Askari Bank Limited

EXECUTIVE SUMMARY:

The Department of Administrative Sciences offers Masters degree in Business Administration.

They are giving the best education and are offering for specialization, financial management,
marketing management, human resource management and computer application to business. An
important program is six to eight weeks internship with any recognized institution.

I decided to take up Askari Bank Limited for my internship because it is a competing Bank
nowadays and gives a good training to the internees. So in order to learn more this was my
choice.

This report is about my internship that I have undergone at Askari Bank Limited Multan Branch
from 2nd June 2008 to 18th July 08. During my internship I am able to learn practical aspect of
business, and get good working experience.

On the very first day of my internship I reported to Operation Manager Mr. Noor ul Islam. He
gave me small introduction of the Bank and introduced me to the staff of the Bank. Every
internee is rotated among the Bank’s departments and so was I. This rotation is done in order to
have general concept regarding Bank’s functions, operations and policies. In this rotation the
stay in department is usually a week. I have learned more about the Basic Banking, Credits and
Foreign Trade department and have given below the caption of activities I was involved in
during the period of six weeks.

During my internship I found that Askari Bank is a best Bank in Multan because most of the
Exports and Imports in Multan are done through this Bank. Multan is one of the cotton growing
cities of Pakistan. Most of the businesses in Multan are directly or indirectly linked to cotton
that is also the case with Askari Bank’s clients. Because Multan is an Agricultural City, and its
major export is Cotton and Mango. So its export is done on seasonal basis. In the season of
cotton and Mango export Askari Bank get its target easily but difficult for it to get its target in
the off season.

Low profit rates used to be one of the major reasons for not meeting the deposit targets. The
profit rates on Askari deposit schemes were quite low when compared with other Banks
especially with the National Saving Centers, but now Askari Bank is giving a comparatively high
profit rates to its customers. In today’s every customer is a rational customer, he knows the value
of money and wants a best return on his money.

INTRODUCTION TO BANK:

Askari Bank Limited (AKBL) works as a Unit of Army Welfare Trust was established for the
Welfare of Army Officials. The office of Army Welfare Trust is situated at AWT Plaza,
Rawalpindi. AWT offers the “AWT Saving Scheme” to the army officials only. AWT has its
units as under:

• Askari Associates.
• Askari Leasing.
• Askari General.
• Private Business.
• Textile Mills.
• Cement Industry.
• Askari Commercial Bank.

Askari Bank Limited was incorporated on October 9, 1991, as a Public Limited Company, and is
listed on Karachi, Lahore and Islamabad Stock Exchanges. The Bank obtained business
commencement certificate on February 26, 1992 and started operations form April 1, 1992.
Askari Bank is scheduled Commercial Bank and is principally engaged in the business of
Banking as defined in the Banking Companies Ordinance 1962.

Askari Bank Limited continues to scale new heights in all areas of its operations. The safety and
security of depositor’s funds, high productivity and optimum use of technology are the hallmarks
of its corporate strength.

In 1994, AKBL earned international recognition as Asia Money Award and the title of “Best
Commercial Bank of Pakistan” for the year 1994, while Euro money declared the Bank as best
domestic Bank of Pakistan for the year 1995.

ASKARI BANK LIMITED MULTAN

Askari Bank Limited Multan was inaugurated on December 28,1994.

It is located on Abdali Road Opposite to PIA Office. The location is connected to all the main
trade centers in Multan. It is a prosperous branch streaming towards great achievements.

At the time of its establishment the factored who were considered are as follows

• Multan is zone covering a large population.

• Multan City is linked to many big cities.
• Agro based area constituting growers and gainers
• Army Offices & Fort Colony
• Educational Institution

DEPARTMENTS:

The bank has following department:

• Account Opening department

• ATM Department
 • Credit Card Department
• Account Department
• Credit Department
• Remittance Department
• Foreign Trade Department
• Cash Department

ACCOUNT OPENING DEPARTMENT

Borrowing funds from different sources has become an essential feature of today’s business
enterprises. But in the case of a bank borrowing funds from outside parties is al l the more vital
because the entire banking system is based on it. The borrowed capital of a bank is much greater
their own capital. Banks borrowing is mostly in the form of deposits. These deposits are lent out
to different parties. Such deposit creation is done through opening an account in the Bank.

In AKBL Multan Mr. Sheeraz Hassan is operating the account opening department along with
performing some auxiliary functions of Check Book Issuing

TYPES OF ACCOUNTS

In AKBL, there are the following types of accounts:

• Current account.
• Saving Account.
• Askari Special Deposit Account.(ASDA)
• Basic Banking account
• Term Deposit.

CURRENT ACCOUNT

In current account there is no interest on it. It is for only transaction purposes. They are paid on
demand. When a banker accepts a demand deposit, he incurs the obligation of the paying all
cheques drawn against him to the extended of the balance in the account. As there is no profit
paid on this account it is also called chequing account because cheques can be drawn on it.
Current account is mostly opened for business.

SAVING ACCOUNT

The purpose of this account is to induce the habit of saving individuals in the neighborhood. The
minimum deposit for opening the account is Rs.1050/- (as obvious in the Annexure).

Though individuals open such accounts for saving purpose, persons belonging to Armed forces
and different military institutions are free to use this account on current basis.

ASKARI SPECIAL DEPOSIT ACCOUNTANT

ASDA account is an interest bearing current account interest is paid. The payment of return is
monthly, where as the rate of return with aspect to the amount of minimum deposit clear from
deposit schedules in following table). It is also chequing account because cheques can be drawn
on it. It is necessary for this account that the client must maintain a minimum balance of Rs.
50,000 at the end of the month. That’s why it is similar to current account. It is mostly opened by
Business but individuals too open this account.

Tax of 0.3% would be deducted on ASDA if withdrawals are more than Rs.25,000.

TERM DEPOSITS

A term deposit is a deposit that is made for a certain periods of time at the end of the specific
period. the customer is allowed to with draw the principle amount .

AKBLs Term deposits are of types clear in the deposit scheme in the table). One of them is
“Askari” Advantage one month. The rate of return on this account is set by head office. The term
deposit account vary one month to 1 year for all following accounts (as clear from Deposit
Scheme in the table).

• The amount of profit is given to depositors in three ways:

• By cash
• By sending a bank Draft to depositors Home address or Officers or whichever is specified
as mailing Address.
• The amount is credited in any one of the checking Accounts of the depositor.

ACCOUNT OPENING PROCEDURE

Fro the chequing accounts (C/A, ASDA, SAVING), there are different types of account holders
are required for all these types of account holders. The operation /procedure requirement that is
needed for ” Individual Account ” differ greatly from ” Joint account ” proprietorship “Partner
ship “, “Limited Company”

and “Club society or Association ” as explained below.

INDIVIDUAL’S ACCOUNT

When a single man or women opens an account in his/her own name and has the right to operate
it is called individual Account.

DOCUMENTATION REQUIREMENT

For literate person copy of National Identity Card is required as a primary requirement. For
illiterate person and Veiled Women, along with the copy of National Identity Card requirement
he or she must come in person for opening the account.

OPERATION
 • The person place a “Check Mark ” in the type of account and type of operation required
• He/She fills in part-I of the form , a fix his /her either two or four similar signature (or
thumb expression in the signature space and get it introduced and signed by a person
who already has an account with the bank and write his account no in the specific rows in
a specific space.
• The person fills in “next of Kin ” position where he/she father, mother, husband/wife or
any other relative’s name, his /her address, phone no and affix his/her signature to certify
this requirement. This requirement is needed because in his/her absence bank can have
correspondence with the specific person.
• The person put her /his signature (” or thumb expression) on the signature Specimen Card
(SS CARD) similar in the area on the form. One the back of S.S card mailing address,
telephone no, Person to contact and introducer space is filled in. All these requirement are
necessary for future
• The person deposits the initial amount for opening account on to the cash counter.
• The person put his signature on form -A (check book requisition) on two places in
“authorized signature” and fills in the “Title of Account space by writing his name.
• If the person put his signature in Urdu or any language other than English, he signed a
“Vernacular form” where under take that affixed signature are original and his own
signature and two postal size photos are needed.
• The next day is the opening of account.

JOINT ACCOUNT

When two or more persons, neither partners, nor trustees, open an in their name is called joint
Account. Husband and wife or two persons of same sex can open joint account.

DOCUMENTATION

For joint account copy of National Identity Card of all the persons is obtained other things
remaining same as in individuals account.

OPERATION

• The person checks the type of amount and type of operation required in the respective
box on the form.
• The persons fill in the Part-I and part-II in the form.
• Signatures of both persons are obtained on the form in the area specified for signature
and S.S. Card.
• In the title of account space names of all the persons are mentioned.
• Accounts holder specified in the form that they will operate the form singly or jointly.

PROPRIETORSHIP ACCOUNT

When an owner of a firm operating singly, opens an account in his firm name, this account is
called a proprietorship Account the proper himself liable for all his acts.
DOCUMENTATION REQUIRED

For this kind of account, an application for opening the account on the firm letter -pad (having
the firm name) is required along with the NIC Card of proprietor.

OPERATION

All operation remains the same except that the firm name is written in the “Title of the Account”
area and signature of the proprietor are affixed in the S.S. Card and the area specified for
signatures on the form.

PARTNER SHIP ACCOUNT

The account is opened in the firm name and all partner designate one two persons to act on
behalf of the partner ship firmer all acts on behalf of firm. The partners in the partnership firm
are liable for the acts of the firm jointly and severely. Every partner has in a firm has an implied
authority bind his co. partners by drawing and enclosed cheques.

DOCUMENTATIONS

• Copy of N.I.C card of all partners

• Application to open the account on the firm letter pad.
• Partner ship deed in case registered partnership firm.
• Letter showing the implied Authority of one or more partners to act on behalf of the firm.
• In case of non -registered partnership firm, understanding on behalf of the firm to remain
liable for all acts of the firm.
• Name, address of all partners is written on the pad.

OPERATION

All other requirement remain same except that the form is dully signed by all partners cards are
signed by all those partners who will act on behalf of the firm and along filling part-I , Part-Iv is
also filled.

LIMITED COMPANY ACCOUNT

This account is for limited companies. In order to facilitate their transaction with outside parties,
bank provides many facilities.

DOCUMENTATION REQUIRED

• Memorandum of Association.
• Articles of the Association
• Resolution of the Board of Director.
• Certificate of Incorporation.
• Certificate of commencement of business
 • N-I-C

OPERATION

The persons authorized in the Resolution of the Board of Directors put their signatures on S.S
Cards. Next of kin “requirement “is not need in case of a Limited Company. After completing
each and every formality, introducer signature is verified by S.S card and is stamped “Verified”
customer signatures are admitted by stamping “Admitting” near signature and again signatures
on S.S card are admitted in the same way. The same process of verification and admission of the
signatures is repeated on Form-A and next of Kin area.

After completing each and every formality, Accountant is open in the computer by writing name,
address, A/C Number etc.

LETTER OF THE THANKS

At the start of the letter 2nd day, AKBL issues letter of thanks to “Account opener” and “account
opener” and ” Account Introducer ” for the trust the have on AKBL.

CHECK BOOK ISSUING

Check books are issued only for checking account such as current Account, saving Account and
ASDA Account. They are not issued for other fixed and term deposits because of their Long
term Accounts “nature.”

ISSUING PROCEDURE

• Signatures on cheque – book requisition are verified by matching with signatures on SS.
• Cheque – book leaves number, account number, account holder’s name are mentioned in
the cheque- book is made by mentioning the and the total of sum of excise duty and
provincial tax.
• The name of A/c holder and date of cheque – book issuance is written on cheque – book
requisition the account-opening officer puts his initials on requisition leave.
• A/c number is stamped over the leaves of cheque – book and finally authorized person
affix his signature over the debit voucher and he voucher is attached from the cheque
book and is handed over to the customer .

RECEIVING INWARD CHEQUES

Another responsibility and function of account Opening Department is to receive Inward cheques
for collection of other Banks as well as of AKBL . Then these cheques are sent to clearing
official who clears these checks at SBP from other banks.

ACCOUNT CLOSING
Account is closed on the written request of the customer AKBL free of cost. But to surrender the
cheque book yet if some leaves are yet to be write to the bank as a necessary requirements for
closing the account.

PROCEDURE

• The customer for individuals account write an application to the manager of the bank an a
simple paper about the closing of his account with the bank (In case of proprietor ship
partnership and limited company account the application should be written an firm or
company letter –head)
• The individual or in case of other type- proprietor firm and company surrender the
cheque book to the bank.
• The cheque book is then torn from one side and is attached with the application.
• In case of Ltd. Company account resolution of the board of directors is also obtained to
attach it with the application.
• The account opening form of the account holder is taken from the account-opening file,
and the application, cheque book, and resolution of board of directors in case of limited
company account are attached with the form.
• Lastly, it is written in “Red Ink on the form that account closed” and “Date of account
closing.”

EVERYDAY POSTING

Following transaction of cheque book is posted:-

Dr_____________ party A/c 50(for 10 leaves)

Rs 5/leave.

ATM- CARDS DEPARTMENT

This department deals in issuing ATM-Card, term deposits and Askari Bachat Certificate. Mr.
Sheeraz Hassan deals this department.

ATM CARD

ATM – Cards are only issue to Account Holder

ISSUING PROCEDURE

• The person, first open the account within the blank.

• Then he fills the ATM application form in which name of account holder, Fathers name
account number and N.I.Card number are mentioned.
• A copy of N.I. card is also attached with the application form.
• After completing this process, the application package is sent to head office
 • ACBL head office takes a period of 3-4 weeks for preparing and processing of ATM –
cards. First, list of card holder is issued and then after 15 days cards are send to ACBL’s
issuing branch. The card and list are not sent simultaneously in order to avoid any
mishandling.
• ACBL takes Rs. 350/- for 1st time issuance as charges for a card
• Biannually takes Rs 75.

ACCOUNTING DEPARTMENT

Accounts department is a department which deals and checks all the activity of all the
department .It also deals in expression of finance of the bank. Salary payment is also one
function of the bank.

CHECKING BANK’S DAILY ACTIVITY

Accounts department deals and checks the entire working of the Branch; all the vouchers that
have been posted at the computer are scrutinized in accounts department. The “End of Day” i.e.
computer print is also received from the computer. The next day the activity is separated some
statements from the “End of Day”. Then next day activity separated some statements from the
“End of Day”. The vouchers are sorted out head wise. The vouchers are matched with the
entries in the statements.

Any abnormality if occurs, is immediately dealt with. All the vouchers and instruction are
checked individually are checked individually against the computer printouts. After checking
they are signed by Mr. .Naeem Shehzad and the internal auditor Mr. Shafiq.

OTHER ACTIVITIES

• Preparation of daily bank positions statement

• Payment of salaries
• Preparation of the statements
• Depreciation calculation
• Lockers Issuance

REMITTANCE DEPARTMENT:

The need of remittance is commonly felt is commercial life particularly and in everyday life
generally. The main function of the remittance department is to transmit money from one place
to another. By providing this service to the customer, Bank earns a lot of income. Also customer
is able to meet its day to day financial requirements.

Demand Draft:

It is an instrument payable on demand for which value has been received, issued by the branch of
the Bank drawn i.e. payable at some other place (branch) of the same Bank. If two Banks are
involved then the DD is sent to other Bank but in other case it is handed over to the applicant.
Issuance Procedure:

• A demand draft application is given to the customer, he fills in relevant information and
signs it.
• The officer checks the information form.
• The Bank charges such as commission, excise duty is charged as per effective schedule
of charges. If he fills the tax exemption form, tax is not charged.
• In case of cash deposit, the cashier counts the amount and signs the DD application and
enters it in the register.
• Then the officer of remittance department signs it and operation manager counter signs it.
• The entry is made in the DD issuing register, DD is given to the customer.
• Vouchers are prepared and posted.
• DD advises are printed and mailed to the respective branch.

Payment Procedure:

• The Bank receives DD.

• The DD credit advice is received through mail. The numbers are checked and signatures
are verified.
• An entry is made on the DD payable register and the vouchers are made.
• DD credit is attached with the vouchers and given for posting to the computer.

• When DD is received the test numbers are checked and the payment is made.
• Vouchers are given for posting and the entry that was made in the register is closed i.e.
DD payable is Nil.

Pay Order:

It is an instrument issued for payment in same city. Pay order issued from on e branch can only
be payable from the same branch. It is normally referred to as Banker’s cheque. It is also called
confirmed cheque, because Bank issues this on it own guarantee.

Issuance Procedure:

• The standard form is given to the customer. He fills in the details and signs it.
• The concerned officer checks the form.
• Bank charges (or commission) as per the schedule of charges and the withholding tax of
0.3% are applied.
• The cash amount of the pay order is received.
• A cash memo is signed, stamped and handed over to the applicant as a receipt.
• Then the pay order receipt is filled accordingly.
• Counter foil is also filled.
• An entry is made in the pay order issue register.
• Then the authorized officer signs it after checking the pay order.
• The order is then handed over to the applicant after obtaining his signature on the PO
Form.
 • A voucher is also made and posted at the computer.

Payment Procedure:

• On presentation of the pay order receipt, two authorized officers of the branch sign the
receipt.

• PO entry is made in the PO issue register.

• Then the amount is credited to the account of the customer or pain in cash.
• PO is posted at the computer.

Outward Bills for Collection:

The bills, which are received by the Bank and sent to other cities (branches) for the local clearing
in that city, are called Outward Bills for Collection.

Procedure:

• The cheques that are of other cities are separated.

• They are entered in the OBC Register and OBC numbers are given to them.
• The OBC forwarding schedules are prepared for different branches.
• The respective cheques are attached with the schedule.
• The office copy is filled and original schedule is mailed.
• On clearing, the respective Banks send back the OBCs along with the IBCA (Inter
Branch Credit Advice).
• The OBC numbers are checked from the OBC register, after that entries are made.
• Commission charges are deducted from the account.

Inward Bills for Collection:

The bills, which are received by the Bank from other branches out of the city for local clearing
are called Inward Bills for Collection.

Procedure:

• The OBC of other branches will be the IBC of this branch. So an OBC forwarding
schedule is received by mail.
• The cheques are entered in the IBC register. The IBC numbers are allotted to them.
• The cheques are lodged for clearing.
• After realization, an IBCA is prepared and mailed to the branch from where the cheque
was received.
• At the end of the day, two vouchers are prepared and posted.

FOREIGN TRADE DEPARTMENT

Foreign trade department deals in:

 • Foreign currency account
• Exports
• Imports

FOREIGN CURRENCY ACCOUNT

Mainly this account deals in individual, personal and companies account

CRITERIA FOR OPENING FOREIGN CURRENCY ACCOUNT

There are not hard and fast rules for becoming the Foreign Currency Account holder. Bank
wants only introduction of the Client and very little about the background. I.D card is also not
necessary, if someone has; well and good, otherwise no restriction will be there for him.

FEATURES OF FOREIGN CURRENCY ACCOUNTS

• There will be legal protection for the account holders.

• According to foreign exchange rules and regulation every citizen of Pakistan, either
within the Pakistan or outside the Pakistan, can open the foreign currency account.
• Resident firms and Resident Companies including investment Banks can open Foreign
Currency Accounts.
• All foreign nationals and foreign Companies in Pakistan or abroad can open Foreign
Currency Accounts.
• Opening of Foreign Currency Accounts in the joint names of residents/non-residents is
permissible. Foreign Currency can be deposited by:
• Remittance received from abroad
• Foreign Currency Notes
• There will be no restriction and questioning to him about the currency, which he wants to
deposit that from where he got that money.
• No Zakat will be deducted on these accounts; no Income Tax deduction, no Wealth Tax
deduction will be there.
• These incentives reinforce and motivated the people to invest in foreign currency
accounts rather to keep the foreign currency idle.
• Foreign currency accounts can easily be transferred from one person to another, one place
to another, with in the ACBL Branches or in other Bank.
• The account holder can transfer the funds freely, in any currency to any part of the world.
• Foreign currency Accounts can be used for payment of purchases at Duty Free shops.

FACILITIES

This account provides following facilities:

• Traveling quota
• Out ward remittances
• In ward remittances receiving
• To make remittances procedure flexible
EXPORT

Mainly export deals in:

• Negotiation of documents
• Sending the documents for collection
• Pre-shipment financing
• Post-shipment financing
• Remittance against agent commission
• Forward covered booking
• Handling the documents for negotiation according to the UCP 500 (uniform custom and
practices)
• Handling the documents for collection according to URR (uniform rules for collection)
• Submission of monthly returns to SBP regarding the export on form A-2/O-2

IMPORT

• Opening the letter of credit

• Scrutinize the documents receive from flowing bank under letter of credit. Account to
UCP 500 and extending the credit facility to the importer informs FIM (finance against
imported merchandise) FATR (finance against trust receipt).
• Arrange forward cover booking regarding import payments
• Also arrange forward cover booking for letter of credit open other then ACBL
• Submission of monthly returns to SBP regarding the import on form I

SWOT ANALYSIS

SWOT (Strength, Weaknesses, Opportunities & Threats) analysis of AKBL is described below:

Strengths:

• AKBL has got a well-developed on-line system in most of its branches. Remittance
Department is working very efficiently in transferring the funds of people due to this
system.
• The Bank has also started ATM facility in most of its branches. 24-hour Banking is new
trend in Pakistan and AKBL has also taken apart in this trend.
• One distinctive feature of the Bank is that it is the only Bank working for the welfare of
army officers, which was established by Army Welfare Trust.
• The productivity of the Bank is very good. Bank is providing a high quality service to its
customers.
• AKBL have strength that most of the imports which are done in Multan are handle by
AKBL Multan.

Weaknesses:
 • AKBL has lesser number of branches as compared to many other branches. Due to this
problem, army officers can not avail the benefits of their own Bank.
• The human resource department is not performing the function of selection and
recruitment very effectively. Selection process is not on merit due to which competent
persons cannot be selected.
• Bank should boost the product development and increase the range of facilities offered
for customers.
• Bank is weak in its credit management. Bank should lend to very sound parties and
increase its payment rate.

Opportunities:

• Govt. is taking very bold steps to promote IT in Pakistan. AKBL has an opportunity to
improve in technology.
• AKBL is surrounded by many competitors. It has an opportunity to do aggressive
marketing to increase its business.
• AKBL may increase its branches in competitive areas

Threats:

• AKBL has many competitors, which are continuously increasing its products and
marketing aggressively. It may cause its customers to shift to competitors.
• Some other Banks have competent taskforce, which is also a threat for AKBL. Because
human resource is the most valuable resource.
• Due to the increased bad situation of Pakistan in which army is considered to be involved
increase the frequency of withdrawals, which would decrease deposits.

Financial Analysis:

Financial Highlights

The current year’s profit (2007) after taxation of the bank stood at Rs. 2,681,012 as compared to
Rs. 2,249,974 for last year. The deposits decreased by 16.49% to Rs. 11,197,424 as against Rs.
13,044,593 as on 31 Dec 2006. The loans and advances figure stood at R.s 5,521,030 reflect on
the improving market image of Askari Bank as a formidable financial institution.

Ratio Analysis

The information contained in the four basic financial statements is of major significance to
various interested parties who regularly need to have relative measures of the company’s
operating efficiency. Relative is the key word here, because the analysis of financial statements
is based on the use of ratios or relative values. Ratio analysis involves methods of calculating
and interpreting financial ratios to analyze and monitor the firm’s performance. The basic inputs
to ratio analysis are the firm’s income statement and balance sheet.

Ratios 2007 2006

Current ratio 1.03 1.04
Total asst turnover 0.11 0.09
Debt ratio 0.93 0.93
Gross Profit margin 0.11 0.22
Operating profit margin 0.21 0.12
Net profit margin 0.22 0.26
ROA 0.02 0.02

Earning asset to total assets

Earning assets are the assets which are very important for any company for the bank earning
assets are the assets on which bank can earn its profit which may includes loans, advances,
operating fixed assets and other assets on the loans and advances bank can make profit by giving
or investing in some where so Askari Bank has increased it’s earning assets in the year 2007 as
compared to the previous year that show the good trend in the profitability of the Askari bank
and the customer believe on the Bank.

Ratio tells that on what percentage earning assets contribute the total assets. Well bank also has
increased it’s earning assets ratio shows the more profitability of the bank as it can be shown by
the profit and loss account of the 2007 that shows the net mark up income more for the year as
compared to the previous year so bank is going gradually to the more profitability by giving
more advances and loans.

Earning assets

ASSETS 2007

Cash 13356055
Balances with other banks 3497054
Lending 14444143
Investments 39431005
Advances 100780162
Operating fixed assets 5128428
Total earning Assets 176636847
Other assets 5535038

TOTAL 182171885

Total Earning Assets: Rs. 176636847

Formula:

Earning Assets / Total Assets

= 176636847 / 182171885
= 0.969616

Return on earning asset

This ratio indicates the how much of earning assets take part in making of the profit before
taxation. This ratio is decreased during the year. Why is it so it has different reasons these are as
follows

Profit before taxation was more in the previous year as compared to the year 2007 because bank
has low expenses and less provision for the bad debts and also bank has small investments and
limited loans and advances but in 2007 situation has changed and bank increased its loans and
advances.

Earning assets were also low in the previous year as compared to the 2007 so overall ratio has
been decreased but shows the good trend for the making of long term planning

Formula:

Profit after tax / earning assets

= 2,681,012 / 176636847

= .015

Loan loss coverage ratio

This important figure is a reserve account to cover unexpected defaults on loans by borrowers.
These are generally referred to as no performing loans. The higher the no performing loan and
charge-off percentages, the higher the provision for loan losses should probably be.
Consequently, this would reduce net income and earnings per share.

Well in the year 2007 bank’s this ratio has been increased to a great extent due to different
reasons theses are as follows.

Profit before taxation is low for the 2007 due to more expenses because bank is in expanding
mode that’s why its expenses are increasing day by day.

Provisions and bad debts also increased in the year 2007 because bank also has invested more in
this year and ad more also granted more loans.

Formula:

Provision against non-performing loan and advances / profit (loss) before tax

= 3,920,240 / 2,299,785
= 1.70

Loan to deposit

Well there is a concept that bank’s loans are its assets while its deposits are liabilities. But if a
bank has low deposits then obviously it will give low loans because bank gives it’s loans by the
deposits and earn on the loans then pay mark up on the deposits to the customers.

Well bank has increased its loans to deposits ratio in the year 2007 showing its more deposits as
well more loans and that is good for the bank to remain in the market and to penetrate in the
market.

But profit has not increased with the same ratio because

Bank has low mark up rates

Bank has more capacity for provisions

Formula:

Loans / deposit

= 14444143 / 11,197,424

= 1.289

Current ratio

This ratio indicates the liquidity of the bank. Well this ratio has been decreased but nt much
decreased during the year to a small extent due to

Bank has increased its deposits so liabilities have been increased.

Bank has increased its assets as well to overcome the liabilities.

So overall we can say bank is the liquid enough to pay its liabilities

Formula :

Current assets / current liabilities

= 171508419 / 166214583

= 1.03

Debt Ratio:
Debt ratio remained the same in previous year it was .93 and in 2007 its again 0.93. Bank has not
decreased its debt ratio in 2007.

Net Profit Margin:

Net profit margin of a bank has been increased from 0.12 to 0.21.

Horizontal and vertical analysis

Comparing analytical data for a current period with similar computations for prior years affords
some basis for judging whether the condition of the business is improving or worsening. This
comparison of data over time is called as horizontal or trend analysis, to express the idea of
reviewing data for a number of consecutive periods. It is distinguished from vertical analysis or
static analysis which refers to the review of the financial information of only one accounting
period.

HORIZONTAL ANALYSIS

Balance sheet accounts

2007 2006 %age

ASSETS

Cash 13356055 14879230 -1523175 -10.2369

balances wid other
banks 3497054 7333002 -3835948 -52.3107
Lendings 14444143 8392950 6051193 72.09852
Investments 39431005 28625915 10805090 37.74583
Advances 100780162 99179372 1600790 1.614035
o.fixd assets 5128428 3810331 1318097 34.59272
defferd tax assets
other assets 5535038 3812788 1722250 45.17036

TOTAL 182171885 166033588 16138297 9.719899

LIABILITIES

bills payable 2627051 1839077 787974 42.84617

Borrowings 17553525 14964087 2589438 17.30435
deposits&other acc 143036707 131839283 11197424 8.493238
sub-ord loans 2997300 2998500 -1200 -0.04002
liabl against assets
deferred tax liab 471519 736298 -264779 -35.9608
other liab 3219796 2603113 616683 23.69021

TOTAL 169905898 154980358 14925540 9.630601

Net assets 12265987 11053230 1212757 10.97197

PROFIT and loss accounts

2007 2006 %age

interest earned 15143241 12596921 2546320 20.21383

interest expensed 8685624 6977313 1708311 24.48379

net mark up/interest income 6457617 5619608 838009 14.91223

loans & advances 3920240 1128137 2792103 247.4968

value of investment 1501 376 1125 299.2021
bad debts written off
3921741 1128513 2793228 247.514

interest income after provision 2535876 4491095 -1955219 -43.5355

Non markup/interest income

fee,comm,brockerage income 1072868 1013660 59208 5.841012

dividends income 137079 109326 27753 25.38554
income from dealing in for curr 655761 584344 71417 12.22174
gain on sale of inv 2361251 112474 2248777 1999.375
unleasing gain 1728 -2308 4036 -174.87
other income 336809 321758 15051 4.677739

total non markup/interest income 4565496 2139254 2426242 113.4153

7101372 6630349 471023 7.104045

Non markup/interest expense
admin exp 4789536 3277353 1512183 46.14038
other pro/write offs
other charges 12051 6141 5910 96.2384

total non markup/interest expense 4801587 3283494 1518093 46.23407

2299785 3346855 -1047070 -31.2852

Profit before taxation

current yrs 98535 983875 -885340 -89.985

prior yrs -233950
Deferred -245812 113006 -358818 -317.521

-381227 1096881 -1478108 -134.756

Profit after taxation 2681012 2249974 431038 19.15747
profit brought forward 1799979 1617597 182382 11.27487

profit available for appr. 4480991 3867571 613420 15.8606

VERTICAL ANALYSIS

balance sheet accounts

2007 2006
ASSETS

cash 13356055 7.331567657 14879230 8.961578

balances wid other
banks 3497054 63.18030698 7333002 4.416577
lendings 14444143 7.928854115 8392950 5.054971
Investments 39431005 21.64494538 28625915 17.24104
10078016
advances 2 55.32146851 99179372 59.73452
o.fixd assets 5128428 2.815158881 3810331 2.294916
defferd tax assets
other assets 5535038 3.038360173 3812788 2.296396

18217188 16603358
TOTAL 5 8

LIABILITIES

Bills payable 2627051 1.442072689 1839077 1.107654

Borrowings 17553525 9.635693784 14964087 9.012687
14303670 13183928
deposits&other acc 7 78.51744357 3 79.40519
Sub-ord loans 2997300 1.645314259 2998500 1.80596
liabl against assets
deferred tax liab 471519 0.258831927 736298 0.443463
other liab 3219796 1.767449461 2603113 1.567823

16990589 15498035
TOTAL 8 8

Net assets 12265987 11053230

Findings on the basis of analysis

By the horizontal or comparative analysis in which base year is taken as 2006 certain changes are
measured in the Bank’s performance. Cash with other banks and balances with other banks
gradually increased in the time line showing the bank’s good performance and this indicate that
bank can earn more by making balances with the other banks. Lending to financial institutions
not done in the last year due to more investments done by the bank and by giving more and more
advances to the customers but this also has increased the bad debts and provisions of the bank as
compared to the previous years.

Operating assets has been decreased so that is in favor of the bank. On the liabilities side bank
also has increased it’s bills payable that shows that bank has certain increased in the liabilities as
well bank’s deposits also increased showing the great penetration in the market place as well
customer’s believe on the bank to make deposits that’s why bank’s mark up expense has been
increased. Equity also increased in the previous year but bank’s profit has been decreased
because bank has invested so much and in the development process so increased in the expenses.
Overall bank’s financial position in the marketplace has been increased in terms of deposits and
advances. All these reasons are favorable to the bank in year 2006 because at one side bank’s
assets have been increased in the form of advances and at other side markup income increased
due to deposits because bank can more invest it

Balance Sheet’s one portion that is Assets shows certain changes during the year. e.g

Cash & balances with treasury banks have been increased that shows the bank has fulfilled and
improved SBP requirements because of maintenance of foreign currency as well as Pakistani
currency with other banks due to this balances with the other banks whether outside the Pakistan
or inside the Pakistan have been increased.

While investment have been decreased due to making balances with the other banks and so
advances increased by giving more to the customers so earning power also increased. In 2007
bank not lend money to the financial institutions. Bank’s operating fixed assets have been
decreased to a small extent due to this profit also is increased because bank is the service
organization and for service organizations no need of more operating fixed assets. Bank’s
deposits and other accounts have not been increased to the same extent as bank is giving
advances. Well that shows a positive trend because bank expenses would be automatically
decreased that are due to cash management.

Bank’s net assets have been decreased because of less operating fixed assets and also due to
increase in liabilities. Balance Sheet shows the assets are more contributed by the Advances and
liabilities are more contributed y the Deposits that are favorable for the Bank. Overall result is
less profit for 2007 as compared to 2006. But this has certain different reasons these are as
follows

Increase cash and balances with the other banks

More advances

Increase in deposits
All these reasons are favorable to the bank in year 2007 because at one side bank’s assets have
been increased in the form of advances and at other side markup income increased due to
deposits because bank can more invest it.

Applications of Class Room Concept:

• In Accounts department there was an implementation of Financial Accounting in making

balance sheets, income statements, calculation of depreciation etc
• In credits department there was an implementation of different categories of loans like
personal loans, corporate loans etc which was studied in Financial Management.

Recommendations:

Already the bank is having a good infrastructure not much recommendations are needed as a
manager but few can work :-

• Customers should be given some sort of facilities which can convince people for
investment and go for Askari bank for Exports n Imports.
• Fist floor of bank is much congested, there is needed to work on that.
• There is not a proper environment of customer dealing on that floor that’s why customer
feels difficulty in that.
• Accounts department was much congested, so area of that department should be
extended.
• After biannually closing of bank there should be a get together of all the employees of
bank which can give them a healthy atmosphere to work.
• Few of the employees used to interfere in others work so they should be strictly advised
to perform their own duty well.