CHAPTER NO.

1 OBJECTIVES OF STUDYING THE ORGANIZATION

The objectives or purposes of internship are to learn the existing accounting and finance practices being followed in the bank. The main objectives are given as under:
1 2 3 4 5 6 7 To understand financial system of country. To understand role of banking sector in financial system of country. To understand the application of theoretical knowledge in practical life. To attain specialization in banking and finance. To understand application of Prudential Regulation issued by SBP. I want to get job in bank so I select bank for studying. Askari bank is leading bank in the country.

8 To study the accounting and financial internal control system of Askari Bank Limited. 9 To review its appraisal and auditing system. 10 To analyze the financial system and financial reports..
11 To study the role of Askari bank in banking Sector of Pakistan. 12 To get the thorough knowledge of different credits offered by bank. 13 To be a part of a competitive environment and enhances my skills. 14 To printout/identify problems, opportunities and providing recommendation there on.

To develop understanding of finance and accounting function integrated, Askari bank Limited is an organization, which can help a student to learn finance and accounting practices in a system fully equipped with latest technology to cater for the needs of present business environment.

CHAPTER NO.2 ASKARI BANK LTD.: AN OVERVIEW

2.1: BRIEF HISTORY

skari Bank Ltd was incorporated in Pakistan on October 09, 1991, as a Public Limited Company. The initial public offering of PKR 120 million was over subscribed 16 times. It commenced operations on April 1, 1992

and is principally engaged in the business of banking, as defined in the Banking Companies Ordinance, 1962. The Bank is listed on the Karachi, Lahore & Islamabad Stock Exchanges. AKBL is one of the financial ventures of the Army Welfare Trust (AWT) that is rated as the top private bank in the country. The bank is one of leading bank in the country. The Askari Bank is one of the major resource pools for the AWT, which has 4.91 percent stakes in the Bank. A Board of Directors, dominated by the AWT, however, controls the Bank. Another 39.67 percent shares are owned by its various directors, who are mostly retired military personnel. These retired generals have personal financial stakes as well. In the early years, the focus of the business was primarily on non-corporate sector of the retail market. However, with substantial growth in its deposit base, the bank has shifted its focus to wholesale trade, manufacturing and project financing, while retaining its niche with the medium-sized customers, who continue to provide the best return on the earning assets. As a result of annual compound growth rate of 26% over the last three years in its deposit base, and a growth of modest 9% in the loans portfolio, the bank has been able to generate substantial surplus liquidity,

which it diverted to high yielding government paper. This has given its asset base a great deal of leverage, while at the same time generating high quality earnings. During the same period, the bank has been heavily involved in the financing of the international trade and handled imports and exports to the tune of PKR 61,356 million, establishing excellent correspondent banking the leading banks around the globe.

2.2: NATURE OF THE ORGANIZATION

Askari Bank Ltd. The Group's principal activities are to provide lending, depository and related financial services. Financial services include credit risk management, foreign trade, treasury, corporate and merchant banking, retail banking, electronic banking, credit cards, marketing and customer service. The Bank operates through 200 branches. On 30-May2008, the Group acquired Askari Investment Management Limited.

2.3: BUSINESS VOLUME

2008 Revenue Deposits Advances Investments 18,393,313 167,676,572 128,818,242 35,677,755

2007 15,143,241 143,036,707 100,780,162 39,431,005

2006 12,596,921 131,839,283 99,179,372 28,625,915

2005 8,780,698 117,794,690 85,976,895 25,708,194

2004 7,890,513 93,318,795 69,838,392 17,239,156

2.4: NUMBER OF EMPLOYEES

2008 4252 1703 __ 541 1064 7560 2007 3834 1273 __ 789 912 6808 2006 3241 687 __ 657 641 5226

Permanent Temporary/on contractual basis Daily wages Commission based Outsourced Total Staff at the end of the years

2.5: PRODUCT LINE

PRODUCTS AND SERVICES Askari Bank Ltd. offers a full range of banking products and services to its customers across the country. The elegantly designed products offer to the customers the ease and convenience of conducting banking transactions in full confidentiality in a first class way. facility. Following are the list of products Askari Commercial Bank Ltd. Is dealing with: A. B. C. D. Retail banking Corporate & investment Askari master card Agricultural banking Askari Bank Ltd. gives its customers the convenience of 24 hours telephone banking service; internet banking and online ATMs and funds transfer

A- RETAIL BANKING
The Retail Banking Group offers auto, mortgage, personal and business finance as its core products. The Group is organized on a hub and spokes basis and its 6 hubs, i.e., Retail Banking Centers (RBC), in Rawalpindi, Peshawar, Lahore, Karachi and Quetta are now supported by 38 spokes, i.e. Retail Banking Units (RBU), which operate from the branches in close proximity of the relevant RBCs.

Products

 Ask Card (Debit / ATM card) Ask Power (Prepaid card) Askari Banks mortgage finance (Home loans) Askari Banks business finance (Business loans) Askari Banks personal finance SmartCash (Running finance facility for consumers) I-Net Banking (internet banking solutions) Askar (auto loans) Askari Touch 'N' Pay (online utility bill payment services) Askari Value Plus (flexible deposit accounts) Cash Management Services Rupee traveler cheques Askari investment certificates Personal Finance Personal Finance is a parameter driven product for catering to the needs of the general public belonging to different segments. One can avail unlimited opportunities through Askari Bank's Personal Finance. With unmatched finance features in terms of loan amount, payback period and most affordable monthly installments, Askari Bank's Personal Finance makes sure that one gets the most out of his/her loan. Once a good credit history is established, the door to opportunity opens much wider. Featuring: Loan amount up to 500,000 Repayment period from 1 to 5 years Fixed monthly repayment Competitive Rates

No pre-payment penalties Shortest processing time Servicing available at all ACBL branches And certainly unmatched service quality

Not restricted to new financing, under Personal Finance scheme, ACBL offers extended facilities, which are: - Back to Original: Under this scheme borrower can avail extended amount of finance up to 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, we have signed MOUs with Multinational companies and large local corporate including schools & colleges. - Dream Life (Financing for Consumer Durables): We are the financial market player in delivering quality service to customers with highly professional standards. We 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, we have also signed agreements with other top manufacturers of automobiles for financing of motorcycles to the general public at most competitive rates. You Your are age is eligible between to 21 apply and if: 57

You have a verifiable minimum gross monthly income of Rs. 10,000/Salaried: Minimum length of confirmed service with present employer is at least six months with a total length of at least one year service Self-Employed: In business for the last one year.

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. Askari "Mortgage Finance" offers the convenience of owning a house of choice, while living in it at its rental value. The installment plan has carefully designed to suit both the budget & accommodation requirements. It has been designed for enhancing financing facility initially for employees of corporate companies for purchase/ construction/ renovation of house.

Featuring:

Finance limit up to Rs. 10,000,000/Tenure : Up to 20 years Markup Servicing: Monthly Life/Property Insurance Early settlement charges NIL Balance Transfer Facility

You are eligible to apply, if you:

Are a Pakistani national & wish to acquire/construct a Are interested in obtaining financing for a residential Are 25 years & above and under 60 years of age, having a Have a minimum income of 20,000 per month Are a permanent employee for at least 2 years of service with Are self employed individual with at least 5 years of business Have a total debt burden not exceeding 35% of your net

residential accommodation in Pakistan.

property located in the urban developed areas

verifiable income

present employer

track record

verifiable income

Business Finance

In pursuance of the National objectives to review the economy of the country, ACBL is providing loans to small and medium size business enterprises under Askari Bank's Business Finance Scheme. The goal is to offer a loan, which enables business community to receive the financing required by them based on their cash flows. Valued customers can enjoy the convenience of getting financing on attractive terms with the minimum processing turnaround time.

Featuring:

Running finance facility ranging from 500,000 to 3,000,000 Pay mark up on daily outstanding loan balance

You are eligible to apply:

If your age is between 25 and 55 years If you are a resident of Pakistan If you have 1 year or more business or professional experience in the If you are the member of the relevant trade body If you are willing to provide your own or co-borrower residential

present business

urban property as security. ASKCAR (Car Finance) Yet another of AKBLs products, Askar offers the most convenient and affordable vehicle- financing scheme, which provides to the valuable customers an opportunity to own a brand new vehicle of their choice. With minimum down payment, lowest insurance rates and widest range of available car makes and models, Askcar offers the best value to the esteemed customers. ASKCARD

10

Askari Banks debit card is tailored to the customers shopping needs and is another valuable financial solution reflecting commitment to building lasting relationship with the customers. ASKCARD means freedom, comfort, convenience and security, so that you can have retail transactions with complete peace of mind. ASKCARD enhances the quality of life by letting the customers to shop, dine at restaurants, pay your utility bills, transfer funds, withdraw and deposit cash through ATM anywhere, anytime Travellers Cheques The range of products and value added services enhances with introduction of Rupee Travellers Cheques (RTCs) launched in March 2002. In spite of the constraint on issuing higher denomination of RTCs against restrictions imposed by the Central Bank of Pakistan ACBL has been striving to attain our shares with sizeable portfolio. AskSmart This personal line of credit would be set up with a specified credit limit up to Rs. 500,000/Value Plus The first liability product launched by AKBL is showing a remarkable acceptability in the market. It promises greater financial freedom and security in an unmatched way. A unique partnership between AKBL and New Hemisphere Insurance Group brings global accidental protection for the entire family. It offers a choice enrolment plan with an automatic monthly premium deduction facility at a price as low as Rs=20/per month.

11

B: CORPORATE & INVESTMENT

The Corporate and Investment Banking Divisions (CBD & IBD) are strongly positioned across priority markets with a distinct strategy for developing corporate business. The strategic framework generates sustainable returns based on strong market presence and financial solutions ranging from debt and equity market transactions to syndicate finance, and from transaction banking to corporate finance advisory services. In 2007 The Corporate Banking Division (CBD) undertook a number of dept repricing swap transactions, aimed at reducing the financial burden of its key client portfolios and also managed advisory and loan arrangement activities. The major new relationships cover telecommunications, oil and gas, and chemicals sectors. CBD has dedicated marketing and support units functioning at Karachi and Lahore. In order to enhance focus on relationship management, and service quality, more dedicated staff is being assigned. The investment banking activity mainly covers, debt / capital markets, advisory services and trading (both equities and derivatives).After the initial start-up phase, the capital market desk, based at Karachi, increased the volume of capital market related transactions. The corporate and investment banking will continue to play a major role in loan syndications, structured financing and debt / capital raising transactions with the objective of providing entire range of corporate and investment banking solutions to its valued clients under one umbrella.

12

Corporate and Investment Banking Group Products Loan syndications (arranger / co-arrangers & lead manager) Structured finance Equity financing Working capital financing Corporate finance advisory services Commercial paper Debt swaps Balance sheet restructuring Debt capital markets Capital raising Trading activity (equities and derivatives) Discretionary portfolio management

13

C- ASKARI MASTER CARD

Askari MasterCard is global member of MasterCard International. AKBL knows the customer requirements & provide them payment solutions & continue to bring new & exciting ways to pay & support the valued customers, from utilizing modern technology to making responsible social contributions; we are continuously & consistently striving to address newer challenges with single motivation: "The Sensible Choice" Products Askari MasterCard (credit card facility) Balance Transfer Facility Smart Installment Plan

14

D- AGRICULTURE BANKING
The role of agriculture in Pakistan economy is of pivotal nature. Due to diverse geographical and climatic conditions the country has tremendous potential for growth and development in agriculture. However, adequate and timely financial assistance to the farmers will improve production potential of agriculture sector in the country. The modern concept of agricultural credit envisages establishment of an efficient institutional credit system to serve as a package of credit, supplies and knowledge for the overall strength of the farmers who at present suffer from low productivity and financial insecurity. A successful credit evaluation system, therefore, should have the basic ingredients to provide adequate amount at the right time and in the right form to help farmers in making a productive use of loan funds.

The Agriculture Credit Division (ACD), a relatively new setup, dedicated to serve the needs of the largest sector of our economy. ACDs primary focus remained on the development and introduction of agriculture financing products based on the farmers needs and sound credit management principles and practices. Since its launch, ACD has introduced a broad range of products, under the 'Askari Kissan' agri finance program, to adequately meet short and long term financing requirements of the farmers for raising crops, dairy farming, poultry, fisheries, forestry and orchids. Agri loans are also provided for farm mechanization, transportation, marketing of agriculture produce, storage, land improvements and irrigation.

The initiation of all proposals is based on sound and well defined criteria for assessing quantitative and qualitative risk profiles of each applicant / transaction within the admissible lending practices of agriculture credit allowed by SBP. All finances are

15

asset based / collateralized and / or secured by other acceptable securities. Appropriate margins on securities are applied where specified by SBP, or determined by the Bank, on the basis of disposal costs and potential prices movements of the underlying assets. Crops / asset and life insurance of borrowers are mandatory for mitigating risks arising from uncertainties. The Division remains proactively engaged in evolving policies and procedures for strengthening the credit framework for the benefit of all stakeholders, and is determined to make its full contribution towards ensuring that Pakistan is a food and fiber surplus country.

Askari Kissan Agriculture Finance Program The Askari Kissan Agri Finance Program (AKAFP) has been designed to meet ON FARM / OFF FARM credit requirements of farmers on the most convenient, flexible, easy terms and conditions. The program features: Featuring: A broad array of credit lines designed to meet farming requirements. Repay and borrow at your convenience on revolving credit basis at lowest mark-up rates renewal able after three years. Convenient repayment terms based on cash flow abilities. Availability of leased Tractors / Transport without Land / Collateral. No Hidden Cost. Availability of interest free package for inputs and tractors etc. No Pre-adjustment penalties. Earn prompt payment Bonuses and reduce financial costs.

16

Insurance cover of leased assets, animals, crops and life assurance of

borrowers Products Askari Kissan Ever Green Finance Askari Kissan Tractor Finance Askari Kissan Aabpashi Finance Askari Kissan Livestock Development Finance Askari Kissan Farm Mechanization Finance AskCard Askari Kissan Farm Transport Finance

17

CHAPTER NO 3. ORGANIZATIONAL STRUCTURE

3.1: STUCTURE OF OVERALL ORGANIZATION Board of Directors
Lt. Gen. Javed Zia
Chairman

Lt. Gen. (R) Imtiaz Hussain Mr. Kashif Mateen Ansari , FCMA Mr. Zafar Alam Khan Sumbal Mr. Muhammad Riyazul Haque Mr. Shahid Mahmud Mr. Ali Noormahomed Rattansey , FCA Dr. Bashir Ahmad Khan Mr. Tariq Iqbal Khan, FCA
(NIT Nominee)

Mr. M.R.Mehkari
President & Chief Executive

18

Audit Committee
Dr. Bashir Ahmad Khan
Chairman

Mr. Ali Noormuhammad Rattansey, FCA Mr. Zafar Alam Khan Sumbal

Company Secretary
Mr. Saleem Anwer , FCA

Auditors
A.F. Ferguson & co.
Chartered Accountants

Legal Advisor
Rizvi, Isa, Afridi & Angell

Shariah Advisor
Dr. Muhammad Tahir Mansoori

19

REGISTER &SHARE TRANSFER OFFICE Askari Asssociates (Private) Limited, 6th floor,AWT Plaza, The Mall, P.O. Box 678, Rawalpindi. Tel. (051) 9272442-44 Fax: (051)9272447 E-Mail: askaribank@isb.compol.com

REGISTERED OFICE/ HEAD OFFICE AWT Plaza, The Mall, P.O.Box No. 1084, Rawalpindi- Pakistan. Tel. (051) 9372150-53 Fax. (051) 9272455 Website: www.askaribank.com.pk

20

3.2: STRUCTURE OF THE PIRMALAH BRANCH

Branch Manager Aftab Ahmad Zia Operational Manager Assmat Tahir In charge General Banking Ahsan Iftkhar Agriculture Credit Officer Haider Ali System Administration Yasir Imran

21

Accounts Rashid Mehmood C.D. Incharge Muhammad Hanif Remittance Incharge Junaid Baber Cash Officer Muhammad Ruuman

22

3.3: REVIEW OF VARIOUS DEPARTMENTS

VARIOUS DEPARTMENTS OF THE ORGANIZATION

This Group is responsible for serving the needs of large corporate clients in public and private sector, managing correspondent banking relationships and undertaking money market transactions. The Group is organized in three divisions namely Corporate and Merchant Banking Division, International Division and the Treasury.

3.3.1: CORPORATE AND MERCHANT BANKING DIVISION

This Division is engaged in provision of financing facilities to large corporate clients including multinationals. Principal activities include syndicated loans, guarantees, and working capital finance, underwriting and advisory services. The Division has played an important role in providing development finance for the modernization and expansion of the country's core industries. Credit risk is well diversified with exposures in sectors like fuel & energy, chemicals, textiles and fertilizers. Three units have been set-up at Karachi, Lahore and Rawalpindi for sales and operations, which are supported by centralized marketing from the Head Office.

3.3.2: INTERNATIONAL DIVISION

Mainly responsible for managing correspondent banking relationships and planning overseas operations, the Division plays a vital role in extending foreign trade transactions support to the branches. The Bank became a member of SWIFT in the Year 2000 and is also a contributor to the equity of Pakistan Export Finance Guarantee Agency Ltd With a network of 167 correspondents spread over 95 countries worldwide, the Bank continued to reinforce its leadership position in trade finance, transacting business of over Rs. 70 billion,

23

during this year. Through the concerted efforts of this Division, we are a participating Bank under the "Pakistan Trade Enhancement Facility" of the International Finance Corporation, and our customers are entitled to avail of the "Political Risk Guarantees Scheme" extended by the Asian Development Bank.

3.3.3: TREASURY
Responsible for managing Banks liquidity and foreign exchange transactions, our Treasury in one of the most active in the market. Through reported transactions, purchase of Government paper and foreign exchange trading, the Division adds substantially to the Bank's sustained earnings.

3.3.4: RETAIL BANKING GROUP

Retail banking group was formed in 2000, this group is responsible for serving the needs of the retail market. Focusing on individual consumers and small and medium size enterprises, for purpose of product differentiation, the group is managed in three business arms i.e. Investments products unit, asset products unit, and the credit cards division. INVESTMENT PRODUCTS UNIT Responsible for developing and managing brands which serve the investment needs of the consumer market, this unit focuses on deposit mobilization, provision of value added services based on modern technology and undertaking the centralized marketing and advertising for the Bank. This unit is also actively involved in the acquisition business and has signed-up over 300 merchants nation-wide which offers shopping discounts to the Bank's Privilege Card members. Askari Bank's Value Plus is a unique deposits account, which offers handsome monthly profits, accidental insurance cover, partial liquidity on all time deposits and free Privilege

24

Card membership. The Unit is also administering the sales and distribution, including arrangement for strategic partnership alliances for Askari- i-Net Banking, the first internet banking in Pakistan, which allows routine banking transactions from any where in the World, round the clock, over the internet. ASSET PRODUCTS UNIT. This Unit is engaged in the development and management of retail credit schemes. The consumer market in Pakistan has not only grows exponentially over the last decade or so, but the needs of this segment have become extremely diverse. In order to sustain competition, it is but imperative to continue offering innovative consumer credit schemes. With the launch of Askari Bank's Personal Finance an Askar (auto-loans), this unit is emerging as a significant contributor to the Bank's loan growth. The unit also administers the first e-commerce banking solution in Pakistan, under the brand name ASK-IBL online. This is a b2b automated credit transaction module, offering merchandise credit to retailers on goods purchased form one of the largest distributors n the country. Strong collection and prudent risk management policies have restricted delinquencies to very low levels.

CREDIT CARDS DIVISION.

This Division manages Askari Master Card brand and is headquartered at Karachi. With a new fully automated transaction processing system, the brand was re-launched in 2001, supported by an aggressive advertising campaign and strong sales team network. The product now has portfolio of nearly 20,000 cards, in less than one year. The brand is accepted worldwide and over 3,000 locations in Pakistan.

OPERATIONS AND CREDIT GROUP

25

A support function group mainly responsible for development of systems and procedures, process re-engineering, automation and credit management. The group is organized in three divisions i.e. System and operations division, electronic technology divisions and the credit division.

3.3.6: SYSTEM AND OPERATIONS DIVISIONS

This group has been instrumental in development of procedures and manuals for various operating requirements of the bank. After careful mapping of the existing process flows, the division recommends automation and re-engineering requirements. To improve transaction efficiencies. The division is active in providing equipment procurement support and development of new branches. The protection of fixed assets of the bank is also managed by the by this division, as directs function. During year 2001, the division has proposed several cost cutting initiatives based upon improvement of our existing procedures and documentation reduction. Seven new branches have been opened during this year. The division successfully implements the model branch concept during 2001, which has been proved to be a milestone towards improving our customer service standards and achieving process uniformity with optimum resource utilization.

3.3.7: ELECTRONIC TECHNOLOGY DIVISION

This division operates as the backbone for all operational functions in the bank. Responsible primarily for the development of banking software and provision of computer hardware to all business units, the division also engaged in the development of technology based value added customer service products. The division has helped the bank in playing the pioneering role in offering Internet banking service e-commerce solution and on-line banking. The division provides online real time branch connectivity and has full-automated transaction processing support programmers in the place. The division is focusing on use of data-warehousing technology to enhance the relationship management program of the bank.

26

3.3.8: CREDIT DIVISION

Providing extensive support to branches for credit administration, control and monitoring, the division has played a pivotal role in helping the bank achieve a remarkable loan Growth of 31%, with well diversified risk exposures. Most of the loans are of shot -term trade financing on a secure and self-liquidating basis. The division has a special assert management team, which is responsible for ensuring low ratio of bad debts, effective monitoring of delinquent advances and close follow-up of recoveries. Bank's head office credit committee, reviews the credit quality and pricing on regular basis not only to ensure healthy credit growth but also the management of bank's risk assets in almost prudent and profitable manner Taking into account the expanding branch network and the increasing customer base, credit administration was strengthened by decentralizing the delegation of lending authorities at the regional and area management level. The decentralization has benefited the bank and its customer tremendously as the new arrangements now provide for faster credit delivery, focused credit development, and more effective monitoring and controls. Further steps are being taken to streamline credit appraisal procedures and training to credit officers at all levels.

3.3.9: HUMAN RESOURCE DIVISION

Strategically, perhaps the most important division at the head office is responsible for human resource management, including recruitment staff training and evaluation. The division also handles matters relating to administration. This division operates on future oriented strategy focusing on employees personal and professional growth. Staff development activities are geared to enhance their capabilities for applying the knowledge and facts towards development of practical situations. Under our human resource management policy, we develop and groom our management personal for

27

positions of greater responsibilities analytical, interpersonal, conceptualized and specialized skills to enable them understand cause-and-effect relationships and to think logically. Staff is given on the-the -job as off-site training in diverse areas of banking and management. Our hiring philosophy is based upon meritocracy and selecting the right person for the right job. We lay greater emphasis on employees honesty and integrity besides technical competence. Candidates are selected through well defined and systematic selection procedure.

3.3.10: FINANCE DIVISION

Responsible for bookkeeping and accounts, this division at head office, prepare all financial return and the MIS through its management-reporting wing. The division is actively involved in preparing market comparative analysis, consolidation of bank's budgets, its monitoring and constant review of various financial indicators. Finance division works as the backbone for the bank's operations. The division, which reports directly to the president and chief executive of the bank, has been instrumental in preparation of banks business plans and future strategies. The budgetary performance are constantly reviewed and through a sophisticated " monthly performance report which is a computer based program, the division provides feed back to the senior on strategic issue like reasons for budgetary variance and methods to arrest negative performance factors. Preparing the bank's annual accounts and coordinating external audit is also a direct function of the finance division. Through the dedicated efforts of staff at this division, the bank has been winning various awards foe the best presentation of the annual accounts and also the management has also been able to monitor and review the bank's performance in proactive manner.

28

3.3.11: AUDIT DIVISION

The audit division reports directly to the board through the executive committee, which is also the audit committee. The audit division is completely independent of the management and is responsible for checking and reporting on the management compliance with the boards policies and directives, as also the prudential regulations and other directives of the SBP. However their role is not intended to just that of fault finding; but also guiding and assisting branches in improving their operations.

The division is responsible for evaluating every aspect of the bank's operations with the goal of improving the effectiveness of risk management and internal control. There is also a regional audit function attached to each area office; the nature of this business is of more quality assurance rather than strictly audit. The regional audit report to the area manager, and assist them in ensuring that there is proper compliance with all the relative directives, and also that customer service standards are maintained and improved, at the branches in the area. The system of regional and area offices has been introduced since 1999for effective supervision and control of branches. The scope of the system also spans the development and management of bank's business and activities, on a regional basis.The bank's branch network has been divided into 6 regions: 1) North region 2) Comparison of Islamabad and Rawalpindi area and the north area. 3) Central region 4) Comprising of Lahore and East area. 5) South region: and 6) West region

29

A process of effective decentralization has been implemented, with delegation of authority and greater responsibility and accountability. Under this system the regional heads have the primary responsibility for business development, profitability productivity, operational efficiency and credit quality. The system helps our customers through quick decision-making and fast product delivery. It has now enabled the bank to further expand and diversify its geographical reach and business activities

30

CHAPTER NO 4. STUCTURE AND FUNCTIONS OF THE ACCOUNT DEPARTMENT

4.1: STUCTURE OF ACCOUNT DEPARTMENT
Branch Manager Mr. Aftab Ahmad Zia Operational Manager

Assmat Tahir
Incharge Account Department

Rashid Mehmood

4.2: ACCOUNTING OPERATIONS

Accounts Department is quite important department of the Bank. This is the department who is responsible for all account statements like as expenses, taxes etc. it prepare the reports on daily, weekly, monthly, quarterly, and annually basis. It makes the correspondence with the head branches also. Following are the responsibilities of the said department. a. Checking of Activity on Daily Basis b. Maintenance of SBP Account c. Payment of Bills to Different suppliers/couriers etc. d. Depreciation Vouchers at end of Each Month e. Payment of Staff Salary

31

f. Submission of all relevant statements to SBP/Head Office

DAILY BANK POSITION STATEMENT All relevant reports pertaining to the whole day working are printed out in the daily working procedure of End of Day run by the Computer Department. Some reports in which each financial transaction either pertaining to customers accounts or to General Ledger Accounts is printed in this procedure are called Daily Activity Reports. This is responsibility of Accounts Department to check each transaction made through computer posting in order to assure that the entry passed in quite right and correct. Each & every voucher is sorted out and then is placed in the following bunches according to its nature. 1. Saving Accounts 2. FCY Accounts 3. Head Office Vouchers 4. Current Deposit Accounts Features It manages the vouchers of their day to day transactions. It has the responsibility to see on line transactions like transfer of amounts by customers and check and verified them through vouchers. They make the budget for their monthly and daily expenses (refreshment, stationary; etc.) Salaries of the staff are prepared in this department. Approval of expenses of exceed from budget. It makes the account statements on daily, weekly, monthly, quarterly and annually basis. It deals in the tax also. It makes the correspondence with head office and head branches also.

32

 Incharge of this department also is the incharge of all labor type employees. Simply In charge of this department is also responsible for maintaining of branch and refreshment in the branch. Salaries of employees. Maintain fixed assets register / Depreciation of assets.

4.3: ROLE OF FINANCIAL MANAGER

The financial manager does all financial transactions with other financial institutions: Payment of cheques Payment of demand draft Cash receive from other financial institutions Included 1: Cheques 2: Demand Draft 3: Travel Cheques All these transactions done by financial manager of bank, he can receive and pay all such kind of payments with all other financial institutions. And all other transactions with any financial institutions are also done by financial manager. Lend money to other banks and also borrow money from other banks is also responsibility of financial manager in bank. Responsible for bookkeeping and accounts at head office, prepare all financial return and the MIS through its management-reporting wing. It actively involved in preparing market comparative analysis, consolidation of bank's budgets, its monitoring and constant review of various financial indicators. Financial manager reports directly to the president and chief executive of the bank, has been instrumental in preparation of banks business plans and future strategies.

33

Preparing the bank's annual accounts and coordinating external audit is also a direct function of the finance manager.

4.4: ELECTRONIC DATA IN DECISION MAKING

Banks use different types of electronic data in decision making. Internet is the major source for collecting data. With the help of internet and intranet banks perform their lot of transactions and it make possible to do E banking. Electronic data which is most useful in decision making include D.D. system Data related to computerized demand draft also include in decision making in banks Computerized D.D. includes electronic and hard copy demand draft. O.B.C (Outward Bill for Collection) Banks add data of cheques which is sent by bank to other banks for collection. Electronic Reports After getting information from ATM and Emails banks make electronic reports. Such kinds of reports are very helpful in decision making.

Software used by Bank

Unibank Unibank is readymade software which performs all kinds of banking transactions in Askari bank. Functions on Unibank Debit and Credit Transfer balance Account Opening Electronic Vouchers Commission Charges Cheque Book charges

34

Connecting to Head Office Closing Format (day end) Weekly Format Basic Data (monthly closing report) Monthly tax statement

4.5: Sources of funds for last five years

Deposits 2008 167,676,572 2007 143,036,707 2006 131,839,283 2005 118,794,690 2004 83,318,795

4.6:Generation of funds for last five years

Investments 2008 35,677,755 2007 39,431,005 2006 28,625,915 2005 25,708,194 2004 17,239,156

4.7: Allocation of funds for last five years

Advances Loans 2008 128,818,242 4,479,754 2007 100,780,162 14,444,143 2006 99,179,372 8,392,950 2005 85,976,895 10,172,242 2004 69,838,392 2,324,839

CHAPTER NO 5.

35

CRITICAL ANALYSIS OF THE THEORETICAL CONCEPTS RELATING TO PRACTICAL EXPERIENCE

During our education we study lot of subjects but during any job or business applications of all these subjects are not possible. But some of them must apply in any job or business. Every organization must follow theoretical concepts but its not possible to apply as well as. Its possible they use such concepts in their own way. So during my MBA I study 20 subjects but I observe that few of them applicable in bank like CREDIT MANAGEMENT, FINANCIAL MANAGEMENT, BANKING LAW, COST ACCOUNTING, FINANCIAL ACCOUNTING, INVESTMENTS. Which concepts I study during my college work, I observe during my internship bank also apply these concepts. I am not saying that they apply as well as but they follow such rules and laws. For example we study about bank accounts, bank also follows such rules but they divide the features of such accounts according to their products. Other point is that theoretical concepts are relating to the rules of state bank of Pakistan and the banks also work under the SBP. All other theoretical concepts like debit, credit, vouching, general entries, ledgers, financial statements have the same application in bank. In short bank must follow all theoretical concepts in their practices but its possible they use such concepts according to their requirements or needs, and its not possible for them to make their own concepts for banking.

CHAPTER NO 6.

36

FINANCIAL ANALYSIS
6.1: FIVE LATEST YEAR BALANCE SHEETS
Rupees in 000

2008 Assets
Cash Balance and 16,029,35 with

2007
13,356,055

2006
14,879,230

2005
11,766,925

2004
8,762,866

Treasury Banks Balance with 3,954,814 other banks Lending financial institutions Investments 35,677,755 Advances 128,818,242 Operating fixed 8,266,458 assets Deferred assets Other Assets tax _ 8,964,480 to 4,479,754

3,497,054 14,444,143

7,333,002 8,392,950

5,550,148 10,172,242

4,847,899 2,324,839

39,431,005 100,780,162 5,128,428 _ 5,535,038

28,625,915 99,179,372 3,810,331 _ 3,812,788 166,033,588

25,708,194 85,976,895 3,192,862 _ 2,732,641 145,099,907

17,239,156 69,838,392 2,595,023 _ 1,559,023 107,167,540

206,191,138 182,171,885

Liabilities
Bills Payable Borrowings 2,584,828 15,190,148 2,627,051 17,553,525 1,839,077 14,964,087 1,315,680 10,562,338 1,227,093 13,781,555

37

Deposits

and 167,676,572 2,996,100

143,036,707 2,997,300

131,839,283 2,998,500

118,794,690 2,999,700

83,318,795 1,000,000

other accounts Sub-ordinate loans Liabilities against subject assets to

1,459

14,159

finance lease Deferred tax 12,987 liabilities Other liabilities 4,759,140 193,219,775 12,971,363

471,519 3,219,796 169,905,898 12,265,898

736,298 2,603,113 154,980,358 11,053,230

567,217 2,045,340 136,286,424 8,813,483

1,282,980 526,866 101,151,448 6,016,092

Net Assets

6.2: FIVE LATEST YEAR INCOME STATEMENTS

38

Rupees in 000

2008
Mark_up/Return/ 18,393,313 Interest earned Less Mark_up/Return/ Interest expense Net markup/ Interest income 7,742,594 10,650,719

2007
15,143,241

2006
12,596,921

2005
8,780,698

2004
4,487,206

8,685,624

6,977,313

4,278,374

1,117,206

6,457,617

5,619,608

4,502,324

3,370,000

Provision against 3,824,778 nonperforming loan advances Provision impairment the value and for in of 247,311 508

3,920,240

1,128,137

638,547

277,398

1,501

376

(36,555)

38,066

investment Bad debts written directly off

__

__

__

4,072,597 Net markup/Interest income provision after 3,669,997

3,921,741 2,535,876

1,128,513 4,491,095

601,992 3,900,332

315,471 3,054,529

Add Non markup /Interest income

39

Fee, Commission Dividend income Income dealing from in

1,257,584 173,621 873,512

1,072,868 137,079 655,761

1,013,660 109,326 584,344

838,561 51,143 356,218

708,377 26,318 180,992

foreign currency Gain on sale of investments Un realized gain Other income Total markup/ interest income 6,376,997 Administrative 5,904,169 7,101,372 4,789,536 __ 12,051 4,801,587 2,299,785 98,535 (233,950) (245,812) (381,227) 2,681,012 6,630,349 3,277,353 __ 6,141 3,346,855 3,346,855 987,875 __ 113,006 1,096,881 2,249,974 5,452,898 2,591,985 __ 1,832 2,593,817 2,859,081 828,774 (188,247) 196,558 837,085 2,021,996 4,688,057 1,845,317 2,842,740 138 1,845,317 2,842,740 876,089 __ 43,611 919,700 1,923,040 Less Non markup/interest expenses expenses Other provisions 459 Other charges 10,987 Total expenses 5,915,615 Profit before tax 461,382 Less Taxation Current year Prior years Deferred Total Tax Profit after tax 17,363 (50,000) 107,794 75,157 386,225 22,384 343,156 non 2,707,000 1,728 336,809 4,565,496 (2,308) 321,758 2,139,254 __ 206,819 1,552,566 __ 177,648 1,633,528 36,743 2,361,251 112,474 99,825 540,193

Unappropriated profit forward brought

2,144,810

1,799,979

1,617,597

1,538,432

____

40

Profit available 2,531,035 for appropriation

4,480,991

3,867,571

3,560,428

1,923,040

6.3: RATIO ANALYSIS FOR THE LAST FIVE YEARS 2008

Gross Profit Ratio Net Profit Ratio Expense Ratio Return of Investment/Earning Power 0.07:1 0.061:1 0.93:1 0.0019:1

2007
0.32:1 0.38:1 0.68:1 0.015:1

2006
0.50:1 0.34:1 0.50:1 0.014:1

2005
0.52:1 0.71:1 0.48:1 0.014:1

2004
0.61:1 0.41:1 0.39:1 0.018:1

41

Return

of

Fixed 0.047:1

0.52:1 0.039:1 1.38:1 14.2:1 0.9:1 5.5:1 57:1 3.09:1 0.94:1 1.04:1

0.59:1 0.04:1 1.74:1 19.3:1 1.4:1 3.2:1 77:1 2:1 0.90:1 1.047:1

0.63:1 0.038:1 1.71:1 18.5:1 1.5:1 8.8:1 90:1 2.1:1 0.91:1 1.041:1

0.75:1 0.044:1 1.83:1 19.2:1 1.6:1 8.3:1 80:1 2.54:1 0.90:1 1.034:1

Assets Assets Turn Over 0.031:1 Ratio Fixed Assets Turn 0.77:1 Over Ratio Return on Equity 15.0:1 Return on Average 0.9:1 Assets Price Earning 4.7:1

Ratio(P/E) Debt Ratio 48:1 Interest Coverage 1.08:1 Ratio Quick Ratio Current Ratio 0.92:1 1.02:1

Ratio Analysis
Gross Profit Ratio
G .P. Ratio gradually decrease in the period of 2004 to 2008, in first three years there is very slight change but in last two years there is great decrease in GP Ratio.

Net Profit Ratio

Net Profit Ratio fluctuated in the period of 2004 to 2008, in first year it increase but the next year it decrease and again increase but big decrease in 2008.

Expense Ratio
Expense Ratio constantly increase from 2004 to 2008, very small change in 2005 to 2006 but 60% increase in the whole period.

42

Large decline in GP Ratio and NP Ratio is due to high addition in Expenses of the organization. Return of Investment/Earning Power
Earning power of the organization decrease in first year but it constant in next two years then a very vast decline in 2008.

Return of Fixed Assets

Return of Fixed Assets frequently decline in the period of 2004 to 2008.

Assets Turn Over Ratio

Assets Turn over Ratio is fluctuated in the whole period. In start it decrease but slightly increase in 2006 then again decrease up to final year.

Fixed Assets Turn Over Ratio

Fixed Assets Turn Over Ratio vary from period to period and perform like previous it reduce in start but slightly increase in 2006 then once more decrease up to final year.

Return on Equity
Return on Equity rise and fall from 2004 to 2008, primary year it fall and rise in 2006, next year Return on Equity fall and for a second time rise in last year.

Return on Average Assets

Return on Average Assets is continuously shrink in first three years but still same in last two years.

Price Earning Ratio (P/E)

Price Earning Ratio fluctuate in all five analysis years at start it get higher but go down in coming year and again grow and drop in next two years.

Debt Ratio
Debt Ratio improve only in 2005 as contrast to first year but in next three years it frequently decline up to 2008.

Interest Coverage Ratio

43

Interest Coverage Ratio go down in initial three years then rapidly get higher in 2007 and yet again lower in 2008.

Quick Ratio
Quick Ratio is not extra fluctuating in this five years period. There is a very tiny differentiation in Quick Ratio of all such years.

Current Ratio
There is no large difference in the current assets and current liabilities of the organization in this assessment period so that Current Ratio is not extra fluctuate, in early three years it rise and in last two years it fall but these fluctuation is very minor.

6.4: HORIZONTAL ANALYSIS OF THE BALANCE SHEET FOR THE LAST FIVE YEARS 2008 Assets
Cash Balance and -82% with -28% 521% 51% 261% 15% 338% 100% 100% 52% 69% 34% 100%

2007

2006

2005

2004

Treasury Banks Balance with -19% other banks Lending financial institutions Investments 107% to 93%

129%

66%

49%

100%

44

Advances 84% Operating fixed 219% assets Other Assets 475% 92%

44% 98% 255% 70%

42% 47% 145% 55%

23% 23% 75% 35%

100% 100% 100% 100%

Liabilities
Bills Payable Borrowings Deposits 111% 10% 114% 27% 72% 199% -63% 511% 70% 104% 50% 1% 58% 199% -43% 394% 53% 84% 23% -24% 43% 200% -56% 288% 35% 46% 100% 100% 100% 100% 100% 100% 100% 100%

and 101% 199%

other accounts Sub-ordinated loans Deferred

tax -99% 803% 91% 116%

liabilities Other liabilities

Net Assets

45

Horizontal Analysis of Balance Sheet

For the purpose of Horizontal Analysis of Balance Sheet for the last five years 2004 to 2008. I select 2004 as a base year and evaluate assets and liabilities of all other four years on the base of 2004 and compare all this period. Cash and Balance with Treasury Banks, increase 34% in 2005, 69% in 2006 and in 2007 52% but it decrease with -82% in 2008 as compare to base year. Balance with other banks, go up from 2004 with 15%and 51% in 2005, 06 then it decrease with -28% and -19% in 2007, 08. Lending to financial institutions, constantly increase but with fluctuations. It rise 338% in 2005, then 261% in 2006, 521% in 2007, but only 93% in 2008. Investments repeatedly increase up to 2007 then bit decline. So 49% increase in 2005,66% in 2006,and 129% increase in 2007 but in 2008 percentage increase is 107, as compare to 2004. Advances of the organization continually grow in whole evaluation period, if we compare it with base year 23% growth in 2005, 42% in 2006, and 44% expansion in 2007,but a high growth of 84% in 2008. Operating fixed assets also have same condition similar to advances, 23% enlargement in 2005, 47% in 2006, and 98% in 2007, but a very vast growth 219% in 2008 as compare to 2004. Other Assets also increase constantly In evaluation period, 75% increase in 2005, measure up to 2004, in 2005, 145% in 2006, 255% but a big change in 2008 of 475%. This continuity in expansion is due to enlarge in assets of organization every year. Total Assets of the organization are

46

also continually rise from base year to final year, 35% enhance in 2005, 55% in 2006, 70% in 2007, and 92% growth in 2008, as compare to 2004. Bills Payable is the first item of liability side, and it fluctuates during its growth. In 2005, 23% enhance as compare to base year. And 50% increases in 2006, 114% increase in 2007, but in 2008 growth rate in 111% in bills payable. There is large fluctuation in Borrowings of the organization in the selected period. Thus -24% decrease in 2005, but in 2006 only 1% increase in Borrowings and 27% in 2007, but only 10% increase in 2008 as compare to 2004. Deposits and other accounts regularly rise with the passage of time, 43% increase in 2005, 58%,72% and 101% growth in 2006,07and 08, as compare to base year. Sub-ordinated loans 200% rise in2005, but a same growth of 199% in rest of three years as compare to 2004. Deferred tax liabilities frequently turn down in the whole period of evaluation, -56%,-43%,-63% and -99% in 2005 to 2008 as match up to to base year. Other liabilities raise gradually, 289% in 2005, 394% in 2006, 511% in 2007 and 803% in 2008 as evaluate to 2004 that is base year. Liability side of the balance sheet also go up continually, 35%, 53%, 70% and 91% from 2005 to 2008, as measure up to to base year. After subtracting liabilities from the assets side of the balance sheet the and 116% growth in 2008. Net Assets are also continually grow up as compare to base year, 46% in 2005,84% in 2006, 104% in 2007

47

6.5: HORIZONTAL ANALYSIS OF INCOME STATEMENT FOR THE LAST FIVE YEARS 2008
Markup/Return/ Interest earned Less Markup/Return/ Interest expense Net markup/ Interest income 130% 92% 67% 34% 100% 853% 677% 525% 283% 100% 310%

2007
237%

2006
181%

2005
96%

2004
100%

Provision against 1279% nonperforming loan advances Provision impairment the value investment and for in of -98.67%

1313%

307%

130%

100%

-96.06%

-99.02%

-196%

100%

48

Net markup/Interest income after

1191% 20%

1143% -17%

258% 47%

91% 28%

100% 100%

provision Add Non markup /Interest income Fee, Commission Dividend income Income dealing from in -93% 93% non 66% 337% 90% 179% -79% 81% 31% -82% 16% -5% 100% 100% 100% 76% 560% 383% 51% 421% 262% 43% 315% 221% 18% 94% 97% 100% 100% 100%

foreign currency Gain on sale of investments Other income Total markup/ interest income 36% Administrative 220% 51% 160% 8633% 160% -19% -89% __ -664% -141% 39% 41% 78% 4350% 81% 18% 13% __ 159% 19% 17% 16% 40% 1228% 41% 0.6% -5% __ 351% -9% 5% 100% 100% 100% 100% 100% 100% __ 100% 100% 100% Less Non markup/interest expenses expenses Other charges 7862% Total expenses 221% Profit before tax -84% Less Taxation Current year Prior years Deferred Total Tax Profit after tax -98.2% __ 147% -92% -80%

49

Horizontal Analysis of Income statement For the purpose of Horizontal Analysis of Income Statement for the last five years 2004 to 2008. I select 2004 as a base year and evaluate incomes and expenditures of all other four years on the base of 2004 and compare all this period. Markup Earned of the bank is fluctuate in the whole period, it increase 96% in
2005, 81% in 2006, 237% in 2007, and 310% growth in 2008 as compare to 2004. Markup Expense gradually increase in evaluation period, thus 283% increase in 2005, 525% increase in 2006, 667% rise in 2007, and 853% increase in 2008. This expense increase gradually due to increase in deposits of the bank every year. Net Markup also rises constantly due to rise in markup income. And 34% growth in 2005, 67% in 2006, 92% in 2007 and 130% growth in 2008 as compare to 2004. Provision against nonperforming loan and advances rapidly increase from base year to final year. It rise 130%,307%,1313% and 1279% from 2005 to 2008. Provision for impairment in the value of investment constantly decrease with fluctuation, -196% fall in 2005, -99.02% in 2006,-96.06 in2007,and -98067% fall in 2008 as compare to base year. Net Markup after Provision fluctuate in evaluation period 28% growth in 2005, 47% in 2006, but -17% fall in 2007,as compare to base year and only 20% rise in 2008, on base of 2004.Non Markup Income, include Fee or Commission gradually rise with 18%,43%,51%a and 76% from 2005 to 2008 on the base of 2004.Divident income too rise constantly on the base of 2004, 94% increase in 2005, 315% in 2006, 421% in 2007, and 560% in 2008.Income from Foreign Currency as well grow gradually 97% grow in 2005, 221% in 2006, 262% in 2007,and 383% grow in 2008 from base year. Gain on sale of investment fluctuate in the whole period, -82%,-79% decrease in 2005 and 2006,but in 2007 it increase 337% then again fall of -93% in 2008 from base year. Other Income rise continually 16%,81%,90%and 93% from 2005 to 2008 on the base of 2004. After addition of all these income, 16% increase in

50

2005, 41%,51%and 36% in 2006,07and 08.Non Markup Expense include Administrative Expenses 40%,78%,160% and 220% from 2005 to 2008, on the base of 2004.Other

Charges expense make a big difference as compare to base year 1228%,4350%,8683%and 7862% from 2005 to 2008 fluctuate. Profit before Tax is rise in start 0.6% and 18% in 2005 and 2006 then decrease constantly from 2007 to 2008, -19% and -84% compare with base year. Total Tax is ebb and flow with -9%,19%,-141%,-92% from 2005 to 2008 on the base of 2004.Profit after Tax increase in start but at last year suddenly fall due to increase in expenses of the organization. As compare to 2004, 5% growth in 2005, 17% in 2006,and 39% in 2007 but in 2008 it decrease with -80%.

51

6.6: VERTICAL ANALYSIS OF BALANCE SHEET FOR THE LAST FIVE YEARS 2008 Assets
Cash Balance and 8% with 2% 8% 5% 5% 4% 7% 5% 2% 7% 9% 8% 8%

2007

2006

2005

2004

Treasury Banks Balance with 2% other banks Lending financial institutions Investments 18% Advances 62% Operating fixed 4% assets Other Assets 4% to 2%

22% 55% 3% 3%

17% 60% 2% 2%

18% 69% 2% 2%

16% 65% 2% 2%

100% Liabilities
Bills Payable 1%

100%
1%

100%
1%

100%
0.9%

100%
0.10%

52

Borrowings Deposits

7% and 81% 2%

10% 78% 2% _ 2% 93% 7% 100%

9% 79% 2% _ 2% 93% 7% 100%

7.3% 82% 2% 0.4% 1.4% 94% 6% 100%

13% 79% 0.9% 1% 0.5% 94.5% 5.5% 100%

other accounts Sub-ordinated loans Deferred

tax _ 3% 94% 6% 100%

liabilities Other liabilities

Net Assets

Vertical Analysis of Balance Sheet

53

For the purpose of Vertical Analysis of Balance Sheet for the last five years 2004 to 2008. I evaluate assets and liabilities of the organization that how much its share includes in total. Cash and Balance with Treasury Banks have 8%
share out of 100% in 2008,7% in 2007, 9% in 2006, and again 8% in 2005,04. Balance with other banks have 2% contribution in 2008,07 and 5% in 2006 and 2004 but 4% in 2005, out of 100% total assets. Lending to financial institutions have 2%,8%,5%,7% and2% share in 2008 to 2004 out of 100%. Investments include 18% in 2008,22% in 2207, 17% in 2006, 18% in 205 and 16% in 2004.the largest contribute in assets is Advances that have contribution of 62% in 2008, 55% in 2007,60% in 2006, 69% in 2005 and 65% in 2004. Operating fixed assets and Other Assets both have same ratio 4% and 3% share in 2008 and 2007 and 2% in 2006 to 2004, in total assets. On liability side Bills Payable is the first item and it has 1% share in total liabilities from 2008 to 2006, and 0.9%, 0.10% in 2005, 04. Borrowings include in total liability 7%, 10%, 9%, 7.3% and 13% from 2008 to 2004.The largest contribution in liabilities is Deposits and other accounts that is 81%in 2008,78% in 2007, 79% in 2006,82% in 2005 and again 79% in 2004 out of total liabilities in all five years. Sub-ordinated loans include in total liabilities 2% from 2008 to 2005 and only 0.9% in 2004. Deferred tax liabilities only include in 2005 and 2004, 0.4% and 1%. Other liabilities have 3% share in 2008, and 2% in 2007 and 2006, 1.4% in 2005, and 0.5% in 2004 in total liabilities. Total Liabilities have 94% in 2008 and 2005, 93% in 2007 and 2006, and 94.5% in 2004. After subtracting total liabilities from total assets we Net Assets have 6% in 2008 and 2005,7% in 2007 and 2006, 5.5% in 2004.

6.7: VERTICAL ANALYSIS OF THE INCOME STATEMENT FOR THE LAST FIVE YEARS
54

2008
Mark_up/Return/ 100% Interest earned Less Mark_up/Return/ Interest expense Net markup/ Interest income 42% 58%

2007
100%

2006
100%

2005
100%

2004
100%

57%

55%

49%

25%

43 %

45%

51%

75%

Provision against 21% nonperforming loan advances Provision impairment the value and for in of 1% 22% Net markup/Interest income after 20% _

26%

9%

7.3%

6%

(0.3)%

1%

investment Bad debts written off directly

__ 26% 17% 9% 36%

__ 7%

__

__ 7% 68%

44%

provision Add Non markup /Interest income Fee, Commission 6.9% 7.1% 0.9% 8% 0.9% 10% 0.6% 16% 0.6% Dividend income 1%

55

Income dealing

from 4.8% in

4%

4.6%

4%

4%

foreign currency Gain on sale of 0.2% investments Un realized gain Other income Total markup/ interest income 35% Administrative 32% 47% 32% _ 32% 15% 53% 26% _ 26% 27% 62% 29% _ 29% 33% 104 % 41% _ 41% 63% Less Non markup/interest expenses expenses Other charges _ Total expenses 32% Profit before tax 3% Less Taxation Current year Prior years Deferred Total Tax Profit after tax 0.1% -0.3% 0.6% 0.4% 2.6% 1% -2% -2% -3% 18% 8% __ 1% 9% 18% 9% (2)% 2% 10% 23% 19% __ 0.1% 20% 43% 0.1% 2% non 15% __ 2% 30% __ 2.6% 17% __ 2.3% 18% __ 4% 36% 16% 0.9% 1.1% 12%

Vertical Analysis of Income statement

Vertical Analysis of the organization from 2004 to 2008. I evaluate all the incomes and expenditure for all five years and in the last year profit ratio is very short due to high

56

expenses of the bank. Mark up earned is the maim source of income and mark up expense is the main expenditure of bank. Markup are 58% in 2008, 57% in 2007, 55% in2006, 49%in 2005 and 25% in 2004 of interest income, after subtracting markup expense from markup income we get Net Markup income that is 42% in 2008, 43% in 2007, 45% in 2006, 51% in 2005 and 75% in 2004 of markup income. Then Subtract provision from net income 22%, 26%, 9%, 7%, 7% from 2008 to 2004. Now net income is 20%, 17% 36%,44%,68% from 2008 to 2004.Total non markup income is 15% in 2008,30% in 2007,17% in 2006, 18% in 2005and 36% in 2004 out of total income. After that add non markup income and the net income is 35% in2008, 47% in 2007, 53% in 2006, 62% in 2005, and 104% in 2004. Then less non markup expenses 32% in 2008,07 and 26% in 2006, 29% and 41% in 2005and 2004. We get profit before tax 3% in 2008, 15% in 2007, 27% in 2006, 33% in 2005 and 63% in 2004 out of total income of bank. And the total taxes of these five years are 0.4%,-3%, 9%, 10%, and 20% from 2008 to 2004. After subtracting total tax we obtain Profit after Tax, 2.6% in 2008, 18% in 2007 and 2006, 23% in 2005 and 43% in 2004 out of total revenue of bank.

CHAPTER NO.7 Compare the Organization with its Competitors

Askari Bank Ltd vs. United Bank Ltd

Rupees in 000

57

Askari Bank Ltd 2008

Assets Liabilities Profit after Tax 206,191,138 193,219,775 386,225

United Bank Ltd 2008

592,185,170 540,965,713 5,855,847

2007
182,171,885 169,905,898 2,681,012

2007
546,795,871 498,904,933 5,776,553

Balance Sheet Ratios Askari Bank Ltd 2008 2007

Current Ratio 1.02:1 1.04:1 0.06:1 0.93:1 Debt Ratio 0.05:1 Debt to Total 0.9:1 Asset Ratio

United Bank Ltd 2008 2007

1.06:1 0.053:1 0.9:1 1.05:1 0.06:1 0.9:1

Askari Bank Ltd vs. United Bank Ltd

58

Profitability Ratios Askari Bank Ltd 2008 2007

Profitability Relation Investment Return Equity Interest Coverage Ratio on 0.095:1 1.08:1 0.89:1 1.48:1 0.58:1 2:1 0.7:1 2.32:1 in 0.002:1 to 0.015:1

United Bank Ltd 2008 2007

0.009:1 0.01:1

Askari Bank Ltd vs. Bank Alfalah Ltd

Rupees in 000

Askari Bank Ltd 2008

Assets Liabilities 206,191,138 193,219,775

Bank Alfalah Ltd 2008

310,209,754 292,632,928

2007
182,171,885 169,905,898

2007
330,679,872 313,265,718

59

Profit after Tax

386,225

2,681,012

1,008,807

638,812

Balance Sheet Ratios Askari Bank Ltd 2008 2007

Current Ratio 1.02:1 1.04:1 0.06:1 0.93:1 Debt Ratio 0.05:1 Debt to Total 0.9:1 Asset Ratio

Bank Alfalah Ltd 2008 2007

1.75:1 0.065:1 1.2:1 2.1:1 0.08:1 1.6:1

Askari Bank Ltd vs. Bank Alfalah Ltd

Askari Bank Ltd 2008 2007

Profitability in 0.002:1 0.015:1

Bank Alfalah Ltd

2008
0.045:1

2007
0.05:1

60

Relation Investment Return Equity Interest

to on 0.095:1 1.08:1 0.89:1 1.48:1 0.60:1 1.5:1 1.3:1 1.02:1

Coverage Ratio

Askari Bank Ltd vs. Bank of Punjab

Rupees in 000

Askari Bank Ltd 2008

Assets Liabilities Profit after Tax 206,191,138 193,219,775 386,225

Bank of Punjab 2008

2 00,400,065 1 89,455,998 204,609

2007
182,171,885 169,905,898 2,681,012

2007
2 34,974,195 2 15,978,401 718,689

61

Balance Sheet Ratios Askari Bank Ltd 2008 2007

Current Ratio 1.02:1 1.04:1 0.06:1 0.93:1 Debt Ratio 0.05:1 Debt to Total 0.9:1 Asset Ratio

Bank of Punjab 2008 2007

1.05:1 0.09:1 0.95:1 0.9:1 0.05:1 0.8:1

Askari Bank Ltd vs. Bank of Punjab

Profitability Ratios Askari Bank Ltd 2008 2007

Profitability Relation Investment Return Equity Interest Coverage Ratio in 0.002:1 to on 0.095:1 1.08:1 0.89:1 1.48:1 0.60:1 0.85:1 0.70:1 1.38:1 0.015:1

Bank of Punjab 2008 2007

0.055:1 0.13:1

62

CHAPTER NO.8

FUTURE PROSPECTS OF THE ASKARI BANK

The operating environment for banks in 2010 will be very challenging in the wake of intense competition in the pricing of asset and liability products. Effective asset liability management together with banks ability to offer improved and innovative products will play a key role in producing better results. ACBL will be start a new soft ware in 2010.Which is helpful to control the expenses because only one admin control whole branches of the region. ACBL should be continued to pursue strategic expansion of its nation-wide branch network which reached 200 by the end of the year 2007. Further expansion is planned and is in progress. In addition to the existing network which offers conventional banking services, the Bank will be launching dedicated Islamic Banking branches during 2011. The Bank will also be looking at augmenting its existing delivery channels with new IT backed channels to boost customer convenience. The Bank will

63

continue to diversify its credit portfolio with emphasis on consumer, SMEs and agriculture while ensuring credit growth strictly on the basis of quality, risk and pricing, aimed at improving returns on assets and capital. In 2010, ACBL will further consolidate its corporate identity and offer to the clients a better -service and more customized products. Through this more focused approach, ACBL plans to out perform the competition.

Askari Bank should be consistently focused on building long term shareholders value, as the primary objective. The strength of the brand name, supported by strategic expansion and the depth of the customer relationships, gives ACBL a strong foundation on which to build and continue growing in the times ahead. The key elements of planning have been to increase market share, mobilize resources, develop retail, agriculture and Islamic banking, introduce fresh initiatives for corporate and investment banking, capitalize on new business opportunities and implement various technology initiatives. At ACBL planning is done at top level. Every year board meeting is held to discuss various business issues. It begins from studying the market trends and goes on to forecasting future where various indicators such as market indicators, industry picture and internal processes are given thorough consideration. Board of Directors takes keen interest in the affairs of the Bank and in the formulation of policies. The agenda approved by the Board of Directors is then passed on to the Executive Committee where further essentials are carefully planned and then the goals formulated are assigned to various business heads.

64

CHAPTER NO.9

WEAKNESSES
Perfection is only the claim of Allah Almighty. No other being living or dead can say this for itself. Similarly, Askari Bank also has some shortcomings that need to be mentioned:

Most of the employees are overloaded with work. Lack of expert finance managers. Lack of training of employees. Inefficient software (Unibank) Less Advertising in Electronic Media. Lack of Marketing Promotion. Low number of branches.

65

 It is slow in the introduction of new services Domestic bank with operations only in Pakistan and does Not Possess Foreign Network. Less walk in customers Few consumer products High expenditure High degree of centralization in the bank

Opportunities
capitalizing on the real estate sectors boom by introducing flexible house financing more facilities for credit card users more retail banking products Extension of local branch network Establishing foreign branch network Capitalizing on information technology Unexplored market of multinational corporations Growth in textile sector Adopt E-banking

Threats

66

Mergers of small banks with bigger banks thereby increasing competition Foreign investments are increasing. Standard Chartered bank acquired Union bank Private banks are increasing their customer base and no of deposit

CHAPTER NO.10 Conclusion

The Askari Bank continued to aggressively fortify its banking network across the country during financial years 2004-08. The bank under its expansion program of its operations added highest number of branches in this period. The bank will continue to expand as per SBPs instruction as work is already underway to some proposed locations during the current year as well. The Askari bank aims to explore new markets by expanding its network to smaller towns and by offering agriculture banking products supported with technology-based services. EPS during the period stood at Rs13.42 compared to Rs12.76 previously. The Bank also declared final cash dividend at Rs1.50/share along with 33per cent bonus shares payout. The interest income of Askari Bank portrayed exceptional growth of 21per cent to Rs18, 393million, primarily due to 82per cent increment in interest earned on loans and advances to customers to Rs.12,818 million as against Rs100,780million during last year.

67

Moreover, markup earned on investments also increased. These are the cumulative consequence of increased branch network, effective asset/liability management and substantial growth in business volumes. From the above discussion it is evident that the bank is progressing. Being a domestic bank it has been able to satisfy its customers with the latest technology. The expansion of the network of branches of the bank will further enable it to maintain its competitive position.

CHAPTER NO.11 RECOMMENATIONS

Askari bank is a very good organization on every point of view, i.e. public dealing and also with the business point of view. Here the customers do not feel any difficulty dealing with the bank due to the hard working staff. Inspire of this effective and efficiency but I have some suggestions, which can add some input in than in than aviating environment.

ADMINISTRATIVE ANALYSIS
CENTRALIZATION Askari bank is a totally centralized bank. In order to improve the working condition of three branches, modern techniques of decentralization must be adopted. Some of the authority must be delegated to the lower management and the staff, unto some extend. This

68

will improve the confidence of the employees, their working performance and may result in quick and prompt attenuation paid to the customers. CONTROL AND EXPENATIONS Expenditures must be control, which are very high.

New software
Want to introduce new soft ware which easily use and fill up all aspects.

PERSONNEL MANAGEMTN ANALYSIS.

NEED FOR BETTER TRAINING It has been noticed that the training program of Askari bank is not proper. Special marketing and financial management training should be given to the employees. They should be given to the employees who concerned with marketing. They should learn the new methods for motivating customers. The training program of the bank should include scientific techniques to improve the decision making inter-done by incorporating case studies, sensitivity training and special projects. Both the specialized and generalized training should be provided to the fresh as well as the on-job workers to maintain the high standard of the fresh as well as the on-job workers to maintain the high standard of the services. A recommended training program for the employees training is given bellow Practical Market Research Skills This program should be designed for department and filed Sales personnel who are some times required to actually conducting their own market research without having any professional skill. The focus of this course should be on those specific market skills are more likely to be used in Pakistan. Better Field Finance Managements This should aim at improve the skills and the knowledge used by the filed finance mangers in controlling financial activities,. Executive in charge of the finance areas/territories and

69

who supervise several staff. The basic trust of this program should be one presenting the filed finance manager job comprising of leading team, motivating sub-ordinates to perform, and controlling a profit center. Appraising the Market This would offer the trainees the practical ways to reduce new project risk by proper market appraisal. Market appraisal of the new project can not be done in Pakistan and shows how four techniques can be systematically applied in estimating the real market potential, judging the price trends, identifying the market risks and forecasting the capacity utilization SOCIALZING The most important recommendation is that the branch should have more of social Parties and evenings where the employers are invited so that this becomes a source of motivation. Because working the entire time makes one socially dull.

Currently banking sector is experiencing some major changes because of mergers and acquisition. Standard Chartered Bank has set a new trend in the banking industry of the country after having acquired Union Bank. Policy-makers at the State Bank believed that the banking environment has changed and the merger of the Union Bank was the outcome of the policies adopted by the SBP. The SBP has been pursuing the policy of merger of small banks with strong banks. 1 Such a scenario will increase the competition for domestic banks and Askari Commercial Bank LTD is one of them. Reports suggest that some more European banks are interested in increasing their stakes in the financial industry of Pakistan. Higher-ups in the banking industry said that they expected the country to see more deals in the banking industry such as the merger of Union Bank. They said a lot of inquiries about the performance of financial institutions and regulatory laws were
1

70

being received from European banks. Bankers said that the attraction was not just the surplus money floating in the European banking industry but the performance of banking industry in Pakistan was also attractive. In order to compete in such a rapid changing environment ACBL needs to be more aggressive. It should be flexible enough to adapt to the ever changing banking industry of Pakistan. The banks promote retail banking aggressively and needs to work on lowering rates. Keeping a close watch on competitors and continuously updating banking facilities for its customers is necessary for survival. Also introduction of innovative products catering to the banking needs of the customers both the corporate clients as well as the individuals is required.

REFERENCES

James C.Van Horne, 2000. Financial Management N. Khurram, 2004. Financial Analysis www.askaribank.com.pk www.sbp.pk www.wikipedia.org www.ubl.com.pk www.bankalfalah.com.pk www.bop.com.pk

71

Audited Financial Reports of Askari Bank

72

73