SCB Annual Report 2020 - Standard Chartered

NOTICE OF ANNUAL GENERAL MEETINGNotes:1.The Share Transfer Books of the Bank will remain closed from 22March 2021 to 29 March 2021 (both days inclusive). Transfer receivedat the Share Registrar by the close of business on 19 March 2021 willbe treated in time.2.Participation in AGM through online platform / facility:We acknowledge and appreciate the tremendous efforts thateveryone is putting in for protecting themselves and others fromCovid-19. In view of current Covid-19 situation in the country duringthe second wave and practical difficulties in maintaining socialdistancing in public gathering, it is our combined responsibility tofurther enhance our efforts in fight against the pandemic for thesafety of our shareholders, our staff and general public.Pursuant to Securities and Exchange Commission of Pakistan’sCircular No. 6 of 2021 dated 3 March 2021, it has been decided by theBank to continue with contingency planning measures and hold the15th AGM through online platform/facility.Accordingly, following arrangements have been made by the Bankto facilitate the participation of the shareholders in the AGM throughonline platform/facility, either in-person or through appointedproxies. Shareholders are requested to get themselves registered withthe Company Secretary Office, at least 24 hours before the time ofAGM (i.e. before 04:00 p.m. on 28 March 2021) by providing followingdetails at cosec.pk@sc.comFolio/CDCName ofCNIC NoAccount No. ShareholdersCell No.Email AddressUpon receipt of the above information from interested shareholders,the Bank will send the login details at their email addresses. On theAGM day, shareholders will be able to login and participate in theAGM proceedings through their smartphone or computer devicesfrom their home. Login facility will be opened 15 minutes before themeeting time to enable the participants to join the meeting, afteridentification and verification process.3.Only those persons whose names appear in the Register of Membersof the Bank as at 19 March 2021 will be entitled to attend/participatein/vote at the AGM and be entitled to receive above stated cashdividends.4.A member entitled to attend and vote at the above meeting isentitled to appoint another member as his/her proxy to attend andvote instead of him/her. Proxies, in order to be valid, must be receivedby the Bank at its registered office marked for the attention of theoffice of the Company Secretary, not less than 48 hours before thetime for holding the meeting and must be duly stamped, signed andwitnessed. A member shall not be entitled to appoint more than oneproxy.5.Members are requested to notify change in their address, if any, to theBank’s Share Registrars, M/s. CDC Share Registrar Services Limited,CDC House, 99-B, Block B, SMCHS, Main Shahrah-e-Faisal, Karachi- 74400. Toll Free: 0800-CDCPL (23275), Fax: (021) 34326053, Email:info@cdcsrsl.com.6.A.For Attending the Meeting:i)In case of individuals, the account holder or sub-accountholder and/or the person whose securities are in groupaccount and their registration details are uploaded asper the Regulations, shall authenticate his/her identity byshowing his/her original Computerised National IdentityCard (CNIC) or original passport at the time of attendingthe Meeting.ii)In case of corporate entity, the Board of Directors’resolution/power of attorney with specimen signature ofthe nominee shall be produced at the time of the Meeting.B.For Appointing Proxies:i)In case of individuals, the account holder or sub-accountholder and/or the person whose securities are in groupaccount and their registration details are uploaded as perthe Regulations, shall submit the proxy form as per theabove requirement.ii)The proxy form shall be witnessed by two persons whosenames, addresses and CNIC numbers shall be mentionedon the form.4Standard Chartered - Annual Report 2020

NOTICE OF ANNUAL GENERAL MEETINGiii)iv)v)Attested copies of CNIC or the passport of the beneficialowners and the proxy shall be furnished with the proxyform.The proxy shall produce his/her original CNIC or originalpassport at the time of the Meeting.In case of corporate entity, the Board of Directors’resolution/power of attorney with specimen signatureshall be submitted along with the proxy form to the Bank.7.Members may inspect the minutes of the AGM held on 09 April 2020,in terms of Section 52 of the Companies Act, 2017, at the Bank’sregistered address.8.In terms of Section 223 (7) of the Companies Act 2017, the AnnualReport for the year ended 2020 will also be placed on the Bank’swebsite simultaneously with the dispatch of the same to the members.Statement under section 134 (3)Statement for Item (4) to the AgendaThe meeting fee payable to the Independent Directors and Non-ExecutiveDirectors (who are not group employees) of the Bank was approved by theBoard of Directors in terms of Article 60 of the Articles of Association ofthe Bank. This meeting fee requires approval of the shareholders in AGMin terms of paragraph C-2 of Regulation G-1 of Prudential Regulations forCorporate/Commercial Banking issued by the State Bank of Pakistan.The Independent Directors and Non-Executive Directors (who are notgroup employees) of the Bank are interested in the payment of fees andremaining members of the Board have no interest in the matter.SHAREHOLDERS AWARENESS:1.E-Dividend Requirements: In accordance with the Companies(Distribution of Dividend) Regulation 2017, shareholders are advisedto provide their Identification Number/Computerised NationalIdentity Card (CNIC) Number and International Bank AccountNumber (IBAN) details, if they have not already done so, to our ShareRegistrar (if shares are held in physical form) at their above referredoffice address or to the respective Participants/Broker (if shares areheld through CDS Account) latest by 19 March 2021. Failing whichmay result in withholding of dividend payments of respectiveshareholders.2.Tax Requirements: The dividend income on shares is liable todeduction of withholding tax under Section 150 of the Income TaxOrdinance, 2001 and pursuant to the provisions of Finance Act, 2020,effective from 01 July 2020; the ‘Filer’ and ‘Non-Filer’ shareholders willpay tax on dividend income @ 15% and 30% respectively. The Filerstatus of shareholders will only be determined on the basis of latestavailable Active Taxpayers List (ATL) uploaded by the Federal Boardof Revenue (FBR) on their website http://www.fbr.gov.pk/.In case a Folio/CDS Account is jointly held, each joint-holder will betreated separately as Filer or Non-Filer and tax will be deducted on thegross dividend amount determined by bifurcating the shareholdingof each joint-holder on equal proportions, except where shareholdingproportion of joint-holders is pre-defined as per the records ofBank’s Share Registrar and thus tax rates will be applied in line withrespective proportions. Those shareholders, who are holding sharesjointly, are requested to update/notify the shareholding proportionsof principal and joint-holder(s) in writing to our Share Registrar latestby 19 March 2021 at their above referred office address.In this regard, all shareholders, whose names are not entered intothe ATL despite the fact that they are filers, are advised to make surethat: (i) Their names appear into the ATL before start of closed period(referred above), otherwise they will be treated as non-filers for taxdeduction purpose, and (ii) A copy of their National Tax Number issubmitted to their relevant Participant/CDC Investor Account Servicesor to our Share Registrar (in case of physical shareholding only) attheir above referred office address.Corporate shareholders are requested to provide of a copy of validIncome Tax Exemption Certificate issued by the concerned authority toyour institution, which is compulsorily required to claim tax exemptionin terms of clarification issued by FBR vide their letter C.No.1 (43) DG(WHT)/ 2008-Vol.11-66417-R, dated 12 May 2015. In case you aresubject to any special tax rate, please also provide a copy of relevantcertificate issued by the concerned authority. Relevant copies shouldreach our Share Registrar at their above-mentioned office address.Notice of Annual General Meeting5

CHAIRMAN’S REVIEWFor the year ended 31 December 2020I am pleased to deliver my fourth review as Chairman of the Board of Directors (‘the Board’) of Standard Chartered Bank(Pakistan) Limited (‘the Bank’), in line with the requirements of Section 192 of the Companies Act, 2017.Standard Chartered Group views high standards of corporate governance as a critical component for the long-termsuccess of all companies and for the economic health and stability of markets across the globe. As part of the Group’sapproach to corporate governance, the Board fully recognises that the success of the Bank ultimately depends upon thecapacity of the directors to provide the vision and direction needed, not only to survive, but also to develop and prosper. TheBoard endeavours to maintain and strengthen the high level of corporate governance, continuously improving corporatetransparency, ensuring the healthy development of the Bank and endeavouring to enhance corporate values.The Bank’s Board of Directors is comprised of seven members and is well composed in terms of skills, competency, knowledge,experience and diversity. The Board performs its statutory role and fulfils its objectives by ensuring that the Bank has acompetent leadership and an effective executive management. The Board establishes significant policies, frameworksand the code of conduct, and delegates the authorities and responsibilities down the line for the Bank’s smooth operations.The Board has constituted four Committees namely, Board Audit Committee, Board Human Resource and RemunerationCommittee, Board Risk Committee and, most recently, the Board Information Technology Committee. All Committees havea defined scope of work and reporting procedures and such Committees are discharging their function and duties as pertheir respective terms of reference.The Board meets frequently enough to discharge adequately its responsibilities and it receives the agenda papers andappropriate supporting materials in sufficient time prior to the Board and its Committee meetings. The Board membershave established a very open and candid atmosphere in the boardroom.During the year under review, six meetings of the Board were held in which the Board received presentations on businessstrategy, financial performance and business updates covering challenges and opportunities. Besides this, the Board’sfocus areas were digital strategy, customer service, policies, product performance and reviews, cost discipline, capitaladequacy and assessment, information and cyber security risk, regulatory compliance and market updates.The Board continued performing its statutory role during this unprecedented time of the Covid-19 pandemic. Challengesfacing the businesses were discussed and guidance was provided to management. Filling the casual vacancies on theBoard that arose during this period was also a challenge which has, however, been successfully concluded.Overall, performance and effectiveness of the Board remained ‘Satisfactory’ based on the annual evaluation of the Boardwhich was carried out by external consultants in 2020. The evaluation process covered many aspects including the Board’scomposition and the Board’s understanding of its role, responsibilities and duties as well as the Bank’s risk profile andregulatory environment. It also reviewed the directors’ induction process and training, the Board’s involvement in strategyplanning, the quality of information which the Board receives and the effectiveness of the follow up on action points.Surveys of the Board’s Sub-Committees also showed ‘Satisfactory’ ratings. Moreover, survey results of individual directors,including the Chairman and Chief Executive, were noted as ‘Satisfactory’. There were no material themes from the surveybut some generic areas for improvement are being tracked to conclusion.On behalf of the Board, I would like to thank all the stakeholders for their continued trust and support. I also take thisopportunity to express my gratitude to my fellow Board members for their valuable contribution.Ian BrydenChairman25 February 20216Standard Chartered - Annual Report 2020

DIRECTORS’ REPORT - 31 December 2020On behalf of the Board of Directors, we are pleased to present the Directors’ Report of Standard Chartered Bank (Pakistan)Limited (SCBPL or the Bank) along with the audited financial statements and auditors’ report thereon for the year ended31st December 2020.EconomyThe rapid spread of COVID-19 and sharp deterioration in global economic outlook created severe economic and financialshock for many countries around the world. For Pakistan, the current shock transmits mainly through slowdown in economicactivity, lower tax revenue and higher Government financing needs relative to pre-COVID-19 levels. Support from theInternational Monetary Fund (IMF) emergency financing under the Rapid Financing Instrument (USD 1.39bn) in April 2020provided strong support to the authorities’ emergency policy response, preserving fiscal space for essential health spending,shoring up confidence and catalyzing additional donor support. Pakistan has also received approval for its participation inthe G-20's Debt Service Suspension Initiative (DSSI), which will materially lower FY21 debt repayments to bilateral creditors.State Bank of Pakistan (SBP) adopted timely measures, including lowering of the policy rate (625 bps since March 2020)and new refinancing facilities, to support liquidity, credit conditions and safeguard financial stability. Under the SBPrelief package, repayments of more than Pakistani Rupee (PKR) 650bn by the borrowers have been deferred along withdisbursement of PKR 238bn in payroll support facilities for Corporate/ SME sector.On the fiscal side, public finances remain under pressure from the increase in health-related expenditures and decline intax revenues. Government projects a growth of 2% for GDP in FY21, following a contraction of 0.4% in FY20 resulting fromthe pandemic.On the monetary front, average consumer price inflation (new base) in the month of December 2020 was 8.0% ascompared to December 2019 average (new base) of 12.6%. At close of December 2020, external conditions showed steadyimprovement. The country posted a surplus of USD 1.1bn (Jul 20 to Dec 20) as compared to a deficit of USD 2.0bn in thecomparative period. Improvement in Balance of Payments was primarily driven by import compression and growth inworkers’ remittances. The SBP foreign exchange reserves stood at USD 13.4bn at close of December 2020 (December 2019;USD 11.3bn) with PKR depreciating by 3.1% for the year.Pakistani banks continue to remain well capitalized with an industry wide Capital Adequacy Ratio of 19.5% and remainprofitable with a Return on Equity (after tax) of 14.8% for period ending September 2020. While banking sector NonPerforming Loans increased slightly to 9.9% at close of September 2020 (8.6% at the end of 2019), it remains to be seenhow the uncertainties surrounding COVID-19 impact the banking sector going forward.PurposeAt Standard Chartered our purpose is to drive commerce and prosperity through our unique diversity which captures thespirit of Standard Chartered by bringing together the best of what we already have – our incredible diversity of locations,cultures and expertise and ties it to what we do as a Bank – facilitating commerce in the real economy.Our purpose signifies the way we want to do business with a human aspect as prosperity is not just about financial wealthbut contributes towards creating healthier and happier communities. The purpose also embodies a more proactive andhigh-performance culture.Our strategic pillarsProgress in 2020 on our strategic pillars is as follows: Deliver our networkOur network is the key to our ability to compete profitably and remains a differentiator for our clients. We continueto leverage this strength and systematically increase network linked income through innovative solutions, productspecialization and structured off-shore offerings. Our focus remains on facilitating our clients in the Belt and RoadInitiative and other trade corridors as well as building momentum in Sovereign, Multinational and Local corporatesspace. Transform and disrupt with digitalOur digital transaction mix, including “SC Mobile” application customers, continue to increase. SCBPL has recentlyupgraded core banking system to advanced platform and is also investing in state of the art digital capabilities andsolutions to drive enhanced client experience.Directors’ Report7

DIRECTORS’ REPORT Improve productivityWe are strengthening our digital agenda in line with client needs. The increased focus on productivity resulted incontrolled costs coupled with top line growth. We maintained best in class CASA mix in the industry. Grow our affluent businessPost launch of Premium segment in Q4 2019, we are now focusing on driving Emerging Affluent top-line growth to builda feeder for Priority Banking Segment. Optimise returnsWe continue to optimise returns, focusing on Return on Equity and the Cost to Income Ratio. Financial results aresummarised in the next section.Operating Results and Business OverviewBalance SheetPaid-up capitalTotal equityDepositsAdvances – grossAdvances – netInvestments – netProfit and LossRevenueOperating expensesOther non mark-up expensesOperating profit (before provisions and tax)Recovery / (provisions) and write offs - netProfit before taxProfit after taxEarnings per Share (EPS) – Rupees31 December 2020(PKR millions)31 December 2019(PKR 8,71672,917465,629235,269218,087249,164Year ended31 December 2020(PKR millions)Year ended31 December 2019(PKR .3939,07611,12976527,1821727,19916,0174.14The Bank delivered resilient financial performance with Profit before tax of PKR 23.6bn compared to PKR 27.2bn in 2019.Despite significant interest rate cuts, overall revenue growth was 5%, whereas client revenue increased by 15% year on yearwith positive contributions from financial markets, retail products and transaction banking. Operating expenses increasedby only 7% year on year on account of spending mainly on the Bank’s products, services, digital platforms and people togrow the franchise.On advances side, momentum was impacted due to the slowdown in economic activity. The Bank is closely monitoringthe portfolio given the uncertain economic environment and is maintaining adequate provisions, where required. Withdiversified product & client base, the Bank will continue its strategy to build a profitable, efficient and sustainable portfolio.On the liabilities side, the Bank achieved another milestone as total deposits crossed PKR 550bn. At year end, total depositsclosed at PKR 557bn with a growth of 20%, whereas current and saving accounts also grew by 19% from the start of theyear and are now 93% of the deposit base. The optimal funding structure of the balance sheet continues to support theBank’s performance.The Bank continues to invest in its digital capabilities and infrastructure to enhance our clients’ banking experiencethrough the introduction of innovative solutions. We have made steady progress in further strengthening our control andcompliance environment by focusing on our people, culture and systems. We are fully committed to sustained growth byconsistently focusing on our clients and product suite along with a prudent approach to building the balance sheet whilebringing the best in class services to our customers.8Standard Chartered - Annual Report 2020

DIRECTORS’ REPOR

2 Standard Chartered - Annual Report 2020 Table of Contents Notice of Annual General Meeting 3 Chairman's Review 6 Directors' Report - English 7 Directors' Report - Urdu 13 Management's Statements on Internal Controls and Risk Management Framework 20 Report of Shari'ah Board - English 26 Report of Shari'ah Board - Urdu 29