Title Cover Title Page Internship Letter Preface Dedications Acknowledgement Executive Summary Table of Contents

1. Industry Introduction2. An Overview of Organization

a. History of Organizationb. Nature of Organization

i. Vision Statementii. Mission Statement

c. Main Featuresd. Competitors

3. Organizational Structurea. Hierarchy Chartb. Number of Employeesc. Main Officesd. Introduction of All Departmentse. Comments on Organizational Structure

4. Work Done by Internee5. Financial Analysis of Organization

a. Financial Data of Last Five Yearsi. Horizontal Analysis

ii. Vertical Analysisb. Significance of Ratiosc. Component of Ratiosd. Horizontal Analysis of Ratiose. Interpretation of Ratios

6. SWOT Analysis7. Conclusion8. Recommendations9. Limitations10. Bibliography

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11. Annexes 12. Glossary

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PREFACE

The pre-requisite of internship program is to make the students of M.Com

aware of the practical expertise and to acquaint them with the real

management process.

With an intention of grooming the best executives of the future,

Department of Commerce has organized a comprehensive

internship-training program. All of us were placed in leading

organizations of business arena to gain f irst hand knowledge and

insight into their management and working. So, when I was given the

chance of selecting an organization, I opted for Askari Commercial

Bank Limited.

Getting a chance of working in Askari Bank Limited. proved to be

very beneficial for me. I think that I gained comprehensive insight

into the working of a bank. But nothing could have been possible

without the co-operation and guidance of the off icers of Askari Bank

Ltd, which is formally (Askari Commercial Bank Limited.)

After the completion of internship program, internship report has been

prepared just in accordance with the practical exposure.

I have strong belief that this report will guide and ease the readers to

understand the operations of banking system and more prominently have

good knowledge about Askari Bank Limited, one of the most trusty and

leading banks in Pakistan.

Dear readers, I hope that you will appreciate my report and sense that

reading my report is not like to waste the time in any respect.

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DEDICATIONS

All the efforts in compil ing this report are dedicated To My Beloved Parents, Brothers, Friends & My Honourable Faculty Members of Department of Commerce, As they helped me in this Achievement

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ACKNOWLEDGEMENT

Countless thanks to Almighty Allah (The most merciful the most

beneficial). The only creator of universe who enabled me to

complete this report, in spite of various diff icult ies. All respects to

the Holy Prophet (P.B.U.H) who enable us to recognize our greater

and whose spiritual teaching guide us in every matter of the l i fe.

I would l ike to express my gratitude to the Department of Business

Administration for giving me the opportunity and arranging such an

extensive internship program.

I would also l ike to acknowledge my debts to those off icers Askari

Bank Limited, of who have been extremely helpful for me.

First of al l Mr.Ghulamm Habib, He has been a permanent source of

encouragement and guidance. His helpful nature did not restrict me

to the premises to the branch but extended to any place and any

matter I needed his support on.

I would also acknowledge my debt to Mr.Nabeel , for the knowledge

he provided me.

In short, I would always be thankful to all the managers and off icers,

for their courteous and compassionate treatment given to me.

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EXECUTIVE SUMMARY

The Department of Commerce was established in 2005 and offers

Masters and Bachelors degree in Commerce. An important

programme is six to eight weeks internship with any recognized

institution.

The banking structure in Pakistan comprises of the following types, State Bank of Pakistan, Commercial Bank of Pakistan; Exchange Banks, Saving banks, Cooperative banks, 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.

To open an account the customer has to meet the general banking manager with an introducer. The procedure begins with the punching of account opening form to the customer file i.e. customer’s master file. Before closing any account, bank send letter to the account hold for informing him that his account is going to be closed. There is need an approval form higher authority to close any account. Current deposits are those which are payable to bank whenever demanded by the customer. Bank does not pay any profit on current deposits. The following are the financial products/services of PLS Account, Saving Account, Term deposit and Foreign currency accounts.

In remittance department like any other BANK AL-FALAH also have instruments for transferring of money, Telegraphic Transfer, Mail Transfer. In cash department both deposits and withdrawals go side by side. This department works under the CD In charge and deals with cash deposits and payments. This department maintains the following sheets, books, and ledger of account cash received voucher sheet.

Cash paid voucher sheet, Paying-in-slip, Cheque Book, Cash balance book. The clearing in Karachi at BANK AL-FALAH or other banks is being done through NIFT (National Institute of Facilitation Technology).

Bank provides this facility to the people who need advance money to meet their requirement. Party dealing with other banks financial condition of borrower business and as a first step credit proposal is being made. BANK AL-FALAH provides advances, which are two types. Secured Advances, Unsecured Advances. BANK AL-FALAH usually classified advances in to following types Commercial Advances, Corporate/SME’s Advances, Agricultural Advances.

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Commercial Advances are of following types Demand Finance, Cash Finance, Export Refinance Part I (Pre Shipment) & others. Banks Agriculture division deals with the agriculture advances. Bank provides the Agriculture Advances in order to enhance and support the agriculture sector of the country. Farm Credit & Non Farm Credit.

In foreign exchange, BANK AL-FALAH is dealing Foreign Currency Accounts, Foreign Remittances, and Foreign Bills for Collection, Imports & Exports

Foreign currency accounts & the foreign currency department deals with the following types of accounts, Current account, Saving bank account, Term deposit. Foreign accounts are convertible on floating rate available to the bank. Letter Of Credit facility is being provided by BANK AL-FALAH in foreign exchange.

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INDUSTRY INTRODUCTION

What is BANK?

It has not so far been decided as to how the word ‘Bank’ originated. Some authors opine

that this word is derived from the words ‘Bancus’ or Banque’ which mean a bench. Other

authorities hold the opinion that the word ‘Bank’ is derived from the German word

‘Back’, which means ‘joint stock fund’. It is therefore, not possible to decide as to which

of the opinion is correct, for no record is available to ascertain the validity of any of the

opinions

The term bank is being used for a long time yet it has no precise definition. The basic

reason is that the banks perform not just one but many types of functions originally the

banks were supposed to make short term loans to the traders only. The banks now not

only make short term loans to the formers, traders, industrialist etc. But also invest in a

wide variety of long term earning assets.

The commercial banks also undertake and execute trust, deal in stock, shares and

debentures, issue guaranties and indemnities underwrite and sell new securities, and deal

in foreign exchange etc.

Banking industry acts as life-blood of modern trade and commerce acting as a bridge to

provide a major source of financial intermediation.

However some of the definitions of bank from different authors are as follows.

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Depository financial institution: a financial institution that accepts deposits and channels

the money into lending activities; "he cashed a check at the bank"; "that bank holds the

mortgage on my home" 　

　According to Dr. Hart

“Banker or bank is a person

or company carrying on business of

Receiving money and collecting drafts for the

Customers subject to the obligation of honouring cheques

Drawn upon them from time to time by

Customers to the extends of

The amounts available

On their currents

Accounts”

　

In the words of G W Gilbert

“A banker is a dealer in capital

Or more properly a dealer in money.

He is an intermediate party between the borrower and lender.

He borrows one party and

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Lends to the

Another”

　Types of Banks

Commercial bank.

Exchange bank.

Central bank or state bank.

Industrial bank.

Agriculture bank.

Investment bank.

Saving bank.

Central Bank

Every country has its central bank or state bank. Its major function is to carry out a

country’s monetary policy with an aim to safeguard its financial and economic stability.

It has the monopoly of note issue. It is also the custodian of money market. State bank is

the Banks bank and lender to the government.

Commercial Bank

Commercial banks are profit earning concerns. They receive deposits and advance loans

to the borrows. They greatly help in financing for internal and external trade of the

country.

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Exchange Bank

The main function of the exchange bank is to finance the foreign trade by the purchase

and sale of foreign currencies in the form of drafts, bills of exchange, telegraphic

transfers. They also perform the function of commercial bank. Receiving deposits and

advancing loans.

Industrial Banks

Commercial bank cannot afford to block their funds in long term investments. The

industrial banks receive long term deposits and finance the industries by providing them

long term credits. In Pakistan the Industrial bank named as Industrial Development Bank

of Pakistan (I.D.B.P) was established in 1961 for this purpose.

Agricultural Bank

Agricultural bank provides short and long period loans for financing agriculture. The

agriculturists need short and long term loans for meeting their day to day and long term

requirements for making permanent improvement in the land. In Pakistan Agricultural

Bank is named as Agricultural Development bank of Pakistan (A.D.B.P) and it was

established in 1961

Investment Bank

The main function of investment bank the merchandising of shares and other securities,

managing and distributing the issue of shares and other securities.

Saving Banks

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These are the institutions which are sponsored by the government for having facilities to

the people and small means. These banks collect small saving of people and allow them

to withdraw in small amounts. Also another institution i.e. National Savings is working in

the same capacity.

List of Banks in Pakistan

The market for banks is diverse in Pakistan comprising nationalized commercial banks

(NCBs), Private Banks and foreign banks. In 1993, there were 33 commercial banks in

Pakistan 14 being local and 19 foreign. By the end of 2001, the number of banks has

increased to 43, 24 being local and 19 as foreign.

History Of Banking In Pakistan

Banking in fact is primitive as human society, for ever since man came to realize the

importance of money as a medium of exchange; the necessity of a controlling or

regulating agency or institution was naturally felt. Perhaps it was the Babylonians who

developed banking system as early as 2000 BC. IT is evident that the temples of Babylon

were used as ‘Banks’ because of the prevalent respect and confidence in the clergy.

The partition plan was announced on June 3, 1947 and August 15, 1949 was fixed as the

date on which independence was to take effect. It was decided that the Reserve bank of

India should continue to function in the dominion of Pakistan until September 30, 1948

due to administrative and technical difficulties involved in immediately establishing and

operating a Central Bank.

At the time of partition, total number of banks in Pakistan were 38 out of these the

commercial banks in Pakistan were 2, which were Habib Bank Limited and Australia

Bank of India. The total deposits in Pakistani banks stood at Rs.880 million whereas the

advances were Rs.198 million. The Governor General of Pakistan, Muhammad Ali

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Jinnah issued the order for the establishment of State Bank of Pakistan on 1st of July

1948.

In 1949, National Bank of Pakistan was established. It started with six offices in former

East Pakistan. There were 14 Pakistani scheduled commercial banks operating in the

country on December 1973, the name of these were:

National Bank of Pakistan

Habib Bank Limited

Habib Bank (Overseas) Limited

United Bank Limited

Muslim Commercial Bank Limited

Commerce Bank Limited

Australia Bank Limited

Standard Bank Limited

Bank of Bahawalpur Limited

Premier Bank Limited

Pak Bank Limited

Lahore Commercial Bank Limited

Sarhad Bank Limited

Punjab Provincial Co-operative Bank Limited

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The Pakistan Banking Council prepared banks amalgamation schemes in 1974 for

amalgamation of smaller banks with the five bigger banks of the country. These five

banks are as under:

National Bank of Pakistan

Habib Bank Limited

United Bank Limited

Muslim Commercial Bank Limited

Allied Bank Limited

So, through the Nationalization of Bank Act 1974, the State Bank of Pakistan, all the

commercial banks incorporated in Pakistan and carrying on business in or outside the

country were brought under the government ownership with effect from Jan. 1, 1974. The

ownership, management, and control of all banks in Pakistan stood transferred to and

vested in the Federal Government. The Finance Minister announced plans to start Islamic

Banking system in Pakistan in the budget speech on June 26, 1980, but it could not be

possible till August, 2003.

　

State BANK Of Pakistan

The State Bank of Pakistan is the central bank of the country. Usually the starting point

for a central bank is a banking system that is already in place - the banking system

necessitates the presence of a central bank. But the State Bank of Pakistan (SBP) is

unique in the sense that it started its function in a newly born country, where it also had

to shoulder responsibilities of developing and rehabilitating a banking system and the

economy, in addition to the traditional central banking functions. Performance of the

Bank since its inception in 1948, as reviewed in subsequent pages, shows that it has faced

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all the challenges with a great zeal and commitment. The founders of the Bank set a

multi-dimensional target before it that included not only regulation of the monetary and

credit system but also the growth of this system. The vision of its founders was a stable

monetary system in Pakistan with fuller utilization of the country’s productive resources

(SBP Act, 1956).

In order to achieve the goals set before it, the State Bank of Pakistan performed all the

traditional and non-traditional functions. The traditional functions, which are generally

performed by central banks all over the world, are classified into two groups;

the primary functions including issue of notes, regulation

of the financial system, lender of the last resort, and

conduct of monetary policy,

the secondary functions including management of public

debt, management of foreign exchange, advising the

Government on policy matters, anchoring payments

system, and maintaining close relationships with

international financial institutions.

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BANK ALFALAH LIMITED

BRIEF HISTORY

Bank Alfalah Limited (“Alfalah”) was formed following the privatization of Habib Credit and Exchange Bank Limited (“HCEB”) a wholly owned subsidiary of Habib Bank Limited (“HBL”). The Abu Dhabi Consortium led by H.H. Sheikh Nahayan Bin Mubarak Al Nahayan and comprising of prominent members of the ruling family and leeding businessmen of the UAE, acquired 70% shareholding in HCEB from the privatization commission (“PC”), Government of Pakistan (“GoP”) at a price of Rs 39 per share in July 1997. In February 1998, HCEB was renamed as Bank Alfalah Limited

Alfalah is one of the fastest growing private banks in the country. Over the past six years, the bank has made notable progress in increasing business volume, efficiency and profitability. Alfalah is amongst the major private commercial banks in Pakistan in term of total deposits and assets. As of December 31, 2003, the Bank’s total deposits stood at Rs.76.7b while net advances amounted to Rs. 49.2b. Alfalah is operating through an extensive branch network comprising of 67 branches. The Bank offers a full range of banking services to a wide spectrum of clients

The bank offers a wide range of banking products and services tailored to cater customer specific banking requirements. The thrust is on building and maintaining a long lasting business relationship on mutually beneficial terms with customers. The teams for Corporate, Trade Finance & Private Banking and Structured Finance Unit provide innovative and efficient solutions to the varied requirements of bank’s esteemed clientele.

At present, the bank is operating with a network of 67 branches strategically positioned in all major cities of the country like Karachi, Lahore, Rawalpindi, Islamabad, Peshawar, Sialkot, Faisalabad, Multan, Mardan, Rahim yar Khan, Sarghoda, Sahiwal, Gujranwala, Sukhar, Haiderabad. The aim is to further expand this network by following a well designed expansion strategy. To support bank’s international operations, the bank is well connected by way of established correspondent relationships with banks of excellent

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ratings worldwide. In addition, Online Banking, Automated Teller Machines (ATM's), Credit Cards etc, are a few products currently under process and will be launched in a short span of time.

At Bank Alfalah, customers are the real assets and serving them better is the driving objective that's leading the bank towards new horizons of development in advanced banking facilities while maintaining maximum customer satisfaction.

ORGANIZATION PROFILE

Name of Organization: BANK ALFALAH LIMITED.

Chairman: H.H SHEIKH NAHAYAN MABARAK.

Location: CHAK PULLL111 BRANCH SARGODH

Tel: 048-3791066Website: www.bankalfalah.com

Board of Directors:

1. Mr. Qamar.Z.Al Askare.2. Mr. Abdullah Khalil.3. Mr. Ikram UL Majeed Seghal.4. Mr. Nadeem Iqbal Sheikh.5. Mr. Muhammad Saleem Akhtar.

Executive Committee:

1. Mr. Muhammad Saleem Akhtar.

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2. Mr.Ikram UL Majeed Seghal.3. Mr.Pervaiz A Shahid.4. Mr.M.Waqas Mohsin.5. Mr.Muhammad Yousaf.

Auditors of the Bank

M/S A .Ferguson and Co. Chartered Accountants.

Legal Advisors of the Bank

1. Zafar Law Associates.2. Sajad Law Associates.3. Samee & Billal Associates.

MANAGEMENT

CHAIRMAN

BOARD OF DIRECTORS

CHIEF EXECUTIVE OFFICER

EXECUTIVE INCHARGE

AREA OFFICE NORTH

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AREA OFFICE SOUTH

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CHAIRMAN ‘S MESSAGE

Culture Change and Leadership Excellence are challenges, which stare us in the face in our quest for greater heights for Bank Alfalah in the future. To focus on the subject, two workshops were arranged for the Bank’s HO Executives and Branch Managers – one each in areas North and South.

Here is the essence of the insight gained by me from the workshops. “Each one of us must take personal responsibility for contributing to the future growth and progress of the Bank by utilizing our God given talents and skills – by being ACTORS, not spectators. This is only possible if all BAL staff members become proactive and openly express their views for the betterment of the organization”.

Towards this end, the Bank’s Management is looking forward to ushering in an era of open, direct and honest communication within the Bank. This electronic newsletter and the Bank’s internal e-mail are going to be important tools to achieve this objective. Good luck to you all.

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H.H Sheikh Nahayan Mabarak

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MISSION/OBJECTIVE

The focus of BAL was widened from providing combination – Banking product to financial services by diversifying into potential growth areas.

MISSION STAEMENT:BANK Alfalah is a client-oriented bank and its mission is:

“TO PROVIDE MOST EFFICIENT AND HIGHLY PERSONALIZED

BANKING SERVICES AND FACILITIES TO ITS CLIENTS”

Expansion of its branches

To become market leader of the banking industry

To earn maximum yield on shareholder equity

To attract maximum deposits

OBJECTIVES

Increase in earnings

Focus on export finance

Increase in share capital

Value added products-today & tomorrow

Cut out to meet the high demands of customers, we have an array of products in our pipeline

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VISION STATEMENT

We focus on our customers as an active component in growth process. We continue to offer services that expand their access to excellent and affordable technologies. Our qualified and experienced workforce must work closely with our customers to continually enhance their confidence and trust in us.SCOPE OF BAL

SCOPE FOR TODAY:

On line banking

Credit cards

Tele Banking

Safe deposit lockers

Travelers cheque

Foreign currency and saving account

SCOPE FOR TOMMORROW:

Priority banking

ATM’s (Auto Tailor Machines)

Business financing

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FEATURES

Bank Alfalah Limited is and established bank. It has some special features with the help

of those it is growing rapidly.

Good Work Environment

As the work environment plays a great role in this

competition age, so the bank has good work environment.

All the people work with cooperation; managers are so kind

that each problem can be discussed with them.

Efficiency

Employees at Bank Al-Falah are quite efficient. As

Multan branch is a new one, its employees have to

bring their bank among the list of good banks.

Therefore, they work more than their working hours

and it is all according to their will. It also shows their

loyalty, commitment to organization.

Customer Services

All the customers are entertained individually. Same

kind of behavior and attention is given to all the customers.

Suggestions asked from Customers

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Getting ideas for improvement from customer side is a

new idea and that is working very well in Bank Alfalah Ltd.

All the customers are asked to fill a suggestion form and the

standards of the bank are improved through them.

Employee Benefits

Employees are given the benefits like bonus, gratuity

funds, loans, increments, house rent, medical and

conveyance.

Computerized Working Environment

In bank, all the work is done on computers. All the

entries are made in computer. Balance are fed into the

computer. This increases efficiency of the bank.

Share Capital

The authorized capital of Bank Alfalah is of Rs. 1000

Million (100,000, 000) Paid-up capital is of Rs 600 Million

(600,000,000) ordinary shares of Rs.10 each issued for

cash.

Products

Prioritizing its product portfolio in line with its

corporate and consumer needs and wants the bank is

committed to develop products that give more value to its

customers in both the sectors.

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Following their trend of bringing value added products

and services to their customers the bank has present Royal

Group, Royal Profit and Royal Patriot.

ROYAL GROUP

Royal Group is a joint investment plan that allows

individuals to invest money collectively and earn higher rate

of profit.

Deposit Amount Rate

100,000-999,999 9.50 %

1,000,000-9,999,999 9.70 %

10,000,000 and above 10.00 %

ROYAL PROFIT

It is the profit obtained by individuals on their deposited

amount.

Deposit Amount Rate

50,000 to 999,999 9.00 %

1,000,000 to 9,999,999 9.50 %

10,000,000 & Above 10.50 %

ROYAL PATRIOT

It is similar to term deposit. In term deposit one get no

benefit of profit when he withdraws his money before

maturity date. But in case of Royal Patriot if one withdraw

his money before the maturity date, he can get the benefit

of profit. The profit rates for different periods are following:

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Duration 1Mon

th

3Mont

hs

6Mon

ths

12Mon

ths

2Years

Amount Rate Rate Rate Rate Rate

25,000-

999,999

8.00

%

10.00

%

10.50

%

11.00

%

11.00

%

1,000,000-

4,999,999

8.10

%

10.10

%

10.60

%

11.10

%

11.25

%

5,000,000 &

Above

8.20

%

10.25

%

10.70

%

11.20

%

11.50

%

FINANCE POLICY

Bank Alfalah finance on short term basis only against current assets to its

customers in both corporate and consumer sectors. They don’t invest too much in fixed

assets. Maximum credit for short term is Rs. 50 Millions for one party, they don’t go

beyond five years financing.

FINANCING SCHEMES

The bank has introduced many financing Schemes such as Term Finance & Royal

Personal Finance. The bank has recently introduced a Car Finance Scheme.

Royal Personal Finance

This is the facility for individuals to finance their domestic requirements such as purchase

of household equipments, computers, funding of education, marriage, planning a holiday,

payments of credit card bills, other liabilities or any other personal requirement.

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Facility Range Minimum Rs. 50,000 Maximum Rs. 500,000

Tenure From 1 to 3 years.

Maximum Loan Entitlement (Approximately)

Tenure 1 year 2 years 3 years

Factors 0.09168 0.04993 0.03615

ALFALAH CAR

It’s a scheme that enables one to own his desired car

at easily affordable and flexible installments with a

minimum down payment and insurance.

Salient Features

Lowest Financing cost available in the market

Tenure of 1 to 5 years as per individual requirement

Quickest processing

Minimum processing charges: Rs. 3000 payable once

Down Payment requirement of 25%

Repayment through monthly installments

Lowest Insurance rates available from bank’s approved insurance companies

Monthly Installments

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Monthly Installments for Alfalah Car can be calculated by multiplying Bank’s

financing amount with the following factors:

Periods Factors

For 12 months

For 24 months

For 36 months

For 48 months

For 60 months

0.09072

0.04962

0.03609

0.02944

0.02553

Eligibility Criteria

All Businessmen, Corporate Employees, and other salaried or self-employed

professionals having net take home income in excess of three times the monthly

installment.

Moral Values of Employees:

Moral values of employees are very high and these moral values include.

PASSION

 RESPECT 

INTEGRITY

 EXCELLENCE

 FAIRNESS   

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COMPETITION

The main competitors of the bank are:

Askari Commercial Bank.

Union Bank.

Prime Commercial Bank.

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ORGANIZATIONAL STRUCTURE

ORGANIZATION CHART

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Consumer DurablesVisa/Credit Cards

Home Finance Car Finance

Chief Manager

Branch Manager

Credit Dept.

Consumer Banking

Remittance Dept.

Trade/Finance Dept.

Clearing Dept.

Marketing Dept.

Consumer Finance

Cash Dept.

Accounts Dept.

IT Dept.

Number of Employees:

The overall Staff at NIB Bank branches are detailed below.

(Numbers)

STAFF STRENGTH 2009 2008

Permanent 4,925 5,131

Temporary / on contractual basis 72 142

Group's own staff strength at the end of the year 4,997 5,273

Outsourced 1,430 1,656

Total staff strength 6,427 6,929

DEPARTMENTS

The main departments of the bank are as follows:

Consumer banking.

Remittance department.

Trade and finance department.

Credit department.

Clearing department.

Marketing department.

Accounts department.

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Cash department.

Consumer Finance:

It includes:

Car financing

Visa Cards

Home finance &

Consumer durables

COMMENT ON ORGANIZATION CULTURE

Efficient staff.

Bank Alfalah offers its respective clients calendars, New Year table calendar and key chains etc free of cost.

A very high level of secrecy is maintained.

A verified statement requisition is required to obtain statement of account from the customers each time.

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Branch Manager regularly informs the employees about positive and negative points.

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SLOGANS

The caring bank

All things we do are for u.

Let’s carve a bright future.

Looking at a world of opportunities.

We offer you the best product.

Rest assured, your savings are safe with us.

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WORK DONE BY INTERNEEE

ACCOUNTS OPENING

TYPES OF ACCOUNTS

Following are the types of accounts in Pak rupee1) PLS / Savings Account2) Current Account3) Royal profit Account

1) PLS/ Savings Account: Profit and loss account is basically a saving account; to open this account minimum cash requirement is Rs 20,000 for the individual. To open the corporate account minimum cash requirement is Rs 100,000. Rate of interest on PLS is 8% and interest is calculated and given after six months. Customer cannot withdraw the amount from account till six months; if he wants to withdraw he has to give the notice.

2) Current Account: To open the current account minimum requirement is Rs 50,000 for the individual and Rs 100,000 for the company. Customer can withdraw the amount any time during the banking hours whenever he likes, there is no need to give any notice. No interest is paid on the current account.

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3) Royal Profit: Royal Profit account is basically a combination of current and PLS account, more flexibility is given in this account to facilitate the customers customer can withdraw the amount whenever he likes without giving any kind of notice and on the month end balance profit is also given to the customer. However the only restriction is that accounts balance should be at least Rs 50,000. Interest is given according to the following rates

Royal Profit

50,000 to 999,999 1.50%1,000,000 to 9,999,999 1.75%10,000,000 & above 2.00%50,000,000 & above 2.50%

4) Fixed Accounts

Royal Patriot (Term Deposits): To avail the Royal Patriot Deposit first we have to open the Royal Profit Account. It is term deposit account on which following rates are applicable to the following amounts.

1 Month

Three Months

6 Months

One Year

25,000999,99

91.50% 1.75% 2.00% 2.25%

1,000,000

4,999,999

1.60% 1.85% 2.10% 2.35%

5,000,000

& above

1.70% 1.95% 2.20% 2.45%

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Classic PLS Deposits

Saving A/C 1.50%Notice Deposit 1.50%

The bank offers facility of saving & term deposits in foreign currencies. The intrest rates on these deposits are quoted on the basis of prevalent rates in the international money markets. All profit bearing Pk Rupees A/C’s are subject to deduction of zakat & W. H. Tax.

PROCEDURE

1.Account Opening Form:

First of all customers who want to open the account are required to

get the account opening form from the customer service officer. To

open all types of account same form is required Filling of account

opening form includes type of account, name, and address,

signature of customer and signature of introducer and attach a

photocopy of national identity card.

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2.Documents required for account opening:

a) For individual:

Only ID card of the customer is required which the authorize officer

will attest.

b) For Limited Company:

copy of certificate of incorporation

Memorandum and articles of association

List of board resolution

Certificate of commencement of Business(if required)

Copies of NIC of Directors

Latest Copy of Form 29

c) For Partnership Firm:

Partnership Deed, certified copy

NIC photocopies of all partners

Partnership mandate

d) Club/ society/ Association:

copy of rules

certified copy of resolution

3) Stamping:

After the form is completed it will be submitted to the concerned

person. It will be checked by him, if all requirements and signatures

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of introducer are complete, verification and signatures admitted

stamps will be put on the form.

4) Specimen Signature Card:

The signature of the client is obtained on a specimen signature card

(S.S Card). The card is obtained with two signatures from the

customer. Every time a cheque is received for payment from the

client, the signature on the cheque is verified by comparing it with S.S

Card.

5) Account Number:

When all the formalities are completed, an account number is allotted

to the customer and all the information is entered into the computer

and register. Then that account number is written on S.S Card and

account opening form.

.

6) Issuance of a Cheque Book:

After opening an account with the bank, the account holder makes a

request in the name of the bank for the issuance of a cheque book.

Such a request is known as Requisition Slip. BAL issues cheque books

of at 25, 50 and 100 leaves. Special check book is issued to the Royal

Profit account holder on which name of the account holder is

mentioned. When he used this book completely then he can apply for

another.

7) Entry of Cheque Book:

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Before issuance of a cheque book the bank stamp every leaf with the

account number of the customer, enter it in the cheque book register

and computer and issues the cheque book to the customer after his

signature on the register.

8) Filing of AOF:

Account opening forms are basic documents of the contract therefore

these are filed in numerical order and kept for reference.

9) Letter of Thanks:

A letter of thanks is prepared. One letter is for the customer and one

for the introducer. One copy is send to the customer and the other

copy is kept in the record along with other documents.

CLOSING OF ACCOUNT:

If any customer wants to close his or her account, he can close it

whenever likes, for this he has to bring the cheque book with him and

handover it to the account opening person that cheque book will be

marked by that officer and treated so that anyone else cannot use

that.

ACCOUNTS MAINTAINING

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Following activities are carried out in the accounts department:

Reports

Budgeting

Maintenance of fixed assets and calculation of their depreciation

Funds management

Reconciliation

Foreign exchange, old Account Contracts

Activity checking

BUDGETING: Accounting department prepares the budget for the branch for the whole year. Budget is prepared on the basis of forecast and that forecast is made on the basis of past performance of the branch. Different budgets are prepared regarding the different requirements such as what will be their target of the deposits by end of 2004, what will be target of advances in 2004, what should be the income, what expenses will be done within the branch etc, these budgets are prepared on the past performance Quarterly figures of the past year is taken, calculate its average growth and then forecast either this year we can increase or decrease that position different targets are set. Every branch prepares its own budget for the fiscal year and then budgets of all the branches across the country are consolidated at the head office in Karachi. In this way a consolidated budget is also prepared.

Fiscal year of the bank starts from January to December.

Accounting department starts preparing the budget from October for

the next year. Before the preparation of budget the bank reviews its

sources and funds it has and the uses of those sources. Budget of each

branch is submitted to head office for modifications and for approval.

After the modification and approval the budget for a specific branch is

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being set by the head office. Monthly budget meeting is held to

analyze the monthly performance by all the branch mangers with

head office. The actual performance is compared with the estimated

and variance is calculated. Variance can be negative as well as

positive.

REPORTS: Different type of reports is prepared in bank in which

some reports are prepared daily, some are weekly and some are

monthly and some yearly. There are almost the bank prepares 150

reports. The reports that are prepared daily and through which I

have gone through are the following:

Statement of affairs:

It includes information about assets, liabilities and their balance.

Daily position of deposit and advances are also calculated in this

report.

Currency wise report (ccy):

It provides the details of all the deposits currency in different

categories of account like what is the balance in the current

deposits in different currencies like Pak rupee, dollar and pound

and then sub total. Same is case with saving deposits, term

deposits and others.

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Subsidiary Statement:

This is a detailed report, which includes all the information

regarding the statement of affairs.

Balance Sheet:

Final balance sheet is prepared after six months but daily the

amount of assets and liabilities are monitored on the system.

New Foreign Currency Report:

In this account information regarding the new foreign currency

accounts is given. The old foreign currency accounts are those,

which at the time of nuclear explosions freezes by the government.

Monthly Budget Review Report:

This report is made to review the performance of the month by

calculating the variance. And then if the variance is in negative,

positive actions are taken and reasons will also be mentioned in the

report.

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REMITTANCES In remittances I have learnt the following

1) Telegraphic Transfers (TT)2) Demand Drafts (DD)3) Payment Orders (PO)4) Transfer Entries5) Online Transactions6) Pay Slips7) Outward Bills For Collection8) Clearing

TELEGRAPHIC TRANSFERS:In Telegraphic Transfers the cash is transferred to the local cities as well as to the foreign countries. In TT’s cash could be transferred from the one account to another, from one Bank to the other bank, and money could also be get in the cash form. the procedure of TT involve first of all the TT form is issued to the customer on his request, when the customer submits the form the bank makes the entry in the record in which it Debits the customer account and Credit the Head office account. All the transfers are made through the head office account. Then after the bank informs the other bank to which it has to transfer the cash either through Telex or through the IBCA (inter bank credit advice) this is called the test applied for TT. This transaction is completed on the same day. In the end bank give the copy of the telex to the customer for the confirmation that the cash is transferred. The bank charge Rs 500 for this service and for the cancellation of TT it charges Rs 100. TT can be made in any currency like in Pak rupee, dollars pounds etc.

DEMAND DRAFTS:Demand draft is drawn on the request of the customer to the other cities not for the same city. The procedure is the DD application form is issued to the customer on his request; charges are taken from the customer. Then DD is drawn to branches of the Bank Alfalah in the

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requested city or either on the branches of the correspondent banks in that required city. DD can be drawn both against cash as well as against Account. The entry is made in which customer is Debited and head office is Credited. Then the advice is sent to that branch on which it is drawn in which the amount and party name is stated and finally the DD is given to the customer. DD is cleared in two days.

PAYMENT ORDER:

This service is provided to facilitate the customer like if the customer has to make payment to anyone and if he doesn’t want to make the cash payment, he can ask the bank to make the Payment order on the name of the person to whom he has to make the payment. Procedure is the same Pay order form is issued to the customer and charges are charged from the customer. It is necessary that pay order should be presented to the same branch from which it is drawn either that party could come to the same branch like Bank Alfalah Gulberg branch and present it on the counter and gets the cash or either it could be presented through clearing like if it is presented in any other bank like in MCB it comes through clearing to the Bank Alfalah Gulberg and then it will be cleared by the staff of Bank Alfalah Gulberg and send back again to the MCB after clearing and then MCB will give credit to the customer.

TRANSFER ENTRIES:

In the transfer entries the customer request through an application to transfer the cash from one account to another account like if city school maintains the salaries account in bank alfalah it can request the bank alfalah to transfer the amount from salary account to different staff members account. The entry will be salaries account Debit and staff is credited.

ONLINE TRANSACTIONS:

For instance on line transactions are not real on line transactions for the time being, it is done manually, Bank Alfalah is managing it

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through Fax. The purpose of the online transactions is to facilitate the customer in the sense that if a person have an account in the Bank Alfalah Gulberg branch he can present the cheque in any branch of Bank Alfalah like in LDA branch, that branch sends the cheque through Fax and the staff of Gulberg branch confirms the balance and signature and all other formalities, clear that cheque and the send the IBCA (inter bank credit advise) to the LDA branch then staff of LDA will give cash to the customer.

PAY SLIPS:

Pay slips are issued to bearer, the different kinds of expenses which are made by the employees like the entertainment expenses, fuel expense etc and also to bear the expenses of the services which the bank gets from other organizations like electricity, phone bills, postal charges etc. Pay slips are presented to the account department, they enter it into the system, make the entry in which that particular expense head is Debited and Pay slip is credited and the pay slip is issued.

OUTWARD BILLS FOR COLLECTION (OBC):This facility is provided to the customers to present the cheque of

another city like Karachi and in the Lahore branch of Bank Alfalah

where he is maintaining the account. First of all the customer

presents the cheque to the cash counter then it comes to the

remittances Department, in the remittances, the staff of local

remittances deals that cheque put the stamp and number on that

cheque, than schedule is prepared . If Bank Alfalah has branch in that

city, of which the cheque is presented like if the cheque of Karachi is

presented then Schedule is addressed to the Manager of Karachi

branch, in which the OBC number, cheque number and amount is

written then this schedule along with the original cheque is mailed to

the Bank Alfalah Karachi. Customers have wait three days to get the

cash in Lahore.

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on the other side if cheque of that city in which Bank Alfalah do not

have any branch like in sheikupura, then the schedule of OBC is

addressed to the manager of that bank of which the cheque is issued

like if the cheque is of MCB sheikhupura it will take five days to clear

that cheque. When the cheque is cleared then that bank sends IBCA

to Bank Alfalah that is cheque is cleared and payment can be given to

the customer and if that OBC is returned then the Bank Alfalah

charge Rs 200 from the customer.

CLEARING:

In clearing the customer who is maintaining the account in Bank

Alfalah can present of any other bank like the customer presenting

the cheques of MCB Mall branch. So instead of going to the MCB Mall

branch the customer presents it to the Bank Alfalah Gulberg, staff put

the stamps on the cheque enter it into the record put the scroll

number then send it into the clearing, then this cheque goes to the

MCB Mall, if all obligations are fulfilled like balance, signature all are

clear then MCB clear the cheque and send through the clearing to

Bank Alfalah where staff gives the credit to the customer and if

cheque is returned because of any reason like signatures are not

correct or if there is no balance then customer is charged Rs 200.

SCHEDULE OF BANK CHARGES

Pay Order Minimum Rs. 10 or at the

discretion of Branch Manager

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Cancellation of Pay Order Rs 100

Issuance of Duplicate Pay Order Rs 100

Issuance of Drafts, TTs

1) upto Rs 10,000

2) From Rs 10,001 to Rs 100,000

3) From Rs 100,001 to Rs

1000,000

4) From Rs 1,000,001 to Rs

2,000,000

5) Over Rs 2,000,000

0.25% Minimum Rs 25

0.20% Minimum Rs 40

0.10% Minimum Rs 200

0.075% Minimum Rs 1000

0.060% Minimum Rs 2000

If a party maintaining average

balance of Rs 100,000 in a

current account , no charges will

be deducted for the issuance of

PO and DD, drawn on any Bank

Alfalah’s branch

Cancellation of DD’s / TT’s Rs 100 per cancellation

Issuance of Duplicate DD Rs 100 per item

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CAR FINANCE

Bank Alfalah Limited introduces its car finance in July, 2000 from Lahore. The country head Mr. Adil Rashid’s planning for the product was excellent. The product penetrates in the market so successfully by its attractive features and grabs a lion share of car financing. The core competency of the product is its lowest rate in the market, fast

processing and customer services.

The bank is very selective regarding its clients, this is the reason the bad debt rate is very low or negligible which helps in enhancing the profitability of the bank, which is the main goal of the bank.

ELIGIBILITY:

The person who is applying for car finance from Bank Alfalah Limited should fulfill the following criteria.

Total net monthly income must be Rs. 15,000/-. Take home net income must be excess of three times of monthly

installment. Permanent salaried employee or running business from last three

years. Businessman and / or Self-employed professionals ( Sole-

proprietor / Partnership) Age limit is between 21-57 years. Pakistan nationals, residing in Pakistan in cities where Bank

Alfalah Ltd has its branch.

UN-APPROVED PROFESSIONS:

The following professions on general basis are on negative list but on special and on social repute theses people are served, the purpose to keep them on unapproved list is to avoid bad debt chances.

Police Department Lawyers

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Politicians Land lord Car Dealers Rent A Car Dealers Salespersons working in remote areas of countries

BASIC REQUIREMENTS:

When a customer found to be eligible to apply for the car finance then one has to provide the following documents for processing of ones proposal, on the basis of these documents the bank analysis that whether the person is eligible to finance or not. The list of documents is as follow:

Copy of N.I.C. Bank statement for the Last Six Months. Original Utility Bill of Present Residential address. Signature verified by the Bank. If salaried person: Salary Slip from Present Employer. If Self – Employed Wealth Tax Returns/ Assets & Liability

Statement. Optional: Copy of Driving License.

CONDITIONS:

Following are the conditions, under which the bank can finance the car to the customers, although, bank can change them but on the basis of market and economic conditions of the country:

Down Payment: Minimum 20% of actual price of car. Limit Amount of Loan: Minimum Rs.100,000/- and Maximum

Rs.1,000,000/-. Tenure range between 1-5 years. Repayment: monthly installments. Financing is only for Brand New Car. Insurance Companies are New Hampshire, Adam Jee, Jupiter

Insurance, East West Company or any other approved insurance company ( The bank is adding more reputed company on its panel).

RATES & CHARGES:

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Initially the IRR (Internal Rate of Return) was 19% but as the State Bank of Pakistan is continually decreasing its discount rate the bank decreases its rate to facilitate its customer, in banking sector this is the lowest IRR across the board:

IRR: 17 % pa Documentation Charges: Rs.3,000/-

At the Time of Disbursement Customer will pay:

The customer is liable to pay when its proposal gets approval:

Down Payment First Installment (Optional) First Year’s Insurance Documentation Charges (Rs.3,000/-)

LEGAL DOCUMENTS:

To get finance the customer has to sign filled legal documents to cover its exposure, these documents protect bank, if the borrower failed repay its liability to bank:

1. Demand Promissory Note2. Transfer Letter3. Delivery Acceptance Form4. Bill of Exchange5. Irrevocable Power of Attorney6. Letter of Hypothecation of Motor Vehicle7. Agreement of Financing of Motor Vehicle

Please find enclosed the car finance application form, which is much comprehensive to determine the customer profile and self explanatory.

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ALFALAH VISA CARD

BAL start Al visa card, significant features are as follow:

No joining fees

No annual fee or renewal fee

Lowest mark up 2.25% per month

Card is globally accepted in more than 130 countries

All billing in Pak rupees

24 hours banking service

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CREDIT DEPARTMENT

As per Banking Companies Ordinance 1962, Section 5 ( c ) Banking company is any company which accept deposits of money and liable to pay back to the depositor on call by cheque, Payment order , Demand Draft or any other financial instruments and lend that money further to manufacturers, service renders and any other entrepreneur who required money for ones business.

Credit Department deals with the second part of the definition of banking, which creates assets for the banks. Where small and huge savings of the depositors are further lended to the entrepreneurs to boost their business. The credit department is basically divided in two major portions: one is risk asset marketing and other is risk asset monitoring. Ones the loan market and disburse the role of first part comes to end, but the role of other part begins from here, therefore the role of monitoring is more important then first portion, because the negligence of monitoring department can cause the bad debts and other financial loses.

First of all in my credit report I’ll describe the products of Credit Department:

1-FUNDED :

This is a sort of financing in which bank’s funds are directly involved, and given to the customer. Various kinds of funded portfolio are described as below:

Current Financing: This is also know as running financing, cash financing, In this financing the client account is not credited with an amount, but his account has given a certain required limit which is requested by the customer, and the customer lies with a negative balance or in the form of Over Draft. In this the customer pay mark-up only on outstanding balance and can reduce the balance by adjusting the amount, and again can avail the amount.

Term finance: In this the bank creates a loan account and credits the customer’s account with the loan amount. Therefore the loan account reflects

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in negative. The customer‘ll start paying the mark up on whole loan amount. Because this transaction is one time transaction, which reduce as per amortization schedule.

FIM: This financing is against the imported merchandise, and also kind of OTT (one time transaction). In this customer import commodities through proper banking channel and offer the bank for pledge on imported commodities and ask funds from bank against these. The customers sell these products and pay the bank with same amount to release these products.

FATR : This financing is against a trust receipt, and usually given to well reputed companies, this is also OTT (one time transaction). This facility is also available against imported products but the imported commodities lies with the customer.

LBP-D: Local Bills Purchased-discounted, This facility is for the manufacturer (exporters) to keep customer’s funds in running position, The customer usually negotiate or discount ones documents with banks for funds the bank provide the funds to the customer and take exposure on L/C opener bank against their acceptance or purchase the documents on high risk and make more profit but only with reputed companies.

FBP – D: This facility is same as LBP-D but for the exporters to other countries. In bank this facility is handled by Trade Finance Department.

PAD, Overdue Acceptance: Basically these two products are the conversion of non-funded facilities into funded and are handled by Trade Finance Department.

Refinance: The purpose of this facility is to boost the export of the country. This facility is from State Bank of Pakistan in which SBP supervise the lended money to the exporter. This is very cheap with respect to mark-up. The mark-up rate in this facility is associated by discount rate which usually varies. There are two kind of refinance: one is known to be FAPC-I and other is FAPC-II. Refinance –I is for

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first time exporter and refinance-II is based on last year export performance. In this facility SBP allow banks to keep margin in mark- up rate usually 1.5-2%.

2-NON-FUNDED: This is a sort of financing in which bank’s funds are not directly or indirectly involved.

Letter of Guarantee: This is a documented guarantee by a bank in which bank takes standing on its customer behalf, this is a financial instruments on legal documents against which bank always try to be secure. So this is a legal instrument and has some worth and also its expiry. In case of customer’s default, the bank is liable to pay on its customer behalf to the organization/individuals who are beneficiary.

Letter of Credit: This is also a documented instrument through which a customer can import the commodities to one country. This instrument also has its legal authenticity and works under UCP, on this instrument all the terms and conditions are written and explore all the terms and conditions for trade. This facility is also dealt by Trade Finance Department.

Acceptance: This facility is also handled by Trade Finance Department. When the exporter sent its documents back to importer through its bank the importer bank give the acceptance of these documents ( if the documents are acceptable to importer bank) and declare that if its party fails to provide you funds then the bank will be liable to pay on its behalf.

All the above mentioned facilities are against some securities and no one exist with out security except TOD (Temporary Over Draft) which is less then Rs.25,000/- and for a very short period for a customer who is very important and valuable for bank.

In terms of security the bank has to have security/securities against a loan, there are many types of securities which are acceptable by bank, I’ll only highlight the general type of security with respect to there liquidity:

Cash Collateral/ GoP Securities:

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This is the most liquid security acceptable by the bank, usually individuals/ organizations ask loan against their saving in shape of foreign currency (US$, , €, etc) and the GOP issued securities₤ (Bonds, DSC, RIC, SSC). Since these securities are the most liquid and the risk is minimum therefore the bank charges the lowest rate on loans against these securities.

Mortgage of land/property: Since in Pakistan people use to invest in land and in property, therefore they invest their savings in property, and when ever they required money they use to offer land/property as security, therefore, banks take the property under its mortgage and register the property in banks name, whether as registered or equitable mortgage.

Hypothecation & Charge: This security is considered to be the most risky but through tight monitoring it is very useful to enhance the portfolio and for income. Bank hypothecates the company asset by creating charge on the offered asset, although this asset remains with the customer but its title stands in bank name. Mainly there are three types of charge:

Ranking Charge: In this the banks stands in ranking for there claim. E.g., if the company will default the 1st ranking charge bank has its first claim on assets, then 2nd, 3rd and so on.

Proportionate Charge: The banks claim stands in proportion, e.g., if the company default the banks will have a right of 40% on asset other 30%, third one have 20% and so on till 100%.

Pari Passu: All the banks have equal rights on asset, by there mutual understanding.

All the above mentioned charges are mainly dependent of No Objection Certificate (NOC). If one bank give the authority for charge on its already hypothecate asset of company to other bank , than the other one can creates its charge on the asset other wise it is not possible.

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CREDIT PROCEDURE

This is general procedure of a loan process in which a borrower has to go through and the bank management can make a decision whether the loan should be extending to the borrower or not. A process flow chart on next page will depict a general procedure, in which a borrower comes to credit officer with an application for loan where he describes ones need, requirements, and the funds utility. Then the bank official asks one details like financial statements (Balance Sheet, Income Statement, Cash Flow). The credit officer brings the issue in senior officials and when they give him an ok sign, he starts his procedure. The officer starts making the CLP (Credit Line Proposal) of the concern client; this CLP contains all the information of client, and financial analysis supported by statistical analysis. Then sent to Head Office for approval. When HO send a sanction limit to the branch with specific terms and conditions. Then branch offer the terms and conditions to customer if he rejects the case usually comes to end other wise when he accept it. The branch starts fulfilling the terms and conditions and get signed the legal documents by the authorized signatory as declared by board resolution (if company). When all the formalities get completed the Credit Monitoring Department issue a Pre-disbursement Certificate (PDC), which contains the completed issues and discrepancies. When all the top officials sign this and give a signal of disbursement the Officer make a Limit Input Form, which contains all the quantitative terms like loan amount, security value, mark-up rate, etc and get signed. Then all these things fed to the system for customer use. All the facilities have specific documentation that has to be done before loan disbursement the details of legal documents as per each loan is attached as annexure-I at the end. These documents have legal value and stamped by revenue stamp issued by treasury of Government of Pakistan. The most common document in all these documents is Demand Promissory Note, in which customer makes promise to pay the specific value to the bank in case of default.

Normally Bank Alfalah is financing for working capital to the customer to fulfill the yearly requirements of the customer. Some how they have made long term financing for textile machinery purchase and also made long term financing as auto loan. The purpose for short term financing is to avoid the bad debts. This is the reason the bank has very short list of bad debts and successful in recovery. In annual

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renewal the bank can check the latest position of the client and for renewal the customer has to perform in batter way.

Customer Request

↓Documents from the customer

↓CLP (Credit Line Proposal)

↓Approval (Sanction)

↓Offer Letter

↓Acceptance

↓Security Possession (Pledge, Hypothecation, mortgage, or Lien)

↓Legal Documentation

↓Completion Certificate (PDC)

↓Limit Input Form

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↓System Input

CLEARING

CLEARING INWARD:

In clearing inward those cheques are come in

the branch which is presented in other banks for clearance, those

banks send them here for clearance. First of all it comes through

NIFT (National institution of Funds Transfer) to the cash

department; they will receive it they will check that date, amount

and figures, stamping, all requirements are correct. After verifying

all these things they send it to the operations for posting, in

operations entry will be posted in the bank smart, in which bank

will be debited and customer will be credited. If any cheque will be

returned because of any reason Rs.300 will be charged from the

customer.

CLEARING OUTWARD:

First of all customer presents the cheque or

any other instrument at the CD(cash department) they will check it

whether is it properly filled or not taken it comes to the

operations , here an officer will sought out the instruments of OBC/

LC/ FC. Then the cheques of clearing will be separated , that

cheques will be posted in the system , system will issue the scroll

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number which will be written on the cheque then stamp of clearing

will be put on the cheque and then it will be send to that bank on

which it was drawn through NIFT. If any cheque is retuned then Rs

200 will be charged from the customer.

TRADE DEPARTMENT

This department deals in foreign trade financing. This department is

further divided into two departments:

Import Department

Export Department

Trade deals with the entry/departure of goods into/from one country

to another country. International Trade is basically a consequence of

an agreement between a buyer and seller separated by geographical

boundaries.

To ensure secure transfer of goods to the right buyer and payment to

the right seller, the services of financial institutions are very

important, which have contracts and roots in both countries become

indispensable.

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The banks act as Authorized Dealer of the Government of Pakistan,

serve four purposes in trade. These are:

1. They use their reputation to give credibility to their customer,

who may be unknown in another country.

2. They check the validity of the trade agreement al along spotting

and then informing their customers of any deviation and

discrepancy as regards the requirements of the agreement.

3. They act as post offices, so as to lend validity to correspondence

between the importer and exporter.

4. They serve as money changers by dealing in the relevant

currencies in the relevant countries, allowing exporters to

receive payment in their own currency and importers to pay in

their own.

Just as trading customers are interested in goods and not the

documents, banks are interested in documents and not goods. Banks

see goods in their documents, not in the shipyard. If the documents

say the goods are fine, the bank accepts them as so, even though the

goods may, in reality be damaged or totally non-existent. Therefore,

preparation, transfer and perusal of documents command the greatest

importance for banks.

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IMPORT DEPARTMENT

Requirements to be fulfilled

The importer should fulfill the following requirements.

1. Membership in the Chamber of Commerce

2. Import Export license from EPB

3. C.P Book (Category pass)

4. N.T.N (National Tax Number)

5. Letter of Credit

CONTRACT:

Apart from an L/C, a foreign trade transaction can be carried out

through a contract. A contract is mutual understanding between the

buyer and seller without the involvement of the letter of credit.

The importer and exporter might decide to carry on trade without the

involvement of a letter of credit. In this situation, trade is carried out

based on a mutual contract between them. In a contract, the bank is

not liable to make payment upon receipt of documents.

LETTER OF CREDIT

The letter of credit is today the foremost way of financing

international trade. In simple words, a letter of Credit (L/C) can be

defined as:

“A bank’s written undertaking given to the exporter for payment of a

certain sum of money on behalf of the importer provided the exporter

tenders to the bank or its overseas agents, the specified documents

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within a specified period in accordance with the terms of the

undertaking”.

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Advantages of L/C:

Following are some of the main advantages of a letter of credit:

Since a letter of credit is opened only fro the importers with

established credit standing, the exporter is sure of receiving the

price of his commodity.

An exporter may obtain necessary finance immediately on

shipment under a letter of credit (through negotiation or OD

buying).

A letter of credit may help the importer to meet its financial

difficulties. He may obtain some finances against the L/C (Like

FIM, FATR etc).

Similarly, an L/C enables the exporter to obtain finances from

his bank, for the operations of production even before shipment

(Pre-Shipment finance).

Types of L/C:

Letter of Credit is either

1. Revocable

2. Irrevocable

1. Revocable Letter of Credit:

A revocable Letter of Credit can be amended or cancelled by the

issuing bank at any time without prior notification to the seller.

This form of credit gives the buyer maximum facility but it places

the seller in difficult position when the goods are in transit and the

credit is revoked before the documents are presented and payment

has not been made on presentation. Since it offers little security to

the seller, it is hardly used in foreign trade.

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2.Irrevocable Letter of Credit:

An irrevocable letter of Credit constitutes a definite undertaking of

the issuing bank to accept and pay the bills drawn upon it so long

as the terms and conditions stipulated in the letter are fulfilled.

This form of credit can be amended or cancelled only with

agreement of all parties to it. Since it gives the seller greater

assurance of payment, it is always preferred to revocable letter of

credit.

Banks involve in Letter of Credit:

Following Banks are involved in letter of credit:

i. Issuing Bank (Opening Bank)

ii. Reimbursing Bank

iii. Advising Bank

iv. Negotiating Bank

v. Intermediary Bank

i. Issuing Bank (Opening Bank):

Issuing bank is the bank which opens the L/C on behalf of the

importer. This bank’s undertaking under an irrevocable L/C is

absolute. Therefore, once the L/C has been communicated to the

beneficiary through the bank, it has no option, but to pay, provided

the other terms and conditions have been fulfilled.

ii. Reimbursing Bank:

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According to ICC rules, Reimbursement against foreign currency

has to be made through the country originating that currency.

Therefore, for dollar transactions, reimbursement has to be made

through the bank situated in USA.

When issuing bank don’t have any branch in USA (for dollar

payments), like BAL, the reimbursement is made through a bank in

USA, where the issuing bank has Nostro Account, that bank is

known as Reimbursing Bank or Drawee Bank. It is correspondent

of issuing bank and makes payment by debiting the Nostro

account.

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iii. Advising Bank:

The bank that advises the L/C means who physically delivers the

L/C to the exporter on behalf of the issuing bank. It is a

correspondent bank of the issuing bank situated in the

beneficiary’s country or it can also be a branch of issuing bank.

iv. Negotiating Bank:

The negotiating bank receives the documents and delivers to

exporter. When the exporter completes all the documents, after

making shipment, the negotiating bank sends them to the issuing

bank.

v. Intermediary Bank:

Intermediary bank is that where the negotiating bank has its

Nostro Account and who obtains reimbursement against L/C from

reimbursing bank and gives credit to the negotiating bank. For

dollar payments, intermediary bank would have to be situated in

USA. Similarly, for transactions in GBP, both the Reimbursement

and Intermediary banks would be in UK.

The number of banks involved in L/C Processing may vary from 1

to 6. Only a single bank can also perform all the functions through

its different branches.

Terms for an Importer to get an L/C:

A letter of Credit cannot be opened on behalf of the importer

unless he fulfills the following requirements:

1. The person must be an account holder of BAL.

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2. No person can be an importer without first being registered

with EPB. So the person must have valid import registration

with Export Promotion Bureau (EPB) of Pakistan. This

registration is not necessary fro those who have been

exempted from it.

3. The person must process a valid membership certificate of

Trade Organization, licensed and recognized by Federal

Government like a Chamber of Commerce (e.g. Lahore

Chamber of Commerce)

4. The person must possess a valid NTN (National Tax No)

certificate.

5. The person must have the Sales Tax Registration Certificate.

L/C Application Form:

After having an approved L/C limit, the process of L/C opening starts

with L/C Application form. The bank has prescribed a standard

application form that contains the required guidelines, instructions

and other relevant terms and conditions under which the L/C is to be

opened and claims from the beneficiary are to be settled.

The application form contains the following:

1. Description of the goods, detail of quantity, unit price, total

price and currency of detail.

2. Instructions about the advice of credit, whether it should be

sent by airmail, by courier or telecommunicated.

3. Form of credit: Whether revocable or irrevocable, confirmed or

unconfirmed. Due to permission of irrevocable credit only, it is

prescribed on from.

4. The name and address of the beneficiary.

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5. Type of Credit: Whether sight, usance etc.

6. Validity period of credit and last dates for shipment and

negotiation.

7. Port of shipment and port of destination and whether trans-

shipment and/or part-shipment are allowed.

8. Types and number of sets of documents required to be

submitted by the exporter.

9. Shipping terms in the contract of sale, e.g. FOB, C&F OR CIF

etc.

The application form is a formal contract between the issuing bank

and the applicant; therefore, it is signed by the customer, who by

doing so undertakes to abide by the terms and conditions of L/C,

mentioned in the application form.

Documents required for opening an L/C:

For getting an L/C issued, the importer needs to submit the

following documents along with the application form.

Performa Invoice:

The foremost document required by the bank for establishment of

an L/C is the Performa Invoice (signed by both the importer and

exporter). It is issued by the exporter. When the importer has

direct relations with exporter, then he gives Performa Invoice or

Contract form. It comprises all the terms and conditions that have

to be mentioned on L/C. Performa Invoice constitute the basis of

the whole transaction.

Indent:

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When the importer and exporter don’t have direct relations and are

connected to each other through an intermediary, called Indenter,

then he issues an indent form containing all terms and conditions.

Insurance Policy:

Goods being imported serve as security for bank. SO these goods

should be properly insured. Therefore, bank requires the insurance

documents from the importer. There two types of insurance policy:

i. Open Policy:

An open policy is for a specific amount. It provides cover to a

number of L/Cs up to the limit of policy.

ii. Cover Note:

It is an L/C to L/C document and importer must provide a separate

cover note for every L/C, if he doesn’t have an open policy.

Form I:

To assess all those transactions in the country, in which foreign

currency is involved, State Bank of Pakistan has made it compulsory

to submit the I Form (‘I’ stands for imports) when an import

transaction is carried out. I form contains all the information about

the transaction along with importer’s NTN and import registration

number.

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Promissory Note:

It is an unconditional written promise signed by the maker, to pay on

demand or at a fixed or determinable future time, a certain sum of

money to be specified person or to the bearer of the instrument.

Therefore, to make the payment secure, bank obtains a promissory

note signed by the importer, along with the above stated documents.

Documents send by the negotiating Bank:

In the operations of documentary credit, all parties concerned deal in

documents and not in goods or services to which the documents may

relate.

Following are the documents sent by the negotiating bank for the

settlement of L/C:

Commercial Invoice

Bill of Exchange

Transport Documents (Bill of Lading/Air Way Bill/ Railway

Receipt )

Insurance documents

Packing List

Certificate of Origin

Covering Schedule

Commercial Invoice:

Commercial Invoice prepared by the exporter signifies the name and

address of importer, invoice price, invoice number and all the

specifications of goods being imported.

Bill of exchange:

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A bill of exchange is an instrument in writing containing an

unconditional order, signed by the maker, directing a certain person

to pay a certain sum of money on demand or at a future determinable

period, to a certain person or to the bearer of the instrument.

It is drawn by the exporter through negotiating bank and is an order

for the importer or the issuing bank to pay a specified amount. In case

of sight bill it has to be paid immediately.

Transport document:

Bill of Lading is a document issued by the shipping company which

stipulates the quantity of commodity, weight, port of shipping and

discharge, date of shipment and other specifications. Bank examines

that whether all these specifications are in accordance with the

Performa invoice and L/C, especially the date of Bill of Lading (i.e.

date of shipment).

Instead of shipping company, if an airline or railway has been

assigned the task of transporting the goods, then these companies

issue Airway Bill or Railway Receipt, respectively.

Insurance documents:

The L/C calls for insurance policy or certificate in Negotiable Form for

full CIF invoice value and endorsed to the order of the issuing bank. If

insurance is being converted by the importer, then the issuing bank

must enters that the insurance provides cover the currency in which

L/C is opened. This is necessary to avoid exchange risk. Following

points should be checked in insurance policy.

a) Registration of Ins. Co with SBP

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b) Description of goods insured

c) Place of dispatch and destination

d) Expire date of insurance

e) Last Date of Shipment Valid

Packing list:

It is prepared by the exporter to show that the consignment is in

accordance with the order of importer. The list gives a detail that how

goods have been packed and the number of cartons they have been

packed in.

GOODS TO BE IMPORTEDImport items are mentioned by the Government of Pakistan. Import

items have been divided into two categories.

1.Import under Free List:

This includes items which can be imported against cash or under

loans, credit from world source.

2.Import under Tied List:

These items are importable exclusively from specified countries and

against export license. Moreover imports are fully prohibited from

Israel.

Shipping Guarantee

Sometime, it so happens that the consignment reaches the port in the

importer’s country but the bank has not received the documents.

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Since, the importer needs original bill of lading and commercial

invoice to get his consignment cleared, through the bill of entry.

Whereas these documents has not reached the bank and without

these, the importer cannot claim possession of the consignment. So

the bank, in such case, issues a shipping guarantee. Bank does so

against a certain margin, which should be 110%.

EXPORT DEPARTMENT

Export means sending goods outside the country. In Pakistan, the

actual export instruments offered by GOP differ in structural detail

from imports, but the essential concepts remain the same.

CONDITIONS FOR EXPORTERS:

The exporter has to fulfill the following conditions:

The person must be an account holder of BAL.

No one can export any commodity until and unless he is a

Pakistani National and also has a valid registration with Export

Promotion Bureau (EPB).

The person must possess a valid membership certificate of

Trade organization, licensed and recognized by Federal

Government like Chamber of Commerce (e.g. Lahore Chamber

of Commerce)

The person must possess a valid NTN (National Tax Number)

certificate.

A person cannot export any good unless he files an E form (E

stands for Exports) with his application to the bank. All

specifications stipulated on the form must be met.

The person must have the Sales Tax Registration Certificate.

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E-Form:

E stands for exports. E-Form is a basic requirement to be fulfilled by

an exporter. E-Form is a very sensitive document. Bank does not give

this form to any person before filling of basic from which contains the

information about his business, nature of business, his name address,

and some documents have to be attached with the form to get E-form.

These documents include:

Certified copy of letter of authority, if E-form is signed by other

than proprietor/directors/partners on behalf of the company.

Copy of ID cards of the proprietor/directors/partners and

authorized persons

Export registration certificate

Lahore Chamber of Commerce Certificate

National Tax number

E form contains the following details:

i. Goods (with full details and quantity as identifiable with

report)

ii. Quantity (bales, bundles, pieces)

iii. Invoice value of Goods (state currency and terms CIF, C&F,

FOB)

iv. Terms of sales

v. Port /Station country of departure

vi. Name and address of the Importer

vii. Name of carrying steamer/air co./truck co./railways

viii. Value declared in document

ix. Port of shipment

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After filling the complete information about the goods to be exported,

the exporter brings E-Form to the bank for verification. The bank

verifies the contents in accordance with the documents and not by

physical checking.

After getting the E-form verified from bank, the exporter starts

preparing for the shipment. As the bank only deals in documents, so

in order to receive the payment for his goods to be exported, the

exporter has to send certain documents to the L/C issuing bank via

negotiating bank.

A very important step is to scrutinize the documents, before sending

them to the issuing bank. It requires utmost care of the bank officer.

When the documents are presented in the bank, they are always

scrutinized and they must be in accordance with the requirements

stipulated on the L/C. Any deviation could result in rejecting the

documents by the importer, hence causing loss to the exporter or

even to the bank if the documents are to be negotiated.

FUNCTIONS:

Functions of export department are as follows:

Collection

Negotiation

Collection

The bank sends the documents on behalf of the exporter to the issuing

bank and payment against them is received after a specific period. In

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collection, the exporter is paid only when the bank obtains

reimbursement. The payment is made to the exporter in PKR (Pak

Rupees) and the exchange rate is the buying rate of the day.

Negotiation

Negotiation means discounting of the foreign bills of exchange. Bank

provides this facility in form of negotiation. Bank purchases these bills

through negotiation and provides the funds to party against bills.

Negotiation is of two types:

i. Freely Negotiation: When all documents are fair.

ii. Under Reserve Negotiation: When there is any

discrepancy in the documents and some property or asset is

pledged against it.

The exporter gets L/C in his favor from importer’s bank. Then he ships

the goods and comes to the bank for negotiation i.e. he sells the

documents to the bank and gets payment. When the bank receives the

payment the file will be closed.

When a bank negotiates the documents, responsibility transfer to the

bank, unless he requires the indemnity bond from the client, that if

the payment is not received, then he will pay the amount. But if client

does not negotiate and gets loan against documents then he will be

responsible till the amount realized at maturity. Bank receives mark-

up on loan. On negotiation the L/C is endorsed in the favor of BAL.

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SPORTS

Bank Alfalah Defence Branch also takes part in sports activities along with proving the quality services to their customers and maintaining the high profitability. Bank Alfalah Defence Branch cricket team has won two cricket tournaments recently under the captaincy of Mr. Zahid Wattoo (The Consumer development Officer). Which were organized by LDA Plaza Branch Lahore and Main Branch Gulberg Lahore one by one?

The picture report is as follows:

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MANAGEMENT STYLE

During my internship I rotated in different departments of the Bank and I worked with almost all employees. I found all of them very co-operative and hardworking. Each of the members is committed to his/her profession respectively. They have ability to handle a problem as the manager of the branch has complete trust and confidence in the subordinates in all matters. They always get ideas from subordinates and constructively use them. They also give economic rewards on basis of group participation and appraising progress toward goals. Management always encourages decision-making through the organization and operates amongst themselves and with their subordinates as a group.

STRAIN & STRESSES

Running a bank successfully can only be achieved by continuous efforts of the employees. Each employee is given a specific goal and these goals may be short, medium or long term.Bank Alfalah is a leading bank and all activities are carried out smoothly by employees. However I noticed sometimes the bank employees felt over burden due to the reasons such as:

There was excessive load of work sometimes. No staff can leave office with out completion of his/her work.

Therefore employees use to sit for late hours to get their work done.

It is a very risky job. The higher authorities allocated targets of deposits. This

keeps the staff under tremendous pressure at times.

Sometimes stress also has a positive impact on performance. The bank prospers as well as individuals and more benefits are given according to their performance.

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During my stay in branch I observed that the manager consulted day-to-day problems with staff members, which help in creating an atmosphere of confidence in the branch. The staff members also give their full co-operation to each other in different situations.

APPLICATION OF KNOWLEDGE & SKILL

During my internship I got lot of help from the knowledge and skill learned in the MBA program.

Financial ManagementI learnt practically that how the financial decision are made which I was studied theoretically during my MBA program.

Investment I was my goodness that the Bank Alfalah offered its shares in the capital market during my internship span. I studied a course of INVESTMENT ANALYSIS in my MBA program. During the period of public offering and receiving of applications I have come to know that how to make an investment decision and what considerations should be kept in mind. That’s why I also applied for 1000 shares of Bank Alfalah Ltd.

Principles of Accounting

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With the knowledge of this subject I was able to understand the accounting procedure of the bank i.e. how transactions are recorded, posted, reported and how profit is calculated.

Business Economics

Many rules of Business Economics are applicable on labor e.g. motivation theory, the concept of reward and punishment and personalities characteristics.

Management

This knowledge was applied in understanding of different management styles.

Organizational Theory

This subject has helped me to understand the meaning of organization, the structure of organization and the span of control.

Business Communication & Report Writing

In this course I was taught different styles of letters and how they are typed. I observed that there was normally semi block style in the letters of the Bank.

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FINANCIAL ANALYSIS

INVESTMENTS

Investments are made by the banks in order to secure themselves and earn some profit

from it. Generally these investments are done in government securities and shares. NIB

bank invested its money in the following types of securities;

1. Market treasury bills

2. Preference shares

3. Ordinary shares of listed companies

4. Pakistan Investment bonds

5. Term finance certificates and

6. Investments in Associates

The Market Treasury Bills and Pakistan Investment Bonds are held by the State Bank Of

Pakistan which are eligible for rediscounting. The market treasury bills matures within 3

to 12 months yielding 8% to 9% markup while the Pakistan Investment Bonds matures in

7 to 8 years carrying 8% of markup per annum.

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RUPEES IN --- 000 ---

YEAR 2004 2005 2006 2007 2008

INVESTMENTS 1,187,529 5,129,285 6,594,036 40,439,935 35,176,823

Interpretation

As we can see from the above graph that the investments especially in the government

papers were round about 1 billion in 2004 it is just because that at that time it was a new

bank just starting off its business however in the next year 2005 the NIB bank rose its

investments to 5 billion and kept on rising it in 2006 as it were 6.5 billion approximately.

Similarly we can see that there is a huge fluctuation in 2007 and 2008 it’s just because of

the fact that the NIB bank acquired the PICIC commercial bank. But however these

investments were declined from 2007 to 2008 from 40 billion approx to 35 billion

approx. it is because of the economic melt down and recession originating from the west

which affected the whole world so as Pakistanis banks as well.

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DEPOSITS

Deposits are the liabilities of a bank which is the main source of raising the funds. These

funds are further lend to the other customers on a rate higher on which they are raised

from the depositors. Deposits are the core ingredient of the banking business without

which a company can’t be called a bank. Deposits are of two main types;

1. DEMAND DEPOSITS

These deposits are further classified to;

a) Current deposits

b) Saving deposits

2. TIME DEPOSITS

These deposits are further classified to;

a) Notice term deposits

b) Fixed term deposits

RUPEES IN --- 000 ---

YEAR 2004 2005 2006 2007 2008

DEPOSITS 10,648,570 22,554,274 30,566,540 116,671,219 104,586,167

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Interpretation

The above graph shows gradual increase in deposits from 2004 to 2006 but the jump of

the graph form 2006 to 2007 is just because of the fact that in this year NIB bank

acquired PICIC commercial bank. So the deposits came under its umbrella. The decrease

in deposits from 2007 to 2008 shows the inefficiency of the bank to attract more deposits

rather they decreased from 116 billion to 104 billion.

ADVANCES

Banks after accepting deposits disburse the money In the form of loans to generate the

profit from. However besides this function banks also perform other different functions

and disburse its collected funds in different areas. These areas come under the umbrella

of the advances. Advances of NIB Bank includes disbursement of funds in the following

areas;

a) Loans, cash credits and running finances (inside or outside Pakistan)

b) Net investments in finance and lease (inside or outside Pakistan) and;

c) Bills discounted and purchased (excluding treasury bills)

RUPEES IN --- 000 ---

YEAR 2004 2005 2006 2007 2008

ADVANCES 11,737,275 19,622,929 31,052,169 81,932,379 80,344,193

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Interpretation

We can see from the graph that at the time 2004 the advances are the lowest because at

that time it was just like an infant baby, it was newly formed bank gradually NIB bank

started its business and we can see that further to the next years its graph is going on

rising. In 2007 the acquisition of PICIC commercial bank by NIB bank took place so

that’s why the graph jumped high in 2007 however further from this year the advances

didn’t increased rather decreased this is just because of the economical constraints that

shocked the whole globe as will as this bank.

PROVISIONS AGAINST NON PERFORMING LOANS

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RUPEES IN --- 000 ---

YEAR 2004 2005 2006 2007 2008

Provisions 73,255 91,288 269,583 1,494,801 9,657,400

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RATIO ANALYSIS

Financial ratios are useful indicators of a firm's performance and financial

situation. Financial ratios can be used to analyze trends and to compare the

firm's financials to those of other firms. Ratio analysis is the calculation and

comparison of ratios which are derived from the information in a company's

financial statements. Financial ratios are usually expressed as a percent or as

times per period. Ratio analysis is a widely used tool of financial analysis. It

is defined as the systematic use of ratio to interpret the financial statements

so that the strength and weaknesses of a firm as well as its historical

performance and current financial condition can be determined. The term

ratio refers to the numerical or quantitative relationship between two

variables. With the help of ratio analysis conclusion can be drawn regarding

several aspects such as financial health, profitability and operational

efficiency of the undertaking. Ratio points out the operating efficiency of the

firm i.e. whether the management has utilized the firm’s assets correctly, to

increase the investor’s wealth. It ensures a fair return to its owners and

secures optimum utilization of firm’s assets. Ratio analysis helps in inter-

firm comparison by providing necessary data. An inter firm comparison

indicates relative position. It provides the relevant data for the comparison of

the performance of different departments. If comparison shows a variance,

the possible reasons of variations may be identified and if results are

negative, the action may be initiated immediately to bring them in line. Yet

another dimension of usefulness or ratio analysis, relevant from the View

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point of management is that it throws light on the degree efficiency in the

various activity ratios measures this kind of operational efficiency.

A. Liquidity Ratios

B. Profitability Ratios

C. Market Ratios

D. Income over Expense Ratio

A) LIQUIDITY RATIOS

Liquidity ratios measure a firm’s ability to meet its current obligations. These include:

Advances to Deposit ratio:

This ratio shows the ratio of advance to deposits which means that how much

advances were made with respect to deposits.

Formula is

Advances to Deposit ratio = Total advances (in the year)

Total deposits (in the year)

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Rupees in --- 000 ---

YEAR 2004 2005 2006 2007 2008

Advances 11,737,275 19,622,929 31,052,169 81,932,379 80,344,193

Deposits 10,648,570 22,554,274 30,566,540 116,671,219 104,586,167

Ratio 1.10 0.87 1.01 0.70 0.77

Interpretation

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As we can see from the above graph that the net advances in 2008 are 80.34 billion which

is 2% less than the previous year. In reality the surge in advances is 5 billion but

provision against non performing loans has lofted it thus it shows a less amount of

advances this year. Advances in 2007 are the highest because of the loaning to the

commercial, consumers and SME sector.

Earning Assets to Assets ratio:

This ratio shows the relation between earnings assets and total assets. Earning assets are

those which directly contribute in earnings of a business.

The formula is

Earning Assets to Asset Ratio = Earning Assets

Assets

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RUPEES IN --- 000 ---

YEAR 2004 2005 2006 2007 2008

Earning Assets 4,967,239 9,285,427 13,464,364 42,449,386 42,938,188

Total Assets 16,557,463 32,018,715 46,428,843 176,872,441 178,909,115

Ratio 0.30 0.29 0.29 0.24 0.24

Interpretation

We can see that there is 3% decrease in the year 2005 with respect to the previous year

which means that the earning assets have decreased as compared to the total assets in this

year. In 2006 the ratio is the same which means that the earning assets as well as the total

assets have increased with the same ratio. From the year 2006 to 2007 there is 21%

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decrease in the ratio which means that the earning assets have not increased with the

increase in the total assets. The ratio is the same in the 2008 which means that both the

earning and total assets have increased with the same rate.

B) PROFITABILITY RATIOS:

Profitability is the net result of a number of policies and decisions. This section of the project discusses the different measures of corporate profitability and financial performance. These ratios, much like the operational performance ratios, give users a good understanding of how well the company utilized its resources in generating profit and shareholder value. The long-term profitability of a company is vital for both the survivability of the company as well as the benefit received by shareholders. It is these ratios that can give insight into the all important "profit". Profitability ratios show the combined effects of liquidity, asset management and debt on operating results. These ratios examine the profit made by the firm and compare these figures with the size of the firm, the assets employed by the firm or its level of sales.Profit After Taxes

Profit after taxes are given in the income statement of the bank here we have the values on the graph which shows the profit after taxes of the NIB Bank.

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RUPEES IN --- 000 ---Year 2004 2005 2006 2007 2008PAT 122,609 103,771 125,937 -489,769 -7,474,679

Interpretation

As we can see from the above calculations that the profits are increasing as we go from 2004 to 2008 which is a very good sign which shows a high amount of market share of the NIB Bank and pertains its strong position. However the fluctuation of the year 2008 is because of the acquisition of the PICIC commercial bank.

Return on Assets:

Return on Assets (ROA) = Profit after Taxation / Average Total assets x 100

ROA is a measure of a company's profitability, equal to a fiscal year's earnings divided

by its total assets, expressed as a percentage. This is an important ratio for companies

deciding whether or not to initiate a new project. The basis of this ratio is that if a

company is going to start a project they expect to earn a return on it, ROA is the return

they would receive. Simply put, if ROA is above the rate that the company borrows at

then the project should be accepted, if not then it is rejected.

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RUPEES IN --- 000 ---Year 2004 2005 2006 2007 2008PAT 122,609 103,771 125,937 -489,769 -7,474,679

Total assets 16,557,463 32,018,715 46,428,843 176,872,441 178,909,115ROA ratio 0.74051% 0.32349% 0.27125% -0.27124% -4.17792%

Interpretation

The above calculations identifies that the NIB Bank is getting 0.74%, 0.32%, 0.27%, 0.27%, 4.17% returns on its assets in 2004, 2005, 2006, 2007 and 2008 respectively. The ratio shows its highest fluctuation in 2008 because of merging of PICIC commercial Bank into NIB Bank. However from 2004 to 2007 the ratio is going on decreasing which means that the assets were not utilized efficiently.

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Return on Equity (ROE):

Return on Total Equity = Profit after taxation x 100

Total Equity

Return on Equity measures the amount of Net Income earned by utilizing each dollar of

Total common equity. It is the most important of the “Bottom line” ratio. By this, we can

find out how much the shareholders are going to get for their shares. This ratio indicates

how profitable a company is by comparing its net income to its average shareholders'

equity. The return on equity ratio (ROE) measures how much the shareholders earned for

their investment in the company. The higher the ratio percentage, the more efficient

management is in utilizing its equity base and the better return is to investors.

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RUPEES IN --- 000 ---

Year 2004 2005 2006 2007 2008

Net income 122,609 103,771 125,937 -489,769 -7,474,679

Total equity 1,363,848 4,212,875 4,331,875 36,452,822 39,698,508

ROE ratio 8.98993% 2.46319% 2.90722% -1.34357% -0.1883%

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Interpretation

Return On Equity ratio is declining from 2004 to 2008 because the bank was expanding and progressing and was purchasing more and more assets and establishing more and more branches over the country so the customers were also increasing. As we can see that the ratio has a great fluctuation in 2008 that is because of merging of PICIC with NIB so that the equity of PICIC commercial bank came under the NIB so that’s why in this year the ratio is the lowest as compared to the other years.

Return on Operating Assets:

Return on Operating Assets = Profit after Taxation x 100

Operating assets

Whereas;Operating assets = Operating fixed assets + Cash and balances with treasury banks +

Balances with other banks

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RUPEES IN --- 000 ---YEAR 2004 2005 2006 2007 2008

Profit after Taxation 122,609 103,771 125,937 -489,769 -7,474,679Operating Assets 1,413,266 4,419,810 4,913,117 15,645,901 13,851,373

Return on Operating Assets

8.67% 2.35% 2.56% -3.13% -53.96%

InterpretationAs we can see from the above table and chart that the ratio decreases from 2004 to 2005 but then the trend goes on increasing and we can see that there is huge decrease in the ratio in 2008 as the loss of the PICIC commercial bank and NIB bank were cumulated and similarly the operating assets of PICIC commercial bank also came under NIB bank thus this justifies the fact of fluctuation and sudden jump in the values from 2007 to 2008. Economic downturn in this tenure also affected the profitability to some extent.

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Return On DepositsThis ratio shows how much return is earned in relation to the total deposits. The formula is:

Return on Deposit Ratio = Profit After Taxation x 100 Total Deposits

RUPEES IN --- 000 ---YEAR 2004 2005 2006 2007 2008

Profit after Taxation 122,609 103,771 125,937 -489,769 -7,474,679Deposits 10,648,570 22,554,274 30,566,540 116,671,219 104,586,167

Ratio 0.65% 0.63% 0.44% -0.58% -10.13%

InterpretationAs we can see from the above calculations that the trend of the ratio is decreasing from the year 2004 to 2008. The return on deposits in 2004 is 65 percent while it’s 63 percent in 2005 and 0.44 percent in 2006 while it has gone down to -0.58 percent in 2007 which

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shows total loss in this year while there in 2008 we can see that NIB bank suffered huge losses and the ratio is -10.13 percent.

C) MARKET RATIO:

Market Value Ratios relate an observable market value, the stock price, to book values

obtained from the firm's financial statements.

Earning Per Share- EPS:

Earning Per Share = Profit after Taxation

Number of Shares

The portion of a company's profit allocated to each outstanding share of common

stock. Earnings per share serve as an indicator of a company's profitability. Earnings per

share are generally considered to be the single most important variable in determining a

share's price. It is also a major component used to calculate the price-to-earnings

valuation ratio.

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Year 2004 2005 2006 2007 2008E/Share 0.99 0.45 0.37 -0.44 -2.63

Interpretation

As we can see from the above graph that the earning per share is declining over the years but there is huge loss in shares in 2007 and 2008. This shows the lack of confidence of the customers in the bank. The other core factor is the devaluation of the Pakistani currency as well as the devaluation of the government securities and the economic downturn in the world.

D) INCOME OVER EXPENSE RATIO

This ratio shows the relation between income and expense of a company and tells us that how many times a company or a bank can cover its expenses. Ratio equal to 1 tells us that the company is just covering its expensing over and above 1 is countered as the company’s profit. Higher the value above the 1 more the financially sound is the company or the bank. The formula is as under:

Income to expense ratio = total income/total expense

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RUPEES IN --- 000 ---YEAR 2004 2005 2006 2007 2008

Total Income 429,174 742,831 1,245,595 1,107,903 2,833,649Total Expenses 397,841 713,054 1,223,682 2,146,173 8,164,241Ratio (in times) 1.07 1.04 1.01 0.51 0.34

Interpretation

In 2004 the income with respect to expense is maximum but it’s decreasing year by year which means that the bank’s expenses are increasing but the income is proportionally increasing with a lower rate. In 2008 ratio is the lowest which means that the income is insufficient to meet the expenses so which means that the bank observed high losses this year.

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SWOT ANALYSIS

The SWOT analysis for BANK ALFALAH LIMITED identified the following strengths, weaknesses, opportunities and threats.

Strengths

The main strength of the bank is its good will and loyal staff. Efficient management and they believe in cost control

strategies. Healthy working environment. Providing excellent customer service. On line banking facility is one of the main strength of BAL.

Weaknesses

Ineffective network among branches in Pakistan Lack of online services Limited Branches in Pakistan

Opportunities

Can introduce new product portfolio. Can introduce more public financing schemes. High perspective growth

Threats

Increasing competition of private banks. Restricted policies from State Bank of Pakistan. Both foreign and local competitors.

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.CoclusionThe NIB bank in the year 2004, 2005 and 2006 is showing positive ratios while the bank profitability decreased and even it suffered huge losses due to the acquisition of PICIC and PCBL during the years 2007 and 2008. This is because of huge provisions against the obligations of PICIC and PCBL. These provisions were made by the proper notice from the State Bank of Pakistan as this was mandatory for the NIB bank.

The NIB bank although made a profit of 2 billion during the years 2007 and 2008 but it was veiled by the huge provision. NIB bank made for about 9 billion of provisions in 2008. Expenses were also increased during these two years and the earnings were not enough to cover these expenses. Similarly the total assets also increased as NIB bank acquired the prescribed banks so there was a huge problem of managing these assets.

Second reason but an indirect reason for the losses in 2007 and 2008 is the recession, which affected almost all the world’s economic systems. Thus all the banks in Pakistan as well as NIB bank were affected by this economic crisis.

NIB bank’s managers should properly manage assets by understanding the basic principals of management and by implementing them properly. They should use the resources optimally. They should also rythemate such a marketing campaign that promotes the bank and create value of the bank in the minds of its customers.

RECOMMENDATIONS

After spending six weeks as an internee with BANK ALFALAH. This is the time for thinking about the bank in holistic framework. The recommendations below are based on my observation about bank.

No proper division of work among employee. One person has to do a lot of effort.

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ATM machine facility will tend to increase its learning, so they have taken initiative but should start it as early as possible.

The server is usually down so efforts should be made to provide on line facility to the customers more quickly.

The bank should increase its branches through out the country as well as in other countries so that citizens can benefit from a leading bank and as well as easy assess to BAL.

Improved services should be provided to the utility consumers intending to deposit, telephone and WAPDA bills.

The security should be improved. Arm detector should be installed in branch entrance.

So these are some problems, which need full attention of management in order to retain sincere employees that can work for the betterment of the bank.

Limitations

Lack of avalibility of data

Time consumening

Lack of time

Lack of trust

Very costly

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Bibliography ANNUAL REPORTS OF NIB BANK

WWW.NIBPK.COM

WWW.GOOGLE.COM

WWW.WIKIPEDIA.COM

WWW.ANSWER.COM

BOOK OF COMMERCIAL AND CORPORATE BANKING BY S.T PETER

ROSE

Glossary

Banking Terms

Banking DefinitionsBanking Terms Glossary: Notes and References

AAA AAA is a term or a grade that is used to rate a particular bond. It is the highest rated bond that gives maximum returns at the time of maturity. Usually the grade AAA is given to the best debt obligation or a security, by a credit

 

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rating agency.

ABA Transit Number

The ABA transit number is assigned by the American Bankers Association. It is a numeric coding that indicates and facilitates the amount of check payments, balances and dues that are to be cleared among different banks at the clearing house.

 

ABO

ABO is an abbreviation for the term 'Accumulated Benefit Obligation'. It is basically the measure of the liability of the pension plan of an organization and is calculated when the pension plan is to be terminated.

 

Debt Management

Debt management is a process of managing debts and repaying creditors. Debt management is a very broad concept covering almost anything related to debts and their repayment.

To know more on debt management read, Debt management, Debt Assistance and Debt Advise.

Debt Consolidation Loan

A debt consolidation loan is a type of loan, where the bank or the lending institution provides the borrower with a loan that helps the borrower to pay off all his previous debts.

More on: Debt Consolidation

Debt Settlement

Debt settlement is a procedure wherein a person in debt negotiates the price with the lender of a loan, in order to reduce the installments and the rate of repayment, and ensure a fast and guaranteed repayment.

To know more on Debt settlement refer to Debt Settlement

Debt Repayment

Debt repayment is the total process repayment of a debt along with the interest. Sometimes, the consolidation that is provided is also included in debt repayment.

 

Debt Recovery

Debt recovery is the process that is initiated by the banks and lending institutions, by various procedures like debt settlement or selling of

Z score Z score is a measure, used in the banking

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field, to determine the difference between a single data point and a normal data point.

Zero Balance Account

A bank account which does not require any minimum balance is termed as a zero balance account.

Zero Cost Collar

A type of arrangement, wherein, the borrower buys a cap from the bank and sells the floor. In this arrangement, the cost of the cap is recovered by sale proceeds of the floor or vice versa.

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