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INTRODUCTION

Banking system are dividend in two area investment bank and


commercial bank. The Banks are doing two type of activity going under
inspection recently. Debate at that either two different type of activity
carry on in one financial organization or working in separate form or
knowing the difference between commercial banks and investment banks
can shed some light on this issue.

Investment bank industry internationally is known for its diversified


products including future and forward swap agreements

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Sector Review-Investment Banks

Investment bank industry internationally is known for its diversified products including
future and forward swap agreements. However, in Pakistan it is still quite young moving
up with baby steps. Compared to its pears ‘The Commercial Banks’ the Investment banks
have some inherent disadvantages. Commercial Banks have lower cost of funds, as low
as 0% to 5%, compared to the Investment Banks where they have to rely on leveraging
from the Commercial Banks which is obviously at a higher cost. Investment Banks are at
a loss also at the lending/ investing side of the balance sheet. Commercial Banks as like
Investment Banks can invest in Stock, they can participate in Corporate Financing as well
as Money Market lending. Commercial Banks being greater in size can participate in
commercial lending more vibrantly due to which they normally end up being arranger
and advisor gaining heavily from advisory fee and arranging commission. In addition to
this Commercial Banks can more efficiently make loans to consumers and formulate
market based efficient products like ‘Ready Cash’ by Union Bank, for small businesses
not to mention the other variety of trade based products like discounting of bills and
export re financing. These reason combined with lack of financial products in the money
and capital market, Investment banks in Pakistan suffer greatly in paying to their stake
holders competitive value on equity. The highest return on equity earned by an
Investment bank in 2008 was 16.20% (Escorts Investment Bank) where as Commercial
Banks posted in excess of 27% (MCB). Commercial Banks have equity base many times
greater than Investment Banks. The highest equity of an Investment Bank is 2.24 Bln.
(IGI Investment Bank) where the highest equity for Commercial Banks is 65 Bln. (HBL).

The competitive disadvantage faced by Investment banks in Pakistan are not unique, in-
fact these are the same problems which were faced by the banks in America. Addressing
to this issue American Congress passed an Act in 1933,called the ‘Glass-Steagall Act’, to
restrict Commercial Banks in taking direct exposure in Equity markets the bill was
however, later replaced by another Act in 1981, called the ‘Depository Institutions
Deregulation and Monetary Control Act’ allowing limited exposure in Equity market for
Commercial Banks.

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INVESTMENT BANKS AMBIT OF OPERATIONAL ACTIVITIES

 Syndication/ Direct Financing Activities


 Treasury/ Money Market Activities
 Equity Investments/Trading
 Brokerage
 Fixed Income /Debt Securities
 Corporate Finance and Advisory
 Bank Guarantees / Letters of Credit
 Deposit Schemes (Certificate of Deposit)
 Housing Finance
 Leasing Finance

INVESTMENT BANKS REGULATORS

Investment Banks are regulated by Securities & Exchange Commission of Pakistan.

LIST OF ACTIVE COMPETITORS LISTED ON STOCK EXCHANGE

 First Credit and Investment Bank Limited


 Escorts Investment Bank Limited
 First Dawood Investment Bank Limited
 First International Investment Bank Limited
 Orix Investment Bank (Pakistan) Limited
 Trust Investment Bank Limited
 Security Investment Bank Limited

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FIRST CREDIT AND INVESTMENT BANK LIMITED

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COMPANY PROFILE

INCORPORATION:

First Credit and Investment Bank Limited (the Company) was incorporated in Pakistan on
August 31, 1989 as a public limited company under the name of First Credit and Discount
Corporation Limited. Subsequently, the name of the Company was changed to First Credit and
Investment Bank Limited on March 15, 2006.

HEAD OFFICE /REGISTERED OFFICE:

2nd Floor ,Sidco Avenue Centre, Stratchen Road ,Karachi - 74200

SPONSORS:

The Company is an associated undertaking of Water and Power Development Authority


(WAPDA) and National Bank of Pakistan (NBP).

LISTING IN STOCK EXCHANGE AND EQUITY STRUCTURE:

The shares of FCIB were listed on Karachi Stock Exchange in August 2008. Prior to listing
National Bank of Pakistan (NBP) and Water and Power Development Authority (WAPDA) held
50% each in the equity of FCIB. However, after issue of fresh capital (Rs.250Million) to the
public, share of NBP and WAPDA stands diluted to 30.77% each. The balance 38.46%
shareholding is with the general public. After listing the Company’s paid up capital stands at
Rs.650Million.

CREDIT RATING:

The medium to long term credit rating of the Company rated by JCR-VIS Credit Rating
Company Limited is ‘BBB+’ with a positive outlook. Short term rating of the bank is ‘A-2’.

DISTINGUISHING FEET:

The company played a pioneering role in developing the primary as well as secondary debt
markets in Pakistan, particularly through issuance of WAPDA Bonds & Civil Aviation Bonds. In
2004 the Company obtained license from SECP to undertake Investment Finance Services
(Investment Banking).

VISION

Be a preferred investment bank enhancing value for the stakeholders and contributing to the
National goals.

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Mission Statement

Contributing through innovative financing and investment in quality portfolio, advisory services
delivered in an environment of trust and customer confidence supported by a team of
professionals.

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MANAGEMENT PROFILE

MR. MOHAMMAD IMRAN MALIK


CHIEF EXECUTIVE/ PRESIDENT

Mr. Malik has over 30 years of experience in the areas of investment banking and
commercial banking. He has done his MBA from IBA Karachi. Prior to that he graduated
from the University of Punjab. He started his career with Habib Bank Limited where he
worked in the areas of commercial banking and branch management. He then moved to
NDFC where he held key positions including as Head of Banking, Treasury, and Loan
Departments. In 1993, Mr. Malik was appointed as the Managing Director of FCDC
which was later reconstituted as FCIB.

MR. MUHAMMAD MOHSIN ALI


EXECUTIVE VICE PRESIDENT / COMPANY SECRETARY

He has over 16 years of experience in accounts, finance, costing, internal auditing, fund
management, risk analysis and interpretation of financial statements. He has in-depth
knowledge of corporate and income tax laws, Prudential Regulations and NBFC Rules.
He is a science graduate from Karachi University and fellow member of Institute of Cost
& Management Accountants of Pakistan, Karachi.

SAIYID NAJAM RIZVI


VICE PRESIDENT

After completion of his MBA from IBA Karachi in 1986 Mr. Rizvi joined NDFC-Project
Division. Over a period of almost 16 years at NDFC his job assignments included
postings in Merchant Banking, Capital Market, Project Supervision and Private Energy
and Recovery Divisions. Subsequent to amalgamation of NDFC with NBP he worked up
to September 2005 with Special Assets Division of NBP before joining Crescent
Standard Investment Bank‘s Corporate Finance Department as Assistant General
Manager.

MR. HASNAIN RAZA


ASSISTANT VICE PRESIDENT

He has more than 12 years experience in the areas of Credit Administration in different
Investment Banks including Orix Investment Bank. He has done his Masters in
Commerce from Karachi University.

MR. KHURSHID ANWAR


HEAD OF INTERNAL AUDIT

He has more than 20 years experience in the areas of Audit, Investment Banking, Equity,
and Branch Management. He has done his Masters in Business Administration.

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MR. MUHAMMAD KAMRAN
SR. MANAGER FINANCE & ACCOUNTS

He has more than 5 years experience in the areas of Accounts and Reporting. He is fellow
member of ACCA. He was previously associated with Rehman Sarfarz & Co. as
Manager Audit.

MR. MANSOOR LAKHANY


SR.MANAGER EQUITY

He has more than 05 years experience in the area of Capital Market and Portfolio
Management. He has done his MBA from Bahria University Karachi. He was previously
associated with First National Equity as Portfolio Manager.

MR. MUHAMMAD ARSHAD CHAUDHRY


SR. MANAGER TREASURY

He has more than 06 years experience in the areas of Treasury and Fund Management,
Corporate & Investment Banking, Equity Operations. He has done his Masters in
Business Administration and presently doing CFA. He was previously associated with
Crescent Group as Manager Treasury.

MR. ABDUL NASIR


MANAGER-I.T.

Mr. Abdul Nasir possesses more than 7 years experience of working in the different areas
of Information Technology. He has in depth knowledge of oracle applications and used it
extensively during his association with Dawood Investment Bank Limited. He attended
various conference and seminars on modern application softwares & networking.

MR. MUHAMMAD ASLAM


Manager Administration

Mr. Muhammad Aslam is B.COM. & LLB from Karachi University. He got Diploma in
Labor Laws & Industrial Relations from Karachi University. He has completed short
courses in Disciplinary Procedures, Management Industrial Conflicts and skills in
Administrations from P.I.M. He has over 30 years experience in Administration,
Industrial Relations and Human Resources. He has worked General Tyre, Atlas Group,
and Peoples Steel Mills Ltd.

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BOARD OF DIRECTORS

 Mr. Shahid Anwar Khan, Chairman

 Ch. Abdul Qadeer, Director

 Dr. Asif A. Brohi, Director

 Mr. Najib Tariq, Director

 Mr. Wajahat A. Baqai, Director

 Mr. Hamad Rasool, Director

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ORGANOGRAM

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MANAGEMENT HIERARCHY
Category
First
TOP Middle Line Support
Management
Chief Executive
1 - -
 Corporate Finance
- 1 -
 Relationship Management
- - 2
 Investment Banking
- 1 -
 Treasury
- 1 -
  Money Market
- - 1
  Capital Market
- - 1
 Fund Mobilization
- - 1
 Advisory
- 1 2
 Marketing (Product Development)
- - -
 Branches
- 1 2
 Operations
- 1 -
 C.A.D.
- 1 1
 Settlement
- 1 -
  Settlement-Equity
- - 2
  Settlement-Treasury
- - 1
 Recovery
- - -
 I.T.
- 1 2
 Risk Management & Compliance
- 1 -
 Internal Audit
- 1 1
 CFO
1 - -
  Finance & Accounts
- 1 2
  Corporate Affairs
- 1 -
 H.R. & Admin.
- 1 1 10

Total 2 14 19 10

Grand Total 45

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OPERATIONAL ACTIVITIES
Syndication/ Direct Financing Activities:

FCIB is engaged in various financing activities mostly through syndication; (against


securities of receivables, demand promissory notes, letters of credit, etc.)

Treasury/ Money Market Activities:

A separate division for treasury operations has been established which is quite active in
the money market and to finance other fund based activities of the Bank. Presently, this
division is generating funds from various sources, like treasury lines, deposits schemes,
etc.

Equity Investments/Trading:

FCIB also has a healthy equity portfolio and takes advantages of trading opportunities for
earning optimum capital gains. However, the Bank adopts cautious approach in making
investments in equity market to avoid any possible losses. It is also actively involved in
doing arbitrage and investments in CFS.

Fixed Income /Debt Securities:

FCIB has a very solid track record in being a pioneer institution in development of the
debt securities market in the country. It has raised various large sized issues of WAPDA
and Civil Aviation Bonds. It has also developed the secondary market of these bond
issues. Presently, Bank participated in Initial Public Offering (IPO) and underwriting the
rated TFCs.

Corporate Finance and Advisory

Bank has also actively engaged in underwriting of equity as well as debt instruments. The
Bank is also involved as joint arranger and advisor to the Securitization deals.

Bank Guarantees / Letters of Credit

FCIB also provides repayment / performance guarantees and opens / participates in


inland letter-of-credit on behalf of its customers.

Deposit Schemes (Certificate of Deposit)

FCIB has a team of professionals working towards meeting the challenges of a dynamic
financial environment. FCIB ensures implementation of modern principles of investment
management and prudent practices to achieve security of capital and return. FCIB’
emphasizes innovation and continuously strives to find new products to satisfy specific
customer needs.

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ACCOUNTING SYSTEM AND SIGNIFICANT ACCOUNTING POLICIES

Applicable Laws And Regulations:

These financial statements are prepared in accordance with approved accounting


standards as applicable in Pakistan. Approved accounting standards comprise of such
International Financial Reporting Standards (IFRS) issued by the International
Accounting Standards Board as are notified under the Companies Ordinance, 1984,
the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003
(the NBFC Rules), the Non-Banking Finance Companies and Notified Entities
Regulations, 2008 (the NBFC Regulations) and the directives issued by the Securities
and Exchange Commission of Pakistan (SECP). Wherever the requirements of the
Companies Ordinance 1984, the NBFC Rules, the NBFC Regulations or the directives
issued by SECP differ with the requirements of IFRS, the requirements of the Companies
Ordinance 1984, the NBFC Rules, the NBFC Regulations or the directives issued by the
SECP shall prevail.

Accounting Conventions:

These financial statements are prepared under the historical cost convention, except for
the measurement of certain financial instruments at fair value.

Significant Accounting Policies

Property and equipment


 These are stated at cost less accumulated depreciation and accumulated impairment
losses, if any. Depreciation is charged to income using the straight line method
whereby the cost of an asset is written-off over its estimated useful life. In respect of
additions and disposals during the year, depreciation is charged from the month of
acquisition and up to the month preceding the disposal respectively.

 Maintenance and normal repairs are charged to profit and loss account as and when
incurred.

Intangible assets
 Intangible assets are stated at cost less accumulated amortization and accumulated
impairment losses, if any. The cost of intangible asset is amortized over its estimated
useful life, using straight line method.

Investments
 The Company determines the appropriate classification of its investments at the time
of purchase and classifies these investments as held-for-trading, held-to-maturity or
available-for-sale. These are initially recognised at cost, being the fair value of the
consideration given, including the acquisition cost.
 Subsequent to initial recognition, investments in quoted securities are marked to
market, in accordance with the guidelines contained in the State Bank of Pakistan's

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BSD Circular No. 20 dated August 04, 2004 using rates quoted on Stock Exchange.
Unquoted investments are carried at cost less accumulated impairment losses, if any,
in accordance with the above mentioned circular.

Trade date accounting


 All purchases and sale of investments are recognised at trade date. Trade date is a
date on which the Company commits to purchase or sell an asset.

Term finance / Credit facilities


 Term finances originated by the Company are stated net of provision for losses on
such assets.

Cash and cash equivalents


 Cash and cash equivalents are carried in the balance sheet at cost. For the purpose of
cash flow statement, cash and cash equivalents consist of cash and bank balances.

Provisions
 Provisions are recognized when the Company has a present legal or constructive
obligation as a result of past event and it is probable that an outflow of resources will
be required.

Accrued and other liabilities


 Accrued and other liabilities are measured at cost which is the fair value of the
consideration to be paid in the future for goods and services received whether billed
to the Company or not.

Dividend
 Stock and cash dividend declared subsequent to balance sheet date are considered as
non-adjusting event and are not recorded in financial statements of the current year.

OPERATIONAL CHALLENGES & THE CURRENT ECONOMIC TURMOIL

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The recent economic turmoil around the world has caught even the best international
financial institutions, like Lehman Brothers and Merrill Lynch, off balance. In Pakistan
however, things are no different. Service sector has contributed more than half the growth
in GDP in the past seven years of boom, and the very sector appears to be intoxicated
with NPL’s, Low Spreads and diminishing asset value. Pakistan has not witnessed an
official default by any financial institution yet, but the conditions are not so good after
all. Compared to other kinds of financial institutions, the Investment banks are made to
churn the hardest nuts. Before the close of September quarter investment banks had more
exposure into stock market than the commercial banks as a percentage of their own
equity and due to closure of ready market at KSE they were faced with sever shortage of
short term funds. High cost of funds and few viable lending opportunities have lead
investment banks short on spreads cropping their corporate earnings inside out.

Due to prolonged inflationary pressure on the economy the real sector is also feeling the
heat especially after hard talks with India. Cement and fertilizers, as an example are the
most leveraged sectors of the economy and due to international economic slowdown and
cement and fertilizer prices being peaked out the spreads of profits are bound to diminish
every quarter. This is a cause of concern for investment banks in general as they have
small equity base and any default in the real sector can weigh heavily on there annual
earnings and later to their survival.

Comprehending the severity of the financial crisis the figures are not short of words.
Only in the last one year Discount rate has risen to 15% from meager 10% shooting 6-M
Kibor from 10% to in excess of 15%. T-bill rates being the bench mark for risk free rates
have also risen in line with discount rates. The last T-bill auction on 3rd December this
year yielded to app. 14% over which the bids were rejected by SBP. Metaphorically
speaking, in the last one year we have witnessed CRR and SLR changing so many times
that it is often hard to keep record of the exact reserve requirements for the Commercial
Banks. During the current year alone (January to December) (CPI-Food) Inflation has
evolved into hyper inflation reaching to app. 30% year on year basis. Stock market like
wise has suffered some heavy burns. In 2007 KSE was named the best performing stock
market in the world however this year it is the worse. KSE has declined app. 65% from
its peak at app. 15600 points.

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ROLE OF HUMAN RESOURCE MANAGEMENT

Human resource management in FCIB is all about Recruitment, Orientation, Training and
Discipline. In a staff of relatively small numbers it often comes to personalized
relationship of the HR-Manager with the other office employees, however, a framework
is been developed for guidance. The HRM framework of duties and areas of
consideration are discussed quite briefly in the following paragraphs.

1. Recruitment
Recruitment procedure in FCIB involves:
 Initial screening;
 Completed application;
 Employment test (for fresh applicants only);
 Comprehensive interview;
 Background information;
 Medical examination; and
 Final job offer.

2. Orientation
Orientation is important for any new employee weather fresh or coming from a vast
working background. It is always a first step to helping an employee feel his way into
an organizational setup without too much disturbing the existing culture of the
organization. Orientation in FCIB means familiarizing the employee with;
 His and FCIB’s Objectives;
 History of the Institution;
 Procedures;
 Rules;
 Relevant HR policies; and
 Other employees.
The orientation ends with introduction of the employee to his/her Head of
Department.

3. Compensation:
Compensation at FCIB is divided into several heads which are:
 Basic Salary;
 Fringe benefits and perquisites;
 Bonus
 Company Maintained Car
 Club Membership
 Post paid sim
 Medical Insurance;
 Hose Rent;
 Cost of Living Allowance;
 EOBI membership;

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 Provident Fund (after getting permanent); and
 Gratuity (after four years of service).

4. Training:
Employee training from time to time is of utmost importance to keep with it self
highly motivated and objective work force and for this reason HRM takes
recommendations from the respective Heads to send an employee for training. The
training methods followed by FCIBL includes:
 On Job training;
 Off job training; and
 Outdoor training.

5. Discipline:
In order to safeguard culture of the organization it very necessary to have disciplined
employees. To keep check on the employee discipline a swap card system is
introduced for check-in and check-out of employees from the bank. A separate
smoking area is introduced aloof from the working area to discourage smoking during
working hours.

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FINANCIAL RESULTS OF FIRST CREDIT & INVESTMENT BANK

FINANCIAL RESULTS OF FIRST CREDIT & INVESTMENT BANK LIMITED


1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Rs. IN MILLIONS
Total assets
904 670 769 704 587 1,354 1,346 1,764 2,058 1,729
Equity
266 291 323 362 395 427 451 498 554 558
Profit before tax
65 66 66 64 52 48 39 50 57 25
Profit after tax
38 37 33 39 33 42 31 47 56 16
Return on equity (after tax)
14.29% 12.71% 10.22% 10.78% 8.37% 9.84% 6.87% 9.50% 10.11% 2.87%
Return on assets
4.20% 5.52% 4.29% 5.54% 5.62% 3.10% 2.30% 2.68% 2.72% 0.93%

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