Professional Documents
Culture Documents
BLO
GSPOT.COM
PAKASSIGNMENT@GMAIL.COM
Introduction:
1.1 Executive Summary:
I have done my internship at The Bank of Punjab, Jauharabad Branch. There
are four departments in the branch, and I worked as an assistant in that
branch. For the first two weeks I worked in deposit department under the
supervision of Muhammad Faisal, where I have to perform following tasks:
• Entering information in KYC (know your customer) forms.
• Scanning and arranging specimen signature cards.
• Inform customer of essential conditions under which the account will be
operated.
Then another task for me was “issuing of cheques books”. It is one of the most
interesting works that I have learnt in the bank. Cheques books should be
issued only after all the formalities of the account opening forms, which have
been checked by the branch manager.
Maintaining Dispatch register and Inward Mailing register was also included in
duties assigned to me. I also used to help different employees in their work.
My work timings were from 9am to 5pm, six days in a week.
1.2 Objectives of Studying the Organization
Pakistan came into being on 14th August, 1947; sufficient banking services
were available in the areas forming Pakistan. Out of the total branches of the
nearly 3,500 in the undivided India, as many as about 1,500 branches were
existing in these areas.
It was agreed between the two countries that reserve bank of India shall
continue to function in the Pakistan territory until 30th September 1948 and
that Indian notes would continue to be legal tender at Pakistan until 30th
September 1948. Unfortunately, relationship between the two countries
became most strained immediately after independence; banking was mostly in
the lands of Hindus who immediately started transferring their offices and
assets into India. As a result most of the banks in Pakistan were closed down
and even those which were open were not doing any effective business.
The number of banking office in Pakistan came down to about 200 on 30th June
1948. Branches of some European banks were also functioning in a limited
manner, financing in export of crops, and their number was limited to about
20.
It was only the Habib bank, which transferred its office from Bombay to Karachi
Austral Asia bank was another bank, which was in existence in the Pakistan
territory at the time of independence. Despite of best efforts on the part of
government of Pakistan, no heady way could be made on this behalf and
reserve bank of India was in no mood to help the new country. Imperial bank of
India, agent of the reserve bank of India also started closing down its branches
in Pakistan.
Reserve bank also refused to advance money to Pakistan to make essential
payments such as salaries etc, also Pakistan’s share of Rs.75 billion in cash
balance was with held by bank, causing hardships to the newly born state. In
view of these hopeless state affairs it was agreed between the two countries
that reserve bank would serve as monetary authority in Pakistan only up to
30th June 1948.
2.1.1 Nationalization of Banks
Business Volume in terms of Investment, Current & Fixed Assets, Share Capital,
Revenues, Deposits, Advances, Income, and EPS for the last 5 years is as under:
• Over last five years, Pakistan economy grown with real pace. Because of
which record growth in Banking sector.
Source: http://www.bop.com.pk/
2.2.4 BOD’s, Management and Employees
2.2.5 Products
2.2.5.1 CONSUMER PRODUCTS
1. Saving Accounts
2. Current or demand accounts
3. Fixed accounts
1. SAVING ACCOUNTS(PLS)
These types of accounts are designed to encourage the saving habit of the
customer and lead to long term or invest relationship. Bank saving account are
in the nature of deposit accounts and are not normally available for drawings.
Rates of interest are typically ahead, by a small margin. Savings accounts with
the banking sector represent a very small proportion of total deposits.
Customer can make withdrawals from this type of account. The cash reserve
ratio is typically low then the current account because the withdrawals against
this account are very low.
1. Agriculture Schemes
2. Business Promotion Finance Schemes
1. Agriculture Schemes
There are many agriculture promotion schemes provided by BOP.
• Kissan Dost Agricultural Finance Scheme
• Kissan Dost Tractor Finance scheme
• Kissan Dost Aabiari Scheme
• Kissan Dost Mechanization Support Scheme
• Kissan Dost Farm Transport Scheme
• Kissan Dost Eslah-E-Arazi Scheme
• Kissan Dost Live Stock Development Scheme
• Kissan Dost Live Stock Scheme
Such type of schemes provides farmers a real plate form to accelerate. Some
facilities given by Kissan Dost Agricultural finance scheme are:
- Purpose
Provision of financial facility to farmers for purchase of inputs (Seed, fertilizer,
pesticides, fungicides etc).
- Amount
Maximum of Rs.500000 according to per acre limit of the crop.
- Security
Charge on Agriculture Land through Agriculture Pass Book.
- Insurance
The borrower will have to arrange life assurance under the Bank’s charge.
- Mark-up
9% mark-up per Annum.
BOP car loan is a demand financing facility to purchase brand new locally
manufactured/Assembled cars for personal use. This facility can be availed by
salaried person of different nature and by the business persons. All must have
the holdings of NIC.
BOP Aasaish loan is demand finance facility for purchase of consumer durable
goods like TV, Refrigerators, Mobiles, Microwave Oven, Fans, Audio/Video
system etc with no down payment, in addition with the free home delivery.
The financing tenure of this product is max 36 months. The nature of
employment should be salaried or the business man.
2.3 SERVICES
Head Office and the main branch of BOP is in Gulberg 3, Lahore & Egerton,
Lahore Respectively.
The Bank has been divided into seven regions
Each consisting a number of branches.
• Lahore Region
• Faisialabad Region
• Gujranwala Region
• Rawalpindi Region
• Karachi/Quetta Region
• Multan Region
• Peshawar Region
Rest are the branches working under these regions. Which are almost 270 in all
over Pakistan.
The distribution of funds to these departments are Banks internal matter and
they avoid to disclose. Through Financial Statements it is only possible to
analyze long term and short term financing.
4.4.4 E-Banking
The bank has a centralized database that is web-enabled. All the services that
the bank has permitted on the internet are displayed in menu. Any service can
be selected and further interaction is dictated by the nature of service.
4.4.5 Utility bills
The bank also makes possible the payment of electricity, gas and telephone
bills for its customers charging some commission on each payment.
4.4.6 Lockers
Commission charged on lockers provided by bank for customers, is also a source
of inflow for the bank.
4.4.7 Consumer financing
Personal Finance, mortgage finance, business finance, smart cash, auto
financing and travelers cheques are all sources of funds for the bank. The bank
finances all these loans and facilities on competitive mark up rates.
4.4.8 Agriculture financing
The bank provides adequate and timely financial assistance to the farmers to
improve production potential of agriculture sector. Insurance of leased assets,
animals, crops and life assurance of borrowers are all source of money for the
bank.
5 Critical Analysis
5.1 Critical Analysis of the practical exposure relating to theoretical concepts
This part of report is the essence of the internship, as this will help other
students to better understand the working environment of the bank by finding
the relationship between what is written in the books and what is actually
going on in fields. The theory written in the books in cases is not implemented
as it is. In some cases theory is implemented with a little modification but in
other cases theory has nothing to do with practice. In accounting, banks don’t
prepare worksheet, but part of worksheet is prepared like trial balance, but
little differences, theory and practice has substantial relationship. The
securities for the loans are handled in the same way as theory says like
mortgage, pledge, hypothecation, advances against insurance policies or
liquidation procedure is the same. The difference is there in the case of loans.
Theory talks about four or five terms of loans that is cash finance, overdraft,
loans etc., but in practice there are some more terms used like running
finance, demand finance etc. All other concepts of remittances, bills, foreign
exchange deposits, letters of credit are in accordance with theory almost. So
for a internee it is more important to learn new things which he/she has never
heard about in his/her course book.
To me, Theory gives you the direction to understand the processes and the
terminologies going across the World using best business practices in a broader
view covering each and every aspect of possible business scenarios. On the
contrary practical life is specific, enclosed in a jar. In practical professionalism
and firm’s environment is each and every thing. Professional life only builds on
the knowledge based on books even though it may only use 1% of the
theoretical knowledge.
Balance Sheet
As of DEC 31, 2007
2006 2007
Rupees in ‘000
Assets
Cash and balances with treasury banks 14,054,859 14210302
Balances with other banks 3,722,089 1927662
Lendings to financial institutions 11,846,823 2450000
Investments 28,233,211 73461695
Advances 101,319,954 133893585
Operating fixed assets 2,068,744 3252759
Deferred tax assets - -
Other assets 3,609,457 5778192
164,855,137 234974195
Liabilities
Bills payable 856,448 937647
Borrowings 6,989,424 17842915
Deposits and other accounts 137,727,606 191968909
Sub-ordinated loans - -
Liabilities against assets subject to finance lease 40,988 40321
Deferred tax liabilities 298,616 2205530
Other liabilities 2,816,341 2983079
148,729,423 215978401
Net Assets 16,125,714 18995794
Represented By
Share capital 2,902,490 4230379
Reserves 4,537,232 7427232
Unappropriated profit 3,219,246 3452842
10,658,968 15110453
Surplus on revaluation of assets - net 5,466,746 3885341
16125714 18995794
Income Statement
As of the year ended Dec 31, 2007
2006 2007
Rupees in ‘000
Mark-up/return/interest earned 11,579,036 17,539,094
Mark-up/return/interest expensed 7,508,795 13,939,377
Net mark-up/ interest income 4,070,241 3,599,717
Provision against non-performing loans and advances 340,626 1,616,421
Provision for diminution in the value of investments 33,000 24,479
Bad debts written off directly 100 246,869
373,726 1,887,769
Net mark-up/ interest income after provisions 3,696,515 1,711,948
Non Mark-up/interest Income
Fee, commission and brokerage income 473,212 653,512
Dividend income 1,385,875 1,804,878
Income from dealing in foreign currencies 239,804 377,233
Gain on sale and redemption of securities 389,063 2,039,535
Unrealized gain / (Loss) on revaluation of investments
classified as held for trading
Other income 466,435 547,635
Total non-markup/interest income 2,954,389 5,422,793
6,650,904 7,134,741
Non Mark-up/interest Expenses
Administrative expenses 1,751,970 2,250,777
Provision against lending to financial institutions 130,000 -
Provision against off balance sheet items 175 292
Other charges 38 37,950
Total non-markup/interest expenses 1,882,183 2,289,019
4,768,721 4,845,722
Extra ordinary/unusual items - -
Profit Before Taxation 4,768,721 4,845,722
Taxation - Current 880,997 169,252
- Prior years’ (19,921) -
- Deferred 83,469 250,772
964,466 400,103
Profit After Taxation 3,804,255 4,445,619
Unappropriated profit brought forward 169,817 3,219,246
Transfer from surplus on revaluation of fixed assets - net of tax 6,174 5,866
175,991 3,225,112
Profit available for appropriation 3,980,246 7,670,731
Basic Earnings per share - Rupees 9.01 10.51
Diluted Earnings per share - Rupees 9.01 10.51
Balance Sheet
Total Assets Rs in m 43,621 66,320 111,154 164,855 234,974
Advances (net) Rs in m 18,344 39,439 63,624 101,320 133,894
Investments Rs in m 11,458 16,198 18,026 28,233 73,462
Shareholders Equity Rs in m 3,052 4,420 6,777 10,659 15,110
Revaluation Reserve Rs in m 2,155 3,419 6,893 5,467 3,885
Deposits Rs in m 34,938 54,724 88,465 137,728 191,969
Borrowings from FIs Rs in m 2,684 2,832 6,791 6,989 17,843
• BOP’s income statement for the last five years represents a high growth in it.
• Its all due to the increase in equity , and increase in the deposits of the bank.
• Rise in the Markup Interest earning income results rise up in the profit of
bank represents increase in lending by the bank.
• Total earnings mark-up & non mark-up were rising 33% from last year. As
deposits and the lendings of the banks are rising up.
• Administrative expenses are increased with a great pace in last few years
because of high rate of inflation.
• Rise in expenses results decrease in the 22% percent profit from last year.
• Total assets were increased in last few years. 22% increase in the assets from
the last year represents growth in the Bank.
• As bank increase their paid up capital because of which SOE increase at the
end of 2006.
• BOP is grabbing the confidence of their customers results increase in the
deposits.
• Gross spread ratio defines the total spread of interest between borrowing and
lending.
• Spread: Difference between funded revenue as a percentage of average
earning assets and the cost of funds as a percentage of average paying funds.
• The higher the spread the higher will be the profit margin.
• GSR= Rev/CGS
• GSR= (Mark-up earned – Mark-up Expense)/Mark-up earned
• GSR is 2nd highest all over the globe in Pakistan.
• GSR of the bank is decreasing because of the decrease in margin, a SBP rise
up the interest rates on the deposits.
• This ratio tells what percent of interest is covered from the total income of a
firm or a bank.
• It tells the ability of a bank to pay its mark-up to the depositors..
• MP/Interest cover ratio= EBIT/Mark-up
• This ratio analysis tells profitability of a firm after paying all the taxes to
total income.
• Profitability of BOP is increased because of decrease in the tax paid to the
govt and of high spread ratio.
• BOP negotiated their taxes with the government and only paid 20% tax in
2006 and only 8% in 2007 instead of 35%
• This ratio gives an idea of returning net profit generated by the bank in
comparison with assets.
5.2.4.12 Cost/Income
• Operating cost includes all expenses charged to arrive at profit before tax
excluding cost of funds, provisions and head office expenses. Head office
expenses are not considered since all banks do not account for head office
expenses in their financial statements.
• Operating income means funded and non-funded revenue less cost of funds
and provisions.
• As administrative costs are increased because of which results decrease in
the cost to Income ratio.
5.3.3 STRENGTH
The Bank officers of BOP are considered as one of the most able professionals
in the banking world (some belong to BCCI). However, they have added some
local flavour in accordance with their targeted segmented. In my observation
that they interact with their clients as if they are their personal friends and
discuss about their problems as their own.
As a result of the compassionate and personalized services of the officers,
the clients’ perception for BOP is very high. They have trust and feel
themselves to be secure while dealing with BOP.
BOP has opened all its branches at commercial areas so that the customers
or clients face no problems in reaching to the bank. For example, Khanewal
Road Branch is being situated in business and commercial hub of Multan as big
volume in trade.
BOP has got a reliable and easy to use internal computer system. Every
information regarding the transactions in customers’ deposits has been
computerized. Data are properly maintained.
Good security system
Not excellent but good facilities are given to employees
5.3.4 WEAKNESSES
Satisfy dynamic consumer needs, BOP has made significant in roads in its
entire service spectrum. A lot of products have been introduced especially in
Retail Banking (Agriculture side) and people are increasingly becoming loyal to
the bank and because of feasible transactions. Optimum pricing and branding
strategies of the bank are helping to make customer feel secure and
convenient.
All the opportunities of the 21st century are to be availed in the information
technology. Information technology is the future of this dynamic world.
Therefore BOP should emphasize much on IT, especially on E-Banking. Bank can
design a universal account like other foreign banks, to enhance online
facilities.
BOP has introduced a number of financial schemes including special ‘Deposit
Accounts’. These accounts have their unique features. During the last three
years, BOP deposits have been increasing @ 40%, which is a very healthy sign.
Therefore, with the commencement of new schemes there can even be a
greater increase in its deposits
5.3.6 THREATS
6 Industrial Analysis
• As graphical shows NBP (National Bank of Pakistan) is the key player and the
leader in the industry with total assets and liabilities of RS. 764,609. While BOP
is RS. 234,991.
• Major Player Includes NBP, HBL, UBL, BAF, ABL, SCB and BOP.
• Total Assets of the major players in the industry are RS. 3,561,195 (M).
• BOP is considered as one of the major banks in Pakistan by assets.
• Like major Player NBP has the largest Profit before and after Tax i.e.,
28,452(M) and 19,405 (M) respectively. While BOP has PBT RS. 4,856 (M) and
PAT RS. 4,454 (M) only
• The total Profit before and after tax of the major players are RS. 99,835 (M)
and RS. 70,045 (M) respectively.
• Major Players in the Medium category of the Banking industry are AB, NIB,
ABN, Citi, SB BAH, FB.
• Total Assets and liabilities of this level comprised on RS. 1,091,083(M)
• Net Income of this level is RS. 9,567 (M)
• This level is giving a tough competition to the major players and trying to
grab there share.
• Few mergers are taking place and in future it is expected to be more because
to maintain SB Standard reserve ratio.
• Major Players in the Small category of the Banking industry are ATLAS KASB,
JS etc.
• Total Assets and liabilities of this level comprised on RS. 411,077 (M)
• Net Income of this level is RS. (2,176) (M)
• These Banks are going in loss overall in 2007. Since they are new players in
Pakistani Market. It is expected that they will give return in future.
To me the major and the most important flaw in the BOP is lack of internal
controls and inter communication between different branches of the bank. As
far as financial aspect is concerned there is no proper system is configured
that’s why there is always a risk of big frauds with in the bank. I during my
internship also pointed out that point but no one bothered. To me the bank
should install some proper resource planning and controlling systems like other
banks do i.e., oracle financials etc.
7.1.2 Professional Training
BOP staff lacks professionalism. They lack the necessary training to do the job
efficiently and properly. Although staff colleges are in all major cities of the
Punjab but they are not performing well. For this purpose these staff colleges
should be reorganized and their syllabus should be made in such a way which
can help the employee understand the ever-changing global economic scenario.
Banking council of Pakistan should also initiate some programs to equip the
staff with much needed professional training.
7.1.3 Delegation of Authority
Employees of the bank should be given a task and authority and they should be
asked for their responsibility. The sense responsibility in employees mind is one
of the most important factors in the success of any organization.
7.1.4 Performance Appraisal
During Internship I felt that there is no or very less appraisal of any ones cool
performance. The manager should strictly monitor the performance of every
staff member. All of them should be awarded according to their performance
and result in the shape of bonuses to motivated and incite them to work more
efficiently.
7.1.5 To Over Come Problem of Space and Furniture
Transfer is not properly carried out. Some of the employees are continually
serving at the same post. They are simply rotated at the same branch.
Therefore it is recommended that evenly rotation of every employee should
take place after every three years in different braches of the bank.
7.1.7 Changes in Policies
There should not be any abrupt policies change by the upper management, as
this practice hurts the customer confidences in the bank. Government should
make long-term policies
7.1.8 Need of Qualified Staff
Bank gets Rs. 2 to 3 to processes a utility bill, and it is very tire, tough and
hard job despite this working resulting in a loss to then Rs 3 to5 per
transaction. These charges should be increased to RS 10 per bill to enable the
branch to cover their handling costs and make some profit.
7.1.10 Link with the Head Quarter
100 major branches of BOP should established a direct link with the, head
quarter in Lahore, through Internet or Intranet. This will make the functions
and decision making of the management easier and convenient. Though
management has a plan to connect all branches via WIMAX technology. Which
would really bring a great future aspects.
7.1.11 Credit Card
BOP should start its operation in credit card. These cards are very helpful for
the ordinary customer in general and the business people in particular. To
make it mores secure and to eliminate the misuse of it, the management is
required to keep proper security against the card.
7.1.12 Clean Loans
Clean loan or clean overdraft is the credit facility extended to the customers to
the customers without any security. These types of small term loans should not
be extended to anybody, because sometime these loans are provided to blue-
eyed people of the management and they become a part of bad debts.
7.1.13 Cash Financing
In this mode of financing the amount of credit not utilized by the borrower is
remained tax-free. It is recommended that a small amount of interest should
be charged on this amount as well because the bank gas kept-aside the amount
for that borrower and can not advance it anywhere.
7.1.14 Decreasing Administrative Expenses
Bank should decrease their administrative expenses. This was Rs 2.25 billion in
the year 2007. That can be done by lying off the surplus pool of employee with
golden hand shakes scheme. The branches that are not much used could also be
closed. That will give positive results in the future.
7.1.15 Should be Aggressive in Credit Policy
I would like to suggest that at least all the main branches of BOP should be
fully computerized in order to expedite the dealing process among bankers and
their customers. Every department should be provided a computer with
adequate training (especially Advances, Deposits and Foreign Exchange
departments). Daily records should be entered directly into these computers,
(instead entering the overall daily transactions after the banking hours). It will
not only reduce transaction time, will increase accuracy but will also be
efficient as well.
Not only it will be economical but will also reduce the extra burden of work of
the bank. It will also help in reducing the use of excessive paper work.
7.1.17 Staff Relationship
Good relationship among staff member leads to the peak performances in any
organization. I observed that the staff relationship was normal other wise but
some time I noticed that there exists little conformity among the staff
members. Another syndrome from which the staff suffered was that all of them
considered themselves more important than others. Some of the officers used
to say that if I am absent for a day the bank would stop working. So this sort of
attitude is not good because it mars bank image and juniors’ willingness learn
and work hard and in the end will hurt the whole team.
7.1.18 Improper Distribution of Work
In the Main branch during my internship I saw that when some of the employees
are transfer to other places, due to their relation with influential people and
with top management they can cancel their transfer in few weeks, when they
are unsatisfied at that place.
So I suggest that in the organization there should be no favouritism, nepotism
and politics and their transfer and promotion should be made on merit and
according to the rules and regulations of the bank and provided favourable
environment to the employee to show their performances.
7.1.20 Inter Departmental Transfer
I watched during my internship that, there employees who have worked on one
seat for many a year. It can have negative effects motivation of employee who
is hard working and intelligent. Take the example of advances section. In
advance section if the employee is transfer after sixth month or seven month,
how can he be able to show his performances and how can he be able to know
the bank customer in a short period of time.
7.1.21 Marketing Policy
The branch should adopt various marketing strategy and promotion strategy to
promote the bank and its product.
The most important in my opinion is personal marketing; it is the most
effective of all when you think in term of branch level. But on the whole
organization level, they should arrange the seminar with in the bank and
outside the bank. They should introduce various prizing schemes just like Allied
Bank. Karamad Scheme, Bank Al-Fallah (monthly income earning scheme) and
various others.
They should do more advertising through newspaper and media and through
channel of personal contacts.
7.1.22 Complaints of Customer
The credit department of the bank should carry out vigilant credit monitoring.
They should ensure the proper payment of instalments and the mark-up by the
borrower.
The staff members who have done all the paper work of the loan extension
should perform the monitoring, as he/she will be having more information
about the borrower.
7.1.25 Extended Banking Hours
Bank should initiate these loans because most of bank’s customers are middle
class and they cannot afford to buy house or household goods at once by their
own.
7.1.27 Avoiding Bad Debts
Great care should be taking while extending the loan. Loans should be awarded
against reasonable securities, where market value should be equal to the loan
granted.
Policies should be crafted in a way to ensure that no loan is extended on
political pressure. SBP regulation for loan approval should be strictly followed.
According to which the current ration of borrower’s business must be 1:1 and
the debt to equity ratio should be 60:40, means the liquidity position of
business should be healthy.
7.2 RECOMMENDATIONS FOR STUDENTS
In this section some recommendations for those students who are planning for
an internship at BOP particularly and in any other bank generally. The most
important of all is the difference between what we learn from the books i.e.
the theory and what actually is done i.e. in practice. This difference is
described in detail below:
7.2.1 Working in different departments
During my internship I observed that other internees in the bank use to stick
with one department only. An internee with specialization in Finance was of
the view that he should be in Finance department same was the case with
other specialized Internees. But I would suggest that one must work in every
department for some time to gain a hand on experience of all the departments.
As in real working environment employee have to coordinate with other
departments, so he/she must know what the other departments operations are
and how they work.
7.2.2 Relationship between Theory and Practice:
This part of report is the essence of the internship, as this will help other
students to better understand the working environment of the bank by finding
the relationship between what is written in the books and what is actually
going on in fields. The theory written in the books in cases is not implemented
as it is. In some cases theory is implemented with a little modification but in
other cases theory has nothing to do with practice. In accounting, banks don’t
prepare worksheet, but part of worksheet is prepared like trial balance, but
little differences, theory and practice has substantial relationship. The
securities for the loans are handled in the same way as theory says like
mortgage, pledge, hypothecation, advances against insurance policies or
liquidation procedure is the same. The difference is there in the case of loans.
Theory talks about four or five terms of loans that is cash finance, overdraft,
loans etc., but in practice there are some more terms used like running
finance, demand finance etc. All other concepts of remittances, bills, foreign
exchange deposits, letters of credit are in accordance with theory almost. So
for a internee it is more important to learn new things which he/she has never
heard about in his/her course book.
To me, Theory gives you the direction to understand the processes and the
terminologies going across the World using best business practices in a broader
view covering each and every aspect of possible business scenarios. On the
contrary practical life is specific, enclosed in a jar. In practical professionalism
and firm’s environment is each and every thing. Professional life only builds on
the knowledge based on books even though it may only use 1% of the
theoretical knowledge.
8 Conclusions
By analyzing the financial statements of the bank, I came across to know that it
is one of the most growing bank in the subcontinent. Now they should carry on
with the present management which too k it from one of the ordinary bank to
this level. No doubt professionalism and internal controls of the bank are one
of the major issues which may results some major losses to the bank. Bias in
hirings and between colleagues should be removed