TABLE OF CONTENTS

Table of contents 1

Acknowledgement 3

Objective of studying the organization 5

Overview of the organizationBrief history of the organization 6Nature of the organization 7Business volume in terms of deposits,investments, advance, etc

7

Hierarichal view of LDA plaza branch 8Product lines (description of the various products/ services offered by the organization

9

Organizational structure 11Review of the various departments of the organization in terms of their functions and responsibilities, etcMain offices (Head offices and branches).

Structure and functions of Accounts/ Finance/ 28Audit DepartmentThe role of financial manager 29Use of electronic data in decision making 31Sources of funds 31Generation of funds 32Allocation of funds 32

Critical analysis of the theoretical concepts relating to practical experiences i.e. relate the theoretical concepts

34

Balance sheet of last five years 36Financial analysis (ratio analysis, horizontal & vertical analysis of the organization for the last five years).

38

Horizontal analysis Balance Sheet 38Horizontal analysis Balance Sheet 38Vertical analysis Balance Sheet 40

1

GROUP HEADCHIEF OPERATING OFFICER

REGIONAL MANAGEROPERATION MANAGER

AREA MANAGER MANAGERCASHIEROFFICERSPEONSCEO

Vertical analysis Balance Sheet 40Horizontal analysis Profit and Loss Account 42Horizontal analysis Profit and Loss Account 44Vertical analysis Profit and Loss Account 45Vertical analysis Profit and Loss Account Expense 46Financial analysis(Ratio analysis) 47Hierarchy Of Management 56

SWOT analysis 57Future prospectus 60Industrial analysis 62Comparison of the Bank Industry Major Vs Medium Vs Small Banks

62

Weaknesses and their Recommendation64

Conclusion69

Referances 70

2

Dedication

This Report is dedicated to my parents and my teachers and Bank Alfalah Limited

who gave me courage to complete this report.

Objectives of Studying the Organization

Major objectives to study this organization are:

1. To get awareness about the business development & financial techniques.

2. Comparison of the assets of organization with other organizations.

3. Policies followed by the organization enforced through laws of SBP.

3

4. Study the facilities provided by the organization to common public in various

forms.

5. To study the terms & conditions for fringe benefits provided to employees of the

organization at the age of superannuation.

6. To get MBA (Masters in Business Administration) degree.

7. To apply theoretical concepts in practical aspects

History Of Organisation

Bank Alfalah Limited was incorporated on June 21st, 1997 as a public limited

company under the Companies Ordinance 1984. Its banking operations commenced from

November 1st, 1997. The bank is engaged in commercial banking and related services as

defined in the Banking Company’s ordinance, 1962. The Bank is currently operating

more than 285 branches with the registered office at B.A.Building, I.I.Chundrigar,

Karachi. Since its inception, as the new identity of H.C.E.B after the privatization in

4

1997, the management of the bank has implemented strategies and policies to carve a

distinct position for the bank in the market place. Strengthened with the banking of the

Abu Dhabi Group and driven by the strategic goals set out by its board of management,

the Bank has invested in revolutionary technology to have an extensive range of products

and services. This facilitates our commitment to a culture of innovation and seeks out

synergies with clients and service providers to ensure uninterrupted services to its

customers. They perceive the requirements of customers and match them with quality

products and service solutions. During the past five years, They have emerged as one of

the foremost financial institution in the region endeavoring to meet the needs of

tomorrow today

Since the inception of Bank Alfalah, by the grace of the Almighty, They have

moved rapidly in expanding their branch network and deposit base, along with making

profitable advances and increasing the range of products and services. They have made a

break-through in providing premier services at an affordable cost to our customers.

Keeping in view valued clients and the need for constant and effective communication of

information, As They pursues the path of excellence, and customer satisfaction remains

their priority. It is only when we know our customers better, can we deliver a higher

quality of services, thereby adding synergy to existing management expertise, financial

strength and profitability. This is yet another channel of communication for the delivery

of quality products and services that enhance value to bank’s stakeholders.

Nature of Organisation

Bank Alfalah Limited was incorporated on June 21st, 1997 as a public

limited company under the Companies Ordinance 1984. Its banking

operations commenced from November 1st, 1997. The bank is

engaged in commercial banking and related services as defined in the

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Banking Company’s ordinance, 1962. The Bank is currently operating

more than 285 branches with the registered office at B.A.Building,

I.I.Chundrigar, Karachi. Since its inception, as the new identity of

H.C.E.B after the privatization in 1997, the management of the bank

has implemented strategies and policies to carve a distinct position for

the bank in the market place

Business Volume

These are the quick facts of the business volume in terms of deposits,advances,revenue

and Investment of last five years.

Rupees in “000”

2008 2007 2006 2005 2004

Deposits 300732858 273173841 239509391 222345067 129714891

Advances 192671169 171198192 149999325 118864010 88931400

Investment 75973238 88491564 56502210 57425700 35503196

Hierarchical View of Management LDA Plaza Branch

Total number of employees in LDA plaza branch where I did my internship is fifty.The

branch was headed by Chief manager Mr Muhammad Naeem Dar.

HIERARCHY OF BRANCH

6

ImportsDepartment

ExportsDepartment

Foreign ExchangeDepartment

CHIEF MANAGER / BRANCH MANAGER

Manager InternationalBanking

MangerOperations

7.

CashDepartment5.

Account opening Department

3.

RemittancesDepartment

ClearingDepartment

AccountsDepartment

Internal AuditDepartment

14.

MarketingDepartment

MangerCredits

LeasingDepartment

PRESIDENT

Home financeDepartment

Car financeDepartment

Credit cardDepartment

OFFICERS G

Circle/

FINANCIAL CONTROL GROUP (SOUTH) "BRANCH LICENSING UNIT"

PRESIDENT

DE

I II III

PRODUCT & SERVICES

BAL offers highly prioritized and specifically tailored products and services designed to

suit the needs and preferences of their highly valued customers. For becoming a highly

effective financial supermarket, BAL provides a complete range of products to its

corporate clients, commercial enterprises and to the consumers. BAL offers syndicated

loans and structured financial products to the large corporate clients.

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True to its strategy of becoming a highly effective financial supermarket, BAL Limited

provides a complete range of products to its customers; the corporate clients, commercial

enterprises and the small consumers. At BAL the primary commitment is to understand and

support its client’s business objectives and financial needs. All this is ensured through

constant R & D focus and training & development of staff. BAL Bank Limited provides a

wide range of products/ services to its customers, which can be compared with any foreign,

or national bank in terms of quality and reliability.

The products and services BAL is presently offering come under four main heads i.e.

Corporate Banking, Consumer Banking, Consumer Finance and Electronic Banking. The

various items that fall under these four heads can be summarized

CONSUMER BANKING:

Current Account

o Current Account is non-remunerative account. No restriction on withdrawals

and frequency of transaction. No profit is paid on Current Accounts. Service

charges are recovered as specified in schedule of charges. No Zakat is

deducted on Current Accounts. Free of cost account statements are dispatched

on half yearly basis within one week after the mid-year closing. if any

customer wishes to receive the account statement other than the half yearly

cycle, charges will be recovered as per the Schedule of Bank Charges.

Foreign Currency Account

o The minimum amount to be placed under this product is USD 200.

Individuals (Single & Joint), Firms, Companies can open this Account. Free

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locker facility. Free of Charge Bank Statement & Smart Cards. No Charges

on Standing Instruction.

PLS Account

o PLS Saving Account is on Profit and Loss sharing basis. One individuals

(Single and Joint) are eligible to open PLS Saving Accounts. A checking

account with no restriction on Deposits and Withdrawals. Minimum balance

requirement as specified in Schedule of Bank Charges. Services Charges will

be deducted, if average monthly balance requirement is not maintained.

Profit/ Interest Provisioning/accruals is done on monthly basis, on minimum

monthly account balance and profit /interest will be disbursed / paid on half

yearly basis as per the rates notified by the banks.

Business Account

o An upward mobile way to bring down costs on your way up.

o BAL Business Account lets you build your business through the accrued

savings from discounted transaction fees, and more.

Several Different Key points of Business Account are:

o Higher the balance, higher the number of free transactions.*

o Open a Business Account with Rs.50, 000 Only.

o Unlimited free cash deposit and withdrawal facility at hundreds of branches

nationwide.

Major Key Points are as follows

o The higher you balance, the higher your profit.

o Now avail attractive rates up to 8.5%.*

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o Profit calculated on monthly basis.

o Profit paid into your account semi-annually.

o No joining fee on Debit/ATM Card.

o 50% Discount on Locker.

o Cash Deposit and Withdrawals facility at hundreds of branches nationwide.

o Unlimited number of ATM withdrawal transactions.

CORPORATE BANKING

Term loans

o As an individual can gain and benefit the most through BAL Consumer

Banking. In BAL you get friendly, efficient and attentive personalized

banking services a unique banking relationship experienced by each BAL

client.

Working Capital Loans

o Based on the customer specific needs, the corporate bank offers a number of

different working capital financing facilities including Running finance, Cash

finance, Export Refinance, pre-shipment and post-shipment etc. Tailor- made

solutions are developed in keeping view the unique requirements of your

business.

Trade Finance

o Under Corporate Banking BAL offers trade finance services that include an

entire range of import and export activities including issuing Letter of Credits

(L/Cs), purchasing export document, providing guarantees and other support

services.

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Cash Management

o One network of 285 branches in Pakistan enables us to collect and disburse

payments efficiently with our cash management services. This also enables us

to offer you a choice of paper based or electronic fund transfer solutions

including collection amounts, cross branch online transactions etc.

Investment Banking

o BAL Investment Banking Team has emerged as a leading player in Pakistan’s

investment Baking arena. The team handles advisory, corporate finance and

capital market related transactions.

Within these areas, the Team has developed expertise in:

o Private Placement

o Debt/Equity Underwriting

o Term Finance Certificate

o Arrangement of Nom-Fund Facilities

o Mergers and Acquisitions

o Privatization

o Corporate Advisory

CONSUMER FINANCING

Car financing

o BAL CAR4U gets not only a car of own choice but leads to the best in life.

it is affordable with competitive mark up, flexible conditions, easy processing

and above all, no hidden costs.

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Housing finance

o BAL Pyara Ghar is an ideal Home Finance product that lets purchase,

renovate or construct home the way every one has always wanted. Financing

available is up to 20 years for amount up to Rs. 20 million.

Classic and Gold credit cards

o A suite of Classic and Gold credit cards focusing primarily on providing

convenience, safety, shopping pleasure and security giving a different feel to

the world of Credit Cards through innovative features. These unique features

include i-revolve which makes a variable mark up rate available to you upon

revolving and is the first of its kind in Pakistan

Personal loan

o BAL personal Loan is simply a clean cash facility extended for personal use.

it offers a fixed installment loan that provides you access to cash instantly

without any collateral. Financing available is up to 5 years for amount up to

Rs. 1million.

ELECTRONIC BANKING

ATM

o One of the nation’s largest networks of over 360 ATMs and still growing. Get

24-hour convenience of cash withdrawal, mini-statement, utility bill payment,

funds transfer services and much more.

Online Banking

o One of the largest network of over 700 online branches in the country and

growing. Providing customers with 24/7 real time online transaction facilities.

Mobile Banking

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o Banking at your finger tips. SMS anytime to get information regarding

balance and mini statements.

Services at Bank Alfalah

Branch Banking

Safe Deposit Lockers

Bank Alfalah provides safe deposit lockers facilities to its customers for safe

keeping of their valuables like documents, securities and jewellery etc.

Consumer Banking

1) Debit Card

2) Credit card

3) RTC’s

4) Home loans

5) Auto loans

6) Money Gram

Deposit Department

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Customer is a person who has some sort of account, either deposit or current or

some similar relation. A person becomes a customer the moment the bank receives the

money or cheques and agrees to open an account.

It is contractual agreement between bank and customer after which both concerned

parties indulge in a mutually beneficial business relationship.

"Deposits are the blood of a Bank"

Acceptance of deposits is the real source of income of a bank. Deposits department is the

backbone of corporate banking. Deposit is often used to describe the money, which

customers of all kinds leave with the banks.

Deposits account can be defined as an account, which is opened to earn interest.

The term deposit is highly misleading. It is not something deposited for safe

keeping, like currency in a safe deposit box. Bank deposits are not like that. When one

brings currency to a bank for "Deposit" the bank does not put the currency in a vault. It

may put a small fraction of the currency in the vault as "Reserves" but it will lend most of

deposits to some one else or buy an investment.

The entire banking system is based upon borrowing. Like all banks, deposit department

has acknowledged its worth as the most important. Almost all the operations generate

from the deposit department and with due course of time reflect back to the deposit

department.

In order to attract funds, bank has introduced various types of deposits schemes that may

suit the needs and tastes of a large body of depositors.

Types Of Deposit Facility

Deposits are broadly classified into the following categories.

Current Account

Savings Account

Term/Fixed deposit

Royal Profit

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Now I am going to discuss above deposit schemes offered by BAL.

Current Account

Current A/c is basically used to meet the daily transactions.

Current account provides safety to the customer's money, gives the advantage of

paying debts by the convenient and safe means of sending cheques through the

post thus avoiding the trouble and loss that might be involved if payments had to

be made in notes and coins. All payments in and out are the record of financial

transactions. Interest is not allowed on these accounts.

No interest is paid on current accounts

In case of current a/c customers can draw money at any time when customer need

it. There is no restriction that customer cannot draw money before such & such

time so we can say there is no time limit.

Limited company, partnership firm, club, society or association joint and sole

proprietorship can open this account.

Minimum balance acceptable by the bank to maintain the account is Rs.10000/-.

PLS

In case of saving accounts, account holder gets profit.

In Bank Alfalah Limited saving a/c is used as current a/c, & there is no main

difference between current & saving account except profit. Limited company,

Partnership Company, joint & sole proprietorship, can open this account.

Balance acceptable by the bank to open this account is Rs.5, 000.

The profit is given to the customers at minimum balance during the month

2½% zakat is deducted at 1st Ramazan.

Term / Fixed Deposit

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When customer places money with a banker for a fixed period a deposit is termed

as fixed/term/time deposit.

Some important features that I have done in practice is that:

No cheques-book is required.

Time period varies from 3 months, 6 months to 1 year & up to 5 years. The profit

rate varies according to the time period for which it is deposited.

The term deposit is renewed automatically on the date of maturity at the SBP's

applicable rolling rate of interest, the acknowledgement of receipt of money is

taken on the letter of authority after its proper identification. If a deposit receipt is

lost or stolen a duplicate receipt is issued after obtaining an indemnity. It is

necessary to obtain a duplicate receipt if original is lost because it is so worded

that banker undertakes to repay the amount on the presentation of duly discharged

receipt.

Deposits on joint names are payable to conditions agreed at the time of their

acceptance.

On expiry the depositor presents the deposit receipt (advice) dully stamped and gets the

money in cash or transfer to his account. It is legally, a depositor cannot demand the

payment of his fixed deposit before the expiry of the stipulated period but generally to

oblige the customer, banker allows them to withdraw their fixed deposit before maturity.

In these cases customer are asked to forgo interest. Deposit receipts issued is called fixed

deposit receipts.

Royal profit

Royal profit has following features

In this account minimum requirement is Rs.50, 000.

It has some features of saving account and current account.

Monthly profit is calculated on average deposit during the month.

Procedure To Open An Account

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I worked and observed that when a customer wants to open an account, the bank officer

gives application form to him. All information, which are necessary to be known by the

bank, are requirements of the application form. Form also requires the essential

documents to be attached by the customer.

Following persons can open an account:

Sole proprietors

Private accounts (individual a/c's)

Joint account

Limited Company

Partnership company

Trust and Association

Basically following information is required:

Name

Address

Telephone no.

Currency of account

Nature of Business

Residential status

Special instruction regarding the account

Signature of the applicant.

Cash Dealing Department

Cash department of BAL is given the complete responsibility of handling all receipts &

disbursement of cash, as a result of transaction in both local & foreign currencies, & near

cash items such as traveler cheque etc (when they are issued against cash).

As a consequence it is also responsible for the book-keeping of these transactions & the

safe custody of cash & near cash securities. Following are the major functions of the cash

dealing department of BAL

I. Cash receipts (or receive deposits)

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II. Encashment of cheque

Cash department of BAL is a separate close part covered with glasses. No one other than

cash department's employee is allowed to enter into that area. That’s why I did not work

in this department but I have gained knowledge about it from teller of BAL.

I. Cash Receipt

The depositor uses cheque deposit slip (or cash deposit slip) for depositing the amount.

Information required

All the details are required regarding date, account number, and amount in words &

figures, title of account & signature of depositors.

Procedure

The cashier first verifies all the requirements of the cash deposit slip that whether these

are fulfilled or not & verifies the amount written in words & figures. The deposit slip is

stamped, cash is received & second copy is given to the depositor.

Encashment Of Cheque

Cheque encashment involves following four main steps. These steps are:

i) Accepting of cheques

ii) Affirmation of signatures

iii) Entry into system

iv) Payment of cash

II. Encashment of a Cheque

Requirements to Encash a Cheque

Following requirements are essential to encash a cheque.

1.No Stop Payment Instruction

No stop payment instruction is presented for the account.

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2.Instrument in Writing

It must be in writing. However, there is no bar on writing material but the cheque written

with lead pencil is not honored by the bank in practice because unauthorized alternations

can also easily be made are difficult to detect so a cheque should be pen written..

3.Cheque must not be crossed

The cheque, which could be presented to the drawer bank for encashment over the

counter, should not be crossed whereas crossed cheques are deposited into account.

4.The sum of money must be certain

A cheque must contain an order to pay a certain sum of money only amount in figures

and words must be same.

5.Drawer's Signature

The document in order to be validly called a cheque must bear the drawer's (account

holder) signature or that of his authorized person. At the time of opening an account a

customer provides a banker with a specimen of his signatures, so the signature on the

cheque must tally with that.

6.Sufficient Balance

Sufficient balance should be present in the customer's (drawer's) account to encash

cheque.

Payment Of Cash

The cashier enters the entry cheque in computer & pays against the second signature of

the receiver on the back of the cheque.

Remittance Department

When money is transferred from one place to another place or from one country

to another country to fulfill the requirements of the customers by the order of the

customer, it is called remittance.

I worked in this department and realized that Bank remits money in different ways.

Some of these ways are as under:

Pay Order

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Demand Draft

Telegraphic Transfer

Mail Transfer

Rupee Traveler Cheques

Pay order

Pay order is also a cheques drawn on the bank but it is payable in the same city.

The bank also charges nominal charges for its issuance.

order.

Demand Draft

DD (Demand Draft) is a cheques issued by the bank drawn on the same bank’s

outstation branch. The bank charge nominal commission on issuance of demand draft. If

lost the holder must in personal request the bank in writing for the duplicate. The bank if

satisfied can issue a duplicate demand draft after getting the indemnity.

Telegraphic Transformation

TT stands for telegraphic transfer and MT stands for Mail transfer. In BAL I

observed that the TT is normally faxed to the other branch and then the original copy is

sent by mail.

In case if inward TT is drawn on other bank a TTR is prepared for onward transfer.

Clearing

Clearing is the system by which banks exchange cheques and other negotiable

instrument, drawn on each other, within the specified area, and secure payment for their

clients through clearing house specified time by book entries i.e., State Bank of Pakistan..

Nearly all the banks provide a wide variety of services to their depositors. One

valuable service provided is that of clearing. Clearing department also plays an

important role in performing the activities of the bank.

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The basic function of clearing department is to provide services to customers in

collection of their cheques of other banks, whether they are in city or outside the city. The

customer can get the money in his account at Bank Alfalah Limited from the cheques

drawn on another bank. The bank accepts the cheque in the clearing department & later

on collects these cheques from the bank on which it is drawn through the clearing house

Every bank acts in two ways i.e.,

1) Paying Bank (The bank, which pays the cheques of his customers, presented by

other banks.)

2) Collection Bank (The bank, which collects the fate of cheques on the behalf of

customers, presented by other banks.)

Different modes of transferring the money are follows as

Transfer

Clearing

Collection

Transfer

A method which means simply we transfer amount from one account to another

account is called transfer.

Clearing.

A system through which funds are transferred from one bank to another in (same

city) clearing house. It may be within city or outside the city. A process by which cheque

is exchanged between the collecting bank and paying bank and the ensuring financial

settlement is called clearing.

Clearing-house

Clearing house is a place where representative of the member bank meet at given

timings every day, to exchange cheques and other instruments drawn on each other.

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Representative of the banks take all the cheques and the instruments such as PO, DD etc

drawn on banks in the city, to the clearing house and bring back cheques and other

instruments drawn on our bank which are payable by us.

Credit Department

Credit comes from the Latin word "creditus" which means, "to believe." Credit

allows us to buy things, which might not be able to afford all at once by letting us pay

over a period of time. But to obtain credit, creditor believes that bank is trustworthy and

responsible.

During my stay at BAL (LDA Branch) I observed that Bank does not dish out the money

to everybody. For bankers it is a matter of

Trust, faith, belief

Trust that money lent will come back

That the transaction booked will prove rewarding for the bank

This trust comes through

Ability & integrity of credit officer

Good repute of the borrower

Honesty & intention to repay

Ability

Solvency

What differentiates a bank from its competitors is the quality of its loan officers, lending

policies and strategies. Credit policy of a bank is usually combination of globally

accepted time tested standards relating to

Safety

Liquidity

Profitability

Most of their loans are made to businesses so loan officer has understanding of

Nature of businesses, industries and their products

Laws relating to these businesses

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Followings are responsibilities of credit officer

Sound judgment and evaluation

Accurate reporting to the management for their decision making

Credit maintenance as per bank’s policy

Periodical re-evaluation and ratings of borrowers

Timely problem identification and taking appropriate remedial steps.

Credit Process

The function of credit department is to lend in the form of clean advances, against

promissory notes, as well as secured advances against tangible and marketable securities.

According to the Prudential Regulations of the State Bank of Pakistan, No bank can issue

a clean advance of more than Rs.100, 000/-. The bankers prefer such securities that do

not run the risk of general depreciation due to market fluctuations.

Credit process consists following activities:

Credit marketing

Analysis and assessments

Qualitative

Quantitative

CLP

Proposal evaluation & decision at appropriate level

Credit administration

Completion of documents

Monitoring

Rating

Sensing problem loans

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Credit Marketing

Types of borrowers

Individuals

Married women

Existing account holders

Staff members

Relatives of staff

Employees of other banks

Joint account holders

Businesses

Sole proprietorship

Partnership

Corporate bodies

Joint ven5tures

Group accounts

Other

Clubs and associations

Government bodies

Traders

Property dealers

Manufacturers

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Types Of Securities

Securities are

Stock Exchange Securities

Immovable property or fixed assets

Goods & products

Various forms of deposits

Life insurance policies

Vehicles

Miscellaneous

Salary cheques

Gold

Methods Of Charging Securities

Charge on collaterals can be created through:

Mortgages

Pledges with conferring possession of assets

Hypothecation

Lien

Assignment

Common Securities for the banker’s advances are as under.

Guarantees:

When an application for advance cannot offer any tangible security, the banker may rely

on personal guarantees to protect himself against loss on advances or overdraft to the

applicant.

Mortgage:

A mortgage is the transfer of an interest in specific immovable property for the

purpose of security the payment of money advanced or to be advanced by; way of loan,

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and existing or future debt, or the performance of an engagement, which may rise to a

pecuniary liability. The transfer is called a mortgagor, the transferee a mortgage.

Promissory Note

Sometimes promissory note is also accepted as a security, “A promissory note is

an instruments in writing containing an unconditional undertaking signed by the maker,

to pay; on demand or at a fixed or determinable future time a certain sum of money only,

to or to the order of certain persons, or to the bearer or the instrument.” A promissory

note is incomplete until has been delivered to payee or the bearer. Moreover, the sum

promised in a promissory note may be two or more makers who may be liable three on

jointly and severally.

Pledge

A formal contract whereby the borrower agrees to deposit goods/ documents with

the creditor on the condition that those will be redelivered to the depositor if the debt is

repaid or can be sold by the creditor if the borrower defaults. After recovery of dues from

sale proceeds the surplus if any is paid back to the borrower Possession passes to bank,

ownership remains with borrower.

Lien

Right of a person in possession of the securities or goods of another person to

retain them until the owner discharges his debt or meets other obligations towards the

possessor.

Lender can dispose off the goods/securities for recovery of debt after serving proper

notice. Banks have a right of “General Lien” also which they can apply towards recovery

of amount. This right is not applicable in certain situations.

Hypothecation

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When moveable property/ goods are charged with the amount of debt but neither

the ownership nor the possession is passed to the lender. It is said to be hypothecated. By

virtue of letter of hypothecation bank can take possession of hypothecated goods in case

of default of the borrower.

Check-points

Regular stock reports giving details of goods with volume and value

Regular inspections for physical verification

Complete valid effective insurance in bank’s name

Registration of charge wherever applicable

Letter of hypothecation on bank’s approved format

Structure and function of Accounts//Finance/Audit Department

Finance and Accounting operations

Functions of Finance

1- Investment Decision

The investment decision is the most important of the BAL Bank’s three major decisions

when it comes to value creation. It begins with the determination of the total amount of

assets needed to hold by the BAL Bank. Review the balance sheet in your mind for a

moment. Imagine liabilities and owner's equity being listed on the right hand side of the

balance sheet and its assets on the left.

2- Financing

The second major decision of the BAL Bank is financing decision. The financial manager

is concerned with the make up of the right hand side of the balance sheet.

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Dividend must be viewed as an integral part of the BAL Bank’s financing decision. The

dividend payout ratio determines the amount of earning that can be retained in the firm.

3- Assets Management Decision.

The third important major decision of the BAL Bank is the asset management decision.

Once assets have been acquired and appropriate, financing provided. These assets must

still be managed efficiently. The financial manager is charged with varying degrees of

operating responsibility over existing assets.

4- Risk Management

In keeping with BAL bank's track record of strong profitability and market leadership,

the function of risk management has become a critical fulcrum of the bank's long term

vision and success. The approach of risk management has evolved beyond the classic

exercise of balancing risk and reward. We have inculcated modern technique which will

allow business units of the bank to create more share holder value through a better

understanding. The risk management group controls the review and administration of

lending solutions offered to our clients through a dedicated team of experienced

professional. It also manages the tree main areas of risk that are inherent to all activities

of the bank namely credit risk, market risk and operational risk.

5- Budgeting

There are today two basic philosophies as to the levels at which budgeted amounts should

be set. We will identify three philosophies as

i. The Behavioral Approach

The assumptions’ underlying the behavioral approach is that the departmental

managers will be most highly motivated if they view the budget as a fair basis for

evaluating departmental performance. Therefore, budgeted amounts are set at

reasonable and achievable levels.

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ii. Total Quality Management Approach

A basic premise of total quality management is that every individual and segment

of the organization constantly should strive for improvement. The entire

organization is committed to the goal of completely eliminating inefficiency and

non value adding activities.

THE ROLE OF FINANCIAL MANAGER

FINANCIAL MANAGER

“The person which manages the financial resources of a business is called financial

manager”.

ILLUSTRATION:

The emergence of financial management as a distinct management discipline is relatively

recent and linked to changes in business and socio economic scenario, brought about by

the advancement in computer and information technology, emergence of multi product

and multi division corporation with complex and dynamic organizational sets-ups,

increasing global competition etc.

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

financial managers, who oversee the preparation of financial reports, direct investment

activities, and implement cash management strategies. Because computers are

increasingly used to record and analyze data.Many financial managers are spending more

time developing strategies and implementing the long term goals of their organization.

ROLE AND DUTIES OF FINANCIAL MANAGER

The duties of financial manager varies with their specific titles, which include controller,

treasurer or finance officer, credit manager, cash manager, and risk and insurance

manage. Controller directs the preparation of financial reports that summarize and

29

forecast the organizations’ financial position such as income statement, balance sheet and

analyses of future earning and expenses. Controllers also are in charge of preparing

special reports required by regulatory authorities. Often Controller oversees the

accounting, audit, and budget departments. Treasurer and finance officer direct the

organization’s financial goals, objectives, and budgets. They oversee the investment of

funds, managed associated risks, supervise cash management activities, execute capital

raising to support a firm’s expansion, and deal with mergers and acquisitions. Credit

managers oversee the firms’ issuance of credit, establishing credit rating criteria,

determining credit ceilings, and monitoring the collections of past -due accounts.

Managers specializing in international finance develop accounting and financial systems

for the banking transactions of multinational organizations.

Use of electronic data in decision making

Electronic data gives exact values and figures which top level management

required. Because of electronic data they came across to know those minute

things which impacts a lot on final place. Through this they can measure

exact profit and loss accounts, assets and liabilities up to a branch level from

where they can decide which should be kept and which should not.

Through this top level management is able to decide which product

should be taken into course for further level or which should stop.

Electronic data make management able to take decision at any point of

time

Sources of Funds trend

The major sources of funds are:

Public Source

As the largest regional bank of Pakistan according to asset base the Banks major

source of funds is from the Public.

Financial institutions

30

Corporate sector is one of the major sources of funds in all types of Banking. All

major organisations, financial institutions and government & private organisations

are the major sources of the funds.

Deposits 2008 2007 2006 2005 2004

Customers 289,137,021 264,272,208 229,595,652 210,549,380 126,195,222,

Financial

Institution

300,732,858 273,173,841 239,509,391 222,345,067 129,714,891

Generation of Funds :

Mark up /return Interest earned

(Rupees in Million)

Year 2008 2007 2006 2005 2004

Markup/interest 31046 25783 21191 12246 5620

Markup/return/interest earned can be obtained by two ways

a) On loan and advances to:

Customers

Financial institution

b) On investments in:

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Available for sale of securities

Held to maturity securities

On deposits with financial institution

On securities purchased under resale agreement

On money at call

Others

Allocation of Funds trend

BAL’s funds are allocated to the following departments. The banks major focus is

on short term financing. Major allocation of funds are on these divisions.

Long Term Financing(For over one year)

Long term financing includes a tenure more than one year.

Short Term Financing(For upto one year)

Short term financing includes period less than one year. The banks major focus is

on short term financing.

2008 2007 2006 2005 2004

Long Term Finances65,960,365 64,658,338 64,691,318 48,016,917 31,208,249

Short Term Finances132,851,487 111,020,472 87,544,463 70,847,903 57,723,151

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Agriculture financing

The bank provides adequate and timely financial assistance to the farmers to

improve production potential of agriculture sector. Insurance of leased assets, animals,

crops and life assurance of borrowers are all source of money for the bank.

E-Banking

The bank has a centralized database that is web-enabled. All the services that the

bank has permitted on the internet are displayed in menu. Any service can be selected and

further interaction is dictated by the nature of service.

Utility bills

The bank also makes possible the payment of electricity, gas and telephone bills

for its customers charging some commission on each payment.

Lockers

Commission charged on lockers provided by bank for customers, is also a source

of inflow for the bank.

Consumer financing

Personal Finance, mortgage finance, business finance, smart cash, auto financing and

travelers cheques are all sources of funds for the bank. The bank finances all these loans

and facilities on competitive mark up rates

Critical Analysis of the practical exposure relating to theoretical

concepts

33

This part of report is the essence of the internship, as this will help other students to better

understand the working environment of the bank by finding the relationship between

what is written in the books and what is actually going on in fields. The theory written in

the books in cases is not implemented as it is. In some cases theory is implemented with a

little modification but in other cases theory has nothing to do with practice. In

accounting, banks don’t prepare worksheet, but part of worksheet is prepared like trial

balance, but little differences, theory and practice has substantial relationship. The

securities for the loans are handled in the same way as theory says like mortgage, pledge,

hypothecation, advances against insurance policies or liquidation procedure is the same.

The difference is there in the case of loans. Theory talks about four or five terms of loans

that is cash finance, overdraft, loans etc., but in practice there are some more terms used

like running finance, demand finance etc. All other concepts of remittances, bills, foreign

exchange deposits, letters of credit are in accordance with theory almost. So for a internee

it is more important to learn new things which he/she has never heard about in his/her

course book.

To me, Theory gives you the direction to understand the processes and the terminologies

going across the World using best business practices in a broader view covering each and

every aspect of possible business scenarios. On the contrary practical life is specific,

enclosed in a jar. In practical professionalism and firm’s environment is each and every

thing. Professional life only builds on the knowledge based on books even though it may

only use 1% of the theoretical knowledge.

Computer system

The system has not totally shifted on computer. Manual procedure is still there hence

computer facility is not fully availed. There should be a system at each counter for quick

processing.

34

Right person for right job

During my internship I have observed the person who has came as customer Relationship

Officer was acting as Cashier. It should not be like this. The person should be posted

according to his qualification, profession skills and experience.

Customer problem

People have to wait for en-cashing their cheques for about 10-20 minutes, which is

not good for the reputation of bank, the delay is due to manual work. Therefore I suggest

that computers and other electronic machines should be installed in bank so that time

could be saved.

Deficiency in management

I felt at some places the BAL need to have employees, because a lot of work is to be done

by a single employee that will result in work overload and employee might not perform

his/her job with full devotion.

Financial Analysis

To analyse the financial position of BAL, different tools are use, which includes Ratio

Analysis, Common size Analysis of the last five years.

I ntroduction and Importance of Financial Analysis

Financial analysis involves the use of various financial statements. These

statements do several things. First the balance sheet and the second is

income statement.

The balance sheet summarizes the assets, liabilities, and owner’s equity of a

business at a point in time, while the income statement summarizes revenues

35

and expenses of a firm over a particular period of time. A conceptual

framework for financial analysis provides the analyst with an interlocking

means for structuring the analysis.

Balance Sheet of last five year s

Rupees in “000”

ASSETS 2008 2007 2006 2005 2004Cash and balances with treasury banks

32687335 29436378 27859360 24788625 19708518

Balances with other banks

21581043 18380738 12731952 9713369 3183957

Lending to financial institution

3315500 3452059 12456653 27050493 -

Investments 75973238 88491564 56502210 57425700 35503196Advances 192671169 171198992 149999325 118864010 88931400Fixed assets 13773293 11922324 10502900 6620067 4280504Deferred tax - - - - -

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assetsOther assets 8989186 6013097 5633051 3851529 3226959

348990764 328895152 275685541 248313793 154834534LIABILITIESBills payable 3452031 4138243 3091135 3733124 2233671Borrowings 13690222 21230697 8394130 5844389 12723830Deposits and other accounts

300732858 273173841 239509391 222345067 129714891

Sub-ordinated loans

2571169 3220858 3222106 3223355 1899480

Liabilities against assets subject to finance lease

- - - - -

Deferred tax liabilities

208465 1379809 1921338 484066 275834

Other liabilities 11291280 9531860 7305496 5219666 2725344331946025 312675308 263443596 240849667 149573050

NET ASSETS 17044739 16219844 12241945 7464126 5261484REPRESENTED BYShare capital 7995000 6500000 5000000 3000000 2500000Reserves 3166056 2414833 2749533 2351218 1008772Unappropriated profit

3447467 4851840 2823072 1386845 860300

14608523 13766673 10572605 6738063 4369072Surplus on revaluation of assets

2436216 2453171 1669340 726063 892412

17044739 16219844 12241945 7464126 5261484

37

Common Size Analysis

Horizontal Analysis

This type of analysis represents the percent change in specific line item of the Income

statement or the balance sheet from the last year. This analysis is used to comment on the

growth of specific line item in the industry or the firm.

  2008 2007 2006 2005 2004

ASSETSCash and balances with treasury banks

% 165.

85 149.36 141.36 125.82 100

Balances with other banks

%677.81 577.29 399.88 305.07 100

Lending to financial institution

% - - - - -

Investments % 213.99 249.25 159.15 161.72 100

Advances % 216.65 192.51 168.67 133.66 100

Fixed assets % 426.82 369.46 325.48 205.15 100

Deferred tax assets % - - - - -

Other assets % 210.002 140.48 131.59 89.98 100

LIABILITIESBills payable % 154.55 185.27 138.38 167.13 100

Borrowings % 107.59 166.86 65.97 45.93 100

Deposits and other accounts

%231.84 210.59 184.64 171.41 100

Sub-ordinated loans % 135.36 169.57 169.63 169.69 100

Liabilities against assets subject to finance lease

%- - - - -

38

Deferred tax liabilities % 7.65 50.61 70.49 17.76 100

Other liabilities % 4093.5 3455.65 2648.51 1892.32 100

INTERPRETATION

Horizontal analysis is done using fixed base method. In this analysis, values

of the year 2002 are taken as base.

Formula

= Current Year x100

Base year

BALANCE SHEET HORIZONTAL ANALYSIS

COMMENTS

■ Cash is increasing gradually yearly, but decrease in 2005 and 2008, cash shows that the liquidity position of the bank is going to be strong, so it is positive sign for the bank.

■ There is decreasing trend in balance with other banks which is a negative sign.

■ Increase in money at call and short notice, it means that customers of bank are very punctual in making payments. Therefore it is good sign for the bank.

■ In the field of investment there is increasing trend with the passage of time. It is common term of finance” more investment more return.

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■ As we know that main source of profit of a bank is the difference between the percentages of interest, Banks pay less rate of interest than receiving the interest from the customers. In this case advance to customers very low in 2004 but increase from 2005. It means that BAL is running very well.

■ BAL is in a position that it is earning more and more profit with passage of time. Then bank can purchase more and more fixed assets, and it is bank is doing. Assets of the banks are increasing day by day by purchasing the assets. More assets mean that bank has more capacity to pay off its liabilities. There is increasing trend in field of fixed assets. It is due to purchase of new assets.

■ Other assets have a decreasing trend which is not a positive sign. Decrease in assets decrease the worth of organization

■ There is increasing trend in deposits and other accounts which shows the credibility of the bank.

■ Borrowing is decreasing in 2004 but there is increasing trend in the year 2005. Although it is seeing that bank’s borrowing is increasing with the passage of time which is not a good sign but there is a positive thing in this behalf, usually banks borrow money at that time when they would have to give it for earning more profit, The BAL Bank doing the same thing for increasing its profits.

■ Bills payable increase in 2008 but decrease in 2007 negative sign.

■ Other liability has an increasing trend not good because increase in liability decreases the liquidity position of the bank.

■ Share capital increase that shows the creditability of bank.

■ The BAL Bank Limited is increasing its reserves and Un-appropriated profit in order to increase its lending power, which is good sign, because according to the prudential regulations of State Bank of Pakistan, a bank can lend money (per party exposure) equal to the 30% of its assigned capital plus reserves.

40

Vertical analysis

ASSETS 2008 2007 2006 2005 2004Cash and balances with treasury banks

9.37 8.95 10.11 9.98 12.72

Balances with other banks

6.18 5.59 4.62 3.91 2.06

Lending to financial institution

.95 1.05 4.52 10.89 -

Investments 21.77 26.91 20.49 23.12 22.93Advances 55.21 52.05 54.41 47.87 57.44Fixed assets 3.95 3.62 3.81 2.67 2.08Deferred tax assets - - - - -Other assets 2.58 1.83 2.04 1.55 2.76LIABILITIES

Bills payable0.99 1.25 1.21 1.50 1.44

Borrowings3.92 6.45 3.04 2.35 8.22

Deposits and other accounts 86.17 83.06 86.88 89.54 83.78

Sub-ordinated loans074 0.98 1.17 1.29 1.23

Liabilities against assets subject to finance lease

- - - - -

Deferred tax liabilities 0.06 0.42 0.69 0.19 1.76

Other liabilities3.23 2.89 2.65 2.10 0.18

41

BALANCE SHEET (ASSETS)VERTICAL ANALYSIS

COMMENTS

■ There is increasing trend in cash and balances .cash and balances increases in 2006 again but decreases in 2008.

■ Balance with other banks increases in 2006 and again start to decreases in 2007 and 2008.

■ Lending to financial institution increase in 2006 an decrease in 2007 and 2008.

■ Investments are decreasing every financial year in 2007 it began to rise up and finally in 2008 it stars decreases.

■ Operating fixed assets are increasing after every year.

■ Other assets are also increasing every year which is a positive sign for the organization.

Profit and Loss Account of last five yearsRupees in “000”

2008 2007 2006 2005 2004Mark up / return / interestearned

31046583 25783871 21191470 12246811 5620203

Mark up / return / interestexpensed

20331194 16620963 15232886 7204992 2434459

Net mark up / interest income

10715389 9162908 5958584 5041819 3185744

Provision against loans and advances

2035997 2370867 (697690) (402298) (370208)

Provision for diminution in value investments

1479062 - - - 2165

42

Bad debts written off directly

28298 5844 1537 512 351

3543357 2376711 699227 402810 372724Net mark up / interest income after provision

7172032 6786197 5259357 4639009 2813020

Non mark up / interest incomeFee,commission and brokerage income

2539321 2429599 1804998 1158747 675868

Dividend income 300943 64722 37393 52014 52539Income from dealing in foreign currencies

914845 474510 386997 290091 218820

Gain on sale of securities 424220 2059793 180751 239551 -Unrealized loss on revaluation of investments

(81571) (21530) (27599) 23163 -

Other income 1247669 1031372 842099 504967 572822Total non mark up / interest income

5245427 6038466 3224639 2268533 1520049

12417459 12824663 8483996 6907542 4333069Non mark up / interest Administrative expenses 10471399 8272587 5874745 4313023 2677635Provision against off balance sheet obligations

28582 6959 - 10125 -

Other charges 122758 9565 43306 21104 1700Total non mark up / interest expenses

10622739 8289111 5918051 4344252 2679335

1794720 4535552 2565945 2563290 1653734Extra ordinary / unusual items

- - - - -

Profit before taxation

Current 1730051 1726810 476226 592635 586159 Prior years (221797) - (100874) 1037 (30000) Deferred (1014835) (321487) 427902 267524 12912

493419 1405323 803254 861196 561745Profit after taxation

43

Unappropriated profit brought forward

1301301 3130229 1762691 1702094 463043

Transferred from surplus on revaluation

4851840 2823072 1886845 860300 23667

Profit available for appropriation

24586 24585 26074 24870 23667

6177727 5977886 3675610 2587264 2078698

Horizontal Analysis of Profit and Loss Account

This type of analysis represents the percent change in specific line item of the Income statement from the last year. This analysis is used to comment on the growth of specific line item in the industry or the firmHorizontal analysis of incomet side,

2008 2007 2006 2005 2004Mark up / return / interestearned

552.41 458.77 377.05 217.90 100

Fee commission and brokerage income

375.71 359.47 267.06 171.45 100

Dividend income 572.79 123.19 71.17 99 100

Income from dealing in foreign currency

418.08 216.85 176.85 132.57 100

Other income 217.81 180.05 147.01 88.15 100

Total non mark up / interest income

345.08 345.08 212.14 149.24 100

Mark up / return / interestearned

552.41 458.77 377.05 217.90 100

Provision against loans & Advances

549.96 640.41 188.46 108.67 100

Provision for diminution in value of investment

1479062 - - - -

44

Bad debts written off directly 8062.10 1664.95 473.89 145.87 100

Administrative expenses 391.07 308.95 219.40 161.07 100

Other charges 7221.05 562.65 2547.41 1241.41 100

Profit before taxation 87.84 4.37 142.99 153.31 100

PROFIT AND LOSS A/CHORIZONTAL ANALYSIS

■ Interest income decrease in 2004 will great proposition which is not favorable. It means that interest received by the bank is decreasing with the passage of time. It is not good for a banking company.

■ It is known that banks provide many services for their customers and also act as a agent of the customer. The banks receive fee and commission after their services; it is a main source of bank to receive fee and commission from their customers. In case bank is taking more fees as compared to previous years. This is good for the bank.

■ In foreign currency dealing and dividend there is huge increasing trend which shows the investment of bank in healthy organization.

■ Other income decrease in 2006 but this increase mean positive situation.

■ Return on deposit decreases which shows good sign and it is due to decrease in return rate.

■ Adm and diminution and provision against non performing loan decreasing turned that is favorable.

■ Bad debts increased with huge amount not positive sign.

■ Profit before taxation has increased with greater proportion.

■ Tax increases which are not bad because it is interrelated with profit, if profit increased, tax also increase.

45

Vertical analysis of Profit & Loss

2008 2007 2006 2005 2004 Mark up / return / interestearned

85.55 81.02 86.79 84.37 78.71

Fee commission and brokerage income

6.99 7.63 7.39 7.98 9.47

Dividend income 0.83 0.21 0.153 .358 .735

Income from dealing in foreign currency

2.52 1.49 1.59 1.99 3.16

Other income 3.43 3.24 3.45 3.48 8.02

Mark up / return / interestearned

67.96 70.70 74.06 68.63 60.88

Provision against loans & Advances

4.45 6.5 2.44 2.25 4.01

Provision for diminution in value of investment

3.23 - - - -

Bad debts written off directly 0.06 0.02 0.01 0.003 0.004

Administrative expenses 22.92 22.68 20.53 24.17 29

Other charges 0.27 0.03 0.15 0.12 0.02

Profit before taxation 1.09 0.06 2.81 4.82 6.08

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PROFIT AND LOSS A/CVERTICAL ANALYSIS

■ Interest income increase which is good sign for the BAL Bank. Income increases because the bank advances increases from the previous year.

■ Banks provide many facilities other than money lending and borrowing. Banks receive fee, commission etc. for these services. Therefore fee and commission income are increasing which is good and favorable signs It means bank doing good business with its clients.

■ Divided income decreased but it is very small. The dividend income fluctuating every year, there is a problem for investor to properly estimate the dividend and return on investment.

■ Other income increase with great proportion good sign.

■ Income from foreign currency decreases yearly that is not good sign for the BAL Bank.

■ Return on deposit decrease good sign because it increases the profit.

■ Administration expenses are increased but no alarming rate. The administrative expenses are paid to expand new branches and hired new staff for the bank.

■ Position against non performing loan is zero which show bank have good customer.

47

RATIO ANALYSIS

Ratio means “one number expressed in term of another a ratio is statistical

yardstick by mean of which relationship between two or various figures can

be compared or measured. The ratio analysis can be done under,

Ration analysis can be classified into different types

1- Profitability ratio2- Liquidity ratio3- Coverage ratio4- Activity ratio5- Special ratio6- Gearing ratio

1.PROFITABILITY RATIOS

“Profitability reflects not only the quantity and trend in earning but also the factors

that may affect the sustainability or quality of earnings.”

Following profitability ratios have been calculated

I. Net Profit Ratio

II. Profit before Tax Ratio

III. Return on equity

IV. Return on total assets

V. Return on fixed assets

VI. Operating Expense Ratio

VII. Administrative Expense Ratio

48

I. NET PROFIT RATIO

Net Profit after tax x 100

Markup /Interest earned

Data Values 2008 2007 2006 2005 2004

Net profit after Tax 6177727 5977886 3675610 2587264 2078698

Markup/ Interest earned 31046583 25783871 21191470 12246811 5620203

Ans 19.89% 23.18% 17.34% 21.13% 36.99%

II.RETURN ON ASSETS

Net profit after tax x 100

Total assets

Data Values 2008 2007 2006 2005 2004

Profit After Tax 6177727 5977886 3675610 2587264 2078698

Total Assets 348990764 328895152 275685541 248313793 1548345341

Ans 1.77% 1.81% 1.33% 1.04% 1.34&

INTERPRETATION

49

This ratio indicates the profitability of the bank based on total assets; it means that what

is the ratio of net profit after tax to total assets. This decrease shows the bank’s

inefficiency to generate net profit as compared to last year.

III. RETURN ON FIXED ASSETS

Net profit after tax x 100

Fixed Assets

Data Values 2008 2007 2006 2005 2004

Net Profit After Tax 6177727 5977886 3675610 2587264 2078698

Fixed Assets 13773293 11922324 10502990 6620067 4280504

Ans 44.8% 50.1% 34.9% 39.1% 48.5%

INTERPRETATION

The ratio increases which is a tremendous increase in Bank return on fixed assets. But it

reduces .This decrease shows the bank’s inefficiency to generate return on fixed assets as

compared to last year.

IV. ADMINISTRATIVE EXPENSE RATIO

Administrative expenses X 100

Total deposit

Data Values 2008 2007 2006 2005 2004

50

Administrative

Expenses 10471399 8272587 5874745 4313023 2677635

Total Deposits 300732858 273173841 239509391 222345067 129714891

Ans 3.48% 3.03% 2.45% 1.94% 2.06%

INTERPRETATION

This ratio indicates the rate of administrative expenses to total deposit.

2. LIQUIDITY RATIOS

Liquidity represents the ability of a bank to efficiently and economically accommodate

deposits withdrawal as well as fund increase in assets. A bank has a liquidity potential

when it has the ability to obtain sufficient funds in a timely manner at a reasonable cost.

Illiquidity is a primary factor leading to a bank’s failure whereas high liquidity helps

otherwise weak institutions to remain funded during the period of difficulty.

“Liquidity reflects the adequacy of the institution’s current and prospective

sources of liquidity and funds management practices.”

I. Current ratio

II. Quick Asset to Deposit ratio

III. Interest coverage ratio

IV. Liquid assets to total assets

51

3. ACTIVITY RATIOS

I. Fixed asset turnover ratio

II. Total asset turnover ratio

I. FIXED ASSET TURNOVER RATIO

Interest/markup/ return earned

Fixed Assets

Data Values 2008 2007 2006 2005 2004

Markup/ Interest 31046583 25783871 21191470 12246811 5620203

Fixed Assets 13773293 11922324 10502990 6620067 4280504

Ans 2.25 2.16 2.02 1.85 1.31

INTERPRETATION

Fixed asset turnover indicates the efficiency with which the company uses its assets to

generate sales. Generally, the higher a company’s fixed asset turnover, the more

efficiently its assets have been used.

52

II. TOTAL ASSET TURNOVER RATIO

Interest/markup/ return earned

Total Assets

Data Values 2008 2007 2006 2005 2004

Markup/ Interest 31046583 25783871 21191470 12246811 5620203

Total Assets 348990764 328895152 275685541 248313793 154834534

Ans 0.088 0.078 0.077 0.049 0.036

INTERPRETATION

This ratio shows the overall efficiency of the bank in utilizing its assets to earn mark up

return.

4. SPECIAL BANK RATIOS

I. Total advances to total Assets

II. Fixed assets to total assets

I. TOTAL ADVANCES TO TOTAL ASSETS

Total advances x 100

Total Assets

53

Data Values 2008 2007 2006 2005 2004

Total Advances 192671169 171198992 149999325 118864010 88931400

Total Assets 348990764 328895152 275685541 248313793 154834534

Ans 55.21% 52.05% 54.41% 47.87% 57.43

INTERPRETATION

This ratio shows the advances, which the bank makes as the percentage of its total assets.

If the advances of the banks increasing within increase in the total assets it is favorable

for the bank business. Because there are more advances, there is more income of the bank

and respectively more profit. Total advances to total assets variation is showing

increasing trend in the last year’s whish shows that the management of the bank is

increasing the portion of its advances then compare to increase in the total assets which is

favorable.

II. FIXED ASSETS TO TOTAL ASSETS

Fixed Assets x 100

Total assets

Data Values 2008 2007 2006 2005 2004

Fixed Assets 13773293 11922324 10502990 6620067 4280504

Total Assets 348990764 328895152 275685541 248313793 154834534

Ans 3.95% 3.62% 3.81% 2.67% 2.76%

54

INTERPRETATION

In the bank, another financial institution, fixed assets are comprised of equipment,

furniture and building. These assets have great importance in banks in order to maintain

the working condition that up to that mark.

5 GEARING RATIOS

These ratios measure the extent to which bank’s resources have been geared by debt i.e.

financed by debt in relation to share holder’s equity.

I. Debt To equity Ratio

II. Debt To Total Asset Ratio

.

55