In the name of God
Contents
Consolidated Balance Sheet Highlights 4
Message from the Chairman & Managing Director 6
Members of the Board of Directors 10
General Managers 11
Organizational Chart 12
Iran at a Glance 14
Achievements 17
History 18
Iranian Banking System 19
21
Islamic Banking in Iran
Goals, and Strategic Planning in BSI 23
Mission and Vision 25
Privatization 26
Corporate & Commercial Banking Projects 27
International Banking
31
Technological Infrastructures
37
Human Resources
41
Free Trade Zones
42
Risk Management 43
Anti Money Laundering 46
Highlights of BSI Success in International and National Arena 48
Financial Performance 49
Financial Statements 59
Excerpts from the Auditors Report 60
97
BSI Subsidiaries & Branches Abroad
98
International Network
Contact Persons 105
Bank Saderat Iran Group
Consolidated Balance Sheet Highlights
20.03.2007 20.03.2008 20.03.2009
billion Rls *million USD billion Rls *million USD billion Rls *million USD
Assets 319,910 34,610 386,263 43,062 408,185 41,981
Liabilities 289,611 31,322 356,082 39,697 379,674 39,049
Customer Deposits 198,322 265,413 29,589 271,138 27,886
21,455
Loans to Customers 182,782 19,774 219,196 24,437 245,234 25,222
Shareholders' Equity 30,299
3,278 30,181 3,365 28,511 2,932
Income Statement Highlights
Net Interest Income 20,727 2,253 26,897 2,999 32,704 3,364
Non-Interest Income 946 11,154 1,243 8,250 849
8,707
Operating Income 3,199 38,051 4,242 40,954 4,212
29,434
Operating Expenses (1,647) (23,217) (2,588) (24,052) (2,474)
(15,156)
Operating Profit 1,552 14,834 1,654 16,901 1,738
14,278
Other Expenses (7,153) (777) (8,393) (936) (9,783) (1,006)
Provisions (4,060) (442) (4,606) (513) (4,015) (413)
Income Tax (576) (62) (310) (35) (293) (30)
Net Profit 2,490 271 1,525 170 2,811 289
Key Ratio
51.5% 61% 58.7%
Expenses/Income
8.5% 4% 6.9%
Net Profit /Operating Income
8.3%
Return on Equity 5% 9.9%
Return on Assets 0.8% 0.4% 0.7%
Loans / Deposits 92.2% 69.8% 79.8%
*USD/RLS exchange rates as of 20.03.2008 and 20.03.2009 are 8970 and 9723 respectively. Therefore,
decrease in the USD figures in the presented financial statements, compared with the previous year,
is due to the increase in the exchange rate.
Message From the Chairman and Managing Director
On the 57th Anniversary of the Bank, on behalf
of the Board of Directors and the diligent staff,
I, would like to seize the opportunity and
express my deepest gratitude to BSI customers
and shareholders.
During 2008, the global economy underwent
massive changes including financial crises and
economic depression which dramatically
affected many countries.
Influenced by many factors, the crises had a
facilitating money and trade exchanges.
devastating impact on banks and stock markets
To maintain BSI's commanding presence as an
all over the world so that the financial indices
international bank, the Board of Directors has
lost 50% of their value.
implemented thorough and meaningful plans.
This led to an exacting investigation and a
The overseas branches produced net profits of
review of the methods and use of effective
USD 180 million and USD 212 million in 2007
financial management tools. On the other hand,
and 2008 respectively, revealing a 17% growth
the Iranian economy, particularly the money
in profitability and FX income despite existing
and capital market, was not closely linked to
sanctions.
the corresponding markets abroad and was,
BSI started offering banking services in 1952.
consequently, little affected by the crises, taking
Since then, it has continued to achieve success
advantage of proper economic policy.
and to provide its customers with satisfaction
Having the largest overseas branch network
and has, now, the largest domestic and overseas
within the Iranian banking system, BSI has,
branch network within the Iranian banking
fortunately, been able to develop its
system with 21 overseas branches, two Regional
international banking relations in line with
Offices, two independent banks (Bank Saderat
PLC, London and Bank Saderat Tashkent), including internet banking and mobile banking.
and two Joint-Venture Banks (Future Bank, Quality and quantity improvement of new
Bahrain and Arian Bank, Afghanistan). services in our bank is what our managers and
With the highest number of branches in the staff aspire to.
country, BSI naturally possesses a large number BSI performance highlights in attracting
of customers. Our bank has equipped all its resources and granting loans are as follows:
branches with Real Time Online System Deposits: Total deposits increased from Rls
(SEPEHR), has opened more than 30 million 265,413 billion in the year ended 20.3.2007 to
online accounts, has issued 7.4 million Rls 271,138 billion in the year ended 20.3.2008,
electronic cards and credit cards, and has 2051 showing a growth of 2.2%. It is noteworthy that
mobile and fixed ATMs and 200,000 POS. Our operational deposits (4 main deposits) increased
customers have welcomed our newest services 18.5% in the reported year.
Deposits Comparative Table
Billion RLS
Description
20.03.2008 20.03.2007
Interest-free Current Account 44,571 45,110
Interest-free Saving Account 26,265 22,447
Short-term Deposits 77,236 58,721
Long-term Deposits 59,200 48,758
Other Deposits 63,866 90,377
Total 271,138 265,413
Facilities: Total facilities increased from Rls 185,356 billion in the year ended 20.3.2007 to Rls
216,357 billion in the year ended 20.3.2008, showing a growth of 17%.
Facilities Comparative Table
Billion RLS
Description
20.03.2008 20.03.2007
4,867
Facilities granted to public sector 3,011
180,489
Facilities granted & claims from private sector 213,346
185,356
Total 216,357
After privatization, BSI will bring dramatic changes including dissolution of loss-making branches
or merger with other branches, restructuring in order to improve efficiency, process reengineering,
risk management and credit rating, improving human resources efficiency, developing new
branches and subsidiaries all over the world, diversifying the services, and etc.
I would like to express my sincere gratitude to all the people who contributed to the bank
development within the Iranian banking system and all those who continue to believe in Bank
Saderat Iran after 57 years. I wish to assure our shareholders that BSI, as a privatized bank, is
ready to meet the challenges and grasp new opportunities to develop.
Yours sincerely
Dr. Hamid Borhani
Chairman & Managing Director
Members of The Board of Directors
Dr. Hamid Borhani
Chairman of the Board of Directors
Mr. Ghodratollah Sharifi
Board Member
Mr. Gholamreza Hajizadeh
Board Member
Dr. Hojatollah Saydi
Board Member
Mr. Mahdi Fattahi
Board Member
Mr. Bahman Vakili
Board Member
General Managers
Mr. GholamReza Arjmandi
General Manager, Financial Affairs
Mr. Parviz Soltani
General Manager, Human Resources Affairs
Mr. Reza Goudarzi
General Manager, Planning & Programming Affairs
Mr. Gholam Ali Shafiee
General Manager, Services & Support Affairs
Mr. Gholam Souri
General Manager, International Affairs
Mr. Alireza Mousavihassab
General Manager, BSI Provinces Affairs
Mr. Mohammad Rabizadeh
General Manager, Structural & Procedural
Reformations Affairs.
Mr. Ahmad Mazaheri
General Manager, Credit & Investment Affairs
Mr. Hamid Saghar
Manager, Budget & Accounting Department
Mr. Mohsen Hosseini HosseinPoor
Manager, Foreign Department
During the first and second quarters of 2008,
Iran at a Glance
as a result of the surplus oil income, the earned
Iranian Economy during the First Six
profit belonging to prior investment and return
Months of the Year 2008
of granted facilities, $28,618 million was
remitted to the Foreign Reserve Account, with
Due to an upturn in the international crude oil
$23,610 million withdrawn. Thus, net cash of
market and other markets during the first six
the Foreign Reserve Account (regardless of
months of the year 2008, there was a surplus
cash balance at the beginning of the period)
foreign payments balance so that the trade
shows a surplus of $5,008 million during the
surplus was $31,858 million including non-oil
above period.
export trade($9,865 million) and imports
($35,508 million). In this period, the total
During the first and second quarters of 2008,
foreign assets of Central Bank of Iran (including
crude oil export was about 2,498.4k barrels
Foreign Reserve Accounts) show an increase
per day, showing a 2.7% growth compared to
of $15,204 million.
the same period in 2007.
At the end of September 2008, the liquidity consisting of 170.5k, 125.9k, and 135.4k billion
had 1.8% growth compared to the previous for income, capital assets assignment and
year, showing 11.2% decrease in comparison financial assets assignment respectively.
with the corresponding growth last year. Net
foreign assets of the banking system had a During the same period, Mining and Industries
growth of Rial 54.2k billion which, in turn issued 16,600 establishment licenses and 3,300
caused 3.3% growth in liquidity. new sections development licenses.
During the first and second quarters of 2008,
Started from early 2007, prosperity in the all the price indices in Tehran Stock Exchange
construction industry continued during the rose except those of "50 chosen companies".
first and second quarters of 2008. Also the number and value of traded stocks
During the first six months of 2008, total state increased 86.5% and 265% respectively
budget was reported Rial 431.8k billion compared to the previous year.
Balance of Payments
Million USD 2006 2007 2008
Oil and Gas 62,011 81,764 71,654
Others 14,044 15,637 14,278
Total exports 76,055 97,401 85,932
Total Imports 50,020 56,582 52,023
Trade balance 26,035 40,819 33,909
Net services (6,146) (7,199) (6,491)
Net money transfers 513 461 558
Current account balance 20,402 34,081 27,976
Source: Central Bank of Iran (Nine Months)
Achivements
History
As a private bank and public joint stock BSI is the shareholder of two active
company, BSI was established on September independent and two joint venture banks.
6, 1952 with Rials 20 million in share capital,
50% of which was paid in cash and launched With more than 3000 active branches and
its operation on November 13, 1952 with a a paid-up share capital of Rials 16,803 billion,
staff of thirteen. BSI runs the largest banking network in Iran. In
2000, BSI started offering electronic services and
BSI overseas activity began by establishing a
now pioneers in the number of online
branch in Hamburg, Germany and now it has
branches, ATM machines, POS machines, and
21 active branches and 3 Regional Offices in
issued debit cards across Iran and Middle East
Asian and European countries. Furthermore,
banking systems.
Iranian Banking System
Iranian banking activities have become monetary system and the Central Bank
very diverse and the banking industry has operations were officially separated from those
experienced impressive improvement thanks of Bank Melli Iran.
to IT developments and new banking methods.
After the Islamic Revolution and the necessity
Nowadays, banking services are not restricted
to establish the Islamic economic system in
to offering loans and taking deposits, but
Iran, a Usury-free Banking Operation Law was
involve a wide array of financial transactions.
passed to omit usury from banking operation
Banking may generally be categorized as
and to reconcile juridical standards with
wholesale banking, retail banking, and
banking systems in light of the concept of usury
comprehensive banking.
in Islamic jurisdiction and the contents of fourth
Offering financial services and products to
article of the Constitution, stating that all the
customers is the bank's main mission. A bank's rules should comply with Islamic standards.
success depends on its good relationship with Before nationalization, the Iranian banking
its customers and managing information. network consisted of 36 banks. Based on Banks
A rapidly-growing banking system and the Merger Plan, officially implemented since
importance of money and capital markets in November 1979, the banking network (except
the country's economy in the1950s necessitated Central Bank) included 3 specialized banks
establishing comprehensive rules governing (Maskan, Keshavarzi, Industries and Mines)
monetary and banking operations. On May 28, and 6 commercial banks (Melli, Sepah, Mellat,
1960, Iran Monetary and Banking Statute Bill Tejarat, Saderat, Refah Kargaran). Export
was announced to the government under the Development Bank was founded as a
title of "The Country's Monetary and Banking specialized bank on July 10, 1991.
Law" after it was passed by Parliament
According to Credit and Money Council
Common Commissions. The bill was proposed
approvals in 1992 and 2000, Non-banking
to be brought into effect for five years as a pilot
Credit Institutions and private banks were
scheme. By appointing the first Central Bank
authorized to begin their operation respectively.
governor on August 9, 1960 the Iranian Central
Along with these banks, a Ministry of
Bank was formalized. An independent
Communications and IT's affiliate, "PostBank"
bank was thus established to oversee the
offers some banking services.
transactions and guide the banking and
Usury-free Banking Operations Bill was and approved by the Guardian Council.
presented to the cabinet by the Ministry of This law requires that allocating resources and
Finance and Economic Affairs on May 5, 1982, granting facilities by banks are performed in
passed by the Parliament on September 1983, terms of Islamic contracts.
Islamic Banking in Iran
The First Step to Islamizing the Banking
approved a number of changes in the banks'
System
interest rate structure in its 392nd session dated
December 24, 1979, which were put into action
After the Islamic Revolution, the necessity to
on March 1980:
set up an Islamic economic system was felt as
a major requirement. The most important
1. The minimum possible guaranteed profit for
action would be eradicating usury from the
the deposits
banking system so that an economy based on
2. To specify commissions and the minimum
fairness could be developed. Therefore, in 1979,
possible guaranteed profit for the loans and
some steps were taken for Islamizing the
other credit facilities
banking system. These steps can be
In 1982, Usury-free banking operations bill
summarized as omitting interest and initiating
was presented to Islamic Parliament for
commissions in the banking system, founding
omitting interest and reconciling banking
Islamic bank, and developing Qardh - Al
transactions with Islamic standards. The bill
Hassaneh Funds.
was ultimately passed on August 30, 1984.
Interest Omission and Initiation According to this law, the banking system was
of Commission aimed at setting up a justice-based credit and
money system, characterized by proper money
One of the main requirements to omit interest
and credit circulation, especially money value
and usury from our economy and to reconcile
maintenance, keeping equilibrium in the
it with principles of Islamic economy is
balance of payments, facilitating commercial
developing a system, through which
exchanges and offering services legally
investments take place based on real social
delegated to the banks.
needs rather than to maximize shareholders'
To secure banking transactions and capital
dividends. The system is required to steer
return in connection with banking facilities,
society's material and immaterial resources
the law considers the entire contracts made
towards meeting the basic needs, using
between the bank and its customers as
methods other than the interest rate.
indispensable documents subject to the
For this reason, the Credit and Money Council executive procedures of official documents.
The granted facilities in form of Islamic
Contracts are: 7. Lease to Own
1. Qardh - Al Hassaneh 8. Salaf
2. Modharebeh 9. Je'aaleh
3. Legal Partnership 10. Mozare'eh
4. Civil Partnership 11. Mosaghat
5. Direct Investment 12. Debt Purchase
6. Instalment Sale 13. Guarantees
Goals, and Strategic Planning in BSI
1- Management and Human Resources
Development Projects
A. The Employees' Performance B. Motivating Factors Project
Assessment Project Identifying categorizing and prioritizing the
The goal of this project is appraising the factors segregated into occupational levels as
well as a study into the current motivating
employees' performance to reach a degree of
system in the bank, analyzing the data and
efficiency and optimum use of the
answering letters containing motivating
organization's facilities and resources which is
questions, resulting in a list of motivating and
designed in 4 phases.
non-motivating factors.
In phases 1 and 2, recognizing the bank's
C. Appointment and Meritocracy System
present status and comparative studies under
Project
the title of  knowing the organization's
The main aim of this project is to design a system
structure were completed.
of employees' job promotion and appointment.
To do so, the project is designed in 4 phases,
In the third phase, the employees' personal
which the first and the second phases deal with
assessment indices and standardizing them
the present appointment status of the Bank and
along with designing the organization's
the third phase prepares a description of
performance indices with the cooperation of the
occupations including the organization status
department's heads, the representatives of
and structure, job description and engagement
the organization units and the expert group of
conditions, personal specifications and skills.
the project, were determined during an
Of the most important issues on the fourth
interactive process.
phase is designing an appointment process in
the BSI network, which is done by analyzing
Planning a positive/negative performance
the individual characteristics for any position
assessment system and estimating the
and designing a new appointment system
organization s performance and personnel
according to 4 factors, i.e. individual
behavior indices has now been put into effect.
characteristics, skills, motivation, performance.
2- "The Human Resources
Programming and Provision System
Design" Project
This project, operative in 2008, has the following outcomes were determined to be put into effect
important results: by the related departments.
A: preparing a Human Resources Strategic
4- Increasing Profitability Projects
Plan for the next five years.
B: Designing operational improvement plans
1) Improving profitability and financial indices.
for human resource strategies.
2) Changing organization structures based on
C: Re-engineering the process of employing
those of private banks.
staff.
D: Designing a human resources planning system
To implement profitability indices
through relevant software.
improvement strategy, BSI undertook
projects about marketing, work-force
3- Market Share Projects productivity improvement, and virtual
banking development. However, improving
In 2007, the BSI Research and Innovation financial indices remains under investigation.
Department undertook a project named
"Market Management and Research". The
project started with three plans, namely, "BSI
Customers' Satisfaction Assessment", "Iranian
Banking Services Market Categorization for
BSI based on the Bank's Main Goals and
Strategies", and "Customer Relationship
Management System Analysis plus
Contractors' Assessment Pattern and CRM
software" in December 9, 2007. The plans
ultimate outcomes were presented in
September 23, 2008 and were eventually
approved by BSI Board of Directors. The
Mission and Vision
BSI Vision
BSI Mission
The bank s aims to consolidate its position
The BSI Mission is to build a lasting
as a large international financial group which
relationship with its clients by giving quality
meets all its customers' financial needs. For
financial services for the purpose of :
this purpose, leadership in domestic markets,
- Promoting economic growth in the Islamic
public policies, and global reach are taken into
Republic of Iran
consideration.
- Giving efficient services to its customers
- Supporting domestic products
Constant search for new products and
- Developing international cooperation
services to satisfy the customers' needs and at
the same time outperform competitors in
Offering quality services by using innovative
profitability
technology and human resources management
in a modern organization culture which is based
Our next purpose is to be the best in all the
on meritocracy while maintaining high ethical
markets we take part and achieve the desired
and professional standards.
results using knowledgeable experts.
Privatization
BSI introduction meetings were held on June Affairs'approval to sell BSI stock, 6% was sold
3rd, 5th, and 7th 2009 in Dubai, London and on June 9, 2009, 5% was assigned to BSI staff,
Tehran, respectively prior to offering its stock. 40% to Edalat Stock and the remaining 49%
Upon Ministry of Finance and Economic stayed with the government.
Number of Number of Ownership
Shareholders
People Stocks Percentage
Real Entity 4163 620,529,003 3.69
Legal Entity 63 387,650,997 2.31
Bank Staff 29257 840,150,000 5
Islamic Republic of Iran Government 1 8,233,470,000 49
Edalat Stock Agency 1 6,721,200,000 40
Total 33485 16,803,000,000 100
Corporate & Commercial Banking
Projects
Sugar Cane and Subsidiary Industries Preparing consumable M.D.F for about 19
Development Company Million people with per capita consumption of
5.2 Kilograms in a year
Sugar Cane and Subsidiary Industries
Preparing the facility of producing 80,000
Development Company is the biggest group
Tons meat by using produced livestock food.
in cultivating sugar cane and producing sugar
With per capita consumption of 15 Kilograms,
and other products in Iran. This company was
the meat for 5.4 Million people of the country
established as per the government's ratified law
is provided
in the year ended 20.03.1980. Seven cultivating
Producing biotechnological products (such
and industrial companies i.e. Imam Khomeini,
as leaven, alcohols, etc) which both have the
Amir Kabir, Da'abal Khazai, Mirzakochak Khan,
domestic use and are exportable
Salman Farsi, Farabi and Dehkhoda are all its
Creating more than 5000 jobs
subsidiaries. The main products of the company
The granted facilities to the Sugar Cane and
are sugar, paper, livestock food, M.D.F, alcohol
Subsidiary Industries Development Co. Plan
and dry leaven.
is Rials 5,202.8 Billion by the year ended
20.03.2008
The total area under-cultivation of sugar cane
in this company is 84,000 Hectares. Every year,
Tose'eh Sakhteman Int. Company
7 Million tons of sugar cane is obtained from
In an area of 220,000 square meters in the heart
these units.
of Tehran and its vital highways, Tehran
International Tower has been erected with
The Economic Effects of Sugar Cane
more than 160 meters in height as the highest
Development Company
residential tower in Iran to encourage vertical
Preparing consumable sugar for about 28
construction and to prevent horizontal
Million people with per capita consumption of
development. Having three wide sides, this
25 Kilograms in a year
Preparing consumable paper for about 27 tower has 56 floors, consisting of 572 units.
Million people with per capita consumption of The Bank granted Rials 194.8 billion to the
13 Kilograms in a year.
company.
Abadeh Cement
From the beginning of November 2005, the nominal capacity of the company reached 6,500
development of this factory has been started tons per day. To help this project, BSI granted
with the cooperation of Bank Saderat Iran. The Euro 22.6 Million and Rials 265 billion facilities
preparation of this project in less than 2.5 years by the year ended 20.03.2008.
with the endeavor of Iranian experts shows
their independence in designing and cement Larestan Cement
industry engineering. The factory production Larestan Cement received Euro 21 Million
will increase from 500 tons to 1,200 tons a day. facilities.
This increase in capacity of production is
significant and will solve the problem of cement Abyek Cement
shortage for the ongoing project in this area. The company received Euro 38 Million equal
Bank Saderat Iran granted 5.2 Million Euros Rials 70 billion facilities.
and 65 billion Rials facilities to this factory.
Zabol Cement
Karoon Cement
Sanaye'e Zabol Co. (joint-stock) was
Karoon Cement factory started its activity from
established with a 51% share of Province
year ended 20.03.2008 with the capacity of
Domestic-Private Section and a 49% share of
producing 3,000 tons grey cement per day.
Iran Consuming Industries Development and
This factory is able to produce different kinds
Renovation Organization (IMIDRO) with the
of Portland Cements according to A.S.T.M
aim of producing 1 million tons of grey cement
standard and tailored to the orders of
per annum. IMIDRO 49% share was
customers. The company has played a great
subsequently put in a bid by Country
role in the development and progress of the
Privatization Organization and sold to Province
country and has increased its production
Domestic-Private Section.
capacity to reach a higher state in the cement
The project has received Rials 63.6 billion
industry.
facilities from the bank by the end of 2008.
Having high technology, the second phase of
Perlit Asia Casting Industry (joint-stock)
executive operation along with the first phase
An amount more than Euro 10 Million was
has been started with a capacity of 3500 tons
paid for a factory to be built for casting and
grey cement. With the cooperation of BSI,
producing cast-iron parts of cars with an annual double-baked enamelled wall tiles, unglazed
capacity of 20,000 tons on a day and night shift porcelain tiles (granite tiles), and enamelled
and 275 days per annum basis. porcelain tiles, with a nominal capacity of 30
million square meters.
Bahman Group
Considering this capacity, Apadana Ceram will
This company produces Mazda vans, Mazda
rank as one of the greatest tile producers all
cars, Pajero, ambulance, and money delivery
over the world. With the execution of the
vans and has received EUR 7 million and Rials
development plan, the company would be able
33 billion facilities from BSI.
to produce tiles with a capacity of 50 million
square meters per annum.
Zanjan-Tabriz Freeway
285 km long Zanjan-Tabriz Freeway is one of
the greatest freeway projects in the country,
being built in 16 segments. The second phase
of this project, funded by Ministry of Roads
and Transport, banks, and the private sector,
for Rials 2,000 billion is underway. This freeway
is a complement to 89-km Tehran-Bazargan
freeway on northwest passage of Iran and
passes the Tabriz Belt, Ghezelcheh-Meydan,
Noori-Gol, Yousef Abad, Bostan Abad,
Maragheh Intersection, Hashtrood and
Ghezeh-Aghaj, Sarcheshm Intersection, and
Bijar Intersection.
BSI has granted Rials 411.4 billion to this
syndicated project by the end of the year 2008.
Apadana Ceram Company
Using modern technology of tile production,
the company produces different kinds of
International Banking
BSI overseas activity started with Hamburg units rose to Rls 1,893 billion (USD 195 million)
Branch in Germany in 1961 and now it has the by the end of 2008, an increase of 17.4%
largest international FX network in Iran, having comparing to the preceding year.
21 branches, 2 regional offices, 2 independent By far, overseas branches operation has led to
banks, 3 Joint Venture Banks and 122 FX a positive result so that their income constitutes
branches. a major part of the total profit across BSI
network. This process of profitability is
Total number of staff working at overseas predicted to continue in the year to come.
branches and offices equals 523, of whom 449
To improve in profitability and international
were local and 74 were dispatched.
activity, BSI is expanding its overseas branches.
Hence, establishing new branches in Belarus,
BSI overseas branches are now engaging in all
Syria, Malaysia, India, China, and Iraq is under
kinds of banking activities such as granting
investigation.The operations of some major
various banking facilities, opening L/Cs, issuing
BSI overseas units are as follows:
letter of guarantees, and money transfers after
following anti-money laundering and Basel II
Bank Saderat PLC, London
regulations according to the homeland banking
rules.
The post -tax profit achieved in the year to the
end of December 2008 was EUR 20.2m, an
BSI overseas branches take full advantage of
increase of EUR 1.9m (10.6%) on the figure
their potentialities with respect to the following
factors: achieved in 2007. This result produced an after-
A wide variety of banking services and facilities tax return on equity of 12.4% -another record
tailored to customers' needs result.
Well-designed regulated system
It is appropriate to note that the Bank remains
Quick decision-making
very well capitalized. As at 31 December 2008,
Flexibility in the bank's policy-makings
the bank had 340% of the minimum capital
considering the change in economic conditions
requirement calculated in accordance with the
and international financial markets.
Base II capital adequacy rules.
It is notable that total profit earned by overseas
Furthermore, against the background of international banking practices and standards
widespread liquidity shortages in the banking and with the laws of England and Wales.
sector, the Bank continues to enjoy comfortable
levels of liquidity that are more than sufficient Bank Saderat PLC has been diligent in
to meet its needs. establishing the highest standards of
anti-money laundering systems and controls.
The Directors were able to pay an interim To that end, in consultation with a specialist
dividend of EUR 6.0m in July 2008, and a final anti-money laundering company, the bank has
dividend of EUR 14.9m is to be proposed at updated its Manual for Preventing Financial
the forthcoming Annual General Meeting. Crime and introduced an updated set of best
practice procedures that reflect the new
The Bank continues to exercise tight control risk-based approach of the Regulator.
over its mainly Sterling expenses, which are All staff have recently undergone further
expressed in Euros for purpose of the annual training, which has been provided by specialist
accounts. In Sterling terms, the Bank's expenses external consultants.
increased by only 0.8% in 2008 as compared
with 2007.
BSI Branches in Germany
No new bad debt provisions were raised during
Total assets increased by about 16% from EUR
the year under review.
516 million in 2007-08 to EUR 598 million in
However, the bank was able to write back EUR
2008-09 and business volume increased by 10%
321k of provisions relating to impaired loans.
from EUR 635 million in 2007 to EUR 699
At the end of 2008, provision against impaired
million in 2008.
loans totalled EUR 187k.
Operating capital increased from EUR 39
The Bank continues to adopt a conservative
million in 2007 to EUR 49 million in 2008.
lending approach, with most of its commercial
Receivables from banks stood at EUR 179
loans being fully secured.
million, involving balances from current
Bank Saderat PLC, a UK bank, complies fully
accounts, clearing balance and time deposits
with FSA regulations, with money laundering
with domestic as well as foreign banks, of which
and counter terrorist financing regulations, with
EUR 205,000 are in foreign currencies.
Receivables from customers stood at EUR 333 against EUR 1.8 million in 2007, which contain
million in 2008 against EUR 338 million in taxes, audit fees, employment cost etc.
2007. Driven by a rising demand at reducing refinance
rates after financial markets crisis, net interest
Liabilities to customers (deposits) amount to income increased to EUR 25.6 million.
EUR 60 million in 2008, of which 9.2%
accounts for cash received from customer's Net commission income also rose to EUR
guarantees. BSI branches in Germany are 6 million. Earnings before provisions amounted
members of German Deposit Insurance Fund to EUR 26 million in 2008 against EUR 17
and all deposits are insured up to EUR 11.5 million. million in 2007.
Provisions made in 2008 were EUR 4 million
Financial Situation
2008/09 2007/08 2006/07
Assets
MŹ MŹ MŹ
Total assets 598 516 440
Volume of business 699 635 495
Cash 75 7 18
Receivables from banks 179 160 140
Receivables from customers 333 338 272
Liabilities to banks 330 236 161
Liabilities to customers 72
60 75
Clearing balance 164
132 140
Operating Capital
36
49 39
 Bank Saderat Iran, Paris Branch
The volume of the transactions of BSI Paris Revenues for the branch, from then on, are
Branch has slightly been reduced in 2008 commissions paid by the Head Office based
compared to 2007, mainly due to the decrease on the volume of the transactions handled by
of the refinancing activities. The profit after tax the Branch. To a certain extent, this change
for 2008 was Euro7.2 Million compared to will have an impact on the income of BSI Paris
Euro 6.1 Million for 2007(+18.0%). Branch, regardless of the general economic
situation in France.
AS a matter of fact, the profit after tax for 2008
has taken into account the withholding taxes Recent forecasts given by IMF and OECD have
paid to the tax authorities from 2006 to 2008, shown that no real economic improvement is
for a total amount of Euro 1.8 Million. Without expected in 2009, and that the recovery will be
these withholding taxes, the profit after tax gradual after 2009.
for 2008 should have been Euro 9.0 Million,
therefore +47.5% compared to 2007.
The above performance was achieved in a
context of a gloomy French economy, affected
by the global downturn of industrialized
countries. The economic slowdown is being
keenly felt, with corporate bankruptcies and a
higher unemployment rate.
For 2009, perspectives for BSI Paris Branch
seem to remain moderate. On February 1,
2009, all the refinancing transactions of the
documentary credits of BSI Paris Branch have
been assigned to the Head Office, leaving the
Branch the task to manage and to follow up
those transactions which are themselves
recorded in the books of the Head Office.
BSI Branches in the U.A.E
valued clients encouraged the bank to offer
Despite the lack of political stability throughout
another private banking product called
the Middle East region , Bank Saderat Iran in
"Conservative Investment Portfolio" in July
the UAE ( The Bank ) has done very well
2005. The return on these products was far
during the last five years , our proactive banking
better than expected and the annual yield
policy continued during the current year, thus,
reached 10%.
our trade finance activity, which is our core
business and one of the major sources of our
On January 15, 2008 at the request of our
profitability, continued its growth through
clients, we launched the third private banking
2008.The bank's net profit rose from AED 387
product which was the extension of our second
million in 2007 to AED 410 million in 2008.
product "Conservative Investment Portfolio".
The upward trend in profit has continued
In August 2008, we successfully launched the
during the last nine years.
fourth private banking product "Conservative
Investment Portfolio - II".
In recent years, the bank has continued its
In 2008, our total profit was standing at Dhs
policy of maintaining a high quality asset
534 million.
portfolio. Total facilities to customers increased
Considering our owner's equity of AED 1,306
from AED 3,967 million in 2004 to AED 6,376
million, the growth in revenue shows a perfect
million in 2008. The increase represents all
capital management. The Returns on Equity
categories of credit and advances, mainly in
has been 32.2% for 2008, which in comparison
trade finance-related areas.
with the other banks in UAE, we are among
At the end of the year 2008, our lending ratio
the most successful ones.
was around 87% and Risk Assets ratio was
12.2%.
The bank has also established a full functional
In the year 2004, after a comprehensive market
Risk Management Department. The bank has
study in UAE, the bank launched its first private
implemented Basel II in accordance with
banking product called "Balanced Investment
CBUAE (Central Bank of UAE) guidelines
Portfolio". Success of the first private banking
and regularly reports to CBUAE.
product and the positive feedback from our
The bank has performed ICAAP (Internal The bank has successfully completed the
Capital Adequacy Assessment Process) as per processes project. The processes consist of
Basel II, Pillar II wherein the complete various products and services offered across
assessment of risk in the bank was done and the bank. The main goal of the project has
the stress test conducted had a positive result. been to:
1. Define a uniform process across all the
In order to keep pace with the changing
branches and departments for all the products
banking environment, the bank has capitalized
and services.
on staff training and risk awareness programs.
2. Identify and minimize the risk at operational
level.
The bank has reviewed and updated the
3.Improve the work process and procedure to
existing policies and procedures and also
achieve higher efficiency.
formulated new policies and procedures in
4. A training tool for all staff.
the areas where required.
The following table summarizes the bank s operation results at the overseas units:
2006 2007 2008 2007 to 2008
Million USD
million US$ million US$ million US$ Growth (%)
Total Assets 6,050 6,361 6,092 -4%
Total Shareholder s Equity 501 554 595 7.4%
Net Profit Before Taxation 200 234 351 50%
Net Profit 174 172 195 13.4%
Percentage of BSI Group Net Profit 54.2% 117.81% 101%
Technological Infrastructures
Electronic Banking
Having the largest banking network in Iran, SEPEHR project exercised great influence on
BSI has started implementing online real time banking system, on passing from traditional to
banking system in the form of SEPEHR Project, modern banking, in BSI network. By adding
to offer essential and on time services to its subsystems and new capabilities, it turned to
customers. Now after a while, all our branches one of the greatest online real time banking
offer various online services. systems in the country. According to statistics
cited by Central Bank of Iran, BSI ranks as the
The SEPEHR Project goals are: to strengthen first bank in terms of the number of POS
the banking system's executive authority, to machines and transactions, ATM transactions,
provide day and night services, to accelerate centralized accounts, centralized mechanized
banking operations, to diversify into various branches, and telephone bank customers in
quality services, to avoid carrying banknotes, Iran and, in some cases, in the Middle East.
to have access to updated information for quick
decision-making, to develop more controller
tools, to adapt with international banking and
new banking standards in order to reduce
customers' physical presence at the branches
and to prevent wasting their time and money.
SEPEHR system can provide worthy and
quality services simultaneously all over the
country, using terrestrial and support satellite
telecommunication network and computer
technology. This is a key to electronic
commerce, IT community, and ultimate
development in banking industry.
The following tables show the highlights of new banking services during the period 2006-2008:
The Latest Information Technology in BSI
Total
Year Description of the Major Subsystems Number of
Subsystem
1) Payment of Bills through ATMS and Telephone Banking
2) Offering Internet Banking Services
3) Developing Mobile ATM Services
4) RTGS Services
2006 28
5) Valued Cheques and Teenage Account Services
6) Developing Intranet Services including Access to Exchange Rate, Circulars, and
Inquiry about Past Records
7) Request for Issuing Substantial Goods Drafts through Intranet
1) Interbank Transactions through Pin Pad
2) Offering Banking Services through Mobile Phones
3) Online Services for FX Accounts (Saving/Current)
2007 50
4) Initiating Supply, Treasury, and Human Resources Holistic Systems
5) Using Customer-ranking System to Reduce Outstanding Debts while considering
Risk Management
6) Developing POS
1) Developing Internet Banking Products and Services
2) Developing Mobile Banking Services
3) Designing Centralized SEPEHR System in Bank Internal Accounts
(Debits, Credits, and etc.)
4) Developing Gift Cards, Credit Cards, Smart Cards and Pin Pads
2008 60
5) Designing and Initiating Advance Cards, Special Cards, Virtual Cards and SEPEHR
Money Cards
6) Completing SEPEHR Supporting Network, Initiating Intranet Supporting Site,
Improving Physical and Virtual Security of the Sites
7) Selling IranCell and Talia Credits through ATM
8) Preparing a Holistic Financial System and Developing Interbank Markets
Statistical data and status of the new banking products and services during the years 2007
and 2008:
Performance of Performance of
Description of the Plan
2008 2007
1 Development of Electronic Banking Services 75,991 31,195
2 Development of Mobile Banking Services 61,862 200
3 Development of Gift Cards 30,396 _
4 Development of Credit Cards 59,526 21,276
5 Development of ATMs 1,919 1,655
6 Development of POSs 171,394 85,000
7 Development of Pin Pads 4,920 4,719
Debit Card
6,000,000
5,000,000
4,000,000
2007
3,000,000
2008
2,000,000
1,000,000
0
2007 2008
Credit Card
70,000
60,000
50,000
40,000 2007
2008
30,000
20,000
10,000
0
2007 2008
ATM
2,000
1,900
1,800
2007
2008
1,700
1,600
1,500
2007 2008
POS
200,000
150,000
2007
100,000
2008
50,000
0
2007 2008
Human Resources
It is obvious that despite human society advances and moves towards the information age,
the workforce plays an important role as an organization's greatest wealth. Having more than
30,000 employees and taking advantage of educated and experienced personnel, BSI has committed
them to giving top priority to the customers' satisfaction.
Workforce Breakdown by Educational Level (Feb 2009)
Educational Secondary High School Associate Bachelor Masters
Doctorate Total
level School Diploma Degree Degree Degree
Percent 9.02 49.38 10.52 29.69 1.37 0.02 100
Workforce Breakdown by Age (Feb 2009)
Under 25 26 - 35 36 - 45 More than
Age Total
years old Years old Years old 46 years old
100
Percent 4.02 29.15 52.37 14.46 100
Workforce Breakdown by Occupational Category (Feb 2009)
Occupation Management Specialized Operative Total
Percent 33.72 5.38 60.90 100
Workforce Breakdown by Work Experience (Feb 2009)
History of Less than 5 to 10 10 to 15 15 - 20 20 to 25 25 to 30 More than
Total
occupation 5 years years years years years years 30 years
Percent 22.28 9.01 7.80 33.03 24.59 3.25 0.03 100
Free Trade Zones
The Free Trade Zones have been established operating with 138 staff in front and back
to enhance exports, reduce importing costs,
offices, 17 branches, 9 counters and 5 FX
develop the private sector, support the areas
branches.
with potential for investment, absorb domestic
At present, The Free Trade Zones branches
liquidity, new job opportunities and attract
are located in Kish, Qeshm, Chabahar, Djolfa,
investments especially foreign ones.
and Anzali and Arvand Free Zones branch is
Free Trade Zones Regional Office is now
underway.
Free Trade Zones Resources and Loans
Attraction IRR IRR Loans Attraction FX
Fiscal year
Resources Granted Resources
2006 1,399,724 482,756 143,092
2007 1,358,931 300,930 519,409
2008 6,239,474 556,855 344,409
Risk Management
reduce potential loss to shareholders' equity
In Banking, Risk Management has developed
and other assets.
through diverse banking services, intense
competition, innovations and the market
Credit Risk Management
development. Risk Management, thus, includes
all kinds of tools, methods and risk operating
Credit risk is based on non-repayment of
procedures in banks.
principle and interest of loan at maturity by the
borrower. Credit risk may be defined as the
As the mediators for attracting and offering
exposure of credit portfolio to probable
resources, banks always face different kinds of
outstanding, doubtful or bad debts due to
risks such as credit risk, market risk, liquidity
internal factors (weakness in credit
risk, operational risk and so on. Hence, ignoring
management, internal controls, or supervision)
risk management may make the banks suffer
or external factors (economic depression, crisis,
enormous expenses and lead them to
and etc.).
bankruptcy or serious financial crises. As a
result, establishing risk management system,
Credit risk can be controlled by resource
as a management tool, is essential for a bank
allocation adjustment for different activities,
to ensure authentic activity and reduced
customers' credit level assessment and getting
vulnerability and to prevent potential loss to
enough guarantees. Key factors in credit risk
the shareholders' equity and other assets. This
are:
can be achieved through investigation,
identification, analysis, proper decision-making,
Lack of a management system and composition
and intelligent management.
for credit portfolio
Lack of a systematic customer identification
With respect to the status, special structure,
procedure
numerous branches inside and outside of the
Non-recognition of the required cash
country, plentiful customers, long history and
Lack of experienced experts
good reputation in banking industry, BSI felt
obliged to maintain an efficient risk
management system to maximize profit and to
assets maturity date with liabilities maturity
Taken Steps to Reduce Credit Risk in BSI
date to more reduce the risk.
Investigating the status quo regarding KYC
(Know Your Customer). Capital Adequacy Risk Management
A study into determining a proper pattern
Capital adequacy ratio represents the extent to
for customer-ranking system.
which the depositors and creditors are
Specifying effective indicators in ranking.
supported against unprecedented losses.
Developing "Special Customers Identification"
According to Capital Adequacy Bylaw
project.
approved by Money and Credit Council dated
Preparing software program for ranking
February 14, 2004, adequate capital is a
customers with the assistance of creditable
necessity for a healthy bank system. To
companies.
guarantee a stable status, banks and credit
Assenting to Credit Assessment System,
institutions ought to maintain a proper ratio
affirmed by Central Bank of Iran, which has
between capital and risk in their assets. This
come into operation by Ranking Counseling Co.
ratio helps protect banks, depositors and
Examining and naturalizing Basel II
creditors, against unprecedented losses and has
recommendations through standardizing
been determined to be at least 8% as per the
banking operations at international level.
Central Bank of Iran's regulations.
Preparing new reporting forms for credit
information to use in ranking program.
Profit Rate Risk Management
Creating customers data bank
Profit rate risk can be investigated from "granted
Liquidity Risk Management
facilities" and "deposits" point of view.
Using the data on the revenue resulted from
Liquidity risk in banks results from liquidity
income assets and the costs of the profits paid
shortage and lack of confidence. Cash adequacy
to depositors, and the shares of the resources
provides the possibility of paying liabilities and
and facilities, one can calculate the profit rate
depositors' liquidity requirement on due date.
difference, which can be viewed as one of the
Taken Steps to Reduce Liquidity Risk: most important criteria for looking into this
In order to reduce liquidity risk, BSI has set up kind of risk.
a liquidity management task force to plan an The positive difference between BSI deposit
optimum assets management system in a way rates and those of the private banks shows that
that a parallel between liquidity and profit be BSI procedure is consistent with the law of
made. BSI has also attempted to synchronize profit rate rationalization.
Market Risk Management
important challenge for the bank, allowing for
One of the subcategories of market risk,
calculating the capital allocation to meet the
exchange rate risk is caused by exchange rate
contingencies.
fluctuations. The risk receives even more
attention when foreign investment, L/C and
L/G-related activities form a major part of a
Considering the increasingly widespread
bank's portfolio.
banking operations and the implications of
operational risk for banks' efficiency and
To reduce exchange rate risks, BSI has
profitability, BSI has taken major steps to tackle
conducted a series of studies as follows:
the problems as follows:
The effects of exchange rate fluctuations on
the bank's portfolio
Initial identification of operational risk in
To specify a model suitable for the bank to
the bank
calculate risk level
Designing a questionnaire to carry out a poll
To specify the optimum exchange rate
of different units in the bank
portfolio with respect to risk level of every single
Gathering the answer sheets to determine
currency
the final results
Specifying the contingencies and damage
Operational Risk Management
resulted from the risk
Estimating the degree of damage using
Operational risk is defined as the risk of loss
statistics
resulting from inadequate or failed internal
Selecting an effective model for calculating
processes, people and systems, or from external
the minimum required capital
events. Basel II has given guidance to 3 broad
methods of Capital calculation for Operational
Risk
1- Basic Indicator Approach
2- Standardized Approach
3- Advanced Measurement Approaches
Quantifying operational risk is the most
Anti-Money Laundering
BSI Anti-Money Laundering Department Ongoing Monitoring of Accounts, and Risk
officially started its operation on April 17, 1999. Management.
The department took remarkable steps toward
fulfilling the bank's senior management goals 2- Training Programs
and implementing the regulations regarding With regard to the importance of staff training
anti-money laundering in compliance with and creditable international organizations
international organizations standards. A emphasis on the role of trained staff in executing
summary of these steps are as follows: anti-money laundering rules, BSI has offered
some training courses and is planning to
1- Naturalization and Preparing Know continue them to inform all the staff of money
Your Customer (KYC) Instructions laundering and the ways to fight against it.
It includes four parts: Customer Acceptance
Policy, Customer Identification Procedures,
The following table shows the number of trained staff in 2008
compared with its previous year:
Job title 2007 2008
Management 172 2,250
Specialized 93 332
Executive 176 1,409
3- "Systematizing Suspicious Operations Reports Received from Branches" Software
Program
The software was designed for statistical analysis of suspicious operations reports received from
branches based on Central Bank of Iran predetermined formats and launched in bank since
February 23, 2009.
4- Anti-Money Laundering Committee install subsystems such as Suspicious
Since BSI Anti-Money Laundering Department Transactions Recognition Software and Anti-
establishment, a number of meetings, attended money Laundering Software.
by the Committee members, have been held
to discuss suspicious operations reports 6- Branch Performance Form concerning
received from branches. Anti-Money Laundering
After a full-scale investigation into the existing
5- Suspicious Transactions Recognition rules and conforming to the standards of
Software System (AML System) International Organizations, an Anti-Money
With respect to the importance of systematizing Laundering Investigation Form was prepared,
Anti-Money Laundering process and providing which was at the Inspectors' and Auditors'
Suspicious Transactions Recognition Software, disposal all over the country.
BSI has started producing the latter in order to
Highlights of BSI Success in International and National Arena
International Arena
Won "Best Islamic Financial Institutions
Award" 2008 awarded by Global Finance
Best Islamic Bank in Iran in 2006 by Islamic
Finance Institute
Won the Award for Best Debt House in Iran
2005 awarded by EUROMONEY magazine
Awarded the "Bank of the Year 2001-Iran"
by The Banker magazine
National Arena
Ranked No.1 among Subsidiary Organizations
of Ministry of Finance and Economic Affairs
in 2009
Best Electronic Bank in 2004
Second best Bank of Iran in 2003
Ranked No.1 in Offering Services in 2004
Ranked No.1 in Responsiveness
Most Preferred Bank in Islamic Banking
Chosen Bank by Ministry of Finance and
Economic Affairs
Financial Performance
FINANCIAL PERFORMANCE
Total Assets
500,000
400,000
2006
300,000
2007
2008
200,000
100,000
0
BSI Network Group
BSI Group's total assets increased by 5.7% from Rls 386,263 billion in 2007 to Rls 408,185 billion
in 2008 . This mainly resulted from Cash, Due from Government ,Facilities Granted and Claims
from Private Sector.
Total Liabilities
400,000
300,000
2006
2007
200,000
2008
100,000
0
BSI Network Group
BSI Group's total liabilities increased by 6.6% from Rls 356,082 billion in 2007 to Rls 379,674
billion in 2008. This mainly resulted from due to Central Bank and Term Investment Deposits.
In Billion RLS
404,588
408,185
370,895
386,263
305,583
319,910
235,943
198,189
172,295
379,638
379,674
In Billion RLS
351,250
356,082
286,179
289,611
212,193
178,559
152,789