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Chapter #01


In a modern economy of today, banks play a very important role in the economic
development of a country so we can say that banks play a role of backbone in the
economy of any country. A Bank is also known as banke, banc, banque, is a business
that provides a banking service profit. Bank is a financial intermediary between the
borrowers and lenders. It borrows from one party and lends to another and the
difference between the terms in which it borrows and lends is the source of its profit.
The banker business is to take the debts of the other people to offer his own in
exchange and there by creates money. The banks influence the economic activity in
two ways. Firstly the lowering of interest rate makes the investment more profitable
and an increase in the interest rate discourages investment. Secondly, the making of
capital available to the investors increases investment, production and trade in the
economy and vice versa.
Different sectors works in a particular economy. Where the financial sector play a
leading role the economy of that particular country. The financial sector in Pakistan
can be grouped into banking and non-banking financial institutions (NBFIs). Banking
institutions include large public sector scheduled banks; private sector banks and
foreign banks while NBFIs include development finance institutions (DFIs), private
sector investment banks, leasing companies’ modarabas and mutual funds.
At the time of independence of the county Pakistan, In 1974, under the Banks
(Nationalization) Act 1974, 13 commercial banks were nationalized and were
merged/amalgamated into five commercially viable units i.e. Habib Bank Limited,
National Bank of Pakistan, United Bank Limited, Muslim Commercial Bank, and
Allied Bank Limited on the basis of their respective strengths and weaknesses.
Pakistan Banking Council (PBC) was set up in 1974 to look after the administrative
matters of nationalized commercial banks and co-ordinate their activities within the
framework of basic policies laid down by the State Bank.


The aim of assigning this project was to apply theoretical knowledge in practical field.
It was a good opportunity for me to develop new concepts and test the learned
concepts in the presence of organizational complexity. In order to practice and
develop personal skill in an organizational setting I have completed this project.
I have been given an excellent opportunity by my adviser to study operation to Bank
Alfalah Limited, as an internee at its Jinnah Road Rawalpindi Branch. Bank Alfalah is
the only Islamic Bank working in the Pakistan. Keeping in view the great reputation
of Bank Alfalah, I have tried my best to explain all the banking operation learned
during my internship and to remain very careful while problem identification and
giving suggestions as well as I can.
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I availed the opportunity of getting experience in five departments that are Customer
Services Department, Marketing Department, Documentary Credit Department,
Account Department, Credit Department
This report is one of the necessary elements to get the Master of Business
Administration Degree from the Allama Iqbal Open University. As a part of my MBA
studies I went through six weeks internship at Bank Alfalah. During the internship
period, I hope that this report will give a detail and true picture of the Bank and what I
did and learnt during my training program. I also try my best to write this report in
such a way that gives more information about the financial accounting systems and
ratio analysis techniques to the reader in simple language. For the sake of simplicity, I
have divided this report in portions. So, reader will not face any difficulty in
understanding this report. I have also tried my level best to obtain as accurate data and
present all what I have learnt in the following pages. I hope that this report will be a
true representative of my efforts and will satisfy the purpose, which I was meant to


Banks in a Public Sector
Such banks work under the direct control and authority of the government. These are
also owned by the government. The chief executive of such banks is appointed
directly by the federal government. The banks provide finance for the development
scheme launched by the Government priority. Public sector which is the large part of
the economy has scheduled commercial banks, namely National Bank of Pakistan and
First Women Bank are owned by the government of Pakistan (GoP). Although other
banks, Habib bank limited, Muslim Commercial Bank, Allied Bank Limited and
United bank Limited were privatized but still GOP has significant stakes in them.
These six large banks are dominant in terms of total number of branches, deposits and
advances, collectively accounting for 72% to 74% of total deposits and advances.

Banks in a Private Sector:

These banks are controlled by individuals or private organization, in any economy the
private sector is the dominant sector of the economy. Private sector banks are
relatively new compared to public sector banks. These banks are still very small in
terms of branch network and level of operations. They focus on very selective market
segments where they are quite successful. Despite a lower profile in total deposits and
advances, these banks account for 22% of the total profitability of the sector.
These banks are Askari Commercial Bank, Bank Al Falah Limited, Bolan bank
Limited, bank Al- Habib limited, Faysal bank Limited, KASB bank Limited, Meezan
bank Limited, Metropolitan bank Limited, Prime Commercial bank Limited, National
Investment bank Limited, Saudi-Pak commercial Limited, Soneri bank Limited and
Standard Chartered bank limited.

Foreign banks:
The banks which have there head offices in some other countries or incorporated in
foreign country are known as foreign banks. According to the development of the
particular country some time we must also concern with the financial system of the
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foreign countries. Owing to the inefficiencies of the public sector scheduled banks
which stem from their nationalization in the 70s, the relatively lower standing of the
private sector banks and the dollarisation of the economy, foreign banks have been
able to perform extremely well by exploiting gaps in the local banking sector. There
are 16 foreign banks operating in the country:
ABN AMRO, Al-Baraka Islamic bank, American express bank Limited, bank of
Tokyo Mitsubishi Limited, Bank of Ceylon, Credit Agricole, Indosuez, Citi bank
N.A, Deutsche bank A.G, Doha bank, Habib bank A.G Zurich, Hong Kong &
Shanghai Banking Corporation Limited, International Finance Investment &
Commerce bank Limited, Mashreq bank P.S.C, Oman International Bank S.O.A.G,
Rupali bank Limited, Standard Chartered bank.
The foreign banks have a strong presence in all the major cities and are targeting high
net worth individuals and blue chip companies. Their strategy is quite successful as
they account for 34% of total sector profits, despite having only 5% of deposits and
6% of advances.
Micro Finance banks
Currently there are two micro finance banks are operating in Pakistan. One is
Khushhali bank and other is the first micro finance bank Ltd.


To get knowledge about daily business activities
To apply knowledge in practice
To understand the policies
To study the status of the organization
To understand the managerial efforts
To find out problems and give their recommendations.
To gain experience of banking applications and procedures.
To fulfill the requirement for award of degree.
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Chapter #02

“To be the premier organization operating locally &
internationality that provides the complete range of
financial services to all segments under one roof”.

“To develop & deliver the most innovative products,
manage customer experience, deliver quality services that
contributes to brand strength, establishes a competitive
advantage and enhances profitability, thus providing
value to the stakeholders of the bank”.
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History of Bank Alfalah limited

Bank Alfalah Limited was incorporated on June 21st, 1997 as a public limited
company under the Companies Ordinance 1984. Its banking operations commenced
from November 1st, 1997. The bank is engaged in commercial banking and related
services as defined in the Banking companies ordinance, 1962. The Bank is currently
operating through 234 branches in 74 cities, with the registered office at
B.A.Building, I.I.Chundrigar, Karachi.
Since its inception, as the new identity of H.C.E.B after the privatization in 1997, the
management of the bank has implemented strategies and policies to carve a distinct
position for the bank in the market place
Strengthened with the banking of the Abu Dhabi Group and driven by the strategic
goals set out by its board of management, the Bank has invested in revolutionary
technology to have an extensive range of products and services.
This facilitates our commitment to a culture of innovation and seeks out synergies
with clients and service providers to ensure uninterrupted services to its customers.
We perceive the requirements of our customers and match them with quality products
and service solutions. During the past five years, we have emerged as one of the
foremost financial institution in the region endeavoring to meet the needs of tomorrow

A Progressive Bank with Its Own Style and Philosophy

With the shortest period of time BAL emerged as a dynamic and a large international
organization. In 1969 the management of the union bank limited in corporate in
former East Pakistan was handed over to BAL which was later merged with BAL in
early seventies.
In view of highly impressive growth and development achieved during its 43 year of
experience, BAL has come to be accepted has one of the most progressive and
dynamic component of the banking industry in Pakistan.

Record Performance

The financial results of the early years of the bank’s operation shows that the new
bank got off to a flying start and was set to beat past record of growth in Pakistan’s
banking history. Although the bank use the conventional banking apparatus of the
day, its approach was market oriented and appealed to the customers. In fact every
features and aspect of BAL’s behavior reflected and highlighted the differences. Most
significantly the style of the addresses to the customers differed.

Catalyst of change

BAL’s emergence proved a catalyst and brought changes in the banking sector as a
whole. The Bank customer relations attained a new dimension and courtesy,
politeness and efficiency gained fundamental importance. Convenience of the
customers remained the core and criterion of this relationship. BAL the scene in the
office and the branches redesigned and modernized
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Ready for 21st Century

Bank Alfalah Limited has stepped in to the 21st century with confidence. Now that the
Bank has privatized and 51% shares have been purchased by investor’s i. e. The Best
Way group UK and Abu Dhabi consortium electing HH. Sheikh Nahyan al Mubarik
as Chairman, who have retained Mr. Amar Zaffar Khan as President and CEO of BAL
in order to continue toe policies of dynamism and therefore. BAL has geared itself to
provide the services which the customers in the modern day banking expect from a
The Bank also ha plans to play its dynamic role in the overall development of the
country. It is now well equipped with the last technologies and professional
experience to face the future with determination and confidence and with its high
aims and sense of direction to serve the Nation with zeal and devotion.


Al Falah Bank is firmly grounded with a corporate philosophy that incorporates five
solid values which each individual associated with the bank abides by.

Humility Integrity

Meritocracy bank

Team Work

Culture of

Al Falah encourages a culture of mutual respect and treats between team members
and customers with humility and care.

For Al Falah, integrity means a synergic approach towards abiding their core values.
United with the force of shared values and integrity, Al Falah forms a network of a
well-integrated team.

At every level, from selection to advancement, Al Falah has designed a consistent
system of human resource practices, based on objective criteria throughout all the
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layers of the organization. Al Falah therefore able to achieve a specific level of

performance at every layer of the organization.

Team Work
Teamwork becomes a cohesive and unified force, to offer the customer, a level of
service beyond their expectations. This force is derived from participative and
collective endeavors, a common set of goals and a spirit to share the glory and the
strength to face failures together.

Culture of Innovation
Al Falah aim to be proactively responsive to new ideas, and to respect and reward the
agents, leaders and creators of change.


Abu Dhabi Group is represented in Pakistan by the following entities;

Bank Alfalah Limited was incorporated on June 21st, 1997 as a public limited
company. Bank Al Falah wholly owned other organizations namely United Bank
(PVT) LTD., Al Falah Insurance Co LTD, Al Falah Securities PVT Ltd.Al Falah
GHP, Warid Telecom and Wateen Telecom. The market share of HBL is 16% of total
banking sector in Pakistan.

Business volume:
Rs. In million
2004 2005 2006 2007 2008
Assets 154835 248314 275686 328895 348991

Investment 35503 57416 56502 88492 75973

Deposits 129715 222345 239509 273174 300733

Advances 88931 118864 149999 171199 192671

EBIT 2026 2966 3264 6906 3831

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Business Volume

300000 Assets
250000 Investment
200000 Deposits
150000 Advances
100000 EBIT

2004 2005 2006 2007 2008

Balance Sheet (Rs. in million)

2007 2008
Total deposits 273,174 300,733
Total assets 328,895 348,991
Advance 171,199 192,671
Share holders equity and Revaluation surplus 13,767 14,609
Capital adequacy ratio 9.85% 8.03%




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Bank Al Falah hits the different market segments and for each segment a different
GROUP is maintained for this purpose. Each group fulfills the needs of the customers
by giving desired products.
• Retail Banking
• Corporate Banking
• International and Overseas Banking
• Global treasury
• Corporate planning and information technology
• Global compliance
• Human resource and organizational development

2,007 2,006
(Rs. In '000)
Profit Before Provision and Taxation 6,906,419 3,830,717
Provisions (2,370,867) (2,035,997)
Profit Before Taxation 4,535,552 1,794,720
Taxation (1,405,323) (493,419)
Profit After Taxation 3,130,229 1,301,301
Earning Per Share Rs 3.92 Rs 1.63
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Apart from playing a historical role and pivot role in banking bank Alfalah has
reflected its interests in humanitarian goals contributing the social welfare of the
people. Various secular institutions have been established through out the country and
grants, stipends and scholarships are regularly given to students with high academic
Special support has also been extended to health awareness programs for the illiterate,
as how to safeguard health through preventive measures and control or cure common
disease. Greater emphasize is given to preventive measures, hygienic habits and
childcare to combat the high infant mortality rate.
In times of natural disasters such as floods, earthquake and other such phenomenon it
is in keeping with the spirit and tradition of the banks pioneer to come to the forefront
in helping to alleviate the resulting misery of the affected victims by providing money
and kind.
Commitment and dedication to a nation is at the core of its success and development.
The bank takes pride in playing its role towards the betterment of society and further
serving the nation.
Bank Alfalah not only playing an economy in Pakistan, but has also played a major
role in promoting national sports. It has thereby inspired a sporting spirit, which is
reflected by of its players earning international fame in the field of cricket end

Number of Employees
Human Resource being the pulse of any organization and is its most precious asset.
Training of this resource is of vital importance. With this key factor in mind Bank
Alfalah pioneered its first training programme in 1997, in which youth were recruited
after an extensive tour of leading academic institution.
Training programs are conducted with the latest aids and equipment and involve
extensive to new recruits and existing staff with specialized courses that cater to the
different cadre of personnel on topics of management, marketing, selling, accounting
and finance, banking law and practice and internal procedure. The total numbers of
employees were 7584 on 31/12/2008.
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Chapter #03

Current Account:

• Non interest bearing checking account.

• Minimum account opening requirement of Rs. 10,000 only.
• Free debit card can be used to withdraw cash and make purchases at thousands
of outlets across Pakistan which provides access to funds 24 hours a day.
• No restriction on number of withdrawals and on number of deposits

PLS Savings Account:

• Profit & Loss Sharing Saving Bank Account.

• Minimum account opening requirement of Rs. 5,000 only.
• No restriction on number of withdrawals and number of deposits.
• Profit on saving accounts is credited to the customer account on half-yearly
• Free debit card can be used to withdraw cash and make purchases at thousands
of outlets across Pakistan which provides access to funds 24 hours a day.

Royal Profit:

• Minimum Deposit requirement of Rs. 50,000 only.

• Higher returns on higher balances.
• No restriction on number of withdrawals and on number of deposits.
• Free debit card can be used to withdraw cash and make purchases at thousands
of outlets across Pakistan which provides access to funds 24 hours a day.
Profit is credited to the customer account on monthly basis.

Basic Banking Account:

• Initial deposit for account opening is Rs. 1,000 with no minimum balance
• Non interest bearing checking account.
• Maximum 2 deposits & 2 withdrawals through cheque is allowed.
• Free debit card can be used to withdraw cash and make purchases at thousands
of outlets across Pakistan which provides access to funds 24 hours a day.
• No restriction on ATM withdrawal.

Any Pakistani resident over the age of 18 can open this account. This account is for
individual/joint customers only. Other customers like companies, corporate etc are not
eligible for opening of this account.
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Minimum balance requirement for opening this account is Rs. 10,000/- with a
maximum of Rs.1, 000,000/- Three debit transactions are allowed in a month either
through cheques or Debit Card/POS machine. There is no restriction on deposit
The bank will issue the first cheque book of 25 leaves and a Debit card free of cost.
When will the profit be credited in the account? Profit will be calculated on monthly
minimum balance basis and will be credited in the account on quarterly basis. No
profit shall be payable for a particular month, if the minimum balance for any
particular day of said month falls below the amount of Rs. 10,000/-. Yes it is. (Subject
to fulfillment of all related requirements) All service charges are as per the prevailing
‘Schedule of Charges’ Only one account per customer will be allowed across all
branches of Bank Alfalah. Account statement will be generated on half yearly basis.

Alfalah Mahana Amdan

Alfalah Mahana Amdan is a 3 year TDR with expected rate of profit of 10% p.a. This
term deposit will provide an opportunity to individual/joint customers to enjoy higher
returns that will automatically be credited to his/her current/PLS/RP/BBA account on
1st working day of each month. This facility is not available for business and
corporate customers.


Bank Alfalah provides safe deposit locker facility to its customers for safe keeping of
their valuables like documents, securities and jewellery etc.

Important features of lockers facility are as follows:

• Various sizes to choose from small, medium & large.

• Annual locker rent ranges from Rs.1,000/- to Rs.3,500/-.
• Locker rent is waived for customers maintaining a minimum deposit of Rs.2
million in current account or above US $25,000/- in a current account or US
$50,000/- in a savings account.

ATM/Debit Card

In our endeavor to provide you versatile banking options to fulfill your financial
needs, Bank Alfalah Limited presents the Alfalah HilalCard, a Debit Card which
gives you unlimited access to your current / savings account with a simple swipe at
millions of retail shops and ATMs worldwide. The Alfalah HilalCard comes with a
host of conveniences and benefits combined with the wide reach of Visa Network,
enabling it to be accepted at more than 1 million ATMs and 29 million retail outlets
around the world, making it the most acceptable Debit Card available in Pakistan.
What's more, it is easy to operate and can be used on any electronic self-printing POS
machine where VISA is accepted, locally and internationally. No more hassle of
remembering your PIN for retail transactions and no need to go to the ATM for cash
withdrawal! One swipe and your transaction is complete.
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The Alfalah HilalCard can be used electronically at any retail outlet or ATM that
accepts VISA cards and displays these logos:
Personal Identification Number (PIN):
Debit cards that are currently available in Pakistan require the card member to enter
the PIN number in order to complete a transaction. The Alfalah HilalCard is a "One-
Swipe Card" and does not require you to remember any PIN in order to execute retail
transactions. The PIN which will be delivered to you for Visa Electron will be
required for ATM based transactions only.
Special POS Machines:
In order to use other debit cards currently in the market you would need to find outlets
that carry special POS machines where these cards can be used. Alfalah HilalCard is
accepted at all outlets displaying the VISA/Electron logo worldwide and having self-
printing POS terminals.
Global Acceptability:
The Alfalah HilalCard is globally accepted welcomed at all locations displaying the
VISA/ ELECTRON/PLUS logos with self-printing POS terminals. Your card is
accepted at nearly 29 million physical locations in more than 150 countries round the
globe with above 22,000 major establishments in Pakistan.
With your Alfalah HilalCard, you can pay for shopping, meals, travel, entertainment,
holiday, petrol and much more. Also it gives you access to ready cash through your
PIN (Personal Identification Number) at more than 1 million ATMs to withdraw any
amount up to your available bank account balance. This premier card service is a
convenient point-of-sale alternative for ATM cardholders who do not qualify for Visa
credit purchasing power. Through Alfalah HilalCard, you can access your Bank
Alfalah's account from anywhere in the world.
24-Hour Customer Service
They will assist you in:

ShahDin Manzil

Bank Alfalah is committed to the projection of Pakistan's rich cultural heritage. We

strongly believe that the all must fulfill our social responsibilities in addition to
achievement of the commercial objectives. A few examples set by Bank Alfalah are
Alfalah Square, Alfalah Mini Golf, the resurrection of Shahdin Manzil, right across
the main Mall road (Shahrah-e-Quaid-e-Azam), Lahore.

Shahdin Manzil symbolizes more than an ideal colonial architecture. It is known by

the name of and stands testimony to the memory of its owner, the first Muslim judge
of the Lahore High Court - Justice Shaahdin Humayun and substantiates Lahore's
claim as a centre of academic and cultural excellence. It has always remained as a
landmark in the historic city of Lahore with its typical architectural beauty. Over the
years, the elements of nature and neglect had rendered the building uninhabitable. The
management of Bank Alfalah has chose to resurrect Shahdin Manzil to its original
splendor and grandeur. The restoration work is resulted in a fusion of the old with the
new, together with some interesting new design elements. This spirit of merger that is
being carried into the new design with modern building techniques and materials
assures us that the old blends seamlessly with the new, and yet hold its own place.
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Bank Alfalah has also allotted 3/4th of a floor of this building to house an I.T. library
with round the clock research facilities for I.T. developers and researchers. The bank
has not changed its name and the renovated, refurbished and redecorated building will
continue with its original name i.e. "SHAHDIN MANZIL".

Shahdin Manzil has developed into a state-of-the-art, technologically advanced and

intelligent office premises, which incorporates all the concepts of a modern office
while maintaining the rich facade of the building. It has been made structurally sound
with most modern and high-tech office facilities within its walls but would retain its
original and historic look from its exterior. The new look of Shahdin Manzil stands
out as a model of most modern facilities blended with history and grandeur of the
past. Shahdin Manzil will always continue to remain a landmark of Lahore, and will
be a proof of Bank Alfalah's mission to contribute towards the welfare of the
community and heritage at large. You will receive your PIN within 7-10 working days
after receiving the Card for usage on Visa/Electron/ PLUS branded ATMs worldwide.
Please beware that your PIN is very confidential.

Shopping - Local and International Usage

Alfalah HilalCard is accepted at over 29 million physical locations in more than 150
countries around the globe, with more than 22,000 establishments in Pakistan

• Your Alfalah HilalCard is welcomed at all merchant outlets with self-printing

terminals that display the VISA/ ELECTRON sign in Pakistan and around the
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Financial Services
Structured Finance

Structured Finance Department comprises a team of hand picked professionals,

dedicated to syndicated loans and structured products. The team’s expertise is well
known in the marketplace with its capability to assist public & private sector entities,
major financial institutions, multinational corporations, domestic & international
institutional investors in innovative financing including underwriting & private

The scope of SFU’s activities also encompasses advisory assignments, such as

privatization, Mergers & Acquisitions (M&As), domestic listings, IPOs and

During the past few years, SFU has been successful in sourcing and participating in a
number of prestigious transactions involving large amounts.
Some of the value added services offered by SFU include the following:

• Loan syndication
• Public floatation of Term Finance Certificates (TFCs) and equity
• Private placement of Term Finance Certificates (TFCs) and equity
• Guarantee syndications
• Financial restructuring
• Mergers & Acquisitions (M&As)
• Fostering joint ventures
• Privatization – Sale side and buyers side advisory
• Structuring new financial instruments

In future, SFU is envisaged to supplement the enhanced profile and profitability of

Bank Alfalah Limited through its value added services, through both asset building
and income generating aspects

Inspired by a challenging spirit and an unyielding desire to create a sound and reliable
network of correspondent relationships, the bank has placed great emphasis towards it
growth. Accomplishing something for the first time requires a special focus. It
demands foreseeing possibilities. In our endeavor to do so, we successfully
surmounted problems and difficulties arising out of issues relating to weak economic
conditions of the economy and a continuous deteriorating status of country risk.

The incertitude and skepticism of the international banking community towards

financial institutions from emerging markets remained intact. Our persistence during
the past four years allowed us to make significant inroads into the arena of
correspondent banking. Large international banks, after critically evaluating us,
agreed to enter into relationship.
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During 2002 we added 81 banks to our network of correspondents, bringing the total
number over 170. Of these relationships, there are now several banks that rank
amongst, the top financial institutions in the world. Our geographical coverage now
extends to over 100 countries, which is adequately compatible with our trade flows.

Our correspondents, during the year extended us unqualified support, which enabled
us to undertake a healthy quantum of foreign trade business. There are many
challenges ahead for the bank, in the coming year, our bank will not only continue to
review its efforts on existing correspondents to make the relationship more beneficial,
but will also add more correspondents to establish a comprehensive international
networking to facilitate our customer’s transaction as well as the Bank’s proprietary

We have provided against the list of correspondents their world and country ranking.
These ranking have been taken from The Bankers Almanac – July 2001 issue.

We would like to emphasize that correspondent arrangements do not necessarily

imply the existence of account relationship. We are in the process of rationalizing our
current nostro account relationships. We shall continue to open new accounts in
various currencies based on our trade flows and business requirements.

The correspondents are listed on a country-wise basis. The banks are listed
International Banking Division

Small and Medium Enterprise (SME)

Small and Medium Enterprise (SME) means an entity, ideally not a public limited
company, which does not employ more than 250 persons (if it is manufacturing /
service concern) and 50 persons (if it is trading concern) and also fulfills the
following criteria of either ‘a’ and ‘c’ or ‘b’ and ‘c’ as relevant:

(a) A trading / service concern with total assets at cost excluding land and building up
to Rs 50 million.

(b) A manufacturing concern with total assets at cost excluding land and building up
to Rs 100 million.

(c) Any concern (trading, service or manufacturing) with net sales not exceeding Rs
300 million as per latest financial statements.

An Individual, if he or she meets the above criteria, can also be categorized as an


Realizing its corporate social responsibility and carrying forward the image of "The
Caring Bank", Bank Alfalah started a separate department at the Head Office level in
early 2004. The SME Department was established with a mandate to foster SME
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finance at BAL, explore opportunities for developing structured product programs for
SMEs, introduce the concept of Dedicated SME officers and finding market based
solutions to fill the financing gap to this important and under-served business

Bank Alfalah believes in innovation, simplification of procedures, and reduction in

turnaround time and customer friendly service. To accomplish this resolve, the SME
Department is supported by 86 dedicated officers in 57 branches of the bank who are
nurturing valuable relationships in the SME sector.


Bank Alfalah’s first SME product Alfalah Karobar Finance is a running finance
facility based on projected cash flows. Under AKF, we offer working capital finance
(Rs.0.5 million to Rs. 10 million) to SME’s at highly competitive rates. We have a
team of professional credit officers who provide expert financial advice along with
customized packages to a diverse range of business clientele. The product is available
to SME’s through our 86 branches in 38 cities.

• AKF is a Running Finance facility between Rs 0.50M to Rs 10.0M.

• Tailor-made product for SMEs for their working capital financing based on
the cash flow methodology. (Our Edge = Better pricing, quicker TAT and
low processing charges.)
• At Bank Alfalah, 86 branches are designated to deal with AKF business in the
entire country.
• The purpose of the AKF is financing procurement of raw material, finished
goods and receivables of SME businesses.
• SME Customers with following acceptable criteria are entertained in this

1. Resident Pakistanis
2. Individuals/ sole proprietors aged up to 60 years.
3. In the same business for the last three years
4. Could offer mortgage urban residential/commercial/ industrial
properties (third party collateral also allowed)
5. Overall debt burden not to exceed 40% of the projected cash flows
over the period of financing.
6. Maximum AKF entitlement to be worked out by considering the
lowest of: 60% of assessed market value of the mortgaged property, or
35% of sales turnover or condition # 5 above.
• Validity of the AKF shall be initially for a period of one year.
• Quarterly mark-up shall be serviceable within 15 days of its becoming due.
• Turn-around-time for the approval of AKF would be 20 working days from
the date of receipt of complete LAF along with its attachment.
• Processing charges of Rs 2,000/- are recovered upfront with Loan Application
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Clean-up requirement: At least 25% of the AKF approved limit shall be required to be
cleaned-up for two days in six months.
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Alfalah Milkiat Finance (AMF)

Alfalah Milkiat Finance (AMF) is a unique long term financing facility offered to
SMEs to purchase, renovate or expand their business premises. It is being offered
keeping in mind requirements of the small business owner who needs to take his/her
business to the next level.

AMF is grouped into four sub categories to help you identify which arrangement suits
your needs best. .

AMF-1: Acquisition of rented commercial/ industrial property by present tenant..

AMF-2: Construction on owned and in possession commercial/ industrial premises/


AMF-3: Purchase of constructed commercial/ industrial property.

AMF-4: Renovation of owned and in possession commercial / industrial property.

Salient Features

• AMF 1,2 & 3 shall be repayable in 2-12 years whereas AMF-4 shall be repaid
in 2-4 years.
• Mark up shall be (SBP discount rate + 4%)
• Monthly installments will be hassle free through post dated cheques.
• AMF shall be disbursed approximately within one month after completion of
documentary requirements by you.
• The property being financed shall be mortgaged in favor of the bank

Lease finance:

In modern days leasing has now become an economic and financial reality of primary
importance. It is the originality of the leasing techniques and its economical
advantages, which has enabled it to enter the world of industrial investment in
Pakistan and on the international scene.

Lease finance provides a significant source of funds for companies to acquire or use
assets. Leasing provides additional earning opportunities to acquire assets and to get
the inflows simultaneously out of the operations of the same assets. The ownership of
the asset is vested with the Bank (lesser) and in return for rental payments; the client
(lessee) has full use of the asset. Being a medium to long term mode of financing, it
allows the lessee to use the funds for other profitable purposes which otherwise would
have been tied up in case of immediate payment for purchase of the asset.
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Bank Alfalah Credit Card

Your Bank Alfalah Credit Card is your partner everywhere and is globally accepted
and welcomed at locations displaying the VISA logo. It is accepted at nearly 29
million locations in more than 150 countries around the globe and over 22,000 Bank
Alfalah’s establishments in Pakistan.

Alfalah VISA lets you pay for shopping, travel, entertainment, meals and much more.
Card members are facilitated through a number of promotions from time to time. In
addition, there are a number of strategic business partnerships with leading local and
international brands for purchase of home appliances at exciting Step-BY-Step (SBS)
monthly installment plan with free home delivery at lowest interest rates. Salient
features are:

• No Joining / Annual / Renewal fee

• Electricity, Sui Gas, PTCL and Warid bills payment through 24 hour Call
Center and Auto Debit instructions
• SMS for card usage, mini statement, payment receipt confirmation, etc.
• Cash withdrawal at all 1LINK ATMs
• Special offer on Warid post paid connections

Your Bank Alfalah Titanium MasterCard is your partner everywhere and is globally
accepted and welcomed at locations displaying the MasterCard logo. It is accepted at
nearly 25 million locations around the globe and at over 22,000 Bank Alfalah’s
merchant establishments in Pakistan.

Alfalah Titanium MasterCard lets you pay for shopping, travel, entertainment, meals
and much more. You have access to cash at more than 1 million ATMs worldwide
and 2200 1Link ATMs in Pakistan. With your Alfalah Titanium MasterCard and PIN
(Personal Identification Number) you can withdraw any amount up to 50% of your
assigned credit limit.

You can generate PIN through IVR (Interactive Voice Response). Please ensure that
your PIN is kept safe and confidential. In case it gets known to someone else report
the matter to our Toll Free number 0800-22225.

You also have the option of withdrawing cash by requesting an Over-the-Counter

Cash Advance at 300,000 financial institutions worldwide or at any Bank Alfalah
Branch/ATM or participating VISA member banks in Pakistan.
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With this facility, you no longer need to just dream about the home you want for
yourself and your family .We will provide you up to 80% of the purchase price of the
property, so that you can realize your dream and enter the reality of owning a home!.

Payment period ranges from 3 to 20 years.

You own a plot but need financing to construct a home that excites everyone in your
family! No problem. We will provide up-to 100% of the construction cost enabling
you to say good-bye to rent forever! Even if you don't have a plot, we will provide up
to 60% of the value of the plot that you have selected to purchase!

Payment period ranges from 3 to 20 years.

You already own a home, but need extra space for a growing family or want to see
some rooms get a new look. Simply apply for financing of up to Rs. 3.50 million or
40% of the surveyed value of your home and get yourself the extra space!
The crown jewel of our Home Finance scheme, the golden opportunity for someone
starting a career to buy an already constructed housing unit early in life! We offer a
moratorium of up to 3 years in principal payments, for a financing of up to 20 years.
You service only the mark-up element initially, and principal repayment starts after
the end of moratorium period.
Home Start is specially designed for young professionals to own a quality asset.

• Quickest processing.
• No hidden charges.
• Minimum down payment.
• Complete repayment at any point of time.
• Balance transfer facility {BTF} for existing as well as new clients from other
• Tenure period ranging from 1 to 5 years.
• Financing of all brand new locally assembled vehicles and used cars.
• Financing limit ranging between Rs. 200,000/- to Rs. 2000,000/- for brand
new cars.
Corporate & Individual Car Leasing

BAL’s recently introduced car leasing facility for individuals and corporate sector
has set new dimensions for the product. Now you are provided with the option of
either to get the vehicle leased or financed.

Treasury & Investment

Money Market
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• Short term money market inter-bank trading.

• Active Treasury Bills trading in secondary market.
• Forward – forward inter-bank money market trading.
• Money market linked lending to and borrowing from corporate clients.

Foreign Exchange Market

• Active trading in ready and forward USD/PKR.

• Active quotations of foreign exchange rates in fifteen major currencies.
• Information in respect of prevailing rates of most of the currencies of the
world for corporate clients and individuals.
• Forward – Forward foreign exchange rates of USD/PKR.
• Active swap trading in USD/PKR and other major currencies such as EUR,


• Active Investment in treasury bills (TBs).

• Active Trading in Pakistan Investment Bonds (PIBs).
• Active investment in Certificate of Investment (COIs)
• Active investment in Terms Finance Certificates (TFCs)

Government Securities

• Efficient service for individuals and corporate clients for buying and selling
govt securities on their appropriate requests.


• Investment Securities Portfolio Accounts of Customers for holding on their

behalf Treasury Bills, Pakistan Investment Bonds.

Financial Advisory Services

• Briefing on current information available in market in respect of prevailing

rates of USD/PKR.

Briefing on current information available in market in respect of foreign exchange

rates of major foreign currencies. Future expectations and sentiments on major foreign
currencies including Pak.Rupees.
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The thrust for Islamic Banking is founded on the desire to submit to the Divine
Instructions on all transactions, particularly those involving exchange of money for
money. However, it would be quite unfair to limit Islamic Banking to elimination of
Riba only. Riba is but one of the major undesirable elements of an economic
transaction, the others being Gharar (uncertainty) and Qimar (speculation). While
elimination of these objectionable aspects in a transaction is indeed a critical aim of
Islamic banking system, it is by no means its ultimate objective. At the heart of
Islamic Banking is a system of commercial transactions that not only provides Halal
modes of commercial transactions by avoiding that which is obnoxious and
objectionable, but also fosters ethical, fair and just practices.

A key element of Islamic economics is distribution of equitable rewards to the

different factors of production. Islamic economic system seeks system of
Redistributive justice where concentration of wealth in a few hands is countered and
flow of money into economy is fluent. Islamic Banking is, therefore, seen as a
lynchpin to achieving the economic and social goals of the Islamic economic system.


It has been argued in vain for long in some circles that the prohibition in Islam is that
of excessive interest only. Or that it is the interest on consumptive loans that has been
forbidden and as such loans extended for commercial purposes are entitled to an
excess over the principal amount lent. Such tendentious arguing fails to give due
understanding to verses 278 and 279 of Surah Al-Baqarah (quoted below).

“O ye who believe! Be afraid of Allah and give up what remains (due to you)
from Riba (usury) (from now onwards) if you are (really) believers! 2:278

And if you do not do it, take notice of war from Allah and His Messenger! But if
you repent, you shall have your capital sums 2:279

However, this does not mean that Islam prohibits any gain on principal sums. In
Islam, profit is the recognized reward for capital. When capital employed in
permissible business yields profit that “excess over capital” becomes the rightful and
just claim of the owner of the capital. As a corollary, the risk of loss also rests
exclusively with the capital and no other factor of production is expected to incur it.

Another important element of Islamic finance is that profit or reward can only be
claimed in the instance where either risk of loss has been assumed or effort has been
expended. Profit is therefore received by the provider of capital and
wages/remuneration by labor/manager.
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A depositor in an Islamic bank can therefore make earnings on his or her deposit in
several ways. Through return on his capital when that capital is employed in a
business venture; through sharing of profit when his capital is part of the capital that
is employed in a partnership, and finally through rental earnings on an asset that has
been partially financed by his capital.

Islamic financing: Asset-based financing

A key feature of Islamic banking is that unlike conventional banks which deal
primarily in money and financial securities, Islamic financing is related to an asset
that is a feature of the transaction, and quite often the principal feature itself. From
this springs an important distinguishing feature of Islam wherein Islamic financing is
always based on illiquid assets that have intrinsic value. Profit to Islamic financing is
generated through bonafide sale of these assets.

Conventional banking, on the other hand, is free of such limitations. It lends money
and makes its earnings through this act of lending. Its earnings are unconcerned with
the economic fate of its lending.

A Perspective:

The history of Islamic banking from its recorded inception is less than 40 years old.
From a humble beginning in a small village in Egypt in the late 60’s, it has spread to
the four corners of the world. By normal standards in a time span that is less than half
a century it could have hardly been expected to establish foothold in Muslim world,
let alone make its presence felt in Muslim-minority countries. Yet such has been its
phenomenal rate of growth that not only is it taking firm roots in its homestead, but is
also attracting genuine interest among the standard bearers of conventional banking
and in swathes of land where Muslims are a small minority only.

Still there is much ground left to cover. In Pakistan, Islamic Banking is less than 3%
of the Banking sector. Even in the Gulf states, where it has a larger footprint, in no
single country is the volume of Islamic banking more than a third of the entire sector.

Many blame Islamic Banking’s small share against conventional banking to a smaller
portfolio of products. A standard complaint against Islamic banks is that they do not
have the same variety of financial instruments as found in conventional banking.
Though valid to an extent, this popular jeremiad needs to be seen in the perspective of
Islamic Banking’s brief history against more than two centuries of conventional
banking adopted in full force across the globe, its competition against an entrenched
system of banking and the constraints within which it must operate.

Notwithstanding, Islamic banking is still growing at more than twice the growth rate
of conventional banking worldwide, and while it may not have the latter’s plethora of
financial products, its repertoire of Islamic financial products is steadily increasing.

In the following space, principal Islamic instruments are briefly described to acquaint
the reader with their fundamental aspects. Following that, Islamic Products in BAL-
IBD’s portfolio are illustrated in terms of their features. Principle Islamic Instrument
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Musharakah is one of the two ideal modes of Islamic financing. The other one being
Mudarabah. Musharakah is a contractual relationship formed through mutual consent
of the parties for sharing of profits and losses in a joint venture. Assets in the venture
are jointly owned in proportion to each partner’s contribution. The profits are shared
in a pre-agreed ratio. Losses, however, are incurred in proportion to each partner’s
investment. Islamic Bank representing share of its depositors invests funds in the joint
venture alongside other investor(s).


Like Musharakah, Mudarabah is also a form of partnership. Whereas all partners in

Musharakah contribute capital, under Mudarabah partnership is formed between
provider of capital and provider of expertise or human resource. Proportions for
sharing profit are decided upfront. Losses are incurred solely by the partner
contributing capital.


Murabaha is a non-participatory mode of Islamic financing where the bank sells the
asset required by its client to the client on cost-plus basis. The asset is first purchased
by the bank and the bank incurs the risk of any loss or damage to the asset as long as
the asset remains under its ownership. Upon sale of the asset, the Islamic bank is
obligated to inform the client of the exact cost incurred in the purchase of the asset
and the margin of profit incorporated in the sale price. Payment by the client of the
sale price may be deferred in which case it would become Muajjal. The selling price
once agreed cannot be changed even when the client fails to pay on the agreed date.


Under this facility a client may take on rent, property, vehicle or any other real asset
belonging to the bank. The bank transfers the right of use of the asset to the client,
while retaining the ownership of the asset. The client pays periodic rent to the bank
for the use of the asset. Basis for rentals can be fixed as well as floating. Any change
is rental may be made through mutual consent.


Salam is a contract of advanced payment against deferred delivery of goods. Goods

paid for in advance by the buyer are delivered by the seller after an interval of time.
The Seller receives in advance fully paid price of the goods at the time of contract
undertaking to deliver the goods specified by the buyer at a future date.

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Manufacture of a specific product against precise specifications by a manufacturer for

delivery to buyer. It is necessary that the price of the product and product
specifications are fully agreed upon by the manufacturer and the buyer, and that the
material required for manufacture is arranged by the manufacturer.

CH# 05


Organizational structure is the framework which defines the boundaries of the formal
organization and with which the organization operates. A suitable organization
structure for the nature of the organization leads to better performance. The
Organizational Structure of Bank Alfalah Limited is as follow:-







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The organizational structure of the bank constitutes of a Board of Directors and an

executive committee as the governing bodies. Bank Alfalah Limited (BAL) continue
to his strengthen his presence in the market place and as of year end 2008, we have a
network of 282 branches that include 48 Islamic banking branches, seven foreign
branches 5 Bangladesh and 2 in Afghanistan and one offshore banking unit in
Bahrain.. The Head Office of Bank Alfalah is situated at Karachi. All Branches,
Regional Offices and Corporate Branches are under the distractive control of Head
Office. The Head Office of Bank Alflah Limited is responsible for making / execution
of polices. The Organizational Structure of BAL is as follow:-

The organization wide restructuring process has culminated. At this stage the
centralization segment has almost completed. Branches are operating as customer
contact points providing a culture free environment and better customer service.
Centralization process has led to marked improvement in turnout times and greater
customer satisfaction for more focus and improvement in procedure controls and
delivery channels.

PACRA, a premier rating agency of the country, has rated the bank ‘AA’ (double A),
Entity Rating for long term and A1+ (A one plus) for the short term. These ratings
denote a very low expectation of credit risk, strong capacity for timely payment of
financial commitments in the long term and by highest capacity for timely repayment
in the short term, respectively. The ratings of first and second and third unsecured
listed and subordinated TFC issues of PKR 650 million, PKR 1,250 million and
Rs.1,325 million have been maintained at AA- (Double A minus).

Board of Directors
H.E. Sheikh Hamdan Bin Mubarak Al Nahayan
Mr. Abdulla Nasser Hawalileel Al-Mansoori
Mr. Abdull Khalil Al Mutawa
Mr.Khalid Mana Saeed Al Otaiba
Mr. Ikram Ul-Majeed Sehgal
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Mr. Nadeem Iqbal Sheikh

Mr. Sirajuddin Aziz
Director & CEO

Mr. Sirajuddin Aziz
Chief Executive Officer
Mr. Parvez A. Shahid
Co-Chairman Central Management Committee
Mr. Arfa Waheed Malik
Group Head Corporate & Investment Banking
Mr. Shakil Sadiq
Group Head Branch Banking & SME
Mr. Ijaz Farooq
Group Head Islamic Banking
Mr. Adil Rashid
Group Head Consumer Finance
Mr. Nadeem Ul Haq
Group Head Operations
Mr. Mohammad Yousuf
Group Head Credit & Collections
Mr. Bakhtiar Khawaja
Group Head Training & Development
Mr. A. Wahid Dada
Group Head Commercial Banking
Mr. Hamid Ashraf
General Manager Legal Affairs Division & Company Secretary
Mr. Zahid Ali H. Jamall
Chief Financial Officer
Mr. Mohammad Iqbal Saifee
Group Head Audit & Inspection Division
Mr. Talib Rizvi
Group Head Priority Banking & Wealth Management
Mr. Tariq Mir
General Manager International Business
Mr. Ather Shehab
Executive Incharge Establishment & Administration
Mr. Mahmood Ashraf
General Manager Credit Monitoring Division
Mr. Falak Sher
Chief Compliance Officer
Mr. Imtiaz Ahmad Sheikh
Head of Information Technology
Mr. M. Mudassar Aqil
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General Manager Human Resource & Quality Assurance

Mr. Haroon Khalid
Head of Risk Management
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Account Opening and Maintenance:

This department deals in account opening. This department is made for the
convenience of customers having dealings of PAK rupees. It makes easy for account
whether it is individual account, company account etc For individual account
minimum Rs 500 up to Rs 10000 required to open account. For company account
minimum Rs 1000 required to open account. This department, s deals to open account
of the department or customers are in the Pakistan. It also deals to make following
Individual account
Partnership account
Proprietorship account
Proprietorship account, joint account etc

Major Tasks Learnt:

I was placed in account opening department. I learnt the various functions carried out
by the account opening department and got an opportunity to help in the daily
activities. The account opening department is handed by Mr. Faisal. During my
internship I worked under his supervision

Daily Activities:
Deals with the customers guide them about the functions of account in BAL. Filling
of account opening forms are maintained on daily basis. To check the account serial
numbers which are daily allotted to customers. A/C opening forms are checked and
stamped duly signed. Supporting documents are also checked such that CNIC, job
letters, student card, department card etc Letter of banks and opening letters are also
sent to the customers and introducers of account holders.
The Account opening forms are authorized by BCSM and supervisor by
depositing in charge after being feed in the computer.
After feeding of a/c opening form are filed in the account opening files of current
account or saving a/c in the serial numbers.
The SS Card is scanned on daily basis in computer.
Maintaining KYC,s of account holders.
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This department deals the depositing. This department is made for the convenience
of customers having a/c in the UBL. It make easier to get information about balance
of accounts or depositing. This department also deals with the issuance of certificate.
All funds of collection account are made by this department. Issuance of check books,
statement of accounts, supervisions of signs on the checks and up dating.
Closing and activation of accounts are also made by this department.


I was placed in the depositing department. I learnt various functions carried out by the
department and got an opportunity to help in the daily activities. The depositing
department handled by two officers. During my internship I also worked under their

Daily Activities:
Debit and credit vouchers are posted pertaining to customer deposit.
Vouchers having amount more then Rs. 50000 are supervised by deposit in charge.
Check books are issued to the customers on daily basis.
Accounts are closed and activated by this department.
Accounts are closed and activated by this department.
Check received and clearing are also deposited by deposited by deposit department
They maintain and look after the account opening files of the costumers’
Statements of account holders are also up to dated from this department.
Signatures of the customers are also up to dated from this department.
Changes in addresses or costumers missing CNIC and changes in SS cards are also
All funds of collection accounts are also transferred to different accounts are made on
daily basis.

Pay Order
It is an instrument that is issued if the payment is to be made in the same city or if
you want to send money in the same city then you will make PO. Pay order issued
from one branch can only be payable from the same branch. It is normally referred to
as banker, s Cheque. Important point cancel it but the one who has deposited money
once, cannot get it back it is non refundable. It is issued in a manner that form is given
to the customer; he fills and signs it. After proper checking and charging bank
commission according to the schedule of charges, the cash amount stamped and
handed over to the applicant as a receipt. After the pay order receipt is filled, an entry
is made in the pay order issue register. After checking properly, concerned officer
signs it. The order is then handed over to the applicant after obtaining his signature on
the PO Form. A voucher is also made and posted at the computer.

After the issuance there comes payment step. When the pay order receipt is presented
two authorized officers of the branch sign the receipt. PO entry is made in the PO
issue register. Then the amount is credited to the account of the customer. Then PO is
posted at the computer.
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BAL provides another reason to transfer your money. Pay order is a secure and easy
way to move your money from one place to another. And, the charges for this service
are extremely competitive.

Maintenance of Cheque Books:

Cheque books are maintained on daily basis. I also made the Cheque books. The
procedure of maintaining the Cheque books is that if account is newly open then the
Cheque book requisition slip is filled by the customer, there is clearly mentioned the
leaves of the Cheque book. Daily number of customers gives request for new Cheque
book. If customer has an old Cheque book then he / she will fill the Cheque that is
present in the Cheque book and give it to the Cheque book issuance counter. Time for
receiving new one is one week. If Cheque book is not collected within 60 days then it
is destroyed automatically.

Procedure for Issuing Now Cheque Book:

When Cheque book requisition slips are received, on the same date the account
numbers and name of the customers should write in the Cheque book register. Then
that Cheque book requisition slip is send through NIFT to Karachi Head Office. When
Cheque books are made in the Karachi Head office then these are send back through

Charges for Cheque Book

The amount is R S.3 per leave. Cheque books mostly contains of 25 leaves.
Customers pay cash against the Cheque Book then there will be no deduction in the
account of the customer, if customer does not make payment against the Cheque book
then account is automatically Dr by Rs. 75. There are no Cheque book charges for the
BAL Staff is free of cost.

Certificate of Insurance:
This scheme is introduced for all BAL account holders. Insurance is for the permanent
disability and permanent partial disability. No benefit will be given in case of
temporary disability. Rs. 50000/- will be given in case of temporary permanent partial
disability. In case of joint account, only the primary account holder will be offered
insurance coverage.
Customers having more than one account with the bank shall be offered single
insurance coverage.

Verification of CNIC through NADRA:

When account is opened, the CNIC is verified through NADRA. All the account
numbers and CNIC of the customers are sending to NADRA. After that NADRA send
back the original the original CNIC of the customers with there account numbers.
These are then matched by the CNIC that are attached with the account opening foam,
after this stamp of CNIC verified and signatures are done by the person who checks
the CNIC.
Guidelines for using special purpose software for CNIC verification
To implement prudential Rules and Regulations as per SBP, s Circular dated July 08,
2006, pertaining to CNIC verification, saying “It is mandatory for the Banks to get the
CNICs verified from NADRA, for their Customer Accounts.
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Bank is a profit seeking institution. It attracts surplus balances from the customers at a
low rate of profit and makes advances / finances to individuals and business firms at
higher rate of mark – up.
Financing is a principal function of a bank through which pace of activity is
accelerated in the various sectors of economy. Through this medium, the wheels of
trade, commerce and industry are set in motion and an effective financial contact is
maintained with people in every walk of life. Also, the indicators which reflect the
high quality of a Bank’s management are its prudent financing decisions, proper
coated of finance and prompt recovery of bank’s dues are per borrower’s
commitment/repayment schedule.

Running Finance
Among the various modes of Bank financing, credit lines offered to customers under
the above head (R/F) are the most commonly used. Withdrawals on the current
account are allowed in excess of the credit balance which the customer has
maintained therefore, creating a R/F (Overdraft). Under this type of financial
accommodation, the borrower is required to adjust the finance provided by the bank
within the stipulated expiry time. Mostly this facility is provided to businessmen who
need cash to run their business daily.
At the time of entering into an agreement with the customer the bank is required to
obtain all relevant security documents completed in all respect particularly the
An application for loan is given.
Promissory Note duly stamped is submitted.
Mark-up agreement for the total amount involved i.e., purchases price, mark-up for
the agreed period and mark-up for the cushion period of 210 days.
Sufficient tangible prime/collateral securities of stable value and of an easily
realizable nature the relevant documents are submitted (lien and related documents).
Two personal guarantees are presented.
Adequate insurance as appropriate covering charged in bank’s favor. The cost of
insurance to be borne by the borrower.

Demand Finance
A fixed amount of financing accommodation is allowed to the borrower for a fixed
period repayable either in periodic installments or in lump sum at a fixed future date.
This accommodation is extended in lump sum for the mutually agreed period and the
borrower has to repay the entire amount of finance together with mark-up at the
agreed rate.
The procedure for D/F is the same as that of R/F. In case a party does not adjust the
outstanding amount on due date, falling on last day of the month the Mark-up would
be adjusted / worked out from the first to last day of expiry.

Personal Loans
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Customers whose salary account is maintained by bank are eligible for this type of
loan. It is up to three basic salaries of employees of government organization. The
objective of this type of loan is to improve the life style of customers.
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Staff Loans
These types of loans include house loans, car loan etc. they are long term loans.
Amount is deducted every month from the salary of employee.

Loan Sanctioning Powers

For Firms
Head office can sanction 40 million rupees or above firms
Regional headquarter can sanction maximum 20 million rupees for firms
Zonal Chief can sanction maximum one million.
For Individuals
Head office can sanction 10 million rupees or above for individuals.
Regional headquarter can sanction maximum 10 million rupees Zonal Chief can
sanction 0.5 million rupees for individuals.


The word "Remittance" means to send money by mail or any other method. Funds
transfer is one of the basic functions of the Banking sector. These transfers may be in
the form of domestic remittance or to/from foreign location. Banking channels are
most frequently used for remittances due to its large network, reliability, safety,
legitimacy and timely delivery to the right beneficiary. Banks use their large
communication and branch network for ensuring efficient delivery of funds in the
shortest possible time.
Outward / Inward Remittances
When the bank sends a telegram etc, to another bank (concerned branch) for payment
to the customers, it is called outward remittance. The sender is required to apply
through a firm in which he will give all the necessary about the sender and the
beneficiary. The signature of the customers is verified. The details regarding
documents attached and exchange control regulations are scrutinized. Telexes option
and transaction number is recorded on the source document. This source document is
then forward for verification. No instrument is given to the customers. Customer can
receive the TT receipt at the end of the day and document is credited to the
beneficiary account.

When TT through telexes etc is drawn on NBP Branch, it is called inward remittance.
Message is received from the Telex Department. The concerned office duly checks
authentication and purpose of remittance it is received from abroad. In NBP
remittance takes places in the following ways.
Telegraphic / Mail Transfers (TTs)
Demand Draft(D.D) / Pay Orders (POs)
Collection / Clearance of Cheques
Telegraphic / Mail Transfer
In a number of cases, funds are needed to be urgently remitted to the beneficiaries by
the remitters. This service is readily provided by the bank both to customers and non-
customers and funds are transferred to the destination through telegram / tele fax to
ensure payment to the beneficiaries at the earliest. The message communicating the
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transfer of funds is sent to the drawer branch in coded language which is supported by
a confidential number known as “TEST NUMBER” to establish its genuineness and
authenticity. The salient features and procedure of TT is similar to “DD”.
In case of MT, there is no need to dispatch anything to the payee. The bank makes
special arrangement for the payment to the beneficiary through mail/courier service,
which is “Mail Transfer”.
The salient features and procedure are similar as that of “DD” and “TT”.

Demand Draft
The Demand Draft is a written order (Bill of Exchange) drawn by one branch at a
bank upon another branch of the same bank in another city to pay a certain sum of
money to or to the order of a specified person.
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Bank Alfalah is a business Organization and its main objective is to earn profit. It
provides a number of services to its customers in order to achieve its objective. It
offers a variety of interests bearing obligations to the public. These obligations are the
sources of funds for the bank and are shown on the liability side of the balance sheet
of the bank. The main sources of funds of BAL are:

Fixed Deposits
Saving Deposits
Current Deposits

These deposits are the major sources of funds of BAL.

Fixed Deposits:
Time deposits are lodged with the bank for a fixed period of time. The bank pays
interest to the depositors.
Rs. In ‘000’
2006 2007

Fixed Deposits 100,017,399 128,403,278

Saving Deposits:
Saving deposits is an important source of BAL funds. The bank pays interest on the
minimum monthly balance to the depositors at the end of the June and December
every year. The depositors are normally allowed to withdraw a limited amount of
money only twice a week.
Rs. In ‘000’
2006 2007
Saving Deposits 170,256,433 188,687,111

Current Deposits:
A current account is a running account which is continuously in operation. The bank
does not pay any interest on these deposits.
Rs. In ‘000’
2006 2007
Current 173,828,526 216,576,895
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Capital Accounts:
Capital accounts are an important source of bank funds. There are four common form
of capital account.

Capital Stock:
It consist of total common stock outstanding valued at par.

This is a portion of undivided profit set a side.
Rs. In ‘000’
2006 2007
Surplus 5,368,099 20,543,099

Undivided Profit:
Undivided Profit consists upon net difference between the total assets of the bank &
the sum of liabilities capital stock surplus & other contingencies undivided profit is
the balancing item on the balance sheet.

Reserve for contingency:

Reserve for contingency is an account held by the bank for the purpose of
accommodating losses realizes insecurities and certain other considerations.

Other Borrowing:
Borrowing is another item on the liability side of the balance sheet of a bank. The
BAL can also raise fund for short period of time by borrowing from the central bank.
The BAL also borrows funds by the sale of promissory notes, loams & securities.
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Interest Income:
The major portion of its income is the interest, which is charged on different types of
loans granted.

Rs. In ‘000’
2006 2007

Interest Income 30,153,716 33,629,470

BAL has started different projects on the partnership basis and the profit from that
project is distributed between bank and partners according to the agreed ratio.

Rs. In ‘000’
2006 2007
Profit before Taxation 2,565,945 4,535,552
Profit after Taxation 1,762,691 3,130,229

Profit on Securities:
BAL has invested major portion of its sources in different marketable and non
marketable securities and profit received on securities investment.

Locker Rent:
BAL has locker which are available to public for saving different precious things and
documents. The bank received the rent for the use of that locker.

Collection charges on Utilities Bills:

BAL also received the utility bills from public.

Service Charges:
BAL charged service charges from account holders and on banking instruments.

BAL is performed different services for its customers and commission is charged for
the award of these services.
Rs. In ‘000’
2006 2007
40 of 78

Commission 6,144,628 6,781,683

Collection Charges:
BAL collects the amount of customer from other banks and institutions on that
collection, collection fee is charged at the rate of 2% of total amount.

Discounting on the Bills of Exchange:

BAL is discounting on the bill and discount received on that bill discounted at the rate
of 9% of total amount.
41 of 78


Cash and balances with treasury banks:
Cash is declining by 0.92% as compared with the previous year. Cash with other

Operating Fixed Assets
Cash and balances with treasury
Other Assets - Net 9%
Balances with other banks

Lendings to financial institution


Investments - Net

Advances - Net

banks comprises of balance in local currency, in foreign currency in hand as well as

cash in transits and then the cash balances with the State Bank named as local
currency current account, local currency deposit account and foreign currency deposit
account and some of the cash is also maintained with international banks. Cash and
balances with treasury banks, which is a part of current assets changes according to
the organizations needs.
Balances with other banks:
It comprise of balances maintained with local banks and foreign banks. It showed a
substantial increase that is of 338% from the previous year, as the economy of
Pakistan is growing with the pace of 7% and demand for money is increasing. In order
to liquidate the transactions, BAL has to maintain balances with other banks. To meet
the demands of local and international customers BAL increased the percentage of
balances with other banks.
42 of 78

Lending to Financial Institution:

Due to excess liquidity in the market and low interest rates, Rupee is easily available
in all the corners of economy. Therefore, lending to financial institutions increased by
5.3%. The story of excess liquidity is the case with all the financial institutions;
therefore the other financial institutions also made fewer borrowings as compare to
the growth in economy. Furthermore, BAL is not willing to lend heavy amount on
low rates.
Investments form the second largest part, after advances, of the total assets of BAL
with 26%. There is a massive decline in the investments from last year, the main
reason being the “Prudential Regulations”, a policy of State Bank of Pakistan to
restrict commercial banks not to invest more then 20% of their equity in share market.
For that reason BAL has squared its position in stock exchanges and reduced their
portfolio of investments.

Investments by Se gme nts

TFC's, Debentures, Bonds
and PTC's

Unlisted Companies shares 8%


Listed Companies' shares


Subsidiaries and Associated


Federal Gov ernment


Advances form the largest part of the total assets i.e., 54%. Substantial increase has
been recorded in advances from 2003 to 2004. As the economy is expanding rapidly
and the quest for money is increasing, after the permission of SBP, commercial banks,
including BAL have started schemes for Car Financing, House Financing. The mode
of banking operations have changed, from conventional banking SBP has now
allowed commercial banks to enter in the leasing market, which has resulted in
increase in Advances as well as the Income of Commercial Banks.
43 of 78

Deferred liabilities -

Other liabilities Bills Payable

3% 3%

Sub-ordinate loan Borrow ings from

1% financial institutions

Deposits and other


Bills Payable:
There is a decrease of 9.88% in Bills payable this year. Excess liquidity is the main
reason, no doubt banking operations have increased, but now banks avoid credit and
used their own resources to pay off their bills.
Borrowings from Financial Institutions:
There is a substantial decline of 73% in borrowings from financial institutions. This is
mainly due to the fact that BAL has enough liquidity to meet its obligations so they
don’t need to go to market and borrow from other financial institutions, as well as the
fact that State Bank is providing rupee at the cheapest cost.

As the crack down continues on Muslims in USA and UK, especially on Pakistanis in
the wake of 9/11, some Pakistanis living abroad for 20 years have been deported back
to Pakistan and their accounts are being frozen due to suspect linkages with Al-Qaida.
This fear element has forced Pakistanis to send their saving’s back to their home land.
44 of 78

This resulted in record foreign remittances for Pakistan and foreign reserves went up
to $ 12.88 billions.
Indirectly it has also affected the deposits of local commercial banks. BAL is well
known internationally, has a good reputation in the eyes of Pakistanis abroad, so they
use BAL as a channel to send their remittances back to the country.
Furthermore, as the crackdown is made on money laundering by US officials, most of
the Pakistanis, who previously used these illegal channels for sending money to
Pakistan, have started sending their income and savings through banking channels,
which resulted in soaring foreign reserves.



Sub-ordinate Loans:
Sub-ordinated loans basically include Term Finance Certificates and the mark-up on
TFCs. These term finance certificates have mutual sharing of profit and loss. There is
a decrease in investments in term finance certificates. This is because interest rates
have decreased and now there is lower profit on them.
Deferred Tax Liabilities:
Deferred tax is the difference between tax payable and tax expense. This difference
arises due to different accounting methods used for reporting and for taxation
purposes. Deferred tax liabilities have shown a large decrease from 2003-04. This
decrease is mainly due to the revaluation of securities. The revaluation has caused the
value of the securities to decline substantially.
Shareholders equity has increased because all its elements, that is, share capital,
retained earnings and reserves are increasing. Share capital has increased because the
bank has issued bonus shares while reserves and retained earnings have increased
45 of 78

because profit after tax has increased and the company is retaining most of these

46 of 78


Advances to Deposit Ratio

Advances to Deposit Ratio= Total advances/ Total deposits

Rs. in million
2008 2007 2006 2005 2004
Advances to 64.06 62.67% 62.63% 53.46% 68.56%
Deposit Ratio
Total Advances 192671 171119 149999 118864 88931
Total deposits 300733 273174 239509 222345 129715

Advances to Deposit

40.00% Advances to Deposit
2008 2007 2006 2005 2004

The Advances to Deposit ratio is showing healthy growth, it was 64.17% in 2003 and
it becomes 66.06% in 2007. This reflects that bank is playing its role in the economic
growth of the country by providing main factor of production “Capital”. Due to
increase in the advances the bank’s profitability also increased.
47 of 78

Cash to Deposit Ratio

Cash to Deposit Ratio= Cash / Deposit

Rs. in million
2008 2007 2006 2005 2004
Cash to Deposit Ratio 10.87 10.77 11.63 11.14 15.19
Cash 32687 29436 27859 24788 19708
Deposits 300733 273174 239509 222345 129715

Cash to Deposit Ratio

Cash to Deposit
2008 2007 2006 2005 2004

The cash to deposit ratio is also decreasing. In 2003 it was 10.98, whereas in 2007 it
reduces to 10.77 of the deposit. It shows the bank is utilizing its assets more
productively in investment. The cash in hand is the only asset on which there is no
earning, by reducing this figure and utilizing it for investment is good approach of the
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Equity to Assets= Equity / Assets

Rs. in million
2004 2005 2006 2007 2008

Equity to Assets 2.82 2.71 3.81 4.19 4.18

Equity 4369 6738 10573 13767 14609
Assets 154835 248314 275686 328895 348991

Equity to Assets

Equity to Assets
2004 2005 2006 2007 2008

The equity to asset ratio is also increasing. In 2003 it was 3.79 and in 2007 it becomes
4.18 almost satisfactory increases in 5 years. The increasing equity shows healthy sign
of bank financial stability.

Equity to Deposits
Equity to Deposits= Equity / Deposits
Rs. in million
2008 2007 2006 2005 2004
Equity to 4.86 1.37 1.82 3.03 3.37
Equity 14609 3753 4369 6738 4369
Deposits 300733 273174 239509 222345 129715
49 of 78

Equity To Deposits

2004 2005 2006 2007 2008

The equity to deposit ratio is also increasing consistently. In five years it reaches to
1.82 from 17.95. The good point is that deposit of the bank increased and equity is
going decrease. The bank uses properly the deposits.


Net Profit Margin

Net Profit Margin= Net Profit / Net Sales *100
Rs. in million
2008 2007 2006 2005 2004

Net Profit Margin 3.58 9.84 7.22 11.73 15.29

Net Profit 1301 3130 1763 1702 1092
Net Sales 36292 31822 24416 14515 7140

Net Profit Margin

Net Profit Margin
2008 2007 2006 2005 2004
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The profitability of the bank increased tremendously from 4% to 30%. It shows that
bank decreases its expenses and increases the sources of revenues. The provision
expense also decreases in the last 5 years by adopting the policy of prudent lending;
this cut off in the provision also enhanced the net profit margin of the bank.

Return on Equity

Return on Equity= Dividend / Average total Equity

Rs. in million
2008 2007 2006 2005 2004
Return On Equity 9.17 25.72 20.37 30.65 26.89

Return On Equity




Return On Equity


2008 2007 2006 2005 2004

The return on equity looks at the return earned by management on the stockholder’s
investment that is on owner’s equity. The return on equity is net income, which
represents the return from all sources, operating and non- operating. The return on
equity of the bank shows a consistent and very well growth in last 5 years. The return
on equity in 2003 was 25.72, whereas in 2007 it becomes 79.08. It means bank is
paying handsome amount in the form of dividend to its shareholders. And get
maximum return and give satisfaction to his share holders
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Return on Total Assets

Return on Total Assets= Net Income / Average Total Assets *100

Rs in million
2008 2007 2006 2005 2004
Return on Total Assets 10.39 9.68 8.86 5.85 4.61
Net Income 36292 31822 24416 14515 7140
Total Assets 348991 328895 275686 248318 154835



Return on Total Assets

2004 2005 2006 2007 2008

The return on total assets measures the efficiency with which management has
utilized the assets under its control regardless of whether these assets were financed
with debt or equity. The return on total assets also showing healthy growth in last 5
years. It was 7.5 in 2003 and reaches to 9.68 in 2007. It indicates that bank is utilizing
its assets in a professional way. This trend should be maintained to be competitive in
the market.

Earning Per Share

Earning Per Share= Net Income / No of Ordinary Shares
Rs in million
2008 2007 2006 2005 2004
Earning Per Share 1.63 3.92 2.91 3.92 3.90
52 of 78

Earning Per Share
2004 2005 2006 2007 2008

Book Value Per Share Excluding Revaluation of Assets

Rs in million
2008 2007 2006 2005 2004
Earning Per Share 18.27 21.18 21.15 22.46 17.48



Book Value P/S

2004 2005 2006 2007 2008

Book Value Per Share Including revaluation of Assets

Rs in million
2008 2007 2006 2005 2004
Earning Per Share 21.32 24.95 24.48 24.88 21.05
53 of 78



Book Value P/S

2004 2005 2006 2007 2008

Earning per share is perhaps the most widely used of all accounting ratios. The trend
is earning per share and the expected earnings in future periods are major factors
affecting the market value of a company’s share. The EPS share is encouraging for
the investor. In 2004 EPS was 3.90 and in 2007 it becomes 4.82 This consistent
growth shows better policies and utilization of available resources.


Current Ratio
Current Ratio= Current Assets / Current Liabilities

Rs in million
2008 2007 2006 2005 2004

Current Ratio 2.92 1.85 3.48 4.81 1.35

Current Assets 57583 53047 51269 61552 22892
Current Liabilities 19713 28589 14707 12800 16856

Current Ratio

3 Current Ratio

2008 2007 2006 2005 2004
54 of 78

The current ratio expresses the relationship between Current Assets and Current
Liabilities. As debts come due, they must be paid out of current assets. The current
ratio indicates a company’s short run debt paying ability. It is a measure of liquidity
and solvency. The current ratio of HBL is decreasing. In 2001 it was 24 whereby in
2005 it becomes should be reduced because from managerial point of view too
high a current ratio may indicate that capital is not being used productively.

Gross Spread Ratio

Rs in million
2008 2007 2006 2005 2004
N Markup Income/G 34.51 35.54 28.12 41.17 56.69
Markup Income



N Markup
30 Income/G Markup


2004 2005 2006 2007 2008

Net Interest Income in the FY-03 & 04 jumped to 39.5& 47.5 respectively, but due to
loaning in the form of credit card, consumer financing, personal loan, agri credit &
increase in lending to SME. In the year-05, this ratio further increased by (63%”)
through a combination of growth in loans portfolio across all sector as well as
increase in spread on account of high interest rate.
55 of 78


Financial leverage is the extent to which a company is financed with debt. The
amount of debt a company uses has both positive and negative effects. The more the
debt, the more the company will have trouble in meeting in its obligations. Thus the
more debt, the higher is the profitability of financial distress and bankruptcy. On the
other hand debt is the major source of financing and banking industry typically uses
the higher percentage of debt. Debt financing provides significant tax advantage and
its transaction costs are low than that of equity. Leverage ratios measure the amount
of financial leverage. Commonly used leverage ratios are debt ratio, and debt to
equity ratio.

Debt-to-total Assets Ratio:

Debt-To-Total Assts Ratio = Total Debts

Total Assets

2004 2005 2006 2007 2008

Total Debts 14433 23141 25112 29762 316993
6 2 5 1
Total Assets 15483 24831 27568 32889 348991
5 4 6 5
Debt-To-Total Assets Ratio 0.93 0.93 0.91 0.90 0.91

(Rs. in Million)
56 of 78

Debt-To-Total Assets Ratio

Debt-To-Total Assets
2004 2005 2006 2007 2008

Debt ratio shows the fraction of the company’s assets that is financed by debts.
Creditor of a company would generally like this ratio to be low. The ratio is derived
by dividing a firm’s total debt to its total assets.

This ratio indicates the extent to which debt financing is used relative to equity

Debt-To-Equity Ratio = Total Debts

Shareholder’s Equity

(Rs. in Million)
2004 2005 2006 2007 2008

Total Debts 14433 23141 25112 29762 316993

6 2 5 1
Shareholder’s Equity 4369 6738 10573 13767 14609

Debt-To-Equity 33.04 34.34 23.75 21.61 21.70

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Debt-To-Equity Ratio

20 Debt-To-Equity Ratio
2004 2005 2006 2007 2008

Here the trend of this ratio is decreasing which is 16 in 2003 and decreased to 10.96 in
2004 and further decreased to 5.55 in 2007. This shows that debt financing was more
used in previous years but now it’s decreasing and equity financing is used also so it’s
also increasing.

Coverage ratio shows the number of times a company can cover or meet a particular
financial charge or obligation. One of the most commonly used coverage ratios is the
interest coverage ratio.
It measures the number of times the income is available to pay interest charges and
covers the company’s interest and thus avoids bankruptcy. The ratio is calculated by
dividing the income before interest expense and tax of a period by interest expense of
the same period. The higher the ratio, the greater is the likelihood that the company
could cover the interest expenses.
Interest Coverage = Earning Before Interest and Taxes
Interest Expense
(Rs. in Million)
2004 2005 2006 2007 2008

EBIT 1654 2563 2566 4536 1795

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Interest Expense 562 861 803 1406 493

Interest Coverage 2.94 2.98 3.19 3.22 3.64

Interest Coverage

2 Interest Coverage
2004 2005 2006 2007 2008

This ratio serves as one measure of the firm’s ability to meet interest payments and
thus avoid bankruptcy. The higher the ratio, the greater the ability that the company
can cover its interest payments without difficulty. It also sheds some light on the
firm’s capacity to take on new debt.
The interest coverage ratio of NBP has shown an improvement over the period of five
years. In the year 2006, the ratio is 3.19, which shows that the income in 2005 covers
2.98 times the interest expense. As the core business of a bank is borrowing and
lending, interest expense constitute the main expense of the business that’s why the
interest expense is so higher and ratio is so lower.



Vertical/Cross-sectional/Common size statements came from the problems in
comparing the financial statements of firms that differ in size.
• In the balance sheet, for example, the assets as well as the liabilities and equity are
each expressed as a 100% and each item in these categories is expressed as a
percentage of the respective totals.
• In the common size income statement, turnover is expressed as 100% and every
item in the income statement is expressed as a percentage of turnover (sales).
Vertical analysis also called component percentages indicate the relative size of each
item included in a total. For example each item on a balance sheet could be expressed
59 of 78

as a percentage of total assets. This shows quickly the relative importance of each
type of assets as well as the relative amount of financing obtained from current
creditors, long term creditors and stockholders. Another application of vertical
analysis is to express all items in an income statement as a percentage of net sales.
Such a statement is called a common size income statement.


This technique is also known as comparative analysis. It is conducted by setting
consecutive balance sheet, income statement or statement of cash flow side-by-side
and reviewing changes in individual categories on a year-to-year or multiyear basis.
The most important item revealed by comparative financial statement analysis is
A comparison of statements over several years reveals direction, speed and extent of a
trend(s). Restating amount of each item or group of items as a percentage does the
horizontal financial statements analysis.
Such percentages are calculated by selecting a base year and assign a weight of 100 to
the amount of each item in the base year statement. Thereafter, the amounts of similar
items or groups of items in prior or subsequent financial statements are expressed as a
percentage of the base year amount. The resulting figures are called index numbers or
trend ratios.


Comparative Balance Sheet
For the Years 2004-2008
2,008 2,007 2,006 2,005 2,004
Assets Rs. (000) Rs. (000) Rs. (000) Rs. (000) Rs. (000)
TREASURY BANKS 32,687,335 29,436,378 27,859,360 24,788,625 19,708,518
BANKS 21,581,043 18,380,738 12,731,952 9,713,369 3,183,957
INSTITUTIONS 3,315,500 3,452,059 12,456,653 27,050,493 -
INVESTMENT 75,973,238 88,491,564 56,502,210 57,425,700 35,503,196
ADVANCES 192,671,169 171,198,992 149,999,325 118,864,010 88,931,400
60 of 78

OTHER ASSETS 8,989,186 11,922,324 10,502,990 3,851,529 3,226,959

OPERATING FIXED ASSETS 13,773,293 - - 6,620,067 4,280,504
DEFFERED TAX ASSET - NET - 6,013,097 5,633,051 - -
TOTAL 348,990,764 328,895,152 275,685,541 248,313,793 154,834,534

BILLS PAYABLE 3,452,031 4,138,243 3,091,135 3,733,124 2,233,671
FINANCIAL INSTITUTIONS 13,690,222 21,230,697 8,394,130 5,844,389 12,723,830
ACCOUNTS 300,732,858 273,173,841 239,509,391 222,345,067 129,714,891
SUB ORDINATED LOANS 2,571,169 3,220,858 3,222,106 3,223,355 1,899,480
OTHER LIABILITIES 11,291,280 1,379,809 1,921,338 5,219,666 2,725,344
DEFFERED TAX LIABILITIES 208,465 9,531,860 7,305,496 484,066 275,834
TOTAL LIABILITIES: 331,946,025 312,675,308 263,443,596 240,849,667 149,573,050
SHARE CAPITAL 7,995,000 6,500,000 5,000,000 3,000,000 2,500,000
RESERVES 3,166,056 2,414,833 2,749,533 2,351,218 1,008,772
UNAPPROPRIATED PROFIT 3,447,467 4,851,840 2,823,072 1,386,845 860,300
OF ASSETS 2,436,216 2,453,171 1,669,340 726,063 892,412
TOTAL 348,990,764 328,895,152 275,685,541 248,313,793 154,834,534



Comparative Balance Sheet
For the Years 2004-2008
2,008 2,007 2,006 2,005 2,004
Assets (In %) (In %) (In %) (In %) (In %)
TREASURY BANKS 9 9 10 10 13
INSTITUTIONS 0.95 1 5 11 -
INVESTMENT 22 27 20 23 23
61 of 78

ADVANCES 55 52 54 48 57
OTHER ASSETS 3 4 4 2 2
TOTAL 100 100 100 100 100
BILLS PAYABLE 0.99 1.26 1.12 1.5 1.44
INSTITUTIONS 3.92 6.46 3.04 2.35 8.22
DEPOSITS & OTHER ACCOUNTS 86.17 83.06 86.88 89.54 83.78
SUB ORDINATED LOANS 0.74 0.98 1.17 1.3 1.23
OTHER LIABILITIES 3.24 0.42 0.7 2.1 1.76
DEFFERED TAX LIABILITIES 0.06 2.9 2.65 0.19 0.18
SHARE CAPITAL 2.29 1.98 1.81 1.21 1.61
RESERVES 0.91 0.73 1 0.95 0.65
UNAPPROPRIATED PROFIT 0.99 1.48 1.02 0.56 0.56
ASSETS 0.70 0.75 0.61 0.29 0.58

TOTAL 100 100 100 100 100


Comparative Profit & Loss A/C
For The Years 2004-2008
Rs. (000)
DESCRIPTION: 2,008 2,007 2,006 2,005 2,004

MARKUP/RETURN/INTEREST EARNED 31,046,583 25,783,871 21,191,470 12,246,811 5,620,203

EXPENSED 20,331,194 16,620,963 15,232,886 7,204,992 2,434,459
NET MARKUP/INTEREST INCOME 10,715,389 9,162,908 5,958,584 5,041,819 3,185,744
PERFORMING LOANS & ADVANCES 2,035,997 2,370,867 697,690 402,298 370,208
62 of 78


VALUE OF INVESTMENTS 62 - - 23,163 -2,165
BAD DEBTS WEITTEN OFFF DIRECTLY 28,298 -5,844 -1,537 -512 -351
3,543,357 -2,376,711 -699,227 -379,647 -372,724
AFTER PROVISIONS 7,172,032 6,786,197 5,259,357 4,662,172 2,813,020
INCOME 2,539,321 2,429,599 1,804,998 1,158,747 675,868
DIVIDEN INCOME 300,943 64,722 37,393 52,014 52,539
CURRENCIES 914,845 474,510 386,997 290,091 218,820
GAIN ON SECURITIES 424,220 2,053,192 180,751 - -
OF INVESTMENT (181,571) -14,929 -27,599 - -
OTHER INCOME 1,247,669 1,031,372 842,099 744,518 572,822
INCOME 5,245,427 6,038,466 3,224,639 2,245,370 1,520,049
12,417,459 12,824,663 8,483,996 6,907,542 4,333,069
ADMINISTRATIVE EXPENSES 10,471,399 8,272,587 5,874,745 4,313,023 2,677,635
OTHER PROVISIONS/ WRITE OFFS 28,582 6,959 - 10,125 -
OTHER CHARGES 122,758 9,565 43,306 21,104 1,700
EXPENSES 10,622,739 8,289,111 5,918,051 4,344,252 2,679,335
PROFIT BEFORE TAXATION 1,794,720 4,535,552 2,565,945 2,563,290 1,653,734
TAX 493,419 1,405,323 803,254 861,196 561,745

PROFIT AFTER TAXATION 1,301,301 3,130,229 1,762,691 1,702,094 1,091,989



Comparative Profit & Loss A/C
For The Year 2004-2008
DESCRIPTION: 2008 2007 2006 2005 2004

EARNED 100.00 100.00 100.00 100.00 100.00
EXPENSED 65.49 64.46 71.88 58.83 43.32
63 of 78


PERFORMING LOANS & ADVANCES 6.56 (9.20) (3.29) (3.28) (6.59)
IN VALUE OF INVESTMENTS - - - 0.19 (0.04)
DIRECTLY 0.09 (0.02) (0.01) 0.00 (0.01)
INCOME 8.18 9.42 8.52 9.46 12.03
DIVIDEN INCOME 0.97 0.25 0.18 0.42 0.93
FOREIGN CURRENCIES 2.95 1.84 1.83 2.37 3.89
GAIN ON SECURITIES 1.37 7.96 0.85 - -
REVLUATION OF INVESTMENT (0.58) (0.06) (0.13) - -
OTHER INCOME 4.02 4.00 3.97 6.08 10.19
INCOME - - - - -
EXPENSES - - - - -
ADMINISTRATIVE EXPENSES 33.73 32.08 27.72 35.22 47.64
OTHER CHARGES 0.40 0.04 0.20 0.17 0.03
EXPENSES - - - - -
PROFIT BEFORE TAXATION 5.78 17.59 12.11 20.93 29.42
TAX 1.59 5.45 3.79 7.03 10.00
PROFIT AFTER TAXATION 4.19 12.14 8.32 13.90 19.43


The common size / vertical analysis of Income statement of Bank Alfalah Limited as
given in the above table is showing a consistent increasing trend in the bank’s gross
profit margin. The main reason behind this increase is that the bank has controlled its
mark up expenses in relation to total mark up revenue, which were constantly reduced
in year 2005 to year 2006. In simple words we can say that this decreasing trend in the
mark up expenses resulting in the increased gross profit. Mark up expenses is actually
cost of sale in case of a bank. Furthermore this increasing in gross profit margin
shows the efficiency of the bank’s management in controlling mark up expenses. So
64 of 78

this increasing trend of a gross profit margin is a positive and healthy sign and the
bank’s management should continue such type of efforts in order to achieve such type
of results in future.

Now if we look at the figures of analysis of total income then we will see the
decreasing trend in 2006 with respect to 2005. It is because of major decrease in fees
and commission, which shows that the services of BAL other than advances and
investments provided for daily use purpose of the customer are not regularly used by

If we look at the figures of non mark up expense there is decreasing trend, which is
because of decrease in administrative expense. The increasing rate of gross profit is
less with respect to net profit because non mark up expense and taxes both are
showing reducing trend which is the main purpose in more increase in net profit with
respect to gross profit.
65 of 78

Comparative Profit
Comparative & Loss
Balance A/C
For The Years 2004-2008
For the Years 2004-2008
Description 2007-2008
2007-2008 2006-2007
2006-2007 2005-2006
2005-2006 2004-2005
Assets % % Increase/ % % Increase/ % % Increase/ %% Increase/
GroGrowDecreaseIncrease/ Gro Grow Decrease
Increase/ Growt Decrease
Gro Increase/ Gro
Gro Increase/
DESCRIPTION: wth th (Decrease) wth th (Decrease) wth h (Decrease) wth
wth (Decrease)
CASH & BALANCES 3,250,957 4,592,
1,577,018 3,070,735 1 5,080,107
TREASURY 11 20 5262712 6 22 401 12 73 8,944,659 18
26 6,626,608
BANKS 1,388, 11 1
EXPENSED WITH 22 3710231
3,200,305 9 077
5,648,786 1 8,027,894
3,018,583 96 4,770,533
OTHER BANKS 17 44 3,204, 31 205
LENDING TO 17 1552481
(136,559) 54 324
(9,004,594) 18(14,593,840)
916,765 58 1,856,075
INSTITUTIONS LOANS & 2 (1,673, (32,090
INVESTMENT ( (334870)
(12,518,326 40 177)
31,989,354 73 (295,392)
(923,490) 9 )21,922,504
PROVISION AGAINST 14) ) 57 (2) 62
ADVANCESIN VALUE OF 21,472,177 21,199,667 (10 31,135,315 (1,1 29,932,610
INVESTMENTS 13 0 1479062 14 - - 260) (23,163) 3470) 25,328
OTHER ASSETS ( (2,933,138) 2 1,419,334(4, 20 6,651,461 (161
OFFF DIRECTLY 25) 384 22454 14 80 307) 0
173 (1,025) 1946 )
OPERATING FIXED 13,773,293 - (6,620,067) 2,339,563
ASSETS AFTER - - 1,526, (100) 55
DEFFERED TAX 6 (6,013,097)
385835 29 840
380,046 13 5,633,051
597,185 66 1,849,152
ASSET – NET & - 7 624, - -
20,095,612 35 601
53,209,611 56 27,371,748
646,251 71 482,879
6 19 27, 11 (28 60 (525
LIABILITIES: 365 236221 73 329 ) (14,621) (1) )
PAYABLE ( 93 (686,212)440335 23 513
1,047,108 33 96,906
(641,989) 33 71,271
17) 34 1,0 1,872, (17) 67
BORROWING FROM ( (79)(7,540,475)
(1628972) 36 441
12,836,567 - 180,751
2,549,741 - -
UNREALIZED 36) 153 44 (54)
DEPOSITS & OTHER 1116 27,559,017
(166642) 46) 33,664,450
670 - 17,164,324
(27,599) - -
ACCOUNTS 10 14 189, 8 71
SUB ORDINATED ( 21 (649,689)216297 22 273(1,248) 13 97,581
(1,249) 30 171,696
TOTAL NON-MARK- 20) (0) 2,813, (0) 70
OTHER LIABILITIES 7 (13) 9,911,471
(793039) 87 827
(541,529) 44 (3,298,328)
979,269 48 725,321
ADMINISTRATIVE 18 (28) 2,397, (63) 92
DEFFERED TAX ( 27 (9,323,395)
2198812 41 842
2,226,364 1, 36 6,821,430
1,561,722 61 1,635,388
OTHER PROVISIONS/ 98) 30 6, 409 (10 75
LIABILITIES: 311 19,270,717
21623 - 959
49,231,712 0) (10,125)
22,593,929 - 10,125
6 19 ( (33, 9 10 61 1,1
CAPITAL 1183 1,495,000 113193 78) 741)
1,500,000 5 22,202
2,000,000 41 19,404
TOTAL NON-MARK- 23 30 2,371, 67 20
2333628 40 060
(334,700) 36 398,315
1,573,799 62 1,664,917
PROFIT BEFORE 31 (12) 1,969, 17 133
UNAPPROPRIATED ( (60)(1,404,373)
(2740832) 77 607
2,028,768 0 1,436,227
2,655 55 909,556
PROFIT 29) 72 602, 104 (7 61
SURPLUS ON (65) (16,955)
(911904) 75 069
783,831 ) (57,942)
943,277 53 299,451
REVALUATION OF (1) 47 1,367, 130 (19)
PROFIT AFTER TAXATION (58) (1828928) 78 538 4 60,597 56 610,105
TOTAL 20,095,612 53,209,611 27,371,748 93,479,259
6 19 11 60
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The assets increases in 2006 as compared to 2004 and Trend Analysis shows
continuous increase in assets.

Trend Analysis shows increase in the liabilities.

Income Statement
Profit After tax /Net Income increases in 2006 as compared to previous two years
which shows that the sales increases and because of this the company earned profit.
It is observed that interest income of the bank has increasing trend due to more
advances, which is a positive sign. Fee income and brokerage of the bank has
increasing trend, which shows sound business of the bank it is positives sign. Share
profit has sharp increase over the years which is due to sale of bank share to general
public it shows public confidence on the bank which is also a positive sign.

Administration expenses have increased in recent years, which are to control bank,
more efficiently than before. Taxation expense of the bank has also increasing trend
which is due to increase in profits which is a positive sign. Net profit of the bank has
sharp-increasing trend, which is due to increase in different kind of income of the
bank. Overall income statement of the bank depicts very sound position of the bank’s

It is observed that cash balance, lending to financial institutions & investment of the
bank has increasing trend this is due to increase in deposits of the bank, which is
positive sign. Bank’s advances also having increasing trend, which is a positive sign.
Deposits of the bank have increased more than previous years, which shows public
trusts on the bank. Profit of bank also shows a stable increase due to increase in
revenue and other income of the bank.
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In this chapter I compare bank alfalah limited to others major banks in Pakistan with
different prospective of financial affairs. These are in detail as follow;

Income Statement (Rs In Million) (2008)


ABL 4777 1744 3033

HBL 13127 5085 8041

MCB 13340 4126 9214

NBP 19056 6347 12709

UBL 9708 3540 6168

BAL 1794 493 1301

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Assets and Liabilities (Rs In Million) (2008)


ABL 44830 192170 192170

HBL 177942 691992 57943

MCB 70357 299708 299708

NBP 156986 577719 577719

UBL 61559 358056 358056

BAL 75973 348991 348991




400000 Investment
300000 Assets


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Advances and Deposits (Rs in Million (2008)

Banks Deposit Advances

HBL 161907 382173

NBP 531298 268839

UBL 229340 210153

MCB 463427 180323

ABL 296499 110947

BAL 300733 192671



300000 Deposit

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Operating Cost to Operating Income(2008)

BANKS Operating Cost Operating Income

MCB 6223 6920

NBP 11457 8919

UBL 8522 7312

ABL 4311 4265

HBL 16015 14034

BAL 10622 12417

Operating Cost
Operating Income
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Number of Staff

BANKS 2007 2008

UBL 9444 9287
MCB 9493 9983
ABL 6909 6768
NBP 13824 13745
HBL 16314 18625
BAL 7371 7584



10000 2007

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1) Lack of incentives

During my internship, once I asked to an employee that gives our comments about the
incentives, he replied that we have been learning that our incentives should increased
soon but a year has passed and incentives have not been given yet. After that I
realized that the procedure of increasing the incentives is very slow. The employees
are getting very demodulated due to lack of incentives.

2) High staff Turnover

Staff turnover has been observed greatly in this period (November 2007,
Febrary2008) due to job dissatisfaction & low motivation. It is a bitter fact in BAL
that employees are hired on contractual basis which lasts for almost a year. The
contract base staffs deprived of the extra benefits that the permanent staff enjoys. This
is reason why staffs turnover is increased.

3) Inexperience Staff

The fresh recruitments which are made are usually inexperienced in BAL because
when employees working from; other banks come for an interview they refuse to offer
their services after they hear the low salary package. So because of that low salary
package mostly inexperienced staff is hired since other banks are offering better
salaried than BAL.

4) Low Salary Package

The salary package is low in BAL as compared with the other banks. While hiring the
employees who are MBA and the starting salary is just Rs. 14000/- Therefore it is the
main problem for the BAL. While hiring the fresh graduates starting salary package is
just Rs. 10000/- As compared with the work load the salary package is very low that’s
why employees are not satisfied with their jobs.

5) Branch Issues

The branch issues are also very important reason for the rise in the problems faced by
the bank. Actually the customers have serious complaints regarding the branch. Some
of them is that the Cheque which are dropped in the drop
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Boxes are cleared very late. Customers are not satisfied with the behavior of the
employees. They stand in lines for receiving or deposit cash and utility bills for a long
time, but no positive response from the tellers.

6) Employees Efficiency

Employees are not much efficient due to lack of training and knowledge. High level
management requirement is too much high but they are not providing the facilities to
the employees therefore the employees efficiency is decreasing day by day. They are
not motivated by the high level management and as a result the interest of employees
in their jobs is also deceasing.
No concept of job rotation applied here if it is applied the job rotation can take place
from branch to the regional headquarter, this will boost up the moral e of its
employees and it will also provide them chance of more learning.

7) Policies Description

New policies are prepared by the higher management and these are not will explained
to the lower level managers, department wise so as to discipline the work according to
the policies and procedures devised. No participation in the seminars therefore
briefing sessions are not updates at low level management other than the formal way
of reporting. More forever the employees should not be provided chance for giving
suggestion to the higher management in these sessions.

8) Courier Complaints

The bank uses shaheen courier for mailing the customers bills and for its own use i.e.
Inter bank mailing BAL uses Leopards courier. Customers have a lot of complaints
regarding BAL, s courier. They don, t receive their bills in time due to which they are
unable to do timely payments.
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1) Give Incentives

Incentives play a very pleasant role in efficiency of employees. If employees are

given certain challenging targets with good rewards their motivation will increase to a
great extent. While challenging targets with good reward their motivation will
increase to a great extent. While interviewing one of the employees I was amazed to
here was a rumor that an incentive program is coming for the collections department,
it has been a year since the incentive coming’

2) Improve Salary packages

First of all I would suggest the salary scales of the employees be revised. There is
dire need of policies to be changed for the betterment of the staff and to encourage
then to work hard. If the employee is being given salary less then is expectation then
he will not be motivated towards his work rather he will be in search of better

3) Training program

There should be training programs on monthly basis in order to enable free flow of
knowledge teams. This training program should be conducted on a monthly basis in
order to make employees gain full information regarding their work.

4) Utilize New Technology

Today is the world of competition. Most of the financial institutions use

sophisticated technology and provide better services in this way so BAL can
enhance its performance through utilize day to day change in technology in
banking sector.

5) Take Feed Back

Any evaluation system can check the performance of the business BAL can do
it through take the feedback from customers and take the decision according to
the requirement of daily operation problem.
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Bank Alfalah is one of the banks performance has been improving day by day. It has
been offering unique services such has its recent campaign of free insurance for all
BAL account holder, car replacement plan etc, If the above recommendation are
applied that it can play a significant roll and improving the performance of BAL
consumer product put the main things is to meet the demands of the customer and to
full fill the requirement in the competitive situations. I have observed during my
internship that resource are available put these are not will utilize by the management.
Proper training should have customer service center having UAN number as well as
there should be proper check and balance of each employee.
During my internship I found that staff efficiency and motivating the employees has a
deep relationship, due to this relationship output of BAL increases and it can easily
archive its goals. Human Resource of every department plays a primary role in
conducting any activity. Hence if the human resource is not will trained and efficient
then this will affect the entire organization productivity.
The deposit staff has been suffering high turnover absenteeism, lack of skilled
profession etc. reason of that is in banks offer better salary package and during my
internship I had seen three employees resigning due to better opportunities in bank
such as ABN Amro and standard chartered. Most of the employees are just first
graduate who are unaware of practical knowledge. The company invests on them by
giving them proper training but later an win they see on growth opportunities that live
the bank which proves a waste for the bank. All employees are hired on contracts that
expire after a year. Only after a year employees are kept permanent on the basis of
their of dedication to work and their achievements
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1. Siddiqi H.Asrar, (2002).PRACTICE AND LAW OF BANKING IN

PAKISTAN, decent print enterprises, Karachi.
2. Cheema M. Khalid, (2006).BUSINESS LAW, Syed Mobin Mahmud
Publishing, Lahore.
3. Bank Alfalah Annual Report 2003-2007




1. Baig, A.Shujat, (1999). “Banking System in Pakistan”, Finance and

Markets, 06-12 Dec, 1999, p.1.
2. NBP Economic Bulletin, (Jul-Aug 2008).
3. Islamic Bulletin Published by NBP, Nov-Dec 2007, Vol.34, p.6.
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BAL Jinnah Road

Branch Rawalpindi

A/C Clearing
CS Dept Car F Cash BBO &
Dept Dept Dept Dept Computers

Remittances Credit & Advances

Dept Deposit Dept

Dept Operation Dept