BANK ALFALAH LIMITED Overview:

Bank Alfalah Limited was incorporated on June 21, 1997 as a public limited company under the Companies Ordinance, 1984. The bank is engaged in commercial banking and related services as defined in the Banking Companies Ordinance, 1962. The bank was privatized in 1997. The Abu Dhabi Group, owner of the bank, has invested in technology to have an extensive range of products and services. These broadly include general banking, financial services, Islamic banking, consumer banking, treasury and international banking. Because of its superlative performance over the years the bank has been assigned short-term rating of A1+ and long term rating of AA. The bank currently has a network of 282 branches. This includes 48 Islamic banking branches and 7 foreign branches in Bangladesh, two in Afghanistan and one offshore banking unit in Bahrain. Bank Alfalah has expanded its branch network and deposit base, along with making profitable advances and increasing the range of products and services. Bank Alfalah is the 5th largest bank of Pakistan in terms of its assets that are 6% of the total banking sector assets.

Major Functions of the bank

o o o o

Branch banking
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Deposits, Remittances, Foreign trade, Lockers.

Consumer banking
Credit Cards, Auto loans, Home loans, Consumer durables, RTCs. Telephone banking, ATMs, Online banking Short/Long Term finance, Trade finance, structured finance. Money market, Forex market, Investments, Government securities, Correspondent banking.

Electronic Banking Corporate banking Treasury & Investment

Major Competitors
* Arif Habib Bank Ltd. * Askari Bank * Bank AL Habib

* Allied Bank of Pakistan * BankIslami Pakistan Ltd. * Faysal Bank * Habib Bank * Habib Metropolitan Bank * KASB Bank * MCB Bank Limited * NIB Bank * PICIC Commercial Bank * Saudi Pak Non-Commercial Bank * Soneri Bank * Union Ban * United Bank * Bank Of Punjab * Citi bank * Standard chartered Bank Ltd. * ABN Amro Bank Ltd. * HSBC Ltd. * Dubai Islamic Bank Ltd. * Mehran Bank Ltd. * Al Meezan Bank Ltd.

Credit Rating
PACRA, a premier rating agency of the country, has rated the bank AA (double A), Entity rating for the Long Term and A1 + for the Short Term. These ratings denotes a very low expectations of credit risk, strong capacity for timely payment of financial commitments in the long term & by highest capacity for timely repayment in the shot term, respectively. Further, the unsecured debt of the bank has been awarded a credit rating of AA- (double A minus).

Quantitative Analysis
Ratios
Net Profit Before Tax Income Expense Ratio Return on Equity Return on Assets Advance to Deposits Ratio Cash Dividend Stock Dividend Earning per Share Net Profit After Tax Net Interest Margin Equity Multiplier Cash to Total Assets Equity Capital to Total Assets Capital adequacy ratio (CAR)

2008 %
5.78 3.42 9.17 0.38 64.07 15 % 23% 1.63 4.19 3.07 20 15 4.44 8.03

2007 %
17.59 3.84 25.72 1.04 62.67 30% 3.92 12 2.78 20 14 4.93 9.85

2006 %
12.11 4.13 20.37 0.67 62.63 33.33% 2.91 8.31 2.16 22.51 14.72 4.88 9.48

Peers %
40 4.50 25 1.53 70.33 6.50 27 5 16.50 14 6.50 11.32

Profitability Ratios
Net Profit before Tax:
In 2007 the Net Profit before Tax increased by 45% from (12.11% to 17.59%) as compared to 2006 because of increase in revenue but in 2008 it decreased by 67% from 17.59% to 5.78% as compared to 2007 due to huge increase in its Non interest Expenses that shows it operational deficiency which is also not good while making the comparison with peers of banks n the cross sectional anlysis.

Income to Expense Ratio:

Interest income to expense Ratio in consecutive three years that are 2006, 2007, 2008 is consistently decreasing that shows the expenses of the bank is increasing as compare to its income by 10% only in 2008. On the other hand the income did not increased at that ratio in 2008 as compared to 2007 as increased in 2007 relatively 2006 but on average comparatively with other banks it is good.

Net Profit after Tax Ratio:

In 2007 as compared to 2006 there was an increase in the Profit margin from 8.31% to 12% but in 2008 as compared to 2007 there is a decreased by 66%. The major reason as discussed earlier is that the bank has not earned the revenue as he earned in 2007 & on the other hand its Non mark-up expenses increased by 10%. While the making the comparison with peers it is in very bad Condition.

Return on Equity:
Return on equity increased by 26.50 in 2007 as compared to 2006 due to increase in good increase in net income that was 77 relatively to 2006 but in 2008 it decreased by 64% as compared to 2007 because in 2008 its equity level increased by only 5 % but the increase in net income is only 3.34% due to less generating revenue & increase in operational expenses. The big reason for this was the bad political instability in the country due to which the investor was also reluctant to invest the money. The return on equity is not so good according to the peers in 2008 as it was in previous years.

Return on Assets:
The return on assets Increased in 2007 from 0.67% to 1.04% that was good increase. But in 2008 as compared to 2007 it decreased by 1.041% to 0.38 due to less increase in the net income that is only 5% in 2008. There is no doubt to say that the Bank Alfalah has not utilized its assets properly in 2008 as it did in 2007 which shows its minimum operational efficiency. So the return on assets in trend analysis is not good but according to the peers group of banks it was good n 2006 & 2007 but not in 2008.

Cash Dividend:
The very important point in this analysis is that the bank has declared a cash dividend of 15 % while its return on equity is decreased by 64% & similarly its profitability is also not in good position. On the other hand it has not declared any kind of dividend when he made a huge increase in its return on equity by 26.50% in 2007 and so on. So the investors should not invest only due to its 15% cash dividend but they must have to analyze its Profitability ratios that are not good in the last proceeding year (2008).

Assets Management Ratios

Advances to Deposits Ratio:
In advances to deposits ratio the utilizations of the deposits in the form of advances is almost good. That is 62 % on average & it is also good on average according to the peers while making the cross sectional analysis.

Liquidity Ratio
Cash to Total Assets:
This ratio relatively last three years that is from 2006 to 2007 is very good that shows its good liquid position. It also means that it can satisfy the needs of the depositors very easily that will help to build its market creditability & comparatively with peers it is also good.

Risk Measuring Ratio

Capital Adequacy ratio (CAR):
According to the trend analysis the capital adequacy ratio that is on average is 9% is good because it is showing that it can bear the market risk or loss if happens due to any reason. 2006 to 2008 it is almost maintaining the same capabilities of the risk bearing that is also a positive sign for its financial market strength.

Cash Dividend:
The very important point in this analysis is that the bank has declared a cash dividend of 15 % while its return on equity is decreased by 64% & similarly its profitability is also not in good position. On the other hand it has not declared any kind of dividend when he made a huge increase in its return on equity by 26.50% in 2007 and so on. So the investors should not invest only due to its 15% cash dividend but they must have to analyze its Profitability ratios that are not good in the last proceeding year (2008).

Conclusion
The bank Alfalah has a significant progress in the banking sector, and it has achieved this position in a very short time period. The bank Alfalah has a great share in the market as well as high growth rate as compare to the all other banks, due to its best customer dealing, compensation to customers & employees as well as organizational control due to the best & powerful planning & controlling sector. But as for as its profitability, assets utilization & operational efficiency is concerned then it is not so good as other banks have while we makes its cross sectional analysis with other banks. No doubt It is very good in trend analysis but to survive in the market the

bank has need to make good profitability, assets utilization & operational efficiency as other banks have if Bank Alfalah wants to survive in the long run. O there is no doubt that the Bank Alfalah is the best in its field, but it has also some weak points like some of resource are still un-utilized and the political pressure of the reference about the posts in the organization that my hit its operational efficiency.

Suggestions
Some following suggestions, which will help the management of bank Alfalah for more control & greatest position, are; The bank should improve its online banking. The bank should control its Non mark-up expenses. The bank needs to expand the network of their branches in overseas to generate the more revenue. The assets should be utilized properly that will contribute to its profitability. They need to more focus on the consumer banking, because this feels requiring more attention & growth. They need to improve & grow the Employee development Progress & plans. They need to decrease their rate of interest on deposits to compete their competitors.

Note:
For making the cross sectional analysis (Peers group) with Bank Alfalah the following banks data has used: Allied Bank Limited Muslim Commercial Bank Limited Habib Bank Limited United Bank Limited