CHAPTER 01 Introduction to the Report

This Internship report is aimed at studying and analyzing Askari Bank Limited (ABL) in general and its branch office at Abbottabad, in particular. The main purpose of the internship is to prepare and submit a report as a partial fulfillment for the award of MBA degree from COMSATS Institute of Information Technology Abbottabad. This report has the aim to share my knowledge and experience that I have gathered during my academics and practical training at Askari Bank. Being the world-class bank, Askari Bank has maintained the world-class standards in all aspects including financial standards. This report has covered the financial strategies and practices that are being followed in Askari bank.

1.1 Background of the study Pakistan‟s economy at present is going in depression. The importance of sound banking system cannot be denied in such critical time to re-stabilize the economy, which must meet the financial needs of the growing agriculture, industrial and commercial/services sector. In the present day world, economy has started dominating every sphere of life and for the socioeconomic growth of any country, monetary institution is critical. Banking sector is the backbone of the industrial sectors, trade and commerce of the country hence providing stimulus to overall development of the economy. Askari Bank since 1991 has played a pivotal role in the development of Pakistan. Like other multinational banks, ABL has adopted a customer-oriented approach, in order to provide quality products according to customer needs and stands as a role model for the other banks. Askari Bank works round the clock to provide services that are unmatched in the region. It has the experienced, committed team of professionals with diversified expertise. This report has the aim to cover all operational aspects of Askari Bank and products that it offers.

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1.2 Purpose of the Internship The primary purpose of the internship is to fulfill the academic requirements of my study. The purpose of the study also is, to do practical work, in the field and apply the knowledge of classroom lectures to the real life situations, which thus enables a student to be a future banking practitioner. Besides this, some other purposes are associated, which includes          To gather relevant information then interpret and analyze it in a useful manner To define and describe various functions of the bank. To highlight the outline facilities and products offered by ABL to its customers. To analyze the bank through different techniques i.e. Horizontal, Vertical, and SWOT analysis. To get exposure and to develop the interpersonal communication skill. To identify the areas of the bank where there is some room for improvement. To present some feasible solutions for the problems pertaining to ABL. To apply the knowledge gained in practical field. It is also one of the main objectives of internship to practically apply in concepts learned during my study at COMSATS Abbottabad.

1.3 Merits of the Report    It is a compulsory requirement for the award of Master‟s Degree in Business Administration The study conducted will benefit the finance students in particular and banking students in general It will help the present and prospective students of the department in making assignments and writing reports on the ABL, evolution of baking, importance of banking and different operations.  The third chapter of this report comprehensively encompasses most of the aspects of banking, followed by SWOT analysis, conclusion and recommendations. Furthermore,  ABL branch Abbottabad may also benefit from the

recommendations made at the end of the report. It can also provide assistance to students seeking financial data for analysis.
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It can also provide help ABL management in identifying their Strengths, Weaknesses, Opportunities and Threats.

1.4 Scope of Report Banking has a very broad scope. In only six weeks of internship, it is very difficult to understand each and every aspect of bank. Due to the barriers of limited time and space, the scope of work is usually confined. However this study of ABL will help the management to identify their weaknesses and threats and overcome them by using their strengths and capitalizing on the opportunities. This internship report will be source of financial data for all those who are interested in financial statement analysis of ABL.

1.5 Methodology of the Report This study involves two types of data for report writing.

1.5.1 Primary Sources   Interviews and discussion with staff members Personal observations

1.5.2 Secondary Sources      Annual reports of ABL Brochures & Manuals. Websites Newspapers Previous Internship Reports.

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1.6 Limitations of the Report For a corporate level organization, like Askari Bank Limited, where the span of operation is too wide, six weeks of time is very limited for complete observation for the purpose of the complete research of specialized and sensitive institutions. It does not permit to fully analyze and understand the entire functionality of the bank, and privacy policy of Bank also limits access to the organizational data and information that is termed as confidential. Also due to the bank tight schedule and busy schedule of the required staff complete information could not be collected easily. The information at the branch level is also not allowed to be accessed. During the study I tried to include only relevant material. This study was conducted in accordance with the objectives of the study.

1.7 Scheme of the Report This internship report is divided into five chapters as: Chapter one includes background, purpose, scope, limitations, methodology, and scheme of the report. Chapter two includes background and history of banking in Pakistan, background of ABL, roles, functions and branches. Chapter three includes organizational structure of ABL, organizational charts and departments of ABL. Chapter four includes financial, SWOT analysis and findings based on work in chapter three. This will stick to the branch where I have worked. Chapter five includes recommendations of the study based on the analysis in the previous chapter.

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CHAPTER 02 Introduction to Askari Bank Limited

2.1 Early Growth of Banking “Banking in fact is as ancient as human society. For ever since man came to realize the importance of money as a medium of exchange. Perhaps these were the Babylonians who developed banking system as early as in 2000B.C. It is evident that the temples of Babylon were used as banks because of the prevalent respect and confidence in the clergy.

2.2 Formal Definition of Bank “A financial institution that is licensed to deal with money and its substitutes by accepting time and demand deposits, making loans, and investing in securities. The bank generates profits from the difference in the interest rates charged and paid.” These are the following types of banks      Central Bank Commercial Bank Industrial Bank Exchange Bank Saving Bank

2.3 History of Banking in Pakistan On 14th August 1947, a new Muslim country with the name of Pakistan came into being. In accordance with the provision of Indian Independence Act of 1947, an expert committee was appointed to study the issue. The committee recommended that the Reserve Bank of India should continue to function in Pakistan until 30th September 1948, at this time there were 19 foreign banks with the status of small branch offices and only two Pakistani institutions i.e. Habib Bank, and the Australasia Bank. To rebuild the confidence of the people in these banks, the then Government promulgated the banking

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companies ordinance, 1947”. “Government of Pakistan inaugurated the State Bank of Pakistan on July 1, 1948.At the end of June 1958, the number of branches of Pakistani banks increased from 195 to 307 and, the number of scheduled banks increased to 36 by June 1965.

2.4 Historical Background of Askari Bank Ltd ABL was incorporated in Pakistan on October 09, 1991, as a Public Limited Company. It commenced operations on April 1, 1992 and is principally engaged in the business of banking, as defined in the Banking Companies Ordinance, 1962. The Bank is listed on the Karachi, Lahore & Islamabad Stock Exchanges and its shares are currently the highest quoted from among the new private sector banks in Pakistan. The Head office of Askari Bank, Limited is located at AWT Rawalpindi.

2.5 Vision Statement of ABL To be the bank of first choice in the region.

2.6 Mission Statement of ABL To be the leading private sector bank in Pakistan with an international presence, delivering quality service through innovative technology and effective human resource management in a modern and progressive organizational culture of meritocracy, maintaining high ethical and professional standards, while providing enhanced value to all our stake-holders, and contributing to society.

2.7 Corporate Objectives of ABL   

To achieve sustained growth and profitability in all areas of business. To build and sustain a high performance culture, with a continuous improvement focus. To develop a customer–service oriented culture with special emphasis on customer care and convenience.

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To build an enabling environment, where employees are motivated to contribute to their full potential. To maximize use of technology to ensure cost–effective operations, efficient management information system, enhanced delivery capability and high service standards.

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To manage the Bank‟s portfolio of businesses to achieve strong and sustainable shareholder returns and to continuously build shareholder value. To deliver timely solutions that best meet the customers‟ financial needs. To explore new avenues for growth and profitability

2.8 ABL As Leading Banking Sector entity Over the years, Askari Bank has proved its strength as a leading banking sector entity, by achieving the following firsts in Pakistani Banking:     First Bank to offer on-line real-time banking on a country-wide basis. First Bank with a nation-wide ATM network. First Bank to offer Internet Banking Services First Bank to offer e-commerce solutions.

2.9 Credit Rating The Pakistan Credit Rating Agency (PACRA) as given in Annual Report 2008 maintained both ABL long term and short term ratings at „AA‟ and „A1+‟. The rating specifies a very high credit quality and very strong capacity for timely payment of financial commitments.

2.10 Awards and Achievements   Recently Askari Bank have been once again been given the “Best Retail Bank in Pakistan” by The Asian Banker for the 2nd consecutive year. Askari Bank has been given the 1st Consumer Choice Award 2004 for the Commercial Banking Category by the Consumer Association of Pakistan.

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The bank has also received the Corporate Excellence Award for the financial sector from the Management Association of Pakistan (MAP) for the years 2002, 2003 and 2004.

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The bank have been declared The Best Bank in Pakistan by the global finance magazine for the years 2001 and 2002. Askari bank won the first prize in the Best Corporate Report awards for the year 2000, 2001 and 2002 from the institute of chartered accountants of Pakistan and the institute of cost and management accountants of Pakistan, for the services sector.

2.11 Corporate Profile Corporate body of Askari bank Limited consist if 12 Board of Directors including one Chairman 1. President 2. Chief Executive 3. Secretary 4. NIT Nominees

Detail of Board of Directors             Lt. Gen. Imtiaz Hussain Lt. Gen. (R) Zarrar Azim Brig. (R) Muhammad Shiraz Baig Brig. (R) Asmat Ullah Khan Niazi Brig. (R) Muhammad Bashir Baz Brig. (R) Shaukat Mahmood Chaudhari Mr. Kashif Mateen Ansari Mr. Zafar Alam Khan Sumbal Mr. Muhammad Afzal Munif, FCA Mr. Muhammad Najam Ali, FCA Mr. Tariq Iqbal Khan, FCA Mr. Shaharyar Ahmad Chairman Director Director Director Director Director Director Director Director Director Director(NIT Nominee) President & Chief Executive

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2.11.1 Audit Committee    Dr. Bashir Ahmad Khan Mr. Ali Noormahomed Rattansey, FCA Mr. Zafar Alam Khan Sumbal Chairman Member Member

2.11.2 Company Secretary    Mr. Saleem Anwar, FCA

2.11.3 Auditors F. Ferguson & Co.(Chartered Accountants)

2.11.4 Legal Advisors Rizvi, Isa, Afridi & Angell

2.11.5

Registered / Head Office

AWT Plaza, The Mall, P.O. Box No. 1084 Rawalpindi, Pakistan. Tel: (92 51) 9063000 Fax: (92 51) 9272455 E-mail: webmaster@askaribank.com.pk Website: www.askaribank.com.pk

2.12 Ethical Values The intrinsic core values that are corner stones of our corporate behavior are as fallows.     Commitment Integrity Fairness Teamwork

2.13 Role of ABL in Banking Sector The impressive growths in development, which ABL achieve, make this bank undoubtedly the most dynamic and progressive. In a very short period of time it became
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one of the leading bank overtaking several other older and its competitor banks. The major contributions the bank has made are:        

Record setting performance and commitment to serve the customers. Personalized service and dynamic approach. Professional management. Modern banking policy. Human resources development. Small loans or micro credits. Utility bills collection. Credit cards

2.14 Number of Branches Askari Bank has expanded into a nationwide presence of 200 Branches/sub-branches including 20 dedicated Islamic Banking Branches, and whole sale bank Branch in Bahrain. A shared network of over 2,991 online ATMs covering all major cities in Pakistan supports the delivery channels for customer service. As on December 31, 2008, the Bank had equity of Rs.12.97 billion and total assets of Rs.206.19 billion, with over 816,629 banking customers, serviced by 6,496 employees.

2.15 Structure of ACBL A board of Directors is running the affairs of ABL. The board of Directors consisting of one president, 04 Directors from ABL, one from Pakistan banking council, one from Ministry of Finance and additional one who is the sectary of board of managers of ACBL. Hence the board of directors is 08 member team which takes all-important decisions relating to the operations and policies of the bank. Second highest authority in the ABL is Executive Committee consisting 7 members including Chairman/President of ACBL and sectary of CBL. Below the general managers are the circle executives who are Senior Vice Presidents or Vice Presidents (VP). In each zone there are number of branches of ACBL, and each branch is managed by branch manager.
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Fig 2.1 ABL Organization Structure Chart (Source: Annual report 2008)
President

Senior Executive Vice –President (SEVP) Executive Vice President (EVP)

Senior Vice President (SVP)

Vice President (VP)

Additional /Assistant Vice President (AVP)

Manager

Assistant Manager Grade -1 Grade -II

Grade -III

Assistant, Cashier etc

Non –Clerical staff

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CHAPTER 03 Askari Bank Services and Products
3.1 Introduction to ABL Abbottabad Branch Askari Limited Bank, Abbottabad branch was established at 1999 with amount of resources. The Bank‟s branch building is located in Supply Bazaar. With the passage of time the number of customers increased and there was need of more advanced departments with all the new technology. ASKARI bank expanded its departments into a three story buildings dealing with different needs and facilities to the customers. The branch deals with four main departments‟ i.e credit, bills and remittances, accounts and deposits department. Apart from Islamic banking a separate Leasing department is working to cater the needs of growing Islamization in the region. In short Askari Bank Abbottabad is one the renowned bank in the city.

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Figure 3.1: Organizational Chart of the Branch
Chief Manager/ (Branch Manager)

Deputy-Chief Control & Management

Deputy-Chief Accountant

Deputy-Chief Finance

DeputyChief Cash

Deputy-Chief Bill and Remittance

Deposit Department. Foreign Currency Accounts Department.

Finance Department.

Cash Department.

Bills and Remittance Department.

Source: Annual Report 2008

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3.2 Departmentalization
The organization of ABL is a complete banking system. This banking system is collection of interrelated departments that works together to achieve the objectives of the organization. I can rightly say that ABL is a hierarchical system in that it includes other sub departments and these are integrated to work together. The ABL‟s existing system includes following departments.       

Account Opening Department Remittance Department Credit Department Cash department Clearing Department Accounts Department Foreign Trade Department

Figure 3.2 Branch systems Hierarchy ASKARI BANK LIMITED ASKARI BANK MAIN BRANCH 001 RAWALPINDI Accounts opening Remittance Department Department Credit Department Cash Department Clearing Department Accounts Department Foreign Trade Department Plastic Money

Management Information System

Source: Self made
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3.2.1 Accounts Opening Department 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 more vital because the entire banking system is based on it. The borrowed capital of bank is much greater than their own capital. Banks borrowing is mostly in the form of deposits. These deposits are lent out to different parties. Such deposit creation is done through opening an account in the bank.

3.2.1.1 Types of Accounts In ABL, there are the following types of accounts:       

Current account Saving accounts Term deposit Askari Special deposit Account Askari Bachat certificate Notice Deposits Foreign currency saving Account

3.2.1.1.1 Current account These accounts are for the current deposits i.e. customer can deposit and withdraw the amount any time and no profit is paid.” This account is operating through cheques. The customer is required to maintain a minimum balance in this account. In current account, there is no profit and interest on the money kept. Current account is mostly opened for business.

3.2.1.1.2 Saving account (profit and loss sharing) Pls. saving accounts opened by individuals (single or joint), for charitable institutions, companies, educational institutions, firms etc. This account can be opened with a very

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small amount, withdrawals from this account is made through cheques. Return/profit is paid at flexible rate calculate on six months basis. 3.2.1.1.3 Term deposit The deposits that can be withdrawn after a specified period of time are known as fixed or term deposits. In this account person or account holder keeps the money for definite period of time. The amount deposited is not withdrawn able by cheques. After the maturity of account, account holder receives the actual money along with the profit given after each six months during deposited period. The term deposit account varies from one month to 5 years, and the minimum balance requirement is Rs.5000/- for all other nine accounts.

3.2.1.1.4 

Askari Special deposit Account(ASDA)

It is a special scheme known as “ASKARI Special Deposit Accounts”. Amounts in these accounts are accepted as prescribed by bank from time to time. The deposits are subject to PLS rules/regulations and invested by the bank on the same basis.

  

The profits on ASDA is payable as determined by the bank in the basis of profit and loss sharing arrangements. The profit as determined by the bank shall be final binding on the account holder. Profit shall be paid every six months on declaration of actual rate of profit on such deposits by H.O.

3.2.1.1.5

Askari Bachat certificate

ABC‟s are long term fixed deposit for 3 and 5 years. These are not term deposits because payment of return is on monthly basis rather than on maturity of deposits. The minimum balance requirement is Rs.25, 000/- and maximum balance requirement is Rs.1.0 million. If ABC is for 3 years, the rate of return for 3 years is 12%; if ABC is for 5 years the rate of return is 13%. This is not a chequing account; no cheque is drawn on it only payment of return is made monthly.

3.2.1.1.6

Notice Deposits

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Notice deposits are kind of fixed deposits. The minimum balance requirement for opening the account is Rs.5000/- and payment is drawn on maturity.

3.2.1.1.7 Foreign Currency Saving Account      The Pakistani national as well as the foreigners can open this account. The profit is also paid credited to this account depending upon the monthly products. The customer has the facility of withdraw in foreign as well as Pak currency. Equivalent Pak rupees are also calculated for the transactions in the FC saving accounts. Monthly and daily revaluation rates of each foreign currency in Pak rupees are maintained for the correct operation in the FC saving accounts.

3.2.1.2 Account opening procedure For the chequing accounts (C/A, ASDA, SAVING), there are different account holders required for each type of these accounts. The operation/ procedure requirement that is needed for “ Individual Account” differ greatly from “joint Account” “proprietorship” “Partnership” “Limited company” and below. “Club Society or Association” as explained

3.2.1.3 Letter of thanks At the 2nd day of account opening, ABL issues letter of thanks to “account opener” and “account introducer” for the trust they have on ABL. 3.2.1.4 Stamping “Posted” After completing all this process. The forms are signed from manager of the branch after which the forms are stamped across as “POSTED” on one corner of the front side of the form. Then they are posted in the respective “account opening file”. The very next day cheque book is issued to the customer

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3.2.2

Remittance Department

This department of ABL is concerned with transfer of money from one place to another place that is transfer of funds

3.2.2.1 Instruments of bills and Remittance Department The instruments that are handled in the Remittance department are as follows:        Demand Draft Telegraphic Transfer Mail transfer Pay order Pay slip OBC IBC

3.2.2.1.1 Demand draft A bank draft is an order by one branch of bank to another branch of the same bank to pay a certain amount of money on demand to the person named there in. DD is just a check and is issued when the customer wants to take the draft personally. For the preparation of a draft, first of all customer has to fill an application form, then the concerned officer fills the following before delivering the draft to the customer.

3.2.2.1.2 Telegraphic Transfer A telegraphic transfer is a fastest and safest way to transfer money. After filling the application form, the concerned officer fills the telegraphic form. This telegram is sent to the required bank. Which on receiving it immediately makes the payment to the customer and afterwards the vouchers are sent to the bank by ordinary mail.

3.2.2.1.3 Mail transfer

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When a customer requests the bank to transfer his money from this bank to any other bank or the branch of the same bank in the city/ outside the city or outside the country, the first thing he has to do is to fill an application form in which he states that I want to transfer the money from this bank to another bank. If the customer is the account bolder of bank, then the bank will debit his account. The concerned office will fill the different forms to make the mail transfer complete. Three forms used for this purpose are listed below:  Debit voucher  Credit voucher  Mail transfer register If the customer is not the account holder of bank, then firstly he has to deposit the money and then the above said procedure will be adopted to transfer his money.

3.2.2.1.4

Pay order

It is a cheque drawn by a bank on itself. Pay order is an instrument in which three parties are involved the purchaser, the bank, and the receiver. It can be purchased by any customer.

3.2.2.1.5 Pay slip It is an instrument used by the banks for its payment. The slips are issued to the employee of the banks their bills and invoices. The bills are transferred to pay slips . In this case only one bank is involved and that is the issuer as well as the payer.    Procedure prescribed for P.O for issuance and payment is followed for pay slips with following exceptions. Pay slips are issued by the bank for settlement for this own payment. No excise duty is applicable on P.S.

3.2.2.1.6

Outward Bills for Collection

The bills which are sent to their city banks for the local clearing in that city are outward bills for collection.Cheques are entered in the OBC register, the number is written in the stamps. The OBC forwarding schedules are prepared for the different branches. Then
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respective cheques are attached with the schedule.On clearance the respective banks send back the OBC‟s along with IBCA(inter branch credit advice). At the end of the day, contra vouchers are made.

3.2.2.1.7

Inward bills for Collection

The bills received from other banks out of city for the local clearing are called inward bills for collection.The OBC of the other branches will be the IBC‟c 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.After realization, an IBCA is prepared and mailed to the branch

3.2.3

Credit Department

The earnings of commercial banks are chiefly derived from interest charge on loans and discounts. It attracts surplus balance from customers at lower rate of interest and makes advances at higher rate of interest.The finance system deals with providing finances (loans) and ensuring the guarantees.

3.2.3.1 Types of Advances Offered By ABL ABL Credit department deals with all the advances, which are made to the customers. Advances are important for the banking business because it gives the bank interest on the amount loaned. ABL is also very active in advancing loans to customers, thus helping the economy of the country in its development. It provides the following finances:

3.2.3.1.1 Demand Finance Demand finance is one of the long-term loans and is allowed against fixed assets. It can also be short term. Usually businessmen avail this facility for the purchase of machinery and other installations.

3.2.3.1.2 Running Finance This is a type of finance, which meets the day-to-day finance requirements of the business. The amount is transferred to the debtor‟s current account and can be withdrawn
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through cheques. The limit on this type of finance is 35000 and the maximum period for this type of finance is one year and can be renewed by a new application.

3.2.3.1.3 Cash Finance Cash finance is also called working capital. It is a short-term loan. Probably the most popular form of providing funds to the clients in the banking sector is the Cash Finance system. In this, the bank lends money to borrowers against tangible security. The total amount of loan, which is granted, is not paid in one installment. The borrowers have to pay markup on the amount borrowed.

3.2.3.2 Level of Lending 3.2.3.2.1 The structure for lending in ABL has four levels 1. 2. 3. 4. Branch credit committee Credit committee at Head office Executive committee Board

3.2.3.3 Financial Products of ABL 3.2.3.3.1 Personal Finance Personal Finance is a parameter driven product for catering to the needs of the general public belonging to different segments. One can avail unlimited opportunities through Askari Bank's Personal Finance. With unmatched finance features in terms of loan amount, payback period and most affordable monthly installments, Askari Bank's Personal Finance makes sure that one gets the most out of his/her loan. Once a good credit history is established, the door to opportunity opens much wider. 3.2.3.3.2 Askari "Mortgage Finance Askari "Mortgage Finance" offers the convenience of owning a house of choice, while living in it at its rental value. The installment plan has carefully designed to suit both the budget & accommodation requirements. It has been designed for enhancing financing
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facility initially for employees of corporate companies for purchase/ construction/ renovation of house. The maximum financing amount is Rs. 10 million with repayment tenure up to 20 years. 3.2.3.3.3 Business Finance In pursuance of the National objectives to review the economy of the country, ABL is providing loans to small and medium size business enterprises under Askari Bank's Business Finance Scheme. Their goal is to offer a loan, which enables business community to receive the financing required by them based on their cash flows. 3.2.3.3.4 Ask Car (Car Finance) ABL offers the most convenient and affordable vehicle- financing scheme, which provides their valuable customers an opportunity to own a brand new vehicle of their choice. With minimum down payment, lowest insurance rates and widest range of available car makes and models, Ask car offers the best value to our esteemed customers. 3.2.3.3.5 Ask CARD ASKCARD means freedom, comfort, convenience and security, so that you can have retail transactions with complete peace of mind. ASKCARD is your new shopping companion which enhances your quality of life by letting you do shopping, dine at restaurants, pay your utility bills, transfer funds, withdraw and deposit cash through ATM anywhere, anytime. 3.2.3.3.6 Travelers Cheques The range of their products and value added services enhances with introduction of Rupee Travelers Cheques (RTCs) launched in March 2002. 3.2.4 Cash Department

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The main function of this system is Receipts & payments to the customers, on behalf of their account, through Cheques or any other negotiable instruments. All those transactions, which are held on the counter on cash basis lies under the cash department. The cash system mainly deals with following areas:   Receipts Payments

3.2.4.1 Calculation of Ending Cash Balance The official time for receiving deposits and payments is till 5 pm. However some important customers is accommodated afterwards.      The cash in hand is counted. It contains the cash at the counter and cash in the strong room. The opening balance is taken i.e. ending balance of previous day The receipts are added The payments are deducted This daily cash position is written down on daily cash position book.

3.2.4.2 Liquidity Maintenance ABL has to maintain 35% liquidity at SBP. Every branch maintains 5% of its deposits at the local SBP. But this 30% is kept in the form of Approved securities. For example: Foreign Investment Bills and Treasury Bills.

3.2.5 Clearing Department There is no legal obligation on a banker to collect cheques drawn upon other banks for a customer. However, it is function of almost every modern bank of collection of cheques and bills on behalf of the customers. Clearing department services are provided in order to make arrangements for the economic collection of cheques, DD‟s pay and other negotiable instruments. A large part of this work is carried on through the clearing house.

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3.8 Accounts Department This is one of the most important departments in ABL. The bank daily transactions are recorded in computers, nowadays, so the function of this department is to get a summary of all the transactions. The credit and debit vouchers are arranged and saved for the record purpose. It also indicates, head office entries as clearing, transfer delivery etc. On the weekend it has to prepare the extract which is send to head office for reconciliation. Thus this department will create a link between head office and branch office. The functions of Accounts department are as follows:       

Preparation of daily bank position Statement Checking Bank‟s daily Activity Maintenance of book of the accounts of head office. Salary disbursement and investment of staff. Arrangement of stationary for bank. Dealing with disposal of commercial external audit reports and state bank of Pakistan instructions. Pre audit checking of all bank transactions.

3.2.7 Credit card Department Credit card, card that identifies its owners as one who is entitled to credit when purchasing goods or services from certain establishments. When a credit card is used, the retailer records the name and account number of the purchaser and amount of the sale, and forwards this record to the credit card billing office. At intervals, usually monthly, the billing office sends a statement to the card holder listing all the charged purchases and requesting payments immediately or installments‟.

3.2.7.1 ABL Offerings The bank is already offering credit cards like Master cards international in collaboration with international financial service organizations. Credit card issuing is an important activity that the most successful and modern banks are doing and are generating profit from it. Credit cards are of two types
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 

Master Card Visa Card

ABL issues three types of Master Cards:

3.9.1.1 Local card This master card is issued for the amount of Rs. 25000/- and more. This local card operates on national level.

3.9.1.2 Silver Card This master card is issued for the amount of Rs. 35000/- and more. This is an international card which is acceptable all over the world.

3.9.1.3 Gold Card This master card is issued for the amount of Rs. 2,00,000/- and more. This is an international card which is acceptable all over the world. All these three types of cards issued only to those individuals which hold accounts in the bank. The bank also takes care that a sufficient amount of security, almost 125% of the amount of credit card.

3.10 Foreign Trade Department ABL has been authorized by State Bank of Pakistan (SBP) to have dealing in foreign currency. The foreign exchange departments provide facility of foreign currency accounts (FACs) to Pakistani citizen and foreigners and facilitate its clients in foreign trade. This facility is provided in shape of letter of credit (L.C), and guarantee by the bank to the exporters and importers.

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CHAPTER 04

Financial Analysis of ABL

4.1 Introduction
The importance of financial statement analysis lies in their utility to satisfy the question in the mind of stakeholders. Different classes of people are interested in the financial statements with a view to assessing the economic and financial position of any business or industrial concern in term of profitability, liquidity or solvency etc. Financial statements among other things include balance sheet and income statement. Balance sheet presents assets and liabilities of the business at a given date. Besides showing the ability of the business to service the loans on the strength of its financial structure and its profitability, helps in judging the impact of financial and fiscal support.

4.2 Purpose of Financial Analysis
The analysis of Financial Statements (FS) is to examine past and current financial data so the company‟s performance and financial position can be evaluated and future risk and potentials can be estimated. The analysis can yield valuable information about trends and relationship, the quality of a company‟s earnings, and its financial strengths and weaknesses.

4.2.1 Analysis
The financial data of ABL is analyzed in the following two ways   Common Size Analysis Ratio Analysis

Common size analysis and ratio analysis are techniques that can be used to identify trends in financial statement; common size analysis is also useful in comparative analysis, and some source of industry data.

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4.2.2 Common Size Analysis
Technique for identifying relationship between items in the same financial statement by expressing all amounts as the percentage of the total amount taken as 100. For common size analysis two basic techniques are used.

1. Common Size Vertical Analysis Comparison with base amount with in the same year. a. b. Vertical Analysis of Balance Sheet Vertical Analysis of Income Statement

2. Common Size Trend Analysis Comparison with Base year a. Trend Analysis of Balance Sheet b. Trend Analysis of Income Statements

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4.2.2.1 Trend Analysis of Balance Sheet Table 4.1 Trend Analysis of Balance Sheet 2006 ASSETS Cash and Balances with treasury bank Balances with other banks Lending to financial institutions Investments Advances Operating Fixed Assets Deferred tax assets Other assets Total Assets LIABILITIES & OWNERS' EQUITY Bills Payable Borrowing from Financial Institution Deposits & other accounts Sub-ordinated loans Financial lease liabilities Deferred Tax Liabilities Other Liabilities Total Liabilities OWNERS' EQUITY Share Capital Reserve Un-appropriated Profit Surplus on Revaluation Total Owners' Equity Total Liabilities & Owners' Equity 100 100 100 100 100 100 149.9 119.4 119.1 11.5 110.9 110.4 202 131.8 17.1 65.2 117 125.54 % 100 100 100 100 100 100 -100 100 100 100 100 100 100 100 100 100 100 142.8 117.3 108.49 99.95 64 123.6 109.6 140.5 101.5 127 99.91 1.76 182.82 124.65 2007 % 89.76 47.68 172 137.7 101.6 135 145 110 2008 % 107.7 53.93 53.93 124.6 130 217 235 124

Source: Financial Statements of ABL for the year 2006, 2007, and 2008 are used
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4.2.2.1 Trend Analysis of Balance Sheet

4.2.2.1.1 Percentage Growth in Assets and Liabilities Again the horizontal analysis shows the same result as of vertical analysis. The total assets have increased to 110.% in 2006 to 124% in 2008. On the other hand total liabilities have increased approximately in same ratio as to from 109.6% in 2006 to 124.65% in 2008. The management focus on the non-current assets. The current liabilities have also increased with a greater proportion compare to long term liabilities.

4.2.2.1.1 Share Capital reserve and total Owner equity Share capital has increased from 149.9% in 2006 to 202% in 2008 which shows an increase in the value of bank. Reserves have increased from 119.4% in 2007 to 131% in 2008 which is also good sign. The total owner‟s equity has decreased from 110.9% in 2007 to 117% in 2008 which is not good as it represents the growth of the bank.

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Figure 4.1 Trend Analysis of Balance sheet of Year 2007
Cash and Balances with treasury bank Balances with other banks Lending to financial institutions Investments Advances Bills Payable Borrowing Deposits

180.00% 160.00% 140.00% 120.00% 100.00% 80.00% 60.00% 40.00% 20.00% 0.00% 2007

Figure 4.2 Trend Analysis of Balance sheet of Year 2008
Cash and Balances with treasury bank Balances with other banks 200.00% Lending to financial institutions 150.00% Investments Advances Bills Payable 50.00% Borrowing 0.00% 2008 Deposits

250.00%

100.00%

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4.2.2.2 Trend Analysis of Income Statement Table 4.2 Trend Analysis of Income Statement 2006
Markup/Return/Interest earned Markup/Return/Interest expensed Net Markup/Interest Income

2007 120% 124 114 29 25

2008 145% 152 138 29 74

100% 100 100 100 100 100 100 100 100 100 100 100

Provision against non-performing loans and advances Provision for the impairment in the value of investments Bad debts written off directly Net mark-up/ interest income after provision
Non Markup/Interest Income Fee, Commission & Brokerage Income Dividend Income Foreign Currency Income

57

82

104 125 112 2088 (138) 104 213.4

122 158 149 33 (1790) 106 126.5

Gain sale of investments-net

Unrealized gain/loss on revaluation of investments 100 Other income
Total Non-Markup/Interest Income Non-Markup/Interest Expenses Administrative Expenses

100 100

100 100 100 100 100 100 100 100 100

144 196 144 69 10 -(-231) 119

177 178 177 13 2 -101 17

Provisions/write offs Other charges
Total Non-Markup/Interest Expenses

Profit before taxation Taxation current year Prior years Deferred Profit after taxation

Source: Financial Statements of ABL for the year 2006, 2007, and 2008 are used
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4.2.2.2 Trend Analysis Income Statement Analysis

The horizontal analysis of the income statement of Askari Commercial Bank Ltd shows that the markup income is taken as 100% because it is the primary source and the real objective of the operations of the bank.

4.2.2.2.1 Markup Expenses

Markup expenses have increased from 124% in 2007 to 152% in 2008 which shows the management disability control on financial cost.

4.2.2.2.2 Net Mark-Up Income/Gross Profit

The net markup income/gross profit has reduced to 138% in 2008 from 114% in 2007 which is a negative sign and it is due to no control over markup expenses.

4.2.2.2.3 Non Markup/Non Interest Income

Total operating income has decreased from 213.4% in 2007 to 126.5% in 2008 and which is a negative sign. The total non-markup interest expense has increased from 144% in 2007 to 177% in 2008.

4.2.2.2.4 Net Income Net income of the bank have shown a steep decline in 2008 as it has drop down to 17% from 119% in 2007 and it shows a weak performance on the management part.

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Figure 4.3 Trend Analysis of Income Statement of Year 2007

250% Markup/Return/Interest expensed Net Markup/Interest Income 150% Total Non-Markup/Interest Income Profit after taxation 50%

200%

100%

0% 2007

Figure 4.4 Trend Analysis of Income Statement of Year 2008

160% 140% 120% 100% 80% 60% 40% 20% 0% 2008 Markup/Return/Interest expensed Net Markup/Interest Income Total Non-Markup/Interest Income Profit after taxation

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4.2.2.3 Vertical Analysis of Balance sheet Table 4.3 Vertical Analysis of Balance sheet 2006 % Assets Cash & Balances with treasury Banks Balance with other Banks Lending to Other Financial Institutions Investments Advances Operating Fix Assets Deferred Tax Assets Other Assets Total Assets Liabilities Bills Payable Borrowings Deposits & other accounts Sub-ordinate Loans Financial lease liabilities Deferred tax liabilities Other liabilities Total Liabilities Owner’s Equity Share capital Reserves Unappropriated profit Surplus on revaluation of assets- net of tax Total owner’s equity 1.04 3.50 1.3 0.86 6.66 1.21 3.81 1.1.8 0.09 6.73 1.96 3.71 0.14 0.45 6.29 8.96 4.42 5.05 17.24 59.69 2.29 2.29 100 1.11 9.01 79.40 1.81 -0.44 1.57 93.34 2007 % 7.33 1.92 7.93 21.64 55.32 1.11 3.04 100 1.44 9.64 78.52 1.64 0.0024 0.26 1.76 93.27 2008 % 7.77 19.1 2.17 17.3 62.4 4.1 4.34 100 1.25 7.36 81.3 1.45 -0.0062 2.308 93.70

Total liabilities & Owner’s equity 100% 100% 100% Source: Financial Statements of ABL for the year 2006, 2007, and 2008 are used

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4.2.2.3 Vertical Analysis of Balance Sheet A vertical analysis of balance sheet of Askari Bank shows that the Bank has financed its fixed assets more than the current assets. And the assets have been financed mostly be long term liabilities and a little by capital which goes in the favor of owners.

4.2.2.3.1 Percentage Growth in Assets and Liabilities Cash and cash Balances with other banks have decreased from 8.96% in 2006 to 77.7% in 2008. Lending to financial institution has decreased from 5.05% in 2006 to 2.17% in 2008. Investments have almost remained same during the time, 17.24%in 2006 to 17.3% in 2008.Advances increased to 59% in 2006 to 62% in 2008. On the other hand current liabilities have increased more than the long term liabilities. Bills payable and borrowings have increased 1.11% and 9.01% to 1.25 % and 7.36%. Deposits have increased from79% in2006 to 81.3% in 2008 and subordinate loans have decreased from 1.81%in 2006 to 1.45% in 2008.

4.2.2.3.2 Share Capital reserve and total Owner equity Share capital has increased from 1.04% in 2006 to 1.96% in 2008 which is good sign because it represents the increased profitability of the bank. Reserves have increased from 3.50% in 2006 to 3.71% in 2008 which is also good sign. The total owner‟s equity has decreased from 6.66% in 2006 to 6.29% in 2008 which is not good as it represents the growth of the bank.

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Figure 4.5 Vertical Analysis of Balance Sheet Year 2007

Share Capital 1% Sub-ordinated loans 1%

Total Owners' Equity Reserve 3% 2%

2007

Balances Cash and with other Balances with banks treasury bank Lending to financial 1% 4% institutions 4% Investments 11%

Deposits & other accounts 40%

Advances 28%

Borrowing from Financial Institution 5%

Bills Payable 1%

Figure 4.6 Vertical Analysis of Balance sheet Year 2008
Share capital 1% Reserves 2%

2008

Sub-ordinate Loans 1%

Total Cash & owner’s Balances with equity treasury Banks 3% 4%

Balance with other Banks 9% Lending to Other Financial Investments Institutions 8% 1%

Deposits & other accounts 38%

Advances 29%

Borrowings 3%

Bills Payable 1%

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4.2.2.4 Vertical Analysis of Income Statement Table 4.4 Vertical Analysis of Income Statement 2006 %
Markup/Return/Interest earned Markup/Return/Interest expensed Net Markup/Interest Income

2007 % 100% 57.35 42.65 25.89 0.99

2008% 100% 57.9 42.09 20.79 0.0027 1.34

100% 55.38 44.62 8.95 0.29

Provision against non-performing loans and advances Provision for the impairment in the value of investments Bad debts written off directly Net mark-up/ interest income after provision
Non Markup/Interest Income Fee, Commission & Brokerage Income Dividend Income Foreign Currency Income

36.65

16.74

19.95

8.05 0.86 4.64 0.89

7.08 0.91 4.33 15.59 0.01 2.24 30.15

6.83 0.94 4.74 0.199 0.12 1.86 14.71

Gain sale of investments-net

Unrealized gain/loss on revaluation of investments -0.02 Other income
Total Non-Markup/Interest Income Non-Markup/Interest Expenses Administrative Expenses

2.55 16.98

26.01 -0.05 26.06 26.56 7.80

31.62 0.08 31.70 15.19 0.65 -1.54

32.09 0.0024 0.06 32.16 2.50 0.094 -0.27 0.58 2.09

Provisions/write offs Other charges
Total Non-Markup/Interest Expenses

Profit before taxation Taxation current year Prior years Deferred Profit after taxation

0.89 17.86

0.89 17.70

Source: Financial Statements of ABL for the year 2006, 2007, and 2008 are used
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4.2.2.4 Vertical Analysis Income Statement

The vertical analysis of the income statement of Askari Commercial Bank Ltd shows that the markup income is taken as 100% because it is the primary source and the real objective of the operations of the bank.

4.2.2.4.1 Markup Expenses

Markup expenses have increased from 55.38% in 2006 to 57.9% in 2008 which is not a good sign.

4.2.2.4.2 Net Mark-Up Income/Gross Profit

The net markup income/gross profit has reduced to 42.09% in 2008 from 44.62% in 2006 which is a negative sign and it is due to no control over markup expenses.

4.2.2.4.3 Non Markup/Non Interest Income

Total operating income is 16.98% in 2006 and 30.15% in 2007 and 14.71% in 2008, which is a negative sign. The total non-markup interest expense have increased from 26.06% in 2006 to 32.16% in 2008.

4.2.2.4.4 Net Income Net income of the bank have shown a steep decline in 2008 as it has drop down to 2.09% from 17.86% in 2006 and it shows a weak performance on the management part.

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Figure 4.7 Vertical Analysis of Income Statement Year2007
Profit after taxation 12%

2007

Total NonMarkup/Interest Income 20%

Markup/Return/I nterest expensed 39%

Net Markup/Interest Income 29%

Figure 4.8 Vertical Analysis of Income Statement Year2008

Total NonMarkup/Interest Income 13%

2008

Profit after taxation 2%

Net Markup/Interest Income 36%

Markup/Return/I nterest expensed 49%

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4.3 Financial Ratios Analysis
Financial ratio is a ratio of two selected numerical values taken from an enterprise‟s financial statements. There are many standard ratios that are used to try to evaluate the overall financial condition of a company. Financial ratios may be used by managers within a firm, by current and potential shareholders (owners) of a firm, and by a firm‟s creditors. Security analysis use financial ratios to compare strengths and weaknesses from various companies. While conducting the analysis of Askari Bank I will use two set of ratios and will try to portray the financial health of the bank. The following ratios will be used for analysis purpose.  Profitability Ratios

Profitability Ratios Profitability ratios are a measure that indicates how well a firm is performing in terms of its ability to generate profit. Here are some ration are given below for the purpose to make inference on the basis of these rations

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4.3.1 Profitability Ratios of ABL
Table 4.5 Profitability Ratios of ABL Profitability Ratios 2006 2007 2008

Net interest margin

5,619,608

6,457,617

7,742,594

Operating profit margin Credit to Deposit Ratio Cost to income ratio Return on Assets(ROA) Return on Earning Assets Equity to Total Assets Earning Assets to Total Assets Loan Loss Coverage Ratio NIM to Average Earning Assets

26.56%

15.18%

2.50%

75% 146% 1.35% 1.87%

70% 179% 1.47% 1.71%

76.8% 1531% 0.18% 0.25%

5.79% 76.97% ---

6.64% 76.97% -4.819%

5.83% 79.77% 1733% 5.08%

Source: Calculated from the Financial Statements of Year 2006,2007, 2008

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4.3.1.1 Net Interest Margin Net interest margin is the difference in mark up interest earned and mark up interest expensed.

Net Interest Margin
10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 0 2006 2007 2008 Net Interest Margin

4.3.1.2Operating Profit Margin Ratio Operating profit is a ratio of Profit before Taxes and Markup/ return interest earned. It is also showing reduced performance of the bank. It has reduced from 26.56% in 2006 to 2.50% in 2008.

Operating Profit Margin Ratio
30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2006 2007 2008 Operating Profit Margin Ratio

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4.3.1.3

Credit to Deposit ratio

Credit to deposit ratio also depicts the varying performance by the bank. It is ratio of Advances and Deposits. CD ratio is 75% in 2006 and 76.5% in 2008. It means corporate customer credibility has increased during time.

Credit to Deposit Ratio
78% 76% 74% 72% 70% 68% 66% 2006 2007 2008 Credit to Deposit Ratio

4.3.1.4 Cost to Income Ratio Cost to income ratio is showing an increased tendency. The cost is increasing in a greater proportion as compare to income.

Cost to Income Ratio
20 15 10 5 0 2006 2007 2008 Cost to Income Ratio

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4.3.1.5 Return on Assets (ROA) This ratio comparatively gives not a good picture of the bank. It has reduced tremendously in 2008 to 0.18% from 1.35% in 2006.

Return on Assets(ROA)
2.00% 1.50% 1.00% 0.50% 0.00% 2006 2007 2008 Return on Assets(ROA)

4.3.1.6 Return on Earning Assets This ratio of Return on Earning Assets is calculated by dividing Net Income by Average Earning Assets. Earning Assets include Loans, Leases, Investment securities and money market assets. It excludes cash and non-earning deposits and fixed assets.

Return on Earning Assets
2.00% 1.50% 1.00% 0.50% 0.00% 2006 2007 2008 Return on Earning Assets

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4.3.1.7 Equity to Total Assets This ratio is calculated by dividing equity portion of balance sheet to total assets. The ratio had almost same performance in year 2006 and 2008 i-e 5.79% and 5.83%

Equity to Total Assets
6.80% 6.60% 6.40% 6.20% 6.00% 5.80% 5.60% 5.40% 5.20% 2006 2007 2008

Equity to Total Assets

4.3.1.8 Earning Assets to Total Assets Earning Assets to total assets ratio is calculated for each of the particular year and it is ratio of two balance sheet items It was almost same in year 2006 and 2007 i-e 77% but the ratio showed rising trend in 2008 to 79%.

Earning Assets to Total Assets
80.00% 79.50% 79.00% 78.50% 78.00% 77.50% 77.00% 76.50% 76.00% 75.50% 2006 2007 2008

Earning Assets to Total Assets

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4.3.1.9 NIM to Average Earning Assets Net interest margin to earning assets ratio is calculated by Net mark-up income to average earning assets of consecutive two years. This ratio has reduced from 2.7% in 2006 to o.25% in 2008.

NIM to Average Earning Assets
5.10%
5.00% 4.90% 4.80% 4.70% 4.60% 2007 2008 NIM to Average Earning Assets

4.3.1.10 Loan Loss Coverage Ratio This ratio shows asset quality and the level of protection of loans and is calculated as Pretax income + provision for loan losses / debts written off.

loan Loss coverge
1800% 1600% 1400% 1200% 1000% 800% 600% 400% 200% 0% 2006 2007 2008

loan Loss coverge

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4.4 SWOT Analysis
SWOT analysis is one of the most expedient technique or tool used in the Strategic Management process for conducting the situation analysis of an organization. The proper analysis of the firm is given in the form of Strengths, Weaknesses, Opportunities and Threats (SWOT) the company presently facing or can be forecasted for the future. It is a common approach to make assessments in terms of internal and external environment of the organization, and to formulate strategies analyzing its internal strengths and weakness, external opportunities and threats, coming up is the SWOT analysis for the ABL:

4.4.1 Strengths Firstly we analyze the Strengths of the ABL that are as follows: 

Computerization

The main strength of Askari Bank Limited is that all of its branches are fully computerized and they have latest software‟s available to keep the records of their customers account and other important information up-to-date. It reduces manual work and provides good customer services. 

Well-knitted branch network

ABL has a well-knitted and adequately equipped branch networking system that efficiently covers both the domestic and international markets. ABL has the largest branch networking in Pakistan. 

Largest Private Bank

ABL is one of the largest private banks with deposit base of Rs.167.68 billion/- showing constant growth over the period 1999 till day and with many online branches in major cities of Pakistan. 

Competent Staff

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Strength of Askari Bank Limited is that it has staff which is well qualified and capable of performing the task because of their expertise and training in the field  Customer’s Feedback

Customers are allowed to give suggestions regarding banking services. If there is any complaint by the customer the bank authorities investigates the reasons for complaint. Complaint monitoring system is excellent at Askari Bank that shows bank values more to its customers. 

International markets

ACBL is actively participating in international markets and has recently introduced credit cards in UAE, Bahrain and Qatar, being backed by 24 hours call center out of UAE. 

The ABL ATM Switch-Net

I.T group of ABL has been able to create the largest network for secure electronic financial transactions in Pakistan. 

Information System

Askari Bank has also invested heavily in information technology resources, which has now allowed bank to develop one of the most comprehensive and advanced system available. With the help of this system Askari bank has now achieved an “online” status via real time facilities and features available through nationwide network. With the team of highly qualified professionals, Askari Bank is able to use its real time system resources to provide customers with comprehensive account of their transaction on a daily basis. ABL is one of those few banks who are reaping the benefits of electronic transaction  Leadership in ATM’s

With over 186 ATMs and 106 online branches ABL is again an undoubted industry leader with connectivity extended to above than twenty five cities of Pakistan. ABL ATMs not only serve 24 hours cash convenience but also improve on the counter services and turnaround time at cash counters.
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Worldwide master card

The ABL ATMS Master Card has become a global service furthering the convenience to the customers. Traveling customers can access their accounts from a large number of internationally deployed ATMs and point of sale unit.

4.4.2 Weakness Secondly we analyze the Weakness of the ABL that are as follows:  

Due to risks such as political economy and legal the bank has suffered losses the main reason was piling up to of large amount of irrevocable debts. The bank still has traditional ways of operations in this advance technological environment. For example account opening registers, manual checking of vouchers.

  

Accumulated losses pushed the bank to cut down its promotional activities in order to reduce expenses for last few years. Although the bank has computerized accounting system, but still bankers make their entries in accounting register manually. In Askari Bank the individual difference has strong impact on the organization‟s performance due to wrong criteria of selection of employees. So with the passage of time individual differences start increasing which undermine the goodwill of the organization.

The advertising media used by Askari bank for publicity include mostly newspapers and journals. But the most powerful and effective media is of television through which people in Pakistan as well as outside Pakistan can have instant information about new products and developments of ABL

No availability of sophisticated equipment‟s in branches and lengthy credit processing and documentation procedures.

4.4.3 Opportunities Thirdly we analyze the Opportunities of the ABL that are as follows:
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 

ABL as a largest Pvt. Bank can increase it market share by producing good, market oriented and customer needs satisfying products. Askari Bank is now looking into new ways of providing banking services to its customers. New concept of mobile banking has been introduced by the bank, which will prove to be remarkable success in the field of consumer banking.

Customer feedback on different products and accounts have really improved the bank performance and encouraged the atmosphere for other future policies.

Askari bank is an active player in the loan business. Its strength in loaning stems from its ability to forge strong relationships not only with borrowers but also with bank investors. Bank can capture more markets by introducing new products for business community, as it is the only group, which can contribute more towards increasing the assets of the bank.

Foreign remittances are another area as present worldwide control system over transfer of currencies through illegal channels has facilitated the area for the banks.

There is a large pool of free MBA graduates who can be hired to achieve professionalism on its organizational culture.

Now computer literacy rate is increasing and its really big opportunity for Askari Bank that when public will have more knowledge about computers than they will be more attractive to the innovative products of Askari bank.

Increase the product range to fulfill customer requirements and ATM network, ABL can expend its 24 hours cash facilities to other cities of the country in order to meet growing market demand.

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ABL also has an opportunity to expend its new technological advancement like, Tele banking and Internet banking facilities in order to serve the customers more efficiently.

Due to efficient and experienced management group. ABL can also improve well and expend its foreign operation successfully.

Increasing need and potential of leasing in Pakistan provide ABL an opportunity to utilize its skills and efficiencies in leasing business as well.

4.4.4 Threats Finally we analyze the Threats of the ABL that are as follows: 

As the ABL leading in the domestic commercial banking sector in Pakistan, as such no any close competitors of ABL but every commercial bank is the competitors for each other. But mainly these are Habib Bank Limited, Bank AlFalah, MCB etc. they are threats for ABL. At any time they can capture the clients of ABL by providing any benefit more than that.

Political instability is also threat for the bank because instability leads to lower business. The same situation is prevailing in Pakistan.

In our county, the rate of inflation is increasing along with the unemployment. So due to increase in price of the products, the savings of the nation is decreasing with passage of time. So it is threat for the banking sector. In the future, the deposits of the bank will decrease.

ABL is giving higher rate of return to their clients on various certificates like, Defense saving certificate etc. Being a private commercial bank it should earn more than that of nationalized banks.

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Increase in competition due to increasing number of foreign banks offering highly specialized and attractive services.

Growing global technological advancements and adaptation of modern style of management in banking sector.

 

Extensive promotional campaigns run by competitors.

It is always threat for commercial banks. Because SBP is the role authority of Government, which monitors all commercial banks affairs, whenever it feels any regulation, it imposes without consideration of commercial banks plans etc.

Growing concept of Islamic banking in Pakistan economy can be a serious threat to ABL so they should start their Islamic banking in Abbott Abad branch as well.

The SWOT analysis is a mirror image of the banks present conditions. The management can elaborate strategic plans for capitalizing the available opportunities. ABL is continuously introducing new innovative products so as to cope with changing environment. It has a diversifiable culture. It has been leader of introducing many new ideas, products which are earning a lot for the bank and this struggle is still continuous with same acceleration. No bank has given such a comprehensive motive so if we want to look at the future of Askari bank they are going to touch new horizons of technology.

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CHAPTER 05 Recommendations and Conclusion
Findings and Recommendations are considered to be the most important part of internship report, without which no report is considered complete and meaningful. This part of report is based on the previous sections i.e. review and analysis. Moreover, for bringing suggestions, discussions have been conducted with the staff of ABL officers, who not only provided the basis for recommendations but also pointed out some areas, where the change for the development is utmost important. Realizing the importance of this section, efforts have been made to give feasible recommendations, which are categorized under the following headings.

5.1 Findings
5.1.1 Employee empowerment Bank recognizes its employees as the prime asset and key contributors to the performance of the bank and places great emphasis on the attraction, development, and motivation of its employees. 5.1.2 Better compensation packages During the year, the compensation package was substantially improved in order to Enhance employees‟ motivation and loyalty. 5.1.3 Involvement of Higher Management Whatever ABL have achieved would not have been possible without the patronage and support of the manager, which is greatly appreciated and acknowledged.

5.2 Recommendations 5.2.1 Generalization of Procedures
The procedure for opening an account should be simplified. The account opening form should be self-explanatory and include translation in Urdu for those customers who are not well read since the fact cannot be ignored that many people do not have a good understanding of English.
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5.2.2 Human Resource Department The importance of manpower cannot be denied in any organization. In case of banks it is the most valuable asset, because the bank is most sensitive organization and to be in harmony with this sensitivity, need for proper human resource is felt badly.

5.2.3 Basis for Promotion A sizeable promotion of the officers of ABL, are promoted in without test and interviews of officers cadre. The promotion policy must be too tight and transparent that no one may have the chance to promote on criteria other than required qualification, experience and performance. As for present excess staff, those not found up to the required criteria may be given GHS etc.

5.2.4 Management Chances On Merit In ABL, though vary rare fresh recruitment are made, and the bank faces saturation in personnel, now clipping will be more helpful. The downsizing will leave the ABL with the staff, to be retained on the basis of ultimate meritocracy with zero tolerance of incompetence. Now in this remaining workforce, a cultural change right from the top management down to the frontline, that better suits to present day needs of banking environment could be included through proper discipline and training.

5.2.5 Needs of Change in Recruitment Policy It is important to say that the external level market is full of required talent like MBA, M.COM. But on the country only graduation with simple subjects is still requisite qualification for officer‟s cadre, which has already worked amply in the devastation of ABL. Therefore the recruitment qualification to the officers frame work should be enhanced for simple graduation, to professionally qualified preferably masters in their respective fields.

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5.2.6 Delegation of Powers Delegating powers to the department in-charges up to the possible extent will most certainly reduce the workload on the managers and they would be able to perform well by taking quick remedial actions where necessary. Besides, the spare time will be spent dealing with matters of more important nature.

5.2.7 Development of Managerial Leadership In services industries like banks the need of managerial skill is much more important. It makes positive contribution towards effective results. Without development of managerial leadership, the effective utilization of the human resource will be impossible. ABL should also focus on this area and should avoid deficiencies in managerial leadership by applying modern style of management.

5.2.8 Computer Trainings The present conventional and orthodox training programs need to be made more comprehensive and reinforce with inclusion of computer training process.

5.2.9 Incorporated Marketing Strategy All the officers in the deposits department should be involved in the marketing and not just opening accounts and maintaining their records. This can be done through improving their personal relation skills of visiting the potential customers and convincing them to open accounts whenever wherever possible.

5.2.10 Change in Appraisal System To present performance appraisal system is good. However, it needs to be implemented in true sense. The drawbacks that are obvious like nepotism and favoritism etc., needs to root out and the culture of ultimate meritocracy in appraising needs be inculcated.

5.2.11 Credits and Advances Department The defaulted loans have showered the process of development of banking sectors in Pakistan and have reduced the lending capacities of banks. In result of which economic
55

growth has reduced and rate of industrialization has become lowered. Defaulted loans being the major cause for this depression, various suggestions and recommendations have been given with focus on ABL to overcome the drawbacks of this department.

5.2.12 Guidance for Risk Management Exclusive mandatory training concerning all possible aspects like financial management and organizational management is required to be develop and designed to achieve     Risk assessment ability Understanding of all legal matters Early detection ability Ability to develop and suggest sound strategies when needed.

5.2.13 Fake Financial Presentation by clients Banks should confirm that the provided figures by borrowing organizations are fairly audited and that the auditors are on the approved list of the bank and they have clear opinion about the affairs of company and nothing has been made secret.

5.2.14 Poor Management A large number of industrial units and projects became sick because of poor management. When a business become sick or fails it is unable to return the loans, it has taken, and as a result such loans become bad debts, to avoid this, it is the responsibility of ABL, to ensure that the company to which loan is sanctioned enjoys good management skills and reputation. This can only be confirmed, if the bank assesses the management of borrowing party by taking care of

i. ii. iii. iv. v. vi.

Length and type of experience Qualification and integrity Management style SWOT analysis Financial procedures and documentation followed by employees Span of authority and responsibility
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vii.

Decision making skills of employees

5.2.15 Proper Documentation Loans become irrevocable through court of law in case of default when the bank fails to prove their claims against delinquent borrower. If documents are obtained clearly as per terms of the loan it is not difficult for the counsel to get the decree against the defaulter. For proper documentation all the possible steps must be kept in mind.

5.2.16 Administrative Reforms  

Fast resolving of loan default cases is must.

The bank should plan to enhance its ATMs and Internet Banking Services with new features like inter-branch funds transfer, and the payment of utility bills.

The future focus of the ABL should be to improve the automation of the accounting processes and enhance the quality and effectiveness of MIS.

The ABL should increase press coverage and advertising to create effectively market it‟s corporate as well as product/Brand image.

The marketing policies and strategies must be clearly written and communicated to all the staff members. The Branch Managers must make the use of the staff in pursing the organizational objectives.

The Bank must reshape its portfolio of business by investing in higher growth areas, extending and developing its core competencies and moving out of week and non-core segment.

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5.3 Conclusion
Banking sector has adopted new techniques with the passage of time in order to compete in this world. ABL is one such bank that is successfully operating in its field. A system of regional management is in place to ensure the improvement in productivity. They are alive to the expectations of the customers. It is moving towards its goals. It has won many awards in the banking world. It achieves its target and playing active role in social sector as well. It is successfully creating the relationship with the nation. The performance of the bank is improving with the time. Its profitability has shown improvement over years, but still it requires improvement in infrastructure and technology. The bank aims at a prosperous future by “inspiring relationship” and work for the betterment.

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References
Annual Reports of ABL; 2006-07, 2007-08 Aslam, S (1999); Banking & Finance. Abbottabad. Hussain, S; Rana,K & Shabbir, A (1991); Banking Currency and Finance. , Lahore: Ilmi Kutab Khana. Iffland, Charles & Langueton, Pierre (1996); International Banking. New York: Irwin Book Co. Mr. Sardar Arif, Branch Manager, Abbottabad Branch, ABL. Siddiqui, Asrar H(2007) ; Practice and Law of Banking in Pakistan: 8th edition Royal Book Company, Karachi. www.askaribank.com.pk (Accessed December 27, 2009) www.askaribank.com.pk/Reports (Accessed January 15, 2010)

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Annexure A

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Annexure B

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Annexure C

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Annexure D

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Chief . DeputyFinance Foreign DeputyDeputyDeposit Cash Manager/ DeputyChief Bill Department Currency Department Chief Chief (Branch Chief and . Accounts .Accountant Cash Finance Manager) Control & Department Remittance Managemen . t

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