Beruflich Dokumente
Kultur Dokumente
DEDICATION
This piece of work is dedicated to my beloved Parents & Teachers Whose prayers and affection are the source of strength For me in every field of life May God bless them with good health and long life And to All those who love and care about me.
PREFACE
Intelligence is the sum of total capabilities. The justice to ones intelligence is to apply it at right place. Internship is an opportunity to do justice with your capabilities. It is a tool to apply your intelligence and gain supervised practical experience during educational period. Fortunately I had the opportunity to be the internee at a very competent BANK ALFALAH LIMITED at Gulberg 3, Main Boulevard, Lahore.
During my internship I had been rotated within different departments as CRO (customer relation officer), operations, remittances, clearing and trade finance etc. This movement and working provided complete knowledge of their working to me; they also explained each and every concept to make clear to me. This knowledge and practical experience was the thing which helped me to complete this internship report. This report includes a complete introduction of Bank Alfalah limited and banking sector, their complete functioning and performance, SWOT analysis and financial analysis of their statements. In the end the conclusion of whole report is written along with certain suggestions for the organization.
ACKNOWLEDGEMENT
I bow my head before Almighty ALLAH Who rendered me knowledge as well as courage to complete this task by putting my best efforts in it. I pay thanks to all my teachers whose efforts made me capable of understanding the things happening technically.
I owe a debt of gratitude to Bank Alfalah limited for providing me this golden opportunity to interact with the business in a practical situation.
I express my immense appreciation for Prof Nisar Ahmad my internship teacher and Mr. Syed Asad Ali Shah, Operations officer, Bank Alfalah Limited, whose outstanding Managerial skills, breadth of knowledge and counseling assured this projects clarity and completeness. Without their able guidance I was unable to complete my project.
I highly thank the staff members of the Bank Alfalah Limited who really cooperated with me and provided me their complete guidance and gave me their precious time and taught me basics of banking as well as new concepts of banking.
I would like to express my deepest gratitude to my Parents, without their prayers I am nothing. I acknowledge the endless efforts and support empowered by the prayers of my Wellwishers who helped me for the successful completion of this project.
EXECUTIVE SUMMARY
My experience of carrying out the internship in Bank Alfalah was very informative and enjoyable in a very good working environment. I explored the real life practical business activities and had the opportunity to incorporate these with the pure academic theoretical learning. However, when the time come to put all the experiences and learning from the internship in the form of a report, I found it difficult in the beginning but when I started, ALLAH helped me and I enjoyed writing all that I learnt. Banking is not a new notion for people but it has very old background when Greeks used to keep their money and other valuable with the priests in the temples. This practice gives clear imprecations that the banking was started well in the past and then moved forward so rapidly and become a necessity of every business entity as well as individuals in the shape of todays modern banking system. Bank Alfalah Limited was incorporated on June 21, 1997 as a Public Limited Company under the Companies Ordinance 1984. Its banking operations commenced from November 1, 1997. Bank Alfalah has a varied product and service range to cater its valued customers. Undoubtedly Alfalah is one of the major players in Pakistans banking structure with the distinction of market leader within its competitors. Bank Alfalah is enjoying its strong financial and market position with many strengths however, there is still some room for improvement. To stay in competition and have competitive edge Bank Alfalah has to undertake some certain decisions according to the Pakistans scenario. The financial analysis clearly describes that Bank Alfalah has a profitable business in Pakistan however; analysis also indicates slight problems in the operations. The overall condition of the bank is excellent.
INDUSTRY PROFILE
BANKING HISTORY
BANK.
Many
authors, historians and academicians have different point of view about this word; some of them think It is derived from Italian word Banco or Banque which means desk or counter that they used during renaissance and on the other hand some advocate the notion that it comes from the German word Back which means joint stock fund and then later when Germans occupied the major parts of Italy Back was transformed into bank. It is very much difficult to decide which opinion is more authentic and legitimate as there are no such evidences available to corroborate them. However, the concept of banking is quite old when Greeks in 2000 BC used to keep their money and other valuables with the priests in the temples and these priests were also considered as financial agents at that time. Later on the other example of banking was observed when people started to deposit their money and valuables to goldsmiths as they had good reputation of trust, honor and solvency in the society and also had strong safes to protect their money from thieves. Soon these goldsmiths began to issue receipts for the money deposited with them. These receipts were fully accepted in payment of debts, and then the receipts were drawn in such a way that it entitled any holder to claim the specified amount of money from goldsmiths. These receipts can be considered the earlier bank notes. Moving to the modern banking first bank was founded in 1401 as Bank of Barcelona and then later on in 1407 another bank was founded in Genoa as Bank of St George; this bank dominated the business in the Mediterranean. Later on when Lombardy merchants came to England in the fourteenth century and settled in the parts of the city of the London flourished the modern banking structure. In 1694 the Bank of England was founded by act of parliament. The main purpose of the act founding the bank is to raise money for the War of the League of
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Augsburg by taxation and by the novel device of a permanent loan on which interest would be paid but the principle would not be repaid. In the following year another bank was founded with the name of Bank of Scotland.
COMPANY PROFILE
Prioritizing its product portfolio in line with consumer needs and wants, the bank is committed to develop products that give more value to its customer be it a simple bank
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account or complex financing of a major project. Designing product portfolio in response to customers preferences, banks products like Royal Profit, Royal Patriot and Royal Custodial are prime examples of quality and innovation providing timely banking opportunities to its customers. Assessment of the needs and wants of its customers is an on going process at Bank Alfalah, which helps it to continually develop new products and services. Some of our new products in the pipeline include Royal Forex, ATM Network and credit cards. To continuously offer courteous, professional and advanced banking solutions, banks team has recently been energized by going through training programs with a focus on Information Technology. With a team of talented, service-dedicated professional bankers, Bank Alfalah commits all its energies, resources and time to cater to all banking and financial needs of its customers. To make banking solutions accessible to more and more people, BAL has embarked upon a rapid expansion program, aiming to provide a networking that makes its services available to any of its customers in all the major urban centers of Pakistan with a view to go international. With its key indicators of progress already soaring to new heights, the bank is committed to put all its energies, resources and time to bring higher value and satisfaction of its customers, employees and shareholders. Technological developments are opening up new vistas of solutions for distributing traditional financial products. Concurrently, rapid change in customer preferences has resulted in a major shift from manual to automated services of the bank. Information technology today, is the key to sustain and succeed in the corporate world. Therefore, during the recent past, Bank Alfalah made heavy investments, towards enhancing its capabilities in the area of automation and technology. BAL is well positioned to meet client needs, with improved competitive advantage.
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VISION
To be the premier organization operating locally & internationality that provides the complete range of financial services to all segments under one roof.
MISSION
To develop & deliver the most innovative products, manage customer experience, deliver quality services that contributes to brand strength, establishes a competitive advantage and enhances profitability, thus providing value to the stakeholders of the bank.
CREDIT RATING
PACRA, a premier rating agency of the country, has rated the bank AA (double A), Entity Rating for long term and A1+ (A one plus) for the short term. These ratings denote a very low expectation of credit risk, strong capacity for timely payment of financial commitments in the long term and by highest capacity for timely repayment in the short term, respectively. The ratings of first and second and third unsecured listed and subordinated TFC issues of PKR 650 million, PKR 1,250 million and Rs.1, 325 million have been maintained at AA- (Double A minus).
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METHOD OF COMMUNICATION
A good deal of verbal interchange takes place in bank each day. It is a two way street. The competent officer discusses rather than direct, listens as well as interacts. The bank makes the communications channel more effective by staff meeting eventually it is an extension of the conversational or discussion technique but embraces a larger segment of the organization. Such meetings are regular features of efficiently operated bank and take a wide variety of forms, ranging from daily or weekly officers meetings to annual weekly conferences. The major portion of communication necessary for the day to day operations of a bank consists of simple person to person conversation more complex ideas, however, gain clarity if they are put in writing. Thus the bank is talented in the ability to write clearly which is an invaluable management talent that needs constant practice and development.
MANAGEMENT STYLE Management is a process of utilizing material and human resources to accomplish designated objectives. It involves the organization, direction, coordination and evaluation of people to achieve these goals. The role of a manager is to assemble the best work team he can obtain and then to provide a supportive motivational environment to guide that team to accomplish the necessary objectives. It involves organizing, motivating, leading, training communicating with and coordinating others.
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The management of the Bank Alfalah focuses on some of the objectives that it wants to achieve. The way managers treat and deal with their subordinates in order to accomplish the multiple objectives of the organization is determined primarily by management system of beliefs about the nature of man and about the determinants of cooperation in an organized endeavor.
MOTIVATION
The term motivation implies action to satisfy a need. Motivation can be defined as a willingness to expend energy to achieve a goal or a reward. The management styles adopted by the bank affect greatly, and employees are motivated in order to enhance their performance and achieve the desired goals.
PROMOTION
Bank Alfalahs decisions about promotions are decided upon the basis of merit in ones present position and ability and potential to assume the impossibilities of higher level positions. Sometimes other factors are considered such as length of service, education, training courses completed and previous work history.
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ORGANIZATIONAL HIERARCHY
Chairman
Board of Directors
Executive Committee Chief Executive Officer Executive Incharges Assistant Executive Incharges Area Managers Branch Managers Operation Managers Officers
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BOARD OF DIRECTORS
Mr. Abdulla Nasser Hawalileel AlMansoori Director Mr. Abdull Khalil Al Mutawa Director
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Accounts Department Account Opening Department Car Financing Department Remittances / Clearance Department Advances Department Agricultural Loan Department Home Loan Department Information Technology Department Cash Department Trade Finance Department
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1. CRO department (Customer Relationship Officer) or 2. Account Opening Department 3. Operations Department 4. Remittances and clearing 5. Trade finance
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CRO Department
CRO department mainly includes the following activities Reception
RECEPTION
The first week of internship was in CRO department and at the reception; the duties assigned to me at the reception were as follows:
1. Fill the cash deposit slips for the customers 2. Fill the cheque deposit slips for the customers 3. To give any other information regarding Bank Alfalah Limited 4. To give tokens to the customers. 5. To do the filing of various forms.
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payment; here the customer has to select the mode of payment as Cheque. Then we write the amount in words and figures on the slip. Then put a crossing and a clearing stamp on the cheque. The officer signs the slip and gives it to the customer. These cheques are retained by the officer for entering them into the register. Days serial number of cheques starts from one, we write the account number, in which the cheque is deposited, then the cheque number and amount and then the name of bank whose cheque is it is entered in the register. These cheques are then handed over to the responsible persons, i-e the online cheques are given to the person dealing online, the local cheques are given to the person who is on posting of local cheques and cheques of other banks are given to the person who is in the clearing department.
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Current Account
The current account is the most common account and the most preferred amongst business concerns. There is no restriction on the amount of withdrawal. Current account enables the client to do cash transactions in a more efficient manner.
Features
Current Accounts can be opened in the BAL with the sum not less thanRs.10,000/No Profit No deduction of Zakat Account close charges Rs.150 Service charges for maintaining minimum balance Rs.10,000 Online Charges Rs.100
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Features
The minimum balance requirement for opening the account is Rs.5000. There can be profit or loss on the investment of the Customers funds deposited with the bank and this amount shall be acceptable to the Customer. The profit is paid half yearly. Deduction of Zakat Withholding tax on profit @ 10% No Service Charges to close the account Service Charges for maintaining minimum Balance Rs.50 Online Charges Rs.150
Features
The minimum balance requirement for opening the account is Rs.50, 000. Profit on Monthly Basis Higher the amount higher the profit Deduction of Zakat and Withholding Tax No Service Charges on minimum balance requirement but no profit for that month. No Charges to close to Account
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Features
Fixed Profit The longer the period for which the amount is kept the higher the rate of interest. Term Deposit usually for the period of three months, six months, one year, and five years. Deduction of Zakat and withholding Tax @ 10%.
Features
Minimum Deposit amount is Rs. 1000 1st two transactions are free of cost Bank can close the Account after six month if balance is zero.
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THE ACCOUNT OPENING FORM When a client comes to the bank, and makes a request for opening of an A/C. The officer says that first fill up a prescribed application form. If he/she wants to open a PLS A/C, then he/she has to fill a form according to the account. COMPLETION OF THE FORM The name, occupation, and complete address of the person opening the account are written in the columns that are provided in the form. One signature of the person is taken on the face of the form and one is taken on the backside. These signatures should be usual signatures and he would operate the account with them in future.
INTRODUCTION The introduction of a current account holder is accepted for the opening of either a current account or a solving account. The introduction of saving bank account is accepted only for saving bank accounts. The signature of the account-holder introducing the account is obtained at the place provided for in the account opening form. SPECIMEN SIGNATURE CARD The signatures of the client are obtained on a specimen Signature card. These cards are obtained in duplicate with two signatures on each card from the customer. Every time a cheque is received for a payment from the client, the signature on the cheque are verified by comparing them with the S.S. Card.
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KYC form: This form is also filled while opening any account. It contains the information about account holder like; profession or business, account in any other bank, residential details, vehicle details, employer or business address etc. The purpose of KYC form is to know whether account holder really earns much to hold the balance in its account that it contains. The purpose is to avoid opening an account of a person who seems to earn illegally or black money.
ACCOUNT NUMBER When all the formalities are completed then the final approval of account has to be taken from the Branch Manager. After obtaining approval of the branch manager an account number is allotted to the customer and all the information is entered into the computer. Then that account number is printed on the cheque book, S. S. cards and account opening form.
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Joint Account
These are the account of two or more persons who are neither partners nor trustees. Account Opening Procedure Title of Account Title of account holder should mention the names of all the joint account holders. Special Instruction
At the time of opening the account clear and specific instructions should be obtained regarding operation of the account and payment of the balance at the death of one or more joint account holders in the following manner: The account shall be operated by any joint account holders singly. By either or survivor singly By any two or more joint account holders or by any two or more survivors jointly. By all the joint account holders jointly By all the survivors jointly.
These instructions as far as possible should be obtained in handwriting of the parties concerned, under the signature of all the joint account holders.
Trust Account
According to section 3 of Trust Act, 1882:
A trust is an obligation annexed to the ownership of property and arising out of a confidence proposed in and accepted by him for the benefit of another, or of another or owner.
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Account Opening Procedure:Branches are allowed to open the Trust Account subject to the prior approval of Area Manager, after scrutiny of the legal documents by the legal advisor. Title of Account:The account should be opened in the name of the trust. However, if the account is opened in the name of the trustees, the account should not be treated as a joint account; rather it should be treated as a trust account. Special Instructions:The Banker should examine the trust deed very carefully. Particular attention should be paid to the borrowing powers, status of account in case of death of any trustee or signatory, and provisions for the appointment of new trustees.
Documents: Attested photocopy of Computerized National Identity Cards (CNIC) of all the trustees. Attested copy of Certificate of Registration. Certified copy of Instrument of Trust / Trust Deed
Mode of Signature All the trustee are required to sign the account opening form, Specimen Signature Card, and Cheque book requisition slip in their official capacity. Clubs, Societies and Associations Account These are non- trading / non- profit organization and are formed for the promotion of culture, education, recreational activities and charitable purpose etc.
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Operational Instructions
All the parties must be in accordance with the clauses of the resolution. In case of death of office bearer, account should be blocked until new resolution is received.
Documents: Copy of by- laws / regulations. List of members of managing / executive Committee. Copy of certificate of Registration (if registered) Copies of CNIC of all the members of Executive Committee. List of names of officials authorized to sign on behalf of the organization along with the Specimen Signature under the signature of the Secretary of the club/society.
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Operations department
ISSUANCE OF CHEQUE BOOK
After opening an A/C with the bank, the A/C holder once again makes a request in the name of bank for the issuance of a cheque book. The A/C holder mentions title of A/C, A/C number, sign it properly and mentions the number of leaves he requires. Normally BAL issues a cheque book having at least 25 leaves. Every cheque book also contains one leaf that is used for another issue of a cheque book.
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ID card of the customer NTN number or NTN certificate Letter head of business if the account is to be maintained with the name of business.
Remittances
Remittance is transfer of funds from one place to another or from one person to another. A Remittance is an important service provided by banks to customers as well as non-customers. Since it is not a free service it is a source of income for the bank.
Remitter One who initiates, or requests for a remittance. The remitter comes to the issuing or originating branch, asks for a remittance to be made, and deposits the money to be remitted. The bank charges him a commission for this service. He may or may not be the branchs customer.
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Remittee A Remittee is also called the beneficiary, or the payee. The person in whose name the remittance is made. A remittee is also the one who receive the payment. Issuing Bank Issuing bank is the bank that sends or affects the remittance, through demand drafts, telegraphic transfers, or Mail Transfers.
REMITTANCES DEPARTMENT
SERVICES OF REMITTANCES SECTION
Payment Orders (amount transfer within the city) Demand Drafts (intercity amount transfer) Pay Slips (payment at the spot usually bank expenses) Call Deposits (used for bids)
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1-PAYMENT ORDERS
Payment Orders are issued for the money transfer with in the city. The procedure to issue a remittance in the software is i. ii. iii. New issuance Add Drawn on (other branch of BAL in case of DD & same branch in case of payment order) iv. v. vi. vii. In favour of (the beneficiary) On account of (the sender of remittance) Amount Date
Accounting entry
a. By depositing cash the cashier debit cash and credit miscellaneous. After that the remittance officer debit miscellaneous and make a credit to pay order. b. By transfer (from clients account) a debit entry to Client account and a credit to Cheque are made & after that a debit to Cheque and credit to Pay Order & Commission & Charges is made.
Note: The miscellaneous account should show a zero balance at the end of the day.
2-DEMAND DRAFTS a. Accounting entry by drawing branch (says Gulberg Branch) is made by debiting Clients Account and crediting Head Office Treasury Account and Commission & Charges.
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b. Accounting entry in the branch on which the DD is drawn on receipt of advice from drawing branch is made by debiting Head Office Treasury Account and crediting Demand Draft Payable & when DD is paid a debit entry for DD Payable and a credit entry for Clients Account is made.
When the customer purchases a draft, the drawing branch sends the advice (a copy of DD) to the drawee branch and the original copy of DD is given to the purchaser.
On the arrival of advice the drawee branch debits HO account and credits the DD payable account. When the customer comes with the original DD to the drawee branch, his account is credited by debiting the DD payable account. 3-CALL DEPOSIT Call deposit is a way to pay a liability through a bank. This is used in order to eliminate the risk in money transfer. This is generally used for bids and tenders. Accounting entries when the payer deposits the cash is made by debiting cash and crediting call Deposit & when the beneficiary presents the instrument to the branch a debit to Call Deposit and a credit to Client Account is made. 4- PAY SLIP Pay lip is used to pay the day to day expenditure of the bank on the spot. The regular services providers like security company, stationery suppliers etc. Accounting entries are made by debiting Expense Account and crediting Withholding Tax & Pay Slip. After that a debit to Pay Slip and credit cash is made by remittance officer.
TELEGRAPHIC TRANSFER
When a TT comes to the college road branch along with the advice, the following entry is passed by debiting the HO Treasury Account and crediting the TT Payable account. After that a debit entry for TT Payable and a credit entry for the Client Account are made for the completion of the TT Cycle.
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Clearing Department
A system by which banks exchange cheques and other negotiable instruments drawn on each other within a specific area and thereby securing payment for their clients through the Clearing House at specified time in an efficient way. EXPLANATION By clearing means sometimes the account holder of Bank Alfalah Limited presents a cheque which is not drawn on Bank Al-Falah but the person, has an account in Bank Al-Falah Limited. In this case bank accepts this cheque in clearing department and later on collets the amount from bank on which cheque is drawn through clearing house. This function is called clearing.
Types of Clearing
There are four types of clearing: Inward Clearing Outward Clearing Intercity Clearing Same Day Clearing
Inward Clearing:
Those cheques and other negotiable instruments which are drawn on BAL Gulberg Branch Lahore, sent by other banks, constitutes the inward clearing of Bank Al-Falah Limited. After having all the stamps and dates of cheques confirmed, the concerned drawers accounts are debited in BAL Gulberg Branch Lahore.
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Inward Return:
Presentation Flaw e.g. Clearing stamp not affixed or wrong discharge given by collecting banker. Defect in the Cheques i.e. Post dated cheques, unauthorized cutting. Insufficient Balance
Outward Clearing
When cheques and other negotiable instruments drawn upon other banks like City Bank, MCB, ABN-AMRO or Askari Bank of the same city (Lahore) are presented in BAL Gulberg Branch to deposit them in the respective payees accounts, these instruments are lodged in outward clearing of BAL Gulberg Branch. Outward Return Cheques returned will be treated as inward cheques. Enter the cheques in cheques return register, mentioning the reason as appearing on the cheques return memo received from the paying bank. Advice the customer about fate. Return the cheques to the customer after getting sign on the register. Collect the cheques return charges as per S.O.C (Schedule of Charges).
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Clearing Process
Stamps Put On the Cheques:
When the cheques are presented in BAL Gulberg Branch to be deposited in their respective payees accounts, different stamps are put on cheques before their lodgment in outward clearing.
Clearing Stamp:
After the cheques have been crossed specially, clearing stamp is put on the cheques and other instruments, with the next date, so these cheques would have to be presented in their concerned drawee banks on the subsequent day.
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Endorsement Stamp:
The word endorsement means anything written or printed on the back of an instrument. So endorsement stamp has to put with words Payees account Credited in Bank Al-Falah Limited, Gulberg Branch, Lahore.
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Procedure of Settlement
Assume that BAL got the cheques which are drawn on HBL, NBP, and MCB for amount Rs.50, 000/-, Rs.30,000/-, Rs.15,000/- respectively, its total being Rs.95,000/-. It means that this amount is to be credited to BAL account with NIFT. On the other hand the cheques drawn on BAL are from HBL, NBP and MCB of Rs.15,000/- Rs.75,000/-, and Rs.30,000/- respectively, its total being Rs.120,000/-. It means that this amount is to be debited from BAL account. The difference between Rs.95,000/- credit and Rs.120,000/- debit is Rs.25,000/- debit, which means the house is against BAL for Rs.25,000/-.
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Import
The bringing of commodities into Pakistan from outside by sea, land or air. Requirements for the Importer:These requirements / documents must be fulfilled by the importer before doing the import: NTN Sale Registration Certificate Membership from Chamber Of Commerce Methods of Doing Import Letter of Credit Contract Advance Payment Open Account
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Letter Of Credit
A Letter Of Credit is a financial instrument issued by a bank on behalf of the registered customers. It gives surety to the Exporter that his amount is safe. The letter of credit is a written instrument issued by the buyers bank authorizing the seller to draw in accordance with certain terms and conditions. There are four basic parties
Exports
Exports are major sources of earning foreign exchange and play an important role in the economic development of the country. It helps to utilize excess resources of the country. Exports mean selling goods to another country. Exports of all eligible commodities through authorized banking channels are admissible under exchange control regulation.
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Requirements for the Exporter: These requirements / documents must be fulfilled by the exporter before doing the export: NTN Sale Registration Certificate Membership from Chamber Of Commerce
As well as the market stability, reputation, financial position of the exporter is first of all checked. Documents to Be Attached For Export Commercial Invoice Bill of lading Packing list Total quantity Net weight/carton Gross weight/carton Total net weight/carton Total gross weight Bill of exchange (original or draft) E-form: Initial document on which total export proceeding is based. In this form, all the conditions are given, which are necessary for exports. Letter of credit: It is a written agreement between importer and exporter. Certificate of Origin (Form A) Insurance (if any)
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Procedure:
Receipt of Letter Of Credit: Issuance of E-Forms that is verified by an authorized signatory. Copies of E-Form Original: is sent to the custom officer Duplicate: Bank receive the duplicate Triplicate: is sent to the State Bank Of Pakistan Quadruplicate: is kept by the exporter for his personal record. Verification of E-Form Export Documents Scrutiny Of The Documents Dispatch Realization of Export Proceeds.
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ANALYSIS
Following analyses have been considered important to undertake to determine the capabilities, financial and market position of Bank Alfalah Limited:
FINANCIAL ANALYSIS
Financial analysis, as the name implies, means the analysis of financial data of a business entity in order to determine its financial condition at any particular point in time during its life cycle. To evaluate the financial condition and performance of a firm, the financial analyst needs certain yardsticks. To evaluate BALs financial condition and performance, I am going to undertake following analyses making use of BALs balance sheet and income statement
Ratio Analysis
RATIO ANALYSIS
Financial ratios are used to weigh and evaluate the operating performance of the firm. Ratio means one number expressed in term of another. A ratio is a statistical yardstick by means of which relationship between two or various figures can be compared or measured. The term accounting ratio is used to describe significant relationship between figures shown on a balance sheet, profit and loss account or in any other part of accounting organization. Accounting ratio thus shows the relationship between the accounting data. To understand BALs financial position the following ratios analysis are considered to be analyzed:
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PROFITABILITY RATIOS:
The continued viability of any bank depends on its ability to earn an appropriate return on its assets and capital. Good earnings performance enables a bank to fund its operations, remain competitive in the market and increase or decrease in market funds. Profitability reflects not only the quantity and trend in earning but also the factors that may affect the sustainability or quality of earnings. Following profitability ratios have been calculated 1. 2. 3. 4. 5. 6. 7. 8. 9. Net Profit Margin Net Interest income to Gross income Ratio Operating Expense Ratio Administrative Expense Ratio Total Asset Turn over Return on Assets Return on equity Non interest income to total assets Non interest expenses to total assets
= 33.52%
= 46.13%
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The above ratio indicates that the proposition of profit has been increase from 33.52% in 2006 to 46.13% in 2007.
= 70.2%
= 71.4%
Slowing interest rates have two sided effects: lowering incomes & lowering interest expenses. So in such scenario bank is able to succeed if it lowers its interest expenses greater than decrease in interest income. Bank can managed it by reducing borrowing from financial institutions which is more costly than deposits.
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= 69.75%
= 64.6%
In 2007 BAL has cut down its operating cost expenses from 69.75% to 64.6%.
= 2.45%
= 3.03%
BAL has shown mixed capacity to absorb administrative expenses. In 2007, administrative expenses have increased to 3.03% due to expanded branch network.
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= 7.69%
= 7.84%
It is increasing, which is favorable. It means bank is able to utilize its assets efficiently in generating its mainstream income.
6. RETURN ON ASSETS
Net profit after tax X 100 Total assets 2006 1762691/ 275685541 x 100 2007 3130229 / 328895152 x 100
=0 .64%
=0 .95%
ROA is the most comprehensive measure of banks earning capacity. Net profit margin ignores efficiency concept while total asset turn over ignores earning perspectives. ROA takes both perspectives into account. Thats why it is most widely used indicator for representing the earnings of bank over time period. The higher it is the better. An increasing trend of this ratio signifies increased efficiency of management of a bank to improve upon its earning capacity.
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7. RETURN ON EQUITY
Net profit after tax X 100 Capital fund 2006 1762691/ 12241945 x 100 2007 3130229 / 16219844 x 100
=14.39%
=19.29%
BAL has shown mixed trend in ROE. In 2007, the rate of change in net profit after tax is more than capital fund.
=1.17%
=1.83%
This ratio has increased in 2007. It shows that bank has turned to non-interest income to sustain its earnings and vice versa.
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=2.15%
=2.52%
Non-interest expenses represent operating expenses such as administrative expenses, staff salaries and other charges plus extra ordinary and unusual items if they represent expense. On the whole it is observed that this ratio it is quite reasonable when consider it in terms of the general financial position of the bank and this little increase could be associated to operational negligence.
SWOT ANALYSIS
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According to David Jobber (2004) a SWOT Analysis is a structured approach to evaluating the strategic position of a business by identifying its strengths, weaknesses, opportunities and threats. It provides a simple method of synthesizing the results of the marketing audit by summarizing the companys strengths and weaknesses as they relate to external opportunities and threats. Strengths and weaknesses can be derived from the internal marketing audit analysis. Opportunities and threats can be derived from the external marketing audit analysis. Following figure illustrates the strengths, weaknesses, opportunities and threats of BAL:
SWOT
INTERNAL
STRENGTH WEAKNESS
EXTERNA L
OPPORTUNITY THREAT
Compassionate
Customer Service Goodwill and Trust Wide Branch Network Broad Product Range Computerized System Highly Experienced STRE of TeamNGTHS
Professionals
Advertisement Problem of
Employees
No Foreign Network Uneven Distribution of work
Competition Political
Instability
New Entrants Mergers &
Acquisitions
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Bank Alfalah is considered to be a very sound bank in the financial circles. Its a bank where the customers can safely keep their money as long as they want. BAL strengths can be categorized as: Bank is financially strong and has a huge deposit reserve. Highly Professional Human Resource Department. Commitment of Sponsors. Efficiency. Vastly Experienced Management. Foreign Trade is the focus of bank. It has become an ideal bank for the importers and exporters. Crucial Location of Branches. Humble Management. Personnel of Alfalah are well trained and highly skilled. Majority of employees have many years of experience in banking sector and are an asset for the bank. Bank Alfalah has a wide network of branches at the ideal locations, catering the financial needs of its clients. Some of the most important of the above points are discussed below.
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The bank is focusing on Trade Financing; it attaches great significance to the development and maintenance of healthy correspondent relationships with other banks and financial institutions. Towards this pursuit, BAL has developed excellent business relations with foreign banks, whose support in terms of lines of credit extended to the bank, has enabled it to handle the ever-growing trade volumes.
WEAKNESSES:
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Perfection is only the claim of Allah Almighty. No other being living or dead can say this for itself. Similarly, Bank Alfalah also has some shortcomings that need to be mentioned:
Bank Alfalah Limited Does Not Possess Foreign Network. Most of the employees are overloaded with work. No Advertising in Electronic Media. Disproportionate Presence Of Old Staff In The Upper Management Hierarchy. Foreign Banks Still Are A Little More Prestigious. There is uneven distribution of work and promotions are not very timely.
PROBLEMS OF EMPLOYEES
I observed during my internship that some of the employees were burdened with over work. So I think that the work should be distributed according to their posts and capabilities.
OPPORTUNITIES:
Bank Alfalah has grown up its business at a very high pace and it has got tremendous popularity, even with in a very short span of time. There are many opportunities for the bank and by availing that it can stand amongst the top foreign banks.
Extension of local branch network. Establishing foreign branch network. Capitalizing on information technology. Unexplored market of multinational corporations. University Of Central Punjab
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Marketing.
INFORMATION TECHNOLOGY
All the opportunities of the 21st century are to be availed in the information technology. Information technology is the future. Therefore BAL should emphasize much on IT, especially the E Banking. Bank Alfalah can design a universal account like other foreign banks, to enhance online facilities.
GROWTH IN DEPOSITS
BAL has introduced a number of financial schemes including special royal accounts. These accounts have their unique features (discussed earlier). During the last three years, BALs deposits have been increasing @ 30%, which is a very healthy sign. Therefore, with the commencement of new schemes there can even be a greater increase in its deposits.
MARKETING
More market share and customers can be gained by effective marketing strategies.
THREATS:
. Following are main threats to the bank Network expansion by foreign banks. Terrorist image of the country. Inconsistency in government policies. New Entrants. Mergers and Acquisition.
ECONOMIC CONDITIONS
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Despite the difficult circumstances that confronted the banking sector in particular and the country in general, Bank Alfalah has been still highly profitable. But, the facts cant be denied and there might be an adverse impact of such situation.
COMPETITORS
Bank Alfalah is facing a strong competition by its major competitors; Union Bank and Askari Commercial Bank. Business of these banks is also growing at a very high pace.
NEW ENTRANTS
In the recent decade Pakistani banking sector has witnessed a gigantic growth which resulted into the emergence of many new banks in the banking sector e.g. Askari etc. are also giving though competition to foreign banks with similar products and services on low charges.
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RECOMMENDATIONS
After spending six weeks at different departments of the Bank Alfalah, interacting with the employees, getting their views, observing the organizational structure and design, I have come up with the following suggestions that in my view, will definitely improve a few weaknesses observed in the bank by me.
In order to improve the image of bank and create public awareness, bank should establish separate Marketing department.
Account opening form should contain an option of transformation of funds/ deposit after the death of account holder to his family or nominee to avoid the interference and lengthy procedure of taking permission (for the transformation of funds) from the court.
The management should work free from political pressure. A plan should be developed to employ professionally qualified new blood, relating to finance and marketing, their recruitment should be strictly on the basis of merit and induction should be confirmed after proper training.
The number of allowances and perquisites for the employees should be increased to ensure that they put their body and soul in the jobs assigned to them.
The rates for the various charges provided by the bank should be brought down a bit, as it would result in increase in the number of customers of the bank.
Management should distribute work equally among different employees. Some of the employees are overburdened while some sections are overstaffed.
Bank Alfalah Limited should embark upon an even more aggressive management strategy of expansion of branch network not only in the local market (Pakistan), but also in foreign markets because that is a huge untapped opportunity for Bank Alfalah Limited.
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One of the most pressing needs of the time is to advertise Bank Alfalah Limited in the electronic media. Bank Alfalah Limited has made little effort in employing advertisement in electronic media as a full fledge marketing tool. I think it is high time that BAL does this.
Bank Alfalah Limited should evolve a very serious management policy to attract multinational corporations as its clients. This action, if actualized, would not only prove to be highly profit generating, but it would also contribute a lot towards Bank Alfalah Limited image building.
Presently, like most of the commercial banks working in Pakistan, a high percentage of Bank Alfalahs credit client hail from two or three industrial sectors. In the near future the management of Bank Alfalah Limited should try its level best to diversify as regards the mix of its advances; reason being over reliability on one sector of the economy could hurt the financial soundness of the bank if any adverse change in the external environment takes place.
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CONCLUSION
To conclude, Bank Alfalah is an established bank, which is growing at a rapid pace. The bank has a good working environment and employees possess a cooperative sense. Banks takes care of its customers as well as it employees by giving benefits like bonus, gratuity funds, loans, increments and other entertainment facilities. All the working is based on networking through information technology which makes the work more efficient and in a well-organized manner. The good thing about the bank is that it introduces innovative products time to time to boost the customers value. Bank also has a diversified investment in telecommunication sector that is Warid Telecommunication. Employees are very competitive and have an ability to lead; they always come up with new ideas to bring change, continuous improvement and for organizational development. There is dual check and balance by the officers on each transaction. The implications from the analyses undertaken of the financial statements of Bank Alfalah year 2006 and 2007 indicates that the bank is doing a profitable business and positively contributing in Pakistans economy. The best thing, which, I observed during my internship, was that the bank had a good, friendly environment. In this regard I would like to mention the behavior of employees with internees. All the employees were extremely helpful, despite the fact that they had to follow a very tight schedule. Still they guided me as much as they could, especially the Operations officer who really has an outstanding motivational and communicational skill. In short, Bank Alfalah is a flourishing bank and I find myself very honored to work in such organization, which will help me in my future. University Of Central Punjab
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REFERENCES
The entire information of this report has been collected from following sources:
MR. AZEEM KHAN- MANAGER OPERATIONS OF BANK ALFALAH MR SYED ASAD ALI SHAH-OPERATIONS OFFICER MR. SHAHZAD-MANAGER TRADE FINANCE MISS SONIA SOLOMON-CUSTOMER RELATIONSHIP OFFICER
BIBLIOGRAPHY
BOOKS
CHARLES. H. G., FINANCIAL STATEMENT ANALYSIS, (7TH Edition), The University of Toledo. JOBBER, D. (2004) PRINCIPLES AND PRACTICES OF MARKETING (4th Edition), London, The McGraw-Hill Companies. LAWRENCE. J. G., PRINCIPLES OF MANAGERIAL FINANCE, (10TH Edition), PEARSON EDUCATION (Pvt.) Ltd. Singapore M. A. GHANI, (2006) ADVANCE ACCOUNTS, PAK Imperial Book Depot, Pakistan. NORMAN G, and PATRICK, (1998) INTRODUCTION TO FINANCIAL MANAGEMENT, Star Publishers (Pvt.) Ltd. AUSTRALIA MATZ USRY. COST ACCOUNTING PLANNING AND CONTROL, (7th Edition) Southwestern Publishing Company. MUHAMMED A. and SOHAIL A. Ahmed, Pakistan. RIAZ A. MIAN (2003) MONEY BANKING AND FINANCE, Published by Munir Ahmed, Pakistan. SOHAIL A. and ZAFAR A. (2005) COST ACCOUNTING, Published by Sayed Mubin Mehmood & CO. Pakistan. SAEED NASIR. BANKING, CURRENCY AND FINANCE. Pakistan ACCOUNTING, (3RD Edition) Published by Munir
WEB SITES
www.bankalfalah.com
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