Professional Documents
Culture Documents
Chapter #01
INTRODUCTION
I availed the opportunity of getting experience in five departments that are Customer
Services Department, Marketing Department, Documentary Credit Department,
Account Department, Credit Department
This report is one of the necessary elements to get the Master of Business
Administration Degree from the Allama Iqbal Open University. As a part of my MBA
studies I went through six weeks internship at Bank Alfalah. During the internship
period, I hope that this report will give a detail and true picture of the Bank and what I
did and learnt during my training program. I also try my best to write this report in
such a way that gives more information about the financial accounting systems and
ratio analysis techniques to the reader in simple language. For the sake of simplicity, I
have divided this report in portions. So, reader will not face any difficulty in
understanding this report. I have also tried my level best to obtain as accurate data and
present all what I have learnt in the following pages. I hope that this report will be a
true representative of my efforts and will satisfy the purpose, which I was meant to
achieve.
Foreign banks:
The banks which have there head offices in some other countries or incorporated in
foreign country are known as foreign banks. According to the development of the
particular country some time we must also concern with the financial system of the
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foreign countries. Owing to the inefficiencies of the public sector scheduled banks
which stem from their nationalization in the 70s, the relatively lower standing of the
private sector banks and the dollarisation of the economy, foreign banks have been
able to perform extremely well by exploiting gaps in the local banking sector. There
are 16 foreign banks operating in the country:
ABN AMRO, Al-Baraka Islamic bank, American express bank Limited, bank of
Tokyo Mitsubishi Limited, Bank of Ceylon, Credit Agricole, Indosuez, Citi bank
N.A, Deutsche bank A.G, Doha bank, Habib bank A.G Zurich, Hong Kong &
Shanghai Banking Corporation Limited, International Finance Investment &
Commerce bank Limited, Mashreq bank P.S.C, Oman International Bank S.O.A.G,
Rupali bank Limited, Standard Chartered bank.
The foreign banks have a strong presence in all the major cities and are targeting high
net worth individuals and blue chip companies. Their strategy is quite successful as
they account for 34% of total sector profits, despite having only 5% of deposits and
6% of advances.
Micro Finance banks
Currently there are two micro finance banks are operating in Pakistan. One is
Khushhali bank and other is the first micro finance bank Ltd.
Chapter #02
OVER REVIEW OF BANK ALFALAH LIMITED
VISION
“To be the premier organization operating locally &
internationality that provides the complete range of
financial services to all segments under one roof”.
MISSION
“To develop & deliver the most innovative products,
manage customer experience, deliver quality services that
contributes to brand strength, establishes a competitive
advantage and enhances profitability, thus providing
value to the stakeholders of the bank”.
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With the shortest period of time BAL emerged as a dynamic and a large international
organization. In 1969 the management of the union bank limited in corporate in
former East Pakistan was handed over to BAL which was later merged with BAL in
early seventies.
In view of highly impressive growth and development achieved during its 43 year of
experience, BAL has come to be accepted has one of the most progressive and
dynamic component of the banking industry in Pakistan.
Record Performance
The financial results of the early years of the bank’s operation shows that the new
bank got off to a flying start and was set to beat past record of growth in Pakistan’s
banking history. Although the bank use the conventional banking apparatus of the
day, its approach was market oriented and appealed to the customers. In fact every
features and aspect of BAL’s behavior reflected and highlighted the differences. Most
significantly the style of the addresses to the customers differed.
Catalyst of change
BAL’s emergence proved a catalyst and brought changes in the banking sector as a
whole. The Bank customer relations attained a new dimension and courtesy,
politeness and efficiency gained fundamental importance. Convenience of the
customers remained the core and criterion of this relationship. BAL the scene in the
office and the branches redesigned and modernized
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Humility Integrity
Al
Falah
Meritocracy bank
Team Work
Culture of
Innovation
Humility
Al Falah encourages a culture of mutual respect and treats between team members
and customers with humility and care.
Integrity
For Al Falah, integrity means a synergic approach towards abiding their core values.
United with the force of shared values and integrity, Al Falah forms a network of a
well-integrated team.
Meritocracy
At every level, from selection to advancement, Al Falah has designed a consistent
system of human resource practices, based on objective criteria throughout all the
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Team Work
Teamwork becomes a cohesive and unified force, to offer the customer, a level of
service beyond their expectations. This force is derived from participative and
collective endeavors, a common set of goals and a spirit to share the glory and the
strength to face failures together.
Culture of Innovation
Al Falah aim to be proactively responsive to new ideas, and to respect and reward the
agents, leaders and creators of change.
BUSINESS VOLUME
Bank Alfalah Limited was incorporated on June 21st, 1997 as a public limited
company. Bank Al Falah wholly owned other organizations namely United Bank
(PVT) LTD., Al Falah Insurance Co LTD, Al Falah Securities PVT Ltd.Al Falah
GHP, Warid Telecom and Wateen Telecom. The market share of HBL is 16% of total
banking sector in Pakistan.
Business volume:
Rs. In million
2004 2005 2006 2007 2008
Assets 154835 248314 275686 328895 348991
Business Volume
400000
350000
300000 Assets
250000 Investment
200000 Deposits
150000 Advances
100000 EBIT
50000
0
2004 2005 2006 2007 2008
800,000
700,000
600,000
500,000
2008
400,000
2007
300,000
200,000
100,000
0
Advance
adequacy
deposits
Capital
Total
ratio
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2,007 2,006
(Rs. In '000)
Profit Before Provision and Taxation 6,906,419 3,830,717
Provisions (2,370,867) (2,035,997)
Profit Before Taxation 4,535,552 1,794,720
Taxation (1,405,323) (493,419)
Profit After Taxation 3,130,229 1,301,301
Earning Per Share Rs 3.92 Rs 1.63
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Apart from playing a historical role and pivot role in banking bank Alfalah has
reflected its interests in humanitarian goals contributing the social welfare of the
people. Various secular institutions have been established through out the country and
grants, stipends and scholarships are regularly given to students with high academic
merits.
Special support has also been extended to health awareness programs for the illiterate,
as how to safeguard health through preventive measures and control or cure common
disease. Greater emphasize is given to preventive measures, hygienic habits and
childcare to combat the high infant mortality rate.
In times of natural disasters such as floods, earthquake and other such phenomenon it
is in keeping with the spirit and tradition of the banks pioneer to come to the forefront
in helping to alleviate the resulting misery of the affected victims by providing money
and kind.
Commitment and dedication to a nation is at the core of its success and development.
The bank takes pride in playing its role towards the betterment of society and further
serving the nation.
Bank Alfalah not only playing an economy in Pakistan, but has also played a major
role in promoting national sports. It has thereby inspired a sporting spirit, which is
reflected by of its players earning international fame in the field of cricket end
hockey.
Number of Employees
Human Resource being the pulse of any organization and is its most precious asset.
Training of this resource is of vital importance. With this key factor in mind Bank
Alfalah pioneered its first training programme in 1997, in which youth were recruited
after an extensive tour of leading academic institution.
Training programs are conducted with the latest aids and equipment and involve
extensive to new recruits and existing staff with specialized courses that cater to the
different cadre of personnel on topics of management, marketing, selling, accounting
and finance, banking law and practice and internal procedure. The total numbers of
employees were 7584 on 31/12/2008.
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Chapter #03
PRODUCTS AND SERVICES
Current Account:
Royal Profit:
• Initial deposit for account opening is Rs. 1,000 with no minimum balance
requirement.
• Non interest bearing checking account.
• Maximum 2 deposits & 2 withdrawals through cheque is allowed.
• Free debit card can be used to withdraw cash and make purchases at thousands
of outlets across Pakistan which provides access to funds 24 hours a day.
• No restriction on ATM withdrawal.
Any Pakistani resident over the age of 18 can open this account. This account is for
individual/joint customers only. Other customers like companies, corporate etc are not
eligible for opening of this account.
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Minimum balance requirement for opening this account is Rs. 10,000/- with a
maximum of Rs.1, 000,000/- Three debit transactions are allowed in a month either
through cheques or Debit Card/POS machine. There is no restriction on deposit
transactions.
The bank will issue the first cheque book of 25 leaves and a Debit card free of cost.
When will the profit be credited in the account? Profit will be calculated on monthly
minimum balance basis and will be credited in the account on quarterly basis. No
profit shall be payable for a particular month, if the minimum balance for any
particular day of said month falls below the amount of Rs. 10,000/-. Yes it is. (Subject
to fulfillment of all related requirements) All service charges are as per the prevailing
‘Schedule of Charges’ Only one account per customer will be allowed across all
branches of Bank Alfalah. Account statement will be generated on half yearly basis.
Alfalah Mahana Amdan is a 3 year TDR with expected rate of profit of 10% p.a. This
term deposit will provide an opportunity to individual/joint customers to enjoy higher
returns that will automatically be credited to his/her current/PLS/RP/BBA account on
1st working day of each month. This facility is not available for business and
corporate customers.
Lockers
Bank Alfalah provides safe deposit locker facility to its customers for safe keeping of
their valuables like documents, securities and jewellery etc.
ATM/Debit Card
In our endeavor to provide you versatile banking options to fulfill your financial
needs, Bank Alfalah Limited presents the Alfalah HilalCard, a Debit Card which
gives you unlimited access to your current / savings account with a simple swipe at
millions of retail shops and ATMs worldwide. The Alfalah HilalCard comes with a
host of conveniences and benefits combined with the wide reach of Visa Network,
enabling it to be accepted at more than 1 million ATMs and 29 million retail outlets
around the world, making it the most acceptable Debit Card available in Pakistan.
What's more, it is easy to operate and can be used on any electronic self-printing POS
machine where VISA is accepted, locally and internationally. No more hassle of
remembering your PIN for retail transactions and no need to go to the ATM for cash
withdrawal! One swipe and your transaction is complete.
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The Alfalah HilalCard can be used electronically at any retail outlet or ATM that
accepts VISA cards and displays these logos:
Personal Identification Number (PIN):
Debit cards that are currently available in Pakistan require the card member to enter
the PIN number in order to complete a transaction. The Alfalah HilalCard is a "One-
Swipe Card" and does not require you to remember any PIN in order to execute retail
transactions. The PIN which will be delivered to you for Visa Electron will be
required for ATM based transactions only.
Special POS Machines:
In order to use other debit cards currently in the market you would need to find outlets
that carry special POS machines where these cards can be used. Alfalah HilalCard is
accepted at all outlets displaying the VISA/Electron logo worldwide and having self-
printing POS terminals.
Global Acceptability:
The Alfalah HilalCard is globally accepted welcomed at all locations displaying the
VISA/ ELECTRON/PLUS logos with self-printing POS terminals. Your card is
accepted at nearly 29 million physical locations in more than 150 countries round the
globe with above 22,000 major establishments in Pakistan.
With your Alfalah HilalCard, you can pay for shopping, meals, travel, entertainment,
holiday, petrol and much more. Also it gives you access to ready cash through your
PIN (Personal Identification Number) at more than 1 million ATMs to withdraw any
amount up to your available bank account balance. This premier card service is a
convenient point-of-sale alternative for ATM cardholders who do not qualify for Visa
credit purchasing power. Through Alfalah HilalCard, you can access your Bank
Alfalah's account from anywhere in the world.
24-Hour Customer Service
They will assist you in:
ShahDin Manzil
Bank Alfalah has also allotted 3/4th of a floor of this building to house an I.T. library
with round the clock research facilities for I.T. developers and researchers. The bank
has not changed its name and the renovated, refurbished and redecorated building will
continue with its original name i.e. "SHAHDIN MANZIL".
Alfalah HilalCard is accepted at over 29 million physical locations in more than 150
countries around the globe, with more than 22,000 establishments in Pakistan
Financial Services
Structured Finance
During the past few years, SFU has been successful in sourcing and participating in a
number of prestigious transactions involving large amounts.
Some of the value added services offered by SFU include the following:
• Loan syndication
• Public floatation of Term Finance Certificates (TFCs) and equity
• Private placement of Term Finance Certificates (TFCs) and equity
underwriting.
• Guarantee syndications
• Financial restructuring
• Mergers & Acquisitions (M&As)
• Fostering joint ventures
• Privatization – Sale side and buyers side advisory
• Structuring new financial instruments
Inspired by a challenging spirit and an unyielding desire to create a sound and reliable
network of correspondent relationships, the bank has placed great emphasis towards it
growth. Accomplishing something for the first time requires a special focus. It
demands foreseeing possibilities. In our endeavor to do so, we successfully
surmounted problems and difficulties arising out of issues relating to weak economic
conditions of the economy and a continuous deteriorating status of country risk.
During 2002 we added 81 banks to our network of correspondents, bringing the total
number over 170. Of these relationships, there are now several banks that rank
amongst, the top financial institutions in the world. Our geographical coverage now
extends to over 100 countries, which is adequately compatible with our trade flows.
Our correspondents, during the year extended us unqualified support, which enabled
us to undertake a healthy quantum of foreign trade business. There are many
challenges ahead for the bank, in the coming year, our bank will not only continue to
review its efforts on existing correspondents to make the relationship more beneficial,
but will also add more correspondents to establish a comprehensive international
networking to facilitate our customer’s transaction as well as the Bank’s proprietary
needs.
We have provided against the list of correspondents their world and country ranking.
These ranking have been taken from The Bankers Almanac – July 2001 issue.
The correspondents are listed on a country-wise basis. The banks are listed
alphabetically.
International Banking Division
Small and Medium Enterprise (SME) means an entity, ideally not a public limited
company, which does not employ more than 250 persons (if it is manufacturing /
service concern) and 50 persons (if it is trading concern) and also fulfills the
following criteria of either ‘a’ and ‘c’ or ‘b’ and ‘c’ as relevant:
(a) A trading / service concern with total assets at cost excluding land and building up
to Rs 50 million.
(b) A manufacturing concern with total assets at cost excluding land and building up
to Rs 100 million.
(c) Any concern (trading, service or manufacturing) with net sales not exceeding Rs
300 million as per latest financial statements.
Realizing its corporate social responsibility and carrying forward the image of "The
Caring Bank", Bank Alfalah started a separate department at the Head Office level in
early 2004. The SME Department was established with a mandate to foster SME
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finance at BAL, explore opportunities for developing structured product programs for
SMEs, introduce the concept of Dedicated SME officers and finding market based
solutions to fill the financing gap to this important and under-served business
segment.
Bank Alfalah’s first SME product Alfalah Karobar Finance is a running finance
facility based on projected cash flows. Under AKF, we offer working capital finance
(Rs.0.5 million to Rs. 10 million) to SME’s at highly competitive rates. We have a
team of professional credit officers who provide expert financial advice along with
customized packages to a diverse range of business clientele. The product is available
to SME’s through our 86 branches in 38 cities.
1. Resident Pakistanis
2. Individuals/ sole proprietors aged up to 60 years.
3. In the same business for the last three years
4. Could offer mortgage urban residential/commercial/ industrial
properties (third party collateral also allowed)
5. Overall debt burden not to exceed 40% of the projected cash flows
over the period of financing.
6. Maximum AKF entitlement to be worked out by considering the
lowest of: 60% of assessed market value of the mortgaged property, or
35% of sales turnover or condition # 5 above.
• Validity of the AKF shall be initially for a period of one year.
• Quarterly mark-up shall be serviceable within 15 days of its becoming due.
• Turn-around-time for the approval of AKF would be 20 working days from
the date of receipt of complete LAF along with its attachment.
• Processing charges of Rs 2,000/- are recovered upfront with Loan Application
Form.
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Clean-up requirement: At least 25% of the AKF approved limit shall be required to be
cleaned-up for two days in six months.
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Alfalah Milkiat Finance (AMF) is a unique long term financing facility offered to
SMEs to purchase, renovate or expand their business premises. It is being offered
keeping in mind requirements of the small business owner who needs to take his/her
business to the next level.
AMF is grouped into four sub categories to help you identify which arrangement suits
your needs best. .
Salient Features
• AMF 1,2 & 3 shall be repayable in 2-12 years whereas AMF-4 shall be repaid
in 2-4 years.
• Mark up shall be (SBP discount rate + 4%)
• Monthly installments will be hassle free through post dated cheques.
• AMF shall be disbursed approximately within one month after completion of
documentary requirements by you.
• The property being financed shall be mortgaged in favor of the bank
Lease finance:
In modern days leasing has now become an economic and financial reality of primary
importance. It is the originality of the leasing techniques and its economical
advantages, which has enabled it to enter the world of industrial investment in
Pakistan and on the international scene.
Lease finance provides a significant source of funds for companies to acquire or use
assets. Leasing provides additional earning opportunities to acquire assets and to get
the inflows simultaneously out of the operations of the same assets. The ownership of
the asset is vested with the Bank (lesser) and in return for rental payments; the client
(lessee) has full use of the asset. Being a medium to long term mode of financing, it
allows the lessee to use the funds for other profitable purposes which otherwise would
have been tied up in case of immediate payment for purchase of the asset.
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Alfalah VISA lets you pay for shopping, travel, entertainment, meals and much more.
Card members are facilitated through a number of promotions from time to time. In
addition, there are a number of strategic business partnerships with leading local and
international brands for purchase of home appliances at exciting Step-BY-Step (SBS)
monthly installment plan with free home delivery at lowest interest rates. Salient
features are:
MASTER CARDS
Your Bank Alfalah Titanium MasterCard is your partner everywhere and is globally
accepted and welcomed at locations displaying the MasterCard logo. It is accepted at
nearly 25 million locations around the globe and at over 22,000 Bank Alfalah’s
merchant establishments in Pakistan.
Alfalah Titanium MasterCard lets you pay for shopping, travel, entertainment, meals
and much more. You have access to cash at more than 1 million ATMs worldwide
and 2200 1Link ATMs in Pakistan. With your Alfalah Titanium MasterCard and PIN
(Personal Identification Number) you can withdraw any amount up to 50% of your
assigned credit limit.
You can generate PIN through IVR (Interactive Voice Response). Please ensure that
your PIN is kept safe and confidential. In case it gets known to someone else report
the matter to our Toll Free number 0800-22225.
HOME FINANCE
With this facility, you no longer need to just dream about the home you want for
yourself and your family .We will provide you up to 80% of the purchase price of the
property, so that you can realize your dream and enter the reality of owning a home!.
• Quickest processing.
• No hidden charges.
• Minimum down payment.
• Complete repayment at any point of time.
• Balance transfer facility {BTF} for existing as well as new clients from other
Banks.
• Tenure period ranging from 1 to 5 years.
• Financing of all brand new locally assembled vehicles and used cars.
• Financing limit ranging between Rs. 200,000/- to Rs. 2000,000/- for brand
new cars.
Corporate & Individual Car Leasing
BAL’s recently introduced car leasing facility for individuals and corporate sector
has set new dimensions for the product. Now you are provided with the option of
either to get the vehicle leased or financed.
Money Market
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Investment
Government Securities
• Efficient service for individuals and corporate clients for buying and selling
govt securities on their appropriate requests.
Custodianship
ISLAMIC BANKING
Introduction:
The thrust for Islamic Banking is founded on the desire to submit to the Divine
Instructions on all transactions, particularly those involving exchange of money for
money. However, it would be quite unfair to limit Islamic Banking to elimination of
Riba only. Riba is but one of the major undesirable elements of an economic
transaction, the others being Gharar (uncertainty) and Qimar (speculation). While
elimination of these objectionable aspects in a transaction is indeed a critical aim of
Islamic banking system, it is by no means its ultimate objective. At the heart of
Islamic Banking is a system of commercial transactions that not only provides Halal
modes of commercial transactions by avoiding that which is obnoxious and
objectionable, but also fosters ethical, fair and just practices.
Riba:
It has been argued in vain for long in some circles that the prohibition in Islam is that
of excessive interest only. Or that it is the interest on consumptive loans that has been
forbidden and as such loans extended for commercial purposes are entitled to an
excess over the principal amount lent. Such tendentious arguing fails to give due
understanding to verses 278 and 279 of Surah Al-Baqarah (quoted below).
“O ye who believe! Be afraid of Allah and give up what remains (due to you)
from Riba (usury) (from now onwards) if you are (really) believers! 2:278
And if you do not do it, take notice of war from Allah and His Messenger! But if
you repent, you shall have your capital sums 2:279
However, this does not mean that Islam prohibits any gain on principal sums. In
Islam, profit is the recognized reward for capital. When capital employed in
permissible business yields profit that “excess over capital” becomes the rightful and
just claim of the owner of the capital. As a corollary, the risk of loss also rests
exclusively with the capital and no other factor of production is expected to incur it.
Another important element of Islamic finance is that profit or reward can only be
claimed in the instance where either risk of loss has been assumed or effort has been
expended. Profit is therefore received by the provider of capital and
wages/remuneration by labor/manager.
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A depositor in an Islamic bank can therefore make earnings on his or her deposit in
several ways. Through return on his capital when that capital is employed in a
business venture; through sharing of profit when his capital is part of the capital that
is employed in a partnership, and finally through rental earnings on an asset that has
been partially financed by his capital.
A key feature of Islamic banking is that unlike conventional banks which deal
primarily in money and financial securities, Islamic financing is related to an asset
that is a feature of the transaction, and quite often the principal feature itself. From
this springs an important distinguishing feature of Islam wherein Islamic financing is
always based on illiquid assets that have intrinsic value. Profit to Islamic financing is
generated through bonafide sale of these assets.
Conventional banking, on the other hand, is free of such limitations. It lends money
and makes its earnings through this act of lending. Its earnings are unconcerned with
the economic fate of its lending.
A Perspective:
The history of Islamic banking from its recorded inception is less than 40 years old.
From a humble beginning in a small village in Egypt in the late 60’s, it has spread to
the four corners of the world. By normal standards in a time span that is less than half
a century it could have hardly been expected to establish foothold in Muslim world,
let alone make its presence felt in Muslim-minority countries. Yet such has been its
phenomenal rate of growth that not only is it taking firm roots in its homestead, but is
also attracting genuine interest among the standard bearers of conventional banking
and in swathes of land where Muslims are a small minority only.
Still there is much ground left to cover. In Pakistan, Islamic Banking is less than 3%
of the Banking sector. Even in the Gulf states, where it has a larger footprint, in no
single country is the volume of Islamic banking more than a third of the entire sector.
Many blame Islamic Banking’s small share against conventional banking to a smaller
portfolio of products. A standard complaint against Islamic banks is that they do not
have the same variety of financial instruments as found in conventional banking.
Though valid to an extent, this popular jeremiad needs to be seen in the perspective of
Islamic Banking’s brief history against more than two centuries of conventional
banking adopted in full force across the globe, its competition against an entrenched
system of banking and the constraints within which it must operate.
Notwithstanding, Islamic banking is still growing at more than twice the growth rate
of conventional banking worldwide, and while it may not have the latter’s plethora of
financial products, its repertoire of Islamic financial products is steadily increasing.
In the following space, principal Islamic instruments are briefly described to acquaint
the reader with their fundamental aspects. Following that, Islamic Products in BAL-
IBD’s portfolio are illustrated in terms of their features. Principle Islamic Instrument
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Musharakah:
Musharakah is one of the two ideal modes of Islamic financing. The other one being
Mudarabah. Musharakah is a contractual relationship formed through mutual consent
of the parties for sharing of profits and losses in a joint venture. Assets in the venture
are jointly owned in proportion to each partner’s contribution. The profits are shared
in a pre-agreed ratio. Losses, however, are incurred in proportion to each partner’s
investment. Islamic Bank representing share of its depositors invests funds in the joint
venture alongside other investor(s).
Mudarabah:
Murabaha:
Murabaha is a non-participatory mode of Islamic financing where the bank sells the
asset required by its client to the client on cost-plus basis. The asset is first purchased
by the bank and the bank incurs the risk of any loss or damage to the asset as long as
the asset remains under its ownership. Upon sale of the asset, the Islamic bank is
obligated to inform the client of the exact cost incurred in the purchase of the asset
and the margin of profit incorporated in the sale price. Payment by the client of the
sale price may be deferred in which case it would become Muajjal. The selling price
once agreed cannot be changed even when the client fails to pay on the agreed date.
Ijara:
Under this facility a client may take on rent, property, vehicle or any other real asset
belonging to the bank. The bank transfers the right of use of the asset to the client,
while retaining the ownership of the asset. The client pays periodic rent to the bank
for the use of the asset. Basis for rentals can be fixed as well as floating. Any change
is rental may be made through mutual consent.
Salam:
Istisna:
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CH# 05
ORGANIZATIONAL STRUCTURE
Organizational structure is the framework which defines the boundaries of the formal
organization and with which the organization operates. A suitable organization
structure for the nature of the organization leads to better performance. The
Organizational Structure of Bank Alfalah Limited is as follow:-
PRESIDENT
BOARD OF DIRECTORS
COMMITTIE
REGIONAL MANAGEMENT
OPERATIONS CHIEF REGIONAL
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The organization wide restructuring process has culminated. At this stage the
centralization segment has almost completed. Branches are operating as customer
contact points providing a culture free environment and better customer service.
Centralization process has led to marked improvement in turnout times and greater
customer satisfaction for more focus and improvement in procedure controls and
delivery channels.
PACRA, a premier rating agency of the country, has rated the bank ‘AA’ (double A),
Entity Rating for long term and A1+ (A one plus) for the short term. These ratings
denote a very low expectation of credit risk, strong capacity for timely payment of
financial commitments in the long term and by highest capacity for timely repayment
in the short term, respectively. The ratings of first and second and third unsecured
listed and subordinated TFC issues of PKR 650 million, PKR 1,250 million and
Rs.1,325 million have been maintained at AA- (Double A minus).
Board of Directors
H.E. Sheikh Hamdan Bin Mubarak Al Nahayan
Chairman
Mr. Abdulla Nasser Hawalileel Al-Mansoori
Director
Mr. Abdull Khalil Al Mutawa
Director
Mr.Khalid Mana Saeed Al Otaiba
Director
Mr. Ikram Ul-Majeed Sehgal
Director
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Management
Mr. Sirajuddin Aziz
Chief Executive Officer
Mr. Parvez A. Shahid
Co-Chairman Central Management Committee
Mr. Arfa Waheed Malik
Group Head Corporate & Investment Banking
Mr. Shakil Sadiq
Group Head Branch Banking & SME
Mr. Ijaz Farooq
Group Head Islamic Banking
Mr. Adil Rashid
Group Head Consumer Finance
Mr. Nadeem Ul Haq
Group Head Operations
Mr. Mohammad Yousuf
Group Head Credit & Collections
Mr. Bakhtiar Khawaja
Group Head Training & Development
Mr. A. Wahid Dada
Group Head Commercial Banking
Mr. Hamid Ashraf
General Manager Legal Affairs Division & Company Secretary
Mr. Zahid Ali H. Jamall
Chief Financial Officer
Mr. Mohammad Iqbal Saifee
Group Head Audit & Inspection Division
Mr. Talib Rizvi
Group Head Priority Banking & Wealth Management
Mr. Tariq Mir
General Manager International Business
Mr. Ather Shehab
Executive Incharge Establishment & Administration
Mr. Mahmood Ashraf
General Manager Credit Monitoring Division
Mr. Falak Sher
Chief Compliance Officer
Mr. Imtiaz Ahmad Sheikh
Head of Information Technology
Mr. M. Mudassar Aqil
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ACCOUNT DEPARTMENT
Daily Activities:
Deals with the customers guide them about the functions of account in BAL. Filling
of account opening forms are maintained on daily basis. To check the account serial
numbers which are daily allotted to customers. A/C opening forms are checked and
stamped duly signed. Supporting documents are also checked such that CNIC, job
letters, student card, department card etc Letter of banks and opening letters are also
sent to the customers and introducers of account holders.
The Account opening forms are authorized by BCSM and supervisor by
depositing in charge after being feed in the computer.
After feeding of a/c opening form are filed in the account opening files of current
account or saving a/c in the serial numbers.
The SS Card is scanned on daily basis in computer.
Maintaining KYC,s of account holders.
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DEPOSIT DEPAARMENT
Functions:
This department deals the depositing. This department is made for the convenience
of customers having a/c in the UBL. It make easier to get information about balance
of accounts or depositing. This department also deals with the issuance of certificate.
All funds of collection account are made by this department. Issuance of check books,
statement of accounts, supervisions of signs on the checks and up dating.
Closing and activation of accounts are also made by this department.
Daily Activities:
Debit and credit vouchers are posted pertaining to customer deposit.
Vouchers having amount more then Rs. 50000 are supervised by deposit in charge.
Check books are issued to the customers on daily basis.
Accounts are closed and activated by this department.
Accounts are closed and activated by this department.
Check received and clearing are also deposited by deposited by deposit department
They maintain and look after the account opening files of the costumers’
Statements of account holders are also up to dated from this department.
Signatures of the customers are also up to dated from this department.
Changes in addresses or costumers missing CNIC and changes in SS cards are also
checked.
All funds of collection accounts are also transferred to different accounts are made on
daily basis.
Pay Order
It is an instrument that is issued if the payment is to be made in the same city or if
you want to send money in the same city then you will make PO. Pay order issued
from one branch can only be payable from the same branch. It is normally referred to
as banker, s Cheque. Important point cancel it but the one who has deposited money
once, cannot get it back it is non refundable. It is issued in a manner that form is given
to the customer; he fills and signs it. After proper checking and charging bank
commission according to the schedule of charges, the cash amount stamped and
handed over to the applicant as a receipt. After the pay order receipt is filled, an entry
is made in the pay order issue register. After checking properly, concerned officer
signs it. The order is then handed over to the applicant after obtaining his signature on
the PO Form. A voucher is also made and posted at the computer.
After the issuance there comes payment step. When the pay order receipt is presented
two authorized officers of the branch sign the receipt. PO entry is made in the PO
issue register. Then the amount is credited to the account of the customer. Then PO is
posted at the computer.
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BAL provides another reason to transfer your money. Pay order is a secure and easy
way to move your money from one place to another. And, the charges for this service
are extremely competitive.
Certificate of Insurance:
This scheme is introduced for all BAL account holders. Insurance is for the permanent
disability and permanent partial disability. No benefit will be given in case of
temporary disability. Rs. 50000/- will be given in case of temporary permanent partial
disability. In case of joint account, only the primary account holder will be offered
insurance coverage.
Customers having more than one account with the bank shall be offered single
insurance coverage.
ADVANCES DEPARTMENT
Bank is a profit seeking institution. It attracts surplus balances from the customers at a
low rate of profit and makes advances / finances to individuals and business firms at
higher rate of mark – up.
Financing is a principal function of a bank through which pace of activity is
accelerated in the various sectors of economy. Through this medium, the wheels of
trade, commerce and industry are set in motion and an effective financial contact is
maintained with people in every walk of life. Also, the indicators which reflect the
high quality of a Bank’s management are its prudent financing decisions, proper
coated of finance and prompt recovery of bank’s dues are per borrower’s
commitment/repayment schedule.
Running Finance
Among the various modes of Bank financing, credit lines offered to customers under
the above head (R/F) are the most commonly used. Withdrawals on the current
account are allowed in excess of the credit balance which the customer has
maintained therefore, creating a R/F (Overdraft). Under this type of financial
accommodation, the borrower is required to adjust the finance provided by the bank
within the stipulated expiry time. Mostly this facility is provided to businessmen who
need cash to run their business daily.
At the time of entering into an agreement with the customer the bank is required to
obtain all relevant security documents completed in all respect particularly the
following:
An application for loan is given.
Promissory Note duly stamped is submitted.
Mark-up agreement for the total amount involved i.e., purchases price, mark-up for
the agreed period and mark-up for the cushion period of 210 days.
Sufficient tangible prime/collateral securities of stable value and of an easily
realizable nature the relevant documents are submitted (lien and related documents).
Two personal guarantees are presented.
Adequate insurance as appropriate covering charged in bank’s favor. The cost of
insurance to be borne by the borrower.
Demand Finance
A fixed amount of financing accommodation is allowed to the borrower for a fixed
period repayable either in periodic installments or in lump sum at a fixed future date.
This accommodation is extended in lump sum for the mutually agreed period and the
borrower has to repay the entire amount of finance together with mark-up at the
agreed rate.
The procedure for D/F is the same as that of R/F. In case a party does not adjust the
outstanding amount on due date, falling on last day of the month the Mark-up would
be adjusted / worked out from the first to last day of expiry.
Personal Loans
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Customers whose salary account is maintained by bank are eligible for this type of
loan. It is up to three basic salaries of employees of government organization. The
objective of this type of loan is to improve the life style of customers.
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Staff Loans
These types of loans include house loans, car loan etc. they are long term loans.
Amount is deducted every month from the salary of employee.
REMITTANCE DEPARTMENT
The word "Remittance" means to send money by mail or any other method. Funds
transfer is one of the basic functions of the Banking sector. These transfers may be in
the form of domestic remittance or to/from foreign location. Banking channels are
most frequently used for remittances due to its large network, reliability, safety,
legitimacy and timely delivery to the right beneficiary. Banks use their large
communication and branch network for ensuring efficient delivery of funds in the
shortest possible time.
Outward / Inward Remittances
When the bank sends a telegram etc, to another bank (concerned branch) for payment
to the customers, it is called outward remittance. The sender is required to apply
through a firm in which he will give all the necessary about the sender and the
beneficiary. The signature of the customers is verified. The details regarding
documents attached and exchange control regulations are scrutinized. Telexes option
and transaction number is recorded on the source document. This source document is
then forward for verification. No instrument is given to the customers. Customer can
receive the TT receipt at the end of the day and document is credited to the
beneficiary account.
When TT through telexes etc is drawn on NBP Branch, it is called inward remittance.
Message is received from the Telex Department. The concerned office duly checks
authentication and purpose of remittance it is received from abroad. In NBP
remittance takes places in the following ways.
Telegraphic / Mail Transfers (TTs)
Demand Draft(D.D) / Pay Orders (POs)
Collection / Clearance of Cheques
Telegraphic / Mail Transfer
In a number of cases, funds are needed to be urgently remitted to the beneficiaries by
the remitters. This service is readily provided by the bank both to customers and non-
customers and funds are transferred to the destination through telegram / tele fax to
ensure payment to the beneficiaries at the earliest. The message communicating the
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transfer of funds is sent to the drawer branch in coded language which is supported by
a confidential number known as “TEST NUMBER” to establish its genuineness and
authenticity. The salient features and procedure of TT is similar to “DD”.
In case of MT, there is no need to dispatch anything to the payee. The bank makes
special arrangement for the payment to the beneficiary through mail/courier service,
which is “Mail Transfer”.
The salient features and procedure are similar as that of “DD” and “TT”.
Demand Draft
The Demand Draft is a written order (Bill of Exchange) drawn by one branch at a
bank upon another branch of the same bank in another city to pay a certain sum of
money to or to the order of a specified person.
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SOURCES OF FUNDS
Bank Alfalah is a business Organization and its main objective is to earn profit. It
provides a number of services to its customers in order to achieve its objective. It
offers a variety of interests bearing obligations to the public. These obligations are the
sources of funds for the bank and are shown on the liability side of the balance sheet
of the bank. The main sources of funds of BAL are:
Fixed Deposits
Saving Deposits
Current Deposits
Fixed Deposits:
Time deposits are lodged with the bank for a fixed period of time. The bank pays
interest to the depositors.
Rs. In ‘000’
2006 2007
Saving Deposits:
Saving deposits is an important source of BAL funds. The bank pays interest on the
minimum monthly balance to the depositors at the end of the June and December
every year. The depositors are normally allowed to withdraw a limited amount of
money only twice a week.
Rs. In ‘000’
2006 2007
Saving Deposits 170,256,433 188,687,111
Current Deposits:
A current account is a running account which is continuously in operation. The bank
does not pay any interest on these deposits.
Rs. In ‘000’
2006 2007
Current 173,828,526 216,576,895
Deposits
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Capital Accounts:
Capital accounts are an important source of bank funds. There are four common form
of capital account.
Capital Stock:
It consist of total common stock outstanding valued at par.
Surplus:
This is a portion of undivided profit set a side.
Rs. In ‘000’
2006 2007
Surplus 5,368,099 20,543,099
Undivided Profit:
Undivided Profit consists upon net difference between the total assets of the bank &
the sum of liabilities capital stock surplus & other contingencies undivided profit is
the balancing item on the balance sheet.
Other Borrowing:
Borrowing is another item on the liability side of the balance sheet of a bank. The
BAL can also raise fund for short period of time by borrowing from the central bank.
The BAL also borrows funds by the sale of promissory notes, loams & securities.
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ALLOCATION OF FUNDS
Interest Income:
The major portion of its income is the interest, which is charged on different types of
loans granted.
Rs. In ‘000’
2006 2007
Profit:
BAL has started different projects on the partnership basis and the profit from that
project is distributed between bank and partners according to the agreed ratio.
Rs. In ‘000’
2006 2007
Profit before Taxation 2,565,945 4,535,552
Profit after Taxation 1,762,691 3,130,229
Profit on Securities:
BAL has invested major portion of its sources in different marketable and non
marketable securities and profit received on securities investment.
Locker Rent:
BAL has locker which are available to public for saving different precious things and
documents. The bank received the rent for the use of that locker.
Service Charges:
BAL charged service charges from account holders and on banking instruments.
Commission:
BAL is performed different services for its customers and commission is charged for
the award of these services.
Rs. In ‘000’
2006 2007
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MOBILIZATION OF FUNDS
ASSETS
Cash and balances with treasury banks:
Cash is declining by 0.92% as compared with the previous year. Cash with other
Assets
Operating Fixed Assets
Cash and balances with treasury
3%
banks
Other Assets - Net 9%
2%
Balances with other banks
2%
Investments - Net
26%
Advances - Net
54%
Advances:
Advances form the largest part of the total assets i.e., 54%. Substantial increase has
been recorded in advances from 2003 to 2004. As the economy is expanding rapidly
and the quest for money is increasing, after the permission of SBP, commercial banks,
including BAL have started schemes for Car Financing, House Financing. The mode
of banking operations have changed, from conventional banking SBP has now
allowed commercial banks to enter in the leasing market, which has resulted in
increase in Advances as well as the Income of Commercial Banks.
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Liabilities
Deferred liabilities -
Net
0%
LIABILITIES
Bills Payable:
There is a decrease of 9.88% in Bills payable this year. Excess liquidity is the main
reason, no doubt banking operations have increased, but now banks avoid credit and
used their own resources to pay off their bills.
Borrowings from Financial Institutions:
There is a substantial decline of 73% in borrowings from financial institutions. This is
mainly due to the fact that BAL has enough liquidity to meet its obligations so they
don’t need to go to market and borrow from other financial institutions, as well as the
fact that State Bank is providing rupee at the cheapest cost.
Deposits:
As the crack down continues on Muslims in USA and UK, especially on Pakistanis in
the wake of 9/11, some Pakistanis living abroad for 20 years have been deported back
to Pakistan and their accounts are being frozen due to suspect linkages with Al-Qaida.
This fear element has forced Pakistanis to send their saving’s back to their home land.
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This resulted in record foreign remittances for Pakistan and foreign reserves went up
to $ 12.88 billions.
Indirectly it has also affected the deposits of local commercial banks. BAL is well
known internationally, has a good reputation in the eyes of Pakistanis abroad, so they
use BAL as a channel to send their remittances back to the country.
Furthermore, as the crackdown is made on money laundering by US officials, most of
the Pakistanis, who previously used these illegal channels for sending money to
Pakistan, have started sending their income and savings through banking channels,
which resulted in soaring foreign reserves.
ADVANCES
37%
DEPOSITS
63%
Sub-ordinate Loans:
Sub-ordinated loans basically include Term Finance Certificates and the mark-up on
TFCs. These term finance certificates have mutual sharing of profit and loss. There is
a decrease in investments in term finance certificates. This is because interest rates
have decreased and now there is lower profit on them.
Deferred Tax Liabilities:
Deferred tax is the difference between tax payable and tax expense. This difference
arises due to different accounting methods used for reporting and for taxation
purposes. Deferred tax liabilities have shown a large decrease from 2003-04. This
decrease is mainly due to the revaluation of securities. The revaluation has caused the
value of the securities to decline substantially.
SHAREHOLDERS EQUITY
Shareholders equity has increased because all its elements, that is, share capital,
retained earnings and reserves are increasing. Share capital has increased because the
bank has issued bonus shares while reserves and retained earnings have increased
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because profit after tax has increased and the company is retaining most of these
profits.
FINANCIAL
STATEMENTS
ANALYSIS
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BANKING/REGULATORY RATIOS
Advances to Deposit
80.00%
70.00%
60.00%
50.00%
40.00% Advances to Deposit
30.00%
20.00%
10.00%
0.00%
2008 2007 2006 2005 2004
Comments:
The Advances to Deposit ratio is showing healthy growth, it was 64.17% in 2003 and
it becomes 66.06% in 2007. This reflects that bank is playing its role in the economic
growth of the country by providing main factor of production “Capital”. Due to
increase in the advances the bank’s profitability also increased.
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16
14
12
10
Cash to Deposit
8
Ratio
6
4
2
0
2008 2007 2006 2005 2004
Comments:
The cash to deposit ratio is also decreasing. In 2003 it was 10.98, whereas in 2007 it
reduces to 10.77 of the deposit. It shows the bank is utilizing its assets more
productively in investment. The cash in hand is the only asset on which there is no
earning, by reducing this figure and utilizing it for investment is good approach of the
management.
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Equity to Assets
4.5
4
3.5
3
2.5
Equity to Assets
2
1.5
1
0.5
0
2004 2005 2006 2007 2008
Comments:
The equity to asset ratio is also increasing. In 2003 it was 3.79 and in 2007 it becomes
4.18 almost satisfactory increases in 5 years. The increasing equity shows healthy sign
of bank financial stability.
Equity to Deposits
Equity to Deposits= Equity / Deposits
Rs. in million
2008 2007 2006 2005 2004
Equity to 4.86 1.37 1.82 3.03 3.37
Deposits
Equity 14609 3753 4369 6738 4369
Deposits 300733 273174 239509 222345 129715
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Equity To Deposits
2
0
2004 2005 2006 2007 2008
Comments:
The equity to deposit ratio is also increasing consistently. In five years it reaches to
1.82 from 17.95. The good point is that deposit of the bank increased and equity is
going decrease. The bank uses properly the deposits.
PROFITABILITY RATIOS
18
16
14
12
10
Net Profit Margin
8
6
4
2
0
2008 2007 2006 2005 2004
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Comments:
The profitability of the bank increased tremendously from 4% to 30%. It shows that
bank decreases its expenses and increases the sources of revenues. The provision
expense also decreases in the last 5 years by adopting the policy of prudent lending;
this cut off in the provision also enhanced the net profit margin of the bank.
Return on Equity
Return On Equity
35
30
25
20
Return On Equity
15
10
0
2008 2007 2006 2005 2004
Comments:
The return on equity looks at the return earned by management on the stockholder’s
investment that is on owner’s equity. The return on equity is net income, which
represents the return from all sources, operating and non- operating. The return on
equity of the bank shows a consistent and very well growth in last 5 years. The return
on equity in 2003 was 25.72, whereas in 2007 it becomes 79.08. It means bank is
paying handsome amount in the form of dividend to its shareholders. And get
maximum return and give satisfaction to his share holders
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ACTIVITY RATIOS
12
10
6
Return on Total Assets
4
0
2004 2005 2006 2007 2008
Comments:
The return on total assets measures the efficiency with which management has
utilized the assets under its control regardless of whether these assets were financed
with debt or equity. The return on total assets also showing healthy growth in last 5
years. It was 7.5 in 2003 and reaches to 9.68 in 2007. It indicates that bank is utilizing
its assets in a professional way. This trend should be maintained to be competitive in
the market.
4
3.5
3
2.5
2
Earning Per Share
1.5
1
0.5
0
2004 2005 2006 2007 2008
25
20
15
Book Value P/S
10
0
2004 2005 2006 2007 2008
25
24
23
22
Book Value P/S
21
20
19
2004 2005 2006 2007 2008
Comments:
Earning per share is perhaps the most widely used of all accounting ratios. The trend
is earning per share and the expected earnings in future periods are major factors
affecting the market value of a company’s share. The EPS share is encouraging for
the investor. In 2004 EPS was 3.90 and in 2007 it becomes 4.82 This consistent
growth shows better policies and utilization of available resources.
LIQUIDITY RATIOS
Current Ratio
Current Ratio= Current Assets / Current Liabilities
Rs in million
2008 2007 2006 2005 2004
Current Ratio
3 Current Ratio
0
2008 2007 2006 2005 2004
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Comments:
The current ratio expresses the relationship between Current Assets and Current
Liabilities. As debts come due, they must be paid out of current assets. The current
ratio indicates a company’s short run debt paying ability. It is a measure of liquidity
and solvency. The current ratio of HBL is decreasing. In 2001 it was 24 whereby in
2005 it becomes 16.it should be reduced because from managerial point of view too
high a current ratio may indicate that capital is not being used productively.
Rs in million
2008 2007 2006 2005 2004
N Markup Income/G 34.51 35.54 28.12 41.17 56.69
Markup Income
60
50
40
N Markup
30 Income/G Markup
Income
20
10
0
2004 2005 2006 2007 2008
Comments:
Net Interest Income in the FY-03 & 04 jumped to 39.5& 47.5 respectively, but due to
loaning in the form of credit card, consumer financing, personal loan, agri credit &
increase in lending to SME. In the year-05, this ratio further increased by (63%”)
through a combination of growth in loans portfolio across all sector as well as
increase in spread on account of high interest rate.
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LEVERAGE RATIOS
Financial leverage is the extent to which a company is financed with debt. The
amount of debt a company uses has both positive and negative effects. The more the
debt, the more the company will have trouble in meeting in its obligations. Thus the
more debt, the higher is the profitability of financial distress and bankruptcy. On the
other hand debt is the major source of financing and banking industry typically uses
the higher percentage of debt. Debt financing provides significant tax advantage and
its transaction costs are low than that of equity. Leverage ratios measure the amount
of financial leverage. Commonly used leverage ratios are debt ratio, and debt to
equity ratio.
(Rs. in Million)
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0.935
0.93
0.925
0.92
0.915
Debt-To-Total Assets
0.91
Ratio
0.905
0.9
0.895
0.89
0.885
2004 2005 2006 2007 2008
Comments:
Debt ratio shows the fraction of the company’s assets that is financed by debts.
Creditor of a company would generally like this ratio to be low. The ratio is derived
by dividing a firm’s total debt to its total assets.
DEBT-TO-EQUITY RATIO
This ratio indicates the extent to which debt financing is used relative to equity
financing.
(Rs. in Million)
2004 2005 2006 2007 2008
Debt-To-Equity Ratio
40
35
30
25
20 Debt-To-Equity Ratio
15
10
5
0
2004 2005 2006 2007 2008
Comments:
Here the trend of this ratio is decreasing which is 16 in 2003 and decreased to 10.96 in
2004 and further decreased to 5.55 in 2007. This shows that debt financing was more
used in previous years but now it’s decreasing and equity financing is used also so it’s
also increasing.
COVERAGE RATIOS
Coverage ratio shows the number of times a company can cover or meet a particular
financial charge or obligation. One of the most commonly used coverage ratios is the
interest coverage ratio.
INTEREST COVERAGE RATIO:
It measures the number of times the income is available to pay interest charges and
covers the company’s interest and thus avoids bankruptcy. The ratio is calculated by
dividing the income before interest expense and tax of a period by interest expense of
the same period. The higher the ratio, the greater is the likelihood that the company
could cover the interest expenses.
Interest Coverage = Earning Before Interest and Taxes
Interest Expense
(Rs. in Million)
2004 2005 2006 2007 2008
Interest Coverage
4
3.5
3
2.5
2 Interest Coverage
1.5
1
0.5
0
2004 2005 2006 2007 2008
Comments:
This ratio serves as one measure of the firm’s ability to meet interest payments and
thus avoid bankruptcy. The higher the ratio, the greater the ability that the company
can cover its interest payments without difficulty. It also sheds some light on the
firm’s capacity to take on new debt.
The interest coverage ratio of NBP has shown an improvement over the period of five
years. In the year 2006, the ratio is 3.19, which shows that the income in 2005 covers
2.98 times the interest expense. As the core business of a bank is borrowing and
lending, interest expense constitute the main expense of the business that’s why the
interest expense is so higher and ratio is so lower.
VERTICAL ANALYSIS
Introduction:
Vertical/Cross-sectional/Common size statements came from the problems in
comparing the financial statements of firms that differ in size.
• In the balance sheet, for example, the assets as well as the liabilities and equity are
each expressed as a 100% and each item in these categories is expressed as a
percentage of the respective totals.
• In the common size income statement, turnover is expressed as 100% and every
item in the income statement is expressed as a percentage of turnover (sales).
Vertical analysis also called component percentages indicate the relative size of each
item included in a total. For example each item on a balance sheet could be expressed
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as a percentage of total assets. This shows quickly the relative importance of each
type of assets as well as the relative amount of financing obtained from current
creditors, long term creditors and stockholders. Another application of vertical
analysis is to express all items in an income statement as a percentage of net sales.
Such a statement is called a common size income statement.
HORIZONTAL ANALYSIS
Introduction:
This technique is also known as comparative analysis. It is conducted by setting
consecutive balance sheet, income statement or statement of cash flow side-by-side
and reviewing changes in individual categories on a year-to-year or multiyear basis.
The most important item revealed by comparative financial statement analysis is
trend.
A comparison of statements over several years reveals direction, speed and extent of a
trend(s). Restating amount of each item or group of items as a percentage does the
horizontal financial statements analysis.
Such percentages are calculated by selecting a base year and assign a weight of 100 to
the amount of each item in the base year statement. Thereafter, the amounts of similar
items or groups of items in prior or subsequent financial statements are expressed as a
percentage of the base year amount. The resulting figures are called index numbers or
trend ratios.
LIABILITIES:
BILLS PAYABLE 3,452,031 4,138,243 3,091,135 3,733,124 2,233,671
BORROWING FROM
FINANCIAL INSTITUTIONS 13,690,222 21,230,697 8,394,130 5,844,389 12,723,830
DEPOSITS & OTHER
ACCOUNTS 300,732,858 273,173,841 239,509,391 222,345,067 129,714,891
SUB ORDINATED LOANS 2,571,169 3,220,858 3,222,106 3,223,355 1,899,480
LIABILITIES AGAINST ASSETS
SUBJECT TO FINANCE LEASE - - - - -
OTHER LIABILITIES 11,291,280 1,379,809 1,921,338 5,219,666 2,725,344
DEFFERED TAX LIABILITIES 208,465 9,531,860 7,305,496 484,066 275,834
TOTAL LIABILITIES: 331,946,025 312,675,308 263,443,596 240,849,667 149,573,050
REPRESENTED BY:
SHARE CAPITAL 7,995,000 6,500,000 5,000,000 3,000,000 2,500,000
RESERVES 3,166,056 2,414,833 2,749,533 2,351,218 1,008,772
UNAPPROPRIATED PROFIT 3,447,467 4,851,840 2,823,072 1,386,845 860,300
SURPLUS ON REVALUATION
OF ASSETS 2,436,216 2,453,171 1,669,340 726,063 892,412
TOTAL 348,990,764 328,895,152 275,685,541 248,313,793 154,834,534
ADVANCES 55 52 54 48 57
OTHER ASSETS 3 4 4 2 2
OPERATING FIXED ASSETS 4 - - 3 3
DEFFERED TAX ASSET – NET 0 2 2 - -
TOTAL 100 100 100 100 100
LIABILITIES:
BILLS PAYABLE 0.99 1.26 1.12 1.5 1.44
BORROWING FROM FINANCIAL
INSTITUTIONS 3.92 6.46 3.04 2.35 8.22
DEPOSITS & OTHER ACCOUNTS 86.17 83.06 86.88 89.54 83.78
SUB ORDINATED LOANS 0.74 0.98 1.17 1.3 1.23
LIABILITIES AGAINST ASSETS
SUBJECT TO FINANCE LEASE - - - - -
OTHER LIABILITIES 3.24 0.42 0.7 2.1 1.76
DEFFERED TAX LIABILITIES 0.06 2.9 2.65 0.19 0.18
TOTAL LIABILITIES:
REPRESENTED BY:
SHARE CAPITAL 2.29 1.98 1.81 1.21 1.61
RESERVES 0.91 0.73 1 0.95 0.65
UNAPPROPRIATED PROFIT 0.99 1.48 1.02 0.56 0.56
SURPLUS ON REVALUATION OF
ASSETS 0.70 0.75 0.61 0.29 0.58
MARKUP/RETURN/INTEREST
EARNED 100.00 100.00 100.00 100.00 100.00
MARKUP/RETURN/INTEREST
EXPENSED 65.49 64.46 71.88 58.83 43.32
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COMMENTS:
The common size / vertical analysis of Income statement of Bank Alfalah Limited as
given in the above table is showing a consistent increasing trend in the bank’s gross
profit margin. The main reason behind this increase is that the bank has controlled its
mark up expenses in relation to total mark up revenue, which were constantly reduced
in year 2005 to year 2006. In simple words we can say that this decreasing trend in the
mark up expenses resulting in the increased gross profit. Mark up expenses is actually
cost of sale in case of a bank. Furthermore this increasing in gross profit margin
shows the efficiency of the bank’s management in controlling mark up expenses. So
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this increasing trend of a gross profit margin is a positive and healthy sign and the
bank’s management should continue such type of efforts in order to achieve such type
of results in future.
Now if we look at the figures of analysis of total income then we will see the
decreasing trend in 2006 with respect to 2005. It is because of major decrease in fees
and commission, which shows that the services of BAL other than advances and
investments provided for daily use purpose of the customer are not regularly used by
customers.
If we look at the figures of non mark up expense there is decreasing trend, which is
because of decrease in administrative expense. The increasing rate of gross profit is
less with respect to net profit because non mark up expense and taxes both are
showing reducing trend which is the main purpose in more increase in net profit with
respect to gross profit.
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BANK
BANKALFALAH
ALFALAHLIMITED
LIMITED
HORIZONTAL
HORIZONTAL/ /INDEX
INDEX/ /TREND
TRENDANALYSIS
ANALYSIS
Comparative Profit
Comparative & Loss
Balance A/C
Sheet
For The Years 2004-2008
For the Years 2004-2008
Description 2007-2008
2007-2008 2006-2007
2006-2007 2005-2006
2005-2006 2004-2005
2004-2005
Assets % % Increase/ % % Increase/ % % Increase/ %% Increase/
GroGrowDecreaseIncrease/ Gro Grow Decrease
Increase/ Growt Decrease
Gro Increase/ Gro
Gro Increase/
Decrease
DESCRIPTION: wth th (Decrease) wth th (Decrease) wth h (Decrease) wth
wth (Decrease)
MARKUP/RETURN/INTERE
CASH & BALANCES 3,250,957 4,592,
1,577,018 3,070,735 1 5,080,107
STWITH
EARNED
TREASURY 11 20 5262712 6 22 401 12 73 8,944,659 18
26 6,626,608
MARKUP/RETURN/INTERE
BANKS 1,388, 11 1
STBALANCES
EXPENSED WITH 22 3710231
3,200,305 9 077
5,648,786 1 8,027,894
3,018,583 96 4,770,533
6,529,412
NET MARKUP/INTEREST
OTHER BANKS 17 44 3,204, 31 205
INCOME
LENDING TO 17 1552481
(136,559) 54 324
(9,004,594) 18(14,593,840)
916,765 58 1,856,075
27,050,493
PROVISION
FINANCIALAGAINST NON(4) (72) (54) -
PERFORMING
INSTITUTIONS LOANS & 2 (1,673, (32,090
ADVANCES
INVESTMENT ( (334870)
(12,518,326 40 177)
31,989,354 73 (295,392)
(923,490) 9 )21,922,504
PROVISION AGAINST 14) ) 57 (2) 62
DIMINUTION
ADVANCESIN VALUE OF 21,472,177 21,199,667 (10 31,135,315 (1,1 29,932,610
INVESTMENTS 13 0 1479062 14 - - 260) (23,163) 3470) 25,328
BAD DEBTS WEITTEN
OTHER ASSETS ( (2,933,138) 2 1,419,334(4, 20 6,651,461 (161
624,570
OFFF DIRECTLY 25) 384 22454 14 80 307) 0
173 (1,025) 1946 )
NET MARKUP/INTEREST
OPERATING FIXED 13,773,293 - (6,620,067) 2,339,563
INCOME
ASSETS AFTER - - 1,526, (100) 55
PROVISIONS
DEFFERED TAX 6 (6,013,097)
385835 29 840
380,046 13 5,633,051
597,185 66 1,849,152
-
FEE, COMMISSION
ASSET – NET & - 7 624, - -
BROKERAGE
TOTAL INCOME 5 109722
20,095,612 35 601
53,209,611 56 27,371,748
646,251 71 482,879
93,479,259
6 19 27, 11 (28 60 (525
DIVIDEN INCOME
LIABILITIES: 365 236221 73 329 ) (14,621) (1) )
INCOME FROM DEALING 87,
INBILLS
FOREIGN CURRENCIES
PAYABLE ( 93 (686,212)440335 23 513
1,047,108 33 96,906
(641,989) 33 71,271
1,499,453
17) 34 1,0 1,872, (17) 67
GAIN ON SECURITIES
BORROWING FROM ( (79)(7,540,475)
(1628972) 36 441
12,836,567 - 180,751
2,549,741 - -
(6,879,441)
FINANCIAL LOSS ON
UNREALIZED 36) 153 44 (54)
INSTITUTIONS
REVLUATION OF ( 12,
INVESTMENT
DEPOSITS & OTHER 1116 27,559,017
(166642) 46) 33,664,450
670 - 17,164,324
(27,599) - -
92,630,176
ACCOUNTS 10 14 189, 8 71
OTHER INCOME
SUB ORDINATED ( 21 (649,689)216297 22 273(1,248) 13 97,581
(1,249) 30 171,696
1,323,875
LOANS
TOTAL NON-MARK- 20) (0) 2,813, (0) 70
UP/INTEREST INCOME
OTHER LIABILITIES 7 (13) 9,911,471
(793039) 87 827
(541,529) 44 (3,298,328)
979,269 48 725,321
2,494,322
ADMINISTRATIVE 18 (28) 2,397, (63) 92
EXPENSES
DEFFERED TAX ( 27 (9,323,395)
2198812 41 842
2,226,364 1, 36 6,821,430
1,561,722 61 1,635,388
208,232
LIABILITIES
OTHER PROVISIONS/ 98) 30 6, 409 (10 75
WRITE
TOTALOFFS
LIABILITIES: 311 19,270,717
21623 - 959
49,231,712 0) (10,125)
22,593,929 - 10,125
91,276,617
6 19 ( (33, 9 10 61 1,1
OTHER
SHARE CHARGES
CAPITAL 1183 1,495,000 113193 78) 741)
1,500,000 5 22,202
2,000,000 41 19,404
500,000
TOTAL NON-MARK- 23 30 2,371, 67 20
UP/INTEREST
RESERVES EXPENSES 28 751,223
2333628 40 060
(334,700) 36 398,315
1,573,799 62 1,664,917
1,342,446
PROFIT BEFORE 31 (12) 1,969, 17 133
TAXATION
UNAPPROPRIATED ( (60)(1,404,373)
(2740832) 77 607
2,028,768 0 1,436,227
2,655 55 909,556
526,545
PROFIT 29) 72 602, 104 (7 61
TAX
SURPLUS ON (65) (16,955)
(911904) 75 069
783,831 ) (57,942)
943,277 53 299,451
(166,349)
REVALUATION OF (1) 47 1,367, 130 (19)
ASSETS
PROFIT AFTER TAXATION (58) (1828928) 78 538 4 60,597 56 610,105
TOTAL 20,095,612 53,209,611 27,371,748 93,479,259
6 19 11 60
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COMMENTS
Assets
The assets increases in 2006 as compared to 2004 and 2005.so Trend Analysis shows
continuous increase in assets.
Liabilities
Trend Analysis shows increase in the liabilities.
Income Statement
Profit After tax /Net Income increases in 2006 as compared to previous two years
which shows that the sales increases and because of this the company earned profit.
It is observed that interest income of the bank has increasing trend due to more
advances, which is a positive sign. Fee income and brokerage of the bank has
increasing trend, which shows sound business of the bank it is positives sign. Share
profit has sharp increase over the years which is due to sale of bank share to general
public it shows public confidence on the bank which is also a positive sign.
Administration expenses have increased in recent years, which are to control bank,
more efficiently than before. Taxation expense of the bank has also increasing trend
which is due to increase in profits which is a positive sign. Net profit of the bank has
sharp-increasing trend, which is due to increase in different kind of income of the
bank. Overall income statement of the bank depicts very sound position of the bank’s
profitability.
It is observed that cash balance, lending to financial institutions & investment of the
bank has increasing trend this is due to increase in deposits of the bank, which is
positive sign. Bank’s advances also having increasing trend, which is a positive sign.
Deposits of the bank have increased more than previous years, which shows public
trusts on the bank. Profit of bank also shows a stable increase due to increase in
revenue and other income of the bank.
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In this chapter I compare bank alfalah limited to others major banks in Pakistan with
different prospective of financial affairs. These are in detail as follow;
20000
18000
16000
14000
12000
PBT
10000
Tax
8000
PAF
6000
4000
2000
0
ABL HBL MCB NBP UBL BAL
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700000
600000
500000
400000 Investment
300000 Assets
Liabilities
200000
100000
0
ABL HBL MCB NBP UBL BAL
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600000
500000
400000
300000 Deposit
Advances
200000
100000
0
HBL NBP UBL MCB BAL
70 of 78
18000
16000
14000
12000
10000
Operating Cost
8000
Operating Income
6000
4000
2000
0
MCB NBP UBL ABL HBL BAL
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Number of Staff
20000
15000
10000 2007
2008
5000
0
UBL MCB ABL NBP HBL BAL
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PROBLEMS IDENTIFICATION
1) Lack of incentives
During my internship, once I asked to an employee that gives our comments about the
incentives, he replied that we have been learning that our incentives should increased
soon but a year has passed and incentives have not been given yet. After that I
realized that the procedure of increasing the incentives is very slow. The employees
are getting very demodulated due to lack of incentives.
Staff turnover has been observed greatly in this period (November 2007,
Febrary2008) due to job dissatisfaction & low motivation. It is a bitter fact in BAL
that employees are hired on contractual basis which lasts for almost a year. The
contract base staffs deprived of the extra benefits that the permanent staff enjoys. This
is reason why staffs turnover is increased.
3) Inexperience Staff
The fresh recruitments which are made are usually inexperienced in BAL because
when employees working from; other banks come for an interview they refuse to offer
their services after they hear the low salary package. So because of that low salary
package mostly inexperienced staff is hired since other banks are offering better
salaried than BAL.
The salary package is low in BAL as compared with the other banks. While hiring the
employees who are MBA and the starting salary is just Rs. 14000/- Therefore it is the
main problem for the BAL. While hiring the fresh graduates starting salary package is
just Rs. 10000/- As compared with the work load the salary package is very low that’s
why employees are not satisfied with their jobs.
5) Branch Issues
The branch issues are also very important reason for the rise in the problems faced by
the bank. Actually the customers have serious complaints regarding the branch. Some
of them is that the Cheque which are dropped in the drop
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Boxes are cleared very late. Customers are not satisfied with the behavior of the
employees. They stand in lines for receiving or deposit cash and utility bills for a long
time, but no positive response from the tellers.
6) Employees Efficiency
Employees are not much efficient due to lack of training and knowledge. High level
management requirement is too much high but they are not providing the facilities to
the employees therefore the employees efficiency is decreasing day by day. They are
not motivated by the high level management and as a result the interest of employees
in their jobs is also deceasing.
No concept of job rotation applied here if it is applied the job rotation can take place
from branch to the regional headquarter, this will boost up the moral e of its
employees and it will also provide them chance of more learning.
7) Policies Description
New policies are prepared by the higher management and these are not will explained
to the lower level managers, department wise so as to discipline the work according to
the policies and procedures devised. No participation in the seminars therefore
briefing sessions are not updates at low level management other than the formal way
of reporting. More forever the employees should not be provided chance for giving
suggestion to the higher management in these sessions.
8) Courier Complaints
The bank uses shaheen courier for mailing the customers bills and for its own use i.e.
Inter bank mailing BAL uses Leopards courier. Customers have a lot of complaints
regarding BAL, s courier. They don, t receive their bills in time due to which they are
unable to do timely payments.
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SOLUTIONS:
1) Give Incentives
First of all I would suggest the salary scales of the employees be revised. There is
dire need of policies to be changed for the betterment of the staff and to encourage
then to work hard. If the employee is being given salary less then is expectation then
he will not be motivated towards his work rather he will be in search of better
opportunities.
3) Training program
There should be training programs on monthly basis in order to enable free flow of
knowledge teams. This training program should be conducted on a monthly basis in
order to make employees gain full information regarding their work.
Any evaluation system can check the performance of the business BAL can do
it through take the feedback from customers and take the decision according to
the requirement of daily operation problem.
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CONCLUSION
Bank Alfalah is one of the banks performance has been improving day by day. It has
been offering unique services such has its recent campaign of free insurance for all
BAL account holder, car replacement plan etc, If the above recommendation are
applied that it can play a significant roll and improving the performance of BAL
consumer product put the main things is to meet the demands of the customer and to
full fill the requirement in the competitive situations. I have observed during my
internship that resource are available put these are not will utilize by the management.
Proper training should have customer service center having UAN number as well as
there should be proper check and balance of each employee.
During my internship I found that staff efficiency and motivating the employees has a
deep relationship, due to this relationship output of BAL increases and it can easily
archive its goals. Human Resource of every department plays a primary role in
conducting any activity. Hence if the human resource is not will trained and efficient
then this will affect the entire organization productivity.
The deposit staff has been suffering high turnover absenteeism, lack of skilled
profession etc. reason of that is in banks offer better salary package and during my
internship I had seen three employees resigning due to better opportunities in bank
such as ABN Amro and standard chartered. Most of the employees are just first
graduate who are unaware of practical knowledge. The company invests on them by
giving them proper training but later an win they see on growth opportunities that live
the bank which proves a waste for the bank. All employees are hired on contracts that
expire after a year. Only after a year employees are kept permanent on the basis of
their of dedication to work and their achievements
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BIBLIOGRAPHY
BOOKS
WEBSITES
WWW.SBP.ORG.PK
WWW.BANKALFALAH.COM
WWW.FINANCE.GOV.PK
WWW.PRIVATISATION.GOV.PK
ARTICLES
ANNEXURE A:
PRESIDENT
BOARD OF DIRECTORS
COMMITTIE
REGIONAL MANAGEMENT
OPERATIONS CHIEF REGIONAL
ANNEXURE B:
ORGANIZATIONAL CHART
BAL JINNAH ROAD BRANCH RAWALPINDI
A/C Clearing
CS Dept Car F Cash BBO &
Dept Dept Dept Dept Computers
Establishment
Dept Operation Dept