National Bank of Pakistan: Standalone Financial Statements For The Quarter Ended September 30, 2010

National Bank of Pakistan
Standalone Financial Statements For the Quarter ended September 30, 2010
Directors Report It gives me great pleasure to present on behalf of the Board of Directors accounts for the nine months period ended September 30, 2010. The Profit for the nine months period ended September 30,2010 after carry forward of accumulated profit of 2009 is proposed to be appropriated as follows: Rs. in million
Net Profit before taxation for the nine months period ended Sep 30, 2010 Taxation -Current year -Prior years -Deferred After tax profit Un-appropriated profit brought forward (restated) Transfer from surplus on revaluation of fixed assets Profit available for appropriation Cash Dividend paid Transfer to Statutory Reserve (10% of after tax profit) Bonus sharess issued Un-appropriated profit carried forward 16,630
6,700 (1,433) 5,267 11,363 60,697 88 72,148 (8,073) (1,136) (2,691) 60,248
The Bank recorded impressive growth in terms of profit and balance sheet despite challenging external environment. After tax profit of the Bank stands at Rs. 11.4 billion showing an increase of Rs.2.0 billion or 21% compared to corresponding period. Net interest income of the bank registered an increase of around Rs. 4.0 billion or 14%. The increase is attributed to both volume and rate increase. This growth was made possible by across the board increase in all areas.
Non interest / mark up income recorded an increase of Rs. 148 million despite no dividend on NIT units, which last year was 1.3 billion as these units were redeemed in December 2009. This reduction in dividend income was compensated by an impressive increase in capital gains as the bank capitalized on good opportunities for sale of its shares portfolio.
Administrative expenses show an increase of Rs. 3.9 billion or 25% compared to corresponding period mainly due to inflation linked salary increases and increase in other expenses mainly related to inflation.
Due to focused approach, NPL provisioning during the period decreased compared to the corresponding period last year, provision against investments were higher mainly on account of impairment provision against shares. Deposits increased by Rs. 17 billion from December 31, 2009, whereas compared to corresponding period September 30, 2009 deposits are higher by Rs. 90 billion or 14%. The increase in deposits was mainly recorded in CASA (Current & Saving) categories. Advances reflect a decline of Rs.27 billion mainly on account of repayment of seasonal finances and conversion of some power related project loans into term finance certificates due to which the increase is reflected in investments.
We are pleased to inform that JCR VIS Credit rating agency has reaffirmed NBPs long term credit rating of AAA/A-1+ on a standalone basis. This rating reflects banks well capitalized position, diversified deposit base and extensive outreach in the domestic market.
Going forward the Bank is making concerting efforts to focus on recoveries as well as on increasing its CASA deposits so as to reduce the cost of funds and improve its margins. During the month of August 2010 the bank opened its first branch in Riyadh Saudi Arabia. This will be an excellent venture as the bank shall focus on capturing sizable portion of bilateral trade and investment business. The Bank is also making progress in the implementation of the Core Banking Software. This conversion of the banks I.T. platform will give a competitive advantage for further market penetration and new venues for income generation.
In the end we extend our appreciation to the banks staff for their commitment, dedication and hard work in achieving these excellent results. We also would like to express our appreciation to our stakeholders, regulators and our valued customers for their support and continued confidence in NBP.
On behalf of Board of Directors
S. Ali Raza
Chairman & President

Date: October 29, 2010

Unconsolidated Condensed Interim Statement of Financial Position As at Sept 30, 2010 (Un-Audited) Sept 30 Dec 31 2010 2009 ---------- (Rupees in '000') -------(Restated)
Note ASSETS Cash and balances with treasury banks Balances with other banks Lendings to financial institutions - net Investments - net Advances - net Operating fixed assets Deferred tax assets - net Other assets
6 7 8
72,390,482 25,161,056 32,799,388 258,269,514 447,997,394 26,059,519 5,126,048 61,056,095 928,859,496
115,827,868 28,405,564 19,587,176 217,642,822 475,243,431 25,147,192 3,062,271 59,666,438 944,582,762
LIABILITIES Bills payable Borrowings Deposits and other accounts Sub-ordinated loans Liabilities against assets subject to finance lease Deferred tax liabilities Other liabilities NET ASSETS REPRESENTED BY Share capital Reserves Unappropriated profit 7,203,785 20,222,427 744,095,539 102,539 38,574,956 810,199,246 118,660,250 10,621,169 45,278,138 727,464,825 42,629 42,269,623 825,676,384 118,906,378
13,454,628 23,995,080 60,248,197 97,697,905 10 20,962,345 118,660,250 (0.25)
10,763,702 22,681,707 60,696,510 94,141,919 24,764,459 118,906,378 (0.250)
Surplus on revaluation of assets - net
CONTINGENCIES AND COMMITMENTS
11
The annexed notes 1 to 18 including restated statement of financial position for three years form an integral part of these unconsolidated condensed interim financial statements.
Director
Director
Director

Unconsolidated Condensed Interim Statement of Financial Position As at Sept 30, 2010 (Un-Audited) (Audited) Sept 30 Dec 31 Dec 31 2010 2009 2008 ------------------- (Rupees in '000') ----------------(Restated) 72,390,482 25,161,056 32,799,388 258,269,514 447,997,394 26,059,519 5,126,048 61,056,095 928,859,496 115,827,868 28,405,564 19,587,176 217,642,822 475,243,431 25,147,192 3,062,271 59,666,438 944,582,762 106,503,756 38,344,608 17,128,032 170,822,491 412,986,865 24,217,655 3,204,572 44,550,347 817,758,326
Note ASSETS Cash and balances with treasury banks Balances with other banks Lendings to financial institutions - net Investments - net Advances - net Operating fixed assets Deferred tax assets - net Other assets
6 7 8
LIABILITIES Bills payable Borrowings Deposits and other accounts Sub-ordinated loans Liabilities against assets subject to finance lease Deferred tax liabilities Other liabilities NET ASSETS REPRESENTED BY Share capital Reserves Unappropriated profit 7,203,785 20,222,427 744,095,539 102,539 38,574,956 810,199,246 118,660,250 10,621,169 45,278,138 727,464,825 42,629 42,269,623 825,676,384 118,906,378 10,219,061 40,458,926 624,939,016 25,274 39,656,831 715,299,108 102,459,218
13,454,628 23,995,080 60,248,197 97,697,905 10 20,962,345 118,660,250 (0)
10,763,702 22,681,707 60,696,510 94,141,919 24,764,459 118,906,378 (0)
8,969,751 19,941,047 52,456,204 81,367,002 21,092,216 102,459,218 -
Surplus on revaluation of assets - net
11
Director
Director
Director

Unconsolidated Condensed Interim Profit and Loss Account (Un-Audited) For the Quarter and Nine Months Ended Sept 30, 2010 Quarter Nine Months Quarter Nine Months Ended Ended Ended Ended Sept 30 Sept 30 Sept 30 Sept 30 2010 2010 2009 2009 -------------------------- (Rupees in '000') -----------------------------------(Restated)---------18,663,111 55,931,541 22,108,324 65,579,026 9,958,684 28,247,726 11,184,484 33,917,144 8,704,427 27,683,815 10,923,840 31,661,882 1,710,513 540,856 419 2,251,788 8,672,052 4,588,942 2,117,300 3,965 419 6,710,626 24,951,256 3,567,291 (369,631) (69) 3,197,591 5,506,836 8,631,720 121,480 20,237 56 8,773,493 18,910,322
Note Mark-up / return / interest earned Mark-up / return / interest expensed Net mark-up / interest income Provision against non-performing advances - net Provision for diminution in value of investments - net Provision against off-balance sheet obligations Bad debts written off directly Net mark-up / interest income after provisions NON MARK-UP/ INTEREST INCOME Fee, commission and brokerage income Dividend income Income from dealing in foreign currencies Gain / (loss) on sale and redemption of securities - net Unrealized gain / (loss) on revaluation of investments classified as Held-for-trading Other income Total non-mark-up / interest income
2,261,605 141,768 407,596 229,464 (716) 47,837 3,087,554 11,759,606
7,006,003 643,690 1,669,588 1,939,800 (6,574) 135,393 11,387,900 36,339,156
2,029,414 1,399,238 638,576 174,745 (5,650) 36,883 4,273,206 9,780,042
6,354,927 1,702,366 2,565,583 237,327 54,421 325,486 11,240,110 30,150,432
NON MARK-UP/ INTEREST EXPENSES Administrative expenses Other provisions / write offs Other charges Total non-mark-up / interest expenses Extra ordinary / unusual items PROFIT BEFORE TAXATION Taxation - Current - Prior year(s) - Deferred PROFIT AFTER TAXATION Basic and diluted earnings per share (Rupees) 12 6,694,631 61,887 23,002 6,779,520 4,980,086 4,980,086 1,969,047 (531,675) 1,437,372 3,542,714 2.63 19,518,947 144,659 45,408 19,709,014 16,630,142 16,630,142 6,699,869 (1,433,157) 5,266,712 11,363,430 8.45 5,443,123 11,732 14,959 5,469,814 4,310,228 4,310,228 1,823,703 (633,159) 1,190,544 3,119,684 2.32 15,425,744 475,546 249,068 16,150,358 14,000,074 14,000,074 6,340,587 (1,741,479) 4,599,108 9,400,966 6.99
Director
Director
Director

Unconsolidated Condensed Interim Statement of Changes in Equity (Un-Audited) For the Nine Months Ended Sept 30, 2010
Share Capital Reserves Capital Exchange Statutory Translation Unappropriated Profit Total
Revenue General
Balance as at January 1, 2009 Comprehensive income Profit after taxation for the nine months ended Sept 30, 2009 Other comprehensive income - net of tax Transferred from surplus on revaluation of fixed assets to unappropriated profit - net of deferred tax Transfer to statutory reserve Transactions with owners Transfer to reserve for issue of bonus shares Issue of bonus shares (20%) Cash dividend (Rs. 6.5 per share) Balance as at Sept 30, 2009 (as previously reported) Restatement due to effect of an error Balance as at Sept 30, 2009 (Restated)
-------------------------------------------------- (Rupees in '000) ------------------------------------------------8,969,751 5,987,376 13,432,333 521,338 52,456,204 81,367,002
727,413 727,413
10,050,966 10,050,966
10,050,966 727,413 10,778,379
1,005,097
92,950 (1,005,097)
92,950 -
1,793,951 10,763,702 10,763,702
6,714,789 6,714,789
14,437,430 14,437,430
521,338 521,338
(1,793,951) (5,830,338) 53,970,734 (650,000) 53,320,734
(5,830,338) 86,407,993 (650,000) 85,757,993
Balance as at Oct 1, 2009 (Restated) Comprehensive income Profit after taxation for the three months ended December 31, 2009 Other comprehensive income - net of tax
10,763,702
6,714,789
14,437,430
521,338
53,320,734
85,757,993
192,062 192,062
8,160,880 8,160,880
8,160,880 192,062 8,352,942
Transferred from surplus on revaluation of fixed assets to unappropriated profit - net of deferred tax Transfer to statutory reserve Balance as at December 31, 2009 (Restated) Balance as at January 1, 2010 (Restated) Comprehensive income Profit after taxation for the nine months ended Sept 30, 2010 Other comprehensive income - net of tax Transferred from surplus on revaluation of fixed assets to unappropriated profit - net of deferred tax Transfer to statutory reserve Transactions with owners Transfer to reserve for issue of bonus shares Issue of bonus shares (25%) Cash dividend (Rs. 7.5 per share) Balance as at Sept 30, 2010
10,763,702 10,763,702
6,906,851 6,906,851
816,088 15,253,518 15,253,518
521,338 521,338
30,984 (816,088) 60,696,510 60,696,510
30,984 94,141,919 94,141,919
177,030 177,030
11,363,430 11,363,430
11,363,430 177,030 11,540,460
1,136,343
88,302 (1,136,343)
88,302 -
2,690,926 13,454,628
7,083,881
16,389,861
521,338
(2,690,926) (8,072,777) 60,248,197
(8,072,777) 97,697,905
Director
Director
Director

Unconsolidated Condensed Interim Statement of Comprehensive Income (Un-Audited) For the Nine Months Ended Sept 30, 2010
Quarter Ended Sept 30 2010
Nine Months Ended Sept 30 2010
-------------------------- (Rupees in '000') -----------------------------------(Restated)---------Profit after taxation 3,542,714 11,363,430 3,119,684 9,400,966
Other comprehensive (loss) / income:
Exchange adjustments on translation of net assets of foreign branches Income tax relating to component of other comprehensive (loss) / income Other comprehensive (loss) / income - net of tax Total comprehensive income
386,649 386,649 3,929,363
177,030 177,030 11,540,460
409,467 409,467 3,529,151
727,413 727,413 10,128,379
Surplus arising on revaluation of assets has been reported in accordance with the requirements of the Companies Ordinance, 1984 and the directives of the State Bank of Pakistan in a separate account below equity.
Director
Director
Director

Unconsolidated Condensed Interim Cash Flow Statement (Un-Audited) For the Nine Months Ended Sept 30, 2010 Nine Months Nine Months Ended Ended Sep 30, 2010 Sep 30, 2009 ---------- (Rupees in '000') ------------(Restated) CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation Less: Dividend income Adjustments Depreciation Provision against non-performing advances - net Provision for diminution in value of investments - net Provision against off-balance sheet obligations Bad debts written off directly Other provisions / write offs Gain on sale of fixed assets Financial charges on leased assets 678,484 4,588,942 2,117,300 3,965 419 144,659 (20,679) 7,766 7,520,856 23,507,308 (13,153,712) (6,709,310) 22,657,095 (2,043,409) 750,664 (3,417,384) (25,702,930) 16,630,714 (3,714,105) (16,203,705) (6,173,248) (7,766) (6,181,014) 1,873,253 546,998 8,631,720 121,480 20,237 56 475,546 (2,768) 7,906 9,801,175 22,098,883 12,029,390 (3,535,017) (31,149,751) (12,838,074) (35,493,452) (2,821,593) 10,026,391 29,579,004 (1,725,848) 35,057,954 (6,343,282) (7,906) (6,351,188) 15,312,197 16,630,142 643,690 15,986,452 14,000,074 1,702,366 12,297,708
(Increase) / decrease in operating assets Lendings to financial institutions - net Held-for-trading securities Advances - net Other assets (excluding advance taxation) Increase / (decrease) in operating liabilities Bills payable Borrowings Deposits and other accounts Other liabilities (excluding current taxation) Income tax paid Financial charges paid Net cash from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Net investments in Available-for-sale securities Net proceeds from Held-to-maturity securities Investments in associates and joint venture Dividend income received Investments in operating fixed assets Sale proceeds of operating fixed assets disposed off Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Payments of lease obligations Dividend paid Net cash used in financing activities Effects of exchange rate changes on cash and cash equivalents Net increase in cash and cash equivalents Cash and cash equivalents at beginning of the period Cash and cash equivalents at the end of the period (26,822) (8,057,304) (8,084,126) 177,030 (47,329,113) 144,169,195 96,840,082 (13,308) (5,830,338) (5,843,646) 727,413 (45,446,743) 144,676,388 99,229,645 (47,873,520) 7,833,544 (328,853) 643,690 (1,590,811) 20,679 (41,295,271) (67,538,772) 11,501,483 1,702,366 (1,310,552) 2,768 (55,642,707)
Director
Director
Director

Notes To The Unconsolidated Condensed Interim Financial Statements (Un-Audited) For the Nine Months Ended September 30, 2010
1.
STATUS AND NATURE OF BUSINESS 1.1 National Bank of Pakistan (the bank) was incorporated in Pakistan under the National Bank of Pakistan Ordinance, 1949 and is listed on all the stock exchanges in Pakistan. It's registered and head office is situated at I.I. Chundrigar Road, Karachi. The bank is engaged in providing commercial banking and related services in Pakistan and overseas. The bank also handles treasury transactions for the Government of Pakistan (GoP) as an agent to the State Bank of Pakistan (SBP). The bank operates 1,265 (2009: 1,265) branches in Pakistan and 23 (2009: 22) overseas branches (including the Export Processing Zone branch, Karachi). The bank also provides services as trustee to National Investment Trust (NIT), Long-Term Credit Fund (LTCF) and Endowment Fund for student loans scheme.
2.
STATEMENT OF COMPLIANCE 2.1 These unconsolidated condensed interim financial statements of the bank for the nine months period ended September 30, 2010 have been prepared in accordance with the requirements of the International Accounting Standard 34 - Interim Financial Reporting, provisions of the Companies Ordinance, 1984, Banking Companies Ordinance,1962 and directives issued by the Securities and Exchange Commission of Pakistan and the State Bank of Pakistan. In case where requirements differ, the provisions of the Companies Ordinance, 1984, the Banking Companies Ordinance, 1962 and the said directives have been followed. 2.2 The State Bank of Pakistan has deferred the applicability of International Accounting Standard (IAS) 39, 'Financial Instruments: Recognition and Measurement' and International Accounting Standard (IAS) 40, 'Investment Property' for Banking Companies through BSD Circular Letter No. 10 dated August 26, 2002. Further, according to the notification of SECP dated April 28, 2008, the IFRS - 7 "Financial Instruments: Disclosures" has not been made applicable for banks. Accordingly, the requirements of these standards have not been considered in the preparation of these unconsolidated condensed interim financial statements. However, investments have been classified and valued in accordance with the requirements of various circulars issued by SBP.
2.3 The disclosures made in these unconsolidated condensed interim financial statements have been limited based on the format prescribed by the SBP vide BSD Circular Letter No. 2, dated May 12, 2004 and International Accounting Standard (IAS) 34, 'Interim Financial Reporting' and do not include all the information required in the annual financial statements. Accordingly, these unconsolidated condensed interim financial statements should be read in conjunction with the annual financial statements of the bank for the year ended December 31, 2009. 2.4 During the period, following new / revised standards, amendments and interpretations to accounting standards became effective: - IAS 27 - Consolidated and Separate Financial Statements (Amendments). - IFRS 2 - Share Based Payments: Amendments relating to Group Cash-settled Share-based Payment Transaction. - IFRS 3 - Business Combinations (Revised). - IFRIC 17 - Distributions of Non-cash Assets to owners Adoption of the above standards, amendments and interpretations did not affect the accounting policies of the Bank as disclosed in the annual financial statements for the year ended December 31, 2009. 2.5 These unconsolidated condensed interim financial statements are separate financial statements of the bank in which the investments in subsidiaries, associates and joint ventures are stated at cost and have not been accounted for on the basis of reported results and net assets of the investees.
3.
ACCOUNTING POLICIES The accounting policies adopted in preparation of these unconsolidated condensed interim financial statements are consistent with those followed in the preparation of the annual financial statements of the bank for the year ended December 31, 2009.
4.
ACCOUNTING ESTIMATES AND JUDGEMENTS The estimates / judgments and associated assumptions used in the preparation of these unconsolidated condensed interim financial statements are consistent with those applied in the preparation of the annual financial statements of the bank for the year ended December 31, 2009.
5.
FINANCIAL RISK MANAGEMENT The financial risk management objectives and policies applied during the period are consistent with those disclosed in the annual financial statements of the bank for the year ended December 31, 2009.
6.
INVESTMENTS - net (Un-Audited) Sept 30, 2010 Given as Collateral (Audited) Dec 31, 2009 Given as Collateral
Note
Held by Bank
Total
Held by Bank
Total
---------- (Rupees in '000') -------6.1 Investments by type: Held-for-trading securities Market Treasury Bills Pakistan Investment Bonds Ordinary shares of listed companies Total Held-for-trading securities Available- for-sale securities Ordinary shares of listed companies Ordinary shares of un-listed companies 19,711,248 777,247 20,488,495 124,545,339 256,081 13,394,476 3,093,816 215,424 1,385,624 285,005 19,711,248 777,247 20,488,495 125,930,963 256,081 13,679,481 3,093,816 215,424 8,970,362 94,173 23,705 9,088,240 8,970,362 94,173 23,705 9,088,240
---------- (Rupees in '000') --------
1,987,272 221,275 170,383 2,378,930
1,987,272 221,275 170,383 2,378,930
15,499,059 753,114 16,252,173 91,064,768 271,533 10,907,159 3,021,990 210,003
23,504,630 1,213,247 -
15,499,059 753,114 16,252,173 114,569,398 271,533 12,120,406 3,021,990 210,003
Market Treasury Bills Preference shares Pakistan Investment Bonds GoP Foreign Currency Bonds Foreign Government Securities Term Finance Certificates, Foreign Currency Debt Securities and Sukuk Bonds Investments in mutual funds Investment outside Pakistan National Investment Trust (NIT) LoC Units National Investment Trust (NIT) Non-LoC Units NIT Market Opportunity Fund Total Available- for- sale securities Held-to-maturity securities Government Compensation Bonds Pakistan Investment Bonds GoP Foreign Currency Bonds Foreign Government Securities Debentures, Bonds, Participation Term Certificates, Foreign Currency Debt Securities and Term Finance Certificates Total Held-to-Maturity Securities Investments in associates Investments in joint ventures Investments in subsidiaries Investment at cost Less: Provision for diminution in value of Investments - net Investments (net of provisions) Unrealized (loss) / gain on revaluation of investments classified as Held-for-trading Surplus on revaluation of Available-for-sale securities Total Investments at carrying value
6.2 6.3
61,057,162 1,016,702 463,295 1,397,619 500,000 1,147,500 227,575,909
1,670,629
61,057,162 1,016,702 463,295 1,397,619 500,000 1,147,500 229,246,538
30,914,446 977,335 463,295 1,042,439 1,530,000 156,655,141
24,717,877
30,914,446 977,335 463,295 1,042,439 1,530,000 181,373,018
8,775,751 1,330,606
8,775,751 1,330,606
1,132,963 8,616,000 371,910 1,392,168
263,661 -
1,132,963 8,879,661 371,910 1,392,168
4,345,278 14,451,635 1,049,669 1,581,188 1,939,953 255,686,594
1,670,629
4,345,278 14,451,635 1,049,669 1,581,188 1,939,953 257,357,223
10,508,477 22,021,518 989,669 1,312,335 1,939,953 185,297,546
263,661 24,981,538
10,508,477 22,285,179 989,669 1,312,335 1,939,953 210,279,084
6.4
(4,252,712) 251,433,882
1,670,629
(4,252,712) 253,104,511
(2,141,534) 183,156,012
24,981,538
(2,141,534) 208,137,550
(6,574) 5,185,609 256,612,917
(14,032) 1,656,597
(6,574) 5,171,577 258,269,514
2,355 9,502,001 192,660,368
916 24,982,454
2,355 9,502,917 217,642,822
6.2
Investment outside Pakistan - Bank Al-Jazira The Bank holds 17,500,000 (2009: 17,500,000) shares in Bank Al-Jazira (BAJ) incorporated in the Kingdom of Saudi Arabia, representing 5.83% (2009: 5.83%) holding in total share capital of BAJ. The investment has been marked to market using closing price as quoted on the Saudi Stock Exchange in accordance with SBP concurrence vide letter No. BSD/SU-13/331/685/2006 dated February 17, 2006.
6.3
National Investment (Unit) Trust - [NI(U)T] In the previous year, the Government of Pakistan (GoP) had communicated a methodology to settle the long outstanding issue of the Letter of Comfort (LOC) Holders and National Investment Trust Limited (NITL) which had been discussed between the LOC Holders and NITL. The LOC Holders, as a result of the discussion, had executed agreements with NITL. In case of the bank, the effective date of the agreement had been December 31, 2009. Later, all underlying assets of NI(U)T-LOC Holders Fund (the Fund) were distributed to the LOC Holders according to their respective holdings in the Fund except for the Strategic Assets and 5% Balance Assets. The Strategic Asset comprised of frozen shares of Pakistan State Oil (PSO) and Sui Northern Gas Pipeline Limited (SNGPL), cash and, other receivables held in the portfolio of the Fund.
It was agreed that the Strategic Assets would be transferred to the bank and the cash received from such transfer would be paid to other LOC Holders except 5% of cash which would be paid to NITL. It was also decided that the 5% Balance Assets would be transferred to NITL. The bank requested GoP to revise the decision to the extent of 5% Balance Assets to be transferred to NITL and give 10% discount to the bank on values of PSO and SNGPL shares.
The GoP considered the viewpoint of the bank over the matter of 5% and reduced the same to 2.5% for the benefits of all LOC Holders. Accordingly, the bank has recorded its share of Balance Assets and a capital gain of Rs. 294 million in the current period. The GOP didn't accede to the request relating to 10% discount. Various discussion in this regard have since been made and any settlement of the Strategic Assets will be made on the basis of further decision from the GOP.
Further, in the month of April 2010, a extra ordinary general meeting of LOC Holders has held to discuss the settlement of liabilities of the Fund. After discussion all LOC Holders agreed to purchase further units of the Fund to retire the outstanding short term financing, accordingly the bank purchased further 11,204,720 units of the Fund for the said purpose.However, the matter entailing the rate at which the Strategic Assets are to be transferred to NBP is still under deliberations
6.4
Acquisition of Major Share Holding in National Asset Fullerton Management Limited (NAFA) On March 31, 2010, the bank acquired entire holding (27%) consisting of 6.75 million shares of NIB Bank Limited in NAFA at Rs. 39.83 per share which has resulted in increase in the bank's post-acquisition holding from pre- acquisition holding of 27% to 54%. The bank has classified its 54% holding as "Investments in Joint Ventures" (Jointly Controlled Entity) because as per the joint venture agreement the bank does not have control to govern some of the financial and operating policies of the jointly controlled entity.
(Audited) (Un-audited) Dec 31 Sept 30 2009 2010 ---------- (Rupees in '000') -------7. ADVANCES - net Loans, cash credits, running finances, etc. In Pakistan Outside Pakistan 469,366,422 38,669,185 508,035,607 2,854,682 19,911,141 22,765,823 60,963 530,862,393 53,604,048 2,014,914 55,618,962 475,243,431
434,880,320 50,562,429 485,442,749
Bills discounted and purchased (excluding Government treasury bills) Payable in Pakistan Payable outside Pakistan
2,665,050 19,957,344 22,622,394
Margin Financing / Continuous Funding System Financing Advances - gross Less: Provision against non-performing advances Specific General Advances - net of provision
60,963 508,126,106 58,025,762 2,102,950 60,128,712 447,997,394
7.1
Advances include Rs. 75,475 million (2009: Rs.70,923 million) which have been placed under the non-performing status as detailed below: Sept 30, 2010 (Un-Audited) Total Provision Required -------------------------------- (Rupees in '000') -------------------------------Overseas 2,639 214,233 2,008,070 2,224,942 1,304,776 8,712,749 4,767,045 60,690,808 75,475,378 1,110,683 2,354,402 54,560,677 58,025,762
Domestic Category of Classification
Provision Held
Other Assets Especially Mentioned Substandard Doubtful Loss
1,304,776 8,710,110 4,552,812 58,682,738 73,250,436
1,110,683 2,354,402 54,560,677 58,025,762
Domestic Category of Classification
Dec 31, 2009 (Audited) Total Provision Required -------------------------------- (Rupees in '000') -------------------------------Overseas 2,639 648,234 1,297,794 1,948,667 748,091 6,871,002 7,243,569 56,060,411 70,923,073 1,498,492 3,194,416 48,911,140 53,604,048
Provision Held
748,091 6,868,363 6,595,335 54,762,617 68,974,406
1,498,492 3,194,416 48,911,140 53,604,048
7.2
During the period, the SBP vide its BSD Circular No. 2 dated June 03, 2010 has amended the Prudential Regulations in respect of provisioning against non-performing advances, the impact of which is immaterial in the current period. To date the bank has taken total FSV benefit of Rs. 2,825 million net of tax of which Rs. 2,417 million would not be available for the distribution of cash and stock dividend to shareholders as required by SBP Regulations.
(Audited) (Un-Audited) Dec 31 Sept 30 2009 2010 -------- (Rupees in '000) -----8. DEFERRED TAX ASSETS - net Deductible temporary differences on: Provision for diminution in the value of investments Provision against advances Provision against off-balance sheet obligation Other provisions Charge against defined benefits plans Taxable temporary differences on: Excess of accounting book value of leased assets over lease liabilities Difference between accounting book value of fixed assets and tax base Revaluation of securities Revaluation of fixed assets (169) (288,834) (1,398,239) (1,229,404) (2,916,646) 5,126,048 (7,065) (222,293) (2,028,859) (1,276,951) (3,535,168) 3,062,271 1,293,589 4,994,526 116,622 330,631 1,307,326 8,042,694 552,534 4,720,840 116,622 280,000 927,443 6,597,439
Net deferred tax assets
(Audited) (Un-Audited) Dec 31 Sept 30 2009 2010 -------- (Rupees in '000) -----9. DEPOSITS AND OTHER ACCOUNTS Customers Fixed deposits Savings deposits Current accounts - remunerative Current accounts - non-remunerative Financial Institutions Remunerative deposits Non-remunerative deposits 33,421,087 25,940,651 59,361,738 744,095,539 10. SURPLUS ON REVALUATION OF ASSETS - net Surplus on revaluation of fixed assets - net of tax Surplus / (deficit) on revaluation of available-for-sale securities - net of tax Federal Government securities Term Finance Certificates and Sukuks Quoted shares and mutual funds GoP Foreign Currency Bonds NIT Units NIT Market Opportunity Fund Investment outside Pakistan - Bank Al-Jazira Deferred tax liability (983,177) (645,641) (1,280,754) 928,786 406,006 247,341 6,499,016 5,171,577 (1,398,239) 20,962,345 (70,166) (763,683) 1,739,784 556,772 616,024 360,573 7,063,613 9,502,917 (2,028,859) 24,764,459 17,189,007 17,290,401 48,428,983 43,752,678 92,181,661 727,464,825 196,032,389 242,427,195 76,941,796 169,332,421 684,733,801 194,731,591 196,373,780 75,133,946 169,043,847 635,283,164
11. 11.1
CONTINGENCIES AND COMMITMENTS Direct credit substitutes Includes general guarantee of indebtedness, bank acceptance guarantees and standby letters of credit serving as financial guarantees for loans and securities issued in favour of: - Government - Financial institutions - Others 16,864,047 4,320,921 10,841,884 32,026,852 17,443,452 4,469,377 11,214,383 33,127,212
11.2
Transaction-related contingent liabilities Includes performance bonds, bid bonds, warranties, advance payment guarantees, shipping guarantees and standby letters of credits related to particular transactions issued in favour of: - Government - Financial institutions - Others 19,508,321 4,457,516 9,727,806 33,693,643 18,524,777 4,232,783 9,237,363 31,994,923
11.3
Trade-related contingent liabilities Letters of credit issued in favour of: - Government - Financial institutions - Others
130,877,865 167,248 40,187,482 171,232,594
126,151,618 161,208 38,736,236 165,049,062
11.4
Other contingencies
11.4.1 Claims against the bank not acknowledged as debts [including SBP liabilities on Bangladesh borrowing and interest thereon amounting to Rs. 175 million (2009: Rs. 175 million) and claims relating to former Mehran Bank Limited amounting to Rs. 965 million (2009: Rs. 965 million)]. 11.4.2 Taxation
6,906,507
6,561,411
The income tax returns of the bank for global operations and for Azad Jammu Kashmir is due to be filed the tax year 2010 (accounting year ended December 31, 2009) on or before October 30, 2010.Whereas the income tax returns of the bank for global operations and for Azad Jammu Kashmir, upto the tax year 2009 (accounting year ended December 31, 2008), have been filed under section 120 and amended by the Taxation Officer under section 122(5A) of the Income Tax Ordinance, 2001 During the period the bank received various appellate decisions from the Appellate Tribunal Inland Revenue (ATIR) from tax year 2003 through tax year 2007 in which substantial reliefs were allowed for matters including disallowance for bad debts on the basis of SBPs certificates, staff welfare fund, allocation of financial expenditure between taxable and exempt / low tax rate income and revaluation loss on barter trade agreements. Also appeal effects of such decisions have been obtained from the tax department giving rise to aggregate tax refund of Rs. 6,221 million. For the purpose of contingencies, there are only three matters under appeal where management is confident that the appellate decisions will provide necessary relief to the bank. These matters are interest credited to suspense account, allocation of administrative expenditure between taxable and exempt / low tax rate income and disallowance for bad debts on the basis of SBPs certificates. The aggregate effect of aforementioned contingencies work out at Rs. 5,065 million (December 31, 2009: Rs. 7,368 million).
11.4.3 Provident Fund As fully explained in note 21.4.3 to the unconsolidated financial statements of the Bank for the year ended December 31, 2009, management in the last year based on the legal advice, calculated interest on the outstanding Provident Fund balance at the five years fixed deposit rate for settlement of the PF balance interpreting the rate as the highest rate as per its understanding of the Supreme Courts decision dated May 04, 2009. Consequently, the difference was adjusted in Bank's Books of Accounts. Some petitioners filed the review petition against the Bank in the Court, asserting that the Banks interpretation of the highest interest rate was not correct. The legal advisor of the Bank informed management that such petition had not been admitted in the Court. However, in the current period, it came to managements knowledge that the review petition had actually been admitted in the last year, which the Court heard and decided on September 20, 2010. As per the said Court order: The employee on his retirement or leaving the job or the heirs of the person who had passed away, are entitled for the best rate of interest as per scheme instead of prescribed rate on the fixed deposit till the time he was the employee of the Bank ; and If the payment has not been made for any reason i.e, litigation, etc., he would be entitled for the best rate of interest admissible to any other ordinary customer till the date of payment. Therefore, management has treated omission of the fact as prior period error as per IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. The impact is as follows: (Un-audited) Sep 30, 2009 Rs ' 000 1,000,000 1,000,000 350,000 350,000 650,000 650,000 Re 0.48
Increase in Mark-up / Return / Interest expensed in Profit and Loss Account Increase in Deposits "Curent Account - Remunerative" Decrease in tax charge for the nine months Increase in Advance Tax Decrease in profit for the nine months - after tax Decrease in unappropriated profit Decrease in earnings per share - after tax (basic and diluted) 11.4.4 Barter Trade Agreements / Golden Handshake
The current status of these contingencies is same as disclosed in the annual financial statements of the bank for the year ended December 31, 2009. 11.4.5 Benazir Employees' Stock Option Scheme The Federal Cabinet approved "Benazir Employees Stock Option Scheme (BESOS)" on August 5, 2009 for empowerment of employees of State Owned Entities through transfer of 12% shares owned by GoP to an employees' trust to be registered. As the Federal Government and the SBP held about 75.60% shares of the bank , it is unclear how transfer of such shares to the employees' trust will take place. Pending resoulotion of such uncertainties, the cost of such scheme has not been accounted for in these financial statements.
Dec 31 Sept 30 2009 2010 (Audited) (Un-Audited) ---------- (Rupees in '000') -------11.5 Commitments in respect of forward exchange contracts Purchase Sale 11.6 Commitments in respect of forward trading of government securities Purchase 11.7 11.8 Commitments for the acquisition of operating fixed assets Other Commitments Cross Currency SWAP 12. BASIC AND DILUTED EARNINGS PER SHARE (Un-Audited)
Quarter Ended Sept 30 2010 Profit after taxation (Rupees in '000) Weighted average number of ordinary shares (in '000) Basic and diluted earnings per share (Rupees) 3,542,714 1,345,463 2.63 Nine Months Ended Sept 30 2010 11,363,430 1,345,463 8.45 Quarter Ended Sept 30 Nine Months Ended Sept 30 2009 2009 ----------(Restated)---------3,119,684 9,400,966 1,345,463 2.32 1,345,463 6.99
53,500,872 93,207,461
87,829,307 38,568,464
4,261,000 2,361,654
5,000,000 1,537,996
5,746,522
6,914,649
13.
Transfer and Assignment Agreement with SME Bank Limited During the Year, the Bank and the SME Bank entered into a transaction for transfer and assignment of Rs 4.947 billion non-performing loans by the SME Bank to the Bank on deferred price basis. These non-performing loans were fully provided. As per the pricing formula, the Bank will pay to the SME Bank fifty percent of the recoveries of these non-performing loans net of all expenses on annual basis, except for the first two years when higher of the fifty percent of net recoveries or twenty-five percent of the gross recoveries will be paid to SME Bank. The differential on account of payment on the basis of twenty-five percent of gross recoveries in the first two years, if paid, will be adjusted by the Bank against the net recoveries in the subsequent years."
14.
SEGMENT DETAILS WITH RESPECT TO BUSINESS ACTIVITIES (UN-AUDITED) The segment analysis with respect to business activity is as follows:
Corporate Finance Trading & Sales Retail Banking Commercial Banking Payment & Settlement Agency Services Total
---------------------------------------------------------------- Rupees in '000 ---------------------------------------------------------------Sept 30, 2010 Total income Total expenses Net income Sept 30, 2009 - Restated Total income Total expenses Net income
267,214 518 266,696
1,340,116 33,869 1,306,247
13,295,203 10,142,394 3,152,809
24,035,430 13,217,390 10,818,040
994,441 885,757 108,684
3,117,378 2,139,711 977,667
43,049,782 26,419,640 16,630,142
295,407 518 294,889
1,405,837 18,856 1,386,981
12,342,776 9,360,069 2,982,707
20,491,099 13,157,006 7,334,093
1,442,843 737,092 705,751
2,945,963 1,650,309 1,295,654
38,923,925 24,923,851 14,000,074
15. RELATED PARTY TRANSACTIONS

The bank has related party relationship with its associated undertakings, subsidiary companies, joint ventures, employee benefit plans, and its key management personnel (including their associates). Transactions between the bank and its related parties are carried out under normal commercial term except employee staff loans, return on provident fund and loan given to NBP Exchange Company Limited, that are as per the agreed term. Transactions with related parties during the period are as under:
(Un-Audited) Sept 30, 2010 At January 01 Advances Key Management Executives Subsidiaries Associates 97,439 575,404 1,287,942 1,960,785 25,500 6,477 31,977 (9,890) (145,004) (154,894) 113,049 430,400 1,294,419 1,837,868 95,931 682,730 1,269,498 2,048,159 4,524 18,444 22,968 (Audited) Dec 31, 2009 At June 30 01 At January 01 Received during the year Repaid during the year At December 31 (3,016) (107,326) (110,342) 97,439 575,404 1,287,942 1,960,785 Given during the period Repaid during the period At June 30 01 At January 01 (Audited) Dec 31, 2009 Given during the year Repaid during the year At December 31
-------------------------------------------------------------------------- (Rupees in '000') -----------------------------------------------------------------------------
(Un-Audited) Sept 30, 2010 At January 01 Deposits Subsidiaries Key Management Executives Pension Fund (Current) Pension Fund (Fix Deposit) Provident Fund 259,618 8,340 405,351 7,300,000 8,448,101 16,421,410 51,011 5,903,009 2,500,000 1,111,219 9,565,238 (153,509) (30,530) (6,303,571) (1,500,000) (480,278) (8,467,888) 106,109 28,821 4,789 8,300,000 9,079,042 17,518,760 167,224 3,869 3,940,161 5,900,000 8,507,300 18,518,554 Received during the period Repaid during the period
-------------------------------------------------------------------------- (Rupees in '000') ----------------------------------------------------------------------------92,394 38,859 12,791,620 4,800,000 3,548,530 21,271,403 (34,388) (16,326,430) (3,400,000) (3,607,729) (23,368,547) 259,618 8,340 405,351 7,300,000 8,448,101 16,421,410
(Un-Audited) Sept 30 2010
(Audited) Dec 31 2009
---------- (Rupees in '000') -------Debts Due by company in which a director of the bank is interested as director Placements with: Pension Fund Joint venture Associates / Subsidiaries Deposits with: Joint venture Repo borrowing from: Subsidiary Other receivables from subsidiaries Other payables from subsidiaries 401,760 44,893 521 (Un-Audited) Nine Months Period Ended Sept 30 2010 Income for the period On advances / placements with: Subsidiaries Key management executives Debts Due by company in which a director of the bank is interested as director Expenses for the period Remuneration to key management executives Charge for defined benefit plan Mark-up on Deposits of: Subsidiaries Provident fund Pension fund Key management executives Commission paid to subsidiaries Mark-up on Repo Borrowing of: Subsidiaries 33,054 39,399 7,314 1,316,910 600,278 1,123 4,690 187 1,273,964 513 563 245,543 17,661 155,549 7,089 270 4,343 1,394,467 4,289 3,935 548,771 Sept 30 2009 450,000 36,764 8,540 146,594 25,915 2,900,000 495,864 25,881 13,527,058 13,714,011
---------- (Rupees in '000') --------
15.1 Although the Federal Government and the SBP held about 75.60% shares of the bank (2009: 75.60%), the transactions with these entities have not been treated as related party transactions for the purpose of this disclosure.
16.
ISLAMIC BANKING BUSINESS The bank is operating 8 (December 31, 2009: 8) Islamic banking branches as at September 30, 2010. The statement of financial position and profit and loss account is as under: (Audited) (Un-Audited) Dec 31 Sept 30 2009 2010 ---------- (Rupees in '000') -------Statement of Financial Position ASSETS Cash and balances with treasury banks Investments Financing and receivables Fixed assets Other assets
49,711 406,209 360,774 107,451 27,154 951,299
43,290 144,789 736,417 104,314 8,627 1,037,437
LIABILITIES Bills payable Deposits and other accounts Due to Head Office Other liabilities NET ASSETS REPRESENTED BY Islamic banking fund Un-remitted loss Deficit on revaluation of assets
4,433 594,030 93,130 32,491 724,084 227,215
6,070 507,760 246,385 58,870 819,085 218,352
300,000 (19,679) 280,321 (53,106) 227,215
300,000 (11,437) 288,563 (70,211) 218,352
Sept 30 Sept 30 2009 2010 (Un-Audited) (Un-Audited) ----------- (Rupees in '000) ----------Profit and Loss Account Profit / return on financing and placements earned Profit / return on deposit and other dues expensed Net spread earned OTHER INCOME Fee, commission and brokerage income Income from dealing in foreign currencies Other income Total other income OTHER EXPENSES Administrative expenses Other charges Total other expenses (LOSS) / PROFIT BEFORE TAXATION 107,620 107,620 (19,679) 81,207 81,207 10,050 2,509 355 24 2,887 11,200 11,200 118,343 33,289 85,054 142,090 62,033 80,057
17.
DATE OF AUTHORIZATION FOR ISSUE The unconsolidated condensed interim financial statements were authorized for issue on October 29, 2010 by the Board of Directors of the bank.
18.
GENERAL
18.1 Figures have been rounded-off to the nearest thousand rupees.
Director
Director
Director

Consolidated Financial Statements For the Quarter ended September 30, 2010
National Bank of Pakistan Consolidated Condensed Interim Statement of Financial Position As at Sept 30, 2010 (Un-Audited) Sept 30 Dec 31 2010 2009 ----------- (Rupees in '000') ----------(Restated) 72,822,832 116,668,514 25,426,280 28,786,397 32,954,388 19,683,526 258,579,299 217,596,037 449,266,060 475,338,439 26,124,620 25,200,870 5,127,667 3,064,459 61,799,546 59,915,027 932,100,692 946,253,269
Note ASSETS Cash and balances with treasury banks Balances with other banks Lendings to financial institutions - net Investments - net Advances - net Operating fixed assets - net Deferred tax assets Other assets
6 7 8
LIABILITIES Bills payable Borrowings Deposits and other accounts Sub-ordinated loans Liabilities against assets subject to finance lease Deferred Tax Liabilities Other Liabilities NET ASSETS REPRESENTED BY Share capital Reserves Unappropriated Profit Minority Interest Surplus on revaluation of assets - net
7,203,785 20,222,427 745,289,929 102,539 38,541,214 811,359,894 120,740,799
10,621,169 44,828,138 727,513,013 42,629 42,455,768 825,460,717 120,792,553
10
13,454,627 24,875,364 61,268,333 99,598,324 112,092 99,710,416 21,030,383 120,740,799
10,763,702 23,395,059 61,696,595 95,855,356 110,930 95,966,286 24,826,267 120,792,553
11 1 0
The annexed notes 1 to 18 including restated statement of financial position for three years form an integral part of these consolidated condensed interim financial statements.
Director
Director
Director
National Bank of Pakistan Consolidated Condensed Interim Statement of Financial Position As at Sept 30, 2010 (Un-Audited) Sept 30 Dec 31 2010 2009 ------------------- (Rupees in '000') (Restated) 72,822,832 116,668,514 25,426,280 28,786,397 32,954,388 19,683,526 258,579,299 217,596,037 449,266,060 475,338,439 26,124,620 25,200,870 5,127,667 3,064,459 61,799,546 59,915,027 932,100,692 946,253,269 (Audited) Dec 31 2008 ----------------106,778,346 39,490,730 17,139,081 171,204,889 413,076,389 24,271,964 3,203,565 44,912,238 820,077,202
Note ASSETS Cash and balances with treasury banks Balances with other banks Lendings to financial institutions - net Investments - net Advances - net Operating fixed assets - net Deferred tax assets Other assets
6 7 8
LIABILITIES Bills payable Borrowings Deposits and other accounts Sub-ordinated loans Liabilities against assets subject to finance lease Other Liabilities NET ASSETS REPRESENTED BY Share capital Reserves Unappropriated Profit Minority Interest Surplus on revaluation of assets - net
7,203,785 20,222,427 745,289,929 102,539 38,541,214 811,359,894 120,740,799
10,621,169 44,828,138 727,513,013 42,629 42,455,768 825,460,717 120,792,552
10,219,061 40,044,291 625,349,270 25,274 39,988,100 715,625,996 104,451,206
10
13,454,627 24,875,364 61,268,333 99,598,324 112,092 99,710,416 21,030,383 120,740,799 1 1
10,763,702 23,395,059 61,696,595 95,855,356 110,930 95,966,286 24,826,267 120,792,553 (1) (1)
8,969,751 20,476,863 53,567,326 83,013,940 112,699 83,126,639 21,324,568 104,451,206 -
11
Director
Director
Director
National Bank of Pakistan Consolidated Condensed Interim Profit & Loss Account - (Un-Audited) For the Nine Months Period Ended Sept 30, 2010 Quarter Nine Months Quarter Nine Months Ended Ended Ended Ended Sept 30 Sept 30 Sept 30 Sept 30 2010 2010 2009 2009 ---------------------------- (Rupees in '000') ---------------------------------- (Restated) ------22,179,833 65,785,216 18,704,253 56,051,294 11,183,616 33,911,764 9,946,670 28,211,557 10,996,216 31,873,452 8,757,583 27,839,737 1,710,513 540,856 56 2,251,425 8,744,791 4,588,942 2,117,300 3,965 419 6,710,626 25,162,826 3,564,761 (367,266) 3,197,495 5,560,088 8,631,720 147,345 20,237 56 8,799,358 19,040,379
Note Mark-up / return / interest earned Mark-up / return / interest expensed Net mark-up / interest income Provision against non-performing loans & advances - net Provision for diminution in the investments value - net Provision against off-balance sheet obligations Bad debts written off directly Net mark-up / interest income after provisions NON MARK-UP / INTEREST INCOME Fee, commission & brokerage income Dividend income Income from dealing in foreign currencies Gain / (loss) on sale of securities Unrealized gain / (loss) on revaluation of investments classified as held-for-trading Share of loss from joint ventures Share of profit from associate Other income Total non mark-up / interest income NON MARK-UP / INTEREST EXPENSES Administrative expenses Other provisions / write offs Other charges Total non mark-up / interest expenses Extra ordinary items PROFIT BEFORE TAXATION Taxation - Current Taxation - Prior year(s) - Deferred PROFIT AFTER TAXATION Attributable to: Shareholders of the Bank Minority Interest
2,273,402 141,768 434,017 229,464 (716) (58,865) 1,126 52,769 3,072,965 11,817,756 6,756,162 66,190 23,002 6,845,354 4,972,402 4,972,402 1,969,781 (531,923) 1,437,858 3,534,544
7,055,079 643,690 1,720,905 1,939,800 (6,574) (84,706) 9,245 142,192 11,419,631 36,582,457 19,711,060 144,436 45,408 19,900,904 16,681,553 16,681,553 6,702,198 (1,433,560) 5,268,639 11,412,914
2,048,085 1,399,238 662,452 175,125 (5,650) (5,652) 1,022 36,826 4,311,446 9,871,534 5,496,471 23,357 14,834 5,534,662 4,336,872 4,336,872 1,834,537 (1,316) (664,771) 1,168,450 3,168,422
6,403,898 1,702,366 2,621,378 237,707 54,421 441 6,035 327,853 11,354,099 30,394,478 15,578,350 506,874 249,068 16,334,292 14,060,186 14,060,186 6,354,358 (1,316) (1,763,375) 4,589,667 9,470,519
3,536,556 (2,012) 3,534,544
11,414,076 (1,162) 11,412,914
3,147,464 665 3,168,422
9,469,143 1,376 9,470,519
-------------------------------- Rupees ---------------------------------Basic and Diluted Earnings per Share (Rupees) 12 2.63 8.48 2.35 7.04
Director
Director
Director

Consolidated Condensed Interim Statement of Comprehensive Income (Un-Audited) For the Nine Months Ended Sept 30, 2010
-------------------------- (Rupees in '000') --------------------------------- (Restated) ------Profit after taxation 3,534,544 11,412,914 3,168,422 9,470,519
Other comprehensive (loss) / income:
Exchange adjustments on translation of net assets of foreign branches Income tax relating to component of other comprehensive (loss) / income Other comprehensive (loss) / income - net of tax Total comprehensive income
496,725 496,725 4,031,270
343,962 343,962 11,756,877
1,056,560 1,056,560 4,224,982
833,104 833,104 10,303,622
Surplus arising on revaluation of assets has been reported in accordance with the requirements of the Companies Ordinance, 1984 and the directives of the State Bank of Pakistan in a separate account below equity.
Director
Director
Director
National Bank of Pakistan Consolidated Condensed Interim Statement of Changes in Equity - (Un-Audited) For the Nine Months Period Ended Sept 30, 2010 Reserves Share capital Exchange Translation Capital Statutory General Revenue Unappropriated profit Sub Total Minority Interest
Total
-------------------------------------------------------------------
(Rupees in '000)
-----------------------------------------------------------------------
Balance as at January 1, 2009 Profit after Taxation for the Nine Months period ended Sept 30, 2009 Other Comprehensive Income - net of tax
8,969,751
6,432,145
13,523,380
521,338
53,567,323
83,013,937
112,699
83,126,636
833,104 833,104 -
1,005,097
10,120,519 10,120,519 92,949 (1,005,097)
10,120,519 833,104 10,953,623 92,949 -
1,376 1,376
10,121,895 833,104 10,954,999 92,949
Transfer from Surplus on Revaluation of Fixed Assets Transfer to Statutory Reserve Transactions with Owners Transfer to reserve for issue of bonus shares Issue of Bonus Shares (20%) Cash dividend (Rs. 6.5 per share) Balance as at Sept 30, 2009 (as previously reported) Restatement due to effect of an error Balance as at Sept 30, 2009 (Reinstated)
1,793,950 10,763,701 10,763,701
7,265,249 7,265,249
14,528,477 14,528,477
521,338 521,338
(1,793,950) (5,830,338) 55,151,406 (650,000) 54,501,406
(5,830,338) 88,230,171 (650,000) 87,580,171
114,075 114,075
(5,830,338) 88,344,246 (650,000) 87,694,246
Balance as at Oct 1, 2009 (Restated) Profit after taxation for the three months period ended Dec 31, 2009 Other Comprehensive Income - net of tax
10,763,701
7,265,249
14,528,477
521,338
54,501,406
87,580,171
114,075
87,694,246
263,907 263,907
7,980,292 7,980,292 30,985
7,980,292 263,907 8,244,199 30,985 95,855,355
(3,145) (3,145)
7,977,147 263,907 8,241,054 30,985
Transfer from Surplus on Revaluation of Fixed Assets Transfer to Statutory Reserve Balance as at December 31, 2009 (Restated) 10,763,701 7,529,156 816,088 15,344,565 521,338
(816,088) 61,696,595
110,930
95,966,285
Balance as at January 1, 2010 (Restated) Profit after Taxation for the Nine Months period ended Sept 30, 2010 Other Comprehensive Income - net of tax
10,763,701
7,529,156
15,344,565
521,338
61,696,595
95,855,355
110,930
95,966,285
343,962 343,962 -
1,136,343
11,412,914 11,412,914 58,868 (1,136,343)
11,412,914 343,962 11,756,877 58,868 -
1,162 1,162 -
11,414,076 343,962 11,758,039 58,868 -
Transfer from Surplus on Revaluation of Fixed Assets Transfer to Statutory Reserve Transactions with Owners Transfer to reserve for issue of bonus shares Issue of Bonus Shares (25%) Cash dividend (Rs. 7.5 per share) Balance as at Sept 30, 2010
2,690,925 13,454,627
7,873,118
16,480,908
521,338
(2,690,925) (8,072,776) 61,268,333
(8,072,776) 99,598,324
112,092
(8,072,776) 99,710,416
Director
Director
Director
National Bank of Pakistan Consolidated Condensed Interim Cash Flow Statement - (Un-Audited) For the Nine Months Period Ended Sept 30, 2010
Nine Months Nine Months Ended Ended Sept 30 Sept 30 2010 2009 ----------- (Rupees in '000) ----------(Restated) 16,681,553 14,060,186 643,690 1,702,366 16,037,863 12,357,820 689,127 4,588,942 2,117,300 3,965 419 144,436 (22,020) 7,766 84,706 (9,245) 7,605,397 23,643,259 (13,212,362) (7,146,508) 21,483,437 (2,614,253) (1,489,686) (3,417,384) (25,252,930) 17,776,916 (3,933,992) (14,827,390) (6,173,926) (7,766) (6,181,692) 1,144,491 (47,606,822) 7,762,322 643,690 (328,853) (1,612,877) 22,020 (41,120,520) (26,822) (8,057,303) (8,084,125) 556,450 8,631,720 147,345 20,237 56 506,874 (2,428) 8,145 (441) (6,035) 9,861,923 22,219,743 11,487,993 (3,678,222) (31,231,950) (12,897,938) (36,320,117) (2,821,593) 10,441,026 29,352,876 (1,767,373) 35,204,936 (6,346,798) (8,145) (6,354,943) 14,749,619 (67,489,447) 11,519,176 1,702,366 (1,344,038) 2,428 (55,609,515) (11,672) (5,830,338) (5,842,010)
CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation Less: Dividend income Adjustments: Depreciation Provision against non-performing advances - net Provision / (reversal) for diminution in the value of investments - net Provision against off balance sheet obligations Bad Debts Written off directly Other provisions / write offs Gain on sale of fixed assets Financial charges on leased assets Share of loss / profit from joint ventures Share of profit from associates
(Increase) / decrease in operating assets Lendings to financial institutions - net Held-for-trading securities Advances - net Other assets (excluding advance taxation - net) Increase / (decrease) in operating liabilities Bills payable Borrowings Deposits and other accounts Other liabilities Income tax paid Financial charges paid Net cash flow from operating activities (Net investments) in available-for-sale securities Proceeds from held-to-maturity securities Dividend income received Investment in associate / joint venture Investments in operating fixed assets Sale proceeds of property and equipment disposed off Net cash (used) in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Payments of lease obligations Dividend paid Net cash used in financing activities Effects of exchange rate changes on cash and cash equivalents Net increase in cash and cash equivalents Cash and cash equivalents at beginning of the period Cash and cash equivalents at the end of the period
207,136 1,185,094 (47,853,018) (45,516,812) 145,390,674 146,097,099 97,537,656 100,580,287 97,537,656 (0) (100,580,287) The annexed notes 1 to 18 including restated statement of financial position for three years form an integral part of these consolidated condensed interim financial statements.
Director
Director
Director
National Bank of Pakistan Depreciation onis rounded off off and provision made for comparison. while no depreciation is Figures have beenadditions during necessary for theon the basis fixed considered doubtful. Have beenbad debts are writtennearest to Rupee. is purposeof debts assets of the Company and Known rearranged wherever the year charged The finance secured against equitable mortgage of of whole year NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS (UN-AUDITED) For the Nine Months Period Ended Sept 30, 2010 1.
Depreciation onis roundedduring necessary stock exchangefor fixed assets of Figures have beenadditions Price neareston the for theon the basisOctober 31, 2001. doubtful. Have beenbad debts are writtenquotedyear Rupee. is purposeon debts considered the Company and Known rearranged whereveroff and to charged made of comparison. while no depreciation is The finance secured off the equitable mortgage of of whole year against provision THE GROUP AND ITS OPERATIONS
1.1 The "Group" Consist of: Holding Company - National Bank of Pakistan Subsidiary Companies - CJSC Subsidiary Bank of NBP in Kazakhistan - NBP Capital Limited - NBP Exchange Company Limited - NBP Modaraba Management Company Limited - Taurus Securities Limited - National Agriculture & Storage Company Limited - Cast-N-Link Products Limited The Group is engaged in commercial banking, modaraba management, brokerage, leasing and discounting services. The holding company was incorporated in Pakistan under the National Bank of Pakistan Ordinance, 1949 and is listed on all the stock exchanges in Pakistan. Its registered and head office is situated at I.I. Chundrigar Road, Karachi. The holding company is engaged in providing commercial banking and related services in Pakistan and overseas. The holding company also handles treasury transactions for the Government of Pakistan (GoP) as an agent to the State Bank of Pakistan (SBP). The holding company operates 1,265 (2009: 1,265) branches in Pakistan and 23 (2009: 22) overseas branches (including the Export Processing Zone branch, Karachi). Under a Trust Deed, the holding company also provides services as trustee to National Investment Trust (NIT) and Long Term Credit Fund (LTCF). NBP Capital Limited, CJSC Subsidiary Bank of NBP in Kazakhistan, NBP Exchange Company Limited, NBP Modaraba Management Company Limited and National Agricultural & Storage Company Limited are wholly owned subsidiaries of the holding company while the controlling interest in Taurus Securities Limited is 58.32%, and Cast-N-Link Products Limited is 76.51%.
1.2 Basis of Consolidation - The interim condensed consolidated financial statements include the interim condensed financial statements of the holding company and its subsidiary companies - "the Group". - The assets and liabilities of subsidiary companies have been consolidated on a line by line basis and the carrying value of investments held by the holding comany is eliminated against the subsidiaries' shareholders' equity in the interim condensed consolidated financial statements. - Minority interest are that part of the net results of operations and of net assets of subsidiary companies attributable to interests which are not owned by the holding company. - Material intra-group balances and transactions have been eliminated. - National Agriculture & Storage Company Limited and Cast-N-Link Product Limited have not been Consolidated, as SECP has allowed exemption under sub-section (8), of section 237, of the Companies Ordinance, 1984 vide letter no. EMD/233/627/2002-1720 dated July 7, 2010 till December 31, 2010
NATIONAL BANK OF PAKISTAN
2. STATEMENT OF COMPLIANCE 2.1 These consolidated condensed interim financial statements of the bank for the nine months period ended September 30, 2010 have been prepared in accordance with the requirements of the International Accounting Standard 34 - Interim Financial Reporting, provisions of the Companies Ordinance, 1984, Banking Companies Ordinance,1962 and directives issued by the Securities and Exchange Commission of Pakistan and the State Bank of Pakistan. In case where requirements differ, the provisions of the Companies Ordinance, 1984, the Banking Companies Ordinance, 1962 and the said directives have been followed. 2.2 The State Bank of Pakistan has deferred the applicability of International Accounting Standard (IAS) 39, 'Financial Instruments: Recognition and Measurement' and International Accounting Standard (IAS) 40, 'Investment Property' for Banking Companies through BSD Circular Letter No. 10 dated August 26, 2002. Further, according to the notification of SECP dated April 28, 2008, the IFRS - 7 "Financial Instruments: Disclosures" has not been made applicable for banks. Accordingly, the requirements of these standards have not been considered in the preparation of these financial statements. However, investments have been classified and valued in accordance with the requirements of various circulars issued by SBP.
2.3 The disclosures made in these condensed consolidated interim financial statements have been limited based on the format prescribed by the SBP vide BSD Circular No. 2, dated May 12, 2004 and International Accounting Standard (IAS) 34, 'Interim Financial Reporting' and do not include all the information required in the annual financial statements. Accordingly, these consolidated condensed interim financial statements should be read in conjunction with the annual consolidated financial statements of the Bank for the year ended December 31, 2009. 2.4 During the period, following new / revised standards, amendments and interpretations to accounting standards became effective:
- IAS 27 - Consolidated and Separate Financial Statements (Amendments). - IFRS 2 - Share Based Payments: Amendments relating to Group Cash-settled Share-based Payment Transaction. - IFRS 3 - Business Combinations (Revised). - IFRIC 17 - Distributions of Non-cash Assets to owners Adoption of the above standards, amendments and interpretations did not affect the accounting policies of the Bank as disclosed in the annual financial statements for the year ended December 31, 2009. 3. ACCOUNTING POLICIES The accounting policies adopted in preparation of these interim condensed consolidated financial statements are consistent with those followed in the preparation of the annual consolidated financial statements of the holding company for the year ended December 31, 2009.
4. ACCOUNTING ESTIMATES AND JUDGMENTS The estimates/judgments and associated assumptions used in the preparation of these interim condensed financial statements are consistent with those applied in the preparation of the annual consolidated financial statements of the bank for the year ended December 31, 2009.
5. FINANCIAL RISK MANAGEMENT The financial risk management objectives and policies are consistent with those disclosed in the annual consolidated financial statements of the bank for the year ended December 31, 2009.
6.
INVESTMENTS September 30, 2010 (Un-audited) Held by Given as Total bank collateral ----------- (Rupees in '000) ----------December 31, 2009 (Audited) Held by Given as Total bank collateral ----------- (Rupees in '000) -----------
Note 6.1 Investments by type: Held-for-trading securities Ordinary shares of listed companies Market Treasury Bills Pakistan Investment Bonds Total Held-for-Trading Securities Available- for- sale securities Ordinary shares of listed companies Ordinary shares of unlisted companies
23,705 9,407,560 94,173 9,525,438
23,705 9,407,560 94,173 9,525,438
170,383 1,987,272 221,275 2,378,930
170,383 1,987,272 221,275 2,378,930
19,714,600 777,247 20,491,847 124,545,339 278,581 13,602,476 3,093,816 61,118,885 1,043,830 215,424 463,295 1,147,500 1,397,619 500,000 227,898,613
1,385,624 285,005 1,670,629
19,714,600 777,247 20,491,847 125,930,963 278,581 13,887,481 3,093,816 61,118,885 1,043,830 215,424 463,295 1,147,500 1,397,619 500,000 229,569,242
15,507,402 753,114 16,260,516 91,064,768 294,033 11,117,142 3,021,990 30,985,145 1,041,137 424,078 463,295 1,530,000 1,042,439 157,244,543
23,504,630 1,213,247 24,717,877
15,507,402 753,114 16,260,516 114,569,398 294,033 12,330,389 3,021,990 30,985,145 1,041,137 424,078 463,295 1,530,000 1,042,439 181,962,420
Market Treasury Bills Preference shares Pakistan Investment Bonds Federal Investment Bonds GoP Foreign Currency Bonds Debentures, Bonds, Participation Term Certificates and Term Finance Certificates Mutual funds Foreign Government Securities Investment outside Pakistan NIT Market Opportunity Fund National Investment Trust (NIT) LoC Units National Investment Trust (NIT) Non-LoC Units Total Available- for- sale securities Held-to-maturity securities Government Compensation Bonds Pakistan Investment Bonds Federal Investment Bonds Market Treasury Bills
GoP Foreign Currency Bonds
6.2
6.3
Foreign Government Securities Debentures, Bonds, Participation Term Certificates and Term Finance Certificates Certificates of Investment Total Held-to-maturity securities Investments in associates Investments in joint ventures Investments in subsidiaries Investment at cost Less: Provision for diminution in value of Investments Investments (net of provisions) Deficit on revaluation of Held-for-trading securities Surplus on revaluation of Available-for-sale securities Total investments at market value
8,858,377 1,330,606 4,420,278 14,609,261 1,255,928 2,733,234 3,245 256,025,719 (4,252,712) 251,773,007 (6,574) 5,156,269 256,922,702
1,670,629 1,670,629 (14,032) 1,656,597
8,858,377 1,330,606 4,420,278 14,609,261 1,255,928 2,733,234 3,245 257,696,348 (4,252,712) 253,443,636 (6,574) 5,142,237 258,579,299
1,132,963 8,702,404
371,910 1,392,168 10,508,477 22,107,922 1,185,085 2,412,261 3,245 185,331,986 (2,187,187) 183,144,799 2,355 9,466,428 192,613,582
263,661 263,661 24,981,538 24,981,538 915 24,982,453
1,132,963 8,966,065 371,910 1,392,168 10,508,477 22,371,583 1,185,085 2,412,261 3,245 210,313,524 (2,187,187) 208,126,337 2,355 9,467,343 217,596,035
6.4
6.2
Investment outside Pakistan - Bank Al-Jazira The Bank holds 17,500,000 (2009: 17,500,000) shares in Bank Al-Jazira (BAJ) incorporated in the Kingdom of Saudi Arabia, representing 5.83% (2009: 5.83%) holding in total share capital of BAJ. The investment has been marked to market using closing price as quoted on the Saudi Stock Exchange in accordance with SBP concurrence vide letter No. BSD/SU-13/331/685/2006 dated February 17, 2006.
6.3
National Investment (Unit) Trust - [NI(U)T] In the previous year, the Government of Pakistan (GoP) had communicated a methodology to settle the long outstanding issue of the Letter of Comfort (LOC) Holders and National Investment Trust Limited (NITL) which had been discussed between the LOC Holders and NITL. The LOC Holders, as a result of the discussion, had executed agreements with NITL. In case of the bank, the effective date of the agreement had been December 31, 2009. Later, all underlying assets of NI(U)T-LOC Holders Fund (the Fund) were distributed to the LOC Holders according to their respective holdings in the Fund except for the Strategic Assets and 5% Balance Assets. The Strategic Asset comprised of frozen shares of Pakistan State Oil (PSO) and Sui Northern Gas Pipeline Limited (SNGPL), cash and, other receivables held in the portfolio of the Fund.
It was agreed that the Strategic Assets would be transferred to the bank and the cash received from such transfer would be paid to other LOC Holders except 5% of cash which would be paid to NITL. It was also decided that the 5% Balance Assets would be transferred to NITL. The bank requested GoP to revise the decision to the extent of 5% Balance Assets to be transferred to NITL and give 10% discount to the bank on values of PSO and SNGPL shares. The GoP considered the viewpoint of the bank over the matter of 5% and reduced the same to 2.5% for the benefits of all LOC Holders. Accordingly, the bank has recorded its share of Balance Assets and a capital gain of Rs. 294 million in the current period. The GOP didn't accede to the request relating to 10% discount. Various discussions have since been made in this regard and any settlement of the Strategic Assets will be made on the basis of further decision from the GOP. Further, in the month of April 2010, a extra ordinary general meeting of LOC Holders has held to discuss the settlement of liabilities of the Fund. After discussion all LOC Holders agreed to purchase further units of the Fund to retire the outstanding short term financing, accordingly the bank purchased further 11,204,720 units of the Fund for the said purpose.However, the matter entailing the rate at which the Strategic Assets are to be transferred to NBP is still under deliberations.
6.4
Acquisition of Major Share Holding in NAFA On March 31, 2010, the bank acquired entire holding (27%) consisting of 6.75 million shares of NIB Bank Limited in NAFA at Rs. 39.83 per share which has resulted in increase in the bank's post-acquisition holding from pre- acquisition holding of 27% to 54%. The bank has classified its 54% holding as "Investments in Joint Ventures" (Jointly Controlled Entity) because as per the joint venture agreement the bank does not have significant control to govern some of the financial and operating policies of the jointly controlled entity.
6.4.1 The share of assets, liabilities, of the jointly controlled entity at June 30, 2010: Dec 31 Sept 30 2009 2010 (Audited) (Un-audited) ----------- (Rupees in '000') ----------Current assets Non - current assets Current liabilities Non - current liabilities 126,769 92,132 218,901 -52,216 -15,895 150,791 76,296 51,913 128,209 -24,355 -8,843 95,012
Ownership interest Cost Share of post acquisition profit
54% 336,353 -5,186 331,167
27% 67,500 27,512 95,012
The diferrence between share of net assets and cost of investment represents Goodwill.
Note 7. ADVANCES - net Loans, cash credits, running finances, etc. In Pakistan Outside Pakistan Net investment in finance lease In Pakistan Outside Pakistan Bills discounted and purchased (excluding Government treasury bills) Payable in Pakistan Payable outside Pakistan Margin Financing Advances - gross Less: Provision against non-performing loans Specific General Advances - net of provision 10 -
Dec 31 Sept 30 2009 2010 (Audited) (Un-audited) ----------- (Rupees in '000') -----------
434,562,724 51,800,990 486,363,713 330,481 330,481 2,682,271 19,957,344 22,639,615 60,963 509,394,772 (58,025,762) (2,102,950) (60,128,712) 449,266,060
468,860,532 39,050,979 507,911,511 365,210 365,210 2,854,682 19,911,141 22,765,823 60,963 531,103,507 (53,750,154) (2,014,914) (55,765,068) 519,644,911
7.1 Advances include Rs.75,475 million (2009: Rs.71,174 million) which have been placed under the non-performing status as detailed below:
September 30, 2010 (Un-audited)
Category of Classification
Provision Provision Domestic Overseas Total Required Held ----------------------------------(Rupees in '000)--------------------------------------1,304,776 8,710,110 4,552,812 58,682,738 73,250,436 2,639 214,233 2,008,070 2,224,942 1,304,776 8,712,749 4,767,045 60,690,808 75,475,378 1,110,683 2,354,402 54,560,677 58,025,762 1,110,683 2,354,402 54,560,677 58,025,762
December 31, 2009 (Audited)
Category of Classification
Provision Provision Domestic Overseas Total Required Held ----------------------------------(Rupees in '000)--------------------------------------748,091 6,868,363 6,595,335 55,013,578 69,225,367 2,639 648,234 1,297,794 1,948,667 748,091 6,871,002 7,243,569 56,311,372 71,174,034 1,498,492 3,194,416 49,057,246 53,750,154 1,498,492 3,194,416 49,057,246 53,750,154
7.2 During the period, the SBP vide its BSD Circular No. 2 dated June 03, 2010 has ammended the Prudential Regulations in respect of provisioning against non-performing advances, the impact of which is immaterial in the curent period. To date the bank has taken total FSV benefit of Rs. 2,825 million net of tax of which Rs. 2,417 million would not be available for the distribution of cash and stock dividend to shareholders as required by SBP Regulations.
Dec 31 Sept 30 2009 2010 (Audited) (Un-audited) ----------- (Rupees in '000) ----------8. DEFERRED TAX ASSETS - net Deferred tax assets arising in respect of Provision for diminution in the value of investments Provision against advances Provision against off-balance sheet obligations Other provision Charge against defined benefits plans Taxable temporary differences on: Excess of accounting book value of leased assets over lease liabilities Difference between accounting book value of fixed assets and tax base Revaluation of securities Revaluation of fixed assets Others Net deferred tax assets (169) (289,402) (1,398,239) (1,229,404) (2,917,214) 5,127,667 (7,065) (222,293) (2,028,859) (1,276,951) (750) (3,535,918) 3,064,459 1,293,589 4,994,526 116,622 332,818 1,307,326 8,044,881 553,506 4,720,840 116,622 281,966 927,443 6,600,377 Note
10
9.
DEPOSITS AND OTHER ACCOUNTS Customers Fixed deposits Savings deposits Current accounts - remunerative Current accounts - non-remunerative Financial Institutions Remunerative deposits Non-remunerative deposits
Dec 31 Sept 30 2009 2010 (Audited) (Un-audited) ----------- (Rupees in '000) -----------
196,129,695 242,427,512 78,144,672 169,332,421 686,034,300 33,314,978 25,940,651 59,255,629 745,289,929
194,851,862 196,374,087 75,321,341 169,043,847 635,591,137 48,399,678 43,522,198 91,921,876 727,513,013
Dec 31 Sept 30 2009 2010 (Audited) (Un-audited) ----------- (Rupees in '000) ----------10. SURPLUS ON REVALUATION OF ASSETS Surplus on Revaluation of Fixed Assets - net of Tax Surplus / (Deficit) on Revaluation of Available-for-Sale Securities - net of Tax Federal government securities Term finance certificates Quoted shares and mutual funds Gop foreign currency bonds NIT units NIT market opportunity fund Investment outside pakistan Deferred tax liability recognized Share of revaluation loss on securities of associates (1,017,591) (645,410) (1,275,912) 928,786 406,006 247,341 6,499,016 5,142,237 (1,398,239) (25) 21,030,383 (106,461) (763,248) 1,740,074 556,772 616,024 360,573 7,063,613 9,467,347 (2,028,859) (25) 24,826,267 17,286,410 17,387,804
11. 11.1
CONTINGENCIES AND COMMITMENTS Direct credit substitutes Includes general guarantee of indebtedness, bank acceptance guarantees and standby letters of credit serving as financial guarantees for loans and securities issued in favour of: Dec 31 Sept 30 2009 2010 (Audited) (Un-audited) ----------- (Rupees in '000) ----------- Government - Financial institutions - Others 16,864,047 4,320,921 10,841,884 32,026,852 17,443,452 4,469,377 11,214,383 33,127,212
11.2
Transaction-related contingent liabilities Includes performance bonds, bid bonds, warranties, advance payment guarantees, shipping guarantees and standby letters of credits related to particular transactions issued in favour of: - Government - Financial institutions - Others 19,508,321 4,457,516 9,727,806 33,693,643 18,524,777 4,232,783 9,237,363 31,994,923
11.3
Trade-related contingent liabilities Letters of credit Issued in favour of - Government - Financial institutions - Others
130,877,865 167,248 40,187,482 171,232,594
126,151,618 161,208 38,736,236 165,049,062
11.4 11.4.1
Other contingencies Claims against the bank not acknowledged as debts [including SBP liabilities on Bangladesh borrowing and interest thereon amounting to Rs. 175 million (2009: Rs. 175 million) and claims relating to former Mehran Bank Limited amounting to Rs. 965 million (2009: Rs. 965 million)].
6,906,507
6,561,411
11.4.2
Taxation The income tax returns of the bank for global operations and for Azad Jammu Kashmir is due to be filed the tax year 2010 (accounting year ended December 31, 2009) on or before October 30, 2010.Whereas the income tax returns of the bank for global operations and for Azad Jammu Kashmir, upto the tax year 2009 (accounting year ended December 31, 2008), have been filed under section 120 and amended by the Taxation Officer under section 122(5A) of the Income Tax Ordinance, 2001. During the period the bank received various appellate decisions from the Appellate Tribunal Inland Revenue (ATIR) from tax year 2003 through tax year 2007 in which substantial reliefs were allowed for matters including disallowance for bad debts on the basis of SBPs certificates, staff welfare fund and allocation of financial expenditure between taxable and exempt / low tax rate income and revaluation loss on barter trade agreements. Also appeal effects of such decisions have been obtained from the tax department giving rise to aggregate tax refund of Rs.6,221 million. For the purpose of contingencies, there are only three matters under appeal where management is confident that the appellate decisions will provide necessary relief to the bank. These matters are interest credited to suspense account, allocation of administrative expenditure between taxable and exempt / low tax rate and disallowance for bad debts on the basis of SBPs certificates. The aggregate effect of aforementioned contingencies work out at Rs. 5,065 million (December 31, 2009: Rs. 7,368 million).
11.4.2
Provident Fund As fully explained in note 21.4.3 to the unconsolidated financial statements of the Bank for the year ended December 31, 2009, management in the last year based on the legal advice, calculated interest on the outstanding Provident Fund balance at the five years fixed deposit rate for settlement of the PF balance interpreting the rate as the highest rate as per its understanding of the Supreme Courts decision dated May 04, 2009. Consequently, the difference was adjusted in Bank's Books of Accounts. Some petitioners filed the review petition against the Bank in the Court, asserting that the Banks interpretation of the highest interest rate was not correct. The legal advisor of the Bank informed management that such petition had not been admitted in the Court.
However, in the current period, it came to managements knowledge that the review petition had actually been admitted in the last year, which the Court heard and decided on September 20, 2010. As per the said Court order: The employee on his retirement or leaving the job or the heirs of the person who had passed away, are entitled for the best rate of interest as per scheme instead of prescribed rate on the fixed deposit till the time he was the employee of the Bank ; and
If the payment has not been made for any reason i.e, litigation, etc., he would be entitled for the best rate of interest admissible to any other ordinary customer till the date of payment. Therefore, management has treated omission of the fact as prior period error as per IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. The impact is as follows: (Un-audited) Sep 30, 2009 Rs ' 000 Increase in Mark-up / Return / Interest expensed in Profit and Loss Account Increase in Deposits "Curent Account - Remunerative" Decrease in tax charge for the nine months Increase in Advance Tax Decrease in profit for the nine months - after tax Decrease in unappropriated profit Decrease in earnings per share - after tax (basic and diluted) 11.4.3 Barter Trade Agreements / Golden Handshake The current status of these contingencies is same as disclosed in the annual financial statements of the bank for the year ended December 31, 2009. 1,000,000 1,000,000 350,000 350,000 650,000 650,000 Re 0.48
11.4.4
Benazir Employees' Stock Option Scheme The Federal Cabinet approved "Benazir Employees Stock Option Scheme (BESOS)" on August 5, 2009 for empowerment of employees of State Owned Entities through transfer of 12% shares owned by GoP to an employees' trust to be registered. As the Federal Government and the SBP held about 75.60% shares of the bank , it is unclear how transfer of such shares to the employees' trust will take place. Pending resoulotion of such uncertainties, the cost of such scheme has not been accounted for in these financial statements. Dec 31 Sept 30 2009 2010 (Audited) (Un-audited) ------- (Rupees in '000) -------
11.5
Commitments in respect of forward exchange contracts Purchase Sale 53,500,872 93,207,461 87,829,307 38,568,464
11.6
Commitments in respect of trading with Govt. securities Purchase 4,261,000 5,000,000
11.7
Other Commitments Cross Currency SWAP 5,746,522 2,361,654 6,914,649 1,537,996
11.8 12.
Commitments for the acquisition of operating fixed assets BASIC AND DILUTED EARNINGS PER SHARE Quarter Ended Sep 30 2010 Profit after taxation (Rupees in '000) Weighted average number of ordinary shares (in '000) Basic and diluted earnings per share (Rupees) 3,534,544 1,345,463 2.63 Nine Months Ended Sep 30 2010 11,412,914 1,345,463 8.48
Quarter Nine Months Ended Ended Sep 30 Sep 30 2009 2009 --------(Restated)-------3,168,422 1,345,463 2.35 9,470,519 1,345,463 7.04
13
Transfer and Assignment Agreement with SME Bank Limited During the Year, the Bank and the SME Bank entered into a transaction for transfer and assignment of Rs 4.947 billion nonperforming loans by the SME Bank to the Bank on deferred price basis. These non-performing loans were fully provided. As per the pricing formula, the Bank will pay to the SME Bank fifty percent of the recoveries of these non-performing loans net of all expenses on annual basis, except for the first two years when higher of the fifty percent of net recoveries or twenty-five percent of the gross recoveries will be paid to SME Bank. The differential on account of payment on the basis of twenty-five percent of gross recoveries in the first two years, if paid, will be adjusted by the Bank against the net recoveries in the subsequent years."
14. SEGMENT DETAILS WITH RESPECT TO BUSINESS ACTIVITIES - (Un-Audited) The segment analysis with respect to business activity is as follows:Corporate Finance Modaraba Taurus Trading & Retail Commercial Payment & Agency Assets Retail Sales Banking Banking Settlement Services Management Brokerage ---------------------------------------------------------------- Rupees in '000 ---------------------------------------------------------------Total
Sept 30, 2010 Total income Total expenses Net income 267,214 518 266,696 35,432,016 34,080,283 1,351,733 13,295,203 10,142,394 3,152,809 24,035,430 13,217,390 10,818,040 994,441 885,757 108,684 3,117,378 2,139,711 977,667 11,077 9,868 1,210 52,087 47,373 4,715 77,204,847 60,523,294 16,681,553
Sept 30, 2009 - Restated Total income Total expenses Net income 15. 295,407 518 294,889 28,423,766 28,373,670 50,096 1,405,837 18,856 1,386,981 12,342,776 9,360,069 2,982,707 20,491,099 13,157,006 7,334,093 1,442,843 737,092 705,751 2,945,963 1,650,309 1,295,654 57,702 47,687 10,015 67,405,393 53,345,207 14,060,186
RELATED PARTY TRANSACTIONS The Bank has related party relationship with its associated undertakings, joint ventures, employee benefit plans, and its key management personnel (including their associates). Transactions between the Holding Company and its related parties are carried out under normal commercial term except employee staff loans, return on provident fund and loan given to NBP Exchange Company Limited, that are as per the agreed term. Transactions with related parties during the period are as under:
(Un-Audited) (Audited) Sept 30, 2010 Dec 31, 2009 At Given during Repaid during At At Given during Repaid during At Jan 01 the period the period Sept 30 Jan 01 the year the year Dec 31 -------------------------------------------------------------------------- (Rupees in '000') ----------------------------------------------------------------------------Advances Key Management Executives Associates 97,439 1,287,942 1,385,381 25,500 6,477 31,977 (9,890) (9,890) 113,049 1,294,419 1,407,469 95,931 1,269,498 1,365,429 4,524 18,444 22,968 (3,016) (3,016) 97,439 1,287,942 1,385,381
(Un-Audited) (Audited) Sept 30, 2010 Dec 31, 2009 At Given during Repaid during At At Given during Repaid during At Jan 01 the period the period Sept 30 Jan 01 the year the year Dec 31 -------------------------------------------------------------------------- (Rupees in '000') ----------------------------------------------------------------------------Deposits Key Management Executives Pension Fund (Current) Pension Fund (Fix Deposit) Provident Fund 8,340 405,351 7,300,000 8,448,101 16,161,792 51,011 5,903,009 2,500,000 1,111,219 9,565,238 (30,530) (6,303,571) (1,500,000) (480,278) (8,314,379) 28,821 4,789 8,300,000 9,079,042 17,412,652 3,869 3,940,161 5,900,000 8,507,300 18,351,330 38,859 12,791,620 4,800,000 3,548,530 21,179,009 -34,388 (16,326,430) (3,400,000) (3,607,729) (23,368,547) 8,340 405,351 7,300,000 8,448,101 16,161,792
Sept 30 Dec 31 2010 2009 (Un-audited) (Audited) ----------- (Rupees in '000) ----------Debts Due by company in which a director of the bank is interested as director Placements with: Pension Fund Joint venture Associates Deposits with: Joint venture 13,527,058 13,714,011
146,594 25,915
2,900,000 495,864 25,881
8,540
Nine Months Nine Months Ended Ended Sept 30 Sept 30 2010 2009 (Un-audited) (Un-audited) ----------- (Rupees in '000) ----------Income for the period Key Management Executives Debts Due by company in which a director of the bank is interested as director Expenses for the period Remuneration to key management executives "Charge for Defined Benefit Plan" group in FS Grouping Charge for defined benefit plan Mark-up on deposits of: Provident Fund Pension Fund Key Management Executives 4,343 1,394,467 3,935 548,771
245,543 17,661
155,549 7,089
Code (1206) in FS Grouping Calculation from sheet provided by Main Br.
1,316,910 600,278 1,123
1,273,964 513
15.1 Although the Federal Government and the SBP held about 75.60% shares of the holding company (2009: 75.60%), the transactions with these entities have not been treated as related party transactions for the purpose of this disclosure.
16.
ISLAMIC BANKING BUSINESS The Bank is operating 8 (December 31, 2009: 8) Islamic banking branches as at Sept 30, 2010. The balance sheet and profit and loss account of such branches is as under: Sept 30 Dec 31 2010 2009 (Un-audited) (Audited) ------ (Rupees in '000) -----49,711 406,209 360,774 107,451 27,154 951,300 43,290 144,789 736,417 104,314 8,627 1,037,437
Balance Sheet ASSETS Cash and balances with treasury banks Investments Financing and Receivables
Fixed Assets
Other assets Total Assets LIABILITIES Bills payable Deposits and other accounts Due to Head Office Other liabilities NET ASSETS REPRESENTED BY Islamic Banking Fund Un remitted (loss) / profit Surplus on Revaluation of Assets
4,433 594,030 93,130 32,491 724,084 227,216
6,070 507,760 246,385 58,870 819,085 218,352
300,000 (19,679) 280,321 (53,106) 227,216
300,000 (11,437) 288,563 (70,211) 218,352
Sept 30 Sept 30 2009 2010 (Un-audited) (Un-audited) ------ (Rupees in '000) -----Profit and Loss Account Profit / return on financing and placements earned Profit / return on deposit and other dues expensed Net spread earned OTHER INCOME Fee, commission and brokerage income Income from dealing in foreign currencies Other income Total other income OTHER EXPENSES Administrative expenses Other charges Total other expenses 118,343 33,289 85,054 142,090 62,033 80,057
2,509 355 24 2,887
1,367 9,834 11,201
107,620 107,620 (19,679)
81,008 200 81,208 10,050
17.
DATE OF AUTHORIZATION FOR ISSUE The consolidated condensed interim financial statements were authorized for issue on October 29, 2010 by the Board of Directors of the Holding Company.
18.
GENERAL Figures have been rounded-off to the nearest thousand rupees.
Director
Director
Director

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National Bank of Pakistan: Standalone Financial Statements For The Quarter Ended September 30, 2010

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National Bank of Pakistan

On behalf of Board of Directors

Chairman & President