CHAPTER 01 Introduction to the Report This Internship report is aimed at studying and analyzing Askari Bank Limited (A BL)

in general and its branch office at Abbottabad, in particular. The main purp ose of the internship is to prepare and submit a report as a partial fulfillment for the award of MBA degree from COMSATS Institute of Information Technology Ab bottabad. This report has the aim to share my knowledge and experience that I ha ve gathered during my academics and practical training at Askari Bank. Being the world-class bank, Askari Bank has maintained the world-class standards in all a spects including financial standards. This report has covered the financial stra tegies and practices that are being followed in Askari bank. 1.1 Background of the study Pakistans economy at present is going in depression. The importance of sound banking system cannot be denied in such critical time to re-stabilize the economy, which must meet the financial needs of the growing ag riculture, industrial and commercial/services sector. In the present day world, economy has started dominating every sphere of life and for the socioeconomic gr owth of any country, monetary institution is critical. Banking sector is the bac kbone of the industrial sectors, trade and commerce of the country hence providi ng stimulus to overall development of the economy. Askari Bank since 1991 has pl ayed a pivotal role in the development of Pakistan. Like other multinational ban ks, ABL has adopted a customer-oriented approach, in order to provide quality pr oducts according to customer needs and stands as a role model for the other bank s. Askari Bank works round the clock to provide services that are unmatched in t he region. It has the experienced, committed team of professionals with diversif ied expertise. This report has the aim to cover all operational aspects of Askar i Bank and products that it offers. 1

1.2 Purpose of the Internship The primary purpose of the internship is to fulfil l the academic requirements of my study. The purpose of the study also is, to do practical work, in the field and apply the knowledge of classroom lectures to t he real life situations, which thus enables a student to be a future banking pra ctitioner. Besides this, some other purposes are associated, which includes ather relevant information then interpret and analyze it in a useful manner To d efine and describe various functions of the bank. To highlight the outline facil ities and products offered by ABL to its customers. To analyze the bank through different techniques i.e. Horizontal, Vertical, and SWOT analysis. To get exposu re and to develop the interpersonal communication skill. To identify the areas o f the bank where there is some room for improvement. To present some feasible so lutions for the problems pertaining to ABL. To apply the knowledge gained in pra ctical field. It is also one of the main objectives of internship to practically apply in concepts learned during my study at COMSATS Abbottabad. 1.3 Merits of the Report It is a compulsory requirement for the award of Masters Degree in Business Administration The study conducted will benefit the finance s tudents in particular and banking students in general It will help the present a nd prospective students of the department in making assignments and writing repo rts on the ABL, evolution of baking, importance of banking and different operati ons. The third chapter of this report comprehensively encompasses most of the as pects of banking, followed by SWOT analysis, conclusion and recommendations. Fur thermore, ABL branch Abbottabad may also benefit from the recommendations made at the end of the report. It can also provide assistance to students seeking financial data for analysis. 2

It can also provide help ABL management in identifying their Strengths, Weakness es, Opportunities and Threats. 1.4 Scope of Report Banking has a very broad scope. In only six weeks of interns hip, it is very difficult to understand each and every aspect of bank. Due to th e barriers of limited time and space, the scope of work is usually confined. How ever this study of ABL will help the management to identify their weaknesses and threats and overcome them by using their strengths and capitalizing on the oppo rtunities. This internship report will be source of financial data for all those who are interested in financial statement analysis of ABL. 1.5 Methodology of the Report This study involves two types of data for report w riting. 1.5.1 Primary Sources rvations Interviews and discussion with staff members Personal obse

1.5.2 Secondary Sources Annual reports of ABL Brochures & Manuals. Websites News papers Previous Internship Reports. 3

1.6 Limitations of the Report For a corporate level organization, like Askari Ba nk Limited, where the span of operation is too wide, six weeks of time is very l imited for complete observation for the purpose of the complete research of spec ialized and sensitive institutions. It does not permit to fully analyze and unde rstand the entire functionality of the bank, and privacy policy of Bank also lim its access to the organizational data and information that is termed as confiden tial. Also due to the bank tight schedule and busy schedule of the required staf f complete information could not be collected easily. The information at the bra nch level is also not allowed to be accessed. During the study I tried to includ e only relevant material. This study was conducted in accordance with the object ives of the study. 1.7 Scheme of the Report This internship report is divided into five chapters as : Chapter one includes background, purpose, scope, limitations, methodology, and scheme of the report. Chapter two includes background and history of banking in Pakistan, background of ABL, roles, functions and branches. Chapter three inclu des organizational structure of ABL, organizational charts and departments of AB L. Chapter four includes financial, SWOT analysis and findings based on work in chapter three. This will stick to the branch where I have worked. Chapter five i ncludes recommendations of the study based on the analysis in the previous chapt er. 4

CHAPTER 02 Introduction to Askari Bank Limited 2.1 Early Growth of Banking Banking in fact is as ancient as human society. For e ver since man came to realize the importance of money as a medium of exchange. P erhaps these were the Babylonians who developed banking system as early as in 20 00B.C. It is evident that the temples of Babylon were used as banks because of t he prevalent respect and confidence in the clergy. 2.2 Formal Definition of Bank A financial institution that is licensed to deal wi th money and its substitutes by accepting time and demand deposits, making loans , and investing in securities. The bank generates profits from the difference in the interest rates charged and paid. These are the following types of banks ral Bank Commercial Bank Industrial Bank Exchange Bank Saving Bank 2.3 History of Banking in Pakistan On 14th August 1947, a new Muslim country wit h the name of Pakistan came into being. In accordance with the provision of Indi an Independence Act of 1947, an expert committee was appointed to study the issu e. The committee recommended that the Reserve Bank of India should continue to f unction in Pakistan until 30th September 1948, at this time there were 19 foreig n banks with the status of small branch offices and only two Pakistani instituti ons i.e. Habib Bank, and the Australasia Bank. To rebuild the confidence of the people in these banks, the then Government promulgated the banking 5

Cent

companies kistan on ani banks to 36 by

ordinance, 1947. Government of Pakistan inaugurated the State Bank of Pa July 1, 1948.At the end of June 1958, the number of branches of Pakist increased from 195 to 307 and, the number of scheduled banks increased June 1965.

2.4 Historical Background of Askari Bank Ltd ABL was incorporated in Pakistan on October 09, 1991, as a Public Limited Company. It commenced operations on April 1, 1992 and is principally engaged in the business of banking, as defined in th e Banking Companies Ordinance, 1962. The Bank is listed on the Karachi, Lahore & Islamabad Stock Exchanges and its shares are currently the highest quoted from among the new private sector banks in Pakistan. The Head office of Askari Bank, Limited is located at AWT Rawalpindi. 2.5 Vision Statement of ABL To be the bank of first choice in the region. 2.6 Mission Statement of ABL To be the leading private sector bank in Pakistan w ith an international presence, delivering quality service through innovative tec hnology and effective human resource management in a modern and progressive orga nizational culture of meritocracy, maintaining high ethical and professional sta ndards, while providing enhanced value to all our stake-holders, and contributin g to society. 2.7 Corporate Objectives of ABL To achieve sustained growth and profitability in all areas of business. To build and sustain a high performance culture, with a continuous improvement focus. To develop a customerservice oriented culture with special emphasis on customer car e and convenience. 6

To build an enabling environment, where employees are motivated to contribute to their full potential. To maximize use of technology to ensure costeffective oper ations, efficient management information system, enhanced delivery capability an d high service standards.

To manage the Banks portfolio of businesses to achieve strong and sustainable sha reholder returns and to continuously build shareholder value. To deliver timely solutions that best meet the customers financial needs. To explore new avenues fo r growth and profitability 2.8 ABL As Leading Banking Sector entity Over the years, Askari Bank has proved its strength as a leading banking sector entity, by achieving the following firs ts in Pakistani Banking: First Bank to offer on-line real-time banking on a coun try-wide basis. First Bank with a nation-wide ATM network. First Bank to offer I nternet Banking Services First Bank to offer e-commerce solutions. 2.9 Credit Rating The Pakistan Credit Rating Agency (PACRA) as given in Annual R eport 2008 maintained both ABL long term and short term ratings at AA and A1+. The r ating specifies a very high credit quality and very strong capacity for timely p ayment of financial commitments. 2.10 Awards and Achievements Recently Askari Bank have been once again been give n the Best Retail Bank in Pakistan by The Asian Banker for the 2nd consecutive yea r. Askari Bank has been given the 1st Consumer Choice Award 2004 for the Commerc ial Banking Category by the Consumer Association of Pakistan. 7

The bank has also received the Corporate Excellence Award for the financial sect or from the Management Association of Pakistan (MAP) for the years 2002, 2003 an d 2004.

The bank have been declared The Best Bank in Pakistan by the global finance maga zine for the years 2001 and 2002. Askari bank won the first prize in the Best Co rporate Report awards for the year 2000, 2001 and 2002 from the institute of cha rtered accountants of Pakistan and the institute of cost and management accounta nts of Pakistan, for the services sector. 2.11 Corporate Profile Corporate body of Askari bank Limited consist if 12 Board of Directors including one Chairman 1. President 2. Chief Executive 3. Secretar y 4. NIT Nominees

Detail of Board of Directors Lt. Gen. Imtiaz Hussain Lt. Gen. (R) Zar ig. (R) Muhammad Shiraz Baig Brig. (R) Asmat Ullah Khan Niazi Brig. (R) Muhammad Bashir Baz Brig. (R) Shaukat Mahmood Chaudhari Mr. Kashif Mateen Ansari Mr. Zaf ar Alam Khan Sumbal Mr. Muhammad Afzal Munif, FCA Mr. Muhammad Najam Ali, FCA Mr . Tariq Iqbal Khan, FCA Mr. Shaharyar Ahmad Chairman Director Director Director Director Director Director Director Director Director Director(NIT Nominee) Pres ident & Chief Executive 8

2.11.1 Audit Committee Dr. Bashir Ahmad Khan Mr. Ali Noormahomed Rattansey, FCA Mr. Zafar Alam Khan Sumbal Chairman Member Member 2.11.2 Company Secretary Mr. Saleem Anwar, FCA

2.11.3 Auditors F. Ferguson & Co.(Chartered Accountants) 2.11.4 Legal Advisors Rizvi, Isa, Afridi & Angell 2.11.5 Registered / Head Office AWT Plaza, The Mall, P.O. Box No. 1084 Rawalpindi, Pakistan. Tel: (92 51) 906300 0 Fax: (92 51) 9272455 E-mail: webmaster@askaribank.com.pk Website: www.askariba nk.com.pk 2.12 Ethical Values The intrinsic core values that are corner stones of our corp orate behavior are as fallows. Commitment Integrity Fairness Teamwork 2.13 Role of ABL in Banking Sector The impressive growths in development, which ABL achieve, make this bank undoubtedly the most dynamic and progressive. In a v ery short period of time it became 9

one of the leading bank overtaking several other older and its competitor banks. The major contributions the bank has made are: Record setting performance and commitment to serve the customers. Personalized s ervice and dynamic approach. Professional management. Modern banking policy. Hum an resources development. Small loans or micro credits. Utility bills collection . Credit cards 2.14 Number of Branches Askari Bank has expanded into a nationwide presence of 2 00 Branches/sub-branches including 20 dedicated Islamic Banking Branches, and wh ole sale bank Branch in Bahrain. A shared network of over 2,991 online ATMs cove ring all major cities in Pakistan supports the delivery channels for customer se rvice. As on December 31, 2008, the Bank had equity of Rs.12.97 billion and tota l assets of Rs.206.19 billion, with over 816,629 banking customers, serviced by 6,496 employees. 2.15 Structure of ACBL A board of Directors is running the affairs of ABL. The b oard of Directors consisting of one president, 04 Directors from ABL, one from P akistan banking council, one from Ministry of Finance and additional one who is the sectary of board of managers of ACBL. Hence the board of directors is 08 mem ber team which takes all-important decisions relating to the operations and poli cies of the bank. Second highest authority in the ABL is Executive Committee con sisting 7 members including Chairman/President of ACBL and sectary of CBL. Below the general managers are the circle executives who are Senior Vice Presidents o r Vice Presidents (VP). In each zone there are number of branches of ACBL, and e ach branch is managed by branch manager. 10

Fig 2.1 ABL Organization Structure Chart (Source: Annual report 2008) President Senior Executive Vice President (SEVP) Executive Vice President (EVP) Senior Vice President (SVP) Vice President (VP) Additional /Assistant Vice President (AVP) Manager Assistant Manager Grade -1 Grade -II Grade -III Assistant, Cashier etc Non Clerical staff 11

CHAPTER 03 Askari Bank Services and Products 3.1 Introduction to ABL Abbottabad Branch Askari Limited Bank, Abbottabad branch was established at 1999 with amount of resources. The Banks branch building is l ocated in Supply Bazaar. With the passage of time the number of customers increa sed and there was need of more advanced departments with all the new technology. ASKARI bank expanded its departments into a three story buildings dealing with different needs and facilities to the customers. The branch deals with four main departments i.e credit, bills and remittances, accounts and deposits department. Apart from Islamic banking a separate Leasing department is working to cater th e needs of growing Islamization in the region. In short Askari Bank Abbottabad i s one the renowned bank in the city. 12

Figure 3.1: Organizational Chart of the Branch Chief Manager/ (Branch Manager) Deputy-Chief Control & Management Deputy-Chief Accountant Deputy-Chief Finance DeputyChief Cash Deputy-Chief Bill and Remittance Deposit Department. Foreign Currency Accounts Department. Finance Department. Cash Department. Bills and Remittance Department. Source: Annual Report 2008 13

3.2 Departmentalization The organization of ABL is a complete banking system. This banking system is col lection of interrelated departments that works together to achieve the objective s of the organization. I can rightly say that ABL is a hierarchical system in th at it includes other sub departments and these are integrated to work together. The ABLs existing system includes following departments. Account Opening Department Remittance Department Credit Department Cash departme nt Clearing Department Accounts Department Foreign Trade Department Figure 3.2 Branch systems Hierarchy ASKARI BANK LIMITED ASKARI BANK MAIN BRANCH 001 RAWALPINDI Accounts opening Remittance Department Department Credit Departme nt Cash Department Clearing Department Accounts Department Foreign Trade Departm ent Plastic Money Management Information System Source: Self made 14

3.2.1 Accounts Opening Department Borrowing funds from different sources has bec ome an essential feature of todays business enterprises. But in the case of a ban k borrowing funds from outside parties is all more vital because the entire bank ing system is based on it. The borrowed capital of bank is much greater than the ir own capital. Banks borrowing is mostly in the form of deposits. These deposit s are lent out to different parties. Such deposit creation is done through openi ng an account in the bank. 3.2.1.1 Types of Accounts In ABL, there are the following types of accounts: Current account Saving accounts Term deposit Askari Special deposit Account Aska ri Bachat certificate Notice Deposits Foreign currency saving Account 3.2.1.1.1 Current account These accounts are for the current deposits i.e. custo mer can deposit and withdraw the amount any time and no profit is paid. This acco unt is operating through cheques. The customer is required to maintain a minimum balance in this account. In current account, there is no profit and interest on the money kept. Current account is mostly opened for business. 3.2.1.1.2 Saving account (profit and loss sharing) Pls. saving accounts opened b y individuals (single or joint), for charitable institutions, companies, educati onal institutions, firms etc. This account can be opened with a very 15

small amount, withdrawals from this account is made through cheques. Return/prof it is paid at flexible rate calculate on six months basis. 3.2.1.1.3 Term deposi t The deposits that can be withdrawn after a specified period of time are known as fixed or term deposits. In this account person or account holder keeps the mo ney for definite period of time. The amount deposited is not withdrawn able by c heques. After the maturity of account, account holder receives the actual money along with the profit given after each six months during deposited period. The t erm deposit account varies from one month to 5 years, and the minimum balance re quirement is Rs.5000/- for all other nine accounts. 3.2.1.1.4 Askari Special deposit Account(ASDA) It is a special scheme known as ASKARI Special Deposit Accounts. Amounts in these accounts are accepted as prescribed by bank from time to time. The deposits are subject to PLS rules/regulations and invested by the bank on the same basis.

The profits on ASDA is payable as determined by the bank in the basis of profit and loss sharing arrangements. The profit as determined by the bank shall be fin al binding on the account holder. Profit shall be paid every six months on decla ration of actual rate of profit on such deposits by H.O. 3.2.1.1.5 Askari Bachat certificate ABCs are long term fixed deposit for 3 and 5 years. These are not term deposits b ecause payment of return is on monthly basis rather than on maturity of deposits . The minimum balance requirement is Rs.25, 000/- and maximum balance requiremen t is Rs.1.0 million. If ABC is for 3 years, the rate of return for 3 years is 12 %; if ABC is for 5 years the rate of return is 13%. This is not a chequing accou nt; no cheque is drawn on it only payment of return is made monthly. 3.2.1.1.6 Notice Deposits 16

Notice deposits are kind of fixed deposits. The minimum balance requirement for opening the account is Rs.5000/- and payment is drawn on maturity. 3.2.1.1.7 Foreign Currency Saving Account The Pakistani national as well as the foreigners can open this account. The profit is also paid credited to this accou nt depending upon the monthly products. The customer has the facility of withdra w in foreign as well as Pak currency. Equivalent Pak rupees are also calculated for the transactions in the FC saving accounts. Monthly and daily revaluation ra tes of each foreign currency in Pak rupees are maintained for the correct operat ion in the FC saving accounts.

3.2.1.2 Account opening procedure For the chequing accounts (C/A, ASDA, SAVING), there are different account holders required for each type of these accounts. T he operation/ procedure requirement that is needed for Individual Account differ greatly from joint Account proprietorship Partnership Limited company and below. Clu iety or Association as explained 3.2.1.3 Letter of thanks At the 2nd day of account opening, ABL issues letter of thanks to account opener and account introducer for the trust they have on ABL. 3.2 .1.4 Stamping Posted After completing all this process. The forms are signed from manager of the branch after which the forms are stamped across as POSTED on one co rner of the front side of the form. Then they are posted in the respective accoun t opening file. The very next day cheque book is issued to the customer 17

3.2.2 Remittance Department This department of ABL is concerned with transfer of money from one place to ano ther place that is transfer of funds

3.2.2.1 Instruments of bills and Remittance Department The instruments that are handled in the Remittance department are as follows: Demand Draft Telegraphic T ansfer Mail transfer Pay order Pay slip OBC IBC 3.2.2.1.1 Demand draft A bank draft is an order by one branch of bank to another branch of the same bank to pay a certain amount of money on demand to the perso n named there in. DD is just a check and is issued when the customer wants to ta ke the draft personally. For the preparation of a draft, first of all customer h as to fill an application form, then the concerned officer fills the following b efore delivering the draft to the customer. 3.2.2.1.2 Telegraphic Transfer A telegraphic transfer is a fastest and safest wa y to transfer money. After filling the application form, the concerned officer f ills the telegraphic form. This telegram is sent to the required bank. Which on receiving it immediately makes the payment to the customer and afterwards the vo uchers are sent to the bank by ordinary mail. 3.2.2.1.3 Mail transfer 18

When a customer requests the bank to transfer his money from this bank to any ot her bank or the branch of the same bank in the city/ outside the city or outside the country, the first thing he has to do is to fill an application form in whi ch he states that I want to transfer the money from this bank to another bank. I f the customer is the account bolder of bank, then the bank will debit his accou nt. The concerned office will fill the different forms to make the mail transfer complete. Three forms used for this purpose are listed below: Debit voucher Cre dit voucher Mail transfer register If the customer is not the account holder of bank, then firstly he has to deposit the money and then the above said procedure will be adopted to transfer his money. 3.2.2.1.4 Pay order It is a cheque drawn by a bank on itself. Pay order is an instrument in which th ree parties are involved the purchaser, the bank, and the receiver. It can be pu rchased by any customer. 3.2.2.1.5 Pay slip It is an instrument used by the banks for its payment. The sl ips are issued to the employee of the banks their bills and invoices. The bills are transferred to pay slips . In this case only one bank is involved and that i s the issuer as well as the payer. Procedure prescribed for P.O for issuance and payment is followed for pay slips with following exceptions. Pay slips are issu ed by the bank for settlement for this own payment. No excise duty is applicable on P.S. 3.2.2.1.6 Outward Bills for Collection The bills which are sent to their city banks for the local clearing in that city are outward bills for collection.Cheques are entered in the OBC register, the n umber is written in the stamps. The OBC forwarding schedules are prepared for th e different branches. Then 19

respective cheques are attached with the schedule.On clearance the respective ba nks send back the OBCs along with IBCA(inter branch credit advice). At the end of the day, contra vouchers are made. 3.2.2.1.7 Inward bills for Collection The bills received from other banks out of city for the local clearing are calle d inward bills for collection.The OBC of the other branches will be the IBCc of t his branch. So an OBC forwarding schedule is received by mail. The cheques are e ntered in the IBC register. The IBC numbers are allotted to them.After realizati on, an IBCA is prepared and mailed to the branch 3.2.3 Credit Department The earnings of commercial banks are chiefly derived from interest charge on loa ns and discounts. It attracts surplus balance from customers at lower rate of in terest and makes advances at higher rate of interest.The finance system deals wi th providing finances (loans) and ensuring the guarantees. 3.2.3.1 Types of Advances Offered By ABL ABL Credit department deals with all th e advances, which are made to the customers. Advances are important for the bank ing business because it gives the bank interest on the amount loaned. ABL is als o very active in advancing loans to customers, thus helping the economy of the c ountry in its development. It provides the following finances: 3.2.3.1.1 Demand Finance Demand finance is one of the long-term loans and is all owed against fixed assets. It can also be short term. Usually businessmen avail this facility for the purchase of machinery and other installations. 3.2.3.1.2 Running Finance This is a type of finance, which meets the day-to-day finance requirements of the business. The amount is transferred to the debtors cu rrent account and can be withdrawn 20

through cheques. The limit on this type of finance is 35000 and the maximum peri od for this type of finance is one year and can be renewed by a new application. 3.2.3.1.3 Cash Finance Cash finance is also called working capital. It is a shor t-term loan. Probably the most popular form of providing funds to the clients in the banking sector is the Cash Finance system. In this, the bank lends money to borrowers against tangible security. The total amount of loan, which is granted , is not paid in one installment. The borrowers have to pay markup on the amount borrowed. 3.2.3.2 Level of Lending 3.2.3.2.1 The structure for lending in ABL has four lev els 1. 2. 3. 4. Branch credit committee Credit committee at Head office Executiv e committee Board 3.2.3.3 Financial Products of ABL 3.2.3.3.1 Personal Finance Personal Finance is a parameter driven product for catering to the needs of the general public belo nging to different segments. One can avail unlimited opportunities through Askar i Bank's Personal Finance. With unmatched finance features in terms of loan amou nt, payback period and most affordable monthly installments, Askari Bank's Perso nal Finance makes sure that one gets the most out of his/her loan. Once a good c redit history is established, the door to opportunity opens much wider. 3.2.3.3. 2 Askari "Mortgage Finance Askari "Mortgage Finance" offers the convenience of o wning a house of choice, while living in it at its rental value. The installment plan has carefully designed to suit both the budget & accommodation requirement s. It has been designed for enhancing financing 21

facility initially for employees of corporate companies for purchase/ constructi on/ renovation of house. The maximum financing amount is Rs. 10 million with rep ayment tenure up to 20 years. 3.2.3.3.3 Business Finance In pursuance of the Nat ional objectives to review the economy of the country, ABL is providing loans to small and medium size business enterprises under Askari Bank's Business Finance Scheme. Their goal is to offer a loan, which enables business community to rece ive the financing required by them based on their cash flows. 3.2.3.3.4 Ask Car (Car Finance) ABL offers the most convenient and affordable vehicle- financing s cheme, which provides their valuable customers an opportunity to own a brand new vehicle of their choice. With minimum down payment, lowest insurance rates and widest range of available car makes and models, Ask car offers the best value to our esteemed customers. 3.2.3.3.5 Ask CARD ASKCARD means freedom, comfort, conv enience and security, so that you can have retail transactions with complete pea ce of mind. ASKCARD is your new shopping companion which enhances your quality o f life by letting you do shopping, dine at restaurants, pay your utility bills, transfer funds, withdraw and deposit cash through ATM anywhere, anytime. 3.2.3.3 .6 Travelers Cheques The range of their products and value added services enhanc es with introduction of Rupee Travelers Cheques (RTCs) launched in March 2002. 3 .2.4 Cash Department 22

The main function of this system is Receipts & payments to the customers, on beh alf of their account, through Cheques or any other negotiable instruments. All t hose transactions, which are held on the counter on cash basis lies under the ca sh department. The cash system mainly deals with following areas: Receipts Payme nts 3.2.4.1 Calculation of Ending Cash Balance The official time for receiving depos its and payments is till 5 pm. However some important customers is accommodated afterwards. The cash in hand is counted. It contains the cash at the counter and cash in the strong room. The opening balance is taken i.e. ending balance of pr evious day The receipts are added The payments are deducted This daily cash posi tion is written down on daily cash position book. 3.2.4.2 Liquidity Maintenance ABL has to maintain 35% liquidity at SBP. Every br anch maintains 5% of its deposits at the local SBP. But this 30% is kept in the form of Approved securities. For example: Foreign Investment Bills and Treasury Bills. 3.2.5 Clearing Department There is no legal obligation on a banker to collect ch eques drawn upon other banks for a customer. However, it is function of almost e very modern bank of collection of cheques and bills on behalf of the customers. Clearing department services are provided in order to make arrangements for the economic collection of cheques, DDs pay and other negotiable instruments. A large part of this work is carried on through the clearing house. 23

3.8 Accounts Department This is one of the most important departments in ABL. Th e bank daily transactions are recorded in computers, nowadays, so the function o f this department is to get a summary of all the transactions. The credit and de bit vouchers are arranged and saved for the record purpose. It also indicates, h ead office entries as clearing, transfer delivery etc. On the weekend it has to prepare the extract which is send to head office for reconciliation. Thus this d epartment will create a link between head office and branch office. The function s of Accounts department are as follows: Preparation of daily bank position Statement Checking Banks daily Activity Mainte nance of book of the accounts of head office. Salary disbursement and investment of staff. Arrangement of stationary for bank. Dealing with disposal of commerci al external audit reports and state bank of Pakistan instructions. Pre audit che cking of all bank transactions. 3.2.7 Credit card Department Credit card, card that identifies its owners as one who is entitled to credit when purchasing goods or services from certain establ ishments. When a credit card is used, the retailer records the name and account number of the purchaser and amount of the sale, and forwards this record to the credit card billing office. At intervals, usually monthly, the billing office se nds a statement to the card holder listing all the charged purchases and request ing payments immediately or installments. 3.2.7.1 ABL Offerings The bank is already offering credit cards like Master card s international in collaboration with international financial service organizati ons. Credit card issuing is an important activity that the most successful and m odern banks are doing and are generating profit from it. Credit cards are of two types 24

Master Card Visa Card ABL issues three types of Master Cards: 3.9.1.1 Local card This master card is issued for the amount of Rs. 25000/- and more. This local card operates on national level. 3.9.1.2 Silver Card This master card is issued for the amount of Rs. 35000/- and more. This is an international card which is acceptable all over the world. 3.9.1.3 Gold Card This master card is issued for the amount of Rs. 2,00,000/- an d more. This is an international card which is acceptable all over the world. Al l these three types of cards issued only to those individuals which hold account s in the bank. The bank also takes care that a sufficient amount of security, al most 125% of the amount of credit card. 3.10 Foreign Trade Department ABL has been authorized by State Bank of Pakistan (SBP) to have dealing in foreign currency. The foreign exchange departments prov ide facility of foreign currency accounts (FACs) to Pakistani citizen and foreig ners and facilitate its clients in foreign trade. This facility is provided in s hape of letter of credit (L.C), and guarantee by the bank to the exporters and i mporters. 25

CHAPTER 04 Financial Analysis of ABL 4.1 Introduction The importance of financial statement analysis lies in their utility to satisfy the question in the mind of stakeholders. Different classes of people are intere sted in the financial statements with a view to assessing the economic and finan cial position of any business or industrial concern in term of profitability, li quidity or solvency etc. Financial statements among other things include balance sheet and income statement. Balance sheet presents assets and liabilities of th e business at a given date. Besides showing the ability of the business to servi ce the loans on the strength of its financial structure and its profitability, h elps in judging the impact of financial and fiscal support. 4.2 Purpose of Financial Analysis The analysis of Financial Statements (FS) is to examine past and current financi al data so the companys performance and financial position can be evaluated and f uture risk and potentials can be estimated. The analysis can yield valuable info rmation about trends and relationship, the quality of a companys earnings, and it s financial strengths and weaknesses. 4.2.1 Analysis The financial data of ABL is analyzed in the following two ways ysis Ratio Analysis Common Size Anal

Common size analysis and ratio analysis are techniques that can be used to ident ify trends in financial statement; common size analysis is also useful in compar ative analysis, and some source of industry data. 26

4.2.2 Common Size Analysis Technique for identifying relationship between items in the same financial state ment by expressing all amounts as the percentage of the total amount taken as 10 0. For common size analysis two basic techniques are used. 1. Common Size Vertical Analysis Comparison with base amount with in the same ye ar. a. b. Vertical Analysis of Balance Sheet Vertical Analysis of Income Stateme nt 2. Common Size Trend Analysis Comparison with Base year a. Trend Analysis of Bal ance Sheet b. Trend Analysis of Income Statements 27

4.2.2.1 Trend Analysis of Balance Sheet Table 4.1 Trend Analysis of Balance Shee t 2006 ASSETS Cash and Balances with treasury bank Balances with other banks Len ding to financial institutions Investments Advances Operating Fixed Assets Defer red tax assets Other assets Total Assets LIABILITIES & OWNERS' EQUITY Bills Paya ble Borrowing from Financial Institution Deposits & other accounts Sub-ordinated loans Financial lease liabilities Deferred Tax Liabilities Other Liabilities To tal Liabilities OWNERS' EQUITY Share Capital Reserve Un-appropriated Profit Surp lus on Revaluation Total Owners' Equity Total Liabilities & Owners' Equity 100 1 00 100 100 100 100 149.9 119.4 119.1 11.5 110.9 110.4 202 131.8 17.1 65.2 117 12 5.54 % 100 100 100 100 100 100 -100 100 100 100 100 100 100 100 100 100 100 142. 8 117.3 108.49 99.95 64 123.6 109.6 140.5 101.5 127 99.91 1.76 182.82 124.65 200 7 % 89.76 47.68 172 137.7 101.6 135 145 110 2008 % 107.7 53.93 53.93 124.6 130 2 17 235 124 Source: Financial Statements of ABL for the year 2006, 2007, and 2008 are used 28

4.2.2.1 Trend Analysis of Balance Sheet 4.2.2.1.1 Percentage Growth in Assets and Liabilities Again the horizontal analy sis shows the same result as of vertical analysis. The total assets have increas ed to 110.% in 2006 to 124% in 2008. On the other hand total liabilities have in creased approximately in same ratio as to from 109.6% in 2006 to 124.65% in 2008 . The management focus on the non-current assets. The current liabilities have a lso increased with a greater proportion compare to long term liabilities. 4.2.2.1.1 Share Capital reserve and total Owner equity Share capital has increas ed from 149.9% in 2006 to 202% in 2008 which shows an increase in the value of b ank. Reserves have increased from 119.4% in 2007 to 131% in 2008 which is also g ood sign. The total owners equity has decreased from 110.9% in 2007 to 117% in 20 08 which is not good as it represents the growth of the bank. 29

Figure 4.1 Trend Analysis of Balance sheet of Year 2007 Cash and Balances with treasury bank Balances with other banks Lending to financ ial institutions Investments Advances Bills Payable Borrowing Deposits 180.00% 160.00% 140.00% 120.00% 100.00% 80.00% 60.00% 40.00% 20.00% 0.00% 2007 Figure 4.2 Trend Analysis of Balance sheet of Year 2008 Cash and Balances with treasury bank Balances with other banks 200.00% Lending t o financial institutions 150.00% Investments Advances Bills Payable 50.00% Borro wing 0.00% 2008 Deposits 250.00% 100.00% 30

4.2.2.2 Trend Analysis of Income Statement Table 4.2 Trend Analysis of Income St atement 2006 Markup/Return/Interest earned Markup/Return/Interest expensed Net Markup/Interes t Income 2007 120% 124 114 29 25 2008 145% 152 138 29 74 100% 100 100 100 100 100 100 100 100 100 100 100 Provision against non-performing loans and advances Provision for the impairment in the value of investments Bad debts written off directly Net mark-up/ interes t income after provision Non Markup/Interest Income Fee, Commission & Brokerage Income Dividend Income Fo reign Currency Income 57 82 104 125 112 2088 (138) 104 213.4 122 158 149 33 (1790) 106 126.5 Gain sale of investments-net Unrealized gain/loss on revaluation of investments 100 Other income Total Non-Markup/Interest Income Non-Markup/Interest Expenses Administrative Exp enses 100 100 100 100 100 100 100 100 100 100 100 144 196 144 69 10 -(-231) 119 177 178 177 13 2 -101 17 Provisions/write offs Other charges Total Non-Markup/Interest Expenses Profit before taxation Taxation current year Prior years Deferred Profit after t axation Source: Financial Statements of ABL for the year 2006, 2007, and 2008 are used 31

4.2.2.2 Trend Analysis Income Statement Analysis The horizontal analysis of the income statement of Askari Commercial Bank Ltd sh ows that the markup income is taken as 100% because it is the primary source and the real objective of the operations of the bank. 4.2.2.2.1 Markup Expenses Markup expenses have increased from 124% in 2007 to 152% in 2008 which shows the management disability control on financial cost. 4.2.2.2.2 Net Mark-Up Income/Gross Profit The net markup income/gross profit has reduced to 138% in 2008 from 114% in 2007 which is a negative sign and it is due to no control over markup expenses. 4.2.2.2.3 Non Markup/Non Interest Income Total operating income has decreased from 213.4% in 2007 to 126.5% in 2008 and w hich is a negative sign. The total non-markup interest expense has increased fro m 144% in 2007 to 177% in 2008. 4.2.2.2.4 Net Income Net income of the bank have shown a steep decline in 2008 a s it has drop down to 17% from 119% in 2007 and it shows a weak performance on t he management part. 32

Figure 4.3 Trend Analysis of Income Statement of Year 2007 250% Markup/Return/Interest expensed Net Markup/Interest Income 150% Total Non-M arkup/Interest Income Profit after taxation 50% 200% 100% 0% 2007 Figure 4.4 Trend Analysis of Income Statement of Year 2008 160% 140% 120% 100% 80% 60% 40% 20% 0% 2008 Markup/Return/Interest expensed Net Markup/Interest Income Total Non-Markup/Interest Income Profit after taxation 33

4.2.2.3 Vertical Analysis of Balance sheet Table 4.3 Vertical Analysis of Balanc e sheet 2006 % Assets Cash & Balances with treasury Banks Balance with other Ban ks Lending to Other Financial Institutions Investments Advances Operating Fix As sets Deferred Tax Assets Other Assets Total Assets Liabilities Bills Payable Bor rowings Deposits & other accounts Sub-ordinate Loans Financial lease liabilities Deferred tax liabilities Other liabilities Total Liabilities Owner's Equity Share capital Reserves Unappropriated profit Surplus on revaluation of assets- net of tax Total owner's equity 1.04 3.50 1.3 0.86 6.66 1.21 3.81 1.1.8 0.09 6.73 1.96 3 .71 0.14 0.45 6.29 8.96 4.42 5.05 17.24 59.69 2.29 2.29 100 1.11 9.01 79.40 1.81 -0.44 1.57 93.34 2007 % 7.33 1.92 7.93 21.64 55.32 1.11 3.04 100 1.44 9.64 78.5 2 1.64 0.0024 0.26 1.76 93.27 2008 % 7.77 19.1 2.17 17.3 62.4 4.1 4.34 100 1.25 7.36 81.3 1.45 -0.0062 2.308 93.70 Total liabilities & Owner's equity 100% 100% 100% Source: Financial Statements of ABL for the year 2006, 2007, and 2008 are used 34

4.2.2.3 Vertical Analysis of Balance Sheet A vertical analysis of balance sheet of Askari Bank shows that the Bank has financed its fixed assets more than the c urrent assets. And the assets have been financed mostly be long term liabilities and a little by capital which goes in the favor of owners. 4.2.2.3.1 Percentage Growth in Assets and Liabilities Cash and cash Balances wit h other banks have decreased from 8.96% in 2006 to 77.7% in 2008. Lending to fin ancial institution has decreased from 5.05% in 2006 to 2.17% in 2008. Investment s have almost remained same during the time, 17.24%in 2006 to 17.3% in 2008.Adva nces increased to 59% in 2006 to 62% in 2008. On the other hand current liabilit ies have increased more than the long term liabilities. Bills payable and borrow ings have increased 1.11% and 9.01% to 1.25 % and 7.36%. Deposits have increased from79% in2006 to 81.3% in 2008 and subordinate loans have decreased from 1.81% in 2006 to 1.45% in 2008. 4.2.2.3.2 Share Capital reserve and total Owner equity Share capital has increas ed from 1.04% in 2006 to 1.96% in 2008 which is good sign because it represents the increased profitability of the bank. Reserves have increased from 3.50% in 2 006 to 3.71% in 2008 which is also good sign. The total owners equity has decreas ed from 6.66% in 2006 to 6.29% in 2008 which is not good as it represents the gr owth of the bank. 35

Figure 4.5 Vertical Analysis of Balance Sheet Year 2007 Share Capital 1% Sub-ordinated loans 1% Total Owners' Equity Reserve 3% 2% 2007 Balances Cash and with other Balances with banks treasury bank Lending to financ ial 1% 4% institutions 4% Investments 11% Deposits & other accounts 40% Advances 28% Borrowing from Financial Institution 5% Bills Payable 1% Figure 4.6 Vertical Analysis of Balance sheet Year 2008 Share capital 1% Reserves 2% 2008 Sub-ordinate Loans 1% Total Cash & owner's Balances with equity treasury Banks 3% 4% Balance with other Banks 9% Lending to Other Financial Investments Institutions 8% 1% Deposits & other accounts 38% Advances 29% Borrowings 3% Bills Payable 1% 36

4.2.2.4 Vertical Analysis of Income Statement Table 4.4 Vertical Analysis of Inc ome Statement 2006 % Markup/Return/Interest earned Markup/Return/Interest expensed Net Markup/Interes t Income 2007 % 100% 57.35 42.65 25.89 0.99 2008% 100% 57.9 42.09 20.79 0.0027 1.34 100% 55.38 44.62 8.95 0.29 Provision against non-performing loans and advances Provision for the impairment in the value of investments Bad debts written off directly Net mark-up/ interes t income after provision Non Markup/Interest Income Fee, Commission & Brokerage Income Dividend Income Fo reign Currency Income 36.65 16.74 19.95 8.05 0.86 4.64 0.89 7.08 0.91 4.33 15.59 0.01 2.24 30.15 6.83 0.94 4.74 0.199 0.12 1.86 14.71 Gain sale of investments-net Unrealized gain/loss on revaluation of investments -0.02 Other income Total Non-Markup/Interest Income Non-Markup/Interest Expenses Administrative Exp enses 2.55 16.98 26.01 -0.05 26.06 26.56 7.80 31.62 0.08 31.70 15.19 0.65 -1.54 32.09 0.0024 0.06 32.16 2.50 0.094 -0.27 0.58 2.09 Provisions/write offs Other charges Total Non-Markup/Interest Expenses Profit before taxation Taxation current year Prior years Deferred Profit after t axation 0.89 17.86 0.89 17.70 Source: Financial Statements of ABL for the year 2006, 2007, and 2008 are used 37

4.2.2.4 Vertical Analysis Income Statement The vertical analysis of the income statement of Askari Commercial Bank Ltd show s that the markup income is taken as 100% because it is the primary source and t he real objective of the operations of the bank. 4.2.2.4.1 Markup Expenses Markup expenses have increased from 55.38% in 2006 to 57.9% in 2008 which is not a good sign. 4.2.2.4.2 Net Mark-Up Income/Gross Profit The net markup income/gross profit has reduced to 42.09% in 2008 from 44.62% in 2006 which is a negative sign and it is due to no control over markup expenses. 4.2.2.4.3 Non Markup/Non Interest Income Total operating income is 16.98% in 2006 and 30.15% in 2007 and 14.71% in 2008, which is a negative sign. The total non-markup interest expense have increased f rom 26.06% in 2006 to 32.16% in 2008. 4.2.2.4.4 Net Income Net income of the bank have shown a steep decline in 2008 a s it has drop down to 2.09% from 17.86% in 2006 and it shows a weak performance on the management part. 38

Figure 4.7 Vertical Analysis of Income Statement Year2007 Profit after taxation 12% 2007 Total NonMarkup/Interest Income 20% Markup/Return/I nterest expensed 39% Net Markup/Interest Income 29% Figure 4.8 Vertical Analysis of Income Statement Year2008 Total NonMarkup/Interest Income 13% 2008 Profit after taxation 2% Net Markup/Interest Income 36% Markup/Return/I nterest expensed 49% 39

4.3 Financial Ratios Analysis Financial ratio is a ratio of two selected numerical values taken from an enterp rises financial statements. There are many standard ratios that are used to try t o evaluate the overall financial condition of a company. Financial ratios may be used by managers within a firm, by current and potential shareholders (owners) of a firm, and by a firms creditors. Security analysis use financial ratios to co mpare strengths and weaknesses from various companies. While conducting the anal ysis of Askari Bank I will use two set of ratios and will try to portray the fin ancial health of the bank. The following ratios will be used for analysis purpos e. Profitability Ratios Profitability Ratios Profitability ratios are a measure that indicates how well a firm is performing in terms of its ability to generate profit. Here are some r ation are given below for the purpose to make inference on the basis of these ra tions 40

4.3.1 Profitability Ratios of ABL Table 4.5 Profitability Ratios of ABL Profitability Ratios 2006 2007 2008 Net interest margin 5,619,608 6,457,617 7,742,594 Operating profit margin Credit to Deposit Ratio Cost to income ratio Return on A ssets(ROA) Return on Earning Assets Equity to Total Assets Earning Assets to Tot al Assets Loan Loss Coverage Ratio NIM to Average Earning Assets 26.56% 15.18% 2.50% 75% 146% 1.35% 1.87% 70% 179% 1.47% 1.71% 76.8% 1531% 0.18% 0.25% 5.79% 76.97% --6.64% 76.97% -4.819% 5.83% 79.77% 1733% 5.08% Source: Calculated from the Financial Statements of Year 2006,2007, 2008 41

4.3.1.1 Net Interest Margin Net interest margin is the difference in mark up int erest earned and mark up interest expensed. Net Interest Margin 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 0 2006 2007 2008 Net Interest Margin 4.3.1.2Operating Profit Margin Ratio Operating profit is a ratio of Profit befor e Taxes and Markup/ return interest earned. It is also showing reduced performan ce of the bank. It has reduced from 26.56% in 2006 to 2.50% in 2008. Operating Profit Margin Ratio 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2006 2007 2008 Operating Profit M argin Ratio 42

4.3.1.3 Credit to Deposit ratio Credit to deposit ratio also depicts the varying performance by the bank. It is ratio of Advances and Deposits. CD ratio is 75% in 2006 and 76.5% in 2008. It me ans corporate customer credibility has increased during time. Credit to Deposit Ratio 78% 76% 74% 72% 70% 68% 66% 2006 2007 2008 Credit to Deposit Ratio 4.3.1.4 Cost to Income Ratio Cost to income ratio is showing an increased tenden cy. The cost is increasing in a greater proportion as compare to income. Cost to Income Ratio 20 15 10 5 0 2006 2007 2008 Cost to Income Ratio 43

4.3.1.5 Return on Assets (ROA) This ratio comparatively gives not a good picture of the bank. It has reduced tremendously in 2008 to 0.18% from 1.35% in 2006. Return on Assets(ROA) 2.00% 1.50% 1.00% 0.50% 0.00% 2006 2007 2008 Return on Assets(ROA) 4.3.1.6 Return on Earning Assets This ratio of Return on Earning Assets is calcu lated by dividing Net Income by Average Earning Assets. Earning Assets include L oans, Leases, Investment securities and money market assets. It excludes cash an d non-earning deposits and fixed assets. Return on Earning Assets 2.00% 1.50% 1.00% 0.50% 0.00% 2006 2007 2008 Return on Earning Assets 44

4.3.1.7 Equity to Total Assets This ratio is calculated by dividing equity porti on of balance sheet to total assets. The ratio had almost same performance in ye ar 2006 and 2008 i-e 5.79% and 5.83% Equity to Total Assets 6.80% 6.60% 6.40% 6.20% 6.00% 5.80% 5.60% 5.40% 5.20% 2006 2007 2008 Equity to Total Assets 4.3.1.8 Earning Assets to Total Assets Earning Assets to total assets ratio is c alculated for each of the particular year and it is ratio of two balance sheet i tems It was almost same in year 2006 and 2007 i-e 77% but the ratio showed risin g trend in 2008 to 79%. Earning Assets to Total Assets 80.00% 79.50% 79.00% 78.50% 78.00% 77.50% 77.00% 76.50% 76.00% 75.50% 2006 2007 2008 Earning Assets to Total Assets 45

4.3.1.9 NIM to Average Earning Assets Net interest margin to earning assets rati o is calculated by Net mark-up income to average earning assets of consecutive t wo years. This ratio has reduced from 2.7% in 2006 to o.25% in 2008. NIM to Average Earning Assets 5.10% 5.00% 4.90% 4.80% 4.70% 4.60% 2007 2008 NIM to Average Earning Assets 4.3.1.10 Loan Loss Coverage Ratio This ratio shows asset quality and the level o f protection of loans and is calculated as Pretax income + provision for loan lo sses / debts written off. loan Loss coverge 1800% 1600% 1400% 1200% 1000% 800% 600% 400% 200% 0% 2006 2007 2008 loan Loss coverge 46

4.4 SWOT Analysis SWOT analysis is one of the most expedient technique or tool used in the Strateg ic Management process for conducting the situation analysis of an organization. The proper analysis of the firm is given in the form of Strengths, Weaknesses, O pportunities and Threats (SWOT) the company presently facing or can be forecaste d for the future. It is a common approach to make assessments in terms of intern al and external environment of the organization, and to formulate strategies ana lyzing its internal strengths and weakness, external opportunities and threats, coming up is the SWOT analysis for the ABL: 4.4.1 Strengths Firstly we analyze the Strengths of the ABL that are as follows: Computerization The main strength of Askari Bank Limited is that all of its branches are fully c omputerized and they have latest softwares available to keep the records of their customers account and other important information up-to-date. It reduces manual work and provides good customer services. Well-knitted branch network ABL has a well-knitted and adequately equipped branch networking system that eff iciently covers both the domestic and international markets. ABL has the largest branch networking in Pakistan. Largest Private Bank ABL is one of the largest private banks with deposit base of Rs.167.68 billion/showing constant growth over the period 1999 till day and with many online bran ches in major cities of Pakistan. Competent Staff 47

Strength of Askari Bank Limited is that it has staff which is well qualified and capable of performing the task because of their expertise and training in the f ield Customer's Feedback Customers are allowed to give suggestions regarding banking services. If there i s any complaint by the customer the bank authorities investigates the reasons fo r complaint. Complaint monitoring system is excellent at Askari Bank that shows bank values more to its customers. International markets ACBL is actively participating in international markets and has recently introdu ced credit cards in UAE, Bahrain and Qatar, being backed by 24 hours call center out of UAE. The ABL ATM Switch-Net I.T group of ABL has been able to create the largest network for secure electron ic financial transactions in Pakistan. Information System Askari Bank has also invested heavily in information technology resources, which has now allowed bank to develop one of the most comprehensive and advanced syst em available. With the help of this system Askari bank has now achieved an online status via real time facilities and features available through nationwide networ k. With the team of highly qualified professionals, Askari Bank is able to use i ts real time system resources to provide customers with comprehensive account of their transaction on a daily basis. ABL is one of those few banks who are reapi ng the benefits of electronic transaction Leadership in ATM's With over 186 ATMs and 106 online branches ABL is again an undoubted industry le ader with connectivity extended to above than twenty five cities of Pakistan. AB L ATMs not only serve 24 hours cash convenience but also improve on the counter services and turnaround time at cash counters. 48

Worldwide master card The ABL ATMS Master Card has become a global service furthering the convenience to the customers. Traveling customers can access their accounts from a large num ber of internationally deployed ATMs and point of sale unit. 4.4.2 Weakness Secondly we analyze the Weakness of the ABL that are as follows: Due to risks such as political economy and legal the bank has suffered losses th e main reason was piling up to of large amount of irrevocable debts. The bank st ill has traditional ways of operations in this advance technological environment . For example account opening registers, manual checking of vouchers.

Accumulated losses pushed the bank to cut down its promotional activities in ord er to reduce expenses for last few years. Although the bank has computerized acc ounting system, but still bankers make their entries in accounting register manu ally. In Askari Bank the individual difference has strong impact on the organiza tions performance due to wrong criteria of selection of employees. So with the pa ssage of time individual differences start increasing which undermine the goodwi ll of the organization.

The advertising media used by Askari bank for publicity include mostly newspaper s and journals. But the most powerful and effective media is of television throu gh which people in Pakistan as well as outside Pakistan can have instant informa tion about new products and developments of ABL

No availability of sophisticated equipments in branches and lengthy credit proces sing and documentation procedures. 4.4.3 Opportunities Thirdly we analyze the Opportunities of the ABL that are as follows: 49

ABL as a largest Pvt. Bank can increase it market share by producing good, marke t oriented and customer needs satisfying products. Askari Bank is now looking in to new ways of providing banking services to its customers. New concept of mobil e banking has been introduced by the bank, which will prove to be remarkable suc cess in the field of consumer banking.

Customer feedback on different products and accounts have really improved the ba nk performance and encouraged the atmosphere for other future policies.

Askari bank is an active player in the loan business. Its strength in loaning st ems from its ability to forge strong relationships not only with borrowers but a lso with bank investors. Bank can capture more markets by introducing new produc ts for business community, as it is the only group, which can contribute more to wards increasing the assets of the bank.

Foreign remittances are another area as present worldwide control system over tr ansfer of currencies through illegal channels has facilitated the area for the b anks.

There is a large pool of free MBA graduates who can be hired to achieve professi onalism on its organizational culture.

Now computer literacy rate is increasing and its really big opportunity for Aska ri Bank that when public will have more knowledge about computers than they will be more attractive to the innovative products of Askari bank.

Increase the product range to fulfill customer requirements and ATM network, ABL can expend its 24 hours cash facilities to other cities of the country in order to meet growing market demand. 50

ABL also has an opportunity to expend its new technological advancement like, Te le banking and Internet banking facilities in order to serve the customers more efficiently.

Due to efficient and experienced management group. ABL can also improve well and expend its foreign operation successfully.

Increasing need and potential of leasing in Pakistan provide ABL an opportunity to utilize its skills and efficiencies in leasing business as well. 4.4.4 Threats Finally we analyze the Threats of the ABL that are as follows: As the ABL leading in the domestic commercial banking sector in Pakistan, as suc h no any close competitors of ABL but every commercial bank is the competitors f or each other. But mainly these are Habib Bank Limited, Bank AlFalah, MCB etc. t hey are threats for ABL. At any time they can capture the clients of ABL by prov iding any benefit more than that.

Political instability is also threat for the bank because instability leads to l ower business. The same situation is prevailing in Pakistan.

In our county, the rate of inflation is increasing along with the unemployment. So due to increase in price of the products, the savings of the nation is decrea sing with passage of time. So it is threat for the banking sector. In the future , the deposits of the bank will decrease.

ABL is giving higher rate of return to their clients on various certificates lik e, Defense saving certificate etc. Being a private commercial bank it should ear n more than that of nationalized banks. 51

Increase in competition due to increasing number of foreign banks offering highl y specialized and attractive services.

Growing global technological advancements and adaptation of modern style of mana gement in banking sector.

Extensive promotional campaigns run by competitors. It is always threat for commercial banks. Because SBP is the role authority of G overnment, which monitors all commercial banks affairs, whenever it feels any re gulation, it imposes without consideration of commercial banks plans etc.

Growing concept of Islamic banking in Pakistan economy can be a serious threat t o ABL so they should start their Islamic banking in Abbott Abad branch as well. The SWOT analysis is a mirror image of the banks present conditions. The managem ent can elaborate strategic plans for capitalizing the available opportunities. ABL is continuously introducing new innovative products so as to cope with chang ing environment. It has a diversifiable culture. It has been leader of introduci ng many new ideas, products which are earning a lot for the bank and this strugg le is still continuous with same acceleration. No bank has given such a comprehe nsive motive so if we want to look at the future of Askari bank they are going t o touch new horizons of technology. 52

CHAPTER 05 Recommendations and Conclusion Findings and Recommendations are considered to be the most important part of int ernship report, without which no report is considered complete and meaningful. T his part of report is based on the previous sections i.e. review and analysis. M oreover, for bringing suggestions, discussions have been conducted with the staf f of ABL officers, who not only provided the basis for recommendations but also pointed out some areas, where the change for the development is utmost important . Realizing the importance of this section, efforts have been made to give feasi ble recommendations, which are categorized under the following headings. 5.1 Findings 5.1.1 Employee empowerment Bank recognizes its employees as the prime asset and key contributors to the performance of the bank and places great emphasis on the attraction, development, and motivation of its employees. 5.1.2 Better compensa tion packages During the year, the compensation package was substantially improv ed in order to Enhance employees motivation and loyalty. 5.1.3 Involvement of Hig her Management Whatever ABL have achieved would not have been possible without t he patronage and support of the manager, which is greatly appreciated and acknow ledged. 5.2 Recommendations 5.2.1 Generalization of Procedures The procedure for opening an account should be simplified. The account opening f orm should be self-explanatory and include translation in Urdu for those custome rs who are not well read since the fact cannot be ignored that many people do no t have a good understanding of English. 53

5.2.2 Human Resource Department The importance of manpower cannot be denied in a ny organization. In case of banks it is the most valuable asset, because the ban k is most sensitive organization and to be in harmony with this sensitivity, nee d for proper human resource is felt badly. 5.2.3 Basis for Promotion A sizeable promotion of the officers of ABL, are promo ted in without test and interviews of officers cadre. The promotion policy must be too tight and transparent that no one may have the chance to promote on crite ria other than required qualification, experience and performance. As for presen t excess staff, those not found up to the required criteria may be given GHS etc . 5.2.4 Management Chances On Merit In ABL, though vary rare fresh recruitment are made, and the bank faces saturation in personnel, now clipping will be more hel pful. The downsizing will leave the ABL with the staff, to be retained on the ba sis of ultimate meritocracy with zero tolerance of incompetence. Now in this rem aining workforce, a cultural change right from the top management down to the fr ontline, that better suits to present day needs of banking environment could be included through proper discipline and training. 5.2.5 Needs of Change in Recruitment Policy It is important to say that the exte rnal level market is full of required talent like MBA, M.COM. But on the country only graduation with simple subjects is still requisite qualification for offic ers cadre, which has already worked amply in the devastation of ABL. Therefore th e recruitment qualification to the officers frame work should be enhanced for si mple graduation, to professionally qualified preferably masters in their respect ive fields. 54

5.2.6 Delegation of Powers Delegating powers to the department in-charges up to the possible extent will most certainly reduce the workload on the managers and they would be able to perform well by taking quick remedial actions where necess ary. Besides, the spare time will be spent dealing with matters of more importan t nature. 5.2.7 Development of Managerial Leadership In services industries like banks the need of managerial skill is much more important. It makes positive contribution towards effective results. Without development of managerial leadership, the ef fective utilization of the human resource will be impossible. ABL should also fo cus on this area and should avoid deficiencies in managerial leadership by apply ing modern style of management. 5.2.8 Computer Trainings The present conventional and orthodox training programs need to be made more comprehensive and reinforce with inclusion of computer tra ining process. 5.2.9 Incorporated Marketing Strategy All the officers in the deposits departmen t should be involved in the marketing and not just opening accounts and maintain ing their records. This can be done through improving their personal relation sk ills of visiting the potential customers and convincing them to open accounts wh enever wherever possible. 5.2.10 Change in Appraisal System To present performance appraisal system is goo d. However, it needs to be implemented in true sense. The drawbacks that are obv ious like nepotism and favoritism etc., needs to root out and the culture of ult imate meritocracy in appraising needs be inculcated. 5.2.11 Credits and Advances Department The defaulted loans have showered the pro cess of development of banking sectors in Pakistan and have reduced the lending capacities of banks. In result of which economic 55

growth has reduced and rate of industrialization has become lowered. Defaulted l oans being the major cause for this depression, various suggestions and recommen dations have been given with focus on ABL to overcome the drawbacks of this depa rtment. 5.2.12 Guidance for Risk Management Exclusive mandatory training concerning all possible aspects like financial management and organizational management is requ ired to be develop and designed to achieve Risk assessment ability Understanding of all legal matters Early detection ability Ability to develop and suggest sou nd strategies when needed. 5.2.13 Fake Financial Presentation by clients Banks should confirm that the prov ided figures by borrowing organizations are fairly audited and that the auditors are on the approved list of the bank and they have clear opinion about the affa irs of company and nothing has been made secret. 5.2.14 Poor Management A large number of industrial units and projects became si ck because of poor management. When a business become sick or fails it is unable to return the loans, it has taken, and as a result such loans become bad debts, to avoid this, it is the responsibility of ABL, to ensure that the company to w hich loan is sanctioned enjoys good management skills and reputation. This can o nly be confirmed, if the bank assesses the management of borrowing party by taki ng care of i. ii. iii. iv. v. vi. Length and type of experience Qualification and integrity Management style SWOT analysis Financial procedures and documentation followed by employees Span of au thority and responsibility 56

vii. Decision making skills of employees 5.2.15 Proper Documentation Loans become irrevocable through court of law in cas e of default when the bank fails to prove their claims against delinquent borrow er. If documents are obtained clearly as per terms of the loan it is not difficu lt for the counsel to get the decree against the defaulter. For proper documenta tion all the possible steps must be kept in mind. 5.2.16 Administrative Reforms Fast resolving of loan default cases is must. The bank should plan to enhance its ATMs and Internet Banking Services with new features like inter-branch funds transfer, and the payment of utility bills.

The future focus of the ABL should be to improve the automation of the accountin g processes and enhance the quality and effectiveness of MIS.

The ABL should increase press coverage and advertising to create effectively mar ket its corporate as well as product/Brand image.

The marketing policies and strategies must be clearly written and communicated t o all the staff members. The Branch Managers must make the use of the staff in p ursing the organizational objectives.

The Bank must reshape its portfolio of business by investing in higher growth ar eas, extending and developing its core competencies and moving out of week and n on-core segment. 57

5.3 Conclusion Banking sector has adopted new techniques with the passage of time in order to c ompete in this world. ABL is one such bank that is successfully operating in its field. A system of regional management is in place to ensure the improvement in productivity. They are alive to the expectations of the customers. It is moving towards its goals. It has won many awards in the banking world. It achieves its target and playing active role in social sector as well. It is successfully cre ating the relationship with the nation. The performance of the bank is improving with the time. Its profitability has shown improvement over years, but still it requires improvement in infrastructure and technology. The bank aims at a prosp erous future by inspiring relationship and work for the betterment. 58

References Annual Reports of ABL; 2006-07, 2007-08 Aslam, S (1999); Banking & Finance. Abbo ttabad. Hussain, S; Rana,K & Shabbir, A (1991); Banking Currency and Finance. , Lahore: Ilmi Kutab Khana. Iffland, Charles & Langueton, Pierre (1996); Internati onal Banking. New York: Irwin Book Co. Mr. Sardar Arif, Branch Manager, Abbottab ad Branch, ABL. Siddiqui, Asrar H(2007) ; Practice and Law of Banking in Pakista n: 8th edition Royal Book Company, Karachi. www.askaribank.com.pk (Accessed Dece mber 27, 2009) www.askaribank.com.pk/Reports (Accessed January 15, 2010) 59

Annexure A 60

Annexure B 61

Annexure C 62

Annexure D 63

Chief . DeputyFinance Foreign DeputyDeputyDeposit Cash Manager/ DeputyChief Bill Department Currency Department Chief Chief (Branch Chief and . Accounts .Accoun tant Cash Finance Manager) Control & Department Remittance Managemen . t 64