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BANK AUDI SYRIA sa
Annual report 2009
TABLE OF CONTENTS
Financial Performance Summary
3
The Board of Directors’ Report to the General Assembly of Shareholders in 2009
5
Corporate Governance Guidelines
6
Main Founders (establishment phase)
15
Organizational Chart of Bank Audi Syria sa
16
Related and Sister Companies
18
Syrian Economy’s Performance
19
Syrian Banking Sector’s Performance
21
Banking, Regulatory & Legal Environment
24
Major Structural Developments of Bank Audi Syria in 2009
26
Financial Performance of Bank Audi Syria in 2009
27
Auditor’s Report
40
Consolidated Financial Statements
42
Addresses and Branches
2
104
bank audi syria’s Financial
Performance Summary
Total assets
CAGR
(06-09) 61.9%
SYP billions
75.55
Loans & advances to customers
(net)
SYP billions
30.00
80.00
26.10
70.00
58.60
20.00
19.31
15.00
40.00
36.38
30.00
9.83
10.00
20.00
17.79
10.00
2007
2008
2009
Customers deposits and Margin
accounts
SYP billions
0.00
4.88
5.00
0
2006
2007
2008
2009
Profit for the year
CAGR
(06-09) 66.4%
CAGR
(06-09) 1013%
SYP billions
800.00
80.00
67.10
700.00
70.00
624.54
60.00
52.14
50.00
400.00
365.60
30.00
300.00
258.80
200.00
20.00
14.56
100.00
10.00
0.00
2007
2008
2009
600.00
500.00
40.00
32.52
2006
25.00
60.00
50.00
2006
CAGR
(06-09) 74.8%
0.45
2006
0.00
2007
2008
2009
3
selected financial highlights of bank audi syria
SYP ‘000’
Liquid Assets
Dec 2009
47,250,599
Dec 2008
36,976,268
Loans & Advances to Customers (net)
26,100,199
19,305,772
Other Assets
829,793
880,586
Fixed Assets
1,366,501
1,436,641
75,547,092
58,599,268
1,012,302
2,058,286
Total Assets = Total Liabilities & Equity
Due to Banks
67,102,176
52,142,234
Other Liabilities
Due to Customers & Margin Accounts
1,302,995
1,332,021
Equity
6,129,618
3,066,728
Liquid assets to assets
62.5%
63.1%
Net liquid assets to deposits
68.9%
67.0%
Loans to deposits
38.9%
37.0%
Structural Ratios
Fixed assets to equity
Assets / Equity
Bank deposits to customers deposits
22.3%
46.8%
1232.5%
1910.8%
1.5%
3.9%
88.8%
89.0%
53.93%
55.16%
Return on average assets
0.93%
0.77%
Return on average equity
13.6%
12.4%
Total Shares
5,000,000
2,500,000
Average Shares for the Period
3,410,959
2,500,000
183.1
146.24
Customers’ deposits / assets
Profitability Ratios
Cost to net income
Shares Data
Basic & diluted earnings per share for equity holders of the parent
4
The Board of Directors’ Report to the
General Assembly of Shareholders in 2009
In the wake of turbulence in the global financial markets
since late 2008, and residual repercussions into 2009,
Bank Audi Syria managed to overcome the difficult global
circumstances that led to a local financial slowdown and
maintained a healthy growth and development pace,
through astute management of the sources and usage of
funds. The different performance indicators growth rates
of the Bank in 2009 clearly showcase the efficiency and
flexibility adopted by the Bank in that period, to withstand
the different challenges.
•In 2009, the Bank grew its total assets by 29%, or SYP 17
billion, reaching SYP 75.5 billion at the end of the period.
This growth proved to be the highest among private
traditional banks according to initial figures for 2009;
•Customers’ deposits and margin accounts volume
increased by SYP 15 billion, reaching an aggregate of
SYP 67 billion at the end of the period. This translates
into net increase of 29% compared to last year.
•The Bank deployed approximately 45% of the increase
in deposits in the form of direct credit facilities, thus
reaching a total portfolio size of SYP 26 billion at the end
of 2009, reflecting a growth rate of 33% compared to
2008.
•The Bank’s net profit increased during this period by
71% over the results of 2008, despite diminishing returns
from the international markets and reducing spreads in
the local markets, thus closing the 2009 financial year
with a net SYP 624.5 Million.
These performance indicators confirm the Bank’s ability to
maintain high performance in different circumstances, by
being flexible and responsive in its policies and interaction
with the Syrian market dynamics.
With regard to retail banking products and services, the
Bank sought to emphasise organic growth, rather than
horizontal growth, therefore increasing the depth and
scope of its product offerings. This strategy was geared to
fulfill the needs and aspirations of the different segments
in the Syrian market. Furthermore, the Bank sought to offer
outstanding services in its branch network across Syrian
cities and governorates, and leveraging this network to
achieve an increase of 43% of its customer base compared
to 2008.
In terms of corporate and commercial lending, the Bank
is well aware that a healthy banking system is fostered on
its ability to facilitate the transfer of funds to the various
productive sectors of the economy. In that regards, during
2009, the Bank continued to target different productive
sectors with the aim of providing comprehensive banking
services. These services include syndicated loans, long-
term loans, and commercial facilities to support the trade
sector. In addition, the Bank offered loans to small and
medium enterprises (SME), such as a specialized loan for
the professionals in the health sector allowing them to
upgrade their equipment and premises. All of this lending
activity was developed within a balanced framework of
maturities management, aiming to keep liquidity related
risks under a healthy and constructive control.
The bank was keen on listing its shares on the Damascus
Stock Exchange on the inauguration of the market, as
another proof of the bank’s role and support of all activities
and steps taken for the development of a modern and
healthy financial sector in Syria. Moreover, in cooperation
with Audi Saradar Group, the Bank launched the ‘Audi
Index of the Stock Market’ and continued publishing the
‘Syrian Economic Report’ as a firm belief in the importance
of bringing awareness onto the latest developments in the
Syrian economy.
The Bank continued to assume its civic role, which it
considers to be a part of its fundamental values, through
continuously offering academic scholarships and actively
participating in different social activities.
For the second year in a row, Bank Audi Syria was granted
the ‘Best Emerging Market Bank in the Middle East’, by
Global Finance for 2009. This prize was in recognition
of the Bank’s achievements in offering the best financial
services, its contribution to the economy as a whole, and
the value it is creating to institutions and individuals alike.
The Board of Directors confirms the accuracy of the
financial statements published in this report, certified
by the appointed Auditor. The Board also confirms its
ongoing commitment to implement and maintain effective
financial control mechanisms to guarantee the efficiency
of the Bank performance.
Finally, we would like to thank the Bank’s employees who
have shown, throughout different periods that they are
the pillars upon which successes and achievements are
built. Their exemplary attitude towards their duties and
responsibilities is the best example of a harmony between
their individual awareness and the Bank’s general interest.
For this reason, they deserve praise, appreciation, and
support.
Deputy-Chairman & General Manager Bassel Hamwi
Chairman
Georges Achi
5
Corporate Governance Guidelines
1
Summary of
Corporate
Governance
Guideline for Banks
by the traditional and Islamic banks operating in Syria.
These Guidelines apply to all banks operating in Syria and
their affiliated institutions, as well as any other financial
companies specified by the Monetary and Credit Council.
The Chairman of the Syrian Securities Exchange also
issued the Code of Best Practices on 29th June 2008. The
Central Bank- the Credit and Monetary Council set as
deadline the beginning of 2010 for banks to be compliant
with the Guidelines regulations.
The purpose of the Corporate Governance Guidelines in
traditional and Islamic banks operating in the Syrian Arab
Republic is to provide a framework for the governance of
these banks to be used by the Board of Directors in order
to protect the interests of the shareholders and others
stakeholders. Accordingly, these Guidelines define the
rules for the composition of the Board of Directors, the
role of the Chairman of the Board, the different activities
of the Board and its committees, the proper environment
for monitoring and control, transparency and disclosure.
Such a framework guarantees the continuity, consistency
and effectiveness of the Board of Directors’ approach to
managing the Bank’s affairs.
3
Steps by Bank Audi
Syria to apply
Decision No. 489
2
Summary of the
Steps for Issuing
the Corporate
Governance
Guidelines by Syrian
Authorities on 8th
April 2009 under
Decision No. 489/MN/B4
Public authorities in Syria have developed Corporate
Governance by modernising laws and regulations. The
Central Bank - the Credit and Monetary Council issued
the Corporate Governance Guidelines on 8th April 2009
under the Decision No. 489 /MN/B4. This Decision set the
adoption of the aforementioned Governance Guidelines
6
In order to comply with the Corporate Governance
Guidelines under Decision No. 489, the Board of Directors
of Bank Audi Syria ratified the Corporate Governance
Guidelines at its meeting held on 25th November 2009 and
the Board’s Risk Committee Charter and Remuneration
Committee Charter. The bank will comply with the
guideline’s rules in 2010, in relation to the election of
committees and other terms as well.
4
Bank Audi Syria’s Board of Directors
Chairman
Dr. Georges A.Achi
Deputy Chairman & General Manager
Mr. Bassel S. Hamwi
Members of the Board
Mr. Raymond W. Audi, representative of Bank Audi sal, Audi–Saradar Group
Mr. Samir N. Hanna, representative of Bank Audi sal, Audi–Saradar Group
Dr. Freddie C. Baz, representative of Audi Saradar Investment Bank sal
Mr. Elia S. Samaha, representative of Lebanon Invest sal
Mr. Adnan N. Takla
Dr. Ahmad M. Al Abboud
Mrs. Rana T. Zein
Advisors to the Board
Mrs. Nada N. Assaad
Mrs. Yasmina R. Azhari
Mr. Abdulateef A. Al-Rajihi
Mr. Mohamed Said Z. Zaim
Legal Advisor Sarkis Law firm
External Audit
Ernst & Young
5
Management
Top Management
Mr. Bassel S. Hamwi* Mr. Antoine G. El-Zyr* Senior Management General Manager
Deputy General Manager
Mr. Mahmoud A. Kurdy* Mr. Jamil R. Shocair* Mr. Fady A. Obeid*
Assistant GM/Chief Financial Officer
Assistant GM /Head of Corporate
Banking Division
Assistant GM/Head of Retail Division
Branch Network
Regional Manager (North Area)
Mr. Melhem J. Abou-Antoun
Main Departments
Mr. Abdulrahman M. Abrash
Mr. Jamil R. Samaha
Mr. Gilbert G. Ghosn
Mr. Mohamad A. Chamseddine
Mr. Mohannad S. Kandil
Mr. Elie N. Kanaan
Mr. Kenan K. Aslan
Mr. Shadi N. Khoury
Mr. Hussein A. Jaber
Mr. Jean E. Homsy
Mr. Khaled H. Midani
Deputy Chief Financial Officer
Head of Operations & Correspondent Banking Department
Head of Treasury Department
Head of Human Resources Department
Head of Information Technology Department
Head of Credit Risk Management Department
Chief Accountant
Head of Branch Network Management Department
Head of Sales & Business Development Department
Head of Engineering Department
Head of Administration Department
General Manager Office
Head of Legal Department
Senior Internal Auditor
Head of Compliance Unit
Mrs. Rawia V. Osta
Mr. Dany A. Chamoun
Mr. Iyad S. Saleh
* Member of the executive committee
7
6
Biographies of the Members of the Board
of Directors
Dr. Georges A. Achi
Mr. Bassel S. Hamwi
•Chairman of the Board of Directors of Bank Audi Syria sa
•Deputy-Chairman of the Board of Directors of Bank Audi
Syria sa
•Chairman of the Audit Committee
•Former Chairman of the Board of Directors in Bank Audi
SAL – Audi-Saradar Group, from August 2008 till end of
2009
•General Manager of Bank Audi Syria sa
•Holds a Doctoral Degree in Law from the University
of Paris and a Doctoral degree in Economics from the
University of Geneva.
Has worked in the banking sector in Syria prior to the
nationalization and then moved afterwards to Lebanon
and held the General Manager position in various banks.
He was elected as the Chairman of the Board of Directors
of Crédit Commercial du Moyen-Orient sal (CCMO) from
1988 to 1997; at that time when CCMO was merged with
Bank Audi sal.
He was also elected in 1989 as Chairman of the Association
of Banks in Lebanon and served two mandates until 1993.
He is currently the Secretary General of the Association
Board as well as the head of the Board legal committee. He
is also a member of the Board of Directors of the National
Institute for the Guarantee of Deposits and Kafalat.
Georges Achi is the author of several publications in
finance and banking.
In 2004, he was appointed Advisor to the Chief Executive
Officer of Bank Audi SAL.
He was also involved in structuring and setting up the
Damascus Securities Exchange in March 2009, and was
elected as Deputy Chairman of its Board of Directors.
He is also a member of the Syrian Business Council (SBC),
the Banking Training Centre (BTC) and the International
Chamber of Commerce (ICC) in Syria.
Mr. Hamwi led the team which structured Bank Audi Syria
and was responsible for its initial public offering, the most
successful IPO in Syria to date.
Mr. Hamwi served 14 years in the International Finance
Corporation (IFC), the private sector arm of the World Bank
Group, where he worked on financing several industrial
projects such as cement and hotels, and other sectors
such as technical consultation to countries in the financial
and banking sectors.
Mr. Hamwi was responsible for IFC’s activities in Islamic
finance in the region and the financial sector in the Gulf
States.
Mr. Hamwi holds a Masters in International Finance and
Bachelor’s in Business Computer Information Systems
and Organizational Management from the University of
North Texas.
Mr. Hamwi is a participant in Harvard’s Presidents Program
at the Harvard Business School, and is the author of
several publications in Finance & Banking.
8
Mr. Raymond W. Audi
Mr. Samir N. Hanna
•Member of the Board of Directors of Bank Audi Syria sa,
and a representative of Bank Audi sal.
•Member of the Board of Directors of Bank Audi Syria sa
and Representative of Bank Audi sal.
•Member of the Board of Directors of Bank Audi France
•Member of the Board of Directors and General Manager
of Bank Audi sal – Audi Saradar Group
•Member of the Board of Directors of Bank Audi
Switzerland
•Chairman of the Board of Director of the Libano-Arabe
– Société d’Assurances et de Réassurances in Lebanon.
Raymond Audi was born in Saida in 1932, a Lebanese
national. He completed his secondary education at St.
Joseph College Beirut.
He worked with his two brothers, Georges and Jean, in
banking, and founded Bank Audi sal in 1962. He became
the General Manager of the Bank and later a Chairman
in 1998. Raymond Audi served as President of the
Association of Banks in Lebanon from November 1993 to
November 1994. He has been the Secretary General of the
Association Board since 2001.
•Chairman of the Executive Committee of Audi Saradar
Group
He was born in Beirut in 1944, a Lebanese national.
He started his banking career in January 1963 and held
various positions across many departments of the Bank.
In 1975, he moved to the United Arab Emirates where he
was appointed as a General Manager of ‘Investbank’, part
of Bank Audi, for 8 years. He relocated to Lebanon in 1982
and was appointed as a General Manager of Bank Audi
Lebanon in 1989.
In the early 1990s, Mr. Hanna worked on and implemented
an expansion and restructuring strategy of the Bank,
transforming it into a solid financial institution offering
universal banking products and services.
He is currently the Chief Executive Officer of the Group and
he is heading the development of the group into becoming
a leading regional financial institution in the MENA region.
9
Dr. Freddie C. Baz
Mr. Elia S. Samaha
a representative of Bank Audi Saradar
representative of Lebanon Invest sal
•Member of the Board of Directors of Bank Audi sal - Audi
Saradar Group
•General Manager in Bank Audi sal – Audi Saradar Group
•General Manager and Group Chief Financial Officer and
Strategy Director of the Group
•Member of the Board Executive Committee of Bank Audi
sal - Saradar Group
•Manages the relations with Correspondent Banks and
Financial Institutions.
•Responsible for the Regional Expansion of Bank Audi sal
in Syria and Jordan
Dr. Baz joined Bank Audi sal in 1991 as Advisor to the
Chairman and founded the Secretariat for Planning and
Development.
He currently has overall authority over finance, accounting,
MIS and the budgeting function across the group, and is
responsible for the development of the Group strategy.
Dr. Baz is also the Managing Director of Bankdata Financial
Services WLL, which he founded in 1985, the publisher of
‘Bilanbanques’, the only reference in Lebanon providing
an extensive structural analysis of all banks located in
Lebanon.
Dr. Baz holds a State Doctoral Degree in Economics from
the University of Paris I (Panthéon – Sorbonne).
He joined the Bank Audi in 2007, moving from Citibank/
Citigroup where he had started his career in 1980 as a
Management Associate in the Corporate Bank in Beirut.
Of his 27 years with Citigroup, he spent 15 years in
Athens, Dubai, Abu Dhabi and Cairo, with short-term
assignments in New York and London. He focused on
country management and business development as well
as on Corporate Banking, Corporate Finance, and Risk
Management. His last assignment with Citigroup was as
Managing Director in charge of the Citigroup franchise in
Egypt and of Corporate Banking and Corporate Finance
for the Levant and North Africa region.
Elia Samaha is a member of the Middle East advisory
Board of the Suliman S. Olayan School of Business at the
American University of Beirut.
He holds a Bachelor’s Degree in Economics from the
American University of Beirut.
10
Mr. Adnan N. Takla
He was born in Homs in 1939, a Syrian national, and
completed his secondary education at School of Shweir
in Lebanon in 1956. He has been involved in trading
since 1962 and he has performed many projects in the
contracting sector since 1970 to date. He is an industrialist
and owner of a ceramics factory since 1994.
He was born in Deir-Ezzor in 1935, a Syrian national. He
is an agricultural engineer and holds a Master’s in ‘Crops
Protection’ from the USA.
Mr. Abboud is the Chairman of the Board of Directors of
Abboud Group in Syria.
11
Mrs. Rana T. Zein
Ms. Nada N. Assaad
•Advisor to the Board of Directors of Bank Audi Syria sa
She was born in 1965 in Damascus, a Syrian national.
She completed her secondary education at the American
School in Athens, Greece in 1982.
She holds a degree in Marketing Administration from
DEREE, the American College of Greece in Athens.
Rana Zein is a member of the Board of Directors of
Naftomar Shipping and Trading Co, and a member of the
International Leaders in Cleveland Clinic Foundation, also
a sponsor of Cleveland Clinic Foundation Healthlink in
Athens, Greece.
She is a member of the Muscular Dystrophy Association
in Athens, Greece.
She was born in 1981 in Damascus, a Syrian national.
She holds a Bachelor’s in Business Administration from
the American University of Beirut.
She started her career as a Deputy CFO at Lead for Trading
and Contracting in June 2002, and became the CFO in
June 2004.
12
Nada Assaad is the Chairwoman of the Board of Directors
of Al Jumail Group since 2006, and an Advisor to the Board
of Directors of the Syrian Arab Insurance.
She is an active member of various groups and organizations,
most importantly ‘Basma’ for supporting children with
cancer, the Syrian Business Council and the Syrian Young
Entrepreneurs Association (SYEA).
Ms. Yasmina R. Azhari
A Syrian national, holds a Bachelor’s of Art in French
Literature from Tishreen University. She is a partner and
Administrative Manager at P&O Nedlloyd shipping agency.
She is also a representative of “NMCP” a Netherlands
Management Corporation Program, and an Honorary
Consul of Netherlands in Lattakia and Tartous. She is the
Head of Lattakia Business Women Committee.
He holds a Master’s of Business Administration (MBA)
from the American University of Beirut. He is currently the
Chairman of the Boards of Directors of Tradeco Global
Engineering & Construction S.A in Geneva, Switzerland,
Swiss-Attixs Development W.L.L Manama, Bahrain, and
Abdulateef Al Rajihi Group, Khubar, Saudi Arabia
Yasmina Azhari is a representative of the Dutch Private
Co., “G&M Partners”, which offers services, training,
and development courses for international tourist
establishments, and is also a member of the Lattakia
Chamber of Commerce and Industry. She was named
in ‘Forbes’ magazine as one of 50 Most Powerful Arab
businesswomen.
She is the Chairman of the Board of Directors of Mawred
in Syria and head of Bashaer Al Nour NGO, a member
of the Arab Businesswomen Council, the Syrian Business
Council, a member of the Board of Directors of Tartous
Port, and a member of the project of United Nation
Advisory Council of the Global Charter on Syria.
Furthermore, he is the General Manager of al Khatt Printing
in Dammam, Saudi Arabia, and the Regional Manager of
the al Rajihi Bank of the Eastern Region in Saudi Arabia.
He is currently a member of Board of Directors of Islam
Jordanian Bank for finance and investment in Amman,
Jordan, and the Rajihi Trading Group, Riyadh, Saudi
Arabia.
13
Mr. Mohamed Said Z. Zaim
7
Duties and
Responsibilities
of the Board
of Directors’
Committees
Risk Committee
The Risk Committee recommends to the Board of Directors
the risk policy that is appropriate for the Bank’s ability and
risk appetite. It reviews the Top Management performance
in credit risk management, markets risk, liquidity risk,
operational risk, compliance, and other.
Governance and Remuneration
Committee
He was born in Aleppo in 1969, a Syrian national.
He continued his studies at Boarzell Tutorial College
in Sussex, United Kingdom. He holds a Bachelor’s
of Business Administrations and Economy from the
American College of Switzerland in Luzern Switzerland
(1993-1998). He is currently working for Unexim Group on
project establishment and development. He is a founding
member and the Director of Riyadh Electric Wires and a
member of Riyadh Electric Wires in Saudi Arabia. He is a
founding member of Electric Appliances and Equipment
Associates in Lebanon. He is a partner and DeputyChairman of the Modern Company for Cables Industry in
Damour, Lebanon.
Furthermore he is a founding member and DeputyChairman of the Board of Directors of Unexim Group
in Beirut, Lebanon and Akar for tourism, the holding
company for the Blue Lagoon in Aleppo, Syria. Also, he is
a founding member, partner and Deputy-General Manager
in the United Company for Tourism and Travel in Aleppo,
Syria.
14
The Corporate Governance Committee establishes
the governance framework and guideline, monitors
its implementation and suggests amendments when
necessary. The committee also ensures the transparency
of the election, renewal, or replacement of members or the
Chairman of the Board of Directors and the Chief Executive
Officer. It evaluates the efficiency of the Board of Directors
and each Board member independently, as well as the
performance of the Executive Managers. The committee
guarantees the transparency of policies of remuneration,
bonuses, and allowances for the members of the Board
and the Executive Managers.
Audit committee
This committee supervises the control function, compliance
and financial disclosure in general, and reviews in particular
financial reports, audit and control systems. Moreover, it
reviews the adequacy and results of internal and external
audits and the accounting issues that have a vital effect on
the financial statements.
Main Founders - Establishment phase
Bank Audi sal – Audi Saradar group
Audi Saradar Investment Bank sal
Lebanon Invest sal
Mrs. Huda A. Muhanna
Mrs. Hadia A. Debs
Mr. Bassel S. Hamwi
Mr. Adnan N. Takla
Dr. Georges A. Achi
Mr. Mohamad Ayman M. Al Asfari
Mr. Hammad M. Al-Attasi
Mr. Riad G. Zein
Mr. Imad G. Zein
Mrs. Nada N. Assaad
Mrs. Mayya N. Assaad
Mr. Mohamad Saied Z. Al Zaim
41%
3%
3%
2%
5%
4%
3%
2%
2%
2%
2%
1%
1%
1%
1%
1%
1%
15
Functional Organizational Chart of
Bank Audi Syria sa
General Management Office
- Audit Department
- Legal Department
- Compliance Unit
Assistant General
Manager - Head of Retail
Retail Division
Human
Resources
Department
16
Information
Technology
Department
Credit Risk
Management
Department
Central
Operations &
Correspondent
Banking
Department
Sales &
Business
Development
Department
Consumer
Lending
Department
Branch Network
Management
Department
Functional Organizational Chart of Bank Audi Syria sa
Board of Directors
General Manager
Executive Committee
Deputy General Manager
Assistant General
Manager - Head of
Corporate Banking
Assistant General
Manager - Chief Financial
Officer
Corporate Banking
Division
Finance & Administration
Division
Corporate
Lending
Department
SME Lending
Department
Administration
Department
Engineering
Department
Treasury
Department
Finance
Department
Division
Department
17
Related and Sister Companies
Audi Capital Syria ltd.
With an aim to fulfill an effective role in achieving ongoing and
promised changes in the Syrian Market, and emphasising
the concept of a Syrian bank that offers comprehensive
services to Syrian citizens and the economy, Bank Audi
Syria established Audi Capital Syria Limited with a capital
of SYP 270 Million, owned at 99.999% by Bank Audi
Syria.
This company offers the following range of services:
1.
Consultations and analysis of published data
relating to the stock market. It provides customers
and others with advice, or consultation, in return for
fees or commissions.
2.
Stock brokerage that includes:
a- Buying and selling stocks on behalf of others
in exchange for commissions.
b- Trading stocks directly for Audi Capital Syria
in the stock market.
3.
Managing IPOs without underwriting. This includes
managing and marketing stocks on behalf of the
issuing company. In addition, it involves preparing
bulletins and carrying out all required research and
procedures for issuing and listing the stocks.
4.
Investment management of stocks and funds.
This service covers portfolio management for third
parties (investment management) in accordance
with an agreement signed with the broker. The
agreement defines the investment policy as well as
authorities and duties of the investment manager.
These activities also include the management of
joint investments funds.
As a subsidiary of Bank Audi Syria and Audi Saradar
group, the company gains from the wide technical and
field expertise of these financial companies. Moreover,
the company stands to gain experienced and technical
expertise from the comprehensive support of Bank Audi
Private Bank, which is a related company to Audi Saradar
Group. Audi Capital will start its activities by mid 2009.
18
Syrian Arab
Insurance sa
Syrian Arab Insurance is a sister company of Bank Audi
Syria, a part of Audi Saradar Group, and is 5% owned by
the Bank. The company was established in 2006 with a
capital of SYP 1 billion, representing 2 million shares. The
company offers special programs and various services
that consist of a wide range of insurance policies. These
policies are designed to appeal to all segments of Syrian
society, citizens and companies. The most important
of these are automobile, property, travel, engineering,
accident, health, and life insurance.
The company is adopting a framework to ensure
transparency and fruitful partnerships with its clients,
employees, and providers, in order to achieve healthy and
long-standing success.
The Arab Syria Insurance reported a profit of SYP 70.9
million, a growth of 39% above 2008. It achieved, since
inception, an annual growth of SYP 60.5 million, thus
increasing profit by 35.45% per share. The total assets of
the company reached SYP 2.1 billion as at end 2009, and
reported a total average growth of 23% since inception.
Development of Syrian Economy in 2009
During 2009, the Syrian economy experienced a slowdown
as it was directly affected by the consequences of the
global financial crisis. However, it neither suffered a
recession nor a deflation, at the GDP level.
According to the International Monetary Fund, the global
economy has experienced a negative growth in real
GDP (at the end of 2009) averaging -1.3%, compared
to 3.2% in 2008. The Middle East and MENA regions, in
SYP billions
3,000
5.2%
5.1%
2,500
4.3%
4.5%
2.535
6.0%
2.437
5.0%
2.025
2,000
4.0%
1.709
4.0%
1.491
1,500
3.0%
1,000
2.0%
500
Nominal
Gross
Domestic
Product
(GDP)
Real
GDP
growth rate
1.0%
2005
2006
2007
2008
*2009
*expected
general, experienced a growth decline to 2.4% and 2.5%,
respectively, versus 6.2% and 5.2% in the previous year.
The Syrian economy reported a real growth of 4.0% in 2009
versus 5.20% in 2008, and an average growth in nominal
non-oil GDP of 7.7% in 2009 versus 30.5% in 2008. The
real sector was noticeably affected by the impact of the
global crisis mainly in the export and total consumption
components.
Syrian export of products dropped by -13.5% compared
to last year, following many years of consistent annual
positive growth averaging 13.0% between 2005 and 2008.
This decline was mainly due to a decline in oil exports
which reported a negative growth of -36.8% in 2009
compared to the annual total recorded growth of 4.8%
between 2005 and 2008. Non-oil exports dropped by
-5.2% in 2009. This was a consequence of the resilience
of such export products as agriculture, fabrics, and cotton,
as the demand for these products was less affected by the
financial crisis.
The financial crisis had a negative impact on the
consumption growth of the private and public sectors. A
negative growth of -9.4% and -0.2%, respectively, reflected
negatively on the total level of consumption in 2009,
representing a drop of -8.2% compared to an average
annual growth of 20.6% between 2005 and 2008.
As for domestic investments, a positive average growth
of 15.0% was maintained in 2009, whereas the public
sector’s investments witnessed a growth of 44.0%. As
for private sector investment, the pace of growth slowed
down by 1.9% compared to the pre-crisis period.
Moreover, it is worth mentioning the effect of remittances
of workers abroad and direct foreign investments, on the
real sector in Syria. Worker transfers were affected by the
tough economic circumstances amid the financial crisis, in
particular within GCC countries which host more than 1.5
million Syrian expatriates. Workers either suffered a pay
cut or lost their jobs, consequently leading to a decline in
their cash flow. As for direct foreign investments, the lack
of liquidity in the region following the fall in oil prices, and
the deterioration of the global and local financial markets,
resulted in a decline in growth (not deflation) in 2009.
In conclusion, the effect of the global financial crisis on
the Syrian economy was inevitable. However, the reform
process in the Syrian economy is capable of revitalising the
path towards structural growth over the foreseeable future.
19
The components of the Syrian GDP
(Gross Domestic Product)
nominal gross domestic product (gdp)
(At current prices, SYP million)
Nominal Gross Domestic Product (GDP)
2005
2006
2007
2008
*2009
1,491,000
1,709,000
2,025,000
2,535,000
2,437,000
Growth rate
14.4%
17.1%
21.2%
34.2%
-3.7%
ow Oil GDP
357,000
404,000
467,000
639,000
400,000
Growth rate
CAGR
20052008
19.4%
CAGR
20052009
13.1%
21.4%
2.9%
18.7%
15.8%
24.9%
15.6%
18.2%
46.7%
-37.3%
1,134,000
1,305,000
1,558,000
1,896,000
2,037,000
Growth rate
11.5%
17.6%
22.1%
30.5%
7.7%
Real GDP growth rate
4.5%
5.1%
4.3%
5.2%
4.0%
4.9%
-2.9%
677,467
743,134
882,671
1,016,744
886,465
14.5%
7.0%
24.7%
12.1%
21.5%
23.5%
-12.6%
537,229
607,945
725,110
826,968
706,962
15.5%
7.1%
128,925
147,127
211,977
262,989
150,862
26.8%
4.0%
11.4%
8.0%
10.6%
6.4%
17.9%
11.3%
16.5%
16.1%
24.3%
18.2%
4.3%
13.1%
ow non-oil GDP
+Imports of goods and services
Growth rate
o.w. Goods
Oil
113.9%
16.6%
47.4%
33.0%
-42.5%
Non-oil
Growth rate
408,305
460,818
513,133
563,979
556,100
Growth rate
13.9%
15.3%
13.9%
17.9%
-1.2%
140,237
135,190
157,561
189,776
179,502
12.8%
-1.5%
19.2%
29.2%
-5.2%
2,168,508
2,451,548
2,909,237
3,553,372
3,325,716
17.4%
15.5%
21.4%
31.0%
-6.2%
322,056
391,361
455,625
509,535
584,880
3.8%
24.2%
19.1%
19.9%
15.0%
Services (Payments)
Growth rate
=Aggregate supply
Growth rate
Domestic investment
Growth rate
o.w. Private sector
183,393
232,424
279,450
352,365
358,239
Growth rate
11.7%
29.5%
23.0%
35.2%
1.9%
o.w. Public sector
138,663
158,937
176,175
157,170
226,641
-5.0%
17.1%
13.4%
-4.3%
44.5%
+Total consumption
Growth rate
1,225,602
19.3%
1,391,126
16.0%
1,678,725
23.4%
2,147,145
37.2%
1,966,659
-8.2%
20.6%
12.5%
o.w. Private Sector final consumption
Growth rate
1,034,754
22.1%
1,192,882
17.8%
1,415,475
21.4%
1,868,295
41.5%
1,688,841
-9.4%
21.8%
13.0%
190,848
198,244
263,250
278,850
277,818
13.5%
9.8%
6.1%
6.2%
35.8%
13.6%
-0.2%
620,850
669,061
774,887
896,692
774,177
13.0%
5.7%
21.9%
10.1%
18.5%
24.1%
-13.5%
Goods
471,020
521,577
584,208
708,777
589,568
14.6%
5.8%
o.w. Oil
223,441
207,223
217,214
257,221
162,142
4.8%
-7.7%
22.2%
14.6%
7.8%
5.4%
17.9%
11.3%
Growth rate
o.w. Public Sector final consumption
Growth rate
+Exports of goods and services
Growth rate
Growth rate
25.8%
-5.2%
7.2%
27.0%
-36.8%
o.w. Non-oil
247,579
314,354
366,994
451,556
427,427
Growth rate
26.7%
29.8%
19.4%
31.9%
-5.2%
Services (Receipts)
149,830
147,484
190,679
187,916
184,609
Growth rate
=Aggregate demand
Growth rate
*expected
20
10.0%
0.6%
32.2%
5.7%
-1.6%
2,168,508
17.4%
2,451,548
15.5%
2,909,237
21.4%
3,553,372
31.0%
3,325,716
-6.2%
Development
of the Syrian
Banking Sector
and Bank Audi Syria
Performance
Development of the Syrian
Banking Sector
Syria witnessed a continuous expansion in banking
activities in 2009. Banking groups reported a growth of
7.5%, as of September 2009, reaching SYP 129.8 billion
(annual growth of 10%). The sector volume reached SYP
1.862 billion as at end of September 2009.
The Syrian banking sector was immune to the losses that
hit global and regional financial sectors. This was due to
the limited involvement of the Syrian banking sector within
global markets, and the conservative control policy of the
Central Bank of Syria, whereby it prevents banks from
investing in local and regional stock market portfolios. The
effects of this crisis on banking performances are reflected
in the relative performance of the Syrian banks, particularly
private banks, compared to the considerable drop in
realised gains of liquid investments in global financial
businesses. However, a fall in interest rates suppressed
margins on interest. Therefore, such gains from the lending
growth could not compensate, amid the slowdown of the
Syrian market, into more moderate economic growth,
as previous levels. Private Banks’ lending increased by
13.8% in the first 9 months of 2009 (annual growth of
22.7%) compared to 84.0% in 2008. The contribution of
the private banking sector to increased lending for the
private sector dropped from 66.9% in 2008, to 31% in the
first 9 months of 2009.
banks, whilst the private banks maintained the ratio of
38% in the two periods.
The Syrian banking sector hasn’t experienced noticeable
changes as a result of the global financial crisis. However,
in a country that seeks to play an expanding role in the
regional financial services sector, a group of challenges
have emerged. These involve sustaining the primary
revenues amid the relative deterioration of the business
environment, and the improvement of the financial
performance indicators in general. Nevertheless, the
expansion of the Syrian banking market continued in
spite of the global financial crisis. That’s evidenced by the
establishment of private banks such as Fransabank and
Bank of Jordan, in addition to Chark Bank, Qatar National
Bank, and the Islamic Al-Baraka Bank. Other banks in the
region, traditional and Islamic, are to obtain licences to
enter the Syrian market.
Deposits of the private sector are the main driver of the
growth for the Bank’s activity. It exceeds three quarters
of total assets of the Banks. The total deposits of the
private sector, as at September 2009, reached SYP 899
billion. This gives an average growth of 10.2% (annual
growth of 13.5%), of which SYP 383 billion are in private
banks. Concurrently, these banks grew by 17.1 % in the
same period (annual growth of 22.8%) compared to 30%
in 2008. This growth allowed private banks to sustain a
growing share of the market, reaching 42.6%, as at the
end of September 2009, compared to 40.1% in 2008.
Furthermore, the banking sector continued to deploy the
deposits of the private sector in the form of advances
offered to the private sector. The ratio of advances versus
deposits rose from 47% in 2008 to 50.9% in September
2009 in the sector as a whole. This ratio rose from 54.3%
to 60.5% between 2008 and September 2009 in public
21
syrian banking sector – total assets
SYP mill
Banking Sector Total Assets
Growth
o.w. Public Banks
Growth
o.w. Private Banks
2004
2005
2006
2007
2008
Sep-09
1,250,260
1,342,953
1,410,440
1,593,982
1,732,149
1,861,973
5.7%
7.4%
5.0%
13.0%
8.7%
7.5%
1,224,024
1,247,726
1,227,645
1,304,006
1,344,089
1,406,571
3.4%
1.9%
-1.6%
6.2%
3.1%
4.6%
26,236
95,227
182,795
289,976
388,060
455,401
Growth
Conventional Banks
26,236
Growth
263.0%
92.0%
58.6%
33.8%
17.4%
95,227
182,795
271,064
341,909
389,659
263.0%
92.0%
Islamic Banks
48.3%
26.1%
14.0%
18,912
46,151
65,742
144.0%
42.5%
Growth
Private Banks M.Share
2.1%
7.1%
13.0%
18.2%
22.4%
24.5%
Private share of Change
39.2%
74.4%
129.8%
58.4%
70.99%
51.87%
total deposits from syrian private banking sector
SYP mill
Deposits from Private sector
Growth
by Public Banks
Growth
by private Banks
2004
2005
2006
2007
2008
Sep-09
438,459
477,794
585,854
715,778
816,493
899,375
11.4%
9.0%
22.6%
22.2%
14.1%
10.2%
418,471
410,918
436,371
464,047
489,240
516,282
6.3%
-1.8%
6.2%
6.3%
5.4%
5.5%
19,988
66,876
149,483
251,731
327,253
383,093
Growth
Conventional Banks
19,988
Growth
234.6%
123.5%
68.4%
30.0%
17.1%
66,876
149,483
233,923
289,048
333,805
234.6%
123.5%
56.5%
23.6%
15.5%
38,205
49,288
114.5%
29.0%
Islamic Banks
17,808
Growth
4.6%
14.0%
25.5%
35.2%
40.1%
42.6%
44.5%
119.2%
76.4%
78.7%
74.99%
33.15%
total credit to syrian private banking sector
SYP mill
Credit to Private sector
Growth
by Public Banks
2004
2005
2006
2007
2008
Sep-09
147,770
222,528
254,750
304,980
389,878
457,951
35.1%
50.6%
14.5%
19.7%
27.8%
17.5%
143,362
205,474
219,335
237,397
265,519
312,457
Growth
31.0%
43.3%
6.7%
8.2%
11.8%
17.7%
by private Banks
4,408
17,054
35,415
67,583
124,359
145,495
286.9%
107.7%
90.8%
84.0%
17.0%
17,054
35,415
65,903
110,183
125,439
286.9%
107.7%
86.1%
67.2%
13.8%
1,680
14,176
20,055
Growth
Conventional Banks
4,408
Growth
Islamic Banks
Growth
743.8%
41.5%
3.0%
7.7%
13.9%
22.2%
31.9%
31.8%
11.5%
16.9%
57.0%
64.0%
66.88%
31.05%
22
Bank Audi’s
Performance
Initial disclosures of private and traditional banks show the
constant efficiency of Bank Audi Syria. It contributed to
29.0% of the increase at the level of private and traditional
banks in 2009. This secured a market share of 19.6%.
Bank Audi Syria played an effective role in the growth of
the banking private sector in the first 9 months of 2009.
This is revealed through the Bank’s contribution of 27.2%
of the total assets of private and traditional banks, or
19.3%, when including the growth of the assets of Islamic
private banks.
Therefore, the Bank market share among traditional
private banks increased from 17.1% in 2008 to 18.4% by
September 2009, and from 15.1% to 15.7% in the banking
sector as a whole.
SYP mill
At the level of deposits in the private sector, as at the first 9
months of 2009, Bank Audi’s contribution to the increase in
deposits was 25.1%, within traditional and private banks.
This ratio is 20.1% within the private banking sector as a
whole. The Bank increased its share from 18% to 19%
between the end of 2008 and September 2009.
Bank Audi Syria contributed a third of the increase in the
credit portfolio of traditional and private banks. It increased
its market share from 17,5% to 18.9% between the end of
2008 and end of September 2009. This contribution would
have amounted to 20.9% if private and Islamic bank lending
was included, consequently, 16.3% of the market share.
2005
2006
2007
2008
Sep-09
Dec-09*
BASY Total Assets
17,788
36,383
58,599
59,121
71,589
75,547
BASY Share of Change (Private
Conventional Banks)
14.6%
21.1%
31.4%
1.8%
27.2%
29.0%
BASY Share of Change (Private Banking
Sector)
14.6%
17.3%
22.7%
1.2%
19.3%
19.7%**
Market share (Private Conventional Banks)
9.7%
13.4%
17.1%
16.0%
18.4%
19.6%
Market Share (Private Banking Sector)
9.7%
12.5%
15.1%
13.7%
15.7%
16.8%**
* based on the initial data for the private banks’ results of the end of 2009
** The ratio misses the numbers of the Al Cham Islamic bank, it wasn’t available until the date of publishing.
SYP mill
BASY Total Deposits
2005
2,157
2006
14,560
2007
32,521
2008
52,142
Sep-09
63,371
Conventional Banks)
4.6%
15.0%
21.3%
35.6%
25.1%
Banking Sector)
4.6%
15.0%
17.6%
26.0%
20.1%
Market share (Private Conventional
Banks)
3.2%
9.7%
13.9%
18.0%
19.0%
Market Share (Private Banking Sector)
3.2%
9.7%
12.9%
15.9%
16.5%
SYP mill
2005
2006
2007
2008
Sep-09
17
4,885
9,832
19,306
23,724
Conventional Banks)
0.1%
26.5%
16.2%
21.4%
29.0%
Banking Sector)
0.1%
26.5%
15.4%
16.7%
20.9%
Market share (Private Conventional
Banks)
0.1%
13.8%
14.9%
17.5%
18.9%
Market Share (Private Banking
Sector)
0.1%
13.8%
14.5%
15.5%
16.3%
BASY Total Lending
23
Banking, Regulatory and Legal Environment
Introduction
Operating banks in Syria are subject to the authority of
the Credit and Monetary Council. The CMC regulates
the function and effectiveness of banking and financial
institutions to help develop the monetary and financial
market and ensure its stability according to the needs
of the national economy. Furthermore, it maintains the
purchasing power of the Syrian currency and exchange
rate stability. It operates within its authority and under the
government’s general economic guidelines, approved by
Council of Ministers.
The Credit and Monetary Council consists of:
The Governor of the Central Bank of Syria, as Chairman;
The Deputy Governor of the Central Bank of Syria, as a
Deputy;
The Head of State Planning Commission, the Assistant
to the Minister of Trade and Commerce, the Assistant to
the Minister of Finance, the Assistant to the Minister of
Agriculture, and the Assistant to the Minister of Industry all
act as Members; and Three Experts.
The global financial
crisis and coping
mechanisms
The global financial crisis impacted negatively the world
economy during 2008. Global markets are still suffering its
consequences, which are expected to last for an extended
time, and which may leave damaging results that influence
all economic sectors.
This crisis showcases the importance of the effective role
the government can play in controlling and balancing
macroeconomic conditions. The uncontrolled expansion
of the activities of global institutions, on balance sheet
or off balance sheet, basis was the main factor that
destabilized the global financial system. Banking and
financial controls were not sufficient and comprehensive
enough for all aspects of the financial sector; additionally
there were weaknesses in regulatory frameworks for risk
management and liquidity. To rectify this, supervisory
24
institutions are currently working to tighten regulations
and improve efficiency.
Despite the events that shook global economic stability,
the effect of the crisis on the Syrian economy was very
limited due to many factors. Most importantly, effective
banking supervision was carried out by the Central Bank
of Syria, who adopted a rigorus of standards and controls.
These were compatible with international accounting
standards and agreements, most importantly Basel II.
In addition, the role of the Government Commission for
Banks at the Central Bank of Syria was further developed.
This Commission is directly responsible for banks and their
performance. The Central Bank of Syria had been keen to
enhance the standards of banking supervision by training
employees in the department, and improving their skills at
both office and field supervision levels.
The compliance of Syrian banks with regulations,
instructions, and supervisory controls, protected banks from
facing difficulties and turbulence. The most important areas
targeted by these regulations and controls are the exchange
rate, the foreign currency, Basel II standards for banking
supervision, the maximum limits for available facilities, and
banking deployments and investments abroad.
The Credit and Monetary Council, carries out, as a part
of its constant activity, the development of its existing
resolutions, and the enactment of new ones. For 2009,
these can be summarised as follow:
•Resolutions to regulate facilities, banking deployments
and investments.
These resolutions determined the maximum limits of
facilities or placement of funds, and the basis to be followed
to ensure the highest degree of guarantees. For example,
a paragraph was added to Resolution no. 395 pursuant
to Resolution no. 483 that clarified accepted guarantees
to reduce the value of granted or used facilities. In similar
vein Resolution no. 501 replaced pre-existing Resolutions
no. 100-114-173-248-339 to achieve compliance with the
‘risk concentration principles’ of the Basel Committee for
Banking Supervision. The concentration ratios in banks
balance sheets and mother company is 25% of equity and
75% of accounts in and off balance sheet; this is done
after weighing according the bank’s classification and
types of balance sheet accounts. It also prevented dealing
with fiduciary accounts, and set a ceiling of investment
in government or regular securities, the same as those
applied to investing in shares and fixed assets.
•Regulatory Resolutions for work performance in the
banking sector
In this context, Resolution no. 534 provides for the
formation of an independent department, the ‘Department
of Compliance’, which reports directly to the Bank’s Board
of Directors. This is done to ensure its independence and
its responsibility for maintaining compliance with laws and
regulations in force. In particular, laws and resolutions
related to money laundering and financing terrorism,
Resolution no 489 relating to the Corporate Governance
Guidelines for banks operating in Syria.
•Regulatory Resolutions for activating the development
process
These regulations encourage banks to fund development
projects by increasing the ratios that define the volume
of granted facilities to equity, such as Resolution no.
461 which raised granted facilities from 25% to 35% of
equity as defined by Resolution 395. It allows the funding
of tourism projects according to a “Build, Operate, and
Transfer (B.O.T)” principle up to 50% of the project value as
defined by Resolution no. 490, or by allowing the decrease
of the level of the Obligatory Reserve Requirement.
cash inflows and outflows during certain periods to which
ratios must be complied to.
In order to adhere to the policy of a tight approval process
and improving the quality of the securities and guarantees,
Resolution no. 597 was issued providing guidelines and
special treatment for the risk classification of debts and
accumulation of Loan Loss Provision.
•Resolutions to combat money laundering and terrorism
Resolution no. 590 was issued to allow the banks to offer
Syrian citizens foreign currency, thereby enabling them
to fund international credit or debit cards. This resolution
superseded Resolution no. 396 and its Executive
Instructions no. 474; In addition, resolution no. 607 was
issued imposing the usage of crossed checks.
As the CMC fulfils its role in the organization, coordination
and regulation of the work of different financial institutions,
and the Central Bank of Syria fulfils its role in handling
the monetary policy and supervising its implementation,
the result benefits the banking sector as whole and is
reflected in better regulation and supervision, leading to
the stability, prosperity and growth of the sector.
This is defined in resolution no. 502 which reduces level
of the Obligatory Reserve Requirement whenever facilities
are directed towards the industrial sector. It is important
to note that Bank Audi Syria benefited from Resolution
no. 461, and was granted the approval to fund the two
companies, Lafarge and Al Medsteel, pursuant to CMC
Resolution no. 587.
•Regulatory resolutions that contribute to the banking
stability
There are a number of resolutions that deal with this
aspect:
Resolution no. 460 authorised the Central Bank of Syria to
provide liquidity to different banks under specific conditions
and interest rates. This is an important resolution aiming at
supporting banks suffering from liquidity squeeze.
Resolution no. 462 allowed a bigger margin for interest
rates pricing.
Resolution no. 500 stated that direct and indirect credit
facilities were prohibited to relatives of members of the
Board of Directors as well as to any related company of
members of the Board of Directors.
In order to comply with international standards for
managing liquidity, Resolution no. 588 was issued to set
the volume of liquidity available in the bank at 30% of all
currencies, and 20% of Syrian Pounds for every working
day. It implemented an additional method to measure
liquidity based on ‘maturities mismatch’ to compare future
25
Major structural Developments
of Bank Audi Syria in 2009
Bank Audi witnessed three major structural developments
in 2009: its listing on the Damascus Securities Exchange;
its increase in capital from SYP 2.5 billion to SYP 5 billion;
and the issuing of the final licence for Audi Capital ltd.
Listing Bank Audi’s
Shares on the DSE
The Bank has a role in supporting various developments
that are taking place in Syria in general, and in the financial
sector, in particular. The Bank was the first company to
be listed on the Damascus Securities Exchange at its
inception on 10th March 2009. The value of Bank Audi
Syria’s shares was first established at SYP 1380, on the
day of listing, to close at SYP 1914 at the end of 2009.
This is a solid increase of 39%. Note that this takes into
account a reduction in the share price on the DSE on 26th
June 2009, due to an increase in capital by 100%.
Increase Bank Audi
Syria’s Capital
To keep up with the growth of the Syrian economy
whilst adhering to the provisions of local regulations,
international standards of capital adequacy, and domestic
factors relating to the expansion of Bank Audi Syria and
its desire to maximize gains for its shareholders, the Board
of Directors obtained the approval of the shareholders on
the 2nd October 2008, to increase the capital from SYP 2.5
billion to SYP 5.0 billion.
The Bank increased its capital in 2009 over two phases.
The first phase was during the IPO from 24th June 2009
to 13th July 2009, during which the Bank’s shareholders
exercised their right to preferential subscription, within the
limits of the number of shares owned by each shareholder.
The second stage, from the 14th July 2009 to the 2nd
August 2009, covered the surplus from the first phase of
the subscription.
The Bank’s shareholders demonstrated their confidence
26
in the Bank’s performance and increased their investment
in the Bank by subscribing for 99.22 % of shares on
offer in the first phase. Therefore there was a surplus of
19.324 shares that remained for subscription, reaching an
oversubscription of 699.26% in the second phase. The
total coverage to shares offered reached 104.6%. The
capital increase was accomplished to be effective from
20th August 2009.
Audi Capital ltd.
Audi Capital was launched in 2009. It is a limited liability
company registered in the commercial register under
no /15663/ on the 27th January 2009. The company will
provide financial brokerage services on the Damascus
Securities Exchange. The company was granted the final
licence by the Syrian Commission for Financial Market &
Securities (SCFMS) on March 17 2009, and is planned to
begin its activities by mid-2010.
Bank Audi Syria’s Performance 2009
1
Human Resources
Development
Evolution of the employees
distribution in the headquarters and
the branches
300
250
279
239
195
200
In accordance with Bank Audi Syria 2009 strategy,
which consists of developing the HR function, and
given Management belief in the positive impact such a
development would have on employees’ performance,
the process of generating policies and procedures was
accomplished to organize employees’ work at the bank. On
another role, the focus was on improving the level and skills
of existing staff rather than recruiting external candidates
in order to provide employees with development and
advancement opportunities.
Along the above lines, the Bank strived to motivate
employees and develop their skills and expertise by
offering them training courses in different areas. The
number of trainees reached 1,617 with an average of
30 training hours per employee. On the other hand, new
employees underwent different internal training programs
to meet future work responsibilities.
147
150
100
50
2009
0
Branches
Headquarters
By the end of 2009, 67% of employees were holders of
graduate or post-graduate degrees and worked either in
banking operations (in branches and at the headquarters)
or in other departments. The remaining employees (13%)
are educated up to an intermediate level and occupy
supporting positions at the Bank.
Distribution of employees by
educational level
12%
Distribution of training courses
according to their type
33%
overseas training
courses
55%
88%
local training
courses
in-house training
courses
Distribution of the human capital
among employees and trainees
500
400
474
386
300
200
100
113
27
0
2008
2009
Employees
Trainees
Lower to
intermediate
education
post-graduate
education
(or higher
education)
9%
3%
2008
Undergraduate
Education
(or University
Education)
The Bank worked as well on increasing the percentage of
Syrian citizens in the banking sector by giving priority to
the hiring of local talent to occupy managerial positions in
accordance with the resolutions of the Ministry of Labor
and Social Affairs.
Bearing this in mind, the Bank launched during 2009 a
3 to 6-month “Accelerated Development Program” for
managerial positions. The objective of this program was to
develop local staff technical and supervisory skills in order
for them to assume their fiduciary responsibilities vis-à-vis
our customers that we consider, at Bank Audi Syria, as our
top priority.
As a result of Bank Audi’s belief in developing human
capital and investing in internal talents, priority was given
to promoting bank employees. Thus, the percentage of
internal promotions at Bank Audi Syria rose to 16% in
2009 as opposed to 9% in 2008.
27
The Bank’s management strategies are based on
guidance, development and the provision of opportunities
to demonstrate personal skills and creativity. Bank Audi
Syria employees enjoy many privileges and benefits, some
of which are basic entitlements and some of which are
additional benefits granted by management to ensure the
total comfort of employees, such as the expansion of the
health insurance network and the possibility of covering
female employees’ families that are not insured elsewhere.
It’s worth mentioning that the number of employees, who
were entitled to educational grants for their children in
2009 reached 39 employees. On the other hand, 62 of the
employees’ children benefited from this grant.
Bank Audi Syria also grants personal loans to its employees
to meet their financial needs, according to certain universal
fixed terms and conditions approved by the Central Bank
of Syria. These loans totaled SYP one and a half million.
In addition, the Bank also grants its employees consumer
loans, one of the products offered to its clients, without
exceeding the employee’s legally permitted level of debt.
Human resources activities in 2009 were crucial, as the
Bank’s carefully appointed and trained staff are the main
driver of our growth and the representatives of our six core
values and ambitious future goals.
2
Commercial and
Syndicated Loans
2.1
Policy of Commercial Lending of
Bank Audi Syria
A healthy banking system is the most important factor
supporting economic growth. It generates a supply of
financial resources into the economy, particularly via
lending to productive sectors.
Based on the effective role of Bank Audi Syria in the
banking sector, the Bank adopted a credit policy that
achieves a balance between the need to support large
investments that drive the economy in Syria, and the need
to maintain an acceptable level of risk.
Accordingly, Bank Audi Syria has adopted since its
inception a credit policy to provide most productive sectors
with comprehensive banking services. The services range
from granting loans to small and medium-sized institutions,
to offering commercial facilities for the activation of trade
exchange, long-term loans to productive sectors (in
particular industry and tourism), or syndicated loans for
large projects. The Bank has always sought to provide
loans and advances to different sectors, and to sustain
a balanced credit portfolio between long term loans and
short term facilities used to finance the production cycle
28
and working capital. This is to maintain adequate liquidity
in order to reduce associated risks.
2.2
Lafarge Syndicated Loan
Bank Audi sal - Audi Saradar Group arranged and acted
as book-runner of a syndicated loan for Lafarge to finance
a cement project in Syria with a production capacity
of SYP 2.75 million tons per annum. Bank Audi led the
syndication of 15 banks in Syria, Lebanon and Jordan,
in addition to the European Investment Bank (EIB), the
Danish export credit agency Eksport Kredit Fonden (EKF)
and the Société de Promotion et de Participation pour la
Coopération Economique (PROPARCO). The total value of
the loan was USD 340 million, distributed into two parts.
The first was in Syrian pounds for a 5 years period and the
second was in US Dollars for a 7 years period. This loan
was the largest syndicated loan in Syrian history and the
first of its kind in the region.
Lafarge cement factory is one of the largest development
projects in Syria. Moreover, it is the biggest foreign direct
investment (FDI) that has taken place in Syria in decades.
The project is characterised by the following:
•The creation of many new job opportunities for people in
the area of the factory in Aleppo region;
•Consumption of local raw material and production of
cement which is a strategic product in the development
of the Syrian economy. Furthermore, this project will
generate a surplus in foreign currency because it reduces
the need imports ; and
•Producing good quality cement will maximise the export
of surplus of this product and other local products. This
will result in a flow of foreign currency.
Bank Audi sal plays an essential role in this syndication
loan, as summarised by the following:
•The Lender: Bank Audi sal is the lender of the syndication
loan.
•The Issuing Bank: facilitates importing the machinery
and equipment for this project.
•Syrian Lenders’ Agent: represents the lenders in their
internal relationship, the relationship with the borrower,
and the relationship with third parties, including the rest
of the external creditors and government organizations.
•Syrian Security Agent: represents the lenders in their
internal relationship, the relationship with the borrower, and
the relationship with third parties including the rest of the
external creditors and government bodies. Moreover, Bank
Audi Syria sa will act as a trustee of the guarantees and will
hold the legal documents relating to these guarantees.
2.3
Small and Medium Loans
Small and medium-sized enterprises play a vital role in
economic growth, creation of jobs and the activation of
local and regional development. They help to secure social
harmony and to enhance women’s status and that of the
younger generation of entrepreneurs. The role of these
loans in the restructuring of the economy and fighting
poverty and unemployment has been recognized by Bank
Audi Syria. Accordingly, the Bank launched a special unit
for financing small and medium-size projects, becoming a
leader in financing this important sector.
Despite the difficulties faced by small projects, often
characterised by limited or poor production capacity, or
inadequate invested capital, Bank Audi Syria, was in a
short period of time able to achieve a good increase in the
percentage of loans offered to these projects. It increased
them as a percentage of the credit portfolio and also
maintained a high quality of loans.
The Bank’s initiative to finance small businesses has
motivated other banks to follow. This has reflected
positively on the financing conditions, therefore enabling
small and medium businesses to obtain funding in Syria
2.4
New Products for Small and
Medium-Sized entreprises in 2009
Bank Audi Syria launched a range of products addressed
to small to medium-sized businesses in 2009, following
a study on the Syrian market. The Bank launched a loan
in June 2009 designed for the medical sector to allow
them to purchase equipment or to own their practicing
premises. Bank Audi Syria was the first private bank to
launch a medical loan.
The Bank’s initiative to support the Syrian medical sector
encouraged other banks to launch similar loans, which in
turn would be reflected positively on the medical sector
in terms of both quality of service and quantity of the
available premises and equipment.
The Bank also developed other banking services for
other economic sectors with a focus on improving the
mechanism for granting loans and services to customers.
3
Bank Audi Syria’s
Strategy in Retail
Banking Services,
Marketing and Sales
3.1
Bank Audi Syria Strategy in Retail
Banking Services
Bank Audi Syria strived to maintain a high standard of
service to its customers by offering pioneering products
that meet the needs and aspirations of the Syrian society.
Indeed, the bank adopted a strategy aiming at working on
customer retention by enhancing current clients’ loyalty to
the bank, in addition, to its continuous efforts to attract
new customers and spread banking awareness among
the Syrian society both on the professional and private
levels, such as car loans; where selling opportunities were
maximized by a dynamic direct sales force that promoted
the bank’s product in the most important car exhibitions,
such as the ’ SYRMOTOR SHOW’ in Damascus in addition
to exhibitions in the other Syrian cities like Aleppo, Lattakia
and Homs. In these occasions, the bank welcomed visitors
in an elegant stand, presented them with impressive
car loan offers, granted approvals & executed car loans
in record time. Clients were also directed to the bank’s
representative offices in different car dealerships spread
across the country.
As for the electronic banking products, Bank Audi Syria
has largely expanded its portfolio of payment cards
following the receipt of a formal licence from MasterCard
International enabling the Bank to be the first and only
private bank in Syria that holds an official license from
MasterCard to issue international and local cards. The
bank was also able to expand its point of sales network
at retailers in the country and launch two debit cards,
Gold and Platinum, in addition to a unique co-branded
credit card - MTN MasterCard - in cooperation with MTN
(available for local &/or international use).
The Gold and Platinum debit cards are characterized
by their smart design and the higher withdrawal limits
compared to Visa card. Accordingly, the customer’s
purchase power reaches SYP 220,000 for the Gold card
and SYP 300,000 for the Platinum one. Moreover, these
cards have enhanced security features as the client
receives a confirmation SMS on his/her mobile following
each transaction made through the card.
The launching event of these cards took place in September
2009 at the Four Seasons Hotel in Damascus with top
representatives from MasterCard, Bank Audi Syria & Bank
Audi SAL Audi Saradar Group in charge of the electronic
banking business.
The MTN MasterCard on the other hand was launched
in November 2009. It is the first co-branded credit card
ever to be launched in Syria between a bank and a leading
international telecom company. This card was able to
combine special features and benefits from both the
banking and mobile telecom worlds to create a unique
loyalty program. Accordingly, the cardholder earns 5 free
local call minutes from mobile to mobile for every 2,000
SYP spent on a POS or 4,000 withdrawn on an ATM
accepting MasterCard cards. Moreover the cardholder
benefits from a free MTN golden number, free international
access, free international roaming without guarantee
deposit requirement in addition to a VIP treatment at MTN
CSP. The credit limit of this card reaches 1.5 million SYP.
This joint credit card was also launched in a press
conference at the Four Seasons Hotel in Damascus in the
presence of representatives from the top management
of MasterCard, Bank Audi Syria and MTN. Participants
29
highlighted the significance of the electronic banking
products as fast and reliable payment solutions available
now to Syrian citizens. The launch of MTN MasterCard was
accompanied by a full-fledged advertising campaign going
from newspapers, daily, weekly and monthly magazines
to websites, radio ads and billboards in addition to the
flyers available at Bank Audi Syria’s branches and MTN
Customer Service Points. The slogan was” Redeem free
talk using your card”
In line with its urge to continuously improve customer
experience and make sure up to the standard customer
care is being granted to its clients, the marketing and
research department at the bank prepared & conducted
surveys all throughout 2009 to gather clients’ comments
and suggestions and follow-up on their needs.
The bank also carried out market studies on the
developments in the Syrian banking environment
customer’s behaviours and needs. Accordingly, the bank
was a pioneer in launching products and services that
correspond to the aspirations of the society and positively
reflect on the Syrian economy.
The marketing and Business Intelligence unit is also
responsible for product development and staff training prior
to launch sought to improve employees’ performance through
ongoing training sessions which focused on customer needs
as well as developing the employees’ customer services
skills, selling skills and problem solving skills.
As for the newly launched products and services, the retail
marketing and sales division built-up a diversified portfolio
including retail loans and electronic payment cards.
The Bank will resume its strategy in 2010, which will focus
on deposits acquisition through the launch of products
that preserve its existing customer’s base and expand it
steadily.
3.2
Retail Products and Services
In July 2009, Bank Audi launched the ‘Maxi Housing Loan’
which expands the house financing options available
to clients by allowing them to purchase a house under
construction that requires internal finishing. This product
is characterized by its flexibility as the Bank finances up
60% of the value of the property in core & shell, and up to
100% of the finishing cost at a competitive interest rate &
a tenure reaching 15 years. The additional finishing loan
on top of the house loan is disbursed to the client in three
phases according to the work in progress whereby the
client fills out the estimated cost of each period according
to the bill of quantities document provided by the bank.
Hence, the Bank fulfils the needs of those customers who
wish to buy a house in the suburbs or newly developed
areas for reasonable prices compared to city centres.
This unique housing loan program was accompanied by a
large advertising campaign under “Own your house & finish
it as you please ‘‫ ’متلك بيتك واكسيه على كيفك‬which lasted for
a period of 4 weeks and included billboards, newspapers,
magazines, radio ads in addition to flyers which have been
distributed to real estate agents..
30
This product expands the housing loan portfolio currently
available in the bank serving and satisfying the needs of
all segments in the Syrian Society.
The housing loan portfolio now includes 3 different
housing loan options
The Traditional Loan designed for individuals who have
savings and are able to pay a minimum of 35% of the
property price. This loan offers a low interest rate, over
tenure of 15 years.
The ‘FlexiPay’ Loan, allowing customers to pay adown
payment as low as 25% of the property price. The period
of this loan goes up to 20 years with a competitive interest
rate fixed for the first 4 years.
The Bank’s housing loan products have achieved a steady
success in the market, especially that they provide the
comfort and security of life and property insurance policies
over the period of the loan.
Furthermore, Bank Audi Syria has constantly offered its
customers modern and environment-friendly products.
Indeed, following the remarkable success of LCD and
Plasma loans in cooperation with Sony and Samsung,
the PC Loans in cooperation with Toshiba, and the Solar
heating systems with Prima group for renewable energy (Al
Tawfeer),the Bank was the first to launch a bundle of high
tech products such as the digital and video camera loans
with Sony in addition to interest free packages launched
on special occasions.
It is worth mentioning that the Bank always partners
with prestigious and professional companies which offer
products of high quality and within required standards.
Currently, Bank Audi Syria is preparing to launch a set of
innovative retail products which will enhance the bank’s
portfolio on both a local and regional level.
Finally, given the importance of diversifying bank accounts,
the bank is currently preparing to introduce new investment
programs designed to cater different segments of the
Syrian society. Such plans will enhance customer loyalty
towards the Bank and fulfill the needs of the expanding
customer base.
4
Bank Audi Syria’s
Corporate Social
Responsibility (CSR)
and Participation in
Conferences and
Exhibitions
Bank Audi Syria resumed participating in CSR activities
and continued its scholarship program ‘ ‫’ننمي طموحات شبابنا‬.
The 7 outstanding students who were granted the
scholarships will graduate in 2011 from Al Kalamoon
private university holding a BA in ‘Business Administration,
Banking and Finance’,
As for sponsoring relevant conferences relating to
the financial sector and investments, Bank Audi Syria
sponsored the Public Private Partnership conference (PPP),
organized by the British-Syrian Society in October 2009
through hosting its opening cocktail reception, which took
place at the Sheraton Hotel in Damascus, in the presence
of the official sponsors and participants. This conference
focused on three key sectors: infrastructure, transport, and
the energy segments of electricity, oil and gas.
The conference hosted a group of prominent speakers
from banking and global financial firms as well as executive
officials of the Syrian Government, in addition to private
banking sector representatives who highlighted on how
investment opportunities can be realised through the
private public partnership.
Spreading awareness and providing education related
to the development and changes in the Syrian economy,
Bank Audi Syria continued publishing the ‘Syria Economic
Report’ which includes periodic updated and accurate
studies on the of the Syrian economy in all sectors such
as tourism, agriculture, industry, services, foreign trade,
insurance‫ و‬banking, capitals and property. The Bank
invited the local and foreign press who operate in Syria to
a dinner gathering at the Four Seasons Hotel, Damascus,
in September 2009 to discuss this report and to put it in
use as a statistical and economic reference on the current
Syrian economy.
In an unprecedented initiative, and on the occasion of
the inauguration of the Damascus Securities Exchange
on March 10, 2009, during which the first official stock
exchange trading took place, Bank Audi Syria declared its
launching of the Audi Index:
“Audi Index (AIP)”
“Audi Index – Market Capitalization (AIMC)”
“Audi Index – Trading Volume (AITV)”
These indices were the first to monitor the Damascus
Securities Exchange activities and the launch of these
indices closely followed the evolution of the price of
stocks listed in the Syrian market and the market growth
in general, in addition to changes in the exchange size.
Bank Audi Syria launched these indices to be the first
institution to keep its customers, as well as all Syrian
citizens and investors informed about the state of the
market following each session, through total transparency
and clarity, monitoring economic performance and
available investment opportunities
Total assets
Billions of SYP
28.9%
75.55
80
70
61.1%
60
58.60
50
104.5%
36.38
40
30
20
17.79
10
0
2006
2007
2008
2009
5
Development of
Financial Activity of
Bank Audi Syria
5.1
Assets Growth
Bank Audi Syria grew its total assets by 28.9% in 2009,
equivalent to SYP 17 billion, reaching SYP 75.5 billion as
at Dec 31, 2009. Such substantial growth in total assets
reinforces the bank’s position in size among private banks
as it scored the highest contribution to the size growth of
the private and conventional banking sector for the second
year in a row registering 18.90% share of the increase in
total assets for 2009.
5.2
Use of Funds
The Interest earning assets has reached SYP 55.9 billion
as at Dec 31, 2009 growing by 23.8% compared to
Dec 31, 2008. Such revenue generating asset category
has captured the biggest share of the total bank assets
being 74% versus 77% in 2008. Given the local currency
investment opportunity limitation to customer lending
environment, the bank could strive to keep the interest
earning assets as the biggest contributor to the increase
in total assets of 63.3% in 2009, versus 77.4% in 2008.
Such growth in interest earning assets represents an
evident indicator of the Bank’s efficient Assets & Liabilities
management.
Analyzing the structure of Interest Earning Assets clearly
31
2009
Interest Earning Assets
Volume
2008
Balances with Banks
11,644,626,415
% of Total
Assets
15.4%
17,593,831,533
% of Total
Assets
30.0%
Placements with Banks
13,588,351,737
18.0%
6,103,238,735
10.4%
Loans and advances to customers (net)
26,100,199,495
34.5%
19,305,771,518
32.9%
35.2%
1,151,009,080
1.5%
1,960,049,457
3.3%
-41.3%
Investments - Loans and receivables
Investments - Available for Sale
Volume
Percentage
Change
-33.8%
122.6%
3,446,910,665
4.6%
232,653,482
0.4%
1381.6%
Total Interest Earning Assets
55,931,097,392
74.0%
45,195,544,725
77.1%
23.8%
Total Assets
75,547,091,806
100.0%
58,599,267,806
100.0%
28.9%
*After deduction of private equity of SYP 50 million in non interest-generating assets
Structure of interest earning
assets for 2009
2.1%
6.2%
20.8%
Loans and
advances to
customers (net)
Placements with
Banks
Balances with
Banks
24.3%
46.7%
InvestmentsAvailable for Sale
Investments-Loans
and receivables
Structure of interest earning
assets for 2008
4.3%
0.5%
Loans and
advances to
customers (net)
Balances with
Banks
42.7%
38.9% Placements with
Banks
Investments-Loans
and receivables
13.5%
InvestmentsAvailable for Sale
indicates the Bank’s continuous efforts to improve efficiency
of its Assets & Liabilities Management by reinforcing Interest
Earning Assets optimal structure towards captions yielding
higher returns. It’s noteworthy that the Bank could improve
its Interest Earning Assets structure under challenging
operating conditions depicting the Syrian Market
characterized by the limited investment opportunities.
This trend is evident as the share of loan portfolio, which
constitutes the biggest share of Interest-Earning Assets,
grew from 42.7% in 2008 to 46.7% in 2009. Such growth
came at the expense of the drop in bank placements
caption, which yield lower return than the loan portfolio,
from 52.4% in 2008 to 45.1% in 2009. Such development is
justified by substantial growth in loan portfolio being 35.2%
during 2009 which represents 63.3% & 40.1% of the growth
in Interest Earning Assets and Total Assets respectively.
Treasury management is also another supporting factor
to the optimization of Interest earning Assets structure,
whereby the Bank has targeted reducing current accounts
balances with correspondent banks to the minimum required
32
for liquidity and shifting the excess to deposit placements
with banks thus benefiting from the substantially higher
rates of returns. In parallel, the growth in both current
accounts and placements with banks combined of 6.50%
over 2008 amounting to SYP1.50 billion was exclusively
reflected in growth in bank placements caption. In effect,
the bank placements has grown by 122.6% to reach
SYP 13.6 billion thus representing 24.3% of total Interest
Earning Assets as at Dec 31, 2009. In contrast, the current
accounts with banks has declined by 33.8% in 2009 to
reach SYP 11.6 billion thus representing 20.8% of the total
Interest Earning Assets by end of 2009.
Finally, the deployments of the Bank’s investments reported
an increase of SYP 2.4 billion in 2009 thus growing by 110%
over 2008. Accordingly, the investment portfolio, which
includes financial assets in both accounting classifications
as loans and receivables and available for sale, has reached
SYP 4.6 billion at the end of the period. The investments
in financial assets available for sale has increased by SYP
3.20 billion in 2009 due to purchasing a portfolio of medium
term bonds thus benefiting from improvements in global
financial markets. Upon the sale of EuroBonds in 2009
classified as loans and receivables, this financial asset class
has dropped by 41.3% compared to 2008.
5.3
Assets Quality
5.3.1 Risk weighted assets and Capital Adequacy
The bank has maintained a 52% ratio of risk weighted
assets to total assets being a key indicator to the quality of
assets. This ratio is considerably good when benchmarked
to the good international norms of risk weight assets ratio
between 50% and 60%.
In reference to Basel II minimum requirements on
capital adequacy set at 8.00%, the Bank’s maintained
over adequate capital to cover its weighted assets
whereby the bank has reported a Basel II ratio for capital
adequacy of 15.44% in 2009 rising from 9.58% in 2008.
This increase was mainly due to the doubling the Bank’s
capital, a process which was completed in August 2009
and came as natural outcome of the Bank’s expansion plan
& growth on one hand, and in compliance to the 8.00%
minimum capital adequacy requirement in accordance
with the CBS resolutions and Basel II accord.
5.3.2 Loan Portfolio
The noticeable growth of loan portfolio in 2009 was just as
significant as that achieved in the past years. The size of
loan portfolio has reached SYP 26.1 billion in net terms as
at Dec 31, 2009 as compared to SYP 19.3 billion by end
of 2008, thus growing by 35%. Such performance has led
Bank Audi Syria to capture 18.60% of the total increase in
the loan portfolio of the conventional private banking sector
in 2009, being the second largest share of the increase.
With such noticeable growth of its lending portfolio, it’s
noteworthy that the Bank did not compromise its loan book
quality by maintaining its deliberate selective credit policy.
5.3.2.1 Breakdown of Loan Portfolio by Economic
Sector
Analyzing the loan portfolio breakdown by economic sector
indicates a growth of loans granted to both industrial sectors
and individuals thus increasing their share in total portfolio
at the expense of trade and real-estate sectors between
2008 and 2009. This emphasises the Bank’s effective role
and contribution to supporting the national economy and
providing premium services that address people’s needs
and thus help improve their lifestyles through making
available the relevant credit facilities and services.
It is important to mention that the industrial sector share
increased from 22% in 2008 to 31% in 2009. This comes
in line with government economic policy and the Central
Bank of Syria’s guidelines for stimulating the industrial
sector particularly depicted by the issuance of Credit
and Monetary Council Resolution no. 502 in 2009 which
stipulates a reduction in the mandatory reserve on deposits
against lending granted to industrial sector.
5.3.2.2 Distribution of Portfolio by Borrowers
The Bank maintained its role of supporting financing
extended to corporate clients reinforced by increasing its
capital to become the largest Bank with biggest capital in
the traditional private banking sector. Therefore, the Bank
propensity for lending increased and thus its capability to
finance bigger projects has increased, while respecting
Structure of net loans and advances portfolio by customer category (economic sector)
Billions of SYP
Financial
0%
1%
23%
Industrial
31%
42%
Trading
30%
5%
4%
Real Estate
Agricultural
1%
0%
2009
29%
IndividualRetail
35%
0%
5%
10%
15%
20%
the regulatory lending limits as stipulated by domestic
laws and Basel II accord as well.
Furthermore, the Bank didn’t undermine the role of small
and medium-sized companies. The results showed that
the loan portfolio granted to these companies increased
form SYP 98 millions in 2008 to SYP 441 millions in 2009;
i.e. doubling its share in total loan portfolio from 1.00% in
2008 to become 2.00% in 2009.
As for individuals, the Bank continued to offer the same
special retail services and loans as it was renowned for
in previous years. Accordingly, individual retail loans grew
from SYP 4.59 billion at the end of 2008 to SYP 6.8 billion
at the end of 2009. As a result, the retail loan portfolio
share in total loan portfolio has risen from 24% in 2008 to
26% at the end of 2009.
The contribution that Bank Audi Syria made to support
the lending needs of individuals was demonstrated by the
distribution of the portfolio by the borrowers in terms of
number of clients depicted by the ratio of retail clients to
retail borrowers being 99% by end of 2009.
25%
30%
35%
2008
40%
45%
Structure of net loans and
advances portfolio by custmer
category profile
80%
70%
76%
72%
60%
50%
40%
30%
26% 24%
20%
2009
10%
2% 1%
0%
Corporate
Retail
2008
SME
33
5.3.2.3 Distribution of Loan Portfolio by Tenor
The loan portfolio is systematically distributed among
the maturities brackets which maintains relatively narrow
maturity gaps, thus provides a sustainable and healthy
liquidity management.
5.3.3 Bank Placements
The Bank maintained its successful policy in concentrating
the deployments of deposits in foreign banks of high credit
rating as 45% of the placements portfolio is deposited in
banks rated between AAA+ and AA- followed by 50% in
banks rated between A+ and BBB-.
As for the geographical distribution, the Bank deployed
57% of its total bank placements with Syrian banks or
in other Middle Eastern countries followed by 35% in
European banks in 2009 compared to 59% share in 2008.
This reflected the Bank’s conservative strategy towards
countries likely to be more susceptible to the global
financial crisis.
Net loans and advances to customers by residual maturity for 2009
9000
8000
7.676
7000
6000
5000
4000
3000
2.718
3.576
3.306
2.758
1.996
2000
1.236
1000
1.132
1.016
686
0
less than
a year
1 to 3
month
3 to 6
month
6 to 9
month
9 to 12
month
1 to 2
years
2 to 3
years
3 to 4
years
4 to 5
years
more than
5 years
Structure of due from banks
based on credit risk rating
AAA- to +AAA
0%
5%
AA- to +AA
23%
34%
A- to +A
BBB- to +BBB
11%
27%
BB- to +BB
B- to +B
34
Structure of due from banks by
currency for 2009
5.3.4.1 Investment portfolio breakdown by Obligor
Credit Rating
1%
53%
37%
Euro
US Dollar
9%
Other
The investment portfolio is concentrated in institutions
with a high credit rating that ranged from A to AA- which
amounted to 73% of its total investment portfolio. With
such investment is place, the Bank has guaranteed a
reasonable interest margin on foreign currency and at the
same time avoided indulging in high risk opportunities that
would trigger investing in papers issued by institutions of
lower credit ratings.
Structure of investment based
on issuer credit rating*
Syrian pound
6%
Structure of due from banks by
currency for 2008
AA
10%
24%
10%
-AA
+A
2%
9%
14%
11%
14%
Euro
41%
A
-A
Not Rated
US Dollar
70%
Other
Syrian Pound
5.3.4 Investment Portfolio
In 2009 the bank has witnessed a satisfactory growth in
its investment portfolio which resulted in improvement of
revenue stream as well as a diversity in revenue sources,
which ensured growth quality and sustainability.
The Bank registered a growth in its investment portfolio
of 107% in 2009, to reach an average value of SYP 4.65
billion at end of period.
It is worth mentioning that investments are one of the few
and limited areas in which the Bank can deploy foreign
currency funds, especially after the sharp drop in global
Dollar and Euro interest rates worldwide.
*investment available for sale only
5.4
Sources of Funding
5.4.1 Customer Deposits and Margin Accounts
Customer deposits increased by 29% to reach SYP 67.1
billion at end of 2009, compared to SYP 52.1 billion as
at end of 2008. Such noticeable increase in deposits and
margin accounts between 2008 and 2009 constitutes
88.3% of the increase in total assets.
The Bank’s market share of conventional private banking
sector deposit base has reached 18.54% as at Dec 31,
2009 compared to 18.03% at the end of 2008. This increase
in the market share comes as a result of capturing over
20% of the increase achieved by the conventional private
sector, being the highest share of increase during 2009.
35
Customer deposits and margin accounts
80.0 %
70.0 %
63% 61%
60.0 %
50.0 %
40.0 %
29% 29%
30.0 %
20.0 %
10.0 %
4% 7%
5% 3%
Margin Accounts
Saving Accounts
5.4.1.1 Deposits breakdown by Currency
The structural distribution of the Bank’s deposits showed
an increase in Syrian Pound deposits against foreign
currencies deposits. The concentration of deposits of
Dollars and Euros declined to 31% and 6% respectively at
the end of 2009, compared to 38% and 8% at the end of
2008. This was a direct consequence of the financial crisis
which led individuals to refrain from depositing in foreign
currencies due to the sharp drop in their return.
Structure of customer deposits
by currency for 2009
6%
31%
0%
Other
63%
Euro
US Dollar
Syrian Pound
Structure of customer deposits
by currency for 2008
38%
8%
0%
54%
Other
Euro
US Dollar
Syrian Pound
36
2009
0.0 %
Term Deposits
Current Accounts
2008
5.5.
Liquidity Management.
The Bank maintained sufficient liquidity during 2009 due
to its robust and periodic management of the liquidity
ratios of each separate currency. The liquidity ratio for all
currencies was 55% at the end of 2009, distributed as
48% for Syrian pounds and 65% for foreign currencies.
This compared to 41% at the end of 2008, distributed as
18% for Syrian pounds and 79% for foreign currencies.
Moreover, the Bank maintained an acceptable maturity
gap, reflecting a high possibility of the need to liquidate a
large portion of assets. In parallel, the Bank succeeded in
maintaining reasonable coverage, by recognising that the
Bank’s coverage ratio of deposits is a main factor behind
the Bank’s funds of highly liquid assets. The average
coverage ratio of all currencies was 56% in 2009.
5.6.
Profitability Growth
5.6.1 Interest Income and Expenses
Despite the significant drop in the international interest
rates in 2009 and the shrinking opportunities for
deployment in foreign currencies, the Bank achieved an
increase of 10.8% in interest income to reach SYP 2706
million, compared to SYP 2443 million in 2009.
On the other hand, the interest expenses increased by
20.8% to reach SYP 1271 million versus SYP 1135 million
in 2008;This was a normal increase when compared with
the increase of the volume of customer deposits in 2009
which was in line with the Bank’s expansion strategy.
In aggregate, net income from interest grew by 2.0%
compared to 2008, to reach SYP 1335 million, versus
SYP 1309 million in 2008. This was a result of the high
efficiency in controlling interest rates paid, which helped
to guarantee an acceptable interest margin.
Interest revenues and expenses
3000
2.706
2.443
2500
2000
1.443
677
1.309
1.135
1.371 1.335
1500
1000
767
Interest
Received
Interest
Paid
500
0
2007
2008
2009
Interest
Margin
5.6.2 Commission Income and Expenses
The year of 2009 has witnessed a noticeable growth in the
revenue from commissions and fees, which increased by
46% compared to 2008, reaching the amount of SYP 449
million versus SYP 309 million in 2008.
As for commission’s expenses, it increased by 14%
compared to 2008. Commission’s expenses reached SYP
9.47 million in 2009 compared to SYP 8.35 million in 2008.
As a result, the increase of net commissions and fees
income was 47%; which is a good growth rate that was
achieved through:
•Growth of the Bank’s customer base, reflecting high
customer confidence in the Bank; This trust was built by
offering various banking services and high quality products
to meet the needs of different groups in society.
•The increase of trade finance operations deriving from
letters of guarantees, letters of credit, acceptances, and
documentary collections. The Bank achieved a 45%
increase in trade finance operations compared to 2008.
The ratio of non interest income to net financial income
amounted to 30% growing by 6% from 24% in 2008. This
was a good growth rate that the Bank aims to increase
due to the fact that commissions are recurrent revenue
with low sensitivity to global markets.
Total operating income rose to SYP 1859 million increasing
by 29% compared to SYP 1440 million in 2008.
5.6.3 Costs (General Operating Expenses)
Total operating expenses reached SYP 1026 million (43%
staff expenses, 41% other operating expenses, and 16%
depreciation and amortization) growing by 24% compared
440.0
450
350
308.6
•The essential changes and growth in the Bank’s structure
with regard to implementation of corporate governance
policies, such as creating new units likes risk management,
and internal control and compliance unit.
•The Bank’s policies and principles for sustaining
human resources as an essential role for the Bank’s
development.
•Inflation factors and their impact on the purchasing
power of the Syrian Pound.
The Bank has shown high competence in managing its
expenses despite the above mentioned constraints, when
compared to its income. This is shown by the sharp drop
in the cost to income ratio, from 55.2% in 2008 to 53.9%
in 2009.
Given that expenses in an organization are intended to
increase profitability and the size of the Bank reflecting
in a higher market share, the ratio of the expenses versus
total assets is an essential key to bank performance that
shouldn’t be overlooked, as the bank has managed to
reduce this percentage to 1.26% in 2009 versus 1.40%
in 2008.
On the other hand, the efficiency in cost management
was manifested by the drop in both employee and branch
share of expenses. The first indicator dropped from SYP
2.6 million in 2008 to SYP 2.4 million in 2009, while the
second indicator dropped from SYP 65.6 million to SYP
51.3 million in the same period.
120.00%
500
400
300.3
•The expansion plan that started in 2008 and fully
impacted in 2009.
General operating expenses
Commissions revenues and
expenses
449.5
to SYP 820 million in 2008 (44% staff expenses, 43%
other operating expenses, and 13% depreciation and
amortization)
The major changes in the global financial conditions,
that was noticed in a sharp drop in international interest
rates, and the shrinking opportunities for investment due
to the high financial risk in many countries, left the banks
with limited choices to maintain or increase profitability
margins, the conservative cost growth management was
the only way to do it, this approach was followed by most
of the successful banks in the world.
The analysis of the increase in the bank’s general operating
expenses in 2009, compared to 2008, shows that it was a
normal increase taking into consideration the following:
250
Commissions
Received
13.19%
16.24%
42.94%
41.16%
163.9
150
100
50
7.4
2007
8.3
2008
9.5
2009
0
80.00%
60.00%
200
156.5
100.00%
Commissions
Paid
Net
Commissions
40.00%
43.86%
42.60%
2008
2009
20.00%
Depreciation
and
Amortization
Other
Operating
Expenses
Staff
Expenses
0.00%
37
5.6.4 Profitability
Bank Audi Syria reported a net profit of SYP 624.5 million
in 2009. This was an increase of 70.8%, equivalent to SYP
256 million, compared to the increase of SYP 106.8 million
in 2008. It was the highest reported percentage increase
among its peers according to the financial disclosure for
2009. As a result, earnings per share rose from SYP 146.24
in 2008 to SYP 183.10 in 2009. After excluding unrealised
losses on structural positions, the earnings per share rose
to SYP 199.65 in 2009 versus SYP 164.92
Despite doubling its capital, Bank Audi Syria’s profitability
performance enabled it to maintain its book share value at
the end of November 2009, compared to 2008.
At the end of 2009, the book value per share reached SYP
1.225.92, of a total shares 5 million shares, compared to
1.226.69, of a total 2.5 million shares.
As for the market value of share, this increased from SYP
1380 on the day of listing on the Damascus Securities
Exchange (DSE) on the 10th March 2009, to close at SYP
1914 the 31st December 2009, an increase of SYP 534.
This took into account a reduction in the share price by
the DSE on 26th June 2009, from SYP 1731 to SYP 1365,
which resulted from the increase in the Bank’s capital.
Dec-13
Dec-12
1. Net Operating Margin (Net Profit)/ (Net Revenue)
32.81%
24.59%
o.w net Interest Income
70.14%
88.05%
o.w Net commission Income
23.12%
20.20%
6.74%
-8.24%
5.6.5 DuPont profitability analysis & Ratios
o.w other Revenue
2. Asset Utilization (Net Revenue)/ (Average Assets)
3. Total Expenses/ Net Revenue
2.84%
3.13%
53.93%
55.16%
4.Provision Expenses / Net Revenue
1.28%
2.36%
5. Balancing Factor (Total Expenses)/ (Provision expenses)
4199%
2341%
ROAA = 1*2
0.93%
0.77%
ROAA excluding FX revaluation on Capital
1.02%
0.87%
ROAE
13.58%
12.44%
ROAE excluding FX revaluation on Capital
14.81%
14.03%
The analysis of DuPont profitability ratios showed increase
in the operating margin of Bank Audi Syria from 24.5%
in 2008 to 32.81% in 2009. This led to an increase in the
Bank return on average assets ratio from 0.77% to 0.93%
between 2008 and 2009 despite the decline in the assets
utilization ratio to 2.84% in 2009 compared to 3.13% in
2008 which was a result of an increase in assets volume
levels versus increase in profitability levels.
Excluding unrealised losses that resulted from the
revaluation of the FX Structural Position, will result in a
return on average assets ratio reaching 1.02% at the end
of 2009 versus 0.87 % in 2008.
The analysis also showed an increase in return on average
equity ratio from 12.44% to 13.58% between 2008 and
2009. This was triggered by the increase in return on
average assets ratio as mentioned above; 2009 witnessed
a growth in the ratio of shareholders equity in proportion
to total assets, from 6.19% to 6.86%, in addition to
growth in the Bank efficiency performance that resulted
from a decline in the cost to income ratio from 55.16% to
53.93%.
After excluding realised losses triggered by the revaluation
of the FX Structural Position, return on average equity
would have reached 14.81% at the end of 2009 compared
to 14.03% in 2008.
38
Highlights from the extraordinary general assembly
that replaces the ordinary general assembly of the
shareholders of Bank Audi Syria dated 03rd of May 2010
•Decision no.1: Approving the board of director›s report,
the external auditor’s report, the statement of financial
position and the income statement for the year ended
2009.
•Decision no.2: The consent to transferring 10% from
profit subject to reserves into statutory reserve and 10%
into special reserve, as per articles no. 197 & 198 of
Companies Law.
•Decision no.3: Upon board of directors’ recommendation,
accumulating year profit into retained earnings has been
approved in light of capital increase by transferring part
of retained earnings to capital as per the next decision.
Accordingly, the profit subject to reserves and the
earnings available for distribution have been calculated as
following:
Profit before tax
Add: unrealized net foreign exchange losses on structural position
796,084,973 SYP
56,450,754 SYP
Profit subject to reserves
852,535,727 SYP
Subtract: statutory reserve not available for distribution
(85,253,573) SYP
Subtract: special reserve not available for distribution
(85,253,573) SYP
Subtract: income tax provision
(171,540,778) SYP
Net profit for year 2009 after reserves and tax provision
510,487,803 SYP
Subtract: unrealized net foreign exchange losses on structural position
(56,450,754) SYP
Subtract: amount restricted as general reserve for credit risk to be taken at end of year 2010
(78,264,000) SYP
Result: profit for year 2009 available for distribution
375,773,049 SYP
Decision no.4: the consent on capital increase by the
amount of 350,000,000 SYP (three hundred and fifty
millions Syrian Pounds) through transferring part of
retained earnings into capital based on article no. 101
from Companies Law, however the capital increase will
be applied by allocating seven stocks for each hundred
stock, each stock worth one thousand Syrian Pounds,
taking into consideration that the bank will seek the
required approvals from the Central Bank of Syria, the
Syrian Commission on Financial Markets & Securities and
the Ministry of Commerce & Trade. Thus, bank’s capital
will be 5,350,000,000 SYP (five billions and three hundred
and fifty million Syrian Pounds). In addition, article no.
6 of bank’s bylaws will be updated to be in accordance
with capital increase taking into consideration the related
applicable decisions of Damascus Securities Exchange
that regulate capital increasing and allocating free stocks
based on decision no. 445 for the year 2009.
39
Therefore, profit appropriation for year 2009 would be as
following:
Profit distributed as stocks
350,000,000 SYP
Unrealized net foreign exchange losses on structural position
56,450,754 SYP
Amount restricted as general reserve for credit risk to be taken at end of year 2010
78,264,000 SYP
Retained earnings
25,773,049 SYP
Shareholders equity:
Share capital
5,350,000,000 SYP
Statutory reserve
193,612,770 SYP
Special reserve
193,612,770 SYP
Available-for-sale reserve
Retained earnings
Unrealized accumulated losses
Total shareholders equity
Minority interests (Non-controlling interests)
Total Equity
40
32,141,481 SYP
608,162,274 SYP
(247,911,742) SYP
6,129,617,553 SYP
500 SYP
6,129,618,053 SYP
AUDITORS’ REPORT
41
CONSOLIDATED FINANCIAL STATEMENTS
AND THE NOTES
consolidated statement of financial position as at 31 december 2009
Notes
2009
2008
SP
SP
ASSETS
Cash and balances with central banks
3
16,906,790,003
10,815,729,429
Balances due from banks
4
11,644,626,415
17,593,831,533
Placements due from banks
5
13,588,351,737
6,103,238,735
Derivative financial instruments
6
-
1,125,200
7
26,100,199,495
19,305,771,518
Financial investments - loans and receivables
8
1,151,009,080
1,960,049,457
Financial investments – Available for sale
9
3,496,910,665
282,653,482
Fixed assets
10
1,259,055,254
1,322,588,766
Intangible assets
11
107,445,513
114,052,674
Other assets
12
829,792,565
880,586,386
Statutory blocked funds
13
462,911,079
219,640,626
75,547,091,806
58,599,267,806
14
1,012,302,107
2,058,285,769
TOTAL ASSETS
LIABILITIES AND EQUITY
LIABILITIES
Due to banks
Due to customers
15
64,637,730,550
48,538,813,633
Margin accounts
16
2,464,445,936
3,603,419,963
Provisions
17
1,789,896
935,741
Current tax liabilities
18
171,540,778
219,199,110
Other liabilities
19
1,129,664,486
1,111,885,759
69,417,473,753
55,532,539,975
5,000,000,000
2,500,000,000
TOTAL LIABILITIES
EQUITY
Equity attributable to equity holders of the parent
Share capital
Statutory reserve
21
193,612,770
108,359,197
Special reserve
21
193,612,770
108,359,197
Available-for-sale reserve
22
32,141,481
(23,704,046)
Retained earnings
23
958,162,274
565,174,471
Accumulated losses related to unrealized net foreign exchange losses on structural
position
23
(247,911,742)
(191,460,988)
6,129,617,553
3,066,727,831
TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY
Chairman
Dr. Georges Achi
The attached notes 1 to 44 form part of these consolidated financial statments.
42
20
500
-
6,129,618,053
3,066,727,831
75,547,091,806
58,599,267,806
Deputy Chairman & General Manager
Bassel Hamwi
consolidated income statement for the year ended 31 december 2009
2009
2008
Notes
SP
SP
Interest and similar income
24
2,706,152,550
2,443,476,577
Interest and similar expenses
25
Net interest income
(1,370,999,301)
(1,134,607,310)
1,335,153,249
1,308,869,267
Fees and commission income
26
449,469,099
308,621,652
Fees and commission expenses
27
(9,474,831)
(8,347,081)
Net fees and commission income
Net interest, fees and commission income
439,994,268
300,274,571
1,775,147,517
1,609,143,838
Net gains arising from dealing in foreign currencies
100,383,725
86,920,770
Unrealised net foreign exchange losses on structural position
(56,450,754)
(46,695,000)
Gains (losses) on financial investments
28
7,394,498
(236,909,156)
Other operating revenues
29
20,550,963
27,428,505
1,847,025,949
1,439,888,957
Total operating income
Personnel expenses
30
(437,318,549)
(359,713,401)
Depreciation of fixed assets
10
(155,118,287)
(97,934,977)
Amortisation of intangible assets
11
(11,550,628)
(10,260,694)
Credit loss expense
31
(23,590,236)
(34,087,610)
Provisions
17
(854,155)
(935,741)
Other operating expenses
32
(422,509,121)
(352,155,110)
(1,050,940,976)
(855,087,533)
796,084,973
584,801,424
Total operating expenses
PROFIT BEFORE TAX
Income tax expense
18
PROFIT FOR THE YEAR
(171,540,778)
(219,199,110)
624,544,195
365,602,314
624,544,195
365,602,314
-
-
624,544,195
365,602,314
183.10
146.24
Attributable to:
Equity holders of the parent
Minority Interests (Non-controlling interests)
Basic and diluted earnings per share for equity holders of the parent
33
consolidated statement of comprehensive income for the year ended 31 december
2009
Notes
Profit for the year
2009
2008
SP
SP
624,544,195
365,602,314
Other comprehensive income
Unrealized gains (losses) on available for sale financial investments recycled to the
income statement
22
55,468,489
(60,037,853)
Net realized losses on the sale of available for sale financial investments recycled to
the income statement
28
-
32,726,951
22
377,038
3,106
680,389,722
338,294,518
680,389,722
338,294,518
-
-
680,389,722
338,294,518
Net realized losses recycled to the income statement related to reclassified financial
investments loans and receivables
Total comprehensive income for the year
Attributable to:
Equity holders of the parent
43
44
-
Balance at 31 December 2008
108,359,197
-
2,500,000,000
Appropriation of net income
63,149,642
-
-
Total comprehensive income
-
45,209,555
193,612,770
-
85,253,573
-
-
2,500,000,000
Transfer to reserves (note 21)
Distributed dividends (note 43)
Balance at 1 January 2008
2008
5,000,000,000
-
Transfer to reserves (note 21)
Appropriation of net income
Balance at 31 December 2009
-
Distributed dividends (note 43)
Total comprehensive income
-
2,500,000,000
-
108,359,197
Statutory
reserve
SP
2,500,000,000
Share
capital
SP
Minority interests (non-controlling interests)
Increase in share capital (note 20)
Balance at 1 January 2009
2009
108,359,197
-
63,149,642
-
-
45,209,555
193,612,770
-
85,253,573
-
-
-
-
108,359,197
Special
reserve
SP
(23,704,046)
-
-
(27,307,796)
-
3,603,750
32,141,481
-
-
55,845,527
-
-
-
(23,704,046)
Available-forsale reserve
SP
-
(239,303,030)
(126,299,284)
365,602,314
-
-
(454,037,049)
(170,507,146)
624,544,195
-
-
-
-
Profit for
the year
SP
565,174,471
285,998,030
-
-
(82,500,000)
361,676,441
958,162,274
510,487,803
-
-
(117,500,000)
-
-
565,174,471
Retained
earnings
SP
(191,460,988)
(46,695,000)
-
-
-
(144,765,988)
(247,911,742)
(56,450,754)
-
-
-
-
-
(191,460,988)
Accumulated
losses related
to unrealized
net foreign
exchange
losses on
structural
position
SP
3,066,727,831
-
-
338,294,518
(82,500,000)
2,810,933,313
6,129,617,553
-
-
680,389,722
(117,500,000)
-
2,500,000,000
3,066,727,831
Total
SP
Attributable to equity holders of the parent
Consolidated statement of changes in equity for the year ended 31 december 2009
-
-
-
-
-
-
500
-
-
-
-
500
-
-
Minority
interests
(Noncontrolling
interests)
SP
3,066,727,831
-
-
338,294,518
(82,500,000)
2,810,933,313
6,129,618,053
-
-
680,389,722
(117,500,000)
500
2,500,000,000
3,066,727,831
Total equity
SP
Consolidated statement of cash flows for the year ended 31 december 2009
Notes
2009
SP
2008
SP
796,084,973
584,801,424
OPERATING ACTIVITIES
Profit before tax
Adjustments for:
Depreciation
10
155,118,287
97,934,977
Amortisation
11
11,550,628
10,260,694
Credit loss expense
31
23,590,236
34,087,610
(Gains) losses on available for sale financial investments
28
(5,394,498)
236,909,156
Loss on sale of fixed assets
66,759
25,000
981,016,385
964,018,861
Increase in central bank deposits
(1,623,544,474)
(3,495,735,962)
(Increase) decrease in placements due from banks
(7,485,113,002)
3,132,580,733
1,125,200
(1,125,200)
(6,818,018,213)
(9,508,238,319)
50,793,821
(191,289,075)
Profit before changes in operating assets and liabilities
Decrease (Increase) in derivative financial instruments
Increase in loans and advances to customers
Decrease (increase) in other assets
(Decrease) increase in margin accounts
(1,138,974,027)
2,594,057,130
Increase in customers' deposits
16,098,916,917
17,014,365,061
Increase in other liabilities and provisions
Net cash flows from operating activities before tax
Income tax paid
18
Net cash flows (used in) from operating activities
34,460,165
569,596,167
100,662,772
11,078,229,396
(219,199,110)
(140,740,844)
(118,536,338)
10,937,488,552
(3,153,017,158)
2,612,802,105
809,040,377
(60,049,457)
(209, 152,918)
(723,615,278)
117,501,384
-
INVESTING ACTIVITIES
(Purchase) sale of financial investments – Available for sale
Sale and maturity (purchase) of financial investments - loans and receivables
Purchase of fixed assets
10
Proceeds from sale of fixed assets
Purchase of intangible assets
11
Increase in statutory blocked funds
Net cash flows (used in) from investing activities
(4,943,467)
(5,937,005)
(248,043,019(
-
(2,688,614,801)
1,823,200,365
FINANCING ACTIVITIES
Increase in share capital
20
Dividends paid
(133,327,283)
Minority interests (non-controlling interests)
Net cash flows from (used in) financing activities
Changes on foreign currency on statutory blocked funds
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at 1 January
CASH AND CASH EQUIVALENTS AT 31 DECEMBER
2,500,000,000
34
(63,553,248)
500
-
2,366,673,217
(63,553,248)
4,772,566
7,055,347
(435,705,356)
12,704,191,016
21,598,025,838
8,893,834,822
21,162,320,482
21,598,025,838
Operational cash flows from interests and dividends
Interest received
2,801,079,678
2,356,809,267
Interest paid
1,185,480,070
1,104,290,413
2,000,000
-
Dividends received
45
1
CORPORATE
INFORMATION
Bank Audi Syria S.A. (the “Bank”) was established as a
public shareholding company on 30 August 2005 under
commercial registration number (14456), and based on
the decree of the government banking control commission
number 703/LA dated 13 September 2005 and in
accordance with the banking law number 28 for the year
2001. The Bank was registered under number (12) as a
private bank, with its headquarter in Damascus - Syria.
The Bank was established with a paid capital of SP
2,500,000,000 divided into 2,500,000 shares with a par
value of SP 1,000 per share. On 20 August 2009, the
capital was increased to reach SP 5,000,000,000.
The Bank provides a full range of banking services through
a network consisting of 21 branches distributed over the
districts.
The Bank’s shares are listed in Damascus Securities
Exchange.
The Bank is 47% owned by Bank Audi S.A.L. – Audi
Saradar Group.
Bank Audi S.A.L. – Audi Saradar Group research products
to the Bank or conducting specific research.
Bank Audi Syria S.A. contributes 99.99% in the capital of
Audi Syria Investment LLC registered under commercial
registration number (15663) on 27 January 2009. On
29 October 2009, the board of managers of Audi Syria
Investment LLC decided to change the name of the
company to be “Audi Capital Syria LLC”. Accordingly,
the company started the legal procedures to change
the name; however, the change became effective on 23
December 2009.
The consolidated financial statements for the year
ended 31 December 2009 were authorised for issuance
in accordance with a resolution of the directors on 28
February 2010 subject to the approval of the shareholders
in the annual General Assembly.
2
BASIS OF PREPARATION
AND SIGNIFICANT
ACCOUNTING POLICIES
2.1
Basis of preparation
The First General Assembly of the Bank‘s shareholders
held on 20 August 2005 resolved to enter into a technical
assistance agreement with Bank Audi S.A.L – Audi Saradar
Group to transfer some of Bank Audi S.A.L – Audi Saradar
Group’s know – how and management experience in
banking activities to the Bank .
The consolidated financial statements have been prepared
under the historical cost basis, except for available for
sale financial investments that have been measured at fair
value.
Under the terms of this agreement, Bank Audi S.A.L – Audi
Saradar Group will provide the following services:
The consolidated financial statements have been presented
in Syrian Pound which is the functional currency of the
Group.
1 Assisting in defining and implementing strategy for
banking operations in Syria.
2 Operational assistance through recruiting, training,
supervising and evaluating the performance of the
Bank’s employees in addition to staff provisioning to the
Bank.
3 Assisting in defining and implementing procedures for
the operational risk management.
4 Assisting in evaluating, developing and selecting
the required information technology, management
information systems and communication infrastructure
necessary to carry out the Bank’s business.
5 Assisting in product development, through making
available to the Bank a range of Bank Audi S.A.L – Audi
Saradar Group’s products that are appropriate for the
Syrian Market.
6 Assisting in research products, through making available
46
Statement of compliance
The consolidated financial statements have been prepared
in accordance with International Financial Reporting
Standards (IFRS).
Basis of consolidation
The consolidated financial statements comprise the
financial statements of the Bank and its subsidiary for the
year ended 31 December 2009.
The accompanying consolidated financial statements
contain the Bank's activities and the activities of the
subsidiary company, Audi Syria Investment LLC. The
principle activity for this subsidiary company is to provide
consultation, analysis related to the financial securities in
addition to buying and selling securities on behalf of the
company and on behalf of others. Audi Syria Investment LLC
was established on 27 January 2009 and registered under
commercial registration number (15663). The ownership
percentage of Bank in this company is 99.99%.
Subsidiaries are fully consolidated from the date on which
control transferred to the Bank, control is achieved where
the Bank has power to govern the financial and operating
polices of an entity so as to obtain benefit from its
activities. The results of subsidiaries acquired or disposed
of during the year are included in the consolidated income
statement from the date of acquisition or up to the date of
disposal.
The financial statements of the Bank’s subsidiary are
prepared for the same reporting year as the Bank, using
consistent accounting policies.
All intra – group balances, transactions, income and
expenses are eliminated in full.
Minority interests represents the portion of profit or loss
and net assets not owned, directly or indirectly, by the Bank
and are presented separately in the consolidated income
statement, consolidated statement of comprehensive
income and within the equity in the consolidated statement
of financial position from equity attributable to the parent.
2.2
Changes in accounting policies
The accounting policies used in the preparation of the
consolidated financial statements are consistent with those
used in the previous financial year, except that the Group
has adopted the following new standards, amendments,
and interpretations as of 1 January 2009.
IAS 1 Revised: Presentation of Financial Statements
(amended)
The revised standard separates owner and non-owner
changes in equity. The statement of changes in equity
includes only details of transactions with owners, with all
non-owner changes in equity presented as a single line.
In addition, the standard introduces the statement of
comprehensive income: it presents all items of recognized
income and expense either in one single statement, or in
two linked statements. The Group has elected to present
two separate statements.
IFRS 8 Operating Segments
The new standard which replaced IAS 14 ‘Segment
reporting’ requires a ‘management approach’ under which
segment information is presented on the same basis as
that used for internal reporting purposes. Accordingly, the
segments are reported in a manner that is more consistent
with the internal reporting provided to the chief operating
decision - maker.
Amendments to IFRS 7 Financial Instruments:
Disclosures - Improving Disclosures about Financial
Instruments
The amendments to IFRS 7 were issued on 7 March
2009 to enhance fair value and liquidity disclosures. With
respect to fair value, the amendments require disclosure
of a three-level fair value hierarchy, by class, for all
financial instruments recognised at fair value and specific
disclosures related to the transfers between levels in the
hierarchy and detailed disclosures related to level 3 of the
fair value hierarchy. In addition, the amendments modify
the required liquidity disclosures with respect to derivative
transactions and assets used for liquidity management.
The Group has also adopted the following new or revised
standards as of 31 December 2009:
- Amendment to IFRS 2 “Share-based Payment– Vesting
Conditions and Cancellations” effective 1 January 2009.
- Amendment to IAS 23 “Borrowing Costs” effective 1
January 2009.
- Amendments to IAS 32 “Financial InstrumentsPresentation” effective 1 January 2009.
- IAS 1 “Puttable Financial Instruments and Obligations
Arising on Liquidation” (revised) effective 1 January
2009.
- IFRIC 9 and IAS 39 (revised): Embedded Derivatives
applicable for periods ending or after 30 June 2009.
- IFRIC 13 “Customer Loyalty Programmes” effective 1
July 2008.
- IFRIC 16 “Hedges of a Net Investment in a Foreign
Operation” effective 1 October 2008.
The application of these standards and interpretations has
no material impact on the financial position or performance
of the Group.
2.3
International Financial Reporting
Standards and interpretations
issued or amended but not yet
effective
- Amendment to IFRS 2 “Share-based Payment” effective
1 January 2010.
- IFRS 3 “Business Combinations” (revised) effective 1
July 2009.
- IAS 27 “Consolidated and Separate Financial Statements”
(revised) effective 1 July 2009.
- Amendment to IAS 39 Financial Instruments: Recognition
and Measurement – Eligible Hedged items effective 1
July 2009.
- IFRIC 18 “Transfers of Assets from Customers” effective
1 July 2009.
The Group’s management does not expect that the
mentioned above standards and interpretations to have
significant impact on the Group’s financial statements
when it will be applied in future years.
47
2.4
Improvements to IFRSs
In May 2008 and April 2009, the Board has issued its
first omnibus of amendments to its standards, primarily
with a view to removing inconsistencies and clarifying
wording. Applying those amendments led to change in
the accounting policies without having any impact on the
financial position or the performance of the Group.
2.5
Significant accounting judgments
and estimates
In the process of applying the Group’s accounting policies,
management has exercised judgment and estimates in
determining the amounts recognised in the consolidated
financial statements. The most significant uses of judgment
and estimates are as follows:
Going concern
The Group’s management has made an assessment of
the Group’s ability to continue as a going concern and
is satisfied that the Group has the resources to continue
in business for the foreseeable future. Furthermore, the
management is not aware of any material uncertainties
that may cast significant doubt upon the Group’s ability to
continue as a going concern. Therefore, the consolidated
financial statements continue to be prepared on the going
concern basis.
although not specifically identified as requiring a specific
allowance, have a greater risk of default than when
originally granted.
Impairment of available for sale financial investments
The Group reviews its debt securities classified as availablefor-sale investments at each statement of financial position
date to assess whether they are impaired. This requires
similar judgment as applied to the individual assessment
of loans and advances.
The Group also records impairment charges on availablefor-sale equity investments when there has been a
significant or prolonged decline in the fair value below
their cost. The determination of what is ‘significant’ or
‘prolonged’ requires judgment. In making this judgment,
the Group evaluates, among other factors, historical share
price movements and duration and extent to which the fair
value of an investment is less than its cost.
Deferred tax assets
Deferred tax assets are recognised for all unused tax
losses to the extent that it is probable that taxable profit
will be available against which the losses can be utilised.
Significant management judgment is required to determine
the amount of deferred tax assets that can be recognised,
based upon the likely timing and level of future taxable
profits together with future tax planning strategies.
The Group did not recognise deferred income tax assets
at the consolidated financial statements date.
Fair value of financial instruments
Where the fair values of financial assets and financial
liabilities recorded on the statement of financial position
cannot be derived from active markets, they are determined
using a variety of valuation techniques that include the use
of mathematical models. The inputs to these models are
derived from observable market data where possible, but
where observable market data are not available, judgment
is required to establish fair values.
Impairment losses on loans and advances
The Group reviews its loans and advances on quarterly
basis to assess whether an allowance for impairment
should be recorded in the income statement. In particular,
judgment by management is required in the estimation
of the amount and timing of future cash flows when
determining the level of allowance required. Such estimates
are based on assumptions about a number of factors and
actual results may differ, resulting in future changes to the
allowance.
In addition to specific allowances against individually
significant loans and advances, the Group also makes a
collective impairment allowance against exposures for
groups of assets with similar risk characteristics which,
48
2.6
Summary of significant
accounting policies
The principal accounting policies applied in the preparation
of the accompanying consolidated financial statements
are set out below:
1. Foreign currencies
Transactions in foreign currencies are initially recorded in
the functional currency rate of exchange (published by
the Central Bank of Syria) at the date of the transaction.
Monetary assets and liabilities in foreign currencies are
translated into Syrian Pound at rates of exchange prevailing
at the consolidated statement of financial position date
(published by the Central Bank of Syria). Any gains or
losses are taken to the consolidated income statement.
The consolidated financial statements have been presented
in Syrian Pounds which is the functional and presentation
currency of the Group.
2. Financial instruments – initial recognition and
subsequent measurement
• Date of recognition
Purchases or sales of financial assets that require delivery
of assets within the time frame generally established by
regulation or convention in the marketplace are recognised
on the trade date.
• Initial recognition of financial instruments
The classification of financial instruments at initial
recognition depends on the purpose for which the financial
instruments were acquired and their characteristics. All
financial instruments are measured initially at their fair
value.
• ‘Day 1’ profit
Where the transaction price in a non-active market is
different to the fair value from other observable current
market transactions in the same instrument or based
on a valuation technique whose variables include only
data from observable markets, the Group immediately
recognises the difference between the transaction price
and fair value (a ‘Day 1’ profit) in the consolidated income
statement under “Net trading profits (losses)”.
In cases where use is made of data which is not observable,
the difference between the transaction price and model
value is only recognised in the consolidated income
statement when the inputs become observable, or when
the instrument is derecognised.
• Due from banks and loans and advances to
customers
“Due from banks” and “Loans and advances to customers”
are financial assets with fixed or determinable payments
and fixed maturities that are not quoted in an active market.
They are not entered into with the intention of immediate or
short-term resale and are not classified as “Financial assets
held for trading”’, designated as “Financial investment –
available-for-sale” or “Financial assets designated at fair
value through profit or loss”. After initial measurement,
amounts due from banks and loans and advances to
customers are subsequently measured at amortised cost
using the effective interest rate method, less allowance for
impairment. Amortised cost is calculated by taking into
account any discount or premium on acquisition and fees
and costs that are an integral part of the effective interest
rate. The amortisation is included in ‘Interest and similar
income’ in the consolidated income statement. The losses
arising from impairment are recognised in the consolidated
income statement in ‘Credit loss expense’.
• Available-for-sale financial investments
Available-for-sale financial investments are those which
are designated as such or do not qualify to be classified
as designated at fair value through profit or loss, heldto-maturity or loans and advances. They include equity
instruments, money market and other debt instruments.
After initial measurement, available-for-sale financial
investments are subsequently measured at fair value.
Unrealised gains and losses are recognised directly in
equity in the ‘Available-for-sale reserve’. When the security
is disposed of, the cumulative gain or loss previously
recognised in equity is recognised in the consolidated
income statement under “Gains (losses) on financial
investments. Where the Group holds more than one
investment in the same security they are deemed to be
disposed of on a first-in first-out basis.
Interest earned whilst holding available-for-sale financial
investments is reported as interest income using the
effective interest rate. Dividends earned whilst holding
available-for-sale financial investments are recognised in
the consolidated income statement when the right of the
payment has been established.
The losses arising from impairment of such investments
are recognised in the consolidated income statement in
‘Impairment losses on financial investments’ and removed
from the available-for-sale reserve included in equity.
• Loans and receivables financial investments
Loans and receivables financial investments that are not
eligible for classification as “Held to maturity”, have fixed
and determinable payments and not quoted in an active
market are carried at amortized cost less allowance for
impairment. After initial recognition, amounts classified as
Loans and receivables financial investments are measured
at amortized costs adjusted for effective fair value hedge
less allowance for impairment. Impairment losses are
recognized in the consolidated income statement in
‘Impairment losses’. Amortized cost includes premiums
and discounts as well as fees that are an integral part
of effective yield. Discount and premium amortization is
included in the consolidated income statement in “Interest
and similar income”.
• Reclassification of financial assets
Effective 1 July 2008, the Group may reclassify, in certain
circumstances, financial instruments out of the ‘Availablefor-sale’ category into the ’Loans and receivables’ category.
Reclassifications are recorded at fair value at the date of
reclassification, which becomes the new amortised cost.
For a financial asset reclassified out of the ’Available-forsale’ category, any previous gain or loss on that asset that
has been recognised in equity is amortised to profit or loss
over the remaining life of the investment using the effective
interest rate. Any difference between the new amortised
cost and the expected cash flows is also amortised over
the remaining life of the asset using the effective interest
rate. If the asset is subsequently determined to be
impaired then the amount recorded in equity is recycled to
the consolidated income statement.
Reclassification is at the election of management, and is
determined on an instrument by instrument basis. The
49
Group does not reclassify any financial instrument into
the fair value through profit or loss category after initial
recognition.
3. Derecognition of financial assets and financial
liabilities
• Financial assets
A financial asset (or, where applicable a part of a financial
asset or part of a group of similar financial assets) is
derecognised where:
- the rights to receive cash flows from the asset have
expired; or
- the Group has transferred its rights to receive cash flows
from the asset or has assumed an obligation to pay the
received cash flows in full without material delay to a
third party under a ‘pass-through’ arrangement; and
- either (a) the Group has transferred substantially all the
risks and rewards of the asset, or (b) the Group has
neither transferred nor retained substantially all the risks
and rewards of the asset, but has transferred control of
the asset.
When the Group has transferred its rights to receive cash
flows from an asset or has entered into a pass-through
arrangement, and has neither transferred nor retained
substantially all the risks and rewards of the asset nor
transferred control of the asset, the asset is recognised
to the extent of the Group’s continuing involvement in the
asset. Continuing involvement that takes the form of a
guarantee over the transferred asset is measured at the
lower of the original carrying amount of the asset and the
maximum amount of consideration that the Group could
be required to repay.
Where continuing involvement takes the form of a written
and/or purchased option (including a cash-settled option
or similar provision) on the transferred asset, the extent of
the Group’s continuing involvement is the amount of the
transferred asset that the Group may repurchase, except
that in the case of a written put option (including a cashsettled option or similar provision) on an asset measured at
fair value, the extent of the Group’s continuing involvement
is limited to the lower of the fair value of the transferred
asset and the option exercise price.
• Financial liabilities
A financial liability is derecognised when the obligation
under the liability is discharged or cancelled or expired.
Where an existing financial liability is replaced by another
from the same lender on substantially different terms, or the
terms of an existing liability are substantially modified, such
an exchange or modification is treated as a derecognition
of the original liability and the recognition of a new liability,
and the difference in the respective carrying amounts is
recognised in the income statement.
50
4. Determination of fair value
The fair value for financial instruments traded in active
markets at the statement of financial position date is based
on their quoted market price or dealer price quotations (bid
price for long positions and ask price for short positions),
without any deduction for transaction costs.
For all other financial instruments not traded in an active
market, the fair value is determined by using appropriate
valuation techniques. Valuation techniques include:
- The discounted cash flow method,
- comparison to similar instruments for which market
observable prices exist, or
-options pricing models.
The purpose of using valuation techniques is to obtain
a fair value that reflects the market value taking into
consideration market factors and any risks or rewards
expected at the determination of fair value of a financial
instruments. If fair value could not be reliably estimated,
a financial instrument is carried at cost less impairment in
value, if any.
5. Impairment of financial assets
The Group assesses at each statement of financial
position date whether there is any objective evidence that
a financial asset or a group of financial assets is impaired.
A financial asset or a group of financial assets is deemed
to be impaired if, and only if, there is objective evidence
of impairment as a result of one or more events that
has occurred after the initial recognition of the asset (an
incurred ‘loss event’) and that loss event (or events) has an
impact on the estimated future cash flows of the financial
asset or the group of financial assets that can be reliably
estimated. Evidence of impairment may include indications
that the borrower or a group of borrowers is experiencing
significant financial difficulty, the probability that they will
enter bankruptcy or other financial reorganisation, default
or delinquency in interest or principal payments and where
observable data indicates that there is a measurable
decrease in the estimated future cash flows, such as
changes in arrears or economic conditions that correlate
with defaults.
• Due from banks and loans and advances to
customers
For amounts due from banks and loans and advances
to customers carried at amortised cost, the Group first
assesses individually whether objective evidence of
impairment exists individually for financial assets that are
individually significant, or collectively for financial assets
that are not individually significant. If the Group determines
that no objective evidence of impairment exists for an
individually assessed financial asset, whether significant
or not, it includes the asset in a group of financial assets
with similar credit risk characteristics and collectively
assesses them for impairment. Assets that are individually
assessed for impairment and for which an impairment loss
is, or continues to be, recognised are not included in a
collective assessment of impairment.
If there is objective evidence that an impairment loss has
been incurred, the amount of the loss is measured as the
difference between the asset’s carrying amount and the
present value of estimated future cash flows (excluding
future expected credit losses that have not yet been
incurred). The carrying amount of the asset is reduced
through the use of an allowance account and the amount
of the loss is recognised in the income statement. If, in a
subsequent year, the amount of the estimated impairment
loss increases or decreases because of an event occurring
after the impairment was recognised, the previously
recognised impairment loss is increased or reduced by
adjusting the allowance account.
The present value of the estimated future cash flows is
discounted at the financial asset’s original effective interest
rate. If a loan has a variable interest rate, the discount
rate for measuring any impairment loss is the current
effective interest rate. The calculation of the present value
of the estimated future cash flows of a collateralised
financial asset reflects the cash flows that may result
from foreclosure less costs for obtaining and selling the
collateral, whether or not foreclosure is probable.
For the purpose of a collective evaluation of impairment,
financial assets are grouped on the basis of the Bank’s
internal credit grading system that considers credit risk
characteristics such as asset type, industry, geographical
location, collateral type, past due status and other relevant
factors.
Future cash flows on a group of financial assets that are
collectively evaluated for impairment are estimated on the
basis of historical loss experience for assets with credit risk
characteristics similar to those in the group. Historical loss
experience is adjusted on the basis of current observable
data to reflect the effects of current conditions on which
the historical loss experience is based and to remove the
effects of conditions in the historical period that do not
exist currently. Estimates of changes in future cash flows
reflect, and are directionally consistent with, changes in
related observable data from year to year.
• Available-for-sale financial investments
For available-for-sale financial investments, the Group
assesses at each statement of financial position date
whether there is objective evidence that an investment or
a group of investments is impaired.
In the case of equity investments classified as availablefor-sale, objective evidence would include a significant
or prolonged decline in the fair value of the investment
below its cost. Where there is evidence of impairment, the
cumulative loss – measured as the difference between
the acquisition cost and the current fair value, less any
impairment loss on that investment previously recognised
in the consolidated income statement – is removed
from equity and recognised in the consolidated income
statement.
Impairment losses on equity investments are not reversed
through the consolidated income statement; increases in
their fair value after impairment are recognised directly in
equity.
In the case of debt instruments classified as availablefor-sale, impairment is assessed based on the same
criteria as financial assets carried at amortised cost. If,
in a subsequent year, the fair value of a debt instrument
increases and the increase can be objectively related to an
event occurring after the impairment loss was recognised
in the consolidated income statement, the impairment loss
is reversed through the consolidated income statement.
• Renegotiated loans
Where possible, the Group seeks to restructure loans rather
than to take possession of collateral. This may involve
extending the payment arrangements and the agreement
of new loan conditions. Once the terms have been
renegotiated any impairment is measured using the original
effective interest rate as calculated before the modification
of terms and the loan is no longer considered past due.
Management continuously reviews renegotiated loans to
ensure that all criteria are met and that future payments
are likely to occur. The loans continue to be subject to an
individual or collective impairment assessment.
6. Hedge accounting
The Group makes use of derivative instruments to
manage exposures to interest rate, foreign currency and
credit risks, including exposures arising from forecast
transactions and firm commitments. In order to manage
particular risks, the Group applies hedge accounting for
transactions which meet the specified criteria. At inception
of the hedge relationship, the Group formally documents
the relationship between the hedged item and the hedging
instrument, including the nature of the risk, the objective
and strategy for undertaking the hedge and the method
that will be used to assess the effectiveness of the hedging
relationship.
Also at the inception of the hedge relationship, a formal
assessment is undertaken to ensure the hedging
instrument is expected to be highly effective in offsetting
the designated risk in the hedged item. Hedges are
formally assessed each quarter. A hedge is expected to
be highly effective if the changes in fair value or cash flows
attributable to the hedged risk during the period for which
the hedge is designated are expected to offset in a range
of 80% to 125%.
51
Fair value hedges
For designated and qualifying fair value hedges, the change
in the fair value of a hedging derivative is recognised in the
consolidated income statement in ‘Net trading income’.
If the hedging instrument expires or is sold, terminated
or exercised, or where the hedge no longer meets the
criteria for hedge accounting, the hedge relationship is
terminated. For hedged items recorded at amortised cost,
the difference between the carrying value of the hedged
item on termination and the face value is amortised
over the remaining term of the original hedge using the
effective interest rate. If the hedged item is derecognised,
the unamortised fair value adjustment is recognised
immediately in the income statement.
7. Offsetting financial instruments
Financial assets and financial liabilities are offset and
the net amount reported in the consolidated statement
of financial position if, and only if, there is a currently
enforceable legal right to offset the recognised amounts
and there is an intention to settle on a net basis, or to
realise the asset and settle the liability simultaneously.
8. Leases
The determination of whether an arrangement is a lease,
or it contains a lease, is based on the substance of the
arrangement and requires an assessment of whether the
fulfilment of the arrangement is dependent on the use of
a specific asset or assets and the arrangement conveys a
right to use the asset.
Group as a lessee
Leases which do not transfer to the Group substantially all
the risks and benefits incidental to ownership of the leased
items are operating leases. Operating lease payments are
recognised as an expense in the consolidated income
statement on a straight line basis over the lease term.
Contingent rental payable are recognised as an expense
in the period in which they are incurred.
9. Recognition of income and expenses
Revenue is recognised to the extent that it is probable
that the economic benefits will flow to the Group and the
revenue can be reliably measured. The following specific
recognition criteria must also be met before revenue is
recognised:
• Interest and similar income and expense
For all financial instruments measured at amortised cost
and interest bearing financial instruments classified as
available-for-sale financial investments, interest income or
expense is recorded at the effective interest rate, which
is the rate that exactly discounts estimated future cash
payments or receipts through the expected life of the
financial instrument or a shorter period, where appropriate,
to the net carrying amount of the financial asset or financial
52
liability. The calculation takes into account all contractual
terms of the financial instrument (for example, prepayment
options) and includes any fees or incremental costs that
are directly attributable to the instrument and are an
integral part of the effective interest rate, but not future
credit losses.
The carrying amount of the financial asset or financial
liability is adjusted if the Group revises its estimates of
payments or receipts. The adjusted carrying amount is
calculated based on the original effective interest rate
and the change in carrying amount is recorded as interest
income or expense.
Once the recorded value of a financial asset or a group
of similar financial assets has been reduced due to
an impairment loss, interest income continues to be
recognised using the original effective interest rate applied
to the new carrying amount.
• Fee and commission income
The Group earns fee and commission income from a
diverse range of services it provides to its customers. Fee
income can be divided into the following two categories:
- Fee income earned from services that are provided
over a certain period of time
Fees earned for the provision of services over a period of
time are recognized over that period. Loan commitment
fees for loans that are likely to be drawn down and other
credit related fees are deferred and recognised as an
adjustment to the effective interest rate on the loan.
- Fees that are earned on the execution of a significant act.
The fees are recognised as revenue when the significant
act has been completed,(example: commission on the
allotment of shares to a client).
• Dividend income
Dividend income is recognised when the Group’s right to
receive the payment is established.
• Net trading income
Results arising from trading activities include all gains
and losses from changes in fair value and related interest
income or expense and dividends for financial assets and
financial liabilities held for trading.
10. Financial guarantees
In the ordinary course of business, the Group gives financial
guarantees, consisting of letters of credit, guarantees and
acceptances. Financial guarantees are initially recognised
in the financial statements (within ‘Other liabilities’) at fair
value, being the premium received. Subsequent to initial
recognition, the Group’s liability under each guarantee is
measured at the higher of the amount initially recognised
less, when appropriate, cumulative amortisation
recognised in the consolidated income statement, and
the best estimate of expenditure required to settle any
financial obligation arising as a result of the guarantee.
Any increase in the liability relating to financial guarantees
is recorded in the consolidated income statement in
‘Credit loss expense’. The premium received is recognised
in the consolidated income statement in ‘Net fees and
commission income’ on a straight line basis over the life
of the guarantee.
11. Cash and cash equivalents
Cash and cash equivalents as referred to in the consolidated
cash flow statement comprises cash on hand, current
accounts with central banks and amounts due from banks
on demand or with an original maturity of three months or
less.
12. Fixed assets
Fixed assets are stated at cost excluding the costs of
day-to-day servicing, less accumulated depreciation and
accumulated impairment in value. Changes in the expected
useful life are accounted for by changing the depreciation
period or method, as appropriate, and treated as changes
in accounting estimates.
Depreciation is calculated using the straight-line method to
write down the cost of fixed assets to their residual values
over their estimated useful lives. Land is not depreciated.
The estimated useful lives are as follows:
• Premises and leasehold improvements 10 to 40 years
• Furniture and equipment
5 to 10 years
An item of fixed assets is derecognised upon disposal or
when no future economic benefit is expected from its use
or disposal. Any gain or loss arising on derecognition of
the asset (calculated as the difference between the net
disposal proceeds and the carrying amount of the asset)
is recognised in ‘Other income’ or ‘Other expenses’ in the
consolidated income statement in the year the asset is
derecognised.
Projects in progress are not depreciated until such time as
the relevant assets are completed and put into operational
use.
13. Intangible assets
Intangible assets acquired separately are measured on
initial recognition at cost. Following initial recognition,
intangible assets are carried at cost less any accumulated
amortisation and any accumulated impairment losses.
The useful lives of intangible assets are assessed to be
either finite or indefinite. Intangible assets with finite lives
are amortised over the useful economic life. Intangible
assets with indefinite lives are reviewed for impairment at
each financial statement date and any impairment losses
is recorded in the consolidated income statement. The
amortisation period and the amortisation method for an
intangible asset with a finite useful life are reviewed at
least at each financial year-end. Changes in the expected
useful life or the expected pattern of consumption of future
economic benefits embodied in the asset are accounted
for by changing the amortisation period or method,
as appropriate, and treated as changes in accounting
estimates. The amortisation expense on intangible assets
with finite lives is recognised in the consolidated income
statement in the expense category consistent with the
function of the intangible asset.
Amortisation is calculated using the straight-line method
to write down the cost of intangible assets to their residual
values over their estimated useful lives as follows:
• Computer softwares
5 years
• Key money
70 years
14. Impairment of non-financial assets
The Group assesses at each reporting date whether
there is an indication that an asset may be impaired. If
any indication exists, or when annual impairment testing
for an asset is required, the Group estimates the asset’s
recoverable amount. An asset’s recoverable amount is
the higher of an asset’s or cash-generating unit’s (CGU)
fair value less costs to sell and its value in use. Where
the carrying amount of an asset or CGU exceeds its
recoverable amount, the asset is considered impaired and
is written down to its recoverable amount.
For assets excluding goodwill, an assessment is made at
each reporting date as to whether there is any indication
that previously recognised impairment losses may no
longer exist or may have decreased. If such indication
exists, the recoverable amount is estimated.
A previously recognised impairment loss is reversed
only if there has been a change in the estimates used to
determine the asset’s recoverable amount since the last
impairment loss was recognised. If that is the case, the
carrying amount of the asset is increased to its recoverable
amount.
15. Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event,
and it is probable that an outflow of resources embodying
economic benefits will be required to settle the obligation
and a reliable estimate can be made of the amount of the
obligation.
16. Trading and settlement dates
All financial assets and liabilities are initially recognised
on the trade date, i.e., the date that the Group becomes
a party to the contractual provisions of the instrument.
This includes “regular way trades”: purchases or sales
53
of financial assets that require delivery of assets within
the time frame generally established by regulation or
convention in the market place.
17. Off balance sheet
Irrevocable commitments and contingent liabilities arising
during the ordinary course of the Group’s business are
disclosed as “Off balance sheet items”. These consist of
financial guarantees, letters of credit and other undrawn
commitments to lend. Guarantees received are not offset
against those items.
18. Taxes
- Current income tax
Current tax assets and liabilities for the current and
prior years are measured at the amount expected to be
recovered from or paid to the taxation authorities. The tax
rates and tax laws used to compute the amount are those
that are enacted or substantively enacted by the statement
of financial position date.
- Deferred tax
Deferred tax is provided on temporary differences at
the statement of financial position date between the tax
bases of assets and liabilities and their carrying amounts
for financial reporting purposes. Deferred tax assets and
liabilities are measured at the tax rates that are expected
to apply in the year when the asset is realised or the liability
is settled, based on tax rates (and tax laws) that have
been enacted or substantively enacted at the statement of
financial position date.
The carrying amount of deferred tax assets is reviewed
at each statement of financial position date and reduced
to the extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part of the
deferred tax asset to be utilised. Unrecognised deferred
tax assets are reassessed at each statement of financial
position date and are recognised to the extent that it has
become probable that future taxable profit will allow the
deferred tax asset to be recovered.
Current tax and deferred tax relating to items recognised
directly in equity are also recognised in equity and not in
the income statement.
19. Dividends on ordinary shares
Dividends on ordinary shares are recognised as a liability
and deducted from equity when they are approved by the
Bank’s shareholders.
Dividends for the year that are approved after the statement
of financial position date are disclosed as an event after
the statement of financial position date.
20. Segment reporting
The Group’s segmental reporting is based on the following
operating segments: Retail, corporate, and treasury.
54
3
CASH AND BALANCES
WITH CENTRAL BANKS
2009 SP
2008 SP
Cash on hand
2,079,148,080
1,931,573,773
Current account with the Central Bank of Syria
8,450,848,094
4,130,906,301
Deposits reserve (*)
6,376,793,829
4,753,249,355
16,906,790,003
10,815,729,429
(*) According to banking laws and regulations, banks are required to maintain
a cash statutory deposit with the Central Bank of Syria in form of non-interest
bearing deposit, which amounted to SP 6,376,793,829 as at 31 December
2009 and represents 10% of average customers' deposits as per resolution
number 389/MN/B4 issued on 5 May 2008, and resolution number 502/MN/B4
issued on 10 May 2009 (2008: SP 4,753,249,355).
This reserve is mandatory and not available for use in the Bank’s day-to-day
operations.
4
BALANCES DUE FROM
BANKS
2009
Local banks
SP
Foreign banks
SP
Total
SP
1,124,638,074
2,882,474,658
4,007,112,732
940,790,911
6,696,722,772
7,637,513,683
2,065,428,985
9,579,197,430
11,644,626,415
2008
Local banks
SP
Foreign banks
SP
Total
SP
Current accounts
Placements with original maturity of three months or less
245,276,559
245,276,559
648,905,458
16,699,649,516
17,348,554,974
894,182,017
16,699,649,516
17,593,831,533
Current accounts
Placements with original maturity of three months or less
Non-interest bearing current accounts amounted to SP
912,378,038 (2008: SP 318,340,291).
55
5
PLACEMENTS DUE
FROM BANKS
2009
Placements with original maturity exceeding three months
2008
Placements with original maturity exceeding three months
Local banks
SP
Foreign banks
SP
Total
SP
5,729,250,191
7,859,101,546
13,588,351,737
Local banks
SP
Foreign banks
SP
Total
SP
2,867,600,000
3,235,638,735
6,103,238,735
6
DERIVATIVE FINANCIAL
INSTRUMENTS
The table below shows the fair values of derivative
financial instruments, recorded as assets or liabilities,
together with their notional amounts. The notional amount,
recorded gross, is the amount of a derivative’s underlying
asset, reference rate or index and is the basis upon which
changes in the value of derivatives are measured. The
notional amounts indicate the volume of transactions
outstanding at the year end and are indicative of neither
the market risk nor the credit risk.
Notional amount
based on maturity
31 December 2008
Swap contracts on foreign operations
Positive
fair value
SP
Negative
fair value
SP
Net fair
value
SP
Total notional
amount
SP
From 3 to 12
months
SP
5,547,120
(4,421,920)
1,125,200
6,397,794,000
6,397,794,000
5,547,120
(4,421,920)
1,125,200
6,397,794,000
6,397,794,000
Derivatives held for trading
Most swap contracts on foreign currencies are related to
customers’ operations and are covered with other parties
and include:
Swap contracts
Swap contracts are contractual arrangements between
two parties to exchange interest rates or foreign exchange
differences based on specific nominal value.
Interest rate swaps relate to contracts taken out by the
Bank with other financial institutions in which the Bank
either receives or pays a floating rate of interest in return
56
for paying or receiving, respectively, a fixed rate of interest.
The payment flows are usually netted against each other,
with the difference being paid by one party to the other.
In currency swap, the Bank pays a specified amount in
one currency and receives a specified amount in another
currency. Currency swap are mostly gross-settled.
7
LOANS AND ADVANCES
TO CUSTOMERS (Net)
2009
SP
2008
SP
3,789,856,333
3,230,243,693
12,064,576,193
8,672,626,159
(102,582,874)
(117,372,184)
11,961,993,319
8,555,253,975
3,642,693,414
3,320,032,522
Corporate lending
Overdraft
Loans
Unearned interest income related to loans
Net loans
Discounted bills
Unearned interest income related to discounted bills
Net discounted bills
(389,074,356)
(376,067,608)
3,253,619,058
2,943,964,914
509,280,017
97,986,971
Small and medium business lending
Loans
Unearned interest income related to small and medium business lending
(68,092,213)
-
441,187,804
97,986,971
6,653,300,710
4,538,376,784
(6,943,522)
(32,673,375)
Net loans
6,646,357,188
4,505,703,409
Credit cards
155,568,200
83,956,166
26,248,581,902
19,417,109,128
(134,927,846)
(111,337,610)
Net loans
Consumer lending
Loans
Unearned interest income related to loans
Total
Less: Allowance for impairment losses
Less: Suspended interest
Net loans and advances to customers
(13,454,561)
-
26,100,199,495
19,305,771,518
Non-performing loans and advances to customers
amounted to SP 623,661,821 as at 31 December 2009
representing 2.37% from total loans and advances to
customers, while there are no non-performing loans and
advances to customers as at 31 December 2008 (See note
37.2).
Non-performing loans and advances to customers after
deducting the suspended interest amounted to SP
610,207,260 as at 31 December 2009 representing 2.32%,
while there is no non-performing loans and advances to
customers on 31 December 2008.
57
Impairment allowance for loans and advances to
customers
At 1 January 2009
(write-back) charge for the year
At 31 December 2009
Corporate lending
SP
Consumer lending
SP
Total
SP
50,538,435
60,799,175
111,337,610
30,627,094
(7,036,858)
23,590,236
81,165,529
53,762,317
134,927,846
At 1 January 2009
Individual impairment
-
-
-
Collective impairment
50,538,435
60,799,175
111,337,610
47,539,980
20,475,204
68,015,184
(16,912,886)
(27,512,062)
(44,424,948)
47,539,980
20,475,204
68,015,184
33,625,549
33,287,113
66,912,662
81,165,529
53,762,317
134,927,846
At 1 January 2008
54,275,780
22,974,220
77,250,000
(write-back) charge for the year
(3,737,345)
37,824,955
34,087,610
At 31 December 2008
50,538,435
60,799,175
111,337,610
54,275,780
-
54,275,780
-
22,974,220
22,974,220
Change during the year:
At 31 December 2009
At 1 January 2008
Change during the year:
(54,275,780)
-
(54,275,780)
50,538,435
37,824,955
88,363,390
-
-
-
50,538,435
60,799,175
111,337,610
50,538,435
60,799,175
111,337,610
At 31 December 2008
For the year ended 31 December 2009, no impairment
allowances were recovered or transferred against other
facilities, while for the year ended 31 December 2008 the
impairment allowances that were recovered or transferred
against other facilities amounted to SP 54,275,780.
At 1 January
Add: Interest suspended during the year
At 31 December
58
Suspended interest
The movement in the suspended interest is as follows:
2009
SP
2008
SP
-
-
13,454,561
-
13,454,561
-
8
FINANCIAL
INVESTEMENTS- LOANS
AND RECEIVABLES
2009
SP
Certificates of deposit - local banks (*)
Certificates of deposit - foreign banks (**)
2008
SP
100,000,000
650,000,000
1,051,009,080
1,310,049,457
1,151,009,080
1,960,049,457
(*)During 2006 and 2007, the Bank purchased certificates of deposit issued
by local banks The certificates of deposit carry an annual interest rate ranging
between 9% and 10% and have the following maturities as at 31 December:
Maturity
Book Value
2009
SP
2008
SP
2009
-
550,000,000
2010
100,000,000
100,000,000
100,000,000
650,000,000
(**) Moreover, during 2006 and 2007, the Bank purchased certificates of
deposit (Euro CDs) issued by foreign banks. The certificates of deposits carry
an annual interest rate of 7.625% and mature at 31 December on the following
periods:
Maturity
2010
2012
Amendments to IAS 39 and IFRS 7, “Reclassification of
Financial Assets”:
Following the amendments to IAS 39 and IFRS 7,
“Reclassification of Financial Assets”, the Group
reclassified certain financial assets available for sale to
financial investments loans and receivables.
The Group has identified financial assets, eligible for
reclassification for which as at 1 October 2008, the Group
Book Value
2009
SP
2008
SP
629,322,911
881,435,257
421,686,169
428,614,200
1,051,009,080
1,310,049,457
has intent and ability to carry for the foreseeable future
rather than selling in near future. Under IAS 39 as amended,
the reclassifications were made with effect from 1 October
2008 at fair value at the date of reclassification.
The impact of the reclassifications on the Group is detailed
as follows:
SP
Book value as of 1 October 2008
1,298,755,950
Book value as of 31 December 2009 (*)
1,051,009,080
Fair value as of 31 December 2009
1,107,271,564
(*) The decline in value is due to selling part of these assets.
59
As of the reclassification date, the effective interest rates
on reclassified assets ranged between 7.57 % and 8.52
% with anticipated cash flows of USD 34,751,381, and
became at 31 December 2009 USD 26,560,800. The
reason for the decline in the cash flows is due to selling
part of these assets. Effective interest rates on reclassified
available for sale financial assets ranged between 8.04 %
and 8.26 %.
If the reclassification had not occurred, the consolidated
statement of comprehensive income would have included
SP 50,043,500 of unrealized fair value gains on the
reclassified available for sale financial assets.
The net interest income on reclassified financial assets over
the period from date of reclassification until 31 December
2009 is detailed as follows:
For the year ended 31 December
2009 SP
For the period from date of reclassification until 31 December
2009 SP
102,069,228
127,299,929
Net interest income
As of 1 October 2008, the available reserve for the
reclassified assets, recorded directly in shareholders’ equity,
amounted to SP 827,034, and became at 31 December
2009 SP 446,890 as a result of selling part of these assets.
This amount will be amortized upto the maturity date using
the effective interest method.
9
FINANCIAL
INVESTMENTSAVAILABLE-FOR-SALE
2009
SP
2008
SP
3,446,910,665
232,653,482
Quoted Financial investments
Medium-term notes (*)
Unquoted Financial investments
Equity securities (**)
Total financial investments-available-for-sale
Notes analysis:
Medium-term fixed yield income notes (*)
(*) During the second quarter of year 2008, the Group purchased medium term
notes carrying an annual interest rate ranging between 5.625% and 5.750%.
Also, the Group purchased medium term notes during the second and third
quarters of year 2009 carrying an annual interest rates ranging between 4.5 %
and 6.5%, and have the following maturities as at 31 December 2009:
Maturity
Fair value
SP
2012
642,565,476
2013
333,421,821
2014
2,470,923,368
3,446,910,665
60
50,000,000
50,000,000
3,496,910,665
282,653,482
2009
SP
2008
SP
3,446,910,665
232,653,482
The Group carried as well available for sale investments in
the form of medium-term notes issued by a foreign bank
amounted SP 17,161,661 as of 31 December 2009. As at
31 December 2008, the market value of these investments
have suffered a permanent decline in value, therefore; the
Group has determined the fair value of the mentioned
instruments and recognised the difference equals to
92.2% as a impairment loss.
10
FIXED ASSETS
Moreover, the remaining provision against the mentioned
instruments will be booked in January 2010 according
to Credit and Monetary Council resolution (B4/MN/616)
dated 30 December 2009 and Central Bank of Syria letter
number (1/100/503) dated 2 February 2010.
Premises and leasehold improvements
Furniture and equipment
The estimated useful lives of the assets for the calculation
of depreciation are as follows:
10 to 40 years
5 to 10 years
Projects in progress are not depreciated until the relevant
assets are completed and put into operational use.
(**) Amount represents the Bank’s investment in Syrian Arab Insurance
Company S.A. which is equivalent to 5% of the company’s capital. This
investment is recorded at cost since its fair value cannot be reliably estimated
in absence of an active market for this investment and inability to predict
expected cash flows to determine the fair value. The Group is intending to
maintain this investment for the foreseeable future.
2009
Lands SP
Premises & leasehold
improvements SP
SP
Total SP
-
679,172,861
483,057,575
1,162,230,436
Cost
At 1 January 2009
Additions
7,681,000
26,246,725
52,418,423
86,346,148
Transfers
4,951,000
180,173,847
122,931,113
308,055,960
Disposals
-
(206,550)
(704,191)
(910,741)
12,632,000
885,386,883
657,702,920
1,555,721,803
At 1 January 2009
-
65,017,151
116,479,726
181,496,877
Depreciation charge for the year
-
67,995,545
87,122,742
155,118,287
Relating to disposals
-
-
(90,333)
(90,333)
At 31 December 2009
-
133,012,696
203,512,135
336,524,831
At 1 January 2009
-
201,344,983
-
201,344,983
Additions
-
104,789,547
-
104,789,547
Transfers
-
(267,239,333)
-
(267,239,333)
Disposals
-
(719,595)
-
(719,595)
At 31 December 2009
-
38,175,602
-
38,175,602
140,510,224
140,510,224
At 31 December 2009
Accumulated depreciation
Projects in progress
Advance payments on purchase of fixed assets
At 1 January 2009
-
-
Additions
-
-
18,017,223
18,017,223
Transfers
-
-
(40,816,627)
(40,816,627)
Disposals
-
(116,028,140)
-
(116,028,140)
At 31 December 2009
-
(116,028,140)
117,710,820
1,682,680
12,632,000
674,521,649
571,901,605
1,259,055,254
Net book value
At 31 December 2009
61
2008
Lands
SP
Premises & leasehold
improvements
SP
SP
Total
SP
At 1 January 2008
-
447,068,368
306,417,431
753,485,799
Additions
-
38,104,921
100,357,375
138,462,296
Cost
Transfers
-
193,999,572
76,307,769
270,307,341
Disposals
-
-
(25,000)
(25,000)
At 31 December 2008
-
679,172,861
483,057,575
1,162,230,436
Accumulated depreciation
At 1 January 2008
-
26,014,977
57,546,923
83,561,900
Depreciation charge for the year
-
39,002,174
58,932,803
97,934,977
Relating to disposals
-
-
-
At 31 December 2008
-
65,017,151
116,479,726
181,496,877
Projects in progress
At 1 January 2008
-
15,992,965
-
15,992,965
Additions
-
455,724,535
-
455,724,535
Transfers
-
(270,372,517)
-
(270,372,517)
Disposals
-
-
-
-
At 31 December 2008
-
201,344,983
-
201,344,983
Advance payments on purchase of fixed assets
At 1 January 2008
-
-
11,081,777
11,081,777
Additions
-
-
129,428,447
129,428,447
Transfers
-
-
-
-
Disposal
-
-
-
-
At 31 December 2008
-
-
140,510,224
140,510,224
-
815,500,693
507,088,073
1,322,588,766
Net book value
At 31 December 2008
62
11
INTANGIBLE ASSETS
The estimated useful lives of the intangible assets for the
calculation of amortization are as follows:
Computer softwares
Key money
2009
5 years
70 years
Computer softwares
SP
Key money
SP
Total
SP
49,217,696
88,914,186
138,131,882
Cost
At 1 January 2009
Additions
At 31 December 2009
4,943,467
-
4,943,467
54,161,163
88,914,186
143,075,349
20,480,305
3,598,903
24,079,208
Accumulated amortization
At 1 January 2009
Amortization charge for the year
At 31 December 2009
10,280,428
1,270,200
11,550,628
30,760,733
4,869,103
35,629,836
43,215,515
88,914,186
132,129,701
5,937,005
-
5,937,005
2008
Cost
At 1 January 2008
Additions
Transfers
At 31 December 2008
65,176
-
65,176
49,217,696
88,914,186
138,131,882
11,489,811
2,328,703
13,818,514
Accumulated amortization
At 1 January 2008
Amortization charge for the year
At 31 December 2008
8,990,494
1,270,200
10,260,694
20,480,305
3,598,903
24,079,208
23,400,430
84,045,083
107,445,513
28,737,391
85,315,283
114,052,674
Net book value
At 31 December 2009
At 31 December 2008
63
12
OTHER ASSETS
Branches and offices rent prepayments
2009
SP
2008
SP
192,260,936
221,421,191
Other prepayments
34,374,253
34,813,980
Transfers and checks under collection
84,851,945
108,138,878
Collateral repossessed (*)
92,331,250
-
Due from credit card agents
22,413,340
12,992,700
Others
20,486,624
25,218,292
Accrued interest receivable – Central Bank of Syria
11,310,331
14,273,392
209,813,653
243,169,495
Accrued interest receivable – Banks and financial institutions
Accrued interest receivable – Loans and advances corporate
41,623,644
30,076,490
Accrued interest receivable – Loans and advances consumer
36,167,155
23,430,855
Accrued interest receivable – Financial investments-loan and receivables
55,588,576
163,152,152
Accrued interest receivable –Available for sale financial investments
28,570,858
3,898,961
829,792,565
880,586,386
(*) The following is the movement over repossessed collateral:
Repossessed collaterals
SP
Balance at 1 January
2008
Total
SP
Total
SP
-
-
-
Additions
92,331,250
92,331,250
-
Balance 31 December (**)
92,331,250
92,331,250
(**) The amount represents the value of real estate repossessed by the Bank in
settlement of a facility granted to one of the creditors according to the contract
dated 18 June 2009. The Central Bank of Syria has approved the transaction
by the letter reference 5/100/4062 dated 1 July 2009, provided that the
repossessed asset be liquidated within two years of the date of repossession
as per paragraph 100/2/B of law number 23 for the year 2002.
64
2009
13
STATUTORY BLOCKED
FUNDS
As per section B of article 12 of law number 28 for the year
2001, private banks should keep 10% of their capital as
a statutory blocked deposit at the Central Bank of Syria.
This deposit is interest free.
As at 31 December 2009, blocked deposits at the Central
Bank of Syria were as follows:
2009
SP
2008
SP
Funds in Syrian Pounds
148,597,900
21,235,700
Funds in United States Dollars
314,313,179
198,404,926
462,911,079
219,640,626
Local banks
SP
Foreign banks
SP
Total
SP
977,414,329
34,887,778
1,012,302,107
14
DUE TO BANKS
2009
Current accounts (*)
Term deposits
2008
Current accounts
Term deposits
-
-
-
977,414,329
34,887,778
1,012,302,107
Local banks
SP
Foreign banks
SP
Total
SP
791,293,093
106,992,676
898,285,769
-
1,160,000,000
1,160,000,000
791,293,093
1,266,992,676
2,058,285,769
(*) The amount includes SP 34,257,843 as at 31 December 2009 representing
cash margins against bank guarantees (31 December 2008: nil).
65
15
DUE TO CUSTOMERS
2009
SP
2008
SP
Large corporate customers
Current accounts and demand deposits
Time and notice deposits
4,024,674,915
3,435,883,618
13,563,437,241
9,696,141,002
-
73,901,445
2,686,019,286
2,186,323,212
944,753,719
733,673,889
-
47,278
58,743,226
68,336,759
Blocked accounts
Small and medium-enterprises
Saving deposits
Blocked accounts
Retail customers
12,798,384,586
9,607,826,239
27,491,275,456
20,992,644,121
3,070,194,858
1,743,286,434
247,263
749,636
64,637,730,550
48,538,813,633
Saving deposits
Blocked accounts
Syrian governmental (public) sector deposits amounted to
SP 860,533,707 representing 1.3% of the total deposits for
the year 2009 (2008: SP 2,481,062 representing 0.005%
of the total deposits).
Interest free deposits amounted to SP 19,099,042,439
representing 29.55% of total deposits at 31 December
2009 (2008: SP 15,915,265,444 representing 32.79%).
Blocked deposits amounted to SP 58,990,489 representing
0.09% of total deposits at 31 December 2009 (2008: SP
142,987,840 representing 0.29% of total deposits).
16
MARGIN ACCOUNTS
2009
SP
Cash margins against direct facilities
Cash margins against indirect facilities
66
2008
SP
243,464,612
700,221,692
2,220,981,324
2,903,198,271
2,464,445,936
3,603,419,963
17
PROVISIONS
2009
Provision against operating
foreign position
At 1 January
SP
Provided during the
year SP
Utilized during the year
SP
Amount written-back
SP
At 31 December
SP
935,741
854,155
-
-
1,789,896
-
935,741
-
-
935,741
2008
Provision against operating
foreign position
18
CURRENT TAX LIABILITY
Balance at 1 January
Income tax paid
2009
SP
2008
SP
219,199,110
140,740,844
(219,199,110)
(140,740,844)
Accrued income tax (*)
171,540,778
219,199,110
Balance at 31 December
171,540,778
219,199,110
2009
SP
2008
SP
796,084,973
584,801,424
Unrealised losses from foreign exchange difference on structural position
56,450,754
46,695,000
Dividend income from a subsidiary
(2,000,000)
-
1,270,200
1,270,200
The tax returns were filed for the years 2005 to 2008
(inclusive) at the specified dates, and the payment of the
assessed income tax was settled as per these tax returns
which are still subject to the inspection of the Finance
Directorate.
(*) The relationship between the income tax expense and the accounting profit
can be explained as follows:
Accounting profit before tax
Key money amortisation
Building depreciation
7,395,786
-
Credit loss expense
23,590,236
34,087,610
Suspended interests
Impairment loss on available for sale investments
Net income of a subsidiary
13,454,561
-
(209,942,205)
209,942,205
(141,194)
-
686,163,111
876,796,439
Effective rate of income tax
25%
25%
Current income tax expense
171,540,778
219,199,110
67
19
OTHER LIABILITIES
Unearned revenues
Transfers and checks under collection
Staff related provisions
2009
SP
2008
SP
31,062,015
15,513,421
645,198,288
681,204,251
43,118,754
45,493,021
Accrued expenses
50,598,145
53,203,783
Various taxes payable
31,069,112
32,739,447
Accounts payable and sundry creditors
13,980,793
149,412,516
Liabilities arising under financial guarantees
24,309,568
-
Dividends payable
3,119,469
18,946,752
Others
4,028,295
17,711,752
133,561
226,303
Accrued interest payable – Due to banks
Accrued interest payable – Due to customers
283,046,486
97,434,513
1,129,664,486
1,111,885,759
20
SHARE CAPITAL
The authorised, issued and fully paid share capital as at
31 December 2009 equals SP 5,000,000,000 compromise
of 5,000,000 shares of SP 1,000 par value each (2008:
SP 2,500,000,000 compromise of 2,500,000 shares of SP
1,000 par value each).
The authorised, issued and fully paid share capital is
divided into two categories:
Category A: These are the stocks that shall be owned by
Syrian individuals or Syrian companies and are paid in
Syrian Pounds, except for non-resident Syrian individuals
who shall pay the value of shares in foreign currency at
exchange rate according to the Central Bank of Syria.
These shares represent 51% of the Bank’s share capital.
Category B: These are the stocks that can be owned
by foreign individuals or companies based on the prime
ministers decision, the value of these shares shall be paid
in foreign currencies. These shares represent 49% of the
Bank’s share capital.
Bank Audi S.A.L. – Audi Saradar Group shares are from
category B and represent 47% of the Bank’s share capital.
The extraordinary general assembly of the Bank dated
26 October 2008 approved a capital increase amounting
to SP 2,500,000,000; accordingly the Bank’s capital will
become SP 5,000,000,000 subject to the completion of
68
legal requirements. Accordingly, the Bank has obtained
the approval of the Central Bank of Syria, the Ministry
of Economy and Trade and the Syrian Commission on
Financial Markets and Securities. This capital increase to
be offered on two stages: the first starts on 24 June 2009
and ends on 13 July 2009, and the second starts on 14
July 2009 and ends on 2 August 2009.
The share allotment policy was approved by the Syrian
Commission on Financial Markets and Securities on
11 August 2009, accordingly, the capital increase was
released on 20 August 2009, and the Bank’s commercial
registration was amended to reflect a total capital of SP
5,000,000,000.
On 4 January 2010 Law number 3 was issued to amend
some of the articles of Law number 28 issued in 2001
and the Decree number 35 issued in 2005, which requires
increasing the minimum banks capital in the Syrian Arab
Republic to be SP 10,000,000,000. The existing banks
were granted three years grace period to be in compliance
with the new law.
21
RESERVES
Statutory reserve
According to the companies law number 3 for year 2008
and the resolution number 369/100/3 dated 20 January
2009 and resolution number 952/100/1 dated 12 February
2009, the transferred to Bank statutory reserve 10% of
the pre-tax profit for the year before unrealised gain or
loss on foreign exchange structural position. The Bank
may resolve to discontinue such annual transfer when the
statutory reserve becomes equal to 25% of the Bank’s
capital. This reserve is not available for distribution to the
shareholders.
Statutory reserve is computed as follows:
Profit before tax
Add: Unrealised foreign exchange loss
Statutory reserve 10%
2009
SP
2008
SP
796,084,973
584,801,424
56,450,754
46,695,000
852,535,727
631,496,424
85,253,573
63,149,642
2009
SP
2008
SP
796,084,973
584,801,424
Special reserve
According to the Central Bank of Syria resolution number
369/100/3 dated 20 January 2009 and resolution number
952/100/1 dated 12 February 2009, the special reserve
was computed as 10% of pre-tax profit for the year before
unrealised gain or loss on foreign exchange structural
position. The Bank may resolve to discontinue such annual
transfer when the special reserve becomes equal to 100% of
the Bank’s capital. This reserve is not available for distribution
to the shareholders.
Special reserve is computed as follows:
Profit before tax
Add: Unrealised foreign exchange loss
Special reserve 10%
56,450,754
46,695,000
852,535,727
631,496,424
85,253,573
63,149,642
69
22
AVAILABLE FOR SALES
RESERVE
2009
Available for sales investments
Total
2008
Available for sales investments
Bonds SP
Certificates of
deposit SP
SP
(22,880,118)
(823,928)
(23,704,046)
3,603,750
-
3,603,750
55,468,489
-
55,468,489
(59,210,819)
(827,034)
(60,037,853)
Net realized gains recycled to the income
statement on the sale of available for sale
financial investments
Net realized losses recycled to the income
statement related to reclassified financial
investments loans and receivables reserve
amortization
-
-
-
32,726,951
-
32,726,951
-
(7,521)
(7,521)
-
3,106
3,106
Net realized losses recycled to the income
statement related to the sale of financial
investments loans and receivables
At 31 December
-
384,559
384,559
-
-
-
32,588,371
(446,890)
32,141,481
(22,880,118)
(823,928)
(23,704,046)
At 1 January
Unrealized gains (losses)
23
RETAINED EARNINGS
AVAILABLE FOR
DISTRIBUTION
Bonds SP
Certificate sof
deposit SP
Total
SP
24
INTEREST AND SIMILAR
INCOME
In accordance with the resolutions of the Central Bank
of Syria and the Credit and Monetary Council circular
number 362, unrealised accumulated losses on structural
position are not subject for distribution and accordingly
are disassociated from retained earnings. Therefore, the
total retained earnings available for distribution as at 31
December 2009 amounted to SP 710,250,532 (2008: SP
373,713,483).
2009 SP
2008 SP
Overdrafts
326,989,296
286,090,768
Corporate lending
746,021,085
577,283,155
Loans and advances to customers:
Consumer lending
589,609,739
288,610,846
Small and medium enterprises lending
31,116,636
7,483,825
Discounted bills
320,827,203
255,836,715
158,926,076
141,408,098
Due from banks
467,061,620
740,808,555
65,600,895
145,954,615
2,706,152,550
2,443,476,577
Financial investments - available-for-sale
70
25
INTEREST AND SIMILAR
EXPENSES
2009
SP
2008
SP
398,609
4,310,220
Due to customers
Saving deposits
Due to banks
62,085,341
35,472,869
1,269,203,892
999,337,505
660,114
9,094,263
38,651,345
86,392,453
1,370,999,301
1,134,607,310
2009
SP
2008
SP
Credit related fees and commission income
128,013,563
111,601,275
Trade finance related fees and commission income
182,709,796
128,784,807
Branch operations fees and other commission income
138,745,740
68,235,570
449,469,099
308,621,652
2009
SP
2008
SP
Fees and commission paid to banks
2,559,071
2,703,086
Transfers fees and commission expenses
6,488,000
5,643,995
Margin accounts
26
FEES AND COMMISSION
INCOME
27
FEES AND COMMISSION
EXPENSES
Credit card fees and commission expenses
373,096
-
Other fees and commission expenses
54,664
-
9,474,831
8,347,081
71
28
GAINS (LOSSES) ON
AVAILABLE FOR SALE
INVSETMENTS
2009
SP
2008
SP
Impairment loss on available for sale investments(*)
-
(209,942,205)
Loss on sale of available for sale investment
-
(32,726,951)
Gain on purchase of available for sale investments
-
5,760,000
Gain on sale of financial investments-loans and receivables (note 35)
5,394,498
-
Dividend income (note 35)
2,000,000
-
7,394,498
(236,909,156)
2009
SP
2008
SP
Internet services revenues
4,132,768
7,051,402
Safe box rental income
1,049,832
993,930
11,339,694
16,144,085
4,028,669
3,239,088
20,550,963
27,428,505
(*) The Bank carries available for sale investments in form of medium-term
notes. As at 31 December 2008, the market value of these investments have
declined; therefore, the Bank has determined the fair value of these instruments
and recognised the difference as a permanent impairment in the investment
realized in the consolidated income statement.
29
OTHER OPERATING
INCOME
Banking services income
Other income
72
30
PERSONNEL EXPENSES
Salaries and related benefits
Social securities
Employees’ insurance expenses (note 35)
Bonuses
Trainings and seminars
2009
SP
2008
SP
272,621,249
178,036,555
40,832,508
25,111,383
8,237,637
6,987,705
41,347,662
45,481,986
7,101,537
7,969,924
Trainees development expenses
25,965,007
54,234,803
Other development expenses
29,919,670
29,105,897
Others
11,293,279
12,785,148
437,318,549
359,713,401
2009
SP
2008
SP
Corporate lending
30,627,094
(3,737,345)
Consumer lending
(7,036,858)
37,824,955
23,590,236
34,087,610
2009
SP
2008
SP
31
CREDIT LOSS EXPENSE
Loans and advances to customers:
32
OTHER OPERATING
EXPENSES
112,466,320
96,877,520
Advertising and marketing
Rental expenses
46,825,133
53,580,131
Stationary and printing expenses
11,688,193
13,813,381
Telecommunication expenses
25,208,728
15,802,351
3,612,400
1,818,374
Governmental fees
35,252,762
26,664,366
Consultation and legal fees
10,423,948
8,899,575
Credit card expenses
Swift expenses
Development expenses (note 35)
1,104,793
1,728,328
81,520,639
61,320,902
Maintenance
8,853,260
3,488,666
Travel and transportation
8,735,210
10,655,876
17,541,742
8,648,646
7,744,302
6,586,420
14,141,094
7,602,944
Utilities
Insurance (note 35)
IT expenses
Cleaning, security and maintenance services
24,011,380
19,310,856
Others
13,379,217
15,356,774
422,509,121
352,155,110
73
33
BASIC AND DILUTED
EARNINGS PER SHARE
Basic earnings per share are calculated by dividing the
net profit for the year by the weighted average number of
shares outstanding during the year as follows:
Profit for the year related to equity holders of the parent (SP)
Weighted average number of shares outstanding during the year
Basic earnings per share related to equity holders of the parent (SP)
2009
SP
2008
SP
624,544,195
365,602,314
3,410,959
2,500,000
183.10
146.24
2009
SP
2008
SP
10,529,996,174
6,062,480,074
Diluted earnings per share have the same figure as the
basic earnings per share since the Bank has not issued
any instrument which would have an impact on earnings
per share when exercised.
34
CASH AND CASH
EQUIVALENTS
Cash and balances with the Central Bank (*)
Add: Due from banks with an original maturity of three months or less
11,644,626,415
17,593,831,533
Deduct: Due to banks with an original maturity of three months or less
(1,012,302,107)
(2,058,285,769)
21,162,320,482
21,598,025,838
2009
SP
2008
SP
Basic salaries
14,300,168
10,887,324
Other short-term benefits
28,285,756
33,070,260
Total compensations paid to key management personnel
42,585,924
43,957,584
(*) The deposit with the Central Bank of Syria is not available to the Bank’s dayto-day operations therefore is not part of cash and cash equivalents.
35
RELATED PARTY
TRANSACTIONS
Compensations of key management personnel are as
follows:
74
Transactions with other related parties
In addition to transactions with key management, the
Group enters into transactions with major shareholders,
and other related parties in the ordinary course of business
at commercial interest and commission rates. All credit
facilities given to related parties are performing and no
provisions were taken for them.
Related party
Total
Parent company
SP
Sister
companies SP
Others
SP
2009
SP
2008
SP
116,132,505
-
-
116,132,505
233,849,377
(105,391)
-
-
(105,391)
(105,221,549)
Current accounts due to National Sudan Bank
-
(524,545)
-
(524,545)
(1,771,127)
Current accounts due from Bank Audi S.A.L -Audi Saradar Group
(Jordan branches)
-
843,999
-
843,999
4,875,440
Current accounts due from Bank Audi Switzerland
-
376,896
-
376,896
865,581
Current accounts due from Bank Audi France
-
325,408
-
325,408
5,611,807
Placements due from Bank Audi S.A.L- Audi Saradar Group
-
-
-
-
757,040,000
Placements due from Bank Audi-Qatar
-
593,450,000
-
593,450,000
-
Placements due from Bank Audi-Egypt
-
-
-
-
372,255,600
Placements due from Bank Audi-Switzerland
-
-
-
-
2,134,400,000
Placement due to Bank Audi S.A.L - Audi Saradar Group
-
-
-
-
(1,160,000,000)
911,498
-
-
911,498
57,658,756
Balances due to Syrian Arab Insurance Company
-
(1,219,745,134)
-
(1,219,745,134)
(1,093,296,649)
Investment in Syrian Arab Insurance Company
-
50,000,000
-
50,000,000
50,000,000
Balances due to Lebanese Arab Company
-
(116,966)
-
(116,966)
(3,351,789)
Shareholders’ deposits
-
-
(355,280,063)
(355,280,063)
(520,782,733)
Purchase of certificates of deposit – Foreign banks through Bank
Audi S.A.L - Audi Saradar Group
-
-
-
-
205,275,000
Sale of Certificates of deposit – Foreign banks through Bank Audi
S.A.L - Audi Saradar Group
237,865,031
-
-
237,865,031
-
3,166,748,468
-
-
3,166,748,468
2,024,089,688
Purchase of other debt securities through Bank Audi S.A.L - Audi
Saradar Group
-
-
-
-
281,123,925
Purchase of bonds through Bank Audi S.A.L - Audi Saradar Group
-
-
-
-
386,929,500
Purchase of bonds from Bank Audi S.A.L - Audi Saradar Group
-
-
-
-
417,305,400
1,262,675,449
-
-
1,262,675,449
1,296,044,600
Letters of guarantee in favour of Bank Audi Egypt
-
40,755,521
-
40,755,521
15,146,600
Letters of guarantee in favour of Bank Audi S.A.L -Audi Saradar
Group (Jordan branches)
-
5,039,445
-
5,039,445
459,000
Letters of guarantee in favour of Bank Audi-France
-
61,941,330
-
61,941,330
-
1,743,030,072
-
-
1,743,030,072
1,585,206,841
Consolidated statement of financial position items:
Current accounts due from Bank Audi S.A.L - Audi Saradar Group
Current accounts due to Bank Audi S.A.L - Audi Saradar Group
Interest receivable due from balances held with Bank Audi Group
Purchase of medium term notes through Bank Audi S.A.L - Audi
Saradar Group
Consolidated off – statement of financial position
items:
Letters of guarantee in favour of Bank Audi S.A.L - Audi Saradar
Group
Letters of credit in favour of Bank Audi S.A.L - Audi Saradar Group
75
Related party
Total
Parent company
SP
Sister
companies SP
Others
SP
2009
SP
2008
SP
Letters of credit in favour of Bank Audi-France
-
-
-
-
30,313,360
Letters of credit in favour of Bank Audi-Egypt
-
27,927,475
-
27,927,475
18,376,813
Letters of credit in favour Sudan National Bank
Acceptances Bank Audi S.A.L - Audi Saradar Group
-
42,180,600
-
42,180,600
-
3,170,053
-
-
3,170,053
24,215,023
-
3,231,244
-
3,231,244
20,771,415
Acceptances Bank Audi Egypt
Consolidated income statement items:
Interest income
34,297,120
-
-
34,297,120
196,267,466
Interest expenses
(463,896)
-
-
(463,896)
(3,210,860)
Commission income from parent company and sister
companies
8,769,724
53,317
-
8,823,041
5,283,591
Losses on financial investments-available-for-sale
-
-
-
-
(26,966,951)
Dividends income – Syrian Arab Insurance Company
-
2,000,000
-
2,000,000
-
(81,520,639)
-
-
(81,520,639)
(61,320,902)
-
(15,981,939)
-
(15,981,939)
(13,574,125)
5,394,498
-
-
5,394,498
-
Development costs (**)
Insurance expenses- Syrian Arab Insurance Company
Gains on sale of financial investments-Loans and
receivables
(**) Amount represents development expenses incurred by the Bank and paid
to Audi Bank S.A.L.- Audi Saradar Group in accordance with the technical
assistance agreement which is described in note (1) to the consolidated
financial statements.
Maximum and minimum interest rates on Board of
Directors and key management deposits range between
4% and 5%.
36
FAIR VALUE
OF FINANCIAL
INSTRUMENTS
Determination of fair value and fair value hierarchy
The Bank uses the following hierarchy for determining and
disclosing the fair value of financial instruments:
Level 1: quoted (unadjusted) prices in active markets for
identical assets or liabilities;
Level 2: other techniques for which all inputs which have a
significant effect on the recorded fair value are observable,
either directly or indirectly; and
Level 3: techniques which use inputs which have a
significant effect on the recorded fair value that are not
based on observable market data.
The following table shows an analysis of financial
instruments recorded at fair value by level of the fair value
hierarchy:
2009
2008
Notes
Level 1
SP
Level 2
SP
Level
3 SP
Total
SP
Level 1
SP
Level 2
SP
Level 3
SP
Total
SP
Derivative financial
instruments
6
-
-
-
-
-
1,125,200
-
1,125,200
Financial investmentsavailable for sale
9
3,446,910,665
-
-
3,446,910,665
232,653,482
-
-
232,653,482
3,446,910,665
-
-
3,446,910,665
232,653,482
1,125,200
-
233,778,682
76
Set out below is a comparison by class of the carrying
amounts and fair values of the Bank’s financial instruments
that are carried in the consolidated financial statements.
The table does not include the fair values of non-financial
assets and non-financial liabilities.
2009
Carrying Values
Fair Values
SP
Cash and balances with
Central bank
2008
Carrying Values
Fair Values
SP
Unrecognised
gains (losses)
SP
SP
SP
Unrecognised
gains (losses)
SP
16,906,790,003
16,903,871,078
(2,918,925)
10,815,729,429
10,814,224,838
(1,504,591)
11,644,626,415
11,644,626,415
-
17,593,831,533
17,593,831,533
-
13,588,351,737
13,603,711,597
15,359,860
6,103,238,735
6,129,059,722
(25,820,987)
-
-
1,125,200
1,125,200
-
Financial assets
Derivative financial
instruments
Loans and advances to
customers
26,100,199,495
26,091,245,658
(8,953,837)
19,305,771,518
19,306,726,031
954,513
Financial investments –
loans and receivables
1,151,009,080
1,208,144,993
57,135,913
1,960,049,457
1,961,667,852
1,618,395
Financial investments –
available for sale
3,496,910,665
3,496,910,665
-
282,653,482
282,653,482
-
462,911,079
462,911,079
-
219,640,626
219,640,626
-
1,012,302,107
1,012,302,107
-
2,058,285,769
2,058,285,769
-
Due to customers
64,637,730,550
64,635,681,688
2,048,862
48,538,813,633
48,538,978,839
(165,206)
Margin accounts
2,464,445,936
2,464,445,936
-
3,603,419,963
3,603,419,963
-
Financial liabilities
Due to banks
Total unrecognised
change in fair values
The following describes the assumptions used to determine
fair values for those financial instruments.
Carrying value approximates fair value
For financial assets and financial liabilities that are liquid
or having a short term maturity (less than three months)
it is assumed that the carrying amounts approximate to
their fair value. This assumption is also applied to demand
deposits, savings accounts without a specific maturity
and variable rate financial instruments.
Fixed rate financial instruments
The fair value of fixed rate financial assets and liabilities
carried at amortised cost are estimated by comparing
market interest rates when they were first recognised
with current market rates offered for similar financial
instruments. The estimated fair value of fixed interest
bearing deposits is based on discounted cash flows using
prevailing money-market interest rates for debts with
similar credit risk and maturity. For quoted debt issued, the
fair values are calculated based on quoted market prices.
For those notes issued where quoted market prices are
not available, a discounted cash flow model is used based
on a current interest rate yield curve appropriate for the
remaining term to maturity.
62,671,873
26,724,098
37
RISK MANAGEMENT
37.1
Introduction
Risk is inherent in the Bank’s activities but it is managed
through a process of ongoing identification, measurement
and monitoring, subject to risk limits and other controls.
This process of risk management is critical to the Bank’s
continuing profitability and each individual within the Bank
is accountable for the risk exposures relating to his or her
responsibilities. The Bank is exposed to credit risk, market
risk, liquidity risk, and operational risk. Operational risk
includes interest rate risk and currency risk.
Risk management structure
The Board of Directors is ultimately responsible for
identifying and controlling risks; however, there are
separate independent bodies responsible for managing
and monitoring risks.
Board of Directors
The Board of Directors is responsible for the overall
77
risk management approach and for approving the risk
strategies and principles.
to ensure that all business divisions have access to
extensive, necessary and up-to-date information.
Risk Management
The Risk Management Unit is responsible for implementing
and maintaining risk related procedures to ensure an
independent control process.
Risk mitigation
The Group actively seeks to mitigate risks, therefore uses
collateral to reduce its credit risks.
Bank Treasury
Bank Treasury is responsible for managing the assets
and liabilities and the overall financial structure. It is also
primarily responsible for the funding and liquidity risks of
the Group.
Internal Audit
Risk management processes throughout the Group
are audited annually by the internal audit function that
examines both the adequacy of the procedures and the
Group’s compliance with the procedures. Internal Audit
discusses the results of all assessments with management,
and reports its findings and recommendations to the Audit
Committee.
Risk measurement and reporting systems
The Group’s risks are measured using a method which
reflects both the expected loss likely to arise in normal
circumstances and unexpected losses, which are an
estimate of the ultimate actual loss based on statistical
models. The models make use of probabilities derived from
historical experience, adjusted to reflect the economic
environment. The Group also runs worse case scenarios
that would arise in the event that extreme events which are
unlikely to occur do, in fact, occur.
Monitoring and controlling risks is primarily performed
based on limits established by the Group. These limits
reflect the business strategy and market environment of
the Group as well as the level of risk that the Group is
willing to accept, with additional emphasis on selected
industries. In addition, the Group monitors and measures
the overall risk bearing capacity in relation to the aggregate
risk exposure across all risk types and activities.
Information compiled from all the businesses is examined
and processed in order to analyse, control and identify
early risks. This information is presented and explained to
the Board of Directors, the Risk Management, and the head
of each business division. The report includes aggregate
credit exposure, hold limit exceptions, liquidity ratios and
risk profile changes. On a monthly basis detailed reporting
of industry, customer and geographic risks takes place.
Senior management assesses the appropriateness of the
allowance for credit losses on a quarterly basis. The Board
of Directors receives a comprehensive risk report once a
quarter which is designed to provide all the necessary
information to assess and conclude on the risks of the
Group. For all levels throughout the Group, Specifically
tailored risk reports are prepared and distributed in order
78
Excessive risk concentration
Concentrations arise when a number of counterparties are
engaged in similar business activities, or activities in the
same geographic region, or have similar economic features
that would cause their ability to meet contractual obligations
to be similarly affected by changes in economic, political
or other conditions. Concentrations indicate the relative
sensitivity of the Group’s performance to developments
affecting a particular industry or geographical location.
In order to avoid excessive concentrations of risk, the
Group’s policies and procedures include specific guidelines
to focus on maintaining a diversified portfolio. Identified
concentrations of credit risks are controlled and managed
accordingly.
37.2
Credit risk
Credit risk is the risk that the Group will incur a loss because
its customers, clients or counterparties failed to discharge
their contractual obligations. The Group manages and
controls credit risk by setting limits on the amount of risk
it is willing to accept for individual counterparties and
for geographical and industry concentrations, and by
monitoring exposures in relation to such limits.
Credit-related commitments risks
The Group makes available to its customers guarantees
which may require that the Group makes payments on
their behalf. Such payments are collected from customers
based on the terms of the letter of credit. They expose the
Group to similar risks to loans and these are mitigated by
the same control processes and policies.
The following table shows the maximum exposure to credit
losses (after deducting the impairment allowance and
before guarantees and other risk mitigating resources).
2009
SP
2008
SP
Balances with central banks
14,827,641,923
8,884,155,656
11,644,626,415
17,593,831,533
13,588,351,737
6,103,238,735
Loans and advances to customers
26,100,199,495
19,305,771,518
5,931,995,193
4,352,537,377
814,203,139
176,323,023
18,912,813,359
14,678,924,147
441,187,804
97,986,971
3,496,910,665
282,653,482
-
1,125,200
Consolidated statement of financial position items:
Retail
Real estate
Corporate
Small and medium enterprises
Financial investments – available for sale
Financial investments–loans and receivables
1,151,009,080
1,960,049,457
Other assets
829,792,565
880,586,386
462,911,079
219,640,626
72,101,442,959
55,231,052,593
Letters of credit
4,327,298,014
4,362,646,395
Acceptances
1,449,135,727
977,819,277
Guarantees:
7,750,115,903
5,267,856,073
Payment
2,776,141,455
1,832,478,855
Performance bond
4,019,402,856
2,978,531,588
954,571,592
456,845,630
Commitment and contingent liabilities:
Other
Irrevocable commitments to lend
Total credit risk exposure
9,254,927,510
4,952,474,183
22,781,477,154
15,560,795,928
94,882,920,113
70,791,848,521
79
According to Credit and Monetary Council resolution
number 597/MN/B4, facilities are classified into six grades.
Credit exposure based on risk rating
31 December 2009
Syrian Pounds
Small & medium
Consumer
Good (low risk)
Good(normal risk)
Watch list
Real estate
Corporate
enterprises
Total
-
-
88,106,732
1,535,969
89,642,701
5,879,959,735
814,203,139
16,326,377,871
507,744,048
23,528,284,793
62,668,001
-
2,511,017,551
-
2,573,685,552
Total
5,942,627,736
814,203,139
18,925,502,154
509,280,017
26,191,613,046
Undue of which
4,411,969,999
789,868,175
17,107,006,767
481,138,732
22,789,983,673
Past due of which:
1,530,657,737
24,334,964
1,818,495,387
28,141,285
3,401,629,373
Up to 30 days
1,153,047,271
24,334,964
635,541,116
4,810,605
1,817,733,956
from 31 up to 60 days
271,509,056
-
471,561,089
20,707,165
763,777,310
106,101,410
-
711,393,182
2,623,515
820,118,107
Non-performing:
52,038,035
-
571,623,786
-
623,661,821
Substandard
27,476,584
-
570,990,806
-
598,467,390
12,434,967
-
Doubtful
-
-
12,434,967
632,980
-
12,759,464
814,203,139
19,497,125,940
509,280,017
26,815,274,867
-
491,657,230
68,092,213
566,692,965
1,964,739
-
11,489,822
-
13,454,561
53,762,317
-
81,165,529
-
134,927,846
814,203,139
18,912,813,359
441,187,804
26,100,199,495
Loss
12,126,484
Total
5,994,665,771
6,943,522
Deduct: suspended interests
Deduct: impairment provision
5,931,995,193
Deduct: unearned interests
Net
31 December 2008
Syrian Pounds
Good(normal risk)
Small & medium
Consumer
Real estate
Corporate
enterprises
Total
4,446,009,927
176,323,023
415,222,902,37
97,986,971
19,943,222,295
-
-
-
-
Watch list
Total
4,446,009,927
176,323,023
15,222,902,374
97,986,971
19,943,222,295
Undue of which
4,394,431,505
176,323,023
14,682,738,909
97,986,971
19,351,480,408
Past due: of which
51,578,422
-
540,163,465
-
591,741,887
Up to 30 days
20,587,088
-
339,439,392
-
360,026,480
14,544,409
-
48,891,863
-
63,436,272
16,446,925
-
151,832,210
-
168,279,135
Non-performing:
-
-
-
-
-
Substandard
-
-
-
-
-
Doubtful
-
-
-
-
-
Loss
-
-
-
-
-
Total
4,446,009,927
176,323,023
15,222,902,374
97,986,971
19,943,222,295
32,673,375
-
493,439,792
-
526,113,167
-
-
-
-
-
Deduct: unearned interests
Deduct: suspended interests
Deduct: impairment provision
Net
80
60,799,175
-
50,538,435
-
111,337,610
4,352,537,377
176,323,023
14,678,924,147
97,986,971
19,305,771,518
Renegotiated loans
These represent facilities that have been classified as
non-performing and reclassified later according to credit
terms changes, and graded as watch list. There are no
renegotiated facilities as of 31 December 2009 and 2008.
changed (instalment, maturity extension, grace period
extension, etc…), graded as watch list. Rescheduled
loans amounted to SP 370,940,369 as of 31 December
2009 with no rescheduled loans as of 31 December 2008.
Indirect credit exposure based on risk rating
Rescheduled loans
These represent facilities for which credit terms have been
31 December 2009
Syrian Pounds
Small & medium
Consumer
Real estate
Corporate
enterprises
Total
Good (low risk)
-
-
359,581,615
-
359,581,615
Good(normal risk)
-
-
7,956,417,024
-
7,956,417,024
Watch list
-
-
293,502,185
-
293,502,185
Total
-
-
8,609,500,824
-
8,609,500,824
Undue of which
-
-
8,609,500,824
-
8,609,500,824
Past due: of which
-
-
-
-
-
Up to 30 days
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Substandard
-
-
-
-
-
Doubtful
-
-
-
-
-
Loss
-
-
-
-
-
Total
-
-
8,609,500,824
-
8,609,500,824
Deduct: Unearned interests
-
-
-
-
-
Deduct: Suspended interests
-
-
-
-
-
Non-performing:
Deduct: Impairment provision
-
-
-
-
-
Net
-
-
8,609,500,824
-
8,609,500,824
Consumer
Real estate
Corporate
31 December 2008
Syrian Pounds
Small & medium
enterprises
Total
Good (low risk)
-
-
-
-
-
Good(normal risk)
-
-
12,868,763,983
-
12,868,763,983
Watch list
-
-
187,398,506
-
187,398,506
Total
-
-
13,056,162,489
-
13,056,162,489
Undue of which
-
-
13,056,162,489
-
13,056,162,489
Past due: of which
-
-
-
-
-
Up to 30 days
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Non-performing:
-
-
-
-
-
Substandard
-
-
-
-
-
Doubtful
-
-
-
-
-
Loss
-
-
-
-
-
Total
-
-
13,056,162,489
-
13,056,162,489
Deduct: Suspended interests
-
-
-
-
-
Deduct: Impairment provision
-
-
-
-
-
Net
-
-
13,056,162,489
-
13,056,162,489
81
In order to reduce credit risk, the Group agreed with
particular major retail dealers to settle due instalments
from their current accounts with the Group. Thus, such
instalments are fully secured.
According to Credit and Monetary Council number 597/
MN/B4 dated 9 December 2009, and the Central Bank
of Syria instructions, the Group is required to provide
additional provisions and general reserve for credit risk
according to the following criteria starting from the year
2010:
Total loans covered by these agreements amounted to
SP 1,004,314,045 as of 31 December 2009 containing
due unsettled instalments of SP 42,638,244 (2008: total
loans covered amounted to SP 975,534,636 containing
SP 40,515,298 due unsettled instalments).
1. Providing impairment allowance for performing facilities
in the range between 2% and 3% of the gross exposure
considering guarantees and the level of these facilities.
2. Appropriating for general reserve for credit risk at the
rate of 1% of good direct facilities, and 0.5% of good
(normal risk) indirect facilities.
Distribution of collateral value against the direct
facilities
31 December 2009
Syrian Pounds
Small & medium
Consumer
Real estate
Corporate
enterprises
Total
-
-
104,447,691
2,042,485
106,490,176
Good (low risk)
5,503,962,110
1,027,317,812
30,211,233,614
1,014,538,730
37,757,052,266
Watch list
Good (normal risk)
89,829,417
-
6,113,547,131
-
6,203,376,548
Non-performing:
48,833,210
-
638,823,497
-
687,656,707
28,737,361
-
638,823,497
-
667,560,858
Substandard
Doubtful
Loss
Total
8,188,342
-
-
-
8,188,342
11,907,507
-
-
-
11,907,507
5,642,624,737
1,027,317,812
37,068,051,933
1,016,581,215
44,754,575,697
Of which margin accounts
-
-
503,325,654
5,176,085
508,501,739
Acceptable bank guarantees
-
-
1,136,574,168
-
1,136,574,168
49,769,124
1,027,317,812
2,399,638,823
502,323,205
3,979,048,964
-
-
99,373,184
-
99,373,184
Real estate
Securities
Cars and equipment
5,280,818,779
-
3,459,400,682
31,697,783
8,771,917,244
Personal guarantees
312,036,834
-
29,469,739,422
477,384,142
30,259,160,398
31 December 2008
Syrian Pounds
Consumer
Real estate
Corporate
enterprises
Total
4,881,308,085
243,165,843
23,538,133,726
167,499,747
28,830,107,401
Watch list
-
-
2,621,735,517
-
2,621,735,517
Non-performing:
-
-
-
-
-
Substandard
-
-
-
-
-
Doubtful
-
-
-
-
-
Loss
-
-
-
-
Total
4,881,308,085
243,165,843
26,159,869,243
167,499,747
31,451,842,918
Of which margin
accounts
23,136,286
-
20,916,831
210,235
44,263,352
Acceptable bank
guarantees
-
-
148,263,012
-
148,263,012
3,592,271
217,032,812
918,797,433
105,090,632
1,244,513,148
Good (normal risk)
Real estate
Securities
82
Small & medium
-
-
97,601,447
-
97,601,447
Cars and equipment
3,126,161,869
-
1,812,370,925
-
4,938,532,794
Personal guarantees
1,728,417,659
26,133,031
23,161,919,595
62,198,880
24,978,669,165
Distribution of collateral value against the indirect
facilities
31 December 2009
Syrian Pounds
Small and medium
Consumer
Real estate
Corporate
enterprises
Good (low risk)
-
Good (normal risk)
-
Watch list
Non-performing:
Total
-
398,798,261
-
398,798,261
-
7,075,652,282
-
7,075,652,282
-
-
274,642,013
-
274,642,013
-
-
-
-
-
Substandard
-
-
-
-
-
Doubtful
-
-
-
-
-
Loss
-
-
-
-
-
Total
-
-
7,749,092,556
-
7,749,092,556
Margin accounts
-
-
1,796,239,953
-
1,796,239,953
-
-
9,103,882
-
9,103,882
Real estate
-
-
188,260,717
-
188,260,717
Securities
-
-
626,816
-
626,816
Cars and equipment
-
-
-
-
-
Personal guarantees
-
-
5,754,861,188
-
5,754,861,188
Consumer
Real estate
Corporate
enterprises
Total
Good (normal risk)
-
-
6,808,975,612
-
6,808,975,612
Watch list
-
-
64,116,957
-
64,116,957
Non-performing:
-
-
-
-
-
Substandard
-
-
-
-
-
Doubtful
-
-
-
-
-
31 December 2008
Syrian Pounds
Small & medium
Loss
-
-
-
-
-
Total
-
-
6,873,092,569
-
6,873,092,569
Of which margin accounts
-
-
2,853,747,481
-
2,853,747,481
-
-
78,864,988
-
78,864,988
Real estate
-
-
77,119,664
-
77,119,664
Securities
-
-
2,398,553
-
2,398,553
Cars and equipment
-
-
-
-
-
Personal guarantees
-
-
3,860,961,883
-
3,860,961,883
83
Quality of financial assets based on internal credit risk
rating
Quality of financial assets exposed to credit risk is measured
using internal criteria for credit rating. The following table
shows exposures to credit risk of the financial assets
using the internal rating criteria. The following figures do
not include any impairment allowance:
31 December 2009
Notes
Good
SP
Normal
SP
Impaired
SP
Total
SP
3
14,827,641,923
-
-
14,827,641,923
4
6,364,882,532
5,279,743,883
-
11,644,626,415
5
7,128,701,546
6,459,650,191
-
13,588,351,737
Derivatives financial instruments
6
-
-
-
-
8
-
1,151,009,080
-
1,151,009,080
Financial investments - available-for-sales(*)
9
3,429,749,004
50,000,000
224,483,875
3,704,232,879
13
31 December 2008
462,911,079
-
-
462,911,079
32,213,886,084
12,940,403,154
224,483,875
45,378,773,113
Good
SP
Normal
SP
Impaired
SP
Total
SP
Notes
3
8,884,155,656
-
-
8,884,155,656
4
13,284,052,614
4,309,778,919
-
17,593,831,533
5
2,525,905,056
3,577,333,679
-
6,103,238,735
6
-
1,125,200
-
1,125,200
8
-
1,960,049,457
-
1,960,049,457
9
215,209,886
50,000,000
228,172,000
493,381,886
13
219,640,626
-
-
219,640,626
25,128,963,838
9,898,287,255
228,172,000
35,255,423,093
Financial investments - available-for-sales(*)
(*) Represents permanent decline in an investment value, which was issued by
a foreign bank during 2008.
Quality of financial assets based on credit risk rating
Internal risk rating
Rating according to
S&P
2009
SP
2008
SP
15,290,553,002
9,103,796,282
Good
Class 1 (*)
from AAA+ to AAA-
Class 2
from AA+ to AA-
Class 3
from A+ to A-
4,803,966,024
5,711,423,612
12,119,367,058
10,313,743,944
32,213,886,084
25,128,963,838
10,521,715,107
4,464,001,759
Normal
Class 4
From BBB+ to BBB-
Class 5
From BB+ to BB-
Class 6
From B+ to B-
(*) Central Bank of Syria is rated as class 1 and included in good class.
84
206,160,157
231,473,101
2,212,527,890
5,202,812,395
12,940,403,154
9,898,287,255
45,154,289,238
35,027,251,093
Credit risk exposure based on rating of rating agencies:
31 December 2009
Credit rating
Rating agency
Financial investments-Available for sale
SP
A
S&P
248,504,973
NR
S&P
17,161,661
AA
S&P
1,016,204,346
A-
S&P
383,949,992
AA
S&P
186,568,045
AA-
S&P
884,200,986
A
S&P
138,036,361
Aa2
Moody’s
256,024,142
A+
S&P
316,260,159
Total
3,446,910,665
31 December 2008
Credit rating
Rating agency
A
S&P
NR
Moody’s
Financial investments-available-for-sale
SP
215,209,886
17,443,596
Total
232,653,482
Concentration by geographical area
The tables below show the maximum limit for credit exposure
by geographical area:
31 December 2009
Europe
Asia*
America
Total
SP
14,827,641,923
Other Middle
East countries
SP
-
SP
-
SP
-
SP
-
SP
14,827,641,923
4,007,112,732
1,420,711,655
5,284,306,407
502,374,463
430,121,158
11,644,626,415
5,729,250,191
3,469,471,315
3,499,455,231
890,175,000
-
13,588,351,737
5,931,991,618
-
-
-
-
5,931,991,618
814,206,714
-
-
-
-
814,206,714
18,912,813,359
-
-
-
-
18,912,813,359
441,187,804
-
-
-
-
441,187,804
50,000,000
3,181,244,115
-
-
265,666,550
3,496,910,665
Financial investments-loans and
receivables
100,000,000
1,051,009,080
-
-
-
1,151,009,080
Other assets
748,579,913
66,527,569
9,717,336
2,298,314
2,669,433
829,792,565
Syria
Consumer
Real estate
Corporate
Financial investments-available for sale
Total
462,911,079
-
-
-
-
462,911,079
52,025,695,333
9,188,963,734
8,793,478,974
1,394,847,777
698,457,141
72,101,442,959
*Excluding Middle East countries.
85
31 December 2008
Syria
Europe
Asia*
America
Total
SP
8,884,155,656
Other Middle
East countries
SP
-
SP
-
SP
-
SP
-
SP
8,884,155,656
662,876,559
4,583,510,092
11,419,444,882
-
928,000,000
17,593,831,533
3,150,000,000
438,722,279
2,514,516,456
-
-
6,103,238,735
1,125,200
-
-
-
-
1,125,200
4,352,537,377
-
-
-
-
4,352,537,377
176,323,023
-
-
-
-
176,323,023
Consumer
Real estate
Corporate
14,678,924,147
-
-
-
-
14,678,924,147
97,986,971
-
-
-
-
97,986,971
Financial investments-available
for sale
50,000,000
-
-
-
232,653,482
282,653,482
receivables
650,000,000
1,310,049,457
-
-
-
1,960,049,457
Other assets
734,158,771
61,052,342
81,467,548
-
3,907,725
880,586,386
Total
219,640,626
-
-
-
-
219,640,626
33,657,728,330
6,393,334,170
14,015,428,886
-
1,164,561,207
55,231,052,593
* Excluding Middle East countries.
Concentration by economical sector
The following table shows the allocation of the Group’s
financial assets by economical sector as of 31 December
2009:
Economical Sector
(Syrian Pounds)
31 December
2009
Financial
Industrial
Trading
Real estate
Agriculture
IndividualsServices
Governmental &
Public sectors
Total
Balances with
central banks
14,827,641,923
-
-
-
-
-
-
14,827,641,923
Balances due
from banks
11,644,626,415
-
-
-
-
-
-
11,644,626,415
Placements
due from
banks
Loans and
advances to
customers
Financial
investmentsavailable for
sale
Financial
investments
- loans and
receivables
Other assets
13,588,351,737
-
-
-
-
-
-
13,588,351,737
180,791,865
7,985,513,445
7,792,477,151
1,090,134,872
-
9,051,282,162
-
26,100,199,495
818,494,838
394,060,503
-
-
-
383,949,992
1,900,405,332
3,496,910,665
1,151,009,080
-
-
-
-
-
-
1,151,009,080
389,886,675
27,741,873
23,324,189
95,561,995
-
275,466,316
17,811,517
829,792,565
462,911,079
-
-
-
-
-
-
462,911,079
43,063,713,612
8,407,315,821
7,815,801,340
1,185,696,867
-
9,710,698,470
1,918,216,849
72,101,442,959
Statutory
blocked funds
Total
86
The following table shows the allocation of Group’s
financial assets by economical sector as of 31 December
2008:
Economical Sector
(Syrian Pounds)
31 December
2008
Financial
Industrial
Trading
Real estate
Agriculture
Balances with
central banks
8,884,155,656
-
-
-
-
-
-
8,884,155,656
Balances due
from banks
17,593,831,533
-
-
-
-
-
-
17,593,831,533
Placements
due from
banks
Derivative
financial
instruments
Loans and
advances to
customers
Financial
investmentsavailable for
sale
Financial
investment
- loans and
receivables
Other assets
6,103,238,735
-
-
-
-
-
-
6,103,238,735
1,125,200
-
-
-
-
-
-
1,125,200
87,092,005
4,489,676,773
8,058,080,323
910,412,888
180,923,671
5,579,585,858
-
19,305,771,518
282,653,482
-
-
-
-
-
-
282,653,482
1,960,049,457
-
-
-
-
-
-
1,960,049,457
545,865,576
12,372,114
22,344,761
2,508,807
498,567
296,996,561
-
880,586,386
219,640,626
-
-
-
-
-
-
219,640,626
35,677,652,270
4,502,048,887
8,080,425,084
912,921,695
181,422,238
5,876,582,419
-
55,231,052,593
Statutory
blocked funds
Total
Individuals- Governmental
Services
& Public
sectors
Total
Collateral and other credit enhancements
The amount and type of collateral required depends on
an assessment of the credit risk of the counterparty.
Guidelines are implemented regarding the acceptability of
types of collateral and valuation parameters.
Individually assessed allowances
The Bank determines the impairment allowances
appropriate for each individually significant loan and
advance on an individual basis according to criteria set in
resolution number (597/MN/B4) as follows:
The main types of collateral obtained are as follows:
• For corporate lending: mortgages over real estate
properties, inventory and cash margins.
• For consumer lending: mortgages over residential
properties and cars, payroll and cash margins.
Management monitors the market value of collateral,
requests additional collateral in accordance with the
underlying agreement, this occurs in the course of
reviewing the adequacy of the allowance for impairment
losses.
• Delay in completing the facilitated project.
• Ability to improve performance once a financial difficulty
has arisen.
• Projected receipts and the expected dividend payout
should bankruptcy ensue.
• The availability of other financial support and the
realisable value of collateral.
• Timing of the expected cash flows.
The impairment losses are evaluated at each reporting
date, unless unforeseen circumstances require more careful
attention.
Impairment assessment
The main considerations for the loan impairment
assessment include whether any payments of principal or
interest are overdue by more than 90 days or there are
any known difficulties in the cash flows of counterparties,
credit rating downgrades, or infringement of the original
terms of the contract. The Bank addresses impairment
assessment in two areas: individually assessed allowances
and collectively assessed allowances.
Collectively assessed allowances
Allowances are assessed collectively for losses on loans
and advances that are not individually significant and for
individually significant loans and advances where there
is not yet objective evidence of individual impairment.
Allowances are evaluated on each reporting date with
each portfolio receiving a separate review.
87
The collective assessment takes account of impairment
that is likely to be present in the portfolio even though
there is not yet objective evidence of the impairment in an
individual assessment. Impairment losses are estimated
by taking into consideration the following factors: historical
losses on the portfolio, current economic conditions, the
approximate delay between the time a loss is likely to
have been incurred and the time it will be identified as
requiring an individually assessed impairment allowance,
and expected receipts and recoveries once impaired.
Management is responsible for deciding the length of this
period which can extend for as long as one year.
The impairment allowance is then reviewed by credit
management to ensure alignment with the Bank’s overall
policy.
Financial guarantees and letters of credit are assessed
and provision made in a similar manner as for loans.
37.3
Market risk
Interest rate risk
Interest rate risk arises from the possibility that changes in
interest rates will affect future cash flows or the fair values
of financial instruments. The Board has established limits
on the interest rate gaps for stipulated periods. Positions
are monitored on a daily basis.
The following table demonstrates the sensitivity to a
reasonable possible change in interest rates, with all other
variables held constant.
The sensitivity of the income statement is the effect of
the assumed changes in interest rates on the net interest
income for one year. The sensitivity of equity is calculated
by revaluing fixed rate available-for-sale financial assets.
The sensitivity of equity is analysed by maturity of the
asset. The total sensitivity of equity is based on the
assumption that there are parallel shifts in the yield curve,
while the analysis by maturity band displays the sensitivity
to non-parallel changes.
Impact of change in the interest rate of 2%
(Figures in thousands of Syrian Pounds)
Increase impact
31 December 2009
31 December 2008
Gap
Effect on profit
before tax
Effect on equity
(after considering
the income tax
effect)
Gap
Effect on profit
before tax
Effect on equity
(after considering
the income tax
effect)
USD
(5,130,409)
(89,782)
(67,337)
(2,593,407)
(45,385)
(34,039)
EUR
(913,817)
(15,992)
(11,994)
(575,475)
(10,071)
(7,553)
GBP
(16,585)
(290)
(218)
(4,569)
(80)
(60)
JPY
69
-
-
(92)
(2)
(1)
Currency
CHF
SP
Others
(8)
-
-
(1)
-
-
(12,311,594)
(215,453)
(161,590)
(11,744,037)
(205,521)
(154,141)
18,309
320
240
1,107
19
14
Decrease impact
31 December 2009
31 December 2008
Gap
Effect on profit
before tax
Effect on equity
(after considering
the income tax
effect)
Gap
Effect on profit
before tax
Effect on equity
(after considering
the income tax
effect)
USD
(5,130,409)
89,782
67,337
(2,593,407)
45,385
34,039
EUR
(913,817)
15,992
11,994
(575,475)
10,071
7,553
GBP
(16,585)
290
218
(4,569)
80
60
JPY
69
-
-
(92)
2
1
Currency
CHF
SP
Others
88
(8)
-
-
(1)
-
-
(12,311,594)
215,453
161,590
(11,744,037)
205,521
154,141
18,309
(320)
(240)
1,107
(19)
(14)
Currency risk
Currency risk is the risk that the value of a financial
instrument will fluctuate due to changes in foreign
exchange rates. The Board has set limits on positions
by currency. Positions are monitored on a daily basis to
ensure that those limits are not exceeded.
The Group prepares sensitivity analysis to monitor the
impact of changes on net profits and losses in the event
of a change in reasonable exchange rates with the rest of
variables constant.
The tables below indicate the currencies to which the
Group had significant exposure at 31 December 2009.
The analysis calculates the effect of a reasonably possible
movement of the currency rate against the Syrian pounds,
with all other variables held constant on the income
statement and equity. A negative amount in the table
reflects a potential net reduction in income statement or
equity, while a positive amount reflects a net potential
increase.
Impact of change in the exchange rate of 2%
31 December 2009
Open position
31 December 2008
Effect on equity
Open position
SP
Effect on profit
before tax
SP
Effect on equity
SP
Effect on profit
before tax
SP
SP
SP
Currency
USD
2,534,008,534
50,680,171
38,010,128
1,280,250,159
25,605,003
19,203,752
EUR
(4,588,462)
(91,769)
(68,827)
1,361,552
27,231
20,423
GBP
405,992
8,120
6,090
523,804
10,476
7,857
JPY
68,934
1,379
1,034
(129,248)
(2,585)
(1,939)
CHF
Others
69,926
1,399
1,049
10,903
218
164
21,439,826
428,797
321,597
13,286,548
265,731
199,298
89
Interest rate gap analysis
Amounts are classified based on re-pricing of interest or
maturity whichever comes first.
31 December 2009
less than 1 month
from 1 to 3
months
from 3 months to
6 months
from 6 months to
9 months
from 9 months to
12 months
8,450,848
-
-
-
-
7,913,732
3,730,894
-
-
-
1,460,800
4,272,380
3,321,792
1,993,180
2,540,200
Loan and advance to customers
7,676,152
2,718,274
3,306,216
1,236,356
1,015,629
receivables
50,000
-
50,000
629,323
-
-
-
-
-
-
Fixed assets
-
-
-
-
-
Intangible assets
-
-
-
-
-
Other assets
-
-
-
-
-
Statuary blocked funds
-
-
-
-
-
25,551,532
10,721,548
6,678,008
3,858,859
3,555,829
Assets
Total assets
Liabilities
Due to banks
1,012,302
-
-
-
-
Due to customers
54,646,616
8,900,013
646,024
383,891
50,469
Margin accounts
2,003,983
302,829
140,899
13,226
3,102
Provisions
-
-
-
-
-
Current tax liability
-
-
-
-
-
Other liabilities
-
-
-
-
-
Total liabilities
90
57,662,901
9,202,842
786,923
397,117
53,571
Interest re-pricing gap
(32,111,369)
1,518,706
5,891,085
3,461,742
3,502,258
Accumulated re-pricing gap
(32,111,369)
(30,592,663)
(24,701,578)
(21,239,836)
(17,737,578)
from 1 year to 2
years
from 2 years to 3
years
from 3 years to 4
years
from 4 years to 5
years
More than 5 years
Non-interest
items
Total
-
-
-
-
-
8,455,942
16,906,790
-
-
-
-
-
-
11,644,626
-
-
-
-
-
-
13,588,352
3,575,773
2,758,043
1,995,756
1,131,656
686,345
-
26,100,200
-
421,686
-
-
-
-
1,151,009
-
642,565
333,422
2,470,924
-
50,000
3,496,911
-
-
-
-
-
1,259,055
1,259,055
-
-
-
-
-
107,445
107,445
-
-
-
-
-
829,793
829,793
-
-
-
-
-
462,911
462,911
3,575,773
3,822,294
2,329,178
3,602,580
686,345
11,165,146
75,547,092
-
-
-
-
-
-
1,012,302
10,718
-
-
-
-
-
64,637,731
407
-
-
-
-
-
2,464,446
-
-
-
-
-
1,790
1,790
-
-
-
-
-
171,541
171,541
-
-
-
-
-
1,129,664
1,129,664
11,125
-
-
-
-
1,302,995
69,417,474
3,564,648
3,822,294
2,329,178
3,602,580
686,345
9,862,151
6,129,618
(14,172,930)
(10,350,636)
(8,021,458)
(4,418,878)
(3,732,533)
6,129,618
91
Amounts are classified based on re-pricing of interest or
maturity whichever comes first.
31 December 2008
less than 1 month
from 1 to 3
months
from 3 months to
6 months
from 6 months to
9 months
from 9 months to
12 months
4,130,906
-
-
-
-
17,222,760
371,072
-
-
-
-
-
4,567,600
-
710,640
Assets
-
1,125
-
-
-
Loan and advances to customers
15,310,601
617,353
826,729
-
883,658
receivables
-
-
-
-
675,000
-
-
-
-
-
Fixed assets
-
-
-
-
-
Intangible assets
-
-
-
-
-
Other assets
-
-
-
-
-
Statuary blocked funds
-
-
-
-
-
36,664,267
989,550
5,394,329
-
2,269,298
2,058,286
-
-
-
-
Due to customers
44,380,509
3,952,271
115,554
88,295
-
Margin accounts
1,200,744
1,965,415
409,359
27,901
-
Provisions
-
-
-
-
-
-
-
-
-
-
Total assets
Liabilities
Due to banks
Other liabilities
-
-
-
-
-
47,639,539
5,917,686
524,913
116,196
-
Interest re-pricing gap
(10,975,272)
(4,928,136)
4,869,416
(116,196)
2,269,298
Accumulated re-pricing gap
(10,975,272)
(15,903,408)
(11,033,992)
(11,150,188)
(8,880,890)
Total liabilities
92
from 1 year to
2 years
from 2 years to
3 years
from 3 years to
4 years
from 4 years to
5 years
More than 5 years
Non-interest
items
Total
-
-
-
-
-
6,684,823
10,815,729
-
-
-
-
-
-
17,593,832
824,999
-
-
-
-
-
6,103,239
-
-
-
-
-
-
1,125
1,667,431
-
-
-
-
-
19,305,772
800,000
-
-
485,049
-
-
1,960,049
-
-
-
232,653
-
50,000
282,653
-
-
-
-
-
1,322,589
1,322,589
-
-
-
-
-
114,053
114,053
-
-
-
-
-
880,586
880,586
-
-
-
-
-
219,641
219,641
3,292,430
-
-
717,702
-
9,271,692
58,599,268
-
-
-
-
-
-
2,058,286
1,985
-
-
-
200
-
48,538,814
-
-
-
-
-
-
3,603,419
-
-
-
-
-
936
936
-
-
-
-
-
219,199
219,199
-
-
-
-
-
1,111,886
1,111,886
1,985
-
-
-
200
1,332,021
55,532,540
3,290,445
-
-
717,702
(200)
7,939,671
3,066,728
(5,590,445)
(5,590,445)
(5,590,445)
(4,872,743)
(4,872,943)
3,066,728
93
Foreign currency concentration 31 December 2009
(Figures in Syrian Pounds)
Currency
USD
EUR
GBP
JPY
Other
Total
2,361,936,113
604,725,005
17,056,235
-
26,871,332
3,010,588,685
Assets
Balances and Placement due from banks
13,523,886,499
2,272,435,350
82,361,911
74,285
52,148,043
15,930,906,088
3,033,024,072
621,781,955
73,754,365
-
-
3,728,560,392
Financial investments- Loans and
receivables
1,051,009,080
-
-
-
-
1,051,009,080
Financial investments- Available for sale
3,130,650,416
316,260,249
-
-
-
3,446,910,665
-
-
-
-
-
-
Fixed assets
Intangible assets
Other assets
-
-
-
-
-
-
163,562,489
7,201,462
22,242
-
1,247,009
172,033,202
314,313,179
-
-
-
-
314,313,179
23,578,381,848
3,822,404,021
173,194,753
74,285
80,266,384
27,654,321,291
126,847,472
22,611,516
-
-
-
149,458,988
Due to customers
19,280,285,443
3,734,838,209
97,736,275
5,320
33,165,686
23,146,030,933
Margin accounts
1,594,492,051
59,595,265
74,964,800
-
681,094
1,729,733,210
Provisions
-
-
-
-
-
-
-
-
-
-
-
-
Total assets
Liabilities
Due to banks
Other liabilities
Total liability
Net
42,748,348
9,947,493
87,686
31
24,909,852
77,693,410
21,044,373,314
3,826,992,483
172,788,761
5,351
58,756,632
25,102,916,541
2,534,008,534
(4,588,462)
405,992
68,934
21,509,752
2,551,404,750
Foreign currency concentration 31 December 2009
(Figures in Syrian Pounds)
Currency
USD
EUR
GBP
JPY
Other
Total
2,213,346,821
604,366,375
5,847,841
-
12,191,520
2,835,752,557
Balances and placement due from banks 16,712,641,676
Assets
3,425,043,953
182,055,623
113,804
23,302,705
20,343,157,761
1,125,200
-
-
-
-
1,125,200
1,677,744,457
284,235,951
191,958
-
55
1,962,172,421
Financial investments- Loans and
receivables
1,310,049,457
-
-
-
-
1,310,049,457
232,653,482
-
-
-
-
232,653,482
Financial investments- Available for sale
Fixed assets
-
-
-
-
-
-
Intangible assets
-
-
-
-
-
-
Other assets
148,664,584
31,298,406
910,600
-
1,499,923
182,373,513
198,404,926
-
-
-
-
198,404,926
22,494,630,603
4,344,944,685
189,006,022
113,804
36,994,203
27,065,689,317
Total assets
Liabilities
1,429,811,494
3,521,658
-
-
866
1,433,334,018
Due to customers
Due to banks
17,883,594,527
3,815,525,892
187,657,522
206,742
19,975,886
21,906,960,569
Margin accounts
1,828,569,851
477,615,139
-
-
3,720,000
2,309,904,990
Provisions
-
-
-
-
-
-
-
-
-
-
-
-
Other liability
Total liabilities
Net
94
72,404,572
46,920,444
824,696
36,310
-
120,186,022
21,214,380,444
4,343,583,133
188,482,218
243,052
23,696,752
25,770,385,599
1,280,250,159
1,361,552
523,804
(129,248)
13,297,451
1,295,303,718
37.4
Prepayment risk
Prepayment risk is the risk that the Group will incur a
financial loss because its customers and counterparties
repay or request prepayment earlier or later than expected,
such as fixed rate mortgages when interest rates fall.
The Group’s assets with fixed interest rates are not
considered material with respect to the total assets.
Moreover, other risks that lead to prepayments are not
material with respect to the markets where the Group
operates. Accordingly, the Group considers prepayment
risk on net profits as not material after considering any
penalties arising from prepayments.
37.5
Liquidity risk
Liquidity risk is the risk that the Group will be unable to meet
its payment obligations when they fall due under normal
and stress circumstances. To limit this risk, management
has arranged diversified funding sources in addition to its
core deposit base, manages assets with liquidity in mind,
and monitors future cash flows and liquidity on a daily
basis. This incorporates an assessment of expected cash
flows and the availability of high grade collateral which
could be used to secure additional funding if required.
The Group maintains a portfolio of highly marketable and
diverse assets that can be easily liquidated in the event
of an unforeseen interruption of cash flow. The Group
also has committed lines of credit that it can access to
meet liquidity needs. In addition, the Group maintains a
statutory deposit with the Central Bank of Syria equal to
10% of customer’s deposits and 10% of share capital. The
liquidity position is assessed and managed under a variety
of scenarios, giving due consideration to stress factors
relating to both the market in general and specifically to
the Group. The liquidity ratio is calculated based on the
Central Bank of Syria resolution No.73.The most important
of these is to maintain limits on the ratio of net liquid assets
to customer’s liabilities and risk-weighted commitments
and contingent liabilities. Net liquid assets consist of cash,
short term bank deposits, less deposits due to banks. The
ratio during the year was as follows:
2009
%
2008
%
Average during the period
47
42
Highest
52
50
Lowest
41
33
95
The table below shows an analysis of assets and liabilities analysed according to when they are expected to be recovered
or settled as at 31 December 2009:
less than 8 days
from 1 to 3 months
from 3 to 6 months
SP
10,529,996,174
from 8 days to
one month
SP
-
SP
-
SP
-
3,701,195,349
4,212,536,974
3,730,894,092
-
-
1,460,800,000
4,272,380,191
3,321,791,546
4,429,914,757
3,246,237,579
2,718,273,649
3,306,216,177
Financial investments-Loans and receivables
-
50,000,000
-
50,000,000
-
-
-
-
Loan and advances to customers (net)
Fixed assets
-
-
-
-
Intangible assets
-
-
-
-
96,188,768
223,569,933
64,121,357
89,794,775
Other assets
Statutory blocked fund
Total assets
Due to banks
Due to customers
Margin accounts
Provisions
Other liabilities
-
-
-
-
18,757,295,048
9,193,144,486
10,785,669,289
6,767,802,498
978,044,264
34,257,843
-
-
19,509,078,790
35,137,536,460
8,900,013,300
646,024,000
848,052,390
1,155,930,396
302,829,150
140,899,000
-
1,789,896
-
-
-
-
-
171,540,778
85,987,464
999,590,784
38,818,894
3,319,353
Total liabilities
21,421,162,908
37,329,105,379
9,241,661,344
961,783,131
Net
(2,663,867,860)
(28,135,960,893)
1,544,007,945
5,806,019,367
The table below shows an analysis of assets and liabilities analysed according to when they are expected to be recovered
or settled as at 31 December 2008:
less than 8 days
SP
6,062,480,074
from 8 days to
one month
SP
-
2,625,622,017
7,053,752,751
7,914,456,765
-
-
93,468,548
2,720,570,187
1,589,200,000
Loan and advances to customers (net)
from 3 to 6 months
SP
-
SP
-
-
-
-
-
3,230,244,000
2,753,304,818
1,902,689,883
1,361,940,925
Financial investments-Loans and receivables
-
-
-
50,000,000
-
-
-
-
Fixed assets
-
-
-
-
Intangible assets
Other assets
Statutory blocked fund
Total assets
Due to banks
Due to customers
Margin accounts
Provisions
Other liabilities
96
from 1 to 3 months
-
-
-
-
10,079,000
614,272,186
4,973,258
18,632,765
-
-
-
-
11,928,425,091
10,514,798,303
12,542,690,093
3,019,773,690
2,058,285,769
-
-
-
15,230,033,033
29,141,389,200
3,944,144,000
108,899,000
1,302,375
1,880,849,588
1,301,221,000
416,014,000
-
935,741
-
-
-
-
-
219,199,110
604,507,000
507,378,759
-
-
Total liabilities
17,894,128,177
31,530,553,288
5,245,365,000
744,112,110
Net
(5,965,703,086)
(21,015,754,985)
7,297,325,093
2,275,661,580
from 6 to 9 months
from 9 months to 1 year
more than 1 year
Without maturity
Total
SP
-
SP
-
SP
-
SP
6,376,793,829
SP
16,906,790,003
-
-
-
-
11,644,626,415
1,993,180,000
2,540,200,000
-
-
13,588,351,737
1,236,355,743
1,015,629,080
10,147,572,510
-
26,100,199,495
629,322,911
-
421,686,169
-
1,151,009,080
-
-
3,496,910,665
-
3,496,910,665
-
-
-
1,259,055,254
1,259,055,254
-
-
-
107,445,513
107,445,513
167,257,580
1,188,965
187,671,187
-
829,792,565
-
-
-
462,911,079
462,911,079
4,026,116,234
3,557,018,045
14,253,840,531
8,206,205,675
75,547,091,806
-
-
-
-
1,012,302,107
383,891,254
50,468,746
10,718,000
-
64,637,730,550
13,226,000
3,102,000
407,000
-
2,464,445,936
-
-
-
-
1,789,896
-
-
-
-
171,540,778
1,675,097
225,968
46,926
-
1,129,664,486
398,792,351
53,796,714
11,171,926
-
69,417,473,753
3,627,323,883
3,503,221,331
14,242,668,605
8,206,205,675
6,129,618,053
from 6 to 9 months
from 9 months to 1 year
more than 1 year
Without maturity
Total
SP
-
SP
-
SP
-
SP
4,753,249,355
SP
10,815,729,429
-
-
-
-
17,593,831,533
825,000,000
175,000,000
700,000,000
-
6,103,238,735
1,125,200
-
-
-
1,125,200
2,224,088,905
-
7,833,502,987
-
19,305,771,518
-
500,000,000
1,410,049,457
-
1,960,049,457
-
-
282,653,482
-
282,653,482
-
-
-
1,322,588,766
1,322,588,766
-
-
-
114,052,674
114,052,674
43,299,323
-
189,329,854
-
880,586,386
-
-
-
219,640,626
219,640,626
3,093,513,428
675,000,000
10,415,535,780
6,409,531,421
58,599,267,806
-
-
-
-
2,058,285,769
113,498,400
-
850,000
-
48,538,813,633
2,698,000
-
1,335,000
-
3,603,419,963
-
-
-
-
935,741
-
-
-
-
219,199,110
-
-
-
-
1,111,885,759
116,196,400
-
2,185,000
-
55,532,539,975
2,977,317,028
675,000,000
10,413,350,780
6,409,531,421
3,066,727,831
97
Contingent Liabilities
31 December 2009
Up to 1 year
SP
From 1 year to 5 years
SP
Total
SP
Letters of credit and acceptances
4,033,058,690
1,743,375,051
5,776,433,741
8,994,393,795
260,533,715
9,254,927,510
Guarantees
5,488,213,338
2,261,902,565
7,750,115,903
18,515,665,823
4,265,811,331
22,781,477,154
Up to 1 year
SP
From 1 year to 5 years
SP
Total
SP
Letters of credit and acceptances
4,386,502,480
953,963,192
5,340,465,672
3,734,452,119
1,218,022,064
4,952,474,183
Guarantees
3,692,341,149
1,575,514,924
5,267,856,073
11,813,295,748
3,747,500,180
15,560,795,928
31 December 2008
37.6
Operating risk
Operational risk is the risk of loss arising from systems
failure, human error, fraud or external events. When controls
fail to perform, operational risks can cause damage to
reputation, have legal or regulatory implications, or lead
to financial loss. The Group cannot expect to eliminate
all operational risks, but it endeavors to manage these
risks through a control framework and by monitoring
and responding to potential risks. Controls include
effective segregation of duties, access, authorization and
reconciliation procedures, staff education and assessment
processes, including the use of internal audit.
38
SEGMENTAL ANALYSIS
The primary segment reporting format is determined to be
business segments as the Bank’s risks and rates of return
are affected predominantly by differences in the products
and services produced. Secondary information is reported
geographically.
For management purposes, the Bank is organised into
three business segments:
98
Retail banking
Principally handling individual customers’ deposits, and providing consumer loans, overdrafts, credit cards facilities and funds
transfer facilities.
Corporate banking
Principally handling loans and other credit facilities and deposit and current accounts for corporate and institutional customers.
Treasury
Treasury and finance and other central functions
Primary segment information
– business segments
The following table presents income and profit and certain
asset and liability information regarding the Bank’s business
segments for the year ended 31 December 2009:
2009
Retail Banking
SP
Treasury
SP
Other
SP
Total
SP
Total
SP
295,605,469
122,461,921
-
1,847,025,949
1,439,888,957
-
-
-
(1,027,350,740)
(1,027,350,740)
Unallocated expenses
Credit loss expense
Profit before tax
2008
Corporate
banking
SP
1,428,958,559
7,036,858
(30,627,094)
-
-
(23,590,236)
(34,087,610)
302,642,327
1,398,331,465
122,461,921
(1,027,350,740)
796,084,973
1,405,801,347
(171,540,778)
(291,199,110)
624,544,195
365,602,314
Income tax
Net profit for the year
Other information
Segment assets
Segment liabilities
6,789,817,115
19,410,586,519
47,555,882,397
1,790,805,775
75,547,091,806
56,773,034,025
43,549,974,617
23,835,248,355
1,012,435,668
1,019,815,113
69,417,473,753
54,298,180,181
Capital expenditures
214,096,385
729,552,283
Depreciation and
amortization
166,668,915
108,195,671
Secondary segment information
The following tables show the distribution of the Bank’s
external net operating income, total assets and capital
expenditures by geographical segment, allocated based
on the location in which the transactions and assets are
recorded, for the years ended 31 December 2009 and
2008:
(Domestic) Syria
Total assets
Capital expenditures
Outside Syria
Total
2009
SP
2008
SP
2009
SP
2008
SP
2009
SP
2008
SP
1,513,918,987
907,246,454
333,106,962
532,642,503
1,847,025,949
1,439,888,957
55,471,344,180
37,025,943,543
20,075,747,626
21,573,324,263
75,547,091,806
58,599,267,806
214,096,385
729,552,283
-
-
214,096,385
729,552,283
39
CAPITAL ADEQUACY
The primary objective of the Bank’s capital management
is to ensure that the Bank complies with the Central Bank
requirements and that the Bank maintains strong and
healthy capital ratios in order to support its business.
The management monitors the bank’s capital adequacy
on monthly basis.
The table below presents the capital adequacy of the
Bank:
99
2009
SP
Tier 1 capital
5,990,031,059
2,902,675,157
Core capital
6,097,476,572
3,090,431,877
5,000,000,500
2,500,000,000
Share capital
Statutory reserve
193,612,770
108,359,197
Special reserve
193,612,770
108,359,197
Retained earnings
Less:
Investments in banks and financial institutions
Net intangible assets
Unrealized loss from financial investments
Tier 2 (supplementary) capital
50% of unrealized gains on available for sale investments
710,250,532
373,713,483
107,445,513
187,756,720
-
50,000,000
107,445,513
114,052,674
-
23,704,046
16,070,741
-
16,070,741
-
6,006,101,800
2,902,675,157
39,146,946,482
30,291,986,918
Capital adequacy (%)
15.34%
9.58%
Basic capital adequacy (%)
15.30%
9.58%
Basic capital adequacy to shareholders’ equity (%)
97.72%
94.65%
Total regulatory capital:
Total assets and off balance sheet commitments (weighted)
According to the CMC resolution number 253 dated 24
January 2007, minimum capital adequacy ratio for banks
operating in Syria should be 8%.
100
2008
SP
40
ASSETS AND LIABILITIES MATURITY ANALYSIS
31 December 2009
Assets
Up to 1 year
SP
More than 1 year
SP
Total
SP
10,529,996,174
6,376,793,829
16,906,790,003
11,644,626,415
-
11,644,626,415
13,588,351,737
-
13,588,351,737
15,952,626,985
10,147,572,510
26,100,199,495
729,322,911
421,686,169
1,151,009,080
-
3,496,910,665
3,496,910,665
Fixed assets
-
1,259,055,254
1,259,055,254
Intangible assets
-
107,445,513
107,445,513
642,121,378
187,671,187
829,792,565
-
462,911,079
462,911,079
53,087,045,600
22,460,046,206
75,547,091,806
Financial investments-loans and receivables
Other assets
Total assets
Liabilities
Due to banks
1,012,302,107
-
1,012,302,107
Due to customers
64,627,012,550
10,718,000
64,637,730,550
Margin accounts
2,464,038,936
407,000
2,464,445,936
1,789,896
-
1,789,896
Provisions
Current tax liabilities
Other liabilities
Total liabilities
Net
31 December 2008
Assets
Financial investments-loans and receivables
171,540,778
-
171,540,778
1,129,617,560
46,926
1,129,664,486
69,406,301,827
11,171,926
69,417,473,753
(16,319,256,227)
22,448,874,280
6,129,618,053
Up to 1 year
SP
More than 1 year
SP
Total
SP
6,062,480,074
4,753,249,355
10,815,729,429
17,593,831,533
-
17,593,831,533
5,403,238,735
700,000,000
6,103,238,735
1,125,200
-
1,125,200
11,472,268,531
7,833,502,987
19,305,771,518
550,000,000
1,410,049,457
1,960,049,457
-
282,653,482
282,653,482
Fixed assets
-
1,322,588,766
1,322,588,766
-
114,052,674
114,052,674
691,256,532
189,329,854
880,586,386
Intangible assets
Other assets
Total assets
-
219,640,626
219,640,626
41,774,200,605
16,825,067,201
58,599,267,806
2,058,285,769
-
2,058,285,769
Liabilities
Due to banks
Due to customers
48,537,963,633
850,000
48,538,813,633
Margin accounts
3,602,084,963
1,335,000
3,603,419,963
Provisions
Other liabilities
Total liabilities
Net
935,741
-
935,741
219,199,110
-
219,199,110
1,111,885,759
-
1,111,885,759
55,530,354,975
2,185,000
55,532,539,975
(13,756,154,370)
16,822,882,201
3,066,727,831
101
41
COMMITMENTS AND
CONTINGENCIES
41.1
Contingent liabilities and
commitments
2009
SP
2008
SP
Letters of credit
4,327,298,014
4,362,646,395
Acceptances
1,449,135,727
977,819,277
7,750,115,903
5,267,856,073
- Payment
2,776,141,455
1,832,478,855
- Performance bond
4,019,402,856
2,978,531,588
Guarantees
- Other
954,571,592
456,845,630
9,254,927,510
4,952,474,183
22,781,477,154
15,560,795,928
2009
SP
2008
SP
Due within 1 year
-
193,380,234
More than 1 year
-
77,352,093
Total
-
270,732,327
41.2
Contractual obligations and
operating leases
Construction Contract Commitments
Operating leases commitments
Due within 1 year
90,652,710
86,056,660
More than 1 year
862,379,402
935,735,816
Total
953,032,112
1,021,792,476
Construction contracts commitments as at 31 December
2008 represent administrative offices construction
contracts; however these contracts were cancelled during
the first half of year 2009. Operational leases represent
rental contracts for administrative offices and branches
inside Syria.
42
PROPOSED DIVIDENDS
According to the board of director’s resolution dated 28
February 2010, the proposed dividends is SP 50 per share
making a total of SP 250,000,000. These dividends are
subject to the approval of the general assembly.
102
43
DIVIDENDS PAID
On 31 March 2009, the general assembly of shareholders
resolved to distribute part of the distributable retained
earnings in the amount of SP 117,500,000 equivalent to
SP 47 per share (2008: 82,500,000 equivalent to SP 33
per share).
44
COMPARATIVE FIGURES
Some of 2008 balances were reclassified to correspond
with current period presentation; such reclassifications
did not affect previously reported profit or shareholders’
equity.
Presentation at 31 December 2008
Presentation at 31 December 2009
Other assets
6,180,159
Other assets
1,125,200
Unrealized gains on foreign exchange on structural position
Provisions
Other liabilities
Due to customers
Amount
SP
935,741
107,843,062
103
BANK AUDI SYRIA sa
addresses and branches
DAMASCUS
Mohafaza (Main Branch)
Mohafaza Bldg., Youssef Al-Azmeh Square.
Tel: (963-11) 23888000. Fax: (963-11) 2454197.
Mazzeh
Mazzeh Highway (near Al-Muhandes Al-Arabi Bldg.).
Tel: (963-11) 6626612. Fax: (963-11) 6626619.
Abu Rummaneh
Kanawati Bldg. (facing Japanese embassy), 7 Al-Jalaa
Street, Abu Rummaneh.
Tel: (963-11) 3346408. Fax: (963-11) 3346410.
West Mazzeh
Al Massoudi Street (facing “City Mall” main entrance).
Tel: (963-11) 6630397. Fax: (963-11) 6630385.
Malki
Abdul Mona’em Riad Street (next to “German Cultural
Center - Goethe”).
Tel: (963-11) 3739695. Fax: (963-11) 3739503.
Kafarsouseh
Cham City Center, Street No. 2, Tanzeem Kafarsouseh.
Tel: (963-11) 2111593. Fax: (963-11) 2111897.
Kassaa
Droubi Bldg., Al Akhtal Street, Kassaa Street extension, Al
Abbassyeen Square.
Tel: (963-11) 4459160. Fax: (963-11) 4459322.
Dummar
Island No. 1, Cham Mall, Dummar Project.
Tel: (963-11) 3142320. Fax: (963-11) 3142324.
DAMASCUS REEF
Harasta
Basal Area (next to Dacia Cars Agency), Harasta.
Tel: (963-11) 4475890. Fax: (963-11) 4475891.
Jaramana
Al Baladia Square, Jaramana.
Tel: (963 11) 5637272. Fax: (963-11) 5637279.
ALEPPO
Regional Office – North
Baghdad Station, Majd Al-Deen Al-Jabri Street, Al
Aziziyah.
Tel: (963-21) 2279801-6. Fax: (963-21) 2279809.
Aziziyah (Main Branch)
Baghdad Station, Majd Al-Deen Al-Jabri Street, Al
Aziziyah.
Tel: (963-21) 2279801-6. Fax: (963-21) 2279809.
Souk Al Intaj
Mohafaza, Souk Al Intaj.
Tel: (963-21) 2241033. Fax: (963-21) 2241023.
Harika
Al Kuwatli Bldg., 1st Floor, Abd El Kader Al Husseini
Street.
Tel: (963-11) 2217870. Fax: (963-11) 2218420.
105
LATTAKIA
Lattakia
Al-Jazair Street, facing Customs Administration Bldg., Old
Port Area.
Tel: (963-41) 486023. Fax: (963-41) 486024.
HOMS
Homs
Al Atassi Bldg., Shukri Kuwatli Street.
Tel: (963-31) 2454415. Fax: (963-31) 2454420.
TARTOUS
Tartous
Salah Daniel Bldg., Amn Al-Dawlah Square, 8 March
Street.
Tel: (963-43) 324868. Fax: (963-43) 324866.
AL HASAKA
Al Qameshli
Bldg. 116, Port Said Street, Al Qameshli.
Tel: (963-52) 427222. Fax: (963-52) 447616.
HAMA
Hama
Al Assi Square, facing Al Nawaeer (next to MTN).
Tel: (963-33) 219560. Fax: (963-33) 219567.
DARAA
Daraa
Daraa Tourism Hotel (next to Police Headquarters).
Tel: (963-15) 211400. Fax: (963-15) 211407.
106
DEIR AL ZOUR
Deir Al Zour
Corniche Al Nahr (next to Al Nour Specialist Hospital).
Tel: (963-51) 375900. Fax: (963-51) 375907.
SWEIDA
Sweida
Al Muhwari Street.
Tel: (963-16) 228146. Fax (963-16) 228137.

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