Annual Report 2013

Transcription

Annual Report 2013

Annual Report
The Arab Islamic Bank
Annual Report 2013
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Annual Report 2013
Annual Report 2013
In the Name of God Most Gracious Most Merciful
O ye who believe! Fear Allah, and give up what remains of your demand for usury, if ye are
indeed believers.
If ye do it not, Take notice of war from Allah and His Messenger. But if ye turn back, ye shall
have your capital sums: Deal not unjustly, and ye shall not be dealt with unjustly.
Surah Al-Baqara - Ayat 278-279
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Annual Report 2013
Annual Report 2013
10
Board of
Directors Report
37
Members of
the Executive
Administration
60
Financial
Statements
08
06
Bank Preview
Chairman’s
Letter
32
Members of
the Board of
Directors
58
Report of the
Unified Fatwa
31
Bank’s
Organizational
Structure
46
Permanent
Committees of
the Board
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Annual Report 2013
Overview of the Bank:
The Arab Islamic Bank was established as the first Islamic banking company operating
in Palestine on 81995/1/. It is a public shareholding company registered under number
563201011. The Bank started its banking activity in early 1996 and practices banking,
financial, commercial and investment activities according to the Islamic Sharia provisions
through the main headquarters in Al-Bireh, and its nine branches in Palestine, in addition
to two new branches under construction. The Bank has no branches outside Palestine
and does not have any subsidiary companies.
Bank’s Vision:
The Bank works on instilling the principle of dealing with the Islamic banking system as
a first choice for banking transactions. It plays an effective role in elevating the Islamic
economic system to achieve the principle of takaful, and takes Islamic social goals into
account. The Bank is committed to offering modern Islamic banking solutions and high
quality services, through marketing and instilling the principles of the Islamic economy,
locally and internationally, working with a team spirit, training staff on banking
operations according to Islamic Sharia, and accepting counseling from everyone in service
of the community.
Strategic Goals:
• Fulfilling the various banking needs of clients according to the Islamic Sharia
provisions, which meet or exceed their requirements and expectations and guarantee
the best possible returns for both shareholders and clients.
• Offering Islamic banking services using modern technology and communications, in
response to the requirements of development and competition and the diverse needs
of clients.
• Developing the human capital at the Bank on an ongoing basis, and using the latest
technology available, as well as implementing the highest available professional
standards.
• Commitment to Islamic Sharia requirements, as all programs and actions are
accredited by the Fatwa Committee and implementation is monitored by the Sharia
Comptroller, under the supervision of the Palestine Monetary Authority.
Annual Report 2013
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Annual Report 2013
Chairman’s Letter
Walid Tawfiq Fakhouri
Dear Shareholders,
Peace be upon you,
On behalf of myself and the members of the Board of Directors, it is my pleasure to welcome
you to the eighteenth annual meeting of the General Assembly of the Arab Islamic Bank.
Allow me to present to you a summary of the Bank’s work and achievements during 2013,
as well as the audited financial statements for the period ended 31 December 2013.
The Arab Islamic Bank has been able to prove its ability to achieve its strategic goals as
outlined in the ambitious strategic plan for the five years of 2012 – 2016. During 2012
and 2013, the Bank was able to achieve the desired growth and improve and develop the
banking services offered, whose results were reflected in expanding the Bank’s client base,
in addition to increasing its market share in the Palestinian banking market.
Annual Report 2013
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The Bank witnessed a growth in its assets
bringing the total number of ATMs spread
during 2013, by about 25 million dollars, at
throughout the country to 41.
a rate of 25%, reaching about 470 million
Based on this growth and within the
dollars. Its market share of the banking
sector assets increased from 3.7% at the
end of 2012 to 4.2% at the end of 2013.
It also saw a growth in client deposits, of
about 65 million dollars (21%) to reach
over 372 million dollars. It also achieved
a growth in direct financing of about 20
million dollars (11%) with net financing
reaching over 191 million dollars, forming
51% of client deposits.
The Bank’s market share of client deposits
in the banking sector grew from 4.2% at
the end of 2012 to 4.6% at the end of 2013,
and direct financing from 4.2% at the end
of 2012 to 4.3% at the end of 2013. The
Bank also achieved pre-tax profits of about
5 million dollars.
To
continue
to
framework of the strategic action plan,
the 2014 plan was a distinguished plan
in that it offered outstanding services to
clients, developing the human capital and
expanding the banking network.
In conclusion, allow me to express our
deep gratitude and appreciation to the
Palestine Monetary Authority, the Palestine
Capital Markets Authority, the Companies
Controller, the Ministry of Trade and
National Economy, the Palestine Exchange,
the security departments and all ministries,
official
institutions,
and
departments
for their cooperation and support of the
Bank. We are also grateful to our clients
for the valuable trust they have placed in
us. We take this opportunity to express
increase
the
Bank’s
our deep gratitude to the Sharia Fatwa
capacities in line with future growth plans,
and Monitoring Committee, the General
we started in the last quarter of the year to
Manager, the Executive Board and all the
establish and equip two new branches, one
staff for their blessed efforts in achieving
in the city of Yatta, Hebron governorate,
the Bank’s goals. May we continue to serve
which should start operation during the
Islam and Muslims, and continue to build
first quarter of 2014, and the other in
the independent Palestinian state with
the city of Ramallah. This is in addition
Jerusalem as its capital.
to inaugurating 11 new ATM machines,
Walid Tawfiq Fakhouri
which will be installed at various sites,
Chairman of the Board
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Annual Report 2013
Board of Directors Report
Islamic Banking Globally
Islamic banking is considered an important component of the global banking system. Its
total assets are approximately 2 trillion dollars through over 400 banking institutions spread
out in 75 countries around the world. The Islamic banking institution is characterized by the
economic and social message of working under the Islamic provisions. It is an institution with
a message and not a mere merchant. The Islamic bank seeks the most useful projects rather
than the most profitable ones. The Islamic bank does not aim to merely implement the Islamic
banking system but rather to contribute to building a full Islamic society on ideological, moral,
and economic principles.
After four decades of implementation, Islamic banking still has a long way to progress, which
requires additional development of banking mechanisms to ensure the ideal model of Islamic
banking that succeeds in offering Islamic products in an outstanding manner. This is still under
continuous development, in order to reach the appropriate model for the Islamic bank.
Islamic Banking in Palestine
Palestine has 17 banks, seven of which are Palestinian, and 10 are foreign. The Palestinian
banks include two Islamic banks, the Arab Islamic Bank and the Palestine Islamic Bank. The
share of Islamic banks is estimated at approximately 8% of the net assets of the Palestinian
banking sector, and approximately 9% of the total direct financing and client deposits. It is
noteworthy that the global share of Islamic banking has exceeded 25%, which means there is
a real opportunity for the Islamic banking industry in Palestine to maximize its market share.
Annual Report 2013
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This constitutes a motive for the Arab Islamic Bank to achieve its strategic goals that aim to
double the size of the bank in terms of client deposits and direct financing and maximizing its
profit, thus maximizing investor returns through implementing the five-year strategic action
plan which has been in progress for two years.
Bank Performance
The table below presents the performance of the Arab Islamic Bank over five years. It shows
that the Bank’s size grew significantly on all its main indicators. Its assets rose to about 176
million dollars (59%), direct financing rose by about 99 million dollars (107%), and client
deposits increased by about 123 million dollars (49%). It also achieved a net profit of 3.5
million dollars during 2013. The strategic action plan that has gone into implementation in
early 2012, which assumed the need to double the Bank’s size between 2012 and 2016, has
achieved its goals to date. The growth in the last five years was concentrated in 2012 and 2013
as indicated in the table below:
Item
2009
2010
2011
2012
2013
Assets
294
286
301
375
470
Direct financing
92
78
133
172
191
Client deposits
249
246
282
308
372
Net profit
1
(2.3)
0.9
0.6
3.5
.DSU noillim ni stnuomA *
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Annual Report 2013
Assets – Million Dollars
470
375
294
286
301
2009
2010
2011
2012
2013
Client Deposits – Million Dollars
372
249
246
2009
2010
282
2011
308
2012
2013
Annual Report 2013
Direct Financing – Million Dollars
172
191
133
92
78
2009
2010
2011
2012
2013
Net Proﬁts – Million Dollars
3.5
1
0.9
2010
2009
2011
-2.3
0.6
2012
2013
13
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Annual Report 2013
Competitive Position:
smret ni ,slevel laicos dna lacitilop ,cimonoce eht no ytilaer nainitselaP eht fo etips nI
dna gnivorpmi ni ssergorp ot skees ylsuounitnoc knaB cimalsI barA eht ,ytilibatsni fo
gnoma ytiliba evititepmoc sti gnicnahne hguorht ecnamrofrep lareneg sti gnipoleved
eht ni htworg setacidni taht atad eht morf raelc si sihT .enitselaP ni gnitarepo sknab eht
.3102 fo dne eht ta %2.4 ot 2102 fo dne eht ta %7.3 morf stessa fo erahs tekram s’knaB
ta %3.4 ot 2102 fo dne eht ta %2.4 morf werg osla gnicnanfi tcerid fo erahs tekram stI
%6.4 ot 2102 fo dne eht ta %2.4 morf werg erahs ’stisoped tneilc stI .3102 fo dne eht
eht dna knaB cimalsI barA eht neewteb setar htworg gnirapmoC .3102 fo dne eht ta
gniwollof eht ,smeti denoitnemerofa eht no 3102 gnirud rotces gniknab nainitselaP
:stluser eht setacidni elbat
Item / Growth Rates
Assets
Direct Financing
Client Deposits
Palestinian Banking Sector
11.4%
7.0%
10.8%
Arab Islamic Bank
25.3%
11.4%
21.0%
Annual Report 2013
Arab Islamic Bank Performance Indicators:
2013
2012
86.7%
84.7%
Direct Financing / Equity Rights
306.9%
300.2%
Retained Earnings (Losses) / Equity Rights
2.5%
0.4%
Client Deposits / Assets
79.2%
82.0%
Direct Financing / Assets
40.7%
45.8%
Direct Financing / Client Deposits
51.4%
55.8%
77.6%
81.3%
Return on Assets
0.7%
0.2%
Return on Equity Rights
5.6%
1.1%
Average assets for each branch
52,201,633
41,690,680
Average client deposits for each branch
41,360,294
34,190,501
Average direct financing for each branch
21,258,370
19,084,399
Capital Structure Indicators
Liabilities and Rights of Unrestricted
Investment Account Owners’ Equity / Assets
Liquidity Indicators
Profitability Indicators
Financing and Investment Revenues / Total
Revenues
Volume Indicators
15
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Annual Report 2013
Social Responsibility
The Arab Islamic Bank played an effective role in supporting, enhancing and developing
various community aspects, through which it offered services to various groups of the
Palestinian society. It supports local institutions, associations, schools, hospitals and
cultural, educational, and service centers, in addition to patronizing economic, cultural
and community activities.
Annual Report 2013
17
The total community bank donations and contributions exceeded USD 495,000, distributed
among areas of development, culture, education, health, childhood, aid, persons with
special needs, and sports. They were distributed as follows:
Item
Development
Amount ($)
271,317
Culture
99,962
Education
47,648
Health
37,266
Childhood
23,961
Aid
10,297
Persons with special needs
3,984
Sports
857
Total
495,292
The Bank implements the following policy in the area of social responsibility:
1. Receive applications in all areas through the Bank’s branches throughout the governorates.
2. Investigate the validity of the information in the application through the branches.
3. Send the applications to the Planning and Studies Department at Headquarters for study
and recommendation.
4. Verify the incoming information and write a recommendation to the Office of the
General Manager.
5. The General Manager submits the applications to the Sharia Fatwa and Monitoring
Committee for opinions.
6. The applications are then sent to the Planning Department to notify the stakeholders of
the decision.
7. The Bank pays the amounts donated to the stakeholders, such as paying the supplier
directly.
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Annual Report 2013
Human Resources:
The Bank places attention to its human resources at the top of its priority list, for it is the main
pillar of success for any institution regardless of its business nature. The Bank does this by
focusing on developing and improving the efficiency of its staff through their participation
in all local and international training courses, seminars, conferences and workshops, which
enhance their professional capacities and expertise, each according to their area of work.
Sixty-six internal and external training workshops were organized, with a total of 1,800
training hours. Most employees from the branches and headquarters participated. The total
number of bank employees reached 264.
Distribution of Employees at the Bank’s Headquarters and Branches:
Number of
employees
Administration
AlBireh
Jenin
Nablus
Hebron
Tulkarem
Gaza
Khan
Younes
Bethlehem
Qalqiliah
Total
142
16
17
15
16
15
11
10
11
11
264
Distribution of Employees According to their Academic Qualifications:
Academic Qualification
Number of Employees 2013
Number of Employees 2012
MA
22
17
Higher Diploma
1
2
BA
178
168
Diploma
31
34
Secondary Certificate
13
10
Less
19
23
Total number of employees
264
254
Annual Report 2013
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Policy of Employment, Training and Incentives at the Bank:
The Bank follows a systematic policy of employment. The best capacities with the
required specifications and qualifications are recruited. Interviews are conducted with
the applicants through a specialized employee selection committee at the bank. The
candidate is chosen on the basis of specific criteria followed by the committee. The
selection of an employee goes through several phases that depend on the type and
nature of the vacancy.
As for training, an annual training plan is adopted by the senior management at the
Bank, aimed at assisting in the achievement of the Bank’s strategic plan goals. This
plan takes into account the employees’ training needs, in addition to developing and
improving their skills and expertise. The role of the Bank’s Training Department is
mainly to look for the best training opportunities that contribute to enhancing and
building the banking qualifications and expertise among the employees.
As for incentives, an employee evaluation system is currently under development and
is based on several professional aspects. It also includes a system of financial and nonfinancial rewards that depend on the contribution of employees in the recruitment of
new clients and new deposits and financing. This will be applied in the coming year, so
that it is based on the achievement of annual goals for individuals, departments and
branches. It is also reliant on employee performance indicators and their contribution
to the achievement of the Bank’s strategic goals.
Following is an overview of the training courses and workshops organized by the Bank and
those in which the Bank participated in 2013:
Number of Courses
Number of Training Hours
Local and external courses
66
1,800
Internal workshops
15
122
spohskrow lanretxE
18
86
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Annual Report 2013
Banking and Financing Services
Banking Services for Individuals
Savings Programs
The‫ﺍﻟﻌــــﺮﺑﻲ‬
Bank provides‫ﺍﻹﺳــــﻼﻣﻲ‬
five savings programs
that meet the needs of all segments of the society.
‫ﺍﻟﺒﻨــــﻚ‬
These programs are characterized by rewarding the clients throughout the year so that they
remain in constant contact with the Bank. The Bank’s savings programs are subject to the Bank’s
mechanisms of profit distribution for investment, according to Islamic investment criteria.
‫ُﻋﻤﺮﺓ ﻣﺒﺎﺭﻛ‬
‫ﺍﻟﺒﻨــــﻚ ﺍﻹﺳــــﻼﻣﻲ ﺍﻟﻌــــﺮﺑﻲ‬
Pilgrimage
The performance of the Umrah pilgrimage is a desirable rite to be
performed by Muslims, and hence the Bank offers a daily Umrah
award for its clients through the Umrah Savings Program.
‫ﻛﻤﻞ ﻧﺺ ﺩﻳﻨﻚ‬
Marriage
The Bank contributes to assisting its clients in marrying through
granting a monthly award through the
Marriage Savings Program.
‫ﻧﻬﺘﻢ‬
‫ﺑﺤﻀﻮﺭﻙ‬
ِ
Jawahir
The Bank honors women, who constitute half of society, and thus
it created this program at the beginning of the year to honor
‫ﻛﻞ ﻳﻮﻡ‬
its clients with ten gold awards on a quarterly basis through the
Jawahir Savings Program.
‫ﻛﻞ ﺷﻬﺮ‬
Save and Own
‫ﺗﻮﻓﻴﺮ ﺍﻟﻌﻤﺮﺓ‬
‫ﺑﺮﻧﺎﻣﺞ‬
‫ﺑﺮﻧﺎﻣﺞ ﺗﻮﻓﻴﺮ ﺍﻟﺰﻭﺍﺝ‬
The dream of owning an apartment is among the most prominent
dreams that people try to achieve. The Bank thus offers two
‫ﺍﻟﻌــــﺮﺑﻲ‬
‫ﺍﻹﺳــــﻼﻣﻲ‬
‫ﺍﻟﺒﻨــــﻚ‬
ً
$ 3,000
‫ﺷﻬﺮﻳﺎ ﺑﻘﻴﻤﺔ‬
‫ﺟﺎﺋﺰﺓ‬
opportunities a year to own an apartment, once every six months,
through the “Save and Own” Savings Program.
ً
$500 ‫ﻳﻮﻣﻴﺎ ﺑﻘﻴﻤﺔ‬
‫ﺭﺣﻠﺔ ﻋﻤﺮﺓ‬
3 ‫ﻛــﻞ‬
‫ﺷﻬﻮﺭ‬
‫ﺷﺮﻭﻁ ﺍﻟﺒﺮﻧﺎﻣﺞ‬
‫ﺗﻮﻓﻴﺮ ﺟﻮﺍﻫﺮ‬
‫ﺑﺮﻧﺎﻣﺞ‬
ً‫ﺣﺠﺎً ﻣﺒﺮﻭﺭﺍً ﻭﺳﻌﻴﺎً ﻣﺸﻜﻮﺭﺍ‬
:‫ﺷﺮﻭﻁ ﺍﻟﺒﺮﻧﺎﻣﺞ‬
.‫· ﺍﻟﺤﺴﺎﺑﺎﺕ ﺍﻟﺘﻲ ﺳﺘﺸﺎﺭﻙ ﻓﻲ ﻫﺬﺍ ﺍﻟﺒﺮﻧﺎﻣﺞ ﻫﻲ ﺣﺴﺎﺑﺎﺕ ﺍﻟﺘﻮﻓﻴﺮ ﺑﻜﺎﻓﺔ ﺍﻟﻌﻤﻼﺕ‬
Pilgrimage (Hajj)
.$500 ‫· ﺃﻥ ﻻ ﻳﻘﻞ ﺍﻟﺤﺪ ﺍﻷﺩﻧﻰ ﻟﻠﺮﺻﻴﺪ ﺍﻟﻴﻮﻣﻲ ﺧﻼﻝ ﺍﻟﺸﻬﺮ ﺍﻟﺬﻱ ﺗﺠﺮﻱ ﻓﻴﻪ ﺍﻟﻘﺮﻋﺔ ﻋﻦ ﻣﺒﻠﻎ‬
‫· ﺍﻟﺤﺴﺎﺑﺎﺕ ﺍﻟﻤﺸﺎﺭﻛﺔ ﺗﺨﻀﻊ ﻵﻟﻴﺔ ﺗﻮﺯﻳﻊ ﺍﻷﺭﺑﺎﺡ‬
ً .‫ﺍﻟﻤﻌﺘﻤﺪﺓ ﻟﺪﻯ ﺍﻟﺒﻨﻚ‬
$ 70,000 ‫ﺳﻨﻮﻳﺎ ﺑﻘﻴﻤﺔ‬
‫ﺟﺎﺋﺰﺓ‬
40
. ‫ ﻳﺘﺤﻤﻞ ﺍﻟﻔﺎﺋﺰ ﻗﻴﻤﺔ ﺿﺮﻳﺒﺔ ﺍﻟﺪﺧﻞ ﻋﻠﻰ ﺍﻟﺠﺎﺋﺰﺓ‬.
The
Hajj
is
a
mandatory
rite
for
every
Muslim,
and
thus the
Bank
$300 ‫ ﺷﻬﻮﺭ ﺍﻟﺘﻲ ﺗﺠﺮﻱ ﻓﻴﻬﺎ ﺍﻟﻘﺮﻋﺔ ﻋﻦ ﻣﺒﻠﻎ‬3 ‫· ﺃﻥ ﻻ ﻳﻘﻞ ﺍﻟﺤﺪ ﺍﻷﺩﻧﻰ ﻟﻠﺮﺻﻴﺪ ﺍﻟﻴﻮﻣﻲ ﺧﻼﻝ‬
.2014/12/31
‫ﺍﻟﺘﻮﻓﻴﺮ ﻓﻲ‬
‫· ﺗﺠﺪﺩ ﺟﻮﺍﺋﺰ‬
.‫ " ﻟﻜﻞ ﺟﺎﺋﺰﺓ‬$ 1,750 ‫"ﺫﻫﺐ ﺑﻘﻴﻤﺔ‬
.‫· ﻳﺠﺮﻱ ﺍﻟﺴﺤﺐ ﻓﻲ ﻧﻬﺎﻳﺔ ﻛﻞ ﺷﻬﺮ‬
.‫· ﺍﻟﺤﺴﺎﺑﺎﺕ ﺍﻟﺘﻲ ﺳﺘﺸﺎﺭﻙ ﻓﻲ ﻫﺬﺍ ﺍﻟﺒﺮﻧﺎﻣﺞ ﻫﻲ ﺣﺴﺎﺑﺎﺕ ﺍﻟﺘﻮﻓﻴﺮ ﺑﻜﺎﻓﺔ ﺍﻟﻌﻤﻼﺕ‬
aibnk.com
.‫ﺍﻟﺒﻨﻚ‬in
‫ﻟﺪﻯ‬making
‫ﺍﻷﺭﺑﺎﺡ ﺍﻟﻤﻌﺘﻤﺪﺓ‬
‫ﺗﺨﻀﻊ ﻵﻟﻴﺔ‬
‫ﺍﻟﻤﺸﺎﺭﻛﺔ‬
‫ﺍﻟﺤﺴﺎﺑﺎﺕ‬
helps
the‫ﺗﻮﺯﻳﻊ‬
dream
come
true
for ·ten clients every year
.‫· ﻳﺠﺮﻱ ﺍﻟﺴﺤﺐ ﻧﻬﺎﻳﺔ ﻛﻞ ﺍﺳﺒﻮﻉ‬
‫ﺷﺮﻭﻁ ﺍﻟﺒﺮﻧﺎﻣﺞ‬
.2014/12/31
‫· ﺗﺠﺪﺩ ﺟﻮﺍﺋﺰ ﺍﻟﺘﻮﻓﻴﺮ ﺑﺘﺎﺭﻳﺦ ﻛﻞ‬
www.aibnk.com
‫ ﺷﻬﻮﺭ‬6
through the Hajj Savings Program.
‫ﺑﺮﻧﺎﻣﺞ ﻭﻓﺮ ﻭﺗﻤﻠﻚ‬
.‫ﺍﻟﺒﻨﻚ‬
‫ﺃﺣﺪ ﻓﺮﻭﻉ‬
‫ﺯﻳﺎﺭﺓ‬
‫ ﺃﻭ‬1800242242
‫ﻟﻤﺰﻳﺪ ﻣﻦ ﺍﻟﻤﻌﻠﻮﻣﺎﺕ ﻳﺮﺟﻰ ﺍﻻﺗﺼﺎﻝ ﻋﻠﻰ ﺍﻟﺮﻗﻢ ﺍﻟﻤﺠﺎﻧﻲ‬
.‫ﻓﻲ ﻫﺬﺍ ﺍﻟﺒﺮﻧﺎﻣﺞ ﻫﻲ ﺣﺴﺎﺑﺎﺕ ﺍﻟﺘﻮﻓﻴﺮ ﺑﻜﺎﻓﺔ ﺍﻟﻌﻤﻼﺕ‬
‫ﺳﺘﺸﺎﺭﻙ‬
‫ﺍﻟﺘﻲ‬
‫ﺍﻟﺤﺴﺎﺑﺎﺕ‬
.
. ‫ ﺷﻬﻮﺭ ﺗﺴﺒﻖ ﺗﺎﺭﻳﺦ ﻳﻮﻡ ﺍﻟﺴﺤﺐ‬3 ‫ ﻟﻤﺪﺓ‬$ 300 ‫ ﺃﻥ ﻻ ﻳﻘﻞ ﺍﻟﺤﺪ ﺍﻷﺩﻧﻰ ﻟﻠﺮﺻﻴﺪ ﺍﻟﻴﻮﻣﻲ ﻋﻦ‬.
.‫ ﺗﻮﺩﻉ ﻓﻲ ﺍﻟﺮﺻﻴﺪ ﺗﻤﻨﺤﻚ ﻓﺮﺻﺔ ﺇﺿﺎﻓﻴﺔ ﻟﻠﻔﻮﺯ‬$ 300 ‫ ﻛﻞ‬.
.‫ ﺍﻟﺤﺴﺎﺑﺎﺕ ﺍﻟﻤﺸﺎﺭﻛﺔ ﺧﺎﺿﻌﺔ ﻵﻟﻴﺔ ﺗﻮﺯﻳﻊ ﺍﻻﺭﺑﺎﺡ ﺍﻟﻤﻌﺘﻤﺪ ﻓﻲ ﺍﻟﺒﻨﻚ‬.
$ 100,000 ‫ ﺷﻬﻮﺭ ﺑﻘﻴﻤﺔ‬6 ‫ﺷﻘﺔ ﻛﻞ‬
. ‫ ﻳﺘﺤﻤﻞ ﺍﻟﻔﺎﺋﺰ ﻗﻴﻤﺔ ﺿﺮﻳﺒﺔ ﺍﻟﺪﺧﻞ ﻋﻠﻰ ﺍﻟﺠﺎﺋﺰﺓ‬.
.‫ ﺃﻭ ﺯﻳﺎﺭﺓ ﺃﺣﺪ ﻓﺮﻭﻉ ﺍﻟﺒﻨﻚ‬1800242242 ‫ﻟﻤﺰﻳﺪ ﻣﻦ ﺍﻟﻤﻌﻠﻮﻣﺎﺕ ﻳﺮﺟﻰ ﺍﻻﺗﺼﺎﻝ ﻋﻠﻰ ﺍﻟﺮﻗﻢ ﺍﻟﻤﺠﺎﻧﻲ‬
Annual Report 2013
21
Financing Programs
The bank provides several financing programs for individuals, and is careful to sign agreements
and memoranda of understanding with local community institutions through which it extends
competitive offers for its financing programs, according to the Islamic Sharia teachings. The
Bank’s Individuals Financing Department offers four basic financing programs:
Car financing
The Bank offers comprehensive Islamic banking solutions to
finance client dreams of owning a car, based on facilitated terms
and conditions and installment programs.
‫ﺍﻟﺒﻨــــﻚ ﺍﻹﺳــــﻼﻣﻲ‬
Rent and Own
‫ﺍﻹﺳــــﻼﻣﻲ‬
‫ ﺍﻟﺒﻨــــﻚ‬housing that provides them with
Bank clients
can obtain appropriate
safety and security through the lease programs ending in ownership,
which is characterized by flexibility and long-term installments.
‫ﺑﺮﻧﺎﻣﺞ ﺗﻤﻮﻳﻞ ﺍﻟﺴﻴﺎﺭﺍﺕ‬
Personal financing
The Bank takes into account the need to provide financing means
for all personal needs of clients, according to Islamic teachings and
with high competitive advantages.
:‫ﻣﻴﺰﺍﺕ ﺍﻟﺒﺮﻧﺎﻣﺞ‬
.‫ ﻳﻤﻜﻨﻚ ﻫﺬﺍ ﺍﻟﺒﺮﻧﺎﻣﺞ ﻣﻦ ﺍﻗﺘﻨﺎﺀ ﺳﻴﺎﺭﺗﻚ ﺍﻟﺘﻲ ﺗﺤﻠﻢ ﺑﻬﺎ‬.‫ ﻳﻤﻨﺢ ﻫﺬﺍ ﺍﻟﺘﻤﻮﻳﻞ ﺑﻄﺮﻕ ﺗﺘﻔﻖ ﻭﺗﻌﺎﻟﻴﻢ ﺍﻟﺸﺮﻳﻌﺔ ﺍﻹﺳﻼﻣﻴﺔ ﺍﻟﻐﺮﺍﺀ‬.‫ ﻳﻤﺘﺎﺯ ﺍﻟﺒﺮﻧﺎﻣﺞ ﺑﺎﻟﺴﻬﻮﻟﺔ ﻭﺍﻟﻤﺮﻭﻧﺔ ﺑﻤﺎ ﻳﺘﻨﺎﺳـﺐ ﻭ ﻣﻮﺍﺭﺩﻙ ﺍﻟﻤﺎﻟﻴﺔ‬‫ﺍﻟﺒﺮﻧﺎﻣﺞ‬
،‫ ﺃﻟﻒ ﺩﻭﻻﺭ ﺃﻭ ﻣﺎ ﻳﻌﺎﺩﻟﻬﺎ ﺑﺎﻟﻌﻤﻼﺕ ﺍﻷﺧﺮﻯ‬75 ‫ ﺗﺼﻞ ﻗﻴﻤﺔ ﺍﻟﺘﻤﻮﻳﻞ ﺇﻟﻰ‬.‫ ﺷﻬﺮ‬72 ‫ﻭﻣﺪﺓ ﺍﻟﺴﺪﺍﺩ ﺗﺼﻞ ﺍﻟﻰ‬
.‫ ﺇﻣﻜﺎﻧﻴﺔ ﺗﻤﻮﻳﻞ ﻛﺎﻣﻞ ﻗﻴﻤﺔ ﺍﻟﺴﻴﺎﺭﺓ‬.‫ ﻳﻤﻜﻦ ﺍﻻﺳﺘﻔﺎﺩﺓ ﻣﻦ ﺍﻟﻌﺮﻭﺽ ﻭﺍﻻﺗﻔﺎﻗﻴﺎﺕ ﺍﻟﻤﻮﻗﻌﺔ ﻣﻊ ﻛﺎﻓﺔ ﺷﺮﻛﺎﺕ ﺍﻟﺴﻴﺎﺭﺍﺕ ﻓﻲ ﻓﻠﺴﻄﻴﻦ‬-
Financing for Business Owners‫ﻣﻴﺰﺍﺕ‬
The Bank finances a group of business owners who constitute a
sizeable percentage of society, for homes, cars, goods, and projects,
‫ﺑﺮﻧﺎﻣﺞ ﺍﺳﺘﺄﺟﺮ ﻭﺗﻤﻠﻚ‬
according to their financial resources and Islamic principles.
www.aibnk.com
.‫ ﺃﻭ ﺯﻳﺎﺭﺓ ﺃﺣﺪ ﻓﺮﻭﻉ ﺍﻟﺒﻨﻚ‬1800242242 ‫ﻟﻤﺰﻳﺪ ﻣﻦ ﺍﻟﻤﻌﻠﻮﻣﺎﺕ ﻳﺮﺟﻰ ﺍﻻﺗﺼﺎﻝ ﻋﻠﻰ ﺍﻟﺮﻗﻢ ﺍﻟﻤﺠﺎﻧﻲ‬
‫ﺍﻣﺘﻠﻚ ﻣﻨﺰﻝ ﺍﻷﺣﻼﻡ‬
‫ﺑﺮﻧﺎﻣﺞ ﺍﻟﺘﻤﻮﻳﻞ ﺍﻟﺸﺨﺼﻲ‬
:‫ﻣﻴﺰﺍﺕ ﺍﻟﺒﺮﻧﺎﻣﺞ‬
.‫· ﻳﺘﻴﺢ ﻟﻚ ﺇﻣﻜﺎﻧﻴﺔ ﺍﻣﺘﻼﻙ ﻣﻨﺰﻝ ﺍﻻﺣﻼﻡ ﺑﺄﺳﻠﻮﺏ ﺍﻹﻳﺠﺎﺭﺓ ﺍﻟﻤﻨﺘﻬﻴﺔ ﺑﺎﻟﺘﻤﻠﻴﻚ‬
.‫· ﻳﻤﻨﺢ ﻫﺬﺍ ﺍﻟﺘﻤﻮﻳﻞ ﺑﻄﺮﻕ ﺗﺘﻔﻖ ﻭﺗﻌﺎﻟﻴﻢ ﺍﻟﺸﺮﻳﻌﺔ ﺍﻹﺳﻼﻣﻴﺔ ﺍﻟﻐﺮﺍﺀ‬
.‫· ﻳﻤﺘﺎﺯ ﺍﻟﺒﺮﻧﺎﻣﺞ ﺑﺎﻟﺴﻬﻮﻟﺔ ﻭﺍﻟﻤﺮﻭﻧﺔ ﺑﻤﺎ ﻳﺘﻨﺎﺳـﺐ ﻭ ﻣﻮﺍﺭﺩﻙ ﺍﻟﻤﺎﻟﻴﺔ‬
‫· ﻳﻤﻜﻨﻚ ﻫﺬﺍ ﺍﻟﺒﺮﻧﺎﻣﺞ ﻣﻦ ﺍﻟﺤﺼﻮﻝ ﻋﻠﻰ ﺗﻤﻮﻳﻼﺕ ﺑﺴﻘﻮﻑ ﺗﺘﻼﺋﻢ ﻭﺍﺣﺘﻴﺎﺟﺎﺗﻚ‬
.‫ ﺳﻨﺔ‬25 ‫ﻭﺑﻔﺘﺮﺓ ﺳﺪﺍﺩ ﺗﺼﻞ ﺇﻟﻰ‬
22
Annual Report 2013
Services Offered to Small and Medium Enterprises
The Bank considers the small and medium enterprises (SMEs) sector as an important promising sector
in Palestine, with a great future and an ability to contribute to Palestinian economic development
in general. Thus, the SME Financing Department at the Bank carries special importance, providing
opportunities to offer the necessary financing and appropriate consultations for this group
through offering banking and financing services according to Islamic teachings, which are also
flexible to serve the various fields of these projects.
Annual Report 2013
23
Services Offered to Major Companies
The Arab Islamic Bank seeks to partner with the major companies’ sector to develop the Palestinian
economy. The Companies’ Business Development Department provides a host of innovative
solutions according to Sharia financing formulas, including Murabaha sales, speculation, tooling,
and leases, ending with ownership for major companies through financing the operating capital,
financing assets, machinery and equipment, real estate financing, and financing industrial and
commercial projects. The Bank also offers external trade services represented by letter of credit,
collection policies, and guarantee letters, each according to the nature of the work of these
companies, to achieve the best results for all parties.
24
Annual Report 2013
Treasury and Financial Markets
The Treasury and Financial Markets Department is considered one of the best profit-making units at
the Bank. It exerts huge efforts to monitor international markets for the trade of foreign currencies.
It offers services of instant currency selling and buying services for clients after offering sufficient
information on currency markets and the status of interest rates. The Bank pays special attention
to this department by providing the latest means of communicating with international markets to
remain up to date with all money market developments.
Service and Product Development
In 2013, the Bank continued to develop its banking services and products to meet, if not exceed,
client expectations and fulfill their needs at the highest levels of quality, speed, and accuracy, through
using the latest information technology. A new branch is underway in the city of Yatta in Hebron
Governorate, ATMs are being installed, and the operating system for all ATMs is being updated
to meet VISA and MasterCard EVM requirements, as a first step to issue and accept international
VISA cards in the near future. An agreement was signed with Microsoft Company to support and
upgrade the systems used at the Bank to keep up with the latest developments in operating systems
and Microsoft programs. Special equipment and instruments were procured to protect information
systems. A contract was also signed with an Australian company to examine the efficiency of security
systems used in the Bank. The Mobile Banking service will also be launching in the first half of next
year. Moreover, a number of systems were applied which will develop and improve the quality of
services offered to clients.
Annual Report 2013
25
Research and Development
The Planning and Studies Department monitors the Bank’s performance indicators all year round
and compares them with general performance indicators for the banking sector. It also drafts
recommendations to enhance and develop the Bank’s performance, and follows-up on the
implementation of the budget for the branches and departments. Additionally, the department
establishes a comprehensive database to meet the needs of beneficiaries inside and outside the
Bank, analyzes data and information available, conducts comparisons among surveys implemented
for various periods, documents statistical bulletins and reports, creates practical plans for the Bank’s
needs in the short and long term in terms of various resources, and drafts the necessary technical
standards for them.
Risk Management
The Arab Islamic Bank implements the latest best international banking criteria in managing all types
of risks, whether financing risks, processes and operation, market and solvency, business, reputation,
and work continuity, in order to achieve transparency and compliance with the decisions of the
monitoring bodies, the instructions of the Palestine Monetary Authority and the international criteria
arising from the instructions of BASEL II. Stress tests were conducted and their results were reflected in
the Bank’s financial data to understand their impact on the Bank’s profits and risk-weighted assets to
hedge sufficient capital according to the guidelines and recommendations of BASEL II Committee, in
addition to preparing for work continuity tests from an alternative site and testing the alternative site
to guarantee work in exceptional circumstances, and test the Bank’s ability to maintain its continued
offering of banking services to its clients in emergency circumstances. Workshops were organized
for Bank departments to understand and identify the size of risks for each unit and limit and/or
alleviate them according to best banking practices, in addition to using support tools in identifying
and assessing the size and level of credit risk arising from financing to Bank clients and the risks of
the emerging market from investing in local and international capital markets.
26
Annual Report 2013
Commitment to Implementing Company Governance Rules
The Bank affirms its commitment to all policies, provisions, and rules of the company governance code
in Palestine, to ensure fairness, integrity, transparency, and disclosure of financial and non-financial
matters, thus making the relationship between the three parties, composed of shareholders, Board
of Directors, and the executive administration, one that is characterized by transparency and that
guarantees the fulfillment of all interests on an equitable basis. This enables the shareholders to
assess the Bank’s situation and level of performance, in addition to taking into account accountability
in the relationships between the executive administration and the Board of Directors, between the
Board of Directors and the shareholders, and between the Board of Directors and other stakeholders,
while taking into account the separation of responsibilities and authorities of all employees at the
Bank, based on the following principles:
1. General Assembly Meetings
The ordinary and extraordinary general assembly meetings are held at the invitation of the Board of
Directors, sent to shareholders at least 14 days prior to the date of convening the session. These are
also announced in local newspapers at least two weeks before the meeting. At the General Assembly
Meeting, shareholders are presented with the external auditor’s report, and the report of the Sharia
Fatwa and Monitoring Committee. All questions are also answered. During the meetings, the agenda
items are discussed and the opportunity is also presented to include any other items at the request
of the shareholders.
2. Equal Rights of Shareholders
The Board of Directors of the Arab Islamic Bank ensures that each Bank shareholder enjoys all
rights merited according to the valid laws, regulations, and instructions. These include the right to
property records, the right to receive invitations to attend general assembly meetings, the right to
fair treatment of all shareholders and their enjoyment of the same rights, whether in the distribution
of cash or stock dividends, the right to transfer or mortgage shares, the right to vote and elect, and
the priority right in new public offerings.
3. Company Management
The current Board of Directors of the Arab Islamic Bank consists of nine members. Membership of
Board stipulates that the elected member must own no less than 7,000 shares. Members of the Board
should also have financial and economic experience. The Board meets regularly and whenever needed
at a rate of no less than six meetings annually. The Ordinary General Assembly Meeting is held once a
year while an Extraordinary General Assembly Meeting is held whenever necessary. The Bank’s Board
of Directors forms from among its members several standing committees, including the Executive
Annual Report 2013
27
Committee, the Review and Audit Committee, Risk, Governance and Compliance Committee, and the
Investment and Money Market Committee.
As for the executive administration, the Bank’s General Manager has qualifications, integrity,
and significant banking and economic expertise. Moreover, prominent officials with the required
qualifications and expertise were appointed to the executive administration. The General Manager
drafts and follows-up on the implementation of the Bank’s strategic plans approved by the Board
of Directors. There is also a segregation of duties between the Board of Directors and the executive
administration with regard to the Bank’s daily operations.
4. Auditing
Two separate auditing efforts are conducted at the Arab Islamic Bank: a licensed external auditing
firm with the necessary experience and expertise work neutrally and independently from the Bank,
the Board, and the executive administration; additionally, an Internal Auditing Department reports
to the Review and Audit Committee of the Board of Directors, which conducts testing for the
implementation of the internal monitoring system and drafts all reports related to internal auditing
work to submit to the said committee, which in turn sends these reports to the Board of Directors
after attaching its special recommendations.
5. Disclosure and Transparency:
The Arab Islamic Bank is committed to the disclosure requirements stipulated by the current laws,
regulations, and instructions, including daily disclosure related to essential matters and periodic
disclosure related to financial data, as well as what must be contained in the annual report, to
ensure that the necessary information reaches the decision makers and external stakeholders, such as
shareholders, investors, and clients. Disclosure takes place through several media outlets, including
the Bank’s website, local newspapers, the Palestine Exchange website, and other means to ensure
that the necessary information reaches stakeholders at the appropriate time.
6. Other Stakeholders:
The Arab Islamic Bank maintains relations with all of the Bank’s stakeholders, including shareholders,
employees, clients and all those who have a relationship with the Bank. It deals with all of them
on the basis of the laws, regulations, and instructions that guarantee the rights of each of them. It
operates according to its bylaws and the Bank’s financial and administrative system, in addition to
following the guidelines of the valid relevant laws such as the Labor Law, the Companies’ Law, and
contracts signed between the Bank and each of the stakeholders.
28
Annual Report 2013
Other Disclosures
Contracts and Transactions of Relevant Parties:
There are no contracts, projects, or links undertaken by the Bank with the chair of the Board
of Directors, members of the Board, the General Manager, or any employee of the Bank or
their relatives.
Potential Risks:
There are no potential risks facing the Bank in the next fiscal year that should have a financial
impact on the Bank.
Differences between preliminary data previously disclosed and final data are as follows:
• Financial position statement: Retrospectively, assets and accrued tax liabilities were
calculated, and the items that were impacted as a result of this amendment were
disclosed in note number 44.
• Income statement: Recording of the Palestine Monetary Authority fines, note number 31.
Non-Recurring Transactions
There is no financial impact for the transactions of a non-recurring nature during the fiscal
year, and they do not fall within the main Bank activities.
International Quality Criteria
The Bank applies the BASEL I criteria and guidelines, some of the BASEL II criteria and
guidelines, best governance practices, and all instructions of the Palestine Monetary
Authority to cover all aspects of risk management.
Concessions
There is no government protection or concessions enjoyed by the Bank or any of its products
pursuant to the laws and regulations, or otherwise, and there are no patents or royalties
that were obtained by the Bank.
Annual Report 2013
29
Legal Procedures
The number of cases filed against the Bank were three cases and four cases as of 31 December
2013 and 2012 respectively, as part of the Bank’s normal activity. The amount of these cases
totaled USD 70,805 and USD 148,856 respectively, and it is the assessment of the Bank’s
administration and lawyer that the Bank will not bear any commitments with the exception
of what was allocated to address these cases.
Foreign Investments
The investments entered into during 2012 are the Murabaha with the Turkish Baraka Bank
in the value of USD 3 million, the Murabaha contract in Bangladesh in the value of USD 3
million. The investment entered into during 2013 is only the renewal of the Bangladesh
Murabaha contract in the value of USD 3 million.
Decisions with a Material Impact
There were no decisions issued by the executive, judicial or legislative authorities, or by
international organizations, the occupation authority, or any other entities with a financial
impact on the Bank’s work, its products, its competitive capacities, or its continuity.
Reliance on Main Suppliers and Clients
The Arab Islamic Bank deals with several local and external suppliers to cover its various
purchases. Two companies that the Bank deals with have purchases that each exceed 10%
of the total Bank’s purchases; the percentage of purchases from Trust Global Insurance
Company was 12.37% and from the Palestine Office Technology Company (OFFTEC) was
17.07% of the total bank purchases during 2013.
30
Annual Report 2013
Efficiency of the Internal Control and Monitoring Systems
The executive administration follows a frame of work to assess the efficiency of internal
control and monitoring through three independent departments directly under the
supervision of the Review and Audit Committee and the Governance and Compliance
Committee of the Board of Directors according to the instructions of the Palestine Monetary
Authority and the other monitoring bodies. These departments implement and assess
internal control and monitoring systems for various operations at the Bank, including the
Risk Department, the Internal Audit Department, and the Compliance Unit. The first sets the
monitoring procedures to control the anticipated risks arising from various banking and nonbanking aspects at the Bank, which include credit, market, operation, and other risks. The
Internal Audit Department examines the commitment of Bank departments and branches
to implementing control and monitoring systems and gives recommendations to address
any gaps through periodic inspection operations. The Compliance Unit monitors the Bank’s
implementation of the Palestine Monetary Authority instructions as well as the external
monitoring bodies mandated with the Bank’s compliance to the rules of governance and
transparency. It must be noted here that reports by these departments are directly submitted
to the committees of the Board of Directors, each according to their specialization, which in
turn submit them to the Board of Directors.
The external auditor examines the efficiency of internal control and monitoring systems
periodically through periodic visits to the Bank’s departments and branches, and submitting
reports and recommendations. Drafts of the annual report are also prepared in parallel
to the financial statements, through which internal control and monitoring systems are
assessed. This is submitted to the Review and Audit Committee, which in turn submits it
to the Board of Directors along with its recommendations, with a copy sent to the Bank’s
executive administration.
It must be noted here that the Arab Islamic Bank always seeks to avoid any gaps and
weaknesses in internal control and monitoring systems through periodic monitoring and
evaluation of these systems, amending and developing them to guarantee that they stay
on the right track, dealing promptly with the changes and developments in various fields
relevant to the sound Islamic banking industry.
Future Plan:
1. Maximize the Bank’s market share through opening new branches and installing ATM machines.
2. Develop the quality of services offered to clients with regard to savings, financing, and investment.
3. Enhance risk monitoring to balance expansion and growth with monitoring quality and
reducing risks.
4. Enhancing the human capital and its efficiency and continuing with the comprehensive
training plan for the Bank’s staff.
5. Enhance the Bank’s revenue power in a manner that leads to elevating returns on equity
rights, and maximizing profit indicators to become feasible and competitive compared
with other banks in the Palestinian banking system.
Annual Report 2013
Bank’s Organizational Structure

31
32
Annual Report 2013
Members of the Board of Directors
•Representative of: Al Tawfiq Investment House Compan
•Date of company membership: 2010
•Date of birth: 121972/2/
•Academic qualifications:
MBA, City University London 2000
BA, Marketing, Western International University 1992
•Practical expertise:
2004 to date – chairman of the board of the Arab Islamic Bank
•Membership:
2005 to date – member of the Bank of Jordan Board of Directors
1999 – 2004 delegated Member of the Board – Arab Islamic Bank
Mr. Walid Tawfiq Fakhouri
Chairman of the Board of Directors
•Representative of: Arab Gulf Company
1979 BA in Business Administration, Minnesota University
•Membership:
1993 to date – Member of the Arab Islamic Bank board
1992 to date – Member of the Bank of Jordan board
1992 – 2008 Member of the International Tobacco & Cigarette
Co. board
Mr. Yehya Zakaria Qadamani
Vice Chair of the Board
Annual Report 2013
33
•Representative of: Al - Ekbal Jordanian Co.
1995 MA in Business Administration and Accounting, Kansas
Buffalo College
1990 BA in Economics, Southern California University
2007 to present – Chairman of the Board of Directors / General
Manager – Bank of Jordan
General Manager of Bank of Jordan 2003 – 2007
Deputy General Manager of Bank of Jordan 1997 – 2003
Executive Assistant to the General Manager 1995 – 1996
•Membership:
Chairman of the Board of Directors of Tafawoq Financial
Investments
Vice Chairman of the Bank of Jordan Board of Directors, Syria
•1993 to date Member of the Arab Islamic Bank Board of Directors
Mr. Shakher Tawfiq Fakhouri
Member of the Board
•Representative of: Palestine Investment Fund Company
2004 MA in Finance and Administration, Cranfield University
2001 MA in Business Administration, Maastricht University
1995 BA in Engineering, University of Jordan
2006 to date – Director of Investment, Palestine Investment Fund
7 years Director of Facilities, Finance and Investment, Palestinian
Banking Institution and Palestinian Development Fund
Assistant Program Manager, ILO – one and a half years
Project Development officer UN – two years
Mr. Basem Mohammad Abdul Halim
Member of the Board
34
Annual Report 2013
• Representative of: Farah Electrical and Health Appliances Company
MBA, Northwestern University 1998
BA, Youngstown State University 1987
Applied Information Management (AIM), Managing Partner,
2004 to date
Arab Palestinian Shopping Centers, General Manager 1998 – 2004
APIC, Information Systems Manager 1998 – 1999
Assistant to the General Manager, Palestine
Telecommunications Company, 1995 – 1997
Terno & Associates, Inc., Senior Project Manager, 19941995Nashbar & Associates, Inc., Team Leader & Programmer/
Analyst, 1989 – 1992
R&S United Family Foods, Deputy General Manager 1980 – 1989
Mr. Sam Sami Bahour
Member of the Board
•Representative of: Al Yamama Investment Company
•Academic qualifications: 1976, BA in Economics and Trade,
University of Jordan
Deputy General Manager of Iqbal for Reflective Materials
Manufacturing, 1991 to date
Deputy General Manager and Project and Financial
Administration Manager at Iqbal for Reflective Materials
Manufacturing 1981 – 1991
•Account at Saudi Iqbal Institution 1977 – 1981
•Membership
•Member of the Board of the Arab Islamic Bank 1993 to
dateRepresentative of: Bank of Jordan Company
Mr. Salahuddin Al Shareef
Member of the Board
Annual Report 2013
Electrical Engineer, Portland State University, 1984
Partner and General Manager, Cables Cloit 2009 to date
Partner and General Manager, Qatari Group Doha 1998 – 2008
Partner and General Manager, Mizan Amman 1991 – 1997
Deputy General Manager, Mizan Kuwait 1984 – 1990
•Membership
Member of the Board, Unified Cables Company, Jordan
Member of the Board, Clean Energy Company, Jordan
Member of the Board, Bank of Jordan, two years
Mr. Haitham Mohammad Barakat
Member of the Board
•Representative of: Eqbal Investment Company
PhD, University of Bradford Management, 2006
MBA, Business Administration, Lewis University, 1992
BA, Business Administration, Bethlehem University, 1990
Dean of Business Administration, Bethlehem University
•Membership
Member of the Palestinian Audit Council, as of 2009
Member of the Palestinian Licensing Council, as of 2009
Member of the American Institute of CPAs, as of 1992
Member of the Arab Association for Accountants, as of 1998
Member of the American Accounting Association 1998
Dr. Fadi Said Qattan
Member of the Board
35
36
Annual Report 2013
•Representative of: Bank of Palestine Company
PHD in Economics, General Finance, Munich University 1983
MA in Political Science, Munich University, 1979
MA in Economics, Munich University, 1977
BA in Economics, Munich University, 1975
Special Advisor to the Bank of Palestine Board, 2009 to date
General Manager, Palestine Capital Markets Authority, 2005
– 2009
Undersecretary, Ministry of Finance 1994 – 2004
Professor of Economics, Al-Najah National University, 1983 –
2003
•Membership
Member of the National Social Security Team
Member of the Board of Trustees of the Palestinian Radio and
Television Commission
Member of the Board of the Palestine Monetary Authority
1996 – 2005
Member of the Committee to License Legal Account Auditors
1997 – 2005
Member of the National Committee for Governance and
Head of the Technical Team 2007
Member of the National Money Laundering Committee
Dr. Atef Kamal Alawneh
Member of the Board
Annual Report 2013
37
Members of the Executive Administration
•Date of appointment: 162011/1/
MA in Public Administration, American University, Cairo 1987
BA in Accounting, Al-Najah National University, 1981
•Previous practical experience:
Rafah Bank, Ramallah, 2005 – 2011
Cairo Amman Bank, Ramallah, 2003 – 2005
Palestinian Banking Institution, Jerusalem, 1996 – 2003
Technical Development Corporation 1992 – 1996.
Technical Development Corporation 1990 – 1992.
Andalus Company, Saudi Arabia 1987 – 1990
Al-Najah National University 1982 – 1984
Mr. Sami Abdul Raheem Saidi
General Manager
Mr. Amjad Ghazi Al Jaabari
Executive Director of Operations and Systems
•Date of birth: 18/8/1967
•Date of appointment: 11/10/1997
•Academic qualifications: MA in International Administration
•Previous practical experience: Hebron University 1995 – 1997
Mr. Bilal Yousef Abu Radi
Manager of Liabilities Development and Branches Department
Diploma in Law
Previous practical experience:
Jordan Kuwait Bank 1978 – 1999
Cairo Amman Bank 1976 - 1977
38
Annual Report 2013
Mr. Khaled Izzat Manager of the Work Organization and Procedures Department
BA in Business Administration
Jordan Commerce Bank 1996 – 1999
Orient Bank in Dubai 1975 - 1995
Mr. Mustafa Sharif Abu Kheizaran
Manager of Networks and Systems Department
MA in Computer Engineering, Birzeit University
BA in Electronic Engineering
Palestinian Central Bureau of Statistics Department 1995 – 2001
Samco Company 1993 – 1995
Mrs. Adeeba Abdullah Afaneh
Manager of Legal Affairs Department
BA in Law, University of Jordan, 1996
Practicing Lawyer, Lawyer Adel Abu Diab Office, 1998 – 2001
Trainee Lawyer, Lawyer Hussein Al Shyoukhi Office, 1996 – 1998
Annual Report 2013
Mr. Ahmad Mohammad Saleh
Manager of Planning and Studies Department
MA in Administration and Marketing
BA in Marketing
Aseel General Contracting Company 2003 - 2004
Mr. Marwan Mohammad Badawi
Manager of Small and Medium Project Development
MA in Financial and Banking Sciences
Al Rafah Bank 2006 – 2008
Palestine Commercial Bank 1996 – 2006
Cairo Amman Bank 1994 – 1996
Mr. Ammar Younes Khudeiri
Manager of Banking Business Systems Department
MA in Computer Science, Birzeit University
Higher Diploma in Computer Programming, Brilliants Institute, Bangalore, India
BA in Computer Science, Bangalore, India
International Bank of Palestine 1996 – 2008
39
40
Annual Report 2013
Mr. Ibrahim Ismail Abu Abdo
Manager of Internal Monitoring and Auditing Department
MA in Business Administration
Higher Diploma in Bank Administration
BA in Accounting
Egyptian Real Estate Bank 1998 – 2009
Jordan Kuwait Bank 1995 – 1998
Bank of Jordan 1994 – 1995
Mr. Hassan Issam Sabri
Manager of Company Business Development Department
MA in Administrative and Accounting Sciences, Al-Najah National University, 1999
BA in Financial and Banking Sciences, Yarmouk University 1989
Arab Bank, UAE, 2009 – 2008
Arab Bank, Palestine, 1994 – 2005
National Arab Bank, Riyadh, 1989 – 1994
Mr. Hatem Fawzi Suboh
Manager of Financing and Collection Follow-Up Department
MA in Administrative and Marketing Sciences, University of Jordan
BA in Financial and Banking Sciences, Yarmouk University
Al-Najah National University 2003 – 2005
Annual Report 2013
41
Mr. Imad Mahmoud Issa
Manager of Financing and Collection Follow-Up Department
BA in English Literature and Language, Amman Private University
Higher Diploma in Marketing, Birzeit University and Birzeit Center for Continuing Education
Al-Quds Bank 2005 – 2008
Mr. Adnan Abdul Ilah Khufash
Manager of Banking Operations Department
MA in Commerce, Bona University, India
BA in Accounting, Bona University, India
Diploma in General Insurance, Royal Society Institute in Bahrain and the Palestine Capital Markets
Authority
ANZ Grindlay’s Bank 1998 - 1999
Mr. Rateb Abdulah Itani
Manager of Human Resources Development Department
Al-Quds Open University / part time 2007 – 2010
42
Annual Report 2013
Mr. Saed Miqdad Miqdadi
Manager of Risk Management Department
BA in Business Administration, East Mediterranean University, Cyprus
Rafah Bank 2006 – 2010
Jordan Ahli Bank 2003 – 2006
Grindleys Bank 2000 – 2003
Mr. Abdullah Saleh Hamad
Manager of Real Estate and Supplies Department
MA in Civil Engineering
BA in Civil Engineering
Director of Buildings Directorate, Palestine Telecommunications Co. 1997 – 2010
Contracting Companies, Palestinian House, Contractors Company 1994 - 1996
Mr. Mohammad Husni Srour
Manager of Individual Business Development Department
Higher Diploma in Developing Small and Medium Projects
BA in Business Administration
Rafah Bank 2006 – 2011
UN 2004 – 2006
New Techni Comp 2003
Annual Report 2013
Mr. Firas Juma Shuman
Manager of the Treasury and Money Markets Department
MA in Electronic Engineering
Palestine Islamic Bank 2009 – 2011
International Bank of Palestine 1999 – 2009
Union Savings and Investment Bank 1996 – 1999
Mrs. Maisara Hatem Salameh
Manager of Financial Department
BA in Accounting and Finance
CMA
ACPA
Price Waterhouse Coopers 2004 - 2013
Ernst & Young 2003 – 2004
Mrs. Fairouz Fathi Thabaleh
Compliance Comptroller
BA in Law
Cairo Amman Bank 1997 - 2010
43
44
Annual Report 2013
Mrs. Linda Mahmoud Al Sheikh Yousef
Head of the Shareholders Division
Diploma in Administration
Office of the Head of the Palestine Central Bureau of Statistics 1995 – 2001
Mr. Muhannad Assaf
Legal Advisor
Ernst & Young Company
External Auditor
Annual Report 2013
45
46
Annual Report 2013
Permanent Committees of the Board:
Committee Name
Executive Committee – Standing Committee
Date of formation 28/9/2010
Mr. Yehya Qadamani / Vice Chair of the Board – Committee Chair
Members and
Rapporteurs
Mr. Sam Bahour / Member of the Board – Vice Chair
Mr. Basem Abdul Halim / Member of the Board – Member
Mr. Haitham Barakat / Member of the Board – Member
Mr. Hatem Suboh – Director of Financing Control – Committee Secretary
•
Study financing applications whose value is in excess of the powers of the
Financing Committee at the headquarters.
•
Monitor all reports, data, and studies that enable them to perform their
work efficiently and professionally.
•
Update the Board of Directors sufficiently and periodically on the status of
the Bank’s credit portfolio in terms of size, developments, and classified
finances, especially created to address any losses, as well as follow-up and
collection efforts.
•
Inform the Board of Directors immediately of any essential changes to the
status of the credit portfolio, the status of the Bank’s credit policy, the terms
for granting finances, guarantees and credit limits, and the limitations of
the powers of the Financing Committee at the headquarters according
to the monitoring authority laws and instructions, the decisions and
recommendations of the Risk Management department and the banking
Powers
criteria, and submit them to the Board of Directors for ratification.
•
Review credit policies periodically and update them according to the
developments in the economic, political, and banking environment and
the changes in the Bank’s status.
•
Approve the marketing plans drafted by the executive administration to
grant financing of all forms, and verify that the executive administration
is committed to the Bank’s credit policies and the powers outlined by the
Board of Directors.
•
Study the applications to grant and/or renew financing submitted by
the Financing Committee at the executive administration, and take the
appropriate decision in their regard according to the committee’s powers
and limits in accordance with the instructions of the monitoring authorities
and the recommendations of the Risk Management Department.
•
Study the status of the existing defaulting loans and draft the necessary
plans to reduce them and verify the sufficiency of allocations according
to the instructions of the monitoring authorities in addition to submitted
recommendations on the writing off of these loans.
Discharging of
The committee is cleared of its responsibilities during the General Assembly
responsibilities
Meeting every year
Annual Report 2013
Committee Name
Review and Audit Committee – Standing Committee
Date of formation
28/9/2010
47
Mr. Atef Alawneh / Member of the Board of Directors – Chair of the committee
Members and
rapporteurs
Mr. Fadi Qattan / Member of the Board – member
Mr. Salahuddin Al Shareef / Member of the Board – member
Mr. Ibrahim Abu Abdo / Manager of the Internal Audit Department –
Committee Secretary
Powers
•
Follow up internal control systems and the comprehensiveness of the
internal and external audit plans.
•
Control areas of risk in the Bank operations and their coverage through
internal and external audits, and guarantee the integrity and accuracy of
financial information.
•
Draft criteria for financial disclosure submitted to the Board of Directors,
shareholders, and other users.
•
Control the degree of the Bank’s commitment to the laws, regulations and
instructions issued by the Palestine Monetary Authority as well as the rules
issued by the Board of Directors and the other valid legislation in Palestine.
•
Coordinate with the Risk, Governance, and Compliance Committee
to guarantee the determination of the Bank’s financial status and
performance, review compliance reports Bank and commitment to the
work procedures manual as well as the comprehensiveness of reports in
terms of all aspects of work according to the requirements of the relevant
monitoring authorities.
•
Review and adopt the annual internal audit plan and the goals and area
of the internal audit function to guarantee comprehensive auditing of all
banking and administrative activities at the Bank.
•
Adopt the powers and responsibilities of the Monitoring and Internal
Audit department and its relationship to the other monitoring functions
at the Bank, and draft a clear mechanism to hold accountable the head
and employees of the Monitoring and Internal Auditing Department to
guarantee they are undertaking the duties and responsibilities in which
they are mandated.
•
Guarantee the independence of the Monitoring and Internal Auditing
Department so that the internal auditing is directly linked to the committee
in terms of submitting the reports, reviewing the comments in the internal
audit report, following up the procedures in their regard with the higher
administration for correction, and conducting the accountability deemed
fit by the committee to guarantee effective internal auditing.
•
Direct communication with the internal and external auditors and the
advisors of the Bank, and undertake any fact-finding or investigation as it
deems fit for the performance of its duties, and obtaining any specialized
consultations according to what it deems necessary.
•
Request and receive reports on the reappointment of external audits and
their fees, and submit the results of their work to the annual meeting of
shareholders, in the presence of the chair of the committee to answer
shareholder questions
Discharging of
responsibilities
Meeting every year
48
Annual Report 2013
Committee Name
Date of formation
Risk, Governance and Compliance Committee – Standing
Committee
28/9/2010
Mr. Walid Fakhouri / Chair of the Board of Directors – Committee Chair
Members and
rapporteurs
Mr. Haitham Barakat / Member of the Board – member
Mr. Sam Bahour / Member of the Board – member
Dr. Urwa Sabri / Head of the Fatwa and Sharia Monitoring Committee –
member
Mrs. Fairouz Thabaleh / Compliance Office at the Bank – Committee Secretary
Powers
•
Undertakes the duties related to nominating qualified persons for the
chairmanship and membership of the board of directors according to
objective criteria.
•
Create a replacement plan for the chairmanship and membership of the
board of directors in case of a vacancy.
•
Determine the compensation for the members of the board, including
salaries, bonuses and others, and adopt a policy of bonuses and salaries
for all responsible employees and their amendments to be harmonious
with achieving the goals and revenues with the least risk according to the
instructions of the monitoring authorities.
•
Adopt work procedures and organizational structures or amend them and
adopt policies related to the work of the bank
•
Study the reports of the compliance departments, the risk management
department, the sharia monitor, the risk assessment and monitoring
environment reports and the reports of the monitoring authority’s
inspection, and ratify them.
•
Study any Bank issues and disputes with other parties and vice versa, and
provide the Board of Directors with periodic reports on the risks facing it or
that the Bank might face, and any essential changes to the Bank’s status.
•
Verify that there is an appropriate environment for risk management at
the Bank to include a study on the appropriateness of the organizational
structure at the Bank and a qualified staff that independently works
on managing the basic risks facing the Bank, according to a clear risk
management system.
Discharging of
responsibilities
Meeting every year
Annual Report 2013
Committee Name
Date of formation
49
Investment and Money Markets Committee – Standing
Committee
28/9/2010
Mr. Walid Fakhouri / Chair of the Board of Directors / Chair of the committee
Members and
rapporteurs
Mr. Basim Abdul Halim / Member of the Board – member
Mr. Sam Bahour / Member of the Board – member
Mr. Sami Saidi / General Manager – member
Director of the Treasury and Money Markets Department – member
Director of the Risk Management Department – Committee Secretary
•
Study the reports and studies related to the status of current external
investments of the Bank and the status of the local and international
money markets.
•
Identify accredited financial mediators to exchange in the securities in
the stock exchange, and approve the ceiling for open currency centers
permitted under the management of the Treasury department and the
financial markets.
•
Periodically update the board on the status of the Bank’s investment
portfolios and of any essential changes to these investments.
•
Draft the Bank’s investment policy and review and update it periodically
and verify its compliance with the valid laws and instructions and the
banking criteria, and submit it to the board for ratification.
•
Study the investment applications and ownership of various securities,
and submit recommendations to the board regarding the investment
decisions that guarantee the powers of the committee according to the
instructions of the monitoring authorities and recommendations of the risk
management department.
•
Verify commitment of the administration to the implementation of the
investment decisions and the specified ceilings and authorities outlined by
the committee.
•
Buy and sell shares of listed and unlisted companies in the stock exchange
according to the provisions of the Islamic Sharia, at the recommendation
of the Treasury Department and the money markets, and contribute
and participate in the IPOs of companies with the approval of the
Board of Directors, subscribe in deposit certificates, bonds and specified
investments, and approve joint investment funds prepared by the Bank at
the recommendation of the Treasury and Money Markets Department.
•
Approve various money market operations run by the Bank, including
merger and acquisition processes and obtaining licenses to practices
financial services and professions approved by the money market
commission as well as custody services according to the Board of Directors’
strategies and guidelines.
Powers
Discharging of
responsibilities
Meeting every year
50
Annual Report 2013
Meetings of the Board and its Committees:
In 2013, the Board of Directors of the Arab Islamic Bank and its committees convened periodic
meetings to discuss and approve all matters related to the Bank. Frequency of meetings is
outlined hereunder
Entity
Number of meetings in 2013
Board of Directors
6
Risks, Governance and Compliance Committee
7
Investment and Money Markets Committee
4
Review and Audit Committee
5
Executive Committee
32
All meetings of the Board of Directors and its committees met the legal quorum. Moreover,
the Board of Directors, its committees, members, and prominent managers are evaluated,
and the Board continuously monitors the results of the evaluation. There are also no disputes
between the Board and the Audit Committee.
Privileges and Bonuses Enjoyed by the Chair and Members of the Board:
Total
Travel and
Accommodation Annual
Expenses
Privileges
Position
Annual
Transportation
Annual
Bonus
Chair of the Board
6,000
10,000
147,540
163,540
Vice Chair
16,750
10,000
-
26,750
Mr. Shaker Tawfiq Fakhouri
Member
5,500
8,333
-
13,833
Mr. Salahuddin Al Shareef
Member
5,000
8,333
-
13,333
Mr. Sam Sami Bahour
Member
17,500
10,000
-
27,500
Mr. Basem Abdul Haleem
Member
14,917
8,333(*)
-
23,250 (*)
Mr. Haitham Samih Barakat
Member
9,666
8,333
-
17,999
Mr. Atef Kamal Alawneh
Member
6,000
10,000
-
16,000
Dr. Fadi Saeed Qattan
Member
6,000
10,000
-
16,000
87,333
83,332
147,540
318,205
Name
Mr. Walid Tawfiq Khoury
Total
* The privileges and bonuses enjoyed by the chair and members of the Board were granted based
on a system of bonuses for the members of the Board adopted at the meeting of the Board of
Directors number 1/2010 on 18/2/2010.
51
Annual Report 2013
Privileges and Bonuses Enjoyed by Members of the Executive Administration
Total
Annual
Salaries
Annual
Bonuses
End of
Year
Award
Annual
Travel
Expenses
Financing
General Manager
Total
Annual
Privileges
210,600
12,150
17,550
17,002
257,302
-
Assistant Manager
67,850
4,397
5,538
-
77,785
-
Executive
Manager of the
Operations and
Systems Department
54,150
2,626
4,513
-
61,289
-
Executive Manager of Syndicated Financing
Department
54,150
2,626
4,513
-
61,289
-
Executive Administration
Guarantees
Salaries,
Manager of
Liabilities and
Branches
49,725
Manager of the
Finance Department
58,319
-
4,984
-
63,303
-
Manager of the
Human Resources and Training
Department
40,320
1,972
3,360
-
45,652
-
Manager of
Monitoring and
Internal Audit
Department
45,465
2,278
3,789
-
51,532
7,527
2,541
4,144
-
56,410
16,259
dues and
car
Manager of the
Risk Management Department and Board
Secretary
49,110
Manager of the
Treasury and
Money Markets
Department
41,880
2,062
3,490
-
47,432
4,232
Total
671,569
33,149
55,974
17,002
777,694
46,966
Salaries and
dues
Salaries,
2,497
4,093
-
55,700
18,948
dues,
guarantees
and car
Salaries and
dues
* Salaries, privileges and bonuses enjoyed by the members of the executive administration were
granted pursuant to the salary scale adopted according to the Bank’s internal memorandum
number 3/T/2009 dated 14/9/2009, and based on the decision of the Risks, Governance and
Compliance Committee number 1/2011.
52
Annual Report 2013
Policy to determine stipend for attending the Board of Directors’ sessions:
A system of bonuses for the Board of Directors was adopted at the meeting of the Board of
Directors number 12010/ dated 182010/2/.
Distribution of profits: The chair and members of the Board are paid an annual bonus with
a ceiling of USD 10,000 (ten thousand USD). The total bonuses paid to all members of the
board should not exceed 10% of the net profits after tax, according to the valid Companies
Law.
Stipend for transportation of Board members: The member is paid USD 6,000 annually as
a transportation stipend to attend periodic meetings. A percentage is deducted from this
amount equal to the percentage of meetings not attended by the member to the total
number of meetings that year. The finance department is authorized to pay the above
amount in the form of monthly payments of USD 500, and the final settlement is made at
the end of the year.
Stipend for transportation of the executive committee members: The amount of USD 1,000
is paid monthly to each member of the executive committee for transport to attend the
periodic meetings. A percentage is deducted from this amount equal to the percentage of
meetings not attended by the member to the total number of meetings that month.
Agenda of the Ordinary General Assembly Meeting of the Arab Islamic Bank and
Board of Directors Recommendations:
Pursuant to Article 216, paragraph 1, of the Companies Law of 1964, the chair and members
of the Board are honored to invite the shareholders to attend the ordinary general assembly
meeting of 2012, which will be held at 12:00 noon on Sunday, 2818 ,2013/4/ Jumada Akhira
1434 Hijri, at the Grand Park Hotel, Al Masyoun, Ramallah.
Meeting Agenda:
1. Read the events of the session held on 32012/5/.
2. Read and discuss the report of the board on the Bank’s work during 2012 and its future
plans, and ratify it.
3. Listen to the report of the Unified Fatwa and Sharia Monitoring Commission of 2012
about the financial statements of the Bank.
4. Listen to the auditors’ report of 2012 on the Bank’s financial statements.
5. Discuss the Bank’s financial statements for the fiscal year 2012 and ratify them.
6. Clear the members of the Board for the year ended 312012/12/ pursuant to the provisions
of the law.
53
Annual Report 2013
7. Approve the payment of USD 59,999 as a reward for the members of the Board for the
year 2012.
8. Approve the appointment of Dr. Atef Alawneh as representative of the Bank of Palestine
to the Board.
9. Elect the Bank’s auditors for the year 2013 and determine their fee.
Voting by a Group of the Shareholders
The shareholders voted in the last Ordinary General Assembly meeting held on 242013/4/ to
approve the financial statements and clear the members of the Board of Directors for the
fiscal year ended 31 December 2012. The Bank’s future plan was also approved, in addition
to a unanimous approval of the appointment of Dr. Atef Alawneh as representative of the
Board of the Bank of Palestine as a new Member of the Board of the Arab Islamic Bank. The
company Ernst & Young was also elected as the Bank’s auditor in 2013.
Senior Shareholders at the Bank
The number of the Arab Islamic Bank shareholders totaled 1,273 at the end of 2013.
The subscribed capital, paid and listed in the Palestine Exchange, was 48,719,588 shares/
dollars. The stated capital was 50,000,000 shares/dollars. Following are the investors whose
ownership totals 5% or more of the paid capital as of 312013/12/.
Number of
Shareholder’s Name
shares as of
31/12/2013
Bank of Palestine
Percentage
Number of shares as
of 31/12/2012
Percentage
10,488,219
21.53
9,999,990
20.98
Aswaq Asset Management Company
5,873,152
12.06
2,268,751
4.76
Bank of Jordan Company
4,467,767
9.17
4,467,767
9.37
Arab Gulf Investments and Transportation Company
4,391,502
9.01
4,391,502
9.21
Palestine Investment Fund Company
4,253,961
8.73
4,055,938
8.51
Jordanian Eqbal General Trading
Company
4,067,975
8.35
4,067,975
8.53
Eqbal Investment Company
1,637,761
3.36
2,737,761
5.74
Control of the Company:
Shareholder Name
Bank of Palestine
Number of Shares as of 312013/12/
Percentage %
10,488,219
21.53
54
Annual Report 2013
Fakhouri Family Companies Group
Number of Shares as of
31/12/2013
Percentage %
4,467,767
9.17
Arab Gulf Investments and Transportation
Company
4,391,502
9.01
Jordanian Eqbal General Trading Company
4,067,975
8.35
Eqbal Investment Company
1,637,761
3.36
Yamama General Investments Company
1,725,024
3.54
Farah Electrical and Health Appliances Company
1,693,984
3.48
North International Industrial Company
42,349
0.09
Al-Tawfiq Investment House
7,000
0.01
Shareholder Name
Bank of Jordan Company
Total
18,033,362
37.01
31/12/2013
Percentage
1,482,360
3.04
Iqbal Tawfiq Shaker Fakhouri
435,986
0.89
Samer Tawfiq Shaker Fakhouri
348,789
0.72
Shaker Tawfiq Shaker Fakhouri
348,789
0.72
Fakhouri Family
Shareholders Name
Tawfiq Shaker Khader Fakhouri
Nimat Theib Kamel Al Ajam
348,789
0.72
Walid Tawfiq Shaker Fakhouri
348,789
0.72
Amal Tawfiq Shaker Fakhouri
174,392
0.36
Total
3,487,894
7.17
Group of Companies of the Palestinian Investment Fund Company
Shareholders Name
Palestine Investment Fund Company
Aswaq Investment Portfolios Company
Total
31/12/2013
Percentage
4,253,961
8.73
5,873,152
12.06
10,127,113
20.79
55
Annual Report 2013
‫ا‬Profits and losses with the rights of shareholders and prices of securities
Budget
Profits / Losses
after Tax
Stock
Dividends
Percentage
of Stock
Dividends
Cash
Dividends
End of Year
Equity
Share
Closing
Price
End of Year
2008
5,094,275
2,303,600
6.00
0
47,768,326
1.10
2009
1,002,050
0
0.00
0
49,980,388
1.15
2010
-2,270,207
0
0.00
0
48,036,063
0.90
2011
887,058
0
0.00
0
56,480,729
0.82
2012
648,513
0
0.00
0
57,208,245
0.92
2013
3,500,463
0
0.00
0
62,321,764
1.15
Exchange activity on the bank’s shares at the Palestine Stock Exchange
2013
2012
Comments
According to the
Number of stated shares
$50,000,000 / share
$50,000,000 / share
requirements of the
Palestine Monetary
Authority 072009/
Number of shares subscribed,
listed
1,047,104 shares were
48,719,588$ / share
47,672,484$ / share
listed as a result of the
IPO of 122013/
Number of shareholders
1,273
1,416
Opening price
0.88$
0.81$
Highest price
1.27$
0.92$
Lowest price
0.83$
0.64$
Closing price
1.15$
0.92$
68.88% of the total
Number of sessions in which
the share was exchanged
166
186
number of stock
exchange sessions
during 2013
Value of exchanged shares
“dollars”
Number of shares exchanged
“shares”
Number of transactions
executed
Average share turnover
4,991,377$
4,485,333$
4,651,838 shares
5,641,873 shares
700
1,213
9.55%
11.83%
56
Annual Report 2013
Ownership of Securities by Board Members and Members
of the Executive Administration:
A. Ownership of legal members of the board
Nationality of
Number of
Number of
Position
“Representative”
Al Tawfiq Investment Company
represented by Mr. WalidTawfiq
Fakhouri
Chair of
the board
Jordanian
7,000
7,000
Arab Gulf Company represented
by Mr. Yehya Zakaria Qadamani
Vice Chair
Palestinian
4,391,502
4,391,502
Member
Palestinian
1,725,024
1,725,024
Member
Palestinian
1,693,984
1,693,984
Member
Palestinian
4,253,961
4,055,938
Member
Jordanian
4,467,767
4,467,767
Member
Jordanian
4,067,975
4,067,975
Member
Palestinian
1,637,761
2,737,761
Member
Palestinian
10,488,219
9,999,990
Member Name
Yamama Company for General Investment represented by Mr. Salahuddin Mohammad Al Shareef
Farah Electrical and Health Appliances Company represented by
Mr. Sam Bahour
Palestinian Investment Fund Company represented by Mr. Basem
Abdul Halim
Bank of Jordan Company represented by Mr. Haitham Samih
Barakat
Jordanian Eqbal General Commerce Company represented by
Eqbal Investment Company represented by Dr. Fadi Saeed Qattan
Bank of Palestine Company represented by Dr. Atef Alawneh
shares as of
31/12/2013
shares as of
31/12/2012
B. Ownership of Members of the Board who are Company Representatives
Member Name
“representative”
Mr. Walid Tawfiq Fakhouri
Mr. Salahuddin Mohammad
Shareef
Mr. Sam Sami Bahour
Mr. Basem Abdul Halim
Mr. Haitham Samih Barakat
Dr. Fadi Saeed Qattan
Dr. Atef Alawneh
Member
Company Name
Tawfiq Investment Company
Arab Gulf Company
Yamama General
Investments Company
Farah Electrical
and Health Appliances Company
Palestinian Investment Fund
Company
Bank of Jordan
Company
Jordanian Eqbal
General Commerce Company
Eqbal Investment
Company
Bank of Palestine
Company
Position
Chair of
the board
Number of shares Number of shares
as of 31/12/2013 as of 31/12/2012
348,789
348,789
Vice Chair
89,149
83,999
Member
133,212
133,212
Member
0
0
Member
0
0
Member
11,168
5,649
Member
348,789
348,789
Member
0
0
Member
0
0
Annual Report 2013
57
C. Ownership of Executive Administration
Member Name
Member Company
“representative”
Name
Nationality
Number of
Number of
shares as of
shares as of
31/12/2013
31/12/2012
Mr. Sami Abdul Rahim Saidi
General Manager
Palestinian
0
143,005
Mr. Amjad Ghazi Sadeq Al
Jaabari
Executive Manager
– Operations and Systems Department
Palestinian
0
12,720
Mr. Ahmad Mohammad
Ibrahim Saleh
Manager of the Planning and Studies
Department
Palestinian
25,682
26,182
Mr. Saed Miqdad Miqdadi
Manager of the Risk
Management Department and Board
Secretary
Palestinian
3,146
3,000
* There are no companies controlled by the executive administration
D. Ownership of relatives of the board and executive administration (wife and
minor children only)
Relation to Board
Name
Mrs. Buthaina Abdul Qader
Saidi
Mrs. Amal Amin Aziz Qadamani
Number of
Number of
shares as of
shares as of
31/12/2013
31/12/2012
Palestinian
2,726
2,600
Wife of the Board Vice
Palestinian
Chair
26,220
24,000
and Executive
Nationality
Administration
General Manager’s
Wife
* There are no companies controlled by the executive administration
Form and Mechanisms of Communicating Information to the Shareholders:
1. Website of the Palestine Exchange and the Palestine Capital Markets Authority, all
essential data is communicated according to the disclosure system valid in Palestine.
2. Official correspondence via official mail, and sometimes through email and fax.
3. Local newspapers in the West Bank and Gaza.
4. Website of the Arab Islamic Bank, shareholder relations(www.aibnk.com)
5. By phone through the shareholders department 028036-241- and via email (linda.
yousef@aibnk.com)
6. Through all branches and offices of the Arab Islamic Bank spread throughout Palestine.
7. Annual reports published by the Bank
‫‪The Arab Islamic Bank‬‬
‫‪Annual Report 2013‬‬
‫تقرير هيئة الفتوى والرقابة الشرعية‬
‫‪ 31‬كانون أول ‪2013‬‬
‫‪58‬‬
Annual Report 2013
59
60
Annual Report 2013
‫القوائم المالية‬
2013 ‫ كانون أول‬31
Annual Report 2013
Ernst & Young
P.O. Box 1373
7th Floor,
PADICO House Bldg.
Al-Masyoun
Ramallah-Palestine
Tel: +972 22421011
Fax: +972 22422324
www.ey.com
Independent Auditors' Report
To the Shareholders of Arab Islamic Bank P.L.C.
We have audited the accompanying financial statements of Arab Islamic Bank P.L.C
(the Bank), which comprise the statement of financial position as at December 31,
2013, income statement, statement of comprehensive income, statement of
changes in equity, statement of cash flows, statement of changes in restricted
investment accounts and statement of earnings and disbursements prohibited by
Shari’a for the year then ended, and a summary of significant accounting policies
and other explanatory information.
Board of Directors’ Responsibility for the Financial Statements
The Board of Directors is responsible for the preparation and fair presentation of
these financial statements in accordance with the Islamic Shari’a Rules and
Principles as determined by the Shari’a Supervisory Board of the Bank, and in
accordance with the Financial Accounting Standards issued by the Accounting and
Auditing Organization for Islamic Financial Institutions, and for such internal
control as management determines is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to
fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on the financial statements based on our
audit. We conducted our audit in accordance with Auditing Standards for Islamic
Financial Institutions issued by the Accounting and Auditing Organization for
Islamic Financial Institutions (AAOIFI). Those standards require that we comply with
ethical requirements and plan and perform the audit to obtain reasonable
assurance about 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 auditors’ judgment, including the assessment of the risks of material
misstatement of the financial statements, whether due to fraud or error. In making
those risk assessment, the auditor considers internal controls relevant to the
entity’s preparation and fair presentation of the financial statements in order to
design audit procedures that are appropriate for the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the entity’s internal
controls. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by
management, 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 present fairly, in all material respects, the
financial position of the Bank as at December 31, 2013 and its financial
performance, cash flows, statement of changes in restricted investment accounts
and statement of earnings and disbursements prohibited by Shari’a for the year
then ended in accordance with the Islamic Shari’a Rules and Principles as
determined by the Shari’a Supervisory Board of the Bank, and in accordance with
Financial Accounting Standards issued by the Accounting and Auditing
Organization for Islamic Financial Institutions.
A member firm of Ernst & Young Global Limited
Ernst & Young – Middle East
March 26, 2014
Ramallah – Palestine
61
62
Annual Report 2013
ARAB ISLAMIC BANK
STATEMENT OF FINANCIAL POSITION
As at December 31, 2013
Assets
Cash and balances with Palestine Monetary
Authority
Balances at banks and financial institutions
Investments at Islamic banks
Islamic financing
Financial assets at fair value through equity
Financial assets at amortized cost
Investment properties
Property and equipment
Deferred tax assets
Other assets
2013
U.S. $
2012
Restated
(Note 44)
U.S. $
January 1,
2012
Restated
(Note 44)
U.S. $
88,609149
59,860,159
80,479,423
191,325,328
7,223,123
15,066,941
6,470,776
2,079,414
18,700,388
81,084,050
35,521,363
46,650,235
171,759,593
6,922,311
14,228,289
7,222,117
1,988,014
9,840,150
47,034,984
17,257,883
60,289,291
133,226,391
6,465,655
7,454,537
14,060,773
7,789,896
1,816,355
6,010,148
469,814,701
375,216,122
301,405,913
12
13
14
15
16
17
18
43,629,188
110,592,681
7,279,284
2,708,259
2,484,744
1,861,475
5,182,651
173,738,282
16,155,707
91,031,595
4,851,023
2,448,887
975,263
1,742,076
6,452,202
123,656,753
222,640
80,767,010
3,430,139
2,057,979
905,177
1,690,062
4,143,022
93,216,029
19
233,754,655
194,351,124
151,709,155
20
21
21
21
8
7
48,719,588
2,731,027
3,937,351
820,076
4,133,615
415,413
1,564,694
62,321,764
47,672,484
2,380,981
2,666,494
295,007
3,868,475
114,601
210,203
57,208,245
47,672,484
2,316,130
2,085,020
197,730
3,752,973
151,100
305,292
56,480,729
469,814,701
20,616,025
375,216,122
17,480,771
301,405,913
45,927,135
Notes
3
4
5
6
7
8
9
10
11
Total Assets
Liabilities, Unrestricted Investment
Accounts and Equity
Liabilities
Banks and financial institutions deposits
Customers’ deposits
Cash margins
Sundry provisions
Tax provisions
Deferred tax liabilities
Other liabilities
Total Liabilities
Unrestricted investment accounts
Equity
Paid-in share capital
Statutory reserve
General banking risk reserve
Pro-cyclicality reserve
Investment properties reserve
Cumulative change in fair value
Retained earnings
Total Equity
Total Liabilities, Unrestricted Investment
Accounts and Equity
Restricted investment accounts
The accompanying notes from 1 to 46 are part of these financial statements
1
Annual Report 2013
ARAB ISLAMIC BANK
INCOME STATEMENT
For the year ended December 31, 2013
Notes
Revenues
Investments and financing revenues
Less: Return on unrestricted investment accounts
Bank’s share of income from financing and
investment
Bank's share of income from restricted investment
accounts
Net commissions
Foreign currencies exchange gains
Gains (losses) on financial assets
Other revenues
Total revenues
Expenses
Personnel expenses
Operating expenses
Depreciation and amortization
Impairment allowance for Islamic financing
Impairment loss on investments
PMA fines
Total expenses
Profit before tax
Tax expense
Profit for the year
22
23
24
25
26
27
28
29
30
6
31
16
Basic and diluted earnings per share
35
2013
U.S. $
2012
U.S. $
13,022,566
(701,164)
11,518,400
(446,034)
12,321,402
11,072,366
161,085
1,547,900
2,179,736
234,975
345,720
16,790,818
151,087
1,248,180
1,510,461
(198,030)
377,489
14,161,553
5,928,197
4,409,980
1,181,147
299,031
10,000
11,828,355
4,962,463
(1,462,000)
3,500,463
5,240,458
5,935,627
1,311,681
141,311
490,000
13,119,077
1,042,476
(393,963)
648,513
0.073
0.014
2
63
64
Annual Report 2013
ARAB ISLAMIC BANK
STATEMENT OF COMPREHENSIVE INCOME
For the year ended December 31
2013
U.S. $
Profit for the year
2012 Restated
(Note 44)
U.S. $
3,500,463
648,513
300,812
384,539
(119,399)
(36,499)
167,516
(52,014)
Other comprehensive income for the year
565,952
79,003
Total comprehensive income for the year
4,066,415
727,516
Other comprehensive income:
Items to be reclassified in the income statement in
subsequent periods:
Change in fair value of financial assets
Unrealized gains on revaluation of investment properties
Deferred taxes
3
December 31, 2012
Balance, beginning of the year
before adjustments
47,672,484
Adjustments (note 44)
Beginning balance after
adjustments
47,672,484
Profit for the year
Adjusted other comprehensive
income
Total comprehensive income
for the year
Transfer to reserves
Balance, end of year
47,672,484
Paid-in share
capital
December 31, 2013
U.S. $
Balance, beginning of the year 47,672,484
Profit for the year
Other comprehensive income
Total comprehensive income
for the year
Transfer to reserves
Special subscriptions to capital
1,047,104
48,719,588
STATEMENT OF CHANGES IN EQUITY
ARAB ISLAMIC BANK
581,474
2,666,494
64,851
2,380,981
97,277
295,007
-
197,730
-
133,059
64,671
525,069
820,076
Procyclicality
U.S. $
295,007
-
151,100
(36,499)
(36,499)
114,601
115,502
115,502
3,868,475
151,100
-
300,812
415,413
Cumulative
change in fair
value
U.S. $
114,601
300,812
3,752,973
-
5,443,035
(1,690,062)
265,140
4,133,615
Investment
properties
U.S. $
3,868,475
265,140
648,513
(743,602)
210,203
-
305,292
648,513
(815,655)
1,120,947
3,500,463
(2,145,972)
1,564,694
Retained earnings
(Accumulated
losses)
U.S. $
210,203
3,500,463
-
727,516
57,208,245
79,003
56,480,729
648,513
56,853,438
(372,709)
4,066,415
1,047,104
62,321,764
Total equity
U.S. $
57,208,245
3,500,463
565,952
Annual Report 2013
4
2,085,020
-
2,316,130
-
350,046
2,731,027
2,085,020
-
1,270,857
3,937,351
Statutory
U.S. $
2,380,981
-
2,184,395
131,735
General
banking
risk
U.S. $
2,666,494
-
Reserves
65
66
Annual Report 2013
ARAB ISLAMIC BANK
STATEMENT OF CASH FLOWS
Operating activities
Profit before taxes
Adjustments for:
Sundry provisions
Impairment loss of financial assets at fair value through
equity
Depreciation and amortization
Impairment allowance for Islamic financing
Loss on disposal of property and equipment
Impairment loss on investments
Notes
Changes in assets and liabilities:
Statutory cash reserve
Islamic financing
Investments at Islamic banks maturing after 3 months
Other assets
Customers' deposits
Cash margins
Other liabilities
Net cash flows used in operating activities before taxes
and provisions
Taxes paid
Sundry provisions paid
Net cash flows used in operating activities
Investing activities
Purchase of financial assets at fair value through equity
Sale of financial assets at amortized cost
Purchase of investment properties
Purchase of property and equipment
Purchase of intangible assets
Sale of property and equipment
Net cash flows (used in) from investing activities
Financing activities
Increase in paid-in share capital
Increase in unrestricted investment accounts
Net cash flows from financing activities
Increase in cash and cash equivalents
Cash and cash equivalents, beginning of the year
Cash and cash equivalents, end of year
34
2013
U.S. $
4,962,463
1,042,476
512,019
439,000
1,181,147
299,031
542
6,955,202
368,103
1,311,681
141,311
5,609
490,000
3,798,180
(11,770,026)
(19,864,766)
(2,228,863)
(8,960,372)
19,561,086
2,428,261
(1,269,551)
(14,189,144)
(38,674,513)
1,421,543
(3,611,465)
20,393,493
1,420,884
2,309,188
(15,149,029)
(43,919)
(252,647)
(15,445,595)
(27,131,834)
(495,536)
(48,092)
(27,675,462)
(454,113)
(316,517)
(15,865)
2,168
(784,327)
(861,258)
6,964,537
(651,725)
(335,961)
19,630
5,135,223
1,047,104
39,403,531
40,450,635
24,220,713
104,739,251
128,959,964
32,513,061
32,513,061
9,972,822
94,766,429
104,739,251
5
2012
U.S. $
Annual Report 2013
ARAB ISLAMIC BANK
Statements of Changes in Restricted Investment Accounts
Restricted investment accounts - Customers
Restricted investment account balance
Gross income for the year
Bank’s share of income from restricted
investment accounts
Net income of restricted investment accounts
during the year
2013
U.S. $
Investment
deposits
2012
U.S. $
Investment
deposits
20,616,025
20,616,025
17,480,771
17,480,771
394,398
313,145
(161,085)
(151,087)
233,313
162,058
6
67
68
Annual Report 2013
ARAB ISLAMIC BANK
Statement of Earnings and Disbursements Prohibited by Shari’a
Earnings prohibited by Shari’a
Interest revenues
Profit from Islamic financing
Total earnings prohibited by Shari’a
2013
U.S. $
2012
U.S. $
187,089
107,233
294,322
128,248
86,244
214,492
Disbursements
Donations
Total disbursements
Balance of prohibited by Shari’a, end of year
294,322
294,322
-
214,492
214,492
-
7
Annual Report 2013
ARAB ISLAMIC BANK
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2013
1.
General
Arab Islamic Bank P.L.C. (the Bank) was incorporated in Al-Bireh, Palestine as a
public shareholding company in accordance with the Companies Law of 1964, and
registered in Palestine under number (563201011) on January 8, 1995.
The Bank commenced operations in early 1996. The Bank is licensed to provide all
banking services, financing, trading and investing activities in accordance with
Islamic Shari’a principles through its headquarters in Al-Bireh, (9) branches and
one office.
The Bank’s operations are supervised by a Shari’a and Fatwa Supervisory Board
(the Board) which comprise three members appointed by the General Assembly of
the Bank. The Board’s role is to review the Bank’s activities and transactions to
ensure the Bank’s compliance with Islamic Shari’a rules and principles.
The Bank’s General Assembly resolved in its extraordinary meeting held on
September 28, 2010 to increase authorized share capital up to U.S. $ 50 million.
The Bank’s paid-in share capital is U.S. $ 48,719,588 with par value of U.S. $
1 each as of December 31, 2013.
The total number of the Bank’s staff is (264) and (254) as at December 31, 2013
and 2012, respectively.
The financial statements were authorized for issuance by the Bank’s Board of
Directors during their meeting number (2/2014) held on February 25, 2014.
2.1 Basis of preparation
The financial statements have been prepared in accordance with the Financial
Accounting Standards issued by the Accounting and Auditing Organization for
Islamic Financial Institutions (AAOIFI) and in compliance with Islamic Shari’a Rules
and Principles as determined by the Bank’s Shari’a Supervisory Board, prevailing
local laws and Palestine Monetary Authority (PMA) regulations.
The financial statements have been prepared under the historical cost basis, except
for financial assets at fair value through equity and investment properties that
have been measured at fair value at the date of the financial statements.
The financial statements have been presented in U.S. Dollars (U.S $), which is the
functional currency of the Bank.
The standards issued by the International Accounting Standard Board and the
interpretations issued by International Financial Reporting Interpretations
Committee issued by the International Accounting Standards Board are applied in
case of the absence of accounting standards issued by the Accounting and Auditing
Organizations for Islamic Financial Institutions.
8
69
70
Annual Report 2013
2.2 Changes in accounting polices
The accounting policies adopted are consistent with those of the previous financial
year, except for the several new and amended standards. The following standards
have no material effect on the financial position or performance of the Bank:
IAS 1 Presentation of Items of Other Comprehensive Income – (Amendment)
The amendments to IAS 1 introduce a grouping of items presented in other
comprehensive income (OCI). Items that could be reclassified (or recycled) to
profit or loss at a future point in time shall have to be presented separately from
items that will never be reclassified. The amendment affects presentation only and
has no impact on the Bank’s financial position or performance.
IAS 1 Clarification of the requirement for comparative information (Amendment)
The amendment to IAS 1 clarifies the difference between voluntarily additional
comparative information and the minimum required comparative information. An
entity must include comparative information in the related notes to the financial
statements when it voluntarily provides comparative information beyond the
minimum required comparative period. The additional voluntarily comparative
information does not need to be presented in a complete set of financial
statements.
FAS 26 Investments properties
Initial recognition of real estate investments should be at cost at the time they are
acquired. These costs include initial costs to acquire the investment plus any
additional direct costs. For the purpose of subsequent measurement, the entity
shall determine whether the real estate investment is being held-for-use or heldfor-sale.
Held-for Use: Either fair value model or the cost model is applied
1. Cost Model: Investments in real estate should be recorded at cost less
depreciation and any impairment provisions.
2. Fair value model: If the entity elects to use the fair value model, all real
estate investment shall be recorded at fair value. Unrealized gains are
recorded in fair value reserve and any unrealized losses are adjusted to the
extent of available credit balance in the reserve. If unrealized losses
exceeded the available balance, the unrealized losses should be recognized
in the income statement.
Held-for-sale: Real estate investment shall be carried at the lower of its carrying
value and expected fair value less costs to sell (net realizable value). Depreciation
on such assets should be discontinued from date of reclassification to Held-forsale. Any adjustments to fair value shall be recorded in the income statement.
IFRS 13 - Fair Value Measurement
IFRS 13 provides guidance on how to measure fair value under IFRS when fair
value is required or permitted. The Bank is currently assessing the impact that this
standard will have on the financial position and performance. This standard has no
impact on the Bank’s financial position or performance.
The following standards and interpretation have been issued but are not yet
mandatory, and have not been adopted by the Bank. These standards and
interpretation are those that the Bank reasonably expects to have no impact on
disclosures, financial position or performance when applied at a future date:
9
Annual Report 2013
Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)
These amendments will become effective for annual periods beginning January 1,
2014.
Offsetting Financial Assets and Financial Liabilities - Amendments to IAS 32
This standard will become effective for annual periods beginning on or after
January 1, 2014.
IFRIC Interpretation - 21 Levies
This Interpretation will be effective for annual periods beginning on or after 1
January 1, 2014.
2.3 Segments Information
A business segment consists of assets and operations providing goods or services
that are exposed to risks and returns different from those of other business
segments.
A geographic segment relates to goods or services within a specific economic
environment that are exposed to risks and returns different from those of other
segments working in other economic environments.
2.4
Summary of Significant Accounting Policies
Revenues and expenses recognition
Revenues and expenses are recognized using the accrual basis of accounting,
except for profits from non-performing Islamic financing which are recognized as
suspended profits and not recorded as revenues. commission revenues are
recognized when services are rendered.
Date of financial assets recognition
Purchases and sales of financial assets are recognized on the trade date, (which is
the date on which the Bank commits to purchasing or selling the financial asset).
Financial assets at fair value through equity are measured at fair value plus cost of
acquisition.
Purchases and sales of financial assets are recognized on the trade date, which the
date on which the Bank commits to purchasing or selling the financial assets.
Purchases and sales of financial assets occurred when the financial assets are
transferred during the period according to the laws or to the market rules.
Equity investments classified as financial assets at fair value through equity are
those, that are not classified as trading investments. After initial measurement, fair
value changes are reported in the statement of comprehensive income until:
The investment when disposed, the cumulative unrealized gain or losses are
recognized in income statement.
The impairment loss is recognized, then cumulative unrealized losses
recognized in income statement.
Realized gains on such investments are recorded on the income statement when
earned.
Financial assets at fair value through equity are stated at cost when their fair value
cannot be reliably determined.
10
71
72
Annual Report 2013
Fair value for financial Instruments
Fair value of financial instrument represent the closing price of similar items with a
market price in active markets at financial statements date. Unquoted investments
are measured at fair value on the basis of market price for similar investments.
Fair value measurement
The bank measures most of its financial instruments, and discloses some of its
non-financial assets such as investment properties, at fair value at each reporting
date. Also, fair values of financial instruments and non-financial assets measured
at cost are disclosed in the notes to the financial statements.
Fair value is the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement
date. The fair value measurement is based on the presumption that the transaction
to sell the asset or transfer the liability takes place either:
In the principal market for the asset or liability, or
In the absence of a principal market, in the most advantageous market
for the asset or liability
The principal or the most advantageous market must be accessible to by the Bank.
A fair value measurement of a non-financial asset takes into account a market
participant's ability to generate economic benefits by using the asset in its highest
and best use or by selling it to another market participant that would use the asset
in its highest and best use.
The Bank uses valuation techniques that are appropriate in the circumstances and
for which sufficient data are available to measure fair value, maximising the use of
relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial
statements are categorised within the fair value hierarchy, described as follows:
Level 1 — Quoted (unadjusted) market prices in active markets
Level 2 — Valuation techniques for which the lowest level input that is
significant to the fair value measurement is directly or indirectly
observable
Level 3 — Valuation techniques for which the lowest level input that is
significant to the fair value measurement is unobservable
The Bank determines whether transfers have occurred between levels in the
hierarchy by re-assessing categorization (based on the lowest level input that is
significant to the fair value measurement as a whole) at the end of each reporting
period .
External appraisers are involved for valuation of significant assets, such as
investment properties. The Bank decides, after discussions with the external
appraiser, which valuation techniques and inputs to use for each case.
For the purpose of fair value disclosures, the Bank has determined classes of
assets and liabilities on the basis of the nature, characteristics and risks of the
asset or liability and the level of the fair value hierarchy as explained above.
Impairment of financial assets
The Bank assesses at each statement of financial position date whether there is
any objective evidence that a financial asset or group of financial assets is
impaired. If such evidence exists, any impairment loss is recognized in the income
statement.
11
Annual Report 2013
Equity classified as financial assets at fair value through equity - if there is a
prolonged decline in the fair value below cost, the decline is measured at the
original cost, and the period of the prolonged decline is measured from the
period of decline of fair value below cost. Impairment is the difference between
cost and fair value, less any impairment loss previously recognized in the
income statement.
For debt instruments classified as financial assets and carried at cost impairment is the difference between amortized cost and fair value less any
impairment loss previously recognized in the income statement.
Restricted investment accounts
The Bank receives an agreed upon percentage of profits as commission for
investing customers’ restricted investment accounts in specific ventures on behalf
of the customers. This commission represents the difference between the
percentage of profit earned from the specific venture and the percentage agreed
upon with customers. Customers bear profits or losses resulting from these
ventures except in the case of the Bank’s violation, negligence or non-compliance
with agreed upon conditions, then the Bank bears the resulting losses.
Return on unrestricted investment accounts
Returns are distributed to unrestricted investment accounts according to the
Bank’s policy and after deducting the Bank’s share as a Mudarib.
Profits from jointly financed Islamic financing and investments are distributed
according to the average monthly balances of such investments. The distribution
for all currencies is as follows:
Unrestricted
Share of
investment
deposits in
Bank’s
accounts’
profits
share
Share
%
%
%
Saving and cash margins sharing profits
85
95
5
Deposits maturing within 1 month
85
95
5
Deposits maturing within 3 months
85
95
5
85
95
5
Deposits maturing within 1 year
85
95
5
The Bank bears all administrative costs. In addition, the executive management of
the Bank adjusts the profit percentage distributed to unrestricted investment
accounts according to the Bank’s results as well as prevailing market rates.
Profit equalization reserve
The excess of adjusted profits is recorded in profit equalization reserve to face the
volatility of returns on unrestricted investment accounts. In case that the
amortized profit to be distributed is less than the realized profit, the Bank uses
profit equalization reserve.
In case of the absence of profits for distribution, the Bank has the right to grant
non-refundable gifts for the unrestricted investment accounts.
Murabaha receivables
Murabaha receivables are recorded at cost net of provision for doubtful Murabaha
and suspended profits. Specific provision is established when there is objective
evidence that may affect future cash flows, When the impairment is measurable,
provision is recorded in the income statement.
12
73
74
Annual Report 2013
Non performing Murabaha profits are suspended in accordance with PMA
instructions.
Murabaha receivables accounts are written off from the provision when the
collection procedures become ineffective. The excess in the provision and cash
recoveries of Murabaha receivables that were previously written off are recorded
in the income statement.
Ijarah receivables
Ijarah is the benefit of ownership against compensation and is divided into two
types:
Operating Ijarah: are lease contracts that do not end with the lessee to own the
leased asset.
Ijarah muntahia bittamleek: are leases, which expire with the lessee owning the
leased asset and take several types as reflected in the standard lease and capital
lease in accordance with the financial accounting standards for Islamic financial
institutions.
Ijarah receivables are recorded at cost including direct cost to make ready for
intended use. Income is distributed in proportion to the financial periods covered
by the lease contract. Maintenance expenses are recorded in the financial period in
which they occur.
Istisna’a financing
Istisna'a is a contract of sale between the Bank as maker or contractor and the
owner of the contract (the buyer), where the Bank undertakes to build or
manufacture the subject of the contract, upon request of the owner of the contract
and according to his/her specifications, for the right price and in a manner agreed
upon payment, whether paid in advance or by installments or deferring payment to
a specific date in the future. Istisna'a is recoded at fair value after deducting the
suspended profits and provision for doubtful Islamic financing.
Mudarabah
Mudarabah is the partnership that the Bank in which contributes to the working
capital of the beneficiary. Mudarabah is recorded at fair value after deducting the
suspended profits and provision for doubtful Islamic financing.
Properties held for rental, or for capital appreciation purposes, or both, are
classified as investments properties. Investments properties are measured initially
at cost including transaction costs, being the fair value of the consideration given
and acquisition charges associated with the property. Subsequent to initial
recognition, investment properties are stated at fair value and changes in fair value
are recognized in the statement of comprehensive income. In case of decline in the
carrying value of these properties a provision should be taken and recognized in
the income statement in the period where the decline occurs.
Property and equipment are stated at cost less accumulated depreciation and/or
accumulated impairment losses, if any. Such cost includes the cost of replacing
part of the property and equipment and borrowing costs for long-term construction
projects if the recognition criteria are met. All other repair and maintenance costs
are recognized in the income statement as incurred. Land is not depreciated.
13
Annual Report 2013
Depreciation is calculated on a straight-line basis over the estimated useful lives at
the following annual rates:
Useful life
Years
Buildings
50
Furniture, equipment and leasehold improvements
5-14
Motor vehicles
10
Computers
5
An item of property and equipment and any significant part initially recognized is
derecognized upon disposal or when no future economic benefits are expected
from its use or disposal. Any gain or loss arising on derecognition of the asset
(calculated as the difference between the net disposal proceeds and the carrying
amount of the asset) is included in the income statement when the asset is
derecognized.
The assets’ residual values, useful lives and methods of depreciation are reviewed
at each financial year end and adjusted prospectively, if appropriate.
Intangible assets
The cost of intangible assets acquired in a business combination is their fair value
as at the date of acquisition. Intangible assets acquired separately are measured on
initial recognition at cost. Following initial recognition, intangible assets are carried
at cost less any accumulated amortization and any accumulated impairment losses.
The useful lives of the intangible assets are assessed to be either finite or
indefinite. Intangible assets with finite lives are amortized over the useful economic
life. The amortization expense on intangible assets with finite lives is recognized in
the income statement. Intangible assets with indefinite useful lives are tested for
impairment annually and the impairment expenses are recognized in the income
statement.
Intangible assets resulting from the Bank’s operations are not capitalized and
should be recognized in the income statement in the period the expenditure
incurred.
Intangible assets are reviewed for impairment at each reporting date. Also the
economic useful lives for definite life intangible assets are reassessed and any
adjustments are made in the subsequent periods.
Intangible assets comprise computer software. Bank’s management estimates the
useful lives of the intangibles; the intangibles are amortized using the straight line
method based on the expected useful live of 5 years.
Assets obtained by the Bank by calling on collateral
Assets obtained by the Bank by calling on collateral are stated in the statement of
financial position under “Other assets” at the lower of the carrying value or fair
value of the assets. These assets are revaluated individually at the date of the
financial statements at fair value. Any impairment loss is recorded in the income
statement. However, any appreciation in the assets’ value is not recorded as gain.
Subsequently, the gain resulted from the appreciation of the assets value is
recorded in the income statement to extent of the impairment loss previously
recorded.
14
75
76
Annual Report 2013
Zakat
During 2012, the Bank has changed the policy related to Zakat, in which each
shareholder bears the payment responsibility of his/her Zakat payment. The Bank,
with the consent of Shari'a Supervisory Board, annually informs the shareholders
with the amount of Zakat due on each share.
Earnings prohibited by Shari’a
The Bank records earnings prohibited by Shari’a in a special account that is shown
in the statement of financial position within other liabilities account. This amount is
disbursed on charitable activities as determined by the Bank’s Shari’a Supervisory
Board.
Offsetting
Financial assets and financial liabilities are offset and the net amount is reported in
the statement of financial position only when there is a legally enforceable right to
offset the recognized amounts and the Bank intends to either settle on a net basis,
or to realize the asset and settle the liability simultaneously.
Provisions
Provisions are recognized when the Bank has a present obligation (legal or
constructive) arising from a past event and the costs to settle the obligation are
both probable and able to be reliably measured.
Tax provisions
Income tax expense is calculated based on taxable income that may differ from
accounting income as the later includes non-taxable income or non-deductible
expenses. Such income/expenses might be taxable/deductible in the following
years.
The Bank provides for income taxes in accordance with the rates enforced by law
and regulations of Palestine as well as International Accounting Standards (12).
Deferred income tax is provided for using the liability method on temporary
differences at the statement of financial position date between the tax bases of
assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred taxes are calculated according to tax rates that are expected to applicable
on the date of the tax settlement or the realization of deferred tax assets.
Basic earnings per share is calculated by dividing the net profit for the year
attributable to ordinary equity holders of the Bank by the weighted average
number of ordinary shares outstanding during the year.
Diluted earnings per share is calculated by dividing the profit attributable to
ordinary equity holders of the Bank (after deducting interest and any related
expenses on the convertible preference shares) by the weighted average number of
ordinary shares outstanding during the year plus the weighted average number of
ordinary shares that would be issued on the conversion of all the dilutive potential
ordinary shares into ordinary shares.
Cash and cash equivalents
Represents cash on hand and cash balances at the PMA, cash at financial
institutions, and investments at Islamic banks that mature within three months
after subtracting banks and financial institutions’ deposits that mature within three
months and the restricted balances.
15
Annual Report 2013
Foreign currencies
Foreign currency transactions during the year are recorded using exchange rates
that were in effect at the dates of transactions.
Monetary assets and liabilities in foreign currencies are translated at the exchange
rates prevailing at the financial statements date as issued by PMA.
Non-monetary items measured at fair value in foreign currencies are translated
using the exchange rates prevailing at the date of determining the fair value.
Any foreign currency exchange gains or losses are taken to the income statement.
Use of estimates
The preparation of the financial statements requires Bank’s management to make
estimates and assumptions that affect the reported amounts of financial assets and
liabilities and disclosure of contingent liabilities, These estimates and assumptions
also affect the revenues, expenses and the resultant provisions, In particular,
considerable judgment by management is required in the estimation of the amount
and timing of future cash flows. Such estimates are necessarily based on
assumptions about several factors involving varying degrees of judgment and
uncertainty and actual results may differ resulting in future changes in such
provisions.
Management believes that estimates are reasonable and are as follows:
Provision for doubtful Islamic financing: the Bank reviews its provision
according to PMA regulations.
Tax provisions are calculated based on the tax rates, prevailing laws and
accounting standards that are applicable at the statement of financial position
date.
Management reviews periodically the useful lives of the tangible and intangible
assets in order to assess the depreciation and amortization for the year based
on the assets’ condition and useful lives and future economic benefits, any
impairment is recognized in the income statement.
Management reviews, on a regular basis, the financial assets that are stated at
cost to estimate impairments, if any. Impairment losses are recognized in the
income statement.
The fair value of investment properties is determined at least through two
appraisers certified or accredited by the Palestine Capital Market Authority.
Legal cases provision are established to provide for any legal obligations, if
any, based on the opinion of the Bank’s lawyer.
3. Cash and balances with Palestine Monetary Authority
This item represents the following:
Cash on hand
Balances with PMA:
Current and demand accounts
-
2013
U.S. $
39,398,018
2012
U.S. $
41,183,473
897,431
48,313,700
88,609,149
3,356,903
36,543,674
81,084,050
PMA requested the Bank to increase statutory reserve rate from 12% to 14%
starting from September 2013 as a result of non-compliance with PMA
instruction number (7/2009) (the Instruction) regarding the increase of the
Bank’s paid-in capital to U.S. $50 million. Subsequent to the date of the
financial statements and through a special subscription, the Bank increased its
paid-in capital to U.S. $50 million according to the instruction.
16
77
78
-
Annual Report 2013
No profit is earned on statutory cash reserves and current accounts.
4. Balances at banks and financial institutions
Local banks and financial institutions
Foreign banks and financial institutions
-
2013
U.S. $
2012
U.S. $
33,321,937
33,321,937
10,536,194
10,536,194
19,167,626
7,370,596
26,538,222
59,860,159
12,952,337
12,032,832
24,985,169
35,521,363
Non-profit bearing balances at banks and financial institutions amounted to
U.S. $ 52,489,563 and U.S. $ 23,488,531 as at December 31, 2013 and
2012, respectively. This item includes swap deposits of U.S. $ 33,321,937
and U.S. $ 15,326,596 as at December 31, 2013 and 2012, respectively.
5. Investments at Islamic banks
Investments maturing within 3 months
Investments maturing after 3 months
Impairment loss on investments at Islamic
banks
2013
U.S. $
72,433,544
11,805,725
84,239,269
2012
U.S. $
40,833,219
9,576,862
50,410,081
(3,759,846)
80,479,423
(3,759,846)
46,650,235
Distribution of investments at Islamic banks is as follow:
Deposits at Islamic banks
syndicated foreign investments
Impairment loss on investments at Islamic
banks
2013
U.S. $
73,677,630
10,561,639
84,239,269
2012
U.S. $
34,628,439
15,781,642
50,410,081
(3,759,846)
80,479,423
(3,759,846)
46,650,235
The following is a summary of changes in provisions for impairment loss on
investments at Islamic Bank:
2013
2012
U.S. $
U.S. $
(3,759,846)
(3,759,846)
Provision during the year
Balance, end of the year
(3,759,846)
(3,759,846)
17
Annual Report 2013
6. Islamic financing
Murabah receivables
Mudarbah financing
Ijarah muntahia bittamleek
Current overdraft accounts
Suspended profits
Impairment provision for doubtful Islamic
financing
2013
U.S. $
172,454,654
7,984,794
8,064,230
2,560,835
987,652
192,052,165
(90,270)
2012
U.S. $
153,773,627
9,370,466
5,269,329
3,182,713
556,376
172,152,511
(90,645)
(636,567)
191,325,328
(302,273)
171,759,593
–
Islamic financing net of unearned profits amounted to U.S. $ 17,106,661 and
U.S. $ 14,178,731 as at December 31, 2013 and 2012, respectively.
–
Downgraded Islamic financing net of suspended profits according to PMA
regulations amounted to U.S. $ 6,628,337 and representing 3.45% and U.S. $
4,813,752 representing 2.80% of gross Islamic financing as at December 31,
2013 and 2012, respectively.
–
Defaulted Islamic financing net of suspended profits amounted to U.S. $
2,039,918 representing 1.06% of gross Islamic financing and U.S. $
2,590,212 representing 1.50% of gross Islamic financing as at December 31,
2013 and 2012, respectively.
–
Direct Islamic financing granted to Palestinian National Authority and by its
guarantee amounted to U.S. $ 42,583,583 representing 22.17% of gross
Islamic financing and U.S. $ 42,086,233 representing 24.45% of gross
Islamic financing as at December 31, 2013 and 2012, respectively.
–
Fair value of customers’ collaterals against direct Islamic financing according
to PMA regulations amounted to U.S. $ 64,206,013 and U.S. $ 49,810,282
as at December 31, 2013 and 2012, respectively.
–
Islamic financing granted to non-residents as at December 31, 2013
amounted to U.S. $ 321,861.
–
According to PMA circular number (1/2008), defaulted Islamic financing for
more than six years were written off from financial statements. These
defaulted Islamic financing amounted to U.S. $ 85,918 as at December 31,
2013. The impairment provision for doubtful Islamic financing and suspended
profits balance for defaulted accounts amounted to U.S. $ 82,589 and U.S. $
3,329 as at December 31, 2013 and 2012, respectively.
The movement on the impairment provision for doubtful Islamic financing was as
follows:
2013
2012
U.S. $
U.S. $
302,273
216,577
299,031
141,311
Recovery of impaired Islamic financing
11,149
9,380
Impairment provision written off for financing in
default for more than 6 years
(6,962)
(74,453)
Foreign currencies difference
31,076
9,458
636,567
302,273
18
79
80
Annual Report 2013
The movement on suspended profits was as follows:
Suspended profits during the year
Suspended profits transferred to revenues
Suspended profits written off for financing in
default for more than 6 years
Foreign currencies difference
2013
U.S. $
90,645
48,131
(51,618)
2012
U.S. $
40,825
75,568
(25,335)
(201)
3,313
90,270
(652)
239
90,645
The movement on the impairment provision for doubtful Islamic financing default
for more than 6 years was as follows:
2013
2012
U.S. $
U.S. $
86,776
21,703
6,962
74,453
Recovery during the year
(11,149)
(9,380)
82,589
86,776
Following is the distribution of Islamic financing net of suspended profits by
economic sector:
2013
2012
U.S. $
U.S. $
Industrial and Trade
Manufacturing
9,468,387
9,347,369
Agricultural
678,921
344,772
10,147,308
9,692,141
Services
Others
16,239,299
22,793,730
16,239,299
22,793,730
Wholesale and Retail
Internal trade
40,128,548
30,659,492
Financing of professions
3,265,848
3,198,296
43,394,396
33,857,788
Real Estate
Permanent residence
16,078,218
16,180,184
Commercial and investment
17,820,647
14,831,486
33,898,865
31,011,670
Land
Personal
3,584,025
3,288,097
Investment
21,567,091
15,272,984
25,151,116
18,561,081
Consumers’ Loans
Car loans
18,804,968
12,432,049
Consumable goods financing
1,742,360
1,627,174
20,547,328
14,059,223
Public Sector
Palestine National Authority
42,583,583
42,086,233
42,583,583
42,086,233
191,961,895
172,061,866
19
Annual Report 2013
2013
Local
Foreign
Total
U.S. $
U.S. $
U.S. $
Quoted shares 2,367,004
- 2,367,004
Unquoted shares 4,374,429
481,690 4,856,119
6,741,433
481,690 7,223,123
81
7.
Local
U.S. $
2,007,807
4,374,429
6,382,236
2012
Foreign
U.S. $
540,075
540,075
Unquoted shares are shown at cost amounted to U.S. $ 4,856,119 after
deducting accumulated impairment losses amounting to U.S. $ 1,880,206.
Bank’s management believes that fair values of such investments are not
materially different from their carrying amounts.
Local unquoted shares as at December 31, 2013 represent investment in
Northern Industrial Company (the Company) in Jenin which amounted to U.S.
$ 4,374,429. The Palestinian National Authority confiscated part of the
Company’s land according to the Palestinian Ministers Council resolution
dated September 17, 2000 for the benefit of Jenin Industrial Zone Project.
According to a letter sent by the Minister of Finance dated April 4, 2004, the
Company will be fairly compensated for its share in the confiscated land after
completing the technical arrangements in connection with the confiscated
land revaluation in accordance with Condemnation Law number (2) for the
year 1953 prevailing in the West Bank. Up to the date of the financial
statements, the Company was not compensated. During 2011 and 2012,
the Bank recognized impairment loss on this investment in the amount of
U.S. $ 736,206.
Total
U.S. $
2,007,807
4,914,504
6,922,311
Following is the movement on the cumulative change in fair value for financial
assets during the year:
2013
2012
U.S. $
U.S. $
114,601
151,100
Unrealized gains (losses)
300,812
(36,499)
415,413
114,601
8. Investment properties
Following is the movement on Investment properties:
2013
U.S. $
14,228,289
454,113
384,539
15,066,941
Additions
Change in fair value during the year
2012
U.S. $
14,060,773
167,516
14,228,289
Following is the movement on investment properties reserve:
2013
U.S. $
3,868,475
384,539
(119,399)
4,133,615
Unrealized gains
20
2012
U.S. $
3,752,973
167,516
(52,014)
3,868,475
January 1,
2012
U.S. $
4,329,367
1,113,668
(1,690,062)
3,752,973
82
Annual Report 2013
9. Property, plant and equipment
December 31, 2013
Cost:
Additions
Disposals
Accumulated depreciation:
Depreciation for the year
Disposals
Net book value
Projects in progress*
Net book value as at
December 31, 2013
December 31, 2012
Cost:
Balance, beginning of
the year
Additions
Disposals
Accumulated
depreciation:
Balance, beginning of
the year
Depreciation for the year
Disposals
Net book value
Projects in progress*
Net book value as at
December 31, 2012
Buildings
U.S. $
Furniture,
equipment and
leasehold
improvements
U.S. $
888,064
888,064
Motor
vehicles
U.S. $
Computers
U.S. $
11,229,008
129,212
(12,402)
11,345,818
465,012
465,012
2,926,630
168,386
(28,767)
3,066,249
15,508,714
297,598
(41,169)
15,765,143
35,463
17,761
53,224
6,163,498
663,577
(10,166)
6,816,909
200,681
43,816
244,497
2,131,959
339,994
(28,293)
2,443,660
8,531,601
1,065,148
(38,459)
9,558,290
834,840
-
4,528,909
263,923
220,515
-
622,589
-
6,206,853
263,923
834,840
4,792,832
220,515
622,589
6,470,776
Total
U.S. $
Buildings
U.S. $
Furniture,
equipment
and leasehold
improvements
U.S. $
888,064
888,064
10,321,712
946,817
(39,521)
11,229,008
457,141
45,516
(37,645)
465,012
2,695,743
232,606
(1,719)
2,926,630
14,362,660
1,224,939
(78,885)
15,508,714
17,702
17,761
35,463
5,433,105
760,263
(29,870)
6,163,498
180,531
42,739
(22,589)
200,681
1,759,644
373,502
(1,187)
2,131,959
7,390,982
1,194,265
(53,646)
8,531,601
852,601
-
5,065,510
245,004
264,331
-
794,671
-
6,977,113
245,004
852,601
5,310,514
264,331
794,671
7,222,117
Motor
vehicles
U.S. $
Computers
U.S. $
* Projects in progress balances as at December 31, 2013 and 2012 comprise
leasehold improvements of the Bank’s new branches. The estimated cost to
complete projects in progress is U.S $ 2,864,700.
21
Total
U.S. $
Annual Report 2013
10. Deferred tax assets
The movements on the deferred tax assets was as follows:
2013
U.S. $
Balance, beginning of year
Addition
Amortization
2012
U.S. $
January 1,
2012
U.S. $
1,988,014
91,400
-
1,816,355
171,659
-
84,442
1,816,355
(84,442)
2,079,414
1,988,014
1,816,355
The balance of deferred tax assets represents the result of impairment losses
related to investments with Islamic banks and financial assets at amortized cost,
which was previously recognized in the income statement.
11. Other assets
Clearing checks
Account receivable, advances and temporary expenses
Accrued revenues
Assets obtained by the Bank by calling on collateral
Intangible assets*
Prepaid expenses
Stationery and printings
Others
2013
U.S. $
12,622,999
3,737,008
565,736
563,792
556,265
555,974
78,387
20,227
18,700,388
2012
U.S. $
6,761,877
1,681,136
489,400
656,399
171,693
57,837
21,808
9,840,150
* This item represents computer software. Following is details of the movement on
intangible assets:
2013
2012
U.S. $
U.S. $
656,399
437,854
Additions
15,865
335,961
Amortization
(115,999)
(117,416)
556,265
656,399
12.
PMA balances
Local deposits maturing within 3 months
Foreign deposits maturing within 3 months
22
2013
U.S. $
344,174
33,657,466
9,627,548
43,629,188
2012
U.S. $
838,239
10,074,338
5,243,130
16,155,707
83
84
13.
Annual Report 2013
Customers' deposits
2013
U.S. $
110,592,681
2012
U.S. $
91,031,595
110,592,681
91,031,595
Total deposits comprise of customers’ deposits (Note 13), cash margins (Note
14) and unrestricted investment accounts (Note 19) all of which amounted to
U.S. $ 351,626,620 and U.S. $ 290,233,742 as at December 31, 2013 and
2012, respectively.
Restricted deposits amounted to U.S. $ 5,038,407 and U.S. $ 3,178,279
representing 1.43% and 1.10% of the total deposits as at December 31, 2013
Government deposits amounted to U.S. $ 863,604 and U.S. $ 351,319
Quasi-governmental deposits amounted to U.S. $ 1,094,062 and U.S. $
679,357 representing 0.31% and 0.23% of the total deposits as at December
31, 2013 and 2012, respectively.
Dormant deposits amounted to U.S. $ 8,223,961 and U.S. $ 4,729,534
Non-profit bearing deposits amounted to U.S. $ 117,871,965 and U.S. $
95,882,617 representing 33.52% and 33.04% of the total deposits as at
December 31, 2013 and December 31, 2012, respectively.
14.
Cash margin
This item represents cash margin against the following:
2013
U.S. $
5,772,105
1,470,584
36,595
7,279,284
Direct Islamic financing
Indirect Islamic financing
Others
23
2012
U.S. $
4,009,127
806,839
35,057
4,851,023
Annual Report 2013
15. Sundry provisions
This item represents the following provisions:
December 31, 2013
Provision for employees’ indemnity
Provision for legal cases
Others
December 31, 2012
Provision for legal cases
Others
Balance,
beginning of
the year
U.S. $
Additions
for the
year
U.S. $
Payments
during the
year
U.S. $
2,138,424
60,463
250,000
2,448,887
512,019
512,019
(214,647) 2,435,796
(38,000)
22,463
250,000
(252,647) 2,708,259
1,747,516
60,463
250,000
2,057,979
439,000
439,000
(48,092) 2,138,424
60,463
250,000
(48,092) 2,448,887
Balance,
end of year
U.S. $
16. Tax provisions
The movement on tax provisions during the years ended December 31, 2013 and
2012 was as follows:
2013
2012
U.S. $
U.S. $
975,263
905,177
Provision for the year
1,553,400
565,622
Payment during the year
(43,919)
(495,536)
2,484,744
975,263
Income tax expense reported in income statement represents the following:
2013
2012
U.S. $
U.S. $
Income tax for the current year
1,553,400
565,622
Deferred tax assets additions
(91,400)
(171,659)
1,462,000
393,963
The reconciliation between accounting income and taxable income is as follows:
2013
2012
U.S. $
U.S. $
Bank’s accounting profit before tax
4,962,463
1,042,476
Profit subject to Value Added Tax (VAT)
3,682,225
555,649
Less: VAT on income
(496,450)
(77,247)
Revenues subject to income tax
1,303,285
1,694,396
Taxable income
4,489,060
2,172,798
Income tax
896,016
432,893
Total taxes for the year
1,392,466
510,140
Provision
1,553,400
565,622
Effective tax rate
31%
%54
The Bank did not reach a final settlement with the tax departments with regards to
the Bank’s results of operations for the years from 2010 to 2012.
24
85
86
Annual Report 2013
17. Deferred tax liabilities
The movements on the deferred tax liabilities as follows:
2013
U.S. $
Balance, beginning of year
Additions
2012
U.S. $
January 1,
2012
U.S. $
1,742,076
119,399
1,690,062
52,014
1,690,062
1,861,475
1,742,076
1,690,062
The balance of deferred tax liabilities resulted from the revaluation of investment
properties which was presented in investment properties reserve in equity.
18. Other Liabilities
Certify checks
Trade payable
Return on unrestricted investment accounts
Temporary accounts
Accrued donations
Accrued payroll taxes
Board of Directors remuneration
Other credit balances
19. Unrestricted investment accounts
Time deposits
Saving deposits – Hajj and Omrah
Saving deposits-Marriage
Cash margins sharing profits
Saving deposits – ‘Save and own’
Saving deposits-Jewels
Profit equalization reserve*
*
2013
U.S. $
3,402,776
465,575
332,191
327,329
178,248
108,394
83,332
284,806
5,182,651
2013
U.S. $
56,930,273
107,597,179
10,590,436
2,222,080
42,398,879
13,944,939
70,869
233,754,655
2012
U.S. $
4,041,697
264,752
151,430
748,000
830,764
151,003
60,000
204,556
6,452,202
2012
U.S. $
53,419,341
92,569,972
10,886,280
3,542,791
33,722,702
210,038
194,351,124
According to Financial Accounting Standard (FAS) no. (11), profit equalization
reserve was appropriated in order to keep a certain rate of return for
unrestricted investment accounts.
Following is the movement of profit equalization reserve:
2013
U.S. $
210,038
Used during the year
(139,169)
Balance, ending of year
70,869
25
2012
U.S. $
210,087
(49)
210,038
Annual Report 2013
Following are the rates of return on unrestricted investment accounts per currency:
2013
2012
%
%
Currency
USD
0.54
0.54
JOD
0.34
0.32
ILS
0.18
0.31
EURO
0.34
0.71
20. Paid-in share capital
Paid-in share capital, beginning of the year
New subscriptions – Private offering
Paid-in share capital, end of year
2013
U.S. $
47,672,484
1,047,104
48,719,588
2012
U.S. $
47,672,484
47,672,484
The Bank’s General Assembly resolved in its extraordinary meeting held on
September 28, 2010 to increase authorized share capital up to 50 million shares of
U.S. $ 1 par value for each share. During 2013, the paid-in share capital was
increased to reach the amount of U.S. $ 48,719,588.
Subsequent to the date of the financial statements and in accordance with PMA
instructions number (2009/7), the Bank increased the paid-up capital to become
U.S $ 50 million with a nominal U.S. $1 par value per share through a special
subscription.
21.
Reserves
Statutory Reserve
As required by the Companies’ Law and Banking Law, 10% of the net profit after
tax is transferred to the statutory reserve. This transfer will continue until the total
reserve balance equals the Bank’s paid-in share capital. This reserve is not
available for distribution to shareholders, and cannot be utilized without the prior
approval of PMA.
For the year ended 2012, this reserve is appropriated in compliance with PMA’s
regulations number (5/2008) based on 1.5% of the direct Islamic financing and
0.5% of the indirect Islamic financing. For 2013, this reserve is appropriated from
retained earnings in compliance with PMA regulations based on 1.5% of the direct
Islamic financing net of provisions for doubtful Islamic financing and suspended
profits, and 0.5% of the indirect Islamic financing. According to PMA instructions
(1/2013) and (3/2013), general banking reserve on direct Islamic financing
percentage was adjusted to become 2% starting from January 1, 2013. This
adjustment is not applied on indirect Islamic financing. The reserve cannot be
utilized or reduced without prior approval of PMA.
This reserve represents 15% of net profit after tax deducted in accordance with
PMA instruction (1/2011) to support Banks’ capital against banking risks. The
reserve is not to be utilized or reduced without PMA’s prior approval. Transfers to
this reserve shall not cease until the total balance of this reserve reaches 20% of
the Bank’s share capital.
26
87
88
Annual Report 2013
22. Investments and financing revenues
This item represents revenues from the following:
Murabaha investments
Investments in Islamic institutions
Mudarabah investments
Ijarah muntahia bittamleek
23. Return on unrestricted investment accounts
This item represents revenues as following:
Time deposits
Saving deposits
Cash margins sharing profits
24. Net Commissions
Commissions received on:
Indirect Islamic financing
Transfers
Checks under collection
Post-dated checks
Checkbooks
Salaries transferred
Accounts’ management
Dormant account
ATM
Other banking services
Commissions paid
25. Foreign currencies exchange gains
Foreign currencies trading
Foreign currencies revaluation gains (losses)
27
2013
U.S. $
10,586,860
1,227,597
565,425
192,311
450,373
13,022,566
2012
U.S. $
8,841,115
1,444,444
727,283
227,384
278,174
11,518,400
2013
U.S. $
598,844
100,523
1,797
701,164
2012
U.S. $
381,063
63,821
1,150
446,034
2013
U.S. $
2012
U.S. $
5,145
246,581
209,984
85,419
335,094
114,498
263,745
222,365
59,628
50,846
186,205
1,779,510
(231,610)
1,547,900
6,151
195,422
252,399
86,997
322,328
100,451
187,220
192,105
18,713
101,651
1,463,437
(215,257)
1,248,180
2013
U.S. $
2,043,252
136,484
2,179,736
2012
U.S. $
1,511,926
(1,465)
1,510,461
Annual Report 2013
26. Gains (losses) on financial assets
Dividends income from financial assets at fair
value through equity
Impairment loss of financial assets at fair value
through equity
27. Other revenues
This item represents revenues from the following:
Rent income from investment properties
Others
28. Personnel expenses
Salaries and related benefits
VAT on salaries
Medical expenses
Travel, accommodation, and transportation
Currency rate allowance
Training expenses
28
2013
U.S. $
2012
U.S. $
234,975
170,073
234,975
(368,103)
(198,030)
2013
U.S. $
230,000
115,720
345,720
2012
U.S. $
230,000
147,489
377,489
2013
U.S. $
4,152,974
636,845
512,019
210,865
202,353
135,453
77,688
5,928,197
2012
U.S. $
3,821,414
516,267
439,000
200,915
173,282
15,560
74,020
5,240,458
89
90
Annual Report 2013
29. Other operating expenses
2013
U.S. $
2,140
518,365
521,562
509,610
407,992
100,000
425,821
268,550
415,973
330,158
195,670
173,126
183,810
57,712
83,332
97,863
8,400
30,500
79,396
4,409,980
Losses from operating activities*
Rent
Maintenance and cleaning
Advertisements and marketing
Fees, license and subscriptions
Deposit Insurance Corporation
Vehicles and transportation
Utilities
Hajj, Omrah and marriage gifts
Telephone and postage
Professional and consultancy fees
Stationery and printings
Insurance
Hospitality
Board of Directors’ remuneration
Cash shipping costs
Guarding
VAT on leased properties
Sundry
*
2012
U.S. $
2,211,341
497,533
533,752
420,862
416,142
404,742
235,984
320,376
249,773
152,458
139,673
95,760
74,178
60,000
35,142
8,400
79,511
5,935,627
During 2012, Bank’s management discovered that one of Bank’s staff has
committed embezzlement in amount of U.S. $ 2,811,341. The Bank provided
for this embezzlement in the amount of U.S. $ 2,211,341 as losses from
operating activities. Bank’s management took all necessary legal measures
against involved parties. Bank’s management, Bank’s legal consultant and
Bank’s insurance consultant believe that the provision is sufficient against this
case.
30. Depreciation and amortization
This item represents depreciation and amortization of the following:
2013
U.S. $
1,065,148
Intangible assets
115,999
1,181,147
2012
U.S. $
1,194,265
117,416
1,311,681
31. PMA fines
PMA imposed fines during 2013 amounted to U.S $ 10,000 resulted from he
Bank’s noncompliance with regulatory instructions within the agreed period.
32. Zakat
Each shareholder bears the responsibility for Zakat payment, in which the Bank,
with the consent of Shari'a Supervisory Board, annually informs the shareholders
with the amount of Zakat due on each share. Zakat per share for 2013 amounted
to U.S. $ 0.0103.
29
Annual Report 2013
33. Commitments and contingent liabilities
Total outstanding commitments and contingent liabilities as at the financial
statements date are as follows:
2013
2012
U.S. $
U.S. $
Letter of credits
6,500,274
6,109,576
Letter of guarantees
5,046,243
4,060,663
Acceptance
774,811
578,402
Hajj and Omrah gifts
737,050
788,850
Marriage gifts
228,000
249,000
Save and own gift
100,000
Unutilized limits of Islamic financing
9,847,517
7,271,433
23,233,895
19,057,924
34. Cash and cash equivalents
For the purpose of the statement of cash flows, cash and cash equivalents
comprise the following:
2013
2012
U.S. $
U.S. $
Cash and balances with PMA
Add: Balances at banks and financial institutions
maturing within 3 months
Investments at Islamic banks maturing
within 3 months
Less: Banks and financial institutions deposits
maturing within 3 months
35. Basic and diluted earnings per share
88,609,149
81,084,050
59,860,159
35,521,363
72,433,544
40,833,219
(43,629,188)
(48,313,700)
128,959,964
(16,155,707)
(36,543,674)
104,739,251
2013
U.S. $
3,500,463
Profit for the year
Weighted average number of subscribed shares
30
2012
648,513
Shares
47,698,303
47,698,303
U.S. $
0.073
0.014
91
Islamic financing
Deferred tax assets
Other assets
Joint
financing
U.S. $
88,609,149
59,860,159
80,479,423
191,325,328
1,210,801
421,484,860
Sources of financing of Bank’s assets and investments
36.
31
7,223,123
15,066,941
6,470,776
2,079,414
17,489,587
48,329,841
2013
Selffinancing
U.S. $
Total
U.S. $
88,609,149
59,860,159
80,479,423
191,325,328
7,223,123
15,066,941
6,470,776
2,079,414
18,700,388
469,814,701
Joint
financing
U.S. $
81,084,050
35,521,363
46,650,235
171,759,593
907,737
335,922,978
6,922,311
14,228,289
7,222,117
1,988,014
8,932,413
39,293,144
2012
Selffinancing
U.S. $
Total
U.S. $
81,084,050
35,521,363
46,650,235
171,759,593
6,922,311
14,228,289
7,222,117
1,988,014
9,840,150
375,216,122
92
Annual Report 2013
93
Annual Report 2013
37. Related party transactions
Related parties represent major shareholders, directors and key management
personnel of the Bank, and entities controlled, jointly controlled or significantly
influenced by such parties. Transactions with related parties during the year
represented by deposits, advances and Islamic financing are as follows:
Nature of relationship
Statement of financial position
items:
Deposits
Board of Directors’ accrued
remuneration
Off balance sheet items:
Commitments and contingencies
Income statement items:
Profit received
Board of Directors and
executives management
Board of Directors
2013
U.S. $
2012
U.S. $
965,429
942,819
1,076,041
560,528
83,332
60,000
107,159
-
2013
U.S. $
63,350
Direct Islamic financing granted to related parties as at December 31, 2013
and 2012 represent 0.50% and 0.55% of the net Islamic financing,
respectively.
Direct Islamic financing granted to related parties as at December 31, 2013
and 2012 represent 1.92% and 2% of the Bank’s regulatory capital
respectively.
Average profit on Islamic financing in U.S. $ granted to related parties ranges
between 3.30% to 11% during 2013.
Board of Directors and executives remuneration (Salaries, Bonus and other
benefits) are as follows:
2013
2012
U.S. $
U.S. $
Board of Directors’ remuneration *
83,332
60,000
Board of Directors’ travel and transportation
expenses*
234,873
197,716
Executives management salaries and related benefits
227,602
224,812
Executives management indemnity
17,550
16,875
32
2012
U.S. $
95,888
94
*
Annual Report 2013
Following are the details of Board of Directors’ bonuses and expenses for the
years 2013 and 2012:
2013
2012
U.S. $
163,540
23,250
27,500
26,750
13,833
17,999
13,333
16,000
16,000
318,205
Waleed Tawfeq Fakhori
Basem Abdulhalim
Sam Buhour
Yehia Zakria Qadamani
Shaker Tawfeq Fakhouri
Haytham Sameh Barakat
Salah Aldin Alsharif
Ragheb Alaref
Fadi Saeed Qattan
Atef Alawneh
U.S. $
138,954
28,000
25,571
22,393
14,071
12,726
10,214
3,858
1,929
257,716
Policy of remuneration and bonuses
The Bank has a clear governing rules of practice of remuneration and bonuses,
where the aim of this policy is to establish governance and control and fair and
equitable distribution of rewards for all within clear and specific instructions based
on the level of performance taking into account all types of risks to which the Bank
can be exposed in addition to PMA instructions.
38. Concentration of assets and liabilities
Following is breakdown of the Bank’s assets, unrestricted Investment Accounts and
Equity by geographical area and segment:
December 31, 2013
Cash and balances
with PMA
Balances at banks and
financial institutions
Investments at Islamic
banks
Islamic financing
Financial assets at fair
Property and
equipment
Deferred tax assets
Other assets
Total assets
Commitments and
Contingencies
Letter of credit
Acceptances
Marriage gifts
Save and own gift
Unutilized Islamic
financing limits
Palestine
Jordan
Israel
Others
Total
88,609,149
-
-
-
88,609,149
33,321,937
2,658,144
6,381,120
17,498,958
59,860,159
191,325,328
20,309,591
-
-
60,169,832
-
80,479,423
191,325,328
6,741,433
15,066,941
-
-
481,690
-
7,223,123
15,066,941
6,470,776
2,079,414
18,134,652
361,749,630
22,967,735
6,381,120
565,736
78,716,216
6,470,776
2,079,414
18,700,388
469,814,701
6,500,274
5,046,243
774,811
737,050
228,000
100,000
-
-
-
6,500,274
5,046,243
774,811
737,050
228,000
100,000
9,847,517
23,233,895
-
-
-
9,847,517
23,233,895
33
95
Annual Report 2013
December 31, 2012
Cash and balances with
PMA
Investments at Islamic
banks
Islamic financing
Financial assets at fair
Deferred tax assets
Other assets
Total assets
Commitments and
Contingencies
Letter of credit
Acceptances
Marriage gifts
Unutilized Islamic
financing limits
Palestine
39.
Israel
Others
Total
81,084,050
-
-
-
81,084,050
10,536,194
3,154,453
2,842,620
18,988,096
35,521,363
171,759,593
7,156,569
-
-
39,493,666
-
46,650,235
171,759,593
6,382,236
14,228,289
7,222,117
1,988,014
9,350,750
302,551,243
10,311,022
2,842,620
540,075
489,400
59,511,237
6,922,311
14,228,289
7,222,117
1,988,014
9,840,150
375,216,122
6,109,576
4,060,663
578,402
788,850
249,000
-
-
-
6,109,576
4,060,663
578,402
788,850
249,000
7,271,433
19,057,924
-
-
-
7,271,433
19,057,924
Assets
According to segment
U.S. $
Corporate accounts
112,505,484
Retail accounts
79,456,409
Treasury
236,171,852
Others
41,680,956
Total
469,814,701
*
Jordan
2013
Liabilities
and
unrestricted
investment
accounts and
equity
U.S. $
90,520,275
309,765,063
43,619,188
25,910,175
469,814,701
2012
Commitments
and
Contingencies*
U.S. $
27,283,122
15,501,748
1,065,050
43,849,920
Assets
U.S. $
116,596,445
56,844,284
170,177,959
31,597,434
375,216,122
Liabilities and
unrestricted
investment
accounts and
equity
U.S. $
69,037,422
270,819,950
16,155,707
19,203,043
375,216,122
This item includes restricted investment accounts as at December 31, 2013
and 2012.
Risk management
Introduction
The Bank manages, assesses, and monitors its operating risks on an ongoing basis
in order to limit it to an acceptable level. The Bank identified assets that are subject
to various risks (operating risk, credit risk, market risk). The tasks and monitoring
responsibilities concerning risk management are divided between the Bank’s
employees in all management levels.
34
Commitments
and
Contingencies
U.S. $
22,399,618
13,101,227
1,037,850
36,538,695
96
Annual Report 2013
Risk management process
The Board of Directors is responsible for the overall risk management approach
and for approving the risk management strategies and principles. In addition, there
are several parties in different departments who are also responsible for risk
management.
The Risk Governance and Compliance Committee (the Committee) has the overall
responsibility for the development of the risk strategy and implementing principles,
frameworks, policies and limits. The Committee is responsible for managing risk
decisions and monitoring risk levels and reports on a monthly basis to the
Supervisory Board.
The Bank discloses any information relevant to the financial statements users that
pertain to the nature and extent of the risks that apply to the Bank and its financial
instruments as of the financial statements date.
I.
Credit risks
Credit risks are those risks resulting from the default of counterparties to the
financial instrument to repay their commitment to the Bank. The Bank, through
credit risk management, sets ceilings for direct credit facilities (retail or corporate)
and total loans granted to each sector and each geographical area. The Bank also
monitors credit risks and continuously evaluates the credit standing of customers.
The Bank also obtains appropriate collaterals from customers.
Exposures to credit risks
Statement of financial position Items:
Balances with PMA
Islamic financing
Other assets
Commitments and contingencies:
Letter of credit
Letter of guarantee
Acceptance
Gifts funds
Unutilized Islamic financing limits
35
2013
U.S. $
2012
U.S. $
49,211,131
59,860,159
80,479,423
191,325,328
4,302,744
385,178,785
39,900,577
35,521,363
46,650,235
171,759,593
2,170,536
296,002,304
6,500,274
5,046,243
774,811
1,065,050
9,847,517
23,233,895
6,109,576
4,060,663
578,402
1,037,850
7,271,433
19,057,924
Annual Report 2013
97
II. Equity Price risk
Equity price risk results from changes in fair value of equity instruments. The effect
of the expected decrease in equity instrument prices is equal and opposite to the
effect of the increase stated below:
Market
Palestine
Exchange
Change
in
index (%)
+10
2013
Effect on
income
statement
(U.S. $)
Effect on
equity
(U.S. $)
-
236,700
Change
in
index
(%)
+10
2012
Effect on
income
statement
(U.S. $)
Effect on
equity
(U.S. $)
-
200,781
III. Foreign Currency risks
Currency risk is the risk that the value of a financial instrument will fluctuate due to
changes in foreign exchange rates. The U.S. $ is the functional currency for the
Bank. The Board of Directors has set limits on positions by currency. In accordance
with the Bank’s policy, positions are monitored on a daily basis and hedging
strategies are used to ensure positions are maintained within established limits.
The Jordanian Dinar (JOD) exchange rate is pegged to the U.S. Dollars, so foreign
currency risk of JOD is not material on the Bank’s financial statements.
The effect of expected decreases in foreign currency rates is equal to and in
opposition to the effect of increases shown below:
2013
2012
Change
Effect on
Effect
Change
Effect on
on
in
income
in
income
statement
currency
statement
equity
currency
(U.S. $)
rate (%)
(U.S. $)
(U.S. $)
rate (%)
Currency
ILS
+10
(1,194,298)
+10
(195,003)
Other currencies
+10
48,532
+10
53,892
-
36
Effect
on equity
(U.S. $)
-
98
Annual Report 2013
Foreign currency position of the Bank is as follows:
December 31, 2013
Assets
Investment at Islamic banks
Islamic financing
Financial assets at fair value
through equity
Investments properties
Other assets
Total assets
JOD
Total
21,046,557
36,523,758
1,205,026
58,775,341
8,198,430
33,036,919
54,387,047
31,768,444
41,596,018
6,175,087
6,585
46,141,961
33,036,919
95,989,650
1,964,702
655,401
1,472,972
120,762,028
10,892,359
120,780,579
481,690
109,262
7,977,650
2,446,392
655,401
12,474,593
249,520,257
7,289,122
56,109,840
949,291
1,416,610
65,764,863
2,435,428
2,165,098
331,443
16,961
4,948,930
27,379,202
78,517,968
2,000,122
2,073,571
109,970,863
66,958,692
2,543,403
144,676,911
132,723,555
7,492,333
254,647,774
(11,942,976)
485,317
(5,127,517)
5,348,734
2,378,296
14,125,957
Liabilities
Banks and financial institutions
deposits
17,654,652
20,243,030
Cash margin accounts
719,388
Other liabilities
640,000
Total liabilities
39,257,070
Unrestricted investment
accounts
75,174,816
Total liabilities and unrestricted
investment account
114,431,886
concentration
6,330,142
Commitments and
contingencies
6,398,927
December 31, 2012
Total assets
Total liabilities
Unrestricted investment account
concentration
Commitments and
contingencies
Equivalent to U.S. $
Other
ILS
currencies
JOD
78,000,768
17,182,473
61,392,769
Equivalent to U.S. $
ILS
Other
currencies
109,785,762
4,977,277
56,027,903
2,455,364
55,707,888
1,982,993
Total
192,763,807
75,665,740
119,083,650
(574,474)
(1,950,029)
538,920
(1,985,583)
4,426,945
2,801,073
1,484,365
8,712,383
37
Financial assets at fair value through
equity
Deferred tax assets
Other assets
Total assets
Liabilities, unrestricted investment
accounts and equity
Liabilities
Cash margin
Sundry provisions
Tax provisions
Other liabilities
Total liabilities
Equity
Statutory reserve
Accumulated losses
Total equity
Total liabilities, unrestricted investment
accounts and equity
Maturity gap
Cumulative maturity gap
December 31,2013
Assets
Islamic financing
3,737,008
81,723,115
2,484,744
1,779,875
4,264,619
187,331,095
-
12,622,997
182,329,996
43,629,188
110,592,681
3,402,776
157,624,645
10,777,695
-
-
13,460,459
565,736
27,864,320
6,054,410
21,244,174
38
191,595,714
13,460,459
(109,872,599) 14,403,861
(95,944,943) (81,541,082)
7,370,596
21,574,638
49,040,873
40,295,449
52,489,563
50,858,906
26,063,081
More than 3
months up to
6 months
U.S. $
-
6,658,309
47,255,524
47,255,524
More than 1
year up to 3
years
U.S. $
-
-
24,206,736
24,206,736
More than 3
years
U.S. $
22,806,381
6,658,309
3,918,411
40,597,215
24,206,736
(77,622,671) (37,025,456) (12,818,720)
-
7,279,284
7,279,284
15,527,097
1,218,383
26,724,792
1,991,469
23,514,940
More than 6
months up to
1 year
U.S. $
66,891,498
12,818,720
-
48,719,588
2,731,027
3,937,351
820,076
4,133,615
415,413
1,564,694
62,321,764
2,708,259
1,861,475
4,569,734
-
7,223,123
15,066,941
6,470,776
2,079,414
556,264
79,710,218
48,313,700
-
Without
maturity
U.S. $
469,814,701
-
48,719,588
2,731,027
3,937,351
820,076
4,133,615
415,413
1,564,694
62,321,764
43,629,188
110,592,681
7,279,284
2,708,259
2,484,744
1,861,475
5,182,651
173,738,282
233,754,655
7,223,123
15,066,941
6,470,776
2,079,414
18,700,388
469,814,701
88,609,149
59,860,159
80,479,423
191,325,328
Total
U.S. $
Annual Report 2013
168,402,340
13,927,656
13,927,656
More than 1
month up to 3
months
U.S. $
Less than 1
month
U.S. $
The table below summarizes the allocation of assets and liabilities on the basis of the remaining contractual entitlement as at December 31,
2013 and 2012:
II.
Liquidity risk
Liquidity risk is the risk that the Bank will be unable to meet its payment obligations when they fall due. To limit this risk, management arranges
diversified funding sources, manages assets and liability with liquidity in mind, and monitors future cash flows and liquidity.
99
Liabilities, unrestricted investment accounts
and equity
Liabilities
91,031,595
Sundry provisions
Tax provisions
Other liabilities
4,224,458
Total liabilities
95,256,053
10,021,043
Equity
Statutory reserve
Accumulated losses
Total equity
Total liabilities, unrestricted investment
accounts and equity
105,277,096
Maturity gap
21,038,646
Cumulative maturity gap
21,038,646
44,540,376
12,952,337
32,708,801
30,024,167
Deferred tax assets
Other assets
6,090,061
Total assets
126,315,742
December 31,2012
Assets
Islamic financing
Less than 1
month
U.S. $
14,536,165
13,349,320
(58,359,545)
167,597,698
(92,747,511)
(71,708,865)
39
14,536,165
8,645,855
19,239,630
27,885,485
More than 3
months up to
6 months
U.S. $
16,155,707
975,263
2,227,744
19,358,714
148,238,984
22,569,026
4,364,572
45,422,899
2,493,690
74,850,187
More than 1
month up to 3
months
U.S. $
-
1,152,016
40,510,717
40,510,717
More than 1
year up to 3
years
U.S. $
25,253,939
1,152,016
(4,784,225) 39,358,701
(63,143,770) (23,785,069)
-
4,851,023
4,851,023
20,402,916
931,007
18,938,707
600,000
20,469,714
More than 6
months up to 1
year
U.S. $
17,623,473
(6,161,596)
-
-
17,623,473
17,623,473
More than 3
years
U.S. $
375,216,122
-
47,672,484
2,380,981
2,666,494
295,007
3,868,475
114,601
210,203
57,208,245
47,672,484
2,380,981
2,666,494
295,007
3,868,475
114,601
210,203
57,208,245
61,399,208
6,161,596
-
16,155,707
91,031,595
4,851,023
2,448,887
975,263
1,742,076
6,452,202
123,656,753
194,351,124
81,084,050
35,521,363
46,650,235
171,759,593
6,922,311
14,228,289
7,222,117
1,988,014
9,840,150
375,216,122
Total
U.S. $
2,448,887
1,742,076
4,190,963
-
36,543,674
6,922,311
14,228,289
7,222,117
1,988,014
656,399
67,560,804
Without
maturity
U.S. $
100
Annual Report 2013
Annual Report 2013
40.
101
Fair value measurement
The fair value measurement hierarchy of the Bank assets as of December 31, 2013:
Date of
measurement
Total
U.S. $
Assets measured at fair value:
Financial asset at fair value
through equity (note 7):
Quoted
December 31, 2013 2,367,004
Unquoted
December 31, 2013 4,856,119
Investment properties (note 8) December 31, 2013 15,066,941
Quoted prices
in active
markets
(Level 1)
Significant
observable
inputs
(Level 2)
U.S. $
Significant
unobservabl
e inputs
(Level 3)
U.S. $
2,367,004
-
U.S. $
-
4,856,119
-
15,066,941
The following table provides the fair value measurement hierarchy of Bank’s assets as of
December 31, 2012:
Date of
measurement
Assets measured at fair value:
Financial asset at fair value
through equity (note 7):
Quoted
December 31, 2012
Unquoted
December 31, 2012
Total
U.S. $
Quoted prices
in active
markets
(Level 1)
U.S. $
2,007,807
4,914,504
2,007,807
-
Investment properties (note 8) December 31, 2012 14,228,289
-
Significant
Significant
observable unobservabl
inputs
e inputs
(Level 2)
(Level 3)
U.S. $
There have been no transfers between Level 1, Level 2 and Level 3 during the year.
40
U.S. $
-
4,914,504
- 14,228,289
102
41.
Annual Report 2013
Fair value of financial instruments
The table below represents a comparison by class of the carrying amounts and fair
values of the Bank’s financial instruments carried in the financial statements as at
December 31, 2013 and 2012:
Carrying amount
Fair value
2013
2012
2013
2012
U.S. $
U.S. $
U.S. $
U.S. $
Financial assets
Balances with PMA
88,609,149
81,084,050
88,609,149
81,084,050
59,860,159
35,521,363
59,860,159
35,521,363
80,479,423
46,650,235
80,479,423
46,650,235
Islamic financing
191,325,328 171,759,593 191,325,328
171,759,593
Financial assets at fair value
through equity:
Quoted shares
2,367,004
2,007,807
2,367,004
2,007,807
Unquoted shares
4,856,119
4,914,504
4,856,119
4,914,504
Other assets
16,925,743
8,932,413
16,925,743
8,932,413
Total assets
444,422,925 350,869,965 444,422,925
350,869,965
Financial liabilities
Banks and financial
institutions deposits
Other liabilities
Total liabilities
Unrestricted investment
accounts
43,629,188
110,592,681
7,279,284
5,182,651
166,683,804
16,155,707
91,031,595
4,851,023
6,452,202
118,490,527
43,629,188
110,592,681
7,279,284
5,182,651
166,683,804
16,155,707
91,031,595
4,851,023
6,452,202
118,490,527
233,754,655
194,351,124
233,754,655
194,351,124
The fair value of the financial assets and liabilities are included at the amount at which
the instruments could be exchanged in a current transaction between willing parties,
other than in a forced or liquidation sale.
Fair values of balances with PMA, balances at banks and financial institutions,
investments at Islamic banks, Islamic financing, other financial assets, banks and
financial institutions deposits, customers’ deposits, cash margin, other liabilities and
unrestricted investment accounts approximate their carrying amounts largely due to the
short–term maturities of these instruments.
The fair value of the quoted financial assets at fair value through equity that have a
market price set in accordance with the prices traded on the date of the financial
statements.
Unquoted financial assets at fair value through equity are stated at cost less
accumulated impairment as their fair values cannot be reliably determined.
41
Annual Report 2013
103
42. Segment information
a. Information on the Bank’s business segments:
For management purposes, the Bank is organized into three major business segments:
Retail banking: Principally handling individual customers’ deposits and providing them
with Islamic financing and other services.
Corporate banking: Principally handling Islamic financing, deposits and current accounts
for corporate and institutional customers.
Treasury: Principally providing trading and treasury services and the management of
the Bank’s funds.
The Bank’s business segments:
Total
Retail
Gross revenue
Impairment provision
for doubtful Islamic
financing
Segment results
Unallocated expenses
Profit before tax
Taxes expense
Profit for the year
U.S. $
5,587,551
-
Other information
Total segment assets
79,456,409
Total segment liabilities
and unrestricted
investment accounts 299,794,085
Corporate
Treasury
Other
U.S. $
8,381,326
U.S. $
3,407,333
U.S. $
580,695
-
-
112,505,484
236,171,852
51,761,665
43,629,188
(299,031)
2013
2012
U.S. $
17,956,905
U.S. $
15,353,005
(299,031)
17,657,874
(12,695,411)
4,962,463
(1,462,000)
3,500,463
(141,311)
15,211,694
(14,169,218)
1,042,476
(393,963)
648,513
41,680,956
469,814,701
375,216,122
12,307,999
407,492,937
318,007,877
332,382
987,686
1,181,147
1,311,681
Capital expenditures
Depreciation and
amortization
b. Geographical distribution information
This disclosure represents the geographical distribution of the Bank’s operations. The
Bank mainly carries out its activities in Palestine which represents the local operations.
In addition, the Bank carries out its activities outside Palestine which represents the
foreign operations.
Following is the distribution of the Bank’s revenue, assets and capital expenditures
according to geographical sector:
Total revenues
Total assets
Capital
expenditures
Local
2013
2012
U.S. $
U.S. $
16,241,417
13,485,418
361,749,630
302,551,243
332,382
Foreign
2013
2012
U.S. $
U.S. $
1,715,488
1,867,587
108,065,071
72,664,879
987,686
-
42
-
Total
2013
2012
U.S. $
U.S. $
17,956,905
15,353,005
469,814,701
375,216,122
332,382
987,686
104
Annual Report 2013
43. Capital management
The primary objective of the Bank's capital management is to ensure that it maintains
adequate capital ratios in order to support its business and maximize shareholder value.
The Bank manages its capital structure and makes adjustments to it in light of changes in
business conditions, The Bank’s General Assembly resolved in its extraordinary meeting
held on September 28, 2010 to increase authorized share capital up to U.S. $ 50 million.
During 2013, the paid-in share capital was increased to reach the amount of U.S. $
48,719,588, U.S. $ 1 par value for each share.
Subsequent to the date of the financial statements and in accordance with PMA
instructions number (2009/7), the Bank increased the paid-up capital to become U.S $
50 million with a nominal U.S. $1 par value per share through a special subscription.
The capital adequacy ratio is computed in accordance with the PMA regulations derived
from Basel Committee regulations computed as follows:
2013
Regulatory capital
Amount
U.S. $
50,073,761
Percentage
to assets
%
10.66
Percentage
to risk –
weighted
assets
%
18.93
Basic capital
51,714,426
11.01
19.55
44.
2012
Amount
U.S. $
47,297,101
Percentage
to assets
%
12.61
Percentage
to risk –
weighted
assets
%
22.13
49,692,074
13. 24
23.25
Comparative figures
In light of the clarity of the tax practices of the Palestinian income tax law, the Bank and
retroactively calculate and record the assets and deferred tax liabilities.
Following is the impact of the restatements on retained earnings as of January 1, 2012:
U.S. $
Before
After
restatement
Restatement restatement
Deferred tax assets
499,002
1,317,353
1,816,355
1,690,062
1,690,062
Statuary reserve
2,184,395
131,735
2,316,130
133,059
64,671
197,730
5,443,035
(1,690,062)
3,752,973
(Accumulated losses) retained earnings
(815,655)
1,120,947
305,292
Following is the impact of the restatements on the statement of financial position as of
December 31, 2012:
U.S. $
Before
After
restatement
Restatements restatement
1,742,076
1,742,076
5,610,551
(1,742,076)
3,868,475
43
Annual Report 2013
45. Legal cases against the Bank
In the normal course of business, the number of litigations filed against the Bank was 4
as at December 31, 2013 compared to 3 as at December 31, 2012. The litigations filed
against the Bank amounted to U.S. $ 70,805 and U.S. $ 148,856 as at December 31,
2013 and 2012, respectively. Bank’s management and Bank’s lawyer believe that
provision is sufficient against these litigations.
46. Concentration of risk in geographical area
The Bank carries out its activities in Palestine. The political and economic destabilization
in the area increases the risk of carrying out business and could adversely affect
performance.
44
105
106
Annual Report 2013
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108
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109
110
Annual Report 2013
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112
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114
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Transcription

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