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1) Introduction of Banking

“Bank is a pipeline through which currency moves into and out of circulation.”

Bank accepts deposits and repays cash to its customers on their demand. The bank

borrows money at a lesser rate of interest and lends it to the borrowers at a higher rate.

It is thus a profit-lending concern. Bank cannot lend all the money that has been

deposited with it. It has to keep a certain portion of the total deposits in cash with

them in order to meet the cash requirements of the individuals and business concern.

1.1 Banking History

Word Bank is said to be derived from the words Bancus or Banque. The history of

banking is traced to as early as 200 BC. The priests in Greece used to keep money and

valuables of the people in temples. These priests thus acted as financial agents. The

origin of banking is also traced to early goldsmiths. They used to keep strong safes for

storing the money and valuables of people. The persons who had surplus money

found it safe and convenient to deposit their valuables with them. The FIRST

STAGE in the development of modern banking, thus, was the accepting of deposits

of cash from those persons who had surplus money with them.

The Goldsmiths used to issue receipts for the money deposited with them. These

receipts began to pass from hand to hand in settlement of transactions because people

had confidence in the integrity and solvency of Goldsmiths. When it was found that

these receipts were drawn in such a way that it entitles any holder to claim the

specified amount of money from goldsmiths. A depositor who is to make the

payments may now get the money in cash from goldsmiths or pay over the receipt to

the creditor. These receipts were the earlier bank notes. The SECOND STAGE in

development of banking thus was the issue of bank notes.

The goldsmiths soon discovered that all the people who had deposited money with

them did not come to withdraw their funds in cash. They found that only a few

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persons presented the receipt for encashment during a given period of time. They also

found that most of the money deposited with was lying idle. At the same time, they

found that they were being constantly requested for loan on good security. They

thought it profitable to lend at least some of money deposited with them to the needy

persons. This proved quite a profitable business for the goldsmiths. They instead of

charging interest from the depositors began to give them interest on the money

deposited with them. This was the THIRD STAGE, in the development of banking.

.

1.2 Commercial Banking in Pakistan

At the time of partition total number of Banks was 38 only. Out of these Banks the

Pakistani Banks were only 2, Indian Banks 29, Exchange Banks were 7. The total of

deposits of Pakistani Banks was Rs.880 Million and advances were Rs.198 Million.

According to banking companies ordinance Banks are the companies, which transacts

the business of banking in Pakistan. Commercial Banks have constituted the most

important part of the intuitional credit in the economy of Pakistan. Being the largest

source of credits, banking industry is a pivot of whole the economic activities in

Pakistan. Section 37(2A) of State Bank of Pakistan Act 1965 lays down that the

Banks must have paid-up-capital and reserve of not less than Rs.5 Lac and fulfilling

certain other requirements for declaring as “Scheduled Bank”.

At the time of independence Bank services was badly affected. But with the passage

of time these are improving. The Government of Pakistan nationalized all Banks in

early 1974. This act was done to minimize control of few hands over banking. But

this step was proved futile for the banking in Pakistan. So the Govt. had to revise its

decision in 1990. Two Banks Allied Bank of Pakistan Limited and Muslim

Commercial Bank of Pakistan Limited have been denationalized. Since then Banks

were working well.

Now slogan of the Banks is to serve their customers in the best possible manner.

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2) An Overview of the Bank of Punjab

2.1 History of BOP

The Bank of Punjab was established in November 1989, the first branch which

opened was the Main Branch Lahore. In 1989 BOP was mended as a non-scheduled

Bank in the province of Punjab. The Bank of Punjab started functioning with the

inauguration of its first branch of 7-Egerton Road, Lahore.

In beginning the main deposits were the Government, because it was opened to

support the Government of Punjab. In 1994 the BOP was converted into a Scheduled

Bank it opened its branches in all over the country. There are 306 branches of BOP in

the whole country and now management plan to open 46 new branches of BOP..

Functionally the bank of Punjab is divided in the division and the each division is

headed by the general managers.

The government of the Punjab holds the majority of the shares in BOP. It is doing

business in commercial banking and the retail banking. Corporate banking treasury

and investment and trade finance. The shares of BOP are traded in all three stock

Exchanges of the Pakistan. The strength of its branches in province of Punjab is 237.

The bank provides all types of banking services such as Deposit in Local currency,

Client Deposits in Foreign currency, Remittances and Advances to businesses, trade,

industry and agriculture. The Bank of Punjab has entered into a new era of science to

the nation under the experienced and professional hands of its management. The Bank

of Punjab has played a vital role in the national economy through mobilization of

untapped local resources, promoting savings and providing funds for investments.

The total number of staff of BOP is approx.4000. The staff of BOP is highly qualified

and hard working. Most of the employees are Master Degree Holder. If we highlight

the fact of network BOP is the 6th largest among both the local and foreign banks, in

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the last year ratings it was at 7th position among the top ten banks in Pakistan. Bank

earned a pre-tax profit of Rs. 124.739 million.

The Bank of Punjab has the privilege to discharge its responsibilities towards national

prosperity and progress. Within the couple of years of its scheduling, the bank has not

only carved out for itself prominent niche in the mainstream banking of the country

but in certain areas it has the distinction of taking the lead. In short span of time the

Bank has been able to evolve a distinct corporate culture through of its owned-based

policies, which are realistic and are on highly professional footings.

2.2 Board of Directors of BOP

Name Designation Office Address

Mr. Abdul Ghafoor

Mirza

Chairman The Bank of Punjab, Head Office BOP Tower,

10-B, Block-E-II, Main Boulevard, Gulberg-III,

Lahore

Mr. Naeemuddin

Khan

President &

CEO

The Bank of Punjab, Head Office BOP Tower,

10-B, Block-E-II, Main Boulevard, Gulberg-III,

Lahore.

Mr. Javaid Aslam Director Chairman, Planning & Development Board

Punjab P&D Department, Govt. of Punjab Civil

Secretariat, Lahore.

Mr. Tariq Bajwa Secretary

Finance/

Director

Finance Department, Govt. of Punjab, Civil

Secretariat, Lahore.

Mr. Tariq Mahmood

Pasha

Director Secretary, Auqaf& Religious Affairs, Aiwan-e-

Auqaf, Shah Chiragh Building, Near Lahore

High Court, Lahore.

KhawajaFarooqSaee

d

Director 403-Sadiq Plaza Shahrah-e-Quaid-e-Azam

Lahore

Mr. Junaid Ashraf

Khawaja

Director ASSAC CORPORATION, 16 AllamaIqbal

Road, Lahore.

Mr. Saeed Anwar Director 108-A, Block-E/I, Halli Road Gulberg-III,

Lahore

Dr. Umar Saif Director Punjab Information Technology Board(PITB),

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Arfa Software Technology Park, 11th Floor,

346-B, Ferozepur Road, Lahore

Mr. Raza Saeed Secretary to

the Board

The Bank of Punjab, Head Office BOP Tower,

10-B, Block-E-II, Main Boulevard, Gulberg-III,

Lahore

2.3 Top level Management of BOP

Name Designation

Mr.Naeemud Din Khan President & CEO

Mr. Khalid Siddiq Tirmizey Deputy CEO & Head Islamic Banking

Mr.Taha Mahmood Group Head, Retail Banking

Mr.Sajjad Hussain Group Head, Special Projects & Legal

Mr.Moghis Rafiuddin Bokhari Group Head, Human Resources

Mr.Ijaz ur Rehman Qureshi Group Head, Audit & Risk Asset Review

Mr.Kamran Khalil Group Head, Administrative Support

Mr.Liaqat Ali Group Head, Commercial Banking

Mr.Taimur Afzal Group Head, Retail Finance

Mr.MustafaHamdani Group Head, Payment Services

Mr.Mahboob ul Hassan Group Head, Special Assets Management

Mr.Tariq Maqbool Group Head, Compliance & Internal Control

Mr.Irfanddin Group Head, Operations

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2.4 Awards & Achievements

Excellence Award by the Central Board of Revenue

The Central Board of Revenue presented "Excellence Award" to the Bank of Punjab

in recognition of the contribution made by the bank towards Government exchequer.

3rd Kissan Time Awards

In recognition of Bank's contribution in development and growth of agricultural

sector, the Bank honored with "Top Bank for Agriculture Loans" and "Best Bank

Crop Insurance" under 3rd Kissan Time Awards year 2006.

Best Corporate Report Award

Annual Report of the Bank for the year 2005 won 5th position for "The Best

Corporate Report Award" for the financial sector, adjudicated jointly by the Institute

of Chartered Accountants of Pakistan and the Institute of Cost and Management

Accountants of Pakistan.

16th Bolan Excellence Award

The Bank was awarded Best Bank Award under 16th Bolan Excellence Awards

distributed in 2006.

Achievement Award

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The Lahore Chamber of Commerce & Industry (LCCI) awarded the Bank "LCCI

Achievement Award" 2006.

Vision Statement of BOP

“To be a customer focused bank with service Excellence”

Mission Statement of BOP

“To exceed the expectation of our stakeholders by leveraging our relationship with the

government of Punjab and delivering a complete range of professional solutions with

a focus on program driven products and services in the agriculture and middle

markets through a motivated team"

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3) Structure of Bank of Punjab

3.1 Hierarchy Chart

Functional Hierarchy of Bank of Punjab

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Chairperson of Board of Governor

President of BOP

International Division

Retail Banking Division

Special Assets Management

Division

Credit Administration

Division

Audit Division

HR Division

Finance Division

IT Division

Risk Management

Regions

Areas

Branches

Commercial Assets

Management

Corporate Assets

Management

RCAD Department

Hub

Regional Teams

Report to State Bank of

Pakistan

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Hierarchy Chart of BOP Branch BWN (0031)

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Branch Manager

Operational Manager

Credit Remittances

Advances

Account Opening

Short-term Loans

Mortgage Loans

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4) Departments of BOP

4.1) Account Opening Department

This department is basically known as “Deposit Department.” Deposit of funds from

outside people is one of the most important functions of this system. Banking system

is based on such deposits without these deposits it is difficult for the bank to run

effectively. Deposits are capital of bank and it is more than bank own capital fund.

This deposit is a form of borrowing for bank. Bank then uses these deposits by lent

out it other parties that generate profits and bank is shared as well in such profit as

well. Such deposit formation is done through opening an account in the bank account

opening department.

Basic Tasks

Responsible for processing request of account opening/closing.

Customer queries

Statement printing and other customer related transactions (this position is also

responsible for signature capturing).

NDRA verification of CNICs before account opening.

Issuance of checkbook as per laid down procedure and preparation of

periodical MIS related to client service area.

4.2) Cash Department

This department is considered as most likely to risk in any bank. The requirement to

work in this department is that the very careful, capable, competent and alert are

required. Balance of payments actually has a diligent staff with considerable skills

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and to work. There is a department of box in which the head of the department of

housing and deeply controlling all the money on their activities

Basic Tasks

Issuance of Token.

Receiving of cash/payment.

Receiving of utility, credit card bills.

Receiving of school fee.

Handling and keeping records of said department.

Marketing for branch deposit.

Alternate of Cash Officer on Alternate Saturday.

Any other duty will be assigned by the Manage at any time

4.3) Clearing Department

The function of this department is to make the arrangements for collection of bank

cheques. But in the traditional banking system it is not the legal obligation of the

banker to collect cheques drawn upon other bank for a customer. But, in today

banking system scenario through modern banking practices it is now easy the

collection of cheques and bills on behalf of the customer.

4.4) Remittance Department

Transfer of money or equivalent to money from one branch to another branch of the

same bank is called remittance. This service is specially provides to the regular

customer of the bank. The main function of this department is transfer of funds.

Fundamental function of this department is under below

Demand Draft.

Travellers Cheque

Telegraphic transfer.

Mail transfer.

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Pay order.

OBC.

IBC.

4.5) Credit Department

Credit department is also one of the most important departments of the bank. It's

called the brain bank. This department controls the relations of the bank or finance-

related loans. The credit department of the balance of payments also performs the

functions of connecting to the credit management and credit accounts. Skilled

professionals offer modern corporate banking services in personal behavior. The

commitment to maintain steady long-term relationships and long term relationships

with our customers, the Bank's balance of payments services change combined with

the technological capacity to offer banking solutions complicated.

5) Marketing Mix of BOP

Marketers use several tackle to obtain preferred reactions from their objective markets. That tackles compose a promotion mix.

These tackles are categorized into four large group that are called the four Ps of selling: product, price, place and advertising.

From the buyer’s point of sight every marketing tool is planned to convey a consumer advantage. The seller’s four Ps communicate to the customer’s four Cs.

4 P’s 4 C’s

Product Customer Solution

Price Customer Cost

Place Convenience

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Promotion Communication

5.1 Products

Product is the combination of goods and services that can be obtainable to a market to

suit the need and wants

Product is the first and the major significant aspect of promotion mix. Product plan

calls for creation corresponding decision on product mix, product line, brands,

packaging, and laboring.

Cut out to gather the high and diverse demands of today’s customer, The Bank of

Punjab has an array of products in the pipeline.

New Product Are Essential To Growth

The Bank of Punjab has a big product collection but it should keep on initiate new

products & services to the customers, to keep side by side with the change and

innovation.

Replacement product must be created

To build sales

To keep up with the competition

As the product ages, its profit generally declines.

Primary Banking Product

Primary banking products offered by BOP are:

Current Account

Saving Account/PLS Deposits

The three major product offered by The Bank of Punjab.

Deposit Product

Current Account

BOP Basic Banking Account

YLS(Young Line Saving Account) launch in 2010

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Online Banking

When a customer wants deposit the money or encash the cheque or to transmit the

money from account in one city branch to another city branch he use the online

banking facility. The client has to be relevant for this particular array between

branches and that will make him capable to transmit his money very fast. Ideally this

transfer should take only 5 to 10 minutes but practically it takes about half an hour or

so. Bank charge a amount on Rs 300 if the amount of deposit or withdraw is less than

100,000 and if the amount exceeds 100,000 the bank don’t charge any amount.

Lockers

Lockers are available in three different sizes small, medium and big against a fee on

annually basis.

Locker Size Annual Fee

Small Rs.1,200

Medium Rs.1,800

Large Rs.3,000

Extra Large Rs.6,500

Car Financing

The Bank of Punjab Car is an extremely successful scheme which, has enabled

hundreds of individuals to own their desired brand new cars at

Easily affordable & Flexible Installments

Minimum Down Payment

Minimum Insurance

Others

SME Financing

Agriculture Credit

Consumer and Commercial Financing

ATM Facility

Debit Card

Credit Card

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E-Banking etc

BOP solar scheme (Launch inn 2013)

5.2) Pricing

Price is anything which is paying against something.

The major ordinary and clear validation given for the significance of price is that price

is the only aspect in the marketing mix that produces profits; all other aspects are

linked with cost. The charges rewarded for the services mainly include:

Mark up/ interest

Bank Charges

Fees and Bank Commission

The Bank of Punjab proposes very rational and aggressive charges on all the services

it offers to its customers. Its rates for some client products like car finance are the

lowest in the peer group.

5.3) Place

This includes the past actions the company undertake for made the product that

accessible to the target customers.

The manufacturer does not sell his products straight to ending user. Between producer

and ultimate users locate one or more marketing channel. They detain the market

through diverse channels. For this reason, they select positions for head office and its

branches, which are suitable to detain final market.

To constantly propose polite, specialized and superior banking solutions & to become

easy to get to to more & more people, The Bank of Punjab has go on board upon a

quick development programmed, planning to offer a networking that compose

services accessible to any of the customers in all the main city of Pakistan. The Bank

of Punjab has 306 branches in all over the Pakistan and now the BOP management

plan to open 46 more branches in Punjab.

5.4) Promotion

Promotion means communicate the product to the public about the merits of the

product and also induces the potential buyers to buy it.

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That is an age of opposition. Many organizations are giving monetary services to the

consumer. Those days everyone is in front of stress of competitor. In this world of

rising rivalry between banks that is single method to carry on and develop for banks.

The market place is the suitable marketing and support of its products. Same is the

case with banking company. There is massive number of distant and limited banks

working in the country and it has been observed that they are highlights much on their

marketing plans. In this situation the key for a bank to be successful and capture its

customers is sufficient support of its products &services. The bank can capture and

keep its customers through:

Sales advertising

commercial

straight Marketing

community Relation

5) Human Resource Activities

This division performs the duty of hiring the employees, training the employees as

well as retaining the employees and if necessary, firing the employees.

6) SWOT Analysis of BOP

SWOT analysis is an acronym that stands for strengths, weaknesses, opportunities and

threats. SWOT analysis is careful evaluation of an organization’s internal strengths

and weaknesses as well as its environment opportunities and threats.

“SWOT analysis is a situational which includes strengths, weaknesses, opportunities

and threats that affect organizational performance.”

“The overall evaluation of a company strengths, weaknesses, opportunities and threats

is called SWOT analysis.”

In SWOT analysis the best strategies accomplish an organization’s mission by:

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Exploiting an organization’s strengths and opportunities.

Neutralizing its threats.

Avoiding or correcting its weaknesses.

SWOT analysis is one of the most important steps in formulating strategy using the

organization mission as a context; managers assess internal strengths distinctive

competencies & weaknesses and external opportunities & threats. The goal is to then

develop good strategies and exploit strengths and opportunities, neutralize threats and

avoid weaknesses.

Strengths

Firstly it is Supported by Punjab Government, or funded by the Punjab

Government, it build people trust

BOP has signed an MOU with Government of the Punjab to provide facility

regarding to SME financing to the engineering firms of Government of the Punjab

for managing infrastructure

The bank of the Punjab is rated among top six banks in Pakistan; in perspective of

remittance business as compare other province banks

BOP has high credit rating as compare to other province bank, because BOP is

performing positive role in economic progress through reengineered operations

and innovative financial products

BOP is doing well in every facet of performance through clients focused policies

to maximize value and satisfaction as compare to other province bank

Wide range of consumers financing, agriculture loans scheme as compare to

others province bank

The BOP in strength that it is managing the Chief Minister self employment

scheme for unemployed educated youth.

The BOP has employ energetic work ethics conducive to merit, integrity better

then peers and exceeding customers expectations as compare to other province

banks

BOP in a strength because it have Government Deposit as compare to others

BOP has huge branches in commercial areas even remote area to meet the

consumers desired

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BOP is following roles and regulation very strictly which received from Punjab

Government, so it makes the environment in disciplined  

BOP has strength due to its name “Punjab” so Majority people prefer to deposit

money in this bank

BOP in strength because it has reliable, user friendly internal computer system for

their consumers

BOP has very sound financial strength as compare to others bank

Weaknesses

Poor performance of the employees because most the employee did not

communicate with the managers related to task issue or for effective planning

Lack of coordination: employee could not coordinate each other if any worker

face any dispute during the work, so there is need coordination in decision

making, problem solving, in any issues if raise during working hours. 

Traditional approach Because BOP is still using old method for working and

for documentation

BOP has good product and service but it cannot participate in promoting its

product on electronic media. Less promotion activities

Poor customers dealing as compare to other banks, employee did not behave

with consumers in sweat manners

Lack of training and awareness program, BOP is not conducting extensive

training to their employees, that’s why employee are not well trained in their

job

Opportunities

Due to huge Government Deposit BOP has the opportunity to expand its

network in remote areas.

The BOP management have been improved by the new management, now

there is opportunity to considered adequate effectively implemented and

monitored

BOP has opportunity it is earning commission on Government Transaction

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Due to huge revenue, BOP has opportunity to introduce new scheme related to

Consumers finance, in Retail banking, and in Agriculture loan scheme to

obtained maximum market share

BOP Trust and reliability due to supported by Punjab Government create

opportunity to increase the deposit and profitability through expanding their

products and services to the peoples 

Due to increasing in deposit BOP could increase its investment and financing

in banking sector

Threats

Inflation is big causes, Modern type of banking, these are the big threats for

BOP, it leads to reduce the deposit by reducing the consumers as well as

working condition

Punjab roles and regulation, the changing trend in Punjab Government policies

also become threat to BOP

Political instability, changing or up and down in Politician parities also a big

threat for BOP, new candidate will come with new policies

Due to usability among country and its economic condition investor feel

hesitate to investment their revenue 

Modern marketing concept, efficient service adopt by the competitors are also

threat to BOP

Muslim community hate the consumers banking, it is also threat for BOP

7) PEST Analysis of BOP

PEST analysis of any industry investigates the important factors that affect the

industry and influence the companies operating in the sector. PEST stands for

Political, Economic, Social and Technological analysis. The PEST Analysis is a tool

to analyze the forces that drive the industry and how those factors can influence the

industry.

POLITICAL

ECONOMICAL

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SOCIO CULTURAL

TECHNOLOGICAL

Political:

The political condition of our country is not satisfactory. Every government

has its own policies. Every government cut off polices of previous

Government also is trying to implement new tax policies and other regulation

to encourage the economy. When the political environment is not satisfactory,

the foreign investors would not like to come and make investment due to

which foreign investment would go down.

Economic:

The bank of Punjab is operating its business in present economy. The

economic condition of this country is not up to mark. Heavy loans and

increasing inflation rate make the business environment strict. Increasing

inflation rate cause of production due to which our countries products well out

at a high prices with low margin.

Social:

In this environment, many processes can effect the organization like attitudes,

values behavior and beliefs of people living in different areas. The bank of

Punjab is providing services according to the varying demands and changing life

styles.

Technological:

Technical achievement is very important tool to provide services and

customers changing demands. The development and application of advanced

technology help this organization to compete in the global market place.

9) Financial Analysis of Bank of Punjab

To analyze the financial position of BOP, different tools are use, Horizontal analysis,

and Vertical analysis and Ratio analysis of three years.

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9.1) Introduction & 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 assets, liabilities and owner’s equity of a business at a

point in time, while the income statement summarizes revenues 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.

9.2 Financial Summary of BOP (3 Years)

2011 2012 2013

Operating Results

Markup/Return/Interest

Earned

Rs in

Millions6,125 11,579 17,539

Markup/Return/Interest

Expense

Rs in

Millions2,669 7,509 13,939

Net Markup IncomeRs in

Millions3,456 4,070 3,600

Non-markup based

Income

Rs in

Millions1,331 2,954 5.423

Non-markup based

Expense

Rs in

Millions1,291 1,882 2,289

Provision against

NPL’s

Rs in

Millions331 374 1,888

Net Profit Before TaxRs in

Millions3,165 4,769 4,846

Net Profit After TaxRs in

Millions2,353 3,804 4,446

Balan

ce Sheet

Total AssetsRs in

Millions1,11,154 1,64,855 2,34,974

Advances(net) Rs in 63,624 1,01,320 1,33,894

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Millions

InvestmentsRs in

Millions18,026 28,233 73,462

Share Holder’s EquityRs in

Millions6,777 10,659 15,110

Revaluation ReserveRs in

Millions6,893 5,467 3,885

DepositsRs in

Millions88,465 1,37,728 1,91,969

Borrowings from FIsRs in

Millions6,791 6,989 17,843

COMMENTS

BOP income statement for these three years represents a high growth in it.

It’s all due to the increase in equity and increase in deposits of bank.

Rise in markup interest earning income results rise up in the profit of bank

represents increase in lending by the bank.

Deposits are almost rose up to around 300% in these five years.

These five years were really good for banking sector. Assets of the banks are

rise up to 400% particularly in 2013 just because of crescent towers.

9.3 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 firm.

2010 2011 2012

Operating Results

Markup/Return/Interest

Earned% 58.28 47.10 33.98

Markup/Return/Interest

Expense% 73.06 64.45 46.12

Net Markup Income % 46.87 15.08 -13.05

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Non-markup based Income % 17.58 54.94 45.52

Non-markup based Expense % 10.92 31.40 17.78

Provision against NPL’s % 85.80 11.49 80.19

Net Profit Before Tax % 45.15 33.63 1.58

Net Profit After Tax % 41.86 38.14 14.43

Balance Sheet

Total Assets % 40.33 32.57 29.84

Advances(net) % 38.01 37.20 24.32

Investments % 10.14 36.15 61.56

Share Holder’s Equity % 34.77 36.41 29.45

Revaluation Reserve % 50.39 -26.08 -40.72

Deposits % 38.14 35.76 28.25

Borrowings from FIs % 58.29 2.83 60.83

COMMENTS

Total earnings marks-up and non mark-up were rising 33% from last year. As

deposits and the lending’s of the banks are rising up.

Administrative expenses are increased with a great pace in last few years

because of high rate of inflation.

Rise in expenses result decrease in the 22% profit from last year.

Total assets were increased in last few years. 22% increase in the assets from

the last year represents growth in the bank.

As bank increase their paid up capital because of which SOE increase at the

end of 2013.

9.4 Vertical analysis

It represents the percent of a line item (expenses, tax, interestsand dividends) impacts

on total revenues.

2010 2011 2012

Markup/Return/Interest

Earned% 82.15 79.67 76.38

Non-markup based Income % 17.85 20.33 23.62

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Markup/Return/Interest

Expense% 35.80 51.67 60.70

Non-markup based Expense % 17.31 12.95 9.97

Provision against NPL’s % 4.44 2.57 8.22

Net Profit Before Tax % 42.45 32.81 21.10

Net Profit After Tax % 31.56 26.17 19.36

COMMENTS

Mark-up interest earned is increased because of increase in 30% lending’s

from the last year.

Net profit before and after tax is decreased because of huge rise up in the

administrative expense.

9.5 Ratio analysis

Ratio analysis is used to calculate the profitability, liquidity / leverage etc. of the firm.

From ratio analysis it is possible to predict future variances.

Ratios 2010 2011 2012

Gross spread ratio % 56 35 21

Profit before tax to total income % 66.11 67.89 53.71

Markup/interest cover ratio Times 2.79 1.94 1.65

Profit after tax to total income % 49.16 54.16 49.27

Total assets turnover Times 0.07 0.09 0.1

Return on avg total assets (after

tax)% 2.65 2.76 2.22

Price earnings ratio Times 10.23 7.71 9.31

EPS (non dilutive) Rs/share 10.01 13.14 10.51

Dividend per share Rs/share 5.2 3.25 3.5

Market value per share Rs/share 102.45 101.25 97.8

Capital adequacy ratio % 12.78 10.09 9.69

No. of branches No. 266 266 272

Staff strength No. 3,430 3,681 3,859

Gross margin % 4.19 3.10 3.30

Net margin % 3.99 3.03 3.16

Net interest margin % 3.90 2.95 3.09

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INTERNSHIP REPORT

Total revenue % 5.39 4.81 4.91

Equity/Assets % 12.10 10.80 10.30

ROE % 21.90 25.50 25.40

Cost/Income % 26.90 26.40 24.70

Gross spread ratio

Gross spread ratio defines the total spread of interest between borrowing and

lending.

Spread: Difference between funded revenue as a percentage of average

earning assets and the cost of funds as a percentage of average paying funds.

The higher the spread the higher will be the profit margin.

GSR=Rev/CGS

GSR= (Mark-up earned– Mark-up expense)/Mark-up earned

GRS is 2nd highest all over the globe in Pakistan.

GRS of the bank is decreasing because of the decrease in margin, SBP rise up

the interest rates on deposits.

Profit before tax to total income

Operating Income - Operating Cost = Profit before Tax

This ratio tells what percent of total income is earned before paying all the

taxes.

BOP has a high value of profit before tax to total income and they are

decreasing after 2012 because of increase in administrative expenses and

righting off the bad debts.

The main reasons for reduction in profitability were additional provision

against NPL due to the elimination of benefit of FSV and downturn in

consumer and individual banking.

Markup/interest cover ratio

This ratio tells what percent of interest is covered from the total income of

the firm or bank.

It tells the ability of a bank to pay its mark-up to the depositors.

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INTERNSHIP REPORT

MP/interest cover ratio=EBIT/Mark-up

Profit after tax to total income

This ratio analysis tells profitability of a firm after paying all the taxes to total

income.

Profitability of BOP is increased because of the decrease in tax paid to Govt.

and of high spread ratio.

BOP negotiated their taxes with the Govt. and only paid 20% tax in 2012 and

only 8% in 2013 instead of 35%.

Total assets turnover

Assets turnover = Net Income/Total Assets

This ratio tells the turnover of the assets to generate income.

This ratio is increased during last few years which represent increase in the

turnover by assets.

Return on average total assets (after tax)

This ratio gives an idea of retuning net profit generated by the bank in

comparison with assets.

Return on assets = Profit after Tax/Total Assets

This ratio is decreasing in the last year because of decrease in profit as

expenses rose up.

The decrease was mainly due to increased equity as a result of increase in

minimum capital requirements and additional provision due to withdrawal of

benefit of FSV for most types of advances.

Price earnings ratio

Price earnings ratio = Market price of a share/EPS

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INTERNSHIP REPORT

From this ratio it is analyzed what % of EPS is the part of MPS. What percent

earned from a share equivalent to the worth of 1 Rs MPS by the bank or a

firm.

EPS (earning per share)

EPS = Net Income/Total Shares

Through this ratio it can be analyzed what percent of 1 Rs share is earned.

Capital adequacy ratio

Capital adequacy ratio informs lending up to a certain ratio of equity.

This ratio is set by the State Bank of Pakistan.

Net Interest Income

Difference between funded revenue as a percentage of average earning assets

and the cost of funds as a percentage of average paying funds.

ROE (Return on Equity)

Profit before tax as a percentage of total equity.

Cost/Income

Operating Cost includes all expenses charged to arrive at profit before tax

excluding cost of funds, provisions and head office expenses. Head office

expenses are not considered since all banks do not account for head office

expenses in their financial statements.

Operating Income means funded and non-funded revenue less cost of funds

and provisions.

As administrative costs are increased because of which results decrease in the

Cost to Income Ratio.

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INTERNSHIP REPORT

10) Work done as an Internee

There are following learning points for me in the bank.

First Week

In my first week in Bank of Punjab, they assigned me work in Account Opening

Department. Mam. SHAHIDA trained me very nicely and I learned lot of things in

this department. He told me:

Different accounts names and their codes

How to open the account?

New Computerized National Identity Card is must for opening of new

account.

How to fill the deposit slip if anyone wants to transfer cash in the account?

How to fill the different accounts form?

How to fill the voucher for issuing of the cheque book for the first time?

How to fill the requisition slip for the second time issuance of cheque book?

How to issue the cheque book?

How to enter it in the register?

What are the procedures for the ATM card?

What are the necessary requirements of different accounts to be

opened?

Joint Stock Company’s Account

Copies of following documents duly certified by the authorized officer:

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INTERNSHIP REPORT

Resolution of Board of Directors for opening of account specifying the

persons authorized to operate the company’s account.

Memorandum and Article of Association

Certificate of commencement of company

Attested copies of CNIC of all directors

Individual Account

Application for account opening

SS (Specimen Signature) card

Attested copy of CNIC

Verification of person through NADRA Verysis System. It is a mandatory

requirement to verify the CNIC of the customer before opening the account

In case of salaried person attested copy of his/her service card or any other

acceptable evidence of service

In case of illiterate person two passport size photograph and thumb impression

Right & Left on SS Card

In case CNIC does not contain a photograph Bank may allow the customer to

open the account subject to provision the following documents:

A copy of the photograph duly attested by Gazette Officer / Nazim

A confirmation in writing to the effect that the person has no other

document bearing his/her photograph

Moreover, the particulars of CNIC of such person must be confirmed

from NADRA Verisys System

Partnership Account

Application for account opening

SS (Specimen Signature) card

Attested copies of CNIC of all partners

Attested copy of Partnership Deed or Letter of Partnership duly signed by all

partners of the firm

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INTERNSHIP REPORT

Attested copy of registration certificate with registrar of the firm. In case of

unregistered partnership, this fact should be clearly mentioned on the account

opening form

Authority letter in original, in favor of the person authorized to operate the

account of the firm

Illiterate/Photo/Disable Person Account

Attested copy of CNIC

Two attested photograph (one photograph should be pasted on the account

opening form and other should be pasted on SS card). Left thumb impression

in case of male and right thumb impression in case of female on the account

opening application & SS card.

Agent Account

Attested copy of CNIC of the agent

Certified copy of “Power of Attorney”

Trust Account

Attested copy of Certificate of Registration

Resolution duly passed by the trustees regarding opening and operating of

account in the bank in the name of said Trust Deed

Attested copies of CNIC of all trustees

Certified copy of Letter of Administration Instrument of Trust

Minor Account

A minor is a person who has not attained the age of 18 years, if the court

appoint guardian of his/her person or property, then the period of his/her

minority extends to the age of 21 years.

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INTERNSHIP REPORT

An account in the name of minor is allowed to open by his guardian preferably

jointly in the name of guardian / minor.

Title of account is on the minor’s name (as per Form-B) and word minor be

added to the title of account. In the account opening form, the particulars of

guardian will be filled out in the column of personal information.

Attested copy of CNIC of guardian

Attested copy of Form-B of minor

Clubs, Societies & Association Account

Certified copy of Certificate of registration issued by the registrar of Co-

operative Societies / Registration Authority

Certified copy of Memorandum and Article of Association of the society

containing official seal of the Registration Authority

Permission of the Registration Authority for opening of account in the name of

association as required under Section 37 of Co-operative Societies Act 1925.

List of member of the Managing Committee duly certified by the Registrar of

Societies

Attested copies of CNIC of the authorized officials / persons

Accomplishment

I am fully trained in this job how to open the different accounts, how to issue the

cheque book and enter it in the register, how to transfer the amount through cash or

cheque to an account and how to issue a Debit Card.

Second Week

In the second week in the Bank of Punjab, they assigned me work in the Clearing

Department. Mr. MAZHAR AZEEM trained me very nicely and I learned lot of

things in this department. Funds transfer between two banks and branches is known as

clearing.

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INTERNSHIP REPORT

There are two types of clearing:

I/W (Inward Clearing)

O/W (Outward Clearing)

In this week I entered the cheques lodged for inward clearing in clearing register as

their cheque number, account holder name, cheque amount and bank name amount to

be paid.

Secondly, in this week I prepared outward clearing for next day. Same as entered

cheque number, account holder name, cheque amount and bank name amount to be

paid.

In this week I also entered cheque return in cheque return register and put cheque

return slip on cheque.

Accomplishments

I am fully trained now in this particular job. How to fill cheque return slip? How to

enter in I/W, O/W clearing registered?

Third Week

 

In third week I perform following tasks relating to the banking system

.1. IBC

2. OBC

In this week I worked for IBC (Inter Billing Clearing). IBC means cheque lodged for

clearing from other city. I entered these cheques in IBC register if it is BOP cheque

then Mr. ASJAD cleared or return this cheque. If it is cheque of other bank then it is

again entered in O/W clearing registered and lodged next day for clearing. Secondly,

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INTERNSHIP REPORT

in this week I prepared OBC, filling of OBC slip as cheque number, their amount,

OBC number and branch name.

Accomplishments

In this week I repeatedly performed this job and now I am fully trained in this job.

Fourth Week

In fourth week in Bank of Punjab, they assign me work in Remittances Department.

Mr. SHAFIQ PARACHA trained me very nicely and I learned lot of things in this

department. He assigns me work for Remittances, Demand Draft and Pay Order

preparation. Demand Draft is for payment outside of city and Pay Order for local

payment. It is a secure source of payment. There are no charges for pay order while

other banks charge for this service so it is an advantage going to BOP to attract

customers.

Accomplishments

In this week I repeatedly perform the jobs and now I am fully trained in such type of

operations i.e. to make the DD, pay order and mark the charges if customer is not

account holder of bank then Rs.255commission of the bank.

Fifth Week

In this week I worked in Accounts and Cash Department. In this week I learned about

receipts and payments, how to enter it in computer, how to sort the vouchers and

preparation of salaries.

Accomplishments

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INTERNSHIP REPORT

I am fully trained in this job i.e. to check that all the vouchers are scrutinized and

matched with activity.

Sixth Week

In sixth week I worked in Credit Department. I learned about advances from Credit

Officer What are requirements for loan? It is a procedure that takes many days.

Accomplishments

In this week I am fully trained in these jobs and remaining period is spend to collect

internship letter

11) Conclusion

Marketing project is an interesting program, which gave us the practical touch of the

field. Through this, we learnt that what is the exact activities in the sectors and

approaches which they used when they are making their products. We learnt from the

company Manager and understood the operations of company. This program

enhanced my knowledge about the industry.

12) Recommendations

BOP policy frame work should be clear and should be transparences

BOP are required to motivate their supervisor, branch managers that they treat

with their employees fairly

BOP should improve its Performance appraisal system and it must be on merit

Employee training is essential, BOP should conduct training program for their

workers.

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INTERNSHIP REPORT

BOP should make a good working condition; e.g. branch physical

environment, working desk etc. if possible avoid overcrowding and allow each

worker his or her own personal space.

BOP should administer the associate performance review program

BOP should build a formal recognition program, like employee of the month.

Etc.

12) Bibliography

www.bop.com.pk

https://www.bop.com.pk/index.aspx

https://www.bop.com.pk/Products.aspx

https://www.bop.com.pk/Branches.aspx

http://hrweb.berkeley.edu/guides/managing-hr/managing-successfully/

performance-management

https://www.bop.com.pk/Financial/AnnualAccounts.aspx

http://www.investopedia.com/features/industryhandbook/banking.asp

Bank Magazine

Brochures

Information provided by the employees

My observation

13) Glossary

BOP: Bank of Punjab

H.O:Head Office

CEO: Chief Executive Officer

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INTERNSHIP REPORT

B.D: Board of Directors

FED:Federal Excise Duty

WHT: With Holding Tax

TDR:Term Deposit Receipts

CDR: Cash Deposit Receipts

AOF: Account Opening Form

SSC: Specimen Signature Card

KYC: Know Your Customers

IBC: Inward Bills for Collection

OBC: Outward Bills for Collection

NIFT: National Institute of Facilitation Technology

PO: Pay Order

DD: Demand Draft

ATM: Automated Teller Machine

PLS: Profit And Loss Saving A/C

LTF: Loan Transfer Facility

RF: Running Finance

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INTERNSHIP REPORT

RM: Relationship Manager

RO: Relationship Officer

TL: Transfer Letter

DAF: Delivery Acceptance Form

PO: Purchase Order

LOA: Letter of Acceptance

NIT: National Investment Trust

LTCF: Long-Term Credit Fund

CAC: Central Audit Committee

BRMC: Board Risk Management Committee

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