CHAPTER # 1

Introduction of the
Organization

1
1. INTRODUCTION

Faysal Bank started operations in Pakistan in 1987, first as a branch set-up of Faysal Islamic

Bank of Bahrain and then in 1995 as a locally incorporate Pakistani bank under the present

name of Faysal Bank Limited. On January 1, 2002, Al Faysal Investment Bank Limited,

another group entity in Pakistan, merged into Faysal Bank Limited which resulted in a larger,

stronger and much more versatile institution. In fact it has the highest share capital amongst

private banks in Pakistan and is amongst the largest in terms of equity. Faysal Bank Limited

is a full service banking institution offering consumer, corporate and investment banking

facilities to its customers.

The Bank’s widespread and growing network of branches in the four provinces of the country

and Azad Kashmir, together with its corporate offices in major cities, provides timely and

differentiated services in an effective manner. The strength and stability of Faysal Bank

Limited is evident through the Credit Rating assigned by JCR-VIS Credit Rating Company

Limited of “AA” (Double A) for long to medium term and “A-1+” (A One Plus) for short

term.

The majority share holding of Faysal Bank Limited is held by Ithmaar Bank B.S.C an

investment bank listed in Bahrain. The remaining shareholders comprise of general public,

NIT and other Pakistani institutions.

1.1 VISION

“Excellence in all that we do.”

2
1.2 MISSION

“Achieve leadership in providing financial services in chosen markets through innovation.”

1.3 Group Information

Ithmaar Bank B.S.C. is licensed by the Central Bank of Bahrain and listed on the Bahrain

Stock Exchange (ITHMR). It has a paid-up capital of US$360 million, total equity of US$1.1

billion and is a full investment bank with its direct business covering the Middle East and

North Africa (MENA) region, as well as South Asia, Asia-Pacific and Europe. Besides

holding significant investments in the banking, financial services and real estate sectors in

different markets, the main activities of the Bank include underwriting (equity and other

financings), private equity (structuring, participation and portfolio management), Islamic

financing, private banking, and advisory services covering project financing, investments,

capital markets and mergers & acquisitions.

1.4 Capital and Ownership

The majority share holding of Faysal Bank Limited is owned by companies of the Dar Al

Maal Al Islami Trust (DMI) including Shamil Bank of Bahrain E.C. The remaining

shareholders comprise of the general public, NIT and other Pakistani institutions. The Bank’s

shares are quoted on the Karachi and Lahore Stock Exchanges.

1.5 Conformity to Islamic Sharia’a

The Holy Quran outlines for Muslims a complete code of life for dealing individually or

collectively. This is future amplified by saying and practice of Holy Profit(May be upon him)

From these guidelines , an Islamic economic system can be elaborated upon, aimed at

creating a socially, economically and politically viable and just environment supporting the

universal well being of humanity

3
In this context all functions of the bank are performed in strict adherence to the principles of

Islamic Sharia’a. In order to ensure such conformity of Sharia’a, the Bank operations are

checked and monitored by its Religion Supervisory Board to whom the management reports

periodically. In case of new operations and activities prior approval of Religious Supervisory

Board is invariably obtained by the bank management.

The Religious Supervisory Board of the bank itself comprises eminent scholars of Islamic

Sharia’a from Bahrain, Egypt, Saudi Arabia, Turkey, and Pakistan possessing in-death

knowledge of the conditions in which the Bank operates. The Groups Religion Board,

composed also of many internationally renowned Islamic Scholars, provides advice from

time on issue that pertain to Group level implementation

The members of the board are highly respected individuals who have substantial knowledge

and experience of corporate law and regulatory practices and running successful businesses,

industries and financial sector enterprises.

The day to day affairs of the bank are managed by professionally qualified and experienced

finance, business and banking professionals with substantial exposure in their respective

fields of specialization providing the bank with a fine blend of expertise in various

financials/banking disciplines under one roof.

1.6 PRODUCTS AND SERVICES

FBL offers a wide range of banking products and services to public and private sector

corporations, partnerships, individuals, professional, and expatriate Pakistan working abroad.

These include:

4
1.2.1 Faysal Savings Account

Faysal Savings is specially designed to cater to the need of those who like to earn on their

hard earned savings. This account provides convenience for the account holders.

1.2.2 Faysal Sahulat

Faysal Sahulat is a transactional account specially designed for individuals and business

customers who seek instant access to their funds at any FBL branch in Pakistan.

1.2.3 Rozana Munafa Plus

Rozana Munafa Plus is a savings account in which profit is calculated on day end balance,

and is disbursed on a monthly basis. The customer gets benefited because it provides

customer with the option of a high value, monthly profit account.

1.2.4 Basic Banking Account

As per SBP prudential communicated via BPD circular No.30, Faysal Bank has introduced

the Basic Banking Account (BBA) to cater the needs of low income groups having the

following features.

1.2.5 Faysal Moavin Savings Account

Faysal Moavin is a Savings account made for genuine individual savers. Faysal Moavin

offers the perfect combination of savings account matched with the flexibility of a current

account.

1.2.6 Faysal Premium

5
Faysal Premium is a savings account specially designed for high value deposits with

attractive profit rates.

1.2.7 Faysal Izafa

Faysal Bank realizes that every customer's financial needs are different. As a result, the

Faysal Izafa Term Deposit is designed to provide individuals and corporate customers an

opportunity to grow their money securely and earn attractive profits.

1.2.8 Faysal Mahfooz Sarmaya

Faysal Bank endeavors to build and strengthen customer relationships by providing

innovative banking products and services. To provide convenience and value to customers

with foreign currency related needs, Faysal Bank's Mahfooz Sarmaya foreign currency

account offers attractive features:

1.2.9 FCY Saving Plus

FCY Saving Plus is a new foreign currency savings account with attractive profit rates where

customers get their profit on a monthly basis.

1.2.10 Consumer Finance Products

• Faysal Car Finance

• Faysal Housing Finance

• Faysal Finance

1.2.11 Faysal House Finance

Product Features

• Buying a new home.

6
 • Building a new home.

• Buy a Land plus construction.

• Remodeling or Renovation of Existing home.

1.2. 12 Corporate and Investment Banking

• Corporate Financing

• SME Finance

• Trade Financing

• Treasury & Capital Markets

• Investment Banking

• Agricultural Financing

• Cash Management

1.2.13 Corporate Financing

Faysal Bank Limited is fully geared to meet the changing economic challenges present in

Pakistan. FBL is ever striving to build meaningful relationships with its customers and

become partners in their growth and progress by acting as financial advisors and consultants

as well as financiers. Its Corporate Finance Group extends both short and long term financing

facilities designed to fulfill the individual need of each corporate customer.

1.2. 14 Small and Medium Enterprise Financing

Small and Medium Enterprise (SME) unit of the Bank is geared towards catering to the

banking requirements of small to medium businesses in a timely and therefore cost effective

manner. All the branches of Faysal Bank are equipped to speedily attend incoming financing

7
requests from SMEs. FBL helps its customers grow from strength to strength by acting as

their bankers and financial advisors.

1.2.15 Trade Financing

Faysal Bank has established a strong presence globally in Trade Financing through its

network, affiliates and correspondents. The Bank has conveniently maintained relationships

with major banks in the international financial market and continues to develop new ones

wherever needed. Its Trade Finance services include a full range of import, export and

guarantee products, thus offering tailor-made solution to fit the individual need of each

customer.

1.2.16 Treasury and Capital Markets

Faysal Bank's Treasury is one of the leading market makers in quoting competitive prices in

all major currencies and provides dynamic corporate and institutional marketing teams with

up-to-date market information. The bank’s cutting edge is the in-time advice and execution of

deals for its customers.

Faysal Bank's treasury team strives to satisfy the customer's financial needs in a timely and a

flawless manner. Faysal Bank has earned immaculate reputation in the field of Capital

Markets, which is quite evident from its track record and market share in this area.

1.2.17 Investment Banking

With the ever-changing business environment in Pakistan, companies need expert partners

with a keen understanding of business to help achieve profit objectives. At Faysal Bank, the

leaders of businesses and institutions are offered, corporate advisory services and a wide

array of tools to help them accomplish their goals. The bank advises and facilitates the

arrangement of commercial paper, syndications, mergers, acquisitions and underwriting

8
arrangements amongst many others. Whether the customers require financing of a project or

managing of investments, it can guide them through the markets and tailor a solution to meet

their specific needs.

1.2.18 Agricultural Financing

Faysal Bank offers specialized products for the agricultural sector. All of its branches located

in agricultural areas of Pakistan are equipped to help the local farmers improve their yield

and methods of farming by offering timely and affordable modes of financing to suit their

needs. To increase its outreach into agricultural regions of Pakistan, Faysal Bank has entered

into strategic partnership with the specialized entities engaged in the Agro related supplies

and services.

1.2.19 Cash Management

Faysal Bank's Cash Management department has emerged as one of the leading cash

management solution providers in strategic markets such as local corporates, multi-national

companies, and mid-tier markets. Faysal Bank's role in these segments, span the entire

spectrum of services including, but not limited to Strategic Receivables/Payables

Management, Corporate Electronic Banking, Payroll and Fund Management Services,

Dividend Processing, and Process Re-engineering. Success of Cash Management services is

primarily attributable to its focus on providing streamlined and customized solution that adds

value to business process of its clients.

1.2.20 PocketMate Visa Debit Card

Combining the wide acceptability of a credit card and the thoughtful prudence of an ATM

card, Faysal Bank PocketMate is the most convenient way to carry cash. No more fear of

overspending. No more searching for the nearest ATM. PocketMate Visa Debit Card

provides customers with the freedom of world wide acceptability at over 27 million merchant

9
outlets as an ATM card operative at all ATMs in Pakistan plus at over 1 Million ATMs

worldwide bearing VISA logo.

1.2.21 Travelers Cheques

Customers can purchase American Express, US Dollar and Pound Sterling Travelers cheques

at selected branches of Faysal Bank.

1.2.22 Transfer of Funds

Customers can deposit and withdraw cash from any branch of Faysal Bank, regardless of

which branch the account is in. Customers need only to carry their cheque book.

1.2.23 Money Transfer through SWIFT and Western Union Service

Customers of Faysal Bank can now easily and speedily transfer funds in foreign currency

through the SWIFT system installed at the Bank. Customers who receive money transfers

from overseas through the Western Union service can now withdraw their funds through any

Faysal Bank branch.

1.2.24 Safe Deposit Lockers

At Faysal Bank, customers are offered Safe Deposit Lockers in a pleasant and secure

environment. All lockers are discretely placed within the Bank’s professionally guarded

premises. Lockers are available in three different sizes to suit individual customer needs at

reasonable rentals. Faysal Bank also offers an added insurance feature with locker.

1.2.25 Non Stop Banking

All branches of Faysal Bank remain open for business from 9 a.m. to 5 p.m. from Monday to

Thursday and Saturday. On Friday, the bank is open from 9 a.m. to 12.30 p.m. and then again

10
from 3 p.m. to 5 p.m. To suit customer needs, FBL has extended its banking hours on

Saturdays. Now customers can enjoy its consistent and quality service from 9 a.m. to 5 p.m.

11
 CHAPTER # 2

DEPARTMENTLIZATION

12
2 DIFFERENT DEPARTMENTS OF FBL

Different departments of Faysal Bank are as under:

2.1.1 Operations Department

Operations Department is subdivided into following four departments:

• Remittance

• Cash

• Account Opening

• Customer Service

2.1.2 Agri-Finance Department

This department provides agriculture loans to the formers at nominal rates with easy terms. It

includes short term financing for fertilizers, seeds, pesticides etc and long term financing for

purchase of harvesting machines and installation of tube-wells etc.

2.1.3 Credit Administration Department

This department supervises the loans either given or received in the form of deposits. It

administers the conditions imposed at the time of delivering of loan like security etc.

2.1.4 Marketing Department

It peruse the customers to make business with the bank either in the form of deposits or by

applying for financing. Different tools and techniques of marketing are used such as making

13
contact personally with the customers, advertisement through television, news papers and on

the website.

2.1.5 Consumer and Finance Department

This department provides loans to the ultimate consumer in the form of car leasing, house

financing and as well as personal loans. Besides this it also administers the loans already

given.

2.1.6 Documentary Credit and Foreign Trade Department

This department provides assistance to customers regarding foreign trade, such as it deals

with the international companies and provides goods and services required by customers. The

kind of assistance it provides includes letter of credit facility, guarantor and also helps in

foreign remittances.

14
 CHAPTER # 3

WORK DURING INTERNSHIP

WORK DURING INTERNSHIP

15
Departments, I served

During my internship at FBL, I got a chance to work in three main departments.

These are:

• Clearing Department

• Account Opening

• Remittance

3.1 Clearning

I started my internship in the clearing department where my supervisor was Madam Shabnam

Riaz. I spent 4 weeks in this department. During my stay in this department, my supervisor

told me the basics and the practical work involved in cheque clearing and cheques received

for collection purposes.

I would like to start from cheque clearing. The major things involved in this context are to be

discussed here.

3.1.1 Types of Clearing

The Clearing process is of two types:

• Inward clearing

• Outward clearing

The clearing facility is provided by the state bank of Pakistan for offsetting of cross

obligations between the different banks. The facility is now handed over to NIFT abbreviated

as National Institutional Facilitation Technologies Pvt. Limited. I will discus both clearing

through SBP and through NIFT and their roles after discussing inward and outward clearing.

16
 Inward Clearing

Inward clearing is where the FBL customer draws cheque in the favor of a non- FBL

customer. The inward clearing process decreases the deposits of the bank. In FBL, inward

clearing is now centralized and the CPU (Central Processing Unit) at the Mall does all the

inward clearing like verification of cheques, stamping and posting etc. In case of any

difficulty, the CPU sends faxes to the respective FBL branches regarding the confirmation of

client and also the signature verification of the client. The branches then reply to the faxes

after necessary verification and fax them back if the status of the client is ok and ask the CPU

to make the payment. In case of any difference in the signatures of the client as per stored

signature database, the bank carefully monitors and discourages the payment of such doubtful

cheque. The branch only maintains all the correspondence with the CPU in a separate file

named as “Inward Clearing to CPU”.

 Outward Clearing

Outward clearing means cheques drawn by non- FBL customers in favor of the FBL

customers and deposited in one of the branches of the FBL. The outward clearing increases

the deposits of the bank.The outward cheque clearing process is now centralized meaning

there by all the posting of the cheques is done at the CPU. When a branch receives cheques to

be sent for local clearing, the following work is done:

• Counter foil of the pay-in slip signed by an authorized officer of the branch bearing

the stamp “Received for Clearing” is returned to the customer for his/her record.

• The cheques received at the counter are then given to the clearing department for the

purpose of clearing.

• The clearing officer does all the necessary scrutiny of the cheques like:

17
 • Checks the date of the cheque. This is the most important thing in the cheque clearing

process. The post dated cheques should not be received for clearing. They should be

received on the date mentioned on the cheques.

• The amount in words and figures must be matched.

• The account title must be same on the cheque and the bank’s copy of the deposit slip.

• The cheques are checked for crossing whether it is simple crossing or payee account

crossing. In simple crossing, the cheque is deposited in the account but it can be

endorsed in favor of another party other than the name of the payee on the cheque. In

account payee crossing, the amount must be credited in the account bearing the name

on the cheque.

• The clearing officer also checks that there should not be any cutting and overwriting

on the cheques.

• The cheque should not be mutilated. If so, the stamp of “Mutilation Guaranteed” must

be affixed at the back of the cheque and is duly signed by the authorized officer.

After looking for the necessary components of the cheque, the next procedure is to affix

stamps on the cheque and the deposit slips.

3.1.2 Stamping on the Cheques and Deposit Slips

For cheques, two stamps are affixed:

• “Payee’s Account Credited” on the back of the cheque.

• “Clearing Stamp” on the front of the cheque.

For deposit slips, only one stamp is used:

• Clearing stamp.

18
 • The stamps are duly signed by the authorized officer of the bank. In FBL new garden

town branch, the manager operations Mr. Ahsan Iqbal Sheikh signs the stamps.

The date on the clearing stamp is always one day ahead, because the cheques are presented in

the concerned branches the next day for payment.

3.1.3 Preparation of Excel Sheet

All the cheques are entered in the excel sheet in lots of 50. In the excel sheet, following are

the fields that are filled:

• Cheque amount.

• Deposit slip amount.

• Depositor’s account number.

3.1.4 Jotting

After the preparation of excel sheet the cheques and the deposit slips are separated and jotting

of cheques and deposit slips is separately done in order to assure that the total of all cheques

agrees to the total of deposit slips/vouchers.

3.1.5 Cheques ready to sent for clearing

After jotting of cheques, the cheques are bundled in lots of 50 and a bundle cover is attached

to the cheques which are provided by the NIFT containing the following information:

• Bank /Branch code.

• No. of Instruments.

• Date.

• Amount of total cheques.

19
 • Signature by the Manager Operations

After preparing bundle covers, a sheet is prepared named as “Outward cheques for Clearing”

which includes the total number of instruments and the deposit slips and the consolidated

amount of the cheques. The sheet is duly signed by the Manager Operations and is then

attached with the bundle of cheques and the deposit slips and send for the purpose of clearing

to the CPU Mall where these cheques are again scrutinized and entries are posted in the

system. After posting the cheques, the NIFT riders come to CPU and collect the cheques for

clearing.

3.1.6 Filing of Documents

NIFT sends daily scroll sheet to the bank’s branches which contains the detail of both inward

and outward cheques returns. This sheet is kept along with the print out of daily excel sheets

in a separate file named as “Outward Cheques for Clearing”.

3.1.7 Same Day Clearing

The practice of issuing SBP cheque on behalf of the customers for the purpose of same day

adjustment adopted by the banks have been dis-continued and a system has been introduced

for same day clearing through NIFT.

3.1.8 Pre- Requisites for Same Day Clearing

The following are the requirements for availing this facility:

• Same day clearing is restricted to instruments valued at Rs. 500,000/- and above and

received by 10:00 AM.

• The depositor must make specific request to the branch for same day clearing.

20
 • The same day clearing is restricted to the branches that are designated only which

will ensure that the timings in this respect are strictly followed.

3.1.9 Cheques Returned in Outward Clearing

The cheques which are sent for local clearing may be returned for the following reasons:

• Funds Insufficient

• Signatures Differs

• Dormant Account

• Stop Payment by the Drawer etc.

The returned cheques are entered in the separate register called “Returned Cheques in

Outward Clearing” the day when they received. After making the entries, the client is called

for the collection of such cheques. If the client does not come to the bank after the reasonable

time period, the cheque is then dispatched to the customer along with the letter containing the

details of the cheque like cheque date, cheque number and the reason for return of the cheque.

The photocopy of both the cheque and the letter is kept in a file called “Returned Cheques

Dispatched”.

If the client comes to collect the cheque, photocopy of the cheque and the return memo is also

kept and then receiving of the client is taken on the cheque return register and the

photocopies of both the cheque and the return memo are kept in a file named as “Returned

Cheques”.

Now I would like to discuss the procedure of clearing through State Bank of Pakistan and the

role of NIFT in the clearing process.

21
3.10 Cheques on Collections

Cheques for collection are those which are not included in the local clearing. They are

outsidcity cheques. There treatment is somewhat different as compared to local clearing

cheques.

 Procedure for Cheques on Collection (COC’s)

The collection is also handled by the clearing officer. When the concerned staff at the counter

collects the cheque for collection purposes, the customer’s copy of the deposit slip is returned

by affixing the stamp “Cheque Received Subject to Realization”, which means that on the

realization of the cheque, amount will be transferred to the customer’s account. The same

scrutiny of the cheques is done as in the case of clearing.

 Stamping of the cheques

The following stamps are used for collection:

• Crossing stamp of “Faysal Bank Limited” on the face of the cheque.

• “Payee’s Account will be Credited on Realization” stamp on the back of the cheque.

• “Outward Collection Number” stamp on the back of the cheque. The same stamp is

also affixed on the deposit slip.

 Entries in the Register

After stamping, the entries of the cheques are made in a register called “Outward Bills for

Collection” (OBC). The register contains the following fields:

• Date.

• Beneficiary Name.

22
 • Cheque Number.

• Account Number.

• Amount.

• Bank Name and Address.

 Posting Entries in the System

After stamping and entries, the cheques are posted in the system. The software used for this

purpose in Faysal Bank is “SYMBOLS”. After posting of cheques, the letters are printed

from the system containing the address, name, cheque number, amount of the cheque. The

letter is stamped with the Faysal Bank crossing stamp and is duly signed and stamped by the

authorized officer, here in this case is the Manager Operations of the bank. The stamps are

also signed by him.

 Collection Area where FBL has its Branch

For those outside city areas, where Faysal bank has its branches, cheques on collection are

sent to these branches which collects the funds from the branches on which cheque is drawn

and then credits the same in the customer account. This branch sends those cheques in its

local clearing and after the clearing process the funds are transferred to the customer’s

account.

 Collection Area where FBL has no Branch

Those areas where FBL has no branch, the cheques are directly sent to the branches on which

the cheques are drawn. These branches draws a Demand Draft in favor of Faysal Bank which

when received by the branch lodge in the local clearing for the release of funds.

23
  Time Period for Collection

Where FBL has a Branch 3 Days

Where FBL has no Branch 7 Days

 Filing of Documents

After the preparation of the letters and cheques, the photocopies of the cheques and the letters

and also the deposit slips are kept for the bank’s record and are maintained in the file called

“Cheques on Collection (COC)”. The cheques along with the original letters are then

dispatched to the respective branches for collection purpose.

Reminders for Delayed COC’S

The cheques which are sent for collection, if not realized after a reasonable period of time,

reminders are issued to the respective bank’s branches. For record purposes, photocopies of

reminders are maintained in the file called “COC Reminders”.

Realization of COC’S

When cheques are sent for collection, they are treated as a liability for the bank. When COC

gets realized, the entries are made in the OBC (Outward Bills for Collection) register bearing

the realization date. The realized cheques on collection are also kept in separate file called as

“COC Realized”.

COC Returned

Those cheques which are returned in the collection are recorded in the returned register in the

collection returns portion.

24
 3.2 ACCOUNT OPENING

After working in the clearing department, I was moved to the account opening department

where my supervisor was Madam Rabia Shafqat. She told me the basics of account opening. I

spent one week in this department. The things which I have learned in this department are

shown as below:

3.2.1 Procedure of Account Opening

Account opening is the most important department of a bank; the reason is that it is where a

customer- banker relation starts. The procedure which I am going to explain is the general

procedure of account opening which is applicable to all categories of accounts. The required

documentation is discussed after the procedure for each category of account. The three

significant steps in the account opening process are:

• Obtaining the Required Documents.

• Proper Introduction of the Account.

• Know your Customer (KYC) details.

The following procedure is followed for account opening purposes:

• Introduction of Account.

• Introduction by Staff.

• Obtaining CNIC from the Customer.

• CNIC Verification from NADRA.

• Verification of the Customer’s Name.

• Occupation/ Employment Evidence.

• Customer Profile Form (CPF).

25
 • Verification of signatures on Account Opening Form and SSC (Signature Specimen

Card).

• Signature Scanning from AOF/SSC.

• Sending Documents to CPU.

• Initial Deposit.

• Letter of Thanks.

• Issuance of Cheque Book.

 Introduction of Account

Introduction of an account is one the essentials from State Bank of Pakistan. The introduction

of an account can be given by the Faysal Bank’s existing customer and in this case the bank

ensures that the account is at least 3-6 months old with satisfactory conduct. The account

opening officer verifies the signature of the introducer from the system containing his/her

information.

 Introduction by Staff

The introduction of the new customer can be given by the permanent staff member of the

bank. In this case the name of such staff member is provided on the AOF [CRF] by means of

a notation underneath the introducer’s column “Personally Known to me”.

 Obtaining CNIC from Customer

After the introduction of the account, the customer is given the account opening form and

he/she fills out the necessary columns which are required for the purpose of account opening.

After filling out the form, photocopy of the CNIC is obtained from the customer. The account

opening officer ensures in this case that CNIC must not be expired. For expired CNIC’s,

26
customer has to submit copy of expired CNIC and a NADRA receipt in evidence of having

applied for renewal of CNIC.

 CNIC Verification from NADRA

The CNIC’s of the customers are verified through the NADRA’S specialized software which

is called as “VERISYS”. This software is being used in FBL for the purpose of the

confirmation of the client’s information regarding address, name, CNIC number etc. which is

provided by him/her in the account opening form.

 Verification of the Customer Name

The person’s name whose account is to be opened is confirmed from the following two

documents:

• OFAC (Office for Foreign Asset Control).

• Concerned Party List (CPL).

The OFAC and the CPL contains the list of those customers which have been blocked for any

kind of financial and public dealings.

 Occupation/Employment Evidence

The occupation or the employment evidence is obtained from the customer in the shape of a

letter confirming occupation, alternatively a business card (only subject to on spot

verification) or a valid student ID (If student account is being opened).

 Customer Profile Form (CPF)

The customer profile form serves the purpose of identifying the customer’s various

credentials such as how marketed, past banking history, introducer’s particulars, expected

transactional activity and average amount of transactions etc.

27
The CPF also pinpoints based on the above parameters as a derived conclusion whether the

customer is rated as an average risk as (or) higher than average risk customer by the bank.

The completion of this form as a part of KYC strategy is fundamental to account opening

formalities.

 Verification of Signatures on AOF and SSC

The signatures on the completed AOF and SSC must match with each other. The account

opening officer must give reasonable attention for the purpose of verification of the

signatures. This is manually done by the officer without using the system.

 Signature Scanning from AOF and SSC

It is a decentralized activity. The branch is responsible for the scanning of signatures from

SSC and AOF. The scanned signatures are recorded in the database of the system and are

promptly considered for future transactions of the customer.

 Stamping of the Account Opening Form

After gathering the necessary information from the customer along with the documents and

internal documentation of the bank, the stamping is done on the AOF. The following stamps

are required for this purpose:

• “A/c Opening in my Presence” stamp.

• “OFAC/CPL Checked” stamps.

• B.M and O.M stamps and their signatures.

• “Original Seen” stamp on ID cards.

 Sending Documents to CPU

After stamping on the account opening form, the account opening set is sent to the Central

Processing Unit (CPU) for the purpose of the verification of the account opening documents

28
because the account opening process is also centralized. The account opening set contains the

following things:

• Cheque Book Requisition.

• SSC (Signature Specimen Card).

• A/c Opening Form.

 Initial Deposit

After the confirmation from CPU after three working days that the account has been opened

for the customer, the account number is allotted to the customer and the customer deposits an

initial amount in cash. Cheques may only be accepted as part of the initial deposit in the case

of undoubted customers and on the personal responsibility of the branch manager.

 Letter of Thanks

Letter of thanks is the letter issued by the bank to the customer for two purposes:

• First purpose is to say thanks to the customer for opening the account in their bank.

• Second purpose is to confirm the address provided by the customer while opening the

account.

 Issuance of Cheque Book

Cheque book is issued to the customer after sending the letter of thanks when the customer

comes with the letter of thanks and requests for the issuance of the cheque book. A cheque

book (usually having 25 leaves) is issued to the customer. The first cheque book is issued free

of cost, but the subsequent are charged Rs. 5/- for every leaf. The procedure in this manner is

to complete the cheque book requisition containing title of account, account number, type of

currency and signature of the customer. Signature of the customer on the cheque book

29
requisition is verified through the system. Particulars are entered in the cheque book issuance

register. After taking these necessary steps, the customer is given the cheque book and the

concerned staff takes the customer’s signatures on the cheque book issuance register and

affix stamp of signature verification. After verifying signatures from the system, the account

opening person signs the stamp and issues the cheque book after taking signatures of the

account holder on the cheque book requisition acknowledging that he/she has taken the

cheque book.

 Closing of Account

At any time the customer can come to the bank and ask for the closing of the account. For

this purpose, the following requirements are to be fulfilled:

• Filling the Closing A/c Form.

• The cheque Book is Torne.

• Nil the A/c of the Customer.

After doing this, the documents which are to be sent to the Central Processing Unit (CPU)

are:

• A/C Opening Form.

• Inter Office Memorandum (IOM) containing the basic details of the Account Holder.

• Closing A/c Form.

• Statement describing the Nil A/c.

The CPU confirms the credentials of the account holder and after necessary verification,

closes the account of the customer and confirms the branch via fax.

30
3.2.2 Categories of Accounts

An account can be opened in any of the following categories:

• An Individual Account.

• Joint Account.

• Proprietorship Account.

• Limited Company Account.

• Partnership.

• Club, Society, Association and Trust.

3.2.3 Documentation In Case Of Limited Company Accounts

• Photocopies of National Identity Cards of each Director.

• Copy of Company’s Memorandum and Articles of Association.

• List of Directors.

• Copy of Board Resolution.

• Certificate of Incorporation.

• Power of Attorney/ Mandate.

3.2.4 Documentation In case of Partnership Account

• Certified Copy of Partnership Deed.

• Power of Attorney/ Mandate (If Required).

• Attested Copy of Registration Certificate with the registrars of Firms.

• CNIC Copy of Partners.

• Partnership Mandate.
31
 • Original Authority Letter of Partners Favoring Persons Authorized to Operate the

Account.

3.2.5 Documentation In Case of Club, Society, Association or Trust

• Certified Copy of (By- laws rules and Regulations and Certificate of Registration).

• Certified Copy of the Resolution of the Governing Body for Opening the Account and

Authorizing the person(s) to operate the Account.

• Copy of CNIC of Authorized Persons.

• Undertaking signed by all Authorized Persons Mentioning Intimation to the Bank in

case of change of Authorized Persons Operating the Account.

3.2.6 Documentation In Case of Individual/ Proprietorship

• Copy of CNIC.

• Copy of Services Card or any other proof of employment.

• Power of Attorney.

• Declaration of Proprietorship.

3.2.7 Documentation In Case of Joint Account

• Copy of CNIC.

• Completed Signature Specimen Card.

• Power of Attorney.

• Income Proof.

• Any Other.

32
3.3 REMITTANCE DEPARTMENT

In the last week of my internship I was moved to the remittances department where my

supervisor was Mr. Siddiq Ahmed. He was very encouraging personality and helped me in

each and every way to know the domain of remittances and the practical work involved in it.

Before discussing in depth about the remittances, I should first define the term remittance:

“It refers to the transfer of money from an individual, usually a person who has emigrated

from his/her city or country of origin, to another individual, usually a relative who remains at

home.”

Remittances are financial flows arising from the movement or transfers of money from one

place to another within or outside the city or country.

Remittances contribute to economic growth and to the livelihoods of needy people

worldwide. Moreover, remittance transfers can also promote access to financial services for

the sender and recipient, there by increasing financial and social inclusion.

My supervisor told me that the remittance includes the following things:

• Pay Orders.

• Demand Drafts.

• Traveler’s Cheques.

• Tele-graphic Transfer through SWIFT.

• Western Union Money Transfer.

3.3.1 Pay Orders

33
Pay order abbreviated as “P.O” is a negotiable instrument (such as a draft) which instructs a

payer bank to pay a certain sum to a third party within the city. It is a payment instrument

which is used by the banks to settle payment obligations on behalf of their customers. This

instrument is guaranteed by the bank for its full value and is similar to a demand draft.

In FBL, P.O is payable at any of the Faysal bank’s branch in Pakistan. Payment through pay

order is a confirmed payment. The reason is that when pay order is made, the applicant who

has an account with the Faysal bank is debited and the amount is added to the pay order

account. And from that account, the beneficiary account is credited for the amount of pay

order. FBL only issues “Payee Account Only” pay orders. Pay orders in cash are not issued in

FBL.

3.3.2 Validity

Pay order is valid for 6 months after the date of issue. If the customer does not claim the

payment within 6 months of the issue then the amount of the pay order is included in the

“Unclaimed Account” and the amount stays there for 10 years.

3.3.3 Procedure for the Issuance of Pay Order

When a customer comes for the issuance of pay order, the processing steps includes the

following:

• The customer is given the “Funds Transfer- Application Form”.

• The customer fulfills the application form which includes the following details:

o Transaction Details.

 It includes Amount in Figures and Words.

34
  The desired Currency.

 Mode of Payment.

o Beneficiary Details (In whose favor P.O is issued).

o Applicant’s Detail (Who Requests for P.O).

• The filled form along with the cheque is given to the remittance officer who verifies

the form through the following stamps:

o Sign Verification (Where the customer has done the Signatures) on the

application form.

o Transfer Posted (Means amount is transferred from the Applicants account to

the Beneficiaries Account).

o Time Stamp (Contains the Date and the Time of Receiving of Application).

The remittance officer then makes the necessary entries in the system by debiting the account

of the applicant and crediting the account of the beneficiary. The commission is deducted at

the time of issuance of the P.O. The commission charges are flat Rs. 80/-which are charged to

the applicant’s account. After the entries, the P.O is ready to be given to the customer.

3.3.4 Demand Draft

A demand draft referred to as “DD” is a banker’s own draft drawn upon another banker as

per agency arrangement (or) upon one of its own branches payable on presentation by the

drawee bank.

35
Types

• Local DD.

• Foreign DD.

 Local DD

In FBL, local demand drafts are not issued. Local DD’s are those which are issued by the

banks for the settlement of funds between the cities.

 Foreign DD

Foreign currency demand drafts are issued in FBL. Foreign DD is the banker’s own draft

drawn upon another bank/ correspondent bank in a country other than the country from where

it is issued and drawn and payable in currency of the country in whose bank/ branch it is

drawn. For this purpose, the bank has maintained its “Nostro A/c” with Standard Chartered

Bank, HSBC and Mashriq Bank for demand draft Purposes. FBL does its remittance in

abroad with HBL. Through Nostro account, outward remittance in DD takes place. I will

explain the term Nostro A/C for outward and Vostro A/c for inward remittances as follows:

3.3.5 Nostro A/c

To best remember it is “Our account with them in their currency”. Nostro accounts are

usually in the currency of the foreign country. This allows for easy cash management because

currency does not need to be converted.

36
3.3.6 Vostro A/c

To best remember it is “Their account with us in our currency”. These accounts are

maintained by the correspondent banks in the currency of the country in which the account is

opened. These accounts are also known as “Loro Account”.

For the purpose of inward foreign currency demand drafts, FBL is maintaining Vostro

account of Shamil Bank of Behrain and Qatar International Islamic Bank.

3.3.7 Traveler’s Cheques

Traveler cheques (TC) is form of currency cheques for travelers which is convenient to carry

and incase of misplace or lost one can easily have their cash again. In previous years

businessmen were mostly carrying their cash in form of currency notes, usually they were

worried about their cash, and it shouldn’t be stolen or lost by them. For those reasons and for

the comfort of the business community internationally countries decided to issue them

travelers’ cheques, and now a day’s business community could use it easily without any fear

of lost and steal.

In Faysal Bank, the traveler’s cheques are issued at the selected branches. In Faysal Bank

new garden town branch, traveler’s cheques are not issued.

3.3.8 Telegraphic Transfer through SWIFT

It is largely the obsolete method of transferring funds through a telegraph or telex link from

one country to another. With the help of this service a customer can transfer money to the

bank account of a beneficiary in most foreign countries of the world also called wire transfer;

it has been replaced by secure cable and wireless telecommunications networks. In FBL, the

transfer of funds through this medium is implemented through SWIFT which is the standard

in all banks of the industry. The telegraphic transfer is of two types:

37
 • Local TT.

• Foreign TT.

 Local TT

In local telegraphic transfer, the funds are transferred from one city to another. The local

transfer system is not been used in FBL. The method was that the customer who wanted to

avail this facility was given the funds transfer application. The person who wanted to remit

the money used to provide the details of the receiving person. The transaction was done

between the banks. The bank remitting the money used to credit the account of the person

sending the money and the paying bank used to debit such account and made payment to the

receiving person. The payments were done on the counters. The NIC of the persons were

taken in that kind of transactions. This system has not been used today because the SBP has

started restricted the counter payments due to the fraudulent nature of the transaction.

 Foreign TT

The foreign telegraphic transfer means the transfer of funds to a foreign country. Both inward

and outward is done at FBL. The foreign TT is done through SWIFT which is acting as a

quickest mode for the transfer of funds to abroad. The TT is only done account to account in

FBL. The procedure for the foreign TT followed by the remittance officer is explained as:

• The customer comes to the bank for the purpose of TT.

• The customer is given the Funds Transfer Form on which the customer provides the

details like:

o Amount of the Transaction in Words and Figures.

o The Desired Currency.

38
 o Beneficiary Details to whom the funds are to be transferred.

o Beneficiary Bank’s details in the abroad.

o Applicant’s Details.

• After filling out the information, the customer signs the form and hands it over to the

remittance officer along with the cheque.

• The remittance officer in the scrutiny process assures himself that the requirements of

the Anti- Monet Laundering (AML) regulation of the SBP in this context are fulfilled.

• The name of the person who is remitting is confirmed from the Office for Foreign

Asset Control (OFAC) list.

• The Know Your Customer (KYC) requirements are duly accounted for.

• The remittance officer makes sure that the purpose of the remittance must be provided

by the customer.

• The charges of TT are deducted from the account which is flat 16 US dollars.

• The stamping is done on the form and the remittance officer signs the form.

• The form also gets signed by the operations manager.

The completed form along with the cheque is sent to the FBL head office where all the

SWIFT operations are taken place. The head office makes all the dealing with the

correspondent banks in abroad for the purpose of TT.

39
3.3.9 THE ROLE OF SWIFT IN TELEGRAPHIC TRANSFER

SWIFT stands for the Society for Worldwide Interbank Financial Telecommunication, a

member-owned cooperative through which the financial world conducts its business

operations with speed, certainty and confidence. Over 8,300 banking organizations, securities

institutions and corporate customers in more than 208 countries are the members of SWIFT

and every day exchange millions of standardized financial messages.

Its role is two-fold. They provide the proprietary communications platform, products and

services that allow its customers to connect and exchange financial information securely and

reliably. They also act as the catalyst that brings the financial community together to work

collaboratively to shape market practice, define standards and consider solutions to issues of

mutual interest.

SWIFT enables its customers to automate and standardize financial transactions, thereby

lowering costs, reducing operational risk and eliminating inefficiencies from their operations.

By using SWIFT customers can also create new business opportunities and revenue streams.

SWIFT has its headquarters in Belgium and has offices in the world's major financial centers

and developing markets.

SWIFT is solely a carrier of messages. It does not hold funds nor does it manage accounts on

behalf of customers, nor does it store financial information on an ongoing basis. As a data

carrier, SWIFT transports messages between two financial institutions. This activity involves

the secure exchange of proprietary data while ensuring its confidentiality and integrity.

3.3.10 Services Provided by SWIFT

SWIFT network provides the following services to the banks:

• The exchange of real-time messages using XML standards.

40
 • The exchange of bulk messages (e.g. non-urgent and low value payments).

• A secure browser for accessing account information.

3.3.11 Joining SWIFT

In Pakistan the banks get the membership of SWIFT through State Bank of Pakistan. The

Financial documents along with the registration application are submitted to State Bank and

from where these are transferred to the SWIFT. After verification SWIFT gives the

membership to the Bank.

Following are the steps below to learn how to join SWIFT, connect to the SWIFT network

and become fully operational.

 Procedure

Every client has its own SWIFT BIC code, in order to identify Financial Institutions. BIC

stands for Bank Identifier Code. To transfer messages securely and efficiently, the client bank

connects through SWIFTNet network by the assigned SWIFT BIC code. SWIFT clients can

configure their existing email infrastructure to pass email messages through the highly secure

and reliable SWIFTNet network instead of the open Internet. SWIFTNet Mail is intended for

the secure transfer of sensitive business documents, such as invoices, contracts and

signatories, and is designed to replace existing telex and courier services, as well as the

transmission of security-sensitive data over the open Internet.

SWIFT code

The SWIFT code is 11 characters made up of:

41
 • 4 characters: Bank code (only letters).

• 2 characters: 3166-1 alpha 2 country code (only letters).

• 2 characters: location code (letters and digits).

• 3 characters: Branch code, optional (xxx for primary office) (letters and digits).

Procedure for International Clearing

Outward Transfer

For the purpose of outward transfer, as the foreign bank branch receives the SWIFT message,

the Nostro account is debited for the bank’s record. The transferee has account with the

foreign bank, the funds simply transfers to the transferee’s account.

Inward Transfer

For the purpose of inward transfer, as the domestic bank branch receives the SWIFT

message, the Vostro account is debited for the bank’s record. The transferee has account with

the domestic bank, the funds simply transfers to the transferee’s account.

Western Union Money Transfer

The Western Union Company, under the Western Union, Orlandi Valuta and Vigo brands,

touches people around the world with 379,000 Agent locations in 200 countries and

territories. Hundreds of millions of people currently live outside of their home countries and

use Western Union services to remain connected to their families and homelands. Western

union money transfer is a fastest way to receive money worldwide.

There are other banks and institutions that are dealing in Western Union. They include

National Bank of Pakistan, Pakistan Postal Service, Dollar East, and Master Currency etc.

42
FBL acts as agent between the sender and the receiver. Only receiving money option is there

in FBL.

 Procedure of Payment

The Western Union is a counter payment which means that the sender of the money does not

need to have an account with FBL. The procedure followed by the remittance officer in this

context is as follows:

• The person who wants to receive money is given the Western Union Money Transfer

form.

• The person fulfils the following details on the form:

• Date.

• MTCN (Money Transfer Control Number). It is a unique number which is given to

the person remitting the money abroad by the money exchanger of that particular

country.

• Sender Name. The name of the sender must include the surname.

• Sender Country.

• Amount in PKR (Approximate Amount).

• Receiver Contact.

43
When the customer completes the form, the remittance officer asks for the photocopy of the

valid identity card of the receiving person. If the ID card is not available, the photocopy of

the passport is taken from the customer. The officer then makes the needed entries in the

Western Union software which is installed at FBL. The entries are made in the software in

the form called as “To Receive Money”. After making the entries, the print out of the form is

taken, the officer signs the western union form. The money transfer form is kept by the bank

for its own record purposes. The customer is given the “To Receive Money” form and the

customer puts his/her signatures on the form and takes the payment from the counter by

presenting such form and photocopy of ID card.

At the remittance department, my supervisor also told me how to issue a term deposit receipt

because this was also the responsibility of the remittance officer.

3.3.12 Term Deposit Receipt (TDR)

TDR is an amount of money either in Pak rupee or foreign currency kept for a fixed term

subject to profit and loss. The receipt is a non- negotiable item. The minimum amount for

opening a TDR is Rs. 25000.

3.3.13.WrackRate

Wrack rate is the normal rate which is decided on the basis of KIBOR. It is a bi-annually rate.

This rate is given to most of the customers. There is no special approval for this rate. This

rate is negotiable on the basis of the amount of investment.

3.3.14 Grid Rate

Grid rate is the special rate which is given to the prime customers and is determined on daily

basis. In FBL, the approval is to be taken from the area manager for providing such rate to the

customer.

44
3.3.15 Processing of a New TDR

When the customer comes to the bank for the opening of a new TDR, then the following

procedure is adopted for this purpose:

• The customer is given the Term/Notice Deposit- Application Form.

• The customer fulfills the form which contains the following fields:

o Title Account.

o Amount of Investment in Words and Figures.

o Term/Notice Deposit Duration.

o Profit Payment Frequency (Monthly, Quarterly, Half Yearly, Yearly, and On

Maturity).

After filling the application form, the customer signs the form and hands it over to the

remittance officer. The remittance officer after scrutiny of the form affixes the following

stamps on the form:

• Time Stamp.

• Sign Verification stamp

After stamping, an Inter Office Memorandum (IOM) is prepared which contains the TDR

amount, its tenure, profit rate, account number. The IOM is duly signed by the branch

manager and the manager operations.

The completed form, IOM and the profit rate approval sheet from the branch manager or area

manager is sent to the FBL head office (Karachi) for the approval of TDR.

45
3.3.16 Redemption of TDR

On the date of maturity, the customer has the option to re-invest the amount. There are three

options available to the customer:

• Principal Re-investment.

• Principal plus Profit Re-investment.

• No Re-investment.

3.3.17 Premature withdrawal of TDR

The premature withdrawal occurs where the customer encashes the TDR before the expiry of

the term (Maturity). Penalty is imposed on the premature encashment. The penalty is

imposed as:

3.4 NEW THINGS LEARNED

My internship experience has given me a realistic preview of my field of education. Now I

feel that I am better prepared to enter the world of professional work. I feel honored that I

have worked with such experienced professionals. I must admit that such interaction in this

respectable professional community will help me in seeking out job opportunities in the near

future. Each task I performed was a different experience in itself. By the end of it, I must say

I realize my potentials, I have realized that earning money is not so easy after all, it takes a lot

of hard work and devotion, and not to forget time. I definitely have learned things, which will

impact my career and my character. The overall experience of my internship was very good; I

have learnt the sense of responsibility in its literal meaning. I am now capable of dealing with

different sort of customers, and how to be patient while doing so. Besides this I also gained
46
knowledge about banking which I previously lacked and many more products being offered

by the bank. So in a nutshell, this internship gave me the experience, which would no doubt

boost my confidence to work in future.

47
 CHAPTER # 4
FINANCIAL ANALYSIS

48
Faysal Bank

Summarized Balance Sheet of 5 years

Years 2008 2007 2006 2005 2004

Assets:

Cash 6872032 7207998 6696726 5048395 2866278

Balance with other Banks 3708451 2883040 2045887 3564030 648660

Lending to Fin. Institutions 7078102 4608205 10742841 4417378 872132

1150280
Investment net of provision 31553108 22525358 23887864 5 11218501

5137325
Loans and advances 87346401 74468644 62035978 4 29626223

Other Assets 2204368 1537764 2371825 1473952 1183315

Operating Fixed Assets 2514959 2239392 2882441 1158407 1030352

Differed Tax Assets _ _ _ _ 160936

11547040 11066358 7853822

Total Assets 141277421 1 2 1 47606397

Liabilities:

Bills Payable 2406927 4516125 1193309 905637 430862

Borrowings from Fin. Institutions 9995855 14965037 15295730 8478048 6529810

5646032
Deposits and Other Accounts 102067422 74413641 74595564 9 31332172

Sub-ordinated loans 1000000 _ _ _

Liabilities against assets subject to

financial lease 7827 14664 122549 18434 16404

Deffered tax liability 2691466 1839860 1269113 166442 _

Other Liabilities 6951421 5924440 3527023 2294899 1318437

10167376 6832378
Total Liabilities 125120918 7 96003288 9 39627685

1021443
Net Assets 16156503 13796634 14660294 2 7978712

49
Share Holders Equity

Share Capital 5296445 4237157 3684484 2912635 2647850

Capital Reserve 3567033 3079527 2516211 2259101 2115989

Unappropriated Profit & Reserves 1481668 1815643 1938651 1079492 846016

Total Equity of the Bank 10345146 9132327 8139346 6251228 5609855

Surplus on Revaluation of Assets 5811357 4664307 6520948 3963204 2368857

1021443
Total Share Holders Equity 16156503 13796634 14660294 2 7978712

11547040 11066356 7897134

Total Liabilities And Equity 141277421 1 2 8 47606397

50
 Faysal Bank

Vertical Analysis of Balance Sheet

2008 2007 2006 2005 2004

Assets

Cash An Balance With Treasury Banks 4.86% 6.24% 6.05% 6.39% 6.02%

Balance With Other Banks 2.62% 2.49% 1.84% 4.51% 1.36%

Lending To Financial Institutions 5.01% 3.99% 9.70% 5.59% 1.83%

Investment 22.33% 19.50% 21.58% 14.94% 23.56%

Advances 61.82% 64.49% 56.05% 63.63% 62.23%

Operating Fixed Assets 1.78% 1.93% 2.60% 3.00% 2.48%

Deferred Tax Assets-Net 0.00% 0.00% 0.00% 0.00% 0.33%

Other Assets 1.56% 1.33% 2.14% 1.92% 2.16%

Total Assets 100% 100% 100% 100% 100%

Liabilities

Bill Payable 1.70% 3.91% 1.07% 1.14% 0.90%

Borrowing From Financial Institutions 7.07% 12.96% 13.82% 10.73% 13.71%

Deposits And Other Accounts 72.11% 64.25% 67.40% 71.49% 65.81%

Sub-Ordinate Loans 0.70% 0.00% 0.00% 0.00% 0.00%

Liabilities Against Assets Subject To

Finance Lease 0.00% 0.01% 0.11% 0.02% 0.03%

Deferred Tax Liabilities-Net 1.90% 1.59% 1.14% 0.21% 0.00%

Other Liabilities 4.92% 5.13% 3.18% 2.90% 2.76%

Total Liabilities 88.43% 87.86% 86.75% 86.51% 83.24%

Share Capital 3.74% 3.66% 3.32% 3.68% 5.56%

Reserves 2.52% 2.66% 2.27% 2.86% 4.44%

Inappropriate Profit 1.06% 1.64% 1.75% 1.36% 1.77%

Minority Interest 0.05% 0.08% 0.00% 0.00% 0.00%

51
Surplus On Revaluation Of Assets 4.11% 4.03% 5.55% 5.01% 4.97%

Total Liabilities And Equity 100% 100% 100% 100% 100%

Faysal Bank Ltd

Horizontal Analysis of Balance sheet

52
Years 2008 2007 2006 2005 2004

Assets

Cash An Balance With Treasury

Banks 239.75% 251.47% 233.63% 176.13% 100%

Balance With Other Banks 571.71% 444.46% 315.40% 549.44% 100%

Lending To Financial Institutions 811.58% 528.38% 1231.79% 506.50% 100%

Investment 281.26% 200.78% 212.93% 105.18% 100%

Advances 294.82% 251.36% 209.39% 169.62% 100%

Operating Fixed Assets 212.53% 189.24% 243.59% 200.23% 100%

Deferred Tax Assets-Net 0.00% 0.00% 0.00% 0.00% 100%

Other Assets 213.94% 149.24% 230.19% 147.29% 100%

Total Assets 296.76% 242.55% 232.45% 165.88% 100%

Liabilities

1048.15
Bill Payable 558.62% % 276.95% 210.19% 100%

Borrowing From Financial Institutions 153.08% 229.18% 234.24% 129.83% 100%

Deposits And Other Accounts 325.15% 236.79% 238.08% 180.19% 100%

Sub-Ordinate Loans

Liabilities Against Assets Subject To

Finance Lease 47.71% 89.39% 747.06% 112.37% 100%

1106.48
Deferred Tax Liabilities-Net 1617.36% % 762.49% 100.00%

Other Liabilities 527.27% 449.37% 267.51% 174.06% 100 %

Total Liabilities 315.26% 256.02% 242.26% 172.41% 100%

Share Capital 200.02% 160.02% 139.15% 110.00% 100%

Reserves 168.57% 145.53% 118.91% 106.76% 100%

Unappropriated Profit 177.89% 224.29% 229.15% 127.59% 100%

Minority Interest 78.12% 100.00%

Surplus On Revaluation Of Assets 245.32% 196.90% 259.55% 167.30% 100%

Total Liabilities And Equity 296.76% 242.55% 232.45% 165.88% 100%

53
 Faysal Bank Ltd

Summarized Income Statement Of 5 years

Years 2008 2007 2006 2005 2004

Mark Up / Interest Income 11610781 9728046 6319498 2753451 2074611

Fee, Commission And Brokerage 743913 603667 581854 397064 251189

54
Income

Divided Income 1221217 1249522 721804 697499 763697

Income After Dealing In Foreign

Currencies 313597 120992 95451 162444 107473

Other Income 43821 447708 -1024 5050 2554

Total Income: 13933329 12149935 7717583 4015508 3199524

Less: Mark Up / Interest Expenses 7459392 6089255 3309989 1118118 946485

Gross Profit 6473937 6060680 4407594 2897390 2253039

Less: OPERATING EXPENSES

Administrative Expenses 2799747 1866584 1428830 1134672 834754

Provision Against Non Performing

Loans 1797432 517027 -19026 51609 208097

Bad Debts Written Off Directly - 67 1118 141

Other Provisions / Write Offs 6061 - - 1742

Other Charges 9855 32857 2220 1150 11935

Total Operating Expenses 4613095 2416535 1412024 2377098 1056669

Profit Before Tax 2697827 3870340 4018476 2207470 2745272

Less: Tax 425719 1053768 902338 454000 593928

Profit After Tax 2272108 2816572 3116138 1753470 2151344

Faysal Bank Ltd

Vertical analysis of Income statement

Years 2008 2007 2006 2005 2004

Mark Up / Interest Income 100.00 100.00 100.00 100.00 100.00

55
 6.41 6.21 9.21 14.42 12.11
Fee, Commission And Brokerage
Income

10.52 12.84 11.42 25.33 36.81

Divided Income

2.70 1.24 1.51 5.90 5.18

Income After Dealing In Foreign
Currencies

0.38 4.60 -0.02 0.18 0.12

Other Income

120.00 124.90 122.12 145.84 154.22

Total Income:

64.25 62.59 52.38 40.61 45.62

Less: Mark Up / Interest Expenses

55.76 62.30 69.75 105.23 108.60

Gross Profit

Less: OPERATING EXPENSES

24.11 19.19 22.61 41.21 40.24

Administrative Expenses

15.48 5.31 -0.30 1.87 10.03

Provision Against Non Performing
Loans

0.00 0.00 0.00 0.04 0.01

Bad Debts Written Off Directly

0.05 0.00 0.00 0.00 0.08

Other Provisions / Write Offs

Other Charges 0.08 0.34 0.04 0.04 0.58

56
 39.73 24.84 22.34 86.33 50.93

Total Operating Expenses

23.24 39.79 63.59 80.17 132.33

Profit Before Tax

3.67 10.83 14.28 16.49 28.63

Less: Tax

19.57 28.95 49.31 63.68 103.70

Profit After Tax

Faysal Bank Ltd

Horizontal analysis of Income statement

Years 2008 2007 2006 2005 2004

559.66 468.91 304.61 132.72 100

Mark Up / Interest Income

296.16 240.32 231.64 158.07 100

Fee, Commission And Brokerage
Income

159.91 163.61 94.51 91.33 100

Divided Income

291.79 112.58 88.81 151.15 100

Income After Dealing In Foreign
Currencies

1715.78 17529.68 -40.09 197.73 100

Other Income

435.48 379.74 241.21 125.50 100

Total Income:

Less: Mark Up / Interest Expenses 788.12 643.35 349.71 118.13 100

57
 287.34 269.00 195.63 128.60 100

Gross Profit

Less: OPERATING EXPENSES

335.40 223.61 171.17 135.93 100

Administrative Expenses

863.75 248.45 -9.14 24.80 100

Provision Against Non Performing
Loans

0.00 47.52 0.00 792.91 100

Bad Debts Written Off Directly

347.93 0.00 0.00 0.00 100

Other Provisions / Write Offs

82.57 275.30 18.60 9.64 100

Other Charges

436.57 228.69 133.63 224.96 100

Total Operating Expenses

98.27 140.98 146.38 80.41 100

Profit Before Tax

71.68 177.42 151.93 76.44 100

Less: Tax

105.61 130.92 144.85 81.51 100

Profit After Tax

58
4.2 RATION ANNALYSIS

Short Term Liquidity Analysis:

Current Ratio
Current ratio =Current Assets/Current liabilities

Year 2004 2005 2006 2007 2008

Current
ratio 1.49 1.588 1.48 1.75 2.08

59
 Current Ratio

2.5
2
1.5
1 Current Ratio

0.5
0

2004 2005 2006 2007 2008

Years

Interpretation:
Current ratio is used to assess the short term debt paying ability of the firm. FBL in starting
was not good in paying its short term debt but now in 2008 it is very good in short term
paying ability .Its reason is FBL now have much focus on deposits and reserves, now they
can

Quick Acid Test Ratio

Acid-test ratio =Current assets – Inventory/Current liabilities

Year 2004 2005 2006 2007 2008

Quick
acid test
ratio 1.35 1.48 1.37 1.75 2.0

Quick Acid Test Ratio

2.5
2
1.5 Quick Acid Test
1 60 Ratio
0.5
0

2004 2005 2006 2007 2008

Years
 Interpretation:
Acid test ratio is useful in measuring the liquidity position of the firm. It is more liquid ratio
than current ratio. Here the result of current ratio and Acid test ratio is almost same because
the reason is that FBL has no inventory so, the result of both ratios are same.

Cash Ratio
Cash ratio =Cash Equivalents + Marketable Securities/Current liabilities

Year 2004 2005 2006 2007 2008

Cash
Ratio 0.113 0.178 0.121 0.161 0.163

Cash Ratio

0.2
0.15
0.1 Cash Ratio
0.05
0

2004 2005 2006 2007 2008

Years

61
Interpretation:
The cash ratio indicates the immediate liquidity of the firm. A high cash ratio indicates that
the firm is not using its cash in a better way. While the cash ratio which is too low could
indicate an immediate problem with paying bills. The cash ratio of FBL in 2007 and in 2008
is remain stable.

Working Capital
Working capital= Current asset – Current liabilities

Year 2004 2005 2006 2007 2008

Working
capital( 1525389 283670 3532790 475005 70308
Rs) 1 22 4 30 646

Working Capital

80000000
60000000
40000000 Working Capital
20000000
0

2004 2005 2006 2007 2008

Years

Interpretation:
It is also used to indicate the short term solvency of the business. The higher the ratio the
better the position of company in debt paying. The working capital ratio of FBL is sharply
increases every year from 2004 to 2008 because its liabilities are decreases.

62
Profitability Analysis Ratio:

Net Profit Margin

Net profit margin = Net profit / Total income

Year 2004 2005 2006 2007 2008

NPM
(%) 23.13% 35.70% 35.08% 23.79% 9.15%

Net Profit Margin

40.00%
30.00%
20.00% Net Profit Margin
10.00%
0.00%
2004 2005 2006 2007 2008
years

Interpretation:
This ratio is used to measure the profit return on sales. It is used to measure net income
generated by each rupee of sale. The higher the ratio the better the company in profitability.
The ratio of FBL is going to decrease from 2006 to 2008; this thing indicates that FBL is not
in position in profitability.

63
Return on Average Asset
Return on average assets = Net operating income/ Total assets

Year 2004 2005 2006 2007 2008

ROA
(%) 5.11% 2.78% 3.25% 2.5% 1.77%

Return on Assets

6.00%
4.00% Return on
2.00% Assets

0.00%
2004 2005 2006 2007 2008
year

Interpretation:
It is also called firms return on investment (ROI). It measures the overall effectiveness of
management in generating profit with its available assets. Higher this ration better is
company, but FBL ROA show decreasing trend expect of 2004. This show that FBL is not in
good in profitability.

64
 Return on Equity
Return on equity (ROE) = Net Income/ Average stockholder’s equity

Year 2004 2005 2006 2007 2008

ROE (%)
44.22% 29.57% 42.74% 32.67% 23.33%

Return on total Equity

60.00%
40.00% Return on total
20.00% Equity

0.00%
2004 2005 2006 2007 2008
Years

Interpretation:
It measures the overall effectiveness of management in generating profit with its
Shareholder’s equity. Shareholders of the bank may be interested in this ratio as to check the
firm’s effectiveness in using the capital provided by them. This ratio measure both common
and preferred shareholders. Higher this ratio, more effective the firm is .Return on total asset
ratio of FBL shows decreasing trend.

65
 Return on Common Equity
Return on common equity = Net income/ Average total asset

Year 2004 2005 2006 2007 2008

Return on
common
equity 44.22% 29.57% 42.74% 32.67% 23.33%

Return on Common Equity

60.00%
40.00% Return on
20.00% Common Equity

0.00%
2004 2005 2006 2007 2008
Years

Interpretation:
It measures the return only to the common shareholders. The Return on equity of FBL is
decreasing in 2007 and in 2008. Its mean that the profit by using common equity is
decreasing.

66
Long term Solvency Ratio:

Debt Ratio
Debt Ratio = Total Liabilities/Total Assets

Year 2004 2005 2006 2007 2008

Debt
Ratio
(%) 83.24% 86.57% 86.75% 88.05% 88.56%

Debt Ratio

90.00%
88.00%
86.00%
Debt Ratio
84.00%
82.00%
80.00%
2004 2005 20062007 2008
year

67
Interpretation:
The debt ratio indicates the percentage of assets financed by creditors, and how well creditors
are protected in case of solvency. The lower the ratio the better the company position in long
term liability. Here the debt ratio of FBL is going to increase from 2004 to 2008, so, this
thing is not better for FBL.

Debt to Equity Ratio

Debt equity ratio =Total liabilities/Shareholders Equity

Year 2004 2005 2006 2007 2008

Debt to
Equity
ratio 706% 117.9% 109% 108.9% 119.6%

Debt To Equity Ratio

800%
600%
Debt To Equity
400%
Ratio
200%
0%
20042005200620072008
year

Interpretation:
It also tells that creditors are protected in case of insolvency. The lower the ratio the better the
company's debt position. Debt/Equity Ratio indicate the outsider's portion of equity. The
outsider's proportion in total equity is decreasing each year in previous 5 years but it is still
very bad for FBL because its proportion is so high.

68
Analysis for the Investor:
Earnings per Share

Earning per share (EPS) = Net Income/ Weighted average no of shares outstanding

Year 2004 2005 2006 2007 2008

EPS 8.12 6.02 8.33 6.65 4.29

EPS(Rs)

10
8
6
4 EPS(Rs)
2
0

2004 2005 2006 2007 2008

Years

Interpretation:
It represents the number of rupee earned on behalf of each outstanding share of common
stock. The graph shows the decreasing trend in 2007 and in 2008 while in 2006 the ratio is
high but after that decreases.

Price Earning Ratio

Price earning ratio = Market price of common stock per share/ Earning per share.
69
 Year 2004 2005 2006 2007 2008

P/E (%) 4.43% 7.23% 8.89% 9.10% 15.35%

Price Earning Ratio

20.00%
15.00%
Price Earning
10.00%
Ratio
5.00%
0.00%
2004 2005 2006 2007 2008
Years

Interpretation:
It measures the amount investors willing to pay for each rupee of the firm’s earning. It also
shows the degree of confidence of investors on firm. Higher this ratio higher is the investor’s
confidence. Here this ratio indicates the increasing trend from 2004 to 2008 and its better for
company.

Dividend Payout Ratio

Dividend payout =Dividend per Common share/Diluted earning per share

Year 2004 2005 2006 2007 2008

Dividend
payout
ratio 55.42% 74.75% 42.01% 75.19% 58.27%

70
 Dividend Payout Ratio

80.00%
60.00%
Dividend Payout
40.00%
Ratio
20.00%
0.00%
2004 2005 2006 2007 2008
Years

Interpretation:
This ratio indicates that from earnings what percent of it given to outsiders inform of
dividends. Here it shows that from 100 Rs earnings a big portion of it is given to outsiders.
This thing FBL is very attractive for investors.

Dividend Yield
Dividend Yield =Dividend per common share/ Market price per common share

Year 2004 2005 2006 2007 2008

Dividend
yield
ratio (%) 12.50% 10.34% 4.72% 8.26% 3.79%

71
 Dividend Yield 12.50%

15.00%
10.00% Dividend Yield
5.00% 12.50%

0.00%
2003 2004 2005 2006
Years

Interpretation:
This ratio indicates that from investment how much dividend is generated. The higher the
ratio the better the position of company. Here the ratio has decreasing trend from 2004 to
2008 and it is very disappointed for investors.

Book Value per Share (Rs)

Total stockholder equity –preferred stock equity/ No. of common shares outstanding

Year 2004 2005 2006 2007 2008

Book Value per

share(Rs) 21.19 21.46 22.02 21.55 19.53

72
 Book Value Per Share(Rs)

23
22
21 Book Value Per
20 Share(Rs)
19
18
2004 2005 2006 2007 2008
Years

Interpretation:
It indicates the amount of stockholders equity that relates to each share of outstanding
common stock. It also compare with market price per share. If book value is less than market
price per share its mean it is overprice share bur if book value is high than market value per
share than it is under price.

4.3 SWOT ANALYSIS

Strengths

• FBL has strong background because it is backup by sheikh of Saudi Arabic.

• FBL has much focus on personal marketing for this purpose they send letters to every
client whenever they launch any new product or service.
• The software which is used in FBL is managed in Singapore.
• Its deposits are 48 cruor in Rahim Yar Khan branch , it is on second in R.Y.K
• The bank has established a good branch network within a short span of time.
• FBL has a countrywide network of online branch banking business and ATM’s in all
major cities of the country.
• Bank has well-developed intra-net and inter-net communication network.
• FBL offer Pocket mate card which is acceptable worldwide at more than 10 lack
ATM machines.
• During the year Faysal bank was placed in the top 25 performing companies by the
Karachi Stock Exchange (KSE) for the year 2003.
• The annual report of Faysal bank for 2006 won the first price in the Best Corporate
Rewards

73
Weaknesses

• Bank has no adequate number of branches as compared to its competitors like Askari
Bank etc.
• To improve the services and to handle the problem of customers, the bank has no
customer complaint department.
• The procedure and documentation for loaning is very difficult.
• No job security is there for the employees, and no union exits to secure them.
• As every person in the bank has his/her own computer in the branch but he or she are
not well equipped with the knowledge of using the computer efficiently.
• Bank has no grievance-handling department for the internal problems of the
employees.
• Due to lack of computer specialist at branch level it has to take assistance from the
head office so in case they waste their lot of time.

Opportunities

• FBL can introduce special schemes of lending for potential small industries.
• Increase the capacity of branch instead of going towards overstaffing.
• Bank has no foreign branches so it should open its branches outside the country
• FBL has applied for a license for separate "Islamic banking branches"
• Barclays' which is an American bank wants to takeover FBL, in this situation there
overall system become international.

 Threats

• SBP levy heavy penalties on bank in case of violating the prudential regulations
especially in case of advances.
• Now the other players of banking are also providing the modern technology based
services like online and Internet banking facility so there is no more competitive
advantage in this area
• The bank stop it's working in case of system failure or in load shading.
• Responding to the SBP's l regulations management takes too much care while
granting loans.

74
• Because of takeover of Barclays it is a big threat that the top management will totally
change.
• Because the takeover of Barclays new and strike rules and regulations will impose on
employees.

CHAPTER # 5

CONCLUSION

AND RECOMMENDATIONS

75
5.1 CONCLUSION

Faysal Bank Limited is a full service banking institution that offers consumer, corporate and

investment banking facilities to its customers. The bank offers a variety of consumer products

such as auto finance, home loans, saving schemes and debit cards.

The bank also offers specialized products for the agricultural sector. Its trade finance services

include a range of import, export and guarantee products. The bank also offers services such

as cash management, automated teller machines, traveler’s cheque, transfer of funds, safe

deposit lockers and non stop banking.

Faysal Bank continues to pursue a goal of improving upon its risk management procedures

with the aim of attaining full compliance of the State Bank of Pakistan guidelines.

I observed Faysal Bank Limited a financially sound bank. Its profits are increasing year by

year. Its staff is very good and sincere with bank.

76
Faysal Bank views specialization and service excellence as the cornerstone of its strategy.

The people at Bank realize that innovation, creativity, reliability, customized services and

their execution are the key ingredients for their future growth

They are aware that they have stepped into 21st century and they must meet its challenges by

acquiring the highest level of technology. They will thus be accelerating their technological

advance to enable them to distribute their products and services through most efficient and

modern technology means.

5.2 RECOMMENDATIONS

Global competition, customer attrition and the pressures to reduce the operating costs have

created a harsh environment for the world’s financial institutions. Banks face many

challenges in today’s dynamic market place. In a global economy, bank needs efficient

development of products that can quickly satisfy a more demanding customer base and build

long term customer trust. Customers now have many choices than ever before. Many

institutions are struggling to find the right mix of retail and commercial strategies as well as

the optimal way to combine their self service, online and branch channels.

In order to cope with today’s turbulent environment, Faysal Bank must adopt a strategic

approach toward information and process management that enables customer centricity,

demonstrates a commitment to world class customer service and improve the depth of their

relationship with customers.

I have a very limited knowledge to give suggestions about the bank. But my stay in Faysal

Bank as an internee has given the chance to explore different aspects of the organization. In

view of these aspects, I have some suggestions for the bank which are as follows:

77
• Faysal Bank should increase the efficiency and effectiveness of their marketing

campaigns.

• Faysal Bank should have a close look on regularity measures of anti-money

laundering.

• Effective implementation of corporate governance is the key for sustainability of

banking sector. Faysal Bank should also consider this point.

• The promotion criterion in Faysal Bank is not satisfactory. It must initiate reasonable

steps for the improvement of this system and should develop a performance based

reward system.

• One way to retain customers is to offer a wide range of services such as tax advice,

free life insurance equivalent to amount deposited, shares portfolio management and

fund management facility etc. Banks should have a slightly different mix of services

and means of providing these such that customers can choose the mix that suits them

best.

• The top management should immediately start thinking in terms of rotating the

employees in various departments, as this transforms work force into human capital.

If a particular individual keeps on employing his/ her efforts in one sphere of banking

it would not only create a sense of monotony and boredom, but also let the employees

not interested in polishing their skills.

• One of the most pressing needs of the time is to advertise the products and services in

the electronic media. Faysal Bank Limited has not yet employed advertisement in

electronic media as a full fledge marketing tool, It should start doing this as a mean to

attract potential customers.

78
 /..

5.3 RFERENCES

 Van horne,j.c and j.m wachowicz 1998. Jr.12th edition, ‘fundamental of financial
management’ new jersey: prentice-hall.

 Barely,Richard a, and stewart c.myers.2004.principles of corporate finance,8th ed.new

York:mcgraw-hill.

 Emery,d.r, j.d finnerty and j.d stowen,(1998). Principles of financial management (1st ed).
New jersey:prentice-hall.

 m.y.khan and p.k.jain, ‘financial management’3rd edition,mcgraw hill.

Online reference

 Http:/www.faysalbank.com

 http:/www.google.com.pk

 http:/www.brecorder.com

 http:www.kse.com

79
ANNEXTURE

80
Faysal Bank

Summarized Balance Sheet of 5 years

Years 2008 2007 2006 2005 2004

Assets:

Cash 6872032 7207998 6696726 5048395 2866278

Balance with other Banks 3708451 2883040 2045887 3564030 648660

Lending to Fin. Institutions 7078102 4608205 10742841 4417378 872132

1150280
Investment net of provision 31553108 22525358 23887864 5 11218501

5137325
Loans and advances 87346401 74468644 62035978 4 29626223

Other Assets 2204368 1537764 2371825 1473952 1183315

Operating Fixed Assets 2514959 2239392 2882441 1158407 1030352

Differed Tax Assets _ _ _ _ 160936

11547040 11066358 7853822

Total Assets 141277421 1 2 1 47606397

Liabilities:

Bills Payable 2406927 4516125 1193309 905637 430862

Borrowings from Fin. Institutions 9995855 14965037 15295730 8478048 6529810

Deposits and Other Accounts 102067422 74413641 74595564 5646032 31332172

81
 9

Sub-ordinated loans 1000000 _ _ _

Liabilities against assets subject to

financial lease 7827 14664 122549 18434 16404

Deffered tax liability 2691466 1839860 1269113 166442 _

Other Liabilities 6951421 5924440 3527023 2294899 1318437

10167376 6832378
Total Liabilities 125120918 7 96003288 9 39627685

1021443
Net Assets 16156503 13796634 14660294 2 7978712

Share Holders Equity

Share Capital 5296445 4237157 3684484 2912635 2647850

Capital Reserve 3567033 3079527 2516211 2259101 2115989

Unappropriated Profit & Reserves 1481668 1815643 1938651 1079492 846016

Total Equity of the Bank 10345146 9132327 8139346 6251228 5609855

Surplus on Revaluation of Assets 5811357 4664307 6520948 3963204 2368857

1021443
Total Share Holders Equity 16156503 13796634 14660294 2 7978712

11547040 11066356 7897134

Total Liabilities And Equity 141277421 1 2 8 47606397

82
 Faysal Bank Ltd

Summarized Income Statement Of 5 years

Years 2008 2007 2006 2005 2004

Mark Up / Interest Income 11610781 9728046 6319498 2753451 2074611

Fee, Commission And Brokerage

Income 743913 603667 581854 397064 251189

Divided Income 1221217 1249522 721804 697499 763697

Income After Dealing In Foreign

Currencies 313597 120992 95451 162444 107473

Other Income 43821 447708 -1024 5050 2554

Total Income: 13933329 12149935 7717583 4015508 3199524

Less: Mark Up / Interest Expenses 7459392 6089255 3309989 1118118 946485

Gross Profit 6473937 6060680 4407594 2897390 2253039

Less: OPERATING EXPENSES

Administrative Expenses 2799747 1866584 1428830 1134672 834754

Provision Against Non Performing

Loans 1797432 517027 -19026 51609 208097

Bad Debts Written Off Directly - 67 1118 141

Other Provisions / Write Offs 6061 - - 1742

Other Charges 9855 32857 2220 1150 11935

Total Operating Expenses 4613095 2416535 1412024 2377098 1056669

83
Profit Before Tax 2697827 3870340 4018476 2207470 2745272

Less: Tax 425719 1053768 902338 454000 593928

Profit After Tax 2272108 2816572 3116138 1753470 2151344

84