STANDARD CHARTERED BANK PAKISTAN (PVT) LTD.

OVERVIEW:
Standard Chartered was formed in 1969 through a merger of two banks: The Standard Bank of British South Africa, founded in 1863, and the Chartered Bank of India, Australia and China, founded in 1853. Both companies were keen to capitalize on the huge expansion of trade and to earn the handsome profits to be made from financing the movement of goods between Europe, Asia and Africa. The Chartered bank was founded by James Wilson following the grant of a Royal Charter by Queen Victoria in 1853. Chartered opened its first branches in Mumbai (Bombay), Kolkata and Shanghai in 1858, followed by Hong Kong and Singapore in 1859. The Standard Bank was founded in the Cape Province of South Africa in 1862 by John Paterson. It was a commenced business in Port Elizabeth, in January 1863. It was prominent in financing the development of the diamond fields of Kimberley from 1867 and later extended its network further north to the new town of Johannesburg when gold was discovered there in 1885. It expanded in Southern, Central and Eastern Africa and, by 1953, had 600 offices. In 1965, it merged with the Bank of West Africa, expanding its operations into Cameroon, Gambia, Ghana, Nigeria and Sierra Leone. From the early 1990s, Standard Chartered has focused on developing its strong franchises in Asia, Africa and the Middle East. It has concentrated on consumer, corporate and institutional banking and on the provision of treasury services - areas in which the Group had particular strength and expertise.

STANDARD CHARTERED BANK IN PAKISTAN: YEAR OF SETUP:

Standard Chartered is the largest international Bank in Pakistan. In Pakistan it established operations in Karachi in year 1863. Standard Chartered Bank (Pakistan) Limited (SCBPL) was incorporated in Pakistan on July 19, 2006 and it became the first international bank to be incorporated in Pakistan. Standard Chartered acquired controlling stake (95.37%) in one of the best private banks in Pakistan called the Union Bank, through a transaction of US $487 million. Union Bank Ltd was the 8th largest bank in Pakistan in terms of market share of assets and had an extensive customer base with 400,000 retail and SME banking customers. However it had a small but growing wholesale banking business.

MAIN OBJECTIVE:
Standard Chartered Bank is an international bank, focused on the established and emerging markets of Asia, Africa, the Middle East and Latin America with an extensive global network of more than 600 offices in over 50 countries. The three principal business groups are Treasury, Consumer Banking and Corporate and Institutional Banking. Their main objective is to offer outstanding value to their customers by providing knowledgeable, efficient and reliable service in a personal, helpful and responsive manner. Central to this service philosophy is the professional consultative approach they take with each customer. By getting to know the customer better, they can identify the customer's needs and match them with quality products which suit their best.

NUMBER OF BRANCHES:
The bank has a network of over 174 branches in 41 cities in Pakistan adding 154 branches and 33 cities over last four years. Standard Chartered employs a workforce of over 9,000 employees in its Pakistan operations. Standard Chartered Bank has a network of over 200 ATMs across Pakistan. Standard Chartered has a network of over 1,600 branches and outlets and 5,500 ATMs in more than 70 countries and territories across the globe, making it one of the world's most international banks.

ACHIEVEMENTS:
The bank has the honor of being the first international bank to get an Islamic banking license and open the first Islamic banking branch. Another major achievement of the bank includes its short-term credit rating of AAA for long-term and A1+ for short-term. These are the highest long-term rating assigned by PACRA to any private sector commercial bank. On July 15th 2010, Standard Chartered was also named as the Best Regional Bank in Asia and Best Bank in Pakistan in the awards for Excellence 2010 by Euromoney.

PRODUCTS:
Personal Banking:
Standard Chartered provide Mortgages, Credit Cards, Personal Loans, Auto Loans, Islamic Banking, and Wealth Management products. In order to maximize customer convenience, they offer 24-hour Phone Banking, statements, SMS Banking, ATM Cards and VISA Debit Cards, as well as Online Banking and state of the art branches.

SME Banking:
At Standard Chartered SME Banking is made to offer solutions that address specific business needs. From managing the working capital, aiding business expansion, business protection or increasing the yield. Choose what we can do for you and your business.

Wholesale Banking:
Wholesale banking provides Transactional banking, Debt Capital Markets, Corporate Finance, Derivatives & Fix Options, Commodity Finance and deposit products.

Islamic Banking:
Standard Chartered Saadiq's dedicated Islamic Banking team provides comprehensive international banking services and a wide range of Shariah compliant financial products that are based on Islamic values.

Priority Banking:
The new service for customers with high investable assets combines highly customized financial solutions covering banking, borrowing, protection and investments, with exclusive new products such as the Visa Platinum Debit & Credit Cards. It also includes a range of International banking services and exclusive lifestyle privileges for Priority customers and their families A key part of the new Priority Banking offering in Pakistan is an exclusive rewards programme, which recognizes customers for all aspects of their banking relationship, as well as high levels of service to meet customers needs for exclusivity, expertise and responsiveness.

FUNCTIONS AND SERVICES:

Standard Chartered Bank (Pakistan) Limited is currently performing following functions and providing following services:

Credit Cards Mortgages Personal Loans Auto Loans Deposit accounts Wealth management products Foreign Exchange Spot and Forward Asset &Liability management Internet rate / Liquidity management Short term loans/ deposits Economics Research and Analysis Customer Risk Management Non deliverable forwards FX option Interest rate derivatives Interest rate swaps Cross currency swaps FRAs Interest rate options Financial engineering

CUSTOMER SOLUTIONS AND RISK MANAGEMENT:

Standard Chartered Bank (Pakistan) offers wide range of facilities that ensure the solution; these solutions may be of following type:

Protection against adverse market movements Foreign exchange Interest rates Funding, enhanced deposits Corporate finance Transaction, translation, economic exposure Acquisitions, disposals, CAPEX, dividends Access to onshore markets using SCB's capabilities Structured products to match customers' risk appetite and requirements Execution and advice on efficient hedging policy implementation

INFLOWS:
CERTAIN IMPORTANT DEPOSIT ACCOUNTS:
SAVING ACCOUNT BASIC BANKING ACCOUNT RUPEE CURRENT ACCOUNTS XTRA MILE CURRENT ACCOUNT BUSINESS ACCOUNT STANDARD CHARTERED SAADIQ PAKISTAN TIJARAT CLASSIC ACCOUNT SUHALUT ONLINE ACCOUNT AVERAGE LENDING RATE OF STANDARD CHARTERED BANK OF PAKISTAN IS 16.33%.

DEPOSITS:
Deposits from notes to the consolidated financial statements shows that fixed deposits increased as of saving deposits increased similarly, Current account decreased but as we make conclusion out of it, deposits of 2007 was greater as compared to deposits of year 2008.

Deposits of group companies increased but subsidiaries companies decreases in year 2008 as you see above in balance sheet for both years.

OUTFLOWS
ADVANCES:
Advances are stated net of provision against non-performing advances. Specific and general provisions are made based on an appraisal of the loan portfolio that takes into account Prudential Regulations issued by SBP from time to time. Specific provisions are made where the repayment of identified loans is in doubt and reflect an estimate of the amount of loss expected. The general provision is for the inherent risk of losses which, although they have not been separately identified, are known from experience to be present in any loan portfolio. Provision made / reversed during the year is charged to the profit and loss account and accumulated provision is netted off against advances. Advances are written-off when there is no realistic prospect of recovery. When the Bank is the lessor in a lease agreement that transfers substantially all of the risks and rewards incidental to ownership of an asset to the lessee, the agreement is presented within loss and advances. Total net loans and advances increased by approximately 5% to PKR 125.60 billion from PKR 119.54 billion while deposit base was marginally reduced by 1.5% to PKR 174.5 billion compared to PKR 177.2 billion last year. The bank continues to maintain adequate liquidity. The advances to deposit ratio as at December 31, 2008 was 72%.

OTHER OUTFLOWS
INVESTMENTS:

One of the greatest myths about investing is that its only for the very wealthy. The fact is that Mutual Funds have made it possible for anyone to invest, even if it is a small amount. It is not how much you invest, but how you invest that matters. The first step towards developing an investment plan is to understand your needs. How long can you afford to stay invested, how much money you need, how much risk you are comfortable with and what are your goals, are some questions that need to be addressed at the onset. With limited investment options and a booming but volatile stock market, what is good for customer hard earned income is an important decision. Standard Chartered Investment Services help with the decision, once again, a first such service to be offered by any Bank in Pakistan. Since 2004, Standard Chartered bank is the first bank to offer a diverse portfolio of investment options to its valued customers. Offerings are designed to provide customer with an opportunity to diversify his/her investments, minimize risk and maximize returns! Investment options can be categorized into:
1. Government Securities:

These are issued by Government of Pakistan and include Special Savings Certificates (3 year investment) and Defense Savings Certificates (10 year investment)
2. Mutual Funds:

Standard Chartered Bank has partnered with the leading investment houses of Pakistan for distributing their mutual funds.

Mutual Fund Basics

A Mutual Fund is a pool of money that gives small investors access to a well diversified portfolio of equities, bonds, and other securities. Each shareholder participates in the gain or loss of the fund. Shares are issued and can be redeemed as needed (in the case of an open-ended fund). The fund's net asset value (NAV) is determined each day. Each mutual fund portfolio is invested to match the objective stated in its investment agenda Equity Funds An equity fund is one that is invested mainly in company equity through the stock exchange and is exposed to the risk of volatility associated with the equity market. Although this fund is the riskiest within the genre of mutual funds, it is also known to yield the maximum yields and dividends. Fixed Income Funds A Fixed Income Fund is one that invests in avenues which offer fixed returns over a set tenor. These funds are inherently linked to the general interest rate and are, therefore, unlike the stock market, safe from drastic fluctuation. The capital value is more easily sustainable while the returns are generally modest. However, active fund management can yield returns which are higher than most fixed income avenues in the market and therefore, it is an attractive investment avenue for investors with moderate risk appetites. Money Market Funds A Money Market Fund is one that invests in liquid, short-term avenues which offer fixed returns over short periods. These funds are inherently linked to the general interest rate and are,
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therefore, unlike the stock market, safe from drastic fluctuation. Underlying investment may include securities issued by corporate bodies, spread transactions, reverse-repo transactions, selective exposure in the CFS market, Term Finance Certificates (TFCs) and commercial paper. Balanced Funds These funds maintain a mix within equity and fixed income markets. The inclination of this mix will be dictated by the funds strategic intent and mission statement. This fund offers more maneuvering room to its fund managers as they have the option to switch between market types i.e. fixed income avenues and capital markets. Effectively, the risk associated to this category lies somewhere between that of equity funds and fixed income funds and the returns also vacillate correspondingly between the ranges of the two.

The Bank classifies its investments as follows: a) Held for trading These are securities, which are acquired with the intention to trade by taking advantage of short term market / interest rate movements and are carried at market value. The surplus / deficit arising as a result of revaluation at market value are taken to income. b) Held to maturity These are securities with fixed or determinable payments and fixed maturity that are held with the intention and ability to hold to maturity. These are carried at amortized cost. c) Available for sale These are investments that do not fall under the held for trading or held to maturity categories and are carried at market value. The surplus / deficit arising as a result of revaluation at market value is kept in a separate account below equity. d) Subsidiaries Investments in subsidiaries are carried at amortized cost.

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Investment by Segment:

INVESTMENT POLICIES:
The Banks Treasury invests its deposits in profitable ventures. The funds, which are not required for lending in the foreseeable future, prove to be a source of the Banks investment portfolio. The Bank aims at obtaining the maximum income with the minimum exposure to risk. The Treasury usually deals in stocks at the national and the international level. The Treasury deals with international trading. At the national level it invests in federal investment bonds, treasury bills, and national investment units (NIT) and Federal and Provincial loans. The whole amount of funds generated from various sources is not invested because it is a requirement of the State Bank of Pakistan to keep a certain percentage of funds with it as assigned capital. The Treasury also deals in the sale and purchase of different currencies.

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FINANCIAL STATEMENTS SCBP:

BALANCE SHEET:

BALANCE SHEET ANALYSIS:

Pakistan's banking sector has remained remarkably resilient, despite pressures emanating from weakening macroeconomic environment. Enhanced capital requirement since last couple of years has resulted in consolidation within the industry which we expect to continue in the near future. Capital adequacy of the banking system was 11.8% at end-Sep'08. Tier 1 capital ratio of the banking system was 9.7%. However, challenges remain in terms of NPLs emanating from some of the more leveraged sectors. Total assets of the bank grew to PKR 264.6 billion from last year's PKR 255.5 billion mainly due to increased lending in wholesale banking. Total net loans and advances increased by approximately 5% to PKR 125.60 billion from PKR 119.54 billion while deposit base was marginally reduced by 1.5% to PKR 174.5 billion compared to PKR 177.2 billion last year. The bank continues to maintain adequate liquidity. The advances to deposit ratio as at December 31, 2008 was 72%.
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PROFIT AND LOSS ACCOUNT:

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PROFIT AND LOSS ACCOUNT ANALYSIS:

Overall revenue of the Bank grew by 3% to PKR 23.0 billion for the year ended December 31, 2008 as against PKR 22.3 billion in 2007. Net Mark-up / Interest income of PKR 16.4 billion was marginally higher than last year. Wholesale banking Net Mark up / Interest income was 57% higher than last year primarily due to an increase in its advances portfolio. This growth was offset by a reduction in the consumer banking interest income as at December 31, 2008. Consumer banking advances has reduced primarily due to the decision of the bank to be extra prudent on both secured and unsecured products. Non mark-up / interest income was 8% higher than last year primarily due to increase in Consumer banking income on account of value added Wealth management products. Despite double digit inflation and significant investment in technology, branch network and infrastructure, non mark-up expense have increased only by 4% to PKR 12.62 billion compared to last year PKR 12.16 billion. In line with our growth strategy the distribution network was further enhanced by 33 branches. Total network now stands at 174 branches in 41 cities compared to 141 branches last year. For convenience of our customers 40 ATMs and 6 Cash Deposit Machines (CDM) were also added during the year under review. Profit after tax of the current year was PKR 630 million resulting in basic/diluted earnings of PKR 0.16 per share.

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CASH FLOW STATEMENT:

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SUBSIDIARIES OF SCBP:
1. Standard Chartered Leasing Ltd:
Profile: Standard Chartered Leasing Ltd., a subsidiary of Standard Chartered Bank (Pakistan) Limited, has been in the forefront of the leasing business since 1993. Standard Chartered Leasing Limited has maintained its unique market position. It caters to the customers leasing need through customized lease products which are cost effective and simple. Standard Chartered Leasing core business is lease financing with a focus on corporate, small and medium enterprises. It also offers unique investment opportunities to Individual and Corporate / SME customers through certificate of investments. Standard Chartered Leasing is an investment grade company with existing PACRA credit ratings of AA - for long term and A1+ for short term. These ratings indicate low expectation of credit risk emanating from very strong capacity for timely payment of financial commitments. We operate in the major cities of Pakistan including: Lahore, Islamabad, Faisalabad, Sialkot, Hyderabad, Peshawar along with its registered office in Karachi. Standard Chartered Leasing is also listed on all the three Stock Exchanges in Pakistan. Standard Chartered Leasing Ltd is 86.50% owned by Standard Chartered Bank (Pakistan) Ltd. Standard Chartered Leasings existing paid up capital is PKR 978 million which meets the minimum capital requirement set by the Securities and Exchange Commission of Pakistan (SECP). Company: The authorized capital of SCLL is PKR. 1 billion, whereas the paid up capital is PKR 978 million. This meets the minimum capital requirement of the Securities and Exchange Commission of Pakistan (SECP). Network: The Head office and branch are located in Karachi, whereas others branches exist in Lahore, Islamabad, Faisalabad, Sialkot, Hyderabad and Peshawar. Business Strategy: Aggressive marketing coupled with risk minimization forms the basis of SCLL business strategy. Leasing is SCLL's core business and the company constantly strives to meet needs of its
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customers. SCLL concentrates on medium term financing and has provided lease finance facilities to a number of industrial as well as infrastructure related projects. In pursuance of its policy of sharing risks and rewards with other leasing companies, SCLL actively strives to participate in quality syndications. Furthermore, in order to augment the growth of small & medium-scale industry in Pakistan, SCLL has been on the forefront of providing lease facilities to small and medium enterprises and consumers. Management: The Management team of Standard Chartered Leasing Limited comprises of experienced executives from the financial sector. They bring with them diverse practical knowledge and expertise which ensures efficient working of the Company.

2. Standard Chartered Services Of Pakistan (Pvt) Ltd:

Company Overview: Standard Chartered Services Of Pakistan (pvt) Ltd. operates as a subsidiary of Standard Chartered Bank (Pakistan) Limited.

3. Standard Chartered Modaraba (SCM):

Established in 1987, and listed on the Karachi and Lahore stock exchanges, SCM is now one of the largest modarabas in the country.

Products:

Standard Chartered Modaraba , at present, offer the following Islamic products to our
customers: Ijarah Leasing Companies can obtain financing for various assets financing from SCM through leasing. We lease vehicles, computers, machinery, and equipment to companies and cash flows can be tailor made to suit individual company needs.

Musharika Partnership Financing This is a mode of Islamic finance where two or more parties provide capital towards financing of a particular project. Profits are shared on a pre-agreed ratio but any losses are borne on the basis of equity participation.

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Morabaha Cost Plus Financing This is a contract sale between the financier and its client for the sale of goods at a price, which includes a profit margin agreed by both parties. As a financing technique it involves the purchase of good by the financier as requested by its client. The goods are sold to the client with a mark-up. Repayment, usually in installments, is specified in the contract.

SHARE PRICE OF SCBP (SNAPSHOT):

PRICE: 9.000 PKR Summary
Change 0.100 (1.124%) Open 8.900 PKR High 9.200 PKR Low 9.000 PKR

As on June 03, 2011

Earnings
Earnings 0.950 Price/Earnings 9.474 Relative P/E 0.923

Fundamentals
Shares (Millions) 3,871.585 Market Cap (Millions) 34,844.270 ROE 7.387 Beta vs. KSE100 1.124

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