INTRODUCTION1. Objective of the studying the Organization:

Banking is one of the most sensitive businesses all over the world. Bank play very important

role in the economy of a country and Pakistan in bi exemption. it influences and facilitates

many different but integrated economic activities like resources mob imitation, poverty

elimination, production and distribution of public finance, the economy of Pakistan is

growing day by day with an accelerated pace, to meet the requirements of these pace sound

banking system is needed so that one can meet the financial needs of individuals and

corporation also the agricultural, industrial, business sectors. Allied bank was formally

known as the Australasia bank established on 3rd December, 1942 in the city of Lahore, this

is before the formation of Pakistan. it was formed with a paid up share capital of RS.0.12

million under the Chairmanship of Khawaja Bashir Bux, the bank had attracted deposits,

equivalent to RS.0.431 million in its first eighteen months of business. Total assets then

amounted to Rs.0.572 million, deposits come to RS.101.554 billion and total assets equal

Rs.121.164 billion. In this report I have tried to cover all the necessary aspects of banking by

ABL. The primary purpose of the internship is to fulfill the academic requirements of my

study as it is compulsory to do practical work in an organization and to implement the tools

that they have studied for the analysis, there are some secondary purposes associated like

To gain practical knowledge and experience that will help in future to get good opportunities

(jobs).Another objective of my work experience was to relate the gained knowledge from

books and institute with working organization so that I can see the different between

concepts and their implementations. To gain confidence, which usually lack when any one

enter in any, firm for the first time, therefore work experience removes certain fears and

flaws that can create problem for any student. This internship will provide me with the

exposure of the finance field. The internship is considered as the most efficient tool for

learning the procedures and processes of any sort of profession. As I being the management

student, this internship would prove to be as the most suitable method of teach the

management practices have studied the world class courses here at A.IO.U which I think will

definitely be found in actual practice in any organization. The courses will relate to the real

work in one or other aspects. The internships are meant to provide the students to apply their

learning's that they do in classes to the real situations. As I have intended to do my majors at

finance so I will try to seek my personal attitude towards finance during this internship.

Generally, it is noticed that there is remarkable difference between market knowledge and

bookish knowledge although the concepts are same but their application is different. During

my internship i tried to delineate this difference, and was personally curious about the feeling

of professional financial work in an office environment. Banking is a wide field and the

whole aspects of banking cannot be covered in the eight week period so i tried to cover the

important aspects by using most important most fusible technique. However this study of

ABL’s will help the management to identify their weakness and strengths so that they can

minimize the threats and can avail the benefit from the opportunities. This internship report

will be source information for all those who are the interested in the study of financial and

competitive position of ABL. The source of data in this report included interviews of

management, customer response interviews and discussion with staff members and personal

observation personal observations. In the way to write report required different secondary

data sources included ABL annual reports brochures, manuals, website and business reviews.

Time is the major factor which hinders the dynamics of bank processing's. Lack of

documented material provide to be another constraints in this regard as most of the material

is confidential, therefore, internees are not allowed to get "handouts"

Most of the times people were not free to answer my queries or they were not interested it all

in my work. No one is entitled to retrieve its result for any purpose except authorized bank I

personnel for official purpose. Research student are not allowed to retrieve and use any

confidential material for any purpose, as it is again the bank policy. Banks play a central and

very important role in the monetary life of a country, that’s why they are well thought-out as

the livelihood of modern economy. Today no one can deny the importance of Banking in the

economy. They facilitate and expedite trade and commerce and provide a variety of services

that one can’t imagine with out Banks. The requirement of the Master degree in Business

Administration is fulfilled when an internship of eight weeks has been done. The dedicated

students polishes there professional skills in there specialized field. Main purpose of this

program is to make students familiar with the personal interaction in career settings and

practical work as it fosters the development of communication skills to work practically

o To analyze the performance of ABL at the branch level and bank level.

o To highlight the important features of financial products offered by ABL

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o To analyze the bank through different techniques i.e. Horizontal, Vertical.

o To apply the knowledge gained in practical field.

This report is a reflection on my experience when I was internee in ABL, main branch

Abbottabad. Since its inception in 1942, ABL has maintained a steady growth over the sixty

years span of its operations. After its nationalization in 1974, it was denationalized in 1991

and the employees became the owners of ABL, through the unique concept of ESOP

(Employees Stock Ownership Scheme)

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2 Overview of the Allied Bank Limited

2.1 Brief history of the Organization

Established in December 1942 as the Australasia Bank at Lahore with a paid-up share

capital of PKR 0.12 million under the Chairmanship of Khawaja Bashir Bux, and his

business associates, including Abdul Rahman Malik who was amongst the original Board of

Directors, the bank had attracted deposits, equivalent to PKR 0.431 million in its first

eighteen months of business. Total assets then amounted to PKR 0.572 million. Today Allied

Bank's paid up Capital & Reserves amount to Rs. 10.5 billion, deposit exceeded Rs. 143

billion and total assets equal Rs. 170 billion. The Allied Bank's story is one of dedication,

commitment to professionalism, adaptation to changing environmental challenges resulting

into all round growth and stability, envied and aspired by many. In the early 1940s the

Muslim community was beginning to realize the need for the active participation in the field

of trade and industry. The Hindus had since the late 1880s established a commanding

presence in these areas and industry, trade and commerce in the undivided Sub-continent was

completely dominated by them. Banking, in particular, was an exclusive enclave of the

Hindus and it was widely believed, and wrongly so, that Muslims were temperamentally

unsuited for this profession. It was particularly galling for Khawaja Bashir Bux and Abdul

Rahman Malik to hear the gibe that Muslims could not be successful bankers. They decided

to respond to the challenge and took lead in establishing this first Muslim bank on the soil of

Punjab that was to become Pakistan in December 1942; by the name of Australasia Bank

Limited. The initial equity of the Bank amounted to Rs 0.12 million, which was raised to Rs

0.5 million by the end of first full year of operation, and by the end of 30th June 1947 capital

increased to Rs. 0.673 million and deposits raised to Rs 7.728 million. Australasia Bank was

the only fully functional Muslim Bank on Pakistan territory on August the 14th, 1947.It had

been severely hit by the riots in East Punjab. The bank was identified with the Pakistan

Movement. At the time of independence all the branches in India, (Amritsar, Batala,

Jalandhar, Ludhaina, Delhi and Angra (Agra)) were closed down. New Branches were

opened in Karachi, Rawalpindi, Peshawar, Sialkot, Sargodha, Jhang, Gujranwala and Kasur.

Later it network spread to Multan & Quetta. The Bank financed trade in cloth and food

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grains and thus played an important role in maintaining consumer supplies during riot

affected early months of 1948. Despite the difficult conditions prevailing and the substantial

set back in the Bank’s business in India, Australasia Bank made a profit of Rs 50,000 during

1947-48.By the end of 1970 it had 101 branches. Unfortunately it lost 51 branches in the

separation of East Pakistan which became Bangladesh. The bank did well in despite losing

lot of its assets. By the end of 1973 the bank had 186 branches in West Pakistan.

Allied Bank from 1974 to 1991 In 1974, the Board of Directors of Australasia Bank

was dissolved and the bank was renamed as Allied Bank. The first year was highly successful

one: profit exceeded the Rs 10 million mark; deposits rose by over 50 percent and

approached Rs 1460 million. Investments rose by 72 percent and advances exceeded Rs 1080

million for the first time in bank history. 116 new branches were opened during 1974 and the

Bank started participation in the spot procurement agriculture program of the Government.

Those seventeen years of the Bank saw a rapid growth. Branches increased from 353 in 1974

to 748 in 1991. Deposits rose from Rs 1.46 billion, and Advances and investments from Rs

1.34 billion to Rs 22 billion during this period. It also opened three branches in the UK.

ESOP Revolution (Employee stock ownership plan) under the philosophy of ESOP

ownership of an enterprise is transferred to its employees who are in an advantageous

position in running the enterprise. The added advantage of ESOP that it strengthens the

workers stake in the free enterprise system, in job securities, better profitability & unique

corporate culture symbolizing family feelings & professional fraternity. September 10,1991

is the historical date as on this date the bank became the country’s 1st bank to be

reconstituted as an institution jointly owned by its employees through the unique concept of

Employees Stock Ownership plan [ESOP] developed by the Allied Management Group

headed by Mr. Khalid Latif enabled the bank staff to react creatively to the privatization

challenge. More that 7500 staff members acquired a share in the bank. The articulation of the

ESOP is a landmark in the financial history of Pakistan-indeed of the entire world .It is a

practical step ensuring an increase in workers participation and in productivity a means for

enhancing an equitable redistribution of financial assets & an effective strategy for achieving

the cherished goal of national self-reliance.

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Privatization 1991 to 2008 As a result of privatization in September 1991, Allied

Bank entered in a new phase of its history, as the world’s first bank to be owned and

managed by its employees. In 1993 the First Allied Bank Modaraba (FABM) was floated.

After privatization, Allied Bank registered an unprecedented growth to become one of the

premier financial institutions of Pakistan. Allied Bank’s capital and reserves were Rs. 1.525

(Billion) and assets amounted to Rs. 87.536 (Billion) and deposits were Rs. 76.038 (Billion).

Allied Bank enjoyed an enviable position in the financial sector of Pakistan and was

recognized as one of the best amongst the major banks of the country. In August 2004 as a

result of capital reconstruction, the Bank’s ownership was transferred to a consortium

comprising Ibrahim Leasing Limited and Ibrahim Group. Today the Bank stands on a solid

foundation of over 63 years of its existence having a strong equity, assets and deposits base

offering universal banking services with higher focus on retail banking. The bank has the

largest network of on-line branches in Pakistan and offers various technology based products

and services to its diversified clientele through its network of more than 700 branches. In

May 2005 Ibrahim Leasing Limited was amalgamated by transfer to and vested in with and

into Allied Bank Limited. ILL shareholders were issued ABL shares in lieu of the ILL shares

held by them. Application for the listing of ABL shares in all the Stock Exchange Companies

of Pakistan was made. ABL was formally listed and trading of the shares of the Bank

commenced w.e.f. the 8th , 10th and 17th August in ISE,LSE & KES. Muhammad Aftab

Manzoor has taken charge as CEO and President of the Bank on August 13 2007. He is an

ex-president of MCB Bank Ltd. Today, with its existence of over 60 years, the Bank has built

itself a foundation with a strong equity, assets and deposit base. It offers universal banking

services, while placing major emphasis on retail banking. The Bank also has the largest

network of over 700 online branches in Pakistan and offers various technology-based

products and services to its diverse clientele

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2.2 Nature of the Allied Bank Limited

Allied Bank Limited (ABL) is one of the dynamic commercial Bank of Pakistan by capturing

largest market share amongst new Banks and has provided good value to its shareholders.

Allied Bank limited (ABL) is principally engaged in the business of Banking (“banking

means the accepting, for the purpose of lending or investment, of deposits of money from the

public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or

otherwise;) as defined in the Banking companies’ ordinance, 1962 over the year; ABL has

proved its strength as a leading Banking sector entity. Allied bank engages in following

function The borrowing, raising, or taking up of money; the lending or advancing of money

either upon or without security; the drawing, making, accepting, discounting, buying, selling,

collecting and dealing in bills of exchange, hundies, promissory notes, coupons, drafts, bills

of lading, railway receipts, warrants, debentures, certificates, scrips (participation term

certificates, term finance certificates, and such other instruments as may be approved by the

State Bank) and other instruments, and securities whether transferable or negotiable or not;

the granting and issuing of letters of credit, traveller’s cheques and circular notes; the

buying, selling and dealing in bullion interest the buying and selling of foreign exchange

including foreign bank notes; the acquiring, holding, issuing on commission, underwriting

and dealing in stock, funds, shares, debentures, debenture stock, bonds, obligations,

securities (participation term certificates, term finance certificates, and such other

instruments as may be approved by the State Bank) and investment of all kinds; the

purchasing and selling of bonds, scrips or other forms of securities (participation terms

certificates, term finance certificates, and such other instruments as may be approved by the

State Banks) on behalf of constituents or others, the negotiating of loans and advances; the

receiving of all kinds of bonds, scrips of valuables on deposit or for safe custody the

collecting and transmitting of money and securities;

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2.3 Business Volume of ABL:

Rs in (Million)2,005 2,006 2,007 2,008 2,009

Total Revenue 5,027 6,120 10,333 14,736 19,708

Deposit 61,657 83,319 118,795, 131,839 143,037

Advances 44,778 69,838 85,977, 99,179 100,780

Investments 22,104 17,239 25,708 28,625 39,431

Pre-tax Profit 1,902 28,243 2,859 3,347 2,210

After tax profit 1,103 1,923 2,022 2,250 2,681

Return per Share 8.78 12.76 13.42 7.48 8.92Source: ABL website (www.abl.com.pk)

From deposit point of view it can be concluded that from the year 2005 to 2009, the total

deposits has increased about 100-110%, which shows a tremendous growth in deposit. From

the table we also conclude the result of pre-tax profit which also show increase from 1.9

billion to 2.2 billion in 2008 it was 3.3 billion but in 2009 it decrease due to opening of new

branches all over the Pakistan.

The overall progress of the bank is very good in private sector. From the above table a

conclusion can be made that bank sees up and down from earning per share but it is only due

to opening of new branches, as the number of required branches once achieved the bank will

increase its earning per share.

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3 Employee in ABL Bank

Year 2004 2005 2006 2007 2008 2009

Employee 6768 6909 7139 8181 8325 8713

No of Employee in ABL Abbottabad (BISE) Branch

Staff Strength Total

Permanent

Temporary/on contract

Bank’s own staff strength at the end of the year

Outsourced

8,713

142

8,855

2,835

Total Staff Strength 11,690

Designation No s

Assistant Voice President 2

Officer in Grade-I 12

Officer in Grade-II 10

Officer in Grade-III 5

Senior Assistants 1

Massagers 5

Total 35

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4 Product/ service Lines of Allied bank of Pakistan

4.1.1 All-Time Banking

Allied Bank has introduced the Allied Cash last year also referred to as ATM card. The

customer will now have the convenience of withdrawing cash from any of ABL’s ATMs

(Auto Taller Machine) conveniently located in major cities at any time of the day or night

even on closed days/holidays. Other services include customer being able to inquire about the

balance of his/her account or printing an abbreviated (mini) statement showing the most

recent eight transactions up to the previous working day.

In order to obtain Allied Cash+ Card, the customers simply have to fill out prescribed

Application form available at selected Allied Bank Branches in Karachi and Lahore. The

dully-filled form should be handed over the Manager of the Branch where the customer is

maintaining his account. Non-account holders would first have to open an account with

Allied Bank to have access to this facility. The Customer can feel absolutely safe his Allied

Cash + Card because it can only be used with the Personal identification Number (PIN),

which is given to him by the bank. Graphical representations have been employed, where

appropriate, for ease of understanding.

4.1.2 Allied Umrah Aasan

This unique scheme facilities those persons, who cannot afford to incur the lump sum

expenses for Umrah. It allows the intending pilgrims (Aazmeen) to make payment of Umrah

charges in monthly installments. Its salient features are:

o It is free of interest and markup.

o Using this scheme family, relatives and household servants can be sent for Umrah.

o Around 2500 Aazmeen are to be sent for Umrah every month.

o Lucky winners of the draw are duly informed by their respective branches.

o Total package for Aazmeen from Karachi is being Rs. 45,000. Aazmeen from Lahore

and Islamabad will have to pay an extra Rs. 3,000/- for Airline fare.

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o Umrah packages are of 10 days duration. The charges include Airline return ticket.

o Fee Visa, family accommodation and traveling within Saudi Arabia (Jeddah to Makka,

Makka to Madina and Median to Jeddah).

o Application for whole Family/Group can be filed through a single Application form. All

applicants of a family/group are sent for Umrah even if only one member of that

family/group is declared successful in the draw.

o Due to any reason if Umrah Applicant needs to withdraw his/her application, he/she will

given a refund of all money deposited through installments till that time.

o At the time of submitting the application Aazmeen has to deposit Rs. 2,000 per person as

first installment. Rest of the money is to be deposited through monthly installments of

Rs. 2,000/- person on every 5th day of the month.

o If an Applicant wins in the draw he/she is required to pay the balance amount through

monthly installments on returning from Umrah.

o Aazmeen have to submit a copy of their NI Cards and Passports with the application.

o Applicants have to deposit the monthly installment using deposit slips still 5th of every

month. Defaulters will not be included in the draw.

4.1.3 Master Cards

The customer can now become the holder of a true Credit Card here in Pakistan.

Allied Bank under license from Master Card International, U.S.A. issues its Master Card to

anyone meeting the eligibility criteria. With the Allied Bank Master Card the customer is

assured of a service meeting the highest international standards maintained by Master Card.

The Allied Bank Master Card helps the customer pay without the complications of cash or

checks. It doesn’t cost the customer anything if he pays in full within the due date, but if he

decides to spread the payments over several months a service charge @ 2.50% per month is

charged. Allied Bank – Master Card is safer than cash and simpler than checks.

The customer has been an account holder with the Allied Bank to apply for the Allied Bank –

Master Card that is available to the customer for an initial fee of Rs. 2,000/- (Rs. 500/-

membership fee + Rs. 1,500/- annual fee). Once the customer obtains his card, he simply

presents it at Shops, Supermarkets, Hotels, Pharmacies, Nursing Homes, restaurants, Petrol

Pumps and hundreds of other establishments which display the familiar Master Card sign

throughout Pakistan and abroad.

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Once purchases are made, the customer signs a voucher and that’s it he is not required to take

extra troubles. Every month the customer receives a statement showing details of

transactions, outstanding and the minimum amount due. The statements also give the last

date for payment so the customer can avoid paying service charges.

In order to avoid disruption in use of the card, it is essential that a least minimum payable

amount of the bill be paid regularly. In case the required payment is not received the

operation of the Master Card is automatically, suspended by the system. In such case, the

card is activated after receipt of overdue payment only.

4.1.4 Allied Tahafuz Deposit Scheme

Brings the customer unparalleled life insurance covers along with attractive monthly

profit. Minimum Deposit amount – Rs. 50,000/- or multiples thereof. Insurance cover up to -

Rs. 5,000,000/. As Competitive rate profit. The features of this scheme are:

Prospective client who will maintain a return free deposit for at least 3 months shall eligible

to avail interest free/mark-up free finance. Payment of profit on monthly basis, automatic

renewal on face value. Life insurance up to 5 times of the customer’s deposit amount with no

extra cost. Premium shall be paid by the bank. Full payment of claim in case of Death

Permanent total Disability. Eligibility Age – 18 to 64 years.

No medical examination for deposit up to Rs. 500,000/- and age up to 60.

4.1.5 Allied Karzas Scheme (No Interest/Markup)

Allied Bank moves a step forwards by introducing interest free banking through Allied

Karzas Scheme. The aim of this scheme is to provide an opportunity to the depositors to take

advantage of a real Riba Free economic environment and avail

Prospective client will maintain a return free deposit for at least 3 months shall be eligible to

avail interest free/mark-up free finance.

Deposit amount Rs. 100,000/- and multiples thereof.

Minimum deposit period, 3 months with automatic rollover facility.

Premature encashment allowed, without any penalty/charge.

Minimum deposit period for eligibility of finance, 3 months.

Maximum period of finance, 6 months.

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Maximum period to avail finance 12 months from the maturity of deposit. Every month (30

days) completed by the deposit shall be taken into account for calculation of entitlement of

finance. Finance proposal processing fee Rs. 100/- (non-refundable) plus documentation cost

on actual basis. In case of default/delay in repayment @ 0.055% per day (20.075% p.a._ to

be placed in charity A/C. Formula for calculation of entitlement of finance.

Same amount of finance for half the period of deposit or same period of finance for half the

amount of deposit.

4.1.6 Home Remittances

The Bank having a network of 755 branches all over Pakistan, undertakes to provide

safe and instant payment of remittance from expatriates, routed through designated foreign

exchange companies and correspondent banks with whom special arrangements have been

made in this regard. Through the Allied Express Services, ABL ensures that beneficiaries’

Accounts in ABL branches are credited with in 48 hours of receiving home remittance

information from overseas.

4.1.7 Hajj Services

The Bank serves the intending pilgrims by helping them in performing this religious

obligation. The Hajj forms and other related services are provided by the bank. However, the

terms and conditions for accepting the Hajj forms from intending pilgrims are in accordance

with the Hajj Policy announced by the government, each year. Hajj applications are available

with all branches during Hajj season, immediately after the Hajj policy is announced by the

Government of Pakistan.

4.1.8 Utility Bills

All branches of the Bank collect utility bills of electricity, gas and telephones. For

convenience of the customers, Utility Bills are collected by the branches during banking

hours and also in he evening banking on all working days. Bills can be paid through cash or

checks. Consumers may drop bills with crossed checks into a drop box available at the

branches under “Checks Drop-in” system.

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4.1.9 Agricultural Finances

Bank under Agricultural Financing Schemes envisaged by he State Bank of Pakistan

extend short, medium and long term, farm and non-farm credits. The farm credits are

extended for production (inputs) and development purposes. Non-farm credits are allowed

for livestock (goats, sheep and cattle), poultry, factory including social forestry and fisheries

(inland and marine excluding deep sea fishing).

4.1.10 Lockers

Allied Bank Lockers are available in three different sizes Small, Medium and Large

on a yearly fee. Locker holders need not have an account in the Bank.

4.1.11 Imp clients/customers through large number of authorized branches where trained

and motivated staff is available to handle the business on behalf of customer.

4.1.12 Allied Bank Rupee Travelers Checks

Carrying cash to strange alien location can prove to be risky as a single incident can render

one without monetary backup of any sort. Hence banks introduce traveler’s checks in order

to protect against any contingency.

4.1.13 Seasonal Finance

Running Finance is a short-term loan allowed by the bank for a period of one year. The

running finance account can be operated and daily sale proceeds can be deposited into the

account. The markup is recovered on the products of daily outstanding balance. The running

finance is suitable for meeting day-to-day financial needs of the business.

Cash Finance is allowed against pledge of goods. The delivery of goods is made against

payment.

Demand Finance is disbursed in lump sum or in accordance with the agreed disbursements

schedule and it is repayable as per the agreed installments, which could be monthly,quarterly,

biannual or annual.

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President

Senior Vice President

Vice President

Executive Vice President

Senior Executive Vice President [rosodmemtPresident

Regional General Manager Managerxecutive Vice President

Branch Manager

ABL STRUCTURE

5 Comments on Structure of ABL

Successful and profitable banking management depends on two principal factors. The manner in

which the functions of banking, that is the acquiring of deposits, the investing or converting such

deposits into earning assets, and the servicing of such deposits, are performed. The degree to

which officers and employees contribute their talents to the progress and welfare of the bank in

discharging duties and responsibilities.

5.1 Management Hierarchy

The management hierarchy represents the different positions and designations in the

hierarchy of the ABL. However, this is not the reporting hierarchy but merely represents the

positions and grades on the basis of seniority and grades.

5.2 Functional Hierarchy

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The functional hierarchy represents the reporting order in the hierarchy of ABL. The

hierarchy has president and directors at top management level and officers Grade I, II and

Grade III at the lower level management of ABL. The middle level management consists of

regional general Manager and Regional Controller of Operations. These positions are not

fixed. Any person in the hierarchy above the branch manager can be appointed as RGM and

controller operations.

5.3 Structure of Head Office

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President and CEOPresident and CEO

Board of DirectorBoard of Director

Head of Departments Head of Departments

Regional General ManagerRegional General Manager Controllers of operation

Controllers of operation

Branch ManagerBranch Manager

Office G-I, II and other lower StaffOffice G-I, II and other lower Staff

Allied Bank of Pakistan Head Office is situated in Karachi having branches, regional

functionality, money circulation, and their human resources and so on. ABL has its offices

and corporate branches spreader all over the country. Head Office is an administrative office

to manage all its branches and offices, to manage their policy making body/decision making

bodies which are given as under:

a. Board of Directors

b. Executive Committee

c. Divisional Head Offices and Provincial Headquarters

The head office has nine divisions which are divided in to different wings. The Head

Office is responsible for central affaires and delegation of powers / authority to the Regional

Headquarters. (Annexure Attached)

5.4 Board of Directors

The Board of Directors (BOD) of ABL is comprises of President, 3 SEVPs, 1

Representative of PBC, 1 representative of GOP, and 1 for private sector so it comprises of 7

persons.

5.5 Executive Committee

The executive committee consists of President and nine members and one of the

members also perform the functions of Secretary of the committee. The executive committee

nominates the divisional Heads. This body monitors day to day affaires of the Bank and is

sanctioning authority of financial and business proposal.

5.6 Divisional Chiefs

The Bank has nine division which are working under SEVP, EVP and divisional

chiefs. These nine divisions are:

Management Support

Audit and inspection

Treasury Management

Marketing and Development

Credit Policy Management

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Overseas Banking

Special Assets Management

Bank Secretariat

5.7 Provincial Chiefs

To enhance and manage the performance of banking system, the administration also

has divided the power of sanctioning finance and other credit facilities through provincial

chiefs by province-wise. The provincial head quarters of these chiefs are situated in Lahore,

Karachi, Quetta and Peshawar. The ABL has 29 regions in four provinces and Azad

Kashmir.

5.8 Regional Management Committee

The management has designed the banking structure into regions and their sub-divisions. To

manage these regions, a Regional Management Committee is allocated which consists of the

following designations, looks after the affaires of the regions.

Business Chief

Operational Chief

Risk Management Chief

Compliance Chief

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6 Organization Branch Structure

6.1 Structure of Balakot Branch.

In ABL Balakot branch Balakot was opened in 1997. “Mr. Shahid” SVP is the chief

Manager and Mr. Asim is operation manager who is AVP. There are 10 employees in Bank.

At present branch is providing services in all areas of banking. (Annexure-III shows this

relation at end of reports.)

There are six departments in Abbottabad Branch i.e.

Credit department

Accounts department

Deposit department

Remittances department

Cash department

IT department

Credit and Accounts department directly comes under the supervision of chief manager the

rest of department answerable to manager operation and manager operation responsible to

chief manager. There is foreign exchange department which works under deposit department

6.2 Staff order of this Branch

The staff order of the branch is as follows:

Branch Manager is a head within the branch. Under branch manager there are four main

designations i.e. Offices Grade-I, Officers Grade-II, Customer Service Manager and HR

Manager. Officers Grade-II & II are also divided into these departments like credit

department, account department, remittances department, cash department and IT department

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Branch Manager

Customer Service Manager Officer G-I

Teller Messenger

Officer G-II Manager

Operation

having their proper designations while customer service manager is also under branch

manager has to take the responsibility to handle and motivate customer. Teller works under

customer service manager. HR manager is also works under branch manager having

responsibility to hire contract employees within local community and also to handle and

manage payroll system for branch employees. Messenger and teller also works under HR

manager.

6.3 ABL Various Departmental Review:

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Different departments of ABL are working which are given as under:

6.3.1 Current Saving Department

In ABL current saving department mainly deals with cheques, vouchers and advices.

First of all a cheque holder have to present his/her cheque to the person responsible for

issuing the tokens. . Then cheque is passed on to the computer operator to entry it in

computer. Afterward it will go for signature verification after which it will be given to

cashier for payment.

Computer Operations: In ABL the computer section have several duties that are as under.

Daily Transactions: To record all the transactions in case of deposits made by the people

and also to record all the withdrawals made by the people or customers. Each transaction has

to be recorded in its appropriate head of account with the help of prescribed codes.

Vouchers: To record all the vouchers made by the remittance department, Remittance

department have to prepare debit and credit vouchers for about every transaction recorded in

their department. Then these vouchers are sent to computer operator to record those in

computer.

Advices: To record all advices received from other branches. Most of the-inter branch or

intra branch- remittances are subject to ultimate receipt of advices from the corresponding

branch to materialize the transactions. These advices also have to be recorded in computer.

Statements: To close the daily record a number of statements have to be printed out.

Statements like:

Day’s transactions (sequence)

Overdrawn facilitated a/c statement

Markup sheet

Inter branch transactions

Detail of PLS and Current a/c

Day’s transactions (a/c wise)

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Operative, Dormant, Inoperative and Unclaimed a/c

All ATM transactions

Detail of GL entries (official & non customer transactions)

Summary of all a/c (debits, credits & balances)

Profit due, transferred, disbursed, etc.

6.3.2 Account Department

Bank borrowing funds from outside parties is more important because the entire

banking system is based on it. Receiving of deposits is a basic function of all commercial

banks. Commercial banks do not receive these deposited for safekeeping purpose only. When

the bank receives the amount of deposited as a depositor, it become the owner of it. The bank

may therefore use these deposits, as it deems appropriate. But there is an implicit agreement

that the amount owned by the bank will be paid back to the depositors on demand or after a

specified period of time.

The borrowed capital of the bank is than the bank own capital. Bank’s borrowing is

mostly in the form of deposits. These deposits are lend-out to different parties. Larger the

difference between the rate at which these deposits are borrowed and the rate at which they

lend-out the greater will be the profit margin of the bank. Larger the funds lend-out the

greater will be the return earned on them and greater the amount of return on these deposits

earned greater will be the profit for the bank. It is because of this interrelated relationship.

Deposits are referred to as the “life blood small” for any banking sector.

Kinds of Account: There are numbers of account that ABL offers to its customer keeping in

mind their needs and dealing.

Saving Bank & PL Account: In Pakistan the saving Bank accounts are know as profit and

profit and loss sharing accounts (PLS A/C) fowling the illumination of bank. The owners of

such account are not allowed to withdraw money more than once are twice a week. In case of

withdrawal of large sum, the depositor is required to give to prior notices a week or two.

Thus the bankers are not required is always available to bank for giving to loans to their

22

customers. Thus these deposits also serves as source of credit certain by the commercial

banks. The rate or profit on this type of account varies from time to time. All the commercial

banks declare the rate of profit every year that is paid on these accounts on the basis of their

monthly credit balance. The bank will determine the proportion of profit & its decision will

be final. Profit will be determined on daily product basis while it will be paid on monthly

basis & will be paid on the minimum balance between the first day & last day of the month.

Zakat will be deducted on the exceeding amount as exempted from the Zakat deduction.

Taxes will be imposed according to the rules & regulation. In Pakistan post offices &

national saving centers also maintain this savings bank account to encourage saving habits

among the people. At the time of opening this account, a minimum amount of Rs.500 is to be

deposited. Subsequently the account is opened & account number is located. The depositor is

given a cheque book. The depositors who are wishing to close his account are required to

present his cheques to the bank in order to draw the credit balance and to close the account.

This type of account you can open joint account also which can be operated by anyone.

Current Account: There is no limit of withdraw of money from these accounts. In practice

the bankers do not allow any profit to such deposits in Pakistan. The customers are required

maintaining the minimum credit balance in their account in case of failing incidental charges

are recovered from defaulters. This is because the depositors may withdraw current deposits

at any time and as such the bank is not entirely free to employ such deposits. In general, the

bank allows the overdraft facilities to current account holders & the prevailing rate of markup

is charged from these customers. In ABL the minimum amount required to open the current

account is Rs. 500. No profit is paid to account beside this that the account holder has the

facility to taking s much money as he wants. Individual account is opened in the name of the

single personal one person on whose name it is opened only conduct it. While two opens

joint account and partnership account are more person and the bank fallow their instructions

for the conduct of the account. Similarly limited companies can also open their current

account.

Fixed Deposit Account/Term Deposits : These deposits are also called as time deposits

because these deposits are based on the fixed duration. The period for which these deposits

are kept with bank are ranged from seven days to ten years in light of the agreement between

the customer and the banker. The profit allowed on these account depend on the duration

longer the duration of the deposits the higher will be the rate of profit. The operation of fixed

23

account is different from saving & current accounts. Every time money is deposited with the

bank an application from filled and the bank issue a fixed deposit receipt for amount

deposited along with specific period. Fixed deposit receipt is given to the depositor and the

bank retains the counterfoil of the same receipt. Fixed term deposits may be in the joint

names of two or more person. The payment to one of those people will not discharge by the

bank without the authority of others.

Opening and operation of bank account: As discuss earlier there is a prescribed procedure

for opening different types of account. Following steps re followed while opening a new

account.

Application from for Opening of Accounting: A person who wishes to open a bank

account is required to complete this from the personal information is to be furnished. The

application signs the declaration to effect that he has understood the rules and regulation of

the bank.

Introduction: As required by the banking law the new customer needs to be introduced by

the account holder of the same branch where the account is being opened. The manager or

any other bank officer may introduce the new customer if they know them personally.

Signature card: At the time of opening an account a specimen signature card containing two

signature of the customer is required which the manager of the branch attaches with

application form. During the operation of account the signature is verified when the cheque is

presented for payment.

Cheque Book: After completing formalities for opening saving and current a cheque book s

issued to the customer for withdrawing cash from his or her account at the time of need. The

cheque contains minimum 25 pages & maximum 100 pages. The bank also charges excise

duty on cheque book.

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6.3.3 Advances Department

Lending Principles: The basis function of the bank is to accept deposit and lend money to

the borrowers against a spread so to be able to give some profit to the depositors as well as to

earn profit for the bank. While lending the money to the borrowers the bank should observe

the following lending principals:

Safety Principle: It means that the landed money will come back along with interest or

service charges etc. The borrower should not invest the money borrowed in unproductive

or speculative business.

Liquidity Principle: The money which has been landed to the borrower should be

returned to the bank on demand or as per repayment schedule provided by the client. The

sources of repayment should be clear and definite

Purpose Principle: The purpose of the advances should be legitimate and productive. It

should be ensured that the banks, funds are not being utilized for speculative business.

The credit restrictions by the central bank should not be violated & it should also be

ensured. It is always beneficial for the bank to finance for short-term requirements.

Profitability Principle: The end result of every business activity should be to earn some

profit. Similarly the bank must get some profit out of the activity of lending so that the

depositors could get their shares as well as the shareholders could earn something for

their investments..

Security Principle: The proposal should be dealt on its merit not on security. The

security should be considered a safety for the bank only in case of unexpected

emergencies. All the relevant documents of securities must be obtained & got valuation

of the property or any other security should be assessed correctly.

Spreading of Risk Principle: It is always safe for the bank to spread the risk in large

number of borrowers instead of loaning huge amount to few big shots, it is better to

obtain different types of securities instead of concentrating on one security..

National Interest and Suitability Principle: It is our moral as well as legal obligation to

ensure that no loaning is running counter to national interest. It is also our duty to ensure

that our lending policies are not against the social conditions or bindings

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6.3.4 Credit Department

The main function of the credit department is to lend money to the customer. Allied

Bank Ltd. Lends money in the form of clean advances against promissory notes as well as

secured advances against tangible and marketable securities. Beside these ABL also lend

money against life policies and immovable property.

Lien: Lien is the bank right to with hold property until the claim on the property is paid.

The bank looks at their lien as a protection against loss or overdraft or any other credit

facility. In ordinary lien the borrower remains the owner of the property, but the actual or

constructive possession remains with the creditor or bank though the borrower has no

right to sell it.

By Cash Credit: In this the bank lends money to the borrower against tangible security.

The total amount of the loan is not paid in one installment. The borrower has to pay

markup on the amount borrowed. Cash credit is favorite loan for large commercial &

industrial concern.

By Overdraft: This the most common type of bank lending. When a borrower requires

temporary accommodation, ABL allows its customer to withdraw an excess of the

balance form their account which the borrowing customers have in credit and thus called

overdraft. This facility is given to regular reliable & well established customer. When it is

against collateral securities, it is called “Secured Overdraft” & when borrowing customer

can not offer any collateral security except his personal security then the accommodation

is called “Clean Overdraft”.

Short Term Finance: Allied Bank Ltd. receives the saving of the people and lends it for

short term to its customers. Short-term finance is generally given for a period of one year

or less in durationdium Term Finance. The duration range of the intermediate term

finance is from one year to three years. It is also called term loan. Intermediate term

finance is usually given for the expansion of an existing business or for the purchase of

new equipments.

26

Long Term Finance: This type of finance is required for the period of more than five

years. Long term finance is generally given for the compilation of big projects, for the

construction of building and for the purchase of machineries.

Producer of Applying for Loan: Any customer who applies for loan should have an

account (usually current account) with ABL branch concerned. That account must be in

running position. When approval from head office is given, branch gives tern & condition

to the party. Bank does not advance 100% loan against a security, rather the profit margin

is different in different type of loan.

6.3.5 Remittances Department

Another important department in ABL Khyber Bazar Branch is Remittances

Department. The remittances department transfers the funds from one bank to other bank and

from one place to another place.

In remittances department the collection take place. The ABL made payment of only open

cheques on the counter and prohibits the payment of crossed cheques. ABL transfers money

from one place to another by the following means:

Mail Transfer: When a customer requests the bank to transfer his money from this

bank to any other bank or the branch of some other bank, the first thing he has to do is to

fill an application form. In which he states that he/she wants to transfer the money from

this bank to that bank by mail. If the customer is the account holder of the bank,

operating personal will proceed further with steps like:

Writing a debit voucher for a/c holder’s a/c

Preparing an advice in favor of stated bank/branch

Writing credit voucher for GL

Mail the advice

If the customer is not the account holder of this bank, then firstly, he has to deposit the

money and than above procedure will be adopted to transfer his money.

27

Telegraphic Transfer: With the changing requirements of the customer, ABL has

introduced the fastest transfer of money. The sender is required to apply through a form

in which he will give all the necessary details about the sender and beneficiary. The

sender deposits the money to be transferred plus bank charges at the bank counter. The

remittances officials send a telegram to concerned branch with specified code words and

the receiving branch makes payment to the beneficiary. Vouchers are sent by ordinary

mail to keep the record. On TT, no excise duty is charged only commission and telegram

charges are charged.

Pay Order: Pay order is the most convenient simple and secure way of transfer of

money. It is issued by, drawn upon and payable by the same branch of the bank. It is

neither transferable nor negotiable and as such it is payable to the payee named there in.

The following are the parties to a pay order.

Purchaser is a person, firm, company or local authority.

Issuing/paying branch is one which issues/pays on presentation.

Payee is a person named there in.

Demand Draft: Demand Draft is another way of transfer of money from one bank to

another bank. Unlike pay order, a form is required to be filled for the issuance of the

demand draft in which necessary particulars about the beneficiary and sender are given.

The sender deposits the amount of DD plus commission and other charges on the bank

counter, from where he is given a receipt and in accordance with this receipt he is issued

The following are the main essential of draft:

It is a Negotiable Instrument.

Filling a form and depositing the amount written on it prepare 2} Draft.

It is a written order to its branches or to another bank to pay the stated amount on draft.

6.3.6 Cash Department

This is the most important and critical department in a Bank. There are two basic

functions performed by the cash department. These are

28

Receipts: An individual who has account in the Bank can deposit money in

his account. For deposit of the money the individual has to fill the deposit slip in which the

account holder writes his name, Account number, amount of the money both in figures and in

words. After filling the deposit slip the Cash amount along with the deposit slip is submitted

with the cashier. The cashier collects the cash and counts it and after verification the cashier

stamps the deposit slip. One part of the deposit slip is given back to the customer and the

other part of the deposit slip remains with the bank for the record purposes.

The cashier also record the deposits made by the customers in credit sheets daily. The

deposits of all customers of the bank are controlled by mean of ledger account. Every

customer has its own ledger account and has separate ledger cards in which his / her total

record is kept. Bill collection is also one of the main functions of bank. Cashier has to

prepare a list of bills’ serial number, a copy of which is to be sent to the corresponding

organization.

Payments: The procedure of clearance of a cheque or payments is as following. First of

all the customer presents his cheque to the cashier The cashier records the account number

and the amount, which is to be drawn. Then the cashier check the cheque number in the

computer for the verification whether the account holder has such amount in his account

which he is demanding or not. If the computer passes the cheque, the Passing officer signs

the cheque and sent it to the cash counter then cashier pays the written amount to the

customer and then in the end cashier records the amount paid in computer.

6.3.7 Foreign Currency Department

Like Pak rupees account the foreign currency has many accounts like

Saving account

Current account

Term deposit account.

The bank deal in three type of foreign currency account Dollar, Euro & Pound

The account is open with 1000 dollar if it is less 5-dollar per month is deducted. For opening

the account NIC & introduction is required of the same bank. If any person wants to import

29

goods from foreign, an account is required and for international trading the FC is needed.

ABL provide foreign currency on Pak rupee at booking rate and the central office sent Rates

In foreign currency department the remittance is sent through Foreign Telegraphic Transfer.

The account holder can sent the amount in foreign bank account. If any transaction is made

the daily report is given to the central office Karachi daily.

Different accounts can b open like joint account or company account. The thankful

letter is sent for opening the foreign currency account to account holder and introducer.

When any transaction is made the bank inform stock exchange daily. The foreign currency

note is counted and recorded in the cash memo book. The people in the foreign country sent

the amount through S.W.I.F.T. Weekly and monthly report of all the transaction is given to

the stock exchange. Cheque book is also issued to the account holder & the foreign currency

Account number is given to him. In this FBC & FBR is done. Debit Credit Voucher is used.

The charges are deducted while closing the foreign currency account. And the cheque book is

return while closing the account. The branch sent excess foreign currency to its main branch.

If any branch needs foreign exchange they sent to this branch.

6.3.8 Clearing Department

In clearing process, if the account holder of ABL receives the cheque of other bank

like City Bank, Habib Bank Limited etc, and he submits it in ABL branch to be cashed. At

the same time the clearing process starts. First the bank name. Cheque number and the

amount are written in the register. After this three kind of stamps are required first bank

name stamp, secondly clearing stamp of next date and If the cheque is not local then the inter

city clearing stamp is required.

Some cheques are local and some are outstation. The institution N.I.F.T. provides the

services in clearing the cheque. They send the different cheque to different banks. The

N.I.F.T service is only in few cities, like Karachi, Lahore, Rawalpindi. The cheque of inter

city is send through N.I.F.T. And where, the N.I.F.T service is not available so the cheque is

sent through T.C.S.

30

The clearance of cheque is informed through advice. Some cheque is not passed so they

should return so Rs. 100 is deducted and if the cheque is inter city then the postage charges is

deducted. For this purpose the Debit & Credit voucher is used. When the cheque is cleared

the today stamp is required. Some cheque is drawn on ABL. This is called outward clearing.

These cheques will be entered in the outward clearing register. And the advice is sent for the

clearance of cheques. The account holder account is credited.

Out Ward Bill for collection: OBC means the cheque of other banks. When they sent

OBC the OBC is credit & OBR is debited and the advice is made on that time, one copy is

remain in the bank and the other copy is sent to the related branch. When they realized the

opposite entry is made. It is entered in the OBC register. The income A\c commission is

credited, and postage

31

FINANCE & ACCOUNT DEPARTMENT

7 Structure of ABL Finance & Account Division:

ESVP heads finance division. This ESVP is also DH (Divisional Head) of this department.

This division is responsible for keeping the records of all the transaction of different

branches. There are 15 people working in this department for all branches of Allied bank and

the final authority in this department is ESVP. Finance division is further divided into

subdivision, which are Budget and Finance & DRC.

The Finance Division (FND) is the hub of all financial information for maintaining

statutory accounts and measuring the performance of the Bank. While ensuring overall

financial management, financial control, financial reporting and accounting function, FND is

responsible for maintaining the account records and systems in accordance with internal

policies, regulatory requirements, corporate governance and international accounting

standards. It also establishes policies and procedures relating to finance function, monitors

returns / spreads and reports on various performance indicators including asset / liability

mismatch.

7.1 Finance & Account Operations:

The Bank’s management is responsible to establish and maintain an adequate and effective

system of internal controls and procedures. The management is also responsible for

evaluating the effectiveness of the bank’s internal control system that

Covers material matters by identifying control objective and reviewing significant policies

and procedures. The scope of Audit and Credit Risk Review Group (A & CRRG),

independent from line management, inter-alia includes, review and assessment of the

adequacy and effectiveness of the control activities across the bank as well as to ensure

implementation of and compliance with all the prescribed policies and procedures. All

significant and material findings of the internal audit reviews are reported to the Audit

Committee of the Board of Directors.

32

Note: Structure and Functions of the Finance Department (Annexure attached-)

The Audit Committee actively monitors implementations to ensure that identified risks are

mitigated to safeguard the interest of the bank. The Internal Controls Division under the

ambit of Operations Group is entrusted with the responsibility

of expediting rectification of irregularities and control lapses in branches’ operations and

various controlling offices pointed out through audit reviews. Vigorous efforts are made by

Operations Group to improve the Control Environment at grass root level by continuous

review & streamlining of procedures to prevent & rectify control lapses as

well as imparting training at various levels. The Compliance Group, through its regional

offices, ensures adherence to the regulatory requirements and bank’s internal policies and

procedures, with specific emphasis on KYC/AML. The Bank’s internal

control system has been designed to provide reasonable assurance to the Bank’s management

and Board of Directors. All Internal Control Systems, no matter how well designed, have

inherent limitations that they may not entirely eliminate misstatements. Also projections of

evaluation of effectiveness to future periods are subject to the risk that controls may become

inadequate because of changes in conditions or that the degree of compliance with the

policies or procedures may eteriorate. However, control activities are ongoing process that

includes identification,

evaluation and management of significant risks faced by the Bank. Recognizing it to be an

ongoing process, the management of Allied Bank is in the process of adopting an

internationally accepted COSO (Internal Control – Integrated) Framework with the assistance

of a reputable advisory firm in accordance with SBP Guidelines on Internal Controls. The

bank has already completed the detailed documentation of the existing

processes and controls, together with a comprehensive gap analysis of the control design.

The bank has addressed some of the major gaps identified during the exercise and is at an

advanced stage of developing and implementing remediation plans for the remaining gaps. In

addition, comprehensive management testing plans and framework are being developed for

ensuring on-going operating effectiveness of key controls.

Allied Bank expects the complete various stages of its Internal Control Program and achieve

external auditors’ certification on internal controls over financial reporting in 2010.

33

The Board of Directors being ultimately responsible for the internal control system endorses

the management evaluation and efforts to adopt above mentioned internationally accepted

standards in improving controls and processes to ensure better risk mitigation.

7.2 The Role of Financial Mangers:

Almost every firm, government agency, and other type of organization have one or more

financial managers. Financial managers oversee the preparation of financial reports, direct

investment activities, and implement cash management strategies. Managers also develop

strategies and implement the long-term goals of their organization.

Work environment in Allied bank for financial manager:

Working in comfortable offices, often close to top managers and to departments that develop

the financial data those managers need, financial managers typically have direct access to

state-of-the-art computer systems and information services. They commonly work long

hours, often up to 50 or 60 per week. Financial managers generally are required to attend

meetings of financial and economic associations and may travel to visit subsidiary firms or to

meet customers.

Financial managers of the bank play an increasingly important role in mergers and

consolidations and in global expansion and related financing. The financial manager of the

bank has specialized knowledge to reduce risks and maximize profit. ABL bank financial

managers advise senior managers financial and other matters.

The role of the financial manager, particularly in the bank, is changing in response to

technological advances that have significantly reduced the amount of time it takes to produce

financial reports. The CFO of the bank work on teams, acting as business advisors to top

management. The team of CFO of the bank is will equipped with the latest computer

technology to increase the efficiency of the bank financial operations.

The CFO of the bank monitor and control the flow of cash receipts and disbursements to

meet the business and investment needs of the bank. The example is cash flow projections

are needed to determine whether loans must be obtained to meet cash requirements or

whether surplus cash should be invested in interest-bearing instruments. The CFO of the

34

bank also responsible of Risk and insurance programs to minimize risks and losses that might

arise from financial transactions and business operations. They also manage the

organization’s budget.

The other function of the bank CFO such as lending, trusts, mortgages, and investments, or

programs, including sales, operations, or electronic financial services. He also establishes

relationships with other financial institutions in terms of accounts, cash management and

credit management to get new market for the bank and to attract business.

7.3 Use of Electronics data in decision making:

The Electronic Technology Division (ETD) is responsible for managing the Bank's

technology needs. This includes not just establishing and maintaining technology

infrastructure for providing operational support to all units of the Bank, but also encompass

introducing latest state-of-the-art technology-driven products and service delivery systems. In

an age of ever increasing competitive pressures, technology support impacts service delivery

standards and customer satisfaction levels. The value addition from this area has made a

significant contribution towards successfully expanding and managing the customer base of

the Bank.  The ABL has a countrywide communications network utilizing Satellite, Radio

and Leased Line links. Through it, the Local Area Network (LAN) in each branch is

connected with the Wide Area Network (WAN) of the Bank. This has provided the Bank

with on-line country wide ATM / Inter-branch transaction capability. The Bank, along with a

foreign partner Bank, is the original co-founder of the first inter-Bank ATM switch in

Pakistan, which is now known as "One-Link".

During the year, a large number of new technology initiatives were successfully

implemented. The every new branch opened during the year was operational with on-line

Banking from day one. This included the ABL bank Offshore Banking Unit in Bahrain,

( which was linked to the Head Office and the Treasury via a Virtual Private Network (VPN).

The Bank's existing systems were also updated. The list covers a wide range from upgrading

the SWIFT connectivity of the Bank; to enhancing an Oracle based Human Resource

Management Information System. New initiatives include developing an Oracle based

35

application for State Bank of Pakistan reporting, Electronic Bills Payment System via the

Bank's ATM network and the Internet.

The technology area has ambitious plans for the future. The list includes Call Centers,

Data Mining and Warehousing Project, and enhancement of the ATM network to the

international CIRRUS network standards. The range of utility bills presently payable via the

Internet and the ATM network is to be increased, subject to agreements with the utility

companies. In addition to the above, the Bank will focus on improving customer service

standards and products range by focusing on new and emerging e-commerce and internet

related technologies.

ABL has an Electronic Technology System at Head Office Rawalpindi. This system

provides services to the individual-to-individual Accounts Holders, information required by

upper Management / State Bank & Government Departments.

The Electronic Technology System provide following services:

Online Banking

Internet Banking

Auto Teller Machine (ATM)

Phone Banking

Balance Transfer facility

Online Availability Of Different Application Form

Technology has played a pivotal role in meeting customer expectations, particularly

with respect to speed and quality of service.

ABL has fully automated transitive processing systems for back-office support. Its

branch network is connected online real time and its customers have access to off site as well

as on site ATMs, all over Pakistan. Its phone Banking services and Internet Banking facility

allows customers to enjoy routine-Banking services from any here any time in the world.

5.4 Mobilization of funds in ABL:

The basic function of bank is accepting deposit and lending advances and the difference is

the bank profit. For lending advances bank need money and this money comes from

customer through deposit. So main source of funds in bank is deposit and same with Allied

36

bank for mobilization of funds Allied bank top management make policies in the guidelines

of SBP policy. The Allied bank top management, expert management and CFO do lot of

working before introducing any scheme once they work on that scheme and take final

decision than they launch that scheme.

In Allied bank following schemes are used for mobilization of fund. Through which Allied

bank raise fund.

1: Current Account.

2: Saving Account.

3: Term & fixed Deposit Account.

(Rs. In Million)

YEAR 2005 2006 2007 2008 2009

Fixed Deposits 6,762 13,275 37,999 40,349 29,997

Saving Deposits 42,241 49,911 57,854 64,698 81,605

Current Accounts 11,406 18,463 20,089 23,925 28,465

Other Deposits 66 97, 125 290 415

Total Deposits 163,140 81,748 116,068 129,264 140,484

www.abl.com.pk

Fixed Deposits are continuously increasing from 2005 to 2008 while in 2009 it is decreasing.

Saving deposits are increasing from 2005 to 2009 as well as current assets are increasing.

The major change is in other deposits i.e. in 2005 these are 66,550, in 2006 these are at

97,829 have a continuous increase up till 2009 i.e. 415,904 a great change.

5.5 Generation of funds in ABL

Financial institution works for profit and specially commercial bank the primary objective is

profit. And Allied bank also works for profit and this profit mostly comes from markup

income and non markup income. Markup income means the difference between interests paid

to depositors and receives interest from loan. And non markup income means the income

receives by giving different types of services to customers receive commission on the

services.

Allied bank also generates funds through loaning / Investment & Commission / Exchange.

37

Allied bank also invests in stock exchange and earns dividend this dividend income also the

generation of funds of Allied bank. Allied bank also generate fund by dealing in foreign

currencies.

(In Million)

S.# Generation of Fund 2005 2006 2007 2008 2009

1 Net Mark-up / Interest Income 4073 4487 8780 12596 15143

2 Fee Commission & Brokerage Income 524 708 838 1013 1072

3 Dividend Income 37 26 51 109 137

4 Income from dealing in foreign currencies 112 180 356 5844 655

5 Other income 278 177 206 321 336

Total Income 5027 5581 10233 14626 1734

www.abl.com.pk

5.6 Sources of Fund in ABL:

The sources by which Allied bank get fund are following.

1. Paid up capital, the reserve fund.

2. Deposits

3. Borrowing from non-deposit sources.

All these sources are very important sources and through this bank have generated lot of

fund. And through this Allied bank balance sheet figure goes up and these funds are used for

advances and for investment purpose.

These are main sources besides these main sources, Allied bank also gives different services

to its clients which are in the shape of advances and also bank help them in there business in

return of these loans bank gets interest and its commission which is also the source of funds.

Allied bank make very strong policy in raising fund that’s why every year the figure of these

funds increase upward.

(In Million)

S.# YEAR 2005 2006 2007 2008 2009

01 Reserve Fund 2759 4317 5862 5814 6948

02 Deposits 61656 83318 118794 131839 143036

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03 Borrowings 15903 13781 10562 14964 17553

www.abl.com.pk

The bank has main three sources of funds:

In 2005 reserve funds are 2759 which is increased to 6948 in 2009 which shows the growth

of bank. In 2005 deposits are 61656 which is also in increasing up till 2009 i.e. 143036 and

also the borrowings are 15903 in 2005 increasing continuously to 2009 i.e. 17553.

3.9 Allocation of Funds in ABL:

(In Million)

S.# SECTOR 2005 2006 2007 2008 2009

01 Cash & balances with treasury Bank 6678 8762 11766 14879 13356

02 Balance with others Bank 2650 4847 5550 7333 3497

03 Lending to financial institutions 5770 2324 10172 8392 14444

04 Investment 22104 17239 25708 28625 39431

05 Advances 44777 69838 85976 99179 100780

06 Fixed assets 1979 2595 3192 3810 5128

www.abl.com.pk

Bank accept deposit and on these deposit bank gives interest for this interest and for his own

profit bank allocate these fund in different sector. The main allocation of fund in Allied bank

is lending advances from these bank earn interest income through which he pays to depositor

and remaining difference is bank profit. Beside this bank also invest in other businesses but

in the guideline of state bank. Allied bank always invests in safe investment due to which

risk of loss is minimized. In Pakistan all the financial institution works under the guideline of

state bank same with Allied bank that strictly follows the policies and restrictions of state

bank of Pakistan. State bank of Pakistan has check and balance on banks that they not invest

fund of depositor in risky investment. Due to these policies every bank maintain 8% of CRR

(cash required return) with state bank of Pakistan which now 6% due to liquidity. Throw

which depositor has trust on banks. Allied bank also maintains 6% CRR with state bank of

total demand/time liability which help them in case of emergency.

39

5.8 Critical Analysis of Theoretical Concepts

Financial statements (or financial reports) are formal records of a business' financial

activities. These statements provide an overview of a business' profitability and financial

condition in both short and long term. There are four basic financial statements:

1. Balance Sheet - Also referred to as statement of financial condition, reports on a company's

assets, liabilities and net equity as of a given point in time.

2. Income Statement - Also referred to as Profit or loss statement, reports on a company's

results of operations over a period of time.

3. Cash Flow Statement - Reports on a company's cash flow activities, particularly its

operating, investing and financing activities.

4. Statement of Stockholder's Equity - Reconciles the difference between net equity at two

different points in time.

Financial statements provide information of value to company officials as well as to

various outsiders, such as investors and lenders of funds. Publicly owned companies are

required to periodically publish general-purpose financial statements that include a balance

sheet, an income statement, and a statement of cash flows. Some companies also issue a

statement of stockholders' equity and a statement of comprehensive income, which provide

additional detail on changes in the equity section of the balance sheet. Financial statements

issued for external distribution are prepared according to generally accepted accounting

principles (GAAP), which are the guidelines for the content and format of the statements. In

the United States, the Securities and Exchange Commission (SEC) has the legal

responsibility for establishing the content of financial statements, but it generally defers to an

independent body, the Financial Accounting Standards Board (FASB), to determine and

promote accepted principles.

Users of Financial Statements

40

Financial statements are used by both internal and external users.

1. Internal Users: Are owners, managers, employees and other parties who are directly

connected with a company. Owners and managers require financial statements to make

important business decisions that affect its continued operations. Financial analysis is then

performed on these statements to provide management with a more detailed understanding of

the figures. These statements are also used as part of management's report to its stockholders,

as it form part of its Annual Report.

Employees also need these reports in making collective bargaining agreements (CBA) with

the management, in the case of labor unions or for individuals in discussing their

compensation, promotion and rankings.

2. External Users: Are potential investors, Banks, government agencies and other parties

who are outside the business but need financial information about the business for a diverse

number of reasons.

Prospective investors make use of financial statements to assess the viability of

investing in a business. Financial analysis are often used by investors and is prepared by

professionals (Financial Analysts), thus providing them with the basis in making investment

decisions.

Financial institutions (Banks and other lending companies) use them to decide

whether to grant a company with fresh working capital or extend debt securities (such as a

long-term Bank loan or debentures) to finance expansion and other significant expenditures.

Balance Sheet

A balance sheet, also known as a "statement of financial position", reveals a

company's assets, liabilities and owners' equity (net worth). The balance sheet, together with

the income statement and cash flow statement, make up the cornerstone of any company's

financial statements. If you are a shareholder of a company, it is important that you

understand how the balance sheet is structured, how to analyze it and how to read it.

How the Balance Sheet Works

41

The balance sheet is divided into two parts that, based on the following equation, must equal

(or balance out) each other. The main formula behind balance sheets is:

Assets = liabilities + shareholders' equity

This means that assets, or the means used to operate the company, are balanced by a

company's financial obligations along with the equity investment brought into the company

and its retained earnings.

Assets are what a company uses to operate its business, while its liabilities and equity

are two sources that support these assets. Owners' equity, referred to as shareholders' equity

in a publicly traded company, is the amount of money initially invested into the company

plus any retained earnings, and it represents a source of funding for the business. It is

important to note, that a balance sheet is a snapshot of the company’s financial position at a

single point in time.

It's called a balance sheet because the two sides balance out. This makes sense: a company

has to pay for all the things it has (assets) by either borrowing money (liabilities) or getting it

from shareholders (shareholders' equity).

The balance sheet is one of the most important pieces of financial information issued

by a company. It is a snapshot of what a company owns and owes at that point in time. The

income statement, on the other hand, shows how much revenue and profit a company has

generated over a certain period. Neither statement is better than the other - rather, the

financial statements are built to be used together to present a complete picture of a company's

finances.

42

FINANCIAL ANALYSIS

7 Financial Analysis

Financial statement analysis is the principal mean of reporting the financial condition and the

result of operations of an organization, or in other words we can say that financial analysis

are carried out for the purpose of identifying the financial strengths and weaknesses of an

organization by properly establishing the relationship between the balance sheet and income

statement items. This analysis helps many parties in making decision who are interested in

business activities. To improve the quality of decision making, proper analysis of these

statements helps a lot. The firm itself and outsider providers of capital, creditors and

investors all undertake financial statement analysis. The type of analysis varies according to

the specific interests of the party involved.

For example, suppliers are interested in liquidity of the firm. There claims are short term, and

the ability of the firm to pay these quickly is best judged by an analysis of the firm’s

liquidity. The claims of the bondholders, on other hand, are long term. So bond holders are

more interested in cash-flow ability of the firm. Investors are commonly concerned with

present and future earnings. As a result, investors usually focus on analyzing profitability.

They would also be concerned with the firm’s financial conditions insofar as it affects the

ability of the firm to pay dividend and avoid bankruptcy. Management also analyzes financial

analysis for the purpose of internal control and to check the performance of the firm.

Similarly government agencies analyze financial data for the tax purpose.

43

Allied Bank LimitedBalance Sheet

2005 2006 2007 2008 2009ASSETS Rupees in thousandsCash & balances with treasury Banks 6,678,026 8,762,866 11,766,925 14,879,230 13,356,055

Balances with other Banks 2,650,166 4,847,899 5,550,148 7,333,002 3,497,054

Lending’s to financial institutions 5,770,842 2,324,839 10,172,242 8,392,950 1,444,143

Investments 22,104,425 17,239,156 25,708,194 8,625,915 39,431,005

Advances 44,777,538 69,838,392 85,976,895 99,179,372 100,780,162

Operating fixed assets 1,979,919 2,595,023 3,192,862 3,810,331 5,128,428

Deferred tax assets - - - - -

Other assets 1,425,986 1,459,716 2,732,641 3,812,788 5,535,038

85,386,902 107,167,540 145,099,907 166,033,588 182,171,885

LIABILITIESBills payable 973,703 1,227,093 1,315,680 1,839,077 2,627,051

Borrowings from financial institutions 15,903,055 13,781,555 10,562,338 14,964,087 17,553,525

Deposits and other accounts 61,656,607 83,318,795 118,794,690 131,839,283 143,036,707

Sub-ordinated loans - 1,000,000 2,999,700 2,998,500 2,997,300

Liabilities against assets subject to finance lease

37,350 14,159 1,459 - -

Deferred tax liabilities 806,753 526,866 567,217 736,298 471,519

Other liabilities 962,592 1,282,980 2,271,393 2,603,113 3,219,796

80,340,060 101,151,448 136,512,477 154,980,358 169,905,898

NET ASSETS 5,046,842 6,016,092 8,587,430 11,053,230 12,265,987

Share capital 1,141,680 1,255,848 1,507,018 2,004,333 3,006,499

Reserves 2,759,599 4,317,301 5,862,074 5,814,754 6,948,336

Un-appropriated profit - - - 1,799,979 2,144,810

  3,901,279 5,573,149 7,369,092 9,619,066 12,099,645

Surplus on revaluation (Net to Tax) 1,145,563 442,944 1,218,338 1,434,164 166,342

5,046,842 6,016,093 8,587,430 11,053,230 12,265,987

From 2005 to 2009

www.abl.com.pk

44

Allied Bank Limited

Profit & Loss

From 2005-2009

  2005 2006 2007 2008 2009

Mark-up / return / interest earned 4,073,715 4,487,206 8,780,698 12596921 15143241

Mark-up / return / interest expensed 1,379,609 1,117,206 4,278,374 6977313 8685624

Net mark-up / interest income 2,694,106 3,370,000 4,502,324 5619608 6457617

Provision(Non-performing loans & Advances) 308,528 277,398 638,547 1128137 3920240

(Reversal) / provision for impairment in the –     - -

value of investments – 38,066 -36,555 376 1501

Bad debts written off directly   7   - -

  308,528 315,471 601,992 1128513 3921741

Net mark-up / interest income after provisions 2,385,578 3,054,529 3,900,332 4491095 2535876

Non mark-up / interest income          

Fee, commission and brokerage income 524,775 708,377 838,561 1013660 1072868

Dividend income 37,658 26,318 51,143 109326 137079

Income from dealing in foreign currencies 112,808 180,992 356,218 584344 655761

Gain on sale of investments   540,193 99,825 112474 2361251

Other income 278,512 177,648 206,819 321758 336809

Total non-markup / interest income 953,753 1,633,528 1,552,566 2139254 4565496

  3,339,331 4,688,057 5,452,898 6630349 7101372

Non mark-up / interest expenses          

Administrative expenses 1,436,304 1,845,179 2,591,985 3277353 4789536

Other charges 1227 138 1,832 6141 12051

Total non-markup / interest expenses 1437531 1,845,317 2,593,817 3283494 4801587

  1901800 2,842,740 2,859,081 3346855 2299785

Profit before taxation 1901800 2,842,740 2,859,081 3346855 2299785

Taxation – current 873,639 876,089 828,774 983875 98535

– prior years' – – -188,247 - -233950

– Deferred -74,904 43,611 196,558 113006 -245812

  798735 919,700 837,085 1096881 -381227

Profit after taxation 1103065 1,923,040 2,021,996 2249974 2681012

Un-Appropriated profit brought forward - – – 1617597 1799979

Profit available for appropriation 1103065 1,923,040 2,021,996 3867571 4480991

Appropriations:          

Statutory reserve 220,613 384,608 404,399    

Capital reserves (reserve for issue of bonus shares) 114,168 251,170 497,315    

Revenue reserves 539,948 1,036,092 894,229    

45

Proposed cash dividend 228,336 251,170 226,053    

  1,103,065 1,923,040 2,021,996    

www.abl.com.pk

7.3 Ratio Analysis

With a greater understanding of the balance sheet and how it is constructed, it can be

looked now at some techniques used to analyze the information contained within the balance

sheet. The main way this is done is through financial ratio analysis.

Financial ratio analysis uses formulas to gain insight into the company and its operations. For

the balance sheet, using financial ratios (like the debt-to-equity ratio) can show a better idea

of the company’s financial condition along with its operational efficiency. It is important to

note that some ratios will need information from more than one financial statement, such as

from the balance sheet and the income statement.

The main types of ratios that use information from the balance sheet are financial

strength ratios and activity ratios. Financial strength ratios, such as the working capital and

debt-to-equity ratios, provide information on how well the company can meet its obligations

and how they are leveraged. This can give investors an idea of how financially stable the

company is and how the company finances itself. Activity ratios focus mainly on current

accounts to show how well the company manages its operating cycle (which include

receivables, inventory and payables). These ratios can provide insight into the operational

efficiency of the company.

7.3.1 Current Ratio

This ratio indicates the business liquidity position over specific period of time. It measures

ability to meet current debts with current assets. It is calculated as.

Current Ratio = Current Assets / Current Liabilities

  2005 2006 2007 2008 2009

C. Assets 15,099,034 15,935,604 27,489,315 30,605,183 31,297,252

C. Liabilities 16,876,758 15,008,648 11,878,018 14,964,087 20,180,576

Current Ratio 0.89 1.06 2.31 2.05 1.55

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As we see the current ration of Allied bank we increase every year from 2005 to 2008 but if

we see 2009 in that year downward tread current ration decrease from 2.05 in 2008 to 1.55 in

2009. in 2003 the current ratio is 0.89 which increase in 2006 to 1.06 due to decrease in

current liabilities although current assets decreases in 2006 but current liabilities decrease

more than current liabilities the reason of decrease in current assets is due to decrease in

lending to financial institutions also in this year bank made less investment compare to last

year. In 2008 bank also borrow less compare to last year. In 2009 current ration increase very

high compare to other years. The reason is same that in this year current assets increase very

much and current liabilities decrease very much compare to last year. This is due to the same

reason of last year. In 2007 again current ration increase which is good sign for Allied bank.

But in 2009 it decrease due to liquidity problem and this year Allied bank clear its bill which

are due on him. ABL has maintained and constructed funds to settled short debts and is in

sound position.

Last five year financial statements of ABL

7.3.2 Leverage Ratio

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

47

of equity. Leverage ratios measure the amount of financial leverage. Commonly used

leverage ratios are debt to ratio, and debt to equity ratio.

Financial leverage is concerned with the proportion of debts to its equity. Higher the

leverage, higher the profitability as with the increase in leverage the financial risk increases.

7.3.3 Debt Ratio

This ratio shows the percentage of debt to the total assets. It also indicates the proportion of

rights of the outsiders on the assets of the business.

Debt Ratio = Total Debts / Total Assets

  2,005 2,006 2,007 2,008 2,009

Total Debts 80,340,060 101,151,448 136,512,477 154,980,358 169,905,898

Total Assets 85,386,902 107,167,540 145,099,907 166,033,588 182,171,885

Debt Ratio 0.94 0.94 0.94 0.93 0.93

The debt ratio of Allied bank is very constant through out the last 5 years only little bit

change in last 2 years compare to 2005, 2006 and 2007. this ration exhibit that slight increase

in 2006 with gradual decrease over the next few years up to 2009, balance sheet indicates

that substantially less than 95% of the organizations assets were financed by out side which

has shown gradual decrease in 2007,2008,2009 from 94.08% in 2007 to 93.27% in 2009.

7.3.4 Debt to Total Capitalization Ratio

48

It is the ratio which is also used to measure the financial leverage or risk of any business. It

shows a proportion or percentage of business total debts to its shareholders funds.

Debt to Equity Ratio = Total Debts / Share holders Equity + debt

  2005 2006 2007 2008 2009

Total Debts 80,340,060 101,151,448 136,512,477 154,980,358 169,905,898

Equity(D+E) 3,901,279 5,573,149 7,369,092 9,619,066 12,099,645

Debt to Equity Ratio 20.59 18.15 18.53 16.11 14.04

The debt to equity ration shows Conservative approach to debt/equity ratio indicates smaller

amount of funds came from shareholders equity than outsiders provided comparison between

the year’s shows that the ratio has considerably decreased which shows credibility of the

organization and stakeholders’ protection. In 2005 debt to equity ratio is 20.59 which

decrease in 2006 to 18.15 in 2006 again rise due to increase in total debt in this year bank

total deposit increase very much due to change in rate before this bank pays less interest rate

but due to rate change in market Allied bank also change it and attract more customer. In

2008 this ration goes down and same trend in 2009 the reason is stakeholders investment in

bank.

INTEREST COVERAGE RATIO

49

Any business may measure its ability to pay interest out of its annual profit interest and taxes

in number of times with the help of interest coverage ratio. If the ratio’s trend shows

increasing trend, then definitely the business ability to pay interest enhances.

Interest Coverage= Earning before interest and taxes / Interest Expense

  2005 2006 2007 2008 2009

EBIT 1,901,800 2,842,740 2,859,081 3,346,855 2,299,785

Interest Expense 1,379,609 1,117,206 4,278,374 6,977,313 8,685,624

Interest Coverage 1.37 2.54 0.66 0.47 0.26

Profits before taxes available to cover interest expense have been fluctuating unevenly

through 2005-2009. 1.37 In 2005, it increased to 2.54 in 2006. the reason of this increase is

that this year Allied bank make huge profit this not only Allied bank but every bank this year

make huge profit due to grooming of banking sector. Decrease was indicated in 2007 to

0.668, 0.479 and 0.264 in next respective years. In next all year this ration trend is

downward the main reason of this is increase in interest rate and also competition in banking

sector.

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TOTAL ASSET TURNOVER

This ratio shows the efficiency of the business in relation to its total assets. In other words it

indicates the revenue generated in number of time by utilizing all assets.

TAT= total revenue / Total Assets

  2005 2006 2007 2008 2009

Net

sales

4,073,715 4,487,206 8,780,698 12,596,921 15,143,241

Total

Assets

85386902 107,167,540 145,099,907 166,033,588 182,171,885

TAT 0.04 0.04 0.06 0.07 0.08

ABL has shown consistent development in ability to general sales using available assets.

With slight decrease in 2007 as compared to 2006 and 2005. ABL has shown improvement

and increase in total assets turn over which is a healthy contribution. 6% in 2007, 7.6% in

2008 and 8.3% in 2009. The reason of improvement is that total assets of Allied bank goes

up every year which due to opening of new branches.

NET PROFIT MARGIN

51

This ratio indicates the earning capacity of business in percentage against its total revenue. In

other words, we can say that a company is earning net amount in rupees against every Rs.100

of revenue generated. If the net margin profit increases its shows the increase in the

profitability state of business.

Net profit margin= Net profit after taxes / total revenue *100

2005 2006 2007 2008 2009

Net profit after taxes 1,103,065 1,923,040 2,021,996 2,249,974 2,681,012

Net sales 4,073,715 4,487,206 8,780,698 12,596,921 15,143,24

1

Net profit margin 27.07 42.85 23.02 17.86 17.70

Return on sale increased from 27% to 42.85% in 2006. In the following years despite of

increase in sales, net profit has decreased, to 23.03% in 2007, 17.86% in 2008 and 17.7% in

2009. Possible reason may be increase in operating expenses and increase in inflation rate.

LIQUIDITY QUCIK RATIO

Quick Assets refer to the most liquid assets which readily be converted into cash. Quick

assets to deposits ratio show how much liquid money is in hand to meet obligations without

going to the creditors or the money market. The minimum Cash Reserve Requirement by

SBP for commercial banks is 5% & 15% in the form of Govt. securities.

52

Liquidity Quick Ratio = Quick Assets / Total Deposits x 100

2005 2006 2007 2008 2009

Quick Assets 6,678,026 8,762,866 11,766,925 14,879,230 13,356,055Total Deposits 61,656,607 83,318,795 118,794,69

0131,839,28

3143,036,707

Liquidity Quick Ratio 10.84 10.51 9.90 11.28 9.34

In our case, the ratio is much above the benchmarked level and ranges between 38 – 48%. It

reflects very positively on the liquidity of the Bank. Bank is well equipped to pay back in

case all the deposits are called without going to the debtors.

RE

TURN ON INVESTMENT

It shows the net profit earned against utilization of total assets in term of percentage. This is

an important ratio to measure the profitability as well as optimal utilization of available

assets.

ROI= Net profit after taxes / Total assets * 100

  2005 2006 2007 2008 2009

Net profit after taxes 1,103,065 1,923,040 2,021,996 2,249,974 2,681,012

Total Assets 85386902 107,167,540 145,099,907 166,033,588 182,171,885

ROI 1.29 1.79 1.39 1.35 1.47

53

ROI has shown uneven variations in 2005, 2006 and 2007 with considerable stability in 2008

and 2009. In general again country economic condition, competition in banking sector and

organizational restructuring may be the affective causes.

ADVANCES TO DEPOSITS RATIO

A steady increase in the advances has been observed over the years. It is a very good sign as

deposit money is not sitting idle and is used in a viable manner. The gap in deposits and

advances figures is because of investment in securities, bank preferably invests in govt.

securities, which are risk free. The Bank seems to be a regular borrower from the inter bank

market; the bank borrowing are increasing over the years but this increase can be neglected

because the balance sheet shows the bank borrowing figure of the last day of income year,

this might have been returned the very next day, so it is not as such alarming.

Advances to Deposits ratio =Advances / Deposits + Borrowed Funds x 100

2005 2006 2007 2008 2009Advances 44,777,538 69,838,392 85,976,895 99,179,372 100,780,162

Borrowings 15,903,055 13,781,555 10,562,338 14,964,087 17,553,525

Deposits 61,656,607 83,318,795 118,794,690 131,839,283 143,036,707

Advances to Deposits 57.73 71.92 64.46 66.55 62.75

In the year 2005 the ration is 57.73 which is increasing in the year 2006 i.e. 71.92. in the year

2007 there is a decline at 64.46 then again increase in year 2008 at 66.55. in the year 2009 it

54

is on 62.75 which is in decrease.

GROSS PROFIT MARGIN

The gross profit is calculated by subtracting the mark up expenses from its markup

income. The above ratios indicated the amount earned by NBP against each Rs. 100 of

markup in order to meet the operating expenses of the business.

Gross profit margin= Gross profit / Net sales

  2005 2006 2007 2008 2009

Gross profit 2,694,106 3,370,000 4,502,324 5,619,608 6,457,617

Net sales 4,073,715 4,487,206 8,780,698 12,596,921 15,143,241

Gross profit margin 0.66 0.75 0.51 0.44 0.42

With considerable increase in 2006 from 66% to 75% profits have decreased in the following

years to 42.64% in 2009 due to competition in the banking sector and fluctuation in the

economic stability has caused this decrease in gross profits.

55

RETURN ON EQUITY

The percentage earning after paying taxes by any business against its shareholder’s funds can

be measured with the help of return on equity. If there is an increase in ROE, it shows the

stability of the business in terms of profit earning.

ROE= Net profit after taxes / Shareholders equity * 100

  2005 2006 2007 2008 2009

Net profit after taxes 1,103,065 1,923,040 2,021,996 2,249,974 2,681,012

Shareholders equity 3,901,279 5,573,149 7,369,092 9,619,066 12,099,645

Return on Equity 28.27 34.50 27.43 23.39 22.15

Return on shareholders equity has substantially decreased in 2007 and onwards from 34.5%

in 2006 to 22.16% in 2009. Again possible reasons might be increased competition among

banks and fluctuating economic conditions of the country. Highest return was achieved in

2004 with increase from 28.27% in 2005 to 34.5% in 2006.

56

CAPITAL ADEQUACY RATIO

Total eligible regulatory capital held 38.1 76,680,848 63,960,748

Total risk weighted assets 38.2 586,894,116 555,979,573

Capital adequacy ratio 13.07% 11.50%

FIXED ASSETS TO NET SALE

This ratio is used to calculate the relation between the total sales to total fixed assets that

mean how much sales to fixed assets. the following formula is used to measured it.

FAT= Net Sales / Fixed Assets (Rs in thousand)

Particulars 2005 2006 2007 2008 2009

Net sales 4,073,715 4,487,206 8,780,698 12596921 15143241

Fixed Assets 1,979,919 2,595,023 3,192,862 3,810,331 5,128,428

FAT 2.06 1.73 2.75 3.31 2.95

The relation b/w the fixed assets to net sale in FY-05 is 2.06 that is almost doubled to assets

which is positive sign of organization development in next FY-06 it reduced and again 2.75

in FY-07 and tend to increase in FY-08 and again decline in FY-09

57

INCOME TO EXPENSE RATIO

The income to expenses ratio used to measure the efficiency of bank how much expenses

paid by bank to generate the income. In other word it shows relation between total income

and total expenses and the following formula is used to calculate it.

Income to Expense Ratio = Total income /Expense (Rs in thousand)

Particular 2005 2006 2007 2008 2009Total Income 5,027,468 612,734 10,333,264 14,736,175 19,708,737

Total Expenses 2,817,140 2,962,523 6,872,191 10,260,807 13,487,211

Debt Ratio 1.785 0.207 1.504 1.436 1.461

In the above table the performance of bank is batter in FY-05 but it decreased in FY-06 to

due high competition and inflation the revenue is not increased and expenses increased and

lead to decrease the bank performance. However in the FY-07 the performance of bank is

increased by cuts in expenses and increased in revue and reach to batter position.

58

CURRENT ASSETS TO NET SALES

This ratio is used to measure the performance of bank current assts to its income. What is

total income in use of current assets? Hara it is concluded that how much current asset is

productive to generate the sales. The following way is used to calculate it.

CAT= Net Sales /Total Current Assets (Rs in thousand)

Particulars 2005 2006 2007 2008 2009Net sales 4,073,715 4,487,206 8,780,698 12596921 15143241

Current Assets 15,099,034 15,935,604 27,489,315 30,605,182 18,297,252

CAT 0.270 0.282 0.319 0.412 0.828

In connection to current assets to sales the performance of bank is batter in FY-05 which

gradually increased in the nest four year. It shows the batter management of current

utilization for generation of revenue. In FY-09 the Total current assets to income is high and

almost doubled to base year of 05. in the FY-09 the international economic recession but still

bank performance is batter in relation to its current assets, that show the management assets

best placement

59

NOTE

Overall ABL has best performed in 2006 with increased net profits, return on equity, it is

best to compare ratios with industry averages. Onwards 2006 ABL has converted their

operations into fast growing institution in Pakistan. The result can be seen in the years 2007

to 2009 but it is expected that the financial position will grow up in the year 2008.

60

HORIZANTAL ANALYSIS OF

ALLIED BANK

BALANCE SHEET FOR THE LAST FIVE YEARS

ENDED 31 DECEMBER 2005 TO 2009

Rupees in thousands 2005 2006 2007 2008 2009Assets          Cash & balances with treasury Banks 100 131.22 176.2 222.81 200Balances with other Banks 100 182.93 209.43 276.7 131.96Lending’s to financial institutions 100 40.29 176.27 145.44 250.3Investments 100 77.99 116.3 129.5 178.39Advances 100 155.97 192.01 221.49 225.07Operating fixed assets 100 131.07 161.26 192.45 259.02Deferred tax assets          Other assets 100 102.37 191.63 267.38 388.16

  100 125.51 169.93 194.45 213.35Liabilities          Bills payable 100 126.02 135.12 188.87 269.8Borrowings from financial institutions 100 86.66 66.42 94.1 110.38Deposits and other accounts 100 135.13 192.67 213.83 231.99Sub-ordinated loans          Liabilities against assets subject to finance lease

100 37.91 3.91    

Deferred tax liabilities 100 65.31 70.31 91.27 58.45Other liabilities 100 133.28 235.97 270.43 334.49  100 125.9 169.92 192.91 211.48Net assets 100 119.21 170.15 219.01 243.04Represented by          Share capital 100 110 132 175.56 263.34Reserves 100 156.45 212.42 210.71 251.79Unappropriated profit 100 142.85 188.89 246.56 310.15Surplus on revaluation of assets – net of tax

100 38.67 106.35 125.19 14.52

  100 119.21 170.15 219.01 243.04

www.abl.com.pk

61

Horizontal analysis balance sheet

In the above analysis, for horizontal analysis we take year 2005 as a base, and all the other

values are shown/calculated in percentage in subsequent years.

Assets:

As we can see that cash balances at bank, with treasury and with other banks has been

increased from the year 2005 to 2008 very sharply, but in the year 2009, it falls to 200 and

132. the reason of this is In the year 2009, a major investment has been made in the

expansion phase. It can be clearly seen from the heading investment, operating fixed assets

and other assets. The generation of funds has been invested in order to expand the business in

2009. The investment was increased from 129% to 178% operating fixed assets from 192%

to 259% and other assets 267% to 388% in the same year. It is a sharp increase. Even in the

previous years 2006 to 2008. The rapid increase in the above heading was seen but not as

much as in the year 2009, which justifies the decrease in cash balances at bank, with treasury

and other banks.

Lending to financial institutions was reduced to 40% in the year 2006 and then rapid increase

was seen in 2007 but in the year 2009, a tremendous fall was recovered. The same reason can

be predicted. So far as the advances are concerned, there was continuous increase from year

2006 to 2008, but in the year 2009, the position looked like stagnant. It shows the reliance of

the bank is to expand the business. However, if we look overall assets situation, we can see a

constant growth from the year 2006 to 2009. Hence, we can conclude that the bank’s assets

position had been increasing year to year which lead to stability as well as growth.

Liabilities:

The position of liabilities was very much similar to the assets. Bills payables, deposits and

other accounts and other liabilities had shown a synonymous type of trends. The trends were

continuously seen and shown in the following paragraph with figures.

Bills payable were increased to 269% in the year 2009 as compare to year 2005 but from

various increasing steps of 126% in2006, 135% in 2007 and 188% in 2008. Similarly,

deposits were tends to increased to 135%, 192%, 213% and 231% in the years 2006, 2007,

2008 and 2009 respectively. It clearly had shown the attraction of new clients towards ABL.

Other liabilities were also shown the similar trend and raised to 334% from 2005 to 2009.

62

However, borrowing from financial institutions had fallen in the year 2006 and 2007 but

there is increased in year 2008 and 2009. it may be the change in the methods of borrowing

by the treasury department of the ABL. Liabilities against assets subject to finance lease had

reduced very quickly from 2005 to 2006 and even in the year 2007, the bank had no such

liability. Deferred tax liabilities had shown uneven increase or decrease. It may be due to

change amount of provision against deferred taxation. The net assets figure showed the best

trends in the year 2006 as sharp increase were recorded. Afterwards, the trend of increase

was not stopped but at a lower rate was observed.

Equity:

The share capital of the ABL was increased from year to year but in 2009 a rapid fund raising

was seen through issuing of new shares. The trust of investors enabled to bank to raise equity

and to expand the network of ABL banking system in various parts of the country. As in the

ratio analysis we have also observed the expansion phase of ABL was 2007 to 2009. in the

same manner, the reserves of the bank directly proportionate to the share capital. The surplus

on revaluation of assets was reduced to 38% in the year 2006 and then increased very quickly

in the year 2007 to 106% but in the year 2009; the surplus was reduced to 14%. The cause of

reduction was transferring the surplus to reserves as well as the amortization against such

surplus.

63

HORIZANTAL ANALYSIS OF

PROFIT AND LOSS STATEMENT FOR LAST FIVE YEARS

ENDED 31 DECEMBER 2005 TO 2009

  2005 2006 2007 2008 2009Mark-up / return / interest earned 100 110.15 215.55 309.22 371.73Mark-up / return / interest expensed 100 80.98 310.11 505.75 629.57Net mark-up / interest income 100 125.09 167.12 208.59 239.69Provision against non-performing loans and advances

100 89.91 206.97 365.65 1270.63

(Reversal) / provision for impairment in the

100        

  100 102.25 195.12 365.77 1271.11Net mark-up / interest income after provisions

100 128.04 163.5 188.26 106.3

Non mark-up / interest income          Fee, commission and brokerage income

100 134.99 159.79 193.16 204.44

Dividend income 100 69.89 135.81 290.31 364.01Income from dealing in foreign currencies

100 160.44 315.77 518 581.31

Unrealized gain/loss on revaluation of investments

         

Other income 100 63.78 74.26 115.53 120.93Total non-markup / interest income 100 171.27 162.78 224.3 478.69  100 140.39 163.29 198.55 212.66Non mark-up / interest expenses          Administrative expenses 100 128.47 180.46 228.18 333.46Other provisions / write offs          Other charges 100 11.25 149.31 500.49 982.15Total non-markup / interest expenses 100 128.37 180.44 228.41 334.02  100 149.48 150.34 175.98 120.93Extra ordinary / unusual items          Profit before taxation 100 149.48 150.34 175.98 120.93Taxation – current 100 100.28 94.86 112.62 11.28 – prior years'           – deferred 100 -58.22 -262.41 -150.87 328.17  100 115.14 104.8 137.33 -47.73Profit after taxation 100 174.34 183.31 203.97 243.05Unappropriated profit brought forward

         

Profit available for appropriation 100 174.34 183.31 350.62 406.23

64

Appropriations:          Transfer to:          Statutory reserve 100 174.34 183.31 0 0Capital reserves (reserve for issue of bonus shares)

100 220 435.6 0 0

Revenue reserves 100 191.89 165.61 0 0

Proposed cash dividend 100 110 99 0 0

Unappropriated profit carried B/F 100 174.34 183.31 0 0

Basic/ diluted earnings 100 145.33 152.85 85.19 101.59

www.abl.com.pk

HORIZONTAL ANALYSIS INCOME STATEMENT

Markup/return/interest earned:

The markup and interest income was slightly increased in the year 2006 but rapid increase

was recorded in the subsequent years and even it went up to 371% in the year 2009 as

compare to year 2005. The fast increase may be due to increase in investment in those

portfolio, which yielded higher returns. It may also be due to increase in the advances and

loans given to the businessmen and various clients of ABL.

Markup/return/interest expensed

the depositors trend towards ABL and expansion of the business put the trend over the period

2005 to 2009 in such a manner that it increased tremendously from year to year, especially

this rapid trend was observed in the year 2008 i.e. 505% as compare to 310% in the year

2007. Obviously the increase in the deposits of the ABL the markup/interest expense ratio

was increased.

Net markup/ interest income

This head of income is derived by subtracting the interest/markup expense from

interest/markup income. The trend here was looked to be very attractive and consistent,

125% in the year 2006, 167% in 2007, 208% in 2008 and 239% in 2009. from this we can

conclude that ABL was making optimal utilization of available deposits and able to generate

attractive profits.

65

Provision against non-performing loans and advances:

The rapid and fast increase in provision against Provision against non-performing loans and

advances caused by issuing new loans and advances to attract customers. As we have already

discussed in various parts of the report that in the last few year, the competition environment

has been created, which in turn competes to introduce new products. ABL was succeeded to

add new clients and customers. It is a fact that increase in receivables put impact on chances

of bad debts that may be the reason for increase in the Provision against non-performing

loans and advances especially in the year 2008 and 2009.

Fee, commission and brokerage income:

The last paragraph enumerated that ABL was successful by attracting new customers. The

functionality of the bank was also increased which ultimately increased the fee, commission

and brokerage income. The trend of increase was very consistent as 134% in year 2006,

159% in 2007, 193% in 2008 and 204% in 2009.

Dividend income

Dividend income earned by the bank on account of investment made in stock markets. The

rapid increase in the dividend income clearly indicates the policy of treasury department to

make more investment in the risky business to get higher profitability. The policy of ABL

looked very successful as the dividend income was 364% in 2009 when we compare it to

year 2005. However, the major change was observed in the year 2008 when a tremendous

increase was indicated.

Income from dealing in foreign currencies

According to an article published in the management accountant edition NOV-DEC 2009,

the business of foreign currency exchange was groomed in the last five year with a swing.

The same trend can be seen from this analysis. The reason is to introduce a lot of branches to

deal in foreign exchange, especially in the year 2008. In the same year, another reason might

be the depreciation of local currencies against world reputed currencies like US dollars, UK

pounds and EUROS.

Other income

66

Other income of the bank should be directly proportionate to increase in interest income as

well as increase in the clients/customers of the bank. However, the trend in the ABL was

quite opposite in the year 2006, which fell to 63% as compare to year 2005. but afterwards,

the trend was established and a continuous increase was seen. The reason may be the total

reliance of the bank on interest income.

Non-markup/interest expenses

Non markup/interest expenses head includes administrative expenses, other provisions/write-

off and other charges, but the major portion is administrative expenses. The trend was looked

alike the interest and non-interest income. The growth in the ABL not only increased the

income portion but also increased the expenses portion. The constant increase up to year

2008 was recorded, but in 2009, the rapid increase was seen. The reason may be the same it

the expansion phase of the ABL.

Profit before taxation and after taxation

The profit before taxation was increased to 149% in the year 2006 as compare to base year

2005. In the year 2007, a slight increase was recorded. But in the year 2007, again a rapid

increasing trend was observed. However, 2009 was the year in which before taxation profit

fell down to 120% as compare to 175% in 2005. The possible reason may be introduction of

new branch in various cities resulting increase in operating cost. When operating cost

increasing trend was higher than revenue generation, then definitely impact in the form of

reduction in profits can be there. The same was observed here.

So far as, profit after taxes is concerned, it shows a similar trend of increasing. It was because

of adjustments of provision for taxations current as well as provisions for deferred taxation.

The continuous increase in after tax profit went up to 243% in year 2009 as compare to

2003% in 2008, 183% in 2007 and 174% in 2006 keeping in view the year 2005 as base.

Basic/diluted EPS

EPS in the years 2006 and 2007 was ideally increased but in the year 2008 it fell down to

85%. However, the slight increasing trend continuous. The decreases in EPS may be issue of

new shares fro fund raising and introduction of new branches of the ABL throughout the

country. But year 2009 against showed the growth in EPS as compare to year 2008.

67

VERTICAL ANALYSIS OF

BALANCE SHEET FOR THE LAST FIVE YEARS

68

ENDED 31 DECEMBER 2005 TO 2009

Assets 2005 2006 2007 2008 2009Cash balances with treasury Banks 8 8 8 9 7Balances with other Banks 3 5 4 4 2Lending’s to financial institutions 7 2 7 5 8Investments 26 16 18 17 22Advances 52 65 59 60 55Operating fixed assets 2.34 2.42 2.2 2.29 2.81Other assets 1.67 1.36 1.88 2.3 3.04

  100 100 100 100 100           Liabilities          Bills payable 1 1 1 1 2Borrowings from financial institutions 19.79 13.62 7.74 9.65 10.33Deposits and other accounts 76.74 82.37 87.02 85.07 84.18Sub-ordinate loans   0.99 2.19 1.93 1.76Liabilities against assets subject to finance lease

0.74 0.23 0.02    

Deferred tax liabilities 1 0.52 0.41 0.47 0.28Other liabilities 1.19 1.26 1.66 1.67 1.89

Net assets 100 100 100 100 100Represented by           Share capital 29.26 22.53 20.45 20.83 24.84 Reserves 70.73 77.46 79.54 60.45 57.42 Un-Appropriated profit       18.71 17.72

Surplus on revaluation of assets – net of tax 100 100 100 100 100 www.abl.com.pk

VERTICAL ANALYSIS OF BALANCE SHEET

Assets

69

In the vertical analysis the total value of assets are taken as a base in order to calculate

percentage share of each head of account in the assets.

The overall picture of the assets looked very stable. Cash and balance with treasury bank and

with other banks showed a similar view. However, in the year 2009, the total percentage of

cash balances declines to 7.33% with treasury and 1.92% to other banks. Lending to the

financial institutions is only head of account under assets, which gave uneven idea. In the

year 2004 it declined to 2.17 but thin in 2007 it increased to 7.01. Similarly in 2008 it

reduced to 5.05 but again 2009 enhanced to 7.93. Keeping in view the base as total assets we

can conclude that major portion of assets comprised of advances, about more than a half of

total assets in each year. In year 2005, share of advances was 52.44% in 2006, 65.17% in

year 2007, 59.25% in year 2008, 59.73% in year 2009. The total share was 55.32%. Another

considerable contribution was of investment i.e. one quarter of total assets in approximation.

Remaining about 25% share of total assets related to cash balances with treasury bank, with

other bank lending’s to other financial institution and other assets. The overall positions of

assets are not fluctuating.

Liabilities

The major portion of total liabilities was of deposits and other accounts that was a good sign

for ABL. In 2005, the deposits were about 76.74% of total liabilities, the share in year 2006

and 2007 tend to increase as in 2007, and total percentage of total assets was recorded at

87.02%. However, in the year 2008, the share was declined by 2% and then in 2009 by 1%.

The diversion was transferred to borrowings from financial institution. The share of bills

payable seemed to be very much stable as 1.21% in 2005 to 1.55% in year 2009 with slight

increase and even decrease in year 2007.

Subordinated loans share in year 2005 was nil, but from the year 2006 to 2009, it contributed

between 1% to 2% shares to total liabilities. The remaining 2% to 3% share of total liabilities

comprised of liabilities against assets subject to finance lease, deferred taxation and other

liabilities. The liabilities against assets subject to finance lease were terminated in the year

2008 and also not found in 2009. The percentage share of deferred tax liabilities decreased to

0.28% in the year 2009 as compare to 1% in year 2005. In short we can conclude that ABL

was able to maintain its liabilities with stability.

Shareholders equity

70

From this section one thing looked very clear that in the year 2005 to 2008, the ABL has not

any unappropriated profit. It means that after distribution of dividend. Bank’s policy is to

transfer all the revenue reserves to ‘Reserves Account’. However, in the year 2008, the

balance sheet showed unappropriated profit of 17% to 18%. But overall reserves remained

constant. The major portion of the equity section was also recorded as reserve. The portion of

share capital during this period tend to decrease due to high profitability, but in 2009 the

issue of large amount shares converted the share to 24.85% as against in the year 2009

VERTICAL ANALYSIS OF

71

PROFIT AND LOSS STATEMENT FOR LAST FIVE YEARS

ENDED 31 DECEMBER 2005 TO 2009

Administrative expenses 2005 2006 2007 2008 2009Mark-up / return / interest earned 81.03 73.31 84.98 85.48 76.84Non mark up income          Fee, commission and brokerage income 10.44 11.57 8.12 6.88 5.44Dividend income 0.75 0.43 0.49 0.74 0.7Income from dealing in foreign currencies 2.24 2.96 3.45 3.97 3.33Gain on sale of investments 0 8.83 0.97 0.76 11.98Unrealized gain/loss on revaluation of investments

0 0 0 -0.02 0.01

Other income 5.54 2.9 2 2.18 1.71Total non-markup / interest income 18.97 26.69 15.02 14.52 23.16Total markup and non mark up income 100 100 100 100 100Mark up expenses 27.44 18.25 41.4 47.35 44.07Non mark up expenses          Administrative expenses 28.57 30.15 25.08 22.24 24.3Other provisions / write offs          Other charges 0.02   0.02 0.04 0.06Total non-markup / interest expenses 28.59 30.15 25.1 22.28 24.36           PROVISIONS          Provision (Non-performing loans & advances) 6.14 4.53 6.18 7.66 19.89(Reversal) / provision for impairment in the          value of investments   0.62 -0.35   0.01Bad debts written off directly            6.14 5.15 5.83 7.66 19.9Total expenses markup and non mark up 62.17 53.56 72.33 77.29 88.33Profit before taxation 37.83 46.44 27.67 22.71 11.67Taxation – current 17.38 14.31 8.02 6.68 0.5– prior years'     -1.82   -1.19 – deferred -1.49 0.71 1.9 0.77 -1.25  57.9 82.32 19.57 15.72 -4.39Profit after taxation 21.94 31.42 19.57 15.27 13.6

www.abl.com.pk

VERTICAL ANALYSIS OF INCOME STATEMENT

72

For the whole income statement the combination of both markup/interest and

non-markup/income was taken as a base. As we can see in the above analysis the total

markup and non-markup income showed 100% in each year. All the other corresponding

figures are based on it.

Income

As earlier discussed, the income group was consisted of both markup income and non-

markup income. The above analysis clearly indicated a major portion of total income was a

markup income. And it should be as the business of banking is based upon it. In the year

2005, the share of markup income was 81.03% but it was reduced to 73.31% because of

diversion towards gain on sale of investment. In the year 2007 and 2008 it again remained

increased and stable. But again in year 2009, it fall down and the same reason was record. In

short, we can conclude that ABL was succeeded to maintain the share of markup income to

its total income. In the year 2006 and 2009, the decline was affected by gain on sale of

investment.

The non-markup income portion was about 20% in each year except in 2006 and 2009

against due to gain on Sales of investment. The non-markup income comprised of fee,

commission and brokerage income, dividend, income from dealing in foreign currencies gain

on sales of investment (almost negligible) and other income. The combination of all of these

non-markup income portion showed same picture except fee, commission and brokerage

income whose share were started to decline from the year 2007 to 2009. However, the year

2006 and 2009 figures were offset by gain on sale of investment as 8.83% in 2006 and

11.98% in 2009 as against 0.97% in year 2007 and 0.76% in 2008.

The total expenses (both markup and non-markup) share to total income was 62.17%, thus

leasing 37.83% profit before taxation. However, the ABL was succeeded to reduce the share

of expenses to 53.56% leaving 46.44% for PBT. But from the year 2007 to 2009, the trend of

expenses tends to increase. The increase in operating cost was due to expansion and

introduction of new branches as discussed earlier. The tremendous increase in total expenses

was recorded in the year 2007 by 18% but afterwards by 4% in 2008 and further 11% in

2009 the PBT for the year 2009 was minimum i.e. 11.67% as compare to all of the years

mentioned in the profit. The decline in the PBT was not due to decrease in profitability but

due to excessive operating cost incurred for expansion. Its ultimate effect is predicted to

73

coming one or two years. Definitely, when all the branches will operate at its capacity level,

the PBT share shall increase.

In the year 2005, the proportion of both markup and non-markup looked same but year 2006

showed a different picture. Its operating (non-markup) expenses portion was 30% as against

just 18% markup. The reason may be again the expansion phase, but onwards, the portion of

markup income was more as compare to non-markup portion. Its reasons may be that the

ABL was succeeded to hold major portion of business and to attract the depositors to make

their investment there. Ultimate result can be seen from portion of markup expenses

enhancement.

The PAT share showed the same trend as we have discussed in PBT figures. The basic

emphasis of the bank is PBT rather than PAT. As it is a fact that higher profit higher

taxation. The bank was also succeeded to implement the policy of provision for taxation in

good manner as that can be judged from PAT. Finally we can conclude that profitability and

financial position of ABL were tend to increase from year to year and showed very stable

position.

Organizational Analysis of “Allied Bank” with other top players

74

  Rs. ( Billion)  NBP HBL UBL ABL

Balance Sheet 2007 2008 2009 2007 2008 2009 2007 2008 2009 2007 2008 2009

Cash& bank Bal. 121 142 119 84 89 77 39 49 71 42 60 35

Invest. 180 140 157 187 120 107 115 66 62 125 64 69

Advances 320 316 269 346 349 317 289 255 210 191 198 180

Assets 668 635 578 653 590 529 499 436 358 385 343 299

Deposits 523 502 463 528 459 433 392 344 297 288 257 229

Equity 97 82 76 63 53 41 39 33 24 50 42 24

Income Statement

Gross revenues 32.8 39.9 30.5 29 36.2 29.9 21.9 26.4 18.5 19.9 25.1 19.6

Net interest income 23.9 27.8 21.2 21.8 27.7 22 15 19.1 13.1 15.1 20.1 13.8

Non interest Income 8.9 12.2 9.4 7.2 8.5 7.9 6.9 7.3 5.4 4.8 5 5.8

Admin. expenses 10.4 13.4 11.2 12.9 15.4 14.1 9.7 11.6 8.4 4.6 6.5 6.5

Pre Tax Profit 22.2 26.3 19.1 16.1 18.8 13.8 11.4 14.5 9.7 16.7 18.5 13

Net Income 14.8 17 12.7 10.2 12.7 9.7 7.4 9.7 6.2 11.6 12.1 8.9

Loan deposit 61% 63% 58% 65% 76% 73% 74% 74% 71% 66% 77% 79%

Mkt Share advances 11% 11% 10% 11% 13% 11% 10% 9% 8% 6% 7% 7%

 In Percentage

NBP HBL UBL ABLBalance Sheet 2007 2008 2009 2007 2008 2009 2007 2008 2009 2007 2008 2009Mkt share Deposit 12 13 12 12 12 11 10 9 8 6 7 7Capital adequacy 14 13 12 10 9 8 8 8 7 13 12 8Return on assets 2.9 2.7 2.2 2.1 2.2 1.8 2 2.2 1.7 4 3.5 3Return on Equity 20 21 17 22 24 23 25 29 25 31 29 38Interest spread 1.8 6.1 5 4.1 5.9 5.2 3.7 6 4.8 4.8 7.6 5.5Fee/Pre tax 40 46 49 44 45 57 60 50 55 29 27 44Revenue Expenses 315 297 272 225 235 212 225 227 219 431 387 303Current share price 244 - - 261.5 -   174.3 - - 381 - -Share o/s min 709 - - - 690 -   648 - 546 - -EPS 27.7 24 17.92 19.7 18.4 13.86 15.2 14.9 9.39 28.3 22.2 17.4Price earning Ratio 8.08     13.3     11.5     13.5    Market Cap.Pk Rs. 173     180     113     208    

The banking sector is dominated by National Bank Limited, Allied Bank Limited, Habib

Bank Limited, United Bank Limited and MCB Bank Limited. The balance sheet indicates the

trend of growth of deposits for the players. As can be witnessed from the above that the

75

deposit growth rate has been fluctuating over the last 5 years. A major decline was seen in

the growth of deposits for ABL in 2008, when it fell from 28% to 13%. The reason cited for

this slowdown was the slow growth of M2.The advance growth rate for the top players has

shown a similar trend, all the fluctuations for all the banks have been witnessed in the same

direction. As can be observed ABL's performance in terms of advances growth rate has been

better from the top players during the last 5 years. The advances of ABL grew by 11% in

FY09 as compared to 5.58% of NBP and -4% of UBL and MCB each during the year under

review. Another major trend seen in the banking sector has been the growth in profits after

tax for the top players. It can be clearly seen that the growth in PAT of ABL has been much

above the other top players. During FY09 there was a growth of 71% in ABL's PAT, as

compared to 14% of UBL and 2% of MCB. Another major comparison between ABL and

the other top players is that in the growth of the net interest income. Even in this area ABL

has outperformed other major players. The growth in the net interest income is 41% in FY09

as compared to 18% of UBL, 16% of MCB and 3% of NBP. In case of the non-interest

income, the growth for ABL has been in line with that of its peer except for NBP whose

growth though has fluctuated but still is above the other players in the market. The growth in

non-interest income for ABL in FY09 is around 22%, as compared to 45% of NBP

Future-Prospects:

76

The recent economic trends suggest the possibility of a modest recovery during 2010. The

major impetus for growth is expected to come from the services sector, while LSM has also

lately shown signs of recovery. The positive improvement in macroeconomic indicators,

mainly inflation and contraction in external imbalances bodes well for the revival of

economic activity. However, risks to these improvements remain as inflationary pressures

have not completely abated, the commodity prices may spur again to unmanageable levels

and foreign inflows (for instance from Friends of Democratic Pakistan (FoDP) and other

bilateral arrangements) may not materialize on time. Meanwhile, the severe energy shortages

and the sensitive security situation remain a major threat to the potential output of the

economy. The rising fiscal slippages, deficit of 1.5% of GDP for 2010 as compared to 1.1%

in 2009 poses another challenge. A sizeable portion of it also relates to increasing

expenditure on defense and security. The continuing pressure in the operation environment

suggests that the challenges for the banking sector would persist in 2010. ABL, while

remaining prudent under the circumstances would continue to emphasis on improving cost

effective deposit mix, building risk weighted assets by ensuring quality and optimizing costs

to pursue the strategy of maintaining steady growth.

77

SHORT FALLS / WEAKNESSES OF THE ORGANIZATION

A short falls/weakness is defined as an area in an organization where the organization is not

as good at doing something as its competitors or a thing which an organization lacks thus

putting the organization at disadvantage in comparison to its competitors. Based on the above

definition Allied Bank Limited has the following weaknesses

Employees at branch level are not properly motivated to work by heart. They take all

the routine activities as a boring job.

ABL has centralized power system.

Lack of international branch network

There is less communication between different levels of management

The selection criteria for employees are not on merit basis.

It has high markup rates, thus discouraging the middle investors.

Major account benefits are for army officials.

1: Total Quality Management: -

Ours is the age of cutthroat competition, scarcity of resources, technological advancement,

integration of financial services, expansion of economic markets and cultural diversity. In

these complicated and conflicting financial and economic scenarios the need of TQM in the

ranks of domestic Banking industry is indispensable. The middle management should need to

have basic understandings about complicated management processes, crisis management

tools, marketing/product strategies, financial and treasury management techniques, financial

discipline, soundness and transparency of Banking system. Human resource administration

and above all genuine leadership qualities to adequately operate within a highly sensitive and

complicated industry.

There is urgent need of having TQM in the realm of Allied Bank. At the dawn of WTO and

increasing chances of investment Banking among the SARRC countries the TQM is the need

of the hour. Allied Bank must pay attention to this shift and start thinking strategically for

providing high quality products and services to customers. According to a study from

Business Communications Company, Inc. the changing Global Commercial Banking

Industry Structure, total commercial Banking assets are expected to climb at an average

annual growth rate [AAGR] of 7.1% from $6,772 billion in 2003 to $9,537 billion in2009.

78

The Allied Bank should determine where improvement is needed, how service can be

improved and where operating system breakdowns occur, why they occur and how they can

be avoided.

2: Wastage of time: -

There is major problem of wastage of time of customer due to less injection of stag where

needed

3: Reward System: -

The employees are really upset about their salaries and promotions, the reward

system is not up to standard as other organization are.

4: Employee Involvement: -

The employees are not involved in decision-making. Give very little chance to employees in

decision making only those who are near to manager are involve in this procedure.

5: Wastage of Stationary: -

Another problem that I observed is wastage of stationary like Account opening

Forms. Deposit slips, ATM forms, Online Form etc. and other type of stationary.

6: Extra telephone calls budgets: -

The telephone calls budget is also; very high which cannot be ignorable. Employees

sometime use it as it looks like free.

Conclusion

79

ABL is a leading market player in the financial sector in Pakistan.

Despite of the fast changing market conditions and narrowing of traditional lucrative

margins on loans, ABL is a bit slow in committing itself to seek out new opportunities

and make its existing operations more efficient.

The Electronic Technology Department (ETD) needs further improvement, developments

and technologies by including new products and services.

Although Phonic Banking, Online Banking, Internet Banking, Balance Transfer Facility,

ATM (Auto Teller Machine), Online Availability of Different Application Form. All of

them continue to receive encouraging response from the consumers but still considerable

attention is required for further improvement.

The ETD staff working at branch level is not fully trained because their technological

skills are less developed for which the Bank along with the ETD has to make a complete,

sound and separate training program to develop their skills. As staff being the principal

asset of the Bank, should be groomed through professional development.

Knowledge of Risk Management is Missing: -

The main purpose of financial and Banking organization is to create valuable system

by interacting with its environments, customers, constituents, suppliers, technology,

competition, economy, government, etc. A valuable system is created by the conversion of a

available resources i.e. human, financial, physical, and intangible assets into goods and

services that fulfill the needs of the customers and save the vest interests of Banking and

financial organization. Risk management performs all these diversified but integrated work to

achieve maximum out-put. Managing risk is actually managing the organization, planning,

organizing, directing and controlling organization systems and resources to achieve

objectives. Managing risk must come from within and act to change the organization and its

response to changes in the environment.

Now many domestic Banks are hiring experts of risk management to secure their

precious assets. Allied Bank Pakistan has created risk management group at head office but

they must adopt this police at regional level to save the best interests of the Bank and

enhance the chances of investments.

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Recommendations

81

Recommendations are supposed to be the most important part of internship report. A good

report is said to be completed and important only when recommendations are given. To get

suggestions, discussions have been conduct with the staff of ABL officers. The cooperative

staff helped me a lot and provided me the basis for recommendations and also pointed out

some areas, where the change for the development is essential.

Despite of the fast changing market conditions and reduction of traditional profitable margins

on loans, Allied Bank Limited is a bit slow in commit itself to seek out new opportunities

and make its existing operations more efficient. For that purpose, I suggest the following

recommendations.

The Bank should plan to enhance its ATMs and Internet Banking Services with new features

like inter-branch funds transfer, and the payment of utility bills more quickly as they are

doing. The Bank should also plan to setup a call center and Data Warehouse to enhance the

timeliness and quality of services.

The future focus of the ABL should be to improve the automation of the accounting

processes and enhance the quality and effectiveness of MIS.

Although the Bank’s products and Services are structured to cover and improve the

quality of lives of all important towns and cities but the Bank should also start to explore

new markets in the smaller towns in the rural areas of Pakistan for its Retail Banking

products, supported by technology based services.

The ABL should increase press coverage and advertising to create effectively market it’s

corporate as well as product/Brand image.

The H.R.M Department of the ABL should effectively increase its focus on providing in

house training staff, which should be conducting training services all, year around to

enhance professionalism and employee development.

The marketing policies and strategies should be clearly written and communicated to all

the staff members. The Branch Managers must make the use of the staff in pursing the

organizational objectives.

1 Employees’ training

82

To increase the efficiency and effectiveness, the management should arrange timely training

sessions so that the employees get the complete knowledge of how to deal with the customers

and work well in team as well as individually.

The ETD(Electronic Technology Department) staff working at branch level is not fully

trained because their technological skills are less developed for which the bank along with

the ETD has to make a complete, sound and separate training program to develop their skills.

As staff being the principal asset of the bank, should be groomed through counties

professional development.

2 Improvements needed in ETD

The Electronic Technology Department (ETD) needs further improvement, developments

and technologies by including new products and services.

3 New Features

The bank should plan to enhance its ATMs and Internet Banking Services with new features

like inter-branch funds transfer, and the payment of utility bills. The Bank should also plan to

setup a call center and Data Warehouse to enhance the timeliness and quality of services.

4 Technology

Although Phonic Banking, Online Banking, Internet Banking, Balance Transfer Facility,

ATM (Auto Teller Machine), Online Availability of Different Application Form continue to

receive encouraging response from the consumers but still considerable attention is required

for further improvement.

5 Refresher courses

The employees of the bank should frequently conduct meaningful refresher courses,

workshops and seminars so as to improve the knowledge of staff. Because of the new

technological developments and severe competition the HRD should train their staff to cope

with the new changes. This will be beneficial for the bank’s productivity.

6 Automation

83

The future focus of the ABL should be to improve the automation of the accounting

processes and improve the quality and effectiveness of MIS.

7 Explore New Markets

Although the Bank’s products and Services are structured to cover and improve the quality of

lives of all important towns and cities but the Bank should also start to explore new markets

in the smaller towns in the rural areas of Pakistan for its Retail banking products, supported

by technology based services such as online banking and ATMs.

8 Improve advertising

The Allied Bank Limited should increase press coverage and advertising to create effectively

market it’s corporate as well as product/Brand image.

9 Organization Environment

To motivate bank’s employees and for attracting more customers, bank should maintain an

attractive and effective environment so that employees feel comfortable while working and it

will result in an increase in the efficiency of the bank.

10 H.R.M Department

The H.R.M department of the Allied Bank Limited should effectively increase its focus on

providing in house training staff, which should be conducting training services all year round

to improve professionalism and employee development. The need for proper human resource

is felt badly.

11 Marketing Policies and Strategies

The marketing policies and strategies must be clearly written and communicated to all the

staff members. The Branch Managers must make the use of the staff in pursing the

organizational objectives.

12 Participation of the Staff

84

The Bank must ensure the participation of the staff in all the promotion activities of the bank.

The Bank should encourage ownership behavior so that everyone feels responsible for

performance and reputation of the Bank. To this end the bank must adhere to the policy of

fringe benefits, rapid promotions of the capable managers and officials to motivate the staff.

13 Reshaping the Portfolio

The Bank must reshape its portfolio of business by investing in higher growth areas,

extending and developing its core competencies and moving out of week and non-core

segment.

14 Provide Customer Satisfaction

In order to earn a striking profit in future, and to compete in a highly competitive

environment, the Allied Bank Limited must constantly provide customer satisfaction my

delivering products and services through innovative technology and effective human resource

management. The Allied Bank Limited can achieve all this through aggressive marketing, by

adding diversified skills to its ETD team, prudent management of its risk portfolio, strong

collection and recovery efforts, and a strict focus on controlling operating costs.

15 Motivation

Every human being needs appreciation in every aspect. It’s the duty of management to

motivate and appreciate their employees. This will result in loyalty, and improve the

performance of the staff.

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References

Annual Report of ABL 2009.

Annual Report of ABL 2008.

Annual Report of ABL 2007.

Annual Report of ABL 2006.

Annual Report of ABL 2005.

Annual Report of ABL 2004.

A Review from Daily “The News”.

Iffland, Charles & Langueton, Pierre. (1996) International Banking, Irwin Book

Co., New York.

Khan Rana, Safdar Hussain & Khan Rana, Ahmad Shabir. (1991) Banking

Currency and Finance, Ilmi Kutab Khana, Lahore.

Sardar Aslam (1999) Banking & Finance Principal (Retd) Govt College of

commerce Abbottabad...

Saeed, M Nasir. (1994) Economics of Pakistan, Ilmi Kutab Khana, Lahore.

Siddiqi, Asrar H. (1998) Practice and Law of Banking in Pakistan, 6th Ed, Royal

Book Co, Karachi.

www.AlliedBank.com.pk

www.sbp.org.pk

86

Annexure – I ABL Structure

87

President

Senior Vice President

Vice President

Executive Vice President

Senior Executive Vice President [rosodmemtPresident

Regional General Manager Managerxecutive Vice President

Branch Manager

MANAGEMENT HIERARCHY

Annexure – II

88

FUNCTIONAL HIERARCHY

Annexure- III Structure of Branch

89

President and CEO

Board of Director

Head of Departments

Regional General Manager Controllers of Operation

Branch Manager

Office G-I, II and other lower Staff

90

STRUCTURE OF ABL

91

President

Board Of Directors

Group Operation Chief Credit Committee

Regional Operations ChiefRegional Management

Committee

Operation Manager At Branch Regional Business Chief

& Regional Risk Management Chief

Annexure – IV

STAFF ORGANIZATION OF THE BRANCH

Annexure – V

92

Branch Manager

Customer Service Manager Officer G-I

Teller Messenger

Officer G-II HR Manager

ORGANOGRAM OF FINANCE DEPARTMENT

93

Credit Control Officer

Account Officer

Receipts Officer

CashiersBilling Officer

Payments Officer