An Eye On The Future!

It’s a very exciting and satisfying moment for me as I brief you on the performance of Escorts Investment Bank. Exciting because the period under review is my first full Financial Year as the President and CEO of the bank - this is also true for most of the key members of my team. Satisfying because the New Strategy that we designed and implemented, for the required Repositioning for Growth has completely transformed the bank, into a vibrant, proactive, progressive and a very profitable institution, with an Earning Per Share (EPS) and Return on Equity (ROE) well above most of our peers. The bank has also built an enviable asset quality and a reputation for good corporate conduct. The significantly higher Brand Visibility in the financial and corporate circles also cannot go unnoticed.

All in all, every business activity made progress, either in financial terms or toward a
Broader Strategic Goal.

The following Financial Highlights bear ample testimony to the success of the New Strategy:

Financial Highlights (As at June 30, 2003)

Key Success Factors

The Human Capital

All our successes this year stem from a common root. We were successful because of the people who work at Escorts Bank. A new management team brought discipline and excitement to the Bank. We have been able to put together a talented team, who will continue to bring our shareholders the greatest value. In the process, we will be a stronger, more reliable institution for our shareholders to own, a more exciting and fulfilling company to work in, and for our peers, a competitor worth reckoning.

Management by Objectives

As mentioned in my earlier Reviews covering this Financial Year, we based our Business Plan on a redefinition of the Statement of Objectives of our Bank as:

“ Value addition for our Shareholders through enhanced business activity and a shift from risk avoidance to proactive Risk Identification and improved Risk Management.”

Business Diversity

A well-planned program towards Business Diversity has enhanced our profitability and increased our stability. A number of new business activities were identified to diversify and augment the Product Mix and Revenue Streams of the Bank. Acquisition of a Corporate Seat at the Lahore Stock Exchange and setting up of a Capital Markets and Brokerage Division, a Car Finance Counter, a Structured Finance and Advisory Division were all steps in this direction. The diversity of our products and services will reduce volatility in our earnings.

Proactive Resource Mobilization and Marketing

A proactive Resource Mobilization and Marketing Campaign was launched at Lahore, Karachi and Islamabad with substantial successes.

Treasury as Driver of Profitability

Improved Treasury Management, fresh and favorable credit lines, innovative products and vigorous participation in Money Market Operations resulted in a very significant decrease in the Bank’s Weighted Average Cost of Funds (WACOF).

Reengineered Work Processes

Work Processes were continuously reengineered throughout the year under review, which improved the Time Efficiency and Customer Satisfaction levels.

Good Corporate Governance and Effective Internal Controls

Strong prudential risk management has been a key to the Bank’s success. We have a systematic approach to managing risk with a special emphasis on the main risks, including market risk, credit risk, liquidity risk, operational risk, and legal compliance and documentation risk. This will remain a key area of management focus.
We find ourselves in complete sync with the rationale and practical exigencies of the set of reforms initiated by the Securities and Exchange Commission of Pakistan (SECP). Escorts Bank has a strong Board of Directors actively involved with the Policy Making Function. The Bank also has an independent and professional Executive Management vested with the necessary Operational Autonomy and a disciplined focus on what is in the shareholder’s interest. Internal Controls have been strengthened during the year under review, to enforce Good Corporate Governance and to ensure adherence to the highest Professional and Ethical Standards.

Profitability, Productivity & Efficiency Ratios

The Return on Equity (Percentage Return on Average Equity) has very substantially improved from 5.75 % as at the end of last Financial Year to 25.31 % this year depicting an increase of 19.56 %. Similarly Return on Total Assets Increased by 2.21 % to 3.35 %. On the other hand, continued cost management initiatives across the Bank meant that the Cost/Income Ratio improved and fell by 12.87 % and Revenue/Expense improved by 0.23 times. Total Income/Total Assets improved by 1.07 % and Operating Profit / Total Assets improved by 1.68 %.

Future Outlook

The outlook for Escorts Investment Bank remains very encouraging and positive.
We have undergone meaningful strategic changes and I look forward to building on these in FY 2003 – 2004 and beyond. We remain firmly committed to our existing, well-defined and focused strategy. Our action plan going forward consists of increasing the coverage of our activities, and further strengthening our balance sheet. Our task is to consolidate our gains, leverage our accomplishments and sustain our growth momentum. Our lean model has enabled us to react quickly, creating opportunities from changing market conditions. We shall continue to rely heavily on the quality of our Management Team and their commitment to deliver consistently better results. We shall continue to recruit and attract talent from
across the financial services industry to add to our skilled management.

We also wish and hope that in our efforts to develop and introduce sophisticated investment banking products in our country, we shall not be alone, and that institutions like Escorts Investment Bank shall continue to receive the full support of the SECP and the State Bank of Pakistan (SBP).

Before I conclude let me once again reassure you that the foregoing strategies will continue to enhance shareholder’s value, with returns significantly above market.

Sincerely,

Rashid Mansur
President & CEO

September 22, 2003
Lahore.