Chapter 1

Introduction of BANK OF PUNJAB

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Topics       Mission Statement Core Value Scope of the Bank Management of the Bank Objectives Organization Structure 3 3 4 6 3 3

Page No.

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1.1 Mission Statement
Be a dynamic resource of economic development and growth for stakeholders through service excellence achieving high standards of professionalism, dedication integrity and team work.

1.2 Core Values
 Integrity  Dedication  Transparency  Team work

1.3 Scope of the Bank.
Being a commercial Bank, The Bank of Punjab performs all such functions as are attributed to commercial banking institution both in the area of resource mobilization, loans, and investment. The Bank is thus providing all type of advances to business, trade, and industry on seasonal and annual basis, and is ensuring, through the prudent policy, the safety and protection of its loan portfolios, as the resources base of the bank expands, project financing will also be brought into its fold.

1.4 Management of the Bank.
At the level of Decision-making and implementation, senior management of the bank is drawn from highly accomplished bankers with rich experience in the banking profession both domestic and international. The entire responsibilities of policy formulation and management have been placed, under the law, with the Board of Director. Furthermore it will be heartening to know that

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Mr. Nawaz Sharif, during his chief Minister ship of the province of Punjab issued special instructions to the political and executives echelons not to interfere in The Bank of Punjab, thereby ousting the possibility any pressure which may be put on the management of the bank in respect of recruitment of staff or provision of credit. These instructions have become an essential part of the culture of the bank.

1.5 OBJECTIVES.
The Bank of Punjab being a commercial bank performs all those function as are attributed to such banking institutions both in the areas of resources mobilization and investment. It is providing funds for commerce, trade, industry, and agriculture but its main emphasis is on accelerated development of agro-based industry. So the main objective of the bank is to channelize the resources into sectors, which have suffered from neglect. Other objectives included. 1 2 To provide speedier services to the common man. To provide the highest rate of return to the shareholders by achieving good profitable growth. 3 To enter into financing contracts and to mobilize resources in local and now in foreign currencies consistent with the objects of the bank.

Subsidiaries and Sponsorship
The bank is one of the sponsors of Trust Management Services Pvt. Limited besides being a co-sponsor of Trust Modaraba a Modaraba company incorporated in Pakistan under the Modaraba companies and Modaraba (Floatation and control) Ordinance, 1980. Authorized Modaraba Fund and paid up Fund of the said unit in Rs. 500 million and Rs. 150 million respectively. 4

The Bank is one of the sponsors of Trust Leasing Corporation Limited a public limited company established under the Companies Ordinances, 1984. Authorized paid up capital of the company is Rs. 250 million and Rs. 100 million respectively. First Punjab Modaraba Services (Pvt) Ltd. was established in Pakistan under Companies Ordinance. 1984 and register under Moderate Companies and Modaraba (Flotation and Control) Ordinance, 1980 is wholly owned subsidiary of the bank. Authorized fund of this Modaraba is Rs. 500 million where as paid up fund is Rs 200 million.

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1.6Organization structure

DIVISION AND DEPARTMENTS
DIVISION
♦ ADMINISTRATION ♦ OPERATIONS ♦ BUSINESS DEVELOPMENT ♦ CREDIT ♦ INTERNATIONAL ♦ FINANCE ♦ RECOVERY ♦ AUDIT & INSPECTION ♦ TREASURY

DEPARTMENTS
♦ ORGANIZATION & METHODS ♦ INFORMATIONAL & TECHNOLOGY ♦ OFFICERS TRAINING INSTITUTE ♦ LAW ♦ PLANNING RESERCH & PUBLICATION

HEADED BY: GENERAL MANAGER

HEADED BY: CHIEF MANAGER

REGIONAL CHIEFS

BRANCH 6 NETWORK

REGIONAL NET-WORK

FAISALABAD
Total Branches 34

LAHORE
Total Branches 64

GUJRANWALA
Total Branches 43

MULTAN
Total Branches 60

KARCHI / QUETTA
Total Branches 05

RAWALPINDI
Total Branches 36

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Chapter 2 FUNCTIONS OF DIVISIONS

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2.1 Administration/Human Resource Division
G.M

Admin & Establishment

Officer’s Training Institute

]This division deals with the problems relates to the staff administration. The main function of this department is to arrange a comprehensive training program for recruited staff. Others function includes: ♦ Recruitment ♦ Staff remuneration ♦ Placing the staff ♦ Providing and defining the opportunities for career development and growth ♦ Devising and implementing services rules. ♦ Promotion and demotion ♦ Suspension and termination ♦ Transportation ♦ Security, health and benefits.

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2.2

Operations Division
G.M Computer Dept.

Engg. & Maintenance

O & M Department

This Division is concerned with the operational working in general banking, which is concerned with the routine working of the bank. Any problem or ambiguity arise in any branch working are rectified and suggested for correction by this division. This Division usually takes technical procedures involved the decisions like commissions. And also.

♦ The maintenance of the existing building owned by the bank. ♦ Opening new branches and their maintenance. ♦ It also deals with the stationery problems of the bank.

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2.3 Business Development Division
G.M

Marketing Cell

PRP Department

It is the other name of the marketing division. It promotes the bank cause i.e. deposits and work for the over all development of the bank. Deposits are the lifeblood of any bank. Without deposits bank cannot perform any function of banking. This division fixes the deposits target of every branch by keeping and eye over the potential customers in the area. It gives motivation to branches to achieve their targets through different campaigns and schemes like cash prizes and special increments. It publishes a bulletin in which those branches are encouraged who achieves their monthly targets. The main function is to develop and attract the customers and depositors. It also manages: ♦ Advertising policy ♦ Sales promotion. ♦ Schemes offered by the bank.

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2.4

Credit Division

G.M

Agriculture Credit Wing

This division control over all credit operations like sanction of loans, Inland Bill Purchased (IBP) and also keeps check over securities mortgage, hypothecating or pledge. It also fix the rate of mark-up and other decisions concerning with the credit. There is a credit committee, which consists of senior officers; Branches send the credit proposal to head office credit division. Credit committee approves it after making a through analysis. It also

♦ Prepare the policies regarding the sanctioning loan ♦ Monitor loans and credit ♦ Look after the portfolio of the bank ♦ Define credit limits against specified securities.

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2.5 International Division G.M International wing

Forex Money Market Investment

Eng. & Maintenance
This division is providing important services to the bank regarding the matters of International Trade, Import, Export Letters of Credit, Travelers cheque etc. ♦ It develops “ Correspondent Relationship” with others on commission basis and this helps to deal with the clients having import export business. ♦ It handles treasury operations. ♦ The Marketing and Spot Inspection cell, which were introduced by the bank, are showing positive results in terms of achieving foreign currency deposit targets and other foreign related business.

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2.6 Finance Division G.M Balance Sheet Results Monitoring SBP Affairs, and Compliance.

Company Affairs

It controls the routine financial matters. The permission of special expenditure incurred in the branches, and other such cases. The daily position and HO Extracts are daily sent to this division by all the branches. This division not only estimates the profit and loss of every branch but also prepare overall income statement and balance sheet of the complete bank. It also keeps record of total deposits of the bank and then their classification in the form of loans into different sectors of economy. The basic functions are: ♦ Monitoring the fiscal and financial policies of the bank. ♦ Deals in exploring means for investing surplus bank funds. ♦ Maintenance and investment of Gratuity and Pension Funds of the employees.

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2.7 Recovery Division G.M

Law Department
The recovery division, which was established in 1994 to assist in regularizing the difficult loan accounts, has rendered valuable services in this respect. To effect recoveries in an efficient manner, a policy has been framed in accordance with the guidelines issued by the State Bank of Pakistan Moreover, recovery cells at regional levels have been set up to assist the head office. This division looks after the matters of recovery of loans with the assistance of legal advisors.

2.8 Audit and Inspection G.M

Audit of Branches

Rectification and Persuasion

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This department ensures appropriate system of checks and balances. It checks all the irregularities, errors and forgeries if any, under the rules and regulations formed by the Government of Punjab. For this purpose it doesn’t only keep and eye on the branches in their vicinity but also conduct surprise and comprehensive audits of the branches. This strategy has improved working at the branch level. It not only points out the discrepancies but also tries to solve it. Surprise audit maintain a good check on the over all working of the branch especially of the side of finance.

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Chapter 3 Business Operations

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3.1 SERVICES PROVIDED TO CUSTOMERS
The following are the services being provided to the claims. ♦ Acceptance of deposits ♦ Granting of loans ♦ Transaction Foreign Exchange Services ♦ Remittance – Collection ♦ SPEDFAX- instant Fund Transfer Service ♦ Lockers facility ♦ Utility Services

The Bank of Punjab attaches specials importance to the fee earning business and business base remuneration. As part of diversification of the banks utility services, the collection of bills of INSTAPHONE (mobile phone network) was added to existing collection arrangements for WAPDA, SUI GAS, WASA, PTCL, and PAKTEL. By using bank’s extensive branch network, effort have been to made to maximize the exploitation of this source in view of its rich potential of yielding business and deposit direct earning of commission.

3.2 Deposit Section
In modern times very few business enterprises are carried out solely with the capital of the owners. Borrowing funds from different sources has becomes an essential feature of today business enterprise. But in the case of a entire banking system is based on it. The

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borrowed capital of the bank is much greater then their own capital. Banks borrowing is mostly in the form of deposits. These deposits are lent out to different parties. The larger the difference between the rate at which the deposits are borrowed and the rate at which they is lent out the greater of the profit margin of the bank. Furthermore, the larger the deposit the larger will be the funds available for employment; larger the funds lent out the greater will be the profit of the bank. To receive the deposit is the basic function of all commercial banks. The bank does not receive these deposits for save keeping purpose only, but they accept deposits as debts. When banks receive deposit from a customer, the relationship of a debtor and creditor is established where by the customer become the creditor and the bank a debtor. When the bank receives amount of deposit as a debtor, it becomes the owner of it. It may, therefore use it as deems appropriate. But there is an implicit agreement that the amount owned would be paid back by the bank to the depositor after a specified period.

3.3 NATURE OF DEPOSITS
• • • • • CURRENT DEPOSITS PROFIT & LOSS SHARING ACCOUNT SHORT NOTIC TERM DEPOSITS CALL DEPOSIT TERM DEPOSIT RECEIPTS (TDR). CURRENT DEPOSITS:

3.3.1

In this type of account the client to allowed to deposit or withdraw money as and when he likes. Because of their nature, these deposits are treated as the current liabilities of the 19

bank. There is not profit on such deposits. Usually this type of account is opened by the business.

3.3.2

PROFIT & LOSS SHARING ACCOUNT.

This type of accounts is one step towards the Islamization of banking system in Pakistan. There are two types of PLS Accounts. ♦ PLS Saving Account ♦ PLS-TDR (Profit & Loss Sharing Term Deposit Receipts). PLS saving accounts can be opened with the minimum sum of Rs. 100 and PLSTDR account can be opened for a sum of Rs. 1000 or above. Profit is paid on both types of the PLS account on half yearly basis. Under PLS saving account the depositor undertakes to share profit or loss on the deposits earned or sustained by the bank. Secondly the bank is at the liberty to invest the funds of the deposits in any avenue, it deems fit. The PLS deposits are invested in non-interested channels. 3.3.3 SHORT NOTICE TERM DEPOSITS (SNTD)

This kind of deposit is for a short period. The depositor may withdraw his deposit at any time by giving seven days notice to the bank. This type of deposit facilitates the depositor to withdrawn his amount with interest of the deposited period. 3.3.4 CALL DEPOSIT

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Call deposits are the sorts of deposits, which are deposited with the banker against any tender. This is without interest deposit. This may be with interest provided the depositor has agreed to keep this amount with the bank for some fixed period. 3.3.5 TERM DEPOSIT RECEIPTS (TDR)

This type of deposit is same as the SNTD. The difference is that SNTD is for short period (7- 30 days) while TDR is for long period (1 month up to 5 years).

3.4 ACCOUNT OPENING SECTION
Account opening is the first step towards establishing a relationship between the customer and the bank. The Bank of Punjab is offering basically two types of account:

♦ CURRENT DEPOSIT ACCOUNT ♦ PROFIT & LOSS SHARING ACCOUNT
The necessary condition for a customer, who wants to open an account with the bank, is introduction, which is preferably by the bank officers or any account holder of the bank. The different categories of accounts that are available are as under.

♦ INDIVIDUAL account ♦ Joint Account ♦ Partnership Account ♦ Limited Company Account ♦ Clubs, Society, Association, or Trust Account ♦ SNTD ♦ TDR 21

♦ Foreign Currency Deposit 3.5 CLEARING DEPARTMENT
Clearing is the most important department of the bank performing various function.

• Clearing House:
A clearinghouse is an organization of the member banks, working under SBP and which is for the purposes of setting inter banks claim resulting from transmission of funds from one bank to another. The branch cheque/instruments are credited into the account of the customer. The clearing can be: ♦ Outward ♦ Inward

Outward Clearing
The instrument collected or stored bank wise and a schedules is prepared separately for each bank mentioning the total number of instruments and the amount of the instruments. Then these are recorded in a register called “OUTWARD CLEARING REGISTER” then a main schedule is prepared showing the total number of cheque and their aggregate amount being presented in the clearing. The cheque/instruments are handed over the clearing branch. Central clearing branch issue CREDIT ADVICE to the branch for passing credit to its customer immediately. The branch, on receiving credit advice debits the clearing account and credit the respective customer accounts.

• Inward Clearing

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On receiving cheque/instruments from central clearing branch, the in charge checks the number and amount of cheque received in clearing must tally with the main schedule received from central clearing branch. These cheque/instrument are entered in “INWARD CLEARING REGISTER” for the cheque/instrument passed in clearing is a credit advice for the aggregate amount of cheque passed in clearing is prepared, drawn on central clearing branch.

• Reserves at State Bank of Pakistan
Deposit held by bank at SBP serves as check clearing and collection balances. Rather than physically transferring funds between banks, check clearing and collection can be done by simply debiting or crediting a bank’s account at SBP.

3.6 REMITTANCE DEPARTMENT
Remittance is a major function of the bank. It is the transfer of money from one place to another place. The need for remittance is commonly felt in commercial life particularly and in everyday life generally. By proving this service to the customers the Bank of Punjab earns a lot of income in the form of service charges.

The Bank of Punjab deals with the following type of remittances:  Demand Draft (DD)  Mail Transfer (MT)  Telegraphic Transfer (TT) 23

 Pay Order Now we discuss all these in detail: -

3.6.1 DEMAND DRAFT (DD):
Demand draft is a written order given by the one branch of a bank on behalf of customer to another branch of the same bank to a certain amount to the certain person. Procedure for Prepare Demand Draft. 1. A draft voucher is filled which contains the following information     Name of the parties involved Date Amount to be sent Account number (if DD is crossed) 2. A credit voucher is filled in order to get the excise duty and exchange commission. 3. The sender deposits the total amount of the two vouchers i.e. the debit and credit vouchers. 4. Then the cashier sends the cash receipt voucher to the accounts department and the account records the amount paid in his cash scroll. 5. Accountant gives the DD leaf along with the DD voucher to his assistant who records the sender’s name, amount and receiver’s name. After writing all the information in the DD register he gives it to the officer along with the DD for authentication.

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6. After authentication the DD is handed over to the sender and bank sends the advice to the concerned branch. So when the party presents the DD in the concerned branch its payment could be made. Parties involved in the Demand Draft The following parties are involved in demand draft;

1. Purchaser or Sender
The purchaser is the person who sends the money to a particular person payable at a certain branch.

2. Issuing or Drawing Branch
The branch from where the demand draft is issued to another branch of the same bank.

3. Drawer Branch
Branch in which the draft has drawn and called upon to pay the amount.

4. Payee
The person who is entitled to receive the amount after presenting the demand draft in the drawer branch.

3.6.2 MAIL TRANSFER (MT):
It is the transfer of money from one branch to another branch of the same bank through mail service. In mail transfer there is no need of advice as the amount is directly credited to the receiver’s account.

Procedure
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First a voucher is filled in whish the sender writes the amount to be sent, name, account number of the receiving person with the branch name and date.

A credit voucher is filled in order to deduct exchange, postage charges according to the amount of the mail transfer.

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The sender deposits the total amount in the cash department. The cash officer gives the vouchers to the officer after affixing received cash stamp and writing the amount in red ink.

Then the officer writes the amount paid in the cash scroll and gives the MT to his assistant.

MT leaf is filled according to the information provided in credit voucher. He also writes the same information in the MT register. Then he gives the MT leaf and MT register to the officer for authentication.

3.6.3 TELEGRAPHIC TRANSFER (TT):
This is the most urgent method of remitting the money from one place to another place. This method is used when the sender desires to send urgently, in this case the sender request the manager of the branch to issue TT. Procedure; For sending the TT the manager and officer apply a test. In the test the manager and officer uses a coding technique. They write their own code numbers, which is allotted, to them as the bank branch code. After making all the conformation the concerned branch makes the payment to the receiver. If the sender wants to convey the same message through telephone then he has to pay the charges of telephone along with the TT charges.

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First the person deposit the TT amount along with the charges through the credit voucher then his TT sent to the relevant branch.

3.6.4 Pay Order (PO):
A pay order is a written order issued by the bank on its own branch, drawn upon and payable by itself to pay a specified sum of money to the person. The purpose of a pay order is to transfer the fund from one place to another. It is usually not issued in favor of the parties of other cities. Usually the pay order is issued for the local transfer of money from one person to another or from the person to any other department. It is used for different purposes. The purpose may be the repairs of the branch or renovation of the branch.

Procedure. The procedure of a pay order varies with the nature of the purpose. If the work is of huge amount then first the manager writes a letter to the Zonal Chief in order to get sanction of the work. Then the advertisement of the work is given in the newspaper in order to invite the contractors. But if the work is small then the branch manager has discretionary power to select the party whose rate is lowest. After finishing the work the contractor submits the bill of work on his stamp pad. Then the bank issues a pay order, against the pay order the contactor gets the amount from the issuing branch.

3.7 ADVANCES / CREDIT DEPARTMENT
A “Major source of bank’s Income” It is the loan function, which produces the major person of bank’s income, and as such it is the major areas of professional banker’s concern and attention. 27

Principles while advancing Basically there are five principles that must be duly observed while advancing money to borrowers. ♦ Safety ♦ Liquidity ♦ Disposal ♦ Remuneration ♦ Suitability

Forms of Lending
Many there are two types of advances: ♦ Short-term (maturity within one year) ♦ Long term (maturity with the period of more than one year)

However they are further classified as: ♦ Running Finance ♦ Demand Finance ♦ Cash Finance ♦ Letter of Guarantee

3.7.1 Running Finance
This form of finance was previously known as “overdraft”. When a customer requires the temporary accommodation, his bank allows withdrawal his account in excess of credit balance, which the customer has in its account, a running finance occurs. The 28

accommodation is thus allowed collateral security. When it is against collateral securities, it is called a “Secured Running Finance” and when the customer cannot offer any collateral security except his personal security, accommodation is called a “Clean Running Finance.” The customer is in advantageous position in running finance because he has to pay the mark-up only the balance outstanding against him on daily product basis.

3.7.2 Demand Finance.
This is common form of financing to commercial and industrial concerns and is mad available either against pledge or hypothecation of goods produce or merchandise. In Demand Finance the party is financed up to a certain limit either at once or as and when required. The party due to facility of paying mark-up only on the amount it actually utilizes prefers this form of financing. ♦ Ordinary Shares ♦ Preferred Shares It can be ♦ Quoted or Unquoted ♦ Registered ♦ Bearer ♦ Inscribed

3.7.3 Advances Against Immovable Property (Mortgage).
A mortgage is the transfer of and interest in specific immovable property for the purpose of securing the payment of the money, advanced or to be advanced. By way of loan, and

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existing debts or the performances of the engagement this may rise the pecuniary liability. The transfer is called the ‘mortgager’ and the transferee the ‘mortgagee’ the principal money and interest of which payment is secured for the time being and instrument by which the transfer is affected, is called the letter of the mortgage deed. Availability of adequate flows of credit for industry and agriculture are a sine qua non for the growth and development of an economy. This acquires added importance when agriculture is the mainstay of the economy as also the sector where the bulk of the poor are concentrated. Growth and productivity in Pakistan's agriculture has slowed down in recent years and is, therefore, of serious concern given its importance for the economic prosperity of the country. Apart from various other weaknesses in the infrastructural support of the agricultural sector, inadequacy and lack of efficacy of credit, flows to support agriculture related activities has been a major constraining factor.

Agriculture is the largest sector of the economy. It contributes 25 percent to GDP, provides raw materials to 80 percent of industry and employment to over 50 percent of the population. This is a sector that has the shortest gestation period for investments and, therefore, a remarkable capacity to bring about a turn around in the economy. This important sector in Pakistan is suffering from a number of maladies and is consequently witnessing stagnation in productivity.

Due to policy and administrative exigencies, the savings in the agriculture sector remain low and, therefore, the sector has perpetually remained capital starved. The pricing of

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input and output in agriculture over the years has forced the majority of farmers in Pakistan to plough back their incomes into agriculture and non-institutional credit, and has more often than not served to sap their potential earnings. Needless to say, that shortage of savings and lack of availability of capital is one of the major reasons for poverty in the country. The agricultural and rural sectors in Pakistan in general and in Punjab in particular are, therefore, suffering from severe under-development. Under a desirable development model, Punjab can: ♦ Increase agricultural production to meet the country's requirement of essential foods items and industrial raw materials. ♦ Develop agro-based industry in the rural sector for economic value addition; ♦ Generate additional employment opportunities in rural as well as adjacent small towns/cities; ♦ Control massive migration to the urban centers that in turn is causing a number of social, administrative (i.e. law and order) and economic problems for the urban areas. ♦ Elevate poverty and improve the income generating capacity of the agri-based population. Never before in the history of Pakistan, has the development of the agricultural and food sectors been as critical as at this juncture and appropriate short and long term measures are necessary for its revival, sustenance and stability. Supply of credit by Financial Institutions for meeting the specific needs of agriculture and rural sectors are essential components for improvement in both short and long-term development of the country. This has assumed even greater importance in the present situation of declining water 31

availability. Per acre, production is plummeting. The per acre yield of most of the crops is stagnant rather diminishing. The most important factors responsible for this downward trend in productivity are: -

FACTORS RESPONSIBLE FOR LOW YIELD PER ACRE:
* * * Imbalanced fertilizer use Availability of certified and good quality seeds Improper control of pests and weeds

SCARCITY AND INEFFICIENT USE OF WATER:
* Natural and mechanical water resources.

NON-USE OF MECHANIZED FARMING PRACTICES:
♦ LACK OF EDUCATION AND RESOURCES, MOTIVATION TO USE ADVANCED TOOLS FOR AGRICULTURE: ♦ HIGH COST, LOW OUT PUT, UNSKILLED LABOUR INTENSIVE ♦ NON-AVAILABILITY OF CREDIT AND FINANCIAL ASSISTANCE TO THE AGRICULTURE SECTOR The importance of availability of credit to the agriculture sector has always been recognized by Government and given Top Priority. Specialized institutions have been in place for a number of years. However, these institutions have failed to realize the full potential from the sector and at times contributed to its further deterioration..

The list of eligible items for Agri-Credit is mainly divided in two sectors; i.e.

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►Farm Credit. And ►Non-Farm Credit Farm Credit is further bifurcated into: ♦ Short-Term ♦ Medium-Term ♦ Long-Term Credit. The priority items, which are recommended for inclusion in our schemes, are given here under; EXISTING: (Kissan Dost Agriculture Finance Scheme) Product /purpose of

Finance) Seeds, Fertilizers, Pesticides, Herbicides, Weedicides. All types of labor and water charges are already embodied in our package financing, i.e., 8000 Per Acres (no change)

PROPOSED: (Product /purpose of Finance) 1. 3. Orchard and Nursery Sericulture 2. 4. Manual Sprayers Apiculture

EXISTING:

Tractors (Product/purpose of Finance)

PROPOSED: 33

(Product & Purpose of Finance) Tube-Well Installation of Tube Well, water management, equipment, modules & culvert, lining of channels etc. Solar energy plants and pumps for irrigation, equipment for sprinkle/trickle/drip irrigation system.

Mechanization Support
Agri-implements, Equipment, i.e. trailers and thrashers, power tillers, power & boom sprayers, ploughs and cultivators, ridggers / drills, rotavators, diggers, saw machines for crates making, press machines for wheat straw and dry fodders.

Farm Transport
Lease finance for purchase of Motor Cycles and small Vans for Milk and other agri products transportation to local market.

slah-e-Arazi
Precision land leveling & reclamation, soil improvement, embankment, land formation and land improvement, laser leveling etc. For the time being, bank does not propose to extending Non-Farm Credit, i.e. for big Dairy Farms, Poultry Farm but will accommodate existing borrowers and established small individual farmers by financing livestock. (Goat, sheep, cattle & fattening animals) on a limited scale to revive, accelerate and supplement the income generating capacity of the small farmers.

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Chapter 4 PERFORMANCE

4.1 Deposits

Years 2002 2003 2004 2005 2006 2007 36

Deposits (Rs in Million) 12116 14256 15797 17101 15019 17028

2008 2009

19034 23767

2009 2008 2007 2006 2005 2004 2003 2002 19034 17028 15019 17101 15797 14256 12116

23767

Years Deposits (Rs in Mill ion

4.2 Advances

Years 2002 2003 2004 2005 2006 2007 37

Deposits (Rs in Million) 2909 4208 5065 5612 6151 6144

2008 2009

5772 6621

6151 6144 5612 5065 4208 2909

6621 5772

2002

2003

2004

2005

2006

2007

2008

2009

4.3 Investment

Years 2002 2003 2004 2005 2006 2007 2008 2009 38

Deposits (Rs in Million) 6649 5435 5919 6581 4991 7866 5970 8295

7866 6649 5435 5919 6581 4991 5970

8295

2002

2003

2004

2005

2006

2007

2008

2009

4.4 Capital & Reserves

Years 2002 2003 2004 2005 2006 2007 2008 2009

Deposits (Rs in Million) 1389 1509 1672 1795 1823 2180 2391 2313

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2500 2000 1500 1000 500 0

4.5 Total Assets

Years 2002 2003 2004 2005 2006 2007 2008 2009

Deposits (Rs in Million) 14340 16419 18512 19886 18215 21275 24802 29532

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30000 25000 20000 15000 10000 5000 0 Deposits (Rs in Million
2002 2003 2004 2005 2006 2007 2008 2009

4.6 Profit

Years 2002 2003 2004 2005 2006 2007 2008 2009

Deposits (Rs in Million) 174 151 163 123 28 356 222 283

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Years
2002 2003 2004 2005

Deposits (Rs in Million
2006 2007 2008 2009

4.7 Growth of Shareholder

Years 2002 2003 2004 2005 2006 2007 2008 2009

Deposits (Rs in Million) 2691 3955 5389 5389 5389 5896 6436 5891

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5389

5389 5389

6436 5891 5896

2002 2003 2004 2005 2006 2007 2008

3955 2691

1
4.8 Categories of Shareholders

2009

Categories Directors/CEO/Spouse Provincial Govern Foreign funds Individuals Insurance Companies Financial Institutions NBFI Modaraba & Modaraba Management Co Others

No of Share Holders 4 1 50 5659 4 28 103 8 28 43

Shares Held 11576 51781427 3052275 14378263 3453355 5881765 16547565 9279 5299821

Percentage 0.01 51.57 3.04 14.32 3.44 5.85 16.48 0.01 5.28

TOTAL

5891

100415326

100

0.01 5.28 0.01 16.48 5.85 3.44 14.32
Directors/CEO/Spouse Foreign funds Insurance Companies NBFI Others

51.57

3.04
Provincial Govern Individuals Financial Institutions Modaraba & Modaraba Management Co

Chapter 5 FINANCIAL STATEMENTS AND ANALYSIS

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5.1

Balance Sheet
THE BANK OF PUNJAB SUMMARISED BALANCE SHEET Rs. In Million 2009 2008 2007 2814341 3170272 7479833 6620988 2008543 4 8294651 388788 5048 393836 758930 2953285 1 250144 1289547 4448268 432575 6776167 5771526 1742853 6 5969947 274059 2136 274059 185070 942955 2480270 3 162545 2509262 45 1483412 458204 2911000 6143664 1099628 0 7865794 248575 2641 251216 192077 881108 2018647 5 130480 312319

For the Years ASSET CURRENT ASSETS Cash Balance with other Banks Account Receivable Advances TOTAL CURRENT ASSETS LONG TERM INVESTMENT Fixed Asset Capital work in progress TOTAL FIXED ASSETS Deferred Tax Debt OTHER ASSETS TOTAL ASSETS

2006

2005

2021955 1746493 2071514 1968484 1750000 4644966 6150648 4111500 1199411 12471437 7 4990619 230646 33749 264395 6580583 233601 44807 278408

961312 555210 1821044 19885638 3 872378 543309 1074567 10009548

CURRENT LIABILITIES Notes Payable Account Payable

Accrued Liabilities Other Liabilities TOTAL CURRENT LIABILITIES Deferred Liabilities Long Term Liabilities TOTAL LIABILITIES STOCK HOLDERS EQUITY Share Capital Reserves Unappropriated Profit Stock Holder Equity Total Liabilities & Equity

64240 731756 2335687 117435 2376701 7 2622013 8 1004154 1357499 1452 2363105 2858324 3

18804 686653 3377264 1903473 7 2241199 8 979662 1275191 05 2390705 2480270 3

535706 978505 1702841 2 1800691 7 851880 1327231 447 2179558 2018647 5

4 67345 27857 429930 415076 1211532 10995790 7 3000 3000 7091933 4273426 1639175 18090723 3 851880 774436 971049 1020343 225 136 1823154 1794915 1821490 19885638 7

5.2 Horizontal Analysis
THE BANK OF PUNJAB COMPARATIVE BALANCE SHEET Rs. In Million For the Years 2009-2008 ASSETS CURRENT ASSETS Cash Balance with other Banks Account Receivable Advances TOTAL CURRENT ASSETS LONG TERM INVESTMENT Fixed Asset Capital work in progress TOTAL FIXED ASSETS Deferred Tax Debt Rs (In Million) (1633927) 2737697 703666 849462 2656898 2324704 114729 2912 119777 (185070) 46 %AGE (93%) 139% 15% 20.6% 21% 35% 49% 7% 43% (96%)

2008-2007 Rs (In Million) 2964856 (25629) 3865167 (372138) 6432256 (1895847) 25484 (505) 22843 (7007) %AGE 170% (1.3%) 83% (9%) 51% (29%) 11% (1.12%) 8.2% (3.6%)

OTHER ASSETS TOTAL ASSETS CURRENT LIABILITIES Notes Payable Account Payable Accrued Liabilities Other Liabilities TOTAL CURRENT LIABILITIES Deferred Liabilities Long Term Liabilities TOTAL LIABILITIES STOCK HOLDERS EQUITY Share Capital Reserves Unappropriated Profit Stock Holder Equity Total Liabilities & Equity Horizontal Analysis (Balance Sheet)

(184025) 4730148 87599 (1219715) 45436 45103 1041577 117435 4732280 3808140 24492 82308 1447 27600 3780540

(33%) 23.7% 16% (12%) 163% 11% 9.5% 3914% 110% 21% 3% 8% 1064% 105% 19%

61847 4616228 32065 2196943 18804 150947 2398759 2006325 4405081 127782 (52040) (442) 211147 4616228

11% 23% 6% 21% 67% 36% 22% 47% 24% 16.5% (5%) (32.5%) 11.7% 23%

THE BANK OF PUNJAB COMPARATIVE BALANCE SHEET Rs. In Million For the Years ASSETS CURRENT ASSETS Cash Balance with other Banks Account Receivable Advances TOTAL CURRENT ASSETS LONG TERM INVESTMENT Fixed Asset Capital work in progress TOTAL FIXED ASSETS Deferred Tax Debt OTHER ASSETS TOTAL ASSETS 2007-2006 2006-2005 Rs Rs %AGE %AGE (In Million) (In Million) (538543) (31%) 275462 15.7% (1613310) (82%) 103030 5.23% 1161000 25% (2894966) (62%) (6984) (.16%) 2039148 50% (997837) (8%) (477320) (3.8%) 2875175 44% (1589964) (24%) 17929 8% (2955) (1.2%) (31108) (69%) (11058) (24.6%) (13179) (4.7%) (14013) (5%) 192077 (100%) (80204) (14%) 406102 73% 1976032 10% (1675195) (8.4%) 47

CURRENT LIABILITIES Notes Payable Account Payable Accrued Liabilities Other Liabilities TOTAL CURRENT LIABILITIES Deferred Liabilities Long Term Liabilities TOTAL LIABILITIES STOCK HOLDERS EQUITY Share Capital Reserves Unappropriated Profit Stock Holder Equity Total Liabilities & Equity

(741898) (10433355) (67345) 105776 (11136822) (3000) 9936479 1615164 0 356182 22 356404 1971568

(136%) (104%) (241%) 25% (101%) (100%) 232% 10% 0% 35% 163% 20.4% 10%

329069 736126 39488 14854 1119537 2818507 (1698970) 77444 (49294) (89) 28239 (1670731)

60% 7% 141% 3.5% 10% 66% (9%) 10% (5%) 65% 1.5% 8.4%

5.2.1 Profit & Loss Account

THE BANK OF PUNJAB SUMMARISED PROFIT & LOSS ACCOUNT Rs. In Million For the Years 2009 2008 2007 2006 Service Revenue Mark up/Interest, Discount & Returned Earned Fee Commission & Brokerage Dividend Income Other Operating Income Total Service Revenue Less: Cost /Return on Deposit Gross Income Less: Operating Expenses 48 2069555 60320 189051 104581 2423507 996335 1392644 2172956 51937 109804 58647 2393344 1113151 1259790 1934794 61395 161307 47300 2204796 1083344 999004 2260770 60637 71258 25725 2425299 1510145 912797

2005

2259608 58521 46738 26150 2391017 1755443 635100

Administrative Expenses Provision against nonperforming advances Provision for diminution in value of investment Bad Debts Total Operating Expenses Operating Profit Other Income Other Charges Profit Before Tax Less: Tax Profit After Tax

901041 76076 (23472) 1574 955219 437425 43154 4664 431844 283979

837055 39286 0 200 876541 383249 28480 1460 421275 236245

678675 143059 0 33 821767 177237 21967 690 319639 162220 157419

722009 81230 0 0 803239 109558 17269 2088 124739 96500 28239

601368 (123615) 27273 337 505363 129737 7561 1683 135615 12500 123115

147870 185030

Horizontal Analysis (P&L A/c) THE BANK OF PUNJAB COMPARATIVE PROFIT & LOSS ACCOUNT Rs. In Million 2009-2008 Rs (In Million) (103401) 8383 79247 45934 30163 (116816) 132854 63986 49 %AGE (4%) 15% 170% 175% 1% (7%) 21% 10.6%

For the Years Service Revenue Mark up/Interest, Discount & Returned Earned Fee Commission & Brokerage Dividend Income Other Operating Income Total Service Revenue Less: Cost /Return on Deposit Gross Income Less: Operating Expenses Administrative Expenses

2008-2007 Rs (In Million) 238162 (9458) (51503) 11347 188548 29807 260786 158380 %AGE 10% (17%) (110%) 43.39% 8% 1.6% 41% 26%

Provision against non- performing advances Provision for diminution in value of investment Bad Debts Total Operating Expenses Operating Profit Other Income Other Charges Profit Before Tax Less: Tax Profit After Tax Horizontal Analysis (P&L A/c)

36790 (23472) 1374 78678 54176 14674 3204 10569 37160 47734

30% (86%) 407.7% 15.5% 41.7% 194% 190% 8% 297% 38.7%

(103773) 0 167 54774 206012 6513 770 101636 22810 78826

(84%) 0% 49.5% 11% 159% 86% 46% 75% 183% 64%

THE BANK OF PUNJAB COMPARATIVE PROFIT & LOSS ACCOUNT Rs. In Million 2007-2006 Rs (In Million) (325976) 758 90049 21575 (220503) (426801) 86207 (43334) 61929 0 50 %AGE (15%) .71% 193% 82.5% (9%) (24%) 13.6% (7%) 50% (0%)

For the Years Service Revenue Mark up/Interest, Discount & Returned Earned Fee Commission & Brokerage Dividend Income Other Operating Income Total Service Revenue Less: Cost /Return on Deposit Gross Income Less: Operating Expenses Administrative Expenses Provision against non- performing advances Provision for diminution in value of investment

2006-2005 Rs (In Million) 1162 2116 24520 (425) 34282 (245298) 277697 120641 204945 (27273) %AGE 1% 3.61% 52% (1.6%) 1.4% (14%) 43.7% 20% 166% (100%)

Bad Debts Total Operating Expenses Operating Profit Other Income Other Charges Profit Before Tax Less: Tax Profit After Tax

33 18528 67579 4598 (1398) 194900 65720 129180

10% 3.6% 52% 61% (83%) 143% 525% 105%

(337) 297976 (20179) 9708 405 (10976) 84000 (94976)

(100%) 59% (15.5%) 128% 24% (8%) 572% (77%)

Comparative Financial Statement Comparative financial statement present financial information for the current period and one or more past periods. In comparative analysis the statements predict about the movements and trends of the business with respect to past years, whether there is increase in the business activities or decrease. It may also help to comments about the future expectations of the ways in which the financial and operating performance will go. There are two type of comparative financial statement analysis.  Horizontal Analysis  Trend Percentage Analysis

Horizontal Analysis Comparison of two or more years’ financial statement is called Horizontal Analysis. It shows the changes between years both in rupee and percentages form. So in this way it facilitates the analyst to predict about the ways if the business in which it is going. It emphasis the proportional relationship between the reporting periods, rather than with in the reporting period. 51

In this report I shall use this type of comparative financial statement analysis to analyze the performance of The Bank of Punjab. Trend Percentage Analysis Trend percentages state the several years’ financial data in terms of a base year. The base years equals to 100% with all other stated as some percentage of this base year. In this way it predict good and easy way information about the business activities. By simple looking at these percentages one can see the ways in which the business in going on whether the business is making performance or not. Comments on Comparative Analysis of 2009-2008 The results that I have perceived from the Comparative Analysis of Balance Sheet and Profit & Loss Account of 2009-08. From Balance Sheet ∗ The current assets increased by 21%, this is mainly due to a higher increase in Balance with other Banks i.e. 139%but cash is reduced which is not good for the Short term solvency of the bank. Account receivable also increases as compared to last year but other assets decrease i.e. 33%. ∗ ∗ ∗ Total Assets are increased by 23.7%. Fixed Assets are increased by 43%. The increase in Balance with other banks by 139% is a good sign for the short-term solvency of the bank. ∗ The Account receivable is increased by 15% in this period.

As a whole total assets and total liabilities plus owner’s equity is increased by 19% which corresponds with the increase in service revenue. 52

From Profit and Loss Account ∗ The service revenue of the bank is increased by 1% than that of 2008, with the decrease of –7% in the cost return on deposits. So service decreased less than that of return on deposits. ∗ This less decrease, service revenue than that of return on deposits results in an increase of 21% of Gross profit. ∗ The other income of the bank also increased in 2009 then that of in 2008. These are increased by 194%. ∗ As the service revenue increased, the administrative expenses also increased by 11%. ∗ Overall profit after tax also increased by 39% in 2005 then that of 2009.

Comments on Comparative Analysis of 2008-2007 From Balance Sheet ∗ The current assets increased by 51%, this is mainly due to a higher increase in cash i.e. 170% but balance with other bank is reduce which is not good for the Short term solvency of the bank. Account receivable also increases as compared to last year. ∗ ∗ Total Assets are increased by 23%. Fixed Assets are increased by 8.2%.

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The decrease in Balance with other banks by –1.3% is not good sign for the short-term solvency of the bank.

The Account receivable is increased by 83% in this period.

As a whole total assets and total liabilities plus owner’s equity is increased by 23% which corresponds with the increase in service revenue.

From Profit and Loss Account ∗ ∗ The service revenue of the bank is increased by 8% than that of 2007 This less decrease, service revenue than that of return on deposits results in an increase of 41% of Gross profit. ∗ The other income of the bank also increased in 2001 then that of in 2007. These are increased by 86%. ∗ As the service revenue increased, the administrative expenses also increased by 26%. ∗ Overall profit after tax also increased by 64% 2001 then that of 2007.

Comments on Comparative Analysis of 2008-2009 The results that I have perceived from the Comparative Analysis of Balance Sheet and Profit & Loss Account of 2008-2009. From Balance Sheet ∗ The current assets decreases by -8%, this is mainly due to a higher decrease in Balance with other Banks i.e. -82% and cash is also reduced by -31%, which is not good for the Short-term solvency of the bank. Account receivable increase as compared to last year but other assets decrease i.e. 14%. 54

∗ ∗ ∗

Total Assets are increased by 10%. Fixed Assets are increased by 8%. The decrease in Balance with other banks by -82% is not a good sign for the short-term solvency of the bank.

The Account receivable is increased by 25% in this period.

From Profit and Loss Account ∗ The service revenue of the bank is decreased by -9% than that of 2009, with the decrease of –15% Mark up interest on deposits. So service decreased less than that of Mark-up Interest. ∗ This less decrease, service revenue than that of mark-up on deposits results in an increase of 14% of Gross profit. ∗ The other income of the bank increased highly in 2005 then that of in 2009. These are increased by 61%. ∗ As the service revenue decreased, the administrative expenses also decreased by -7%. Overall profit after tax also increased by 105% in 2005 then that of 2009. Comments on Comparative Analysis of 2007-2008 The results that I have perceived from the Comparative Analysis of Balance Sheet and Profit & Loss Account of 2007-2008. From Balance Sheet

55

The current assets decreases by –3.8%, this is mainly due to a higher decrease in Account Receivable but increased in Balance with other Banks i.e. 5% and cash is also increased by 15.7% which is good for the Short term solvency of the bank.

∗ ∗ ∗ ∗

Total Assets are decreased by -8.4%. Fixed Assets are also decreased by -1.2%. The Account receivables are decreased by -62% in this period.

From Profit and Loss Account ∗ The service revenue of the bank is increased by 1% than that of 2008, with the decrease of –14% in the cost return on deposits. So service decreased less than that of return on deposits. ∗ This less decrease, service revenue than that of return on deposits results in an increase of 43.7% of Gross profit. ∗ The other income of the bank also increased in 2005 then that of in 2009. These are increased by 128%. ∗ As the service revenue increased, the administrative expenses also increased by 20%. ∗ Overall profit after tax decreased by -77% in 2005 then that of 2009.

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5.3 Vertical Analysis (Balance Sheet) THE BANK OF PUNJAB TREND PERCENTAGES For the Years ASSETS CCURRENT ASSETS Cash Balance with other Banks Account Receivable Advances TOTAL CURRENT ASSETS LONG TERM INVESTMENT Fixed Asset Capital work in progress TOTAL FIXED ASSETS Deferred Tax Debt OTHER ASSETS TOTAL ASSETS CURRENT LIABILITIES Notes Payable Accounts Payable Accrued Liabilities 2009/2005 2008/2005 2007/2005 2006/2005

161% 161% 161% 160% 161% 126% 166% 11% 141% 00% 136% 148% 46% 12% 230% 57

254% 21% 141% 140% 139% 90% 117% 04% 98% 96% 169% 124% 30% 25% 67%

84% 23% 62% 149% 88% 119% 106% 05% 90% 100% 158% 101% 24% 03% 00%

115% 105% 37% 150% 96% 75% 98% 75% 94% 00% 173% 91% 160% 107% 241%

Other Liabilities TOTAL CURRENT LIABILITIES Deferred Liabilities Long Term Liabilities TOTAL LIABILITIES STOCK HOLDERS EQUITY Share Capital Reserves Unappropriated Profit Stock Holder Equity Total Liabilities & Equity

176% 21% 3914% 556% 144% 129% 133% 1067% 131% 143%

165% 30% 00% 445% 13% 126% 125% 3% 133% 124%

129% 08% 00% 398% 99% 110% 130% 328% 121% 101%

103% 110% 100% 165% 90% 110% 95% 165% 101% 91%

5.4 Trend Analysis (Profit & Loss A/c)
THE BANK OF PUNJAB TREND PERCENTAGES For the Years Service Revenue Mark up/Interest, Discount & Returned Earned Fee Commission & Brokerage Dividend Income Other Operating Income Total Service Revenue Less: Cost /Return on Deposit Gross Income Less: Operating Expenses Administrative Expenses Provision against non- performing advances Provision for diminution in value of investment Bad Debts 149% 61% (86%) 467% 58 139% 31% 0% 59% 112% 115% 0% 9% 120% 65% 0% 0% 91% 103% 404% 399% 101% 56% 219% 96% 88% 234% 224% 100% 63% 198% 85% 104% 345% 180% 92% 61% 157% 100% 103% 152% 98% 101% 86% 143% 2009/2005 2008/2005 2007/2005 2006/2005

Total Operating Expenses Operating Profit Other Income Other Charges Profit Before Tax Less: Tax Profit After Tax

189% 337% 570% 277% 318% 1182% 230%

173% 295% 376% 86% 310% 1480% 191%

162% 136% 290% 40% 235% 1297% 127%

159% 84% 228% 124% 91% 772% 22%

Graphically Presentation of trend Percentages This table and graph shows the trend of Total current Assets, Total Fixed Assets, and Total Assets during the years 2005-09

No of Years Total Current Assets Total Fixed Assets Total Assets

88% 100% % % % 141% 98% 90% 94% 100% 148% 124% 101% 91% 100%

2009 161

2008 139

2007

2006 96

2005

59

180% 160% 140% 120% 100% 80% 60% 40% 20% 0%
2009 2008 2007 2006 2005

Total Current Assets

Total Fixed Assets

Total Assets

This table and graph shows the trend of Gross Income, profit before tax, and Net income.

No of Years Gross Income Profit before Tax Net Income

2009 2008 2007 2006 219% 198% 157% 143% 318% 310% 235% 230% 191% 127% 91% 22%

2005 100% 100% 100%

60

350% 300% 250% 200% 150% 100% 50% 0% 2009 2008 Gross Income 2007 2006 2005 Net Income

Profit before Tax

This table and graph shows the trend of current Liabilities, Deferred Liabilities and Long Term Liabilities during the period 2005-09

No of Years 2009 2008 2007 2006 Current Liabilities 21% 30% 08% 110% Long Term Liabilities 556% 445% 398% 165% Total Liabilities 144% 13% 99% 90%

2005 100% 100% 100%

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600%

500%

400%

300%

200%

100%

0%
2002 2001 2000 1999 1998

Current Liabilities Long Term Liabilities Total Liabilities

5.5

RATIO ANALYSIS

The relationship of one item to another expressed in simple mathematical form is known as a ratio. A single ratio in itself is meaningless because it does not furnish a complete picture. A ratio becomes meaning full when compared with some standard. So we have taken ratios and percentage of the BOP based in its record of the past financial and operating performance. On the following pages, I make the analysis of the financial statements of BOP by using related items for the last five years.

Profitability vs. Investment 62

Return on Assets Return on Deposits Return on Equity

Net profit after taxes / Total assets Net profit after taxes / Deposits Net profit after taxes / Equity

No of Years Return on Assets Return on Deposits Return on Equity Remarks.

2009 .96% 1.19% 12.01 %

2008 . 95% 1.24 % 9.88 %

2007 . 70% . 92% 7.2 %

2006 . 15% . 39% 1.54 %

2005 . 61% 2.8% 6.7%

The return on assets shows a increasing trend, which is good sign for the BOP. Return on deposits is also not stable; in starting years it increases and then decreases and knows again increase. This is due to an increase in deposits and less increase in profit. The ROE ratio of five years of BOP indicates that the profitability of the bank with equity is increasing day by day. This looks to be very positive sign.

Profitability Ratios.

Gross Profit Margin Operating Profit Margin Net Profit Margin

Gross profit / Income Operating profit / Income Net profit / Income

No of Years

200

200

200

200

9 8 7 6 Gross Profit Margin 57% 52% 45% 37% Operating Profit Margin 18% 16% 8% 5% Net Profit Margin 11% 9% 7% 1% 63

2005 27% 6% 5%

Remarks. The net profit margin of five years indicates that the income of the BOP after paying its non-productive expenses is increasing year by year, which is a very good sign for the bank. As I see the operating profit of the bank shows a increasing trend in ratio. This shows that the earning capacity of the bank is increasing year by year.

Earning Per Share Earning Per Share Profit after Tax / No of Shares 200 200 200 200

No of Years

9 8 7 6 Earning Per Share 2.83 2.41 1.85 .33 Comments

2005 1.59

Earning of BOP shows the increasing trend. This shows that the earning capacity of a single share is increasing and shareholders are earning increase every year. This is very good sign for BOP. This ratio should be as high as possible because it has a great importance for an investor to invest in the Bank of Punjab. Regulatory Ratios: Advances to Deposits Ratio Advances / Deposits 64

Cash to deposits Ratio

Cash / Deposits

No of Years

200

200

200

200

9 8 7 6 Advances to Deposits Ratio 28% 30% 36% 36% Cash to deposits Ratio 12% 23% 9% 13%

2005 33% 42%

Remarks.

Advances to deposits ratio of The Bank of Punjab shows that the portion

of loan in total deposit of the bank is not stable, 1st three year from 2005 to 2007 increase then decrease. It means that the credit (advances) circulation of the bank has fallen from 36% to 28% during the last five years, which is a not good sign. And the cash to deposits ratio is also decrease from 42% to 12%.

Capital adequacy Ratios: Equity to Asset Ratio Total Equity / Total Assets Equity to Deposit Total Equity / Deposits Ratio 200 9 8% 200 200 200

No of Years Equity to Asset Ratio Equity to Deposit Ratio Remarks

8 7 6 10% 11% 10%

2005 9% 3%

10% 13% 13% 12%

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This ratios is showing increasing trend, in 2009 it decreased. This means that deposit of the banks are decreased in 2009 and assets are also decreased in 2009, which is not good for the Bank of Punjab. Efficiency Ratios: Deposits to total liabilities Ratio Deposits/Total Liabilities Investment to Total Assets Ratio Investments / Total Assets

No of Years

200

200

200

200

9 8 7 6 Deposits to total liabilities Ratio 91% 85% 95% 92% Investment to Total Assets Ratio 28% 24% 27% 27%

2005 94% 34%

Chapter 6
66

SWOT ANALYSIS

SWOT ANALYSIS 6.1 STRENGTHS
 In the bank service quality standards are designed and monitored to ensure a consistent and convenient customer experience.  Products and services are as diverse as market segments. Bank has structured and syndicated financing arrangements, working capital finance, financing of international trade, consumer credit, small business loans, credit cards and ATM cards.  The human resource philosophy at BOP Bank focuses on multi-talent hiring, professional grooming, requisite training and merit based reward system.  Staff welfare has always been a priority. New initiatives like hospitalization plan, home loan insurance have added new dimensions to the staff-care policy and motivated them to out-perform competitors.  Bank enjoys a strategic competitive advantage over all domestic players by virtue of its leadership in technological innovations. 67

 Bank has fully automated transaction-processing systems for back-office support.  Bank's branch network is connected on-line real-time and customers have access to off-site as well as on-site ATMs, all over Pakistan.  Bank also is pioneer in e-commerce venture in Pakistan through a major retail distributor.  From a humble beginning with just 10 branches in 1993, today bank enjoys a network of 242 outlets, spread across the country. A network of self-service ATMs supports these outlets.

6.2

WEAKNESSES

 Bank is providing credit facilities only to the urban areas not too much attention is paid to the rural areas.  As Pakistan is agriculture country but no special schemes for the agri- loans.  Bank is not giving emphasis on the small-scale businesses, which are large in number in Pakistan.  There is enormous difference between the bank-lending rate and return on deposits.  The procedure and documentation while sanction loan is thorny, which is a barrier for advances.  Bank gives targets to employees for deposits due to this reason they pay more attention to fulfil these targets to save their jobs. This distracts their attention from their duties.  No job security is there for the employees, and no union exits to secure them.  BOP has only agency arrangements with the foreign banks, no branch exists outside the Pakistan, while their main competitors have their own branch network outside the Pakistan.  To improve the services and to remove the problems of customer the bank has no customer complaint department.  Limited locker facility is there, which does not fulfil the requirements of customer and charges of lockers are also very high. 68

OPPORTUNITIES
 Bank has a small branch network so The Bank of Punjab can increase its turnover though increase the number of branches.  Bank has no foreign branches so it should open its branches outside the country especially in U.K, U.S.A and in U.A.E.  Facilities like financing of housing should also be offered to general public especially in the urban areas.  In agrarians cities like Rahim Yar Khan there is a potential for giving credit facilities to farmers.  To increase its advances bank should focus small scale industries and choose one among them and then a special scheme of lending should be introduced for that particular small scale industry.

6.4

THREATS
to invest anywhere.

 Law and order situation in Pakistan is faulty that is why people are not confident  The markets rates are now at extremely low levels, with very little chance of their going up during the rest of the year. The low interest rate means low profits for the banks.  Saving rate in Pakistan is very low i.e.15% as compared to 30% in China and 40% in Malaysia.  As the banking procedures are complicated that is why general public takes interest into other options of investments like in shares of companies and in Term Finance Certificates.  Now the world is a global village so competitors may rise from anywhere in the world at anytime.  In near future the world is going to be free trade zone so the concept of "survival of the fittest" will be in action.

69

 After the 11 September incident and due to terrorist activities in Pakistan the economy is moving very slow. It means less investment and as a result low loan demands.  High rate of taxes on banking companies.  SBP have a heavy penalty on banks for violating the Prudential Regulation. So it requires greater care while advancing.  Increasing ATM trend among the banks also requires attention of the management to this side.

70

Chapter 7 CONCLUSION AND RECOMMENDATION

7.1 CONCLUSION
The Bank of Punjab is contributing a lot towards the industrial development and capital formation in the country. As it is exhibit from the data regarding the bank’s financial performance as shows in the financial performance as shows in the financial analysis, that bank is sharing major banking business of the country. Further more the policies and schemes as are introduced and carried on by the bank are of great source of help in its trading and non-trading growth. They facilitate trade both inside and outside the country. The Bank if Punjab has endeavored to remain in the forefront of modern financial institutions and has

71

consistently shows tremendous growth in all area of its activity. However after scheduling, due to its emphasis on consolidation and controlled lending, the growth of profit has somewhat declined. But the bank’s performance is in line with its set goals. The policies of the bank are uniform and going very smoothly. The employees are given all the possible facilities and generous compensation. In return employees are stressed for their best efficiency. Merit policy prevails in all the activities of the bank. Bank Management has studied the administrative policies of all other banks, and all their problems and drawbacks are planned to be avoided. Therefore, the policies of the management are progressive and proper. The progressive approach and trend towards progress and prosperity reflects that bank will touch the zenith of development and progress. The dedicated, enthusiastic and motivated employees can bring that time even earlier.

7.2

Recommendation
 Survive in the Market

The bank should not relay on its present sources and facilities but also it should establish new ways of acquiring, managing and sharing market information to survive in the industry and to earn profits.  Computer Specialis The bank should increase the computer specialist at branch level.  Customer Compliant Department The bank should improve the services and remove the problems of customer by making a vast customer complaint department.  Locker Facility The bank should increase locker facility and decrease the charges of lockers. 72

 Security Measurement Bank has low security measurement in branches. Bank should increase the number of guards and other technical security tools.  Improve and Update Website The Bank should improve and keep the up to date information on web site.  Hire New Talent Instead of preferring the old employees of the other banks, management should hire new and well-educated talent. This will contribute to the long-term benefits of the bank.  Credit Policy Credit policy should cover both the rural and as well as urban areas. Credit facilities should be enhanced to small-scale businesses.  Bonus Employees who perform extraordinary and achieve more than their targets should be given bonus.

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