Annual Report 2014 - Habib Bank AG Zurich

Transcription

Habib Bank AG Zurich
Annual Report 2014
Table of contents
Group key figures
Letter from the Chairman and the President
Habib Bank AG Zurich - the Group
Group organisation structure
Directors' report
Group risk principles
2
4
5
6
8
12
Group Financial statements
Balance sheet
Income statement
Cashflow statement
Statement of changes in equity
Summary of significant accounting principles
Notes to annual consolidated financial statements
Report of the Statutory Auditor
16
18
20
22
24
28
52
Bank 54
56
58
59
71
72
Financial statements
Balance sheet
Income statement
Notes to annual financial statements
Appropriation of profit / coverage of losses / other distributions
Addresses
73
1
Group key figures*
31.12.10
31.12.11
31.12.12
31.12.13
31.12.14
8'032
8'354
7'850
7'772
9'804
827
880
877
873
987
Advances
2'892
2'645
2'351
2'871
3'408
Deposits
6'197
6'439
6'289
6'398
8'018
Total income 2
258.6
305.9
286.4
253.9
418.9
Operating expenses
141.6
151.6
159.9
175.1
178.3
Operating result
54.3
107.2
69.9
55.1
207.8
Group profit / loss
29.1
61.7
40.4
28.6
77.6
in CHF million
Balance sheet
Total assets
Shareholder's equity
1
Income statement
10000
8000
Total assets, in CHF million
Shareholder's equity 1, in CHF million
9'804
987
8'354
8'032
7'850
7'772
1000
827
880
877
873
Advances, in CHF million
3500
3000
800
3'408
2'892
2'645
2500
2'871
Deposits, in CHF million
10000
8000
2'351
6000
600
2000
6000
4000
400
1500
4000
2000
0
1000
200
2010
2011
2012
2013
2014
0
Total income 2, in CHF million
500
418.9
400
305.9
300 258.6
286.4
2011
2012
2013
2014
Operating expenses, in CHF million
200
150
141.6
151.6
159.9
175.1
178.3
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
6'398
0
2010
2011
2012
2013
77.6
80
70
61.7
40
69.9
30
55.1
40.4
29.1
28.6
20
10
2010
2011
2012
2013
2014
0
2010
2011
* Effective 1 January 2013, the Group adopted the new accounting principles in accordance of FINMA Circular 2015/1 "Accounting - Banks"
1
2
2
Excl. minority interest in equity and in Group profit / loss
Including "Gross result from interest operations", "Result from comission business and services", "Result from trading activities and the fair value option"
and "Other result from ordinary activities"
GROUP
2014
Group profit / loss, in CHF million
50
107.2
50
0
6'289
60
54.3
50
2010
2014
207.8
100
0
2013
250
100
100
2012
Operating result, in CHF million
150
253.9
2011
200
200
0
0
6'197
2000
500
2010
8'018
6'439
2012
2013
2014
31.12.10
31.12.11
31.12.12
31.12.13
31.12.14
Key figures and ratios
177
197
219
253
278
Number of employees
Number of offices
3'289
3'308
3'823
4'140
4'456
Return on equity (ROE) (%) 1
3.1%
6.4%
4.0%
2.8%
7.0%
11.7%
12.0%
12.7%
13.1%
12.3%
54.8%
49.6%
55.8%
69.0%
42.6%
16.1%
19.4%
21.8%
21.0%
19.5%
Equity ratio (%)
Cost / income ratio (%)
Total capital ratio (%)
2
Number of offices
300
253
250
200
177
197
278
219
Number of employees
5000
4000
3'823
3'289
4'140
4'456
6
3'308
5
2000
4 3.1%
3
1000
0
0
2011
2012
2013
2014
12
11.7%
12.0%
12.7%
13.1%
12.3%
2.8%
1
2010
2011
2012
2013
2014
0
2010
2011
Cost / income ratio (%)
80
50
49.6%
42.6%
2013
21.8%
21.0%
2012
2013
19.4%
20
55.8%
2012
2014
Total capital ratio (%)2
25
69.0%
70
60 54.8%
9
4.0%
2
Equity ratio (%)
15
7.0%
6.4%
3000
50
2010
8
7
150
100
Return on equity (ROE) (%) 1
19.5%
16.1%
15
40
6
20
3
0
10
30
5
10
2010
2011
2012
2013
2014
0
2010
2011
2012
2013
2014
1
Group profit / loss as percentage of equity of average at year end 2013 and 2014
2
Since 1 January 2013, capital adequacy has been determined in accordance with the standards in the "Basel III Accord"
0
2010
2011
GROUP
2014
3
Letter from the Chairman and the President
It is our pleasure to present you with the 47th annual report of Habib Bank AG Zurich based on the new
accounting principles issued by the Swiss Financial Market Supervisory Authority.
By the grace of God, Habib Bank AG Zurich delivered good results for 2014 while maintaining a strong
capital base and high liquidity. Our Group maintained its conservative lending policy, with a high degree of
discipline. This policy is characterised by a high percentage of fully secured and relatively short-term lending.
As a result, advances to clients decreased to 43% of deposits received from clients. The remaining liquidity
was placed in the interbank market or invested in investment-grade bonds.
During 2014, Ray Barnes joined our Board of Directors as a new member. Ray Barnes comes from a rich
background of banking.
The Board of Directors has proposed that out of the profit for the year ended 31 December 2014 and a carryover profit from last year adding up to a distributable amount of CHF 41'088'790.– the following appropriations should be made:
- Allocation to statutory retained earnings reserves
- Allocation to voluntary retained earnings reserves
- Distribution of dividend from distributable profit - Profit and loss carried forward
CHF CHF CHF CHF 2'000'000.–
21'000'000.–
18'000'000.–
88'790.–
We would like to thank our clients for their loyalty to Habib Bank AG Zurich and for the trust they placed in
us in 2014. We also wish to thank all our employees for their ongoing commitment and contribution to the
success of Habib Bank AG Zurich.
Dr. Andreas Länzlinger
Chairman of the Board of Directors
4
Muhammad H. Habib
President
Habib Bank AG Zurich - the Group
Habib Bank AG Zurich (hereinafter "the Bank") was incorporated in Switzerland in 1967 and is privately
owned.
The Habib family has been actively involved in banking for over 170 years. Two family members, Mr.
Muhammad H. Habib, President, and Mr. Mohamedali R. Habib, Joint President, are members of the General
Management. Other members of the family are currently working their way up through the management grades.
The traditional values of the Habib family are: trust, integrity, respect, service and commitment.
The Bank has its Head Office and operation in Zurich and branches in the United Kingdom, the United Arab
Emirates and Kenya. The Bank holds four wholly owned subsidiaries: Habib Canadian Bank, Canada, HBZ
Bank Limited, South Africa, Habib European Bank Ltd., Isle of Man and HBZ Services FZ-LLC, United Arab
Emirates. The Bank holds a 51% ownership interest in Habib Metropolitan Bank Ltd., Pakistan and HBZ
Finance Ltd., Hong Kong (altogether "the Group").
The Bank and the Group are subject to the consolidated supervision of the Swiss Financial Market Supervisory
Authority (FINMA). The Group has a strong capital base and liquidity ratios above industry standards and
benefits from the political and economic stability of having its Head Office in Switzerland. Furthermore, the
Group has close co-operation with the various regulatory bodies and central banks in the countries in which
the Group operates.
The Group places a high emphasis on personal service in the countries it operates. The branches and subsidiaries cover nine countries spread over four continents. At the end of 2014, 4'456 employees together with
278 offices are strategically well placed to provide maximum assistance to our local and international clientele. The Group is active in commercial banking, retail banking, trade finance business, wealth management
and Islamic banking.
5
Group organisation structure
In 2014, the Group adapted its organisation structure to best support the achievement of the objectives set in the
Group Strategic Plan 2013-2020. The new structure supports the focus on clients and the development of the client
base and the business volumes. Moreover, it supports operational excellence in all countries and the centralised
operations.
Board of Directors
The Board of Directors of the Bank is made up of non-executive and independent directors, all of whom have
extensive experience in their respective field of competence.
Name
Born
Citizenship
Board of Directors
Audit Committee
Dr. Andreas Länzlinger
1959
Swiss
Chairman
Dr. Ulrich Grete
1942
Swiss
Vice Chairman
Ray Barnes*
1945
British
Member
Dr. Marco Duss
1943
Swiss
Member
Chairman
Urs Seiler
1949
Swiss
Member
Member
Ursula Suter
1954
Swiss
Member
Risk & Control
Committee
Member
Member
Member
Chairwoman
* from 28 April 2014
General Management
General Management consists of two members of the Habib family and two non-family members. The majority of
the members of General Management have residency in Switzerland.
Name
Born
Citizenship
Function
Muhammad H. Habib
1959
Swiss
President and Head of Markets Overseas
Mohamedali R. Habib
1964
Canadian
Joint President and Head of Markets Asia & Special Services
Shaun Wallis
1955
British
Member of General Management and Head of Global Operations
Walter Mathis
1961
Swiss
Member of General Management and Head of Shared Services
Management of the branch network
Name
Born
Citizenship
Function
Country
Christian Lerch
1959
Swiss
Country Manager
Switzerland
Anjum Iqbal
1952
British
Country Manager
United Kingdom
Arif Lakhani
1945
Pakistani
Country Manager
United Arab Emirates
Mohammad Ali Hussain
1954
Kenyan
Country Manager
Kenya
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GROUP
Management of the subsidiaries
Name
Born
Citizenship
Function
Country
Muslim Hassan
1955
Canadian
Chief Executive Officer
Canada
Zafar Khan
1952
South African
South Africa
Mohammed Jafri
1951
British
Isle of Man
Atif Mufti
1973
Pakistani
United Arab Emirates*
Sirajuddin Aziz
1956
Pakistani
Pakistan
Ikram Quraishi
1948
USA
Hong Kong
Name
Born
Citizenship
Function
Syed Iftikhar Ali
1948
Pakistani
Head of Group Internal Audit
Name
Born
Citizenship
Function
Dr. Pascal Mang
1964
Swiss
Head of Group Legal & Compliance
Ralph Schneider
1964
Swiss
Head of Group Credit
Alfred Merz
1962
Swiss
Head of Group Financial Control
Felix Gasser
1959
Swiss
Head of Group Risk Control
Atif Mufti
1973
Pakistani
Head of Group Operations
Syam Pillai
Haja Alavudeen
1962
1966
Indian
Indian
Heads of Group Information Technology
Sibel Sanus
1954
Turkish
Head of Group Financial Institutions
Dr. Sitwat Husain
1964
Pakistani
Head of Group Human Resources
Adnan Fasih
1967
Pakistani
Head of Group Islamic Banking
* HBZ Services FZ-LLC
Group Internal Audit
Group Support Functions
GROUP
7
Directors' report
Economic environment
Economic uncertainty remained throughout 2014.
The expectations of a robust economic rebound did
not materialise and global growth picked up only
modestly compared to the previous year. A number
of headwinds limited activity as both developed and
emerging market economies continued to grapple
with the aftermath of the Global Financial Crisis.
Two developments in particular characterised the
global economic context in 2014: First, the rebound
of the US dollar in anticipation of higher US interest
rates; second, the sharp decline of the oil price from
mid-year onwards as global demand trailed supplies.
Among the large developed economies, the US
economy continued to be the growth leader. 2014
marked the fifth year of economic expansion for the
US despite harsh weather conditions earlier in the
year, which saw growth contracting in the first quarter. Strong final demand, a pick-up in capital spending and the ongoing recovery of housing activity
sustained broad-based economic and employment
growth. The drag from tighter fiscal policy eased,
while the US Federal Reserve kept its policy rate
unchanged, close to zero. Canadian growth held up
well as a result of strong consumer spending despite
gathering headwinds from the lower oil price. The
UK economy surprised positively. However, the
much expected first rate hike by the Bank of England
was postponed as inflationary pressures subsided
and the outlook for the eurozone, UK's most important trading partner, remained bleak. The eurozone
disappointed once again. Unsolved structural issues,
such as rigid labour markets but also unsustainable
high levels of public debt in many countries, all
but choked off the incipient recovery. Inflation also
rolled over creating the risk for the eurozone to fall
back into deflation. In this context, the European
Central Bank increased its monetary stimulus by
cutting interest rates, introducing negative deposit
rates and launching a new programme for purchasing assets. The European Central Bank's stress test
and asset quality review showed that many eurozone
banks had made significant progress in de-risking
8
GROUP
their balance sheets and shoring-up their capital.
Despite weakness among its main European trading
partners, Switzerland performed well in 2014 with
growth lifted by private consumption and exports to
other markets.
Despite weakness in the property and external sectors, the Chinese economy maintained a real growth
rate of some 7%. Official interventions were largely
limited to smoothing out volatility in the interbank
market and industry-specific weaknesses. Growth
in Hong Kong slowed on weaker goods and service
exports. Other emerging markets struggled even
more. Brazil suffered from delayed structural reforms
and a drop of business confidence and Russia came
under pressure when Western governments adopted
sanctions to counter the country's annexation of
Crimea. The country was also hit by the steep fall
in oil price, which also affected the Middle East.
The United Arab Emirates, however, continued to
benefit from its regional safe-haven status and its
property markets sustained its remarkable recovery
for another year. South African growth was hampered by mining strikes and numerous bottlenecks.
Weak commodity prices represented another major
headwind. Kenya's economy experienced decent
growth as the Central Bank of Kenya held the
policy rate stable. Pakistan weathered another challenging year fairly successfully. Although the prolonged political stand-off during the late summer
did affect activity negatively, the economy still
managed to grow at a decent pace. Inflation continued to decline, which allowed the State Bank of
Pakistan to cut the discount rate late in the year.
The International Monetary Fund approved further
disbursements under its current programme, which
helped to strengthen the external funding position.
Banking sector
The business environment for the banking industry
continued to be dominated by extremely low interest rates in the developed world. Short-term rates
remained anchored by highly accommodative global
monetary policy and remained close to their historical lows. Against expectations, US capital market
rates tended lower despite the end of asset purchases by the US Federal Reserve. In the eurozone,
the introduction of negative deposit rates by the
European Central Bank in June depressed rates even
further. To counter sustained upward pressure on
the Swiss franc, the Swiss National Bank followed
suit in December and announced the introduction of
negative interest rates and to end the EUR/CHF
floor of 1.20 in January 2015. Among emerging
markets, central banks with an easing bias prevailed
with the notable exception of South Africa.
The development of credit demand, on the other
hand, varied greatly across economies and regions.
While in the US credit growth expanded at a healthy
pace, the eurozone experienced another year of
credit contraction as the economy as a whole continued to deleverage, albeit at a slower pace. With
European banks shrinking their balance sheets
further, more financing activity moved to the capital markets and non-traditional lenders in Europe.
Credit and loan growth in emerging markets stayed
well ahead of the developed world but progressed at
different rates depending on the region.
The private banking and wealth management business represented a strong franchise for many banks.
With asset prices rising on average, global wealth
accumulation continued unabated. The fastest
growth came once again from emerging markets, in
particular Asia.
The global banking sector remained the focus of
official regulators. Meeting regulatory requirements,
be it in terms of capital, compliance or investor protection once again tied up significant financial and
human resources and exerted downward pressure
on operating margins. Moreover, record fines hit
several global banking institutions for alleged past
wrong doings in various business activities.
Operational performance and outlook
General comments
2014 was a good year for the Group. The operating
result reached CHF 207.8 million, which represents
an increase of CHF 152.7 million over 2013.
The after-tax return on equity was at 7.0% in 2014
compared to 2.8% in 2013.
The Group decided to apply the new regulatory
requirements (FINMA Circular 2015/1 "Accounting
- Banks"), coming into force beginning 2015, to
the 2014 financial statements. This has required a
restatement of the 2013 figures.
Income statement
The Group recorded a profit of CHF 77.6 million in
2014, which represents an increase of CHF 49 million against 2013.
"Gross result from interest operations" amounted to
CHF 224.1 million, which represents an increase
of CHF 39.4 million against the previous year. This
development was mainly due to an increase of the
balance sheet items "Amounts due in respect of customer deposits", "Amounts due from customers" and
"Other financial instruments at fair value".
The "Subtotal result from commissions business and
services" amounted to CHF 75.6 million, which represents an increase of CHF 7.6 Million against 2013.
"Result from trading activities and the fair value
option" amounted CHF 104.5 million against a negative figure of CHF 2.1 million for the previous year.
That difference mainly comes from two facts. First,
the application of new options available within the
FINMA Circular 2015/1 "Accounting - Banks", generated a revaluation of the financial instruments with
fair value option of CHF 54.1 million. Second, the
adopted consolidation policy resulted in an income
GROUP
9
amounting to CHF 29.4 million deriving from the
translation of financial statements of branches.
"Subtotal operating expenses" increased by CHF 3.2
million to CHF 178.3 million compared to 2013.
"Personnel expenses" decreased by CHF 0.5 million
compared to 2013 to CHF 121.3 million. The main reason for the slight decrease was the re-positioning and
subsequent cost savings of the Group's UK operations.
The average number of employees during 2014 of
the Group was 4'298 compared to 3'982 during 2013.
"General and administrative expenses" amounted to
CHF 57.0 million, which represents an increase of
CHF 3.7 million against 2013, mainly due to higher
office space expenses and other operating expenses
driven by the Group's branch expansion strategy.
"Changes in reserves for general banking risks"
amounted to CHF 76.6 million against CHF 5.4
million for the previous year. The Group follows a
prudent reserve policy in order to face uncertainty
due to the strong Swiss Franc and activities in emerging countries.
The increase of "Taxes", from CHF 19.1 million in
2013 up to CHF 56.2 million in 2014, was driven by
the substantial improvement of the Group's profit.
Due to a strict cost control and increased income,
the Group's cost / income ratio improved from 69%
to 42.6%.
Balance sheet
The balance sheet reached CHF 9'803.5 million, i.e.
an increase of CHF 2'031.6 million compared to
2013. This is mainly due to the increased focus on
deposit mobilisation.
"Liquid assets" amounted to CHF 941.0 million
against CHF 853.3 million for 2013, which represents an increase of CHF 87.7 million.
10
GROUP
"Advances" (i.e. "Amounts due from customers"
and "Mortgage loans") reached CHF 3'408.2 million
against CHF 2'871.3 million in 2013, i.e. an increase
of CHF 536.9 million.
"Other financial instruments at fair value" and
"Financial investments" amounted to CHF 3'081.8
million. The increase against 2013 is CHF 1'119.3
million. The Group invested a large part of deposited
funds in local government papers. The general interest rate decrease provided substantial revaluation
profits on these instruments.
"Amounts due in respect of customer deposits"
reached CHF 8'017.8 million against CHF 6'397.6
million for the previous year. All countries contributed to the increase of CHF 1'620.2 million.
Capital and liquidity
The Group has a strong capital base as well as a high
liquidity ratio.
The capital adequacy ratios stand at Bank level at
24.4%, and at Group level at 19.5%, and the level
of liquidity coverage ratio amounts at Bank level to
272% and at Group level to 303%.
Both significantly exceed the regulatory requirements.
Operations
In late 2013, we completed a new seven-year Group
Strategic Plan 2013-2020, which was approved by the
Board of Directors in early 2014. The Plan calls for
three phases, the first of which covers 2014 / 2015 and
involves a substantial programme of IT, operational
and business projects. These projects aim at improving operational efficiency, at fostering consistent
systems, processes, products and services, at improving regulatory compliance and at refining corporate
governance and risk. All this has the intent of increasing consistency across the Group and providing a
stable, efficient and focused platform for growth for
the remainder of the Group Strategic Plan.
Significant improvements were realised concerning
the Group's proprietary banking system, Master
hPLUS, both from a functional and technical and
organisational point of view. From a functional point
of view, we worked on two plans, the first focusing on client service and the second concentrating
on operational and regulatory issues. Concerning
our clients, we have implemented a better suite of
products and services (such as e-banking, SMS
mobile banking, cards products and various lending
products), and concerning operational and regulatory
issues we have greatly improved our processes and
efficiency, as well as enhancing risk controls and
reporting capabilities to local regulators.
tion will continue strengthening its offer to small and
medium enterprises. The impact of negative interest
rates will have a limited impact on the Group's overall result. Finally, in 2015 we will continue to roll out
the newly established "SIRAT" product suite in our
Islamic branches.
From a technical and organisational point of view, in
2014 Master hPLUS has been rolled out as a single
core product in eight out of nine countries.
Finally, during 2014 we have reviewed and substantially improved our Group governance documents
(policies, directives and guidelines), which led to a
strengthening of our Group Corporate Governance
and to a more focused operation.
Outlook
Thanks to our unique place in the market and international presence, the previously achieved organisational and technical objectives, and a sound financial
basis, we are well positioned to achieve the planned
increase of our business. We plan to increase our
deposit base in all countries with further expansion
of our branch network of our subsidiaries in Canada,
South Africa and Pakistan.
Alongside continued business growth, the preparation to transform our UK operations into a subsidiary has been completed and we are awaiting the
final regulators' approval in 2015. In March 2015,
our Hong Kong deposit taking company received
the regulator's authorisation to act as a Restricted
License Bank, which will enable us to expand our
product suite and brand image in the region and to
increase our business with China. The Swiss opera-
GROUP
11
Group risk principles
Risk & Control Framework
The Risk & Control Framework of the Group is the
cornerstone for risk management and control. The Risk
& Control Framework provides the basis to effectively
identify, assess and manage risks within the Group.
Furthermore, it defines which body has the overall
responsibility for a particular risk class, who manages
it and who performs independent risk control.
Risk organisation
At the level of the Board of Directors, the responsibilities are the following:
• the Board of Directors is responsible for the
strategic direction, supervision and control of the
Group, and for defining our overall risk tolerance
by means of a risk appetite statement and overall
risk limits;
• the Risk & Control Committee is responsible
for assisting the Board of Directors in fulfilling its
oversight responsibilities by providing guidance
regarding risk governance and the development of
the risk profile, including the regular review of
major risk exposures and overall risk limits; and
• the Audit Committee is responsible for assisting
the Board of Directors in fulfilling its oversight
responsibilities by monitoring General Manage ment's approach with respect to financial reporting,
internal controls and accounting. Additionally,
the Audit Committee is responsible for monitoring
the independence and the performance of the
Group Internal Audit and external auditors.
At the operational level, the Group operates with
a three-line of defence model whereby business
functions, risk management oversight and assurance
roles are performed by functions independent of one
another.
Furthermore, a clear distinction is made between
"risk owners", "risk managers" and "risk controllers":
• Risk owners bear the overall supervision and
responsibility for the management of specific risk
classes or risk types;
12
GROUP
• Risk managers focus on the monitoring and proactive
management of risk. They initiate risk management
measures and can change the risk profile;
• Risk controllers independently monitor and assess
risk as well as highlight deviations from target
risk parameters and non-compliance with policies.
Risk management principles
The following general principles support the Group's
effort to maintain an appropriate balance between
risk and return:
• We protect the financial strength of the Group by
controlling our risk exposures and avoiding potential
risk concentrations at individual exposure levels, at
specific portfolio levels and at an aggregate Group wide level across all risk types;
• We protect our reputation through a sound risk
culture characterised by a holistic and integrated
view of risk, performance and reward, and through
full compliance with our standards and principles;
• We systematically identify, classify and measure
risks applying best practice;
• We ensure management accountability, whereby
Business Line Management owns all risks assumed
throughout the Group and is responsible for the
continuous and active management of all risk expo sures to ensure that risk and return are balanced;
• We set up independent risk control functions or
units, which monitor effectiveness of risk manage ment and oversee risk-taking activities;
• We disclose risks to the Board of Directors, regu lators and other stakeholders in a comprehensive
and transparent manner.
Internal controls
Internal controls are a set of instruments used to
monitor and control operational and other business
risks. This process involves evaluating reports from
the internal and external auditors on an ongoing
basis, assessing risks and adjusting business processes and the internal control system. The organisational units responsible for internal controls therefore
work closely with other organisational units within
the Group. We see risk management as an on-going,
multi-level and integral process within the Group.
Credit risk
Credit risk arises from the possibility that a counterparty, i.e. private clients, corporate clients, financial
institution and issuer or sovereign does not fulfil its
contractual obligations or the credit quality deteriorates. In order to manage potential default risk and
other prevailing credit risks most effectively, it is
divided into the following risk types: client credit
risk, credit issuer risk, credit counterparty risk, country risk (including cross-border / transfer risk), settlement risk and credit concentration risk.
The Group manages its credit risk within a conservative framework by evaluating the creditworthiness
of the borrowing counterparties, setting appropriate
credit limits and obtaining collateral as deemed necessary. For each collateral type a minimum haircut
is defined in order to account for the volatility in
market values according to the nature and liquidity
of the collateral. Around 35% of the Group's credit
exposure is secured by property and only 18% is
unsecured.
The Group's credit risk appetite is defined and monitored through a comprehensive system of credit limits.
The Group has its own rating system for corporate
clients. Each credit is assessed as to the borrower's
credit worthiness, collateral coverage and collateral
quality requirements, as well as the underlying transaction rationale, business potential and any additional risk mitigations. Personal credits are usually
only granted on a fully collateralised basis. Collateral
coverage is monitored on a regular basis and according to the prevailing market conditions.
Adequate and clear segregation of duties is established
among the various organisational units involved in
the acquisition of credit business, the analysis and
approval of a credit request, and the subsequent
administration.
Bank counterparties, issuers and sovereigns are analysed according to their financial performance and
their external rating. Over 75% of the credit exposure
to financial institutions is of investment-grade quality and the remaining 25% consists mainly of trade
finance exposure in emerging markets where the
Group is closely related to and monitors the portfolio
with a set of country limits.
As for non-performing loans, the Group is in a comfortable position. After taking the collateral at market
value and the specific provisions into account, the
net unsecured and unprovided position at the end of
December 2014 was only CHF 10.5 million.
Country risks are monitored quarterly and are either
guaranteed with the World Bank (MIGA) or provided for in accordance with the guidelines of the Swiss
Bankers Association using international ratings.
Liquidity risk
The Group applies a prudent approach to liquidity risk management. The Group Asset & Liability
Management Committee oversees liquidity and market risks regularly.
The Group grants advances and loans to clients both
on a short-term basis and with tenors generally up
to five years. Funding is primarily obtained through
deposits, which are mainly at sight, or short-term
deposits. Wholesale funding is not significant and
deposits are well diversified. No single depositor
accounts for more than 5% of the Group's total
deposits. Excess liquidity is held as bank placements
or financial investments. The latter primarily consist
of bond portfolios of sovereign issuers or other issuers of high quality.
The contractual maturities of the Group's financial
assets exceed the contractual maturities of the financial liabilities. However, when determining maturity
gaps, the stickiness of deposits or economic maturities needs to be considered, which significantly
GROUP
13
reduces the contractual gaps. Furthermore, individual clients groups in different countries will not act in
the same way and at the same time.
In general, the Group is exposed to potential larger
depositor outflows and sudden adverse market developments. Therefore, related scenarios have been
analysed as part of the three liquidity stress tests performed throughout the Group. The stress test results
showed that the liquid assets available could absorb
projected outflows in all cases.
The Group maintains a strong liquidity position,
which is further supported by established repo
functionalities. In addition, liquidity coverage ratio
targets have been defined for all operating group
companies.
In addition, branches and subsidiaries have placed
excess liquidity in bank placements or in financial
investments with tenors usually up to three to five
years. While the volume of financial investments
is kept limited, the average duration of the fixed
income portfolios creates interest rate risk exposure
given the absence of long-term wholesale financing.
As for foreign exchange risks, the Group pursues a
risk-averse approach and aims at keeping potential
foreign exchange losses low. The Group neither
speculates on foreign exchange movements nor pursues proprietary foreign exchange trading activities.
The short-term liquidity disposition and liquidity
situation of individual countries are monitored by
the respective Country Treasury functions. In addition, liquidity reserves are held both on Group and
on country level and contingency funding plans are
in place for the Group, all branches and subsidiaries.
Profits earned in the Bank's branches are subject to
exchange rate risk up to their remittance to Habib
Bank AG Zurich, Zurich. These risks are monitored at
the Head Office, and profits hedged as felt appropriate. Capital and reserves held in the branches are also
subject to foreign exchange risk insofar as they are
held in local currencies. Any foreign exchange translation gains or losses on these capital and reserves are
taken to the income statement in the year in which
they occur.
Market risk
Operational risk
The Group is exposed to interest rate risk, foreign
exchange risk and, to a very limited extent, to equities and commodities risk.
Operational risk is defined as the risk of direct or
indirect loss, or damaged reputation, resulting from
inadequate or failed internal processes, from people
or systems, or from external events.
The Group's market risk appetite is defined and
monitored through a comprehensive system of market risk limits. Furthermore, the Group regularly
performs scenarios and stress tests for interest rate
and foreign exchange risks based on prevailing risk
exposures.
The Group is exposed to interest rate risk due to
interest periods set for advances made to clients
exceeding the interest periods for client deposits
taken. To limit interest rate risk, most client advances
are agreed on a three or six month base rate plus a
credit spread.
14
GROUP
The Group makes use of six operational risk management processes, which consist of key risk indicators, change risk assessment, risk self-assessment,
scenario analysis, risk event management and issue
management and action tracking.
Furthermore, three types of risk mitigation are used
and comprise control enhancement, business continuity management and other mitigation measures
(risk avoidance, risk reduction, risk transfer).
To proactively address risks related to potential business disruptions, business impact analyses, crisis
management teams and business continuity plans
have been established for the Group as well as all
branches and subsidiaries.
Legal and compliance risk
Legal risk is the risk that the Group will conduct
activities or carries out transactions in which it is
inadequately covered or is left exposed to potential
litigation. It is the possibility that a failure to meet
legal requirements may result in unenforceable contracts, litigation, fines, penalties or claims for damages or other adverse consequences.
Compliance risk is the risk of legal or regulatory
sanctions, material financial loss, or loss to the reputation the Group may suffer as a result of its failure
to comply with laws, regulations, rules, related selfregulatory organisation standards, and codes of conduct applicable to its banking activities.
Measures aimed at minimising legal and compliance risks include raising staff awareness of legal
and regulatory issues through training, and internal
directives and controls to ensure adherence to the
legal and regulatory requirements within which the
Group operates.
The Group has established a Code of Conduct and
promotes transparency and ethical behaviour.
Systemic risk
Systemic risk can be defined as a risk of disruption
to financial services that is caused by an impairment
of all or parts of the financial system and has the
potential to have serious negative consequences for
the real economy.
The Group analyses on a regular basis factors that
could have a destabilising impact on the financial
system, which include amongst others fragile economic development, continued financial market
uncertainty, numerous political crises, increased exposure to cyber attacks as well as the ever-increasing
extent and complexity of regulations. Based on this
analysis, the Group implements mitigating measures
wherever possible.
Risk assessment
The Board of Directors conducted a risk assessment
of major risk exposures of the Bank and the Group
in 2014.
In line with the development of the legal and regulatory environment of the industry, the Group has
consistently invested in personnel and technical
resources to ensure adequate compliance coverage.
A comprehensive framework of policies and regular
specialised training sessions ensure that staff receive
appropriate ongoing education and training in this
area.
Reputation risk
Reputation risk is the risk that illegal, unethical or
inappropriate behaviour by the Group itself, employees or clients or representatives of the Group may
damage Habib Bank AG Zurich's reputation, leading
potentially to a loss of business, fines or penalties.
GROUP
15
Balance sheet at 31 December 2014 (before appropriation)
Note
31.12.14
31.12.13
941'016'888
853'327'819
2'061'059'726
1'857'781'349
Assets
Liquid assets
Amounts due from banks
Amounts due from securities financing transactions
1
18'767'086
Amounts due from customers
2
2'972'811'140
2'683'737'425
Mortgage loans
2
435'419'767
187'616'972
Trading portfolio assets
3
707'381
439'618
12'161'635
Positive replacement values of derivative financial instruments
4
20'615'774
Other financial instruments at fair value
3
1'956'773'047
1'078'169'000
Financial investments
6/7
1'125'111'322
884'383'787
123'278'850
82'606'132
127'017
Accrued income and prepaid expenses
Non-consolidated participations
9
87'823
Tangible fixed assets
10
90'629'110
79'037'342
Intangible assets
11
5'140'175
6'853'565
Other assets
12
Total assets
16
GROUP
52'069'330
45'633'074
9'803'487'419
7'771'874'735
31.12.14
31.12.13
370'241'284
240'513'918
8'017'828'492
6'397'607'689
21'637'974
11'746'824
128'954'146
76'651'420
12
35'115'000
17'655'342
15
22'967'365
10'315'108
Reserves for general banking risks
555'832'400
502'014'560
Bank's capital
150'000'000
150'000'000
Minority interest in equity
197'351'764
136'204'230
Retained earnings reserves
217'268'504
223'828'435
8'675'204
-23'315'391
77'615'286
28'652'601
Note
Liabilities
Amounts due to banks
Liabilities from securities financing transactions
1
Amounts due in respect of customer deposits
Negative replacement values of derivative financial instruments
4
Accrued expenses and deferred income
Other liabilities
Provisions
Currency translation reserves
Group profit / loss
- of which minority interests group profits / losses
Total liabilities
22'441'639
7'959'206
9'803'487'419
7'771'874'735
1'139'144'136
1'141'327'916
45'712'100
26'877'501
221'270'809
173'000'926
Off balance sheet transactions
Contingent liabilities
22
Irrevocable commitments
Credit commitments
23
GROUP
17
Income statement
2014
2013
232'970'799
260'600'897
205'855'109
76'778'502
Interest expense
-214'685'855
-152'651'656
Gross result from interest operations
224'140'053
184'727'744
-14'599'358
-8'914'382
209'540'695
175'813'362
5'672'159
5'199'741
Commission income from lending activities
28'237'720
30'022'863
Commission income from other services
46'378'704
36'493'102
Note
Result from interest operations
Interest and discount income
Interest and dividend income from trading portfolios
Interest and dividend income from financial investments
Changes in value adjustments for default risks and losses from interest operations
Subtotal net result from interest operations
Result from commission business and services
Commission income from securities trading and investment activities
Commission expense
Subtotal result from commission business and services
Result from trading activities and the fair value option
25
-4'654'917
-3'693'083
75'633'666
68'022'623
104'539'235
-2'110'039
16'975'202
2'584'954
570'146
662'559
Other result from ordinary activities
Result from the disposal of financial investments
Income from participations
Result from real estate
Other ordinary income
Other ordinary expenses
Subtotal other result from ordinary activities
18
GROUP
140'111
-2'808'943
-71'548
14'736'405
3'316'076
2014
2013
-121'335'539
-121'857'921
Note
Operating expenses
Personnel expenses
26
General and administrative expenses
27
Subtotal operating expenses
Value adjustments on participations, depreciation and amortisation on
tangible fixed and intangible assets
Changes to provisions and other value adjustments, and losses
Operating result
Extraordinary income
-56'991'414
-53'256'095
-178'326'953
-175'114'015
-11'759'200
-10'421'582
-6'566'683
-4'367'049
207'797'163
55'139'374
28
2'675'030
700'398
28
-70'624
-2'598'445
-76'619'639
-5'439'000
-56'166'644
-19'149'726
Group profit / loss
77'615'286
28'652'601
- of which minority interests in group profit / loss
22'441'639
7'959'206
Extraordinary expenses
Changes in reserves for general banking risks
Taxes
30
GROUP
19
Cashflow statement
in CHF 000's
Cash flow from operating activities
2014
2013
Source
of funds
Use
of funds
Source
of funds
Use
of funds
271'453
64'095
56'051
72'662
Group profit for the period
77'615
28'653
Change in reserves for general banking risks
76'620
5'439
Value adjustments on participation depreciations and amortisation
on tangible fixed assets and intangible assets
11'759
10'422
Provisions and other value adjustments
6'567
Changes in value adjustments for default risks and losses
14'599
31'990
16'109
8'914
14'788
40'673
52'303
Previous year's dividend
16'923
2'623
23'422
24'842
Cash flow from shareholders' equity transaction
Bank's capital
Recognised in reserves
Cash flow from transactions in respect of participations, tangible
fixed assets and intangible assets
Real estate
Other tangible fixed assets
Intangible assets
20
GROUP
7'484
15'384
2'231
22'327
6'934
9'546
1'742
9'526
511
5'838
489
4'234
39
8'567
in CHF 000's
2014
2013
Source
of funds
Use
of funds
Source
of funds
Use
of funds
717'652
600'435
405'875
265'395
Cash flow from the banking operations
Medium to long-term business (> 1 year)
Other liabilities
14'585
233
117'165
44'458
17'460
17'655
441'768
Mortgage loans
247'803
23'025
346'196
384'950
126'674
Other accounts receivable
Short-term business
23'353
1'632'432
174'326
6'436
3'270
1'861'418
410'489
115'142
403'934
171'914
Negative replacement values for derivative financial instruments
1'503'056
122'401
9'891
4'837
203'279
730'842
226'740
267
Positive replacement values for derivative financial instruments
190
8'454
532'408
367'401
Currency differences
278'063
18'767
5'280
4'343
4'998
Liquidity
87'689
110'328
Liquid assets
87'689
110'328
Total
2'629'021
2'629'021
874'646
GROUP
874'646
21
In CHF 000's
Reserves
for general
banking
risk
Bank's
capital
Currency
translation
reserves
Effect of the restatement
Equity at 01.01.14
502'016
150'000
-23'315
Transfer of profits to retained earnings
Group
profit
or
loss
Minority
interest
in equity
Retained
earnings
reserves
8'639
8'991
136'204
223'829
28'652
7'959
20'693
-28'652
Total
17'630
1'017'385
Capital increase / decrease
Currency translation differences
31'991
Dividends and other distributions
Other allocations to (transfers from) the
reserves for general banking risks
26'639
-11'422
53'817
58'930
-12'000
22'803
Other allocations to (transfers from) other
reserves
14'869
76'620
-15'253
Group profit / loss
Equity at 31.12.14
22
GROUP
555'832
-23'422
150'000
8'675
197'352
217'269
-384
77'615
77'615
77'615
1'206'743
"Picture to come later"
GROUP
23
Summary of significant accounting principles
The Habib Bank AG Zurich Group's annual financial
statements have been drawn up in accordance with the
accounting rules incorporated into the Swiss Banking
Act and its accompanying ordinance, together with
FINMA Circular 2015/1 "Accounting - Banks".
These accounts, which are based on the following
consolidation and accounting policies, give a true
and fair view of the Bank and the Group's assets, of
its financial position and of the results of its operations.
Consolidation principles
Scope of the consolidation
The Group accounts incorporate the annual financial
statements of Habib Bank AG Zurich, Zurich and its
subsidiaries. Refer to note 8 for a list of consolidated
subsidiaries.
Method of consolidation
The Group’s capital consolidation follows the purchase method.
The interest in equity and profit or loss attributable to
minority shareholders are disclosed separately. Intragroup assets and liabilities as well as expenses and
income from intra-group transactions are eliminated.
Consolidation period
The consolidation period for all Group companies is
the calendar year. The closing date for the consolidated financial statements is 31 December.
Foreign currency translation
In the financial statements of individual Group companies and branches, income and expenditure in foreign
currencies are translated at the exchange rate ruling as
at the transaction date. Amounts due from and due to
third parties in foreign currencies are translated at the
year-end rate. Gains and losses arising from currency
translations into the local currencies are charged to the
income statement as "Result from trading activities
and the fair value option".
24
GROUP
For consolidation purposes, the balance sheets of
the financial statements of branches and subsidiaries
based outside Switzerland are translated into Swiss
francs at exchange rates prevailing at the Group
reporting date. The corresponding income statements
are translated at the average rates of the respective
year. Foreign exchange differences arising from the
translation of the financial statements of subsidiaries
are recorded within the equity, whereas those from
the translation of financial statements of branches
are recorded in the income statement as "Result from
trading activities and the fair value option".
The following exchange rates of the major currencies
were used for the balance sheet:
31.12.14
31.12.13
1 US dollar 0.99
0.89
1 pound sterling
1.54
1.47
100 UAE dirham
26.95
24.19
100 Pakistan rupees
0.98
0.84
100 South Africa rand
8.51
8.50
The following exchange rates of the major currencies
were used for the income statement:
31.12.14
31.12.13
1 US dollar 0.92
0.92
1 pound sterling
1.51
1.45
100 UAE dirham
24.98
25.15
100 Pakistan rupees
0.91
0.92
100 South Africa rand
8.48
9.60
Valuation and accounting principles
The valuation and accounting principles are consistent for the Bank and the Group.
The financial statements of all group companies used
for consolidation comply with the below valuation
and accounting principles.
Recording of transactions
Value adjustments for default risks
Transactions are recorded at the transaction date.
Prior to the value date, forward foreign exchange and
precious metal transactions are carried as off balance
sheet business. Receivables and payables are disclosed
according to the domicile or residency of clients.
Receivables where it is considered unlikely that the
debtor will fulfill his obligations are considered at
risk. In particular, receivables where interest and
commissions are more than 90 days overdue are
considered to be at risk. Interest at risk, and interest,
which is impaired, are not recognised as income but
are deducted, together with value adjustments against
the capital amount of the respective assets. Should
the collection of interest in respect of "Amounts due
from customers" and "Mortgage loans" be uncertain,
interest is not calculated.
Liquid assets and amounts due to and from banks
and amounts due in respect of customer deposits
These amounts, including interest due but not paid,
are shown at nominal value.
Amounts due from and liabilities from securities
financing transactions
The Group buys and sells securities under agreements to re-sell or re-purchase substantially identical
securities. Such agreements do not normally constitute economic sales and are therefore treated as
financing transactions. Securities sold subject to such
agreements continue to be recognised in the balance
sheet. The proceeds from the sale of these securities
are treated as liabilities. Securities purchased under
agreements to re-sell are recognised as loans collateralised by securities, or as cash deposits against
which the Group's securities are pledged.
Amounts due from customers and mortgage loans
These claims are reported at nominal value. All
customer loans are assessed individually for default
risks and, where necessary, value adjustments made
in accordance with Group policy. These value adjustments take into account the value of any collateral
(at lending values) and the financial standing of the
borrower. They are set off against the corresponding
assets.
Several Islamic Banking branches in Pakistan and
South Africa maintain "Assets held under Ijarah"
agreements. Acquired assets under this agreement
are stated at cost less accumulated depreciation and
impairment, if any.
For consumer loans, specific value adjustments
according to time-based criteria are built where interest is overdue for more than 60 days.
Value adjustments for country risk are assessed in
accordance with the guidelines on the management
of country risk from the Swiss Bankers Association.
Furthermore, country-specific general credit risk
value adjustments are maintained based on the differentiated risk profiles recognised for individual
sectors of the loan portfolios, or where uncertainty
is reflected by additional value adjustments. Value
adjustments for country risk, as well as country
specific general credit risk value adjustments, are
deducted from "Amounts due from customers".
"Trading portfolio assets" positions consist mainly of
precious metals. They are valued at fair value as at
the balance sheet date.
"Other financial instruments at fair value" which are
traded on an active market and meet the conditions
for an assessment at fair values according to FINMA
Circular 2015/1 "Accounting - Banks" and which
are not intended to be held until maturity are valued
according to this principle.
GROUP
25
"Financial investments" consist mainly of fixed interest securities. The majority of these are acquired with
the intention of holding them until maturity and are
hence carried at cost adjusted for the amortisation of
premiums and discounts using the accrual method.
The remaining investments in this positions are valued at the lower of cost or market value principle.
This position also includes real estate, assumed from
the lending business for resale, and a number of
securities, both of which are valued at the lower of
cost or market value.
Derivative financial instruments
Derivative financial instruments consist entirely of
trading instruments which are reported at fair value.
The realised and non-realised gains and losses from
these transactions are reported under "Result from
trading activities and the fair value option".
The Group had no significant open derivative transactions on its own account at the balance sheet date.
Positive and negative replacement values of open
derivative financial instruments on behalf of clients
are shown in the balance sheet as a separate line item.
The respective contract volumes are shown in the
notes.
Long-term holdings in associated companies, none
of which exceed 10%, are valued at cost less any
economically necessary depreciation.
"Tangible fixed assets" used for more than one accounting period and which exceed the thresholds defined
by the Group are capitalised. In this case, they are
depreciated on a straight-line basis over the period of
their estimated useful lifetime. Estimated life times
have been set as follows:
26
GROUP
Bank buildings and residential
apartments
Leasehold improvements
Furniture
Other fixed assets
Software (acquired) 25-50 years
5-10 years
4-7 years
3-5 years
3-5 years
No depreciation is charged on land except where
value adjustments have been made to allow for a
reduction in market value. The tangible fixed assets
are re-assessed whenever circumstances suggest that
their value may have fallen below their book value.
Intangible assets: Goodwill
Goodwill in the balance sheet results from the premium paid over net asset value from an acquired
company. In such cases, the recorded goodwill is
reviewed for impairment every year and written off
over five years on a straight line basis.
Provisions
The Group records "Provisions" to cover specific risks
that are based on a past event that represent a probable obligation and for which the amount can be
reliably estimated.
These taxed reserves are held in line with the Group's
prudent policies as precautionary reserves to hedge
against latent risks in the Group's operating activities.
They form part of the "Tier 1" capital of the Group.
Off balance sheet items
Contingent liabilities relate mainly to irrevocable
commitments originating from letters of credit
and guarantees. These are generally fully secured.
Necessary provisions are recorded on balance sheet
under "Provisions". "Contingent liabilities", together
with "Irrevocable commitments", call liabilities and
acceptance credits, are recorded at nominal value.
Fiduciary transactions are converted into Swiss
francs at the rates prevailing at the balance sheet date
and are shown at nominal value.
Taxes and deferred taxes
Income taxes are based on the tax laws of each tax
authority and are expensed in the period in which the
related profits are made. Deferred taxes arising from
temporal differences between the stated values of
assets and liabilities in the consolidated sheet and their
corresponding tax values are recongnised as deferred
tax assets or deferred tax liabilities. Deferred tax assets
are capitalised if there is likely to be enough taxable
profit to offset these differences in future.
Pension plan commitments
In Switzerland, the occupational benefit plans are
covered by Allianz Suisse Insurance Company. All
employees are insured in accordance with the law,
the foundation document and the regulations of the
benefit plan. In the other countries pension liabilities
are covered by insurance companies or are posted
directly to the balance sheet. The employer contribution is included under "Personnel costs".
Amounts due from and due to related parties and
governing bodies
Amounts due from and due to related parties include
credit lines to Board Members and General Management. These transactions have been executed in
accordance with the current internal regulations on
staff loans, advances and deposits.
Amounts due from and due to related parties are
included in table 16.
Changes from the previous year / Transition to
Effective 1 January 2014, the Group adopted the
The aforementioned accounting policies have been
applied in the preparation of the financial statements
for the year ended 31 December 2014.
The opening balances of the consolidated financial
statement as at 1 January 2013, as well as the consolidated income statement for 2013 have undergone
a restatement.
The following paragraphs explain the principal
adjustments made by the Group in restating its consolidated financial statements as per 1 January 2013.
Financial investments at fair value
Financial investments held by Habib Metropolitan
Bank Ltd., which fulfill the criteria for the application of the fair value option, were revalued from
amortised costs to fair value as of 1 January 2013
and reclassified to the balance sheet position "Other
financial instruments at fair value". The net impact of
the revaluation amounted to CHF 17.6 million (CHF
27.1 million less deferred tax liabilities of CHF 9.5
million) was recognised in equity with no effect on
the consolidated income statement 2013. The resulting effects on the Group's equity are disclosed in the
statement of changes in equity.
Due to decreasing market values, the Group experienced a net loss of CHF 7.5 million in 2013 on its
"Other financial instruments at fair value".
Foreign exchange impact
Under the previous accounting principles yearend rates were used for the translation of income
statements from foreign branches and subsidiaries.
Following the new accounting standard and hence
applying average rates for the translation of these
income statements, the consolidated income statement 2013 increased by CHF 2.0 million.
Events after the balance sheet date
No events that would adversely affect the financial
statements included in this report occurred after the
balance sheet date.
GROUP
27
Notes to annual consolidated financial statements
1 Structure of securities financing transactions (assets and liabilities)
in CHF 000's
Book value of receivables from cash collateral related to securities borrowing and
reverse-repurchase transactions*
31.12.14
18'767
Book value of payables from cash collateral posted for securities lending and repurchase
transactions*
Book value of securities lent in connection with securities lending or delivered as collateral in
connection with securities borrowing as well as securities in own portfolio transferred in
connection with repurchase transactions
- of which those with an unrestricted right to resell or pledge
Fair value of securities serving as collateral posted for securities lending or securities borrowed or
securities received in connection with reverse-repurchase transactions with an unrestricted right to
resell or repledge them
- of which repledged securities
- of which resold securities
* Before taking into consideration any netting agreements
28
GROUP
18'767
31.12.13
2 Collateral for loans and off-balance sheet transactions, as well as impaired loans / receivables
Type of collateral
Mortgage
coverage
Secured by
other
collateral
Unsecured
Total
Due from customers
941'930
1'620'927
639'268
3'202'124
Mortgage loans
435'420
435'420
- Residential and commercial property
402'780
402'780
in CHF 000's
Loans (before offsetting any value adjustments)
- Commercial premises
Total loans (before netting any value adjustments)
Total loans (after netting any value adjustments)
32'640
32'640
31.12.14
1'377'350
1'620'927
639'268
3'637'544
31.12.13
1'108'156
1'544'138
406'725
3'059'019
31.12.14
1'201'558
1'583'367
623'304
3'408'229
31.12.13
1'021'585
1'469'959
379'810
2'871'354
15'874
451'050
672'220
1'139'144
45'712
45'712
3'241
150'961
67'069
221'271
31.12.14
19'115
602'011
785'001
1'406'127
31.12.13
28'222
1'194'732
118'252
1'341'206
Gross debt
amount
Est. liquidation
value
of the
collateral
Net debt
amount
Individual
value
adjustments
31.12.14
368'461
117'555
250'906
226'708
31.12.13
308'902
71'268
237'634
185'938
Off balance sheet
Credit commitments
Total off balance sheet
in CHF 000's
Impaired loans / receivables
GROUP
29
3 Breakdown of trading portfolios and other financial instruments at fair value
in CHF 000's
31.12.14
31.12.13
707
440
707
440
1'956'773
1'078'169
Debt instruments
1'839'980
974'070
116'793
104'099
1'957'480
1'078'609
Assets
Trading portfolios
Debt instruments, money-market instruments, money-market transactions
- of which listed
Equity interests
Precious metals and commodities
Other trading assets
Structure products
Others
Total assets
- of which determined by valuation model
- of which securities allowed for repo transactions in accordance with liquidity requirements
30
GROUP
17'223
4'806
1'298
1'334
GROUP
31
4 Presentation of derivative financial instruments
Trading instruments
in CHF 000's
Positive
replacement
values
Negative
replacement
values
Contract
volume
18'949
13'335
3'035'469
Interest rate instruments
Forward contracts, including FRAs
Swaps
Futures
Options (OTC)
Options (exchange-traded)
Foreign exchange / precious metals
Forward contracts
Combined interest rates / currency swaps
Futures
Options (OTC)
Equity interests / indices
Forward contracts
Swaps
Futures
Options (OTC)
5'416
Credit derivatives
Credit default swaps
Total return swaps
First-to-default swaps
Other credit derivatives
Other
Forward contracts
1'668
8'303
1'138'035
20'616
21'638
4'178'919
Swaps
Futures
Options (OTC)
Total before taking into consideration netting agreements
Total at 31.12.14
- of which determined by using a valuation model
32
GROUP
Trading instruments
in CHF 000's
Total at 31.12.13
Positive
replacement
values
Negative
replacement
values
Contract
volume
12'162
11'747
2'350'164
Positive
replacement
value
(accumulated)
Negative
replacement
value
(accumulated)
at 31.12.14
20'616
21'638
at 31.12.13
12'162
11'747
Central
clearing
parties
Banks and
securities
dealers
Other clients
291
18'634
1'691
in CHF 000's
Total after taking into consideration netting agreements
Total
5 Breakdown by counterparties of derivative financial instruments
in CHF 000's
Positive replacement values (after taking into consideration netting contracts)
The Group has no hedging instruments.
GROUP
33
6 Breakdown of financial investments
Book value
Fair value
31.12.14
31.12.13
31.12.14
31.12.13
Debt instruments
1'115'015
874'397
1'116'937
879'570
- of which held until maturity
1'115'015
874'397
1'116'937
879'570
Equity interests
1'120
647
1'044
647
Real estate
8'976
9'340
13'833
10'039
1'125'111
884'384
1'131'813
890'256
177'029
225'642
in CHF 000's
- of which not held until maturity
Total
7 Breakdown of the counterparty according to rating
in CHF 000's
Book values
AAA
AA
A
BBB
BB to B
Unrated
230'189
106'707
194'841
250'108
330'171
13'095
Rating category is based on the sovereign foreign currency long-term rating system from S&P.
34
GROUP
8List of consolidated companies in which the Bank permanently holds direct or indirect
participation of significance
Business
activities
Share capital
(in 1'000)
Capital
share
Proportion of voDirect
ting rights ownership
Indirect
ownership
Company name and registered office
Habib Canadian Bank Limited, Toronto, Canada
Bank
CAD 30'000
100%
100%
100%
0%
HBZ Bank Limited, Durban, South Africa
Bank
ZAR 50'000
100%
100%
100%
0%
Habib European Bank Limited, Douglas,
Isle of Man
Bank
GBP 5'000
100%
100%
100%
0%
HBZ Services FZ-LLC, Dubai, UAE
Service centre
AED 300
100%
100%
100%
0%
Habib Metropolitan Bank Ltd., Karachi, Pakistan
Bank
PKR 10'478'315
51%
51%
51%
0%
HBZ Finance Ltd., Hong Kong
Deposit-taking
company
HKD 300'000
51%
51%
51%
0%
GROUP
35
9 Presentation of participations
In CHF 000's
Acquisition cost
Accumulated
amortisations or
value adjustments
(equity valuation)
Book value at
31.12.13
Other participation with no market value
- HBZ Int. Exchange Co (Singapore) Pte Ltd., Singapore
39
39
- S.W.I.F.T. SCRL, Belgium
88
88
127
127
Total
10 Tangible fixed assets
Acquisition cost
Accumulated
depreciation
Bank buildings
91'436
-29'181
Other real estate
15'037
-8'236
2'980
-2'809
39'825
-30'013
149'277
-70'240
in CHF 000's
Proprietary or separately acquired software
Other tangible fixed assets
Tangible assets acquired under financial leases:
- of which bank buildings
- of which other real estate
- of which other tangible fixed assets
Total
* including net of foreign currency adjustments
36
GROUP
Reporting year
Reclassifications
Investments
Divestments
Amortisations
Value adjustments
of participations
interest
Book value at
31.12.14
Market value
-39
88
-39
88
Reporting year
Book value at
31.12.13
Reclassifications
Investment
Divestment*
Depreciation
Reversals
Book value at
31.12.14
62'254
7'444
5'880
-3'268
-1'080
71'230
6'801
2'103
1'054
-2'238
7'719
171
133
10
-91
223
9'811
5'705
501
-4'559
-1
11'457
79'037
15'384
7'445
-10'156
-1'081
90'629
GROUP
37
11 Intangible assets
Reporting year
in CHF 000's
Goodwill
Acquisition
cost
Accumulated
amortisations
Book
value at
31.12.13
8'567
-1'713
8'567
-1'713
Amortisations
Book
value at
31.12.14
6'854
-1'714
5'140
6'854
-1'714
5'140
Investment
Divestment
Patents
Licenses
Other intangible assets
Total
12 Breakdown of other assets and other liabilities
Other assets
in CHF 000's
Compensation account
31.12.14
Other liabilities
31.12.13
4'245
31.12.14
31.12.13
11'338
4'513
Deferred income tax recognised as assets
29'341
37'602
Others
18'483
8'031
23'777
13'142
Total
52'069
45'633
35'115
17'655
38
GROUP
13 Disclosure of assets pledged or assigned to secure own commitments and of assets under
reservation at ownership*
in CHF 000's
Book value
Effective
commitments
Assets pledged
391
11'298
Assets put under ownership reservation
Total
11'689
* Excluding securities financing transactions
14 Payable to own employee benefit plans
31.12.14
31.12.13
141
123
Payables to employee benefit plans
Commitments to own pension and welfare plans
The Group does not maintain its own pension plans. The occupational benefit plans in the countries are covered
by insurance companies. All employees are insured in accordance with the law, the foundation document and the
regulations of the benefit plan.
In accordance with the contractual and legal conditions of the benefit plan in the countries, there can be neither
economic liabilities that exceed the contributions set by the regulations of the benefit plan, nor economic benefits
for the Group. In addition, during both the reporting year and during the previous year, there were no non-committed
plans, nor was there an employer-paid contribution reserve, such that the expenses shown in the income statement
equal the actual expenses for pension and welfare plans for the reporting period.
GROUP
39
15 Value adjustments and provisions and reserves for general banking risks
In CHF 000's
Provisions for deferred taxes
Balance at 31.12.13
Use in conformity
with designated
purpose
1'947
Provisions for pension fund obligations
Provisions for default risks
Provisions for other business risks
8'368
-1'356
10'315
-1'356
Provisions for restructuring
Other provisions
Total provisions
502'015
Value adjustments for default risks and country risks
187'665
-6'903
- of which value adjustments for default risks in respect of impaired loans
185'938
-6'903
- of which value adjustments for latent risks
40
GROUP
1'727
Reclassifications
Currency
differences
Past due interest,
recoveries
New creations
charged to income
Releases to income
Balance at 31.12.14
555
1'344
-221
3'624
512
4'421
682
7'047
14'741
181
181
3'909
3'909
1'237
9'084
-221
22'967
53'818
555'832
-3'909
27'027
8'116
44'367
-27'056
229'308
-3'909
27'027
8'116
43'494
-27'056
226'708
873
2'600
GROUP
41
16 Disclosure amounts due from / to related parties
in CHF 000's
Amounts due from
31.12.14
Amounts due to
31.12.13
Qualified holdings
31.12.14
31.12.13
44'473
32'195
10'349
12'153
Associates
20
Transactions with members of governing bodies
Other related parties
42
GROUP
1'224
750
17 Maturity structure of financial instruments
Due
On
demand
in CHF 000's
Callable
Within
3 months
Between
Between
3 and 12 12 months
months and 5 years
After
5 years
No
maturity
Total
Asset / financial instruments
Liquid assets
587'358
132'303
23'810
Amounts due from securities
293'886
59'773
941'017
1'746'595
158'352
2'061'060
18'767
489'410
Mortgage loans
18'767
1'414'922
710'899
315'551
42'029
2'972'812
27'751
13'978
341'050
52'640
435'420
707
707
Positive replacement values of
derivative financial instruments
657
19'958
11'671
941'223
586'550
300'536
116'793
1'956'773
677'067
13'010
54'055
212'980
158'387
9'612
1'125'111
Other financial instruments at fair
value
Total
20'616
31.12.14
1'887'504
23'810
3'546'561
1'938'280
1'456'132
553'592
126'404
9'532'283
31.12.13
997'446
638'201
2'892'322
996'593
1'555'867
467'849
9'340
7'557'618
119'935
79'306
9'494
5'092
370'242
1'924'402
949'625
186'005
25'200
8'017'828
Liabilities / financial instruments
156'415
Liabilities from securities
Amounts due in respect of
customer deposits
4'570'261
Negative replacement values of
derivative financial instruments
Total
362'335
589
21'049
21'638
31.12.14
4'727'266
362'335
2'065'386
1'028'931
195'499
30'292
8'409'708
31.12.13
3'559'800
11'746
2'185'564
783'577
97'021
12'160
6'649'868
GROUP
43
18 Assets and liabilities broken down by domestic and foreign origin in accordance with domicile principle
in CHF 000's
31.12.14
Domestic
31.12.13
Foreign
Domestic
Foreign
Assets
Liquid assets
124'037
816'980
103'019
750'309
295'693
1'765'367
267'519
1'590'262
23'619
2'660'118
18'767
95'126
Mortgage loans
435'420
231
440
24
20'592
91
1'956'773
Intangible assets
Other assets
12'071
1'078'169
120'985
1'004'127
54'059
830'325
14'225
109'054
6'693
75'913
187'617
476
2'877'685
88
10'909
79'721
127
11'540
5'140
67'497
6'854
4'939
47'130
449
45'184
671'552
9'131'934
467'429
7'304'446
1'083
369'159
122'289
7'895'538
114'408
6'283'200
9
21'629
140
11'607
5'933
123'021
1'598
Other liabilities
9'380
25'736
17'655
10'636
12'331
10'315
229'382
326'450
Bank's capital
150'000
Total
Liabilities
240'514
Provisions
Group profit / loss
Total
202'690
GROUP
299'325
150'000
197'352
136'204
217'269
223'828
8'675
-23'315
3'374
74'241
-3'334
31'987
758'030
9'045'457
666'015
7'105'860
Receivables and payables are reported according to the domicile or residency of clients in Switzerland (incl. Liechtenstein).
Other assets / liabilities are reported according to location.
44
75'053
19 Breakdown of total assets by countries or regions (domicile principle)
in CHF 000's
31.12.14
31.12.13
Assets
Europe
1'680'179
17.1%
1'587'146
20.4%
of which Switzerland
503'674
5.1%
499'347
6.5%
United Kingdom
844'327
8.6%
675'671
8.7%
Others
332'178
3.4%
412'128
5.3%
North America
239'324
2.4%
132'959
1.7%
7'178'093
73.3%
5'242'530
67.5%
Asia
of which UAE
2'546'860
26.0%
2'020'861
26.0%
3'910'030
39.9%
2'564'763
33.0%
Others
721'203
7.4%
656'906
8.5%
Other countries
705'891
7.2%
809'240
10.4%
of which South Africa
328'608
3.4%
305'765
3.9%
377'283
3.8%
503'475
6.5%
9'803'487
100.0%
7'771'875
100.0%
Pakistan
Others
Total assets
20 Breakdown of total assets by credit rating of regions (risk domicile principle)
in CHF 000's
Net foreign exposures
at 31.12.14
at 31.12.13
AAA
2'259'160
23.0%
2'164'047
27.8%
134'415
1.4%
86'498
1.1%
2'917'948
29.8%
2'388'145
30.7%
181'289
1.8%
300'395
3.9%
4'129'248
42.1%
2'677'592
34.5%
5'079
0.1%
5'079
0.1%
176'349
1.8%
150'119
1.9%
9'803'487
100.0%
7'771'875
100.0%
AA+ to AAA+ to ABBB+ to BBBBB+ to BCCC
Unrated
Total
GROUP
45
21 Assets and liabilities broken down by the most important currencies for the Group
in CHF 000's
CHF
USD
GBP
AED
PKR
Other
Total
123'852
180'153
6'422
539'519
80'215
10'855
941'016
6'631
713'888
163'726
606'984
32'771
537'061
2'061'061
Asset
Liquid assets
Amounts due from securities financing
transactions
18'767
12'467
Mortgage loans
Positive replacement values for derivative
financial instruments
711'969
449'802
104
476
697'706
941'451
159'416
2'972'812
372'744
13'830
48'742
435'420
181
707
23
20'616
50
24
610
19'958
Intangible assets
Other assets
Total assets shown in balance sheet
Delivery claims from spot exchange
transactions, foreign exchange forwards
and foreign exchange options
Total assets
46
GROUP
18'767
1'956'773
1'956'773
267'374
377'739
108'745
409
231'415
139'430
1'125'111
14'048
7'927
1'669
13'316
84'458
1'861
123'279
88
88
10'909
11'318
20'558
29'746
18'098
5'140
90'629
5'140
693
6'290
1'002
10'047
29'165
4'872
52'069
441'701
1'998'121
743'294
2'261'284
3'438'549
920'539
9'803'487
8'953
844'132
78'391
122
1'005'794
149'512
2'086'904
450'654
2'842'253
821'685
2'261'406
4'444'343
1'070'051
11'890'391
in CHF 000's
CHF
USD
GBP
AED
PKR
Other
Total
1'653
80'132
5'583
16'733
257'928
8'214
370'242
128'815
1'895'792
693'507
1'865'989
2'678'173
755'554
8'017'829
21'049
21
21'638
10'940
128'954
Liabilities
Liabilities from securities financing
transactions
Negative replacement values of derivative
financial instruments
Other liabilities
Provisions
9
559
5'933
434
462
915
10'637
229'381
Bank's capital
150'000
5'563
19'209
86'875
7'592
14'254
10'395
1'497
35'115
7'960
1'885
22'968
23'817
17'845
555'832
2'486
284'789
150'000
163'990
Group profit / loss
Total liabilities shown in balance sheet
Delivery commitments from spot exchange
transactions, foreign exchange forwards
and foreign exchange options
Total liabilities
Net position for each currency
195'598
33'362
197'352
21'671
217'269
8'675
8'675
-2'944
-2'551
36'983
33'257
12'870
77'614
2'237'957
3'305'113
842'188
9'803'487
983'659
153'937
2'086'904
11'890'391
728'218
1'977'273
712'738
6'819
878'166
64'323
735'037
2'855'439
777'061
2'237'957
4'288'772
996'125
-286'517
20'848
30'556
23'327
133'436
78'351
GROUP
47
22 Breakdown of contingent liabilities
in CHF 000's
31.12.14
31.12.13
Credit guarantees and similar
363'549
321'787
Performance-related guarantees and similar
Irrevocable commitments due to documentary credits
17'683
775'595
Other contingent liabilities
Total
745'527
56'331
1'139'144
1'141'328
31.12.14
31.12.13
162'044
173'001
23 Breakdown of committed credits
in CHF 000's
Commitments arising from deferred payments
Commitments arising from acceptances
Other credit commitments
Total
59'226
221'271
173'001
31.12.14
31.12.13
89'745
103'963
16'171
12'594
105'917
116'557
24 Breakdown of fiduciary transactions
in CHF 000's
Fiduciary investments with third-party companies
Fiduciary loans
Fiduciary transactions from securities lending and borrowing which are carried out by the Bank
acting under its own name but on behalf of clients
Other fiduciary transactions
Total
48
GROUP
25 Breakdown of the result from trading activities and the fair value option
in CHF 000's
2014
2013
54'114
-11'023
Result from trading activities
Interest rate instruments (incl. funds)
Unrealised forex gains / losses on reserves held in foreign currencies
33'007
-9'364
Foreign exchange
17'373
18'435
46
-158
104'539
-2'110
54'114
-11'023
2014
2013
109'377
108'088
7'669
8'977
4'290
4'793
121'336
121'858
Commodities / precious metals
Total
- of which from the fair value option applied to assets
26 Breakdown of personnel expenses
in CHF 000's
Salaries and additional allowances
- of which expenses related to share-based compensation and alternative forms of variable compensation
Social insurance obligations
Value adjustments for economic benefits or obligations arising from pension funds
Other personnel expenses
Total
GROUP
49
27 Breakdown of general and administrative expenses
2014
2013
18'793
15'520
Expenses for information technology and telecommunications
7'830
7'475
Expenses for motor vehicles, machinery, furniture and other equipment and operating
lease expenses
4'288
4'347
Audit fees
1'706
2'271
- of which for financial and regulatory audits
1'611
1'850
95
421
in CHF 000's
Office space expenses
- of which for other services
Other operating expenses
24'374
23'643
Total
56'991
53'256
2014
2013
28 Analysis of extraordinary income and expenses
in CHF 000's
Release of provisions no longer required
296
Profit on sale of fixed assets
203
509
Recoveries and others
2'175
191
Total
2'675
700
Other
71
2'598
Total
71
2'598
50
GROUP
29 Breakdown of operating result broken down according domestic and foreign origin
according to the principle of permanent establishment
2014
in CHF 000's
Net result from interest operations
2013
Switzerland
Abroad
Switzerland
Abroad
10'525
199'016
11'049
164'764
7'644
67'989
6'254
61'769
30'102
74'438
-7'504
5'394
Other result from other ordinary activities
22'708
-7'972
21'247
-17'931
Total net income
70'979
333'471
31'046
213'996
Personnel expenses
21'315
100'021
22'046
99'812
11'815
45'176
12'479
40'777
Operating expenses
33'130
145'197
34'525
140'589
Value adjustments on participations, depreciation and amortisation
on tangible fixed and intangible assets
-1'716
-10'043
-1'175
-9'247
Changes to provisions and other value adjustments, and losses
-1'334
-5'233
2'662
-7'029
Operating result
% Switzerland / Abroad
34'799
16.7%
172'998
83.3%
-1'992
-3.6%
57'131
103.6%
Taxes
-1'641
2.9%
-54'526
97.1%
-1'356
7.1%
-17'794
92.9%
Group profit / loss
3'374
4.3%
74'241
95.7%
-3'334
-11.6%
31'987
111.6%
Income and expenditure Switzerland: includes the Zurich Branch and the Zurich Head Office.
30 Presentation of current taxes, deferred taxes and disclosure of the tax rate
in CHF 000's
2014
2013
Income taxes
63'771
24'408
Deferred tax expenses
-7'604
-5'259
Taxes
56'166
19'149
Average tax rate
30.7%
44.3%
GROUP
51
To the General Meeting of
Zurich
Report of the Statutory Auditor on the Consolidated Financial Statements
As statutory auditor, we have audited the accompanying consolidated financial statements of Habib Bank AG Zurich, which
comprise the balance sheet, income statement, statement of changes in equity, cash flow statement and notes (pages 16 to 51 of
the annual report) for the year ended 31 December 2014.
Board of Directors' Responsibility
The Board of Directors is responsible for the preparation of the consolidated financial statements in accordance with the provisions governing the preparation of financial statements for banks and the requirements of Swiss law. This responsibility includes
designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable
in the circumstances.
Auditor's Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit
in accordance with Swiss law and Swiss Auditing Standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor
considers the internal control system relevant to the entity's preparation of the consolidated financial statements in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the entity's internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and
the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements for the year ended 31 December 2014 give a true and fair view of the financial position, the results of operations and the cash flows in accordance with the provisions governing the preparation of financial
statements for banks and comply with Swiss law.
Report on Other Legal Requirements
We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence
(article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence.
In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control
system exists, which has been designed for the preparation of consolidated financial statements according to the instructions of
the Board of Directors.
We recommend that the consolidated financial statements submitted to you be approved.
KPMG AG
Ertugrul Tüfekçi
Licensed Audit Expert
Auditor in Charge
Zurich, 20 April 2015
52
GROUP
Mirko Liberto
GROUP
53
Balance sheet at 31 December 2014 (before appropriation)
Note
31.12.14
31.12.13
754'274'639
668'260'423
1'580'953'168
1'571'356'532
Assets
Liquid assets
1
1'473'372'474
1'294'775'470
Mortgage loans
1
373'190'848
137'309'404
707'381
439'618
2
634'400
878'811
4
817'340'429
691'520'172
Participations
Intangible assets
Other assets
Total assets
54
BANK
6
33'787'224
28'915'132
237'569'135
225'431'859
37'528'826
38'491'229
5'140'175
6'853'566
19'417'697
15'108'273
5'333'916'396
4'679'340'489
31.12.14
31.12.13
69'271'194
69'304'835
4'259'131'763
3'691'058'502
568'191
858'062
36'036'665
14'205'278
6
22'711'638
22'678'509
7
13'121'908
8'367'802
488'000'000
458'000'000
150'000'000
150'000'000
Note
Liabilities
2
Other liabilities
Provisions
Bank's capital
8
Statutory retained earnings reserves
75'000'000
75'000'000
Voluntary retained earnings reserves
178'986'247
176'541'796
525'705
99'779
40'563'085
13'225'926
5'333'916'396
4'679'340'489
297'273'480
353'717'090
Profit carried forward / loss carried forward
Profit / loss (result of the period)
Total liabilities
Off balance sheet transactions
45'712'100
1'724'000
Credit commitments
70'933'878
27'819'006
12
BANK
55
Income statement
2014
2013
97'388'510
91'742'392
17'721'919
11'483'474
-14'533'926
-15'772'298
100'576'503
87'453'568
-3'120'380
495'462
97'456'123
87'949'030
5'180'402
4'873'402
Commission income from lending activities
17'646'605
17'882'571
Commission income from other services
22'946'027
15'769'838
Note
Result from interest operations
Interest and discount income
Interest and dividend income from trading portfolios
Interest and dividend income from financial investments
Interest expense
Gross result from interest operations
Changes in value adjustments for default risks and losses from
interest operations
Subtotal net result from interest operations
Commission income from securities trading and investment activities
Commission expense
Subtotal result from commission business and services
14
-2'022'158
-1'520'794
43'750'876
37'005'017
38'155'473
-213'779
Other result from ordinary activities
Result from the disposal of financial investments
Income from participations
2'492'973
12'851'972
11'849'945
Result from real estate
222'430
379'062
Other ordinary income
4'986'000
4'540'552
Other ordinary expenses
Subtotal other result from ordinary activities
56
BANK
-68'809
18'060'403
19'193'723
2014
2013
-59'908'920
-66'304'607
Note
Operating expenses
Personnel expenses
15
16
-42'570'268
-42'979'692
-102'479'188
-109'284'299
Value adjustments on participations and depreciation and amortisation on
tangible fixed and intangible assets
-5'762'645
-5'357'125
Changes to provisions and other value adjustments and losses
-5'982'569
-4'250'786
83'198'472
25'041'781
17
2'420'400
153'997
17
-70'685
-41'864
Subtotal operating expenses
Operating result
Changes in reserves for general banking risks
Taxes
Profit / loss (result for the period)
-30'000'000
18
-14'985'103
-11'927'987
40'563'085
13'225'926
BANK
57
In CHF 000's
Equity at 01.01.14
Reserves for
general
banking risk
Bank's
capital
Statutory
retained
earnings
reserves
458'000
150'000
75'000
Transfer of profits to retained earnings
Voluntary
retained
earnings and
profit / loss
carried
forward
Bank
profit
or
loss
Total
176'642
13'226
872'868
13'226
-13'226
Capital increase / decrease
Currency translation differences
Dividends and other distributions
Other allocations to (transfers from) the
reserves for general banking risks
1'644
1'644
-12'000
-12'000
30'000
30'000
Other allocations to (transfers from)
other reserves
Profit / loss (result of the period)
Equity at 31.12.14
58
BANK
488'000
150'000
75'000
179'512
40'563
40'563
40'563
933'075
Notes to annual financial statements
1 Collateral for loans and off-balance sheet transactions, as well as impaired loans / receivables
Type of collateral
Mortgage
coverage
Secured by
other
collateral
Unsecured
Total
Due from customers
470'177
481'889
575'972
1'528'038
Mortgage loans
373'191
373'191
- Residential and commercial property
373'191
373'191
in CHF 000's
Loans (before offsetting any value adjustments)
- Commercial premises
Total loans (before netting any value adjustments)
Total loans (after netting any value adjustments)
31.12.14
843'368
481'889
575'972
1'901'229
31.12.13
668'275
545'767
267'725
1'481'767
31.12.14
841'040
445'455
561'068
1'846'563
31.12.13
635'700
540'536
255'849
1'432'085
6'062
222'640
68'572
297'273
45'712
45'712
2'068
24'038
44'828
70'934
31.12.14
8'130
246'679
159'111
413'919
31.12.13
10'533
371'440
1'287
383'260
Gross debt
amount
Est. liquidation
value
of the
collateral
Net debt
amount
Individual
value
adjustments
31.12.14
116'330
48'794
67'537
52'067
31.12.13
122'947
13'713
109'234
47'955
Off balance sheet
Credit commitments
Total off balance sheet
in CHF 000's
Impaired loans / receivables
BANK
59
2 Presentation of derivative financial instruments
Trading instruments
in CHF 000's
Positive
replacement
values
Negative
replacement
values
Contract
volume
634
568
124'034
Interest rate instruments
Forward contracts, including FRAs
Swaps
Futures
Options (OTC)
Foreign exchange / precious metals
Forward contracts
Combined interest rates / currency swaps
Futures
Options (OTC)
Equity interests / indices
Forward contracts
Swaps
Futures
Options (OTC)
5'416
Credit derivatives
Credit default swaps
Total return swaps
First-to default swaps
Other credit derivatives
Other
Forward contracts
Swaps
Futures
Options (OTC)
Total before taking into consideration netting agreements
Total at 31.12.14
60
BANK
634
568
129'450
Trading instruments
in CHF 000's
Positive
replacement
values
Negative
replacement
values
Contract
volume
879
858
194'495
Positive
replacement
value
(accumulated)
Negative
replacement
value
(accumulated)
at 31.12.14
634
568
at 31.12.13
879
858
Banks and
securities
dealers
Other clients
Total at 31.12.13
in CHF 000's
Total after taking into consideration netting agreements
Total
3 Breakdown by counterparties of derivative financial instruments
in CHF 000's
Central
clearing
parties
Positive replacement values (after taking into consideration netting contracts)
634
The Bank has no hedging instruments.
BANK
61
4 Breakdown of financial investments
Book value
Fair value
in CHF 000's
31.12.14
31.12.13
31.12.14
31.12.13
Debt instruments
816'855
691'447
819'307
696'765
- of which held until maturity
816'855
691'447
819'307
696'765
485
73
409
Total
817'340
691'520
819'716
177'029
225'642
- of which not held until maturity
Equity interests
Real estate
696'765
5 Breakdown of the counterparty according to rating
in CHF 000's
Book values
AAA
AA
A
BBB
BB to B
Unrated
221'734
106'707
179'808
201'381
104'227
3'484
6 Breakdown of other assets and other liabilities
Other assets
in CHF 000's
31.12.14
Other liabilities
31.12.13
31.12.14
31.12.13
6'980
10'146
Compensation account
3'257
Deferred income taxes recognised as assets
8'968
7'603
Others
7'193
7'505
15'732
12'532
Total
19'418
15'108
22'711
22'678
62
BANK
BANK
63
7 Value adjustments and provisions and reserves for general banking risks
In CHF 000's
Balance at 31.12.13
Use in conformity
with designated
purpose
8'368
-1'356
8'368
-1'356
Provisions for deferred taxes
Provisions for pension fund obligations
Provisions for default risks
Provisions for other business risks
Provisions for restructuring
Other provisions
Total provisions
458'000
Value adjustments for default risks and country risks
49'682
-4'817
- of which value adjustments for default risks in respect of impaired loans
47'955
-4'817
- of which value adjustments for latent risks
64
BANK
1'727
Reclassifications
Currency
differences
Past due interest,
recoveries
New creations
charged to income
Releases to income
Balance at 31.12.14
682
5'428
13'122
682
5'428
13'122
30'000
488'000
5'655
-441
16'277
-11'689
54'667
5'655
-441
15'404
-11'689
52'067
873
2'600
BANK
65
8 Bank's capital
31.12.14
in CHF 000's
Bank's capital / cooperative capital
Total
nominal
value
150'000
150'000
31.12.13
Quantity
Capital
eligible for
dividends
Total
nominal
value
Quantity
Capital
eligible for
dividend
1'500'000
150'000
150'000
1'500'000
150'000
1'500'000
150'000
150'000
1'500'000
150'000
- of which paid up
Total Bank's capital
Authorised capital
- thereof executed capital increases
9 Disclosure of holders of significant participations
in CHF 000’s
31.12.14
31.12.13
At nominal
value
At nominal
value
Significant shareholders and groups of shareholders with voting
agreements
voting shares
Gefan Finanz AG, Zug
150'000
100%
150'000
non-voting shares
Benefical holdings:
Gefan Finanz AG is 100% owned by a trust structure, which represents in equal shares the four branches of the
Mohamedali Habib Family. No individual has a beneficial interest of 10% or more in the shares of Habib Bank AG, Zurich.
66
BANK
100%
10 Disclosure amounts due from / to related parties
in CHF 000's
Amounts due from
31.12.14
Amounts due to
31.12.13
Qualified holdings
Group companies
30'360
48'220
31.12.14
31.12.13
44'473
32'195
23'274
41'190
Associates
Transactions with members of governing bodies
7
1'224
750
7'428
10'021
Other related parties
11 Breakdown of total assets by the credit rating of regions (risk domicile principle)
in CHF 000's
at 31.12.14
at 31.12.13
AAA
1'882'418
35.3%
1'780'540
38.1%
94'892
1.8%
57'731
1.2%
2'612'559
49.0%
2'142'143
45.8%
AA+ to AAA+ to ABBB+ to BBB-
173'957
3.3%
223'467
4.8%
BB+ to B-
391'898
7.3%
328'654
7.0%
5'079
0.1%
5'079
0.1%
173'114
3.2%
141'726
3.0%
5'333'916
100.0%
4'679'340
100.0%
CCC
Unrated
Total
Rating category is based on the sovereign foreign currency long-term rating system from S&P on an immediate borrower basis.
12 Breakdown of credit commitments
31.12.14
31.12.13
Commitments arising from acceptances
24'176
27'819
Other credit commitments
46'758
Total
70'934
in CHF 000's
Commitments arising from deferred payments
BANK
27'819
67
13 Breakdown of fiduciary transactions
31.12.14
31.12.13
Fiduciary investments with third-party companies
89'745
103'963
Fiduciary investments with group companies and affiliated companies
13'969
23'510
16'171
12'594
119'885
140'067
2014
2013
33'007
-9'364
5'103
9'308
46
-158
38'155
-214
in CHF 000's
Fiduciary loans
Fiduciary transactions from securities lending and borrowing which are carried out by the Bank
acting under its own name but on behalf of clients
Other fiduciary financial transactions
Total
14 Breakdown of the results from trading activities and the fair value option
in CHF 000's
Result from trading activities
Interest rate instruments (incl. funds)
Unrealised forex gains / losses on reserves held in foreign currencies
Foreign exchange
Commodities / precious metals
Total
- of which from the fair value option applied to assets
68
BANK
15 Breakdown of personnel expenses
in CHF 000's
Salaries and additional allowances
2014
2013
53'098
58'525
5'587
5'618
1'224
2'162
59'909
66'305
- of which expenses related to share-based compensation and alternative forms of variable compensation
Social insurance obligations
Value adjustments for economic benefits or obligations arising from pension funds
Other personnel expenses
Total
16 Breakdown of general and administrative expenses
in CHF 000's
2014
2013
Office space expenses
6'456
5'548
Expenses for information technology and telecommunications
4'160
4'180
Expenses for motor vehicles, machinery, furniture and other equipment and operating
lease expenses
1'159
1'337
Audit fees
1'300
1'509
- of which for financial and regulatory audits
1'275
1'419
25
90
Other operating expenses
29'495
30'406
Total
42'570
42'980
- of which for other services
BANK
69
17 Analysis of extraordinary income and expenses
in CHF 000's
2014
2013
Release of provisions no longer required
Profit on sale of fixed assets
42
203
19
Recoveries and others
2'175
135
Total
2'420
154
Other
71
42
Total
71
42
in CHF 000's
2014
2013
Income taxes
13'620
13'250
18 Presentation of current taxes, deferred taxes and disclosure of the tax rate
Deferred tax expenses
1'364
-1'322
Taxes
14'985
11'927
Average tax rate
16.4%
52.9%
70
BANK
Appropriation of profit / coverage of losses / other distributions
The Board of Directors will submit the following proposal to the General Meeting of Shareholder in respect of the distribution of profit.
in CHF 000's
31.12.14
31.12.13
40'563
13'226
526
100
41'089
13'326
-2'000
0
Profit / loss (result for the period)
Profit carried forward / loss carried forward
Distributable profit
Appropriation of profit
- Allocation to statutory retained earnings reserves
- Allocation to voluntary retained earnings reserves
-21'000
-800
- Distribution of dividend from distributable profit
-18'000
-12'000
89
526
Profit carried forward
BANK
71
To the General Meeting of
Zurich
Report of the Statutory Auditor on the Financial Statements
As statutory auditor, we have audited the accompanying financial statements of Habib Bank AG Zurich, which comprise the
balance sheet, income statement, statement of changes in equity and notes (pages 54 to 70 of the annual report) for the year ended
31 December 2014. Board of Directors' Responsibility
The Board of Directors is responsible for the preparation of the financial statements in accordance with the provisions governing the preparation of financial statements for banks, the requirements of Swiss law and the company's articles of incorporation.
This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation of
financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further
responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in
the circumstances.
Auditor's Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance
with Swiss law and Swiss Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable
assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.
The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the
financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control
system relevant to the entity's preparation of the financial statements in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control system.
An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements for the year ended 31 December 2014 give a true and fair view of the financial position,
the results of operations and the cash flows in accordance with the provisions governing the preparation of financial statements
for banks and comply with Swiss law and the company's articles of incorporation.
Report on Other Legal Requirements
We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence
(article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence.
In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control
system exists, which has been designed for the preparation of financial statements according to the instructions of the Board of
Directors.
We further confirm that the proposed appropriation of available earnings complies with Swiss law and the company's articles of
incorporation. We recommend that the financial statements submitted to you be approved.
KPMG AG
Ertugrul Tüfekçi
Auditor in Charge
Zurich, 20 April 2015
72
BANK
Mirko Liberto
Addresses
Head Office and operation
Weinbergstrasse 59, PO Box 225
8042 Zurich / Switzerland
Telephone:
(+4144) 269 45 00
Telefax:
(+4144) 269 45 35
Branches
United Kingdom
Habib House
42 Moorgate
London EC2R 6JJ / UK
Telephone:
(+44207) 452 0200
Telefax:
(+44207) 628 1787
Umm Al Sheif
Shaikh Zayed Road
PO Box 3306
Dubai / UAE
Telephone:
(+9714) 2214535 / 3735200 / 2607999
Telefax:
(+9714) 3384857 / 3384595
Kenya
Habib House
Koinange Street
PO Box 30584 00100
Nairobi / Kenya
Telephone:
(+254-20) 341172 / 6 / 7
Telefax:
(+254-20) 2217004
73
Subsidiaries
Habib Canadian Bank, Canada
Habib Canadian Bank
918 Dundas Street East
Suite 1 – B
Mississauga, Ontario L4Y 4H9 / Canada
Telephone:
+1 (905) 276 5300
Telefax:
+1 (905) 276 5400
HBZ Bank Limited, South Africa
HBZ Bank Limited
135 Jan Hofmeyr Road
PO Box 1536, Westville
Wandsbeck 3631 / South Africa
Telephone:
(+2731) 267 4400
Telefax:
(+2731) 267 1193
Habib European Bank Ltd.,
Habib European Bank Ltd.
Isle of Man
14 Athol Street
Douglas / Isle of Man IM1 1JA
Telephone:
(+441624) 622 554 / 629 857
Telefax:
(+441624) 627 135
HBZ Services FZ LLC,
HBZ Services FZ LLC
Dubai Outsource Zone
PO Box 186997
Dubai / UAE
Telephone:
(+9714) 4456744
Telefax:
(+9714) 2284211
Habib Metropolitan Bank Ltd.,
Habib Metropolitan Bank Ltd.
Pakistan
Spencer's Building
I.I. Chundrigar Road
Karachi / Pakistan
Telephone:
(+9221) 111-14-14-14
Telefax:
(+9221) 3263 0404
HBZ Finance Limited,
HBZ Finance Limited
Hong Kong
1701-05, 17 / F, Wing On House,
71 Des Voeux Road Central,
Hong Kong
74
Telephone:
(+852) 2521 4631
Telefax:
(+852) 2810 4477
Representative offices
Bangladesh
BDBL Bhaban, 1st floor
(Bangladesh Development Bank Ltd.)
12 Kawran Bazar C / A
Dhaka 1000 / Bangladesh
Telephone:
Hong Kong
(+88) 02 811 51 00
1701-05 17 / F, Wing On House,
71 Des Voeux Road Central,
Hong Kong
Telephone:
(+852) 2521 4631
Telefax:
(+852) 2810 4477
Pakistan
HBZ Plaza
I.I. Chundrigar Road
Karachi / Pakistan
Telephone:
(+9221) 3227 4878
Telefax:
(+9221) 3227 4879
75
Layout und Produktion
Theiler Werbefabrik GmbH

Annual Report 2014 - Habib Bank AG Zurich

Transcription

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