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ACKNOWLEDGMENT

All gratitude and thanks to almighty ALLAH the gracious, the most merciful
and beneficent who gave me courage to undertake and complete this task. I am
very much obliged to my ever caring and loving parents whose prayers have
enabled to reach this stage.
I am grateful to almighty ALLAH who made me able to complete the work
presented in this report. It is due to HIS unending mercy that this work moved
towards success.
I am highly indebted to my course instructor Mr. Abdul Jabbar for providing me
an opportunity to learn about the Banking system of Allied Bank Limited" which
is vital ingredient of M.com program. I am very great full to my teachers for
providing me guideline for the completion of this report.
I feel great pride and pleasure on the accomplishment of this report.

TABLE OF CONTENTS

ACKNOWLEDGMENT.....................................................................................................1
TABLE OF CONTENTS.....................................................................................................2
EXECUTIVE SUMMARY.................................................................................................4
CHAPTER# I.......................................................................................................................6
INTRODUCTION OF THE STUDY..................................................................................6
1.1 BACK GROUND OF THE STUDY....................................................................6
1.2

PURPOSE OF THE STUDY................................................................................6

1.3

SCOPE OF THE STUDY.....................................................................................7

1.4

RESEARCH METHODOLOGY..........................................................................7

CHAPTER # 2.....................................................................................................................9
INTRODUCTION TO BANKING AND............................................................................9
ALLIED BANK LIMITED.................................................................................................9
2.1 ORIGIN OF BANKING.......................................................................................9
2.2

HISTORY OF BANKING....................................................................................9

2.3

DEFINITION OF BANKING............................................................................10

2.4

DEVELOPMENT OF BANKING IN PAKISTAN............................................11

2.5 BRIEF HISTORY OF ALLIED BANK LIMITED.................................................12


2.6 FUNCTIONS OF ALLIED BANK LIMITED........................................................14
2.7 ORGANIZATIONAL STRUCTURE......................................................................16
2.8 MANAGETMENT HIERARCHY..........................................................................20
2.9

ORGANIZATIONS & FUNCTIONAL CHART.............................................21

CHAPTER NO 3...............................................................................................................29
WHAT I LEARNED AT ABL WARSAK ROAD BRANCH...........................................29
1 REMITTANCE DEPARTMENT................................................................................29
2 GENERAL BANKING..............................................................................................30
3.ACCOUNT DEPARTMENT......................................................................................39
CHAPTER 4......................................................................................................................42
CRITICAL ANALYSIS.....................................................................................................42
4.1 FINANCIAL ANALYSIS........................................................................................42
4.2 RATIO ANALYSIS.................................................................................................43
4.2 SWOT ANALYSIS..................................................................................................47
STRENGTH WEAKNESSES OPPORTUNITIES & THREAT...............................47
CHAPTER 5......................................................................................................................54
CONCLUSION AND RECOMMENDATIONS...............................................................54
5.1 CONCLUSION...................................................................................................54
5.2

RECOMMENDATIONS....................................................................................55

REFERENCES..................................................................................................................57

EXECUTIVE SUMMARY
As per requirements of the University of Peshawar, the students completing the
M.COM course are required to submit the Internship report. During internship, the
banking various transaction was observed. The report has been written with reference to
all activities being conducting in Allied Bank.
The purpose of the study is to evaluate the working of the branch and assess the day to
day transaction. The evaluation is done in order to find out the problems in the working
of the bank affairs. The recommendations are based on the analysis of the data collected
during Internship both from primary and secondary data sources.

Allied Bank was established as a result of merger of four banks namely Australasian
Bank, Lahore Commercial Bank, Sarhad Bank and Pak Bank. The bank was disinvested
in 1991 and become the first ever bank in the world to be owned by its employees. The
bank has vast network of branches in Pakistan. The functional structures of the bank have
been divided under four provincial chiefs. The activates are further organized in zonal
and circle offices.
The management and organizational structures of ABL is in conformity with
organizational structure of other nationalized banks. This is because of face that ABL was
once operating in public sector. The board of directors is the main controlling body
looking the affairs of the bank. The Board consists of president, being nominated by the
government and 9 other directors.
The bank like other commercial banks has basic objectives of mobilization of resources
and reinvesting them in profitable avenues. In order to achieve this objective, the bank

has developed innovative schemes in order to attract the depositors. Allied Bank has been
successful in out playing other banks as far as innovations in deposit schemes are
concerned. Allied Bank has been able to locate opportunities in order to reap the benefits
of its liquidity. There are various functions involved in securing deposits and reinvesting
them for obtaining profit. Allied Bank has organized the departments in such a way that
the banking functions are done smoothly.
The remarkable operations of the bank are evident from its financial and operational
results as indicated in its audited accounts for the year ended 99.9. The board has
declared gross profit of Rs. 3.8 billion deposits his fact that economy of the country was
sluggish during the year. The bank has anticipated in self-employment scheme for
promotion of small and medium size industries in Pakistan. Total assets of the bank have
also increased during 2013 & 2011, which represent stable operations of the ABL.
The bank has, however some deficiencies, which need to be, tackle. Some if those can be
attributed to the overall environment of the bank where are some deficiencies are
specified to Allied Bank. The SWOT analysis has lower indicated that the bank is at
advantageous position. The Allied Bank has the required expertise to put the operations in
right direction. Proper attention if these issues will be the starting point. The bank is
capable enough to take care of the gray areas.

CHAPTER# I
INTRODUCTION OF THE STUDY
1.1

BACK GROUND OF THE STUDY

This study is carried out to familiarize the students with the working of an institution
and the environment of that institution to produce a comprehensive report on it. The
study undertaken is conducted, in ABL Warsak Road Branch Peshawar as a financial
institution.
Analysis is done from its financial tool and its operational aspects, while
recommendations are given, to cover those loopholes, which exist in the operations of
Allied Bank.

1.2

PURPOSE OF THE STUDY

This study is a pre-requisite for the completion of the Master in Commerce course at
management sciences department of Peshawar City Institute of Modern Sciences
Peshawar. The other purposes to conduct this study include:
i) Gathering the relevant information about ABL.
ii) To observe, analyze and interpret the relevant data.
iii) To work practically in an organization.

1.3

SCOPE OF THE STUDY

Internship at ABL was an excellent chance to understand how a bank operates. The main
focus of my study was on financial analysis and SWOT analysis in one of the branches of
ABL. Similarly different aspects of overall situation of ABL are also covered in this
report.

1.4

RESEARCH METHODOLOGY

The methodology of the report for collection of data is primary as well as secondary. The
biggest source of information is my personal observation while working with staff and
having discussions with them. Formally arranged face to face interviews and discussions
also helped me in this regard.

1.4.1 Primary Data


The sources for primary data collection are as follows:
i) Personal observation.
ii) Interviews of staff.
iii) Discussion with officers.

1.4.2 Secondary Data


The sources for secondary data are as follows:
i. Manuals.
ii. Journals.
iii. ABLs own half yearly magazine.
iv. Others magazines.
v. Annual reports.

CHAPTER # 2

INTRODUCTION TO BANKING AND


ALLIED BANK LIMITED
2.1

ORIGIN OF BANKING

There are different opinions about the origin of the word Bank. According to some
authors the word Bank is derived from the Banco or Bancus which means a bench.
It was due to the fact that the Jews merchants in Liambordy transacted their business of
money exchange on benches. if the business of any merchant failed, the people destroyed
his Banco. From this practice the word Bankrupt has evolved. According to another
opinion, the word Bank is derived from the German word Back which means joint
stock fund. Later on this word Back was initialized into Bank or Banke.

2.2

HISTORY OF BANKING

As regards the growth of modern commercial bank, it can be traced as early as 600 BC.
G. Crowther in his famous book, An Outline of Money, has traced the history of
modern English commercial banking. According to him, the present day banker has
three ancestors; (1) the merchants (2) the goldsmiths and (3) the moneylenders.
2.2.1 The Merchants
The earliest stage in the growth of banking can be traced to the working of merchants. These
merchants were traders in commodities. They carried on the trading activities from one place
to another. It was risky for the traders to keep money with themselves for payment. The
traders with high reputation began to issue receipts, which were accepted as titles of money.
These receipts or letters of transfer also called hundi in Indo Sub- Continent were the first
mode of payments. The merchants banking thus forms the earlier stage in the evolution of

modern banking.
2.2.2 The Goldsmiths
The second stage in the growth of banking is normally traced to earlier goldsmiths. These
goldsmiths also called Seths in India used to receive gold and silver for safe custody. The
goldsmiths began to issue receipts for the metallic money (gold and silver) kept with
them. These receipts with the passage of time became payable to the bearer on demand.
In this way the goldsmiths note, become a medium of exchange and a mean of payment.
The goldsmiths, thus, can rightly be termed as the introducer of the modern bank note.
2.2.3 The Moneylenders
The third stage in the development of banking arose when the goldsmiths became the
moneylenders. By experience the goldsmiths (who were called money lenders) came to
know that they could keep a small proportion of the total deposits for meeting the
demands of customers for cash and the rest they could easily lend. In Economic
terminology, we can say that they allowed the overdraft facilities to their depositors.

2.3

DEFINITION OF BANKING

Like many other subjects and social sciences no precise definition can be given from the
study of banking also. Different authors have defined and described this subject, keeping
in view the particular functions and modern banking, but the basic idea is the same.
Banking has now become a multi-service organization with wider scope and area of its
influence. However, different writers give the following definitions of bank from time to
time.
Mr. Gilbert says, Bank is a dealer in capital or more peculiarly in money. He is an

intermediate party between borrower and lenders.


Mr.Kinly says, Bank is an institution which receives deposits and advances loans.
The definition in the banking companies Act 1962 is Bank means a person, transacting
the business of accepting for the purpose of lending or investment, of deposits of money
from the public repayable on demand or otherwise and withdrawal by cheques, drafts or
orders or otherwise and includes any post office saving Bank.

2.4

DEVELOPMENT OF BANKING IN PAKISTAN

Like any other institutions, at the time of freedom of Pakistan in 1947, it inherited a poor
and weak system of banking. It was due to the fact that most of the important sectors of
the economy including banking was controlled by Hindu nation. At the time of partitions,
these non-Muslim bankers transferred the bank resource to India. Bank staff mainly
consists of non-Muslim and also migrated to India. At the time of independence, there
were only two Pakistani Banks, i.e., Habib Bank Limited and Australasia Bank. At this
stage, Pakistan had 631 branches of scheduled bank and 411 offices of non-scheduled
banks. Even from these branches the money and other financial resources were
transferred to India because their Head Office were located in India, which also badly
affected the banking business of the country at early stage.
It was not possible to setup the central bank immediately after independence hence it was
agreed to act reserve bank of India as central bank of Pakistan till 30 th 1948. But it failed
to safeguard the interest of Pakistans banking affairs. It was now felt that establishment
of countrys own central bank is only solution for the removal of financial difficulties and
for sound development of banking system in the country. As result of this, SBP, being the

central bank of the country was established on 1 st July 1948 inaugurated by Quaid-eAzam Muhammad Ali Jinnah, the first Governor General of Pakistan. SBP in addition
to its normal duties as a central bank played a very important role in the development,
controlling modernizing the banking system of the country. With the development, now
commercial banks with countrywide branches were established. Sooner they extended
their branches to the foreign countries. Moreover specialized in financial institutions like
ADBP, PICIC, NDFC, HBFC, IDBP were also created to help and finance the particular
sectors of the economy like industry, agriculture and housing.

2.5 BRIEF HISTORY OF ALLIED BANK LIMITED


Commercial banks are playing a vital role in the economic development of a country. At
the time of independence, Pakistan had only 487 branches of commercial banks, which
were further reduced to 196 as a number of branches of different banks shifted to India or
U.K. At the time of independence there were two main banks of Muslim community i.e.
Habib Bank Limited and Australasia Bank Limited remained with Pakistan and took over
the task of development of banking in Pakistan.
Australasia Bank Limited was the first Muslim Bank, which was established on the soil
of Pakistan on December 3, 1942. Under the Banks (Nationalization) Act 1974, all
commercial banks were nationalized. Due to its three regional banks namely Sarhad
Bank, Pak Bank and Lahore Commercial Bank were merged into Australasia Bank with
effect from 1st July 1974, and was renamed as Allied Bank of Pakistan Limited. On
September 12, 1991 Allied Bank became the worlds first bank to be owned and managed
by its employees. Allied Bank has a domestic network of 756 branches, About 60
domestic branches of the bank spread all over the country are authorized to deal in

10

foreign exchange. There is a network of 59 foreign correspondents of the banks all over
the world.
In the domestic field operations, ABL has established its presence all over the country. Its
field operation is one of the most extensive among the leading banks in Pakistan. Every
province has a provincial chief usually a SEVP (Senior Executive Vice President) who
overlook the operations of ABL in that particular province. Islamabad and Gilgit regions
are with Punjab province and Kashmir region with KPK province. Under the provincial
chief is the General Managers, who are either EVP (Executive Vice President) or SVP
(Senior Vice President). The number of General Managers depends upon the complexity
and extensiveness of the field operations in the province.

2.6 FUNCTIONS OF ALLIED BANK LIMITED


Functions of ABL are summarized below:
2.6.1 Accepting Deposits
The primary function of the commercial bank is to receive surplus balances of
individuals, public houses and institutions and to honor cheques drawn upon them. The
funds deposited with Allied Bank are as follows:
(a) Current deposits.
(b) Profit and Loss Sharing Account (Saving).
(c) Fixed Deposits.
2.6.2 Financing

11

The other important function of the ABL is to provide finances to the individuals and
business houses against securities at a certain fixed rate of interest. ABL tried to attract
the idle funds of the public and lend them at higher rate of interest then what they pay to
their customers following four types of financing takes place at ABL:
Demand Finances.
Running Finances.
Cash Finances.
Fixed Asset Financing.
Fixed asset finances are long-term finances. These are provided to projects for purchase
of machinery and cost of purchase.
2.6.3 Agency Services To Customers
Following are the agency services to ABL: i. Collection of Cheques.
ii. Collection of Dividends.
iii. Purchase and Sale of Securities.
iv. Execution of Standing Instructions.
v. Transfer of Funds.
vi. Acts as an Agent.

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2.6.4 General Utility Services


ABL also performs a number of other general utility services to his client, which are as
follows:
i. Foreign Exchange Business.
ii. Acts as a Referee.
iii. Acceptance of Bills of Exchange.
iv. Issue of Travelers Cheques.
v. Collection of Utility Bills.
vi. Locker.
Mission
a) Provide High-Technology facilities to meet customers needs.
b) Provide reward to the employees according to their abilities and profession.
c) Provide value-added services.
Values

a) High Progress
b) Commitment with work
c) Bring innovation in services
d) Team-work
e) Usage of latest Technology.

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f) Provide satisfactory services.

2.7 ORGANIZATIONAL STRUCTURE


2.7.1 MANAGEMENT AND ORGANIZATION OF ALLIED BANK
LIMITED
The ownership, management and control of all the commercial banks were taken over by
the Government of Pakistan on January 1, 1974. The financially weaker banks were
merged with the banks, which had strong footing. As a result of merger of banks, five
major banking companies were formed.
The management and organizational structure of the nationalized commercial banks have
uniformity. We describe this structure in brief: 1 Board of Directors
In the management of the banks, the Board of Directors is at the top of the controlling
bodies. Since there are no private shareholders now, so there is no general meeting of the
shareholders and are no elected directors. The Board now consists of a nominated
President, a Secretary and 9 other members. After nationalization of Banks in 1974, most
of the powers of Board have been transferred to the Banking Council and Executive
Board. The Secretary of the Board presents the Annual Report of the Bank.
2 Executive Board
The general direction and supervision of the affairs of commercial banks lies in their
respective Executive Boards. The Federal Government appoints the President, Secretary
and 9 other members of the Executive Board.
3 Chief Executive

14

The President is the administrative head of a bank. He presides over the meetings of the
Executive Board, manages and controls the affairs of the bank. The president holds office
at the pleasure of Federal Government.
4 Divisional Chiefs
In order to improve the management and operation of a bank, it has been split up into a
number of divisions. Each Division of a bank placed under the supervision and control of
Divisional Chief or Senior Executive Vice-President (SEVP) or Executive Vice-President
(EVP).
For sound business purpose, the main divisions of a commercial bank are as under:
(1) International Division.
(2) Personnel Division. (HRM division)
(3) Inspection and Audit Division.
(4) Credit Division.
(5) Planning and Coordination Division.
(6) General Division.
(7) MIS Division (Now call IT Division).
(8) Central division
5 Provincial Chiefs
In order to improve the performance of the banking system, each bank has a Provincial
Chief. The Provincial Chief has the powers for sanctioning finance and other credit
facilities.

15

6 Circle Executive
Each commercial bank has a number of circles. They are placed directly under the
supervision and control of the Chief Executive. The Chief Executive is usually SVP or
VP.
7 Zonal Heads
Each circle is divided into a number of zones. These zones are administered by Zonal
heads that hold the costs of VP and AVP.
8 Branch Managers
Each zone of a commercial bank is divided into several branches. The control and
supervision of each branch is mostly entrusted to AVP or officer of class II. A few big and
financially sound branches are even administered by SVPS and VPS.

2.8 MANAGETMENT HIERARCHY

16

2.9

ORGANIZATIONS & FUNCTIONAL CHART

17

Chairman &
Chief Executive

Central Office

SEVP

PHQ
Sindh

2.10

Islamic
Banking

Div

SEVP

Business
promoti
on
marketi
ng dev

Admn &
HRM Div

PHQ
NWFP

Credit
monitori
ng div
divdivisi
on.

Recovery
Div

Audit
&
Inspecti
on Div

PHQ
Punja
b

Mainte
nance
engg
protocol

General
Service
Division

Custom
er
Service
Diviosi

PHQ
Baluch
istan

Agricult
ure &
SFD

Credit &
Corporat
e Div

Preside
nt
sectaria
n and
board
affairs

SEVP

10
circles
off dept

Researc
h and
dev

Credit
processing
division

Interna
tional
Div

Overse
as
Operati
ons

Finance
Div

Investm
ent
funds
div

Enviro
nment
protecti
on.

Trainin
g div
academ
ies

Legal
affairs
div

Sports
div H.O
Lahore

ORGANIZATIONAL CHART

18

EXECUTIVE COMMITTEE: Rashid M. Chaudhry

Chairman

MEMBERS: M. Saleem Sheikh

Member

S. Jauhar Hussain

Member

I.A Usmani (Retd)

Member

Naveed Masood

Member

Bilal Mustafa

Member

M. Saleem Khan Durrani

Member

Ashraf Hussain Qureshi

Member

SECRETARY: Umer Farooqui

Secretary

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2.11 BOARD OF DIRECTORS

1. Pervaiz Iqbal Butt

President & CEO

2. Abdul Aziz Khan

Chairman

3. Muhammad Aftab Manzoor

Director

4. Nazrat Bashir

Director

5. Sheikh Mukhtar Ahmad

Director

6. Sheikh Jalees Ahmad

Director

7. Muhannad Waseem Mukhtar

Director

8. Muhammad Naeem Mukhtar

Director

9. Mubashir A. Akhtar

Director

10. Farrakh Qayyum

Director

11. Tasneem M. Noorani

Director

20

2.12 BRANCH CHART OF ABL, WARSAK ROAD BRANCH

21

CHAPTER NO 3
WHAT I LEARNED AT ABL WARSAK ROAD BRANCH
I have done 8 weeks short internship and I have worked in only 3 departments which are;
Remittance, General Banking & Account Department, because the time was very limited
and banking sector is a very huge sector. ABL has various departments, which are
performing different jobs assigned to them. It has following six departments.
1. Cash Department.
2. Advances Department.
3. Remittance Department.
4. Foreign Exchange Department.
5. Bills Department.
6. CD Department.

1 REMITTANCE DEPARTMENT
The bank transfers a large proportion of money from one place to another or from person
to person. The department, which deals with transfer of money, is called Remittance
Department. Transfer of money takes place through the following bills of exchange.
i. Mail Transfer
ii. Telegraphic Transfer
iii. Demand Draft

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2 GENERAL BANKING
General banking means performing the daily routine works. General banking has the
various departments performing the various functions. These departments of general
banking are as follows:
3.2.1 Deposit Department
Allied Bank Limited accept the following types of deposits:
3.2.1.1 Current Deposit
The holder of this type of account is allowed to deposit or withdraw money as and when
he likes. Thus he may deposit or withdraw money several times in a day if he likes.
Businessmen and companies usually open this type of account. The bank does not give
any portion of profit to this kind of account holders. Current account can be opened with
minimum initial deposit of Rs.500/-.
3.2.1.2 Fixed Deposit
Allied bank also offered the fixed deposit account to its customers. In this type of account
the deposits are accepted for a period of maximum 5 to 7 years. A fixed interest is paying
on the deposits. If the customer wants to withdraw his amount then he will give a 7 days
notice to the bank.
3.2.1.3 Profit & Loss Sharing Saving Account
The commercial banks are accepting interest free deposits from January 01, 1982. Under
interest free system, PLS saving accounts are opened in proper introduction with sums
not less than Rs.500/- to individuals (single or joint) charitable institutions, provident and
other funds of local bodies; and in all other cases where the account are to be opened

23

under the order of a competent law.


PLS saving account having a running minimum credit balance of Rs.500/- would be
eligible for sharing profit/loss of the bank. The bank at the close off shall determine the
rate of profit or loss on PLS saving account each half-year. In its safe discretion and the
banks decision will be final. Zakat is also deducted from this account at the rate of 2.5%.
If the balance exceeds from deduction limit.
3.2.2 Account Opening Department
The opening of new account is the establishment of customer-bank relationship. By
opening an account at a bank, a person becomes a customer of the bank. Before a banker
opens a new account, he should ascertain whether or not the person desirous of opening
the account. The banker should determine the prospective customers integrity,
repeatability, occupation and the nature of account.
The business by the introductory reference given at the account opening negligence in
this informal preliminary investigation may result in serious consequences not only for
the banker concerned directly, but also for other bankers and the general public who is
affected indirectly.
3.2.2.1 Account of the Customers Individuals Accounts
An individual can open either PLS saving account or current Account. He can open the
account in any branch of the bank. When an individual deposit the initial amount he fill a
pay-in slip and deposit the initial amount to the cashier. The officer handling the
application, verify the form and ask the customer to come after one week, if he require a
chequebook. After one week the chequebook is given to customer & can handle his

24

account.
When an account is opened with a banker, the customer gives the banker a specimen
signature, on the specimen signature card. These cards are specially designed for this
purpose. The name of customers, and account number are entered on it. When a customer
brings his cheque to withdraw the money, the banker check his signature with the
specimen signature, and then issue the required amount. If the cheque signature is
different from the specified signature, the banker returned the cheque with remark
Signature Differs.
The main problems occur in the individual account are death of customer, Insolvency of
Customer.
3.2.2.2 Joint Account
These are the accounts of two or more persons who are neither partner nor trustee. When
such an account is opened, it is necessary that the banker should obtain clear directions as
to whether one or more of them shall operate upon the account.
3.2.2.3 Partnership Account
The account is to be operated according to instructions given at the time of opening the
account. Every partner in a firm has an implied power to bind his co-partners by drawing
and endorsing of cheques. The drawing, accepting, and endorsing of bills of exchange,
and making and endorship of partner has an Implied authority to countermined payment
of any cheque drawn on the firms account and the banker is bond to comply with the
instructions issued by that partner.
In addition, the account opening forms duly signed by all partners and the specimen

25

signatures cards containing the specimen signatures of true and authorised persons, and
allow the operations on the account under those signatures as long as the authority is not
terminated. When a banker receives a notice of death, retirement or dismissal of the
authorised person, they should stop the operation on the account and wait for a fresh
resolution authorising another person for operation.
Books Relating to the Customer
3.2.2.3.1 Pay-In-Slip
When money is to deposit in the bank the pay-in-slip is to be filled. The object of this
book is to provide the customer with the banks acknowledged of receipt of money to be
credited to his account.
3.2.2.3.2 Cheque Book
A checkbook contains a number of cheques, which is given to a customer upon written
request. It enables a customer to make withdrawal from his account or made payment to
various parties by an issue of cheque.
3.2.2.3.3 Pass Book
The clerk in this book records pass Book is a copy of the customer account as it appears
in the hand balance.
3.2.3 Credit Department
The main function of advance/credit department is to ascertain that prospective customer
looking for loans, is the right person to extend. If provided, then maintaining record of
advances forward and finally collecting principle amount plus mark up.

26

3.2.3.1 Types of Credit


ABL extend two types of Credits. Running Finance, Demand Finance. Running Finance
is generally given to meet temporary requirements of his or her running business of good
customer using this banks facility to compete in market. While Demand finance is those
advances, which are disbursing for one going year and are repayable in Lump sum.
3.2.3.2 Structure of Advances/Credit Department
ABL regulations HBL is bound to keep reserve (25% to 30%) total deposit at State Bank
of Pakistan. It means that bank can extend advances up to 70% of total deposits. The
deposits, which ABL keeps as a reserve with SBP, can get 10% interest per annum.
There is no centralisation in ABL; it means that extra deposits remain with branches,
which give it in form of loan to various needy customers. Banks deposits, as a security
against credit. Interest rate against bank deposits stock-in-trade and fixed assets are
17.5% per annum. While interest rate against foreign currency is 16%. Usually the bank
gives loan at 15% to 18% per annum. If loan is Rs.10 and security is Rs.15 the margin
in 50% and if loan is Rs.10 and security is Rs. 20; the margin will be 100%.
3.2.3.3 Documents required for securing loans
All original property documents along with clear legal opinion valuation certificate,
Credit report. Report for previous bank, Periodical stock reports duly inspected.
In file following documents is usually keep, Application for credit facility, Sanction
advances, Application form for finance, Credit report, Insurance certificate, Earth quake
endorsement, Fire policy, Balance confirmation, A legal advisor report, Statement of
stock position.

27

If the banker sees any reason for non-payment of a cheque is attached a printed form with
the cheque and those reasons are marked due to which the cheque was not honoured. The
various reasons, Exceeds arrangement, Refer to Drawer, Not arranged for, Affects no
cleared. Please present again, Full cover not received, Crossed cheque must be present
again, Post dated out of date, Amount in words and figures differs, Drawers signature
differ from specimen filed in this office, Drawers signature incomplete, requires
drawers full signature, Funds drawn against not yet received present again, Cheque
incomplete, Clearing stamp required, Advice not received etc.
3.2.3.4 Non-Performing Advances
If the loan is not return on the due date usually the due date is 90 days so such loan is

3.ACCOUNT DEPARTMENT
Account department of Allied Bank Limited performs the following functions:
3.1 Agency Function
Allied Bank Limited provides a wide range of agency function to its customers. They are
involved in clearing of goods, the purchase of property, negotiable instrument, leasing,
and other corporate activities. ABL charge a very nominal fee for these facilities. This
provides ABL an edge over its competitors.
3. 2

Staff Salaries

Allied bank a very attractive salary package for its employees. The salary staff came into
action at the 28th of each month. The salary calculations are related to the account section,
and paid through cash department.

28

3.3 Treasury Function


It handles the liquid funds and keeps a close eye on their receipts and payments; there is
very tough and practical accounting procedure to regulate these funds.
3. 4 Reconciliation of Accounts
As per Allied bank limited standard procedure, the bank has to furnish the reconciliation
statement to the zonal head office and customers at the end of each month. But if the
customer needs reconciliation statement twice or more a month so his request also been
entertained by the department.
3. 5

Asset and Liability Position of the Bank

This is the most important function of the account department. In this function the bank
position in the light of its asset and liabilities is assessed on regular basis, and if there is
any discrepancy incurs then it is promptly reported and remedial action are taken to solve
the problem.
3.6 Classification of Advances
Accounts department has to deal with various types of advances at the same time. In
order to deal with them clearly and finally the department has to manage various types of
advances separately on the basis of their nature, duration, and amount.
3.7 Issue of term deposits
Term deposits for a business is considered as a more controllable and predictable source
of revenue up to certain extends. So a great deal of cautions should be required to handle
them. This crucial responsibility is handed over to accounts department.

29

CHAPTER 4
CRITICAL ANALYSIS
4.1 FINANCIAL ANALYSIS
Financial analysis is the process of identifying the financial strengths and weaknesses of
the firm by properly establishing relationships between the items of balance sheet and
profit & loss account. Financial analysis can be undertaken by management of the firm,
or by parties outsides the firm such as creditors, investors and others. The nature of
analysis is depending on the purpose of the analyst.
4.1.1 Trade Creditors
Trade creditors are interested in firms ability to meet their claims over a very short
period of time. Their analysis will, therefore, confine to the evaluation of the firms
liquidity position.
4.1.2 Suppliers of Long Term Debt
Suppliers of long-term debt on the other hand are concerned with firms long-term
solvency and survival. They analysis the firms profitability over time, its ability to
generate cash to be able to pay interest and repay interest and repay principal and the
relationship between various sources of founds (Capital structure relationship). Longterm creditor do analyses the historical financial statements by they place more emphasis
on the firms projected financial statement s to make analysis about its future solvency and
profitability
4.1.3 Investors
Investors who have invested their money in the firms capital are most concerned about
the firms steady growth in earnings. As such, they concentrate on the analysis of the
firms present and future profitability. They are also interested in the firms finical
structure of the extent it influences the firms earnings ability and risk.

30

4.1.4 Management
Year
Current
Assets
Current
Liabilities
Current
Ratio

2010

2011

2012

2013

2014

124,488,881

129,015,867

145,130,215

153,731,491

187,348,386

143,864,461
0.87

134,554,662
0.96

163,615,465
0.89

176,596,798
0.87

205,249,386
0.91

Management of
the firm would be
interested in every
aspect of the
financial analysis.
It is their overall

responsibility to see that the resources of the firm are used most effectively and
efficiently and that the firms financial condition is sound.

4.2 RATIO ANALYSIS


Ratio analysis is powerful tool of financial analysis. A ratio is defined as: The quotient
of two mathematical expression and as the relationship between two or more things.
In financial ratio analysis a ratio is used as benchmark for evaluating the financial
position and performance of a firm.
Standards of Comparison
The ratio analysis involves comparison for a useful interpretation of the financial
statements. A single ratio I it self does not indicate favorable of unfavorable condition. It
should be compared with some standard. Such as past ratio calculated from the past
financial statements of the same firm.

4.2.1 LIQUIDITY RATIOS

4.2.1.1 CURRENT RATIO


Definition:
Current ratio is defined as current assets divide by current liabilities, which shows the

31

firm liquidity in the short run.1 Current ratio states that whether the firm is able to pay
its current liabilities with its current assets, if it do not so, then it should be insolvent in
the short run.
Formula
Current Ratio = Current Ratio / Current Liabilities
Interpretation:
If the current ratio of the firm is equal to or above than 1, then the firm is able to pay its
current liabilities with its current assets. The banking industry maintains the current ratio
of 0.902.
The current ratio of Allied Bank Limited for six years is below 1, which means that if the
bank is liquidate in the short run than it will not be able to pay its current liabilities. But
on the other hand if we compare the current with the industry averages than it is good
enough because ABL current ratio is near to the industry ratio. The best current ratio is
for the year 2011, which is 0.96. The quality of the current ratio can be affected through
accounts receivable turnover ratio, which is very low for the six years; it means that we
cannot collect our receivables in time.

4.2.1.2 CASH RATIO


Year
Cash &
Cash
Equilents
Marketable
Securities
Current
Liabilities
Cash Ratio

2009

2010

2011

2012

2013

2014
54,642,071

21,576,211

23,668,066

19,125,145

40,461,095

38,020,175

21,379,354

18,014,668

9,670,896

7,949,639

32,248,362

20,433,829

130,132,435
0.33

143,864,461
0.29

134,554,662
0.21

163,615,465
0.30

176,596,798
0.40

205,249,386
0.37

Definition:
Cash ratio is a more conservative option to know the short run liquidity of the firm. In
cash ratio the current assets are cash and marketable securities divided by current
liabilities. As we know that the marketable securities are the current assets, which are
extremely liquid and very near to cash. It is understood that the cash ratio should be less
1 Van Horne, James C. and Wachowicz, JR., John M, (1998). Fundamentals of
Financial Management. 11TH Edition. USA: Prentice-Hall, Inc P-127
2 Internship Report By Zubair Muhammad MBA

32

than current and quick ratio.


Formula
Cash Ratio = Cash + Marketable Securities / Current Liabilities
Interpretation:
Due to the fact that the advances and other assets requires time to convert into cash.
Therefore to know that to what extent the firm is near to cash. Obviously the cash ratio is
less tan the current ratio. In the first three years there is a negative trend and the best
ratio is for year 2014 i-e 0.40.

4.2.2 FINANCIAL LEVERAGE RATIOS:

4.2.2.1 DEBT TO ASSETS RATIO:


Year
Total
Liabilities
Total
Assets
Debt Ratio

2009
134,470,442

2010
148,849,739

2011
139,138,976

2012
142,181,022

2013
183,104,472

2014
215,040,240

139,991,644

154,716,101

155,211,116

168,623,155

191,821,032

225,387,212

0.961

0.962

0.896

0.843

0.955

0.954

Definition:
This ratio states to what extent the firm assets are financed through debt. The ratio is
calculated by dividing the firm total debt divide by total assets.
Formula
Debt to Assets ratio = Total Debt / Total Assets
This ratio is very important for creditors, because with the help of this ratio the creditors
can make the decisions whether to lend an advance to the bank or not.
The higher the debt ratio the greater the financial risk and vice versa. The ABL for six
financial years have very high debt ratio, which shows greater financial risk. For 2010
the debt ratio is 0.96, which shows that the 96% of the assets are financed through debt.
Similarly for six years more than 80% of the assets are financed through debt. This ratio
shows a red alert to the creditors of the bank and to those who want to lend to the bank.

33

4.2.2.2 DEBT TO EQUITY RATIO:


Year
Total
Liabilities

2009

2010

2011

2012

2013

2014

134,470,442

148,849,739

139,138,976

169,463,731

183,104,472

215,040,240

Common
Stock

22,481,680

22,481,680

22,481,680

22,481,680

5,180,000

5,180,000

Retained
Earnings

3,831,817

3,761,331

4,087,899

3,960,453

4,258,947

4,712,569

Debt to
Equity Ratio

5.11

5.67

5.24

6.41

19.40

21.74

Definition:
This ratio states that how much finance is contributed by the creditors and other financial
institutions to the capital of the company in relation to the shareholders.
Formula
Debt to Equity Ratio = Total Debt / Total Equity
Interpretation:
The lower the debt to equity ratio, the lower the financial risk for the creditors and vice
versa. In the case of ABL the said ratio is in the range of 5.11 to 6.41 for the first four
years. For year 2010 the creditors are contributing Rs 5.11 and the share holders
contributing Rs 1. This is due to the following reasons;

Credit worthiness of ABL


Creditors have no idea of financial leverage ratios

In 2014 and 2013 the debt to equity ratio has drastically increased due to the reduction of
share capital from 22.481 billion to 5.18 billion.

4.2.3 PROFITABILITY RATIOS


4.2.3.1 Net Profit Margin
Markup
Earned
NProfit
Loss
NProfit
Margin

2009
8,699,226

2010
10,274,435

2011
10,416,460

2012
11,468,051

2013
11,527,524

2014
9,269,494

(18,413,317)

(17,046,421)

(16,265,284)

(16,540,219)

(15,445,588)

1,546,807

(212)

(166)

(156)

(144)

(134)

17

Definition:

34

This ratio gives a measure of net income Rupees generated by each Rupee of Markup
earned. It is desirable for the said ratio to high. NPM is greatly depends on the company
policies regarding use of common, preferred and debt financing, administration and
selling expenses, financial charges, minority interest, income from other sources etc. The
NPM is greatly depends on the efficiency of the company.
Formula
Net Profit Margin = Net Income / Markup earned
Interpretation:
Due to heavy losses in first five years of analysis the NPM is in negative. This is due to
the fact that the management is not efficient and due to the previous years losses hence
the ratio is in negative. In 2013 the NPM is 17% which shows that if the sale is Rs 100
the net profit is Rs 17 which is good comparing the previous five years of analysis. The
performance in 2013 is excellent due to the privatization of ABL. Due to the
privatization heavy layoffs and downsizing actions were taken. This restructuring or
rightsizing results in reduction in the number of banks and its employees.
4.2.3.2 Total Assets Turnover
Markup
Earned
Total
Assets
TA
Turnover

2009
8,699,226

2010
10,274,435

2011
10,416,460

2012
11,468,051

2013
11,527,524

2014
9,269,494

139,991,644

154,716,101

155,211,116

168,623,155

191,821,032

225,387,212

6.214

6.641

6.711

6.801

6.010

4.113

Definition:
Measure the activity of the assets and ability of the firm to generate markup earned
through the use of its assets. The higher the said ratio the higher will be the performance
of the management.
Formula
Total Assets Turnover = Markup Earned / Total Assets
Interpretation:
For the first four years of analysis there is positive trend in the said ratio and it is above
than 6%, which shows that if our assets are of Rs 100 then our markup earned are of Rs
6. In 2013 the ratio is reduced to 4, the main reason is the assets are increased but on the

35

other hand the markup earned is reduced due to the decrease in number of branches.

4.3 SWOT ANALYSIS


The main purpose of doing SWOT analysis is to highlight all aspect of the bank. We can
say that it is a tool to get a quick overview of banks strategic situation. It is an effective
technique for analyzing the strengths, weakness, and opportunities and threat of an
organization. It tells us about the firm position. It helps the readers to understand the
performance of the bank very easily. It forecast the future status and point out the
problems likely to come in achieving the specified objectives.
As like the other banks the ABL have some strength, weakness, opportunities and threats,
which are as under: -

4.3.1 Strengths
Strength is present within an organization and when utilized, become a means of
distinction from competitors.
1. ABL is a schedule commercial bank with good branch networks in KPK.
2. Equipped with modern technology.
3. Trained & qualified professionals.
4. Low level of employee satisfaction and commitment.
5. Good banking relations with other financial institutions as well as with the
customers, which give positive results in goodwill & loyalty of the customers
towards the organization.
6. Courteous staff.
7. Regular training programmes for their employees, which are still very less in
majority of other banks.
8. Sound computer network.
9. Introduction of the Auto Cash Teller Machines (ATM).
10. First bank to privatize, which has, now become the leader in market with largest

36

online ATM network in the country.


11. Allied Direct Internet Banking offers the convenience to manage and control your
banking and finances-whenever & wherever it is required.

4.3.2 Weaknesses
Weaknesses are the shortcoming in the structure or functioning of the bank and need to be
taken care of immediately. It is usually because of these weaknesses that the competitors
leave us behind in the race.
1. Centralized decision-making.
2. Excessive paper work & lengthy procedure for obtaining loan.
3. Absence of sound and organized marketing & MIS deptt.
4. Relying more on the rented building.
5. Improper selection of premises for branches i.e. Regional Office Peshawar is on
the 1st floor, which create problems for customers and especially for aged
customers.
6. The management is not dynamic like other banks e.g. Habib Bank, MCB and
UBL etc.
7. The employees are totally unaware about the latest technology.
8. The top management especially manager are not well educated therefore they
cannot perform their duties efficiently as well as effectively. Which may directly
affects the goodwill of the bank.
9. The recruitment process is very lengthy it should be trimmed & lack of
transparent system of recruitment and selection.
10. Lengthy advancement procedures. For advancement every borrower either sole
proprietorship, partnership, joint stock companies, individual etc is require to

37

fulfill certain conditions for loan. Depending on the nature of loan sometimes the
loan process take too much time due to legal formalities such as documentation,
providing of guarantee, pledge, etc.
11. Though there are training academies at the zonal levels, but the training programs
are usually confined to the managerial staff, there is a need of training at all the
levels.
12. The performance appraisal system is ineffective

4.3.3 Opportunities
Opportunities are always present in the external market whoever grab it first, is the
market leader. Means an external situation, which an organization can benefit from, is
called opportunity for that organization. ABL can grab the following opportunities
1. Opening of new branches inside as well as outside the boundaries.
2. Inter-branch transaction through computer network.
3. Providing new investment opportunities for the people of the country.
4. Serving new customers or expanding into new geographical markets or product
segments.
5. Customers feedback on different products and services has really improved the
banks performance and encouraged the atmosphere for other future policies.
6. Opening the business schools.
7. Give information to the bank employees about the latest facilities. That they can
easily cope with the any situation.
8. Launching new marketing schemes to boost up the deposits. As well as to extend
the companys brand name or reputation to new geographic areas.
9. Sponsoring more and more games.

38

10. There is good opportunity for the bank to sponsor games on provincial and
national levels for its publicity. Just in 2006 they sponsor the Pak VS India
cricket series.
11. Training can enhance the employees skills

4.3.4 Threats
Threats are also part of your external environment and pose a constant danger to an
organizations operations. However, a proficient is the one that converts these threats
into opportunities.
1. Not adopting itself with the changing marketing strategies of other financial
institutions. I.e. Crore Patti of HBL, Car Aamed of UBL etc.
2. Closed and sick industries/projects financed by the Bank.
3. Slow industrialization in the country.
4. Changing political & economic conditions.
5. High turnover of already trained employees from the bank.
6. Increasing foreign banks in the country. Which provide highly specialized and
attractive services provided by foreign banks to their customers
7. Un-consistency in government policies regarding to business and economic
sector.
8. Strict regulations by the government over credit facilities to the customers as to
meet the prudential regulations
9. And last but not least, slower economic growth rate of the country.
10. Increasing number of private foreign bank in the country.

39

CHAPTER 5
CONCLUSION AND RECOMMENDATIONS
5.1CONCLUSION
Allied Bank of Pakistan limited (formerly Australasia Bank Limited) has witnessed and
experienced all political, economic, financial and technological changes, which have
taken place in the South Asian Region since it was incorporated in 1942 at Lahore.
In 1947 when Bank was in nascent age, it had to undergo a traumatic event, which
divided Asian Sub-continent into two independent states namely Pakistan and India.
Allied Bank, being the only Muslim Bank on the soil of Pakistan, lost over 50% of its
operations and assets, which were on the soil of India.
The management undauntedly faced the multiple challenges resulting from huge human
and financial losses on the one hand and the payment system and banking facilities to all
sectors of economy on the other hand. The Bank also rendered valuable treasury services
for the Government OF Pakistan and despite many constraints played an effective role in
socio-economic uplift of the country.
In 1971 the Bank lost more than half of its assets and network due to secession of the
then East Pakistan. The Bank not only survived this serious crisis but also regained its
financial strength maintaining the growth rates in key performance indicators.
1974 the Government of Pakistan nationalized all financial institutions in the country
Realizing the robust financial strength of Australasia Bank Limited among all the
nationalized financial institutions the government decided to merge three financially
weak institutions, namely Sarhad Bank Limited, Lahore Commercial Bank Limited and
Pak Bank Limited into Australasia Bank Limited and renamed it as Allied Bank of
Pakistan Limited.
Allied Bank remained in the Public Sector for eighteen (18) years, during which the
quality which the quality of its assets remained comparatively better among its peers.

40

During this period the Bank expanded its domestic network and also opened its first
foreign branch at London (U.K.) in 1977. The performances of the domestic and foreign
operations of Mulish Commercial Bank were merged into Allied Bank of Pakistan.
As a result of privatization in September 1991, Allied Bank entered in a new phase of its
history, as worlds first bank to be owned and managed by its employees.
Today allied Banks capital and reserves are Rs. 1.825 (B) and assets amount to Rs.
103.48 (B) and deposits are Rs. 111.44 (B). Allied Bank enjoys an enviable position in
the financial sector of Pakistan. As on date the quality of assets of the Bank is one of the
best amongst the major Banks of the country. Now ABL is one of the heading banks in
Pakistan. And enjoying the progress satisfactory.

5.2

RECOMMENDATIONS
Some of the recommendations are given here for its improvement.
1

Excessive paper work is nothing but waste of time. So excessive paper work i.e.
lengthy procedures should be avoided.

1. When a good worker is paid the same salary, then why he will work hard, by
looking his colleagues, either he should be awarded with increments or special
prize.
1. The formally organized Mkg. & MIS departments should establish.
1. Forecasting needs to be introduced at Allied Bank Limited. Before making any
decision, it should properly forecast to see that the decision, which they are likely
to take, has any good or bad implications for the bank and for the economy as a
whole. It will help in better planning.
1. Planning is the name of thinking in advance. A scientific manager always tries to
know where he is & where he wants to reach in future. Planning helps determine
future personnel needs and attendant training programs. Without knowing what
managerial personnel will be needed and what experience to demand, an

41

enterprise cannot intelligently recruit people and train them. Furthermore


organization planning can disclose weaknesses and other mistakes in the
organization. So the importance of planning cannot be ignored.
1. The banks promotion policy should be based on experience, hard work and
capabilities of the workers etc. besides promotions these workers should also be
given some other incentives.
1. There is lack of co-ordination between upper Mgt. & the staff at branches & other
levels. So there should be proper co-ordination among them.
1.

(MBO) or management by objectives needs to be introduced in the bank


immediately. It will help improve the functioning of the bank and will lead to
greater participation, and the workers and subordinates will be encouraged.

1. Some of the workers are not qualified and efficient. In one of the branches of
ABL, a person is working against the post of a cashier, just because of the fact
that he has deposited a big amount in the bank. So for making the ABL a more
successful organization such things should be avoided. And this is the main and
very big problem of the ABL.Which may definelty give very harmful affects in
the near future.
1. Latest software should be introduced in all departments so that data processing of
computers can be enhanced. The officers in all deptt: of the bank are still working
with the old computers. The conditions of the computers are not satisfactory.
1. In order to strengthen the operational capabilities of the employees the bank must
organize a number of in-house training courses and seminars on different topic
relate to advances and other departments.

42

REFERENCES
Personal observation and interview with, Branch Manager Mr Muhammad. Hanif Sab.
Personal observation and interview with Mr. AhmarHussain Sab (CSM).
Personal observation and interview with Mr. Musa Kaleem Ullah Sab (MTO).
Personal observation and interview with Mr.Asghar Khan (Assistant Cashier)

BIBLIOGRAPHY

1. Mhuhammad Yousaf Shah. Grade-1 officer.& ATM coordinator Zonal office


Peshawar..
2. Mian Waheed Grade-1 officer. Branch manager Warsak Road branch
3. Usman Acountant Warsak Road branch peshawar
4. Allied Bank Ltd Annual report (2008-2014), Karachi.
5. Head office of KPK performance report (2008-2014)
6. http://www.abl.com.pk
7. http://www.google.com

43