Board of Directors` statement

1
2
Table of contents
Chapter I – General performance at a glance
5
Board of Directors’ statement6
Board of Directors7
Organizational chart8
History10
Vision and mission11
Values11
Objectives12
Credit rating14
Key achievements14
Awards15
Key projects15
Anti-money laundering15
Risk management16
Human resources18
Domestic banking branch network20
International banking20
Performance indicators22
Macroeconomic indicators23
Chapter II– Financial statements and summary notes
25
Balance sheet26
Profit and loss statement
27
Comprehensive profit and loss statement 28
Cash flow statement 29
Summary notes to the financial statements
30
Chapter III– Financial analysis53
Market position54
Balance sheet summary56
Performance indicators57
Key ratios 65
Efficiency ratios
68
Operational control indicators69
3
4
5
Board of Directors’ statement
Welcome to the Tejarat Bank annual report for the financial year 2010-11, a year in which we
managed to improve our standing among the top five commercial banks in the country, despite
difficult economic conditions. We increased our financial resources by 20 percent and maintained
our number one position in documentary letters of credit and letters of guarantee, allowing us to
increase our earnings per share (EPS) to IRR 330, up from IRR 288 in 2009-10.
During the year, considering the existing competitive environment in the country’s banking
industry, we increased our focus on modern banking technologies, including electronic banking,
to enable us to better meet the needs of our customers and investors.
Through the implementation of a new comprehensive strategic planning system and the
formulation of new vision, mission and strategic objectives, Tejarat Bank aims to become the best
financial institution in the country in the near future and one of the top five banks in the Middle
East.
Our achievements during the past year would not have been possible without the efforts of our
valued employees and the trust and support of our esteemed shareholders. We aim to utilize the
trust and opportunities bestowed upon us in the best possible way to create increased value for all
our key stakeholders.
6
Board of Directors
Board of Directors
7
General Assembly
Organizational chart
Board of
Directors
Risk
Committee
Audit
Committee
Managing
Director
Public Relations and
Advertising Department
Internal Audit
Department
Board Secretariat’s
Office
Deputy Director
of Finance and
Procurement
Deputy Director
of Organization and
Information
technology
Financial Affairs
Management
Organization
Affairs
Management
Management
Accounting and
Statistics
Department
Organization and
Procedures
Department
Treasury and
Transactions
Department
Research, Risk and
Strategic Planning
Department
Deputy Director of
Provinces Affairs
and Marketing
International
Affairs
Management
International
Network Affairs and
Foreign Currency
Operations
Department
Overseas Letters of
Guarantee
Department
Treasury and
Correspondent
Banking Relations
Department
Investments and
Companies’
Affairs
Department
Foreign Currency
Accounting
Department
8
Procurement and
Property
Management
Information
Technology
Management
Engineering and
Property
Department
Software Research and
Development
Department
Supplies
Department
Card Operations and
Modern Services
Department
General Services
Department
Operations and
Technical Support
Department
Supervision and
Coordination
Department
Provinces Affairs
and Marketing
Management
Branch Network
Coordination
Department
Marketing and
Customer Relations
Department
Region 1 Supervision
Department
Sistan va
Baluchestan
Southeast
Tehran
Fars
Northeast
Tehran
Kermanshah
Shahr-e-Ray
and Suburbs
Kohgiluyeh va
Boyerahmad
Central Branch,
code 450
Golestan
Free Trade
Zones
Mazandaran
East Azarbaijan
Hormozgan
Semnan
Hamedan
Bushehr
Lorestan
Khorasan
Razavi
Zanjan
Deputy Director of
Human Resources
and Inspection
Guarding
and Custody
Management
Personnel
Security
Department
Region 2 Supervision
Department
Qom
North Khorasan
Khuzestan
Qazvin
Southwest Tehran
West and Central
Tehran
Documents, Data
and Computer
Security
Department
Physical Security
and Safety
Services
Department
Human Resources
Management
Deputy Director of
Credit and Legal
Affairs
Credit Affairs
Management
Welfare
Department
Credit
Administration
Department
Personnel
Department
Review
and Supervision
Department
Employee Accounting
Department
Credit Information
Department
Training
Department
Collections Follow-Up
and Monitoring
Department
Northwest Tehran
Karaj and Suburbs
Selection Board
Kurdistan
West Azarbaijan
Kerman
Ardebil
Gilan
Esfahan
Markazi
Province
Chaharmahal va
Bakhtiari
Yazd
Ilam
South Khorasan
Inspection
Management
Legal Affairs
Management
Domestic Currency
Inspection
Department
Claims
Department
Foreign Currency and
Technical Inspection
Department
Legal Services
Department
9
History
The origins of the Iranian banking industry in the modern sense go back to 1887, when the Bank
of the Middle East was established in central Tehran. Although this bank was rather short-lived,
lasting only one year, before being replaced by the Shahi Bank, it founded the origins of the Iranian
banking industry, and a home to Tejarat Bank, whose headquarters are now located in the original
home of the Bank of the Middle East.
Prior to the Islamic Revolution in 1979, 36 banks were operating in Iran, either government or
privately-owned, some with full Iranian ownership and some with partly foreign ownership. After
the revolution, all banks were pronounced national, and few of the older banks merged to form the
post-revolution banking industry landscape in the country.
Tejarat Bank was established in October 1979, through a merger of 11 privately-owned banks,
some of which were partly foreign-owned, with the initial total capital of IRR 39 billion. The bank’s
capital was later increased to IRR 41 billion, through a merger with the Iran Russia Bank in 1981.
Following the recent privatization bill, Tejarat Bank initiated its public offering in the spring of
2008, being enlisted on the Stock Exchange Organization of Iran in April 2009. The Bank is now
partly privately-owned, with the Iranian Government still holding around 31 percent of its shares.
Shareholder structure
Description
Number of shares
Government of the Islamic
Republic of Iran
30.53
4,141,851,741
Justice Shares Brokerage
40.00
5,427,439,652
3.05
414,234,566
21.42
2,906,643,281
Employees (preferred shares)
5.00
678,429,960
Total
100
13,568,599,200
Private individuals
Legal entities
10
Share (%)
Vision and mission
Vision
• Becoming the best financial service provider in the country
• Ranking among the top five banks in the Middle East in creating value for its stakeholders
• Maintaining an active international presence in financial products and services
Mission
To meet the growing needs of its growing customer base and safeguard the interests of its
shareholders, Tejarat Bank aims to continuously identify and explore new lines of business in the
financial services industry, through detailed analysis of existing market conditions.
Values
Our values are based on five main pillars, as outlined below:
Customers
We believe that our customers are our main reason for the creation of value. We will thus strive
to meet their needs, such that it enables us to gain a competitive advantage in terms of customer
relationship, satisfaction and loyalty.
Employees
We believe our employees comprise our main capital. We therefore consider their development
and empowerment key to our organizational success and will strive to create a working environment
which is motivational, supportive and knowledge-based.
Shareholders
We are committed to safeguarding the longer-term interests of our shareholders, while
guaranteeing shorter-term gains.
Society
We believe in continuously raising the level of the bank’s social recognition. We aim to achieve
this through observing professional ethics and the principles of corporate governance.
Modern technologies
To be able to better meet customer needs we use the latest banking technologies.
11
Objectives
Continuous safeguarding of shareholder interests
• Active international presence in offering banking products and services
• Effective presence in the Middle East in offering Islamic Banking products and services
• Market leadership in offering financial products and services in the country
• Contributing to the improvement of financial operational indicators in the country
• Observing the principles of corporate governance
Securing short-term interests of shareholders
• Increased market share in profitable financial products and services
• Offering quality and competitively priced financial services and products in the country
• Effective management of the bank’s assets and liabilities
• Effective management of the bank’s shares on the stock market
• Timely meeting of financial commitments to shareholders
Improving value-added customer relations
• Establishment of the system and cycle of customer satisfaction improvement
• Establishment of an effective system of customer relationship management
• Analysis, identification and meeting of new customer needs
• Offering variety in financial products and services
Development and enablement of human resources
• Providing a motivational and pleasant working environment
• Adapting working environment conditions to the physical needs of employees
• Embedding a knowledge- based attitude
• Improving human resources efficiency
• Providing the necessary conditions for improving the performance of each employee
• Providing the foundation for the flourishing of creativity and innovation
• Establishing a comprehensive training system
• Adapting employee enablement to market needs
12
Raising the bank’s social recognition
• Commitment by all employees to the principles of corporate citizenship
• Collective observance of professional ethics and social values
• Cognizant interaction with environmental conditions
13
Credit rating
Tejarat Bank is the first of the big five commercial banks in Iran to have achieved a credit rating
by an international credit rating agency.
Capital Intelligence (CI) has rated the bank’s credit rating as BB- for the second consecutive
year in 2010-11, the highest possible for an Iranian financial institution, considering the country’s
Sovereign Foreign Currency Ratings of BB-.
Financial strengths specified in the CI report:
• Strong domestic franchise and stable, low cost deposit funding
• Gradual improvement of liquidity
• Commitment by shareholders to reinvest dividends
• Access to international trade finance, despite sanctions on Iran
• Diversified credit portfolio and low borrower concentration
Benefits of the international credit rating for Tejarat Bank:
• Prospects for expansion of its international branch network
• Expansion of its international correspondent banking network and securing new international
lines of credit with favorable rates
• Securities issue (in particular sokook) with favorable rates
• Increase in share price and number of shares purchased by domestic and international buyers,
due to the improved risk position
Key achievements
In the financial year 2010-11, Tejarat Bank achieved the following, from among the top 5
commercial banks in the country:
• One percent increase in total deposits
• Number one position in letter of guarantee
• Number one position in letters of credit
• Ten percent increase in market share in domestic letters of credit
• Five percent increase in market share in international letters of credit
14
Awards
• Gold award in quality of service in the country
• Top ranking in internet banking in the country
• Diamond award in quality from the BID Institute for “Sustained commitment to quality
improvement and advancement”
Key projects
Tejarat Insurance Company
To complete its financial services value chain and expand its product and service offering to
its customers, Tejarat Bank initiated the proceedings during the financial year 2010-11 for the
establishment of a new insurance company.
Tejarat investment company
To add variety to the range of services offered, Tejarat Bank sees the establishment of a new
investment company as one of its priorities. In this regard, the new venture’s business plan has
been developed during 2010-11 and the company’s shareholder structure has been identified. At
present, planning is underway for obtaining the legal permits for the investment company.
Anti-money laundering
Tejarat Bank has completed a number of key initiatives in 2010-11 in terms of anti-money
laundering (AML), in line with guidelines and regulations laid down by the CBI, a summary of
which are detailed below:
• Regular meetings by the Anti-Money Laundering Committee, for reviewing the bank’s AML
directive and improving its AML procedures
• Communicating and cooperating with the Anti-Money Laundering Secretariat at the Ministry
of Economic Affairs and Finance, for sending and receiving information on suspicious
transactions
• Deploying AML software for control, identification and reporting on suspicious transactions
• Providing AML training to employees and development of corresponding brochures
15
Risk management
As a member of the country’s banking network and in line with the directives of the Central
Bank of Iran (CBI), Tejarat Bank has based its risk management strategy on the following key
fundamentals:
• Use and improvement of procedures for the measurement and management of risks faced by
the bank
• Adapting its risk management procedures with the regulations and guidelines issued by the CBI
• Progressing toward creation of databases to allow for implementation of advanced methods
of risk measurement
To support its risk management activities, Tejarat Bank has established a risk management
framework during the past years, central to which is the bank’s Risk Committee and subsidiary
committees for credit, liquidity, operational and market risks.
Credit risk
Management of credit risk at Tejarat Bank is based on three main focus areas, including credit
scoring, credit portfolio and the limit of responsibility of credit agents.
Key activities carried out during the last financial year with regard to credit risk include:
• Deployment of an automated credit scoring system in select branches
• Development of a system for scoring customer credit beyond the credit limits allowed by
branches
• Assignment of customer credit codes
• Improved credit reporting mechanisms
Operational risk
According to the definitions of the Basel Committee on Banking Supervision, operational risk is
defined as the probability of default (loss) from incomplete or unsuccessful operations in internal
or external processes.
To mitigate operational risk, Tejarat Bank has carried out the following steps during the past
financial year:
• Establishing a system for systemic control of blocked accounts during remote transactions
• Establishing an automated system for payment of custom guarantees on due date
16
• Revision and establishment of a system for blocking lost or stolen interbank checks
• Development of a system for reporting on bills voided or issued after close of operation on
each day
• Establishment of a system for automated issue of security documents with regard to received
waybills (letters of credit portfolio)
• Organizing general IT security courses for all employees
• Preparation of the RFP (request for proposals) for a project titled “Design and Implementation
of a Database for Measurement of Operational Risk” and holding negotiations with candidate
companies for carrying out the proposal
Market risk
Market risk is the risk of fluctuations in the value of future liquidity, resulting from financial tools,
as a result of market risk factors, such as interest rates, currency exchange rates and stock price.
From among these, exchange rate risk and interest rate risk are considered the most important for
the bank.
To make use of modern methods of measuring market risk, Tejarat Bank has designed a software
tool for the calculation of foreign currency portfolio risk.
Liquidity risk
Liquidity risk relates to accessibility of necessary resources for meeting account debits and other
obligations of the bank.
The Bank has taken significant steps toward deployment of modern methods of liquidity risk
management, including:
• Development of a software program for the calculation of an optimum interest rate for the
bank’s central account, for optimum management of branch resources and expenditure and
prevention of shortfalls in accounts with the CBI
• Development of the RFP for a project titled “Design and Implementation of an Assets and
Liabilities Management System (ALM)”
17
Human resources
The following table shows the breakdown of human resources, in terms of education, gender and
location of service (headquarters/branch):
2010-11
Description
Number
Share (%)
Number
Share (%)
6,170
29
5,891
28
High school
diploma and higher
national diploma
13,665
65
13,972
65
Below high school
diploma
1,207
6
1,435
7
17,363
83
17,521
82
Female
3,679
17
3,777
18
Headquarters
5,179
25
5,226
25
15,863
75
16,072
75
21,042
100
21,298
100
Bachelors and
postgraduate
degrees
Education
Male
Gender
Location of service
2009-10
Branch
Total
The breakdown of training courses for Tejarat Bank employees for the past two years is as follows:
Description
Number of training courses
Total training hours
18
2010-11
2009-10
1,846
1,234
2,050,396
714,581
Key projects carried out in 2010-11 in terms of human resources development included:
• Phase 1 of the project “Analysis of Baking Job Functions based on onet”
• “Review of the Level of Employee Job Satisfaction and Fatigue”, plus presentation of
solutions for improvement
• Development of a strategic human resources development program
• Encouragement of remote learning, to allow for employees nationwide to gain access to the
necessary training in areas such as banking services, laws and regulations
19
Domestic banking branch network
Tejarat Bank today has a near 2,000 strong nationwide branch network. Each year, the bank
makes a thorough analysis of the performance of all branches and at the end of the year, strategic
decisions are made regarding the closing down, merging or moving of branches. During the
financial year 2010-11, the decision was made to reduce the number of total branches from 1,951
to 1,898, with the breakdown shown in the following table:
Description
Tehran
Other cities
2010-11
2009-10
369
415
1,515
1,522
14
14
1,898
1,951
Free trade zones
Total
International banking
International banking operations
The following table provides a summary of the number and volume of Tejarat Bank’s international
banking operations during the past two years.
Figures in USD million
2010-11
Description
Number
Amount
Number
Amount
577
606
917
939
7,212
8,095
8,768
6,887
Inward foreign currency transfers
20,377
17,536
18,639
6,603
Outward foreign currency transfers
19,685
8,111
17,977
2,977
Letters of guarantee
Letters of credit
20
2009-10
International banking liabilities
The table below shows a summary of the bank’s foreign exchange liabilities during the past two
years.
Figures in IRR million
Description
2010-11
2009-10
4,958,291
1,954,648
544,738
954,978
9,264,374
4,261,228
18,658,331
17,908,027
658,498
562,445
Others
19,973,546
11,006,540
Total
54,057,778
36,647,866
Profit-free (qardh-ul-hassanah)
deposits
Time deposits
Current account deposits
Advances for L/Cs
L/G Deposits
Foreign exchange branches
In line with branch restructuring activities for the year, the number of foreign exchange branches
of Tejarat Bank in the country increased from 35 in 2009-2010 to 37 in 2010-11, while the number
of foreign exchange departments decreased by one from 134 to 133, as can be seen from the
following table.
Description
Number of foreign exchange
branches
Number of foreign exchange departments
2010-11
2009-10
37
35
133
134
21
Overseas branches
Tejarat Bank has two overseas branches, one in Paris, France and the other in Dushanbe, Tajikistan.
In addition, Tejarat Bank is one of the main shareholders of the Persian International Bank in
London, Europäisch-Iranische Handelsbank in Hamburg and Trade Capital Bank in Belarus.
Performance indicators
Description
22
Unit
2010-11
2009-10
2008-09
2007-08
Capital
IRR billion
13,569
10,437
10,437
10,437
Total income
IRR billion
465,312
383,487
339,646
297,921
Total liabilities
IRR billion
438,841
361,391
321,026
280,828
Total deposits
IRR billion
337,703
268,675
216,428
187,674
Total credit outstanding
IRR billion
239,587
201,711
191,519
172,285
Profit before tax
IRR billion
5,880
4,462
3,915
3,153
Number of employees
Person
21,042
21,298
21,298
20,768
Number of branches
Branch
1,900
1,953
1,984
1,965
Return on capital
%
33.01
36
26.7
30.2
L/G commitments
IRR billion
114,209
89,954
78,873
61,452
L/C commitments
IRR billion
103,381
74,852
66,579
72,611
Macroeconomic indicators
Description
Unit
2010-11
billion persons
74.7
Population growth
Percentage
Unemployment rate
2008-09
2007-08
73.6
72.5
71.5
1.5
1.5
1.5
1.4
Percentage
14.6
11.4
10.4
10.5
Inflation rate
Percentage
12.4
12.5
25.4
18.4
Trade balance
USD billion
27,136
20,936
45,309
40,819
Oil and gas exports
USD billion
60,339
69,825
88,920
81,764
Non-oil exports
USD billion
16,123
17,709
17,651
15,637
Imports
USD billion
49,327
66,598
61,261
56,582
Economic growth
Percentage
-
3.5*
2.3
8.7
Liquidity growth
Percentage
25.2
23.9
15.9
27.7
23,295
12,536
7,966
10,082
Population
Stock market index
)Q1(
)Q1-Q3(
)Q1-Q3(
)Q1-Q3(
)Q1-Q3(
2009-10
Source: Central Bank of Iran
* “Recent Economic Transformations in the Country in 2010-11” - presented at the 21st Conference on Monetary and Currency
Policies, Economic Deputy of the Central Bank of Iran
23
24
25
Balance sheet
As at March 20, 2011
Figures in IRR million
Restated
Assets
Note
20/3/2011
20/3/2010
Restated
Liabilities and
shareholders’ equity
Note
20/3/2011
20/3/2010
Cash
4
4,695,936
4,060,004
Due from the Central Bank of Iran
5
61,049,936
43,526,923
Due to the Central Bank of Iran
17
13,896,542
16,788,928
42,454,966
38,332,067
Due to banks and credit
institutions
18
17,140,706
6,437,219
22,403,676
22,078,001
Sight deposits
19
101,412,816
83,759,279
239,587,259
201,711,079
Qardh-ul-hassanah and similar
deposits
20
25,033,778
18,609,168
Due from banks and credit institutions
Due from the Government
Credit facilities and receivables
6
7
8
Liabilities:
Other accounts receivable
9
2,340,957
4,296,390
Time deposits
21
183,169,560
140,457,327
Debtors for letters of credit and term
bills of exchange
10
54,667,264
43,370,619
Other deposits
22
28,087,065
25,849,692
Participation bonds
11
8,713,640
7,323,427
Liabilities for acceptance of
letters of credit and term bills
of exchange
23
53,980,460
40,570,175
Investments and joint ventures
12
5,012,549
2,366,511
Tax paid
2,330,706
2,458,776
Fixed tangible assets
13
12,139,847
11,872,501
688,742
577,249
Fixed intangible assets
14
733,563
732,457
10,392,160
23,891,266
Other assets
15
9,256,985
2,994,231
275,432
246,166
Items in transit
16
2,255,480
822,487
2,433,091
1,745,569
438,841,058
361,390,814
Profit paid to depositors
Provisions and other liabilities
24
Dividends
Provision for employee
termination benefits
Total liabilities
Shareholders' equity
Capital
25
13,568,599
10,437,384
Legal reserve
26
3,179,156
2,507,269
Other provisions
27
2,117,414
1,669,489
325,207
220,590
723,900
723,900
6,556,724
6,537,251
Shareholders' equity
26,471,000
22,095,883
Total liabilities and
shareholders' equity
465,312,058
383,486,697
Profit or loss from currency
translation
From the unified exchange rate
28
Accumulated profit
Total Assets
383,486,697
Customer commitments for letters
of credit
37_1
103,381,512
74,851,972
Commitments for letters of credit
37_1 103,381,512
74,851,972
Customer commitments for letters of
guarantee
37_2
114,209,218
89,954,213
Commitments for letters of
guarantee
37_2 114,209,218
89,954,213
Other customer commitments
37_3
9,381,799
8,938,332
Other commitments
37_3
9,381,799
8,938,332
2,139,907
2,304,416
Party to administered funds and
similar
37_4
2,139,907
2,304,416
229,112,436
176,048,933
Total off balance sheet items
229,112,436
176,048,933
Administered funds and similar items
Total off balance sheet items
26
465,312,058
37_4
Profit and loss statement
For the year ended March 20, 2011
Figures in IRR million
Restated
Description
20/3/2011
Note
20/3/2010
Joint income:
Profit from credit facilities
29
26,172,599
Profit from investments and deposits
30
1,972,840
22,573,684
3,362,828
28,145,439
Provisional profit for time deposits
Different between provisional and
actual profit for time deposits
31
25,936,512
)18,569,349(
)16,062,164(
)3,851,622(
)1,620,425(
Depositors' share of profits
Bank's share of joint income
)22,420,971(
)17,682,589(
5,724,468
8,253,923
Non-joint income
Profit and penalty
32
3,242,459
2,821,739
33
4,156,186
3,312,515
2,079,985
791,342
3,851,622
719,573
14,049,825
1,620,425
273,801
8,819,822
19,774,293
17,073,745
Commission income
Settlement of foreign
currency transactions
Legal fees
Other income
Total joint income
Total income
Less: expenses
Personnel and administrative expenses
Doubtful debt expense
34
35
)9,692,107(
)2,539,913(
)7,215,143(
)2,737,131(
Financial expenses
36
)1,246,891(
)2,379,127(
)415,220(
)279,828(
Other expenses
Total expenses
Profit before tax
Tax
Net profit
Earnings per share (IRR)
Basic earnings per share
38
)13,894,131(
)12,611,229(
5,880,162
)1,400,914(
4,479,248
330
366
4,462,516
)1,108,821(
3,353,695
321
314
Retained Profit (Loss) Account
Net Profit
Accumulated profit at the
beginning of the year
Annual adjustments
Accumulated profit at the
beginning of the year - adjusted
Previous year dividend
Transfer to capital account upon
approval by the bank's AGM
Profit payable
Allocation during the period
Legal reserve
Other reserves
Total reserves
Accumulated profit at the end of the year
4,479,248
3,353,695
4,408,481
6,292,790
2,128,770
)649,809(
6,537,251
5,642,981
)2,609,346(
)1,706,370(
)730,617(
)3,339,963(
7,676,536
3,936,611
7,290,306
)1,119,812(
)451,833(
)301,222(
)753,055(
6,556,724
6,537,251
)671,887(
)447,925(
27
Comprehensive profit and loss statement
For the year ended March 20, 2011
Figures in IRR million
Restated
Description
20/3/2011
20/3/2010
4,479,248
3,353,695
231,354
126,737
Comprehensive profit for the fiscal year
4,710,602
3,480,432
Annual adjustments
2,128,770
)649,809(
Comprehensive profit recognized from the
previous reporting year
6,839,372
2,830,623
Net profit
Profit and loss from currency
conversion - overseas branches
28
Cash flow statement
For the year ended March 20, 2011
Figures in IRR million
Restated
Description
20/3/2011
20/3/2010
Operating activities:
Net cash inflow (outflow) from operating
activities
27,316,434
)8,787,875(
Return on investments and profit payments
for financing:
Dividend received from investments and
joint ventures
Dividend
159,453
122,121
)2,580,080(
)1,997,872(
Net cash inflow (outflow) from investment
activities
)2,420,627(
)1,875,751(
)1,424,528(
)2,923,658(
Income tax:
Tax paid
Investment activities:
Payments for investments and joint ventures
Proceeds from the sale of investments and
joint ventures
Payments for the purchase of fixed assets
Proceeds from the sale of fixed assets
)2,805,185(
)873,382(
263,693
69,267
)501,369(
)533,638(
189,160
67,500
Net cash outflow from investment activities
)2,853,701(
)1,270,253(
Net cash inflow (outflow) before financing
activities
20,617,578
)14,857,537(
325,207
220,590
Net increase (decrease) in cash
20,942,785
)14,636,947(
Cash at the beginning of the year
18,524,444
33,161,391
Cash at the end of the period
39,467,229
18,524,444
Profit (loss) from cash conversion
29
1- Historical background:
Tejarat Bank (Public Joint Stock) was established on December 20, 1979 through the merger of
Irano-British Bank, Bank Etebarat Iran, Bank of Iran and the Middle East, Mercantile Bank of Iran
and Holland, Bank Bazargani Iran, Bank Iranshahr, Bank Sanaye Iran, Bank Shahriar, Bank Iranian,
Bank Kar, International Bank of Iran and Japan and Iran-Russia Bank, registered by the Registrar of
Companies under number 38227. Change of the bank’s legal entity to public joint stock and update
of its articles of association were registered and publicized on February 22, 2009 by the Registrar of
Companies and Industrial Ownership, under number 38027. On April 29, 2009, Tejarat Bank was
admitted to the Tehran Stock Exchange (TSE) and its shares were listed on the TSE on May 18, 2009.
The bank’s headquarters are located in Tehran.
2- Basis for the preparation of the financial statements:
The financial statements of the bank are prepared on the basis of historical cost price, with
current values being used where necessary.
3- Summary of main accounting procedures:
3-1- Investments
3-1-1- Evaluation method:
•Long-term investments are valued at cost price, after deduction of the provision for
permanent depreciation in the value of each investment. Quick-trading current investments
are valued at minimum cost price and the net sale price of total investments, while other current
investments are valued at minimum cost price and the net sale price of each investment.
3-1-2- Income identification method:
•Profit from investment in affiliated and subsidiary companies is identified with the approval
of the financial statements by the general meeting of investee company’s shareholders (up to
the approval date of the financial statements), while profit from other investments, including
current and long-term, is identified at the time of approval by the general meeting of the investee
company’s shareholders (up to the balance sheet date).
3-2-Tangible fixed assets:
3-2-1-Tangible fixed assets, with the exception of items under note 3-2-2, are registered on
the accounts on the basis of cost price. Expenses for improvement and overhaul, which would
significantly increase the capacity or useful life of fixed assets or substantially improve their
productivity, are considered capital expenses and depreciate during the remainder of the useful life
30
of the corresponding assets. Maintenance and minor repairs expenses, incurred for preservation
and improvement of anticipated financial interests of the business from the original evaluated
standards of performance for the assets are considered as current expenses at the time of occurrence
and added to profit and loss for the period.
3-2-2- In line with Art 62 of the Third Development Plan, buildings, land and goodwill for
commercial properties of the bank at the end of the fiscal year 2004-05, are registered on the
accounts at their reappraised price of IRR 10,830 billion. In line with corresponding regulations,
surplus of IRR 9,206 billion from the aforementioned reappraisal has been deposited to the
Government’s capital increase account with the bank.
3-2-3- Based on the approval at the 1,077th meeting of the Money and Credit Council on
February 17, 2007, depreciation of fixed assets has been calculated since 2006, in compliance
with the depreciation table, subject of Art 151, Direct Tax Law, approved in March 1988, and the
subsequent amendments, according to the following rates and methods.
Description
Depreciation rate
Depreciation method
Buildings and Installations
7%
Descending
Motor vehicles
25%
Descending
Furniture and computer system hardware
10 years
Direct
Computer hardware (PCs)
3 years
Direct
Depreciation of reappraised properties has been calculated since the end of the fiscal year 2004-05
at the rate of 3.5 percent using the descending method, in compliance with Clause 10, Depreciation
Bylaw, subject of Art 151, Direct Tax Law.
3-3- Goodwill for commercial properties:
Goodwill for the bank’s commercial properties during the fiscal year 2004-05 has been registered
on the basis of reappraised price, in line with Art 62 of the Third Development Plan. In addition, as
depreciation of assets is calculated based on the depreciation table, subject of Art 151 of the Direct
Tax Law, as stipulated in the approval at the 1,077th Meeting of the Money and Credit Council, no
depreciation has been calculated for goodwill since March 21, 2006.
31
3-4- Identification of income from granted credit facilities, commission and penalties:
In accordance with circular no.772/MB, dated July 18, 2005, by the Banking Studies and
Regulations Department of the Central Bank of the Islamic Republic of Iran and the approval at
the 1,044th meeting of the Money and Credit Council, dated July 16, 2005, the bank’s income is
identified on an accrual basis, as detailed below:
Type of income
Identification method
Profit from granted credit facilities
Based on duration and in consideration of the principal
balance and minimum expected profit of granted facilities
Delay penalties for repayment of credit installments
Based on duration, outstanding installment payments and
specified penalty rate
Commission on letters of guarantee issued
At the time of issue
Commission on other banking services
Proportional to the level of service offered
3-5- Basis for determination of depositors’ share form joint profit:
Income from activities related to granted credit facilities and investment in shares and participation
bonds, identified within the framework of the bank’s accounting procedures, are considered as joint
income. The depositors’ share of join profit is determined proportional to the usage of net deposits
in the abovementioned activities, based on the Non-Usury Banking Law ratified on 20, November,
1984 and the corresponding executive bylaw and regulations, in line with circular no.1799/MB,
dated January 8, 2004 by the Central Bank of the Islamic Republic of Iran.
3-6- Classification of granted credit facilities:
Credit facilities granted by the bank are evaluated and classified into the following four classes,
according to the Instructions for the Classification of Credit Institution Assets, ratified by the
Money and Credit Council (subject of circular no.2823/MB, dated February 24, 2007, by the
Banking Studies and Regulations Department of the Central bank of the Islamic Republic of Iran),
taking into consideration factors such as payment delay, customers’ financial status and customers’
business status:
1- Current (overdue, up to 2 months)
2- Overdue (overdue, 2 to 6 months)
3- Deferred (overdue, 6 to 18 months)
4- Doubtful (overdue, over 18 months)
32
3-7- Provision for doubtful debts:
The provision for doubtful debts is calculated in accordance with the Instructions for Calculation
of Debt Provision for Credit Institutions, ratified by the Money and Credit Council (Subject of
circular no.2823/MB, dated February 24, 2007 by the Banking Studies and Regulations Department
of the Central Bank of the Islamic Republic of Iran), as follows:
• General provision is calculated as 1.5% of the total balance of credit facilities (including old,
current, overdue, deferred and doubtful) at the end of each year, with the exception of the
balance for credit facilities for which a specific provision has been calculated.
• Specific provision is calculated based on the balances for overdue, deferred and doubtful credit
facilities, taking into consideration the value of collateral for each case, with the application of
specific coefficients, as follows:
Class
Coefficient
Overdue
10%
Deferred
20%
Doubtful (taking into account customer repayment ability)
Doubtful - overdue for 5 years or more
50% -100%
100%
• Properties presented as collateral are initially appraised by experienced evaluators and experts.
For office properties up to 80% of the appraisal price and for commercial properties up to 60%
of the appraisal price would be collateralized by the bank.
• Up to 70% of collateralized value of the property is considered in calculation of the specific
provision for doubtful debts on the strength of circular no.2823/MB, dated February 24, 2007,
issued by the Central Bank of the Islamic Republic of Iran.
• To take into consideration significant increases in property prices during the recent years,
formally reported by the corresponding authorities, collateralized value of properties are
adjusted by multiplying them by 1.7 and adapting them to spot price.
3-8- Provision for employee leave and termination benefits:
• Provision for employee termination benefits is calculated according to the latest fixed monthly
salary and benefits.
• Provision for employee leave benefits is calculated based on the last day at fixed salary and
continuous benefits for each employee, multiplied by their outstanding leave balance at the end of
33
each year. The value is adjusted at the end of each year depending on the outstanding leave balance.
3-9- Currency conversion:
3-9-1- Domestic accounts
Foreign currency monetary items are converted at market rate at the balance sheet date (interbank
market reference rate declared daily by the Central Bank of the Islamic Republic of Iran), while
non-monetary items are converted at market rate on the transaction date. The difference between
settlement and conversion of foreign currency monetary items is identified as income and expense
for the corresponding period.
3-9-2- Overseas branches:
All monetary and non-monetary items (with the exception of shareholders’ equity) of overseas
branches and units are converted at market rate at the balance sheet date. Shareholders’ equity is
converted at market rate on the date on which such item is created (historical rates). Profit and loss
items are converted at the average market rate for the year. Difference from translation of the financial
statements for the corresponding units is stated under the title “shareholders’ equity”.
3-10- Due from the Government:
Mandatory credit facilities granted based on the guarantee by the Management and Planning
Organization of Iran are classified under the following conditions as due from the Government:
a) Deferred credit, as a result of the borrower’s failure to repay, inadequate collateral or the
bank’s inability to collect
b) Overdue credit, related to the execution of capital assets acquisition projects
c) Credit facilities granted to ministries and government institutions
4- Cash:
Figures in IRR million
Description
Cash on hand - IRR
Cash on hand - foreign currency (overseas
branches)
Foreign
currency cash
Total
34
20/3/2011
20/3/2010
4,262,230
3,886,797
13,702
5,175
420,004
168,032
4,695,936
4,060,004
Cash balances are insured against theft, fire and accidents with Iran Insurance Company.
5- Due from the Central Bank of Iran:
Figures in IRR million
Description
20/3/2011
20/3/2010
Statutory deposits (domestic and overseas
branches)
31,922,476
27,729,453
Sight and time deposits with the Central
Bank of Iran
25,829,897
15,613,254
Current account with the Central Bank of
Iran (domestic and overseas branches)
2,222,162
115,661
Current adjustments for government
institutions and companies, represented by
the Central Bank of Iran
1,075,401
68,555
61,049,936
43,526,923
Total
6- Due from banks and credit institutions:
Figures in IRR million
Description
20/3/2011
20/3/2010
Foreign currency deposits with
foreign banks
11,664,325
16,566,754
Sight and time deposits with domestic
banks / IRR and foreign currency
14,847,462
5,845,676
Payment of checks issued by other banks
11,951,543
11,198,131
Credit granted to other banks
1,184,625
3,190,809
Other receivables
2,867,797
1,593,663
)60,786(
)62,965(
42,454,966
38,332,067
General provision for doubtful debts
Total
35
7- Due from the Government:
Figures in IRR million
Description
20/3/2011
For credit facilities granted under
government guarantee
20/3/2010
7,571,480
14,338,341
_
96,589
For liabilities undertaken by the
Government
21,517,677
13,356,663
Future years' income guaranteed by the
Government
)6,344,308(
)5,408,213(
)341,173(
)305,379(
22,403,676
22,078,001
For credit facilities granted under
government guarantee through other banks
General provision for doubtful debts
Total
8- Credit facilities and receivables:
Figures in IRR million
20/3/2011
Balance
Future
years’ profit
Deferred
profit
Provision for
doubtful debts
Net
Net
77,820,219
)12,420,303(
)1,906,705(
)6,058,237(
57,434,974
61,354,862
6,533,815
)1,681,508(
)8,335(
)96,164(
4,747,807
9,531,053
517,149
)128,974(
)60,447(
)24,630(
303,099
549,598
887,263
-
)8,912(
)130,568(
747,783
1,401,063
470,395
-
)72,158(
)113,504(
284,734
1,592,202
Equity participation
126,920,524
-
)464,100(
)7,704,430(
118,751,994
90,589,555
Factoring
Qardh-ul-hassanah
9,712,035
)3,262(
-
)159,888(
9,548,885
1,401,556
12,854,037
)183,355(
-
)205,139(
12,465,543
9,676,437
Credit granted in foreign
currency
20,121,055
-
)957,825(
)2,620,264(
16,542,965
14,110,456
Customer liabilities under letters
of credit
14,766,368
-
-
)2,809,275(
11,957,093
10,334,842
708,190
-
)13,674(
)221,847(
472,669
303,547
6,330,502
-
-
)789(
6,329,713
865,908
277,641,552
)14,417,402(
)3,492,156(
)20,144,735(
239,587,259
201,711,079
Description
Installment sale
Service contract (Jo'aaleh)
Hire purchase
Forward contract
Modharebeh
Customer liabilities under letters
of guarantee
Other credit facilities
36
20/3/2010
Total
9- Other accounts receivable:
Figures in IRR million
Description
20/3/2011
20/3/2010
1,701,149
3,906,405
Profit and commission income (overseas branches)
283,243
89,678
Dividends receivable
178,877
121,454
Profit income from participation bonds
141,514
169,256
53,599
24,106
)17,425(
)14,509(
2,340,957
4,296,390
Debt to participation bond issuers
Other foreign exchange fees
Provision for commission receivable on foreign currency letters of guarantee
Total
10- Debtors for letters of credit and term bills of exchange: Figures in IRR million
Description
20/3/2011
20/3/2010
Debtors for letters of credit and term bill of exchange
- private sector
33,810,244
19,017,492
Debtors for letters of credit and term bill of exchange
- public sector
21,689,516
24,957,298
)832,496(
)604,171(
54,667,264
43,370,619
Provision for doubtful debts
Total
37
11- Participation bonds:
Figures in IRR million
Description
20/3/2011
20/3/2010
Participation bonds issued by ministries and
state companies
4,297,814
5,126,593
Participation bonds for private companies
3,398,416
1,084,311
Participation bonds for development projects
1,016,255
1,112,523
1,155
_
8,713,640
7,323,427
Government securities (overseas branches)
Total
12- Investments and joint ventures:
Figures in IRR million
20/3/2011
Description
Investment in free-trading shares
Total
Current Long-term
Total
1,102,857
-
1,102,857
337,488
-
337,488
Investments in other shares
-
2,513,763
2,513,763
-
929,346
929,346
Other investments (overseas)
-
1,395,929
1,395,929
-
1,099,677
1,099,677
1,102,857
3,909,692
5,012,549
337,488
2,029,023
2,366,511
Total
38
Current Long-term
20/3/2010
Cost price or reappraisal amount
Accumulated depreciation
Figures in IRR million
526,345
446,989
-
5,342
67,647
-
)500(
)3,901(
)1,365(
-
)19,765(
)153(
5,756
-
1,587,177
998,265
69,885
519,027
-
Balance at
the end of
the fiscal
period
10,966,779
421,204
17,970
10,001,260
526,345
20/3/2011
10,880,726
393,937
20,459
9,937,808
528,522
20/3/2010
n
)1,805(
10,520,287
68,597
91,521
)14,162(
Book value
)372(
180,571
87,855
927,009
)5,766(
Balance at
Accumulated Amendments,
th beginning Fiscal period
adjustments
of the fiscal depreciation depreciation and transfers
of assets sold between items
period
)74,247(
)104(
1,419,469
164,510
Balance at
the end of
the fiscal
period
528,522
29,166
)3,830(
88,521
1,442,595
Amendments,
adjustments
and transfers
of items
10,384,797
1,890
)2,500(
12,553,956
Assets sold
during the
fiscal period
89,899
13,344
267,183
Assets added
during the
fiscal period
1,320,104
)80,949(
907,709
Balance at
th beginning
of the fiscal
period
13- Tangible fixed assets:
Description
Land
Buildings
Motor vehicles
Furniture
44,400
1,087,310
12,323,322
1,087,311
345,419
)165,817(
907,709
-
Assets under completion
1,587,177
67,415
-
)14,162(
74,389
35,590
)5,766(
74,389
67,415
)81,243(
164,510
)28,617(
Orders and capital
advances
-
1,442,595
16,651
75,960
13,727,024
11,368
16,651
)8,493(
11,368
Capital items in storage
)80,949(
11,872,501
501,369
12,139,847
13,315,097
Total
Tangible fixed assets have sufficient insurance coverage for fires, floods and earthquakes.
39
14- Intangible assets
Figures in IRR million
Description
Royalties for use of public services
20/3/2011
20/3/2010
32,989
30,211
-
37
Place of business goodwill
700,574
702,209
Total
733,563
732,457
Operational and administrative software
15- Other assets:
Other assets amount to IRR 9,256,985 million, mainly consisting of provisional debt totaling
IRR 7,336,118 and collateral totaling IRR 1,927,937 million.
16- Items in transit:
Main part of items in transit corresponds to the difference between domestic debtor and creditor
accounts and foreign currency claims and deposits registered in overseas branches and the head
office.
17- Due to the Central Bank of Iran:
Figures in IRR million
Description
20/3/2011
20/3/2010
2,937,198
10,566,097
10,424,711
4,856,194
Current balance for state institutions and companies
412,791
991,533
Other
121,842
375,104
13,896,542
16,788,928
Credit received from the Central Bank of Iran
Time deposits by the Central Bank of Iran
Total
40
18- Due to banks and credit institutions:
Figures in IRR million
Description
20/3/2011
20/3/2010
Credit received from foreign banks for
domestic usance
7,359,257
5,031,474
Foreign currency sight and time deposits by
domestic banks
4,825,425
716,908
Sight deposits by foreign banks (foreign
currency)
2,482,755
5,622
Time deposits by domestic banks
1,879,235
142
Other
594,034
683,073
Total
17,140,706
6,437,219
19- Sight deposits:
Figures in IRR million
Description
20/3/2011
20/3/2010
Current account deposits - IRR and foreign currency
82,671,411
67,778,262
Bank checks sold through other banks
12,841,337
11,952,787
4,618,338
2,324,435
Bank checks sold
675,250
907,700
Other
606,480
796,095
101,412,816
83,759,279
Provisional creditors / IRR and foreign currency
(domestic and overseas)
Total
20- Qardh-ul-hassanah deposits:
Figures in IRR million
Description
20/3/2011
20/3/2010
Qardh-ul-hassanah deposits - IRR and foreign currency
24,546,611
18,236,738
487,167
372,430
25,033,778
18,609,168
Youth and unused special qard-ul-hassanah accounts
Total
41
21- Time deposits
Figures in IRR million
Description
Long-term time deposits
Short-term time deposits
Special short-term time deposits
Foreign currency time deposits
Total
20/3/2011
20/3/2010
108,860,480
71,489,811
65,184,686
54,957,915
8,579,656
13,054,622
544,738
954,980
183,169,560
140,457,327
21-1- Long-term time deposits
Figures in IRR million
Description
20/3/2010
1-year time deposit
26,630,622
19,500,828
2-year time deposit
4,140,997
3,436,097
3-year time deposit
3,237,390
2,886,707
4-year time deposit
489,348
415,259
5-year time deposit
71,316,348
38,075,560
3,045,775
7,175,360
108,860,480
71,489,811
Certificate of deposit (1-year)
Total
42
20/3/2011
22- Other deposits:
Figures in IRR million
Description
Cash deposits for letters of guarantee (IRR)
Cash deposits for letters of guarantee (foreign currency)
Advances on letters of credit
Advances on other credit facilities
Total
20/3/2011
20/3/2010
7,637,824
6,547,621
658,498
562,445
19,516,420
18,392,152
274,323
347,474
28,087,065
25,849,692
23- Liabilities for accepting letters of credit and term bill of exchange
Retained liabilities for acceptance of letters of credit and term bills of exchange (foreign currency),
in relation to documents traded and endorsed by foreign correspondent banks for finance and
usance letters of credit, with a maturity date beyond March 21, 2011.
24- Provisions and other liabilities:
Figures in IRR million
Description
20/3/2011
20/3/2010
Credit facilities from the Foreign Exchange
Reserve Fund
3,071,604
16,059,929
Provision for retirement fund expenses
1,318,864
3,666,709
Proceeds from the sale of foreign currency participation
bonds for Pars Oil and Gas Company
1,237,309
-
Collection of checks by other banks (deposited by
customers)
1,086,752
1,283,914
Subsidy for improvement of rural dwellings
734,774
734,753
Profit and commission income
716,383
574,566
Provision for employment redemption
776,465
531,685
Government profit share subsidy, clause 2, 2005-06
fiscal budget policy
465,695
506,381
Other
984,314
533,329
10,392,160
23,891,266
Total
43
25- Capital:
25-1- The bank’s original share capital stood at IRR 34,120 billion (consisting of 34,120,000
shares with the nominal value of IRR 1,000), increasing during various stages to reach IRR
13,568,599 billion (consisting of 13,568,599,000 shares with the nominal value of IRR 1,000) at
the end of the fiscal year 2010-11.
Figures in IRR million
Year of increase
Percentage
increase
Increased
amount
New capital
Source of increase
1979-80
-
-
39,120
Merging of banks
1992-93
1,360
532,000
571,120
Reappraisal of fixed assets
2000-01
115.6
660,000
1,231,120
From participation bonds
2004-05
748
9,206,264
10,437,384
Fixed assets reappraisal surplus
13,568,599
From cash contribution,
updated shareholder claims and
accumulated profit
2010-11
30
3,131,215
25-2- Shareholder structure at balance sheet date: Figures in IRR million
20/3/2011
Number of shares
Percentage
of share
Number of shares
Percentage
of share
Government of the Islamic
Republic of Iran
4,141,851,741
30.53
3,737,832,080
35.8
Justice shares brokerage
5,427,439,652
40
4,174,953,600
40
Employees (preferred shares)
678,429,960
5
521,869,200
5
Private individuals
414,234,566
3.05
428,509,379
4.1
2,906,643,281
21.42
1,574,219,741
15.1
13,568,599,200
100
10,437,384,000
100
Legal entities
Total
Number of shareholders:
Private individuals
Legal entities
44
20/3/2010
29,869
160
25-3- Capital adequacy ratio (CAR) is the ratio of the bank’s capital to its risk-weighted assets.
The Central Bank of Iran requires that all banks maintain a minimum CAR of 8 percent. The
bank’s CAR at balance sheet date is:
Figures in IRR million
Description
20/3/2011
20/3/2010
Paid up capital
3,830,335
699,120
Legal reserve
3,179,156
2,507,269
Other reserves
3,166,521
2,613,979
Accumulated profit
6,556,724
6,537,251
16,732,736
12,357,619
General provision for liabilities and investments
4,267,050
3,135,454
Provision for reappraisal of fixed assets
9,738,264
9,738,264
‫ــــــــــــــ‬
)516,099(
Tier 2 capital
14,005,314
12,357,619
Total capital base
30,738,050
24,715,238
Less: investment in subsidiary banks and credit
institutions (unconsolidated)
)2,547,256(
)1,740,785(
Total capital base
28,190,794
22,974,453
341,366,444
250,836,337
8. 3
9. 2
Tier 1 capital
Less: Tier 2 capital adjustments
Total risk-weighted assets
Capital adequacy ratio (percent)
26- Legal reserve:
Equivalent of 15 percent of net profit, minus deduction of loss from previous years, is considered
legal reserve. Transfer to legal reserve is compulsory by law, until the balance reaches the bank’s
capital and after that it is voluntary.
27- Other reserves:
Other reserves consist of precautionary reserve. In order to mitigate risk, the bank allocates 10
percent of net profit each year to its precautionary reserves.
45
28- From the unified exchange rate:
In accordance with CBI regulations on unification of exchange rates, dated March 9, 2002, the balance
of the bank’s foreign currency assets and liabilities were converted on March 26, 2002 and the proceeds,
equivalent to IRR 723,900 million, were deposited into an account titled “Proceeds from unification of
exchange rates after tax”.
29 and 30- joint income: Figures in IRR million
Description
20/3/2011
20/3/2010
20,404,967
16,456,314
5,636,710
5,983,127
Profit from investment in participation bonds
856,859
2,088,840
Profit from credit facilities granted to banks and deposits
with banks
942,578
1,279,786
Share and joint venture profit
304,325
128,445
28,145,439
25,936,512
Profit from credit facilities
Late payment charges on credit facilities
Total
46
31- Difference between provisional and actual profit for time deposits:
The difference between provisional and actual profit for time deposits is calculated as follows:
Figures in IRR million
Description
20/3/2011
20/3/2010
165,632,966
145,294,999
Investments *
2,021,849
1,417,356
Participation bonds
5,408,289
8,349,675
Credit facilities *
Total operating resources (customer deposits + other
resources)
173,063,104
155,062,030
Total time deposits
157,047,902
121,202,683
Statutory deposit for time deposits
)18,818,643(
)15,359,722(
Net customer deposits
138,229,259
105,842,961
Deposits with the bank
34,833,845
49,219,069
79.9%
68.26%
26,172,599
22,573,684
856,859
2,088,840
1,115,981
1,273,987
Total joint profit
28,145,439
25,936,511
Depositors' share of profits
22,420,971
17,682,589
Legal fees
)3,851,622(
)1,620,425(
Profit payable to depositors
18,569,349
16,062,164
Provisional profit payable to depositors during the year
18,569,349
16,062,164
‫ـــــــــــــ‬
‫ــــــــــــــ‬
Less: net deposits
Customer deposits to operating resources
Profit from credit facilities
Profit from participation bonds
Profit from investments
Surplus balance to be divided among depositors
* Amounts for credit facilities, investments, participation bonds, time deposits and legal deposits have been calculated based on
weekly averages during the period.
47
32- Profit and penalty receivable (non-joint income):
Figures in IRR million
Description
20/3/2011
20/3/2010
1,121,679
134,433
Profit income from investments
732,092
647,062
Late payment charges on L/Cs
650,391
1,415,055
Profit and penalty receivable from foreign currency
facilities
147,172
136,661
8,361
399,051
Other
582,764
89,477
Total
3,242,459
2,821,739
Late payment charges on other receivables
Late payment charges on other receivables
33- Commission income (non-joint income): Figures in IRR million
Description
20/3/2011
20/3/2010
Commission received from banks - RTGS
1,464,043
1,321,630
Commission on letters of credit
1,160,173
748,435
Qardh-ul-hassanah commission
353,374
275,024
Commission received from banks - RTGS
390,925
251,671
Commission received (overseas branches)
141,865
125,597
Commission for other services
645,806
590,158
4,156,186
3,312,515
Total
48
34 and 35- Administrative, general and doubtful debt expenses: Figures in IRR million
Description
20/3/2011
20/3/2010
7,719,598
5,473,613
1,807,992
1,524,291
Depreciation expenses
164,517
217,240
Doubtful debt expense
2,539,913
2,737,130
12,232,020
9,952,274
Employee expenses
Other administrative expenses
Total
36- Financial expenses:
Figures in IRR million
Description
20/3/2011
20/3/2010
Profit paid to retirement funds
120,685
629,287
Commission expenses
410,759
300,077
Profit paid (overseas branches)
168,778
188,820
Foreign currency sight deposits by brokers
172,061
167,410
Miscellaneous
374,608
1,093,533
1,246,891
2,379,127
Total
37- Off balance sheet items:
37-1- Customer commitments for letters of credit
Figures in IRR million
Description
Customer commitments for letters of credit
Customer commitments for domestic letters of credit
Total
20/3/2011
20/3/2010
94,646,661
71,865,011
8,734,851
2,986,961
103,381,512
74,851,972
49
37-2- Customer commitments for letters of guarantee:
Figures in IRR million
Description
20/3/2011
20/3/2010
Customer commitments for letters of guarantee
(domestic)
87,772,312
64,248,125
Customer commitments for letters of guarantee
(foreign currency)
26,436,906
25,706,088
114,209,218
89,954,213
Total
37-3- Other customer commitments:
Figures in IRR million
Description
20/3/2011
20/3/2010
Party to customer commitments for transaction
agreements
4,912,975
4,537,169
Commitments by the Management and Planning
Organization for credit granted from the Foreign
Exchange Reserve Fund
4,463,176
4,396,032
5,648
5,131
9,381,799
8,938,332
Other
Total
37-4- Administered funds and similar items:
Figures in IRR million
Description
20/3/2011
20/3/2010
1,296,269
1,518,907
Unused administered funds
125,422
129,111
Credit granted from special qardh-ul-hassanah deposits
167,141
185,424
78,172
52,753
472,903
418,221
2,139,907
2,304,416
Credit granted from administered funds
Unused special qardh-ul-hassanah deposits
Credit granted from interbank funds
Total
50
38- Basic earnings per share:
Calculations for basic earnings per share for the fiscal years 2009-10 and 2010-11 have been
carried out based on the weighted average of the number of shares issued during the corresponding
year, in compliance with the Accounting Standard Number 30 for the calculation of earnings per
share. Considering the increase of capital by IRR 3,131,215 million (IRR 730,617 million from
accumulated profit and the issue of 2,400,598,000 share options with a nominal price of IRR
1,000), the weighted average for the number of shares during the two years specified stands at
12,222 and 12,139 million shares, respectively.
51
52
53
Market position
Tejarat Bank is one of the top five commercial banks in Iran, alongside the banks Melli, Sepah,
Saderat and Mellat.
Traditionally considered fully government-owned banks, each of the top five have been
undergoing full or part-privatization during the past years.
In this section, Tejarat Bank’s market position, in terms of resources and market share, is reviewed
in comparison to its peer group.
Performance indicators
The following table shows the standing of Tejarat Bank among the top five commercial banks, in
terms of the number of employees and branches, resources, expenditure and liabilities for the past
two financial years. As could be seen from the data provided, the standing of the bank in 2010-11
has improved in most areas, in comparison with 2009-10.
Figures in IRR billion
Time period
Description
Private
resources (IRR)
Net private
utilization
L/C
commitments
L/G
commitments
11,987
1,400,960
1,106,788
301,338
228,333
Tejarat Bank
21,135
1,951
242,064
196,450
74,852
85,209
Share of total
15 %
16 %
17.3 %
18 %
25 %
37.3 %
4
3
4
4
2
1
133,724
11,889
1,699,960
1,361,514
337,361
274,667
Tejarat Bank
20,913
1,898
302,296
239,395
103,382
101,354
Share of total
15.6%
16%
17.8 %
17.6 %
30.6 %
36.9 %
4
3
4
4
1
1
Rank
Five banks’ total
February 20
to March
20, 2011
Number of
branches
137,645
Five banks’ total
February 20
to March
20, 2010
Number of
employees
Rank
In terms of letters of credit, the bank has enjoyed significant growth of 38 percent in 2010-11,
resulting in a leading market share of 31 percent, up from second position in 2009-10.
As for letters of guarantee, the bank has been able to maintain its number one position, with a
market share of 37 percent.
54
Total deposits
The following tables shows a breakdown of IRR deposits for the various types of deposit accounts
offered by the bank, in comparison with the other four commercial banks.
Figures in IRR billion
Time section
February 20
to March
20, 2010
February 20
to March
20, 2011
Growth rate
Description
Profit-free
qardh-ulShort-term time Long-term time
Other deposits
current accounts hassanah savings
deposits
deposits
Total
286,012
98,674
420,928
457,408
137,938
1,400,960
Tejarat Bank
62,999
16,635
68,013
71,490
22,927
242,064
Share of total
22 %
17 %
16 %
16 %
17 %
17.3 %
358,635
132,644
467,567
591,449
149,664
1,699,960
Tejarat Bank
72,862
20,053
75,564
108,860
24,956
302,296
Share of total
20 %
15 %
16 %
18 %
17 %
18 %
Five banks’ total
25.4
34.4
11.1
29.3
8.5
21.3
Tejarat Bank
15.7
20.5
11.1
52.3
8.8
24.9
Five banks’ total
Five banks’ total
In 2010-11, the growth in total deposits for the bank has been 0.5 percent, leading to a market
share of 24.9 percent. Considering the market average of 21.3 percent, this denotes a positive
standing for the bank in terms of deposits among its peer group.
The breakdown of the bank’s total deposits into the two categories profit-free (qardh-ul-hassanah)
and profit-bearing is shown in the following diagram. The bank’s total profit-free deposits equal 39
percent of total deposits, which is 2 percent above the market average of 37 percent.
55
Breakdown of profit-bearing and profit-free deposits
Percent
80
61%
60
39%
40
63%
37%
20
0
Profit-free deposits
Tejarat Bank
Profit-bearing deposits
Five banks’ total
Balance sheet summary
The following table provides a summary of the bank’s balance sheet items over the last three
years:
Percent
Description
56
2010-11
2009-10
2008-09
Description
2010-11
2009-10
2008-09
Cash and due from banks
23.3
22.4
24.9
Due to banks
6.7
6.1
11.3
Granted credit facilities
68.1
69.7
67.0
Deposits
72.6
70.1
63.7
Other accounts receivable
0.5
1.1
0.1
Liabilities for L/C and
term bills of exchange
11.5
10.5
12.1
Participation bonds
1.9
1.9
2.9
Other liabilities and
reserves
3.5
7.5
7.4
Investments and joint
ventures
1.1
0.6
0.6
Shareholders’ equity
5.7
5.8
5.5
Fixed assets
2.7
3.3
3.6
Other assets
2.4
1.0
0.9
Total assets
100
100
100
Total liabilities and
shareholders’ equity
100
100
100
Performance indicators
Total deposits
The following figure shows total deposits (IRR and foreign currency) for the past four financial
years. As can be seen from the figure, total deposits at the end of the financial year 2010-11 reached
IRR 337,703 billion, showing a 25.7 percent increase compared with 2009-10. In comparison
with the country’s liquidity growth rate of 25.2, Tejarat Bank has displayed a good performance in
attracting deposits, particularly in light of a highly competitive market environment.
Total deposits
IRR billion
400/000
337,703
350/000
300/000
268,675
250/000
200/000
187,675
216,428
150/000
100/000
50/000
0
2007-08
2008-09
2009-10
2010-11
The breakdown of deposits (IRR and foreign currency) based on account type and in terms of
profit paid is shown in the following diagram. The total for profit-free deposit and current accounts
equals 45.7 percent and for savings and time deposit accounts equals 54.3 percent. The higher ratio
for time deposits provides the bank with better resources for granting credit to customers.
Breakdown of deposits in terms of profit paid
Sight deposits
Qardh-ul-hassanah and similar deposits
Short-term time deposits
Long-term time deposits
Other deposits
57
Total credit outstanding
The growth in total credit outstanding over the last four years is shown in the following figure.
This includes new and outstanding credit granted to public and private sector customers. The rate
of growth in outstanding credit for the year 2010-11 stood at 17.6 percent, with the average rate of
growth during the four-year period shown equaling 17.5 percent.
Total credit outstanding
IRR billion
300/000
282,136
250/000
200/000
174,049
197,017
239,829
150/000
100/000
50/000
0
2007-08
2008-09
2009-10
2010-11
Credit facilities granted by Iranian banks are broken down into two main categories, transactional
and participatory. Transactional agreements have a fixed rate of return and fixed maturity and
payments and are usually granted to provide working capital and trade finance. Participatory
agreements on the other hand are profit-sharing contracts where the bank and the customer share
the proceeds. These types of agreements are usually granted for trade and industrial projects and
for providing fixed and working capital to manufacturing units with appropriate profitability.
The following figure shows the breakdown in the proportion of transactional and participatory
credit granted over the past two years. The increase in participatory credit, further to increasing
profitability for the bank, leads to better allocation of resources in society (due to the selection of
financial activities with higher rate of return) and economic growth in the country.
2010-11
2009-10
55%
87,289
45%
70,995
Transactional credit
58
110,386
59%
41%
Participatory credit
77,589
The breakdown of total credit outstanding based on the economic sector at the end of 2010-11
is shown in the following figure. As can be seen from the figure, the main proportion of credit
outstanding (approximately 71.4 percent) has been granted to industry and mining, housing and
construction and agriculture sectors, which represents support of manufacturing and the creation
of employment in the country.
Breakdown of total credit outstanding based on the economic sector
Exports
Commerce and services
Agriculture
Housing and construction
Industry and mining
L/G commitments
Details of letters of guarantee issued (IRR and foreign currency), guarantee deposits and charges
during the past four years are shown in the table below. For the year 2010-11, these three parameters
demonstrated a 27, 16.7 and 10.8 percent increase, respectively. It should be noted that for L/G
commitments, Tejarat Bank holds the number one place among all banks in the country and a 37
percent share among the top five commercial banks.
Figures in IRR billion
Description
2009-10
2008-09
2007-08
114,209
89,954
78,874
61,452
L/G deposits
8,296
7,110
6,791
5,106
L/G commission
1,464
1,322
1,128
903
L/G commitments in foreign
currency and IRR
2010-11
59
Foreign currency and IRR L/G commitments balance
IRR billion
120/000
114,209
100/000
80/000
60/000
78,874
89,954
61,452
40/000
20/000
0
2007-08
2008-09
2009-10
2010-11
L/C commitments
Details of L/C (letters of credit) commitments, including credit outstanding and prepayments
during the past four years are shown in the following table. As can be seen from the table, credit
outstanding at the end of 2010-11 shows a 38 percent increase compared with the previous year,
despite a difficult year for foreign trade and problems due to international sanctions.
Figures in IRR billion
60
Description
2010-11
2009-10
2008-09
2007-08
Customer commitments for L/Cs
103,382
74,852
66,579
72,612
L/C advances
19,516
18,392
2,069
11,308
Customer commitments for L/Cs
IRR billion
110,000
103,382
100,000
90,000
80,000
72,612
70,000
74,852
66,579
60,000
50,000
40,000
2007-08
2008-09
2009-10
2010-11
Total Income
The following table shows the breakdown of total income for the Bank during the past two years.
Total income for the Bank during 2010-11 enjoyed a 21.4 percent increase, rising from IRR 34,756
billion to IRR 42,195 billion.
Figures in IRR million
2010-11
2009-10
Description
Balance
Balance
Changes
%
Profit from credit facilities
26,172,599
22,573,684
15.9
Profit from investments and joint ventures
1,972,840
3,362,828
)41.3(
Total joint income
28,145,439
25,936,512
8.5
Profit and penalty receivable
3,242,459
2,821,739
14.9
Commission income
4,156,186
3,312,515
25.5
Other income
6,651,181
2,685,568
147.7
Total non-joint income
14,049,825
8,819,822
59.3
Total income
42,195,264
34,756,334
21.4
61
The breakdown of total income based on income type for 2010-11 is shown in the figure below.
Breakdown of total income based on income type
Profit from credit facilities
Profit from investments and joint ventures
Profit and penalty received
Commission income
Other income
The following figures show the breakdown of income for the Bank for the past four years in
terms of joint and non-joint income. Total joint and non-joint income for 2010-11 was equal to IRR
19,774 billion, showing an increase of approximately 15.8 percent compared with the previous
year. Of this, 28.9 percent was attributed to joint income and 71.1 percent to non-joint income. An
increase in the bank’s share of non-joint income from total income from 51.7 percent in 2009-10
to 71.1 percent in 2010-11 shows greater stability in the composition of the Bank’s income.
Total income
IRR billion
25,000
19,774
20,000
15,000
13,414
10,000
7,174
5,000
6,240
15,702
8,640
7,062
17,074
14,050
8,820
8,254
5,724
0
2007-08
Joint income h
62
2008-09
Non-joint income
2009-10
2010-11
Total income
Breakdown of joint and non-joint income
Joint income
Non-joint income
Profit paid to depositors
The trend of profit paid out to depositors, representing their share of the bank’s profit income, is
shown in the following figure for the past four years. As can be seen from the figure, profit paid out
in 2010-11 shows a 26.8 percent increase compared with the previous year. This rate, compared
with the 30 percent increase in time deposits shows an improvement in the expense composition
of time deposits and a reduction in costs (the cost of money).
Profit paid to depositors
IRR billion
22,421
20,000
17,683
15,000
10,000
9,428
11,789
5,000
0
2007-08
2008-09
2009-10
2010-11
63
Total expenses
Details of the bank’s expenses are shown in the following table for the past four years. As can be
seen from the information provided, the decreasing trend of non-performing credit over the given
period is due to an improvement in classes of credit and the quality of the bank’s assets, resulting
in a reduction in the share of this type of expense and the increase of other expense items.
Figures in IRR billion
2010-11
2009-10
2008-09
2007-08
Description
Amount
Percentage
Amount
Percentage
Amount
Percentage
Amount
Percentage
Doubtful debt expenses
2,540
18.3
2,737
21.7
3,834
32.5
4,056
39.5
165
1.2
217
1.7
208
1.8
210
2.0
Personnel expenses
7,720
55.6
5,474
43.4
4,098
34.8
3,346
32.7
Overhead expenses
1,808
13.0
1,524
12.1
1,264
10.7
903
8.8
Other expenses
1,662
12.0
2,659
21.1
2,383
20.2
1,746
17.0
Total
13,894
100
12,611
100
11,787
100
10,261
100
Depreciation expense
Net profit
The following figure shows the trend of net profit during the past four years. As net profit is
demonstrative of an organization’s performance during a specified period, it is considered one of
the most important performance indicators. The rising trend of this indicator during the past years
indicates favorable and improving performance. It should be noted that the higher value for net
profit during 2007-08, compared with the following year is due to an unusual increase in nonoperational profit due to the sale of excess properties held by the bank during the financial year.
64
Net profit trend
IRR billion
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
4,479
3,153
2,785
2007-08
2008-09
3,354
2009-10
2010-11
Key ratios
Return on shareholders’ equity
The following figure shows return on shareholders’ equity during the past four years. As can be
seen from the figure, this indicator has increased from 21.9 percent in 2009-10 to 24.2 percent
in 2010-11, indicative of better management of assets, liabilities and general performance of the
Bank.
Figures in IRR million
Description
2010-11
2009-10
2008-09
2007-08
Profit before tax
5,880,162
4,462,516
3,915,251
3,152,804
Average shareholders’ equity
24,283,442
20,357,689
17,856,483
15,047,683
24.2
21.9
21.9
21.0
Return on shareholders’ equity (%)
65
Return on shareholders' equity
Percent
26
25
24.2
24
23
22
21.9
21.9
21.0
21
20
19
2007-08
2008-09
2009-10
2010-11
Return on assets
Return on assets for the past four years is shown in the following figure. This ratio, which is
representative of the rate of return in profit for every IRR 100 in assets is one of most important
ratios for evaluating performance. The growing trend for this ratio during the given period is
indicative of optimum management of assets.
Figures in IRR million
Description
2010-11
2009-10
2008-09
2007-08
Profit before tax
5,880,162
4,462,516
3,915,251
3,152,804
424,399,378
361,566,201
318,783,570
269,975,356
1.39
1.23
1.23
1.17
Total assets
Return on assets (%)
66
Return on assets
Percent
1.6
1.5
1.4
1.39
1.3
1.23
1.2
1.23
1.17
1.1
1.0
2007-08
2008-09
2009-10
2010-11
Profit margin
The rates for return on credit facilities, cost of money and profit margin for the past four years
are provided in the following table. As can be seen from the table, profit margin during 2010-11
enjoyed a growth of 18.5 percent in 2010-11, which is due to an 11 percent reduction in the cost
of money.
Figures in %
Description
2010-11
2009-10
2008-09
Rate of return on credit facilities
14.8
15.4
12.2
Cost of money rate
8.4
9.5
8.2
Profit margin rate
6.4
5.9
4
67
2010-11
5.9
2009-10
Percent
6.4
Profit margin
4
2008-09
0
1
2
3
4
5
6
7
Efficiency ratios
The increasing trend in efficiency ratios for branches and employees during the past four years
is shown in the following table. These indicators have enjoyed significant growth in 2010-11,
compared with the previous year, such that the ratio of deposits and credit facilities to average
number of employees (per capita) has risen from 12.7 percent and IRR 11 billion in 2009-10 to 16
percent and IRR 14 billion in 2010-11.
Figures in IRR million
Indicator
Personnel
Branches
2010-11
2009-10
2008-09
2007-08
Deposits per capita
16,059
12,652
10,162
9,037
Credit facilities per capita
12,984
11,085
9,005
8,296
2,007
1,637
1,291
1,100
Net profit per capita
213
158
131
152
Deposits per capita
177,739
137,571
108,977
95,412
Credit facilities per capita
143,708
120,537
96,570
87,588
Income per capita
22,208
17,796
13,842
11,613
Net profit per capita
2,357
1,717
1,402
1,603
Income per capita
In addition, the rate of profit per capita has grown by 35 percent in 2010-11 to IRR 213 million
from IRR 158 million in 2009-10.
Branch efficiency indicators per capita have also enjoyed considerable growth in 2010-11.
68
Operational control indicators
Fixed assets to total assets
The following diagram shows the trend in the ratio of fixed assets to total assets during the past
four years. This ratio is representative of the proportion of the bank’s assets which have been taken
out of the bank’s operations, toward supporting the bank’s fixed assets. Due planning carried out
in line with control procedures has been effective in reducing this ratio during the given period.
Figures in IRR billion
Description
2010-11
2009-10
2008-09
2007-08
Fixed assets
12,873
12,605
12,299
11,932
Total assets
465,312
383,487
339,646
297,921
2.77
3.29
3.62
4.01
Fixed to total assets (%)
Fixed assets to total assets
Percent
7
6
5
4.01
4
3.62
3.29
3
2.77
2
1
0
2007-08
2008-09
2009-10
2010-11
69
Capital adequacy ratio
Capital adequacy ratios for the Bank over the past three years have been provided in the following
figure. In accordance with guidelines set by the CBI, this ratio needs to be maintained at a minimum
of 8 percent. At the end of 2010-11 capital adequacy ratio stood at 8.3 percent for Tejarat Bank.
Capital adequacy ratio
Percent
10
8
9.2
8.3
2009-10
2010-11
7.6
6
4
2
0
2008-09
Open currency position
The following diagram shows the status of the bank’s open currency position during the past
three years. The sudden increase in this indicator in 2010-11 is due to the canceling out of the
bank’s claims from the CBI against its debt due to credit received from the country’s foreign
currency reserve fund during the year. It should be noted that plans to control the open currency
position have been underway, with the decrease from the maximum shown in the figure to IRR
9,393 billion in September 2011 being indicative of the bank’s success in this regard to date.
921
2010-11
2,265
2009-10
2008-09
0
70
3,000
6,000
9,000
12,000
15,000
18,000
IRR billion
16,532
Open currency position
71
72