CEO'S MANAGEMENT REVIEW
Further progress on both fronts during
2015 was cause for satisfaction.
AIB is today the only private commercial bank in Afghanistan to have major clearing banks as correspondents – Standard Chartered Bank and Commerzbank – providing our customers with much-needed safe and speedy international transfers,
and facilitating the finance of trade.
Our achievements in this area have not gone unnoticed in international banking circles, and we are optimistic about securing more correspondent arrangements with other leading global institutions.
This goal was supported in 2015 by an intensive review and upgrade of ‘know
your customer’ and anti-money laundering procedures and processes to ensure that
we comply with the highest international standards. We are also upgrading our compliance-related IT systems.
We have set a high benchmark for this entire exercise to ensure that we are in
line with the requirements of US banking regulators, and we have engaged specialist international consultants to ensure we succeed. Our correspondent banks recognise AIB as the only Afghan bank to achieve this and have indicated that they are prepared
to expand their relationships with us.
Such abilities enhance our role as a vital intermediary in enabling Afghanistan trade flows, stimulating the domestic economy, and in turn making a vital contribution to the Bank’s substantial growth in foreign exchange business.
While moving into a higher league of international banks and banking, AIB maintained its well-established trend of domestic growth during 2015, despite a depressed market environment for most of the year.
• Assets grew by 9.64 percent to AFN 61.65 billion (2014: AFN 56.23 billion), bringing compound annual asset growth since 2009 to 24 percent. Deposits also grew by 9.62 percent, from AFN 52.9 billion to AFN 58.00 billion.
• Revenue remained the same as last year at AFN 1.96 billion (2014: AFN 1.96 billion). Non-interest income accounted for 46 percent of total revenue, underlining the value of strong correspondent partnerships and sound regulatory compliance. Compound annual revenue growth since 2009 now stands at 4.5 percent.
Budget targets for the year were generally met, but the poor condition of the real estate market negatively affected loan recoveries. Commercial lending was subdued, indicative of the increasingly cautious market attitude during this time
of weak business confidence.
With expenses being contained at forecast levels, the 27 percent net profit margin equates to earnings per share of AFN 17.46 (2014: AFN 16.66), and 15.28 percent return on equity.
Total capital increased from AFN 3.07 billion to AFN 3.4 billion. Our capital adequacy ratio of 13.59 percent and 87 percent liquidity are very satisfactory by domestic and international standards. AIB believes it retains the highest score of all Afghan banks in its ‘CAMEL’ rating – the acronym for five key components of a bank’s health: capital adequacy, asset quality, management, earnings, and liquidity.
Being based in an Islamic country, it is
only logical for AIB to support its core services with Islamic options. During 2015, we established three Shariah-compliant windows: in Kabul at Head Office branch
and in the cities of Kandahar and Mazar. Expansion of the branch network was limited, opening new branches at Sinafar in Mazar and at the American University Afghanistan in Kabul, bringing the total to 34.
However, expansion of electronic channels continued apace, introducing the new self-service internet banking platform that enables customers to manage their banking transactions from anywhere. This supports the growing popularity of internet banking, with the number of users increasing by 71 percent to 9,198.
Customer service was further enhanced
by expansion of AIB’s ATM network, already the largest in the country, adding four
more to bring the total to 64. Our ATMs
are multi-currency, offering the Afghani
and US dollar as standard, as well as the euro in certain locations. The range of
ATM services has been expanded to include balance enquiries and mini-statements,
and the hours for call centre and phone banking services extended from 8:30am
to 11:00pm.
Our MasterCard-branded Platinum and Titanium credit cards have shown steady progress since their launch in 2013, with more than 700 issued. Debit cards in issue, which do not require users to undergo credit checks, now number more than 70,000. Our prepaid cards, including the prepaid MasterCard and China Union Pay, have more than doubled to over 3,300.
Demand for retail lending products also grew steadily, despite the unfavourable market conditions. Our payroll loan provides small general-purpose funding for the acquisition of consumer goods, while the home equity loan enables customers to leverage the capital value of their primary homes to buy a secondary property and/or make improvements to their existing houses. Portfolios have grown respectively by 72 percent and more than 100 percent.
AIB’s commitment to support small and medium enterprises, clearly under-served
by Afghanistan’s banking sector as a whole, continues to gather momentum. Our
drive into this market gives priority to servicing established businesses involved
in strategic economic sectors – such as manufacturing and import substitution – and reinforces our role as a growth engine for national development.
The SME loan portfolio now comprises
20 borrowing businesses. By virtue of rigorous cash flow-based analysis and close monitoring, no loans are in arrears – also indicative of borrowers’ appreciation of
this much-valued service.
On the IT front, the Bank was awarded
the 2015 Transformation Award from Baar, Switzerland for its successful implementation of fully automated processes for card issuance, renewal, tracking of fees due,
and recording all transactions.
Ensuring that services to customers continue uninterrupted is a vitally important resource, so the Bank’s Business Continuity Plan was again successfully tested and upgraded.
In human relations, and in line with the Bank’s commitment to excellence and helping promising employees with further education, AIB sponsored four staff members, one female and three male,
to continue their post-graduate studies
at the American University of Afghanistan.
Professional training was maintained at
all levels and reached a record number of employees through courses ranging from basic banking induction to specialist areas such as accounting, electronic banking, risk management, information technology, and communications skills.
The formation of an internal gender committee (an initiative strongly encouraged by the Bank’s Supervisory Board) will support the increased presence of female staff in positions of responsibility within the Bank.
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 2015.
Guy Mallett
Chief Executive Officer
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