Professional Documents
Culture Documents
The history of interest-free banking can be divided into two parts. First, when it still
remained an idea; second, when it became a reality.
The literature of the period begins with evaluations and ends with attempts at finding
ways and means of correcting and overcoming the problems encountered by the
existing banks. During the last few decades interest-free banking attracted more
attention, partly because of the political interest it created in Pakistan and partly
because of the emergence of young Muslim economists.Meezan bank is the first
Islamic bank and is therefore recognized as one of the pioneer banks that promotes
Riba-free (interest free) banking activities all over the country.
Table of Contents
2
Acknowledgement.6
Executive Summary..7
Introduction.8
Shariah Board..9
Organizational structure..14
Islamic banking15
Clearing.21
Remittance26
Cash Department.31
SWOT Analysis47
Conclusion52
3
ACKNOWLEDGEMENT
The last but not least, I would feel incomplete without thanking to my parents who
pray for my brilliant success and bright future.
4
EXECUTIVE SUMMARY
In the first I have discussed about the introduction of the Meezan Bank,
Basic Functions of Meezan Bank and vision & mission of Meezan Bank Ltd. Then I
introduced Meezan Bank (Gulgashat Branch Multan). I have also mentioned the
Islamic modes of financing, products, packages, which the Meezan Bank Ltd. offers
to its customers and then I have given a brief overview of different accounts opened
and Investment Certificates issued by Meezan Bank Ltd and cheque clearing and
remittance, stop payment, financial services and ATM functions. And in the last I have
And in last I also mentioned some important references and web sights from
5
INTRODUCTION
Meezan Bank is publicly listed company, first incorporated on January 27, 1997. It
started operations as an Islamic investment bank in August of the same year, which
has been licensed by the State Bank of Pakistan to operate as an Islamic
Commercial bank on 31st January 2002.
State Bank of Pakistan granted the Nations first full-fleged commercial banking
license of Islamic Banking to Meezan bank Ltd. It was a new era in banking Sector
history in Pakistan that Meezan Bank Ltd adheres strictly to the principles of Islamic
Shariah with absolutely no compromise, and is recognized as Pakistans truly premier
Islamic Bank.
Meezan Bank is operating approximately more than 400+ branches in 100 plus
different cities. In addition, the State Bank of Pakistan itself governs the activities
of Meezan Bank and its Shareholders.
Meezan bank Ltd has a strong Balance sheet with excellent operating profitability,
including a capital adequacy ratio that has placed the Bank at the top of industry.
6
INTRODUCTION TO MEEZAN BANK LTD
Meezan Bank
1997:
1999:
The Shariat Appellate Bench of supreme court of Pakistan reject the appeal and direct
all laws on interest banking to cease but the Government set in a high level
commission, task and committees to institute and promotes Islamic banking .
2001:
2002:
7
Al Meezan convert itself in to a full fledge Islamic commercial bank. The first Islamic
banking license is issued to the bank and is renamed Meezan Bank. President general
Pervaz Musharraf.
2003-----2009:
2010:
2011:
This is the second consecutive year in which Meezan Bank has been awarded Best
Islamic Bank in Pakistan and Best Trade Finance Bank in Pakistan by Asset Triple A.
These awards highlight Meezan Banks continuous growth and successful year of
2011 in which Meezan Bank announced a growth of 106 % in its Profit-after-
8
tax (Dec-2011), a deposit figure of over Rs. 170 billion and held the 9th largest bank
branch network in Pakistan.
2012:
In May 2012, Meezan Bank - the premier Islamic Bank, completed 10 years of
Islamic Banking in Pakistan. The Bank has been consistently recognized as the Best
Islamic Bank in Pakistan by various local and international institutions over the past
several years:
2014:
Shariah Board
9
VISION AND MISSION STATEMENT
Our Vision
Our Mission
10
bounds of Shariah, while optimizing the stakeholders value through an organizational
culture based on learning, fairness, respect for individual enterprise and performance.
STAFF
Names Designations
11
Ahsan Usman Officer
ORGANIZATIONAL STRUCTURE
As I already introduced Meezan bank Ltd (Main Branch Multan). So, this Branch is
comprises of a Branch Manager, who reports to the Area Manager about the work &
performance of the branch employees. A separate area has been set aside for
operations which are monitor by an Operation Manager, who reports to Branch
Manager about daily cash transactions, clearance, remittances & accounts opening.
There are also PBO (Personal Banking Officer) and BDOs (Business Development
Officers), who are directly related to Branch Manager and reports him about customer
relationship & services provided to them, and about deposits targets of concerned
bank.
Branch
Manager
Operation
Manager
Personal Liability
Chief Cash Accounts Banking Sales
Cash Deposit Opening
Officer
Officer Officer Officer
12
BDOs
Cash Sorter
Officer
Clearing Remittance
Officer Officer
Islamic Banking
The interest free system envisages the gainful use of ones saving with other on the
basis of profit and loss sharing in a defined manner. Effective from Jan 01, 1981, the
Nationalized commercial banks and now all other commercial banks in Pakistan have
introduced the profit and loss sharing (PLS) Deposit Scheme features of which as
under .
RIBA
The word Riba means excess, increase or addition, which correctly interpreted
according to Shariah terminology, implies any excess compensation without due
consideration .
(This definition of Riba is derived from Quran and is unanimously accepted by all
Islamic scholars)
13
1 ) Musharkah
2) Mudarabah
Where one party provides the funds while the other provides expertise and
management. The latter is referred to as the Mudarib. Any profits accrued are shared
between the two parties on a pre-agreed basis, while loss is borne only by the provider
of the capital.
3) Murabaha
It means a sale on mutually agreed profit. It is a contract of sale in which the seller
declares his cost & profit. Islamic Banks have adopted this as a mode of financing. As
a financing technique, it involves a request by the client to the bank to purchase
certain goods for him.
4) Ijarah
Ijarah or leasing is the transfer of usufruct for a consideration which is rent in case of
hiring of assets or things and wages in case of hiring of persons.
5) Musawamah
14
It is a general & regular kind of sale in which price of the commodity to be traded is
bargained between seller and the buyer without any reference to the price paid or cost
incurred by the former. It can be used where the seller is not in a position to ascertain
precisely the cost of commodities that he is offering to sell.
6) Istisna
Mudarabah basis
The Bank is the Manager (Mudarib) of the funds deposited by the customers. The
Customer is an Investor (Rab-ul-Mal), and the bank allocates the funds received from
the customers to a deposit pool.
These funds from the pool are utilized to provide financing to customers under
Islamic modes that include, but are not restricted to, Murabaha and Ijarah.
Murabah
Ijarah
Depositors Funds
Diminishing Musharakah
15
Bank
Profits Profits
The Gross Income will be shared between the bank (as Mudarib) and Depositors
(Rab-ul-Mal) in a predetermined ratio (%) of the actual profit earned.
1) Current Accounts
Currents Accounts are the business accounts offered to all types of business owners.
The bank doesnt earn any type of profit from these accounts but these are opened
only due to the facilitation of the customers. Current accounts can be opened jointly,
singly, company etc. Free online services from all branches. No restrictions on
number of transactions of withdrawals.
2) Saving Accounts
Saving accounts are opened due to the saving of money. The bank also provides profit
to the customers. That profit is calculated & paid on monthly basis. If during the
month average deposits falls below 1000/-, then no profit no Loss.
KMA accounts are offered specially to those customers who have valuable business
and earn 1 million each month. So, the bank facilitates them with free cheques book,
free ATM card, free Telephone Banking and free Internet Banking. The minimum
16
investment for this account is 1 million. And the bank provides them profit at different
rates.
This account required minimum investment of 25000. This account is opened for all
customers, who can operate it easily. In these accounts bank also provides profits to
the customers. These accounts also provide facility of withdraw of cash any time.
These accounts are opened for those customers who are residents of Pakistan but
earning outside of the country anywhere so he deposits his amount in dollar or other
currency and our bank provides him more profit as compared to the local investors &
on monthly basis. The minimum investment for this account is $500.
These all current and saving accounts can be opened in any category of the
following types of accounts;
Individual Accounts
Joint Accounts
Minor Account
Partnership Accounts
Staff Accounts.
1. Individual Accounts
17
2. Joint Accounts
Joint Account is an account in the names of two or more persons (other than Partners
or Trustees). In case of death, cheques signed by DECEASED Account Holder
presented for payment will not be entertained and therefore must be returned. When
the balance of Joint Account is repayable to either party or survivor, the Specimen
Signature Card should be marked to effect the arrangement.
3. Minor Account
A person who has not attained the age of 18 years is minor. However, incase Court
has appointed a Guardian for the property of a Minor, and then the period of his / her
maturity extends to the age of 21.
A formally stamped written request on the official Letter Head of the Business / Firm
of the Sole Proprietor in order to open a Sole Proprietor Account must be submitted
along with AOF (Accounts Opening Form).
Additional care must be taken while opening of sole proprietor account. Beside other
documents the customer should be ask to produce the original NTN (National Tax
Number) certificate issued to his name in the capacity as sole proprietor of said firm.
These types of accounts are opened only for those persons who are illiterate. This
account is also known as PHOTO ACCOUNT, that during opening this account we
paste the current passport size photographs with AOF (Accounts Opening Form).
6. Partnership Accounts
18
Partnership is an association of two or more persons who have agreed to share profits
of a business carried on by all or by any one of them acting for all. The terms and
conditions must be spelled out in the Partnership Deed formally agreed upon among
Partners by incorporating the same in the Deed. The signing and delegation of powers
of those authorized to operate the account should be clearly stated on the AOF
documentation in accordance with Partnership Deed.
7. Staff Accounts
Staffs can open only one saving or current account singly or jointly with his / her
spouse at the time of appointment in the respective branch of Meezan Bank Limited.
The account will be opened for the purpose of salary disbursement (like salary, bonus,
increments, allowance or any form of reimbursement from Meezan Bank Limited
against services rendered by employee).
WEEKLY WORK
Account opening and closing is the function of customer services department. The
banks customers includes individuals (single or joint), firm
(partnership/proprietorship), Autonomous corporations, Limited companies,
Charitable Institutions, associations, Educational Institutions or local bodies
19
Basic for Account Opening
Account opening is the basic and first relationship, which is established between Bank
and the customer. In account opening extreme care has to be exercised in case of
completion of account opening documentation.
Whenever a client comes in the bank in order to open an account the first information
that is given to him/her about the types of accounts, which can be opened, so far this
purpose the client is given detailed information about the accounts and their
respective profit rates.
1. Individual accounts:
Copy of CNIC.
2. Proprietorship Account:
Copy of CNIC.
3. Minor Account:
20
4. Partnership Accounts:
5. Limited Company:
6 . Joint Accounts:
Jointly
Either or Survivor
21
Other(s)(Please specify)
.NOTE:
These all documents are required original, bank itself get the photocopy of these
documents.
1) CIF
2) KYC
3) Accounts
4) CDD
First of all, after inquiring from the customer what type of account he/she wants to
open, the account opening form is got filled from the customer and signed it. Along
with the account opening form, the customer is also signed two Specimen Signatures
Cards. After fulfilling all the formalities of account opening, the computer generated
account number is given to the customer that is of special series depending on the
type of account.
Requisition Slip
A requisition slip is given to the customer to sign it so that the customer can get
cheque book. Chequebook is issued after one day of receiving the requisition slip.
Letter of Thanks
After opening the account A Letter Of Thanks is send to the customer in order to
thank the customer for opening an account in the Bank. This letter tells all the
information regarding his/her accounts, which are kept very confidential.
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Account Opening Register
After an account is opened, an entry is made in the account opening register, which
has the following columns:
Date
Account Number
Name & Address
Telephone Number
Initial Deposit
Customer Services/Relation Officer enters the new account opened in computer and
the Specimen signature Cards are also scanned so that whenever a cheque of the
respective account comes for encashment, the signatures can be verified.
OPERATIONS DEPARTMENT
Functions Performed
Clearing
Remittance
23
1) Intercity:
Letter
Stamping(clearing,intercity,payee A\C credit
System entry
When cheque is clear it is realized in system and adjustment entries are done in
system.
Charges
Total 174
2) OBC
All about lodgment process is same but when OBC is realized then dd\Po is received
which is lodged in local clearing.
OBC Charges
24
Total 290
CLEARING
In clearing process, if the account holder of MBL receives the cheque of other bank
like City Bank, Habib Bank Limited etc, and he submits it in MBL branch to be
cashed. At the same time the clearing process starts. First the bank name, Cheque
number and the amount are written in the register. After this three kind of stamps are
required first bank name stamp, secondly clearing stamp of next date and If the
cheque is not local then the inter city clearing stamp is required.
Some cheques are local and some are outstation. The institution N.I.F.T. provides the
services in clearing the cheque. They send the different cheque to different banks..
The cheque of inter city is send through N.I.F.T. And where, the N.I.F.T service is not
available so the cheque is sent through T.C.S. The clearance of cheque is informed
through advice. Some cheque is not passed so they should return so Rs. 100 is
deducted and if the cheque is inter city then the postage charges is deducted.
Inward Clearing
In the morning, the bank receives its own cheques, which have been presented by the
customers in some other bank to be deposited in their account. NIFT provides the
facility of bringing cheques for inward and also takes the cheques of outward clearing
to other banks. The cheques received in inward clearing are the cheques drawn on
bank and the bank has to pay for them. For this purpose the bank makes clearing in
computer by checking the balances of the respective customer, if their balances are up
to the mark then that cheque is cleared and the respective customer account is debited
with the respective amount. If the balances are short then that cheque is bounced back
to the related bank.
All required stamps of Clearing, Crossing and Endorsement are not present on
cheques.
Cheque is post date.
25
Refer to drawer
If any of these reasons exists then that cheque is returned through NIFT and deducts
Rs. 300 from customer account as cheque returned charges. Then the report of
returning any cheque is sent through fax to the head office Karachi. After this put the
entry in Cheque return register showing the following columns:
Date
Title of account
Account number
Cheque number
Reason to return
Outward Clearing
All the cheques of other banks which are deposited to MBL are presented in outward
clearing. This is said as outward clearing because they are presented on the very next
day after depositing a cheque.
Transfer of amount
Telling account balances
REMITTANCE
26
Another important department in MBL is Remittances Department. The remittances
department transfers the funds from one bank to other bank and from one place to
another place. In remittances department the collection take place. The MBL made
payment of only open cheques on the counter and prohibits the payment of crossed
cheques.
MBL transfers money from one place to another by the following means:
Pay order
Inward collection
Outward collection
Pay order is an order to pay money but this payment is to be made within city and
other as well. Because MBL pay order is payable at any MBK branch in Pakistan
The original copy of the pay order is given to the customer and carbon copy is kept
with bank for office record.
B) Inward Collection
When the bank receives cheques of any other bank from its any branch situated in the
some other city, and then those have been dealt as inward collection
CASH DEPARTMENT
The cash department is the most important department of the bank. It receives cash
from customers and then deposits it into the accounts of the customers and maintained
their balances. There are two basic functions performed by the cash department.
These are
27
1. Receipts
An individual who has account in the Bank can deposit money in his account. For
deposit of the money the individual has to fill the deposit slip in which the account
holder writes his name, Account number, amount of the money both in figures and in
words.
After filling the deposit slip the Cash amount along with the deposit slip is submitted
with the cashier. The cashier collects the cash and counts it and after verification the
cashier stamps the deposit slip. One part of the deposit slip is given back to the
customer and the other part of the deposit slip remains with the bank for the record
purposes
The cashier also record the deposits made by the customers in credit sheets daily. The
deposits of all customers of the bank are controlled by mean of ledger account. Every
customer has its own ledger account and has separate ledger cards in which his / her
total record is kept.
2. Payments
First of all the customer presents his cheque to the cashier. The cashier records the
account number and the amount, which is to be drawn. Then the cashier check the
cheque number in the computer for the verification whether the account holder has
such amount in his account which he is demanding or not. If the computer passes the
cheque, the Passing officer signs the cheque and sent it to the cash counter then
cashier pays .
Scroll book
Paying book
Scroll Book
28
When cash is received at the customer it is recorded in the scroll book.
The cashier makes entry in the paying cashbook when cash is paid.
The consolidated figure of receipt and payment of cash is entered in cash balance
book.
To facilitate the customer through opening accounts of different types, Meezan Bank
also issues some investment certificates through which they could benefit customer.
The customer could easily invest in different types of certificates of different
investments and could get profit at attractive rates. These certificates are as under:
These certificate requires the minimum investment of 50,000/=. These certificates are
of three types one of them is for 3 months-5 years and the profit distribution of this
type certificate is at the maturity of payment. 2nd is for 1year-5 years and profit
distribution of this is quarterly and the 3rd and last which is for 5 years and profit
distribution is on monthly basis but its investment is minimum 200,000/= rupees.
The Monthly Mudarabah Certificate is the flexible investment product, which has
been designed to give customers a monthly return, which is purely halal. These
certificates require the investment of 100,000/= rupees, and the profit distribution is
on monthly basis. As the investment increases the distribution rate also increases.
29
3. Meezan Aamdan Certificate-MAC.
Meezan Aamdan Certificate (MAC) is the long term investment with high monthly
profit especially designed for those individuals and corporations who are in need of
regular stream of monthly income. MAC is therefore, a monthly income (Mahana
Aamdani) certificate with a variety of free packaged benefits. The minimum
investment for this certificate is 1, 00,000/= rupees. These are issued for two different
tenures i.e. for 51/2 and 7 years. The 7 year certificate has more attractive profit
distribution as compared to 51/2.
Meezan Current Account is a Rupee-based current account that provides you the
convenience of putting your money in a Riba-free account and accessing it without
30
any restrictions on withdrawal while enjoying a host of professional conveniences
from Meezan Bank.
Key Features:
The Riba-free Rupee Saving Account is a basic banking account for every customer's
need. The account provides monthly returns along with a variety of free packaged
benefits.
Key Features:
Meezan Bachat Account offers a higher expected rate of return with nearly the same
convenience and service of a regular savings account.Meezan Bachat Account can be
opened by Salaried or Self-employed, Housewives and Retired individuals.
31
Key features:
Meezan Labbaik Saving Aasaan is an ideal deposit product for you if you are an
individual saver and wish to save for your spouse, children, parents, etc.
Key Features:
Available for individuals, where customers can open a single / joint account
with family members
Labbaik Saving Plan is available for six (06) months to twenty (20) years
Labbaik Saving Account is a Pak Rupee account
It will be a Recurring Deposit Account, where customers will deposit monthly
contribution as per the deposit schedule plan
Labbaik Saving Account is a non-chequing account, where no cheque book or
VISA Debit Card will be issued
Key Features:
32
There is no deduction of service charges if the balance maintained is low
You will have instant access to your account both through Internet Banking
and through Online Banking at all branches of Meezan Bank across Pakistan
Free Cheque books
Free Pay Orders
Free VISA Debit Card
Free Account Statements
Free Online Banking
Free Internet Banking
Free Hold Mail Facility
Free SMS Alert services
Free intercity clearing
The Meezan Dollar Saving Account can be opened by individuals and businesses
including Sole Proprietorships, Partnerships and Limited Companies.
Key Features:
Karobari Munafa is a high profit savings account specifically tailored for large
Corporate or GoP-controlled entities. It allows customers to earn higher returns on
33
surplus cash balances, has no preset transaction limits and comes with a variety of
free packaged benefits
Key Features:
1) Online Banking
Our free On-line Banking facility allows all customers to access their account
and conduct banking transactions from any of Meezan bank's branches nationwide
2) Financial Services
Western Union
34
This is a financial service by which money is transfer via online system.Translink is a
centralized payment processing system enabling to provide immediate support to the
branch in case if the customer have not personal account in MBL.
Code:
Detail:
Expiry date
Address
Account number
Sender/remittance name
Sender city/country
Documents:
35
Fax-online payment receipt:
This will be treated as profit that transaction has been completed at wo pos
& now cash can be paid to the beneficiary. Branch will take beneficiary
signature & authorize branches officer will sign on payment receipt..
Adjusting Entries:
Cash on hand cr
Meezan Bank, Pakistans first and largest Islamic Bank, has entered into a Money
Remittance Agreement with Ria Financial services, a wholly owned subsidiary of
Euronet Worldwide, Inc. Ria Financial Services was founded in 1987 and today is
recognized as the third largest money transfer company in the world, with a global
agent network of 100,000 locations in over 130 countries on five continents.
This new partnership will facilitate Pakistanis around the world in sending money to
their families and friends in Pakistan by simply visiting any Ria Financial Services
location worldwide. The amount remitted from abroad can be collected from any of
Meezan Banks 230 branches located in 63 cities across Pakistan, instantly and in
cash, even without having a bank account.
This is also a financial service which is used transfer money via online system.it has
13 digits code. all documents and apply and transfer procedure requirements are same.
36
3. Home Remittance
Meezan Bank's Remittance services are simple and reliable. They are available at
your doorstep through a wide and efficient network of corresponding banks
worldwide. Only the leading global financial institutions form this network of
correspondent banks.
Quick Remittance in major currencies i.e. USD, GBP, EUR, JPY, CHF, SGD, AUD
Instant online transfer within our branch network without any charges
Extensive branch network in all major cities of Pakistan
Meezan Visa Debit Card allows you to use your own money at more than 30
million outlets and 160 countries worldwide
Free Internet banking facility
4. Electronic Banking
If you wish to remit money to Pakistan, simply give instructions to your existing bank
for money transfer by providing the name of your preferred Meezan Bank branch and
beneficiary account number.
Meezan Bank offers a wide network of ATMs located at its branches as well as
prominent offsite locations. You do not need to carry cash anymore; simply go to the
ATM and withdraw cash anywhere, anytime. We also offer access to more than 2,000
ATM locations country-wide via 1Link and MNET Network.
Using your card is quicker and far more convenient than queuing at a cash dispenser
and safer than carrying cash.
37
Use your own money at more than 30 million outlets and 160 countries
worldwide.
Use it to buy both big and small items, wherever you see the Visa symbol.
Each withdrawal taken directly from your Meezan Bank Linked Account.
A safe and convenient alternative to carrying cash.
You can call support 24 hours a day, 7 days a week with any queries. Simply
call 111-331-331 and 111-331-332
All shopping transactions on your card are signature based. Simply swipe and
sign!
Meezan Internet Banking is the smarter way to bank, providing you global access to
your account 24 hours a day, 7 days a week.
Facilities
With Meezan Internet Banking, you can get secure and convenient access to the
following facilities:
Meezan Bank offers a wide network of ATMs located at its branches as well as
prominent offsite locations. You do not need to carry cash anymore; simply go to the
ATM and withdraw cash anywhere, anytime. We also offer access to more than 2,000
ATM locations country-wide via 1Link and MNET Network.
Key Features:
Transfer funds between your own accounts in the same branch via ATM.
The cash withdrawal limit for Meezan Visa Debit Card per day is subject to
the funds present in your selected account.
Alerts:
Debit Alert: An instant SMS alert to inform you when any amount is deducted
from your Current or Savings account(s).
Credit Alert: An instant SMS alert to inform you when any amount is added
into your Current or Savings account(s).
Cheque Bounce: An instant SMS alert to inform you that your cheque has
been dishonoured.
Important:
SMS Alert service is applicable to all Current and Saving accounts (either or
survivor in case of joint accounts).
The service is currently for customers residing in Pakistan.
SMS Alert Service is not available on Mobile Network Portable (MNP)
numbers.
39
9. 24/7 Call Center
With our Call Centre facility, you no longer have to take time out to visit your branch
for your everyday banking needs. By simply dialing 111-331-331/332 (dial 00-92-21-
111-331-331/332 from outside Pakistan)
Car Ijarah is Pakistans first Interest Free car financing based on the Islamic
financing mode of Ijarah (Islamic leasing). This product is ideal for individuals
looking for car financing while avoiding an interest-based transaction.
Meezan Bank Car Ijarah is a car rental agreement, under which the Bank purchases
the car and rents it out to the customer for a period of 3 to 5 years, agreed at the time
of the contract. Upon completion of the lease period the customer gets ownership of
the car against his initial security deposit.
Key Features:
Investment can be made for 3 months, 6 months, 1 year, 2 years, 3 years and 5
years
Profit payment options are monthly, quarterly or at maturity
Minimum investment required for quarterly and on-maturity payment is Rs.
50,000/
Minimum investment required for monthly profit payment is Rs. 200,000/
40
Pre-mature withdrawal can be made as per approved schedule
Key Feature:
The Dollar Mudarabah Certificate (DMC) is a deposit product through which you can
invest your US Dollars with Meezan Bank for periods ranging from 3 months to 3
years and earn six-monthly or at maturity profit payments on your investment.
41
Pre-mature withdrawal options available as per approved Early Redemption
Schedule
Strengths Weaknesses
SWOT
Analysis
Opportunities Threats
42
Strengths
Following are some of the strengths of Meezan bank which distinguish it from other
banks in market.
Karachi, August 20, 2008: Meezan Bank, the largest Islamic Bank in Pakistan
has been conferred the Best Islamic Bank Award by Rawalpindi Chamber of
Commerce and Industry.
The Chief Minister of Punjab Mr. Shahbaz Sharif bestowed this award to Mr.
SaleemKhan Regional Manger - North, Meezan Bank at 21st RCCI
achievement awards ceremony held at the Convention Center in Islamabad.
Weaknesses
43
Offering fewer services than the competitors
Opportunities
Venturing into Islamic groups out side the countries as opportunity to expand
business inUAE and Golf states. I-e financial institutions.
Coming up with. Products for the SME to targeting the medium level
customers.
Doing business with companies having Islamic mindset. I-e Islamic financial
Institutions.
Threats
New competitors setting up their Islamic banking sections and they have the
infrastructure, skill, ability, resources & attitude to capture the market more
than theMeezan bank.
High Interest Rate from SBP
44
Govt. policies are mostly for conventional banking system not for specially
designed for Islamic banking.
Financial Analysis
Ratio Analysis:
Ratio analysis is helpful to the management of the organization as well as for the
investors and creditors. Investor keeps an eye on the companys financial
statement and make decisions whether to invest funds in that company or not.
Similarly a creditor also analysis the financial statements and makes decisions
whether to grant loan or not.
Financial statements for the last three years from 2008 to 2010 are given
below:
45
Return on deposit and other dues expensed 3.088,344 4,969,916 6,606,474
Net spread earned 3,714,879 5,132,144 5,684,075
Provision against non-performing financing (net) 428,436 1,430,536 1,330,057
Provision for diminution in value of investment and
impairment 288,884 88,640 46,862
Provision against off balance sheet obligations - - 37,682
Provision against amount due from financial
institutions - 12,625 81,875
Bad debts written off directly - - -
717,320 1,531,801 1,496,476
Net spread after provisions 2,997,559 3,600,343 4,187,599
OTHER INCOME
Fee, commission and brokerage income 431,725 529,260 615,752
Dividend income 243,585 189,973 321,898
Income from dealing in foreign currencies 304,692 752,904 1,381,044
Capital gain / (loss) on sale of investment net 47,001 76,160 97,155
Unrealized loss on held for trading investment (23,014) - -
Impairment on reclassification of securities from
held for trading to available for sale securities (362,751) - -
Other income 66,670 49,507 59,181
Total other income 707,908 1,597,804 2,475,030
6,662,629
3,705,467 5,198,147
OTHER EXPENSES
Administrative expenses 2,626,606 3,530,161 4,460,804
Other provision / write offs / (reversals) 86,263 (73,484) 18.306
Other charges 287 1,747 56,559
Total other expenses 2,713,156 3,458,424 4,535,669
992,311 1,739,723 2,126,960
Extraordinary / Unusual Items - - -
PROFIT BEFORE TAXATION 992,311 1,739,723 2,126,960
Taxation - current 314,790 1,440,374 1,025,135
- Prior years - - (332,808)
- Deferred 56,334 (726,002) (214,955)
371,124 714,372 477,372
PROFIT AFTER TAXATION 621,187 1,025,351 1,649,588
Un-appropriated profit brought forward 1,219,228 -
Profit before appropriations 1,840,415 -
46
Other assets including inventories 4,123,441 8,413,810 8,949,759
Total Assets 85,276,070 124,169,096154,752,425
LIABILITIES:
Bills payable 1,057,017 1,249,210 1,767,370
Due to financial institutions 4,008,496 8,468,425 5,829,296
Deposits and other accounts 70,233,875 100,333,051 131,070,328
Sub-ordinated loan - - -
Liabilities against assets subject to finance leases - - -
Deferred tax liabilities 453,038 - -
Other liabilities 3,548,666 4,933,951 5,005,440
Total liabilities 79,301,092 114,984,637143,672,434
Represented By
Share capital 4,925,961 6,650,048 6,982,550
Reserves 845,022 1,050,092 1,380,010
Un-appropriated profit 570,114 1,390,395 2,377,563
Total equity 6,341,097 9,090,535 10,740,123
Surplus/ (Deficit) on revaluation of investment (366,119) 93,924 339,868
5,974,978 9,184,459 11,079,991
Liquidity Ratios
Current Ratio
Acid Test Ratio
Working Capital
Current Ratio
Current Assets: Cash and balances with other treasury banks + Balance
with other banks + due from financial Institution + short term investment
+ short term financing + other assets
47
Working
Year 2008
Current Assets = 5,763,710 + 1,344,974 + 18,108,000 + 1,542,473 +
21,499,732
+ 4,108,833
Current Assets = 52,367,722
Year 2009
Current Assets = 8,387,432 +5,260,467 +34,486,875 + 1 2,195,470 +
25,203,080
+ 8,413,810
Current Assets = 93,947,134
Year 2010
Current Assets = 12,780,806 + 9,939,660 + 10,511,855 + 37,873,600
+ 32,095,399
+ 8,949,759
Current Assets = 112,151,079
Interpretation
As the current ratio in the year 2008 is 0.90, in the year 2009 is 1.08 and
in the year 2010 it is 1.06 Which depicts that there is a slight increase in
the year 2009 as compare to year 2008 where as there is a negligible
decrease of 0.02 as compared to year 2009. Current ratio must be 2:1 in
accordance with the prudential regulations of State Bank of Pakistan as
well as international accounting standards but in case of Meezan Bank
current ratio seems to be unsatisfactory in all the three years which is not
a healthy sign so for as banks short term solvency to pay its short Debts
are concerned
48
Acid Test Ratio = Current Assets - (inventories + prepayments) / current
liabilities
Year 2008 Year 2009 Year 2010
109,273,310 /
50,289,704 / 58,123,087 91,043,434 / 86,338,599 105,272,728
= 0.86 : 1 = 1.05 : 1 = 1.04 : 1
Working
Year 2008
Quick Assets = 52,367,722 (1,535,744 + 542,274)
Quick Assets = 50,289,704
Year 2010
Quick Assets = 112,151,079 - (2,461,097 + 416,672)
Quick Assets = 109,273,310
Interpretation:
The Quick Ratio for the year 2008 is 0.86 which is less than 0.14 as
compare to industrys ratios but in the year 2009 is 1.05 which is slight
more than the standard ratio. Similarly in the year 2010 the Quick ratio
1.04 which is also more than the industrys standard ratio. Quick Ratio in
the year 2008 is unsatisfactory where as in the years 2009 and 2010
Quick Ratio is quite satisfactory.
Leverage Ratios
49
Total Capitalization Ratio
Debt Ratio
Total Assets = Cash and balances with treasury banks + balances with
other banks + due from financial institutions + investments + financings +
operating fixed assets + other assets
Working
Year 2008
50
Total Assets = 12,780,806 + 9,939,660 + 10,511,855 + 54,966,907 +
54,195,163 +
3,066,100 + 342,175 + 8,949,759
Total Assets = 154,752,425
Graphical Representation:
Interpretation:
Banks Debt ratio in the years 2008, 2009 and 2010 is 0.9299, 0.9260 and
0.9284. Debt Ratio indicates that banks Debt is on higher side in all the
three years as compare to its assets which indicates that the bank is
highly levered and its fixed financial cost is much higher which may
decrease the operating profit of the company with the result of decrease in
earning per share.
Working
Year 2008
Total Debt = 1,057,017 + 4,008,496 + 70,233,875 + 0 + 0 + 453,038 +
3,548,666
Total Debt = 79,301,092
Year 2009
Year 2010
Graphical Representation:
51
Interpretation:
Working
Year 2008
Year 2009
Interpretation:
In all the three years Debt as compare to total tangible assets is 0.1348,
0.1265 and 0.1309 respectively which indicates that Debt portion in the
total tangible assets is not on higher side which shows a healthy sign on
the financial position of the bank and bank will be a going concern for
indefinite period.
Total capitalization Ratio
52
Long Term Debt = Deposit and other account + Sub- ordinates loans +
Liabilities against assets subject to finance lease + Deferred tax liabilities
+ other liabilities
Working
Year 2008
Long Term Debt = 21,178,005
Year 2009
Long Term Debt = 28,646,038
Interpretation:
Long term debt of the company is in all the three years 0.7695, 0.7591
and 0.7814 respectively of Total Capitalization i.e. (Debt + equity) which
depicts that the banks long term solvency to pay out its long term debts
is not too much stable because of high degree of debt in the total capital
employed.
Profitability Ratios
Profitability ratios measure the earning ability of the firm. Following ratios
are calculated:
53
Net Profit Margin = Net Profit / Total Revenue *100
Year 2008 Year 2009 Year 2010
621,187 / 6,803,213 * 100 1,025,351 / 10,102,060 * 100 1,649,588 / 12,290,549 * 100
= 9.13 % =10.14 % =13.42 %
Year 2010
Net Profit = 1,649,588
Total Revenue = 12,290,549
Interpretation:
Net Profit margin in the Year 2008,2009 and 2010 is 9.13%, 10.14% and
13.42% respectively which shows an increasing trend as for as index
analysis is concerned. Net Profit Margin is to a reasonable extent i.e.
return on sales after payment of tax.
Return on Assets
Working
Year 2008
Profit before tax = 992,311
Total Assets = 85,276,070
Year 2009
Profit before Tax = 1,739,723
Total Assets = 124,169,096
Year 2010
Profit before tax = 2,126,960
Total Assets = 154,752,425
54
Interpretation:
Interpretation:
55
= Earning Before interest and tax (EBIT)(EBT) / Total Revenue
Year 2008 Year 2009 Year 2010
992,311 / 6,803,213 1,739,723 / 10,102,060 2,126,960 / 12,290,549
= 14.58% = 17.22% = 17.30%
Working
Year 2008
EBT = Earning Before tax = 992,311
Total Revenue = 6,803,213
Year 2009
EBT = Earning before tax = 1,739,723
Total Revenue = 10,102,060
Year 2010
EBT = Earning before tax = 2,126,960
Total Revenue = 12,290,549
Interpretation:
Operating income means income from operation i.e. earning before Tax
(EBT). Income from operation in the year 2008 is 14.58%, in the year
2009 is 17.22% and in the year 2010 is 17.30% which is to a reasonable
extent in all the three years.
Working
Year 2008
EBT = Earning before tax = 992,311
Operating Assets = 5,763,710 + 1,344,974 + 18,108,000 + 39,528,731
+ 1,880,515
Operation Assets = 66,625,930
Year 2009
EBT = Earning before tax = 1,739,723
56
Operating Assets = 8,387,432 + 5,260,467 + 34,486,875 + 41,709,656
+ 2,416,375
Operating Assets = 92,260,805
Year 2010
EBT= Earning before tax = 2,126,960
Operating Assets = 12,780,806 + 9,939,660 + 10,511,855 +
54,195,163 + 3,066,100
Operating Assets = 90,493,584
Interpretation:
Return on operating assets in the years 2008, 2009 and 2010 is 1.49%,
1.88%, and 2.35% respectively. As for as index analysis is concerned,
return on operating assets has been an increasing trend from 2008 to
2010 but it is much below the standard of banking industry.
Working
Year 2008
Return on Owners Equity in the year 2008 is 9.79%, in the year 2009 is
11.27% and in the year 2010 is 15.35% which shows an increasing trend
57
to a greater extent from year on year basis as well as it is also meeting
the standard of banking industry.
Working
Year 2008
Gross profit = Net spread earned = 3,714,879
Total revenue = Return earned on financings, investments, placements
= 6,803,213
Year 2009
Gross profit = Net spread earned = 5,132,144
Total Revenue = Return earned financings, investments and placements
=10,102,060
Year 2010
Gross profit = Net Spread earned = 5,684,075
Total Revenue = Return on financings, investments and placements =
12,290,549
Interpretation
Gross profit margin on year to year basis is 54.60%, 50.80% and 46.24%
which is showing a much healthy sign because of high gross profit margin
on sales. It is much above the industry yard stick.
Activity Ratios
Working
58
Year 2008
Total Revenue = profit / return earned on financings, investments and
placements = 6,803,213
Total Assets = 85,276,070
Year 2009
Total Revenue = profit/return earned on financings, investments and
placements = 10,102,060
Total Assets = 124,169,096
Year 2010
Total Revenue = profit/return on financings, investments and
placements
= 12,290,549
Total Assets = 154,752,425
Interpretation:
Turnover means how many times we make the sales during the year as
compare to our total assets. It is in the year 2008 is 0.079, in 2009 is
0.081 and in 2010 is 0.079. Sale turnover is much lower keeping in view
the standard of banking industry.
Working
Year 2008
Total Revenue = return on financings, investments and placements =
6,803,213
Interpretation:
From year on year basis fixed assets turnover has been an increasing
trend in the year 2009 but in the year 2010 it has again been decreased
which has not a uniform trend. Keeping in view the standard of the
59
banking industry, it is much below the standard which dose not shows a
healthy sign.
Market Ratios
Earning Per Share = Net income after tax / No. of Shares Outstanding
Year 2008 Rs.(000) Year 2009 Rs.(000) Year 2010 Rs. (000)
621,187 / 4,925,96.1 1,025,351 / 6,650,04.8 1,649,588 / 698,255
= 1.26 = 1.54 = 2.36
Working
Year 2008
Net Income = profit after tax = 621,187
Year 2009
Net Income = profit after tax = 1,025,351
Year 2010
Net income = profit after tax = 1,649,588
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Interpretation:
Earning per Share in the year 2008 is 1.26, in the year 2009 is 1.54 and in
the year 2010 is 2.36. On year to year basis earning per share is
increasing but it is not up to the mark as for as industry standard is
Price Earning Ratio = Market price per share / Earning per share
Year 2008 Year 2009 Year 2010
21.48 / 1.26 15.74 / 1.54 16.90 / 2.36
= 17.04 = 10.22 = 7.16
Working
Year 2008
Market price per share = 21.48
Earning per share = 1.26
Year 2009
Market price per share = 15.74
Earning Per share = 1.54
Year 2010
Market price per share = 16.90
Earning per share = 2.36
Interpretation:
Price Earning ratios means how much the price of the share in the market
as compare to earning per share. P/E ratio in the year 2008 is 17.04, in
2009 is 10.22 and in 2010 is 7.16 which is decreasing on year to year
basis. Although P/E ratio is meeting the criterion of industry standard but
has a decreasing trend on year to year basis.
61