BANK OF PUNJAB

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Table of Content
TABLE OF CONTENT...................................................................................................................1

1 INTRODUCTION:.....................................................................................................4
1.1 EXECUTIVE SUMMARY: ..................................................................................... ..............4
1.2 OBJECTIVES OF STUDYING THE ORGANIZATION...................................................... ...4

2 OVERVIEW OF THE ORGANIZATION...................................................................5

2.1 HISTORY OF BANKING IN PAKISTAN ..................................................................... .........5
2.1.1 NATIONALIZATION OF BANKS...........................................................................................6
2.2 HISTORY & NATURE OF BOP...................................................................... .....................7
2.2.1 MISSION STATEMENT........................................................................................................8
2.2.2 VISION STATEMENT ..........................................................................................................8
2.2.3 BUSINESS VOLUME............................................................................................................8
2.2.4 BOD’S, MANAGEMENT AND EMPLOYEES........................................................................9
2.2.5 PRODUCTS........................................................................................................................12
2.3 SERVICES.................................................................................................... ....................14
2.4 MAJOR CUSTOMERS OF BOP........................................................... ............................15

3 ORGANIZATIONAL STRUCTURE........................................................................15
3.1 MAIN OFFICES........................................................................................................ .........15

4 STRUCTURE & FUNCTIONS OF THE ACCOUNTS/ FINANCE/ AUDIT

DEPARTMENT..........................................................................................................16
4.1 STRUCTURE AND FUNCTIONS OF FINANCE DEPARTMENT......................................16
4.2 USE OF ELECTRONIC DATA IN DECISION MAKING................................ .....................16
4.3 SOURCES OF FUNDS TREND........................................................................ ................16
4.4 ALLOCATION OF FUNDS TREND.................................................................................. ..16
4.4.1 LONG TERM FINANCING.................................................................................................16
4.4.2 SHORT TERM FINANCING................................................................................................17
4.4.3 AGRICULTURE FINANCING..............................................................................................17
4.4.4 E-BANKING........................................................................................................................17
4.4.5 UTILITY BILLS....................................................................................................................17
4.4.6 LOCKERS.................................................................................................................... .......17
4.4.7 CONSUMER FINANCING..................................................................................................17
4.4.8 AGRICULTURE FINANCING..............................................................................................17

5 CRITICAL ANALYSIS............................................................................................18
5.1 CRITICAL ANALYSIS OF THE PRACTICAL EXPOSURE RELATING TO THEORETICAL
CONCEPTS................................................................................................... ..............18

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 5.1.1 COMPUTER SYSTEM........................................................................................................18
5.1.2 RIGHT PERSON FOR RIGHT JOB....................................................................................18
5.1.3 CUSTOMER PROBLEM.....................................................................................................18
5.1.4 DEFICIENCY IN MANAGEMENT.......................................................................................18
5.2 FINANCIAL ANALYSIS................................................................................................ ......19
5.2.1 INTRODUCTION AND IMPORTANCE OF FINANCIAL ANALYSIS....................................19
5.2.2 FINANCIAL STATEMENTS (2006-07)................................................................................19
5.2.3 COMMON SIZE ANALYSIS................................................................................................22
5.2.4 RATIO ANALYSIS...............................................................................................................24
5.3 ORGANIZATIONAL ANALYSIS ........................................................................ ................29
5.3.1 HIERARCHICAL FLOW......................................................................................................29
5.3.2 INTRODUCTION (SWOT ANALYSIS)................................................................................30
5.3.3 STRENGTH.......................................................................................................................30
5.3.4 WEAKNESSES...................................................................................................................30
5.3.5 OPPORTUNITIES ..............................................................................................................31
5.3.6 THREATS........................................................................................................................... .31
5.4 FUTURE PROSPECTS............................................................................................... ......31
5.4.1 FINANCIAL VALUATIONS AND THE FUTURE PROSPECT OF BOP...............................31

6 INDUSTRIAL ANALYSIS.......................................................................................32
6.1 OVERVIEW ON THE MAJOR PLAYERS OF BANK INDUSTRY.....................................32
6.2 COMPARISON OF THE BANK INDUSTRY MAJOR VS MEDIUM VS SMALL BANKS....33

7 WEAKNESSES AND THEIR RECOMMENDATIONS (FINANCIAL &

ADMINISTRATIVE ASPECTS).................................................................................35
7.1.1 INTERNAL CONTROLS.....................................................................................................35
7.1.2 PROFESSIONAL TRAINING.............................................................................................35
7.1.3 DELEGATION OF AUTHORITY.........................................................................................35
7.1.4 PERFORMANCE APPRAISAL...........................................................................................35
7.1.5 TO OVER COME PROBLEM OF SPACE AND FURNITURE............................................35
7.1.6 TRANSFER..................................................................................................................... ....35
7.1.7 CHANGES IN POLICIES....................................................................................................36
7.1.8 NEED OF QUALIFIED STAFF............................................................................................36
7.1.9 UTILITY BILL CHARGES .................................................................................................36
7.1.10 LINK WITH THE HEAD QUARTER..................................................................................36
7.1.11 CREDIT CARD..................................................................................................................36
7.1.12 CLEAN LOANS.................................................................................................................36
7.1.13 CASH FINANCING...........................................................................................................36
7.1.14 DECREASING ADMINISTRATIVE EXPENSES...............................................................36
7.1.15 SHOULD BE AGGRESSIVE IN CREDIT POLICY............................................................37

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 7.1.16 TECHNOLOGICAL ADVANCEMENT...............................................................................37
7.1.17 STAFF RELATIONSHIP....................................................................................................37
7.1.18 IMPROPER DISTRIBUTION OF WORK..........................................................................37
7.1.19 FAVOURITISM AND NEPOTISM......................................................................................37
7.1.20 INTER DEPARTMENTAL TRANSFER.............................................................................38
7.1.21 MARKETING POLICY......................................................................................................38
7.1.22 COMPLAINTS OF CUSTOMER.......................................................................................38
7.1.23 ORGANIZATIONAL COMMITMENT.................................................................................38
7.1.24 CREDIT MONITORING ...................................................................................................38
7.1.25 EXTENDED BANKING HOURS.......................................................................................38
7.1.26 HOUSING AND HOUSE HOLD GOODS LOANS............................................................39
7.1.27 AVOIDING BAD DEBTS...................................................................................................39
7.2 RECOMMENDATIONS FOR STUDENTS...................................................................... ...39
7.2.1 WORKING IN DIFFERENT DEPARTMENTS.....................................................................39
7.2.2 RELATIONSHIP BETWEEN THEORY AND PRACTICE:...................................................39

8 CONCLUSIONS.....................................................................................................40

9 REFERENCES.......................................................................................................40

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1 Introduction:

1.1 Executive Summary:

I have done my internship at The Bank of Punjab, Khanewal road branch Multan. There are four
departments in the branch, and I worked as an assistant in that branch. For the first two weeks I worked in
deposit department under the supervision of Mr. Arshad, where I have to perform following tasks:

• Entering information in KYC (know your customer) forms.

• Scanning and arranging specimen signature cards.

• Inform customer of essential conditions under which the account will be operated.

Afterwards I have learnt about vouchers, checking of vouchers is essential to confirm that correct
calculation has been done. Vouchers are properly bind sealed, and checking by the manager. I have
checked the following things:

• The check should not be post-dated/anti-dated.

• Amount in words and figures tallies.

• Cash paid stamps (with dates) are duly affixed in case of cash cheques and in case of clearing
stamps is affixed.

• Cutting/over writings are duly authenticated by the account holder, etc

Then another task for me was “issuing of cheques books”. It is one of the most interesting works that I
have learnt in the bank. Cheques books should be issued only after all the formalities of the account
opening forms, which have been checked by the branch manager.

Maintaining Dispatch register and Inward Mailing register was also included in duties assigned to me.
I also used to help different employees in their work.

My work timings were from 9am to 5pm, six days in a week.

1.2 Objectives of Studying the Organization

Major objectives to study this organization are:

1.To get awareness about the business development & financial techniques.

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 2.Comparison of the assets of organization with other organizations.

3.Policies followed by the organization enforced through laws of SBP.

4.Study the facilities provided by the organization to common public in various forms.

5.To study the terms & conditions for fringe benefits provided to employees of the organization at the age
of superannuation.

6.To get MBA (Masters in Business Administration) degree.

7.To apply theoretical concepts in practical aspects.

2 Overview of the Organization

2.1 HISTORY OF BANKING IN PAKISTAN

Pakistan came into being on 14th August, 1947; sufficient banking services were available in

the areas forming Pakistan. Out of the total branches of the nearly 3,500 in the undivided India, as many as

about 1,500 branches were existing in these areas.

It was agreed between the two countries that reserve bank of India shall continue to function in the

Pakistan territory until 30th September 1948 and that Indian notes would continue to be legal tender at Pakistan

until 30th September 1948. Unfortunately, relationship between the two countries became most strained

immediately after independence; banking was mostly in the lands of Hindus who immediately started

transferring their offices and assets into India. As a result most of the banks in Pakistan were closed down and

even those which were open were not doing any effective business.

The number of banking office in Pakistan came down to about 200 on 30th June 1948. Branches of

some European banks were also functioning in a limited manner, financing in export of crops, and their number

was limited to about 20.

It was only the Habib bank, which transferred its office from Bombay to Karachi Austral Asia bank

was another bank, which was in existence in the Pakistan territory at the time of independence. Despite of best

efforts on the part of government of Pakistan, no heady way could be made on this behalf and reserve bank of

India was in no mood to help the new country. Imperial bank of India, agent of the reserve bank of India also

started closing down its branches in Pakistan.

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 Reserve bank also refused to advance money to Pakistan to make essential payments such as salaries

etc, also Pakistan’s share of Rs.75 billion in cash balance was with held by bank, causing hardships to the

newly born state. In view of these hopeless state affairs it was agreed between the two countries that reserve

bank would serve as monetary authority in Pakistan only up to 30th June 1948.

2.1.1 Nationalization of Banks

The principle of nationalization of banks is to stream line the operation of commercial banks in such a

way that it may be conductive to the development activities in process in the country.

Since the commercial banks were owned controlled by big business groups of the country it was

feared that these banks would not maintain uniformity in their operational and would be instrumental to

inflationary pressure. However, the considerations behind nationalization are

1.To form uniformity in the policy of the commercial banks so they may serve the best national interest.

2.To make the operation of commercial banks highly sensitive and responsive to the policy of the government

relation to financial matters.

3.To make the credit policy of the commercial banks more purpose full and effective especially in the

development of economic sectors of the country. It acts as an agent of the State Bank of Pakistan

4.To make the best use of the funds available at the disposal of these banks for the economic development of

the country.

5.To eliminate unhealthy and uneconomic competition among commercial banks.

6.To development strong money banks market in the country so that the value of currency may be maintained

at stable level both in national facilities to exporter and agriculturists which have not been satisfactory in the

past years.

Table 1: Public Sector Commercial Banks

Askari Bank ASKARI

BANK
First Women Bank Limited FWB
The Bank of Khyber KB

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 The Bank of Punjab BOP

Table 2: Local Private Banks

Askari Commercial Bank Limited

Bank Al-Falah Limited

Bank Al Habib Limited

Bolan Bank Limited

Faysal Bank Limited
Saudi Pak Commercial Bank Ltd
Soneri Bank Limited

Union Bank Limited

Muslim Commercial Bank Limited

Allied Bank of Pakistan

Union Bank Limited

Table 3: Foreign Banks

ABN Amro Bank

CITI Bank

Habib Bank A. G. Zurich

Mashreq Bank PJSC

Oman Bank

Rupali Bank

Standard Chartered Bank

Table 4: Specialized Banks

Zari Tarqiati Bank Ltd.

Industrial Development Bank of Pakistan

Punjab Provincial Cooperative Bank Limited

2.2 History & Nature of BOP

The Bank of Punjab was established in 1989 and was given the status of scheduled bank in 1994.

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 The Bank of Punjab is working as a scheduled commercial bank with a network of almost 280 branches at
all over major locations in the Punjab. The Bank provides all types of banking services such as Deposits in
Local Currency and client foreign currency, remittances, and advances to business, trade, industry and
agriculture. The Bank of Punjab has indeed entered a new era of science to the nation under experience and
professional hands of its management. The Bank of Punjab plays a vital role in the national economy
through mobilization of hitherto untapped local resources, promoting savings and providing funds for
investments. The bank offers attractive rates of profit on all deposits, opening of foreign currency accounts
and handling of foreign exchange business for example imports, exports and remittances, financing, trade
and industry for working capital requirements and money market operations. The lending policy of bank is
not only cautious and constructive but also based on principles of prudent lending with maximum
emphasis on security.

Source: http://www.bop.com.pk/

2.2.1 Mission Statement

“To exceed the expectations of our stakeholders by leveraging our relationship with the government of Punjab
and delivering a complete range of professional solutions with a focus on program driven products and services
in the agriculture and middle tire markets through a motivated team.”

Source: http://www.bop.com.pk/

2.2.2 Vision Statement

“To be a customer focused bank with service excellence.”

Source: http://www.bop.com.pk/

2.2.3 Business Volume

These are the quick facts of the business in October 2007. At that instant BOP’s business volume is as under.

Assets(Current + Fixed) US$ 2.7 Billion PKR 164.7 Billion

Loans US$ 1.7 Billion PKR 103.7 Billion
Deposits US$ 2.3 Billion PKR 140.3 Billion

Business Volume in terms of Investment, Current & Fixed Assets, Share Capital, Revenues, Deposits,
Advances, Income, and EPS for the last 5 years is as under:

2003 2004 2005 2006 2007

Total assets RS (M) 43,621 66,320 111,154 164,855 234,974
Revenue RS (M) 3,675 5,488 10,912 18,603 26562
Shareholder's Equity RS (M) 3052 4,420 6,777 10,659 15,110
Investment RS (M) 11,458 16,198 18,026 28,233 73,462
Deposits RS (M) 34,938 54,724 88,465 137,728 191,968
Advances (net) RS (M) 18,344 39,439 63,624 101,320 133,894

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 Income RS (M) 831 1,368 2,353 3,804 4,446
EPS (Rs/share) Rs 6.86 9.08 10.01 13.14 10.51
ROI % 7 8 13 13 6

• Over last five years, Pakistan economy BalanceSheet Overview

grown with real pace. Because of which
record growth in Banking sector.
450,000 15,110

400,000

350,000 10,659 191,968

300,000

250,000 6,777 137,728

Rs. (M)
200,000
4,420 88,465
150,000 3052 234,974
100,000 54,724
164,855
34,938 111,154
50,000 66,320
43,621
0
2003 2004 2005 2006 2007

Total Assets Deposits Shareholder's Equity

Imcome Statement Overview

30,000

25,000

20,000
Rs (M)

15,000

10,000
2,353

5,000
10,912

18,603
5,488

4,846
26562
4,769
1,736
3,675

3,804
3,165
1,368

4,446
1,002
831

0
2003 2004 2005 2006 2007

Total Revenues Net profit before tax Income Source: http://www.bop.com.pk/

2.2.4 BOD’s, Management and Employees

2.2.4.1 Staff Strength

The total number of employees in the organization is 3859. Which is increasing. Regular hiring’s are taking
place.

4,500
3,859
4,000
3,430 3,681
3,500 3,144
3,019
3,000
2,500
Numbers

2,000
1,500
1,000
500
0
2003 2004 2005 2006 2007

Staff Strength
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 2.2.4.2 Board of Directors (BOP)

CHAIRMAN
01 MR. JAVED MAHMOOD

02 MR. SAJJAD HUSSAIN ACTING PRESIDENT

DIRECTOR
03 MR. SOHAIL AHMAD
DIRECTOR
04 MR. ALMAN ASLAM
DIRECTOR
05 MR. ANEEQ KHAWAR
DIRECTOR
06 MR. SHAFQAT ELLAHI
DIRECTOR
07 MR. SHAFQAT MAHMOOD

SECRETARY
01 MR. RAZA SAEED
TO THE BOARD

2.2.4.3 BOP Top Level Management

Mr. Naveed Hafeez Shaikh Acting General Manager HR

Mr. Nadeem Amir General Manager Finance
Mr. Sharjeal Masud General Manager Operations
Mr. Muhammad Salim Mirza General Manager Treasury
Mr. Shaheen N. Qureshi General Manager Special Assets
Dr. Shahid A. Zia General Manager T.R.C. & P Division
Mr. Feisal Azmat Khan General Manager IT
Mr. Muhammad Hanif Head Audit & Inspection
Mr. Salman Saeed Head Credit Policy
Mr. Moazzam M Maneka Head Agriculture Credit Department

2.2.4.4 Hierarchical View of Management Khanewal branch

Total number of employees in Khanewal Road branch where I did my internship is eleven. The branch was
headed by Branch manager Mr Manzoor Hussain Maher. The flow of responsibilities and designations are
shown in management’s hierarchy.

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 Branch
Manager

Operational
Manager

Account Opening
Credit Remittances Advances Foreign Trade

Short-term
Import
loans

Mortgage
Export
Loans

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2.2.5 Products

2.2.5.1 CONSUMER PRODUCTS

1. Saving Accounts
2. Current or demand accounts
3. Fixed accounts
1. SAVING ACCOUNTS(PLS)

These types of accounts are designed to encourage the saving habit of the customer and
lead to long term or invest relationship. Bank saving account are in the nature of deposit accounts and are not
normally available for drawings.
Rates of interest are typically ahead, by a small margin. Savings accounts with the banking sector represent a
very small proportion of total deposits. Customer can make withdrawals from this type of account. The cash
reserve ratio is typically low then the current account because the withdrawals against this account are very
low.

2. CURRENT OR DEMAND ACCOUNT

These are those deposits, which can be drawn by the depositor at any time by representing a
cheque to the bank. People deposits their money in this account they gave a ready command on their account in
developed countries of world, a very significant part of money is kept under current or demand account. On this
type of account of interest transfer of cash or by at sight. The cash reserve ratio for his account is very high.
The operating cost for the handling of this type of account is very regular.
3. FIXED OR TERMS ACCOUNT

Fixed accounts are those which are deposited for a fixed period of time and repayable
after the expiry of stipulated time to the customer. Those people who have surplus funds and want to have save
investment deposit the amount in the fixed account.
The rate of interest given to depositor varies with the length of deposit, i-e. It is higher for longer
period and lower for shorter period.
The rate of this type of deposits is higher the saving bank accounts. The cash reserve against this deposit are
vary low because there no fear of with draw of a month before the stipulated of time.

2.2.5.2 FINANCE PRODUCTS

1. Agriculture Schemes
2. Business Promotion Finance Schemes

1. Agriculture Schemes

There are many agriculture promotion schemes provided by BOP.

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 • Kissan Dost Agricultural Finance Scheme
• Kissan Dost Tractor Finance scheme
• Kissan Dost Aabiari Scheme
• Kissan Dost Mechanization Support Scheme
• Kissan Dost Farm Transport Scheme
• Kissan Dost Eslah-E-Arazi Scheme
• Kissan Dost Live Stock Development Scheme
• Kissan Dost Live Stock Scheme

Such type of schemes provides farmers a real plate form to accelerate. Some facilities given by Kissan Dost
Agricultural finance scheme are:
- Purpose
Provision of financial facility to farmers for purchase of inputs (Seed, fertilizer, pesticides, fungicides etc).
- Amount
Maximum of Rs.500000 according to per acre limit of the crop.
- Security
Charge on Agriculture Land through Agriculture Pass Book.
- Insurance
The borrower will have to arrange life assurance under the Bank’s charge.
- Mark-up
9% mark-up per Annum.

2. Business Promotion Finance Schemes

• BOP Quick Cash

• BOP Car Loan
• BOP House Loan
• BOP SME Loan
• BOP Assaish Loan
• BOP House Loan For Federal Govt

2.1. BOP CAR LOAN

BOP car loan is a demand financing facility to purchase brand new locally manufactured/Assembled cars for
personal use. This facility can be availed by salaried person of different nature and by the business persons. All
must have the holdings of NIC.

2.2. BOP Aasaish Loan

BOP Aasaish loan is demand finance facility for purchase of consumer durable goods like TV, Refrigerators,
Mobiles, Microwave Oven, Fans, Audio/Video system etc with no down payment, in addition with the free

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home delivery. The financing tenure of this product is max 36 months. The nature of employment should be
salaried or the business man.

2.3 SERVICES

These are the services provided by the BOP.

• ATM Facility
• Letter of Credit
• Pay Order
• On-Line Banking
• E-Banking
• Debit Card
• Consumer Financing
• Agriculture Financing
• Corporate Financing
• Commission free Remittance
• Demand Drafts
• Collection of Utility
• Lockers Facility

3.1. Automated Teller Machine (ATM)

Through the ATM’s Customers have access to the various services such as withdrawal, balance
enquiry and mini statement? Complete security is ensured because access to the account is only possible by
entering a four digit personal identification number (PIN) known only to the account holder. Cash withdrawal
limit is up to Rs.20, 000 per day. Annual charges of ATM is Rs.250/- per card.
3.2. Online Banking
BOP is currently offering window-based online banking to its customers, which gives access to
information on their accounts and the liability to act on the latest information received over the net.
3.3. Lockers
It is one of the utility services that BOP provides to their customers for keeping jewellery,
important documents and other valuables.
3.4. Demand Drafts
BOP provides safe, speedy and reliable way to transfer money at vary reasonable rates. Any
person whether an account holder of the bank or not, can purchase a Demand Draft from a bank branch.
3.5. Letters of Credit
BOP is offering its business customers the widest range of option in the area of money
transfer. BOP’s letter of credit service is with competitive rates, security, and ease of transaction, BOP Letter of
credit is the best way to do the business transactions.
3.6. Pay Order
BOP provides transfer of money using different facilities. Its pay orders are a secure and easy
way to move the money from one place to another. The charges for this service are extremely competitive.

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3.7. Mail Transfer
Moves money safely and quickly from BOP Mail Transfer service. The rates for this service
is quiet impressive as compare to the market.
3.8. Short Term Investment
BOP offers excellent rates of profit on all its short term investment accounts. The packages
are starting from 3 months. BOP’s rates of profit are extremely attractive, along with the security and service
only BOP can provide.
3.9. Agricultural Finance
It help farmers utilize funds efficiently to further develop and achieve better production.
Provides farmers an integrated package of credit with supplies of essential inputs, technical knowledge, and
supervision of farming.

2.4 Major Customers of BOP

Some of the major customers of Bank of Punjab are:
• Educational Institutes
• Agriculturists
• Pakistan Telecommunication Private Limited
• WAPDA
• Pharmaceutical Companies
• WASA
• MDA

3 Organizational Structure
3.1 Main Offices

Head Office and the main branch of BOP is in Gulberg 3, Lahore & Egerton, Lahore Respectively.
The Bank has been divided into seven regions
Each consisting a number of branches.

• Lahore Region
• Faisialabad Region
• Gujranwala Region
• Rawalpindi Region
• Karachi/Quetta Region
• Multan Region
• Peshawar Region
Rest are the branches working under these regions. Which are almost 270 in all over Pakistan.

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4 Structure & Functions of the Accounts/ Finance/ Audit Department

4.1 Structure and functions of Finance Department

The management of BOP comprises of two types i.e. Chairman’s Secretariat & President Secretariat.
Chairman’s secretariat deals with finance division. Mr Nadeem Amir is general manager of finance division of
mentioned secretariat. The financial analyst related to BOP matters of chairman’s secretariat is Mr. Masroor
Zaigham. The manager of finance division is Mr. Muhammad Ijaz Aziz. Mr. Muhammad Arshad is the head of
finance division of BOP. The finance department deals in authenticity of cheques, proper utilization of funds,
preparation of day end statements, online banking, collection of mails, opening & closing account of customers
& companies etc.

4.2 Use of electronic data in decision making

Electronic data gives exact values and figures which top level management required. Because of
electronic data they came across to know those minute things which impacts a lot on final place.
Through this they can measure exact profit and loss accounts, assets and liabilities up to a branch level
from where they can decide which should be kept and which should not.
Through this top level management is able to decide which product should be taken into course for
further level or which should stop.
Electronic data make management able to take decision at any point of time.

4.3 Sources of Funds trend

The major sources of funds are:
• Public Source
As the largest regional bank of Pakistan according to asset base with specialized in Agriculture has a
large deposits with 80% from the rural areas of the Punjab. The Banks major source of funds is from the
Public.
• Money Market
Figurative expression for the informal network of dealers and investors over which short-term debt
securities are purchased and sold. Money market securities generally are highly liquid securities that
mature in less than one year, typically in less than ninety days.
• Corporate treasuries and Government Institutions
Corporate sector is one of the major sources of funds in all types of Banking. All major organisations,
financial institutions and government & private organisations are the major sources of the funds e.g.,
WAPDA.

4.4 Allocation of Funds trend

BOP’s funds are allocated to the following departments. The banks major focus is on short term
financing. Major allocation of funds are on these divisions.

4.4.1 Long Term Financing

Long term financing includes a tenure more than one year.

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4.4.2 Short Term Financing
Short term financing includes period less than one year. The banks major focus is on short term
financing.

From the above it is further sub distributed to

1. SME Division
2. Agriculture financing
3. Consumer financing
4. Corporate financing

The distribution of funds to these departments are Banks internal matter and they avoid to disclose.
Through Financial Statements it is only possible to analyze long term and short term financing.

4.4.3 Agriculture financing

The bank provides adequate and timely financial assistance to the farmers to improve production
potential of agriculture sector. Insurance of leased assets, animals, crops and life assurance of borrowers are all
source of money for the bank.

4.4.4 E-Banking
The bank has a centralized database that is web-enabled. All the services that the bank has permitted on
the internet are displayed in menu. Any service can be selected and further interaction is dictated by the nature
of service.

4.4.5 Utility bills

The bank also makes possible the payment of electricity, gas and telephone bills for its customers
charging some commission on each payment.

4.4.6 Lockers
Commission charged on lockers provided by bank for customers, is also a source of inflow for the
bank.

4.4.7 Consumer financing

Personal Finance, mortgage finance, business finance, smart cash, auto financing and travelers
cheques are all sources of funds for the bank. The bank finances all these loans and facilities on competitive
mark up rates.

4.4.8 Agriculture financing

The bank provides adequate and timely financial assistance to the farmers to improve production
potential of agriculture sector. Insurance of leased assets, animals, crops and life assurance of borrowers are all
source of money for the bank.

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5 Critical Analysis
5.1 Critical Analysis of the practical exposure relating to theoretical concepts
This part of report is the essence of the internship, as this will help other students to better understand the
working environment of the bank by finding the relationship between what is written in the books and what is
actually going on in fields. The theory written in the books in cases is not implemented as it is. In some cases
theory is implemented with a little modification but in other cases theory has nothing to do with practice. In
accounting, banks don’t prepare worksheet, but part of worksheet is prepared like trial balance, but little
differences, theory and practice has substantial relationship. The securities for the loans are handled in the same
way as theory says like mortgage, pledge, hypothecation, advances against insurance policies or liquidation
procedure is the same. The difference is there in the case of loans. Theory talks about four or five terms of
loans that is cash finance, overdraft, loans etc., but in practice there are some more terms used like running
finance, demand finance etc. All other concepts of remittances, bills, foreign exchange deposits, letters of credit
are in accordance with theory almost. So for a internee it is more important to learn new things which he/she
has never heard about in his/her course book.
To me, Theory gives you the direction to understand the processes and the terminologies going across the
World using best business practices in a broader view covering each and every aspect of possible business
scenarios. On the contrary practical life is specific, enclosed in a jar. In practical professionalism and firm’s
environment is each and every thing. Professional life only builds on the knowledge based on books even
though it may only use 1% of the theoretical knowledge.

5.1.1 Computer system

The system has not totally shifted on computer. Manual procedure is still there hence computer facility is not
fully availed. There should be a system at each counter for quick processing.

5.1.2 Right person for right job

During my internship I have observed the person who has came as customer Relationship Officer was acting as
Cashier. It should not be like this. The person should be posted according to his qualification, profession skills
and experience.

5.1.3 Customer problem

People have to wait for en-cashing their cheques for about 10-20 minutes, which is not good for the
reputation of bank, the delay is due to manual work. Therefore I suggest that computers and other electronic
machines should be installed in bank so that time could be saved.

5.1.4 Deficiency in management

I felt at some places the BOP need to have employees, because a lot of work is to be done by a single employee
that will result in work overload and employee might not perform his/her job with full devotion.

18
5.2 Financial Analysis
To analyse the financial position of BOP, different tools are use, which includes Ratio Analysis, Common size
Analysis of the last five years.

5.2.1 Introduction and Importance of Financial Analysis

Financial analysis involves the use of various financial statements. These statements do several things. First the
balance sheet and the second is income statement.
The balance sheet summarizes the assets, liabilities, and owner’s equity of a business at a point in time, while
the income statement summarizes revenues and expenses of a firm over a particular period of time. A
conceptual framework for financial analysis provides the analyst with an interlocking means for structuring the
analysis.

5.2.2 Financial Statements (2006-07)

5.2.2.1 Balance Sheet

Balance Sheet
As of DEC 31, 2007
2006 2007
Rupees in ‘000
Assets
Cash and balances with treasury banks 14,054,859 14210302
Balances with other banks 3,722,089 1927662
Lendings to financial institutions 11,846,823 2450000
Investments 28,233,211 73461695
Advances 101,319,954 133893585
Operating fixed assets 2,068,744 3252759
Deferred tax assets - -
Other assets 3,609,457 5778192
164,855,137 234974195
Liabilities
Bills payable 856,448 937647
Borrowings 6,989,424 17842915
Deposits and other accounts 137,727,606 191968909
Sub-ordinated loans - -
Liabilities against assets subject to finance lease 40,988 40321
Deferred tax liabilities 298,616 2205530
Other liabilities 2,816,341 2983079
148,729,423 215978401
Net Assets 16,125,714 18995794
Represented By
Share capital 2,902,490 4230379
Reserves 4,537,232 7427232
Unappropriated profit 3,219,246 3452842

19
 10,658,968 15110453
Surplus on revaluation of assets - net 5,466,746 3885341
16125714 18995794

5.2.2.2 Income Statement

Income Statement
As of the year ended Dec 31, 2007
2006 2007
Rupees in ‘000
Mark-up/return/interest earned 11,579,036 17,539,094
Mark-up/return/interest expensed 7,508,795 13,939,377
Net mark-up/ interest income 4,070,241 3,599,717
Provision against non-performing loans and advances 340,626 1,616,421
Provision for diminution in the value of investments 33,000 24,479
Bad debts written off directly 100 246,869
373,726 1,887,769
Net mark-up/ interest income after provisions 3,696,515 1,711,948
Non Mark-up/interest Income
Fee, commission and brokerage income 473,212 653,512
Dividend income 1,385,875 1,804,878
Income from dealing in foreign currencies 239,804 377,233
Gain on sale and redemption of securities 389,063 2,039,535
Unrealized gain / (Loss) on revaluation of investments
classified as held for trading
Other income 466,435 547,635
Total non-markup/interest income 2,954,389 5,422,793
6,650,904 7,134,741
Non Mark-up/interest Expenses
Administrative expenses 1,751,970 2,250,777
Provision against lending to financial institutions 130,000 -
Provision against off balance sheet items 175 292
Other charges 38 37,950
Total non-markup/interest expenses 1,882,183 2,289,019
4,768,721 4,845,722
Extra ordinary/unusual items - -
Profit Before Taxation 4,768,721 4,845,722
Taxation - Current 880,997 169,252
- Prior years’ (19,921) -
- Deferred 83,469 250,772
964,466 400,103
Profit After Taxation 3,804,255 4,445,619
Unappropriated profit brought forward 169,817 3,219,246
Transfer from surplus on revaluation of fixed assets -
net of tax 6,174 5,866
175,991 3,225,112
Profit available for appropriation 3,980,246 7,670,731

20
Basic Earnings per share - Rupees 9.01 10.51
Diluted Earnings per share - Rupees 9.01 10.51

5.2.2.3 Financial Business Summary (5Yrs)

2003 2004 2005 2006 2007

Operating Results
Markup/ return/ interest earned Rs in m 1,664 2,555 6,125 11,579 17,539
Markup/ return/ interest expenses Rs in m 484 719 2,669 7,509 13,939
Net markup income Rs in m 1,180 1,836 3,456 4,070 3,600
Non-markup based Income Rs in m 831 1,097 1,331 2,954 5,423
Non-markup based expenses Rs in m 1,002 1,150 1,291 1,882 2,289
Provision against NPLs Rs in m 8 47 331 374 1,888
Net profit before tax Rs in m 1,002 1,736 3,165 4,769 4,846
Net profit after tax Rs in m 689 1,368 2,353 3,804 4,446

Balance Sheet
164,85
Total Assets Rs in m 43,621 66,320 111,154 5 234,974
101,32
Advances (net) Rs in m 18,344 39,439 63,624 0 133,894
Investments Rs in m 11,458 16,198 18,026 28,233 73,462
Shareholders Equity Rs in m 3,052 4,420 6,777 10,659 15,110
Revaluation Reserve Rs in m 2,155 3,419 6,893 5,467 3,885
137,72
Deposits Rs in m 34,938 54,724 88,465 8 191,969
Borrowings from FIs Rs in m 2,684 2,832 6,791 6,989 17,843

5.2.2.3.1 Graphical Representation of Financial Summary (Income statement)

Operating Results

• BOP’s income statement for the last five 25,000

years represents a high growth in it. 20,000

• Its all due to the increase in equity , and

RS in Millions

15,000

increase in the deposits of the bank.

10,000

• Rise in the Markup Interest earning income

5,000
results rise up in the profit of bank
represents increase in lending by the bank. 0
2003 2004 2005 2006 2007

Total Income/ Revenues Total Expenses Net profit before tax Net profit after tax

5.2.2.3.2 Graphical Representation of Financial Summary (Balance Sheet)

Balance Sheet

250,000

200,000
Rs in Millions

150,000

100,000

50,000
21
0
2003 2004 2005 2006 2007

Total Assets Investments Shareholders Equity Deposits Borrowings from FIs

 • Deposits are almost rose upto around 300% in last 5 years.
• As last 5 years were really good for banking sector. Assets of the banks are risen upto 400%
particularly in 2007 just because of crescent towers.

5.2.3 Common Size Analysis

5.2.3.1 Horizontal Analysis

This type of analysis represents the percent change in specific line item of the Income statement or the balance
sheet from the last year. This analysis is used to comment on the growth of specific line item in the industry or
the firm.

2003 2004 2005 2006 2007

Operating Results
58.2857 47.1025
Markup/ return/ interest earned % -24.399 34.8728 1 1 33.98141
-105.78 32.6842 73.0610 64.4559
Markup/ return/ interest expenses % 5 8 7 9 46.12956
35.7298
Net markup income % 9.0678 5 46.875 15.086 -13.0556
24.2479 17.5807 54.9424
Non-markup based Income % 54.994 5 7 5 45.52831
12.8695 10.9217 31.4027
Non-markup based expenses % 4.09182 7 7 6 17.78069
82.9787
Provision against NPLs % -575 2 85.8006 11.49733 80.19068
45.1500 33.6338
Net profit before tax % 56.8862 42.28111 8 9 1.588939
41.8614 38.1440
Net profit after tax % 58.7808 49.6345 5 6 14.43995
Balance Sheet
34.2264 40.3350 32.5746
Total Assets % 32.2964 8 3 9 29.84117
53.4876 38.0123
Advances (net) % 63.9065 6 9 37.2049 24.3282
29.2628 10.1409 36.1527
Investments % 27.6052 7 1 3 61.56789
30.9502 36.4199
Shareholders Equity % 22.5754 3 34.7794 3 29.45731
36.9698 50.3989
Revaluation Reserve % 55.9165 7 6 -26.0838 -40.7207
36.1559 38.1405 35.7683
Deposits % 31.9738 8 1 3 28.25508
5.22598 58.2977 2.83302
Borrowings from FIs % 51.9374 9 5 3 60.83058

22
5.2.3.1.1 Graphical Representation (Income Statement)

• Total earnings mark-up & non mark-up were rising 33% from last year. As deposits and the lendings
of the banks are rising up. Income Statement

• Administrative expenses are increased with a 180.00

great pace in last few years because of high 160.00

rate of inflation. 140.00

120.00

Percentage
Rise in expenses results decrease in the 22% 100.00

percent profit from last year. 80.00

60.00

40.00

20.00

0.00
5.2.3.1.2 Graphical Representation (Balance 2003 2004 2005 2006 2007

Sheet) Total Earnings (Markup/Non Markup) Total Expense Net profit after tax

• Total assets were increased in last few years. Balance Sheet

22% increase in the assets from the last year
45.00
represents growth in the Bank.
40.00

• As bank increase their paid up capital 35.00

because of which SOE increase at the end of 30.00

2006.
Percentage

25.00

20.00
• BOP is grabbing the confidence of their 15.00
customers results increase in the deposits. 10.00

5.00

0.00
2003 2004 2005 2006 2007

Total Assets Shareholders Equity Deposits

5.2.3.2 Vertical Analysis

It represents the percent of a line item (expenses, tax, interests, dividends) impacts on total revenues.

2003 2004 2005 2006 2007

Markup/ return/ interest earned % 66.69 69.96 82.15 79.67 76.38

Non-markup based Income % 33.31 30.04 17.85 20.33 23.62
Markup/ return/ interest expenses % 19.40 19.69 35.80 51.67 60.70
Non-markup based expenses % 40.16 31.49 17.31 12.95 9.97
Provision against NPLs % 0.32 1.29 4.44 2.57 8.22
Net profit before tax % 40.16 47.54 42.45 32.81 21.10
Net profit after tax % 27.62 37.46 31.56 26.17 19.36

5.2.3.2.1 Graphical Representation

23
 • Markup interest earned is increased because
of increase in 30% lendings from the last Vertical Analysis

year. 90.00
80.00

• Net profit before and after tax is decreased 70.00

60.00
because of huge rise up in the admin 50.00

%age
expenses. 40.00
30.00
20.00
10.00
0.00
2003 2004 2005 2006 2007

Markup/ return/ interest earned Non-markup based Income

5.2.4 Ratio Analysis Markup/ return/ interest expenses Non-markup based expenses
Provision against NPLs Net profit before tax

Ratio analysis is used to calculate the profitability, Net profit after tax

liquidity/leverage etc. of the firm. From ratio analysis

it is possible to predict future variances.
Following ratios of BOP has been calculated:
Ratios 2003 2004 2005 2006 2007

Gross spread ratio % 71 72 56 35 21

Profit before tax to total income % 49.8 59.19 66.11 67.89 53.71
Markup/ Interest cover ratio times 5.15 5.08 2.79 1.94 1.65
Profit after tax to total income % 34.26 46.65 49.16 54.16 49.27
Total assets turnover times 0.06 0.06 0.07 0.09 0.1
Return on avg total assets (after tax) % 1.88 2.49 2.65 2.76 2.22
Price earning ratio times 5.09 7.25 10.23 7.71 9.31
EPS (Non dilutive) Rs./share 6.86 9.08 10.01 13.14 10.51
Dividend per share Rs./share 2.5 4 5.2 3.25 3.5
Market value per share Rs./share 34.95 65.9 102.45 101.25 97.8
Capital adequacy Ratio % 15.5 12.83 12.78 10.09 9.69
No. of branches No. 241 253 266 266 272
Staff Strength No. 3,019 3,144 3,430 3,681 3,859
Gross margins % 4.00% 3.51% 4.19% 3.10% 3.30%
Net margin % 3.30% 3.41% 3.99% 3.03% 3.16%
Net Interest Margin % 3.23% 3.34% 3.90% 2.95% 3.09%
Total revenue % 5.50% 5.34% 5.39% 4.81% 4.91%
Equity / Assets % 11.60% 11.90% 12.10% 10.80% 10.30%
RoE % 16.20% 21.00% 21.90% 25.50% 25.40%
Cost/Income % 49.80% 38.10% 26.90% 26.40% 24.70%

5.2.4.1 Gross spread ratio

• Gross spread ratio defines the total spread

of interest between borrowing and 80
71 72
lending. 70

60
• Spread: Difference between funded 56
50
revenue as a percentage of average
40
earning assets and the cost of funds as a 35
30
percentage of average paying funds.
20 21

10

0
2003 2004 2005 2006 200724
Gross spread ratio
• The higher the spread the higher will be the profit margin.
• GSR= Rev/CGS
• GSR= (Mark-up earned – Mark-up Expense)/Mark-up earned
• GSR is 2nd highest all over the globe in Pakistan.
• GSR of the bank is decreasing because of the decrease in margin, a SBP rise up the interest rates on
the deposits.

5.2.4.2 Profit before tax to total income

• Operating income less operating cost (profit 80

before tax). 70
67.89
66.11

• This ratio tells what percent of total income 60 59.19

53.71
is earned before paying all the taxes. 50
49.8
% age

40
• BOP has a high value of profit before tax to
30
total income and they are decreasing after
20
2006 because of increase in admin expenses
and righting off the bad debts. 10

• The main reasons for reduction in the 2003 2004 2005 2006 2007

profitability were additional provision Profit bef ore tax to total income

against NPL due to the elimination of

benefit of FSV and downturn in consumer and individual banking.

5.2.4.3 Mark-up/ Interest cover ratio

• This ratio tells what percent of interest is 6

covered from the total income of a firm or a 5

5.15 5.08

bank.
4

• It tells the ability of a bank to pay its mark- 3

2.79
up to the depositors..
2 1.94
1.65
• MP/Interest cover ratio= EBIT/Mark-up 1

0
2003 2004 2005 2006 2007

Markup/ Interest cover ratio

25
5.2.4.4 Profit after tax to total income
Profit after tax to total income

• This ratio analysis tells profitability of a firm 60

54.16
after paying all the taxes to total income. 50 49.16 49.27
46.65

• Profitability of BOP is increased because of 40

34.26
decrease in the tax paid to the govt and of high 30

spread ratio. 20

• BOP negotiated their taxes with the government 10

and only paid 20% tax in 2006 and only 8% in 0

2007 instead of 35% 2003 2004 2005 2006 2007

P rofit after tax to total income

5.2.4.5 Total assets turnover

• Asset turnover= Net Income/ Total assets 0.12

• This ratio tells the turnover of the asset to 0.1 0.1

generate income. 0.09

0.08

• This ratio is increased during last few years 0.07

0.06 0.06 0.06
which represent increase in the turnover by
assets. 0.04

0.02

0
2003 2004 2005 2006 2007

Total assets turnover

5.2.4.6 Return on Total assets (after tax)

• This ratio gives an idea of returning net profit 3

2.76
generated by the bank in comparison with assets. 2.5
2.65
2.49

2.22
2
1.88
• Return on assets= Profit after tax / Total Assets
1.5

1
• This ratio is decreasing in the last year because
of decrease in Profit as expenses raised up. 0.5

0
2003 2004 2005 2006 2007

Return on avg total assets (after tax)

26
• The decrease was mainly due to increased equity as a result of increase in minimum capital
requirements and additional provision due to withdrawal of benefit of FSV for most types of advances.

5.2.4.7 Price earning ratio

12

• Price Earning Ratio= Market price of a share/ 10.23

10
EPS 9.31

8
• From this ratio it is analyzed what % of EPS is 7.25
7.71

the part of MPS. What percent earned from a 6

share equivalent to the worth of 1 RS MPS by 5.09

the bank or a firm. 4

0
2003 2004 2005 2006 2007

P rice earning ratio

5.2.4.8 Earning Per Share

• EPS = Net Income/ total shares

120
• Through this ratio it can be analyzed what
percent of 1RS share is earned. 100 102.45 101.25
97.8

80
Rs. Per Share

65.9
60

40
34.95

20 13.14
9.08 10.01 10.51
6.86
2.5 4 5.2 3.25
3.5
0
2003 2004 2005 2006 2007

EPS (Non dilutive) Dividend per share

Market value per share

27
5.2.4.9 Capital adequacy Ratio

18

16
15. 5

• Capital adequacy ratio informs lending up to a 14

12. 78
12
certain ratio of equity. 10
12. 83 10. 09
9. 69

• This ratio is set by the State Bank of Pakistan. 8

0
2003 2004 2005 2006 2007

Capital adequacy Ratio

5.2.4.10 Net Interest Income

4.50%

4.00% 3.99%
• Difference between funded revenue as a percentage 3.50%
3.41%
of average earning assets and the cost of funds as a 3.00%
3.30%
3.03%
3.16%

percentage of average paying funds. 2.50%

2.00%

1.50%

1.00%

0.50%

0.00%
2003 2004 2005 2006 2007

Net Interest Margin

5.2.4.11 Return on equity

30.00%
• Profit before tax as a percentage of total equity.
25.00% 25.50% 25.40%

21.90%
21.00%
• The decrease was mainly due to increased equity 20.00%

as a result of increase in minimum capital 15.00%

16.20%

requirements and additional provision due to

withdrawal of benefit of FSV for most types of 10.00%

advances.
5.00%

0.00%
2003 2004 2005 2006 2007

RoE
60.00%

50.00% 49.80%

5.2.4.12 Cost/Income 40.00%

38.10%

30.00% 26.90% 26.40%

24.70%
20.00%

10.00%

0.00%
28
2003 2004 2005 2006 2007

Cost/ Income
 • Operating cost includes all expenses charged to arrive at profit before tax excluding cost of funds,
provisions and head office expenses. Head office expenses are not considered since all banks do not
account for head office expenses in their financial statements.
• Operating income means funded and non-funded revenue less cost of funds and provisions.
• As administrative costs are increased because of which results decrease in the cost to Income ratio.

5.3 Organizational Analysis

5.3.1 Hierarchical Flow

BOARD OF DIRECTORS

PRESIDENT

CORPORATE HEAD RETAIL HEAD

COMMERCIAL HEAD CONSUMER HEAD

REGIONAL HEADS

BRANCH

BRANCH

29
5.3.2 INTRODUCTION (SWOT Analysis)

SWOT analysis is an acronym that stands for strengths, weakness, opportunities, and threats SWOT analysis is
careful evaluation of an organization’s internal strengths and weakness as well as its environment opportunities
and threats.

“SWOT analysis is a situational which includes strengths, weaknesses, opportunities and threats that affect
organizational performance.”

“The overall evaluation of a company strengths, weaknesses, opportunities and threats is called SWOT
analysis.”

In SWOT analysis the best strategies accomplish an organization’s mission by:

1. Exploiting an organizations opportunities and strength.

2. Neutralizing it threats.

3. Avoiding or correcting its weakness.

SWOT analysis is one of the most important steps in formulating strategy using the organization mission as a
context; managers assess internal strengths distinctive competencies and weakness and external opportunities
and threats. The goal is to then develop good strategies and exploit opportunities and strengths neutralize
threats and avoid weaknesses.

5.3.3 STRENGTH

 The Bank officers of BOP are considered as one of the most able professionals in the banking
world (some belong to BCCI). However, they have added some local flavour in accordance with
their targeted segmented. In my observation that they interact with their clients as if they are their
personal friends and discuss about their problems as their own.
 As a result of the compassionate and personalized services of the officers, the clients’ perception
for BOP is very high. They have trust and feel themselves to be secure while dealing with BOP.
 BOP has opened all its branches at commercial areas so that the customers or clients face no
problems in reaching to the bank. For example, Khanewal Road Branch is being situated in
business and commercial hub of Multan as big volume in trade.
 BOP has got a reliable and easy to use internal computer system. Every information regarding the
transactions in customers’ deposits has been computerized. Data are properly maintained.
 Good security system
 Not excellent but good facilities are given to employees

5.3.4 WEAKNESSES

 Lack of proper internal controls is one of the major weakness of BOP. It is also pointed by the
auditor in his review.
 BOP has formulized a lot of products and services for its customers, even more than other
commercial banks, but any advertisement on electronic media has not been seen.
 I observed during my internship that some of the employees were burdened with over work. So I
think that the work should be distributed according to their post and capabilities.
 Biased selection of employees.

30
5.3.5 OPPORTUNITIES

 Satisfy dynamic consumer needs, BOP has made significant in roads in its entire service spectrum.
A lot of products have been introduced especially in Retail Banking (Agriculture side) and people
are increasingly becoming loyal to the bank and because of feasible transactions. Optimum pricing
and branding strategies of the bank are helping to make customer feel secure and convenient.
 All the opportunities of the 21st century are to be availed in the information technology. Information
technology is the future of this dynamic world. Therefore BOP should emphasize much on IT,
especially on E-Banking. Bank can design a universal account like other foreign banks, to enhance
online facilities.
 BOP has introduced a number of financial schemes including special ‘Deposit Accounts’. These
accounts have their unique features. During the last three years, BOP deposits have been increasing
@ 40%, which is a very healthy sign. Therefore, with the commencement of new schemes there can
even be a greater increase in its deposits

5.3.6 THREATS

 Despite the difficult circumstances that confronted the banking sector in particular and the country
in general, BOP has been still highly profitable. But, the facts can’t be denied and there might be an
adverse impact of such situation.
 BOP is facing a strong competition by its competitors, Business of all these Banks are growing at
very high pace.

5.4 Future Prospects

5.4.1 Financial Valuations and the future prospect of BOP

BOP’s share is currently trading at PKR 97.80 (On closing of fiscal year at 30 th June, 2007). And by looking at
the growth track of BOP it can be analyzed that it will real grow up. Through different estimations and by
viewing remarks of analysts it is expected that it would grow up to PKR 125 by DEC. It shows real future
profit.
This evaluation is based on a normalized ROE of 25.3% (ROA of 2.7%), cost of
Equity of 17.0 % and a long-term growth rate of 11.2%.
A sensitive analysis shows:
• With every 10% change in credit Market value per share

costs, fair value would change by 140

3.3%. 120
125

102.45
• For every 10% change in NIM, 100 97.8
101.25
BOP’s fair value would change by
Rs/ Share

80
7.5%. 65.9
60

• A100bp change in loan growth 40

34.95
estimates for 2007, 2008, and 2009
20
would cause a
0
Change of 1.0% in fair value. 2003 2004 2005 2006 2007 E 2008

Market value per share

The calculations made in sensitivity of changes in
the cost of equity and the

31
Terminal growth rate. The cost of equity is based on a 10.2% risk free rate, a 6%
equity risk premium, and a fundamental risk-weighted of 1.13. The perpetual
growth assumption implies a dividend payout ratio of 25%. For every 50% change in
the cost of equity, and the terminal growth rate the bank’s fair value
would change by 4.6%.
It can be confirmed by looking at share price performance. BOP’s share price has performed well in the last
year. It is up 31.2% in the past 12 months, and is up 21.1% YTD. The stock has outperformed the local
benchmark KSE-100 by 5.0%. Performance is quiet amazing.

6 Industrial Analysis

6.1 Overview on the Major Players of Bank Industry

The brief overview on the bank industry and the major players involved on it. The combined values of all
major players are collected from their financial statements of 2007.

Assets Liabilities & Equity

900,000 900,000
Cash & bank
800,000 800,000

700,000 Investments 700,000

Bills Payable
600,000 Lendin To Financial 600,000 Borrowings
Institutions
Rs In Millions

500,000 500,000 Deposits

Rs in M

Advances
SubOrdinated Loans
400,000 400,000 Other Liabilities
Op Fixed Assets &
300,000 Intangible Assets 300,000 Equity
Other assets Total
200,000 200,000
Total
100,000 100,000

0 0
NBP HBL UBL MCB BAF ABL SCB BOP
L

L
P

P
F

L
CB
HB

UB

BA

AB

SC

BO
NB

• As graphical shows NBP (National Bank of Pakistan) is the key player and the leader in the industry
with total assets and liabilities of RS. 764,609. While BOP is RS. 234,991.
• Major Player Includes NBP, HBL, UBL, BAF, ABL, SCB and BOP.
• Total Assets of the major players in the industry are RS. 3,561,195 (M).
• BOP is considered as one of the major banks in Pakistan by assets.
• Like major Player NBP has the largest Profit before and after Tax i.e., 28,452(M) and 19,405 (M)
respectively. While BOP has PBT RS. 4,856 (M) and PAT RS. 4,454 (M) only
• The total Profit before and after tax of the major players are RS. 99,835 (M) and RS. 70,045 (M)
respectively.

32
 Income Comparison

50,000

45,000 Spread

40,000 Provision
35,000
Non Markup Interst
Income
Rs In Million

30,000
Operating Income
25,000

20,000 Operating Expenses

15,000
PBT
10,000
Tax
5,000

0 Profit after Tax

NBP HBL UBL MCB BAF ABL SCB BOP

6.2 Comparison of the Bank Industry Major Vs Medium Vs Small Banks

Total Assets Liability Comparison

4000000 4,000,000

3500000 3,500,000

3,000,000
3000000
Rs. In Millions

2,500,000 Major Players

Rs In Millions

2500000
Major Players 2,000,000 Medium Players
2000000 Medium Players Small Players
1,500,000
Small Players
1500000 1,000,000
1000000 500,000

500000 0
l
ta
ty
s

ts

0
Bo ble

es
s
ng

To
si

ui
an

liti
po

Eq
wi
ya
Investments

Advances

Total
Lendin To

Lo
Op Fixed
Cash &

Assets &

bi
Financial

rro

De
assets
Other

Pa

ia
bank

ed

rL
ls

at

he
Bi

in
rd

Ot
bO
Su

• Major Players in the Medium category of the Banking industry are AB, NIB, ABN, Citi, SB BAH, FB.
• Total Assets and liabilities of this level comprised on RS. 1,091,083(M)
• Net Income of this level is RS. 9,567 (M)
• This level is giving a tough competition to the major players and trying to grab there share.

33
• Few mergers are taking place and in future it is expected to be more because to maintain SB Standard
reserve ratio.

Incom e Com parison

200,000

150,000
Rs in Million

100,000 Major Players

Medium Players
50,000 Small Players

x
e
e
ad

ax
ls

Ta
PB
m
om

se
-50,000
sa
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rT
en
nc
Sp

er

In

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xp
tI
ev

af
g
rs

E
tin
R

it
te

of
n/

ra

tin
In
o

Pr
pe
p/
i

ra
is

O
ku

pe
ov

ar
Pr

O
M
on
N

• Major Players in the Small category of the Banking industry are ATLAS KASB, JS etc.
• Total Assets and liabilities of this level comprised on RS. 411,077 (M)
• Net Income of this level is RS. (2,176) (M)
• These Banks are going in loss overall in 2007. Since they are new players in Pakistani Market. It is
expected that they will give return in future.

34
7 Weaknesses and their Recommendations (Financial &
Administrative Aspects)

7.1.1 Internal Controls

To me the major and the most important flaw in the BOP is lack of internal controls and inter communication
between different branches of the bank. As far as financial aspect is concerned there is no proper system is
configured that’s why there is always a risk of big frauds with in the bank. I during my internship also pointed
out that point but no one bothered. To me the bank should install some proper resource planning and controlling
systems like other banks do i.e., oracle financials etc.

7.1.2 Professional Training

BOP staff lacks professionalism. They lack the necessary training to do the job efficiently and properly.
Although staff colleges are in all major cities of the Punjab but they are not performing well. For this purpose
these staff colleges should be reorganized and their syllabus should be made in such a way which can help the
employee understand the ever-changing global economic scenario.
Banking council of Pakistan should also initiate some programs to equip the staff with much needed
professional training.

7.1.3 Delegation of Authority

Employees of the bank should be given a task and authority and they should be asked for their responsibility.
The sense responsibility in employees mind is one of the most important factors in the success of any
organization.

7.1.4 Performance Appraisal

During Internship I felt that there is no or very less appraisal of any ones cool performance. The manager
should strictly monitor the performance of every staff member. All of them should be awarded according to
their performance and result in the shape of bonuses to motivated and incite them to work more efficiently.

7.1.5 To Over Come Problem of Space and Furniture

In the critical analysis this, problem is discussed. To overcome this problem it is suggested that a special
section should be made inside the branch. Which should only handle the treasury function, salaries and
pensions of federal personnel or the bank should do these functions in the evening time. Also management
should purchase more furniture and arrange them in such a way which provides maximum space and
convenient especially in deposit department and there should also be convenient sitting place for customers.

7.1.6 Transfer

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Transfer is not properly carried out. Some of the employees are continually serving at the same post. They are
simply rotated at the same branch. Therefore it is recommended that evenly rotation of every employee should
take place after every three years in different braches of the bank.

7.1.7 Changes in Policies

There should not be any abrupt policies change by the upper management, as this practice hurts the customer
confidences in the bank. Government should make long-term policies

7.1.8 Need of Qualified Staff

Required, qualified staff should be provided to branch in order to improve the functioning of the branch.
Especially a telephone operator should be appointed.

7.1.9 Utility Bill Charges

Bank gets Rs. 2 to 3 to processes a utility bill, and it is very tire, tough and hard job despite this working
resulting in a loss to then Rs 3 to5 per transaction. These charges should be increased to RS 10 per bill to
enable the branch to cover their handling costs and make some profit.

7.1.10 Link with the Head Quarter

100 major branches of BOP should established a direct link with the, head quarter in Lahore, through Internet
or Intranet. This will make the functions and decision making of the management easier and convenient.
Though management has a plan to connect all branches via WIMAX technology. Which would really bring a
great future aspects.

7.1.11 Credit Card

BOP should start its operation in credit card. These cards are very helpful for the ordinary customer in general
and the business people in particular. To make it mores secure and to eliminate the misuse of it, the
management is required to keep proper security against the card.

7.1.12 Clean Loans

Clean loan or clean overdraft is the credit facility extended to the customers to the customers without any
security. These types of small term loans should not be extended to anybody, because sometime these loans are
provided to blue-eyed people of the management and they become a part of bad debts.

7.1.13 Cash Financing

In this mode of financing the amount of credit not utilized by the borrower is remained tax-free. It is
recommended that a small amount of interest should be charged on this amount as well because the bank gas
kept-aside the amount for that borrower and can not advance it anywhere.

7.1.14 Decreasing Administrative Expenses

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Bank should decrease their administrative expenses. This was Rs 2.25 billion in the year 2007. That can be
done by lying off the surplus pool of employee with golden hand shakes scheme. The branches that are not
much used could also be closed. That will give positive results in the future.

7.1.15 Should be Aggressive in Credit Policy

As mentioned earlier, BOP is very conservative in advances and loans policy. It reduces the investment
opportunities. Also loans should be given to the small businessmen and the other businesses on large scale like
in agriculture sector at the low mark-up rate. It should adopt flexible credit policy while giving credit to the
agriculture sector.

7.1.16 Technological Advancement

I would like to suggest that at least all the main branches of BOP should be fully computerized in order to
expedite the dealing process among bankers and their customers. Every department should be provided a
computer with adequate training (especially Advances, Deposits and Foreign Exchange departments). Daily
records should be entered directly into these computers, (instead entering the overall daily transactions after the
banking hours). It will not only reduce transaction time, will increase accuracy but will also be efficient as well.
Not only it will be economical but will also reduce the extra burden of work of the bank. It will also help in
reducing the use of excessive paper work.

7.1.17 Staff Relationship

Good relationship among staff member leads to the peak performances in any organization. I observed that the
staff relationship was normal other wise but some time I noticed that there exists little conformity among the
staff members. Another syndrome from which the staff suffered was that all of them considered themselves
more important than others. Some of the officers used to say that if I am absent for a day the bank would stop
working. So this sort of attitude is not good because it mars bank image and juniors’ willingness learn and work
hard and in the end will hurt the whole team.

7.1.18 Improper Distribution of Work

Proper distribution of work leads to success in every organization. Proper distribution of work prevents the
employee from over and under work situation. So for a smooth running of an organization proper distribution
of work is the hint to be followed.
During my internship I observed that there was no proper distribution of work in the bank. I saw that some of
the employee worked like ants other sat idle staring here and there. So this created a lot of over work situation
for while relaxation for other.

7.1.19 Favouritism and Nepotism

In the Main branch during my internship I saw that when some of the employees are transfer to other places,
due to their relation with influential people and with top management they can cancel their transfer in few
weeks, when they are unsatisfied at that place.
So I suggest that in the organization there should be no favouritism, nepotism and politics and their transfer and
promotion should be made on merit and according to the rules and regulations of the bank and provided
favourable environment to the employee to show their performances.

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7.1.20 Inter Departmental Transfer

I watched during my internship that, there employees who have worked on one seat for many a year. It can
have negative effects motivation of employee who is hard working and intelligent. Take the example of
advances section. In advance section if the employee is transfer after sixth month or seven month, how can he
be able to show his performances and how can he be able to know the bank customer in a short period of time.

7.1.21 Marketing Policy

The branch should adopt various marketing strategy and promotion strategy to promote the bank and its
product.
The most important in my opinion is personal marketing; it is the most effective of all when you think in term
of branch level. But on the whole organization level, they should arrange the seminar with in the bank and
outside the bank. They should introduce various prizing schemes just like Allied Bank. Karamad Scheme, Bank
Al-Fallah (monthly income earning scheme) and various others.
They should do more advertising through newspaper and media and through channel of personal contacts.

7.1.22 Complaints of Customer

There should be an information desk to provide the information and to receive the complaints of the customer
in the bank.
There is no complaint box available in the branch and not any person appointed to hear the complaints.
Every person cannot go to the manager for the complaint because most of the people are hesitant. So I suggest
management to install a compliant box in the branch, and recruit a special person for that guidance of the
customer when they are unable to manage some difficulties in banking matters.

7.1.23 Organizational Commitment

It is suggested that employees working on daily wages basis should be given some benefits, which the other
employees are getting. Their salaries must increase according to efficiency, performance and service this will
increase there commitment to the organization.

7.1.24 Credit Monitoring

The credit department of the bank should carry out vigilant credit monitoring. They should ensure the proper
payment of instalments and the mark-up by the borrower.
The staff members who have done all the paper work of the loan extension should perform the monitoring, as
he/she will be having more information about the borrower.

7.1.25 Extended Banking Hours

The banking hours may be extended up to six, as being practiced by UBL opposite to it. Some of the business
community due to law and order situation are now reluctant to keep the fund in their premises and would want
to depart with it. Therefore, Main Branch may extend the night banking to cater to demand of this business
community. The branch could also be opened to cater the requirements of this business community

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7.1.26 Housing and House Hold Goods Loans

Bank should initiate these loans because most of bank’s customers are middle class and they cannot afford to
buy house or household goods at once by their own.

7.1.27 Avoiding Bad Debts

Great care should be taking while extending the loan. Loans should be awarded against reasonable securities,
where market value should be equal to the loan granted.
Policies should be crafted in a way to ensure that no loan is extended on political pressure. SBP regulation for
loan approval should be strictly followed. According to which the current ration of borrower’s business must be
1:1 and the debt to equity ratio should be 60:40, means the liquidity position of business should be healthy.

7.2 RECOMMENDATIONS FOR STUDENTS

In this section some recommendations for those students who are planning for an internship at BOP particularly
and in any other bank generally. The most important of all is the difference between what we learn from the
books i.e. the theory and what actually is done i.e. in practice. This difference is described in detail below:

7.2.1 Working in different departments

During my internship I observed that other internees in the bank use to stick with one department only. An
internee with specialization in Finance was of the view that he should be in Finance department same was the
case with other specialized Internees. But I would suggest that one must work in every department for some
time to gain a hand on experience of all the departments. As in real working environment employee have to
coordinate with other departments, so he/she must know what the other departments operations are and how
they work.

7.2.2 Relationship between Theory and Practice:

This part of report is the essence of the internship, as this will help other students to better understand the
working environment of the bank by finding the relationship between what is written in the books and what is
actually going on in fields. The theory written in the books in cases is not implemented as it is. In some cases
theory is implemented with a little modification but in other cases theory has nothing to do with practice. In
accounting, banks don’t prepare worksheet, but part of worksheet is prepared like trial balance, but little
differences, theory and practice has substantial relationship. The securities for the loans are handled in the same
way as theory says like mortgage, pledge, hypothecation, advances against insurance policies or liquidation
procedure is the same. The difference is there in the case of loans. Theory talks about four or five terms of
loans that is cash finance, overdraft, loans etc., but in practice there are some more terms used like running
finance, demand finance etc. All other concepts of remittances, bills, foreign exchange deposits, letters of credit
are in accordance with theory almost. So for a internee it is more important to learn new things which he/she
has never heard about in his/her course book.
To me, Theory gives you the direction to understand the processes and the terminologies going across the
World using best business practices in a broader view covering each and every aspect of possible business
scenarios. On the contrary practical life is specific, enclosed in a jar. In practical professionalism and firm’s
environment is each and every thing. Professional life only builds on the knowledge based on books even
though it may only use 1% of the theoretical knowledge.

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8 Conclusions

By analyzing the financial statements of the bank, I came across to know that it is one of the most growing

bank in the subcontinent. Now they should carry on with the present management which too k it from one of

the ordinary bank to this level. No doubt professionalism and internal controls of the bank are one of the major

issues which may results some major losses to the bank. Bias in hirings and between colleagues should be

removed.

9 References
Reference material used for compiling this report is gathered from these sites.
• www.bop.com.pk
• www.jpmorgan.com
• www.kpmg.com.pk
• www.sbp.gov.pk
• www.globalbanking.com

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