Annual Report 2012

VISION STATEMENT
TO BE A QUALITY FINANCIAL SERVICE PROVIDER

MAINTAINING THE HIGHEST STANDARDS IN
BANKING PRACTICES
MISSION STATEMENT
TO BE A STRONG AND STABLE FINANCIAL INSTITUTION

OFFERING INNOVATIVE PRODUCTS AND
SERVICES WHILE CONTRIBUTING
TOWARDS THE NATIONAL ECONOMIC AND
SOCIAL DEVELOPMENT
Contents
Corporate Information 1
Directors' Report 2
Statement of Compliance with the Code of Corporate Governance 7
Review Report to the Members on Statement of Compliance

with the Best Practices of the Code of Corporate Governance 9
Statement on Internal Controls 10
Auditors' Report to the Members 11
Statement of Financial Position 12
Profit and Loss Account 13
Statement of Comprehensive Income 14
Statement of Changes in Equity 15
Cash Flow Statement 16
Notes to the Financial Statements 18
Report of Shariah Advisor 91
Notice of Annual General Meeting 92
Pattern of Shareholding 95
Consolidated Financial Statements 98
Branch Network 181
Form of Proxy
Corporate Information
Board of Ali Raza D. Habib Chairman

Directors Abbas D. Habib Chief Executive & Managing Director
Anwar Haji Karim
Hasnain A. Habib
Imtiaz Alam Hanfi
Murtaza H. Habib
Qumail R. Habib Executive Director
Shameem Ahmed
Syed Mazhar Abbas
Wazir Ali Khoja
Audit Syed Mazhar Abbas Chairman

Committee Anwar Haji Karim Member
Shameem Ahmed Member
Murtaza H. Habib Member
Human Resource Syed Mazhar Abbas Chairman

& Remuneration Abbas D. Habib Member
Committee Anwar Haji Karim Member
Murtaza H. Habib Member
Company
Secretary A. Saeed Siddiqui
Statutory Ernst & Young Ford Rhodes Sidat Hyder

Auditors Chartered Accountants
Legal Liaquat Merchant Associates

Advisor Advocates and Corporate Legal Consultants
Registered 126-C, Old Bahawalpur Road,

Office Multan
Principal 2nd Floor, Mackinnons Building,

Office I.I. Chundrigar Road,
Karachi
Share M/s. Noble Computer Services (Pvt.) Limited

Registrar First Floor, House of Habib Building, (Siddiqsons Tower),
3-Jinnah Co-operative Housing Society,
Main Shahrah-e-Faisal, Karachi.
Website www.bankalhabib.com
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Directors' Report
The Directors are pleased to present the Twenty-second Annual Report together with the audited financial
statements of the Bank for the year ended December 31, 2012.
The operating results and appropriations, as recommended by the Board, are given below:
(Rupees in '000)
Profit for the year before tax 8,869,497
Taxation (3,422,983)
Profit for the year after tax 5,446,514
Unappropriated profit brought forward 3,726,098
Transfer from surplus on revaluation of fixed assets – net of tax 37,370
3,763,468
Profit available for appropriations 9,209,982
Appropriations:
Transfer to Statutory Reserve (1,089,303)
Cash Dividend – 2011 (2,196,493)
Issue of Bonus Shares – 2011 (1,317,896)
(4,603,692)
Unappropriated profit carried forward 4,606,290
Basic / Diluted earnings per share - after tax Rs. 5.39
For the year ended December 31, 2012, the Directors propose a cash dividend of 30%, i.e., Rs. 3 per share.
Performance Review
Alhamdolillah, the performance of your Bank continued to be satisfactory during the year. Deposits rose
to Rs. 340,393 million against Rs. 302,099 million a year earlier, while advances increased to Rs. 147,869
million from Rs. 114,872 million. Foreign Trade Business handled by the Bank during the year was
Rs. 516,194 million. Profit before tax for the year increased to Rs. 8,869 million as compared to Rs. 7,155
million last year, while profit after tax increased to Rs. 5,447 million against Rs. 4,533 million last year. It
may be mentioned that the net profit for the year 2012 was arrived at after making a general provision of
Rs. 400 million, which is over and above what is required in terms of Prudential Regulations of State Bank
of Pakistan. This is in line with the Bank’s prudent policies and serves to provide further strength to the
Bank.
During the year, the Bank opened 18 branches and 21 sub-branches, bringing our network to 392. Your
Bank now has a network of 308 branches (including 13 Islamic Banking Branches and a Wholesale Branch
in the Kingdom of Bahrain), 82 sub-branches, and two Representative Offices, one each in Dubai and
Istanbul. As before, the Bank will continue to expand its network in Pakistan and abroad.
We are pleased to advise that your Bank was selected for the following awards in 2012:
• “Bank of the Year – 2011 (Medium Banks) Award” by CFA Association of Pakistan. This is the third
consecutive year that your Bank has received this award, having received it earlier for the years 2009
and 2010.
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• “Top 25 Companies Award” for the year 2011 by the Karachi Stock Exchange. Criteria for the award
include dividend payout, capital efficiency, profitability, free-float of shares, transparency & investor
relation and compliance with listing regulations. This, too, is the third consecutive year that the Bank
has received this award.
Board Meetings
During the year, six meetings of the Board were held and the attendance of each Director was as follows:
Name of Director Meetings Held Meetings Attended
Mr. Ali Raza D. Habib, Chairman 6 5
Mr. Abbas D. Habib 6 6
Mr. Anwar Haji Karim 6 6
Mr. Hasnain A. Habib 6 4
Mr. Imtiaz Alam Hanfi 6 6
Mr. Murtaza H. Habib 6 5
Mr. Qumail R. Habib 6 6
Mr. Shameem Ahmed 6 6
Mr. S. Mazhar Abbas 6 6
Mr. Wazir Ali Khoja 6 2
Committee Meetings
Code of Corporate Governance requires formation of two committees of the Board, viz. Audit Committee
and Human Resource & Remuneration Committee. During the year, nine meetings of the Audit Committee
and two meetings of the Human Resource & Remuneration Committee were held, and the attendance of
members was as follows:
Audit Committee* Human Resource & Remuneration Committee**
Name of Director Meetings Meetings Name of Director Meetings Meetings

Held Attended Held Attended
Mr. S. Mazhar Abbas, 9 9 Mr. S. Mazhar Abbas, 2 1
Chairman Chairman
Mr. Shameem Ahmed 9 9 Mr. Abbas D. Habib 2 2
Mr. Anwar Haji Karim 9 8 Mr. Anwar Haji Karim 2 2
Mr. Murtaza H. Habib 9 6 Mr. Murtaza H. Habib 2 2
*Mr. Ali Raza D. Habib resigned as member of the Audit Committee on October 23, 2012; he had attended
four out of eight meetings of the Committee held upto the said date.
**Earlier, the Bank had a Human Resources Committee, which had held two meetings before the formation
of Human Resource & Remuneration Committee.
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Directors Training Programme
One of our Directors had already completed the directors’ formal training programme in 2011. Another
Director has attended two training programmes in 2012.
Credit Rating
Alhamdollilah, Pakistan Credit Rating Agency Limited (PACRA) has maintained the Bank’s long term and
short term entity ratings at AA+ (Double A plus) and A1+ (A One plus), respectively. The ratings of our
unsecured, subordinated TFCs have also been maintained at AA (Double A). These ratings denote a very
low expectation of credit risk emanating from a very strong capacity for timely payment of financial
commitments.
Future Outlook
The global economy, particularly in the West, continues to be weak and uncertain, with generally low growth,
high unemployment, and fiscal and current account deficits. Domestically, the business environment remains
challenging, given the energy shortages, security concerns, and low industrial investment. However, home
remittances continue to be strong, inflation appears to be under control, current accounts deficit are narrowing,
and interest rates have been declining. Decline in interest rates is expected to provide some relief to business
enterprises and help revive private sector investment. But it also poses a challenge for banks, who are faced
with a decline in their interest margins. As before, we will continue to follow our usual prudent policies in
dealing with the emerging challenges and opportunities.
Auditors
The present auditors Messrs Ernst & Young Ford Rhodes Sidat Hyder, Chartered Accountants, retire and
offer themselves for reappointment. As suggested by the Audit Committee, the Board of Directors has
recommended their reappointment as auditors of the Bank for the year ending December 31, 2013, at a
fee to be mutually agreed.
Risk Management Framework
The Bank always had a risk management framework commensurate with the size of the Bank and the nature
of its business. This framework has developed over the years and continues to be refined and improved.
Its salient features are summarised below:
• Credit risk is managed through the credit policies approved by the Board; a well-defined credit approval
mechanism; use of internal risk ratings; prescribed documentation requirements; post-disbursement
administration, review, and monitoring of credit facilities; and continuous assessment of credit worthiness
of counterparties. The Bank has also established a mechanism for independent, post-disbursement
review of large credit risk exposures. Decisions regarding the credit portfolio are taken mainly by the
Central Credit Committee. Credit Risk Management Committee of the Board provides overall guidance
in managing the Bank’s credit risk.
• Market risk is managed through the market risk policy approved by the Board; approval of counterparty
limits and dealer limits; specific senior management approval for each investment; and regular review
and monitoring of the investment portfolio by the Bank’s Asset Liability Management Committee (ALCO).
In addition, the liquidity risk policy provides guidance in managing the liquidity position of the Bank,
which is monitored on daily basis by the Treasury and the Middle Office. Risk Management Committee
of the Board provides overall guidance in managing the Bank’s market and liquidity risks.
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• Operational risk is managed through the audit policy and the operational risk policy approved by the
Board, along with the policy on prevention of frauds and forgeries; operational manuals and procedures
issued from time to time; a system of internal controls and dual authorisation for important transactions
and safe-keeping; a Business Continuity Plan, including a Disaster Recovery Plan for I. T.; and regular
audit of the branches. Audit Committee of the Board provides overall guidance in managing the Bank’s
operational risk.
In order to comply with SBP’s guidelines on risk management, the Bank has established a separate Risk
Management Division, including a Middle Office that independently monitors and analyses the risks inherent
in our Treasury operations. The steps taken by the Division include: sensitivity testing of Government
Securities portfolio; computation of portfolio duration and modified duration; analysis of forward foreign
exchange gap positions; more detailed reporting of TFCs and equities portfolios; development of improved
procedures for trading in equities and settlements; monitoring of off-market foreign exchange rates and
foreign exchange earnings; and establishment of a mechanism for independent, post-disbursement review
of large credit risk exposures.
Corporate Social Responsibility (CSR)
Your Bank is fully committed to the concept of Corporate Social Responsibility and fulfills this responsibility
by engaging in a wide range of activities which include:
• corporate philanthropy amounting to Rs. 28.8 million by way of donations during the year for social and
educational development and welfare of under-privileged people;
• energy conservation, environmental protection, and occupational safety and health by restricting
unnecessary lighting, implementing tobacco control law and “No Smoking Zone”, and providing a safe
and healthy work environment;
• business ethics and anti-corruption measures, requiring all staff members to comply with the Bank’s
“Code of Conduct”;
• consumer protection measures, requiring disclosure of the schedule of charges and terms and conditions
that apply to the Bank’s products and services;
• amicable staff relations, recognition of merit and performance, and on-going opportunities for learning
and growth of staff, both on-the-job and through formal training programmes;
• employment through a transparent procedure, without discrimination on the basis of religion, caste,
language, etc., including employment of special persons;
• expansion of the Bank’s branch network to rural areas, which helps in rural development;
• contribution to the national exchequer by the Bank by way of direct taxes of over Rs. 3.0 billion paid
to the Government of Pakistan during the year; furthermore, an additional amount of over Rs. 5.0 billion
was deducted/collected by the Bank on account of withholding taxes, sales tax on services, and federal
excise duties paid to the Government of Pakistan.
Statement on Corporate and Financial Reporting

1. The financial statements, prepared by the Bank, present fairly its state of affairs, the result of its
operations, cash flows and changes in equity.
2. Proper books of account have been maintained by the Bank.
3. Appropriate accounting policies have been consistently applied in preparation of the financial statements;
changes, if any, have been adequately disclosed and accounting estimates are based on reasonable
and prudent judgment.
4. International Financial Reporting Standards, as applicable in Pakistan, have been followed in preparation
of financial statements and departure therefrom, if any, has been adequately disclosed.
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5. The system of internal controls is sound in design and has been effectively implemented and monitored.
6. There are no doubts upon the Bank’s ability to continue as a going concern.
7. Key operating and financial data for last six years are summarised below:
(Rupees in million)
2012 2011 2010 2009 2008 2007
Total customer deposits 340,393 302,099 249,774 189,280 144,390 114,819
Total advances 147,869 114,872 125,773 105,985 100,197 79,224
Profit before tax 8,869 7,155 5,656 4,512 3,579 3,052
Profit after tax 5,447 4,533 3,602 2,856 2,425 2,211
Shareholders’ Equity 21,175 17,837 14,706 12,287 9,967 8,014
Earnings per share * (Rs) 5.39 4.49 3.57 2.83 2.40 2.19
Cash Dividend (%) 30 25 20 20 12.50 15
Stock Dividend (%) – 15 20 20 27.50 30
* Earnings per share from 2007 to 2011 have been recalculated based on the existing paid-up capital.
8. Value of investments of Provident Fund and Gratuity Fund Schemes based on latest audited financial
statements as at December 31, 2011 was as follows:
(Rupees in ’000)
Provident Fund 1,489,548
Gratuity Fund 499,748
9. The pattern of shareholding and additional information regarding pattern of shareholding is given on
pages 95, 96, 97.
10. No trade in the shares of the Bank was carried out by the Directors, CEO, CFO, Head of Internal Audit,
and Company Secretary, and their spouses and minor children, except that during the year an Executive
purchased 12,500 shares and sold 1,500 shares. For the purpose of this disclosure, the definition of
“Executive” includes Assistant General Managers and above, in addition to officials already mentioned
in the listing regulations.
General
We wish to thank our customers for their continued support and confidence, the State Bank of Pakistan for
their guidance, and local and foreign correspondents for their cooperation. We also thank all our staff
members for their sincere and dedicated services, which enabled the Bank to achieve these satisfactory
results.
On behalf of the Board of Directors
ALI RAZA D. HABIB

Karachi: February 14, 2013 Chairman
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Statement of Compliance with the Code of Corporate Governance
For the year ended December 31, 2012
This statement is being presented to comply with the Code of Corporate Governance (“the Code”) contained
in listing regulations of the Karachi, Lahore and Islamabad Stock Exchanges for the purpose of establishing
a framework of good governance, whereby a listed company is managed in compliance with the best
practices of corporate governance.
The Bank has applied the principles contained in the Code in the following manner:
1. The Bank encourages representation of independent non-executive directors and directors representing
minority interest on its Board of Directors. At present the Board includes eight non-executive directors.
The last election of Directors was held on March 25, 2010.
2. The directors have confirmed that none of them is serving as a director in more than seven listed
companies, including the Bank, except for the nominee director of National Investment Trust (NIT).
3. All the directors of the Bank are registered as taxpayers and none of them has defaulted in payment
of any loan to a banking company, a DFI or an NBFI or, being a member of a stock exchange, has
been declared as a defaulter by that stock exchange.
4. No casual vacancy occurred in the Board during the year.
5. The Bank has prepared a “Code of Conduct” and has ensured that appropriate steps have been taken
to disseminate it throughout the Bank along with supporting policies and procedures.
6. The Board has developed a vision/mission statement, overall corporate strategy and significant policies
of the Bank. A complete record of particulars of significant policies along with the dates on which they
were approved or amended has been maintained.
7. All the powers of the Board have been duly exercised and decisions on material transactions, including
appointment and determination of remuneration and terms and conditions of employment of the CEO
and Executive Director, have been taken by the Board.
8. The meetings of the Board were presided over by the Chairman and, in his absence, by a director
elected by the Board for this purpose and the Board met at least once in every quarter. Written notices
of Board meetings, along with agenda and working papers, were circulated at least seven days before
the meetings. The minutes of the meetings were appropriately recorded and circulated.
9. The directors of the Bank are well conversant with their duties and responsibilities. A director attended
two training programmes during the year.
10. The Board has approved appointment of Chief Financial Officer, Company Secretary and Head of
Internal Audit, including their remuneration and terms and conditions of employment.
11. The Directors’ Report for the year has been prepared in compliance with the requirements of the Code
and fully describes the salient matters required to be disclosed.
12. The financial statements of the Bank were duly endorsed by CEO and CFO before approval of the
Board.
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13. The directors, CEO and executives do not hold any interest in the shares of the Bank other than that
disclosed in the pattern of shareholding.
14. The Bank has complied with all the corporate and financial reporting requirements of the Code.
15. The Board has formed an Audit Committee, comprising four non-executive directors, including the
Chairman of the Committee.
16. Meetings of the Audit Committee were held at least once in every quarter prior to approval of interim
and final results of the Bank and as required by the Code. The terms of reference of the Committee
have been formed and advised to the Committee for compliance.
17. The Board has formed a Human Resource & Remuneration Committee. It comprises four members,
of whom three are non-executive directors, including the Chairman of the Committee.
18. The Bank has an effective internal audit division that is manned by suitably qualified and experienced
personnel. The audit team is conversant with the policies and procedures of the Bank.
19. The statutory auditors of the Bank have confirmed that they have been given a satisfactory rating
under the quality control review programme of the Institute of Chartered Accountants of Pakistan, that
they or any of the partners of the firm, their spouses and minor children do not hold shares of the Bank
and that the firm and all its partners are in compliance with International Federation of Accountants
(IFAC) guidelines on code of ethics as adopted by the Institute of Chartered Accountants of Pakistan.
20. The statutory auditors or the persons associated with them have not been appointed to provide other
services except in accordance with the listing regulations and the auditors have confirmed that they
have observed IFAC guidelines in this regard.
21. The ‘closed period’, prior to the announcement of interim/final results, and business decisions, which
may materially affect the market price of Bank’s securities, was determined and intimated to directors,
employees and stock exchange(s).
22. Material/price sensitive information has been disseminated among all market participants at once
through stock exchange(s).
23. We confirm that all the other material principles contained in the Code have been complied with.
ALI RAZA D. HABIB

8
Review Report to the Members on Statement of Compliance with
the Best Practices of the Code of Corporate Governance
We have reviewed the Statement of Compliance with the best practices (the Statement) contained in
the Code of Corporate Governance (the Code) for the year ended 31 December 2012 prepared by the
Board of Directors (the Board) of Bank AL Habib Limited (the Bank) to comply with the Listing Regulations
of the Karachi, Lahore and Islamabad Stock Exchanges, where the Bank is listed.
The responsibility for compliance with the Code is that of the Board of the Bank. Our responsibility is
to review, to the extent where such compliance can be objectively verified, whether the Statement reflects
the status of the Bank’s compliance with the provisions of the Code and report if it does not. A review
is limited primarily to inquiries of the Bank personnel and review of various documents prepared by the
Bank to comply with the Code.
As part of our audit of financial statements, we are required to obtain an understanding of the accounting
and internal control systems sufficient to plan the audit and develop an effective audit approach. We are
not required to consider whether the Board’s statement on internal control covers all risks and controls,
or to form an opinion on the effectiveness of such internal controls, the Bank’s corporate governance
procedures and risks.
Further, Sub-Regulation (x) of Listing Regulation 35 notified by The Karachi Stock Exchange Limited
requires the Bank to place before the Board for their consideration and approval related party transactions,
distinguishing between transactions carried out on terms equivalent to those that prevail in arm’s length
transactions and transactions which are not executed at arm’s length price recording proper justification
for using such alternate pricing mechanism. Further, all such transactions are also required to be
separately placed before the audit committee. We are only required and have ensured compliance of
requirement to the extent of approval of related party transactions by the Board and placement of such
transactions before the audit committee. We have not carried out any procedures to determine whether
the related party transactions were undertaken at arm’s length price or not.
Based on our review, nothing has come to our attention which causes us to believe that the Statement
does not appropriately reflect the Bank's compliance, in all material respects, with the best practices
contained in the Code, effective for the year ended 31 December 2012.
Ernst & Young Ford Rhodes Sidat Hyder

Karachi: February 14, 2013 Chartered Accountants
Audit Engagement Partner: Arslan Khalid
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Statement on Internal Controls
The Management of the Bank is responsible for establishing the Internal Control System with the main
objectives of ensuring effectiveness and efficiency of operations; reliability of financial reporting; safeguarding
of assets; and compliance with applicable laws and regulations. The Internal Control System has evolved
over the years, as it is an ongoing process and is included in the Bank’s policies, procedures, financial limits,
etc., as detailed in various manuals, circulars and instructions issued by the Bank. This system continues
to be reviewed, refined and improved from time to time and immediate corrective action is taken to minimize
risks which are inherent in banking business and operations.
The Internal Control System is reviewed by the Internal Auditors as well as External Auditors and their
findings and recommendations are reported to the management and to the Audit Committee of the Board,
and corrective action is taken to address control deficiencies and for improving procedures and systems
as they are identified. The Board, acting through the Audit Committee, provides supervision and overall
guidance in improving the effectiveness of the Internal Control System.
While the Internal Control System is effectively implemented and monitored, there are inherent limitations
in the effectiveness of any system, including the possibility of human error or system failure and circumvention
or overriding of controls. Accordingly, even an effective Internal Control System can only provide reasonable
but not absolute assurance that the system’s objectives will be achieved.
During the year under review, we have endeavoured to follow the guidelines issued by State Bank of Pakistan
on internal controls and to incorporate these guidelines in the Bank’s existing Internal Control System for
evaluation and management of significant risks and we will endeavor to further improve our Internal Control
System during 2013.
A. SAEED SIDDIQUI M. SALEEM CHASHMAWALA

Company Secretary Head of Internal Audit
Karachi: February 14, 2013
Board of Directors’ Remarks on the

Management’s Evaluation of Internal Controls
Keeping in view the feedback received by the Board of Directors from the Audit Committee, and reports
submitted as to the business policies and major risk related decisions taken by the management, the Board
of Directors endorse management’s evaluation of Internal Controls.
ALI RAZA D. HABIB

10
Auditors' Report to the Members
We have audited the annexed statement of financial position of Bank AL Habib Limited (the Bank) as at 31
December 2012, and the related profit and loss account, statement of comprehensive income, statement of
changes in equity and cash flow statement together with the notes forming part thereof (here-in-after referred
to as the 'financial statements') for the year then ended, in which are incorporated the unaudited certified
returns from the branches except for fifteen branches which have been audited by us and we state that we
have obtained all the information and explanations which, to the best of our knowledge and belief, were
necessary for the purposes of our audit.
It is the responsibility of the Bank's Board of Directors to establish and maintain a system of internal control,
and prepare and present the financial statements in conformity with approved accounting standards and the
requirements of the Banking Companies Ordinance, 1962 (LVII of 1962) and the Companies Ordinance, 1984
(XLVII of 1984). Our responsibility is to express an opinion on these statements based on our audit.
We conducted our audit in accordance with the International Standards on Auditing as applicable in Pakistan.
These standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of any material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing
the accounting policies and significant estimates made by management, as well as, evaluating the overall
presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion
and after due verification, which in case of loans and advances covered more than sixty percent of the total
loans and advances of the Bank, we report that:
(a) in our opinion, proper books of accounts have been kept by the Bank as required by the Companies
Ordinance, 1984 (XLVII of 1984), and the returns referred to above received from the branches have
been found adequate for the purposes of our audit;
(b) in our opinion:
i) the statement of financial position and profit and loss account together with the notes thereon
have been drawn up in conformity with the Banking Companies Ordinance, 1962 (LVII of 1962),
and the Companies Ordinance, 1984 (XLVII of 1984), and are in agreement with the books of
account and are further in accordance with accounting policies consistently applied except for
the changes as stated in note 5.1 to the financial statements, with which we concur;
ii) the expenditure incurred during the year was for the purpose of the Bank's business; and
iii) the business conducted, investments made and the expenditure incurred during the year were
in accordance with the objects of the Bank and the transactions of the Bank which have come
to our notice have been within the powers of the Bank;
(c) in our opinion, and to the best of our information and according to the explanations given to us the
statement of financial position, profit and loss account, statement of comprehensive income, statement
of changes in equity and cash flow statement together with the notes forming part thereof conform with
approved accounting standards as applicable in Pakistan and give the information required by the
Banking Companies Ordinance, 1962 (LVII of 1962) and the Companies Ordinance, 1984 (XLVII of
1984), in the manner so required and give a true and fair view of the state of the Bank's affairs as at
31 December 2012 and its true balance of the profit, comprehensive income, its cash flows and changes
in equity for the year then ended; and
(d) in our opinion, Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980),
was deducted by the Bank and deposited in the Central Zakat Fund established under Section 7 of that
Ordinance.

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Statement of Financial Position
As at 31 December 2012
2012 2011
Note (Rupees in '000)
ASSETS
Cash and balances with treasury banks 8 27,464,340 22,957,986

Balances with other banks 9 9,744,716 6,743,337
Lendings to financial institutions 10 993,981 –000
Investments 11 249,754,075 222,958,574
Advances 12 147,868,668 114,872,252
Operating fixed assets 13 11,164,099 10,743,753
Deferred tax assets –000 –000
Other assets 14 6,115,660 6,006,559
453,105,539 384,282,461
LIABILITIES
Bills payable 15 5,257,191 4,979,720

Borrowings 16 69,622,055 43,441,594
Deposits and other accounts 17 340,392,871 302,098,594
Sub-ordinated loans 18 6,489,300 7,390,358
Liabilities against assets subject to finance lease –000 –000
Deferred tax liabilities 19 1,933,584 1,231,486
Other liabilities 20 5,479,743 5,287,157
429,174,744 364,428,909
NET ASSETS 23,930,795 19,853,552
REPRESENTED BY :
Share capital 21 10,103,868 8,785,972

Reserves 6,464,546 5,324,689
Unappropriated profit 4,606,290 3,726,098
21,174,704 17,836,759
Surplus on revaluation of assets - net of tax 22 2,756,091 2,016,793
23,930,795 19,853,552
CONTINGENCIES AND COMMITMENTS 23
The annexed notes 1 to 47 form an integral part of these financial statements.
ALI RAZA D. HABIB ABBAS D. HABIB SYED MAZHAR ABBAS ANWAR HAJI KARIM
Chairman Chief Executive and Director Director
Managing Director
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Profit and Loss Account
For the year ended 31 December 2012
2012 2011
Mark-up / return / interest earned 25 41,467,868 36,502,763

Mark-up / return / interest expensed 26 (26,105,660) (22,500,758)
Net mark-up / return / interest income 15,362,208 14,002,005
Provision against non-performing loans and advances 12.6 (466,101) (1,820,788)
Provision for diminution in the value of investments –00 –00
Bad debts written-off directly –00 –00
(466,101) (1,820,788)
Net mark-up / return / interest income after provisions 14,896,107 12,181,217
NON MARK-UP / INTEREST INCOME
Fees, commission and brokerage income 1,502,213 1,305,976
Dividend income 328,207 233,398
Income from dealing in foreign currencies 577,887 739,706
Gain / (loss) on sale / redemption of securities - net 27 77,173 (1,263)
Unrealised gain / (loss) on revaluation of investments
classified as held for trading –00 –00
Other income 28 481,862 443,033
Total non mark-up / interest income 2,967,342 2,720,850
17,863,449 14,902,067
NON MARK-UP / INTEREST EXPENSES
Administrative expenses 29 (8,795,739) (7,584,677)
Other provisions / write-offs 30 (12,060) (15,797)
Other charges 31 (186,153) (146,254)
Total non mark-up / interest expenses (8,993,952) (7,746,728)
Extra-ordinary / unusual items –00 –00
PROFIT BEFORE TAXATION 8,869,497 7,155,339
Taxation – Current (3,263,970) (2,453,493)
– Prior years 122,893 –00
– Deferred (281,906) (168,366)
32 (3,422,983) (2,621,859)
PROFIT AFTER TAXATION 5,446,514 4,533,480
Restated
Basic and diluted earnings per share - Rupees 33 5.39 4.49
Managing Director
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Statement of Comprehensive Income
2012 2011
(Rupees in '000)
Net profit for the year 5,446,514 4,533,480
Other comprehensive income
Exchange difference on translation of net

investment in a foreign branch 50,554 25,729
Total comprehensive income for the year 5,497,068 4,559,209
Managing Director
14
Statement of Changes in Equity
Revenue Reserves
Share Statutory Special General Foreign Unappro- Total
Capital Reserve Reserve Reserve Currency priated
Translation Profit
Reserve
(Rupees in '000)
Balance as at 01 January 2011 7,321,643 3,634,173 126,500 540,000 91,591 2,992,475 14,706,382
Total comprehensive income for the year –00 –00 –00 –00 25,729 4,533,480 4,559,209
Transfer from surplus on revaluation

of fixed assets - net of tax –00 –00 –00 –00 –00 35,497 35,497
Transfer to statutory reserve –00 906,696 –00 –00 –00 (906,696) –00
Cash dividend (Rs. 2 per share) –00 –00 –00 –00 –00 (1,464,329) (1,464,329)
Issue of bonus shares in the ratio of 20

shares for every 100 shares held 1,464,329 –00 –00 –00 –00 (1,464,329) –00
Balance as at 31 December 2011 8,785,972 4,540,869 126,500 540,000 117,320 3,726,098 17,836,759
Total comprehensive income for the year –00 –00 –00 –00 50,554 5,446,514 5,497,068

of fixed assets - net of tax –00 –00 –00 –00 –00 37,370 37,370
Transfer to statutory reserve –00 1,089,303 –00 –00 –00 (1,089,303) –00
Cash dividend (Rs. 2.5 per share) –00 –00 –00 –00 –00 (2,196,493) (2,196,493)

shares for every 100 shares held 1,317,896 –00 –00 –00 –00 (1,317,896) –00
Balance as at 31 December 2012 10,103,868 5,630,172 126,500 540,000 167,874 4,606,290 21,174,704
Managing Director
15
Cash Flow Statement
2012 2011
(Rupees in '000)
Cash Flow From Operating Activities
Profit before taxation 8,869,497 7,155,339

Dividend income (328,207) (233,398)
8,541,290 6,921,941
Adjustments for non - cash items:

Depreciation 809,691 762,990
Amortisation 32,996 37,983
Provision against non-performing loans and advances 466,101 1,820,788
Gain on sale of operating fixed assets (64,755) (84,392)
(Gain) / loss on sale / redemption of securities (77,173) 1,263
Provision for compensated absences 31,113 23,242
Provision against off-balance sheet items 12,060 15,797
1,210,033 2,577,671
9,751,323 9,499,612
(Increase) / decrease in operating assets

Lendings to financial institutions (993,981) 1,139,268
Advances (33,462,517) 9,080,024
Other assets (120,700) 110,869
(34,577,198) 10,330,161
Increase in operating liabilities

Bills payable 277,471 1,989,731
Borrowings 26,228,864 22,030,466
Deposits 38,294,277 52,324,382
Other liabilities (excluding provision for taxation) 257,442 831,657
65,058,054 77,176,236
40,232,179 97,006,009
Income tax paid (3,282,726) (2,712,051)
Net cash flow from operating activities 36,949,453 94,293,958

(Balance carried forward)
16
Note 2012 2011
(Rupees in '000)
Net cash flow from operating activities

(Balance brought forward) 36,949,453 94,293,958
Cash Flow From Investing Activities
Net investments in available for sale securities (53,906,373) (69,985,171)

Net investments in held to maturity securities 28,615,628 (14,860,567)
Net investment in associates (225,000) (51,656)
Dividend received 332,196 232,039
Investments in operating fixed assets (1,273,761) (1,132,753)
Sale proceeds of operating fixed assets 77,367 107,407
Net cash used in investing activities (26,379,943) (85,690,701)
Cash Flow From Financing Activities
Receipts of sub-ordinated loans –000 3,000,000

Payments of sub-ordinated loans (901,058) (451,902)
Dividend paid (2,162,870) (1,440,922)
Net cash (used in) / from financing activities (3,063,928) 1,107,176
Exchange adjustment on translation of net investment

in a foreign branch 50,554 25,729
Increase in cash and cash equivalents 7,556,136 9,736,162
Cash and cash equivalents at beginning of the year 29,652,920 19,916,758
Cash and cash equivalents at end of the year 34 37,209,056 29,652,920
Managing Director
17
Notes to the Financial Statements
1. STATUS AND NATURE OF BUSINESS
Bank AL Habib Limited (the Bank) is a banking company incorporated in Pakistan on 15 October
1991 as a public limited company under the Companies Ordinance, 1984 having its registered office
at 126-C, Old Bahawalpur Road, Multan with principal place of business in Karachi. Its shares are
listed on all the Stock Exchanges in Pakistan. It is a scheduled bank principally engaged in the
business of commercial banking with a network of 308 branches (2011: 290 branches), 82 sub-
branches (2011: 61) and 02 representative offices (2011: 02).The branch network of the Bank
includes a wholesale branch in the Kingdom of Bahrain (2011: 01), a branch in Karachi Export
Processing Zone (2011: 01) and 13 Islamic Banking branches (2011: 11).
2. BASIS OF PRESENTATION
2.1 These financial statements have been prepared in conformity with the format of financial statements
prescribed by the State Bank of Pakistan (SBP) vide BSD Circular No. 04, dated 17 February 2006.
2.2 In accordance with the directives of the Federal Government regarding the shifting of the banking
system to Islamic modes, SBP has issued various circulars from time to time. Permissible forms of
trade-related modes of financing includes purchase of goods by banks from their customers and
immediate resale to them at appropriate mark-up in price on deferred payment basis. The purchase
and resale arising under these arrangements are not reflected in these financial statements as such,
but are restricted to the amount of facility actually utilised and the appropriate portion of mark-up
thereon. However, murabaha financing arrangements undertaken by the Islamic Banking branches
are accounted for as a purchase and sale transaction of the underlying goods in these financial
statements in accordance with the accounting policies of the Bank.
2.3 The financial results of the Islamic Banking branches have been consolidated in these financial
statements for reporting purposes, after eliminating material inter-branch transactions / balances.
Key financial information of the Islamic Banking branches is disclosed in note 44.
2.4 These are separate financial statements of the Bank in which investments in subsidiary and associates
are reported on the basis of direct equity interest and are not consolidated or accounted for by using
equity method of accounting.
3. STATEMENT OF COMPLIANCE
3.1 These financial statements have been prepared in accordance with approved accounting standards
as applicable in Pakistan. Approved accounting standards comprise International Financial Reporting
Standards (IFRS) issued by the International Accounting Standards Board (IASB) and Islamic
Financial Accounting Standards (IFAS) issued by the Institute of Chartered Accountants of Pakistan
(ICAP) as are notified under the Companies Ordinance, 1984, the requirements of the Companies
Ordinance, 1984, the Banking Companies Ordinance, 1962 and regulations / directives issued by
the Securities and Exchange Commission of Pakistan (SECP) and SBP. Wherever the requirements
of the Companies Ordinance, 1984, the Banking Companies Ordinance, 1962 or regulations /
directives issued by SECP and SBP differ with the requirements of IFRS or IFAS, the requirements
of the Companies Ordinance, 1984, the Banking Companies Ordinance, 1962 or the requirements
of the said regulations / directives shall prevail.
18
3.2 SBP vide BSD Circular No. 10, dated 26 August 2002 has deferred the applicability of International
Accounting Standard (IAS) 39, "Financial Instruments: Recognition and Measurement" and IAS 40,
"Investment Property" for banking companies till further instructions. Further, according to the
notification of SECP dated 28 April 2008, IFRS - 7 "Financial Instruments: Disclosures" has not been
made applicable for banks. Accordingly, the requirements of these standards have not been considered
in the preparation of these financial statements.
4. BASIS OF MEASUREMENT
These financial statements have been prepared under the historical cost convention except for the
certain investments, land and buildings and derivative financial instruments which are revalued as
referred to in notes 5.4, 5.6 and 5.14 below.
5. SIGNIFICANT ACCOUNTING POLICIES
5.1 The accounting policies adopted in the preparation of these financial statements are consistent with
those of the previous financial year except as described below:
New and amended standards and interpretations
The Bank has adopted the following amended IFRS which became effective during the year:
IAS 12 – Income Taxes - Recovery of Underlying Assets (Amendment)
The adoption of the above amendment did not have any material effect on these financial statements.
5.2 Cash and cash equivalents
Cash and cash equivalents as referred to in the cash flow statement comprises cash and balances
with treasury banks and balances with other banks less overdrawn nostros accounts.
5.3 Repurchase / resale agreements
The Bank enters into transactions of repos and reverse repos at contracted rates for a specified
period of time. These are recorded as under:
Sale under repurchase obligation
Securities sold with a simultaneous commitment to repurchase at a specified future date (repos)
continue to be recognised in the statement of financial position and are measured in accordance
with accounting policies for investments. Amounts received under these agreements are recorded
as repurchase agreement borrowings. The difference between sale and repurchase price is amortised
as expense over the term of the repo agreement.
Purchase under resale obligation
Securities purchased with a corresponding commitment to resell at a specified future date (reverse
repos) are not recognised in the statement of financial position. Amounts paid under these arrangements
are included in reverse repurchase agreement lendings. The difference between purchase and
resale price is accrued as income over the term of the reverse repo agreement.
19
5.4 Investments
Investments in subsidiary and associates are stated at cost less provision for impairment, if any.
Other investments are classified as follows:
Held for trading
These are investments acquired principally for the purpose of generating profits from short-term
fluctuations in price or dealer’s margin or are securities included in a portfolio in which a pattern of
short-term trading exists.
Held to maturity
These are investments with fixed or determinable payments and fixed maturities which the Bank
has the intention and ability to hold till maturity.
Available for sale
These are investments which do not fall under the held for trading and held to maturity categories.
All purchases and sales of investments that require delivery within the time frame established by
regulations or market convention are recognised at the trade date. Trade date is the date on which
the Bank commits to purchase or sell the investments.
Investments (other than held for trading) are initially measured at fair value plus transaction cost
associated with the investment. Investments classified as held for trading are initially measured at
fair value, and transaction costs are expensed in the profit and loss account.
After initial recognition, quoted securities, other than those classified as held to maturity, are carried
at market value. Unquoted securities are valued at cost less impairment in value, if any. Held to
maturity securities are carried at amortised cost.
Surplus / (deficit) arising on revaluation of quoted securities which are classified as available for
sale investments is taken to a separate account which is shown in the statement of financial position
below equity. The surplus / (deficit) arising on these securities is taken to the profit and loss account
when actually realised upon disposal or in case of impairment of securities. The unrealised surplus
/ (deficit) arising on revaluation of quoted securities which are classified as held for trading is taken
to the profit and loss account.
Provision for diminution in the values of securities is made after considering impairment, if any, in
their value and charged to profit and loss account. Impairment is recognised when there is an
objective evidence of significant and prolong decline in the value of such securities. Provision for
impairment against debt securities is made as per the aging criteria prescribed by the Prudential
Regulations of SBP and in case of unquoted equity securities on the basis of book value of investee's
net assets.
Premium or discount on debt securities classified as available for sale and held to maturity is
amortised using effective interest method and taken to the profit and loss account.
20
5.5 Advances
Loans and advances
These are stated net of provisions for non-performing advances. Provision for non-performing
advances is determined in accordance with the requirements of the Prudential Regulations and is
charged to the profit and loss account. The Bank also maintains general provision in addition to the
requirements of the Prudential Regulations on the basis of the management's risk assessment.
Advances are written off when there are no realistic prospects of recovery.
Finance lease receivables
Leases where the Bank transfers substantially all the risks and rewards incidental to ownership of
an asset to the lessee are classified as finance leases. A receivable is recognised at an amount
equal to the present value of the lease payments including any guaranteed residual value.
Ijarah finance
In accordance with the requirements of IFAS 2 'Ijarah', assets leased out under ijarah arrangements
on or after 01 January 2009 are stated at cost less depreciation and impairment, if any and included
under "Advances". Such assets are depreciated over the terms of Ijarah contracts. Ijarah arrangements
executed before the above referred date are accounted for as finance lease.
Murabaha
Funds disbursed under murabaha arrangements for purchase of goods are recorded as advance
for murabaha. On culmination of murabaha i.e. sale of goods to customers, murabaha receivables
are recorded at the sale price net of deferred income. Goods purchased but remaining unsold at
the reporting date are recorded as inventories.
5.6 Operating fixed assets
Tangible operating assets - owned
Land is measured at cost at the time of initial recognition and is subsequently carried at revalued
amount. Buildings are initially measured at cost and upon revaluation, are carried at revalued amount
less accumulated depreciation and impairment, if any. All other operating fixed assets are stated
at cost less accumulated depreciation and impairment, if any. Depreciation is charged to profit and
loss account on straight line basis so as to charge the assets over their expected useful lives at
the rates specified in note 13.2. The depreciation charge is calculated after taking into account
residual value, if any. The residual values, useful lives and depreciation method are reviewed
annually and adjusted, if appropriate. Depreciation is charged on prorata basis, i.e., full month
charge in the month of purchase and no charge in the month of disposal.
Land and buildings are revalued by independent professionally qualified valuers with sufficient
regularity to ensure that the net carrying amount does not differ materially from the fair value. The
surplus arising on revaluation of fixed assets is credited to the “surplus on revaluation of assets"
account shown below equity. The Bank has adopted the following accounting treatment of depreciation
on revalued assets, keeping in view the requirements of the Companies Ordinance, 1984 and
SECP's SRO 45(1)/2003 dated 13 January 2003:
21
- depreciation on assets which are revalued is determined with reference to the value assigned
to such assets on revaluation and depreciation charge for the year is taken to the profit and
loss account; and
- an amount equal to incremental depreciation for the year net of deferred taxation is transferred
from surplus on revaluation of assets to unappropriated profit through statement of changes
in equity to record realisation of surplus to the extent of the incremental depreciation charge
for the year.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset,
as appropriate, only when it is probable that future economic benefits associated with the item will
flow to the Bank and the cost of the item can be measured reliably. The carrying amount of the
replaced part is derecognised. All other repairs and maintenance are charged to the income statement
during the financial period in which they are incurred.
Gains and losses on disposal of fixed assets are included in income currently, except that the related
surplus on revaluation of land and buildings (net of Deferred tax) is transferred directly to unappropriated
profit.
Tangible operating assets - leased
Leases where the Bank assumes substantially all the risks and rewards of ownership are classified
as finance leases. Assets subject to finance lease are accounted for by recording the assets and
related liability. These are stated at lower of fair value and the present value of minimum lease
payments at the inception of lease less accumulated depreciation. Financial charges are allocated
over the period of lease term so as to provide a constant periodic rate of financial charge on the
outstanding liability. Depreciation is charged on the basis similar to the owned assets.
Intangible assets
Intangible assets having a finite useful life are stated at cost less accumulated amortisation and
impairment, if any. Amortisation is based on straight line method by taking into consideration the
estimated useful life of assets at the rates specified in note 13.3. Intangible assets are amortised
on prorata basis i.e. full month amortisation in the month of purchase and no amortisation in the
month of disposal.
Capital work in progress
Capital work in progress is stated at cost less impairment, if any.
Impairment
The carrying values of fixed assets are reviewed for impairment when events or changes in
circumstances indicate that the carrying values may not be recoverable. If any such indication exists
and where the carrying values exceed the estimated recoverable amounts, the fixed assets are
written down to their recoverable amounts.
The resulting impairment loss is taken to profit and loss account except for impairment loss on
revalued assets which is adjusted against the related revaluation surplus to the extent that the
impairment loss does not exceed the surplus on revaluation of assets.
22
5.7 Employees' benefits
Defined benefit plan
The Bank operates an approved gratuity fund for all its confirmed employees, which is administered
by the Trustees. The Bank's costs and contributions are determined based on actuarial valuation
carried out at each year end using Projected Unit Credit Actuarial Method. Net cumulative unrecognised
actuarial gains / losses relating to previous reporting periods in excess of the higher of 10% of
present value of defined benefit obligation or 10% of the fair value of plan assets are recognised
as income or expense over the estimated remaining working lives of the employees.
Defined contribution plan
The Bank operates an approved provident fund scheme for all its regular permanent employees,
administered by the Trustees. Equal monthly contributions are made both by the Bank and its
employees to the fund at the rate of 10% of the basic salary in accordance with the terms of the
scheme.
Compensated absences
The Bank accounts for all accumulating compensated absences when employees render service
that increases their entitlement to future compensated absences. The liability is determined based
on actuarial valuation carried out using the Projected Unit Credit Method.
5.8 Provisions against liabilities
These are recognised when the Bank has a legal or constructive obligation as a result of past
events, it is probable that an outflow of resources will be required to settle the obligation and a
reliable estimate of the amount can be made. Provisions are reviewed at each reporting date and
are adjusted to reflect the current best estimate.
5.9 Provisions against off-balance sheet obligations
The Bank, in the ordinary course of business, issues letters of credit, acceptances, guarantees, bid
bonds, performance bonds etc. The commission against such contracts is recognised in the profit
and loss account under "fees, commission and brokerage income" over the period of contracts. The
Bank's liability under such contracts is measured at the higher of the amount representing unearned
commission income at the reporting date and the best estimate of the amount expected to settle
any financial obligation arising under such contracts.
5.10 Revenue recognition
(a) Mark-up / interest / return on advances and investments is recognised on accrual basis, except in
case of advances classified under the Prudential Regulations on which mark-up is recognised on
receipt basis. Markup / interest / return on rescheduled / restructured loans and advances and
investments is recognised as permitted by the regulations of SBP.
(b) Financing method is used in accounting for income from lease financing. Under this method, the
unrealised lease income is deferred and taken to income over the term of the lease period so as
to produce a constant periodic rate of return on the outstanding net investment in lease. Gain / loss
on termination of lease contracts, front end fee and other lease income are recognised as income
on receipt basis.
23
(c) The rentals from ijarah are recognised as income over the term of the contract net of depreciation
expense relating to the ijarah assets.
(d) Income from murabaha is accounted for on a time proportionate basis over the period of murabaha
transaction.
(e) Dividend income is recognised when the right to receive is established.
(f) Gain or loss on sale of investments are recognised in profit and loss account in the year in which
they arise.
(g) Fee, commission and brokerage income are recognised as services are performed.
5.11 Taxation
Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit
and loss account except to the extent that it relates to the items recognised directly in equity or
surplus on revaluation of assets, in which case it is recognised in equity or surplus on revaluation
of assets.
Current
Provision for current tax is based on the taxable income for the year, using tax rates enacted or
substantively enacted at the statement of financial position date and any adjustments to the tax
payable in respect of previous years. Current tax assets and liabilities are measured at the amount
expected to be recovered from or paid to taxation authorities.
Deferred
Deferred tax is provided on all temporary differences at the statement of financial position date
between the tax bases of assets and liabilities and their carrying amounts for financial reporting
purposes.
Deferred tax assets are recognised for all deductible temporary differences and unused tax losses,
to the extent that it is probable that taxable profits will be available against which the deductible
temporary differences and unused tax losses can be utilised.
Deferred tax liabilities are recognised for all taxable temporary differences, except in respect of
taxable temporary differences associated with investment in foreign operations, when the timing
of the reversal of the temporary differences can be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future.
The carrying amount of deferred tax assets are reviewed at each statement of financial position
date and reduced to the extent that it is no longer probable that sufficient taxable profit or taxable
temporary differences will be available to allow all or part of the deferred tax asset to be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the
period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that
have been enacted or substantively enacted at the statement of financial position date.
24
5.12 Currency translation
Functional and presentation currency
These financial statements are presented in Pak Rupees which is the Bank's functional currency
and presentation currency.
Transactions and balances in foreign currencies
Foreign currency transactions are translated into Pak Rupees at the exchange rates prevailing on
the date of transaction. Monetary assets and liabilities in foreign currencies are translated into Pak
Rupees at the exchange rates prevailing at the reporting date. Non-monetary items that are measured
in terms of historical cost in a foreign currency are translated using the exchange rates at the dates
of the initial transactions. Non-monetary items measured at fair value in a foreign currency are
translated using exchange rates at the date when the fair value was determined. Exchange gains
or losses are included in income currently.
Foreign operations
The assets and liabilities of foreign operations are translated to Pak Rupees at exchange rates
prevailing at the reporting date. The income and expense of foreign operations are translated at
rate of exchange prevailing during the year. Exchange gain or loss on such translation is taken to
equity through statement of other comprehensive income under "foreign currency translation reserve".
Commitments
Commitments for outstanding forward foreign exchange contracts are translated at forward rates
applicable to their respective maturities.
5.13 Financial instruments
Financial assets and financial liabilities are recognised at the time when the Bank becomes a party
to the contractual provision of the instrument. Financial assets are de-recognised when the contractual
right to future cash flows from the asset expires or is transferred along with the risk and reward of
ownership of the asset. Financial liabilities are de-recognised when obligation is discharged, cancelled
or expired. Any gain or loss on de-recognition of the financial asset and liability is recognised in the
profit and loss account of the current period.
5.14 Derivative financial instruments
Derivative financial instruments are initially recognised at their fair value on the date on which the
derivative contract is entered into and are subsequently remeasured at fair value. All derivative
financial instruments are carried as asset when fair value is positive and liabilities when fair value
is negative. Any change in the value of derivative financial instruments is taken to the profit and loss
account.
5.15 Off-setting
Financial assets and financial liabilities are only off-set and the net amount is reported in the financial
statements when there is a legally enforceable right to set-off the recognised amount and the Bank
intends either to settle on a net basis, or to realise the assets and to settle the liabilities simultaneously.
Income and expense items of such assets and liabilities are also off-set and the net amount is
reported in the financial statements.
25
5.16 Dividends and appropriations to reserves
Dividends and appropriations to reserves are recognised in the year in which these are approved,
except appropriations required by the law which are recorded in the period to which they pertain.
5.17 Segment reporting
A segment is a distinguishable component of the Bank that is engaged in providing products and
services (business segment), or in providing products or services within a particular economic
environment (geographical segment), which is subject to risk and rewards that are different from
those of other segments. The segment reporting format has been determined and prepared in
conformity with the format of financial statements and guidelines, prescribed by SBP vide BSD
Circular No.04, dated, 17 February 2006. The Bank's primary format of reporting is based on
business segments.
5.17.1 Business segments
Retail banking
It consists of retail lending, deposits and banking services to private individuals and small businesses.
The retail banking activities include provision of banking and other financial services, such as current
and savings accounts, credit cards, consumer banking products etc., to individual customers, small
merchants and SMEs.
Commercial banking
Commercial banking represents provision of banking services including treasury and international
trade related activities to large corporate customers, multinational companies, government and semi
government departments and institutions and SMEs treated as corporate under the Prudential
Regulations.
5.17.2 Geographical segments
The Bank operates in two geographic regions, being:
- Pakistan
- Middle East
5.18 Earnings per share
The Bank presents basic and diluted earnings per share (EPS). Basic EPS is calculated by dividing
the profit or loss attributable to ordinary shareholders of the Bank by the weighted average number
of ordinary shares outstanding during the period / year. Diluted EPS is determined by adjusting the
profit or loss attributable to ordinary shareholders and the weighted average number of ordinary
shares outstanding for the effects of all dilutive potential ordinary shares, if any. There were no
convertible dilutive potential ordinary shares in issue at 31 December 2012.
5.19 Clients' assets
The Bank provides services that result in the holding of assets on behalf of its clients. Such assets
are not reported in the financial statements, as they are not the assets of the Bank.
26
6. ACCOUNTING JUDGMENTS AND ESTIMATES
The preparation of financial statements requires management to make judgments, estimates and
assumptions that affect the application of policies and reported amounts of assets and liabilities,
income and expenses. The estimates and associated assumptions are based on historical experience
and various other factors that are believed to be reasonable under the circumstances, the result
of which forms the basis of making judgment about carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these estimates. The estimates
and underlying assumptions are reviewed on an ongoing basis. Revision to accounting estimates
are recognised in the period in which the estimate is revised if the revision affects only that period,
or in period of revision and future periods if the revision affects both current and future periods. The
estimates and judgments that have a significant effect on the financial statements are in respect
of the following:
Note
Classification of investments and provision for diminution in the value of investments 5.4 & 11
Provision against non-performing advances 5.5 & 12
Useful lives of assets and methods of depreciation and amortisation 5.6 & 13
Defined benefit plan 5.7 & 36
Provisions against off-balance sheet obligations 5.9 & 20
Current and deferred taxation 5.11 & 19
7. STANDARDS, INTERPRETATIONS AND AMENDMENTS TO APPROVED ACCOUNTING

STANDARDS THAT ARE NOT YET EFFECTIVE
The following revised standards and interpretation with respect to the approved accounting standards
as applicable in Pakistan would be effective from the dates mentioned below against the respective
standard or interpretation:
Effective date
(accounting periods
Standard, interpretation or amendment beginning on or after)
IAS 1 – Presentation of Financial Statements – Presentation of

items of other comprehensive income 01 July 2012
IAS 19 – Employee Benefits –(Amendment) 01 January 2013
IAS 32 – Offsetting Financial Assets and Financial liabilities – (Amendment) 01 January 2014
IFRIC 20 – Stripping Costs in the Production Phase of a Surface Mine 01 January 2013
The Bank expects that the adoption of the above revisions and amendments of the standards will
not materially affect the Bank's financial statements in the period of initial application other than the
amendments to IAS-19 'Employee Benefits' as described below:
Amendments to IAS 19 range from fundamental changes to simple clarification and re-wording.
The significant changes include the following:
27
- For defined benefit plans, the ability to defer recognition of actuarial gains and losses (i.e., the
corridor approach) has been removed. As revised, actuarial gains and losses are recognised
in other comprehensive income when they occur. Amounts recorded in profit and loss are limited
to current and past service costs, gains or losses on settlements, and net interest income
(expense). All other changes in the net defined benefit asset (liability) are recognised in other
comprehensive income with no subsequent recycling to profit and loss.
- The distinction between short-term and other long-term employee benefits will be based on the
expected timing of settlement rather than the employee’s entitlement to the benefits.
- Objectives for disclosures of defined benefit plans are explicitly stated in the revised standard,
along with new or revised disclosure requirements. These new disclosures include quantitative
information of the sensitivity of the defined benefit obligation to a reasonably possible change
in each significant actuarial assumption.
While the Bank is currently assessing the full impact of the above amendments which are effective
from 01 January 2013 on the financial statements, it is expected that the adoption of the said
amendments will result in retrospective change in the Bank's accounting policy related to recognition
of actuarial gains and losses (refer to note 5.7 to the financial statements) to recognise actuarial
gains and losses in total in other comprehensive income in the period in which they occur. The
potential impact of the said changes on the financial position and performance for the year 2012
upon adoption of the standards in 2013 is estimated as under:
2012
(Rupees in '000)
Net decrease in unappropriated profit as on 01 January 2012 175,582
Net decrease in other comprehensive income 7,984
Net increase in profit or loss for the year 8,898
Net increase in employees’ benefit liability 174,668
The impact for the year 2013 has not yet been determined by the Bank.
In addition to the above amendments, improvements to various accounting standards have also
been issued by the IASB. Such improvements are generally effective for accounting periods beginning
on or after 01 January 2013. The Bank expects that such improvements to the standards will not
have any material impact on the Bank's financial statements in the period of initial application.
Further, following new standards have been issued by IASB which are yet to be notified by SECP
for the purpose of applicability in Pakistan.
IASB Effective date

(annual periods beginning
on or after)
IFRS 9 – Financial Instruments: Classification and Measurement 01 January 2015
IFRS 10 – Consolidated Financial Statements 01 January 2013
IFRS 11 – Joint Arrangements 01 January 2013
IFRS 12 – Disclosure of Interests in Other Entities 01 January 2013
IFRS 13 – Fair Value Measurement 01 January 2013
28
Note 2012 2011
(Rupees in '000)
8. CASH AND BALANCES WITH TREASURY BANKS
In hand
Local currency 4,902,297 4,013,528
Foreign currencies 1,144,677 591,887
National prize bonds 27,353 14,962
6,074,327 4,620,377
In transit
Local currency 71,940 10,000
Foreign currencies 3,007 –00
74,947 10,000
With State Bank of Pakistan in:
Local currency current accounts 8.1 13,024,891 10,689,526
Local currency current account-Islamic Banking 8.2 224,122 198,378
Foreign currency deposit accounts
Cash reserve account 8.3 1,491,248 1,466,115
Cash reserve account-Islamic Banking 6,412 3,778
Special cash reserve account 8.3 4,473,744 4,398,345
Local US Dollar collection account 8.4 27,855 34,107
19,248,272 16,790,249
With National Bank of Pakistan in:
Local currency current accounts 2,066,794 1,537,360
27,464,340 22,957,986
8.1 Represent statutory cash reserve maintained under Section 36 of the State Bank of Pakistan Act,
1956.
8.2 Represents statutory cash reserve maintained by the Islamic Banking branches in accordance with
BPD Circular No. 01 of 2003.
8.3 Represent cash reserves maintained against foreign currency deposits mobilised under Circular FE-
25 of 1998 to comply with statutory requirements.
8.4 Represents US Dollar collection account maintained with SBP in accordance with Circular FE-02 of
2004.
29
Note 2012 2011
(Rupees in '000)
9. BALANCES WITH OTHER BANKS
In Pakistan
Current accounts 749,181 733,852
Deposit accounts –00 350,000
Savings accounts 9.1 2,786 467,393
751,967 1,551,245
Outside Pakistan
Current accounts 2,697,112 846,210
Deposit accounts 9.2 6,295,637 4,345,882
8,992,749 5,192,092
9,744,716 6,743,337
9.1 These carry expected profit rates of 6% (2011: 6.99% to 8.25%) per annum.
9.2 These carry interest rates upto 0.09% (2011: upto 0.04%) per annum.
10. LENDINGS TO FINANCIAL INSTITUTIONS
In local currency
Repurchase agreement lendings (Reverse Repo) 10.1 993,981 –00
10.1 Securities held as collateral against repurchase agreement lendings
2012 2011
Further Further
Held by given as Total Held by given as Total
Bank collateral Bank collateral
(Rupees in '000)
Market Treasury Bills 993,981 –00 993,981 –00 –00 –00
10.1.1 The market value of securities held as collateral against lendings to financial institutions amounted to
Rs. 999.753 (2011: Nil) million.
30
11. INVESTMENTS
2012 2011
Note
Held by Given as Total Held by Given as Total
11.1 Investments by type Bank collateral Bank collateral
(Rupees in '000)
Available for sale securities 11.5
Market Treasury Bills 114,006,833 50,291,508 164,298,341 78,715,641 27,588,855 106,304,496
Pakistan Investment Bonds 13,446,569 –00 13,446,569 14,617,483 –00 14,617,483
Foreign Currency Bonds 1,108,499 –00 1,108,499 979,474 –00 979,474
Sukuks 3,508,008 –00 3,508,008 6,947,740 –00 6,947,740
Ordinary shares of listed
companies 265,972 –00 265,972 70,918 –00 70,918
Ordinary shares of
unlisted companies 39,570 –00 39,570 39,570 –00 39,570
Listed term finance certificates 502,829 –00 502,829 584,461 –00 584,461
Unlisted term finance certificates 532,820 –00 532,820 249,920 –00 249,920
Open ended mutual funds 1,525,000 –00 1,525,000 1,450,000 –00 1,450,000
134,936,100 50,291,508 185,227,608 103,655,207 27,588,855 131,244,062
Held to maturity securities 11.2
Market Treasury Bills 48,660,340 –00 48,660,340 76,079,520 –00 76,079,520
Sukuks 229,705 –00 229,705 266,900 –00 266,900
61,682,195 –00 61,682,195 90,297,823 –00 90,297,823
Associates 11.12
Habib Sugar Mills Limited 180,977 –00 180,977 180,977 –00 180,977
Habib Asset Management Limited 33,750 –00 33,750 33,750 –00 33,750
First Habib Income Fund 550,000 –00 550,000 550,000 –00 550,000
First Habib Stock Fund 50,000 –00 50,000 50,000 –00 50,000
First Habib Cash Fund 300,000 –00 300,000 100,000 –00 100,000
First Habib Islamic Balanced Fund 25,000 –00 25,000 –00 –00 –00
1,139,727 –00 1,139,727 914,727 –00 914,727
Subsidiary 11.13
AL Habib Capital Markets (Pvt.) Ltd. 200,000 –00 200,000 200,000 –00 200,000
Investments at cost 197,958,022 50,291,508 248,249,530 195,067,757 27,588,855 222,656,612

Provision for diminution in the
value of investments 11.4 (5,700) –00 (5,700) (5,700) –00 (5,700)
Investments (net of provisions) 197,952,322 50,291,508 248,243,830 195,062,057 27,588,855 222,650,912
Surplus on revaluation of
available for sale
investments - net 22.2 1,419,923 90,322 1,510,245 161,803 145,859 307,662
Investments after revaluation of
available for sale investments 199,372,245 50,381,830 249,754,075 195,223,860 27,734,714 222,958,574
11.2 The aggregate market value of held to maturity securities as at 31 December 2012 amounted to Rs. 62,824 (2011: Rs. 91,084) million.
31
Note 2012 2011
(Rupees in '000)
11.3 Investments by segment
Federal Government Securities
Market Treasury Bills 11.6 212,958,681 182,384,016
Pakistan Investment Bonds 11.7 25,950,121 28,100,205
Foreign Currency Bonds 11.10 1,006,813 620,558
Sukuks 11.8 1,000,000 4,000,000
240,915,615 215,104,779
Fully paid-up ordinary shares

Listed companies 11.5.5 265,972 70,918
Unlisted companies 11.11 39,570 39,570
305,542 110,488
Term finance certificates, sukuks and bonds
Term Finance Certificates
Listed term finance certificates 749,760 928,142
Unlisted term finance certificates 574,487 374,920
11.9 1,324,247 1,303,062

Sukuks 11.8 2,737,713 3,214,640
Foreign Currency Bonds 11.10 101,686 358,916
4,163,646 4,876,618
Others
Open ended mutual funds 11.5.9 1,525,000 1,450,000
Associates 11.12 1,139,727 914,727
Subsidiary 11.13 200,000 200,000
2,864,727 2,564,727
Investments at cost 248,249,530 222,656,612

value of investments 11.4 (5,700) (5,700)
Investments - net of provisions 248,243,830 222,650,912

available for sale investments - net 22.2 1,510,245 307,662
available for sale investments 249,754,075 222,958,574
32
Note 2012 2011
(Rupees in '000)
11.4 Particulars of provision for diminution in the
value of investments
Available for sale investments: 11.4.1 5,700 5,700
11.4.1 Particulars of provision in respect of type and segment
Available for sale investments:
Unlisted companies 5,700 5,700
11.5 Quality of available for sale securities

Name of security Face 2012 2011 2012 2011 2012 2011
value Rating* Cost Carrying value
Rs. / USD (Rupees in '000)
11.5.1 Market Treasury Bills – Unrated Unrated 164,298,341 106,304,496 164,686,670 106,668,552
11.5.2 Pakistan Investment Bonds – Unrated Unrated 13,446,569 14,617,483 14,382,871 14,653,808
11.5.3 Foreign Currency Bonds

Government of Pakistan Bonds USD 100 B- B- 662,181 455,068 701,421 385,867
Government of Sri Lanka Bonds USD 100 B+ _ 101,686 –00 105,165 –00
Government of Sri Lanka Bonds USD 100 _ B+ –00 358,916 –00 366,529
1,108,499 979,474 1,164,097 889,563
11.5.4 Sukuks
2012 2011 Name of Security
No. of certificates
Dar Al Arkan International Sukuk
–00 20,000 Company USD 100 – A– –00 179,891 –00 158,304
170,000 170,000 Engro Foods Limited Rs.5,000 A A 850,000 850,000 850,000 850,000
–00 30,000 Government of Pakistan Ijarah Sukuk - III Rs.100,000 – Unrated –00 3,000,000 –00 3,014,100
10,000 10,000 Government of Pakistan Ijarah Sukuk - VIII Rs. 100,000 Unrated Unrated 1,000,000 1,000,000 1,009,800 1,002,800
1,087,849 1,087,849 Liberty Power Tech Limited Rs.1,000 A+ AA 1,033,008 1,087,849 1,033,008 1,087,849
–00 40,000 Sui Southern Gas Company Limited Rs.5,000 – AA –00 80,000 –00 80,000
150,000 150,000 WAPDA Second Sukuk Company Limited Rs.5,000 Unrated Unrated 625,000 750,000 625,000 750,000
3,508,008 6,947,740 3,517,808 6,943,053
33
11.5.5 Ordinary shares of listed companies
2012 2011 Name of security Face 2012 2011 2012 2011 2012 2011
No. of shares value Rating* Cost Carrying value
Rs. (Rupees in '000)
34,059 –00 Attock Petroleum Limited Rs.10 Unrated – 15,207 –00 17,438 –00
2,700,415 1,201,952 Habib Metropolitan Bank Limited Rs.10 AA+ AA+ 36,204 22,139 37,840 20,301
52,862 52,862 International Industries Limited Rs.10 Unrated Unrated 357 357 1,740 2,009
3,364,056 3,364,056 International Steel Limited Rs.10 Unrated Unrated 47,332 47,332 40,705 39,057
107,268 –00 Meezan Bank Limited Rs.10 AA- – 3,028 –00 3,223 –00
234,075 –00 Pakistan Oilfields Limited Rs.10 Unrated – 89,111 –00 102,417 –00
425,168 2,500 Pakistan Petroleum Limited Rs.10 Unrated Unrated 68,421 422 75,165 421
17,500 8,000 Packages Limited Rs.10 AA AA 1,429 668 2,645 662
200,000 –00 Pakistan Telecommunication Rs.10 Unrated – 2,694 –000 3,470 –00
18,000 –00 Shell Pakistan Limited Rs.10 Unrated – 2,189 –000 2,452 –00
265,972 70,918 287,095 62,450
11.5.6 Ordinary shares of unlisted companies
2012 2011 Name of security

No. of shares / certificates
3,000,000 3,000,000 Khushhali Bank Limited Rs.10 A A 30,000 30,000 30,000 30,000
Pakistan Export Finance Guarantee
569,958 569,958 Agency Limited Rs.10 Unrated Unrated 5,700 5,700 –00 –0
24 24 S.W.I.F.T – Unrated Unrated 3,870 3,870 3,870 3,870
39,570 39,570 33,870 33,870
11.5.7 Listed term finance certificates
No. of certificates
6,000 6,000 Allied Bank Limited Rs.5,000 AA AA – 29,928 29,940 30,261 30,273
33,800 33,800 Allied Bank Limited - II Rs.5,000 AA AA – 168,797 168,865 170,316 166,965
5,000 5,000 Askari Bank Limited - II Rs.5,000 AA – AA – 24,930 24,940 25,030 25,015
40,000 40,000 Engro Fertilizers Limited - III Rs.5,000 A AA 199,600 199,680 194,750 195,593
–00 5,000 Jahangir Siddiqui & Company Ltd - IV Rs.5,000 – AA –00 12,478 –00 13,027
6,600 6,600 NIB Bank Limited Rs.5,000 A+ A+ 32,941 32,954 33,026 32,297
–00 20,000 Orix Leasing Pakistan Limited - III Rs.5,000 AA+ AA+ –00 16,654 –00 16,570
20,000 20,000 Pak Arab Fertilizers Limited Rs.5,000 AA AA 30,000 74,000 30,031 74,000
5,000 5,000 United Bank Limited - III Rs.5,000 AA AA 16,633 24,950 16,877 25,315
502,829 584,461 500,291 579,055
11.5.8 Unlisted term finance certificates

No. of certificates
150 150 Askari Bank Limited - IV Rs.1,000,000 AA – AA– 149,940 150,000 149,940 150,000
20,000 20,000 Bank Alfalah Limited - IV Rs.5,000 AA – AA– 99,880 99,920 99,880 99,920
Standard Chartered Bank
56,600 –00 (Pakistan) Limited Rs.5,000 AAA – 283,000 –00 283,000 –00
532,820 249,920 532,820 249,920
34
11.5.9 Open ended mutual funds
2012 2011 Name of Security Face 2012 2011 2012 2011 2012 2011
No. of units value Rating* Cost Carrying value
–00 5,000,000 ABL Cash Fund Rs.10 – AA+ –00 50,000 –00 50,094
–00 4,997,052 ABL Government Securities Fund Rs.10 – A+ –00 50,000 –00 50,100
–00 483,822 Askari Sovereign Cash Fund Rs.100 – AA+ –00 50,000 –00 48,622
–00 97,084 Atlas Money Market Fund Rs.500 – AA+ –00 50,000 –00 48,889
–00 2,500,000 BMA Empress Cash Fund Rs.10 – AA+ –00 25,000 –00 25,287
–00 505,191 HBL Money Market Fund Rs.100 – AA+ –00 50,000 –00 52,126
–00 500,000 IGI Money Market Fund Rs.100 – AA+ –00 50,000 –00 50,341
–00 4,853,756 NAFA Government Securities Liquid Fund Rs. 10 – AAA –00 50,000 –00 49,422
22,746,463 6,395,907 NIT Unit Fund Rs.10 AM2– AM2- 700,000 200,000 754,955 165,654
60,308,340 59,181,134 NIT Government Bond Fund Rs.10 AA AA 600,000 600,000 634,209 632,416
19,469,983 20,000,000 NIT Income Fund Rs.10 A+ AA- 200,000 200,000 211,526 215,622
–00 504,927 Pak Oman Advantage Islamic Income Fund Rs. 50 – A+ –00 25,000 –00 26,532
–00 2,500,000 Pak Oman Government Securities Fund Rs.10 – AA –00 25,000 –00 25,579
–00 250,000 PICIC Cash Fund Rs.100 – AA+ –00 25,000 –00 25,069
258,854 –00 Primus Cash Fund Rs.100 AAA – 25,000 –00 25,941 –00
1,525,000 1,450,000 1,626,631 1,465,753
185,227,608 131,244,062 186,732,153 131,546,024
* Rating in case of ordinary shares of listed and unlisted companies represents the rating of investee companies, in all other cases,
rating represents the rating of underlying instruments.
11.6 Market Treasury Bills
These securities have a maturity period of six months to one year (2011: six months to one year), with yield ranging between 9.25%
to 11.92% (2011: 11.78% to 13.91%) per annum.
11.7 Pakistan Investment Bonds
These securities have a maturity period of 3, 5, 7 and 10 years (2011: 3, 5, 7 and 10 years) with interest rates ranging between 9%
to 12% (2011: 9% to 12%) per annum. These include securities costing Rs. 5 (2011: Rs. 5) million pledged with the Controller of
Military Accounts, Karachi as a security deposit for extending banking facilities on account of regimental funds vis-a-vis private fund
accounts.
35
11.8 Sukuks
Redeemable
value per Maturity
2012 2011 certificate Date Name of Security Rate 2012 2011
No. of certificates (Rupees) (Rupees in '000)
Available for sale

–00 30,000 –00 Mar-12 Government of Pakistan Ijarah Sukuk - III Weighted average 6 months –00 3,000,000
T-Bills rate
10,000 10,000 100,000 May-14 Government of Pakistan Ijarah Sukuk - VIII Weighted average 6 months 1,000,000 1,000,000
T-Bills rate
1,000,000 4,000,000
Others
Available for sale
–00 20,000 –00 Jul-12 Dar Al Arkan International Sukuk Company 3 months' LIBOR plus 225 bps –00 179,891
170,000 170,000 5,000 Jan-17 Engro Foods Limited 6 months' KIBOR plus 69 bps 850,000 850,000
1,087,849 1,087,849 950 Mar-21 Liberty Power Tech Limited 3 months' KIBOR plus 300 bps 1,033,008 1,087,849
–00 40,000 –00 Dec-12 Sui Southern Gas Company Limited 3 months' KIBOR plus 20 bps –00 80,000
150,000 150,000 4,167 Jul-17 WAPDA Second Sukuk Company Limited 6 months' KIBOR less 25 bps 625,000 750,000
2,508,008 2,947,740
Held to maturity
–00 5,000 –00 Oct-12 WAPDA First Sukuk Company Limited 6 months' KIBOR plus 35 bps –00 25,000
250,000 250,000 919 Mar-21 Liberty Power Tech Limited 3 months' KIBOR plus 300 bps 229,705 241,900
229,705 266,900
2,737,713 3,214,640
3,737,713 7,214,640
11.8.1 These Sukuks have face value of Rs. 5,000 per certificate except for Liberty Power Tech Limited’s Sukuk which has face value of
Rs. 1,000 per certificate and Government of Pakistan Ijarah Sukuk which have face value of Rs. 100,000 per certificate.
36
11.9 Term Finance Certificates
Redeemable
value per Maturity
Listed - Available for sale
6,000 6,000 4,988 Dec-14 Allied Bank Limited* 6 months' KIBOR plus 190 bps 29,928 29,940
33,800 33,800 4,994 Aug-19 Allied Bank Limited - II* 6 months' KIBOR plus 85 bps 168,797 168,865
5,000 5,000 4,986 Oct-13 Askari Bank Limited - II* 6 months' KIBOR plus 150 bps 24,930 24,940
40,000 40,000 4,990 Nov-15 Engro Fertilizers Limited - III 6 months' KIBOR plus 155 bps 199,600 199,680
–00 5,000 –00 May-12 Jahangir Siddiqui & Company Limited - IV 6 months' KIBOR plus 250 bps –00 12,478
6,600 6,600 4,991 Mar-16 NIB Bank Limited* 6 months' KIBOR plus 115 bps 32,941 32,954
–00 20,000 –00 May-12 Orix Leasing Pakistan Limited - III 6 months' KIBOR plus 150 bps –00 16,654
20,000 20,000 1,500 Feb-13 Pak Arab Fertilizer Limited 6 months' KIBOR plus 150 bps 30,000 74,000
5,000 5,000 3,327 Sep-14 United Bank Limited - III* 6 months' KIBOR plus 170 bps 16,633 24,950
502,829 584,461
Unlisted - Available for sale

150 150 999,600 Dec-21 Askari Bank Limited - IV* 6 months' KIBOR plus 175 bps 149,940 150,000
20,000 20,000 4,994 Dec-17 Bank Alfalah Limited - IV* 15.00% per annum 99,880 99,920
56,600 –00 5,000 Jan-22 Standard Chartered Bank (Pakistan) Limited* 6 months' KIBOR plus 75 bps 283,000 –00
532,820 249,920
Listed - Held to maturity

20,000 20,000 4,985 Feb-13 Askari Bank Limited* 6 months' KIBOR plus 150 bps 99,700 99,740
–00 15,000 –00 Nov-12 Bank Alfalah Limited - II* 6 months' KIBOR plus 150 bps –00 49,868
9,000 9,000 1,247 Feb-13 Faysal Bank Limited* 6 months' KIBOR plus 190 bps 11,223 22,455
5,000 5,000 1,247 May-13 Soneri Bank Limited* 6 months' KIBOR plus 160 bps 6,235 18,705
5,000 5,000 1,250 Feb-13 Standard Chartered Bank (Pakistan) Ltd. - III* 6 months' KIBOR plus 200 bps 6,250 17,480
–00 1,070 –00 Aug-12 United Bank Limited* 8.45% per annum –00 3,558
4,000 4,000 4,999 Mar-13 United Bank Limited - II* 9.49% per annum 19,994 19,995
246,931 343,681
Unlisted - Held to maturity

2,500 2,500 16,667 Jan-13 Orix Leasing Pakistan Limited - IV 6 months' KIBOR plus 120 bps 41,667 125,000
1,324,247 1,303,062
*These Term Finance Certificates are subordinated.
11.9.1 These Term Finance Certificates have face value of Rs. 5,000 per certificate except for Orix Leasing Pakistan Limited
- IV, which have face value of Rs 100,000 per certificate and Askari Bank Limited - IV which have face value of Rs. 1,000,000
per certificate.
37
11.10 Foreign Currency Bonds
Redeemable
value per Maturity
No of certificates (Rupees) (Rupees in '000)
of US $ 100 each
Federal Government Securities - Available for sale
80,000 60,000 8,277 Jun-17 Government of Pakistan Bonds 6.875% p.a. 662,181 455,068
40,000 20,000 8,616 Mar-16 Government of Pakistan Bonds 7.125% p.a. 344,632 165,490
1,006,813 620,558
Others - Available for sale
–00 40,000 –00 Oct-12 Government of Srilanka Bonds 8.250% p.a. –00 358,916
10,000 –00 10,169 Jan-15 Government of Srilanka Bonds 7.400% p.a. 101,686 –00
101,686 358,916
1,108,499 979,474
11.10.1 Foreign Currency Bonds are redeemable semi-annually.
11.11 Ordinary shares of unlisted companies
2012 2011 Name of companies

No. of ordinary shares
3,000,000 3,000,000 Khushhali Bank Limited 30,000 30,000

Par value per share: Rs. 10
Break up value per share: Rs. 13.71 (2011: Rs. 13) based on audited
financial statements for the year ended 31 December 2011
Chief Executive: Mr. Ghalib Nishtar
569,958 569,958 Pakistan Export Finance Guarantee Agency Limited 5,700 5,700
Break up value per share: Rs. 1.16 (2011: Rs. 1.16) based on audited
Chief Executive: Mr. S. M. Zaeem
24 24 Society for Worldwide Interbank Financial Telecommunication (S.W.I.F.T) 3,870 3,870

allocated shares based on the financial contribution from network based
serviced by the Bank.
39,570 39,570
38
11.12 Associates
2012 2011 Name of companies Note 2012 2011
No. of ordinary shares / units (Rupees in '000)
9,366,312 9,366,312 Habib Sugar Mills Limited 11.12.1 180,977 180,977
% of holding: 6.24% (2011: 6.24%)
Market value: Rs. 231.348 (2011: Rs. 205.216) million
Chief Executive: Mr. Raeesul Hasan
3,375,000 3,375,000 Habib Asset Management Limited 11.12.2 33,750 33,750
% of holding: 30% (2011: 30%)
financial statements for the year ended 30 June 2012
Chief Executive: Mr. Imran Azim
5,562,566 5,266,182 First Habib Income Fund 550,000 550,000
Average cost per unit: Rs. 98.88 (2011: Rs. 104.44)
Net asset value: Rs. 100.07 (2011: Rs. 102.77)
Management Company: Habib Asset Management Limited
Chief Executive of the Management Company: Mr. Imran Azim
500,000 500,000 First Habib Stock Fund 50,000 50,000
Average cost per unit: Rs. 100 (2011: Rs. 100)
Net Asset Value: Rs. 113.33 (2011: Rs. 88.30)
3,182,506 1,010,249 First Habib Cash Fund 11.12.3 300,000 100,000

252,322 –00 First Habib Islamic Balanced Fund 25,000 –00

Average cost per unit: Rs. 99.08
Net Asset Value: Rs. 100.50
1,139,727 914,727
11.12.1 Due to common directorship in Habib Sugar Mills Limited, the Bank considers the investee company as an associate.
11.12.2 Includes Rs. 24.750 (2011: Rs. 24.750) million invested in Habib Asset Management Limited classified as strategic investment in accordance with SBP’s
guidelines contained in BPD Circular Letter No. 16 of 2006 dated 01 August 2006.
11.12.3 This includes investment in seed capital aggregating to Rs. 50 million which is required to be held for a period of two years.
39
2012 2011 Name of company 2012 2011
No. of ordinary shares (Rupees in '000)
11.13 Subsidiary
20,000,000 20,000,000 AL Habib Capital Markets (Private) Limited
% of holding: 66.67% (2011: 66.67%)
Break up value per share: Rs.10.89 (2011: Rs. 10.95) based on audited
financial statements for the year ended 30 June 2012
Chief Executive: Mr. Aftab Q. Munshi 200,000 200,000
Note 2012 2011

(Rupees in '000)
12. ADVANCES
Loans, cash credits, running finances, etc.

In Pakistan 126,989,918 101,971,343
Outside Pakistan 8,203,074 4,325,819
135,192,992 106,297,162
Net investment in finance lease / ijarah financing

In Pakistan 12.2 501,124 426,351
Outside Pakistan –00 –000
501,124 426,351
Ijarah financing under IFAS 2 12.3 & 5.5 307,173 109,668
Murabaha 12.4 3,206,606 2,007,557
Bills discounted and purchased

(excluding market treasury bills)
Payable in Pakistan 1,924,843 1,928,992
Payable outside Pakistan 12,329,922 9,233,700
14,254,765 11,162,692
Advances - gross 153,462,660 120,003,430

Provision against non-performing loans and advances
Specific provision 12.5 (3,062,933) (2,998,847)
General provision against consumer advances
(as per SBP regulations) 12.6.1 (31,059) (32,331)
General provision 12.6.2 (2,500,000) (2,100,000)
(5,593,992) (5,131,178)
Advances - net of provisions 147,868,668 114,872,252
40
2012 2011
(Rupees in '000)
12.1 Particulars of advances - gross
12.1.1 In local currency 126,989,148 98,301,664

In foreign currencies 26,473,512 21,701,766
153,462,660 120,003,430
12.1.2 Short term (for upto one year) 126,512,567 99,436,079

Long term (for over one year) 26,950,093 20,567,351
153,462,660 120,003,430
12.2 Net investment in finance lease / ijarah financing

2012 2011
Later than Later than
Not later one and Not later one and
than one less than Over five than one less than Over five
year five years years Total year five years years Total
(Rupees in '000)
Lease / ijarah receivable 205,606 258,804 –0 464,410 200,095 190,153 –0 390,248

Residual value 29,450 83,940 –0 113,390 30,555 74,032 –0 104,587
Minimum lease / ijarah payments 235,056 342,744 –0 577,800 230,650 264,185 –0 494,835
Financial charges for future
periods (39,981) (36,695 ) –0 (76,676 ) (39,219) (29,265) –0 (68,484)
Present value of finance
lease / ijarah financing 195,075 306,049 –0 501,124 191,431 234,920 –0 426,351
12.3 Ijarah financing under IFAS 2

2012
Cost Accumulated Depreciation Book Value
As at As at As at As at As at Rate of
01 Jan. Additions / 31 Dec. 01 Jan. Charge / 31 Dec. 31 Dec. depreciation
2012 (deletions) 2012 2012 (deletions) 2012 2012 %
(Rupees in '000)
Equipment 272,385 325,362 432,787 178,009 112,278 141,824 290,963
(164,960 ) (148,463)
Vehicles 20,383 7,220 27,603 5,091 6,302 11,393 16,210
292,768 332,582 460,390 183,100 118,580 153,217 307,173 33.33
(164,960 ) (148,463)
2011
Equipment 229,695 42,690 272,385 103,317 74,692 178,009 94,376

Vehicles 6,198 14,185 20,383 1,001 4,090 5,091 15,292
235,893 56,875 292,768 104,318 78,782 183,100 109,668 33.33
41
12.3.1 Future ijarah payments receivable 2012 2011
(Rupees in '000)
Not later than one year 149,447 69,594

Later than one year and not later than five years 189,244 41,657
338,691 111,251
12.4 Murabaha - gross 3,381,017 2,126,887

Less: Deferred murabaha income (53,465) (43,169)
Profit receivable shown in other assets (120,946) (76,161)
Murabaha 3,206,606 2,007,557
12.5 Advances include Rs. 3,705.730 (2011: Rs 3,203.630) million which have been placed under non-
performing status as detailed below:
2012
Classified advances Provision required Provision held
Domestic Overseas Total Domestic Overseas Total Domestic Overseas Total
(Rupees in '000)
Category of classification
Substandard 379,505 92,802 472,307 94,876 23,200 118,076 94,876 23,200 118,076
Doubtful 83,246 –0 83,246 41,626 –0 41,626 41,626 –0 41,626
Loss 3,148,885 1,292 3,150,177 2,901,939 1,292 2,903,231 2,901,939 1,292 2,903,231
3,611,636 94,094 3,705,730 3,038,441 24,492 3,062,933 3,038,441 24,492 3,062,933
2011
(Rupees in '000)
Substandard 56,537 –0 56,537 14,134 –0 14,134 14,134 –0 14,134

Doubtful 100,467 –0 100,467 48,520 –0 48,520 48,520 –0 48,520
Loss 3,045,133 1,493 3,046,626 2,934,700 1,493 2,936,193 2,934,700 1,493 2,936,193
3,202,137 1,493 3,203,630 2,997,354 1,493 2,998,847 2,997,354 1,493 2,998,847
12.5.1 For the purposes of determining provision against non-performing advances, the Bank has not taken into account the Forced
Sales Value of pledged stock and mortgaged properties held as collateral against non-performing advances.
42
12.6 Particulars of provision against non-performing loans and advances
2012 2011
Note Specific General Total Specific General Total
(Rupees in '000)
Opening balance 2,998,847 2,132,331 5,131,178 1,682,297 1,628,184 3,310,481
Charge for the year
Specific provision 400,812 –00 400,812 1,481,521 –00 1,481,521
General provision for
consumer portfolio 12.6.1 –00 (1,272 ) (1,272) –00 4,147 4,147
loans and advances 12.6.2 –00 400,000 400,000 –00 500,000 500,000
Reversals (333,439) –00 (333,439) (164,880) –00 (164,880)
67,373 398,728 466,101 1,316,641 504,147 1,820,788
Amount written-off 12.7 (3,287) –00 (3,287) (91) –00 (91)
Closing balance 3,062,933 2,531,059 5,593,992 2,998,847 2,132,331 5,131,178
12.6.1 The Prudential Regulations require banks to maintain a general reserve equal to 1.5% of the consumer
portfolio which is fully secured and 5% of the consumer portfolio which is unsecured. Accordingly,
the general provision maintained by the Bank for secured and unsecured consumer portfolio as of
31 December 2012 amounts to Rs. 31.059 (2011: Rs. 32.331) million.
12.6.2 In line with its prudent policies, the Bank also makes general provision against its loans and advances
portfolio. This general provision is in addition to the requirements of the Prudential Regulations and
as of 31 December 2012 amounts to Rs. 2,500 (2011: Rs. 2,100) million.
12.6.3 Particulars of provision against non-performing loans and advances

2012 2011
Specific General Total Specific General Total
(Rupees in '000)
In local currency 2,968,839 2,531,059 5,499,898 2,997,354 2,132,331 5,129,685

In foreign currency 94,094 –00 94,094 1,493 –000 1,493
3,062,933 2,531,059 5,593,992 2,998,847 2,132,331 5,131,178
12.7 Particulars of write-offs: 2012 2011

(Rupees in '000)
12.7.1 Against provision 3,287 91
Directly charged to profit and loss account –00 –00
3,287 91
12.7.2 Write-offs of Rs. 500,000 and above 3,287 –00

Write-offs of below Rs. 500,000 –00 91
3,287 91
43
12.7.3 In terms of sub-section (3) of section 33A of the Banking Companies Ordinance, 1962, the statement
in respect of written-off loans or any other financial relief of five hundred thousand rupees or above
allowed to a person(s) during the year ended 31 December 2012 is given in Annexure 1.
12.8 Particulars of Loans and Advances to Directors, Note 2012 2011

Associated Companies, Subsidiary etc. (Rupees in '000)
(i) Debts due by directors, executives or officers

of the Bank or any of them either severally
or jointly with any other persons
Balance at beginning of the year 1,397,010 1,124,509
Loans granted during the year 733,758 638,536
Repayments (450,684) (366,035)
Balance at end of the year 1,680,084 1,397,010
(ii) Debts due by companies or firms

in which the directors of the Bank are
interested as directors, partners or in
the case of private companies as members
Balance at beginning of the year 1,404,261 369,808
Loans granted during the year 16,218,504 17,461,683
Repayments (16,007,385) (16,427,230)
(iii) Debts due by subsidiary companies, controlled

firms and other related parties
Balance at beginning of the year 9,380 –00
Repayments (3,160,608) (5,015,732)
Balance at end of the year 7,166 9,380
13. OPERATING FIXED ASSETS

Capital work-in-progress 13.1 374,146 92,558
Property and equipment 13.2 10,735,875 10,635,968
Intangible assets 13.3 54,078 15,227
11,164,099 10,743,753
13.1 Capital work-in-progress

Civil works 308,150 90,770
Consultants’ fee and other charges 65,996 1,788
374,146 92,558
44
13.2 Property and equipment
2012
Cost / Revalued Amount Accumulated Depreciation Book Value
As at Additions / As at As at Charge / As at As at Rate of

01 January (deletions) / 31 December 01 January (deletions) / 31 December 31 December depreciation
2012 adjustments* 2012 2012 adjustments* 2012 2012 %
(Rupees in '000)
Owned
Leasehold land 3,255,495 391 3,255,886 –00 –00 –00 3,255,886 –00
–00 –00
–00 –00
Buildings on
leasehold land 5,000,238 153,042 5,146,655 85,645 152,869 238,305 4,908,350 2.22 - 10
3,128* 43*
(9,753)* (252)*
Imrovements to leasehold
buildings 741,465 64,403 806,614 90,044 39,005 129,104 677,510 5
(3,128)* (43)*
3,874* 98*
Furniture and fixtures 399,443 42,952 440,528 182,825 38,019 219,239 221,289 10
(1,867) (1,605)
–00 –00
Electrical, office and
computer equipments 2,728,741 419,531 3,136,969 1,605,433 417,918 2,012,879 1,124,090 20
(11,303) (10,472)
–00 –00
Vehicles 846,878 247,616 1,004,763 372,345 161,880 456,013 548,750 20
(89,731) (78,212)
–00 –00
12,972,260 927,935 13,791,415 2,336,292 809,691 3,055,540 10,735,875

(102,901) (90,289)
(5,879)* (154)*
45
2011

Reversal of Reversal of
accumulated accumulated
As at Additions / depreciation Revaluation As at As at Charge / depreciation As at As at Rate of
01 January (deletions) / / other surplus 31 December 01 January (deletions) / / other 31 December 31 December depreciation
2011 adjustments adjustments / (deficit) 2011 2011 adjustments adjustments 2011 2011 %
(Rupees in '000)
Owned
Leasehold land 3,476,864 32,481 –00 (121,477) 3,255,495 –00 –00 –00 –00 3,255,495 –00
(2,266) –00
(130,107) –00
Buildings on
leasehold land 4,773,595 177,337 (422,054) 339,720 5,000,238 364,086 144,406 (422,054) 85,645 4,914,593 2.22 - 10
–00 (7,047) –00 (793)
138,687 –00 –00
buildings 537,355 230,419 –00 –00 741,465 65,976 31,044 –00 90,044 651,421 5
(14,664) (3,911)
(11,645) (3,065)
Furniture and fixtures 355,736 45,873 –00 –00 399,443 149,153 35,249 –00 182,825 216,618 10
(2,166) (1,577)
–00 –00
computer equipments 2,265,093 484,786 –00 –00 2,728,741 1,204,256 420,980 –00 1,605,433 1,123,308 20
(21,138) (19,803)
–00 –00
Vehicles 682,080 262,490 –00 –00 846,878 330,654 131,311 –00 372,345 474,533 20
(97,692) (89,620)
–00 –00
12,090,723 1,233,386 (422,054) 218,243 12,972,260 2,114,125 762,990 (422,054) 2,336,292 10,635,968
(137,926) (7,047) (114,911) (793)
(3,065) (3,065)
46
13.2.1 Details of disposal of fixed assets during the year:
Book Sale Mode of Particulars of
Particulars Cost value price disposal purchaser
(Rupees in '000)
Items having book value in aggregate more than
Rs. 250,000 or cost more than Rs. 1,000,000
Furniture and fixtures 1,736 244 282 Auction Karachi Auction Mart, Karachi.
Electrical, office and computer equipments 9,114 474 1,582 Auction Karachi Auction Mart, Karachi.
Electrical, office and computer equipments 507 261 315 Insurance claim Habib Insurance Company Ltd
(a related party), Karachi.
Vehicles 1,165 680 1,110 Sale AL-Futtaim Motors, Dubai.
Vehicles 14,699 9,048 13,732 Insurance claim Habib Insurance Company Ltd
Vehicles 1,240 181 919 Auction Mr. Abdul Khaliq, Karachi.
Vehicles 1,284 – 1,276 Auction Mr. Anwar Alam, Karachi.
Vehicles 1,082 – 1,012 Auction Mr. Aqeel Ahmed, Karachi.
Vehicles 2,518 – 2,233 Auction Mr. Faisal Abdul Aziz, Karachi.
Vehicles 1,392 – 1,311 Auction Mr. Fazal Muhammad, Karachi.
Vehicles 3,159 394 2,461 Auction Mr. Hasnain Abbas, Karachi.
Vehicles 2,551 – 2,202 Auction Mr. Iqbal Mehmood, Karachi.
Vehicles 2,055 – 1,562 Auction Mr. Iqbal Muhammad, Karachi.
Vehicles 6,299 121 4,266 Auction Mr. Muhammad Ali, Karachi.
Vehicles 6,352 – 3,899 Auction Mr. Muhammad Ali Akbar,
Karachi.
Vehicles 15,682 476 11,751 Auction Mr. Muhammad Kaleem Iqbal,
Karachi.
Vehicles 1,928 – 1,528 Auction Mr. Muhammad Yamin, Karachi.
Vehicles 5,560 559 4,353 Auction Mr. Numeri Abrar, Karachi.
Vehicles 1,343 – 1,378 Auction Mr. Shahid Aziz, Karachi.
Vehicles 2,155 – 2,291 Auction Mr. Wasim Mirza, Karachi.
Vehicles 1,748 – 1,705 Auction Mr. Zahid Qadri, Karachi.
Vehicles 3,338 – 3,054 Auction Syed Muhammad Ali Warsi,
Karachi.
Items having book value in aggregate less than

Rs. 250,000 or cost less than Rs. 1,000,000
Furniture and fixtures 131 18 49 Various

Electrical, office and computer equipments 1,682 96 1,134 Various
Vehicles 14,181 60 11,962 Various
102,901 12,612 77,367
47
13.2.2 The leasehold land and buildings of the Bank were last revalued by independent professional valuers
as at December 31, 2011. The revaluation was carried out by M/s. Iqbal A. Nanjee & Co on the basis
of professional assessment of present market values and resulted in a surplus Rs. 218.243 million
over the book value of the respective properties. Had there been no revaluation, the carrying amount
of revalued assets at December 31, 2012 would have been as follows:
2012 2011
(Rupees in '000)
Leasehold land 2,634,212 2,633,821

Buildings on leasehold land 3,153,732 3,096,739
5,787,944 5,730,560
13.2.3 As at 31 December 2012, the gross carrying amount of fully depreciated assets still in use amounted
to Rs. 1,123.364 (2011: Rs. 858.544) million.
13.3 Intangible assets
2012
Cost Accumulated Amortisation Book Value
01 January 31 December 01 January 31 December 31 December Amortisation
2012 Additions 2012 2012 Charge 2012 2012 %
(Rupees in '000)
Computer
software 189,477 64,238 253,715 174,250 25,387 199,637 54,078 50
2011
(Rupees in '000)
Computer
software 178,034 11,443 189,477 145,876 28,374 174,250 15,227 50
13.3.1 As at 31 December 2012, the gross carrying amount of fully amortised intangible assets still in use amounted to Rs.178.033
(2011: Rs. 146.652) million.
Note 2012 2011
(Rupees in '000)
14. OTHER ASSETS
Mark-up / return / interest accrued in local currency 4,500,941 4,310,254
Mark-up / return / interest accrued in foreign currencies 115,498 99,198
Advances, deposits and prepayments 930,082 1,077,108
Unrealised gain on forward foreign exchange contracts 251,487 242,237
Stationery and stamps on hand 134,729 116,183
Receivable from SBP on encashment of Government Securities 24,289 26,268
Non-refundable deposits 14.1 89,109 96,719
Others 69,525 38,592
6,115,660 6,006,559
48
14.1 Represent deposits paid in relation to acquisition of some of the Bank's properties. These are being
written-off over the periods ranging from 10 to 20 years (being estimated useful lives of related
properties).
Note 2012 2011

(Rupees in '000)
15. BILLS PAYABLE
In Pakistan 5,257,191 4,979,720
16. BORROWINGS
In Pakistan 67,902,505 43,213,300
Outside Pakistan 1,719,550 228,294
69,622,055 43,441,594
16.1 Particulars of borrowings with respect
to currencies
In local currency 67,902,505 43,213,300
In foreign currencies 1,719,550 228,294
69,622,055 43,441,594
16.2 Details of borrowings

Secured
Borrowings from State Bank of Pakistan
Export refinance scheme 16.3 14,138,447 11,537,652
Long term financing for export
oriented projects 16.4 369,695 568,700
Long term financing for imported
and locally manufactured plant
and machinery 16.5 3,015,612 3,322,617
Financing facility for storage of
agricultural produce 16.6 47,703 71,554
17,571,457 15,500,523
Repurchase agreement borrowings 16.7 50,331,048 27,712,777
67,902,505 43,213,300
Unsecured
Overdrawn nostros –00 48,403
Borrowings from financial institutions 16.8 1,719,550 179,891
1,719,550 228,294
69,622,055 43,441,594
49
16.3 These carry mark-up rate of 8.50% (2011: 10%) per annum, payable quarterly at the time of partial
payment or upon maturity of loan, whichever is earlier.
16.4 These carry mark-up rates ranging from 4% to 5% (2011: 4% to 5%) per annum having maturity
periods upto 3 to 4 years.
16.5 These carry mark-up rates ranging from 8.20% to 9.50% (2011: 9.70% to 11%) per annum having
maturity periods upto ten years.
16.6 This carries mark-up rate of 5.50% (2011: 5.50%) having maturity period upto two years.
16.7 These carry mark-up rate of 8.86% (2011: 11.50% to 11.90%) per annum, having maturity periods
upto one month.
16.8 This carries mark-up rate of 0.65% to 0.80% (2011: 0.45%) having maturity period upto one month.
Note 2012 2011

(Rupees in '000)
17. DEPOSITS AND OTHER ACCOUNTS
Customers
Fixed deposits 96,079,552 120,176,785
Savings deposits 105,561,063 70,196,707
Current accounts - Remunerative 29,061,770 26,524,367
Current accounts - Non-remunerative 104,284,355 78,697,621
334,986,740 295,595,480
Financial institutions
Remunerative deposits 4,949,283 6,267,220
Non-remunerative deposits 456,848 235,894
5,406,131 6,503,114
340,392,871 302,098,594
17.1 Particulars of deposits

340,392,871 302,098,594
18. SUB-ORDINATED LOANS - unsecured
Term Finance Certificates (TFCs) - I - (Quoted) –00 897,658

Term Finance Certificates (TFCs) - II - (Quoted) 18.1 1,496,700 1,497,300
Term Finance Certificates (TFCs) - III - (Unquoted) 18.2 1,994,400 1,996,000
Term Finance Certificates (TFCs) - IV - (Unquoted) 18.3 2,998,200 2,999,400
6,489,300 7,390,358
50
18.1 Term Finance Certificates - II (Quoted)
Total issue Rupees 1,500 million
Rating AA
Rate Payable six monthly at average six months’
KIBOR plus 1.95% without any floor and cap
Redemption 6-84th month: 0.28%; 90th and 96th month:
49.86% each
Tenor 8 years
Maturity February 2015
18.2 Term Finance Certificates - III (Unquoted)
Rating AA
Rate Payable three monthly at 15.50% p.a. for first
5 years and 16.00% p.a. for next 3 years
Redemption 3rd-84th month: 0.56%; 87th, 90th, 93rd and 96th
month: 24.86% each
Tenor 8 years
Maturity June 2017
18.3 Term Finance Certificates - IV (Unquoted)
Rating AA
Rate Payable six monthly at 15.00% p.a. for first
5 years and and 15.50% p.a.
for next 5 years
Redemption 6th - 108th month: 0.36%; 114th and 120th month:
49.82% each
Tenor 10 years
Maturity June 2021
Note 2012 2011

(Rupees in '000)
19. DEFERRED TAX LIABILITIES
Taxable temporary differences arising in respect of:
Accelerated depreciation 927,356 926,229
Surplus on revaluation of fixed assets 22.1 616,069 636,247
Surplus on revaluation of investments 22.2 514,394 94,147
2,057,819 1,656,623
Deductible temporary differences arising in respect of:

Provision against non-performing loans and advances (123,665) (424,567)
Provision for diminution in the value of investments (570) (570)
(124,235) (425,137)
1,933,584 1,231,486
51
19.1 Reconciliation of deferred tax
Balance Recognised in Recognised Balance Recognised in Recognised Balance
as at profit and in deficit on as at profit and in surplus on as at
01 January loss revaluation 31 December loss revaluation 31 December
2011 account of assets 2011 account of assets 2012
(Rupees in '000)
Taxable temporary differences
arising in respect of:
Accelerated depreciation 845,006 81,223 –00 926,229 1,127 –00 927,356
Surplus on revaluation of fixed assets 536,459 (19,114 ) 118,902 636,247 (20,123) (55) 616,069
Surplus on revaluation of investments –00 –00 94,147 94,147 –00 420,247 514,394
1,381,465 62,109 213,049 1,656,623 (18,996) 420,192 2,057,819
Deductible temporary differences
Deficit on revaluation of investments (207,396) –00 207,396 –00 –00 –00 –00
Provision against non-performing
loans and advances (530,824) 106,257 –00 (424,567 ) 300,902 –00 (123,665)
Provision for diminution in
the value of investments (570) –00 –00 (570 ) –00 –00 (570)
(738,790) 106,257 207,396 (425,137 ) 300,902 –00 (124,235)
642,675 168,366 420,445 1,231,486 281,906 420,192 1,933,584
Note 2012 2011

(Rupees in '000)
20. OTHER LIABILITIES
Mark-up / return / interest payable in local currency 2,387,134 3,056,580
Mark-up / return / interest payable in foreign currencies 26,341 51,136
Provision for compensated absences 20.1 234,770 203,242
Taxation (Provision less payments) 336,269 477,918
Unclaimed dividends 113,394 79,771
Branch adjustment account 303,174 55,419
Special exporters’ accounts in foreign currencies 115,852 23,825
Unearned commission income 23,467 2,694
Security deposits against leases / ijarah 156,943 138,285
Other security deposits 214,794 180,957
Workers’ welfare fund 456,716 270,869
Accrued expenses 207,315 135,792
Provision against off-balance sheet items 20.2 85,182 73,122
Payable to SBP / NBP 439,512 408,295
Payable to supplier against murabaha 129,069 –00
Charity payable 9,782 2,285
Others 240,029 126,967
5,479,743 5,287,157
20.1 Provision for compensated absences has been determined on the basis of independent actuarial
valuation. The significant assumptions used for actuarial valuation were as follows:
2012 2011
(% per annum)
Discount rate 12.00% 12.50%
Expected rate of increase in salary in future years 11.00% 11.50%
52
2012 2011
20.2 Provision against off-balance sheet items (Rupees in '000)
Opening balance 73,122 57,325

Charge for the year 12,060 17,001
Reversals –00 (1,204)
Amount written-off –00 –00
Closing balance 85,182 73,122
21. SHARE CAPITAL
2012 2011
(Number of shares)
Authorised Capital
1,200,000,000 1,200,000,000 Ordinary shares of Rs.10/- each 12,000,000 12,000,000
Issued, subscribed and paid-up capital

Ordinary shares of Rs.10/- each
fully paid in cash
30,000,000 30,000,000 Issued for cash 300,000 300,000
980,386,742 848,597,167 Issued as bonus shares 9,803,868 8,485,972
1,010,386,742 878,597,167 10,103,868 8,785,972
21.1 As of statement of financial position date 166,648,241 (2011: 142,241,798) ordinary shares of
Rs. 10/- each were held by the related parties.
Note 2012 2011
(Rupees in '000)
22. SURPLUS ON REVALUATION OF ASSETS - NET OF TAX
Operating fixed assets 22.1 1,760,240 1,803,278
Available for sale investments 22.2 995,851 213,515
2,756,091 2,016,793
22.1 Surplus on revaluation of operating fixed assets

Balance at the beginning of the year 2,439,525 2,275,893
(Adjustment) / surplus on revaluation of the Bank’s properties
during the year (5,723) 218,243
Transfer to unappropriated profit in respect of incremental
depreciation charged during the year (57,493) (54,611)
2,376,309 2,439,525
Related deferred tax liability on:
Balance at the beginning of the year 636,247 536,459
(Adjustment) / revaluation of Bank’s properties during the year (55) 118,902
(616,069) (636,247)
1,760,240 1,803,278
53
2012 2011
(Rupees in '000)
22.2 Available for sale investments
Federal Government Securities 1,386,550 319,757
Fully paid-up ordinary shares 21,123 (8,468)
Term finance certificates, sukuks and bonds 941 (19,380)
Open ended mutual funds 101,631 15,753
1,510,245 307,662
Related deferred tax liability (514,394) (94,147)
995,851 213,515
23. CONTINGENCIES AND COMMITMENTS

23.1 Direct Credit Substitutes
Financial institutions 166,232 79,615
Others 348,728 446,014
514,960 525,629
23.2 Transaction-related Contingent Liabilities
Government 9,446,751 8,008,832
Others 6,279,180 4,544,785
15,794,428 12,669,078
23.3 Trade-related Contingent Liabilities
Letters of credit 50,183,933 32,838,848
Acceptances 8,647,034 7,104,549
58,830,967 39,943,397
23.4 Other contingencies
The Income tax returns of the Bank have been submitted upto and including the Bank’s financial
year 2011. The income tax assessments of the Bank have been made by the tax authorities upto
and including the assessment / tax year 2012.
For tax years, 2005 to 2008, the CIT Appeals has passed appellate orders by disallowing certain
expenses / deductions (including bad debts written-off, improvement in leasehold premises, provision
against non-performing loans and advances) having an aggregate tax impact (net of provision) of
Rs. 44.256 (2011: Rs. 124.353) million. The Bank has preferred an appeal before ITAT against the
above referred orders of the CIT Appeals.
The management, based on the opinion of its tax advisor, is confident about the favourable outcome
of the above matters and hence, no additional provision has been considered necessary in these
financial statements.
54
2012 2011
(Rupees in '000)
23.5 Commitments in respect of forward lending
Commitments to extend credit 472,257 15,603
23.6 Commitments in respect of forward exchange contracts

Purchase 15,272,338 28,032,085
Sale 16,888,512 25,331,776
23.7 Commitments for the acquisition of operating
fixed assets 146,070 124,899
24. DERIVATIVE FINANCIAL INSTRUMENTS
The Bank deals in derivative financial instruments namely forward foreign exchange contracts and
foreign currency swaps with the principal view of hedging the risks arising from its trade business.
As per the Bank’s policy, these contracts are reported on their fair value at the statement of financial
position date. The gains and losses from revaluation of these contracts are included under “income
from dealing in foreign currencies”. Unrealised gains and losses on these contracts are recorded
in the statement of financial position under “other assets / other liabilities”. These products are offered
to the Bank’s customers to protect from unfavourable movements in foreign currencies. The Bank
hedges such exposures in the inter-bank foreign exchange market.
2012 2011
(Rupees in '000)
25. MARK-UP / RETURN / INTEREST EARNED
On loans and advances to:
Customers 13,691,778 13,442,085
13,882,134 13,678,594
On investments:
Available for sale securities 18,071,395 12,175,797
Held to maturity securities 9,339,003 10,307,118
27,410,398 22,482,915
On deposits with financial institutions 83,058 75,416
On securities purchased under resale agreements 89,539 261,479
On call money lendings 2,739 4,359
41,467,868 36,502,763
26. MARK-UP / RETURN / INTEREST EXPENSED
Deposits 19,513,825 19,070,623
Sub-ordinated loans 995,475 893,189
Repurchase agreement borrowings 3,745,487 785,368
Borrowings from SBP 1,386,260 1,556,218
Other borrowings 464,613 195,360
26,105,660 22,500,758
55
Note 2012 2011
(Rupees in '000)
27. GAIN / (LOSS) ON SALE / REDEMPTION OF SECURITIES - NET

Listed shares 4,327 –00
Government securities 6,132 393
Mutual funds 66,714 (1,656)
77,173 (1,263)
28. OTHER INCOME

Gain on sale of operating fixed assets 64,755 84,392
Recovery of expenses from customers 28.1 134,483 95,742
Lockers rent 4,368 5,221
Rent on property 2,964 2,705
Cheque book issuance / cheque return charges 181,010 139,045
Banking charges 45,753 62,824
Others 48,529 53,104
481,862 443,033
28.1 Includes courier, SWIFT, postage and other charges recovered from customers.
29. ADMINISTRATIVE EXPENSES

Salaries, allowances, etc. 3,810,690 3,157,742
Charge for defined benefit plan 36.8 114,232 103,403
Contribution to defined contribution plan 155,643 130,873
Non-executive directors' fees, allowances
and other expenses 2,500 2,075
Rent, taxes, insurance, electricity, etc. 1,389,798 1,179,401
Legal and professional charges 58,229 51,994
Communications 233,213 203,045
Repairs and maintenance 441,786 407,178
Security charges 402,484 329,232
Stationery and printing 221,042 211,573
Advertisement and publicity 249,046 250,898
Donations 29.1 28,750 24,650
Auditors' remuneration 29.2 5,541 4,014
Depreciation 13.2 809,691 762,990
Travelling and conveyance 59,309 49,903
Vehicle running expenses 298,699 232,451
Commission and brokerage 38,912 82,971
Subscriptions and publications 46,383 45,863
Clearing charges (NIFT) 54,586 47,252
Staff training 22,725 17,453
Staff refreshment 73,286 53,267
Cleaning charges 32,884 28,047
Others 29.3 182,201 147,177
8,795,739 7,584,677
56
2012 2011
(Rupees in '000)
29.1 The details of donations in excess of Rupees One hundred
thousand are given below:
Al-Sayyeda Benevolent Trust 925 925
GCU Endowment Fund Trust* 1,000 –0
Habib Education Trust 900 900
Habib Medical Trust 925 925
Habib Poor Fund 900 900
Institute of Management Sciences, Bahauddin
Zakariya University, Multan 500 500
Lahore University of Management Sciences /
National Management Foundation 20,000 15,000
Panah Trust 500 –0
Rahmatbai Habib Food & Clothing Trust 900 900
Rahmatbai Habib Widows & Orphans Trust 900 900
Sindh Institute of Urology and Transplantation –0 2,500
The Citizens Foundation 1,300 1,200
28,750 24,650
* Mr. Shameem Ahmed, Director of Bank AL Habib Limited, is member of Executive Committee of
GCU Endowment Fund Trust, GC University, Lahore.
29.2 Auditors' remuneration

Audit fee 1,950 1,300
Half yearly review 600 400
Special certifications 2,500 1,850
Provident fund and gratuity fund 75 25
Out of pocket expenses 416 439
5,541 4,014
29.3 Includes, amongst others, charitable expenses being payments made by the Bank on account of
sadqa, poor feeding, distribution of charity in the holy month of Ramzan, and other similar payments,
amounting to Rs. 24.1 million during 2012.
30. OTHER PROVISIONS / WRITE-OFFS
31. OTHER CHARGES
Penalties imposed by SBP 306 227
186,153 146,254
32. TAXATION
For the year
Current 3,263,970 2,453,493
Prior years (122,893) –00
Deferred 281,906 168,366
3,422,983 2,621,859
57
2012 2011
(Rupees in '000)
32.1 Relationship between tax expense
and accounting profit
Tax at the applicable rate of 35% (2011: 35%) 3,104,324 2,504,369

Tax effects of:
Expenses that are not deductible in
determining taxable income 180,010 177,347
Tax effect of prior year provisions 209,996 –00
Dividend income taxed at reduced rate (38,293) (58,350 )
Others (33,054) (1,507 )
3,422,983 2,621,859
33. BASIC AND DILUTED EARNINGS PER SHARE
Profit after taxation 5,446,514 4,533,480
(Number)
Restated
Weighted average number of ordinary shares 1,010,386,742 1,010,386,742
(Rupees)
Restated
Basic and diluted earnings per share 5.39 4.49
33.1 The weighted average number of shares for 2011 has been adjusted for the effect of bonus shares
issued during the year.
Note 2012 2011
(Rupees in '000)
34. CASH AND CASH EQUIVALENTS
Overdrawn nostros 16.2 –00 (48,403)
37,209,056 29,652,920
(Numbers)
35. STAFF STRENGTH
Permanent 4,858 4,456
Temporary / on contractual basis 198 177
Bank’s own staff at end of the year 5,056 4,633
Outsourced 1,497 1,392
Total staff strength 6,553 6,025
58
36. DEFINED BENEFIT PLAN
36.1 General description
by the Trustees. The benefits under the gratuity scheme are payable on retirement at the age of 60
years or on earlier cessation of service as under:
Number of years of eligible service Amount of gratuity payable:

completed:
Less than 5 years Nil

5 years or more but less than 10 years 1/3rd of basic salary for each year served
15 years or more Full basic salary for each year served
36.2 Principal actuarial assumptions
The latest actuarial valuation of the scheme was carried out on 31 December 2012 and the significant
assumptions used for actuarial valuation were as follows:
2012 2011
% per annum % per annum
Discount rate 12.00 12.50
Expected rate of increase in salary in future years 11.00 11.50
Expected rate of return on plan assets 12.00 12.50
2012 2011
(Rupees in '000)
36.3 Movement in defined benefit plan
Contribution to the fund (114,232) (103,403 )
Closing balance –00 –00
36.4 Reconciliation of defined benefit plan

Present value of defined benefit obligations 883,142 706,730
Fair value of plan assets (708,474) (531,148 )
Unrecognised actuarial loss (174,668) (175,582 )
–00 –00
36.5 Movement in present value of defined
benefit obligations
Current service cost 85,201 70,055
Interest cost 90,365 82,767
Benefits paid (18,251) (16,017 )
Actuarial loss 19,097 14,875
59
2012 2011
(Rupees in '000)
36.6 Movement in fair value of plan assets
Expected return on plan assets 70,232 58,289
Actuarial gain on plan assets 11,113 1,249
Contribution to the fund 114,232 103,403
Benefits paid (18,251) (16,017 )
36.7 Movement in unrecognised actuarial loss

Amount recognised during the year (8,898) (8,870 )
Actuarial loss during the year 7,984 13,626
36.8 Charge for defined benefit plan

Expected return on plan assets (70,232) (58,289 )
Actuarial loss recognised 8,898 8,870
36.9 Actual return on plan assets 81,345 59,538
36.10 Historical information
2012 2011 2010 2009 2008

(Rupees in '000)
Present value of defined benefit
obligations (883,142) (706,730) (555,050) (418,650) (314,703)
Fair value of plan assets 708,474 531,148 384,224 268,835 181,364
Deficit (174,668) (175,582) (170,826) (149,815) (133,339)
Experience loss / (gain)
on obligations 19,097 14,875 33,065 21,596 47,098
Experience gain / (loss) on plan assets 11,113 1,249 4,342 (2,157) (3,315)
60
2012 2011
36.11 Components of plan assets as a percentage
of total plan assets
Government securities 87.84% 65.28%
Term finance certificates 4.38% 6.13%
Bank balances 7.78% 28.59%
100.00% 100.00%
36.12 Expected contribution to be paid to the funds in the next financial year
The Bank contributes to the gratuity fund according to the actuary's advice. Based on actuarial advice,
the management estimates that the charge and contribution to defined benefit plan for the year ending
31 December 2013 would be Rs. 120.978 million.
37. DEFINED CONTRIBUTION PLAN

The general description of the plan is included in note 5.7.
38. COMPENSATION OF DIRECTORS AND EXECUTIVES
Chief Executive Directors* Executives

2012 2011 2012 2011 2012 2011
(Rupees in '000)
Fee ** –00 –00 2,500 2,075 –00 –00

Managerial remuneration 11,068 9,790 6,541 5,785 902,659 746,802
Charge for defined benefit plan 3,078 3,114 1,818 1,817 114,450 108,859
Contribution to defined
contribution plan 1,107 979 654 578 67,439 55,254
Rent and house maintenance 4,427 3,916 2,616 2,314 318,648 266,112
Utilities 2,963 2,330 678 578 79,662 66,528
Medical 2 15 80 89 26,881 15,524
Bonus 2,741 2,420 1,620 1,430 201,575 167,177
Others –00 –00 –00 –00 26,692 22,545
25,386 22,564 16,507 14,666 1,738,006 1,448,801
Number of person(s) 1 1 9 9 775 635
Executives, including the Chief Executive and Executive Director, are provided with Bank's maintained
cars in accordance with the terms of their employment and are entitled to medical and life insurance
benefits in accordance with the policy of the Bank. In addition, the Chief Executive and Executive
Director are also provided with drivers, club memberships, security arrangements and payment of
travel bills in accordance with their terms of employment.
* Directors include one executive director (2011: 01)

** This represents fee paid to non-executive directors for attending Board of Directors and its
committees’ meetings.
61
39. FAIR VALUE OF FINANCIAL INSTRUMENTS
2012 2011
Book value Fair value Book value Fair value
(Rupees in '000)
On-balance sheet financial instruments
Assets
Cash and balances with treasury banks 27,464,340 27,464,340 22,957,986 22,957,986
Balances with other banks 9,744,716 9,744,716 6,743,337 6,743,337
Lendings to financial institutions 993,981 993,981 –000 –000
Investments 249,754,075 251,010,405 222,958,574 223,788,348
Advances 147,868,668 147,868,668 114,872,252 114,872,252
Other assets 4,961,740 4,961,740 4,716,550 4,716,550
440,787,520 442,043,850 372,248,699 373,078,473
Liabilities
Bills payable 5,257,191 5,257,191 4,979,720 4,979,720
Borrowings 69,622,055 69,622,055 43,441,594 43,441,594
Deposits and other accounts 340,392,871 340,392,871 302,098,594 302,098,594
Sub-ordinated loans 6,489,300 6,489,300 7,390,358 7,390,358
Other liabilities 4,040,166 4,040,166 4,203,891 4,203,891
425,801,583 425,801,583 362,114,157 362,114,157
Off-balance sheet financial instruments

Commitment to extend credit 472,257 472,257 15,603 15,603
Forward purchase of foreign exchange contracts 15,272,338 15,455,658 28,032,085 28,555,234
Forward sale of foreign exchange contracts 16,888,512 16,956,048 25,331,776 25,057,442
Fair value is the amount for which an asset could be exchanged, or a liability settled, between
knowledgeable willing parties in an arm's length transaction. Fair value of financial instruments is
based on:
Federal Government Securities PKRV rates (Reuters page)

Listed securities Market prices
Mutual funds Net asset values
Unlisted equity investments Break up value as per latest available
audited financial statements.
Fair value of fixed term advances of over one year, staff loans and fixed term deposits of over one
year cannot be calculated with sufficient reliability due to non-availability of relevant active market
for similar assets and liabilities. The provision for impairment of loans and advances and debt securities
has been calculated in accordance with the Bank's accounting policies as stated in note 5.5 and 5.4.
62
40. SEGMENT DETAILS WITH RESPECT TO BUSINESS ACTIVITIES
The segment analysis with respect to business activity is as follows:
2012
Retail Commercial Inter Segment Total
Banking Banking Elimination
(Rupees in '000)
Total income 20,858,764 41,098,762 (17,522,316 ) 44,435,210

Total expenses (18,448,000) (34,640,029) 17,522,316 (35,565,713 )
Net income 2,410,764 6,458,733 –00 8,869,497
Segment assets (net of provisions) 309,061,714 437,597,441 (293,553,616 ) 453,105,539

Segment non performing loans 46,187 3,659,543 –00 3,705,730
Segment provision required 43,747 3,019,186 –00 3,062,933
Segment liabilities 307,890,399 414,837,961 (293,553,616 ) 429,174,744
Segment return on net assets (%)* 6.75% 9.39%
Segment cost of funds (%)* 5.99% 8.35%
2011
Retail Commercial Inter Segment Total
Banking Banking Elimination
(Rupees in '000)
Total income 16,699,455 35,596,782 (13,072,624 ) 39,223,613

Total expenses (13,986,972) (31,153,926) 13,072,624 (32,068,274 )
Net income 2,712,483 4,442,856 –00 7,155,339
Segment assets (net of provisions) 258,584,173 367,357,459 (241,659,171 ) 384,282,461
Segment non performing loans 51,532 3,152,098 –00 3,203,630
Segment provision required 47,584 2,951,263 –00 2,998,847
Segment liabilities 256,721,791 349,366,289 (241,659,171 ) 364,428,909
Segment return on net assets (%)* 6.46% 9.69%
Segment cost of funds (%)* 5.45% 8.92%
*These percentages have been computed based on closing assets / liabilities figures.
63
41. RELATED PARTY TRANSACTIONS
Related parties of the Bank comprise subsidiaries, associates (including entities having directors in common with the Bank),
retirement benefit funds, major share holders, directors and key management personnel and their close family members.
Transactions with related parties of the Bank are carried out on an arm's length basis in terms of the policy as approved by
the Board of Directors. The transactions with employees of the Bank are carried out in accordance with the terms of their
employment.
Transactions with related parties, other than those disclosed in note 13.2.1 and 21.1, are summarised as follows:
2012
Non Key
Subsidiary Associates Executive Management Retirement Total
Directors Personnel Benefit Funds
(Rupees in '000)
Deposits
At beginning of the year 1,494 1,438,356 86,815 275,992 118,882 1,921,539
Placements during the year 429,868 75,338,485 631,362 1,169,514 7,365,961 84,935,190
Withdrawals during the year (425,042) (75,085,259) (571,583) (1,150,739) (7,333,240) (84,565,863)
At end of the year 6,320 1,691,582 146,594 294,767 151,603 2,290,866
Advances
At beginning of the year 9,380 1,404,261 426 30,252 –00 1,444,319
Given during the year 3,158,394 16,218,504 2,976 41,608 –00 19,421,482
Repaid during the year (3,160,608) (16,007,385) (3,051) (43,255) –00 (19,214,299)
At end of the year 7,166 1,615,380 351 28,605 –00 1,651,502
Investments
At beginning of the year 200,000 914,727 –00 –00 –00 1,114,727
Investment made during the year –00 225,000 –00 –00 –00 225,000
Redeemed during the year –00 –00 –00 –00 –00 –00
At end of the year 200,000 1,139,727 –00 –00 –00 1,339,727
Contingencies and commitments –00 532,693 –00 –00 –00 532,693
Purchase of fixed assets –00 1,734 –00 –00 –00 1,734
Sale of securities –00 3,436 –00 –00 –00 3,436
Purchase of mutual funds units –00 225,000 –00 –00 –00 225,000
Mark-up earned 354 131,746 2 1,764 –00 133,866
Mark-up expensed 632 92,825 13,588 26,001 17,668 150,714
Bank charges and commission 92 910 245 197 –00 1,444
Gain on sale of securities –00 4 –00 –00 –00 4
Salaries and allowances –00 –00 –00 162,863 –00 162,863
Bonus –00 –00 –00 24,238 –00 24,238
Contribution to defined contribution plan –00 –00 –00 6,948 –00 6,948
Contribution to defined benefit plan –00 –00 –00 12,075 –00 12,075
Staff provident fund –00 –00 –00 –00 155,643 155,643
Staff gratuity fund –00 –00 –00 –00 114,232 114,232
Directors' fee –00 –00 2,500 –00 –00 2,500
Insurance claim received –00 20,628 –00 –00 –00 20,628
Insurance premium paid –00 145,459 –00 –00 –00 145,459
Dividend income –00 67,136 –00 –00 –00 67,136
Rental income 2,964 –00 –00 –00 –00 2,964
Commission expensed 123 –00 –00 –00 –00 123
Others expensed 619 –00 –00 –00 –00 619
Others income 333 –00 –00 –00 –00 333
64
2011
Non Key
Subsidiary Associates Executive Management Retirement Total
(Rupees in '000)
Deposits
At beginning of the year 20,009 1,687,940 13,638 126,804 310,525 2,158,916
Placements during the year 3,883,764 56,377,143 2,732,759 657,330 3,789,104 67,440,100
Withdrawals during the year (3,902,279) (56,626,727) (2,659,582) (508,142) (3,980,747) (67,677,477)
At end of the year 1,494 1,438,356 86,815 275,992 118,882 1,921,539
Advances
At beginning of the year –00 369,808 214 17,525 –00 387,547
Given during the year 5,025,112 17,461,683 1,653 31,744 –00 22,520,192
Repaid during the year (5,015,732) (16,427,230) (1,441) (19,017) –00 (21,463,420)
At end of the year 9,380 1,404,261 426 30,252 –00 1,444,319
Investments
At beginning of the year 200,000 864,727 –00 –00 –00 1,064,727
Investment made during the year –00 100,000 –00 –00 –00 100,000
Redeemed during the year –00 (50,000) –00 –00 –00 (50,000)
At end of the year 200,000 914,727 –00 –00 –00 1,114,727
Contingencies and commitments –00 518,781 –00 –00 –00 518,781
Purchase of fixed assets –00 2,424 –00 –00 –00 2,424

Sale of securities 2,108 47,089 –00 –00 –00 49,197
Redemption of mutual funds units –00 48,344 –00 –00 –00 48,344
Purchase of mutual funds units –00 100,000 –00 –00 –00 100,000
Mark-up earned 166 62,740 –00 1,812 –00 64,718
Mark-up expensed 1,245 88,406 5,753 14,535 19,947 129,886
Bank charges and commission 20 6,544 3 90 –00 6,657
Loss on sale of securities –00 (1,293) –00 –00 –00 (1,293)
Salaries and allowances –00 –00 –00 143,546 –00 143,546
Bonus –00 –00 –00 21,375 –00 21,375
Contribution to defined contribution plan –00 –00 –00 5,844 –00 5,844
Contribution to defined benefit plan –00 –00 –00 12,028 –00 12,028
Staff provident fund –00 –00 –00 –00 130,873 130,873
Staff gratuity fund –00 –00 –00 –00 103,403 103,403
Directors' fee –00 –00 2,075 –00 –00 2,075
Insurance claim received –00 23,783 –00 –00 –00 23,783
Insurance premium paid –00 138,300 –00 –00 –00 138,300
Dividend income –00 80,990 –00 –00 –00 80,990
Rental income 2,705 –00 –00 –00 –00 2,705
65
42. CAPITAL ASSESSMENT AND ADEQUACY - BASEL II SPECIFIC
42.1 Scope of application
The Bank is the only entity in the Group to which Basel ll capital adequacy framework applies. The
Bank has ownership in the following subsidiary, where the Bank holds more than 50% of voting
shares as at 31 December 2012:
Name Type of entity Country of incorporation
AL Habib Capital Markets (Private) Limited Financial Pakistan
The assets, liabilities, income, expenses and cash flows of above subsidiary are included in the
consolidated financial statements.
The Bank has ownership in the following associated companies, where the Bank either holds more
than 20% of voting shares or has common Directors on the Board:
Habib Asset Management Limited Financial Pakistan

Habib Sugar Mills Limited Commercial Pakistan
Investment in above associates is accounted for under equity method of accounting in the consolidated
42.2 Capital adequacy
The Basel II Framework for capital adequacy is applicable to the Bank both at the consolidated level
(including subsidiary) and also on a stand alone basis. It is the Bank’s policy that the level of capital
maintained by it should be such that it maximises the return to shareholders while providing sufficient
buffer to absorb risks, including those from any unexpected events. Therefore, the Bank carefully
monitors its capital adequacy ratio and endeavours to maintain it at a level sufficiently higher than
the minimum regulatory requirement. The capital adequacy assessment process will continue to be
further improved and refined, keeping in view the guidelines of SBP.
SBP requires that banks in Pakistan should maintain regulatory capital for credit, market, and
operational risks, the amount of which should at least be equal to 10% of their risk weighted assets.
The Bank calculates capital requirement as per Basel II regulatory framework, using the following
approaches:
Credit risk Standardised Approach

Market risk Standardised Approach
Operational risk Basic Indicator Approach
Total regulatory capital should be at least 10 % of risk-weighted assets and the Bank's capital
adequacy ratio is 15.96% (2011: 16.69%).
66
In addition, SBP requires that the paid-up capital of locally incorporated banks should be raised to
Rs. 10 billion by 31 December 2013 in a phased manner. The Bank has been increasing its paid-
up share capital to comply with the aforesaid requirement. The paid-up capital requirement as of
31 December 2012 is Rs. 9 billion. The Bank's paid-up capital as of 31 December 2012 is Rs.
10.104 billion.
The Bank's exposure to and its management and control of risks is described in note 43. Stress
testing is performed for various risks and their impact on capital adequacy ratio as per guidelines
of SBP.
42.3 Capital structure
The Bank’s Tier I capital comprises share capital, statutory reserve, special reserve, general reserve
and unappropriated profit.
The Bank’s Tier II capital includes subordinated loans, general provisions, revaluation reserves and
exchange translation reserve.
The Bank does not use any Tier III capital at present, which may include short-term subordinated
debt solely for the purpose of meeting a portion of capital requirement for market risk.
2012 2011
(Rupees in '000)
Tier I Capital
Share capital 10,103,868 8,785,972
Reserves 6,296,672 5,207,369
Less: Adjustment for investments in
subsidiaries and associates* (116,875) (116,875)
Intangible assets (54,079) (15,227)
Total Tier I Capital 20,835,876 17,587,337
Tier II Capital
Subordinated loans (upto 50% of total Tier I capital) 4,837,000 5,536,420
General provisions subject to 1.25% of
total risk weighted assets 2,334,910 1,971,979
Exchange translation reserve 167,874 117,320
Revaluation reserves (upto 45%) 1,748,942 1,236,236
subsidiaries and associates* (116,875) (116,875)
Total Tier II Capital 8,971,851 8,745,080
Eligible Tier III Capital –00 –00
Total Eligible Regulatory Capital 29,807,727 26,332,417
* 50% deduction from Tier I capital and 50% deduction from Tier II capital as required by BASEL
II framework.
67
42.4 The risk weighted assets to capital ratio, calculated in accordance with SBP's guidelines on capital
adequacy is as follows:
Capital Requirements Risk Weighted Assets
2012 2011 2012 2011
(Rupees in '000)
Credit Risk
Sovereign 255,500 138,574 2,555,005 1,385,736
Public sector enterprises 735,574 119,701 7,355,743 1,197,007
Corporates 11,546,804 10,132,755 115,468,035 101,327,551
Banks 556,899 345,051 5,568,989 3,450,524
Retail 681,887 798,544 6,818,874 7,985,435
Residential mortgages 58,429 49,911 584,289 499,108
Equities, regulatory instruments, and mutual funds 412,577 333,345 4,125,770 3,333,452
Other assets 1,356,352 1,240,994 13,563,521 12,409,942
15,604,022 13,158,875 156,040,226 131,588,755
Market Risk
Interest rate risk 26,922 57,292 336,524 716,145
Foreign exchange risk 40,639 18,768 507,986 234,605
67,561 76,060 844,510 950,750
Operational Risk 2,392,643 2,017,507 29,908,039 25,218,835
Total 18,064,226 15,252,442 186,792,775 157,758,340
Capital Adequacy Ratio

Total eligible regulatory capital (a) 29,807,727 26,332,417
Total risk weighted assets (b) 186,792,775 157,758,340
Capital Adequacy Ratio [(a) / (b) x 100] 15.96% 16.69%
43. RISK MANAGEMENT
The Bank has a risk management framework commensurate with its size and the nature of its business.
The Board of Directors has approved risk management policies covering key areas of activities for
the guidance of management and committees of the Board, management committees, and Divisions
/ Departments of the Bank.
This section presents information about the Bank’s exposure to and its management and control of
risks, in particular the primary risks associated with its use of financial instruments.
43.1 Credit risk
Credit risk is the risk of loss arising from failure by a client or counterparty to meet its contractual
obligation. It emanates from loans and advances, commitments to lend, contingent liabilities such
as letters of credit and guarantees, and other similar transactions both on and off balance sheet.
These exclude investments and treasury-related exposures, which are covered under market risk.
It is the Bank’s policy that all credit exposures shall be adequately collateralised, except when specially
exempted by SBP as in case of personal loans and credit cards, and those at overseas branch where
the accepted local banking practice is followed.
68
The objective of credit risk management is to keep credit risk exposure within permissible level,
relevant to the Bank’s risk capital, to maintain the soundness of assets and to ensure returns
commensurate with risk.
Credit risk of the Bank is managed through the credit policy approved by the Board, a well defined
credit approval mechanism, prescribed documentation requirement, post disbursement administration,
review and monitoring of all credit facilities; and continuous assessment of credit worthiness of
counterparties. Decisions regarding the credit portfolio are taken mainly by the Central Credit
Committee. Credit Risk Management Committee of the Board provides overall guidance in managing
the Bank's credit risk.
Counterparty exposure limits are approved in line with the Prudential Regulations and the Bank's
own policies, by taking into account both qualitative and quantitative criteria. There is an established
system for continuous monitoring of credit exposures and follow-up of any past due loans with the
respective business units. All past due loans, including trade bills, are reviewed on fortnightly basis
and pursued for recovery. Any non-performing loans are classified and provided for as per Prudential
Regulations. The Bank has also established a mechanism for independent post-disbursement review
Credit facilities, both fund based and non-fund based, extended to large customer groups and industrial
sectors are regularly monitored. The Bank has concentration of credit in textile which is the largest
sector of Pakistan's economy. Concentration risk is managed by diversification within sub-sectors
like spinning, weaving and composites, credit worthiness of counterparties, and adequate collateralisation
of exposures.
Credit administration function has been placed under a centralised set-up. Its main focus is on
compliance with terms of sanction of credit facilities and the Bank’s internal policies and procedures,
scrutiny of documentation, monitoring of collateral, and maintenance of borrowers’ limits, mark-up
rates, and security details.
The Bank has implemented its own internal risk rating system for the credit portfolio, as per guidelines
of SBP. Credit ratings by external rating agencies, if available, are also considered.
The Bank lends primarily against the cash flow of the business with recourse to the assets being
financed as primary security. Collaterals in the form of liquid securities, tangible securities, and other
acceptable securities are obtained to hedge the risk, as deemed appropriate. Main types of collaterals
taken by the Bank include charge on stock-in-trade, receivables, machinery, mortgage of properties,
pledge of goods, shares and other marketable securities, government securities, government
guarantees, bank guarantees and cash margins and bank deposits.
Specific provisions on credit portfolio are determined in accordance with the Prudential Regulations.
General provision on the consumer portfolio is also determined as per Prudential Regulations. The
Bank maintains additional general provision in line with its prudent policies. Particulars of provisions
against advances are given in note 12.6.
The Bank uses the Standardised Approach to calculate capital charge for credit risk as per Basel II
regulatory framework, with comprehensive approach for credit risk mitigation.
Stress testing for credit risk is carried out regularly to estimate the impact of increase in non-performing
loans and downward shift in these categories.
69
43.1.1Credit risk: Disclosures on portfolio subject to Standardised Approach - Basel II Specific
The Bank uses the ratings issued by The Pakistan Credit Rating Agency Limited (PACRA) and JCR-
VIS Credit Rating Company Limited (JCR-VIS) for its local currency exposures and ratings issued
by Moody’s, S&P, and Fitch for its foreign currency exposures. These External Credit Assessments
Institutions (ECAIs) have been approved by SBP.
For foreign currency claims on sovereigns, the Bank also uses risk scores of Export Credit Agencies
(ECAs).
Moody’s,
JCR-VIS PACRA S&P, and Fitch ECA Score
(local (local (foreign (foreign
currency) currency) currency) currency)
Types of exposures
Corporates 3 3 – –
Banks 3 3 3 –
Sovereigns – – 3 3
Small and Medium Enterprises – – – –
Securitisations – – – –
Others (public sector enterprises) 3 3 – –
The Bank has not transferred public issue ratings onto comparable assets in the banking book
in its calculations. ECAI ratings and ECA scores are aligned with risk buckets as determined by
SBP.
Credit exposures subject to Standardised Approach
Amount Credit Risk
outstanding/ Mitigation
credit equivalent (CRM)
Risk buckets (rated and unrated) deduction Net amount
(Rupees in '000)
0% 291,260,681 –00 291,260,681
20% 21,707,097 566,125 21,140,972
35% 1,669,397 –00 1,669,397
50% 22,352,066 1,025,220 21,326,846
75% 12,215,036 3,123,204 9,091,832
100% 136,686,784 3,100,704 133,586,080
150% 157,917 51,674 106,243
486,048,978 7,866,927 478,182,051
43.1.2 Credit risk: Disclosures on CRM for Standardised Approach – Basel II Specific
Eligible collaterals used by the Bank for credit risk mitigation are cash margins and cash deposits,
government securities, financial guarantees, listed shares, and other listed, quoted or rated securities.
The Bank requires perfection of collaterals by marking lien on cash margins and deposits, pledging
of shares and other securities and verifying the authenticity of guarantees received. Shares and
securities including marketable government securities are taken at market value and other government
securities are taken at encashment value. Appropriate hair-cuts are applied as per Basel II regulatory
framework. Among the mitigants used by the Bank, there is concentration in cash margins and cash
deposits.
70
44.1.3 Segment by class of business 2012
Contingencies and
Gross Advances Deposits Commitments
(Rupees % (Rupees % (Rupees %
in '000) in '000) in '000)
Agriculture / agri business 2,210,977 1.44 317,034 0.09 1,366,191 1.82

Automobiles and transportation
equipment 928,223 0.60 1,242,271 0.36 2,620,963 3.49
Cement 585,206 0.38 70,492 0.02 289,846 0.39
Chemicals / pharmaceuticals 3,185,449 2.08 1,808,832 0.53 2,302,915 3.06
Commerce and trade 9,259,016 6.03 14,856,632 4.36 11,960,693 15.92
Electronics and electrical appliances 171,860 0.11 347,378 0.10 1,227,607 1.63
Fertilizers 607,413 0.40 4,169,917 1.23 69,186 0.09
Financial 4,292,076 2.80 5,406,131 1.59 1,370,623 1.82
Food and allied 28,206,992 18.38 2,983,610 0.88 2,464,831 3.28
Ghee and edible oil 3,927,721 2.56 947,494 0.28 7,224,412 9.61
Individuals 3,456,865 2.25 241,523,050 70.95 13,860 0.02
Iron and steel 7,495,526 4.88 1,596,071 0.47 3,925,636 5.22
Oil refinery / marketing 1,563,332 1.02 10,374,129 3.05 1,588,844 2.11
Paper and board 1,736,539 1.13 95,685 0.03 332,428 0.44
Plastic products 1,713,649 1.12 435,890 0.13 3,296,186 4.39
Production and transmission of energy 10,586,705 6.90 1,082,843 0.32 1,789,234 2.38
Real estate / construction 1,586,594 1.03 4,451,451 1.31 3,103,729 4.13
Services (other than financial) 1,476,647 0.96 9,977,542 2.93 1,497,228 1.99
Shoes and leather garments 996,765 0.65 578,336 0.17 334,860 0.45
Sugar 3,161,360 2.06 1,467,343 0.44 609,057 0.83
Surgical equipments 687,175 0.45 385,881 0.11 634,632 0.84
Textile
Spinning 21,595,676 14.07 1,578,789 0.46 9,494,332 12.64
Weaving 9,768,467 6.37 855,448 0.25 3,751,720 4.99
Composite 19,200,670 12.51 1,689,800 0.50 4,370,065 5.82
Ready-made garments 4,219,638 2.75 933,643 0.27 2,863,392 3.81
54,784,451 35.70 5,057,680 1.48 20,479,509 27.26
Others 10,842,119 7.07 31,217,179 9.17 6,637,885 8.83
153,462,660 100.00 340,392,871 100.00 75,140,355 100.00
71
2011
Contingencies and
in '000) in '000) in '000)

equipment 984,322 0.82 1,753,251 0.58 2,065,421 3.89
Cement 1,454,491 1.21 120,863 0.04 290,182 0.55
Electronics and electrical appliances 211,638 0.18 441,998 0.15 912,852 1.72
Fertilizers 995,800 0.83 5,325,396 1.76 595,629 1.12
Financial 2,703,099 2.25 6,503,156 2.15 1,009,373 1.90
Food and allied 8,249,156 6.87 2,824,299 0.93 976,276 1.84
Individuals 3,417,499 2.85 191,617,198 63.43 5,475 0.01
Iron and steel 4,423,216 3.69 1,050,440 0.35 1,535,498 2.89
Paper and board 1,945,457 1.62 111,307 0.04 475,018 0.89
Services (other than financial) 496,901 0.41 10,057,095 3.33 592,458 1.11
Shoes and leather garments 1,271,026 1.06 679,898 0.23 208,454 0.39
Sugar 4,250,475 3.54 1,371,828 0.45 110,388 0.21
Textile
Spinning 21,295,370 17.75 826,133 0.27 3,656,283 6.88
Weaving 8,011,212 6.68 772,394 0.26 1,389,818 2.62
Composite 16,884,454 14.07 1,771,836 0.58 2,851,233 5.35
49,872,808 41.57 3,991,151 1.32 9,480,499 17.83
Others 8,072,814 6.73 27,996,358 9.27 7,825,807 14.73
120,003,430 100.00 302,098,594 100.00 53,138,104 100.00
72
43.1.4 Details of non-performing advances and specific provisions by class of business segment
2012 2011
Specific Specific
Classified Provision Classified Provision
Advances held Advances held
(Rupees in '000)
Agriculture / agri business 74,156 74,156 74,156 74,156

Automobiles and transportation equipment 33,769 33,769 33,734 33,734
Chemical / pharmaceuticals –00 –00 5,169 5,169
Commerce and trade 447,105 447,105 457,098 446,087
Electronics and electrical appliances 4,058 4,058 9,498 4,749
Financial 292,327 90,056 292,327 210,201
Ghee and edible oil 2,075 2,075 2,075 2,075
Individuals 51,558 49,120 53,687 49,739
Oil refinery / marketing 17,998 17,998 17,998 17,998
Plastic products 91,676 91,676 92,278 88,528
Real estate / construction 260,346 260,346 263,313 253,921
Shoes and leather garments 5,849 5,849 16,621 16,621
Surgical equipments 2,797 2,797 –00 –00
Textile
Spinning 961,282 942,162 933,591 933,591
Weaving 251,362 108,814 23,443 11,722
Composite 994,954 872,101 837,414 811,428
Ready-made garments 164,233 44,290 10,125 9,825
2,371,831 1,967,367 1,804,573 1,766,566
Others 50,185 16,561 81,103 29,303
3,705,730 3,062,933 3,203,630 2,998,847
43.1.5 Segment by sector

2012
Gross Contingencies and
Advances Deposits Commitments
in '000) in '000) in '000)
Public / Government 33,456,872 21.80 27,499,134 8.08 8,252,289 10.98

Private 120,005,788 78.20 312,893,737 91.92 66,888,066 89.02
153,462,660 100.00 340,392,871 100.00 75,140,355 100.00
2011
in '000) in '000) in '000)

Private 109,716,839 91.43 258,549,573 85.58 45,757,359 86.11
120,003,430 100.00 302,098,594 100.00 53,138,104 100.00
73
43.1.6 Details of non-performing advances and specific provisions by sector
2012 2011
Specific Specific
(Rupees in '000)
Public / Government –00 –00 –00 –00

Private 3,705,730 3,062,933 3,203,630 2,998,847
3,705,730 3,062,933 3,203,630 2,998,847
43.1.7 Geographical segment analysis

2012
Profit Total Contingencies
before assets Net assets and
taxation employed employed commitments
(Rupees in '000)
Pakistan 8,602,918 442,100,032 22,926,850 70,403,181

Middle East 266,579 11,005,507 1,003,945 4,737,174
8,869,497 453,105,539 23,930,795 75,140,355
2011
(Rupees in '000)
Pakistan 7,012,632 378,033,970 19,285,289 51,726,462

Middle East 142,707 6,248,491 568,263 1,411,642
7,155,339 384,282,461 19,853,552 53,138,104
43.2 Market risk

Market risk is the risk of loss arising from movements in market rates or prices, such as interest rates,
foreign exchange rates, and equity prices.
The Bank takes positions in securities for the purpose of investment and not to run a trading book.
As regards foreign exchange positions, the purpose is to serve the needs of clients. The Bank does
not engage in trading or market making activities.
Market risk is managed through the market risk policy approved by the Board, approval of counterparty
and dealer limits, specific senior management approval for each investment and regular review and
monitoring of the investment portfolio by the Asset Liability Management Committee (ALCO). A key
element of the Bank’s market risk management is to balance safety, liquidity, and income in their order
of priority. Another key element is separation of functions and reporting lines for the Treasury Division
which undertakes dealing activities within the limits and parameters set by ALCO, Settlements
Department which confirms and settles the aforesaid deal and Middle Office which independently
monitors and analyses the risks inherent in treasury operations. Risk Management Committee of the
Board provides overall guidance in managing the Bank’s market risk.
74
Dealing activities of the Bank include investment in government securities, term finance certificates,
sukuks / bonds, shares and mutual funds, money market transactions and foreign exchange transactions
catering to the needs of its customers. All such activities are carried out within the prescribed limits.
Any excess over limits noted by the Settlements Department and / or the Middle Office is reported
to senior management and ALCO. Stress testing is performed as per guidelines of SBP as well as
Bank's internal policy.
The Bank uses the Standardised Approach to calculate capital charge for market risk as per Basel
ll regulatory framework. Details of capital charge for market risk are given in note 42.4.
43.2.1 Interest rate / yield risk
Interest rate risk is the risk of loss from adverse movements in interest rates. ALCO monitors and
manages the interest rate risk with the objective of limiting the potential adverse effects on the
profitability of the Bank arising from fluctuation in the market interest rates and mismatching or gaps
in the amount of financial assets and financial liabilities in different maturity time bands.
The Bank's interest rate exposure is calculated by categorising its interest sensitive assets and
liabilities into various time bands based on the earlier of their contractual repricing or maturity dates.
Interest rate risk exposures of the Bank are controlled through dealer limits, counter-party exposure
limits and (when necessary) type-of-instrument limits. Duration and modified duration of various types
of debt securities as well as their entire portfolio are also calculated, and the impact of adverse change
in interest rates on the market value of the securities is estimated. Stress testing for interest rate risk
is carried out regularly to estimate the impact of adverse changes in the interest rates.
Interest rate / yield risk in the banking book – Basel II Specific
The Bank holds financial assets and financial liabilities with different maturities or repricing dates and
linked to different benchmark rates, thus creating exposure to unexpected changes in the level of
interest rates. Interest rate risk in the banking book refers to the risk associated with interest-bearing
financial instruments that are not held in the trading book of the Bank.
Repricing gap analysis presents the Bank’s interest sensitive assets (ISA) and interest sensitive
liabilities (ISL), categorised into various time bands based on the earlier of their contractual repricing
or maturity dates (or settlement dates for off-balance sheet instruments). Deposits with no fixed
maturity dates (for example, saving deposits and treasurer’s call deposits) are included in the lowest,
one-month time band, but these are not expected to be payable within a one-month period. The
difference between ISA and ISL for each time band signifies the gap in that time band, and provides
a workable framework for determining the impact on net interest income.
The Bank reviews the repricing gap analysis periodically to monitor and manage interest rate risk in
the banking book.
75
43.2.2 Mismatch of interest rate sensitive assets and liabilities
2012
Exposed to Yield / Interest rate risk Non interest
Effective Total Upto 1 Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5 Over 10 bearing
Yield / month month months to months year to years to years to years to years financial
Interest to 3 6 months to 1 2 years 3 years 5 years 10 years instruments
Rate months year
(Rupees in '000)
Assets
Cash and balances with treasury banks –00 27,464,340 4,505,096 –00 –00 –00 –00 –00 –00 –00 –00 22,959,244
Balances with other banks 0.02% 9,744,716 8,657,164 –00 –00 –00 –00 –00 –00 –00 –00 1,087,552
Lendings to financial institutions 8.75% 993,981 993,981 –00 –00 –00 –00 –00 –00 –00 –00 –00
Investments 10.56% 249,754,075 40,906,218 63,430,590 59,723,528 59,863,152 1,329,443 2,287,865 6,290,528 12,635,428 –00 3,287,323
Advances 9.82% 147,868,668 96,601,542 30,756,777 14,801,038 543,920 811,925 915,702 1,242,651 773,125 1,421,988 –00
Other assets –00 4,961,740 –00 –00 –00 –00 –00 –00 –00 –00 –00 4,961,740
440,787,520 151,664,001 94,187,367 74,524,566 60,407,072 2,141,368 3,203,567 7,533,179 13,408,553 1,421,988 32,295,859
Liabilities
Bills payable –00 5,257,191 –00 –00 –00 –00 –00 –00 –00 –00 –00 5,257,191
Borrowings 8.56% 69,622,055 52,388,284 6,919,877 6,970,516 377,627 617,118 656,261 1,019,825 672,547 –00 –00
Deposits and other accounts 7.81% 340,392,871 159,178,745 18,351,569 19,422,776 22,455,908 9,396,968 3,846,405 2,999,296 –00 –00 104,741,204
Sub-ordinated loans 14.84% 6,489,300 –00 1,497,100 1,000 1,400 1,994,000 1,200 2,994,600 –00 –00 –00
Liabilities against assets subject
to finance lease –00 –00 –00 –00 –00 –00 –00 –00 –00 –00 –00 –00
Other liabilities –00 4,040,166 –00 –00 –00 –00 –00 –00 –00 –00 –00 4,040,166
425,801,583 211,567,029 26,768,546 26,394,292 22,834,935 12,008,086 4,503,866 7,013,721 672,547 –00 114,038,561
On-balance sheet gap 14,985,937 (59,903,028) 67,418,821 48,130,274 37,572,137 (9,866,718) (1,300,299) 519,458 12,736,006 1,421,988 (81,742,702)
Forward purchase of foreign exchange contracts 15,272,338 5,575,942 3,782,904 3,874,199 2,039,293 –00 –00 –00 –00 –00 –00
Forward sale of foreign exchange contracts (16,888,512) (9,981,099) (3,247,329) (2,753,805) (906,279) –00 –00 –00 –00 –00 –00
Forward commitments to extend credit 472,257 503 –00 471,754 –00 –00 –00 –00 –00 –00 –00
Off-balance sheet gap (1,143,917) (4,404,654) 535,575 1,592,148 1,133,014 –00 –00 –00 –00 –00 –00
Total interest / yield risk sensitivity gap 13,842,020 (64,307,682) 67,954,396 49,722,422 38,705,151 (9,866,718) (1,300,299) 519,458 12,736,006 1,421,988
Cumulative interest / yield risk sensitivity gap (64,307,682) 3,646,714 53,369,136 92,074,287 82,207,569 80,907,270 81,426,728 94,162,734 95,584,722
76
2011
Rate months year
(Rupees in '000)
Assets
Lendings to financial institutions –00 –00 –00 –00 –00 –00 –00 –00 –00 –00 –00 –00
Investments 12.93% 222,958,574 6,060,076 17,702,677 64,957,947 104,926,382 5,646,183 1,322,197 7,094,040 12,572,272 –00 2,676,800
Advances 11.14% 114,872,252 68,346,823 22,578,663 16,621,536 2,006,255 562,517 834,119 1,795,555 930,881 1,195,903 –00
Other assets –00 4,716,550 –00 –00 –00 –00 –00 –00 –00 –00 –00 4,716,550
372,248,699 84,481,400 40,281,340 81,579,483 106,932,637 6,208,700 2,156,316 8,889,595 13,503,153 1,195,903 27,020,172
Liabilities
Bills payable –00 4,979,720 –00 –00 –00 –00 –00 –00 –00 –00 –00 4,979,720
Borrowings 11.02% 43,441,594 28,079,004 7,439,070 4,065,242 102,898 428,846 758,275 1,731,338 836,921 –00 –00
Sub-ordinated loans 14.59% 7,390,358 448,830 1,497,700 1,000 450,228 2,800 1,994,000 2,995,800 –00 –00 –00
to finance lease –00 –00 –00 –00 –00 –00 –00 –00 –00 –00 –00 –00
362,114,157 152,579,644 39,870,038 20,407,235 33,631,836 5,893,545 12,630,379 8,147,433 836,921 –00 88,117,126
On-balance sheet gap 10,134,542 (68,098,244) 411,302 61,172,248 73,300,801 315,155 (10,474,063) 742,162 12,666,232 1,195,903 (61,096,954)
Forward commitments to extend credit 15,603 –00 15,603 –00 –00 –00 –00 –00 –00 –00 –00
Off-balance sheet gap 2,715,912 (5,754,058) (2,758,293 ) 7,055,298 4,172,965 –00 –00 –00 –00 –00 –00
Total interest / yield risk sensitivity gap 12,850,454 (73,852,302) (2,346,991 ) 68,227,546 77,473,766 315,155 (10,474,063) 742,162 12,666,232 1,195,903
Cumulative interest / yield risk sensitivity gap (73,852,302) (76,199,293 ) (7,971,747 ) 69,502,019 69,817,174 59,343,111 60,085,273 72,751,505 73,947,408
77
43.2.3 Foreign exchange risk
Foreign exchange risk is the risk of loss from adverse changes in currency exchange rates. The
Bank’s foreign exchange exposure comprises forward contracts, purchase of foreign bills, foreign
currency loans and investments, foreign currency cash in hand, balances with banks abroad, foreign
currency deposits and foreign currency placements with SBP and other banks. Focus of the Bank’s
foreign exchange activities is on catering to the needs of its customers, both in spot and forward
markets.
Foreign exchange risk exposures of the Bank are controlled through dealer limits, open foreign
exchange position limits, counterparty exposure limits, and country limits. The Bank manages its
foreign exchange exposure by matching foreign currency assets and liabilities within strict limits.
The net open position in any single currency and the overall foreign exchange exposure are both
managed within the statutory limits as prescribed by SBP as well as the internal limits set by the
Bank itself. Stress testing for foreign exchange risk is carried out regularly to estimate the impact
of adverse changes in foreign exchange rates.
2012
Net
Off-balance currency
Assets Liabilities sheet items exposure
(Rupees in '000)
Pakistan Rupee 409,226,607 387,790,256 1,617,592 23,053,943

United States Dollar 41,446,186 34,425,693 (6,072,866) 947,627
Great Britain Pound 871,690 4,221,366 3,347,636 (2,040)
Japanese Yen 81,871 –00 (121,822) (39,951)
Euro 1,309,654 2,323,450 981,461 (32,335)
Other currencies 169,531 413,979 247,999 3,551
453,105,539 429,174,744 –00 23,930,795
2011
Net
(Rupees in '000)
Pakistan Rupee 349,738,266 328,081,272 (2,713,485) 18,943,509

Great Britain Pound 371,841 3,584,968 3,262,903 49,776
Japanese Yen 89,471 –000 (10,988) 78,483
Euro 1,052,866 2,163,503 1,231,057 120,420
Other currencies 7,811 246,244 188,481 (49,952)
384,282,461 364,428,909 –00 19,853,552
78
43.3 Liquidity risk
Liquidity risk is the risk of loss to a bank arising from its inability to meet obligations as they fall due
or to fund growth in assets, without incurring unacceptable losses.
Liquidity risk is managed through the liquidity risk policy approved by the Board, careful monitoring
of daily liquidity position by the Treasury Division and the Middle Office and regular review and
monitoring of the liquidity position by ALCO. Risk Management Committee of the Board provides
overall guidance in managing the Bank’s liquidity risk.
Key elements of the Bank’s liquidity risk management are as follows:
- To maintain a comfortable margin of excess liquidity in the form of cash and readily marketable
assets to meet the Bank’s funding requirements at any time.
- To keep a strong focus on mobilisation of low-cost core deposits from customers.
- To maintain a realistic balance between the behavioural maturity profiles of assets and liabilities.
- To maintain excellent credit rating (as borrowing costs and ability to raise funds are directly
affected by credit rating).
- To have a written contingency funding plan to address any hypothetical situations when access
to normal sources of funding is constrained.
The Bank’s liquidity risk management addresses the goal of protecting solvency and the ability to
withstand stressful events in the market place. Stress testing for liquidity risk is carried out regularly
to estimate the impact of decline in liquidity on the ratio of liquid assets to deposits plus borrowings.
79
43.3.1 Maturities of assets and liabilities - based on expected maturities as determined by ALCO
For assets and liabilities that have a contractual maturity, the expected maturity is considered to be the same as contractual maturity. Assets and Liabilities
that do not have a contractual maturity have been categorised on the basis of expected maturities as determined by ALCO. In case of saving and current
accounts, their historical net withdrawal pattern over the next one year was reviewed, based on year-end balances for the last three years. Thereafter,
taking a conservative view, ALCO categorised these deposits in various maturity bands. Other assets and liabilities have been categorised on the basis
of assumptions / judgments that are believed to be reasonable.
2012
Total Upto 1 Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5 Over 10
month month to months to months year to years to years to years to years
3 months 6 months to 1 year 2 years 3 years 5 years 10 years
(Rupees in '000)
Assets
Cash and balances with treasury banks 27,464,340 27,464,340 –00 –00 –00 –00 –00 –00 –00 –00
Balances with other banks 9,744,716 9,744,716 –00 –00 –00 –00 –00 –00 –00 –00
Lendings to financial institutions 993,981 993,981 –00 –00 –00 –00 –00 –00 –00 –00
Investments 249,754,075 38,434,669 62,897,387 58,054,852 62,815,416 2,526,058 2,680,452 7,771,480 14,125,164 448,597
Advances 147,868,668 47,633,623 34,093,076 21,159,105 18,032,771 7,862,798 6,444,278 9,101,032 2,105,560 1,436,425
Operating fixed assets 11,164,099 237,880 201,863 270,583 501,317 719,828 2,794,609 607,040 744,914 5,086,065
Other assets 6,115,660 4,673,631 709,243 268,362 171,176 84,787 42,754 44,137 49,377 72,193
453,105,539 129,182,840 97,901,569 79,752,902 81,520,680 11,193,471 11,962,093 17,523,689 17,025,015 7,043,280
Liabilities
Bills payable 5,257,191 5,257,191 –00 –00 –00 –00 –00 –00 –00 –00
Borrowings 69,622,055 52,388,284 6,919,877 6,970,516 377,627 617,118 656,261 1,019,825 672,547 –00
Deposits and other accounts 340,392,871 45,046,215 42,670,873 43,742,080 46,775,212 53,171,715 47,621,152 49,205,973 12,159,651 –00
Sub-ordinated loans 6,489,300 –00 700 1,000 1,700 751,000 750,700 1,992,000 2,992,200 –00
to finance lease –00 –00 –00 –00 –00 –00 –00 –00 –00 –00
Deferred tax liabilities 1,933,584 404,002 25,554 37,672 69,589 123,258 657,363 43,405 (1,415 ) 574,156
Other liabilities 5,479,743 3,543,508 107,018 400,762 812,157 8,979 29,342 107,253 –00 470,724
429,174,744 106,639,200 49,724,022 51,152,030 48,036,285 54,672,070 49,714,818 52,368,456 15,822,983 1,044,880
Net assets 23,930,795 22,543,640 48,177,547 28,600,872 33,484,395 (43,478,599) (37,752,725 ) (34,844,767) 1,202,032 5,998,400
Share capital 10,103,868

Reserves 6,464,546
Unappropriated profit 4,606,290
Surplus on revaluation of assets
– net of tax 2,756,091
23,930,795
80
2011
(Rupees in '000)
Assets
Lendings to financial institutions –00 –00 –00 –00 –00 –00 –00 –00 –00 –00
Investments 222,958,574 3,158,213 16,913,667 63,525,673 107,551,489 6,035,585 2,511,935 7,964,644 14,848,771 448,597
Advances 114,872,252 31,079,666 21,808,824 23,878,107 17,538,304 4,256,319 4,366,018 6,553,986 4,179,736 1,211,292
Operating fixed assets 10,743,753 105,051 178,026 204,540 368,897 657,297 554,334 2,882,493 697,887 5,095,228
Other assets 6,006,559 4,481,549 908,419 208,801 164,028 82,645 26,438 25,552 40,016 69,111
384,282,461 68,525,802 39,808,936 87,817,121 125,622,718 11,031,846 7,458,725 17,426,675 19,766,410 6,824,228
Liabilities
Bills payable 4,979,720 4,979,720 –00 –00 –00 –00 –00 –00 –00 –00
Borrowings 43,441,594 28,079,004 7,439,070 4,065,242 102,898 428,846 758,275 1,731,338 836,921 –00
Sub-ordinated loans 7,390,358 448,830 700 1,000 450,528 3,400 751,000 1,747,100 3,987,800 –00
to finance lease –00 –00 –00 –00 –00 –00 –00 –00 –00 –00
Deferred tax liabilities 1,231,486 (313,035 ) 20,625 34,895 65,675 117,528 98,752 640,106 (13,522 ) 580,462
364,428,909 79,409,657 56,338,652 38,533,369 52,292,209 38,096,393 43,572,356 41,484,800 13,721,579 979,894
Net assets 19,853,552 (10,883,855 ) (16,529,716) 49,283,752 73,330,509 (27,064,547) (36,113,631 ) (24,058,125) 6,044,831 5,844,334

Reserves 5,324,689
– net of tax 2,016,793
19,853,552
81
43.3.2 Maturities of assets and liabilities - based on contractual maturities
The following maturity profile is based on contractual maturities for assets and liabilities that have a contractual maturity. Assets and liabilities that do not
have a contractual maturity have been categorised in the shortest maturity band.
2012
(Rupees in '000)
Assets
Investments 249,754,075 43,068,989 62,812,290 58,038,142 59,706,261 2,476,662 2,626,920 7,595,133 13,429,678 –00
Advances 147,868,668 47,633,623 34,093,076 21,159,105 18,032,771 7,862,798 6,444,278 9,101,032 2,105,560 1,436,425
Operating fixed assets 11,164,099 5,456,072 135,923 199,124 373,599 662,400 533,173 607,040 744,914 2,451,854
Other assets 6,115,660 4,960,457 686,663 129,666 103,811 84,787 42,754 44,137 49,377 14,008
453,105,539 139,322,178 97,727,952 79,526,037 78,216,442 11,086,647 9,647,125 17,347,342 16,329,529 3,902,287
Liabilities
Bills payable 5,257,191 5,257,191 –00 –00 –00 –00 –00 –00 –00 –00
Borrowings 69,622,055 52,388,284 6,919,877 6,970,516 377,627 617,118 656,261 1,019,825 672,547 –00
Deposits and other accounts 340,392,871 263,919,950 18,351,569 19,422,776 22,455,908 9,396,968 3,846,405 2,999,295 –00 –00
to finance lease –00 –00 –00 –00 –00 –00 –00 –00 –00 –00
Deferred tax liabilities 1,933,584 1,018,392 22,193 32,631 59,507 103,094 81,621 43,405 (1,415 ) 574,156
Other liabilities 5,479,743 4,537,712 103,618 4,000 794,294 8,979 29,342 1,798 –00 –00
429,174,744 327,121,529 25,397,957 26,430,923 23,689,036 10,877,159 5,364,329 6,056,323 3,663,332 574,156
Net assets 23,930,795 (187,799,351 ) 72,329,995 53,095,114 54,527,406 209,488 4,282,796 11,291,019 12,666,197 3,328,131

Reserves 6,464,546
– net of tax 2,756,091
23,930,795
82
2011
(Rupees in '000)
Assets
Investments 222,958,574 6,129,090 16,899,567 63,494,892 105,011,717 6,029,052 2,514,068 8,007,197 14,872,991 –00
Advances 114,872,252 31,079,666 21,808,824 23,878,107 17,538,304 4,256,319 4,366,018 6,553,986 4,179,736 1,211,292
Other assets 6,006,559 4,697,135 888,777 119,432 105,936 82,645 26,438 25,552 40,016 20,628
384,282,461 76,852,360 39,711,221 87,671,405 122,990,062 10,967,730 7,403,275 15,202,448 19,790,630 3,693,330
Liabilities
Bills payable 4,979,720 4,979,720 –00 –00 –00 –00 –00 –00 –00 –00
Borrowings 43,441,594 28,079,004 7,439,070 4,065,242 102,898 428,846 758,275 1,731,338 836,921 –00
to finance lease –00 –00 –00 –00 –00 –00 –00 –00 –00 –00
364,428,909 241,190,952 38,512,934 20,453,475 34,440,798 5,998,872 11,474,835 6,965,381 4,811,199 580,463
Net assets 19,853,552 (164,338,592 ) 1,198,287 67,217,930 88,549,264 4,968,858 (4,071,560 ) 8,237,067 14,979,431 3,112,867

Reserves 5,324,689
– net of tax 2,016,793
19,853,552
83
43.4 Equity position risk in the banking book – Basel II Specific
The Bank's policy is to take equity positions for investment purposes and not to run a trading book
for buying and selling of equities. Equity holdings include direct investment in shares and in equity-
based mutual funds, both closed-end and open-ended. Policies covering their valuation and
accounting are disclosed in note 5.4.
Equity position risk
Equity position risk is the risk of loss from adverse movements in equity prices. The Bank’s policy
is to take equity positions for investment purposes and not to run a trading book for buying and
selling of shares.
Equity position risk of the Bank is controlled through equity desk / dealer limits, broker limits, equity
portfolio limits, and future contracts limits. Direct investment in equities and mutual funds is managed
within the statutory limits as prescribed by SBP as well as the internal limits set by the Bank itself.
Stress testing for equity price risk is carried out regularly to estimate the impact of decline in stock
prices.
43.5 Operational risk
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people,
and systems or from external events. This definition includes legal risks but excludes strategic and
reputational risks.
Operational risk is managed through the operational risk policy and audit policy approved by the
Board, along with the policies on prevention of frauds and forgeries and compliance with “Know
Your Customer” / "Customer Due Diligence" and “Anti Money Laundering / Combating Financing
of Terrorism” requirements; operational manuals and procedures issued from time to time; a system
of internal controls and dual authorisation for important transactions and safe-keeping; a Business
Continuity Plan, including a Disaster Recovery Plan for I.T., to prevent interruption of business
services in the event of a major incident or disaster; an I.T. Security Policy to ensure security and
integrity of I.T. systems; and regular audit of the branches. Audit Committee of the Board provides
overall guidance in managing the Bank’s operational risk.
The Bank’s operational risk management framework, as laid down in the operational risk policy, is
flexible enough to implement in stages and permits the overall risk management approach to evolve
in the light of organisational learning and the future needs of the Bank.
The Bank places a high priority on conducting all business dealings with integrity and fairness, as
laid down in the Code of Conduct (formally Statement of Ethics & Business Practices), which is
required to be complied by all employees.
Internal controls are an essential feature of risk reduction in operational risk management and the
Bank continues to improve its internal controls.
Operational risk disclosures – Basel II Specific
The Bank uses Basic Indicator Approach to calculate capital charge for operational risk as per Basel
II regulatory framework. This approach is considered to be most suitable in view of the business
model of the Bank which relies on an extensive network of branches to offer one-stop, full-service
banking to its clients. The Bank has developed and implemented an Operational Loss Database.
Operational loss events are reviewed and appropriate corrective actions taken on an ongoing basis,
including measures to improve security and control procedures.
84
44. ISLAMIC BANKING BUSINESS
44.1 The Bank is operating 13 (2011: 11) Islamic banking branches in Pakistan. The statement of financial
position and profit and loss account of these branches as at 31 December 2012 and for the year are
as follows:
44.1.1 STATEMENT OF FINANCIAL POSITION

Note 2012 2011
(Rupees in '000)
ASSETS
Cash and balance with treasury banks 322,418 270,353
Balances with and due from financial institutions 2,786 494,968
Investments 1,573,586 1,362,945
Islamic financing and related assets 44.1.1.1 7,698,981 5,903,778
Operating fixed assets 41,123 35,719
Other assets 254,653 252,128
9,893,547 8,319,891
LIABILITIES
Bills payable 44,896 29,886
Due to financial institutions 1,081,647 1,192,491
Deposits and other accounts 6,824,034 5,447,863
– Current accounts 1,469,285 986,652
– Saving accounts 713,014 519,840
– Term deposits 3,981,713 3,612,383
– Others 58,863 12,832
– Deposits from financial institutions - remunerative 600,625 315,594
– Deposits from financial institutions - non-remunerative 534 562
Due to Head Office 360,000 195,478
Other liabilities 315,081 180,097
(8,625,658) (7,045,815)
NET ASSETS 1,267,889 1,274,076
REPRESENTED BY:
Islamic banking fund 950,000 900,000
Unremitted profit 310,177 372,106
1,260,177 1,272,106
Surplus on revaluation of assets 7,712 1,970
1,267,889 1,274,076
85
44.1.1.1 Islamic financing and related assets
2012 2011
(Rupees in '000)
Murabaha 3,125,006 1,848,829

Ijarah 3,926 44,812
Net book value of assets / investment in ijarah under IFAS 2 307,173 109,668
Diminishing musharika 2,851,554 2,099,681
Export refinance murabaha 81,600 158,727
Export refinance istisna 1,000,047 1,086,631
Istisna 44,644 11,102
Gross financing 7,413,950 5,359,450
Less: general provisioning against consumer financing (231) –00
Net financing 7,413,719 5,359,450
Advance against murabaha 277,979 488,786
Advance against ijarah 7,283 55,542
Islamic financing and related assets - net off provision 7,698,981 5,903,778
Financings / inventory / receivables 7,413,950 5,359,450

Advances 285,262 544,328
Less: general provision against consumer financing (231) –00
7,698,981 5,903,778
Islamic modes of financing
Subsequent to the year end, SBP issued BSD Circular Letter No. 03 dated January 22, 2013 whereby
all Islamic Banks and Banks with Islamic banking Branches are required to present all financing,
advances against murabaha, inventories and any other related items pertaining to Islamic mode of
financing under the caption "Islamic Financing and Related Assets" in the Statement of Financial
Position. Previously, Advances against Murabaha and Inventories were reported under "Other Assets"
separately from the financing balances. This change in presentation is effective from 31 December
2012 and accordingly the Bank has revised the presentation of the Financial position of Islamic
Banking Branches.Corresponding figures for 2012 have been adjusted accordingly.
86
2012 2011
(Rupees in '000)
44.2 PROFIT AND LOSS ACCOUNT
Profit / return on financing and placements earned 1,076,165 1,029,044

Profit / return on deposits and other dues expensed (566,121) (569,686)
510,044 459,358
Provision against non performing loans and advances (231 ) –00
Net spread earned 509,813 459,358
OTHER INCOME
Fee, commission and brokerage income 29,808 28,670
Other income 5,269 4,399
43,841 41,383
553,654 500,741
OTHER EXPENSES
Administrative expenses (243,477) (128,635)
PROFIT BEFORE TAXATION 310,177 372,106
44.3 Remuneration to Shariah Advisor / Board 1,530 1,230
44.4 CHARITY FUND

Additions during the year 9,779 2,281
Payments / utilisation during the year
Health (1,356) (1,609)
Social welfare (925) (450)
(2,281) (2,059)
44.5 PROFIT AND LOSS DISTRIBUTION AND POOL MANAGEMENT

44.5.1 The number and nature of pools maintained by the Islamic Banking Branch along with their
key features and risk and reward characteristics :
We have a single pool mechanism with the depositors. The pool operates on Mudarba basis. Since
we are operating in a single pool structure the risk and reward are proportionately shared by the
depositor.
Parameters associated with risk and rewards:
Following are the key consideration attached with risk and reward of the pool:
Period, return, safety, security and liquidity of the investment.
87
Maturities of funds obtained from Principal Office, Islamic Banking Institutions and Shariah compliant
organisations as regulated in Pakistan.
Element of risk attached to various types of investment.
SBP rules and Shariah clearance.
44.5.2 Avenues / sectors of economy / business where Mudaraba based deposits have been deployed
The Mudaraba based funds have been deployed in the following avenues / sectors / business:
Chemical & pharmaceuticals

Agribusiness
Textile
Sugar
Shoes and leather garments
GOP ijarah sukuk
Production and transmission of energy
Food and tobacco except sugar
Individuals
Others (Ship breaking, Plastic product)
44.5.3 Parameters used for allocation of profit, charging expenses and provisions etc. along with
a brief description of their major components
The Bank’s Islamic Banking Division (IBD) is currently accepting Pak Rupees Term Deposits and
Saving Deposits under Mudaraba Arrangements, wherein the Bank is Mudarib and depositors are
Rab-Ul-Maal. The bank also commingles its funds with those of depositors.
The funds so generated shall be invested by the Bank in Shariah compliant modes of financing such
as Murabaha, Ijarah, Istisna, Diminishing Musharaka and Ijarah Sukuk.
The Bank calculates the profit of the pool after every quarter. Profit is distributed at the Gross Income
level. The Gross Income is calculated after deducting costs and expenses such as cost of Murabaha,
cost of Takaful, Depreciation directly incurred in deriving that Income.
Gross Income of the deposit pool is being shared between the Bank (Mudarib) and depositors (Rab
ul Maal) on the basis of a pre-determined profit sharing ratio.
The Bank’s profit sharing ratio during the year was 60% (2011: 60%) of Gross Income and depositor
profit sharing ratio was 40% (2011: 40%) of Gross Income.
The profit is distributed among the account holders on the basis of predetermined weightages,
announced at the beginning of the quarter based on their respective category / tiers. In case of loss,
Rab-Ul-Maal has to bear the loss in the ratio of investment.
In case of provisioning, the general and specific provisions created against non-performing financing
and diminution in the value of investments as under prudential regulations and other SBP directives
shall be borne by the IBD as Mudarib. However, write-offs of financings and loss on sale of investments
shall be charged to the pool along with other direct expenses.
88
44.5.4 Mudarib share (in amount and percentage of Distributable Income)
2012 2011
(Rupees in Million)
Distributable Income 953 952

Mudarib Share 572 571
Mudarib Share (percent) 60% 60%
44.5.5 Amount and percentage of Mudarib share transferred

to the depositors through Hiba

Hiba 189 169
Hiba percentage of Mudarib Share 33% 30%
44.5.6 Profit rate earned vs. profit rate distributed to the depositors
during the year
Profit Rate Earned 12.30% 13.71%

Profit Rate Distributed 7.48% 8.86%
45. SUBSEQUENT EVENT
Subsequent to the year end, the Board of Directors proposed a final cash dividend of Rs. 3 (2011:
Rs. 2.50) per share.
46. GENERAL
46.1 Comparative information has been re-classified, re-arranged or additionally incorporated in these
financial statements, wherever necessary to facilitate comparative and to conform with changes in
presentation in the current year.
46.2 Captions, as prescribed by BSD Circular No. 04, dated 17 February 2006, in respect of which there
are no amounts have not been reproduced in these financial statements, except for the captions
of the statement of financial position and profit and loss account.
46.3 Figures have been rounded off to the nearest thousand rupees.
46.4 Effective this year, the cost of foreign exchange forward swap contracts has been netted of against
mark-up / return / interest expense. This was previously included in income from dealing in foreign
currencies. Accordingly, comparative figure in respect of swap cost for the year ended 31 December
2012 amounting to Rs. 126.855 million has been reclassified in these financial statements. There
are no other major reclassification to report.
47. DATE OF AUTHORISATION
These financial statements were authorised for issue in the Board of Directors' meeting held on
February 14, 2013.
Managing Director
89
Annexure-1
Statement showing written-off loans or any other financial relief

of five hundred thousand rupees or above provided
during the year ended 31 December 2012
(Rupees in '000)
Name of Outstanding Liabilities

at beginning of year Interest / Other
Name and individuals / Father's / Principal
S. Mark-up financial Total
address partners / Husband's written-
No. Interest / written- relief (9+10+11)
of the borrowers directors (with Name Principal Others Total off
Mark-up off provided
CNIC No.)
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)
1. Tooba Garments Industries Rukhsana S. Moin-ul-Haq Farooqi 5,665 1,200 – 6,865 665 1,214 167 2,046
19/2/2, Sector-12 C, North (CNIC No. 42101-1264204-2)
Karachi Ind’l Area, Karachi
2. Tabassum / Shahnawaz Khan Tabassum Shahnawaz M. Shahnawaz Khan 2,964 3,195 – 6,159 – 3,195 – 3,195
G-23/IIA, 5th Gizri Street, (CNIC No. 42401-1813128-4) Yousuf Zai
Gizri Avenue, Phase-IV DHA
Karachi M. Shahnawaz Khan M. Basharat Khan
(CNIC No. 42401-0530477-7) Yousuf Zai
3. R.A. Associates (Pvt) Ltd Syed Muhammad Pervez Jafri Syed Muhammad 5,169 198 – 5,367 1,167 270 – 1,437
Flat No. 2, Asif Palace, BS-2 (CNIC No. 42101-3191477-7) Ahsan Jafri
Block-13, F.B. Area
Karachi Nabeela Jafri Syed Muhammad
(CNIC No. 42101-9822525-0) Pervez Jafri
4. M.H. Oil Mills (Pvt) Ltd Mr. Abdul Hai Muhammad Umer 16,573 6,678 – 23,251 1,455 7,968 – 9,423
E-32, S.I.T.E, (CNIC No. 42101-6938667-5)
Karachi
Mr. Muhammad Arshad Hai Abdul Hai
(CNIC No. 42101-5007544-9)
Mr. Muhammad Asim Hai Abdul Hai

(CNIC No. 42101-8957508-9)
Total 30,371 11,271 – 41,642 3,287 12,647 167 16,101
Note: 1 The amount of principal written-off was against the specific provision held by the Bank.
Note: 2 Interest / mark-up written-off was against suspended mark-up.
90
Report of Shariah Advisor
We have examined, on test check basis, each class of transaction, the relevant documentation and procedures
adopted by Islamic Banking Branches / Division of Bank AL Habib Limited (IBB-BAHL), and we hereby
report, for the year ended December 31, 2012, that in our opinion;
(a) the affairs of IBB-BAHL have been carried out in accordance with rules and principles of Shariah,
SBP regulations and guidelines related to Shariah compliance and other rules as well as with
specific fatawa and rulings issued by the Shariah Advisor from time to time;
(b) the allocation of funds, weightages, profit sharing ratios, profits and charging of losses, if any,
relating to PLS accounts conform to the basis vetted by the Shariah Advisor in accordance with
Shariah rules and principles and;
(c) any earnings that have been realised from sources or by means prohibited by Shariah rules
and principles have been credited to charity account.
ISMATULLAH
Shariah Advisor
Karachi: February 14, 2013 Islamic Banking Division
91
Notice of Annual General Meeting
Notice is hereby given that the Twenty-second Annual General Meeting of Bank AL Habib Limited will be
held at the Registered Office of the Bank located at 126-C, Old Bahawalpur Road, Multan, on Tuesday,
March 26, 2013 at 10:30 a.m. to transact the following business:
1. To receive and adopt the Audited Annual Accounts and Consolidated Accounts of the Bank for the
year ended December 31, 2012 together with the Reports of Directors and Auditors thereon.
2. To consider and approve payment of cash dividend @ 30 %, i.e., Rs. 3/- per share of Rs. 10/- each
for the year ended December 31, 2012 as recommended by the Board of Directors.
3. To appoint auditors for the year 2013 and to fix their remuneration. Ernst & Young Ford Rhodes Sidat
Hyder, Chartered Accountants, being eligible offer themselves for re-appointment.
4. To elect Directors of the Bank in accordance with Section 178(1) of the Companies Ordinance, 1984.
The number of Directors to be elected pursuant to Section 178(1) of the Companies Ordinance, 1984
has been fixed at 10 (ten) by the Board of Directors.
The following are the retiring Directors and have offered themselves for re-election:
Mr. Ali Raza D. Habib, Mr. Abbas D. Habib, Mr. Anwar Haji Karim, Mr. Hasnain A. Habib, Mr. Imtiaz
Alam Hanfi, Mr. Murtaza H. Habib, Mr. Qumail R. Habib, Mr. Shameem Ahmed, Syed Mazhar Abbas,
and Mr. Wazir Ali Khoja - NIT Nominee.
5. To consider any other business of the Bank with the permission of the Chair.
Special Business
6. To consider and approve the remuneration payable to the Chief Executive and Executive Director
of the Bank.
7. To consider and approve the remuneration payable to Directors for attending Board Meeting and Sub-
Committee Meeting of Board.
For Item Nos. 6 and 7, a statement under Section 160 (1)(b) of the Companies Ordinance, 1984 is
annexed.
By order of the Board
A. SAEED SIDDIQUI
Karachi: March 5, 2013 Company Secretary
92
Notes:
1. Any member desirous to contest the election of Directors shall file the following with Company
Secretary of the Bank at its Registered Office located at 126-C, Old Bahawalpur Road, Multan, not
later than 14 days before the day of the above said meeting:
(a) His/Her intention to offer himself/herself for the election in terms of Section 178(3) of the
Companies Ordinance, 1984. He/She should also confirm that:
(i) He/She is not ineligible to become a director of the Bank under any applicable laws and
regulations (including listing regulations of Stock Exchanges).
(ii) Neither he/she nor his/her spouse is engaged in the business of brokerage or is a
sponsor, director or officer of a corporate brokerage house.
(iii) He/She is not serving as a director in more than seven listed companies simultaneously.
Provided that this limit shall not include the directorships in the listed subsidiaries of a
listed holding company.
(b) Consent to act as Director in Form 28 under Section 184 of the Companies Ordinance, 1984.
(c) Fit and Proper Test proforma, Affidavit, and Questionnaire as per requirement of SBP's BPRD
Circular No. 4 dated April 23, 2007.
A copy of the relevant documents may be obtained from the office of the Company Secretary of the
Bank or may by downloaded from the websites of SECP and SBP.
2. In terms of the criteria prescribed by SBP, association of the following persons as Director is
undesirable and against the public interest:
(a) a person who is/has been associated with any illegal activity, especially related to the banking
business;
(b) a person who in his/her individual capacity or as proprietary concern or any partnership firm
or any private unlisted / listed company has been in default of payment of dues owed to any
financial institution and/or in default of payment of any taxes.
It should also be noted that under SBP regulations a person is not permitted to be a Director of more
than one financial institution, and the Directors will not assume the charge of their respective offices
until their appointments are approved in writing by SBP.
3. A member entitled to attend and vote at this meeting is entitled to appoint a proxy to attend and vote
on his/her behalf. A proxy (except for a corporation) must be a member of the Bank. Proxy form, in
order to be effective, must be received at the Registered Office of the Bank located at 126-C, Old
Bahawalpur Road, Multan, duly stamped and signed not less than 48 hours before the meeting.
4. The CDC account / sub account holders are requested to bring with them their Computerized National
Identity Cards along with participant(s) ID Number and their account numbers at the time of attending
the Annual General Meeting in order to facilitate identification of the respective shareholders. In case
of a corporate entity, the Board of Directors' Resolution/Power of Attorney with specimen signatures
be produced at the time of meeting.
5. The share transfer book of the Bank will remain closed from March 16, 2013 to March 26, 2013 (both
days inclusive). Members are requested to promptly communicate any change in their address to our
Share Registrar, M/s. Noble Computer Services (Pvt.) Limited, located at 1st Floor, House of Habib
Building (Siddiqsons Tower), 3-Jinnah Cooperative Housing Society, Main Shahrah-e-Faisal, Karachi-
75350.
6. Securities & Exchange Commission of Pakistan (SECP) vide its S.R.O. 779 (I)/2011 dated August
18, 2011 has directed all listed companies to ensure that Dividend Warrants should bear the
Computerised National Identity Card (CNIC) Numbers of the registered members. Members who
have not yet provided attested copies of their valid CNICs/NTNs (in case of corporate entities) are
requested to send the same directly to the aforesaid Share Registrar of the Bank at the earliest.
. 93
Statement Under Section 160(1)(b) of the Companies Ordinance, 1984
The statement is annexed to the Notice of the 22nd Annual General Meeting of Bank AL Habib Limited at
which certain special business is to be transacted. The purpose of this statement is to set forth the material
facts concerning such special business.
Item No. 6 of the Agenda
Subsequent to the re-appointment of the Chief Executive by the Board of Directors and as recommended
by them in their meeting held on February 14, 2013, it is intended to propose the following resolution to be
passed as an Ordinary Resolution:
“RESOLVED that the remuneration of the Chief Executive shall not exceed Rs. 2,000,000/- per month
exclusive of perquisites, benefits and other allowances to which he is entitled under the terms of his
employment, subject to an increment not exceeding 15% per annum.”
As recommended by the Board of Directors in their meeting held on February 14, 2013, it is further intended
to propose the following resolution to be passed as an Ordinary Resolution:
“RESOLVED that the remuneration of Mr. Qumail R. Habib, Executive Director shall not exceed
Rs. 1,300,000/- per month exclusive of perquisites, benefits and other allowances to which he is entitled
under the terms of his employment, subject to an increment not exceeding 15% per annum.”
Item No. 7 of the Agenda
It is proposed that the remuneration payable to Directors for attending Board Meeting and Sub-Committee
Meeting of the Board be increased from Rs. 25,000/- to Rs.50,000/- per meeting and to pass the following
resolution as a Special Resolution:
“RESOLVED that the remuneration payable to Directors, for attending Board Meeting and Sub-Committee
Meeting of the Board be and is hereby increased from Rs. 25,000/- (Rupees Twenty Five Thousand) to
Rs. 50,000/- (Rupees Fifty Thousand).”
“FURTHER RESOLVED that the figure “Rs. 25,000” (Rupees Twenty Five Thousand) appearing in Article
106 of Articles of Association be and is hereby substituted by the figure “Rs. 50,000” (Rupees Fifty Thousand).”
94
Pattern of Shareholding as at December 31, 2012
Number of Total Shares

Size of Shareholding
Shareholders Held
379 From 1 To 100 12,856
804 From 101 To 500 234,284
620 From 501 To 1,000 483,771
2,307 From 1,001 To 5,000 5,936,055
671 From 5,001 To 10,000 4,948,854
406 From 10,001 To 15,000 5,018,761
1,375 From 15,001 To 20,000 23,184,056
120 From 20,001 To 25,000 2,686,855
77 From 25,001 To 30,000 2,131,503
127 From 30,001 To 35,000 4,202,367
42 From 35,001 To 40,000 1,598,779
66 From 40,001 To 50,000 3,028,263
82 From 50,001 To 60,000 4,464,638
105 From 60,001 To 80,000 7,386,988
79 From 80,001 To 100,000 7,110,785
70 From 100,001 To 150,000 8,590,503
60 From 150,001 To 200,000 10,446,205
50 From 200,001 To 250,000 11,330,537
29 From 250,001 To 300,000 8,097,247
44 From 300,001 To 350,000 14,528,166
66 From 350,001 To 600,000 30,958,412
54 From 600,001 To 1,000,000 40,821,029
147 From 1,000,001 To 1,010,386,742 813,185,828
7,780 1,010,386,742
Categories of Number of Number of

Shareholders Shareholders Shares Held Percentage
Individuals 7,532 597,761,738 59.16%
Investment Companies 2 8,488 0.00%
Insurance Companies 12 85,239,895 8.44%
Joint Stock Companies 109 61,459,520 6.08%
Financial Institutions 16 51,763,505 5.12%
Modaraba Companies 2 19,810,486 1.96%
Mutual Funds 21 101,864,263 10.08%
Foreign Companies 14 31,499,263 3.12%
Pension Funds 9 2,778,305 0.28%
Others 63 58,201,279 5.76%
TOTAL 7,780 1,010,386,742 100.00%
95
Pattern of Shareholding as at December 31, 2012
Additional Information
Shareholders' Category Number of Number of
Shareholders Shares Held
Associated Companies
Habib Insurance Co., Ltd. 1 3,500,000

Habib Sugar Mills Ltd. 1 16,806,083
Mutual Funds
Tri-Star Mutual Fund Limited 1 1,731

Safeway Mutual Fund 1 4,547
JS-KSE 30 Index Fund 1 26,129
AH DOW Jones Safe Pak Titans 15 Index Fund 1 27,516
NIT Equity Market Opportunity Fund 1 44,081
First Capital Mutual Fund 1 57,500
Lakson Income Fund 1 82,000
Namco Balanced Fund 1 119,500
AKD Index Tracker Fund 1 129,391
Crosby Dragon Fund 1 148,966
Lakson Equity Fund 1 150,000
MCB Dynamic Allocation Fund 1 205,000
Pakistan Strategic Allocation Fund 1 292,891
Pakistan Capital Market Fund 1 466,500
Pakistan Premier Fund 1 609,130
KASB Asset Allocation Fund 1 649,922
MCB Dynamic Stock Fund 1 1,019,531
JS Value Fund Limited 1 1,117,000
Pakistan Stock Market Fund 1 1,381,992
JS Growth Fund 1 3,454,000
National Investment (Unit) Trust
National Bank of Pakistan, Trustee Department 1 91,876,936
Directors
Ali Raza D. Habib 1 9,460,541

Qumail R. Habib 1 14,526,052
Anwar Haji Karim 1 11,226,509
Wazir Ali Khoja (NIT Nominee) – –000
Murtaza H. Habib 1 12,453,356
Syed Mazhar Abbas 1 16,795
Hasnain A. Habib 1 10,856,188
Imtiaz Alam Hanfi 1 4,657
Shameem Ahmed 1 1,920
96
Shareholders' Category Number of Number of
Shareholders Shares Held
Chief Executive Officer
Abbas D. Habib 1 37,749,190
Directors' Spouses and Minor Children
Mrs. Razia A. Raza Habib

W/o Mr. Ali Raza D. Habib 1 4,209,925
Mrs. Niamet Fatima

W/o Mr. Abbas D. Habib 1 4,380,180
Qasim Abbas Habib

S/o Mr. Abbas D. Habib (Joint A/c) 1 841,954
Executives 44 742,415
Joint Stock Companies and Corporations 108 44,653,437
Banks, Development Financial Institutions,

Non-Banking Finance Companies, Insurance
Companies, Takaful, Modarabas and Pension Funds 39 89,341,448
Shareholders holding five percent or more voting rights
State Life Insurance Corporation 1 66,759,231

National Investment (Unit) Trust (included in the list above
under Mutual Funds)
Individuals 7,476 491,292,056
Others (Including foreign companies) 77 89,700,542
7,780 1,010,386,742
97
Consolidated Financial Statements
Bank AL Habib Limited
and
Subsidiary Company
98
Bank AL Habib Limited and its Subsidiary Company
Directors’ Report on Audited Consolidated Financial Statements
The Directors are pleased to present the Audited Consolidated Financial Statements of Bank AL Habib
Limited and the Bank’s Subsidiary M/s AL Habib Capital Markets (Private) Limited for the year ended
December 31, 2012.
(Rupees in '000)
Profit for the year before tax 8,929,242

Taxation (3,418,722)
Profit for the year after tax 5,510,520
Share of loss attributable to minority interest 3,029

Profit attributable to shareholders 5,513,549
Unappropriated profit brought forward 3,767,998
Transfer from surplus on revaluation of fixed assets - net of tax 37,370

Profit available for appropriation 9,318,917
Appropriations:
Transfer to Statutory Reserve (1,089,303)
Cash Dividend - 2011 (2,196,493)
Issue of Bonus Shares - 2011 (1,317,896)
(4,603,692)
Un-appropriated profit carried forward 4,715,225
Earnings per share (after tax) Rs. 5.46
Pattern of Shareholding
The pattern of shareholding as at December 31, 2012 is annexed with the financial statements of
Bank AL Habib Limited.
ALI RAZA D. HABIB

99
Auditors' Report to the Members
We have audited the annexed consolidated financial statements comprising consolidated statement of financial
position of Bank AL Habib Limited (the Bank) and its subsidiary company, (together referred to as Group) as
at 31 December 2012, and the related consolidated profit and loss account, consolidated statement of
comprehensive income, consolidated statement of changes in equity and consolidated cash flow statement
together with the notes forming part thereof for the year then ended. We have also expressed separate opinion
and review conclusion on the financial statements of the Bank and its subsidiary company respectively. These
financial statements are the responsibility of the Bank’s management. Our responsibility is to express an
opinion on these financial statements based on our audit.
Our audit was conducted in accordance with the International Standards on Auditing and accordingly included
such tests of accounting records and such other auditing procedures as we considered necessary in the
circumstances.
In our opinion, the consolidated financial statements present fairly the financial position of the Bank and its
subsidiary company as at 31 December 2012 and the results of their operations for the year then ended.

100
Consolidated Statement of Financial Position
As at 31 December 2012
2012 2011
ASSETS

Lendings to financial institutions 10 993,981 –000
Investments 11 249,923,504 223,105,101
Advances 12 147,859,828 114,863,132
Operating fixed assets 13 11,211,423 10,791,345
Deferred tax assets –000 –000
Other assets 14 6,153,613 6,063,405
453,353,942 384,525,614
LIABILITIES
Bills payable 15 5,257,191 4,979,720

Borrowings 16 69,622,055 43,441,594
Deposits and other accounts 17 340,386,558 302,097,187
Sub-ordinated loans 18 6,489,300 7,390,358
Liabilities against assets subject to finance lease 19 –000 28
Deferred tax liabilities 20 1,929,441 1,232,433
Other liabilities 21 5,490,982 5,373,006
429,175,527 364,514,326
NET ASSETS 24,178,415 20,011,288
REPRESENTED BY :
Share capital 22 10,103,868 8,785,972

Reserves 6,464,546 5,324,689
Equity attributable to the shareholders of the Holding company 21,283,639 17,878,659

Non-controlling interest 106,753 109,782
Total equity 21,390,392 17,988,441

Surplus on revaluation of assets - net of tax 23 2,788,023 2,022,847
24,178,415 20,011,288
CONTINGENCIES AND COMMITMENTS 24
The annexed notes 1 to 48 form an integral part of these consolidated financial statements.
Managing Director
101
Consolidated Profit and Loss Account
2012 2011
Mark-up / return / interest earned 26 41,474,034 36,529,237

Mark-up / return / interest expensed 27 (26,105,028) (22,499,843)
Net mark-up / return / interest income 15,369,006 14,029,394
Provision against non-performing loans and advances 12.6 (466,101) (1,820,788)
Reversal of provision for diminution in the value of investments 14 9
Bad debts written-off directly –00 –00
(466,087) (1,820,779)
Net mark-up / return / interest income after provisions 14,902,919 12,208,615
NON MARK-UP / INTEREST INCOME
Fees, commission and brokerage income 1,520,773 1,315,699
Dividend income 262,664 153,855
Gain on sale / redemption of securities - net 28 77,686 447
Unrealised gain / (loss) on revaluation of investments
classified as held for trading –00 –00
Share of profit from associates 140,224 84,546
Other income 29 479,600 440,408
Total non mark-up / interest income 3,058,834 2,734,661
17,961,753 14,943,276
NON MARK-UP / INTEREST EXPENSES
Administrative expenses 30 (8,834,298) (7,621,965)
Other provisions / (write-offs) / gains 31 (12,060) (16,064)
Other charges 32 (186,153) (146,254)
Total non mark-up / interest expenses (9,032,511) (7,784,283)
Extra-ordinary / unusual items –00 –00
PROFIT BEFORE TAXATION 8,929,242 7,158,993
Taxation – Current (3,264,799) (2,454,253)
– Prior years 122,893 –00
– Deferred (276,816) (167,636)
33 (3,418,722) (2,621,889)
PROFIT AFTER TAXATION 5,510,520 4,537,104
Attributable to:
Shareholders of the Holding company 5,513,549 4,537,656
Non-controlling interest (3,029) (552)
5,510,520 4,537,104
Restated
Basic and diluted earnings per share attributable to
equity holders of the Holding company - Rupees 34 5.46 4.49
Managing Director
102
Consolidated Statement of Comprehensive Income
2012 2011
(Rupees in '000)
Net profit for the year 5,510,520 4,537,104
Other comprehensive income
Exchange difference on translation of net

investment in a foreign branch 50,554 25,729
Total comprehensive income for the year 5,561,074 4,562,833
Attributable to:
Shareholders of the Holding company 5,564,103 4,563,385
Non-controlling interest (3,029) (552)
5,561,074 4,562,833
Managing Director
103
Consolidated Statement of Changes in Equity
Attributable to the shareholders of the Holding Company

Revenue Reserves
Foreign Non-
Share Statutory Special General Currency Unappro- Total controlling Total
Capital Reserve Reserve Reserve Translation priated Interest Equity
Reserve Profit
(Rupees in '000)
Balance as at 01 January 2011 7,321,643 3,634,173 126,500 540,000 91,591 3,030,199 14,744,106 110,334 14,854,440
Total comprehensive income for the year –000 –000 –00 –00 25,729 4,537,656 4,563,385 (552 ) 4,562,833

of fixed assets - net of tax –000 –000 –00 –00 –00 35,497 35,497 –00 35,497
Transfer to statutory reserve –000 906,696 –00 –00 –00 (906,696) –00 –00 –00
Cash dividend (Rs. 2 per share) –000 –000 –00 –00 –00 (1,464,329) (1,464,329) –00 (1,464,329)

shares for every 100 shares held 1,464,329 –000 –00 –00 –00 (1,464,329) –000 –00 –000
Balance as at 31 December 2011 8,785,972 4,540,869 126,500 540,000 117,320 3,767,998 17,878,659 109,782 17,988,441
Total comprehensive income for the year –000 –000 –00 –00 50,554 5,513,549 5,564,103 (3,029 ) 5,561,074

of fixed assets - net of tax –000 –000 –00 –00 –00 37,370 37,370 –00 37,370
Transfer to statutory reserve –000 1,089,303 –00 –00 –00 (1,089,303) –00 –00 –00
Cash dividend (Rs. 2.5 per share) –000 –000 –00 –00 –00 (2,196,493) (2,196,493) –00 (2,196,493)

shares for every 100 shares held 1,317,896 –000 –00 –00 –00 (1,317,896) –000 –00 –000
Balance as at 31 December 2012 10,103,868 5,630,172 126,500 540,000 167,874 4,715,225 21,283,639 106,753 21,390,392
Managing Director
104
Consololidated Cash Flow Statement
2012 2011
(Rupees in '000)
Cash Flow From Operating Activities

Dividend income (262,664) (153,855)
8,666,578 7,005,138
Adjustments for non - cash items:

Depreciation 810,500 766,566
Provision against non-performing loans and advances 466,101 1,820,788
Reversal of provision for diminution in the value of investments (14) (9)
Gain on sale of operating fixed assets (65,085) (84,469)
Share of profit from associates (140,224) (84,546)
Financial charges on leased assets 1 23
Gain on sale / redemption of securities (77,686) (447)
1,069,762 2,494,990
9,736,340 9,500,128
(Increase) / decrease in operating assets

Lendings to financial institutions (993,981) 1,139,268
Advances (33,462,797) 9,089,372
Other assets (101,806) 179,369
(34,558,584) 10,408,009
Increase in operating liabilities

Bills payable 277,471 1,989,731
Borrowings 26,228,864 22,030,466
Deposits 38,289,371 52,336,302
Other liabilities (excluding provision for taxation) 184,878 816,269
64,980,584 77,172,768
40,158,340 97,080,905
Income tax paid (3,285,625) (2,716,057)
Net cash flow from operating activities 36,872,715 94,364,848

(Balance carried forward)
105
Note 2012 2011
(Rupees in '000)
Net cash flow from operating activities

(Balance brought forward) 36,872,715 94,364,848
Cash Flow From Investing Activities
Net investments in available for sale securities (54,010,447) (70,082,696)

Net investments in held to maturity securities 28,796,240 (14,836,530)
Net investment in associates (157,789) 31,992
Dividend received 266,653 152,496
Investments in operating fixed assets (1,274,301) (1,133,063)
Sale proceeds of operating fixed assets 77,697 107,484
Net cash used in investing activities (26,301,947) (85,760,317)
Cash Flow From Financing Activities
Receipts of sub-ordinated loans –000 3,000,000

Payments of sub-ordinated loans (901,058) (451,902)
Payments of lease obligations (29) (381)
Dividend paid (2,162,870) (1,440,922)
Net cash (used in) / from financing activities (3,063,957) 1,106,795
Exchange adjustment on translation of net investment

in a foreign branch 50,554 25,729
Increase in cash and cash equivalents 7,557,365 9,737,055
Cash and cash equivalents at beginning of the year 29,654,228 19,917,173
Cash and cash equivalents at end of the year 35 37,211,593 29,654,228
Managing Director
106
Notes to the Consolidated Financial Statements
1. STATUS AND NATURE OF BUSINESS
1.1 The Group comprises of:

Holding company
– Bank AL Habib Limited
Subsidiary company
– AL Habib Capital Markets (Private) Limited
1.2 Bank AL Habib Limited (the Bank) is a banking company incorporated in Pakistan on 15 October
1991 as a public limited company under the Companies Ordinance, 1984 having its registered office
at 126-C, Old Bahawalpur Road, Multan with principal place of business in Karachi. Its shares are
listed on all the Stock Exchanges in Pakistan. It is a scheduled bank principally engaged in the
business of commercial banking with a network of 308 branches (2011: 290 branches), 82 sub-
branches (2011: 61) and 02 representative offices (2011: 02).The branch network of the Bank
includes a wholesale branch in the Kingdom of Bahrain (2011: 01), a branch in Karachi Export
Processing Zone (2011: 01) and 13 Islamic Banking branches (2011: 11).
1.3 The Bank has invested in 66.67% shares of AL Habib Capital Markets (Private) Limited. The company
was incorporated in Pakistan on 23 August 2005 as a private limited company under the Companies
Ordinance,1984.The company is a corporate member of the Karachi Stock Exchange (Guarantee)
Limited and is engaged in equity, money market and foreign exchange brokerage services, equity
research, corporate financial advisory and consultancy services.
2. BASIS OF PRESENTATION
2.1 These consolidated financial statements have been prepared in conformity with the format of financial
statements prescribed by the State Bank of Pakistan (SBP) vide BSD Circular No. 04, dated 17
February 2006.
2.2 In accordance with the directives of the Federal Government regarding the shifting of the banking
system to Islamic modes, SBP has issued various circulars from time to time. Permissible forms
of trade-related modes of financing includes purchase of goods by banks from their customers and
immediate resale to them at appropriate mark-up in price on deferred payment basis. The purchase
and resale arising under these arrangements are not reflected in these consolidated financial
statements as such, but are restricted to the amount of facility actually utilised and the appropriate
portion of mark-up thereon. However, murabaha financing arrangements undertaken by the Islamic
Banking branches are accounted for as a purchase and sale transaction of the underlying goods
in these consolidated financial statements in accordance with the accounting policies of the Group.
2.3 The financial results of the Islamic Banking branches have been consolidated in these consolidated
financial statements for reporting purposes, after eliminating material inter-branch transactions /
balances. Key financial information of the Islamic Banking branches is disclosed in note 45.
107
3. STATEMENT OF COMPLIANCE
3.1 These consolidated financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan. Approved accounting standards comprise International Financial
Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and
Islamic Financial Accounting Standards (IFAS) issued by the Institute of Chartered Accountants of
Pakistan (ICAP) as are notified under the Companies Ordinance, 1984, the requirements of the
Companies Ordinance, 1984, the Banking Companies Ordinance, 1962 and regulations / directives
issued by the Securities and Exchange Commission of Pakistan (SECP) and SBP. Wherever the
requirements of the Companies Ordinance, 1984, the Banking Companies Ordinance, 1962 or
regulations / directives issued by SECP and SBP differ with the requirements of IFRS or IFAS, the
requirements of the Companies Ordinance, 1984, the Banking Companies Ordinance, 1962 or the
requirements of the said regulations / directives shall prevail.
3.2 SBP vide BSD Circular No. 10, dated 26 August 2002 has deferred the applicability of International
Accounting Standard (IAS) 39, "Financial Instruments: Recognition and Measurement" and IAS 40,
"Investment Property" for banking companies till further instructions. Further, according to the
notification of SECP dated 28 April 2008, IFRS - 7 "Financial Instruments: Disclosures" has not been
made applicable for banks. Accordingly, the requirements of these standards have not been considered
in the preparation of these consolidated financial statements.
4. BASIS OF MEASUREMENT
These consolidated financial statements have been prepared under the historical cost convention
except for the certain investments, land and buildings and derivative financial instruments which are
revalued as referred to in notes 5.5, 5.7 and 5.15 below.
5. SIGNIFICANT ACCOUNTING POLICIES
5.1 The accounting policies adopted in the preparation of these consolidated financial statements are
consistent with those of the previous financial year except as described below:
New and amended standards and interpretations
The Group has adopted the following amended IFRS which became effective during the year:
IAS 12 – Income Taxes - Recovery of Underlying Assets (Amendment)
The adoption of the above amendment did not have any material effect on these consolidated
5.2 Basis of consolidation
Subsidiary is a company in which the Bank directly or indirectly controls, beneficially owns or hold
more than 50% of the shares or otherwise has the power to elect and appoint more than 50% of
its directors. The financial statements of the subsidiary is included in the consolidated financial
statements from the date the control commences until the date the control ceases. In preparing
consolidated financial statements, the financial statements of the Bank and subsidiary are combined
on a line by line basis by adding together like items of assets, liabilities, income and expenses.
Significant intercompany transactions have been eliminated.
108
5.3 Cash and cash equivalents
Cash and cash equivalents as referred to in the cash flow statement comprises cash and balances
with treasury banks and balances with other banks less overdrawn nostros accounts.
5.4 Repurchase / resale agreements
The Bank enters into transactions of repos and reverse repos at contracted rates for a specified
period of time. These are recorded as under:
Sale under repurchase obligation
Securities sold with a simultaneous commitment to repurchase at a specified future date (repos)
continue to be recognised in the consolidated statement of financial position and are measured in
accordance with accounting policies for investments. Amounts received under these agreements
are recorded as repurchase agreement borrowings. The difference between sale and repurchase
price is amortised as expense over the term of the repo agreement.
Purchase under resale obligation
Securities purchased with a corresponding commitment to resell at a specified future date (reverse
repos) are not recognised in the consolidated statement of financial position. Amounts paid under
these arrangements are included in reverse repurchase agreement lendings. The difference between
purchase and resale price is accrued as income over the term of the reverse repo agreement.
5.5 Investments
Investments (other than associates) are classified as follows:
Held for trading
These are investments acquired principally for the purpose of generating profits from short-term
fluctuations in price or dealer’s margin or are securities included in a portfolio in which a pattern of
short-term trading exists.
Held to maturity
These are investments with fixed or determinable payments and fixed maturities which the Group
has the intention and ability to hold till maturity.
Available for sale
These are investments which do not fall under the held for trading and held to maturity categories.
All purchases and sales of investments that require delivery within the time frame established by
regulations or market convention are recognised at the trade date. Trade date is the date on which
the Group commits to purchase or sell the investments.
Investments (other than held for trading) are initially measured at fair value plus transaction cost
associated with the investment. Investments classified as held for trading are initially measured at
fair value, and transaction costs are expensed in the profit and loss account.
109
After initial recognition, quoted securities, other than those classified as held to maturity, are carried
at market value. Unquoted securities are valued at cost less impairment in value, if any. Held to
maturity securities are carried at amortised cost.
Surplus / (deficit) arising on revaluation of quoted securities which are classified as available for sale
investments is taken to a separate account which is shown in the statement of financial position
below equity. The surplus / (deficit) arising on these securities is taken to the profit and loss account
when actually realised upon disposal or in case of impairment of securities. The unrealised surplus
/ (deficit) arising on revaluation of quoted securities which are classified as held for trading is taken
to the profit and loss account.
Provision for diminution in the values of securities is made after considering impairment, if any, in
their value and charged to profit and loss account. Impairment is recognised when there is an
objective evidence of significant and prolong decline in the value of such securities. Provision for
impairment against debt securities is made as per the aging criteria prescribed by the Prudential
Regulations of SBP and in case of unquoted equity securities on the basis of book value of investee's
net assets.
Premium or discount on debt securities classified as available for sale and held to maturity is
amortised using effective interest method and taken to the profit and loss account.
Investment in associates
Investment in associates are accounted for by using equity method of accounting.
5.6 Advances
Loans and advances
These are stated net of provisions for non-performing advances. Provision for non-performing
advances is determined in accordance with the requirements of the Prudential Regulations and is
charged to the profit and loss account. The Bank also maintains general provision in addition to the
requirements of the Prudential Regulations on the basis of the management's risk assessment.
Advances are written off when there are no realistic prospects of recovery.
Finance lease receivables
Leases where the Bank transfers substantially all the risks and rewards incidental to ownership of
an asset to the lessee are classified as finance leases. A receivable is recognised at an amount
equal to the present value of the lease payments including any guaranteed residual value.
Ijarah finance
In accordance with the requirements of IFAS 2 'Ijarah', assets leased out under ijarah arrangements
on or after 01 January 2009 are stated at cost less depreciation and impairment, if any and included
under "Advances". Such assets are depreciated over the terms of Ijarah contracts. Ijarah arrangements
executed before the above referred date are accounted for as finance lease.
Murabaha
Funds disbursed under murabaha arrangements for purchase of goods are recorded as advance
for murabaha. On culmination of murabaha i.e. sale of goods to customers, murabaha receivables
are recorded at the sale price net of deferred income. Goods purchased but remaining unsold at
the reporting date are recorded as inventories.
110
5.7 Operating fixed assets
Tangible operating assets - owned
Land is measured at cost at the time of initial recognition and is subsequently carried at revalued
amount. Buildings are initially measured at cost and upon revaluation, are carried at revalued amount
less accumulated depreciation and impairment, if any. All other operating fixed assets are stated
at cost less accumulated depreciation and impairment, if any. Depreciation is charged to profit and
loss account on straight line basis so as to charge the assets over their expected useful lives at the
rates specified in note 13.2. The depreciation charge is calculated after taking into account residual
value, if any. The residual values, useful lives and depreciation method are reviewed annually and
adjusted, if appropriate. Depreciation is charged on prorata basis, i.e., full month charge in the month
of purchase and no charge in the month of disposal.
Land and buildings are revalued by independent professionally qualified valuers with sufficient
regularity to ensure that the net carrying amount does not differ materially from the fair value. The
surplus arising on revaluation of fixed assets is credited to the “surplus on revaluation of assets"
account shown below equity. The Bank has adopted the following accounting treatment of depreciation
on revalued assets, keeping in view the requirements of the Companies Ordinance, 1984 and
SECP's SRO 45(1)/2003 dated 13 January 2003:
- depreciation on assets which are revalued is determined with reference to the value assigned
to such assets on revaluation and depreciation charge for the year is taken to the profit and
loss account; and
- an amount equal to incremental depreciation for the year net of deferred taxation is transferred
from surplus on revaluation of assets to unappropriated profit through statement of changes
in equity to record realisation of surplus to the extent of the incremental depreciation charge
for the year.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset,
as appropriate, only when it is probable that future economic benefits associated with the item will
flow to the Bank and the cost of the item can be measured reliably. The carrying amount of the
replaced part is derecognised. All other repairs and maintenance are charged to the income statement
during the financial period in which they are incurred.
Gains and losses on disposal of fixed assets are included in income currently, except that the related
surplus on revaluation of land and buildings (net of Deferred tax) is transferred directly to unappropriated
profit.
Tangible operating assets - leased
Leases where the Group assumes substantially all the risks and rewards of ownership are classified
as finance leases. Assets subject to finance lease are accounted for by recording the assets and
related liability. These are stated at lower of fair value and the present value of minimum lease
payments at the inception of lease less accumulated depreciation. Financial charges are allocated
over the period of lease term so as to provide a constant periodic rate of financial charge on the
outstanding liability. Depreciation is charged on the basis similar to the owned assets.
111
Intangible assets
Intangible assets having a finite useful life are stated at cost less accumulated amortisation and
impairment, if any. Amortisation is based on straight line method by taking into consideration the
estimated useful life of assets at the rates specified in note 13.3. Intangible assets are amortised
on prorata basis i.e. full month amortisation in the month of purchase and no amortisation in the
month of disposal. Intangible assets with indefinite useful lives are not amortised instead they are
systematically tested for impairment annually.
Capital work in progress
Capital work in progress is stated at cost less impairment, if any.
Impairment
The carrying values of fixed assets are reviewed for impairment when events or changes in
circumstances indicate that the carrying values may not be recoverable. If any such indication exists
and where the carrying values exceed the estimated recoverable amounts, the fixed assets are
written down to their recoverable amounts.
The resulting impairment loss is taken to profit and loss account except for impairment loss on
revalued assets which is adjusted against the related revaluation surplus to the extent that the
impairment loss does not exceed the surplus on revaluation of assets.
5.8 Employees' benefits
Defined benefit plan
by the Trustees. The Bank's costs and contributions are determined based on actuarial valuation
carried out at each year end using Projected Unit Credit Actuarial Method. Net cumulative unrecognised
actuarial gains / losses relating to previous reporting periods in excess of the higher of 10% of
present value of defined benefit obligation or 10% of the fair value of plan assets are recognised
as income or expense over the estimated remaining working lives of the employees.
Defined contribution plan
The Bank operates an approved provident fund scheme for all its regular permanent employees,
administered by the Trustees. Equal monthly contributions are made both by the Bank and its
employees to the fund at the rate of 10% of the basic salary in accordance with the terms of the
scheme.
AL Habib Capital Markets (Private) Limited operates un approved provident fund scheme for its
confirmed employees. Contributions are made by the company and the employees at the rate 10%
of the basic salary in accordance with the terms of the scheme.
Compensated absences
The Bank accounts for all accumulating compensated absences when employees render service
that increases their entitlement to future compensated absences. The liability is determined based
on actuarial valuation carried out using the Projected Unit Credit Method.
5.9 Provisions against liabilities
These are recognised when the Group has a legal or constructive obligation as a result of past
events, it is probable that an outflow of resources will be required to settle the obligation and a
reliable estimate of the amount can be made. Provisions are reviewed at each reporting date and
are adjusted to reflect the current best estimate.
112
5.10 Provisions against off-balance sheet obligations
The Group, in the ordinary course of business, issues letters of credit, acceptances, guarantees,
bid bonds, performance bonds etc. The commission against such contracts is recognised in the
profit and loss account under "fees, commission and brokerage income" over the period of contracts.
The Group's liability under such contracts is measured at the higher of the amount representing
unearned commission income at the reporting date and the best estimate of the amount expected
to settle any financial obligation arising under such contracts.
5.11 Revenue recognition
(a) Mark-up / interest / return on advances and investments is recognised on accrual basis, except in
case of advances classified under the Prudential Regulations on which mark-up is recognised on
receipt basis. Markup / interest / return on rescheduled / restructured loans and advances and
investments is recognised as permitted by the regulations of SBP.
(b) Financing method is used in accounting for income from lease financing. Under this method, the
unrealised lease income is deferred and taken to income over the term of the lease period so as
to produce a constant periodic rate of return on the outstanding net investment in lease. Gain / loss
on termination of lease contracts, front end fee and other lease income are recognised as income
on receipt basis.
(c) The rentals from ijarah are recognised as income over the term of the contract net of depreciation
expense relating to the ijarah assets.
(d) Income from murabaha is accounted for on a time proportionate basis over the period of murabaha
transaction.
(e) Dividend income is recognised when the right to receive is established.
(f) Gain or loss on sale of investments are recognised in profit and loss account in the year in which
they arise.
(g) Fee, commission and brokerage income are recognised as services are performed.
5.12 Taxation
Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit
and loss account except to the extent that it relates to the items recognised directly in equity or
surplus on revaluation of assets, in which case it is recognised in equity or surplus on revaluation
of assets.
Current
Provision for current tax is based on the taxable income for the year, using tax rates enacted or
substantively enacted at the statement of financial position date and any adjustments to the tax
payable in respect of previous years. Current tax assets and liabilities are measured at the amount
expected to be recovered from or paid to taxation authorities.
Deferred
Deferred tax is provided on all temporary differences at the statement of financial position date
between the tax bases of assets and liabilities and their carrying amounts for financial reporting
purposes.
113
Deferred tax assets are recognised for all deductible temporary differences and unused tax losses,
to the extent that it is probable that taxable profits will be available against which the deductible
temporary differences and unused tax losses can be utilised.
Deferred tax liabilities are recognised for all taxable temporary differences, except, in respect of
taxable temporary differences associated with investment in foreign operations, when the timing
of the reversal of the temporary differences can be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future.
The carrying amount of deferred tax assets are reviewed at each statement of financial position
date and reduced to the extent that it is no longer probable that sufficient taxable profit or taxable
temporary differences will be available to allow all or part of the deferred tax asset to be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the
period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that
have been enacted or substantively enacted at the statement of financial position date.
5.13 Currency translation
Functional and presentation currency
These consolidated financial statements are presented in Pak Rupees which is the Group's functional
currency and presentation currency.
Transactions and balances in foreign currencies
Foreign currency transactions are translated into Pak Rupees at the exchange rates prevailing on
the date of transaction. Monetary assets and liabilities in foreign currencies are translated into Pak
Rupees at the exchange rates prevailing at the reporting date. Non-monetary items that are measured
in terms of historical cost in a foreign currency are translated using the exchange rates at the dates
of the initial transactions. Non-monetary items measured at fair value in a foreign currency are
translated using exchange rates at the date when the fair value was determined. Exchange gains
or losses are included in income currently.
Foreign operations
The assets and liabilities of foreign operations are translated to Pak Rupees at exchange rates
prevailing at the reporting date. The income and expense of foreign operations are translated at
rate of exchange prevailing during the year. Exchange gain or loss on such translation is taken to
equity through statement of other comprehensive income under "foreign currency translation reserve".
Commitments
Commitments for outstanding forward foreign exchange contracts are translated at forward rates
applicable to their respective maturities.
5.14 Financial instruments
Financial assets and financial liabilities are recognised at the time when the Group becomes a party
to the contractual provision of the instrument. Financial assets are de-recognised when the contractual
right to future cash flows from the asset expires or is transferred along with the risk and reward of
ownership of the asset. Financial liabilities are de-recognised when obligation is discharged, cancelled
or expired. Any gain or loss on de-recognition of the financial asset and liability is recognised in the
profit and loss account of the current period.
114
5.15 Derivative financial instruments
Derivative financial instruments are initially recognised at their fair value on the date on which the
derivative contract is entered into and are subsequently remeasured at fair value. All derivative
financial instruments are carried as asset when fair value is positive and liabilities when fair value
is negative. Any change in the value of derivative financial instruments is taken to the profit and loss
account.
5.16 Off-setting
Financial assets and financial liabilities are only off-set and the net amount is reported in the financial
statements when there is a legally enforceable right to set-off the recognised amount and the Group
intends either to settle on a net basis, or to realise the assets and to settle the liabilities simultaneously.
Income and expense items of such assets and liabilities are also off-set and the net amount is
reported in the financial statements.
5.17 Dividends and appropriations to reserves
Dividends and appropriations to reserves are recognised in the year in which these are approved,
except appropriations required by the law which are recorded in the period to which they pertain.
5.18 Segment reporting
A segment is a distinguishable component of the Group that is engaged in providing products and
services (business segment), or in providing products or services within a particular economic
environment (geographical segment), which is subject to risk and rewards that are different from
those of other segments. The segment reporting format has been determined and prepared in
conformity with the format of financial statements and guidelines, prescribed by SBP vide BSD
Circular No. 04, dated, 17 February 2006. The Group's primary format of reporting is based on
business segments.
5.18.1 Business segments
Retail banking
It consists of retail lending, deposits and banking services to private individuals and small businesses.
The retail banking activities include provision of banking and other financial services, such as current
and savings accounts, credit cards, consumer banking products etc to individual customers, small
merchants and SMEs.
Commercial banking
Commercial banking represents provision of banking services including treasury and international
trade related activities to large corporate customers, multinational companies, government and semi
government departments and institutions and SMEs treated as corporate under the Prudential
Regulations.
Retail brokerage
Retail brokerage activities include the business of equity, money market and foreign exchange
brokerage, equity research and corporate financial advisory and consultancy services.
5.18.2 Geographical segments
The Group operates in two geographic regions, being:
- Pakistan
- Middle East
115
5.19 Earnings per share
The Group presents basic and diluted earnings per share (EPS). Basic EPS is calculated by dividing
the profit or loss attributable to ordinary shareholders of the Bank by the weighted average number
of ordinary shares outstanding during the period / year. Diluted EPS is determined by adjusting the
profit or loss attributable to ordinary shareholders and the weighted average number of ordinary
shares outstanding for the effects of all dilutive potential ordinary shares, if any. There were no
convertible dilutive potential ordinary shares in issue at 31 December 2012.
5.20 Clients' assets
The Group provides services that result in the holding of assets on behalf of its clients. Such assets
are not reported in the financial statements, as they are not the assets of the Group.
6. ACCOUNTING JUDGMENTS AND ESTIMATES
The preparation of financial statements requires management to make judgments, estimates and
assumptions that affect the application of policies and reported amounts of assets and liabilities,
income and expenses. The estimates and associated assumptions are based on historical experience
and various other factors that are believed to be reasonable under the circumstances, the result
of which forms the basis of making judgment about carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these estimates. The estimates
and underlying assumptions are reviewed on an ongoing basis. Revision to accounting estimates
are recognised in the period in which the estimate is revised if the revision affects only that period,
or in period of revision and future periods if the revision affects both current and future periods. The
estimates and judgments that have a significant effect on the financial statements are in respect
of the following:
Note
Classification of investments and provision for diminution
in the value of investments 5.5 & 11
Provision against non-performing advances 5.6 & 12
Useful lives of assets and methods of depreciation and amortisation 5.7 & 13
Defined benefit plan 5.8 & 37
Provisions against off-balance sheet obligations 5.10 & 21
Current and deferred taxation 5.12 & 20
7. STANDARDS, INTERPRETATIONS AND AMENDMENTS TO APPROVED ACCOUNTING

STANDARDS THAT ARE NOT YET EFFECTIVE
The following revised standards and interpretation with respect to the approved accounting standards
as applicable in Pakistan would be effective from the dates mentioned below against the respective
standard or interpretation:
Effective date
(accounting periods beginning
Standard, interpretation or amendment on or after)
IAS 1 – Presentation of Financial Statements
– Presentation of items of other comprehensive income 01 July 2012
IAS 19 – Employee Benefits –(Amendment) 01 January 2013
IAS 32 – Offsetting Financial Assets and Financial liabilities
– (Amendment) 01 January 2014
IFRIC 20 – Stripping Costs in the Production Phase of a Surface Mine 01 January 2013
116
The Group expects that the adoption of the above revisions and amendments of the standards will
not materially affect the Group's financial statements in the period of initial application other than
the amendments to IAS-19 'Employee Benefits' as described below:
Amendments to IAS 19 range from fundamental changes to simple clarification and re-wording. The
significant changes include the following:
- For defined benefit plans, the ability to defer recognition of actuarial gains and losses (i.e., the
corridor approach) has been removed. As revised, actuarial gains and losses are recognised
in other comprehensive income when they occur. Amounts recorded in profit and loss are limited
to current and past service costs, gains or losses on settlements, and net interest income
(expense). All other changes in the net defined benefit asset (liability) are recognised in other
comprehensive income with no subsequent recycling to profit and loss.
- The distinction between short-term and other long-term employee benefits will be based on the
expected timing of settlement rather than the employee’s entitlement to the benefits.
- Objectives for disclosures of defined benefit plans are explicitly stated in the revised standard,
along with new or revised disclosure requirements. These new disclosures include quantitative
information of the sensitivity of the defined benefit obligation to a reasonably possible change
in each significant actuarial assumption.
While the Group is currently assessing the full impact of the above amendments which are effective
from 01 January 2013 on the consolidated financial statements, it is expected that the adoption of
the said amendments will result in retrospective change in the Group's accounting policy related to
recognition of actuarial gains and losses (refer to note 5.8 to the consolidated financial statements)
to recognise actuarial gains and losses in total in other comprehensive income in the period in which
they occur. The potential impact of the said changes on the financial position and performance for
the year 2012 upon adoption of the standards in 2013 is estimated as under:
2012
(Rupees in '000)
Net decrease in unappropriated profit as on 01 January 2012 175,782
Net decrease in other comprehensive income 7,984
Net increase in profit or loss for the year 8,898
Net increase in employees’ benefit liability 174,668
The impact for the year 2013 has not yet been determined by the Bank.
In addition to the above amendments, improvements to various accounting standards have also been
issued by the IASB. Such improvements are generally effective for accounting periods beginning on
or after 01 January 2013. The Group expects that such improvements to the standards will not have
any material impact on the Group's financial statements in the period of initial application.
Further, following new standards have been issued by IASB which are yet to be notified by SECP for
the purpose of applicability in Pakistan.
IASB Effective date
(annual periods beginning
on or after)
IFRS 9 – Financial Instruments: Classification and Measurement 01 January 2015
IFRS 10 – Consolidated Financial Statements 01 January 2013
IFRS 11 – Joint Arrangements 01 January 2013
IFRS 12 – Disclosure of Interests in Other Entities 01 January 2013
IFRS 13 – Fair Value Measurement 01 January 2013
117
Note 2012 2011
(Rupees in '000)
8. CASH AND BALANCES WITH TREASURY BANKS
In hand
Local currency 4,902,302 4,013,530
Foreign currencies 1,144,677 591,887
National prize bonds 27,353 14,962
6,074,332 4,620,379
In transit
Local currency 71,940 10,000
Foreign currencies 3,007 –00
74,947 10,000
With State Bank of Pakistan in:
Local currency current accounts 8.1 13,024,891 10,689,526
Local currency current account-Islamic Banking 8.2 224,122 198,378
Foreign currency deposit accounts
Cash reserve account 8.3 1,491,248 1,466,115
Cash reserve account-Islamic Banking 6,412 3,778
Special cash reserve account 8.3 4,473,744 4,398,345
Local US Dollar collection account 8.4 27,855 34,107
19,248,272 16,790,249
With National Bank of Pakistan in:
Local currency current accounts 2,066,794 1,537,360
27,464,345 22,957,988
8.1 Represent statutory cash reserve maintained under Section 36 of the State Bank of Pakistan Act,
1956.
8.2 Represents statutory cash reserve maintained by the Islamic Banking branches in accordance with
BPD Circular No. 01 of 2003.
8.3 Represent cash reserves maintained against foreign currency deposits mobilised under Circular FE-
25 of 1998 to comply with statutory requirements.
8.4 Represents US Dollar collection account maintained with SBP in accordance with Circular FE-02 of
2004.
118
Note 2012 2011
(Rupees in '000)
9. BALANCES WITH OTHER BANKS
In Pakistan
Current accounts 751,293 734,227
Deposit accounts –00 350,000
Savings accounts 9.1 3,206 468,324
754,499 1,552,551
Outside Pakistan
Current accounts 2,697,112 846,210
Deposit accounts 9.2 6,295,637 4,345,882
8,992,749 5,192,092
9,747,248 6,744,643
9.1 These carry expected profit rates of 6% (2011: 6.99% to 8.25%) per annum.
9.2 These carry interest rates upto 0.09% (2011: upto 0.04%) per annum.
10. LENDINGS TO FINANCIAL INSTITUTIONS
In local currency
Repurchase agreement lendings (Reverse Repo) 10.1 993,981 –00
10.1 Securities held as collateral against repurchase agreement lendings
2012 2011
Further Further
Held by given as Total Held by given as Total
Bank collateral Bank collateral
(Rupees in '000)
Market Treasury Bills 993,981 –00 993,981 –00 –00 –00
10.1.1 The market value of securities held as collateral against lendings to financial institutions amounted to
Rs. 999.753 (2011: Nil) million.
119
11. INVESTMENTS
2012 2011
Note
Held by Given as Total Held by Given as Total
11.1 Investments by type Group collateral Group collateral
(Rupees in '000)
Available for sale securities 11.5
Market Treasury Bills 114,006,833 50,291,508 164,298,341 78,715,641 27,588,855 106,304,496
Foreign Currency Bonds 1,108,499 –00 1,108,499 979,474 –00 979,474
Sukuks 3,508,008 –00 3,508,008 6,947,740 –00 6,947,740
Ordinary shares of listed
companies 276,576 –00 276,576 151,110 –00 151,110
Ordinary shares of
unlisted companies 39,570 –00 39,570 39,570 –00 39,570
Open ended mutual funds 1,727,189 –00 1,727,189 1,478,000 –00 1,478,000
135,148,893 50,291,508 185,440,401 103,763,399 27,588,855 131,352,254
Held to maturity securities 11.2
Market Treasury Bills 48,660,340 –00 48,660,340 76,260,132 –00 76,260,132
Sukuks 229,705 –00 229,705 266,900 –00 266,900
61,682,195 –00 61,682,195 90,478,435 –00 90,478,435
Associates 11.12
Habib Sugar Mills Limited 281,831 –00 281,831 248,315 –00 248,315
Habib Asset Management Limited 40,013 –00 40,013 35,254 –00 35,254
First Habib Income Fund 556,646 –00 556,646 541,283 –00 541,283
First Habib Stock Fund 56,665 –00 56,665 44,149 –00 44,149
First Habib Cash Fund 318,760 –00 318,760 104,094 –00 104,094
First Habib Islamic Balanced Fund 25,358 –00 25,358 –00 –00 –00
1,279,273 –00 1,279,273 973,095 –00 973,095
Investments at cost 198,110,361 50,291,508 248,401,869 195,214,929 27,588,855 222,803,784
value of investments 11.4 (6,586) –00 (6,586) (6,600) –00 (6,600)
Investments (net of provisions) 198,103,775 50,291,508 248,395,283 195,208,329 27,588,855 222,797,184
available for sale
investments - net 1,437,899 90,322 1,528,221 162,058 145,859 307,917
available for sale investments 199,541,674 50,381,830 249,923,504 195,370,387 27,734,714 223,105,101
11.2 The aggregate market value of held to maturity securities as at 31 December 2012 amounted to Rs. 62,824 (2011: Rs. 91,265) million.
120
Note 2012 2011
(Rupees in '000)
11.3 Investments by segment
Market Treasury Bills 11.6 212,958,681 182,564,628
Pakistan Investment Bonds 11.7 25,950,121 28,100,205
Foreign Currency Bonds 11.10 1,006,813 620,558
Sukuks 11.8 1,000,000 4,000,000
240,915,615 215,285,391
Fully paid-up ordinary shares

Listed companies 11.5.5 276,576 151,110
Unlisted companies 11.11 39,570 39,570
316,146 190,680
Term finance certificates, sukuks and bonds
Term Finance Certificates
Listed term finance certificates 749,760 928,142
Unlisted term finance certificates 574,487 374,920
11.9 1,324,247 1,303,062

Sukuks 11.8 2,737,713 3,214,640
Foreign Currency Bonds 11.10 101,686 358,916
4,163,646 4,876,618
Others
Open ended mutual funds 11.5.9 1,727,189 1,478,000
Associates 11.12 1,279,273 973,095
3,006,462 2,451,095
Investments at cost 248,401,869 222,803,784

value of investments 11.4 (6,586) (6,600)
Investments - net of provisions 248,395,283 222,797,184

available for sale investments - net 1,528,221 307,917
available for sale investments 249,923,504 223,105,101
121
Note 2012 2011
(Rupees in '000)
11.4 Particulars of provision for diminution in the
value of investments

Adjustment of provision upon disposal of investments (14) (9)
Closing balance 11.4.1 6,586 6,600
11.4.1 Particulars of provision in respect of type and segment
Listed companies 886 900

Unlisted companies 5,700 5,700
6,586 6,600
11.5 Quality of available for sale securities

Name of security Face 2012 2011 2012 2011 2012 2011
value Rating* Cost Carrying value
Rs. / USD (Rupees in '000)
11.5.1 Market Treasury Bills – Unrated Unrated 164,298,341 106,304,496 164,686,670 106,668,552
11.5.2 Pakistan Investment Bonds – Unrated Unrated 13,446,569 14,617,483 14,382,871 14,653,808
11.5.3 Foreign Currency Bonds

Government of Sri Lanka Bonds USD 100 B+ _ 101,686 –00 105,165 –00
Government of Sri Lanka Bonds USD 100 _ B+ –00 358,916 –00 366,529
1,108,499 979,474 1,164,097 889,563
11.5.4 Sukuks
2012 2011 Name of Security
No. of certificates
Dar Al Arkan International Sukuk
–00 20,000 Company USD 100 – A– –00 179,891 –00 158,304
170,000 170,000 Engro Foods Limited Rs.5,000 A A 850,000 850,000 850,000 850,000
–00 30,000 Government of Pakistan Ijarah Sukuk - III Rs.100,000 – Unrated –00 3,000,000 –00 3,014,100
10,000 10,000 Government of Pakistan Ijarah Sukuk - VIII Rs. 100,000 Unrated Unrated 1,000,000 1,000,000 1,009,800 1,002,800
1,087,849 1,087,849 Liberty Power Tech Limited Rs.1,000 A+ AA 1,033,008 1,087,849 1,033,008 1,087,849
–00 40,000 Sui Southern Gas Company Limited Rs.5,000 – AA –00 80,000 –00 80,000
150,000 150,000 WAPDA Second Sukuk Company Limited Rs.5,000 Unrated Unrated 625,000 750,000 625,000 750,000
3,508,008 6,947,740 3,517,808 6,943,053
122
11.5.5 Ordinary shares of listed companies
2012 2011 Name of security Face 2012 2011 2012 2011 2012 2011
No. of shares value Rating* Cost Carrying value
34,059 –00 Attock Petroleum Limited Rs.10 Unrated – 15,207 –00 17,438 –00
3,595 –00 Aisha Steel Limited Rs.10 A- – –00 –00 36 –00
35,954 35,954 Arif Habib Corporation Limited Rs.10 AA AA 1,477 1,477 954 932
9,806 9,806 Fatima Fertilizer Company Limited Rs.10 A+ A+ –00 –00 259 225
2,700,415 1,201,952 Habib Metropolitan Bank Limited Rs.10 AA+ AA+ 36,204 22,139 37,840 20,301
251,000 251,000 Hub Power Company Limited Rs.10 AA+ AA+ 8,821 8,821 11,355 8,584
52,862 52,862 International Industries Limited Rs.10 Unrated Unrated 357 357 1,740 2,009
3,364,056 3,364,056 International Steel Limited Rs.10 Unrated Unrated 47,332 47,332 40,705 39,057
5,061 5,061 Jahangir Siddiqui & Company Limited Rs.10 AA AA 284 284 82 21
532 532 JS Investments Limited Rs.10 A+ A+ 22 22 4 1
107,268 –00 Meezan Bank Limited Rs. 10 AA- – 3,028 –00 3,223 –00
234,075 –00 Pakistan Oilfields Limited Rs.10 Unrated – 89,111 –00 102,417 –00
425,168 2,500 Pakistan Petroleum Limited Rs.10 Unrated Unrated 68,421 422 75,165 421
17,500 8,000 Packages Limited Rs.10 AA AA 1,429 668 2,645 662
200,000 –00 Pakistan Telecommunication Rs.10 Unrated – 2,694 –00 3,470 –00
18,000 –00 Shell Pakistan Limited Rs.10 Unrated – 2,189 –00 2,452 –00
–00 850,717 Thal Limited Rs. 10 – – –00 69,588 –00 69,588
276,576 151,110 299,785 141,801
11.5.6 Ordinary shares of unlisted companies

No. of shares / certificates
3,000,000 3,000,000 Khushhali Bank Limited Rs.10 A A 30,000 30,000 30,000 30,000
Pakistan Export Finance Guarantee
569,958 569,958 Agency Limited Rs.10 Unrated Unrated 5,700 5,700 –00 –0
24 24 S.W.I.F.T – Unrated Unrated 3,870 3,870 3,870 3,870
39,570 39,570 33,870 33,870
11.5.7 Listed term finance certificates

No. of certificates
6,000 6,000 Allied Bank Limited Rs.5,000 AA AA – 29,928 29,940 30,261 30,273
33,800 33,800 Allied Bank Limited - II Rs.5,000 AA AA – 168,797 168,865 170,316 166,965
5,000 5,000 Askari Bank Limited - II Rs.5,000 AA – AA – 24,930 24,940 25,030 25,015
40,000 40,000 Engro Fertilizers Limited - III Rs.5,000 A AA 199,600 199,680 194,750 195,593
–00 5,000 Jahangir Siddiqui & Company Ltd - IV Rs.5,000 – AA –00 12,478 –00 13,027
6,600 6,600 NIB Bank Limited Rs.5,000 A+ A+ 32,941 32,954 33,026 32,297
–00 20,000 Orix Leasing Pakistan Limited - III Rs.5,000 AA+ AA+ –00 16,654 –00 16,570
20,000 20,000 Pak Arab Fertilizers Limited Rs.5,000 AA AA 30,000 74,000 30,031 74,000
5,000 5,000 United Bank Limited - III Rs.5,000 AA AA 16,633 24,950 16,877 25,315
502,829 584,461 500,291 579,055
123
2012 2011 Name of Security Face 2012 2011 2012 2011 2012 2011
No. of certificates / units value Rating* Cost Carrying value
11.5.8 Unlisted term finance certificates
150 150 Askari Bank Limited - IV Rs.1,000,000 AA – AA– 149,940 150,000 149,940 150,000
20,000 20,000 Bank Alfalah Limited - IV Rs.5,000 AA – AA– 99,880 99,920 99,880 99,920
Standard Chartered Bank
56,600 –00 (Pakistan) Limited Rs.5,000 AAA – 283,000 –00 283,000 –00
532,820 249,920 532,820 249,920
11.5.9 Open ended mutual funds
5,380,103 6,004,292 ABL Cash Fund Rs.10 AA AA+ 50,000 60,000 53,870 60,162
–00 4,997,052 ABL Government Securities Fund Rs.10 – A+ –00 50,000 –00 50,100
3,984 483,822 Askari Sovereign Cash Fund Rs.100 AAA AA+ 189 50,000 401 48,622
24,657 97,084 Atlas Money Market Fund Rs.500 AA AA+ 12,000 50,000 12,453 48,889
–00 2,500,000 BMA Empress Cash Fund Rs.10 – AA+ –000 25,000 –00 25,287
533,591 602,849 HBL Money Market Fund Rs.100 AA AA+ 50,000 60,000 54,004 62,205
–00 500,000 IGI Money Market Fund Rs.100 – AA+ –00 50,000 –00 50,341
269,857 78,234 MCB Cash Management Optimizer Fund Rs. 100 AA AA+ 25,000 8,000 27,059 8,049
–00 4,853,756 NAFA Government Securities Liquid Fund Rs. 10 – AAA –00 50,000 –00 49,422
22,746,463 6,395,907 NIT Unit Fund Rs.10 AM2– AM2- 700,000 200,000 754,955 165,654
60,308,340 59,181,134 NIT Government Bond Fund Rs.10 AA AA 600,000 600,000 634,209 632,416
19,469,983 20,000,000 NIT Income Fund Rs.10 A+ AA- 200,000 200,000 211,526 215,622
–00 504,927 Pak Oman Advantage Islamic Income Fund Rs. 50 – A+ –00 25,000 –00 26,532
–00 2,500,000 Pak Oman Government Securities Fund Rs.10 – AA –00 25,000 –00 25,579
–00 250,000 PICIC Cash Fund Rs.100 – AA+ –00 25,000 –00 25,069
789,747 –00 Primus Cash Fund Rs.100 AAA – 50,000 –00 52,558 –00
426,706 –00 UBL Liquidity Plus Fund Rs.100 AA+ – 40,000 –00 42,789 –00
1,727,189 1,478,000 1,843,824 1,493,949
185,440,401 131,352,254 186,962,036 131,653,571
* Rating in case of ordinary shares of listed and unlisted companies represents the rating of investee companies, in all other cases,
rating represents the rating of underlying instruments.
11.6 Market Treasury Bills
These securities have a maturity period of six months to one year (2011: six months to one year), with yield ranging between 9.25%
to 11.92% (2011: 11.78% to 13.91%) per annum.
11.7 Pakistan Investment Bonds
These securities have a maturity period of 3, 5, 7 and 10 years (2011: 3, 5, 7 and 10 years) with interest rates ranging between 9% to
12% (2011: 9% to 12%) per annum. These include securities costing Rs. 5 (2011: Rs. 5) million pledged with the Controller of Military
Accounts, Karachi as a security deposit for extending banking facilities on account of regimental funds vis-a-vis private fund accounts.
124
11.8 Sukuks
Redeemable
value per Maturity
Available for sale

–00 30,000 –00 Mar-12 Government of Pakistan Ijarah Sukuk - III Weighted average –00 3,000,000
6 months T-Bills rate
10,000 10,000 100,000 May-14 Government of Pakistan Ijarah Sukuk - VIII Weighted average 1,000,000 1,000,000
6 months T-Bills rate
1,000,000 4,000,000
Others
Available for sale

–00 20,000 –00 Jul-12 Dar Al Arkan International Sukuk Company 3 months' LIBOR plus 225 bps –00 179,891
170,000 170,000 5,000 Jan-17 Engro Foods Limited 6 months' KIBOR plus 69 bps 850,000 850,000
1,087,849 1,087,849 950 Mar-21 Liberty Power Tech Limited 3 months' KIBOR plus 300 bps 1,033,008 1,087,849
–00 40,000 –00 Dec-12 Sui Southern Gas Company Limited 3 months' KIBOR plus 20 bps –00 80,000
150,000 150,000 4,167 Jul-17 WAPDA Second Sukuk Company Limited 6 months' KIBOR less 25 bps 625,000 750,000
2,508,008 2,947,740
Held to maturity
–00 5,000 –00 Oct-12 WAPDA First Sukuk Company Limited 6 months' KIBOR plus 35 bps –00 25,000
250,000 250,000 919 Mar-21 Liberty Power Tech Limited 3 months' KIBOR plus 300 bps 229,705 241,900
229,705 266,900
2,737,713 3,214,640
3,737,713 7,214,640
11.8.1 These Sukuks have face value of Rs. 5,000 per certificate except for Liberty Power Tech Limited’s Sukuk which has face value of
Rs. 1,000 per certificate and Government of Pakistan Ijarah Sukuk which have face value of Rs. 100,000 per certificate.
11.9 Term Finance Certificates
Redeemable
value per Maturity
Listed - Available for sale
6,000 6,000 4,988 Dec-14 Allied Bank Limited* 6 months' KIBOR plus 190 bps 29,928 29,940
5,000 5,000 4,986 Oct-13 Askari Bank Limited - II* 6 months' KIBOR plus 150 bps 24,930 24,940
40,000 40,000 4,990 Nov-15 Engro Fertilizers Limited - III 6 months' KIBOR plus 155 bps 199,600 199,680
–00 5,000 –00 May-12 Jahangir Siddiqui & Company Limited - IV 6 months' KIBOR plus 250 bps –00 12,478
6,600 6,600 4,991 Mar-16 NIB Bank Limited* 6 months' KIBOR plus 115 bps 32,941 32,954
–00 20,000 –00 May-12 Orix Leasing Pakistan Limited - III 6 months' KIBOR plus 150 bps –00 16,654
20,000 20,000 1,500 Feb-13 Pak Arab Fertilizer Limited 6 months' KIBOR plus 150 bps 30,000 74,000
502,829 584,461
125
Redeemable
value per Maturity
Unlisted - Available for sale

150 150 999,600 Dec-21 Askari Bank Limited - IV* 6 months' KIBOR plus 175 bps 149,940 150,000
20,000 20,000 4,994 Dec-17 Bank Alfalah Limited - IV* 15.00% per annum 99,880 99,920
56,600 –00 5,000 Jan-22 Standard Chartered Bank (Pakistan) Limited* 6 months' KIBOR plus 75 bps 283,000 –00
532,820 249,920
Listed - Held to maturity
20,000 20,000 4,985 Feb-13 Askari Bank Limited* 6 months' KIBOR plus 150 bps 99,700 99,740
–00 15,000 –00 Nov-12 Bank Alfalah Limited - II* 6 months' KIBOR plus 150 bps –00 49,868
9,000 9,000 1,247 Feb-13 Faysal Bank Limited* 6 months' KIBOR plus 190 bps 11,223 22,455
5,000 5,000 1,247 May-13 Soneri Bank Limited* 6 months' KIBOR plus 160 bps 6,235 18,705
5,000 5,000 1,250 Feb-13 Standard Chartered Bank (Pakistan) Ltd. - III* 6 months' KIBOR plus 200 bps 6,250 17,480
–00 1,070 –00 Aug-12 United Bank Limited* 8.45% per annum –00 3,558
4,000 4,000 4,999 Mar-13 United Bank Limited - II* 9.49% per annum 19,994 19,995
246,931 343,681
Unlisted - Held to maturity
2,500 2,500 16,667 Jan-13 Orix Leasing Pakistan Limited - IV 6 months' KIBOR plus 120 bps 41,667 125,000
1,324,247 1,303,062
*These Term Finance Certificates are subordinated.
11.9.1 These Term Finance Certificates have face value of Rs. 5,000 per certificate except for Orix Leasing Pakistan Limited
- IV, which have face value of Rs 100,000 per certificate and Askari Bank Limited - IV which have face value of Rs. 1,000,000
per certificate.
11.10 Foreign Currency Bonds
Redeemable
value per Maturity
of US $ 100 each
Federal Government Securities - Available for sale
80,000 60,000 8,277 Jun-17 Government of Pakistan Bonds 6.875% p.a. 662,181 455,068
40,000 20,000 8,616 Mar-16 Government of Pakistan Bonds 7.125% p.a. 344,632 165,490
1,006,813 620,558
Others - Available for sale
–00 40,000 –00 Oct-12 Government of Srilanka Bonds 8.250% p.a. –00 358,916
10,000 –00 10,169 Jan-15 Government of Srilanka Bonds 7.400% p.a. 101,686 –00
101,686 358,916
1,108,499 979,474
11.10.1 Foreign Currency Bonds are redeemable semi-annually.
126
11.11 Ordinary shares of unlisted companies
2012 2011 Name of companies Note 2012 2011

No. of ordinary shares / units (Rupees in '000)
3,000,000 3,000,000 Khushhali Bank Limited 30,000 30,000
Break up value per share: Rs. 13.71 (2011: Rs. 13) based on audited
Chief Executive: Mr. Ghalib Nishtar
569,958 569,958 Pakistan Export Finance Guarantee Agency Limited 5,700 5,700
Chief Executive: Mr. S. M. Zaeem
24 24 Society for Worldwide Interbank Financial Telecommunication (S.W.I.F.T) 3,870 3,870
allocated shares based on the financial contribution from network based
serviced by the Bank.
39,570 39,570
11.12 Associates
9,366,312 9,366,312 Habib Sugar Mills Limited 11.12.1 281,831 248,315
% of holding: 6.24% (2011: 6.24%)
Market value: Rs. 231.348 (2011: Rs. 205.216) million
Chief Executive: Mr. Raeesul Hasan
3,375,000 3,375,000 Habib Asset Management Limited 11.12.2 40,013 35,254
% of holding: 30% (2011: 30%)
Break up value per share: Rs. 10.87 (2011: Rs. 10.36) based on
audited financial statements for the year ended 30 June 2012
Chief Executive: Mr. Imran Azim
5,562,566 5,266,842 First Habib Income Fund 556,646 541,283
Net asset value: Rs. 100.07 (2011: Rs. 102.77)
500,000 500,000 First Habib Stock Fund 56,665 44,149
Average cost per unit: Rs. 100 (2011: Rs. 100)
3,182,506 1,010,249 First Habib Cash Fund 11.12.3 318,760 104,094
252,322 –00 First Habib Islamic Balanced Fund 25,358 –00
Average cost per unit: Rs. 99.08
Net Asset Value: Rs. 100.50
1,279,273 973,095
127
11.12.1 Due to common directorship in Habib Sugar Mills Limited, the Group considers the investee company as an associate.
11.12.2 Includes Rs. 24.750 (2011: Rs. 24.750) million invested in Habib Asset Management Limited classified as strategic
investment in accordance with SBP’s guidelines contained in BPD Circular Letter No. 16 of 2006 dated 01 August
2006.
11.12.3 This includes investment in seed capital aggregating to Rs. 50 million which is required to be held for a period of
two years.
2012 2011
(Rupees in '000)
11.13 Movement of investments in associates

Share of profit 140,224 84,546
Investment-net 233,090 52,949
Dividend received (67,136) (81,081)
Closing balance 1,279,273 973,095
11.14 Summary of audited financial information of associates

2012
Name of associates Based on the financial Assets Liabilities Equity Revenue Profit
statements for the year ended
(Rupees in '000)
First Habib Cash Fund June 30, 2012 2,033,816 6,866 2,026,950 153,783 142,954
First Habib Income Fund June 30, 2012 1,034,567 15,484 1,019,083 166,502 127,647
First Habib Stock Fund June 30, 2012 114,354 1,322 113,032 10,873 4,001
Habib Asset Management Limited June 30, 2012 126,755 4,420 122,335 46,467 5,804
Habib Sugar Mills Limited September 30, 2012 5,277,629 1,222,778 4,054,851 7,205,601 781,150
First Habib Islamic Balanced Fund Audited accounts not available
2011
Assets Liabilities Equity Revenue Profit
(Rupees in '000)
First Habib Cash Fund June 30, 2011 574,434 4,445 569,989 22,452 19,568
First Habib Income Fund June 30, 2011 1,264,765 13,302 1,251,463 217,227 161,947
First Habib Stock Fund June 30, 2011 124,506 1,202 123,304 28,906 21,065
Habib Asset Management Limited June 30, 2011 120,327 3,796 116,531 44,011 5,000
Habib Sugar Mills Limited September 30, 2011 4,016,747 498,657 3,518,090 7,587,780 755,016
First Habib Islamic Balanced Fund Audited accounts not available
128
Note 2012 2011
(Rupees in '000)
12. ADVANCES
Loans, cash credits, running finances, etc.

In Pakistan 126,981,078 101,962,223
Outside Pakistan 8,203,074 4,325,819
135,184,152 106,288,042
Net investment in finance lease / ijarah financing

In Pakistan 12.2 501,124 426,351
Outside Pakistan –00 –000
501,124 426,351
Ijarah financing under IFAS 2 12.3 & 5.6 307,173 109,668
Murabaha 12.4 3,206,606 2,007,557
Bills discounted and purchased

(excluding market treasury bills)
Payable in Pakistan 1,924,843 1,928,992
Payable outside Pakistan 12,329,922 9,233,700
14,254,765 11,162,692
Advances - gross 153,453,820 119,994,310

Provision against non-performing loans and advances
Specific provision 12.5 (3,062,933) (2,998,847)
General provision against consumer advances
(as per SBP regulations) 12.6.1 (31,059) (32,331)
General provision 12.6.2 (2,500,000) (2,100,000)
(5,593,992) (5,131,178)
Advances - net of provisions 147,859,828 114,863,132
129
2012 2011
(Rupees in '000)
12.1 Particulars of advances - gross
12.1.1 In local currency 126,980,308 98,292,544

153,453,820 119,994,310
12.1.2 Short term (for upto one year) 126,503,727 99,426,895

Long term (for over one year) 26,950,093 20,567,415
153,453,820 119,994,310
12.2 Net investment in finance lease / ijarah financing

2012 2011
Later than Later than
Not later one and Not later one and
than one less than Over five than one less than Over five
year five years years Total year five years years Total
(Rupees in '000)
Lease / ijarah receivable 205,606 258,804 –0 464,410 200,095 190,153 –0 390,248

Residual value 29,450 83,940 –0 113,390 30,555 74,032 –0 104,587
Minimum lease / ijarah payments 235,056 342,744 –0 577,800 230,650 264,185 –0 494,835
Financial charges for future
periods (39,981) (36,695 ) –0 (76,676 ) (39,219) (29,265) –0 (68,484)
Present value of finance
lease / ijarah financing 195,075 306,049 –0 501,124 191,431 234,920 –0 426,351
12.3 Ijarah financing under IFAS 2

2012
Cost Accumulated Depreciation Book Value
01 Jan. Additions / 31 Dec. 01 Jan. Charge / 31 Dec. 31 Dec. depreciation
2012 (deletions) 2012 2012 (deletions) 2012 2012 %
(Rupees in '000)
Equipment 272,385 325,362 432,787 178,009 112,278 141,824 290,963
(164,960 ) (148,463)
Vehicles 20,383 7,220 27,603 5,091 6,302 11,393 16,210
292,768 332,582 460,390 183,100 118,580 153,217 307,173 33.33
(164,960 ) (148,463)
2011
Equipment 229,695 42,690 272,385 103,317 74,692 178,009 94,376

Vehicles 6,198 14,185 20,383 1,001 4,090 5,091 15,292
235,893 56,875 292,768 104,318 78,782 183,100 109,668 33.33
130
12.3.1 Future ijarah payments receivable 2012 2011
(Rupees in '000)
Not later than one year 149,447 69,594

Later than one year and not later than five years 189,244 41,657
338,691 111,251
12.4 Murabaha - gross 3,381,017 2,126,887

Less: Deferred murabaha income (53,465) (43,169)
Profit receivable shown in other assets (120,946) (76,161)
Murabaha 3,206,606 2,007,557
12.5 Advances include Rs. 3,705.730 (2011: Rs 3,203.630) million which have been placed under non-
performing status as detailed below:
2012
(Rupees in '000)
Category of classification
Substandard 379,505 92,802 472,307 94,876 23,200 118,076 94,876 23,200 118,076
Doubtful 83,246 –0 83,246 41,626 –0 41,626 41,626 –0 41,626
Loss 3,148,885 1,292 3,150,177 2,901,939 1,292 2,903,231 2,901,939 1,292 2,903,231
3,611,636 94,094 3,705,730 3,038,441 24,492 3,062,933 3,038,441 24,492 3,062,933
2011
(Rupees in '000)
Substandard 56,537 –0 56,537 14,134 –0 14,134 14,134 –0 14,134

Doubtful 100,467 –0 100,467 48,520 –0 48,520 48,520 –0 48,520
Loss 3,045,133 1,493 3,046,626 2,934,700 1,493 2,936,193 2,934,700 1,493 2,936,193
3,202,137 1,493 3,203,630 2,997,354 1,493 2,998,847 2,997,354 1,493 2,998,847
12.5.1 For the purposes of determining provision against non-performing advances, the Bank has not taken into account the Forced
Sales Value of pledged stock and mortgaged properties held as collateral against non-performing advances.
131
12.6 Particulars of provision against non-performing loans and advances
2012 2011
Note Specific General Total Specific General Total
(Rupees in '000)
Opening balance 2,998,847 2,132,331 5,131,178 1,682,297 1,628,184 3,310,481
Charge for the year
Specific provision 400,812 –00 400,812 1,481,521 –00 1,481,521
consumer portfolio 12.6.1 –00 (1,272 ) (1,272) –00 4,147 4,147
loans and advances 12.6.2 –00 400,000 400,000 –00 500,000 500,000
Reversals (333,439) –00 (333,439) (164,880) –00 (164,880)
67,373 398,728 466,101 1,316,641 504,147 1,820,788
Amount written-off 12.7 (3,287) –00 (3,287) (91) –00 (91)
Closing balance 3,062,933 2,531,059 5,593,992 2,998,847 2,132,331 5,131,178
12.6.1 The Prudential Regulations require banks to maintain a general reserve equal to 1.5% of the consumer
portfolio which is fully secured and 5% of the consumer portfolio which is unsecured. Accordingly,
the general provision maintained by the Bank for secured and unsecured consumer portfolio as of
31 December 2012 amounts to Rs. 31.059 (2011: Rs. 32.331) million.
12.6.2 In line with its prudent policies, the Bank also makes general provision against its loans and advances
portfolio. This general provision is in addition to the requirements of the Prudential Regulations and
as of 31 December 2012 amounts to Rs. 2,500 (2011: Rs. 2,100) million.
12.6.3 Particulars of provision against non-performing loans and advances

2012 2011
Specific General Total Specific General Total
(Rupees in '000)
In local currency 2,968,839 2,531,059 5,499,898 2,997,354 2,132,331 5,129,685

In foreign currency 94,094 –00 94,094 1,493 –000 1,493
3,062,933 2,531,059 5,593,992 2,998,847 2,132,331 5,131,178
12.7 Particulars of write-offs: 2012 2011

(Rupees in '000)
12.7.1 Against provision 3,287 91
Directly charged to profit and loss account –00 –00
3,287 91
12.7.2 Write-offs of Rs. 500,000 and above 3,287 –00

Write-offs of below Rs. 500,000 –00 91
3,287 91
132
12.7.3 In terms of sub-section (3) of section 33A of the Banking Companies Ordinance, 1962, the statement
in respect of written-off loans or any other financial relief of five hundred thousand rupees or above
allowed to a person(s) during the year ended 31 December 2012 is given in Annexure 1.
12.8 Particulars of Loans and Advances to Directors, Note 2012 2011

Associated Companies etc. (Rupees in '000)
(i) Debts due by directors, executives or officers

of the Group or any of them either severally
or jointly with any other persons
Balance at beginning of the year 1,397,327 1,124,509
Loans granted during the year 733,758 638,853
Repayments (450,684) (366,035)
(ii) Debts due by companies or firms

in which the directors of the Group are
interested as directors, partners or in
the case of private companies as members
Balance at beginning of the year 1,404,261 369,808
Repayments (16,007,385) (16,427,230)
13. OPERATING FIXED ASSETS

Capital work-in-progress 13.1 374,146 92,558
Property and equipment 13.2 10,748,449 10,648,811
Intangible assets 13.3 88,828 49,976
11,211,423 10,791,345
13.1 Capital work-in-progress

Civil works 308,150 90,770
Consultants’ fee and other charges 65,996 1,788
374,146 92,558
133
13.2 Property and equipment
2012
As at Additions / As at As at Charge / As at As at Rate of

01 January (deletions) / 31 December 01 January (deletions) / 31 December 31 December depreciation
2012 adjustments* 2012 2012 adjustments* 2012 2012 %
(Rupees in '000)
Owned
Leasehold land 3,255,495 391 3,255,886 –00 –00 –00 3,255,886 –00
–00 –00
–00 –00
Buildings on
leasehold land 5,014,738 153,042 5,161,155 89,996 153,594 243,381 4,917,774 2.22 - 10
3,128* 43*
(9,753)* (252)*
buildings 741,465 64,403 806,614 90,044 39,005 129,104 677,510 5
(3,128)* (43)*
3,874* 98*
Furniture and fixtures 401,359 42,952 442,444 183,544 38,211 220,150 222,294 10
(1,867) (1,605)
–00 –00
computer equipments 2,741,318 420,071 3,149,592 1,616,668 417,778 2,023,480 1,126,112 20
(11,797) (10,966)
–00 –00
Vehicles 852,888 247,616 1,011,300 378,200 161,912 462,427 548,873 20
(89,774) (78,255)
570* 570*
13,007,263 928,475 13,826,991 2,358,452 810,500 3,078,542 10,748,449
(103,438) (90,826)
(5,309) 416
Leased 570 –00 –00 570 –00 –00 –00
Vehicles –00 –00
(570)* (570)
570 –00 –00 570 –00 –00 –00
–00 –00
(570)* (570)*
13,007,833 928,475 13,826,991 2,359,022 810,500 3,078,542 10,748,449
(103,438) (90,826)
(5,879)* (154)*
134
2011
Reversal of Reversal of
accumulated accumulated
As at Additions / depreciation Revaluation As at As at Charge / depreciation As at As at Rate of
01 January (deletions) / / other Surplus 31 December 01 January (deletions) / / other 31 December 31 December depreciation
2011 adjustments adjustments / (deficit) 2011 2011 adjustments adjustments 2011 2011 %
(Rupees in '000)
Owned
Leasehold land 3,476,864 32,481 –00 (121,477) 3,255,495 –00 –00 –00 –00 3,255,495 –00
(2,266) –00 –00
(130,107) –00 –00
Buildings on
leasehold land 4,788,095 177,337 (422,054) 339,720 5,014,738 367,712 145,131 (422,054) 89,996 4,924,742 2.22 - 10
–00 (7,047) –00 (793)
138,687 –00 –00
buildings 537,355 230,419 –00 –00 741,465 65,976 31,044 –00 90,044 651,421 5
(14,664) –00 (3,911)
(11,645) –00 (3,065)
Furniture and fixtures 357,652 45,873 –00 –00 401,359 149,680 35,441 –00 183,544 217,815 10
(2,166) –00 (1,577)
–00 –00 –00
computer equipments 2,277,951 484,936 –00 –00 2,741,318 1,213,391 423,511 –00 1,616,668 1,124,650 20
(21,569) –00 (20,234)
–00 –00 –00
Vehicles 685,363 262,650 –00 –00 852,888 333,936 131,439 –00 378,200 474,688 20
(97,817) (89,745)
–00 2,692 –00 2,570
12,123,280 1,233,696 (422,054) 218,243 13,007,263 2,130,695 766,566 (422,054) 2,358,452 10,648,811
(138,482) (7,047) (115,467) (793)
(3,065) 2,692 (3,065) 2,570
Leased
Vehicles 3,262 –00 –00 –00 570 3,140 –00 –00 570 –00
–00 –00 –00 –00
–00 (2,692) –00 (2,570)
3,262 –00 –00 –00 570 3,140 –00 –00 570 –00
–00 –00 –00 –00
–00 (2,692) –00 (2,570)
12,126,542 1,233,696 (422,054) 218,243 13,007,833 2,133,835 766,566 (422,054) 2,359,022 10,648,811
(138,482) (7,047) (115,467) (793)
(3,065) –00 (3,065) –00
135
13.2.1 Details of disposal of fixed assets during the year:
Book Sale Mode of Particulars of
Particulars Cost value price disposal purchaser
(Rupees in '000)
Items having book value in aggregate more than
Rs. 250,000 or cost more than Rs. 1,000,000
Furniture and fixtures 1,736 244 282 Auction Karachi Auction Mart, Karachi.
Electrical, office and computer equipments 9,114 474 1,582 Auction Karachi Auction Mart, Karachi.
Electrical, office and computer equipments 507 261 315 Insurance claim Habib Insurance Company Ltd
Vehicles 1,165 680 1,110 Sale AL-Futtaim Motors, Dubai.
Vehicles 14,699 9,048 13,732 Insurance claim Habib Insurance Company Ltd
Vehicles 1,240 181 919 Auction Mr. Abdul Khaliq, Karachi.
Vehicles 1,284 – 1,276 Auction Mr. Anwar Alam, Karachi.
Vehicles 1,082 – 1,012 Auction Mr. Aqeel Ahmed, Karachi.
Vehicles 2,518 – 2,233 Auction Mr. Faisal Abdul Aziz, Karachi.
Vehicles 1,392 – 1,311 Auction Mr. Fazal Muhammad, Karachi.
Vehicles 3,159 394 2,461 Auction Mr. Hasnain Abbas, Karachi.
Vehicles 2,551 – 2,202 Auction Mr. Iqbal Mehmood, Karachi.
Vehicles 2,055 – 1,562 Auction Mr. Iqbal Muhammad, Karachi.
Vehicles 6,299 121 4,266 Auction Mr. Muhammad Ali, Karachi.
Vehicles 6,352 – 3,899 Auction Mr. Muhammad Ali Akbar, Karachi.
Vehicles 15,682 476 11,751 Auction Mr. Muhammad Kaleem Iqbal,
Karachi.
Vehicles 1,928 – 1,528 Auction Mr. Muhammad Yamin, Karachi.
Vehicles 5,560 559 4,353 Auction Mr. Numeri Abrar, Karachi.
Vehicles 1,343 – 1,378 Auction Mr. Shahid Aziz, Karachi.
Vehicles 2,155 – 2,291 Auction Mr. Wasim Mirza, Karachi.
Vehicles 1,748 – 1,705 Auction Mr. Zahid Qadri, Karachi.
Vehicles 3,338 – 3,054 Auction Syed Muhammad Ali Warsi, Karachi.
Items having book value in aggregate less than
Rs. 250,000 or cost less than Rs. 1,000,000
Furniture and fixtures 131 18 49 Various
Electrical, office and computer equipments 2,176 96 1,451 Various
Vehicles 14,224 60 11,975 Various
103,438 12,612 77,697
13.2.2 The leasehold land and buildings of the Bank were last revalued by independent professional valuers
as at December 31, 2011. The revaluation was carried out by M/s. Iqbal A. Nanjee & Co on the basis
of professional assessment of present market values and resulted in a surplus Rs. 218.243 million
over the book value of the respective properties. Had there been no revaluation, the carrying amount
of revalued assets at December 31, 2012 would have been as follows:
2012 2011
(Rupees in '000)
Leasehold land 2,634,212 2,633,821
Buildings on leasehold land 3,163,158 3,106,889
5,797,370 5,740,710
136
13.2.3 As at 31 December 2012, the gross carrying amount of fully depreciated assets still in use amounted
to Rs. 1,131.914 (2011: Rs. 864.965) million.
13.3 Intangible assets
2012
(Rupees in '000)
Computer software 192,776 64,238 257,014 177,550 25,386 202,936 54,078 50
Stock Exchange
Membership Card 34,750 –00 34,750 –00 –00 –00 34,750
227,526 64,238 291,764 177,550 25,386 202,936 88,828
2011
(Rupees in '000)
Computer software 181,333 11,443 192,776 149,114 28,436 177,550 15,226 50
Stock Exchange
Membership Card 34,750 –00 34,750 –00 –00 –00 34,750
216,083 11,443 227,526 149,114 28,436 177,550 49,976
13.3.1 As at 31 December 2012, the gross carrying amount of fully amortised intangible assets still in use amounted to Rs.178.333
(2011: Rs. 149.952) million.
13.3.2 In accordance with the requirements of the Stock Exchanges (Corporatisation, Demutualization and Integration) Act, 2012
(The Act), the Company has received equity shares of KSE and a trading right entitlement in lieu of its membership card of
KSE. The Company’s entitlement in respect of KSE’s shares is determined on the basis of valuation of assets and liabilities
of KSE as approved by SECP and the Company has been allotted 4,007,383 shares of the face value of Rs. 10/- each out
of which 2,404,430 shares are kept in the blocked account and the divestment of the same will be made in accordance with
the requirements of the Act within two years from the date of Demutualization. The valuation of Trading Right Entitlement
and the accounting treatment of shares received from KSE are being discussed in the Professional Standards and Technical
Committee of the Institute of Chartered Accountants of Pakistan (ICAP) and will be finalised in due course.
Note 2012 2011

(Rupees in '000)
14. OTHER ASSETS
Mark-up / return / interest accrued in local currency 4,500,941 4,310,255
Mark-up / return / interest accrued in foreign currencies 115,498 99,198
Advances, deposits and prepayments 931,798 1,099,942
Unrealised gain on forward foreign exchange contracts 251,487 242,237
Stationery and stamps on hand 134,729 116,183
Receivable from SBP on encashment of Government Securities 24,289 26,268
Non-refundable deposits 14.1 89,109 96,719
Others 105,762 72,603
6,153,613 6,063,405
137
14.1 Represent deposits paid in relation to acquisition of some of the Bank's properties. These are being
written-off over the periods ranging from 10 to 20 years (being estimated useful lives of related
properties).
Note 2012 2011

(Rupees in '000)
15. BILLS PAYABLE
In Pakistan 5,257,191 4,979,720
16. BORROWINGS
In Pakistan 67,902,505 43,213,300
Outside Pakistan 1,719,550 228,294
69,622,055 43,441,594
16.1 Particulars of borrowings with respect
to currencies
In foreign currencies 1,719,550 228,294
69,622,055 43,441,594
16.2 Details of borrowings
Secured
Borrowings from State Bank of Pakistan
Export refinance scheme 16.3 14,138,447 11,537,652
Long term financing for export
oriented projects 16.4 369,695 568,700
Long term financing for imported
and locally manufactured
plant and machinery 16.5 3,015,612 3,322,617
Financing facility for storage of
agricultural produce 16.6 47,703 71,554
17,571,457 15,500,523
Repurchase agreement borrowings 16.7 50,331,048 27,712,777
67,902,505 43,213,300
Unsecured
Overdrawn nostros –00 48,403
Borrowings from financial institutions 16.8 1,719,550 179,891
1,719,550 228,294
69,622,055 43,441,594
16.3 These carry mark-up rate of 8.50% (2011: 10%) per annum, payable quarterly at the time of partial
payment or upon maturity of loan, whichever is earlier.
16.4 These carry mark-up rates ranging from 4% to 5% (2011: 4% to 5%) per annum having maturity
periods upto 3 to 4 years.
138
16.5 These carry mark-up rates ranging from 8.20% to 9.50% (2011: 9.70% to 11%) per annum having
maturity periods upto ten years.
16.6 This carries mark-up rate of 5.50% (2011: 5.50%) having maturity period upto two years.
16.7 These carry mark-up rate of 8.86% (2011: 11.50% to 11.90%) per annum, having maturity periods
upto one month.
16.8 This carries mark-up rate of 0.65% to 0.80% (2011: 0.45%) having maturity period upto one month.
Note 2012 2011

(Rupees in '000)
17. DEPOSITS AND OTHER ACCOUNTS
Customers
Fixed deposits 96,079,552 120,176,785
Savings deposits 105,561,063 70,196,707
Current accounts - Remunerative 29,061,770 26,524,367
Current accounts - Non-remunerative 104,284,355 78,697,621
334,986,740 295,595,480
Financial institutions
Remunerative deposits 4,949,208 6,267,159
Non-remunerative deposits 450,610 234,548
5,399,818 6,501,707
340,386,558 302,097,187
17.1 Particulars of deposits

340,386,558 302,097,187
18. SUB-ORDINATED LOANS - unsecured
Term Finance Certificates (TFCs) - I - (Quoted) –00 897,658

Term Finance Certificates (TFCs) - II - (Quoted) 18.1 1,496,700 1,497,300
Term Finance Certificates (TFCs) - III - (Unquoted) 18.2 1,994,400 1,996,000
Term Finance Certificates (TFCs) - IV - (Unquoted) 18.3 2,998,200 2,999,400
6,489,300 7,390,358
18.1 Term Finance Certificates - II (Quoted)

Rating AA
Rate Payable six monthly at average six months’
KIBOR plus 1.95% without any floor and cap
Redemption 6-84th month: 0.28%; 90th and 96th month:
49.86% each
Tenor 8 years
Maturity February 2015
139
18.2 Term Finance Certificates - III (Unquoted)
Rating AA
Rate Payable three monthly at 15.50% p.a.
for first 5 years and 16.00% p.a. for next 3 years
Redemption 3rd-84th month: 0.56%; 87th, 90th, 93rd and
96th month: 24.86% each
Tenor 8 years
Maturity June 2017
18.3 Term Finance Certificates - IV (Unquoted)

Rating AA
Rate Payable six monthly at 15.00% p.a. for first
5 years and and 15.50% p.a.
for next 5 years
Redemption 6th - 108th month: 0.36%; 114th and 120th month:
49.82% each
Tenor 10 years
Maturity June 2021
19. LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASE

2012 2011
Minimum Financial Principal Minimum Financial Principal
lease charges for outstanding lease charges for outstanding
payments future periods payments future periods
(Rupees in '000)
Not later than one year – – – 28 – 28
Note 2012 2011

(Rupees in '000)
20. DEFERRED TAX LIABILITIES
Taxable temporary differences arising in respect of:
Accelerated depreciation 929,371 927,849
Surplus on revaluation of fixed assets 23.1 616,069 636,247
Surplus on revaluation of investments 23.2 514,394 94,147
2,059,834 1,658,243
Deductible temporary differences arising in respect of:
Provision against non-performing loans and advances (123,665) (424,567)
Lease obligations –00 (8)
Provision for compensated absences (6,158) (665)
Provision for diminution in the value of investments (570) (570)
(130,393) (425,810)
1,929,441 1,232,433
140
20.1 Reconciliation of deferred tax
Balance Recognised in Recognised Balance Recognised in Recognised Balance
as at profit and in deficit on as at profit and in surplus on as at
01 January loss revaluation 31 December loss revaluation 31 December
2011 account of assets 2011 account of assets 2012
(Rupees in '000)
Taxable temporary differences
Accelerated depreciation 847,004 80,845 –00 927,849 1,522 –00 929,371
Surplus on revaluation of fixed assets 536,459 (19,114 ) 118,902 636,247 (20,123) (55) 616,069
Surplus on revaluation of investments –00 –00 94,147 94,147 –00 420,247 514,394
1,383,463 61,731 213,049 1,658,243 (18,601) 420,192 2,059,834
Deductible temporary differences
Deficit on revaluation of investments (207,396) –00 207,396 –00 –00 –00 –00
Provision against non-performing
loans and advances (530,824) 106,257 –00 (424,567 ) 300,902 –00 (123,665)
Provision for diminution in
the value of investments (570) –00 –00 (570 ) –00 –00 (570)
Lease obligations (65) 57 –00 (8 ) 8 –00 –00
Provision for compensated absences (255) (410 ) –00 (665 ) (5,493) –00 (6,158)
(739,110) 105,904 207,396 (425,810 ) 295,417 –00 (130,393)
644,353 167,635 420,445 1,232,433 276,816 420,192 1,929,441
Note 2012 2011

(Rupees in '000)
21. OTHER LIABILITIES
Mark-up / return / interest payable in local currency 2,387,134 3,056,483
Mark-up / return / interest payable in foreign currencies 26,341 51,136
Provision for compensated absences 21.1 234,770 203,242
Taxation (Provision less payments) 322,619 466,338
Unclaimed dividends 113,394 79,771
Branch adjustment account 303,174 55,419
Special exporters’ accounts in foreign currencies 115,852 23,825
Unearned commission income 23,467 2,694
Security deposits against leases / ijarah 156,943 138,285
Other security deposits 214,794 180,957
Accrued expenses 208,629 136,903
Provision against off-balance sheet items 21.2 85,182 73,122
Payable to SBP / NBP 439,512 408,295
Payable to supplier against murabaha 129,069 –000
Charity payable 9,782 2,285
Others 263,604 223,382
5,490,982 5,373,006
21.1 Provision for compensated absences has been determined on the basis of independent actuarial
valuation. The significant assumptions used for actuarial valuation were as follows:
2012 2011
(% per annum)
Discount rate 12.00% 12.50%
Expected rate of increase in salary in future years 11.00% 11.50%
141
2012 2011
21.2 Provision against off-balance sheet items (Rupees in '000)

Reversals –00 (1,204)
Amount written-off –00 –00
22. SHARE CAPITAL
2012 2011
(Number of shares)
Authorised Capital
1,200,000,000 1,200,000,000 Ordinary shares of Rs.10/- each 12,000,000 12,000,000
Issued, subscribed and paid-up capital

Ordinary shares of Rs.10/- each
fully paid in cash
30,000,000 30,000,000 Issued for cash 300,000 300,000
980,386,742 848,597,167 Issued as bonus shares 9,803,868 8,485,972
1,010,386,742 878,597,167 10,103,868 8,785,972
22.1 As of statement of financial position date 166,648,241 (2011: 142,241,798) ordinary shares of
Rs. 10/- each were held by the related parties.
Note 2012 2011
(Rupees in '000)
23. SURPLUS ON REVALUATION OF ASSETS - NET OF TAX
Operating fixed assets 23.1 1,760,240 1,803,278
Available for sale investments 23.2 1,027,783 219,569
2,788,023 2,022,847
23.1 Surplus on revaluation of operating fixed assets

Balance at the beginning of the year 2,439,525 2,275,893
(Adjustment) / surplus on revaluation of the Bank’s properties
during the year (5,723) 218,243
2,376,309 2,439,525
Related deferred tax liability on:
Balance at the beginning of the year 636,247 536,459
(Adjustment) / revaluation of Bank’s properties during the year (55) 118,902
(616,069) (636,247)
1,760,240 1,803,278
142
2012 2011
(Rupees in '000)
23.2 Available for sale investments
Federal Government Securities 1,386,550 319,757
Fully paid-up ordinary shares 24,097 (2,610)
Term finance certificates, sukuks, bonds and others 14,895 (19,380)
Open ended mutual funds 116,635 15,949
1,542,177 313,716
Related deferred tax liability (514,394) (94,147)
1,027,783 219,569
24. CONTINGENCIES AND COMMITMENTS

24.1 Direct Credit Substitutes
Others 348,728 446,014
514,960 525,629
24.2 Transaction-related Contingent Liabilities
Government 9,446,751 8,008,832
Others 6,279,180 4,544,785
15,794,428 12,669,078
24.3 Trade-related Contingent Liabilities
Letters of credit 50,183,933 32,838,848
Acceptances 8,647,034 7,104,549
58,830,967 39,943,397
24.4 Other contingencies
The Income tax returns of the Bank have been submitted upto and including the Bank’s financial
year 2011. The income tax assessments of the Bank have been made by the tax authorities upto
and including the assessment / tax year 2012.
For tax years, 2005 to 2008, the CIT Appeals has passed appellate orders by disallowing certain
expenses / deductions (including bad debts written-off, improvement in leasehold premises, provision
against non-performing loans and advances) having an aggregate tax impact (net of provision) of
Rs. 44.256 (2011: Rs. 124.353) million. The Bank has preferred an appeal before ITAT against the
above referred orders of the CIT Appeals.
The management, based on the opinion of its tax advisor, is confident about the favourable outcome
of the above matters and hence, no additional provision has been considered necessary in these
143
2012 2011
(Rupees in '000)
24.5 Commitments in respect of forward lending
Commitments to extend credit 472,257 15,603
24.6 Commitments in respect of forward exchange contracts

Purchase 15,272,338 28,032,085
Sale 16,888,512 25,331,776
24.7 Commitments for the acquisition of operating
fixed assets 146,070 124,899
25. DERIVATIVE FINANCIAL INSTRUMENTS
The Group deals in derivative financial instruments namely forward foreign exchange contracts and
foreign currency swaps with the principal view of hedging the risks arising from its trade business.
As per the Group’s policy, these contracts are reported on their fair value at the statement of financial
position date. The gains and losses from revaluation of these contracts are included under “income
from dealing in foreign currencies”. Unrealised gains and losses on these contracts are recorded
in the statement of financial position under “other assets / other liabilities”. These products are offered
to the Group’s customers to protect from unfavourable movements in foreign currencies. The Group
hedges such exposures in the inter-bank foreign exchange market.
2012 2011
(Rupees in '000)
26. MARK-UP / RETURN / INTEREST EARNED
On loans and advances to:
Customers 13,691,482 13,442,440
13,881,838 13,678,949
On investments:
Available for sale securities 18,071,395 12,175,798
Held to maturity securities 9,345,391 10,333,202
27,416,786 22,509,000
On deposits with financial institutions 83,132 75,450
On securities purchased under resale agreements 89,539 261,479
On call money lendings 2,739 4,359
41,474,034 36,529,237
27. MARK-UP / RETURN / INTEREST EXPENSED
Deposits 19,513,193 19,134,980
Sub-ordinated loans 995,475 893,190
Repurchase agreement borrowings 3,745,487 785,368
Borrowings from SBP 1,386,260 1,556,218
Other borrowings 464,613 130,087
26,105,028 22,499,843
144
Note 2012 2011
(Rupees in '000)
28. GAIN ON SALE / REDEMPTION OF SECURITIES - NET

Listed shares 4,849 54
Government securities 6,132 393
Mutual funds 66,705 –0
77,686 447
29. OTHER INCOME

Gain on sale of operating fixed assets 65,085 84,469
Recovery of expenses from customers 29.1 134,483 95,742
Lockers rent 4,368 5,221
Cheque book issuance / cheque return charges 181,010 139,045
Banking charges 45,753 62,824
Others 48,901 53,107
479,600 440,408
29.1 Includes courier, SWIFT, postage and other charges recovered from customers.
30. ADMINISTRATIVE EXPENSES

Salaries, allowances, etc. 3,836,494 3,181,285
Charge for defined benefit plan 37.8 114,232 103,403
Contribution to defined contribution plan 157,282 130,873
Non-executive directors' fee, allowances
and other expenses 2,500 2,075
Rent, taxes, insurance, electricity, etc. 1,392,694 1,182,294
Legal and professional charges 58,508 54,469
Communications 233,884 203,704
Repairs and maintenance 442,331 407,643
Financial charges on leased assets 1 23
Security charges 403,204 329,852
Stationery and printing 221,391 212,013
Advertisement and publicity 249,215 251,020
Donations 30.1 28,750 24,650
Auditors' remuneration 30.2 6,116 4,356
Depreciation 13.2 810,500 766,566
Travelling and conveyance 59,309 49,903
Vehicle running expenses 300,449 233,934
Commission and brokerage 38,789 83,110
Subscriptions and publications 47,650 46,697
Clearing charges (NIFT) 55,494 47,931
Staff training 22,725 17,453
Staff refreshment 73,286 53,267
Cleaning charges 32,884 28,047
Others 30.3 182,501 146,110
8,834,298 7,621,965
145
2012 2011
(Rupees in '000)
30.1 The details of donations in excess of Rupees One hundred
thousand are given below:
Al-Sayyeda Benevolent Trust 925 925

GCU Endowment Fund Trust* 1,000 –0
Habib Education Trust 900 900
Habib Medical Trust 925 925
Habib Poor Fund 900 900
Institute of Management Sciences, Bahauddin
Zakariya University, Multan 500 500
Lahore University of Management Sciences /
National Management Foundation 20,000 15,000
Panah Trust 500 –0
Rahmatbai Habib Food & Clothing Trust 900 900
Rahmatbai Habib Widows & Orphans Trust 900 900
Sindh Institute of Urology and Transplantation –0 2,500
The Citizens Foundation 1,300 1,200
28,750 24,650
* Mr. Shameem Ahmed, Director of Bank AL Habib Limited, is member of Executive Committee of
GCU Endowment Fund Trust, GC University, Lahore.
30.2 Auditors' remuneration

Audit fee - standalone financial statements 2,100 1,250
Audit fee - consolidated financial statements 300 300
Half yearly review 650 475
Special certifications 2,575 1,850
Provident fund and gratuity fund 75 25
Out of pocket expenses 416 456
6,116 4,356
30.3 Includes, amongst others, charitable expenses being payments made by the Group on account of
sadqa, poor feeding, distribution of charity in the holy month of Ramzan, and other similar payments,
amounting to Rs. 24.1 million during 2012.
31. OTHER PROVISIONS / WRITE-OFFS

Provision against other assets –00 267
12,060 16,064
32. OTHER CHARGES

Penalties imposed by SBP 306 227
186,153 146,254
146
2012 2011
(Rupees in '000)
33. TAXATION
For the year
Current 3,264,799 2,454,253
Prior years (122,893) –00
Deferred 276,816 167,636
3,418,722 2,621,889
33.1 Relationship between tax expense

and accounting profit
Tax at the applicable rate of 35% (2011: 35%) 3,125,235 2,505,648

Tax effects of:
Expenses that are not deductible in
determining taxable income 475,031 173,432
Tax effect of prior years provisions (122,893) –00
Dividend income taxed at reduced rate (38,293) (58,350 )
Others (20,358) 1,159
3,418,722 2,621,889
34. BASIC AND DILUTED EARNINGS PER SHARE ATTRIBUTABE

TO EQUITY HOLDERS OF THE HOLDING COMPANY
Profit after taxation - attributable to equity holders
of the Holding company 5,513,549 4,537,656
(Number)
Restated
Weighted average number of ordinary shares 1,010,386,742 1,010,386,742
(Rupees)
Restated
Basic and diluted earnings per share 5.46 4.49
34.1 The weighted average number of shares for 2011 has been adjusted for the effect of bonus shares
issued during the year.
Note 2012 2011
(Rupees in '000)
35. CASH AND CASH EQUIVALENTS
Overdrawn nostros 16.2 –00 (48,403)
37,211,593 29,654,228
(Numbers)
36. STAFF STRENGTH
Permanent 4,882 4,482
Temporary / on contractual basis 198 177
Group’s own staff at end of the year 5,080 4,659
Outsourced 1,497 1,392
Total staff strength 6,577 6,051
147
37. DEFINED BENEFIT PLAN
37.1 General description
by the Trustees. The benefits under the gratuity scheme are payable on retirement at the age of 60
years or on earlier cessation of service as under:
Number of years of eligible service Amount of gratuity payable:

completed:
Less than 5 years Nil

15 years or more Full basic salary for each year served
37.2 Principal actuarial assumptions
The latest actuarial valuation of the scheme was carried out on 31 December 2012 and the significant
assumptions used for actuarial valuation were as follows:
2012 2011
% per annum % per annum
Discount rate 12.00 12.50
Expected rate of increase in salary in future years 11.00 11.50
Expected rate of return on plan assets 12.00 12.50
2012 2011
(Rupees in '000)
37.3 Movement in defined benefit plan
Contribution to the fund (114,232) (103,403 )
Closing balance –00 –00
37.4 Reconciliation of defined benefit plan

Present value of defined benefit obligations 883,142 706,730
Fair value of plan assets (708,474) (531,148 )
Unrecognised actuarial loss (174,668) (175,582 )
–00 –00
37.5 Movement in present value of defined
benefit obligations
Benefits paid (18,251) (16,017 )
Actuarial loss 19,097 14,875
148
2012 2011
(Rupees in '000)
37.6 Movement in fair value of plan assets
Expected return on plan assets 70,232 58,289
Actuarial gain on plan assets 11,113 1,249
Contribution to the fund 114,232 103,403
Benefits paid (18,251) (16,017 )
37.7 Movement in unrecognised actuarial loss

Amount recognised during the year (8,898) (8,870 )
Actuarial loss during the year 7,984 13,626
37.8 Charge for defined benefit plan

Expected return on plan assets (70,232) (58,289 )
Actuarial loss recognised 8,898 8,870
37.9 Actual return on plan assets 81,345 59,538
37.10 Historical information
2012 2011 2010 2009 2008

(Rupees in '000)
Present value of defined benefit
obligations (883,142) (706,730) (555,050) (418,650) (314,703)
Fair value of plan assets 708,474 531,148 384,224 268,835 181,364
Deficit (174,668) (175,582) (170,826) (149,815) (133,339)
Experience loss / (gain)
on obligations 19,097 14,875 33,065 21,596 47,098
Experience gain / (loss) on plan assets 11,113 1,249 4,342 (2,157) (3,315)
149
2012 2011
37.11 Components of plan assets as a percentage
of total plan assets
Government securities 87.84% 65.28%
Term finance certificates 4.38% 6.13%
Bank balances 7.78% 28.59%
100.00% 100.00%
37.12 Expected contribution to be paid to the funds in the next financial year
The Bank contributes to the gratuity fund according to the actuary's advice. Based on actuarial advice,
the management estimates that the charge and contribution to defined benefit plan for the year ending
31 December 2013 would be Rs. 120.978 million.
38. DEFINED CONTRIBUTION PLAN

The general description of the plan is included in note 5.8.
39. COMPENSATION OF DIRECTORS AND EXECUTIVES
Chief Executive Directors* Executives

2012 2011 2012 2011 2012 2011
(Rupees in '000)
Fee ** –00 –00 2,500 2,075 –00 –00

Managerial remuneration 11,068 9,790 6,541 5,785 915,056 756,282
Charge for defined benefit plan 3,078 3,114 1,818 1,817 114,450 108,859
Contribution to defined
contribution plan 1,107 979 654 578 68,679 56,202
Rent and house maintenance 4,427 3,916 2,616 2,314 323,607 269,904
Utilities 2,963 2,330 678 578 80,902 67,476
Medical 2 15 80 89 27,031 15,624
Bonus 2,741 2,420 1,620 1,430 201,575 167,177
Others –00 –00 –00 –00 26,793 22,545
25,386 22,564 16,507 14,666 1,758,093 1,464,069
Number of person(s) 1 1 9 9 781 639
Executives, including the Chief Executive and Executive Director, are provided with Group's maintained
cars in accordance with the terms of their employment and are entitled to medical and life insurance
benefits in accordance with the policy of the Bank. In addition, the Chief Executive and Executive
Director are also provided with drivers, club memberships, security arrangements and payment of
travel bills in accordance with their terms of employment.
* Directors include one executive director (2011: 01)

** This represents fee paid to non-executive directors for attending Board of Directors and its
committees’ meetings.
150
40. FAIR VALUE OF FINANCIAL INSTRUMENTS
2012 2011
Book value Fair value Book value Fair value
(Rupees in '000)
Assets
Cash and balances with treasury banks 27,464,345 27,464,345 22,957,988 22,957,988
Balances with other banks 9,747,248 9,747,248 6,744,643 6,744,643
Lendings to financial institutions 993,981 993,981 –000 –000
Investments 249,923,504 251,022,489 223,105,101 223,857,614
Advances 147,859,828 147,859,828 114,863,132 114,863,132
Other assets 4,961,740 4,961,740 4,750,561 4,750,561
440,950,646 442,049,631 372,421,425 373,173,938
Liabilities
Bills payable 5,257,191 5,257,191 4,979,720 4,979,720
Borrowings 69,622,055 69,622,055 43,441,594 43,441,594
Deposits and other accounts 340,386,558 340,386,558 302,097,187 302,097,187
Sub-ordinated loans 6,489,300 6,489,300 7,390,358 7,390,358
to finance lease –00 –00 28 28
Other liabilities 4,065,054 4,065,054 4,301,322 4,301,322
425,820,158 425,820,158 362,210,209 362,210,209

Commitment to extend credit 472,257 472,257 15,603 15,603
Forward purchase of foreign exchange contracts 15,272,338 15,455,658 28,032,085 28,555,234
Forward sale of foreign exchange contracts 16,888,512 16,956,048 25,331,776 25,057,442
Fair value is the amount for which an asset could be exchanged, or a liability settled, between
knowledgeable willing parties in an arm's length transaction. Fair value of financial instruments is
based on:
Federal Government Securities PKRV rates (Reuters page)

Listed securities Market prices
Mutual funds Net asset values
Unlisted equity investments Break up value as per latest available
audited financial statements.
Fair value of fixed term advances of over one year, staff loans and fixed term deposits of over one
year cannot be calculated with sufficient reliability due to non-availability of relevant active market
for similar assets and liabilities. The provision for impairment of loans and advances and debt securities
has been calculated in accordance with the Bank's accounting policies as stated in note 5.6 and 5.5.
151
41. SEGMENT DETAILS WITH RESPECT TO BUSINESS ACTIVITIES
The segment analysis with respect to business activity is as follows:
2012
Retail Commercial Retail Inter Segment Total
Banking Banking Brokerage Elimination
(Rupees in '000)
Total income 20,858,764 41,178,432 29,686 (17,534,014) 44,532,868
Total expenses (18,448,000) (34,635,258) (54,382) 17,534,014 (35,603,626)
Net income 2,410,764 6,543,174 (24,696) –00 8,929,242
Segment assets (net of provisions) 309,061,714 437,756,090 346,174 (293,810,036) 453,353,942
Segment non performing loans 46,187 3,659,543 –00 –00 3,705,730
Segment provision required 43,747 3,019,186 –00 –00 3,062,933
Segment liabilities 307,890,399 414,892,102 203,062 (293,810,036) 429,175,527
Segment return on net assets (%)* 6.75% 9.41% 8.58%
Segment cost of funds (%)* 5.99% 8.35% 26.78%
2011
Retail Commercial Retail Inter Segment Total
Banking Banking Brokerage Elimination
(Rupees in '000)
Total income 16,764,482 35,609,124 38,152 (13,147,860) 39,263,898
Total expenses (14,045,531) (31,158,594) (48,640) 13,147,860 (32,104,905)
Net income 2,718,951 4,450,530 (10,488) –00 7,158,993
Segment assets (net of provisions) 258,617,003 367,376,285 422,531 (241,890,205) 384,525,614
Segment non performing loans 51,532 3,152,098 –00 –00 3,203,630
Segment provision required 47,584 2,951,263 –00 –00 2,998,847
Segment liabilities 256,723,923 349,395,580 285,028 (241,890,205) 364,514,326
Segment return on net assets (%)* 6.48% 9.69% 9.03%
Segment cost of funds (%)* 5.47% 8.92% 17.06%
*These percentages have been computed based on closing assets / liabilities figures.
152
42. RELATED PARTY TRANSACTIONS
Related parties of the Group comprise associates (including entities having directors in common
with the Group), retirement benefit funds, major share holders, directors and key management
personnel and their close family members.
Transactions with related parties of the Bank are carried out on an arm's length basis in terms of
the policy as approved by the Board of Directors. The transactions with employees of the Group
are carried out in accordance with the terms of their employment.
Transactions with related parties, other than those disclosed in note 13.2.1 and 22.1 are summarised
as follows:
2012
Non Key
Associates Executive Management Retirement Total
(Rupees in '000)
Deposits
At beginning of the year 1,438,356 86,815 275,992 118,882 1,920,045
Placements during the year 75,338,485 631,362 1,169,514 7,365,961 84,505,322
Withdrawals during the year (75,085,259) (571,583) (1,150,739) (7,333,240) (84,140,821)
At end of the year 1,691,582 146,594 294,767 151,603 2,284,546
Advances
At beginning of the year 1,404,261 426 30,252 –00 1,434,939
Given during the year 16,218,504 2,976 41,608 –00 16,263,088
Repaid during the year (16,007,385) (3,051) (43,255) –00 (16,053,691)
At end of the year 1,615,380 351 28,605 –00 1,644,336
Investments
At beginning of the year 973,095 –00 –00 –00 973,095
Investment made during the year 225,000 –00 –00 –00 225,000
Redeemed / adjusted during the year 81,178 –00 –00 –00 81,178
At end of the year 1,279,273 –00 –00 –00 1,279,273
Contingencies and commitments 532,693 –00 –00 –00 532,693
Purchase of fixed assets 1,734 –00 –00 –00 1,734

Sale of securities 3,436 –00 –00 –00 3,436
Redemption of mutual funds units 59 –00 –00 –00 59
Purchase of mutual funds units 225,000 –00 –00 –00 225,000
Mark-up earned 131,746 2 1,764 –00 133,512
Mark-up expensed 92,825 13,588 26,001 17,668 150,082
Bank charges and commission 910 245 197 –00 1,352
Gain on sale of securities 4 –00 –00 –00 4
Salaries and allowances –00 –00 172,338 –00 172,338
Bonus –00 –00 24,238 –00 24,238
Contribution to defined contribution plan –00 –00 7,578 –00 7,578
Contribution to defined benefit plan –00 –00 12,075 –00 12,075
Staff provident fund –00 –00 –00 157,282 157,282
Staff gratuity fund –00 –00 –00 114,232 114,232
Directors' fee –00 2,500 –00 –00 2,500
Insurance claim received 20,945 –00 –00 –00 20,945
Insurance premium paid 146,029 –00 –00 –00 146,029
Dividend income 67,136 –00 –00 –00 67,136
Brokerage and advisory income 758 –00 –00 –00 758
153
2011
Non Key
Associates Executive Management Retirement Total
(Rupees in '000)
Deposits
At beginning of the year 1,687,940 13,638 126,804 310,525 2,138,907
Placements during the year 56,377,143 2,732,759 657,330 3,789,104 63,556,336
Withdrawals during the year (56,626,727) (2,659,582) (508,142) (3,980,747) (63,775,198)
At end of the year 1,438,356 86,815 275,992 118,882 1,920,045
Advances
At beginning of the year 369,808 214 17,525 –00 387,547
Given during the year 17,461,683 1,653 31,744 –00 17,495,080
Repaid during the year (16,427,230) (1,441) (19,017) –00 (16,447,688)
At end of the year 1,404,261 426 30,252 –00 1,434,939
Investments
At beginning of the year 916,681 –00 –00 –00 916,681
Investment made during the year 100,000 –00 –00 –00 100,000
Redeemed / adjusted during the year (43,586) –00 –00 –00 (43,586)
At end of the year 973,095 –00 –00 –00 973,095
Contingencies and commitments 518,781 –00 –00 –00 518,781
Purchase of fixed assets 2,424 –00 –00 –00 2,424

Sale of securities 47,089 –00 –00 –00 47,089
Redemption of mutual funds units 50,914 –00 –00 –00 50,914
Purchase of mutual funds units 100,000 –00 –00 –00 100,000
Mark-up earned 62,740 –00 1,812 –00 64,552
Mark-up expensed 88,406 5,753 14,535 19,947 128,641
Bank charges and commission 6,544 3 90 –00 6,637
Loss on sale of securities (1,372) –00 –00 –00 (1,372)
Salaries and allowances –00 –00 157,866 –00 157,866
Bonus –00 –00 21,375 –00 21,375
Contribution to defined contribution plan –00 –00 6,792 –00 6,792
Contribution to defined benefit plan –00 –00 12,028 –00 12,028
Staff provident fund –00 –00 –00 132,283 132,283
Staff gratuity fund –00 –00 –00 103,403 103,403
Directors' fee –00 2,075 –00 –00 2,075
Insurance claim received 23,783 –00 –00 –00 23,783
Insurance premium paid 139,835 –00 –00 –00 139,835
Dividend income 80,990 –00 –00 –00 80,990
Brokerage and advisory income 667 –00 –00 –00 667
154
43. CAPITAL ASSESSMENT AND ADEQUACY - BASEL II SPECIFIC
43.1 Scope of application
The Bank is the only entity in the Group to which Basel ll capital adequacy framework applies. The
Bank has ownership in the following subsidiary, where the Bank holds more than 50% of voting
shares as at 31 December 2012:
AL Habib Capital Markets (Private) Limited Financial Pakistan
The assets, liabilities, income, expenses and cash flows of above subsidiary are included in the
consolidated financial statements.
The Bank has ownership in the following associated companies, where the Bank either holds more
than 20% of voting shares or has common Directors on the Board:
Habib Asset Management Limited Financial Pakistan

Habib Sugar Mills Limited Commercial Pakistan
Investment in above associates is accounted for under equity method of accounting in the consolidated
43.2 Capital adequacy
The Basel II Framework for capital adequacy is applicable to the Bank both at the consolidated level
(including subsidiary) and also on a stand alone basis. It is the Bank’s policy that the level of capital
maintained by it should be such that it maximises the return to shareholders while providing sufficient
buffer to absorb risks, including those from any unexpected events. Therefore, the Bank carefully
monitors its capital adequacy ratio and endeavours to maintain it at a level sufficiently higher than
the minimum regulatory requirement. The capital adequacy assessment process will continue to be
further improved and refined, keeping in view the guidelines of SBP.
SBP requires that banks in Pakistan should maintain regulatory capital for credit, market, and
operational risks, the amount of which should at least be equal to 10% of their risk weighted assets.
The Bank calculates capital requirement as per Basel II regulatory framework, using the following
approaches:
Credit risk Standardised Approach

Market risk Standardised Approach
Operational risk Basic Indicator Approach
Total regulatory capital should be at least 10% of risk-weighted assets and the Bank's capital
adequacy ratio is 16.12% (2011: 16.86%).
155
In addition, SBP requires that the paid-up capital of locally incorporated banks should be raised to
Rs. 10 billion by 31 December 2013 in a phased manner. The Bank has been increasing its paid-
up share capital to comply with the aforesaid requirement. The paid-up capital requirement as of
31 December 2012 is Rs. 9 billion. The Bank's paid-up capital as of 31 December 2012 is
Rs. 10.104 billion.
The Bank's exposure to and its management and control of risks is described in note 44. Stress
testing is performed for various risks and their impact on capital adequacy ratio as per guidelines
of SBP.
43.3 Capital structure
The Bank’s Tier I capital comprises share capital, statutory reserve, special reserve, general reserve
and unappropriated profit.
The Bank’s Tier II capital includes subordinated loans, general provisions, revaluation reserves and
exchange translation reserve.
The Bank does not use any Tier III capital at present, which may include short-term subordinated
debt solely for the purpose of meeting a portion of capital requirement for market risk.
2012 2011
(Rupees in '000)
Tier I Capital
Share capital 10,103,868 8,785,972
Reserves 6,296,672 5,207,369
Non-controlling interest 106,753 109,782
associates* (20,006) (17,627)
Intangible assets (88,828) (49,977)
Total Tier I Capital 21,113,684 17,803,517
Tier II Capital
Subordinated loans (upto 50% of total Tier I Capital) 4,837,000 5,536,420
General provisions subject to 1.25% of
total risk weighted assets 2,341,526 1,976,286
Exchange translation reserve 167,874 117,320
Revaluation reserves (upto 45%) 1,757,031 1,236,351
associates* (20,006) (17,627)
Total Tier II Capital 9,083,425 8,848,750
Eligible Tier III Capital –00 –00
Total Eligible Regulatory Capital 30,197,109 26,652,267
* 50% deduction from Tier I capital and 50% deduction from Tier II capital as required by BASEL
II framework.
156
43.4 The risk weighted assets to capital ratio, calculated in accordance with SBP's guidelines on capital
adequacy is as follows:
Capital Requirements Risk Weighted Assets
2012 2011 2012 2011
(Rupees in '000)
Credit Risk
Sovereign 255,500 138,574 2,555,005 1,385,736
Public sector enterprises 735,574 119,701 7,355,743 1,197,007
Corporates 11,546,804 10,132,755 115,468,035 101,327,551
Banks 556,950 345,077 5,569,496 3,450,785
Retail 681,367 797,859 6,813,668 7,978,595
Residential mortgages 58,429 49,911 584,289 499,108
Equities, regulatory instruments, and
mutual funds 448,849 349,786 4,488,492 3,497,863
Other assets 1,361,405 1,247,963 13,614,050 12,479,630
15,644,878 13,181,626 156,448,778 131,816,275
Market Risk
Interest rate risk 26,922 57,292 336,524 716,145
Foreign exchange risk 40,639 18,768 507,986 234,605
67,561 76,060 844,510 950,750
Operational Risk 2,402,305 2,026,871 30,028,814 25,335,886
Total 18,114,744 15,284,557 187,322,102 158,102,911
Capital Adequacy Ratio

Total eligible regulatory capital (a) 30,197,109 26,652,267
Total risk weighted assets (b) 187,322,102 158,102,911
Capital Adequacy Ratio [(a) / (b) x 100] 16.12% 16.86%
44. RISK MANAGEMENT
The Bank has a risk management framework commensurate with its size and the nature of its business.
The Board of Directors has approved risk management policies covering key areas of activities for
the guidance of management and committees of the Board, management committees, and Divisions
/ Departments of the Bank.
This section presents information about the Bank’s exposure to and its management and control of
risks, in particular the primary risks associated with its use of financial instruments.
157
44.1 Credit risk
Credit risk is the risk of loss arising from failure by a client or counterparty to meet its contractual
obligation. It emanates from loans and advances, commitments to lend, contingent liabilities such
as letters of credit and guarantees, and other similar transactions both on and off balance sheet.
These exclude investments and treasury-related exposures, which are covered under market risk.
It is the Bank’s policy that all credit exposures shall be adequately collateralised, except when specially
exempted by SBP as in case of personal loans and credit cards, and those at overseas branch where
the accepted local banking practice is followed.
The objective of credit risk management is to keep credit risk exposure within permissible level,
relevant to the Bank’s risk capital, to maintain the soundness of assets and to ensure returns
commensurate with risk.
Credit risk of the Bank is managed through the credit policy approved by the Board, a well defined
credit approval mechanism, prescribed documentation requirement, post disbursement administration,
review and monitoring of all credit facilities; and continuous assessment of credit worthiness of
counterparties. Decisions regarding the credit portfolio are taken mainly by the Central Credit
Committee. Credit Risk Management Committee of the Board provides overall guidance in managing
the Bank's credit risk.
Counterparty exposure limits are approved in line with the Prudential Regulations and the Bank's
own policies, by taking into account both qualitative and quantitative criteria. There is an established
system for continuous monitoring of credit exposures and follow-up of any past due loans with the
respective business units. All past due loans, including trade bills, are reviewed on fortnightly basis
and pursued for recovery. Any non-performing loans are classified and provided for as per Prudential
Regulations. The Bank has also established a mechanism for independent post-disbursement review
Credit facilities, both fund based and non-fund based, extended to large customer groups and industrial
sectors are regularly monitored. The Bank has concentration of credit in textile which is the largest
sector of Pakistan's economy. Concentration risk is managed by diversification within sub-sectors
like spinning, weaving and composites, credit worthiness of counterparties, and adequate collateralisation
of exposures.
Credit administration function has been placed under a centralised set-up. Its main focus is on
compliance with terms of sanction of credit facilities and the Bank’s internal policies and procedures,
scrutiny of documentation, monitoring of collateral, and maintenance of borrowers’ limits, mark-up
rates, and security details.
The Bank has implemented its own internal risk rating system for the credit portfolio, as per guidelines
of SBP. Credit ratings by external rating agencies, if available, are also considered.
The Bank lends primarily against the cash flow of the business with recourse to the assets being
financed as primary security. Collaterals in the form of liquid securities, tangible securities, and other
acceptable securities are obtained to hedge the risk, as deemed appropriate. Main types of collaterals
taken by the Bank include charge on stock-in-trade, receivables, machinery, mortgage of properties,
pledge of goods, shares and other marketable securities, government securities, government
guarantees, bank guarantees and cash margins and bank deposits.
Specific provisions on credit portfolio are determined in accordance with the Prudential Regulations.
General provision on the consumer portfolio is also determined as per Prudential Regulations. The
Bank maintains additional general provision in line with its prudent policies. Particulars of provisions
against advances are given in note 12.6.
The Bank uses the Standardised Approach to calculate capital charge for credit risk as per Basel II
regulatory framework, with comprehensive approach for credit risk mitigation.
Stress testing for credit risk is carried out regularly to estimate the impact of increase in non-performing
loans and downward shift in these categories.
158
44.1.1 Credit risk: Disclosures on portfolio subject to Standardised Approach - Basel II Specific
The Bank uses the ratings issued by The Pakistan Credit Rating Agency Limited (PACRA) and JCR-
VIS Credit Rating Company Limited (JCR-VIS) for its local currency exposures and ratings issued
by Moody’s, S&P, and Fitch for its foreign currency exposures. These External Credit Assessments
Institutions (ECAIs) have been approved by SBP.
For foreign currency claims on sovereigns, the Bank also uses risk scores of Export Credit Agencies
(ECAs).
Moody’s,
JCR-VIS PACRA S&P, and Fitch ECA Score
(local (local (foreign (foreign
currency) currency) currency) currency)
Types of exposures
Corporates 3 3 – –
Banks 3 3 3 –
Sovereigns – – 3 3
Small and Medium Enterprises – – – –
Securitisations – – – –
Others (public sector enterprises) 3 3 – –
The Bank has not transferred public issue ratings onto comparable assets in the banking book
in its calculations. ECAI ratings and ECA scores are aligned with risk buckets as determined by
SBP.
Credit exposures subject to Standardised Approach
Amount Credit Risk
outstanding/ Mitigation
credit equivalent (CRM)
Risk buckets (rated and unrated) deduction Net amount
(Rupees in '000)
0% 291,260,686 –00 291,260,686
20% 21,709,629 566,125 21,143,504
35% 1,669,397 –00 1,669,397
50% 22,352,066 1,025,220 21,326,846
75% 12,208,095 3,123,204 9,084,891
100% 137,101,366 3,100,704 134,000,662
150% 157,030 51,674 105,356
486,458,269 7,866,927 478,591,342
44.1.2 Credit risk: Disclosures on CRM for Standardised Approach – Basel II Specific
Eligible collaterals used by the Bank for credit risk mitigation are cash margins and cash deposits,
government securities, financial guarantees, listed shares, and other listed, quoted or rated securities.
The Bank requires perfection of collaterals by marking lien on cash margins and deposits, pledging
of shares and other securities and verifying the authenticity of guarantees received. Shares and
securities including marketable government securities are taken at market value and other government
securities are taken at encashment value. Appropriate hair-cuts are applied as per Basel II regulatory
framework. Among the mitigants used by the Bank, there is concentration in cash margins and cash
deposits.
159
44.1.3 Segment by class of business 2012
Contingencies and
in '000) in '000) in '000)

equipment 928,223 0.60 1,242,271 0.36 2,620,963 3.49
Cement 585,206 0.38 70,492 0.02 289,846 0.39
Electronics and electrical appliances 171,860 0.11 347,378 0.10 1,227,607 1.63
Fertilizers 607,413 0.40 4,169,917 1.23 69,186 0.09
Financial 4,283,011 2.79 5,399,818 1.59 1,370,623 1.82
Food and allied 28,206,992 18.38 2,983,610 0.88 2,464,831 3.28
Individuals 3,457,090 2.25 241,523,050 70.95 13,860 0.02
Iron and steel 7,495,526 4.88 1,596,071 0.47 3,925,636 5.22
Paper and board 1,736,539 1.13 95,685 0.03 332,428 0.44
Services (other than financial) 1,476,647 0.96 9,977,542 2.93 1,497,228 1.99
Shoes and leather garments 996,765 0.65 578,336 0.17 334,860 0.45
Sugar 3,161,360 2.06 1,467,343 0.44 609,057 0.83
Textile
Spinning 21,595,676 14.07 1,578,789 0.46 9,494,332 12.64
Weaving 9,768,467 6.37 855,448 0.25 3,751,720 4.99
Composite 19,200,670 12.51 1,689,800 0.50 4,370,065 5.82
54,784,451 35.70 5,057,680 1.48 20,479,509 27.26
Others 10,842,119 7.08 31,217,179 9.17 6,637,885 8.83
153,453,820 100.00 340,386,558 100.00 75,140,355 100.00
160
2011
Contingencies and
in '000) in '000) in '000)

equipment 984,322 0.82 1,753,251 0.58 2,065,421 3.89
Cement 1,454,491 1.21 120,863 0.04 290,182 0.55
Electronics and electrical appliances 211,638 0.18 441,998 0.15 912,852 1.72
Fertilizers 995,800 0.83 5,325,396 1.76 595,629 1.12
Financial 2,693,662 2.25 6,501,749 2.15 1,009,373 1.90
Food and allied 8,249,156 6.87 2,824,299 0.93 976,276 1.84
Individuals 3,417,816 2.85 191,617,198 63.43 5,475 0.01
Iron and steel 4,423,216 3.69 1,050,440 0.35 1,535,498 2.89
Paper and board 1,945,457 1.62 111,307 0.04 475,018 0.89
Services (other than financial) 496,901 0.41 10,057,095 3.33 592,458 1.11
Shoes and leather garments 1,271,026 1.06 679,898 0.23 208,454 0.39
Sugar 4,250,475 3.54 1,371,828 0.45 110,388 0.21
Textile
Spinning 21,295,370 17.75 826,133 0.27 3,656,283 6.88
Weaving 8,011,212 6.68 772,394 0.26 1,389,818 2.62
Composite 16,884,454 14.07 1,771,836 0.58 2,851,233 5.35
49,872,808 41.57 3,991,151 1.32 9,480,499 17.83
Others 8,072,814 6.73 27,996,358 9.27 7,825,807 14.73
119,994,310 100.00 302,097,187 100.00 53,138,104 100.00
161
44.1.4 Details of non-performing advances and specific provisions by class of business segment
2012 2011
Specific Specific
(Rupees in '000)
Agriculture / agri business 74,156 74,156 74,156 74,156

Automobiles and transportation equipment 33,769 33,769 33,734 33,734
Chemical / pharmaceuticals –00 –00 5,169 5,169
Commerce and trade 447,105 447,105 457,098 446,087
Electronics and electrical appliances 4,058 4,058 9,498 4,749
Financial 292,327 90,056 292,327 210,201
Ghee and edible oil 2,075 2,075 2,075 2,075
Individuals 51,558 49,120 53,687 49,739
Oil refinery / marketing 17,998 17,998 17,998 17,998
Plastic products 91,676 91,676 92,278 88,528
Real estate / construction 260,346 260,346 263,313 253,921
Shoes and leather garments 5,849 5,849 16,621 16,621
Surgical equipments 2,797 2,797 –00 –00
Textile
Spinning 961,282 942,162 933,591 933,591
Weaving 251,362 108,814 23,443 11,722
Composite 994,954 872,101 837,414 811,428
Ready-made garments 164,233 44,290 10,125 9,825
2,371,831 1,967,367 1,804,573 1,766,566
Others 50,185 16,561 81,103 29,303
3,705,730 3,062,933 3,203,630 2,998,847
44.1.5 Segment by sector

2012
in '000) in '000) in '000)

Private 119,996,948 78.20 312,887,424 91.92 66,888,066 89.02
153,453,820 100.00 340,386,558 100.00 75,140,355 100.00
2011
in '000) in '000) in '000)

Private 109,707,719 91.43 258,548,166 85.58 45,757,359 86.11
119,994,310 100.00 302,097,187 100.00 53,138,104 100.00
162
44.1.6 Details of non-performing advances and specific provisions by sector
2012 2011
Specific Specific
(Rupees in '000)
Public / Government –00 –00 –00 –00

Private 3,705,730 3,062,933 3,203,630 2,998,847
3,705,730 3,062,933 3,203,630 2,998,847
44.1.7 Geographical segment analysis

2012
(Rupees in '000)
Pakistan 8,662,663 442,348,435 23,174,470 70,403,181

Middle East 266,579 11,005,507 1,003,945 4,737,174
8,929,242 453,353,942 24,178,415 75,140,355
2011
(Rupees in '000)
Pakistan 7,016,286 378,277,123 19,443,025 51,726,462

Middle East 142,707 6,248,491 568,263 1,411,642
7,158,993 384,525,614 20,011,288 53,138,104
44.2 Market risk

Market risk is the risk of loss arising from movements in market rates or prices, such as interest rates,
foreign exchange rates, and equity prices.
The Bank takes positions in securities for the purpose of investment and not to run a trading book.
As regards foreign exchange positions, the purpose is to serve the needs of clients. The Bank does
not engage in trading or market making activities.
Market risk is managed through the market risk policy approved by the Board, approval of counterparty
and dealer limits, specific senior management approval for each investment and regular review and
monitoring of the investment portfolio by the Asset Liability Management Committee (ALCO). A key
element of the Bank’s market risk management is to balance safety, liquidity, and income in their order
of priority. Another key element is separation of functions and reporting lines for the Treasury Division
which undertakes dealing activities within the limits and parameters set by ALCO, Settlements
Department which confirms and settles the aforesaid deal and Middle Office which independently
monitors and analyses the risks inherent in treasury operations. Risk Management Committee of the
Board provides overall guidance in managing the Bank’s market risk.
163
Dealing activities of the Bank include investment in government securities, term finance certificates,
sukuks / bonds, shares and mutual funds, money market transactions and foreign exchange transactions
catering to the needs of its customers. All such activities are carried out within the prescribed limits.
Any excess over limits noted by the Settlements Department and / or the Middle Office is reported
to senior management and ALCO. Stress testing is performed as per guidelines of SBP as well as
Bank's internal policy.
The Bank uses the Standardised Approach to calculate capital charge for market risk as per Basel ll
regulatory framework. Details of capital charge for market risk are given in note 43.4.
44.2.1 Interest rate / yield risk
Interest rate risk is the risk of loss from adverse movements in interest rates. ALCO monitors and
manages the interest rate risk with the objective of limiting the potential adverse effects on the
profitability of the Bank arising from fluctuation in the market interest rates and mismatching or gaps
in the amount of financial assets and financial liabilities in different maturity time bands.
The Bank's interest rate exposure is calculated by categorising its interest sensitive assets and
liabilities into various time bands based on the earlier of their contractual repricing or maturity dates.
Interest rate risk exposures of the Bank are controlled through dealer limits, counter-party exposure
limits and (when necessary) type-of-instrument limits. Duration and modified duration of various types
of debt securities as well as their entire portfolio are also calculated, and the impact of adverse change
in interest rates on the market value of the securities is estimated. Stress testing for interest rate risk
is carried out regularly to estimate the impact of adverse changes in the interest rates.
Interest rate / yield risk in the banking book – Basel II Specific
The Bank holds financial assets and financial liabilities with different maturities or repricing dates and
linked to different benchmark rates, thus creating exposure to unexpected changes in the level of
interest rates. Interest rate risk in the banking book refers to the risk associated with interest-bearing
financial instruments that are not held in the trading book of the Bank.
Repricing gap analysis presents the Bank’s interest sensitive assets (ISA) and interest sensitive
liabilities (ISL), categorised into various time bands based on the earlier of their contractual repricing
or maturity dates (or settlement dates for off-balance sheet instruments). Deposits with no fixed
maturity dates (for example, saving deposits and treasurer’s call deposits) are included in the lowest,
one-month time band, but these are not expected to be payable within a one-month period. The
difference between ISA and ISL for each time band signifies the gap in that time band, and provides
a workable framework for determining the impact on net interest income.
The Bank reviews the repricing gap analysis periodically to monitor and manage interest rate risk in
the banking book.
164
44.2.2 Mismatch of interest rate sensitive assets and liabilities
2012
Rate months year
(Rupees in '000)
Assets
Lendings to financial institutions 8.75% 993,981 993,981 –00 –00 –00 –00 –00 –00 –00 –00 –00
Investments 10.56% 249,923,504 40,906,218 63,430,590 59,723,528 59,863,152 1,329,443 2,287,865 6,290,528 12,635,428 –00 3,456,752
Advances 9.82% 147,859,828 96,592,497 30,756,817 14,801,098 544,025 811,925 915,702 1,242,651 773,125 1,421,988 –00
Other assets –00 4,961,740 –00 –00 –00 –00 –00 –00 –00 –00 –00 4,961,740
440,950,646 151,655,376 94,187,407 74,524,626 60,407,177 2,141,368 3,203,567 7,533,179 13,408,553 1,421,988 32,467,405
Liabilities
Bills payable –00 5,257,191 –00 –00 –00 –00 –00 –00 –00 –00 –00 5,257,191
Borrowings 8.56% 69,622,055 52,388,284 6,919,877 6,970,516 377,627 617,118 656,261 1,019,825 672,547 –00 –00
Sub-ordinated loans 14.84% 6,489,300 –00 1,497,100 1,000 1,400 1,994,000 1,200 2,994,600 –00 –00 –00
to finance lease –00 –00 –00 –00 –00 –00 –00 –00 –00 –00 –00 –00
425,820,158 211,566,954 26,768,546 26,394,292 22,834,935 12,008,086 4,503,866 7,013,721 672,547 –00 114,057,211
On-balance sheet gap 15,130,488 (59,911,578) 67,418,861 48,130,334 37,572,242 (9,866,718) (1,300,299) 519,458 12,736,006 1,421,988 (81,589,806)
Forward commitments to extend credit 472,257 503 –00 471,754 –00 –00 –00 –00 –00 –00 –00
Off-balance sheet gap (1,143,917) (4,404,654) 535,575 1,592,148 1,133,014 –00 –00 –00 –00 –00 –00
Total interest / yield risk sensitivity gap 13,986,571 (64,316,232) 67,954,436 49,722,482 38,705,256 (9,866,718) (1,300,299) 519,458 12,736,006 1,421,988
Cumulative interest / yield risk sensitivity gap (64,316,232) 3,638,204 53,360,686 92,065,942 82,199,224 80,898,925 81,418,383 94,154,389 95,576,377
165
2011
Rate months year
(Rupees in '000)
Assets
Lendings to financial institutions –00 –00 –00 –00 –00 –00 –00 –00 –00 –00 –00 –00
Investments 12.93% 223,105,101 6,060,076 17,714,223 65,127,013 104,926,382 5,646,183 1,322,197 7,094,040 12,572,272 –00 2,642,715
Advances 11.14% 114,863,132 68,337,408 22,578,705 16,621,599 2,006,381 562,581 834,119 1,795,555 930,881 1,195,903 –00
Other assets –00 4,750,561 –00 –00 –00 –00 –00 –00 –00 –00 –00 4,750,561
372,421,425 84,472,916 40,292,928 81,748,612 106,932,763 6,208,764 2,156,316 8,889,595 13,503,153 1,195,903 27,020,475
Liabilities
Bills payable –00 4,979,720 –00 –00 –00 –00 –00 –00 –00 –00 –00 4,979,720
Borrowings 11.02% 43,441,594 28,079,004 7,439,070 4,065,242 102,898 428,846 758,275 1,731,338 836,921 –00 –00
Sub-ordinated loans 14.59% 7,390,358 448,830 1,497,700 1,000 450,228 2,800 1,994,000 2,995,800 –00 –00 –00
to finance lease 12.27% 28 9 19 –00 –00 –00 –00 –00 –00 –00 –00
362,210,209 152,579,592 39,870,057 20,407,235 33,631,836 5,893,545 12,630,379 8,147,433 836,921 –00 88,213,211
On-balance sheet gap 10,211,216 (68,106,676) 422,871 61,341,377 73,300,927 315,219 (10,474,063) 742,162 12,666,232 1,195,903 (61,192,736)
Forward commitments to extend credit 15,603 –00 15,603 –00 –00 –00 –00 –00 –00 –00 –00
Off-balance sheet gap 2,715,912 (5,754,058) (2,758,293 ) 7,055,298 4,172,965 –00 –00 –00 –00 –00 –00
Total interest / yield risk sensitivity gap 12,927,128 (73,860,734) (2,335,422 ) 68,396,675 77,473,892 315,219 (10,474,063) 742,162 12,666,232 1,195,903
Cumulative interest / yield risk sensitivity gap (73,860,734) (76,196,156 ) (7,799,481 ) 69,674,411 69,989,630 59,515,567 60,257,729 72,923,961 74,119,864
166
44.2.3 Foreign exchange risk
Foreign exchange risk is the risk of loss from adverse changes in currency exchange rates. The
Bank’s foreign exchange exposure comprises forward contracts, purchase of foreign bills, foreign
currency loans and investments, foreign currency cash in hand, balances with banks abroad, foreign
currency deposits and foreign currency placements with SBP and other banks. Focus of the Bank’s
foreign exchange activities is on catering to the needs of its customers, both in spot and forward
markets.
Foreign exchange risk exposures of the Bank are controlled through dealer limits, open foreign
exchange position limits, counterparty exposure limits, and country limits. The Bank manages its
foreign exchange exposure by matching foreign currency assets and liabilities within strict limits.
The net open position in any single currency and the overall foreign exchange exposure are both
managed within the statutory limits as prescribed by SBP as well as the internal limits set by the
Bank itself. Stress testing for foreign exchange risk is carried out regularly to estimate the impact
of adverse changes in foreign exchange rates.
2012
Net
(Rupees in '000)
Pakistan Rupee 409,475,010 387,791,038 1,617,592 23,301,564

Great Britain Pound 871,690 4,221,366 3,347,636 (2,040)
Japanese Yen 81,871 –00 (121,822) (39,951)
Euro 1,309,654 2,323,450 981,461 (32,335)
Other currencies 169,531 413,980 247,999 3,550
453,353,942 429,175,527 –00 24,178,415
2011
Net
(Rupees in '000)
Pakistan Rupee 349,981,419 328,166,689 (2,713,485) 19,101,245

Great Britain Pound 371,841 3,584,968 3,262,903 49,776
Japanese Yen 89,471 –000 (10,988) 78,483
Euro 1,052,866 2,163,503 1,231,057 120,420
Other currencies 7,811 246,244 188,481 (49,952)
384,525,614 364,514,326 –00 20,011,288
167
44.3 Liquidity risk
Liquidity risk is the risk of loss to a bank arising from its inability to meet obligations as they fall due
or to fund growth in assets, without incurring unacceptable losses.
Liquidity risk is managed through the liquidity risk policy approved by the Board, careful monitoring
of daily liquidity position by the Treasury Division and the Middle Office and regular review and
monitoring of the liquidity position by ALCO. Risk Management Committee of the Board provides
overall guidance in managing the Bank’s liquidity risk.
Key elements of the Bank’s liquidity risk management are as follows:
- To maintain a comfortable margin of excess liquidity in the form of cash and readily marketable
assets to meet the Bank’s funding requirements at any time.
- To keep a strong focus on mobilisation of low-cost core deposits from customers.
- To maintain a realistic balance between the behavioural maturity profiles of assets and liabilities.
- To maintain excellent credit rating (as borrowing costs and ability to raise funds are directly
affected by credit rating).
- To have a written contingency funding plan to address any hypothetical situations when access
to normal sources of funding is constrained.
The Bank’s liquidity risk management addresses the goal of protecting solvency and the ability to
withstand stressful events in the market place. Stress testing for liquidity risk is carried out regularly
to estimate the impact of decline in liquidity on the ratio of liquid assets to deposits plus borrowings.
168
44.3.1 Maturities of assets and liabilities - based on expected maturities as determined by ALCO
For assets and liabilities that have a contractual maturity, the expected maturity is considered to be the same as contractual maturity. Assets and Liabilities
that do not have a contractual maturity have been categorised on the basis of expected maturities as determined by ALCO. In case of saving and current
accounts, their historical net withdrawal pattern over the next one year was reviewed, based on year-end balances for the last three years. Thereafter,
taking a conservative view, ALCO categorised these deposits in various maturity bands. Other assets and liabilities have been categorised on the basis
of assumptions / judgments that are believed to be reasonable.
2012
(Rupees in '000)
Assets
Investments 249,923,504 38,434,669 62,897,387 58,054,852 63,077,728 2,526,058 2,680,452 7,771,480 14,125,164 355,714
Advances 147,859,828 47,624,578 34,093,116 21,159,165 18,032,876 7,862,798 6,444,278 9,101,032 2,105,560 1,436,425
Operating fixed assets 11,211,423 237,963 202,032 270,833 501,817 720,829 2,795,610 609,037 747,797 5,125,505
Other assets 6,153,613 4,711,031 709,525 268,633 171,176 84,787 42,754 44,137 49,377 72,193
453,353,942 129,213,815 97,902,060 79,753,483 81,783,597 11,194,472 11,963,094 17,525,686 17,027,898 6,989,837
Liabilities
Bills payable 5,257,191 5,257,191 –00 –00 –00 –00 –00 –00 –00 –00
Borrowings 69,622,055 52,388,284 6,919,877 6,970,516 377,627 617,118 656,261 1,019,825 672,547 –00
to finance lease –00 –00 –00 –00 –00 –00 –00 –00 –00 –00
Deferred tax liabilities 1,929,441 403,511 24,572 36,197 66,636 123,492 657,565 43,730 (917 ) 574,655
429,175,527 106,662,970 49,722,409 51,149,924 48,019,051 54,671,168 49,713,884 52,367,581 15,823,164 1,045,376
Net assets 24,178,415 22,550,845 48,179,651 28,603,559 33,764,546 (43,476,696) (37,750,790 ) (34,841,895) 1,204,734 5,944,461

Reserves 6,464,546
Non-controlling interest 106,753
– net of tax 2,788,023
24,178,415
169
2011
(Rupees in '000)
Assets
Investments 223,105,101 3,158,213 16,925,212 63,694,739 107,648,562 6,035,585 2,511,935 7,964,644 14,848,771 317,440
Advances 114,863,132 31,070,251 21,808,866 23,878,170 17,538,430 4,256,383 4,366,018 6,553,986 4,179,736 1,211,292
Operating fixed assets 10,791,345 105,127 178,180 204,772 369,360 658,224 555,261 2,884,346 701,023 5,135,052
Other assets 6,063,405 4,508,730 908,893 208,895 164,028 82,645 26,438 25,552 40,016 98,208
384,525,614 68,544,952 39,821,151 87,986,576 125,720,380 11,032,837 7,459,652 17,428,528 19,769,546 6,761,992
Liabilities
Bills payable 4,979,720 4,979,720 –00 –00 –00 –00 –00 –00 –00 –00
Borrowings 43,441,594 28,079,004 7,439,070 4,065,242 102,898 428,846 758,275 1,731,338 836,921 –00
to finance lease 28 9 19 –00 –00 –00 –00 –00 –00 –00
Deferred tax liabilities 1,232,433 (312,088 ) 20,625 34,895 65,675 117,528 98,752 640,106 (13,522 ) 580,462
364,514,326 79,510,745 56,338,531 38,533,228 52,277,648 38,096,140 43,572,103 41,484,533 13,721,508 979,890
Net assets 20,011,288 (10,965,793 ) (16,517,380) 49,453,348 73,442,732 (27,063,303) (36,112,451 ) (24,056,005) 6,048,038 5,782,102

Reserves 5,324,689
– net of tax 2,022,847
20,011,288
170
44.3.2 Maturities of assets and liabilities - based on contractual maturities
The following maturity profile is based on contractual maturities for assets and liabilities that have a contractual maturity. Assets and liabilities that do not
have a contractual maturity have been categorised in the shortest maturity band.
2012
(Rupees in '000)
Assets
Investments 249,923,504 43,238,418 62,812,290 58,038,142 59,706,261 2,476,662 2,626,920 7,595,133 13,429,678 –00
Advances 147,859,828 47,624,578 34,093,116 21,159,165 18,032,876 7,862,798 6,444,278 9,101,032 2,105,560 1,436,425
Other assets 6,153,613 4,997,856 686,945 129,938 103,811 84,787 42,754 44,137 49,377 14,008
453,353,942 139,557,331 97,728,441 79,526,619 78,217,047 11,087,648 9,648,126 17,349,319 16,332,412 3,906,999
Liabilities
Bills payable 5,257,191 5,257,191 –00 –00 –00 –00 –00 –00 –00 –00
Borrowings 69,622,055 52,388,284 6,919,877 6,970,516 377,627 617,118 656,261 1,019,825 672,547 –00
to finance lease –00 –00 –00 –00 –00 –00 –00 –00 –00 –00
Deferred tax liabilities 1,929,441 1,017,901 21,211 31,156 56,553 103,328 81,823 43,730 (917 ) 574,656
429,175,527 327,139,617 25,396,975 26,429,448 23,672,432 10,877,393 5,364,531 6,056,645 3,663,830 574,656
Net assets 24,178,415 (187,582,286 ) 72,331,466 53,097,171 54,544,615 210,255 4,283,595 11,292,674 12,668,582 3,332,343

Reserves 6,464,546
– net of tax 2,788,023
24,178,415
171
2011
(Rupees in '000)
Assets
Investments 223,105,101 6,095,005 16,911,113 63,663,958 105,011,717 6,029,052 2,514,068 8,007,197 14,872,991 –00
Advances 114,863,132 31,070,250 21,808,866 23,878,170 17,538,430 4,256,384 4,366,018 6,553,986 4,179,736 1,211,292
Other assets 6,063,405 4,753,412 889,251 119,527 105,936 82,645 26,438 25,552 40,016 20,628
384,525,614 76,901,271 39,723,437 87,840,861 122,990,651 10,968,722 7,404,202 15,204,270 19,793,797 3,698,403
Liabilities
Bills payable 4,979,720 4,979,720 –00 –00 –00 –00 –00 –00 –00 –00
Borrowings 43,441,594 28,079,004 7,439,070 4,065,242 102,898 428,846 758,275 1,731,338 836,921 –00
to finance lease 28 9 19 –00 –00 –00 –00 –00 –00 –00
364,514,326 241,287,930 38,512,953 20,453,475 34,429,218 5,998,872 11,474,835 6,965,381 4,811,199 580,463
Net assets 20,011,288 (164,386,659 ) 1,210,484 67,387,386 88,561,433 4,969,850 (4,070,633 ) 8,238,889 14,982,598 3,117,940

Reserves 5,324,689
– net of tax 2,022,847
20,011,288
172
44.4 Equity position risk in the banking book – Basel II Specific
The Bank's policy is to take equity positions for investment purposes and not to run a trading book
for buying and selling of equities. Equity holdings include direct investment in shares and in equity-
based mutual funds, both closed-end and open-ended. Policies covering their valuation and
accounting are disclosed in note 5.5.
Equity position risk
Equity position risk is the risk of loss from adverse movements in equity prices. The Bank’s policy
is to take equity positions for investment purposes and not to run a trading book for buying and
selling of shares.
Equity position risk of the Bank is controlled through equity desk / dealer limits, broker limits, equity
portfolio limits, and future contracts limits. Direct investment in equities and mutual funds is managed
within the statutory limits as prescribed by SBP as well as the internal limits set by the Bank itself.
Stress testing for equity price risk is carried out regularly to estimate the impact of decline in stock
prices.
44.5 Operational risk
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people,
and systems or from external events. This definition includes legal risks but excludes strategic and
reputational risks.
Operational risk is managed through the operational risk policy and audit policy approved by the
Board, along with the policies on prevention of frauds and forgeries and compliance with “Know
Your Customer” / "Customer Due Diligence" and “Anti Money Laundering / Combating Financing
of Terrorism” requirements; operational manuals and procedures issued from time to time; a system
of internal controls and dual authorisation for important transactions and safe-keeping; a Business
Continuity Plan, including a Disaster Recovery Plan for I.T., to prevent interruption of business
services in the event of a major incident or disaster; an I.T. Security Policy to ensure security and
integrity of I.T. systems; and regular audit of the branches. Audit Committee of the Board provides
overall guidance in managing the Bank’s operational risk.
The Bank’s operational risk management framework, as laid down in the operational risk policy, is
flexible enough to implement in stages and permits the overall risk management approach to evolve
in the light of organisational learning and the future needs of the Bank.
The Bank places a high priority on conducting all business dealings with integrity and fairness, as
laid down in the Code of Conduct (formally Statement of Ethics & Business Practices), which is
required to be compiled by all employees.
Internal controls are an essential feature of risk reduction in operational risk management and the
Bank continues to improve its internal controls.
Operational risk disclosures – Basel II Specific
The Bank uses Basic Indicator Approach to calculate capital charge for operational risk as per Basel
II regulatory framework. This approach is considered to be most suitable in view of the business
model of the Bank which relies on an extensive network of branches to offer one-stop, full-service
banking to its clients. The Bank has developed and implemented an Operational Loss Database.
Operational loss events are reviewed and appropriate corrective actions taken on an ongoing basis,
including measures to improve security and control procedures.
173
45. ISLAMIC BANKING BUSINESS
45.1 The Bank is operating 13 (2011: 11) Islamic banking branches in Pakistan. The statement of financial
position and profit and loss account of these branches as at 31 December 2012 and for the year are
as follows:
45.1.1 STATEMENT OF FINANCIAL POSITION

Note 2012 2011
(Rupees in '000)
ASSETS
Cash and balances with treasury banks 322,418 270,353
Balances with and due from financial institutions 2,786 494,968
Investments 1,573,586 1,362,945
Islamic financing and related assets 45.1.1.1 7,698,981 5,903,778
Operating fixed assets 41,123 35,719
Other assets 254,653 252,128
9,893,547 8,319,891
LIABILITIES
Bills payable 44,896 29,886
Due to financial institutions 1,081,647 1,192,491
Deposits and other accounts 6,824,034 5,447,863
– Current accounts 1,469,285 986,652
– Saving accounts 713,014 519,840
– Term deposits 3,981,713 3,612,383
– Others 58,863 12,832
– Deposits from financial institutions - remunerative 600,625 315,594
– Deposits from financial institutions - non-remunerative 534 562
Due to Head Office 360,000 195,478
Other liabilities 315,081 180,097
(8,625,658) (7,045,815)
NET ASSETS 1,267,889 1,274,076
REPRESENTED BY:
Islamic banking fund 950,000 900,000
Unremitted profit 310,177 372,106
1,260,177 1,272,106
Surplus on revaluation of assets 7,712 1,970
1,267,889 1,274,076
174
2012 2011
(Rupees in '000)
Murabaha 3,125,006 1,848,829

Ijarah 3,926 44,812
Net book value of assets / investment in ijarah under IFAS 2 307,173 109,668
Diminishing musharika 2,851,554 2,099,681
Export refinance murabaha 81,600 158,727
Export refinance istisna 1,000,047 1,086,631
Istisna 44,644 11,102
Gross financing 7,413,950 5,359,450
Less: general provisioning against consumer financing (231) –00
Net financing 7,413,719 5,359,450
Advance against murabaha 277,979 488,786
Advance against ijarah 7,283 55,542
Islamic financing and related assets - net off provision 7,698,981 5,903,778
Financings / inventory / receivables 7,413,950 5,359,450

Advances 285,262 544,328
Less: general provision against consumer financing (231) –00
7,698,981 5,903,778
Islamic modes of financing
Subsequent to the year end, SBP issued BSD Circular Letter No. 03 dated January 22, 2013 whereby
all Islamic Banks and Banks with Islamic banking Branches are required to present all financing,
advances against murabaha, inventories and any other related items pertaining to Islamic mode of
financing under the caption "Islamic Financing and Related Assets" in the Statement of Financial
Position. Previously, Advances against Murabaha and Inventories were reported under "Other Assets"
separately from the financing balances. This change in presentation is effective from 31 December
2012 and accordingly the Bank has revised the presentation of the Financial position of Islamic
Banking Branches. Corresponding figures for 2012 have been adjusted accordingly.
175
2012 2011
(Rupees in '000)
45.2 PROFIT AND LOSS ACCOUNT
Profit / return on financing and placements earned 1,076,165 1,029,044
Profit / return on deposits and other dues expensed (566,121) (569,686)
Provision against non performing loans and advances 510,044 459,358
Net spread earned (231 ) –00
509,813 459,358
OTHER INCOME
Fee, commission and brokerage income 29,808 28,670
Other income 5,269 4,399
43,841 41,383
553,654 500,741
OTHER EXPENSES
Administrative expenses (243,477) (128,635)
PROFIT BEFORE TAXATION 310,177 372,106
45.3 Remuneration to Shariah Advisor / Board 1,530 1,230
45.4 CHARITY FUND

Additions during the year 9,779 2,281
Payments / utilisation during the year
Health (1,356) (1,609)
Social welfare (925) (450)
(2,281) (2,059)
45.5 PROFIT AND LOSS DISTRIBUTION AND POOL MANAGEMENT

45.5.1 The number and nature of pools maintained by the Islamic Banking Branch along with their
key features and risk and reward characteristics :
We have a single pool mechanism with the depositors. The pool operates on Mudarba basis. Since
we are operating in a single pool structure the risk and reward are proportionately shared by the
depositor.
Parameters associated with risk and rewards:
Following are the key consideration attached with risk and reward of the pool:
Period, return, safety, security and liquidity of the investment.
Maturities of funds obtained from Principal Office, Islamic Banking Institutions and Shariah compliant
organisations as regulated in Pakistan.
176
Element of risk attached to various types of investment.
SBP rules and Shariah clearance.
45.5.2 Avenues / sectors of economy / business where Mudaraba based deposits have been deployed
The Mudaraba based funds have been deployed in the following avenues / sectors / business:
Chemical & pharmaceuticals

Agribusiness
Textile
Sugar
Shoes and leather garments
GOP ijarah sukuk
Production and transmission of energy
Food and tobacco except sugar
Individuals
Others (Ship breaking, Plastic product)
45.5.3 Parameters used for allocation of profit, charging expenses and provisions etc. along with
a brief description of their major components
The Bank’s Islamic Banking Division (IBD) is currently accepting Pak Rupees Term Deposits and
Saving Deposits under Mudaraba Arrangements, wherein the Bank is Mudarib and depositors are
Rab-Ul-Maal. The bank also commingles its funds with those of depositors.
The funds so generated shall be invested by the Bank in Shariah compliant modes of financing such
as Murabaha, Ijarah, Istisna, Diminishing Musharaka and Ijarah Sukuk.
The Bank calculates the profit of the pool after every quarter. Profit is distributed at the Gross Income
level. The Gross Income is calculated after deducting costs and expenses such as cost of Murabaha,
cost of Takaful, Depreciation directly incurred in deriving that Income.
Gross Income of the deposit pool is being shared between the Bank (Mudarib) and depositors (Rab
ul Maal) on the basis of a pre-determined profit sharing ratio.
The Bank’s profit sharing ratio during the year was 60% (2011: 60%) of Gross Income and depositor
profit sharing ratio was 40% (2011: 40%) of Gross Income.
The profit is distributed among the account holders on the basis of predetermined weightages,
announced at the beginning of the quarter based on their respective category / tiers. In case of loss,
Rab-Ul-Maal has to bear the loss in the ratio of investment.
In case of provisioning, the general and specific provisions created against non-performing financing
and diminution in the value of investments as under prudential regulations and other SBP directives
shall be borne by the IBD as Mudarib. However, write-offs of financings and loss on sale of investments
shall be charged to the pool along with other direct expenses.
177
45.5.4 Mudarib share (in amount and percentage of Distributable Income)
2012 2011
(Rupees in Million)
Distributable Income 953 952

Mudarib Share (percent) 60% 60%
45.5.5 Amount and percentage of Mudarib share transferred

to the depositors through Hiba

Hiba 189 169
Hiba percentage of Mudarib Share 33% 30%
45.5.6 Profit rate earned vs. profit rate distributed to the depositors
during the year
Profit Rate Earned 12.30% 13.71%

Profit Rate Distributed 7.48% 8.86%
46. SUBSEQUENT EVENT
Subsequent to the year end, the Board of Directors proposed a final cash dividend of Rs. 3 (2011:
Rs. 2.50) per share.
47. GENERAL
47.1 Comparative information has been re-classified, re-arranged or additionally incorporated in these
financial statements, wherever necessary to facilitate comparative and to conform with changes in
presentation in the current year.
47.2 Captions, as prescribed by BSD Circular No. 04, dated 17 February 2006, in respect of which there
are no amounts have not been reproduced in these financial statements, except for the captions
of the statement of financial position and profit and loss account.
47.3 Figures have been rounded off to the nearest thousand rupees.
47.4 Effective this year, the cost of foreign exchange forward swap contracts has been netted of against
mark-up / return / interest expense. This was previously included in income from dealing in foreign
currencies. Accordingly, comparative figure in respect of swap cost for the year ended 31 December
2012 amounting to Rs. 126.855 million has been reclassified in these financial statements. There
are no other major reclassification to report.
48. DATE OF AUTHORISATION
These consolidated financial statements were authorised for issue in the Board of Directors' meeting
held on February 14, 2013.
Managing Director
178
Annexure-1
Statement showing written-off loans or any other financial relief

of five hundred thousand rupees or above provided
during the year ended 31 December 2012
(Rupees in '000)
Name of Outstanding Liabilities

at beginning of year Interest / Other
Name and individuals / Father's / Principal
S. Mark-up financial Total
address partners / Husband's written-
No. Interest / written- relief (9+10+11)
of the borrowers directors (with Name Principal Others Total off
Mark-up off provided
CNIC No.)
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)
1. Tooba Garments Industries Rukhsana S. Moin-ul-Haq Farooqi 5,665 1,200 – 6,865 665 1,214 167 2,046
19/2/2, Sector-12 C, North (CNIC No. 42101-1264204-2)
Karachi Ind’l Area, Karachi
2. Tabassum / Shahnawaz Khan Tabassum Shahnawaz M. Shahnawaz Khan 2,964 3,195 – 6,159 – 3,195 – 3,195
G-23/IIA, 5th Gizri Street, (CNIC No. 42401-1813128-4) Yousuf Zai
Gizri Avenue, Phase-IV DHA
Karachi M. Shahnawaz Khan M. Basharat Khan
(CNIC No. 42401-0530477-7) Yousuf Zai
3. R.A. Associates (Pvt) Ltd Syed Muhammad Pervez Jafri Syed Muhammad 5,169 198 – 5,367 1,167 270 – 1,437
Flat No. 2, Asif Palace, BS-2 (CNIC No. 42101-3191477-7) Ahsan Jafri
Block-13, F.B. Area
Karachi Nabeela Jafri Syed Muhammad
(CNIC No. 42101-9822525-0) Pervez Jafri
4. M.H. Oil Mills (Pvt) Ltd Mr. Abdul Hai Muhammad Umer 16,573 6,678 – 23,251 1,455 7,968 – 9,423
E-32, S.I.T.E, (CNIC No. 42101-6938667-5)
Karachi
Mr. Muhammad Arshad Hai Abdul Hai
(CNIC No. 42101-5007544-9)
Mr. Muhammad Asim Hai Abdul Hai

(CNIC No. 42101-8957508-9)
Total 30,371 11,271 – 41,642 3,287 12,647 167 16,101
Note: 1 The amount of principal written-off was against the specific provision held by the Bank.
Note: 2 Interest / mark-up written-off was against suspended mark-up.
179
Report of Shariah Advisor
We have examined, on test check basis, each class of transaction, the relevant documentation and procedures
adopted by Islamic Banking Branches / Division of Bank AL Habib Limited (IBB-BAHL), and we hereby
report, for the year ended December 31, 2012, that in our opinion;
(a) the affairs of IBB-BAHL have been carried out in accordance with rules and principles of Shariah,
SBP regulations and guidelines related to Shariah compliance and other rules as well as with
specific fatawa and rulings issued by the Shariah Advisor from time to time;
(b) the allocation of funds, weightages, profit sharing ratios, profits and charging of losses, if any,
relating to PLS accounts conform to the basis vetted by the Shariah Advisor in accordance with
Shariah rules and principles and;
(c) any earnings that have been realised from sources or by means prohibited by Shariah rules
and principles have been credited to charity account.
ISMATULLAH
Shariah Advisor
Karachi: February 14, 2013 Islamic Banking Division
180
Branch Network
The Bank has a network of 390 branches including 82 sub-branches, a wholesale branch in the Kingdom
of Bahrain, a branch in Karachi Export Processing Zone and 13 Islamic Banking branches. The Bank has
branches / sub-branches / representative offices in the following cities:
• Abbotabad • Kamalia Sugar Mills (Kamalia) • Qazi Ahmed

• Attock • Kandhkot • Quetta
• Badin • Karachi • Rahim Yar Khan
• Bahawalpur • Karkhana Bazar (Vehari) • Rawalpindi
• Bhiria Road (Naushero Feroz) • Kasur • Rohaillan Wali
• Burewala • Khairpur • Sadiqabad
• Chaksawari (A.K.) • Khanbela • Sahiwal
• Chakwal • Khanewal • Saleh Khana
• Chenab Nagar • Khanpur • Sanghar
• Dadu • Kharian • Sargodha
• Dadyal (A.K.) • Khurrianwala • Shahdadkot
• Daharki • Khushab • Shahdadpur
• Daska • Kotla Arab Ali Khan • Shahpur Chakar
• Dera Ghazi Khan
• Kunri • Sheikhpura
• Dinga
• Lahore • Shikarpur
• Faisalabad
• Lala Musa • Sialkot
• Fateh Jang
•
• Fazil Pur • Larkana Skardu
• Feroza (Rahim Yar Khan) • Mandi Bahauddin • Sukkur
• Feroze Watoan • Mansehra • Tando Adam
• Gaggo Mandi • Mathanichangan Swabi • Tando Allahyar
• Gambat • Matli • Tando Bagho
• Gawadar • Mehar • Tando Muhammad Khan
• Ghakhar • Mehrabpur • Taxila
• Gharo • Mian Channu • Thari Mirwah
• Ghotki • Mirpur (A.K.) • Tibba Sultanpur
• Gilgit • Mirpurkhas • Toba Tek Singh
• Gujar Khan • Moro • Turbat
• Gujranwala • Multan • Uch Sharif
• Gujrat • Muridke • Wah Cantt
• Hafizabad • Muzaffargarh • Wazirabad
• Hala • Narowal • Zahir Pir
• Haripur • Nausharo Feroze
Off Shore Branches
• Hingorja (Khairpur) • Nawabshah
• Hub • Nooriabad (Jamshoro)
• Export Processing Zone,
Karachi
• Hyderabad • Okara • Manama, Bahrain
• Islamabad • Peshawar
• Jacobabad • Pir Mahal Representative Offices
• Jehlum • Pull Kharan (Shujabad) • Dubai, U.A.E.
• Joharabad • Qasba Gujrat • Istanbul, Turkey
Principal Office Registered Office
Mackinnons Building, I. I. Chundrigar Road, Karachi. 126-C, Old Bahawalpur Road, Multan.
Phones: (92-21) 32412421, 32446916 & 111-786-110 Phones: (92-61) 4580314-16, & 111-786-110
Fax: (92-21) 32419752 Fax: (92-61) 4582471
SWIFT CODE : BAHLPKKA website : www.bankalhabib.com
181
Form of Proxy
The Company Secretary

Bank AL Habib Limited
126-C, Old Bahawalpur Road,
MULTAN.
I/We ________________________________________________________________________________
of __________________________________________________________________________________
a member(s) of Bank AL Habib Limited and holding ___________________________________________
ordinary shares, as per Register Folio No./CDC Account and Participant's I.D. No. ___________________
hereby appoint ____________________________________________Folio No. _____________________
of __________________________________________________________________________________
or failing him/her ____________________________________________Folio No. _____________________
of __________________________________________________________________________________
another member of the Bank to vote for me/us and on my/our behalf at the Twenty Second Annual General Meeting
of the Bank to be held on Tuesday, March 26, 2013 and at any adjournment thereof. _________________
As witness my/our hand this__________________day of_________________2013.
REVENUE
STAMP
RS. 5
SIGNATURE OF MEMBER (S)

A member entitled to attend the Annual General Meeting is entitled to appoint a proxy to attend and vote
instead of him/her. No person shall act as proxy (except for a corporation) unless he/she is entitled to be
present and vote in his/her own right.
CDC account holder or sub-account holder appointing a proxy should furnish attested copies of his / her own
as well as the proxy's CNIC / Passport with the proxy form. The proxy shall also produce his / her original
CNIC or passport at the time of the meeting. In case of corporate entity, the Board of Directors resolution /
power of attorney with specimen signature shall be submitted alongwith proxy form.
The instrument appointing a proxy should be signed by the member or by his/her attorney duly authorised in
writing. If the member is a corporation, its common seal (if any) should be affixed to the instrument.
The proxy forms shall be deposited at the Registered Office of the Bank not less than 48 hours before the
time of the meeting.

Annual Report 2012

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Annual Report 2012

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VISION STATEMENT

TO BE A QUALITY FINANCIAL SERVICE PROVIDER

TO BE A STRONG AND STABLE FINANCIAL INSTITUTION

Statement of Compliance with the Code of Corporate Governance 7

Review Report to the Members on Statement of Compliance

Statement on Internal Controls 10

Auditors' Report to the Members 11

Statement of Financial Position 12

Profit and Loss Account 13

Statement of Comprehensive Income 14

Statement of Changes in Equity 15

Cash Flow Statement 16

Notes to the Financial Statements 18

Report of Shariah Advisor 91

Notice of Annual General Meeting 92

Consolidated Financial Statements 98

Branch Network 181

Board of Ali Raza D. Habib Chairman

Audit Syed Mazhar Abbas Chairman

Human Resource Syed Mazhar Abbas Chairman

Statutory Ernst & Young Ford Rhodes Sidat Hyder

Legal Liaquat Merchant Associates

Registered 126-C, Old Bahawalpur Road,

Principal 2nd Floor, Mackinnons Building,

Share M/s. Noble Computer Services (Pvt.) Limited

Unappropriated profit carried forward 4,606,290

Basic / Diluted earnings per share - after tax Rs. 5.39

Audit Committee* Human Resource & Remuneration Committee**

Name of Director Meetings Meetings Name of Director Meetings Meetings

Mr. Shameem Ahmed 9 9 Mr. Abbas D. Habib 2 2

Mr. Anwar Haji Karim 9 8 Mr. Anwar Haji Karim 2 2

Mr. Murtaza H. Habib 9 6 Mr. Murtaza H. Habib 2 2

Statement on Corporate and Financial Reporting

On behalf of the Board of Directors

ALI RAZA D. HABIB

4. No casual vacancy occurred in the Board during the year.

On behalf of the Board of Directors

ALI RAZA D. HABIB

Ernst & Young Ford Rhodes Sidat Hyder

A. SAEED SIDDIQUI M. SALEEM CHASHMAWALA

Karachi: February 14, 2013

Board of Directors’ Remarks on the

On behalf of the Board of Directors

ALI RAZA D. HABIB

Ernst & Young Ford Rhodes Sidat Hyder

Cash and balances with treasury banks 8 27,464,340 22,957,986

Bills payable 15 5,257,191 4,979,720

NET ASSETS 23,930,795 19,853,552

Share capital 21 10,103,868 8,785,972

CONTINGENCIES AND COMMITMENTS 23

The annexed notes 1 to 47 form an integral part of these financial statements.

Mark-up / return / interest earned 25 41,467,868 36,502,763

Basic and diluted earnings per share - Rupees 33 5.39 4.49

The annexed notes 1 to 47 form an integral part of these financial statements.

Net profit for the year 5,446,514 4,533,480

Other comprehensive income

Exchange difference on translation of net

Total comprehensive income for the year 5,497,068 4,559,209

The annexed notes 1 to 47 form an integral part of these financial statements.

Transfer from surplus on revaluation

Issue of bonus shares in the ratio of 20

Transfer from surplus on revaluation

Issue of bonus shares in the ratio of 15

The annexed notes 1 to 47 form an integral part of these financial statements.