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Dar Al-Maal Al-Islami Trust
Annual Report 2011
end of 2010, which reduced the
value of each participation unit to
$116.67.
Each year it is the Group’s policy to
allocate a percentage of the Group’s
profit to a fiduciary risk reserve to
cover inherent fiduciary risks which
might arise in the Group’s managed
funds. In view of the reported
loss this year, the Board has
resolved to recommend an additional
appropriation of $20 million from
reserves to the fiduciary reserve to
reflect the increased risks. The
amount of the fiduciary risk reserve
of $187.5 million will be kept under
review and will not be available for
distribution.
For the past two years, Ithmaar
Bank B.S.C. has recorded a
steady improvement in most key
performance indicators, confirming
that the bold strategy taken in 2010
to convert the Bank to a licensed
Islamic retail Bank, was the right
one.
Despite the depressed and troubled
global market conditions and the
unprecedented local and regional
political turmoil, Ithmaar Bank
posted a total income of $451
million in 2011, an increase of
2.9% over the previous year. The
balance sheet grew a modest 2.3%
to reach $6.9 billion during the
year, resulting from very impressive
growth in customer deposits and
financings, which increased by
23.5% ($1.48 billion) and 8.7%
($2.73 billion) respectively. The
Bank finds such steady improvement
encouraging however in no measure
cause for complacency. In spite of
the Bank’s net loss of $62.9 million
in 2011, the retail banking strategy
for return on investment is geared
much higher for the future. During
the year the Bank has increased its
branch and ATM networks, invested
in personnel development and
improved a number of core banking
systems. Furthermore, while liquidity
has improved significantly since the
mid-year 2010 position, capital
adequacy continues to be a key
focus for the Bank.
Ithmaar Bank aims to maintain
a necessary level of capital for
its continuing growth. Presently
however, a large part of its capital,
in line with the current capital
adequacy regulations, is allocated
to support the investment portfolio,
a legacy from the investment
banking activities of Ithmaar Bank
prior to its merger with Shamil Bank
B.S.C. in 2010. Raising capital is
therefore a key priority in the
strategic outlook for the immediate
future in order to expand the
Islamic retail and corporate banking
portfolios through the introduction
of new products, whilst seeking
to improve the ratio of financing
to deposits. Corporate banking
activities will be concentrated on the
regional market, with particular
emphasis on the SME sector in key
markets such as Bahrain and Saudi
Arabia.
Owing to its reputation for fair
dealing through well-designed
products and services as well as
innovative advertising campaigns,
Ithmaar Bank is encouraged by
the number of new customers. The
values and passion, which it shares
with its clients have proved their
worth and will continue to do so in
the future.
Faysal Bank Limited, in which the
Group owns an economic interest of
35% through its ownership in
Ithmaar Bank, recorded a net profit
in 2011 of PKR 1,309 million
($15.1 million) after tax. This is an
increase over its 2010 results by
PKR 119 million ($1.4 million).
Despite a difficult political and
economic environment, including a
5% devaluation of the Pakistani
Rupee against the US dollar, FBL
achieved a solid performance.
The bank steered its operations
successfully through the post-
merger integration with Royal Bank
of Scotland Pakistan (RBS) during
the first year following acquisition.
In 2011 the corporate and
investment banking group expanded
its business portfolio and improved
the quality of assets, including the
reversal/recovery of provisions for
non-performing loans of PKR 1,800
million. FBL reached a total asset
base of PKR 292 billion ($3.2
billion), a 9% increase over the
prior year. The retail and Islamic
banking groups rationalised the
overlap of conventional branches
with RBS through relocation or
conversion to Islamic branches thus
achieving the current network of
257 branches (including 45 Islamic
branches); making FBL a major
financial institution in Pakistan with
its large geographical reach and
client base. During 2012 the bank
will focus on further developing
the synergies of the two merged
entities and continue to grow
assets with a particular emphasis
on commercial, consumer and
agricultural segments. FBL is now
ideally poised to realize its fullest
potential in delivering outstanding
results and value to its customers in
the coming years.
Islamic Investment Company of the
Gulf (Bahamas) Limited, which is
wholly-owned by DMI, recorded a
favourable net profit growth of 10%
in 2011 as compared to the prior
year, no small accomplishment
considering the difficulties in the
worldwide market. Thanks to the
launch of a new management fund,
fee income was higher than 2010,
allowing IICG to more than offset a
modest rise in administrative costs.
It must be stated however, that
difficulties remained in attracting
new investors, as evidenced by
the 2% volume decrease in funds
under management at the end
of the year. Generating new
business remained difficult and
few opportunities arose for new
investments. In spite of these
pressures, IICG remains committed
to continue its focus on preserving
its clients’ investments by swiftly
adapting to changing market
conditions and provide innovative
and interesting opportunities for new
customers.
As mentioned last year IICG was
granted an operating license by the
Saudi Arabian Capital Market
Authority for its newly established