In a testing year for the Afghanistan economy and the banking sector in particular, AIB achieved a highly creditable performance. Uncertainty arising from ongoing political and security transitions inhibited growth and led to a considerable slow-down in economic activity and private investment.
Nevertheless, AIB was able to increase revenue by almost 20 percent to AFN 1,965 million (2012: AFN 1,636 m), largely due to a 35 percent rise in fee and foreign exchange income to AFN 761 million (2012: AFN 564m) that contributed 39 percent of total revenue. Deposits increased by five percent to AFN 45,120 million (2012: AFN 43,142m) and showed compound annual growth of 55 percent between 2007 and 2013. Compound revenue growth over the same period reached 30 percent. The main rating agencies continued to assign ‘investment grade’ status to the Bank’s total bond portfolio of AFN 7,640 million. To be conservative in the face of uncertainties, more than 81 percent of this portfolio matures in three years or less.
Despite making provisions for potential losses, we achieved almost all our budget targets for the year, notably in loan and treasury interest income, while containing expenses to forecast levels. The 12.2 percent net profit margin for the year equates to earnings per share of AFN 7.99 and 8.64 percent return on equity. The Bank’s net asset value per share now stands at AFN 93.
Total capital increased from AFN 2,560 million to AFN 2,775 million. Our capital adequacy ratio of 14 percent and our 89 percent liquidity are still very satisfactory, by domestic and international standards. 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.
AIB is also the only financial institution in Afghanistan to have two of the OECD country-based international banking groups as correspondents. These relationships provide our customers with speedy international transfers.
Our performance in 2013 achieved prominent international recognition in the form of two major awards. The Banker magazine ranked AIB ‘Best Afghan Bank’ for the second year in succession during its annual awards ceremony in London, and our commitment to strong corporate governance earned us the Corporate Governance Award, Afghanistan 2014, from Capital Finance International (CFI.co) as part of its world-wide awards programme for the financial services industry.
The Banker is the world’s premier banking and finance resource publication. 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. CFI.co’s global panel of judges reported that they were impressed by our conduct and commitment to healthy and far-reaching corporate governance programmes, commenting: “AIB is a worthy winner and an excellent example to the wider business community in the country.”
Growth in customer numbers continues. At year-end, the total customer account base was 120,129, up from 113,700 in 2012. The number of corporate accounts increased from 19,600 to 20,605 and individual accounts from 94,100 to 99,524. The increase in customer numbers is also reflected in the total volume of transactions, up from 465,630 to 581,972. Use of online and automated banking increased correspondingly with 43 ATMs now operational, 212 point-of-sale machines installed in shops, and 28 in branches for customer cash advances.
We are very conscious of the vital role of small business in economic development and are committed to fostering a culture of entrepreneurship in Afghanistan. Small business continued to be a prime area of focus, developing six products that will be formally launched for this segment in 2014 in response to clear business needs that we have identified. Our new products will provide much-needed assistance to small manufacturers and supply chain providers.
Employers and employees are benefiting from our new payroll lending product, which includes fast access to general purpose personal loans at competitive rates for our payroll account holders.
In response to market demand, we have developed and are introducing our ‘Home Equity’ loan for retail customers. This facility is designed to enable our customers to realise equity value from their wholly-owned properties for making home improvements or, in some cases, to acquire a second property.
AIB’s Platinum and Titanium credit cards, first introduced for VIP customers early in 2013, have now been made available to the open market. The cards have been very well-received, with total issuance by year-end in line with targets.
We have also successfully launched our MasterCard and China Union Pay (CUP) prepaid cards. The CUP cards are proving particularly attractive to businesses travellers trading with China. Used as charge cards, they are readily available to business users and consumers without having to undergo credit checks.
We have also successfully launched our MasterCard and China Union Pay (CUP) prepaid cards. The CUP cards are proving particularly attractive to businesses travellers trading with China. Used as charge cards, they are readily available to business users and consumers without having to undergo credit checks.
The bank is planning to launch its new unembossed debit card under the MasterCard label in the course of 2014. It will be available to all account holders for use domestically and internationally.
We have made good progress with our move to create a Shariah-compliant window for Islamic banking and are awaiting approval from the Central Bank regulators. AIB will then offer customers the choice of Shariah or conventional products.
Commercial lending was relatively subdued in 2013, indicative of the increasingly conservative market attitude to political, economic, and security concerns. Nevertheless, Commercial Banking maintained its income levels.
Electronic banking facilities and customer usage continue to grow. Free SMS services now provide a wide range of customer benefits, from balance enquiry to automatic alerts of account activity. Implementation of the new call centre and phone banking service is close to completion, giving customers prompt answers to any queries they may have about the Bank and their accounts. On-line banking offers the convenience of secure funds transfer and account management, and is an increasingly popular option with customers.
Business continuity is an ongoing priority and IT capability has been designed and implemented to cope with adverse contingencies. An upgrade of the core banking systems is under way and will be completed mid 2014.
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 an extra level of security.
The employee complement grew by six percent from 606 to 643 in 2013. 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, three staff members selected for fast-track career development benefited from specialist professional education with Pakistan’s National Institute of Banking and Finance (NIBAF). In all, a total of 21 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.
In keeping with the Bank’s commitment to good corporate citizenship, AIB continues to undertake projects that have a beneficial impact on the communities where it operates. We sponsored the Kabul Municipality’s fourth academic and research seminar on Milad-e-Kabul (Kabul birth), and maintained our financial support for the Education and Employment Center and the restoration of the Blue Mosque in Mazar.
In closing, I take this opportunity to express sincere thanks to our shareholders and Board for their continued confidence and support, to our loyal customers for their patronage, and to our management and employees for their dedication and hard work throughout 2013.
Khalilullah Sediq
Chief Executive Officer
