Standard Chartered Bank

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LOCALLY EMBEDDED

Mo Pakistan St ney an Ban da kin grd & Fin Ch anc art e er ed Ba nk

INTERNATIONAL BANK

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Standard Chartered Bank

[MONE Y BANKING & FINANCE]

Submitted By:

Bilal Yasir +92345-8703330

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STANDARD CHARTERED BANK (PAKISTAN) LIMITED - AEMBEDDED INTERNATIONAL BANK

LOCALLY

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

STANDARD CHARTERED YEAROF SETUP

BANK IN

PAKISTAN:

Standard Chartered is the largest international Bank in Pakistan. In Pakistan it established operations in Karachi in year 1863. In 2006 Standard Chartered Bank acquired Pakistan's Union Bank. On 30 December 2006, Standard Chartered merged Union Bank with its own subsidiary. After the acquisition of Union Bank the new entity Standard Chartered Bank (Pakistan) Limited was incorporated as a subsidiary of Standard Chartered PLC. Standard Chartered Bank (Pakistan), to create Pakistan's sixth largest bank.

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NUMBER

OF

BRANCHES

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

PERFORMANCEAs one of the world's most international banks, Standard Chartered employs 70,000 people, representing with 125 nationalities, worldwide. This diversity lies at the heart of the Bank's values and supports the Bank's growth as the world increasingly becomes one market. With strong organic growth supported by strategic alliances and acquisitions and driven by its strengths in the balance and diversity of its business, products, geography and people, Standard Chartered is well positioned in the emerging trade corridors of Asia, Africa and the Middle East. Standard Chartered derives over 90 per cent of profits from Asia, Africa and the Middle East. Serving both Consumer and Wholesale Banking customers worldwide, the Bank combines deep local knowledge with global capability to offer a wide range of innovative products and services as well as award-winning solutions. Trusted across its network for its standard of governance and corporate responsibility, Standard Chartered takes a long term view of the consequences of its actions to ensure that the Bank builds a sustainable business through social inclusion, environmental protection and good governance. Standard Chartered is also committed to all its stakeholders by living its values in its approach towards managing its people, exceeding expectations of its customers, making a difference in communities and working with regulators. Standard chartered bank is the first international bank to get an Islamic banking license and to open the first Islamic banking branch in Pakistan.

CREDIT RATINGPakistan Credit Rating Agency (PACRA) has maintained the Banks long-term and short-term ratings AAA (Triple A) A1+ (A One Plus) respectively in 2008. The Banks outstanding two listed, subordinated TFCs are also assigned AAA rating. These ratings denote the lowest expectation of credit risk emanating from an exceptionally strong capacity for timely payment of financial commitments.

EXTERNAL AUDITORS

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The audit committee has suggested the name of M/s KPMG Taseer Hadi & Company, Chartered Accountants as external auditors of the bank for the next term. The retiring auditors, being eligible, offer themselves for re-appointment till the conclusion of next Annual General Meeting.

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ORGANOGRAM

ORGANIZATIONAL STRUCTUREOF

STANDARD CHARTERED BANK

BALANCE SHEET

BALANCE SHEET ANALYSISPakistan's banking sector has remained remarkably resilient, despite pressures emanating from weakening macroeconomic environment. Enhanced capital requirement since last couple of years has resulted in consolidation within the industry which we expect to continue in the near future. Capital adequacy of the

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banking system was 11.8% at end-Sep'08. Tier 1 capital ratio of the banking system was 9.7%. However, challenges remain in terms of NPLs emanating from some of the more leveraged sectors. Total assets of the bank grew to PKR 264.6 billion from last year's PKR 255.5 billion mainly due to increased lending in wholesale banking. Total net loans and advances increased by approximately 5% to PKR 125.60 billion from PKR 119.54 billion while deposit base was marginally reduced by 1.5% to PKR 174.5 billion compared to PKR 177.2 billion last year. The bank continues to maintain adequate liquidity. The advances to deposit ratio as at December 31, 2008 was 72%.

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PROFIT

AND LOSS

ACCOUNT

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PROFIT

AND

LOSS

ACCOUNT

ANALYSIS:

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

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PRODUCTS

PERSONAL BANKING

CREDIT & DEBIT CARDS

Other Financial Services Banking Convenience Rewards and Privileges Priority Center Locations

Tahaffuz Invest 'n' Assure Iqra Education Plan Family Care Cash Cover Plus

ACCOUNTS & DEPOSITS

Credit Cards Master Cashback Credit Cards Saadiq VISA Credit Cards MasterCard VISA Card Easy Credit Card American Express Credit Cards American Express Charge Card PIA Co-branded Credit Card VISA Shopping Card Plus Treasures Catalogue

Savings Accounts Saving Account Supersave Account High Yield Account Easy Saver Account Bonus Saver Account Flex Account Mahana Izaafa Basic Banking Account Rupee Current Account Xtra Mile Account Foreign Currency Accounts Business Account Sahulat Online Account Corporate Salary Account

LOANS & MORTGAGES

For Credit Card Customers Smart Wallet Cover for Life Credit Cover Plus

Mortgages Home Purchase Home Credit Ready Cash Swift Finance

Loans

INVESTMENTS Mutual Funds Basics

Current Accounts

INSURANCE

Debit Cards

Mutual Funds Offered JS ABAMCO Limited National Investments Trust Limited Atlas Asset Management Limited Arif Habib Investments Management Limited BMA Asset Management Limited

For Branch Banking Customers Secure Life Plan Mustaqbil Taleem Rishtey

PRIORITY BANKINGThe Right Partner Product Proposition Visa Platinum Debit Card

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Standard Chartered Bank Rupee Term Deposits Interest Rates Mahana Amdani Certificates Overdrafts Lockers

[MONE Y BANKING & FINANCE] KASB Asset Management Limited

ISLAMIC BANKING WHOLESALE BANKING

SME BANKINGBusiness Accounts

Accounts & Deposits Saadiq Current Account Saadiq Sahulat Online Account Saadiq Saver Saadiq Term Account

Transaction banking Financial Markets

Tijarat Classic Account Tijarat Plus Account Business Power Cash Today Business Installment Loan Kissan Card Rang Hi Rang Tana Bana Pharma Line Agri Deal

Trade and Working Capital

Corporate Finance Principal Finance

Loans

Loans and Mortgages Saadiq Home Financing Saadiq VISA Credit Cards Saadiq VISA Shopping Card Modaraba

Industry Specific Solutions

Credit & Debit Cards

Modaraba

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EXPLANATION

OF

CERTAIN

IMPORTANT ACCOUNTS

SAVING ACCOUNT:Saving Account is the latest addition to Standard Chartered Bank Pakistan Limiteds ever increasing portfolio of products. This product combines a good rate of return, profit paid out on a six-monthly basis, and outstanding services offered by Standard Chartered Bank Pakistan Limited all-in-one. Special Features

Exclusive benefits of a Saving Account: Profit tier rate 5% p.a APY Minimum average balance requirement is Rs. 100,000 Inter-branch transaction facility among 162 branches across Pakistan Customer Contact Center Profit calculated on a minimum balance basis

BASIC BANKING ACCOUNTEnjoy an unmatched combination of high returns and liquidity. In addition, SCB nationwide network of ATMs offers customer 24-hour convenience in withdrawing your funds, ensuring that money works for them, as they would like it.

Special Features Current account, mandatory introduced by State Bank of Pakistan Non-profit bearing Minimum Balance Required: None Account Statements: Issued on annual basis Account closure: If balance is Nil for 180 days Fees: Maximum 2 free deposits & 2 free withdrawals allowed per month. (Rs 100 will be charged after second transaction)

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RUPEE CURRENT ACCOUNTSFor all customer day to day transactions, open a Current Account which offer via 162 online branches and a reliable country wide ATM network. Get easy access to funds as well as enjoy the privileges of having a Rupee Current Account. Special Features

Local Currency Transaction account Non-profit bearing Minimum Balance Required: PKR 5000 Features: Unlimited withdrawals and deposits Offerings: (1) Chequebook (2) VISA debit card for local currency accounts Following Self Service banking facilities provided at time of account opening: Internet Banking SMS Banking Phone Banking Services

XTRA MILE CURRENT ACCOUNTAn Ideal solution for people who want a Transactional Account with cash reward on fuel spend Special Features

Minimum Monthly Average Balance Requirement PKR 15,000 Fuel Cash Back up to 30% Debit Card with no issuance fee Transactional convenience through the use of wide branch network and self service channels

BUSINESS ACCOUNTTake customer business to soaring new heights with this account. Business Account provides efficient, accessible and convenient transactional capabilities of a world-class bank with highly competitive charges. Avail of the best transactional convenience on Business Account: Highly transaction current account aimed at rewarding the customer for their higher average balance maintained Non-profit bearing Minimum Balance Required: Rs. 100,000

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Features: Unlimited withdrawals and deposits Offerings: (1) Chequebook (2) VISA debit card for Local Currency accounts

STANDARD CHARTERED SAADIQ PAKISTANStandard Chartered Saadiq, was established as a dedicated Islamic Banking Division within Standard Chartered Bank (Pakistan) Limited with an aim to meet the unique needs of its customers Standard Chartered Saadiq comprises a team of qualified professionals who design and structure Islamic financial solutions and ensure that they are in line with Shariah principles on Islamic banking and finance At Standard Chartered it is realized that customers want products that are Shariah compliant, and by introducing these Islamic financial solutions, we are fulfilling our promise of being responsive to our customer needs. These products have been developed under the guidance of a dedicated Shariah Advisor

TIJARAT CLASSIC ACCOUNTTijarat Classic Account is a business account designed for small businesses with high number of transactions. Its low costs of transactions enable small businesses to conduct their transactions without worrying about the costs. With a minimum account balance of just Rs. 25,000/- avail free online banking facility up to a maximum of Rs. 1.5 Million a day, Tijarat Classic Account offers low cost, convenient and countrywide transaction capability.

SUHALUT ONLINE ACCOUNTSahulat Online Account has been designed to provide efficient, accessible and convenient transactional capabilities of a world-class bank with highly competitive charges. Special features Non-profit bearing/Local Currency Account Minimum Balance Required: Rs 50,000 Charges: PKR 50 will be charged if Monthly Average Balance not Maintained

AVERAGE LENDING 16.33%

RATE OF

STANDARD CHARTERED BANK

OF

PAKISTAN

IS

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DEPOSITS & ADVANCES: DEPOSITS

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

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

ADVANCESAdvances are stated net of provision against non-performing advances. Specific and general provisions are made based on an appraisal of the loan portfolio that takes into account Prudential Regulations issued by SBP from time to time. Specific provisions are made where the repayment of identified loans is in doubt and reflect an estimate of the amount of loss expected. The general provision is for the inherent risk of losses which, although they have not been separately identified, are known from experience to be present in any loan portfolio. Provision made / reversed during the year is charged to the profit and loss account and accumulated provision is netted off against advances. Advances are written-off when there is no realistic prospect of recovery. When the Bank is the lessor in a lease agreement that transfers substantially all of the risks and rewards incidental to ownership of an asset to the lessee, the agreement is presented within loss and advances.

Total net loans and advances increased by approximately 5% to PKR 125.60 billion from PKR 119.54 billion while deposit base was marginally reduced by 1.5% to PKR 174.5 billion compared to PKR 177.2 billion last year. The bank continues to maintain adequate liquidity. The advances to deposit ratio as at December 31, 2008 was 72%.

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

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

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

Mutual Fund BasicsA Mutual Fund is a pool of money that gives small investors access to a welldiversified portfolio of equities, bonds, and other securities. Each shareholder participates in the gain or loss of the fund. Shares are issued and can be redeemed as needed (in the case of an open-ended fund). The fund's net asset value (NAV) is determined each day. Each mutual fund portfolio is invested to match the objective stated in its investment agenda. Equity Funds An equity fund is one that is invested mainly in company equity through the stock exchange and is exposed to the risk of volatility associated with the

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equity market. Although this fund is the riskiest within the genre of mutual funds, it is also known to yield the maximum yields and dividends.

Fixed Income Funds A Fixed Income Fund is one that invests in avenues which offer fixed returns over a set tenor. These funds are inherently linked to the general interest rate and are, therefore, unlike the stock market, safe from drastic fluctuation. The capital value is more easily sustainable while the returns are generally modest. However, active fund management can yield returns which are higher than most fixed income avenues in the market and therefore, it is an attractive investment avenue for investors with moderate risk appetites.

Money Market Funds A Money Market Fund is one that invests in liquid, short-term avenues which offer fixed returns over short periods. These funds are inherently linked to the general interest rate and are, therefore, unlike the stock market, safe from drastic fluctuation. Underlying investment may include securities issued by corporate bodies, spread transactions, reverse-repo transactions, selective exposure in the CFS market, Term Finance Certificates (TFCs) and commercial paper.

Balanced Funds These funds maintain a mix within equity and fixed income markets. The inclination of this mix will be dictated by the funds strategic intent and mission statement. This fund offers more maneuvering room to its fund managers as they have the option to switch between market types i.e. fixed income avenues and capital markets. Effectively, the risk associated to this category lies somewhere between that of equity funds and fixed income funds and the returns also vacillate correspondingly between the ranges of the two.

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The Bank classifies its investments as follows: a) Held for trading These are securities, which are acquired with the intention to trade by taking advantage of short term market / interest rate movements and are carried at market value. The surplus / deficit arising as a result of revaluation at market value are taken to income.

b) Held to maturity These are securities with fixed or determinable payments and fixed maturity that are held with the intention and ability to hold to maturity. These are carried at amortised cost. c) Available for sale These are investments that do not fall under the held for trading or held to maturity categories and are carried at market value. The surplus / deficit arising as a result of revaluation at market value is kept in a separate account below equity. d) Subsidiaries Investments in subsidiaries are carried at amortised cost.

Investment by Segment

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BANKING INDUSTRY PROFILE:Pakistan Banks Association (PBA) represents the Pakistan Banking Industry. Established in 1953, its main objective is to coordinate the efforts of the banking industry, and to share a common vision of progress and development with its members. PBA Membership is institutionalized and is available only to the Banks operating in Pakistan. Currently there are 48 members, categorized into 6 groups (one of these groups is under formation). Its governing body is an Executive Committee (EC) comprising of 14 members, represented by the Chief Executives of the respective member institutions. PBAs Principal Executive is the Chairman of the Executive Committee, elected periodically from within the EC. Presently, PBA has 10 functional Sub Committees, each chaired by a member of the Executive Committee. Remaining members of the Sub Committees are relevant Executives of member banks. Find more about PBA and its governance in the PBA Profile Section. Particulars of members such as their corporate and management profiles, branch networks and financial statements are available in the PBA Members Section. Over the years the role of PBA has broadened considerably. It is now referred to

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by the State Bank of Pakistan in formulation of regulations for the banking industry, and has been entrusted with the function of regulating and monitoring certain services provided to the banking industry by outside service providers. These service providers include Professional Valuers, who are evaluators allowed to appraise the values of assets collateralized to banks, and Security Agencies offering security services to the Banking Industry. For details visit the PBA Panels Section. Pakistan Banks Association was constituted as a Private Limited Company on 31st March 1953. Its controlling body is the Executive-Committee, which presently comprises of fourteen members. Each member of the Executive-Committee is the Chief Executive of a member Financial Institution. The Executive-Committee is elected by the PBA members for a period of one year. Now, the term of the Executive Committee runs from January 1 of the year to December 31 of that year. After appointment, the Executive-Committee members elect its Chairman and two Vice Chairmen. The Chairman of the Executive Committee is the Chairman of PBA. PBA Chairman is the Principal Executive of PBA. The Executive Committee holds meetings on a regular basis to discuss, resolve, and execute the ongoing issues put up to PBA. These meetings are usually held once a month, but depending on the requirement, they are also held more frequently.

Being a Private Limited Company, PBA also holds Annual General Meetings, and, as per need, Extra Ordinary General Meetings to carry out business required to be done therein under the law, and as required by its charter (Articles of Association). PBA has ten functional Sub-Committees to handle respective issues. The Chairman of each Sub-Committee is a member of the Executive-Committee. These Sub-Committees include the following: PBA Sub-Committee for Accounting and Taxation PBA Sub-Committee for Agricultural Finance PBA Sub-Committee for Basel II, Corporate Governance & Compliance

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PBA Sub-Committee for Consumer Banking PBA Sub-Committee for Credit & Prudential Regulations PBA Sub-Committee for General Banking, Operations & I.T. PBA Sub-Committee for H.R. & Training PBA Sub-Committee for Islamic Banking PBA Sub-Committee for SME / NBFIS PBA Sub-Committee for Treasury & Capital Markets

These Sub-Committees meet as and when required to deal with the issues faced by PBA on the particular aspects concerning the Sub-Committees. PBA membership is open to the Financial Institutions operating in Pakistan. It currently has 48 members. The members are broadly categorized into following six groups: Nationalized Commercial Banks and Government Owned Banks Privatized Banks Development Financial Institutions Small and Medium Enterprise (group under formation) Private Banks Foreign Banks

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FUTURE OUTLOOKA growing and dynamic banking sector is essential for economic growth in Pakistan, as growth in the banking sector and the real economy mutually reinforce each other. The banking sector constitutes the core of the financial sector in Pakistan. Private sector investment and consumption should be seen as the key drivers of the economy and must be supported by growing financial intermediation and services, including not only banks but also non-bank financial institutions, and debt securities and the stock market. The growth in banking system has been driven by rise in deposits to Rs4.1 trillion and advances to Rs3.3 trillion. Banks as profitable ventures have attracted close to over $4 billion of foreign direct investment during 2006-2008. Almost half the assets of banks are now owned by foreign banks that are introducing innovation and technological improvements. Recapitalization and prudent lending supported by strong regulatory and supervisory framework have lowered net non-performing loans to historical lows. In line with international trends, SBP introduced Basel II and banks have higher capital adequacy levels --well above the minimum level for the sector as a whole. Despite economic shock and stress in stock market, the banking system in the first quarter of the fiscal year 2009 has shown an increase in profitability of the banking system. Central banks policies, regulations and supervision systems have been substantially transformed and barring one area (i.e. noncompliance with consolidated supervision principles progress on which is also underway) SBP regulatory and supervisory framework is now in line with the international best practices and norms. Improved management brought high profitability, record low non-performing loans (NPLs) and capital adequacy levels well above regulatory requirements. Despite successful expansion in recent years, the banking sector continues to have a large potential for further growth, diversification and financial strengthening. Deposit base rose to Rs 4.1 trillion and gross advances to Rs 3.3 trillion by September 2008. Supported by the growing financial intermediation process, banks aggregate profitability rose from Rs 63.3 billion in 2005 to Rs 73.3 billion by 2007 and Rs 46.0 billion for half year 2008. Recapitalization and prudent lending has lowered banks net non-performing loans (NPLs) to around 2.0 percent. Banks capitalization and quality of assets have helped raise the risk weighted capital adequacy ratio to 12.1 percent, well above the regulatory minimum of 8.0 percent.

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Agriculture lending has received a significant boost with the banking system meeting its target of Rs 200 billion set for 2007/2008. This notwithstanding, outstanding agriculture advances account for only 6% of total advances and the current flow of credit meets only 45% of the sectors credit requirements. SBPs strategy for agriculture credit seeks to double the number of borrowers from 2 million to 4 million and to meet 75-80% of the agriculture credit requirements within 3 to 5 years.

SBP has encouraged a revolving three-year credit scheme under which farmers can borrow for one year and continue to borrow without providing documentation each year. Guidelines have been issued for lending to the livestock, fisheries and horticulture subsectors and programs are being launched for the dairy sector. In addition, a Small farmer special financing scheme has been promoted based on group based lending and a Crop loan insurance scheme has been structured which is now being offered by some insurance companies. Agriculture credit based on Islamic principles will be promoted and capacity building provided to farmers and bankers in regional languages.

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Standard Chartered Bank

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