1- Introduction

1.1 Executive Summary

Following privatization, Bank Alfalah emerged as new identity of Habib Credit and Exchange Bank with a revived purpose and commitment. Charged with the strength of Abu Dhabi consortium and under the leadership of His Highness Sheikh Nahayan Mabarak Al-Nayayan, the bank has already made significant contributions in building and strengthening both corporate and retail banking sector in Pakistan. Designing the product portfolio of bank in response to the customers preferences, the product like Royal Profit, Royal Patriot and Royal Custodial are prime examples of quality and innovation providing timely banking opportunities to the customers of bank. Assessment of the needs and wants of the customers is an ongoing process at Bank Alfalah, which helps to continually develop new products and services. To continuously offer courteous, professional and advanced banking solutions, the team of bank has recently been rejuvenated by going though training programs with a focus on information technology. To make their banking solutions become accessible to more and more people, they have embarked upon a rapid expansion program, aiming to provide a networking that makes the services available to any of their customers in all the major urban centers of Pakistan- with a view to go international in the near future. With their key indicators of progress already soaring to new heights, the bank is committed to dedicate all its energies, resources and time to bring higher value and satisfaction to their customers, employees and shareholders. The graph of bank is going up and up every year. The ratio of profit is increasing at good percentage. The bank is serving the people at high level of standard by going according to the whishes of the customers.

1.2 Commercial Banking Scenario in Pakistan

At the time of independence in 1947, there were 38 scheduled banks with 195 offices in Pakistan but by December 31, 1973, there were 14 scheduled Pakistani commercial banks with 3,233 offices all over Pakistan & 74 offices in foreign countries. Nationalization of Banks was not done 1 st January 1974 under the Nationalization act 1974, due to certain objectives. But it had negative effects on efficiency of the banking sector afterwards a privatization Commission was set up on January 22, 1991, the commission transferred many banks to the private sector i.e., MCB & ABL. The government approved & permitted the establishment of 10 new private banks in 1991;hence many new private banks have incorporated, since then, BANK ALFALAH in one of the namely established private scheduled banks in Pakistan.

1.3 Introduction to Bank Alfalah

Bank of Credit & Commerce International (BCCI) was a Pakistan based bank, established by Mr. Agha Hassan Abdi from UBL, in association with U.A.E and Europe. BCCI has its branches in 74 different countries of the world. It had its 3 branches in Pakistan. In 1991, the BCCI was banned, when is was accused by European countries that the

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bank was involved in some illegal operations with Gulf countries. The major reason behind European accusation was that BCCI was of Islamic mode. Therefor, the bank was closed due to international pressure. Then, its 3 Pakistani branches were taken over by the Government of Pakistan, which were named as Habib Credit and Exchange Bank (HCEB) and these were working as subsidiary of Habib Bank Limited. Following the privatization in July 1997, Habib credit and Exchange Band assumed the new identity of Bank Alfalah on February 25, 1998. It is now Abu Dhabi based bank as the family of Sheikh Nahayan Mubarik Al-Nahayan purchased 70% of its shares and 30% shares remained with Habib Bank on behalf of Government of Pakistan. It has its 18 branches in 8 cities of Pakistan. The Multan branch has recently been opened in May 1999. It is not listed on any stock exchange of Pakistan. Charged with the strength of Abu Dhabi consortium, and under the leadership of His Highness Sheikh Nahayan Mabarak Al-Nahayan, Minister of Higher Education and Scientific Research, Government of Abu Dhabi, and a prominent member of Royal Family, the bank is energized with the vision, envisaging the development of various sectors in Pakistan.

2- OVER VIEW OF THE ORGANIZAITON

2.1 NATURE Bank Alfalah is a profit organization. Its profits in 2011 are as follows. Profit before provisions and taxation 9,757,522 Provisions (net) (4, 323,804) Profit before tax 5,433,718 Tax (1,930,588) Profit after tax 3,503,130 Earnings per share Rs. 2.50 DIVIDEND: The directors recommend the payment of cash dividend @17.50 subject to approval of shareholders. OPERATING RESULTS: During the year Banks profit before tax stood at Rs. 5,433.718 million compared to Rs. 1,368.745 million for the previous year.

2.3 Mission/Objectives
Edge on competitors. High profits. Expansion of strong structure.

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 Variety of Products. A good banking standard. Bank Alfalahs Slogan Lets Look Ahead Towards a Brighter Future. Together. Bank Believes Every door leads to our customers. The legacy of leadership stands as our guiding light. The strength of chain relies on the strength of each link. A keen ear is a key to understanding. Achievement is nothing without target. Time is our most valuable asset. Performance is nothing without the ability to measure it. Every drop counts.

2.4 Vission To be the premier organization operating locally & internationality that provides the complete range of financial services to all segments under one roof. 2.5 Branches Network
Bank Alfalah has its 18 branches in 8 cities of Pakistan. Detail is as under: KARACHI Main branch, B.A. Building, I.I. Chundrigar Road. Cloth Market Branch. Clifton Branch. Shahrah-e-Faisal Branch. Karachi (new Branch). LAHORE Kashmir Road Branch. Gulberg Branch. Defense Branch

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 RAWALPINDI Mall Road Branch.

OTHER BRANCHES

Other Branches are in: Jauharabad. Sialkot. Islamabad. Peshawar. Multan. Faisalabad. Quetta. Sukkur. Hyderabad. Gujranwala. Now, Bank Alfalah is going to establish its branches in some foreign countries. Hopefully, in Dhaka (Bangladesh) and Bahrain, its branches will be opened in the year 2001. Some branches will also be opened in European countries.

3. Organizational structure 3.1 The Board

The list of Board of Directors of Bank Alfalah Limited is as under: H.H. Sheikh Nahayan Mabarak Al-Nahayan. Mr. Abdulla Naseer Hawalled Al-Mansoori. Mr. Abdulla Khalil Al-Mutawa. Mr. Omar Z. Al-Askari. Mr. Naeem Iqbal Sheikh.

Mr. Ikram-ul-Majeed Sehgal.

Mr. Muhammad Saleem Akhtar.

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The core group

In the core group, there are 2 committees, i.e., Board Advisory Committee. Executive Committee. Board advisory committee Mr. Omar Z. Al-Askari. Mr. Abdulla K. Al Mutawa. Mr. Ganpat Singhvi. Mr. Bashir A. Tahir. Executive Committee Mr. Mohammad Saleem Akhtar. Mr. Ikram-ul-Majeed Sehgal. Mr. Parvez A. Shahid. Mr. Tanveer A. Khan. Mr. Mohammad Yousaf. Mr. M. Waqas Mohsin. Auditors A.F. Ferguson & Co.
Chartered Accountants.

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3.2 ORGANIZATIONAL CHARTS

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FEATURES
Bank Alfalah Limited is and established bank. It has some special features with the help of those it is growing rapidly. Good Work Environment As the work environment plays a great role in this competition age, so the bank has good work environment. All the people work with cooperation; managers are so kind that each problem can be discussed with them.

Efficiency
Employees at Bank Al-Falah are quite efficient. As Multan branch is a new one, its employees have to bring their bank among the list of good banks. Therefore, they work more than their working hours and it is all according to their will. It also shows their loyalty, commitment to organization.

Customer Services
All the customers are entertained individually. Same kind of behavior and attention is given to all the customers. Suggestions asked from Customers Getting ideas for improvement from customer side is a new idea and that is working very well in Bank Alfalah Ltd. All the customers are asked to fill a suggestion form and the standards of the bank are improved through them. Employee Benefits Employees are given the benefits like bonus, gratuity funds, loans, increments, house rent, medical and conveyance.

Computerized Working Environment

In bank, all the work is done on computers. All the entries are made in computer. Balance are fed into the computer. This increases efficiency of the bank.
Share Capital

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The authorized capital of Bank Alfalah is of Rs. 1000 Million (100,000, 000) Paid-up capital is of Rs 600 Million (600,000,000) ordinary shares of Rs.10 each issued for cash.
Products

Prioritizing its product portfolio in line with its corporate and consumer needs and wants the bank is committed to develop products that give more value to its customers in both the sectors. Following their trend of bringing value added products and services to their customers the bank has present Royal Group, Royal Profit and Royal Patriot.
ROYAL GROUP

Royal Group is a joint investment plan that allows individuals to invest money collectively and earn higher rate of profit.

Deposit Amount 100,000-999,999 1,000,000-9,999,999 10,000,000 and above ROYAL PROFIT

Rate 9.50 % 9.70 % 10.00 %

It is the profit obtained by individuals on their deposited amount.

Deposit Amount 50,000 to 999,999 1,000,000 to 9,999,999 10,000,000 & Above ROYAL PATRIOT

Rate 9.00 % 9.50 % 10.50 %

It is similar to term deposit. In term deposit one get no benefit of profit when he withdraws his money before maturity date. But in case of Royal Patriot if one withdraw his money before the maturity date, he can get the benefit of profit. The profit rates for different periods are following:

Duration Amount 25,000-999,999 1,000,000-4,999,999 5,000,000 & Above

4. FINANCE POLICY

1Month Rate 8.00 % 8.10 % 8.20 %

3Months Rate 10.00 % 10.10 % 10.25 %

6Months Rate 10.50 % 10.60 % 10.70 %

12Months Rate 11.00 % 11.10 % 11.20 %

2Years Rate 11.00 % 11.25 % 11.50 %

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Bank Alfalah finance on short term basis only against current assets to its customers in both corporate and consumer sectors. They dont invest too much in fixed assets. Maximum credit for short term is Rs. 50 Millions for one party, they dont go beyond five years financing.
FINANCING SCHEMES

The bank has introduced many financing Schemes such as Term Finance & Royal Personal Finance. The bank has recently introduced a Car Finance Scheme. 4.1 Royal Personal Finance This is the facility for individuals to finance their domestic requirements such as purchase of household equipments, computers, funding of education, marriage, planning a holiday, payments of credit card bills, other liabilities or any other personal requirement. Facility Range Minimum Rs. 50,000 Maximum Rs. 500,000 Tenure From 1 to 3 years.
Maximum Loan Entitlement (Approximately)

Tenure Factors

1 year 0.09168

2 years 0.04993

3 years 0.03615

4.2 ALFALAH QUICK FINANCE: Alfalah Quick Finance is a personal loan against National Saving Certificates, Prize Bonds, Alfalah GHP Principal Protected Fund & PKR/FCY deposit for meeting personal, family and household needs. It is one year revolving limit with quarterly mark-up payments. The amount of financing under AQF ranges from Rs. 50,000 to 2.5 Crore. AQF shall not exceed 90% of the encashment value of the security offered. In case of financing against Foreign Currency Deposit the maximum financing should not exceed 85% of the deposit encashment value. In case of Alfalah GHP Principal Protected Fund taken as a security the financing approved under AQF shall not exceed 70% of the face value of units held by the borrower. Pricing Securities Acceptable under AQF Pricing

1. PKR deposit with BAL (TDR, Minimum 1.75% spread over PLS/Current Account) deposit rate 2. PKR/FCY deposit of other Banks & FCY deposit of BAL Minimum 1.75% spread over 6months KIBOR
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(TDR, PLS/Current Account) 3. Government securities that are Minimum 1.75% spread over 66-months old from the date of months KIBOR issuance including DSC/SSC/RIC 4. Prize Bonds 5. Alfalah GHP Principal Protected Fund Minimum 2 % spread over 6months KIBOR Minimum 1.75% spread over 6months KIBOR

4.3 ALFALH MILKIAT FINANCE: 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. . AMF-1: Acquisition of rented commercial/ industrial property by present tenant.. AMF-2: Construction on owned and in possession commercial/ industrial premises/ plot. AMF-3: Purchase of constructed commercial/ industrial property. AMF-4: Renovation of owned and in possession commercial / industrial property.

You are eligible to apply if:

You have been in business for at least 3 years. Amount of finance you need is between Rs 0.5 Million to Rs 30 Million under AMF 1, 2 & 3 or a maximum of Rs 3.5 Million for AMF 4.

Salient Features

AMF 1,2 & 3 shall be repayable in 2-15 years whereas AMF-4 shall be repaid in 2-4 years. Mark up shall be (1 Year KIBOR + 4%)

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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.

4.4 ALFALAH KAROBAR FINANCE:

AKF is a Running Finance facility between Rs 0.50M to Rs 20.0M. Tailor-made product for SMEs for their working capital financing based on the cash flow methodology. (Our Edge = Better pricing, quicker TAT and low processing charges.) At Bank Alfalah, all branches are designated to deal with AKF business. Thepurpose of the AKF is financing procurement of raw material, finished goods and receivables of SME businesses. SME Customers with following acceptable criteria are entertained in this product: 1. Resident Pakistanis 2. Individuals/ sole proprietors aged up to 65 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. For details and further assistance, please call now at 111-777-786 / 111-225-111 or visit your nearest Bank Alfalah branch. EEZEE FINANCE: All adult residents of Pakistan below 65years of age, salaried or businessmen, having a debt burden less than 50% of their net income.

4.5 AGRI FINANCE:

BANK ALFALAH'S ZARIE SAHULAT offers finance facilities covering entire spectrum of Farm and Non-Farm activities both for production and development purpose. We offer following wide range of Agri Finance Products to encourage farmers to increase farm production. Alfalah PaidawariZarieSahulat

Alfalah MusalsalZarieSahulat Alfalah Tractor and Transport ZarieSahulat Alfalah Machinery & Equipment ZarieSahulat Alfalah AabpaashZarieSahulat Alfalah Islah-e-AraaziZarieSahulat Alfalah Poultry ZarieSahulat Alfalah Dairy & Livestock ZarieSahulat Alfalah Fisheries ZarieSahulat Alfalah Silos/ Storage ZarieSahulat Alfalah Marketing ZarieSahulat Alfalah Agri Industrial ZarieSahulat Alfalah Bills /Guarantee ZarieSahulat( for growers corporate clients only). Alfalah Lease ZarieSahulat.

4.5 ALFALAH CAR FINANCE

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Its a scheme that enables one to own his desired car at easily affordable and flexible installments with a minimum down payment and insurance. Salient Features Lowest Financing cost available in the market Tenure of 1 to 5 years as per individual requirement Quickest processing Minimum processing charges: Rs. 3000 payable once Down Payment requirement of 25% Repayment through monthly installments Lowest Insurance rates available from banks approved insurance companies Monthly Installments Monthly Installments for Alfalah Car can be calculated by multiplying Banks financing amount with the following factors:

Periods
For 12 months

Factors
0.09072 0.04962 0.03609 0.02944 0.02553

For 24 months For 36 months For 48 months For 60 months Eligibility Criteria

All Businessmen, Corporate Employees, and other salaried or self-employed professionals having net take home income in excess of three times the monthly installment.

MONEY GRAM:
Bank Alfalah limited, in collaboration with Money Gram, offers remittance service to Pakistan. Money Gram is person to person money transfer service that allows consumers to receive money in just a few minutes. Money is paid to people through this A/c. Later money is paid to bank through H.O Treasury A/c. H.O Treasury A/c dr. RA A/c Money Gram cr.

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5. Financial Analysis

5.1 Ratio Analysis of bank Alfalah

1-Net Profit Margin Formula (Net profit after taxation / net sale) * 100
Year 2008 1,301,301 / 30,966,638*100 = 4.20 % Year 2009 897,035 / 35,561,312*100 = 2.52% Year 2010 968,452 /37,530,256 *100 = 2.58 %

Working 2008, 2009 Annual report 2009, page-18 profit and loss a/c 2010 Annual report 2010, page-17 profit and loss a/c Graphical Presentation
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Net Profit Margin

4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 2008 2009 2010 Net Profit Margin

Interpretation Net profit margin has been decreased over the year but in year 2009 and 2010 it is relatively stable in values.

2-Gross spread ratio Formula Net interest margin / mark-up earned

Year 2008 10,472,283 / 30,966,638 =0.34 times Year 2009 10,907,132/ 35,561,312 =0.31 times Year 2010 13,674,808/ 37,530,256 =0.36 times

Working 2008 Net income margin = mark-up earned mark-up expanses = 30,966,638-20,494,355=10,472,283 Page-18 2009 profit and loss account 2009 Net income margin = mark-up earned mark-up expanses = 35,561,312-24,654,180=10,907,132 Page-18 2009 profit and loss account 2010 Net income margin = mark-up earned mark-up expanses = 37,530,256-23,855,448=13,674,808 Page-17 profit and loss account
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Graphical presentation
Gross Spread Ratio

0.36 0.35 0.34 0.33 0.32 0.31 0.3 0.29 0.28 2008 2009 2010 Gross Spread Ratio

Interpretation Gross spread ratio is decrease in 2009 and then it is increase in 2010. 3-Non interest income to total income ratio Formula Non interest income / total income
Year 2008 11,751,850/42718488 =0.27 times Year 2009 12,017,858/ 47579170 =0.25 times Year 2010 14,122,586 / 51652842 =0.27 times

Working 2008 Total income=interest earned + non mark-up income =30,966,638+11,751,850 =42718488 2009 Total income=interest earned + non mark-up income =35,561,312 +12,017,858 = 47579170 Page -18 of 2009 profit and loss account 2010 Total income=interest earned + non mark-up income =37,530,256+ 14,122,586 = 51652842 Page - 17 of 2010 profit and loss account Graphical presentation

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Non Interest Income to Total Income Ratio

0.27 0.265 0.26 0.255 0.25 0.245 0.24 2008 2009 2010 Non Interest Income to Total Income Ratio

Interpretation Non interest income to total Income ratio is decrease in 2009 and then increase in 2010. 4-Spread ratio Formula Interest earned / interest expenses
Year 2008 30,966,638 / 20,494,355 =1.51 times Year 2009 35,561,312 / 24,654,180 =1.44 times Year 2010 37,530,256 / 23,855,448 =1.57 times

Working 2008, 2009 Page #18 2010 Page # 17 Graphical presentation

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Spread Ratio

1.6 1.55 1.5 Spread Ratio 1.45 1.4 1.35

2008

2009

2010

Interpretation Spread ratio is decrease in 2009 as compare to 2008 and then increase in 2010.

5-Return on Assets Formula (Earning before income tax / total assets) * 100
Year 2008 22289075/ 348,990,764 *100 =0.06 % Year 2009 25923448/ 389,070,055 *100 =0.07 % Year 2010 25224193/ 411,483,839 *100 =0.06 %

Working 2008 EBIT = profit before tax + interest expenses =1,794,720 + 20,494,355 =22289075 page-18 2009 profit and loss account 2009 2009- EBIT = profit before tax + interest expenses =1,016,316+ 24,907,132 =25923448 page-70 2009 profit and loss account 2010
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2010- EBIT = profit before tax + interest expenses =1,368,745 + 23,855,448 =25224193 page-81 profit and loss accounts Graphical Presentation
Return on Assets

0.07 0.068 0.066 0.064 0.062 0.06 0.058 0.056 0.054 2008 2009 2010 Return on Assets

Interpretation Return on asset is increasing and then stable in its value in 2010. 6-DuPont Return on Assets Formula (Net income / sale) * (sale / total assets) * 100
Year 2008 (0.042022*0.088732) * 100 =0.37 % Year 2009 (0.0252250*0.091400) * 100 =0.23 % Year 2010 (0.0272333*0.086422) * 100 =0.23 %

Working 2008 Net income =1,301,301 page-18 2009 profit and loss account Sales = 30,966,638 Total assets = 348,990,764page-17 2009 balance sheet DuPont return on assets = (Net income / sale) * (sale / total assets) * 100 = (1,301,301/30,966,638 * 30,966,638 / 348,990,764) * 100 = (0.042022*0.088732) * 100 2009 Net income = 897,035 page-18 2009 profit and loss account
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Sales = 35,561,312 Total assets = 389,070,055page-17 2009 balance sheet DuPont return on assets = (897,035/ 35,561,312 * 35,561,312 / 389,070,055) * 100 = (0.0252250*0.091400) * 100 2010 Net income = 968,452 page17 profit and loss account Sales = 37,530,256 Total assets = 411,483,839 page16 balance sheet unconsolidated DuPont return on assets = (968,452 / 35,561,312 * 35,561,312 / 411,483,839) * 100 = (0.0272333*0.086422) * 100

Graphical Presentation
DuPont Return on Assets

0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 2008 2009 2010 DuPont Return on Assets

Interpretation DuPont return on assets has been decrease over the years. It is due to the increase in the net income as compared to the sales.

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7-Return on Total Equity Formula (Net income / total equity) * 100

Year 2008 1,301,301/ 14,608,523 * 100 = 8.91 % =4.54% =4.91 % Year 2009 897,035/ 19,770,260 * 100 Year 2010 968,452 / 19,726,556 * 100

Working 2008 (page18 2009 profit and loss account) (page 17 2009 balance sheet) 2009 (page 18 2009 profit and loss account) (page 17 2009 balance sheet) 2010 (page16 profit and loss account) (page17 balance sheet) Graphical Presentation
Return on Total Equity

9 8 7 6 5 4 3 2 1 0 2008 2009 2010 Return on Total Equity

Interpretation Return on total equity is decrease over the year and this is not good trend for the organization, it should be increase for business profitability.
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8-Debt Ratio Formula Total Liabilities / Total Assets

Year 2008 331,946,025 / 348,990,764 = 0.95 Times Year 2009 366,936,635 / 389,070,055 = 0.94 Times Year 2010 389,178,295 / 411,483,839 = 0.94 Times

Working 2008 (page17 2009 balance sheet) 2009 (page17 2009 balance sheet) 2010 (page16 2010 balance sheet) Graphical Presented
Debt Ratio

0.95 0.948 0.946 0.944 0.942 0.94 0.938 0.936 0.934 2008 2009 2010 Debt Ratio

Interpretation Debit ratio has been decrease over the years.

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9-Debt / Equity Ratio Formula Total liabilities / total share holder Equity
Year 2008 331,946,025 / 14,608,523 =22.72 Times Year 2009 366,936,635 / 19,770,260 =18.56 times Year 2010 389,178,295 / 19,726,556 =19.72 times

Working 2008 (page17 2009 2009 (page69 2010 (page 16 Graphical Presentation
Debt to Equity Ratio

25 20 15 Debt to Equity Ratio 10 5 0

2008

2009

2010

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Interpretation Debt/ equity ratio has been decrease in 2009 and then increase in 2010.

10-Times Interest Earned Formula Earning before Income Tax (EBIT) / Interest Expenses
Year 2008 22289075 / 20,494,283 =1.08 times Year 2009 25923448 / 24,654,180 =1.05 times Year 2010 25224193 / 23,855,448 =1.05 times

Working 2008 EBIT = profit before tax + interest expenses =1,794,720 + 20,494,355 =22289075 (page#18 2009 profit and loss account) Interest expenses =20,494,283 2009 EBIT = profit before tax + interest expenses =1,016,316+ 24,907,132 =25923448 (page#70 2009 profit and loss account ) Interest expenses =24,654,180 2010 2010- EBIT = profit before tax + interest expenses =1,368,745 + 23,855,448 =25224193 (page#81 profit and loss accounts ) Interest expense = 23,855,448 Graphical Presentation

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Times Interest Earned

1.08 1.075 1.07 1.065 1.06 1.055 1.05 1.045 1.04 1.035 2008 2009 2010 Times Interest Earned

Interpretation Time interest has decrease over the years.

11-Advance /deposit ratio Formula Advance / deposit

Year 2008 191,790,988/300,732,85 8 =0.64 times Year 2009 188,042,438/324,759,75 2 =0.58 times Year 2010 207,152,546/354,015,31 1 =0.58 times

Working 2008, 2009 Page # 17 of 2009 2010 Page # 16 of 2010 Graphical presentation

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Advance to Deposit Ratio

0.64 0.63 0.62 0.61 0.6 0.59 0.58 0.57 0.56 0.55 2008 2009 2010 Advance to Deposit Ratio

Interpretation Advance to deposit ratio is decrease over the period and it is worthy for the company.

12-Operating cash flow ratio Formula Operating cash flow / current liabilities
Year 2008 7,403,300/329166391 =0.02 times Year 2009 25,279,776/359186603 =0.07 times Year 2010 18,112,043/381495184 =0.05 times

Working 2008 Current liabilities = bill payable + borrowing + deposit +other liabilities =3,452,031+13,690,222+300,732,858+11,291,280
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=329166391 (Page#17 2009) 2009 Current liabilities = bill payable + borrowing + deposit +other liabilities =3,766,144+20,653,921+324,759,752+10,006,786 =359186603 (Page#17 2009 balance sheet) 2010 Current liabilities = bill payable + borrowing + deposit +other liabilities =4,521,533+13,700,124+354,015,311+9,258,216 =381495184 (Page#16 2010 balance sheet) Graphical presentation
Operating Cash Flow Ratio

0.07 0.06 0.05 0.04 0.03 0.02 0.01 0 2008 2009 2010 Operating Cash Flow Ratio

Interpretation Operating cash flow ratio first increase in 2009 this is not good for the company and then in year 2010 it is relatively stable.

13-Dividend Per share Formula Total dividend / no. of outstanding shares

Year 2008 975,000/799500 =1.22 Rs. Year 2009 0 / 1349156.3 =0.00 Rs. Year 2010 1,079,325 / 1349156.3 =0.80 Rs.

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Working 2008 Dividend paid = 975,000(page20 2009 cash flow) No. of outstanding shares = 7,995,000/10=799500 2009 Dividend paid = 0 (page20 2009 cash flow hence there is no dividend paid amount in 2009 ) No. of outstanding shares = 13,491,563/10=1349156.3 (page 62 2009 share capital note 19.) 2010 Dividend paid = 1,079,325(page19 2010 cash flow) No. of outstanding shares = 13,491,563/10=1349156.3 (page61 2010 share capital note 19.) Graphical Presentation
Dividend per Share

1.4 1.2 1 0.8 0.6 0.4 0.2 0 2008 2009 2010 Dividend per Share

Interpretation Dividend per share of the organization is fluctuation over the year it is depend open the company policy.

14-Earning per share Formula Net income / number of outstanding

Year 2008 1,301,301 / 799500 Year 2009 897,035 / 1349156.3 Page 28 Year 2010 968,452 / 1349156.3

=1.63 Rs.

=0.66 Rs.

=0.72 Rs.

Working 2008 Net income = 1,301,301 No. of outstanding shares = 7,995,000/10=799500 2009 Net income =897,035 No. of outstanding shares = 13,491,563/10=1349156.3 (page 62 2009 share capital note 19.) 2010 Net income = 968,452 No. of outstanding shares = 13,491,563/10=1349156.3 (page61 2010 share capital note 19.) Graphical Presentation
Earning per Share

1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2008 2009 2010 Earning per Share

Interpretation Earning per share has increasing over the years which is good trend for the company.

15- Price / Earning Ratio Formula Market value per share / earning per share
Year 2008 Year 2009 Page 29 Year 2010

21.32 / 1.63 =13.07 Rs.

16.41 / 0.66 =24.86 Rs.

16.53 /0.72 =22.95 Rs.

Working 2008 Market value per share = 21.32 (page 11 share information 2009) Net income = 1,301,301 No of out standing shares = 7,995,000/10=799500 Earning per share = 1,301,301 / 799500 = 1.63 2009 Market value per share = 16.41 (page 11 share information 2009) Net income = 897,035 No of out standing shares = 13,491,563/10=1349156.3 Earning per share = 897,035/ 1349156.3 = 0.66 2010 Market value per share = 16.53 (page 10 share information 2009) Net income = 968,452 No of out standing shares =13,491,563/10=1349156.3 Earning per share = 968,452 / 1349156.3 = 0.72 Graphical Presentation
Price / Earning Ratio

25 20 15 Price / Earning Ratio 10 5 0

2008

2009

2010

Interpretation
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Price earning ratio of the company has been increase over the years. It is good sign for the company.

Horizontal analysis and vertical analysis

5.2 Horizontal analysis Methods of financial statement analysis generally involve comparing certain information. The horizontal analysis compares specific items over a number of accounting periods. For example, accounts payable may be compared over a period of months within a fiscal year, or revenue may be compared over a period of several years. It is a procedure in fundamental analysis in which an analyst compares ratios or line items in a company's financial statements over a certain period of time. The analyst will use his or her discretion when choosing a particular timeline; however, the decision is often based on the investing time horizon under consideration.

HORIZANTAL ANALYSIS OF BANK ALFALAH LTD. AS ON DEC 31 2008, 2007 & 2006 Years (Rupees in 000) 2010 2009 ASSETS Cash and balances with treasury banks Balances with other banks Lending to financial institutions Investments Advances Operating fixed 118.41 29436378 27859360 2008 2010 118.41 2009 105.7 2008 100 Horizontal Analysis

169.5

18380738

12731952

169.5

144.4

100

26.616 134.46 132.88 assets

3452059 88491564 171198992

12456653 56502210 144999325 131.14

26.616 134.46 132.88 11922324

27.71 156.6 118.1

100 100 100

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10502 Deferred tax asset Other assets TOTAL ASSETS LIABILITIES Bills payable Borrowings from financial institutions Deposits and other accounts Sub-ordinate loans Liabilities against assets subject to finance lease Deferred tax liability

990 0 159.58 126.59 111.68 163.09 6013097 328895152 4138243 21230697

131.14 5633051 275685541

113.5 0 159.58 126.59 0

100 0 106.7 119.3 0 100 100

3091135 8394130 239509391 3222106

111.68 163.09 125.56 79.798

133.9 252.9 114.1 99.96

100 100 100 100

125.56 79.798

273173841 3220858

10.85

1379809

1921338

10.85

71.82

100

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Other liabilities TOTAL LIABILITIES

154.56 126

9531860 312675308 16219844

7305496 263443596 12241945

154.56 126 139.23

130.5 118.7 132.5

100 100 100

NET ASSETS 139.23 REPRESENTED BY SHAREHOLDERS EQUITY Share capital 159.9 Reserves 115.15 Unappropriated 122.12 profit 138.17 Surplus on revaluation of assets - net of tax TOTAL EQUITY 145.94

6500000 2414833 4851840 13766673 2453171

5000000 2749533 2823072 10572605 1669340

159.9 115.15 122.12 138.17 145.94

130 87.83 171.9 130.2 147

100 100 100 100 100

139.23

16219844

12241945

139.23

132.5

100

HORIZONTAL ANALYSIS BANK AL FALAH LIMITED PROFIT & LOSS ACCOUNT AS ON DEC 31 2008, 2007 & 2006 2010 Mark-up / return / interest earned Mark-up / return / interest expensed Net mark-up / interest income 31046583 20331194 10715389 2009 2008 Horizontal Analysis (Rupees in 000) 2010 2009 2008 21191470 15232886 5958584 146.51 133.47 179.83 121.7 109.1 153.8 100 100 100

25783871 16620963 9162908

Provision against nonperforming loans and advances - net Provision for diminution in value of investment Bad debts written off directly Net mark-up / interest income after provisions Non mark-up / interest income Fee, commission and brokerage income Dividend income Income from dealing in foreign currencies Gain on sale of securities Unrealized loss on revaluation of investments classifies as held for trading Other income Total non-mark-up / interest income Non mark-up / interest expense Administrative expenses Provisions against offbalance sheet 2,539,321 300,943 914,845 424,220 2,429,599 64,722 474,510 2053192 1,804,998 37,393 386,997 180751 140.68 804.81 236.4 234.7 134.6 173.1 122.6 1136 100 100 100 100 7,172,032 6,786,197 5,259,357 136.37 129 100 1479062 0 0 0 2035997 2370867 697690 291.82 339.8 100

28298 3,543,357

5844 2,376,711

1537 699,227

1841.1 506.75

380.2 339.9

100 100

181,571

21530

27599

657.89

78.01

100

1,247,669 5,245,427 12,417,459

1,031,372 6,038,466 12,824,663

842,099 3,224,639 8,483,996

148.16 162.67 146.36

122.5 187.3 151.2

100 100 100

10,741,399 28,582

8,272,587 6,959

5,874,745 0

182.84 0

140.8 0

100 0

obligations Other charges Total non mark-up / interest expenses Profit before taxation Taxation - Current - Prior years - Deferred Profit after taxation Attributable to: Unappropriated profit brought forward Transferred from surplus on revaluation of fixed assets - net of tax Profit available for appropriation 122,758 10,622,739 1,794,720 1730051 221797 1014835 493419 1301301 4851840 9,565 8289111 4,535,552 1726810 0 321487 1405323 3130229 2823072 43,306 5,918,051 2,565,945 476226 100874 427902 803254 1962691 1886845 283.47 179.5 69.944 0 22.09 0 176.8 0 100 100 100 0

219.88 0 100 237.17 75.13 100 61.428 175 100 66.302 159.5 100

24586

24585

26074

94.293

94.29

100

6177727

5977886

3675610

168.07

162.6

100

5.3 Vertical Analysis

Operating fixed assets Other assets TOTAL ASSETS LIABILITIES Bills payable Borrowings from financial institutions Deposits and other accounts Sub-ordinate loans Liabilities against assets subject to finance lease Deferred tax

13773293 8989186 348990764 3452031 13690222

11922324 6013097 328895152 4138243 21230697

10502990 5633051 275685541 3091135 8394130

3.9466 2.5758 100 0.9891 3.9228

3.625 1.828 100 1.258 6.455

3.8098 2.0433 100 1.1213 3.0448

300732858 2571169

273173841 3220858

239509391 3222106

86.172 0.7367

83.06 0.979

86.878 1.1688

208465

1379809

1921338

0.0597

0.42

0.6969

TOTAL LIABILITIES

331946025

312675308 16219844

263443596 12241945

95.116 4.884

95.07 4.93

95.559 4.441

NET ASSETS 17044739 REPRESENTED BY: Shareholders Equity Share capital 7995000 Reserves 3166056 Unappropriated 3447467 profit 14608523 Surplus on revaluation of assets - net of tax 2436216

6500000 2414833 4851840 13766673 2453171

5000000 2749533 2823072 10572605 1669340

2.291 0.907 0.988 4.186 0.698

1.98 0.73 1.48 4.19 0.75

1.814 0.997 1.024 3.835 0.606

liability Other liabilities 11291280 9531860 7305496 3.2354 2.898 2.6499

TOTAL EQUITY

17044739

16219844

12241945

4.884

4.93

4.441

VERTICAL ANALYSIS BANK AL FALAH LIMITED PROFIT & LOSS ACCOUNT AS ON DEC 31 2008, 2007 & 2006 2010 Mark-up / return / interest earned Mark-up / return / interest expensed Net mark-up / interest income Provision against nonperforming loans and advances - net Provision for diminution in value of investment Bad debts written off directly Net mark-up / interest income after provisions Non mark-up / interest income Fee, commission and brokerage income 2,539,321 2,429,599 1,804,998 8.1791 9.423 8.5176 31046583 20331194 10715389 2009 2008 Vertical Analysis (Rupees in 000) 2010 2009 21191470 15232886 5958584 100 65.486 34.514 100 64.46 35.54 2008 100 71.882 41.23

25783871 16620963 9162908

2035997

2370867

697690

6.55

9.195

3.2923

1479062 28298 3,543,357 7,172,032 5844 2,376,711 6,786,197 1537 699,227 5,259,357

4.76 0.091 11.413 23.101

0 0.023 9.218 26.32

0 0.0073 3.2996 24.818

Dividend income

300,943

64,722

37,393

0.9693

0.251

0.1765

Income from dealing in foreign currencies Gain on sale of securities Unrealized loss on revaluation of investments classifies as held for trading Other income Total non-mark-up / interest income Non mark-up / interest expense Administrative expenses Provisions against offbalance sheet obligations Other charges Total non mark-up / interest expenses Profit before taxation Taxation - Current - Prior years - Deferred Profit after taxation Attributable to: Unappropriated profit brought forward Transferred from surplus on revaluation of fixed assets - net of tax Profit available for appropriation

914,845 424,220

474,510 2053192

386,997 180751

2.9467 1.3664

1.84 7.963

1.8262 0.8529

181,571

21530

27599

0.5848

0.084

0.1302

1,247,669 5,245,427 12,417,459

1,031,372 6,038,466 12,824,663

842,099 3,224,639 8,483,996

4.0187 16.895 1357.3

4 23.42 2703

3.9738 15.217 2192.3

10,741,399 28,582 122,758 10,622,739 1,794,720 1730051 221797 1014835 493419 1301301 4851840

8,272,587 6,959 9,565 8289111 4,535,552 1726810 0 321487 1405323 3130229 2823072

5,874,745 0 43,306 5,918,051 2,565,945 476226 100874 427902 803254 1962691 1886845

5915.8 2.2908 2.3403 85.547 5.7807 0 5.5724 0.7144 3.2687 1.5893 4.1914

38424 0.042 0.058 49.87 27.29 0 6.697 0 1.247 5.45 12.14

21286 0 1.343 69.755 12.108 0 0.476 2.0192 3.7905 9.2617

24586

24585

26074

0.0792

0.095

0.123

6177727

5977886

3675610

19.898

23.18

17.345

B) Vertical Analysis It is a method of financial statement analysis in which each entry for each of the three major categories of accounts (assets, liabilities and equities) in a balance sheet is represented as a proportion of the total account. The main advantages of analyzing a balance sheet in this manner are that the balance sheets of businesses of all sizes can easily be compared. It also makes it easy to see relative annual changes in one business. When using vertical analysis, the analyst calculates each item on a single financial statement as a percentage of a total. The term vertical analysis applies because each year's figures are listed vertically on a financial statement. The total used by the analyst on the income statement is net sales revenue, while on the balance sheet it is total assets. This approach to financial statement analysis, also known as component percentages, produces common-size financial statements. Common-size balance sheets and income statements can be more easily compared, whether across the years for a single company or across different companies.

Bank Alfalah Ltd. The financial statements prepared by the management, present fairly its state of affairs, the results of its operating cash flow and changes in equity. All directors of the company are registered as tax payers and none of them has default in payments of any loan to a banking company. The auditors perform their audit in accordance with the auditing standards as applicable in Pakistan. These standards require that they plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any material misstatement. And in their opinion the consolidated financial statements present fairly the financial position of Habib Bank Limited as at December 31, 2006, 2007 & 2008 and the results of its operations, its cash flows and changes in equity for the year then ended in accordance with the approved accounting standards as applicable in Pakistan. The board of directors through its sub committee called Board Risk Management Committee (BRMC) oversees the overall risk of the bank. RMD is the organizational arm performing the functions of identifying, measuring, monitoring and controlling the various risks and assists the Apex level committee and the various sub- committees in conversion of policies into action. Credit risk Management processes encompasses identification, assessment, measurement, monitoring and control of the credit exposures. The bank, as per State
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Bank of Pakistan Guidelines, has migrated to baseII as on January, with the standardized approach

6. Account opening Department

Borrowing funds from different sources has become an essential feature of todays business enterprises. But in the case of bank borrowing funds from outside parties is more vital because the borrowed capital of a bank is much greater their own capital. Banks borrowing is mostly in the form of deposits. These deposits are lent out to different parties such deposit creation is done through open an account in the bank. The Bank does not make payment of a cheque bearing a six-month or older date. If an account is not operated in six months, it is called Dormant Account.

Page 41

6.1 Types of Account Current Account. Saving Account. Notice Deposit. Term Deposit.

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6.1.1 Current Account

There is no interest on these accounts. It is only for transaction purposes. They paid on demand. Where a banker accepts, paying all checks drawn against him to extend of the balance in the accounts. As there is no profit paid on this account, it is also called checking account because cheque can be drawn on it. Current account is mostly opened for business. The minimum balance requirement for opening the current account is Rs. 10000.
6.1.2 Saving Account The purpose of this account is to introduce the habit of saving individuals in the neighborhood. The profit on saving accounts is paid on the basis of profit and loss sharing at 9 % six monthly. The minimum balance requirement for opening the account is Rs.1000. 6.1.3 Notice Deposits Notice Deposits are kind of fixed deposits. The minimum balance requirement for opening the account is Rs. 5000 and payment is drawn on maturity of the specific period. Notice deposit is of two types. One for which a prior notice of 30 days and is required from the customer before withdrawing deposited amount and for which rate return is 6.10%. Second for which a prior notice of 30 days and above is required from the customer before withdrawing deposited amount and for which the rate of return is 7.50 %.

6.1.4 Term Deposit

A term deposit is a deposit that is made of a certain period of time. At the end of specific period the customer is allowed to with draw the principal amount. The rate of return of this account varies from 8 % to 13 %. The term deposit account varies from one month to 5 years and the minimum balance requirement is Rs. 5000.

Profit Calculation Methods

Daily Product Basis Deposited Amount Rate of return. 365 (No. of days in a year) Average Month Balance. Sum of daily end Balance Rate of return / No. of days in month Minimum Month Balance Any minimum balance during the month is taken for calculating profit

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Saving A/C (05 days _ Minimum Monthly Balance). Minimum Balance of first 5 days is compared to the minimum balance of the minimum balance of remaining 25 days. Less balance is calculated for profit. The amount of profit is given to deposits in three ways: Cash payment ( only in case of term Deposits ). Or as per customer requirement. By sending bank draft to depositors home address or officers or whichever is specified as mailing address. The depositors account is credited at maturity. Amount of Deposits & Other Accounts in 1999. Fixed Deposits Rs. 4,038,133,000. Saving Deposits Rs. 8,734,265,000. Current Accounts Rs. 1,499,657,000. Margin, Call & Sundry Deposits Rs. 158,708,000. Deposits of Federal Government Rs. 1,389,710,000. Particulars of Deposits & Other Accounts In Local Currency Rs. 8,829,008,000. In Foreign Currencies Rs. 6,991,465,000.

Total Deposits Rs. 15,820,473,000.

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6.2 Account opening procedure

For the chequing account, there are different types of account holders are required for all these types of account holders. The operation/procedure requirement that is needed for Individual Account differs greatly from the Joint Accounts proprietorship A/C, Partnership A/C, Private Limited company A/C and Public Limited Company A/C.
6.2.1 Individuals Account

When a single man or woman opens an account in his or her own name and has the right to operate, it is called individual A/C.
Documentation

Copy of National Identity Card. Proper Identification ( Introduction ).

Operation

The person place in the type of account and type of operation required in the account opening form. He/she fills in part 1 of the form, a fix his/her either two of four similar signature ( or thumb expression in the signature space ) and get it introduced and signed by a person who already has an account with the bank and write his account number in the specific rows in a specific space. The person fills his or her father, mother, husband/wife or any other relatives name, his/her address, phone number, his or her sign to certify this requirement. This requirement is needed because in his/her absence bank can have correspondence with a specific person. The person deposits the initial amount for opening account onto the cash counter. The person put his signature on form on two places in authorized Signature and fills in the Title of Account space by writing his name. If the person put his signature in Urdu or any other language other than English, he signed a Vernacular Form. The next day is opening of account 6.2.2 Joint Account When two or more persons neither partners nor, trustees, open an account in their name is joint account.
Documentation copy of N.I.C card. Identification ( Introduction ).

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Operation

The person checks the type of account and type of operation required in the respective box on the form. The person fills the Part-1 and Part-II Signature of box or all persons are obtained on the formed in the area specified for signature. In the title of account space names of all persons maintained. Account holders specified in the form that they will operate the form singly or jointly. 6.2.3 Proprietorship Account When the owner of the firm operating singly, open an account in his firm name. Documentation Copy of N.I.C. Status of the firm. Copy of Sole Proprietorship Declaration. Operation All operation remains the same, except that the firm name is written in title of account area and Signature of the proprietor in the specified area.
6.2.4 Partnership Account

The account is opened in the firm name and all partners designate one or two persons to act behalf of the partnership firm all acts of the firm jointly and serverly.
Documentation

Copy of N.I.C of all partners. Status of the firm ( In case of registered firm ). The attested copy of Partnership Deed (in case of registered firm ). Operation of the A/C (as per deed). Third party Mandate. Letter showing the authority of one or more partners to act on.
Operation

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All other requirements are same except that all partners dully sign the form, cards are signed by all of those partners who will act on behalf of the firm. Private Limited Company account Documentation N.I.C of all partners. Articles and Memorandum of association. List of directors. Resolution of Board of directors. Certificate of Incorporation Form 29 (B) (Lasted Copy). Company secretary will certify all these copies. Operation The person authorized in the resolution of the board of directors put their signature on the S.S Card. Next of Kin requirement is not need in a case of Private Limited Company. Other procedure is same. After completing each and every formalities are signed by all partners who will act on behalf of the firm. 6.2.5 Pubic Limited company account
Documentation

Copy of N.I.C of all partners. Articles and Memorandum of association. List of directors. Resolution of Board of Directors. Certificate of commencement of Business.
Operation Operation is same as Private Limited Company Responsibilities of Account Opening Department

Documentation Intact. Proper Introduction.

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 ChequeBook Issuing. Receiving Inward cheques. Account Closing. Every Day Posting. 6.3 ACCOUNT CLOSING When a customer wants to close his account because of any reason, he has to give a hand written application to the head of the Operations Department to close his account, plus remaining leaves of the chequebook. The Operations Manager first verifies the signatures of account holder, then closing is done from the registers on the computer where the account was opened. In the file of account holder, his account opening form is also crossed. For this closing, a fee of Rs. 150 is charged in Bank Alfalah.
6.4 Cheque Book Issuance

When the account is opened, then, the customer is given a cheque book to sign upon and en cash money. It is proceeded as under.
6.4.1 PROCEDURE

All the account opening formalities must be completed before, issuance of cheque book. Particulars of the chequebook requisition should be completed containing title of account, account number, type of currency, number of leaves and signature of the customer. Signature of, the customer are verified on the requisition. If customer is unable to collect his chequebook, then he can give authority to the 'third person to collect his cheque book' on his behalf by signing on the back of .the requisition. In such case, the particulars of the third person are required like name of the person, NIC number and signature of that person on requisition and chequebook issuance register. Chequebook is taken out from the safe/locker. It is assured that series of the chequebook is in order. Particulars are entered in the cheque book issuance register. Account number is stamped on every leaf of the cheque book and those leaves are counted. Name of the account holder is written on the cover of the cheque book and requisition on the chequebook for further issuance is properly filled stamped and signed by officer of the bank. Chequebook is delivered to the customer and his signature is taken on the cheque book issuance register, cheque serial number is entered in the system (Bank Excel). Stock of Cheque books are balanced at the end of each day and kept under safe custody. Earlier in the banks were charging a fee for issuance of cheque book, but now whenever a new account is opened, the account holder is issued a cheque book free of charge.
Bank Alfalah issues the following chequebooks.

Page 48

Saving account - 25 leaves Current account - 50 leaves

Current account - 25 leaves Foreign currency $ - 10 leaves Foreign currency - 10 leaves Loose cheques are also issued in some cases. Receiving Inward cheques Another responsibility &function of Account Opening Department is to receive Inward cheques for collection of other banks. These cheques are sent to clearing official who clears these cheques at SBP from other banks. Every Day Posting At the end of each day, Posting of cheque books is performed. The account opening department makes credit vouchers of excise duty and provincial tax on chequebook leaves, and posts it in the company. 7. CASH DEPARTMENT

Mr. Muhammad Farooq and Mr. Naseer Ahmed us in learning about Cash Department. Cash Department performs two main functions:

Cash Deposits Cash Payments 7.1 CASH DEPOSITS

Cash receiving officer receives cash along with pay-in slip from the customer. He checks if the deposit slip is properly filled up containing title of account, account number, date and amount in word and figures. He also verifies signature. Detail on both counter file and cash receipt voucher should be the same. Cash is received by the cash receiving officer, twice counted and matched with the deposit slip. The cash details are written on the back of the deposit slip and are also entered in cash receiving register. Cash received stamp is affixed on the face of the deposit slip along with the signature of the cash receiving officer. Deposit slip and cash receiving register is given to the officer in cash department. Again proper scrutiny is made by the officer cash department both on cash receipt and cash receiving register. Officer cash department signs both the deposit slip and register; Deposit slip is credited and posted in the concerned account in the system. Counter folio is given to the depositor as receipt. One consolidated cash debit voucher is posted in the system to balance the cash. 7.2 PAYMENT OF CHEQUES The process for payment of cheques for local and foreign currency is same. First the customer presents the cheque or holder to branch and the particulars of cheque are properly filled in. Signature of the holder is

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taken on the back of the cheque. Cheque handed over to the officer cash department for scrutiny where officer checks the date, amount in words and amount in figures, payee's name crossing if any, account number, cheque serial number, any material alterations, endorsements and signature of the customer. Account is debited and then the officer cancels cheque. It is posted in the system and posting stamp and number is affixed on it. Cheque is handed over to the cash payment officer for payment. One more signature on the back of the cheque is taken from the holder to match with the first one, and then cash is paid to the payee. Cash detail is written on the back of the cheque. Cash paid stamp is affixed on the face of the cheque. Entry is passed in the cash payment register. If the payment is of Rs. 50000 the cashier can make it on its own. If the amount is greater than Rs. 50000 to Rs. 100,000 the cashier and cash deposit Incharge will verify the check and will sing it. Then the payment will be made. But, if the amount is greater than Rs. 100000 to Rs. 1000,000 the manager operation will also verify the check and sign it so that the payment can be made. If the amount is greater than Rs. 1000,000 the Branch Manager Will also verify the check and sign it. Otherwise the payment will not be made.

8.

CLEARING DEPARTMENT

In clearing, Mr. Anees remained so helpful. The clearing process majority involves receiving the cheques and making payments. This process can be inward or outward. CLEARING PROCESS (INWARD/OUTWARD) Here t he local cheques are received that are drawn on BAF. All the cheques are received on one counter alongwith the paying slips duly filled in properly containing particulars of cheques and account harder. Counter folio of paying slip is handed over to the customer by putting stamp for #cheque received for collection for Bank Alfalah' on it duly signed by officer. . These cheques are scrutinized and cheques for local clearing are separated from OBC. These are then entered in clearing register and cheques for collection, are entered in OBC register and handed over the Bills Department for collection. Clearing officer checks and verifies title of all the cheques deposited by the customers to confirm the good title of the cheques. Cheques are scrutinized properly and paying slips are separated from cheques. Special crossing, endorsement and clearing stamps are affixed on the cheques. Cheques of each bank are sorted and arranged branch wise. All the cheques are then entered into the clearing system of the bank. Print out of the clearing is taken and details are attached with the cheques of each bank. Details of these banks are then entered into the clearing schedule containing number of cheques presented and their total amount against the name of each bank. Then total number of cheques presented to all banks and their total amount is written on the foot of that schedule, which is tallied with the clearing register. Next morning, these cheques are delivered to the respective banks in clearing house of State Bank of Pakistan between 9:00 to 9:30AM. In the same manner, other banks present their clearing drawn on Bank Alfalah. Total number of cheques and their amount delivered to other banks and received from them are written on the Clearing House schedule branch for their payment. After proper scrutiny of cheques, verification of signatures and confirmation of balance in the account, the Officer Cash Department pays these cheques by canceling and posting them in the system. If any cheque is not passed due to insufficient balance or any other reason, Officer Cash Department returns the same cheque by attaching a cheque return memo containing reason for return. This cheque is entered into the cheque returned register and bank charges are deducted according to the schedule of charges.

Page 50

Second clearing is called at 2:30PM to check the fate of the cheques presented to other banks in the morning. If any cheque is to return, that is delivered to the same bank in second clearing. In the same manner, if any cheque presented by Bank Alfalah in first clearing is returned, they receive it and once again give schedule of clearing figure to the Officer Clearing House SBP containing number of cheques and their amount delivered and received unpaid.
8.1 Remittances Department The need of remittances is commonly felt in todays business. The main function of remittance department in a bank is the transfer of funds. Mr. Hassan in Bank Alfalah is the officer for Remittances Department. In remittances, following banking instruments are used:

Pay order Demand draft Telegraphic transfer

The procedure for dealing with all these under local as well as foreign currency in BAF is as under. 8.1.1 Pay Order A pay order is a written order issued by a bank, drawn upon & payable by itself, to pay a specified sum of money to or to the order of a specified person.

8.1.2 Procedure for Pay Order

Application form is given to the customer to fill. Two signatures are taken on the form one for request and other for receiving the instrument. All the particulars of application form are checked and bank commission charges and withholding tax is written on the top of the application form. If the customer is maintaining his account with the branch, he can give cheque for total amount of instrument plus bank charges. Cheque and application from is then given to the officer Cash Department for the payment of cheque. After proper scrutiny, Officer Cash Department posts the cheque and signs the application form in token of payment received. If the customer wants to pay cash, then cash is deposited by the customer along with the bank charges and withholding tax. Application form is then given to the Remittances Incharge for issuance of instrument. He enters all the particulars of the application form in the system and computer gives an Auto Control Number to the instrument. Printout is taken on the block of payment Order. Two authorized officers of the branch then sign it. Instrument is then protectographed, and given to the customer. When instrument is presented for payment, it is posted in the system and canceled by the Remittances Incharge after proper scrutiny. 8.1.3 DEMAND DRAFT A Demand Draft (DD) is an instrument, which is drawn by one bank upon another bank for a specific sum of money payable on demand. It is made by the bank, given to the purchaser against cash or cheque. Parties Involved in DD:

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 Purchaser Issuing Branch Drawee Branch Payee Procedure for Issuing DD Issuance procedure of Demand Draft is same as of pay Order. PROCEDURE FOR DEMAND DRAFT PAYABLE When DD advice is received, signatures of both signatory on the DD are verified. All the particulars of the DD payable are entered in the system. Prints out of vouchers (DD payable) are taken. When instrument is presented for payment, signatures of the attorneys are verified on DD and after proper scrutiny, it is posted in the system and canceled by the Remittances Incharge. 8.1.4 Telegraphic Transfer Sometimes, when the remittance is urgently required by the remitter, Telegraphic Transfer (TT) is issued . TT may be issued to general public on their written request and against the value received. Procedure for Issuing Telegraphic Transfer Application form is given to the customer to fill. Two signatures are taken on the form one for request and other for receiving the instrument. All the particulars of application form are checked and bank commission charges and withholding tax is calculated and written on the top of the application form (if customer is tax payer, he can give tax exemption certificate). If the customer is maintaining his account with the branch, he can give cheque and application form is then given to the officer for the payment of cheque. After proper scrutiny, Officer Cash Department posts the cheque. After proper scrutiny, Officer Cash Department posts the cheque and signs the application form, to assure that payment is received. If the customer wants to pay cash, it is deposited by the customer on cash counter. Cash Receiving Officer receives cash n the application form along with the bank charges and withholding tax. Application form is then given to the Remittances Incharge for issuance of the instrument. He enters all the particulars of the application form in the system (BPG) and computer gives an Auto Control Number to the T. T. Telegraphic Transfer message is written in the telex containing name of transferring branch, name of receiving branch, date, amount, currency, payees name and account number or identification if any, payer name and payment advice. A test number is given to the T. T. message for receiving branch. This message is then sent through telex to the receiving branch followed by a T.T. advice. The customer is confirmed that T.T. has been sent. Procedure for T. T. Payable When T.T. message is received, tested number on the T.T. is checked and verified. Tested number is then written in the register and signed by the holder of test keys for officer record. All the particulars of the T.T. payable are entered in the system. Payment instruction on the T.T. message are followed if it is pay and advice it will be paid through TTR on the cash counter or through clearing and if it is credit and advice, it will be transferred in the account mentioned in the T.T. message. Printouts of vouchers (T.T. payable) are taken. If TTR is presented for payment, signatures of the authorized officers are verified on TTR and after proper scrutiny, it is posted in the BPG and canceled by the remittances Incharge.

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Procedure for Foreign Demand Draft Issuance: Application form is given to the customer to fill the same. Two signatures are taken on the form, one for request and other for receiving the instrument. All the particulars of application form are checked and bank commission is charged, which is US$ 5/- for each amount of FDD. Cheque is received from the customer for total amount of FDD plus bank commission. Cheque and application form is then given to the Office Cash Department for the payment of cheque. After proper scrutiny, Officer Cash Department posts the cheque and signs the application form, to assure that payment is received. Then cheque and application form is given to Incharge Remittances, who will enter all the particulars of the application in the FDD Issuance Register. If the customer wants to pay cash, it is deposited by the customer on cash counter. Cash Receiving Officer receives cash on the application form along with the bank charges. Application form is then given to the Remittances Incharge for the issuance of the instrument. A control number is allotted to the instrument from FDD Register. Instrument is completed by putting all the particulars in it and signed by two attorney holders. Instrument is then handed over to the customer. FDD advice is sent to the responding foreign bank/paying bank where they are maintaining dollar account through registered mail. Exchange Transaction Credit Advice (ETCA) is sent to the Head Office for the reimbursement. Copies of the FDD and ETCA are kept in the record of the bank. PROCEDURE FOR FOREIGN TELEGRAPHIC TRANSFER ISSUANCE Application form is given to the customer to fill the same. Two signatures are taken on the form one for request and other for receiving the instrument. All the particulars of application form are checked and bank commissin is charged, which is US$ 15/- (flat rate) for each amount of FTT. If cheque is received from the customer, it is taken for total amount of FTT plus bank commission. Cheque and application form is then given to the Officer Cash Department for the payment of cheque. After proper scrutiny, Officer Cash Department posts the cheque and signs the application form to assure that payment is received. If the customer wants to pay cash, it is deposited by the customer on cash counter. Cash Receiving Officer receives cash on the application form along with the bank charges. Application form is then given to the Remittances Incharge for the issuance of instrument. He enters all the particulars of the application form in the FTT Register and a Control Number is allotted to the FTT. TT message is written in the telex containing name of transferring branch, name of receiving branch, date, amount, currency, payees name and account number or identification if any, payer name and payment instructions. A test number is given to the FTT message for receiving branch. This message is then sent through telex to the receiving branch. Customer is confirmed that FTT has been made. Exchange Transaction Credit Advice (ETCA) is sent to the Head Officer for the reimbursement. Copies of the FTT and ETCA are kept in the record of the bank. Collection All the cheques under collection are called cheques under Collection in Bank Alfalah Limited. There are two types of bills for collection: Outward Bills for Collection Inward Bills for collection 8.1.4 OUTWARDS BILLS FOR COLLECTION Al the cheques are received on one counter along with the paying slips duly filled in properly containing particulars of cheques and account holder. Counter folio of paying slip is handed over to the customer by

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putting stamp for cheque received for collection for Bank Alfalah on it duly signed by officer. These cheques are scrutinized and cheques for local clearing are separated from OBCs. Cheques for local clearing are entered in Clearing Register, whereas cheques for collection are entered in OBC register and handed over to the Bills Department for collection. OBC number is allotted to the cheque from OBC register. Special crossing and bank endorsement stamps are affixed on the cheque. OBC schedule is attached with the cheque and dispatched to the main branch of that city for collection. If they do not have any branch in that city, then cheque will be sent to the Collecting Agent of Bank Alfalah for that city, and if they do not have any collecting agent even, then cheque can be sent directly to the drawing branch. Instructions are given on the OBC schedule for the payment of that cheque. Contraliability vouchers are also posted in the system. When OBC is realized, collection bank pays the amount through IBCA if it is the same bank or through DD if it is another bank. If DD is received against OBC, it is presented in the clearing for collection. If IBCA is received from the branch for the payment of OBC, certain vouchers are posted in the system.

8.1.5 INWARD BILLS FOR COLLECTION If any other bank sends a cheque of Bank Alfalah Limited, it is Inward Bill for Collection. Bank Alfalah remits money after checking the balance of the customer account. The process of collection starts when the cheques of Bank Alfalah Ltd. Are received from other banks. Then these cheques are sent to the Head Office Karachi, which sends the cheques to SBP for clearing and get the confirmation of cheque and credit advice. Main activity of clearing is performed by Head Office, which contacts other banks through SBP. BILLS FOR COLLECTION IN 1999 Payable In Pakistan Rs. 22,092,000 Payable Outside Pakistan Rs. 1,964,738,000 Total Rs. 1,986,830,000

9.

Credit and Advance Department

Credit and Advances Department deals with the provision of loans (credit facility) to the customers. At BAF, credit is given on the basis of a policy made by Board of Directors and is called Credit Policy. This policy statement sets out the underlying principles from which the BOD will determine the commercial credit activity of Bank Alfalah Ltd. The committee to approve direct and review commercial lending of Bank and to ensure that credit policies are adhered to and the credit operation is conducted in an efficient and effective manner. Purpose of this policy is to set out the credit policies for the boar, which will be implemented by the Credit Committee. The policies are described under the following readings: Credit principles Portfolio limits

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 Approval Administration Monitoring and review 9.1 CREDIT PRINCIPLES It includes principles to be adopted for lending authority, approval, monitoring and control on a basis consistent with Bank Alfalah Ltd. The operational objectives and business strategies regarding objectives, structure, performance and administration are also included. 9.2. CREDIT PORTFOLIO These are the guidelines set down by Credit Committee regarding: Total facilities Term facilities 9.3. CREDIT APPROVAL When the terms and conditions are set and both parties are agreed, the Credit committee makes approval for the credit. 9.4. CREDIT ADMINISTRATION The credit application when handed over to Credit Administration, then they critically examine securities given by client to bank against credit facilities. Credit Administration keeps liaison with lawyers, surveyors, valuators and other corporate bodies. 9.5. CREDIT MONITORING The client can present his own account insurance policy as security for credit. When he presents his own account as security, his account is blocked for the same amount, which the bank is granting him. When the facility is adjusted at that time, the blocking is released from the account. Clients can also use third partys account for getting credit. Shares can also be kept as security in this case these are verified and duly signed. These are kept separate to avoid theft. The company whose shares are used is informed that its shares are in the custody of the bank.

Advances Bank Alfalah Limited, Abdali Road Multan, provides the following facilities in Advances Department: Funded facilities Non-funded facilities 9.6 FUNDED FACILITIES

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These are the facilities in which funds like cash fund are included. LPO Goods purchased on behalf of bank and provided to customers. PRE-SHIPMENT It provides to prepare consignment. Maximum tenor is about 150 days. Profit may be 16% per annum. The repayment is generally from sale proceeds. This is for preparation of consignment. POST SHIPMENT During export process, funds are required for preparation of next consignment that is provided by postshipment facility. Maximum tenure is 150 days. Profit rate is about 15% per annum.

NON FUNDED FACILITIES These facilities are on: o o Letter of Credit Letter of Guarantee

L/C is of two types: o o Sight L/C for 90 days Usance L/C for 120 days

CREDIT CARDS Bank Alfalah has no credit card facility but, Inshallah, in March the credit cards will be issued by bank. ADVANCES IN 1999 Rs. 10,327,324,000 All in Local Currency

Foreign Exchange Department Foreign Exchanged Department deals within exports and imports. Mr. Saleem at BAF supervises it. The bank acts as exporter as well as importer bank for different parties who are in the business of export and import. Exports EXPORTER

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When the bank becomes the exporter bank for a party then the market stability, reputation, financial position of the exporter is first of all checked. DOCUMENTS TO BE ATTACHED FOR EXPORTS Invoice Bill of lading Packing list I. II. III. IV. V. Total quantity Net weight/carton Gross weight/carton Total net weight/carton Total gross weight Bill of exchange (original or draft) E-form: Initial document on which total export proceeding is based. In this form , all the conditions are given, which are necessary for exports. Letter of credit: It is written agreement between importer and exporter. Beneficiary certificate DHL certificate (TCS certificate) Form M Certificate of Origin (Form A)

FORM E Government has provided facility to exporter in taking E-Form from any bank and he can present it to any bank for negotiation. Export Proceed Realization Certificate SBP gives rebate to exporter against export after realization. It is paid according to commodity wise and bill wise. Claim period: 1 year. Transport Document (Bill of Lading, Airway Bill) When insurance is done by importer, C&F (cost and freight) usually used.

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FOB cost (free on board) CIF (cost insurance and freight) when insurance is done by exporter, CIF is used. Tenor (At sight) immediate payment by importer after receiving product. Partial shipment: Product is sent partially. Transshipment: Product is sent via any country

E-FORM CERTIFICATION When export is done on C&F basis, so bank issues E-form certification to exporter and he submits it to the custom officer along with E-form certification to certify E-form. FORM OF AUTHORIZED DEALERS CERTIFICATE State Bank permits exporter to issue Bill of Lading in the favor of E-form bank. But if requirement of L/C is to issue Bill of Lading in favor of company then shipping company issues bill of lading in favor of Exporter Company. Authorized Dealer Certificate is filled for this purpose. CERTIFICATE OF ORIGIN This certificate shows that goods are from Pakistan. COVERING SCHEDULE If in covering schedule, it is given that please remit proceed to our Karachi Office A/C no. 5740734881 with ABN (Amro Bank New York), USA for onward credit to BAF Multan. BENEFICIARY CERTIFICATE If L/C requires some information as proof of anything from exporter then exporter has to present beneficiary certificate for that proof.

E-FORM E-form has four copies: One for custom officer One for exporter Triplicate copy for SBP Duplicate copy for bank

Bank reporting or duplicate and triplicate is done by bank. Custom Officer (date is given on the foot of form) should clear product.

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PAYMENT FROM IMPORTER BANK It is the choice of importer to open L/C from any bank and the bank from which L/C is opened can also refer to some other bank for payment. So bill of exchange is sent to referred bank and other documents are sent to L/C opening bank. SWIFT It is network among all banks. No other institute can get involved in it. BILL OF LADING Certificate from shipping company for loading documents. If requirement of L/C is to issue Bill of Lading in favour of L/C opening bank, then authorized dealer certificate will be provided by bank in favor of L/C opening bank. BANK KEEP IN RECORD Covering schedule Invoice Packing list AWB Certificate of Origin E-form Normally bank keeps photocopy of all documents in record. Negotiable documents (original documents). IMPORTS L/C is opened by the importer. There are two types of L/C. Revocable Irrevocable.

NECESSARY REQUIREMENT If place of issue and port of loading is different on Bill of Lading, then along with the stamp of shipment on board, vessel name and port of shipment is written. 1) Issue date of Bill of Lading shipment on board. 2) There should not be cutting on bill of lading without authentication. 3) Bill of lading should show capacity of agent. If bill of lading can be taken by the agent of Importer Company, then his name should be mentioned on bill of lading. 4) Original GSP should be presented.

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5) If TT reimbursement is not acceptable, it means bill of lading is necessary. When documents are received for export, do enter into lodgment register. DOCUMENTS FOR IMPORT Performa Invoice signed by importer Category passbook copy attested by any bank L/C opening application filled in by the customer Import registration with export Promotion Bureau Annexure Verification of signature by S. S. Card L/C issued on basis of L/C application form. Insurance if covered by buyer. Insurance cover note. Insurance policy.

Account Department Most important department of bank as it is concerned with: o o o o Revenue Expenses Assets Liabilities

These are the pillars of any business. This department is supervised by Mr. Masood Ahmad. In this department, all the vouchers that are posted during one day are sent to the Account Department next day. These vouchers are already posted to computer by the concerned department. So computer also sends a report to the Accounts Department. The accounts Department has to tell that all the vouchers are posted under the right head. Amount, date, stamps, signatures all the requirements for cheques and vouchers are fully checked. If any kind of renovation or construction or rebuilding is done, all is paid from the Accounts Department. Like petrol for the car of EVP and VP, stationery charges, medical allowance, etc. are all paid by this department. Daily Customer Movement List

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All the changes that are made in accounts of customer are shown in the daily customer movement list. By using this list, people of Accounts Department can prepare the vouchers. Following activities are performed by Account Department: Voucher preparation Preparation of daily, weekly, monthly, and annual statement. Budgeting and fixed assets Employers benefit Expenditure approval.

10. SWOT ANALYSIS 10.1 Strengths Bank has a belief in customer service Backed by strong Abu Dhabi Consortium Customer give suggestion for the improvement of bank and these suggestions are listened carefully. Manager & EVP Mr. Asif A. Sheikh has good coordination with staff members. Environment is friendly. Products are excellent Expansion is consistent Modernized banking (online + Internet) Fully computerized, each department has to own PC.

10.2 WEAKNESSES BCCI Image. Mixed Culture New Setup No ATM facility is provided

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No traveler cheques are issued. Tokens are not issued to customer so the chances of doubling are present. No credit card facility is available. Personal Lockers are not available. No internal audit is held. Staff is lesser.

10.3 OPPORTUNITIES 10.4 THREATS Competition Legal Reputation Information Technology. Credit Card Facility Internet Banking Establishing Foreign Branches Local Setup Expand

10.5 Recommendations Finally, We are giving some suggestions for Bank Alfalah Limited. These suggestions are based on our experience with bank. This is a routine practice that in order to give personalized services to the customer, bank staff tries to fill all the columns of AOE with their own handwriting, which is wrong. AOE must be filled in by the customers. Bankers should avoid to fill in the AOE because it can create problem if the address, title of account or any other information provided by the customer has not been written properly. Customer may be affected or he may claim that this information was not provided by him, but if AOE is filled by the customer then banker cannot be held responsible for any incorrect information provided by the customer. Under no circumstances chequebook should be given to the customer if the account formalities are incomplete.

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 There are two officers involved in cash deposit process, which is time consuming. Cashier should be given certain powers to receive cash of US$, DM and L to provide prompt services. Similarly, there are two officers involved in cheque payment process, which is time consuming. Cashier should be given certain powers to pay cheques up to Rs. 25,000/- to provide prompt services. Cheques, which are drawn on Bank Alfalah Branch and returned unpaid in clearing, are not reflected in the Statement of Account of the customers. These cheques must be reflected in the accounts so that credibility of the customers may be assessed. Tokens should be issued to avoid doubling. Lockers, ATM, credit card, traveler cheques all these facilities should be provided to attract more customers. Audit should be held internally. Rather there should be an Audit Department in the branch to make audit on daily basis. This can become so helpful as different banks are having this department of their own.

Marketing Practices Adopted by Bank Nowadays marketing of products is of prime importance for any organization. In this dynamic environment, every organization has its own Marketing Department, which is responsible for creating the demand of its goods and services. Nowadays banks also have their marketing departments, which are responsible for creating demand of their products, i.e., their deposit schemes and increasing the deposit of the bank. Bank Alfalah has its own full marketing Department at the Head Office, Karachi. This department prepares different deposit schemes for its customers, time to time, in order to increase the business of the bank. At branch level, the Operations Department follows marketing practices. At each branch of bank, officers are available to provide marketing activities of their products. They make customer calls and personally visit the potential customer to convince them to invest in AFB. They make phone calls to customers and inform them about their schemes, profit rates.

11. CONCLUSION BANK ALFALAH ( BAF ) under the leadership of Sheikh Nahayan Mabarak Al-Nahayan has made significant in building of strengthening both the corporate and retail banking sectors in Pakistan. The Bank attained Number two (2) position in terms of its Balance Sheet size amongst the private banks in Pakistan in 1999. The significant improvements in terms of its results in comparison to the corresponding period for the year 1998 have been much above the market expectations. Balance Sheet footing of the Bank

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reached the level of Rs.21 Billion-an increase of more than 46% over the previous year. Customer Deposits rose by 33% on a year-to-year basis and stood at Rs.15.82 Billion. Bank maintained a Capital adequacy ratio of over 13%, which is significantly above the Basle guidelines and international requirement of 8%. The pre-tax profit of the Bank also increased more than five (5) times as compared to the previous year and stood at Rs.354 million for the year 1999. Banks investment in the Financial Sector was based on the confidence of bank in the country as a whole and it has been amply demonstrated by the growth plans of bank though ambitious in nature but prudent and in line with the potentials of the market place. Although the financial sector in general witnessed some shrinkage, both in terms of downsizing and closure of certain locations, the bank, however, continued with its expansion programme and added five (5) new Branches in their network, one each in Islamabad, Peshawar, Multan, Faisalabad and Lahore. BANK ALFALAH views specialization and service excellence as the cornerstone of its strategy. The people of bank innovation, creativity, reliability, customized services and their execution are the key ingredients for their future growth. Based on this approach, their Treasury Division and the Structured Finance Unit have been geared to provide specialized services to the Corporate customers. Revenues from these activities have started yielding dividends and they expect significant growth in these areas in the coming years. While building on their in-depth familiarity with their customers needs and anticipated developments in the banking industry, the Retail and Corporate areas of their operations will continue to provide a strong and stable base to the business of the Bank. They are aware that they have stepped into the 21st century and they must meet its challenges by acquiring the highest levels of Technology. They will thus be accelerating their enable them distribute their products and services through most efficient and high-tech means. They say that they will invest in the modern tools and substantial allocation of resources will be made to achieve this objective during the current year. Their programme to launch real time on line Banking Services and introduction of ATMs at strategic locations have been firmed up and it will be fully operational during the year 2001. Their focus would be to constantly seek out growth opportunities through increased quality assets and by offering a wider range of products and services to their esteemed customers. There are significant growth opportunities for BANK ALFALAH and they are confident in their ability to grasp them. They are committed to enhancing the shareholders value and look forward with greater optimism to a prosperous future for BANK ALFALAH Based on the profit of Rs.354 million, the Board has proposed that a cash dividend at a rate of Rs. 2.00 per share i.e. 20% of share capital be distributed among the shareholders.

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