Askari Bank-Intern Ship Report

Hailey College Of Commerce 1
INTERNSHIP REPORT
Askari Bank Limited
An internship report submitted in partial satisfaction

Of the requirements for the degree of
B.Com (hons.)
2006-2010
In
Finance
To
DR : LIAQAT ALI
by
Khawaja Hasan Bashir
369 (f) Morning
Hailey College Of Commerce

University Of The Punjab
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Letter Of Transmittal
Professor,
MUHAMMAD RAMZAN,
Hailey College of Commerce,
University of the Punjab,
Lahore.
Subject: letter of Transmittal
Respected Sir,
It is a great honor and immense pleasure for me to present you the
internship report as required for the completion of B.Com. Degree programme.
The staff of the Askari Bank has been very Co–operative with me in providing
information regarding the procedures and processes in practice.
Due to certain constraints and legal formalities, I have not been able to gather all
the facts and figures about the organization.
Yet, the report is a comprehensive one, containing a lot of information of different
departments of Bank such as Account Opening, Clearing and remittance, Cash
and Accounts.
Writing this report was truly comprehensive learning experience and the
practical work during the internship period was an enlightening experience for
me.
I have tried my level best to complete the report with respect to the desired
requirements.
Kindly accept this humble effort of bringing forward my learning during internship
as a report.
Yours truly,
Khawaja Hasan Bashir
369 (f) Morning
b.com (hns)
2006-2010
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ACKNOWLEDGEMENT
All thanks to Allah Almighty, the benevolent and compassionate, who blessed me
with the power & capabilities and remained contented on all intricacies found during the
successful completion of my task. I feel myself indebted and highly grateful to honorable
Director Prof. Dr. Liaqat for allowing me to avail such a precious opportunity of six weeks
Internship at Askari bank Ltd. to enhance and polish my skills and knowledge under a
qualitative supervision and constant market touch.
I also extend my thanks to Manager Operations Ms. Rafia Alam, Askari Bank Ltd.
Allama Iqbal Town Branch, Lahore along with all the Staff of the branch for their
encouraging response and guidance to make my assignment as a real learning experience.
DEDICIATION
I dedicated this assignment to my Parents and Teachers who have always been a source
of inspiration to me and to Ms. Rafia Alam (Operations Manager of Askari Bank) who
gave me great knowledge about banking sector.
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EXECUTIVE SUMMARY
Banking operations and services are one of the basic needs of an economy. These include
acceptance of deposits and disbursement of advances to individuals and others at higher
rates. Banks perform various fundamental factions, which are directly or indirectly
contributory towards economic and social development of countries.
The banking structure in Pakistan comprises of the following types, State Bank of
Pakistan, Commercial Bank of Pakistan, Exchange Banks, Saving banks, Cooperative
banks, and specialized credit institutions. The state bank of Pakistan is the Central bank
of the country and was established on July 01, 1948. The network of bank branches now
covers a very large segment of national economy. The State Bank of Pakistan issues the
shares of these periodically. Bank employees and other common peoples can also
purchase these shares and earn profit.
I have done my internship at The Bank of Punjab, New Muslim Town branch Lahore.
The Askari Bank, a commercial bank was established in October 09, 1991, Askari Bank
Commenced (begin) to operations in April 1992, as a public limited company. The bank
is listed on the Karachi, Lahore and Islamabad Stock Exchanges and the initial public
offering was over subscribed by 16 times. While capturing the target market share
amongst the view banks, Askari has provided good value to its shareholders.
The purpose of this report is to study operations and analyze performance of AskariBank
to see whether the bank is successful in its operational performance or not, and
recommending possible solutions for problems. For meeting the purpose both secondary
and primary data have been used.
:
Firstly I start with the introduction and objectives of report and describes the history and
Introduction of banking in Pakistan.
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Then I give the review portion and contains introduction the organization, The Askari
Bank, was established in October 09, 1991. Remaining parts are explaining vision,
mission, values, objectives and customers of Askari Bank.
Then shows the management, branch structure, organizational structure, operations of

Askari Bank, sources and allocation of funds of the Askari Bank.
Then the portion which contains the products and services offered by The Askari Bank.
Then the portion which contains the learning of eight weeks internship
Then the analysis part of the report and is comprising of two parts. First part is the SWOT
analysis. SWOT analysis is an integral part of analysis. As an internee I was deeply
concerned about the performance level of the BOP and therefore tried to analyze the bank
financial performance that is included in this section, it reveals that the bank is trying to
regain its position in the present more dynamic and competitive environment. Major
findings are included in this summary which is the outcome of these analyses. Second
part contains ratio analysis of Bank.
.
Then the recommendation and conclusion.
Recommendation part and is derived from the previous section of learning. Major
findings are stated in this part. The action plans are included in section with the hope that
if implemented properly will enhance the bank’s overall productivity and will also enable
it to compete more efficiently and effectively. These plans are related to exploration of
new opportunity present in the agriculture sector, effective management and recovery of
advances and marketing activities respectively.
During the study, findings extracted are listed below:

• Mark up expense of the bank has reduced and administrative expenses have
shown increase.
• Non-performing advances have reduced; deposits show consistency.
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• Due to lack of job rotation opportunity and lack of informal group existence,
employees do not share each other workload.
• The recent downsizing hustle and bustle trends have affected bank’s efficiency
due to lay-off survival syndrome.
• Motivation level of employees is not satisfactory which effects their own and as
well as performance of the organization.
• In proportion to number of accounts and functions performed sizes of branch’s
building is small.
• Newly developed account opening form carries restricted space where only two
applicant’s names can be incorporated.
Recommendations of the report are as under:

• Training for developing managerial leadership should be provided.
• Political interference in placements etc. should be discouraged.
• Exercise should be evolved to bring needed cultural and other management
changes.
• Recruitment policies should be changed, M.COM, MBA’s and other business
related qualified individuals should be hired.
• HRD should frequently conduct refresher courses.
• Computer training courses should be imparted.
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CONTENTS
Page#
VISION 11
MISSION 11
OBJECTIVES 12
STRATEGIC PLANNING 12
CODE OF ETHICS AND CONDUCT 12
CORPORATE INFORMATION 13
HISTORY OF ASKARI BANK 14
NEW CORPORATE IDENTITY 14
ORGANOGRAM 16
BRANCHES 17
ENTITY RATING 18
PRODUCTS 19
Consumer Banking Services 19
 Personal Finance 19
 Mortgage Finance 21
 Business Finance 21
 Smart Cash 22
 Auto Financing 23
Corporate & Investment Banking Group (CIBG) 23
 Corporate Banking Division (CBD) 23
 Investment Banking Division 24
INTERNSHIP SECTION 25
Clearing Department 26
 Clearing Outward 27
 Clearing Inward 27
 Online System 27
 Procedure of Clearing Outward 27
 Procedure of Clearing Inward 28
 IBCA Generation 29
 IBDA Generation 29
 Same Day Clearing 29
Outer Bills for Collection (OBC) 31

 Procedure for Outer Bills for Collection 31
 OBC Charges 31
 Entries Made In OBC 31
 Inter Bills for Collection (IBC) 32
Inter City Clearing 32
Cities of Intercity Clearing 32
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REMITTANCES 33
 Advantages of Remittances 34
 Eligibility Criteria 35
 Procedure for the Issuance of DD/PO 35
 Demand Draft / Pay Order Specimen 36
 Issuance of DD against Cash 37
 Issuance of DD upon Tender of Cheque 37
 Signing of Demand Draft 37
 Delivery of Demand Draft 37
 Payment of Demand Draft through Cash 38
 Payment of Demand Draft through Clearing 38
 Payment of Demand Draft through Suspense Accounts 38
 Cancellation of Demand Draft 38
 Request for IBCA to Drawee Branch 38
 Loss/Stop Payment and Issue of Duplicate Demand Draft 39
 Entries Involved In DD/PO Mechanism 40
 Charges 40
 Stamps in Clearing Inward Of DD/PO 40
 Foreign Telegraphic Transfer (FTT) 41
ACCOUNT OPENING DEPARTMENT 42

 Accounts of Proprietorship Concerns 43
 Accounts of Partnership Firms: 44
 Account of Joint Stock Companies 45
 Joint Accounts 47
 Accounts Opening Requirements 48
 Other Routine Activities in Accounts Opening Department 50
 Documents checklist 52
TRADE DEPARTMENT 58
 Terms Relating To Letter Of Credit 58
 Types of Payment in Letter Of Credit 61
 INCO Term 61
 Operation of Letter Of Credit 62
FINANCIAL ANALYSIS OF ASKARI BANK 67

 Balance Sheet 68
 Profit and Loss Statement 69
 Statement of Changes In Equity 70
 Goals 71
 Methods 71
o Past Performance / Horizontal Analysis 71
o Vertical Analysis 71
o Ratio Analysis 71
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o Comparative Performance 71
Horizontal and Vertical Analysis of Income Statement 72

 Mark-Up / Return / Interest Earned 72
 Mark-Up / Return / Interest Expense 74
 Net Mark-Up / Interest Income 76
 Provision Against Non-Performing Loans And Advances 76
 Provision For Impairment In The Value Of Investments 77
 Net Mark-Up / Interest Income After Provisions 78
 Non Mark-Up/Interest Income 79
 Dividend Income 80
 Income From Dealing In Foreign Currencies 80
 Gain On Sale Of Investments 81
 Other Income 81
 Non Mark-Up/Interest Expenses 82
 Administrative Expenses 82
 Other Charges 83
Ratio Analysis 85
 Average Rate Of Lending 85
 Average Rate Of Borrowing 86
 Ratio Of Administrative Cost To Deposit 87
 Spread Of Bank 88
 Margin %Age 89
 Cash Reserve Ratio (CRR) 89
 Current Ratio 90
 Debt Equity Ratio 91
 Infection Ratio 92
 Return On Assets 93
 Return On Equity 93
SWOT ANALYSIS 97
CONCLUSION AND RECOMMENDATION 102
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VISION
To be the Bank of First Choice in the Region
MISSION
To be the leading private sector bank in Pakistan with an international presence,
delivering quality service through innovative technology and effective human resource
management in a modern and progressive organizational culture of meritocracy,
maintaining high ethical and professional standards, while providing enhanced value to
all our stake-holders, and contributing to society
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OBJECTIVES
o To achieve sustained growth and profitability in all areas of business.
o To build and sustain a high performance culture, with a continuous improvement
focus.
o To develop a customer-service oriented culture with special emphasis on
customer care and convenience.
o To build an enabling environment, where employees are motivated to contribute
to their full potential.
o To effectively manage and mitigate all kinds of risks inherent in the banking
business.
o To maximize use of technology to ensure cost-effective operations, efficient
management information system, enhanced delivery capability and high service
standards.
o To manage the Bank's portfolio of businesses to achieve strong and sustainable
shareholder returns and to continuously build shareholder value.
o To deliver timely solutions that best meets the customers’ financial needs.
o To explore new avenues for growth and profitability.
STRATEGIC PLANNING
o To comprehensively plan for the future to ensure sustained growth and
profitability.
o To facilitate alignment of the Vision, Mission, Corporate Objectives and
Corporate Philosophy, with the Business Goals and Objectives.
o To provide strategic initiatives and solutions for projects, products, policies and
procedures.
o To provide strategic solutions to mitigate weak areas and to counter threats to
profits.
o To identify strategic initiatives and opportunities for profit.
o To create and leverage strategic assets and capabilities for competitive advantage
CODE OF ETHICS AND CONDUCT
Askari Bank seeks to maintain high standards of service and ethics enabling it to
be perceived as impartial, ethical and independent. In addition to the general guidelines,
the following are the salient features of the Bank’s code of ethics and conduct.
• Presence of a corporate culture that seeks to create an environment where all persons
are treated equitably and with respect.
• Employees must carry out their responsibilities in a professional manner
at all times. They must act in a prudent manner and must avoid situations that
could reflect unfavorably on themselves, the Bank or its customers.
• Employees must commit to the continued development of the service culture in which
the Bank consistently seeks to exceed customers’ expectations. Fairness,
Truthfulness and Transparency govern our customer relationships in determining the
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transactional terms, conditions, rights and obligations.
• Employees must safeguard confidential information which may come to their
possession during the discharge of their responsibilities. Respect for customers'
confidential matters, merits the same care as does the protection of the Bank's own affairs
or other interests.
• Employees must ensure that know your customer principles are adhered by
obtaining sufficient information about the customers to reasonably satisfy ourselves
as to their reputation, standing and the nature of their business activities.
• Employees must avoid circumstances in which their personal interest conflicts, or
may appear to conflict, with the interest of the Bank or its customers. Employees must
never use their position in the Bank to obtain an advantage or gain.
• Employees must not enter into an agreement, understanding or arrangement
with any competitor with respect to pricing of services, profit rates and / or marketing
policies, which may adversely affect the Bank's business.
• Employees must not accept gifts, business entertainment or other benefits from a
customer or a supplier / vendor, which appear or may appear to compromise
commercial or business relationship.
• Employees must remain alert and vigilant with respect to frauds, thefts or illegal
activities committed within the Bank premises.
CORPORATE INFORMATION
Lt. Gen. Imtiaz Hussain (HIM) Chairman

Lt. Gen. (R) Zarrar Azim Chairman Executive Committee
M.R.Mehkari President & Chief Executive
Brig (R) Muhammad Shiraz Baig Director
Brig (R) Asmat Ullah Khan Niazi Director
Brig (R) Muhammad Bashir Baz Director
Brig (R) Shaukat Mahmood Chaudhari Director
Zafar Alam Khan Sumbal Director
Kashif Mateen Ansari Director
Muhammad Najam Ali Director
Muhammad Afzal Munif Director
Tariq lqbal Khan Director (NIT Nominee)
Saleem Anwar Company Secretary
AUDIT COMMITTEE
Brig (R) Asmat Ullah Khan Niazi Chairman
Brig (R) Muhammad Shiraz Baig Member
Mr. Kashif Mateen Ansari Member
AUDITORS
A.F.Ferguson & Co. Chartered Accountants
LEGAL ADVISORS
Rizvi, Isa, Afridi & Angell
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HISTORY OF ASKARI BANK
The banking sector has witnessed a dramatic change during the last sixteen years
with the development of Askari Bank, which is not only redefining priorities and focus of
the banks, but also threatening the domination of traditional players.
The story begins with the incorporation of Askari Commercial Bank limited in
Pakistan on October 09, 1991, Askari Bank Commenced (begin) to operations in April
1992, as a public limited company. The bank is listed on the Karachi, Lahore and
Islamabad Stock Exchanges and the initial public offering was over subscribed by 16
times. While capturing the target market share amongst the view banks, Askari has
provided good value to its shareholders.
Askari Bank has expanded into a nation-wide presence of 149 branches, including
14 dedicated Islamic Banking Branches, and an Off-Shore Banking Unit in Bahrain. A
shared network of over 2,670 online ATMs covering all major cities in Pakistan supports
the delivery channels for customer service. As at December 31, 2007, the bank had equity
of Rs. 12.3 billion and total assets of Rs.182.2 billion, with over 751,000 banking
customers, serviced by our 5,896 employees
Askari Bank is the only bank with its operational head office in the twin cities of
Rawalpindi - Islamabad, which have relatively limited opportunities as compared to
Karachi and Lahore. This created its own challenges and opportunities, and forced as to
evolve an outward-looking strategy in terms of Askari market emphasis. As a result,
Askari developed a geographically diversified assets base instead of a
concentration and heavy reliance on business in the major commercial centers of
Karachi and Lahore, where most other banks have their operational Head offices.
NEW CORPORATE
IDENTITY
Corporate identity is the business face in

the market. The corporate identity creates an
impression of the company without a single
descriptive term. It is what comes to mind for a
customer when they hear the name of the
company. A great corporate identity can boost a
business from the ground to the stratosphere.
The logo serves as the foundation of corporate
identity. It is the image that represents company
without necessarily displaying the name or
product. A quality logo gives the customer the
feeling that the business is reliable and worthy of their patronage.
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Over the past fifteen years the banking industry has witnessed tremendous
growth. During this phase of commercialization Askari bank’s performance has been
remarkable. With the growing competition and changing environment, it became
inevitable to change the brand and launch a new corporate identity with an objective to
project the bank’ s image in a more effective and impressive way on the national and
international horizons.
To cope with the market dynamics, the management and board of directors of
Askari Bank decided to change the name of brand from Askari Commercial Bank
Limited to Askari Bank Limited. The new corporate identity is a milestone which
represents the underlying values of the Askari bank resulted in its success to date, as well
as its look ahead towards an even brighter future. This entailed adopting best practices,
enhancing our products, services and branch network through a customer- centric
approach. Its new identity is a firm statement of its pledge to that change and above all its
commitment to people. The new identity is thus a living, breathing symbol of a holistic
strategy and is based on the pillars of people, relationships, partnership and trust.
The typeface used for the bank’s logo is simple yet elegant. Without being overly
stylish, it makes a solid statement about the bank, its approach to business while
maintaining the most critical aspect of any logo’s design, readability. This signifies
ability of any text to be readable and recognizable at first glance. The new “askaribank”
logo is distinctive and can be recognized instantly on sight. The use of all lower case
letters and the use of “askari” and “bank” as one word give the logo a unique identity,
enabling it to stand out from the crowd. The last two colors, orange and yellow, are used
in a combination which is representative of a rising sun. The colors themselves, aside
from the positive connotations of a rising sun, carry the joint properties of sunlight, joy,
happiness, hope, wealth, energy and enthusiasm. The stylized 3D icon represents a
positive link between the past, present and future of the bank.
But the promise that the Bank avowed today is not limited only to its customers,
employees and shareholders. Its commitment today is to the nation as a whole, it realize
that its progress and that of the country is inextricably interwoven. Askari measure its
success by the degree to which it makes a difference in the lives of all people, its
customers, employees, stakeholders, partners, the banking industry at large and the wider
social community. The corporate identity, which reflects a vision to significantly touch
the lives of each and every person whom the Bank shares a relationship with as every
such person plays a key role in steering the Askari Bank towards success. Askari Bank is
very serious and committed to translate the values of our new identity into reality. In that
sense, this is a very significant moment for us because it represents more than just a
change in our corporate image.
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NATION-WIDE DISTRIBUTION OF BRANCHES / REGIONS
/ AREAS AND OPERATING UNITS
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PRODUCTS BY
ASKARI BANK
CONSUMER BANKING SERVICES
Consumer finance often refers to a particular type of business, sub prime branch
lending (that is lending to people with less than perfect credit). This branch of the
financial services industry is more extensive because the major banks are less willing to
lend to people with marginal credit ratings. That’s why this type of financing is getting
more familiarity in Pakistan and most of the banks are enhancing their investments
portfolio in Consumer Banking Services
Askari Bank is providing the following financing facilities under Consumer

Banking Services
o Personal Finance
o Mortgage Finance
o Business Finance
o Smart Cash
o Auto Financing
o Askari Debit Card
o Travelers Cheques
PERSONAL FINANCE
Askari provides the personal finance facility and they claim that it is one of
the quickest approval processes around and anyone can avail unlimited opportunities
through Askari Bank’s Personal Finance. Askari provides unmatched financing features
in terms of
• loan amount,
• payback period and
• most affordable monthly installments
PRODUCT FEATURING
Borrower: Resident Pakistani Nationals.

Facility: Term Finance
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Financing Limits: Maximum upto Rs. 500,000/. (Clean) as per R-5
Maximum upto Rs. 1 Million. (Secured)
Tenor: Maximum upto 5 Years
Repayment: Monthly Installments
Markup Rates: Competitive
Servicing: Available at all Askari Bank branches
Balance Transfer Facility: Available
ELIGIBILITY TO APPLY
Age: Between 21 to 65 years.

Income: Minimum gross monthly income of Rs. 10,000/- only.
Financing Limits:Maximum upto Rs. 500,000/. (Clean)
Employment: a) Salaried: Minimum length of confirmed service with present
employer is 6 months with a total length of 1 year
service.
b) Self Minimum 1 year in business.
Employed:
Charges/Fees: As per current schedule of charges.
EXTRA FACILITIES IN PERSONAL FINANCE
Back to Original
Under this scheme borrower can avail extended amount of finance upto the utilized
allocated amount, if his/her repayments are regular.
Balance Transfer Facility

It gives the customer the opportunity to pay off his/her outstanding dues on their credit
cards or other loans at a rate of interest much lower than what one pays on them. That not
only frees up their credit limit, but cost of servicing the debt is greatly reduced.
Computer Loans
This scheme was launched to promote the I.T. technology in the country. In this regard,
Askari have made arrangements with Multinational companies and large local corporates
including schools & colleges.
Dream Life (Financing for Consumer Durables)

Askari is considered to be financial market player in delivering quality service to
customers with highly professional standards. So Askari have joined hands with various
Electronic Companies for sale, of the domestic appliances against consumer financing.
Under this scheme, Askari Bank is financing products of these companies, which would
benefit those people who can only afford to buy home appliances on installments due to
limited resources. In addition to this, Askari have also signed agreements with other top
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manufacturers of automobiles for financing of motorcycles to the general public at most
competitive rates.
MORTGAGE FINANCE
Ever since the inception of life, shelter has been rated among the primary needs of
mankind. Owning a home for oneself still remains an exclusive dream for many. Askari
Bank has made the realization of your dream to have a house of your very own possible.
Whether you plan to build a house, tailor made to your requirements or buy a constructed
house, Askari mortgage finance enables you to pursue your goal without any problems.
PRODUCT FEATURING
Borrower: Resident Pakistani Nationals.

Financing Limits: Maximum upto Rs. 30 Million.
Tenor: Maximum upto 20 years.
Repayment: Monthly Installments.
Prime Security: Mortgage of property.
Servicing: Available at all Askari Bank Branches
Balance Transfer Facility: Available
Age: Between 21 to 65 years.

Income: a) Salaried: Minimum gross monthly income of
Rs.20,000/- only and a permanent
employee with at least 2 years of service
including present employer.
b) Self Employed: Minimum length of 1 years in business.
BUSINESS FINANCE
Everyone always wanted to put in that extra money into your business, which
makes it grow and grow. Now Askari provided who can wipe out your worried about
your daily cash requirements, and start enjoying our unique Askari Business Finance
facility.
Available upto 60% of the assessed market value of your residential property,
through equitable / token mortgage
PRODUCT FEATURING
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Borrower Resident Pakistani Nationals.
Facility Running Finance/Term Finance.
Financing Limits Maximum upto Rs.1.0 Million
Maximum upto Rs.50.0 Million
Primary Security Residential & Commercial / Built up Properly & Land.
Mode of Financing Running Finance: One year line of credit (renewable).
Repayment Running Finance: Monthly debt servicing on the outstanding
balance.
Markup Rates Competitive.
Servicing Available at all Askari Bank Branches.
Balance Transfer Facility Available
Age 21 to 65 Years.
Borrowers Resident Pakistani Nationals.
Business Requirements Maximum upto Rs. 500,000/. (Clean)
Employment Minimum one year's business or professional experience in
the present business
Charge / Fee As per current Schedule of charges
SMART CASH
Smart cash is the facility provided by the Askari Bank in the form of Cash Loan
PRODUCT FEATURING
Borrower: Resident Pakistani Nationals

Facility: Personal Line of Credit.
Maximum upto Rs. 500,000/-(Clean)
Financing Limits:
Maximum upto Rs. 1 Million (Secured)
Tenor: One year (renewable).
Monthly debt servicing on the outstanding
Repayment:
balance.
Markup Rates: Competitive.
Servicing: Available at all Askari Bank Branches
Balance Transfer
Available.
Facility:
Age: Between 21 to 65 Years.

Income: Minimum gross monthly income of Rs. 25,000/- only.
Employment: a) Salaried: Minimum length of confirmed service
with present employer is six months with a total length
of one year service.
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b) Self Employed: Minimum 1 year in business.
(against security).
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AUTO FINANCING
Askari Bank offers the most convenient and affordable vehicle financing scheme
to help you own your favorite brand new car.
PRODUCT FEATURES
Borrower: Resident Pakistani Nationals

Facility: Term Financing
Financing Limits: Rs: 100,000/- to Rs: 3.0 Million
Repayment: Monthly Installments
Balloon Payment: Available
Salaried: Rs: 10,000/-,
Minimum Income:
Self Employed Businessman: Rs: 25,000/-
Charge / Fees: As Per current Schedule of Charges
Auto Insurance: Mandatory
Financing Tenor Up to 7 years
CORPORATE & INVESTMENT BANKING GROUP

(CIBG)
As Askari Bank understand the unique business requirements of our corporate and
institutional clients, and accordingly, strive to meet their expectations through the
provision of a customized, relationship based banking approach, through the Corporate
and Investment Banking Group (CIBG).
CIBG is a one-window operation that provides all requisite banking services for
corporate clientele in an efficient, dependable, consistent, and competitive manner – the
objective being to become your “bank of first call” for all your financial needs.
CIBG is specifically structured to provide dedicated banking services and
products to its corporate customers through two key divisions.
o Corporate Banking Division

o Investment Banking Division
CORPORATE BANKING DIVISION (CBD)
CBD is your long-term business partner that is geared to help corporates in

meeting their business growth objectives. The business is managed by a team of
professionals who understand their requirements and can firmly stand by their side.
Dedicated relationship managers for each of our corporate clients ensure their
satisfaction, which is our top priority. Askari’s relationship oriented outlook focuses upon
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providing a complete array of tailored financing solutions, that are practical and cost
effective, some of which include:
o Working Capital Facilities

o Term Loans
o Structured Trade Finance Facilities
o Letters of Guarantee
o Letters of Credit
o Fund Transfers / Remittances
o Bill Discounting
o Export Financing
o Receivable Discounting
INVESTMENT BANKING DIVISION
IBD provides value-added, specialist services and products through a dedicated

team of professionals, with world-class skills, to provide customized solutions to help
clients meet their strategic objectives. IBD is responsible for seamlessly originating,
executing and distributing all forms of investment banking transactions ranging from
syndicated loans to complex structured and project financing transactions. Some
examples of products offered by IBD include:
o Strategic Advisory
o Privatization Advisory
o M & A Advisory
o Balance Sheet Restructuring
o Syndications
o Project Finance
o Structured Finance
o Islamic Finance
o Private Placements of Debt and Equity
o Issuance and distribution of Term Finance Certificates, Sukuk Bonds, and
Commercial Paper
o Underwritings
o Capital Market Hybrid Products
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INTERNSHIP
SECTION
CLEARING
DEPARTMENT
o LOCAL CLEARING
o SAME DAY CLEARING
o OUTER BILLS FOR COLLECTION - OBC
o INTER BILLS FOR COLLECTION – IBC
o INTERCITY CLEARING
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CLEARING DEPARTMENT
Clearing is a vital service provided by the commercial banks to their customers.
Clearing involves the settling of balances between banks by netting out obligations
and credits rather than transferring the gross amounts.
MEANING OF CLEARING:
The word clearing has been derived from the word "Clear" and is defined as "a
system by which banks exchange cheques and other negotiable instruments drawn on
each other within a specified area and thereby secure payment for their clients through
the clearing house (NIFT is performing this now a days) at specified time" in an efficient
way.
DEVELOPMENT OF CLEARING
Before 1775, the practice followed for collection of cheques drawn on other
banks was that the collecting bank sent clerks with bundles of cheques technically
called “CHARGES” These clerks were called "WALK CLERKS" .These clerks used
to go to each of the banks on which the cheques were drawn and collected cash for the
cheques tendered. This practice was very time consuming and trouble some. As a result,
the clerk started holding informal meetings, in order to exchange these cheques. This
was the beginning of the concept of clearing.
According to W.Evitt in his book on Banking, it was a bank clerk, named
Irvin who originated this idea. This finally lead to the establishment of the
London Clearing House, in 1775. In the beginning certain banks kept themselves
aloof from this Clearing House, but after some time they associated with the organization
realizing its obvious advantages
Today, use of cheque, has become very common. People have, realized that it
is more convenient to make and receive payment by means of cheques than by cash.
That’s why most of the banking transaction by bank’s customer is done by cheques rather
than on cash.
ADVANTAGES OF CLEARING:
1. No cash is needed as such the risks of robbery, embezzlements and pilferages are
Totally eliminated.
2. As major payments are made through clearing, the banks can manage cash payments
at the counters with a minimum amount of cash in vaults.
3. A lot of time, cost and labour is saved.
4. Since it provides an extra service to the customers of banks without any

service charges or costs, more and more people are inclined and attracted towards
banking.
27
CLEARING
Clearing Clearing
Outward Inward
CLEARING OUTWARD
It is the type of clearing in which our clients deposit the instrument of some other
bank’s branches of same city or the instrument of outstation branch which have the
facility of inter-city clearing
e.g. if the Askari’s customer deposit the cheque of Bank Alfalah in his account then this
cheque is lodged in local clearing and the fund are credited in his account in the afternoon
of the next day
CLEARING INWARD
It is the type of clearing in which our clients’ cheques are deposit in other bank’s
branches or in outstation branches of other banks which have the facility of inter-city
clearing
e.g. If the cheque of Askari SAT branch Customer is deposited by the customer of Bank
Alfalah in his account, then the cheque is lodged by in clearing by BAL. This is Clearing
Inward for us and Clearing Outward for BAL and the fund are credited in his account in
the afternoon of the next day
ONLINE SYSTEM
Online System is the system of inter-linked computers of the branches of the same
bank. Now a days ONLINE SYSTEM has provided the solution to settle the cheques of
same bank of same city or other city
e.g. If Askari SAT Branch customer deposit the cheque of Askari Tufail Road or the
cheque of Askari Karachi Branch, then it is settled through clearing Online System and
the funds are credited in the customer’s account at the same time
PROCEDURE OF CLEARING OUTWARD
o Banker receives instruments for clearing outward before 12pm or 1pm

• Banker checks the instrument
• Signatures on both deposit slip and cheque
28
• Amount in figures and words
• Its validity whether stale or post dated
• Not mutilated or torn
• Over-writing, etc
o Banker then fixed the Clearing stamp on both instrument and the deposit
slip and return the other portion of the deposit slip to the customer
In afternoon,
o Banker separate the deposit slip from the cheque
o Stamp of Account Payee Credited (Discharge Stamp) at bank of Instrument
o Crossing of Instrument at the front of Instrument
o Entry in the Uni-bank of the Askari bank and the Credit is transferred to the
customer’s account in float
o Instruments are sent to other bank’s branches in morning of next day
o Other bank’s branches take this as Clearing Inward or otherwise dishonour the
Instruments and return to the Askari SAT branch on the same day through NIFT
by attaching the dishonour memo by mentioning the reason of dishonour usually
the reason of funds insufficient. Other bank deduct the charges from his
customer’s account
o System automatically credit the funds at day end and the reversal entry of debit is
taken place by the banker to cancel the effect of credit of dishonour instruments
and deduct charges of dishonour from his customer’s account. Askari SAT has
already received the funds from Karachi Main in the form of IBCA
o Askari SAT as being a main branch, receives the IBCA of fund of his same
branch and on behalf of other branches
o Askari SAT respond the IBCA (DR) and make IBCAs for other branches to send
funds to other branches of IBCA
PROCEDURE OF CLEARING INWARD
Banker receive instruments of his customer that have been presented in some
other bank’s branches on the day start
Banker checks the instruments in following manner

o UV (Ultra Violet scanned)
o Checking the CR balance in customer’s account and amount is Debit from the
customer’s account otherwise dishonour the instruments and return to the
respective branches and deduct dishonour charges from customer’s account
o Other branches make an IBCA in favor of Askari SAT because they DR the
customer’s account (when other branches do clearing inward)
o CR is transferred to the Head Office – Karachi Main by making an IBCA by
Askari SAT in flavor of Karachi Main on behalf of other branches of Askari (by
responding their IBCAs which they receive during the day through fax) and also
of his branch which is later then settled the net amount with the treasury of the
other bank by our treasury department
29
IBCA GENERATION
IBCA is the abbreviation of INTER BANK CREDIT ADVICE and this advice is
used for the credit transfer within the branches of the same bank
e.g. If any bank of askari of Askari has liability to give funds to any other branch in
Lahore then he will make an IBCA and give to that bank. After that other branch with
respond the IBCA (DR) and CR his head office account
IBDA GENERATION
IBDA is the abbreviation of INTER BANK DEBIT ADVICE and it is just made
by the head office. It is made in that case when branches has the liability to give fund to
the head office
e.g. If head office do any work on behalf of bank then bank got the liability to give funds
to head office like HEAD OFFICE pay for stationary that has been printed for branches
and it paid by the head office on behalf of branches.
Head office will made and IBDA which will represent that the branch account in head
office has been debited and head office has been credit , so it is the advice for the branch
to DR his head office account in your books of accounts
SAME DAY CLEARING

It is the facility given by the bank to its prestigious and esteemed customers to
clear their cheques within the same day.
e.g. If any customer of Askari presented his cheque payable by any other bank (Clearing
outward) then this cheque obviously lodged in clearing outward but it may be lodged in
SAME DAY CLEARING so that the customer can take his funds (CR his account) rather
than wait 2days if it fulfills the following conditions
o Payable Bank must be the member of same day clearing
o Cheque amount must be more than Rs 500,000
Cheque should be submitted before 10am and same day clearing charges are Rs 60
30
31
OUTER BILLS FOR COLLECTION (OBC)
This is the services section provided by the bank in which the bank provides the
facility to collect the funds of the instruments of outstation on behalf of its customers.
e.g. if Askari SAT customer present the cheque of Bank Alfalah PATTOKI then this
cheque will be lodged in OBC.
PROCEDURE FOR OUTER BILLS FOR COLLECTION
o Banker receives instruments for OBC before 12pm or 1pm

• Banker checks the instrument
• Signatures on both deposit slip and cheque
• Amount in figures and words
• Its validity whether stale or post dated
• Not mutilated or torn
• Over-writing, etc
o Banker then fixed the Collection stamp on both instrument and the deposit
slip and return the other portion of the deposit slip to the customer
In afternoon,
o Banker separate the deposit slip from the cheque
o Stamp of Account Payee will be credited (Discharge Stamp) at bank of Instrument
o Crossing of Instrument at the front of Instrument
o Entry in the Uni-bank of the Askari bank and the Credit is transferred to the
customer’s account in float
o Instruments are sent to the main branch of that city and then cheque is lodged in
local clearing.
o That main branch receives the finds as in local clearing and then transfer the funds
to Askari SAT through IBCA
o Askari SAT respond the IBCA and give CR to the particular customer on behalf
of which collection has been made
o OBC is done through mail
OBC CHARGES
Instrument amount Rs 1,000,000 then OBC charges Rs 275

If instrument exceeds Rs 1,000,000 then Rs 1200
ENTRIES MADE IN OBC

DR: Suspense A/C clearing
CR: CPR OBC (General Ledger- GL account)
CPR = Cheque Pending for Realization
After clearing
32
DR: CPR OBC (General Ledger- GL account)
CR: Head Office account
DR: Head Office
CR: Askari SAT
R: Askari SAT
CR: Customer Account
INTER BILLS FOR COLLECTION (IBC)

Instruments in IBC are that instruments which are sent in OBC by other banks.
We receive cheques in mail
o Check
• OBC stamp
• Crossing stamp
• Discharge stamp at back
o After that, instruments are lodged in local clearing if of other branch of
askari otherwise we DR the customer and CR the CPR OBC
o At day end, DR the CPR OBC and IBCA for head office
o Head office will respond IBCA (DR) and CR that particular branch who
lodged instruments in OBC
INTER CITY CLEARING

Inter city clearing is the same as local clearing but it is done in two different
cities. It is the service provided by the NIFT to clear the instruments in short time as local
clearing to facilitate the customers. But the payable bank’s city should be the member of
intercity clearing
Stamps involve in inter city clearing:

• In this case, Payee’s account credited stamp is affix at back of instrument
• And Clearing is mark on front of instrument rather than collection stamp
• Inter city clearing charges vary with the amount of the instrument
CITIES OF INTERCITY CLEARING

o Lahore
o Karachi
o Faisalabad
o Multan
o Peshawar
o Sialkot
o Muzarrabad
o D.I.KHAN
o Islamaabd
o Gujranwala
o Bahalwalpur
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o Rawalpindi
o Quetta
o Sukhar
REMITTANCE
DEPARTMENT
o ADVANTAGES OF REMITTANCES
o ELIGIBILITY CRITERIA
o PROCEDURE FOR THE ISSUANCE OF DD/PO
o REMITTANCE APPLICATION FORM
o DEMAND DRAFT / PAY ORDER SPECIMEN
o ISSUANCE OF DD AGAINST CASH:
o ISSUANCE OF DD UPON TENDER OF CHEQUE:
o SIGNING OF DEMAND DRAFT:
o DELIVERY OF DEMAND DRAFT:
o PAYMENT OF DEMAND DRAFT THROUGH CASH:
o PAYMENT OF DEMAND DRAFT THROUGH CLEARING:
o PAYMENT OF DEMAND DRAFT THROUGH SUSPENSE ACCOUNTS:
o CANCELLATION OF DEMAND DRAFT:
o REQUEST FOR IBCA TO DRAWEE BRANCH:
o LOSS/STOP PAYMENT AND ISSUE OF DUPLICATE DEMAND DRAFT:
o ENTRIES INVOLVED IN DD/PO MECHANISM
o CHARGES
34
o STAMPS IN CLEARING INWARD OF DD/PO
o FOREIGN TELEGRAPHIC TRANSFER (FTT)
35
REMITTANCES
Remittances mean transfer of funds from one place to another. Now a days
remittance is considered as one of the important functions of commercial banks. The
transfer of money is required, not only by the business community but also needed by
general public. Commercial banks not only earn a reasonable amount of
commission, through providing remittances facility to public but they can also
increase the number of their account holders. Inland remittances i.e. Transfer of funds
within the country may he affected freely and liberally by the branches of commercial
banks. In our Bank following products are available for the transfer of funds.
o Demand Draft
o Pay Order
o Rupee Travelers Cheques
o Online Transfer of Funds
o Telegraphic Transfer
PRODUCT USE
Demand Draft (DD) Inter city transfer of funds
Pay Order (PO) Intra city payments
Rupee Travelers Cheques (RTC) Both Intercity as well as intracity transfer of funds
Online Transfer of Funds Both Intercity as well as intracity transfer of funds
Telegraphic Transfer Within countries
ADVANTAGES OF REMITTANCES
o Due to availability of bank's branches in every nook and corner of the country,
inland remittances may be easily affected any where.
o There is no limit fixed on the amount in case of remittances through banks.
o Risks of wrongful payments are lass in case of bank’s transfer of funds.
o Risks involved in physical transportation of money are eliminated.
36
ELIGIBILITY CRITERIA
1. Can be issued to the individuals.

2. Business concerns.
3. Cannot be issued to the minors, insane & illiterate non-account holders.
PROCEDURE FOR THE ISSUANCE OF DD/PO
Remittances application form is filled up and signed by the purchaser. First

signatures on upper column are obtained as applicant; while 2nd signature on lower
column is obtained as an acknowledgement of having received the Demand Draft.
Thumb impressions are not acceptable on the application form. Incase of an
illiterate account holder, he is allowed to affix thumb impression under which his account
number is mentioned.
Remittances application forms for the issuance of Demand Draft are scrutinized
on the following points:
o Full and correct name of the payee, whether his account number and his bank
name is optional
o The amount in words and figures should be the same.
o In case of non customers, full address of the purchaser must be given on
application form and his CNIC is must for the bank officer to be taken as per SBP
rules and regulations
Now a days SBP has imposed a mild restriction to issue DD or PO for non
customer because this activity may be involved in money laundering or terrorist
activity and extra charges are levied on applicant for the making of PO or DD
o Customer is required to deposit the cash (amount + bank’s commission) in his

account so that banker can issue DD/PO in case of non customer.
o Customer present the deposit slip to ensure the banker that he has deposited the
amount
o Banker DR the account of the customer and CR the account DD/PO issued during
the day that is the account of General Ledger (GL)
o DD/PO is printed and handed over to the customer
37
DEMAND DRAFT / PAY ORDER SPECIMEN
Stamp of the bank who lodged the cheque in

local clearing
38
ISSUANCE OF DD AGAINST CASH:
We usually discourage of issuance of DD against cash, and prefer that the
purchaser should be an account holder. However, before making the DD it must be
ensured that the purchaser has deposited the cash and it can be verified from the deposit
slip on which he has deposited the cash on the counter of the bank
ISSUANCE OF DD UPON TENDER OF CHEQUE:

An account holder of the branch may purchase a Demand Draft from the same branch or
from any other of the same bank by tendering cheque of his account along with
Remittances application form.
The cheque tendered should be
o Of the total amount that is the amount of DD plus commission.
o Such cheque should be crossed ‘Account Payee only’
o And must be in favor of Askari bank.
o Cheque must be in order in all the respects
o The signatures on the application form and cheque must be the same.
o Cheque number and account number are written on the Remittances application
form.
o Cheque is sent to enter in the cash department and DR entry in post in party’s
account. The authorized officer put his signature on the application form. DD/PO
maker officer CR the DD/PO issued during the day and print the DD/PO
SIGNING OF DEMAND DRAFT:

o The authorized officer should check that the D.D. has been prepared as per duly
released voucher. He must see that:
i. DD number and control number is given on the application form.
ii) The amount of draft is the same as deposited for DD and shown in the
application form.
iii) The name of payee and the drawee branch is the same as mentioned on the
vouchers.
o After checking the particulars and ensuring their correctness the authorized
checking officer should sign the demand draft at the specified place.
o Second authorized signatory is also required to check all these things
before signing the DD.
DELIVERY OF DEMAND DRAFT:

The Purchaser’s signature is again obtained on the lower specified portion on
application form as an acknowledgement of having received the DD.
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PAYMENT OF DEMAND DRAFT THROUGH CASH:
When a DD is presented for cash payment, identification of payee is required. If
payee is the customer of the drawee branch his signatures are verified from SS card.
When payee is not an account holder he is asked to produce verification from a well
customer of the Bank and or through CNIC.
Verification is obtained on the back of the DD under the signatures of the payee.
Crossed Demand Drafts cannot be paid over the counter. Before making cash payment of
an uncrossed DD following points must be checked.
o DD is drawn on the branch where it is presented.
o It is not a stale DD.
o There is no alteration or over writing.
o It is not mutilated.
o Payee is properly identified.
PAYMENT OF DEMAND DRAFT THROUGH CLEARING:

When a DD whose advice has already been received in clearing for payment, must be
scrutinized on the following grounds:
o It bears clearing, special crossing and regular discharge stamp.
o It is genuine and in order in all the respects.
PAYMENT OF DEMAND DRAFT THROUGH SUSPENSE ACCOUNTS:

In very rare circumstances DD is presented earlier than the receipt of IBCA.
Under such circumstances it is paid to the debit of ‘Suspense Account DD paid
Without Advice’ subject to the approval of the Manager Operations. Before such
payments great care and caution is exercised, where drawee branch is 100% sure
about the genuineness of the payment.
Intimation to the drawee branch is sent through a letter generated by the DD
system, asking them to provide IBCA of the particular DD. On receipt of IBCA
relevant particulars as per IBCA should be matched with the particulars of DD Paid.
After verification IBCA should be posted in the system.
CANCELLATION OF DEMAND DRAFT:

Sometimes purchaser returns back the demand draft purchased by him earlier and
requests for refund of its amount. The refund is made to purchaser after completion of
following procedures:
o Written application: The purchaser has to give an application in writing duly
signed by him. The original DD must be surrendered together with this
application
o Checking DD: The original DD is checked on the following- points:
• It is not a fake or counterfeit DD.
• Duplicate of the same has not been issued.
o Verification of Signatures: Signatures of the purchaser are verified
through DD
application form.
o Refund of amount: The amount of DD is refunded; commission and other
40
charges recovered at the time of issuance are not refunded. For refund of money
following procedure is applied:
Dr: Suspense Account DD Cancelled
Cr: Party’s Account
REQUEST FOR IBCA TO DRAWEE BRANCH:

After making refund, the drawee branch is requested through a fax jointly
signed by two officers of issuing branch. In this letter full particulars of DD are
mentioned with date of cancellation. The drawee branch is requested to reverse the entry
from their “Bills payable Account DD payable Account” and send IBCA. The drawee
branch after verification of issuing branch's signatures passes following vouchers:
Dr: DD payable.
Cr: MO Account of DD Issuing Branch.
o The fact of cancellation is also recorded in the original application of DD

o On receipt of IBCA from the drawee branch the issuing branch is required
to reverse the entry to adjust its suspense account.
Dr: MO Account of Drawee Branch (IBCA originating branch)

Cr: Suspense Account DD Cancelled
In this way debit suspense entry is adjusted. If IBCA is not received from drawee
branch, reminder is sent to ensure an early adjustment of suspense account.
LOSS/STOP PAYMENT AND ISSUE OF DUPLICATE DEMAND DRAFT:

o In case of loss of a DD the purchaser should give application for its loss
and marking of caution against payment thereof.
o The signature of the purchaser is verified by the authorized concerned officer of
remittance department from the original DD application form.
o After the above verification the drawee branch is informed of the loss of the DD
and is advised to mark caution against payment thereof if presented.
o The status of the DD whether still outstanding or already paid, should be
got confirmed from the drawee branch.
o On receipt of confirmation from the drawee branch that the DD is still outstanding
and that they have marked the necessary caution, duplicate DD may be
issued, after completing the following procedure:
1. Obtain Letter of Indemnity
2. Obtain Letter of request for Issuance of Duplicate DD
o After completing the above mentioned formalities a duplicate DD is issued, on the
face of which following narration is printed.
"Duplicate in lieu of original DD No. (Printed No.) Dated_________ reported

lost".
o On the original DD application the previously given DD number is circled

41
and the new DD number is mentioned thereon in red ink
ENTRIES INVOLVED IN DD/PO MECHANISM
DR: Cash / Customer Account

CR: DD/PO issues during the day
DR: DD/PO issues during the day

CR: IBCA sent to drawee branches
By Drawee
DR: IBCA is responded
CR: DD payable
On receipt of DD by drawee
DR: DD payable
CR: Customer is given credited
Request of cancellation by purchased of DD

DR: Suspense Account DD Cancelled
CR: Party’s Account
In case of cancellation, entry made by drawee

DR: DD payable.
CR: MO Account of DD Issuing Branch
On receipt of IBCA by drawer

DR: MO Account of Drawee Branch (IBCA originating branch)
CR: Suspense Account DD Cancelled
CHARGES
Minimum charges on
PO Rs 60
DD Rs 125
Cancellation Rs 275
Re-issue Rs 275
STAMPS IN CLEARING INWARD OF DD/PO

o Discharge stamp at back
o Crossing stamp at front
o Clearing stamp at front
42
FOREIGN TELEGRAPHIC TRANSFER (FTT)
FTT is another mode of remittance. It is used when we want to send the funds to
beneficiary in foreign country.
e.g. if Askari customer wants to send funds to USA to any of his relative or any business
client then bank officer shall enquire the reason of sending and further details:
o Recipient name
o Recipient bank
o Account #
o Account Title
o SWIFT CODE
SWIFT CODE = Society for Worldwide Interbank Financial Telecommunication is the

method used to transfer funds electronically to banks outside the UK clearing system
Charges for FTT is $30 if FTT in pounds then charges equivalent to the amount of $30
After that banker send the fax to CFTU and they send swift to the corresponding bank in
that country. Correspondent bank DR Askari’s account (Nostro account) and CR the
beneficiary
Transfer of funds’ confirmation is sent to Askari bank and credit is made available to the
recipient on the same day.
43
ACCOUNT
OPENING
DEPARTMENT
o ACCOUNTS OF PROPRIETORSHIP CONCERNS

o ACCOUNTS OF PARTNERSHIP FIRMS:
o ACCOUNT OF JOINT STOCK COMPANIES
o JOINT ACCOUNTS
o ACCOUNTS OPENING REQUIREMENTS
o OTHER ROUTINE ACTIVITIES IN ACCOUNTS OPENING
DEPARTMENT
44
ACCOUNTS OF PROPRIETORSHIP CONCERNS
A sole proprietorship concern is a business carried on by an individual owner in

his own name or trade name. It is usual in such cases to take a declaration from the
sole proprietor that no person other than himself has any interest in the business as a
proprietor or otherwise and he, as the sole proprietor will personally be liable for all
dealings and obligations in the name of the business.
ACCOUNT OPENING PROCEDURE:
Title of Account
Title of account must be in the name of proprietorship concern
Special Instructions:
In the case of proprietorship concern, the special instructions should cover the style of the
account and the name of the person who will operate the account as sole proprietor. For
example, if the account to be opened is in the name of “Islamabad Cloth Store”,
the
person who is the sole proprietor should declare as such.
Documents:
o Computerized National Identity card of proprietor
o Letter of request to open the account on the letter head of proprietorship
o Account opening form (pink)
o Declaration for proprietorship concern (Part II, printed on the reverse of AOF)
o Third Party Mandate, in case any other person has been authorized by the
o proprietor to operate the account.
Mode of Signatures:
o Signatures of proprietor as applicant and on Declaration For Proprietorship
o (part-II) are obtained in individual capacity of the proprietor.
o Specimen signatures and signature on the special instructions are obtained
in the official capacity of the proprietor.
Special care:
o The death of sole proprietor will result in freezing all operations (debit) in his
account and any authority delegated by him to a third person for operation of
his account will come to an end.
o The account of proprietorship concern should be handled like individual
deceased person’s account, in the event of the death of the proprietor.
45
ACCOUNTS OF PARTNERSHIP FIRMS:
Definition of Partnership: (section 4, Partnership Act, 1932)

“Partnership” is a relation between persons who have agreed to share
profits of a business carried on by all or any of them acting for all.
Persons who have entered into partnership with one another are called
individually “partners” and collectively “a firm” the name under which the business is
carried on is called the “firm name”.
Title of Account:
Title of account must be in the name of the firm as declared by the partners.
Operational Instructions:
The instructions to operate an account by the mutual consent of all partners that
who will and how many will operate an account
Documents:
o Attested copy of CNIC of all the partners.
o Attested copy of “Partnership Deed” duly signed by all the partners of the firm.
o Attested copy of Registration Certificate with the Registrar of Firms. In case the
partnership is unregistered this fact should be clearly mentioned on the Account
Opening Form.
o Third party mandate, if 3rd party is authorized to operate the account.
Mode of Signature:
o Signatures of all the partners are obtained in their individual capacity as

applicant
o Partnership Mandate is to be signed by all the partners and the Specimen
signatures are to be obtained of the partners who are delegated an authority by all
the partners to operate an account
Special Care:
o One partner is entitled to open an account for the firm’s business provided
that he opens in the firm’s name.
One partner has the power to stop the payment of cheques drawn by him or another and
the Banker is bound to comply with the instructions by that partner.
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ACCOUNT OF JOINT STOCK COMPANIES
Definition of Limited Company:

According to Companies ordinance 1981 ‘Company” as “an association of
individuals for the purpose of profit, possessing a common capital contributed by the
members constituting it, such capital being commonly divided into shares, of which
Title of Account:
Title of account should be exactly in the same name and style as mentioned on
the memorandum and article of association:
All the special instructions should be given to the bank in the form of resolution
of Board of Directors.
Documents:
o Up to date Memorandum & Article of Association (certified by
Director/Company’s Secretary affixed by company’s seal)
o Certificate of Incorporation
o Certificate of Commencement of Business (for Public Ltd. Co only)
o Resolution of Board of Directors passed under company’s seal to open account.
Duly minuted in the minute book (As per specimen given on AOF)
o Copies of CNIC/Passports of all the directors/authorized signatories (attested
by company’s secretary)
o List of directors on Form 29 issued by the Registrar Joint Stock Company.
Certificate of Incorporation: The Company’s Certificate of Incorporation is a very

important document. It gives the evidence of the existence of the company.
Therefore, before having a transaction with a company a banker must satisfy himself that
the company is in existence for which the directors purports to act, and which they
purport to bind. Neither a public nor a private limited company has any legal existence
until Certificate of Incorporation has been obtained. Any contract purported to be made
before incorporation cannot be ratified after incorporation for the reason that
ratification can be made only in respect of contracts entered into on behalf of the
principal who was in existence at the date of the contract. each possesses one or more
and which are transferable by the owners”.
Memorandum & Articles of Association: The Memorandum of Association is the most

important document as it is the charter of the company. It sets out the objectives for
which a joint stock company is formed. It governs the company with regard to its
dealings with the outside world and defines the scope of its activities. It usually has:
47
o Name of the company with the word ‘ Limited’ affixed to the last
word in its name.
o Place with full address of its registered office
o Object of the company.
o Amount of capital and its distribution into shares.
o Declaration of the fact that the liability of the members is limited.
Articles of Associations: Contains rules and regulations for the internal management of
the company and generally contain:
o General powers of the company vested in the directors.
o Election, rotation and retirement of directors.
o Procedure for calling of the meetings and passing of resolutions.
o Methods and principles of declaration of dividends.
Mode of Signatures
In official capacity (with the rubber stamp) on all the documents, such as AOF,
SS Card, Cheque-book requisition slip etc.
Special Care
The opening of account for share subscription by a company shall be
subject to prior approval of Head Office.
Due care and caution should always be exercised to ensure that cheques payable to
limited companies are collected for the credit of company’s account and not foe
personal account of any director / employee etc.
48
JOINT ACCOUNTS
These are the accounts of two or more persons who are neither partners nor
trustees.
Title of Account:
Title of account should mention the names of all the joint account holders.
At the time of opening the account clear and specific instructions should be
obtained
regarding operation of the account and payment of the balance at the death of one or
more joint account holders in the following manner:
The account shall be operated by any joint account holders singly.

o By either or survivor singly.
o By any two or more joint account holders or by any two or more survivors
jointly.
o By all the joint account holders jointly.
o By all the survivors jointly.
These instructions as far as possible should be obtained in the handwriting

of the parties concerned, under the signatures of all the joint account holders.
Documents:
CNICs of all the joint account holders
Mode of Signature
o All joint account holders are required to sign as applicant and in the column of
special instructions.
o Specimen signatures of only those joint account holders are required who are
authorized to operate the account.
49
ACCOUNTS OPENING REQUIREMENTS
All particulars as required in the Account Opening Form are completely filled up:
Name & Address
o Complete address is recorded on the Account Opening Form
o In case of individuals the address consist of House No., Street No., & Name of the
locality besides the name of the city along with the telephone numbers
available. Where such details are not available the address is obtained which
could enable the bank to contact the customer in case of need.
o The customers of rural areas is asked to furnish the name of their nearest Post
Office in addition to the name of their village, Tehsil and District.
o In case of service personnel if the office address is also furnished for

correspondence then the position/designation of the person,
department/company and other details is noted in record.
o Correspondence address, telephone No., contact person and particulars of

the introducer is also mentioned on the back of the S.S.Card at the spaces
provided thereon.
o Details such as name, complete address, position held, nationality of

partners, directors, office bearers or owners in respect of accounts of
partnerships, companies, societies, corporations, clubs, etc.
Identity of the Customer

Account holder’s bona fides must be established.
o Adequate evidence establishing the account holder’s correct
identity/nationality/domicile must be obtained.
o Copy of the CNIC is to be retained after sighting the original.
Job / Profession / Business of the Customer

In case of salaried/married person following details is also ascertained and Salary
Certificate is taken so that to ensure the following information
o Name and address of employer;
o Position held, emoluments, length of service;
o In respect of married persons details of their spouse’s/husband’s employer.
In case of proprietorship, bank officer requires

o Declaration of the proprietorship concern on letter head, and also
o The request to open an account with the bank on letter head
50
In case of proprietorship, bank officer requires
o Copy of registration certificate (if firm is registered)
o Copy of partnership deed
o Request to open an account on letter head
Identity of corporate customers, is to be established through

o Certificates of Registration,
o Certificates of Incorporation,
o Membership of Chambers of Commerce, etc. copies of such documents are
to be retained with the Account Opening Form.
Filling of the KYC

Know Your Customer (KYC) form is filled by the customer himself because
according to the Prudential Regulations issue by the State bank of Pakistan, Banks /
DFIs shall obtain ‘Introduction’ on the new account to assess the prospective
customer’s/account holder’s integrity, respectability and the nature of business etc. Any
laxity in this regard may result in serious consequences for the banker
After all the procedures like

o filling the particulars in AOF
o Acquiring the required documents
o Checking the customer’s identity
o Filling of KYC
The case is forwarded to the head of the department and is later supervised by the
manager operations so that an account may be opened for the prospective relations of the
customer with the bank
After supervision is done, particulars of the customer are then feeded in the
system and the account is opened and the account number is generated
51
Letter of Thanks
i) Letter of Thank is sent to the account holder and copy is retained with the AOF
ii) In case a Letter of Thanks (either to the customer or the introducer) is

returned, “CAUTION” must be noted in the records and appropriate clarifications
is taken for the customer by making a contact to him. If the clarification is deemed
unsatisfactory, the account be considered for closure, after consulting the
Manager/manager Operations.
Issuance of Cheque Book

After the account is opened and the Letter of thanks is delivered to the customer. The
customer is required to carry a letter of thanks and the bank officer by confirming the
entity of the customer by seeing CNIC and letter of thanks issues a cheque book to the
customer so that he may continue his terms and relationship with the bank by debiting or
crediting his account
Now the customer maintains his account with the bank by depositing the excess cash
(CR) and withdrawal from the bank (DR)
OTHER ROUTINE ACTIVITIES IN ACCOUNTS OPENING

DEPARTMENT
Some Other Routine Activities in Accounts Opening Department usually takes
place:
Statement of Accounts
o Periodical statements of accounts are sent to the customers.
o Frequency of the statement is dependent on the request of the customer.
However, generally statement of account to the customers is on 6 monthly basis
as at end of June and December unless specified otherwise.
Change in Address
In case a request is received for change of address.

o The signature of the account holder should be verified from the Specimen
Signature Card by an officer having an attorney
o Record of address should be changed on the Account Opening Form and in
Customer's address details in the computer System.
o The letter of request should be pasted with the Account Opening Form.
o A confirmation to have recorded the change of address is sent to the account
holder on old as well as new address.
Closure of an account
If the customer does not want to continue his relationship with the bank then he
may submit request for the closure of an account and the bank charge some nominal
52
amount for this activity. After this, the relation of customer is terminated and he carries
no longer relation with the bank.
Stopping of the Cheque

Bank gives the facility to their customers to stop the payment of the particular
cheque in case of theft or any other reason and the bank charges nominal amount for this
activity.
Account Activation
Bank marks title on an account like
Dormant (After 180 days = 6 months) if no DR transaction occurs
In-operative (After 1095 days = 3 years) if no DR or CR transaction takes place
Change in specimen signature

Sometimes customer wants to change his signatures for the operations in an
account. So he has to submit his request and fill the new S.S card for the future
verification and then scanned in system.
Changes in Constituents
o Request for a change in constituents must be in writing and duly-signed by the
account holder (s).
o Signature of the account holder is verified and the request should be approved by
the Manager/Manager Operations or Incharge Deposit Department
o In case of any change in the partnerships, old account is closed and new account
should be opened.
o In case a third person is to be authorized by the account holder for operations on
the account same is allowed on the basis of 3rd party mandate, which is provided
to the account holder to fill in & sign. The form is signed by the third person
whose signature is attested by the account holder.
o The Form is properly checked, signatures verified and admitted and pasted in the
pasting file.
53
54
55
56
57
58
59
TRADE DEPARTEMENT
TRADE DEPARTMENT
Trade department is the most important department of any bank and it handles all
the activities relating to
• Import and Export and
• foreign exchange
TERMS RELATING TO LETTER OF CREDIT
LETTER OF CREDIT
A letter of credit is a document issued mostly by a financial institution which usually
provides an irrevocable payment undertaking (it can also be revocable, confirmed,
unconfirmed, transferable or others e.g. back to back: revolving but is most commonly
irrevocable/confirmed) to a beneficiary against complying documents as stated in the
Letter of Credit.
BENEFICIARY
It is that party who receives money and for whom an L/C is opened and it has status of an
exporter
ISSUING BANK
This is the bank of the exporter who opens and L/C on behalf of the customer and in the
favor of the exporter
ADVISING BANK
It is the bank of an exporter and he receives money and do all necessary correspondences
on behalf of the exporter with importer’s bank and he takes commission and fees against
his services
NEGOTIATING BANK
It is the bank other than LC advising bank / Confirming Bank / Nominating Bank from
which exporter receive payment or discounts the documents
CONFIRMING BANK
It is the bank who gives guarantee to the exporter that in case of default of the LC issuing
bank, I will make payment to the exporter
NOMINATING BANK
It is the bank in the exporter country whose name is mentioned in LC from which
exporter will receive payment at maturity or at sight
60
PERFORMA INVOICE
It is the document prepares by the exporter and sent to importer. It contains all the
necessary information about the goods that the importer is willing to purchase (import).
It contains:
• Name of the product
• Type
• Price
• Quality
• Quantity
• Brand
• Name
• Colour, etc
INDENT LETTER
Performa invoice by exporter’s agent in importer’s country
ICC 500
ICC stands for (International Chamber of Commerce). ICC500 is the document
which is the final authority in deciding the dispute arising in the matter of letter of credit.
LETTER OF CREDIT MARGIN

While granting and facility to the customer bank need security or collateral to
make its side safe in case of customer’s default. So in case of L/C bank takes secuiry in
cash.
It is an amount that an importer has to submit with his bank and it usually 20 or 25% of
the amount of the good that are going to be imported. And this percentage determines by
the central bank as well as L/C issuing bank.
Central bank reduce this margin whenever he wants to flourish or support the
import activities and Bank may also reduce this margin in case of his credit worthy
customers
BILL OF LADING
This instrument is issued by the shipping company to the exporter. This document
contains the information regarding:
• The goods shipped
• Port of shipment
• Port of delivery, etc
CERTIFICATE OF ORIGIN
This document is issued by the exporter chamber of commerce that the whole or
major parts of the goods has been manufactured within the country
AIRWAY NOTE
61
This is the document similar to the bill of lading and is issued by the Air cargo
company
IMPORT LICENSE
An import license is a document issued by a national government authorizing the
importation of certain goods into its territory. And this license is presented to bank by and
importer to support his status of an “importer”
OGL (OPEN GENERAL LIST)

It is the list issued by the trade minister of any government which provides the list
of the goods that are legal to be imported
KPT CHARGES
KPT stands for Karachi Port Trust charges and these charge are levied on the
goods imported and is payable by an importer at time of release of goods to an importer
MATE'S RECEIPT
A declaration issued by an officer of a vessel (ship) stating that certain goods have
been received on board his vessel.
NEGOTIATION
Receive payment or discounts the documents other than LC advising bank /
Confirming Bank / Nominating bank
DISCOUNTING
Discount the documents from LC advising bank / Confirming Bank / Nominating bank
LC TRANSMISSION
Sending of the LC by importer to exporter
LC ADVISING
Intimation of the exporter bank to the exporter about LC
INLAND HAULAGE
Commercial transportation cost borne the importer
62
TYPES OF PAYMENT IN LETTER OF CREDIT
CLEAN PAYMENT
This payment is characterized by trust and it is two types
Open account
The exporter sends the good to an importer and it trust the importer due to his
credit worthiness and previous that has been taken place.
Payment in advance
In this mode, an importer trusts on exporter and do make an advance payment on
his request
DOCUMENTARY COLLECTION
This mode of payment rely on the presentment of document in series
INCO TERM
Ex factory
Good will be lifted by the importer from exporter’s godown / factory
But it is not used in Pakistan because if importer has access to the good of exporter then
what is the benefit for the involvement of the bank in the transaction
FOB (Freight On Board)

It means that freight till board of ship will be born by the exporter
CFR / CNF (Cost Freight / Cost And Freight)

It means that the value mentioned in the LC includes the cost of the goods and the
freight charges by the exporter
CIP (Cost Insurance paid upto particular destination)

It means that value in the LC includes the value of the goods, insurance amount
till particular destination
CIF (Cost Insurance freight paid upto particular destination)

means that value in the LC includes the value of the goods, insurance amount till
particular destination and freight of shipment
CP (Carriage upto upto particular destination )

It means that carriage will be borne by the exporter upto particular destination
63
OPERATION OF LETTER OF CREDIT
Following is the procedure that is usually takes place in operation of letter of
credit
Step 1
Mutual agreement between imported and exporter; importer shows his consent and
interest in purchasing (import of good) after that exporter shows his intention to supply
goods and this is mutual agreement and this Mutual agreement takes place personally or
electronically
Step 2
After this, Performa invoice or Indent Invoice is sent to an importer by an exporter or
by his agent respectively.
Step 3
After receiving Performa invoice, importer direct his bank (if he is satisfied by the term
of perform invoice) that he wants to import particular goods from particular country and
then he files an application for an import of goods and L/C is opened after processing
Step 4
After opening of LC, it is transmitted by the importer’s bank (LC issuing bank) in
the form of swift code by the CFTU (Central Foreign Trade Unit) Allama Iqbal Town
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Step 5
On receiving of letter of credit by an advising bank, exporter bank direct the
exporter and give LC to exporter (LC advising)
Step 6
Confirmation is sent to the importer bank by the exporter bank / seller bank
Step 7
Goods are then shipped to the importer as per his requirement relating to consignment
or any other formalities relating to requirement of documents such as
o Certificate of Origin
o Certificate of Inspection, etc
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Step 8
In Case Of Sight LC
Seller provides bill of lading and other documents to receive payment. Seller's
bank exchanges bill of lading and other documents for payment from buyer's bank.
Buyer's bank exchanges bill of lading and other documents for payment from buyer.
Bank debit the customer’s account or he may finance the customer for some days and
bank charge markup for this. Bank give credit to the seller’s bank by giving the
instruction to bank in exporter’s country to debit his Nostro account and credit the
exporter’s bank account. Exporter’s bank later debit his account and give credit exporter
by charging commission from the exporter
Here may be the case, that exporter may present his bill of lading and other
documents to the Confirming Bank / Nominating Bank / Negotiating Bank ( It is the bank
other than LC advising bank / Confirming Bank / Nominating Bank) to receive payment
which adopt the same payment to receive payment as adopted by LC Advising Bank.
1
Seller’s Bank = LC advising bank / Confirming Bank / Nominating Bank / Negotiating Bank ( It is the
bank other than LC advising bank / Confirming Bank / Nominating Bank)
66
In case of Usance LC
In this mode of LC, payment is to be made by the importer at some other time in
future so exporter has to wait but usually exporter does not wait so he discounts the
document from Confirming Bank / Nominating Bank or negotiate it from Negotiating
Bank.
If exporter waits …
If exporter wants to wait then he may give documents to LC advising bank /
Confirming Bank / Nominating Bank / Negotiating Bank for collection which sent
documents and Bills of exchange (B/E) to the importer’s bank, who keeps documents and
give acceptance of B/E and also draw another B/E on importer who also accepts and give
the unconditional undertaking to make payment at some definite future time. B/E is kept
by LC advising bank / Confirming Bank / Nominating Bank / Negotiating Bank, and at
maturity they receive payment on behalf of exporter and give funds to the exporter.
If exporter does not want to wait …

In this case, exporter discounts his documents from the LC advising bank /
Confirming Bank / Nominating Bank or negotiate it from Negotiating Bank. So these
banks make payment to the exporter by discounting the documents and sent documents
and Bills of exchange (B/E) to the importer’s bank, who keeps documents and give
acceptance of B/E and also draw another B/E on importer who also accepts and give the
unconditional undertaking to make payment at some definite future time. B/E is kept by
LC advising bank / Confirming Bank / Nominating Bank / Negotiating Bank, and at
maturity they receive payment on behalf of exporter. So the difference between the
prescribed amount on LC and discounting amount is the income of the bank.
Step 9
Buyer gives payment to his bank and receives documents so he provides bill of lading to
carrier and takes delivery of goods.
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This is all how the procedure of import and export takes place by letter of credit
FOREIGN EXCHANGE BUSINESS

Banks do forex business too and this foreign exchange taken from import and
export and open market
If bank has good import LC business then bank has need of forex for payment and
this exchange need can easily be fulfilled by the bank if he has a good business of export
otherwise he has to take or purchase exchange from open market which is the expensive
source rather than having forex from his own business
If bank had good export business than imports than bank do sell the excess forex
in open market rather than keep the idle forex other than demand and time liabilities and
reserve requirements
This income has the influence in the growth of the banking system and growth in
forex business shows the healthiness of the banking system
68
FINANCIAL
ANALYSIS
of
ASKARI BANK
69
Balance Sheet as at December 31, 2009
2009 2008 Net change
(Rupees in thousand)
ASSETS
Cash and balances with treasury banks 19,385,843 16,029,635 3,356,208
Balances with other banks 8,364,261 3,954,814 4409447
Lendings to financial institutions 4,614,059 4,479,754 1,34,305
Investments 67,046,033 35,677,755 35,677,755

135,034,49 128,818,24
Advances 9 2 6,216,257
Operating fixed assets 9,846,440 8,266,458 1,579,982
Deferred tax assets – –
Other assets 10,036,311 8,964,480 1,071,831

254,327,44 206,191,13
6 8 48,136,308
LIABILITIES
Bills payable 2,945,670 2,584,828 3,60,842
Borrowings 19,300,163 15,190,148 4,110,015

205,970,22 167,676,57
Deposits and other accounts 7 2 38,293,655
Sub-ordinated loans 5,994,900 2,996,100 2,998,800
Liabilities against assets subject to finance – –
Deferred tax liabilities 333,925 12,987 3,20,938
Other liabilities 4,833,489 4,759,140 74,349

239,378,37 193,219,77
4 5 46,158,599
NET ASSETS 14,949,072 12,971,363 1,977,709
REPRESENTED BY
Share capital 5,073,467 4,058,774 1,014,693
Reserves 7,182,987 7,667,141 -4,84,154
Unappropriated profit 886,234 308,980 5,77,254
13,142,688 12,034,895 1,107,793
Surplus on revaluation of assets - net of tax 1,806,384 936,468 8,69,916
14,949,072 12,971,363 1,977,709
70
Profit and Loss Account for the year ended Dec 31, 2009
Net
2009 2008 change
(Rupees in thousand) Rs ' 000
22,661,75 18,393,31
Mark-up / return / interest earned 4 3 4,268,441
13,629,09 10,650,71
Mark-up / return / interest expensed 6 9 2,977,377
Net mark-up / interest income 9,032,658 7,742,594 1,290,056
Provision against non-performing loans and

advances 2,324,377 3,824,778 -1,500,401
Impairment loss on available for sale
investments 431,058 -- --
Provision for impairment in the value of
investments 76,784 508 76,276
Provision against reverse repo 82,674 -- --
247,31
Bad debts written off directly – 1 -
2,914,893 4,072,597 -1157704
Net mark-up / interest income after
provisions 6,117,765 3,669,997 2,447,168
NON MARK-UP/INTEREST INCOME

Fee, commission and brokerage income 1,307,699 1,257,584 50,115
Dividend income 162,537 173,621 -11,084
Income from dealing in foreign currencies 538,445 873,512 -335,067
Gain on sale of investments - net 143,717 36,743 106,974
Unrealised gain / (loss) on revaluation of
investments classified as held for trading - net (1,918) 22,384 (24302)
Other income 404,221 343,156 61,065
Total non-markup / interest income 2,554,701 2,707,000 (152299)
8,672,466 6,376,997 2,295,469
NON MARK-UP/INTEREST EXPENSES

Administrative expenses 6,995,857 5,904,169 1,091,688
45
Other provisions / write offs – 9
Other charges 34,368 10,987 23,381
Total non-markup / interest expenses 7,030,225 5,915,615 1,114,610
1,642,241 461,382 1,180,859
Extra ordinary / unusual items – –
PROFIT BEFORE TAXATION 1,642,241 461,382 1,180,859

Taxation – current year 562,099 17,363 384,736
(50,000
– prior years' 119,827 ) 169,827
– deferred (147,478) 107,794 -255,272
534,448 75,157 459,291
PROFIT AFTER TAXATION 1,107,793 386,225 721,568

Unappropriated profit brought forward 308,980 2,144,810 (1,835,830)
Profit available for appropriation 1,416,773 2,531,035 (1,114,262)
71
Basic / diluted earnings per share - Rupees 2.18 0.76 1.42
72
73
F inancial analysis refers to an assessment of the viability, stability and profitability of
a business. It is performed using ratios that make use of information taken from
financial statements and other reports.
GOALS
Financial analysts often assess the firm's:
1. Profitability- its ability to earn income and sustain growth in both short-term and
long-term. A company's degree of profitability is usually based on the income statement,
which reports on the company's results of operations
2. Solvency- its ability to pay its obligation to creditors and other third parties in the
long-term
3. Liquidity- its ability to maintain positive cash flow, while satisfying immediate
obligations
Both solvency and Liquidity are based on the company's balance sheet, which indicates
the financial condition of a business as of a given point in time.
4. Stability- the firm's ability to remain in business in the long run, without having to
sustain significant losses in the conduct of its business. Assessing a company's stability
requires the use of both the income statement and the balance sheet, as well as other
financial and non-financial indicators.
METHODS
Different type of method are used to do financial analysis
o Past Performance / Horizontal analysis
This method of analysis contrasts with horizontal analysis, which uses one
year's worth of entries as a baseline while every other year represents
differences in terms of changes to that baseline
o Vertical Analysis
In this method, different items are related with any other related item for
interpretation, e.g. administrative cost related to deposits, lending rates
relates with its sources, etc
o Ratio Analysis
Financial ratios are useful indicators of a firm's performance and financial
situation. Most ratios can be calculated from information provided by the
financial statements. Financial ratios can be used to analyze trends and to
compare the firm's financials to those of other firms. In some cases, ratio
analysis can predict future bankruptcy.
o Comparative Performance
Comparison between similar firms is made, etc
74
HORIZONTAL AND VERTICAL
ANALYSIS OF INCOME STATEMENT
MARK-UP / RETURN / INTEREST EARNED
It is the first head of the income statement of any bank’s financial statements. It is
the main source of income for any income and from this source of income, all of the
banks expenses are paid off. Markup is earned on local currency financing and it is non
interest mode of finance according to Pakistan’s law. Return is earned on the investments
that have been made by the banks in different type of securities or projects. While Interest
is earned on the transaction of foreign currencies other than Pakistani Rupees
This head keenly observed by the top level managers, strategists and other stake
holders because all of the expenses of the bank is supposed to be born by this source if
income.
This head may be increased or decreased due to numerous factors.

Mark-up / return / interest earned can be increased due to Bank’s portfolio of investments
or by huge amount of advances which is the sign that customers are showing their interest
in bank to take advances from reputable bank. Also this head may be increased to the
increase in prevailing lending rates. Bank’s sometimes can charge high interest rate
because of its high market share, customer trust on bank and lots of other variables.
Mark-up / return / interest earned can be decreased to the decrease in the bank’s
portfolio of investments might be due to large risk in that sector or due to less liquidity
kept by the bank or by significant decrease in bank’s advances and this may be due to the
shattering of interest of the customer or bank is charging comparatively high interest rates
or because of the unavailability of the customer satisfaction.
If we see this head with respect to Askari Bank then we shall see a favorable
change in this head of income.
2009 2008 Net change % change

22,661,75 18,393,31
Mark-up / return / interest earned 4,268,441 23.20%
4 3
If we see the figure of Mark-up / return / interest earned of 2009, the figure was
Rs 22,661,754,000 while in 2008 it was Rs 18,393,313,000. So we have observed the
change of 23.20% in income head which apparently seems to be the satisfactory fact but
we will go in depth to see the actual reasons for this increment.
75
This Mark-up / return / interest is earned from the following heads Advances,
Investments and Lending to Financial institutions
2009 2008 Net change

% change
ASSETS (Rs in thousand) Rs ' 000
Lending to financial institutions 4,614,059 4,479,754 1,34,305 2.99%
Investments 67,046,033 35,677,755 31,368,278 87.92%
135,034,49
Advances 9 128,818,242 6,216,257 4.82%
So here we see from the above portfolio that the Bank’s Assets have been
increased by the above mentioned percentages. But being an analyst I can observed that
advances just shown showed an increase of just Rs6.2M while Investments and Lending
to financial institutions showed an increase of Rs 31.3M and Rs 1 lac respectively but
advances show grow more than the relative percentages of investments and Lending to
financial institutions because Advances portfolio is considered to be the stable portfolio
and diversified portfolio because it involves financing to consumers. Agriculture,
Corporate, SME, etc which are considered to be the permanent customers of the bank
while return on investments may be due to overall economic activity or Boom in that
particular sector in which bank has made his investments and increase in lending to
financial institutions may be due to the liquidity crunch in that particular bank, that’s why
bank has made mega lending to that particular banks
Net change % change

2009 2008
(Rs in thousand) Rs ' 000
Repurchase agreement lendings 3,866,73
2,554,754 1311979 51.35%
(reverse repo) 3
If we see the notes of lending to financial institutions then we can see that bank
did lend 51.35% more in 2009 than he did in 2008 and also at more interest rate. Bank
did charge markup rates ranging from 9.25% to 9.95% (2008: 8.67% to 9.40%) per
annum and maturities of upto 2 months (2008: upto 1 month).
Net change % change

2009 2008
62,205,12
Available for sale securities 30,947,602 31,257,524 101%
6
Held for trading securities 167,270 134,469 32,801 24.39%
If we see the notes of investments made by the bank then we shall be that
bank has made significant investments in Securities for sale and trading rather than for
trading because we peep into bank then we shall see that the environment of Stock
76
exchanges of Pakistan was very favorable for the short term investors because they were
having the opportunity of capital gain as stock exchange was continuously was rising day
by day due to good conditions in Pakistan and large amount of foreign investments.
So the reason of increase in Mark-up / return / interest earned is due to large

amount of lending at high rates and high return on investments but bank should increase
the advances portfolio to maximize the earnings.
MARK-UP / RETURN / INTEREST EXPENSE

It is the second head of the income statement of any bank’s financial statements.
It is the major and critical expense for any banking company because Mark-up / return /
interest earning is generated because of this expense and all of this banks expenses are
paid off from the Mark-up / return / interest earned.
Markup is paid on local currency deposits. Return is paid on the investments that
have been made by the customers in different type of securities in banking company.
While Interest is paid on the transaction of foreign currencies other than Pakistani Rupees
As it is the major expense of the business and majority of the income of the bank
is dependent on the sources on which these expenses are being incurred and this expense
may decrease the ultimate profit of the bank that is NET Profit and this finally distributed
in the shareholders of the bank. So extraordinary increase or decrease in this expense may
be alarming for the banking company
This head may be increase or decrease due to numerous factors but an increase in
this expense may not be considered harmful for the business or sometimes decrease in
this expense is considered dangerous for the banking concern
Mark-up / return / interest expense are incurred on the deposits made by the
customers in the bank or on the borrowing made by the bank to cater or to make it stable
the liquidity position of bank.
Mark-up / return / interest expense may be increased to the:
o Large amount of deposit
o Expensive deposits
o High prevailing interest rates
o Comparatively high interest rate to attract the deposits
o Large amount of borrowings from the financial institutions, etc
Mark-up / return / interest expense may be decreased to the:

o Less volume of deposit
o Cheap deposit sources
o Low prevailing interest rates
o Comparatively Low interest rates due to market reputation
o Less borrowings from the financial institutions due to financial stability,
etc
If we see this head with respect to Askari Bank then we shall see the Mark-up /
return / interest expense of 2009, the figure was Rs 13,629,096,000 while in 2008 it was
77
Rs 10,650,719,000. So we have observed the change of 27.96% in expense which
apparently seems to be the un-satisfactory figure so we will go in depth to see the actual
reasons for this increment.
%
2009 2008 Net change change
13,629,09 10,650,71
Mark-up / return / interest expense 2,977,377 27.96%
6 9
if we compare mark-up / return / interest expense with mark-up / return / interest

income then we shall see that
%age change in expense > %age change in income
which is unfavorable for the business in short run but it may be beneficial for the banking
company in the long run.
If we see the factors on which expense depends then we shall see:
Net %
2009 2008 change change
(Rs in thousand)
Borrowings 19,300,163 15,190,148 4,110,015 27.05%
205,970,22 167,676,57 38,293,65
Deposits and other accounts 22.83%
7 2 5
Borrowing increased by significant amount of Rs 4.1B (27.05%) and

Deposits increased by 22.83% by Rs 38.2B. so we can that the increase in Mark-up /
return / interest expense is mainly due to the deposits that has been acquired by the bank
in the financial year 2009 and for this he had to bear the mega cost which is not bad
because deposit are then further forwarded in investments, advances and lending. But this
%age increase in Mark-up / return / interest expense should be less than the Mark-up /
return / interest earned. And this increase is due to the expensive acquisition of the
finance might be due to the high prevailing interest rate and also due to the large and
expensive borrowing that can be viewed from the notes
Net %
Repurchase agreement
4,473,167 767,310 3705857 482.96%
borrowings (repo)
These are secured against pledge of Government Securities, and carry mark–up
ranging between 9.20% and 9.60% (2008: 8.35% and 8.81%) per annum and have
maturities of upto 1 month.
78
So the reason of increase in Mark-up / return / interest expense is due to
large amount of borrowings at high rates and large amount of interest that has been paid
on deposits
NET MARK-UP / INTEREST INCOME
Net markup interest income = Mark-up / return / interest earned -

Mark-up / return / interest expensed
Net %
Mark-up / return / interest earned 22,661,754 18,393,313 41,055,067 23.20%
Mark-up / return / interest expensed 13,629,096 10,650,719 2,977,377 27.96%
Net mark-up / interest income 9,032,658 7,742,594 1,290,056 16.66%
Here if we make comparison in percentages then we shall be worried to see that

27.96% in Mark-up / return / interest expensed only produced an increment in of 23.20%
in Mark-up / return / interest earned. But if we see in monetary terms then we observe
that an incurring of expense of Rs 2,977,377 generated an income of Rs 41,055,067 which
is very good for the company and this activity did increase the shareholder’s wealth by
Rs 838M which is satisfactory for the concerned people.
PROVISION AGAINST NON-PERFORMING LOANS AND

ADVANCES
Provision is the cushion against the expected loses and it is not the loss for the
banking company but it is created when the company fears the lose and it step by step
created (yearly) so that to reduced the effect of the shocked against the loss incase if it
occurs in future. The percentage of provision may be increased when the bank smells that
the classified may be turn into substandard or turn into loss or increase in provision
percentage as per the SBP regulations.
Although it reduces the shareholder’s wealth and EPS but it have a long term
point of view if loans classifies or substandard then the gradually created provision will
reduce its effect to disturb the income statement and financial stability of the banking
company otherwise bank may be insolvent or bankrupt
So if we see this head in Askari bank’s income statement of 2009 then we observe that
the provision has been decreased by 39.22% which is extra ordinary high although the
advances increased by 4.82%.
79
Provision against non-
performing loans and 2,324,377 3,824,778 (1,500,401) 39.22%
advances
But if we see the notes then we find that during the year, the State Bank of
Pakistan has amended the Prudential Regulation vide BSD Circular No. 10, dated
October 20, 2009 in relation to provision for loans and advances, thereby withdrawing
the benefit 40% of Forced Sale Value (FSV) of collateral against non-performing
advances for provisioning requirement (except Housing finance, Agriculture finance and
Mortgage finance).
Although classified just increased by 14.35% but provision decreased by 39.22%

so the major contributor towards the decrease in provision is SBP policy
12,593,84
Classified Advances 11,012,731 1,581,113 39.22%
4
So here increase in provision is not a bad sign for the stakeholders but it can be reversed
when de-classified loans are turned classified
PROVISION FOR IMPAIRMENT IN THE VALUE OF

INVESTMENTS
This provision is created to create cushion against the impairment in the value of
investments and this provision depends on the nature and maturity / life of the securities
whether these are long term or short term. Also this provision percentage may depend on
the overall economic activity in the country.
So if we see the income statement of Askari Bank of 2009 then we see significant
increase in this provision which is evident as under:

Provision for impairment in
76,784 508 76,276 15015%
the value of investments
So the provision for impairment in the value of investments in 2009 was Rs 76,784,000
while it was Rs 508,000 and it showed in increase in 15015% which is apparently very
bad sign and it predicts the conditions whether:
o The bank has the securities which are less market worth that’s why its value
continue to decrease and the bank is creating provision to create the cushion
against the expected loss in future
80
o Or the condition of the country of stock exchanges showing a bearish trend due to
unstable political condition like in current scenario
But we here may be the reason that the bank has increased this investment portfolio in
securities of short term for sale or for trading purposes.
So now we see notes of investments that have been made by the bank then we see
the hefty change
Investments 67,046,033 35,677,755 31,368,278 87.92%
Here we see that the investments portfolio has been increased by 87.92% which is very
good for the Askari Bank but we go in notes to see which of the following securities
intended the bank to create provision comparatively 15015% more than 2008’s provision
Net change % change

2009 2008
62,205,12 30,947,60
Available for sale securities 31,257,524 101%
6 2
Held for trading securities 167,270 134,469 32,801 24.39%
So these are the securities for trading and for sale purposes purported the bank to create
massive provision
NET MARK-UP / INTEREST INCOME AFTER PROVISIONS
Net mark-up / interest income after provisions is the mark-up / interest income
which is calculated after deduction of the provisions. So if we look at the income
statement of the Askari bank then we got the good impression

Net mark-up / interest
6,117,765 3,669,997 2,447,168 66.70%
income after provisions
Because the Net mark-up / interest income after provisions income figure was Rs
6,117,765,000 in 2009 while it was Rs 3,669,997,000 which showed a increase of
66.70% from the previous year. The reason behind this the massive decrease in provision
against non-performing loans and advances

Provision against non- 2,324,377 3,824,778 (1,500,401) 39.22%
81
performing loans and
advances
And this decrease is due to the operation and good management of credit department and
the efficiency of the recovery department.
NON MARK-UP/INTEREST INCOME

Second major income source of the bank and the income from the activities other
the primary functions of the bank such as borrowing or lending deposits are included here
in this head
o Fee, commission and brokerage income
o Dividend income
o Income from dealing in foreign currencies
o Gain on sale of investments - net
o Unrealized gain / (loss) on revaluation of investments
classified as held for trading - net
o Other income
Let us interpret one by one:
FEE, COMMISSION AND BROKERAGE INCOME

This is the first head of the secondary income source of the bank in which bank
acts as an agent and it includes
o Fee which is charged by the bank on advancing financial services or advices, such
as to facilitate transactions between buyers and sellers.
o Commission is taken on the services such as LC Commission and
o Brokerage Income on under underwriting agreements relating to trading of the
forex.

Fee, commission and brokerage
1,307,699 1,257,584 50,115 3.98%
income
This change of Rs 50Million is due to the contribution of the fee, commission and
brokerage income
82
DIVIDEND INCOME
Dividend is the distribution of a portion of a company's earnings, decided by the
board of directors, to a class of its shareholders so it is that income which is earned by the
bank as shareholder in other economic entities. So here in balance sheet it showed
substantial change

Dividend income 162,537 173,621 -11,084 6.38%
We can see that bank has decrease a divided of Rs 11M and this decrement may
be due to the following two reasons whether:
o Bank has decreased his investment portfolio in securities – held till maturity, or
o The companies has gone through poor operations and not earned massive profits
and distributed to shareholders in form of cash dividends
So we can see from notes of the financial statements that Askari bank did decrease his
investments in Securities – held for trading by Rs 1108 Million while decrease in
dividend by 6.38% (Rs 11M).
Net %
Held to maturity securities 4,662,774 5,771,222 (1,108,448) 19.20%
INCOME FROM DEALING IN FOREIGN CURRENCIES

Income from dealing in foreign exchange is merchant business activity and this
income ingenerated from the spread of the forex (difference between purchase and sale
price). This is very important source because here no investment but income is generated
on the volume of trade (imports and exports) and good judgments, predictions and better
forward and future contracts
This income may be increase or decrease due to numerous factors and increase in
forex income is considered to be the good sign and vice versa
This income may be decrease due to factors like
o Overall economic depression
o Might be purchasing at high price and sale at price
o Economic condition of 1998 when forex accounts were freezed, etc
So if we see income statement then we examine that this head has shown substantial
difference in income
83
Net %
Income from dealing in foreign currencies 538,445 873,512 -335,067 38.35%
Bank decreased Rs 335Million income from foreign exchange business and the probable
reason is the poor trade activities not because of the decrease in forex rates because forex
rates were relatively stable at that time.
If bank’s reserves of foreign exchange decrease (due to less exports business) and
large importers clients of the banks then bank do not sell the foreign reserves in open
market to produce an income and to maintain its liquidity position and to fulfill cash
reserve ratio (CRR) by State Bank of Pakistan .
GAIN ON SALE OF INVESTMENTS

Gain on sale of investments because of the many reason
o Boom in stock exchange
o Maturity of the securities
o High capital
o Huge volume of investment in securities – held for sale or trading, etc
So when we scrutinized the income statement of 2009 then we view a dramatic

change in gain on sale of investments which was increased by Rs 106 Million, and
increase of 291.14% which is evidently high and good for the bank

Gain on sale of investments - net 143,717 36,743 106,974 291.14%
OTHER INCOME
It is non regular or unusual mode of income. It is neither primary income nor
secondary income. Income from other sources like:
o Rent of property
o Net profit on sale of property and equipment
o Rent of lockers
o Recovery of expenses from customers, etc.
This head of income also has shown an increment relatively by 17.80% as shown below:
Other income 404,221 343,156 61,065 17.80%
84
This head increased due to the recovery of expenses from the customers and the
increase in the rent income from property because of the increase in the property for
letting out.
This head show not be exceed from the regular source of income because banking
company seems to be insecure and convey bad image to stakeholders that bank is earning
from activities other than primary activities
NON MARK-UP/INTEREST EXPENSES

These are the expenses that are incurred other than on primary activities but on
administrative or for promotion or for selling purposes. These expenses are carefully
observed and controlled by the management because these may significantly enhance or
reduce ultimate shareholder’s wealth.
These expenses include:
o Administrative expenses
o Other provisions / write offs
o Other charges, etc
ADMINISTRATIVE EXPENSES
These are the day to day expenses for any banking company and the
administrative or selling purposes to attract the deposit. These may be increased or
decreased due to numerous factors and its decrease can not be considered good
sometimes its increment may be considered good
Administrative cost may be increased due to:
o Increase in the deposits of the bank
o Increase in the operations and number of branches, etc
Administrative cost may be decreased due to:

o Acquisition of the low cost borrowings or deposits
o Highly effective and efficient management of the bank, etc
If we see Income statement of the Askari bank 2009 then we see an increase in
administrative cost by 18.49% of Rs 1.0Billion

Administrative expenses 6,995,857 5,904,169 1,091,688 18.49%
We can not comment just by seeing the administrative cost and increment in it.
For this we have to go in detail on which administrative cost depends. But Administrative
cost usually relate with the amount of deposits for the sake of simplicity
So the deposit figure is:

85
Deposits and other accounts 205,970,227 167,676,572 38,293,655 22.83%
If we do percentage comparison of admin cost with deposit then we shall see that 18.49%
increase in admin cost increase 22.83% deposits but in monetary terms an increase in
admin expense by Rs 1.0Billion attracted the deposit of Rs 38.2 Billion
So this increase in administrative cost is not harmful for Askari bank because this
increment has produced significant increase in deposits
OTHER CHARGES
These are the charges other than the mark-up / return / interest expensed and non-
markup / return / interest expensed. And these are of irregular nature. If we see income
statement then we view approx 212.8% increase in these charges.

Other charges 34,368 10,987 23,381 212.80%
And these are the penalties imposed by the State Bank of Pakistan on Askari bank for the
violations on rules and regulation. This is considered bad because of poor management
but on the other side it is considered because SBP wants to create smooth working,
harmony and full fledged implement of the SBP rules.
86
87
88
RATIO ANALYSIS
Financial ratios are useful indicators of a firm's performance and financial
situation. Most ratios can be calculated from information provided by the financial
statements. Financial ratios can be used to analyze trends and to compare the firm's
financials to those of other firms. In some cases, ratio analysis can predict future
bankruptcy.
In Ratio Analysis of Askari bank of year 2009 and 2008, I will calculate below
mentioned most important ratios
o Average rate of lending

o Average rate of borrowing
o Spread of Bank
o Margin %age
o Cash reserve ratio (CRR)
o Ratio of Admin to Deposit
o Current Ratio
o Debt Equity Ratio
o Infection Ratio
o Return on Assets (ROA)
o Return on Equity (ROE)
Let us calculate each one by one:
AVERAGE RATE OF LENDING

Average rate of lending is one of the most important ratios that is calculated by the
top level management of any banking company. It depends on numerous factors such as
o Sources of borrowing
o Lending portfolio
o Market trend
o Standing of the bank in the trend
o Growth of the banking company, etc
As,
Markup / return / Interest Income
Average rate of lending = X100
Advances + Investments + Lending to F.I.
This ratio depends on Markup / return / Interest Income and Advances, Investments and
Lending to Financial Institutions. This ratio should be significantly more than the average
89
rate of borrowing because all the expenses / average rate of borrowing is dependent on
this ratio
If we calculate average rate of lending of 2009 and 2008, then we see
Average rate of 22,661,754 10.96

2009 = X100 =
lending 206,694,591 %
Average rate of 18,393,313 10.88

2008 = X100 =
lending 168,975,751 %
If we analyze this %ages of 2009 and 2008 then we observe that average rate of lending
is comparatively 0.08% greater than 2008.
net
2009 2008
change
Average rate of lending 10.96% 10.88% 0.08%
As figure of increase by 100% is good for the bank because bank’s capacity has been
increased to bear the expenses more than it had previously. But its increase is not the
guarantee of satisfaction because we also have to see the average rate of borrowing and
administrative to deposit ratio as well .
AVERAGE RATE OF BORROWING

Average rate of borrowing is another most important ratio that is calculated by the top
level management of any banking company and it relates to the cost of borrowings that
are acquired by the bank for its lending purpose and for investment purposes. It depends
on numerous factors such as
o Sources of lending
o Borrowing portfolio
o Market trend
As,
Markup / return / Interest expenses
Average rate of borrowing = X100
Deposits + Borrowing from F.I
90
This ratio depends on Markup / return / Interest expenses and Deposits and
Borrowing from Financial Institutions. This ratio should be significantly less than the
average rate of lending because EAT of the bank is dependent on this ratio.
If we calculate average rate of borrowing of 2009 and 2008, then we see
Average rate of 13,629,096

2009 = X100 = 6.05%
borrowing 225,270,390
Average rate of 10,650,719

2008 = X100 = 5.82%
borrowing 182,866,720
If we analyze this %ages of 2009 and 2008 then we observe that average rate of
borrowing is comparatively 0.23% greater than 2008.
net
2009 2008
change
Average rate of borrowing 6.05% 5.82% 0.23%
Now we see that 103.95% increase in average rate of borrowing produces a change of
just 0.23% increase in average rate of borrowing which is unsatisfactory because it
means we acquired finance at high cost and lend it on low profits less than previous year.
RATIO OF ADMINISTRATIVE COST TO DEPOSIT

This is the ratio that shows how much %age of deposits is expensed on the
acquisition of deposits for particular period. And this is also very important for the
increase or decrease in spread of the bank
So,
Administrative Cost
Ratio of Admin to Deposit = X 100
Deposits
Lets us calculate the Ratio of Admin cost to Deposit for the year 2009 and 2008
Ratio of Admin 6,995,857

2009 = X100 = 3.39%
to Deposit 205,970,227
Ratio of Admin 5,904,169

2008 = X100 = 3.52%
to Deposit 167,676,572
91
Now we see that this ratio has been decreased which is considered to be good
because bank is spending relatively less to acquire more than previous year. In 2008 bank
was spending 3.52% but now bank jst spent 3.39%. This percentage could be considered
of it decrease the relatively more change in lending rate than borrowing rate.
The decrease in administrative cost may be due to

o less advertisement
o Comparatively small network of askari bank than previous year
SPREAD OF BANK
Spread is the earnings of the bank from the primary activities such as borrowing
and lending of deposits after bearing administrative cost.
This calculation is very important because it shows the efficiency of the bank to earn
profits from lending and borrowing of funds
So,
Average rate of lending - Average rate of

Spread of Bank =
borrowing - Ratio of admin to cost
If we calculate the spread of the bank for the year 2009 and 2008 then we see,
10.96% - 6.05% -
2009 Spread of Bank = = 1.52%
3.39%
10.88% - 5.82% -
2008 Spread of Bank = = 1.54%
3.52%
From the above calculation we can see that the spread of the bank has been decreased
from 1.54% to 1.52% which may be due to
o Decrease in lending rate
o Increase in borrowing rate
o Increase in admin to deposit cost
So we did see above that 0.23% increase in borrowing rate just increase the lending rate
by 0.08% which is the main reason for the decrease in spread. So it means that the banks
capacity to bear expanse has been decreased and it will be the reason for the decrease in
net profits and ultimately EPS
And the reason for unsatisfactory increase in borrowing and lending rates may be due to
numerous factors such as
o Sources of borrowing and lending

o Borrowing and lending portfolios
92
o Market trend
This is showing the behavior that the people have less trend to deposit in the bank or have
less liquidity or they want to invest in some other place which gives higher return and
also showing the lending behavior of people may be due to the less liquidity or they want
to increase the operations of their business
MARGIN %AGE
This ratio shows that the margin is how much times of borrowing cost
So,
(Avg rate of lending - Avg rate of borrowing) /
Margin %age =
Avg rate of borrowing *100
Let us calculate the margin %age of 2009 and 2008
(10.96% - 6.05%) / 81.15

2009 Margin %age = =
6.05% %
(10.88% - 5.82%) /
2008 Margin %age = = 86.94%
5.82%
Now we can see that margin %age has been decreased and this decrease is only
due to the relatively abnormal increase in borrowing and lending rates and comparatively
more increase in admin cost to deposit ratio.
CASH RESERVE RATIO (CRR)

Cash Reserve Ratio (CRR) is the statutory liquidity that must be maintained with
the SBP to meet time and demand liabilities. And it varies from time due to
o change in the liquidity of the bank or

o change in SBP rules and regulations to control money supply and credit
extension capacity of the bank, etc
So,
Cash & balance with treasury bank
Cash Reserve Ratio (CRR) = X 100
Deposits
Lets us calculate CRR of 2009 and 2008
Cash reserve ratio 19,385,843

2009 = X100 = 9.41%
(CRR) 205,970,227
93
Cash reserve ratio 16,029,635
2008 = X100 = 9.55%
(CRR) 167,676,572
From the above calculation, we can see that CRR ratio has been decreased by -0.14%
which may be due to high deposits with the Askari bank because deposits increase by
122.83% of Rs 38.2 billion and this is the main reason for the decrease in CRR or may be
due to the change in CRR requirement by SBP
net
2009 2008
change
CRR 9.41% 9.55% -0.14%
CURRENT RATIO
The current ratio is a financial ratio that measures whether or not a firm has
enough resources to pay its debts over the next 12 months. It compares a firm's current
assets to its current liabilities
So,
Current Assets
Current Ratio =
Current Liabilities
The current ratio is an indication of a firm's market liquidity and ability to meet
creditor's demands. Acceptable current ratios vary from industry to industry. If a
company's current assets are in this range, then it is generally considered to have good
short-term financial strength. If current liabilities exceed current assets (the current ratio
is below 1), then the company may have problems meeting its short-term obligations. If
the current ratio is too high, then the company may not be efficiently using its current
assets.
Let us calculate the current ratio for the year 2009 and 2008, so we see
224093036
2009 Current Ratio = = 1.21:1
183914015
175553984
2008 Current Ratio = = 1.18:1
148736323
94
Current ratio has been increased it means that the financial position of Askari
bank has become little bit strong due to decrease in current and saving deposits (current
liabilities) and also due to increase in cash and balances with treasury banks and balances
with other banks

ASSETS
Cash and balances with treasury
19,385,843 16,029,635 3,356,208 120.93%
banks
Balances with other banks 8,364,261 3,954,814 4409447 211.49%
DEBT EQUITY RATIO

The debt to equity ratio (D/E) is a financial ratio indicating the relative proportion
of equity and debt used to finance a company's assets. This ratio is also known as Risk,
Gearing or Leverage. It is equal to total debt divided by shareholders' equity. The two
components are often taken from the firm's balance sheet or statement of financial
position (so-called book value), but the ratio may also be calculated using market values
for both, if the company's debt and equity are publicly traded, or using a combination of
book value for debt and market value for equity.
So,
Long term debts
Debt Equity Ratio =
Long term debts + Equity
When used to calculate a company's financial leverage, the debt usually includes
only the Long Term Debt (LTD). Quoted ratios can even exclude the current portion of
the LTD.
Debt to equity ratio of 2009 and 2008 is:
55,464,359 0.80
2009 Debt Equity Ratio = =
68,601,047 times
44,483,452 0.78
2008 Debt Equity Ratio = =
56,518,347 times
If we see the figures then we see that in 2009 this ratio was just 0.80 times and in 2008 it
was 0.78. it means that leverage of long term debts on equity has been reduced and bank
is using its equity more for banking operations and the probable reason for the decrease is
ratio is increase in equity which is evident from the balance sheet.
95
2009 2008 % change
Share capital 5,073,467 4,058,774 124.99%
96
INFECTION RATIO
This ratio is very important for credit department because they want to see that
classified loans are how much percentage of gross advances. These classified advances
are taken in comparison with respect to total credit portfolio by State Bank of Pakistan
time to time. Because credit extension capacity of any bank is determined by this factor
So,
Classified Advances
Infection Ratio = X 100
Gross advances
And higher the infection ratio less will be the credit extension capacity of any
bank and vice versa
If we calculate infection of year 2009 and 2008 then we see,
12,593,844
2009 Infection Ratio = X 100 = 8.53%
147,628,343
11,012,731
2008 Infection Ratio = X 100 = 7.87%
139,830,973
This infection ratio has been increased by approximately 0.66% and this figure is
considered to be bad because we can observe an increase in advances by 104.82%
increased the infection by 0.66% which is bad sign.
2009 2008 % change

Advances 135,034,499 128,818,242 104.82%
Because bank has invested or give credit to that area which has low credit
worthiness or integrity to pay back the loans and it shows that recovery department is
weak which has been failed to recover loans back and these loans has been turned into
classification. In this case, bank should recover the loans from his debtors by giving then
incentives to pay back the loans by offering less interest rates if they pay in lump sum
and should invest to worthy clients so that to recover in time and more effective the
recovery department should be.
97
RETURN ON ASSETS
The Return on Assets (ROA) percentage shows how profitable a company's assets
are in generating revenue and it equal to the
EAT
Return On Assets = X 100
Total Assets in Balance Sheet
This number tells you "what the company can do with what it's got", i.e. how
many Rupees of earnings they derive from each dollar of assets they control. It's a useful
number for comparing competing companies in the same industry. The number will vary
widely across different industries. Return on assets gives an indication of the capital
intensity of the company, which will depend on the industry; companies that require large
initial investments will generally have lower return on assets
So ROA of 2009 and 2008 are as follows:
1,107,793
2009 Return On Assets = X 100 = 0.43%
254,327,446
386,225
2008 Return On Assets = X 100 = 0.18%
206,191,138
RETURN ON EQUITY
Return on is also called Return on average common equity, return on net worth
measures the rate of return on the ownership interest (shareholders' equity) of the
common stock owners.
ROE is viewed as one of the most important financial ratios. It measures a firm's
efficiency at generating profits from every rupee of net assets (assets minus liabilities),
and shows how well a company uses investment rupees to generate earnings growth.
ROE is equal to a fiscal year's net income (after preferred stock dividends but before
common stock dividends) divided by total equity (excluding preferred shares), expressed
as a percentage.
So,
EAT
Return On Equity = X 100
Equity
ROE of 2009 and 2008 are as follows:
1,107,793
2009 Return On Equity = X 100 = 8.42%
13,142,688
386,225
2008 Return On Equity = X 100 = 3.20%
12,034,895
98
We can view that this ratio has been increased which may create a good image in
shareholders’ mind because they may think that company’s operations efficiency in doing
investments has been increased but as an analyst I will suggest the probable reason of this
increase is the tremendous and massive increase in the equity of the askari bank which is
evident from the following facts
2009 2008 % change

Share capital 5,073,467 4,058,774 125.00%
Reserves 7,182,987 7,667,141 93.68%
Unappropriated profit 886,234 308,980 286.82%
13,142,688 12,034,895 109.20%
99
SUMMARY OF RATIOS
CALCULATIONS RATIO FOR
THE YEAR
RATIO FORMULA 2009 2008
No. 2009 2008
1- Average rate of Markup / return / Interest Income 22,661,754 18,393,313

X100 X100 X100 10.96% 10.88%
lending Advances + Investments + Lending to F.I. 206,694,591 168,975,751
2- Average rate of Markup / return / Interest expenses 13,629,096 10,650,719

X100 X100 X100 6.05% 5.82%
borrowing Deposits + Borrowing from F.I 225,270,390 182,866,720
3- Cash reserve Cash & balance with treasury bank X 19,385,843 16,029,635
X100 X100 9.41% 9.55%
ratio (CRR) Deposits 100 205,970,227 167,676,572
4- Ratio of Administrative Cost 6,995,857 5,904,169

X
Admin cost to X100 X100 3.39% 3.52%
100 205,970,227 167,676,572
Deposit Deposits
5- Current Assets 224093036 175553984

Current Ratio 1.21:1 1.18:1
Current Liabilities 183914015 148736323
6- Debt Equity Long term debts 55,464,359 44,483,452 0.80 0.78

Ratio Long term debts + Equity 68,601,047 56,518,347 times times
7- Classified Advances X 12,593,844 11,012,731

Infection Ratio X100 X100 8.53% 7.87%
Gross advances 100 147,628,343 139,830,973
100
8- Return On EAT X 1,107,793 X 386,225 X
0.43% 0.18%
Assets Total Assets in Balance Sheet 100 254,327,446 100 206,191,138 100
9- Return On EAT X 1,107,793 X 386,225 X

8.42% 3.20%
Equity Equity 100 13,142,688 100 12,034,895 100
10- Spread of Bank Average rate of lending - Average rate of 10.96% - 6.05% - 10.88% - 5.82% -
1.52% 1.54%
borrowing - Ratio of admin to cost 3.39% 3.52%
11- Margin %age (Avg rate of lending - Avg rate of borrowing) (10.96% - 6.05%) (10.88% - 5.82%) /
81.15% 86.94%
/ Avg rate of borrowing *100 / 6.05% 5.82%
LTD = Long term financing of exports oriented projects+ fixed deposits + Subordinated loans
LTD 2009 = 1,780,058 + 47,689,401 + 5,994,900 = 55464359
LTD 2008 = 1,811,653 + 39,675,699 + 2,996,100 = 44483452
C.L = Total Liabilities – LTD

C.L 2009 = 239,378,374 - 55,464,359 = 183914015
C.L 2008 = 193,219,775 - 44,483,452 = 148736323
C.A = Cash and balances with treasury banks + Balances with other banks + Lending to financial institutions + Investments (Securities for sale
& for trading) + Short term Advances + Other Assets
C.A 2009 = 19,385,843 + 8,364,261 + 4,614,059 + (116,410 + 62,205,126) + 119,371,026 + 10,036,311 = 224093036
C.A 2008 = 16,029,635 + 3,954,814 + 4,479,754 + (134,454 + 30,947,602) + 111,043,245 + 8,964,480 =
175553984
101
SWOT ANALYSIS
A tool that identifies the strengths, weaknesses, opportunities and threats of an

organization. Specifically, SWOT is a basic, straightforward model that assesses what an
organization can and cannot do as well as its potential opportunities and threats.
The method of SWOT analysis is to take the information from an environmental
analysis and separate it into internal (strengths and weaknesses) and external issues
(opportunities and threats).
Once this is completed, SWOT analysis determines what may assist the firm in
accomplishing its objectives, and what obstacles must be overcome or minimized to
achieve desired results.
RULES FOR SUCCESSFUL SWOT ANALYSIS

o Be realistic about the strengths and weaknesses of your organization
when conducting SWOT analysis.
o SWOT analysis should distinguish between where your organization is
today, and where it could be in future.
o SWOT should always be specific. Avoid grey areas.
o Always apply SWOT in relation to your competition i.e. better than or
worse than your competition.
o Keep your SWOT short and simple. Avoid complexity and over analysis.
o SWOT is subjective.
102
HISTORY
The SWOT framework was described in the late 1960s by Edmund P. Learned, C.
Roland Christiansen, Kenneth Andrews and William D. Guth in business policy, Text
and Cases (Homewood, IL: Irwin, 1969). The general electric growth council used this
form of analysis in the 1980s. Because it concentrates on the issues that
potentially have the most impact, the SWOT analysis will be useful, when a very
limited amount of time is available to address a complex strategic situation.
The SWOT analysis provide information that is helpful in matching
the firms resources and capabilities to the competitive environment in which it operates
as it is instrumental in strategy formulation and selection.
STRENGTHS
Firm’s strengths are its resources and capabilities that can be used as a basis for
developing a competitive advantage
WEAKNESSES
The absence of certain strengths may be viewed as a weakness.
OPPORTUNITIES
The external environmental analysis may reveal certain new opportunities for profit and
growth.
THREATS
Changes in the external environment also may present threats to the firm.
STRENGHTS
LEADING PRIVATE SECTOR BANK

Askari bank is one of the leading private sector banks in the banking
network in Pakistan with online branches in major cities of the country having high
authorized capital, growth rate and EPS
MAJOR DEPOSIT SOURCES

Askari bank has the major deposit source that is ARMY deposits because all of
the transaction of Army and majority transactions are taken place with Askari bank
ARMY WELFARE TRUST (AWT)

The major number of shares of Askari bank is owned by AWT i.e. 46%.so people
have trust that this bank is very much secure to invest in.
NON STOP BANKING

Askari Bank is providing non-stop banking services to its prestigious customer so
that to increase customer satisfaction and to cater their all around the day
103
ATM NETWORK
The bank has the among largest ATM network of over 2,670 online ATMs.
The customers of Askari Bank withdraw and deposit their funds any time at all the ATM
Sites
ELECTRONIC BANKING - INETBANKING

Askari bank is providing electronic banking services to its esteemed customer
with secure transfer protocol. They can have access to their accounts status through
www.askaribank.com.pk and can pay online utility bills and can also do transfer
transactions online.
STRONG ONLINE SYSTEM

Askari is having the strong online transfer system all across the Pakistan and
customers can easily transfer their funds anywhere and anytime
JOB SPECIALIZATION
I observed the high job specification in Askari Bank- Main Branch because all of
the employees have their segregated duties and they can do their work with proper
concentration efficiently and effectively
HIGH SALARY PACKAGES

Askari is giving high salary packages to it employees from middle level to
executive level employees and Askari MTOs are considered they best MTOs in Pakistan
LESS JOB SATISFACTION

Askari is trying create a ‘we’ culture where there is mutual trust and respect for each
other and encourage ownership behavior so that everyone feels responsible for the
performance and reputation of the Bank. Askari is also committed to develop and
enhance each employee’s skills and capabilities through extensive in-house and external
training programs and job rotations.
HIGH VALUE TO INVESTORS

To gain trust and confidence of shareholders because has belief that the bottom line of
any business is to create shareholder value. So Askari bank is providing timely, regular
and reliable information of activities, structure, financial situation and performance to
investors. At the same time, they are providing one of the best earnings per share in the
banking industry of the country.
MARKET SENSING
Askari bank has good strategists and planners in top level management that sense the
market by thorough analysis and are opening branches in highly business giving and
competitive areas.
104
WEAKNESSES
MONOTYPE SOFTWARE
Askari in using monotype operating system UNI BANK just like DOS (Disk Operating
System) which is less user friendly and having less options that it should have according
to the requirement of current era and it does not have the facility to do multi tasking
which is necessary for fast processing of the job
POOR BRACHES INFRA STRUCTURE

Askari bank has poor infrastructure of most of the old branches since its
beginning but newly opened branches has very attractive and fabulous and aesthetic
infrastructure.
TRAINING FACILITIES
Askari does not provide sequential training programs to its lower level employees
to enhance their capabilities and to make them enable to do jobs efficiently and
effectively
CENTRALIZATION
There is a high degree of centralization in the bank. Almost all the decision-
making is in the hands of the upper management. But centralization is effective
up to a certain level otherwise it becomes inefficient and at times costly too. I personally
observed that delay occurred in the operations of the employees only due to the fact that
they had not got any instructions from the head office.
//
OPPORTUNITIES
EXPANDING ITS WINGS

Askari bank continuously increasing its branch network to increase the customer
base and to take the advantage of customer trust and highly satisfaction. As we can see,
there were just 99 branches at end of 2005 which increased to 122 at the end of 2006
while now Askari has a branch structure of 150 branches, including its 14 Islamic
branches and one offshore branch in Bahrain at the end of 2009.
ORACLE SOFTWARE
Askari Bank of Pakistan has selected Oracle software to modernize its banking
operations, provide world-class service to its customers and compete better with local and
international banks operating in Pakistan. Askari Bank has selected Oracle Applications
for the banking industry including Oracle’s FLEXCUBE Universal Banking Solution,
Reveleus Basel II Solution, FLEXCUBE Islamic Banking and Siebel Customer
Relationship Management (CRM). Techlogix, an Oracle Partner, will implement the
software over a period of 18 months. (Islamabad, July 15 - Associated Press of Pakistan)
105
ISLAMIC BANKING
Askari has the potential to open More Islamic branches because of the potential
and large customer base of 751,000 and customer’s demand
CORPORATE LEVEL BUSINESS

The corporate level business is a big opportunity for Askari bank because it has
good reputation in corporate community that’s why it can expand its operations with
large multinational companies because it is providing competitive services
OVERSEAS OPERATIONS
Askari bank has a big opportunity to work and open its branches abroad as it is
targeting GULF region and has its operation in BEHRAIN.
THREATS
FOREIGN BANKS
Askari Bank is facing stiff competition from some of the foreign and local banks
as well as the newly registered foreign banks in Pakistan.
ACQUISITION AND MERGER

Acquisition and merger is a big threat to Askari Bank because when two entities
combine to form a single entity its financial positions become sturdier. As we know
STANDARD CHARTED acquired UNION BANK and RBS acquired ABN-AMRO.
Generally competitors of Askari Bank reduced but it results in formation of stronger
competitor. And in near future it is also expected that more acquisitions and mergers will
be held which can be a threat to Askari Bank.
EMPLOYEES’ DISSATISFACTION
As Askari bank employees has less job satisfaction so the bank should provide
highly attractive salary packages and best training programs and seminars so that the
employees could be retained, help in the growth of the bank and unnecessary mobility of
employees can be stopped
106
CONCLUSIONS AND
RECOMMENDATIONS
After spending six weeks at different departments of the bank, interacting with the
employees, getting their views, observing the organizational structure and design, I have
come up with the following suggestions that in my view, will definitely improve a few
weaknesses observed in the bank by me.
FLEXIBLE POLICIES
The bank should be adopt flexible policies, specially in the areas of the recruitment,
promotions, evaluation of the employees otherwise the high turnover observed in the
bank will continue to create problems for the bank now and in the future.
JOB SECURITY
The employees in the organization should be insured job security so that there is no
pressure on the employees while performing their tasks.
PERMANENT HIRING
The fresh hiring should be made permanent so that they are secured of their future.
Further the allowances and perquisites attached with the permanent jobs will also
increase the motivation level of the employees.
JOB TRAINING PROGRAMS

The bank should place emphasis on the organization of effective training and
development programs for its new as well as existing employees so that these are
gradually updated regarding the recent developments in the field of banking.
PERQUISITES AND ALLOWANCES

The number of allowances and perquisites for the employees should be increased to
ensure that they put their body and soul in the jobs assigned to them.
REVIVAL OF THE CHARGES

The rates for the various charges provided by the bank should be brought down a bit, as it
would result in increase in the number of customers of the bank.
ADOPTION OF EFFECTIVE TECHNOLOGY

The current unibank system used by the bank is very slow in processing so my view is
that the bank should try to adopt some other but more effective form of technology in
order to provide comfort to the customers as well as the staff.
DECENTRALIZATION
The higher authorities should form team-based management rather than centralized
management. It would result in improvement in uplifting the morale of the employees.
They will be more motivated and involved in all their operations resulting in overall
effectiveness of the organization.
107
OVERSEAS OPERATIONS
Bank should increase the overall operation like it did in Bahrain few years ago because
by doing international image of bank can be made
CORPORATE LEVEL BUSINESS

Corporate level business department should be introduced in major and maximum
branches rather than introduced in just limited and main branches
ISLAMIC BANKING
As Islamic banking is the most desirable by the customers of the bank and it is
also according to the Islamic Shariah so bank should introduce more Islamic branches so
that so increase the banking operations, customer base and customer satisfaction
ORACLE SOFTWARE
Askari bank has the program to introduce the oracle software to modernize its banking
operations, provide world-class service to its customers and compete better with local and
international banks operating in Pakistan. Bank should try to install in short span of time
so that to maximize profits and customer trust as soon as possible
108

Askari Bank-Intern Ship Report

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Hailey College Of Commerce 1

An internship report submitted in partial satisfaction

Hailey College Of Commerce

Then shows the management, branch structure, organizational structure, operations of

During the study, findings extracted are listed below:

Recommendations of the report are as under:

Outer Bills for Collection (OBC) 31

ACCOUNT OPENING DEPARTMENT 42

FINANCIAL ANALYSIS OF ASKARI BANK 67

Horizontal and Vertical Analysis of Income Statement 72

CODE OF ETHICS AND CONDUCT

Lt. Gen. Imtiaz Hussain (HIM) Chairman

Corporate identity is the business face in

Askari Bank is providing the following financing facilities under Consumer

Borrower: Resident Pakistani Nationals.

Age: Between 21 to 65 years.

EXTRA FACILITIES IN PERSONAL FINANCE

Balance Transfer Facility

Dream Life (Financing for Consumer Durables)

Borrower: Resident Pakistani Nationals.

Age: Between 21 to 65 years.

Borrower: Resident Pakistani Nationals

Age: Between 21 to 65 Years.

Borrower: Resident Pakistani Nationals

CORPORATE & INVESTMENT BANKING GROUP

o Corporate Banking Division

CORPORATE BANKING DIVISION (CBD)

CBD is your long-term business partner that is geared to help corporates in

o Working Capital Facilities

INVESTMENT BANKING DIVISION

IBD provides value-added, specialist services and products through a dedicated

3. A lot of time, cost and labour is saved.

4. Since it provides an extra service to the customers of banks without any

PROCEDURE OF CLEARING OUTWARD

o Banker receives instruments for clearing outward before 12pm or 1pm

PROCEDURE OF CLEARING INWARD

Banker checks the instruments in following manner

SAME DAY CLEARING

PROCEDURE FOR OUTER BILLS FOR COLLECTION

o Banker receives instruments for OBC before 12pm or 1pm

Instrument amount Rs 1,000,000 then OBC charges Rs 275

ENTRIES MADE IN OBC

INTER BILLS FOR COLLECTION (IBC)

INTER CITY CLEARING

Stamps involve in inter city clearing:

CITIES OF INTERCITY CLEARING

1. Can be issued to the individuals.

PROCEDURE FOR THE ISSUANCE OF DD/PO

Remittances application form is filled up and signed by the purchaser. First

o Customer is required to deposit the cash (amount + bank’s commission) in his

Stamp of the bank who lodged the cheque in

ISSUANCE OF DD UPON TENDER OF CHEQUE:

SIGNING OF DEMAND DRAFT:

DELIVERY OF DEMAND DRAFT:

PAYMENT OF DEMAND DRAFT THROUGH CLEARING:

PAYMENT OF DEMAND DRAFT THROUGH SUSPENSE ACCOUNTS:

CANCELLATION OF DEMAND DRAFT:

REQUEST FOR IBCA TO DRAWEE BRANCH:

o The fact of cancellation is also recorded in the original application of DD

Dr: MO Account of Drawee Branch (IBCA originating branch)

LOSS/STOP PAYMENT AND ISSUE OF DUPLICATE DEMAND DRAFT:

"Duplicate in lieu of original DD No. (Printed No.) Dated_________ reported

o On the original DD application the previously given DD number is circled