Askari Bank Limited-Report

8/7/2019 Askari Bank Limited-Report

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Askari Bank Limited

EXECUTIVE SUMMARY:

The Department of Administrative Sciences offers Masters degree in Business Administration.They are giving the best education and are offering for specialization, financial management,

marketing management, human resource management and computer application to business. An

important program is six to eight weeks internship with any recognized institution.

I decided to take up Askari Bank Limited for my internship because it is a competing Banknowadays and gives a good training to the internees. So in order to learn more this was my

choice.

This report is about my internship that I have undergone at Askari Bank Limited Multan Branchfrom 2nd June 2008 to 18th July 08. During my internship I am able to learn practical aspect of

business, and get good working experience.

On the very first day of my internship I reported to Operation Manager Mr. Noor ul Islam. He

gave me small introduction of the Bank and introduced me to the staff of the Bank. Everyinternee is rotated among the Banks departments and so was I. This rotation is done in order to

have general concept regarding Banks functions, operations and policies. In this rotation the

stay in department is usually a week. I have learned more about the Basic Banking, Credits and

Foreign Trade department and have given below the caption of activities I was involved induring the period of six weeks.

During my internship I found that Askari Bank is a best Bank in Multan because most of the

Exports and Imports in Multan are done through this Bank. Multan is one of the cotton growingcities of Pakistan. Most of the businesses in Multan are directly or indirectly linked to cotton

that is also the case with Askari Banks clients. Because Multan is an Agricultural City, and its

major export is Cotton and Mango. So its export is done on seasonal basis. In the season of

cotton and Mango export Askari Bank get its target easily but difficult for it to get its target inthe off season.

Low profit rates used to be one of the major reasons for not meeting the deposit targets. The

profit rates on Askari deposit schemes were quite low when compared with other Banks

especially with the National Saving Centers, but now Askari Bank is giving a comparatively highprofit rates to its customers. In todays every customer is a rational customer, he knows the value

of money and wants a best return on his money.

INTRODUCTION TO BANK:

Askari Bank Limited (AKBL) works as a Unit of Army Welfare Trust was established for theWelfare of Army Officials. The office of Army Welfare Trust is situated at AWT Plaza,


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Rawalpindi. AWT offers the AWT Saving Scheme to the army officials only. AWT has its

units as under:

Askari Associates.

Askari Leasing.

Askari General. Private Business.

Textile Mills. Cement Industry.

Askari Commercial Bank.

Askari Bank Limited was incorporated on October 9, 1991, as a Public Limited Company, and is

listed on Karachi, Lahore and Islamabad Stock Exchanges. The Bank obtained businesscommencement certificate on February 26, 1992 and started operations form April 1, 1992.

Askari Bank is scheduled Commercial Bank and is principally engaged in the business of

Banking as defined in the Banking Companies Ordinance 1962.

Askari Bank Limited continues to scale new heights in all areas of its operations. The safety and

security of depositors funds, high productivity and optimum use of technology are the hallmarks

of its corporate strength.

In 1994, AKBL earned international recognition as Asia Money Award and the title ofBest

Commercial Bank of Pakistan for the year 1994, while Euro money declared the Bank as best

domestic Bank of Pakistan for the year 1995.

ASKARI BANK LIMITED MULTAN

Askari Bank Limited Multan was inaugurated on December 28,1994.

It is located on Abdali Road Opposite to PIA Office. The location is connected to all the maintrade centers in Multan. It is a prosperous branch streaming towards great achievements.

At the time of its establishment the factored who were considered are as follows

Multan is zone covering a large population.

Multan City is linked to many big cities.

Agro based area constituting growers and gainers Army Offices & Fort Colony

Educational Institution

DEPARTMENTS:

The bank has following department:

Account Opening department ATM Department


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Credit Card Department

Account Department

Credit Department

Remittance Department

Foreign Trade Department

Cash Department

ACCOUNT OPENING DEPARTMENT

Borrowing funds from different sources has become an essential feature of todays business

enterprises. But in the case of a bank borrowing funds from outside parties is al l the more vital

because the entire banking system is based on it. The borrowed capital of a bank is much greater

their own capital. Banks borrowing is mostly in the form of deposits. These deposits are lent outto different parties. Such deposit creation is done through opening an account in the Bank.

In AKBL Multan Mr. Sheeraz Hassan is operating the account opening department along with

performing some auxiliary functions of Check Book Issuing

TYPES OF ACCOUNTS

In AKBL, there are the following types of accounts:

Current account.

Saving Account.

Askari Special Deposit Account.(ASDA)

Basic Banking account

Term Deposit.

CURRENT ACCOUNT

In current account there is no interest on it. It is for only transaction purposes. They are paid on

demand. When a banker accepts a demand deposit, he incurs the obligation of the paying allcheques drawn against him to the extended of the balance in the account. As there is no profit

paid on this account it is also called chequing account because cheques can be drawn on it.

Current account is mostly opened for business.

SAVING ACCOUNT

The purpose of this account is to induce the habit of saving individuals in the neighborhood. Theminimum deposit for opening the account is Rs.1050/- (as obvious in the Annexure).

Though individuals open such accounts for saving purpose, persons belonging to Armed forces

and different military institutions are free to use this account on current basis.

ASKARI SPECIAL DEPOSIT ACCOUNTANT


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ASDA account is an interest bearing current account interest is paid. The payment of return is

monthly, where as the rate of return with aspect to the amount of minimum deposit clear from

deposit schedules in following table). It is also chequing account because cheques can be drawnon it. It is necessary for this account that the client must maintain a minimum balance of Rs.

50,000 at the end of the month. Thats why it is similar to current account. It is mostly opened by

Business but individuals too open this account.

Tax of 0.3% would be deducted on ASDA if withdrawals are more than Rs.25,000.

TERM DEPOSITS

A term deposit is a deposit that is made for a certain periods of time at the end of the specific

period. the customer is allowed to with draw the principle amount .

AKBLs Term deposits are of types clear in the deposit scheme in the table). One of them is

Askari Advantage one month. The rate of return on this account is set by head office. The term

deposit account vary one month to 1 year for all following accounts (as clear from DepositScheme in the table).

The amount of profit is given to depositors in three ways:

By cash By sending a bank Draft to depositors Home address or Officers or whichever is specified

as mailing Address.

The amount is credited in any one of the checking Accounts of the depositor.

ACCOUNT OPENING PROCEDURE

Fro the chequing accounts (C/A, ASDA, SAVING), there are different types of account holdersare required for all these types of account holders. The operation /procedure requirement that is

needed for Individual Account differ greatly from Joint account proprietorship Partnership , Limited Company

and Club society or Association as explained below.

INDIVIDUALS ACCOUNT

When a single man or women opens an account in his/her own name and has the right to operate

it is called individual Account.

DOCUMENTATION REQUIREMENT

For literate person copy of National Identity Card is required as a primary requirement. For

illiterate person and Veiled Women, along with the copy of National Identity Card requirement

he or she must come in person for opening the account.

OPERATION


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The person place a Check Mark in the type of account and type of operation required

He/She fills in part-I of the form , a fix his /her either two or four similar signature (or

thumb expression in the signature space and get it introduced and signed by a personwho already has an account with the bank and write his account no in the specific rows in

a specific space.

The person fills in next of Kin position where he/she father, mother, husband/wife orany other relatives name, his /her address, phone no and affix his/her signature to certify

this requirement. This requirement is needed because in his/her absence bank can have

correspondence with the specific person.

The person put her /his signature ( or thumb expression) on the signature Specimen Card

(SS CARD) similar in the area on the form. One the back of S.S card mailing address,

telephone no, Person to contact and introducer space is filled in. All these requirement are

necessary for future The person deposits the initial amount for opening account on to the cash counter.

The person put his signature on form -A (check book requisition) on two places in

authorized signature and fills in the Title of Account space by writing his name.

If the person put his signature in Urdu or any language other than English, he signed aVernacular form where under take that affixed signature are original and his own

signature and two postal size photos are needed.

The next day is the opening of account.

JOINT ACCOUNT

When two or more persons, neither partners, nor trustees, open an in their name is called joint

Account. Husband and wife or two persons of same sex can open joint account.

DOCUMENTATION

For joint account copy of National Identity Card of all the persons is obtained other thingsremaining same as in individuals account.

OPERATION

The person checks the type of amount and type of operation required in the respective

box on the form.

The persons fill in the Part-I and part-II in the form.

Signatures of both persons are obtained on the form in the area specified for signature

and S.S. Card.

In the title of account space names of all the persons are mentioned. Accounts holder specified in the form that they will operate the form singly or jointly.

PROPRIETORSHIP ACCOUNT

When an owner of a firm operating singly, opens an account in his firm name, this account is

called a proprietorship Account the proper himself liable for all his acts.


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DOCUMENTATION REQUIRED

For this kind of account, an application for opening the account on the firm letter -pad (having

the firm name) is required along with the NIC Card of proprietor.

OPERATION

All operation remains the same except that the firm name is written in the Title of the Accountarea and signature of the proprietor are affixed in the S.S. Card and the area specified for

signatures on the form.

PARTNER SHIP ACCOUNT

The account is opened in the firm name and all partner designate one two persons to act onbehalf of the partner ship firmer all acts on behalf of firm. The partners in the partnership firm

are liable for the acts of the firm jointly and severely. Every partner has in a firm has an implied

authority bind his co. partners by drawing and enclosed cheques.

DOCUMENTATIONS

Copy of N.I.C card of all partners

Application to open the account on the firm letter pad.

Partner ship deed in case registered partnership firm.

Letter showing the implied Authority of one or more partners to act on behalf of the firm. In case of non -registered partnership firm, understanding on behalf of the firm to remain

liable for all acts of the firm.

Name, address of all partners is written on the pad.

OPERATION

All other requirement remain same except that the form is dully signed by all partners cards are

signed by all those partners who will act on behalf of the firm and along filling part-I , Part-Iv is

also filled.

LIMITED COMPANY ACCOUNT

This account is for limited companies. In order to facilitate their transaction with outside parties,

bank provides many facilities.

DOCUMENTATION REQUIRED

Memorandum of Association.

Articles of the Association

Resolution of the Board of Director.

Certificate of Incorporation.

Certificate of commencement of business


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N-I-C

OPERATION

The persons authorized in the Resolution of the Board of Directors put their signatures on S.S

Cards. Next of kin requirement is not need in case of a Limited Company. After completingeach and every formality, introducer signature is verified by S.S card and is stamped Verified

customer signatures are admitted by stamping Admitting near signature and again signatures

on S.S card are admitted in the same way. The same process of verification and admission of thesignatures is repeated on Form-A and next of Kin area.

After completing each and every formality, Accountant is open in the computer by writing name,

address, A/C Number etc.

LETTER OF THE THANKS

At the start of the letter 2nd day, AKBL issues letter of thanks to Account opener and accountopener and Account Introducer for the trust the have on AKBL.

CHECK BOOK ISSUING

Check books are issued only for checking account such as current Account, saving Account and

ASDA Account. They are not issued for other fixed and term deposits because of their Long

term Accounts nature.

ISSUING PROCEDURE

Signatures on cheque book requisition are verified by matching with signatures on SS. Cheque book leaves number, account number, account holders name are mentioned in

the cheque- book is made by mentioning the and the total of sum of excise duty andprovincial tax.

The name of A/c holder and date of cheque book issuance is written on cheque book

requisition the account-opening officer puts his initials on requisition leave.

A/c number is stamped over the leaves of cheque book and finally authorized person

affix his signature over the debit voucher and he voucher is attached from the cheque

book and is handed over to the customer .

RECEIVING INWARD CHEQUES

Another responsibility and function of account Opening Department is to receive Inward chequesfor collection of other Banks as well as of AKBL . Then these cheques are sent to clearing

official who clears these checks at SBP from other banks.

ACCOUNT CLOSING


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Account is closed on the written request of the customer AKBL free of cost. But to surrender the

cheque book yet if some leaves are yet to be write to the bank as a necessary requirements for

closing the account.

PROCEDURE

The customer for individuals account write an application to the manager of the bank an a

simple paper about the closing of his account with the bank (In case of proprietor ship

partnership and limited company account the application should be written an firm orcompany letter head)

The individual or in case of other type- proprietor firm and company surrender the

cheque book to the bank.

The cheque book is then torn from one side and is attached with the application. In case of Ltd. Company account resolution of the board of directors is also obtained to

attach it with the application.

The account opening form of the account holder is taken from the account-opening file,

and the application, cheque book, and resolution of board of directors in case of limitedcompany account are attached with the form.

Lastly, it is written in Red Ink on the form that account closed and Date of accountclosing.

EVERYDAY POSTING

Following transaction of cheque book is posted:-

Dr_____________ party A/c 50(for 10 leaves)

Rs 5/leave.

ATM- CARDS DEPARTMENT

This department deals in issuing ATM-Card, term deposits and Askari Bachat Certificate. Mr.Sheeraz Hassan deals this department.

ATM CARD

ATM Cards are only issue to Account Holder

ISSUING PROCEDURE

The person, first open the account within the blank.

Then he fills the ATM application form in which name of account holder, Fathers name

account number and N.I.Card number are mentioned.

A copy of N.I. card is also attached with the application form.

After completing this process, the application package is sent to head office


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ACBL head office takes a period of 3-4 weeks for preparing and processing of ATM

cards. First, list of card holder is issued and then after 15 days cards are send to ACBLs

issuing branch. The card and list are not sent simultaneously in order to avoid anymishandling.

ACBL takes Rs. 350/- for 1st time issuance as charges for a card

Biannually takes Rs 75.

ACCOUNTING DEPARTMENT

Accounts department is a department which deals and checks all the activity of all the

department .It also deals in expression of finance of the bank. Salary payment is also one

function of the bank.

CHECKING BANKS DAILY ACTIVITY

Accounts department deals and checks the entire working of the Branch; all the vouchers that

have been posted at the computer are scrutinized in accounts department. The End of Day i.e.computer print is also received from the computer. The next day the activity is separated some

statements from the End of Day. Then next day activity separated some statements from theEnd of Day. The vouchers are sorted out head wise. The vouchers are matched with the

entries in the statements.

Any abnormality if occurs, is immediately dealt with. All the vouchers and instruction are

checked individually are checked individually against the computer printouts. After checkingthey are signed by Mr. .Naeem Shehzad and the internal auditor Mr. Shafiq.

OTHER ACTIVITIES

Preparation of daily bank positions statement

Payment of salaries

Preparation of the statements

Depreciation calculation

Lockers Issuance

REMITTANCE DEPARTMENT:

The need of remittance is commonly felt is commercial life particularly and in everyday lifegenerally. The main function of the remittance department is to transmit money from one place

to another. By providing this service to the customer, Bank earns a lot of income. Also customeris able to meet its day to day financial requirements.

Demand Draft:

It is an instrument payable on demand for which value has been received, issued by the branch of

the Bank drawn i.e. payable at some other place (branch) of the same Bank. If two Banks are

involved then the DD is sent to other Bank but in other case it is handed over to the applicant.


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Issuance Procedure:

A demand draft application is given to the customer, he fills in relevant information and

signs it.

The officer checks the information form.

The Bank charges such as commission, excise duty is charged as per effective scheduleof charges. If he fills the tax exemption form, tax is not charged.

In case of cash deposit, the cashier counts the amount and signs the DD application andenters it in the register.

Then the officer of remittance department signs it and operation manager counter signs it.

The entry is made in the DD issuing register, DD is given to the customer.

Vouchers are prepared and posted.

DD advises are printed and mailed to the respective branch.

Payment Procedure:

The Bank receives DD. The DD credit advice is received through mail. The numbers are checked and signatures

are verified.

An entry is made on the DD payable register and the vouchers are made.

DD credit is attached with the vouchers and given for posting to the computer.

When DD is received the test numbers are checked and the payment is made.

Vouchers are given for posting and the entry that was made in the register is closed i.e.

DD payable is Nil.

Pay Order:

It is an instrument issued for payment in same city. Pay order issued from on e branch can onlybe payable from the same branch. It is normally referred to as Bankers cheque. It is also called

confirmed cheque, because Bank issues this on it own guarantee.

Issuance Procedure:

The standard form is given to the customer. He fills in the details and signs it.

The concerned officer checks the form.

Bank charges (or commission) as per the schedule of charges and the withholding tax of

0.3% are applied.

The cash amount of the pay order is received. A cash memo is signed, stamped and handed over to the applicant as a receipt.

Then the pay order receipt is filled accordingly.

Counter foil is also filled. An entry is made in the pay order issue register.

Then the authorized officer signs it after checking the pay order.

The order is then handed over to the applicant after obtaining his signature on the POForm.


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A voucher is also made and posted at the computer.

Payment Procedure:

On presentation of the pay order receipt, two authorized officers of the branch sign the

receipt.

PO entry is made in the PO issue register. Then the amount is credited to the account of the customer or pain in cash.

PO is posted at the computer.

Outward Bills for Collection:

The bills, which are received by the Bank and sent to other cities (branches) for the local clearingin that city, are called Outward Bills for Collection.

Procedure:

The cheques that are of other cities are separated.

They are entered in the OBC Register and OBC numbers are given to them.

The OBC forwarding schedules are prepared for different branches.

The respective cheques are attached with the schedule.

The office copy is filled and original schedule is mailed.

On clearing, the respective Banks send back the OBCs along with the IBCA (InterBranch Credit Advice).

The OBC numbers are checked from the OBC register, after that entries are made.

Commission charges are deducted from the account.

Inward Bills for Collection:

The bills, which are received by the Bank from other branches out of the city for local clearing

are called Inward Bills for Collection.

Procedure:

The OBC of other branches will be the IBC of this branch. So an OBC forwardingschedule is received by mail.

The cheques are entered in the IBC register. The IBC numbers are allotted to them.

The cheques are lodged for clearing. After realization, an IBCA is prepared and mailed to the branch from where the cheque

was received.

At the end of the day, two vouchers are prepared and posted.

FOREIGN TRADE DEPARTMENT

Foreign trade department deals in:


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Foreign currency account

Exports

Imports

FOREIGN CURRENCY ACCOUNT

Mainly this account deals in individual, personal and companies account

CRITERIA FOR OPENING FOREIGN CURRENCY ACCOUNT

There are not hard and fast rules for becoming the Foreign Currency Account holder. Bank

wants only introduction of the Client and very little about the background. I.D card is also notnecessary, if someone has; well and good, otherwise no restriction will be there for him.

FEATURES OF FOREIGN CURRENCY ACCOUNTS

There will be legal protection for the account holders. According to foreign exchange rules and regulation every citizen of Pakistan, either

within the Pakistan or outside the Pakistan, can open the foreign currency account.

Resident firms and Resident Companies including investment Banks can open Foreign

Currency Accounts.

All foreign nationals and foreign Companies in Pakistan or abroad can open ForeignCurrency Accounts.

Opening of Foreign Currency Accounts in the joint names of residents/non-residents is

permissible. Foreign Currency can be deposited by:

Remittance received from abroad

Foreign Currency Notes

There will be no restriction and questioning to him about the currency, which he wants todeposit that from where he got that money. No Zakat will be deducted on these accounts; no Income Tax deduction, no Wealth Tax

deduction will be there.

These incentives reinforce and motivated the people to invest in foreign currencyaccounts rather to keep the foreign currency idle.

Foreign currency accounts can easily be transferred from one person to another, one place

to another, with in the ACBL Branches or in other Bank.

The account holder can transfer the funds freely, in any currency to any part of the world.

Foreign currency Accounts can be used for payment of purchases at Duty Free shops.

FACILITIES

This account provides following facilities:

Traveling quota

Out ward remittances

In ward remittances receiving

To make remittances procedure flexible


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EXPORT

Mainly export deals in:

Negotiation of documents

Sending the documents for collection Pre-shipment financing

Post-shipment financing

Remittance against agent commission

Forward covered booking

Handling the documents for negotiation according to the UCP 500 (uniform custom and

practices)

Handling the documents for collection according to URR (uniform rules for collection) Submission of monthly returns to SBP regarding the export on form A-2/O-2

IMPORT

Opening the letter of credit

Scrutinize the documents receive from flowing bank under letter of credit. Account toUCP 500 and extending the credit facility to the importer informs FIM (finance against

imported merchandise) FATR (finance against trust receipt).

Arrange forward cover booking regarding import payments

Also arrange forward cover booking for letter of credit open other then ACBL

Submission of monthly returns to SBP regarding the import on form I

SWOT ANALYSIS

SWOT (Strength, Weaknesses, Opportunities & Threats) analysis of AKBL is described below:

Strengths:

AKBL has got a well-developed on-line system in most of its branches. RemittanceDepartment is working very efficiently in transferring the funds of people due to this

system.

The Bank has also started ATM facility in most of its branches. 24-hour Banking is newtrend in Pakistan and AKBL has also taken apart in this trend.

One distinctive feature of the Bank is that it is the only Bank working for the welfare of

army officers, which was established by Army Welfare Trust.

The productivity of the Bank is very good. Bank is providing a high quality service to itscustomers.

AKBL have strength that most of the imports which are done in Multan are handle by

AKBL Multan.

Weaknesses:


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AKBL has lesser number of branches as compared to many other branches. Due to this

problem, army officers can not avail the benefits of their own Bank.

The human resource department is not performing the function of selection andrecruitment very effectively. Selection process is not on merit due to which competent

persons cannot be selected.

Bank should boost the product development and increase the range of facilities offeredfor customers.

Bank is weak in its credit management. Bank should lend to very sound parties and

increase its payment rate.

Opportunities:

Govt. is taking very bold steps to promote IT in Pakistan. AKBL has an opportunity toimprove in technology.

AKBL is surrounded by many competitors. It has an opportunity to do aggressive

marketing to increase its business.

AKBL may increase its branches in competitive areas

Threats:

AKBL has many competitors, which are continuously increasing its products and

marketing aggressively. It may cause its customers to shift to competitors.

Some other Banks have competent taskforce, which is also a threat for AKBL. Because

human resource is the most valuable resource.

Due to the increased bad situation of Pakistan in which army is considered to be involved

increase the frequency of withdrawals, which would decrease deposits.

Financial Analysis:

Financial Highlights

The current years profit (2007) after taxation of the bank stood at Rs. 2,681,012 as compared to

Rs. 2,249,974 for last year. The deposits decreased by 16.49% to Rs. 11,197,424 as against Rs.

13,044,593 as on 31 Dec 2006. The loans and advances figure stood at R.s 5,521,030 reflect onthe improving market image of Askari Bank as a formidable financial institution.

Ratio Analysis

The information contained in the four basic financial statements is of major significance tovarious interested parties who regularly need to have relative measures of the companysoperating efficiency. Relative is the key word here, because the analysis of financial statements

is based on the use of ratios or relative values. Ratio analysis involves methods of calculating

and interpreting financial ratios to analyze and monitor the firms performance. The basic inputsto ratio analysis are the firms income statement and balance sheet.

Ratios 2007 2006


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Current ratio 1.03 1.04

Total asst turnover 0.11 0.09

Debt ratio 0.93 0.93

Gross Profit margin 0.11 0.22

Operating profit margin 0.21 0.12Net profit margin 0.22 0.26

ROA 0.02 0.02

Earning asset to total assets

Earning assets are the assets which are very important for any company for the bank earning

assets are the assets on which bank can earn its profit which may includes loans, advances,

operating fixed assets and other assets on the loans and advances bank can make profit by giving

or investing in some where so Askari Bank has increased its earning assets in the year 2007 ascompared to the previous year that show the good trend in the profitability of the Askari bank

and the customer believe on the Bank.

Ratio tells that on what percentage earning assets contribute the total assets. Well bank also hasincreased its earning assets ratio shows the more profitability of the bank as it can be shown by

the profit and loss account of the 2007 that shows the net mark up income more for the year as

compared to the previous year so bank is going gradually to the more profitability by giving

more advances and loans.

Earning assets

ASSETS 2007

Cash 13356055Balances with other banks 3497054

Lending 14444143

Investments 39431005Advances 100780162

Operating fixed assets 5128428

Total earning Assets 176636847

Other assets 5535038

TOTAL 182171885

Total Earning Assets: Rs. 176636847

Formula:

Earning Assets / Total Assets

= 176636847 / 182171885


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= 0.969616

Return on earning asset

This ratio indicates the how much of earning assets take part in making of the profit before

taxation. This ratio is decreased during the year. Why is it so it has different reasons these are asfollows

Profit before taxation was more in the previous year as compared to the year 2007 because bank

has low expenses and less provision for the bad debts and also bank has small investments and

limited loans and advances but in 2007 situation has changed and bank increased its loans andadvances.

Earning assets were also low in the previous year as compared to the 2007 so overall ratio has

been decreased but shows the good trend for the making of long term planning

Formula:

Profit after tax / earning assets

= 2,681,012 / 176636847

= .015

Loan loss coverage ratio

This important figure is a reserve account to cover unexpected defaults on loans by borrowers.

These are generally referred to as no performing loans. The higher the no performing loan andcharge-off percentages, the higher the provision for loan losses should probably be.

Consequently, this would reduce net income and earnings per share.

Well in the year 2007 banks this ratio has been increased to a great extent due to different

reasons theses are as follows.

Profit before taxation is low for the 2007 due to more expenses because bank is in expandingmode thats why its expenses are increasing day by day.

Provisions and bad debts also increased in the year 2007 because bank also has invested more in

this year and ad more also granted more loans.

Formula:

Provision against non-performing loan and advances / profit (loss) before tax

= 3,920,240 / 2,299,785


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= 1.70

Loan to deposit

Well there is a concept that banks loans are its assets while its deposits are liabilities. But if a

bank has low deposits then obviously it will give low loans because bank gives its loans by thedeposits and earn on the loans then pay mark up on the deposits to the customers.

Well bank has increased its loans to deposits ratio in the year 2007 showing its more deposits as

well more loans and that is good for the bank to remain in the market and to penetrate in the

market.

But profit has not increased with the same ratio because

Bank has low mark up rates

Bank has more capacity for provisions

Formula:

Loans / deposit

= 14444143 / 11,197,424

= 1.289

Current ratio

This ratio indicates the liquidity of the bank. Well this ratio has been decreased but nt much

decreased during the year to a small extent due to

Bank has increased its deposits so liabilities have been increased.

Bank has increased its assets as well to overcome the liabilities.

So overall we can say bank is the liquid enough to pay its liabilities

Formula :

Current assets / current liabilities

= 171508419 / 166214583

= 1.03

Debt Ratio:


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Debt ratio remained the same in previous year it was .93 and in 2007 its again 0.93. Bank has not

decreased its debt ratio in 2007.

Net Profit Margin:

Net profit margin of a bank has been increased from 0.12 to 0.21.

Horizontal and vertical analysis

Comparing analytical data for a current period with similar computations for prior years affords

some basis for judging whether the condition of the business is improving or worsening. This

comparison of data over time is called as horizontal or trend analysis, to express the idea ofreviewing data for a number of consecutive periods. It is distinguished from vertical analysis or

static analysis which refers to the review of the financial information of only one accounting

period.

HORIZONTAL ANALYSIS

Balance sheet accounts

2007 2006 %age

ASSETS

Cash 13356055 14879230 -1523175 -10.2369balances wid other

banks 3497054 7333002 -3835948 -52.3107

Lendings 14444143 8392950 6051193 72.09852

Investments 39431005 28625915 10805090 37.74583Advances 100780162 99179372 1600790 1.614035

o.fixd assets 5128428 3810331 1318097 34.59272defferd tax assets

other assets 5535038 3812788 1722250 45.17036

TOTAL 182171885 166033588 16138297 9.719899

LIABILITIES

bills payable 2627051 1839077 787974 42.84617

Borrowings 17553525 14964087 2589438 17.30435deposits&other acc 143036707 131839283 11197424 8.493238sub-ord loans 2997300 2998500 -1200 -0.04002

liabl against assets

deferred tax liab 471519 736298 -264779 -35.9608other liab 3219796 2603113 616683 23.69021

TOTAL 169905898 154980358 14925540 9.630601


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Net assets 12265987 11053230 1212757 10.97197

PROFIT and loss accounts

2007 2006 %age

interest earned 15143241 12596921 2546320 20.21383interest expensed 8685624 6977313 1708311 24.48379

net mark up/interest income 6457617 5619608 838009 14.91223

loans & advances 3920240 1128137 2792103 247.4968

value of investment 1501 376 1125 299.2021

bad debts written off

3921741 1128513 2793228 247.514

interest income after provision 2535876 4491095 -1955219 -43.5355

Non markup/interest income

fee,comm,brockerage income 1072868 1013660 59208 5.841012dividends income 137079 109326 27753 25.38554

income from dealing in for curr 655761 584344 71417 12.22174

gain on sale of inv 2361251 112474 2248777 1999.375

unleasing gain 1728 -2308 4036 -174.87other income 336809 321758 15051 4.677739

total non markup/interest income 4565496 2139254 2426242 113.4153

7101372 6630349 471023 7.104045

Non markup/interest expense

admin exp 4789536 3277353 1512183 46.14038

other pro/write offs

other charges 12051 6141 5910 96.2384

total non markup/interest expense 4801587 3283494 1518093 46.23407

2299785 3346855 -1047070 -31.2852

Profit before taxation

current yrs 98535 983875 -885340 -89.985

prior yrs -233950

Deferred -245812 113006 -358818 -317.521

-381227 1096881 -1478108 -134.756

Profit after taxation 2681012 2249974 431038 19.15747


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profit brought forward 1799979 1617597 182382 11.27487

profit available for appr. 4480991 3867571 613420 15.8606

VERTICAL ANALYSIS

balance sheet accounts

2007 2006

ASSETS

cash 13356055 7.331567657 14879230 8.961578

balances wid otherbanks 3497054 63.18030698 7333002 4.416577

lendings 14444143 7.928854115 8392950 5.054971

Investments 39431005 21.64494538 28625915 17.24104

advances

10078016

2 55.32146851 99179372 59.73452

o.fixd assets 5128428 2.815158881 3810331 2.294916

defferd tax assetsother assets 5535038 3.038360173 3812788 2.296396

TOTAL

18217188

5

16603358

8

LIABILITIES

Bills payable 2627051 1.442072689 1839077 1.107654

Borrowings 17553525 9.635693784 14964087 9.012687

deposits&other acc143036707 78.51744357

131839283 79.40519

Sub-ord loans 2997300 1.645314259 2998500 1.80596

liabl against assetsdeferred tax liab 471519 0.258831927 736298 0.443463

other liab 3219796 1.767449461 2603113 1.567823

TOTAL

16990589

8

15498035

8

Net assets 12265987 11053230

Findings on the basis of analysis

By the horizontal or comparative analysis in which base year is taken as 2006 certain changes are

measured in the Banks performance. Cash with other banks and balances with other banks


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gradually increased in the time line showing the banks good performance and this indicate that

bank can earn more by making balances with the other banks. Lending to financial institutions

not done in the last year due to more investments done by the bank and by giving more and moreadvances to the customers but this also has increased the bad debts and provisions of the bank as

compared to the previous years.

Operating assets has been decreased so that is in favor of the bank. On the liabilities side bank

also has increased its bills payable that shows that bank has certain increased in the liabilities aswell banks deposits also increased showing the great penetration in the market place as well

customers believe on the bank to make deposits thats why banks mark up expense has been

increased. Equity also increased in the previous year but banks profit has been decreasedbecause bank has invested so much and in the development process so increased in the expenses.

Overall banks financial position in the marketplace has been increased in terms of deposits and

advances. All these reasons are favorable to the bank in year 2006 because at one side banksassets have been increased in the form of advances and at other side markup income increased

due to deposits because bank can more invest it

Balance Sheets one portion that is Assets shows certain changes during the year. e.g

Cash & balances with treasury banks have been increased that shows the bank has fulfilled and

improved SBP requirements because of maintenance of foreign currency as well as Pakistanicurrency with other banks due to this balances with the other banks whether outside the Pakistan

or inside the Pakistan have been increased.

While investment have been decreased due to making balances with the other banks and so

advances increased by giving more to the customers so earning power also increased. In 2007bank not lend money to the financial institutions. Banks operating fixed assets have been

decreased to a small extent due to this profit also is increased because bank is the serviceorganization and for service organizations no need of more operating fixed assets. Banksdeposits and other accounts have not been increased to the same extent as bank is giving

advances. Well that shows a positive trend because bank expenses would be automatically

decreased that are due to cash management.

Banks net assets have been decreased because of less operating fixed assets and also due toincrease in liabilities. Balance Sheet shows the assets are more contributed by the Advances and

liabilities are more contributed y the Deposits that are favorable for the Bank. Overall result is

less profit for 2007 as compared to 2006. But this has certain different reasons these are asfollows

Increase cash and balances with the other banks

More advances

Increase in deposits


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All these reasons are favorable to the bank in year 2007 because at one side banks assets have

been increased in the form of advances and at other side markup income increased due to

deposits because bank can more invest it.

Applications of Class Room Concept:

In Accounts department there was an implementation of Financial Accounting in making

balance sheets, income statements, calculation of depreciation etc

In credits department there was an implementation of different categories of loans likepersonal loans, corporate loans etc which was studied in Financial Management.

Recommendations:

Already the bank is having a good infrastructure not much recommendations are needed as a

manager but few can work :-

Customers should be given some sort of facilities which can convince people forinvestment and go for Askari bank for Exports n Imports.

Fist floor of bank is much congested, there is needed to work on that.

There is not a proper environment of customer dealing on that floor thats why customer

feels difficulty in that. Accounts department was much congested, so area of that department should be

extended.

After biannually closing of bank there should be a get together of all the employees ofbank which can give them a healthy atmosphere to work.

Few of the employees used to interfere in others work so they should be strictly advised

to perform their own duty well.

Askari Bank Limited-Report

Documents

Transcript of Askari Bank Limited-Report