TIDMIBB
RNS Number : 0673D
Islamic Bank of Britain Plc
16 March 2011
Islamic Bank of Britain PLC
Annual Report and Financial Statements
Registered number 4483430
31 December 2010
Chairman's statement
The Bank's financial performance for the year ended 31 December
2010 has continued to be impacted by the challenging economic
environment. The UK only tentatively emerged from recession during
2010, with the housing market continuing to be subdued, increasing
unemployment, downward pressure on disposable incomes and market
yields still at historic lows. Current liquidity and minimum
capital requirements are also constricting the ability of banks to
increase their asset bases.
Despite the difficult conditions, Islamic Bank of Britain has
seen growth in customer finance assets whilst customer deposits
have been maintained.
Highlights
-- Customer financing increased by 17.1% to GBP55m
-- Deposits increased by 1% to GBP187.8m
-- Costs excluding depreciation, amortisation and impairment
provisions fell from GBP9.6m to GBP8.5m.
-- Customer numbers increased slightly to 50,531.
-- Total regulatory capital expressed as a percentage of risk
weighted assets increased to 43.1% (2009: 28.3%)
Current environment and trading performance
The Bank was successful in raising an additional GBP20m of
capital during the year. We were then able to use a part of this to
fund the growth of the Home Purchase Plan ("HPP") product, which,
together with the increase in HPP balances achieved in 2009, led to
the improvement in our revenues from consumer products by GBP0.7m
to GBP2.5m. However, yields in the interbank markets remained at
historically low levels in 2010 with revenues from this source
declining to GBP0.6m from GBP1.2m. The result was a slight increase
in net income to GBP1.3m (2009: GBP1.2m). The specific actions
implemented during 2009 to mitigate the declining revenues
continued into 2010 with a GBP1.1m reduction in operating expenses
net of impairment losses to GBP9.6m. The focus on good quality,
secured finance assets and a reduction in unsecured Personal
Finance balances has led to a 60% fall in impairment costs to
GBP0.16m. The overall result of these initiatives has resulted in a
reduced loss for the year of GBP8.1m (2009: loss of GBP9.5m).
Products
The HPP product was in demand and achieved growth when we had
the capital and funding in place to achieve asset expansion.
Considering that this was only for part of the year, the resulting
32% increase in the Bank's HPP balances was pleasing to note; as
was the fact that this new business was achieved in accordance with
prudent credit policies, with currently no impairment within the
HPP and commercial property finance portfolios. The Bank is now the
provider of the widest range of Sharia compliant products in the UK
retail market.
Capital
As stated in the Interim Report, the Bank raised new capital of
GBP20m via a placing of new shares in August 2010. While the Bank
continues to have sufficient capital for its current requirements,
the Board is in ongoing discussions with its advisors and
interested parties regarding the raising of additional capital and
funding to support planned future growth. In the absence of access
to alternative additional sources of funds the Board believes that
it will be difficult for the Bank to achieve the necessary asset
growth to achieve profitability.
Outlook
The challenging market conditions look set to persist into 2011
and the directors and management will continue to identify
opportunities to mitigate the adverse effects. We will maintain
tight cost control, although mindful that further reductions may
impact the operational capability of the Bank and its ability to
respond quickly when its financial position strengthens. The Bank
intends to seek new funding to support quality asset growth, with
the emphasis on secured consumer finance assets.
I would like to take this opportunity to thank Mohsen Moustafa
for his commitment and stewardship of the Bank, as a director since
2005 and as Chairman from March 2007 until his retirement on 31
December 2010. He has played an important role in the development
of the Bank and in strengthening Islamic finance in the UK.
I would also like to thank Abdul Hakim Al-Adhamy, who retired
from the Board in November 2010, for the valuable role he played on
the Board, as chairman of the Audit Committee and for his wise
counsel and financial advice he provided.
Arising from the strategic review carried out by the Bank and
its advisers in 2010, we are well progressed in seeking to
strengthen the Board with the appointment of additional,
experienced Non-Executive Directors. I am pleased with the support
of our major shareholder, Qatar International Islamic Bank and with
their continued backing; I am looking forward to the next phase of
growth for the Bank. Inshallah.
Finally, I would like to extend my thanks and gratitude to
Islamic Bank of Britain's customers, employees, Sharia Supervisory
Committee scholars and shareholders for their continued support and
commitment to the Bank.
Robert J Owen 15 March 2011
Chairman
Report of the Sharia Supervisory Committee
(In the name of Allah, the Most Gracious, the Most Merciful)
To the Members of the Islamic Bank of Britain PLC
For the period from 1 January 2010 to 31 December 2010
In compliance with the Terms of Reference of the Bank's Sharia
Supervisory Committee, we submit the following report:
We have reviewed the documentation relating to the products and
transactions entered into by the Islamic Bank of Britain PLC for
the period from 1 January 2010 to 31 December 2010.
According to Management, the Sharia Compliance Officer of the
Bank and documents evidencing the facts, the Bank's funds were
raised and invested during this period on the basis of agreements
approved by us.
Therefore, based on the report of our representative and
representations received from Management, in our opinion, the
transactions and the products entered into by the Bank during the
period from 1 January 2010 to 31 December 2010 are in compliance
with the Islamic Sharia rules and principles and fulfil the
specific directives, rulings and guidelines issued by us.
We beg Allah the Almighty to grant us all the success and
straightforwardness.
Dr Abdul Sattar Abu Ghuddah 15 March 2011
Chairman of the Sharia Supervisory
Committee
Directors' report
The directors present their report and financial statements for
the year ended 31 December 2010.
Principal activities
Islamic Bank of Britain PLC (the 'Company' or the 'Bank') is the
only independent Islamic retail bank in the United Kingdom
established and managed on a wholly Sharia compliant basis.
The Bank offers a range of Sharia compliant banking solutions
for both individual and business customers including current
accounts, savings accounts, Home Purchase Plan and business
financing. These are delivered through the Bank's branch network,
which is complemented by internet, telephone and postal banking
channels.
Business review and financial results
These financial statements have been prepared in accordance with
International Financial Reporting Standards as adopted by the
EU.
The financial statements for the year ended 31 December 2010 are
shown on pages 9 to 37. The loss for the year amounts to
GBP8,125,342 (2009: GBP9,492,744). Details of the Company's
performance and prospects are given within the Chairman's statement
on pages 1 and 2.
The directors do not recommend the payment of a dividend (2009:
GBPnil).
The development and performance of the Company during the
financial year and its position at the end of the year, together
with key performance indicators are expanded upon in the Chairman's
statement on pages 1 to 2.
Principal risks and uncertainties
The Bank regards the monitoring and controlling of risks as a
fundamental part of the management process. Senior management are
involved in the development of risk management policies and in
monitoring their application.
The principal non-operational risks inherent in the Bank's
business are credit, liquidity, market, concentration and Sharia
compliance risks. A detailed description of the principal risks and
risk management policies in these areas is set out in Note 4 to the
financial statements.
Principal uncertainties faced by the Bank
Changing Macro economic conditions
Macro economic conditions impact consumer consumption and
demand; the availability of credit and the debt burden of customers
and businesses; and the availability of capital and funding for the
Bank. All these factors will influence the performance of the
Bank.
Changes in Laws and Regulations
The Bank operates in markets that are subject to a wide variety
of legislation, regulation and codes of conduct. Uncertainty arises
from the way in which these laws and regulations change in response
to macroeconomic conditions; new products and services; and
rightfully the greater awareness and prominence of consumer
protection. The nature and impact of future changes in laws,
regulations and codes of practice are not predictable.
Reduced access to funding
Liquidity risk is the risk we do not have sufficient financial
resources available to meet all our obligations and commitments as
they fall due, or can access funding only at excessive cost.
Changing Geopolitical environment
Whilst the Bank operates principally in the UK our performance
is part reliant on the openness of cross border funding and capital
flows. There is therefore a risk that geopolitical tensions or
conflict could impact trade flows and our ability to manage capital
or funding across borders.
Creditor payment policy
The Company seeks to settle trade invoices in line with their
payment terms. The Company does not follow any industry standards
or guidelines for the payment of suppliers. The amount due to the
Company's trade creditors as at 31 December 2010 represented 11
days (2009: 30 days) average daily purchases of goods and services
calculated in accordance with the Companies Act 2006.
Capital
On 17 August 2010, an ordinary resolution was passed at an
extraordinary general meeting increasing the authorised share
capital of the Company from GBP7,250,000 to GBP28,488,233 by the
creation of an additional 2,123,823,300 new Ordinary Shares. On 17
August 2010, an additional 2,000,000,000 shares were allotted for
consideration of GBP20,000,000 before expenses.
Directors and directors' interests
The directors who held office during the year were as
follows:
Mohsen Moustafa (c) Resigned 31 December 2010
Robert Owen (Chairman) (a) (b) (c)
Abdul Hakim Al-Adhamy (a) (b) Resigned 10 November 2010
Gerry Deegan (c)
Sultan Choudhury
(a) Denotes member of Audit Committee
(b) Denotes member of Remuneration Committee
(c) Denotes member of Nomination Committee
The directors who held office at the end of the financial year
had the following interests in the ordinary shares of the Company
according to the register of directors' interests:
Interest at start
Class of share and end of year
Gerry Deegan Ordinary 20,000
Sultan Choudhury Ordinary 34,000
Details of the Executive Director's options to subscribe for ordinary
shares are given below. Further information on the share options
is provided in note 22.
Interest Interest Earliest Latest
at start at end exercise exercise Exercise
of year of year date date price
Gerry 5 Nov 4 Nov
Deegan 157,894 157,894 2010 2017 9.5p
Sultan 5 Nov 4 Nov
Choudhury 157,894 157,894 2010 2017 9.5p
No options were granted or exercised during the year by the directors.
None of the other directors who held office at the end of the
financial year had any disclosable interest in the shares of the
Company.
Significant Shareholders
The following shareholders had interests in the ordinary shares
of the Company in excess of 3% as at 31 December 2010 (comparatives
only shown if holding as at 31 December 2010 was greater than
3%):
2010 2009
(%) (%)
Qatar International Islamic Bank 80.95 11.22
HE Sheikh Thani Bin Abdulla Bin Thani
Jasim Al Thani 6.44 29.99
On 17 August 2010 Qatar International Islamic Bank acquired and
additional 2,000,000,000 shares in the Bank making it the parent
undertaking of the Bank.
Sharia Supervisory Committee members
The Sharia Supervisory Committee members during the year were as
follows:
Dr. Abdul Sattar Abu Ghuddah (Chairman)
Sheikh Nizam Yaqoobi
Mufti Abdul Kadir Barkatullah
The report of the Sharia Supervisory Committee is set out on
page 3.
Political and charitable contributions
The Company made no political contributions during the year
(2009: GBPnil). Donations to UK charities amounted to GBP200 (2009:
GBP1,200) and consisted of late payment fees received on personal
finance accounts that were paid to charity in accordance with
product terms as agreed with the Sharia Supervisory Committee.
Going Concern
Based on the forecasts performed, the directors consider that at
the date of approving the financial statements the Company has
adequate resources to continue operational business for at least
the next 12 months and therefore to adopt the going concern basis
in preparing the financial statements.
Disclosure of information to auditors
The directors who held office at the date of approval of this
directors' report confirm that, so far as they are each aware,
there is no relevant audit information of which the Company's
auditors are unaware; and each director has taken all the steps
that they ought to have taken as a director to make themselves
aware of any relevant audit information and to establish that the
Company's auditors are aware of that information.
Auditors
In accordance with Section 489 of the Companies Act 2006, a
resolution for the re-appointment of KPMG Audit Plc as auditors of
the Company is to be proposed at the forthcoming Annual General
Meeting.
By order of the Board
Gerry Deegan Islamic Bank of Britain PLC
Managing Director Edgbaston House
3 Duchess Place
Birmingham
B16 8NH
15 March 2011
Statement of directors' responsibilities in respect of the
Directors' Report and the Financial Statements
The directors are responsible for preparing the Directors'
Report and the financial statements in accordance with applicable
law and regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law they have
elected to prepare the financial statements in accordance with
IFRSs as adopted by the EU and applicable law.
Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the profit or
loss of the Company for that period. In preparing these financial
statements the directors are required to:
-- select suitable accounting policies and then apply them
consistently;
-- make judgments and estimates that are reasonable and
prudent;
-- state whether they have been prepared in accordance with
IFRSs as adopted by the EU; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
its financial statements comply with the Companies Act 2006. They
have general responsibility for taking such steps as are reasonably
open to them to safeguard the assets of the Company and to prevent
and detect fraud and other irregularities.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the UK governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
Independent auditor's report to the Members of Islamic Bank of
Britain PLC
We have audited the financial statements of Islamic Bank of
Britain PLC for the year ended 31 December 2010 set out on pages 9
to 37. The financial reporting framework that has been applied in
their preparation is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the EU.
This report is made solely to the Company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company's members those matters we are required to state to them in
an auditors' report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company's members, as a body,
for our audit work, for this report, or for the opinions we have
formed.
Respective responsibilities of directors and auditor
As explained more fully in the Director's Responsibilities
Statement set out on page 7, the directors are responsible for the
preparation of the financial statements and for being satisfied
that they give a true and fair view. Our responsibility is to audit
and express an opinion on the financial statements in accordance
with applicable law and International Standards on Auditing (UK and
Ireland). Those standards require us to comply with the Auditing
Practices Board's (APB's) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements
is provided on the APB's website at
www.frc.org.uk/apb/scope/private.cfm.
Opinion on financial statements
In our opinion the financial statements:
-- give a true and fair view of the state of the Company's
affairs as at 31 December 2010 and of its loss for the year then
ended;
-- have been properly prepared in accordance with IFRSs as
adopted by the EU; and
-- have been prepared in accordance with the requirements of the
Companies Act 2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors' Report
for the financial year for which the financial statements are
prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you if, in
our opinion:
-- adequate accounting records have not been kept, or returns
adequate for our audit have not been received from branches not
visited by us; or
-- the financial statements are not in agreement with the
accounting records and returns; or
-- certain disclosures of directors' remuneration required by
law are not made; or
-- we have not received all the information and explanations we
require for our audit.
Ian A Dewar (Senior Statutory Auditor) 15 March 2011
for and on behalf of KPMG Audit Plc,
Statutory Auditor
Chartered Accountants
15 Canada Square
London
E14 5GL
Statement of comprehensive income
For the year ended 31 December 2010
Note 2010 2009
GBP GBP
Income receivable from Islamic financing
transactions 6 3,092,194 3,017,012
Returns payable to customers and banks 6 (1,779,827) (1,807,271)
Net income from Islamic financing
transactions 6 1,312,367 1,209,741
------------ -------------
Fee and commission income 7 404,170 480,591
Fee and commission expense 7 (79,148) (86,939)
Net fee and commission income 7 325,022 393,652
------------ -------------
Operating income 1,637,389 1,603,393
Net impairment loss on financial assets 14 (162,218) (408,939)
Personnel expenses 9 (4,532,041) (5,241,104)
General and administrative expenses (3,955,790) (4,314,807)
Depreciation 15 (876,416) (724,477)
Amortisation 16 (236,266) (406,810)
Total operating expenses (9,762,731) (11,096,137)
------------ -------------
Loss before income tax (8,125,342) (9,492,744)
Income tax expense 11 - -
Loss for the year (8,125,342) (9,492,744)
============ =============
Total comprehensive income for the
year (8,125,342) (9,492,744)
============ =============
Loss attributable to owners of the
Company (8,125,342) (9,492,744)
Total comprehensive income attributable
to owners of the Company (8,125,342) (9,492,744)
Loss per ordinary share
Basic and diluted (pence) 24 (0.63) (1.8)
The notes on pages 13 to 37 are an integral part of these
financial statements.
Statement of financial position
As at 31 December 2010
Note 2010 2009
GBP GBP
Assets
Cash 559,791 577,273
Commodity Murabaha and Wakala
receivables and other advances
to banks 13 160,333,251 155,951,375
Consumer finance accounts and
other advances to customers 14 2,310,206 4,488,744
Net investment in home purchase
plans 14 43,761,647 33,077,501
Net investment in commercial
property finance 14 8,132,739 8,611,393
Property and equipment 15 1,885,136 2,660,754
Intangible assets 16 363,222 315,541
Other assets 17 846,206 1,340,277
Total assets 218,192,198 207,022,858
============= =============
Liabilities and equity
Liabilities
Deposits from banks 18 880,645 609,292
Deposits from customers 19 187,796,190 185,975,992
Other liabilities 20 3,317,104 3,623,541
Total liabilities 191,993,939 190,208,825
Equity
Called up share capital 22 25,464,700 5,464,700
Share premium 54,806,652 54,806,652
Retained deficit (54,118,414) (43,502,640)
Profit stabilisation reserve 45,321 45,321
Total equity 26,198,259 16,814,033
Total equity and liabilities 218,192,198 207,022,858
============= =============
The notes on pages 13 to 37 are an integral part of these
financial statements.
These financial statements were approved by the Board of
Directors on 15 March 2011 and were signed on its behalf by:
Gerry Deegan
Managing Director
Islamic Bank of Britain PLC
Registration number: 4483430
Statement of changes in equity
For the year ended 31 December 2010
Share Profit Profit
Share premium and loss stabilisation
capital account account reserve Total
GBP GBP GBP GBP GBP
Balance at 1
January 2009 4,190,000 48,747,255 (34,046,165) 52,446 18,943,536
Total
comprehensive
income for
the year - - (9,492,744) - (9,492,744)
Credit in
respect of
share based
payments
charge - - 29,144 - 29,144
Transfer from
profit
stabilisation
reserve - - 7,125 (7,125) -
Issue of
ordinary
share
capital 1,274,700 6,059,397 - - 7,334,097
---------- ---------- ------------ ------------- -----------
Balance at 31
December
2009 5,464,700 54,806,652 (43,502,640) 45,321 16,814,033
========== ========== ============ ============= ===========
Balance at 1
January 2010 5,464,700 54,806,652 (43,502,640) 45,321 16,814,033
Total
comprehensive
income for
the year - - (8,125,342) - (8,125,342)
Credit in
respect of
share based
payments
charge - - 20,994 - 20,994
Transfer from
profit
stabilisation
reserve - - - - -
Issue of
ordinary
share
capital 20,000,000 - (2,511,426) - 17,488,574
Balance at 31
December
2010 25,464,700 54,806,652 (54,118,414) 45,321 26,198,259
========== ========== ============ ============= ===========
The notes on pages 13 to 37 are an integral part of these
financial statements.
Statement of cash flows
For the year ended 31 December 2010
Note 2010 2009
GBP GBP
Cash flows from operating activities
Loss for the year (8,125,342) (9,492,744)
Adjustments for:
Depreciation 15 876,416 724,477
Amortisation 16 236,266 406,810
Impairment on financial assets 14 162,218 408,939
Share based payments charge 22 20,994 29,144
Change in Commodity Murabaha and
Wakala receivables (649,216) (3,151,765)
Change in consumer finance accounts
and other advances to customers 2,016,319 2,980,609
Change in net investment in commercial
property finance 478,654 (13,500)
Change in net investment in home
purchase plans (10,684,146) (26,096,661)
Change in other assets 494,071 (77,149)
Change in deposits from banks 271,352 (4,484,827)
Change in deposits from customers 1,820,198 32,695,238
Change in other liabilities (306,436) 142,650
Net cash used in operating activities (13,388,652) (5,928,779)
------------- -------------
Cash flows from investing activities
Purchase of property and equipment 15 (100,798) (119,486)
Purchase of intangible assets 16 (283,947) (143,638)
Net cash used in investing activities (384,745) (263,124)
------------- -------------
Cash flows from financing activities
Issue of ordinary share capital 17,488,574 7,334,097
Net cash generated from financing
activities 17,488,574 7,334,097
------------- -------------
Net change in cash and cash equivalents 3,715,177 1,142,194
Foreign exchange gains 228 (4,716)
Cash and cash equivalents at 1
January 3,751,962 2,614,484
Cash and cash equivalents at 31 December 12 7,467,367 3,751,962
============= =============
The notes on pages 13 to 37 are an integral part of these
financial statements.
Notes to the financial statements
1 Reporting entity
Islamic Bank of Britain PLC (the 'Company' or the 'Bank') is a
company domiciled in the UK. The address of the Company's
registered office is Edgbaston House, 3 Duchess Place, Hagley Road,
Birmingham B16 8NH. The financial statements of the Company are
presented as at and for the year ended 31 December 2010. The
Company is a retail bank offering Sharia compliant banking products
and services.
2 Basis of preparation
(a) Statement of compliance
These financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRSs) as adopted by
the EU and approved by the directors.
These financial statements were approved by the Board of
Directors on 15 March 2011.
The accounting policies set out below have, unless otherwise
stated, been applied consistently to all periods presented in these
financial statements.
(b) Basis of measurement
The financial statements of the Company have been prepared on
the going concern basis. In making the going concern assessment,
the directors have prepared detailed financial forecasts for the
Company, including its funding and capital position, for the twelve
months from the date of approval of these financial statements.
As noted in the Chairman's statement, the Board is in ongoing
discussions with its advisors and interested parties regarding the
raising of additional capital to support planned future growth. The
directors have considered the effect upon the Company of more
pessimistic scenarios on its business, in particular the worsening
of the economic environment and if new capital is not raised as
planned. The scenarios show that the Bank can continue to operate
without breaching Regulatory capital requirements throughout
2011.
Based on the forecasts, the directors are confident that the
Company has adequate resources to continue in operational existence
and will continue to comply with all relevant regulatory
requirements for a period of at least the next 12 months.
Accordingly, they continue to adopt the going concern basis in
preparing the financial statements.
The financial statements have been prepared on the historical
cost basis.
(c) Functional and presentation currency
The financial statements are presented in Sterling, which is the
Company's functional currency.
(d) Use of estimates and judgements
The preparation of financial statements requires management to
make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of
assets, liabilities, income and expenses. Actual results may differ
from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised and in any future periods
affected.
In particular, information about significant areas of
estimation, uncertainty and critical judgements in applying
accounting policies that have the most significant effect on the
amount recognised in the financial statements are described in note
5.
3 Significant accounting policies
(a) Property and equipment
(i) Recognition and measurement
Items of property and equipment are measured at cost less
accumulated depreciation and accumulated impairment losses. Cost
includes expenditure that is directly attributable to the
acquisition of the asset.
(ii) Subsequent costs
The cost of replacing part of an item of property or equipment
is recognised in the carrying amount of the item if it is probable
that the future economic benefits embodied within the part will
flow to the Company and its cost can be measured reliably. The
costs of the day-to-day servicing of property and equipment are
recognised in the statement of comprehensive income as
incurred.
(iii) Depreciation
Depreciation is recognised in the statement of comprehensive
income on a straight line basis over the estimated useful lives of
each part of an item of property and equipment as follows:
Computer equipment 3 Years
Fixtures, fittings and office 5 Years
equipment
Leasehold improvements 10 years or over the life of the lease
whichever is shorter
Depreciation methods, useful lives and residual values are
reassessed at each reporting date.
(b) Intangible assets
Software and computer licences acquired by the Company are
stated at cost less accumulated amortisation and accumulated
impairment losses.
Expenditure on internally developed software is recognised as an
asset when the Company is able to complete the development and use
the software in a manner that will generate future economic
benefits, and can reliably measure the costs to complete the
development. The capitalised costs of internally developed software
include all costs directly attributable to developing the software,
and are amortised over its estimated useful life. Internally
developed software is stated at capitalised cost less accumulated
amortisation and impairment.
Subsequent expenditure on software assets and computer licences
is capitalised only when it increases the future economic benefits
embodied in the specific asset to which it relates. All other
expenditure on software or computer licences is expensed as
incurred.
Amortisation is recognised in the statement of comprehensive
income on a straight line basis over the estimated useful life of
the software or the licence term, from the date that it becomes
available for use. The estimated useful life of software is three
years.
(c) Commodity Murabaha and Wakala receivables and other advances
to banks
Commodity Murabaha is an Islamic financing transaction, which
represents an agreement whereby the Company buys a commodity and
sells it to a counterparty based on a promise received from that
counterparty to buy the commodity according to specific terms and
conditions. The selling price comprises of the cost of the
commodity and a pre-agreed profit margin.
Wakala is an Islamic financing transaction, which represents an
agreement whereby the Company provides a certain sum of money to an
agent, who invests it according to specific conditions in order to
achieve a certain specified return. The agent is obliged to return
the invested amount in case of default, negligence or violation of
any of the terms and conditions of the Wakala.
Commodity Murabaha receivables are recognised upon the sale of
the commodity to the counterparty. Wakala receivables are
recognised upon placement of funds with other institutions.
Income on both Commodity Murabaha and Wakala receivables is
recognised on an effective yield basis. The effective yield rate is
the rate that exactly discounts the estimated future cash payments
and receipts through the agreed payment term of the contract to the
carrying amount of the receivable. The effective yield is
established on initial recognition of the asset and is not revised
subsequently.
The calculation of the effective yield rate includes all fees
paid or received, transaction costs, and discounts or premiums that
are an integral part of the effective yield rate. Transaction costs
are incremental costs that are directly attributable to the
acquisition, issue or disposal of a financial asset or
liability.
Commodity Murabaha and Wakala receivables are initially recorded
at fair value and are subsequently measured at amortised cost using
the effective yield method, less impairment losses. The accrued
income receivable is classified under other assets.
Other advances to banks are stated at cost and are non-return
bearing.
(d) Consumer finance accounts
Islamic consumer financing transactions represent an agreement
whereby the Company buys a commodity or goods and then sells it to
the customer with an agreed profit mark-up with settlement of the
sale price being deferred for an agreed period. The customer may
subsequently sell the commodity purchased to generate cash.
Consumer finance assets will be recognised on the date that the
commodity or good is sold by the Company. Consumer finance account
balances are initially recorded at fair value and are subsequently
measured at amortised cost. The amortised cost is the amount at
which the asset is measured at initial recognition, minus
repayments received relating to the initial recognised amount, plus
the cumulative amortisation using an effective yield method of any
difference between the initial amount recognised and the agreed
sales price to the customer, minus any reduction for
impairment.
Income is recognised on an effective yield basis over the period
of the contract. The effective yield rate is the rate that exactly
discounts the estimated future cash payments and receipts through
the agreed payment term of the contract to the carrying amount of
the receivable. The effective yield is established on initial
recognition of the asset and is not revised subsequently.
The calculation of the effective yield rate includes all fees
paid or received, transaction costs, and discounts or premiums that
are an integral part of the effective yield rate. Transaction costs
are incremental costs that are directly attributable to the
acquisition, issue or disposal of a financial asset or
liability.
(e) Commercial property finance and home purchase plans
Commercial property finance and home purchase plans are provided
using the Diminishing Musharaka (reducing partnership) principle of
Islamic financing. The Company will enter into an agreement to
jointly purchase a property and rental income will be received by
the Company relating to that proportion of the property owned by
the Company at any point in time. The other party to the agreement
will make separate payments to purchase additional proportions of
the property from the Company, thereby reducing the Company's
effective share.
The transaction is recognised as a financial asset upon legal
completion of the property purchase and the amount receivable is
recognised at an amount equal to the net investment in the
transaction. Where initial direct costs are incurred by the Company
such as commissions, legal fees and internal costs that are
incremental and directly attributable to negotiating and arranging
the transaction, these costs are included in the initial
measurement of the receivable and the amount of income over the
term will be reduced. Rental income is recognised to provide a
constant periodic rate of return on the Company's net
investment.
(f) Deposits from customers
Profit sharing accounts are based on the principle of Mudaraba
whereby the Company and the customer share an agreed percentage of
any profit earned on the customer's deposit. The customer's share
of profit is paid in accordance with the terms and conditions of
the account. The profit calculation is undertaken at the end of
each calendar month.
Customer Murabaha deposits consist of an Islamic financing
transaction involving the Company arranging the purchase of an
asset on behalf of the customer and the purchase thereof from the
same customer by the Company at cost plus an agreed profit mark-up
with settlement on a deferred payment basis. Customer Murabaha
deposit balances are included in the statement of financial
position under deposits from customers and the accrued returns
payable to the customer are classified under other liabilities.
Returns payable on customer Murabaha deposits are recognised on an
effective yield basis over the period of the contract.
Customer Wakala deposits consist of an Islamic financing
transaction, which represents an agreement whereby the customer
appoints the Company as agent to invest a certain sum of money,
according to specific conditions in order to achieve a certain
specified return. The Company, as agent, is obliged to return the
invested amount in case of default, negligence or violation of any
of the terms and conditions of the Wakala.
(g) Profit stabilisation reserve
The profit stabilisation reserve is used to maintain returns
payable to customers on Mudaraba based savings accounts. Returns
payable on these profit sharing accounts are credited to customers
in accordance with the terms and conditions of the account. Any
surplus returns arising from the investment of funds are then
credited to this reserve. In the case of inadequate returns
generated by these funds, the Company will maintain the return to
depositors by utilising this reserve.
(h) Derecognition of financial assets and liabilities
The Company derecognises a financial asset when the contractual
rights to the cash flows from the asset expire, or it transfers the
rights to receive the contractual cash flows on the financial asset
in a transaction in which substantially all the risks and rewards
or ownership of the financial asset are transferred. Any remaining
interest in transferred financial assets that is created or
retained by the Company is recognised as a separate asset or
liability.
The Company derecognises a financial liability when its
contractual obligations are discharged or cancelled or have
expired.
(i) Impairment of financial assets
At each statement of financial position reporting date the
Company assesses whether there is objective evidence that financial
assets are impaired. Financial assets are impaired when objective
evidence demonstrates that a loss event has occurred after the
initial recognition of the asset, and that the loss event has an
impact on the future cash flows of the asset that can be estimated
reliably.
The Company considers evidence of impairment at both a specific
asset and collective level. All individually significant financial
assets are assessed for specific impairment. All significant assets
found not to be specifically impaired are then collectively
assessed for any impairment that has been incurred but not yet
identified. Assets that are not individually significant are then
collectively assessed for impairment by grouping together financial
assets (carried at amortised cost) with similar risk
characteristics.
Objective evidence that financial assets are impaired include
default or delinquency by the counterparty, extending or changing
repayment terms, indications that a counterparty may go into
bankruptcy, or other observable data relating to the group of
assets such as adverse changes in the payment status of
counterparties, or economic conditions that correlate with defaults
in the group.
In assessing collective impairment the Company uses analysis of
historical trends to identify the probability of default, timing of
recoveries and the amount of loss incurred, adjusted for
management's judgement as to whether current economic conditions
are such that actual losses are likely to be greater or less than
suggested by historical analysis. Default rates, loss rates and the
expected timing of future recoveries are regularly benchmarked
against actual outcomes to ensure that they remain appropriate.
Impairment losses on assets carried at amortised cost are
measured as the difference between the carrying amount of the
financial asset and the present value of the estimated cash flows
discounted at the assets' original effective yield rate. Losses are
recognised in the statement of comprehensive income and reflected
against the assets carrying value.
When a subsequent event causes the amount of expected impairment
losses to decrease, the impairment loss is reversed through the
statement of comprehensive income.
(j) Impairment of non-financial assets
The carrying amounts of the Company's non-financial assets are
reviewed at each reporting date to determine whether there is any
indication of impairment. If any such indication exists then the
asset's recoverable amount is estimated.
An impairment loss is recognised if the carrying amount of an
asset or its cash-generating unit exceeds its recoverable amount. A
cash-generating unit is the smallest identifiable asset group that
generates cash flows that largely are independent from other assets
and groups. Impairment losses are recognised in the statement of
comprehensive income.
The recoverable amount of an asset is the greater of its value
in use and its fair value less costs to resell. In assessing value
in use, the estimated future cash flows are discounted to their
present value. An impairment loss is reversed if there has been a
change in the estimates used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset's
carrying amount does not exceed the carrying amount that would have
been determined, net of depreciation or amortisation, if no
impairment loss had been recognised.
(k) Provisions
A provision is recognised if, as a result of a past event, the
Company has a present legal or constructive obligation that can be
estimated reliably, and it is probable that an outflow of economic
benefits will be required to settle the obligation. Provisions are
determined by discounting the expected future cash flows at a
pre-tax rate that reflects current market assessments of cost of
funds and, where appropriate, the risks specific to the
liability.
(l) Fees and commissions
Fee and commission income that relates mainly to transaction and
service fees are recognised as the related services are performed.
Fees and commission expenses that relate mainly to transaction and
service fees are expensed as incurred.
Arrangement fees for commercial property finance deals and home
purchase plans are amortised over the expected life of the
transaction.
(m) Income tax expense
Income tax expense comprises current and deferred tax. Income
tax expense is recognised in the statement of comprehensive income
except to the extent that it relates to items recognised directly
in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income
for the year, using tax rates enacted or substantively enacted at
the statement of financial position reporting date, and any
adjustment to tax payable in respect of previous years.
Deferred tax is provided using the statement of financial
position method, providing for temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. Deferred tax
is measured at the tax rates that are expected to be applied to the
temporary differences when they reverse, based on laws that have
been enacted or substantively enacted by the reporting date.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised. Deferred tax assets are reviewed
at each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realised.
(n) Lease payments made
Payments made under operating leases are recognised in the
statement of comprehensive income on a straight-line basis over the
term of the lease. Lease incentives received are recognised as an
integral part of the total lease expense over the term of the
lease.
(o) Employee benefits
Obligations for contributions to defined contribution pension
plans are recognised as an expense in the statement of
comprehensive income when they are due.
Short-term employee benefits, such as salaries, paid absences,
and other benefits, are accounted for on an accruals basis over the
period for which employees have provided services. Bonuses are
recognised to the extent that the Company has a present obligation
to its employees that can be measured reliably.
(p) Cash and cash equivalents
Cash and cash equivalents include notes and coins in hand,
unrestricted balances held with central banks and highly liquid
financial assets with original maturities of less than three
months, which are subject to insignificant risk of changes in their
fair value, and are used by the Company in the management of its
short-term commitments.
Commodity Murabaha and Wakala transactions, used by the Company
for investment purposes, are not included within cash and cash
equivalents. Cash and cash equivalents are carried at amortised
cost in the statement of financial position.
(q) Other receivables
Trade and other receivables are stated at their nominal amount
(discounted if material) less impairment losses.
(r) Earnings per share
The Company presents basic and diluted earnings per share (EPS)
data for its ordinary shares. Basic EPS is calculated by dividing
the profit or loss attributable to ordinary shareholders of the
Company by the weighted average number of ordinary shares
outstanding during the period. 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.
(s) Foreign currency transactions
Transactions in foreign currencies are translated to the
functional currency at exchange rates ruling at the date of the
transaction. Monetary assets and liabilities denominated in foreign
currencies at the reporting date are retranslated to the functional
currency at the exchange rate ruling at that date. The foreign
currency gain or loss on monetary items is the difference between
amortised cost in the functional currency at the beginning of the
period and the amortised cost in foreign currency translated at the
exchange rate ruling at the end of the period. Foreign currency
differences arising on retranslation are recognised in the
statement of comprehensive income.
(t) Share based payments
The cost of equity-settled transactions with employees is
measured by reference to the fair value at the date on which they
are granted. The fair value is determined by an external valuer
using an option pricing model, taking into account the terms and
conditions upon which the options were granted.
The cost of equity-settled transactions is expensed on a
straight-line basis, together with a corresponding increase in
equity, over the period in which the performance and/or service
conditions are fulfilled, ending on the date on which the relevant
employees become fully entitled to the award ('the vesting date').
The cumulative expense recognised for equity settled transactions
at each reporting date until the vesting date reflects the extent
to which the vesting period has expired and the Company's best
estimate of the number of equity instruments that will ultimately
vest. The statement of comprehensive income charge or credit for a
period represents the movement in cumulative expense recognised as
at the beginning and end of that period.
Any dilutive effect of outstanding options is reflected as
additional share dilution in the computation of earnings per
share.
(u) New standards and interpretations effective in 2010
There have been no new standards issued during the year which
impact the Bank's financial statements for 2010.
(v) New standards and interpretations not yet adopted
A number of new standards, amendments to standards and
interpretations relevant to the Company have been issued, but are
not yet effective within the EU and have not been applied in
preparing these financial statements.
-- IAS 24 (Revised), 'Related Party Disclosures' (effective from
1 January 2011). This revised standard includes an exemption from
the disclosure requirements for related transactions between
"state-controlled" entities and includes a revised definition for
related parties. The revised standard will not have a material
impact on the Company's financial results.
-- IFRS 9, 'Financial Instruments' (effective from 1 January
2013). This standard deals with the classification and measurement
of financial assets and will replace IAS 39. The requirements of
this standard represent a significant change from the existing
requirements in IAS 39. The standard contains two primary
measurement categories for financial assets: amortised cost and
fair value. The standard eliminates the existing IAS 39 categories
of 'held to maturity' and 'loans and receivables'. The potential
effect of this standard is currently being evaluated. (*)
-- Improvements to IFRSs. This sets out minor amendments to IFRS
standards as part of an annual improvements process.
* - The revised IFRS 9 has not yet been endorsed by the EU.
4 Financial risk management
The Company has exposure to the following risks arising from its
use of financial instruments:
-- Credit risk
-- Liquidity risk
-- Market risk
-- Operational risk
-- Sharia compliance risk
-- Concentration risk
This note presents information about the Company's exposure to
each of the above risks, its objectives, policies and processes for
measuring and managing these risks, and its management of
capital.
Risk management framework
The Board of Directors has overall responsibility for the
establishment and oversight of the Company's risk management
framework. The Company has established the Asset & Liability
(ALCO), Credit and Risk Committees, which are responsible for
developing and monitoring risk management policies in their
specific areas.
The Company's risk management policies are established to
identify and analyse the risks faced by the Company, to set
appropriate risk limits and controls, and to monitor risks and
adherence to limits. Risk management policies and systems are
reviewed regularly to reflect changes in market conditions,
products and services offered. The Company, through its training
and procedures, aims to develop a disciplined and constructive
control environment, in which all employees understand their roles
and obligations.
Risk management controls and procedures are reviewed by Internal
Audit, both as part of the regular audit review programme and
through ad-hoc reviews. The results of these reviews are reported
to the Audit Committee.
(a) Credit risk
Credit risk is the risk of loss arising from the failure of a
customer or counterparty to meet their contractual obligations. The
risk arises from the Company's secured and unsecured finance
provided to customers and the investment of surplus funds in Sharia
compliant wholesale deposits with bank counterparties.
(i) Management of credit risk
The Board of Directors has delegated responsibility for the
management of credit risk to the Credit Committee. A separate
Credit department, reporting to the Credit Committee is responsible
for oversight of the Company's credit risk, including:
-- Formulating credit policies in consultation with other
business units, covering credit assessments, collateral
requirements, risk reporting, legal requirements and compliance
with regulatory and statutory requirements.
-- Establishing authorisation limits and structures for the
approval and renewal of credit exposure limits.
-- Reviewing and assessing credit risk prior to agreements being
entered into with customers.
-- Limiting concentrations of exposure to counterparties,
countries or sectors and reviewing these limits.
-- Ongoing assessment of exposure and implementation of
procedures to reduce this exposure.
-- Providing advice, guidance and specialist skills to all
business areas to promote best practice throughout the Company in
the management of credit risk.
Adherence to country and counterparty limits, for amounts due
from other banks, is monitored on an ongoing basis by the Company's
Treasury department, with a detailed review of all limits at least
annually. Senior management receive regular reports on the
utilisation of these limits.
(ii) Exposure to credit risk
Commodity Consumer
Murabaha finance Net
and Wakala accounts investment Net
receivables and other in investment
and other advances commercial in home
advances to to property purchase
Note banks customers finance plans Total
2010 GBP GBP GBP GBP GBP
Investment
grade
financial
assets 13 160,333,251 - - - 160,333,251
Unrated
financial
assets 14 - 3,121,158 8,132,739 43,761,647 55,015,544
Specific
allowances
for
impairment 14 - (26,094) - - (26,094)
Collective
allowances
for
impairment 14 - (784,857) - - (784,857)
Carrying
amount 160,333,251 2,310,207 8,132,739 43,761,647 214,537,844
============ ========== =========== =========== ============
2009
Investment
grade
financial
assets 13 155,951,375 - - - 155,951,375
Unrated
financial
assets 14 - 5,300,564 8,611,393 33,077,501 46,989,458
Specific
allowances
for
impairment 14 - (18,481) - - (18,481)
Collective
allowances
for
impairment 14 - (793,339) - - (793,339)
Carrying
amount 155,951,375 4,488,744 8,611,393 33,077,501 202,129,013
============ ========== =========== =========== ============
Investment grade financial assets have a minimum rating of BBB.
As at 31 December 2010, the amount of unimpaired balances stood at
GBP214,405,799 (2009: GBP201,997,391). The maximum exposure to
credit risk is the carrying amount of the financial asset
receivable balances as at 31 December 2010 and 31 December
2009.
(iii) Write-off policy
The Company writes off a balance (and any related allowances for
impairment) when the Credit department determines that the balance
is uncollectible. This determination is reached after considering
information such as the occurrence of significant changes in the
counterparty's financial position such that the counterparty can no
longer pay the obligation, or that proceeds from collateral will
not be sufficient to pay back the entire exposure.
(iv) Collateral
The Company holds collateral against secured advances made to
businesses and individuals in the form of charges over properties,
other registered securities over assets, and guarantees. Estimates
of fair value are based on the value of collateral assessed at the
time of financing and are updated on a periodic basis. The
estimated fair value of collateral held against financial assets as
at 31 December 2010 is GBP92.4 m (2009: GBP68.0m). None of this
amount was held against impaired assets.
(v) Concentration of credit risk
The Company monitors concentrations of credit risk by sector and
geographical location. An analysis of concentrations of credit risk
at the reporting date is shown below.
Consumer finance
Commodity Murabaha and accounts and other Net investment in
Wakala receivables and advances to commercial property Net investment in home
other advances to banks customers finance purchase plan finance
2010 2009 2010 2009 2010 2009 2010 2009
GBP GBP GBP GBP GBP GBP GBP GBP
Concentration
by sector:
Individuals - - 2,292,315 4,433,965 3,592,910 3,787,954 43,761,647 33,077,501
Corporate - - 17,891 54,779 4,539,829 4,823,439 - -
Bank 160,333,251 155,951,375 - - - - - -
160,333,251 155,951,375 2,310,206 4,488,744 8,132,739 8,611,393 43,761,647 33,077,501
============ ============ ========== ========== ========== =========== =========== ===========
Concentration
by location:
United Kingdom 22,758,311 30,797,199 2,310,206 4,488,744 8,132,739 8,611,393 43,761,647 33,077,501
Europe 117,600,000 63,369,582 - - - - - -
Middle East 19,974,940 61,784,594 - - - - - -
160,333,251 155,951,375 2,310,206 4,488,744 8,132,739 8,611,393 43,761,647 33,077,501
============ ============ ========== ========== ========== =========== =========== ===========
The asset quality underlying the commercial property finance and
home purchase plan portfolios is high, with financing decisions
based on clear affordability assessments and prudent
finance-to-value (FTV) ratios. As at 31 December 2010 none of the
facilities within the secured finance portfolios were in
arrears.
(b) Liquidity risk
Liquidity risk is the risk that the Company does not have
sufficient financial resources to meet its commitments when they
fall due, or can secure them only at excessive cost. The Company's
approach to managing liquidity is to ensure that it will always
have sufficient liquidity to meet its liabilities when due, under
both normal and stressed conditions, without incurring unacceptable
losses or risking damage to the Company's reputation.
The Treasury department is responsible for monitoring the
liquidity profile of financial assets and liabilities and preparing
details of projected cash flows arising from projected future
business. The Treasury department maintains a portfolio of
short-term liquid assets, made up of cash on demand and short term
Commodity Murabaha and Wakala transactions to ensure that
sufficient liquidity is maintained. All liquidity policies and
procedures are subject to review and approval by ALCO.
The key measure used by the Company for managing liquidity risk
is the comparison of the maturity of assets and customer deposits.
This analysis is completed and monitored on a daily basis and
reports are submitted each month for review by ALCO. A similar
calculation of mismatches is submitted to the Financial Services
Authority (the 'FSA') as part of the Company's quarterly regulatory
reporting.
Residual contractual maturities of financial liabilities
The following table shows the undiscounted cash flows on the
Company's financial liabilities on the basis of their earliest
possible contractual maturity. However, based on behavioural
experience demand deposits from customers are expected to maintain
an increasing balance.
Gross
Carrying maturity 1 - 3 3 months -
amount outflow Less than 1 months 1 year 1 year - 2
2010 Note GBP GBP month GBP GBP GBP years GBP
Deposits
from
banks 18 880,645 881,403 881,403 - - -
Deposits
from
customers 19 187,796,190 190,156,464 116,458,042 42,489,900 28,036,093 3,172,429
188,676,835 191,037,867 117,339,445 42,489,900 28,036,093 3,172,429
============ ============ ============ =========== =========== ===========
2009
Deposits
from
banks 18 609,292 609,449 609,449 - - -
Deposits
from
customers 19 185,975,992 187,755,526 108,533,978 43,074,152 19,029,148 17,118,248
186,585,284 188,364,975 109,143,427 43,074,152 19,029,148 17,118,248
============ ============ ============ =========== =========== ===========
A breakdown of the Company's Commodity Murabaha and Wakala
receivables by maturity date is shown in note 13.
(c) Market risk
Market risk is the risk of loss of income arising from
unfavourable market movements, including foreign exchange rates and
profit rates. The objective of market risk management is to manage
and control exposures within acceptable parameters, whilst
optimising returns. The Company is not exposed to any material
foreign currency risk. Given the Company's current profile of
financial instruments, the principle exposure is the risk of loss
arising from fluctuations in the future cash flows or fair values
of these financial instruments because of a change in achievable
rates. This is managed principally through monitoring gaps between
effective profit and rental rates and reviewing approved rates and
bands at regular re-pricing meetings:
-- Profit rates for Commodity Murabaha and Wakala receivables
are agreed with the counterparty bank at the time of each
transaction and the profit mark-up and effective yield rate is
consequently fixed for the duration of the contract. Risk exposure
is managed by reviewing the maturity profiles of transactions
entered into.
-- Effective rates applied to new consumer finance transactions
are agreed on a monthly basis by ALCO and the profit mark-up will
then be fixed for each individual transaction for the agreed
deferred payment term.
-- Rentals for longer term commercial property financing and
home purchase plans are benchmarked against a market measure, in
agreement with the Company's Sharia Supervisory Committee, subject
to minimum rent levels.
-- Profit rates payable on Mudaraba customer deposit accounts
are calculated at each month-end in line with the profit allocation
model and the customer terms and conditions. Profit rates payable
on Murabaha and Wakala deposits are agreed with the customer at the
time of each transaction and the profit mark-up and effective yield
rate is consequently fixed for the duration of the contract. Risk
exposure is managed by reviewing the maturity profiles of
transactions entered into.
All rates and re-pricings are reviewed and agreed at ALCO, which
is principally responsible for monitoring market risk. ALCO will
also review sensitivities of the Company's assets and liabilities
to standard and non-standard changes in achievable effective rates.
Standard scenarios that are considered on a monthly basis include a
2.00% or 0.50% rise or fall in effective average rates. An analysis
of the Company's statement of comprehensive income sensitivity to
an increase or decrease in effective rates (assuming no
asymmetrical movement and a constant statement of financial
position status) is as follows:
2.00% parallel 2.00% parallel 0.50% parallel 0.50% parallel
increase decrease increase decrease
GBP GBP GBP GBP
31
December
2010 1,801,901 (1,801,901) 450,475 (450,475)
--------------- --------------- --------------- ---------------
31
December
2009 1,601,764 (1,601,764) 400,441 (400,441)
--------------- --------------- --------------- ---------------
(d) Operational risk
Operational risk is the risk of loss arising from inadequate or
failed internal processes, people and systems or from external
factors other than credit, liquidity and market risks. Legal and
regulatory risks are included within operational risk and managed
and monitored under the risk management framework.
The Company's objective in managing operational risk is to implement
an integrated internal control structure that supports process
efficiency and customer needs, whilst effectively reducing the
risk of error and financial loss in a cost effective manner. The
overall operational risk framework is set by the Board of Directors.
Primary responsibility for the development and implementation
of internal controls is assigned to senior management within each
business department, with the assistance of the Risk department.
Adherence to operational risk policies and procedures is monitored
regularly by the Risk Committee, through the use of key risk indicators,
control related metrics and reports from the Risk department.
(e) Sharia compliance risk
Sharia compliance risk is the risk of loss arising from products
and services not complying with Sharia requirements or in accordance
with Islamic principles. The Bank's purpose is to provide Sharia
compliant banking to customers. The Sharia compliant nature of
each product and service offered is therefore critical to the
success of the Bank.
The Sharia compliance of each product and service offered is achieved
via the Sharia Supervisory Committee (SSC), which seeks to ensure
that the Bank's operations are in compliance with Islamic law.
The SSC is comprised of experts in the interpretation of Islamic
law and its application to modern day Islamic financial institutions.
The SSC meets on a regular basis to review all material contracts
and agreements relating to the Bank's transactions, certifying
every product and service offered. On a day-to-day basis, the
Bank's Sharia Compliance Officer oversees the adherence of transactions,
processes and procedures to ensure that all are operated in accordance
with Sharia requirements.
(f) Concentration risk
Concentration risk is the risk of loss arising from inadequate
diversification of credit risk across sectors. The risk arises
due to exposure to specific geographical locations, industry sectors
or particular customers or institutions.
The Board sets counterparty, country and regional limits in respect
of treasury assets and adherence to these limits is monitored
on a daily basis. Concentrations exist within the commercial property
finance and home purchase plan portfolios due to their current
small overall size. As these portfolios grow, such concentrations
are expected to reduce.
The Credit Committee monitors both sectoral and geographic concentration
for each finance asset class and regularly reviews counterparty,
country and regional limits in respect of treasury assets.
(g) Capital management
In accordance with the EU's Capital Requirements Directive (CRD)
and the guidance provided in the FSA Handbook (BIPRU 2.2), the
Company's Individual Capital Adequacy Assessment Process (ICAAP) is
embedded in the risk management framework of the Company. The ICAAP
is reviewed on an annual basis as part of the Company's strategic
planning process and more frequently if business requirements
demand.
The Company's capital requirements are set by the FSA and
monitored by the Board. Regulatory capital is analysed into two
tiers:
-- Tier 1 capital, which includes ordinary share capital, share
premium and retained earnings, less intangible assets.
-- Tier 2 capital, which includes collective impairment
allowances, restricted to a maximum amount.
The level of total capital is matched against risk-weighted
assets which are determined according to specified requirements
that seek to reflect the varying levels of risk attached to assets.
The Company has put in place processes to monitor and manage
capital adequacy.
The FSA has reviewed and evaluated the ICAAP, and has provided
Individual Capital Guidance (ICG) to the Company. The FSA sets out
ICG for all banks operating in the United Kingdom by reference to
its Capital Resources Requirement. The FSA's approach is to monitor
the available capital resources in relation to the ICG
requirement.
The Company's policy is to maintain a strong capital base so as
to maintain investor, creditor and market confidence and to sustain
the future development of the business. The Company has complied
with all externally imposed capital requirements throughout the
period.
The Company's regulatory capital position as at 31 December was
as follows:
2010 2009
GBP GBP
Tier 1 capital
Total equity 26,198,259 16,814,033
Less intangible assets (363,222) (315,541)
25,835,037 16,498,492
----------- -----------
Tier 2 capital
Collective allowances for impairment
(2009 - restricted to a maximum amount) 784,857 763,179
Total regulatory capital (a) 26,619,894 17,261,671
=========== ===========
Risk weighted assets (b) 61,707,561 61,054,328
Total regulatory capital expressed as
a percentage of risk weighted assets (a)/(b) 43.14% 28.27%
5 Key judgements and uncertainties
Management discussed with the Audit Committee the development,
selection and disclosure of the Company's critical accounting
policies and estimates, and the application of these policies and
estimates. The critical accounting policies are set out below.
(a) Allowance for credit losses
Assets accounted for at amortised cost are evaluated for
impairment on the basis described in accounting policy 3(i).
The specific counterparty component of the total allowances for
impairment applies to claims evaluated individually for impairment
and is based upon management's best estimate of the present value
of the cash flows that are expected to be received. In estimating
these cash flows, management makes judgements about each
counterparty's financial situation and the realisable value of any
underlying collateral. Each impaired asset is assessed on its
merits, and the estimates of cash flows considered recoverable are
approved by the Credit function.
Collectively assessed impairment allowances cover credit losses
inherent in portfolios of claims with similar economic
characteristics when there is objective evidence to suggest that
they contain impaired claims, but the individual impaired items
cannot yet be identified. In assessing the need for collective loss
allowances, management considers factors such as credit quality,
portfolio size, concentrations, and economic factors. In order to
estimate the required allowance, assumptions are made to define the
way inherent losses are modelled and to determine the required
input parameters, based on historical experience and current
economic conditions.
(b) Financial Services Compensation Scheme
Based on its share of protected deposits, the Bank, in common
with all regulated UK deposit takers, pays levies to the Financial
Services Compensation Scheme (FSCS) to enable the FSCS to meet
claims against it. The FSCS levy consists of two parts - a
management expenses levy and a compensation levy. The management
expenses levy covers the costs of running the scheme and the
compensation levy covers the amount of compensation the scheme
pays, net of any recoveries it makes using the rights that have
been assigned to it.
As a result of notifications it has received from the Financial
Services Authority, the Bank recognises a provision (within Other
liabilities) to reflect the Bank's best estimate of the amount that
would be payable. This provision has been reassessed at 31 December
2010 to reflect the estimated amounts that will fall payable in
respect of the 2010/11 and 2011/12 scheme years. The movement in
the provision during the year is as follows:
2010 2009
GBP GBP
Balance at 1 January 187,869 224,000
Utilised in respect of 2009/10 (2009:2008/9)
scheme year settlement (59,799) (59,165)
Increase in provision during year 20,000 23,034
Balance at 31 December 148,070 187,869
-------- --------
6 Net income from Islamic financing transactions
2010 2009
Income received GBP GBP
Commodity Murabaha and Wakala transactions 593,020 1,239,825
Consumer finance 306,402 556,891
Commercial property finance 255,748 370,618
Home purchase plans 1,937,024 849,678
Total income received from Islamic
financing transactions 3,092,194 3,017,012
----------- -----------
Returns payable
Deposits from banks (6,419) (16,116)
Deposits from customers (1,773,408) (1,791,155)
Total returns payable to customers
and banks (1,779,827) (1,807,271)
----------- -----------
Net income from Islamic financing
transactions 1,312,367 1,209,741
=========== ===========
7 Net fee and commission income
2010 2009
Fee and commission income GBP GBP
Retail customer banking fees 330,919 399,933
ATM commission 31,284 30,140
Other 11,966 25,585
Arrangement fees 30,001 24,933
Total fee and commission income 404,170 480,591
-------- --------
Fee and commission expense
ATM interchange fees (70,923) (69,704)
Electronic transaction fees (8,225) (17,235)
Total fee and commission expense (79,148) (86,939)
-------- --------
Net fee and commission income 325,022 393,652
======== ========
8 Auditors' remuneration
Included within operating losses are the following amounts
payable to the auditors:
2010 2009
GBP GBP
Audit of these financial statements 86,510 74,000
Amounts receivable by the auditors and their
associates in respect of: Other services
relating to taxation 22,100 9,900
All other services - 13,000
Total 108,610 96,900
======== =======
9 Personnel expenses
2010 2009
GBP GBP
Wages and salaries 3,958,259 4,647,751
Social security costs 277,295 434,179
Contributions to defined contribution
pension plans 265,062 116,103
Share based payments charge 20,994 29,144
Other staff costs 10,431 13,927
Total 4,532,041 5,241,104
============= =========
The following tables summarise the average number of employees
within the company during the year:
2010 2009
Consumer Support Consumer Support
Banking Services Total Banking Services Total
Average for the
Period 64 56 120 72 75 147
--------- ------------ ------ --------- ------------ ---------
10 Directors' emoluments
The emoluments of the directors who served during the year were
as follows:
Remuneration of Non Executive Directors
2010 2009
Benefits Benefits
Salary Fees in Kind Total Salary Fees in Kind Total
GBP GBP GBP GBP GBP GBP GBP GBP
M
Moustafa 30,000 20,000 - 50,000 30,000 16,500 - 46,500
R Owen 18,000 22,000 448 40,448 18,000 19,500 307 37,807
AH Al
-Adhamy 12,962 20,000 - 32,962 18,000 16,000 - 34,000
A Al
Khulaifi - - - - 613 - - 613
60,962 62,000 448 123,410 66,613 52,000 307 118,920
------- ------- --------- -------- ------- ------- --------- --------
M Moustafa resigned on 31 December 2010. AH Al-Adhamy resigned
on 10 November 2010. A Al Khulaifi resigned on 19 January 2009.
Remuneration of the Executive Directors
2010
Salary Bonus Benefits Pension Contributions Total
GBP GBP GBP GBP GBP
G Deegan 154,125 40,000 57 16,791 210,973
S Choudhury 97,613 40,000 457 10,634 148,704
-------- ------- --------- ---------------------- --------
251,738 80,000 514 27,425 359,677
-------- ------- --------- ---------------------- --------
2009
Salary Bonus Benefits Pension Contributions Total
GBP GBP GBP GBP GBP
G Deegan 150,000 67,500 57 15,000 232,557
S Choudhury 95,000 42,750 420 9,500 147,670
-------- -------- --------- ---------------------- --------
245,000 110,250 477 24,500 380,227
-------- -------- --------- ---------------------- --------
11 Income tax expense
There were no taxable profits or recoverable losses for the year
ended 31 December 2010 (2009: GBPnil) and accordingly the Company
has not provided for a tax charge or a tax debtor.
2010 2009
GBP GBP
Reconciliation of effective tax
rate
Loss before tax (8,125,342) (9,492,744)
=========== ===========
Income tax at UK corporation tax
rate 28% (2009: 28%) (2,275,096) (2,657,968)
Non deductible expenses 18,252 20,938
Depreciation in excess of capital allowances
on which deferred tax not recognised 245,397 205,162
Short term timing differences (7,588) (31,537)
Unutilised tax losses 2,019,035 2,463,405
Income tax expense - -
=========== ===========
Deferred tax assets have not been recognised in respect of the
following items:
Capital allowances 1,387,502 1,627,667
Tax losses 11,582,712 10,000,664
12,970,214 11,628,331
========== ==========
In respect of the recognition of deferred tax assets, for the
purposes of applying the requirements of IAS 12 ('Income Taxes'),
it has been considered that the Company is not currently at a
sufficiently advanced stage in its development to confidently
assert future offsetting tax liabilities. Capital allowances to be
claimed are being finalised and therefore the level of the asset
shown above may change.
The corporation tax rate used to calculate potential deferred
tax assets was 27% (2009: 28%).
Factors that may affect future current and total tax charges
The Emergency Budget on 22 June 2010 announced that the UK
Corporation tax rate will be reduced from 28% to 24% over a period
of 4 years effective from 2011. The first reduction in the UK
corporation tax rate from 28% to 27 % will be effective from 1
April 2011 and will reduce the Company's future tax charge.
12 Cash and cash equivalents
2010 2009
GBP GBP
Cash 559,791 577,273
Other advances to banks 6,907,576 3,174,689
Total cash and cash equivalents 7,467,367 3,751,962
========= =========
13 Commodity Murabaha and Wakala receivables and other advances
to banks
2010 2009
GBP GBP
Repayable on demand 6,907,576 6,174,689
3 months or less but not repayable
on demand 152,574,940 149,154,176
1 year or less but over 3 months 850,735 622,510
Total Commodity Murabaha and Wakala
receivables and other advances
to banks 160,333,251 155,951,375
=========== ===========
A breakdown of Commodity Murabaha and Wakala receivables and
other advances to bank by geographic regions is shown in note 4.
Balances maturing in 1 year or less but over 3 months include a
balance of GBP850,735 (2009: GBP622,510) representing repayable
security deposits held by banks that have issued a guarantee to
cover the Company's future customer card transactions with
MasterCard. These deposits do not earn a return.
14 Advances to customers
Gross Impairment Carrying Gross Impairment Carrying
amount allowance amount amount allowance amount
2010 2010 2010 2009 2009 2009
Retail
customers: GBP GBP GBP GBP GBP GBP
Consumer
finance
accounts and
other
advances to
customers 3,103,267 (810,952) 2,292,315 5,245,785 (811,820) 4,433,965
Corporate
customers:
Consumer
finance
accounts and
other
advances to
customers 17,891 - 17,891 54,779 - 54,779
Total consumer
finance
accounts and
other
advances to
customers 3,121,158 (810,952) 2,310,206 5,300,564 (811,820) 4,488,744
========== ========== ========== ========== ========== ==========
Net investment
in commercial
property
finance 8,132,739 - 8,132,739 8,611,393 - 8,611,393
========== ========== ========== ========== ========== ==========
Net investment
in home
purchase
plans 43,761,647 - 43,761,647 33,077,501 - 33,077,501
========== ========== ========== ========== ========== ==========
14 Advances to customers (continued)
2010 2009
Specific allowances for impairment GBP GBP
Balance at 1 January 18,481 145,707
Charge for the year 8,851 -
Amounts written off during the
year (1,238) (127,226)
--------- ---------
Balance at 31 December 26,094 18,481
--------- ---------
Collective allowances for impairment
Balance at 1 January 793,339 939,908
Charge for the year 153,367 408,939
Amounts written off during the
year (161,848) (555,508)
--------- ---------
Balance at 31 December 784,858 793,339
--------- ---------
Total allowances for impairment
Balance at 1 January 811,820 1,085,615
Charge for the year 162,218 408,939
Amounts written off during the
year (163,086) (682,734)
--------- ---------
Balance at 31 December 810,952 811,820
========= =========
This impairment allowance relates to consumer finance
accounts.
The gross investment in commercial property finance
comprises:
Less than one year 578,677 594,493
Between one and five years 2,254,938 2,330,371
More than five years 8,096,511 8,893,311
Total gross investment in commercial
property finance 10,930,126 11,818,175
Unearned future rental on commercial
property finance (2,797,387) (3,206,782)
----------- -----------
Net investment in commercial property
finance 8,132,739 8,611,393
=========== ===========
The net investment in commercial property finance comprises:
Less than one year 333,572 326,317
Between one and five years 1,379,703 1,367,151
More than five years 6,419,464 6,917,925
------------ ------------
Net investment in commercial property
finance 8,132,739 8,611,393
============ ============
The gross investment in home purchase
plans comprises: 2010 2009
GBP GBP
Less than one year 3,271,687 2,459,386
Between one and five years 13,048,086 9,837,544
More than five years 54,375,426 42,286,737
Total gross investment in home
purchase plans 70,695,199 54,583,667
Unearned future rental on home
purchase plans (26,933,552) (21,506,166)
------------ ------------
Net investment in home purchase
plans 43,761,647 33,077,501
============ ============
The net investment in home purchase plans comprises:
Less than one year 1,335,930 951,605
Between one and five years 5,923,671 4,264,510
More than five years 36,502,046 27,861,386
---------- ----------
Net investment in home purchase
plans 43,761,647 33,077,501
========== ==========
As at 31 December 2010 there is no material difference between
the carrying value and the fair value of any financial assets or
liabilities (2009: GBPnil).
15 Property and equipment
Fixtures
Computer Office Leasehold &
Equipment equipment Improvements fittings Total
GBP GBP GBP GBP GBP
Cost
Balance at 1
January 2010 1,855,187 135,242 4,247,143 335,848 6,573,420
Additions 99,254 1,544 0 0 100,798
Disposals (30,950) (1,415) (360,922) (23,514) (416,801)
Balance at 31
December
2010 1,923,491 135,371 3,886,221 312,334 6,257,417
---------- ---------- ------------- --------- ---------
Depreciation
Balance at 1
January 2010 1,560,720 94,769 1,970,181 286,996 3,912,666
Depreciation
charge for
the year 205,038 14,987 625,327 31,064 876,416
Disposals (30,950) (1,415) (360,922) (23,514) (416,801)
---------- ---------- ------------- --------- ---------
Balance at 31
December
2010 1,734,808 108,341 2,234,586 294,546 4,372,281
---------- ---------- ------------- --------- ---------
Net book value
At 31 December
2010 188,683 27,030 1,651,635 17,788 1,885,136
========== ========== ============= ========= =========
Cost
Balance at 1
January 2009 1,754,591 123,877 4,245,070 330,396 6,453,934
Additions 100,596 11,365 2,073 5,452 119,486
Balance at 31
December
2009 1,855,187 135,242 4,247,143 335,848 6,573,420
---------- ---------- ------------- --------- ---------
Depreciation
Balance at 1
January 2009 1,338,160 74,383 1,548,256 227,390 3,188,189
Depreciation
charge for
the year 222,560 20,386 421,925 59,606 724,477
---------- ---------- ------------- --------- ---------
Balance at 31
December
2009 1,560,720 94,769 1,970,181 286,996 3,912,666
---------- ---------- ------------- --------- ---------
Net book value
---------- ---------- ------------- --------- ---------
At 31 December
2009 294,467 40,473 2,276,962 48,852 2,660,754
========== ========== ============= ========= =========
The Company leases its branch and office premises under
operating leases. The leases typically run for 10 years, with
options to renew the lease after that date. Lease payments are
reviewed after periods stipulated in the agreements to reflect
market rentals.
16 Intangible assets
Purchased
Computer & developed
licences software Total
Cost GBP GBP GBP
Balance at 1 January 2010 782,919 4,190,966 4,973,885
Additions 243,264 40,683 283,947
Disposals (194) 0 (194)
Balance at 31 December 2010 1,025,989 4,231,648 5,257,638
--------- ------------ ---------
Amortisation
Balance at 1 January 2010 720,948 3,937,396 4,658,344
Amortisation charge for the year 37,696 198,570 236,266
Disposals (194) 0 (194)
--------- ------------ ---------
Balance at 31 December 2010 758,450 4,135,966 4,894,416
--------- ------------ ---------
Net book value
At 31 December 2010 267,539 95,683 363,222
========= ============ =========
Cost
Balance at 1 January 2009 718,520 4,111,727 4,830,247
Additions 64,399 79,239 143,638
Balance at 31 December 2009 782,919 4,190,966 4,973,885
--------- ------------ ---------
Amortisation
Balance at 1 January 2009 655,086 3,596,448 4,251,534
Amortisation charge for the year 65,862 340,948 406,810
--------- ------------ ---------
Balance at 31 December 2009 720,948 3,937,396 4,658,344
--------- ------------ ---------
Net book value
--------- ------------ ---------
At 31 December 2009 61,971 253,570 315,541
========= ============ =========
17 Other assets
2010 2009
GBP GBP
VAT recoverable - 70,565
Accrued income 130,831 114,393
Prepayments 715,375 961,319
Other debtors - 194,000
Total 846,206 1,340,277
======= =========
There are no receivables within other assets that are expected
to be recovered in more than 12 months (2009: GBPnil). Other
debtors represent funds remitted to solicitors for home purchase
plans that had not completed at the year-end.
18 Deposits from banks
2010 2009
GBP GBP
Repayable on demand 104,539 78,652
3 months or less but not repayable
on demand 776,106 530,640
Total deposits from banks 880,645 609,292
======= =======
Comprising:
Non profit sharing accounts 104,539 78,652
Profit sharing / paying accounts 776,106 530,640
Total deposits from banks 880,645 609,292
======= =======
19 Deposits from customers
2010 2009
GBP GBP
Repayable on demand 110,148,894 104,437,151
3 months or less but not repayable
on demand 47,885,521 46,993,655
1 year or less but over 3 months 26,407,339 18,664,345
2 years or less but over 1 year 3,354,436 15,880,841
Total deposits from customers 187,796,190 185,975,992
=========== ===========
Comprising:
Non profit sharing 38,364,719 34,215,366
Profit sharing / paying accounts 149,431,471 151,760,626
Total deposits from customers 187,796,190 185,975,992
=========== ===========
20 Other liabilities
2010 2009
GBP GBP
Returns payable to customers 426,879 348,708
Trade payables 184,299 421,859
Social security and income tax 162,251 395,540
Accruals 947,985 1,125,441
Other creditors 1,565,490 1,331,993
VAT payable 30,200 -
Total 3,317,104 3,623,541
========= =========
Included within accruals is a balance of GBP24,000 payable over
the remaining lease term of 3 years relating to refurbishment of a
branch property (2009: GBP32,000). This is paid in equal annual
instalments with GBP16,000 payable in more than 12 months.
21 Operating leases
Non-cancellable operating lease rentals are payable as
follows:
2010 2009
GBP GBP
Less than one year 414,305 444,305
Between one and five years 1,376,430 1,711,735
More than five years 643,250 1,022,250
Total 2,433,985 3,178,290
========= =========
During the year GBP670,273 was recognised as an expense in the
statement of comprehensive income in respect of operating leases
(2009: GBP502,085).
22 Called up share capital
2010 2009
GBP GBP
Authorised
Equity: 2,848,823,300 (2009: 725,000,000)
ordinary shares of GBP0.01 each 28,488,233 7,250,000
========== =========
Allotted, called up and fully paid
Issued ordinary share capital 25,464,700 5,464,700
========== =========
On 17 August 2010, an ordinary resolution was passed at an
extraordinary general meeting increasing the authorised share
capital of the Company from GBP7,250,000 to GBP28,488,233 by the
creation of an additional 2,123,823,300 new Ordinary Shares. On 17
August 2010, an additional 2,000,000,000 shares were allotted for
consideration of GBP20,000,000 before expenses. Expenses of
GBP2,511,426 were incurred in the placing resulting in an increase
to equity of GBP17,488,574.
Company Share Option Plan
In 2007 the Company established an HMRC approved Company Share
Option Plan ('CSOP') under which options to subscribe for the
Company's ordinary shares of 1p each were awarded to certain
employees ('Optionholders').
All options have a vesting period of 3 years, and are subject to
the achievement of specific performance criteria.
Options are forfeited if they remain unexercised after a period
of more than 10 years from the date of grant. Options are also
forfeited if the Optionholder ceases to hold office with the
Company before the options vest, with certain exceptions ("good
leaver" provisions). All options are non-transferable and there are
no cash settlement alternatives.
The following options were previously granted under the CSOP
scheme and represent all outstanding options issued by the
Company:
Number of Number of
options options
outstanding outstanding
at 1 Date Date of Date of Cancelled at 31
January Exercise of first last during December
2010 Price grant exercise exercise year 2010
5 Nov 5 Nov 4 Nov
1,371,823 9.5p 2007 2010 2017 157,894 1,213,929
11
Dec 11 Dec 10 Dec
109,210 9.5p 2007 2010 2017 - 109,210
During the year, 157,895 of the options granted in 2007 were
cancelled due to the employee to whom the options were granted
leaving the employment of the Company. No options were granted
during the year and no options were exercised during the current or
prior years.
The fair value of the equity-settled share options granted under
the CSOP are estimated at the date of grant using a Black-Scholes
model, taking into account the terms and conditions upon which the
options were granted. There are no market conditions which need to
be taken into account in measuring the fair value of the share
options.
The assumptions used in the model are as follows:
Input Assumption
Share price Price at date of grant
70% (Expected volatility is based on the Company's
Expected share price historic share price volatility over the previous
volatility 260 days)
Option life Per scheme rules
Expected dividends Nil
Risk free rate 4.9%
The expense recognised in the statement of comprehensive income
for share based payments and the corresponding movement within
reserves during the year was GBP20,994 (2009: GBP29,144).
23 Related parties
At 31 December 2010, directors of the Company and their
immediate relatives controlled 0.002% of the voting shares of the
Company (2009: 0.03%).
Transactions with key management personnel
Key management of the Company are the Board of Directors and
senior management. The compensation of key management personnel
including the directors is as follows:
2010 2009
GBP GBP
Key management emoluments including
social security costs 1,514,005 1,568,407
Company contributions to pension
plans 63,578 58,684
Total 1,577,583 1,627,091
========= =========
Deposit balances, operated under standard customer terms and
conditions, held by key management personnel and immediate
relatives, including directors, totalled GBP200,869 as at 31
December 2010 (2009: GBP303,194). The highest balance during the
year was GBP407,219 (2009: GBP441,718). Total returns paid on these
accounts during the year totalled GBP1,605 (2009: GBP2,355).
Outstanding consumer finance and home purchase plan balances
relating to key management personnel and immediate relatives
totalled GBP195,749 as at 31 December 2010 (2009: GBP209,753).
Returns recognised during the year for these accounts were GBP8,188
(2009: GBP7,544). All consumer finance account facilities taken by
key management personnel and staff were offered in line with
standard customer terms and conditions.
Ultimate parent company
The Company is a subsidiary undertaking of Qatar International
Islamic Bank which is the ultimate parent company registered in
Doha, Qatar. The ultimate controlling party is Qatar International
Islamic Bank.
24 Loss per ordinary share
Basic and diluted loss per ordinary share are calculated by
dividing the loss for the financial period attributable to equity
holders by the weighted average number of ordinary shares in issue
for the year ended 31 December 2010 of 1,297,154,932 (31 December
2009: 538,437,644).
The Company has established a HMRC approved Company Share Option
Plan, "CSOP", under which options to subscribe for the Company's
ordinary shares of 1p each have been awarded to certain employees.
At 31 December 2010, 1,323,139 options remain outstanding (31
December 2009: 1,481,033). Diluted loss per share is the same as
basic loss per share since the outstanding share options have not
been taken into account due to their anti-dilutive effect. This
arises since the Company is loss making.
25 Capital commitments
The Company had no outstanding capital commitments at 31
December 2010 (2009: GBPnil).
26 Segmental reporting
The Company measures and reports on the financial performance of
the business to the chief operating decision maker as a whole and
so has only one operating segment. All business is conducted from
the United Kingdom.
A split of the Company's revenue by the geographic location in
which the revenue was generated is provided below:
2010 2009
GBP GBP
United Kingdom 2,539,543 1,923,190
Europe 296,409 232,800
Middle East 256,242 861,022
Total 3,092,194 3,017,012
========= =========
The Company does not have any non-current assets located outside
the United Kingdom and no single external customer accounts for
more than 10% of total income.
27 Assets and liabilities denominated in foreign currency
As at 31 December 2010, assets equivalent to GBP1,342,325 were
denominated in US Dollars and are included within Commodity
Murabaha and Wakala receivables and other advances to banks (2009:
GBP1,097,371). At 31 December 2010 assets equivalent to GBP511,949
were denominated in Euro and are included within Commodity Murabaha
and Wakala receivables and other advances to banks (2009:
GBP359,529).
Customer liabilities of GBP1,328,854 were denominated in US
Dollars (2009: GBP1,078,281) and GBP508,468 were denominated in
Euro (2009: GBP356,184).
This information is provided by RNS
The company news service from the London Stock Exchange
END
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Islamic Bank Of Britain (LSE:IBB)
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