Professional Documents
Culture Documents
Chapter 1
INTRODUCTION
The study is about the general operations and management of Allied Bank
Limited G.T. Road branch Peshawar, which was conducted through interviews in
the branch.
The study is critical in nature. It was conducted to investigate critically into the
operations of Allied Bank Ltd especially its operations in and the operations of
ABL, G.T. Road branch Peshawar. The annual reports or the consolidation data
of the Bank has not been focused in specific because it does not reflect on the
operational performance of branches. However, they have been referred to as
when and where required.
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The study covers two areas with its variables, which affects the operations of
the branch directly, or indirectly. These two areas of variables are:
The branch specific variables are the variables under the control of the branch
management and directly affect its operations e.g.
The bank specific variables are those variables, which are not in control of the
branch management and indirectly affect the operation of the branch e.g.
Both primary and secondary have been used in the compilation of this report.
The methodology used is as under:
During the compilation of this report, I relied mainly on the primary data. The
tools used for the collection of primary data are interviews and observation. The
secondary data was mainly used for as a background material and for purpose of
references. The major sources of secondary data were the annual reports and
other printed material of the Bank.
Keeping in view my limitations during and the nature of the study, two
research approaches were adopted. These research approaches are:
• Survey.
• Observation as.
Participant observation and
Non-participant observation.
Details of the sampling plan used during this report are given below.
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1.7 Limitations
The Study was subject to the following limitations, the absence of which could
have made this report more accurate, systematic and factual:
The report has been divided into eight chapters. A brief introduction of these
chapters is given below:
Chapter 2
HISTOR OF BANKING
2.1 Banking
Ever since, money became the medium of exchange in our society, banks
existed in one from or the other, and though in those days their function was
mainly to lend money to the people and the kings. In the words of R.C. Dutt:
“Loans and usury were well understood in those days and Rishis lament their
state of indebtedness with the simplicity of primitive times”
The Vedic Epic clearly mentioned about giving and taking of credit and also
contracts of debts at dicing. Later on, Manu in his “Sammurti” clearly mentioned
these transactions by saying, “a sensible man should deposit his money with a
person of good family, of good conduct, well acquainted with the law, veracious,
having many relatives wealthy and honorable”. Manu has also prescribed the
rules to govern the policy of loans and rates of interest.
During the fifth century people were accustomed to use “hundies” as a credit
instrument. The land revenue was collected generally in kind, while he services
were paid mostly in cash. Therefore, banker’s assistance in these and other
financial matters of State was very much necessary. The bankers enjoyed very
good reputation, and the people deposited their jewelry and cash holdings with
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them for safe custody. Loans were given to the people against personal and other
securities such as ornaments, goods and immovable properties and the banker and
customer had very cordial relations.
These factories thus produced enough for local consumption and left
substantial quantities for exports. Textile, calico-printing and dyeing, pottery,
china-ware, indigo, opium, metal work, paper, leather and sugar etc. were being
exported to foreign countries like China, East Indies and Pacific Islands against
pure gold. Thus the port towns of Surat and Coa (Gujarat). Calicut and Cochin
(Malabar cost); Masupatam and Negapatam (Coromandal cost) and Chitagong
and Sonagung (East Bengal) become the centers of the world trade where foreign
buyers used to come for purchase of Indian commodities.
Muslim historians of the 12th century have also mentioned some bankers
known as “Multani” and “Shroffs”. They used to act as agents to the government
to collect revenue. They also charged money to government. Such a prosperous
society did need a well-regulated financial administration and monetary system.
Muhammad Tughlaq was the first king to have introduced token currency in
India. He issued metal counts as well as paper currency from the Royal Mints.
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In later years, Shershah Suri, and then Mughal emperors further streamlined
this system. Akber established mints all over the country to prepare and issue
currency. Royal treasuries were also established all over the country under a well
conceived plan so that they could function as the offices of “Central Bank” of the
time. They also functioned as the drawing and disbursing offices to the
Government.
Though the Muslim rulers did not establish “Bank” as such, yet they
revolutionized the entire financial and monetary structure in India and the old
“Mahajins” were eliminated. In fact, Government introduced reforms were so
affective that these “classical-bankers” wee pushed into he past. Due to the
prosperity of Indian society of that time, the Royal mints and Treasuries did act as
agencies for transfer of money as well as for custody of valuables.
At the time of independence, the areas, which now constitute Pakistan, were
producing only food grains and agricultural raw material for Indo-Pakistan
subcontinent. There were practically industries and whatever raw material was
produced was being exported from Pakistan. However, commercial Banking
facilities were provided fairly well here.
Before partition of sub-continent, the entire banking system was almost in the
hands of non-Muslims. When Hindus capitalists become sure of division of sub-
continent, they transferred their funds to India in safe places. Pakistan was
declared an independent state. The mass scale migration of Non-Muslims from
Pakistan to India caused the reduction in banking deposits. The number of
scheduled bank branches was reduced from 619 to 213 and the numbers of non-
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scheduled bank reduced from 411 to 106. The independent sate of Pakistan had
no central bank of its own at time of independence.
As a new country without resources it was very difficult for Pakistan to run its
own banking system immediately. Therefore, in accordance with the provision
of Indian independence Act of 1947, an Expert Committee was appointment to
study the issue. The Committee recommended that the Reserve bank of India
should continue to function in Pakistan until 30th September 1948, so that
problems of time and demand liability, coinage, currencies, exchange etc. are
settled between India and Pakistan. It was also stipulated that Pakistan would take
over the management of public debt and exchange control from Reserve Bank of
Indian on 1st April, 1948 and the Indian Notes would continue to be legal tender
in Pakistan till 30th September, 1948. Following the announcement of
independence Plan June, 947, the Hindus residing in the territories now
comprising Pakistan started transferring their assets to India. Moreover, the banks
including those having their registered offices in Pakistan transferred to India in
order to bring a collapse of new state. It is worth mentioning here to list the
important events in the history of banking in Pakistan in chronological order.
The first important event was establishment of Habib Bank Limited, on August
25, 1941 at Bombay. This was the first bank in Indian sub-continent, which was
operated by Muslims. Habib bank Limited transferred its Registered Head Office
to Karachi on August 07, 1947. It played a great role in the next forty year of
Pakistan’s Economic Development.
The other important date is July 09, 1947; when the Muslim Commercial Bank
Limited was registered and incorporated at Calcutta. Its registered Head Office
was transferred to Dacca o August 17, 1948. Subsequently its registered Head
Office moved to Karachi on August 23, 1956.
The most important day is July 01, 1948, when State Bank of Pakistan was
established at Karachi as the central Bank of the country. Central bank addressed
itself with the urgent task of creating a national banking system. In order to attain
this goal it provided every help and encouragement to Habib Bank to expand its
network of branches, and also recommended to Government the establishment of
a new bank which could server as an agent of State Bank. As a result, The
National Bank of Pakistan came into being ion November 09, 1949 and by 1952
it became strong enough to take over the agency function from the Imperial Bank
of India. This was the first Commercial Bank in the public sector. At the end of
June 1999, the number of scheduled Banks in Pakistan was 52 with 7,874
branches. Out of these there are 25 Pakistani bank with 7,779 branches and 27
foreign banks with 95 branches.
The Act further provided for the setting up of the Pakistan Banking Council all
Nationalized commercial Banks, consisting of the following members.
The government of Pakistan from the economic activities and business pattern
in the past two decades has realized that the national economy was dominated by
public sector and production, trade and finance were over regulated. This resulted
not only in chronic budget deficit, leaving not much for physical and social
infrastructure.
banks (central bank) and the other banks operating in the economy. It embodies
the principles and practices relating to the banking transactions prevalent in the
country.
In Pakistan there is a central banking system controlled by the central bank the
State bank of Pakistan. The central bank (SBP) directs and controls the activities
of other banks operating in the economy. It guides commercial banks through the
monetary measures, which are collectively conducive for the economic
development of the country.
At the time of partition, there were 631 offices of the scheduled banks. West
Pakistan contained 487 and East Pakistan 144 such offices. There were only two
Pakistani banks namely Habib Bank and Australasia Bank with their head offices
in Pakistan.
The Central Bank of the country (SBP) was established in July 1948. It
recommended to the government to establish a new bank, as an agent of the State
Bank as well as spearhead of its credit policy. The government accepted the
suggestion and National Bank of Pakistan came into existence in September
1949. This ban also helped Habib Bank to expand its organization. From here
onwards rapid development took place in the banking system of the country.
Currency notes of the value of Rs. 5, Rs. 10, and 100 were issued by the State
Bank for the first time in October 1948 and by August 1949 all currency notes
issued by the Reserve Bank of India worth Rs. 12,000 million were withdrawn
and replaced by Pakistani currency.
Under the banks Nationalization Act, of 1974 the commercial banks were
nationalized in January 1974. The nationalized banks included Habib Bank,
Allied Bank, Muslim Commercial Bank and National bank besides these
Nationalized Commercial banks (NCB’s) and other commercial banks in the
private sector, there are certain foreign bar operating in Pakistan like Citibank,
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standard and chartered Grind lay’s Bank etc. The foreign banks are under the
administrative control of State Bank being the central Bank of the country.
The Federal Government also setup the Pakistan Banking Council (PPC) on
21st March 1974 under the banks nationalized Act of 1974. It reports directly to
the Ministry of Finance and provides support and advice to the State Bank. Its
responsibilities include.
Chapter 3
Allied Bank is the first Muslim bank established on the territory that became
Pakistan. Established on December 03, 1942, as the Australasia Bank, Lahore
with a paid up capital of Rs. 0.12 million, under the chairmanship of Khawaja
Bashir Bux, the bank had attracted deposits worth Rs. 0.431 in its first Eighteen
months of business and its assets then amounted to Rs. 05.72 million.
The Bank went through several distinct phases of history. It began life as a
Lahore based Muslim bank in a financial world, which was predominated by
other non-Muslim communities. Quaid-e-Azam’s Muhammad Ali Jinnah
emphasized on the presence of a Muslim representative Bank in the sub
continent, to minimize the dependence of Indian Muslim communities on other
communities. The founder of Australasia bank, Khawaja Bashir Bux, responded
to the Quaid-e-Azam’s call and established Australasia Bank as a Muslim
representative Bank.
On January 01, 1974 all the schedule banks including Australasia Bank, were
nationalized. Three small provincial banks were merged into Australia Bank and
the new entity was named Allied Bank of Pakistan.
Allied Bank started its operations as a public sector bank. During the seventeen
years of nationalization (1974-91) the value of the total net assets increased to Rs.
24.4 billions and deposits to 21.3 billions with 747 branches network.
The September 10, 1991 the bank made the beginning of a new history. Allied
bank became the world’s first bank, owned by its employees though the unique
concept of ESOP (Employee’s Stock Ownership Plan). More than 7500
employees acquired a share take in the Bank.
Now with its network of over 800 branches located in the urban and rural areas
throughout Pakistan, Allied Bank is positioned to provide personalized banking
services to its customers at locations convenient to the customers. ABL has
invested extensively in branch automation. 560 branches out of total of 819
branches are computerized on branch based multi user computer system.
Mr. Khalid A. Sherwani took over as President of Allied Bank on 18th October,
2000. The President gave policy guide lines and the strategy to run the affairs of
the Bank in the light of changed requirements of the banking industry. He
emphasized that the Bank Executive, officers and staff must work fearlessly and
put in all-out effort to ensure steady growth of the Bank. He emphasized that
customers have to be given the best possible service as they are the source of our
growth and success.
Allied Bank has been divided into 16 regions, each under the control of a
regional General Manger (RGM). The RGM is not any fixed designation in the
organizational hierarchy. The person appointed for its position can be a SEVP
and EVP.
Region Email
Abbottabad coablatd@brain.net.pk
Bahawalpur ro_bahawalpur@ikr.abl.com.pk
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Faisalabad ablcircle@fds.comsats.net.pk
Gujranwala ro_gujranwala@lhr.abl.com.pk
Hyderabad ro_hyderabad@abl.com.pk
Islamabad ro_Islamabad@isb.abl.com.pk
Karachi ro_karachi@abl.com.pk
Lahore ro_lahore@lhr.abl.com.pk
Mardan allieds@brain.net.pk
Mirpur (AJK) ro_Mirpurak@isb.abl.com.pk
Multan ro_multani@lhr.abl.com.pk
Peshawar ro_peshwar@isb.abl.com.pk
Quetta ro_quetta@abl.com.pk
Sargodha ro_surgodha@lhr.abl.com.pk
Sialkot ro_sialkot@lhr.abl.com.pk
Sukkar ro_sukkir@abl.com.pk
Table-3.2
President
Vice President
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Branch Manager
Board of Director
Head of Departments
Branch Manager
Chapter 4
Allied Bank is now introducing the Allied Cash also referred to as ATM card.
The customer will now have the convenience of withdrawing cash from any of
ABL’s ATMs (Auto Taller Machine) conveniently located in major cities at any
time of the day or night even on closed days/holidays. Other services include
customer being able to inquire about the balance of his/her account or printing an
abbreviated (mini) statement showing the most recent eight transactions up to the
previous working day.
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In order to obtain Allied Cash+ Card, the customers simply has to fill out
prescribed Application form available at selected Allied Bank Branches in
Karachi and Lahore. The dully filled form should be handed over the Manager of
the Branch where the customer is maintaining his account. Non-account holders
would first have to open an account with Allied Bank to have access to this
facility. The Customer can feel absolutely safe his Allied Cash + Card because it
can only be used with the Personal identification Number (PIN), which is given to
him by the bank. Graphical representations have been employed, where
appropriate, for ease of understanding.
This unique scheme facilities those persons, who cannot afford to incur the
lump sum expenses for Umrah. It allows the intending pilgrims (Aazmeen) to
make payment of Umrah charges in monthly installments. Its salient features are:
• Total package for Aazmeen from Karachi is being Rs. 30,000. Aazmeen
from Lahore and Islamabad will have to pay an extra Rs. 3,000/- for
Airline fare.
• Umrah packages are of 10 days duration. The charges include Airline
return ticket.
• Visa fee, family accommodation and traveling within Saudi Arabia
(Jeddah to Makka, Makka to Madina and Median to Jeddah).
• Application for whole Family/Group can be filed through a single
Application Form. All applicants of a family/group are sent for Umrah
even if only one member of that family/group is declared successful in the
draw.
• Due to any reason if Umrah Applicant needs to withdraw his/her
application, he/she will given a refund of all money deposited through
installments till that time.
• At the time of submitting the application Aazmeen has to deposit Rs.
2,000 per person as first installment. Rest of the money is to e deposited
through monthly installments of Rs. 2,000/- per son on every 5th day of the
month.
• If an Applicant wins in the draw he/she is required to pay the balance
amount through monthly installments on returning from Umrah.
• Aazmeen have to submit a copy of their NI Cards and Passports with the
application.
• Applicants have to deposit the monthly installment using deposit slips still
5th of every month. Defaulters will not be included in the draw.
The customer can now become the holder of a true Credit Card here in
Pakistan. Allied Bank under license from Master Card International, U.S.A.
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issues its Master Card to anyone meeting the eligibility criteria. With the Allied
Bank Master Card the customer is assured of a service meeting the highest
international standards maintained by Master Card.
The Allied Bank Master Card helps the customer pay without the
complications of cash or checks. It doesn’t cost the customer anything if he pays
in full within the due date, but if he decides to spread the payments over several
months a service charge @ 2.50% per month is charged. Allied Bank – Master
Card is safer than cash and simpler than checks.
The customer has been an account holder with the Allied Bank to apply for the
Allied Bank – Master Card which is available to the customer for an initial fee of
Rs. 2,000/- (Rs. 500/- membership fee + Rs. 1,500/- annual fee). Once the
customer obtains his card, he simply presents it at Shops, Supermarkets,
Hotels, Pharmacies, Nursing Homes, restaurants, Petrol Pumps and hundreds of
other establishments which display the familiar Master Card sign throughout
Pakistan and abroad.
Once purchases are made, the customer signs a voucher and that’s it he is need
required to take extra troubles. Every month the customer receives a statement
showing details of transactions, outstanding and the minimum amount due. The
statements also give the last date for payment so the customer can avoid paying
service charges.
Brings the customer unparalleled life insurance covers along with attractive
monthly profit. Minimum Deposit amount – Rs. 50,000/- or multiples thereof.
Insurance cover up to - Rs. 5,000,000/. Competitive rate profit. The features of
this scheme are:
• Prospective client who will maintain a return free deposit for at least 3
months shall eligible to avail interest free/mark-up free finance.
• Payment of profit on monthly basis, automatic renewal on face value.
• Life insurance up to 5 times of the customer’s deposit amount with no
extra cost.
• Premium shall be paid by the bank.
• Full payment of claim in case of – Death – Permanent total Disability.
• Eligibility Age – 18 to 64 years.
• No medical examination for:
- Deposit up to Rs. 500,000/- and age up to 60.
• Allied Tahaffuz Deposit Certificate acceptable as collateral.
• Prospective client will maintain a return free deposit for at least 3 months
shall be eligible to avail interest free/mark-up free finance.
• Deposit amount Rs. 100,000/- and multiples thereof.
• Minimum deposit period, 3 months with automatic rollover facility.
• Premature encashment allowed, without any penalty/charge.
• Eligible depositors may avail finance individually or for the companies
wherein they have financial interest/stake.
• Minimum deposit period for eligibility of finance, 3 months.
• Maximum period of finance, 6 months.
• Maximum period to avail finance, 12 months from the maturity of deposit.
• Every month (30 days) completed by the deposit shall be taken into
account for calculation of entitlement of finance.
• Finance will be allowed to the eligible clients, only on providing adequate
securities acceptable to the bank and fulfillment of other requirements.
• Finance proposal processing fee Rs. 100/- (non-refundable) plus
documentation cost on actual basis.
• In case of default/delay in repayment @ 0.055% per day (20.075% p.a._
to be placed in charity A/C.
• Formula for calculation of entitlement of finance.
- Same amount of finance for half the period of deposit or
- Same period of finance for half the amount of deposit.
PLS – Saving Account can be opened with a minimum of Rs. 100/-. There are
no limits on the maximum balance. Allied Bank pays the most competitive rate of
profit on PLS savings Account. Funds can be deposited into this account through
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cash, checks and other financial instruments drawn on any bank or any other
branch of Allied Bank. A deposit receipt is issued when funds are lodged in PLS
Special Notice Deposit or PLS Term Deposits. The longer period of holding the
receipt, the higher the rate of return. Allied Bank also issues Deposit at Call
receipt to the customers. The beneficiary of the deposit at call receipt may be the
depositor himself or a third party. The deposit at cal suitable for making down
payment, security deposits, etc. The deposit at call receipt is paid on demand.
Allied Bank offers the highest rate of return on Foreign Currency Deposits in
the Country. Accounts can be opened in US Dollar, Pound Sterling, Deutsche
Mark, Japanese Yen, at designated branches. All Pakistani nationals residing in
Pakistan and outside Pakistan can also open Foreign Currency Accounts.
Resident Firms, Companies including Investment Banks can open Accounts.
• Home Remittances
The Bank having a network of 800 branches all over Pakistan, undertakes to
provide safe and instant payment of remittance from expatriates, routed through
designated foreign exchange companies and correspondent banks with whom
special arrangements have been made in this regard. Through the Allied Express
Services, ABL ensures that beneficiaries’ Accounts in ABL branches are credited
with in 48 hours of receiving home remittance information from overseas.
Allied Bank can transfer funds to he remotest part of the country for
payment/credit to the customer himself or a third party, through
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• Hajj Services
The Bank serves the intending pilgrims by helping them in performing this
religious obligation. The Hajj forms and other related services are provided by the
bank. However, the terms and conditions for accepting the Hajj forms from
intending pilgrims are in accordance with the Hajj Policy announced by the
government, each year. Hajj applications are available with all branches during
Hajj season, immediately after the Hajj policy is announced by the Government
of Pakistan.
• Utility Bills
All branches of the Bank collect utility bills of electricity, gas and telephones.
For convenience of the customers, Utility Bills are collected by the branches
during banking hours and also in he evening banking on all working days. Bills
can be paid through cash or checks. Consumers may drop bills with crossed
checks into a drop box available at the branches under “Checks Drop-in” system.
• Agricultural Finances
• Lockers
Allied Bank Lockers are available in three different sizes Small, Medium and
Large on a yearly fee. Locker holders need not have an account in the Bank.
ABL Provides highly efficient trade finance services for import/export business
for our clients/customers through large number of authorized branches where
trained and motivated staff is available to handle the business on behalf of
customer.
• Seasonal Finance
ABL is one of he most dynamic and progressive bank in the banking industry
of Pakistan. This is due to its impressive growth and development, which it
achieved during sixty years of its existence. It did not take long for Allied to grow
into one of the leading bank in the country overtaking the several other banks
which were its competitors were established earlier.
ABL has provided its employees a better working environment and salary
structure and facilities. Incentives and awards were given to promote efficiency
and better service to customers. A competitive environment was instrumental in
introducing a thorough going professionalism, which in the ultimate analysis
transformed the entire outlook of the industry.
• Deposit Mobilization
The banking sector as a whole and ABL in particular has played an important
role in helping to mobilized savings. The continuously rising importance of
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From its inception, ABL has launched a number of successive drives for
improving the deposit base of the Bank. An essential part of each drive was to
popularize the banking habit among the people both rural and urban, and to bring
a large number of customers into its orbit.
• Branch Expenses
Soon after commencing business by the end of June 1942, only few branches
had been opened. The management decided to broaden the geographical coverage
so besides the cities, the bank branched out into small towns & the far-flung, less
development and unbaked areas of fulfill its social responsibility. The branches in
small town and villages have been vital help to the small industrialists and
business, industrial workers, farmer’s craftsmen and other persons of limited
means. The bank had extended its network to more than 650 by the end of Dec.
1973. At present the number exceeds 819 branches.
• Foreign Trade
The bank has always played key role in the promotion of foreign trade
especially in financing of exports. The bank’ achievement in the area is really
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commendable, as it has not only to compete with the domestic banks but with the
large international financial agencies as well.
The Islamization of economic system in Pakistan began from July 1979. In Jan
1981 the PLS banking was launched. Interest free modes of financing had been
introduced, and in the firs t half of 1985 a number of measures over taken for
complete charge over of the whole system of domestic banking to non interest
basis. And finally the process of transaction from interest base to non interest
banking was completed. Since the banking companies are not allowed to accept
deposits (excluding foreign currency deposits) except on the basis of Profit &
Loss sharing.
A separate department at the head office was set up which was later on
upgraded into a full-fledged Islamic banking division apart from supervising the
Islamic banking operations. The division has conducted research and has been
able to add to the literature on Islamic banking, both of theoretical and practical
significance.
• Computerization
While mechanization in ABL, began as early as in 1950’s the bank also took
the lead in introducing computers in banking operation in Pakistan.
• Utility Booths
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The bank has 34 utility booths throughout of country to accept payments, both
in the morning and in the evening against utility bills, such as gas, electricity and
telephone bills. The bank also issues television licenses.
The bank instituted prizes for those securing highest position in bank diploma
examinations. In 1993, three bonuses were awarded in a single year to recognize
and reward to services and achievements of its employees.
ABL also plays it part in the development of society. It has established public
libraries in many cities and towns.
The ABL functions to pursue the profit motive principle, satisfying the social
and economic needs of the country. ABL is playing it part in the socio-economic
development of NFWP with the following objectives.
CHAPTER 5
that wants to borrow money from financial institutions must show their financial
statements in such a format that is prepared under Generally Accepted
Accounting Principles and Practices and that could cover all the legal aspects of
each accounting concepts. It must follow the International Accounting Standards.
The different types of statement that are prepared are given below.
Income statement same times call profit and loss a/c. It summarizes a firm’s
operating result for a past period normally one year. It matches amount received
from sale of and other interest income in (financial institution) and other items
with all cost incurred in operating the company over period. The result is a net
profit or net income for the period. So it is also an important statement for an
earning concern.
Allied Bank Ltd has also prepared and presented its balance sheet and profit
and loss account for the year ended December 31, 2004. The detail and related
graphs are as under.
BALANCE SHEET
AS AT DECEMBER 31, 2004
(Rs. ‘000)
2004 2003
ASSETS
Cash and balance with treasury banks 10,842,435 9,443,478
Balance with other banks 1,477,282 1,761,896
Lending to financial institutions 16,175,000 15,361,237
Investments 57,262,834 40,734,616
58,799,702 40,659,158
5,946,710 5,758,689
5,548,375 2,596,133
1,155,817 1,200,741
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Advances
Other assets
Operating fixed assets
Deferred tax assets – net
154,208,155
117,515,948
LIABILITIES
Bill payable 2,534,363 1,772,730
Borrowing from financial institutions 11,894,682 2,664,643
Deposits and other accounts 126,391,752 114,218,082
Sub-ordinated loans - -
Liabilities against assets subject to finance lease - -
Other liabilities 3,066,594 2,843,969
Deferred tax liabilities - -
143,887,391
121,490,424
REPRESNTED BY:
Share capital 4,313,156 1,060,156
Share premium 10,950,000 -
Statutory reserve 574,703 557,876
Accumulated losses (6,323,707) (6,490,139)
9,514,152 (4,869,107)
Surplus on revaluation of assets – net of tax 806,612 894,631
10,320,764 (3,974,476)
2,869,757 3,226,500
NON-MARK-UP / INTEREST INCOME
Fee, commission and brokerage income 1,255,153 454,784
Dividend income 14,705 15,352
Income from dealing in foreign currencies 165,345 162,151
Income from sale and purchase of securities 14,008 124,273
Income from trading in government securities 35,688 1,074,486
Unrealized / gain on revaluation of investments classified
as held for trading 68 -
Other income 154,682 312,534
Total non-mark-up / interest expenses 1,739,649 2,143,280
4,609,406 5,369,780
NON-MARK-UP /INTEREST INCOME
Administrative expenses 4,088,685 4,247,103
Provision against other assets 150,179 1,736
(Reversal of provision) provision against off balance sheet
obligations (93,427) 265,513
Other charges 7,009 8,558
Total non-mark-up / interest expenses 4,152,446 4,522,910
456,960 846,870
Reversal arising on account of depreciation charged on land in prior years - 107,189
PROFIT BEFORE TAXATION 456,960 954,059
Taxation – current (For the year) 158,000 97,012
(For prior year) 28,000 209,089
- deferred 102,690 262,378
288,690 568,479
PROFIT AFTER TAXATION 168,270 385,580
(6,475,150) (6,798,603)
APPROPRIATION
Transfer to:
- statutory reserve 16,827 77,116
- capital reserve - -
- revenue reserve - -
- proposed cash dividend - -
- other - -
16,827 77,116
Accumulated losses carried forward (6,323,707) (6,490,139)
Earning per share – basic and diluted (in Rs) 0.27 3.63
INTERNSHIP REPORT ON ABL
1,781,745 991,668
2,224,000 1,930,375
(Increase) / decrease in operating assets
Lending to financial institutions (813,763) (4,522,624)
Held for trading securities 12,147 (16,499)
Advances – net (19,536,967) 4,041,116
Other assets (excluding advance taxation) 200,820 2,247,360
(20,137,763) 1,749,353
CHAPTER 6
FINANCIAL ANALYSIS
Financial analysis is based on the actual data of the ABL, G.T. Road branch
provided by the Operations Control Department, Peshawar Region. The analysis
and all its tools are different from that generally followed in the conventional
analysis procedures. The reasons for this little different procedure are:
INTERNSHIP REPORT ON ABL
Deposits are the lifeblood of banking company. Deposits are the fuel which
keeps the organization. The number of Accounts depicts the customer’s
confidence over the Bank, but deposits are the quantitative measure of this trust.
This direct relationship determines the success or failure of a bank.
Table 6.1
140000
120000
100000 126392
80000 114218
60000 103883
40000 96803 94492
20000
9391 10335 12174
0
-2311
-20000
2000 2001 2002 2003 2004
2000 2001 2002 2003 2004
Graph 6.1
Deposits constitute the majority portion of the liabilities of a bank, which are
used the used for funding its lending and investing activities. The deposits of ABL
have shown a mixed trend over the five years period (2000-2004).
The deposits have decreased by 2% in the year 2001 as compared to the year
2000. But the rates of growth in deposits have increased to 10% in the year 2002
as compared to year 2001. The rates of increase in deposits are 10% and 11% in
the years 2003 and 2004 respectively.
The analysis shows that the Bank is lacking consistency in its deposits
generation. The causes of this inconsistency are:
• Improper assignment of targets to employees.
• Transfers of employees.
INTERNSHIP REPORT ON ABL
• Lack of diversified services range, which can help ABL attract and retain
more customers.
For banks loans of advances are the major portion of its assets. These are the
major assets responsible for the earning of a bank.
INTERNSHIP REPORT ON ABL
The advances of ABL are on the decline trend for the last year. The bank
advances have decreased by Rs. 2,729millions (5%) and 9,027 millions (17%) in
2001 and 2002 with respect to their previous years. Similarly in the year 2003 the
advances are decreased by (10%). In the year 2004 the advances are increased by
Rs. 18,141 million (45%).
60000
50000 57132 58800
54403
40000 45316
40659
30000
20000
10000 18141
0 -2729 -4757
-9087
-10000
2000 2001 2002 2003 2004
Graph 6.2
Assets are the economic resources, which are expected to benefit the future or
present operations of the business. For ABL the cash, loans and advances form
the major portion of the assets, effectively supported by fixed assets. The total
assets of the bank have decreased by 2,138 million (2%) in the year 2001 as
compared 2000. in the year 2002 8,897 million (9%) increase was shown by
INTERNSHIP REPORT ON ABL
ABL. And 5% and 31% increase in advances are shown by ABL for the year
2003 and 2004 respectively.
160000
140000 154208
120000
100000 105706 112465 117516
80000 103568
60000
40000
20000 8897 36692
5051
0
-20000 -2138
2000 2001 2002 2003 2004
Graph 6.3
5000
1587
4492 839 748 954 457
0
-3645 -633 -497
-5000
2000 2001 2002 2003 2004
Graph 6.4
The profit before tax of the Bank is calculated by deducting all the expenses
from the revenue generated by the bank, it is also the Net Income of the bank
because all the expenses are paid out and only tax is include in this profit.
In the year 2001 the profit before tax is decreasing by 3,645 (81%) as compared
2000. But in the next year the profit before tax was increased at 748 (89%).
However in the year 2003, 2004 the profit is increase at a decreasing rate (40%)
and (52%).
6000
4000 4842
2000 -1122 1069
386 168
0
-53 -683 -218
-2000 -3720
-4000
2000 2001 2002 2003 2004
Graph 6.5
The profit after tax of the Bank is calculated by deducting all the expenses and
all taxes from the revenue generated by the bank, it is also the Net Income of the
bank because all the expenses are paid out and alls the taxes are paid.
In the year 2001 the profit before tax is decreasing by 3,720 (77%) as compared
2000. But in the next year the profit before tax was increased at 53 (5%). However
in the year 2003, 2004 the profit is increase at a decreasing rate (64%) and (56%).
60
40 45.54
20 -10.55 10.06 6.63
0.74
0
-0.49 -6 -3
-20 -35
-40
2000 2001 2002 2003 2004
2000 2001 2002 2003 2004
Graph 6.6
8000
2000
12
0
-35 -135 -212
-2000
2000 2001 2002 2003 2004
2000 2001 2002 20030.17%
2004
Graph 6.7
1000
929 856
500 814 752 735
0
-42 -62 -17
-73
-500
2000 2001 2002 2003 2004
Graph 6.8
The branches of ABL are on the decline trend for the last five year. In 2000 the
total numbers of branches are 929. In 2001 the numbers of branches are decrease
by 73 (8%). Respectively in 2002 the number of branches decreased by 42(5%),
in 2003 the number of branches decreased by 62 (8%), and in 2004 the branches
of ABL decreased by (2%)
RATIO ANALIYSIS
There two concepts of working capital. The first define the working capital as
the investment in current assets. Current assets mean which can be converted into
cash within an according period and include cash, short-term securities, debtors,
bill receivable, stock etc. According to the other concept working capital is the
excess of current assets over current liabilities.
The net working capital in the year 2003 is (77713150) while in 2004 net
working capital is increased to 6615572.
80000000 77713150
60000000
40000000
20000000
6615572
0
2003 2004
2003 2004
Net Working Cpital Ratio
CURRENT RATIO.
2003
Current assets
Current ratio=
Current liabilities
113719074
= = 0.94
121490424
2004
150502963
Current ratio= = 1.05
143887391
INTERNSHIP REPORT ON ABL
Current assets are those assets which can quickly convertible to cash are very
near to cash such as account receivable, inventory, investment, and advances etc.
When the current assets are divided by current liability of the same year we find
the current ratio. In the year 2003 the current ratio shows a negative figure of
0.94. But in the year 2004 the current ratio in positive 1.05 it is due to increase in
current assets.
1.05 1.05
1
0.95 0.94
0.9
0.85
2003 2004
Current Ratio 2003 2004
QUICK RATIO.
2003
Quick assets
Quick ratio =
Current liabilities
113719074
= = 0.94
121490424
2004
Quick assets
Quick ratio =
Current liabilities
150502963
= = 1.05
INTERNSHIP REPORT ON ABL
143887391
Quick assets are those assets in which the liquidity is more then the current
assets. When we deduct the amount of inventory and prepaid from the current
assets we fined quick assets. And the quick assets are divided by current liability
we fined quick ratio or acid test ratio. But there is no inventory and prepaid there
fore the current assets and quick are the same. In the year 2003 the quick ratio is
negative (0.94) but in the year 2004 the ratio is positive (1.05). It is due to
increase in assets.
1.05 1.05
0.95
0.94
0.9
0.85
2003 2004
2003
Net profit before tax
Net profit margin before tax = * 100
Total markup & non markup interest income
954059
= *100 = 18%
5369780
2004
Net profit before tax
Net profit margin before tax = * 100
Total markup & non markup interest income
456960
= * 100 = 9.914%
INTERNSHIP REPORT ON ABL
4609406
The net profit before tax in the year 2003 was 18% but in 2004 the ratio in
decreased to 10% it is due to decreased in profit because some assets are acquired
by ABL such as computer equipment and ATM machine etc.
20%
18%
15%
10%
9.94%
5%
0%
2003 2004
2003
Net profit after tax
Net profit margin after tax = * 100
Total markup & non markup interest income
385580
= *100 = 8%
5369780
2004
Net profit after tax
Net profit margin after tax = * 100
Total markup & non markup interest income
168270
INTERNSHIP REPORT ON ABL
= * 100 = 3.65%
4609406
The net profit after tax in the year 2003 was 8% but in 2004 the ratio in
decreased to 3.65% it is due to decreased in profit because some assets are
acquired by ABL such as computer equipment and ATM machine etc.
8%
8%
6%
4%
3.65%
2%
0%
2003 2004
2003
Total assets
=
Total markup & non-markup interest income
117515948
= = 21.88 Time
5369780
2004
Total assets
=
Total markup & non-markup interest income
INTERNSHIP REPORT ON ABL
154208155
= = 33.45 Time
4609406
The turn over of ratio over interest income is 22 time per year in the year
2003. While in the year 2004 the turn over of assets over interest income is 34
time per year.
35
33.45
30
25
20 21.88
15
10
5
0
2003 2004
CHAPTER 7
SWOT ANALYSIS
SWOT analysis
INTERNSHIP REPORT ON ABL
5.1 Strengths
• Employees of the Bank are also owners of the Bank, being employees and
owners; the interest of the Bank is also the interest of the employees.
• Due to the interrelatedness of the Bank and that of the employees, it is much
easier to motivate the employees and lift their spirits.
• The branch is situated in the commercial hub of Peshawar. This location
provides a competitive edge to the Branch.
• The Branch has the most experienced and the least experienced staff, which
is a good combination of experienced heads and exuberance of youth.
• The branch is the main branch in the areas, which is another plus point for
the Branch.
• It holds the Hundi Accounts, where the payments are made through checks.
This process provides an opportunity to the Branch to have more of the
Hundi customers as the Bank customers.
5.2 Weaknesses
• The Branch has a good staff combination on the basis of experience, but
their training capabilities are not up to the requirements of the fast changing
banking environment.
• The customer’s Long tern contacts are not maintained with customers.
• As the bank’s employees are also the owners, it is very difficult to remove
then or punish their negative behavior.
INTERNSHIP REPORT ON ABL
• The technical training of the staff is negligible e.g. in case absence in case
of the absence of computer there is no alternate trained personal who can
record the daily transactions.
• The organization is very much mechanistic and provides no flexibility to
encourage creativity.
• The lower staff is non cooperative as compared the lower staff of other
branches.
• The control of manager is not effective.
• The discretionary powers of manger are very low to offer more incentives
and value added services to its customers.
• There is a lack of commitment and professionalism on part of the
employees. The staff is always in a hurry to leave the bank as soon as
possible. They were also observed to starting their operations comparatively
late.
• The organizational culture is not cooperative and friendly.
• Nepotism was observed on part of the manger as well as the top
management towards some staff members.
• The branch has no industrial accounts.
• The level of technology management in the branch is very low. The
technology available is not maintained well mainly because of the lack of
technically trained staff. For instance the scanner, in spite of its availability
has not been used for scanning the specimen signature cares.
• In spite of the presence of technology many jobs are done manually such as
the letters, drafts for fax messages and other calculations, which could be
easily, done in MS Word and Ms Excel.
• The branch lacks some physical facilities such as washrooms.
• The layout of the branch is such that it is hindering the flow of work on one
hand and the documents are laying exposed which can be easily taken away
by any person entering the branch.
INTERNSHIP REPORT ON ABL
• The job distribution is not up to the mark. The immediate result of this
immediate result of which is:
• Delays were observed because the prescribed procedures are not followed.
• Though ABL, G.T. Road branch in the area it lack specialized counters or
facilities such as:
5.3 Opportunities
• The biggest opportunity for the ABL, G.T. Road branch Peshawar is the
greater number of Hindi customers who get their payments through ABL,
Bank G.T. Road branch. These customers can be easily convinced to open
their accounts with ABL.
• A considerable portion of the labor force of the area is serving overseas.
Their and their families can be encouraged to use ABL as channel for
remittances.
• The Internet facility in the area provides an opportunity to ABL to get
Online.
• The Bank has the basic infrastructure, which can facilitate the online
process.
• The location of the ABL, G.T. Road branch itself provides an opportunity
to ABL to get more and less cost deposits.
5.4 Threats
• The biggest threat to the operational success of the branch is the better
competitor’s services. Many private sector banks are offering higher rates of
return to customers than Allied Bank of Pakistan.
INTERNSHIP REPORT ON ABL
• The banks in the neighborhoods have either become online e.g. Union Bank
G.T. Road is becoming on line e.g. Muslim Commercial Bank.
• Cannibalization of profits is yet another threat to the success of Bank G.T.
Road branch. The branches of Allied Bank are located very close to the
bank G.T. Road branch. All these branches are taking away each other’s
customers.
• One of the biggest to the ABL, G.T. Road branch is the increasing rate of
dissatisfies customers. Most of these customers were observed to be
dissatisfied with the delays in their servicing.
• The greatest threats to the performance of ABL, G.T. Road branch are the
decreasing morale of employees. They feel that they are not provided with
bonuses. They are not given proper attention to have a say in the annual
meetings. The proxy forms are signed on their behalf without letting them
know.
• High-pressure interest groups are developing which poses a constant threat
to Allied Bank.
Chapter 8
The critical analysis ABL in the previous section is the representation of its
past, mirror of its present, and an insight into its future. The past data of
ABL/ABL, G.T. Road branch enabled me to study the organization in a historical
perspective and understand the nuisances in the banking operations. Study of he
present of ABL helped me evaluate the organization in comparison to its future
and competitors. The data obtained from the analysis of its present and future in
combination with my professional studies resulted in some suggestions and
INTERNSHIP REPORT ON ABL
implementation plans, which can help to increase the profitability and operational
success of the ABL, G.T. Road branch Peshawar.
Some of the major findings suggestions are discussed.
The physical facilities or the layout are the most fundamental features in an
organization, which the customers observe in forming an opinion, perception or
idea about the organization. Therefore, every organization tries to make a good
first impression on customers through the presentation of its physical facilities or
layout. The physical facilities in the branch are not up to the mark, which requires
timely changes to provide good environment to customers. The suggested
changes and corrective actions are gives below:
• The lighting system must be improved and all the out of use lights must be
replaced.
• There is always a stinking smell in the Bank due to the out of order
condition of washroom. Therefore the washroom must be brought into
order to remover this unpleasant smell.
• Generators should be made available to the branch to minimize the
disruptions due to power failure.
• Newspaper should be provided to the customers to avoid the pain of
waiting long.
• A cash counting machine can help reduce the time spent in counting cash.
expedite the workflow, avoid overloading of staff and remove the customer’s
grievances arising mainly due to delay in workflow.
More technically trained staff should be added to the existing staff strength
while the efficiency of the existing staff should be increased through proper
training and development.
• Customer’s relations.
• Organizational behavior and developments.
• Marketing and
• Computer literacy.
• Feed Back:
Periodically provided to employees and recognizing their efforts through
reward (bonuses) and publicly appreciation.
• Uniform:
The appraisal system must be uniform in evaluating all the employees
without any discrimination.
• Objectivity:
The appraisal system must be based on facts and figures and objective
evaluation of the facts on grounds.
The biggest source of the bank revenue is advances. The advances of ABL,
G.T. Road branch are on him decreasing trend, causing a decrease in the revenue
for the bank. The bank should make the advance procedure simple and quick to
meet the customer’s requirements. The following steps are suggested for
simplifying the advance procedure.
Deposits are the main source of funds for commercial banks. Therefore, the
priority of every bank is to increase the number and amount of deposits. The key
to successful business does not lie in simply attracting new customers. The real
success is to maintain in the old customers and attract new customers at the same
time because retaining a customer is more difficult than attracting new customers.
The analysis of expenses shows that 43% of eh expenses of he bank are the
payments on fixed deposits, which is a very high proportion. Apart from this the
interest earned on advances Rs. 0.265 million is smaller than the interest paid on
different deposits.
Rs. 4.1 million.
The bank should launch a campaign to get less cost deposits much as high
amount current account as well as low cost PLS saving accounts.
7.9 Decentralization
The authority in the bank is highly centralized with a very wide span of
control, which hinders the smooth functioning of the organization. All the
authorities are vested at the regional or central office. Some the authority must be
delegated at the branch level in the following areas.
The Bank should provide information to all the present and potential customers
relating to the new products, services, some service’s fee structure and other
matters which are likely to affect the customers. It should be made sure that all
the customers have access to this information. Conveying information is of no
use, unless, there is some feedback from he customers. The following measures
are suggested to implement this suggestion.
INTERNSHIP REPORT ON ABL
The financial audit of the bank is conducted on regular basis both as a surprise
and routine audit. However, the performance and system audits are completely
ignored which, other wise, should have been a compulsory part of the auditing
services of the Bank. The immediate outcome of ignoring performance outcome
is shortcoming in the non-financial aspects of his organization such as customer
relations, lack of necessary facilities, motivation of employees, and the control of
manager.
In the light of the above facts it is suggested that the performance audit of the
bank must be carried out on both regular and surprise basis to keep the Bank
competitive in the run of for more customers, more deposits and high
profitability.
G.T Road
branches are so closely located so
that they are mostly taking away
each other customers, rather than
competing the real competitors.
New Adda
Along with concentrating on increasing the customer base, the Bank must also
emphasize on securing the highest market share in other banking services such as
issuance of letter of credit, foreign exchange, remittances, bills identification of
productive secure and easily realizable advances etc. to achieve this strategy the
Bank should have a clear plans with the consent of the higher management. The
plan must be divided into different periods – weekly, monthly, semiannual and
annual. Every stage of the plan must be monitored and controlled on regular
basis.
Presently the computers available in the Bank are used for recoding accounting
entries. There is no other use of computer. The minor calculations and letter that
could have been easily done in Excel and Ms Word are done manually.
It is suggested that full benefit must be taken of the technology available. All
the minor calculations should be done in computers and all the correspondence
should be typed with the help of computers. This will benefit the bank in two
ways:
CHAPTER 9
CONCLUSION
During my internship in ABL G.T. Road branch I observe many of the finding
which were presented in the previous. Now if conclude with major finding which
are given below. Major findings, which came into light as a result of the critical
evaluation of organization and performance of Bank G.T. Road branch, are listed
below.
INTERNSHIP REPORT ON ABL
• The branch is facing shortage of staff, which has made the existing staff
overloaded.
• The branches of ABL in his area eating up each other’s profits by entering
into competition and rivalry with ineffective administrative control from the
top.
The findings of analysis were carefully and thoroughly studied for possible
corrective actions and improvements. As a result of this study, the following
suggestions and recommendations were developed, the implementation of which
can help the branch to improve its performance. A bird eye view of these
recommendations and suggestions is given in the text to follow.
References
2.
M. Saeed, Nasir, (2004) Banking Currency and Finance, Pakistan Kitab Markaz.
3. Allied Bank Ltd Annual report (2004), Karachi.
4. Head office of NWFP performance report (2004)
5. http://www.abl.com.pk