Final Report AIOU

8/2/2019 Final Report AIOU

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1. Objectives of Studying the Organization

Purpose of studying this organization because of good reputation of this bank and

Askari Bank Multan branch is the key business holding branch in the Multan city. I

think this bank provide better jobs opportunity as compare to other organizations, that's

why I choose this organization for internship.

Another reason for studying this organization is that, the Multan branch is carrying

corporate status and better learning opportunities are available there for me, therefore I

preferred to perform my internship in this bank and here I gained practical experience

related with my course and I come to know how bank use the policies and strategies

and how evaluate its performance.

I feel pleasure and honor that I got the opportunity to work in such a privileged andreputable bank of the country. During my internship program I tried my every best to

equip myself with all important knowledge. Furthermore I also learned a lot that how to

deal with corporate clients and what their requirements are. In this report, I have tried to

humble endeavor to cover various aspects of bank like, introduction, its history, main

departments, culture, objectives and working financial analysis.

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2. Overview of the Organization

2.1 Brief History of the Organization

Askari Bank Limited works as a Unit of Army Welfare Trust was established for the

Welfare of Army Officials. The office of Army Welfare Trust is situated at AWT Plaza,

Rawalpindi. AWT offers the "AWT Saving Scheme" to the army officials only. AWT

has its units as under:

Askari Associates.

Askari Leasing.

Askari General Insurance.

Askari Cement.

Askari CNG.

Textile Mills.

Askari Bank Limited.

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 business commencement certificate on February 26, 1992 and started

operations form April 1, 1992. Askari Bank limited 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 depositor's funds, high productivity and optimum use of

technology are the hallmarks of its corporate strength. In 1994, Askari bank limited

earned international recognition as Asia Money Award and the title of "Best Bank of

Pakistan for the year 1995. In 2009, the bank has won the best award in agriculture

sector performance.

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2.1.1 Askari Bank Limited Multan

Askari Bank Limited was inaugurated on December 28, 1994. It is located on Abdali

Road Opposite to PIA Office. The location is connected to all the main trade centers in

Multan. It is a prosperous branch streaming towards great achievements. At the time of

its establishment the factors that were considered are as follows

Multan is zone covering a large population.

Multan is the main city of Southern Punjab.

Multan City is linked to many big cities.

Multan is the textile city because of cotton ginning factories and textile mills.

Multan has one of the biggest Fertilizers Company named as Pak ArabFertilizers Ltd.

Agro based area constituting growers and gainers.

Multan is Army 02-Corpse Head Quarter.

Educational Institution.

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2.2 Nature of the Organization

It is a commercial bank providing lending services to consumers and corporate bodies,

the basic purpose of the bank is to earn profit. This bank is known as Askari Bank Ltd.The head office of Askari bank Ltd. is situated in Rawalpindi. Multan is a cotton city,

so to get the export market of cotton Askari Bank Ltd. open its branch in Multan in

December, 1994. In a short span of time this branch increases their business

remarkably. In 2001 this branch gets the trophy of highest profit for the year 2001. This

branch has highest deposits and advances as compare to other banks working in Multan.

In 2009, the total numbers of branches are 177 all ever the country. Every bank deals in

money, accept the money from those people who have spare it, and give them who have

need it, basically bank is a business of money.

Askari bank Ltd, like other commercial banks deals in money accepts the deposits from

people and lends them who need it.

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3. NPLs and provisions against NPLs.

NPLs increased by 54% during the year to Rs. 3825 million from Rs.3920 million from

last year due to further downgrade of few large exposures. While these NPLs are being

closely monitored for recovery, Rs.1128 million has been appropriated as provisions

against non-performing advances, against previous year's Rs. 639 million. During the

year, the base of general provision was revised from judgmental to consistent vases and

now general provision is maintained @ 5% on all performing advances except

consumer advances-general provision on consumer advances is maintained as per SBP

prudential regulations for consumer finances.

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2.4 Number of Employees

Total number of staff in the Askari Bank Limited, Abdali Road Multan is 57, including

five Executive, three peons, one president and remaining are the employees. Totalnumber of employees of all the branches of Askari Bank Ltd is almost 6500. The cadre

wise break up of employees is as follows,

Number Cadres

01 President & CEO

08 SEVP

16 EVP

32 SVP

84 VP

170 AVP

240 Manager Grade

580 Assistant Manager Grade

1100 OG-I

1580 OG-II

2056 OG-III

633 Clerical and Misc

6500 Total

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charged only the outstanding amount. It is time bound facility and expires after some

specific time.

5. Askari Debit card

Askari Debit Card means freedom, comfort, convenience and security, so that you can

have retail transactions with complete peace of mind. Askari Debit Card is your new

shopping companion which enhances your quality of life by letting anybody do

shopping, dine at restaurants, pay utility bills, transfer funds, withdraw and deposit cash

through ATM anywhere, anytime.

6. Travelers' cheques

Askari Bank offers its "Rupee Traveler Cheques" eliminating all financial risks while

traveling. So avoid risk of carrying cash through Askari Bank's Rupee Traveler

Cheques.

7. Value plus Deposits

These are the unique deposit accounts in which profit rates are relatively high and

insurance is also available to the borrower up to the extent of the deposit kept in the

account.

2.5.2 Islamic Banking Services

Islamic Banking was launched under the brand 'Askari Islamic Banking' by opening 6

dedicated Islamic banking branched in major cities of the country.

1. Islamic Corporate Banking

These are the banking facilities which are specifically offered to corporate customers of

big firms.

2. Islamic Investment Banking

These are the banking facilities which are offered to the investors like investment funds.

3. Islamic Trade Finance

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These are the banking services which are offered to the import and export companies

like LC, Pre-shipment or Post-shipment facilities.

4. Islamic General Banking

These are the general banking facilities like account opening, Pay order or demand draft

issuance etc, which are offered to all customers.

5. Islamic Consumer Banking

These are the consumer banking services which are offered to small customers like

personal finance, mortgage finance, car leasing etc.

2.5.3 Agriculture Finance

Askari Bank's Agriculture Credit Schemes ware launched in 2004 under the umbrella of

Agriculture Credit Division continue to be an attractive Products for meeting ON Farm

and OFF Farm financial requirements of the farmers.

l. Kissan Ever Green Finance

Askari Bank has launched this program with the sole motive to provide dignity,

prosperity and freedom to the tiller of the land. The program is designed to help small,

medium and large farmers in meeting their short-term input requirements against one

time sanction and automatically renewable up to 3 years subject to its stipulated

utilization/periodical adjustment. The credit line is sanctioned in the light of available

cash flows and input requirements i.e. Seeds, Fertilizer & Pesticides etc.

2. Kissan Farm Mechanization Finance

Askari Bank has launched an Askari Kissan Farm Mechanization Finance for the

assistance of the small farmers and provides finance for farm equipment, trailer,

thresher, drills & rotavators etc.

3. Kissan Aabpashi Finance

Agriculture farming is impossible without adequate water. Askari Bank has started a

program for farmers, to finance installation of Tube-Wells (electric, diesel and solar

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energy units) water management equipments and water channel development etc.,

which will help farmers to make optimum use of limited water resources.

4. Kissan Livestock Development Finance

Askari Bank has launched a program enabling the farmer to purchase Milk Animals,

Goats, Sheep, Poultry and Fisheries without incurring extra expenditure because of

availability at his farm. This program has the added advantage that besides fulfilling his

own family's consumption needs he will be able to market the surplus and earn

additional income. This will further improve their cash flows to repay their other

Loans / Revolving Credit on due date.

5. Kissan Farm Mechanization




6. Kissan Farm Transport finance

Askari Bank has launched an Askari Kissan Farm Transport Finance. A grave handicap

that afflicts the farmers is their inability, due to lack of proper facilities, to take their

produce to the market through efficient means of transportation. One can safely

conclude that if provided with appropriate and speedy transport, the farmer can benefit

by enhancing his selling ability and thus increase his income / cash flow, it is pertinent

to mention that a number of Banks, Leasing Companies and Private Agencies have

geared their marketing efforts to concentrate on and have mainly captured the urban

markets.

2.5.4 Corporate & Investment Banking

Corporate Banking is managed by a central corporate banking division based at head

office Rawalpindi and supported by dedicated marketing and back office unites in

Karachi, Lahore and Rawalpindi.

The investment banking activity mainly covers debt/capital markets, advisory services

and trading. The division also offers advisory and loan syndication services.

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3. Organizational structure

3.1 Main offices (Head office and Branches)

The head office of the Askari bank Ltd is situated at AWT Plaza, The mall, Rawalpindi

and the total branches are 177. The branch network is given in Annexure-III. During the

year, Islamic Banking was launched under the Askari Islamic Banking, by opening 6

dedicated Islamic Banking branches in major cities of the country. Further expansion is

planned with improved capabilities for offering products conferring to the shariah

principles.

Hierarchy of complete organization is attached in annexure-I. and Branch level

hierarchy is at annexure-II.

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3.2 Review of the Various Departments of the Organization

The bank has following department:

1. DEPOSITS

Account Opening department

ATM Department

Cash Department

2. ADVANCES

Credit Department

Credit Card Department

Foreign Trade Department

4. Remittance Department

Remittance Department

Clearing Department

5. Others

Accounts Department

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DEPOSITS

3.2.1 Account Opening Department

Askari Bank Ltd accepts/collects deposit from their accountholders. The deposits are

the life blood of any bank. Deposits are of great importance to banks. Deposits are theblood of banks because banks lend these deposits to other needy people or invest these

funds in different projects and earn income. This is distributed among the depositors

and the banks themselves. The bank earns the difference amount between the lending

rate and the deposit rate.

Individual bank deposits provide the least expensive cost of new money for the bank to

loan out. The large amounts of people and deposits help the banks make lots of profit

since the banks charge at prime rate (set indirectly by the country's bank) and the banks

pay a low nominal interest on the deposits. Money is needed to add new infrastructure

(road, bridges, sewers, factories, etc) and capital equipment (machinery, assembly

robots, etc) in order to grow the economy. The banks are reluctant to borrow from other

banks or other sources (such as rich persons) since the interest rate charges is much

higher than the banks would pay individual deposits.

For obtaining a deposit and account in the bank must be there where the deposit is

placed. For this an account opening form is provided to prospective Customer. At the

same time introduction of that Customer is an integral condition so that provided

information by that Customer may also be got Authenticated. Borrowing funds from

different sources has become an essential feature of today's business enterprises. But in

the case of a bank borrowing funds from outside parties is all the more vital because the

entire banking system is based on it. Now its importance is higher, as the SBP has

imposed the equity limit for lending purpose. This year the banks must reach the equity

of Rs.6.00Billion which will be increase gradually. It means the bank can finance up to

the limit of their own equity as prescribed by the bank. The borrowed capital of a bank

is much greater than its own capital. Banks borrowing is mostly in the form of deposits.

These deposits are lent out to different parties. Such deposit creation is done through

opening an account in the Bank.

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3.2.1.1 Types of Accounts

In Askari Bank Limited, there are the following types of accounts:

Current account.

Saving Account.

Basic Banking Account

Value Plus account

Askari Special Deposit Account.(ASDA)

Term Deposit.

3.2.1.1.1 Current Account

In current account there is no profit 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 all cheques 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.

3.2.1.1.2 Saving Account

The purpose of this account is to induce the habit of saving individuals in the

neighborhood. The minimum deposit for opening the account is Rs.5000/- 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.

3.2.1.1.3 Askari Special Deposit Account

ASDA account is an interest bearing current account profit is paid. It is a unique

product. The payment of return is on daily basis, where as the rate of return with respect

to the amount of minimum deposit clear. It is also chequing account because cheques

can be drawn on 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. That's why it is similar to

current account. It is mostly opened by Business but individuals too open this account.

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Operation

A person can open account with the Bank in Pak-rupee or in selected foreign currencies

in nominated Branches of the Askari Bank Ltd. First of all he has to fill the account

opening Form provided by the Bank. If the account holder is illiterate then he providestwo photographs to the Bank and thumbprint is used instead of signature. In order to

stop the payment from the account it is necessary for him to give the instruction to the

Manager in the black and white. He may get the statement of account from the Bank

according to his own will.

3. 2.1.4 Joint Account

When two or more persons, either partners, or trustees, open an in their name is calledJoint 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

things remaining same as in individuals account.

3.2.1.5 Proprietorship AccountWhen an owner of a firm operating singly, opens an account in his firm name, this

account is called a proprietorship Account the proprietor himself liable for all his acts.

Documentation

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 of proprietor.

3.2.1.6 Partnership Account

The account is opened in the firm name and all partner designate one two persons to act

on behalf of the partner ship firm 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.

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Documentation

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.

3.2.1.7 Limited Company Account

This account is for limited companies whether private or public. In order to facilitate

their transaction with outside parties, bank provides many facilities.

Documentation

Memorandum of Association.

Articles of the Association

Resolution of the Board of Director.

Certificate of Incorporation.

Certificate of commencement of business

N-I-C

3.2.1.8 Account Closing

Account is closed on the written request of the customer Askari Bank Limited free of

cost. But the account holder has to surrender the cheque book if some leaves are yet to

be used to the bank as a necessary requirements for closing the account.

3.2.1.9 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 or company letter -head)

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The individual or in case of other type of 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 alsoobtained 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 limited company account are attached with the form.

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

account closing."

3.2.2 ATM- Cards Department

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This department deals in issuing ATM-Card, term deposits and Askari Bachat

Certificate. Mr. Khurram Faiz deals this department.

3.2.2.1 ATM CardATM - 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.C number are mentioned.

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

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

Askari Bank Limited head office takes a period of 3-4 days for preparing and

processing of ATM - cards. First, list of card holder is issued and then after 15

days cards are send to Askari Bank Limited issuing branch. The card and list are

not sent simultaneously in order to avoid any mishandling.

Askari Bank Limited takes Rs. 350/- for 1st time issuance as charges for a $card

Biannually takes Rs 250/-.

3.2.3 Cash Department

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Cash department deals in deposit and withdrawal of cash and cheques. Three Officers

are operating the cash department at Askari Bank Bank Limited, Multan.

CASH DEPOSIT PROCEDUREA customer comes to deposit cash in his account. The procedure followed in the cash

department in this case as follows:

The customer fills the pay-in slip. There are two types of pay-in slips. The red

slip is filled if he is a saving account holder black slip is filled if he is current

account holder. The cashier receives the pay-in slip and cash.

He counts the cash and makes the detail of the notes at the bank of the pay-inslip.

Then he compares the detail with amount written on the pay-in slip.

Signs the pay-in slip.

Puts the stamp of the "Cash Received" on the pay-in slip of writes the serial

number from the receiving cashbook.

The first portion i.e. the Receipt is taken and given to the customer. While the

latter portion handed over to the person for the entry in order to update the data.

3.2.3.1 Cash Payment Procedure

When a customer comes to withdraw a certain amount from his account, he brings a

cheque along with him. In this case the following steps are taken.

The cashier receiving the cheque and check it whether it is postdated or

predated. Cheque can be cashed within six months. A repeated cheque cannotbe cashed.

He takes two signatures at the back of the cheque from the bearer.

He gives the cheque for "posting" at the computer. The computer checks out

whether there is balance in the account or not. Other instructions are also

received e.g. blocked, frozen, etc. The posting is done the account is debited and

the cheque is stamped "posted" with the serial number and date.

The person hands it to the head of bills and remittances department OG 2 forcancellation if the amount is up to Rs. 50,000 and OG 2 cancel it.

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Manager Operations, cancels if the Cheque is Greater than Rs. 50,000. if it is

greater than Rs. 1,000,000 than Vice president cancels it. The signature of the

drawer is verified for the signature specimen cards.

After cancellation, OG 2 hands over it to the cashier and then slightlyinterrogates the bearer about amount of payee.

The cashier counts the cash and makes the detail at the back of the cheque. The

cash is paid to the person and the cheque is stamped "Cash Paid" immediately.

The entry is made in the Paying Cashbook and the Serial Number is written on

the cheque.

3.2.4 Credit Department

Lending or financing is one of the basic functions of banks of all categories, through

which they gain major part of their profit-;. A bank accepts deposits of money and

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repays cash to its depositors on demand. But this is not to say that; bank gives this

service for nothing. Bank borrows money at a lesser rate of interest and lends to the

borrower at higher rate of interest. And the difference between these two is the profit of

the bank.

CREDIT MANAGEMENT CYCLE:

Credit Management is composed of six steps:

1. Proposal

2. Processing

3. Decision

4. Documentation

5. Disbursement

6. Review

PROPOSAL:

The first step in the Credit Management is receiving a credit request, which is a lending

proposal for the bank each borrower has a purpose for borrowing. Some borrow to

fulfill their working capital needs, others wants to finance any project. The customer

presents his idea to the banker and wants the information on bank's facilities. Then after

collecting information if the customer deems it beneficial he makes a loan request.

This bank customer relationship should be mutually beneficial.

PROCESSING OF LOAN PROPOSAL:

Managing a safe, healthy and profitable credit portfolio depends on the quality of

judgment exercised by the officer and the depth of their risk associated with the nature

of the borrowers business. The banker is supposed to make a judicious judgment, which

should be based on a critical study of advance proposals. It is very much necessary that

the banker should have a complete confidence in the integrity and ability of the

customer to use the money to his advantage and repay it within a reasonable period.

Information must be collected and confirmed by investigation and negotiation during

processing of the proposal.

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In respect of fresh (ending proposal, the CLP is the end result of a series of internal and

external investigation exercises following the identification of a potential customer,

beginning with the first call on the customer.

EVALUATION:

To assess the risk and estimate the potential of a particular business, a series of

investigative exercise is undertaken. This evaluation stage include knowing the purpose

of borrowing, knowing business prospects of a customer, visiting the business place,

analysis of financial statement, visiting the collateral securities etc.

PURPOSE OF BORROWING:

The borrower must disclose factual purpose for seeking financial accommodation from

bank without such, the proposal should not be given due consideration.

1. The possible purpose may be as follows:

2. Export Financing / Packing Credit.

3. Import Trade Financing.

4. Working Capital need for Trade and industry.

5. Fixed Investment for Industry (Project Financing).

6. Purchase of Industrial or Commercial Vehicles.

7. Construction of Residential, Industrial and Agricultural

8. Buildings.

9. Finance for movement of Goods / Crops within the country.

10. Purchase of Agricultural Machinery.

11. Development of Agricultural Land.

Different Advance Facilities are offered according purpose of borrowing. Some

facilities may be used for specific purposes because of their very nature and therefore,

risk involved in extending them can be accurately identified; for example; an LC

Facility can be used only for imports and depending on the items being imported, risk

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While processing a loan proposal, a banker has to do a detailed negotiation with the

customer, to have first hand knowledge about certain things and then confirm them. The

negotiation phase is very important for creating a safe credit portfolio. The information

collected in this phase may include the type of advance, the mode of creating charge

over securities, the source of repayment and period for which the facility is needed.

Credit department deals in the following categories.

3.2.4.1 Consumer Banking Services

3.2.4.1.1 Personal Finance

One can avail unlimited opportunities through Askari Bank's Personal Finance. With

unmatched financing features in terms of loan amount, payback period and most

affordable monthly installments, Askari Bank's Personal Finance makes sure that every

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one gets the most out of loan. No matter what need is, Askari Bank has more ways to

serve than ever before.

3.2.4.1.2 Auto Finance

Askari Bank offers the most convenient and affordable vehicle financing scheme to

help in owning every one's own favorite brand new car.

3.2.4.1.3 Business Finance

The customers always want to put in that extra money into business, which makes it

grow and grow.

3.2.4.1.4 Debit card

Askari Debit Card means freedom, comfort, convenience and security, so that you can

have retail transactions with complete peace of mind. Askari Debit Card is your new

shopping companion which enhances your quality of life by letting anybody do

shopping, dine at restaurants, pay utility bills, transfer funds, withdraw and deposit cash

through ATM anywhere, anytime.

3.2.4.1.5 Mortgage Finance

Ever since the inception of life, shelter has been rated among the primary needs of

mankind. Owning a home for oneself still remains an exclusive dream for many. Askari

Bank has made the realization of dream to have a house very own possible. Whether

anybody plans to build a house, tailor made to his requirements or buy a constructed

house, Askari mortgage finance enables everybody to pursue its goal without any

problems.

3.2.4.1.6 Travelers Cheques

Askari Bank offers its "Rupee Traveler Cheques" eliminating all financial risks while

traveling. So avoid risk of carrying cash through Askari Bank's Rupee Traveler

Cheques.

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3.2.4.2 Agriculture Finance

3.2.4.2.1 Kissan Ever Green Financing

Askari Bank has launched this program with the sole motive to provide dignity,

prosperity and freedom to the tiller of the land. The program is designed to help small,medium and large farmers in meeting their short-term input requirements against one

time sanction and automatically renewable up to 3 years subject to its stipulated

utilization/periodical adjustment. The credit line is sanctioned in the light of available

cash flows and input requirements i.e. Seeds, Fertilizer & Pesticides etc.

3.2.4.2.2 Kissan Aab-Pashee Financing

Agriculture farming is impossible without adequate water. Askari Bank has started a

program for farmers, to finance installation of Tube-Wells (electric, diesel and solar

energy units) water management equipments and water channel development etc.,

which will help farmers to make optimum use of limited water resources.

3.2.4.2.3 Kissan Tractor Finance

Askari Bank has launched a Askari Kissan Tractor Finance for the assistance of the

farmers and provides finance for the Tractors.

3.2.4.2.4 Kissan Farm Mechanization Finance




3.2.4.2.4 Kissan Farm Transport Finance

Askari Bank has launched an Askari Kissan Farm Transport Finance. A grave handicap

that afflicts the farmers is their inability, due to lack of proper facilities, to take their

produce to the market through efficient means of transportation. One can safely

conclude that if provided with appropriate and speedy transport, the farmer can benefit

by enhancing his selling ability and thus increase his income / cash flow, it is pertinent

to mention that a number of Banks, Leasing Companies and Private Agencies have

geared their marketing efforts to concentrate on and have mainly captured the urban

markets.

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by debiting the Term Finance Account. The amount of finance is credited to borrower's

personal account by debiting the Term Finance Account. The amount of Finance is

disbursed in lump sum. The repayment of Term Finance is usually in installments and

with other documents a letter of installments is taken from the borrower at the time of

disbursement. By that letter, the borrower binds him to pay the installments at regular

intervals. Monthly repayment amount is calculated by dividing the principal amount by

time period plus mark-up.

3.2.4.4 Non-Fund Based Facilities

3.2.4.4.1 Letter Of Credit

Letter of Credit issued by the bank can broadly be classified as under: -

Sight letter of credit.

Usance letter of credit.

The sight L/Cs calls for the draft to be drawn 'at sight'. Documents negotiated and

received against sight are held as security till their retirement. Drafts drawn under

usance are for a tenure specified in the L/C and are payable by the customer on due

date. Credit line proposal must clearly state the type of letter of credit the branch is

intended to issue.

3.2.5 Credit Card Department

I was told that the bank is authorized to issue the credit card of two companies, which

are under bank of America.

Master Card

Visa Card

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But due unavailability of visa card machine in Multan, AKBL Multan branch deals n

only

3.2.5.1 Master Card

There are following types of master card.

Silver card

Local silver card

Gold card

These are different due to their credit amount limit. For example for silver card,

cardholder can take the maximum amount ranging between Rs. 25,000 to Rs, 200,000.

While the local silver cardholder can use this card up to Rs. 25,000 to 500,000 for goldcardholder this limit has been extended to Rs. 300,000.

3.2.5.2 Issuing Charges

When the card is given to cardholder, there are certain fee charges to by the bank,

which is different for different cards.

Local cardholder is charged Rs. 1200 but if the cardholder is Army officer there

is special discount for him. And he is special charged Rs. 750.

Silver cardholder is charged Rs. 2500.

Gold cardholder is charged Rs. 3500.

3.2.5.4 Issuing Procedure

Credit card is issued to three types of parties.

Professional (Govt & private officers)

Business man Landlord.

3.2.5.4 Professionals

For professionals, bank requires authorized letter from the concerned organization in

which he works. This letter shows all particulars about the person, on the basis of these

particulars; bank open on account and some feasible amount is required.

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Arrange forward cover booking regarding import payments

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

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

The international trade transaction, in which one country buys goods from othercountry, is called import. Import and Export Act of 1950 govern's the import trade in

Pakistan. Previously, the regulating body of imports was controller of Import and

Export. But this function has been shifted to Trade Development Authority. Foreign

Exchange Departments of all banks are restricted to work under the rules and

regulations of government.

Import License and RegistrationThe individuals and firms who are interested to import goods from the foreign countries

are required to obtain import license. Import licenses are a type of artificial restraint on

the import trade of a country. To acquire import license, the importer has to submit

applications to the licensing authority. The importers can only get their merchandize

cleared from the custom authorities if they have the import license duly issued in their

names. The import licenses issued by the Import Trade Controller are required to be

registered with the State Bank of Pakistan.

Contract of sale

After getting the license, the importer then negotiates with the exporter. When they

reach to an agreement on all terms of sale, they sign a contract. Thus contract includes

all information of terms and condition of sale.

Letter of credit

Foreign trade payment problems are mainly solved by a letter of credit. A letter of

credit is issued by the importer's bank. If the guarantees payment to the exporter up to

specified amount of money provided the terms and conditions laid down the L/C are

fulfilled. A letter of credit is a commitment on the part of buyer's bank to pay or accept

draft drawn upon it, provided drafts do not exceed a specified amount.

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A letter of credit thus is a (I) written undertaking by an importer's bank to exporter's

bank. (II) That it will pay or accept draft drawn upon it up to a stated amount with a

specified time. (Ill) The payment will only be made to the exporter if he compliers with

the terms of credit.

Parties to a letter of credit

There are four parties involved in letter of credit.

Account party: The buyer or the importer on whose account and request the

letter of credit is opened is known as account party or opener.

Issuing bank: The bank which issues or opens a letter of credit at the request of

importer is called issuing bank.

Exporter or seller: The seller or the party in whose favor L/C is drawn is the

exporter. He is also called beneficiary.

Negotiating bank: The paying bank in the exporter's country, on which the draft

is drawn, is called negotiating bank or paying bank.

Opening of letter of credit

The main steps involved in the opening of the letter of creditor as follows:

Application for letter of credit

The importer will request with own bank or any other bank, which deals in foreign

trade transactions to issue a letter of credit in favor of the exporter. He will prepare an

application on the prescribed form available from the bank. The information, which are

supplied in the application are based on the contract of sale and include only the

important feature of contract, such as value of merchandise, port of shipment,

documents to be presented, port of unloading, brief description of goods, import license

etc.

Scrutiny of application

Before issuing a letter of credit, the bank will scrutinize whether the importer is of good

financial standing, possesses the import license issued by import control. Authorities,

the amount available covers the letter of credit applied for, market demand of goods,

collateral offered to cover the credit etc.

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Cash margin

The bank asks the importer to deposit cash or securities with the bank. The bank

depending upon the credit worthiness of the importer decides the proper margin of cash

or securities to be deposited.

Issue of the letter of credit

The importer bank after being fully satisfied will issue a letter of credit in favor of the

exporter. The L/C may be sent directly to the exporter or the advising bank in the

exporter's county. In such a case, the advising bank will inform the exporter about

opening a letter of credit.

Shipment of goods

When the exporter receives L/C, he examines it to ensure that it conforms to the terms

of contract of sales. He then shifts the goods and presents all required documents along

with the bill to negotiating bank.

Role of negotiating bank

The negotiating bank after receiving all the documents and the bill from the exporter

will scrutinize them whether these conform with the terms of letter of credit. If the

documents of title accompanying the bill are in order, these will be sent to the importers

bank for payment.

Liability of the issuing bank

On receipt of documents and the bill, the issuing bank will examine them. If the

documents on the face appear to be in order, the payment would be released by the

bank. In case any defect is found in the documents and the draft is honored by the

issuing bank the importer can claim damages on the issuing bank. The issuing bank is

only accountable for the completeness of documents, not to see whether goods conform

to the contract of sale.

Payment by importer to the bank

First the importer pays all his obligations to the bank then the bank releases the

documents. In case of sight draft, the importer's bank pays the amount on the same day

charging the importing customer's account. In case of a time draft, the importer

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discharges his obligations to the accepting bank on or before the maturity date of

acceptance. The accepting bank will then release all the shipping documents to the

importer.

Payment to the exporter

The exporter can obtain payment from the negotiating bank by discounting the draft

(L/C) immediately after shipping the goods and obtaining shipping documents.

Submission of Monthly Returns

It includes reporting of Form-M and Form-E to SBP.

Reporting of Form-E

Every Exporter is required to submit a declaration to custom authorities for goods

exported. This declaration is submitted on prescribed Form-E in quadruplicate, which is

certified by authorized dealer. Four copies of Form-E are maintained. Form-E is

reported to SBP at the end of the month, in which the amount is realized. There is a

prescribed Performa used for the reporting of Form-E. It includes the reporting period,

currency, Serial No. of Form-E, amount, Code No. of country and commodity.

Reporting of Form-M

Every foreign bank deducts some charges from the value of goods. It is for

miscellaneous purposes like foreign bank charges or foreign agent commission. Form-

M is used to declare this outflow of foreign currency. At the end of the month of

realization of the amount, Form-M is reported. It includes the list of Serial No, amount

and purposes of every Form-M.

3.2.7 Remittance Department

The need of remittance is commonly felt is commercial life particularly and in everyday

life generally. 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 customer is able to meet its day to day financial requirements.

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3.2.7.1 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.

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

schedule of 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 and enters 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.

3.2.7.2 Pay Order

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It is an instrument issued for payment in same city. Pay order issued from one branch

can only be payable from the same branch. It is normally referred to as Banker's

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 PO Form.

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.

3.2.7.3 Outward Bills for Collection

The bills, which are received by the Bank and sent to other cities (branches) for the

local clearing in that city, are called Outward Bills for Collection.

Procedure:

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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

(Inter Branch Credit Advice).

The OBC numbers are checked from the OBC register, after those entries are

made.

Commission charges are deducted from the account.

3.2.7.4 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

forwarding schedule 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.

3.2.8 Clearing Department

Cheques of different banks/branches in the same city are deposited with bank for

clearing called local clearing. There is no legal obligation on a bank to collect cheques

drawn upon other banks for a customer. However almost every modern bank performs

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this function of the collection of cheques and bills on behalf of the customer to facilitate

them and provide them quality services.

Advantages of Clearing

Since clearing does not involve any cash etc and the entire transaction take

place through book entries, the number of transactions can be unlimited.

No cash is needed as such the risks of robbery, embezzlements and pilferage is

totally eliminated.

As major payments are made through clearing, the banks can manage cash

payment at the counters with a minimum amount of cash in vaults.

A lot of time, cost and labor are saved. Since it provides an extra service to the customers of banks without any service

charger or costs, more and more people are inclined and attracted towards

banking.

3.2.8.1 NIFT/Clearing House

NIFT

These days clearing operations are performed by NIFT (National InstitutionalFacilitation Technologies). This NIFT takes cheques from banks and performs clearing

house operations with State Bank of Pakistan as an agent. Now the clearing procedure

has become a lot more easier just because of NIFT.

Clearing House

It is a place where representatives of all scheduled banks sit together and interchange

their claims against each other with the help of controlling staff of State Bank of

Pakistan and where there is no branch of State Bank of Pakistan the designated branch

of National Bank of Pakistan acts on behalf of State Bank of Pakistan.

Working of clearing house

All the banks which are the members of clearing house maintain their accounts with

State Bank of Pakistan by debit and credit to which the clearing settlements are made. If

on a particular day, a bank delivers cheques and other negotiable instruments worth

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more than the total amount of Cheque received by it that banks accounts with State

Bank of Pakistan will be credited with the differential amount. If on the other hand the

total amount of cheques and other negotiable instruments draw on a certain bank by

other bank is more than the total amount receivable by it from other banks, then this

bank's account will be debited on that day.

The cheque delivered to the representatives of other banks for clearing are called

outward clearing, whereas cheques received from the representatives of other banks for

payment are called inward clearing.

Procedure of Settlement

Presume that AKBL got the cheques which are drawn on HBL, NBP and MCB for

amounts Rs. 50,000/-, Rs. 15,000/- respectively, its total being amounts Rs.95,000/-, it

means that this amount is to be credited to AKBL A/C with S.B.P. on the other hand the

cheques drawn on AKBL are from HBL, NBP and MCB of Rs. 15,000/-, Rs.75,000/-

and Rs.30,000/- respectively, its total being Rs. 1,20,000/-, it means that this amount is

to be debited from AKBL account. The difference between Rs.95,000/- credit and debit

Rs. 1,20,000/- debit is Rs.25,000/- debit which means the house is against AKBL for

Rs.25,000/-.

The brief detail is following.

AKBL has t receive Rs.50, 000/- from HBL and to pay Rs.15, 000/- to HBL so

difference is Rs.35, 000/- credit.

AKBL has to receive Rs.30, 000/- from NBP and to pay Rs.75, 000/- to NBP so

difference is Rs.45, 000/- debit.

AKBL has to receive from MCB Rs. 15, 000/- and to pay Rs.30, 000/- to MCB

so difference is Rs.15, 000/- debit.

GRAND TOTAL:

35,000-45,000-15,000 - -25,000

I.e. Rs. 25,000 debit

Hence AKBL A/C with State Bank of Pakistan will be debited with Rs.25, 000/- and

the contra will be other banks accounts respectively. This called as "Debit and Credit

Rule".

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The house page is prepared from schedules in triplicate

The schedules and house pages are signed by the officer incharge with branch

stamp

The grand total of the house page is taken and agreed with that of the outwardclearing register

The instruments along with duplicate and house page are sent to the Main

Office

3.2.8.3 Inward Clearing of the Branch

The particulars of the instruments are compared with the list

The instruments are detached and sort out department wise

The entry is made in the Inward Clearing Register (serial number, instrument

number, account number, amount of the instrument is written).

The instruments are sent to the respective departments against

acknowledgement in the Inward Clearing Register.

The instruments are scrutinized in each respect before honoring the same

3.2.3 Accounts Department

Account department is the backbone of a bank. It plays a vital role in performing

different functions of a bank. The account department of AKBL is computerized.

Accounting books of different departments are maintained under this department and

with the help of these, accountant prepare the monthly, quarterly, semiannually and

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Controller

Treasurer

ControllerThe controller's responsibilities are primarily accounting in nature. Cost accounting as

well as budgets and forecasts, concerns internal consumption. External financial

reporting is provided to the Internal Revenue Service (IRS), to the securities and

exchange commission (SEC) and to stockholders.

Treasurer

The treasurer's responsibilities fall into the decision areas most commonly associated

with financial management:

Investment (Capital Budgeting, Pension Management)

Financing (Commercial Banking and Investment Banking relationships,

Investor relations, Dividend disbursement).

Asset Management (Cash Management and Credit Management).

4.2 Finance and Accounting Operations

Askari bank deals in finance and accounting operations. They check the daily voucher

and posting. They note all the banks charges and expanses. The main focus on bank

financial statement, they prepare the financial statement annually and semi annually of

the bank. All accounting and financing activities are checked in this department.

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Preparation of daily bank positions statement

Payment of salaries

Preparation of the statements

Depreciation calculation

Expanses, Income, Liabilities

Generation and Allocation of funds

Manager Accounts

Finalize the Accounts on monthly basis..

Preparation of special reports as per instruction by Branch Manager.

Supervise all the working of other staff members.

Verify the party's payment & all other expenses payments

Deputy Manager Accounts

Posting in the Accounting System.

Supporting to Manager Accounts to finalize the Accounts on monthly basis.

Supporting to make the monthly budget of the company.

Preparation of Debtors and Creditors reconciliation reports and aging schedules.

Preparation of Special reports for decision making of Management.

Accounts Officer

Prepare fund flow statement on daily basis.

Supporting to prepare weekly budget.

Posting of Funds Received from parties.

Tax Officer

Handle all sales tax and income tax matters.

Preparation of Refund case & Processing in department.

E-Filing of both (Sales tax & Parties tax payment)

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E-Filing of both (Sales tax & Parties tax payment)

4.4 The Role of Financial Manager

Financial manager stands between the firm's operations and financial markets. Financial

manager must have considered the interest rates on the load and concluded that it was

not too high. Achievement of goals and objective based on financial manager how he

can get them and what activities he applies. Financial manager also involve in financing

decision. Financial use the policies and strategies how to generate a fun and where have

to invest. Financial manager is responsible for all kind of operations of the bank. Our

financial manager uses the decision making and ratio analysis to earn a profit and

decrease the expanses of the AKBL.

Financial manager is responsible for maintaining the record of accounts, cash

management and credit management. He monitor all kind of cash management

activities in which area more cash should be invested and for whom people should grant

the loan, he control the other activities of credit management.

The role of CFO in this bank is very important. He control and monitor the all the banks

department and also check the performance of the bank and make necessary decisions.He is responsible to control the bank efficiency and checks all the staff of the bank and

also check the performance of financial manager.

In banks, accounts manager plays the role of financial manager, they prepare the

periodical budgets of the branch. They analyze the cash in flows and outflows of the

branch. They also make the expense sheet of the branch and arrange funds in order to

cater those expenses. The accounts manager has a key role in the branch banking

setups. They prepare the branch monthly profit and loss account statement as well. In

Askari bank the account managers are the key persons and have a lot of experience of

branch banking as well.

4.4 Use of Electronic Data in Decision Making

Now this is the age of information technology. So the banking system is also become

computerized. For this purpose Askari bank used software which name is: Uni-Bank Software

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Its working is so simple and it is user interfering software.

It is very important for decision making and it is helpful in the following ways:

1. Used for entering the daily Deposits, Advances, Markup, A/R and

Revenue.2. Used for preparing the daily Reports.

3. Used for calculate the Profitability of the Bank.

So on the bases of these reports Manager decide the future

planning for the Askari bank.

Askari bank Ltd is handling its all customers whether borrowers and depositors with the

help of this software in an efficient manner. The bank gets the statement of every kindwith the help of this software for the analysis purpose with in seconds and makes

effective planning with the help of this software.

The banks handles customers any kind of queries with in seconds with the help of this

software. This software is very user friendly. Askari bank's customer service is very

good and this software plays a key role in that.

4.5 Source of Funds

Major sources of funds are as follows.

Share capital

The reserve funds

Deposits

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The main sources of generation of funds for AKBL include the

followings: Interest on loans (interest income)

Banks Investment in projects or in Stock market.

Fee, commission, and brokerage income

Dividend income

Gain on sales of securities

Income from dealing in foreign currencies.

Values

( Rupees in '000 )

Parameters

2010 2009 2008 2007 2006

18393313 15143241 12596921 8780698 4487206 Interest Earning

1257584 1072868 1013660 838561 649988 Commission and Fee

173621 137079 109326 51143 26318 Dividend Income

873512 655761 584344 356218 180992 Exchange Income

35677755 39431005 28625915 25708194 17239156 Banks Investments in

projects i.e Electric Power

projects, and

infrastructure building

different Govt Projects etc

4.7 Allocation of Funds

The Askari Bank Ltd. uses its funds profitability in the following

categories: Short-term loans repayable at short notice

Investment (government and other stock exchange securities)

Loans and advances to trade commerce and industries

Purchase and Discounting of bills

Financing import and export trade

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Interest and non-interest expenses

Values

( Rupees in '000 )

Parameters

2010 2009 2008 2007 2006

35677755 39431005 28625915 25708194 17239156 Investments

128818242 100780162 99179372 85976895 69938041 Advances

10650719 8685624 6977313 4278374 1117206 Interest Expenses

2707000 4565496 2139254 1552566 1633528 Non-Interest Expenses

The Askari Bank Ltd used its most of its sources of funds in the investment in different

projects, in stock exchange and in advances, which increases the revenue and ultimately

profits. The above table clearly shows that the advances of the company increased from

last year 100.7 billion to 128.818 billion in the current year. The investments are

decreased from the last year because of the bad performance of the stock market.

Overall bank's policies are good and helping the bank in earning profits.

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5.1.3 Ratio Analysis

VALUES PARAMETERS

2010 2009 2008 2007 2006

0.7869 0.7554 0.8046 0.8228 0.8391 Earning to Asset

0.0214 0.0195 0.0168 0.0169 0.0214 Return on Earning Assets

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0.0197 0.0165 0.0121 0.0104 0.0117Equity Capital to Total

Assets

0.7683 0.7046 0.7523 0.7237 0.8382 Loan to Deposit

1.0027 1.0318 1.0446 1.0412 1.0371 Current Ratio

0.0433 0.2648 0.4797 0.6683 2.5445 Interest Coverage Ratio

2.10 17.70 17.86 23.03 42.86 Net Profit Margin

0.0376 0.0354 0.0338 0.0310 0.0314 Net Interest Margin

0.0892 0.0831 0.0759 0.0605 0.0419 Average Yield on Asset

0.58 0.57 0.55 0.49 0.25Interest Expense to Interest

Income

3.06 23.0 22.6 27.7 34.8Return on average

shareholder's fund

2.51 15.2 26.6 32.5 63.3 Profit before tax ratio

12.3 10.9 11.0 8.5 9.9 Capital adequacy ratio

-- 15.0 10.0 15.0 20.0 Rate of cash dividend

15.32 11.2 9.3 9.6 6.1 Price earning ratio

-- 1.5 1.0 1.2 2.1 Dividend yield ratio

0.95 8.92 7.48 13.42 15.31 Earning per share

-- 16.8 8.9 11.2 13.1 Dividend payout ratio

Earning to Assets.

Earning assets are the assets which are very important and vital for the bank in

increasing its profits. Ratio tells that on what percentage earning assets contribute the

total assets. The bank earning to assets ration increased gradually from the year 2006

and in year 2008 it declined a little bit about 0.04, which was due to bank's higher

provision for loan losses, as per directions of the SBP but in year 2009 it was again on

upper side 0.7869 higher about 0.03 from last year.

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Return on Earning Assets.

Earning to assets ration indicates the how efficiently a company is utilizing its assets

and how much it is earning form them.

Return on earning assets ratio in 2006 is 0.0024; in 2007 it is 0.0195 which is little

increase in as compare to previous year. In 2008 are 0.0168 decreases as compare to

previous year and in 2009 it be 0.0169 and it is highest in last year 2010 which is

0.0214.

Equity to Total Assets

Equity capital to assets is a common measure used to analyze capital adequacy of a

bank, while bank has decreased its capital adequacy ratio in the year. But bank's total

assets has increased but increase in the equity is so small because of less profit in the

year and this less profit is due to more provisions.

Equity capital to total assets in 2006 is 0.0117; in 2007 it is 0.0104 which is decreased

as compare to previous year. In 2008 is 0.0121 again increased from previous year and

in 2009 it is 0.0165 and in last year 2010 which is 0.0197, and an inclining trend can

clearly be observed from last four year. This is because of SBP guidelines to banks and

clearly saying to increase their capital and linking the financing with the capital instead

of deposits. The SBP wants to do that because if increasing bad loans percentage from

past few years. With these steps banks will more conscious in lending because their

own equity is at stake.

Loan to Deposits

While there is a concept that bank's 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 the deposits and earn on the loans then pay mark up on the deposits to the

customers.

Loan to deposits ratio in 2006 is 0.838; in 2007 it is 0.724 which is little decrease as

compare to previous year. Loan to deposits ratio in 2008 is 0.752 a little increase from

previous year and in 2009 it is 0.705 and loan to deposits ratio is increased in last year

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2010 which is 0.7683. Both deposits and advances increased but not in line with one

another. In the year 2008, 2009 the advances were almost equal with increase of one

billion but in year 2010 it increased about 28 billion because of increased equity.

Current Ratio

The ratio is mainly used to give an idea of the bank ability to pay back its short-term

liabilities (debt and payables) with its short-term assets (cash, inventory, receivables).

The higher the current ratio, the more capable the bank is of paying its obligations. A

ratio under 1 suggests that the company would be unable to pay off its obligations if

they came due at that point. While this shows the bank is not in good financial health, it

does not necessarily mean that it will go bankrupt - as there are many ways to access

financing - but it is definitely not a good sign.

Current ratio in 2006 is 1.037; in 2007 h is 1.04 which is little increase as compare to

previous year. Current ratio in 2008 is 1.0446 a little increase from previous year and in

2009 it is 1.0318 a little decrease from previous year and current ratio is last year 2010

which is 1.007, a sharp decline from past year, because of increase in liabilities.

Interest Coverage RatioA ratio used to determine how easily a bank can pay interest on deposits and other

accounts. The ratio is calculated by dividing a bank's earnings before interest and taxes

(EBIT) of one period by the bank's interest expenses of the same period: The lower the

ratio, the more the bank is burdened by debt expense. When a bank's interest coverage

ratio is 1.5 or lower, its ability to meet interest expenses may be questionable. An

interest coverage ratio below 1 indicates the bank is not generating sufficient revenues

to satisfy interest expenses.

Interest coverage ratio in 2006 is 2.5445; in 2007 it is 0.6683 which is a sharp decline

as compare to previous year. Interest coverage ratio in 2008 is 0.4797 decreases from

previous year and in 2009 it is 0.2648 and interest coverage ratio is lowest in last year

2010 which is 0.0433. This ratio of the bank is not good because of increase in deposit

rate and decrease in earning. The bank should decrease its higher cost deposit and

should focus on low cost deposit. Therefore the ban in now focusing on low cost

deposits and launching its campaigns for low cost deposit rightly.

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Net Profit Margin

A ratio of profitability calculated as interest income divided by revenues, or net profits

divided by interest income. It measures how much out of every rupee of interest income

a bank actually keeps in earnings. Profit margin is very useful when comparing bank in

similar industries. A higher profit margin indicates a more profitable bank that has

better control over its costs compared to its competitors. Profit margin is displayed as a

percentage.

Net profit margin in 2006 is 42.86; in 2007 it is 23.03 which is sharp decrease as

compare to previous year. Net profit margin in 2008 is 17.86 is also decreased from

previous year and in 2009 it is 17.70 almost equal from previous year and net profit

margin is lowest in last year 2010 which is 2.10. The profit in 2004 was very highbecause of low deposit cost and high lending cost. And after that the situation changed

vise versa. In the last year the profit was very low, it is only because of provisioning of

loan losses as instructed by SBP. But in the coming years the situation will be changed

as per management.

Net Interest Margin

Net Interest Margin (NIM) is a measurement of the difference between the interest

income generated by banks or other financial institutions and the amount of interest

paid out to their lenders (for example, deposits). It is considered similar to the gross

margin of non-financial companies.

Net interest margin in 2006 is 0.0314; in 2007 it is 0.0310 which is little decrease as

compare to previous year. Net interest margin in 2008 is 0.0338 a little increase from

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previous years and in 2009 it is 0.0354 and Net interest margin in last year 2010 which

is 0.0376. Net interest margin is almost equal in all years. It means that the spread

remained steady in all years.

Average Yield on Assets

Annual or other periodic rate of return on investments because banks act as custodians

of deposits for many years until money must be paid out the depositors, They invest it

to achieve a yield adequate to meet these obligations. Yield is also important to the

depositors that include a specific investment element.

Average yield on assets in 2006 is 0.0419; in 2007 it is 0.0605 which is increased as

compare to previous year. Average yield on assets in 2008 is 0.076 a little increase fromprevious year and in 2009 it is 0.0831 and average yield on assets is highest in last year

2010 which is 0.0892. The above quoted figures clearly shows that the bank's perform

good in this area an yield increased steadily in all past years.

Interest Expense to Interest Income

Interest expense to interest income ratio in 2006 is 0.25; in 2007 it is 0.49 which is little

increase as compare to previous year. This ratio in 2008 is 0.55 a little increase from

previous year and in 2009 it is 0.57 and ratio is highest in last year 2010 which is 0.58

which clearly shows that the bank interest income was very good as compared to

interest expenses in past years and bank is performing well.

Return on average shareholder's fund

Return on shareholder's fund was 34.8 in year 2006 which decreased in year 2007, was

27.7 and in year 2008 it was 22.6, in 2009 it was 23.0 and in the last year 2010 it is only

3.06. This ratio declined in almost all years and remained steady almost in the years

2008, 2009 and shows a sharp decline and was only 3.06 in 2010. This was because of

sharp declined banking profits and increasing loan losses. The bank must focus on the

recovery of bad debts and also on the current portfolio in order to boost and attract

shareholder's confidence.

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Profit before Taxes

Profit before taxes ratio was in year 2006 63.3, in 2007 32.5, in 2008 26.6, in 2009 15.2

and at last in 2010 it was only 2.51. This also shows a declining trend and the reason is

same because of sharp declined banking profits and increasing loan losses. At this time

the banking industry is passing through a reviving stage. The bank should focus on

quality loaning and review as well as revise its current strategies.

Capital Adequacy Ratio

Capital adequacy ration tell us that how much the bank's own capital is involved in

lending besides deposits. The SBP is focusing on this ratio very forcefully. This is only

because of current increasing bad loaning. The State Bank wants to increase banks own

stake in the loaning so that they become more focused and vigilant in lending. The

Askari Bank CAR in year 2006 was 9.9, in 2007 8.5, in 2008 11.0 in year 2009 10.9

and in the last year 2010 it was 12.3 which clearly shows the increasing bank's own

stake in loaning.

Rate of Cash Dividend

Rate of Cash Dividend in year 2006 20.0, in 2007 15.0, in 2008 10.0, in year 2009 15.0

and in the last year 2010 it was nil. This was because of declining bank profits from the

past years.

Price Earning Ratio

Price to earning ratio shows that how much a share is earning on its current market

value. The P/E ratio in year 2006 6.1, in 2007 9.6, in 2008 9.3, in 2009 11.2 and in year

2010 it was 15.32. The P/E ratio increased from last years and shows a healthy trend.

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5.1.4 Horizontal and Vertical Analysis

An analysis of percentage financial statements where all balance sheet or income

statement figures for abase year equal 100% and subsequent financial statement items

are expressed as percentages of their values in the base year. A percentage analysis of

financial statements where all balance sheet items are divided by total assets and all

income statement items is divided by net sales or revenues.

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 analysis, to

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express the idea of reviewing data for a number of consecutive periods. It is

distinguished from vertical analysis which refers to the review of the financial

information of only one accounting period.

5.1.4.3 Interpretation of Horizontal and Vertical

Analysis Horizontal Analysis of Balance Sheet

2006 2007 2008 2009 2010

DATA IN %AGE

ASSETS

100% 134% 170% 152% 183% Cash and balance with treasury banksBalance with other banksLending to financial and other institutionsInvestmentAdvancesOther assetsOperating fixed assets

100% 114% 151% 72% 82%

100% 438% 361% 621% 193%

100% 149% 166% 229% 207%

100% 123% 142% 144% 184%

100% 175% 244% 355% 0%100% 123% 147% 198% 0%

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Deferred tax assets0% 0% 0% 0% 0%

100% 135% 158% 170% 192% TOTAL ASSETS

Liabilities and owner's equity

100% 107% 150% 214% 211% Bills Payable BorrowingsDeposits and other accounts Sub-Ordinate LoansLiability against assets subject to finance leaseOther Liabilities Deferred Liabilities

100% 77% 109% 127% 110%

100% 143% 158% 172% 201%

100% 300% 300% 300% 300%

100% 10% 0% 0% 0%

100% 177% 208% 251% 371%

100% 108% 140% 89% 2%

100% 135% 153% 168% 191%

Owner's Equity

100% 120% 160% 239% 323% Share Capital Reserves

Un-appropriated Profits100% 136% 135% 161% 178%0% 0% 0% 0% 0%

100% 132% 173% 217% 216%

100% 275% 324% 38% 211% Surplus on revaluation of assets

100% 135% 158% 170% 192% Total Liabilities and owner's Equity

Interpretation of Horizontal Analysis

The horizontal analysis of the balance sheet clearly shows that the cash balance

increased gradually from year 2006 to year 2007 and now it is 183% as compared to

year 2006. The lending to financial institution has reached upto 193% as compared to

year 2006 but it was at the peak in year 2009 at 621% and it was also higher in year

2006, 2007. It was because of current market crisis and declining liquidity position of

the bank. Investment has reached to 207% but it has decreased from year 2009, just

because of current market scenario. The advances of the bank has reached to 184% as

compared to year 2006 and are at all time high in the last 5 years just because of

increased deposits. The banks deposits are also increased upto 201% from year 2006.Same is the case with the bank's share capital, reserves and surplus on revaluation of

assets, all have been increased just because of the pressure and policies of state bank of

Pakistan about increasing bank's own capital. The horizontal analysis of the bank shows

slightly lower bank's position but it is just because of the current market crisis.

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Vertical Analysis of Balance Sheet

2006 2007 2008 2009 2010

DATA IN %AGEASSETS

8% 8% 9% 7% 8% Cash and balance with treasury banksBalance with other banksLending to financial and other institutionsInvestmentAdvancesOther assetsOperating fixed assetsDeffered tax assets

5% 4% 4% 2% 2%

2% 7% 5% 8% 3%

16% 18% 17% 22% 17%

65% 59% 60% 55% 62%

1% 2% 2% 3% 4%

2% 2% 2% 3% 4%

0% 0% 0% 0% 0%

100% 100% 100% 100% 100% TOTAL ASSETS

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Liabilities and owner's equity

1% 1% 1% 1% 1% Bills PayableBorrowingsDeposits and other accounts

Sub-Ordinated LoansLiability against against assets subject to financeleaseOther LiabilitiesDeffered Liabilities

13% 7% 9% 10% 7%

78% 82% 79% 79% 81%

1% 2% 2% 2% 1%0% 0% 0% 0% 0%

1% 2% 2% 2% 2%

0% 0% 0% 0%

96% 95% 94% 94% 93%

Owner's Equity

1% 1% 1% 2% 2% Share CapitalReservesUn-appropriated Profits

2% 3% 3% 3% 4%

0% 0% 1% 1% 0%

Surplus on revaluation of assets

100% 100% 100% 100% 100% Total Liabilities and owner's Equity

Interpretation of Vertical Analysis

The vertical analysis of the bank shows that the asset side is mostly captured by the

advances with 62% and investments 17%. These two items always captures major

portion of assets side. Advances of the bank have increased from previous years but

other items slightly decreased just because of bank's changing scenario and policy.

On the other side deposits contributes major portion of liability side with 81% and also

increased from previous year. But other things slightly decrease due to the current

scenario.

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Interpretation of Horizontal Analysis

An analysis of percentage financial statement where all balance sheet or income

statement figures for a base year equal 100 (percent) and subsequent financial statement

items are expressed as percentages of their values in the base year. So the above

situation shows that the trend of progress is positive. But the Administrative expanse

increase during the 2009 due to new customer services, introducing new products and

car financing. Administrative expanses are increasing by year to year we need to

control over it. Profit before taxation fluctuate between different years and gradually

increase and in the last year 2010 it is little bit decrease. Total assets of the bank are

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also increasing from year to year which is useful for our bank. Liabilities of the bank

are also increasing from year to year we need to control over it; we need to more focus

on it.

Interpretation of Vertical Analysis

An analysis of percentage financial statements where all balance sheet items are divided

by total assets and all income statement items divided by net sales of revenues. In the

balance sheet the ratio of the advances and the deposits are high which is good.

Deposits are increase in 2008 due to high interest rates. Administrative expanses are

fluctuating during the different years it is maximum in the year of 2010. Profit before

taxation is also increasing in first four years and it is decrease in the last year 2010. The

bank needs to control over the expanses and improve the performance of the bank.

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5.2 Organizational Analysis With Reference to the Industry

NAME OF BANKS TOTAL

ASSETS

TOTAL

LIABILITIES

PROFIT

AFTER TAX

SHARE

CAPITAL

Standard Chartered 264617178 221860038 677132 38715850

Bank Al-Falah 348690764 331U6025 6177727 7995000

National Bank 817,758,326 102,459,218 15,458,590 8,969,751

Askari Bank 206191138 12971363 386225 4058774

The companys financial year-end is DEC. Its year of listing was 2010.

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year 2007 remains challenging and is dependent on the success of the Government's

economic policies and n improvement in the investment climate. The bank's

commitment and endeavor to excel in rendering contemporary banking services along

with acceleration of business mobilization will, Inshallah, further enhance the portfolio

of its business, and the profitability, in the ensuing half-year. The Future vision of the

management of the Askari Bank Abdali Road is starting the Mobile ATM services in

the Multan. This service is already provided in the Karachi Lahore and Islamabad.

6. Short-falls/Weaknesses of the Organization

AKBL has lesser number of branches only 177 as compared to many other bank

branches and only has its presence in urban areas.

Bank is not introducing new products and new schemes in order to increase low

cost deposit which is desperate need of the bank in current scenario. Bank

should boost the product development and increase the range of facilities

offered for customers. AKBL has many competitors, which are continuously

increasing its products and marketing aggressively. It may cause its customers

to shift to competitors.

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

and increase its payment rate. Ratio of bad loans is very high.

The human resource department is not performing the function of selection and

recruitment and as well as performance evaluation very effectively. Selectionprocess is not on merit due to which competent persons cannot be selected and

due to influence of internal/external persons in the performance evaluation and

annual performance system creating panic and frustration among employees

which was cbserved during internship period.

Most of the financing schemes of AKBL are limited just for Army employees

like army personal finance, army house building finance on special discounted

rates and army house hold articles finance which is the biggest weakness of

bank.

Sometimes due to increase in investment by deposits there create a shortage of

funds to advance for working capital and short terms loans.

Financing procedure of the bank should be very simple one, but in AKBL it is

very complicated and large procedure because of which small enterprises

hesitate to get loans.

7. Conclusions

I conclude from my internship that the Askari bank is a growing organization It

provides all the possible services which the customer wanted The behavior of theemployee's are very good with the customer and their dealing are very good , Due to

this internship I learn many things Such as:

Dealing with customers.

Working Discipline.

Punctuality of time.

Commitment with task.

Financial Statement analysis.

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Business communication.

In operation department I learned about account opening procedures and formalities and

analysis of depositors worth and capacity. In cash department I have learned how tohandle customer's cash cheques and their payment procedures. I also learned about the

bank closing cash procedures. In accounts department I have learned about the branch

budget preparations, the making of expense sheets and checking and scrutiny of daily

vouchers. In credits department, I have learned about the initiation of credit proposal

and its pre disbursement security matters handling and post disbursement maintenance

of stocks and insurance and in foreign trade department I have learned bout LC opening

and post shipment finance handling as well.

After this internship I learn many more about the banking organization which I not

know before my internship.

During the internship I compare my theoretical knowledge to my practical knowledge

and clear the many concepts. Due to Internship I feel that I can face the people with

confidence. So the net result is that it improves my confidence and my theoretical

concepts.

8. Recommendation

No doubt Askari Bank is one of the leading banks of the country and upholds its name

but still I have a few suggestions in my mind which I think it is my duty to mention.

First of all, in order to make a good working environment of the bank, some

reco

Final Report AIOU

Documents

Transcript of Final Report AIOU