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1-Objectives of studying the organization

Objectives of studying Allied Bank Limited are following:-


 To prepare internship report according to the requirement of the university.
 To get an opportunity to study for my academic interest.
 To get the foundation of my future studies.
 To get knowledge about various departments of ABL.
 To get knowledge about daily business activities of ABL.
 To know about the bank operations.
 To study Administration and policies of ABL.
 To develop my analytical skills.
 To compare practical experience with theoretical concepts which I have learned
during MBA.

Bank and banking:-


The word bank is derived from the word "Banquet" which means a "Bench". This is
attributed to the fact that the Jewish transacted the business of money exchange on bench in
market place.
According to banking companies ordinance 1962 “Banking is business receiving for
lending or investment, of deposits of money, from public, repayable on demand or
otherwise and which draw able by check, draw, order or otherwise”.

Definition of bank:-
“A bank includes a body of person, who carry on the business of banking” Or “A
bank maybe as an institution dealing mainly in money and credit. It accepts deposits from
one class of people at a lower rate of interest and industry for meeting the requirements.
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This provides finance for successfully carrying on various stages of production as well as
distribution.”
An over view of banking industry in Pakistan:-
At the time of independence the areas of Pakistan were producing only food grains
and agricultural raw material. For Indo-Pak sub continent, there were practically no
industries and whatever raw material was produced was being exported from Pakistan.
How ever commercial banking facilities were provided fairly well here. There were 487
offices of scheduled banks in the territories now constituting Pakistan.
It was very difficult for Pakistan to run its own banking system immediately.
Therefore in accordance with the provision of Indian independence Act 1974, an expert
committee was appointed to study the issue. On the recommendation of committee Reserve
Bank of India continued to function in Pakistan, till 30th September 1984, so that problem
of time and demand, liability, coinage, currencies exchange etc be settled between India
and Pakistan. It was decided that Pakistan will take over the management of public debt
and exchange control from reserve Bank of India on 1st April 1948, and that India notice
would continue to be legal tender to Pakistan till 30th September 1948.
Following the announcement of independence plan in June 1947, the Hindus
residing in the territories now comprising Pakistan started transferring their assets to India.
Moreover the banks including those having the registered offices in Pakistan transferred to
India in order to bring a collapse of new state. By 30th June 1948, the number of offices of
scheduled banks in Pakistan declined from 487 to only 195.
There were 19 non-Indian foreign banks with the status of small branch offices,
which were engaged solely in export of crops from Pakistan institutions i.e., Habib Bank
and Australia Bank.
The nationalization of Banks in Pakistan since January 01st, 1947 has heralded a
new era of development and progress. It has taken a complete banking system with effect
form January 1981. Privatization process of state owned banks and enterprises started in
1991.
Recent trends in banking industry:-
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Pakistan’s economy had a year of solid economic growth in 2005-06 despite


unexpectedly week harvests, a tight monetary policy, extraordinary surge in oil prices and
the devastating earth quake of October 6, 2005.Real GDP registered a strong growth of
6.6% in 2005-06 as against the target 7.0% targeted for the year. The above growth was
attributable to principally higher than expected performance of the service sector.
All the components of the service sector registered strong growth with an overall
growth impact of 8.8% over an equally robust growth of 85 last years. Finance and banking
sector showed remarkable growth of 23% after 29.7% last year. Per capita income being
one of the measures of the level of prosperity in the country registered an increase of 14.2
percent over last year-rising from 742$ to 847$.
The state bank of Pakistan continued to maintain a tight monetary policy throughout
FY-2005-2006. The discount rate was raised from 9% to 9.5% in July 2006.

2-Overview of the Organization Allied Bank Limited

2.1-History:-
Allied Bank is the first Muslim bank, to have been established on the territory that
became Pakistan. Established in December 1942 as the Australasia Bank at Lahore with a
paid-up share capital of Rs. 0.12 million under the Chairmanship of Khawaja Bashir Bux,
the Bank had attracted deposits, equivalent to Rs. 0.431 million in its first eighteen months
of business. Total assets then amounted to Rs. 0.572 million. Today Allied Bank's paid up
Capital & Reserves amount to Rs. 10.5 billion, deposit exceeded Rs. 143 billion and total
assets equal Rs. 170 billion. The Allied Bank's story is one of dedication, commitment to
professionalism, adaptation to changing environmental challenges resulting into all round
growth and stability, envied and aspired by many.

The Pre Independence History (1942 to 1947)


In the early 1940s the Muslim community was beginning to realize the need for the
active participation in the field of trade and industry. The Hindus had since the late 1880s
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established a commanding presence in these areas and industry, trade and commerce in the
undivided Sub-continent was completely dominated by them. Banking, in particular, was
an exclusive enclave of the Hindus and it was widely believed, and wrongly so, that
Muslims were temperamentally unsuited for this profession.
The initial equity of the Bank amounted to Rs 0.12 million, which was raised to Rs
0.5 million by the end of first full year of operation, and by the end of 30th June 1947
capital increased to Rs. 0.673 million and deposits raised to Rs 7.728 million.
Australasia Bank (1947 to 1974)
It had been severely hit by the riots in East Punjab. The bank was identified with the
Pakistan Movement. At the time of independence all the branches in India, (Amritsar,
Batala, Jalandhar, Ludhaina, Delhi and Angra (Agra)) were closed down. New Branches
were opened in Karachi, Rawalpindi, Peshawar, Sialkot, Sargodha, Jhang, Gujranwala and
Kasur. Later it network spread to Multan & Quetta. The Bank financed trade in cloth and
food grains and thus played an important role in maintaining consumer supplies during riot
affected early months of 1948. Despite the difficult conditions prevailing and the
substantial set back in the Bank’s business in India, Australasia Bank made a profit of Rs
50,000 during 1947-48. By the end of 1970 it had 101 branches. Unfortunately it lost 51
branches in the separation of East Pakistan. The bank did well in despite losing lot of its
assets. By the end of 1973 the bank had 186 branches in West Pakistan.

Allied Bank (1991 to 2004)


As a result of privatization in September 1991, Allied Bank entered in a new phase
of its history, as the world’s first bank to be owned and managed by its employees. In 1993
the “First Allied Bank Modaraba (FABM) was floated.
After privatization, Allied Bank registered an unprecedented growth to become one
of the premier financial institutions of Pakistan. Allied Bank’s capital and reserves were
Rs. 1.525 (Billion) and assets amounted to Rs. 87.536 (Billion) and deposits were Rs.
76.038 (Billion). Allied Bank enjoyed an enviable position in the financial sector of
Pakistan and was recognized as one of the best amongst the major banks of the country. In
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August 2004 as a result of capital reconstruction, the Bank’s ownership was transferred to a
consortium comprising Ibrahim Leasing Limited and Ibrahim Group.
Today the Bank stands on a solid foundation of over 63 years of its existence
having a strong equity, assets and deposits base offering universal banking services with
higher focus on retail banking. The bank has the largest network of on-line branches in
Pakistan and offers various technology based products and services to its diversified

ABL (2005 to date)


In May 2005 Ibrahim Leasing Limited was amalgamated by transfer to and vested
in with and into Allied Bank Limited. ILL shareholders were issued ABL shares in lieu of
the ILL shares held by them. Application for the listing of ABL shares in all the Stock
Exchange Companies of Pakistan was made. ABL was formally listed and trading of the
shares of the Bank commenced w.e.f. the following dates.

Islamabad Stock Exchange 8th August 2005


Lahore Stock Exchange 10th August 2005
Karachi Stock Exchange 17th August 2005

2.2-Nature of the Organization:-


Allied Bank Limited {formerly known as Allied Bank of Pakistan Limited} is a
scheduled bank, engaged in commercial and related banking. It has largest share capital in
commercial banking in the Pakistan. The nature of the organization is public service-
oriented. In the view of highly impressive growth and development achieved during its
number of years experience, ABL has come to be accepted as one of the most progressive
and dynamic components of the banking industry in Pakistan.
A Bank, like the society it serves should be dynamic as banking is about people
customers with their needs and opportunities and staff with skills, experience and
resources. ABL has shown dynamism since its inception. There have been many changes in
the structure, functions and the services provided. These changes reflect the changing
requirements of our developing economy as a whole and those of Industry, Commerce and
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private Individuals.
 Vision
To become a dynamic and efficient bank providing integrated solutions in order to
be the first choice bank for the customers
 Mission
• To provide value-added services to our customers
• To provide high-tech innovative solutions to meet customers requirements
• To create sustainable value through growth, efficiency and diversity for all
stakeholders
• To provide a challenging work environment and reward dedicated team
members according to their abilities and performance
• To play a proactive role in contributing towards the society
 Values
 Integrity
 Excellence in service
 High performance
 Innovation and growth

2.3-Business volume:-

Deposits:-
Different types of the deposits offered by the bank are:-
1-Customers
 Fixed deposits
 Savings deposits
2-Current accounts
 Remunerative
 Non–remunerative
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3-Financial Institutions
 Remunerative deposits
4-Particulars of deposits
 In local currency
 In foreign currencies

Advances:-
These are:-
1. Loans, cash credits, running finances, etc(In Pakistan)
2. Net investment in finance lease (In Pakistan)
3. Bills discounted and purchased (excluding treasury bills)
 Payable in Pakistan
 Payable outside Pakistan

Investments:-
The management determines the appropriate classification of its investments at the time
of purchase and classifies these investments as held for trading, available for sale or held to
maturity. These are initially recognized at cost, being the fair value of the consideration
given including the acquisition cost.
 Held for trading
These are securities which are either acquired for generating a profit from short-term
fluctuations in market prices or dealer’s margin or are securities included in a portfolio in
which a pattern of short-term profit taking exists. These include the following:-
1-Ordinary shares of listed companies
2-Available–for–sale securities
 Market Treasury Bills
 Federal Investment Bonds
 Pakistan Investment Bonds
 Ordinary shares/certificates of listed companies
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 Preference shares of listed companies


 Ordinary shares of unlisted companies
 Pre IPO investments
 Privately placed investments
 Held to maturity
These are securities with fixed or determinable payments and fixed maturity that the
Bank has the positive intent and ability to hold to maturity. These include the following:-
1-Pakistan Investment Bonds
2-Foreign Currency Bonds
3-TFCs, Debentures, Bonds and PTCs
 Available for sale
These are investments that do not fall under the held for trading or held to maturity
categories. These are:-
 Pakistan Investment Bonds
 Ordinary shares/certificates of listed companies
 Preference shares of listed companies
 Ordinary shares of unlisted companies
 Pre IPO investments

Total investment by ABL for the year 2007 is Rs. 83, 958,463 Million.

Table of Advances, Revenues, Deposits, Investments of ABL for last 5


years
Year Revenue Deposits Investments Advances
2007 9,716,655 263,972,382 83,958,463 168,407,280
2006 7,148,681 206,031,324 46,953,241 144,033,634
2005 3,033,000 161,907,491 44,830,058 110,946,972
2004 192,000 126,391,752 57,321,020 59,484,812
2003 386,000 114,218,000 40,735,000 49,987,000
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Trend in the data:-


1. Revenue of the ABL has increased in 2005, after the privatization of the bank.
Since that the profitability of the bank has increased.
2. Deposits of the ABL have enlarged in 2005, after the privatization of the bank. This
is representing the trust of the customers on the bank. Since the privatization the
advances of the bank has increased from 114,218,000 to 263,972,382.
3. Investment of the ABL has increased as well after the privatization of the bank.
Bank is investing in different fields.
4. To get more profit and to expand the business the advances of the ABL has
increased.
At overall levels the bank is expanding. This is due to the privatization and the effective
and efficient policies of the bank, management.

2.4-Employees:-
In ALLIEDBANK LIMITED, BLUE AREA BRANCH 29 employees are
working. In COMMERCIAL & SME ASSETS 10 employees are working.
At overall level the number of employees with respect to different years is given
below:-
Year Employees
2007 6,909
2006 6,768
2005 6,859
2004 7,082
2003 7,212
2.5-Products:-
Allied Bank is providing different types of products to its customers. Some of these
are given below with their details.
These are divided into further categories. These are discussed below.

1-Deposit Products
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I. Current account
II. Allied Business Account
III. PLS Saving Deposits
IV. Allied Basic Banking Account
V. Foreign Currency Deposits
VI. PLS Term Deposit Account
VII. Allied Munafa Account
VIII. Behtar Munafa account (BMA)
IX. Behtar Munafa Term Deposit (BMTD)
X. Mahana Aamdani Package
XI. Allied Bachat Scheme (ABS)
XII. Allied e-Savers Accounts (ESA)

2-Alternative delivery channels

I. Online banking
II. Allied cash and shop visa card
III. Internet
IV. Helpline
3-Consumer Products
I. Visa credit card

4-Lending Products
I. Seasonal finance
II. Agricultural finance
III. Import and Export Business/Trade finance
IV. Running finance
V. Demand finance
5-Corporate leasing
1-Deposit Products:-
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I-Current Account:-

Allied Bank offers Current Account facility for individuals as well as for
institutions and commercial customers. There are free Online Transactions, Demand
Draft/TT/Pay Order for depositors maintaining an average monthly balance of Rs. 2.500
(M) & above.

II-Allied Business Account:-


Allied Bank offers a banking experience beyond expectations. Allied Business
Account is a non-profit current account with countless benefits and services. If you are a
businessman, trader or an individual, Allied Business Account is an ideal proposition for
you.

Minimum Average Balance Rs 10,000/- (monthly


Transaction limit: No limit
Eligibility All Individuals & Institutions

Online/Manual Remittances Free


Outward Cheque Return Free
Rs. 500,000/- and
above Issuance of DD/TT/PO/OBC / Free
Expression Collection

Additional Benefits:-
 24 hours helpline service
 Free Internet Banking facility
 SMS transaction alerts
 ATM/Debit Card for cash withdrawals through any ATM and debit transactions at
various retail outlets

III-PLS Saving Deposits:-

Allied Bank offers PLS Savings Account facility to its customers with the following
attractive features.
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 Attractive return of 5.00% per annum


 Free Online Transaction, DD/TT/PO for depositors maintaining average monthly
balance of Rs. 2.500(M) & Above during the previous month.

IV-Allied Basic Banking Account:-

In order to provide basic banking facilities to its lower-middle class customers, Allied
Bank has introduced the “Allied Basic Banking Account” (ABBA).

1. Account can be opened with an initial deposit of Rs 1,000/=


2. It is a non-remunerative account with a no minimum balance requirement.
3. The Statement of Account is issued on a yearly basis.
4. The account will be closed automatically if the balance remains “zero” for one year.
5. No service charges on the account for a maximum of 2-withdrawals and 2-deposits
during a calendar month. Additional transactions will be subject to a service charge
as per the Bank’s Schedule of Charges for every withdrawal/deposit.
6. Unlimited withdrawals from ATMs.

V-Foreign Currency Deposits:-

Allied Bank offers the facility of opening Current, Savings and Term deposit
Accounts. Foreign Currency accounts can be opened in US Dollar, Pound Sterling, Euro,
and Japanese Yen at designated branches.

VI-PLS Term Deposit Account:-

Allied Bank offers the following rates in its normal term deposit account:-

PLS Term 1Month 2Months 6Months 1Year 2Year 3Year 4Year 5Year
Deposit
Up to Rs. 4.00% 6.50% 7.00% 8.00% 8.10% 8.25% 8.80% 8.50%
5,000,000
Rs.5,000,001 4.50% 7.00% 7.50% 8.50% 8.60% 8.75% 8.30% 9.00%
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to
Rs.25,000,000
Rs.25,000,001 5.00% 7.50% 8.00% 9.00% 9.10% 9.25% 9.30% 9.50%
to
Rs50,000,000
Rs50,000,001 5.50% 8.00% 8.50% 9.25% 9.35% 9.50% 9.55% 9.75%
to
Rs100,000,000

VII-Allied Munafa Account:-

Allied Munafa Account is a profit bearing checking account with the payment of
profit on a monthly basis. The estimated rate of profit is given below:

Slabs Rates
Rs 0.5(M) to less than Rs 5 (M) 5.00%
>Rs 5(M) to Rs 25 (M) 6.00%
>Rs 25(M) to Rs. 50 (M) 7.00%
>Rs 50(M) to Rs. 100 (M) 7.50%
>Rs 100(M) to Rs. 250 (M) 8.00%

Silent Features:-

 The applicable profit rate would be based on slab of amounts maintained on average
monthly basis and the profit credited in the account on monthly basis.
 Individuals, Firms, Companies, Schools, Hospitals, Charitable Organization & Non-
Govt. Organizations etc are free to open their account in this scheme.

VIII-Behtar Munafa account (BMA):-

Behtar Munafa Account is a profit bearing checking account with the payment of
profit on a monthly basis. The estimated rate of profit is given below:

Slabs Rates(per anum)


Up to Rs.5,000,000 5.00%
Rs.5,000,001 to Rs.25,000,000 6.00%
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Rs.25,000,001 to Rs.50,000,000 7.00%


Rs50,000,001 to Rs.100,000,000 8.50%
Rs.100,000,001 to Rs.250,000,000 9.25%
Above Rs.500,000,000 10.50%

Salient Features:-

 The applicable profit rate would be based on slab of amounts maintained on average
monthly basis and the profit credited in the account on monthly basis.
 Individuals, Firms, Companies, Schools, Hospitals, Charitable Organizations etc are
free to open their account in this scheme.

IX-Behtar Munafa Term Deposit (BMTD):-

Allied Bank offers following rates in its Behtar Munafa Term Deposit.

Average monthly balance 1Month 3Months 6Months 1Year


Upto Rs.5,000,000 6.00% 8.00% 8.50% 9.50%
Rs.5,000,001 to Rs.25,000,000 6.50% 8.50% 9.00% 10.00%
Rs.25,000,001 to Rs.50,000,000 7.00% 9.00% 9.50% 10.50%
Rs50,000,001 to Rs.100,000,000 7.50% 9.50% 10.00% 11.00%
Rs.100,000,001 to Rs.500,000,000 8.00% 10.00% 10.50% 11.50%
Above Rs.500,000,000 8.50% 10.75% 11.00% 12.00%

X-Mahana Aamdani Package:-

Mahana Aamdani Package is a unique product with attractive returns. It provides an


opportunity for a regular monthly income with a flexibility of placement for 12, 24 & 36
months.

 Minimum Amount:-Rs 100,000/- (with multiples of Rs 10,000/-)


 Profit:-Payable on monthly basis
 Projected profit rates:-Up to @ 10.30% per annum
 Eligibility:- All individuals & institutions
 Period: - 1, 2 and 3 years.
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Special Benefits:-

 Profit to be credited in the depositor’s PLS saving A/C and can be withdrawn
through ATM free of charge
 Free transfer of monthly profit to any branch of ABL all over the Pakistan

XI-Allied Bachat Scheme (ABS):-

Allied Bachat Scheme (ABS) is a PLS Term Deposit Scheme based deposit scheme
whereby you can double your investment in just 7.5 years.

 Maturity Period:-7.5 years


 Minimum Deposit:-Rs. 50,000/- with multiples of Rs. 10,000/-
 Expected rate of Profit:- The deposit amount will be doubled in 7.5 years

No of years ABL projected rates Repayment amount


0 0.00% 50,000.00
1 7.00% 53,500.00
2 8.00% 58,000.00
3 10.00% 65,000.00
4 10.50% 71,000.00
5 11.00% 77,500.00
6 11.50% 84,500.00
7 12.00% 92,000.00

XII-Allied e-Savers Accounts (ESA):-

Allied e- Savers Account is a unique savings plan where you can earn returns as
high as 7.5% with the flexibility of 4 withdrawals a month. So wake up to the world of modern
banking and open an account now.

Slabs Rates
Rs. 400,001 up to Rs. 500,000 7.505
Rs. 300,001 up to Rs. 400,000 6.00%
Rs. 200,001 up to Rs. 300,000 5.00%
Up to Rs. 200,000 5.00%
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Additional Benefits:-
 24 hours phone banking service.
 Free Internet Banking facility.
 ATM/Debit Card for cash withdrawals through any ATM including our largest
network of ATMs across Pakistan and for debit transactions at various retail outlets.
 First free cheque book - A/c Payee only.
XIII-PLS Account:-
Allied Bank offers the PLS Savings Account facility to its customers with the following
attractive features:-
 Attractive return of up to 1.00% per annum
 Free Online Transactions, DD/TT/PO for depositors maintaining an average
monthly balance of Rs. 2,500 (M) & above.
2-Alternative delivery channels:-

I-Online banking:-
Allied Online is a unique service offering from Allied Bank Limited. Through
Allied Online, account in Allied Bank is available from any of branches country-wide.
Allied Online provides a secure, efficient and convenient facility for making payments to
beneficiary accounts from any of branches country-wide. It can be used for cash
management services by corporate customers requiring funds collection or disbursement
facility.
Enchased facility is available at any of over 700 branches located in 250 cities.
Cheque drawn on a remote branch for credit into beneficiary’s account or encashment up to
a specified amount can also be presented at any branch by a 3rd party.
II-Allied cash and shop visa card:-
Allied Visa and Shop visa card are used by customers to:-
 Withdraw cash directly from bank account from over 2,500 ATMs in Pakistan -
including Allied Bank's largest network of ATMs - and over 1 million ATMs
worldwide.
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 To use the Visa power of Allied Cash + Shop Visa Debit Card to shop at over
49,000 retailers in Pakistan and over 27 million retailers internationally.
 To go to all favorite restaurants and order whatever customer wants.
 To enjoy traveling without carrying cash. With your Allied Cash + Shop Visa Debit
Card, customer can buy plane tickets and do all shopping abroad without worrying
about spending too much or running out of cash.
III-Internet:-
Banking at fingertips! Allied Direct Internet Banking offers the convenience to
manage and control banking and finances - when customer wants, where he wants to!
It's Simple, Convenient, Secure and Faster.
Some features of Allied Direct are:-
 Simple and Convenient
 Secure Secured & encrypted
 24hoursx7days in a week Access
3-Consumer Products:-

I-Visa credit card:-


Allied Bank as part of its commitment to improving customer service is in the
process of launching its new Allied Visa Credit Card from July 1, 2008. Accordingly, all
existing ABL MasterCard credit cards are blocked /inactivated by June 30, 2008 preventing
any future transactions on those cards. To assist customers in this process, Allied Bank
contacted its customers/cardholders directly and through personal visits from duly
authorized representatives for the purposes of obtaining consent and other related
documentation including copies of computerized national identity cards. Any balances
remaining on the ABL MasterCard will after compliance with formalities, be transferred to
the new Allied Visa Credit Card.
4-Corporate leasing:-
Allied Bank Limited commenced lease operations upon amalgamation with Ibrahim
Leasing Limited. Facilities include leasing for machinery, commercial vehicles, vehicles
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and equipments. The Bank provides lease facilities for balancing, modernization,
replacement and expansion schemes to corporate and commercial clients in all industrial
enterprises.
Leasing is a popular mode of financing due to its distinctive features like tax shield,
preserve working capital, easy documentation and less processing time. It is available at all
branches of the bank.
5-Lending Products:-

I-Seasonal finance:-
Seasonal Finance facility is allowed against pledge of produce of Cash Crops
harvested in that particular crop season. The delivery of pledged stocks/goods is made
against appropriate cash payment.
II-Agricultural finance:-
Bank under Agricultural Financing Scheme envisaged by the State Bank of Pakistan
extends short, medium and long term, farm and non-farm credits. The farm credits are
extended for production (inputs) and development purposes. Non-farm credits are allowed
for livestock (goats, sheep and cattle), poultry, factory including social forestry and
fisheries (inland and marine excluding deep sea fishing). Details are as below:-
1-Production Loans:-

 Inputs like seeds, fertilizers, pesticides, weed acids, herbicides, labor charges, water
charges, vegetables, Floriculture etc.
 Working capital finance to meet expenses of various natures attributable to farming.

2-Development Loans:-

 Improvement of agricultural land, orchards, etc.


 Tractors, Machinery & other equipments
 Tube wells
 Farm Transportation etc
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3-Non-Farm Loans:-

 Livestock
 Poultry
 Fisheries
 Forestry

III-Import and Export Business/Trade finance:-


Allied Bank provides highly efficient trade finance services for import/export
business for our clients/customers through large number of authorized branches where
trained and motivated staff is available to handle the business on behalf of customer.
IV-Running finance:-
It is a short term loan allowed by the bank for a period of one year. The running
finance account can be operated and daily sale proceeds can be deposited into the account.
The mark-up is recovered on the products of daily outstanding balance. The running
finance is suitable for meeting day to day financial needs of the business.

2.6-Services:-
Allied Bank Limited is providing different types of services to its customers. These
are listed and explained below:-
I. Home remittances
II. Remittances
III. Utility bills
IV. Lockers
V. Commodity operations
VI. Hajj services

I-Home remittances: -
The Bank having a network of over 750 branches all over Pakistan, undertakes to
provide safe and instant payment of remittance from expatriates, routed through designated
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foreign exchange companies and correspondent banks with whom special arrangements
have been made in this regard. Through the Allied Express Service, Allied Bank ensures
that beneficiaries' Accounts in Allied bank branches are credited with in 48 hours of
receiving home remittance information from overseas
II-Remittances:-
Allied Bank can transfer funds to the remotest part of the country for
payment/credit to the customer himself or a third party, through Telegram/Telex/Tele fax
for payment/credit on the same/next day. Telegraphic transfers can also be made abroad in
Foreign Currency. Carrying cash to strange alien location can prove to be risky as a single
incident can render one without monetary backup of any sort. Hence traveler’s cheques are
introduced by banks in order to protect against any contingency.
Telegraphically Transfer:-
Banks are offering various types of products related to funds transfer in Pakistan,
assuring the fastest delivery of Funds around the Globe, through Telex, SWIFT and other
Electronic Media. Allied Bank with its large network spread all over the country is sharing
quite a sizeable Funds transfer business in the domestic market.
Bank has recently moved to optimize the use of electronic media to handle Funds Transfer
with speed. Even the shift over to "SWIFT" is at hand and a network has been established
by Central Office.
Demand Draft:-
A draft is one of the most popular Banking instrument in the trade circles to settle
business deals and transferring funds from one place to another. Allied Bank has taken
radical steps for a speedy Issuance/Payment of Drafts through automation and introduction
of a more simplified system based procedure
Pay Orders:-
Pay order is a Bank instrument issued by a Bank in Pak Rupees at the request of a
customer to transact payment to a named payee through banking channel.
Generally payments against such cheques (Pay orders) are restricted to "Payees Account"
and as such are required to be enrooted through a Bank Account locally
Traveler Cheques, ABRTC:-
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"Rupees Traveler Cheques" is one of the most convenient products launched by


Allied Bank, which has an excellent market response.
ABRTCs are only to be issued by the authorized branches of the ABL With the
application of Government levies, nominal commission is also charged on issuance of
"Traveler Cheques". Traveler Cheques shall be valid until enchased unlike a "Negotiable
Instrument" which is valid for 6 months

III-Utility bills:-
All branches of the Bank collect utility bills of electricity, gas and telephones. For
convenience of the customers, Utility Bills are collected by the branches during banking
hours and also in the evening-banking on all working days. Bills can be paid through Cash
or Cheques. Consumers may drop bills with crossed Cheques into a drop box available at
the branches under "Cheque Drop-in" system.
Utility Bill payment facility - Pay your telephone, electricity, and gas utility bills on
any of our ATMs without having to wait in long queues outside your branch.

IV-Lockers:-
Allied Bank Lockers are available in three different sizes Small, Medium and Large
on a yearly fee. Locker holders need not have an account in the Bank.
Safe Deposit Lockers' Insurance:-
The Bank has already informed its Safe Deposit Locker Holders through half yearly
Statement of Accounts as on 30-06-2007 that the Bank has arranged insurance cover at its
own cost subject to the terms and conditions of the insurance policy for the losses sustained
and discovered by reasons of damage, destruction or loss by fire, burglary and locker
breaking.
Maximum insurance ceiling provided for each category of lockers is mentioned
hereunder:-
S. No. Size Annual Locker Rent Maximum Loss
(Current) Coverage / Limit
1 Small 1,500 Rs.500,000/-
22

2 Medium 2,000 Rs.1,000,000/-


3 Large 4,000 Rs.1,500,000/-
4 Extra large 5,000 Rs.2,000,000/-

V-Commodity operations:-
It is a Cash Credit Financing to Government Department for procurement of various
commodities, as per allocation of the limits by SBP on Government of Pakistan Guarantee.
VI-Hajj services:-

The Bank serves the intending pilgrims by helping them in performing this religious
obligation. The Hajj forms and other related services are provided by the bank. However,
the terms and conditions for accepting the Hajj forms from intending pilgrims are in
accordance with the Hajj Policy announced by the government, each year. Hajj applications
are available with all branches during Hajj season, immediately after the Hajj policy is
announced by the Government of Pakistan.

3-Organizational Structure

3.1-Structure of organization:-
Here is the structure of the organization. Management of the Allied Bank Limited
was changed after the privatization if the Bank. Board of directors is the strategic body of
the bank which is responsible for overall decisions of the bank.
Audit committee is consisted of the following members:-
Mr Farrukh Qayyun Chairman
Mr M Naeem Mukhtar Member
Mr Abdual Aziz Khan Member
Board of directors:-
Management of the Allied Bank Limited was changed after the privatization if the
Bank.
23

Name Designation
Mohammad Aftab Manzoor CEO
Mohammad Naeem Mukhtar Chairman
Abdul Aziz Khan Director
Sheikh Jalees Ahmed Director
Pervaiz Iqbal Butt Director
Farrakh Qayyum Director
Mohammad Waseem Mukhtar Director
Sheikh Mukhtar Ahmed Director
Tasneem M. Noorani Director
Nazrat Bashir Director
Mubashir A. Akhtar Director
Management:-
Name Designation
1. Asim Tufail Group Chief, Consumer & Personal Banking
2. Iqbal Zaidi Group Chief, Compliance
3. MohammadAftab Manzoor Chief Executive Officer
4. Muhammad Yaseen Group Chief, Treasury
5. Shafique Ahmed Uqaili Group Chief, Human Resources
6. Tahir Hassan Qureshi Chief Financial Officer
7. Waheed ur Rehman Company Secretary
8. Fareed Vardag Chief Risk Officer
9. Mohammad Abbas Sheikh Group Chief, Special Assets Management
10. Muhammad Jawaid Iqbal Group Chief, Corporate & Investment
11. Mujahid Ali Banking
12. Syed Shahid Raza Group Chief, Information Technology
13. Tariq Mehmood Head, Business Transformation Team
14. Zia Ijaz Group Chief, Operations
Group Chief, Commercial & Retail Banking
24

Branch network:-
Allied Bank has 741 branches within the Pakistan. Its registered office is situated in
Lahore where as principle offices are given below:-
Central Group:-
Regions Number of Branches
Faisalabad 35
Sargodha 35
Gulberg, Lahore 34
Gujaranwala 34
City, Lahore 33
Multan 31
Sahiwal 25
Sialkot 23
Bahawalpur 22
Gujrat 21
Jhang 18
RahimYar Khan 12
Total 323
North Group:-
Regions Number of Branches
Rawalpindi 40
Peshawar 40
Mir Pur 33
Mardan 32
Islamabad 30
Abbotabad 20
Muzaffarabad 18
Kohat 17
Total 230
South Group:-
Regions Number of Branches
Sadar, Karachi 32
Nazimabad, 32
City,Karachi 31
Quetta 31
Hyderabad 24
Sukkur 21
Nawabshah 17
188
25

Year 2007 2006 2005 2004 2003


Branches 741 735 752 814 856

3.2-Organizational structure of the branch:-


Organogram of the Allied bank Limited, Blue Area Branch

Chief Branch Manager

Cash
Account Opening
Remittances
Clearing
Online
Foreign Currency
Advances
Bills

29 employees are working in Allied Bank Limited, Blue Area branch. These are
headed by Chief branch manager. 15 other employees are also working in the Main cash
department which is also headed by Chief branch manager.

3.3-Review of the various departments ABL Blue Area Branch:-


I have done my internship for 4 weeks in these departments of ABL Blue Area
Branch. Commercial and SME Assets is the department of ABL Corporate Branch.
1. Advances department
2. Clearing department.
3. Foreign currency department
4. Account opening department.
5. Commercial and SME Assets.
26

6. Online
7. Remittances
1-Advances department:-
Different types of advances are offered by the bank. These are:-
1. Loans
2. Cash credits
3. Running finances, etc(In Pakistan)
4. Net investment in finance lease (In Pakistan)
5. Bills discounted and purchased (excluding treasury bills)
 Payable in Pakistan
 Payable outside Pakistan

Functions of the Advances Department:-


Some functions of the advance department are given below:-
1. Deals with advances.
2. Deals with the customer applications for loans.
3. Disbursement of advances.
4. Repayment handling.
5. Deals with cash credits.
6. Deals with loans that may be of running finance.
2-Clearing department:-
This department is headed by clearing officer who is assisted by assistant clearing
officer and entry officer. Supervision is done by CSM. Mostly checks are cleared within
one day and in case of intercity cheque then these are cleared within 3 days through
clearing house of State Bank of Pakistan.
Functions of the Clearing Department:-
Some functions of the clearing department are given below:-
 Clearing of cheque within the Islamabad city.
 Clearing of cheque within intercity like Karachi. Rawalpindi, Lahore etc.
27

 Handling of OBC (Out Door Bills Collection).


 Sending and receiving OBC.
 Entering data online of clearing cheques.
3-Foreign currency department:-
This department is handling following three types of currencies:-
 Euro
 Yen
 Dollar
Department is headed by the Foreign Currency Officer and is assisted by MTO.
Supervision is done by CSM and Chief Manager of the Branch. This department is
handling following accounts in foreign currency:-
 Saving account
 Current account

Functions of the FC Department:-


Some functions of the FC department are given below:-
 Opening of accounts.
 Transactions in foreign currency.
 Exchange of currencies.
 Transaction of foreign currency into foreign as well in Rupees and vice versa.
4-Account opening department:-
This is run by the Account Opening Officer. Supervision is done by Customer
Service Manager. Following accounts holders are there:-
 Individuals
 Company
 Clubs
 Firms
 Partnership firms
28

 Institutions
Functions of the Account Opening Department:-
Some functions of the account opening department are given below:
 Opening of accounts of individuals, companies, clubs, partnerships etc.
 Issuing of cheque books after the account opening within 6 days.
 Issuing of ATM Debit Cards to account holders.
 Issuing of Master Cards to accounts holders.
 Mostly company accounts are handled by the CSM.
6-Online:-
Online Banking facilities are available to customers maintaining accounts at all
online branches across the country.
Functions of the Online Department:-
The following functions are performed by the online department:-
1. Cash Deposit for immediate credit to remote branch.
2. Remote Cheque Encashment from any online branch.
3. Instant Funds Transfer between any 2 online branches.
4. Remote Balance Enquiry and Statement of Account.
In Addition to the above, account holders of all online branches can obtain Allied
Bank's Allied Cash+ Card for use at ATMs as well as at Debit Card POS terminals.
7-Commercial and SME assets, CAD:-
Office of Commercial and SME Assets is the part of the Blue Area Corporate
Branch. Here 13 employees are working. This department is headed by Head Commercial
and SME Assets. Relationship manager and Assistant Relationship managers are working
under him. Organogram of the department is given below.
Nature of the security varies with the nature of facility provided to the customer,
some facilities require heavy security and some may not.
Generally the loan is secured against the following securities:
1. Mortgage
2. Hypothecation
29

3. Pledge
4. Lien

Securitization and CAD Department


Whatever the type of agreement has been signed between, whatever the facility has
been offered, whatever the terms and condition have been agreed, The Bank being the
lender ,always tries to secure itself against the facility provided to the customer, in order to
minimize its risk against the facility given to the customer. Securitization can also be
defined as:
“The process of securitization refers to ensuring that assets of the borrower are legally
encumbered in favor of the Bank through either registering the same with respective legal authorities.”
In order to secure itself from the expected Risk, it always demands certain security
before providing the facility to the customer, so that if the customer proves to be a default,
bank can cover up its money by selling that security in the market. The securities received
will immediately be entered in the safe-in / safe-out register maintained. A separate page
shall be allocated for each customer. The register will be initialed by the Supervisor and
Departmental Head.
Nature of security:-
Nature of the security varies with the nature of facility provided to the customer,
some facilities require heavy security and some may not.
Generally the loan is secured against the following securities:
5. Mortgage
6. Hypothecation
7. Pledge
8. Lien
Mortgage:-
Preamble:-Lands records were first prepared in the 18th centaury in sub-continent
in order to collect the tax on land holdings and on land earnings. For the purpose Land
Revenue Department was setup and different fiscal/ Tax Records were maintained through
them.
30

Post partition Pakistan also adopted the same procedure under the Land Revenue
Act 1967.these records pertained only for revenue but do not inherited title of the property.
There was need to adopt the law which gives a right of Title to an owner. Subsequently
Transfer of Property Act 1882 (TPA) was also adopted by Govt of Pakistan.
Under the revenue Record following books are kept.
 Register Haqdaraan maintained at Village level by Patwari.
 Intiqlat maintained at Tehsil level by Tehsildaar.
Similarly where Provincial Govt has notified the cities, TPA 1882 applies and in
such cities sale and purchase take place through sale deed.
The land/property which exists in the village or outside notified areas, the
documents that shows the present status of the land is called FARD, and its record is
maintained by Patwari at the village for which it is related to. Documents which show the
transfer approval of ownership, is called the Intiqal, and it is held at the Tehsil Office of
Revenue department headed by Tehsildaar.
The lands falling in the area where TPA is applicable, ownership of the title of
property is evidenced through “Sale Deed”. This sales deed is registered with the Sub-
registrar whose office is usually located at Tehsil or at a place notified by Provincial
Governments.
Similarly Govt has established institutions like CDA/DHA/LDA/KDA responsible
for development of their cities. Records of such lands whether
commercial/industrial/Residential are maintained by such authorities. Lands to these
Authorities have been transferred by Revenue departments. Title of ownership of lands
located in these areas is evidenced through Allotment letter /Transfer letter etc. Such
authorities upon complete transfer of their rights execute a Sale deed registered with Sub
Registrar in favor of their allottee.
Similarly Housing Societies also work in the same manner described for CDA.
Many societies are also working in cities that do not hold any NOC from relevant
authorities. Any allotment /transfer letter is illegal through them; therefore care should be
taken to analyze Title of the property.
31

Now I elaborate the concept of Mortgage. Mortgage is the transfer of an interest in


specific immovable property for the purpose of securing the payment, and the transferor is
called the Mortgager and the transferee is called mortgagee.
Mortgage has been classified into two categories:

1. Equitable Mortgage
2. Registered Mortgage

1-Equitable Mortgage:-This Mortgage the customer deposits the original title deed to the
bank and this title deed is the document through which the property is acquired. A specific
document is signed from the customer is called the MOTD (Memorandum of deposit of
Title deed). If the land does exist in the city then the Equitable Mortgage is only done,
customer has the title document Sales deed, there is no need to create the registered
mortgage in this situation.

2-Registered Mortgage:-This Mortgage is registered to the sub-registrar, in this Mortgage,


Mortgage deed is singed. It is also called the legal mortgage, because the charge is
registered legally in the register of sub-registrar as well. It is classified in two categories:
1. Total registered Mortgage: Total register Mortgage is necessary, if the land is in the
record of the revenue department, because the land, which is recorded does not
derive the title to the owner, total register mortgage must be register.
2. Token Registered Mortgage (on a specific amount).

Why the Token Registered Mortgage is created?


Token Register Mortgage is created with the specified amount in order to avoid the
customer to the heavy amount charged as the stamp duty. The second important reason is
that, the land which is register in the Mehkma Maal, it shows the evidence of land to the
specified person, but is not the proof of transfer of title to that person. So that in order to
secure that the token is register to the sub-registrar, who mark the entry the land has been
mortgaged to the Bank.
32

Public and private limited company: In case of the company, the charge is also
registered to the SECP, that the following land has been mortgaged.
Advantage of Mortgage:
 When the value of money falls, the value of land rises, “so therefore it forms a
sound and reliable security.
Disadvantage of Mortgage:
 The laws relating to the immovable property are very complex. It is difficult for the
bank to sell it for recovering the dues.
 Valuation of the Property is also a complex task, because marketability of the land
also varies with respect to location.
Preliminary Enquires before Creating the Mortgage:
 Investigation of the Title
 Search for Prior Charges
 Value of the Property
 Appropriate Form of charges
 Registration of Charge to SECP, if the borrower is Public limited Company.
 Free hold or lease hold property
Hypothecation:-
Hypothecation is also the kind of security in which the charge is created on the
movables goods and against which the facility is provided to the customer. In
Hypothecation the possession and owner ship remains to the customer but over charge is
created on it. If customer fails to repay the amount due on it, we have the right to sell these
movable items for recovering our amount. A special document is signed, between the bank
and the customer in this concern is called the letter of hypothecation
In case of a small medium enterprises / corporation, hypothecation charge may be
created on its receivables, as well as its current and fixed present and future asset. Charge
can also be on the following.
1. Charge over stocks of the company
2. Charge over receivable of the company
33

3. Charge over machinery of the company


4. Charge over property of the company
Process of Registration of Hypothecation on joint stock companies in CAD:
The designated staff will prepare bank’s charge documents like financing
agreement, promissory note etc. and following additional documents (as applicable)
required to be submitted under Companies Ordinance, 1984.
1. Letter of Hypothecation of stocks in case of charge over stocks
2. Letter of Hypothecation of receivable in case of charge over receivables
3. Deed of Floating charge in case of charge over Current (floating) assets
4. Letter of Hypothecation of machinery in case of charge over machinery
The designated officer after preparing documents as mentioned above will hand
over the same to the supervisor / CAD Head
1. The Departmental Head / Supervisor will review the documents for completeness,
sign the covering memo and send it to the Relationship Manager for seeking
required documentation, securities and signatures from the customer.
2. The Relationship Manager will obtain required documentation, securities and
signatures from the customer and submit these documents to designated officer of
CAD against acknowledgement.
3. The Departmental Head / CAD In charge / Operation Manager (In case proper CAD
setup doesn’t exist in the branch) will review the documents to ensure that these are
in order, duly signed by the customers and properly witnessed. He will advise the
Supervisor to draft letter to the valuers for valuation of properties and assets, if
applicable. The letter will be sent to the values duly signed jointly by the
Departmental Head and by the Supervisor.
4. The Departmental Head will sign the letter on behalf of the bank and submit the
same to the Registrar of Joint Stock Companies for formal registration of charge.
The acknowledgment of filing the documents provided by the Registrar will be
maintained for follow-up of charge certificate.
34

5. The securities received will immediately be entered in the safe-in / safe-out register
maintained. A separate page shall be allocated for each customer. The register will
be initialed by the Supervisor and Departmental Head
6. In case where ranking charge registered by CAD with Registrar Joint Stock
Companies as per RA requirement and where subsequently NOC(s) are received for
conversion of ranking of charge into first Pari Passu charge the Departmental Head
will ensure that NOCs are received through CBG from all the existing charge
holders. He will then pass these NOCs to the Supervisor for preparing Form–16
(Annexure E) and supplemental letter of hypothecation agreement for registration
of the NOCs with Registrar of Joint Stock Companies. The Form–16 and the
supplemental agreement will be signed by the authorized signatory of the customer
and signatures shall be verified before submitting the same to the Registrar of Joint
Stock Companies.
7. The authorized representative of FBL will submit the documents to the Registrar
Joint Stock Companies for registering the same.
Pledge:-
It is also the kind of security in which the charge on movable is created. The
difference between the pledge and hypothecation is that in the case of pledge, the
ownership and control remains to the bank, not to the customer. The bank keeps the control
of the goods by the specified Muccudums, who work on behalf of the bank to keep check
and balance of the pledge goods. When the customer and bank signed this agreement, a
special document is signed between them called the pledge.
NO charge is registered to the Registrar Joint Stock Companies (in case of
corporation) when any assets are pledged, why?
A pledge specially involves control over assets and does not require to be registered
with the Registrar of Joint Stock Companies. The apparent reason for the same is that the
bank enjoys physical control of the goods / movable assets. On the other hand, however,
hypothecation of assets is required to be registered with the Registrar. Therefore, if
hypothecation of stocks is registered in favor of any other financial institution before the
stocks being pledged with FBL, then the other financial institution will have a priority
35

charge even on the stocks already pledged with FBL. Hence, CAD will review search
report of the customer to whom credit facility is being allowed against pledge of stocks to
ensure that the customer’s stocks are not already hypothecated to any other financial
institution.
Lien:-
Lien is the kind of security created on most liquid assets; this is considered more
secure charge as compared to pledge and Hypothecation, because the encashment of this
security is more easily compared to other described securities.
In these types of security, CAD signs from the customer the letter of lien.
Lien can be marked on the: Customer account
National saving certificates etc

4-Structure and functions of the Accounts/Finance department


The Finance department of ABL is headed by Country Head Finance who is
responsible for finance functions of the organization.
 Country Head
 Regional Managers
 Finance Officers
Structure and functions of the Accounts/Finance department:-
Finance is the art and science of managing money. The primary responsibility of
finance division is to provide reliable, consistent and timely information to management,
shareholders, regulators and internal business groups to help them take appropriate
decisions for improved performance of the bank.
Vision of Finance Department is, “a highly automated and fully integrated Bank
that is customer centric and capable of meeting all external and internal customer
expectations.”
36

Accounting operations:-
It is said that accounts department is the backbone of the bank. It plays a vital role
in performing different banking functions. The accounts department of ABL is performing
its function computerized. The working in accounts department mainly depends upon
voucher system. For each and every transaction-taking place in the bank vouchers are
prepared and through these voucher contra entries are passed under different heads.
Accounts department controls the expenses and their right allocation of such expenses to
the right and appropriate accounts.
Functions of the account department:-
Following functions cover the working of the Accounts Department:-
1. Accounts – Vouchers for Expenses/Billing.
2. Treasury – Foreign Currency dealings, cash & funds management
3. HRD (Human Resource Department) – Employee salaries/Loans/Provident
fund.
4. Financial Control Unit – SBP (State Bank of Pakistan) cheques.
5. Reconciliation Control Unit.
6. ATM – automated Teller Machine.
7. Tax deduction and collection.
8. General services department.
9. Reporting (daily, weekly, monthly, quarterly, half-yearly, annually)
10. Maintain and update the ledgers for term deposits
11. Update general ledger
12. Prepare & printout different period statements.

Functions of the finance department:-


Following are the main functions of finance department:-
1. To maintain record of accounts according to accounting principles.
2. To maintain inventory records.
3. Preparation of comparative statement.
4. Preparation of cash forecast.
37

5. Funds management.
6. Analysis of Accounts.
7. Implement effective budgetary controls, and analysis of their variances.
8. Checking, verifying, examining and scheduling the invoices of work done as
per term and condition.
9. Responsible for Budget Preparation, cash flow, financial statement, local
and foreign payments.
10. Preparation of reports for lenders.
11. Dealing with customers regarding all payments matters in local currency as
well as foreign currency and keeping records of loans.
Some others are given below:-
A-Daily reports:-

1-Daily Reports:-This report summarizes the daily position of all the main heads of the
bank i.e. different report deposits, TDR/NDR, cash etc.
2-Balance Sheet: This report also summarizes the balance sheet heads of the bank up to
the last working day.
3-Summary sheet:-This report is sent to the reconciliation unit. It summarize the all the
head that have been credited to the Central Branch Control (CBC) Account. It is prepared
on branch wise basis.
4-Reconciliation report:-This is prepared in order to reconcile any outstanding and
exceptional entry reported by the other branches through the reconciliation unit made by
any of the functional department of the bank.
5-Treasury Reporting: This report summarizes the exchange deals made for the foreign
currency with the customer and the head office for reporting the head office the stock of
such currencies and the balances of the Nostro and vostro accounts.
6-SBP Reconciliation Statement: This report is used in order to report the balance of the
FBL with the SBP in the current account with SBP. As the banks have to keep liquid cash
with the SBP so this report list any increase/decrease of the balance with the SBP.
38

7-Advances: This report summarizes the figures of the deposit accounts as well as the loan
accounts of the customer with the bank.
8-Statement of Financing: This report summarizes the amount of financing extended to
the customers.
9-Detailed trial balance: This report summarizes all the balances in the different heads in
the income, expenses, deposits, financing and other related heads.
10-Daily expense vouchers: This report summarizes the daily expenses.

B-Weekly Reports:-
1-Balance sheet:-The balance sheet is prepared on the basis of the whole week activity by
using the General Ledger of the weekend.
2-Trial Balance:-This is same as of the daily trial balance but is prepared with the span of
one week by using the General Ledger of the weekend.
3-Deposit Comparative Position:-This report summarizes the comparative position of the
different deposit accounts category, TDR/NDR, and foreign currency accounts.
4-Risk Assets Liabilities Statement:-This statement summarizes the status of liabilities of
the bank, status of risk assets ( short term and long term), status of risk assets ( consumer
finance) like net lease value, net deposit, net financing amount, financing against FE 25 and
SBP refinance position.
5-Daily Statement of Deposits:-It states the retail deposits (current account, margin
account, and foreign deposits), hot deposits (deposits of security on loaning in big amount
in current account), and cash in hand in both local and foreign currency.

C-Monthly statements:-
1-Profit and loss statement:-This statement is the income statement prepared for the
month summarizing the revenue generated and the expenses incurred during the month.
2-General Ledger:-This ledger has the detailed information of all the heads in deposit,
financing, TDR/NDR, expenses, income and other related accounts. This is a very
extensive report prepared by the system.
39

3-Variance analysis: Comparison of balance sheet.

D-Quarterly Statements:-
1-Tax Statements: These statements include staff tax statement, services tax statement and
supplier’s tax statement.
2-Reconciliations:-Reconciliation of Inter Branch is done by matching ledger entries to the
statement entries. When an entry is properly matched, the date under which it is appearing
in the ledger is noted against the entry in the statement and ledger vice versa. The
matching, investigation, and reconcilement of all accounts entries are done as frequently as
the statement is received.
Finance system of the organization
Financial system of ABL includes from how to generate finance & where to utilize it.
The primary focus of ABL financial system is on automating processes within the bank and
to develop robust databases that will provide a ‘single source of truth’ for all internal and
external exporting reporting. These databases will form the foundation on which other
applications will be built.
3-Report of Financial Statements:-
For obtaining credit, party has to submit the last two to five years Balance Sheet
and Profit & Loss Statement (Income Statement) duly attested to authorized auditors. It is
preferred that the statements should be properly prepared and audited by Chartered
Accountants that give the true picture of the business. But in some cases as I observed in
ABL most of the clients who lie in the category of Consumer Banking Client don’t have
their Financial Statements.
In Such case ABL has to prepare the financial statement on the behalf of customer
and it is mentioned in other relative documents that the financials submitted are self / un-
audited. There is a high percentage of risk involved in it.
4-Comparative Statement of Financial Conditions:-
This form is in tabular form and as the name indicates it helps in analyzing the
financial condition of the firm from all perspectives. In this form bank has to do the ratio
analysis of the financial statements submitted.
40

All the analysis that is covered by this form is described below:-


1. Liquidity Analysis.
2. Activity Analysis.
3. Profitability Analysis.
4. Debt Analysis.
5. Vertical and Horizontal Assessment of Profit & Loss Statement.
6. Vertical and Horizontal Analysis of Balance Sheet.

Role of financial manager:-


The financial manager plays a dynamic role in a modern bank’s development. Some
of important functions of the financial manager are given below:-
1. To raise the funds for the bank.
2. Management of funds.
3. To play the role of the team leader to compete in the world of inflation,
competition, and tax law variations, demand variations, ethical issues etc.
4. To make the investment decisions for the profitability and to raise the value iof the
bank.
Use of electronic data in decision making:-
In ABL to record the financial data, they have designed special software, which
fulfill the entire accounting requirement according to international standard. The software
used by the ABL is “UNIBANK”.
The network used by the ABL is LAN (Local area network) while other branches
are also using WAN (wide area network). In addition to this signature verification software
is there, online report browser is there, exchange server software etc. All the transactions
occur through this system.
Sources of funds:-
Funds are the main element for carrying out the operations in any business concern. Its
importance remains evident in the banking sector as well.

The following are the main sources of funds for ABL.


41

a. Capital Resources

b. Deposits

c. Advances

d. Investments

Generation of funds:-
Deposits act as a backbone of bank. It is the lifeblood of every bank. These deposits
are Source of generating funds for the bank and for the general public to meet the financial
needs.

The bank accepts the deposits at a low rate of interest and lends it at higher rate of
interest, the difference between the lending and accepting rate is the source of income for
the bank.
Profitability of ABL for the last five years

Years Profitability
2007 5,640,497
2006 2,751,431
2005 3,033,00
2004 192,000
2003 386,000
2002 (1,069,00)

6-Critical Analysis of Theoretical and Practical Experiences

The basic objective of the report is to observe that whether the techniques that we
read in the books are being used practically or not. It is because sometimes, it is heard that
there is a difference between theory and practice. But I personally believe that it cannot be
true. Theory is based on practical experiences and observation s of the writer.
42

1. The bank is following the same techniques, rules, policies and strategies to get
different goals and aims.
2. Bank is following the different ways of investment which we studied in the Subject
of Investment.
3. Accounting and costing principles are followed.
4. Policies of the State bank of Pakistan are being implemented to do the business of
the banking.
5. Competition is prevailing. Bank is making efforts at all levels to get competitive
edge on its rival banks.
At the whole level what we studied in the books is practically done. Theoretical
concepts emerged from the practical activities and vice versa.

7-Financial Analysis

7.1:-Five years latest Balance Sheet:-


Balance sheet represents a snapshot of the firm’s financial position at moment in time.
It summarizes the assets, liabilities and owner equity of a business at a moment in time,
usually the end of a year or a quarter.
Data included in the Balance Sheet for the year 2008 is of Half Quarterly Report.

Assets 2003 2004 2005 2006 2007


Cash and 40,669,888 10,842,519 14,742,504 23,042,011 29,739,857
balances
with treasury
banks
balances 4,421,559 14,779,72 32,920,38 1,703,011 668,449
with other
banks
43

Landings to 28,661,666 16,175,00 57,773,82 19,050,239 18,419,241


financial
institutions
Investments 80,847,858 57,321,020 44,830,058 46,953,241 83,958,463

Advances 168,450,16 59,484,812 11,094,697 144,033,63 168,407,280


6 4
2
Other assets 12,673,493 59,509,69 71,812,69 6,445,111 7,548,628

Operating 8,494,846 25,521,74 47,203,44 638,168 662,431


fixed assets
Deferred tax 477,294 11,220,17 68,009,3 10,161,361 10,705,374
assets net
319,606,55 154,926,48 192,169,66 252,026,77 320,109,723
6
4 3 0
Liabilities:-
Bills payable 2,460,062 25,343,63 24,486,20 2,278,007 3,494,384

Borrowings 14,891,029 12,534,363 969,378,5 18,410,425 22,933,656


form
financial
institutions
Deposits and 293,965,00 12,639,172 161,907,49 206,031,32 263,972,382
9 4
other 1
accounts
Sub-ordinate 2,498,500 - - 2,500,000 2,499,000
loans
Liabilities - - - - -
against
assets
subjects to
finance lease
Other 9,073,955 32,060,94 50,845,28 - -
liabilities
44

Deferred tax - - - 5,119,267 7,332,059


liabilities
322,888,55 10,255,844 179,1344,2 234,339,02 300,231,481
5 3
4
Net assets (3,974,000) 10,256,000 13035236 17,687,753 19,878,242

Represented by:-
Share capital (4,869,00) 4,404,642 4,404,642 4,488,642 5,386,370
Share 1,063,000 10,640,031 4,316,324
premium
Reserves - 716,562 1,019,899 6,133,209 6,050,713
Un- (6,490,000) (6,313,635) 1,658,829 5,607,796 6,971,308
appropriated
profit/
Accumulated
losses
9,447,600 11,399,694 16,229,647 18,408,391
Surplus on 895,000 808,244 1,635,542 1,458,106 1,469,851
revaluation
of assets
10,255,844 13,035,236 17,687,753 19,878,242
Earning per (10.55) (10.08) 3.63 0.81 6.89
share(EPS)
Price per - - - - 12.55
earning ratio
- - - - 87

(42) (50) (46) 21 26


7.2-Five year’s latest income statement:-

Description 2003 2004 2005 2006 2007


Mark–up/Return/ 4,985,000 5,244,710 9,846,657 17,215,507 21,201,422
Interest earned
Mark–up/Return/ 1,115,000 794,105,00 2,024,659 6,793,101 10,019,004
Interest expensed
Net Mark–up/ 3,240,521 4,450,605 7,821,998 10,422,406 11,182,418
Interest Income
Provision against 493,234 1,519,682 413,352 583,305 2,712,936
non–performing
45

loans and advances


– net
Provision/(Reversal) (23,685) (26,832) 17,014 (14,623) 719
for diminution in
the value of
Investments – net
Bad debts written 32,176 44,294 154,359 136,189 1,187
off directly
439,006 1,537,144 584,725 704,871 2,714,842
Net Mark–up/ 1,234,291 2,913,461 7,237,273 9,717,535 8,467,576
Interest Income
after provisions

Non mark–
up/interest income

Fee, commission 156,073 1,255,153 1,220,362 2,062,677 1,353,888


and brokerage
income

Dividend Income 12,135 15,230 46,146 147,184 193,255

Income from 142,097 265,345 250,224 194,879 282,285


dealing in foreign
currencies
Gain on sale of 11,000 14,008 123,266 1,439,387 376,792
securities

Unrealized loss on 24,387 35,688 1,117 (1,463) (30,180)


revaluation of
investments
classified as
held for trading –
net
Other income 328,000 155,000 263,599 77,435 273,028
Total non– 124,379 154,682 1,930,420 3,920,099 2,449,068
markup/Interest
Income
1,610,007 1,740,174 1,930,420 12,387,675 12,166,603
Non mark–
up/interest
expenses
Administrative 2,000,149 4,108,172 4,252,337 6,018,346 5,290,578
expenses
46

Provision against 132,147 150,179 39,828 119,579 205,307


other assets – net
Provision against (87,000) (93,427) 79,095 39,805 2,546
off–balance sheet
obligations – net
Other charges 316,545 7,0009 18,999 256,869 7,078
Total non– 3,248,247 4,171,933 4,390,259 6,434,599 5,505,509
markup/Interest
expenses
Extra- - - - - -
ordinary/unusual
items
Profit before 321,587 481,702 4,777,434 5,953,076 6,661,094
taxation
Taxation – Current 123 159,423 1,331,468 1,887,299 2,215,092
– Prior years 671,128 28,316 22,000 (10,381) 48,752
– Deferred 92,247 102,190 390,594 - -
248,844 289,929 1,744,062 1,876,918 2,263,844
Profit after 386,000 191,773 3,033,372 4,076,158 4,397,250
taxation
Un-appropriate (1,0679) (6,471,127) (6,313,635) 5,607,796 2,731,979
profit brought
forward
Transfer from 12,358 14,989 19,882 32,701 19,452
surplus on
revaluation of fixed
assets – net of tax
5,640,497 2,751,431

Earnings per share 3.63 0.81 6.89 7.57 8.16


(in Rupees)

7.3:-Ratio analysis:-
“It is essentially concerned with the calculation of relationships which after
proper identification and interpretation may provide information about the
operations and state of affairs of a business enterprise.” OR
To evaluate a firm’s financial condition and performance, the financial analyst needs to
perform “checkups” on various aspects of a firm’s financial health. A tool frequently used
during these checkups is a Financial Ratio “which relates two pieces of financial data by
47

dividing one quantity by the other.” We calculate ratios because in this way we get a
comparison that may prove more useful than the raw numbers by themselves.
Some of the ratios are given below and they are calculated as well:-
A-Liquidity Ratios:-
These are used to measures the firm’s ability to meet short term obligations. They
compare short term obligations with short term resources available to meet these
obligations. These include the following ratios:
1-Current ratios
2-Acid test ratios
1-Current Ratio:-
Current assets normally include cash, marketable securities, accounts receivable and
inventories. Current liabilities consist of accounts payable, short term notes payable, short-
term loans, current maturities of long term debt, accrued income taxes and other accrued
expenses. It shows a firms ability to cover its current liabilities with its current assets.
Liquidity ratios measure a firm’s ability to meet short-term obligations and pay back the
contractual obligations on the due date.

Current ratio = Current assets / Current liabilities


= 18,035 / 12,143
= 1.49
Interpretation:-
This must be less then 2. This ratio shows that to meet the liabilities of 0.49 the bank has 1
asset. Allied Bank’s current ratio for the year 2006 is 1.13 and for the year 2007 is 1.49,
which shows the increase of 0.36. It means the organization is going towards in profitable
direction.
2-Acid-Test Ratio:-
Current assets less inventories divided by current liabilities. It shows a firm’s ability
to meet current ability to meet current liabilities with its most liquid asset. This ratio serves
as a supplement to the current ratio in analyzing liquidity. This ratio is the same as the
48

current ratio except that it excludes inventories—presumably the least liquid portion of
current assets from the numerator.
Acid-test ratio = cash+ marketable securities + accounts receivable / Current
liabilities
=18035+5777+44830/12143
=5.65
Interpretation:-
Quick ratio/Acid test ratio is found by dividing the most liquid current assets (cash,
marketable securities and accounts receivable) by current liabilities. This ratio shows that
the ABL has assets of value 5 to meet the current liabilities of value 0.65.

B-Financial leverage (Debt) ratios:-


These are divided into the following types:-
1-Debt to Equity ratio
2-Debt to total asset ratio
1-Debt to Equity (Capital) Ratio:-
These represent the extent to which the firm is financed by debt means how much
borrowed money is used by the company. This ownership provides the cushion against the
risk of using debt and leverages.
Debt to Equity ratio = Total Debt / Shareholder equity
=7534/24435
=0.31
Interpretation:-
If this ratio is less then it is safer for the organization. For year 2007 the ratio is 0.31
which shows efficiency of management of using equity.
2-Debt to total asset ratio:-
The debt to total assets ratio is derived by dividing a firm’s total debt by its total
assets. It highlights the relative importance of debt financing to the firm by showing the
percentage of the firm’s assets that are supported by debt financing.
Debt to total asset ratio = Total debt/ Total Assets
49

=7534/192170
=0.04
Interpretation:-
This is less then the zero which shows that the bank has enough capital and assets to
meet its liabilities. As the ratio is less then zero than it depicts that the management is
efficient in using assets of the ABL.

C-Profitability Ratios:-
These are divided in to given types:-
1-Return on Investment Ratio
2-Return on Equity Ratio
1-Return on Assets Ratio:-
This ratio compares unfavorably to a median value for the industry.
Return on Asset Ratio = Net income / Total assets.
Interpretation:-
An improvement in the Return on investment or Earning power of the firm if there
is an increase in turnover on assets, an increase in the net profit margin, or both. If this ratio
is high then it shows that the assets are more efficiently used by the Bank. We see that this
ratio was 0.34 in 2005 and rose to 1.75 in 2007. This shows that now assets are more
efficiently used in 2007.
2-Return on Equity Ratio:-
Return on equity compares net profit after taxes to the equity that shareholders’
have invested in the firm. This ratio tells the earning power on shareholders’ book value
investment and is frequently used in comparing two or more firms in an industry.
Return on Equity ratio = Net profit after taxes / shareholders’ Equity)
4397250/19878242 (100)
=22
Interpretation:-
A high return on equity often reflects the firm’s acceptance of strong investment
opportunities and effective expense management. And higher the return on equity might
50

simply be the result of assuming excessive financial risk. In the table we see that this ratio
for the year 2007 is 22 while for the year 2006 it is 8. This shows that now ABL is much
stronger to accept investments opportunities.

D-Loans to Deposits:-
The loans to deposits ratio measures the total loans outstanding as a percentage of
total deposits. This figure is determined as follows for 2007:
Loans to Deposits = Loans or Advances / Deposits
=119506/161907
=0.74
=74
Interpretation:-
The lower this ratio indicates a bank is loaned up and its liquidity is high. The
higher this ratio indicates a bank is loaned up and its liquidity is low. This ratio is gradually
increasing & that’s not very good. The higher the ratio, the more risky a bank may be to
higher defaults. This ratio has risen from 44 in 2005 to 74 in 2007

E-Deposit Times Capital:-


The ratio of deposits time’s capital concerns both depositors and stockholders. To
some extent, indicating a bank’s debt position. More capital implies a greater margin of
safety, while a larger deposit base gives a prospect of higher return to stockholders, since
more money is available for investment purpose. This figure is determined as follows for
2007:
Deposits to Capital = Deposits / Capital
= 263972382/19878242
= 13.28
This figure is determined as follows for 2006:
= 206031234/17687753
= 11.65
Interpretation:-
51

Overall this ratio should be higher from stockholders point of view or management
point of view but should be low from creditor’s point of view. If deposits are increased the
ratio will increase. So more deposits are available for investments and equity is also
increased. It is 13.28 for 2007 and was 11.65 in 2006. Increase in ratio shows that the
deposits have increased.
F-Loan Loss Coverage Ratio:-
This ratio tells that how many bad debts should happen but these bad debts should
not increase means the organization should earn that much that it should be able to cover
bad debts. This figure is determined as follows:
Loan Loss Coverage Ratio = Provision against Loans & Advances / Profit/ (Loss)
Before Taxation
Interpretation:-
In 2004 ABL loan loss coverage ratio is -0.01, which is not good, and show the
instability of the organization. But from 2005 ABL start improving and till now it’s
improved to 0.23. This ratio should be higher, higher the ratio means less bad debts which
means loans have been recovered. It is good sign for management as well as creditors point
of view.
G-Net Profit/ (Loss) / Advances Ratio:-
This ratio is determined as follows for 2007:
Net Profit/ (Loss) / Advances
=4397250/168407280
=2.6%
For 2006
=4076158/144033634
=2.8%
Interpretation:-
This ratio should be higher. Higher the ratio shows the improvement of business of
the organization. In 2006 this ratio is 2.8% but in 2007 this ratio is 2.6.
H-Dividend Yield ratio:-
52

This indicates the return that investors are obtaining on their investment in the form
of dividends. This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price. It is interesting to note
that there is strong correlation between dividend yields and market prices. Invariably, the
higher the dividend, the higher the market value of the share. The dividend yield ratio
compares the dividend per share against the price of the share and is calculated as:

Dividend Yield ratio= (Total dividend/Number of shares outstanding)

/stock price

7.4:-Financial ratios:-

Financial ratios 2003 2004 2005 2006 2007


Return on Avg - - - 8 29
Equity
Return on Avg -1.07 -0.99 0.34 .014 1.75
Assets
Dividend per - - - - 2.50
share
Dividend yield - - - - 2.9
Dividend payout - - - - 36
ratio
Advances to 63 52 44 55 74
deposit-s ratio
Gross spread 39 50 77 85 79
ratio
Income to 1.24 1.48 1.62 1.50 2.28
expense-ratio
Growth in gross 48 22 14 4 58
income
Growth in net 77 5 136 -50 1482
profit after tax
Total assets to (23) (21) (24) 16 17
S.funds
Intermediation 3.63 3.57 3.38 3.29 2.96
53

cost ratio
Capital adequacy -14 -17 -12 17 11
ratio

At overall level the Allied Bank Limited is showing profit. The above tables of
different ratios with respect to years are showing:-
 Bank has more adequate capital as compared to the previous years.
 After the tax the profits are raising each year.
 Advance to deposits ratios are also raising. It is 74% in 2007.
 Return on equity is 29% in 2007.
 Capital is now more then enough for utilization.
 Income to expense ratio is also rising which shows that the expenses are less as
compared to income.

7.5:-Horizontal analysis of financial statements:-


“An analysis of percentage financial statements where all balance sheet or
income statement figures for a base year equal 100 (percent) and subsequent financial
statement items are expressed as percentage of their values in the base year.”
This technique is also known as comparative analysis. It is conducted by setting
consecutive balance sheet, income statement or statement of cash flow side-by-side and
reviewing changes in individual categories on a year-to-year or multiyear basis. The most
important item revealed by Comparative financial statement analysis is trend. A
comparison of statements over several years reveals direction, speed and extent of trends.
The horizontal financial statements analysis is done by restating amount of each
item or group of items as a percentage. Such percentages are calculated by selecting a base
year and assign a weight of 100 to the amount of each item in the base year statement.
Thereafter, the amounts of similar items or groups of items in prior or subsequent financial
54

statements are expressed as a percentage of the base year amount. The resulting figures are
called index numbers and this analysis is also called index analysis.

Horizontal analysis of balance sheet:-


In horizontal analysis all calculations are calculated on the basis of base year. In
short, the standardization of balance sheet and income statement items as percentages of
totals and indexes to a base year often gives us insights additional to those obtained from
the analysis of financial ratios. In balance sheet, management views the three major aspects
of the organization.
Years 2003 2004 2005 2006 2007
Assets 100 126% 136% 157% 173%
Advances 100 106% 120% 166% 164%
Investments 100 171% 155% 158% 203%
Borrowing 100 184% 165% 186% 200%
from
institutions
Share 100 904% 904% 922% 1106%
capital
Liabilities 100 103% 155% 142% 193%
Reserves 100 128% 183% 108% 214%
Advances 100 135% 166% 186% 200%

1. The Assets of the ABL balance sheet show the constant growth in every year. In
Balance Sheet the base year is 2003 and all financial items are 100(percent) for that
year. Items for subsequent years are expressed as an index relative to that year.
From that analysis we can easily judge the performance of ABL and showing
constant growth, which means that management, used its resources efficiently and
effectively. The assets were 100 in 2003 and they rose to 265 in 2007. This shows
the continuous raise in the assets of the bank.
2. Liabilities at the same time are also increasing.
3. Borrowings from financial institution in 2003 is 100% and in 2004 that is 470%
which is greater.
55

4. In 2005 it reached to 284% and in 2006 it is 286% that is 164% increased from
2002.
5. Same is the case with deposits & other accounts. They are constantly increasing
every year. ABL working on several policies and trying to adopt and implement the
policies through which they can reduce their liabilities.
6. Share capital of the ABL is increasing every year. In 2004 share capital is 414%
which is increased to 506% in 2007.

Horizontal analysis of income statement:-


The horizontal analysis of income statement gives us the information on the
magnitude of absolute changes in profit and expenses. The horizontal analysis of income
statement gives the same picture as the vertical analysis of income statement, namely,
fluctuating behavior. But the sharp improvement in profitability is easily distinguished. In
vertical analysis we have no information about how the absolute amount changes over
time.

Year 2003 2004 2005 2006 2007


Interest 100 205% 297% 445% 525%
income
Interest 100 228% 235% 299% 269%
expenditure
Capital 100 227% 212% 230% 442%
gains
Dividend 100 226% 481% 890% 1312%
income

7.6:-Vertical analysis:-
“An analysis of percentage financial statements where all balance sheet items are
divided by total assets, all income statement items are divided by net sales or
revenues.”
56

Vertical analysis of Balance Sheet:-


In vertical financial statement analysis, the various components of balance sheet
express as the percentages of the total asset of the company.
The expression of individual financial statement items as percentages of totals helps
the analyst to spot trends with respect to the relative importance of these items over time. In
the common size income statement, turnover is expressed as 100% and every item in the
balance sheet is expressed as a percentage of turnovers (sales or total incomes in case of
banks). After dividing the all items of balance sheet with total assets we get the following
data:-
Description 2005 2006 2007
Cash and balance 7.67% 9.14% 9.29%
with treasury banks
Balance with other 17.13 0.67 0.21
banks
Lending to other 3.01 7.56 5.75
institutions
Investments 23.33 18.63 26.23
Advances 57.73 57.15 52.61
Other assets 3.74 2.56 2.36
Operating fixed assets 2.46 0.25 0.21
Deferred tax assets 0.35 4.03 3.34
net
Total Assets 100% 100% 100%
Liabilities:-
Bills payable 1.27 0.90 1.09
Borrowing from 5.04 7.30 7.16
financial institutions
Deposits and other 84.25 81.75 82.46
accounts
Sub-ordinate loans - 0.99 0.78
Liabilities against - - -
assets subjects to
finance lease
Other liabilities 2.65 - -
Deferred tax liabilities - 2.03 2.29
57

Net assets
Represented by:-
Share capital 2.29 1.78 1.68
Share premium 2.25 - -
Reserves 0.53 2.43 1.89
Un-appropriated 0.09 2.23 2.18
profit/Accumulated
losses
Surplus on 0.85 0.58 0.46
revaluation of assets
100% 100% 100%

Findings on the basis of financial analysis:-


On the basis of analysis which has been done there are following findings:-
1. Balance sheet shows that cash and balances with other banks are increasing as well
as advances.
2. Management is efficient to control the expenses.
3. Surplus on losses has decreased.
4. Bank has increased the reserves to meet the future requirements.
5. As we see that in vertical analyses of balance sheet investment has also raised from
23.33% to 26.23% in 2007.
6. Reserves of the bank are increasing from year to year to meet the contingencies.

Vertical analysis of Income Statement:-


In case of income statement items are related to net sales. In case of bank we take
the interest and non-interest income as 100% and compare all other incomes with that for
the comparison.

Description 2004 2005 2006 2007


Mark–up/Return/ Interest 100% 100% 100% 100%
earned
Mark–up/Return/ Interest (15.141) (20.562) (39.459) (47.256)
expensed
Net Mark–up/ Interest 84.859 79.438 60.541 52.744
58

Income
Net Provision (29.308) (5.938) (4.094) (12.805)
Net Mark–up/ Interest 55.551% 73.450% 56.447% 39.939%
Income after provisions
Non mark–up/interest
income

Fee, commission and 23.923 12.394 11.982 6.385


brokerage income
Dividend Income 0.290 4.687 0.855 0.912
Income from dealing in 5.059 2.541 1.132 1.331
foreign currencies
Gain on sale of securities 0.267 1.252 8.361 1.777
Unrealized loss on 0.680 (0.011) (0.0085) (0.142)
revaluation of investments
classified as
held for trading – net
Other income 0.0013 2.677 0.450 1.288
Total non–markup/Interest 33.180 19.605 22.772 11.551
Income
55.550% 93.055% 71.956% 51.490%
Non mark–up/interest
expenses
Administrative expenses 78.330 43.186 34.959 24.954
Provision against other 2.863 0.404 0.695 0.968
assets – net
Provision against off– 1.781 0.803 0.231 0.012
balance sheet obligations –
net
Other charges 0.1334 0.193 1.492 0.033
Total non–markup/Interest 79.546 44.586 37.377 25.968
expenses
Extra-ordinary/unusual - - - -
items
Profit before taxation 41.71 48.518 34.580 31.418
Taxation – Current 3.039 13.522 10.963 10.448
– Prior years 0.540 (0.223) (0.060) 0.230
– Deferred 1.948 3.967 - -
5.527 17.256 10.903 10.678
Profit after taxation 30.656 30.806 23.677 20.740
Un-appropriate profit (123.384) (64.412) 32.274 12.886
brought forward
Transfer from surplus on 0.286 0.202 0.190 0.092
59

revaluation of fixed assets –


net of tax
(123.098) (33.404) (32.464) 12.978
Net 110.257 104.693 98.99 111.176

1. Interest expenses have increased as with rise in interest income.


2. Dividend income is less in 2007 as compared to 2005.
3. Income from dealing in foreign currencies is decreasing which needs to be noticed
by the management.
4. Management is efficient to decrease the losses form 2005 to 2007.
5. Profit of the bank is not increasing. Management must control the losses and should
raise the profits.

7.8:-Organizational analysis with respect to the industry:-


To compare the Allied bank Limited with other banks I have made the SWOT
analysis.
Strengths, Weaknesses, Opportunities and Threats of the bank are included. Its
detail is given below:-

Strengths:-

ABL has always looked upon the customer’s demand and preferences while
introducing new Islamic based products. That is why it has some strong points that
others don’t have as follows:-
 Bank is providing a high quality service to its customers.
 Large numbers of branches.
 The bank enjoys competitive profitability in the industry.
 ABL Bank has captured majority of potential customers in Pakistan.
 ABL Bank is Successive and Market oriented.
60

 In the list of banking industry the Allied bank is at number 5 in respect of its
Balance Sheet and overall its size.
 ABL Bank is investing large amount of funds on HR development and training.
 Customer default rate is lower as compared to other banks.

 ABL is meeting the challenges of latest Technology by introducing online


branches, ATM, VISA and MASTER cards.
Weaknesses:-
 Employee’s turnover is high. Many people are leaving this bank because of getting
less salary as compared to some other private banks.
 ATM machines are not always up to dated.
 Low motivational level; non-aggressive marketing.
 Employees’ dissatisfaction due to improper reward system.
 It is not providing the Islamic modes of financing to the customer.
Opportunities:-
 ABL can remove all the complaints of its customers.
 ABL can give its staff attractive fresh as well as old staff attractive packages, in
order to get them satisfied.
 Growth opportunities of ABL are very high as compared to other Banks.
 ABL has an opportunity to do aggressive marketing to increase its business.
 Can introduce the Islamic modes of financing to attract the more customers.
 Bank can advance loans to the agriculture sector of Pakistan.
Threats:-
 New banks are setting up their operations in the Pakistan more rapidly.
 Foreign banks are flourishing in field of consumer financing.
 For the last of many years, Pakistan is facing economic and political instability,
which is a big threat.
 Today’s government idea of nationalization is a big threat to the bank.
61

Comparison of ABL with respect to the other banks:-


Data of the banks is of the year 2007.
Rs. 000,
Bank Total assets Liabilities Profitability
Allied Bank Limited 319,606,554 299,726,393 56,404,97
Union Bank Limited 392,679,800 365,550,400 36,132,000
ABN AMRO 116,045,223 109,285,312 135,982
Bank Al-Falah 16,219,844 312,675,308 661,534
Bank Al Habib 141,234,274 132,908,95 2,211,333

Bank Al-Falah:-
PACRA, a premier rating agency of the country, has rated the Bank “AA” Entity
Rating for Long Term and A1= for the short term. These rating denote a very low
expectation of credit risk, strong capacity for timely payment of financial commitments in
the long term and by highest capacity for timely repayment in the sort term, respectively.
Further, the unsecured subordinated debt (Term Finance Certificate) has been awarded
credit rating of “AA”.

ABN AMRO:-
Pakistan Credit Rating Agency (PACRA), has upgraded rating of bank with long
term rating of ‘AA’ and short term rating at ‘A1+’ .These ratings represent very high credit
quality, a low expectation of credit risk and a highest capacity for timely payment of
financial commitments. These ratings are pertinent to the senior unsecured creditors
(depositors) of the Bank.

Allied Bank Limited:-


In 2005, Pakistan Credit Rating Agency (PACRA), has upgraded rating of bank
with long term rating of ‘A’ and short term rating at ‘A1’. These were raised to A+ for long
term and A1+ for the short term. Now these are “AA+” for long term and “AA” for the
short term. These ratings represent very high credit quality, a low expectation of credit risk
62

and a highest capacity for timely payment of financial commitments. These ratings are
pertinent to the senior unsecured creditors (depositors) of the Bank.

7.9-Findings on the basis of financial analysis:-


On the basis of analyses which have been done there are following findings:-
1. Balance sheet shows that deposits are increasing as well as advances are also
increasing so expenses are increasing.
2. Management is not too efficient to control the expenses.
3. As we see that in vertical analyses of income statement interest incomes are
increasing and interest expenses are also increasing.
4. Bank is financially sound with a large amount of capital and assets.

7.10-Future prospects:-
1. Bank is going to expand its branches network throughout the country.
2. Policies are made to upgrade the IT system of the bank to solve the problems
occurring in its prevailing IT system.
3. In future the Allied Bank is going to focus on loans to the agriculture sector as it is
the major part of the economy.
4. Allied Bank is going to develop its Human Resource Department. For this purpose
the bank is going the recruit more employees.
5. Allied Bank Limited is also going to expand its branches at an international level
particularly in Golf countries.
6. The Bank will concentrate on growing earnings over the long term at a rate which
will place it favorably when compared with its peer group.
7. Bank will focus on investing its delivery platforms, technology, people and bran to
support the future value of the Bank.

8-Shortfall of the organization


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 Employee’s turnover is high. Many people are leaving this bank because of getting
less salary as compared to some other private banks.
 ATM machines are not always up to dated.
 Low motivational level; non-aggressive marketing.
 Employees’ dissatisfaction due to improper reward system.
 It is not providing the Islamic modes of financing to the customer.

9-Recommendations
 The problems which the CAD staff is facing due to new IT system UNIBANK must
be solved as soon as possible. The proper training arrangements must be done
monthly in this concern.
 Not only by fulfilling training needs but also the financial needs by giving them
more salary and benefits they can also keep them satisfied, because if they will be
satisfied then the customers will also be satisfied.
 Competent team must be recruited and trained in order get competitive advantage.
 This is the time of extensive competition and ABL is surrounded by many
competitors. It has an opportunity to do aggressive marketing to increase its
business.
 New branches must be open on further cities by doing the complete market
analysis.
 Aggressive and proactive management style should be followed to increase HR
efficiency.
 Stuck up portfolio of Finances should be effectively reduced.
 Fund Investments should be made after careful analysis.
 ABL should try to make more

 Better branch environment.


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 Effort to increase it’s Advances by offering slightly low interest rate as compared to
it’s competitors.
 Try to increase current level of equity financing.
 Better cost control measures to reduce other expenses.
 ABL should remove all the complaints of its customers by properly giving job
description of each and every employee, by giving properly training and developing
ethical standard in employees, so that they should deal the customers with cool
mind and should be able to solve their problems.
 HR must focus on Succession Planning, and motivational level of employees must
be checked on different scales for reducing the employees’ turnover.

10-Conclusion
Banking sector in Pakistan has grown stronger and healthier during the past years.
Due to economic growth, high service charges, financial liquidity, reduction in tax rate and
interest rate of deposits and increase in spread rate have increased the bank profitability
significantly. Corporate interest in Islamic banking is still in initial stages but it is growing
that will obviously be beneficial for the ABL growth. The customer interest is increasing in
ABL, which is the positive sign for the Bank. Ratio analysis shows that the Bank overall
profitability has increased as compared to the previous years that are due to privatization of
the bank. Bank is at number 5 in balance sheet and branch network of the bank. Overall
bank is enjoying profits with a great trust of its customers.

11-References
In the preparation of the report following resources are used by me:-
 Data related to products, services, history is taken from the website of the bank.
 Financial reports are collected from the annual reports of the bank.
 SWOT analysis is done with the help of Branch Manager, Relationship Manager
and Head of Commercial and SME Assets of the Allied Bank Limited.
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 KSE website.
 Employees of the Allied Bank Limited.
 Sir Muhammad Waseem (Investment Teacher)
 Sir Sajjad Hussain (Head C & SME Assets)
 Miss Ammana Akram (Relationship Manager of ABL)
 Miss Marya Iftikhar (Relationship Manager of ABL)

2-Annexes
66
67
68

Organogram of Allied Bank Limited

Board of Directors

Audit Committee

President

Internal Audit

Corporate and Commercial and


Investment SME assets
Banking
Consumer
Banking

Treasury
Risk management

Special Asset
Management
Finance

Operations
Information
Technology
Human Resource

Corporate
Compliance and Affairs
Control
69

Organogram of the Allied bank Limited, Blue Area Branch

Chief Branch Manager

Cash
Account Opening
Remittances
Clearing
Online
Foreign Currency
Advances
Bills

Organogram of Commercial and SME Assets


Head Commercial and SME Assets

Marketing Operation

RM RM RM

ARM ARM ARM

Processing Officer

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