Professional Documents
Culture Documents
ASKARI COMMERCIAL
BANK LIMITED
Registration # Fa08-MBA-086
July 2010
I
Internship Report on
ASKARI COMMERCIAL
BANK LIMITED
July 2010
II
Department of Management Sciences
COMSATS Institute of Information Technology
Abbottabad
Approval Sheet
Approval Committee
1. External Examiner
Mr.____________________________ Signature_____________
2. Supervisor
Mr._____________________________ Signature_______________
3. Head of Department
Mr._______________________________ Signature _______________
III
DEDICATIONS
All the efforts in compiling this report are dedicated
To
My Beloved Parents,Friends
&
My Honourable Faculty Members of CIIT,
As they helped me in this Achievement
IV
Abstract
This report comprehends basic information about ASKARI COMMERCIAL BANK
LIMITED general and its branches in particular. Then it includes ACBL’s history,
structure, hierarchy structure, its role in economy and product and services that it provide
to its valued customers. Data in the compilation of report is collected through primary
sources (interviews and observations) and secondary sources ( annual reports, websites,
brochures and manuals)
The main focus of the report is over the analysis of ACBL’s organizational, business, and
financial structure, the common size analysis and ratio analysis reflects a slide downturn
in financial performance over the last three years but SWOT analysis still reveal ACBL
as having strength in providing innovative financial solutions to the customers.
Recommendations at the end mainly covering ACBL’s product and services strategies,
managerial and financial performance to let the management know about immediate
problems and forged them to take remedial measures to prove the bank as one of the
leading private sector bank.
Table of Content
V
Acknowledgements ....................................................................................................VIII
List of Abbreviations.....................................................................................................IX
Executive Summary .......................................................................................................X
CHAPTER 01.....................................................................................................................1
Introduction........................................................................................................................1
1.1 Background of the study............................................................................................1
1.2 Purpose of the Internship...........................................................................................2
1.3 Merits of the Report...................................................................................................2
1.4 Scope of Report..........................................................................................................3
1.5 Methodology of the Report........................................................................................3
1.5.1 Primary Sources..................................................................................................3
1.5.2 Secondary Sources..............................................................................................3
1.6 Limitations of the Report...........................................................................................3
1.7 Scheme of the Report.................................................................................................4
CHAPTER 02.....................................................................................................................5
Introduction to Askari Commercial Bank Limited........................................................5
2.1 Early Growth of Banking...........................................................................................5
2.2 Formal Definition of Bank.........................................................................................5
2.3 History of Banking in Pakistan..................................................................................5
2.4 Historical Background of Askari Commercial Bank Ltd..........................................6
2.5 Vision Statement of ACBL........................................................................................6
2.6 Mission Statement of ACBL......................................................................................6
2.7 Corporate Objectives of ACBL.................................................................................6
2.8 ACBL As Leading Banking Sector entity.................................................................7
2.9 Credit Rating..............................................................................................................7
2.10 Awards and Achievements......................................................................................7
2.11 Corporate Profile......................................................................................................8
2.11.1 Audit Committee...............................................................................................8
2.11.2 Company Secretary...........................................................................................8
2.11.3 Auditors.............................................................................................................8
2.11.4 Legal Advisors..................................................................................................8
2.11.5 Registered / Head Office...................................................................................8
Askari Commercial Bank Services and Products.........................................................12
3.1 Introduction to ACBL Abbottabad Branch..............................................................12
3.2 Departmentalization.................................................................................................13
3.2.1 Accounts Opening Department.........................................................................13
3.2.2 Remittance Department....................................................................................16
3.2.3 Credit Department.............................................................................................18
3.2.4 Cash Department...............................................................................................21
3.2.5 Clearing Department.........................................................................................22
3.2.7 Credit card Department.....................................................................................23
CHAPTER 04...................................................................................................................25
Financial Analysis of ACBL...........................................................................................25
VI
4.1 Introduction..............................................................................................................25
4.2 Purpose of Financial Analysis.................................................................................25
4.2.1 Analysis.............................................................................................................25
4.2.2 Common Size Analysis.....................................................................................26
.......................................................................................................................................38
4.3 Financial Ratios Analysis........................................................................................39
4.4 SWOT Analysis.......................................................................................................43
4.4.1 Strengths...........................................................................................................43
4.4.2 Weakness..........................................................................................................45
4.4.3 Opportunities.....................................................................................................45
4.4.4 Threats...............................................................................................................46
CHAPTER 05...................................................................................................................48
Findings and Recommendations ...................................................................................48
5.1 Findings....................................................................................................................48
References......................................................................................................................51
VII
Acknowledgements
God Al-Mighty is Worthy of all acknowledgements Whose Grace has no limits and Who
gave me the strength and will to complete this report.
I am thankful to my parents who supported me morally and financially for the last two years
despite of their limited resources and social pressures.
Special thanks to my internship supervisor Sir Jamil Anwar for his kind co-operation,
guidance and support to compile this report.
I would like to pay special thanks to Mr.Zulfiqar Kayani(Branch Manager ACBL Abbottabad
Branch) for his constant guidance and motivation, the entire staff at ACBL, for being very
cooperative and courteous with me and providing me with the congenial environment at the
bank during my six weeks stay at ACBL.
My gratitude to all my honor ACBL teachers who taught me different courses during the
last two years with addict zeal and zest. My special gratitude to Sir Qasim Shah for his
guidance. Finally, keeping the tradition alive as well as fulfilling social and ethical
responsibility, my dedications will always go to my dear Parents & Family and Friends.
VIII
List of Abbreviations
ACBL Askari Commercial Bank Ltd.
ATM Auto Teller Machine
ADBP Agricultural Development Bank of Pakistan
BTF Balance Transferred Facility
DD Demand Draft
EBIT Earnings Before Interest and Taxes
ETD Electronic Technology Department
FDD Foreign Demand Draft
FC Foreign Currency
HRM Human Resource Management
IDBP Industrial Development Bank of Pakistan
L/C Letter of Credit
MT Mail Transfer
MIS Management Information System
NIT National Investment Trust
NPL Non Performing Loans
PLS Profit & Loss Sharing
SBP State Bank of Pakistan
IX
Executive Summary
Banks play a significant role in mobilizing savings thus taking great part in capital formation
process. Their role in development of a country has increased, with the advent of modern
technology. The intense competition, among banks, the privatization of the financial
institution and financial liberalization in general are gradually and continuously making the
banking sector efficient and effective.
Because of the reasons mentioned above banking has always been the main field of interest
for most of the students of business administration. It is also an academic requirement to
undergo internship therefore the main purpose behind this report is partial fulfillment of
requirements, for the degree of MBA. The report is categorized into the following chapters:
In the first chapter introduction to the report, background of study, scope of the study, merits,
limitations and scheme of the study are given.
The second chapter is about history of banking, banking in Pakistan, introduction to the
organization, its historical background, role and functions of organization, its core values,
and miscellanies topics related to banking.
The third chapter is the major portion of the report. It covers the organizational structure of
ACBL, the different departments working at ACBL and the different financial products of
ACBL.
The fourth chapter of the report covers the analysis of report and the findings, which have
been observed. It includes the financial analysis. Furthermore it analysis in detail strengths,
weaknesses, opportunities and threats of the organization. SWOT analysis no doubt acts as a
mirror for the management to know the strengths and weaknesses so that it can take
appropriate corrective actions. The management should develop elaborate plans for
capitalizing on the available opportunities.
The end of the report is about recommendations based on the analysis in chapter four. It
mainly focuses on the recommendations pertaining to management/administration, to let
ACBL capitalize on the opportunities and overcome the weaknesses by using its
strengths.
X
CHAPTER 01
Introduction
This Internship report is aimed at studying and analyzing Askari Commercial Bank
Limited (ACBL) in general and its branch office at Abbottabad, in particular. The
main purpose of the internship is to prepare and submit a report as a partial fulfillment
for the award of MBA degree from COMSATS Institute of Information Technology
Abbottabad. This report has the aim to share my knowledge and experience that I
have gathered during my academics and practical training at Askari Commercial
Bank.being the world-class bank, Askari Commercial Bank has maintained the world-
class standards in all aspects including financial standards. This report has covered the
financial strategies and practices that are being followed in Askari Commercial Bank.
1
1.2 Purpose of the Internship
The primary purpose of the internship is to fulfill the academic requirements of my
study. The purpose of the study also is, to do practical work, in the field and apply the
knowledge of classroom lectures to the real life situations, which thus enables a
student to be a future banking practitioner. Besides this, some other purposes are
associated, which includes
2
1.4 Scope of Report
• Banking has a very broad scope. In only six weeks of internship, it is very
difficult to understand each and every aspect of bank.
• Due to the barriers of limited time and space, the scope of work is usually
confined. However this study of ACBL will help the management to identify
their weaknesses and threats and overcome them by using their strengths and
capitalizing on the opportunities.
• This internship report will be source of financial data for all those who are
interested in financial statement analysis of ACBL.
3
• Also due to the bank tight schedule and busy schedule of the required staff
complete information could not be collected easily. The information at the
branch level is also not allowed to be accessed. During the study I tried to
include only relevant material. This study was conducted in accordance with
the objectives of the study.
4
CHAPTER 02
5
number of branches of Pakistani banks increased from 195 to 307 and, the number of
scheduled banks increased to 36 by June 1965.
6
• To deliver timely solutions that best meet the customers‟ financial needs.
• To explore new avenues for growth and profitability
• Recently Askari Commercial Bank have been once again been given the “Best
Retail Bank in Pakistan” by The Asian Banker for the 2nd consecutive year.
• Askari Commercial Bank has been given the 1st Consumer Choice Award
2004 for the Commercial Banking Category by the Consumer Association of
Pakistan.
• The bank has also received the Corporate Excellence Award for the financial
sector from the Management Association of Pakistan (MAP) for the years
2002,2003 and 2004.
• The bank have been declared The Best Bank in Pakistan by the global finance
magazine for the years 2001 and 2002.
• Askari Commercial Bank won the first prize in the Best Corporate Report
awards for the year2000, 2001 and 2002 from the institute of chartered
accountants of Pakistan and the institute of cost and management accountants
of Pakistan, for the services sector.
7
2.11 Corporate Profile
Corporate body of Askari Commercial Bank Limited consist if 12 Board of Directors
including one
Chairman
1. President
2. Chief Executive
3. Secretary
4. NIT Nominees
2.11.3 Auditors
8
2.12 Ethical Values
The intrinsic core values that are corner stones of our corporate behavior are as
fallows.
Commitment
• Integrity
• Fairness
• Teamwork
2.13 Role of ACBL in Banking Sector
The impressive growths in development, which ACBL achieve, make this bank
undoubtedly the most dynamic and progressive. In a very short period of time it
became one of the leading bank overtaking several other older and its competitor
banks. The major contributions the bank has made are:
• Record setting performance and commitment to serve the customers.
• Personalized service and dynamic approach.
• Professional management.
• Modern banking policy.
• Human resources development.
• Small loans or micro credits.
• Utility bills collection.
• Credit cards
2.14 Number of Branches
Askari Commercial Bank has expanded into a nationwide presence of 200
Branches/sub-branches including 20 dedicated Islamic Banking Branches, and whole
sale bank Branch in Bahrain. A shared network of over 2,991 online ATMs covering
all major cities in Pakistan supports the delivery channels for customer service. As on
December 31, 2008,the Bank had equity of Rs.12.97 billion and total assets of
Rs.206.19 billion, with over816,629 banking customers, serviced by 6,496
employees.
2.15 Structure of ACBL
A board of Directors is running the affairs of ACBL. The board of Directors
consisting of one president, 04 Directors from ACBL, one from Pakistan banking
9
council, one from Ministry of Finance and additional one who is the sectary of board
of managers of ACBL. Hence the board of directors is 08 member team which takes
all-important decisions relating to the operations and policies of the bank. Second
highest authority in the ACBL is Executive Committee consisting 7 members
including Chairman/President of ACBL and sectary of ACBL. Below the general
managers are the circle executives who are Senior Vice Presidents or Vice Presidents
(VP). In each zone there are number of branches of ACBL, and each branch is
managed by branch manager.
10
Fig 2.1 ACBL Organization Structure Chart (Source: Annual report 2009)
11
CHAPTER 03
12
3.2 Departmentalization
The organization of ACBL is a complete banking system. This banking system is
collection of interrelated departments that works together to achieve the objectives of
the organization. I can rightly say that ACBL is a hierarchical system in that it
includes other sub departments and these are integrated to work together.
The ACBL existing system includes following departments.
• Account Opening Department
• Remittance Department
• Credit Department
• Cash department
• Clearing Department
• Accounts Department
• Foreign Trade Department
Figure 3.2 Branch systems Hierarchy
13
of deposits.These deposits are lent out to different parties. Such deposit creation is
done through opening an account in the bank.
3.2.1.1 Types of Accounts
In ACBL, there are the following types of accounts:
• Current account
• Saving accounts
• Term deposit
• Askari Special deposit Account
• Askari Bachat certificate
• Notice Deposits
• Foreign currency saving Account
14
3.2.1.1.4 Askari Special deposit Account(ASDA)
• It is a special scheme known as “ASKARI Special Deposit Accounts”. Amounts in
these accounts are accepted as prescribed by bank from time to time. The deposits are
subject to PLS rules/regulations and invested by the bank on the same basis.
• The profits on ASDA is payable as determined by the bank in the basis of profit and
loss sharing arrangements.
• The profit as determined by the bank shall be final binding on the account holder.
• Profit shall be paid every six months on declaration of actual rate of profit on such
deposits by H.O.
15
• Monthly and daily revaluation rates of each foreign currency in Pak rupees are
maintained for the correct operation in the FC saving accounts.
16
• IBC
17
3.2.2.1.5 Pay slip
It is an instrument used by the banks for its payment. The slips are issued to the
employee of the banks their bills and invoices. The bills are transferred to pay slips .
In this case only one bank is involved and that is the issuer as well as the payer.
• Procedure prescribed for P.O for issuance and payment is followed for pay slips
with following exceptions.
• Pay slips are issued by the bank for settlement for this own payment.
• No excise duty is applicable on P.S.
18
3.2.3.1 Types of Advances Offered By ACBL
ACBL Credit department deals with all the advances, which are made to the
customers.Advances are important for the banking business because it gives the bank
interest on the amount loaned. ACBL is also very active in advancing loans to
customers, thus helping the economy of the country in its development. It provides
the following finances:
19
4. Board
20
3.2.3.3.5 Ask CARD
ASKCARD means freedom, comfort, convenience and security, so that you can have
retail transactions with complete peace of mind. ASKCARD is your new shopping
companion which enhances your quality of life by letting you do shopping, dine at
restaurants, pay your utility bills, transfer funds, withdraw and deposit cash through
ATM anywhere, anytime.
21
3.2.4.2 Liquidity Maintenance
ACBL has to maintain 35% liquidity at SBP. Every branch maintains 5% of its
deposits at the local SBP. But this 30% is kept in the form of Approved securities. For
example: Foreign Investment Bills and Treasury Bills.
22
3.2.7 Credit card Department
Credit card, card that identifies its owners as one who is entitled to credit when
purchasing goods or services from certain establishments. When a credit card is used,
the retailer records the name and account number of the purchaser and amount of the
sale, and forwards this record to the credit card billing office. At intervals, usually
monthly,the billing office sends a statement to the card holder listing all the charged
purchases and requesting payments immediately or installments‟.
23
3.10 Foreign Trade Department
ACBL has been authorized by State Bank of Pakistan (SBP) to have dealing in
foreign currency. The foreign exchange departments provide facility of foreign
currency accounts (FCA) to Pakistani citizen and foreigners and facilitate its clients in
foreign trade. This facility is provided in shape of letter of credit (L.C), and guarantee
by the bank to the exporters and importers.
24
CHAPTER 04
4.1 Introduction
The importance of financial statement analysis lies in their utility to satisfy the
question in the mind of stakeholders. Different classes of people are interested in the
financial statements with a view to assessing the economic and financial position of
any business or industrial concern in term of profitability, liquidity or solvency etc.
Financial statements among other things include balance sheet and income statement.
Balance sheet presents assets and liabilities of the business at a given date. Besides
showing the ability of the business to service the loans on the strength of its financial
structure and its profitability, helps in judging the impact of financial and fiscal
support.
4.2.1 Analysis
The financial data of ACBL is analyzed in the following two ways
• Common Size Analysis
• Ratio Analysis
Common size analysis and ratio analysis are techniques that can be used to identify
Horizontals in financial statement; common size analysis is also useful in comparative
analysis, and some source of industry data.
25
4.2.2 Common Size Analysis
Technique for identifying relationship between items in the same financial statement
by expressing all amounts as the percentage of the total amount taken as 100.
For common size analysis two basic techniques are used.
1. Common Size Vertical Analysis
Comparison with base amount with in the same year.
a. Vertical Analysis of Balance Sheet
b. Vertical Analysis of Income Statement
2. Common Size Horizontal Analysis
Comparison with Base year
a. Horizontal Analysis of Balance Sheet
b. Horizontal Analysis of Income Statements
26
Table 4.1 Horizontal Analysis of Balance Sheet
2007 2008 2009
Assets % % %
Cash & Balances with treasury 100 107.7 145
bank
Balances with other banks 100 53.93 239
Lending toFinancial Institutions 100 53.93 31.94
Investments 100 124.6 170
Advances 100 130 133
Operating Fixed Assets 100 217 191
Deferred Tax Assets 100 - -
Other Assets 100 235 181
Total Assets 100 124 139
Liabilities & Owners Equity
Bills Payable 100 140.5 112
Borrowings 100 101.5 109
Deposits & Other Accounts 100 127 143
Subordinated Loans 100 99.91 200
Financial Lease Liabilities 100 - -
Deferred Tax Liabilities 100 1.76 70.81
Other Liabilities 100 182.82 150.01
Total Liabilities 100 124.65 121
Owners Equity
Share Capital 100 202 168
Reserves 100 131.8 103
Un-appropriated Profit 100 17.1 41.3
Surplus On Revaluation 100 65.2 1085
Total Owners Equity 100 117 121
Total Liabilities & Owners 100 125.54 139.60
Equity
27
4.2.2.1.1 Share Capital reserve and total Owner equity
Share capital has decreased from 202% in 2008 to 168% in 2009 which shows a
decrease in the value of bank. Reserves have dereased from 131.8% in 2008 to 103%
in 2009. The total owners equity has increased from 117% in 2008 to 121% in 2009
which is a good sign as it represents the growth of the bank.
28
4.2.2.2 Horizontal Analysis of 2007 2008 2009
29
Income Statement
Markup/Return/Interest earned 100% 145 149
Markup/Return/Interest expensed 100 152 156
Net Markup/Interest Income 100 138 139
Provision against Non performing 100 29 59
Loans & Advances
Provision for impairment in value of 100 135 5115
Investments
Bad debts written off directly 100 - -
Net Markup/Interest Income After 100 82 241
Provisions
Non Markup/Interest Income
Fee Commission 100 122 121
Dividend Income 100 158 118
Foreign Currency Income 100 149 82
Gain on Sale of Investments 100 33 6.08
Unrealized gain/Loss on revaluation 100 (1790) 110
of Investments
Other Income 100 126 120
Total Nonmarkup/Interest Income 100 126.5 146
Non Markup/Interest Expense
Administrative Expenses 100 177 146
Other Provisions/Writeoffs 100 - -
Other Charges 100 178 285
Total Nonmarkup/Interest Expenses 100 177 146
Profit Before Taxation 100 13 71.4
Taxation-Current Year 100 2 2.4
Prior Years 100 - 51.2
Deferred 100 101 59.9
Profit After Taxation 100 17 41.3
30
4.2.2.2 Horizontal Analysis Income Statement Analysis
The horizontal analysis of the income statement of Askari Commercial Bank Ltd
shows that the markup income is taken as 100% because it is the primary source and
the real objective of the operations of the bank.
4.2.2.2.1 Markup Expenses
Markup expenses have increased from 152% in 2008 to 156% in 2009 which shows
the management disability control on financial cost.
4.2.2.2.2 Net Mark-Up Income/Gross Profit
The net markup income/gross profit has increased to 139% in 2009 from 138% in
2008 which is a positive sign and it is due to control over markup expenses.
4.2.2.2.3 Non Markup/Non Interest Income
Total operating income has increased from 126.5% in 2008 to 146% in 2009 which is
a positive sign. The total non-markup interest expense has decreased from 177% in
2008 to 146% in 2010.
4.2.2.2.4 Net Income
Net income of the bank have increased from 17% in 2008 to 41.3% in 2009 and it
shows a good performance on the management part.
31
32
4.2.2.3 Vertical Analysis of Balance sheet
33
4.2.2.3 Vertical Analysis of Balance Sheet
A vertical analysis of balance sheet of Askari Commercial Bank shows that the Bank
has financed its fixed assets more than the current assets. And the assets have been
financed mostly be long term liabilities and a little by capital which goes in the favor
of owners.
4.2.2.3.1 Percentage Growth in Assets and Liabilities
Cash and cash Balances with other banks have decreased from 7.77% in 2008 to 7.6%
in 2009. Lending to financial institution has decreased from 2.17% in 2008 to 1.8% in
2009. Investments has increased from, 17.3% in 2008 to 26% in 2009.Advances
decreased to 62.4% in 2008 to 53% in 2009. On the other hand current liabilities have
increased more than the long term liabilities. Bills payable have decreased 1.25% to
1.15% and borrowings decreased from 7.36% in 2008 to 7.5% in 2009. Deposits
have decreased from 81.3% in 2008 to 80.9% in 2009 and subordinate loans have
increased 1.45% in 2008 to 2.3% in 2009.
4.2.2.3.2 Share Capital reserve and total Owner equity
Share capital has increased from 1.96% in 2008 to 1.99% in 2009 which is good sign
because it represents the increased profitability of the bank. Reserves have decreased
from 3.71% in 2008 to 2.8% in 2009. The total owners equity has increased from
6.29% in 2008 to 12.1% in 2009 which is a good sign.
34
35
4.2.2.4 Vertical Analysis of Income Statement
2007 2008 2009
Markup/Return/Interest earned 100% 100% 100%
Markup/Return/Interest expensed 57.35 57.9 60
Net Markup/Interest Income 42.65 42.09 39.8
Provision against Non performing 25.89 20.07 10.2
Loans & Advances
Provision for impairment in value 0.99 0.0027 0.33
of Investments
Bad debts written off directly - 1.34 -
Net Markup/Interest Income After 16.74 19.95 26.9
Provisions
Non Markup/Interest Income
Fee Commission 7.08 6.83 5.7
Dividend Income 0.91 0.94 0.71
Foreign Currency Income 4.33 4.74 2.37
Gain on Sale of Investments 15.59 0.199 0.63
Unrealized gain/Loss on revaluation 0.01 0.12 0.008
of Investments
Other Income 2.24 1.86 1.78
Total Nonmarkup/Interest Income 30.15 14.71 11.27
Non Markup/Interest Expense
Administrative Expenses 31.62 32.09 30.8
Other Provisions/Writeoffs - 0.0024 -
Other Charges 0.08 0.06 0.15
Total Nonmarkup/Interest Expenses 31.70 32.16 31.0
Profit Before Taxation 15.19 2.50 7.2
Taxation-Current Year 0.65 0.094 2.4
Prior Years -1.54 -0.27 -0.52
Deferred 0.89 0.58 0.65
Profit After Taxation 17.70 2.09 4.8
36
4.2.2.4 Vertical Analysis Income Statement
The vertical analysis of the income statement of Askari Commercial Bank Ltd shows
that the markup income is taken as 100% because it is the primary source and the real
objective of the operations of the bank.
4.2.2.4.1 Markup Expenses
Markup expenses have increased from 57.9% in 2008 to 60% in 2009 which is not a
good sign.
4.2.2.4.2 Net Mark-Up Income/Gross Profit
The net markup income/gross profit has reduced to 39.8% in 2009 from 42.09% in
2008 which is a negative sign and it is due to no control over markup expenses.
4.2.2.4.3 Non Markup/Non Interest Income
Total operating income decreased from 14.71% in 2008 to 11.27 % in 2009 which is a
negative sign. The total non-markup interest expense have decreased from 32.16% in
2008 to 31.0% in 2009.
4.2.2.4.4 Net Income
Net income of the bank has increased from 2.09% in 2008 to 4.8% in 2009.
37
38
4.3 Financial Ratios Analysis
Financial ratio is a ratio of two selected numerical values taken from an enterprise’s
financial statements. There are many standard ratios that are used to try to evaluate
the overall financial condition of a company. Financial ratios may be used by
managers within a firm, by current and potential shareholders (owners) of a firm, and
by a firm’s creditors. Security analysis use financial ratios to compare strengths and
weaknesses from various companies. While conducting the analysis of Askari
Commercial Bank I will use two set of ratios and will try to portray the financial
health of the bank. The following ratios will be used for analysis purpose.
• Profitability Ratios
Profitability Ratios
Profitability ratios are a measure that indicates how well a firm is performing in terms
of its ability to generate profit. Here are some ration are given below for the purpose
to make inference on the basis of these rations
39
4.3.1.1Operating Profit Margin Ratio
Operating profit is a ratio of Profit before Taxes and Markup/ return interest earned. It
is also showing reduced performance of the bank. It has increased from 2.50% in
2008 to 7.24% in 2009.
40
4.3.1.3 Cost to Income Ratio
Cost to income ratio is showing an increased tendency. The cost is increasing in a
greater proportion as compare to income.
41
4.3.1.5 Return on Earning Assets
This ratio of Return on Earning Assets is calculated by dividing Net Income by
Average Earning Assets. Earning Assets include Loans, Leases, Investment securities
and money market assets. It excludes cash and non-earning deposits and fixed assets.
42
4.3.1.7 NIM to Average Earning Assets
Net interest margin to earning assets ratio is calculated by Net mark-up income to
average earning assets of consecutive two years. This ratio has increased from 5.08%
in 2008 to 4.8% in 2009.
4.4.1 Strengths
Firstly we analyze the Strengths of the ACBL that are as follows:
• Computerization
The main strength of Askari Commercial Bank Limited is that all of its branches are
fully computerized and they have latest softwares available to keep the records of
their customers account and other important information up-to-date. It reduces manual
work and provides good customer services.
• Well-knitted branch network
ACBL has a well-knitted and adequately equipped branch networking system that
efficiently covers both the domestic and international markets. ACBL has the largest
branch networking in Pakistan.
43
• Largest Private Bank
ACBL is one of the largest private banks with deposit base of Rs.167.68 billion/-
showing constant growth over the period 1999 till day and with many online branches
in major cities of Pakistan.
• Competent Staff
Strength of Askari Commercial Bank Limited is that it has staff which is well
qualified and capable of
performing the task because of their expertise and training in the field
• Customer’s Feedback
Customers are allowed to give suggestions regarding banking services. If there is any
complaint by the customer the bank authorities investigates the reasons for complaint.
Complaint monitoring system is excellent at Askari Commercial Bank that shows
bank values more to
its customers.
• International markets
ACBL is actively participating in international markets and has recently introduced
credit cards in UAE, Bahrain and Qatar, being backed by 24 hours call center out of
UAE.
• The ACBL ATM Switch-Net
I.T group of ACBL has been able to create the largest network for secure electronic
financial transactions in Pakistan.
• Information System
Askari Commercial Bank has also invested heavily in information technology
resources, which has now allowed bank to develop one of the most comprehensive
and advanced system available. With the help of this system Askari Commercial Bank
has now achieved an “online” status via real time facilities and features available
through nationwide network. With the team of highly qualified professionals, Askari
Commercial Bank is able to use its real time system resources to provide customers
with comprehensive account of their transaction on a daily basis. ACBL is one of
those few banks who are reaping the benefits of electronic transaction
44
• Leadership in ATM’s
With over 186 ATMs and 106 online branches ACBL is again an undoubted industry
leader with connectivity extended to above than twenty five cities of Pakistan. ACBL
ATMs not only serve 24 hours cash convenience but also improve on the counter
services and turnaround time at cash counters.
• Worldwide master card
The ACBL ATMS Master Card has become a global service furthering the
convenience to the customers. Traveling customers can access their accounts from a
large number of internationally deployed ATMs and point of sale unit.
4.4.2 Weakness
Secondly we analyze the Weakness of the ACBL that are as follows:
• Due to risks such as political economy and legal the bank has suffered losses the
main reason was piling up to of large amount of irrevocable debts.
• The bank still has traditional ways of operations in this advance technological
environment. For example account opening registers, manual checking of vouchers.
• Accumulated losses pushed the bank to cut down its promotional activities in order
to reduce expenses for last few years.
• Although the bank has computerized accounting system, but still bankers make
their entries in accounting register manually.
• In Askari Commercial Bank the individual difference has strong impact on the
organization’s performance due to wrong criteria of selection of employees. So with
the passage of time individual differences start increasing which undermine the
goodwill of the organization.
• The advertising media used by Askari Commercial Bank for publicity include
mostly newspapers and journals. But the most powerful and effective media is of
television through which people in Pakistan as well as outside Pakistan can have
instant information about new products and developments of ACBL
• No availability of sophisticated equipment’s in branches and lengthy credit
processing and documentation procedures.
4.4.3 Opportunities
Thirdly we analyze the Opportunities of the ACBL that are as follows:
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• ACBL as a largest Pvt. Bank can increase it market share by producing good,
market oriented and customer needs satisfying products.
• Askari Commercial Bank is now looking into new ways of providing banking
services to its customers. New concept of mobile banking has been introduced by the
bank, which will prove to be remarkable success in the field of consumer banking.
• Customer feedback on different products and accounts have really improved the
bank performance and encouraged the atmosphere for other future policies.
• Askari Commercial Bank is an active player in the loan business. Its strength in
loaning stems from its ability to forge strong relationships not only with borrowers
but also with bank investors. Bank can capture more markets by introducing new
products for business community, as it is the only group, which can contribute more
towards increasing the assets of the bank.
• Foreign remittances are another area as present worldwide control system over
transfer of currencies through illegal channels has facilitated the area for the banks.
• There is a large pool of free MBA graduates who can be hired to achieve
professionalism on its organizational culture.
• Now computer literacy rate is increasing and its really big opportunity for Askari
Commercial Bank that when public will have more knowledge about computers than
they will be more attractive to the innovative products of Askari Commercial Bank.
• Increase the product range to fulfill customer requirements and ATM network,
ACBL can expend its 24 hours cash facilities to other cities of the country in order to
meet growing market demand.
ACBL also has an opportunity to expend its new technological advancement like,
Tele banking and Internet banking facilities in order to serve the customers more
efficiently.
• Due to efficient and experienced management group. ACBL can also improve well
and expend its foreign operation successfully.
• Increasing need and potential of leasing in Pakistan provide ACBL an opportunity
to utilize its skills and efficiencies in leasing business as well.
4.4.4 Threats
Finally we analyze the Threats of the ACBL that are as follows:
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• As the ACBL leading in the domestic commercial banking sector in Pakistan, as
such no any close competitors of ACBL but every commercial bank is the competitors
for each other. But mainly these are Habib Bank Limited, Bank Al-Falah, ACBL etc.
they are threats for ACBL. At any time they can capture the clients of ACBL by
providing any benefit more than that.
• Political instability is also threat for the bank because instability leads to lower
business. The same situation is prevailing in Pakistan.
• In our county, the rate of inflation is increasing along with the unemployment. So
due to increase in price of the products, the savings of the nation is decreasing with
passage of time. So it is threat for the banking sector. In the future, the deposits of the
bank will decrease.
• ACBL is giving higher rate of return to their clients on various certificates like,
Defense saving certificate etc. Being a private commercial bank it should earn more
than that of nationalized banks.
• Increase in competition due to increasing number of foreign banks offering highly
specialized and attractive services.
• Growing global technological advancements and adaptation of modern style of
management in banking sector.
• Extensive promotional campaigns run by competitors.
• It is always threat for commercial banks. Because SBP is the role authority of
Government, which monitors all commercial banks affairs, whenever it feels any
regulation, it imposes without consideration of commercial banks plans etc.
• Growing concept of Islamic banking in Pakistan economy can be a serious threat to
ACBL so they should start their Islamic banking in Abbottabad branch as well. The
SWOT analysis is a mirror image of the banks present conditions. The management
can elaborate strategic plans for capitalizing the available opportunities. ACBL is
continuously introducing new innovative products so as to cope with changing
environment. It has a diversifiable culture. It has been leader of introducing many new
ideas, products which are earning a lot for the bank and this struggle is still
continuous with same acceleration.
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CHAPTER 05
5.1 Findings
The overall financial position of ACBL is favorable for past three years, the growth,
the improvement in IT sector, branch network and infrastructure development has
been very encouraging. Considering the profitability shows the mix trend, though
profits increase from 2008 to 2009, liabilities are more than the assets but the income
generation has been encouraging. The efficiency of the bank, it shows a positive sign,
indicating that ACBL has been efficient in managing its assets and growing overtime
and takes risk in managing its assets.
There is an increasing trend in some items of balance sheet including the advances
and deposits and decreasing in few others like lending to financial institutions and
direct investment. Similarly the horizontal analysis of income statement shows the
declining trend in income and profits overtime from 2008 to 2009 and there is an
increase in expenses of ACBL for past years.
ACBL have more customers as compare to other banks and largest banking network
but more attention towards customer retention and branch maintenance is required
From the quantum of the profit and its financial data it can be easily judged that the
performance of ACBL bank has been encouraging but profits does not ensure this, the
reason may be the economical and political changes of the country.
Branch performance as compared to overall is not very favorable in terms of credit
facility and lending as ACBL branch does not operate with the assets directly and
comparing the deposit base the performance has been very encouraging and the
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efficiency measure shows that branch is contributing to increase the number of
customers for ACBL.
5.2 Recommendations
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5.2.5 Focus on increasing expense:
Looking at the trend of cost to income ratio, ACBL is needed to focus on its
increasing expenses with the increase in income due to increase in employees, the
administration cost is also increasing, moreover the new facilities being offered to
customers are also taking in lots of cost, ACBL has to take few steps in order to
control these cost so that they can not effect the profits.
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References
Aslam, S (1999); Banking & Finance. Abbottabad.
Hussain, S; Rana,K & Shabbir, A (1991); Banking Currency and Finance. , Lahore:
Ilmi Kutab Khana.
Iffland, Charles & Langueton, Pierre (1996); International Banking. New York: Irwin
Book Co.
Siddiqui, Asrar H(2007) ; Practice and Law of Banking in Pakistan: 8th edition Royal
Book Company, Karachi.
Annual Reports of ACBL; 2006-07, 2007-08
www.askaribank.com.pk (Accessed April 26, 2010)
www.askaribank.com.pk/Reports (Accessed May 10, 2010)
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