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Dar Al-Maal Al-Islami Trust
Annual Report 2014
the resources needed to effectively
continue with this strategy, the Board
of Supervisors has resolved not to
recommend a dividend in respect of
the year ended 31 December 2014
at the Annual General Meeting.
Owners and holders of equity
participation certificates will recall
that it has been our policy for
a number of years 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.
One of the transactions referred
to earlier addressed this more
permanently in 2014. Through the
crystallisation of the previous years’
fiduciary reserve of $227.5 million
and the combined asset swap and
debt repayments between DMI and
the managed funds, the inherent risk
was minimised to a level allowing
the Board to reverse the previous
year’s balance to reserves, whilst
recommending the appropriation
of US$20.0 million for the current
period. The amount of the fiduciary
risk reserve of US$20.0 million will
be kept under review and will not be
available for distribution.
Ithmaar Bank B.S.C., DMI’s key
subsidiary held at 46%, reported
a total net loss to equity holders,
after taxes and provisions, of
$15 million for the year ended
31 December 2014, significantly
less than the net loss of $80 million
in 2013. It must be pointed out,
however, that continued sustainable
growth in its core retail banking
operations resulted in a net profit
before provisions for impairment
and taxation of $28.9 million,
compared to $4.8 million for the
prior year. This progress is due
to strategic decisions implemented
during 2014, which literally
transformed the Bank’s operations.
These included amongst others
the divestment of non-core assets,
cost rationalisation measures
across the entire Ithmaar Group
and a full conversion of Ithmaar’s
main subsidiary Faysal Bank of
Pakistan’s remaining conventional
operations to Islamic banking.
The significance of this year is seen
in the Bank’s operating income,
which grew 14% to $227.7 million
from last year’s $199.9 million,
an increase seen in all revenue
categories. Total expenses for
2014 were 1.9% higher than in
the previous year, largely due to the
one-time costs associated with the
Staff Voluntary Separation Scheme
and the full year impact of certain
branches opened in Pakistan in
2013. The balance sheet indicated
customer confidence through their
choice for the Bank’s products
and services. Current accounts
increased 8% over the prior year
to $1.4 billion and deposits from
banks and financial institutions have
increased 13% to $1.5 billion. The
additional liquidity generated was
deployed in Murabaha and other
financings. Total assets increased
by 6.2% to $7.9 billion compared
to $7.4 billion last year. Equity
was sustained at $523.4 million at
31 December 2014.
Ithmaar Bank operates one of the
largest retail banking networks in
Bahrain with 46 ATM’s and 17 full
service branches and is committed
to becoming a leading regional
Islamic retail bank. DMI is pleased
to witness the significant efforts
made by Ithmaar Bank this year and
is confident that the actions taken
will continue to advance the Group
in 2015 and beyond.
With the promising turnaround in
Pakistan’s economic environment,
Faysal Bank Limited, in which the
Group owns an economic interest
of 31% through its ownership
in Ithmaar Bank, registered a
net profit of PKR 2,477 million
($24.4 million) after tax, a 34%
increase over 2013. The growth
was largely due to improved margin
leveraging through increased yields
on investments of newly acquired
low cost deposits. After removal
of one-off reorganisation costs,
management has, through rigorous
control efforts, effectively frozen
operating expenses for the last three
years. During the year the Pakistani
Rupee strengthened by 4.5%
against the US dollar, recovering
some of its past devaluation.
The country’s biggest economic
challenge still remains, however, in
its long standing structural issues.
FBL, one of the top ten banks in
Pakistan, holds high long and short
term credit ratings of AA and A1+
respectively. FBL has a network
of 274 branches, which presently
includes 58 dedicated to Islamic
Banking, and intends to fully
convert the remaining conventional
branches over the next three years.
In 2014 the Bank adopted a new
customer oriented business model
whereby all business processes will
be modernized to improve efficiency
and effectiveness, reinforcing
high quality customer service. By
continuing to concentrate its efforts
on further increasing revenue from
core business activities, FBL is
confident it will meet the future
challenges and expectations of its
shareholders.
Islamic Investment Company of
the Gulf (Bahamas) Limited, DMI’s
wholly-owned subsidiary, reported
a net profit of $29.1 million in
2014 compared to $3.8 million last
year. This was mainly attributable
to a one-off extraordinary gain of
$22.1 million resulting from the
sale of investment securities. On
a consolidated basis the IICG
Group achieved a net profit of
$31.9 million. IICG’s total assets
decreased by 4.2% over 2013
amounting to $153.2 million, while
shareholder’s equity increased 23%
to $67.7 million compared to the
prior year due to the exceptional
income recorded during the year.
During this period, IICG funds under
management reached $2.34 billion,
marginally lower than2013deposits.
The year on year decline in the funds
under management resulted from a
major asset restructuring, referenced
earlier, which creates significant
value, yield improvements and cash
flow enhancements to the funds.
IICG is engaged to deliver strategic
improvements in its managed funds
for the benefit of its clients now and
in the future.