BankIslami Pakistan : Transmission of Quarterly Report for the Quarter and Nine Months Ended September 23,2023

Quarterly Report September 2023

Contents

02	Corporate Information
04	Directors' Report to the Members
15	Statement of Financial Position
16	Profit & Loss Account
17	Statement of Comprehensive Income
18	Statement of Changes in Equity
19	Cash Flow Statement
20	Notes to and forming part of the Financial Statements
50	Consolidated Financial Statements

Quarterly Report September 2023

Corporate Information

Board of Directors
Mr. Suleman Lalani	Chairman (Non-Executive Director)
Mr. Rizwan Ata *	President & Chief Executive Officer
Mr. Akhtar Abbas	Independent Director
Mr. Ali Hussain	Non-Executive Director
Ms. Iffat Zehra Mankani	Non-Executive Director
Mr. Haider Ali Hilaly	Independent Director
Mr. Sulaiman Sadruddin Mehdi	Independent Director
Mr. Syed Ali Hasham	Non-Executive Director
Shariah Supervisory Board
Mufti Irshad Ahmad Aijaz	Chairperson
Mufti Javed Ahmad	Member
Mufti Muhammad Husain	Member
Mufti Syed Hussain Ahmed	Member
Board Audit Committee
Mr. Haider Ali Hilaly	Chairperson
Ms. Iffat Zehra Mankani	Member
Mr. Sulaiman Sadruddin Mehdi	Member
Mr. Syed Ali Hasham	Member
Board Risk Management Committee
Ms. Iffat Zehra Mankani	Chairperson
Mr. Sulaiman Sadruddin Mehdi	Member
Mr. Syed Ali Hasham	Member
Chief Executive Officer	Member
Board Human Resources & Remuneration Committee
Mr. Akhtar Abbas	Chairperson
Ms. Iffat Zehra Mankani	Member
Mr. Suleman Lalani	Member
Mr. Syed Ali Hasham	Member
Board Information Technology Committee
Mr. Haider Ali Hilaly	Chairperson
Mr. Akhtar Abbas	Member
Mr. Suleman Lalani	Member
Chief Executive Officer	Member
* With effect from September 29, 2023.

2

Company Secretary

Mr. Muhammad Shoaib

Auditors

KPMG Taseer Hadi & Co.,

Chartered Accountants

Legal Adviser

1- Haidermota & Co.

2- Mohsin Tayebaly & Co.

Management (in alphabetical order)
Rizwan Ata	President & Chief Executive Officer
Aasim Salim	Group Head Distribution
Bilal Fiaz	Group Head Consumer Banking
Burhan Hafeez Khan	General Manager South West
Kashif Nisar	Head of Product & Shariah Structuring
Mahmood Rashid	Head of Government Relations & Security
Masood Muhammad Khan	Head of Compliance
Mateen Mahmood	Head of Operations
Mohammad Faisal Dhedhi	General Manager South East
Muhammad Amin	Group Head Information Technology
Muhammad Assadullah Chaudhry	Head of Human Resource
Muhammad Idrees Sheikh	Divisional General Manager Interior Sindh
Muhammad Irfan Ahmed	Head of Shariah Compliance
Muhammad Shoaib	Company Secretary
Muhammad Shoaib Rizwani	Divisional General Manager South Punjab
Muhammad Uzair Sipra	Head of Legal
Rizwan Qamar Lari	Group Head Internal Audit
Faisal Anwer	Group Head Treasury & Financial Institutions
Sohail Sikandar	Chief Financial Officer
Tariq Ali Khan	General Manager North
Usman Shahid	Group Head Risk Management
Zabih Ullah Usmani	Divisional General Manager Baluchistan
Zaheer Elahi Babar	Group Head Corporate Banking
Registered Office
11th Floor, Executive Tower, Dolmen City,
Marine Drive, Block-4, Clifton, Karachi.
Phone [phone](BIP)-111
Fax: [phone]
Email: [e-mail]
Share Registrar
CDC Share Registrar Services Limited
Head Office: CDC House, 99 - B, Block 'B',
S.M.C.H.S., Main Shahra-e-Faisal
Karachi- 74400.
Tel: [phone] Fax: [phone]
URL: www.cdcsrsl.com
Email: [e-mail]

Public Dealing Timings of Share Registrar

Monday to Thursday:	9:00 am to 5:00 pm
Friday	9:00 am to 12:30 pm and 2:30 pm to 5:00 pm

Website:

www.bankislami.com.pk

3

Quarterly Report September 2023

Directors' Report to the Members

Dear Members,

On behalf of the Board of Directors, we are pleased to present the Directors' Report of BankIslami Pakistan Limited ('the Bank' or 'BankIslami') on the Condensed Interim Un- audited Financial Statements for the nine months ended September 30, 2023.

Economy Snapshot

In Fiscal Year 2023 (FY23), Pakistan's economy experienced a significant deceleration, with an estimated 0.6% contraction in real GDP. The most recent Pakistan Development Update from the World Bank, titled "Restoring Fiscal Sustainability," highlights that this decline in economic activity can be attributed to a combination of factors. These include domestic and external shocks, such as the Year 2022 floods, government-imposed limitations on imports and capital flows, domestic political instability, the rise in global commodity prices, and stricter global financial conditions. Moving forward, the implementation of the economic adjustment program and a smooth general election planned during the Fiscal Year 2024 (FY24) are expected to boost confidence and would be critical in restoring stability and gradual recovery of economy. Easing import controls is likely to support investments; favorable weather conditions and the Government's relief package of free seeds, subsidized credit, and fertilizers are expected to support a recovery in agriculture. This, in turn, will help the industry, which will also benefit from the increased availability of critical imports. The World Bank estimates forecasted GDP growth for the fiscal year 2024 to recover at 1.7%, while International Monetary Fund (IMF) and Asian Development Bank (ADB) have given forecast of 2.5% and 1.9% respectively.

The Monetary Policy Committee (MPC) has analyzed certain developments having positive expected impact on inflationary pressure, which was at its peak in May 2023 at 38% and declined to 31.4% in September 2023, and decided to maintain the policy rate at 22%. Key considerations to this decision include a healthy agricultural outlook driven by a robust cotton crop and improved conditions, rising global oil prices exceeding $90 per barrel, a shift in the current account to a deficit of USD 809 million in July 2023 - partly due to eased import restrictions, and successful administrative and regulatory measures aimed at food commodity availability and exchange company reforms. These changes are also connected to a recent IMF Stand-By Arrangement (SBA) of USD 3 billion, with an initial disbursement of USD 1.2 billion, helped in narrowing the gap between interbank and open market exchange rates. The SBP's and overall country's reserve now stood at USD 7.6 billion and USD 13 billion as at Oct 06, 2023 respectively, which has previously been reported at USD 4.4 billion and USD 9.2 billion respectively at the end of FY23.

Pakistan's new SBA-supported program will provide a policy anchor for addressing domestic and external imbalances and a framework for financial support from multilateral and bilateral partners. The program will focus on (1) implementation of the FY24 budget to facilitate Pakistan's needed fiscal adjustment and ensure debt sustainability, while protecting critical social spending; (2) a return to a market-determined exchange rate and proper FX market functioning to absorb external shocks and eliminate FX shortages; (3) an appropriately tight monetary policy aimed at disinflation; and (4) further progress on structural reforms, particularly with regard to energy sector viability, governance, and climate resilience.

(Source: SBP Monetary Policy Statement, World Bank Pakistan Development Update and News Reports)

4

Overview of Financial Performance

Following are the key financial highlights for the nine months ended September 30, 2023:

									September			September
		September		December	September		2023 Vs
Key Balance Sheet Numbers						2023 Vs Sep-
2023	2022			2022		December
						tember 2022
								2022
		----------------	Rupees in '000	----------------		---------------	% ---------------
Net Assets		32,694,168		26,450,401			25,610,790		23.6%			27.7%
Deposits	461,908,104	415,911,942			388,128,524		11.1%			19.0%
Financing and related assets - net	203,699,800	201,328,442			205,282,924		1.2%			-0.8%
Investments - net		276,160,518		179,741,488			139,363,656		53.6%			98.2%
Due to FI		60,146,046		21,052,256			20,940,017		185.7%			187.2%

Key profit and expense numbers		September		September	%
2023	2022		Change
		------------- Rupees in '000 -------------
Profit / return earned		65,309,237		31,591,490		106.7%
Profit / return expensed		36,964,611		17,947,864		106.0%
Net Spread Earned	28,344,626	13,643,626	107.7%
Fee and commission income	1,274,885	1,044,835	22.0%
Operating expenses	11,630,715	8,695,391	33.8%
Operating Profit before provisions		18,863,300		7,790,448		142.1%
Provisions (net)		3,903,489		2,246,379		73.8%
Profit before taxation		14,959,811		5,544,069		169.8%
Profit after taxation		8,473,584		2,852,229		197.1%
Earnings per share (in Rupees)		7.6428		2.5726		197.1%

Alhumdulillah! the Bank's net assets increased by 23.6%, primarily driven by the allocation of excess liquidity in GoP Ijarah Sukuk. As a result, the Bank's investment portfolio surged from Rs. 179.74 billion in Dec 2022 to Rs. 276.16 billion in Sept 2023, marking a substantial growth of 53.6%. Consequently, the investment to deposit ratio (IDR) rose from 43.2% as of Dec 31, 2022, to 59.8% as of Sept 30, 2023.

The Bank's total deposits surged by 11.1% compared to the end of the year 2022, while it achieved a year-on-year growth of 19%. The results demonstrate significant growth of 29.9% in term deposits with a slight decrease of 1.9% in current deposits compared to the end of the year 2022. On a year-on-year basis, there is a growth of 12.9% in the current account of the Bank. The growth in total deposits emerged based on the Bank's strategic product diversification, catering to distinct market segments and effectively addressing specific market needs. In line with this approach, the Bank reintroduced attractive term deposit offerings, leveraging the heightened demand owing to higher policy rates. Moreover, it introduced customized products for women, established priority banking centers, and emphasized cash management and employee banking services. Additionally, the Bank is expanding its branch network, thereby improving accessibility and market presence.

The Bank demonstrated controlled growth in its financing portfolio, recording a modest 1.2% increase as compared to the end of the year 2022. Challenges such as high policy rates, stringent regulatory measures on auto financing, and the absence of subsidized housing finance schemes for new cases led to a notable decline in the Bank's consumer financing portfolio. Consequently, the Bank's gross Advance to Deposit ratio (ADR) decreased to 48.9% from 53% reported as of Dec 31, 2022. Nevertheless, going forward, the Bank intends

5

Quarterly Report September 2023

to increase its funding to large corporate and commercial clients, with the goal of sustaining a robust financing portfolio.

A strong capital foundation is essential for maintaining a robust asset portfolio. As of September 30, 2023, the Bank's Capital Adequacy Ratio (CAR) has reached an impressive 22.42%, marking a significant increase from 17.92% recorded as of December 31, 2022, despite the payment of dividend of Re. 1/- per share during the current year. The strong growth in profitability and investments in zero/low risk weighted assets notably contributed to the improved CAR. This growth highlights the Bank's commitment to sustaining a strong financial position and enhancing shareholder value.

Owing to growth in overall balance sheet along with rise in policy rate, the net spread earned by the Bank during the period of 9M 2023 grew by 107.7% as compared to same period last year. With the country going through a high cycle of inflation, opening of new branches by the Bank and increase in headcount primarily on business side, the overall operating expenses of the Bank has increased by 33.8% as compared to same period last year. Net provision against financings and investments increased by 73.8% during the 9M 2023 due to certain fresh classifications, discounting of FSV benefit considered against previously classified financings and incremental general provision. While the management will continue to make efforts to recover from classified portfolio, at the same time, it will continue to prudently monitor the health of the overall financing portfolio. In response to the current economic conditions, the Bank has proactively allocated an additional general provision of Rs. 1.1 billion during the 9M 2023, leading to an improvement in the coverage ratio to 102.2%.

Alhumdulillah! the Bank has attained an increase of 169.8% in its profit before tax for the nine months ended on September 30, 2023 as compared to same period last year. This achievement is a result of Bank's comprehensive strategy which included a focus on attaining an optimal CASA mix, promoting growth in low-risk weighted financing portfolios, prioritizing fee- based income and consciously expanding the investment portfolio. In the year 2023, the recognition of deferred tax assets was adjusted based on the tax rates amended vide Finance Bill 2023-24, leading to a reversal in the tax charge by approx. Rs. 1 billion. Consequently, the profit after tax reached to Rs. 8.47 billion, an increase of 197.1% which underscores the Bank's unwavering commitment to financial excellence and its ability to navigate challenging circumstances, yielding exceptional results.

Group Results

Throughout the initial nine months of the year 2023, the Group witnessed a substantial 20.2% increase in its total assets. This notable enhancement in the Group's financial position was primarily propelled by investments in Sukuks. Demonstrating exceptional performance, the Group attained a post-tax profit of Rs. 8.46 billion, showcasing an impressive 195.4% surge compared to the same period last year. This outstanding accomplishment is attributed to the augmentation of earning assets, the growth of profit-bearing liabilities, and the increase in policy rates.

Dividend

The Board of Directors, in their meeting held on October 24, 2024 declared an interim cash dividend of Rs. 1.75 (17.5%) for the nine months ended September 30, 2023

6

Composition of the Board

In line with the requirements of the Code of Corporate Governance (CCG) and best practices, the Board of the Bank comprises of both non-executive and independent directors, including representation of a female director on the Board.

The current composition of the Board is as follows:

Total number of Directors	8
Composition:
(i)	Independent Directors:	3
(ii)	Non-executive Directors:	4
(iii)	Executive Director:	1
(a)	Female Director:	1
(b)	Male Directors:	7

Acknowledgements

The Board wishes to formally express its profound gratitude to the State Bank of Pakistan for their invaluable assistance and guidance. Additionally, we extend our appreciation to the Securities and Exchange Commission of Pakistan and other regulatory bodies for their unwavering support towards the Bank's endeavors. Our sincere gratitude goes out to our esteemed customers, valued business partners, and shareholders for their continuous loyalty and trust.

Furthermore, we would like to recognize the exceptional dedication, commitment, and tireless efforts exhibited by our management team and employees. Their contributions have been instrumental in propelling BankIslami to a prominent position within the broader banking sector and particularly in the Islamic Banking industry.

On behalf of the Board,

-Sd-	-Sd-
Rizwan Ata	Suleman Lalani
President & Chief Executive Officer	Chairman of the Board of Directors
October 24, 2023

7

Quarterly Report September 2023

ÎgÖZ

eg1XìLe*¯z»egkgñƒD™7d`Zy,6ä™ëZÛðÉggzZ$-zçÃyÎ*0sWJÃZÔeg1 ÐwŠµÌ,6ä™ëZÛ$-zçw²â)ÅJÐ$+YÅx©ïíZvŠgzZyÎ*0sWz8oZhZúg

Æ4,6uà ZzäYÅÐ$+YÅyZÔÆy§*c‰gzZVzgZŠ•ZÑ~g*!zg»Ô@g™gŠVZ/¤LZëXìg‡ X÷g‡u"Ìn

sÜ:ÃòsZJªz+$ÅT÷ÙŠÐ{ógŠÌÃœJgzZx³ÔÎÅ}i5gzZšòOZKZëāt+h×' Xì5x£ëZ~ÅÅ~gîòsZ,6gîm{É~gî

Ð$+YÅeg1

-Sd-	-Sd-
Ð5_	Y«yZçg
ãÑÑyé)G
iI],ZesWeg1}ç	WWÁhZrgzZgœ
	2023Ô',ÆZ24

8