Bank Alfalah Limited MBA Internship Report

7/28/2019 Bank Alfalah Limited MBA Internship Report

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1- Introduction

1.1 Executive Summary

Following privatization, Bank Alfalah emerged as new identity of Habib Credit and Exchange Bank with a revivedpurpose and commitment. Charged with the strength of Abu Dhabi consortium and under the leadership of HisHighness Sheikh Nahayan Mabarak Al-Nayayan, the bank has already made significant contributions in buildingand strengthening both corporate and retail banking sector in Pakistan.

Designing the product portfolio of bank in response to the customers preferences, the product like Royal Profit,Royal Patriot and Royal Custodial are prime examples of quality and innovation providing timely bankingopportunities to the customers of bank.

Assessment of the needs and wants of the customers is an ongoing process at Bank Alfalah, which helps to

continually develop new products and services. To continuously offer courteous, professional and advanced bankingsolutions, the team of bank has recently been rejuvenated by going though training programs with a focus oninformation technology.

To make their banking solutions become accessible to more and more people, they have embarked upon a rapidexpansion program, aiming to provide a networking that makes the services available to any of their customers in all

the major urban centers of Pakistan- with a view to go international in the near future.

With their key indicators of progress already soaring to new heights, the bank is committed todedicate all its energies, resources and time to bring higher value and satisfaction to their customers,

employees and shareholders.

The graph of bank is going up and up every year. The ratio of profit is increasing at good percentage. The bank is

serving the people at high level of standard by going according to the whishes of the customers.

1.2 Commercial Banking Scenario in Pakistan

At the time of independence in 1947, there were 38 scheduled banks with 195 offices in Pakistan but by December31, 1973, there were 14 scheduled Pakistani commercial banks with 3,233 offices all over Pakistan & 74 offices inforeign countries.

Nationalization of Banks was not done 1st January 1974 under the Nationalization act 1974, due to certain objectives.But it had negative effects on efficiency of the banking sector afterwards a privatization Commission was set up on

January 22, 1991, the commission transferred many banks to the private sector i.e., MCB & ABL. The governmentapproved & permitted the establishment of 10 new private banks in 1991;hence many new private banks haveincorporated, since then, BANK ALFALAH in one of the namely established private scheduled banks in Pakistan.

1.3 Introduction to Bank Alfalah

Bank of Credit & Commerce International (BCCI) was a Pakistan based bank, established by Mr. Agha Hassan Abdifrom UBL, in association with U.A.E and Europe. BCCI has its branches in 74 different countries of the world. Ithad its 3 branches in Pakistan. In 1991, the BCCI was banned, when is was accused by European countries that the

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bank was involved in some illegal operations with Gulf countries. The major reason behind European accusationwas that BCCI was of Islamic mode. Therefor, the bank was closed due to international pressure. Then, its 3Pakistani branches were taken over by the Government of Pakistan, which were named as Habib Credit andExchange Bank (HCEB) and these were working as subsidiary of Habib Bank Limited.

Following the privatization in July 1997, Habib credit and Exchange Band assumed the new identity of Bank Alfalahon February 25, 1998. It is now Abu Dhabi based bank as the family of Sheikh Nahayan Mubarik Al-Nahayanpurchased 70% of its shares and 30% shares remained with Habib Bank on behalf of Government of Pakistan.

It has its 18 branches in 8 cities of Pakistan. The Multan branch has recently been opened in May 1999. It is notlisted on any stock exchange of Pakistan.

Charged with the strength of Abu Dhabi consortium, and under the leadership of His Highness Sheikh NahayanMabarak Al-Nahayan, Minister of Higher Education and Scientific Research, Government of Abu Dhabi, and aprominent member of Royal Family, the bank is energized with the vision, envisaging the development of varioussectors in Pakistan.

2- OVER VIEW OF THE ORGANIZAITON

2.1 NATURE

Bank Alfalah is a profit organization.Its profits in 2011 are as follows.Profit before provisions and taxation 9,757,522

Provisions (net) (4, 323,804)

Profit before tax 5,433,718

Tax (1,930,588)

Profit after tax 3,503,130

Earnings per share Rs. 2.50

DIVIDEND:

The directors recommend the payment of cash dividend @17.50 subject to approval ofshareholders.

OPERATING RESULTS:

During the year Banks profit before tax stood at Rs. 5,433.718 million compared to Rs.1,368.745 million for the previous year.

2.3 Mission/Objectives

Edge on competitors.

High profits.

Expansion of strong structure.

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Variety of Products.

A good banking standard.

Bank Alfalahs Slogan

Lets Look Ahead Towards a Brighter Future. Together.

Bank Believes

Every door leads to our customers.

The legacy of leadership stands as our guiding light.

The strength of chain relies on the strength of each link.

A keen ear is a key to understanding. Achievement is nothing without target.

Time is our most valuable asset.

Performance is nothing without the ability to measure it.

Every drop counts.

2.4 Vission

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

2.5 Branches Network

Bank Alfalah has its 18 branches in 8 cities of Pakistan. Detail is as under:

KARACHI

Main branch, B.A. Building, I.I. Chundrigar Road.

Cloth Market Branch.

Clifton Branch.

Shahrah-e-Faisal Branch.

Karachi (new Branch).

LAHORE

Kashmir Road Branch.

Gulberg Branch.

Defense Branch

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RAWALPINDI

Mall Road Branch.

OTHER BRANCHES

Other Branches are in:

Jauharabad.

Sialkot.

Islamabad.

Peshawar.

Multan.

Faisalabad.

Quetta.

Sukkur.

Hyderabad.

Gujranwala.

Now, Bank Alfalah is going to establish its branches in some foreign countries. Hopefully, in Dhaka (Bangladesh)and Bahrain, its branches will be opened in the year 2001. Some branches will also be opened in European countries.

3. Organizational structure

3.1 The Board

The list of Board of Directors of Bank Alfalah Limited is as under:

H.H. Sheikh Nahayan Mabarak Al-Nahayan.

Mr. Abdulla Naseer Hawalled Al-Mansoori.

Mr. Abdulla Khalil Al-Mutawa.

Mr. Omar Z. Al-Askari.

Mr. Naeem Iqbal Sheikh.

Mr. Ikram-ul-Majeed Sehgal.

Mr. Muhammad Saleem Akhtar.

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The core group

In the core group, there are 2 committees, i.e.,

Board Advisory Committee. Executive Committee.

Board advisory committee

Mr. Omar Z. Al-Askari.

Mr. Abdulla K. Al Mutawa.

Mr. Ganpat Singhvi.

Mr. Bashir A. Tahir.

Executive Committee

Mr. Mohammad Saleem Akhtar.

Mr. Ikram-ul-Majeed Sehgal.

Mr. Parvez A. Shahid.

Mr. Tanveer A. Khan.

Mr. Mohammad Yousaf.

Mr. M. Waqas Mohsin.

Auditors

A.F. Ferguson & Co.

Chartered Accountants.

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3.2 ORGANIZATIONAL CHARTS

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FEATURES

Bank Alfalah Limited is and established bank. It has some special features with the help of those it is growing

rapidly.

Good Work Environment

As the work environment plays a great role in this competition age, so the bank has good work environment. All thepeople work with cooperation; managers are so kind that each problem can be discussed with them.

Efficiency

Employees at Bank Al-Falah are quite efficient. As Multan branch is a new one, its employees have to bring theirbank among the list of good banks. Therefore, they work more than their working hours and it is allaccording to their will. It also shows their loyalty, commitment to organization.

Customer Services

All the customers are entertained individually. Same kind of behavior and attention is given to all the customers.

Suggestions asked from Customers

Getting ideas for improvement from customer side is a new idea and that is working very well in Bank Alfalah Ltd.All the customers are asked to fill a suggestion form and the standards of the bank are improved through them.

Employee Benefits

Employees are given the benefits like bonus, gratuity funds, loans, increments, house rent, medical and conveyance.

Computerized Working Environment

In bank, all the work is done on computers. All the entries are made in computer. Balance are fed into the computer.This increases efficiency of the bank.

Share Capital

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The authorized capital of Bank Alfalah is of Rs. 1000 Million (100,000, 000) Paid-up capital is of Rs 600 Million(600,000,000) ordinary shares of Rs.10 each issued for cash.

Products

Prioritizing its product portfolio in line with its corporate and consumer needs and wants the bank is committed todevelop products that give more value to its customers in both the sectors.

Following their trend of bringing value added products and services to their customers the bank has present RoyalGroup, Royal Profit and Royal Patriot.

ROYAL GROUP

Royal Group is a joint investment plan that allows individuals to invest money collectively and earn higher rate ofprofit.

Deposit Amount Rate

100,000-999,999 9.50 %

1,000,000-9,999,999 9.70 %

10,000,000 and above 10.00 %

ROYAL PROFIT

It is the profit obtained by individuals on their deposited amount.

Deposit Amount Rate

50,000 to 999,999 9.00 %

1,000,000 to 9,999,999 9.50 %

10,000,000 & Above 10.50 %

ROYAL PATRIOT

It is similar to term deposit. In term deposit one get no benefit of profit when he withdraws his money beforematurity date. But in case of Royal Patriot if one withdraw his money before the maturity date, he can get the benefitof profit. The profit rates for different periods are following:

Duration 1Month 3Months 6Months 12Months 2YearsAmount Rate Rate Rate Rate Rate

25,000-999,999 8.00 % 10.00 % 10.50 % 11.00 % 11.00 %

1,000,000-4,999,999 8.10 % 10.10 % 10.60 % 11.10 % 11.25 %

5,000,000 & Above 8.20 % 10.25 % 10.70 % 11.20 % 11.50 %

4. FINANCE POLICY

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Bank Alfalah finance on short term basis only against current assets to its customers in both corporate and consumersectors. They dont invest too much in fixed assets. Maximum credit for short term is Rs. 50 Millions for one party,they dont go beyond five years financing.

FINANCING SCHEMES

The bank has introduced many financing Schemes such as Term Finance & Royal Personal Finance. The bank hasrecently introduced a Car Finance Scheme.

4.1 Royal Personal Finance

This is the facility for individuals to finance their domestic requirements such as purchase of household equipments,computers, funding of education, marriage, planning a holiday, payments of credit card bills, other liabilities or anyother personal requirement.

Facility Range Minimum Rs. 50,000 Maximum Rs. 500,000

Tenure From 1 to 3 years.

Maximum Loan Entitlement (Approximately)

Tenure 1 year 2 years 3 years

Factors 0.09168 0.04993 0.03615

4.2 ALFALAH QUICK FINANCE:

Alfalah Quick Finance is a personal loan against National Saving Certificates, Prize Bonds,Alfalah GHP Principal Protected Fund & PKR/FCY deposit for meeting personal, family andhousehold needs.

It is one year revolving limit with quarterly mark-up payments. The amount of financing underAQF ranges from Rs. 50,000 to 2.5 Crore.

AQF shall not exceed 90% of the encashment value of the security offered. In case of financingagainst Foreign Currency Deposit the maximum financing should not exceed 85% of the depositencashment value.

In case of Alfalah GHP Principal Protected Fund taken as a security the financing approvedunder AQF shall not exceed 70% of the face value of units held by the borrower.

Pricing

Securities Acceptable under

AQF

Pricing

1. PKR deposit with BAL (TDR,PLS/Current Account)

Minimum 1.75% spread overdeposit rate

2. PKR/FCY deposit of otherBanks & FCY deposit of BAL

Minimum 1.75% spread over 6-months KIBOR

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(TDR, PLS/Current Account)

3. Government securities that are6-months old from the date ofissuance includingDSC/SSC/RIC


4. Prize Bonds Minimum 2 % spread over 6-

months KIBOR

5. Alfalah GHP PrincipalProtected Fund


4.3 ALFALH MILKIAT FINANCE:

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

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

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

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

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

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

You are eligible to apply if:

You have been in business for at least 3 years.

Amount of finance you need is between Rs 0.5 Million to Rs 30 Million under AMF 1, 2& 3 or a maximum of Rs 3.5 Million for AMF 4.

Salient Features

AMF 1,2 & 3 shall be repayable in 2-15 years whereas AMF-4 shall be repaid in 2-4

years.

Mark up shall be (1 Year KIBOR + 4%)

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Monthly installments will be hassle free through post dated cheques.

AMF shall be disbursed approximately within one month after completion of

documentary requirements by you.

The property being financed shall be mortgaged in favor of the bank.

4.4 ALFALAH KAROBAR FINANCE:

AKF is a Running Finance facility between Rs 0.50M to Rs 20.0M.

Tailor-made product for SMEs for their working capital financing based on the cash flowmethodology. (Our Edge = Better pricing, quicker TAT and low processing charges.)

At Bank Alfalah, all branches are designated to deal with AKF business.

Thepurpose of the AKF is financing procurement of raw material, finished goods andreceivables of SME businesses.

SME Customers with following acceptable criteria are entertained in this product:

1. Resident Pakistanis

2. Individuals/ sole proprietors aged up to 65 years.

3. In the same business for the last three years

4. Could offer mortgage urban residential/commercial/ industrial properties (third partycollateral also allowed)

5. Overall debt burden not to exceed 40% of the projected cash flows over the period offinancing.

6. Maximum AKF entitlement to be worked out by considering the lowest of: 60% ofassessed market value of the mortgaged property, or 35% of sales turnover or condition #5 above.

Validity of the AKF shall be initially for a period of one year. Quarterly mark-up shall be serviceable within 15 days of its becoming due. Turn-around-time for the approval of AKF would be 20 working days from the date ofreceipt of complete LAF along with its attachment.

Processing charges of Rs 2,000/- are recovered upfront with Loan Application Form.

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Clean-up requirement: At least 25% of the AKF approved limit shall be required to becleaned-up for two days in six months. For details and further assistance, please call now at 111-777-786 / 111-225-111 or visit yournearest Bank Alfalah branch.EEZEE FINANCE:

All adult residents of Pakistan below 65years of age, salaried or businessmen, having a debt

burden less than 50% of their net income.

4.5 AGRI FINANCE:

BANK ALFALAH'S ZARIE SAHULAT offers finance facilities covering entire spectrum ofFarm and Non-Farm activities both for production and development purpose. We offer followingwide range of Agri Finance Products to encourage farmers to increase farm production.

Alfalah PaidawariZarieSahulat

Alfalah MusalsalZarieSahulat

Alfalah Tractor and Transport ZarieSahulat

Alfalah Machinery & Equipment ZarieSahulat

Alfalah AabpaashZarieSahulat

Alfalah Islah-e-AraaziZarieSahulat

Alfalah Poultry ZarieSahulat

Alfalah Dairy & Livestock ZarieSahulat

Alfalah Fisheries ZarieSahulat

Alfalah Silos/ Storage ZarieSahulat

Alfalah Marketing ZarieSahulat

Alfalah Agri Industrial ZarieSahulat

Alfalah Bills /Guarantee ZarieSahulat( for growers corporate clients only).

Alfalah Lease ZarieSahulat.

4.5 ALFALAH CAR FINANCE

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Its a scheme that enables one to own his desired car at easily affordable and flexible installments with a minimumdown payment and insurance.

Salient Features

Lowest Financing cost available in the market

Tenure of 1 to 5 years as per individual requirement

Quickest processing

Minimum processing charges: Rs. 3000 payable once

Down Payment requirement of 25%

Repayment through monthly installments

Lowest Insurance rates available from banks approved insurance companies

Monthly Installments

Monthly Installments for Alfalah Car can be calculated by multiplying Banks financing amount with the followingfactors:

Periods Factors

For 12 months

For 24 months

For 36 months

For 48 months

For 60 months

0.09072

0.04962

0.03609

0.02944

0.02553

Eligibility Criteria

All Businessmen, Corporate Employees, and other salaried or self-employed professionals having net take homeincome in excess of three times the monthly installment.

MONEY GRAM:Bank Alfalah limited, in collaboration with Money Gram, offers remittance service to Pakistan.

Money Gram is person to person money transfer service that allows consumers to receivemoney in just a few minutes. Money is paid to people through this A/c. Later money is paid tobank through H.O Treasury A/c.H.O Treasury A/c dr.RA A/c Money Gram cr.

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5. Financial Analysis

5.1 Ratio Analysis of bank Alfalah

1-Net Profit Margin

Formula

(Net profit after taxation / net sale) * 100

Year 2008 Year 2009 Year 2010

1,301,301 /

30,966,638*100

= 4.20 %

897,035 /

35,561,312*100

= 2.52%

968,452 /37,530,256

*100

= 2.58 %

Working2008, 2009

Annual report 2009, page-18 profit and loss a/c2010

Annual report 2010, page-17 profit and loss a/c

Graphical Presentation

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0

0.5

1

1.5

2

2.53

3.5

4

4.5

2008 2009 2010

Net Profit Margin

Net Profit Margin

InterpretationNet profit margin has been decreased over the year but in year 2009 and 2010 it is relativelystable in values.

2-Gross spread ratio

Formula

Net interest margin / mark-up earned


10,472,283 / 30,966,638

=0.34 times

10,907,132/ 35,561,312

=0.31 times

13,674,808/ 37,530,256

=0.36 times

Working

2008

Net income margin = mark-up earned mark-up expanses= 30,966,638-20,494,355=10,472,283

Page-18 2009 profit and loss account2009Net income margin = mark-up earned mark-up expanses

= 35,561,312-24,654,180=10,907,132Page-18 2009 profit and loss account2010

Net income margin = mark-up earned mark-up expanses= 37,530,256-23,855,448=13,674,808

Page-17 profit and loss account

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0.24

0.245

0.25

0.255

0.26

0.265

0.27

2008 2009 2010

Non Interest Income to Total Income Ratio

Non Interest Income to

Total Income Ratio

Interpretation

Non interest income to total Income ratio is decrease in 2009 and then increase in 2010.

4-Spread ratio

Formula

Interest earned / interest expenses


30,966,638 / 20,494,355

=1.51 times

35,561,312 / 24,654,180

=1.44 times

37,530,256 / 23,855,448

=1.57 times

Working

2008, 2009

Page #182010

Page # 17

Graphical presentation

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1.35

1.4

1.45

1.5

1.55

1.6

2008 2009 2010

Spread Ratio

Spread Ratio

Interpretation

Spread ratio is decrease in 2009 as compare to 2008 and then increase in 2010.

5-Return on Assets

Formula(Earning before income tax / total assets) * 100


22289075/ 348,990,764

*100

=0.06 %

25923448/ 389,070,055

*100

=0.07 %

25224193/ 411,483,839

*100

=0.06 %

Working2008

EBIT = profit before tax + interest expenses=1,794,720 + 20,494,355=22289075 page-18 2009 profit and loss account

2009

2009- EBIT = profit before tax + interest expenses=1,016,316+ 24,907,132=25923448 page-70 2009 profit and loss account

2010

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2010- EBIT = profit before tax + interest expenses=1,368,745 + 23,855,448=25224193 page-81 profit and loss accounts


0.054

0.056

0.058

0.06

0.062

0.064

0.066

0.068

0.07

2008 2009 2010

Return on Assets

Return on Assets

Interpretation

Return on asset is increasing and then stable in its value in 2010.6-DuPont Return on Assets

Formula

(Net income / sale) * (sale / total assets) * 100


(0.042022*0.088732) *

100

=0.37 %

(0.0252250*0.091400) *

100

=0.23 %

(0.0272333*0.086422) *

100

=0.23 %

Working

2008

Net income =1,301,301 page-18 2009 profit and loss accountSales = 30,966,638Total assets = 348,990,764page-17 2009 balance sheet

DuPont return on assets = (Net income / sale) * (sale / total assets) * 100= (1,301,301/30,966,638 * 30,966,638 / 348,990,764) * 100= (0.042022*0.088732) * 100

2009

Net income = 897,035 page-18 2009 profit and loss account

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Sales = 35,561,312Total assets = 389,070,055page-17 2009 balance sheet

DuPont return on assets = (897,035/ 35,561,312 * 35,561,312 / 389,070,055) * 100= (0.0252250*0.091400) * 100

2010

Net income = 968,452 page17 profit and loss accountSales = 37,530,256Total assets = 411,483,839 page16 balance sheet unconsolidated

DuPont return on assets = (968,452 / 35,561,312 * 35,561,312 / 411,483,839) * 100= (0.0272333*0.086422) * 100


0

0.05

0.1

0.15

0.2

0.250.3

0.35

0.4

2008 2009 2010

DuPont Return on Assets

DuPont Return on

Assets

Interpretation

DuPont return on assets has been decrease over the years. It is due to the increase in the netincome as compared to the sales.

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7-Return on Total Equity

Formula

(Net income / total equity) * 100


1,301,301/ 14,608,523

* 100

= 8.91 %

897,035/ 19,770,260 *

100

=4.54%

968,452 / 19,726,556 *

100

=4.91 %

Working

2008 (page18 2009 profit and loss account)(page 17 2009 balance sheet)

2009(page 18 2009 profit and loss account)(page 17 2009 balance sheet)2010

(page16 profit and loss account)(page17 balance sheet)


0

1

2

3

4

5

6

7

8

9

2008 2009 2010

Return on Total Equity

Return on Total Equity

Interpretation

Return on total equity is decrease over the year and this is not good trend for the organization, itshould be increase for business profitability.

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8-Debt Ratio

Formula

Total Liabilities / Total Assets


331,946,025 /

348,990,764

= 0.95 Times

366,936,635 /

389,070,055

= 0.94 Times

389,178,295 /

411,483,839

= 0.94 Times

Working

2008(page17 2009 balance sheet)2009

(page17 2009 balance sheet)2010

(page16 2010 balance sheet)

Graphical Presented

0.934

0.936

0.938

0.94

0.942

0.944

0.946

0.948

0.95

2008 2009 2010

Debt Ratio

Debt Ratio

Interpretation

Debit ratio has been decrease over the years.

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9-Debt / Equity Ratio

Formula

Total liabilities / total share holder Equity


331,946,025 /

14,608,523

=22.72 Times

366,936,635 /

19,770,260

=18.56 times

389,178,295 /

19,726,556

=19.72 times

Working

2008

(page17 20092009

(page692010

(page 16


0

5

10

15

20

25

2008 2009 2010

Debt to Equity Ratio

Debt to Equity Ratio

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Interpretation

Debt/ equity ratio has been decrease in 2009 and then increase in 2010.

10-Times Interest Earned

Formula

Earning before Income Tax (EBIT) / Interest Expenses


22289075 / 20,494,283

=1.08 times

25923448 / 24,654,180

=1.05 times

25224193 / 23,855,448

=1.05 times

Working

2008

EBIT = profit before tax + interest expenses=1,794,720 + 20,494,355

=22289075 (page#18 2009 profit and loss account)Interest expenses =20,494,283

2009EBIT = profit before tax + interest expenses

=1,016,316+ 24,907,132=25923448 (page#70 2009 profit and loss account )

Interest expenses =24,654,180

2010

2010- EBIT = profit before tax + interest expenses=1,368,745 + 23,855,448

=25224193 (page#81 profit and loss accounts )Interest expense = 23,855,448


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1.035

1.04

1.045

1.05

1.055

1.061.065

1.07

1.075

1.08

2008 2009 2010

Times Interest Earned

Times Interest Earned

Interpretation

Time interest has decrease over the years.

11-Advance /deposit ratio

Formula

Advance / deposit


191,790,988/300,732,85

8

=0.64 times

188,042,438/324,759,75

2

=0.58 times

207,152,546/354,015,31

1

=0.58 times

Working

2008, 2009

Page # 17 of 2009

2010Page # 16 of 2010

Graphical presentation

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0.55

0.56

0.57

0.58

0.59

0.60.61

0.62

0.63

0.64

2008 2009 2010

Advance to Deposit Ratio

Advance to Deposit

Ratio

Interpretation

Advance to deposit ratio is decrease over the period and it is worthy for the company.

12-Operating cash flow ratio

Formula

Operating cash flow / current liabilities


7,403,300/329166391

=0.02 times

25,279,776/359186603

=0.07 times

18,112,043/381495184

=0.05 times

Working

2008

Current liabilities = bill payable + borrowing + deposit +other liabilities=3,452,031+13,690,222+300,732,858+11,291,280

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=329166391(Page#17 2009)2009

Current liabilities = bill payable + borrowing + deposit +other liabilities=3,766,144+20,653,921+324,759,752+10,006,786=359186603

(Page#17 2009 balance sheet)

2010Current liabilities = bill payable + borrowing + deposit +other liabilities

=4,521,533+13,700,124+354,015,311+9,258,216=381495184

(Page#16 2010 balance sheet)Graphical presentation

0

0.01

0.02

0.03

0.04

0.05

0.06

0.07

2008 2009 2010

Operating Cash Flow Ratio

Operating Cash Flow

Ratio

InterpretationOperating cash flow ratio first increase in 2009 this is not good for the company and then in year2010 it is relatively stable.

13-Dividend Per share

FormulaTotal dividend / no. of outstanding shares


975,000/799500

=1.22 Rs.

0 / 1349156.3

=0.00 Rs.

1,079,325 / 1349156.3

=0.80 Rs.

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Working

2008

Dividend paid = 975,000(page20 2009 cash flow)No. of outstanding shares = 7,995,000/10=799500

2009

Dividend paid = 0 (page20 2009 cash flow hence there is no dividend paid amount in 2009 )

No. of outstanding shares = 13,491,563/10=1349156.3 (page 62 2009 share capital note 19.)

2010

Dividend paid = 1,079,325(page19 2010 cash flow)No. of outstanding shares = 13,491,563/10=1349156.3 (page61 2010 share capital note 19.)Graphical Presentation

0

0.2

0.4

0.6

0.8

1

1.2

1.4

2008 2009 2010

Dividend per Share

Dividend per Share

InterpretationDividend per share of the organization is fluctuation over the year it is depend open the companypolicy.

14-Earning per share

Formula

Net income / number of outstanding


1,301,301 / 799500 897,035 / 1349156.3 968,452 / 1349156.3

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=1.63 Rs. =0.66 Rs. =0.72 Rs.

Working

2008

Net income = 1,301,301No. of outstanding shares = 7,995,000/10=7995002009

Net income =897,035No. of outstanding shares = 13,491,563/10=1349156.3 (page 62 2009 share capital note 19.)2010

Net income = 968,452No. of outstanding shares = 13,491,563/10=1349156.3 (page61 2010 share capital note 19.)Graphical Presentation

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2008 2009 2010

Earning per Share

Earning per Share

Interpretation

Earning per share has increasing over the years which is good trend for the company.

15- Price / Earning Ratio

Formula

Market value per share / earning per share


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21.32 / 1.63

=13.07 Rs.

16.41 / 0.66

=24.86 Rs.

16.53 /0.72

=22.95 Rs.

Working

2008

Market value per share = 21.32 (page 11 share information 2009)Net income = 1,301,301No of out standing shares = 7,995,000/10=799500Earning per share = 1,301,301 / 799500

= 1.63

2009

Market value per share = 16.41 (page 11 share information 2009)Net income = 897,035

No of out standing shares = 13,491,563/10=1349156.3Earning per share = 897,035/ 1349156.3

= 0.66

2010

Market value per share = 16.53 (page 10 share information 2009)Net income = 968,452No of out standing shares =13,491,563/10=1349156.3Earning per share = 968,452 / 1349156.3

= 0.72


0

5

10

15

20

25

2008 2009 2010

Price / Earning Ratio

Price / Earning Ratio

Interpretation

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Price earning ratio of the company has been increase over the years. It is good sign for thecompany.

Horizontal analysis and vertical analysis

5.2 Horizontal analysis

Methods of financial statement analysis generally involve comparing certain information. Thehorizontal analysis compares specific items over a number of accounting periods. Forexample, accounts payable may be compared over a period of months within a fiscal year, orrevenue may be compared over a period of several years. It is a procedure in fundamentalanalysis in which an analyst compares ratios or line items in a company's financial statementsover a certain period of time. The analyst will use his or her discretion when choosing a

particular timeline; however, the decision is often based on the investing time horizon underconsideration.

HORIZANTAL

ANALYSIS OF

BANK ALFALAH

LTD.

AS ON DEC 31 2008,

2007 & 2006

ASSETS

Cash and balances

Years

(Rupees in 000)

2010 2009 2008

Horizontal Analysis

2010 2009 2008

with treasury 118.41 29436378

banksBalances with

27859360 118.41 105.7 100

other banksLending to

169.5 18380738 12731952 169.5 144.4 100

financial 26.616 3452059

institutions

Investments 134.46 88491564

Advances 132.88 171198992

Operating fixed

12456653

56502210

144999325

26.616 27.71 100

134.46 156.6 100

132.88 118.1 100

assets 131.14 11922324

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10502 990 131.14 113.5 100

Deferred tax asset 0

Other assets 159.58 6013097

TOTAL

5633051

0 0 0

159.58 106.7 100

ASSETS

LIABILITIES

126.59 328895152 275685541 126.59 119.3 100

0

Bills payable 111.68 4138243

Borrowings

from financial 163.09 21230697

institutionsDeposits and

3091135

8394130

111.68 133.9 100

163.09 252.9 100

other accountsSub-ordinate

loansLiabilities

against assets

subject to

finance leaseDeferred tax

liability

125.56 273173841

79.798 3220858

0

10.85 1379809

239509391

3222106

1921338

125.56 114.1 100

79.798 99.96 100

0 0 0

10.85 71.82 100

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32


33/64

Other liabilities 154.56 9531860 7305496 154.56 130.5 100

TOTAL

LIABILITIES

126 312675308 263443596 126 118.7 100

NET ASSETS 139.23 16219844 12241945 139.23 132.5 100

REPRESENTED BY

SHAREHOLDERS EQUITYShare capital 159.9 6500000 5000000 159.9 130 100

Reserves 115.15 2414833 2749533 115.15 87.83 100

Unappropriated122.12 4851840 2823072 122.12 171.9 100

profit

138.17 13766673 10572605 138.17 130.2 100Surplus on

revaluation of 145.94 2453171 1669340 145.94 147 100

assets - net of tax

TOTAL139.23 16219844 12241945 139.23 132.5 100

EQUITY

Mark-up / return /

interest earnedMark-up / return /

interest expensedNet mark-up / interest

income

HORIZONTAL ANALYSIS

BANK AL FALAH LIMITED

PROFIT & LOSS ACCOUNT

AS ON DEC 31 2008, 2007 & 2006

2010 2009 2008 Horizontal Analysis

(Rupees in 000) 2010 2009 2008

31046583 25783871 21191470 146.51 121.7 100

20331194 16620963 15232886 133.47 109.1 100

10715389 9162908 5958584 179.83 153.8 100


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Provision against non-

performing loans and 2035997 2370867 697690 291.82 339.8 100

advances - netProvision for

diminution in value of 1479062 0 0 0

investmentBad debts written off

directly

Net mark-up / interest

28298 5844 1537 1841.1 380.2 100

3,543,357 2,376,711 699,227 506.75 339.9 100

income after 7,172,032 6,786,197 5,259,357 136.37 129 100

provisions

Non mark-up /

interest income

Fee, commission and

brokerage income2,539,321 2,429,599 1,804,998 140.68 134.6 100

Dividend income 300,943 64,722 37,393 804.81 173.1 100

Income from dealing in

foreign currenciesGain on sale of

securitiesUnrealized loss on

revaluation of

investments classifies

as held for trading

914,845 474,510 386,997 236.4 122.6 100

424,220 2053192 180751 234.7 1136 100

181,571 21530 27599 657.89 78.01 100

Other income 1,247,669 1,031,372 842,099 148.16 122.5 100

Total non-mark-up /

interest income

Non mark-up /

interest expense

Administrative

expenses

5,245,427 6,038,466 3,224,639 162.67 187.3 100

12,417,459 12,824,663 8,483,996 146.36 151.2 100

10,741,399 8,272,587 5,874,745 182.84 140.8 100

Provisions against off- 28,582 6,959 0 0 0 0

balance sheet


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obligations

Other charges 122,758 9,565 43,306 283.47 22.09 100

Total non mark-up /

interest expenses10,622,739 8289111 5,918,051 179.5 0 100

Profit before taxation 1,794,720 4,535,552 2,565,945 69.944 176.8 100Taxation 0 0 0

- Current 1730051 1726810 476226

- Prior years 221797 0 100874 219.88 0 100

- Deferred 1014835 321487 427902 237.17 75.13 100

493419 1405323 803254 61.428 175 100

Profit after taxation

Attributable to:

Unappropriated profit

brought forwardTransferred from

surplus on revaluation

of fixed assets - net of

tax

Profit available for

appropriation

1301301 3130229 1962691 66.302 159.5 100

4851840 2823072 1886845

24586 24585 26074 94.293 94.29 100

6177727 5977886 3675610 168.07 162.6 100

5.3 Vertical Analysis


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37/64liability

Other liabilities 11291280 9531860 7305496 3.2354 2.898 2.6499

Operating

fixed assets13773293 11922324 10502990 3.9466 3.625 3.8098

Other assets 8989186 6013097 5633051 2.5758 1.828 2.0433

TOTAL

ASSETSLIABILITIES

348990764 328895152 275685541 100 100 100

Bills payable 3452031 4138243 3091135 0.9891 1.258 1.1213

Borrowings

from financial 13690222 21230697 8394130 3.9228 6.455 3.0448

institutionsDeposits and

other accountsSub-ordinate

loansLiabilities

against assets

subject to

finance leaseDeferred tax

300732858 273173841 239509391 86.172 83.06 86.878

2571169 3220858 3222106 0.7367 0.979 1.1688

208465 1379809 1921338 0.0597 0.42 0.6969

TOTAL

LIABILITIES331946025 312675308 263443596 95.116 95.07 95.559

NET ASSETS 17044739 16219844 12241945 4.884 4.93 4.441

REPRESENTED BY:

Shareholders Equity

Share capital 7995000 6500000 5000000 2.291 1.98 1.814

Reserves 3166056 2414833 2749533 0.907 0.73 0.997

Unappropriated

profit

Surplus on

3447467 4851840 2823072 0.988 1.48 1.024

14608523 13766673 10572605 4.186 4.19 3.835

revaluation of 2436216 2453171 1669340 0.698 0.75 0.606

assets - net of tax


38/64

TOTAL

EQUITY17044739 16219844 12241945 4.884 4.93 4.441

Mark-up / return / interest

earnedMark-up / return / interest

expensedNet mark-up / interest

incomeProvision against non-

VERTICAL ANALYSIS

BANK AL FALAH LIMITED

PROFIT & LOSS ACCOUNT

AS ON DEC 31 2008, 2007 & 2006

2010 2009 2008 Vertical Analysis(Rupees in 000) 2010 2009 2008

31046583 25783871 21191470 100 100 100

20331194 16620963 15232886 65.486 64.46 71.882

10715389 9162908 5958584 34.514 35.54 41.23

performing loans and 2035997 2370867 697690 6.55 9.195 3.2923advances - netProvision for diminution

in value of investmentBad debts written off

directly

Net mark-up / interest

income after provisions

Non mark-up / interest

income

Fee, commission and

brokerage income

1479062 4.76 0 0

28298 5844 1537 0.091 0.023 0.0073

3,543,357 2,376,711 699,227 11.413 9.218 3.2996

7,172,032 6,786,197 5,259,357 23.101 26.32 24.818

2,539,321 2,429,599 1,804,998 8.1791 9.423 8.5176


39/64

Dividend income 300,943 64,722 37,393 0.9693 0.251 0.1765

Income from dealing in

foreign currencies914,845 474,510 386,997 2.9467 1.84 1.8262

Gain on sale of securities 424,220 2053192 180751 1.3664 7.963 0.8529Unrealized loss on

revaluation of investments

classifies as held for

trading

181,571 21530 27599 0.5848 0.084 0.1302

Other income 1,247,669 1,031,372 842,099 4.0187 4 3.9738

Total non-mark-up /

interest income

Non mark-up / interest

expense

5,245,427 6,038,466 3,224,639 16.895 23.42 15.217

12,417,459 12,824,663 8,483,996 1357.3 2703 2192.3

Administrative expenses 10,741,399 8,272,587 5,874,745 5915.8 38424 21286

Provisions against off-

balance sheet obligations28,582 6,959 0 2.2908 0.042 0

Other charges 122,758 9,565 43,306 2.3403 0.058 1.343

Total non mark-up /

interest expenses10,622,739 8289111 5,918,051 85.547 49.87 69.755

Profit before taxation 1,794,720 4,535,552 2,565,945 5.7807 27.29 12.108

Taxation 0 0 0- Current 1730051 1726810 476226 5.5724 6.697

- Prior years 221797 0 100874 0.7144 0 0.476

- Deferred 1014835 321487 427902 3.2687 1.247 2.0192

493419 1405323 803254 1.5893 5.45 3.7905

Profit after taxation

Attributable to:

Unappropriated profit

brought forwardTransferred from surplus

1301301 3130229 1962691 4.1914 12.14 9.2617

4851840 2823072 1886845

on revaluation of fixed 24586 24585 26074 0.0792 0.095 0.123

assets - net of tax

Profit available for

appropriation6177727 5977886 3675610 19.898 23.18 17.345


40/64

B)

Vertical

Analysis

It is a method of financial statement analysis in which each entry for each of thethree major categories of accounts (assets, liabilities and equities) in a balancesheet is represented as a proportion of the total account. The main advantages ofanalyzing a balance sheet in this manner are that the balance sheets of businesses ofall sizes can easily be compared. It also makes it easy to see relative annual changes inone business. When using vertical analysis, the analyst calculates each item on asingle financial statement as a percentage of a total. The term vertical analysis appliesbecause each year's figures are listed vertically on a financial statement. The total usedby the analyst on the income statement is net sales revenue, while on the balance sheetit is total assets. This approach to financial statement analysis, also known as component

percentages, produces common-size financial statements. Common-size balance sheetsand income statements can be more easily compared, whether across the years for asingle company or across different companies.

Bank Alfalah Ltd.

The financial statements prepared by the management, present fairly its state ofaffairs, the results of its operating cash flow and changes in equity. All directors of thecompany are registered as tax payers and none of them has default in payments of any

loan to a banking company. The auditors perform their audit in accordance withthe auditing

standards as applicable in Pakistan. These standards require that they plan andperform the audit to obtain reasonable assurance about whether the above saidstatements are free of any material misstatement. And in their opinion the consolidatedfinancial statements present fairly the financial position of Habib Bank Limited as atDecember 31, 2006,2007 & 2008 and the results of its operations, its cash flows and changes in equity forthe year then ended in accordance with the approved accounting standards as

applicable in Pakistan.The board of directors through its sub committee called Board RiskManagement Committee (BRMC) oversees the overall risk of the bank. RMD is theorganizational arm performing the functions of identifying, measuring, monitoringand controlling the various risks and assists the Apex level committee and thevarious sub- committees in conversion of policies into action.Credit risk Management processes encompasses identification, assessment,measurement, monitoring and control of the credit exposures. The bank, as per State

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Bank of Pakistan Guidelines, has migrated to baseII as on January, with the standardizedapproach

6. Account opening Department

Borrowing funds from different sources has become an essential feature of todaysbusiness enterprises. But in the case of bank borrowing funds from outside parties ismore vital because the borrowed capital of a bank is much greater their own capital.Banks borrowing is mostly in the form of deposits. These deposits are lent out to differentparties such deposit creation is done through open an account in the bank.

The Bank does not make payment of a cheque bearing a six-month or older date. If anaccount is not operated in six months, it is called Dormant Account.

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6.1 Types of Account

Current Account.

Saving Account.

Notice Deposit.

Term Deposit.

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6.1.1 Current Account

There is no interest on these accounts. It is only for transaction purposes. They paid on demand. Where abanker accepts, paying all checks drawn against him to extend of the balance in the accounts. As there is noprofit paid on this account, it is also called checking account because cheque can be drawn on it. Currentaccount is mostly opened for business. The minimum balance requirement for opening the current account

is Rs. 10000.

6.1.2 Saving Account

The purpose of this account is to introduce the habit of saving individuals in the neighborhood. The profit onsaving accounts is paid on the basis of profit and loss sharing at 9 % six monthly. The minimum balancerequirement for opening the account is Rs.1000.

6.1.3 Notice Deposits

Notice Deposits are kind of fixed deposits. The minimum balance requirement for opening the account is Rs.5000 and payment is drawn on maturity of the specific period.

Notice deposit is of two types.

One for which a prior notice of 30 days and is required from the customer before withdrawingdeposited amount and for which rate return is 6.10%.

Second for which a prior notice of 30 days and above is required from the customer beforewithdrawing deposited amount and for which the rate of return is 7.50 %.

6.1.4 Term Deposit

A term deposit is a deposit that is made of a certain period of time. At the end of specific period thecustomer is allowed to with draw the principal amount. The rate of return of this account varies from 8 % to

13 %. The term deposit account varies from one month to 5 years and the minimum balance requirement isRs. 5000.

Profit Calculation Methods

Daily Product Basis

Deposited Amount Rate of return.

365 (No. of days in a year)

Average Month Balance.

Sum of daily end Balance Rate of return / No. of days in month

Minimum Month Balance

Any minimum balance during the month is taken for calculating profit

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Saving A/C (05 days _ Minimum Monthly Balance).

Minimum Balance of first 5 days is compared to the minimum balance of the minimum balance ofremaining 25 days. Less balance is calculated for profit.

The amount of profit is given to deposits in three ways:

Cash payment ( only in case of term Deposits ). Or as per customer requirement.

By sending bank draft to depositors home address or officers or whichever is specified as mailing address.

The depositors account is credited at maturity.

Amount of Deposits & Other Accounts in 1999.

Fixed Deposits Rs. 4,038,133,000.

Saving Deposits Rs. 8,734,265,000.

Current Accounts Rs. 1,499,657,000.

Margin, Call & Sundry Deposits Rs. 158,708,000.

Deposits of Federal Government Rs. 1,389,710,000.

Particulars of Deposits & Other Accounts

In Local Currency Rs. 8,829,008,000.

In Foreign Currencies Rs. 6,991,465,000.

Total Deposits Rs. 15,820,473,000.

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6.2 Account opening procedure

For the chequing account, there are different types of account holders are required for all these types ofaccount holders. The operation/procedure requirement that is needed for Individual Account differs

greatly from the Joint Accounts proprietorship A/C, Partnership A/C, Private Limited company A/C andPublic Limited Company A/C.

6.2.1 Individuals Account

When a single man or woman opens an account in his or her own name and has the right to operate, it iscalled individual A/C.

Documentation

Copy of National Identity Card.

Proper Identification ( Introduction ).

Operation

The person place in the type of account and type of operation required in the accountopening form.

He/she fills in part 1 of the form, a fix his/her either two of four similar signature ( orthumb expression in the signature space ) and get it introduced and signed by a personwho already has an account with the bank and write his account number in the specificrows in a specific space.

The person fills his or her father, mother, husband/wife or any other relatives name,his/her address, phone number, his or her sign to certify this requirement. Thisrequirement is needed because in his/her absence bank can have correspondence with aspecific person.

The person deposits the initial amount for opening account onto the cash counter. Theperson put his signature on form on two places in authorized Signature and fills in theTitle of Account space by writing his name.

If the person put his signature in Urdu or any other language other than English, hesigned a Vernacular Form.

The next day is opening of account

6.2.2 Joint Account

When two or more persons neither partners nor, trustees, open an account in their name is joint account.

Documentation

copy of N.I.C card.

Identification ( Introduction ).

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Operation

The person checks the type of account and type of operation required in the respectivebox on the form.

The person fills the Part-1 and Part-II

Signature of box or all persons are obtained on the formed in the area specified forsignature.

In the title of account space names of all persons maintained.

Account holders specified in the form that they will operate the form singly or jointly.

6.2.3 Proprietorship Account

When the owner of the firm operating singly, open an account in his firm name.

Documentation

Copy of N.I.C.

Status of the firm.

Copy of Sole Proprietorship Declaration.

Operation

All operation remains the same, except that the firm name is written in title of account area and Signatureof the proprietor in the specified area.

6.2.4 Partnership Account

The account is opened in the firm name and all partners designate one or two persons to act behalf of thepartnership firm all acts of the firm jointly and serverly.

Documentation

Copy of N.I.C of all partners.

Status of the firm ( In case of registered firm ).

The attested copy of Partnership Deed (in case of registered firm ).

Operation of the A/C (as per deed).

Third party Mandate.

Letter showing the authority of one or more partners to act on.

Operation

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All other requirements are same except that all partners dully sign the form, cards are signed by all of thosepartners who will act on behalf of the firm.

Private Limited Company account

Documentation

N.I.C of all partners.

Articles and Memorandum of association.

List of directors.

Resolution of Board of directors.

Certificate of Incorporation Form 29 (B) (Lasted Copy).

Company secretary will certify all these copies.

Operation

The person authorized in the resolution of the board of directors put their signature on theS.S Card.

Next of Kin requirement is not need in a case of Private Limited Company. Otherprocedure is same.

After completing each and every formalities are signed by all partners who will act onbehalf of the firm.

6.2.5 Pubic Limited company account

Documentation

Copy of N.I.C of all partners.

Articles and Memorandum of association.

List of directors.

Resolution of Board of Directors.

Certificate of commencement of Business.

Operation

Operation is same as Private Limited Company

Responsibilities of Account Opening Department

Documentation Intact.

Proper Introduction.

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ChequeBook Issuing.

Receiving Inward cheques.

Account Closing.

Every Day Posting.

6.3 ACCOUNT CLOSING

When a customer wants to close his account because of any reason, he has to give a hand writtenapplication to the head of the Operations Department to close his account, plus remaining leaves of thechequebook.

The Operations Manager first verifies the signatures of account holder, then closing is done from theregisters on the computer where the account was opened. In the file of account holder, his account openingform is also crossed.

For this closing, a fee of Rs. 150 is charged in Bank Alfalah.

6.4 Cheque Book Issuance

When the account is opened, then, the customer is given a cheque book to sign upon and en cash money. Itis proceeded as under.

6.4.1 PROCEDURE

All the account opening formalities must be completed before, issuance of cheque book. Particulars of thechequebook requisition should be completed containing title of account, account number, type of currency,number of leaves and signature of the customer. Signature of, the customer are verified on the requisition.

If customer is unable to collect his chequebook, then he can give authority to the 'third person to collect hischeque book' on his behalf by signing on the back of .the requisition. In such case, the particulars of thethird person are required like name of the person, NIC number and signature of that person on requisitionand chequebook issuance register.

Chequebook is taken out from the safe/locker. It is assured that series of the chequebook is in order.Particulars are entered in the cheque book issuance register. Account number is stamped on every leaf ofthe cheque book and those leaves are counted. Name of the account holder is written on the cover of thecheque book and requisition on the chequebook for further issuance is properly filled stamped and signedby officer of the bank.

Chequebook is delivered to the customer and his signature is taken on the cheque book issuance register,

cheque serial number is entered in the system (Bank Excel).

Stock of Cheque books are balanced at the end of each day and kept under safe custody.

Earlier in the banks were charging a fee for issuance of cheque book, but now whenever a new account isopened, the account holder is issued a cheque book free of charge.

Bank Alfalah issues the following chequebooks.

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Saving account - 25 leaves

Current account - 50 leaves

Current account - 25 leaves

Foreign currency $ - 10 leaves

Foreign currency - 10 leaves

Loose cheques are also issued in some cases.

Receiving Inward cheques

Another responsibility &function of Account Opening Department is to receive Inward cheques forcollection of other banks. These cheques are sent to clearing official who clears these cheques at SBP fromother banks.

Every Day Posting

At the end of each day, Posting of cheque books is performed. The account opening department makescredit vouchers of excise duty and provincial tax on chequebook leaves, and posts it in the company.

7. CASH DEPARTMENT

Mr. Muhammad Farooq and Mr. Naseer Ahmed us in learning about Cash Department. Cash Departmentperforms two main functions:

Cash Deposits

Cash Payments

7.1 CASH DEPOSITS

Cash receiving officer receives cash along with pay-in slip from the customer. He checks if the deposit slipis properly filled up containing title of account, account number, date and amount in word and figures. Healso verifies signature. Detail on both counter file and cash receipt voucher should be the same. Cash isreceived by the cash receiving officer, twice counted and matched with the deposit slip. The cash details arewritten on the back of the deposit slip and are also entered in cash receiving register. Cash received stampis affixed on the face of the deposit slip along with the signature of the cash receiving officer.

Deposit slip and cash receiving register is given to the officer in cash department. Again proper scrutiny ismade by the officer cash department both on cash receipt and cash receiving register. Officer cashdepartment signs both the deposit slip and register; Deposit slip is credited and posted in the concerned

account in the system.

Counter folio is given to the depositor as receipt. One consolidated cash debit voucher is posted in thesystem to balance the cash.

7.2 PAYMENT OF CHEQUES

The process for payment of cheques for local and foreign currency is same. First the customer presents thecheque or holder to branch and the particulars of cheque are properly filled in. Signature of the holder is

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taken on the back of the cheque. Cheque handed over to the officer cash department for scrutiny whereofficer checks the date, amount in words and amount in figures, payee's name crossing if any, accountnumber, cheque serial number, any material alterations, endorsements and signature of the customer.Account is debited and then the officer cancels cheque. It is posted in the system and posting stamp andnumber is affixed on it. Cheque is handed over to the cash payment officer for payment. One moresignature on the back of the cheque is taken from the holder to match with the first one, and then cash ispaid to the payee. Cash detail is written on the back of the cheque. Cash paid stamp is affixed on the face ofthe cheque. Entry is passed in the cash payment register.

If the payment is of Rs. 50000 the cashier can make it on its own. If the amount is greater than Rs. 50000 toRs. 100,000 the cashier and cash deposit Incharge will verify the check and will sing it. Then the paymentwill be made. But, if the amount is greater than Rs. 100000 to Rs. 1000,000 the manager operation will alsoverify the check and sign it so that the payment can be made. If the amount is greater than Rs. 1000,000 theBranch Manager

Will also verify the check and sign it. Otherwise the payment will not be made.

8. CLEARING DEPARTMENT

In clearing, Mr. Anees remained so helpful. The clearing process majority involves receiving the chequesand making payments. This process can be inward or outward.

CLEARING PROCESS (INWARD/OUTWARD)

Here t he local cheques are received that are drawn on BAF. All the cheques are received on one counteralongwith the paying slips duly filled in properly containing particulars of cheques and account harder.Counter folio of paying slip is handed over to the customer by putting stamp for #cheque received forcollection for Bank Alfalah' on it duly signed by officer. . These cheques are scrutinized and cheques forlocal clearing are separated from OBC. These are then entered in clearing register and cheques for

collection, are entered in OBC register and handed over the Bills Department for collection.

Clearing officer checks and verifies title of all the cheques deposited by the customers to confirm the goodtitle of the cheques. Cheques are scrutinized properly and paying slips are separated from cheques. Specialcrossing, endorsement and clearing stamps are affixed on the cheques. Cheques of each bank are sorted andarranged branch wise. All the cheques are then entered into the clearing system of the bank. Print out of theclearing is taken and details are attached with the cheques of each bank. Details of these banks are thenentered into the clearing schedule containing number of cheques presented and their total amount againstthe name of each bank. Then total number of cheques presented to all banks and their total amount iswritten on the foot of that schedule, which is tallied with the clearing register.

Next morning, these cheques are delivered to the respective banks in clearing house of State Bank ofPakistan between 9:00 to 9:30AM. In the same manner, other banks present their clearing drawn on Bank

Alfalah. Total number of cheques and their amount delivered to other banks and received from them arewritten on the Clearing House schedule branch for their payment. After proper scrutiny of cheques,verification of signatures and confirmation of balance in the account, the Officer Cash Department paysthese cheques by canceling and posting them in the system.

If any cheque is not passed due to insufficient balance or any other reason, Officer Cash Departmentreturns the same cheque by attaching a cheque return memo containing reason for return. This cheque isentered into the cheque returned register and bank charges are deducted according to the schedule ofcharges.

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Second clearing is called at 2:30PM to check the fate of the cheques presented to other banks in themorning. If any cheque is to return, that is delivered to the same bank in second clearing. In the samemanner, if any cheque presented by Bank Alfalah in first clearing is returned, they receive it and once againgive schedule of clearing figure to the Officer Clearing House SBP containing number of cheques and theiramount delivered and received unpaid.

8.1 Remittances Department

The need of remittances is commonly felt in todays business. The main function of remittance department in abank is the transfer of funds.

Mr. Hassan in Bank Alfalah is the officer for Remittances Department. In remittances, following bankinginstruments are used:

Pay order

Demand draft

Telegraphic transfer

The procedure for dealing with all these under local as well as foreign currency in BAF is as under.

8.1.1 Pay Order

A pay order is a written order issued by a bank, drawn upon & payable by itself, to pay a specified sum of moneyto or to the order of a specified person.

8.1.2 Procedure for Pay Order

Application form is given to the customer to fill. Two signatures are taken on the form one for request and

other for receiving the instrument. All the particulars of application form are checked and bank commissioncharges and withholding tax is written on the top of the application form. If the customer is maintaining hisaccount with the branch, he can give cheque for total amount of instrument plus bank charges. Cheque andapplication from is then given to the officer Cash Department for the payment of cheque. After properscrutiny, Officer Cash Department posts the cheque and signs the application form in token of paymentreceived. If the customer wants to pay cash, then cash is deposited by the customer along with the bankcharges and withholding tax.

Application form is then given to the Remittances Incharge for issuance of instrument. He enters all theparticulars of the application form in the system and computer gives an Auto Control Number to theinstrument. Printout is taken on the block of payment Order. Two authorized officers of the branch thensign it. Instrument is then protectographed, and given to the customer.

When instrument is presented for payment, it is posted in the system and canceled by the RemittancesIncharge after proper scrutiny.

8.1.3 DEMAND DRAFT

A Demand Draft (DD) is an instrument, which is drawn by one bank upon another bank for a specific sumof money payable on demand. It is made by the bank, given to the purchaser against cash or cheque.

Parties Involved in DD:

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Purchaser

Issuing Branch

Drawee Branch

Payee

Procedure for Issuing DD

Issuance procedure of Demand Draft is same as of pay Order.

PROCEDURE FOR DEMAND DRAFT PAYABLE

When DD advice is received, signatures of both signatory on the DD are verified. All the particulars of theDD payable are entered in the system. Prints out of vouchers (DD payable) are taken. When instrument ispresented for payment, signatures of the attorneys are verified on DD and after proper scrutiny, it is postedin the system and canceled by the Remittances Incharge.

8.1.4 Telegraphic Transfer

Sometimes, when the remittance is urgently required by the remitter, Telegraphic Transfer (TT) is issued .TT may be issued to general public on their written request and against the value received.

Procedure for Issuing Telegraphic Transfer

Application form is given to the customer to fill. Two signatures are taken on the form one for request andother for receiving the instrument. All the particulars of application form are checked and bank commissioncharges and withholding tax is calculated and written on the top of the application form (if customer is taxpayer, he can give tax exemption certificate). If the customer is maintaining his account with the branch, hecan give cheque and application form is then given to the officer for the payment of cheque. After properscrutiny, Officer Cash Department posts the cheque. After proper scrutiny, Officer Cash Department poststhe cheque and signs the application form, to assure that payment is received. If the customer wants to paycash, it is deposited by the customer on cash counter. Cash Receiving Officer receives cash n theapplication form along with the bank charges and withholding tax. Application form is then given to theRemittances Incharge for issuance of the instrument. He enters all the particulars of the application form inthe system (BPG) and computer gives an Auto Control Number to the T. T.

Telegraphic Transfer message is written in the telex containing name of transferring branch, name ofreceiving branch, date, amount, currency, payees name and account number or identification if any, payername and payment advice. A test number is given to the T. T. message for receiving branch. This messageis then sent through telex to the receiving branch followed by a T.T. advice. The customer is confirmed thatT.T. has been sent.

Procedure for T. T. Payable

When T.T. message is received, tested number on the T.T. is checked and verified. Tested number is thenwritten in the register and signed by the holder of test keys for officer record. All the particulars of the T.T.payable are entered in the system. Payment instruction on the T.T. message are followed if it is pay andadvice it will be paid through TTR on the cash counter or through clearing and if it is credit and advice, itwill be transferred in the account mentioned in the T.T. message. Printouts of vouchers (T.T. payable) aretaken. If TTR is presented for payment, signatures of the authorized officers are verified on TTR and afterproper scrutiny, it is posted in the BPG and canceled by the remittances Incharge.

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Procedure for Foreign Demand Draft Issuance:

Application form is given to the customer to fill the same. Two signatures are taken on the form, one forrequest and other for receiving the instrument. All the particulars of application form are checked and bankcommission is charged, which is US$ 5/- for each amount of FDD. Cheque is received from the customerfor total amount of FDD plus bank commission. Cheque and application form is then given to the Office

Cash Department for the payment of cheque.

After proper scrutiny, Officer Cash Department posts the cheque and signs the application form, to assurethat payment is received. Then cheque and application form is given to Incharge Remittances, who willenter all the particulars of the application in the FDD Issuance Register. If the customer wants to pay cash,it is deposited by the customer on cash counter. Cash Receiving Officer receives cash on the applicationform along with the bank charges. Application form is then given to the Remittances Incharge for theissuance of the instrument. A control number is allotted to the instrument from FDD Register. Instrument iscompleted by putting all the particulars in it and signed by two attorney holders. Instrument is then handedover to the customer. FDD advice is sent to the responding foreign bank/paying bank where they aremaintaining dollar account through registered mail. Exchange Transaction Credit Advice (ETCA) is sent tothe Head Office for the reimbursement. Copies of the FDD and ETCA are kept in the record of the bank.

PROCEDURE FOR FOREIGN TELEGRAPHIC TRANSFER ISSUANCE

Application form is given to the customer to fill the same. Two signatures are taken on the form one forrequest and other for receiving the instrument. All the particulars of application form are checked and bankcommissin is charged, which is US$ 15/- (flat rate) for each amount of FTT.

If cheque is received from the customer, it is taken for total amount of FTT plus bank commission. Chequeand application form is then given to the Officer Cash Department for the payment of cheque. After properscrutiny, Officer Cash Department posts the cheque and signs the application form to assure that payment isreceived.

If the customer wants to pay cash, it is deposited by the customer on cash counter. Cash Receiving Officerreceives cash on the application form along with the bank charges. Application form is then given to theRemittances Incharge for the issuance of instrument. He enters all the particulars of the application form inthe FTT Register and a Control Number is allotted to the FTT. TT message is written in the telexcontaining name of transferring branch, name of receiving branch, date, amount, currency, payees nameand account number or identification if any, payer name and payment instructions. A test number is givento the FTT message for receiving branch. This message is then sent through telex to the receiving branch.Customer is confirmed that FTT has been made. Exchange Transaction Credit Advice (ETCA) is sent to theHead Officer for the reimbursement. Copies of the FTT and ETCA are kept in the record of the bank.

Collection

All the cheques under collection are called cheques under Collection in Bank Alfalah Limited. There aretwo types of bills for collection:

Outward Bills for Collection

Inward Bills for collection

8.1.4 OUTWARDS BILLS FOR COLLECTION

Al the cheques are received on one counter along with the paying slips duly filled in properly containingparticulars of cheques and account holder. Counter folio of paying slip is handed over to the customer by

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putting stamp for cheque received for collection for Bank Alfalah on it duly signed by officer. Thesecheques are scrutinized and cheques for local clearing are separated from OBCs. Cheques for local clearingare entered in Clearing Register, whereas cheques for collection are entered in OBC register and handedover to the Bills Department for collection. OBC number is allotted to the cheque from OBC register.Special crossing and bank endorsement stamps are affixed on the cheque.

OBC schedule is attached with the cheque and dispatched to the main branch of that city for collection. Ifthey do not have any branch in that city, then cheque will be sent to the Collecting Agent of Bank Alfalahfor that city, and if they do not have any collecting agent even, then cheque can be sent directly to thedrawing branch. Instructions are given on the OBC schedule for the payment of that cheque. Contra-liability vouchers are also posted in the system. When OBC is realized, collection bank pays the amountthrough IBCA if it is the same bank or through DD if it is another bank. If DD is received against OBC, itis presented in the clearing for collection. If IBCA is received from the branch for the payment of OBC,certain vouchers are posted in the system.

8.1.5 INWARD BILLS FOR COLLECTION

If any other bank sends a cheque of Bank Alfalah Limited, it is Inward Bill for Collection. Bank Alfalahremits money after checking the balance of the customer account.

The process of collection starts when the cheques of Bank Alfalah Ltd. Are received from other banks.Then these cheques are sent to the Head Office Karachi, which sends the cheques to SBP for clearing andget the confirmation of cheque and credit advice. Main activity of clearing is performed by Head Office,which contacts other banks through SBP.

BILLS FOR COLLECTION IN 1999

Payable In Pakistan Rs. 22,092,000

Payable Outside Pakistan Rs. 1,964,738,000

Total Rs. 1,986,830,000

9. Credit and Advance Department

Credit and Advances Department deals with the provision of loans (credit facility) to the customers. AtBAF, credit is given on the basis of a policy made by Board of Directors and is called Credit Policy. Thispolicy statement sets out the underlying principles from which the BOD will determine the commercialcredit activity of Bank Alfalah Ltd. The committee to approve direct and review commercial lending ofBank and to ensure that credit policies are adhered to and the credit operation is conducted in an efficientand effective manner.

Purpose of this policy is to set out the credit policies for the boar, which will be implemented by the CreditCommittee. The policies are described under the following readings:

Credit principles

Portfolio limits

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Approval

Administration

Monitoring and review

9.1 CREDIT PRINCIPLES

It includes principles to be adopted for lending authority, approval, monitoring and control on a basisconsistent with Bank Alfalah Ltd.

The operational objectives and business strategies regarding objectives, structure, performance andadministration are also included.

9.2. CREDIT PORTFOLIO

These are the guidelines set down by Credit Committee regarding:

Total facilities

Term facilities

9.3. CREDIT APPROVAL

When the terms and conditions are set and both parties are agreed, the Credit committee makes approvalfor the credit.

9.4. CREDIT ADMINISTRATION

The credit application when handed over to Credit Administration, then they critically examine securitiesgiven by client to bank against credit facilities. Credit Administration keeps liaison with lawyers,

surveyors, valuators and other corporate bodies.

9.5. CREDIT MONITORING

The client can present his own account insurance policy as security for credit. When he presents his ownaccount as security, his account is blocked for the same amount, which the bank is granting him. When thefacility is adjusted at that time, the blocking is released from the account. Clients can also use third partysaccount for getting credit. Shares can also be kept as security in this case these are verified and duly signed.These are kept separate to avoid theft. The company whose shares are used is informed that its shares are inthe custody of the bank.

Advances

Bank Alfalah Limited, Abdali Road Multan, provides the following facilities in Advances Department:

Funded facilities

Non-funded facilities

9.6 FUNDED FACILITIES

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These are the facilities in which funds like cash fund are included.

LPO

Goods purchased on behalf of bank and provided to customers.

PRE-SHIPMENT

It provides to prepare consignment. Maximum tenor is about 150 days. Profit may be 16% per annum. Therepayment is generally from sale proceeds. This is for preparation of consignment.

POST SHIPMENT

During export process, funds are required for preparation of next consignment that is provided by post-shipment facility. Maximum tenure is 150 days. Profit rate is about 15% per annum.

NON FUNDED FACILITIES

These facilities are on:

o Letter of Credit

o Letter of Guarantee

L/C is of two types:

o Sight L/C for 90 days

o Usance L/C for 120 days

CREDIT CARDS

Bank Alfalah has no credit card facility but, Inshallah, in March the credit cards will be issued by bank.

ADVANCES IN 1999

Rs. 10,327,324,000 All in Local Currency

Foreign Exchange Department

Foreign Exchanged Department deals within exports and imports. Mr. Saleem at BAF supervises it. Thebank acts as exporter as well as importer bank for different parties who are in the business of export andimport.

Exports

EXPORTER

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When the bank becomes the exporter bank for a party then the market stability, reputation, financialposition of the exporter is first of all checked.

DOCUMENTS TO BE ATTACHED FOR EXPORTS

Invoice

Bill of lading

Packing list

I. Total quantity

II. Net weight/carton

III. Gross weight/carton

IV. Total net weight/carton

V. Total gross weight

Bill of exchange (original or draft)

E-form: Initial document on which total export proceeding is based. In this form , all theconditions are given, which are necessary for exports.

Letter of credit: It is written agreement between importer and exporter.

Beneficiary certificate

DHL certificate (TCS certificate)

Form M

Certificate of Origin (Form A)

FORM E

Government has provided facility to exporter in taking E-Form from any bank and he can presentit to any bank for negotiation.

Export Proceed Realization Certificate

SBP gives rebate to exporter against export after realization. It is paid according to commoditywise and bill wise.

Claim period: 1 year.

Transport Document (Bill of Lading, Airway Bill)

When insurance is done by importer, C&F (cost and freight) usually used.

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FOB cost (free on board)

CIF (cost insurance and freight) when insurance is done by exporter, CIF is used.

Tenor (At sight) immediate payment by importer after receiving product.

Partial shipment: Product is sent partially.

Transshipment: Product is sent via any country

E-FORM CERTIFICATION

When export is done on C&F basis, so bank issues E-form certification to exporter and he submits it to thecustom officer along with E-form certification to certify E-form.

FORM OF AUTHORIZED DEALERS CERTIFICATE

State Bank permits exporter to issue Bill of Lading in the favor of E-form bank. But if requirement of L/C

is to issue Bill of Lading in favor of company then shipping company issues bill of lading in favor ofExporter Company. Authorized Dealer Certificate is filled for this purpose.

CERTIFICATE OF ORIGIN

This certificate shows that goods are from Pakistan.

COVERING SCHEDULE

If in covering schedule, it is given that please remit proceed to our Karachi Office A/C no. 5740734881with ABN (Amro Bank New York), USA for onward credit to BAF Multan.

BENEFICIARY CERTIFICATE

If L/C requires some information as proof of anything from exporter then exporter has to presentbeneficiary certificate for that proof.

E-FORM

E-form has four copies:

One for custom officer

One for exporter

Triplicate copy for SBP

Duplicate copy for bank

Bank reporting or duplicate and triplicate is done by bank. Custom Officer (date is given on the foot ofform) should clear product.

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PAYMENT FROM IMPORTER BANK

It is the choice of importer to open L/C from any bank and the bank from which L/C is opened can alsorefer to some other bank for payment. So bill of exchange is sent to referred bank and other documents aresent to L/C opening bank.

SWIFT

It is network among all banks. No other institute can get involved in it.

BILL OF LADING

Certificate from shipping company for loading documents. If requirement of L/C is to issue Bill of Ladingin favour of L/C opening bank, then authorized dealer certificate will be provided by bank in favor of L/Copening bank.

BANK KEEP IN RECORD

Covering schedule

Invoice

Packing list

AWB

Certificate of Origin

E-form

Normally bank keeps photocopy of all documents in record. Negotiable documents (original documents).

IMPORTS

L/C is opened by the importer. There are two types of L/C.

Revocable Irrevocable.

NECESSARY REQUIREMENT

If place of issue and port of loading is different on Bill of Lading, then along with the stamp of shipment onboard, vessel name and port of shipment is written.

1) Issue date of Bill of Lading shipment on board.

2) There should not be cutting on bill of lading without authentication.

3) Bill of lading should show capacity of agent. If bill of lading can be taken by the agent of ImporterCompany, then his name should be mentioned on bill of lading.

4) Original GSP should be presented.

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5) If TT reimbursement is not acceptable, it means bill of lading is necessary.

When documents are received for export, do enter into lodgment register.

DOCUMENTS FOR IMPORT

Performa Invoice signed by importer

Category passbook copy attested by any bank

L/C opening application filled in by the customer

Import registration with export Promotion Bureau

Annexure

Verification of signature by S. S. Card

L/C issued on basis of L/C application form.

Insurance if covered by buyer.

Insurance cover note.

Insurance policy.

Account Department

Most important department of bank as it is concerned with:

o Revenue

o Expenses

o Assets

o Liabilities

These are the pillars of any business. This department is supervised by Mr. Masood Ahmad. In thisdepartment, all the vouchers that are posted during one day are sent to the Account Department next day.These vouchers are already posted to computer by the concerned department. So computer also sends a

report to the Accounts Department. The accounts Department has to tell that all the vouchers are postedunder the right head. Amount, date, stamps, signatures all the requirements for cheques and vouchers arefully checked.

If any kind of renovation or construction or rebuilding is done, all is paid from the Accounts Department.Like petrol for the car of EVP and VP, stationery charges, medical allowance, etc. are all paid by thisdepartment.

Daily Customer Movement List

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All the changes that are made in accounts of customer are shown in the daily customer movement list. Byusing this list, people of Accounts Department can prepare the vouchers.

Following activities are performed by Account Department:

Voucher preparation

Preparation of daily, weekly, monthly, and annual statement.

Budgeting and fixed assets

Employers benefit

Expenditure approval.

10. SWOT ANALYSIS

10.1 Strengths

Bank has a belief in customer service

Backed by strong Abu Dhabi Consortium

Customer give suggestion for the improvement of bank and these suggestions are listenedcarefully.

Manager & EVP Mr. Asif A. Sheikh has good coordination with staff members.

Environment is friendly.

Products are excellent

Expansion is consistent

Modernized banking (online + Internet)

Fully computerized, each department has to own PC.

10.2 WEAKNESSES

BCCI Image.

Mixed Culture

New Setup

No ATM facility is provided

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Bank Alfalah Limited MBA Internship Report

Documents

Transcript of Bank Alfalah Limited MBA Internship Report