Achievements contradict market trend
In a year when Afghanistan’s banking sector continued to have challenges and fraud scandal dominated the headlines, AIB was a beacon of growth and integrity.
Counter to the prevailing trend, the Bank recorded significant gains across virtually all areas of operations, while further strengthening fundamental indicators such as capital adequacy and liquidity.
Revenue rose by almost 23 percent to $31 million (2011: $25.2m), deposits by 44 percent to $828 million ($575m), and fee and foreign exchange income by 8.0 percent to $10.8 million ($10m) – contributing 35 percent of total revenue.
The 31 percent net profit margin for the year equates to earnings per share of $0.32 and 19.6 percent return on equity. The Bank’s net asset value per share now stands at $1.64.
Total capital grew by 22 percent to $49 million, and with a capital adequacy ratio of 16 percent, and 91 percent liquidity, AIB believes it scores highest of all Afghan banks in its ‘CAMEL’ rating – the acronym for the five key components of a bank’s condition: Capital adequacy, Asset quality, Management, Earnings, and Liquidity.
The rise in the value of deposits reinforces the steep upward trend, showing compound annual growth of 59 percent between 2006 and 2012. Revenue has followed a similar pattern, with compound growth of 35 percent over the same period, while capital grew by a compounded 42 percent.
In taking over Standard Chartered Bank’s business in Afghanistan, we added $150 million in deposits and 12,000 customers. As part of the arrangement AIB will maintain a strategic alliance with Standard Chartered, allowing both institutions to serve clients doing business in Afghanistan, locally and from offshore.
Our performance achieved prominent international recognition with the award of Best Afghan Bank 2012 from The Banker during its annual awards ceremony in London. The Banker is the world’s premier banking and finance resource. Read in more than 180 countries, it has been providing global financial intelligence since 1926 and has built a reputation for objective and incisive reporting on major events.
The award reflects AIB’s commitment to international best practice and governance standards, and its success in extending top-quality banking services to businesses and individuals in Afghanistan. AIB has almost doubled its branch network in only two years, and this expansion continued in 2012 with the addition of three new branches – two in Kabul and one in Helmand – bringing the total to 35 and further reinforcing the Bank’s coverage in all major cities and provinces.
Customer numbers are growing proportionately. At year-end, the total customer accounts base was 113,700, up from 74,767 in 2011. The number of corporate accounts increased from 12,500 to 19,600 and individual accounts from 51,000 to 94,100. The growth in customer numbers is also reflected in the total volume of transactions, up from 465,630 to 581,972.
Use of online banking and ATMs increased correspondingly, with close to 50 ATMs now operational. Point-of-sale machines in shops and branches – for purchases and cash advances – enhance customer convenience while enabling the Bank to increase its deposits from retail vendors. Introduction of SMS banking and investment in a call centre will further improve accessibility to AIB services.
We developed three new business lines in 2012 – a special facility for SME customers, payroll lending, and home equity lending. These products will be fully launched in 2013.
Introducing the SME facility maintains our emphasis on helping to develop this sector, extending customised assistance to small manufacturers and supply chain providers.
Employers and employees will benefit from the new payroll lending system which gives borrowers speedy approval for personal loans. Home equity lending was developed in response to market demand and is expected to be a very popular means for customers to realise funds from their domestic property assets.
The introduction of AIB’s Platinum and Titanium credit cards was well received by VIP customers, and launch of an unembossed MasterCard debit card will contribute to controlled expansion in this segment.
We have also made good progress with our move to create a Shariah-compliant window for Islamic banking and will shortly apply to the Central Bank regulators for operational approval. AIB will then offer customers the choice of Shariah or conventional products.
Commercial lending was relatively subdued in 2012, indicative of the increasingly conservative market attitude to political, economic, and security concerns. Nevertheless, Commercial Banking maintained its income levels.
The main ratings agencies continued to assign ‘investment grade’ status to the Bank’s $92 million total bond portfolio, of which more than 80 percent matures in three years or less.
The employee complement grew from 530 to 606 during the year, a 14 percent increase. Female staff now account for roughly 10 percent of the total. In keeping with the growth in numbers, training remained a major focus. As well as in-house training at head office and branch level, staff members undertook specialist professional education in India and Pakistan, working closely with Pakistan’s National Institute of Banking and Finance (NIBAF). A total of 14 employees undertook NIBAF courses such as Business Communication, Accounting, Commercial Banking, ‘Know Your Customer’, Electronic Banking, Islamic Banking, Basel Capital Accord, and Risk Management in Banks.
Top-quality information technology is a prerequisite for sustained growth, and AIB operations are based on platforms and systems that are recognised as global best practice for banks. Four staff have attained certification in ‘IT Infrastructure Library’ (ITIL) which, under the auspices of the UK Treasury, provides a cohesive set of best practices. The software used by AIB meets the standards established by the Wolfsberg Group of 11 international banks for anti money laundering (AML) monitoring. AIB is believed to be the only bank in Afghanistan to operate an automated filtering system that checks accounts and inward and outward transactions against the requirements of OFAC (Office of Foreign Assets Control of the US Department of the Treasury). Further IT security uses the Symantec system to control and monitor USB ports as well, providing virus and malware protection.
Business continuity is also an ongoing priority and IT capability has been designed and implemented to cope with all adverse contingencies. An overseas-based disaster recovery site (DRS) backs up the domestic DRS, protecting against potential vulnerabilities at the domestic site and head office. Business contingency plan testing has demonstrated that the Bank could operate effectively from its domestic DRS, with the cross-border back-up site providing a further level of security.
In keeping with the Bank’s commitment to good corporate citizenship, AIB continued to undertake projects that have a beneficial impact on the communities where it operates. In addition to funding food and educational materials for the School for Orphans, the Bank made donations to the Radio Voice of Women and contributed to the restoration of the Blue Mosque in Mazar.
In closing, I extend my congratulations to the management board and staff for all their hard work and dedication during 2012 and the performance achieved on behalf of the Bank. We also pay tribute to our customers, whose loyal support underpins the Bank’s continued success.
Khalilullah Sediq
Chief Executive Officer