August 31, 2021: Faysal Bank Limited (FBL) continues to make progress on its strategy to convert into a full-fledged Islamic Bank. The Bank is working on an ‘Asset Led’ model whereby conversion of conventional assets into Sharia compliant financing precedes conversion of deposits, as per financial report shared by the Bank.
FBL has hit another landmark on its conversion journey at June ’21 end as almost three-fourths of its financing is under Islamic modes.
This has been made possible by the untiring efforts of the entire team under the supervision and guidance of the Senior Management, Sharia Board and the Board of Directors. We remain confident that by the grace of Allah and with your support we will be able to achieve our objective of full conversion as envisaged in Bank’s strategy.
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During the period the Bank has launched ‘Faysal Islami Noor card’, Pakistan’s first Tawarruq based Shari’ah compliant alternative to conventional credit card. Despite the challenges posed by Coronavirus pandemic, the Bank has resumed the process of converting branches to achieve over 95% Islamic network by the end of 2021.
Despite the challenges posed by the pandemic, FBL has and will continue to work towards its commitment to achieve complete Islamic transformation. The Bank is targeting to convert another 65 branches to Islamic during the second half of 2021. Another 30 new Islamic branches will be opened before the year end. Digital banking is another strategic thrust of FBL which has achieved greater emphasis during the pandemic. We remain committed to provide best in class service to our customers in these testing times through improved and enhanced offerings from alternate delivery channels and digital platforms.
Faysal Bank is actively engaged with State Bank of Pakistan in its efforts to support the country’s economy. FBL is one of the first banks selected by SBP to offer Roshan Digital Accounts to overseas Pakistanis. As per SBP’s directives, Roshan Apni Car and Roshan Samaji Khidmat for donations & charities were also successfully launched during the six months period under review exclusively for Roshan Digital Account Holders. Roshan Apni Car initiative will help non-resident Pakistanis in applying for car financing via digital platform at preferential rates and expeditious delivery. FBL is also actively participating in Kamyab Jawan Program of Government and meeting disbursement targets. Further the Bank is also taking all possible steps to ensure availability of low-cost housing finance to the eligible segments of the society under Naya Pakistan Housing Program.
Despite growth of Rs. 95 billion in deposits since June ’20, net markup income of the Bank during the six months ended June 30, 2021 is 9.8% lower than the corresponding period of previous year. The main reason for this decline is the drastic cut of 625 bps in policy rate by SBP in the first half of 2020. The policy rate was reduced from 13.25% to 7% to support the economy during the unprecedented lockdown necessitated by the Covid 19 pandemic. However, the bank has been able to offset the decline in its margin to a large extent by generating higher non markup income. Led by higher fee, foreign exchange and other income, the Bank’s non-markup income was 8.4% higher than first half of 2020. Strong cost control measures have ensured that non markup expenses show only a marginal increase of 3.1% despite opening of 30 new branches in 2020 and inflation.
Net provisions for half year under review reflected reversal of Rs. 12 million as against charge of Rs. 1,465 million in the corresponding period of last year. Credit for this primarily goes to recoveries from non-performing financings of Rs. 1,144 million and reversal of impairment on equity secu…