
Unlisted equity investments (other than that deducted from
capital) held in banking book 390,482 347,650 3,463,253 3,264,319
Listed Equity investments and regulatory capital instruments issued
by other banks (other than those deducted from capital)
held in the banking book. 2,285,830 2,728,123 20,273,436 25,616,179
Significant investments and deferred tax assets above 15% threshold 415,950 366,268 3,689,133 3,439,133
3,092,262 3,442,041 27,425,822 32,319,631
Total Credit Risk (A) 34,940,955 30,981,460 309,897,584 290,905,734

MARKET RISK
Capital Requirement for portfolios subject to Standardized Approach
Interest rate risk 227,077 197,890 2,013,985 1,858,118
Equity position risk etc. 3,618,064 4,095,913 32,089,261 38,459,281
Foreign exchange risk 15,135 538,820 134,232 5,059,344
3,860,276 4,832,623 34,237,478 45,376,743
OPERATIONAL RISK
Capital Requirement for operational risks 9,003,951 8,301,395 79,857,656 77,947,372
Total Risk Weighted Assets 47,805,182 44,115,478 423,992,718 414,229,849
174 Annual Report 2017

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

December 31, 2017 December 31, 2016

Capital Adequacy Ratios Required Actual Required Actual

CET1 to total RWA 6.0% 16.91% 6.0% 16.36%

Tier-1 capital to total RWA 7.5% 16.91% 7.5% 16.36%
Total capital to total RWA (Inclusive of 1.275% CCB for 2017) 11.275% 22.39% 10.65% 20.84%

41. RISK MANAGEMENT

The Risk Management Framework (the Framework) provides principles for identifying, assessing, and monitoring risk within
the Bank. The Framework specifies the key elements of the risk management process in order to maximize opportunities, to
minimize adversity and to achieve improved outcomes and outputs based on informed decision making.

Categories of Risk

The Bank generates most of its revenue by accepting following types of risks:

Credit Risk This risk is defined as the possibility of loss due to unexpected default or a deterioration of credit worthiness of a
business partner.

Credit Risk includes Country Risk i.e., the risks that counterparty is unable to meet its foreign currency obligations as a result of
adverse economic conditions or actions taken by governments in the relevant country.

Market Risk The risk of loss generated by adverse changes in the price of financial assets or contracts currently held
by the Bank (this risk is also known as price risk).

Liquidity Risk The risk that the Bank is unable to meet its payment obligations when they fall due and to replace funds
when they are withdrawn; the consequences of which may be the failure to meet obligations to repay
depositors and fulfill commitments to lend.

Operational Risk Operational Risk is the risk of loss resulting from inadequate or failed internal processes, people, and
systems or from external events. The definition excludes reputational risk.

Reputational Risk The risk of failing to meet the standards of performance or behaviour required or expected by
stakeholders in commercial activities or the way in which business is conducted.

Strategic Risk Risk of an adverse impact on strategic goals. Strategic risk mainly arises from strategic decisions,
improper implementation of those decisions, or lack of responsiveness of Bank to industry, economic
or technological changes.

Risk Responsibilities

- The Board of Directors is accountable for overall supervision of the risk management process. This is discharged by
distributing responsibilities at Board level for their management and determining the manner in which risk authorities
are set. The Board is also responsible for approval of all risk policies and ensuring that these are properly implemented.
Further, the Board shall also seek appointment of senior management personnel capable of managing the risk activities
conducted by the Bank.

- The Board Risk Management Committee (BRMC) is responsible for ensuring that the overall risk strategy and appetite
of the Bank is appropriately defined in the Strategic Plan and recommend the same to the Board of Directors.

- The CEO and Group Chiefs are accountable for the management of risk collectively through their membership of Asset
& Liability Committee (ALCO) and Risk Management Committee (RMC). Independent supervision of risk management
activities is provided by the Audit Committee.

- The Risk Management Group is head by a Group Chief responsible to set-up and implement the Risk Framework of
the Bank.

 Allied Bank Limited 175

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

Risk Management Group Organization

Risk management functions have been segregated by business specialization, i.e., Credit Risk, Credit Administration, Technical
Appraisal, Information security and Enterprise Risk which interalia includes Risk Architecture, Operational Risk and Market &
Liquidity Risk. All these functions are operating in tandem to monitor the health of assets and liabilities.

41.1 Credit Risk

Credit risk, the potential default of one or more debtors, is a major source of risk for the Bank. The Bank is exposed to
credit risk through its lending and investment activities. The Bank’s credit risk function is divided into Corporate and Financial
Institutions Risk and Commercial, SME and Consumer Risk. The functions operate within an integrated framework of credit
policies, guidelines and processes. The credit risk management activities are governed by the Credit Policy of the Bank that
defines the respective roles and responsibilities, the credit risk management principles and the Bank’s credit risk strategy. The
policy is supported by a comprehensive Credit Procedures Manual.

The Bank manages three principal sources of credit risk:

i) Sovereign credit risk on its public sector advances

ii) Counterparty credit risk on its private sector advances
iii) Counterparty credit risk on interbank limits

Sovereign Credit Risk

When the Bank lends to public sector borrowers, it prefers obtaining a full sovereign guarantee or the equivalent from the
Government of Pakistan (GOP). However, certain public sector enterprises have a well defined cash flow stream and appropriate
business model, based on which the lending is secured through collaterals other than GOP guarantee.

Counterparty credit risk on its private sector advances

Each borrower’s credit worthiness is analyzed on the Credit Application Package that incorporates a formalized and structured
approach for credit analysis and directs the focus of evaluation towards a balanced assessment of credit risk with identification of
proper mitigates. These risks include Industry Risk, Business Risk, Financial Risk, Security Risk and Account Performance Risk.
Financial analysis is further strengthened through use of separate financial spread sheet templates that have been designed for
manufacturing / trading concerns, financial institutions and insurance companies.

Counter Party Credit Risk on Interbank Limits

In the normal course of its business, the Bank’s Treasury utilizes products such as Reverse REPO and call lending to meet the
needs of interbank borrowers and manage its exposure to fluctuations in market, interest and currency rates. Further, these
products are also used to temporarily invest Bank’s liquidity prior to disbursement. All of these financial instruments involve, to
varying degrees, the risk that the counterparty in the transaction may be unable to meet its obligation to the Bank.

Reflecting a preference for minimizing exposure to counterparty credit risk, the Bank maintains eligibility criteria that link the
exposure limits to counterparty credit ratings by external rating agencies. For example, the minimum rating for counterparties to
be eligible for a banking relationship with the Bank is A.

Country Risk

The Bank has in place a Country Risk Management Framework which has been approved by the Board. This framework
focuses on providing detailed roles and responsibilities with respect to country risk assessment as well as limit setting, exposure
management and reporting of cross border exposure undertaken by the Bank. The Bank utilizes S&P, Fitch and Moody’s country
ratings as well as other macroeconomic and external risk factors in assigning a country risk limit. The Financial Institutions
Division is responsible for monitoring of country exposure limits.

Credit Administration

Credit Administration is involved in minimizing losses that could arise due to security and documentation deficiencies. The Credit
Administration Function constantly monitors the security and documentation risks inherent in the existing credit portfolio through
four regional credit administration departments located all over the country.


176 Annual Report 2017

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

Risk Analytics

To ensure a prudent distribution of asset portfolio, the Bank manages its lending and investment activities within a framework of
Borrower, Group and Sector exposure limits and risk profile benchmarks.

Internal Risk Rating Models

The Bank has developed internal risk rating models to assign credit risk ratings to its Corporate, Financial Institutions, SME and
Consumer borrowers. These models are based on expert judgment, comprising of both quantitative and qualitative factors. The
rating models have been automated through the Bank’s Risk Assessment and Management System (RAMS), and are given
due weightage while extending credit to these asset classes. The Bank has also implemented a Facility Risk Rating Model to
complement the Obligor Risk Rating Models.

Stress Testing

The Bank conducts stress testing of its existing advances portfolio. On a quarterly basis, an extensive stress testing activity
is conducted by giving shocks to all assets of the Bank in line with SBP requirements and assessing its resulting affect on
capital adequacy. The major shock being applied relate to the deterioration in internal ratings of the obligors, adverse shift of
regular borrowers to non-performing status, default by large borrowers or group of borrowers and their resultant impact on the
provisioning requirements and capital adequacy.

Automated System

In order to ensure that monitoring of the regular lending portfolio focuses on problem recognition, an automated system in the
form of a ‘Watch-List’ category has been instituted to cover the gap between Regular and Substandard categories. Identification
of an account on the said ‘Watch-List’ triggers the lending branch to carry out an assessment of the borrower’s ability to rectify
the identified problem / weakness within a reasonable time-frame, consider tighter structuring of facilities, confirm that there are
no critical deficiencies in the existing security position and, if possible, arrange for strengthening of the same through obtaining
additional collateral. It should however, be noted that the ‘Watch-List’ category of accounts is part of the Bank’s Regular portfolio
and does not require any provisioning.

In some cases, an account may even be downgraded directly from a Regular to Sub-Standard or worse on subjective basis
based on the severity of the trigger involved. The Bank has also implemented an Early Warning Alert engine that relays email
alerts to users based on breach of defined triggers.

Management of Non Performing Loans

The Bank has a Special Asset Management Group (SAMG), which is responsible for management of non performing loans.
SAMG undertakes restructuring / rescheduling of problem loans, as well as litigation both civil and criminal for collection of
debt.

For the non-performing loan portfolio, the Bank makes a specific provision based on an assessment of the credit impairment of
each loan. At the end of 2017, the coverage ratio was 92.59% of the non-performing loan portfolio.

The accounting policies and methods used to determine specific and general provision are given in the Note 5 and 10 to these
financial statements. The movement in specific and general provision held is given in Note 10.4 to these financial statements.

Portfolio Diversification

Efficient diversification has been a key consideration for maintaining healthy advances portfolio. The diversification takes into
account the volatility of various sectors by placing concentration limits on lending to these sectors thereby ensuring a diversified
advances portfolio. Composition of the Bank’s advances portfolio is significantly diversified. Power, Gas, Petroleum, Chemical,
Commodity, Textiles and Financial Sector are major contributors to the advances portfolio. These sectors are considered to be
the biggest contributors towards country’s GDP as well.



 Allied Bank Limited 177

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

December 31, 2017

Advances (Gross) Deposits Contingencies and

Commitments

Rupees Percent Rupees Percent Rupees Percent

in ‘000 in ‘000 in ‘000

41.1.1 Segmental Information

41.1.1.1 Segments by class of business

Agriculture, Forestry and Hunting 61,558,861 15.84% 48,763,264 5.52% 1,367,900 0.57%
Basic metals (iron, steel) 2,705,732 0.70% 406,894 0.05% 3,449,034 1.44%
Cement/clay & ceramics 14,416,693 3.71% 1,131,525 0.13% 6,227,925 2.60%
Chemical & pharmaceutical 20,702,251 5.33% 7,627,740 0.86% 3,629,067 1.51%
Construction 8,108,971 2.09% 26,705,938 3.02% 4,394,720 1.83%
Education 115,335 0.03% 20,966,870 2.37% 55,461 0.02%
Financial 20,487,988 5.27% 53,542,976 6.06% 143,541,269 59.84%
Fishing – 0.00% 9,564 0.00% – 0.00%
Footwear & leather garments 1,148,700 0.30% 584,437 0.07% 510,891 0.21%
Furniture & sports goods 1,275,838 0.33% 351,981 0.04% 5,577 0.00%
Grains, food and beverages 11,719,839 3.01% 5,107,635 0.58% 39,448 0.02%
Health & social welfare 55,713 0.01% 6,494,928 0.73% 50,463 0.02%
Hotel, restaurant & clubs 1,400,000 0.36% 1,066,729 0.12% 960 0.00%
Individuals 9,916,565 2.55% 356,719,817 40.36% 5,463,051 2.28%
Machinery & equipment 1,864,567 0.48% 1,465,090 0.17% 1,922,789 0.80%
Manufacture of transport equipment 389,289 0.10% 1,020,939 0.12% 99,084 0.04%
Paper & paper boards 6,218,078 1.60% 878,861 0.10% 1,969,615 0.82%
Petroleum products 10,515,762 2.71% 38,479,576 4.35% 8,824,756 3.68%
Power, gas, water & sanitary 122,133,670 31.42% 35,955,932 4.07% 8,486,247 3.54%
Printing, publishing & allied 114,390 0.03% 607,593 0.07% 110,197 0.05%
Real estate, renting, and business activities 4,790,686 1.23% 41,784,299 4.73% – 0.00%
Rubber & plastic 778,824 0.20% 175,402 0.02% 41,385 0.02%
Sugar 6,034,307 1.55% 847,610 0.10% 19,600 0.01%
Textile - Manufacture of madeup & ready
made garments 21,251,761 5.47% 1,335,119 0.15% 573,861 0.24%
Textile - Finishing 14,557,321 3.74% 414,955 0.05% 5,434,753 2.27%
Textile - Spinning 13,299,514 3.42% 385,411 0.04% 118,344 0.05%
Textile - Weaving 1,731,836 0.45% 101,972 0.01% 211,476 0.09%
Transport, storage & communication 14,112,816 3.63% 6,536,849 0.74% 6,829,587 2.85%
Wholesale & retail trade 8,579,749 2.21% 26,068,685 2.95% 70,277 0.03%
Others 8,766,595 2.26% 198,202,118 22.43% 36,410,988 15.18%
388,751,651 100.00% 883,740,709 100.00% 239,858,725 100.00%

December 31, 2017

Advances (Gross) Deposits Contingencies and

Commitments

Rupees Percent Rupees Percent Rupees Percent

in ‘000 in ‘000 in ‘000

41.1.1.2 Segments by sector

Public / Government 149,693,772 38.51% 213,549,024 24.16% 26,886,670 11.21%
Private 239,057,879 61.49% 670,191,685 75.84% 212,972,055 88.79%
388,751,651 100.00% 883,740,709 100.00% 239,858,725 100.00%
178 Annual Report 2017

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

December 31, 2017 December 31, 2016

Classified Specific Classified Specific

Advances Provisions Advances Provisions
Held Held

Rupees in ‘000

41.1.1.3 Details of non-performing advances and specific provisions by class of business segment

Agriculture, Forestry and Hunting 547,602 494,710 565,045 461,329

Basic metals (iron, steel) 229,849 229,849 276,595 263,962
Cement / clay & ceramics 75,089 75,089 75,089 75,089
Chemical & pharmaceutical 714,158 714,158 742,476 741,228
Construction 148,384 147,259 199,756 199,756
Education 123 123 184 184
Financial 72,454 72,454 72,454 72,454
Footwear & leather garments 75,014 74,419 125,404 125,404
Furniture & sports goods 266,103 266,103 230,858 230,711
Grains, food & beverages 1,766,277 1,760,202 2,082,302 1,916,022
Health & social welfare 5,984 5,984 13,857 13,857
Hotel, restaurant & clubs 7,664 7,664 7,664 7,664
Individuals 449,729 448,329 452,019 446,503
Machinery & equipment 1,206,611 1,206,611 1,233,588 1,233,588
Manufacture of transport equipment 211,014 211,014 227,009 227,009
Paper & paper boards 210,574 210,574 213,624 213,624
Petroleum products 1,201,469 309,149 1,904,067 967,918
Power, gas, water & sanitary 637,015 637,015 637,015 637,015
Printing, publishing & allied 10,838 10,838 11,558 11,558
Real estate, renting, and business activities – – 12,595 12,595
Rubber & plastic 235,068 235,068 333,813 278,477
Sugar 51,216 51,216 250,716 250,716
Textile -Manufacture of made up & ready made garments 2,966,776 2,966,776 3,103,092 3,099,772
Textile - Finishing 2,889,512 2,869,986 3,025,954 2,997,506
Textile - Spinning 1,352,423 1,343,415 1,383,501 1,374,354
Textile - Weaving 60,493 49,563 45,385 45,385
Transport, storage & communication 468,945 140,024 484,439 149,673
Wholesale & retail trade 1,096,493 1,071,495 1,267,062 1,257,189
Others 1,094,872 1,093,149 1,454,488 1,410,021
18,051,749 16,702,236 20,431,609 18,720,563

December 31, 2017 December 31, 2016

Classified Specific Classified Specific

Advances Provisions Advances Provisions
Held Held

Rupees in ‘000

41.1.1.4 Details of non-performing advances and specific provisions by sector

Public/ Government 135,180 135,180 136,180 136,180

Private 17,916,569 16,567,056 20,295,429 18,584,383
18,051,749 16,702,236 20,431,609 18,720,563
 Allied Bank Limited 179

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

December 31, 2017

Profit Total Net Contingencies

before assets assets and
taxation employed employed Commitments

Rupees in ‘000

43.1.1.5 Geographical Segment Analysis

Pakistan operations 19,970,350 1,222,791,490 102,259,363 239,472,586

Middle East 625,772 18,352,995 2,195,867 386,139
Karachi Export Processing Zone 282,573 4,567,628 2,261,123 –
908,345 22,920,623 4,456,990 386,139
20,878,695 1,245,712,113 106,716,353 239,858,725

41.1.2 Credit Risk - General Disclosures

The Bank is following standardized approach for all its Credit Risk Exposures.

41.1.2.1 Credit Risk: Disclosures for portfolio subject to Standardized Approach and supervisory risk weights in IRB approach
Basel II specific

Under standardized approach, the capital requirement is based on the credit rating assigned to the counterparties by the
External Credit Assessment Institutions (ECAIs) duly recognized by SBP for capital adequacy purposes. In this connection, the
Bank utilizes the credit ratings assigned by ECAIs and has recognized agencies such as PACRA (Pakistan Credit Rating Agency),
JCR-VIS (Japan Credit Rating Company – Vital Information Systems), Fitch, Moody’s and Standard & Poors which are also
recognized by the SBP. The Bank also utilizes rating scores of Export Credit Agencies (ECA) participating in the “Arrangement
on Officially Supported Export Credits”.

The Standardised Approach to credit risk sets out fixed risk weights corresponding, where appropriate, to external credit
assessment levels or for unrated claims.

Selection of ECAIs

The Bank selects particular ECAI(s) for each type of claim. Amongst the ECAIs that have been recognised as eligible by SBP, the
following are being used against each respective claim type.

Sovereigns Exposures: For foreign currency claims on sovereigns, the Bank uses sovereign ratings issued by Moody’s, Standard
& Poor’s and Fitch.

Exposures to Multilateral Development Banks (MDBs): For exposures on MDBs not eligible for a 0% risk weight, ratings of
Moody’s, S&P and Fitch are being used to calculate risk-weighted assets.

Exposures to Public Sector Entities (PSEs): For PSE exposures, ratings of PACRA and JCR-VIS are used to arrive at risk
weights.

Bank Exposures: For foreign banks (i.e., incorporated outside Pakistan), ratings of Moody’s, S&P and Fitch is being used to arrive
at risk weights. However, for local banks (i.e., incorporated in Pakistan) ratings of PACRA and JCR-VIS are used.

Corporate Exposures: Ratings assigned by PACRA and JCR-VIS are used for claims on Corporates (excluding equity
exposures).

Use of ECAI Ratings

The Bank prefers solicited ratings over unsolicited ratings at all times, owing to the greater degree of accuracy (in general)
associated with solicited ratings as compared to unsolicited ratings. Unsolicited ratings may only be used in cases where a
solicited rating is not available.


180 Annual Report 2017

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

Mapping to SBP Rating Grades

The selected final ratings (after application of the principles stated above) for all exposures need to be translated to the stan-
dard rating grades given by the SBP. In this regard, the mapping tables to be used for converting ECAI ratings to SBP rating
grades are given below:

Long – Term Rating Grades Mapping

SBP Rating Fitch Moody’s S & P PACRA JCR-VIS
grade
1 AAA Aaa AAA AAA AAA
AA+ Aa1 AA+ AA+ AA+
AA Aa2 AA AA AA
AA- Aa3 AA- AA- AA-
2 A+ A1 A+ A+ A+
A A2 A A A
A- A3 A- A- A-
3 BBB+ Baa1 BBB+ BBB+ BBB+
BBB Baa2 BBB BBB BBB
BBB- Baa3 BBB- BBB- BBB-
4 BB+ Ba1 BB+ BB+ BB+
BB Ba2 BB BB BB
BB- Ba3 BB- BB- BB-
5 B+ B1 B+ B+ B+
B B2 B B B
B- B3 B- B- B-
6 CCC+ and Caa1 and CCC+ and CCC+ and CCC+ and
below below below below below

Short – Term Rating Grades Mapping

SBP Rating Fitch Moody’s S & P PACRA JCR-VIS
Grade

S1 F1 P-1 A-1+ A-1+ A-1+

A-1
S2 F2 P-2 A-2 A-2 A-2
S3 F3 P-3 A-3 A-3 A-3
S4 Others Others Others Others Others

Types of exposures and ECAI’s used

December 31, 2017

Exposures Fitch Moody’s S & P PACRA JCR-VIS

Corporate – – – Yes Yes
Banks Yes Yes Yes Yes Yes
Sovereigns Yes – – – –
SME’s – – – – –
Securitizations – – – – –
Public Sector
Enterprises – – – Yes Yes
 Allied Bank Limited 181

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

Credit exposures subject to Standardized Approach

December 31, 2017 December 31, 2016
Rupees in ‘000
Exposures Rating Amount Deduction Net Amount Deduction Net
Category Outstanding CRM Amount Outstanding CRM Amount

Corporate 1 59,159,663 102,523 59,057,140 54,508,815 54,656 54,454,159
2 34,980,938 – 34,980,938 24,223,266 – 24,223,266
3 , 4 3,612,121 – 3,612,121 622,183 – 622,183
5 , 6 – – – – – –
Claims on banks with original maturity of
3 months or less – 186,358,145 176,900,699 9,457,446 89,458,349 78,588,422 10,869,927
Retail – 17,416,875 1,444,080 15,972,795 14,619,728 1,532,754 13,086,974
Public sector entities 1 26,178,963 7,320,678 18,858,285 30,722,880 7,111,859 23,611,021
Others – 889,244,934 5,449,000 883,795,934 771,815,714 2,940,062 768,875,652
Unrated – 203,153,403 82,997,396 120,156,007 199,679,751 65,980,924 133,698,827
Total 1,420,105,042 274,214,376 1,145,890,666 1,185,650,686 156,208,677 1,029,442,009

41.1.2.2 Credit Risk: Disclosures with respect to Credit Risk Mitigation for Standardized Approach

The Bank has adopted the Simple Approach of Credit Risk Mitigation for the Banking Book. Since, the trading book of the Bank
only comprises equity investments, and units in open ended mutual funds, therefore no Credit Risk Mitigation benefit is taken in
the trading book. In instances where the Bank’s exposure on an obligor is secured by collateral that conforms with the eligibility
criteria under the Simple Approach of CRM, then the Bank reduces its exposure under that particular transaction by taking
into account the risk mitigating effect of the collateral for the calculation of capital requirement i.e. risk weight of the collateral
instrument securing the exposure is substituted for the risk weight of the counter party.

The Bank accepts cash, lien on deposits, government securities and eligible guarantees etc. under the simple approach of
Credit Risk Mitigation. The Bank has in place detailed guidelines with respect to valuation and management of various collateral
types. In order to obtain the credit risk mitigation benefit, the Bank uses realizable value of eligible collaterals to the extent of
outstanding exposure.

Since no specific asset is available by way of security in the context of unfunded credit protection, the creditworthiness and
reliability of the provider and the validity and enforceability of that party’s obligations is of paramount importance. Therefore,
unfunded credit protection is only “eligible” if it is provided by an appropriate counterparty which may include National
Government, Central Bank and other reputable financial institutions etc.

41.2 Equity Position Risk in the Banking Book

The Bank makes investment for variety of purposes. Some of the investment positions of equity holding are made for long
term revenue generation as part of strategic initiatives, while other equity holdings are held to earn capital gain and dividend to
support the Bank’s business activities.

Classification of investments

Under SBP’s directives, equity investment may be classified as ‘held-for-trading’, ‘available-for-sale - further categorized
between strategic and non-strategic’ or ‘investment in subsidiaries and associates’. Some of the equity investments are listed
and traded in public through stock exchanges, while other investments are unlisted.

Policies, valuation and accounting of equity investments

In accordance with the requirements of the SBP, quoted securities are carried at market value whereas investments in subsidiaries
are accounted for in accordance with the relevant International Accounting Standard as applicable in Pakistan.

The unrealized surplus / (deficit) arising on revaluation of the bank’s ‘held-for-trading’ investment portfolio is taken to the profit
and loss account. The surplus / (deficit) arising on revaluation of quoted securities classified as ‘available-for-sale’ is kept in a
separate account shown in the balance sheet below equity. The surplus / (deficit) arising on these securities is taken to the profit
and loss account when actually realised upon disposal.

Unquoted equity securities are valued at the lower of cost and break-up value. Subsequent increases or decreases in the
carrying value are credited / charged to profit and loss account. Break-up value of equity securities is calculated with reference
to the net assets of the investee company as per the latest available audited financial statements. Investments in other unquoted
securities are valued at cost less impairment losses, if any. Provision for diminution in the value of securities is made after
considering impairment, if any, in their value.

Profit and loss on sale of investments is included in income currently.

182 Annual Report 2017

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

Composition of equity investments

Held-for- Available-for- Investment in
trading sale Subsidiary
Rupees in ‘000

Equity Investments - Publicly Traded – 22,957,532 –

Equity Investments - Others – 3,593,618 500,000
Total Value – 26,551,150 500,000

No cumulative gain (2016: Rs. 74,521 million) was realized from sale of equity securities / certificates of close ended mutual
funds and units of open end mutual funds; however unrealized gain of Rs. 12,653.552 million (2016: Rs. 21,713.786 million) was
recognized in the statement of financial position in respect of available-for-sale securities.

41.2.1 Market Risk

The Bank is exposed to Foreign Exchange Rate Risk, Interest Rate Risk and Equity Price Risk.

Market Risk performs risk measurement, monitoring and control functions through use of various risk procedures and models.
To give it a formal structure, all the policies and guidelines are approved by the Board and relevant management committees.
The Bank appointed services of a foreign risk advisory firm for assistance in establishment of Market Risk Management
Framework.

Market Risk Pertaining to the Trading Book

Trading Book

A trading book consists of positions in financial instruments held either with trading intent or in order to hedge other elements
of the trading book. To be eligible for trading book, financial instruments must be held with the intent of trading and free of any
restrictive covenants on their tradability. In addition, positions need to be frequently and accurately valued and the portfolio
should be actively managed.

The Bank’s trading book includes securities classified as ‘Held-for-Trading’, ‘Open Ended Mutual Fund’ and listed equity placed
in ‘Available-for-sale’. These positions are exposed to all forms of market risk, therefore, are managed actively.

Risk Pertaining to Banking Book Investment Portfolio

All investments excluding trading book are considered as part of banking book. Banking book includes:

i) Available-for-sale securities - (other than listed equity)

ii)  Held-to-maturity securities

Investments parked in the banking book include:

i) Government securities
ii) Capital market investments
iii) Investments in bonds, debentures, etc.

Due to the diversified nature of investments in banking book, it is subject to interest rate and equity price risk.

Interest Rate Risk – Banking Book

Government securities (PIBs, Sukuks & T-Bills), Bonds, Debentures, etc. and other money market investments are subject to
interest rate risk. To capture the risk associated with these securities, extensive modelling is being done with respect to duration
analysis. Stress testing and scenario models are also in place to capture the sensitivity of the portfolio to adverse movement
in interest rates. For prudent risk management, all money market investments are marked to market to assess changes in the
market value of investments due to interest rate movements.

Stress Testing

The Bank also conducts Stress Testing of the Bank’s investment portfolio to ascertain the impact of various scenarios on the
capital adequacy and sustainability of the Bank. The exercise assumes various stress conditions, with respect to Market Risk
(Rise or Fall in Interest Rates, leading to interest rate risk), Equity Price Risk resulting from Stock Market movements, FX Rate
Risk leading from adverse movements in exchange rates and Liquidity Risk (ability to meet
 Allied Bank Limited 183

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

41.2.2 Foreign Exchange Risk

Foreign Exchange Risk is the risk of loss arising from fluctuations of exchange rates. Bank’s FX Risk is largely mitigated by
following a matched funding policy whereas for any mismatched exposures, the Bank utilizes appropriate derivative instruments
such as Forwards and Swaps.

The majority of net foreign currency exposure is in US Dollars. The Bank carefully monitors the net foreign currency exposure
and the effect of exchange rate fluctuations by conducting sensitivity analysis and stress testing, as well as utilizing the currency
forwards and swaps to hedge the related exposure.

December 31, 2017
Assets Liabilities Off-balance Net currency
sheet items exposure
Rupees in ‘000

Pakistani Rupee 1,197,945,310 1,038,022,140 (53,340,095) 106,583,075
United States Dollar 46,967,686 92,784,942 45,931,305 114,049
Great Britain Pound 319,361 5,307,053 4,988,957 1,265
Japanese Yen 10,415 761 (10,568) (914)
Euro 371,402 2,856,405 2,487,262 2,259
Other Currencies 97,939 24,459 (56,861) 16,619
47,766,803 100,973,620 53,340,095 133,278
1,245,712,113 1,138,995,760 – 106,716,353

December 31, 2016

Assets Liabilities Off-balance Net currency
sheet items exposure
Rupees in ‘000

Pakistani Rupee 1,007,255,936 883,165,215 (24,548,036) 99,542,685
United States Dollar 60,635,370 77,346,299 17,751,459 1,040,530
Great Britain Pound 659,677 4,976,104 4,354,546 38,119
Japanese Yen 12,130 3,814 (7,407) 909
Euro 330,648 2,777,338 2,486,134 39,444
Other Currencies 51,987 3,150 (36,696) 12,141
61,689,812 85,106,705 24,548,036 1,131,143
1,068,945,748 968,271,920 – 100,673,828

41.2.3 Equity Position Risk

The Board, based on the recommendations of ALCO, approves exposure limits applicable to investments in Trading and
Banking Book. Equity securities are perpetual assets and are classified under either Held-for-Trading Portfolio or Available-for-
Sale Portfolio.

Concentration Risk

ALCO is responsible for making investment decisions regarding capital market investments, whereas limit setting with respect
to portfolio, sector and scrip wise limits is done by BRMC / BOD to guard against concentration risk. Further, these limits are
reviewed and revised periodically. The capital market desk ensures compliance of concentration limits whereas limit monitoring
is done by Market & Liquidity Risk Division on a daily basis and breaches (if any) are promptly reported with proper reason.

Price Risk

Trading and investing in equity securities give rise to price risk. ALCO and Capital Market Unit both ensure that through prudent
trading strategy and use of equity futures, the equity price risk is mitigated, albeit to a certain extent.


 184

41.2.4 Mismatch of Interest Rate Sensitive Assets and Liabilities

Yield / interest rate sensitivity position for on-balance sheet instruments is based on the earlier of contractual re-pricing or maturity date and for off-balance sheet instruments is based on settlement date.

December 31, 2017

Exposed to Yield/ Interest risk

Annual Report 2017

Effective Not exposed

Yield / Total Up to Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5 Above to Yield/
Interest 1 month to 3 to 6 months to to 2 to 3 to 5 to 10 10 years Interest
rate months months 1 year years years years years Risk

Rupees in ‘000

On-balance sheet financial instruments

Assets
Cash and balances with treasury banks 0.00% 85,367,382 11,667,460 – – – – – – – – 73,699,922
Balances with other banks 648,765 322,186 – – – – – – – – 326,579
Lendings to financial institutions 5.65% 8,694,399 8,479,431 – 214,968 – – – – – – –
for the year ended December 31, 2017

Investments 7.48% 698,082,066 211,571,387 251,003,544 1,016,250 79,117,349 68,340,173 1,290,820 13,005,833 32,892,588 2,475,774 37,368,348
Advances 6.58% 372,037,714 53,932,976 194,256,494 91,386,416 10,135,038 1,842,155 2,017,304 4,478,787 12,601,656 – 1,386,888
Other assets 19,749,938 – – – – – – – – – 19,749,938
1,184,580,264 285,973,440 445,260,038 92,617,634 89,252,387 70,182,328 3,308,124 17,484,620 45,494,244 2,475,774 132,531,675
Liabilities
Bills payable 7,835,467 – – – – – – – – – 7,835,467
Borrowings 5.14% 223,556,383 184,037,908 17,618,887 5,134,424 4,208,111 24,603 424,410 3,107,351 9,000,689 – –
Deposits and other accounts 3.02% 883,740,709 105,727,292 186,441,128 86,400,260 247,648,340 11,313,772 1,974,761 335,926 273,883 – 243,625,347
Sub–ordinated loan – – – – – – – – – – –
Other liabilities 10,897,896 – – – – – – – – – 10,897,896
1,126,030,455 289,765,200 204,060,015 91,534,684 251,856,451 11,338,375 2,399,171 3,443,277 9,274,572 – 262,358,710
58,549,809
On–balance sheet gap (3,791,760) 241,200,023 1,082,950 (162,604,064) 58,843,953 908,953 14,041,343 36,219,672 2,475,774 (129,827,035)
Notes to the Unconsolidated Financial Statements

Off–balance sheet financial instruments

Commitments in respect of forward
exchange contracts - purchase 95,038,705 47,065,184 41,879,614 6,075,063 18,844 – – – – – –
Commitments in respect of forward
exchange contracts – sale (41,580,643) (22,932,197) (15,865,961) (2,531,882) (250,603) – – – – – –

53,458,062
Off–balance sheet gap 24,132,987 26,013,653 3,543,181 (231,759) – – – – – –

Total yield / interest risk sensitivity gap 112,007,871 20,341,227 267,213,676 4,626,131 (162,835,823) 58,843,953 908,953 14,041,343 36,219,672 2,475,774

Cumulative yield / interest risk sensitivity gap 112,007,871 20,341,227 287,554,903 292,181,034 129,345,211 188,189,164 189,098,117 203,139,460 239,359,132 241,834,906


 Mismatch of Interest Rate Sensitive Assets and Liabilities
Yield / interest rate sensitivity position for on-balance sheet instruments is based on the earlier of contractual re-pricing or maturity date and for off-balance sheet instruments is based on settlement date.

December 31, 2016

Exposed to Yield/ Interest risk

Effective Not exposed
Yield / Total Up to Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5 Above to Yield/
Interest 1 month to 3 to 6 months to to 2 to 3 to 5 to 10 10 years Interest
rate months months 1 year years years years years Risk
Rupees in ‘000

On-balance sheet financial instruments

Assets
Cash and balances with treasury banks 0.00% 73,203,717 8,435,565 – – – – – – – – 64,768,152
Balances with other banks 679,923 333,002 – – – – – – – – 346,921
Lendings to financial institutions 5.07% 10,512,752 10,012,752 500,000 – – – – – – – –
Investments – net 9.18% 589,864,548 71,498,837 141,710,196 16,556,423 74,462,778 111,061,010 73,945,349 8,378,159 44,180,039 2,420,904 45,650,853
Advances – net 6.70% 329,562,191 61,349,372 109,941,612 71,174,385 37,263,753 4,632,421 2,879,891 31,572,489 2,173,708 3,555,327 5,019,233
for the year ended December 31, 2017

Other assets – net 22,759,481 – – – – – – – – – 22,759,481

1,026,582,612 151,629,528 252,151,808 87,730,808 111,726,531 115,693,431 76,825,240 39,950,648 46,353,747 5,976,231 138,544,640
Liabilities
Bills payable 9,848,795 – – – – – – – – – 9,848,795
Borrowings 5.22% 126,368,875 87,235,061 13,721,226 15,148,598 – 4,209,001 199,752 1,731,008 4,124,229 – _
Deposits and other accounts 3.28% 805,110,834 95,128,635 205,872,981 69,751,195 225,074,398 7,436,987 1,627,872 350,100 193,358 – 199,675,308
Sub–ordinated loan – – – – – – – – – – –
Other liabilities 12,732,271 – – – – – – – – – 12,732,271
954,060,775 182,363,696 219,594,207 84,899,793 225,074,398 11,645,988 1,827,624 2,081,108 4,317,587 – 222,256,374
On–balance sheet gap 72,521,837 (30,734,168) 32,557,601 2,831,015 (113,347,867) 104,047,443 74,997,616 37,869,540 42,036,160 5,976,231 (83,711,734)

Off-balance sheet financial instruments

Commitments in respect of forward
Notes to the Unconsolidated Financial Statements

exchange contracts - purchase 63,017,979 20,680,281 21,891,192 20,127,299 319,207 – – – – – –

Commitments in respect of forward
exchange contracts - sale (38,469,943) (15,855,348) (14,653,980) (7,766,880) (193,735) – – – – – –
Off-balance sheet gap 24,548,036 4,824,933 7,237,212 12,360,419 125,472 – – – – – –
Total yield / interest risk sensitivity gap 97,069,873 (25,909,235) 39,794,813 15,191,434 (113,222,395) 104,047,443 74,997,616 37,869,540 42,036,160 5,976,231
Cumulative yield / interest risk sensitivity gap 97,069,873 (25,909,235) 13,885,578 29,077,012 (84,145,383) 19,902,060 94,899,676 132,769,216 174,805,376 180,781,607
Yield risk is the risk of decline in earnings due to adverse movement of the yield curve.

Interest rate risk is the risk that the value of the financial instrument will fluctuate due to changes in the market interest rates.

41.2.4.1 Reconciliation of Assets and Liabilities exposed to Yield/Interest Rate Risk with Total Assets and Liabilities

December 31, December 31, December 31, December 31,

Reconciliation to total assets 2017 2016 Reconciliation to total liabilities 2017 2016
(Rupees in ‘000) (Rupees in ‘000)

Balance as per Statement of Financial Position 1,245,712,113 1,068,945,748 Balance as per Statement of Financial Position 1,138,995,760 968,271,920
Allied Bank Limited

Less : Non financial assets Less: Non financial liabilities

Operating fixed assets 48,327,029 32,757,221 Deferred tax liability 6,941,804 10,986,887
Other assets 12,804,820 9,605,915 Other liabilities 6,023,501 3,224,258
61,131,849 42,363,136 12,965,305 14,211,145
185

Total financial assets 1,184,580,264 1,026,582,612 Total financial liabilities 1,126,030,455 954,060,775
186 Annual Report 2017

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

41.3 Liquidity Risk

Liquidity Risk is the risk that the Bank is unable to fund its current obligations and operations in the most cost efficient manner.
Bank’s Board of Directors have delegated the responsibility to ALCO for ensuring that Bank’s policy for liquidity management is
adhered to on a continual basis. ALCO uses gap analysis based on “maturity schedule” to assess Bank’s liquidity risk and devise
strategies accordingly. Bank also has in place triggers and limits to monitor liquidity risk on a periodic basis and uses stress
testing & scenario analysis to assess adequacy of Bank’s liquid assets. Bank also complies with SBP’s instructions on Liquidity
Standards as prescribed under the Basel III Framework.

Bank has in place a robust Liquidity Crisis Contingency Plan to deal with any liquidity crisis in the most efficient and effective
manner.

41.3.1 Liquidity Coverage Ratio

The purpose of this disclosure is to provide the information pursuant to Basel III Liquidity Standards issued under BPRD circular
# 08 dated June 23, 2016. This supplements the disclosure in the Risk Management sections as well as related information in
the Notes to the Financial Statements. This public disclosure should be read in conjunction with the Bank’s Financial Statements
as of December 31, 2017.

The Liquidity Coverage Ratio “LCR” ensures that Allied Bank Limited (the “Bank”) maintains sufficient unencumbered High-
Quality Liquid Assets (“HQLA”) to survive a significant liquidity stress scenario over a 30-day horizon. LCR reporting to SBP
commenced from January 31, 2017 on a monthly basis. Minimum requirement is set at 90% as of December 31, 2017 and shall
increase to 100% by December 31, 2018.

Liquidity Management Framework

Daily liquidity management is carried out centrally by the Asset and Liability Management (“ALM”) Desk in Treasury Group which
regulates the day to day liquidity needs of the Bank. Funding and liquidity management strategies are regularly discussed during
Asset and Liability Committee “ALCO” meetings. Such discussions include analysis on composition of deposits and tenure,
funding gaps and concentration, monitoring of short and long-term liquidity ratios (including LCR and NSFR). The Bank utilizes
internal Management Action Triggers and Limits which act as early warning indicators and safeguards to ensure sufficient
liquidity buffers at all times. Additionally, external and internal liquidity stress tests are performed to evaluate available liquidity
under a range of adverse scenarios and to identify potential vulnerabilities in portfolios. The Bank also has in place contingency
funding plans that identify specific management action that can be invoked in times of liquidity crisis.

Funding Sources & Drivers of LCR

The Bank holds a funding base that is driven by Current and Savings Account “CASA” and Term Deposits from retail, affluent
and corporate customers. This is complemented by wholesale funding from operational & non-operational deposits held by
commercial clients of the Bank and funding from interbank market. Bank’s LCR is sensitive to changes in (a) balance sheet
movements resulting from retail, commercial and corporate loan/deposits activities as well as inter-bank borrowing and lending;
(b) maturity movements in the balance sheet and balances falling into and out of the 30-day tenor; (c) HQLA movements driven
by changes in Government Securities and Balances held with SBP.

Liquidity Risk Mitigation Techniques

The Bank uses the following tools to identify and mitigate Liquidity Risk:

• Gap Analysis
• Liquidity Ratio

• Liquidity Stress Testing

• Liquidity Contingency Plan

• Risk Control Limits (RCLs

Composition of High Quality Liquid Assets (“HQLA”)

The Bank holds an adequate portfolio of HQLA that are available to meet the liquidity needs under stress scenarios. The HQLA
comprise primarily of Level 1 securities in the form of Cash and Treasury Balances, Unencumbered Fixed Income Securities
issued by Government of Pakistan in local currency and Foreign Currency Debt securities issued by Government of Pakistan.
Level 1 securities are included at 100% of their market value in the portfolio of HQLA. Level 2A Assets (weight 85%) consist of
marketable securities held with a 20% risk weight under Basel Framework standardized approach for credit risk, whereas level
2B Assets include marketable corporate debt securities (weight 85%) and non-financial common equity shares (weight 50%).
 Allied Bank Limited 187

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

Currency Mismatch

The Bank predominately operates in the Pakistani Rupee. FCY exposures are maintained within pre-defined thresholds and
liquidity for each foreign currency is managed by utilizing interbank market through currency swaps.

Derivative Exposures

Derivative flows comprise mainly of foreign exchange flows driven by swaps, forwards and spots. Such derivative positions are
marked-to market in the computation of net outflows.

Quantitative Disclosure
The data presented in the quantitative disclosure is a simple average of quarterly LCR, wherein quarterly LCR is a simple average
of monthly observations. In the first quarter of 2017, Bank’s LCR was 149%. The average LCR decreased through to the second
quarter to 140% due to reduction in HQLA partially off-set by decrease in Net Cash Outflows. Average third quarter LCR was
138% and fourth quarter LCR increased to 142% due to increase in HQLA as well as decrease in Net Cash Outflows. In all
quarters, Bank’s LCR remained well above the regulatory minimum requirement of 90%.

TOTAL TOTAL
UNWEIGHTEDa WEIGHTEDb
VALUE (average) VALUE (average)
Rupees in ‘000

High Quality Liquid Assets

1 Total high quality liquid assets (HQLA) 375,217,205

Cash Outflows
2 Retail deposits and deposits from small business customers of which: 480,317,451 48,031,745
2.1 stable deposit – –
2.2 Less stable deposit 480,317,451 48,031,745
3 Unsecured wholesale funding of which: 352,150,219 208,647,326
3.1 Operational deposits (all counterparties) 2,464,162 616,040
3.2 Non-operational deposits (all counterparties) 322,104,197 180,449,426
3.3 Unsecured debt 27,581,860 27,581,860
4 Secured wholesale funding –
5 Additional requirements of which: 18,173,421 2,307,935
5.1 Outflows related to derivative exposures and other collateral requirements 114,140 114,140
5.2 Outflows related to loss of funding on debt products – –
5.3 Credit and liquidity facilities 18,059,281 2,193,795
6 Other contractual funding obligations 11,847,756 11,847,756
7 Other contingent funding obligations 161,867,717 4,053,924
Total Cash Outflows 274,888,686

Cash Inflows
8 Secured lending 4,783,292 –
9 Inflows from fully performing exposures 18,282,922 10,437,560
10 Other Cash inflows 1,800,875 1,071,187
Total Cash Inflows 24,867,089 11,508,747

TOTAL ADJUSTED VALUE

Total HQLA 375,217,205

Total Net Cash Outflows 263,379,939
Liquidity Coverage Ratio 142.46%

a Unweighted values are calculated as outstanding balances maturing or callable within 30 days (for inflows and outflows).

b Weighted values are calculated after the application of respective haircuts (for HQLA) or inflow and outflow rates (for inflows
and outflows).

41.3.2 Net Stable Funding Ratio

Net Stable Funding Ratio “NSFR” ensures that Allied Bank Limited reduces funding risk over a longer time horizon by requiring
the Bank to fund its activities with sufficiently stable sources of funding in order to mitigate the risk of future funding stress. NSFR
reporting to SBP commenced from March 31, 2017 on a quarterly basis. Minimum requirement is set at 100%, effective from
December 31, 2017 onwards.
188 Annual Report 2017

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

Unweighted Value by Residual Maturity

No Maturity < 6 months 6 months to < ≥ 1 yr Weighted

1 yr Value

Rupees in ‘000

ASF Item
1 Capital: 105,152,423 – – – 105,152,423
1.1 Regulatory capital 78,412,349 – – – 78,412,349
1.2 Other capital instruments 26,740,074 – – – 26,740,074
2 Retail deposits and deposit from small
business customers: – 103,541,781 45,525,645 356,611,966 490,772,649
2.1 Stable deposits – – – – –
2.2 Less stable deposits – 103,541,781 45,525,645 356,611,966 490,772,649
3 Wholesale funding: – 164,672,401 49,614,751 163,774,164 255,974,339
3.1 Operational deposits – 1,753,868 – – 876,934
3.2 Other wholesale funding – 162,918,534 49,614,751 163,774,164 255,097,405
4 Other liabilities: – 227,823,537 7,902,236 19,531,482 23,482,599
4.1 NSFR derivative liabilities 2,203 – – –
4.2 All other liabilities and equity not included
in other categories – 227,821,334 7,902,236 19,531,482 23,482,599
Total ASF 875,382,010

RSF Item
5 Total NSFR high–quality liquid assets (HQLA) 750,289,694 111,472,466
6 Deposits held at other financial institutions for
operational purposes 648,765 – – 324,383
7 Performing loans and securities: – 100,455,851 54,458,900 245,842,393 273,472,913
7.1 Performing loans to financial institutions
secured by Level 1 HQLA – 5,994,399 – – 577,943
7.2 Performing loans to financial institutions secured by
non–Level 1 HQLA and unsecured performing loans
to financail institutions – 5,255,954 968,080 18,132,318 19,404,752
7.3 Performing loans to non– financial corporate clients,
loans to retail and small business customers, and
loans to sovereigns, central banks and PSEs, of which: – 48,415,106 16,455,263 167,626,906 174,918,055
7.4 With a risk weight of less than or equal to 35%
under the Basel II Standardised Approach
for credit risk – 40,790,392 20,047,870 57,057,524 67,506,522
7.5 Securities that are not in default and
do not qualify as HQLA including
exchange–traded equities. – – 16,987,687 3,025,645 11,065,641
8 Other assets: 29,491,106 6,984,206 55,977,897 74,247,613
8.1 Physical traded commodities, including gold –
8.2 Assets posted as initial margin for derivative contracts –
8.3 NSFR derivative assets 631 631
8.4 NSFR derivative liabilities before deduction
of variation margin posted –
8.5 All other assets not included in the above categories 29,490,475 6,984,206 55,977,897 74,246,982
9 Off–balance sheet items 66,611,146 43,843,560 41,739,010 7,609,686
Total RSF 467,127,060
Net Stable Funding Ratio (%) 187.40%
41.3.3 Maturities of Assets and Liabilities - Based on contractual maturity of the assets and liabilities of the Bank

December 31, 2017

Total Up to 1 Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5 Above

month to 3 to 6 months to to 2 to 3 to 5 to 10 10 years
months months 1 year years years years years

Rupees in ‘000

Assets

Cash and balances with treasury banks 85,367,382 85,367,382 – – – – – – – –

Balances with other banks 648,765 648,765 – – – – – – – –

Lendings to financial institutions 8,694,399 8,479,431 – 214,968 – – – – – –

Investments 698,082,066 210,233,888 248,178,770 391,671 103,757,768 68,866,567 2,195,441 13,575,919 48,406,268 2,475,774

Advances 372,037,714 82,069,988 40,699,897 36,228,801 40,811,476 40,596,290 42,065,219 57,807,131 26,746,349 5,012,563

Operating fixed assets 48,327,029 728,577 1,457,154 2,185,731 4,371,462 2,678,888 1,026,534 1,386,773 1,841,922 32,649,988
for the year ended December 31, 2017

Deferred tax assets – – – – – – – – – –

Other assets 32,554,758 5,908,390 7,580,879 9,473,419 2,725,289 521,343 521,343 1,042,686 1,042,685 3,738,724

1,245,712,113 393,436,421 297,916,700 48,494,590 151,665,995 112,663,088 45,808,537 73,812,509 78,037,224 43,877,049

Liabilities

Bills payable 7,835,467 7,835,467 – – – – – – – –

Borrowings 223,556,383 184,037,908 17,618,887 5,134,424 4,208,111 24,603 424,410 3,107,351 9,000,689 –

Deposits and other accounts 883,740,709 739,681,189 58,139,330 37,584,882 44,685,509 1,065,230 1,974,761 335,926 273,882 –

Deferred tax liabilities 6,941,804 1,739,777 2,085,051 117,616 (137,977) 665,476 71,520 182,495 488,243 1,729,603

Sub–ordinated loan – – – – – – – – – –

Other liabilities 16,921,397 4,648,713 3,080,796 1,522,695 3,832,102 573,239 906,608 963,146 1,394,098 –

1,138,995,760 937,943,054 80,924,064 44,359,617 52,587,745 2,328,548 3,377,299 4,588,918 11,156,912 1,729,603
Notes to the Unconsolidated Financial Statements

Net assets / (liabilities) 106,716,353 (544,506,633) 216,992,636 4,134,973 99,078,250 110,334,540 42,431,238 69,223,591 66,880,312 42,147,446

Share capital 11,450,739

Reserves 17,980,116

Unappropriated profit 49,212,447

78,643,302

Surplus on revaluation of assets

– net of tax 28,073,051

106,716,353
Allied Bank Limited
189
 190

Maturities of Assets and Liabilities - Based on contractual maturity of the assets and liabilities of the Bank

December 31, 2016

Total Up to 1 Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5 Above

month to 3 to 6 months to to 2 to 3 to 5 to 10 10 years
months months 1 year years years years years
Annual Report 2017

Rupees in ‘000

Assets

Cash and balances with treasury banks 73,203,717 73,203,717

Balances with other banks 679,923 679,923

Lendings to financial institutions 10,512,752 10,012,752 500,000 – – – – – – –

Investments 589,864,548 69,682,302 137,611,676 11,398,034 107,974,826 112,896,911 74,850,697 10,252,919 62,776,279 2,420,904

Advances 329,562,191 63,211,304 36,299,580 33,405,466 49,969,528 32,238,429 31,396,100 61,975,675 14,838,788 6,227,321

Operating fixed assets 32,757,221 661,182 1,322,363 1,983,544 3,967,088 1,766,545 802,627 1,025,196 1,304,705 19,923,971
for the year ended December 31, 2017

Deferred tax assets – – – – – – – – – –

Other assets 32,365,396 4,973,343 7,055,832 10,219,701 2,424,786 505,465 505,465 1,010,930 1,010,929 4,658,945

1,068,945,748 222,424,523 182,789,451 57,006,745 164,336,228 147,407,350 107,554,889 74,264,720 79,930,701 33,231,141

Liabilities

Bills payable 9,848,795 9,848,795 – – – – – – – –

Borrowings 126,368,875 87,235,061 13,721,226 15,148,598 – 4,209,001 199,752 1,731,008 4,124,229 –

Deposits and other accounts 805,110,834 668,770,094 59,714,460 37,185,906 36,437,792 831,254 1,627,872 350,100 193,356 –

Deferred tax liabilities 10,986,887 1,167,853 2,306,758 242,521 1,870,322 1,497,840 1,271,349 265,544 1,102,711 1,261,989

Sub-ordinated loan – – – – – – – – – –

Other liabilities 15,956,529 3,455,674 6,000,910 1,670,583 686,064 499,805 589,309 950,390 2,103,794 –

968,271,920 770,477,477 81,743,354 54,247,608 38,994,178 7,037,900 3,688,282 3,297,042 7,524,090 1,261,989
Notes to the Unconsolidated Financial Statements

Net assets / (liabilities) 100,673,828 (548,052,954) 101,046,097 2,759,137 125,342,050 140,369,450 103,866,607 70,967,678 72,406,611 31,969,152

Share capital 11,450,739

Reserves 16,533,485

Unappropriated profit 46,490,244

74,474,468

Surplus on revaluation of assets

– net of tax 26,199,360

100,673,828

41.3.3.1 When an asset or liability does not have any contractual maturity date, the period in which these are assumed to mature has been taken as the expected date of maturity.
41.4 Maturities of Assets and Liabilities - Based on the working prepared by the Asset and Liabilities Management Committee (ALCO) of the Bank
Expected maturities of non-contractual assets and liabilities has been computed using volatility approach. Under this approach maximum volatility of non contractual assets and liabilities is calculated over a period and classified into core and non-core portion.

December 31, 2017

Total Up to 1 Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5 Above

month to 3 to 6 months to to 2 to 3 to 5 to 10 10 years
months months 1 year years years years years

Rupees in ‘000

Assets

Cash and balances with treasury banks 85,367,382 70,958,969 1,590,536 231,422 – 4,195,485 4,195,485 4,195,485 –

Balances with other banks 648,765 648,765 – – – – – – – –

Lendings to financial institutions 8,694,399 8,479,431 – 214,968 – – – – – –

Investments 698,082,066 210,233,888 248,178,770 391,671 103,757,768 68,866,567 2,195,441 13,575,919 48,406,268 2,475,774

Advances 372,037,714 50,100,722 47,356,668 36,228,800 40,811,477 49,033,788 50,502,717 66,244,629 26,746,350 5,012,563

Operating fixed assets 48,327,029 728,577 1,457,154 2,185,731 4,371,462 2,678,888 1,026,534 1,386,773 1,841,922 32,649,988
for the year ended December 31, 2017

Deferred tax assets – – – – – – – – – –

Other assets 32,554,758 5,908,390 7,580,879 9,473,419 2,725,289 521,343 521,343 1,042,686 1,042,685 3,738,724

1,245,712,113 347,058,742 306,164,007 48,726,011 151,665,996 125,296,071 58,441,520 86,445,492 78,037,225 43,877,049

Liabilities

Bills payable 7,835,467 7,835,467 – – – – – – – –

Borrowings 223,556,383 184,037,908 17,618,887 5,134,424 4,208,111 24,603 424,410 3,107,351 9,000,689

Deposits and other accounts 883,740,709 105,727,292 61,993,913 100,492,977 95,140,396 51,520,116 31,916,570 335,926 273,882 436,339,637

Deferred tax liabilities 6,941,804 1,739,777 2,085,051 117,616 (137,977) 665,476 71,520 182,495 488,243 1,729,603

Sub–ordinated loan – – – – – – – – – –

Other liabilities 16,921,397 4,648,713 3,080,796 1,522,695 3,832,102 573,239 906,608 963,146 1,394,098 –
Notes to the Unconsolidated Financial Statements

1,138,995,760 303,989,157 84,778,647 107,267,712 103,042,632 52,783,434 33,319,108 4,588,918 11,156,912 438,069,240

Net assets 106,716,353 43,069,585 221,385,360 (58,541,701) 48,623,364 72,512,637 25,122,412 81,856,574 66,880,313 (394,192,191)

Share capital 11,450,739

Reserves 17,980,116

Unappropriated profit 49,212,447

78,643,302

Surplus on revaluation of assets

– net of tax 28,073,051

106,716,353
Allied Bank Limited
191
 192

Maturities of Assets and Liabilities - Based on the working prepared by the Asset and Liabilities Management Committee (ALCO) of the Bank
Expected maturities of non-contractual assets and liabilities has been computed using volatility approach. Under this approach maximum volatility of non contractual assets and liabilities is calculated over a period and classified into core and non-core portion.

December 31, 2016

Total Up to 1 Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5 Above

month to 3 to 6 months to to 2 to 3 to 5 to 10 10 years
Annual Report 2017

months months 1 year years years years years

Rupees in ‘000

Assets

Cash and balances with treasury banks 73,203,717 60,854,420 1,345,171 221,592 – 3,594,178 3,594,178 3,594,178 – –

Balances with other banks 679,923 679,923 – – – – – – – –

Lendings to financial institutions 10,512,752 10,012,752 500,000 – – – – – – –

Investments 589,864,548 69,665,404 137,611,853 11,123,628 107,972,679 111,842,875 75,033,217 11,417,709 62,776,279 2,420,904

Advances 329,562,191 33,950,540 42,862,164 33,543,156 49,969,528 39,758,593 38,916,264 69,495,838 14,838,788 6,227,320

Operating fixed assets 32,757,221 661,181 1,322,363 1,983,544 3,967,088 1,766,545 802,627 1,025,196 1,304,705 19,923,972
for the year ended December 31, 2017

Deferred tax assets – – – – – – – – – –

Other assets 32,365,396 4,973,343 7,055,832 10,219,701 2,424,786 505,465 505,465 1,010,930 1,010,929 4,658,945

1,068,945,748 180,797,563 190,697,383 57,091,621 164,334,081 157,467,656 118,851,751 86,543,851 79,930,701 33,231,141

Liabilities

Bills payable 9,848,795 9,848,795 – – – – – – – –

Borrowings 126,368,875 87,235,061 13,721,226 15,148,598 – 4,209,001 199,752 1,731,008 4,124,229

Deposits and other accounts 805,110,834 95,128,635 59,714,460 99,619,679 85,345,251 49,738,713 33,314,457 350,100 193,357 381,706,182

Deferred tax liabilities 10,986,887 1,167,853 2,306,758 242,521 1,870,322 1,497,840 1,271,349 265,544 1,102,711 1,261,989

Sub–ordinated loan – – – – – – – – – –
Notes to the Unconsolidated Financial Statements

Other liabilities 15,956,529 3,455,674 6,000,910 1,670,583 686,064 499,805 589,309 950,390 2,103,794 –

968,271,920 196,836,018 81,743,354 116,681,381 87,901,637 55,945,359 35,374,867 3,297,042 7,524,091 382,968,171

Net assets 100,673,828 (16,038,455) 108,954,029 (59,589,760) 76,432,444 101,522,297 83,476,884 83,246,809 72,406,610 (349,737,030)

Share capital 11,450,739

Reserves 16,533,485

Unappropriated profit 46,490,244

74,474,468

Surplus on revaluation of assets

– net of tax 26,199,360

100,673,828
 Allied Bank Limited 193

Notes to the Unconsolidated Financial Statements

for the year ended December 31, 2017

41.5 Operational Risk

The Bank, like all financial institutions, is exposed to many types of operational risks, including the potential losses arising
from internal activities or external events caused by breakdowns in information, communication, physical safeguards,
business continuity, supervision, transaction processing, settlement systems and the execution of legal, fiduciary and agency
responsibilities.

In accordance with the BoD approved Operational Risk Policy, Bank maintains a system of internal controls designed to keep
operational risk at appropriate levels, in view of the bank’s financial strength and the characteristics of the activities and market
in which it operates. These internal controls are periodically updated to conform to industry best practice.

Further, detailed data of operational losses is being maintained, in conformance with regulatory guidelines. Major Operational
Risk events are also analyzed from the control breaches perspective and mitigating controls are assessed on design and
operating effectiveness. Quarterly updates on Operational Risk events are presented to senior management and Board’s Risk
Management Committee & BoD.

The Bank has also developed a Business Continuity Plan applicable to all its functional areas. The Bank updates functional BCPs
on annual basis or at any process change.

The Bank is also implementing internationally accepted Integrated Framework on Internal Control issued by the Committee of
Sponsoring Organizations of the Tread way Commission (COSO), with a view to consolidate and enhance the existing internal
control processes.

The Bank with permission of SBP is conducting a parallel run for Alternate Standardized Approach (ASA) for Basel II – Operational
Risk Capital Charge Reporting, which signifies readiness of the Bank to move to advance approach.

42 NON ADJUSTING EVENT AFTER THE REPORTING DATE
42.1 The Board of Directors of the Bank in its meeting held on February 21, 2018 has proposed a cash dividend in respect of 2017
of Rs. 1.75 per share (2016: cash dividend Rs. 1.75 per share). This appropriation will be approved in the forthcoming Annual
General Meeting. The unconsolidated financial statements of the Bank for the year ended December 31, 2017 do not include
the effect of these appropriations which will be accounted for in the unconsolidated financial statements for the year ending
December 31, 2018.

42.2 The Bank is party to a Suo Moto case SMC No. 20/2016 in the Honorable Supreme Court of Pakistan. Through this case, the
Honorable Supreme Court has taken up the matter relating to pension arrangements of certain privatized banks. Despite the
banks’ submission of being legally compliant, the Honorable Supreme Court of Pakistan concluded the Suo Moto case on
February 13, 2018, by using judicial discretion and fixed the minimum pension at Rs. 8,000 per month from a prospective date
and with 5 % indexation on an annual basis. The detailed judgment has not been issued by the Honorable Supreme Court to
date, and therefore the Management is not in a position to work out the financial impact.

The unconsolidated financial statements of the Bank for the year ended December 31, 2017 do not include the effect of this
adjustment which will be accounted for in the year ending December 31, 2018 as past service cost; once the plan is formally
amended and approved upon receipt of aforementioned detailed judgment and related actuarial valuation.

43 GENERAL
43.1 These accounts have been prepared in accordance with the revised forms of annual financial statements of the banks issued by
the State Bank of Pakistan through its BSD Circular No. 04 dated February 17, 2006.

43.2 Corresponding figures have been re-arranged and re-classified to reflect more appropriate presentation of events and
transactions for the purpose of comparison.

44 DATE OF AUTHORIZATION FOR ISSUE

These financial statements were authorized for issue on February 21, 2018 by the Board of Directors of the Bank.

Chief Financial Officer President and Chief Executive Director

Director Chairman
 194

STATEMENT SHOWING WRITTEN OFF LOANS OR ANY OTHER FINANCIAL RELIEF

OF FIVE HUNDRED THOUSAND OR ABOVE FROM (1st, JANUARY 2017 TO 31st, DECEMBER 2017)
Amount in Million

Name Of Individuals/Partners/Directors Outstanding Liabilities At The Beginning Of Year, Interest/ Other Finan-
Sr. “Father’s Name/ Principal Total
Name And Address Of The Borrower Mark-Up cial Relief
No. Husband’s Name” Interest/ Written-Off 9+10+11
Name Of Directors Nic Nos. Principal Other Total Written-Off Provided
Annual Report 2017

Mark-Up

1 2 3 4 5 6 7 8 9 10 11 12
ANNEXURE I

Mian Muhammad
Muhammad Ali Mian
Plasticon Industries, Dina Nath Stop, 18-Km, Multan 35202-8494170-9 Yousaf
1 Muhammad Saleem 12.996 – 1.980 14.976 2.996 – 0.638 3.634
Road, Lahore 35202–2559409–3 Mian Muhammad
Mian
Yousaf

Haji Jam Muhammad

Sukhaira Cotton Industries And Oil Mills, Jam Muhammad Akmal 32402-1165039-7
2 Aslam – – 3.791 3.791 – – 1.791 1.791
Bakherpur Road, Haji Pur, Tehsil Jampur,Distt: Rajanpur Muhammad Yasir 32402–7252501–5
Rana Faiz Muhammad

Muhammad Saleem 36201-3318622-1 Muhammad Bux

Bhatti Cotton Industries Bhatti Flour Mills Bashir Ahmad 36201-9435924-9 Muhammad Bux
3 4.207 – 8.804 13.011 – – 4.022 40.22
New Bhatti Flour Mills Kehrore Pacca Road, Dunyapur Muhammad Azhar 36201-4778684-1 Muhammad Bux
Muhammad Tariqm 36201-5298654-7 Bashir Ahmad

Marvi Petroleum Services, Panjo 44103–2084545–3 Kanji

4 1.798 – 1.059 2.857 – – 0.881 0.881
Near Coast Guard, Umerkot Road, Mirpur Khas Khushal 44103–2364055–5 Panjo

Malik Muhammad
31301–6575606–3 Haji Mukhtar Ahmed
Akhter
5 Khanpur CNG Filling Station,By Pass Road, Khan Pur 31301–1458042–7 Allah Wasaya 4.982 – 1.963 6.945 – – 0.947 0.947
Malik Mukhtar Ahmed
31301–1458038–1 Haji Mukhtar Ahmed
Muhammad Akram

Sh. Riaz Ahmad M. Aslam & Co.,

6 Riaz Ahmed 35302–2963164–5 Abdul Ghafoor 1.099 – 0.773 1.872 – – 0.622 0.622
79–Sabzi Mandi, Okara

Swiss Embroidery (Pvt) Ltd., Ghulam Mohyudin 35202-4443397-5 Ghulam Hussain

7 5.999 – 4.117 10.116 – – 2.615 2.615
710–Neelum Block, Allama Iqbal Town, Lahore Mariam Aftab 35202-2419157-8 Aftab Ahmed Khan

Mir’s International / Shamanic Corporation

8 Hamid Mir 61101-0943817-5 Gulzar Mir 58.048 – 23.924 81.972 – – 14.824 14.824
Shop No.20, Block 12–B, F–7 Markaz, Islamabad

Atif Builders & Developers

9 House No.146, Phase.I Near Aqeel Kid Acadmi, Arbab Abdul Jabbar 44302–8312874–3 Arbab Abdul Jabbar 4.980 – 2.704 7.684 – – 1.767 1.767
Qasimabad, Hyderabad

Ikramul Haque
10 Ikram Ul Haq 41307–6415958–1 Manzoor Hussain 5.496 – 0.725 6.221 – – 0.721 0.721
Plot No.38, Hyderabad Road, Tando Allah Yar

Seth Saree House Shop No. 206–G, Ground Floor Panorama

11 Zubair Bashir 35202–7992389–1 Muhammad Bashir 5.998 – 4.736 10.734 – – 4.234 4.234
Shopping Plaza, Shahrah–E–Quaid–E–Azam, Lahore.

12 Unique Universal Trading Co. 32–Jail Road, Lahore Ayaz Ahmed 270–72–558817 Muahmmad Azeem 0.900 – 1.055 1.955 – – 0.955 0.955

Malik Saadat Ahmed 27634-2130075-1 Malik Basharat Ahmed

Ahmad Rice Mills
13 Luqman Ahmed 34201-0385107-5 Shahbaz Ahmed 14.500 – 1.974 16.474 – – 1.474 1.474
Sargodha Road, Chakorra (Kunjah), Gujrat.
Malik Sultan Ahmed 34201-0343360-7 Shahbaz Ahmed

Aftab Weaving Factory

14 Aftab Ahmed 33301-1331346-5 Haji Muhammad Tufail 5.669 – 4.483 10.152 – – 3.952 3.952
Chak No.363/Jb, Pansera Road, Gojra.

Sanabil International Mr. Khalid Mehmood 36603-1089517-1 Zaheer Ahmed

15 14.497 – 7.983 22.480 – – 5.790 5.790
38–E Ist Floor Gcl Centre Liaquat Pura Road, Vehari Riaz Ahmed 36603-1456984-5 Muhammad Yayat

Mazhar Hussain
16 Mazhar Hussain 36302-5775503-1 Nazar Hussain 0.498 – 0.565 1.063 – – 0.512 0.512
Khan Colony, Suraj Miani Road, Multan.

City Petroleum Services Haji Muhammad Munir & Sons

17 Muhammad Amjad 36502-6450498-9 Ch. Muhammad Amjad 14.995 – 8.127 23.122 – – 4.094 4.094
Sahiwal Road, 2.Qabula Road Arif Wala.

Malik Traders Malik Bashir Ahmed 32203-6896069-5 Malik Ganmoon Mu-

18 1.950 – 1.568 3.518 – – 0.518 0.518
Link Girls College Road Road Layyah. Malik Allah Ditta 32203-22543330-9 hammad Hussain
 Amount in Million

Name Of Individuals/Partners/Directors Outstanding Liabilities At The Beginning Of Year, Interest/ Other Finan-
Sr. “Father’s Name/ Principal Total
Name And Address Of The Borrower Mark-Up cial Relief
No. Husband’s Name” Interest/ Written-Off 9+10+11
Name Of Directors Nic Nos. Principal Other Total Written-Off Provided
Mark-Up

1 2 3 4 5 6 7 8 9 10 11 12

19 Azad Corporation 63-B, Grain Market Khanewal Samiullah 36103–3458760–3 Muhammad Ashiq 2.198 – 2.038 4.236 – – 1.436 1.436

Sheikh Muhammad
Junaid (Husband)
Sheikh Muhammad
ANNEXURE I

Obaid (Late)
Surriya Junaid 42301-6284653-6
Sheikh Muhammad
Mehreen Obaid 42301-6191762-2
Obaid (Late)
Mahjabeen Obaid 42301-1984041-4
Sheikh Muhammad
Sana Obaid 42301-6253826-4
20 Towellers Limited, WSA-30, Block 1, F.B. Area, Karachi Obaid (Late) 115.001 – 277.872 392.873 100.001 – 289.951 389.955
Hadeel Obaid 42301-7922657-4
Sheikh Muhammad
Abdul Jaleel Sharif 42101-1870065-9
Obaid (Late)
Zeeshan K. Sattar 42301-1075346-1
Abdul Hakeem Sharif
Swaleha Alam 42000-7672493-2
(Late)
Khursheed Ahmed
Abdul Sattar (Late)
Shahzada Misbah Alam

Ch. Imdad Ali 31202-8267785-3 Ch. Qasim Ali

Five Star Industries, Mian Iftikhar Ahmed 35302-9164445-1 Mian Derwaish Ahmed
21 – – 1.187 1.187 – – 0.882 0.882
P.O. Box No 59, Bypass Karachi Road, Bahawalpur Mr. Sana Ullah 31202-0277044-1 Haji Sardar Khan
Ch. Irshad Ul Haq 31202-0327153-3 Ch. Abdul Ghafoor

Zahid Corporation, Street No.7, Near Modren Cotton

22 Shah Nawaz 31303-2451328-5 Jam Amir Bux 2.160 – 1.522 3.682 – – 0.784 0.784
Factory, Mud Darbari, Factory Area, Rahim Yar Khan

Aftab Weaving Factory, Chak No.363/JB, Pansera

23 Aftab Ahmad 33301-1331346-5 Haji Muhammad Tufail 5.669 – 4.483 10.152 – – 3.952 3.952
Road, Gojra

Moiz Wali Associates

24 Abdul Shakoor 462-92-210944 Mangal Khan 1.116 – 4.157 5.273 – – 3.092 3.092
B.No: A/12-B Unit No:VIII, Latifabad, Hyderabad.

Quality Printers A-4, Rashid Square, Block-M, North Syed Mehmood Hus-
25 519-51-165565 Syed Sharafat Hussain 0.482 – 2.098 2.580 – – 1.153 1.153
Nazimabad, Karachi sain Zaidi

Munawar A. Malik 515-41-00219-0 Haji Nawab Ali Malik

Zaheer A. Malik 515-91-00220-2 Haji Munawar Ali Malik
Musarrat Bano Malik 515-50-00219-1 Haji Munawar Ali Malik
Hashmi Can Company Ltd.
26 Humera Malik 515-77-18459-7 Haji Munawar Ali Malik 18.193 – 13.028 31.221 – – 13.020 13.020
B-24, Textile Avenue, S.I.T.E., Karachi
Naseer A. Malik 505-8508356-6 Haji Nawab Ali Malik
Asif A. Mufti 501-45-71993-9 Zarafat A. Mufti
Shamsuddin Khan 519-49-12854-2 Aziz uddin Khan

Arif Old Tyre Merchant,

27 Muhammad Arif 17301-2387711-1 Gull Alam 0.094 – 0.626 0.720 – – 0.500 0.500
Bajori Gate, Sarai Natak, Cinema Road, Peshawar

28 Mukhtiar Ahmed Cotton Ginners, Main Road, Ubauro Mukhtiar Ahmed 45105-6506836-5 Umerudin 1.410 – 1.279 2.689 – – 1.223 1.223

Muhammad Anwar
29 Mian Amin Trading Establishment,F-61, S.I.T.E., Karachi 42201-1390365-1 Abdul Wahid 35.000 – 91.856 126.856 – – 22.949 22.949
Mansoor

Ali Bhai Construction Co. Syed Abdul Majeed

30 Syed Abdul Sajid Shah 31202-8968888-5 3.000 – 3.863 6.863 – – 1.614 1.614
Address House No.387 Model Town A, Bahawalpur. Shah

Noor Trading Co. Address Noor Trading Co., Khawaja Muhammad Zahid Muhammad Akhtar
31 91509-0144792-9 2.991 – 1.359 4.350 – – 0.576 0.576
Street, Chowk BCG, Multan. Akhtar Bhutta

Kharal Zari Corporation

32 Akmal Faiz 36603-5555471-5 Muhammad Nawaz 0.760 – 0.702 1.462 – – 0.562 0.562
Address Chak No.198 EB, Vehari.

Bhoori Cloth House

33 Abdul Ghafoor 31301-1447244-7 Haji Manzoor Ahmad 4.895 – 3.069 7.964 – – 1.454 1.454
Address Sadar Bazar, Khan Pur

New Afzal Garments 218-B, Panorama Centre, The

34 Muhammad Arshad 35202-6331139-5 Muhammad Shafi 0.598 – 0.989 1.587 – – 0.809 0.809
Mall, Lahore
Allied Bank Limited

New Gents Shoes 1772-C, G-1, Rafiq Plaza Moti

35 Mr. Umer Masood 35404-0983906-7 Masood Ahmed 4.000 – 2.063 6.063 – – 2.063 2.063
Bazaar Maswti Gate, Lahore

Siddique Ibrahim House No.151, Block G, Valencia Muhammad Siddique

36 42201-4203157-5 Muhammad Ibrahim 6.759 – 10.156 16.915 – – 1.408 1.408
Housing Society, Lahore Ibrahim
195

Total 362.938 – 502.678 865.616 102.997 – 397.788 500.785

196 Annual Report 2017

ANNEXURE II
as at December 31, 2017

as referred to in notes 11.10 & 11.11 to the financial statements

DISPOSAL OF FIXED ASSETS

Rupees in ‘000
Particulars Original cost / Accumulated Book value Sale Mode of Particulars of
revalued depreciation Proceeds Disposal purchaser
amount

11.10 Electrical, Office & Computer Equipments

Items having book value of more than
Rs.250,000 or cost of
more than Rs.1,000,000
Electrical Equipment 1,035.00 566.78 468.21 510.11 As Per Bank Policy EFU GENERAL
INSURANCE
Electrical Equipment 1,040.73 1,015.95 24.78 150.00 As Per Bank Policy M/S. MUKYAS
Electrical Equipment 2,690.13 2,562.03 128.12 825.00 As Per Bank Policy ENERGY SOLUTIONS
PVT LTD
Electrical Equipment 1,003.70 1,003.70 – 225.00 As Per Bank Policy M/S. MUKYAS
Electrical Equipment 1,094.06 1,094.06 – 150.00 As Per Bank Policy M/S. MUKYAS
Electrical Equipment 1,171.50 1,171.50 – 380.00 As Per Bank Policy ENERGY SOLUTIONS
PVT LTD
Electrical Equipment 1,015.00 1,015.00 – 150.00 As Per Bank Policy M/S. MUKYAS
Electrical Equipment 1,015.24 1,015.25 – 150.00 As Per Bank Policy M/S. MUKYAS
Electrical Equipment 1,169.50 1,169.50 – 150.00 As Per Bank Policy M/S. MUKYAS
Electrical Equipment 2,971.43 2,971.43 – 990.00 As Per Bank Policy ENERGY SOLUTIONS
PVT LTD
Electrical Equipment 1,407.12 1,407.11 – 300.00 As Per Bank Policy M/S. MUKYAS
Electrical Equipment 1,256.22 1,256.22 – 100.00 As Per Bank Policy M/S. SYS TECH ENGI
NEERING
Electrical Equipment 1,171.50 1,171.50 – 275.00 As Per Bank Policy M/S. MUKYAS
Electrical Equipment 4,988.00 4,988.00 – 1,050.00 As Per Bank Policy ENERGY SOLUTIONS
PVT LTD
Electrical Equipment 1,150.00 1,150.00 – 570.00 As Per Bank Policy ENERGY SOLUTIONS
PVT LTD
Electrical Equipment 717.74 350.32 367.41 555.00 As Per Bank Policy EFU
Long Life Equipment 1,145.69 1,145.69 – 52.10 As Per Bank Policy INNOVATIVE PVT LTD
Long Life Equipment 4,197.60 4,197.60 – 52.10 As Per Bank Policy INNOVATIVE PVT LTD
Total 30,240.16 29,251.64 988.52 6,634.31

Vehicles
Items having book value of more than
Rs.250,000 or cost of more than Rs.1,000,000

Motor Vehicle 1,709.87 1,567.37 142.49 1,218.00 As Per Bank Policy ZAHID QADRI
Motor Vehicle 1,743.50 1,598.21 145.31 1,219.09 As Per Bank Policy KHURRUM IMTIAZ
Motor Vehicle 1,547.20 1,418.27 128.93 1,162.72 As Per Bank Policy KHURRUM IMTIAZ
Motor Vehicle 1,146.67 1,146.67 – 900.00 As Per Bank Policy EFU
Motor Vehicle 1,678.50 1,678.50 – 1,210.00 As Per Bank Policy ADNAN NASEER
Motor Vehicle 1,743.50 1,569.15 174.35 1,226.36 As Per Bank Policy KHURRUM IMTIAZ
Motor Vehicle 1,678.50 1,538.62 139.88 1,151.00 As Per Bank Policy ZEESHAN JAMIL
Motor Vehicle 1,678.50 1,538.62 139.88 1,162.00 As Per Bank Policy ZEESHAN JAMIL
Motor Vehicle 1,679.80 1,679.80 – 1,162.00 As Per Bank Policy ADNAN NASEER
Motor Vehicle 1,678.50 1,678.50 – 1,127.00 As Per Bank Policy ZEESHAN JAMIL
Motor Vehicle 1,679.80 1,679.80 – 1,115.00 As Per Bank Policy ZEESHAN JAMIL
Motor Vehicle 1,512.48 1,487.27 25.21 1,170.90 As Per Bank Policy WAQAR AHMED KHAN
Motor Vehicle 1,743.50 1,743.50 – 1,162.00 As Per Bank Policy ADNAN NASEER
Motor Vehicle 1,678.50 1,678.50 – 1,117.00 As Per Bank Policy ADNAN NASEER
Motor Vehicle 1,726.18 1,639.87 86.31 1,160.50 As Per Bank Policy CH. BASHARAT ALI
Motor Vehicle 1,592.17 1,273.74 318.43 1,192.53 As Per Bank Policy IKRAM UL HAQ
Motor Vehicle 1,726.32 1,294.74 431.58 1,203.64 As Per Bank Policy EFU
Motor Vehicle 1,529.02 1,376.11 152.90 1,117.00 As Per Bank Policy ADNAN NASEER
Motor Vehicle 1,529.02 1,529.02 – 1,210.00 As Per Bank Policy ADNAN NASEER
Motor Vehicle 1,529.02 1,529.02 – 1,066.00 As Per Bank Policy ZEESHAN JAMIL
Motor Vehicle 1,720.05 1,118.03 602.02 1,264.55 As Per Bank Policy KHURRUM IMTIAZ
Motor Vehicle 10,237.83 7,678.37 2,559.46 3,412.61 As Per Bank Policy TARIQ MAHMOOD
Motor Vehicle 1,253.41 1,055.19 198.22 1,100.00 As Per Bank Policy EFU
Motor Vehicle 1,683.49 588.82 1,094.67 1,677.00 As Per Bank Policy EFU
Motor Vehicle 2,555.04 2,555.04 – 917.07 As Per Bank Policy MR.MOHAMMAD SHAHZAD
Motor Vehicle 2,750.00 2,750.00 – 1,880.00 Insurance Claim SABRINA SADIA B MIAN
Motor Vehicle 2,750.00 2,750.00 – 1,717.11 As Per Bank Policy FARHAT ABBAS JAFRI
Motor Vehicle 1,414.00 1,414.00 – 1,193.64 As Per Bank Policy KHURRUM IMTIAZ
Motor Vehicle 1,414.00 1,414.00 – 1,250.00 As Per Bank Policy EFU
Total 58,308.37 51,968.73 6,339.64 37,464.72

Other Disposals 224,166.77 221,234.75 2,932.02 19,218.64 As Per Bank Policy MISCELLANEOUS

Grand Total 312,715.30 302,455.12 10,260.18 63,317.67
 Allied Bank Limited 197

ANNEXURE II
as at December 31, 2017

as referred to in notes 11.10 & 11.11 to the financial statements

DISPOSAL OF FIXED ASSETS

Rupees in ‘000
Particulars Original cost / Accumulated Book value Sale Mode of Particulars of
revalued depreciation Proceeds Disposal purchaser
amount

11.11 Items sold to Executives otherwise than

through a Regular Auction

Electrical, Office & Computer Equipments

106.93 106.90 – 10.69 As Per Bank Policy RAHILA KHATRI
106.90 106.90 – 10.69 As Per Bank Policy JUNAID MAQSOOD
194.04 194.04 – 19.40 As Per Bank Policy TAHIR HASSAN
QURESHI
106.90 106.90 – 10.69 As Per Bank Policy AZEEM AMJAD
101.10 101.10 – 10.11 As Per Bank Policy MUNAWAR RAZA SHAH
101.10 101.10 – 10.11 As Per Bank Policy MUHAMMAD KHALID
IDREES
101.10 101.10 – 10.11 As Per Bank Policy RAB NAWAZ
194.04 194.04 – 19.40 As Per Bank Policy SHAHZAD SADIQ
MUHAMMAD
15.00 15.00 – 1.50 As Per Bank Policy TAHIR YAQOOB BHATTI
102.02 102.02 – 10.20 As Per Bank Policy MOIN KHALID
102.02 102.02 – 10.20 As Per Bank Policy MUSA AYUB KHAN
102.02 102.02 – 10.20 As Per Bank Policy AGHA HUR ABBAS
102.02 102.02 – 10.20 As Per Bank Policy MUNIR DAAR
102.02 102.02 – 10.20 As Per Bank Policy ZUBAIR SHARIF
15.00 15.00 – 1.92 As Per Bank Policy KHURSHID ANWAR
186.00 186.00 – 18.60 As Per Bank Policy JAWAD BIN SHABBIR
114.82 114.81 – 11.48 As Per Bank Policy AAMIR ARSHAD
114.82 114.81 – 11.48 As Per Bank Policy FAISAL IQBAL GHORI
114.82 114.82 – 11.48 As Per Bank Policy TARIQ JAVED
GHUMMAN
129.20 129.20 – 12.92 As Per Bank Policy KHURSHID ANWAR
15.00 15.00 – 1.50 As Per Bank Policy TARIQ MAHMOOD
190.13 174.28 15.84 19.01 As Per Bank Policy SHAFIQ UQAILI
101.58 101.58 – 10.16 As Per Bank Policy TAHIR YAQOOB BHATTI
101.58 101.58 – 10.16 As Per Bank Policy WASIF HAMEED
63.50 63.50 – 6.35 As Per Bank Policy MUHAMMAD KHALID
IDREES
69.90 69.90 – 6.99 As Per Bank Policy MUHAMMAD RAFFAT
87.40 87.40 – 8.74 As Per Bank Policy TARIQ JAVED
GHUMMAN
87.40 87.40 – 8.74 As Per Bank Policy TAHIR YAQOOB BHATTI
58.00 58.00 – 5.80 As Per Bank Policy RIAZ HUSSAIN
58.00 58.00 – 5.80 As Per Bank Policy NAVEED NASIM
58.00 58.00 – 5.80 As Per Bank Policy AHMAD MANSOOR
58.00 58.00 – 5.80 As Per Bank Policy MANSOOR ZAIGHUM
58.00 58.00 – 5.80 As Per Bank Policy FAISAL NADEEM
30.00 30.00 – 3.00 As Per Bank Policy MUHAMMAD TARIQ
30.00 30.00 – 3.00 As Per Bank Policy USAMA BIN NASEER
30.00 30.00 – 3.00 As Per Bank Policy MUNAWAR RAZA SHAH
30.00 30.00 – 3.00 As Per Bank Policy HAYAT MUHAMMAD
RAFIQUE
55.00 55.00 – 5.50 As Per Bank Policy AKHTAR ABBAS
30.00 30.00 – 3.00 As Per Bank Policy SYED MUHAMMAD
HAMMAD BUKHARI
28.70 28.70 – 2.87 As Per Bank Policy SYED RAFEH HASSAN
28.70 28.70 – 2.87 As Per Bank Policy TAHIR HUSSAIN
BAKHTIAREE
28.70 28.70 – 2.87 As Per Bank Policy MUHAMMAD AKBAR
28.70 28.70 – 2.87 As Per Bank Policy MUHAMMAD SARWAR
ALAM
28.70 28.70 – 2.87 As Per Bank Policy KHUSHI MUHAMMAD
28.70 28.70 – 2.87 As Per Bank Policy SHEIKH KHALID
FAROOQ
28.70 28.70 – 2.87 As Per Bank Policy TANVEER AHMAD
28.70 28.70 – 2.87 As Per Bank Policy BARKAT ALI KHAN
30.00 30.00 – 3.00 As Per Bank Policy ABDUL KHALIQ
127.53 127.53 – 12.75 As Per Bank Policy MUJAHID ALI
96.35 96.35 – 9.64 As Per Bank Policy MUHAMMAD IDREES
65.00 65.00 – 6.50 As Per Bank Policy QASIM NADEEM
81.60 81.60 – 8.16 As Per Bank Policy SHAFIQUE AHMED
UQAILI
65.00 65.00 – 6.50 As Per Bank Policy JAWAD BIN SHABBIR
65.00 65.00 – 6.50 As Per Bank Policy SHAHID AMIR
30.00 30.00 – 3.00 As Per Bank Policy FAISAL RASHEED
GHORI
28.70 28.70 – 2.87 As Per Bank Policy ATHER AFTAB PASHA
28.70 28.70 – 2.87 As Per Bank Policy SAJJAD HUSSAIN
28.70 28.70 – 2.87 As Per Bank Policy NAUMAN HAFEEZ
28.70 28.70 – 2.87 As Per Bank Policy SALMAN AKHTAR
198 Annual Report 2017

ANNEXURE II
as at December 31, 2017

as referred to in notes 11.10 & 11.11 to the financial statements

Rupees in ‘000
Particulars Original cost / Accumulated Book value Sale Mode of Particulars of
revalued depreciation Proceeds Disposal purchaser
amount

65.00 65.00 – 6.50 As Per Bank Policy JAMIL KHAN

30.00 30.00 – 3.00 As Per Bank Policy ABRAR ALEEM
30.00 30.00 – 3.00 As Per Bank Policy DILDAR HUSSAIN
30.00 30.00 – 3.00 As Per Bank Policy MUHAMMAD HANIF
CHUGTAI
30.00 30.00 – 3.00 As Per Bank Policy FAIZAN IRSHAD
96.35 96.35 – 9.64 As Per Bank Policy TAHIR HASSAN
QURESHI
84.80 84.80 – 8.48 As Per Bank Policy OWAIS SHAHID
65.00 65.00 – 6.50 As Per Bank Policy SADIA SHAIKH
81.50 81.50 – 8.15 As Per Bank Policy TAHIR YAQOOB BHATTI
30.00 30.00 – 3.00 As Per Bank Policy KASHIF KALIM
30.00 30.00 – 3.00 As Per Bank Policy MUHAMMAD JUNAID
SIDDIQUI
30.00 30.00 – 3.00 As Per Bank Policy IJAZ AJMAL
30.00 30.00 – 3.00 As Per Bank Policy SOHAIL SHAKIR DH
30.00 30.00 – 3.00 As Per Bank Policy MUHAMMAD ZIKRIA
96.35 96.35 – 9.64 As Per Bank Policy OWAIS SHAHID
65.00 65.00 – 6.50 As Per Bank Policy SAIRA SHAHID HUSSAIN
85.00 85.00 – 8.50 As Per Bank Policy MUJAHID ALI
65.00 65.00 – 6.50 As Per Bank Policy KHURAM ALI SYED
96.00 96.00 – 9.60 As Per Bank Policy SHAFIQ UQAILI
26.40 26.40 – 2.64 As Per Bank Policy MUNIR DAR
96.35 96.35 – 9.64 As Per Bank Policy MUHAMMAD RAFFAT
30.00 30.00 – 3.00 As Per Bank Policy KASHIF RAZA
30.00 30.00 – 3.00 As Per Bank Policy IJAZ BASHIR BHATTI
65.00 65.00 – 6.50 As Per Bank Policy EJAZ SHAMIM
65.00 65.00 – 6.50 As Per Bank Policy SYED HASAN JAFRI
28.32 28.32 – 2.83 As Per Bank Policy KHAWAJA SAFWAN
65.00 65.00 – 6.50 As Per Bank Policy SIRAJ QADIR
93.80 93.80 – 9.38 As Per Bank Policy AHMAD FAHEEM KHAN
93.80 93.80 – 9.38 As Per Bank Policy IMRAN MAQSOOD
65.00 65.00 – 6.50 As Per Bank Policy SCELLINA NAWAZ
28.32 28.32 – 2.83 As Per Bank Policy MUHAMMAD ANWAR
30.00 30.00 – 3.00 As Per Bank Policy FARRUKH SAEED
30.00 30.00 – 3.00 As Per Bank Policy HAFIZ MOAZZAM
HUSSAIN
28.32 28.32 – 2.83 As Per Bank Policy SHAH FAISAL
85.00 74.38 10.62 28.33 As Per Bank Policy TARIQ MAHMOOD
30.00 30.00 – 3.00 As Per Bank Policy GHULAM RASOOL
30.00 8.75 21.27 22.50 As Per Bank Policy MUHAMMAD HAMZA
HAKIM
244.20 40.74 203.50 193.35 As Per Bank Policy SHAFIQ UQAILI
101.00 101.00 – 10.10 As Per Bank Policy TARIQ RASHID ANSARI
95.00 95.00 – 9.50 As Per Bank Policy ABDUL RAZZAK
Vehicles
10,237.83 7,678.37 2,559.46 3,412.61 As Per Bank Policy TARIQ MAHMOOD
Total 16,996.58 14,185.89 2,810.69 4,297.15
 Allied Bank Limited 199

ANNEXURE III
as at December 31, 2017

LOCATION OF REVALUED PROPERTIES

Date of Purchase Particulars City Location

24.12.2013 PLOT # 8-D, F-8 MARKAZ ISLAMABAD ISLAMABAD
29.12.2015 KHEWAT#224 KHATOONI SALAM SQUARE# 305 FOR NOOR HAYAT COLONY SARGODHA
21.09.2017 PLOT 64-C KHYABAN E ITTEHAD DHA PHASE VI KARACHI KARACHI
07.11.2008 DUBAI CHOWK BAHAWALPUR BAHAWALPUR
18.12.2013 JOHAR TOWN LAHORE LAHORE
01.10.1973 30-NAPIER ROAD, LAHORE LAHORE
22.04.1985 ANARKALI LAHORE LAHORE
25.01.1987 PLOT NO.7-E, MAIN BOULVARD, GULBERG LAHORE LAHORE
16.08.1992 8-KASHMIR EGERTON ROAD LAHORE LAHORE
16.08.1992 8-KASHMIR EGERTON ROAD LAHORE (PARKING) LAHORE
23.09.1996 BANK SQUARE, MODEL TOWN, LAHORE LAHORE
20.04.1994 NEW SADIQ BAZAR RAHIMYAR KHAN RAHIM YAR KHAN
23.12.1970 GOLE CLOTH FAISALABAD FAISALABAD
07.05.1990 PLOT AT SMALL INDUSTRIAL AREA SITE, SAHIWAL SAHIWAL
20.07.1975 TRUNK BAZAR, RAWALPINDI RAWALPINDI
05.06.1997 KASHMIR ROAD, RAWALPINDI RAWALPINDI
20.07.2007 QANDHARI BAZAR, QUETTA QUETTA
20.07.1975 ABL BLUE AREA BLDG, ISLAMABAD ISLAMABAD
22.10.2005 JAIL ROAD, FAISALABAD FAISALABAD
22.10.2005 SATYANA ROAD, FAISALABAD FAISALABAD
06.10.2005 ABDALI ROAD MULTAN MULTAN
31.12.2005 PEOPLES COLONY “D” GROUND, FAISALABAD FAISALABAD
26.12.2008 INDUSTRIAL AREA, BADAMI BAGH (PECO ROAD) LAHORE
17.05.2006 PHASE IV D.H.A LAHORE LAHORE
24.05.2006 CIRCULAR ROAD, LAHORE LAHORE
26.06.2006 CLIMAXABAD , G T ROAD GUJRANWALA GUJRANWALA
30.06.2006 PLOT PHASE V-C, DHA, LAHORE LAHORE
09.05.2006 F-10 ISLAMABAD ISLAMABAD
05.09.2006 PLOT NO: 24, BLOCK -B, GULBERG-II, LAHORE LAHORE
19.02.2007 GULGHASHT COLONY MULTAN MULTAN
04.09.2007 GREEN TOWN LAHORE LAHORE
09.05.2008 MASJID ROAD NAWABSHAH NAWABSHAH
24.12.2008 SAFOORA GOTH, KARACHI KARACHI
26.12.2008 INDUSTRIAL AREA, BADAMI BAGH (PECO ROAD) LAHORE
31.08.2008 AMIN TOWN, FAISALABAD FAISALABAD
18.10.2008 CHOWK BCG, MULTAN MULTAN
18.09.2008 MAIN MARKET CHAKLALA-III, RAWALPINDI
11.08.2008 MURREE ROAD SATELLITE TOWN RAWALPINDI (CHANDNI CHOWK RAWALPINDI) RAWALPINDI
22.11.2008 DHA PHASE-II,  ISLAMABAD ISLAMABAD
12.12.2009 MAIN BRANCH, SHALIMAR LINK ROAD LAHORE
16.10.2009 MODEL TOWN, D.G.KHAN D.G.KHAN
27.08.2010 PORT QASIM, KARACHI KARACHI
25.03.2011 JHANG ROAD, FAISALABAD FAISALABAD
20.08.2011 SABZ PEER PASTUR SIALKOT SIALKOT
16.03.2012 ADDA NANDI PUR SIALKOT SIALKOT
24.12.2013 CHAK # 203/RB, MALIKPUR SHEIKHPURA ROAD MANAWALA FAISALABAD
31.12.2013 CHAK # 68/RB, JARANWALA TEHSIL ADDA JOHAL BRANCH (0806) FAISALABAD
30.09.2014 CHAK # 84/RB SHAH KOT TEHSIL SHAHKOT DISTT. NANKANA SAHIB FAISALABAD
13.07.2015 PLOT NO.382/3 SHAHRAH-E-HALI QUETTA CANTT KNOWN AS IDBL QUETTA QUETTA
22.10.2005 SATYANA ROAD, FAISALABAD FAISALABAD
11.03.2015 BUILDING AT MOUSA CHINIOT-2 TEHSIL SARGODHA ROAD CHINIOT FAISALABAD
09.12.2015 WATER SUPPLY ROAD SARGODHA (0887) SARGODHA
02.08.1999 BUNGLOW NO 8-A QUAID-E-AZAM ROAD MULTAN CANTT. MULTAN
31.12.2009 W.H. GROUND & IST FLOOR, MAUZA JAHANGIRABAD , MULTAN MULTAN
24.12.2014 PLOT KHEWAT NO.322, KHATOONI NO. 324 SITUATED LIAQUAT PUR VEHARI( GREEN CROP PVT VEHARI
01.11.2011 SADRA BADRA, DASKA, SIALKOT SIALKOT
200 Annual Report 2017

ANNEXURE III
as at December 31, 2017

LOCATION OF REVALUED PROPERTIES

Date of Purchase Particulars City Location

04.10.2013 CHAK # 214/RB, DHUDIWALA JARANWALA ROAD BRANCH (0100) FAISALABAD
26.06.2007 MANDI FAIZABAD JARANWALA ROAD WAREHOUSE GUJRANWALA
30.09.2014 LAND (9 MARLAS & 162 SQR FT, KHATA 70, KHASRA 156,) KATCHERY ROAD JHANG SAHIWAL JHANG
28.02.2014 1-E, KHAYABAN-E-SEHAR DHA KARACHI KARACHI
12.03.2015 LAND & BUILDING KHEWAT KHATOONI#45,KHASRA#727 CHAK 298-RB SANGAHILL DISTRICT FAISALABAD
29.04.2015 PLOT AT CHAK # 208/RB, TEHSIL CITY DISTT. FAISALABAD(FOR EDEN VALLEY CHOWK BR,FSD FAISALABAD
13.05.2015 PLOT MEASURING_01 KANAL 15 MARLAS SITUATED AT MOHALLAH NOORPURA KHADIM ALI ROAD SIALKOT
08.10.2012 MALL ROAD RAWALPINDI RAWALPINDI
30.06.2016 AGRICULTURE LAND 61 KANAL AND 18 MARLAS AT TATLAS AALI ROAD KAMONKI GUJRANWALA
24.03.2007 PLOT ADJOINING CLIFTON COLONY, MOUZA NEILKOT, MAIN BOSAN RD, MULTAN MULTAN
31.05.1992 B/O QILA GUJAR SINGH LAHORE LAHORE
29.04.1982 SIRKI ROAD, QUETTA QUETTA
23.06.1999 PLOT NO.B-7 FRUIT & VEGETABLE COMPLEX  HAZAR GANJI QUETTA QUETTA
13.12.2014 CHAK # 124/JB, TEHSIL & DISTT. FAISALABAD ( RAZABAD BRANCH FAISALABAD) FAISALABAD
15.07.2014 MOUZA NOORPUR CHAK # 122/JB TEHSIL CITY DISTT. FAISALABAD FAISALABAD
16.12.2016 BRANCH OF BHERA SARGODHA SARGODHA
28.09.2017 BRANCH 0337 NAMAK MANDI CHOWK DALGRAM RWP RAWALPINDI
09.03.2005 PLOT NO. 12 FT/4 FARERE TOWN, BATH ISLAND CLIFTON KARACHI KARACHI
04.03.1979 SATELLITE TOWN, QUETTA QUETTA
28.10.2014 PLOT # 27, BLOCK “J” WAPDA EMPLYEE’S CO-OPERATIVE HOUSING SOCIETY LTD, FAISALABAD FAISALABAD
19.12.2014 OPEN PLOT AT CHAK # 245 RB MOUZA ABBASPUR, TEHSIL SADDAR, DISTT. FAISALABAD FAISALABAD
15.01.2015 PLOT # 4, BLOCK # 2, CHAK # 64MB, MANDI TOWN JAUHARABAD, DISTT. KHUSHAB FAISALABAD
14.07.2015 LAHORE BUCHEKI TEHSIL & DISTRICT NANKANA SAHB FAISALABAD
15.06.2015 ADDA FALABAD BRANCH, JHANG JHANG
27.07.2016 PLOT NO 42/A, SECTOR XX, PHASE 111-C, DHA, LAHORE(PHASE III) LAHORE WEST
10.11.2016 PLOT NO 97, SECTOR CC-2, PHASE VIII-C, DHA LAHORE LAHORE WEST
03.03.2017 SECTOR MAIN KHYABAN E SIR SYED RAWALPINDI RAWALPINDI
25.05.2017 COMMERCIAL PLOT # 3-A &4-A SECTOR C MAIN BOULEVARD BAHRIA TOWN LAHORE LAHORE
31.12.2017 PLOT # 14 BLOCK # A-3 MAHMOOD ALI KASURI ROAD GULBERG-3 LHR LAHORE
01.12.2016 PLOT NO 3, SECTOR CCA, PHASE 2-C, DHA LAHORE LAHORE WEST
19.08.2006 PROPERTY AT 200-B, UPPER MALL, LAHORE LAHORE
03.01.2015 PLOT # Z-946, RAILWAY WORKSHOP ROAD, DHOKE RATTA, RAWALPINDI RAWALPINDI
10.03.2015 POT#10-D FINANCE & TRADE CENTRE M.A JOHAR TOWN,LAHORE LAHORE
13.04.2015 MOUZA KHUSHAB CHAK#223/RB. TEHSIL CITY DISTT. FAISALABAD FAISALABAD
20.11.2015 PLOT BEARING KHEWAT NO.12847, KHATOONI NO.26056 CHAK 207 SHEIKUPURA FSD FAISALABAD
02.02.2016 PULLI TOOP KHANA(0913) SIALKOT
31.12.2015 PLOT KHATA#63/62,KHATOONI#317-321 10MARLA KOTLA BAQIR SHAH AHMEDPUR BAHAWALPUR
18.12.2015 PLOT GT ROAD ALAHBAD WAZIRABAD FOR SHIFTING OF BR 0565 GUJRANWALA
05.02.2016 KHEWAT# 359, BLOCK A COMMERCIAL AREA SUKH CHAYN GARDENS LAHORE LAHORE WEST
29.04.2016 KHEWAT#2016/2006,KHATOONI#2069 AT KOTHI# 7 CHK 439/EB FR BR 612 61 VEHARI
17.05.2016 PLOT BLOCK-C SHAH RUKN-E-ALAM COLONY,PHASE 1 MULTAN FOR BR 0249 MULTAN
07.01.2017 LAKAR MANDI BAZAR MAMUN KANJAN FOR SHIFTING OF BR 0506 JHANG
27.06.2016 COMMERCIAL PLOT#A-IV AT MAIN COMMERCIAL SEC D17/2 MARGALA VIEW 0650 ISLAMABAD
08.12.2016 PROPERTY FOR B/O LIAQAT SHAHEED ROAD BHALWAL SARGODHA
22.06.2017 PLOT NO.B/30 & B/31 MAIN MARKET RD ZHOB QUETTA
28.09.2017 PROPERTY AT SADDIQ WAHAB ROAD TIMBER MARKET KARACHI FOR BR 1036 KARACHI
20.12.2011 G.T.ROAD, HADBUST MOUZA ADOWAL TEHSIL & DISTT GUJRAT GUJRAT
31.12.2017 PROPERTY BEARING PLOT # 151 BLOCK-Y DHA PASHE-III LAHORE LAHORE
27.09.2017 GENERAL OFFICE COLONY BLOCK B MODELTOWN B BAHAWALPUR FOR BR 0041 BAHAWALPUR
07.05.2015 OPEN CORNER PLOT AT MOUZA CHAPAL CHAK# 73/JB, TEHSIL SADDAR DISTT. FAISALABAD JHANG
04.10.2016 CHAK 46 SHUMALI BLOCK X NEW SATELLITE TOWN SARGODHA CITY SARGODHA
30.06.2016 PLOT NO 286, BLOCK H/2 M.A. JOHAR TOWN, LAHORE LAHORE EAST
18.12.2017 KHEWAT # 31/31, KHATOONI # 54, KHASRA # 332, MOUZA SADRA KALAN SIALKOT
10.09.1999 L.D.A. WASA BRANCH LAHORE LAHORE
17.07.1975 BLDG AT M.W.T. GK-7, KARACHI KARACHI
31.12.2013 PLOT # 52, SECTOR F, DHA PHASE-I, RAWALPINDI RAWALPINDI
 Allied Bank Limited 201

ANNEXURE III
as at December 31, 2017

LOCATION OF REVALUED PROPERTIES

Date of Purchase Particulars City Location

17.10.2016 PROPERTY CHAK 207 RB TEHSIL CITY DISTRICT FAISALABAD FAISALABAD
30.12.1966 BUNGLOW NO.44-D PECHS, KARACHI KARACHI
22.05.2009 PLOT NO: 163-C/II, KHAYABAN-E-SHAHEEN, PHASE-VIII, DHA,KARACHI KARACHI
23.09.2013 PLOT -3 BABAR BLOCK NEW GARDEN TOWN LAHORE LAHORE
31.07.2015 PLOT NO. 1118-A LDA AVENUE-1 RAIWAND ROAD LAHORE LAHORE
15.09.2015 CHAK 212/RB GRAIN MARKET DIJKOT ROAD TEHSIL CITY DISTRICT FAISALABAD FOR BRANCH FAISALABAD
26.11.2015 LAND BEARING KHEWAT NO 2235 KHATOONI NO 2277 SALEEM PARK SARGODHA CITY SARGODHA
11.06.2016 041/1022 KHANEWAL ROAD 0311 MULTAN FOR CONSTRUCTION OF MDC MUL MULTAN
29.09.2017 SHOP NO. 779, 780, 781 CHOUR HARPAL MOHALLAH MUHAMAMD ABAD RWP 0570 RAWALPINDI
10.11.2008 CHOWK SHAH ABBAS MULTAN
29.12.1996 KHALID BIN WALEED ROAD BRANCH KARACHI
22.05.2006 NEW SABZI MANDI SUPPER HIGHWAY KARACHI KARACHI
29.12.2007 PLOT # Z-21, PHASE III DHA LAHORE LAHORE
29.06.2007 JOHAR TOWN LAHORE M BLOCK LAHORE
18.12.2007 KHAYABAN-E-ITTEHAD, DHA, KARACHI KARACHI
21.03.2011 AIRLINE HOUSING SOCIETY, KHYABAN-E-JINNAH, LAHORE LAHORE
25.08.2014 PLOT # 47-C, LANE-15, BUKHARI COMMERCIAL AREA, PHASE-VI, DHA, KARACHI KARACHI
16.12.2014 PLOT # C-19-1LAKE CITY LAHORE LAHORE
28.04.2016 PLOT NO.87,9TH COMMERCIAL STREET,PHASE IV DHA ,KARACHI KARACHI
10.08.2016 PLOT 57-C NATIONAL HIGHWAY, DHA PHASE II KARACHI 200SQ. YARD KARACHI SOUTH
22.12.2016 BLOCK 13-C GULSHAN E IQBAL KARACHI KARACHI NORTH
20.03.1979 DADABHOY CENTRE KARACHI KARACHI
09.08.1980 SHOP NO.5,7,8,10,11,12 KDA, SCHEME NO.24, GULSHAN IQBAL  KARACHI UNIVERSITY ROAD KARACHI
01.01.1985 TAJ COMPLEX KARACHI KARACHI
05.06.1985 AMBER TOWER, KARACHI SHAHRAH-E-FAISAL KARACHI
08.10.1986 BUFFER ZONE, KARACHI KARACHI
17.12.1987 4-SHOPS AT BOATING BASIN, KARACHI KARACHI
09.10.1988 ZAIBUNISA STREET, KARACHI KARACHI
24.02.1992 SHOP NOS.9 & 10 TRADE TOWER KARACHI (BRANCH) KARACHI
08.11.1993 HAIDRY, NORTH NAZIMBAD, BRANCH KARACHI KARACHI
29.12.1994 ZAM ZAMA BUILDING KARACHI KARACHI
27.11.1996 KHAYABAN-E-JAMI BRANCH (JAMI ARCADE) KARACHI
29.06.1998 MASJID-E-TOOBA KARACHI (DHA) KARACHI
11.08.1998 BLOCK K NORTH NAZIMABAD KARACHI (SB-4) KARACHI
21.12.2005 NEW CHALI-BRANCH, KARACHI KARACHI
30.09.1998 KHYABAN-E-BADAR, D.H.A. KARACHI KARACHI
25.08.1999 SHOP NO. G-5, G-6 AND G-47 KEHKASHAN (JADE GARDEN CLIFTON) KARACHI KARACHI
26.05.2000 P.I.B. COLONY BRANCH SHOP NO. 10-11,47 & 48, KARACHI KARACHI
10.06.2000 S.I.T.E. BRANCH, B-12,KARACHI KARACHI
27.08.2003 STOCK EXCHANGE BRANCH KARACHI KARACHI
08.07.1999 CITIZEN COLONY, HYDERABAD 157/E HYDERABAD
13.10.1973 BUNDER ROAD LARKANA LARKANA
09.09.1992 SHAHDMAN COLONY BRANCH LAHORE LAHORE
29.08.1994 SAMANABAD BRANCH LAHORE LAHORE
27.12.1994 BRANDERTH ROAD BRANCH LAHORE LAHORE
29.12.1997 AKBAR BAZAR SHEIKUPURA SHEIKUPURA
20.12.1999 BANK SQUARE, GUJRANWALA GUJRANWALA
19.09.1996 AHMEDPUR EAST BRANCH BAHAWALPUR
28.06.1997 JINNAH COLONY FAISALABAD FAISALABAD
29.07.1975 BLOCK NO.1, SARGODHA SARGODHA
08.05.1994 GRAIN MARKET VEHARI VEHARI
11.12.1997 ASGHAR MALL CHOWK RAWALPNDI RAWALPINDI
15.08.1996 CAVALARY ROAD, NOWSHERA NOWSHERA
17.08.1994 PLOT NO: 37,  PESHAWER PESHAWAR
14.11.1997 PLOT NO.16-B/1, PHASE V, HAYATABAD PESHAWER PESHAWAR
29.07.1975 PLOT # 631 , MIRPUR A.K MIRPUR A.K.
202 Annual Report 2017

ANNEXURE III
as at December 31, 2017

LOCATION OF REVALUED PROPERTIES

Date of Purchase Particulars City Location

24.10.1984 UPPER CHATTER, MUZAFFARABAD, A.K. MIRPUR A.K.
09.09.2005 BROADWAY CLIFTON C.O.K. KARACHI
27.06.2005 KOTWALI ROAD, FAISALABAD FAISALABAD
30.06.2005 SUSAN ROAD / MADINA TOWN, FAISALABAD FAISALABAD
19.08.2005 GARHHA CHINIOT, DISTT. JHANG CHINIOT JHANG
10.11.2006 F-8 ISLAMABAD ISLAMABAD
30.12.2006 FAISAL TOWN. LAHORE LAHORE
14.09.2006 GARDEN TOWN, LAHORE LAHORE
22.06.2006 WAHDAT COLONY PLAZA, LAHORE LAHORE
22.08.2006 PLOT NO. 14 & 346, PHASE 6-C, BLOCK M.B, DHA LAHORE LAHORE
01.09.2006 GHULAM MUHAMMAD ABAD, FAISALABAD FAISALABAD
16.05.2007 BAGBANPURA LAHORE LAHORE
25.11.2006 KARIMABAD BRANCH KARACHI KARACHI
29.08.2006 F-11 ISLAMABAD ISLAMABAD
30.12.2006 B/O ALLAMA IQBAL TOWN, LAHORE LAHORE
08.11.2006 44/F AZIZ SHAHEED ROAD MULTAN MULTAN
12.12.2006 SUPER MARKET (F-6) ISLAMABAD ISLAMABAD
30.10.2006 G - 11 MARKAZ ISLAMABAD ISLAMABAD
20.03.2007 SHAHRAH E NOOR MUHAMMAD HYDERABAD HYDERABAD
09.09.2010 AISHA MANZIL, KARACHI. KARACHI
22.06.2007 HYDER ROAD TOWNSHIP LAHORE LAHORE
19.02.2008 SINDHI MUSLIM H.SOCIETY BR. KARACHI KARACHI
29.06.2007 SHAHEEN CENTRE , CLIFTON, SCHON CIRCLE KARACHI
12.09.2007 BOHRI BAZZAR SADDAR HYDERABAD HYDERABAD
28.02.2009 SHERSHAH BRANCH KARCHI SITE KARACHI
26.06.2007 MANDI FAIZABAD JARANWALA ROAD NANKHANA SHAIB
17.05.2007 CHOWK RASHEEDABAD MULTAN MULTAN
01.02.2011 G 8 ISLAMABAD ISLAMABAD
28.04.2008 RASHID MNHAS ROAD, KARACHI (NEW) KARACHI
03.05.2008 KHAYABAN-E-TANZEEM, KARACHI KARACHI
05.05.2008 SALEH MOHAMMAD STREE BRANCH KARACHI KARACHI
26.02.2008 STARGATE BRANCH KARACHI KARACHI
29.08.2008 BINNORI TOWN KARACHI KARACHI
12.09.2014 OCEAN MALL (SOFITEL TOWER) KHI KARACHI
22.12.2008 BEADON ROAD, LAHORE LAHORE
24.11.2008 I-9, ISLAMABAD (BRANCH LAND & BUILDING) ISLAMABAD
11.12.2008 GULSHAN-E-MAYMAR, KARACHI. KARACHI
07.01.2008 SUNSET BOULEVARD, KARACHI KARACHI
19.08.2008 REGENCY APPARTMENT KARACHI
19.06.2009 MUHAMMED BIN QASIM PARK BRANCH, SUKKUR SUKKUR
10.08.2009 DHA PHASE-1 BRANCH, ISLAMABAD ISLAMABAD
03.08.2009 MAIN TUFAIL ROAD BRANCH, LAHORE CANTT. LAHORE
13.07.2009 PLOT NO: 1, BUNGLOW NO:110, AZIZ SHAHEED ROAD, SIALKOT CANTT SIALKOT
03.08.2009 PLOT # 120  JINNAH AVENUE, HOUSING SCHEME NO 1, GDA , GAWADAR GAWADAR
31.12.2009 HOSPITAL ROAD BRANCH, NAROWAL NAROWAL
26.12.2009 OPEN PLOT NO:110-D, EME SECTOR DHA, LAHORE LAHORE
31.12.2009 JHANG ROAD, MUZAFFARGARH MULTAN
21.08.2006 OPEN PLOT NO:G-4, MAIN BOULEVARD, PHASE-I, DHA, LAHORE LAHORE
23.07.2011 MARKAZ E 11/2 ISLAMABAD (BRANCH LAND & BUILDING) ISLAMABAD
30.06.2011 PL KH # 1040/901-900, KH# 346, KHATOONI#595, PASRUR RD SIALKOT
30.06.2011 PREEDY STREET, SADDAR, KARACHI KARACHI
30.12.2011 WECHS, WAPDA TOWN, MULTAN MULTAN
01.12.2011 SHAHI ROAD RAHIMYARKHAN RAHIM YAR KHAN
29.09.2014 BAHADURABAD, KARACHI KARACHI
30.12.2011 ISLAMABAD STOCK EXCHANGE ISLAMABAD
30.12.2010 HEAD OFFICE BUILDING LAHORE LAHORE
 Allied Bank Limited 203

ANNEXURE III
as at December 31, 2017

LOCATION OF REVALUED PROPERTIES

Date of Purchase Particulars City Location

29.01.2013 MONTGOMERY BAZAR, PROPERTY # 18, KHATOONI NO.1618 FAISALABAD
06.07.2012 PLOT # 14,COMMERCIAL AREA, BLOCK-G,FIEDMC,INDUSTRIAL EST,FAISALABAD FAISALABAD
23.10.2012 PEOPLES COLONY GUJRANWALA GUJRANWALA
24.12.2013 PLOT # 19/I-8 MARKAZ ISLAMABAD ISLAMABAD
28.02.2014 146-C, AL-MURTAZA COMMERCIAL LANE # 1-A, DHA KARACHI KARACHI
30.06.2014 LAND KHEWAT 601 KHATOONI 620 AT LIAQUAT ROAD SHAIWAL FOR RHQ SAHIWAL AND BR 0727 SAHIWAL
11.09.2017 PLOT # 14 DHA PHASE VI - C, LAHORE LAHORE
14.10.2014 PLOT # 48 & 53 DHA PHASE VI - C, LAHORE LAHORE
28.12.2014 SOAN GARDENS, EMPLOYEES COOPERATIVE HOUSING SOCIETY, RAWALPINDI RAWALPINDI
02.02.2015 PLOT # BXII-7S-58 AT RAKBA BHATIA NAGAR G.T ROAD, TEHSIL & DISTT. GUJRANWALA GUJRANWALA
10.02.2014 LAND  88 KANAL AT MOUZA WASU ASTANA TEHSIL ATHARA HAZARI DISTRICT JHANG WAREHOUS JHANG
31.07.2015 PLOT NO. 1125-A LDA AVENUE-1 RAIWANDROAD LAHORE LAHORE
10.11.2015 PLOT FOR SHIFTING OF CHAH-MIRAN BR 0763 EAST REGION LHR LAHORE
1.12.2015 OPEN PLOT KHEWAT NO 1909/1821 & 1910/1822 MAIN ROAD LALLIAN, FAISALABAD, CHINIOT FAISALABAD
26.02.2015 OPEN PLOT AT DHAMKE, LAHORE JARANWALA ROAD, DISTT. SHEIKHUPURA GUJRANWALA
04.03.2015 PROPERTY# B-VII-352 (PT-1) MEASURING 14-MARLAS FOR SHIFTING B/O SAMBRIAL (0554) GUJRANWALA
31.12.2015 PLOT 20, BLOCK B, BROADWAY DHA PHASE VIII LAHORE LAHORE
15.01.2016 PLOT 185 CCA-4 DHA PHASE-VII-C LAHORE LAHORE
19.11.2015 PLOT KHEWAT NO 1994, 1995 SITUATED AT MOUZA PANSERA TEHSIL SADDAR FAISALABAD JHANG
30.12.2015 G.T ROAD WAN-RADHA-RAM HABIBABAD PATOKI SAHIWAL
26.12.2015 PLOT AT SHAHRAH-E-AZAM PATTOKI FOR SHIFTING OF PATTOKI BRANCH (0300) SAHIWAL
08.01.2016 KHEWAT#847,KHATOONI#1089,KHASRA#95/26 MOUZA RAJAN MULTAN
01.03.2016 RENTED PRIMISES CHOWK YADGAR PESHAWAR (0304) PESHAWAR
16.06.2015 LAND SITUATED AT E-78 MADNI CHOWK ATTOCK CITY, RWP RAWALPINDI
17.08.2015 PLOT NO. B-17 SHAHRAH-E-GHALIB CLIFTON BLOCK NO.1. SHIREEN JINNAH COLONY KARACHI KARACHI
17.11.2015 PLOT NO.45,NAYA NAZIMABAD,KHARACHI KARACHI
09.05.2016 ISMAIL ROAD SITARA SAPNA CITY FAISALABAD FAISALABAD
19.05.2016 QUAID-E-MILAT RD FOR SHIFTING GRAIN MARKET BR BAHAWALPUR
11.05.2016 COMMERCIAL PLOT # 10 AT PARK ENCLAVE ISLAMABAD ISLAMABAD
16.01.2017 SHOP NO.2-A &WALL FIXTURE 34 A AT SARDAR COOPERATIVE MARKET KARACHI SOUTH
28.11.2016 PLOT NO 46 SECTOR Z-1 PHASE VIII-C DHA LAHORE LAHORE WEST
03.07.2017 PLOT # 4AT CIVIC CENTRE JUBILEE TOWN LAHORE LAHORE EAST
07.12.2016 PLOT NO.427,BLOCK-E PIA EMPLOYEES CO-OPERATIVE HOUSING SOCIETY LHR LAHORE WEST
15.08.1994 ADAM ARCADE BRANCH, BHAHDURABAD,  KARACHI KARACHI
19.08.1998 CLOTH MARKET KARACHI (M.A.JINNAH ROAD) KARACHI
12.07.1999 SAIMA TRADE TOWER, I.I. CHUNDRIGAR ROAD, KARACHI KARACHI
05.08.1999 BUNGLOW NO. 33/4 BLOCK 7&8 BANGLORE TOWN, KARACHI + RARE PORTION KARACHI
17.05.1995 BLDG AT 199 & 199/A UPPER MALL LAHORE LAHORE
21.12.2005 SR -7 ALTAF HUSSAIN ROAD NEW CHALLI KARACHI
30.04.2008 P #130/3 & 130/4-M INDUSTAL EAST KOT LAKHPAT, LHR LAHORE
31.12.2009 PLOT NO. 39/4, PR-2, SITUATED AT GARDEN ROAD, KARACHI AREA 225 SQ. KARACHI
31.12.2009 BUILDING SITUATED AT MOUZA/ CHAK NO. 239/RB FAISALABAD AREA 06 KANA, 08 MARLA FAISALABAD
31.01.2014 G.T.ROAD 1934, 1935, 1942, MOUZA TEHSIL WAZIRABAD, GUJRANWALA GUJRANWALA
31.03.2011 8TH FLOOR, M/S. JOFA TOWERS, KARACHI KARACHI
31.12.2012 OFFICE NO: A-401, CITY TOWER LAHORE LAHORE
12.09.2017 PROPERTY AT RANG PURA SIALKOT SIALKOT
07.04.2017 BRANCH BALDIA ROAD OUTSDIDE GRAIN MARKET HASILPUR BAHAWALPUR
21.09.2017 BRANCH 0108 AT G T ROAD KARAKORAM HIGHWAY HARIPUR HARIPUR
03.10.2017 PLOT 18C STADIUM LANE PHASE V DHA KARACHI KHADDA MARKET KARACHI
30.06.2017 PROPERTY 463 SHADMAN LAHORE LAHORE
29.09.2017 RESIDENCE PLOT D-18  CHAUDARY KHALEEQ UZ ZAMAN RD CLIFTON KARACHI KARACHI
28.09.2017 PROPERTY NO 12 SECTOR A DHA PHASE II ISLAMABAD FOR BR 0715 ISLAMABAD
27.09.2017 BA-02 LUCKY ONE MALL FOR OPEING OF NEW BRANCH F.B AREA KARACHI KARACHI
13.12.2017 COMMERCIAL PLOTS NO. 20 & 21 BAHRIA ORCHARD RAIWIND LAHORE 1079 LAHORE
27.09.2017 PLOT AT UNIVERSITY ROAD SARGODHA FOR SHIFTING OF BRANCH 0798 SARGODHA
05.12.2017 PROPERTY KHEWAT # 478,KHATOONI # 1413,KHASRA # 2414 OF DAIWAL BR0966 KHUSHAB
204 Annual Report 2017

ANNEXURE III
as at December 31, 2017

LOCATION OF REVALUED PROPERTIES

Date of Purchase Particulars City Location

12.07.2017 COMMERCIAL PLOT # 172 BLOCK CCA,PHASE 4C,DHA LAHORE LAHORE
29.09.2017 PLOT PARAGON CITY BARKI ROAD LAHORE FOR SHIF. BR 1021 LAHORE
27.09.2017 PROPERTY AT GULSHAN E JAMAL FAISAL CANTONMENT KARACHI KARACHI
31.12.2017 PROPERTY AT 870-C, B-BLOCK-2 PECH SOCIETY ALLAMA IQBAL ROAD 0663 KAR KARACHI
31.12.2017 OPEN PLOT # 1474 DABGARI GATE KOHAT ROAD 0604 PESHAWAR CITY PESHAWAR
31.12.2017 PLOT TELE GARDENS SCHEME SEC F-17 ISLAMABAD ISLAMABAD
27.09.2017 MAIN RAILWAY ROAD OPPOSITE GALA MANDI KHANEWAL FOR SHIFT OF BR 0124 KHANEWAL
05.12.2017 PROPERT KHEWAT # 117, KHATOONI # 224, KHASRA # 1041 KAPOORWALI 0558 SIALKOT
13.07.2011 K# 6989/2571, 6991/2571, 6993/2571,SHEIKHUL BANDI, ABBT ABBOTABAD
31.12.2017 COMMERICIAL SPACE SHOP 105 1ST FLOOR LEVEL 1 BAHRIA TOWN KARACHI KARACHI
 Allied Bank Limited 205

ANNEXURE IV
Islamic Banking Business
Shariah Board’s Report
For the year ended December 31, 2017

In the name of Allah, the Beneficent, the Merciful

The Board of Directors and Executive Management are solely responsible to ensure that the operations of Allied Bank Limited - Islamic
Banking Group (ABL-IBG) are conducted in compliance with Shari’ah principles at all times. Shari’ah Board is pleased to submit a report
on the overall Shari’ah compliance environment of ABL-IBG.

To form basis of our opinion as expressed in this report, Shari’ah compliance review of each class of transactions, the relevant documentation
and process flows on sample basis was carried out. Besides, we have also reviewed the reports of the internal Shari’ah audit of ABL-IBG
conducted during the year.

Based on the above, we are of the view that:

The business affairs of ABL-IBG, especially with reference to transactions, relevant documentation and procedures, performed during the
year 2017 are in conformity with the principles and guidelines of Shari’ah issued by Shari’ah Board and State Bank of Pakistan.

The Bank primarily used Murabaha, Ijarah, Diminishing Musharakah and Business Musharkah for its financing activities during the year.
The gradual shift from Trade based modes to Participative modes is an encouraging development beneficial towards the growth of Islamic
Banking industry at large.

ABL-IBG has put a mechanism in place in form of Internal Shari’ah Audit and Sharia’h Compliance reviews to ensure Shari’ah compliance
in their overall operations and will keep its focus on continuous improvement to cater to the growing branch network over the coming
years. The system within the bank is sound enough to ensure that amounts realized from prohibited sources, if any, is not made a part
of the income. The bank recovered charity from customers on delayed payments and accordingly an amount of Rs. 0.023 million was
granted to approved charitable institutions.

The Internal Shari’ah Audit Function plays a vital role in achieving the objective of ensuring Shari’ah compliance by evaluating the adherence
to Shari’ah guidelines prescribed by Shari’ah Board, Resident Shari’ah Board Member and Shari’ah guidelines of Islamic banking division
of SBP, in every activity under taken by the ABL-IBG.

Shari’ah Compliance Department (SCD) of the bank reviews the customer’s business model before finalizing of the process flow of any
facility. Factory visits and reviews of business processes and transactions are undertaken to ensure that the facility being offered to the
customer is delivered through a process that ensures compliance with Shari’ah. Moreover, random physical inspections and concrete
measures were taken to verify the purchases evidences and invoices of financing transactions, thus further improving the quality of internal
controls.

Shari’ah Compliance Review of all IBG Branches/departments was conducted as a part of the Bank’s efforts to strengthen the internal
Shari’ah control mechanism. These reviews not only cover the transactions that the departments undertake but also include an evaluation
of the Shari’ah knowledge of staff.

It is encouraging to note that IBG has aligned various staff facilities according to Shari’ah principles.

During the year 2017, ABL -IBG has successfully opened 40 new branches. Hence, the total branch network reached to 117 as on
December 2017.

Review & Development:

Asset Review: During the year, financing portfolio has increased to Rs. 4,662 million, which mainly constitutes of Business Musharkah
(56.69%), Ijarah (35.13%), Diminishing Musharkah (5.59%), staff Car Ijarah (2.05%) and Murabaha (0.54%). Besides, investment portfolio
has also risen to Rs. 8,304 million mainly constituting of Government Ijarah Sukuk and Corporate Sukuk.

Liability Review: The total deposits of ABL-IBG have increased by 82% reaching to Rs. 15,547 million as at December 31, 2017
compared to Rs. 8,554 million as of last year.

Profit Distribution Policy: Shari’ah compliance also conducted review of the process of profit distribution and charging of losses to
Mudharabah based remunerative deposits, which was reviewed and approved on monthly basis, is in conformity with the Shari’ah rules
and principles and pool management guidelines of State Bank of Pakistan.

Following major milestones were achieved during the year 2017:

Following Policies and Procedures were approved during the year:-

• Islamic Trade Finance Manual

•  Interbank Transactional Manual under Wa’ad
• Operational Risk Management Policy and Manual
• Market and Liquidity Risk policy and Manual
• Reputational Risk Management Framework
206 Annual Report 2017

ANNEXURE IV
Islamic Banking Business
Shariah Board’s Report
For the year ended December 31, 2017

Following asset products were approved during the year:

• Musawamah
• Staff Car Ijarah
• Staff Home Musharakah
• Allied Islamic Car Ijarah

Besides the above, full scope review was carried out for the following policies and manuals:

• Procedural Manual IB Pool Management

• Islamic Banking Policy for Pool Management
• Islamic Banking Deposit Manual
• Islamic Banking Charter
• Manual for Conversion of Conventional Banking Branches to Islamic Banking Branches
• Service Level Agreement

Shari’ah compliance department has also structured 10 customized process flows for asset products and reviewed 2 customized
solutions.

Staff Training

In order to enhance the Islamic banking knowledge and expertise, training on Islamic Banking concepts as well as on Islamic banking
products were imparted to all staff of the Islamic Banking Group. Management Development Center of ABL, arranged various sessions
and more than 225 employees attended these sessions. Moreover, 14 employees attended training session conducted by NIBAF and
other reputed Islamic banking training institutes.

BOD and Executive Management Training/Orientation

In order to enhance Islamic banking knowledge and acumen, different training sessions for BOD and senior management were conducted
by the Shariah Board.

Recommendations:

Following are some areas, which require continuous focus:

1. ABL-IBG has significantly improved in the area of product development during the year. We expect that ABL-IBG will continue its
focus on introducing more products during 2018 besides working on further refinement of the existing products.

2. Bank’s increased focus on customers’ awareness regarding Islamic banking is well appreciated. It is recommended that such
programs should be continued in future for Ulama/Shariah scholars as well.

3. Bank’s policy of appointing new staff members for Islamic banking branches with inclination /commitment to the ideology of Islamic
banking must be continued.

4. The Bank is actively pursuing training of its human resources about various aspects of Islamic Banking & Finance through training
sessions/seminars. However, continous focus must be maintained to improve the level of awareness through enhanced training
mechanism for each level especially for IB Treasury Operations. This will ensure capacity building as well as address the possible
Sharia’ah non-compliance risk.

We pray to almighty ALLAH to provide us guidance to adhere to the Shari’ah principles in day-to-day operations, to absolve our
mistakes and for the success of Islamic banking in Pakistan.

Mufti Muhammad Iftikhar Baig Mufti Mehmood Ahmad Mufti Ehsan Waquar
Resident Member Shari’ah Board Member Shari’ah Board Chairman Shari’ah Board

Date: February 21, 2018

 Allied Bank Limited 207

ANNEXURE IV
Islamic Banking Business
For the year ended December 31, 2017
208 Annual Report 2017

ANNEXURE IV
Islamic Banking Business
For the year ended December 31, 2017
 Allied Bank Limited 209

ANNEXURE IV
Islamic Banking Business
Shariah Board Members’ Profile

Mufti Ehsan Waquar Ahmed Mufti Muhammad Iftikhar Baig

Chairman Shariah Board Resident Shariah Board Member

He is serving as Chairman Shariah Board of Allied Bank Limited, He is serving Allied Bank Limited as Resident Shariah Board
National Bank of Pakistan and Soneri Bank Ltd. He is also Member (RSBM). He is a qualified Mufti from the Jamia Darul-
member Sharia’h board of NBP Fullerton Asset Management Uloom Karachi, which is one of the most reputed and prestigious
Limited (NAFA); a Subsidiary of National Bank of Pakistan. He religious institution in the country. He is also a Law graduate
has professional experience of more than 20 years at senior level and in the process of completing his Ph.D thesis on the subject
management of various prestigious institutions. His unique blend ‘Shariah Compliant Solution regarding Foreign Trade’. His
of Educational combination gives him an ability to understand previous experience includes Shariah Advisory services in local
and correlate commercial transactions with Shariah principles. and international banks. He regularly delivers lectures on Islamic
He graduated as a Mufti achieving Masters in Traditional Islamic Economics and Finance at different forums and educational
Studies and acquired Masters in Economics & MBA in Finance. institutions.
He has also accomplished his Bachelor in Legislation and
Law (LLB).

He was member of Technical Committee for Developing

Accounting & Auditing Standard for Islamic Financial Institutions
at Institute of Chartered Accountants of Pakistan and a member of
Shariah Advisers Forum at State Bank of Pakistan. Furthermore,
he is a frequent writer & contributes for different periodicals being
issued both internationally and locally as well.

Mufti Mahmood Ahmad

Member Shariah Board

He is serving as member Shariah Board of Allied Bank Limited

and MCB Bank Limited. He graduated as a scholar in Shahadatul-
Almiah (Masters in Arabic and Islamic studies) from Wifaqu-ul-
Almadaris Alarabia. He has also done his Masters in Arabic from
Punjab University, Lahore (Takhassus-Fi-Alifta) in Islamic Fiqh and
fatwa from Jamia Darul-Uloom, Karachi. He has also completed
his M Phil in Islamic Banking. He has experience of seven years
as a Shariah consultant with Islamic Micro-Finance and other
organizations. He is a Mufti and Lecturer in world renowned
Islamic university - Al Jamia Al Ashrafia Lahore.
210 Annual Report 2017

ANNEXURE IV
Islamic Banking Business
The Bank is operating 117 Islamic banking branches at the end of December 31, 2017 (2016: 77).
Statement of Financial Position
as at December 31, 2017
Note December 31, December 31,
2017 2016

Rupees in ‘000

ASSETS
Cash and balances with treasury banks 1,093,706 624,008
Balances with other banks 31,209 40,870
Due from financial institutions 1,914,968 1,200,000
Investments 8,303,563 6,047,476
Islamic financing and related assets A-IV. 2 4,662,326 605,138
Operating fixed assets 959,241 426,925
Deferred tax assets – –
Due from Head Office – –
Other assets 385,148 177,468
17,350,161 9,121,885

LIABILITIES
Bills payable 124,270 68,082
Due to financial institutions 500,000 –
Deposits and other accounts
Current accounts -non-remunerative 3,494,591 1,425,226
Saving accounts 5,629,629 2,002,964
Term deposits 1,388,372 236,663
Deposit from Financial Institutions - remunerative 5,034,324 4,889,822
Deposits from Financial Institutions - non-remunerative 50 10
Deferred tax liability – –
Due to Head Office 65,013 77,954
Other liabilities 137,038 45,680
16,373,287 8,746,401
NET ASSETS 976,874 375,484

REPRESENTED BY
Islamic Banking Fund 1,450,000 500,000
Accumulated Losses (557,392) (175,432)
892,608 324,568
Surplus on revaluation of assets 84,266 50,916
976,874 375,484

CHARITY FUND
Opening balance 2 11
Additions during the year 22 5
Payments/ utilization during the year (23) (14)
Closing balance 1 2
 Allied Bank Limited 211

ANNEXURE IV
Islamic Banking Business
Profit and Loss Account
for the year ended December 31, 2017

December 31, December 31,

2017 2016

Rupees in ‘000

Profit / return earned 707,065 372,181

Profit / return expensed 370,973 225,806
Net profit / return 336,092 146,375

OTHER INCOME
Fee, commission and brokerage income 43,396 20,165
Dividend income – 637
(Loss) / income from dealing in foreign currencies (1,097) 101
(Loss) / gain on sale of securities (301) 63,572
Other income 74 57
Total other income 42,072 84,532
378,164 230,907
OTHER EXPENSES
Administrative expenses 760,124 377,829

LOSS BEFORE TAXATION (381,960) (146,922)

Unappropriated loss brought forward (175,432) (28,510)
UNAPPROPRAITED LOSS CARRY FORWARD (557,392) (175,432)

Remuneration to Shariah Advisor / Board 7,332 7,332
212 Annual Report 2017

ANNEXURE IV
Islamic Banking Business
Statement of Cash Flow
for the year ended December 31, 2017

December 31, December 31,

2017 2016

Rupees in ‘000

CASH FLOW FROM OPERATING ACTIVITIES

Loss before taxation (381,960) (146,922)
Less: Dividend income – (637)
(381,960) (147,559)

Adjustments for non-cash items:
Depreciation / amortization 262,838 31,543
Gain on sale of other asset (47) –
262,791 31,543
(119,169) (116,016)
(Increase) / decrease in operating assets
Due from financial institutions (714,968) (927,725)
Islamic financing and related assets (4,203,950) (465,155)
Other assets (excluding advance taxation) (207,634) (154,214)
(5,126,552) (1,547,094)
Increase / (decrease) in operating liabilities
Bills payable 56,188 56,626
Due to financial institutions 500,000 (18,500)
Deposits and other accounts 6,992,281 6,219,928
Other liabilities 91,359 3,737
7,639,828 6,261,791
2,394,107 4,598,681
Income tax paid – –
2,394,107
Net cash flow generated from operating activities 4,598,681

CASH FLOW FROM INVESTING ACTIVITIES
Net investments in ‘available-for-sale’ securities (2,292,081) (4,911,286)
Net realization in ‘held-to-maturity’ securities – 1,120,165
Due from Head Office (12,941) 133,248
Dividend income received – 637
Investments in operating fixed assets (579,048) (412,166)
(2,884,070)
Net cash used in investing activities (4,069,402)

CASH FLOW FROM FINANCING ACTIVITIES
Increase in Share Capital 950,000 –
Net cash used in financing activities 950,000 –

Increase in cash and cash equivalents during the year 460,037 529,279
664,878
Cash and cash equivalents at beginning of the year 135,599

1,124,915
CASH AND CASH EQUIVALENTS AT END OF THE YEAR 664,878
 Allied Bank Limited 213

ANNEXURE IV
Islamic Banking Business
Notes to the Annexure IV
for the year ended December 31, 2017

A-IV. 1 POOLS MANAGEMENT

Allied Bank Limited – Islamic Banking Group is maintaining the following pools for profit declaration & distribution under
Mudaraba, Wakala and Musharka modes:
General Pool - PKR
Under the general deposits pool PKR, the Bank - IBG accepts PKR funds on Mudaraba basis from depositors (Rab-ul-Maal)
where the Bank - IBG acts as Manager (Mudarib) and invests the funds in the Shariah compliant modes of financings, investments
and placements. When investing funds, the Bank prioritizes the funds received from depositors over the funds generated from
own sources.
The profit of General Pool is calculated after deducting the directly incurred expenses, if any, from the income earned on all the
remunerative assets managed by the pool. No provision against any non-performing asset of the pool are passed on is charged
to the pool except on the actual loss / write-off of such non-performing asset. The profit of the pool is shared between equity and
other members of the pool at gross level (before charging of mudarib fee) as per the investment ratios. The profit of the pool is
shared among the members of the pool on pre-defined mechanism based on the profit weightages announced before the profit
calculation period after charging of mudarib fee.
General Pool (s) - FCY (USD/EURO/GBP)
All FCY deposits are parked in these pool(s) and return is shared among FCY deposit holders, the weightages of these pool(s)
are declared separately.
Specific Pools
Specific pool(s) are created where the customers desire to invest in high/low yield assets. Profit rates of these pool(s) are higher/
lower than the general pool depending on the assets. In case of loss in special pool, the loss will be borne by the Special pool
members. The net return on the pool is arrived at after deduction of direct costs from the gross return earned on the pool. From
the net return, profit is paid to the Mudarib in the ratio of the Mudarib’s equity in the pool to the total pool. The balance represents
the distributable profit.

Parameters associated with risk & rewards:

Following are the considerations attached with risk & reward of modaraba based pools:
• Period, return, safety, security and liquidity of investment.
• Financing proposals under process at various stages and likely to be extended in the near future.
• Expected withdrawals of deposits according to the maturities affecting the deposit base.
• Expected amount of procurement of deposit during coming days as a result of concerted marketing efforts of ABL-IBG.
• Maturities of funds obtained from Principal Office, Islamic Banking Institutions and Shariah compliant organizations as
regulated in Pakistan.
• Element of Risk attached to various types of investments.
• SBP rules & Shariah Clearance.
Treasury Pools
Treasury Pools are managed on the basis of Musharakah / Mudarabah / Wakala wherein ABL-IBG and Financial Institutions
share actual return earned by the pool according to pre-defined profit sharing ratio.

The deposits and funds accepted under the above mentioned pools are invested in diversified sectors and avenues of the
economy / business along with investment in Government of Pakistan backed Ijarah Sukuks & other Shariah Compliant
assets.

The risk characteristic of each pool mainly depends on the assets and liability profile of each pool.

A-IV. 2 ISLAMIC FINANCING AND RELATED ASSETS

Note December 31, December 31,

2017 2016

Rupees in ‘000

Business Musharka - Financings 2,643,053 –

Ijarah A-IV. 2.1 1,637,694 105,602
Diminishing Musharaka A-IV. 2.2 260,759 54,355
Staff Ijarah A-IV. 2.3 95,523 –
Murabaha A-IV. 2.4 25,297 445,181
214 Annual Report 2017

ANNEXURE IV
Islamic Banking Business
Notes to the Annexure IV
for the year ended December 31, 2017

December 31, December 31,

2017 2016

Rupees in ‘000

Gross Advance 4,662,326 605,138

Provision held – –
4,662,326
Advance-net of provision 605,138

A-IV. 2.1 Ijarah
Financings 1,590,172 61,562
Advances 28,835 32,530
Inventories 18,687 11,510
1,637,694 105,602
A-IV. 2.2 Diminishing Musharaka
Financing 105,560 –
Advance 155,199 54,355
260,759 54,355
A-IV. 2.3 Staff Ijarah
Financing 37,098 –
Advance 58,425 –
95,523 –
A-IV. 2.4 Murabaha
Financing 18,687 –
Advance 6,610 445,181
25,297 445,181

A-IV. 3. PROFIT / (LOSS) DISTRIBUTION TO DEPOSITOR’S POOL

Profit rate Percentage Amount of

Profit rate and Profit rate return of Mudarib Mudarib
Remunerative weightage return earned Profit Mudarib distributed to share Share
Depositor’s announcement on earning sharing share remunerative transferred transferred
Pool period assets ratio deposits through Hiba through Hiba
(Savings and
Fixed)

Rupees in ‘000 Rupees in ‘000
General Pool Monthly 5.90% 50% 139,704 2.97% 8.30% 11,600


December 31, December 31,
2017 2016

Rupees in ‘000

A-IV. 4 AVENUES / SECTORS WHERE MUDARABA BASED DEPOSITS HAVE BEEN DEPLOYED

Production & Transmission of Energy 2,643,053 503,181

Manufacturing – 54,355
Chemicals & Allied Products 231,544 –
Petroleum and Gas 1,589,841 –
Leather / Leather products 5,106 –
Financial Institutions 51,414 –
Agriculture & Food Products 2,340 –
Transportation & Logistics 40,406 47,602
Others 98,622 –
Total Gross Financing & Related Assets 4,662,326 605,138

GOP Ijarah Sukuk 2,861,151 2,296,489
Power/Energy Generation 4,155,412 2,850,987
Finanicial Institutions 1,287,000 2,100,000
Total Investments & Placements 8,303,563 7,247,476

12,965,889
Total Invested Funds 7,852,614
CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended December 31, 2017
 Allied Bank Limited 217

Directors’ Report on Consolidated Financial Statements

For the year ended December 31, 2017

On behalf of the Board, we are pleased to present the consolidated annual report of Allied Bank Limited (holding com-
pany) and ABL Asset Management Company Limited (subsidiary company).

The operating results and appropriations, as recommended by the Board are given below:
2017 2016 Growth
Rs. in Million %

Profit after tax for the year 12,926 14,700 (12)

Accumulated profits brought forward 47,632 42,285 13
Effect of re-measurement of defined benefit plans - net of tax (966) 289 (434)
Transfer from surplus on revaluation of fixed assets - net of tax 55 58 (5)
Transferred from surplus on revaluation of non-banking assets - net of tax 188 45 318
Profit available for appropriation 59,835 57,377 4

Final cash dividend for the year ended December 31, 2016 at Rs. 1.75
per share (2016: Year ended December 31, 2015 at Rs. 1.75 per share) (2,004) (2,004) 0
1st interim cash dividend for the year ended December 31, 2017
at Rs. 1.75 per share (2016: Rs.1.75 per share) (2,004) (2,004) 0
2nd interim cash dividend for the year ended December 31, 2017
Rs. 1.75 per ordinary share (2016: Rs. 1.75 per share) (2,004) (2,004) 0
3rd interim cash dividend for the year ended December 31, 2017
at Rs. 1.75 per ordinary share (2016: Rs. 2.00 per share) (2,004) (2,290) (12)
Transfer to statutory reserves (1,273) (1,443) (12)
Accumulated profits carried forward 50,546 47,632 6
Earnings Per Share (EPS) (Rs.) 11.29 12.84 (12)

Pattern of shareholding
The pattern of shareholding as at December 31, 2017 is included in the Annual Report.

For and on behalf of the Board,

Mohammad Naeem Mukhtar Tahir Hassan Qureshi

Chairman Board of Directors Chief Executive Officer

Lahore
Dated: February 21, 2018
218 Annual Report 2017

KPMG Taseer Hadi & Co.

Chartered Accountants
2nd Floor,
Servis House
2-Main Gulberg Jail Road,
Lahore, Pakistan

Auditors’ Report
to the Members on Consolidated Financial Statements

We have audited the annexed consolidated financial statements comprising consolidated statement of financial position
of Allied Bank Limited and its subsidiary company (the Group) as at 31 December 2017 and the related consolidated
profit and loss account, consolidated statement of comprehensive income, consolidated statement of cash flow and
consolidated statement of changes in equity together with the notes forming part thereof, for the year then ended. We have
also expressed separate opinion on the financial statements of Allied Bank Limited and its subsidiary company namely ABL
Asset Management Company. These financial statements are the responsibility of the Holding Company’s management.
Our responsibility is to express an opinion on these financial statements based on our audit.

Our audit was conducted in accordance with the International Standards on Auditing and accordingly included such tests
of accounting records and such other auditing procedures as we considered necessary in the circumstances.

In our opinion, the consolidated financial statements present fairly the financial position of Allied Bank Limited and its
subsidiary company as at 31 December 2017 and the results of their operations for the year then ended.

KPMG Taseer Hadi & Co.

Chartered Accountants
(Kamran Iqbal Yousafi)

Lahore
Date: 21 February, 2018
 Allied Bank Limited 219

Consolidated Statement of Financial Position

as at December 31, 2017

December 31, December 31, Note December 31, December 31,

2017 2016 2017 2016
US $ in ‘000 Rupees in ‘000

ASSETS
773,028 662,974 Cash and balances with treasury banks 6 85,355,555 73,203,767
5,882 6,158 Balances with other banks 7 649,512 679,938
78,741 95,209 Lendings to financial institutions 8 8,694,399 10,512,752
6,333,467 5,351,748 Investments 9 699,323,690 590,924,972
3,369,769 2,991,127 Advances 10 372,080,555 330,271,881
437,938 296,904 Operating fixed assets 11 48,355,884 32,783,340
– – Deferred tax assets – –
297,626 295,857 Other assets 12 32,863,008 32,667,653
11,296,451 9,699,977 1,247,322,603 1,071,044,303

LIABILITIES
70,962 89,196 Bills payable 14 7,835,467 9,848,795
2,024,652 1,144,468 Borrowings 15 223,556,383 126,368,875
8,003,301 7,291,347 Deposits and other accounts 16 883,702,056 805,090,074
– – Sub–ordinated loans – –
– – Liabilities against assets subject to finance lease – –
62,863 99,632 Deferred tax liabilities 17 6,941,206 11,001,128
156,112 153,238 Other liabilities 18 17,237,459 16,920,059
10,317,890 8,777,881 1,139,272,571 969,228,931
978,561 922,096 NET ASSETS 108,050,032 101,815,372

REPRESENTED BY
103,704 103,704 Share capital 19 11,450,739 11,450,739
162,838 149,736 Reserves 17,980,116 16,533,485
457,774 431,380 Unappropriated profit 50,546,126 47,631,788
724,316 684,820 79,976,981 75,616,012
254,245 237,276 Surplus on revaluation of assets – net of tax 20 28,073,051 26,199,360
978,561 922,096 108,050,032 101,815,372

CONTINGENCIES AND COMMITMENTS 21


The annexed notes 1 to 44 form an integral part of these consolidated financial statements.

Chief Financial Officer President and Chief Executive Director

Director Chairman
220 Annual Report 2017

Consolidated Profit and Loss Account

for the year ended December 31, 2017

December 31, December 31, Note December 31, December 31,

2017 2016 2017 2016
US $ in ‘000 Rupees in ‘000

595,112 585,146 Mark-up / return / interest earned 23 65,710,553 64,610,157

309,094 283,869 Mark-up / return / interest expensed 24 34,129,289 31,344,015
286,018 301,277 Net mark–up / interest income 31,581,264 33,266,142

Net reversal of provision against non-performing
(17,814) (3,037) loans and advances 10.4 (1,966,938) (335,359)
80 678 Provision for diminution in the value of investments 9.3 8,804 74,906
– – Bad debts written off directly 10.6 – –
(17,734) (2,359) (1,958,134) (260,453)
303,752 303,636 Net mark-up / interest income after provisions 33,539,398 33,526,595

NON MARK-UP / INTEREST INCOME
41,284 40,537 Fee, commission and brokerage income 25 4,558,429 4,476,029
29,496 34,217 Dividend income 3,256,829 3,778,178
6,902 5,846 Income from dealing in foreign currencies 762,059 645,444
5,916 24,812 Gain on sale of securities 26 653,281 2,739,679
Unrealized (loss) / gain on revaluation of investments
(379) 1,171 classified as ‘held-for-trading’ - net 9.10 (41,912) 129,343
2,897 908 Other income 27 319,926 100,260
86,116 107,491 Total non-markup / interest income 9,508,612 11,868,933
389,868 411,127 43,048,010 45,395,528

NON MARK–UP / INTEREST EXPENSES
197,371 186,740 Administrative expenses 28 21,793,123 20,619,264
(1,421) 679 (Reversal) / Provision against other assets 12.2 (156,858) 75,000
(2,279) (120) Reversal against off-balance sheet obligations - net 18.1 (251,616) (13,273)
4,708 4,860 Other charges 29 519,835 536,671
198,379 192,159 Total non-markup / interest expenses 21,904,484 21,217,662

– – Extra–ordinary / unusual items – –
191,489 218,968 PROFIT BEFORE TAXATION 21,143,526 24,177,866

Taxation
66,920 77,656 Current 7,389,100 8,574,615
8,662 8,601 Prior year 956,441 949,657
(1,157) (422) Deferred (127,786) (46,542)
74,425 85,835 30 8,217,755 9,477,730
117,064 133,133 PROFIT AFTER TAXATION 12,925,771 14,700,136

431,380 382,951 Unappropriated profit brought forward 47,631,788 42,284,340

457,774 431,380 PROFIT AVAILABLE FOR APPROPRIATION 50,546,126 47,631,788

In US$ In Rupees

0.10 0.12 Earnings per share - Basic and Diluted 31 11.29 12.84

The annexed notes 1 to 44 form an integral part of these consolidated financial statements.

Chief Financial Officer President and Chief Executive Director

Director Chairman
 Allied Bank Limited 221

Consolidated Statement of Comprehensive Income

for the year ended December 31, 2017

December 31, December 31, December 31, December 31,

2017 2016 2017 2016
US $ in ‘000 Rupees in ‘000

117,064 133,133 Profit after taxation for the year 12,925,771 14,700,136


Other comprehensive income:

Items to be reclassified to profit and loss account
in subsequent periods

Exchange differences on translation of net investment
1,569 (102) in foreign operating branches 173,267 (11,246)


Items not to be reclassified to profit and loss account
in subsequent periods

(13,458) 4,023 Actuarial (loss) / gain relating to defined benefit plans (1,485,955) 444,154
4,710 (1,408) Related deferred tax 520,085 (155,454)
(8,748) 2,615 (965,870) 288,700

109,885 135,646 Comprehensive income transferred to equity 12,133,168 14,977,590


Components of comprehensive income not reflected in equity


Items to be reclassified to profit and loss account
in subsequent periods

(105,337) 50,944 Net change in fair value of ‘available-for-sale’ securities (11,630,976) 5,625,078
36,868 (17,831) Related deferred tax 4,070,842 (1,968,778)
(68,469) 33,113 (7,560,134) 3,656,300
41,416 168,759 Total Comprehensive Income 4,573,034 18,633,890


The annexed notes 1 to 44 form an integral part of these consolidated financial statements.

Chief Financial Officer President and Chief Executive Director

Director Chairman
222 Annual Report 2017

Consolidated Statement of Cash Flow

for the year ended December 31, 2017

December 31, December 31, Note December 31, December 31,

2017 2016 2017 2016
US $ in ‘000 Rupees in ‘000

CASH FLOW FROM OPERATING ACTIVITIES

191,489 218,968 Profit before taxation 21,143,526 24,177,866
(29,218) (34,217) Less: Dividend income (3,226,146) (3,778,178)
162,271 184,751 17,917,380 20,399,688
Adjustments for non-cash items
24,355 20,129 Depreciation / amortization 2,689,264 2,222,565
(17,814) (3,037) Reversal against non-performing loans and advances (1,966,938) (335,359)
80 678 Provision for diminution in the value of investments 8,804 74,906
379 (1,171) Unrealized (gain) / loss on revaluation of ‘held-for-trading’ securities 41,912 (129,343)
(2,279) (120) Reversal of provision against off-balance sheet obligations (251,616) (13,273)
(1,421) 679 (Reversal) / provision against other assets (156,858) 75,000
3,831 4,409 Provision for workers’ welfare fund 422,979 486,877
(480) (330) Gain on sale of operating fixed assets (53,012) (36,471)
(728) 21 (Gain) / loss on sale of non-banking assets / other assets (80,419) 2,294
5,923 21,258 654,116 2,347,196
168,194 206,009 18,571,496 22,746,884
(Increase) / decrease in operating assets

16,468 (64,815) Lendings to financial institutions 1,818,353 (7,156,661)
(225,947) (2,507) Net investments in ‘held-for-trading’ securities (24,948,471) (276,851)
(368,224) (75,066) Advances (40,658,277) (8,288,590)
(1,868) 38,209 Other assets (excluding advance taxation) (206,298) 4,218,970
(579,571) (104,179) (63,994,693) (11,503,132)
Increase / (decrease) in operating liabilities

(18,234) 44,437 Bills payable (2,013,328) 4,906,606
879,810 (104,626) Borrowings 97,146,144 (11,552,534)
711,954 638,887 Deposits and other accounts 78,611,982 70,544,059
5,268 (2,012) Other liabilities 581,647 (222,213)
1,578,798 576,686 174,326,445 63,675,918
1,167,421 678,516 128,903,248 74,919,670
(82,667) (100,558) Income tax paid (9,127,888) (11,103,317)
1,084,754 577,958 Net cash flows generated from operating activities 119,775,360 63,816,353

CASH FLOW FROM INVESTING ACTIVITIES
(965,077) (1,331,707) Net investments in ‘available-for-sale’ securities (106,561,084) (147,043,339)
103,515 970,685 Net realizations from ‘held-to-maturity’ securities 11,429,857 107,180,271
30,817 32,078 Dividend received 3,402,747 3,541,998
(74,566) (55,518) Investments in operating fixed assets (8,233,382) (6,130,195)
728 453 Proceeds from sale of operating fixed assets 80,414 50,069
(904,583) (384,009) Net cash flows used in investing activities (99,881,448) (42,401,196)

CASH FLOW FROM FINANCING ACTIVITIES
(72,336) (74,907) Dividend paid (7,987,116) (8,271,033)
(72,336) (74,907) Net cash flows used in financing activities (7,987,116) (8,271,033)
1,569 (102) Effect of translation of net investment in foreign operating branches 173,267 (11,246)
109,404 118,940 Increase in cash and cash equivalents during the year 12,080,063 13,132,878
674,964 549,468 Cash and cash equivalents at beginning of the year 74,527,584 60,670,689
(6,407) 151 Effect of exchange rate changes on opening cash and cash equivalents (707,403) 16,679
777,961 668,559 CASH AND CASH EQUIVALENTS AT END OF THE YEAR 32 85,900,244 73,820,246

The annexed notes 1 to 44 form an integral part of these consolidated financial statements.

Chief Financial Officer President and Chief Executive Director

Director Chairman
 Allied Bank Limited 223

Consolidated Statement of Changes in Equity

for the year ended December 31, 2017

Capital Reserve Revenue Reserve

Share Exchange Statutory General Un-

Capital Translation Reserve Reserve appropriated Total
Reserve Profit

Rupees in ‘000

Balance as at January 01, 2016 11,450,739 68,933 15,027,093 6,000 42,284,340 68,837,105
Changes in equity during the year ended December 31, 2016:

Total comprehensive income for the year ended December 31, 2016
Net profit for the year ended December 31, 2016 – – – – 14,700,136 14,700,136
Effect of re-measurement of defined benefit
plan–net of deferred tax – – – – 288,700 288,700
Effect of translation of net investment in
foreign operating branches – (11,246) – – – (11,246)
– (11,246) – – 14,988,836 14,977,590
Transactions with owners recognized directly in equity
Final cash dividend for the year ended
December 31, 2015 (Rs. 1.75 per ordinary share) – – – – (2,003,879) (2,003,879)
First interim cash dividend for the year ended
December 31, 2016 (Rs. 1.75 per ordinary share) – – – – (2,003,879) (2,003,879)
Second interim cash dividend for the year ended
December 31, 2016 (Rs. 1.75 per ordinary share) – – – – (2,003,879) (2,003,879)
Third interim cash dividend for the year ended
December 31, 2016 (Rs. 2.00 per ordinary share) – – – – (2,290,148) (2,290,148)
– – – – (8,301,785) (8,301,785)
Transferred from surplus on revaluation of operating fixed assets
to un–appropriated profit-net of tax – – – – 57,830 57,830
Transferred from surplus on revaluation of non–banking assets
to un–appropriated profit-net of tax – – – – 45,272 45,272
Transfer to statutory reserve – – 1,442,705 – (1,442,705) –
Balance as at December 31, 2016 11,450,739 57,687 16,469,798 6,000 47,631,788 75,616,012

Changes in equity during the year ended December 31, 2017:

Total comprehensive income for the year ended December 31, 2017
Net profit for the year ended December 31, 2017 – – – – 12,925,771 12,925,771
Effect of re-measurement of defined benefit
plan-net of deferred tax – – – – (965,870) (965,870)
Effect of translation of net investment in
foreign operating branches – 173,267 – – – 173,267
– 173,267 – – 11,959,901 12,133,168
Transactions with owners recognized directly in equity
Final cash dividend for the year ended
December 31, 2016 (Rs. 1.75 per ordinary share) – – – – (2,003,879) (2,003,879)
First interim cash dividend for the year ended
December 31, 2017 (Rs. 1.75 per ordinary share) – – – – (2,003,879) (2,003,879)
Second interim cash dividend for the year ended
December 31, 2017 (Rs. 1.75 per ordinary share) – – – – (2,003,879) (2,003,879)
Third interim cash dividend for the year ended
December 31, 2017 (Rs. 1.75 per ordinary share) – – – – (2,003,879) (2,003,879)
– – – – (8,015,516) (8,015,516)
Transferred from surplus on revaluation of operating fixed assets
to un–appropriated profit–net of tax – – – – 54,937 54,937
Transferred from surplus on revaluation of non–banking assets
to un–appropriated profit–net of tax – – – – 188,380 188,380
Transfer to statutory reserve – – 1,273,364 – (1,273,364) –
Balance as at December 31, 2017 11,450,739 230,954 17,743,162 6,000 50,546,126 79,976,981

The annexed notes 1 to 44 form an integral part of these consolidated financial statements.

Chief Financial Officer President and Chief Executive Director

Director Chairman
224 Annual Report 2017

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

1 STATUS AND NATURE OF BUSINESS

The "Group" consist of:

Holding Company

Allied Bank Limited ("the Bank"), incorporated in Pakistan, is a scheduled bank, engaged in commercial banking and related
services. The Bank is listed on Pakistan Stock Exchange Limited. The Bank operates a total of 1,250 (2016: 1,148) branches
in Pakistan including 117 (2016: 77) Islamic banking branches, 1 branch (2016:1) in Karachi Export Processing Zone and 1
Wholesale Banking Branch (2016: 1) in Bahrain. The long term credit rating of the Bank assigned by the Pakistan Credit Rating
Agency Limited (PACRA) is 'AA+'. Short term rating of the Bank is 'A1+'.

Ibrahim Holdings (Private) Limited is the parent company of the Bank and it's registered office is in Pakistan.

The Bank is the holding company of ABL Asset Management Company Limited.

The registered office of the Bank is situated at 3 - Tipu Block, Main Boulevard, New Garden Town, Lahore.

Subsidiary Company
ABL Asset Management Company Limited ("the Company") is a public unlisted company, incorporated in Pakistan as a limited
liability company on October 12, 2007 under the repealed Companies Ordinance, 1984. The Company has received certificate
of commencement of business on 31 December, 2007. The Company has obtained licenses from the Securities and Exchange
Commission of Pakistan (SECP) to carry out Asset Management Services and Investment Advisory Services as a Non-Banking
Finance Company (NBFC) under Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003 as amended
through S.R.O.1131[I] 2007 (the NBFC Rules). The Company has also obtained license to carry out business as Pension Fund
Manager, under the Voluntary Pension System Rules, 2005. The registered office of the Company is situated at Plot no. 14,
Main Boulevard, DHA Phase VI, Lahore (previously at 11-B Lalazar, M.T Khan Road Karachi). The Company is a wholly owned
subsidiary of Allied Bank Limited (the Holding company). The management quality rating of the Company, as assigned by JCR-
VIS Crediting Rating Company Limited, is AM2++ (Stable) in December 2017.

ABL Asset Management company is managing following funds:

ABL Income Fund Launched on September 20, 2008
ABL Stock Fund Launched on June 28, 2009
ABL Cash Fund Launched on July 30, 2010
ABL Islamic Income Fund Launched on July 30, 2010
ABL Government Securities Fund Launched on November 30, 2011
ABL Islamic Stock Fund Launched on June 12, 2013
ABL Pension Fund Launched on August 20, 2014
ABL Islamic Pension Fund Launched on August 20, 2014
ABL Islamic Financial Planning Fund Launched on December 22, 2015
ABL Financial Planning Fund Launched on December 31, 2015
ABL Islamic Dedicated stock fund Launched on December 19, 2016

2 a) BASIS OF PRESENTATION

These consolidated financial statements consist of holding company and its subsidiary company for the year ended
December 31, 2017.

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. Permissible forms of trade-
related modes of financing include purchase of goods by banks from their customers and immediate resale to
them at appropriate mark-up in price on deferred payment basis. The purchases and sales arising under these
arrangements are not reflected in these consolidated financial statements as such but are restricted to the amount
of facility actually utilized and the appropriate portion of mark-up thereon.

These consolidated financial statements have been presented in Pakistan Rupees (PKR), which is the currency of the
primary economic environment in which the Bank operates and functional currency of the Bank, in that environment
as well. The amounts are rounded to nearest thousand.

The US Dollar amounts reported in the statement of financial position, profit and loss account, statement of
comprehensive income and statement of cash flow are stated as additional information, solely for the convenience of
 Allied Bank Limited 225

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

the users of financial statements. For the purpose of translation to US Dollar, spot rate of Rs. 110.4172 per US Dollar
has been used for 2017 and 2016, as it was the prevalent rate on reporting date.

b) BASIS OF CONSOLIDATION

The assets and liabilities of subsidiary company have been consolidated on a line by line basis and the carrying
value of investment in subsidiary held by the Bank is eliminated against the shareholders' equity in the consolidated
financial statements.

c) BASIS OF MEASUREMENT

These consolidated financial statements have been prepared under the historical cost convention except for the
following which are stated at revalued amounts / fair values / present values:

- Investments (Note 5.3);
- Certain operating fixed assets (Note 5.5);
- Staff retirement and other benefits (Note 5.7);
- Non-banking assets acquired in satisfaction of claims (Note 5.8); and
- Derivative financial instruments (Note 5.14.2).

3 STATEMENT OF COMPLIANCE

3.1 These consolidated financial statements have been prepared in accordance with approved accounting standards as applicable
in Pakistan. Approved Accounting Standards comprise of such International Financial Reporting Standards (IFRSs) issued by
the International Accounting Standards Board (IASB) and Islamic Financial Accounting Standards (IFASs) issued by The Institute
of Chartered Accountants of Pakistan (ICAP) as are notified under the repealed Companies Ordinance, 1984, provisions of and
directives issued under the Banking Companies Ordinance, 1962 and the directives issued by State Bank of Pakistan (SBP) &
Securities and Exchange Commission of Pakistan (SECP). In case requirements of provisions and directives issued under the
Banking Companies Ordinance, 1962, repealed Companies Ordinance, 1984 and the directives issued by SBP and SECP differ
from requirements of IFRSs and IFASs, the provisions of and directives issued under the Banking Companies Ordinance, 1962,
repealed Companies Ordinance, 1984 and the directives issued by SBP and SECP shall prevail.

3.2 During the year on May 30, 2017, the Companies Act, 2017 (the Act) was enacted which replaced the Companies Ordinance,
1984. However, the Securities and Exchange Commission of Pakistan (SECP) through its Circular No. 23 of 2017 dated
October 04, 2017 has advised that the companies whose financial year closes on or before December 31, 2017 shall prepare
their financial statements in accordance with the provisions of the repealed Companies Ordinance, 1984.

3.3 The SBP, vide BSD Circular No. 10, dated August 26, 2002 has deferred the applicability of International Accounting Standard
39, Financial Instruments: Recognition and Measurement (IAS 39) and International Accounting Standard 40, Investment
Property (IAS 40) for banking companies till further instructions. Further, according to a notification of Securities and Exchange
Commission of Pakistan (SECP) dated April 28, 2008, International Financial Reporting Standard (IFRS 7) 'Financial Instruments
Disclosure', has not been made applicable for banks. Accordingly, the requirements of these standards have not been considered
in the preparation of these consolidated financial statements. However, investments have been classified and disclosed in
accordance with the requirements prescribed by SBP through various circulars.

3.4 IFRS 8 'Operating Segments' is effective for the Group's accounting period beginning on or after January 1, 2009. All banking
companies in Pakistan are required to prepare their annual financial statements in line with the format prescribed under BSD
Circular No. 4 dated February 17, 2006, 'Revised Forms of Annual Financial Statements', effective from the accounting year
ended December 31, 2006. The management of the Bank believes that as the SBP has defined the segment categorisation in
the above mentioned circular, the SBP requirements prevail over the requirements specified in IFRS 8. Accordingly, segment
information disclosed in these consolidated financial statements is based on the requirements laid down by SBP.

3.5 The Securities and Exchange Commission of Pakistan (SECP) vide SRO 56 (1) / 2016 dated January 28, 2016, has notified that
the requirements of IFRS10 (Consolidated Financial Statements) and section 237 of the repealed Companies Ordinance 1984
will not be applicable with respect to the investment in mutual funds established under Trust structure.

3.6 The State Bank of Pakistan through BPRD Circular No. 04 of 2015 dated February 25, 2015 has deferred applicability of Islamic
Financial Accounting Standard-3 for Profit & Loss Sharing on Deposits (IFAS-3) issued by the Institute of Chartered Accountants
of Pakistan and notified by the Securities & Exchange Commission of Pakistan (SECP), vide their SRO No. 571 of 2013 dated
June 12, 2013 for Institutions offering Islamic Financial Services (IIFS). The standard will result in certain new disclosures in the
financial statements of the Bank.
226 Annual Report 2017

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

3.7 New and amended standards and interpretations became effective during the year
During the year, certain amendments to standards, interpretations and improvements to accounting standards became
effective, however, the amendments, interpretations and improvements did not have any material effect on the consolidated
financial statements of the Group.

3.8 New Companies Act, 2017 and new Accounting Standards, Interpretations and Amendments to Published Approved
Accounting Standards that are not yet effective

3.8.1 The Companies Act, 2017 applicable for period beginning on January 01, 2018 requires certain additional disclosures and
section 235 of the repealed Companies Ordinance, 1984 relating to treatment of surplus arising out of revaluation of assets has
not been carried forward in the Companies Act, 2017. This would require change in accounting policy relating to surplus on
revaluation of land and building to bring it in line with the requirements of IAS 16 - Property, plant and equipment.

3.8.2 The State Bank of Pakistan has issued BPRD Circular No. 02 of 2018 dated January 25, 2018 'Revised Forms of Annual
Financial Statements' effective from the accounting year ended December 31, 2018. The 'Revised Forms of Annual Financial
Statements' have changed / added certain disclosures.

3.8.3 The following standards, amendments and interpretations of approved accounting standards will be effective for accounting
periods beginning on or after January 01, 2018:

- Classification and Measurement of Share-based Payment Transactions - amendments to IFRS 2 clarify
the accounting for certain types of arrangements and are effective for annual periods beginning on or
after January 1, 2018. The amendments cover three accounting areas (a) measurement of cash-settled
share-based payments; (b) classification of share-based payments settled net of tax withholdings; and (c)
accounting for a modification of a share-based payment from cash-settled to equity-settled. The new
requirements could affect the classification and/or measurement of these arrangements and potentially the
timing and amount of expense recognized for new and outstanding awards. The amendments are not
likely to have an impact on Group’s financial statements.

- Annual Improvements to IFRSs 2014-2016 Cycle [Amendments to IAS 28 ‘Investments in Associates and
Joint Ventures’] (effective for annual periods beginning on or after January 1, 2018) clarifies that a venture
capital organization and other similar entities may elect to measure investments in associates and joint
ventures at fair value through profit or loss, for each associate or joint venture separately at the time of
initial recognition of investment. Furthermore, similar election is available to non-investment entity that
has an interest in an associate or joint venture that is an investment entity, when applying the equity
method, to retain the fair value measurement applied by that investment entity associate or joint venture to
the investment entity associate's or joint venture's interests in subsidiaries. This election is made separately
for each investment entity associate or joint venture. The amendments are not likely to have an impact on
Group’s financial statements.

- IFRIC 22 ‘Foreign Currency Transactions and Advance Consideration’ (effective for annual periods
beginning on or after January 1, 2018) clarifies which date should be used for translation when a foreign
currency transaction involves payment or receipt in advance of the item it relates to. The related item is
translated using the exchange rate on the date the advance foreign currency is received or paid and
the prepayment or deferred income is recognized. The date of the transaction for the purpose of determining
the exchange rate to use on initial recognition of the related asset, expense or income (or part of it) would
remain the date on which receipt of payment from advance consideration was recognized. If there are
multiple payments or receipts in advance, the entity shall determine a date of the transaction for each
payment or receipt of advance consideration. The application of interpretation is not likely to have an
impact on Group’s financial statements.

- IFRIC 23 ‘Uncertainty over Income Tax Treatments’ (effective for annual periods beginning on or after
January 1, 2019) clarifies the accounting for income tax when there is uncertainty over income tax treatments
under IAS 12. The interpretation requires the uncertainty over tax treatment be reflected in the measurement
of current and deferred tax.

 Allied Bank Limited 227

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

- IFRS 15 ‘Revenue from contracts with customers’ (effective for annual periods beginning on or after July
1, 2018). IFRS 15 establishes a comprehensive framework for determining whether, how much and
when revenue is recognized. It replaces existing revenue recognition guidance, including IAS 18 ‘Revenue’, IAS 11
‘Construction Contracts’ and IFRIC 13 ‘Customer Loyalty Programmes’. The Group is assessing the potential impact
on its financial statements resulting from the adoption of IFRS 15.

- IFRS 9 ‘Financial Instruments’ and amendment – Prepayment Features with Negative Compensation (effective for
annual periods beginning on or after 1 July 2018 and 1 January 2019 respectively). IFRS 9 replaces the existing
guidance in IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 includes revised guidance on the
classification and measurement of financial instruments, a new expected credit loss model for calculating impairment
on financial assets, and new general hedge accounting requirements. It also carries forward the guidance on
recognition and derecognition of financial instruments from IAS 39. The Group is currently awaiting instructions from
SBP as applicability of IAS 39 (as explained in note 3.3) was deferred by SBP till further instructions.

- Amendment to IAS 28 ‘Investments in Associates and Joint Ventures’ - Long Term Interests in Associates and Joint
Ventures (effective for annual period beginning on or after January 1, 2019). The amendment will affect companies
that finance such entities with preference shares or with loans for which repayment is not expected in the foreseeable
future (referred to as long-term interests or ‘LTI’). The amendment and accompanying example state that LTI are in
the scope of both IFRS 9 and IAS 28 and explain the annual sequence in which both standards are to be applied.
The amendments are not likely to have an impact on Group’s financial statements.

Annual Improvements to IFRS Standards 2015–2017 Cycle - the improvements address amendments to following
approved accounting standards:

- IFRS 3 Business Combinations and IFRS 11 Joint Arrangement - the amendment aims to clarify the accounting
treatment when a company increases its interest in a joint operation that meets the definition of a business. A
company remeasures its previously held interest in a joint operation when it obtains control of the business. A
company does not remeasure its previously held interest in a joint operation when it obtains joint control of the
business.

- IAS 12 Income Taxes - the amendment clarifies that all income tax consequences of dividends (including payments
on financial instruments classified as equity) are recognized consistently with the transaction that generates the
distributable profits.

- IAS 23 Borrowing Costs - the amendment clarifies that a company treats as part of general borrowings any (specific)
borrowing originally made to develop an asset when the asset is ready for its intended use or sale.

The above amendments are effective from annual period beginning on or after January 1, 2019 and are not likely to have an
impact on Group’s financial statements.

4 CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

The preparation of these consolidated financial statements in conformity with the approved accounting standards requires the
use of certain critical accounting estimates and assumptions that affect the reported amounts of assets, liabilities, income and
expenses. It also requires the management to exercise its judgment in the process of applying the Group's accounting policies.
Estimates, underlying assumptions and judgments are continually evaluated and are based on historical experience, including
expectations of future events that are believed to be reasonable under the circumstances. The areas where various assumptions
and estimates are significant to the Group's financial statements or where judgment was exercised in application of accounting
policies are as follows:

i) Classification of investments
- In classifying investments as 'held-for-trading' the Group has determined securities which are acquired with
the intention to trade by taking advantage of short term market / interest rate movements and are to be sold
within 90 days.

- In classifying investments as 'held-to-maturity' the Group follows the guidance provided in SBP circulars
on classifying non-derivative financial assets with fixed or determinable payments and fixed maturity. In
making this judgment, the Group evaluates its intention and ability to hold such investments to maturity.

228 Annual Report 2017

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

- The investments, other than those in subsidiary, which are not classified as 'held-for-trading' or 'held-to-
maturity' are classified as 'available-for-sale'.

ii) Provision against non-performing loans and advances and debt securities classified as investments
The Group reviews its loan portfolio and debt securities classified as investments to assess amount of non-performing
loans and advances and debt securities and provision required there-against. While assessing this requirement various
factors including the delinquency in the account, financial position of the borrower and the requirements of the Prudential
Regulations are considered. The amount of general provision is determined in accordance with the requirements set
out in Prudential Regulations.

iii) Valuation and impairment of 'available-for-sale' equity investments

The Group determines that 'available-for-sale' equity investments are impaired when there has been a significant and
prolonged decline in the fair value below its cost. This determination of what is significant and prolonged requires
judgment. In making this judgment, the Group evaluates among other factors, the normal volatility in share price. In
addition, impairment may be appropriate when there is evidence of deterioration in the financial health of the investee,
industry and sector performance, changes in technology and operational and financing cash flows.

iv) Income taxes
In making the estimates for income taxes currently payable by the Group, the management looks at the current income
tax laws and the decisions of appellate authorities. In determination of deferred taxes, estimates of the Group's future
taxable profits are taken into account.

v) Fair value of derivatives

The fair values of derivatives which are not quoted in active markets are determined by using valuation techniques. The
valuation techniques take into account the relevant interest rates in effect at the reporting date and the rates contracted.

vi) Depreciation / amortization

In making estimates of the depreciation / amortization, the management uses method which reflects the pattern in
which economic benefits are expected to be consumed by the Group and estimates the useful life. The method applied
and useful lives estimated are reviewed at each financial year end and if there is a change in the expected pattern or
timing of consumption of the future economic benefits embodied in the assets, the estimate would be changed to
reflect the change in pattern. Such a change is accounted for as change in accounting estimates in accordance with
International Accounting Standard 8 - Accounting Policies, 'Changes in Accounting Estimates and Errors'.

vii) Defined benefits plan

Liability is determined on the basis of actuarial advice using the Projected Unit Credit Method. The actuarial assumptions
used to determine the liability and related expense are disclosed in note 34.

viii) Fair value hierarchy of assets and liabilities
The fair value of the assets and liabilities is the amount at which the instrument could be exchanged in a current
transaction between willing parties, other than in a forced or liquidation sale. The Group categorizes fair value
measurements within the following fair value hierarchy:

a) Level 1

These are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can
access at the measurement date.

b) Level 2

These are inputs other than quoted prices included within Level 1 that are observable for asset or liability,
either directly or indirectly.
 Allied Bank Limited 229

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

c) Level 3

These are input for the assets or liability that are not based on observable market data (unobservable Inputs).

5 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies adopted in the preparation of these consolidated financial statements have been applied consistently to
all periods presented in these consolidated financial statements of the Group. Significant accounting policies are enumerated as
follows:

5.1 Cash and cash equivalents

For the purpose of cash flow statement, cash and cash equivalents include cash and balances with treasury banks and balances
with other banks (net of overdrawn nostro balances) in current and deposit accounts.

5.2 Lendings to / borrowings from financial institutions

The Group enters into transactions of borrowing (re-purchase) from and lending (reverse re-purchase) to financial institutions,
at contracted rates for a specified period of time. These are recorded as under:

(a) Sale under re-purchase agreements

Securities sold subject to a re-purchase agreement are retained in the financial statements as investments and the
counter party liability is included in borrowings from financial institutions. The differential in sale and re-purchase value
is accrued on a prorata basis and recorded as mark-up expense.

(b) Purchase under resale agreements

Securities purchased under agreement to resell (reverse re-purchase) are included in lendings to financial institutions.
The differential between the contracted price and resale price is amortized over the period of the contract and
recorded as mark-up income.

Securities held as collateral are not recognized in the financial statements, unless these are sold to third parties, in
which case the obligation to return them is recorded at fair value as a trading liability under borrowings from financial
institutions.

In Bai Muajjal, the Group sells Sukuk on credit to other financial institutions. The credit price is agreed at the time of sale
and such proceeds are received at the end of the credit period. Profit is recognized on accrual basis.

In Musharaka / Mudaraba, the Group invests in the Shariah compliant business pools of the financial institutions at the
agreed profit and loss sharing ratio. Profit is recognized on accrual basis

Other borrowings including borrowings from SBP are recorded at the proceeds received. Mark-up on such borrowings
is charged to the profit and loss account on a time proportion basis.

Lendings are stated net of provision. Return on such lending is accrued to the profit and loss account on a time
proportion basis except mark-up on impaired/ delinquent lendings, which is recognized on receipt basis.

5.3 Investments

5.3.1 The Group at the time of purchase classifies its investment portfolio, other than investment in subsidiary, into the following
categories:

a) Held-for-trading

These are securities which are either acquired for generating a profit from short-term fluctuations in market prices,
interest rate movements and dealer’s margin.

b) Held-to-maturity
These are debt securities with fixed or determinable payments and fixed maturity that the Group has the positive intent
and ability to hold to maturity.
230 Annual Report 2017

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

c) Available-for-sale
These are investments, other than those in subsidiary, that do not fall under the 'held-for-trading' or 'held-to-maturity'
categories.

5.3.2 Investments are initially recognized at fair value which, in case of investments other than 'held-for-trading', includes transaction
cost associated with the investments. Transaction cost on 'held-for-trading' investments are expensed as incurred.

All 'regular way' purchases and sales of investments are recognized on the trade date, i.e., the date that the Group commits to
purchase or sell the asset. Regular way purchases or sales are purchases or sales of investments that require settlement within
the time frame generally established by regulation or convention in the market place.

5.3.3 In accordance with the requirements of the SBP, quoted securities, other than those classified as 'held-to-maturity' and investments
in subsidiaries, are carried at market value. Investments classified as 'held-to-maturity' are carried at amortized cost.

Unrealized surplus / (deficit) arising on revaluation of the Group’s 'held-for-trading' investment portfolio is taken to the profit and
loss account. Surplus / (deficit) arising on revaluation of quoted securities classified as 'available-for-sale' is kept in a separate
account shown in the statement of financial position below equity. The surplus / (deficit) arising on these securities is taken to the
profit and loss account when actually realized upon disposal or when the investment is considered to be impaired.

Unquoted equity securities are valued at the lower of cost and break-up value. The break-up value of these securities is calculated
with reference to the net assets of the investee company as per the latest available audited financial statements. A decline in
the carrying value is charged to the profit and loss account. A subsequent increase in the carrying value, upto the cost of the
investment, is credited to the profit and loss account. Investments in other unquoted securities are valued at cost less impairment,
if any.

Provision for diminution in the value of securities (except for debentures, participation term certificates, sukuks and term finance
certificates) is made after considering impairment, if any, in their value. Provision for diminution in value of debentures, participation
term certificates, sukuks and term finance certificates are made in accordance with the requirements of Prudential Regulations
issued by SBP.

5.4 Advances
a) Loans and advances

Loans and advances are stated net of general and specific provisions. Specific provision against loans is determined
in accordance with the requirements of the Prudential Regulations and other directives issued by SBP and charged
to the profit and loss account. General provision is maintained in accordance with the requirements of Prudential
Regulations issued by SBP and charged to the profit and loss account. Advances are written off when there are no
realistic prospects of recovery.

b) Net investment in finance lease

Leases, where the Group transfers substantially all the risks and rewards incidental to the ownership of an asset to
the lessee are classified as finance leases. A receivable is recognized at an amount equal to the present value of the
minimum lease payments, including un-guaranteed residual value, if any. Finance lease receivables are included in
advances to the customers.

c) Islamic financing and related assets

The Group provides Islamic financing and related assets mainly through Business Musharakah, Murabaha, Ijarah,
Diminishing Musharakah and Salam. The purchases and sales arising under these arrangements are not reflected in
these financial statements as such but are restricted to the amount of facility actually utilised and the appropriate portion
of profit thereon. The income on such financings is recognised in accordance with the principles of Islamic Shariah.
The Group determines specific an general provisions against Islamic financing and related assets in accordance with
the requirements of the Prudential Regulations issued by the SBP. The net provision made/ reversed during the year is
charged to profit and loss account and accumulated provision is netted off against Islamic financing and related assets.
Islamic financing and related assets are written off when there are no realistic prospects of recovery.
 Allied Bank Limited 231

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

5.5 Operating fixed assets and depreciation

a) Tangible assets
Property and equipment owned by the Group, other than land which is not depreciated, are stated at cost or revalued
amount less accumulated depreciation and impairment losses, if any. Land is carried at revalued amount.

Depreciation is calculated using the straight line method, except buildings which are depreciated using the reducing
balance method, to write down the cost of property and equipment to their residual values over their estimated useful
lives. The rates at which the fixed assets are depreciated are disclosed in note 11.2. The residual values, useful lives
and depreciation methods are reviewed and adjusted, if required. Adjustments in residual values, useful lives and
depreciation methods are treated as change in accounting estimates.

Depreciation on additions is charged from the month the assets are available for use, while no depreciation is charged
in the month in which the assets are disposed off.

Surplus arising on revaluation of fixed assets is credited to surplus on revaluation of fixed assets account. Deficit
arising on subsequent revaluation of fixed assets is adjusted against the balance in surplus account as allowed under
the provisions of the repealed Companies Ordinance, 1984. The surplus on revaluation of fixed assets to the extent
of incremental depreciation charged on the related assets, is transferred directly to unappropriated profit (net of
deferred tax).

Revaluation by independent professionally qualified valuers, is carried out with sufficient regularity to ensure that the
carrying amount of assets does not differ materially from their fair value.

An item of property and equipment is derecognized upon disposal or when no future economic benefits are expected
from its use or disposal. Any gain or loss arising on derecognition of the asset is recognized in the profit and loss
account in the year the asset is derecognized, except that the related surplus on revaluation of fixed assets (net of
deferred tax) is transferred directly to unappropriated profit.

Subsequent costs are included in the asset's carrying amount only when it is probable that future economic benefits
associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and
maintenance are charged to the profit and loss account.

b) Intangible assets

Intangible assets are carried at cost less any accumulated amortization and impairment losses, if any. The cost of
intangible assets is amortized over their estimated useful lives, using the straight line method. Amortization is charged
from the month the assets are available for use at the rate stated in note 11.3. The useful lives are reviewed and
adjusted, if appropriate, at each reporting date.

c) Capital work-in-progress

Capital work-in-progress is stated at cost less impairment losses, if any.

5.6 Taxation

a) Current

Provision for current taxation is based on taxable income for the year determined in accordance with the prevailing laws
for taxation. The charge for current tax is calculated using the prevailing tax rates or tax rates expected to apply to the
profits for the year. The charge for current tax also includes adjustments, where considered necessary relating to prior
years, including those arising from assessments finalized during the year.

b) Deferred

Deferred tax is recognized using the balance sheet liability method on all temporary differences, at the reporting date
between the amounts attributed to assets and liabilities for financial reporting purpose and amounts used for taxation
purposes. Deferred tax is calculated at the rates that are expected to apply to the periods when the difference will
reverse, based on tax rates that have been enacted or substantially enacted at the reporting date.
Deferred tax assets are recognized only to the extent that it is probable that future taxable profits will be available against
232 Annual Report 2017

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

which the assets can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the
related tax benefit will be realized.

The Group also recognizes a deferred tax asset / liability on deficit / surplus on revaluation of fixed assets, non-banking
assets and securities which is adjusted against the related deficit / surplus in accordance with the requirements of IAS-
12 'Income Taxes'.

5.7 Staff retirement and other benefits

5.7.1 Staff retirement schemes

a) For employees who opted for the lump sum pension scheme introduced by the management
An approved pension scheme (defined benefit scheme) under which the benefits on the basis of frozen basic salary,
service length and age as on June 30, 2002 are payable to all employees whose date of joining the Bank is on or before
July 01, 1992 i.e., who have completed ten years of continuous service as on June 30, 2002.

During the year, the pensioners were given an option to settle their monthly pension with a lump sum payment. Those
who will not opt for the lump sum option, will continue to receive monthly pension (defined benefit scheme).

An approved gratuity scheme (defined benefit scheme) under which the benefits are payable as under:

i) For members whose date of joining the Group is on or before July 01, 1992, their services would be
calculated starting from July 01, 2002 for gratuity benefit purposes.

ii) For members whose date of joining the Group is after July 01, 1992 their services would be taken at actual
for the purpose of calculating the gratuity benefit. This rule will be applicable upon retirement or in service
death only, in case of resignation gratuity will be payable from July 01, 2002, even if he or she had joined
the Bank before July 01, 2002.

A Contributory Provident Fund scheme to which equal contributions are made by the Group and the employees
(defined contribution scheme).

b) For employees who did not opt for lump sum pension scheme

An approved pension scheme (defined benefit scheme) under which the benefits on the basis of frozen basic salary as
on June 30, 2002 are payable to all employees opting continuation of the previous scheme and whose date of joining
the Group is on or before July 01, 1992, i.e., who had completed ten years of continuous service as on June 30, 2002.

c) Benevolent Fund
Until December 31, 2008 the Group operated a contributory benevolent fund, which was discontinued for active
employees. The beneficiaries as on that date were also given an option to settle their monthly grant with a lump sum
payment. Those who have not opted for the lump sum option will continue to receive benevolent grant (Defined benefit
scheme).

d) Post retirement medical benefits

The Group provides post retirement medical benefits to eligible retired employees. Provision is made annually to meet
the cost of such medical benefits on the basis of actuarial valuation carried out using the Projected Unit Credit Method.

Annual contributions towards the defined benefit schemes are made on the basis of actuarial valuation carried out using
the Projected Unit Credit Method. Actuarial gains / losses arising from experience adjustments and changes in actuarial
assumptions are recognized in Other Comprehensive Income in the period of occurrence.
 Allied Bank Limited 233

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

5.7.2 Other long term benefit

Employees’ compensated absences

Employees' entitlement to annual leave is recognized when they accrue to employees. A provision is made for estimated liability
for annual leaves as a result of services rendered by the employee against un-availed leaves, as per terms of service contract,
up to the reporting date, based on actuarial valuation using Projected Unit Credit Method. Actuarial gains / losses arising from
experience adjustments and changes in actuarial assumptions are recognized in Profit and Loss account in the period of
occurrence.

5.8 Non-banking assets acquired in satisfaction of claims

Non-banking assets (NBA) acquired in satisfaction of claims are carried at revalued amounts less accumulated depreciation
(excluding land). Revaluation by independent professionally qualified valuers, is carried out with sufficient regularity to ensure
that their net carrying value does not differ materially from their fair value. Surplus arising on revaluation of NBA is credited to the
'surplus on revaluation of assets' account and any deficit arising on revaluation is taken to profit and loss account directly. Legal
fees, transfer costs and direct costs of acquiring title to property are charged to profit and loss account and not capitalised.

5.9 Deposits

Deposits are initially recorded at the amount of proceeds received. Mark-up accrued on deposits is recognized separately as
part of other liabilities and is accrued to the profit and loss account on accrual basis. Deposits mobilized under Islamic Banking
operations are generated under two modes i.e. "Qard" and "Modaraba". Deposits taken on Qard basis are classified as 'Current
accounts' and Deposits generated on Modaraba basis are classified as 'Saving deposits / Fixed deposits'.

5.10 Impairment

a) Available-for-sale equity securities

The Group determines that 'available-for-sale' equity investments are impaired when there has been a significant and
prolonged decline in the fair value of these investments below their cost. The determination of what is significant and
prolonged requires judgment. In making this judgment, the Group evaluates, among other factors, the normal volatility
in share price in the case of listed equity securities. In addition, impairment may be appropriate when there is evidence
of deterioration in the financial condition of the investee, industry and sector performance and changes in technology.

b) Non-financial assets

The carrying amount of the Group's assets (other than deferred tax assets) are reviewed at each statement of financial
position date to determine whether there is any indication of impairment. If such indication exists, the recoverable
amount of the relevant asset is estimated. An impairment loss is recognized whenever the carrying amount of an
asset exceeds its recoverable amount. Impairment losses are recognized in the profit and loss account except for
an impairment loss on revalued assets which is adjusted against the related revaluation surplus to the extent that
the impairment loss does not exceed the revaluation surplus. An impairment loss is reversed if the reversal can be
objectively related to an event occurring after the impairment loss was recognized.

5.11 Provisions

Provisions are recognized when the Group has a present obligation (legal or constructive) 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 can be made.

Provision against identified losses on non-funded exposure is recognized when intimated and reasonable certainty exists for
the Group to settle the obligation. The loss is charged to the profit and loss account net of expected recovery and is classified
under other liabilities.

Provisions are reviewed at the reporting date and are adjusted to reflect the current best estimate.

5.12 Dividend distribution and appropriations

Bonus and cash dividend and other appropriations (except for the appropriations required by law), declared / approved subsequent
to the reporting date are considered as non-adjusting event and are not recorded in consolidated financial statements of the
current year. These are recognized in the period in which these are declared / approved.
234 Annual Report 2017

Notes to the Consolidated Financial Statements

for the year ended December 31, 20176

5.13 Foreign currencies

a) Foreign currency transactions

Transactions in foreign currencies are translated into rupees at the foreign exchange rates ruling on the transaction date.
Monetary assets and liabilities in foreign currencies are expressed in rupee terms at the rates of exchange ruling on the
reporting date. Foreign bills purchased are valued at spot rate and forward foreign exchange contracts are valued at
forward rates applicable to their respective maturities.

b) Foreign operations

The assets and liabilities of foreign operating branches are translated to Pakistan Rupee (PKR) at exchange rates
prevailing at reporting date. The results of foreign operations are translated at the average exchange rate for the period.

c) Translation gains and losses

Translation gains and losses arising on revaluation of net investments in foreign operations are taken to equity under
"Exchange Translation Reserve" through Other Comprehensive Income and on disposal are recognised in profit and
loss account. Regular translation gains and losses are taken to profit and loss account.

d) Commitments

Commitments for outstanding forward contracts disclosed in these financial statements are translated at forward
rates applicable to their respective maturities. Contingent liabilities / commitments for letters of credit and letters of
guarantee denominated in foreign currencies are expressed in rupee terms at the rates of exchange prevailing on
the reporting date.

5.14 Financial instruments

5.14.1
Financial assets and liabilities

Financial assets and financial liabilities are recognised at the time when the Group becomes a party to the contractual provision
of the instrument. Financial assets are de-recognised when the contractual right to future cash flows from the asset expires
or is transferred along with the risk and reward of the asset. Financial liabilities are de-recognised when obligation specific in
the contract is extinguished. Any gain or loss on de-recognition of the financial asset and liability is recognised in the profit and
loss account of the current period. The particular recognition and subsequent measurement methods adopted for significant
financial assets and financial liabilities are disclosed in the individual policy statements associated with them.

5.14.2
Derivative financial instruments

Derivative financial instruments are initially recognized at fair value on the date on which the derivative contract is entered into
and are subsequently re-measured at fair value using appropriate valuation techniques. All derivative financial instruments are
carried as assets when fair value is positive and liabilities when fair value is negative. Any change in the fair value of derivative
financial instruments is taken to the profit and loss account.

5.15 Off setting
Financial assets and financial liabilities are off set and the net amount is reported in the financial statements when there is a legally
enforceable right to off set and the Group intends to either settle on a net basis, or to realize the assets and to settle the liabilities
simultaneously.

5.16 Revenue recognition
Revenue is recognized to the extent that the economic benefits will flow to the Group and the revenue can be reliably measured.
These are recognised as follows:

a) Advances and investments

Mark-up / return on regular loans / advances and investments is recognized on a time proportion basis. Where debt
securities are purchased at premium or discount, the same is amortized through the profit and loss account using the
effective interest rate method.

Interest or mark-up recoverable on classified loans, advances and investments is recognized on receipt basis.
Interest / return / mark-up on classified rescheduled / restructured loans and advances and investments is recognized
 Allied Bank Limited 235

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

as permitted by the regulations of the SBP.

Dividend income is recognized when the right to receive the dividend is established.

Gains and losses on sale of investments are recognized in the profit and loss account.

b) Lease financing

Financing method is used in accounting for income from lease financing. Under this method, the unearned lease
income (excess of the sum of total lease rentals and estimated residual value over the cost of leased assets) is deferred
and taken to income over the term of the lease period so as to produce a constant periodic rate of return on the
outstanding net investment in lease. Unrealised income on classified leases is recognized on receipt basis.

Gains / losses on termination of lease contracts and other lease income are recognized when realized.

c) Islamic financing and related assets

Profit on Business Musharakah financing is booked on accrual basis and is adjusted upon declaration of profit by
Musharakah partners.

Ijarah and Diminishing Musharakah income is recognised on an accrual basis as and when the rental becomes due.

Murabaha and Salam income is recognised on deferred income basis.

d) Fee, commission and brokerage

Fee, commission and brokerage income is recognized on an accrual basis except where, in the opinion of management,
it would not be prudent to do so.

5.17 Segment reporting

A segment is a distinguishable component of the Group that is subject to risks and rewards that are different from those
of other segments. A business segment is one that is engaged either in providing certain products or services, whereas a
geographical segment is one engaged in providing certain products or services within a particular economic environment.
Segment information is presented as per the Group’s functional and management reporting structure. The Group's primary
segment reporting is based on following business segments:

Business segments

a) Corporate & investment banking

This segment offers a wide range of financial services to medium and large sized public and private sector entities
and also covers overseas operation of the Group. These services include, providing and arranging tenured financing,
corporate advisory, underwriting, cash management, trade products, corporate finance products and customer
services on all Group related matters.

b) Trading and sales (Treasury)

This segment undertakes the Group’s treasury and money market activities.

c) Commercial & retail banking

Commercial and retail banking provides services to commercial and retail customers including agriculture sector. It
includes loans, deposits and other transactions with commercial and retail (conventional and Islamic) customers.

d) Others

Others includes functions which cannot be classified in any of the above segments.

5.18 Earnings per share

The Group presents basic and diluted earnings per share (EPS) for its shareholders. Basic EPS is calculated by dividing
the profit or loss attributable to ordinary shareholders of the Group by the weighted average number of ordinary
shares outstanding during the year. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary
shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential
ordinary shares, if any.
236 Annual Report 2017

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

Note December 31, December 31,

2017 2016
Rupees in ‘000

6 CASH AND BALANCES WITH TREASURY BANKS

In hand
Local currency 12,269,658 11,886,895
Foreign currencies 881,144 1,061,186
13,150,802 12,948,081

Remittances in transit 513,672 291,364

With State Bank of Pakistan (SBP) in
Local currency current accounts 6.1 37,791,773 32,998,864
Foreign currency current account 6.2 1,247 9,620
37,793,020 33,008,484
Foreign currency deposit accounts
Non-remunerative 6.1 3,898,776 2,813,207
Remunerative 6.3 11,667,460 8,435,565
15,566,236 11,248,772
With National Bank of Pakistan in
Local currency current accounts 18,156,411 15,439,067

175,414
National Prize Bonds 267,999
85,355,555 73,203,767

6.1 Deposits with SBP are maintained to comply with the cash reserve requirement, under section 22 of the Banking Companies
Ordinance, 1962 and SBP statutory requirements issued from time to time.

6.2 This represents US Dollar settlement account maintained with SBP.

6.3 This represents special cash reserve maintained with SBP. The return on this account is declared by SBP on a monthly basis
and as at December 31, 2017 carries mark-up at the rate of 0.37% (2016: 0%).

December 31, December 31,

2017 2016
Rupees in ‘000

7 BALANCES WITH OTHER BANKS

In Pakistan
On current accounts 747 15

Outside Pakistan
On current accounts 326,579 271,111
On deposit accounts 322,186 408,812
649,512 679,938

 Allied Bank Limited 237

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

Note December 31, December 31,

2017 2016
Rupees in ‘000

8 LENDINGS TO FINANCIAL INSTITUTIONS

Call money lending 8.1 1,000,000 2,091,970

Repurchase agreement lendings (Reverse Repo) 8.2 & 8.8 5,779,431 7,220,782
Musharaka lendings 8.3 1,100,000 700,000
Mudaraba lending 8.4 600,000 500,000
Bai muajjal placement 8.5 214,968 –
Certificates of investment 8.6 70,000 70,000
8.7 8,764,399 10,582,752
Provision against lendings to financial institutions 8.6 & 8.9 (70,000) (70,000)
8,694,399 10,512,752

8.1 This represents local currency call money lending at the mark-up rate of 5.90% (2016: foreign currency lending at the rate of
0.65%) per annum, maturing on January 02, 2018.

8.2 These are short-term local currency lendings to financial institutions against government securities as shown in note 8.8 below.
These carry mark-up at the rate of 5.95% to 6.10% (2016: 5.90% to 6.20%) per annum, maturing on January 02, 2018.

8.3 These represent local currency lendings by Islamic banking business under Musharaka agreement at profit of 5.83% to 5.85%
(2016: 5.00%) per annum, maturing on various dates, latest by January 05, 2018.

8.4 This represents local currency lending by Islamic banking business under Mudaraba agreement at profit of 5.80% (2016: 5.55%)
per annum, maturing on January 12, 2018.

8.5 This represents local currency lending by Islamic banking business under Bai Muajjal agreement with the State Bank of Pakistan
at profit of 5.46% (2016: Nil) per annum, maturing on June 21, 2018.

8.6 This represent local currency classified certificates of investment and related provisioning, amounting to Rs. 70 million (2016: Rs.
70 million).

December 31, December 31,

2017 2016
Rupees in ‘000

8.7 Particulars of lending

In local currency 8,764,399 8,490,782
In foreign currencies – 2,091,970
8,764,399 10,582,752

December 31, 2017 December 31, 2016
Further Further
Held by given as Held by given as
Group collateral Total Group collateral Total
Rupees in ‘000

8.8 Securities held as collateral against lending to Financial Institutions

Market Treasury Bills 800,000 – 800,000 1,220,782 – 1,220,782
Pakistan Investment Bonds 5,000,000 – 5,000,000 6,000,000 – 6,000,000
5,800,000 – 5,800,000 7,220,782 – 7,220,782

December 31, December 31,

2017 2016
Rupees in ‘000

8.9 Particulars of provision

Opening balance 70,000 70,000
Charge for the year – –
Reversal – –
Net charge – –
Closing balance 70,000 70,00
238 Annual Report 2017

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

Note December 31, 2017 December 31, 2016

Held by Given as Held by Given as

Group collateral Total Group collateral Total

Rupees in ‘000

9 INVESTMENTS

9.1 Investments by types

Held–for–trading securities
Market Treasury Bills 24,706,169 – 24,706,169 – – –
Pakistan Investment Bonds 119,940 – 119,940 102,531 – 102,531
Units of open-ended mutual funds/
pension funds - related parties 1,785,318 – 1,785,318 1,390,368 – 1,390,368
Sukuk bonds – – – 40,000 – 40,000
26,611,427 – 26,611,427 1,532,899 – 1,532,899
Available–for–sale securities
Market Treasury Bills 290,064,860 75,614,442 365,679,302 202,224,770 23,995,274 226,220,044
Pakistan Investment Bonds 63,758,497 100,297,935 164,056,432 144,961,948 53,343,313 198,305,261
Ordinary shares of listed companies /
certificates of close-ended mutual funds 14,815,012 – 14,815,012 14,493,083 – 14,493,083
Ordinary shares of unlisted companies 2,500,169 – 2,500,169 2,500,169 – 2,500,169
Investment in related parties
Listed shares 8,142,520 – 8,142,520 8,142,520 – 8,142,520
Unlisted shares 1,093,449 – 1,093,449 997,894 – 997,894
Sukuk bonds 5,465,894 – 5,465,894 5,423,031 – 5,423,031
GOP Sukuk 9,562,817 1,543,073 11,105,890 10,550,356 – 10,550,356
GOP Ijara Sukuk 2,845,696 – 2,845,696 2,148,084 – 2,148,084
Foreign Currency Bonds (US$) 4,996,009 – 4,996,009 4,734,946 – 4,734,946
Term finance certificates (TFCs) 3,707,217 – 3,707,217 4,340,267 – 4,340,267
406,952,140 177,455,450 584,407,590 400,517,068 77,338,587 477,855,655
Held–to–maturity securities
Pakistan Investment Bonds 73,454,137 – 73,454,137 83,222,932 – 83,222,932
GOP Sukuk 1,108,143 – 1,108,143 1,051,562 – 1,051,562
GOP Ijara Sukuk – – – 100,000 – 100,000
Foreign Currency Bonds (US$) – – – 1,595,719 – 1,595,719
TFCs and Sukuk Bonds 346,102 – 346,102 358,879 – 358,879
74,908,382 – 74,908,382 86,329,092 – 86,329,092
Investment at cost 508,471,949 177,455,450 685,927,399 488,379,059 77,338,587 565,717,646
Provision for diminution in the
value of investments 9.3 (2,705,403) – (2,705,403) (2,696,599) – (2,696,599)
Investment (cost net of provisions) 505,766,546 177,455,450 683,221,996 485,682,460 77,338,587 563,021,047
(Deficit) / surplus on revaluation of
‘held-for–trading’ securities - net 9.10 (41,912) – (41,912) 129,343 – 129,343

Surplus on revaluation of
‘available-for-sale’ securities - net 20.3 15,803,706 339,900 16,143,606 25,895,586 1,878,996 27,774,582

Total investments at market value 521,528,340 177,795,350 699,323,690 511,707,389 79,217,583 590,924,972
 Allied Bank Limited 239

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

Note December 31, December 31,

2017 2016
Rupees in ‘000

9.2 Investments by segments

Federal Government Securities

Market Treasury Bills 9.2.1 - 9.2.3 390,385,471 226,220,044
Pakistan Investment Bonds 9.2.1 & 9.2.2 237,630,509 281,630,724
Foreign Currency Bonds (US$) 9.2.1 & 9.2.4 4,996,009 6,330,665
GOP Ijara Sukuk 9.2.1 2,845,696 2,248,084
GOP Sukuk 9.2.1 12,214,033 11,601,918

Fully paid up ordinary shares of listed companies /

certificates of close-ended mutual funds 9.4 22,957,532 22,635,603

3,593,618
Fully paid up ordinary shares of unlisted companies 9.5 3,498,063

Investment in units of open-ended mutual funds 9.6 1,785,318 1,390,368

Term Finance Certificates (TFCs)

and Sukuk Bonds
Term Finance Certificates
Listed 9.7 2,399,462 2,455,310
Unlisted 9.7 1,453,857 2,043,836
Sukuk Bonds 9.8 5,665,894 5,663,031

Investments at cost 685,927,399 565,717,646

Less: Provision for diminution in the value of investments 9.3 (2,705,403) (2,696,599

Investments (cost net of provisions) 683,221,996 563,021,047

(Deficit) / surplus on revaluation of ‘held-for-trading’ securities 9.1 (41,912) 129,343
Surplus on revaluation of ‘available-for-sale’ securities 20.3 16,143,606 27,774,582

Total investments at market value 699,323,690 590,924,972

9.2.1 Principal terms of investments in Federal Government Securities

Name of investment Maturity Coupon Rate / Redemption Frequency

Yield Period

Market Treasury Bills January, 2018 to April, 2018 5.70% - 6.19% On maturity At maturity
Pakistan Investment Bonds March, 2018 to August, 2031 7.00% - 13.00% On maturity Half Yearly
Foreign Currency Bonds (US$) September, 2025 8.25% On maturity Half Yearly
GOP Ijara Sukuk December, 2018 to June, 2020 6M MTB minus 0.50% On maturity Half Yearly
GOP Sukuk December, 2019 to October, 2021 5.50% - 6.75% On maturity Half Yearly

9.2.2 Included herein are Market Treasury Bills having a book value of Rs. 75,442.036 million (2016: Rs. 23,816.042 million) and
Pakistan Investment Bonds having a book value of Rs. 100,297.935 million (2016: Rs. 53,343.313 million), given as collateral
against repurchase agreement borrowings from financial institutions.

9.2.3 Included herein are Market Treasury Bills having a book value of Rs. 172.406 million (2016: Rs. 179.232 million), held by
the SBP against Demand Loan and TT/DD discounting facilities sanctioned to the Bank.

240 Annual Report 2017

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

Name of Bond Coupon Rate Date of Date of Coupon Redemption December 31, December 31,
Issue Maturity Due Period 2017 2016
Rupees in ‘000

9.2.4 Investment in Foreign Currency Bonds

Euro Dollar Bond ($45,000,000) 8.250% 30-Sep-15 30-Sep-25 01-Apr-18 10 Years 4,996,009 4,734,946
Euro Dollar Bond ($10,500,000) 6.875% 01-Jun-07 01-Jun-17 30-May-17 10 Years – 1,083,920
Euro Dollar Bond ($5,000,000) 6.875% 01-Jun-07 01-Jun-17 30-May-17 10 Years – 511,799
4,996,009 6,330,665

Note December 31, December 31,

2016 2015
Rupees in ‘000

9.3 Particulars of provision

Opening balance 2,696,599 2,777,721

Charge for the year 22,581 78,582

Reversals (13,777) (3,676)
Net charge 8,804 74,906
Net reversal on disposal of shares – (156,028)
Closing balance
9.3.1 2,705,403 2,696,599

9.3.1
Particulars of provision in respect of type and segment
By type:

Available-for-sale securities
Ordinary shares / certificates of mutual funds 2,264,790 2,264,790
Ordinary shares of unlisted companies 71,563 49,982
Sukuk Bonds 22,948 22,948
2,359,301 2,337,720
Held-to-maturity securities
TFCs and Sukuk Bonds 346,102 358,879
2,705,403 2,696,599
By Segment:
Fully Paid up Shares
Ordinary shares of listed companies 2,264,790 2,264,790
Ordinary shares of unlisted companies 71,563 49,982
2,336,353 2,314,772
Term Finance Certificates and
Sukuk Bonds
Sukuk Bonds 222,948 222,948
Term Finance Certificates 146,102 158,879
369,050 381,827
2,705,403 2,696,599
 Allied Bank Limited 241

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

Name of Company / Mutual Fund December 31, 2017 December 31, 2016
Cost
per share / No. of shares / No. of shares /
certificates certificates Total Cost certificates Total Cost

Rupees Rupees in ‘000 Rupees in ‘000

9.4 Investments in Listed Ordinary Shares / Certificates of Mutual Funds

Available–for–sale
Agritech Limited 16.16 16,601,113 268,289 16,601,113 268,289
Attock Petroleum Limited 419.20 1,338,450 561,076 1,338,450 561,076
Dolmen City REIT 11.00 41,441,000 455,851 41,441,000 455,851
Engro Fertilizer Limited 69.80 8,150,000 568,831 8,150,000 568,831
Fatima Fertilizer Company Limited 24.39 62,700,000 1,528,975 62,700,000 1,528,975
Fauji Fertilizer Company Limited 103.62 15,481,600 1,604,159 15,481,600 1,604,159
Habib Bank Limited 168.01 6,622,992 1,112,707 6,622,992 1,112,707
Habib Metropolitan Bank Limited 27.96 10,000,000 279,598 10,000,000 279,598
Hub Power Company Limited – related party 36.51 112,000,000 4,089,011 112,000,000 4,089,011
Kot Addu Power Co. Limited – related party 46.06 88,000,000 4,053,509 88,000,000 4,053,509
MCB Bank Limited 199.83 1,125,500 224,907 – –
Nishat Chunian Power Limited 10.00 30,000,000 300,000 30,000,000 300,000
Nishat Power Limited 10.00 30,000,000 300,000 30,000,000 300,000
Orix Leasing Pakistan Limited 35.00 2,772,062 97,022 – –
Pakistan Oil Field Limited 404.83 9,106,350 3,686,501 9,106,350 3,686,501
Pakistan Petroleum Limited 208.66 9,562,740 1,995,359 9,562,740 1,995,359
Pakistan State Oil Company Limited 270.43 1,783,800 482,384 1,486,500 482,384
PICIC Growth Mutual Fund 13.54 6,677,717 90,436 6,677,717 90,436
Pioneer Cement Limited 5.97 106,784 638 106,784 638
Saif Power Limited 18.00 13,889,000 250,002 13,889,000 250,002
Trust Investment Bank Limited 10.00 5,000,000 50,000 5,000,000 50,000
United Bank Limited 158.01 6,064,800 958,277 6,064,800 958,277
22,957,532 22,635,603

Name of Company Percentage of No. of Break–up Value Paid up Value Dec. 31, 2017 Based on audited Name of Chief
Holding shares per share per share Cost accounts as at Executive/Managing Agent

Rupees Rupees Rupees ‘000

9.5 Investment in Un–Listed Shares

Arabian Sea Country Club Limited - related party 6.45% 500,000 0.70 10 5,000 30–Jun–14 Mr. Arif Ali Khan Abbasi
Atlas Power Limited 7.49% 35,500,000 21.48 10 355,000 30–Jun–17 Mr. Maqsood Ahmed Basraa
Central Depository Company of Pakistan Limited 1.00% 1,060,900 36.72 10 40,300 30–Jun–17 Mr. Aftab Ahmed Diwan
Eastern Capital Limited – 500,000 – – 5,000 – Under liquidation
First Women Bank Limited 2.21% 7,734,927 9.96 10 21,200 31–Dec–16 Ms. Tahira Raza
Habib Allied Holding Limited - related party 9.50% 5,874,525 179.09 £1 1,035,922 31–Dec–16 Mr. Abbas Hasan
ISE Towers REIT Management Company Limited* 0.83% 3,034,603 12.13 10 30,346 30–Jun–17 Mr. Mian Ayyaz Afzal
LSE Financial Services Limited* 0.66% 843,975 18.29 10 8,440 30–Jun–17 Mr. Farid Malik
National Institutional Facilitation Technologies
(Pvt) Limited (NIFT) - related party 9.07% 2,266,609 24.62 10 1,527 30–Jun–17 Mr. Haider Wahab
Nishat Hotels and Properties Limited 9.84% 94,497,049 9.60 10 944,970 30–Jun–17 Mr. Mian Hassan Mansha
Pakistan Agricultural Storage and Services
Corporation Limited (PASSCO) - related party 3.33% 1,000 228,378 1,000 1,000 31–Mar–17 Mr.Muhammad Khan Khichi
Pakistan Mortgage Refinancing Company Limited – – – – 12,240 31–Dec–16 Mr. N.K. Rupan
Security General Insurance Company Limited 18.22% 12,401,871 140.51 10 1,075,653 31–Dec–16 Mr. Farrukh Aleem
SME Bank Limited 0.32% 774,351 0.09 10 5,250 31–Dec–16 Mr. Ihsan ul Haq Khan
Society for Worldwide Interbank
Financial Telecommunication 0.01% 10 499,351 € 125 1,770 31–Dec–16 Mr. Gottfried Leibbrandt
1 Link (Guarantee) Limited - related party – – – 50,000 – –
3,593,618

*These shares have been transferred as per the requirements of The Stock Exchanges (Corporation, Demutualization and
integration) Act, 2012.
242 Annual Report 2017

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

Name of Company No. of Units Paid-up Total Cost

value per
2017 2016 Certificate 2017 2016
Rupees Rupees in ‘000

9.6 Detail of investment in Open-Ended Mutual Funds

ABL Cash Fund- related party 981,386 985,822 10 10,050 10,100

ABL Income Fund- related party 82,550,409 63,562,919 10 828,241 645,566
ABL Stock Fund- related party 25,478,063 19,144,409 10 398,290 292,484
ABL Islamic Income Fund- related party 2,905,963 – 10 30,000 –
ABL Islamic Financial Planning Fund - related party 250,000 50,000 10 25,183 5,000
ABL Financial Planning Fund - related party 2,302,149 2,293,226 10 239,157 225,208
ABL Pension Fund - Equity Sub Fund - related party 300,000 300,000 10 56,527 38,644
ABL Pension Fund - Debt Sub Fund - related party 300,000 300,000 10 40,452 37,392
ABL Pension Fund - Money Market Sub Fund - related party 300,000 300,000 10 33,540 32,277
ABL Islamic Pension Fund - Equity Sub Fund - related party 300,000 300,000 10 57,037 39,270
ABL Islamic Pension Fund - Debt Sub Fund - related party 300,000 300,000 10 33,863 32,419
ABL Islamic Pension Fund - Money Market Sub Fund - related party 300,000 300,000 10 32,978 32,008
1,785,318 1,390,368

9.7 Detail of investment in TFCs

Listed
Habib Bank Limited 15,000 15,000 100,000 1,499,100 1,499,700
Bank Al Falah Limited TFC V 64,618 64,618 5,000 322,508 322,638
JS TFC II 37,500 37,500 5,000 89,063 131,250
MCB Bank Limited TFC
(Formerly NIB Bank Limited TFC II) 76,800 76,800 5,000 383,462 383,616
Telecard Limited 75,888 75,888 5,000 105,329 118,106
2,399,462 2,455,310
Unlisted
Faysal Bank Limited – 70,000 5,000 – 174,650
(Chief Executive: Mr. Yousaf Hussain)
Dewan Farooque Spinning Mills Limited 25,000 25,000 5,000 30,274 30,274
(Chief Executive: Mr. Ishtiaq Ahmed)
Khairpur Sugar Mills Limited 13 13 55,536
(Chief Executive: Muhammad Mubeen Jumani) 1 1 55,538
5 5 337,000
1 1 337,077 454 454

Bachani Sugar Mills Limited 23 23 135,227
(Chief Executive: Mr. Najmuddin Ansari) 1 1 135,236
14 14 1,526,874
13 13 655,656
1 1 655,657 10,044 10,044

Bank Al-Habib TFC V 107,000 107,000 5,000 534,679 534,894

(Chief Executive: Mr. Mansoor Ali Khan)
Standard Chartered Bank TFC III – 75,000 5,000 – 375,000
(Chief Executive: Mr. Shazad Dada)
Askari Bank Limited TFC V 120,000 120,000 5,000 599,281 599,520
(Chief Executive: Mr. Syed M. Husaini)
Jahangir Siddiqi & Company Limited 63,800 63,800 5,000 279,125 319,000
(Chief Executive: Mr. Suleman Lalani)
1,453,857 2,043,836
 Allied Bank Limited 243

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

Name of Sukuk Bond Coupon Rate Date of Date of Coupon Coupon Cost
Issue Maturity Due Date Frequency 2017 2016

Rupees in ‘000

9.8 Detail of Investment in Sukuk Bonds

Liberty Power Tech. Limited I 3 MK+3% 18-Mar-09 01-Apr-21 01-Apr-18 Quarterly 1,198,582 1,485,408
Liberty Power Tech. Limited II 3 MK+3% 30-Nov-10 31-Dec-21 01-Apr-18 Quarterly 134,329 166,199
Quetta Textile Mills Limited* 6 MK+1.75% 26-Sep-08 20-Mar-20 25-Mar-16 Quarterly 22,948 22,948
Shahraj Fabrics Pvt Limited* 6 MK +2.10% 08-Mar-08 08-Mar-13 08-Mar-13 Half Yearly 200,000 200,000
K- Electric Limited 3 MK + 1.00% 17-Jun-15 17-Jun-22 16-Mar-18 Quarterly 223,035 248,476
K-Electric Limited 3 MK +2.25% 19-Mar-14 19-Mar-17 19-Mar-17 Quarterly - 40,000
Neelam Jhelum Hydropower Company (Pvt) Limited 6 MK+1.75% 29-Jun-16 29-Jun-26 29-Jun-18 Half Yearly 1,200,000 1,200,000
Neelam Jhelum Hydropower Company (Pvt) Limited 6 MK+1.75% 27-Oct-16 29-Jun-26 27-Apr-18 Half Yearly 1,400,000 1,400,000
Meezan Bank’s Sukuk 6 MK+0.5% 22-Sep-16 22-Sep-26 01-Mar-18 Half Yearly 900,000 900,000
Dubai Islamic Bank Pakistan 6 MK+0.5% 14-Jul-17 14-Jul-27 14-Jul-18 Half Yearly 387,000 -
5,665,894 5,663,031

*These Sukuk Bonds have been classified as loss and fully provided.

2017 2016
Market Market
Name of Security value / Book Rating value / Book Rating
Value Value
Rupees ‘000 Rupees ‘000

9.9 Quality of ‘available-for-sale’ Securities

Government Securities
Market treasury bills 365,643,722 Un Rated 226,247,239 Un Rated
Pakistan Investment Bonds 166,864,554 Un Rated 203,533,463 Un Rated

Listed TFCs
Habib Bank Limited 1,485,849 AA+ 1,503,449 AAA
MCB Bank Limited TFC (Formerly NIB Bank Limited TFC II) 389,427 AAA 387,972 A+
Bank Alfalah Limited - TFC V 328,246 AA 331,119 AA-
JS TFC II 89,416 AA+ 131,329 AA+

Unlisted TFCs
Faysal Bank Limited – – 174,650 AA-
Bank Al-Habib Limited TFC V 534,679 AA 534,893 AA
Standard Chartered Bank – – 375,000 AAA
Askari Bank Limited TFC V 599,281 AA- 599,520 AA-
Jahangir Siddiqi & Company Limited 279,125 ** 319,000 **

Unlisted Shares
Arabian Sea Country Club Limited* - related party 5,000 ** 5,000 **
Atlas Power Limited* 355,000 AA-&A1+ 355,000 AA-&A1+
Central Depository Company of Pakistan Limited 40,300 ** 40,300 **
Eastern Capital Limited* 5,000 ** 5,000 **
First Women Bank Limited* 21,200 A-&A2 21,200 A-&A2
Habib Allied Holding Limited* - related party 1,035,922 ** 990,367 **
ISE Towers REIT Management Company Limited 30,346 ** 30,346 **
LSE Financial Services Limited 8,440 ** 8,440 **
NIFT* - related party 1,527 ** 1,527 **
Nishat Hotels and Properties Limited* 531,545 A-&A2 531,545 A-&A2
Nishat Hotels and Properties Limited 413,425 A-&A2 413,425 A-&A2
Pakistan Mortgage Refinance Company Limited 12,240 ** 12,240 **
PASSCO* - related party 1,000 ** 1,000 **
Security General Insurance Company Limited 1,075,653 AA- 1,075,653 AA-
SME Bank Limited* 5,250 B&B 5,250 B&B
SWIFT 1,770 ** 1,770 **
1 Link (Guarantee) Limited - related party 50,000 ** – –
244 Annual Report 2017

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

2017 2016
Market Market
Name of Security value / Book Rating value / Book Rating
Value Value
Rupees ‘000 Rupees ‘000

Listed Shares / Certificates

Agritech Limited 80,847 ** 210,502 **

Attock Petroleum Limited 700,116 ** 916,330 **
Dolmen City REIT 455,851 RR1 450,464 RR1
Fatima Fertilizer Company Limited 1,936,176 AA-&A1+ 2,313,003 AA-&A1+
Fauji Fertilizer Company Limited 1,224,749 AA&A1+ 1,615,815 AA&A1+
Habib Bank Limited 1,106,636 AAA&A1+ 1,809,733 AAA&A1+
Hub Power Company Limited *- related party 5,541,900 AA+&A1+ 7,519,932 AA+&A1+
Hub Power Company Limited - related party 4,650,100 AA+&A1+ 6,309,828 AA+&A1+
Kot Addu Power Co. Limited* - related party 4,743,200 AA+&A1+ 6,934,400 AA+&A1+
MCB Bank Limited 238,966 AAA&A1+ - -

Listed Shares / Certificates

Nishat Chunian Power Limited* 987,300 ** 1,664,400 **
Nishat Power Limited* 1,020,000 A+&A1 1,922,700 A+&A1
Orix Leasing Pakistan Limited 115,068 AA+&A1+ - -
Pakistan Oilfield Limited* 2,097,144 ** 1,886,674 **
Pakistan Oilfield Limited 3,314,396 ** 2,981,763 **
Pakistan Petroleum Limited* 1,969,064 ** 1,799,516 **
Pakistan State Oil Company Limited 522,850 AA&A1+ 645,453 AA&A1+
PICIC Growth Mutual Fund 189,313 ** 203,403 **
Pioneer Cement Limited 6,740 ** 15,173 **
Saif Power Limited 401,809 A+&A1 493,893 A+&A1
United Bank Limited 1,140,000 AAA&A1+ 1,448,881 AAA&A1+
Trust Investment Bank Limited 7,150 ** 18,700 **
Habib Metropolitan Bank Limited 345,000 AA+&A1+ 370,000 AA+&A1+
Engro Fertilizer Limited 551,918 AA-&A1+ 554,037 AA-&A1+

Investment in Mutual Funds
ABL Cash Fund- related party 10,129 AA(f) 10,153 AA(f)
ABL Income Fund- related party 847,454 A(f) 651,634 A(f)
ABL Stock Fund- related party 354,148 ** 360,531 MFR 4-Star
ABL Islamic Income Fund- related party 30,178 A(f) - -
ABL Islamic Financial Planning Fund - related party 24,653 ** 5,183 **
ABL Financial Planning Fund - related party 234,947 ** 238,179 **
ABL Pension Fund - Equity Sub Fund - related party 46,799 ** 56,527 **
ABL Pension Fund - Debt Sub Fund - related party 42,205 ** 40,452 **
ABL Pension Fund - Money Market Sub Fund - related party 34,827 ** 33,540 **
ABL Islamic Pension Fund - Equity Sub Fund - related party 48,198 ** 57,037 **
ABL Islamic Pension Fund - Debt Sub Fund - related party 34,454 ** 33,864 **
ABL Islamic Pension Fund - Money Market Sub Fund - related party 33,632 ** 32,978 **

Sukuk Bonds
Liberty Power Tech Limited I 1,198,582 A+ 1,485,408 A+
Liberty Power Tech Limited II 134,329 A+ 166,199 A+
Quetta Textile Mills Limited 22,948 ** 22,948 **
K- Electric Limited 222,501 AA+ 250,988 AA+
Neelam Jhelum Hydropower Company (Pvt) Limited 2,600,000 AAA 2,600,000 AAA
Meezan Bank’s Sukuk 900,000 AA- 900,000 AA-
Dubai Islamic Bank Pakistan 387,000 A+ - -
GOP Ijara Sukuk 2,861,151 ** 2,196,404 **
GOP Sukuk 11,290,159 ** 10,858,893 **
 Allied Bank Limited 245

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

2017 2016
Market Market
Name of Security value / Book Rating value / Book Rating
Value Value
Rupees ‘000 Rupees ‘000

Foreign Currency Bonds (US$)
Euro Bonds 5,515,525 ** 5,177,620 **
* Strategic Investments of the Bank
** Ratings are not available

Note December 31, December 31,

2017 2016

Rupees in ‘000

9.10 Unrealized (loss) / gain on revaluation of investments

classified as ‘held-for-trading’

Market Treasury Bills (1,691) –

Pakistan Investment Bonds 3,473 (713)
ABL Cash Fund 79 55
ABL Financial Planning Fund (4,210) 12,971
ABL Income Fund 19,213 6,067
ABL Islamic Income Fund 178 –
ABL Stock Fund (44,144) 68,047
ABL Islamic Financial Planning Fund (530) 183
ABL Pension Fund - Equity Sub Fund (9,728) 17,882
ABL Pension Fund - Debt Sub Fund 1,754 3,060
ABL Pension Fund - Money Market Sub Fund 1,288 1,263
ABL Islamic Pension Fund - Equity Sub Fund (8,839) 17,767
ABL Islamic Pension Fund - Debt Sub Fund 589 1,444
ABL Islamic Pension Fund - Money Market Sub Fund 656 970
Sukuk bonds – 347
(41,912) 129,343

10 ADVANCES

Loans, cash credits, running finances, etc.

In Pakistan 373,200,710 334,088,692
Outside Pakistan 4,499,177 7,876,267
377,699,887 341,964,959
Islamic financing and related assets 4,662,326 605,138
Net investment in finance lease - in Pakistan 10.2 2,380,573 2,131,845
Bills discounted and purchased (excluding treasury bills)
Payable in Pakistan 2,466,333 2,665,812
Payable outside Pakistan 1,585,373 1,687,999
4,051,706 4,353,811
Advances - gross 10.1 388,794,492 349,055,753
Provision for non-performing advances 10.3 & 10.4 (16,702,236) (18,720,563)
General provision 10.4 (11,701) (63,309)
(16,713,937) (18,783,872)
Advances - net of provision 372,080,555 330,271,881

10.1 Particulars of advances (Gross)

10.1.1 In local currency 378,216,223 322,091,390

In foreign currencies 10,578,269 26,964,363
388,794,492 349,055,753

10.1.2 Short term (for up to one year) 134,497,900 183,305,212

Long term (for over one year) 254,296,592 165,750,541
388,794,492 349,055,753
246 Annual Report 2017

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

December 31, 2017 December 31, 2016

Not later Later than one Not later Later than one
than one and less than Over five than one and less than Over five
year five years years Total year five years years Total

Rupees in ‘000

10.2 Net investment in finance lease

Lease rentals receivable 548,697 1,335,126 194,666 2,078,489 548,277 1,191,271 123,062 1,862,610
Residual value 63,787 375,705 178,991 618,483 66,446 319,475 164,983 550,904
Minimum lease payments 612,484 1,710,831 373,657 2,696,972 614,723 1,510,746 288,045 2,413,514
Financial charges for future periods (37,398) (142,759) (136,242) (316,399) (28,902) (117,424) (135,343) (281,669)
Present value of minimum lease payments 575,086 1,568,072 237,415 2,380,573 585,821 1,393,322 152,702 2,131,845

10.3 Advances include Rs. 18,051.749 million (2016: Rs. 20,431.609 million) which have been placed under non-performing status
as detailed below:

December 31, 2017

Category of Classified Advances Provision Required Provision Held

Classification
Domestic Overseas Total Domestic Overseas Total Domestic Overseas Total

Rupees in ‘000

Other assets especially

mentioned 39,805 - 39,805 1,054 - 1,054 1,054 - 1,054
Substandard 492,961 - 492,961 122,297 - 122,297 122,297 - 122,297
Doubtful 107,934 - 107,934 53,967 - 53,967 53,967 - 53,967
Loss 17,411,049 - 17,411,049 16,524,918 - 16,524,918 16,524,918 - 16,524,918
18,051,749 - 18,051,749 16,702,236 - 16,702,236 16,702,236 - 16,702,236

December 31, 2016

Category of Classified Advances Provision Required Provision Held

Classification
Domestic Overseas Total Domestic Overseas Total Domestic Overseas Total

Rupees in ‘000

Other assets especially
mentioned 60,180 - 60,180 1,804 - 1,804 1,804 - 1,804
Substandard 636,905 - 636,905 156,972 - 156,972 156,972 - 156,972
Doubtful 473,854 - 473,854 236,927 - 236,927 236,927 - 236,927
Loss 19,260,670 - 19,260,670 18,324,860 - 18,324,860 18,324,860 - 18,324,860
20,431,609 - 20,431,609 18,720,563 - 18,720,563 18,720,563 - 18,720,563

10.3.1 No benefit of forced sale value of the collaterals held by the Bank has been taken while determining the provision against non
performing loans as allowed under BSD circular No. 01 dated October 21, 2011.

10.3.2 The Bank has participated in government guaranteed syndicated long term loan facilities, granted to Power Holding (Pvt.)
Limited, with the Bank’s share being Rs. 9,348 million and Rs. 5,000 million. State Bank of Pakistan has extended relaxation
against classification of these exposures vide Letter No. BPRD/ BRD (Policy)/ 2017/ 26852 dated November 16, 2017 till
December 31, 2017; with instructions to recognize mark-up on receipt basis.
 Allied Bank Limited 247

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

Note December 31, 2017 December 31, 2016

Specific General Total Specific General Total

Rupees in ‘000

10.4 Particulars of provision against non-performing advances

Opening balance 18,720,563 63,309 18,783,872 19,092,777 71,489 19,164,266
Charge for the year 365,854 – 365,854 1,841,422 – 1,841,422
Reversals 10.5 (2,281,184) (51,608) (2,332,792) (2,168,601) (8,180) (2,176,781)
Net reversal (1,915,330) (51,608) (1,966,938) (327,179) (8,180) (335,359)
Amounts written off 10.6 (102,997) – (102,997) (45,035) – (45,035)
Closing balance 16,702,236 11,701 16,713,937 18,720,563 63,309 18,783,872

10.4.1 In local currency 16,442,940 11,701 16,454,641 18,720,563 63,309 18,783,872

In foreign currencies 259,296 – 259,296 – – –
16,702,236 11,701 16,713,937 18,720,563 63,309 18,783,872

10.5 This includes reversal of provision on account of a non performing loan, classified as loss, settled against Debt Property Swap
amounting to Rs. 32.5 million (2016: Rs. 188.472 million).

Note December 31, December 31,
2017 2016
Rupees in ‘000

10.6 Particulars of write-offs

10.6.1 Against provisions 102,997 45,035
Directly charged to Profit and Loss account – –
102,997 45,035
10.6.2 Write-offs of Rs. 500,000 and above 10.7 102,997 44,637
Write-offs of below Rs. 500,000 – 398
102,997 45,035

10.7 Details of loan write-off of Rs. 500,000/- and above

In terms of sub-section (3) of Section 33A of the Banking Companies Ordinance, 1962, the Statement in respect of written-
off loans or any other financial relief of five hundred thousand rupees and above allowed to a person(s) during the year ended
December 31, 2017 is given in Annexure “I” of the unconsolidated financial statements. However, these write-offs do not affect
the Bank’s right to recover debts from these customers.

10.8 Particulars of loans and advances to directors, related parties, etc.

Details of loans and advances to associates, subsidiary and other related parties are given in note 39.

Note December 31, December 31,

2017 2016
Rupees in ‘000

11. OPERATING FIXED ASSETS

Capital work-in-progress 11.1 3,062,788 3,293,373
Property and equipment 11.2 43,927,333 28,493,367
Intangible assets 11.3 1,365,763 996,600
48,355,884 32,783,340
11.1 Capital work-in-progress
Civil works 2,530,114 2,381,725
Equipment 73,619 686,367
Advances to suppliers and contractors 459,055 225,281
3,062,788 3,293,373
 248

11.2 Property and equipment

Note Cost / Revaluation Accumulated Depreciation

Charge /
(Reversal)
Exchange Net book Value
Annual Report 2017

At Addition/ Revaluation At At and Revaluation At At

January 1, (Deletions) Surplus / Write-off December 31, January 1, other Surplus / Write–off December 31, December 31, Annual rate of
Description 2017 Adjustment 2017 2017 adjustments Adjusment 2017 2017 depreciation %
Rupees in ‘000

Land-Freehold 11.4 12,157,409 2,146,874 976,787 – 15,281,070 – – – – – 15,281,070 –

–

Land-Leasehold 11.4 3,303,825 716,833 7,047,978 – 11,068,636 – – – – – 11,068,636 –
–

for the year ended December 31, 2017

Buildings-Freehold 11.4 5,514,533 980,765 – – 6,260,977 873,444 256,493 (895,616) – – 6,260,977 5

– (234,321) – (234,321)

Buildings-Leasehold 11.4 3,097,922 639,744 523,975 – 4,261,641 285,426 143,361 (428,787) – – 4,261,641 5
– –

Building improvements 2,622,036 880,062 – – 3,501,922 1,613,646 383,625 – – 1,997,095 1,504,827 20
(rented premises) (176) (176)

Furniture and fixtures 1,405,607 285,831 – – 1,682,198 717,576 169,102 – – 878,225 803,973 10
Notes to the Consolidated Financial Statements

(9,240) (8,467)
14
Electrical, office and 9,853,134 2,066,344 – – 11,676,459 6,342,334 1,118,131 – – 7,220,730 4,455,729 14.28 – 50
computer equipments (243,019) (239,763)
28
Vehicles 822,004 66,427 – – 827,965 450,676 140,932 – – 537,486 290,479 20
(60,466)
(54,122)

Total 38,776,470 7,782,880 8,548,740 – 54,560,868 10,283,103 2,211,644 (1,324,403) – 10,633,536 43,927,333
(312,901) (234,321) (302,528) (234,321)
42
11.2 Property and equipment

Note Cost / Revaluation Accumulated Depreciation

Charge /
(Reversal)
Exchange Net book Value
At Addition/ Revaluation At At and Revaluation At At
January 1, (Deletions) Surplus / Write-off December 31, January 1, other Surplus / Write-off December 31, December 31, Annual rate of
Description 2016 Adjustment 2016 2016 adjustments Adjustment 2016 2016 depreciation %
Rupees in ‘000

Land-Freehold 11.4 10,485,685 1,671,724 – – 12,157,409 – – – – – 12,157,409 –

Land-Leasehold 11.4 3,250,052 53,773 – – 3,303,825 – – – – – 3,303,825 –

Buildings-Freehold 11.4 5,093,176 421,357 – – 5,514,533 643,108 230,337 – – 873,445 4,641,088 5

Buildings-Leasehold 11.4 2,917,601 180,321 – – 3,097,922 142,119 143,307 – – 285,426 2,812,496 5

for the year ended December 31, 2017

Building improvements 2,171,449 450,764 – – 2,622,036 1,335,598 278,225 – – 1,613,646 1,008,390 20

(rented premises) (177) (177)

Furniture and fixtures 1,205,812 203,816 (425) – 1,405,607 582,346 139,106 (380) – 717,576 688,031 10
(3,596) (3,496)

Electrical, office and computer 8,351,639 1,586,117 (3,277) – 9,853,134 5,419,584 1,005,717 (3,273) – 6,342,334 3,510,800 14.28 – 50
equipments (81,345) (79,694)

Vehicles 725,507 148,912 – – 822,004 346,326 144,968 – – 450,676 371,328 20
(52,415) (40,618)
Total 34,200,921 4,716,784 (3,702) – 38,776,470 8,469,081 1,941,660 (3,653) – 10,283,103 28,493,367
Notes to the Consolidated Financial Statements

(137,533) (123,985)

11.3 Intangible assets

Cost Accumulated Amortization

Net book Annual

At Addition / At At At value at Rate of
Description January 1, (Deletions) December 31, January 1, Amortization December 31, December 31, amortization
2017 2017 2017 2017 2017 %

Rupees in ‘000

Computer software 2,033,515 681,082 2,714,597 1,036,915 311,919 1,348,834 1,365,763 14.28
Cost Accumulated Amortization

Net book Annual

At Addition At At At value at Rate of
Description January 1, (Deletions) December 31, January 1, Amortization December 31, December 31, amortization
2016 2016 2016 2016 2016 %

Rupees in ‘000
Allied Bank Limited

Computer software 1,567,587 465,928 2,033,515 775,705 261,210 1,036,915 996,600 14.28 – 33.33
249
250 Annual Report 2017

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

11.4 Bank arranged for valuation of Land and Building as at December 31, 2017 from four independent valuers {Sadruddin Associ-
ates (Pvt.) Ltd, Unicorn International Surveyors, Indus Surveyors (Pvt.) Limited and Harvester Services (Pvt). Ltd.}. The revalued
amounts of properties have been determined on the basis of market value. Had there been no revaluation, the carrying amount
of revalued assets would have been as follows:

Rupees in ‘000

- Land (Freehold and leasehold) 12,590,895

- Building 7,037,227

11.5 Fair value of property and equipment excluding land and buildings is not expected to be materially different from their carrying
amount.

Note December 31, December 31,
2017 2016

Rupees in ‘000

11.6 Incremental depreciation charged during the year
transferred to profit & loss account 20.1 84,520 88,968

11.7 Restriction / discrepancy in the title of property
having a net book value of 59,131 45,401

11.8 The gross carrying amount of fully depreciated / amortized assets
that are still in use:
Furniture and fixtures 286,863 224,775
Electrical, office and computer equipments 4,464,328 3,806,128
Vehicles 285,809 46,122
Intangible assets - software 282,187 218,396
Leasehold Improvements 1,200,646 1,033,016

Amount of fully depreciated assets includes depreciation of Rs. 145.56 million (2016: Rs. 106.12 million) of under Rs.10,000
items which are fully depreciated in the month of purchase.

December 31, December 31,
2017 2016

Rupees in ‘000


11.9 The carrying amount of property and equipment
that have retired from active use 353,461 361,307

11.10 The details of disposals of assets whose original cost or book value exceeds one million rupees or two hundred and fifty thou-
sand rupees respectively, whichever is lower, are given in Annexure “II” of unconsolidated financial statement.

11.11 Information relating to sale of operating fixed assets (otherwise than through a regular auction) made to chief executive or a di-
rector or an executive or a shareholder holding not less than ten percent of the voting shares of the Bank or any related party, as
required by SBP’s BSD Circular No. 4 dated February 17, 2006, is given in Annexure “II” of unconsolidated financial statement.
 Allied Bank Limited 251

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

Note December 31, December 31,

2017 2016
Rupees in ‘000

12 OTHER ASSETS

Mark-up / return / interest receivable

in local currency 15,530,697 17,621,002
in foreign currencies 266,574 289,597
Advances, deposits, advance rent and other prepayments 1,257,201 1,135,333
Advance taxation (payments less provisions) 4,747,404 3,955,179
Stationery and stamps in hand 196,230 184,587
Unrealized gain on forward foreign exchange contracts 2,227,080 –
Due from the employees’ retirement benefit schemes
benevolent fund 34.4 112,061 106,116
pension fund 34.4 3,692,032 4,614,727
Receivalable from SBP - customers encashments 15,476 9,979
ATM / POS settlement account 1,331,063 1,161,359
Non banking assets acquired in satisfaction of claims 12.1 3,584,030 3,476,351
Suspense account 517,113 922,303
Excise duty 11 11
Others 133,098 118,060
33,610,070 33,594,604
Less: Provision held against other assets 12.2 (747,062) (926,951)
Other assets (net of provision) 32,863,008 32,667,653

12.1 These assets are stated at revalued amount in accordance with accounting policy mentioned in note 5.8.

December 31, 2017 December 31, 2016

Specific General Total Specific General Total

Rupees in ‘000

12.2 Provision against Other Assets

Opening balance 695,044 231,907 926,951 1,250,830 186,858 1,437,688
Charge for the year 23,620 44,000 67,620 29,951 45,049 75,000
Reversals (20,189) (204,289) (224,478) – – –
Net charge / (reversal) 3,431 (160,289) (156,858) 29,951 45,049 75,000
Written off / adjusted (19,645) (3,386) (23,031) (585,737) – (585,737)
Closing balance 678,830 68,232 747,062 695,044 231,907 926,951

13 CONTINGENT ASSETS

There were no contingent assets of the Bank as at December 31, 2017 and December 31, 2016.

December 31, December 31,

2017 2016

Rupees in ‘000

14 BILLS PAYABLE
In Pakistan 7,835,467 9,848,795

15 BORROWINGS
In Pakistan 206,150,246 103,487,046
Outside Pakistan 17,406,137 22,881,829
223,556,383 126,368,875
15.1 Particulars of borrowings with respect to currencies
In local currency 206,150,246 103,487,046
In foreign currencies 17,406,137 22,881,829
223,556,383 126,368,875
252 Annual Report 2017

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

Note December 31, December 31,

2017 2016

Rupees in ‘000

15.2 Details of borrowings (Secured / Unsecured)

Secured
Borrowings from State Bank of Pakistan
Repurchase agreement borrowings 15.3 169,225,901 55,099,808
Under export refinance scheme 15.4 13,583,114 11,334,860
Long term financing facility 15.5 10,597,665 6,149,320
Financing Facility for Storage of Agriculture Produce (FFSAP) 15.6 5,477 16,430
193,412,157 72,600,418
Repurchase agreement borrowings from Financial Institutions 15.7 7,674,798 23,803,676

Unsecured
Call borrowings 15.8 20,246,997 29,873,171
Trading liability 1,976,436 –
Overdrawn nostro accounts 104,823 63,459
Musharaka Borrowing 15.9 100,000 –
Other borrowings 41,172 28,151
22,469,428 29,964,781
223,556,383 126,368,875

15.3 These represent local currency borrowings from the SBP against government securities, carrying mark-up at the rate of 5.82%
to 5.86% (2016: 5.90%) per annum, maturing on January 05, 2018.

15.4 The Bank has entered into various agreements for financing with the State Bank of Pakistan (SBP) for extending export finance
to customers. As per agreements, the Bank has granted to SBP the right to recover the outstanding amount from the Bank at
the date of maturity of the finance by directly debiting the current account maintained by the Bank with the SBP. The borrowing
carries mark-up at the rate of 1.00% to 2.00% (2016: 1.00% to 2.00%) per annum. These borrowings are repayable within six
months from the deal date.

15.5 This represents Long Term Financing facility availed by the Bank for further extending the same to its customers, for a maximum
period of 10 years. The borrowing repayments to SBP correspond the respective repayment from customers. The borrowing
carries mark-up at the rate of 4.50%, 3.50% and 3.00% (2016: 4.50%, 3.50% and 3.00%) per annum for financing up-to 3
years, 5 years & 10 years respectively.

15.6 These represent borrowings from the SBP under scheme of financing facility for storage of agricultural products. The financing
is available for a maximum period of 10 years. The borrowing carries markup rate at the rate of 2.00% (2016: 2.50% to 3.50%)
per annum.

15.7 These represent borrowings in local and foreign currency from local and foreign interbank markets against government securi-
ties, carrying mark-up at the rate of 5.60% to 5.80% (2016: 5.50% to 5.85%) per annum for local currency borrowings, and at
the rate of 2.80% to 2.85% (2016: Nil) per annum for foreign currency borrowings. These borrowings are maturing on various
dates, latest by February 27, 2018.

15.8 These represent unsecured borrowings in local and foreign currency from the local and foreign interbank markets, carrying mark-
up at the rate of 5.71% (2016: 5.55% to 6%) per annum for local currency borrowings, and at the rate of 1.92% to 4.39% (2016:
1.50% to 4.15%) per annum for foreign currency borrowings. These borrowings are maturing on various dates, latest by August
13, 2018.

15.9 This represents unsecured local currency borrowing by Islamic banking business under Musharaka agreement at profit of 5.85%
(2016: Nil) per annum, maturing on January 02, 2018.

 Allied Bank Limited 253

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

Note December 31, December 31,

2017 2016

Rupees in ‘000

16 DEPOSITS AND OTHER ACCOUNTS

Customers
Fixed deposits 185,545,256 176,919,971
Savings deposits 233,494,351 212,372,097
Current accounts - remunerative 107,441,601 97,923,755
- non - remunerative 303,716,739 248,775,261
830,197,947 735,991,084
Financial Institutions
Remunerative deposits 40,885,415 63,841,039
Non - remunerative deposits 12,618,694 5,257,951
883,702,056 805,090,074
16.1 Particulars of deposits
In local currency 805,059,027 747,276,461
In foreign currencies 78,643,029 57,813,613
883,702,056 805,090,074

17 DEFERRED TAX (LIABILITY) / ASSET - NET
Deferred debits arising in respect of
Provision against:
Investments 19,093 19,093
Other assets 38,959 38,959
Off-balance sheet obligations 14,824 14,824
Advances 46,869 55,572
Post retirement medical benefits 42,980 42,980
Worker’s welfare fund 1,183,246 915,389
1,345,971 1,086,817
Deferred credits arising due to
Surplus on revaluation of operating fixed assets 20.1 (1,208,989) (591,639)
Surplus on revaluation of non-banking assets 20.2 (25,789) (13,930)
Surplus on revaluation of investments 20.3 (5,648,428) (9,734,537)
Actuarial gains (93,888) (613,973)
Accelerated tax depreciation / amortization (1,296,877) (1,120,660)
Excess of investment in finance lease over written down
value of leased assets (13,206) (13,206)

(8,287,177) (12,087,945)
17.1 (6,941,206) (11,001,128)


Balance as at Recognised in Recognised in Balance as at Recognised in Recognised in Balance as at
January 01, Profit and Loss Other Comprehensive December 31, Profit and Loss Other Comprehensive December 31,
2016 Account Income / Equtiy 2016 Account Income / Equtiy 2017

Rupees in ‘000

17.1 Reconciliation of deferred tax

Deferred debits arising in respect of
Provision against:
Investments 19,093 – – 19,093 – – 19,093
Other assets 38,959 – – 38,959 – – 38,959
Off-balance sheet obligations 14,824 – – 14,824 – – 14,824
Advances 149,497 (93,925) – 55,572 (8,703) – 46,869
Post retirement medical benefits 42,980 – – 42,980 – – 42,980
Worker’s welfare fund 747,457 167,932 – 915,389 267,857 – 1,183,246
1,012,810 74,007 – 1,086,817 259,154 – 1,345,971
254 Annual Report 2017

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

Balance as at Recognised in Recognised in Balance as at Recognised in Recognised in Balance as at
January 01, Profit and Loss Other Comprehensive December 31, Profit and Loss Other Comprehensive December 31,
2016 Account Income / Equtiy 2016 Account Income / Equtiy 2017

Rupees in ‘000

Deferred credits arising due to

Surplus on revaluation of operating
fixed assets (622,777) 31,138 – (591,639) 29,582 (646,932) (1,208,989)
Surplus on revaluation of non-banking
assets – – (13,930) (13,930) – (11,859) (25,789)
Surplus on revaluation of investments (7,753,187) (12,572) (1,968,778) (9,734,537) 15,267 4,070,842 (5,648,428)
Actuarial gains (458,519) – (155,454) (613,973) – 520,085 (93,888)
Accelerated tax depreciation /
amortization (1,074,629) (46,031) – (1,120,660) (176,217) – (1,296,877)
Excess of investment in finance
lease over written down
value of leased assets (13,206) – – (13,206) – – (13,206)
(9,922,318) (27,465) (2,138,162) (12,087,945) (131,368) 3,932,136 (8,287,177)
Deferred Tax (Liability) /
Asset - Net (8,909,508) 46,542 (2,138,162) (11,001,128) 127,786 3,932,136 (6,941,206)

17.2 Through Finance Act 2007, a new section 100A read with the 7th Schedule (the Schedule) was inserted in the Income Tax
Ordinance, 2001 for the taxation of banking companies. The Schedule simplifies the taxation of banking companies and is
applicable from the tax year 2009 (financial year ended on December 31, 2008).

The deferred tax asset on the deductible temporary differences disallowed as a deduction in the past up to December 31, 2007,
for which transitory provisions are not available, is being kept as an asset as the Bank is confident that transitory provisions
would be introduced to set out the mechanism of claiming where benefit of these allowances can be claimed.

Note December 31, December 31,
2017 2016

Rupees in ‘000

18 OTHER LIABILITIES

Mark-up / return / interest payable

in local currency 2,269,141 2,471,163
in foreign currencies 264,305 167,682
Accrued expenses 1,764,625 2,306,655
Branch adjustment account 272,344 150,070
Unrealized loss on forward foreign exchange contracts – 308,138
Provision for:
gratuity 34.4 511,919 255,291
employees’ medical benefits 34.4 1,240,250 1,298,380
employees’ compensated absences 34.4 571,757 700,997
Unclaimed dividends 246,259 215,914
Dividend payable 18,292 20,237
Provision against off-balance sheet obligations 18.1 306,342 557,958
Retention money payable 264,520 191,657
Security deposits 662,862 554,178
Sundry deposits 2,064,111 2,125,685
Workers welfare fund payable 18.2 3,415,609 2,660,212
Others 3,365,123 2,935,842
17,237,459 16,920,059
 Allied Bank Limited 255

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

December 31, December 31,

2017 2016

Rupees in ‘000

18.1 Provision against off-balance sheet obligations

Opening balance 557,958 571,231
Charge for the year 12,459 11,113
Reversals (264,075) (24,386)
Net reversal (251,616) (13,273)
Closing balance 306,342 557,958

The above provision includes provisions made against letters of guarantee issued by the Bank.

18.2 The Supreme Court of Pakistan vide its order dated November 10, 2016 has held that the amendments made in the law intro-
duced by the Federal Government for the levy of Workers’ Welfare Fund (WWF) were not lawful. The Federal Board of Revenue
has filed review petitions against this order, which are currently pending.

Legal advice obtained on the matter indicates that consequent to filing of these review petitions the judgment may not currently
be treated as conclusive. Accordingly, the Group maintains its provision in respect of WWF and shall revisit the position on peri-
odic basis.

December 31, December 31,

2017 2016

Rupees in ‘000

18.3 Particulars of other liabilities

In local currency 16,868,331 16,620,704

In foreign currencies 369,128 299,355
17,237,459 16,920,059
19 SHARE CAPITAL

19.1 Authorized capital

December 31, December 31, December 31, December 31,
2017 2016 2017 2016

No. of shares Rupees in ‘000

1,500,000,000 1,500,000,000 Ordinary shares of Rs. 10/- each 15,000,000 15,000,000

19.2 Issued, subscribed and paid-up capital

Fully paid-up Ordinary shares of Rs. 10/- each

December 31, December 31, Ordinary shares December 31, December 31,
2017 2016 2017 2016

No. of shares Rupees in ‘000

406,780,094 406,780,094 Fully paid in cash 4,067,801 4,067,801
720,745,186 720,745,186 Issued as bonus shares 7,207,452 7,207,452
1,127,525,280 1,127,525,280 11,275,253 11,275,253
18,348,550 Ordinary shares of Rs. 10 each, determined
pursuant to the Scheme of Amalgamation in accordance
with the swap ratio stipulated therein less 9,200,000
ordinary shares of Rs. 10 each, held by Ibrahim Leasing
9,148,550 9,148,550 Limited on the cut-off date (September 30, 2004) 91,486 91,486

8,400,000 Ordinary shares of Rs. 10 each, determined

p u r s u a n t t o t h e S c h e m e o f A m a l g a m a t i o n o f
First Allied Bank Modaraba with Allied Bank Limited
8,400,000 8,400,000 in accordance with the share swap ratio stipulated therein. 84,000 84,000
1,145,073,830 1,145,073,830 11,450,739 11,450,739

Ibrahim Holdings (Private) Limited (holding company of the Bank), holds 965,879,110 (84.35%) [2016: 965,879,110 (84.35%)]
ordinary shares of Rs. 10 each respectively, as at reporting date.
256 Annual Report 2017

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

Note December 31, December 31,

2017 2016

Rupees in ‘000

20 SURPLUS ON REVALUATION OF ASSETS - NET OF TAX

Surplus arising on revaluation of:

operating fixed assets 20.1 16,004,075 6,832,802
non-banking assets 20.2 1,575,632 1,313,080
securities investments 20.3 10,493,344 18,053,478
Surplus on revaluation of assets - net of tax 28,073,051 26,199,360

20.1 Surplus on revaluation of operating fixed assets

Surplus as at January 1, 2017 7,424,441 7,513,409
Surplus on revaluation during the year 9,873,143 –

Transferred to unappropriated profit in respect of incremental
depreciation charged during the year - net of deferred tax (54,938) (57,830)
29,582 31,138
Related deferred tax liability 11.6 (84,520) (88,968)
Surplus on revaluation as at December 31, 2017 17,213,064 7,424,441

Related deferred tax liability:
Revaluation surplus as at January 1, 2017 (591,639) (622,777)
Deferred tax liability on revaluation surplus (646,932) –
Deferred tax on incremental depreciation transferred
to profit and loss account 29,582 31,138
17 (1,208,989) (591,639)
16,004,075 6,832,802

20.2 Surplus on revaluation of non-banking assets

Surplus as at January 1, 2017 1,327,010 –
Surplus on revaluation during the year 463,489 1,373,016

Surplus realised on disposal (187,088) (43,911)
Transferred to unappropriated profit in respect of incremental
depreciation charged during the year - net of deferred tax (1,294) (1,361)
Related deferred tax liability (696) (734)
1,990) (2,095)
Surplus on revaluation as at December 31, 2017 1,601,421 1,327,010
Related deferred tax liability:
Revaluation surplus as at January 1, 2017 (13,930) –
Deferred tax liability on revaluation surplus
(12,555) (14,903)
Deferred tax on surplus on disposal – 239
Deferred tax on incremental depreciation transferred
to profit and loss account 696 734
17 (25,789) (13,930)
1,575,632 1,313,080
20.3 Surplus / (deficit) on revaluation of 'available-for-sale' securities
Federal Government Securities
Market Treasury Bills (35,580) 27,195
Pakistan Investment Bonds 2,808,122 5,214,810
Term Finance Certificates (1,194) 16,666
Sukuk Bonds 199,191 359,452
Shares / Certificates - Listed 12,653,552 21,713,786
Foreign Currency Bonds (US$) 519,515 442,673
9.1 16,143,606 27,774,582
Related deferred tax liability 17 (5,650,262) (9,721,104)
10,493,344 18,053,478
 Allied Bank Limited 257

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

December 31, December 31,

2017 2016

Rupees in ‘000

21 CONTINGENCIES AND COMMITMENTS

21.1 Direct credit substitutes

Guarantees in favor of:
Banks and financial institutions 6,187,865 5,397,846

21.2 Transaction-related contingent liabilities

Guarantees in favor of:
Government 96,140 341,738
Others 19,427,128 20,555,816

19,523,268 20,897,554
21.3 Trade-related contingent liabilities 59,545,681 65,473,604

21.4 Claims against the Bank not acknowledged as debt 8,638,605 6,815,687

21.5 The Bank makes commitments to extend credit in the normal course of its business but these being revocable commitments do
not attract any significant penalty or expense if the facility is unilaterally withdrawn.

December 31, December 31,
2017 2016

Rupees in ‘000

21.6 Commitments in respect of forward foreign exchange contracts

Purchase 95,038,705 63,017,979
Sale 41,580,643 38,469,943

21.7 Commitments in respect of
Civil works 1,350,056 704,903
Acquisition of operating fixed assets 1,713,991 885,447
3,064,047 1,590,350

21.8 Commitments in respect of operating lease

Not later than one year 1,120,394 972,962
Later than one year and not later than five years 3,405,724 3,027,123
Later than five years 1,753,793 2,062,169

21.9 Other Commitments 61,551 61,551

21.10 Other Contingencies

21.10.1 The income tax assessments of the Group have been finalized upto and including tax year 2017 for local, Azad Kashmir and
Gilgit Baltistan operations. While finalizing income tax assessments upto tax year 2017, income tax authorities made certain
add backs with aggregate tax impact of Rs. 24,344 million (2016: 21,235 million). As a result of appeals filed by the Group be-
fore appellate authorities, most of the add backs have been deleted. However, the Group and Tax Department are in appeals/
references before higher forums against unfavorable decisions. Pending finalization of appeals/references no provision has
been made by the Group on aggregate sum of Rs. 24,344 million (2016: 21,235 million). The management is confident that the
outcome of these appeals/references will be in favor of the Group.

Tax Authorities have conducted proceedings of withholding tax audit under section 161/205 of Income Tax Ordinance, 2001 for
tax year 2003 to 2006 and tax year 2008 to 2016 and created an arbitrary demand of Rs. 1,440 million (2016: 1,439 million). The
Group's appeals before Commissioner Inland Revenue - Appeals (CIR(A)) / Appellate Tribunal Inland Revenue (ATIR) are pending
for adjudication. The management is confident that these appeals will be decided in favor of the Group; therefore, no provision
has been made against the said demand of Rs. 1,440 million (2016: 1,439 million).
258 Annual Report 2017

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

Tax authorities have also issued orders under Federal Excise Act, 2005/Sales Tax Act/Sindh Sales Tax on Services Act, 2011
for the year 2008 to 2014 thereby creating arbitrary aggregate demand of Rs. 893 million (2016: 890 million). The Group's
appeals before CIR(A) / Appellate Tribunal Inland Revenue (ATIR) are pending for adjudication. The management is confident that
aforesaid demand will be deleted by appellate authorities and therefore no provision has been made against the said demand of
Rs. 893 million (2016: 890 million).

21.10.2 As a result of default by Fateh Textile Mills to terms of compromise decree passed in August 2002 by the Honorable High
Court of Sindh, 16,376,106 shares of ABL were sold in accordance with section 19 (3) of the Financial Institutions (Recovery
of Finances) Ordinance, 2001, after complying with the due and complete transparent process. Sealed bids were invited from
interested parties. The bidding process was scheduled for July 23, 2004 and the Rs. 25 per share was fixed reserve price. On
the bid date, the highest offer for these shares was received at a rate of Rs. 25.51 per share. The bid was approved and the
successful bidder had deposited an amount of Rs. 417.75 million with the Bank.

Fateh Textile Mills Limited filed suit in the High Court of Sindh challenging the above sale of shares. The High Court had not
granted a stay order against the said sale. The sale of shares was, therefore; concluded.

21.10.3 While adjudicating foreign exchange repatriation cases of exporter namely: Fateh Textile Mills Limited, the Foreign Exchange
Adjudicating Court (FEAC) of the State Bank of Pakistan (SBP) has arbitrarily adjudicated penalties against various banks
including Rs. 2,173 million in aggregate against Allied Bank Limited (the Bank). Against the said judgments, the Bank has filed
appeals before the Appellate Board and Constitutional Petitions in the High Court of Sindh, Karachi. The Honorable High Court
has granted relief to the Bank by way of interim orders. Based on merits of the appeals, the management is confident that these
appeals shall be decided in favor of the Bank and therefore no provision has been made against the impugned penalty.

22 DERIVATIVE INSTRUMENTS

The Bank at present does not offer structured derivative products such as Interest Rate Swaps, Forward Rate Agreements or
FX Options. However, the Bank's Treasury Group buys and sells derivative instruments such as:

Forward Exchange Contracts
Foreign Exchange Swaps
Equity Futures
Forward Contracts for Government Securities

Forward Exchange Contracts

Exchange Contract (FEC) is a product which is offered to the obligor who transact internationally. These obligors use this product
to hedge themselves from unfavorable movements in a foreign currency, however, by agreeing to fix the exchange rate, they do
not benefit from favorable movements in that currency.

An FEC is a contract between the Obligor and the Bank in which both agree to exchange an amount of one currency for another
currency at an agreed forward exchange rate for settlement over more than two business days after the FEC is entered into (the
day on which settlement occurs is called the value date). FEC is entered with those Obligors whose credit worthiness has already
been assessed, and they have underlined trade transactions.

If the relevant exchange rate moves un-favorably, Obligor will benefit from that movement because the Bank must exchange
currencies at the FEC rate. In order to mitigate this risk of adverse exchange rate movement, the Bank hedges its exposure by
taking opposite forward position in inter-bank FX.

Foreign Exchange Swaps

A Foreign Exchange Swap (FX Swap) is used by the Bank if it has a need to exchange one currency for another currency on one
day and then re-exchange those currencies at a later date. Exchange rates and forward margins are determined in the "inter-
bank" market and fluctuate according to supply and demand.

An FX Swap prevents the Bank from gaining any benefit resulting from a favorable exchange rate movement in the relevant
currency pair between the time Bank enters into the transaction deal and when settlement occurs. Cancellation of the swap
may also result in exposure to market movements. The key advantage of an FX swap is that it provides the Bank with protection
against unfavorable currency movements between the time it enters into the transaction and settlement. The term and amounts
for FX Swap can also be tailored to suit the Bank's particular needs.

 Allied Bank Limited 259

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

Equity Futures

An equity futures contract is a standardized contract, traded on a futures counter of the stock exchange, to buy or sell a certain
underlying script at a certain date in the future, at a specified price.

The Bank may use equity futures as a hedging instrument to hedge its equity portfolio, in both 'held-for-trading' and 'available-
for-sale', against equity price risk. Only selected shares are allowed to be traded on futures exchange. Equity futures give
flexibility to the Bank either to take delivery on the future settlement date or to settle it by adjusting the notional value of the
contract based on the current market rates. Maximum exposure limit to the equity futures is 10% of Tier I Capital of the Bank,
based on prevailing SBP regulations.

The accounting policies used to recognize and disclose derivatives are given in Note 5.14.2. The risk management framework
of derivative instruments is given in note 41.

Note December 31, December 31,
2017 2016

Rupees in ‘000

23 MARK-UP / RETURN / INTEREST EARNED

On loans and advances:

Customers 23,722,450 21,347,070
On investments in:
Available-for-sale securities 34,616,633 27,447,249
Held-to-maturity securities 6,158,839 15,129,288
Held-for-trading securities 840,195 402,109
41,615,667 42,978,646
On deposits with financial institutions 27,568 9,773
On securities purchased under resale agreements 221,763 147,324
On certificates of investment 2,675 –
On call money lendings 93,088 63,639
On wakala lendings 4,189 28,045
On mudaraba lendings 5,634 21,328
On bai muajjal placement 5,916 –
On musharaka lendings 11,603 14,332
65,710,553 64,610,157

24 MARK-UP / RETURN / INTEREST EXPENSED

Deposits 23,923,527 23,608,093

Long term borrowings 277,636 240,637
Securities sold under repurchase agreements 7,256,991 5,022,492
Call money borrowings 898,155 763,764
Brokerage and commission 165,393 174,305
Other short term borrowings 1,607,587 1,534,724
34,129,289 31,344,015

25 FEE, COMMISSION AND BROKERAGE INCOME
Core fees, commission and brokerage 25.1 4,461,583 4,369,883
Account maintenance charges 96,846 106,146
4,558,429 4,476,029

25.1 The SECP vide circular 40 of 2016 dated 30 December 2016 , further amended by circular 05 of 2017, prescribed certain
conditions on Asset Management Companies (AMC) for charging of selling and marketing expenses. As a result of these
amendments the Management Company may charge selling and marketing expenses to funds under management (CISs)
initially for three years (01 Jan 2017 till 31 December 2019) on open end equity, asset allocation and index funds only upto a
maximum of 0.4% of average annual net assets of the Scheme.


260 Annual Report 2017

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

Note December 31, December 31,

2017 2016

Rupees in ‘000

26 GAIN / (LOSS) ON SALE OF SECURITIES

Shares - Listed – 31,323
- Unlisted – (20,374)
Open Ended Mutual Funds 12,238 129,636
Market Treasury Bills 10,143 (37,115)
Pakistan Investment Bonds 631,201 2,635,029
Sukuk Bonds (301) 1,180
653,281 2,739,679

27 OTHER INCOME
Rent received on Bank’s property 3,337 3,240
Gain on sale of operating fixed assets 53,012 36,471
Gain on sale of non-banking asset / other assets 27.1 80,419 12,104
Recovery from written off loans / others 183,158 48,445
319,926 100,260

27.1 This includes gain on sale of a non banking asset, amounting to Rs. 73.350 million (2016: net loss of Rs. 15.994 million).

Note December 31, December 31,
2017 2016

Rupees in ‘000

28 ADMINISTRATIVE EXPENSES
Salaries, allowances, etc. 28.1 11,264,100 10,761,294
Charge for defined benefit plan - net 28.1 & 34 57,796 137,631
Contribution to defined contribution plan - provident fund 303,795 276,440
Non-executive directors’ fees, allowances and other expenses 18,300 14,700
Rent, taxes, insurance, electricity, etc. 2,742,674 2,499,332
Legal and professional charges 121,024 107,714
Communications 380,872 364,229
Repairs and maintenance 548,645 539,429
Stationery and printing 250,481 231,845
Advertisement and publicity 605,049 550,636
Auditors’ remuneration 28.2 18,201 17,357
Depreciation / amortization 11.2 & 11.3 2,523,563 2,202,869
Security service charges 1,179,531 1,180,029
Travelling, conveyance and fuel expenses 192,942 198,758
Entertainment 139,632 146,425
Computer expenses 1,104,976 1,129,657
Subscription 259,310 184,600
Donations 28.3 54,209 41,878
Others 28.4 28,023 21,010
21,793,123 20,605,833

28.1 The Bank announced the Voluntary Retirement Scheme (VRS) for its employees. Fifty nine (59) employees (2016: 78) of the Bank
opted for retirement under this scheme. In accordance with the actuary recommendations, the Bank has recognized an amount
of Rs. 141 million (2016: Rs. 157 million) to cover additional retirement benefits in respect of such employees.
 Allied Bank Limited 261

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

Note December 31, December 31,

2017 2016

Rupees in ‘000

28.2 Auditors’ remuneration

Annual audit 6,448 6,150
Annual audit overseas business unit* 1,629 1,535
Half year review 2,610 2,435
Special certifications and miscellaneous services 5,124 4,972
Sales tax 653 1,210
Out-of-pocket expenses 1,737 1,055
18,201 17,357

*This includes audit fee amounting to Bahraini Dinar 4,350 (2016: 4,250) relating to Wholesale Bahrain Branch.

28.3 None of the directors, executives and their spouses had any interest in the donees, except Mr. Naeem Mukhtar (Chairman/
Non-Executive Sponsor Director) and Dr. Muhammad Akram Sheikh are directors in National Management Foundation (LUMS)
and Quality School Foundation, respectively.

Note December 31, December 31,

2017 2016

Rupees in ‘000

Acumen Fund Pakistan – 10,000

Agha Khan Hospital & Medical College Foundation – 1,000
Altaf Mahmood Foundation 1,000 500
Anjuman Himayat-i-Islam 28.3.1 4,577 4,900
Bakhtawar Amin Memorial Trust Hospital – 1,000
Baluchistan Residential Colleges 989 –
Chaman (Center for Mentally Challenged Children) 1,695 –
Command Improvement Fund
(Pakistan Navy-for Abdul Sattar Edhi Hockey Stadium) 1,000 –
Deaf and Dumb Welfare Association – 5,763
DHQ Teaching Hospital Sargodha – 1,375
Fountain House Mental Health Association – 500
Government Hospital Gawadar 923 –
International Islamic University – 4,000
Liver Foundation Trust 1,000 –
Markaz-e-Umeed – 500
Muhammad Usman Zafar (Surgical Treatment in United
Kingdom for Cerebral Diplegia) – 1,000
National Management Foundation (LUMS) 30,000 –
Bolan Cricket Stadium 500 –
Punjab Food Authority 4,500 –
Quality Schools Foundation – 10,000
Saleem Memorial Hospital 5,000 –
Sukkur Institute of Business Administration 1,000 –
Taj Medical Complex & Hamdard University 25 –
Tamir Welfare Organization 2,000 1,000
Vocational Training Institute (VTI), Chiniot – 340
54,209 41,878

28.3.1 This represents charitable expenses on account of sadqa & feeding to under privileged.

28.4 This includes canteen expenses amounting to Rs. 25.114 million (2016: Rs. 20.264 million).
262 Annual Report 2017

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

Note December 31, December 31,

2017 2016

Rupees in ‘000

29 OTHER CHARGES
Penalties imposed by SBP 41,642 437
Workers’ welfare fund 422,979 486,877
Education cess 31,022 29,610
Depreciation - non-banking assets 18,938 19,696
Other assets written off 5,254 51
519,835 536,671
30 TAXATION
Current - for the year 7,389,100 8,574,615
- for prior year 30.1 956,441 949,657
8,345,541 9,524,272
Deferred - current (127,786) (46,542)
8,217,755 9,477,730
30.1 The amount represents super tax levied on taxable income of the Bank for tax year 2017 vide Finance Act, 2017 (2016: for the
tax year 2016 vide Finance Act, 2016).

Note December 31, December 31,

2017 2016

Rupees in ‘000

30.2 Relationship between tax expense and accounting profit

Accounting profit for the year 21,143,526 24,177,866

Tax on income @ 35% (2016: 35%) 7,400,234 8,462,253
Effect of permanent differences – (2,711)
Prior year charge 962,923 949,657
Others (125,407) 68,531
Tax charge for the year 8,237,750 9,477,730

31 EARNINGS PER SHARE - BASIC AND DILUTED
Profit after taxation 12,925,771 14,700,136

Number of Shares

Weighted average number of ordinary shares outstanding during the year 1,145,073,830 1,145,073,830

Rupees

Earnings per share - basic and diluted 11.29 12.84

There is no dilution effect on basic earnings per share.

32 CASH AND CASH EQUIVALENTS

Cash and balances with treasury banks 6 85,355,555 73,203,767

Balances with other banks 7 649,512 679,938
Overdrawn nostro accounts 15.2 (104,823) (63,459)
85,900,244 73,820,246
 Allied Bank Limited 263

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

32.1 Reconciliation of movement of liabilities to cash flows arising from financing activities:

Liabilities Equity

Dividend Unclaimed Share Capital Reserves Unappropriated Total

payable dividends profit
Rupees in ‘000

Balance as at January 01, 2017 20,237 215,914 11,450,739 16,533,485 47,631,788 75,852,163
Changes from Financing cash flows
Dividend paid (7,980,807) (6,309) – – – (7,987,116)
Total changes from financing cash flows (7,980,807) (6,309) – – – (7,987,116)
Liability related
Dividend accrued 8,015,516 – – – – 8,015,516
Unclaimed dividend (36,654) 36,654 – – – –
Total liability related changes 7,978,862 36,654 – – – 8,015,516
Total equity related other changes – – – 1,446,631 2,914,338 4,360,969
Balance as at December 31, 2017 18,292 246,259 11,450,739 17,980,116 50,546,126 80,241,532

Note December 31, December 31,

2017 2016

Rupees in ‘000

33 STAFF STRENGTH

Permanent 10,805 10,582

Temporary / on contractual basis / trainee 438 286
Bank’s own staff strength at the end of the year 11,243 10,868
Outsourced 33.1 319 295
Total staff strength 11,562 11,163
Average number of employees 11,363 10,757

33.1 This excludes outsourced security guards, janitorial and tea service staff.

34 DEFINED BENEFIT PLANS

34.1 General description

The Bank operates a funded gratuity scheme for all employees who opted for the staff retirement benefit scheme introduced by
the management with effect from July 1, 2002. For those employees who did not opt for the new scheme, the Bank continues
to operate a funded pension scheme.

The Bank also operates a contributory benevolent fund (defined benefit scheme - funded) and provides post retirement medical
benefits (unfunded scheme) to eligible retired employees.

December 31, December 31,

2017 2016

Rupees in ‘000

34.2 Number of employees and beneficiaries under the schemes

The number of employees covered under the following defined benefit scheme / plans are:
Pension fund 1,193 1,262
Gratuity fund 10,686 10,715
Benevolent fund 88 95
Post retirement medical benefits 10,637 10,430
Employees’ compensated absences 10,805 10,927

In addition, the number of beneficiaries covered under the following defined benefit scheme / plans are:

Pension fund 2,022 1,926
Post retirement medical benefits 2,017 2,017
264 Annual Report 2017

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

34.3 Principal actuarial assumptions

The actuarial valuations were carried out for December 31, 2017 based on the Projected Unit Credit Method, using the following
significant assumptions:

December 31, December 31,
2017 2016

Withdrawal rate

Pension fund Low Low

Gratuity fund High High
Benevolent fund High High
Post retirement medical benefits High High
Employees’ compensated absences High High

Sources of estimation December 31, December 31,
2017 2016

Adjusted SLIC
Mortality rate Adjusted SLIC
2001-2005 2001-2005

Discount rate Yield on investments in Government Bonds 8.25% 8.00%

Expected rate of return on plan assets

Pension fund Yield on investments in Government Bonds 8.25% 8.00%
Gratuity fund Yield on investments in Government Bonds 8.25% 8.00%
Benevolent fund Yield on investments in Government Bonds 8.25% 8.00%

Expected rate of salary increase Rate of salary increase 6.25% 6.00%

The expected return on plan assets is based on the market expectations and depends on the asset portfolio of the Bank, at the
beginning of the period, for returns over the entire life of the related obligation.

Note December 31, 2017

Pension Gratuity Benevolent Post Employees’

fund fund fund retirement compensated
medical absences

Rupees in ‘000

34.4 Reconciliation of (receivable from) / payable to defined benefit plans / other long term benefits

Present value of defined benefit obligations 34.6 1,979,453 2,531,300 8,036 1,240,250 571,757
Fair value of plan's / scheme's assets 34.7 (5,671,485) (2,019,381) (232,158) – –
Net (asset) / liability (3,692,032) 511,919 (224,122) 1,240,250 571,757
Benefit of the surplus not available to the Bank – – 112,061 – –
Net (asset) / liability (3,692,032) 511,919 (112,061) 1,240,250 571,757

Note December 31, 2016

Pension Gratuity Benevolent Post Employees’

fund fund fund retirement compensated
medical absences

Rupees in ‘000

Present value of defined benefit obligations 34.6 2,001,618 2,285,523 8,776 1,298,380 700,997
Fair value of plan's / scheme's assets 34.7 (6,616,345) (2,030,232) (221,007) – –
Net (asset) / liability (4,614,727) 255,291 (212,231) 1,298,380 700,997
Benefit of the surplus not available to the Bank – – 106,115 – –
Net (asset) / liability (4,614,727) 255,291 (106,116) 1,298,380 700,997

 Allied Bank Limited 265

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

Note December 31, 2017

Pension Gratuity Benevolent Post Employees’

fund fund fund retirement compensated
medical absences

Rupees in ‘000

34.5 Movement in (receivable from) / payable to defined benefit plans
Opening balance (4,614,727) 255,291 (106,116) 1,298,380 700,997
(Reversal) / charge for the year 34.9 (363,776) 306,687 (16,978) 129,178 38,016
Other comprehensive losses / (income) 1,286,471 250,516 11,033 (62,068) –
Contribution to the fund / benefits paid – (300,575) – (125,240) (167,256)
Closing balance (3,692,032) 511,919 (112,061) 1,240,250 571,757

Note December 31, 2016

Pension Gratuity Benevolent Post Employees’

fund fund fund retirement compensated
medical absences

Rupees in ‘000

Opening balance (3,799,170) 561,455 (96,406) 1,217,945 763,257

(Reversal) / charge for the year 34.9 (328,106) 279,051 (17,353) 125,283 125,253
Other comprehensive losses / (income) (487,451) (62,336) 7,643 97,990 –
Contribution to the fund / benefits paid – (522,879) – (142,838) (187,513)
Closing balance (4,614,727) 255,291 (106,116) 1,298,380 700,997

December 31, 2017

Pension Gratuity Benevolent Post Employees’

fund fund fund retirement compensated
medical absences

Rupees in ‘000

34.6 Reconciliation of present value of defined benefit obligations

Opening balance 2,001,618 2,285,523 8,776 1,298,380 700,997

Current service cost – 280,153 – 29,182 38,524
Interest cost 149,272 173,464 604 98,861 49,276
Benefits paid (271,434) (234,443) (2,455) (125,240) (167,256)
VRS / settlement loss 5,402 6,111 – 1,135 21,856
Actuarial loss / (gain) 94,595 20,492 1,111 (62,068) (71,640)
Closing balance 1,979,453 2,531,300 8,036 1,240,250 571,757

December 31, 2016

Pension Gratuity Benevolent Post Employees’

fund fund fund retirement compensated
medical absences

Rupees in ‘000

Opening balance 1,971,233 2,043,833 12,355 1,217,945 763,257

Current service cost – 258,156 – 25,602 39,043
Interest cost 163,046 176,572 950 103,187 68,535
Benefits paid (319,203) (163,849) (3,598) (142,838) (187,513)
VRS / settlement loss / (gain) 13,820 6,847 – (3,506) 29,337
Actuarial loss / (gain) 172,722 (36,036) (931) 97,990 (11,662)
Closing balance 2,001,618 2,285,523 8,776 1,298,380 700,997
266 Annual Report 2017

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

December 31, 2017

Pension Gratuity Benevolent Post Employees’

fund fund fund retirement compensated
medical absences

Rupees in ‘000

34.7 Reconciliation of fair value of plan assets

Opening balance 6,616,345 2,030,232 221,007 – –

Expected return on plan assets 518,450 153,041 17,582 – –
Bank's contribution – 300,576 – – –
Benefits paid (271,434) (234,443) (2,455) – –
Actuarial loss (1,191,876) (230,025) (3,976) – –
Closing balance 5,671,485 2,019,381 232,158 – –

December 31, 2016

Pension Gratuity Benevolent Post Employees’

fund fund fund retirement compensated
medical absences

Rupees in ‘000

Opening balance 5,770,403 1,482,378 205,166 – –
Expected return on plan assets 504,972 162,523 18,303 – –
Bank's contribution – 522,879 – – –
Benefits paid (319,203) (163,849) (3,598) – –
Actuarial gain 660,173 26,301 1,136 – –
Closing balance 6,616,345 2,030,232 221,007 – –

December 31, 2017

Pension Gratuity Benevolent Post Employees’

fund fund fund retirement compensated
medical absences

Rupees in ‘000

34.8 Composition of fair value of plan assets

Equity securities 2,827,493 517,952 23,561 – –

Government securities – 304,383 – – –
Cash and cash equivalents 2,843,992 1,197,046 208,597 – –
5,671,485 2,019,381 232,158 – –
34.8.1 Fair value of Bank’s financial instruments
included in plan assets

Shares of ABL 2,827,493 517,952 23,561 – –
Term deposit receipts 2,408,733 972,064 164,907 – –
Bank balances with ABL 435,259 224,982 43,690 – –
5,671,485 1,714,998 232,158 – –
 Allied Bank Limited 267

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

December 31, 2016

Pension Gratuity Benevolent Post Employees’

fund fund fund retirement compensated
medical absences

Rupees in ‘000

Equity securities 3,904,747 726,584 33,051 – –

Cash and cash equivalents 2,711,598 1,303,648 187,956 – –
6,616,345 2,030,232 221,007 – –
Fair value of Bank’s financial instruments
included in plan assets
Shares of ABL 3,635,454 726,584 33,051 – –
Term deposit receipts 2,351,708 1,268,030 161,045
Bank balances with ABL 359,890 35,618 26,911 – –
6,347,052 2,030,232 221,007 – –

December 31, 2017

Pension Gratuity Benevolent Post Employees’

fund fund fund retirement compensated
medical absences

Rupees in ‘000

34.9 Charge for defined benefit plan

Current service cost – 280,153 – 29,182 38,524

Interest cost – 20,423 – 98,861 49,276
Net interest (369,178) – (16,978) – –
VRS loss 5,402 6,111 – 1,135 21,856
Actuarial gain recognised – – – – (71,640)
(363,776) 306,687 (16,978) 129,178 38,016

December 31, 2016

Pension Gratuity Benevolent Post Employees’

fund fund fund retirement compensated
medical absences

Rupees in ‘000

Current service cost – 258,156 – 25,602 39,043
Interest cost – 14,048 – 103,187 68,535
Net interest (341,926) – (17,353) –
VRS loss / (gain) 13,820 6,847 – (3,506) 29,337
Actuarial gain recognised – – – – (11,662)
(328,106) 279,051 (17,353) 125,283 125,253

December 31, 2017

Pension Gratuity Benevolent Post Employees’

fund fund fund retirement compensated
medical absences

Rupees in ‘000

34.10 Actuarial (loss) / gain recognized in other comprehensive income

Actuarial (loss) / gain on obligations (94,594) (20,491) (1,112) 62,068 –

Actuarial loss on assets (1,191,877) (230,025) (3,976) – –
Asset ceiling adjustment – – (5,945) –
Actuarial (loss) / gain in OCI (1,286,471) (250,516) (11,033) 62,068 –
268 Annual Report 2017

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

December 31, 2016

Pension Gratuity Benevolent Post Employees’

fund fund fund retirement compensated
medical absences

Rupees in ‘000

Actuarial (loss) / gain on obligations (172,722) 36,035 931 (97,990) –
Actuarial gain on assets 660,173 26,301 1,136 – –
Asset ceiling adjustment – – (9,710) –
Actuarial gain / (loss) in OCI 487,451 62,336 (7,643) (97,990) –

December 31, December 31,
2017 2016

Rupees in ‘000

34.11 Actual (loss) / return on plan assets

- Pension fund (673,427) 1,165,145
- Gratuity fund (76,984) 188,824
- Benevolent fund 13,607 19,439

34.12 Five year data of defined benefit plan and experience adjustments
Pension fund

2017 2016 2015 2014 2013

Rupees in ‘000

Present value of defined benefit obligation 1,979,453 2,001,618 1,971,233 2,877,345 2,810,086
Fair value of plan assets (5,671,485) (6,616,345) (5,770,403) (7,252,046) (6,591,550)
Surplus (3,692,032) (4,614,727) (3,799,170) (4,374,701) (3,781,464)
Experience adjustments on plan obligations / assets
Actuarial loss on obligation (94,595) (172,722) (152,852) (316,213) (25,739)
Actuarial (loss) / gain on assets (1,191,876) 660,173 (854,480) 478,030 340,760

Gratuity fund

2017 2016 2015 2014 2013

Rupees in ‘000

Present value of defined benefit obligation 2,531,300 2,285,523 2,043,833 1,725,573 1,486,417
Fair value of plan assets (2,019,381) (2,030,232) (1,482,378) (1,727,942) (1,438,351)
Deficit / (surplus) 511,919 255,291 561,455 (2,369) 48,066
Experience adjustments on plan obligations / assets
Actuarial (loss) / gain on obligation (20,492) 36,036 (167,783) (93,984) 92,014
Actuarial (loss) / gain on assets (230,025) 26,301 (168,935) 137,284 15,526

Benevolent fund

2017 2016 2015 2014 2013

Rupees in ‘000

Present value of defined benefit obligation 8,036 8,776 12,355 10,469 10,894
Fair value of plan assets (232,158) (221,007) (205,166) (197,461) (174,403)
Surplus (224,122) (212,231) (192,811) (186,992) (163,509)
Experience adjustments on plan obligations / assets
Actuarial (loss) / gain on obligation (1,111) 931 (4,376) (2,203) (6,973)
Actuarial (loss) / gain on assets (3,976) 1,136 (10,841) 5,247 4,593
 Allied Bank Limited 269

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

Post retirement medical

2017 2016 2015 2014 2013

Rupees in ‘000

Present value of defined benefit obligation 1,240,250 1,298,380 1,217,945 970,060 951,480
Fair value of plan assets – – – – –
Deficit 1,240,250 1,298,380 1,217,945 970,060 951,480
Experience adjustments on plan obligations
Actuarial gain / (loss) on obligation 62,068 (97,990) (243,936) (21,931) 483,192

Employees' compensated absences

2017 2016 2015 2014 2013

Rupees in ‘000

Present value of defined benefit obligation 571,757 700,997 763,257 755,785 820,067
Fair value of plan assets – – – – –
Deficit 571,757 700,997 763,257 755,785 820,067
Experience adjustments on plan obligations
Actuarial gain / (loss) on obligation 71,640 11,662 (45,712) (47,308) 186,066

34.13 Expected contributions to be paid to the funds in the next financial year
The Bank contributes to the gratuity fund as per actuarial expected charge for the next financial year. No contributions are being
made to pension / benevolent fund due to surplus of fair value of plan’s assets over present value of defined obligation. Based
on actuarial advice, management estimates that the charge / (reversal) in respect of defined benefit plans for the year ending
December 31, 2018 would be as follows, subject to Note 42.2:

Pension Gratuity Benevolent Post Employees’

fund fund fund retirement compensated
medical absences

Rupees in ‘000

Expected (reversal) / charge for the next year (299,954) 386,040 (18,490) 156,432 98,359

+1% -1% +1% Salary -1% Salary +10% -10% 1 Year 1 Year
Description Discount Discount Increase Increase withdrawal withdrawal Mortality age Mortality age
Rate Rate Rate Rate Rate Rate set back set forward

Rupees in 000’

34.14 Sensitivity analysis

Pension fund 2,122,754 1,854,112 – – 1,979,544 1,979,362 1,980,905 1,978,007
Gratuity fund 2,373,809 2,709,990 2,721,886 2,360,944 2,544,727 2,516,687 2,530,129 2,532,464
Benevolent fund 7,535 8,607 – – – – 7,285 8,787
Post retirement medical 1,157,857 1,332,850 1,294,657 1,184,859 1,233,364 1,246,745 1,240,595 1,238,996
Leave compensated absences 539,492 604,789 607,962 536,143 564,009 576,546 568,098 572,152

The above sensitivity analysis are based on a change in an assumption while holding all other assumptions constant. In practice,
this is unlikely to occur, and changes in assumptions may be correlated. When calculating the sensitivity of the defined benefit
obligation to significant actuarial assumptions the same method (present value of defined benefit obligation calculated with the
projected unit credit method at the end of the reporting period) has been applied when calculating the defined benefit obligation
recognized within the statement of financial position.

34.15 Risk associated with defined benefit plans

The defined benefit plans may expose the bank to actuarial risks such as longevity risk, investment risk, salary increase risk and
withdrawal rate risk as described below;

Longevity risks:
The risk arises when the actual lifetime of retirees is longer than expectation. This risk is measured at the plan level over the entire
retiree population.

Investment risks:
The risk arises when the actual performance level of investment levels is lower than expectation and thus creating a shortfall in
the funding objectives.
270 Annual Report 2017

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

Salary increase risk:

The most common type of retirement benefit is one where the final benefit is linked with final salary. The risk arises when the
actual increases are higher than expectations and impact the liability accordingly.

Withdrawal Rate:
The risk of actual withdrawals varying with the actuarial assumptions can impose a risk to the benefit obligation. The movement
of the liability can go either way.

35 DEFINED CONTRIBUTION PLAN

The Group has maintained an employee provident fund trust and investments out of provident fund have been made in
accordance with the provisions of section 227 of the repealed Companies Ordinance 1984, and the rules formulated for this
purpose. The salient information of the fund is as follows:

Note December 31, December 31,
2017 2016

Rupees in ‘000

35.1 Employee provident fund

Size of the fund 7,400,879 7,846,302
Investments made (cost) 35.2 6,352,600 6,257,476
Percentage of investment made 85.84% 80.67%
Fair value of investment 7,264,490 7,756,913

35.2 Breakup of investment - Cost

Investment in shares (Listed securities) 1,468,812 1,435,991
Market treasury bills 4,561,832 4,475,025
Pakistan investment bonds 298,719 289,807
Open ended mutual funds 20,452 56,653
GOP Ijarah Sukuks 2,785 –
6,352,600 6,257,476

35.3 Number of employees - Employees provident fund Number

Number of employees at the end of the year 10,236 9,521

Average number of employees during the year 10,105 9,455

Note President / Chief Non-Executive Executives

Executive Directors

2017 2016 2017 2016 2017 2016

Rupees in ‘000
36 COMPENSATION OF DIRECTORS AND EXECUTIVES
Fees 36.1 – – 18,300 14,700 – –
Managerial remuneration 11,400 13,519 – – 1,528,975 1,356,942
Charge for defined benefit plans 928 4,922 – – 191,117 191,929
Contribution to defined
contribution plan 950 1,126 – – 128,397 112,519
Rent and house maintenance 6,840 8,128 – – 843,943 714,313
Utilities 2,280 2,526 – – 295,507 259,039
Medical 2,362 2,526 – – 325,071 280,775
Bonus 36.2 17,000 22,000 – – 579,758 563,114
Conveyance and others 3,293 3,390 – – 850,542 769,395
45,053 58,137 18,300 14,700 4,743,310 4,248,026
Number of persons 1 1 11 11 1,683 1,415

36.1 This represents meeting fee paid to directors (other than two sponsor directors) for attending meetings of the Board of
Directors and Board Committees held during the year.

36.2 Excluding the retiring President/ CEO, whose term completed on December 31, 2016, was paid bonus of Rs. 35 million.
 Allied Bank Limited 271

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

37 FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of traded investments is based on quoted market prices, except for tradable securities classified by the Group as
‘Held-to-Maturity’. Quoted securities classified as ‘Held-to-Maturity’ are carried at amortized cost. Fair value of unquoted equity
investments other than investment in subsidiary is determined on the basis of break up value of these investments as per the
latest available audited financial statements.

Fair value of fixed term loans, other assets, other liabilities, fixed term deposits and borrowings cannot be calculated with
sufficient reliability due to absence of current and active market for such assets and liabilities and reliable data regarding market
rates for similar instruments. The provision / reversal for impairment of loans and advances has been calculated in accordance
with the Bank’s accounting policy as stated in note 5.4 to these financial statements.

The maturity and repricing profile and effective rates are stated in notes 41.2.4 and 41.3.

In the opinion of the management, the fair values of the remaining financial assets and liabilities are not significantly different from
their carrying values since assets and liabilities are either short-term in nature or in the case of customer loans and deposits are
frequently re-priced.

The table below presents, by valuation methods, the financial and non-financial assets carried at fair values. Valuation of
investments and non-banking assets is carried out as per guidelines specified by the SBP. The Bank has adopted revaluation
model (as per IAS 16) in respect of land and building and non-banking assets.

December 31, 2017 December 31, 2016

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

Rupees in ‘000

37.1 FAIR VALUE HIERARCHY OF ASSETS AND LIABILITIES

On balance sheet financial instruments

Financial assets measured at fair value
Held-for-trading securities
Market Treasury Bills – 24,704,478 – 24,704,478 – – – –
Units of open-ended mutual funds – 123,415 – 123,415 1,520,077 – – 1,520,077
Sukuk Bonds 1,741,623 – – 1,741,623 – 40,347 – 40,347
Pakistan Investment Bonds – – – – – 101,819 – 101,819
1,741,623 24,827,893 – 26,569,516 1,520,077 142,166 – 1,662,243
Available–for–sale securities
Market Treasury Bills – 365,643,722 – 365,643,722 – 226,247,239 – 226,247,239
Pakistan Investment Bonds – 166,864,554 – 166,864,554 – 203,520,070 – 203,520,070
Ordinary shares of listed companies /
certificates of close-ended mutual funds 33,346,294 – – 33,346,294 42,084,599 – – 42,084,599
Ordinary shares of unlisted companies – – 3,522,055 3,522,055 – – 3,448,081 3,448,081
Sukuk Bonds – 14,373,811 5,219,911 19,593,722 – 13,306,369 5,151,607 18,457,976
Foreign Currency Bonds (US$) – 5,515,525 – 5,515,525 – 5,177,620 – 5,177,620
Term Finance Certificates – 2,292,939 1,413,084 3,706,023 – 2,353,869 2,003,063 4,356,932
33,346,294 554,690,551 10,155,050 598,191,895 42,084,599 450,605,167 10,602,751 503,292,517
Financial liabilities measured at fair value
Held- for-trading securities
Pakistan Investment Bonds – 1,976,436 – 1,976,436 – – – –
Non - financial assets measured at fair value
Operating fixed assets – 36,872,324 – 36,872,324 – 22,914,819 – 22,914,819
Non–banking assets – 3,584,030 – 3,584,030 – 3,476,351 – 3,476,351
Off balance sheet financial instruments
Foreign exchange contracts - Purchase – 95,038,705 – 95,038,705 – 63,017,979 – 63,017,979
Foreign exchange contracts - Sale – 41,580,643 – 41,580,643 – 38,469,943 – 38,469,943

The valuation techniques used for above assets are same as disclosed in note 5.3, 5.5, 5.8 and 5.14.2 of these financial statements.

272 Annual Report 2017

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

LEVEL 3
December 31, December 31,
2017 2016

Rupees in ‘000

37.1.1 Reconciliation of Investments measured at Fair value

Opening balance 10,602,751 7,091,019

Total (losses) for the period:
Included in profit or loss (21,582) (37,097)
Purchases 482,555 4,523,735
Settlements (908,674) (974,906)
Closing balance 10,155,050 10,602,751

38 SEGMENT DETAILS WITH RESPECT TO BUSINESS ACTIVITIES

The segment analysis with respect to business activity is as follows:

For the year ended December 31, 2017

Corporate & Trading & Commercial

Investment Sale and Retail Asset
Banking (Treasury) Banking Other Management Eliminations Total

Rupees in ‘000

Total income 27,541,596 41,357,556 50,150,587 748,614 651,512 (45,227,777) 75,222,088

Total expenses (23,153,530) (35,358,023) (42,836,573) (5,716,591) (459,378) 45,227,777 (62,296,318)
Net income / (loss) 4,388,066 5,999,533 7,314,014 (4,967,977) 192,134 – 12,925,770
Segment assets (gross) 400,890,640 692,542,154 898,771,802 143,752,585 2,151,050 (870,549,227) 1,267,559,004
Segment non performing loans 1,955,663 – 519,333 15,576,753 – – 18,051,749
Segment provision required 720,077 – 417,106 15,576,754 – – 16,713,937
Segment liabilities 397,834,210 692,542,154 897,377,822 21,250,240 317,372 (870,049,227) 1,139,272,571
Segment return on net assets (ROA) (%)* 6.51% 6.93% 5.82% – 0.05% – –
Segment cost of funds (%)* 5.56% 5.45% 3.07% – 0.00% – –

For the year ended December 31, 2016

Corporate & Trading & Commercial

Investment Sale and Retail Asset
Banking (Treasury) Banking Other Management Eliminations Total

Rupees in ‘000

Total income 25,948,197 44,559,811 41,608,990 1,529,790 672,564 (37,853,693) 76,465,659

Total expenses (21,585,449) (34,224,417) (37,066,016) (6,343,856) 399,478 37,853,693 (61,765,523)
Net income / (loss) 4,362,748 10,335,394 4,542,974 (4,814,066) 273,086 – 14,700,136
Segment assets (gross) 371,284,006 572,327,816 822,485,324 138,227,090 1,952,208 (812,754,719) 1,093,521,725
Segment non performing loans 3,220,882 – 1,557,545 15,653,182 – – 20,431,609
Segment provision required 1,917,869 – 1,216,565 15,649,438 – – 18,783,872
Segment liabilities 367,051,366 572,327,815 820,893,276 20,900,529 310,664 (812,254,719) 969,228,931
Segment return on net assets (ROA) (%)* *7.04% 8.38% 5.03% – 13.93% – –
Segment cost of funds (%)* 5.59% 5.43% 2.26% – – – –

* The segment return on net assets and cost of funds are based on average assets and average liabilities for the year.

39 RELATED PARTY TRANSACTIONS

The Group has related party relationships with its parent, companies with common directorship, directors, employees benefit
plans and key management personnel including their associates.

 Allied Bank Limited 273

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

Contributions to the accounts in respect of staff retirement benefits are made in accordance with actuarial valuation / terms of
the contribution plan. Remuneration of the key management personnel are in accordance with the terms of their employment.
Other transactions are at agreed terms.

December 31, 2017 December 31, 2016

Key Other Key Other
Nature of related party transactions Associated
management related Associated
management related
Parent Directors Companies* personnel parties Parent Directors Companies* personnel parties

Rupees in ‘000

Loans:
Loans at the beginning of the year – 24,137 4,383,200 253,417 17,991,914 – 36,637 1,774,626 264,941 5,379,463
Loans given during the year – 63,948 – 155,728 66,822,844 – 27,681 5,642,759 80,198 71,307,904
Loans repaid / adjustment during the year – (71,056) (841,450) (156,471) (78,849,569) – (40,181) (3,034,185) (91,722) (58,695,453)
Loans at the end of the year – 17,029 3,541,750 252,674 5,965,189 – 24,137 4,383,200 253,417 17,991,914


Deposits:
Deposits at the beginning of the year 403 53,177 258,264 42,152 13,249,519 – 40,868 102,902 22,837 9,572,394
Deposits received during the year 6,779,403 491,942 41,648,556 569,875 157,490,029 654 5,505,258 10,566,219 406,337 94,959,394
Deposits repaid during the year (6,778,604) (210,530) (41,807,971) (550,138) (157,458,644) (251) (5,492,949) (10,410,857) (387,022) (91,282,269)
Deposits at the end of the year 1,202 334,589 98,849 61,889 13,280,904 403 53,177 258,264 42,152 13,249,519
Nostro balances – – – – – – – 35,968 – –
Investments in shares – – 4,836,429 – 5,891,353 – – 4,790,874 – 5,445,403
Other receivables – 12,631 27,810 81,472 384,161 – 6,363 37,246 81,029 513,103
Net receivable from
staff retirement benefit funds – – – – 3,255,453 – – – – 4,419,506
Non funded exposure – – 423,881 – 6,416 – – 550 – 17,421

December 31, 2017 December 31, 2016

Key Other Key Other
Nature of related party transactions Associated
management related Associated
management related
Parent Directors Companies* personnel parties Parent Directors Companies* personnel parties

Rupees in ‘000

Mark–up earned – 1,115 280,274 13,037 559,400 – 1,535 232,676 16,258 806,191
Dividend Income – – 840,000 – 847,936 – – 1,400,000 – 795,022
Capital gain / loss – – – – – – – – – 25,362
Sales commission – – – – 52,139 – – – – 11,597
Fee commission / bank charges 2 17 1,029 64 733 – 36 1,969 76 413
Management fee income – – – – 491,314 – – – – 403,128
Other income** – – 4,036 – 706 – – 3,709 – 180
Mark–up expense on deposits – 2,457 3,184 512 381,989 – 1,259 10,569 553 369,984
Directors’ meeting fee – 18,300 – – – – 14,700 – – –
Remuneration – 43,318 – 377,245 – – 58,137 – 369,445 –
Other charges*** – – 31,082 – 103,364 – – 11,368 – 93,898
Rent expense**** – – 26,619 – – – – 25,648 – –
Charge / (reversal) in respect of staff
retirement benefit funds – – – – 215,783 – – – – 189,366

Shares held by the holding company, outstanding at the end of year are included in note 19 to these unconsolidated financial
statements.

* Associated companies are on the basis of common directorship.

**Other income includes rental income from two offices located at Pakistan Stock Exchange (Islamabad) building rented out to
Associated Company (Ibrahim Fibers Limited) at market value and with prior permission of State Bank of Pakistan.
*** Other charges with Associated Companies include donation to National Management Foundation amounting to Rs. 30 million
and with Other related parties include payments to NIFT amounting to Rs. 99.48 Million.
**** Rent sharing expense of ABL Branch with associated company (Ibrahim Fibers Limited ) was carried out on terms other
than that of arm’s length with prior permission of State Bank of Pakistan.
- During the year ended December 31, 2017; Movable assets were disposed off for Rs.166,000 to the key management
personnel of the Bank. The assets were fully depreciated.

274 Annual Report 2017

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

40 CAPITAL ASSESSMENT AND ADEQUACY

40.1 Capital Adequacy

40.1.1 Objectives of Managing Capital

Capital Management aims to ensure that there is sufficient capital to meet the capital requirements of the Bank as determined by
the underlying business strategy and the minimum requirements of the SBP. The Capital Management process is governed by
the Bank’s Asset & Liability Committee (ALCO), Risk Management Committee (RMC) and Management Committee (MANCO).
Further, capital adequacy and management is overseen by the Board’s Risk Management Committee (BRMC) and Strategic
Planning and Monitoring Committee (SPMC).

Bank’s capital management seeks:
-    to comply with the capital requirements set by the regulators and comparable to the peers;
-   to actively manage the supply of capital costs and increase capital velocity;
-    to increase strategic and tactical flexibility in the deployment of capital to allow for the timely reallocation of capital;
-    to improve the liquidity of the Bank’s assets to allow for an optimal deployment of the Bank’s resources;
-    to protect the Bank against unexpected events and maintain strong ratings;
-    to safeguard the Bank’s ability to continue as a going concern so that it can continue to provide adequate return to
shareholders;
-    availability of adequate capital (including the quantum) at a reasonable cost so as to enable the Bank to expand; and
-    to achieve low overall cost of capital with appropriate mix of capital elements.

Bank through Internal Capital Adequacy Assessment Process (ICAAP) and Advance Stress Testing assesses overall capital
adequacy on a periodic basis in relation to Bank’s risk profile. Utilizing sensitivity and stress analysis techniques, bank assesses
adequacy of Bank’s total capital against adverse shocks with respect to credit risk, market risk, operational risk, concentration
risk, interest rate risk, liquidity risk, country risk, reputational risk and strategic risk. Further, Bank formulates its strategy, including
need assessment for raising additional capital for maintaining adequate capital under stressed conditions.

40.1.2 Externally Imposed Capital Requirements

In order to strengthen the solvency of Banks / Development Financial Institutions (DFI), SBP through its BSD Circular No. 07 of
2009 dated April 15, 2009 has asked the Banks to raise their minimum paid up capital to Rs. 10 billion free of losses.

SBP through its BPRD Circular # 6 of 2013 dated August 15, 2013 has asked banks to maintain the minimum Capital Adequacy
Ratio (CAR) of 11.275% on standalone as well as on consolidated basis till December 31, 2017. Subsequently, a phase in
arrangement has been put in place whereby the banks are required to maintain the following ratios on an ongoing basis:

Year end as of December, 31

2015 2016 2017 2018 2019

Common Equity Tier-1 - CET1 6.00% 6.00% 6.00% 6.00% 6.00%

Additional Tier-1 1.50% 1.50% 1.50% 1.50% 1.50%
Tier 1 7.50% 7.50% 7.50% 7.50% 7.50%
Total Capital 10.00% 10.00% 10.00% 10.00% 10.00%
*Capital Conservation Buffer - CCB 0.25% 0.65% 1.275% 1.90% 2.50%
Total Capital plus CCB 10.25% 10.65% 1.275% 11.90% 12.50%

* Consisting of CET1 only.

The paid up capital and CAR of the Bank stands at Rs. 11.451 billion and 22.38% of its risk weighted exposure as at
December 31, 2016.

The Bank has complied with all externally imposed capital requirements as at year end.
 Allied Bank Limited 275

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

40.1.3 Scope of Applications

The Basel Framework is applicable to the Bank both at the consolidated level (comprising of wholly owned subsidiary - ABL
Asset Management Company Limited) and also on a stand alone basis.

40.1.4 Capital Structure - Basel III transition

State Bank of Pakistan vide BPRD circular # 6 dated August 15, 2013 revised and updated Basel II Framework in accordance
with Basel III capital reforms and clarifications to further strengthen capital related rules. These instructions form part of transitional
arrangement leading to full implementation of Basel III in 2019.

Bank’s regulatory capital is analyzed into two tiers:

Tier 1 capital, which includes fully issued, subscribed and paid up capital, balance in share premium account, reserve for bonus
issue, general reserves as per the financial statements and net un-appropriated profits, etc. after regulatory deductions.

Tier 2 capital, which includes general provisions for loan losses (up to a maximum of 1.25 % of risk weighted assets), reserves
on the revaluation of fixed assets and equity investments (up to a maximum of 45% of the balance in the related revaluation
reserves) and subordinated debt (up to a maximum of 50% of Tier 1 capital). Bank has also implemented transitional standards
of Basel III up to the extent of 80% as at December 31, 2017 as per road map laid down by SBP through BPRD Circular #6
dated August 15, 2013.

The required capital is achieved by the Bank through:

(a)    enhancement in the risk profile of asset mix at the existing volume level;
(b)   ensuring better recovery management; and
(c)    maintain acceptable profit margins.

40.1.5 Leverage Ratio

The leverage ratio of the Group as on December 31, 2017 is 4.71% (2016: 5.17%). The ratio has been computed as prescribed
by State Bank of Pakistan through Instructions for Basel III Implementation in Pakistan.

As on December 31, 2017; Total Tier 1 capital of the Group amounts to Rs. 72,204,657 thousands (2016: Rs. 68,373,829
thousands) whereas the total exposure measure amounts to Rs. 1,534,209,065 thousands (2016: Rs. 1,323,107,729
thousands).

Shift in leverage ratio is mainly due to increase in assets as of December 31, 2017.

Detail of the Bank’s eligible capital is as follows:

276 Annual Report 2017

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

December 31, December 31,

2017 2016
Rupees in ‘000

40.2 CAPITAL ADEQUACY RETURN AS OF DECEMBER 31, 2017

Common Equity Tier 1 capital (CET1): Instruments and reserves

Fully Paid–up Capital/ Capital deposited with SBP 11,450,739 11,450,739
Balance in Share Premium Account
Reserve for issue of Bonus Shares
General/ Statutory Reserves 17,749,162 16,475,798
Gain/(Losses) on derivatives held as Cash Flow Hedge
Unappropriated/unremitted profits/ (losses) 50,546,126 47,631,788
Minority Interests arising from CET1 capital instruments issued to third
party by consolidated bank subsidiaries (amount allowed in CET1
capital of the consolidation group)
CET 1 before Regulatory Adjustments 79,746,027 75,558,325
Common Equity Tier 1 capital: Regulatory adjustments
Total regulatory adjustments applied to CET1 (Note 40.2.1) (7,541,370) (7,184,496
Common Equity Tier 1 a 72,204,657 68,373,829
Additional Tier 1 (AT 1) Capital
Qualifying Additional Tier–1 instruments plus any related share premium
of which: Classified as equity – –
of which: Classified as liabilities
Additional Tier–1 capital instruments issued by consolidated subsidiaries and
held by third parties (amount allowed in group AT 1) of which:
instrument issued by subsidiaries subject to phase out – –
AT1 before regulatory adjustments – –
Total regulatory adjustments applied to CET1 (Note 40.2.2) – –
Additional Tier 1 capital after regulatory adjustments
Additional Tier 1 capital recognized for capital adequacy b – –
Tier 1 Capital (CET1 + admissible AT1) (c=a+b) 72,204,657 68,373,829
Tier 2 Capital
Qualifying Tier 2 capital instruments under Basel III
Capital instruments subject to phase out arrangement from tier 2 (Pre–
Basel III instruments) – –

Tier 2 capital instruments issued to third party by consolidated
subsidiaries (amount allowed in group tier 2) of which: instr
ments issued by subsidiaries subject to phase out – –
General Provisions or general reserves for loan losses–up to maximum of
1.25% of Credit Risk Weighted Assets 11,701 63,309
Revaluation Reserves 23,582,703 19,411,299
of which: Revaluation reserves on Property 14,243,627 5,329,586
of which: Unrealized Gains/losses on AFS 9,339,076 14,081,713
Foreign Exchange Translation Reserves 230,854 57,787
Undisclosed/Other Reserves (if any) – –
T2 before regulatory adjustments 23,825,358 19,532,295
Total regulatory adjustment applied to T2 capital (Note 40.2.3) (1,045,475) (1,172,272)
Tier 2 capital (T2) after regulatory adjustments 22,779,883 18,360,022
Tier 2 capital recognized for capital adequacy 22,779,883 18,360,022
Portion of Additional Tier 1 capital recognized in Tier 2 capital – –
Total Tier 2 capital admissible for capital adequacy (d) 22,779,883 18,360,022
TOTAL CAPITAL (T1 + admissible T2) (e=c+d) 94,984,540 86,733,851
Total Risk Weighted Assets (f) 424,451,794 415,395,823
Capital Ratios and buffers (in percentage of risk weighted assets)
CET1 to total RWA (a/f) 17.01% 16.46%
Tier–1 capital to total RWA (c/f) 17.01% 16.46%
 Allied Bank Limited 277

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

December 31, December 31,

2016 2015
Rupees in ‘000

Total capital to RWA (e/f) 22.38% 20.88%

Bank specific buffer requirement (minimum CET1 requirement plus
capital conservation buffer plus any other buffer requirement) 7.275% 6.65%
of which: capital conservation buffer requirement 1.275% 0.65%
of which: countercyclical buffer requirement – –
of which: D–SIB or G–SIB buffer requirement – –
CET1 available to meet buffers (as a percentage of risk weighted assets) 9.74% 9.81%
National minimum capital requirements prescribed by SBP
CET1 minimum ratio 6.00% 6.00%
Tier 1 minimum ratio 7.50% 7.50%
Total capital Minimum Ratio (Inclusive of 1.275% CCB for 2017) 11.275% 10.65%

December 31, 2017 December 31, 2016

Amounts subject Amounts subject
Regulatory Adjustments and Additional Information Amount to pre–basel III Amount to pre–basel III
treatment treatment
Rupees in ‘000

40.2.1 Common Equity Tier 1 capital: Regulatory adjustments

1 Goodwill (net of related deferred tax liability) – – – –
2 All other intangibles (net of any associated deferred tax liability) (1,457,499) – (1,357,330) –
3 Shortfall in provisions against classified assets (886,726) – (936,149) –
4 Deferred tax assets that rely on future profitability excluding those
arising from temporary differences (net of related tax liability) – – – –
5 Defined–benefit pension fund net assets (2,953,626) (738,406) (2,768,836) (1,845,891)
6 Reciprocal cross holdings in CET1 capital instruments of banking,
financial and insurance entities (960,911) – (694,412) –
7 Cash flow hedge reserve – – – –
8 Investment in own shares/ CET1 instruments – – – –
9 Securitization gain on sale – – – –
10 Capital shortfall of regulated subsidiaries – – – –
11 Deficit on account of revaluation from bank’s holdings of fixed
assets/ AFS – – – –
12 Investments in the capital instruments of banking, financial and
insurance entities that are outside the scope of regulatory
consolidation, where the bank does not own more than 10% of
the issued share capital (amount above 10% threshold) (1,205,467) (301,367) (1,357,324) (904,883)
13 Significant investments in the common stocks of banking,
financial and insurance entities that are outside the scope of
regulatory consolidation (amount above 10% threshold) – – – –
14 Deferred Tax Assets arising from temporary differences (amount
above 10% threshold, net of related tax liability) – – – –
15 Amount exceeding 15% threshold – – – –
16 of which: significant investments in the common stocks of financial entities – – – –
17 of which: deferred tax assets arising from temporary differences – – – –
18 National specific regulatory adjustments applied to CET1 capital – – – –
19 Investments in TFCs of other banks exceeding the prescribed limit – – – –
20 Any other deduction specified by SBP (mention details) (77,141) – (70,445) –
21 Adjustment to CET1 due to insufficient AT1 and Tier
2 to cover deductions – – –
22 Total regulatory adjustments applied to CET1 (sum of 1 to 21) (7,541,370) – (7,184,496)
40.2.2 Additional Tier–1 & Tier–1 Capital: regulatory adjustments
23 Investment in mutual funds exceeding the prescribed limit
[SBP specific adjustment] – – – –
24 Investment in own AT1 capital instruments – – – –
25 Reciprocal cross holdings in Additional Tier 1 capital instruments of
banking, financial and insurance entities – – – –
278 Annual Report 2017

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

December 31, 2017 December 31, 2016

Amounts subject Amounts subject
Regulatory Adjustments and Additional Information Amount to pre-basel III Amount to pre-basel III
treatment treatment
Rupees in ‘000

26 Investments in the capital instruments of banking, financial and

insurance entities that are outside the scope of regulatory
consolidation, where the bank does not own more than 10% of
the issued share capital (amount above 10% threshold) – – – –
27 Significant investments in the capital instruments of banking,
financial and insurance entities that are outside the scope of
regulatory consolidation – – – –
28 Portion of deduction applied 50:50 to Tier–1 and Tier–2 capital
based on pre–Basel III treatment which, during transitional period,
remain subject to deduction from additional tier–1 capital – – –
29 Adjustments to Additional Tier 1 due to insufficient Tier 2 to cover deductions – – – –
30 Total regulatory adjustment applied to AT1 capital (sum of 23 to 29) – – – –

40.2.3 Tier 2 Capital: regulatory adjustments

31 Portion of deduction applied 50:50 to Tier–1 and Tier–2 capital based
on pre–Basel III treatment which, during transitional period, remain subject
to deduction from tier–2 capital – – –
32 Reciprocal cross holdings in Tier 2 instruments of banking, financial
and insurance entities – – – –
33 Investment in own Tier 2 capital instrument – – – –
34 Investments in the capital instruments of banking, financial and insurance
entities that are outside the scope of regulatory consolidation, where the
bank does not own more than 10% of the issued share capital
(amount above 10% threshold) (1,045,475) (261,369) (1,172,272) (781,515)
35 Significant investments in the capital instruments issued by banking,
financial and insurance entities that are outside the scope of
regulatory consolidation – – – –
36 Total regulatory adjustment applied to T2 capital (sum of 31 to 35) (1,045,475) – (1,172,272) –

Note December 31, December 31,
2017 2016
Rupees in ‘000

40.2.4 Additional Information

Risk Weighted Assets subject to pre–Basel III treatment

37 Risk weighted assets in respect of deduction items
(which during the transitional period will be risk weighted
subject to Pre–Basel III Treatment) 40.5 308,576,331 290,167,580
(i) of which: deferred tax assets
(ii) of which: Defined–benefit pension fund net assets 738,406 1,845,891
(iii) of which: Recognized portion of investment in capital of banking,
financial and insurance entities where holding is less than 10% of
the issued common share capital of the entity – –
(iv) of which: Recognized portion of investment in capital of banking,
financial and insurance entities where holding is more than 10% of the
issued common share capital of the entity – –
Amounts below the thresholds for deduction (before risk weighting) – –
38 Non–significant investments in the capital of other financial entities 10,088,564 11,011,566
39 Significant investments in the common stock of financial entities 1,075,653 1,075,653
40 Deferred tax assets arising from temporary differences (net of
related tax liability) – –
Applicable caps on the inclusion of provisions in Tier 2
41 Provisions eligible for inclusion in Tier 2 in respect of exposures
subject to standardized approach (prior to application of cap) 11,701 63,309
42 Cap on inclusion of provisions in Tier 2 under standardized approach – –
43 Provisions eligible for inclusion in Tier 2 in respect of exposures
subject to internal ratings–based approach (prior to application of cap) – –
44 Cap for inclusion of provisions in Tier 2 under internal ratings–based approach – –
 Allied Bank Limited 279

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

Balance sheet as in Under regulatory

published financial scope of Reference
statements consolidation
December 31, 2017
Rupees in ‘000

40.3 Capital Structure Reconciliation

40.3.1 Step 1
Assets
Cash and balances with treasury banks 85,355,555 85,355,555
Balances with other banks 649,512 649,512
Lendings to financial institutions 8,694,399 8,694,399
Investments 699,323,690 699,323,690
Advances 372,080,555 372,080,555
Operating fixed assets 48,355,884 48,355,884
Deferred tax assets
Other assets 32,863,008 32,863,008
Total assets 1,247,322,603 1,247,322,603

Liabilities & Equity

Bills payable 7,835,467 7,835,467
Borrowings 223,556,383 223,556,383
Deposits and other accounts 883,702,056 883,702,056
Sub-ordinated loans – –
Liabilities against assets subject to finance lease – –
Deferred tax liabilities 6,941,206 6,941,206
Other liabilities 17,237,459 17,237,459
Total liabilities 1,139,272,571 1,139,272,571

Share capital/ Head office capital account 11,450,739 11,450,739
Reserves 17,980,116 17,980,116
Unappropriated/ Unremitted profit/ (losses) 50,546,126 50,546,126
Minority Interest –
Surplus on revaluation of assets 28,073,051 28,073,051
Total Equity 108,050,032 108,050,032
Total liabilities & equity 1,247,322,603 1,247,322,603
40.3.2 Step 2
Assets
Cash and balances with treasury banks 85,355,555 85,355,555
Balanced with other banks 649,512 649,512
Lending to financial institutions 8,694,399 8,694,399
Investments 699,323,690 699,323,690
of which: Non-significant capital investments in capital of other f
inancial institutions exceeding 10% threshold 2,250,943 a
of which: significant capital investments in financial sector
entities exceeding regulatory threshold b
of which: Mutual Funds exceeding regulatory threshold c
of which :Reciprocal cross holdings in CET1 960,911 d
of which :Reciprocal cross holdings in Tier2 e
of which: others (mention details) f
Advances 372,080,555 372,080,555
shortfall in provisions / excess of total EL amount over
eligible provisions under IRB" 886,726 g
general provisions reflected in Tier 2 capital 11,701 h
Fixed Assets 48,355,884 48,355,884
of which: Intangibles 1,465,124 i
Deferred Tax Assets
of which: DTAs excluding those arising from temporary differences j
of which: DTAs arising from temporary differences exceeding
regulatory threshold
Other assets 32,863,008 32,863,008 k
of which: Goodwill l
of which: Defined-benefit pension fund net assets 3,692,032 m
Total assets 1,247,322,603 1,247,322,603
280 Annual Report 2017

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

Balance sheet as in Under regulatory

published financial scope of Reference
statements consolidation
December 31, 2017
Rupees in ‘000
Liabilities & Equity
Bills payable 7,835,467 7,835,467
Borrowings 223,556,383 223,556,383
Deposits and other accounts 883,702,056 883,702,056
Sub-ordinated loans
of which: eligible for inclusion in AT1 n
of which: eligible for inclusion in Tier 2 o
Liabilities against assets subject to finance lease
Deferred tax liabilities 6,941,206 6,941,206
of which: DTLs related to goodwill p
of which: DTLs related to intangible assets 7,625 q
of which: DTLs related to defined pension fund net assets r
of which: other deferred tax liabilities s
Other liabilities 17,237,459 17,237,459
Total liabilities 1,139,272,571 1,139,272,571

Share capital 11,450,739 11,450,739

of which: amount eligible for CET1 11,450,739 t
of which: amount eligible for AT1 u
Reserves 17,980,116 17,980,116
of which: portion eligible for inclusion in CET1:Share Premium v
of which: portion eligible for inclusion in CET1 General/
Statutory Reserve 17,749,162 w
of which: portion eligible for inclusion in Tier 2 230,954 x
Unappropriated profit / (losses) 50,546,126 50,546,126 y
Minority Interest
of which: portion eligible for inclusion in CET1 z
of which: portion eligible for inclusion in AT1 aa
of which: portion eligible for inclusion in Tier 2 ab
Surplus on revaluation of assets 28,073,051 28,073,051
of which: Revaluation reserves on Property 14,243,627 ac
of which: Unrealized Gains / Losses on AFS 9,339,076
In case of Deficit on revaluation (deduction from CET1) ad
Total liabilities & Equity 108,050,032 108,050,032

Component of Source
regulatory capital reference number
reported by bank from step 2
Rupees in ‘000

40.3.3 Step 3
Common Equity Tier 1 capital (CET1): Instruments and reserves
1 Fully Paid-up Capital / Capital deposited with SBP 11,450,739 (t)
2 Balance in Share Premium Account (v)
3 Reserve for issue of Bonus Shares
4 General / Statutory Reserves 17,749,162 (w)
5 Gain / (losses) on derivatives held as Cash Flow Hedge
6 Unappropriated / unremitted profits/(losses) 50,546,126 (y)
7 Minority Interests arising from CET1 capital instruments issued to third party by
consolidated bank subsidiaries (amount allowed in CET1 capital of the
consolidation group) (z)
8 CET 1 before Regulatory Adjustments 79,746,027
Common Equity Tier 1 capital: Regulatory adjustments
9 Goodwill (net of related deferred tax liability) (l) - (p)
10 All other intangibles (net of any associated deferred tax liability) 1,457,499 (i) - (q)
11 Shortfall of provisions against classified assets 886,726 (g)
 Allied Bank Limited 281

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

Component of Source
regulatory capital reference number
reported by bank from step 2
Rupees in ‘000

12 Deferred tax assets that rely on future profitability excluding those arising from
temporary differences (net of related tax liability) {(j) - (s} * x%
13 Defined-benefit pension fund net assets 2,953,626 {(m) - (r)} * x%
14 Reciprocal cross holdings in CET1 capital instruments 960,911 (d)
15 Cash flow hedge reserve
16 Investment in own shares/ CET1 instruments
17 Securitization gain on sale
18 Capital shortfall of regulated subsidiaries
19 Deficit on account of revaluation from bank's holdings of property/ AFS (ad)
20 Investments in the capital instruments of banking, financial and insurance
entities that are outside the scope of regulatory consolidation, where
the bank does not own more than 10% of the issued share capital
(amount above 10% threshold) 1,205,467 (a) - (ae) - (ah)
21 Significant investments in the capital instruments issued by banking,
financial and insurance entities that are outside the scope of regulatory
consolidation (amount above 10% threshold) (b) - (af) - (ai)
22 Deferred Tax Assets arising from temporary differences (amount above 10%
threshold, net of related tax liability) (k)
23 Amount exceeding 15% threshold
24 of which: significant investments in the common stocks of financial entities
25 of which: deferred tax assets arising from temporary differences
26 National specific regulatory adjustments applied to CET1 capital
27 Investment in TFCs of other banks exceeding the prescribed limit
28 Any other deduction specified by SBP (mention details) 77,141
29 Regulatory adjustment applied to CET1 due to insufficient AT1 and Tier 2
to cover deductions
30 Total regulatory adjustments applied to CET1 (sum of 9 to 25) 7,541,370
Common Equity Tier 1 72,204,657

Additional Tier 1 (AT 1) Capital

31 Qualifying Additional Tier-1 instruments plus any related share premium -
32 of which: Classified as equity - (u)
33 of which: Classified as liabilities - (n)
34 Additional Tier-1 capital instruments issued by consolidated subsidiaries and
held by third parties (amount allowed in group AT 1) - (x)
35 of which: instrument issued by subsidiaries subject to phase out -
36 AT1 before regulatory adjustments -
Additional Tier 1 Capital: regulatory adjustments -
37 Investment in mutual funds exceeding the prescribed limit (SBP specific adjustment) -
38 Investment in own AT1 capital instruments -
39 Reciprocal cross holdings in Additional Tier 1 capital instruments -
40 Investments in the capital instruments of banking, financial and insurance
entities that are outside the scope of regulatory consolidation, where the
bank does not own more than 10% of the issued share capital (amount
above 10% threshold) - (ae)
41 Significant investments in the capital instruments issued by banking, financial and
insurance entities that are outside the scope of regulatory consolidation - (af)
42 Portion of deduction applied 50:50 to core capital and supplementary capital
based on pre-Basel III treatment which, during transitional period, remain
subject to deduction from Tier-1 capital -
43 Regulatory adjustments applied to Additional Tier 1 due to insufficient Tier 2 to
cover deductions -
282 Annual Report 2017

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

Component of Source
regulatory capital reference number
reported by bank from step 2
Rupees in ‘000

44 Total of Regulatory Adjustment applied to AT1 capital –

45 Additional Tier 1 capital –
46 Additional Tier 1 capital recognized for capital adequacy

Tier 1 Capital (CET1 + admissible AT1) 72,204,657

Tier 2 Capital

47 Qualifying Tier 2 capital instruments under Basel III –

48 Capital instruments subject to phase out arrangement from tier 2
(Pre-Basel III instruments) – (o)
49 Tier 2 capital instruments issued to third party by consolidated subsidiaries
(amount allowed in group tier 2) – (ab)
50 of which: instruments issued by subsidiaries subject to phase out –
51 General Provisions or general reserves for loan losses-up to maximum of 1.25%
of Credit Risk Weighted Assets 11,701 (h)
52 Revaluation Reserves eligible for Tier 2
53 of which: portion pertaining to Property 14,243,627 portion of (ac)
54 of which: portion pertaining to AFS securities 9,339,076
55 Foreign Exchange Translation Reserves 230,954 (x)
56 Undisclosed / Other Reserves (if any) –
57 T2 before regulatory adjustments 23,825,358
Tier 2 Capital: regulatory adjustments
58 Portion of deduction applied 50:50 to core capital and supplementary capital
based on pre-Basel III treatment which, during transitional period, remain
subject to deduction from tier-2 capital –
59 Reciprocal cross holdings in Tier 2 instruments – (e)
60 Investment in own Tier 2 capital instrument –
61 Investments in the capital instruments of banking, financial and insurance
entities that are outside the scope of regulatory consolidation, where the
bank does not own more than 10% of the issued share capital (amount
above 10% threshold) 1,045,475 (ah)
62 Significant investments in the capital instruments issued by banking, financial
and insurance entities that are outside the scope of regulatory consolidation – (ai)
63 Amount of Regulatory Adjustment applied to T2 capital 1,045,475
64 Tier 2 capital (T2) 22,779,883
65 Tier 2 capital recognized for capital adequacy 22,779,883
66 Excess Additional Tier 1 capital recognized in Tier 2 capital –
67 Total Tier 2 capital admissible for capital adequacy 22,779,883
TOTAL CAPITAL (T1 + admissible T2) 94,984,540
40.4 Main Features of Regulatory Capital Instruments
Sr. No. Main Features Common Shares
1 Issuer Allied Bank Limited
2 Unique identifier (eg PSX Symbol or Bloomberg identifier etc.) ABL
3 Governing law(s) of the instrument Laws applicable in Pakistan
Regulatory treatment
4 Transitional Basel III rules Common Equity Tier 1
5 Post-transitional Basel III rules Common Equity Tier 1
6 Eligible at solo/ group/ group & solo Group and standalone
7 Instrument type Ordinary Shares
8 Amount recognized in regulatory capital (Currency in PKR thousands, as of reporting date) 11,450,739
9 Par value of instrument 10
10 Accounting classification Shareholders equity
11 Original date of issuance N/A
for the year ended December 31, 2017

12 Perpetual or dated Perpetual

13 Original maturity date N/A
14 Issuer call subject to prior supervisory approval No
15 Optional call date, contingent call dates and redemption amount N/A
16 Subsequent call dates, if applicable N/A
Coupons / dividends
17 Fixed or floating dividend/ coupon N/A
18 Coupon rate and any related index/ benchmark N/A
19 Existence of a dividend stopper N/A
20 Fully discretionary, partially discretionary or mandatory Fully discretionary
Notes to the Consolidated Financial Statements

21 Existence of step up or other incentive to redeem No

22 Noncumulative or cumulative Noncumulative
23 Convertible or non-convertible Non Convertible
24 If convertible, conversion trigger (s) N/A
25 If convertible, fully or partially N/A
26 If convertible, conversion rate N/A
27 If convertible, mandatory or optional conversion N/A
28 If convertible, specify instrument type convertible into N/A
29 If convertible, specify issuer of instrument it converts into N/A
30 Write-down feature N/A
31 If write-down, write-down trigger(s) N/A
32 If write-down, full or partial N/A
33 If write-down, permanent or temporary N/A
34 If temporary write-down, description of write-up mechanism N/A
35 Position in subordination hierarchy in liquidation (specify instrument type immediately senior to instrument) Rank inferior to all creditors including depositors.
Allied Bank Limited

36 Non-compliant transitioned features No

37 If yes, specify non-compliant features N/A
283
284 Annual Report 2017

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

40.5 Risk Weighted Exposures

The capital requirements for the Bank as per the major risk categories are indicated below:
Capital Requirements Risk Weighted Assets

December 31, December 31, December 31, December 31,

2017 2016 2017 2016
Rupees in ‘000

CREDIT RISK
On-Balance sheet
Portfolios subject to standardized approach (Simple)
Claims on other sovereigns and on Government of Pakistan or provincial
governments or SBP denominated in currencies other than PKR 2,413,170 1,394,048 21,402,839 13,089,649
Claims on Bank for International Settlements, International Monetary Fund,
European Central Bank, and European Community – – – –
Claims on Multilateral Development Banks – – – –
Claims on Public Sector Entities in Pakistan 447,347 775,218 3,967,597 7,279,047
Claims on Banks 768,523 682,757 6,816,165 6,410,863
Claims, denominated in foreign currency, on banks with original maturity
of 3 months or less 21,038 20,842 186,587 195,700
Claims on banks with original maturity of 3 months or less denominated in
PKR and funded in PKR 193,091 224,911 1,712,559 2,111,838
Claims on Corporates (excluding equity exposures) 16,344,205 14,587,829 144,959,692 136,974,917
Claims categorized as retail portfolio 1,247,534 974,665 11,064,602 9,151,781
Claims fully secured by residential property 299,487 270,475 2,656,201 2,539,676
Past Due loans: 54,431 85,671 482,757 804,423
Investments in premises, plant and equipment and all other fixed assets 5,286,933 3,346,870 46,890,760 31,426,012
All other assets 831,225 974,421 7,372,282 9,149,496
27,906,984 23,337,707 247,512,041 219,133,402
Off- Balance Sheet
Non Market related Exposures
Direct Credit Substitutes / Lending of securities or posting
of securities as collateral 2,105,645 2,981,216 18,675,343 27,992,640
Performance related contingencies 780,418 616,547 6,921,670 5,789,172
Trade Related contingencies/Other Commitments with original
maturity of one year or less 939,669 557,430 8,334,091 5,234,088
3,825,732 4,155,193 33,931,104 39,015,900
Market related Exposures 153,116 82,354 1,358,017 773,275

Equity Exposure Risk in the Banking Book
Unlisted equity investments (other than that deducted from
capital) held in banking book 369,114 338,688 3,273,739 3,180,171
Listed Equity investments and regulatory capital instruments issued
by other banks (other than those deducted from capital) held in the
banking book. 2,233,836 2,702,512 19,812,297 25,375,699
Significant investments and deferred tax assets above 15% threshold 303,200 286,393 2,689,133 2,689,133
2,906,150 3,327,593 25,775,169 31,245,003
Total Credit Risk (A) 34,791,982 30,902,847 308,576,331 290,167,580

MARKET RISK
Capital Requirement for portfolios subject to Standardized Approach
Interest rate risk 238,027 212,237 2,111,108 1,992,838
Equity position risk etc. 3,676,496 4,172,722 32,607,506 39,180,486
Foreign exchange risk 15,135 538,821 134,232 5,059,350
3,929,658 4,923,780 34,852,846 46,232,674
OPERATIONAL RISK
Capital Requirement for operational risks 9,135,300 8,413,028 81,022,617 78,995,569

Total Risk Weighted Assets 47,856,940 44,239,655 424,451,794 415,395,823
 Allied Bank Limited 285

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

December 31, 2017 December 31, 2016

Required Actual Required Actual

Capital Adequacy Ratios

CET1 to total RWA 6.0% 16.46% 6.0% 16.46%
Tier-1 capital to total RWA 7.5% 16.46% 7.5% 16.46%
Total capital to total RWA (inclusive of 1.28% CCB for 2017) 11.275% 22.38% 10.65% 20.88%

41. RISK MANAGEMENT

The Risk Management Framework (the Framework) provides principles for identifying, assessing, and monitoring risk within
the Bank. The Framework specifies the key elements of the risk management process in order to maximize opportunities, to
minimize adversity and to achieve improved outcomes and outputs based on informed decision making.

Categories of Risk

The Bank generates most of its revenue by accepting following types of risks:

Credit Risk This risk is defined as the possibility of loss due to unexpected default or a deterioration of credit worthiness of
a business partner.

Credit Risk includes Country Risk i.e., the risks that counterparty is unable to meet its foreign currency obligations as a result of adverse
economic conditions or actions taken by governments in the relevant country.

Market Risk The risk of loss generated by adverse changes in the price of financial assets or contracts currently held by the
Bank (this risk is also known as price risk).

Liquidity Risk The risk that the Bank is unable to meet its payment obligations when they fall due and to replace funds when
they are withdrawn; the consequences of which may be the failure to meet obligations to repay depositors and
fulfill commitments to lend.

Operational Risk Operational Risk is the risk of loss resulting from inadequate or failed internal processes, people, and systems
or from external events. The definition excludes reputational risk.

Reputational Risk The risk of failing to meet the standards of performance or behavior required or expected by stakeholders in
commercial activities or the way in which business is conducted.

Strategic Risk Risk of an adverse impact on strategic goals. Strategic risk mainly arises from strategic decisions, improper
implementation of those decisions, or lack of responsiveness of Bank to industry, economic or technological
changes.

Risk Responsibilities

- The Board of Directors is accountable for overall supervision of the risk management process. This is discharged by
distributing responsibilities at Board level for their management and determining the manner in which risk authorities
are set. The Board is also responsible for approval of all risk policies and ensuring that these are properly implemented.
Further, the Board shall also seek appointment of senior management personnel capable of managing the risk activities
conducted by the Bank.

- The Board Risk Management Committee (BRMC) is responsible for ensuring that the overall risk strategy and appetite
of the Bank is appropriately defined in the Strategic Plan and recommend the same to the Board of Directors.

- The CEO and Group Chiefs are accountable for the management of risk collectively through their membership of Asset
& Liability Committee (ALCO) and Risk Management Committee (RMC). Independent supervision of risk management
activities is provided by the Audit Committee.

- The Risk Management Group is head by a Group Chief responsible to set-up and implement the Risk Framework of
the Bank.

286 Annual Report 2017

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

Risk Management Group Organization

Risk management functions have been segregated by business specialization, i.e., Credit Risk, Credit Administration, Technical
Appraisal, Information security and Enterprise Risk which interalia includes Risk Architecture, Operational Risk and Market &
Liquidity Risk. All these functions are operating in tandem to monitor the health of assets and liabilities.

41.1 Credit Risk

Credit risk, the potential default of one or more debtors, is a major source of risk for the Bank. The Bank is exposed to
credit risk through its lending and investment activities. The Bank’s credit risk function is divided into Corporate and Financial
Institutions Risk and Commercial, SME and Consumer Risk. The functions operate within an integrated framework of credit
policies, guidelines and processes. The credit risk management activities are governed by the Credit Policy of the Bank that
defines the respective roles and responsibilities, the credit risk management principles and the Bank’s credit risk strategy. The
policy is supported by a comprehensive Credit Procedures Manual.

The Bank manages three principal sources of credit risk:

i) Sovereign credit risk on its public sector advances

ii) Counterparty credit risk on its private sector advances
iii) Counterparty credit risk on interbank limits

Sovereign Credit Risk

When the Group lends to public sector borrowers, it prefers obtaining a full sovereign guarantee or the equivalent from the
Government of Pakistan (GOP). However, certain public sector enterprises have a well defined cash flow stream and appropriate
business model, based on which the lending is secured through collaterals other than GOP guarantee.

Counterparty credit risk on its private sector advances

When the Bank lends to private sector borrowers it does not benefit from sovereign guarantees or the equivalent. Consequently,
each borrower’s credit worthiness is analyzed on the Credit Application Package that incorporates a formalized and structured
approach for credit analysis and directs the focus of evaluation towards a balanced assessment of credit risk with identification of
proper mitigates. These risks include Industry Risk, Business Risk, Financial Risk, Security Risk and Account Performance Risk.
Financial analysis is further strengthened through use of separate financial spread sheet templates that have been designed for
manufacturing / trading concerns, financial institutions and insurance companies.

Counter party credit risk on interbank limits

In the normal course of its business, the Bank’s Treasury utilizes products such as Reverse REPO and call lending to meet the
needs of interbank borrowers and manage its exposure to fluctuations in market, interest and currency rates. Further, these
products are also used to temporarily invest Bank’s liquidity prior to disbursement. All of these financial instruments involve, to
varying degrees, the risk that the counterparty in the transaction may be unable to meet its obligation to the Bank.

Reflecting a preference for minimizing exposure to counterparty credit risk, the Bank maintains eligibility criteria that link the
exposure limits to counterparty credit ratings by external rating agencies. For example, the minimum rating for counterparties to
be eligible for a banking relationship with the Bank is A.

Country Risk

The Bank has in place a Country Risk Management Framework which has been approved by the Board. This framework
focuses on providing detailed roles and responsibilities with respect to country risk assessment as well as limit setting, exposure
management and reporting of cross border exposure undertaken by the Bank. The Bank utilizes S&P, Fitch and Moody’s country
ratings as well as other macroeconomic and external risk factors in assigning a country risk limit. The Financial Institutions
Division is responsible for monitoring of country exposure limits.

Credit Administration

Credit Administration is involved in minimizing losses that could arise due to security and documentation deficiencies. The Credit
Administration Function constantly monitors the security and documentation risks inherent in the existing credit portfolio through
four regional credit administration departments located all over the country.


 Allied Bank Limited 287

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

Risk Analytics

To ensure a prudent distribution of asset portfolio, the Bank manages its lending and investment activities within a framework of
Borrower, Group and Sector exposure limits and risk profile benchmarks.

Internal Risk Rating Models

The Bank has developed internal risk rating models to assign credit risk ratings to its Corporate, Financial Institutions, SME and
Consumer borrowers. These models are based on expert judgment, comprising of both quantitative and qualitative factors. The
rating models have been automated through the Bank’s Risk Assessment and Management System (RAMS), and are given
due weightage while extending credit to these asset classes. The Bank has also implemented a Facility Risk Rating Model to
complement the Obligor Risk Rating Models.

Stress Testing

The Bank conducts stress testing of its existing advances portfolio. On a quarterly basis, an extensive stress testing activity
is conducted by giving shocks to all assets of the Bank in line with SBP requirements and assessing its resulting affect on
capital adequacy. The major shock being applied relate to the deterioration in internal ratings of the obligors, adverse shift of
regular borrowers to non-performing status, default by large borrowers or group of borrowers and their resultant impact on the
provisioning requirements and capital adequacy.

Automated System

In order to ensure that monitoring of the regular lending portfolio focuses on problem recognition, an automated system in the
form of a ‘Watch-List’ category has been instituted to cover the gap between Regular and Substandard categories. Identification
of an account on the said ‘Watch-List’ triggers the lending branch to carry out an assessment of the borrower’s ability to rectify
the identified problem / weakness within a reasonable time-frame, consider tighter structuring of facilities, confirm that there are
no critical deficiencies in the existing security position and, if possible, arrange for strengthening of the same through obtaining
additional collateral. It should however, be noted that the ‘Watch-List’ category of accounts is part of the Bank’s Regular portfolio
and does not require any provisioning.

In some cases, an account may even be downgraded directly from a Regular to Sub-Standard or worse on subjective basis
based on the severity of the trigger involved. The Bank has also implemented an Early Warning Alert engine that relays email
alerts to users based on breach of defined triggers.

Management of Non-Performing Loans

The Bank has a Special Asset Management Group (SAMG), which is responsible for management of non-performing loans.
SAMG undertakes restructuring / rescheduling of problem loans, as well as litigation both civil and criminal for collection of debt.

For the non-performing loan portfolio, the Bank makes a specific provision based on an assessment of the credit impairment of
each loan. At the end of 2017, the coverage ratio was 92.59% of the non-performing loan portfolio.

The accounting policies and methods used to determine specific and general provision are given in the Note 5 and 10 to these
financial statements. The movement in specific and general provision held is given in Note 10.4 to these financial statements.

Portfolio Diversification

Efficient diversification has been a key consideration for maintaining healthy advances portfolio. The diversification takes into
account the volatility of various sectors by placing concentration limits on lending to these sectors thereby ensuring a diversified
advances portfolio. Composition of the Bank’s advances portfolio is significantly diversified. Power, Gas, Petroleum, Chemical,
Commodity, Textiles and Financial Sector are major contributors to the advances portfolio. These sectors are considered to be
the biggest contributors towards country’s GDP as well.



288 Annual Report 2017

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

December 31, 2017

Advances (Gross) Deposits Contingencies and

Commitments

Rupees Percent Rupees Percent Rupees Percent

in ‘000 in ‘000 in ‘000

41.1.1 Segmental Information

41.1.1.1 Segments by class of business

Agriculture, Forestry and Hunting 61,558,861 15.83% 48,763,264 5.52% 1,367,900 0.57%
Basic metals (iron, steel) 2,705,732 0.70% 406,894 0.05% 3,449,034 1.44%
Cement/clay & ceramics 14,416,693 3.71% 1,131,525 0.13% 6,227,925 2.60%
Chemical & pharmaceutical 20,702,251 5.32% 7,627,740 0.86% 3,629,067 1.51%
Construction 8,108,971 2.09% 26,705,938 3.02% 4,394,720 1.83%
Education 115,335 0.03% 20,966,870 2.37% 55,461 0.02%
Financial 20,487,988 5.27% 53,504,323 6.05% 143,541,269 59.83%
Fishing – 0.00% 9,564 0.00% – 0.00%
Footwear & leather garments 1,148,700 0.30% 584,437 0.07% 510,891 0.21%
Furniture & sports goods 1,275,838 0.33% 351,981 0.04% 5,577 0.00%
Grains, food and beverages 11,719,839 3.01% 5,107,635 0.58% 39,448 0.02%
Health & social welfare 55,713 0.01% 6,494,928 0.73% 50,463 0.02%
Hotel, restaurant & clubs 1,400,000 0.36% 1,066,729 0.12% 960 0.00%
Individuals 9,959,407 2.56% 356,719,817 40.37% 5,463,051 2.28%
Machinery & equipment 1,864,567 0.48% 1,465,090 0.17% 1,922,789 0.80%
Manufacture of transport equipment 389,289 0.10% 1,020,939 0.12% 99,084 0.04%
Paper & paper boards 6,218,078 1.60% 878,861 0.10% 1,969,615 0.82%
Petroleum products 10,515,762 2.70% 38,479,576 4.35% 8,824,756 3.68%
Power, gas, water & sanitary 122,133,670 31.41% 35,955,932 4.07% 8,486,247 3.54%
Printing, publishing & allied 114,390 0.03% 607,593 0.07% 110,197 0.05%
Real estate, renting, and business activities 4,790,686 1.23% 41,784,299 4.73% – 0.00%
Rubber & plastic 778,824 0.20% 175,402 0.02% 41,385 0.02%
Sugar 6,034,307 1.55% 847,610 0.10% 19,600 0.01%
Textile - Manufacture of madeup & ready
made garments 21,251,761 5.47% 1,335,119 0.15% 573,861 0.24%
Textile - Finishing 14,557,321 3.74% 414,955 0.05% 5,434,753 2.27%
Textile - Spinning 13,299,514 3.42% 385,411 0.04% 118,344 0.05%
Textile - Weaving 1,731,836 0.45% 101,972 0.01% 211,476 0.09%
Transport, storage & communication 14,112,816 3.63% 6,536,849 0.74% 6,829,587 2.85%
Wholesale & retail trade 8,579,749 2.21% 26,068,685 2.95% 70,277 0.03%
Others 8,766,594 2.25% 198,202,118 22.43% 36,472,539 15.20%
388,794,492 100.00% 883,702,056 100.00% 239,920,276 100.00%

December 31, 2017

Advances (Gross) Deposits Contingencies and

Commitments

Rupees Percent Rupees Percent Rupees Percent

in ‘000 in ‘000 in ‘000

41.1.1.2 Segments by sector

Public / Government 149,693,772 38.50% 213,549,024 24.17% 26,886,670 11.21%
Private 239,100,720 61.50% 670,153,032 75.83% 213,033,606 88.79%
388,794,492 100.00% 883,702,056 100.00% 239,920,276 100.00%
 Allied Bank Limited 289

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

December 31, 2017 December 31, 2016

Classified Specific Classified Specific

Advances Provisions Advances Provisions
Held Held

Rupees in ‘000

41.1.1.3 Details of non-performing advances and specific provisions by class of business segment

Agriculture, Forestry and Hunting 547,602 494,710 565,045 461,329

Basic metals (iron, steel) 229,849 229,849 276,595 263,962
Cement / clay & ceramics 75,089 75,089 75,089 75,089
Chemical & pharmaceutical 714,158 714,158 742,476 741,228
Construction 148,384 147,259 199,756 199,756
Education 123 123 184 184
Financial 72,454 72,454 72,454 72,454
Footwear & leather garments 75,014 74,419 125,404 125,404
Furniture & sports goods 266,103 266,103 230,858 230,711
Grains, food & beverages 1,766,277 1,760,202 2,082,302 1,916,022
Health & social welfare 5,984 5,984 13,857 13,857
Hotel, restaurant & clubs 7,664 7,664 7,664 7,664
Individuals 449,729 448,329 452,019 446,503
Machinery & equipment 1,206,611 1,206,611 1,233,588 1,233,588
Manufacture of transport equipment 211,014 211,014 227,009 227,009
Paper & paper boards 210,574 210,574 213,624 213,624
Petroleum products 1,201,469 309,149 1,904,067 967,918
Power, gas, water & sanitary 637,015 637,015 637,015 637,015
Printing, publishing & allied 10,838 10,838 11,558 11,558
Real estate, renting, and business activities – – 12,595 12,595
Rubber & plastic 235,068 235,068 333,813 278,477
Sugar 51,216 51,216 250,716 250,716
Textile -Manufacture of made up & ready made garments 2,966,776 2,966,776 3,103,092 3,099,772
Textile - Finishing 2,889,512 2,869,986 3,025,954 2,997,506
Textile - Spinning 1,352,423 1,343,415 1,383,501 1,374,354
Textile - Weaving 60,493 49,563 45,385 45,385
Transport, storage & communication 468,945 140,024 484,439 149,673
Wholesale & retail trade 1,096,493 1,071,495 1,267,062 1,257,189
Others 1,094,872 1,093,149 1,454,488 1,410,021
18,051,749 16,702,236 20,431,609 18,720,563

December 31, 2017 December 31, 2016

Classified Specific Classified Specific

Advances Provisions Advances Provisions
Held Held

Rupees in ‘000

41.1.1.4 Details of non-performing advances and specific provisions by sector

Public/ Government 135,180 135,180 136,180 136,180

Private 17,916,569 16,567,056 20,295,429 18,584,383
18,051,749 16,702,236 20,431,609 18,720,563
290 Annual Report 2017

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

December 31, 2017

Profit Total Net Contingencies

before assets assets and
taxation employed employed Commitments

Rupees in ‘000

41.1.1.5 Geographical Segment Analysis

Pakistan operations 20,235,181 1,224,401,980 103,593,042 239,534,137

Middle East 625,772 18,352,995 2,195,867 386,139
Karachi Export Processing Zone 282,573 4,567,628 2,261,123 –
908,345 22,920,623 4,456,990 386,139
21,143,526 1,247,322,603 108,050,032 239,920,276

41.1.2 Credit Risk - General Disclosures

The Bank is following standardized approach for all its Credit Risk Exposures.

41.1.2.1 Credit Risk: Disclosures for portfolio subject to Standardized Approach and supervisory risk weights in IRB approach
Basel II specific

Under standardized approach, the capital requirement is based on the credit rating assigned to the counterparties by the
External Credit Assessment Institutions (ECAIs) duly recognized by SBP for capital adequacy purposes. In this connection, the
Bank utilizes the credit ratings assigned by ECAIs and has recognized agencies such as PACRA (Pakistan Credit Rating Agency),
JCR-VIS (Japan Credit Rating Company – Vital Information Systems), Fitch, Moody’s and Standard & Poors which are also
recognized by the SBP. The Bank also utilizes rating scores of Export Credit Agencies (ECA) participating in the “Arrangement
on Officially Supported Export Credits”.

The Standardised Approach to credit risk sets out fixed risk weights corresponding, where appropriate, to external credit
assessment levels or for unrated claims.

Selection of ECAIs

The Bank selects particular ECAI(s) for each type of claim. Amongst the ECAIs that have been recognised as eligible by SBP, the
following are being used against each respective claim type.

Sovereigns Exposures: For foreign currency claims on sovereigns, the Bank uses sovereign ratings issued by Moody’s, Standard
& Poor’s and Fitch.

Exposures to Multilateral Development Banks (MDBs): For exposures on MDBs not eligible for a 0% risk weight, ratings of
Moody’s, S&P and Fitch are being used to calculate risk-weighted assets.

Exposures to Public Sector Entities (PSEs): For PSE exposures, ratings of PACRA and JCR-VIS are used to arrive at risk
weights.

Bank Exposures: For foreign banks (i.e., incorporated outside Pakistan), ratings of Moody’s, S&P and Fitch is being used to arrive
at risk weights. However, for local banks (i.e., incorporated in Pakistan) ratings of PACRA and JCR-VIS are used.

Corporate Exposures: Ratings assigned by PACRA and JCR-VIS are used for claims on Corporates (excluding equity
exposures).

Use of ECAI Ratings

The Bank prefers solicited ratings over unsolicited ratings at all times, owing to the greater degree of accuracy (in general)
associated with solicited ratings as compared to unsolicited ratings. Unsolicited ratings may only be used in cases where a
solicited rating is not available.
 Allied Bank Limited 291

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

Mapping to SBP Rating Grades

The selected final ratings (after application of the principles stated above) for all exposures need to be translated to the stan-
dard rating grades given by the SBP. In this regard, the mapping tables to be used for converting ECAI ratings to SBP rating
grades are given below:

Long – Term Rating Grades Mapping

SBP Rating Fitch Moody’s S & P PACRA JCR-VIS
grade
1 AAA Aaa AAA AAA AAA
AA+ Aa1 AA+ AA+ AA+
AA Aa2 AA AA AA
AA- Aa3 AA- AA- AA-
2 A+ A1 A+ A+ A+
A A2 A A A
A- A3 A- A- A-
3 BBB+ Baa1 BBB+ BBB+ BBB+
BBB Baa2 BBB BBB BBB
BBB- Baa3 BBB- BBB- BBB-
4 BB+ Ba1 BB+ BB+ BB+
BB Ba2 BB BB BB
BB- Ba3 BB- BB- BB-
5 B+ B1 B+ B+ B+
B B2 B B B
B- B3 B- B- B-
6 CCC+ and Caa1 and CCC+ and CCC+ and CCC+ and
below below below below below

Short – Term Rating Grades Mapping

SBP Rating Fitch Moody’s S & P PACRA JCR-VIS
Grade

S1 F1 P-1 A-1+ A-1 A-1

A-1
S2 F2 P-2 A-2 A-2 A-2
S3 F3 P-3 A-3 A-3 A-3
S4 Others Others Others Others Others

Types of exposures and ECAI’s used

December 31, 2017

Exposures Fitch Moody’s S & P PACRA JCR-VIS

Corporate – – – Yes Yes
Banks Yes Yes Yes Yes Yes
Sovereigns Yes – – – –
SME’s – – – – –
Securitizations – – – – –
Public sector
enterprises – – – Yes Yes
292 Annual Report 2017

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

Credit exposures subject to Standardized Approach

December 31, 2017 December 31, 2016
Rupees in ‘000
Exposures Rating Amount Deduction Net Amount Deduction Net
Category Outstanding CRM Amount Outstanding CRM Amount

Corporate 1 59,159,663 102,523 59,057,139 54,549,163 54,656 54,494,507
2 34,980,938 – 34,980,938 24,223,266 – 24,223,266
3 , 4 3,612,121 – 3,612,121 622,183 – 622,183
5 , 6 – – – – – –
Claims on banks with original 186,358,145 176,900,699 9,457,447 89,458,349 78,588,422 10,869,927
maturity of 3 months or less –
Retail – 17,459,717 1,444,080 16,015,636 14,660,758 1,532,754 13,128,004
Public sector entities 1 26,178,963 7,320,678 18,858,285 30,722,880 7,111,859 23,611,021
Others – 888,588,567 5,449,000 883,139,567 771,535,360 2,940,062 768,595,298
Unrated – 203,114,038 82,997,396 120,116,641 199,656,475 65,980,924 133,675,551
Total 1,419,452,152 274,214,376 1,145,237,775 1,185,428,434 156,208,677 1,029,219,757

41.1.2.2 Credit Risk: Disclosures with respect to Credit Risk Mitigation for Standardized Approach

The Bank has adopted the Simple Approach of Credit Risk Mitigation for the Banking Book. Since, the trading book of the Bank
only comprises equity investments, and units in open ended mutual funds, therefore no Credit Risk Mitigation benefit is taken in
the trading book. In instances where the Bank’s exposure on an obligor is secured by collateral that conforms with the eligibility
criteria under the Simple Approach of CRM, then the Bank reduces its exposure under that particular transaction by taking
into account the risk mitigating effect of the collateral for the calculation of capital requirement i.e. risk weight of the collateral
instrument securing the exposure is substituted for the risk weight of the counter party.

The Bank accepts cash, lien on deposits, government securities and eligible guarantees etc. under the simple approach of
Credit Risk Mitigation. The Bank has in place detailed guidelines with respect to valuation and management of various collateral
types. In order to obtain the credit risk mitigation benefit, the Bank uses realizable value of eligible collaterals to the extent of
outstanding exposure.

Since no specific asset is available by way of security in the context of unfunded credit protection, the creditworthiness and
reliability of the provider and the validity and enforceability of that party’s obligations is of paramount importance. Therefore,
unfunded credit protection is only “eligible” if it is provided by an appropriate counterparty which may include National
Government, Central Bank and other reputable financial institutions etc.

41.2 Equity Position Risk in the Banking Book

The Bank makes investment for variety of purposes. Some of the investment positions of equity holding are made for long
term revenue generation as part of strategic initiatives, while other equity holdings are held to earn capital gain and dividend to
support the Bank’s business activities.

Classification of investments

Under SBP’s directives, equity investment may be classified as ‘held-for-trading’, ‘available-for-sale, - further categorized
between strategic and non-strategic or ‘investment in subsidiaries and associates’. Some of the equity investments are listed
and traded in public through stock exchanges, while other investments are unlisted.

Policies, valuation and accounting of equity investments

In accordance with the requirements of the SBP, quoted securities are carried at market value whereas investments in subsidiaries
are accounted for in accordance with the relevant International Accounting Standard as applicable in Pakistan.

The unrealized surplus / (deficit) arising on revaluation of the bank’s ‘held-for-trading’ investment portfolio is taken to the profit
and loss account. The surplus / (deficit) arising on revaluation of quoted securities classified as ‘available-for-sale’ is kept in a
separate account shown in the balance sheet below equity. The surplus / (deficit) arising on these securities is taken to the profit
and loss account when actually realised upon disposal.

Unquoted equity securities are valued at the lower of cost and break-up value. Subsequent increases or decreases in the
carrying value are credited / charged to profit and loss account. Break-up value of equity securities is calculated with reference
to the net assets of the investee company as per the latest available audited financial statements. Investments in other unquoted
securities are valued at cost less impairment losses, if any. Provision for diminution in the value of securities is made after
considering impairment, if any, in their value.

Profit and loss on sale of investments is included in income currently.

 Allied Bank Limited 293

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

Composition of equity investments

Held-for-trading Available-for-sale

Rupees in ‘000

Equity Investments - Publicly Traded 1,785,318 22,957,532

Equity Investments - Others – 3,593,618
Total Value 1,785,318 26,551,150

The cumulative gain of Rs.12.239 million (2016: Rs. 140.585 million) was realized from sale of equity securities / certificates of
close ended mutual funds and units of open end mutual funds; however unrealized gain of Rs. 12,653.552 million (2016: Rs.
21,713.786 million) was recognized in the statement of financial position in respect of available-for-sale securities.

41.2.1 Market Risk

The Bank is exposed to Foreign Exchange Rate Risk, Interest Rate Risk and Equity Price Risk.

Market Risk performs risk measurement, monitoring and control functions through use of various risk procedures and models.
To give it a formal structure, all the policies and guidelines are approved by the Board and relevant management committees.
The Bank appointed services of a foreign risk advisory firm for assistance in establishment of Market Risk Management
Framework.

Market Risk Pertaining to the Trading Book

Trading Book

A trading book consists of positions in financial instruments held either with trading intent or in order to hedge other elements
of the trading book. To be eligible for trading book, financial instruments must be held with the intent of trading and free of any
restrictive covenants on their tradability. In addition, positions need to be frequently and accurately valued and the portfolio
should be actively managed.

The Bank’s trading book includes securities classified as ‘held-for-trading’, ‘Open Ended Mutual Fund’ and listed equity placed
in ‘Available-for-sale’. These positions are exposed to all forms of market risk, therefore, are managed actively.

Risk Pertaining to Banking Book Investment Portfolio

All investments excluding trading book are considered as part of banking book. Banking book includes:

i) Available-for-sale securities - (other than listed equity)

ii)  Held-to-maturity securities

Investments parked in the banking book include:

i) Government securities
ii) Capital market investments
iii) Investments in bonds, debentures, etc.

Due to the diversified nature of investments in banking book, it is subject to interest rate and equity price risk.

Interest Rate Risk – Banking Book

Government securities (PIBs, Sukuks & T-Bills), Bonds, Debentures, etc. and other money market investments are subject to
interest rate risk. To capture the risk associated with these securities, extensive modeling is being done with respect to duration
analysis. Stress testing and scenario models are also in place to capture the sensitivity of the portfolio to adverse movement
in interest rates. For prudent risk management, all money market investments are marked to market to assess changes in the
market value of investments due to interest rate movements.

Stress Testing

The Bank also conducts Stress Testing of the Bank’s investment portfolio to ascertain the impact of various scenarios on the
capital adequacy and sustainability of the Bank. The exercise assumes various stress conditions, with respect to Market Risk
(Rise or Fall in Interest Rates, leading to interest rate risk), Equity Price Risk resulting from Stock Market movements, FX Rate
Risk leading from adverse movements in exchange rates and Liquidity Risk (ability to meet short-term obligations if there is a run
on deposits). Stress testing is also conducted on various macro-economic scenarios to test the resilience of the Bank.
294 Annual Report 2017

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

41.2.2 Foreign Exchange Risk

Foreign Exchange Risk is the risk of loss arising from fluctuations of exchange rates. Bank’s FX Risk is largely mitigated by
following a matched funding policy whereas for any mismatched exposures, the Bank utilizes appropriate derivative instruments
such as Forwards and Swaps.

The majority of net foreign currency exposure is in US Dollars. The Bank carefully monitors the net foreign currency exposure
and the effect of exchange rate fluctuations by conducting sensitivity analysis and stress testing, as well as utilizing the currency
forwards and swaps to hedge the related exposure.

December 31, 2017

Assets Liabilities Off-balance Net currency
sheet items exposure
Rupees in ‘000

Pakistani Rupee 1,199,555,800 1,038,298,951 (53,340,095) 107,916,754
United States Dollar 46,967,686 92,784,942 45,931,305 114,049
Great Britain Pound 319,361 5,307,053 4,988,957 1,265
Japanese Yen 10,415 761 (10,568) (914)
Euro 371,402 2,856,405 2,487,262 2,259
Other Currencies 97,939 24,459 (56,861) 16,619
47,766,803 100,973,620 53,340,095 133,278
1,247,322,603 1,139,272,571 – 108,050,032

December 31, 2016

Assets Liabilities Off-balance Net currency
sheet items exposure
Rupees in ‘000

Pakistani Rupee 1,009,355,185 888,234,829 (24,536,359) 96,583,997
United States Dollar 60,635,370 73,234,391 17,746,280 5,147,259
Great Britain Pound 659,677 4,976,104 4,353,533 37,106
Japanese Yen 12,130 3,814 (7,410) 906
Euro 330,648 2,777,338 2,480,613 33,923
Other Currencies 51,293 2,455 (36,657) 12,181
61,689,118 80,994,102 24,536,359 5,231,375
1,071,044,303 969,228,931 - 101,815,372

41.2.3 Equity Position Risk

The Board, based on the recommendations of ALCO, approves exposure limits applicable to investments in Trading and
Banking Book. Equity securities are perpetual assets and are classified under either Held-for-Trading Portfolio or Available-for-
Sale Portfolio.

Concentration Risk

ALCO is responsible for making investment decisions regarding capital market investments, whereas limit setting with respect
to portfolio, sector and scrip wise limits is done by BRMC / BOD to guard against concentration risk. Further, these limits are
reviewed and revised periodically. The capital market desk ensures compliance of concentration limits whereas limit monitoring
is done by Market & Liquidity Risk Division on a daily basis and breaches (if any) are promptly reported with proper reason.

Price Risk

Trading and investing in equity securities give rise to price risk. ALCO and Capital Market Unit both ensure that through prudent
trading strategy and use of equity futures, the equity price risk is mitigated, albeit to a certain extent.


41.2.4 Mismatch of Interest Rate Sensitive Assets and Liabilities

Yield / interest rate sensitivity position for on–balance sheet instruments is based on the earlier of contractual re–pricing or maturity date and for off–balance sheet instruments is based on settlement date.

December 31, 2017

Exposed to Yield/ Interest risk

Effective Not exposed
Yield/ Total Up to Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5 Above to Yield/
Interest 1 month to 3 to 6 months to to 2 to 3 to 5 to 10 10 years Interest
rate months months 1 year years years years years Risk

Rupees in ‘000

On–balance sheet financial instruments

Assets
Cash and balances with treasury banks 0.00% 85,355,555 11,655,633 – – – – – – – – 73,699,922
Balances with other banks 649,512 322,933 – – – – – – – – 326,579
Lendings to financial institutions 5.65% 8,694,399 8,479,431 – 214,968 – – – – – – –
for the year ended December 31, 2017

Investments 7.48% 699,323,690 211,571,388 252,245,167 1,016,250 79,117,349 68,340,173 1,290,820 13,005,833 32,892,588 2,475,774 37,368,348
Advances 6.58% 372,080,555 53,933,275 194,256,496 91,386,495 10,135,083 1,842,479 2,017,672 4,480,489 12,609,582 32,096 1,386,888
Other assets 19,748,030 – – – – – – – – – 19,748,030
1,185,851,741 285,962,660 446,501,663 92,617,713 89,252,432 70,182,652 3,308,492 17,486,322 45,502,170 2,507,870 132,529,767
Liabilities
Bills payable 7,835,467 – – – – – – – – – 7,835,467
Borrowings 5.14% 223,556,383 184,037,908 17,618,887 5,134,424 4,208,111 24,603 424,410 3,107,351 9,000,689 – –
Deposits and other accounts 3.02% 883,702,056 105,725,557 186,422,669 86,381,801 247,648,340 11,313,772 1,974,761 335,926 273,883 – 243,625,347
Sub–ordinated loan – – – – – – – – – – –
Other liabilities 10,972,907 – – – – – – – – – 10,972,907
1,126,066,813 289,763,465 204,041,556 91,516,225 251,856,451 11,338,375 2,399,171 3,443,277 9,274,572 – 262,433,721
Notes to the Consolidated Financial Statements

On–balance sheet gap 59,784,928 (3,800,805) 242,460,107 1,101,488 (162,604,019) 58,844,277 909,321 14,043,045 36,227,598 2,507,870 (129,903,954)

Off–balance sheet financial instruments

Commitments in respect of forward
exchange contracts – purchase 95,038,705 47,065,184 41,879,614 6,075,063 18,844 – – – – – –
Commitments in respect of forward
exchange contracts – sale (41,580,643) (22,932,197) (15,865,961) (2,531,882) (250,603) – – – – – –

Off–balance sheet gap 53,458,062 24,132,987 26,013,653 3,543,181 (231,759) – – – – – –

Total yield / interest risk sensitivity gap 113,242,990 20,332,182 268,473,760 4,644,669 (162,835,778) 58,844,277 909,321 14,043,045 36,227,598 2,507,870

Cumulative yield / interest risk sensitivity gap 113,242,990 20,332,182 288,805,942 293,450,611 130,614,833 189,459,110 190,368,431 204,411,476 240,639,074 243,146,944
Allied Bank Limited
295
 Mismatch of Interest Rate Sensitive Assets and Liabilities
296

Yield / interest rate sensitivity position for on-balance sheet instruments is based on the earlier of contractual re-pricing or maturity date and for off-balance sheet instruments is based on settlement date.

December 31, 2016

Exposed to Yield/ Interest risk

Effective Not exposed
Yield/ Total Up to Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5 Above to Yield/
Annual Report 2017

Interest 1 month to 3 to 6 months to to 2 to 3 to 5 to 10 10 years Interest

rate months months 1 year years years years years Risk
Rupees in ‘000

On-balance sheet financial instruments

Assets
Cash and balances with treasury banks 0.00% 73,203,767 8,435,615 – – – – – – – – 64,768,152
Balances with other banks 679,938 333,017 – – – – – – – – 346,921
Lendings to financial institutions 5.07% 10,512,752 10,012,752 500,000 – – – – – – – –
Investments – net 9.18% 590,924,972 71,498,837 141,750,543 16,556,423 74,462,778 111,061,010 73,945,349 8,378,159 44,180,039 2,420,904 46,670,930
Advances – net 6.70% 330,271,881 62,018,033 109,941,613 71,174,390 37,263,817 4,632,795 2,880,516 31,575,280 2,187,810 3,578,394 5,019,233
Other assets – net 22,759,482 – – – – – – – – 22,759,482
for the year ended December 31, 2017

1,028,352,792 152,298,254 252,192,156 87,730,813 111,726,595 115,693,805 76,825,865 39,953,439 46,367,849 5,999,298 139,564,718
Liabilities
Bills payable 9,848,795 – – – – – – 9,848,795
Borrowings 5.22% 126,368,875 87,235,061 13,721,226 15,148,598 4,209,001 199,752 1,731,008 4,124,229 – –
Deposits and other accounts 3.28% 805,090,074 95,126,630 205,854,226 69,751,195 225,074,398 7,436,987 1,627,872 350,100 193,358 – 199,675,308
Sub–ordinated loan – – – – – – – – – – –
Other liabilities 13,027,141 – – – – – – – 13,027,141
954,334,885 182,361,691 219,575,452 84,899,793 225,074,398 11,645,988 1,827,624 2,081,108 4,317,587 – 222,551,244
On–balance sheet gap 74,017,907 (30,063,437) 32,616,704 2,831,020 (113,347,803) 104,047,817 74,998,241 37,872,331 42,050,262 5,999,298 (82,986,526)

Off–balance sheet financial instruments

Notes to the Consolidated Financial Statements

Commitments in respect of forward

exchange contracts – purchase 63,017,979 20,680,281 21,891,192 20,127,299 319,207 – – – – – –
Commitments in respect of forward
exchange contracts – sale (38,469,943) (15,855,348) (14,653,980) (7,766,880) (193,735) – – – – – –
Off–balance sheet gap 24,548,036 4,824,933 7,237,212 12,360,419 125,472 – – – – – –
Total yield / interest risk sensitivity gap 98,565,943 (25,238,504) 39,853,916 15,191,439 (113,222,331) 104,047,817 74,998,241 37,872,331 42,050,262 5,999,298
Cumulative yield / interest risk sensitivity gap 98,565,943 (25,238,504) 14,615,412 29,806,851 (83,415,480) 20,632,337 95,630,578 133,502,909 175,553,171 181,552,469

Interest rate risk is the risk that the value of the financial instrument will fluctuate due to changes in the market interest rates.

41.2.4.1 Reconciliation of Assets and Liabilities exposed to Yield/Interest Rate Risk with Total Assets and Liabilities

December 31, December 31, December 31, December 31,

Reconciliation to total assets 2017 2016 Reconciliation to total liabilities 2017 2016
(Rupees in ‘000) (Rupees in ‘000)

Balance as per Statement of Financial Position 1,247,322,603 1,071,044,303 Balance as per Statement of Financial Position 1,139,272,571 969,228,931
Less : Non financial assets Less: Non financial liabilities
Operating fixed assets 48,355,884 32,783,340 Deferred tax liability 6,941,206 11,001,128
Other assets 13,114,978 9,908,171 Other liabilities 6,264,552 3,892,918
61,470,862 42,691,511 13,205,758 14,894,046
Total financial assets 1,185,851,741 1,028,352,792 Total financial liabilities 1,126,066,813 954,334,885

41.3 Liquidity Risk

Liquidity Risk is the risk that the Bank is unable to fund its current obligations and operations in the most cost efficient manner. Bank’s BOD have delegated the responsibility to ALCO for ensuring that Bank’s policy for liquidity management is adhered to
on a continual basis. ALCO uses gap analysis based on “maturity schedule” to assess Bank’s liquidity risk and devise strategies accordingly. Bank also has in place triggers and limits to monitor liquidity risk on a periodic basis and uses stress testing &
scenario analysis to assess adequacy of Bank’s liquid assets. Bank also complies with SBP’s instructions on Liquidity Standards as prescribed under the Basel III Framework.

Bank has in place a robust Liquidity Crisis Contingency Plan to deal with any liquidity crisis in the most efficient and effective manner.

41.3.1 Maturities of Assets and Liabilities – Based on contractual maturity of the assets and liabilities of the Bank

December 31, 2017

Total Up to 1 Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5 Above

month to 3 to 6 months to to 2 to 3 to 5 to 10 10 years
months months 1 year years years years years

Rupees in ‘000

Assets
for the year ended December 31, 2017

Cash and balances with treasury banks 85,355,555 85,355,555

Balances with other banks 649,512 649,512
Lendings to financial institutions 8,694,399 8,479,431 – 214,968 – – – – – –
Investments 699,323,690 210,233,889 249,420,393 391,671 103,757,768 68,866,567 2,195,441 13,575,919 48,406,268 2,475,774
Advances 372,080,555 82,070,288 40,699,899 36,228,880 40,811,521 40,596,614 42,065,587 57,808,833 26,754,275 5,044,658
Operating fixed assets 48,355,884 730,200 1,460,401 2,190,601 4,381,202 2,686,516 1,027,172 1,387,883 1,841,922 32,649,987
Deferred tax assets – – – – – – – – – –
Other assets 32,863,008 6,025,539 7,696,784 9,509,150 2,764,754 521,343 521,343 1,042,686 1,042,685 3,738,724
1,247,322,603 393,544,414 299,277,477 48,535,270 151,715,245 112,671,040 45,809,543 73,815,321 78,045,150 43,909,143
Liabilities
Bills payable 7,835,467 7,835,467 – – – – – – – –
Notes to the Consolidated Financial Statements

Borrowings 223,556,383 184,037,908 17,618,887 5,134,424 4,208,111 24,603 424,410 3,107,351 9,000,689 –
Deposits and other accounts 883,702,056 739,642,536 58,139,330 37,584,882 44,685,509 1,065,230 1,974,761 335,926 273,882 –
Deferred tax liabilities 6,941,206 1,739,625 2,084,871 117,607 (137,964) 665,419 71,514 182,479 488,201 1,729,454
Sub-ordinated loan – – – – – – – – – –
Other liabilities 17,237,459 4,695,573 3,174,515 1,663,274 3,867,006 573,239 906,608 963,146 1,394,098 –
1,139,272,571 937,951,109 81,017,603 44,500,187 52,622,662 2,328,491 3,377,293 4,588,902 11,156,870 1,729,454
Net assets / (liabilities) 108,050,032 (544,406,695) 218,259,874 4,035,083 99,092,583 110,342,549 42,432,250 69,226,419 66,888,280 42,179,689

Share capital 11,450,739
Reserves 17,980,116
Unappropriated profit 50,546,126
79,976,981
Surplus on revaluation of assets
- net of tax 28,073,051
108,050,032

Allied Bank Limited
297
 298

Maturities of Assets and Liabilities – Based on contractual maturity of the assets and liabilities of the Bank

December 31, 2016

Total Up to 1 Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5 Above

month to 3 to 6 months to to 2 to 3 to 5 to 10 10 years
months months 1 year years years years years
Annual Report 2017

Rupees in ‘000

Assets
Cash and balances with treasury banks 73,203,767 73,203,767 _ – – – – – – –
Balances with other banks 679,938 679,938 _ – – – – – – –
Lendings to financial institutions 10,512,752 10,012,752 500,000 – – – – – – –
Investments 590,924,972 69,682,302 137,652,023 12,418,111 107,974,826 112,896,911 74,850,697 10,252,919 62,776,279 2,420,904
Advances 330,271,881 63,879,965 36,299,581 33,405,471 49,969,592 32,238,803 31,396,725 61,978,466 14,852,890 6,250,388
Operating fixed assets 32,783,340 661,783 1,323,571 1,985,356 3,970,712 1,773,793 809,875 1,028,389 1,305,889 19,923,972
Deferred tax assets – – – – – – – – – –
Other assets 32,667,653 5,086,972 7,169,379 10,257,362 2,462,206 505,465 505,465 1,010,930 1,010,929 4,658,945
for the year ended December 31, 2017

1,071,044,303 223,207,479 182,944,554 58,066,300 164,377,336 147,414,972 107,562,762 74,270,704 79,945,987 33,254,209
Liabilities
Bills payable 9,848,795 9,848,795 – – – – – – – –
Borrowings 126,368,875 87,235,061 13,721,226 15,148,598 – 4,209,001 199,752 1,731,008 4,124,229 –
Deposits and other accounts 805,090,074 668,749,334 59,714,460 37,185,906 36,437,792 831,254 1,627,872 350,100 193,356 –
Deferred tax liabilities 11,001,128 1,169,366 2,309,748 242,836 1,872,747 1,499,781 1,272,997 265,888 1,104,140 1,263,625
Sub–ordinated loan – – – – – – – – – –
Other liabilities 16,920,059 4,316,705 6,078,013 1,693,948 686,064 499,805 589,309 950,390 2,103,793 2,032
969,228,931 771,319,261 81,823,447 54,271,288 38,996,603 7,039,841 3,689,930 3,297,386 7,525,518 1,265,657
Net assets / (liabilities) 101,815,372 (548,111,782) 101,121,107 3,795,012 125,380,733 140,375,131 103,872,832 70,973,318 72,420,469 31,988,552

Notes to the Consolidated Financial Statements

Share capital 11,450,739

Reserves 16,533,485
Unappropriated profit 47,631,788
75,616,012
Surplus on revaluation of assets
– net of tax 26,199,360
101,815,372

41.3.1.1 When an asset or liability does not have any contractual maturity date, the period in which these are assumed to mature has been taken as the expected date of maturity.
41.4 Maturities of Assets and Liabilities - Based on the working prepared by the Asset and Liabilities Management Committee (ALCO) of the Bank
Expected maturities of non–contractual assets and liabilities has been computed using volatility approach. Under this approach maximum volatility of non contractual assets and liabilities is calculated over a period and classified into core
and non–core portion.

December 31, 2017

Total Up to 1 Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5 Above

month to 3 to 6 months to to 2 to 3 to 5 to 10 10 years
months months 1 year years years years years

Rupees in ‘000


Assets
Cash and balances with treasury banks 85,355,555 70,947,142 1,590,536 231,422 – 4,195,485 4,195,485 4,195,485 – –
Balances with other banks 649,512 649,512 – – – – – – – –
Lendings to financial institutions 8,694,399 8,479,431 – 214,968 – – –
Investments 699,323,690 210,233,889 249,420,393 391,671 103,757,768 68,866,567 2,195,441 13,575,919 48,406,268 2,475,774
Advances 372,080,555 50,101,022 47,356,670 36,228,879 40,811,522 49,034,112 50,503,085 66,246,331 26,754,276 5,044,658
for the year ended December 31, 2017

Operating fixed assets 48,355,884 730,200 1,460,401 2,190,601 4,381,202 2,686,516 1,027,172 1,387,883 1,841,922 32,649,987
Deferred tax assets – – – – – – – – – –
Other assets 32,863,008 6,025,540 7,696,784 9,509,150 2,764,753 521,343 521,343 1,042,686 1,042,685 3,738,724
1,247,322,603 347,166,736 307,524,784 48,766,691 151,715,245 125,304,023 58,442,526 86,448,304 78,045,151 43,909,143
Liabilities
Bills payable 7,835,467 7,835,467 – – – – – – – –
Borrowings 223,556,383 184,037,908 17,618,887 5,134,424 4,208,111 24,603 424,410 3,107,351 9,000,689 –
Deposits and other accounts 883,702,056 105,725,556 61,992,804 100,483,914 95,131,330 51,511,052 31,907,955 335,926 273,882 436,339,637
Deferred tax liabilities 6,941,206 1,739,625 2,084,871 117,607 (137,964) 665,419 71,514 182,479 488,201 1,729,454
Sub–ordinated loan – – – – – – – – – –
Other liabilities 17,237,459 4,695,573 3,174,515 1,663,274 3,867,006 573,239 906,608 963,146 1,394,098 –
Notes to the Consolidated Financial Statements

1,139,272,571 304,034,129 84,871,077 107,399,219 103,068,483 52,774,313 33,310,487 4,588,902 11,156,870 438,069,091
Net assets 108,050,032 43,132,607 222,653,707 (58,632,528) 48,646,762 72,529,710 25,132,039 81,859,402 66,888,281 (394,159,948)

Share capital 11,450,739

Reserves 17,980,116
Unappropriated profit 50,546,126
79,976,981
Surplus on revaluation of assets
– net of tax 28,073,051
108,050,032
Allied Bank Limited
299
 300

Maturities of Assets and Liabilities - Based on the working prepared by the Asset and Liabilities Management Committee (ALCO) of the Bank

Expected maturities of non-contractual assets and liabilities has been computed using volatility approach. Under this approach maximum volatility of non contractual assets and liabilities is calculated over a period and classified into core and non-core
portion.

December 31, 2016

Annual Report 2017

Total Up to 1 Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5 Above

month to 3 to 6 months to to 2 to 3 to 5 to 10 10 years
months months 1 year years years years years

Rupees in ‘000

Assets
Cash and balances with treasury banks 73,203,767 60,854,470 1,345,171 221,592 – 3,594,178 3,594,178 3,594,178 – –
Balances with other banks 679,938 679,938 – – – – – – – –
Lendings to financial institutions 10,512,752 10,012,752 500,000 – – – – – – –
Investments 590,924,972 69,682,302 137,652,023 12,418,111 107,974,826 112,896,911 74,850,697 10,252,919 62,776,279 2,420,904
for the year ended December 31, 2017

Advances 330,271,881 34,619,201 42,862,165 33,543,161 49,969,592 39,758,967 38,916,889 69,498,629 14,852,890 6,250,387
Operating fixed assets 32,783,340 661,783 1,323,571 1,985,356 3,970,712 1,773,793 809,875 1,028,389 1,305,889 19,923,972
Deferred tax assets – – – – – – – – – –
Other assets 32,667,653 5,086,972 7,169,379 10,257,362 2,462,206 505,465 505,465 1,010,930 1,010,929 4,658,945
1,071,044,303 181,597,418 190,852,309 58,425,582 164,377,336 158,529,314 118,677,104 85,385,045 79,945,987 33,254,208
Liabilities

Bills payable 9,848,795 9,848,795 – – – – – – – –
Borrowings 126,368,875 87,235,061 13,721,226 15,148,598 – 4,209,001 199,752 1,731,008 4,124,229
Deposits and other accounts 805,090,074 95,126,629 59,714,460 99,614,783 85,340,355 49,733,817 33,310,391 350,100 193,357 381,706,182
Deferred tax liabilities 11,001,128 1,169,366 2,309,748 242,836 1,872,747 1,499,781 1,272,997 265,888 1,104,140 1,263,625
Notes to the Consolidated Financial Statements

Sub–ordinated loan – – – – – – – – – –
Other liabilities 16,920,059 4,316,705 6,078,013 1,693,948 686,064 499,805 589,309 950,390 2,103,793 2,032
969,228,931 197,696,556 81,823,447 116,700,165 87,899,166 55,942,404 35,372,449 3,297,386 7,525,519 382,971,839
Net assets 101,815,372 (16,099,138) 109,028,862 (58,274,583) 76,478,170 102,586,910 83,304,655 82,087,659 72,420,468 (349,717,631)

Share capital 11,450,739
Reserves 16,533,485
Unappropriated profit 47,631,788
75,616,012
Surplus on revaluation of assets
– net of tax 26,199,360
101,815,372

 Allied Bank Limited 301

Notes to the Consolidated Financial Statements

for the year ended December 31, 2017

41.5 Operational Risk

The Bank, like all financial institutions, is exposed to many types of operational risks, including the potential losses arising
from internal activities or external events caused by breakdowns in information, communication, physical safeguards,
business continuity, supervision, transaction processing, settlement systems and the execution of legal, fiduciary and agency
responsibilities.

In accordance with the BoD approved Operational Risk Policy, Bank maintains a system of internal controls designed to keep
operational risk at appropriate levels, in view of the bank’s financial strength and the characteristics of the activities and market
in which it operates. These internal controls are periodically updated to conform to industry best practice.

Further, detailed data of operational losses is being maintained, in conformance with regulatory guidelines. Major Operational
Risk events are also analyzed from the control breaches perspective and mitigating controls are assessed on design and
operating effectiveness. Quarterly updates on Operational Risk events are presented to senior management and Board’s Risk
Management Committee & BoD.

The Bank has also developed a Business Continuity Plan applicable to all its functional areas. The Bank updates functional BCPs
on annual basis or at any process change.

The Bank is also implementing internationally accepted Integrated Framework on Internal Control issued by the Committee of
Sponsoring Organizations of the Tread way Commission (COSO), with a view to consolidate and enhance the existing internal
control processes.

The Bank with permission of SBP is conducting a parallel run for Alternate Standardized Approach (ASA) for Basel II – Operational
Risk Capital Charge Reporting, which signifies readiness of the Bank to move to advance approach.

42 NON ADJUSTING EVENT AFTER THE REPORTING DATE
42.1 The Board of Directors of the Bank in its meeting held on February 21, 2018 has proposed a cash dividend in respect of 2017
of Rs. 1.75 per share (2016: cash dividend Rs. 1.75 per share). This appropriation will be approved in the forthcoming Annual
General Meeting. The Consolidated financial statements of the Bank for the year ended December 31, 2017 do not include the
effect of these appropriations which will be accounted for in the consolidated financial statements for the year ending December
31, 2018.

42.2 The Bank is party to a Suo Moto case SMC No. 20/2016 in the Honorable Supreme Court of Pakistan. Through this case, the
Honorable Supreme Court has taken up the matter relating to pension arrangements of certain privatized banks. Despite the
banks’ submission of being legally compliant, the Honorable Supreme Court of Pakistan concluded the Suo Moto case on
February 13, 2018, by using judicial discretion and fixed the minimum pension at Rs. 8,000 per month from a prospective date
and with 5 % indexation on an annual basis. The detailed judgment has not been issued by the Honorable Supreme Court to
date, and therefore the Management is not in a position to work out the financial impact.

The consolidated financial statements of the Bank for the year ended December 31, 2017 do not include the effect of this
adjustment which will be accounted for in the year ending December 31, 2018 as past service cost; once the plan is formally
amended and approved upon receipt of aforementioned detailed judgment and related actuarial valuation.
43 GENERAL
43.1 These accounts have been prepared in accordance with the revised forms of annual financial statements of the banks issued by
the State Bank of Pakistan through its BSD Circular No. 04 dated February 17, 2006.

43.2 Corresponding figures have been re-arranged and re-classified to reflect more appropriate presentation of events and
transactions for the purpose of comparison.

44 DATE OF AUTHORIZATION FOR ISSUE

These financial statements were authorized for issue on February 21, 2018 by the Board of Directors of the Bank.

Chief Financial Officer President and Chief Executive Director

Director Chairman
302 Annual Report 2017

Pattern of Shareholding
Allied Bank Limited

Information for annual financial statements as on December 31, 2017.

1 Issued, Subscribed and Paid-up Capital

As on December 31, 2017 As on December 31, 2016
ORDINARY SHARES
No. of Shares Amount (Rs.) No. of Shares Amount (Rs.)

Fully paid in cash 406,780,094 4,067,800,940 406,780,094 4,067,800,940

Increase in Share Capital – – – –
Issued as bonus shares  720,745,186 7,207,451,860  720,745,186 7,207,451,860
Issued for consideration other than cash 17,548,550 175,485,500 17,548,550 175,485,500
Total  1,145,073,830 11,450,738,300  1,145,073,830 11,450,738,300

2 Major shareholding
Holding more than 5% of the total paid-up capital

Name of Shareholder No. of Shares Held Percentage Held

Ibrahim Holdings (Pvt) Ltd. 965,879,110 84.35

No. of Total Shares

Shareholdings
Shareholders From To Held
6161 1 100 237,121
9237 101 500 2,566,312
1188 501 1000 869,985
2201 1001 5000 4,761,142
411 5001 10000 2,998,849
143 10001 15000 1,790,735
82 15001 20000 1,482,428
62 20001 25000 1,399,327
30 25001 30000 829,007
24 30001 35000 793,013
19 35001 40000 723,474
15 40001 45000 641,628
11 45001 50000 531,173
9 50001 55000 476,514
7 55001 60000 399,633
5 60001 65000 311,322
4 65001 70000 275,196
5 70001 75000 367,400
2 75001 80000 158,000
5 80001 85000 415,455
4 85001 90000 351,063
9 95001 100000 893,100
3 100001 105000 304,270
 Allied Bank Limited 303

Pattern of Shareholding
Allied Bank Limited

No. of Total Shares

Shareholdings
Shareholders From To Held
3 105001 110000 318,400
3 110001 115000 334,771
1 115001 120000 118,944
4 120001 125000 485,100
1 125001 130000 127,500
1 135001 140000 136,956
2 145001 150000 300,000
2 150001 155000 304,127
1 155001 160000 157,600
3 160001 165000 489,000
2 165001 170000 335,500
2 175001 180000 355,450
1 180001 185000 181,820
1 190001 195000 192,800
1 195001 200000 200,000
1 210001 215000 210,500
2 215001 220000 431,600
1 220001 225000 220,900
1 225001 230000 228,569
4 235001 240000 947,137
1 245001 250000 250,000
1 250001 255000 253,000
1 270001 275000 273,600
1 295001 300000 300,000
1 305001 310000 309,100
1 315001 320000 319,300
4 345001 350000 1,385,400
1 355001 360000 358,000
1 375001 380000 378,000
1 400001 405000 404,852
6 495001 500000 2,999,045
1 500001 505000 503,100
1 530001 535000 534,900
1 580001 585000 580,500
2 595001 600000 1,195,200
1 605001 610000 610,000
1 610001 615000 615,000
1 650001 655000 652,500
1 700001 705000 700,500
1 725001 730000 726,642
1 820001 825000 822,151
304 Annual Report 2017

Pattern of Shareholding
Allied Bank Limited

No. of Total Shares

Shareholdings
Shareholders From To Held
1 845001 850000 845,500
1 895001 900000 900,000
1 960001 965000 964,400
1 995001 1000000 1,000,000
1 1015001 1020000 1,015,897
1 1090001 1095000 1,092,614
1 1095001 1100000 1,100,000
1 1100001 1105000 1,102,500
1 1145001 1150000 1,150,000
1 1150001 1155000 1,155,000
1 1250001 1255000 1,252,000
1 1255001 1260000 1,260,000
1 1325001 1330000 1,327,500
1 1430001 1435000 1,433,604
1 1495001 1500000 1,500,000
1 1765001 1770000 1,770,000
1 1900001 1905000 1,902,900
1 1995001 2000000 1,999,500
1 2135001 2140000 2,140,000
1 2640001 2645000 2,645,000
1 2770001 2775000 2,773,000
1 2850001 2855000 2,851,000
1 2885001 2890000 2,885,747
1 3090001 3095000 3,091,000
1 4295001 4300000 4,299,100
1 4675001 4680000 4,676,400
1 4770001 4775000 4,771,700
1 5325001 5330000 5,325,400
1 9755001 9760000 9,755,604
1 29995001 30000000 30,000,000
1 37385001 37390000 37,385,743
1 965875001 965880000 965,879,110
19736 1,145,073,830
 Allied Bank Limited 305

Categories of Shareholders
Allied Bank Limited

Categories of Shareholders No. of Shares Percentage

Shareholders Held %

Parent, Associated Companies, Undertakings and Related Parties

Ibrahim Holdings (Private) Limited 1 965,879,110 84.3508
Trustees Of ABL Employees Superannuation 1 37,385,743 3.2649
Sub-Total 2 1,003,264,853 87.6157
Directors, Chief Executive Officer, and their spouses and minor children

Mohammad Naeem Mukhtar 1 2,500 0.0002
Muhammad Waseem Mukhtar 1 2,500 0.0002
Sheikh Mukhtar Ahmed 1 2,500 0.0002
Abdul Aziz Khan 1 26,620 0.0023
Zafar Iqbal 1 2,500 0.0002
Dr. Muhammad Akram Sheikh 1 2,500 0.0002
Mubashir A. Akhtar & Taqdees Akhtar 1 2,500 0.0002
Sub-Total 7 41,620 0.0036

Banks, Development Financial Institutions, Non Banking Financial Institutions

Samba Bank Limited 1 300,000 0.0262
National Bank Of Pakistan Ltd. 5 4,698,690 0.4103
Habib Metropolitan Bank Limited 1 580,500 0.0507
Bank Al Habib Limited 1 1,102,500 0.0963
Soneri Bank Limited - Ordinary Shares 1 2,851,000 0.2490
The Bank Of Khyber 1 216,000 0.0189
Mcb Bank Limited - Treasury 1 5,325,400 0.4651
First Dawood Investment Bank Limited 1 8,600 0.0008
Escorts Investment Bank Limited 1 77 0.0000
The Bank Of Punjab, Treasury Division. 1 1,999,500 0.1746
First Credit & Investment Bank Limited 1 15,000 0.0013
Sindh Bank Limited 1 3,091,000 0.2699
Trust Leasing Corporation Ltd. 1 200 0.0000
M/S. Al-Faysal Investment Bank 1 55 0.0000
M/S Standard Chartered Bank 1 22,118 0.0019
Habib Bank Limited-Treasury Division 1 4,299,100 0.3754
Sub-Total 20 24,509,740 2.1405
306 Annual Report 2017

Categories of Shareholders
Allied Bank Limited

Categories of Shareholders No. of Shares Percentage

Shareholders Held %

NIT AND ICP

IDBL (ICP UNIT) 1 762 0.0001
Investment Corpn. Of Pakistan 1 3,649 0.0003
M/S. Investment Corporation Of Pakistan 1 322 0.0000
Investment Corporation Of Pakistan 1 10,467 0.0009
Sub-Total: 4 15,200 0.0013

Executives* 2 4,545 0.0004
Other Employees 737 922,417 0.0806
Sub-Total 739 926,962 0.0810

Insurance Companies
Premier Insurance Limited 1 99,100 0.0087
State Life Insurance Corp. Of Pakistan 1 2,885,747 0.2520
Efu General Insurance Limited 1 20,100 0.0018
Efu Life Assurance Ltd 1 7,500 0.0007
Alpha Insurance Co. Ltd. 1 121,000 0.0106
Habib Insurance Co.Limited 1 7,500 0.0007
Habib Insurance Company Limited 1 12,500 0.0011
Igi Life Insurance Limited 1 12,500 0.0011
Igi Life Insurance Limited 1 5,500 0.0005
Adamjee Life Assurance Company Ltd-Imf 1 845,500 0.0738
Adamjee Insurance Company Limited 1 2,773,000 0.2422
Gulf Insurance Company Limited. 1 723 0.0001
M/S. Orient Insurance Co.Ltd., 1 404 0.0000
Jubilee General Insurance Company Limited 1 253,000 0.0221
Sub-Total 14 7,044,074 0.6152

Modarabas And Mutual Funds

Descon Chemicals Limited Gratuity Fund 1 700 0.0001
M/S. Modaraba Al Mali 1 116 0.0000
First Fidelity Leasing Modaraba 1 614 0.0001
Golden Arrow Selected Stocks Fund Limite 1 237,500 0.0207
CDC - Trustee Atlas Stock Market Fund 1 1,150,000 0.1004
CDC - Trustee Akd Index Tracker Fund 1 37,162 0.0032
CDC - Trustee Akd Opportunity Fund 1 237,200 0.0207
CDC - Trustee Ubl Stock Advantage Fund 1 1,902,900 0.1662
CDC - Trustee Nafa Stock Fund 1 4,771,700 0.4167
CDC - Trustee Nafa Multi Asset Fund 1 319,300 0.0279
CDC - Trustee Apf-Equity Sub Fund 1 81,000 0.0071
CDC - Trustee Hbl - Stock Fund 1 726,642 0.0635
CDC - Trustee Nit-Equity Market Opportun 1 1,092,614 0.0954
CDC-Trustee Nafa Asset Allocation Fund 1 595,200 0.0520
Sindh General Provident Investment Fund 1 1,770,000 0.1546
*CEO, COO, all Chiefs & the Group Heads are termed as Executives.
 Allied Bank Limited 307

Categories of Shareholders
Allied Bank Limited

Categories of Shareholders No. of Shares Percentage

Shareholders Held %

CDC - Trustee Picic Stock Fund 1 39,000 0.0034

CDC - Trustee Ubl Asset Allocation Fund 1 500,000 0.0437
CDC - Trustee First Capital Mutual Fund 1 500 0.0000
M/S. First Tawakkal Modaraba 1 347 0.0000
Trustees-Ici M.S.D.C Superannuation Fund 1 35,000 0.0031
Sub-Total 20 13,497,495 1.1787

Foreign Investors
Alpha Beta Finance Limited 1 220,900 0.0193
Tundra Pakistan Fund 1 900,000 0.0786
Tundra Frontier Opportunities Fund 1 1,100,000 0.0961
Tundra SustainABLe Frontier Fund 1 600,000 0.0524
Credit Agricole (Suisse) S.A. (759-5) 1 56,000 0.0049
The Bank Of New York Mellon 1 1 0.0000
Habib Bank Ag Zurich, Zurich,Switzerland 1 164,500 0.0144
Habib Bank Ag Zurich, Deira Dubai 1 2,645,000 0.2310
Viena Zainab 1 347,000 0.0303
Tariic Holding Company Bsc (Closed) 1 107,600 0.0094
Shokatali Mohamedali Alibhai 1 25,000 0.0022
Mohammad Tahir Butt 1 3,824 0.0003
Sub-Total 12 6,169,825 0.5388

Others 164 45,910,539 4.0094
Individuals 18754 43,693,522 3.8158
Grand Total 19,736 1,145,073,830 100.0000

All the trades in shares carried out by the Directors, Executives and their spouses and their minor children are reported
as NIL during 2017.
308 Annual Report 2017

Glossary of Financial & Banking Terms

Allied Bank Limited

Accrual Basis Call Money Rate Defined Contribution

Recognizing the effects of transactions Interbank clean (without collateral) lending/ A post employment benefit plan under which
and other events when they occur without borrowing rates are called Call Money Rates entity and employee pays fixed contribution
waiting for receipt or payment of cash or its into a separate entity (a fund) and will have
equivalent. Common Equity Tier (CET) no legal or constructive obligation to pay
Capital further contribution if the fund does not hold
Automated Teller Machine (ATM) CET capital is sum of fully paid share capital,
sufficient assets to pay all the employee
benefits relating to employee service in the
ATM is an e-banking delivery channel that reserves and un-appropriated profit adjusted
current and prior periods.
enables the customers to perform financial by regulatory adjustments as specified in
transactions 24/7. Basel III.
Derivatives
Alternate Delivery Channels Consumer Price Index (CPI) A financial instrument or a contract where;
(ADCs) • Its value is dependent upon or derived
The CPI measure changes in the cost of from one or more underlying assets.
ADCs are those access points that expand
buying a representative fixed basket of • Requires no or very little initial net
the reach of banking services beyond the
goods and generally indicates inflation rate investment
traditional over the counter banking and
in the country. (Source: Pakistan Bureau of • It is settled at a future date.
includes internet banking, mobile banking,
Statistics)
Point of Sale (POS) transactions, ATM, SMS
and Phone banking.
Defined Benefits
Coupon Rate In a defined benefit plan, an employer
Basis point Coupon rate is interest rate payable on typically guarantees a worker a specific
bond’s par value at specific regular periods. lifetime annual retirement benefit, based on
One hundredth of a per cent i.e. 0.01 per
In PIBs they are paid on bi-annual basis. years of service, final rate of pay, age and
cent. 100 basis points is 1 per cent. Used
other factors. The risks of paying for the plan
when quoting movements in interest rates or
yields on securities. Call Deposits rest entirely with the plan.

These include short notice and special

Breakup Value per share Deferred Taxation
notice deposits
Sum set aside for tax in financial statements
Represents the total worth (equity) of
the business per share, calculated as Current Deposits that will become payable / receivable in a
financial year other than current financial year
shareholders’ equity or Net Assets excluding Non-remunerative Chequing account
due to differences in accounting policies and
the impact of revaluation on fixed assets, deposits wherein withdrawals and deposit
applicable taxation legislations.
divided by the total number of share of funds can be made frequently by the
outstanding at year end. account holders.
Discount rate
Bonus Issue (Scrip Issue) Contingencies Discount is the rate at which SBP provides
three-day Repo facility to banks, acting as
The issue of new shares to existing A condition or situation existing at date
the lender of last resort.
shareholders in proportion to their of Statement of Financial Position where
shareholdings. It is a process for converting the outcome will be confirmed only by
a company’s reserves (in whole or part) into
Dividend Payout Ratio
occurrence of one or more future events.
issued capital and hence does not involve an Dividends (cash dividend plus bonus shares)
infusion of cash. CAGR paid per share as a fraction of earnings per
share (EPS).
An abbreviation for Compound Annual
Cash Equivalents
Growth Rate.
Short–term highly liquid investments that
Dividend Yield Ratio
are readily convertible to known amounts of Corporate Governance Dividend per share divided by the market
cash. value of share.
It is “the system by which companies are
directed and controlled” by the Securities
Capital Adequacy Ratio Earnings Per Share
and Exchange Commission of Pakistan. It
The relationship between capital and risk involves regulatory and market mechanisms, Profit after taxation divided by the weighted
weighted assets as defined in the framework which govern the roles and relationships average number of ordinary shares in issue
developed by the State Bank of Pakistan between a company’s management,
and Basel Committee. its board, its shareholders and other
stakeholders.
 Allied Bank Limited 309

Glossary of Financial & Banking Terms

Allied Bank Limited

Effective Tax Rate Impairment Market Capitalization

Provision for taxation excluding deferred tax Impairment of an asset is an abrupt Number of ordinary shares in issue multiplied
divided by the profit before taxation. decrease of its fair value and measured in by the market value of share as at any cut-
accordance with applicable regulations. off date.
Euro-pay, Master-card and Visa
(EMV) Interest Rate Swap (IRS) Market Treasury bills (MTBs)
EMV is a global standard for cards equipped An Interest Rate Swap (the swap) is a
MTBs are negotiable debt instrument
with computer chips and the technology financial contract between two parties
issued by State Bank of Pakistan on behalf
used to authenticate chip-card transactions. exchanging or swapping a stream of interest
of Government of Pakistan with tenors
payments for a `Notional Principal’ amount
available in 3 months, 6 months and one
Finance Lease on multiple occasions during a specified
year maturities.
period. The swap is usually “fixed to
Finance lease is the one in which risk and
floating” or “floating to floating” exchanges
rewards incidental to the ownership of the
of interest rate. As per the contract, on Materiality
leased asset is transferred to lessee but not
each payment date during the swap period, The relative significance of a transaction
the actual ownership.
the cash payments based on difference in or an event the omission or misstatement
fixed/floating or floating / floating rates are of which could influence the economic
Fixed Deposits
exchanged by the parties from one another. decisions of users of financial statements.
Deposits having fixed maturity dates and a The party incurring a negative interest
rate of return. rate differential for that leg pays the other
Non-Performing Loan
counter-party.
Forced Sale Value (FSV) A non-performing loan is a loan that is in
Forced Sale Value means the value Interest Spread default or close to being in default. Loans
which fully reflects the possibility of price become non-performing in accordance with
Represents the difference between the
fluctuations and can currently be obtained by provision of prudential regulations issued by
average interest rate earned and the average
selling the mortgaged / pledged assets in a SBP.
interest rate paid on funds.
forced / distressed sale conditions.
Non Performing Loan-
Interest in Suspense
Forward Exchange Contract Substandard Category
Interest suspended on non–performing loans
Forward contracts are agreements between Where markup/interest or principal is
and advances.
two parties to exchange two designated overdue by 90 days or more from the due
currencies at a specific time in the future. date.
KIBOR – (Karachi Interbank
Offered Rate)
Non Performing Loan-Doubtful
Gross Domestic Product (GDP) KIBOR is the interbank lending rate Category
GDP is a monetary value of all the finished between banks in Pakistan and is used as a
Where markup/interest or principal is
goods and services produced in a country benchmark for lending.
overdue by 180 days or more from the due
in a specified time period. GDP includes all
date.
private and public consumption, government LIBOR (London Interbank Offered
outlays, investments and exports minus Rate)
Non Performing Loan-Loss
imports that occur within a country. An interest rate at which banks can borrow Category
funds, in marketable size, from other banks
Guarantees Where mark-up/interest or principal is
in the London interbank market. The LIBOR
overdue by one year or more from the due
A promise to answer for the payment of is fixed on a daily basis by the British
date and Trade Bill (Import/ Export or Inland
some debt, or the performance of some Bankers’ Association.
Bills) are not paid/adjusted within 180 days
duty, in case of the failure of another person,
of the due date.
who is, in the first instance, liable to such Liquid Assets
payment or performance. An asset that can be converted into cash Nostro Account
quickly and with minimal impact to the price
Historical Cost Convention An account held with a bank outside
received.
Pakistan.
Recording transactions at the actual value
received or paid.
310 Annual Report 2017

Glossary of Financial & Banking Terms

Allied Bank Limited

Net Interest Income Reverse Repurchase Agreement

The difference between what a bank earns Transaction involving the purchase of
on interest bearing assets such as loans securities by a bank or dealer and resale
and securities and what it pays on interest back to the seller at a future date and
bearing liabilities such as deposits, refinance specified price.
funds and inter–bank borrowings.
Return on Average Equity
Off Balance Sheet Transactions Net profit for the year, less preference share
Transactions that are not recognized as dividends if any, expressed as a percentage
assets or liabilities in the statement of of average ordinary shareholders’ equity.
financial position but which give rise to
contingencies and commitments. Return on Average Assets
Profit after tax divided by the average assets.
Organization of the Petroleum
Exporting Countries (OPEC) Related Parties
OPEC is a permanent intergovernmental
Parties where one party has the ability to
Organization whose objective is to co-
control the other party or exercise significant
ordinate and unify petroleum policies among
influence over the otherparty in making
member Countries.
financial and operating decisions.

Pakistan Investment Bonds Revenue Reserve

(PIBs) Reserves set aside for future distribution and
They are the long term coupon yielding investment.
instruments of the Government of Pakistan
with tenors available in 3, 5, 10, 15 Subsidiary Company
and 20 years.
A company is a subsidiary of another
company if the parent company holds more
Prudence than 50% of the nominal value of its equity
capital or holds some share in it and controls
Inclusion of degree of caution in the exercise
the composition of its Board of Directors.
of judgment needed in making the estimates
required under conditions of uncertainty, so
that assets or income are not overstated and
Shareholders’ Funds
liabilities or expenses are not understated. Total of Issued and fully paid share capital
and revenue reserves.

Price Earnings Ratio (P/E Ratio)

Statutory Reserve Funds
Market price of a share divided by earnings
A capital reserve created as per the
per share.
provisions of the Banking Companies
Ordinance, 1962.
Risk Weighted Assets
On Balance Sheet assets and the credit Weighted Average Cost of
equivalent of off Balance Sheet assets Deposits
multiplied by the relevant risk weighting
Percentage of the total interest expensed on
factors.
average deposits of the bank for the period.

Repurchase Agreement
Contract to sell and subsequently
repurchase securities at a specified date and
price.
 Allied Bank Limited 311

Notes
312 Annual Report 2017

Notes
 Allied Bank Limited 313

Form of Proxy
72nd Annual General Meeting
Allied Bank Limited

I/We _____________________________________________ S/o/ D/o/ W/o __________________________________________________________________

of ________________________________________________________________________________________________________________________ being a

member of Allied Bank Limited and holder of ______________________ ordinary shares as per share Registered Folio No. _________________________

and/or CDC Participant ID No. _____________ and Account/sub-account No. _____________ do hereby appoint Mr./Mrs./Miss _______________________

Folio No./CDC No. ______________ of ________________ failing him/her, Mr./Mrs./Miss __________________ Folio No./ CDC No. _________________
of ______________________________ as my/our proxy and to attend, act and vote for me/us on my/our behalf at the 72nd Annual General Meeting of
the Bank to be held on Monday, the April 9, 2018 and at any adjournment thereof in the same manner as I/we myself/ourselves would vote if personally
present at such meeting.

Signed this __________________________ day of _________________2018.

AFFIX
Revenue
Witness Stamp of Rs. 5/-
1. Signature
Name Signature
Address The signature should
CNIC # agree with the specimen
registered with the Company

Witness

2. Signature

Name

Address

CNIC #

IMPORTANT NOTES:

1. A member entitled to attend and vote at a meeting is entitled to appoint another person as a proxy to attend, speak and vote for him/her.
The proxy appointed should be a member of Allied Bank Limited.

2. For additional copies of the instrument of proxy, the shareholder may use photocopies of the instrument.

3. An instrument of proxy and a Power of Attorney or other authority (if any) under which it is signed, or notarized copy of such Power
of Attorney must be valid and deposited at the Registered Office of the Bank not less than 48 hours before the time of the Meeting. In
calculating the 48 hours, no account shall be taken of any part of the day that is not a working day.

4. For CDC Account holders/Corporate Entities:

i) Attested copies of Computerized National Identity Cards (CNIC) or the Passport of the beneficial owners and the proxy shall
be provided with proxy form.

ii) The proxy shall produce his/her original CNIC or Passport at the time of meeting.

iii) In case of corporate entity, the Board of Directors’ resolution/power of attorney with specimen signatures shall be submitted
along with proxy form to the company.

5. If a member appoints more than one proxy and more than one instrument of proxies are deposited with the Share Registrar, all such
instruments of proxy shall be rendered invalid.

6. Members are requested to immediately notify changes in their registered address, if any, to Bank’s Share Registrar M/s. Central Depository
Company of Pakistan Limited, CDC House, 99-B, S.M.C.H. Society, Main Shahrah-e-Faisal Karachi, before start of the book closure so
that entitlement, if any, be dispatched at the correct address.
314 Annual Report 2017

AFFIX
CORRECT
POSTAGE

Company Secretary
Allied Bank Limited
Head Office / Registered Office
3 Tipu Block, Main Boulevard
New Garden Town
Lahore - Pakistan.
Postal Code: 54000
Phone: +92 42 35880043
Website: www.abl.com
Allied Bank Limited 315
316 Annual Report 2017

AFFIX
CORRECT
POSTAGE

Company Secretary
Allied Bank Limited
Head Office / Registered Office
3 Tipu Block, Main Boulevard
New Garden Town
Lahore - Pakistan.
Postal Code: 54000
Phone: +92 42 35880043
Website: www.abl.com