Escolar Documentos
Profissional Documentos
Cultura Documentos
Table of contents 1
Acknowledgement 3
Organizational structure 11
Review of the various departments of the organization in
terms of their functions and responsibilities, etc
Main offices (Head offices and branches).
1
Vertical analysis Balance Sheet 40
Horizontal analysis Profit and Loss Account 42
Horizontal analysis Profit and Loss Account 44
Vertical analysis Profit and Loss Account 45
Vertical analysis Profit and Loss Account Expense 46
Financial analysis(Ratio analysis) 47
Hierarchy Of Management 56
SWOT analysis 57
Future prospectus 60
Industrial analysis 62
Comparison of the Bank Industry Major Vs Medium Vs Small 62
Banks
64
Weaknesses and their Recommendation
69
Conclusion
Referances 70
2
Dedication
This Report is dedicated to my parents and my teachers and Bank Alfalah Limited
who gave me courage to complete this report.
3
4. Study the facilities provided by the organization to common public in various
forms.
5. To study the terms & conditions for fringe benefits provided to employees of the
organization at the age of superannuation.
History Of Organisation
Bank Alfalah Limited was incorporated on June 21st, 1997 as a public limited
company under the Companies Ordinance 1984. Its banking operations commenced from
November 1st, 1997. The bank is engaged in commercial banking and related services as
defined in the Banking Company’s ordinance, 1962. The Bank is currently operating
more than 285 branches with the registered office at B.A.Building, I.I.Chundrigar,
Karachi. Since its inception, as the new identity of H.C.E.B after the privatization in
1997, the management of the bank has implemented strategies and policies to carve a
distinct position for the bank in the market place. Strengthened with the banking of the
4
Abu Dhabi Group and driven by the strategic goals set out by its board of management,
the Bank has invested in revolutionary technology to have an extensive range of products
and services. This facilitates our commitment to a culture of innovation and seeks out
synergies with clients and service providers to ensure uninterrupted services to its
customers. They perceive the requirements of customers and match them with quality
products and service solutions. During the past five years, They have emerged as one of
the foremost financial institution in the region endeavoring to meet the needs of
tomorrow today
Since the inception of Bank Alfalah, by the grace of the Almighty, They have
moved rapidly in expanding their branch network and deposit base, along with making
profitable advances and increasing the range of products and services. They have made a
break-through in providing premier services at an affordable cost to our customers.
Keeping in view valued clients and the need for constant and effective communication of
information, As They pursues the path of excellence, and customer satisfaction remains
their priority. It is only when we know our customers better, can we deliver a higher
quality of services, thereby adding synergy to existing management expertise, financial
strength and profitability. This is yet another channel of communication for the delivery
of quality products and services that enhance value to bank’s stakeholders.
Nature of Organisation
5
I.I.Chundrigar, Karachi. Since its inception, as the new identity of
H.C.E.B after the privatization in 1997, the management of the bank
has implemented strategies and policies to carve a distinct position for
the bank in the market place
Business Volume
These are the quick facts of the business
CHIEF volume in terms
MANAGER / of deposits,advances,revenue
BRANCH MANAGER
and Investment of last five years.
Rupees in “000”
Accounts Leasing
Investment 75973238 88491564 56502210 57425700 35503196
Department
Department Imports
Department
Hierarchical View of Management LDA Plaza Branch
PRESIDENT
Cash
Total number of employees in LDA plaza branch where I did my internship is fifty.The
Department
5.
Home finance
branch was headed by Chief manager Mr Muhammad Naeem Dar.
Exports Department
HIERARCHY OF BRANCH Department
Account opening
Department
Credit card
Department
3.
Car finance
Foreign Exchange
Department
OFFICERS G
Department
Circle/
Remittances
Department
FINANCIAL
CONTROL GROUP
(SOUTH) "BRANCH
LICENSING UNIT"
PRESIDENT
Internal Audit Marketing 6
Clearing Department DE
Department
Department I II III
14.
PRODUCT & SERVICES
BAL offers highly prioritized and specifically tailored products and services designed to
suit the needs and preferences of their highly valued customers. For becoming a highly
effective financial supermarket, BAL provides a complete range of products to its
corporate clients, commercial enterprises and to the consumers. BAL offers syndicated
loans and structured financial products to the large corporate clients.
True to its strategy of becoming a highly effective financial supermarket, BAL Limited
provides a complete range of products to its customers; the corporate clients, commercial
enterprises and the small consumers. At BAL the primary commitment is to understand and
7
support its client’s business objectives and financial needs. All this is ensured through
constant R & D focus and training & development of staff. BAL Bank Limited provides a
wide range of products/ services to its customers, which can be compared with any foreign,
The products and services BAL is presently offering come under four main heads i.e.
Corporate Banking, Consumer Banking, Consumer Finance and Electronic Banking. The
various items that fall under these four heads can be summarized
CONSUMER BANKING:
Current Account
8
account with no restriction on Deposits and Withdrawals. Minimum balance
requirement as specified in Schedule of Bank Charges. Services Charges will
be deducted, if average monthly balance requirement is not maintained.
Profit/ Interest Provisioning/accruals is done on monthly basis, on minimum
monthly account balance and profit /interest will be disbursed / paid on half
yearly basis as per the rates notified by the banks.
Business Account
o An upward mobile way to bring down costs on your way up.
o BAL Business Account lets you build your business through the accrued
savings from discounted transaction fees, and more.
CORPORATE BANKING
9
Term loans
o As an individual can gain and benefit the most through BAL Consumer
Banking. In BAL you get friendly, efficient and attentive personalized
banking services a unique banking relationship experienced by each BAL
client.
Working Capital Loans
o Based on the customer specific needs, the corporate bank offers a number of
different working capital financing facilities including Running finance, Cash
finance, Export Refinance, pre-shipment and post-shipment etc. Tailor- made
solutions are developed in keeping view the unique requirements of your
business.
Trade Finance
o Under Corporate Banking BAL offers trade finance services that include an
entire range of import and export activities including issuing Letter of Credits
(L/Cs), purchasing export document, providing guarantees and other support
services.
Cash Management
o One network of 285 branches in Pakistan enables us to collect and disburse
payments efficiently with our cash management services. This also enables us
to offer you a choice of paper based or electronic fund transfer solutions
including collection amounts, cross branch online transactions etc.
Investment Banking
o BAL Investment Banking Team has emerged as a leading player in Pakistan’s
investment Baking arena. The team handles advisory, corporate finance and
capital market related transactions.
o Private Placement
o Debt/Equity Underwriting
o Term Finance Certificate
o Arrangement of Nom-Fund Facilities
10
o Mergers and Acquisitions
o Privatization
o Corporate Advisory
CONSUMER FINANCING
Car financing
o BAL CAR4U gets not only a car of own choice but leads to the best in life.
it is affordable with competitive mark up, flexible conditions, easy processing
and above all, no hidden costs.
Housing finance
o BAL Pyara Ghar is an ideal Home Finance product that lets purchase,
renovate or construct home the way every one has always wanted. Financing
available is up to 20 years for amount up to Rs. 20 million.
Classic and Gold credit cards
o A suite of Classic and Gold credit cards focusing primarily on providing
convenience, safety, shopping pleasure and security giving a different feel to
the world of Credit Cards through innovative features. These unique features
include i-revolve which makes a variable mark up rate available to you upon
revolving and is the first of its kind in Pakistan
Personal loan
o BAL personal Loan is simply a clean cash facility extended for personal use.
it offers a fixed installment loan that provides you access to cash instantly
without any collateral. Financing available is up to 5 years for amount up to
Rs. 1million.
ELECTRONIC BANKING
ATM
11
o One of the nation’s largest networks of over 360 ATMs and still growing. Get
24-hour convenience of cash withdrawal, mini-statement, utility bill payment,
funds transfer services and much more.
Online Banking
o One of the largest network of over 700 online branches in the country and
growing. Providing customers with 24/7 real time online transaction facilities.
Mobile Banking
o Banking at your finger tips. SMS anytime to get information regarding
balance and mini statements.
Branch Banking
Bank Alfalah provides safe deposit lockers facilities to its customers for safe
keeping of their valuables like documents, securities and jewellery etc.
Consumer Banking
1) Debit Card
2) Credit card
3) RTC’s
4) Home loans
5) Auto loans
12
6) Money Gram
Deposit Department
Customer is a person who has some sort of account, either deposit or current or
some similar relation. A person becomes a customer the moment the bank receives the
money or cheques and agrees to open an account.
It is contractual agreement between bank and customer after which both concerned
parties indulge in a mutually beneficial business relationship.
"Deposits are the blood of a Bank"
Acceptance of deposits is the real source of income of a bank. Deposits department is the
backbone of corporate banking. Deposit is often used to describe the money, which
customers of all kinds leave with the banks.
Deposits account can be defined as an account, which is opened to earn interest.
The term deposit is highly misleading. It is not something deposited for safe
keeping, like currency in a safe deposit box. Bank deposits are not like that. When one
brings currency to a bank for "Deposit" the bank does not put the currency in a vault. It
may put a small fraction of the currency in the vault as "Reserves" but it will lend most of
deposits to some one else or buy an investment.
The entire banking system is based upon borrowing. Like all banks, deposit department
has acknowledged its worth as the most important. Almost all the operations generate
from the deposit department and with due course of time reflect back to the deposit
department.
In order to attract funds, bank has introduced various types of deposits schemes that may
suit the needs and tastes of a large body of depositors.
13
Deposits are broadly classified into the following categories.
Current Account
Savings Account
Term/Fixed deposit
Royal Profit
Now I am going to discuss above deposit schemes offered by BAL.
Current Account
PLS
In case of saving accounts, account holder gets profit.
In Bank Alfalah Limited saving a/c is used as current a/c, & there is no main
difference between current & saving account except profit. Limited company,
Partnership Company, joint & sole proprietorship, can open this account.
Balance acceptable by the bank to open this account is Rs.5, 000.
14
The profit is given to the customers at minimum balance during the month
2½% zakat is deducted at 1st Ramazan.
Royal profit
15
It has some features of saving account and current account.
Monthly profit is calculated on average deposit during the month.
I worked and observed that when a customer wants to open an account, the bank officer
gives application form to him. All information, which are necessary to be known by the
bank, are requirements of the application form. Form also requires the essential
documents to be attached by the customer.
Following persons can open an account:
Sole proprietors
Private accounts (individual a/c's)
Joint account
Limited Company
Partnership company
Trust and Association
Basically following information is required:
Name
Address
Telephone no.
Currency of account
Nature of Business
Residential status
Special instruction regarding the account
Signature of the applicant.
16
Cash department of BAL is given the complete responsibility of handling all receipts &
disbursement of cash, as a result of transaction in both local & foreign currencies, & near
cash items such as traveler cheque etc (when they are issued against cash).
As a consequence it is also responsible for the book-keeping of these transactions & the
safe custody of cash & near cash securities. Following are the major functions of the cash
dealing department of BAL
I. Cash receipts (or receive deposits)
II. Encashment of cheque
Cash department of BAL is a separate close part covered with glasses. No one other than
cash department's employee is allowed to enter into that area. That’s why I did not work
in this department but I have gained knowledge about it from teller of BAL.
I. Cash Receipt
The depositor uses cheque deposit slip (or cash deposit slip) for depositing the amount.
Information required
All the details are required regarding date, account number, and amount in words &
figures, title of account & signature of depositors.
Procedure
The cashier first verifies all the requirements of the cash deposit slip that whether these
are fulfilled or not & verifies the amount written in words & figures. The deposit slip is
stamped, cash is received & second copy is given to the depositor.
Encashment Of Cheque
Cheque encashment involves following four main steps. These steps are:
i) Accepting of cheques
ii) Affirmation of signatures
iii) Entry into system
iv) Payment of cash
17
II. Encashment of a Cheque
Payment Of Cash
The cashier enters the entry cheque in computer & pays against the second signature of
the receiver on the back of the cheque.
18
Remittance Department
When money is transferred from one place to another place or from one country
to another country to fulfill the requirements of the customers by the order of the
customer, it is called remittance.
I worked in this department and realized that Bank remits money in different ways.
Some of these ways are as under:
Pay Order
Demand Draft
Telegraphic Transfer
Mail Transfer
Rupee Traveler Cheques
Pay order
Pay order is also a cheques drawn on the bank but it is payable in the same city.
The bank also charges nominal charges for its issuance.
order.
Demand Draft
DD (Demand Draft) is a cheques issued by the bank drawn on the same bank’s
outstation branch. The bank charge nominal commission on issuance of demand draft. If
lost the holder must in personal request the bank in writing for the duplicate. The bank if
satisfied can issue a duplicate demand draft after getting the indemnity.
Telegraphic Transformation
TT stands for telegraphic transfer and MT stands for Mail transfer. In BAL I
observed that the TT is normally faxed to the other branch and then the original copy is
sent by mail.
In case if inward TT is drawn on other bank a TTR is prepared for onward transfer.
Clearing
19
Clearing is the system by which banks exchange cheques and other negotiable
instrument, drawn on each other, within the specified area, and secure payment for their
clients through clearing house specified time by book entries i.e., State Bank of Pakistan..
Nearly all the banks provide a wide variety of services to their depositors. One
valuable service provided is that of clearing. Clearing department also plays an
important role in performing the activities of the bank.
Transfer
A method which means simply we transfer amount from one account to another
account is called transfer.
Clearing.
A system through which funds are transferred from one bank to another in (same
city) clearing house. It may be within city or outside the city. A process by which cheque
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is exchanged between the collecting bank and paying bank and the ensuring financial
settlement is called clearing.
Clearing-house
Clearing house is a place where representative of the member bank meet at given
timings every day, to exchange cheques and other instruments drawn on each other.
Representative of the banks take all the cheques and the instruments such as PO, DD etc
drawn on banks in the city, to the clearing house and bring back cheques and other
instruments drawn on our bank which are payable by us.
Credit Department
Credit comes from the Latin word "creditus" which means, "to believe." Credit
allows us to buy things, which might not be able to afford all at once by letting us pay
over a period of time. But to obtain credit, creditor believes that bank is trustworthy and
responsible.
During my stay at BAL (LDA Branch) I observed that Bank does not dish out the money
to everybody. For bankers it is a matter of
21
What differentiates a bank from its competitors is the quality of its loan officers, lending
policies and strategies. Credit policy of a bank is usually combination of globally
accepted time tested standards relating to
Safety
Liquidity
Profitability
Most of their loans are made to businesses so loan officer has understanding of
Nature of businesses, industries and their products
Laws relating to these businesses
Followings are responsibilities of credit officer
Sound judgment and evaluation
Accurate reporting to the management for their decision making
Credit Process
The function of credit department is to lend in the form of clean advances, against
promissory notes, as well as secured advances against tangible and marketable securities.
According to the Prudential Regulations of the State Bank of Pakistan, No bank can issue
a clean advance of more than Rs.100, 000/-. The bankers prefer such securities that do
not run the risk of general depreciation due to market fluctuations.
Credit process consists following activities:
Credit marketing
Analysis and assessments
Qualitative
Quantitative
22
CLP
Proposal evaluation & decision at appropriate level
Credit administration
Completion of documents
Monitoring
Rating
Sensing problem loans
Credit Marketing
Types of borrowers
Individuals
Married women
Existing account holders
Staff members
Relatives of staff
Employees of other banks
Joint account holders
Businesses
Sole proprietorship
Partnership
23
Corporate bodies
Joint ven5tures
Group accounts
Other
Clubs and associations
Government bodies
Traders
Property dealers
Manufacturers
Types Of Securities
Securities are
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Assignment
Common Securities for the banker’s advances are as under.
Guarantees:
When an application for advance cannot offer any tangible security, the banker may rely
on personal guarantees to protect himself against loss on advances or overdraft to the
applicant.
Mortgage:
A mortgage is the transfer of an interest in specific immovable property for the
purpose of security the payment of money advanced or to be advanced by; way of loan,
and existing or future debt, or the performance of an engagement, which may rise to a
pecuniary liability. The transfer is called a mortgagor, the transferee a mortgage.
Promissory Note
Sometimes promissory note is also accepted as a security, “A promissory note is
an instruments in writing containing an unconditional undertaking signed by the maker,
to pay; on demand or at a fixed or determinable future time a certain sum of money only,
to or to the order of certain persons, or to the bearer or the instrument.” A promissory
note is incomplete until has been delivered to payee or the bearer. Moreover, the sum
promised in a promissory note may be two or more makers who may be liable three on
jointly and severally.
Pledge
A formal contract whereby the borrower agrees to deposit goods/ documents with
the creditor on the condition that those will be redelivered to the depositor if the debt is
repaid or can be sold by the creditor if the borrower defaults. After recovery of dues from
sale proceeds the surplus if any is paid back to the borrower Possession passes to bank,
ownership remains with borrower.
25
Lien
Right of a person in possession of the securities or goods of another person to
retain them until the owner discharges his debt or meets other obligations towards the
possessor.
Lender can dispose off the goods/securities for recovery of debt after serving proper
notice. Banks have a right of “General Lien” also which they can apply towards recovery
of amount. This right is not applicable in certain situations.
Hypothecation
When moveable property/ goods are charged with the amount of debt but neither
the ownership nor the possession is passed to the lender. It is said to be hypothecated. By
virtue of letter of hypothecation bank can take possession of hypothecated goods in case
of default of the borrower.
Check-points
Regular stock reports giving details of goods with volume and value
Regular inspections for physical verification
Complete valid effective insurance in bank’s name
Registration of charge wherever applicable
Letter of hypothecation on bank’s approved format
Functions of Finance
1- Investment Decision
26
The investment decision is the most important of the BAL Bank’s three major decisions
when it comes to value creation. It begins with the determination of the total amount of
assets needed to hold by the BAL Bank. Review the balance sheet in your mind for a
moment. Imagine liabilities and owner's equity being listed on the right hand side of the
balance sheet and its assets on the left.
2- Financing
The second major decision of the BAL Bank is financing decision. The financial manager
is concerned with the make up of the right hand side of the balance sheet.
Dividend must be viewed as an integral part of the BAL Bank’s financing decision. The
dividend payout ratio determines the amount of earning that can be retained in the firm.
The third important major decision of the BAL Bank is the asset management decision.
Once assets have been acquired and appropriate, financing provided. These assets must
still be managed efficiently. The financial manager is charged with varying degrees of
operating responsibility over existing assets.
4- Risk Management
In keeping with BAL bank's track record of strong profitability and market leadership,
the function of risk management has become a critical fulcrum of the bank's long term
vision and success. The approach of risk management has evolved beyond the classic
exercise of balancing risk and reward. We have inculcated modern technique which will
allow business units of the bank to create more share holder value through a better
understanding. The risk management group controls the review and administration of
lending solutions offered to our clients through a dedicated team of experienced
professional. It also manages the tree main areas of risk that are inherent to all activities
of the bank namely credit risk, market risk and operational risk.
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5- Budgeting
There are today two basic philosophies as to the levels at which budgeted amounts should
be set. We will identify three philosophies as
A basic premise of total quality management is that every individual and segment
of the organization constantly should strive for improvement. The entire
organization is committed to the goal of completely eliminating inefficiency and
non value adding activities.
FINANCIAL MANAGER
“The person which manages the financial resources of a business is called financial
manager”.
ILLUSTRATION:
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Almost every firm, government agency, and other type of organization has one or more
financial managers, who oversee the preparation of financial reports, direct investment
activities, and implement cash management strategies. Because computers are
increasingly used to record and analyze data.Many financial managers are spending more
time developing strategies and implementing the long term goals of their organization.
The duties of financial manager varies with their specific titles, which include controller,
treasurer or finance officer, credit manager, cash manager, and risk and insurance
manage. Controller directs the preparation of financial reports that summarize and
forecast the organizations’ financial position such as income statement, balance sheet and
analyses of future earning and expenses. Controllers also are in charge of preparing
special reports required by regulatory authorities. Often Controller oversees the
accounting, audit, and budget departments. Treasurer and finance officer direct the
organization’s financial goals, objectives, and budgets. They oversee the investment of
funds, managed associated risks, supervise cash management activities, execute capital
raising to support a firm’s expansion, and deal with mergers and acquisitions. Credit
managers oversee the firms’ issuance of credit, establishing credit rating criteria,
determining credit ceilings, and monitoring the collections of past -due accounts.
Managers specializing in international finance develop accounting and financial systems
for the banking transactions of multinational organizations.
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Through this top level management is able to decide which product
should be taken into course for further level or which should stop.
Electronic data make management able to take decision at any point of
time
As the largest regional bank of Pakistan according to asset base the Banks major
source of funds is from the Public.
• Financial institutions
Corporate sector is one of the major sources of funds in all types of Banking. All
major organisations, financial institutions and government & private organisations
are the major sources of the funds.
Generation of Funds:
(Rupees in Million)
30
Year 2008 2007 2006 2005 2004
Markup/interest 31046 25783 21191 12246 5620
On money at call
Others
BAL’s funds are allocated to the following departments. The banks major focus is
on short term financing. Major allocation of funds are on these divisions.
31
2008 2007 2006 2005 2004
65,960,365 64,658,338 64,691,318 48,016,917 31,208,249
Long Term Finances
132,851,48 111,020,472 87,544,463 70,847,903 57,723,151
Short Term Finances 7
Agriculture financing
The bank provides adequate and timely financial assistance to the farmers to
improve production potential of agriculture sector. Insurance of leased assets, animals,
crops and life assurance of borrowers are all source of money for the bank.
E-Banking
The bank has a centralized database that is web-enabled. All the services that the
bank has permitted on the internet are displayed in menu. Any service can be selected and
further interaction is dictated by the nature of service.
Utility bills
The bank also makes possible the payment of electricity, gas and telephone bills
for its customers charging some commission on each payment.
Lockers
Commission charged on lockers provided by bank for customers, is also a source
of inflow for the bank.
Consumer financing
Personal Finance, mortgage finance, business finance, smart cash, auto financing and
travelers cheques are all sources of funds for the bank. The bank finances all these loans
and facilities on competitive mark up rates
32
Critical Analysis of the practical exposure relating to theoretical
concepts
This part of report is the essence of the internship, as this will help other students to better
understand the working environment of the bank by finding the relationship between
what is written in the books and what is actually going on in fields. The theory written in
the books in cases is not implemented as it is. In some cases theory is implemented with a
little modification but in other cases theory has nothing to do with practice. In
accounting, banks don’t prepare worksheet, but part of worksheet is prepared like trial
balance, but little differences, theory and practice has substantial relationship. The
securities for the loans are handled in the same way as theory says like mortgage, pledge,
hypothecation, advances against insurance policies or liquidation procedure is the same.
The difference is there in the case of loans. Theory talks about four or five terms of loans
that is cash finance, overdraft, loans etc., but in practice there are some more terms used
like running finance, demand finance etc. All other concepts of remittances, bills, foreign
exchange deposits, letters of credit are in accordance with theory almost. So for a internee
it is more important to learn new things which he/she has never heard about in his/her
course book.
To me, Theory gives you the direction to understand the processes and the terminologies
going across the World using best business practices in a broader view covering each and
every aspect of possible business scenarios. On the contrary practical life is specific,
enclosed in a jar. In practical professionalism and firm’s environment is each and every
thing. Professional life only builds on the knowledge based on books even though it may
only use 1% of the theoretical knowledge.
33
Computer system
The system has not totally shifted on computer. Manual procedure is still there hence
computer facility is not fully availed. There should be a system at each counter for quick
processing.
Customer problem
People have to wait for en-cashing their cheques for about 10-20 minutes, which is
not good for the reputation of bank, the delay is due to manual work. Therefore I suggest
that computers and other electronic machines should be installed in bank so that time
could be saved.
Deficiency in management
I felt at some places the BAL need to have employees, because a lot of work is to be done
by a single employee that will result in work overload and employee might not perform
his/her job with full devotion.
Financial Analysis
To analyse the financial position of BAL, different tools are use, which includes Ratio
Analysis, Common size Analysis of the last five years.
34
Financial analysis involves the use of various financial statements. These
statements do several things. First the balance sheet and the second is
income statement.
The balance sheet summarizes the assets, liabilities, and owner’s equity of a
business at a point in time, while the income statement summarizes revenues
and expenses of a firm over a particular period of time. A conceptual
framework for financial analysis provides the analyst with an interlocking
means for structuring the analysis.
35
financial
institution
Investments 75973238 88491564 56502210 57425700 35503196
Advances 19267116 17119899 14999932 11886401 88931400
9 2 5 0
Fixed assets 13773293 11922324 10502900 6620067 4280504
Deferred tax - - - - -
assets
Other assets 8989186 6013097 5633051 3851529 3226959
34899076 32889515 27568554 24831379 154834534
4 2 1 3
LIABILITIES
Bills payable 3452031 4138243 3091135 3733124 2233671
Borrowings 13690222 21230697 8394130 5844389 12723830
Deposits and 30073285 27317384 23950939 22234506 129714891
other accounts 8 1 1 7
Sub-ordinated 2571169 3220858 3222106 3223355 1899480
loans
Liabilities against - - - - -
assets subject to
finance lease
Deferred tax 208465 1379809 1921338 484066 275834
liabilities
Other liabilities 11291280 9531860 7305496 5219666 2725344
33194602 31267530 26344359 24084966 149573050
5 8 6 7
NET ASSETS 17044739 16219844 12241945 7464126 5261484
REPRESENTE
D BY
Share capital 7995000 6500000 5000000 3000000 2500000
Reserves 3166056 2414833 2749533 2351218 1008772
Unappropriated 3447467 4851840 2823072 1386845 860300
profit
14608523 13766673 10572605 6738063 4369072
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Surplus on 2436216 2453171 1669340 726063 892412
revaluation of
assets
17044739 16219844 12241945 7464126 5261484
Horizontal Analysis
This type of analysis represents the percent change in specific line item of the Income
statement or the balance sheet from the last year. This analysis is used to comment on the
growth of specific line item in the industry or the firm.
LIABILITIES
Bills payable % 154.55 185.27 138.38 167.13 100
Borrowings % 107.59 166.86 65.97 45.93 100
Deposits and other %
accounts 231.84 210.59 184.64 171.41 100
37
Sub-ordinated loans % 135.36 169.57 169.63 169.69 100
Liabilities against assets %
subject to finance lease - - - - -
Deferred tax liabilities % 7.65 50.61 70.49 17.76 100
Other liabilities % 4093.5 3455.65 2648.51 1892.32 100
INTERPRETATION
Horizontal analysis is done using fixed base method. In this analysis, values
of the year 2002 are taken as base.
Formula
= Current Year x100
Base year
BALANCE SHEET
HORIZONTAL ANALYSIS
COMMENTS
38
■ In the field of investment there is increasing trend with the passage
of time. It is common term of finance” more investment more
return.
■ As we know that main source of profit of a bank is the difference
between the percentages of interest, Banks pay less rate of interest
than receiving the interest from the customers. In this case advance
to customers very low in 2004 but increase from 2005. It means
that BAL is running very well.
■ BAL is in a position that it is earning more and more profit with
passage of time. Then bank can purchase more and more fixed
assets, and it is bank is doing. Assets of the banks are increasing
day by day by purchasing the assets. More assets mean that bank
has more capacity to pay off its liabilities. There is increasing trend
in field of fixed assets. It is due to purchase of new assets.
■ Other assets have a decreasing trend which is not a positive sign.
Decrease in assets decrease the worth of organization
■ There is increasing trend in deposits and other accounts which
shows the credibility of the bank.
■ Borrowing is decreasing in 2004 but there is increasing trend in the
year 2005. Although it is seeing that bank’s borrowing is
increasing with the passage of time which is not a good sign but
there is a positive thing in this behalf, usually banks borrow money
at that time when they would have to give it for earning more
profit, The BAL Bank doing the same thing for increasing its
profits.
■ Bills payable increase in 2008 but decrease in 2007 negative sign.
■ Other liability has an increasing trend not good because increase in
liability decreases the liquidity position of the bank.
■ Share capital increase that shows the creditability of bank.
39
Vertical analysis
Bills payable
0. 1 1 1 1
9 . . . .
9 2 2 5 4
5 1 0 4
Borrowings
3 6 3 2 8
. . . . .
9 4 0 3 2
2 5 4 5 2
Deposits and other
accounts 8 8 8 8 8
40
6 3 6 9 3
. . . . .
1 0 8 5 7
7 6 8 4 8
Sub-ordinated loans
0 0 1 1 1
7 . . . .
4 9 1 2 2
8 7 9 3
Liabilities against
assets subject to - - - - -
finance lease
Deferred tax
liabilities 0 0 0 0 1
. . . . .
0 4 6 1 7
6 2 9 9 6
Other liabilities
3 2 2 2 0
. . . . .
2 8 6 1 1
3 9 5 0 8
41
■ There is increasing trend in cash and balances .cash and balances
increases in 2006 again but decreases in 2008.
■ Balance with other banks increases in 2006 and again start to decreases
in 2007 and 2008.
■ Lending to financial institution increase in 2006 an decrease in 2007 and
2008.
■ Investments are decreasing every financial year in 2007 it began to rise
up and finally in 2008 it stars decreases.
■ Operating fixed assets are increasing after every year.
■ Other assets are also increasing every year which is a positive sign for the
organization.
42
Non mark up / interest
income
Fee,commission and 2539321 2429599 1804998 1158747 675868
brokerage income
Dividend income 300943 64722 37393 52014 52539
Income from dealing in 914845 474510 386997 290091 218820
foreign currencies
Gain on sale of securities 424220 2059793 180751 239551 -
Unrealized loss on (81571) (21530) (27599) 23163 -
revaluation of
investments
Other income 1247669 1031372 842099 504967 572822
Total non mark up / 5245427 6038466 3224639 2268533 1520049
interest income
12417459 12824663 8483996 6907542 4333069
Non mark up / interest
Administrative expenses 10471399 8272587 5874745 4313023 2677635
Provision against off 28582 6959 - 10125 -
balance sheet obligations
Other charges 122758 9565 43306 21104 1700
Total non mark up / 10622739 8289111 5918051 4344252 2679335
interest expenses
1794720 4535552 2565945 2563290 1653734
Extra ordinary / unusual - - - - -
items
43
appropriation
6177727 5977886 3675610 2587264 2078698
This type of
analysis represents the percent change in specific line item of the Income
statement from the last year. This analysis is used to comment on the growth
of specific line item in the industry or the firm
Horizontal analysis of incomet side,
44
PROFIT AND LOSS A/C
HORIZONTAL ANALYSIS
■ Interest income decrease in 2004 will great proposition which is
not favorable. It means that interest received by the bank is
decreasing with the passage of time. It is not good for a banking
company.
■ It is known that banks provide many services for their customers
and also act as a agent of the customer. The banks receive fee and
commission after their services; it is a main source of bank to
receive fee and commission from their customers. In case bank is
taking more fees as compared to previous years. This is good for
the bank.
■ In foreign currency dealing and dividend there is huge increasing
trend which shows the investment of bank in healthy organization.
■ Other income decrease in 2006 but this increase mean positive
situation.
■ Return on deposit decreases which shows good sign and it is due to
decrease in return rate.
■ Adm and diminution and provision against non performing loan
decreasing turned that is favorable.
■ Bad debts increased with huge amount not positive sign.
■ Profit before taxation has increased with greater proportion.
■ Tax increases which are not bad because it is interrelated with
profit, if profit increased, tax also increase.
45
earned
Fee commission and 6.99 7.63 7.39 7.98 9.47
brokerage income
Dividend income 0.83 0.21 0.153 .358 .735
46
■ Interest income increase which is good sign for the BAL Bank.
Income increases because the bank advances increases from the
previous year.
■ Banks provide many facilities other than money lending and
borrowing. Banks receive fee, commission etc. for these services.
Therefore fee and commission income are increasing which is
good and favorable signs It means bank doing good business with
its clients.
■ Divided income decreased but it is very small. The dividend
income fluctuating every year, there is a problem for investor to
properly estimate the dividend and return on investment.
■ Other income increase with great proportion good sign.
■ Income from foreign currency decreases yearly that is not good
sign for the BAL Bank.
RATIO ANALYSIS
47
Ratio means “one number expressed in term of another a ratio is statistical
yardstick by mean of which relationship between two or various figures can
be compared or measured. The ratio analysis can be done under,
Ration analysis can be classified into different types
1- Profitability ratio
2- Liquidity ratio
3- Coverage ratio
4- Activity ratio
5- Special ratio
6- Gearing ratio
1. PROFITABILITY RATIOS
“Profitability reflects not only the quantity and trend in earning but also the factors
that may affect the sustainability or quality of earnings.”
Following profitability ratios have been calculated
48
Markup /Interest earned
II.RETURN ON ASSETS
Net profit after tax x 100
Total assets
INTERPRETATION
This ratio indicates the profitability of the bank based on total assets; it means that what
is the ratio of net profit after tax to total assets. This decrease shows the bank’s
inefficiency to generate net profit as compared to last year.
49
Net profit after tax x 100
Fixed Assets
INTERPRETATION
The ratio increases which is a tremendous increase in Bank return on fixed assets. But it
reduces .This decrease shows the bank’s inefficiency to generate return on fixed assets as
compared to last year.
INTERPRETATION
This ratio indicates the rate of administrative expenses to total deposit.
50
2. LIQUIDITY RATIOS
I. Current ratio
II. Quick Asset to Deposit ratio
III. Interest coverage ratio
IV. Liquid assets to total assets
3. ACTIVITY RATIOS
51
Interest/markup/ return earned
Fixed Assets
INTERPRETATION
Fixed asset turnover indicates the efficiency with which the company uses its assets to
generate sales. Generally, the higher a company’s fixed asset turnover, the more
52
3
Ans 0.088 0.078 0.077 0.049 0.036
INTERPRETATION
This ratio shows the overall efficiency of the bank in utilizing its assets to earn mark up
return.
INTERPRETATION
53
This ratio shows the advances, which the bank makes as the percentage of its total assets.
If the advances of the banks increasing within increase in the total assets it is favorable
for the bank business. Because there are more advances, there is more income of the bank
and respectively more profit. Total advances to total assets variation is showing
increasing trend in the last year’s whish shows that the management of the bank is
increasing the portion of its advances then compare to increase in the total assets which is
favorable.
INTERPRETATION
In the bank, another financial institution, fixed assets are comprised of equipment,
furniture and building. These assets have great importance in banks in order to maintain
the working condition that up to that mark.
5 GEARING RATIOS
54
These ratios measure the extent to which bank’s resources have been geared by debt i.e.
financed by debt in relation to share holder’s equity.
I. Debt To equity Ratio
II. Debt To Total Asset Ratio
Hierarchy Of Management
CEO
55
CHIEF OPERATING
OFFICER
GROUP HEAD
REGIONAL MANAGER
AREA MANAGER
MANAGER
OPERATION
MANAGER
OFFICERS
CASHIER
PEONS
56
SWOT analysis is an acronym that stands for strengths, weakness, opportunities, and
threats SWOT analysis is careful evaluation of an organization’s internal strengths and
weakness as well as its environment opportunities and threats.
2. Neutralizing it threats.
SWOT analysis is one of the most important steps in formulating strategy using the
organization mission as a context; managers assess internal strengths distinctive
competencies and weakness and external opportunities and threats. The goal is to then
develop good strategies and exploit opportunities and strengths neutralize threats and
avoid weaknesses.
STRENGTH
The Bank officers of BAL are considered as one of the most able
professionals in the banking world (some belong to BCCI). However, they
have added some local flavour in accordance with their targeted segmented. In
57
my observation that they interact with their clients as if they are their personal
friends and discuss about their problems as their own.
As a result of the compassionate and personalized services of the officers,
the clients’ perception for BAL is very high. They have trust and feel
themselves to be secure while dealing with BAL.
BAL has opened all its branches at commercial areas so that the customers
or clients face no problems in reaching to the bank. For example, LDA plaza
Branch is being situated in business and commercial hub of Lahore as big
volume in trade.
BAL has got a reliable and easy to use internal computer system. Every
information regarding the transactions in customers’ deposits has been
computerized. Data are properly maintained.
Good security system
Not excellent but good facilities are given to employees
WEAKNESSES
OPPORTUNITIES
58
Satisfy dynamic consumer needs, BAL has made significant in roads in its
entire service spectrum. A lot of products have been introduced especially in
Retail Banking (Agriculture side) and people are increasingly becoming loyal
to the bank and because of feasible transactions. Optimum pricing and
branding strategies of the bank are helping to make customer feel secure and
convenient.
All the opportunities of the 21st century are to be availed in the information
technology. Information technology is the future of this dynamic world.
Therefore BAL should emphasize much on IT, especially on E-Banking. Bank
can design a universal account like other foreign banks, to enhance online
facilities.
BAL has introduced a number of financial schemes including special ‘Deposit
Accounts’. These accounts have their unique features. During the last three
years, BAL deposits have been increasing @ 40%, which is a very healthy
sign. Therefore, with the commencement of new schemes there can even be a
greater increase in its deposits
THREATS
59
Future Prospects
Organizational Analysis
• As graphical shows NBP (National Bank of Pakistan) is the key player and the
leader in the industry with total assets and liabilities of RS. 764,609. While BAL
is RS. 234,991.
• Major Player Includes NBP, HBL, UBL, , ABL, SCB and BAL.
60
• Total Assets of the major players in the industry are RS. 3,561,195 (M).
• Like major Player NBP has the largest Profit before and after Tax i.e., 28,452(M)
and 19,405 (M) respectively. While BAL has PBT RS. 4,856 (M) and PAT RS.
4,454 (M) only
• The total Profit before and after tax of the major players are RS. 99,835 (M) and
RS. 70,045 (M) respectively.
Income
Comparison
50,00
0 Sprea
45,00
0 d
40,00 Provisio
0 n
35,00
Non Markup
R 0 30,00 Incom
Interst
s 0 e
Operating
In 25,00 Income
Mi 020,00 Operating
lli 0 Expenses
o 15,00 PBT
n 0 10,00
0 Tax
5,00
0
0 Profit after
NBP HBL UBL MC BAL ABL SCBBO Tax
B P
61
Comparison of the Bank Industry Major Vs Medium Vs Small Banks
4000000
4,000,000
3500000
3,500,000
3000000
3,000,000
Rs
In 2500000 2,500,000
Rs. In Millions
Mill Major Players M ajor Players
ion 2000000 Medium Players
s
2,000,000 M edium P layers
Small Players
1500000 1,500,000 Small Players
1000000 1,000,000
500000 500,000
0 0
Inv LenFin Adv Op Ass
Casban Othass Tot
est din anc anc Fix ets
h &k
es er ets al
me To ial
l
ed &
ta
y
its
s
uit
Bo ble
To
ng
s
s
nts
itie
he oan
Eq
o
wi
ya
bil
rr o
De
Pa
ia
d
rL
te
lls
ina
Bi
Ot
rd
bO
•
Su
Major Players in the Medium category of the Banking industry are AB, NIB,
ABN, Citi, SB BAH, FB.
• This level is giving a tough competition to the major players and trying to grab
there share.
• Few mergers are taking place and in future it is expected to be more because to
maintain SB Standard reserve ratio.
200,000
150,000
Major Players
Rs in Million
100,000
Medium Players
50,000 Small Players
0
T
x
ad
Ta
PB
ax
e
es
-50,000
ls
m
om
re
sa
rT
co
ns
Sp
er
nc
In
pe
te
ev
tI
af
g
Ex
tin
/R
rs
it
of
g
te
ra
ion
tin
Pr
62
In
pe
ra
p/
is
pe
ku
ov
ar
Pr
O
M
n
No
• Major Players in the Small category of the Banking industry are ATLAS KASB,
JS etc.
• Total Assets and liabilities of this level comprised on RS. 411,077 (M)
• These Banks are going in loss overall in 2007. Since they are new players in
Pakistani Market. It is expected that they will give return in future.
Internal Controls
To me the major and the most important flaw in the BAL is lack of internal controls and
inter communication between different branches of the bank. As far as financial aspect is
concerned there is no proper system is configured that’s why there is always a risk of big
frauds with in the bank. I during my internship also pointed out that point but no one
bothered. To me the bank should install some proper resource planning and controlling
systems like other banks do i.e., oracle financials etc.
Professional Training
63
BAL staff lacks professionalism. They lack the necessary training to do the job efficiently
and properly. Although staff colleges are in all major cities of the Punjab but they are not
performing well. For this purpose these staff colleges should be reorganized and their
syllabus should be made in such a way which can help the employee understand the ever-
changing global economic scenario.
Banking council of Pakistan should also initiate some programs to equip the staff with
much needed professional training.
Delegation of Authority
Employees of the bank should be given a task and authority and they should be asked for
their responsibility. The sense responsibility in employees mind is one of the most
important factors in the success of any organization.
Performance Appraisal
During Internship I felt that there is no or very less appraisal of any ones cool
performance. The manager should strictly monitor the performance of every staff
member. All of them should be awarded according to their performance and result in the
shape of bonuses to motivated and incite them to work more efficiently.
64
especially in deposit department and there should also be convenient sitting place for
customers.
Transfer
Transfer is not properly carried out. Some of the employees are continually serving at the
same post. They are simply rotated at the same branch. Therefore it is recommended that
evenly rotation of every employee should take place after every three years in different
braches of the bank.
Changes in Policies
There should not be any abrupt policies change by the upper management, as this practice
hurts the customer confidences in the bank. Government should make long-term policies
Clean Loans
Clean loan or clean overdraft is the credit facility extended to the customers to the
customers without any security. These types of small term loans should not be extended
to anybody, because sometime these loans are provided to blue-eyed people of the
management and they become a part of bad debts.
Bank should decrease their administrative expenses. This was Rs 2.25 billion in the year
2007. That can be done by lying off the surplus pool of employee with golden hand
shakes scheme. The branches that are not much used could also be closed. That will give
positive results in the future.
65
Technological Advancement
I would like to suggest that at least all the main branches of BAL should be fully
computerized in order to expedite the dealing process among bankers and their
customers. Every department should be provided a computer with adequate training
(especially Advances, Deposits and Foreign Exchange departments). Daily records
should be entered directly into these computers, (instead entering the overall daily
transactions after the banking hours). It will not only reduce transaction time, will
increase accuracy but will also be efficient as well.
Not only it will be economical but will also reduce the extra burden of work of the bank.
It will also help in reducing the use of excessive paper work.
In the Main branch during my internship I saw that when some of the employees are
transfer to other places, due to their relation with influential people and with top
management they can cancel their transfer in few weeks, when they are unsatisfied at that
place.
So I suggest that in the organization there should be no favouritism, nepotism and politics
and their transfer and promotion should be made on merit and according to the rules and
regulations of the bank and provided favourable environment to the employee to show
their performances.
66
Inter Departmental Transfer
I watched during my internship that, there employees who have worked on one seat for
many a year. It can have negative effects motivation of employee who is hard working
and intelligent. Take the example of advances section. In advance section if the employee
is transfer after sixth month or seven month, how can he be able to show his
performances and how can he be able to know the bank customer in a short period of
time.
Organizational Commitment
It is suggested that employees working on daily wages basis should be given some
benefits, which the other employees are getting. Their salaries must increase according to
efficiency, performance and service this will increase there commitment to the
organization.
Great care should be taking while extending the loan. Loans should be awarded against
reasonable securities, where market value should be equal to the loan granted.
Policies should be crafted in a way to ensure that no loan is extended on political
pressure. SBP regulation for loan approval should be strictly followed. According to
which the current ration of borrower’s business must be 1:1 and the debt to equity ratio
should be 60:40, means the liquidity position of business should be healthy.
From the Quantum of the profit and its financial data it can be easily judged that after
privatization, BAL is performing well. Its deposits are growing day by day and so its
profitability. The controlling body is responsible for the productive performance of the Bank.
Following are my observation and suggestion to improve the efficiency for the development
of the economy.
67
o Net profit after tax ratio should be increased. The bank must minimize his non
performing loans which affect the income of the bank.
o The bank has to increase its sales and do transaction with the original and worthiness
customers so that the non performing can be solved.
o The directors of the banks should increase the equity of the bank. because the equity
of the bank is lesser than the liabilities. This will encourage the investor to invest.
o Before advancing to any customer, the bank must investigate the client’s ECIB report
and data check so that the risk of the default must be mitigate and there will no
chances of non-performing loans.
o Cash and Balances of the bank decrease with the previous year, the bank should give
attractive rate to their customer so that’s the banks cash & balances increases and it
will solve the liquidity position of the bank and will help in day to day cash problems.
o The bank must focus on their foreign accounts and their transactions because if the
bank manage these foreign transactions and attract the client, the bank can earn heavy
income form these accounts. Foreign branches should be opened in order to capture
the international market and to earn international repute for the bank
o Assets quality was impacted by an increase in non performing loans which coupled
with subjective classification by the State Bank of Pakistan resulted gross non
performing loans to gross loans amount increased. Fixed assets turnover ratio should
be maximum by generating greater sales. Utilization of fixed assets should be
maximum.
o A big portion of the home remittance is sent by Pakistan working capital through
BAL. As we know a big portion of this amount is wasted purchasing of luxuries. The
rate of profit should increase 1% or 2% than other banks and it would be profitable
step for the bank.
o Most of the bank employees should be sent for training to other countries and
employees from other branches should be brought here. Some more reading material
should be provided. The purpose should be to educate the employees with the
68
advance studies in their field. The employ should be provided the opportunities to
attend and participate in seminars and lectures on banking.
o Foreign branches should be opened in order to capture the international market and to
earn international repute for the bank.
o Working environment, equipment, furniture and staff dressing should be according to
the modern banking style.
o Proper attention should be paid to upgrade customer services.
o Bank should adopt the global organizational banking structure to meet the
international standards of banking sector.
Conclusions
By analyzing the financial statements of the bank, I came across to know that it is one of
the most growing bank in the subcontinent. Now they should carry on with the present
management which too k it from one of the ordinary bank to this level. No doubt
professionalism and internal controls of the bank are one of the major issues which may
results some major losses to the bank.
References
Reference material used for compiling this report is gathered from these sites.
• www.bankalfalah.com
• www.sbp.gov.pk
69