1.

Title page
a. Name of Organization: UNITED BANK LIMITED

b.Name of Internee:

Muhammad Wajid

Student ID:

MC070404198

Session:

2007-2009

c.Submission date:

26-07-2010

d. Name of the University

e.VU logo

2. Letter of Undertaking

3. Scanned copy of the Internship Completion Certificate

4. Dedication
I would like to dedicate this Internship Report to my parents who have always encourage
me throughout in my academic career and make possible for me to stand where I am
today.

5. Acknowledgement
All praises to Almighty Allah alone, the Most Merciful and the most compassionate and
His Holy Prophet Muhammad (Peace Be Upon Him) the most perfect and exalted one
among and of ever born on the surface of earth, who is forever a torch of guidance and
knowledge for the humanity.
After that I would say thanks to my Finance Instructor for providing me comprehensive
knowledge about Business Administration Courses and also for providing me the
opportunity to complete my internship program in United Bank Limited (Kamalia) to
enhance my practical knowledge about banking sector of Pakistan.
I am also indebted to specially Mr.Muhammad Ramzan (Branch manager of United
Bank Limited, Kamalia Branch) for allowing to me to do my internship and also
providing me necessary assistant and guidance. I am also grateful to Mr. Atir Zulqarnain
(Operational Manager) and Mr.Zahid (Supervisor) because without their help, I would
not be able to achieve this practical knowledge.
I owe depth of gratitude to my affectionate Parents, and Mr. Atir Zulqarnain who
supported me morally.
By the Grace of Almighty Allah and with the co-operation of entire staff of the branch
specifically Mr. Atir Zulqarnain guided me well enough to prepare this entire report and
even during my internship. I tried my level best to prepare this report with high level of
accuracy but no one claim to perfect other than ALMIGHTY ALLAH.

6. Executive Summary
I presented my Finance Report into 3 major sections. In the Ist section I described the
introduction, history of UBL and also the details of products line, introduction of all
departments and the branch where I did my internship and the tasks done by me during
my training programme.
In the 2nd section I made the complete ration analysis, horizontal, vertical and also trend
analysis for three years from 2007 to 2009.In 2009 analysis does not provide satisfactory
results because UBL has not made sufficient investment in current assets. The reason
behind that UBL business is based on large size of deposits so its current liabilities has
more than larger than current assets.
In the 3rd section I suggested some recommendations in the light of financial ratios and
SWOT analysis. UBL has negative working capital in all the three years so it is essential
to increase current assets and reduce investment in fixed assets. Annexes and reference
and sources used are also described in this section.
According to the report of credit rating Company (26th June 2009) United Bank Limited
is one of the largest Commercial Bank in Pakistan. The Bank's long term rating is AA +,
which denotes good credit quality. Protection factors are strong. Risk is modest but may
vary slightly from time to time because of economic conditions.

7. Table of contents
1. Title page.........................................................................................................................1
2. Letter of Undertaking.....................................................................................................2
5. Acknowledgement...........................................................................................................5
6. Executive Summary.........................................................................................................6
7. Table of contents..............................................................................................................7
7. Table of contents..............................................................................................................7
8. Brief introduction of the Organizations Business Sector..............................................9
9. Overview of the organization.......................................................................................10
a. Brief History..............................................................................................................10
b. Nature of the organization.........................................................................................10
c. Business volume........................................................................................................11
d. Product lines..............................................................................................................11
Services:.........................................................................................................................13
e. Competitors................................................................................................................14
10. Organizational structure..............................................................................................14
a. Organizational Hierarchy Chart.................................................................................15
b.Number of employees:................................................................................................16
c.Main offices................................................................................................................16
d. Introduction of all the departments............................................................................17
i. Paying Bank...............................................................................................................18
ii. Collecting Bank.........................................................................................................18
1. To accept transfer deliveries and clearing cheques from the customer of the branch
and to arrange for their collection......................................................................................19
2. To arrange the payment of cheque drawn on the branch and given for collection to
any other branch of UBL of Pakistan or any other members, or sub-members of the local
clearing area.......................................................................................................................19
3. To collect amounts of cheques drawn on members, sub-members of the local
clearing house, sent for collection by those UBL branches which are not represented at
the local clearing area........................................................................................................19
a. Transfer Cheques.........................................................................................................19
b.Transfer Delivery Cheques..........................................................................................19
e. Comments on the organizational structure.................................................................20
11. Plan of Internship Program..........................................................................................20
a. A brief introduction of the branch (UBL) where I did my internship........................20
b. Starting and Ending dates of my Internship..............................................................21
12. Training program.........................................................................................................21
a. Detailed description of the operations/activities which performed by UBL Kamalia
Branch............................................................................................................................21
Documents Required in Account Opening are:.........................................................22
Types of Account in UBL Kamalia Branch:..............................................................22
a. Individual Account.................................................................................................22
b.Joint account:..........................................................................................................22
Current Account:........................................................................................................22
PLS Saving Account:.................................................................................................23

Procedure for D.D:.....................................................................................................23

Procedure for Financing from UBL...........................................................................25
1.Purpose:..................................................................................................................25
2. Business.................................................................................................................25
3 Security:..................................................................................................................25
b. Detailed description of the tasks assigned by me:.....................................................26
13. Structure of the Finance Department...........................................................................29
a. Departmental hierarchy:.............................................................................................29
b. Number of employees working in the finance department:.......................................30
c. Finance & accounting operations:.............................................................................30
14. Functions of the Finance Department..........................................................................31
a. Accounting system of the organization:.....................................................................31
b. Finance system of the organization:..........................................................................31
c. Use of electronic data in decision making.................................................................32
d. Sources of funds:.......................................................................................................32
e. Allocation of funds:....................................................................................................33
15. Critical analysis...........................................................................................................34
1. Ratio Analysis............................................................................................................34
a) Liquidity Ratios.....................................................................................................34
e) Market Ratio:.................................................................................................................56
Market ratios are commonly used by the investors to assess the performance of a business
as an investment and also the cost of issuing stock...........................................................56
2. Horizontal Analysis:..................................................................................................61
3. Vertical Analysis:.......................................................................................................66
(i) Trend Analysis:.........................................................................................................72
b. Future Prospects of UBL:..........................................................................................75
16. SWOT analysis of organization...................................................................................76
Strength:.........................................................................................................................76
Weaknesses:...................................................................................................................76
Opportunities:................................................................................................................77
Threats:..........................................................................................................................77
17. Conclusion...................................................................................................................77
18. Recommendations for Improvement...........................................................................78
19. Reference & Sources used..........................................................................................79
20. Annexes:......................................................................................................................80

8. Brief introduction of the Organizations Business Sector

United Bank Limited is the second largest private commercial bank in Pakistan.UBL has
assets of over Rs. 620 billion and a solid track record of fifty years in addition to the
convenience of over 1121 branches in domestic country and also 17 overseas branches.
UBL opened up for business on November 7, 1959 with authorized capital of Rs.20
million and Paid-up capital of Rs.10 million. In its very first year, it mobilized deposits of
Rs.70 million and earned a profit of Rs.O.7 million. It continued to grow rapidly and
soon became one of the largest banks in the country. The main logic for its exemplary
growth were the introduction, in many instances for the first time in Pakistan, of
professional management, computers, economic and business research, customer
orientation and latest managerial practices.
UBL is a commercial bank which deals in consumers services. In the main, it focuses on
accelerated loan recovery, surplus asset disposal, improving credit systems, operational
controls, monitoring and reporting. From a practical standpoint, the use of better
technology, focusing on the appropriate market segment, and project and specialized
finance will facilitate rapid and sustainable growth.
Improvement in consumer service and prompt attention to customer needs lie at the heart
of UBL's promotional strategy. All planning is directed and geared to customer service
and satisfying the client's diverse needs. The UBL of the past was renowned for its
customer service and the management plans to put new life into it. To that end, training
programmes have been accelerated and upgraded.
UBL has always been an upbeat and growth-oriented institution, but this does not mean
that it has been oblivious to the social responsibilities of business organizations. It always
fulfilled the mandatory credit targets it was given for loaning to the priority sectors. As
part of the government's policy to improve the technical skills of Pakistani workers, it has
set up two computer literacy centres at Sheikhupura and Muzaffarabad. On the level of
social services, the Bank has encouraged sports and built a first-rate sports complex in
Karachi. It has linked up with Internet and SWIFT to provide prompt, responsive service.

It has major plans to train the staff to provide customers the services they expect from
first-rate banks and also provides customer-orientation.
The Current Scenario of UBL is that Bank's Paid-up capital is Rs.1.48 billion. It is not
enough to meet capital adequacy ratio, but the package of the State Bank of
Pakistan(Central Bank) has put together to shore up UBL will provide Rs.21 billion to
increase the capital base. This huge infusion of capital would improve the Bank's
liquidity and boost public confidence. In turn, it would enable it to step up deposit
mobilization, expand its activities, pay depositors a higher return, and upgrade
technology. All of these would impact on profitability.
9. Overview of the organization
a. Brief History
Agha Hasan Abedi founded this bank in 1959.UBL has a long history in the UAE and is
the second foreign bank to open its branch in Abu Dhabi,UAE in July 1967.UBL has
presence in major centers, which include Pakistan,UAE, Bahrain, Qatar, Yemen, USA,
UK, Switzerland,Oman,Egypt and Iran.
In 2002, the Government of Pakistan sold it in an open auction to a consortium of Abu
Dhabi Group and Bestway Group. In 2002 it merged its operations in the UK with those
belonging to National Bank of Pakistan to form United National Bank Limited, of which
it owns 55%, with National Bank of Pakistan owning the remainder.
UBL remained in the private sector for 15 years until it was nationalized on January 1,
1974 with other Pakistani banks. In 1996, its deposits totaled Rs.105.9 billion; advances
amounted to Rs.68.6 billion; assets totaled Rs.177 billion and the number of branches
was 1701, including 27 overseas branches.
b. Nature of the organization
Basically it is engaged in commercial banking and related services of its registered office
at 13 Floor, UBL Building, Jinnah Avenue, Blue Area Islamabad. In order to provide
services to his customers UBL is engaged in lending and borrowing of money, buying,
selling, discounting, collecting and dealing in negotiable instruments such as bill of
exchange, cheque, and promissory note.
10

It also deals in buying, selling of foreign exchange. It also deals in stocks, shares,
debentures and receiving of all kinds of bonds.
UBL also deals in existing corporates with significant long term funding requirements
that cannot be met by single lenders, either due to per party limits or risk diversification
consideration. It also deals with highly leveraged companies in cyclical industries and
start up companies with substantial capital requirements.
c. Business volume
The pattern of shareholding as required u/s 236 of the Companies Ordinance, 1984 and
Article (xix) of the Code of Corporate Governance is given below:

Bank's Paid-up capital is Rs.1.48 billion .Bank also announced a cash dividend on Ist
March 2010, at PKR 2.50 per share i.e.25%. And it has been recommended by the Board
of Directors to issue Bonus Shares in the proportion of one share for every ten shares held
i.e.10%.
d. Product lines
Current Account:
This account is opened with an initial deposit as stipulated by the Bank from time to time
unless specifically exempted. But I observed during my internship that bank department

11

opens the account with an initial deposit Rs.1000/, whether the type of account is current,
saving or basic banking account.
After opening the account a distinctive number is allotted to every account and this
number should be quoted in all correspondence relating to the account and at the time of
making a deposit or withdrawal.
I also observed that any account consists eight digits in number. I also observed during
my internship that initial digits of current account are 010.
Example of current account number is 010-4050-3.
Basic Banking Account (BBA)
In order to accommodate the banking needs of low income groups, UBL launched Basic
Banking Account from February 25, 2006 across its branch network all over Pakistan.
BBA is a current account and there is no minimum balance penalty on this account,
however all other accounts having nil balance for a continuous six months period are
closed. BBA customers are allowed unlimited free ATM withdrawals from UBLs own
ATMs.
I also observed during my internship that initial digits of BBA are 021.
Example of BBA number is 021-2120-3.
PLS Saving Account
PLS Savings Accounts may also be opened by charitable institutions, for Provident Funds
and other funds of benevolent nature by Local Bodies, Companies, Associations,
Societies, Educational Institutions, and Firms etc. Initial digits of PLS Saving Account
are 100.
Example of PLS Saving Account number is 100-7820-3.

Loan Products:
Businessline
It is a Credit Facility against Residential Property. It is an evergreen credit line that the
customer can use for his business expansion

12

UBL Cashline
It is a flexible loan that provides cash up to Rs. (2 Million) without any security
requirements to the salaried individual or businessman.
Credit Cards
UBL offers a range of innovative and exciting cards that is not only powered by the
security of chip but also enable the account holder to personalize it any way he wants.
Services:
UBL is a commercial bank, which transacts the business of banking in accordance
with the provisions of Banking Companies Ordinance,1962. Section 7 of the Act
authorizes banks to engage in the prescribed form of business. In the light of this section
UBLs services can be categorized as under:
Agency services
General Utility Services
Underwriting of loans raised by the Government or public bodies and trading by
corporations etc.
Providing specialized services to customers, and
Hajj-related services.
Besides I want to describe more facilities which are provided to its account holders.
Demand Drafts
UBL also provides the facility of demand draft to both account holders and also non
account holders. For example if non account holder wants to make payment to any
department then bank helps in this regard.
Now I want to give example for it. Due to non payment of partial amount of fee at the
time of admission my VULMS account was closed by Virtual University. Then I made
payment of that amount with the help of demand draft to the Virtual University. If any
person wants to make payment with the help of demand draft upto Rs.100, 000/, then its
charges are Rs.155/.
Commission Free Remittance
13

This facility is provided only to account holders.

Now I want to give example for it which I observed during my internship.
If account holder wants to send money to another party with the help of demand draft,but
the account holder has a larger amount in his balance,then UBL sends the money through
demand draft without deducting the charges.
Online
This facility is provided only to account holders but not to non account holders like
demand draft. If account holder wants to send money to another account holder in
another city but in the same branch, then online service is made.
e. Competitors
Allied Bank Limited
National Bank of Pakistan
Muslim Commercial Bank
Bank Alfalah Limited
Bank-al-Habib Limited
Askari Commercial Bank Limited
Faysal Bank Limited
Habib Bank Limited
Bank Islami Pakistan Limited
Meezan Bank Limited
Standard Chartered Bank
My Bank (Bolan bank)
Soneri Bank

10. Organizational structure

14

a. Organizational Hierarchy Chart

PRESIDENT
PRESIDENT

SENIOR
SENIOREXECUTIVE
EXECUTIVE
VICE
VICEPRESIDENT
PRESIDENT
EXECUTIVE
EXECUTIVEVICE
VICE
PRESIDENT
PRESIDENT

SENIOR
SENIORVICE
VICE
PRESIDENT
PRESIDENT

VICE
VICEPRESIDENT
PRESIDENT

ASSISTANT
ASSISTANT
VICE
VICEPRESIDENT
PRESIDENT

OFFICER
OFFICER
Grade
GradeI I

OFFICER
OFFICER
Grade
GradeIIII

OFFICER
OFFICER
Grade
GradeIIIIII

ACCOUNTANT
ACCOUNTANT

CASHIER
CASHIER
15

PEON
PEON/ /NAIB
NAIBQASID
QASID

b.Number of employees:
Currently there are 1121 Branches of UBL in Pakistan. Approximately 6000
employees are working in UBL including male and female.85% male and 15%
female.
c.Main offices
Head office of UBL is State Life Insurance Corp. Building #1,
I.I. Chundrigar Road, Karachi.List of main offices are below:
Lahore
Krachi
Islamabad
Multan
Muree
Peshawar
Quetta
Faisalabad
Rawalpindi
Sargodha
Sialkot
Sukkur
Rahim Yar Khan
Gujranwala
Hyderabad
Bahawalpur
Abbottabad
Wahcantt

16

d. Introduction of all the departments

Account Opening department:
This department is responsible to open the accounts of its customers.
I observed during my internship the general procedure of opening an account which I
want to describe in detail.
1. Account Opening Form:
The person who is willing to open a bank account, first he has to fill the account opening
form. He furnishes this form according to his full particulars including name, address,
profession etc.
2. Reference and Inquiries:
Before opening new accounts, a banker must make inquiries. The banker in the light of
his inquiries result can betterly judged financial status of his new customer, his character
and social position.
3. Requirements for Opening of Account:
Attested photocopy of C.N.I.C
Specimen Signature
The modern practice which I observed during my Internship is to take these signatures on
cards which are indexed and filed in alphabetical order. The duty of a banker is to verify
customers signature on the cheques with his specimen signature in order to ascertain
whether there has been any forgery or fraud. The bankers take these signature of the
account holder on the specimen signature card first and then feed these signatures into
computers.
Operations Department:
I also observed operations department during my internship in which Operation Manager
is Mr.Atir Zulqarnain.This department manages all departments of bank except credit
department. Operations Manager is responsible for all operations of cash department,
remittance department and clearing department. Opening of new accounts, closing of
zero balance accounts, updating all operational records etc. is done in this department.

17

Remittance Department:
This department transfers funds from one branch of bank to another branch of same bank.
This is an important service which UBL provides to its customers.
Types of Remittances:
Demand Draft:
In the Bank of UBL, DD is used to transfer of funds from one branch of
bank to another branch of same bank. It is an order to pay money drawn by one office of
a bank upon another office of same bank outside the city for sum of money payable to
order on demand.
Payment Order:
Payment order is used to transfer of funds in same city from one office
of bank to another office of same bank .It is an order instrument payable to a certain
person which is issued by a branch and drawn on a same branch.
Mail Transfer:
In this method, transfer of funds is made through dak. Under such method, one office of
bank sends advice to another office of same bank for payment. Such advice is called
Inter Branch Credit Advice (IBCA).
Online Transfer:
It is modern concept for transfer of funds which I observed during my Internship. The
modern concept of only banking has given it a new dimension through which money is
transferred from one place to another within no time, even one country to another
country. Online inter branch transaction is a facility whereby customers maintaining
accounts in online branches.
Bills Clearing Department:
Every bank acts in two ways
XLVIII

Paying Bank

XLIX

Collecting Bank

18

Here in theory no legal obligation on a banker to collect cheques, drawn up to

other banks for a customer. It is, however, an important function of crossed cheques. A
large part of this work is carried out through the NIFT.
NIFT stands for (National Institutional Facilitation Technologies), it is a joint
venture between a consortium of six major banks and private sector. It is responsible for
the establishment and management of automated clearinghouse facilities in Pakistan.
NIFT is proactively involved in the modernization of payment systems in Pakistan.
The following are the main functions of clearing department.
1. To accept transfer deliveries and clearing cheques from the customer of the
branch and to arrange for their collection.
2. To arrange the payment of cheque drawn on the branch and given for collection to
any other branch of UBL of Pakistan or any other members, or sub-members of
the local clearing area.
3. To collect amounts of cheques drawn on members, sub-members of the local
clearing house, sent for collection by those UBL branches which are not
represented at the local clearing area.
Types of cheques collected by clearing department are as follows:
a. Transfer Cheques
Transfer cheques are those cheques, which are collected and paid by the same
branch of bank.Cheque is also called Credit voucher.Credit voucher is one due to which
there is increase in ones balance.Cheque will be credit voucher in case of transfer the
cheque from one customers account to another.
b.Transfer Delivery Cheques
Transfer Deliver cheques are those cheques, which are collected and paid by two
different branches of a bank, situated in the same city. For example transfer of cheques
between UBL and MCB in Kamalia city.
Example: Which I observed during my Internship.

19

I want to give example for it. Assume an account holder has an account in UBL and also
MCB in Kamalia city.It is rule of any private bank that an account holder can withdraw
maximum amount Rs.25,000 Per Day.If he withdraws more than this limit then he will
pay tax Rs.3 on every Per Rs.1000.If in case of emergency he needs Rs.100,000 and
wants to withdraw from MCB.Then in this situation he will handover the MCB Cheque
to UBL to save the amount of tax.To adopt this method no deduction is made and in this
way he will receive full amount Rs.100,000.Because in this case UBL receives the
amount of cheque from MCB on its behalf.
Cash Department:
This department is the backbone of the bank. This is sensitive department of the branch.
No other person is allowed to enter in the premises of cash department. As obvious from
name that this department deals in cash receipts and payments. Cash department is
performing its functions manually. For payments and receipts, it has to maintain certain
sheets, books of accounts and various ledgers.
As all banking business is based on cash. Cash receipts include customer deposits,
payments include cash withdrawals and utility bills include telephone, electricity, gas and
other bills collection.
Cash department deals with
Cash Receipts
Cash Payments
Utility Bills Collection
Lockers Department:
Locker is also called Safe Deposit Vault. The basic purpose of locker is to provide safe
custody to clients valuable ornaments, jewellery or documents. Almost in all branches,
Lockers are available in different sizes at different rates. For availing this opportunity,
customer has to open his account in the same branch.
e. Comments on the organizational structure
Flow of power and designations in UBL is well organized and fulfills the requirements of
the organization.

20

11. Plan of Internship Program

a. A brief introduction of the branch (UBL) where I did my internship
United Bank Limited Branch is the oldest branch in the tehsil Kamalia.It is only one main
branch in Kamalia not other banks like Habib Bank Limited and National Bank of
Pakistan which has two branches one main branch and second is the sub branch. This
Branch is situated in the most commercial and competitive area of the city (Kamalia)
Iqbal Bazar. Now I want to tell about Iqbal Bazar which is the longest bazar in city
Kamalia,where other banks like,Muslim Commercial Bank, Allied Bank, Habib Bank,
Alfalah Bank, , National Bank of Pakistan City Branch and National Bank of Pakistan
KB(Kachehry Branch) are situated so creating a rivalry among these competitors. Its
major customers are Government and semi government institutions like Vocational
institutes, colleges and schools etc.An advantage of which hasUnited Bank Limited,that
the Municipal Committee is situated in front of UBL,due to which many staff members
have account in UBL.
Furthermore I want to tell that popularity of Kamalia due to poultry farming and Khaddar
Industry. So these business persons have major customers of UBL.
In the said branch there are 7 staff members.
b. Starting and Ending dates of my Internship
I started my internship programme 4th May 2010 and my last date of internship
programme was 15th June2010.
c. Names of the departments in which I got training and the duration of my
training
Deposit Department
Remittance Department
Bills clearing department
Operation Department
The duration of my internship programme was 6 weeks.

21

12. Training program

a. Detailed description of the operations/activities which performed by UBL
Kamalia Branch
Deposit Department:
As per the definition of Banking under sec 5(b) of Banking
Companies Ordinance 1992 one of the main functions of a bank is to accept deposit.
Deposits are the backbone of any bank; other functions of the bank primarily depend
upon the type and size of deposits.
UBL Kamalia Branch accepts deposits under the following three accounts:
Current account
Fixed (Terms) Deposits
PLS Saving account
To open an account in UBL the customer will have to fill an account opening form in
front of bank officer. He has to sign in all required places in front of the officer.
Documents Required in Account Opening are:
C.N.I.C Copy.
Two photograph (in case of illiterate person)
Specimen Signature card (SS Card) (Provided By Bank)
Account opening form (Provided by bank)
Cheque Requisition Form (For cheque book issuing)
Types of Account in UBL Kamalia Branch:
a. Individual Account
In this account a single person operates the account. The banker will run the
account according to the rules, but if the customer gives special instructions the Bank will
have to follow it.

22

b.Joint account:
In this type of account two or more than two persons will open the account. The
account will be operated by one account holder in case of (either of the survival). If the
instructions are not given, all the account holders will have to sign the check.
Nature of accounts in UBL Kamalia Branch:
Current Account:
These are non-profitable demand accounts. The account can be opened with minimum
amount of rupees 1000/. These accounts are usually maintained for business purpose.
Fixed Deposit Account:
In this type of account a certain amount is deposited for a fix period such as six months;
one year, or longer. The amount can not be withdrawn till the expiration of fixed period.
PLS Saving Account:
This account as its name suggests is for those persons who want to make small savings.
In this case deposit can be made only up to a certain amount and withdrawals are allowed
only twice or thrice a week a not exceeding a certain amount. This type of account is
opened by small retailers or mostly by wage earners.
Remittance department:
Current business trends demand fast movement from one geographic
end to another. Latest technology has made it possible to make such transactions with in
minutes. UBL Kamalia Remittance Department performs following functions.
Demand Draft (D.D):
Procedure for D.D:

Purchaser is asked to fill in an application form duly singed by applicant. Three things
should be maintained in the form.
Name of Payee
Place of payment
Amount of D.D
Demand draft is a negotiable instrument, which is drawn by one branch of bank on other
branch of the same bank. So when any person wants to make payment form one city to
an other city then he can make payment through demand draft.
23

UBL Bank also provides this facility to non account holders. They will have to submit a
C.N.I.C copy along with D.D application form.
Pay Order:
If some one wants to make payment to some other person he can make payment through
pay order slip. The main advantage of pay order is that it can not be dishonor by the
bank. When payment is required to make within the city.
OBC (Outward Bills for Collection):
These are negotiable instrument drawn on outstation branches of the bank, and issuing
bank sent it for collection on behalf of the customer i.e. cheques, draft, dividend warrants,
treasury bill etc.
IBC (Inward Bills for Collection):
These are negotiable instrument which is collected locally. These bills are received from
outstation branches and banks.
i)

Against cash

ii)

Against cheques

Credit Department Of UBL:

Credit extension is the principal function of a bank, through which pace of activity is
accelerated in the various sectors of economy .Credit department performance is subject
to a defined policy on credit control exercised by the SBP. SBP affect credit decisions
through the weapons of bank rate, open market operations, variable reserve requirements,
selective credit restrictions and prudential regulations.
Facilities offered by UBL Kamalia branch

Running Finance (For one year)

Demand Finance (3to 5 years)

The commercial bank lend money in any one or more of the following ways:
1)

Overdrafts.

2)

Loans

3)

Cash credit

24

1) Over Drafts (O.D):

In this case a customer is authorize to borrow (overdraw) up to an agreed amount in
excess of the customers bank balance. The bank charges the interest at an agreed rate on
the amount actually overdrawn by the borrower.
2) Loans:
A loan is made when a bank advances a fixed sum for a definite period of time.The
amount is placed to the credit of borrower who can draw cheques against the sum of any
amount. Whether he make use of full amount, or par amount he has to pay interest on the
total amount of the loan. Loans are further divided in to following categories.
(a)

Small Loans

(b)

Other Loan

3) Cash Credit:
Seasonal advances
credit. This type of loans is given
Securedunder cash
Clean are allowed generally
Clean
Secured
against following:
Against locally manufactured goods.
Cash finance against rice and paddy.
Against pledge.
Against commodities
Procedure for Financing from UBL
When a party comes for financing, banker will ask the following questions.
1.Purpose:
In this the party mentions the purpose, they want to apply for the finances. No lending is
done with out purpose.
2. Business
The party must have some specific running business i.e. general merchandise,
construction business etc.The second question arises of the cash flow that how much flow
is generated by the party from the current business.
3 Security:
The bank will secure itself against the lending. There can be two type of security.

25

 Commercial
Residential
The bank prefers commercial security. Relationship Manager (RM) is mainly responsible
for the relationship between the banks and party. He acts like a bridge between the two.
Bills Clearing Department:
Bank can make payments of only open Cheques on the counter payment. Payment of
cross Cheques cannot be made on counter its payment is possible through collecting
bankers.
Types of clearing:

In ward clearing

Out ward clearing

Same day clearing

Intercity clearing

In ward clearing:
In inward clearing the cheques of UBL is presented in other bank and it is received by the
UBL through NIFT for clearing.
Out ward clearing:
In out ward clearing the cheques of other banks are presented in the UBL by its customer
for clearing.
Same day clearing:
In same day clearing cheques of other branches are presented by the account holder of the
UBL. The bank clears those cheques through NIFT on behalf of his customer. All the
process is completed with in a day.
Intercity clearing
In intercity clearing cheques of other cities are presented for clearing.
Operation Department:
In UBL Kamalia Branch Operational Manager is Mr.Atir
Zulqarnain.I worked in Deposit department which is under the control of operation
department. Opening of new accounts, closing of zero balance accounts, updating all
operational records etc. is done in operation department.

26

Operation department manages all departments of bank except credit department.

Operational Manager is responsible for all operations of cash department, remittance
department and clearing department. Cheque books issuing and making entries on
computers for the authentication of cheque books, filling deposit slips and cheques all are
the functions of operation department.
b. Detailed description of the tasks assigned by me:
During my internship in UBL Kamalia Branch I worked in Deposit, Remittances, Bills
clearing and Operation department and I successfully completed all the tasks that were
assigned to me. There are four departments in the branch, and I worked as an assistant in
that branch. I worked in deposit department under the supervision of Mr.Shahid, where I
performed the following tasks:
Filling the deposit slips and cheques for many customers.
I also did the duty of Opening New Accounts.
I also filled the account opening forms.
I provided assistance to newly come customers.
I also handed over SS Card to newly customers in order to taking signatures
from them.
Due to knowledge about MS Office I also fed data in computer of newly
account holders.
I also got knowledge about signatures of newly account holders which is
verified by NADRA.
I also filled KYC (Know Your Customer) forms in order to welcome the
newly account holders which is sent by UBL via dak.
Inform customer of essential conditions under which the account will be
operated.
Scanning and arranging SS cards.
Afterwards I also performed the following miscellaneous tasks which I want to
explain.

27

Issuing of Cheque Books:

First of all I want to tell that cheque book is issued in case of two conditions:
At the time of opening new account of the customer
When existing account holder have no cheque in his cheque book.
Prior to issue cheque book Requisition Form is filled which is provided by UBL.
I also observed the number of cheques in cheque book during my internship which I
want to describe.
1. In case of Profit and Loss Saving Account (PLS Account) which cheque book is
issued, it consists of 10 cheques.
2. In case of Current Account which cheque book is issued ,it consists of 25 cheques.
It is one of the most interesting tasks that I learnt in UBL. But cheque book should be
issued only after all the formalities of the account opening forms, which have been
checked by the branch manager.
Voucher checking:
I have learnt about vouchers, checking of vouchers is essential to confirm that correct
calculation has been done. Vouchers are properly bind sealed, and checked by the
branch manager. I also got knowledge about vouchers from the bank personnel.
Now I want to describe the major types of voucher which I obtained from bank
personnel which are as under:
There are three types of Vouchers:
1. Cash Receipt Voucher (It is used in case of receiving the cash)
2. Cash Payment Voucher (It is used in case of payment of cash)
3. Journal Voucher (It is used in case of credit transaction)
I also observed during my Internship that cheque is called Debit Voucher and also
Credit Voucher.
Debit Voucher is one due to which there is decrease in customers balance.
Credit Voucher is one due to which there is increase in customers balance.
In case of withdraw money from the bank through cheque, it is called Debit
voucher.
In case of transferring the amount from one account holder to another through
cheque, it is called Credit Voucher.

28

I also learnt the following tasks:

Over writings on the cheques are duly authenticated by the account holder.
Payment of post dated cheque is not made.
But payment of out dated cheque is made within the period of 6 months.
Amount in words tallies with the figures.
Cash paid stamps (with dates) are duly affixed in case of payment of cash.
Now I want to tell about post dated cheque and out dated cheque which I
observed during my Internship.
Post dated cheque is one on which future date is written.
Example for Post dated cheque:
Suppose if a customer represents the cheque to the bank on 1st August, but date
which is written on the cheque is 10th August. It is called post dated cheque.
Out dated cheque is one on which past date is written.
Example for Post dated cheque:
Suppose if a customer represents the cheque to the bank on 10th August, but
date which is written on the cheque is 1st August. It is called out dated cheque.
Miscellaneous Tasks:
Learned some tips about software of the Bank which is oracle based
Learned how to make inquiry of any account in order to get the balance of
the account holder
Learned how to post the utility bills in the computer
Learned how to make DD(Demand Draft)
Learned about different stamps
Learned how many charges on the DD
Learned what procedure to make online
29

 Made vouchers
Opened new accounts
Also learned that at the time of opening new account of an illiterate
customer two pictures are required and also signs of left thumb in case of
Male and signs of right thumb in case of Female. But in case of literate
customer C.N.I.C is required and also taken signatures.
Learned no online charges when an account holder has a big balance
Also filled the Requisition Form in order to issue the new cheque book
to the account holder
13. Structure of the Finance Department
a. Departmental hierarchy:
There are two types of UBLs Finance Management.
1. President
2. Assistants
There are three types of President which are Senior Vice President, Vice President and
Assistant Vice President. Senior Vice President of Project & Structured Finance is
Muhammad Umer Khan. Vice President of Project & Structured Finance is Hamza Ali
Hasan. Assistant Vice President of Project & Structured Finance is Mehvish Virani.
But Assistants are two types which are Manager and Assistant Manager.Manager of
Equity & Advisory is Mr.Amjad and Assistant Manager of Equity & Advisory is Nazia
Ali.
b. Number of employees working in the finance department:
Numbers of employee who are working in finance department are about 35% of the total
employees.
c. Finance & accounting operations:
First of all I will define Finance which is as under:
Finance is two types which is Cash Inflow and Cash Outflow.

30

 Cash Inflow means Income.

Cash Outflow means Expenses.
The Finance operations provide a range of financial support services. These services
include the management of the financial advice, accounting, budgeting, financial
reporting, accounts maintenance, ledger financial systems and treasury management.
These services are also responsible for all benefits work, Income services and the
Collection of council tax the collection of sundry debts. All aspects pertain to insurance
and risk management advice, together with the payment of suppliers complete the range
of services by Finance operations.
In order to make investment in potential projects, making decisions to undertake the
project with positive cash flows and allocation of funds and resources are the operations
of finance. The finance operations are also included authenticity of cheques, preparation
of day end statements, online banking, collection of mails, opening & closing account of
customers and proper utilization of funds.
But in Accounting operations three major statements are prepared which are
1. Income statement
2. Balance sheet
3. Cash flow
Besides it also include calculating mark up interest rate, income and expenditure
accounts, passing debit and credit entries in ledger.
14. Functions of the Finance Department
a. Accounting system of the organization:
UBL maintains its accounting system on the basis of GAAP which stands for (General
Accepted Accounting Principles). All account officers work under the Operation manager
and submit daily, weekly, monthly, semi annually and annual statements to the head
office. The basic purpose of the Accounting Department is to provide accounting services
and financial support to the Bank.
The Accounting department consists of the following divisions.
Administration:

31

Budgetary responsibility and insuring internal control is the function of

accounting department. Basically accounting department handles a variety of
important tasks. It also includes periodic reporting as well as financial analysis.
Cash Division:
This division is responsible for the receipt and investment of money and also
customer relationships.
Reports Division:
This division is responsible for preparing bank reconciliation statement and
reports for use in analyzing various financial functions of the Bank.
General Accounting:
This division consists of Debtors and Creditors.
Payroll:
In general in payroll means data about the salaries of the employees.
b. Finance system of the organization:
Finance means cash inflow and cash
outflow. Finance is the life blood of any organization. The finance department deals
in authenticity of cheques , preparation of day end statements, online banking,
collection of mails, opening & closing account of customers.
In finance department following functions are performed.
Financial Services:
These services include the preparation of the statement of accounts(Condition) and
annual budget, financial reporting, financial advice, ledger and accounts maintenance and
financial systems.
Auditing:
It includes the internal auditing services.
Income:
Income means inflow of cash.
Procurement:
It includes the contractual matters for all departments.

32

c. Use of electronic data in decision making

Objective of UBL is to maximize profitability
with the help of efficient workers. It may be possible by decreasing operating expenses
by using the latest technological equipments like Computers. Electronic data gives exact
results which top level management (Strategic Management) required.
Due to electronic data three major statements are prepared which are as follows:
1. Profit and Loss account
2. Balance Sheet
3. Cash flow Statement
These statements have financial impact of the Bank. Due to these statements, Ratios of
past years are made to know the direction of the Bank whether Bank is going to Loss or
Profit. After that decisions are made on the basis of financial data which is obtained
through Computers. Electronic data makes management able to take decision at any point
of time.
d. Sources of funds:
These are the major sources of fund which are as follows:
Public Source:
The Banks major source of funds is from the Public.
Government Institutions:
This source is the Corporate sector which is one of the major sources of funds in all types
of Banking. All major organizations, financial institutions, private and government
organizations are the major sources of the funds.
Money Market:
Money market securities generally are highly liquid securities that mature in less than one
year. Money market is an informal network of dealers and investors over which shortterm debt securities are traded.
e. Allocation of funds:
It means use or advances of funds in various places in order
to get return.

33

Now I want to tell the types of Finance.

Short Term Finance:
Short term financing includes period less than one year.
Long Term Finance:
Long term financing includes tenure more than one year.
Sectors for Advances:
There are three main sectors for which UBL is advancing loans. These sectors are:
a. Industrial Sector
b.Commercial Sector
c.Agricultural Sector
a. Industrial loans:
These loans are given to industrial units including cottage and small-scale industries
up to or less than Rs.20 million. Loan period, loans are allowed for a maximum
period of 5 years including a maximum grace period of one year.
b.Commercial Sector:
Total principal amount of loans to a single borrower shall not exceed to Rs.0.3 million,
including loans to dependent members of the family. Maximum maturity period is 3
years.
c.Agricultural Sector:
The loan is advanced to those farmers who have cultivated land. It is classified into
following types:
Production Finance:
This finance is advanced to the agriculturists for inputs requirement of lands i.e.
fertilizers, pesticides, seeds etc. It is also called short-term loan. The amount of advance
with interest is repayable within one year in lump sum form. Loans can be advanced to
the client on his credit worthiness.
Development Finance:
These loans are advance to the farmers for the purpose of development of the land or
other development purpose belongs to the agriculture sector for example for tractors,
thrashers, tube-wells. It can be long term, medium term or short-term loans.

34

The repayments of the loans are schedules in periodic installments, which may be
quarterly, half yearly or yearly basis. Mortgage of land is used as security for the
development finance.
15. Critical analysis
a. Financial Analysis
1. Ratio Analysis
a) Liquidity Ratios
Liquidity ratios measure a firms ability to meet its current obligations.
These include:
Current Ratio = Current Assets / Current Liabilities
This ratio indicates the firms ability to pay its short term liabilities by those assets
expected to be converted to cash in the near future.
Current assets normally include cash, marketable securities, accounts receivables, prepaid
expenses and inventories. Current liabilities consist of accounts payable, short-term notes
payable, accrued taxes, and other accrued expenses.

(Rupees in 000)
Year

2007

2008

Current Assets
Current Liabilities

308,271,290 378,293,973
483713620 554222342

362,079,596
558156110

Current ratio

0.64

0.06

0.68

35

2009

Interpretation:
Standard ratio for current ratio is 2:1.
In all the year current ratio is unsatisfactory. It means that UBL has not made sufficient
investment in current assets. The reason behind that UBL business is based on large size
of deposits so its current liabilities has more than larger than current assets.
Acid Test Ratio
= Liquid or Quick assets /current liabilities
Liquid assets = cash and marketable securities
Year

2007

2008

2009

Liquid assets

57,622,360

50,143,570

61,252,772

Current liabilities

483713620

554222342

Acid Test Ratio

0.12

0.09

558156110
0.11

Interpretation:
Standard ratio for Acid Test Ratio is 1:1.
All the years Acid Test Ratio is unsatisfactory and below standard or Normal ratio from
1:1.
Sales to Working Capital:
Sales to Working Capital = Sales / Working Capital
Sales to working capital give an indication of the turnover in working capital per year. A
low working capital indicates an unprofitable use of working capital.
Year

2007

2008

2009

Sales

41,962,131

53,097,381

61,495,472

Working Capital
Sales to Working

-175442330

-175928329

-196076514

-0.24

-0.30

-0.31

Capital

36

Interpretation:
Because of inappropriate use of working capital sales figure gives the negative ratio. In
recent year there is a net loss.
Working capital= Current assets Current Liabilities
Positive working capital means that the company is able to pay off its short-term
liabilities.
Working capital is also called net working capital.

Working Capital:
Working Capital = Current Assets Current Liabilities
It is the difference between current assets and current liabilities. It is used to measure
a company's efficiency and its short-term financial health. Working capital is also called net
working capital.

Year

2007

2008

2009

Current Assets

308,271,290

378,293,973

362,079,596

Current Liabilities

483713620

554222342

558156110

Working Capital

-175442330

-175928369

-196076514

Interpretation:
In all consecutive years from 2007 to 2009, UBL has Negative working capital it means
that a company currently is unable to meet its short-term liabilities with its current assets.
b) Leverage Ratios:
Leverage means operating a business with borrowed money.

37

It is a combination of assets, debt, equity, and interest payments. These ratios are used to
understand a company's ability to meet it long term financial obligations.Leverage ratios
measure the degree of protection of suppliers of long term funds.
These include:
Time Interest Earned:
Time Interest Earned Ratio = EBIT / Interest Charges

EBIT stands for Earning before interest and tax.

The interest coverage ratio tells us how many times the company can cover its interest
charges from its EBIT.The ratio is designed to understand the amount of interest due as a
function of companys earnings before interest and taxes (EBIT). This ratio measures the
extent to which operating profit can decline before the firm is unable to meet its annual
interest cost/expense.
Year

2007

2008

2009

EBIT

1379

1405

-14392

Interest Charges

Nil

Nil

Nil

EBIT ratio

1379

1405

-14392

Interpretation:
As the UBL uses no debt in its capital structure so the EBIT ratio is hundred percent for
the years 2007, 08 but in 2009 UBL has to face an impairment loss on revaluation of
assets.
Fixed Charge Coverage Ratio:
Fixed Charge Coverage Ratio:
= Net Operating Income / Total Debt
38

The ratio shows the capacity of a firm to meet its total debt (Short and long term debts)
by its operating income/profit.

Year

2007

2008

2009

Net Operating Income 13,796,269

14,052,051

14,392,181

Total debt

65487949

56743538

49158077

Fixed Charge Coverage

0.21

0.25

0.29

Interpretation:
This ratio is a good sign for the bank. Because in incoming year from 2007 to 2009, it
shows the strong capacity of a bank to meet its total debt (Short and long term debts) by
its operating income/profit.
Debt Ratio:
Debt Ratio = Total Debt / Total Assets
The ratio of total debt to total assets, generally called the debt ratio, measures the
percentage of funds provided by the creditors. The higher the ratio, the more leverage the
company is using and the more risk it is assuming.Low leverage means low risk for the
Bank.
Year

2007

2008

2009

Total debt

65487949

56743538

49158077

Total Assets

546,795,871

620,240,530

640,449,529

0.12

0.09

0.08

Debt Ratio
Interpretation:

39

After calculating debt ratio, it came to know that this company is low leveraged .Because
incoming years leverage is coming to fall.
Debt to Equity Ratio:
Debt to Equity Ratio = Long term debt / Total Equity
First of all I want to define the sources of capital which are two in numbers.
1. Equity
2. Debt
Generally this ratio describes the capital structures of the company. It provides detail
around the amount of leverage (liabilities assumed) that a company has in relation to the
money provided by shareholders. The debt to equity ratio gives the proportion of
company assets that are financed by debt versus equity.
A high debt to equity ratio implies that the company has been aggressively financing its
activities through debt and therefore must pay interest on this financing.
Year

2007

2008

2009

Total debt

65487949

56743538

49158077

Total Equity

36,399,410

45,076,576

55,914,736

Debt To Equity Ratio

1.79

1.26

0.88

Interpretation:
Total debt = Short term borrowing + Long term debt.
Total equity = Share capital +Reserve +Unappropriated profit.
In the year 2007 and 2008 total debts are exceeds than the total equity so it leads to high
leverage.

40

But in the year of 2009 UBL is not leveraged one.

Debt to Tangible Net worth Ratio:

Year

2007

2008

2009

Total debt

65487949

56743538

49158077

Net worth

47890938

49395663

67318363

Debt To Net Worth

1.79

1.26

0.88

Ratio

Interpretation:
In the year of 2007 ratio is at maximum point whereas in the year of 2009 it is
satisfactory which is 0.88.
Current Worth / Net worth Ratio:
Current Worth to Net worth Ratio= Current Worth / Net worth Ratio
I calculate current worth and net worth by using this following formula:
Current Worth = Total Current Assets Total Current Liabilities
Net Worth = Total Assets - Total Liabilities
Year

2007

2008

2009

Current Worth

-175442330

-175928369

-196076514

Net Worth
Current to Net worth

47890938

49395663

67318363

-3.66

-3.56

-2.91

Interpretation:
Ratio

41

The ratio gives negative values because its current assets are not sufficient to meet its
current liabilities. In recent year 2009 instead of improving the ratio is unsatisfactory
which a bad sign is.
Total Capitalization Ratio:
Total Capitalization Ratio = Long-term debt / long-term debt + shareholders' equity
This ratio is used to measure the debt component of a company's capital structure, or
capitalization (i.e., the sum of long-term debt liabilities and shareholders' equity) to
support a company's operations and growth.
Year

2007

2008

2009

Long Term debt

3261

1978

611

Long term debt + Equity

Capitalization Ratio

36402671

45078554

55915347

worth Ratio

Interpretation:
After calculating the ratio, it came to know that UBL uses little long term debt in its
capital structure.
Fixed Asset Ratio / Equity Ratio:
To calculate this ratio two ratios are required. One is Fixed Asset Ratio which is
calculated as the following formula:
(1) Fixed Assets Ratio= Net Fixed Assets/Long term funds
This ratio establishes the relationship between long term funds and fixed assets.Since
financial management advocates that fixed assets should be purchased out of long
term funds only.
Long term fund = Equity + Long term Debts

42

Year

2007

2008

2009

Net Fixed Assets

308,271,290

19,926,915

23,734,082

Long term funds

36402671

45078554

55915347

Fixed Assets Ratio

8.47

0.44

0.42

Interpretation:
After calculated the ratio it is clear that in the year of 2009, Long term funds are enough
to purchase the long term or fixed assets.
(2) Equity Ratio:
Equity Ratio = Equity/Total assets
Equity ratio is also called shareholders equity to total equity/net worth to total assets/
and also called Proprietors ratio.

Year

2007

2008

Equity

36,399,410

Total assets

546,795,871

620,240,530

640,449,529

Equity Ratio

0.07 Times

0.07 Times

0.09 Times

43

45,076,576

2009
55,914,736

Interpretation:
The amount which is calculated through this Ratio shows the equity of the Bank. It means
remaining funds have been supplied by the outsiders.
Now combining the ratios from 2007 to 2009.
Fixed Asset Ratio / Equity Ratio for 2007= 8.47/0.07
=121
Fixed Asset Ratio / Equity Ratio for 2008= 0.44/0.07
= 6.23
Fixed Asset Ratio / Equity Ratio for 2009= 0.42/0.09
=4.67
Long term Assets versus Long term Debt
Long term Assets versus Long term Debt= Long Term Assets/ Long Term Debts
Year

2007

2008

2009

Long Term Assets

308,271,290

19,926,915

23,734,082

Long term debt

L.T Assets /L.T Debts

3261

1978

611

94532

10074

38844

worth Ratio

Interpretation:
44

Long term assts are in greater proportion than long term debts. Result is that the assets
are being financed by equity rather than long term debts. It is a good sign for the Bank.
c) Profitability Ratios:
Profitability ratios measure the earning ability of a firm.
These ratios examine the profit made by the firm and compare these figures with the size
of the firm, the assets employed by the firm or its level of sales. The long-term
profitability of a company is vital for both the survivability of the company as well as the
benefit received by shareholders. These ratios are used to measure of corporate
profitability and financial performance. Now I want to analyze the profitability ratios
which are as follows:
Net Profit Margin:
Net Profit margin = Net Profit / Sales x 100
Actually Net Profit Margin gives the net profit that the business is earning per dollar of
sales.This margin indicates the profit after all the costs have been incurred it shows that
what percentage (%) of turnover is represented by the net profit. An increase in the ratios
indicates that a firm is producing higher net profit of sales than before. In fact, Net Profit
is Net Profit after Interest and Tax.

Year

2007

2008

2009

Net Profit

9,237,015

8,445,251

9,487,952

Sales

41,962,131

53,097,381

61,495,472

Net Profit Margin

22%

16%

15%

Interpretation:
45

Result is that the Net Profit Margin was 22% in the 2007, decrease to 16% in 2008 and
then decrease to 15% in 2009.It is a not a good sign.Because it leads to decrease
continuously.
Return on Assets:
Return on Assets (ROA) = Profit after Taxation / Average Total Assets *100
Profit after taxation is generally called Net Profit/Income, which is calculated after
including interest and tax in Operating Profit. If ROA is above the rate that the company
borrows at then the project should be accepted, If ROA is below the rate that the
company borrows at then the project should be rejected.

Year

2007

2008

2009

Net Profit

9,237,015

8,445,251

9,487,952

Average total assets

273397935.5

310120265

320224764.5

ROA

3.38%

2.72%

2.96%

Interpretation:
Return on assets decreased in 2008 and 2009 and it is maximum in year of
2009. Return on asset has been gradually decreased so investment in fixed assets is not
appropriate in 2008 and 2009. In the year of 2009 it gives some increment than the year
of 2008.In the year of 2007 ROA gives maximum value.
DuPont Return on Assets:
DuPont Return on Assets = Profit after taxation/Total Assets x 100
Year
Net Profit

2007
9,237,015

Total assets

46
546,795,871

Dupont ROA

1.69%

2008

2009

8,445,251

9,487,952

620,240,530

640,449,529

1.36%

1.48%

Interpretation:
Calculated ratio is satisfactory in the year of 2007 but decreases in 2008 and also comes
down than the previous year in year of 2009.It is not a good sign for the bank.
Operating Income Margin:
Operating Income Margin = Operating Income / Net Sales*100
Operating income is called operating profit which is calculated after subtracting the
selling and administrative expenses from Gross profit/Income.

Year

2007

2008

2009

Operating Income

13,796,269

14,052,051

14,392,181

41,962,131

53,097,381

61,495,472

32.88%

26.46%

23.40%

Net Sales
Operating Income
Margin

Interpretation:

47

Operating income margin is decreased in three consecutive years, from 2007 to 2009.So
it is a bad sign for the Bank. Maximum value which is satisfactory is in the year of 2007,
but in incoming years it is going on decrease.
Operating Assets Turnover:
Operating Assets Turnover = Operating Assets/ Net Sales
Operating Assets are assets in which include, Cash and balances with treasury banks,
Balances with other banks & Operating fixed assets.
Year

2007

2008

2009

Operating Assets

87644926

84610791

99036844

Net Sales

41,962,131 53,097,381

61,495,472

Operating Assets Turnover

2.08

1.61

1.59

Margin

Interpretation:
UBL has few sales than its competitors and made investment in fixed assets rather than
current assets. In the year of 2007 calculated value is satisfactory. But in incoming years
it will be on decreasing.
Return on Operating Assets:
Return on Operating Assets = Profit after Taxation/ Operating assets*100
Year

2007

2008

2009

Net Profit

9,237,015

8,445,251

9,487,952

Operating assets

19,040,390 19,926,915

23,734,082

48.51%

39.98%

Return on Operating
Assets

48

42.38%

Interpretation:
After calculating the Return on Operating Assets it is crystal clear that
value is decreasing in the years to come. In this scenario maximum value is in the year of
2007 but in incoming years it is on decreasing.
Sales to Fixed Assets:
Sales to Fixed Assets = Net Sales / Fixed Assets
This ratio indicates that how much sales are contributed by investment in fixed Assets.
Year

2007

2008

2009

Sales

41,962,131

53,097,381

Fixed Assets

19,040,390

19,926,915

61,495,472
23,734,082

Sales to Fixed Assets

2.20Times

2.66Times

2.59Times

Interpretation:
It is clear that Sales are increasing in comparison with investment in fixed assets in
2007.In the year of 2008 maximum value which is satisfactory for the Bank.
Return on Investment:
49

Return on Investment = Net profit before interest and tax/Capital employed*100

In the ratio capital employed is calculated with the help of following formula:
Capital employed = Fixed Assets+ (Current Assets Current Liabilities) Working
capital
Year

2007

2008

2009

Net profit before I &T

13,796,269

14,052,051

14,392,181

T
Capital employed

-156401940

-156001414

-172342432

ROI

-8.82%

-9%

-8.35%

Interpretation:
It is also called Overall Profitability Ratio. It indicates the percentage of return on the
total capital employed in the business.It is clear that in the consecutive three years return
on capital gives negative figure which is not a good sign.
Return on Total Equity (ROE):
Return on Total Equity = Profit after taxation / Total Equity*100
Total equity = Share capital +Reserve +Unappropriated profit.
Here profit after taxation means Net Profit.
Return on Equity measures the amount of Net Profit earned by utilizing each dollar of
total common equity. It is the most important Bottom line ratio.
It is calculated to know how much the shareholders are going to get for their shares. This
ratio indicates how profitable a company is by comparing its net income to its average
shareholders' equity. The return on equity ratio (ROE) measures how much the

50

shareholders earned for their investment in the company. The higher the ratio percentage,
the more efficient management is in utilizing its equity base and the better return is to
investors.
Year

2007

2008

2009

Net income

9,237,015

8,445,251

9,487,952

Total Equity

36,399,410

45,076,576

55,914,736

ROE

25.38%

18.74%

16.97%

Interpretation:
It is clear that in the years to come Return on equity will be on decreasing. It shows that it
is not a better return for Investors. Because after the year 2007 it is decreasing.
Gross Profit Margin:
Gross Profit Margin =Gross Profit/Net sale *100
Gross profit ratio is the ratio of gross profit to net sales (Sales-Sales return).
Thus this ratio reflects the margin of profit that an organization is able to earn on its
trading and manufacturing activity. It is employed for inter-firm and intra-firm
comparison of trading results.
Year

2007

2008

2009

Gross Profit

13,796,269

14,052,051

14,392,181

Net sale

41,962,131

53,097,381

61,495,472

Gross Profit Margin

32.88%

26.46%

23.40%

Interpretation:

51

In order to get the required result it is clear that Gross profit margin in the year of 2007 is
maximum point. But in incoming years in 2008 and 2009 it leads to decrease.

d) Activity Ratios:
Activity ratios are sometimes also called efficiency or Turnover ratios.
The word turnover means rotation or utilization of resources in the process of business
activity.
Activity ratios are concerned with measuring the efficiency of assets management. These
ratios express relationship between level of sales and the investment in various assets
inventories, receivables etc. Activity ratios measure a firm's ability to convert different
accounts within their balance sheets into cash.
There are four main activity ratios which are
1. Stock turnover ratio
2. Debtors/Account receivable turnover ratio
3. Creditors/Account payable turnover ratio
4. Working capital turnover ratio
Accounts Receivable Turnover:
Accounts Receivable Turnover = Annual net credit sale/Average account receivable
Annual net credit sale = Annual sale - Sales return
Average account receivable = Opening account receivable+Closing account receivable /2
Interpretation:
This ratio depicts that how many times amount is received from account receivable
during the period of one year.
As UBL has no accounts receivable, so account receivable ratio can not be calculated. I
am analyzing the ratios for banking company(UBL) so the activities ratios does not of
much more concern and usually use for manufacturing business.
Average Collection Period:
Because UBL has not account receivables so it is also impossible to calculate the number
of days for collection.
Accounts Payable Turnover:

52

Accounts Payable Turnover = Annual net credit purchase/Average account payable

Annual net credit purchase = Annual purchase - purchase return
Average account payable = Opening account payable +Closing account payable /2

Year

2007

2008

2009

Net credit purchase

13,078,063

16,620,583

14,974,445

3043633

2605435

2583180

4.30Times

6.38Times

5.80Times

Average account
payable
Accounts Payable
Turnover

Interpretation:
First of all I want to explain that high payable turnover ratio is satisfactory for the Bank.
So in the year of 2008 payable turnover ratio is maximum point which is 6.38 Times. It
indicates less period of credit enjoyed by the Bank, it may be due to fact that either
business of Bank has better liquidity position.
Average Payment Period:
Average Payment Period = Number of days in a year/ Accounts Payable Turnover
ratio
Average Payment period for 2007:
53

=360/4.30
=83 Days
Average Payment period for 2008:
=360/6.38
=56 Days
Average Payment period for 2009:
=360/5.80
=62 Days
Shorter average payment period is satisfactory for the Bank.
Inventory Turnover Ratio:
Inventory Turnover Ratio = Cost of goods sold/ Average Inventory
Here average inventory is equal to opening inventory of stock+ closing inventory of
stock/2.Inventory turnover ratio is also called Stock turnover ratio.
Interpretation:
It is not possible to calculate this ratio because this ratio is used in manufacturing
concerns. But bank is a service sector so Inventory turnover ratio can not be calculated.
Average Age of Inventory:
Average Age of Inventory = Days in the year/ Inventory Turnover Ratio
Interpretation:
Average age of inventory will be possible in that case if Inventory turnover ratio is
possible. So in previous scenario Inventory turnover ratio cannot be calculated. In this
way it is also impossible.
Operating Cycle:
Definition:
Actually it is the length of time from actual outlay of cash for purchases until the
collection of receivables resulting from the sale of goods.
It is the time period between the acquisitions of goods and final cash realization resulting
from sale and subsequent collection.
Total Assets Turnover:
Total Asset Turnover = Total Sales / Total Assets

54

It is calculated by dividing sales in dollars by assets in dollars. Asset turnover measures a

firm's efficiency at using its assets in generating sales or revenue. The higher the number
the better. Companies which have low profit margins tend to have high asset turnover,
while those with high profit margins have low asset turnover.
Year

2007

2008

2009

Total Sales

41,962,131

53,097,381

61,495,472

Total Assets

546,795,871

620,240,530

640,449,529

Total Asset Turnover

0.08

0.08

0.09

Interpretation:
In the year of 2009 Ratio is satisfactory.
Fixed Assets Turnover:
Fixed Assets Turnover = Total sales/Fixed assets
Asset turnover measures a firm's efficiency at using its fixed assets in generating sales or
revenue. The higher the number the better it is.
Year

2007

2008

2009

Total Sales

41,962,131

53,097,381

61,495,472

Fixed Assets

19,040,390

19,926,915

23,734,082

Fixed Asset Turnover 2.20

2.66
2.59
Interpretation: In the year of 2008 calculated Ratio is satisfactory.

55

e) Market Ratio:
Market ratios are commonly used by the investors to assess the performance of a business
as an investment and also the cost of issuing stock.
Dividend per share:
Dividend per Share = Total amount of Dividend/ Number of outstanding shares

Year

2007

2008

2009

Total amount of Dividend

1,942,500

3,945,703

1,094,748

Number of Shares

1,618,750

2023438

1,011,719

Dividend per Share

1.2

1.95

1.08

Interpretation: In the year of 2008 ratio is at maximum point which is Rs.1.95.

Earning Per Share- EPS:
Earning Per Share = Profit after Taxation/ Number of Shares
Year

2007

2008

2009

Profit after Taxation

9,237,015

8,445,251

9,487,952

Number of Shares

1,618,750

2023438

1,011,719

Earning per Share

5.7

4.17

9.38

56

Interpretation:
Earnings per share serves as an indicator of a company's profitability. Earnings per share
are generally considered to be the single most important variable in determining a share's
price. In the year of 2009 Ratio is high.
Market Price / Earning Ratio:
Price / Earning Ratio = Stock Price per Share/ Earning Per Share
Year

2007

2008

2009

Stock Price per Share

4.99

10.99

Earning per Share

5.7

4.17

9.38

Price / Earning Ratio

0.88

1.19

1.17

Interpretation: In the year of 2008 ratio is at maximum point.

Dividend Payout Ratio:
Dividend Payout Ratio = Dividend per Share/

Earning per Share

Year

2007

2008

2009

Dividend per Share

1.2

1.95

1.08

Earning per Share

5.7

4.17

9.38

Dividend Payout Ratio

0.21

0.47

0.12

57

Interpretation:
The percentage of earnings paid to shareholders in form of dividend. More mature
companies tend to have a higher payout ratio. In the year of 2008 ratio is high.
Dividend Yield:
Dividend Yield = Dividend per Share/ Share Price
Year

2007

2008

2009

Dividend per Share

1.2

1.95

1.08

Share price

4.99

10.99

Dividend Yield

0.24

0.39

0.09

Book Value per Share:

Book Value per Share = Shareholders Equity/ Share Capital
Year

2007

2008

2009

Equity

36,399,410

45,076,576

55,914,736

Share Capital

8,093,750

10,117,188

11,128,907

Book Value per Share

4.49

4.45

5.02

Interpretation:
58

In the year of 2009 calculated ratio is at maximum point which is Rs.5.02.

f) Statement of cash flow:
Cash flow ratios indicate liquidity, borrowing capacity or profitability. These ratios can
give users another look at the financial health and performance of a company.
(i)Operating Cash Flow to Current maturities of long term debt and current notes
payable
= Operating cash flow / current maturities of long term debt r + (Accounts) Notes
payables
Year

2007

2008

2009

Operating Cash flow

50,482,038

1,025,033

26,774,872

12,078,519

49,960,560

42,334,638

4.18

0.02

0.63

Current maturities of
long term debt +ACs
payables
Ratio

Interpretation:
The ratio tells the amount of long term debt and account payables in the year of 2008 and
2009.
(ii) Operating Cash Flow to Total Debt:
Operating Cash Flow to Total Debt = Operating Cash Flow/Total Debt
This ratio provides an indication of a company's ability to cover total debt with its yearly
cash flow from operations. The higher the percentage ratio, the better the company's
ability to carry its total debt.
59

Year

2007

2008

2009

Operating Cash flow

50,482,038

1,025,033

26,774,872

Total Debts

65,487,949

56,743,538

49,158,077

0.77

0.02

0.54

Operating Cash Flow/Total

Debt

Interpretation:
In the year of 2009 ratio is higher which is better for the Bank.
(iii)Operating Cash Flow per Share:
Operating Cash Flow per Share = Operating cash flow / Total Shares

Year

2007

2008

2009

Operating Cash flow

50,482,038

1,025,033

26,774,872

Total Shares

1618750

2023438

1011719

Operating Cash Flow per share

31.12

0.51

26.46

(iv)Operating Cash Flow/Cash Dividends:

Year

2007

2008

2009

Operating Cash flow

50,482,038

1,025,033

26,774,872

Cash Dividends

1,942,500

3,945,703

1,094,748

25.98

0.26

24.46

Ratio

60

Interpretation:
More the cash flow from operating leads to more cash dividend which is paid to the
shareholders. In the year of 2007 and 2009 % of cash flow from operating is high.
2. Horizontal Analysis:
It is also called Index analysis. This analysis considers changes in items of financial
statements from a base year to the following years to show the direction of change. In this
analysis I assume base year (2007).
Computation explained = Item of any year/ Base year item (2007) *100

Horizontal Analysis
United Bank Limited
Consolidated Balance Sheet
As On Dec 31 2007, 2008 & 2009

(Rupees in 000)

Horizontal Analysis
2007

ASSETS
Cash and balances
with treasury banks
Balances with
other banks

2008

2009
2007

2008

2009

57,622,360

50,143,570

61,252,772

100

87.02

106.30

10,982,176

14,540,306

14,049,990

100

132.40

127.93

61

Lending to
financial

24,781,723

22,805,341

23,162,130

100

92

93.46

Investments

114,026,273

115,057,090

137,734,578

100

100.90

120.79

Advances

308,271,290

378,293,973

362,079,596

100

122.71

117.45

19,040,390

19,926,915

23,734,082

100

104.65

124.65

Deferred tax asset

---------------

2,164,148

649,814

Other assets

12,071,659

17,309,187

17,786,567

100

143.39

147.34

TOTAL ASSETS
LIABILITIES
Bills payable

546,795,871

620,240,530

640,449,529

100

113.43

117.13

6,087,266

5,210,870

5,166,361

100

85.60

84.87

Borrowings

59,491,253

44,749,690

37,168,277

100

75.22

62.47

412,138,405

492,267,898

503,831,672

100

119.44

122.25

5,996,696

11,993,848

11,989,800

100

200

199.94

3,261

1,978

611

100

60.65

18.74

2,109,989

----------------

-------------------

100

13,078,063

16,620,583

14,974,445

100

127.08

114.50

570,844,867

573,131,166

100

114.42

114.88

49,395,663

67,318,363

100

103.14

140.56

institutions

Operating fixed
assets

Deposits and other

accounts
Sub-ordinate loans
Liabilities against
assets subject to
finance lease
Deferred tax
liability
Other liabilities
TOTAL

498,904,933
LIABILITIES
NET ASSETS
47,890,938
REPRESENTED BY
Shareholders Equity
Share capital
8,093,750
Reserves
11,577,342
Unappropriated
16,728,318
profit
Minority interest
2,115,645

10,117,188
17,256,061

11,128,907
21,167,954

100
100

125
149

137.50
182.84

17,703,327

23,617,875

100

105.82

141.85

2,044,589

2,279,691

100

96.64

107.75

62

Surplus on
revaluation of

9,375,883

2,274,498

9,123,936

100

24.26

97.31

assets
TOTAL EQUITY

47,890,938

49,395,663

67,318,363

100

103.14

140.56

Horizontal Analysis
United Bank Limited
Consolidated Profit & Loss Account
As On Dec 31 2007, 2008 &2009

(Rupees in 000)
Mark-up / return /
interest earned
Mark-up / return /
interest expensed
Net mark-up / interest
income
Provision against
loans and advances -

2007

2008

2009

Horizontal Analysis
2007
2008
2009

41,962,131

53,097,381

61,495,472

100

126.53

146.55

17,162,817

24,303,193

28,323,272

100

141.60

165

24,799,314

28,794,188

33,172,200

100

116

133.76

1,690,095

5,883,778

9,644,927

100

348.13

570.67

(3,803,759)

(1,369,230)

560,852

100

(35.90)

14.75

(6,233)

1,871,589

1,187,460

100

(300)

(190)

Net
Additional
provisioning arising
on account of change
in Prudential
Regulations(Provision
against loans(2009)
Reserve for
diminution Investmnt

63

Bad debts written off

935,165

directly

Total Net Mark up

Net mark-up /

1,485,976

100

68.68

158.90

6,422,78

18,376,528

21,040,498

20,292,985

100

114.50

110.43

5,899,632

7,298,807

6,736,356

100

123.71

114.19

364,260

191,376

214,727

100

52.54

58.95

893,790

1,680,870

1,275,914

100

188

142.75

851,589

254,418

699,275

100

29.80

82.11

(15,755)

(10,682)

(2,582)

(100)

(67.80)

(16.39)

1,614,151

1,506,146

3,396,800

100

93.30

210

9,607,667

10,920,935

12,320,490

100

113.66

128.23

14,257,211

16,679,968

17,803,338

100

116.90

124.87

236,281

468,042

642,274

100

198

271.83

17,430

292,377

64,552

100

167

370

------------------ 340,548

401,073

14,510,922

18,911,237

100

122.53

130.32

interest income after

provisions
Fee, commission and
brokerage income
Dividend
Income from dealing
in foreign currencies
Gain on sale of
securities
Unrealized loss on
revaluation of
investments
Other
income/Charges
Total non mark up
Non mark-up /
interest expense
Administrative
expenses
Other provisions /
write offs - net
Other charges
Workers welfare fund
Total non mark-up /
interest expenses

17,780,935

64

Profit before
taxation

13,796,269

14,052,051

14,392,181

100

101.8

104.32

- Current
- Prior years
- Deferred

5,151,242
442,667
(1,034,655)
4,559,254
9, ,237,015

6,151,520
435,072
(979,792)
5,606,800
8,445,251

6,996,257
78,710
(2,170,738)
4,904,229
9,487,952

100
100
(100)
100
100

119.42
98.29
(94.69)
122.98
91.43

135.82
17.79
(209.80)
107.57
102.72

8,975,280

8,355,757

9,521,546

100

93

106

261,735
9,237,015

89,494
8,445,251

(33,594)
9,487,952

100
100

34.19
91.42

12.85
102.72

11.09

8.26

8.56

100

74.48

77.12

Profit after taxation

Attributable to:
Equity holders of the
Bank
Minority interest
Basic and diluted
earnings per share

3. Vertical Analysis:
It is also called common size / component percentage/Static analysis. It indicates the size
of each item in the financial statement as a % of total of that statement i.e. Assets,
Liabilities & shareholders equity in balance sheet and sales in income statement.
Common-size balance sheets and income statements can be more easily compared,
whether across the years for a single company or across different companies. When using
vertical analysis, the analyst calculates each item on a single financial statement as a
percentage of a total.
Computation explained = Amount of one column/ Total amount of that column *100
Vertical Analysis
United Bank Limited
Consolidated Balance Sheet
As On Dec 31 2007, 2008 & 2009

(Rupees in 000)

Vertical Analysis
2007

2008

2009

65

ASSETS
Cash and balances

2007

2008

2009

57,622,360

50,143,570

61,252,772

10.55

8.08

9.56

10,982,176

14,540,306

14,049,990

2.34

2.19

24,781,723

22,805,341

23,162,130

4.53

3.68

3.62

Investments

114,026,273

115,057,090

137,734,578

20

18.55

21.51

Advances

308,271,290

378,293,973

362,079,596

56.38

60.99

56.54

19,040,390

19,926,915

23,734,082

3.45

3.21

3.70

Deferred tax asset

---------------

2,164,148

649,814

.35

.10

Other assets

12,071,659

17,309,187

17,786,567

2.20

2.79

2.77

TOTAL ASSETS
LIABILITIES
Bills payable

546,795,871

620,240,530

640,449,529

100

100

100

6,087,266

5,210,870

5,166,361

1.11

.84

.81

Borrowings

59,491,253

44,749,690

37,168,277

10.88

7.21

5.80

412,138,405

492,267,898

503,831,672

75.37

79.37

78.67

5,996,696

11,993,848

11,989,800

1.09

1.93

1.87

3,261

1,978

611

5.96

3.19

9.54

2,109,989

----------------

-------------------

0.39

13,078,063

16,620,583

14,974,445

2.39

2.68

2.33

570,844,867

573,131,166

91.24

92.04

89.49

49,395,663

67,318,363

8.76

7.96

10.51

1.49

1.63

1.75

with treasury banks

Balances with
other banks
Lending to
financial
institutions

Operating fixed
assets

Deposits and other

accounts
Sub-ordinate loans
Liabilities against
assets subject to
finance lease
Deferred tax
liability
Other liabilities
TOTAL

498,904,933
LIABILITIES
NET ASSETS
47,890,938
REPRESENTED BY
Shareholders Equity
Share capital
8,093,750

10,117,188

11,128,907
66

Reserves
Unappropriated

11,577,342

17,256,061

21,167,954

2.12

2.78

3.30

16,728,318

17,703,327

23,617,875

3.05

2.85

3.69

2,115,645

2,044,589

2,279,691

0.38

0.33

0.35

revaluation of

9,375,883

2,274,498

9,123,936

1.72

0.36

1.42

assets
TOTAL EQUITY

47,890,938

49,395,663

67,318,363

8.76

7.96

10.51

profit
Minority interest
Surplus on

Vertical Analysis
United Bank Limited
Consolidated Profit & Loss Account
As On Dec 31 2007, 2008 &2009
2007
(Rupees in 000)
Mark-up / return /
interest earned
Mark-up / return /
interest expensed
Net mark-up /
interest income
Provision against
loans and

2008

2009

Vertical Analysis
2007
2008

2009

41,962,131

53,097,381

61,495,472

100

100

100

17,162,817

24,303,193

28,323,272

40.90

45.77

46.06

24,799,314

28,794,188

33,172,200

59.09

54.23

53.94

1,690,095

5,883,778

9,644,927

4.03

11.08

15.68

(3,803,759)

(1,369,230)

560,852

(9.06)

(2.58)

0.91

advances(Net)
Additional
provisioning arising
on account of change
in Prudential
Regulations(Provision
against loans(2009)

67

Reserve for
diminution

(6,233)

1,871,589

1,187,460

(.01)

3.52

1.93

2.23

1.21

2.42

Investment
Bad debts written off
directly

935,165

6,422,78

1,485,976

Net mark-up /
interest income after
provisions
Fee, commission and
brokerage income
Dividend
Income from dealing
in foreign currencies
Gain on sale of
securities
Unrealized loss on
revaluation of
investments
Other
income/Charges
Total non mark up
Non mark-up /
interest expense
Administrative
expenses
Other provisions /
write offs - net
Other charges
Workers welfare fund

18,376,528

21,040,498

20,292,985

43.79

39.62

32.99

5,899,632

7,298,807

6,736,356

14.06

13.75

10.95

364,260

191,376

214,727

0.87

0.36

0.35

893,790

1,680,870

1,275,914

2.13

3.17

2.07

851,589

254,418

699,275

2.03

0.48

1.14

(15,755)

(10,682)

(2,582)

(0.04)

(0.02)

(4.19)

1,614,151

1,506,146

3,396,800

3.85

2.84

5.52

9,607,667

10,920,935

12,320,490

22.89

20.56

20.03

14,257,211

16,679,968

17,803,338

33.98

31.41

28.95

236,281

468,042

642,274

0.56

0.88

1.04

17,430

292,377

64,552

0.04

0.55

0.10

------------------

340,548

401,073

0.64

0.65

68

Total non mark-up /

14,510,922

17,780,935

18,911,237

34.58

33.48

30.75

taxation

13,796,269

14,052,051

14,392,181

32.88

26.46

23.40

- Current
- Prior years
- Deferred

5,151,242
442,667
(1,034,655)
4,559,254
9, ,237,015

6,151,520
435,072
(979,792)
5,606,800
8,445,251

6,996,257
78,710
(2,170,738)
4,904,229
9,487,952

10.86
22.01

10.55
15.90

7.97
15.43

8,975,280

8,355,757

9,521,546

21.38

15.74

15.48

261,735
9,237,015

89,494
8,445,251

(33,594)
9,487,952

0.62

0.17

(0.05)

11.09

8.26

8.56

2.64

1.55

1.39

interest expenses
Profit before

Profit after taxation

Attributable to:
Equity holders of the
Bank
Minority interest
Basic and diluted
earnings per share

4. Review of Descriptive Information for United Bank Limited:

Descriptive information gained from the year (2009) Annual report, Cash flow statements
and Financial statements (T, P &L account and balance sheet). Financial statements are
prepared in accordance with approved accounting standards, (International Accounting
Standards) as notified under the Companies Ordinance, 1984 and directives issued under
the Companies Ordinance, 1984 and Banking Companies Ordinance, 1962 and the
directives issued by State Bank of Pakistan (SBP).
According to the Banking Companies Ordinance 1962, the bank is required to transfer
Twelve percent (12%) of its profit each year to the statutory reserve fund until the amount
in such funds equals in the paid up capital of the United Bank Limited. Dividend
distributions and appropriation to reserves are recognized as a liability in the Balance
Sheet in the period in which these are approved. The Bank monitors and reports its
capital ratios under SBP rules, which ultimately determine the regulatory capital required
to be maintained by Banks.

69

In annual report 2009 and ratio analysis Balance sheet on 31st December 2009 shows
negative working capital which is Rs.(-196,076,514).But net worth (Total assets Total
liabilities) is satisfactory, which is Rs.(67,318,363).
I also want to tell that Gross profit leads to decline from previous years which are
Rs.43.39% and Net profit also leads to decrease which is Rs.28.60%.At the end of the
year 2009 ,Financial statements also depicts that Dividend Payout Ratio is less than
previous year 2008.
After that balance sheet at the end of December 31, 2009 Share capital is maximum value
from previous years which is Rs.11, 128,907.
The auditors conducted 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 United Bank Limited as at December 31, 2007, 2008 & 2009 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 Current Scenario of UBL is that Bank's Paid-up capital is Rs.1.48 billion. It is not
enough to meet capital adequacy ratio, but the package of the State Bank of
Pakistan(Central Bank) has put together to shore up UBL will provide Rs.21 billion to
increase the capital base. This huge infusion of capital would improve the Bank's
liquidity (Working capital) and boost public confidence. In turn, it would enable it to step
up deposit mobilization, expand its activities, pay depositors a higher return, and upgrade
technology. All of these would impact on profitability. The Banks major credit risk in the
case of loans and advances is concentrated in the construction/real estate and trading and
commerce sectors.
5. Comparisons:
In order to comparison I compared previous three years (2007,
2008 and 2009) financial data which are required in my Report and which also
observes the changes. This comparison will lead to assess the current financial
position of the Bank.
Now I will adopt more methods for comparison which are required in my Report.

70

(i) Trend Analysis:

In Trend Analysis firms present ratio is compared with its past and expected future
ratios to determine whether the company's financial condition is improving or
deteriorating over time. Purpose of trend analysis is to check whether the ratio is
rising, falling, or remaining relatively constant. This helps to detect problems or
observe good management.
Trend Analysis
United Bank Limited
For The Years 2007, 2008 & 2009
Performance Area

2007

2008

2009

Trend Analysis

a) Liquidity Ratios

Current Ratio

0.64

0.68

0.06

0.12

0.09

0.11

Acid Test Ratio

Sales to Working Capital

-2.87

-5.82

-0.14

Working capital

Unsatisfactory
(Normal 2:1)
Lower liquidity
in all the years
(Normal 1:1)
Unsatisfactory
Current assets

-175442330 -175928369

-196076514

are not sufficient

to meet current
liabilities

b) Leverage Ratios
Time Interest Earned

Fixed Charge Coverage

Debt Ratio

1379

1405

-14392

0.21

0.25

0.29

0.12

0.09

0.08

Lower since
2009 & no
interest charges
High coverage in
2009
Leverage
decreases in

71

2009
Debt / Equity Ratio

Debt to Tangible Net

1.79

1.79

1.26

1.26

0.88

0.88

worth Ratio
Current Worth / Net worth
Ratio
Total Capitalization Ratio

debt in its capital

structure
In 2009 UBL
uses low debt
Unsatisfactory in

-3.66

-3.56

-2.91

Long term Assets versus

Long term Debt

UBL uses little

all the years

In 2009 Ratio is
minimum
Higher in 2007

94532

10074

38844

but drop in 2008

c) Profitability Ratios
Decreasing
Net Profit Margin

37.24%

29.32%

28.60%

Return on Assets

Lower ROA
3.38%

DuPont Return on Assets

Operating Income Margin
Operating Assets
Turnover
Return on Operating
Assets
Sales to Fixed Assets

continuously

2.72%

2.96%

1.69%

1.36%

1.48%

55.63%

48.80%

43.39%

353.42%

293.85%

298.53%

48.51%

42.38%

39.98%

1.30Times

1.44Times

1.39Times

during 2008 & in

2009
Decreases from
the year 2007
Decreases
Lower efficiency
in 2008
Decreasing in
2009
Lower in 2007
and higher in
2008

72

Return
on Investment (ROI)
Return on Total Equity
Gross Profit Margin
d) Activity Ratios
Accounts Payable
Turnover
Average Payment Period
Total Assets Turnover
Fixed Assets Turnover
e) Market Ratios
Dividend per share
Earning per Share
Price/Earning Ratio
Dividend Payout
Dividend Yield
Book Value per
Share
f) Statement of cash flow
Operating Cash
Flow/Current Maturities
of Long Term Debt and
Current Notes Payable
Operating Cash
Flow/Total Debt
Operating Cash Flow per
Share
Operating Cash
Flow/Cash Dividends

Unsatisfactory

-8.82%

-9%

-8.35%

25.38%

18.74%

16.97%

55.63%

48.80%

43.39%

4.30Times

6.38Times

5.80Times

Higher in 2008

83 Days
0.05
1.30

56 Days
0.05
1.44

62 Days
0.05
1.39

Higher in 2009
Constant
Higher in 2008

1.2

1.95

1.08

5.7
0.88
0.21
0.24

4.17
1.19
0.47
0.39

9.38
1.17
0.12
0.09

4.49

4.45

5.02

Decreasing
continuously
Gradually
decreases

Good percentage
in 2008
Higher in 2009
Higher in 2008
Lower in 2009
Lower in 2009
Higher in 2009

Satisfactory in
4.18

0.02

0.63

0.77

0.02

0.54

31.12

0.51

26.46

25.98

0.26

24.46

2007 but not in

2008
Higher in 2007
but lower in 2008
Higher in 2009
but lower in 2008
Higher in 2007
but lower in 2008

(ii) Industry Averages and Comparisons with Competitors

I have compared all ratios through above mentioned comparisons and analysis, in which
include trend analysis, horizontal analysis and vertical analysis.

73

b. Future Prospects of UBL:

Future prospects of UBL for its strong customers to drive the bank future business
strategy. On the domestic front, bank launched its consumer banking business. Increased
in investment in developing Human Resource and internal system to support the
aggressive consumer initiative and exploration of new avenues of revenue generation.
The first step under this initiative is the launch of ATM cards branded UBL Wallet.
Furthermore UBL introduced a full suite of innovative consumer finance products
designed to capture a significant share of the local consumer finance market. In corporate
banking, UBL recently participated as a co-manager in the securitization of Daewoo's
receivables under a syndicated arrangement.

16. SWOT analysis of organization

Internal Environment
Strength:
UBL where I got internship has got a well reputed online system. Remittance
department is working very efficiently in transferring the funds to peoples due to
this system.
There is also improvement in corporate loans and agricultural loans.
One employee in the bank performs many duties.
All staff members treat their clients or general public with well behavior.
Two major sectors have a big account in UBL Kamalia, which are Poultry
Farming and Khaddar Industry.
In UBL Kamalia Branch, there is computerized system so performance
automatically has been increased and leads to better results.

Weaknesses:
There is yet no ATM machine in UBL Kamalia Branch.
There is also lack of workplace in the Bank.
74

 I observed during my internship that some of the employees were burdened with
over work. So according to my point of view that the work should be distributed
according to their post.
Due to lack of workplace, staff members as well as the general public face
disturbance in the bank.
UBL has formulized a lot of products and services for its customers, but any
advertisement on electronic media has not been seen.
There is no corporate credit department in UBL Kamalia Branch.
The promotion of UBL employees almost depends on bringing of deposits
respectively.
Employees are not well grooming as compare to other modern commercial banks.
UBL mostly depend upon one to one marketing for deposit not organized setup.
External Environment

Opportunities:
Great opportunity of starting Islamic banking system like Bank Alfalah in
Kamalia.
UBL has an opportunity to provide the facility of Online free for their clients like
Bank Alfalah Islamic Banking System in Kamalia.
UBL Kamalia Branch is surrounded by many competitors it has an opportunity to
aggressive marketing to increase its business.
UBL has a great opportunity to open the Branch in busy business areas like KSM
(Kamalia Sugar Mill), Flour Mill and Poultry Farming.
UBL also should introduce attractive mark up rates on customer or public
deposits.
Threats:
UBL is facing a strong competition by its competitors in Kamalia like MCB,
ABL, and Bank Alfalah Islamic. Business of all these Banks is rapidly growing.

75

 Because in Kamalia UBL Branch takes online charges from their customer but
Bank Alfalah not. So due to this difference people will want to open their account
in Bank Alflah Islamic. In this way deposit in the Bank cannot be increased.
Behavior of some employees is not good, so due to this reason customers cannot
open the account in this Branch. If customer has an account in Branch then he
withdraws the whole amount from the Bank. I also observed of this case during
my Internship.
17. Conclusion
I concluded in the light of ratios and SWOT analysis. UBL has negative working capital
in all the three years from 2007 to 2009, so it is essential to increase current assets and
reduce investment in fixed assets.
While having an opportunity to go for internship at UBL Kamalia Branch, I observed the
following reservations:I concluded that UBL Kamalia Branch is housed in small a banking premises which does
not suffice the requirements of visiting clients as well as corporate clients of the Bank. By
having a glance over the current business of the branch, the same should immediately be
shifted to some spacious building at specific area so that best banking services can be
offered to the bank customers. Moreover UBL has no enough staff and have only three
PCs.Due to which clients have to wait to their turn in case of transfer the money
(Online).
Moreover UBL has no ATM machine. So there is an immediate need for ATM Machine at
present era. In this way account holders easily withdraw the amount within the 24 hours.
Recently branch of Bank Alfalah Islamic was opened in Kamalia and it introduced
attractive interest rates on the customer deposits. Bank Alfalah Islamic introduced a new
package to provide the Free Online facility to account holders and also to non account
holders. Due to this unique characteristic UBL faces the challenge.
18. Recommendations for Improvement
I suggested some recommendations in the light of ratios and SWOT analysis. UBL has
negative working capital in all the three years from 2007 to 2009, so it is essential to
increase current assets and reduce investment in fixed assets.

76

During my internship at the UBL I found out weak areas that require improvements for
long-term benefit of the organization. These suggestions and recommendation for
improvements are as follows:
Professional Training:
UBL staff lacks professionalism. They lack the necessary training to do the job
efficiently. For this purpose staff colleges should be reorganized and their syllabus should
be made in such a way which can help the employee understand the ever-changing global
economic scenario.
Delegation of Authority:
Employees of the UBL should be given a task and authority and they should be asked for
their responsibility. The sense responsibility in employees mind and moral check is one
of the most important factors in the success of the organization.
Slow System:
I also pointed out that system of computers is very slow. When an account holder wants
to make online, then online process takes a lot time. In this way there is possibility that
customers will want to open their accounts in other branches which have very fast system
like Bank Alfalah and MCB in Kamalia.
Credit Card:
UBL should start its operation in credit card. These cards are very helpful for the ordinary
customer in general and the business people in particular. To make it more secure and to
eliminate the misuse of it, the management is required to keep proper security against
credit card.
Bank Charges:
At the end of my Internship I also observed that in case of providing the services of
Online to its customers, bank charges are Rs.155/ up to amount Rs.100,000/.But newly
opened branch Bank Alfalah Islamic provides this facility Free to account holders and
also to non account holders.So UBL should also adopt the Free Online policy in order to
success.

77

19. Reference & Sources used

Oral:
Much oral information was provided by Mr.Aatir Zulqarnain (Operational Manager) and
Mr. Zahid (Supervisor).
Written: Internet
Annual Report
Records

Web Sites.
www.ubl.com.pk
www.privatisation.gov.pk
www.google.com

20. Annexes:
Scanned Copies of Financial Statements (UBL) are attached which are on next page.

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Brochures:

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