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Project on National Investment Bank (NIB)
by Commerce Solutions in

NIB

The NIB Bank Limited (formerly NDLC-IFIC Bank Limited) was incorporated in March 2003 as a publicly listed company. In October 2003, all assets and liabilities and all rights and obligations of the former National Development Leasing Corporation ("NDLC") and Pakistan operations of IFIC
Bangladesh were amalgamated with and into NIB Bank. In April, 2004 the Pakistan operations of Credit Agricole Indosuez (the Global French bank) were also amalgamated with and into NIB Bank.

In June 2005, Temasek Holdings of Singapore through Bugis Investments (Mauritius) Pte. Limited acquired over 70 percent shares in the capital of NIB Bank. Presently NIB Bank has a countrywide network of 41 branches and 15 new branches are planned for 2007.

ABOUT THE BANK

NIB Bank Limited started as NDLC-IFIC Bank Ltd. which was incorporated in March 2003 as a public limited company. It started operations in October 2003 when all assets , liabilities , rights and obligations of the former National Development Leasing Corporation (NDLC) and Pakistan operations of IFIC were amalgamated with and into the bank with a paid up capital of Rs.1.2bn. In April 2004 the Pakistan operations of Credit Agricole Indosuez were also amalgamated with and into NIB. In March 2005 Temasek Holdings of Singapore acquired 25% shareholding in NIB Bank, through Bugis Investments.


 

This shareholding was further enhanced to over 70% in June '05 following an increase in NIB's paid up capital to Rs.3.4bn.


 

NIB Bank has since grown rapidly from a base of 2 branches in 2003 to 45 in the 4th quarter of 2007. Total assets have grown from Rs. 9 bn in December 2003 to Rs 87 bn (excluding acquisition of PICIC through rights) as of September 30 2007, a CAGR of 85%. Loan growth has been equally rapid, increasing from Rs 7 bn to Rs 43 bn in the same period (a CAGR of 64%), resulting from successes in both the commercial and consumer business.


 

Deposits for the same period have grown at a CAGR of 95%, reaching Rs. 45.3 bn. The overall client base of NIB has also witnessed a tremendous growth in the same period as of September 2007, from a few thousand to over one hundred thousand.NIB Bank's vision is to rank amongst the top 5 banks in the country.

Therefore towards end of June 2007 it acquired majority shares of PICIC with the aim of merging PICIC and its commercial banking subsidiary PICIC Commercial Bank Limited into NIB . The acquisition was financed through the country's largest private sector rights issue, with resultant increase in NIB's paid up capital to Rs.21.4bn. The PICIC acquisition has bought with it another subsidiary "PICIC AMC" and an affiliate "PICIC Insurance". NIB already has a shareholding in NAFA, an Asset Management Company (AMC); thus its asset management business will now also be increased, with diversification in the insurance business.


 

The legal merger of PICIC, NIB & PCBL took place on , once all regulatory approvals were in place. NIB Bank is led by Khawaja Iqbal Hassan, supported by four business heads and ten business enabling function heads. The merger has resulted in a vastly expanded network of 240 branches and total assets of around Rs.185 bn . Consequently NIB has the second highest paid up capital of around Rs 27bn and ranks number 7 amongst commercial banks in terms of distribution network. Merger synergies will accrue through lower cost deposits, enhanced customer service delivery channels and overall improved efficiencies. These would provide a competitive edge in the face of increasing competition. Temasek Holdings remains the largest single investor in NIB Bank with a shareholding of %.


 

This merger is one step forward in consolidating the banking sector as envisioned by State Bank of Pakistan and enhancing FDI as per the Government of Pakistan's objectives. The powerful franchise of the three merged entities has now been brought together to form a large and powerful bank. Going forward management is confident that the combined bank will be a top performer delivering a wide range of financial services through an extensive branch network. The asset management arms and insurance affiliate are also expected to perform well and provide an attractive dividend stream.


 


 

Corporate Governance

Being aware of our responsibilities under by the Code of Corporate Governance issued by the Securities and Exchange Commission of Pakistan, the following statements are made with regard to the corporate and financial reporting framework to meet with the requirement of the Code.

The financial statements prepared by the management of the Bank present fairly its state of affairs, the result of its operations, cash flows and changes in equity.

Proper books of account of the Bank have been maintained.

Accounting policies have been consistently applied in the preparation of financial statements and accounting estimates are based on reasonable and prudent assessments.

International Accounting Standards, as applicable in Pakistan, have been followed in the preparation of financial statements.

There are no doubts upon the Bank's ability to continue as a going concern.

There has been no material departure from the best practices of corporate governance as detailed in the listing regulations of the stock exchanges of Pakistan.

There are no statutory payments on account of taxes, duties, levies and charges which are outstanding, except as disclosed in the financial statements.

Company Information

Board Of Directors 

  

Francis Andrew Rozario  

Director/Chairman 

Tan Soo Nan  

Director 

Phua Kok Kim  

Director 

Thomas P. Sodano  

Director 

Mahmudul Haq Bhuiyan

Director 

Syed Aamir Zahidi  

Director 

Willie Wai Kong Chan 

Director 

Khawaja Iqbal Hassan 

Director / President & Chief Executive 

Company Secretary  

Aurangzeb Amin 

Chief Financial Officer  

Yameen Kerai 

Auditors 

M. Yousuf Adil Saleem & Co. Chartered Accountants

Legal Advisors 

Rizvi, Isa, Afridi and Angell
Advocates and Corporate Counsellors

Audit Committee 

  

Tan Soo Nan 

Chairman 

Syed Aamir Zahidi  

Member 

Mahmudul Huq Bhuiyan  

Member 

Aurangzeb Amin 

Secretary 

Share Registrar 

THK Associates (Pvt.) Limited,
Ground Floor, Modern Motors House, Beaumont Road, Karachi 75530

Registered Office  

Muhammadi House
P.O. Box 6942
I.I.Chundrigar Road, Karachi 74000

UAN  

111-333-111 

E-mail 

head.office@nibpk.com 

URL 

www.nibpk.com 

Credit Rating Long Term 

A+ 

Short Term: 

A1 


 

Management Profile

Khawaja Iqbal Hassan: President and CEO

Business Function Heads

Naseer ul Hasan: Consumer & Small Enterprises Group Head (CSEG)

Shahid Ali Khan: Emerging Businesses Group Head (EBG)

Masroor Qureshi: Treasury & Financial Institutions Group Head (TFG)

Habib Yousuf: Corporate & Investment Banking Group Head (CIBG)

Business Enabling Function Heads

S. Fahim Ahmad: Corporate Communications Group Head (CCG)

Akbar Chughtai: Remedial Credit Group Head (RCG)

Najeeb Gilani: Internal Audit Group Head (IAG)

Faraz Haider: Compliance & Operational Risk Group Head (CORG)

Nauman Hussain: Operations, Technology & Transactional Banking Group Head (OTBG)

Yameen Kerai: Chief Financial Officer / Finance, Accounting & Business Analytics Group Head (FABG)

Imran Ahmad Mirza: Corporate Secretarial & Legal Group Head (SLG)

Shakeel Pal: Human Capital Optimisation Group Head (HCOG)

Aziz Zuberi: Fraud Management Group Head (FMG)


 

Packages and Rate List

These rates are correct to the date May 21 2008 PLS Savings NIB Azadi Account Deposits Rates (Per Annum) For Individuals and Corporate Upto Rs. 99,999/- 0.10*% Rs. 100,000/- to Rs. 499,999/- 2.00*% Rs. 500,000/- to Rs. 999,999/- 4.00*% Rs.1,000,000/- to Rs.4,999,999/- 6.00*% Rs.5,000,000/- and above Treasury


Special Features:

Annualized Rate of Expected Return

NIB Khazana Deposits Rates (Per Annum) For Individuals and Corporate Upto Rs. 99,999/- 0.10*% Rs. 100,000/- to Rs. 499,999/- 1.50*% Rs. 500,000/- to Rs. 999,999/- 3.50*% Rs.1,000,000/- to Rs.2,999,999/- 4.50*% Rs.3,000,000/- and above

Treasury


Special Features:

Annualized Rate of Expected Return

PLS Notice Deposit Deposits Rates (Per Annum) For Individuals and Corporate 7 Days - 29 Days 5.00*%

Special Features:


NIB Term Deposit Certificates (Khaas)

Deposits Rates (Per Annum) For Individuals and Corporate 1 year 7.00*% 2 year 8.00*% 3 year 9.00*% 4 year 10.00*% 5 year 10.50*%


 

Special Features:

Annualized Rate of Expected Return


NIB Promise Term Deposit Expected annualized rate of return on gross deposit at the end of 8 yers term.

12.50%

Special Features:


 

NIB Amanat Deposit Deposits Rates (Per Annum) For Individuals and Corporate PLS Term Deposit (1 Month) 6.00*% PLS Term Deposit (3 Months) 6.25*% PLS Term Deposit (6 Months) 6.50*% PLS Term Deposit (1 Year) 7.25*%

Special Features:

NOTE

Annualized Rate of Expected Return

NIB Committee Annualized rate of expected return ranges from 3.90% to 5.15% depending upon the number of contributions and tenor

NIB (Foreign Currency Accounts) Deposits Rates (Per Annum) For Individuals and Corporate

USD EUR GBP

NOTE


* For relationship balances of Rs. 3,000,000/- and above, rates to be quoted by treasury.

Annualized Rate of Expected Return


NIB FCY Khazana Deposits USD Khazana Amount NIB Rates Upto US$ 1,000/- 0.25*% US$ 1000/- to US$ 9,999/- 0.50*% US$ 10,000/- to US$ 24,999/- 1.00*% US$ 25,000/- to US$ 49,999/- 1.25*% US$ 50,000/- to US$ 99,999/ 1.50*% US$ 100,000/- and above Treasury or Business

EURO Khazana Amount NIB Rates Upto 1,000/- 1.00*% 1000/- to 9,999/- 1.75*% 10,000/- to 24,999/- 2.00*% 25,000/- to 49,999/- 2.20*% 50,000/- to 99,999/ 2.35*% 100,000/- and above Treasury or Business

GBP Khazana Amount NIB Rates Upto 1,000/- 1.00*% 1000/- to 9,999/- 2.75*% 10,000/- to 24,999/- 3.50*% 25,000/- to 49,999/- 4.00*% 50,000/- to 99,999/ 4.20*% 100,000/- and above Treasury or Business


 

Special Features:

NOTE


Small Business Loan Borrower Type Average Balance Loan Tenure

1-3 Years > 4 Years New to Bank ≤59,999 38% 37%

≥60,000 33% 32%


 

Established ≤59,999 36% 35%

≥60,000 31% 30%


 

Personal Installment Loans

Segment Salary Bracket 1 year 2 year 3 year 4 year 5 year

Salaried A & B ≤24,999 29% 28% 27% 26% 25% Salaried A & B ≥25,000 26% 25% 24% 23% 22% Salaried C ≤24,999 32% 31% 30% 30% 30% Salaried C ≥25,000 30% 29% 28% 28% 28%

Auto Loans Tenor Rate

1 - 7 Years 18.00%-19.00%


Salam Products Rates

Salaam Business Loans 28% - 45%

Salaam Bachat Account 4.5%

Salaam Mortgage 20% - 39%

Salaam Auto Loan 18%-32%


 

PRESS RELEASE BY NIB

The NIB Bank celebrated the acquisition of 63.36 per cent outstanding shares of Pakistan Industrial Credit and Investment Corporation Ltd (PICIC) valuing at Rs20.5bn. The management believes that the merged entity will contribute to the country's vibrant economy by targeting middle class and providing credits to families to buy houses, vehicles and household appliances and support to entrepreneurs, big and small, to expand their businesses. The commemoration of acquisition of a majority shareholding in PICIC by NIB Bank was celebrated here at a ceremony presided over by State Bank Governor Dr Shamshad Akhtar. The Executive Director and CEO of Temasek Holdings — which controls NIB Bank — Madam Ho Ching and the Board of Directors of NIB Bank had hosted the ceremony.

Out of the total stake, 56 per cent of the shares had been acquired from certain shareholders while 7.36 per cent from a tender offer to the general public. The total transaction was valued at $342m (Rs20.5 billion). Through this acquisition, NIB Bank has also gained control of PICIC Commercial Bank, PICIC Asset Management Company, PICIC Insurance Ltd and PICIC Exchange Company. The merged entity will be the seventh largest commercial bank with 215 branches and seven booths spread across the country. Madam Ho Ching said that the increasing level of foreign investments was testimony to the growing international confidence in Pakistan. "Our early investment in NIB Bank and now in PICIC gives us a broad-based exposure to this growing economy via the financial sector," she observed.

Industry analysts think the merger allows NIB to position itself as a dominant player in the financial sector, covering the fields of commercial banking, investment banking, asset management and insurance. Apart from sheer scale of operations and scope of existing products and services, the merged entity will also benefit from Temasek's experience of changing financial paradigms across numerous countries in Asia, she said. Madam Ho Ching emphasised that Temasek had a positive long-term view of Asia. "Over the last two years, the group has doubled their exposure to Asia from 19pc to 39pc. Temasek believed in core principal investment themes, such as transforming economies and Pakistan is certainly one of the most promising countries in this respect," she remarked.

The acquisition will generate around $250 million inflow into Pakistan from Singapore thus making it the largest foreign currency generating transaction in the country's banking sector after Habib Bank. President and CEO of NIB Bank Khawaja Iqbal Hassan said that the merged entity would aspire to be a truly universal bank serving each customer segment through its unique value propositions, embedded in the local market and committed to expanding the reach of banking services to the Pakistani masses. NIB is financing the acquisition through a combination of a rights issue of Rs18.6 billion and a subordinated debt issue of Rs4 billion.

ECONOMIC AND POLITICAL UPDATE

Pakistan's economy showed considerable resilience during July-Dec 2007 amid increased uncertainties in the domestic and external economic environment. After growing at an average rate of 7.5% per annum over the past 4 years, the pace of GDP growth has slowed in the last seven months. However, it is widely believed that GDP growth will still cross the 6% mark in the July 2007-June 2008 period as a whole.

Economic challenges have heightened with the resurgence of inflationary pressures, growing energy shortages, and widening of fiscal and external current account deficits. It appears that July 2007 – June 2008 targets of 6.5% inflation, 4.0% fiscal deficit and 4.8% current account deficit are not likely to be achieved. High international oil and commodity prices are the main reason behind widening of the twin deficits. Moreover, increased domestic political uncertainties have also impacted external investment inflows.

The State Bank of Pakistan has responded by further monetary tightening while calling for more prudence in fiscal policies. Reduction in political uncertainties is expected after the successful completion of the recent elections, most likely helping in attracting foreign capital inflows, provided the new government manages to reassure investors by continuing the economic reforms program

NIB MERGER

2007 was a year in which your Bank took a quantum leap towards its ambition of becoming a leading bank in the country. On December 31, 2007, following approval from the State Bank of Pakistan, your bank successfully merged with Pakistan Industrial Credit & Investment Corporation Ltd (PICIC) and PICIC Commercial Bank Ltd (PCBL). This merger resulted in creating the seventh largest bank in the country in terms of distribution network (240 branches). With Rs. 176.7 bn in total assets, Rs. 82.2 bn in advances and Rs. 116.7 bn in deposits as of December 31, 2007, your Bank has grown its asset base more than twenty times in the first four years of its existence.

Through an enlarged branch network, your Bank now has the size and scale to effectively launch its unique business models over selected and often under-banked market segments. Just under half a million customers of the merged Bank will also provide considerable opportunities to cross-sell products. The stable and lower

cost deposit base inherited from PCBL will allow your Bank the room to grow advances without having to raisedeposits at a high marginal cost. Your Bank will also benefit from acquiring a large branch network at a relatively

low operating cost base.

The merger has also resulted in making PICIC Asset Management Company, with assets under management of almost Rs. 20 bn, a wholly-owned subsidiary of your Bank. It is the intention of your bank to merge PICIC

Asset Management Company with National Fullerton Asset Management Company (NAFA), subject to shareholders and regulatory approvals. This proposed merger will create the largest asset management company in Pakistan.

Your Bank, pending regulatory approval, will also acquire 100% of Global Securities Pakistan Limited, which is one of Pakistan's leading corporate finance and stock broking firms. Post acquisition, the investment banking and advisory business of Global, which is responsible for more than 50% of all privatizations in Pakistan, will

be divested and merged into the Corporate and Investment Banking Group of NIB, creating a new area of growth for your Bank.

After the merger, PICIC Insurance Limited, a listed general insurance company is also now 30% owned by your Bank. A number of initiatives are in place to use your Bank's current and future customer base to enhance the reach of this 3 year-old company operating in the rapidly expanding insurance sector of Pakistan.

As the parent of a diversified financial services group, NIB will be able to serve its customers more effectively
and become a dominant player in the financial services market in Pakistan.
During the second half of 2007 your Bank's priority was to integrate the operations and employees of the former PCBL and PICIC into NIB. We are pleased to inform you that as of January 1, 2008 all staff from the former PICIC and PCBL were successfully placed within the merged bank and work on other aspects of operational integration such as IT systems and infrastructure, procedures, policies and processes has made excellent progress. Management is confident that this process will be completed successfully well before the end of the year with your Bank well-poised to leverage effectively from its size and reach.

TERMS OF MERGER

The legal merger, through finalization of the swap ratios at which we will exchange shares of NIB for shares of PCBL & PICIC. These were approved in the respective Board Meetings of all three institutions on 27th October, as follows:

 
 

i)      2.64 shares of NIB Bank for each share of PICIC.

ii)     2.00 shares of NIB Bank for each share of PCBL.

 
 

The swap ratios have been determined independently by A.F. Ferguson through computing the average of four methods which are commonly used in such an exercise. By using an independent source and an average of four methods we have ensured that the swap ratios are fair for all shareholders of all entities and do not favor one set of shareholders to the disadvantage of the other two.

 
 

The Extra Ordinary General Meetings of shareholders will be held on 26th November to vote on the schemes of amalgamation under which all three entities will be merged into one Bank, for which notices have been published in the press. The three Boards have also determined that NIB shall be the surviving legal entity for a variety of reasons. We expect legal merger to be formalized in the last two weeks of December 2007 after which we can really begin to bring this powerful franchise together.


 

OPERATING RESULTS

Merged Results

To finance the acquisition of PICIC your bank successfully conducted one of the largest rights offerings in the history of Pakistan's capital markets, totaling Rs. 18.6 bn. In addition to this your bank also issued 641,930,317 shares to the shareholders of PICIC and PCBL in exchange for their shares in each of those companies as a

part of the merger. As a result, in January the paid-up capital of your bank increased to Rs. 28.4 bn, which is the second highest paid-up capital among all banks in Pakistan.

The merged income statement represents activity primarily related to NIB Bank and only includes the relevant portion of the income generated at PICIC and PCBL. Due to the substantial growth in its lending activities and improved spreads, NIB Bank doubled its net mark up earned to Rs. 2.00 bn in 2007 from Rs. 1.00 bn in 2006.

Non mark up income also recorded a growth of Rs. 105 mn or 21% over 2006. It is important to note that, unlike many other banks, your bank did not enter into any trading or long positions in the equity markets, and its non mark up income was generated solely from its core operating activities. Before provisions therefore

your bank recorded a 73% growth in total revenue from Rs. 1.5 bn in 2006 to Rs. 2.6 bn in 2007, demonstrating the robustness of its business models. In line with your bank's vision of becoming a leading bank in Pakistan, the investment in branches, people and technology was pursued vigorously in 2007 as well. As a result, total expenses grew to Rs. 2.0 bn for the year; however the Bank's cost to income ratio improved from 81% to 77%, in line with targets.

In order to maximize its post merger capital structure, your Bank financed the acquisition of PICIC through the combination of a rights issue and commercial debt. Since the rights issue was subscribed over a few weeks, your bank borrowed to bridge finance the funding gap, ranging from Rs. 7.1 bn to Rs. 3.8 bn for the period

from June-end to December 2007. This funding cost has been deducted from the published revenues of NIB and has thus lowered the reported earnings of the Bank by an amount of Rs. 235 mn.

In addition to the above, in its circular of October 12, 2007 the SBP removed reliance on FSV of collateral for provisioning purposes, effective December 31, 2007. This requirement increased the provisioning expense of all banks, including NIB. However, it is important to note that this incremental provisioning will not take away the ability of your Bank to recover its debts in the future by disposing of collateral, restructuring non performing advances or accelerating collections. As a matter of policy your bank generally only placed reliance on tangible collateral in the form of land and buildings when calculating FSV, therefore, it is our view that recoveries will materalise. Increased lending volumes in your Bank's consumer portfolio also contributed to the increase in total provisions; however, the ratio of provisioning to average advances on this portfolio is within targeted limits and generally accepted norms.

As a result of the expense of funding for the acquisition and the removal of FSV, your bank was required to absorb a combined cost of over Rs 1.0 bn for the year 2007. Based on this, the Bank recorded a post tax loss of Rs. 351 mn, however, as stated above, the two main reasons for this loss were both exceptional in nature and do not reflect any inherent weakness in your Bank's profit generating capability. Without the removal of the benefit of FSV and without the acquisition drag, your Bank would have recorded a profit before tax of Rs. 361 mn and a profit after tax of Rs. 217 mn. This would have been in line with our strategy of re-investing profit in earlier years to generate much higher revenue growth in the future.

Consolidated Results

On a consolidated basis, your Bank accrued earnings from its subsidiaries and associates and from its investments in the funds managed by these affiliates. Consequently, compared to merged results, your Bank reported a lower pre and post tax loss of Rs. 246 mn and Rs. 111 mn respectively. Your bank recorded a 280% increase in the size of its balance sheet as a result of the merger with PICIC and PCBL and the indigenous growth of NIB Bank through 2007. Total assets increased from Rs. 46 bn to Rs. 177 bn between 2006 and 2007, of which loans and advances increased 165% from Rs. 31 bn to Rs. 82 bn while the industry's loans grew by 10%. Investments increased by 488% to Rs. 39 bn, the bulk of investments being fixed income instruments of the Government of Pakistan. Total deposits also grew aggressively by 281% from Rs. 31 bn to Rs. 117 bn again as a result of the merger and the inherent growth of NIB Bank's deposits, whereas the industry grew by 19%