SUBMITTED TO: Internship Coordinator IMS, BZU Multan SUBMITTED BY: Mahmood Khan MB-10-74 MBA (Morning) 7th Semester Session (2010-2013)

Internship Report

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Internship is the basic requirement of all business programs in nearly all of the business institutes and especially in Institute of Management Sciences, Bahauddin Zakariya University Multan. Internship is one of the crucial parts of the MBA course. Firstly the purpose of internship period is to become familiar with the practical world that what is actually happening in different national and multinational companies and how different activities are performed over there. Secondly, to cope the theoretical knowledge with the practical side that what is to be taught us in business institutes and how it is implemented in different enterprises? I have done my internship in Bank Alfalah Limited (Quaid-e-Azam Road, Multan Cantt Branch) since 2nd of July 2013 to 13th of August 2013. I gained a lot from this internship tenor under the kind supervision and guidance of my internship supervisor. During my whole time I was visited through different cells of the bank and was thoroughly briefed about the procedure and working by cordial senior staff of there. My report is all based on what I have learnt there. I hope that my report will given you good overlook of all the banking related matters.

Internship Report

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Finally. Mr. Mr. Jawad Khan Durrani (Branch Manager) who has guided me all the way through my internship time and stay in the organization for six weeks. Internship Report Page 4 . His guidance leads me to the awareness of hidden aspects of the banking sector and practices. I want to acknowledge Mr. I am very grateful to the whole team working over there in the organization that have provided me the opportunity to explore the practical applications of the techniques and methodologies concerned with the banking. Muhammad Arif Bhatti from credit administration department have helped me a lot during my stay in the bank as an internee. All the department in charges and managers are very kind and helping especially.First of all I want to pay my gratitude to Almighty Allah WHO has enabled me to successfully accomplish my internship in Bank Alfalah Limited. Aamir Ghori from Accounts Deptt.

I would like to dedicate this accomplishment offline to my beloved and caring parents. Internship Report Page 5 . and to my teachers with the support of whom I am standing at this step of my life stairs.

Table of Contents Executive Summary BRIEF INTRODUCTION OF BANKING SECTOR COMPANY PROFILE          Introduction and History Branches Network Credit Rating Message of the Chairman Board of Directors of Bank Alfalah Vision Statement Mission Statement Organogram of Bank Alfalah Product Line of Bank Alfalah 07-08 08-09 09-18 12 DEPARTMENT WORKED DURING INTERNSHIP  Operations Department  Account Opening Department  Cash Dealing Department  Remittance Department  Clearing Department  Accounts Department  Trade Finance Department  Credit Department APPLICATION OF CLASSROOM LEARNING ANALYSIS OF BANK ALFALAH  SWOT Analysis  PEST Analysis MY FINDINGS & SOLUTIONS RECOMMENDATIONS CONCLUSION IF I WAS MANAGER THERE? FINANCIAL ANALYSIS  Common Size Analysis  Financial Ratios Analysis  Competitor Analysis 18-48 48-49 49-53 53-55 55-57 57 57-58 58-71 Internship Report Page 6 .

Quaid-eAzam Road. Risks which the bank is facing are also discussed & after that in the last portion of the report I have presented the conclusions which are followed by my humble recommendations for the improvements.I was lucky enough to avail this chance of doing an internship at Bank Alfalah Ltd. Internship Report Page 7 . This duration of internship was six weeks. Detail of my internship learning experience comes after that. It illustrates the history of Bank Alfalah. My report starts by discussing the brief history of banking in the human history. List of bank's products and services is also mentioned in detail followed by a brief introduction to its various departments. During the training I was introduced to the functioning of all the departments operating in the branch. Then the report discusses the overview of my internship organization. Detail information about the bank's branch network comes next. The financial performance of Bank Alfalah from the year 2011 is presented. Multan Cantt Branch. its chairman & board of directors. It contains the information that I was able to gather and understand regarding the activities of the bank.

A lot of sources say that the word bank is derived from the word "bancus". In addition to that the functions of the earlier banks were quite simple but in this modern world we see that the banks perform a wide variety of functions. In this way all the parties involved in this transaction are benefited. They reason that the early Jews used to sit on benches and did transactions similar to what are carried in modern banks today. bonds and deal in foreign exchange. debentures & various stocks. They utilize the money and earn a return on that which is paid to the bank. The banks after deducting their intermediate costs give the lenders their share. We see that the commercial banks today are involved in buying and selling of shares. Internship Report Page 8 . Generally the state bank of a country is responsible for policy making and overseeing all the activities being carried out in the banks. Every bank issues credit cards to its customers as well. Their role is not just limited to depositing money or issuing loans to different people or organizations.The banking sector plays a very important and vital role in the economy of any country. As stated earlier a bank plays a very vital role in the economy of a country. They sell different types of securities. It serves as a channel through which the borrowers borrow money from the savers.

Karachi. and Karachi. All three branches were given under Habib Bank Limited after valuation of its assets for 15 million dollars. and American Express etc. The bank is currently operating through 282 branches. This includes 48 Islamic banking branches and 7 foreign branches in Bangladesh. imports and exports dealings. traveler‘s cheque sales etc. Its banking operations commenced from November 1st. The bank is listed on the Karachi and Lahore Stock Exchange with a ticker name of “BAFL”. which were named as Habib Credit and Exchange Bank (HCEB) and these were working as subsidiary of Habib Bank Limited. But within a few years this branch crossed mostly all the other banks in case of deposits.A. The Lahore branch was opened on 15th December1978. This branch was opened at that time when some other international banks like Citi Bank. two in Afghanistan and one offshore banking unit in Bahrain with the registered office at B. The bank is engaged in commercial banking and related services as defined in the Banking companies ordinance.I.Chundrigar. Hence Bank Alfalah has two types of branches in Pakistan: 1. the BCCI was banned. when it was accused by European countries that the bank was involved in some illegal operations with Gulf countries. In 1991. 1962.Building. Therefore.Bank Alfalah has gone through different phases over the years. Bank of America. the bank was closed due to international pressure. established by Mr. in association with U. guarantees. 1997 as a public limited company under the Companies Ordinance 1984. In July 1991. I. the branches of BCCI in Pakistan at that time were taken over by The Ministry of Finance and SBP. Lahore and Rawalpindi. advances. It had its 3 branches in Pakistan. Islamic Branches Internship Report Page 9 . Its name and been changed in the following sequence. The major reason behind European accusation was that BCCI was of Islamic mode.E and Europe. Habib credit and Exchange Bank assumed the new identity of Bank Alfalah on June 21st. Bank of Credit and Commerce and International (BCCI)—1972 Habib Credit and Exchange Bank—1992 Bank Alfalah—1997 Bank of Credit & Commerce International (BCCI) was a Pakistan based bank. Agha Hassan Abdi from UBL.A. 1997. Conventional Banking Branches 2. Following the privatization in 1997. were already working. BCCI has its branches in 74 different countries of the world.

Pirmahal. a premier rating agency of the country.A. Sialkot. operating through 471 branches in 163 cities in order to provide creative. along with making profitable advances and increasing the range of products and services. strong capacity for timely payment of financial commitments in the long term and by highest capacity for timely repayment in the short term. Murree. institutions and government organizations. with the registered office at B. by the grace of the Almighty. We have made a break-through in providing Internship Report Page 10 . Some of the main branches are located in all of the major cities including: Lahore. Faisalabad.Building. Kasur. Karachi. Multan. Mirpur Khas etc. He is the member of UAE's ruling family. corporations. Sargodha. respectively.The bank is currently operating through more than 471 branches which include 110 Islamic Banking branches. Gawadar. endeavoring to meet the needs of tomorrow today. Bank Alfalah has emerged as one of the foremost financial institution in the region. Gujranwala. we have moved rapidly in expanding our branch network and deposit base. Sukkur. has rated the bank For long term „ AA‟ (double A) For short term A1+ (A one plus) These ratings denote a very low expectation of credit risk. PACRA. I. Now 15 years after being incorporated. Attock District. Peshawar. Following is presented his unedited message from Bank Alfalah's official web site. Since the inception of Bank Alfalah. H.I.I. customized financial solutions to over 1 million consumers. Quetta. Islamabad. D. 7 foreign branches (5 in Bangladesh and 2 in Afghanistan) and 1 offshore banking unit in Bahrain. Rawalpindi.Khan.H Sheikh Hamdan Bin Mubarak Al Nahayan is the chairman of Bank Alfalah Limited.Chundrigar.

Nadeem Iqbal Sheikh Mr.premier services at an affordable cost to our customers. Afghanistan and Bahrain. customer satisfaction remains our priority. This is yet another channel of communication for the delivery of quality products and services that enhance value to our stakeholders. and Bank Alfalah day by day increasing its products for all the segments in Pakistan i. for Businessmen. Abdulla Khalil Al Mutawa Mr. H. Ikram Ul-Majeed Sehgal Mr.e. under one roof. Bank Alfalah is trying to reach each segment in Pakistan. Khalid Mana Saeed Al Otaiba Mr.H Sheikh Hamdan Bin Mubarak Al Nahayan Mr. As we pursue the path of excellence. Industrialists. Bank Alfalah operates in Pakistan. and Agriculturists and for the Government bodies in the country. It is only when we know our customers better. can we deliver a higher quality of services. Abdulla Nasser Hawaileel Al-Mansoori Mr. Internship Report Page 11 . and trying to provide its products at lowest charges and with easiest way. thereby adding synergy to our existing management expertise. financial strength and profitability. Sirajuddin Aziz Chairman Director Director Director Director Director Chief Executive Officer To be the premier organization operating locally & internationality that provides the complete range of financial services to all segments under one roof. we have designed this website to be as user-friendly as possible. Keeping in view our valued clients and the need for constant and effective communication of information. Bangladesh. Bank Alfalah is one of the leading financial institutes.

In the above Mission the Management of Bank Alfalah emphasis on the following areas:  To provide the new and more innovative products than the other banks to the customers.To develop & deliver the most innovative products. deliver quality services that contributes to brand strength.  Bank Alfalah tries to promote those activities which give the fruitful result to the customers and the stakeholder of the bank. establishes a competitive advantage and enhances profitability.  To take and manage the ideas of the valuable customer for the Bank  This is a one of the main component of Bank Alfalah Mission Statement that to deliver high quality and quick services to the customers. who are keep great value for Bank Alfalah. Branch Manager Manager Operations Manager Trade Finance Credit Officer Incharge Accounts Remittance Officer Account Opening Officer CRO Remittance Officer Officer Imports Officer Exports Trade Finance Officer Chief Teller Teller Teller Internship Report Page 12 . manage customer experience. thus providing value to the stakeholders of the bank.

 Higher returns on higher balances.  The Debit card can be used to withdraw cash and make purchases at thousands of outlets across Pakistan which provides access to funds 24 hours a day.  There is no restriction on number of withdrawals and on number of deposits. The accounts are designed according to the requirements & needs of the customers.000 only.  If gives you the facility of Free Online Banking.  There is no restriction on number of withdrawals and on number of Deposits. At present the bank is offering seven different types of accounts to the customers and these are briefly defined below: (i) Simple Current Account  It is a non interest bearing checking account. 50.5 million ATMs across the world.  The minimum account opening requirement is of Rs.  There is no restriction on number of withdrawals and number of deposits.(1). (iii) Royal Profit Account (RP)  The minimum deposit requirement is of Rs. Debit card can be used to withdraw cash and make purchases at thousands of hours a day. 100 only.000 only. outlets across Pakistan which provides access to funds 24 Internship Report Page 13 .  Profit is credited to the customer account on monthly basis. 5.List of Products Bank Alfalah provides various deposit accounts to fulfill the needs of its customers. (ii) PLS Savings Account  It is a Profit & Loss sharing saving bank account.  Profit on saving accounts is credited to the customer account on half-yearly basis.  The VISA Debit/ATM card can be used at over 30 million outlets and at 1.  The minimum account opening requirement is of Rs.

000 only is required.000 only is required. corporate etc are not eligible for opening of this account. 10.  Maximum 2 deposits & 2 withdrawals through cheques are allowed. (v) Alfalah Kifayat Account  Any Pakistani resident can open this account. The unique tier based structure ensures that the customers Internship Report Page 14 .  This account is strategically divided into three tiers which are Silver.  Online banking facility is also available.  Free Personal Accident Insurance coverage up to the deposit amount or Rs. Debit Cards are issued to the customers. 1. VISA.000/.500. Other customers like companies. 1. (vi) Alfalah Mahana Amdan Account  This account is signed with a contract of 3 years with the bank.15. This account is for individual/joint customers only. (vii) Alfalah Kamyab Karobar  This account is designed for the businessmen. Gold and Platinum.  Customer can avail financing facility up to 90% of the deposit(as per banks policy)  Any Pakistani resident over the age of 18 can open this account. 000. 100.000 with no minimum balance requirement.  There is no restriction on ATM withdrawal.000/-.  Expected Rate of profit is 10% Per annum.  Cheque books.  Minimum placement limit is Rs.  It is a non interest bearing checking account.  The minimum account opening balance of Rs.000/.  Debit card can be used to withdraw cash and make purchases at thousands of outlets across Pakistan which provides access to funds 24 hours a day.  Minimum account opening balance of Rs. 25.  There is no restriction on deposits or withdrawals.(iv) Basic Banking Account (BBA)  The initial deposit for account opening is of Rs.and maximum placement limit is Rs.whichever is lower.  Profit will be automatically credited on the 1st working day of each month into customers Current/PLS/RP/BBA account.

Some of the services are  Free Online Transactions  Free Pay order /Demand Drafts  Free cash deposit across Pakistan  SMS alerts on VISA Debit/ATM Card  Gold VISA Debit/ATM Card with every account.000/in a savings account. Annual locker rent ranges from Rs. 000/.in a current account or US $50. securities and jewellery etc. Locker rent is waived for customers maintaining a minimum deposit of Rs. Higher the deposit. This comes under the foreign exchange department of the bank.2 million in current account or above US $25. (v) Credit Cards Internship Report Page 15 .000/. (iv) Hilal/Debit Cards Bank Alfalah offers its customers with Hilal VISA cards that are accepted at all ATM machines around the world. (iii) Remittance Through Bank Alfalah's international correspondent banking relationships it provides direct and indirect foreign currency remittance facility around the world.e. (2) List of Bank Alfalah Services (i) Currency Exchange Bank Alfalah offers the facility of foreign currency being exchanged to local (Pakistani) currency. medium to large. 000/-. These cards are Based on Islamic and not on the conventional credit card Rs. (ii) Lockers Bank Alfalah provides safe deposit locker facility to its customers for safe keeping of their valuables like documents.can avail smooth & cost efficient facilities based on their current level of deposits i.2. Lockers are present in various sizes. They range from small. higher the number of free services.

Renovate Your Home Financing of Rs.50 million or 40% value of the home To be renovated.Bank Alfalah offers its customer with four types of conventional VISA Credit cards. Repayment period ranges from 3 to 25 years. These are namely:  Platinum Card  Titanium Card  Gold/ Classic Card  Supplementary Cards (vi) Home Loans Under this category Bank Alfalah at present is offering the following Products. Repayment period ranges from 3 to 25 years.Start It Together Financing for buying a constructed house designed to assist Professionals who wish to buy a home early in their Careers. (5). (vii) Auto/Vehicle Loans Anyone can apply for auto loan at bank Alfalah if he is having income from following sources:  Employment (Permanent/Contractual)  Business (Partnership/Proprietorship)  Co-Borrower’s Income (Clubbing of Income) Internship Report Page 16 .Easy Transfer 100% finance on the existing finance. (2) Build Your Home Bank provides you 100% of the construction cost in addition to 60% value of the plot. 3. (3). Repayment period May be stretched to 25 years. (1) Buy Your Home Bank finances from 0 to 70% of the value of the property. (4).

Features of the Auto Loan Plans:  Quickest processing & Turn Around time in the Market  Minimum Documentation Requirements  Variable & Fixed rates to cater to every Budget  No Termination Charges on car Replacement  Discounted Insurance Rate with Free Tracking Device  Balloon payment Options  Deferred Insurance & Registration Charges  150 Cities Existence (viii) Alfalah Agri Finance Bank Alfalah Limited acknowledging the vital role of agriculture in the economic development of Pakistan has designed Rural Finance Program named as "BANK ALFALAH ZARIE SAHULAT". Multan Cantt Branch and the main departments of this bank in which I worked and their functions are as follows:  Operations Department  Account Opening Department  Cash Dealing Department  Remittance Department  Clearing Department  Accounts Department  Trade Finance Department  Credit Department Internship Report Page 17 . I did my internship at Bank Alfalah Limited Quaid-e-Azam Road.

Account Opening Department 2. Accounts Department Internship Report Page 18 .Operation Department Customer service Remittances Clearing Account Opening Account Cash SUPERVISING The detail of those departments that are controlled under operation department is as under. Clearing Department 5. Remittance Department 4. Cash Dealing Department 3. 1.

There are no restrictions on the number of deposits and withdrawal made to and from the account and all account holders receive a Hilal debit card as well.Basic Banking Account (BBA) Basic Banking Account was introduced by banks on an order by the State Bank of Pakistan and is current in nature. There is no minimum balance requirement for BBA. however can be jointly opened by individuals. 3. however initial Deposit must be Rs 1000. Some of the major deposit accounts opened by Bank Alfalah Corporate Branch are as follows: Major Deposit Account Products 1.000 and profit is credited on a half yearly basis.Royal Profit Account Royal profit accounts are opened with a minimum balance requirement of Rs 50. 2. Profits are paid at 2% on all account balances. Maximum two withdrawals and deposits are allowed by cheque. Furthermore all current account holders receive a Hilal debit card and there are no restriction on the number of withdraws or deposits made to and from the account. No zakat is deducted on the accounts balance. Profit and loss saving account cannot be opened by a business corporation. 4. while there is no restriction on ATM withdrawals.Current Account Current Accounts are non interest bearing accounts that have a minimum account opening requirement of Rs 10.000.Accounts opening department is one of the departments that come under the retail/general banking facilities provided by Bank Alfalah Corporate Branch. 5.000.Profit& Loss Saving Account Profit& Loss saving accounts can be opened with a minimum balance requirement of Rs 5. The basic aim of this account is that the higher the balance the higher the return. as profit is credited on a monthly basis.Kifayat Account Internship Report Page 19 .

Account holders lie in different tiers such as Silver. free first pay order and DD etc. free online service. with a maximum limit of Rs 15 million. after the expiry of original period.Mahana Amdan Account Mahana Amdan account is Term Deposit Receipt (TDR) for three years that can be opened with a minimum balance requirement of Rs 100. credited on a monthly basis. and the most suitable business account. Pre-Requisites for Account Opening FOR INDIVIDUALS/SELF EMPLOYED ACCOUNT  CNIC  Source of income (salary slip etc)  NTN certificate (optional)  Company letterhead or authorization (as required) FOR A PARTNERSHIP ACCOUNT  Partnership Deed  Partners CNIC  Company Letterhead  NTN certificate (optional) FOR COMPANIES’ ACCOUNT  Memorandum of Association  Article of Association  Directors CNIC  Company Letterhead  NTN certificate (optional) Internship Report Page 20 . 7.Kifayat account is another saving account product that can be opened with a minimum balance requirement of Rs 10. Profit is calculated on a monthly basis. gold ATM card.Alfalah Kamyab Karobar Account This is the newly introduced account of bank Alfalah that can be opened with a minimum balance requirement of Rs 25000. with a maximum limit of Rs 1 million. Profits are paid at 10% pa.000. Other features of this account include free personal accident insurance and automatic renewal for another 3 years. 5.000. This account has the facility of free cheque book. while it is credited on quarterly basis. gold and Platinum according to their maintaining balance in account. Bank Alfalah pays 7% pay interest on Kifayat Account.

7. Cheques Book Requisition. Account Number When all the formalities are completed then the final approval of account has to be taken from the Branch Manager. and makes a request for opening of an A/C. Every time a Cheque is received for a payment from the client. a verification system started by NADRA on the CNIC of the new account opener. These signatures should be usual signatures and he would operate the account with them. 4. It is used mostly to verify the customer CNIC with Nadra. The signature of the account-holder introducing the account is obtained at the place provided for in the account opening form. the signature on the Cheque are verified by comparing them with the Specimen Signature Card. Then that account number is written on the Cheque Book. Introduction The introduction of a current account holder is accepted for the opening of either a current account or a saving account. Specimen Signature Card. Internship Report Page 21 . 3. 8. occupation. The introducer should be Account Holder. if more information pertaining to the customer is needed to open the account or not. and complete address of the person opening the account are written in the columns that are provided in the form. Vernacular Form The signature of the customer is also obtained on the vernacular form if he / she signs in a language other than English. Online Form The signatures of the client are obtained on a specimen Signature card Cheque book requisition and online form.ACCOUNT OPENING PROCESS 1. The Account Opening Form When a client comes to the bank. 5. These specimen signature cards are obtained in duplicate with two signatures on each card from the customer. The officer says that first fill up a prescribed application form. Signatures are obtained from the customer where it is required. A ‘Verisys’ tells. Verisys Then we do a ‘Verisys’. 2. Specimen Signature cards and account opening form. After obtaining approval of the branch manager an account number is allotted to the customer all the information is entered into the computer. Completion of the Form The name. Signature Difference Form The signatures of the client are obtained on a signature difference form if his / her signatures differ from the computerized National Identity Card. 6.

During the deal with customers first we asked from customer about their profession either a businessman. The process for stopping payment. stating no responsibility on behalf of the bank if any illegal payment is made before the time of announcing a cheque book or ATM card lost. signs it properly. Entry in the Cheque Book Issue Register Check whether or not a senior officer has verified the signatures. if not the first gets them verified. The A/C holder mentions title of A/C. 10. They include: Stamping requisition slip that is in Cheque book. the employee performs certain functions. Stop Payment If a customer looses their cheque book or ATM card. MY ACTIVITIES AND LEARNING IN ACCOUNT OPENING DEPARTMENT As a part of my internship I had to fill the different forms and also did the appropriate bank stamping to complete the forms and also learn about the Cheque Book issuing process after the opening of account. the employee issues the Cheque book to the A/C holder with his/her signature on the register 13. Entry Of A Cheque Book Before issuance of a Cheque book. then that customer will have to come to the bank and firstly report the loss and then stop payment. the customer is guaranteed that no illegal payment is made from their account. after the customer tells that he has lost is cheque book is that he fills a ‘Form B’. Two types of A/c are. Job holder.9. Issuance Of A Cheque Book After opening an A/C with the bank. 11. After entry in the manual register. Sending the form to Head Office After fulfill all the requirement and verify the form from operation manager the account opening form send to Head Office Karachi and make request to issue the printed cheque book. 12. by telling the series of cheque he has lost. By stopping payment. the A/C holder receive a letter of thanks from Head Office Karachi then after receiving this letter client come to bank and makes a request in the name of bank for the issuance of a Cheque book. Different A/c is suitable for different customers such as BBA for student etc. which is same as a cheque book requisition form and an indemnity form. Normally BAL issues a Cheque book having 25 leaves for Saving Account and 50 leaves Cheque Book to Current Account Holder. Internship Report Page 22 . A/C number. Every Cheque book also contains one leaf that is used for another issue of a Cheque book. student or a housewife in order to make estimate of their income.

Nature of business. Kifayat. their Assets. Account title. Liabilities. AKK. RP (Saving). other Bank account #s if they have etc . 2-BUSINESS ACCOUNT It is open with the name of account holder business and for doing business transactions and A/c type could be Current. Agri etc. Account #. Estimated income. We Preview our Customer KYCs periodically (maximum period of preview is 12 months) by monitoring their types and # of transactions. I also learn about this and how to prepare and send notice to the customers. For preview we fill the simple form manually then enter it in the system and a revised KYC is prepared. Filled Form and new KYC. This department of bank is mainly responsible for the handling of cash deposits and encashment of cheques issued by the account holders. The complete set of preview contains Old KYC. KYCs (KNOW YOUR CUSTOMER) This is attached at the end of form and as name mentioned this include all the information about customer such as His Name. The following are the sections of the cash dealing department Receipts of cash Encashment of cheques Cash receipt section Internship Report Page 23 .1-PERSONAL ACCOUNT This A/c is open with the name of person and he can’t do any business transaction in it. I filled the forms for KYC preview and learned about all of these above mentioned activities in account opening department. DORMANT ACCOUNT “The A/c in which there is no transaction from previous six months is stated as Dormant Account” We prepared a Notice to inform the customer that his account become dormant and he can Re Active it by responding. Saving or BBA etc. I have learned about these things. A/c could be a Current.

Parties involve in remittances Four parties involved in remittance:    Remitter Remittee Issuing Bank Paying Bank Remitter One who initiates.The depositor uses depositor slip/vouchers for depositing the amount. Client fills these vouchers. Encashment of cheques Cheques encashment is made in four steps Receiving of cheques Verification of signatures Computer terminal process Payment of cash “Remittance is transfer of funds from one place to another or from one person to another. Remittee Internship Report Page 24 . He may or may not be the branch customer.customers. Since it is not a free service it is a source of income for the bank. asks for a remittance to be made.” A Remittance is an important service provided by banks to customers as well as non. and deposits the money to be remitted. The bank charges him a commission for this service. fulfilling all requirements. The remitter comes to the issuing or originating branch. or requests for a remittance.

or the payee. The person in whose name the remittance is made. pay orders. through demand drafts. Paying Bank Paying Bank also knows as the drawee branch. the amount etc and attach a cheque to pay for the pay order. Pay orders can also be made through cash but mainly it is made through cheque. the entries passed are: Pay order payable Customer A/c Internship Report Page 25 . giving in the details to which account the money is being transferred. makes out the charges for the transfer that the customer will pay and then make the pay order for the customer and pass the following entry: Customer A/c Pay order payable When the customer in favor of whom the pay order was made gives the pay order to his branch. The procedure that is carried out in transferring money through pay order is as follows: Procedure for Transferring Money through Pay Order The customer will come to the bank and fill in the pay order application. The branch on which the instrument is drawn. The officer checks all the details in the application.A Remittee is also called the beneficiary. Issuing Bank The bank that sends or affects the remittance. Instrument used There are two main types of instruments that are used to transfer money. A remittee is also the one who receive the payment. It has to make the payment (usually located in a different city country). or Mail Transfers. which are as follows:   Pay order: Used to transfer money within the city Demand Draft: Used to transfer money outside the city  Pay Orders Pay orders are made to transfer money within the city and this is a safe way to transfer money as the person who makes the transfer through pay order pays in advance.

Online Transfers For Cash Sundry A/c Head Office Internship Report Page 26 . the officer will pass the following entries: Head Office A/c DD Payable A/c When the customer comes with the DD to get his payment. Demand Draft Demand Draft is another way in which customers can transfer money outside the city. Transfers are conducted by Bank Alfalah SRA Branch. There are two types of transfers: 1. and will attach a cheque or pay cash as he wish. Then the officer will check all the details and make a demand draft for the customer and pass the following entries: For Cheque Customer A/C Head Office Inward DD’s This is the procedure adopted when the issuing branch sends copy of the instrument as an advice. There are two types of situations for transfer of money through demand drafts: Outward DD’s When a customer comes to Bank Alfalah to make a DD to transfer money outside the city is known as outward DD. using its software ‘Bank Smart’. When the bank receives the advice. The customer will fill the details in a DD application form. Internal Transfers 2. the following entries are passed: DD Payable A/c Cash If that customer is a Bank Alfalah account holder then the following entries are passed: DD Payable A/c Customer Account Transfers This process is done for the local transfer of cheques.

The officer will post entries by credit the account in favor of whom the cheque was drawn and debit the account that drew it in the banks software. Internship Report Page 27 . 1-Transfer stamp (same day) 2-Bank Alfalah LTD 3-Banksmart 4-Signature verified 5-Payees A/c credited (on Back) Online Transfers All those transfers that take place when a Bank Alfalah account holder draws a cheque in favor of a Bank Alfalah SRA Branch account holders are known as online transfers. When supervised. if they are same then it is an internal transfer 2. Sends the cheque for supervision to the operations manager 5. the cheque will be affixed with the official stamps and kept with the bank.Internal Transfers Internal transfers take place when a Bank Alfalah SRA Branch account holder draws a cheque in favor of another Bank Alfalah SRA Branch account holder. Officer of the bank receives the cheque and determine if the cheque is an internal transfer by looking at the branch code. The process for online transfer is as follows: 1. The process for internal transfer is as follows: 1. 2. Posts entries by debiting the account of the cheque. 4. The bank officer collects the cheque from the depositors. 3. while crediting the account on the slip attached with the cheque. The cheque will be sent for supervision to the operations manager for authentication of the entries 4. Verity’s if the accounts are online and need to be transferred online 3. the cheque will be affixed with the official stamps and kept with the bank. Processing Stamps Transfer cheques are processed by five types of stamps. When supervised.

4. If any fault is found. “A system by which banks exchange cheques and other negotiable instruments drawn on each other within a specific area and thereby secure payment for their clients through the Clearing House called NIFT at specified time in an efficient way. The bank officer verifies all particulars from the instruments and the system for sufficient balance etc. Inward Clearing Inward clearing takes place when a Bank Alfalah Branch account holder drew’s a cheque in favor of a Non. Internship Report Page 28 . 3. Cheques are received by the operations department from NIFT 2. Similarly each bank receives cheques from other banks if any.” Each bank has collected cheques as behalf of their customer but these cheques are not drawn on their own bank so in the clearinghouse (NIFT) they hand over these cheques to respective banks on which these cheques are drawn. Cheques are received by the operations department of Bank Alfalah Branch 2. The customer in favor of whom the cheque is drawn is credited 3. The particular of the returned cheques are entered in the ‘O/W return of inward clearing’ register and returned to NIFT. Outward Clearing Cheques drawn by Non-Bank Alfalah customers in favor of Bank Alfalah Branch customer and deposited at SRA Branch are known as outward clearing cheques. The process for inward clearing is as follows: 1. The process for outward clearing is as follows: 1. stating the reasons with them. then the officer will mark the cheques as a return.The clearing department is responsible for the clearing of all cheques that are of other banks and branches that the bank receives daily and the different types of clearing are:  Inward Clearing  Outward Clearing  Online Clearing  Outward Bills for Collection Clearing process is defined as. Clearing stamps are affixed on the cheque and sent to the other bank via NIFT. then the officer will post these cheques in the system by debiting the customer account.Bank Alfalah account holder. If no fault is found.

Or in other words. however should have an account in the Islamabad/Rawalpindi area. Special crossing and bank endorsement stamps and clearing stamp are affixed on the cheque which is to be cleared. The process for online clearing is as follows: 1. its proceeds can be collected through a mechanism called Outward Bills for Collection (OBC)” Process. The person. which is located outside the city. the posted entries are reversed and the cheque is returned to the customer who presented it and is recorded in the cheque return register. The cheque is sent as an outward clearing via NIFT 2. Intercity Clearing This involves other branches cheques which are of another city and received by air in which own branch is debit and other is credit. Same Day Clearing This involves within city other banks local cheques process by same day clearing stamp and clear within same day and of above 2 lac. Outward Bills for Collection (OBCs) There are some cheques that are drawn by a Non Bank Alfalah Account that is outside the twin city area in favor of Bank Alfalah Branch account holders and thus are treated as OBC’s. When the cheque is cleared. “When an instrument is drawn on a bank. Online Clearing Online clearing takes place when a cheque is drawn by a Non-Bank Alfalah customer in favor of a Bank Alfalah customer but is deposited at Bank Alfalah Branch. Basically this is the benefit provided to the customers. it is credited to the Bank Alfalah account via the online transfer software. The process for clearing of the OBC’s is as follows: Internship Report Page 29 . Regular Clearing This involves within or out of city other banks cheques process by next day clearing stamp. who had drawn this cheque.If any cheque returns the next days as a returned.

When OBC is realized. If DD is received against OBC. which shows the cheque numbers. If they do not have any branch in that city. Then I have done the stamping of all types of cheques and slips. the branch drawn on and amount. I also made entry of OBCs sequence wise in the OBC register and also the entries of Pay Orders and DDs in register. I have also learnt all about these OBCs. I deal with customers by preparing for them slips and cheques. it is presented in the clearing for collection. certain vouchers are posted in the system. Instructions are given on the OBC schedule for the payment of that cheque. Original Cheques are attached to these letter and sent to the main Bank Alfalah branch in that area by courier OBC send and its Realization OBC schedule is attached with the cheque and dispatched to the main branch of that city for collection. then cheque can be sent directly to the drawing branch. Contra-liability vouchers are also posted in the system. then cheque will be sent to the Collecting Agent of Bank Alfalah for that city. I learned how to make cheques and their receipts (slips) and also cash deposit slips by preparing them. and if they do not have any collecting agent even. DD and pay orders and how to make OBC by practically prepared it. An OBC letter is printed. Entries of all OBC cheques are written in an OBC register. I also get knowledge about the process when the cheque is returned due to insufficient fund or other reasons then we return back the cheque to the party with attached MEMO and service charges are deducted from their account. collection bank pays the amount through IBCA if it is the same bank or through DD if it is another bank.     Cheques received by Bank Alfalah Branch The officer affixes the OBC stamp on the cheques and writes its individual number from the OBC register. Internship Report Page 30 . MY ACTIVITIES AND LEARNING IN CLEARING AND REMETENCEE DEPARTMENT As a part of my internship I have learnt all about these clearing and transfer processes by doing them practically. If IBCA is received from the branch for the payment of OBC.

1. Budget Formulation of yearly budgets & targets in consultation with the branch manager is also done by the accounts department. 4. Furniture and their invoices. Income and Expense The department also needs to calculate the revenues and expenses. Statement of Foreign Exchange (a report on the foreign exchange currencies at the bank) and Income Expenditure Statement (a report on the income and expenditures of Bank Alfalah Branch). MY ACTIVITIES AND LEARNING IN ACCOUNTS DEPARTMENT ACTIVITY CHECKING In the accounts department. 2. I had to do daily activity checking and there are four stages in which activity checking takes place: Internship Report Page 31 . Reports It generates reports like Statement of Account Activity (a report on the activity of all accounts at Bank Alfalah Branch). Vehicles. Computers. weekly. 7-Depreciation Record Accounts department also made a record of depreciation of fixed assets such as Office Equipment. monthly. Payments The accounts department is responsible to pay vendors on behalf of the bank with authorization from the branch manager. Activity Checking Daily activity checking and monitoring is done by the accounts department of the whole bank 5. Storage of Records Accounts Department also has the duty to store vouchers and system generated reports. 3. control expenditure and forecast profits every month. Statement of Affairs (a report on the assets and liabilities of Bank Alfalah Branch).Accounts department is a backend department at Bank Alfalah SRA Branch that performs the following functions. It also has to amortize large payments and calculate depreciation of branch assets. These reports can be generated at daily. 6. quarterly or yearly basis as required by the bank.

Bills Payable General (BPG): Includes vouchers and DD. DD’s. ATM. Checking Activity 4. both debit and credit and then packed by totaling the vouchers. FED. payables etc 4. SORTING VOUCHERS After all vouchers are collected. PACKING After the activity is checked. cheques. Expenditure: Expenses vouchers and payment vouchers 3. pay slips etc from all departments of the bank. pay order. which contains all daily activity of the accounts in the bank. Sorting Vouchers 3. cheques etc from all departments 2.1. all sorted vouchers are counted. Activity checking is done by seeing if the values and account numbers in the sorted vouchers match that of the activity and whether or not there is any missing activity that is not in the vouchers. RECORDING OF DEPRECIATION And the other important work that I have learned is the Recording of Depreciation of Assets. daily activity is checked using the statement of account activity. After collecting these vouchers etc from the departments. We use the straight line method to record the depreciation by using Formula. Packing COLLECTING VOUCHERS The first stage of activity checking is collecting all vouchers. Head Office (H. Pay slips etc CHECKING ACTIVITY After sorting takes place. teller. DD advices 6. At the end of the completion of ticking a Summary is prepared which listed the daily total amount of # of cheques. Pay orders. Internship Report Page 32 . Mainly vouchers come from the operations department. vouchers and receipts etc. Collecting vouchers.O): Includes HO vouchers and IBCA. they need to be sorted into different categories: 1. Others: Includes vouchers about excise duty. we need to check if all stamps are stamped on these vouchers etc. Online: Contain online vouchers and online credit slips etc 5. Income: Income vouchers 2.

The earnings of BAL are chiefly derived from interest charge and discounts. State Bank of Pakistan (SBP) has prescribed regulations which are called “PRUDENTIAL REGULATIONS”. ASSET HEAD Office Equipment Computers Vehicles Furniture % OF DEPRECIATION 20% 25% 25% 10% × 31 = 136 Ans After recording depreciation month wise to 31 July 2013. I match the total calculated depreciated Amount with the computerized prepared sheet each for all the assets heads in order to check out that the recording of all is correct and depreciated amount is tallied. Dep Amount = 8000 × 20% 365 Different % of depreciation is given to different groups of Assets such as. Credit department basically has three segments. Another words we can define credit as “trust in one’s integrity in money matters and one’s ability to meet payment when due”.Dep Amount = Purchase Amount × % dep × # of days 365 e. Credit means belief or trust. This department is the revenue generating department. Every Internship Report Page 33 . 1) 2) 3) Credit marketing department Credit administration department Trade finance services department Credit and advance department deals with extending loans (credit facility) to customers. I also checked out the INVOICE documents about the purchase of each asset. “The quality of being credible or trustworthy”.g.

If any bank violates the regulations it should be liable for penalties under the core spirit of SBP PR(S). Individual take current finance for their personal use while in industries. Internship Report Page 34 . The Bank Alfalah limited credit is extended on the basis of these rules and regulations. CREDIT FACILITIES At BAL there are two types of credit facilities 1) 2) Funded facilities Non funded facilities FUNDED FACILITIES These are the facilities in which there is direct involvement of cash fund. 1) 2) 3) 4) 5) 6) 7) Current finance CF Term finance TF Finance against foreign bills “FAFB” Finance against packing and credit “FAPC” Finance against imported merchandise “FIM” Finance against trust receipt “FATR” Payment against document “PAD” Current Finance CF The extensively used financing mode at BAL is current finance (CF) current finance is used to finance both individuals and industries. These regulations tells the term and conditions under which you can extend loans to the borrower and to what extent. Following are the funded facilities. It is taken for fulfilling the requirement of working has to follow these regulations.

2) Post Shipment Post shipment financing is essentially the receivable financing to the exporters till the period he is out of cash after the shipment. He request to the bank to pay all dues to the exporter against the security of imported merchandise. they give money to exporter but take some margin on it. 1) 2) Pre shipment Post shipment 1) Pre Shipment Preshipment loans are export related working capital financing. If they find no discrepancy. Like exporter sends shipment but at that time he needs fund for the operation of the business. Finance against Imported Merchandise FIM This facility is allowed against the commodities imported from other countries usually through letter of credit. bank checks all the documents to be in accordance with terms and conditions. Bill of lading etc. Finance against Foreign Bills FAFB In FAFB facility exporter take loan from bank on the behalf of their foreign export bills. Internship Report Page 35 . Some time importer does not have enough amounts for paying the imported merchandise therefore.Term Finance TF Term finance is for specified time period. Finance against Packing and Credit “FAPC” FAPC is taken for the preparation of consignment. It has two forms. He may go to the bank and surrenders all the documents including L/C. when the importer pays off its liability partially / fully. Bank pays the amount and releases the goods. Term finance is given for fixed asset financing.

1) 2) Letter of credit L/C Letter of Guarantee L/G Internship Report Page 36 . For example when exporter sends all the document to importing bank as document reached. Bank pays all taxes and gets merchandise and then gives it to client. Importer has to import the product. Bank do charges markup against such financing.Finance against Trust Receipt FATR Finance is extended upon the trust receipt signed by borrower. NON FUNDED FACILITIES The facilities where there is no direct involvement of banks fund. FATR is for specific period of time. Payment against Document PAD Payment against document is made by the banks as payment against L/C comes due payment is made for imported documents. Trust receipt is given to the bank by the customer. 1) 2) Pay money and get thing Get fine facility And third is that if that client is trust worthy for bank believing on him based upon his past record. The customer in turn commits that I will pay on such and such date. If client do not pay with in specified time then bank charges higher per day markup. Following are the non funded facilities. importing bank has to make payment within 24 hrs if the importer does not pays then bank charges markup per day. There are three conditions. He releases the goods against the trust receipt.

Letter Of Credit Importer bank issues a document on request stating that it will pay the exporter when exporter fulfill the terms of letter of credit L/C is off two types: 1) 2) Sight L/C Usance L/C Sight L/C Requires the importer / importing bank to pay as soon as it receives the clean documents from exporter. Usance L/C It extends time period (typically 60, 90, 120 days) to importing bank for payment. After specified time period importer have to pay. Letter of guarantee “L/G”. Bank gives guarantee in the behalf of person that I will pay in case of default. Credit Administration Process 1. Registration of charge The CAD manager has to register charge with security and exchange commission of Pakistan (SECP) of mortgage/ hypothecation within 21 days from the date execution of documents. 2. Securities/ Facilities Documentation The CAD manager has following options while securing credit.  First exclusive Charges: In first exclusive charges, first the claim of bank is satisfied in the case of default of the borrower.  Ranking Charges: In this, the ranking is given. The first on the ranking is satisfied and then comes the second and so on.  Pledge: It confers physical possession of movables but not ownership.  Hypothecation: It is a security for a debt, which remain in the possession of the borrower.  Mortgage: It is a claim against real estate or fixed assets. The deposit of title deeds without documentation can create a mortgage.

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 LCs, Bank Guarantees, other guarantees 3. Valuation A CAD manager can take value and evaluate security worth from the following sources Security Deposits Government securities Shares Mortgage of property/ assets Stock( under pledge, hypothecation) Source Computer prints out showing actual amount Face value or encashable value rates published by the government of Pakistan Stock exchanges rates in daily newspaper Valuation report by bank’s evaluator showing market value For pledge Karachi Cotton Association issues its rates. For hypothecation stock report submitted by borrower Life of book debts/receivable submitted by the borrower. Surrender value of life policies issued by insurance company As per terms of sanction advice

Book Debt/ Receivables Life Insurance Policy Any other security

4. Stock report Frequent submission of stock reports is necessary as per term of sanction advice. 5. Stock Inspection Verification of stock is made and it should be the same as given in stock report. The following are usually checked.  Stock break up  Evidence of ownership  Quality/condition of warehouse  Fire Protection adequacy  Adequate protection from theft, burglary etc.

6. Insurance Assets charged to the bank should be insured through an approved insurance company. One month before expiry of the insurance policy, the concerned customers should be reminded to renew the policy.

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7. Search report All public/private limited companies are required to register bank’s charge over its current and fixed assets with SECP. Search report is prepared from the records of SECP showing the ranking of charges over borrower’s assets to different banks. 8. Credit Information Bureau (CIB) State Bank of Pakistan requires banks to obtain detailed information from CIB, SBP when considering proposals of over Rs. 0.5 million to any borrower. In case CIB report indicates over exposure/ default in meeting obligation etc. The accommodation to the concerned borrower can be derived. 9. Borrower Basic Fact Sheet SBP requires that all facility application should be accompanied by the Borrower’s Fact Basic Sheet as per approved format of SBP. Borrowers The following are the categories of the borrowers 1. Corporate Body The term “Corporate Body” will include:  A company incorporated under the companies act.  A corporation created by a ordinance/ a statute/ act of legislature a. Obtain memorandum and Articles of association of the company  Whether company is public limited and quoted on stock exchange, not quoted on stock exchange is a private limited.  Whether it is empowered to borrow?  Are there any restrictions on the company’s power to borrow?  What are directors’ powers? b. Obtain board resolution and ensure that it contains  Authorization to raise facilities  Create Charge on company assets/pledge securities which are in companies name

2. Partnership The partnership deed is obtained. In its absence bank’s standard letter of partnership, duly signed by partners is obtained. Although all partners are jointly and severally liable for the debt of the firm, however, it is considered inexpedient to obtain personal guarantees for good business reason.

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in the required manner. which is not available to others. The function of this department is to serve as a bridge between the importer and exporter in order to settle a transaction. Import can be defined as: “The bringing of commodities into Pakistan from outside by sea. land or air. Trade Finance Department handles two activities: Import  Export IMPORT Import Department of BAL deals with the import of merchandise. When trade is taking place between the representatives of two countries (exporter and importer). Trusts. On the other hand the importer involves his bank (the Issuing Bank). Sole proprietorship It is owed by an individual and there being no formal procedure to be followed for setting the business so a declaration on the firm letter head evidencing proprietor’s name etc is taken. 4. Clubs. Associations. This department provides protection to the rights of importer and exporter. the exporter involves his bank (the Advising Bank) in the transaction. as he wants to feel secure regarding timely payment of his goods in the required currency. 5. in order to get a sense of security regarding timely supply of the required product. Charitable societies Extra care is taken as these borrowers may enjoy legal protection.3. Individual It is ensured that borrower is not suffering from any incapacity and is not a minor. insane or insolvent.” Internship Report Page 40 . These people are not capable of contracting and therefore any borrowing by them is unlawful. Trade Finance involves the import and export activities.

“Exports mean selling goods to another country.” Exports of all eligible commodities through authorized banking channels are admissible under exchange control regulation. Requirement for the Exporter These requirement / document must be fulfilled from exporter before doing the export: Account holder of Bank Alfalah Limited  Must be a Pakistani  Membership from Chamber Of Commerce  NTN (National Tax Number) certificate  The person must have the Sales Tax Registration Certificate.Requirement for the Importer These requirement / document must be fulfilled from importer before doing the import: NTN (National Tax Number) certificate  Sale Registration Certificate  Membership from Chamber Of Commerce  Questionnaire duly filled in  NIC (attested copy) Exports Exports are major sources of earning foreign exchange and play an important role in the economic development of the country.  Form E ( export form) dully filled in  Sale Registration Certificate Methods of Doing International Trade  Letter of Credit  Contract Internship Report Page 41 . It helps to utilize excess resources of the country.

directing a certain person to pay a certain sum of money only to. advising him his L/C has reached Bank Alfalah Limited and he should collect it immediately. A cover letter is prepared and is sent to the beneficiary of the L/C. signed by the maker. The issuing bank sends the L/C to Bank Alfalah Limited. It is drawn by the exporter (drawer) and orders the importer or the importer’s bank (drawee) to pay to the order of Bank Alfalah Limited (payee) a Internship Report Page 42 . A bank that receives the L/C is called an advising bank because after receiving the L/C. his next job is to get an E-form from an authorized Bank. it performs the L/C advising function. the exporter brings the Eform to the bank for verification. When an exporter receives an L/C. In order to receive payment from his goods the exporter has to send certain documents to the issuing bank via his negotiating bank. Banks only deal in documents. or to the order of. These documents are. Then importer’s bank will be called as issuing bank. Bank issues E-form certification to exporter and he submits it to the custom officer along with E-form certification to certify E-form. A copy of the L/C is sent along with the letter. if the stipulated terms and conditions are complied with. On the E-form sent by the commercial bank following things are mentioned  Description of the commodity  Quantity of the commodity exported  Amount realized  Foreign bank charges  Country of the importer 3) CERTIFICATION OF THE E-FORM After filling in the complete information about the goods to be exported. 4) THE DOCUMENTS After getting the E-form verified the exporter starts preparing his shipment.LETTER OF CREDIT (L / C): 1) LETTER Of Credit (L / C) ADVISING Letter of Credit (LC) is a written and conditional undertaking by a bank on the behalf of applicant to the beneficiary to pay a certain amount at a certain date. a certain person or the bearer of the instrument. 2) ISSUANCE OF E-FORMS Government has provided facility to exporter in taking E-Form from any bank and is a part of the exchange control mechanism of the State Bank of Pakistan. The process of International Trade starts with asking of importer to its bank for L/C. Bill of exchange: A bill of exchange is an instrument in writing containing an unconditional order.

The standard definition of a bill of lading is contract between the seller of the goods and the carrier. All commercial banks always issue the E-form in quadruplicate. the importer must make the payment on receipt of the documents. the payment must be made within the specified time limit. stating quantities. The certificate of origin is a document in which the exporter certifies to the place of origin of the goods to be exported.specific amount.  Original: is sent to the custom officer Internship Report Page 43 . The following are types of bill of lading:  OCEAN Bill Of Lading  Air Waybill  Inland Bill Of Lading Packing List / Weight List The exporter prepares these lists in order to show that the consignment is according to the order of the buyer. If the draft is drawn at sight. Commercial Invoice The exporter prepares it. the certificate of origin shows that the country of origin of the goods is Pakistan. Certificate of Origin This document certifies the origin of the exported goods. Its amount must tally with that of the L/C. The standard definition of commercial invoice is that it is an itemized list of goods shipped to a buyer. In the case of exports from Pakistan. The shipper must ensure that the goods are shipped and handed over the right person when documents are presented to him. This number is very significant as it is used in all the correspondence between the exporter and his bank. prices. It also contains all the specifications of the commodity being exported. It shows the name and address of the importer as well as the invoice number. Bill Of Lading The shipping company or the airline that has been assigned the task of transporting the goods issues these. and shipping charges. E-Form It is a necessity for all exports out of Pakistan. It gives a detailed account of the manner in which the goods have been packed and the number of cartons they have been packed in. If it is time draft.

America. Duplicate: Bank receive the duplicate  Triplicate: is sent to the State Bank Of Pakistan  Quadruplicate: is kept by the exporter for his personal record. The exchange rate he will get will however be lower than the TT clean buying rate because the bank is paying him an amount that it is going to receive after three months itself. and U. The payment is made in Pak Rupees and the exchange rate is the Buying rate of the day normally called the T. In simple words. documents are kept with the bank until the importer makes full payment to bank. Contracts are not negotiated however in any case. The exporter might not want to block his funds for such a long time.e. Clean Buying Rate. the payment for the exports would be received after three months. Payment by importer Exporters bank sends all the documents negotiated in LC to importers bank. He can get his documents negotiated the day he presents them to the bank. COLLECTION / NEGOTIATION: When the exporter comes to the bank with the documents.T. Once the shipment arrives in importing country. the drafts are at 90 days from B/L date. the exporter gets them discounted before their maturity. Export Visa This document is required when the destination of consignment is Canada. Internship Report Page 44 . When the reimbursing bank is to pay Bank Alfalah Limited it credits its nostro account maintained with it (the reimbursing bank). Therefore visa is required which is in fact a permission to export goods to the specified countries. he has two options.K. Different countries fix quota for different commodities and restrict imports of those goods with in a specific limit. This is because they are unsafe documents and the bank does not take the risk. Negotiation: The bank purchases the documents from the exporter i. and afterwards bank debits the exporter’s account with the local equivalent of the export proceeds calculated at the TT clean buying rate. For example.  Send them for collection  Get Them negotiated Collection: The bank sends the documents on behalf of the exporter to the importer’s bank for payment.

CONTRACT: The exporter might export the goods based on a CONTRACT with the importer. I saw some practical application of some class room learning. the contract is an unsafe document.e. Usually they are:  Manually signed commercial invoice  Bills of lading  Packing list in quadruplicate  Bill of exchange FILING: A separate file is maintained in each case and if the documents have been negotiated. Now. The importer deposits the amount of the contract with the bank and takes possession of his documents have arrived. DA (Documents Acceptance): Drawee takes documents and possession from the issuing bank and signs a bill of exchange in return giving his acceptance for payment on a specific maturity date. In such a case. Multan Cantt Branch. there is no surety to the exporter that the importer will make the payment. Internship Report Page 45 . If the documents have been sent for collection.Dispatch: The documents brought by the exporter are in the form of sets containing an original and a number of copies. Application of Class Room Learning During my Internship at Bank Alfalah Quaid-e-Azam Road. a file in the similar fashion is kept but it is labeled FDBC i. The issuing bank informs the importer that his documents have arrived. There are two types of contracts. Foreign Documents Sent For Collection. CAD (Cash against Documents): The documents are sent to the issuing bank. it is titled FDBP that is the abbreviation of Foreign Documentary Bills Purchased. if he does not make the payment to the issuing bank no payment is made to the exporter and there is no liability on either bank. The issuing bank then makes the payment to the exporter’s bank. The number of each document required by the importer is mentioned on the credit. The importer might reject the goods on receipt and deny and payment to the exporter. Therefore.

       The concept of debit and credit How to improve efficiency by proper time management Customer relationship management in order to satisfy the customer To learn and see different management practices How to manage the work pressure in the days of relatively high activities The ways by which organization provide employees satisfaction and motivation Practically calculate the depreciation of different fixed assets by using the straight line method etc. interest charging and calculation and others all were practically performed at the department During my internship I have to apply and learn the some concepts that I have learned during my classroom studies such as. Internship Report Page 46 . Letter of guarantees were also issued by the department. Credit Department: At the Credit Department. Trade Finance Department: At Trade Finance Department. Loan is disbursed after the complete study of financial reports such as balance sheet and income statement. Making of installments.I saw most of knowledge application in Trade finance department. At this department. Operation department had less knowledge application. I saw the processing of letter of credit and the documents needed for imports and exports. I got a lot of practical exposure of studying International Finance. Credit Administration Department. Customers were coming for the purpose of their business and they were informed about the rules and regulation for importing and exporting. the loans are to be disbursed. Since this department mostly deals with imports and exports. my practical learning was excellent. So for this purpose a complete interview with borrower is conducted and borrower is asked about its financial strength then a CLP is made.

SWOT stands for Strengths. respectively.     Main source of profit for any financial institution is public saving which only comes from public confidence and BAL is getting this confidence which is one of the main strength of bank. Bank Alfalah is also getting fame in market due to its name “ALFALAH” which is leaving the Islamic and favorable impact on the minds of public. Internship Report Page 47 . Opportunities and Threats. Consumer survey has selected Alfalah credit cards as the best product in the market with attributes of Affordability. In SWOT analysis the best strategies accomplish an organization’s mission by exploiting an organization’s opportunities and strengths while neutralizing its threats and avoiding its weaknesses. During my internship I also observed these and conclude as follows: STRENGTHS The main strengths of the bank are as follows. Within very short period it has got a superb accomplishment which shows the competency of its top management. SWOT analysis is the careful evaluation of organization’s internal strengths and weaknesses as well as its environmental opportunities and threats. strong capacity for timely payment of financial commitments in the long term and by highest capacity for timely repayment in the short term. Weaknesses. These ratings denote a very low expectation of credit risk.  Bank has AA (Double A) and A1+ (A one plus) credit rating for Long term and short term loans respectively.  Being the private organization its main aim is not to earn profit only but also to satisfy its customers and the slogan of BAL is also the representative of this purpose Bank Alfalah “The Caring Bank”.

it has earned a good name by offering special Product like Car. WEAKNESSES Beside all these strengths I also noted some weaknesses which are described as below. BAL is charging online charges for the transfer of money but some other banks not charges. credit card facility. there is a great chance to enhance its market share as the concept of Islamic Banking is gain popularity day by day. BAL’s lending procedure is quite complicated that some people are hesitating to come as they are requiring a huge file of documents.      BAL is not offering the loan facility to the newly established businesses because it is the bank policy that it will give loan only to those people who are running their businesses from 3 years. Due to which the banks interest rate has been substantially increased which will greatly increase the banks’ profitability. BAL is not offering the online facility to the customers having photo account. BAL is not offering any credit facility to students. So the penetration of these products could enhance the market share. As the increase in overall business activity in the country. BAL is providing the facility of Money Gram to the all the people who are its customers or not and through this service it has got the leadership in Money Gram as no other bank is offering this service. In addition to excellent routine banking. the investors are launching various types of Mega Projects especially in housing and textile the bank has a great opportunity to finance these projects at very profitable term.BAL has following opportunities. Home finance.  The SBP has revised the interest policy and the interest rates have been linked with the KIBOR rates. As BAL is providing the facility of Islamic Banking through its separate branches.      Bank Alfalah is spreading its network outside the boundaries of Pakistan and it has new policies in the prudential policies. in order to cope up with both conditions. THREATS Internship Report Page 48 . OPPORTUNITIES It is mandatory to try to make progress with consistency as well as to adopt changes with of time.

in case of inflation the people has low disposal income which means lower deposits in banks. And every one is involved in this trend without taking any measure for the successfulness of these projects. Due to economic instability like currency depreciation and inflation. the bank is constantly facing the threat. business position.g. business and product development and research reports. Internship Report Page 49 . There is a trend of launching mega projects in the country. e. on the other side it also gives some threats.   For last seven to eight years there is political stability in Pakistan but now again a new layer of political instability arises which effects almost all industries operations including banks. The use of PEST analysis can be seen effective for business and strategic planning. POLITICAL FACTORS The political environment of any country is greatly affecting the operations of its businesses and banking sector. PEST also ensures that company’s performance is aligned positively with the powerful forces of change that are affecting business environment. social and technological forces.   Other investment opportunities like investment in property is giving people more return as compared to banks. The analysis examines the impact of each of these factors (and their interplay with each other) on the business. A PEST analysis is merely a framework that categorizes environmental influences as political. marketing planning. The observation of all these factors is described below. PEST analysis is a useful strategic tool for understanding market growth or decline. it can decrease the deposits of banks. This can result into the failure of this project which can make it difficult for the banks to recover their funds from these defaulters.  One of the major threats to the bank is the strong competition facing by its major competitors like UBL. Some of the threats associated with BAL are as follows. As one side environment provides opportunities to the organization. potential and direction for operations. economic. Askari Bank etc so BAL should try to update its products and policies in order to be remain successful.Threats are negative trends in the external environmental factors.

Political instability as now a day’s affected badly the operations of businesses and banks as well. The trend is now changing as the general public is educated and is pursuing professional goals.  The socio cultural environment encapsulates demand and tastes. the bank is constantly facing the threat. SOCIAL FACTOR The social arid cultural influences on business vary from country to country. Due to economic instability like currency depreciation and inflation. affluence. ECONOMIC FACTORS Economic conditions of a country have strong influence on banking sector as the banks are mainly deal with money. in cases of inflation the people have low disposal income which means lower deposits in banks. regions. Economic situations directly affects the purchasing and spending power of public so banks are directly suffer from changes in economy. which vary with fashion and disposable income.  Banks should be aware of demographics changes as the structure of the population by ages. The social structure of Pakistan is closely tied. it will be attractive for firms to invest and grow with expectations of being profitable. e.g. Customers are more aware of market conditions and available options and want to get best value for their money. and numbers working and so on can have an important bearing on demand as a whole and on demand for particular products and services.   Political factors perform an important role in the competition among the banks as the bank which better adopt the changes can survive the best. The more influence of government impose the conditions on banks to work and perform according to their demand this could affect the profitability. If demand is buyout and the cost of capital is low.     Economic conditions affect how easy or how difficult it is to be successful and profitable at any time because they affect both capital availability and cost. can again provide both opportunities and threats for particular companies and banks. and general changes. and demand for the banks. Internship Report Page 50 .

fax machines. Bank Alfalah has been successful by increasing its revenues. So this provides them competitive advantage. fax machines. Which one provided good online service is more successful like Alfalah. there are many failures seen in the different devices used by Bank Alfalah. TECHNOLOGICAL FACTORS Technology is widely recognised as part of the organization and the industry part of the model as it is used for the creation of competitive advantage. latest computers and a good connectivity architecture.   IT information system provides the bank with the feasibility of their operations bank Alfalah has this well organized system. deposit base and branches in Pakistan. Online banking facility is the great success to the banking sector. However. latest computers and a good connectivity architecture. that creates problems for the customers. In achieving this mission. The main vision of Bank Alfalah is to become a premier banking institution in not only Pakistan but also abroad. some of the problems observed are as follows: 1-Technological Advancements Bank Alfalah has equipped its branches with all major IT tools being used in the industry like ATM’s.  Bank Alfalah has equipped its branches with all major IT tools being used in the industry like ATM’s. technology external to the industry can also be captures and used. and this again can be influenced by government support and encouragement. photocopiers. financing and deposits so banks have their services design according to them to be successful. photocopiers. especially its connectivity architecture and remains offline with the main server. The businessmen and upper class people focus more on the banking service for their transactions. Although there are no major problems at Bank Alfalah. Internship Report Page 51 . printers. printers. however it has been observed that when it’s time to work.

7-Amenities at Branch Providing amenities like a separate room for prayers because currently the employees pray in the conference room of the branch.2-Training & Development There are effective training centers of Bank Alfalah at Karachi and Lahore. there were no large company’s accounts mainly because there was no department to develop relationships with large customers. Bank Alfalah although gives a number of Internship Report Page 52 . 3-Job Advancements There is no job advancements procedure for lower staff members or junior executives that have joined recently at Bank Alfalah. 8-Incentive Schemes There are no incentive schemes for employees of Bank Alfalah like scholarship schemes for employees that want to pursue higher education. 6-Priority Banking Bank Alfalah does not have any priority banking department that can cater to the need to high end customer. For Bank Alfalah SRA Branch. for example Standard Chartered Bank introduced a self depositing machine. it employees get to train at the Lahore center. Also separate rooms should be made for the account department for sorting of vouchers as it is also done in the conference room. however. nonetheless the main problem seen is that it is not introducing innovative products like other banks in Pakistan. a machine that can be used by consumers to deposit money at any time of the day. it was observed that there were some departments in the bank that lacked the number of professionals in it that resulted in efficiencies in that department 5-New Products Introduction Bank Alfalah has a wide variety of financial products to cater to the needs of its competitors. The problem with training and development is that it is only available for the officers of the bank and not for the lower staff members. At Bank Alfalah SRA Branch. 4-Lack of Employees in some Departments Although Bank Alfalah is a very good employer of talented professionals at different branches. The main problem that was observed was that the lower staff should be trained about the operations of the bank and also the junior executives should be given promotions by defining the criteria’s like performance etc.

routers etc. which may include using modern technologies like fiber cables. Some of the recommendations that I would recommend to some of the problems discussed in the above section. that might increase the efficiency of both the operations and employees of Bank Alfalah are as follows 1-Technological Advancements Bank Alfalah should develop a modern connectivity architecture to effectively maintain an online connection of the branch with other branches and also the ATM link. Also scheduled backups of data should be done within the bank. which might include:    Personal loans and car financing facilities for all ranks of employees. for all Bank Alfalah employees. Introducing employee awards at branch and regional levels.incentives to its employees. Education fees are also returned by Bank Alfalah to its employees. Also a proper IT department should be established in all branches. The lower staff employed at Bank Alfalah should also be given a chance to succeed in life by training them in different simple jobs at the bank. Internship Report Page 53 . Scholarship programs for all employees. like personal loans at nominal markup but they are only provided to employees that are in higher ranks. 2-Workshops and Counseling Work shop programs should be conducted in every city. phone banking etc. after they have finished their studies. rather than just two centers. 3-Incentives Incentive schemes should be developed for the employees that can help motivate them. introducing them to their prospects in this industry. Also backup links should also be developed. These workshops should relate to all aspects of banking and may also be conducted with other banks as a joint program. which may include sorting of cheques. Also as parts of the human resource training. counseling programs should be started for junior executives or new entrants into the bank. with professional having the knowledge to maintain a secured connection with other banks.

special teams should be developed that include professional from all departments of the banks to come with ideas. in consultation of with the heads of the departments and hire individuals where there are less employees or rotate employees from other departments. while some have more than needed. 6-Placements of Employees There are some departments in the bank that do not have enough employees. A priority banking department should be developed so as to give even more exclusive and customized services to high end customers with large deposit accounts. like that of other bank. 5-Innovative Products New and innovative products should be introduced by Bank Alfalah. like other bank such as Citibank and Standard Chartered Bank develops for their customer. This process will increase the number of ideas generated and even produce innovative products for the bank that might give them the edge. Also Business Development Department should be developed in all branches. 4-Priority Banking and Business Development Department There is no priority banking department at Bank Alfalah. so as to give employees a relaxing environment when they have a break. but do not have the proper place to do it. Job rotation programs to enhance the skills of employees. Internship Report Page 54 . so that they can actively find prospect customers to take up products from Bank Alfalah. For this purpose. All this creates inefficiencies and so the operations manager should look at the department of the branch and see where inefficiencies lie. which takes up a lot of space should be done in a separate place and amenities like television and internet connection should be placed in the common room. Also work like sorting. 7-Amenities in Branch There should be a prayer room developed in all branches as many employees want to pray.

I would also like to increase the advertisement of bank to attract more customers and to make them aware of our products. I would also try to increase the customer satisfaction by providing them good service as I have noted during internship that sometimes customer become angry due to rude behavior of an officer this could affect the customer loyalty so I would like to cover it. If I were manager there I would like to apply some changes in the working of a bank. The top management of the bank is always developing strategies that cope with unexpected challenges to deliver products and services more efficiently. as the bank is growing. increasing the deposit base.It has been fifteen years since the establishment of Bank Alfalah. which shows that Bank Alfalah is being considered as a an employer. that provides its employees with a challenging environment to work in. As I have noted that in some of the department there was over staffing while in others understaffing is there. where they can harness their full potential and shows confidence as an employer by the employees of the bank. The bank has seen phenomenal growth in the past few years by opening more branches in the country. Due to understaffing there is a lot of burden on one officer I would like to cover this problem by doing proper hiring in each department so that employees remain satisfied by the justification of their work. Lastly to become the leading bank of Pakistan. while introducing new ones to the industry. which as a result can increase the efficiency of a bank as it is correctly said that “satisfied worker is a productive worker”. Furthermore. I would like to give some recommendations and is hoped that if they are implemented will bring benefits to Bank Alfalah. In the last section. The services that Bank Alfalah provides have a great market penetration not only because of their features but also the profit and markup rates that they charge. Internship Report Page 55 . Bank Alfalah has to benchmark its services to its major competitors in the industry or the market leader in the industry and provide a continuous mean of improvement in its existing products and services. and since its establishment it has aimed to become the leading bank of Pakistan by that provides outstanding services to its customers. the number of employees at Bank Alfalah are increasing. while also increasing the assets and profits of the bank. Also the products that Bank Alfalah provides cater to sector of the economy.

if cash is Rs 30. Financial statement analysis helps in determining the financial conditions at any particular point in time and effectiveness of operations of a firm during a specific period. proper analysis of these statements helps a lot. As common size analysis gives us relative percentage of an item with respect to total.000 then cash represents 30% of total assets. by generating a percentage increase or decline. 00.000 and the total asset is Rs 1. In the common size analysis we use the balance sheet and income statement and measure their performance as compared to other years and in the same year.Purpose: Financial analysis of the organization involves the evaluation of the financial performance as depicted in the financial statements of the organization. so the growth or Internship Report Page 56 . Financial ratio analysis Common size analysis expresses comparison in percentage. For example. To improve the quality of decision making. A small change in amount can results in a very substantial percentage change. The use of common size analysis makes comparisons of firms for different sizes mush more meaningful. The following types are as follows: A. and all income statement items are divided by net sales or revenue is called common size analysis. The BAL provides this information in the shape of its annual report for every financial year containing financial as well as non-financial information. Common size analysis can give analyst valuable approaching into changes that have occurred in a firm’s financial condition and performance. Common size analysis B. This is the analysis where total assets are divided by all balance sheet items. The financial data of BAL is analyzed in the following two ways The given below types of analyses are used to measure firm’s performance over time.

29% 91% 97.11% -16.45% Share capital 100% Reserves 100% Inappropriate profit 100% Total equity 100% Total liabilities and Total 100% equity Surplus 100% Internship Report Page 57 .88% -86.04% 17.08% 2012 19.16% 5.56% 148.05% 9.52% ---149.98% 17.05% 109.08% -84.46% 36.85% 112.59% -35.60% 118.08% 2012 119.35% 36.45% 107.56% 48.11% 106.60% 18.04% 117. It has the following types:  Horizontal analysis  Vertical analysis 1.55% ---243.58% -44.52% 10.11% 6.46% 136.29% -9% -2.9% 18.04% 85.55% ---143.09% 23.83% 21.41% -3.16% 105.62% 333% 12.03% 104.52% ---49.15% 12.35% 136.11% 83. Horizontal analysis Horizontal analysis compares each amount for a selected base year or we take each item of base year as 100% and compare with other it Horizontal analysis of balance sheet 2010 Assets Cash and balance with treasury 100% bank Balance with other banks 100% Lending to Financial Inst Investments Advances Operating fixed assets Deferred tax assets Other assets Total Assets Liabilities Bills payable Borrowings Deposits and other accounts Deferred tax lease Other liabilities Total liabilities Net Assets Shareholders’ equity 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 2011 111.83% 121.41% 64.62% 433% 112.10% 71.62% 18.28% 118.45% 106.62% 118.05% 106.55% 43.41% 96.10% 118.08% 23% 31.49% 6.16% 105.16% 5.48% 110.08% 123% 131.45% 6.09% 123.88% 13.96% -14.95% 6.08% 15.54% 115.decline in various items of balance sheet and income statement cannot be detected from common size percentages.72% 18.97% 4.45% 2011 % change 11.45% 207.49% 106.45% 143.58% 55.54% 15.98% 117.10% 28.

90% 66.09% in 2012 from 2010(base year).33% 19.32% 116.08% 5.72% 2012 Internship Report Page 58 .51% 214. 2011 and 2012.30% 0.41% 22.30% 100.68% 37. Horizontal analysis of income statement 2010 2011 2012 2011 % change Markup Revenue Markup Expense Gross Profit Margin Provision for Advances Bad debts written off directly Total Provision Net Markup after provision Non-Markup/ Interest Income Fee and Commission Dividend Income Exchange income Gain on sale 100% 100% 100% 100% 100.22% 49.250.03% 55. Cash and balance with treasury bank increased by figures Rs. Share capital increases more in 2012 as compared to 2011.92% 148.79% -79.68% 137.41% 122.9% 92.59% 78.83% ---171.46% in 2012.73% 283. Lending to Financial Inst decreased by 3.96% in 2011 and increased by 333% in 2012. Total liabilities and Total equity increased by 6. Cash and balance with treasury bank.83% ---71. This increase expressed in percentage form is computed as follows Other percentage figures are computed by the same formula. Conclusion: Total assets of BAL are increased 10.51% 114.94% 85. 3.40% 464.92% 48.33% 119.72% 20.04% in 2011 and 19. the rupee amounts for 2010 become the base figure for expressing these changes in percentage form.90% 33.22% 149. This increase is due to the major increase in Operating fixed assets.41% -21.87% 484.56% 100% 100% 100% 100% 100% 100% 100% 120.03% 155.957 between 2010 and 2011.44% 0.94% -14.27% 183. and share capital of BAL increase to 23% in 2011 and 107.Since we are measuring the change between 2010.32% 16. Total assets increases more in 2012 as compared to 2011 from the base year.16% in 2011 and 18.79% 20.04% 364.13% 384.56% in 2012. For example.9% 192.08% 105.

we compare the items of balance sheet or income statement vertically by taking one item as 100% Vertical analysis of balance sheet 2010 Assets Cash and balance with treasury bank Balance with other banks Lending to Financial Inst Investments Advances 8.43% 26.03%% in 2012. Simply.94% in 2011 and 19. which have reduced the expenditure 2.96% 93.49% 48.48% 28.01% 5.65% 20.6% -91. Vertical analysis Vertical analysis compares each amount with a base amount selected from the same year.33% Internship Report Page 59 . as they kept on an increase from the past few years. Gross profit increases by 16.Other Income Total non mark-up income Total non-markup expense Profit Before Tax Taxation Profit After Tax Conclusion: 100% 100% 100% 100% 100% 100% 120.18% 0. that ultimately gives boost to the gross profit of the bank from the base year. by reducing the markup expense.97% 96.57% 126.57% 35. The bank tackled the situation.52% -71.72% 22.19% 28.84% 25.82% 128.05% 26. This is mainly due to the fact that BAL has a good control over its markup expenses.90% 52.15% -60. in relation to its total markup revenue.70% 132.43% -64.89% -58.15% 39.21% 2012 9.85% 1.40% 8.37% 6. that balanced the effect and ultimately the profit after tax has increased.95% 5. Here we find an absolute increase in the gross profit.46% 32. The ultimate increase in the profit after tax also comes due to the fact that BAL has relieved itself from the provisions against the balance sheet liabilities. The markup expense stands as the cost of sales.77% 55.97% 21.11% 41. As we can see that markup expenses are gradually being increased. The increase in the gross profit shows that the management has been able to gain control over the markup expenses then previous year this shows that the bank is moving in a trend where it would lead into the achievement of the goals it has set.95% 21.72% -77. There is more increase in 2012.35% The Trend analysis that we conclude from the above table gives us a clear view of the bank’s income statement.05% 2011 9. The total income of the bank has increased from the base year mainly due to the fee and commission reduction.96% 40.84% 3.

12% 2.97% 0.47% 1. For example.77% 100% 0.91% 0.90% 95.74% 0.29% 0.17% 0.23% 95. the percentage figure above for Cash and balance with treasury bank in 2011 is computed as follows: Other percentage figures are computed by the same formula.70% 100% 3.81% 0.57% 94.06% 3.69% 5.57% 100% 1. The change in assets affects the overall vertical analysis as the Internship Report Page 60 .62% ---1.00% 3.98% 0.98% 4. Conclusion: Vertical analysis shows the proportionate percentage of different items of the balance sheet with respect to Total Assets.18% 0.92% 86.Operating fixed assets Deferred tax assets Other assets Total Assets Liabilities Bills payable Borrowings Deposits and other accounts Subordinate loans Deferred tax liabilities Other liabilities Total liabilities Shareholders’ equity Share capital Reserves Unappropriated profit Total equity surplus Total liabilities and Total equity 3.47% 0. First of all the assets have changed and increased over the time period. The vertical analysis of BAL shows that there are different assets and liabilities over the time period. and each liability and equity account is expressed in terms of Total liabilities and Total equity.74% 100% 3.47% 4.83% 100% 1.30% 83.06% 1.95% 0.18% 0.42% 2.45% 83.73% 1.92% 0.26% 6.60% 100% Each asset in balance sheet is expressed in terms of total assets.72% ---3.97% 5.05% 0.94% ---2. This is due to many reasons.31% 3.05% 2.

33% 30.67% 10.31% 2011 100% 66. and liquidity is inversely proportion to profit.38% 0.54% 9. The cash in hand should be invested in short term investments.00% 0.7% 19. Reserves have decreased over the time period and share holder equity increased a little with respect to assets. Thus showing that now the bank is more liquid. This is due to high interest rates in 2011 and lower interest rates in 2012.83% 0.37% 0.81% in 2012 of total asset over the time period.18% 33. advances and investments. as the major expense and income occurred due to these respectively.97% 2. Bankers prefer to give advances when the interest rate was high but then prefer to invest in no interest income in 2012 when the income from investment was higher than the interest rate. the equity has been increased from 4. The deposits are approximately same in both years.18% to 5.22% Internship Report Page 61 .70% 2.94% ---100% 64. This shows that more people are interested to invest in the BAL in 2012. So looking closely to these items investment increased from 2011 to 2012.38% 0. Vertical analysis of income statement 2010 Markup Revenue Markup Expense Gross Profit Provision for Advances Provision for Investments Bad debts written off Net Markup Income Non-Markup Income Fee and Commission Dividend income Exchange income Gain on sale Unrealized gain 9.95% 1.51% 4.9% 0.82% 6.58% 5.84% 8. as being a non-interest source of income are more promising than advances that are becoming more profitable due to inclining interest rates.87% 1. On other hand the advances decreases in 2012.42% 0. The major components in the balance sheet of banks are deposits.37% 2012 100% 69. Investments.46% 35. Only slightly increase in 2012.02% 26. Now coming to the share holder’s equity. so that the organization can earn profit on idle money.change is analyzed with respect to assets. In BAL share holder equity the major cause of increase is the revaluation of assets and increase in inappropriate profits.78% 0. The cash in hand is decreasing from 2011 to 2012.10% 22.15% ---0.25% 1.08% 6.

74% 32.95% 31.93% 2.52% 9. Furthermore. Now if we take a look at the figure of total income of the bank. The combine effect of all of these has resulted in lower percentage increase in the net profit as compare to decrease of gross profit.60% 5.02% 0.14% 4.40% 32.08% 0.79% 30. In simple words we can say that increase in the markup expenses resulting in the decrease gross profit. Markup expenses are actually cost of sale in case of a bank. This decrease in total income is due to the decrease in the markup income.15% 17. there is consisting decrease in it as well.57% 33.69% The Vertical Analyses of Income Statement of BAL as given in the above table is showing a percentage change with respect of the sales or markup income.09% 0.Other Income Total non-markup income Total income Non-Markup Expenses Admin Expenses Other provisions Other charges Total non-markup expense Profit Before Tax Provision for Taxes Profit After Tax Conclusion: 4. dividend income.00% 23.57% 37. the taxation percentage was high for 2011 but for 2012 the taxation percentage decreases due to decrease in profit before tax.42% 49.03% 15.86% 2. Many organizations total non markup income consists of fees and commissions.22% 30.59% 4. So this decreasing trend of gross profit is a negative sign and the bank’s management should consider it and take some more actions to improve its position. Internship Report Page 62 .04% 32.15% 5. exchange income and other income. There is a consistent decreasing trend in 2012 in the banks gross profit.20% 3. If the look at the figure of non markup expense there is a decreasing trend and this increasing trend in these expense is due to the decrease in administrative expenses.66% 0. Furthermore this decreasing trend in gross profit shows the bank’s management is not efficient in controlling markup expenses.79% 1. This can be because of decreasing interest rate on advances or decreasing interest rate on deposits to encourage savings.71% ---0. As total income is the summation of both markup income and the non markup income. The main reason behind this is that the bank has not controlled its markup expenses in relation to total markup revenue.68% 14.45% 12.

324 54.131. It means that what is the percentage of advances to deposit of a bank.494 30. Along with it. This ratio shows the relationship of advances to deposits. Formula Advances Deposits 2006 28.A financial ratio is an index that relates two accounting numbers and is obtain by dividing one number by other. Whether the advances are enough toms pay its liabilities.984 = 2005 19.7 % Internship Report Page 63 .684. but there are certain basic ratios that are frequently used specially for measuring the banks performance. The number of financial ratios might be created in virtually unlimited. comparison with the other competitors in the same industry can only be carried out with the help of financial ratios. There are some ratios that are used for the analysis of the banks these are: A) REGULATORY RATIOS Advances To Deposit Ratio This ratio is calculated by dividing the amount of advances by deposits.319.207.401 51. One may consider that why there is a need to mingle with these ratios and not take the actual figures straightforwardly. Among various reasons one strong reason can be put forward that ratios help in comparison. only ratios analysis is the viable option for them. When analysis is two compare the internal performance of the organization in relation to time.

317 20.242.327.481.984 = 2005 2. Formula Cash on hand and cash with other bank Total Deposit 2006 1.962 51. This ratio shows the percentage of cash available as compared to deposits .41 % 65.17% Internship Report Page 64 .473 = Interpretation This ratio shows the decreasing trend except 2000 where it increase from 65.122. this ratio tells that at any time if cash is needed to meet the liabilities of deposit liabilities to what percentage it is available. Overall this ratio shows that management is not aggressive toward advancing of loan.33 % 15.41. 74.324 15.= 2004 63.27 % Cash To deposit Ratio The ration is calculating by dividing the cash on hand and cash with other banks by total deposits of the bank.684.820.568 = 2003 10.27 to 74.

324 = 2004 324.55% 1.031 Internship Report Page 65 .503 20.772.207.584% 1.167.56% B) CAPITAL ADEQUACY RATIOS Equity To Assets This ratio is calculating by dividing shareholder’s equity by total assets.615. Formula Shareholder’s equity Total Assets 2006 1.473 = Interpretation This ratio is on increasing trend which is unfavorable.140 30. This shows that bank is not proper utilizing its deposits.777 65.251 15.820.481.568 = 2003 248. 2.

095 = 2004 900.684.984 Internship Report Page 66 .577.330 21.615.39% 4. Formula Total Shareholder’s equity Total Deposits 2006 1.26% 895.019.= 2005 2. 3.47% 1.159 = 2003 3.608 = Interpretation This ratio shows continuously decreasing trend.292 40.25% Equity To Deposits This ratio shows the percentage of shareholder’s equity to total deposit. It means that is not favorable for bank.777 51.361.098.680 27. This ratio is calculating by shareholder’s equity by total deposits of the bank.

473 = 0.39 to 4. This ratio shows the percentage of total deposits to total liabilities which is the major liability of the bank.820.680 20.481.324 = 0.330 15.450x 2004 900.312 x 1.207.292 30. Formula Total Deposits Total Liabilities Internship Report Page 67 .50.361. C) EFFICIENCY RATIOS Deposit To Total Liabilities The deposit is calculating by dividing total deposits by total liabilities.439x 2003 895.568 = 0.= 2005 0.56x Interpretation This ratio shows decreasing trend except 2001 which increases from 4.

568 25. Investment To Total Assets This ratio is calculating by dividing investment by total assets. This ratio shows the percentage of investment to total assets.62% 79.411 = 2004 20.984 61.684. 84.01% 79.057 = 2003 15.820.20% 81.473 19.514.328 = Interpretation This ratio increases in 2002 that is positive sign that bank has more funds to invest.2006 51.364 = 2005 30207324 37.481.938. In 2000 and 2001 this ratio becomes down it mean that management was not properly invest its funds.859.99% Formula Internship Report Page 68 .293.

967. in 2002 it is increasing which is not a favorable trend.75% Interpretation The investment to total asset of bank alfalah indicates the portion of investment in bank’s total assets.42% 37.167.095 = 2004 4.616 40. In 2000 when the ratio decrease from 23.098. This shows that management does not work properly and efficiently and not utilizing the assets fully by investment.89% 2003 4.159 = 18.Investment Assets 2006 24.397 65.396.01% 28.79 to 18.019.031 = 2005 11.577.01 it mean management is properly utilizing the asset fully by investment.993. D) PROFITIBILITY RATIOS Internship Report Page 69 .542 27.694.608 = 23.035 21.

Formula Profit after Tax Total Income 2006 446579 5245912 = 8.Net Profit Margin This ratio is calculating by dividing profit after tax by total income.091.23% Internship Report Page 70 .612 3769801 = 2004 215.350 2.65% 8.896 = 2003 160.893 = 7.236 2.51% 2005 310.51% 8.529. This ratio shows that what is the percentage of net profit to the total income.

164 3769801 = 2004 398. This ratio shows that what is the percentage of operating profit to the total income. Operating Profit Margin This ratio is calculated by dividing the operating profit by total income.05% Internship Report Page 71 . Formula Operating Profit Total Income 2006 894653 5245912 = 2005 524.90% 17.892 15. Management has ability to operate business with great success.930 2529896 = 2003 350.76% 13.Interpretation This ratio shows increasing trend which is favorable this shows management work efficiently.

82% 40.2091893 = Interpretation Operating profit ratio shows the profits of a firm that earn on its income..77% Gross Profit Margin This ratio is calculated by dividing the gross profit by total income.05% this is a favorable trend for the bank. This ratio shows that what is the percentage of gross profit to the total income. Formula Gross Profit Total Income 2006 2133599 5245912 = 2005 1254727 3769801 = 2004 805855 2529896 = 31. 16.85% 33.67% Internship Report Page 72 . In 2002 the trend of this ratio is 17.

777 = 2005 310.679 1.615.52% Return On Equity This ratio is calculating by dividing net profit by total equity.292 = 2004 215.58% Internship Report Page 73 .81% 27. This ratio shows that how much the company is earning on shareholder’s equity.350 900.612 1. Formula Net Profit Total Equity 2006 445.90% 22.361.2003 617550 2091893 = 29.680 = 23.

81% to 27.2003 160. 17.236 895.58% .098.685% Internship Report Page 74 .031 = 2005 310.167.612 40.774% 0. So this is favorable for bank.330 = Interpretation In 2002 the ratio is increase from 22.89% Return On Total Assets This ratio is obtained by dividing net profit by total assets. This shows that management is utilizing its equity in good way.095 = 2004 0. Formula Net Profit Total Assets 2006 446579 65. This ratio shows that what percentage of earning the company is attaining on total assets.

350 27.215.159 = 2003 160.           Habib Bank Limited United Bank Limited Allied Bank Limited Muslim Commercial Bank Limited National Bank of Pakistan Bank of Khyber National Saving Centre Al-Faysal Bank Limited Saudi Pak Bank Limited Standard Charted Bank Limited Internship Report Page 75 . This ratio shows decreasing trend.608 = Interpretation This ratio measure bank ability to utilize its assets to create profit by comparing profit with assets generates profit.762% Market Structure Bank Alfalah Limited The Bank Alfalah Limited Comes under the Monopolistic Competition Because. this mean that management is not properly using its assets.780% 0. 0.019.577.236 21.  There are large numbers of Financial Institutions in the Market.

 In the Market there are number of substitutes are available     National Saving Centre Stock Exchange Government Securities Advances  The products characteristics are different according to:  Rate of Interest  Mode of delivery  Duration of delivery  Services  Communication  The products are relatively homogenous  Types of Accounts  Credit Cards  Debit Cards  Car Finance  Advances  Consumer Durables  Foreign Exchange dealings Internship Report Page 76 .      First Women Bank Limited Bank Al-Habib Limited PICIC commercial Bank Limited KASB Bank Limited NIB Bank Limited Citi Bank Limited  There is large number of customers in the Market.