Internship Report

United Bank Limited

Branch: (0301) Sooter Mandi Faisalabad.
Ph: 041-9200454; 041-9201348

Submitted By:
Ashraf Ali
Roll No. 218
Reg. No: 2003-GCUF-625-7

PROGREAMME: M.Com (FINANCE)

SESSION: 2005-2007

Department Of Commerce,
G.C. University Faisalabad.
CONTENTS Page No.

ACKNOWLEDGEMENT 03
INTRODUCTION 04
ORGANIZATIONAL STRUCTURE 06
ACCOUNT OPENING POLICY 09
ACCOUNT OPENING PROCEDURE 10
CLEARING & COLLECTION MANAGEMENT 11
NATIONAL INSTITUNAL FACILITION
TECHNOLOGIES (Pvt) Ltd (NIFT) 12
PROCEDURE FOR INWARD CLEARING 14
PROCEDURE FOR OUTWARD CLEARING 16
CHEQUES RETURNED UNPAID 18
INTRODUCTION TO UNIVERSAL TELLER SYSTEM
AND ONE WINDOW OPERATION 20
PAY ORDER 22
DEMAND DRAFT 24
PAYMENT OF CHEQUES 27
ISSUANCE OF CHEQUE BOOK 30
PROCEDURE FOR UTILITY BILLS 33
FINANCIAL STATEMENT ANALYSIS 36
RECOMMENDATIONS 64
CONCLUSION 65
BIBLIOGRAPHY 66

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 ACKNOWLEDGEMENT

By the grace of almighty Allah, who enable me to complete this report. I am very
much gratified to the management of UBL for providing the astounding learning
environment. It is an enormous matter of inner satisfaction for me that I have learned
a lot of experience regarding Banking from here in a very short period.

I would like to acknowledge the following people for helping me to complete this
project. Mr. Muhammad Hussain Dogar (Branch Manager) is very polite and
courteous personality. He always positively enforced me to learn more and more.
With the attachment of following people, I have learned about different type of
activities performed by a banker now days.

Abid Hussain Branch Operation Manager.

Raza Ahmad Farooqi Supervisor (Bills/Remittance/Cash)

Usman Bashir Clearing Department.

Abdul Hafiz and Cash Officer

Muhammad Imran Cash Officer

I am very thankful to all of above-mentioned persons who are very much co-
operative, and they provide me the detail information of all routine activities.

Ashraf Ali
Roll. No. 218

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 INTRODUCTIOM

United Bank Limited is one of the largest commercial banks in Pakistan with over
1000 Branches nationwide and a customer base of more than 3.5 million.

The CORPORATE BANK continues to be a key business area for the franchise,
providing multi-pronged services to both Corporate and Financial Institution
customer. The Corporate Bank in pursuit of its ‘house bank’ strategy has been quite
successful in building up well-entrenched relationships and a strong market
presence during 2004.

The CONSUMER BANK has successfully launched a series of products in the year
2004 such as UBL Wallet the ATM/Debit card, UBL Drive car financing, UBL
Address home financing, You First Net Banking its online banking service, UBL Cash
line personal financing and UBL Business line business financing.

The COMMERCIAL BANK has not only tackled shrinking spreads and stiffer
competition, but has also delivered an increase in total deposits and has doubled the
commercial lending portfolio. It posted a massive profit of Rs.4.5 billion and declared
dividend of 22.5% after nearly a decade in 2003.

The TREASURY CAPITAL MARKETS GROUP, which not only is a primary dealer
in Government securities, has also competes effectively with local and international
banks, in areas as diverse as fixed income and Forex sales & trading and structured
products. It has also pioneered the first Rupee based derivative transaction in
Pakistan and established a dedicated Equities Trading Desk.

The INVESTMENT BANK GROUP is involved in several high profile and profitable
transactions; including Pakistan’s first listed and rated Asset Backed Securitization.
Post privatization in 2002, UBL has emerged to be one of Pakistan’s most dynamic
and aggressive financial institutions with its customer centric philosophy of becoming
a world-class bank WHERE YOU COME FIRST.

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UBL has asset of over Rs.300 billion and a solid track record of forty six (48) years –
in addition to the convenience of over 1000 branches serving you throughout the
country and also at several overseas locations.
 Date Established
November 7, 1959
 Chairman
His Highness Shaikh Nahayan Mabarak Al Nahayan
 Deputy Chairman
Sir Muhammad Anwar Perez OBE
 President & CEO
Mr. Atif R. Bokhari
 Branches
1056 Domestic, 15 Overseas Branches
 Representative Offices
Tehran
 Subsidiary
United Bank AG Zurich, Switzerland
United National Bank Limited, UK (joint venture with NBP)
 Associated Company
Oman United Exchange Company, Muscat
 Offshore Banking Unit
Export Processing Zone, EPZ Branch, Karachi, Pakistan
 Head Office
State Life Insurance Corp. Building # 1,
I.I. Chundrigar Road; Karachi, Pakistan
P.O. Box No.4306
Phone: (92-21) 111-825-111
Gram: “UNITED”
Fax: (92-21) 241349

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 ORGANIZATIONAL STRUCTURE OF
UNITED BANK LIMITED

Organization Chart at Branch Level

Area Manager (A.M)

Internal Audit Branch Manager or Credit Committee

Area Operational Manager

Customer Cash & Bills & Marketing Advances Accounts

Deposit Clearing Remittances

I.T Foreign
Exchange

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 Management Hierarchy

President

Senior Executive Vice President (SEVP)

Executive Vice President (EVP)

Senior Vice President (SVP)

Vice President (VP)

Assistant Vice President (AVP)

Officer Grade 1 (OG 1)

Officer Grade 2 (OG 2)

Officer Grade 3 (OG 3)

Operational Staff

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 UBL SETUP

BOARD OF DIRECTORS

EXECUTIVE COMMITTEE

Treasury & Corporate Investment Consumer Human

Capital Banking Group Banking Resource
Market Mgt.

Finance Marketing IT Audit Service

Department Department Department & &
Inspection Quality

Agri Commercial
Loans Banking

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 ACCOUNT OPENING POLICY

All customers account will require proper introduction either from UBL staff, existing
customer of branch / bank or of another bank. An employee of the branch / bank
introducing the account must know the account holder and must posse’s
sufficient information on the new account holder.
The signature of introducer if not holding account at branch must be verified from
another branch / bank prior to issuance of chequebook.
Initial deposit required for opening of account is Rs. 500/-
Later of thanks shall be sent the account holder (if other than bank own staff) for
correctness of address.
Name and address of nominee (next of kin) must also be obtained in the case of an
individual’s account.
Blank columns in account opening form and SS Cards must be crossed or mark
‘VOID’.
PLS Saving Account shall be opened for individuals (single or joint) or charitable
institutions.
PLS Saving Account shall not be opened in the name of illiterate pardahnashin
ladies.
9. In case of illiterate person the introducer shall also verify the thumb impression
on the Account Opening Form.
10. In case of NIC does not contain photograph, photocopy of any other document
such as passport / driving license etc containing photograph shall be obtained.

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 ACCOUNT OPENING PROCEDURE

1. Customer fills in the account opening form, chequebook, and ATM and UB
online request, SS Cards and submits relevant documentation per bank’s
requirement.
2. Account opening form and other documents should be signed in the presence
of officer designated to open accounts.
3. The customer provides original NIC / Passport along with its photocopy for
attestation by the designated officer. The original documents are returned to
customer after attestation.
4. Designated officer scrutinizes the account opening form and SS Card. Blank
spaces on AOF and SS Card are crossed out.
5. Ensure account-opening instructions are clear and specific.
6. Interview the customer to ensure genuineness of the information provided.
7. Documents are complete in all aspects otherwise if any document is missing
or incomplete should be referred to the AM / BM for deferral approval.
8. If deferral is approved it should be recorded in the register maintained with the
designated officer and monitored by the AOM / BM / OM.
9. The missing / incomplete documents must be completed at an early date and
submitted to hub.
10. The designated officer approves account opening form.
11. Branch shall allot account number from Account Opening / Closing register
manually.
12. Computerized branch inputs the details of new account in the system.
13. Account number is noted on account opening form, specimen signature cards
and all other documents.
14. Customer fills in the Pay-in-slip and deposits cash with the teller.
15. Initial deposit is noted on account opening form.
16. SS Card is scanned (Computerized branch only).
17. Manual branch fills in ABC form containing details / profile of customer and
forwards to hub to update in the system.
18. Letter of thanks shall be prepared / mailed to customer.

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 CLEARING & COLLECTION MANAGEMENT

Clearing transaction is inward when Cheque drawn on customer accounts is

presented at other banks and outward when Cheque drawn on other banks but
presented at the user bank branch.

CLEARING HOUSE.
Clearing house refers to the function whereby commercial banks
exchange and settle for Cheque, bill of exchange, draft and other banking
instruments drawn against each other received by them for collection and clearance
from their customers.”

PROCESS.
Suppose a person receives a Cheque of bank X and deposits it in his
bank named bank Y. Now bank X is a debtor of bank Y. in everyday life there is large
numbers of Cheque drawn and received. So banks become debtors and creditors to
each other. The easiest way to set off these claims is to receive or pay the net
amount. This process is called clearing and the function is performed by central
bank.

FEATURES.
 No physical transfer of money.
 Saves time and effort.
 Minimizes the use of cash.
 Security to the banking system/customer.
 Promotes trade and commerce.
 Encourage acceptability of Cheque and other instruments.

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 National Institutional Facilitation Technologies (Pvt) Ltd (NIFT)

Previously, State Bank of Pakistan / National Bank of Pakistan (remote areas

specially) were serving as the Clearing House for the commercial banks in the
country. The representatives of different banks were required to gather physically at
clearing-house in the evening of each working day and exchange Cheque, drawn on
each other.
Recognizing the need for speedy processes and for incorporating latest technology
in service industry, NIFT was incorporated in September 1995 as a joint venture
between six major banks and private investors group:
The clearing arrangement of all commercial banks operating in Pakistan have been
outsourced to NIFT which enable it to centralize the entire process of Cheque
exchange by the banks regarding inward / outward intercity and same day clearing.

INTERCITY CLEARING
NIFT is also providing Intercity Clearing service for the following cities:
- Lahore - Islamabad
- Rawalpindi - Faisalabad
- Karachi - Hyderabad
- Multan - Peshawar
- Gujarat - Gujranwala
Cheque of above-mentioned cities may be sent for collection through NIFT in
Intercity Clearing in place of OBC. The OBC is commission-based collection service
and time-consuming whereas intercity is a relatively speedy service. The lodgment
procedure for Intercity clearing (preparing the Bundle Cover and Summary Sheet) is
the same as for Outward Clearing. However one additional stamp of “INTERCITY
CLEARING” is affixed on the face of the instrument and it must be packed in
respective city’s envelope provided by the NIFT.

SAME DAY CLEARING

The simple Outward Clearing is normally a two-day process. However, within city
NIFT also provides Same Day Clearing service against additional charges provided
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the collecting and drawee branches are registered as “SAME DAY CLEARING”
branch. This service is usually offered to valued customers for Cheque amounting to
Rs.500, 000 and above. The customer’s account will receive credited same day to
the debit of H.O. account against charges Rs.300 per Cheque.

LOCAL COLLECTION
In villages / remote areas, where clearinghouse services are not available, even the
crossed Cheque are being presented on the counter of the paying banks by
representative of collecting banks directly and upon clearance, customer accounts
are credited. It is printed to note that this system consists of arrangements between
banks and the customer is not involved.

DISCHARGES BY COLLECTING BANKS

Discharge means the endorsement stamp affixed on the back of Cheque / other
instrument before lodging the same in Outward Clearing. It signifies that the
collecting banker is truly maintaining payee’s account and account and is acting as
agent

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 PROCEDURE FOR INWARD CLEARING
Computerized branches (NIFT / Clearing Cell)

1. The cheques and other instruments drawn on the same

branch are received from NIFT / Clearing Cell along with forwarding schedule
showing number and amount of instruments enclosed.
2. The cheques and other instruments are handed over to
respective departments to scrutinize / check for any discrepancy such as:
a. Validity (State / post dated).
b. Amount in words and figure agree.
c. Beneficiary and bank properly endorse cheque.
d. Bears presenting banks clearing and crossing stamp.
e. Addition / alteration / cutting, if any, on cheque(s) and other instrument(s),
is authenticated.
3. If cheques are found in order, signature(s) are verified against Unibank system.
4. The cheques are posted in the respective accounts in Unibank system against
available balance through the financial option of the clearing.
5. The signature of issuing officers on Pay Orders, Draft, Mail Transfers, TT
Receipts, RTCs and Tezraftar cheques are verified.
6. The draft drawn / payable on branch are posted in DD – Reconciliation module.
7. In case of Rupee Travelers Cheque(s), circulars issued by Head Office regarding
lost or stolen RTCs must be checked before making payment.
8. The following transaction is passed:
Dr. CD /PLS Saving Customer a/c
Bills Payable PO/DD/MT/TTR 4210,4240,4250,4260
Head Office a/c IBDA (Tezraftar cheques)
Other Asset RTCs paid 7880
Other Asset DD paid advice 7530
Cr. Head Office a/c IBCA

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 9. The branch will ensure that total number and amount of cheques / instruments
received through NIFT / Clearing Cell agrees with the amount shown on NIFT /
Clearing Cell forwarding schedule.
10. The dishonored cheques / instruments are returned along with the cheque
returning memo (showing specific reason of return) duly signed and after entry in
the Cheque Returned Register (as per cheque returning procedure).
11. The cheque returning charges are recovered as per schedule of charges.
12. The paying branch issues Inter Branch Credit Advice (IBCA) for the cheques /
instrument paid i.e. total value of instruments received less the amount of
dishonored cheques delivered to Clearing Cell / NIFT.
13. The NIFT / Clearing Cell responds the IBCA received and disburses funds to
cheque presenting banks / branches.
14. The returned cheques are returned to the cheque presenting banker / branches
along with the cheque returning memo.

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 PROCEDURE FOR OUTWARD CLEARING
Computerized Branches

1. The teller receives deposit slip and cheque(s) drawn on any other bank / UBL
branch in the city and scrutinizes deposit slip / cheque(s) for the following:
a. Amount of cheque(s) agrees with amount on deposit slip.
b. Amount in words / figures on cheque / deposit slip agree.
c. Cheque is bearer, in favor of account holder or endorsed.
d. Crossing and Clearing stamps if previously affixed are cancelled.
e. Cheque is not state / post dated / mutilated.
f. Cutting / alteration / addition on deposit slip, if any, is authenticated by the
depositor.
g. Cutting / alteration / addition on deposit slip, if any, is authenticated by the
drawer.
h. Detail on both part of deposit slip tally and bear depositor’s signature.
i. Deposit slip bears same day’s date otherwise date should be corrected and
authenticated by the depositor.
2. In case any discrepancy is found, deposit slip and cheque shall be returned to
the depositor for correction.
3. The teller affixes bank crossing and (next working day’s) clearing stamp on
the face of the cheque(s), and endorsement stamp on the reverse.
4. The Clearing / Transfer delivery cheques are entered in Unibank system
under single entry option or batch entry option.

5. The Unibank system requires posting and value date entered besides the
following:
• Customer a/c and number, drawee Bank / Branch code, cheque number and
amount.
6. After entry in the system counter foil is delivered to the depositor duly
stamped “Clearing” with date branch name and code and signed by the Teller.
7. In branches where the volume does not warrant immediate entry in the
Unibank system may enter the cheques in Unibank system during intervals.

8. Endorsement on reverse of instruments is signed by the Supervisor /

officer.

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 9. These funds against cheque(s) deposited are made available to the
customer(s) the same day or on next working day depending upon the nature of
clearing that is special or normal.
10. A detailed Clearing register, schedule and summary will be generated from the
Unibank system which contains all the details of each and every instrument /
cheque such as:
• Cheque number, amount of each cheque, drawee Bank name and Branch
name.

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 CHEQUES RETURNED UNPAID

When dishonoring a cheque whether on account of:

Legal bar to payment
For want of funds or
For some technical irregularity
The banker must be careful in selecting the reason to avoid as for as possible the
damage. The objection should not be at variance with the actual facts.

Category of objections.
• Sufficiency of funds
• Availability of funds
• Regularity of cheques

Usually following objections are applied in case of insufficiency of funds.

• Funds not sufficient
• Exceed arrangement
• Refer to drawer
• Account closed
• Full cover not received

Funds not sufficient

It is applied when funds in the customer’s account are insufficient to meet the
cheque’ which has been presented to the banker.

Exceed arrangement
Where the payment of the cheque would over draw the balance in excess of the
agreed sanctioned limit.

Refer to drawer
It is one of the common objections when a cheque is returned for want of funds. By
applying this objection the bank is just saying ‘we are not paying’ go back to the
drawer and ask why/? Or go back to the drawer and ask him to pay’ this is said to be
the milder objection and does not disclose the secrecy of the account.

Account closed
They are far more serious cases where they are justified because I imply that the
drawer was intentionally issuing cheques for the account, which has been closed,
and there is no possibility of this cheques being meet.

Full cover not received

It means that money is not available immediately. Under these conditions before
returning the cheques banker must sure that there is no credit in the bank, which has
not, yet reached the account.
 INTRODUCTION TO UNIVERSAL TELLER SYSTEM AND ONE
WINDOW OPERATION

Responsibilities Of Teller
• To provide outstanding customer service within standard turn around time.
• To follow limits / guidelines for cash.
• To process counter transaction (effectively and efficiently)
• To verify customer signature, post transactions and to handle balance
enquiries.
• To maintain effective and efficient service delivery and quality.
• To maintain one bank one team concept in the branch.

Reporting Line
Teller’s position falls under ‘Operations’ so he reports to branch operation manager.
Teller indirectly reports to branch manager.
Teller Must Be Aware Of:
• Product range
• Bank charges
• Demand draft, local / foreign procedure
• Traveler’s cheques local and foreign
• Cash deposits and withdrawal, local and foreign currency
• Cash deposits-clearing and collections
• Utility bills
• Fixed and Notice Deposits
• Sale and purchase of Government Securities
• Stop payments
• Holding cash in accordance with the limits
Compliance Management For Teller
The teller has to comply strictly with the following: -
• PPI circulars
• Operation manuals
• Regulatory rules (SBP)
PROFESSIONAL ETHICS
• Secrecy
• Loyalty with the organization
• Loyalty with customers
• Job knowledge
• To behave not as an individual, but as an organization
• Integrity
• Honesty
• Discipline
• Never deceive customers / staff members
• Obey seniors and give respect to juniors
• Create good image of the bank
• First deserve than desire

HOUSE KEEPING
The people who work at counter are the most important people and counter are the
most important place for the customers because:
• It is the front most place
• People visit this part of the total establishment
• 90-95 % of business transactions are done at the counter

Customers usually perceive service standards before they actually receive.

Before commencing business each day teller must ensure:
• Counter should give a tidy and clean look.
• Counter Glass should not be dirty and stained, creating a bad image.
• Teller should keep his “service tangibles” neat and clean.
• All stamps at Teller’s counter must be legible and in perfect condition.
• Application form, deposit slips and product brochures must be available on
the counter.
• Ballpoints should always be available at the counter for customers.
 ISSUANCE OF PAY ORDER
(Computerized Branch)

Procedure:

1. Request for issuance of Pay Order shall be received on our standard

application remittance form. Customer’s written request can also be used as
source document.
2. In case of walk-in customer, the application shall be fill in the following details:
• Name of beneficiary.
• Amount of pay order.
• His address and telephone number.
• Shall attach photocopy of CNIC, which shall be compared with original before
attestation.
3. If our bonafides account holder, his signature on the
prescribed place with account number shall be obtained.
4. The cash officer / teller shall check remittance form ensuring
that all required information is provided and it is signed.
5. Charges as per effective SOC shall be applied.
6. If pay order is to be issued against cash, amount of pay
order and charges shall be received in cash after proper counting.
7. Cash officer affix “Received” cash stamp (preferably red ink
pad should be used) and sign (preferably in red ink) in acknowledgement of
having received amount of pay order and charges. Amount of pay order shall be
written in figure and amount of charges shall be circled.
8. In case cheque is tendered along with remittance form, debit
voucher for the charges shall be prepared and both cheque and debit voucher
shall be posted in the ledger/system, subject to the availability of clear / effective
credit balance and transfer stamp shall be affixed on both vouchers.
9. Now Pay Order shall be issued by the system by selecting
the following option:
• Banking
• Option 1 Financial Transaction.
 • Option 7 Bills and Remittances.
• Option 4 Pay Order.
• Option 1 Issuance.
• System shall ask for mode of transaction cash / transfer.
• If PO to be issued is against transfer, feed document number of debit voucher.
The amount debited shall appear, feed name of beneficiary, amount of PO.
• Purchaser’s name shall automatically appear.
• If Pay Order to be issued is against cash, select mode as Cash, feed total
amount of money received (with commission), amount of Pay Order, name of
the beneficiary and name of purchaser.

Account code Title of account Entry

6020-01 Customer A/C or Cash Debit

4210-01 Bills Payable A/C (Pay Order issued) Credit

0640-27 Commission Income on Pay Order issued Credit

10. System prepares and maintains Pay Order issue register.

11. Supervisor shall opt for banking, financial transaction; option 7 for bills and
remittances; option 4 Pay Order; option 3 verification/supervision after checking
the following:
• Name of beneficiary.
• Amount of Pay Order applied.
• Name of the purchaser.
• Quality of printing.
12. System prints name of the branch and date automatically.
13. Pay Order is protectographed by the system.
14. The blank leaves are printed as payee’s A/C only.
15. Pay Order shall be handed over to the purchaser and his acknowledgement shall
be obtained on the respective counter banker’s portion.
 DEMAND DRAFT

According to Sec 85-A NIA 1881 “A demand draft is written order to pay money
drawn by one office of a bank upon another office of the same bank, for a sum of
money payable to or to the order (of a specified person) on demand”.
Demand draft can be issued to customers as well as to non-customers against cash,
cheque and letter of instruction.
NIA = Negotiable Instruments Act.

Remittances by walk-in customers

To discourage the use of banking channels for Money Laundering transfer of illegal
money and financing of terrorist activities the following measures should be taken
immediately:
All walk in customers requesting any type of transfer of funds using uniremote, TT,
MT, DD or pay order should be requested to prove identification by providing original
CNIC / Passport along with the photocopy.
The teller / officer shall verify the photocopy and return the original to the customer.
The photocopy of CNIC / Passport shall be attached with the application.

Procedure for issuance of Demand Draft

Purchaser is asked to fill up remittance form containing columns for: -
Date
Branch
Choices of mode of remittance i.e. demand draft, pay order, MT, TT or Uniremote
(customer is required to tick among the given choices).
Type of Currency i.e. PKR, Euro, JPY, US$ others (customer is required to tick
among the given choices).
Amount in figures and amount in words.

Beneficiary details
• Beneficiary’s name
• Beneficiary’s account number
 • Beneficiary’s NIC / Passport No.
• Bank’s name and address
• City
• Country
• Applicant’s signature
• Lower half of remittance form is meant for bank use only, it contains following
columns.
• Principal amount
• Telex charges
• Fax charges
• Commission
• Withholding tax
• Total deduction
• Commission charges are calculated accordingly and written in the cage
provided on Remittance form.
• Purchaser is asked to deposit the cash.
• Teller receives the cash for demand draft including commission, excise duty
and affixes “Received Cash” stamp on demand draft application form.
• Demand draft application serves the purpose of H.O credit voucher.
• Remittance form is entered in receiving cashier’s book and given to supervisor.
• Demand draft instrument is prepared (two types of demand draft leaves are in
use one is for Rs. 5000 and over and other for below Rs.5000.
Name of drawee Spoke branch and its Hub branch will be written on instrument.
Demand draft is signed by two attorney officers single attorney branch may issue
demand draft for amount below Rs.5000.
After completion of all the formalities demand draft is handed over to the purchaser.
Acknowledgement is obtained on the back of counterfoil of demand draft block and
on demand draft application form.
Following entries are passed.
 Account code Nature Entry

6020-01 Customer Account Or Cash Debit

5610-01 Head Office A/C By IBCA or TEZIBEX Credit

0640-24 Income Account Commission on Demand Draft Credit

At the close of counter hour’s remittance form and voucher for al the demand draft’s
issued during the day will be sent to Hub (off line branches).

At Hub IBCA will be generated through system and mailed / processed through IBEX
to the drawee Hub.
IBCA above Rs. 50000 will be tested / authenticated before dispatch.

Issuance of demand draft against cheque

Account holder of a branch tender’s a cheque along with the demand draft
application form for purchase of demand draft. Cheque is drawn for the amount of
demand draft plus commission.
Cheque is sent to deposit in charge for posting in the ledger. If there is no
discrepancy and funds are available in a/c, cheque is posted (in blue ledger /
system).

Demand Draft application form cheque and voucher for commission are stamped
with “cash transfer stamp” and entry is made. (In system / Transfer Book).
Remaining procedure is the same as in case of issuance against cash.

Payment of Demand Draft

Demand draft can be presented for payment:
Over the counter for payment in cash.
For credit of payee’s account in the branch.
Through clearing.
 PAYMENT OF CHEQUES

Payment of money deposited by the customer is one of the most functions of

banking. This paying function is one, which is distinguishing mark of a banker and
differentiates him from other institutions, which receive money from the public.

1. Payment in due course

The banker gets legal protection only when payment is in ‘Due Course’ see 10 of
NIA 1881 says “payment in due course means payment in accordance with the
apparent tenor of the instrument in good faith and without negligence to any
person in possession thereof under circumstances which do not afford a
reasonable ground of believing that he is not entitled to receive payment of the
amount therein mentioned.
It is contractual obligation of a banker to honor his customer’s cheques if the
following essentials are fulfilled.

2. Cheque should be in proper form

The customer contracts reciprocally that in drawing his cheques he will draw
them in such a form as will enable the banker to fulfill his obligation, and
therefore, in a form which is clear and free from ambiguity. The banker must see
that the customer / holder have not changed the form of the cheque.

3. Cheque should not be crossed

A crossed cheque cannot be honored over the counter to any person but a
collecting banker. If a paying banker honors a crossed cheque contrary to the
crossing, the true owner may require the banker to pay him such damages as he
might have sustained by the banker’s action.

4. Cheque should be drawn on the particular branch

Only the branch of the bank particularly mentioned on the cheque where the
customer is maintaining his account can make the payment of a cheque. If
 arrangements have been made; encashment of a customer’s cheque can be had
at a branch other than the one where he maintains his account.

5. Cheque should not be mutilated

When a cheque is torn, worn out or doesn’t give sufficient evidence of the
customer’s intention, it is called a ‘mutilated cheque’
The banker should see that the cheque presented for encashment is not
mutilated, because if the banker ignores this point, he becomes liable. However
mutilation by accident may be excused if drawer declared about his fact.

6. No unauthorized material alterations

Banker must not pay a cheque bearing apparent material alterations not duly
authorized by the drawer under his full signature, specimen of which has been
supplied to the banker before hand.

7. Funds must be sufficient and available

See 31 of NIA 1881 lay down that “the drawee of a cheque having sufficient
funds of the drawer in his hands. The customer also has the right to over draw up
to a limit not yet reached (arrangements).

8. The cheque should be neither post dated nor stale

• Post dated cheque

If a cheque bears a date later than that on which the holder presents it at the
bank, it is called a ‘post dated’ cheque. Banker should not honor it for the
following reasons.
a) Customer may make stop payment before the due date of cheque.
b) Banker has no right to debit customer’s account before the due date of the
cheque.
c) If a post dated cheque is paid customer’s account balance will be reduced, in
this case if a second cheque (regular) of the same customer is presented it will
be wrongfully dishonored on the ground of insufficiency of funds.
 • Stale cheque

A cheque is said to be stale when it has been in circulation for unreasonable long
period. Banker in Pakistan regards a cheque stale, when remains outstanding for
more than six months. The banker may honor a stale cheque after getting it
confirmed by the drawer.

9. Cheque should be presented during banking hours

Cheque should be presented on working day and during banking hours. Any
change in business hours must be notified before hand.

10. No legal bar prohibiting payment

The banker should see none of the following clauses apply on the cheque
presented for payment.
a) Payment stopped by the drawer.
b) Knowledge of any defect in the title of the person who is presenting
the cheque for payment.
c) Notice of insolvency, insanity or death; or in case of company notice
of its winding up received by the banker.
d) Knowledge that the customer contemplates breach of trust or an act
of insolvency.
 ISSUANCE OF CHEQUE BOOK

INTRODUCTION.
To facilitate the customers to withdraw cash from their accounts or to settle their
financial obligations, chequebook is provided to account holders. Cheques drawn by
customers have legal implications under Negotiable Instruments Act; therefore all the
best precautions must be exercised in the safe custody of the chequebook.

POLICY.
1. Cheque books against new account should be issued against instruction
on account opening form/ authority letter signed by the customer and after the
account opining form is completed in all respect and approved by the designated
officer the chequebook request should be processed.
2. Cheque books against an already existing account would be issued only
against the chequebook requisition extracted from the previous chequebook else
upon receipt of customer written request. Incase if the prior is lost/misplaced,
however extra charges for the same would be charged. Signatures are verified
on the same.
3. The designated officer / Teller on receipt of cheque book requisition /
request letter shall writes date of receipt and time and checks the cheque book
disposal instructions, whether cheque book shall be collected: -
• Personally.
• Through Authorized agent.
• Should be dispatched through courier.
• If no instruction is given it shall be deemed that the chequebook shall be
collected personally or through an authorized agent.
4. The undelivered chequebooks should be kept under dual control.
5. For dormant account the customer, in person, presents the chequebook
requisition. The AOM/BM//OM/SB Supervisor shall follow the procedure for
operation of dormant accounts to satisfy himself about the genuineness of the
applicant.
 6. “Courier” in a sealed envelope under cover of a letter may dispatch
chequebook on customer’s request.
7. Separate folio in the chequebook register shall be allotted for
current/saving account chequebooks of different leaves i.e. of 25, 50 and 100 etc.
8. The daily consumption from the ready chequebooks must be balanced
every day vis-à-vis collected books.

Procedure:

CHEQUE BOOKS PREPARED BY NIFT

Issuance of chequebooks has been assigned to NIFT, as a step towards providing
more personalized service in delivering chequebooks to the account holders.
Hub/Spoke branches shall follow the procedure given below.
i. Upon receipt of the completed cheque book requisition form, the authorized
person signs it and then the details are entered in the cheque book register
which would include the date, account title, account number along with a
serial number.
ii. The same details are filled in the chequebook requisition form to be sent to
the NIFT for preparation of the chequebook.
iii. At the end of the day the entire chequebook requisitions filled in are counted
and the covering schedule is prepared.
iv. The covering schedule is counter signed by the designated officer who will
check the entire details of each request against the customer request, which
are stapled together for the day and kept separately.
v. Chequebooks are received from the NIFT after 3 working days along with a
covering memo, which includes the customer, name and account number.
vi. The receiving officer counts the entire chequebooks, verifies the same for
details on the actual customer request and then enters the cheque serial
number in the original chequebooks request register where earlier the account
details were filled in.
vii. The NIFT schedule is then used as a source document to recover charges
against the chequebook as per the SOC. (Schedule Of Bank Charges)
viii. Accounts where there are insufficient balance, debit block is marked on the
same.
ix. Upon customer receipt the cheque serial is recorded in the system, which
after the customer signature is verified on the acknowledgement.
x. Chequebooks along with the customer request are passed on the supervisor
to approve the serial maintenance in the system.
xi. In the chequebooks request register the release date is mentioned along with
the officer in charge of the delivery of the chequebook.
xii. The original chequebooks request is than sent with the day end voucher.

DISPOSAL OF UN-COLLECTED CHEQUE BOOKS.

1. The chequebooks requisition shall bear a notation or rubber stamp stating, “If
the cheque book is not collected with in 60 days, In order to protect your interest,
the bank shall cancel the cheque book and charges for new cheque book shall be
borne by you”.
2. All un-collected chequebooks shall be kept under lock and key during the day
in a box or in a drawer and overnight shall be kept in main vault or safe.

3. The chequebooks, which remained uncollected beyond 60 days shall be

cancelled, two officers shall prepare a complete list of such chequebooks, once in
a month, showing the following details.
• Date.
• Branch Name.
• Customer Name.
• Account Number.
• Cheque Book leaves numbers.
4. The chequebooks shall be cancelled by tearing off the signature’s portion.

5. Notation of cancellation of chequebooks shall also be made in the

chequebook issuance register in RED along with the destruction date.
6. The original list shall be kept, in a file in main vault/safe along with the
chequebook over night.
 PROCEDURE FOR UTILITY BILLS (CASH)
Procedure:

1. The customer/depositor submits the utility bills and cash to the Teller.
2. The Teller reviews the utility bill ensures payment is being made within due
date otherwise total amount surcharge/penalty shall be received from the
customer/depositor.
• Teller will not entertain request of customer/depositor to accept partial receipt.
• Any utility bill not containing amended amount duly authenticated by the
authorized bank officer would be treated a full amount received by the Teller.
3. Teller counts the cash and stamps the bill at appropriate place in
acknowledgement of “Cash Received-Utility Bills” with date and signatures.
Amount in figure shall be circled to restrict any addition.
4. Bill amount exceeding any Teller’s limit shall be forwarded to Supervisor for
review and counter sign.
5. Counter foil of the bill meant for the customer/depositor shall be separated
and handed over to him.
6. Computerized branches Teller enter / post the transaction in UNIBANK.
7. The Teller of manual branches shall enter transaction in prescribed scroll.
8. After physical verification of cash received and balancing with the
Unibank/scroll register, a consolidated transaction is passed.
9. Following accounting vouchers shall be prepared and passed over to the Hub
branch for posting along with the detailed summery sheet.

HUB/Spoke branches (Computerized)

i. Debit Cash Utility Bills

Credit CD Collection a/c System
Credit Income a/c Commission generated

(Handling Charges –Utility Bills)

 Fund are credited to lead main branch through IBCA/Uniremote
Spock branches transfer funds to respective Hub

ii. Debit CD Collection a/c

Credit Sundry deposit Parking a/c

On receipt of parking a/c liquidation voucher Hubs pass following transaction.

iii. Debit Sundry deposit Parking a/c

Credit Head Office IBCA
(UBL branches having
centralized collection a/c or
Funds are credited through
UNIREMOTE System)

10. Funds are transferred from spoke branches to Hub or directly through
IBCA/Uniremote to lead branch/bank along with relevant stubs and listing.

Documentation Requirement:
BANKING
14. UTILITY COLLECTION >
1. ENTRY

Utility Bills Procedure Payment through Cheque

In addition to cash Utility bills can also be paid through cheques. For this purpose
“Utility Drop Box” shall be placed at a visible location, under the vigilance of Branch
Staff. Customers shall be provided “paid” receipt once the proceeds are realized.
Adequate shade and drinking water facility must be provided for the customer
approach for payment of utility bills, priority service should be provided to senior
citizens, disable persons and female customers.
 Procedure:
1. Two collection Accounts for T&T and Electric
Supply Corporation shall be opened in each branch. One Main collection Account
of utility company and other for cheque collection.
2. After realization of the proceeds of the
cheques funds shall be transferred to main collection account.

3. Cheques dropped for Gas Collection are not

sent in clearing by the branch. These cheques are entered in scroll and sent to
Gas Co. along with Stub.
4. Drop box shall be opened each day before
end of counter hours.
5. Cheques drawn on own branch and for
payment of gas bills shall be separated.
6. Posting for the cheques drawn on our branch
shall be made in respective account and credit shall be given to main collection
account.
7. Cheques drawn on other branches shall be
sent in clearing. On realization proceed shall be credited to main collection
account.
8. Manual Branches shall make entry in scroll, in
computerized Branches entry shall made in the system:
Banking >
14. Utility Collection >
1. Entry >
4. Transfer
9. Online branches shall Uniremote their day’s collection of each utility company to
Hub branch separately, while Offline Branches shall transfer day’s collection of
each utility co. through Parking Account.
10. Hub branch shall transfer total collection of the Hub Branches in the main system
account of the company.
11. Stub of Utility Bills shall be transferred as per Service Level Agreement.
12. Teller will be the custodian of paid receipt of Utility Bills.
 FINANCIAL STATEMENT ANALYSIS
OF
UNITED BANK LIMETED
FOR THE YEARS OF 2004-05-06

Contents Page No.

 Balance Sheet 37-37

 Profit and Loss Account 38-39
 SWOT Analysis 40-43
 Horizontal Analysis 44-45
 Comments On Horizontal Analysis 46-48
 Trend Analysis 49-49
 Quarterly Trend Analysis 50-54
 Ratios Analysis 55-62
 Summery of Financial Ratios 63-63
 UNITED BANK LIMITED
BALANCE SHEETS AS AT DECEMBER 31, 2004-2005-2006

Particulars 2006 2005 2004

Rs. (000) (Rs.000) (Rs.000)
ASSETS
Cash and balance with treasury banks 48,939,840 34,062,679 23,844,435
Balance with other banks 14,034,476 12,729,207 17,699,334
Lendings to financial institutions 29,572,070 17,867,552 18,360,633
Investments 67,260,338 63,026,944 54,953,728
Advances 247,309,893 204,810,470 144,151,055
Other assets 10,062,466 7,829,770 4,439,580
Fixed assets 5,234,463 4,449,324 3,969,006
Deferred tax asset - net 906,661 2,273,005 5,194,892
Total Assets 423,320,207 347,048,951 272,612,663
LIABILITIES
Bills payable 4,560,649 4,159,964 3,811,284
Borrowings from financial institutions 38,544,920 21,790,480 11,975,684
Deposits and other accounts 335,077,873 289,226,299 230,256,627
Sub-ordinated loans 5,998,344 3,999,192 3,500,000
Liabilities against assets to financial lease - - 228
Other liabilities 9,275,034 6,204,746 5,704,749
Total Liabilities 393,456,820 325,380,681 255,248,632
PRESENTED BY:
Share capital 6,475,000 5,180,000 5,180,000
Reserves 8,298,873 6,225,461 5,915,928
Unappropriated profit 12,429,853 7,350,813 3,274,439
Surplus on revaluation of assets 2,659,661 2,911,996 2,993,664
Total shareholder's funds 29,863,387 21,668,270 17,364,031
 UNITED BANK LIMITED
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31, 2005

2005 2004
(Rupees in '000)
Mark-up / return / interest earned 20,158,860 9,233,881
Mark-up / return / interest expensed 6,045,948 1,732,760
Net mark-up / interest income 14,112,912 7,501,121

Provision against loans and advances - net 1,277,002 435,414

Provision / (reversal) for diminution in value of investments – net 112,666 (100,381)
Bad debts written off directly 38,140 3,841
1,427,808 338,874
Net mark-up / return / interest income after provisions 12,685,104 7,162,247
Non mark-up / interest income
Fee, commission and brokerage income 2,543,739 1,654,475
Dividend income / gain on sale of investments 583,982 1,102,510
Income from dealing in foreign currencies 675,109 668,085
Other income 1,210,202 1,072,756
Total non mark-up / return / interest income 5,013,032 4,497,826
17,698,138 11,660,073
Non mark-up / interest expenses
Administrative expenses 7,874,013 6,794,311
Other provisions / write offs / (reversals) 335,409 (34,422)
Other charges 7,066 10,456
Total non mark-up / interest expenses 8,216,488 6,770,345
Extraordinary items - -
Profit before taxation 9,481,648 4,889,728

Taxation - Current - for the year 498,748 283,083

Taxation - Current - for prior years 78,614 285,201
Taxation - Deferred 2,955,254 619,900
3,532,616 1,188,184
Profit after taxation 5,949,032 3,701,544
Unappropriated profit brought forward 3,274,439 1,384,490
9,223,471 5,086,034
Transfer from surplus on revaluation of fixed assets - net of tax 94,148 94,214
Profit before appropriations 9,317,619 5,180,248
Appropriations
Transfer to:
Statutory reserve (1,189,806) (740309)
Capital reserve - -
Revenue reserve - -
Final cash dividend for the years ended December 31, 2004
(Rs.1.50 per share) and 2003 (Rs.2.25 per share) declared
Subsequent to the year end (777,000) (1165500)
(1,966,806) (1905809)
Unappropriated profit carried forward 7,350,813 3274439
 (Rupees)
Basic and diluted earnings per share 11.48 7.15

UNITED BANK LIMITED

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31, 2006

2006 2005
(Rupees in '000)

Mark-up / return / interest earned 32,991,603 20,158,860

Mark-up / return / interest expensed 12,126,809 6,045,948
Net mark-up / interest income 20,864,794 14,112,912

Provision against loans and advances - net 1,972,936 1,277,002

Provision / (reversal) for diminution in value of investments – net 74,573 112,666
Bad debts written off directly 269,349 38,140
2,316,858 1,427,808
Net mark-up / return / interest income after provisions 18,547,936 12,685,104

Non mark-up / interest income

Fee, commission and brokerage income 3,876,799 2,543,739
Dividend income 837,338 202,343
Income from dealing in foreign currencies 659,726 675,109
Gain on sale of securities 280,864 382,419
Unrealized gain/ (loss) on revaluation of investments classified as
held for trading (3,335) (780)
Other income 1,296,996 1,210,202
Total non mark-up / return / interest income 6,948,388 5,013,032
25,496,324 17698136
Non Mark-up / Interest Expenses
Administrative expenses 10,952,275 7,874,013
Other provisions / write offs / (reversals) 226,313 335409
Other charges 25,980 7,066
Total non mark-up / interest expenses 11,204,568 8,216,488
Extraordinary items - -
Profit before taxation 14,291,756 9,481,648

Taxation - Current - for the year 3,412,791 498,748

Taxation - Current - for prior years 45,225 78,614
Taxation - Deferred 1,365,508 2,955,254
4,823,524 3,532,616
Profit after taxation 9,468,232 5,949,032
Unappropriated profit brought forward 7,350,813 3,274,439
16,819,045 9,223,471
Transfer from surplus on revaluation of fixed assets - net of tax 94,454 94,148
Profit available for appropriation 16,913,499 9,317,619

(Rupees)
Basic and diluted earnings per share 14.62 9.19
 SWOT ANALYSIS

INTERNAL STRENGTHS

Ownership of Strong Group

The UBL is under the ownership of two very strong (financially) group (The Abu
Dhabi Group & the Best way Group). The Chairman of the bank is His Highness
Sheikh Nahayan Mubarak Nahayan who is leading role of Abu Dhabi Group. Abu
Dhabi Group has also the ownership of Al-Falah Bank, and recently launched a GSM
Mobile Network company named WARID TELECOM. In Pakistan the largest FDI
(Foreign Direct Investment) is of the Abu Dhabi Group.
The Deputy Chairman of the UBL is Sir Mohammad Anwar Pervaiz (OBE) who is the
leading role of Best way Group. This group has started its business in England and
emerges in the top ten large business entities of England. This group recently
installed the Cement Plant of Pakistan in Tehsil Chowk Saidan Shah District
Chakwal.
Huge Deposits
The bank has stable growth in deposits since its emergence. The UBL is the second
largest bank in Pakistan and because of its 48 years long existence it is the
trustworthy bank in Pakistan and outside Pakistan.
Advances on Sound Basis
The loan facility provided by the bank is on sound basis. They have many checks
and documentation that secure their money after advancing. With their strategy there
are very less chances of non-recovery from the debtor.
Infrastructure
Because of its 1000 Domestic and 15 Overseas Branches they have very good
infrastructure and are prevailing now outside Pakistan also. UBL continually looks for
ways to become more efficient and to increase their profit margins.
Brands
UBL has launched their products and varied services with particular brand names
that is now-a-days a competitive strategy in its own. They are launching same
Schemes that are already existent in the banking sector but because of giving them
brand names they are creating unique identity. Their popular brands are UBL Wallet
(ATM Card), UBL Address (house loan), UBL Drive (car financing), UBONLINE
(online banking services), HAMRAH (traveler Cheque), Click N Remit, TezRaftar
(remittance service) etc.
Fast Service
Another very important aspect of UBL is its fast service. Everything goes very
quickly. If you are looking for a loan, or you want to deposit money or you want to
pay your bills their services are so fast that they respond the customers very quickly.
Like other banks customers do not have to wait for the long time.
Financial
UBL has financial strength as they are gaining profit from the advances that they
provide to the organizations.
Services
UBL is providing lot of services to its customers like incase of remittances they have
services like Click N Remit online service, TezRaftar is an other remittance service,
UB-ONLINE is their online service. Money Gram is their service for foreign currency
remittance from outside Pakistan and Hamrah is their service regarding rupee
Traveler Cheque.
Promotion Criteria
The promotion criterion of employees is made up of passing the Diploma
Examination of Pakistan Institute of Bankers (IBP).
Good Reputation
Because of its quality management, marketing, innovation in products and services
they have established a good reputation in the banking sector.

INTERNAL WEAKNESSES

Centralization
UBL is centralized. It means authority is not delegated to branch level. Manager
cannot take initiative regarding different decisions such that for giving finance.
Low Promotional Activity
The majority of people are not well aware about the products of UBL. It is due to
their very low services of promotional activity.

Low Motivation Level

There is low level of motivation in the employees of the bank
Reactive Approach
UBL Management has opted reactive approach they respond to the market very
slow and are reluctant to take initiative before the problem arise.

EXTERNAL OPPERTUNITIES

Mobile Banking
Mobile banking is a concept that has started to find its roots in the banking sector.
So it is a big opportunity for UBL to avail this chance at big level.
International Expansion
Opportunities exist for expansion of UBL chains in the International Arena, in
particular in Germany and Europe. Particular Invention must be given to the
individual country’s customs and cultural practices to be successful.
Trade Shows
UBL should organize trade shows for the promotion of export for that they should
finance the companies those who wanted to internationalize and wanted to
introduce their product and services outside Pakistan.
Liberalization
Liberalization is a concept that in under discussion around the world as this is
going to be implemented by WTO in a few years to come. With the liberalization
many industries are expected to be open in Pakistan and with free trading lot of
trade activity is expected. So keeping in view these perspectives there is great
opportunity for UBL to be stronger.
Sociocultural
An external opportunity exists in efforts to improve the social environment of local
communities and society in general by offering innovative, community –
involvement programs.
EXTERNAL THREATS

Rapid Changes
The rapidly changing environment in the banking sector and the quick response of
the other banks to these changes can be a threat for UBL.
Customer Behavior
What customer really wants is a difficult thing to identify as to identify the customer
perception and its behavior is complex procedure. So the changing needs of the
customer can be a threat for the banks.
Governmental Policies
Changing Governmental Policies instability in Politics can be seen as a threat for
the banking sector.
Competition
Competition can be the greatest threat for the UBL. As old banks have started
changes and many new banks are emerging as a strong entity so UBL will face a
strong threat from this competition unless the adopt pro – active approach to
handle these threats.
 BALANCE SHEET
For the years of 2004-05-06
HORIZONTAL ANALYSIS

Particulars Change %Age Change %Age

2004-2005 2005-2006
ASSETS Rs. (000) Rs. (000)
Cash and balance with treasury banks 10,218,244 42.85 14,877,161 43.68
Balance with other banks (4,970,127) -28.08 1,305,269 10.25
Lendings to financial institutions 493,081 -2.69 11,704,518 65.51
Investments 8,073,216 14.69 4,233,394 6.72
Advances 60,659,415 42.08 42,499,423 20.75
Other assets 3,390,190 76.36 2,232,696 28.52
Fixed assets 480,318 12.10 785,139 17.65
Deferred tax asset - net (2,921,887) -56.25 (1,366,344) -60.11
Total Assets 74,436,288 27.30 76,271,256 21.98

LIABILITIES
Bills payable 348,680 9.15 400,685 9.63
Borrowings from financial institutions 9,814,796 81.90 16,754,440 76.89
Deposits and other accounts 58,969,672 25.61 45,851,574 15.85
Sub-ordinated loans 499,192 14.62 1,999,152 49.99
Liabilities against assets to financial lease (288) -100.00 0 0.00
Other liabilities 499,997 8.76 3,070,288 49.48
Total Liabilities 70,132,049 27.48 68,076,139 20.92

PRESENTED BY:
Share capital 0 0.00 1,295,000 25.00
Reserves 309,533 5.23 2,073,412 33.31
Unappropriated profit 4,076,374 124.49 8,079,040 185.69
Surplus on revaluation of assets (81,668) -2.73 (252,335) -8.67
Total shareholder's funds 4,304,239 24.79 8,195,117 37.82
 PROFIT AND LOSS ACCOUNT
For the years of 2004-05-06
HORIZONTAL ANALYSIS

PARTECULARS Change 2004 - 05 %Age Change 2005 - 06 %Age

Rs. (000) Rs. (000)

Net interest income 6,611,791 88.14 6,751,882 47.84

Net provision 1,088,934 321.34 889,050 62.27

Non funded income 515,206 11.45 1,935,356 38.61

Total revenue 6,038,063 51.78 7,798,188 44.06

Administrative expenses 1,079,702 15.89 3,078,262 39.09

Profit before tax 4,591,920 93.91 4,810,108 50.73

Profit after tax 2,247,488 60.72 3,519,200 59.16

 BALANCE SHEET
HORIZONTAL ANALYSIS COMMENTS

ASSETS:

 Cash is increased from 2004 to 2006.it shows that the liquidity position
of the bank is going to be strong, so it is good sign for the bank. Therefore
bank has strong liquidity position.
 There is decreasing trend in balance with other banks in 2005 which is
a negative sign. But in 2006 the bank takes necessary steps to increase this
trend.
 In the field of investment there is increasing trend with the passage of
time. It is common term of finance” more investment more return.
 As we know that main source of profit of a bank is the difference
between the percentages of interest, Banks pay less rate of interest than
receiving the interest from the customers. In this case advance to customers
increases from 2004 to 2006. It means that UBL running very well.
 As UBL’s earnings increased yearly, than bank can purchase more and
more of fixed assets more assets mean that bank has more capacity to pay
off its liabilities. There is increasing trend in field of fixed assets. It is due to
purchase of new assets.
 Other assets have an increasing trend which is a positive sign.
Increase in assets increase the worth of organization.
LIABILITIES:

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

 Borrowings have increasing trends. Borrowings are increasing year by year. I

think UBL doing this for increasing his profits, because his borrowings power
increase while UBL pay its obligations in well form.

 Bills payable have also increasing trend, it increases current liabilities. But
variability in increasing trend not more. It show that bank take necessary
steps to control this increasing trend.

 Other liability has an increasing trend not good because increase in liability
decreases the liquidity position of the bank. The increasing trend in 2004-05 is
only 8.76%, but in 2005-06 this is increase by 49.48%.

 Share capital remains same in 2004-05 but in 2005-06 it is increase by 25%

that shows the creditability of bank.

 The UBL is increasing its reserves and Un-appropriated profit in order to

increase its lending power, which is good sign,
 PROFIT AND LOSS A/C
HORIZONTAL ANALYSIS COMMENTS

INCOME:

 Interest income has increasing trend, but in 2004-05 it increases by 88.14%,

while in 2005-06 it increases by decreasing rate at 47.84%. It means that
interest received by the bank is decreasing with the passage of time. It is not
good for a banking company.
 UBL provide many services for their customers and also act as an agent of
the customer. The banks receive fee and commission after their services;
bank is taking more fees as compared to previous years 2004 and 2005. This
is good for the ban.
 Non-funded income in2004-05 increase only by 11.45%, but in 2005-06 it is
increase by 38.61%. This shows the investment of bank in healthy
organization.

EXPENSES:

 There is huge increase in Net provision against loans and bad debts in 2004-
05 by 321.34% which decrease its net interest income. But in 2005-06 this
condition has change and net provision increase by decreasing rate at
62.27%.
 Administrative expenses of UBL also grew by 16% in 2004-05 due to
continued investment in the consumer business, technology and premises.
Admin.
 Expenses grew by 39% in 2005-06 due to ongoing investment in upgrading
the Bank’s branch network.
 Tax increases which are not bad because it is interrelated with profit, if profit
increased, tax also increase.
 Trend Analysis

Trend statement of Balance Sheet Items:

Assets 2006 2005 2004
Cash and balance with treasury banks 205.25 142.85 100
Balances with other banks 79.29 71.92 100
Lendings to financial institutions 161.06 97.31 100
Investments 122.39 144.69 100
Advances 171.56 142.08 100
Other assets 226.65 176.36 100
Fixed assets 131.88 112.10 100
Deferred tax assets- net 17.45_ 43.75_ 100
Total assets 155.28 127.30 100

Liabilities + Shareholders Equity

Bills payable 119.66 109.15 100
Borrowings from financial institutions 321.85 181.96 100
Deposits and other accounts 145.52 125.61 100
Sub-ordinated loans 171.38 114.26 100
Liabilities against assets subject to
financial lease -- -- 100
Other liabilities 162.58 108.76 100
Total liabilities 154.15 127.48 100
Share capital 125 100 100
Reserves 140.28 105.23 100
Unappropriated profit 379.60 224.49 100
Surplus on revaluation of assets 88.84 97.27 100
Total liabilities + Equity 155.28 127.30 100

Trend statement of Profit And Loss Account Items:

Particulars 2006 2005 2004
Net revenues 278.16 188.14 100
Provision 683.69 421.34 100
Non- Interest income 154.48 111.45 100
Non- Interest expenses 165.49 121.36 100
Profit before taxation 292.28 193.91 100
Taxation 405.96 297.31 100
Profit after interest and taxation 386.10 160.72 100

Quarterly Trend Analysis

Bank Level
 PROFITABILITY RATIOS:

Return on Equity Capital: = (Net profit after tax–Preference dividend) X100

Equity share capital

Particulars 2004 2005 2006

Rs. (000) Rs. (000) Rs. (000)
N.P.A.T 3,701,544 5,949,032 9,468,232
Equity share capital 17,364,031 21,668,270 29,863,387
ROE: 21.32% 27.46% 31.71%
 Return on Equity
31.71
32
27.46
28
24 21.32

Percentage
20
Years
16
12 Ratio

8
4
0
2004 2005 2006
Years

This ratio reveals how well the resources of a firm are being used, higher the ratio,
better are the results. ROE relatively increases from 2004 to 2006. The reason
behind is that the bank increase rate of revenues in 2005-06 as compare to the rate
of increase in expenditures.

Earning per share: = Net profit after tax–Preference dividend

No. of equity shares

Particulars 2004 2005 2006

Rs. (000) Rs. (000) Rs. (000)
N.P.A.T 3701544 5949032 9468232
No. of equity shares 518,000,000 518,000,000 647,500,000
EPS ratio: Rs. 7.15 Rs. 11.48 Rs. 14.62
 Earning Per Share

16 14.62

11.48
12
Rupee 7.15 Years
8
Ratio

0
2004 2005 2006
Years

E.P.S. calculated for a number of years indicates whether or not the earning power
of the company has increased. E.P.S. of bank relatively increases from 2004 to
2006. Because there is no increase in share capitals in the year 2005 but increase in
profit. In 2006 there is increase in share capital due to issuance of bonus shares.
But, relatively greater increase in net profit as compare to no. of shares.

Dividend pay-out ratio: = Dividend per equity share

EPS

Particulars 2004 2005 2006

Rs. (000) Rs. (000) Rs. (000)
Dividend per share Rs.1.50 Rs. 2.50 Rs. 3.00
EPS: Rs. 7.15 Rs. 11.48 Rs. 14.62
Dividend pay out ratio: 20.98% 21.78% 20.52%
 Dividend Pay-out Ratio

24 20.98 21.78
20.52
20

Percentage
16
Years
12
Ratio
8
4
0
2004 2005 2006
Years

To find the extent in which EPS has been used for paying dividend and to know what
portion of earnings has been retained in the business. A lower pay-out ratio means a
stronger financial position of the company. The reason behind is that the board of
directors of bank has proposed a cash dividend increase in respect of 2006 of Rs.
3.00 per share (2005: cash dividend Rs. 2.50 per share).

Return on Assets: = Net profit after tax X100

Total assets

Particulars 2004 2005 2006

Rs. (000) Rs. (000) Rs. (000)
N.P.A.T 3,701,544 5,949,032 9,468,232
Total assets 272,612,663 347,048,951 423,320,207
Return on assets ratio: 1.35% 1.71% 2.24%
 Return on Asset

3
2.24
Percentage
2 1.71
1.35 Years
Ratio
1

0
2004 2005 2006
Years

This ratio shows that the return is larger in 2005 and 2006 as compared to return on
assets in the year 2004. interest and discount on loans which is the major source of
revenue for bank has increased in 2005 and2006 as compared to 2006,
Another reason of increasing in return is the increasing in lending rate and
decreasing in financial cost. NPAT increasing rate (2004-05: 60.72%) is more than
the increasing rate of total assets (2004-05: 27.30%).

ANALYSIS FOR LIQUIDITY

Current ratio: = Current assets__

Current liabilities
 Particulars 2004 2005 2006
Rs. (000) Rs. (000) Rs. (000)
Current assets 59,904,402 64,659,438 92,546,386
Current liabilities 15,786,968 25,950,444 43,105,569
Current ratio: 3.79:1 2.49:1 2.15:1

Current Ratio

5
3.79
4

3 2.49
Rupee

Years
2.15
2 Ratio

0
2004 2005 2006
Years

Current ratio is a general and quick measure of liquidity of firm. It is an index of the
firm’s financial stability. It is also an index of technical solvency and an index of the
strength of working capital. A ratio equal to 2:1, i.e., current assets double the
current liabilities, is consider to be satisfactory. C.R. relatively decreases from 2004
to 2006. The reason behind is that, in 2005 and 2006 bank’s borrowings from
financial institutions (liabilities side) has increase and balance with other banks
decrease as compare to 2004.

ANALYSIS FOR LONG TERM FINANCIAL POSITION

Debt – Equity ratio: = External Equities____

Shareholders Equities
 Particulars 2004 2005 2006
Rs. (000) Rs. (000) Rs. (000)
External equity 255,248,632 325,380,681 393,456,820
Shareholders equity 17,364,031 21,668,270 29,863,387
Debt-equity ratio: 14.69 15.02 13.18

Debt Equity Ratio

18
14.69 15.05
15 13.18
Percentage

12
Years
9
Ratio
6
3
0
2004 2005 2006
Years

The purpose is to get an idea of the cushion available to outsider on the liquidation of
the firm. The lower the ratio, the higher the level of the firm’s financing that is being
provided by shareholders. If the owner’s interest is greater than that of creditors, the
financial position is considered to be sound. Debt-equity ratio increase of bank in
(2005: 15.02) but decreases in (2006:13.18) as compare to (2004:14.69)
Reasons behind is that increase in borrowings from financial institutions by 81.96%
in 2005. But in 2006 debt-equity ratio show a good position of bank because
shareholders equity increase as bank issued as bonus shares which increase his
internal equity.

Fixed Assets-to-Shareholder’s funds Ratio: = Fixed Assets______

Shareholder’s Funds
 Particulars 2004 2005 2006
Rs. (000) Rs. (000) Rs. (000)
Fixed assets 3,969,006 4,449,324 5,234,463
Shareholders funds 17,364,031 21,668,270 29,863,387
FA-to shareholders funds ratio 0.22:1 0.21:1 0.18:1

Fixed Asset-to-Shareholders Funds

0.5

0.4

0.3
Rupee

0.22 Years
0.21
0.18 Ratio
0.2

0.1

0
2004 2005 2006
Years

If the ratio is less than 100%, it implies that owner’s funds are more than total fixed
assets and a part of the working capital is provided by the shareholders. When the
ratio is more than 100%, it implies that owner’s funds are not sufficient to finance the
fixed assets and the firm has to depend upon outsiders to finance the fixed assets.

Reason of decreasing this ratio is that shareholders funds increase more sharply
(2004-2005: 24.79%) as compare with fixed assets (2004-2005:12.10%).an other
reason of decreasing this ratio is that, banking company is not allowed to invest too
much funds in the fixed assets because its primary objective is to lend money out
borrowing. there is slight increase in investment in fixed assets as compared to last
year. This investment will no affect much more to the profitability of the bank.

Interest coverage ratio: = EBIT_____

Interest Expenses
 Particulars 2004 2005 2006
Rs. (000) Rs. (000) Rs. (000)
EBIT 11660073 17698136 25496324
Interest expenses 6770345 8216488 11204568
Interest coverage ratio 1.72 times 2.15 times 2.28 times

Interest Coverage Ratio

3
2.15 2.28
Years
Times

2 1.72
Ratio

0
2004 2005 2006
Years

The higher the ratio, the greater the likelihood that the company could cover its
interest payment without difficulty. It also shows the firm’s capacity to take on new
debt. A high ratio assures the lender a regular and periodical interest income. I.C.R.
relatively increases from 2004 to 2006. The reasons of increasing this ratio are,
increasing the EBIT due to increase in Non mark-up / interest income.
NOTE: An interest coverage ratio of only 1 indicates that earnings are just sufficient
to satisfy the interest burden.

Summery of
Financial Ratios Analysis
Ratios 2006 2005 2004
Return on Equity % 31.71% 27.46% 21.32%
Earnings per share (Rs.) 14.62 11.48 7.15
Dividend pay-out ratio 20.52% 21.78% 20.98%
Return on assets 2.24% 1.71% 1.35%
Current ratio 2.15 :1 2.49 :1 3.79 :1
Debt-equity ratio 13.18 15.02 14.69
Fixed assets-to-shareholders funds 0.18:1 0.21:1 0.22:1
Interest coverage ratio 2.28 times 2.15 times 1.72 times

RECOMMENDATIONS
United Bank Limited is a well known and successful financial institution in the
banking sector. I would like to suggest some recommendations for the deficiencies
which I have found during my internship.

 In order to complete with the other banks ATM services should be

expanded throughout the country.
 Separate counters must be set up to give the facility of bills collection
of all utilities like WAPDA, SUI GAS, and TELEPHONE.
 All the employees should have regular job experience all out-look
towards banking. The promotion policy should be adjusted.
 Proper training programs should be introduced to train the less
educated old staff.
 Do not smoke in the branch, especially in the presence of customers.
Not only is smoking harmful, it is also indicative of a casual attitude.
 Give your undivided attention to the customer; if the phone rings,
politely request for a call back.
 Treat customers the Way you want to be treated.
 Dress professionally and adhere to the highest personal grooming
standards. Customers base their impressions about the bank on the quality of
its employees.
 A proper current and saving account balance should be kept every time
to increase the deposits with the bank for a longer period of time.
 Recruitment for new jobs should be done fairly and on merit.

CONCLUSION
2005 has been declared as a “Year of Deposit” by the Top Management. As a step
to realize this, we are pleased to announce the national re-launch of the much
awaited UBL Profit Certificate of Deposit (COD), now with a new features addition of
Monthly Profit Payment.

To accommodate the banking need of low income group, United Bank Limited is
pleased to launch the UBL Basic Banking Account Scheme (UBL BBA) from
February 25, 2006 across its branch network all over Pakistan. This is primarily
aimed toward helping the low income group to benefit from the banking services
without having the pressure to maintain specific balance amount with the banks.

In order to diversify revenue sources UBL in the process of establishing Islamic

Banking and Insurance operations which represent a natural extension of our
business. These businesses will not only create longer-term shareholder value but
also enable UBL to offer an additional array of services to our customers. We expect
Islamic banking operations to commence in 2006 with the insurance business to
follow in 2007.

BIBLIOGRAPHY
REFERENCE: From Books
 Financial Management
By: James C. Van Horne
 Financial Statement Analysis
By: Charles H. Gibson
 Advanced Accounts
By: M. A. Ghani

REFERENCE: From Websites and Bank

 www.ubl.com.pk
 Annual reports of the bank.

REFERENCE: From Persons

 Raza Ahmed Farooqi. (Supervisor)
 Usman Bashir. (Officer Grade II)