FINI619_4_MC110400521

Internship Report

The Bank of Punjab

Railway road sheikhupura Branch name 0112

Fin 619: Internship Report (Finance)

Student Name: ADEELA ZAMAN

Student ID: MC110400521

Spring 2015

Submission Date: July 15, 2015

Resubmission Date: august 17, 2015

Department of Management Sciences

Virtual university of Pakistan

I dedicated this report to my beloved mother without her encouragement and support I was not able to achieve this goal. . For me accomplish this task within the specific time limit. I was provided with every facility by my mother who was necessary in order to complete this challenge assignment.

I am very thankful to “Almighty Allah” the most beneficent, the most mercy full who has given the strength to complete this task. I am also thankful to branch manager and operational manager respectively of the bank of the Punjab circular railway road sheikhupura. Without whose guidance and support it would not have been possible for me to accomplish this assignment.

Furthermore, I am indebted to the staff of the staff of the Bank of the Punjab. From whom I have gained much experience regarding operational work of bank is concerned.

The last but not the last I convey my credit and thankfulness to the virtual universities Authorities. Without whose well in time support and guidance it would be much difficult for me to achieve this task successfully

The bank of Punjab (BOP) established in 1989 and got the status of scheduled bank in 1994. The bank of Punjab offer number of products in their customer. There are 293 branches of BOP in the whole country. Functionally the bank of Punjab is divided in the division and the each division is headed by the general managers

The government of the Punjab holds the majority of the shares in BOP. It is doing business in commercial banking and the retail banking. Corporate banking treasury and investment and trade finance. The shares of BOP are traded in all three stock Exchanges of the Pakistan.

My internship program period is 3rd January 2015 to 14th February 2015. During internship, I worked in Accounts opening Department, Accounts Department, Clearing Department, Remittance Department, Advance and Credit Department and Bill for Collection Department.

As for as the different ratios of the Bank Of the Punjab, they all give the healthy sign regarding financial position of the Bank as well as the operation results of the different financial years. All ratios are fully in accordance with the banking industry’s standard and norm which is a yard stick to measure the performance of any bank. These ratio depict and indicate that the financial strength of the on a higher side and further prospect of the Bank is brighter.

At the end the conclusion and the recommendations are the part of the report. Bibliography is the part, which contain all the references from I, obtained data to prepare this report

Section Description

1 Title page

2 Letter of undertaking

3 Internship certificate

4 Dedication

5 Acknowledgement

6 Executive summary

7 Table of contents

8 Brief introduction of the organization’s business sector

9 Overview of the organization

Brief history

Organizational hierarchy chart

Business volume

Product & services

Competitors

Brief introduction of all departments

Organizational structure

10 Plan of internship program

Brief introduction of branch

Starting& Ending date of internship

Training duration and departments

11 Training program

Account opening department

Remittance department

Clearing department

12 Learning experience

Knowledge gain

Skills learned

Attitude learned /value gained

Most challenging task performed

13 Ratio analysis

14 Future prospects of the organization

15 Conclusion

16 Recommendations for improvement

17 Reference and sources used

18 Annexes

Banking plays a major role in a country’s economy. After partition of India and Pakistan British government’s commission distribute the reserves between Pakistan and India.

In August 1947, various Banks transferred their headquarters and funds to India. Before partition of Pak-o-Hind, some Banks were operated which were Chartered Bank, Grind-lays Bank, Imperial Bank of India, Australasia Bank and Habib Bank. After the independence of Pakistan, Muslim Commercial Bank Limited, Bank of Bahawalpur Limited, Punjab National Bank and National Bank of Pakistan were providing banking facilities to general public.

The State Bank of Pakistan was inaugurated by our great leader Muhammad Ali Jinnah. On 1 st

July 1948. Australasia Bank and Habib Bank were providing facilities to the Pakistan’s nation. After some period, Australasia Bank Limited was converted into Allied Bank of Pakistan.

State Bank of Pakistan is a Central Bank of Pakistan. Other Banks are Commercial Banks, Specialized Bank and Investment Banks.

Now a day in Pakistan, fifty four banks are operated with thousands of branches. Banks are providing Banking facilities to their customers and clients by offering different services and packages.

Pakistan’s banking sector consisting of Islamic Banks, Private Banks, Public Sector Banks, and Micro Finance Banks. These Banks are doing Corporate Banking, Trade Financing, Lease Financing and some Banks are providing online banking facilities, ATM facility and money transfer facilities also.

Banking sector is a back bone of our economy. If this sector is making progress than whole economy is also growing a lot. Our Agricultural sector, Industrial sector, Mining sector, Export sector all depend on the banking industry because Banks provide long term funds as well as short

term funds to all these sectors to meet out their short term as well as long term requirement. Hence, banking progress is necessary indeed.

History

The Bank of Punjab started functioning with the inauguration of its first branch of 7-Egerton Road, Lahore on November 15, 1989. The founder of the bank Mr. Nawaz Sharif performed the inauguration.

The Bank of Punjab is working as a scheduled bank with its 273 branches in all major cities of the country. The bank provides all types of banking services such as Deposit in Local currency, Client Deposits in Foreign currency, Remittances and Advances to businesses, trade, industry and agriculture. The Bank of Punjab is entered into a new era of science to the nation under the experienced and professional hands of its management.

The Bank of Punjab has played a vital role in the national economy through mobilization of untapped local resources, promoting savings and providing funds for investments.

The Bank of Punjab has played a vital role in the economy through mobilization of untapped local resources, promoting savings and providing funds for investment.

The Bank of Punjab has the privilege to discharge its responsibilities towards national prosperity and progress. Within the couple of years of its scheduling, the bank has not only carved out for itself prominent niche in the mainstream banking of the country but in certain areas it has the distinction of taking the lead. In short span of time the Bank has been able to evolve a distinct corporate culture through of its owned-based policies, which are realistic and are on highly professional footings.

Vision and Mission statement

Vision Statement

“To be a customer focused bank with service Excellence”

Mission Statement

“To exceed the expectation of our stakeholders by

Leveraging our relationship with the government of

Punjab and delivering a complete range of professional

Solutions with a focus on program driven products

And services in the agriculture and middle markets

Through a motivated team"

Organizational Hierarchy chart

Chief Executive Officer

Chairman

Board of Directors

Executive Committee

Executive Incharge

Business Volume

Total Number of Stock Holders

Directors 0

Provincial Government 269,686,662

Associated Companies 0

Foreign Shareholders 37,567,609

Individuals 62,526,255

Insurance Companies/Modaraba Mutual Funds 32,993,540

Leasing Companies 957,701

Charitable Trust 273,911

Cooperative Societies 16,011

Area Manager North Area Manager South

NIC Units 3,205,607

ICP 99,00

Joint Stock Companies 19,846,888

Others 101,713,292

Total number of shares 528,798,376

Product Line

Deposits Products

Current Account Basic Banking Account Tijarat Account (LCY) Supreme Current Account (FCY) Young Loin Saving Account ( New Product 2010 )

Deposits Products

Current Account Basic Banking Account Tijarat Account (LCY) Supreme Current Account (FCY) Young Loin Saving Account ( New Product 2010 )

Profit Loss Sharing Term Account

Profit and Loss sharing Term Accounts offered by Bank of Punjab are:

PLS Saving Account Senior Citizen Account Gharayloo Saving Account Ziada Munafa Saving Account PLS-Saving Profit plus Account Corporate Premium Account Supreme Saving Account (PLS) Supreme Saving Account (FCY) Corporate Premium Account

Consumer Finance

Types of consumer finance offered by Bank of Punjab are:

Aasaih Loan Quick Cash Car Loan House Loan Small Cash Personal Loan

BOP Motorcycle Loa The Bank of Punjab offers following Commercial Financing Loans:

Running Finance Cash Finance Demand Finance CNG Filling Station Scheme Auto Lease Financing Scheme Car Lease Financing Scheme Karobar Barao Scheme Fertilizers Dealers Financing Scheme Ali Akbar Group_ Franchise Financing Scheme Atlas Honda Limited _Authorized Dealers Financing Scheme Financing Scheme_ Purchase of Office/Shops

Electronic Banking

Electronic Banking provides non-stop banking convenience, twenty four hours a day, seven days a week.

Visa Debit Card Internet Banking ATM Network BOP Quick pay CallCenter

Services

The Bank of Punjab is dedicate in its efforts to provide a quality banking experience to our customer via a range of unique Banking Services

Commercial Banking Online Banking Cash Management Services

Utility Bills Locker Treasury Western union Money Transfer

Agriculture Credit

Agriculture credit is provided to the farmers and livestock organizations.

Bank of Punjab provides following agriculture loans with a specific markup rate:

Green Tractor Lease Finance Agri Finance Branch Agri Finance Scheme Kissan Dost Finance Scheme Second Hand Tractor Lease Finance Scheme Kissan Dost Aabiari Scheme Kissan Dost Mechanization Support Scheme Kissan Dost Farm transport Scheme Kissan Eslahi-e-Erazi Scheme Kissan Dost Live Stock Development Scheme Livestock Breed Improvement Trough VVW Kissan Dost Commercial Agro Services Kissan Dost Agri Mall Finance Scheme Corporate Farming Finance Scheme Commercial Lease Finances Tractor Scheme Demand Finance Sheds Construction and Civil Work Lease Finance Facility for Milked Animals Running Finance Livestock Poultry Kissan Dost Model dairy Farms (PDDC) Kissan Dost Model Milk Centre (PDDC) Kissan Dost Green House Finance Facility Kissan Dost Cold Storage Finance Facility Scheme for Controlled Shed Lease Finance Facility for Installation of Bio-gas Plant Group Finance to Small farmers Clean Credit Facility through Syngenta Franchises Zarkaashat Drip Irrigation System Markup of Schemes

Trade Finance

Trade finance is a loan provided to the importers and exporters to make their transaction effective. This enhances the global business. The Bank of Punjab makes some trade processing centers to cooperate the exporters and also to the importers in different cities of Pakistan such as Lahore, Islamabad, Rawalpindi and Karachi.

Competitors

The competitors of the Bank of Punjab are the other commercial banks in Pakistan such as:

Muslim Commercial Bank Limited,

Soneri Bank Limited,

United Bank Limited,

Allied Bank Limited,

Askari Bank Limited,

Faisal Bank Limited,

Standard Chartered Bank Limited,

Habib Bank Limited,

Habib Metropolitan Bank Limited,

Bank Al-Habib Limited

Introduction to All Departments

The departments and divisions of Bank of Punjab are as follows:

Retail Banking Division

Special Assets Management Division

Credit Administration Division

Human Resource Division

Finance division

Information Technology Division

Operations Division

Credit Risk Management Division

Corporate Banking Division

Control and Compliance Division

Training, Research, Communication and Public Division

Consumer banking Division

Audit and Inspection Division

Law Division


Retail banking division of the bank deals with the customers and executes their transaction directly. It provides the services of saving account, mortgage loans, personal loans, debit cards, accounts checking, credit cards, ATM cards.


The Bank will invest on behalf of its clients and give them access to a wide range of traditional and alternative product offerings that would not be to the average investor. It includes the automatic sweep of cash balances into a money market fund, as well as brokerage services.

Credit Administration Division

In this division, banks deals with the credit, banks give loans to individuals and to the corporations.

Human Resource Division

This division performs the duty of hiring the employees, training the employees as well as retaining the employees and if necessary, firing the employees.

Finance Division

This division controls the overall activities relating to finance i.e. monitoring the investment activities, financing activities, Debit and Credit of funds and reasons there of with proofs.

Information Technology Division

This department controls and record the data related with the bank. The backup of all branches is sent to IT department on daily basis.

Operations Division

In this division of BOP, lawyers are employee to solve the cases

This division controls the whole operation of all the branches and controls the cash activities, cheques, account opening and other things about operations.

Training, Research, Communication & Public Division

This division conducts research on new products, trains newly hired employees, train old employees on new and innovative circulars in banking sector. It also provides training on customer relation management.

Audit and Inspection division

This department of bank includes the Audit of all the branches; they do audit of the branches and give some opinions to execute their transactions.

Functional Hierarchy of the Bank of Punjab

Comment on Organizational Structure of Bank of Punjab

Division of Labor

Finance Division

Report to

State Bank of Pakistan

IT Division

Chairperson of Board of Governor

President of BOP

President of BOP


HR Division

Credit Administration

Division


Audit Division

International Division

Finance Division

RCAD Department

Hub

Commercial Assets

Management

Corporate Assets

Management

Regional Teams

Report to

State Bank of Pakistan

Regions

Areas

Branches

IT Division

Risk Managemen

t

The structure of the Bank of Punjab is divided into division and these divisions are further divided into departments. This type of structure helps the management in controlling the operations of the bank effectively. Each division is responsible for its respective duties.

Span of Control

Span of control among hierarchical structure is clearly defined. Each department reports to the central department and then this central department reports to the head office.

Communication

Communication among the organizational departments is easy. Horizontal and vertical communication among departments is very effective.

Brief introduction of the branch:

My internship in bank of Punjab is very good for gaining experience. This bank is situated railway road, SKP and its branch code is 0211.I has done my internship under the management of very efficient and skilled staff. Manager and operational manger is very co-operative. The bank provides its services to its customer and these services fulfill the customer’s requirement according to their needs. There are a great number of accounts of traders who make deposits and payment on daily basis. The bank provides some facilities; Loan facility, payment of utility bills, transfer of funds within city or outside the city. So bank of Punjab facilitating their customer by given that excellence of services and fully satisfies customer’s need.

Starting & ending dates of internship:

Starting date of internship: January 3rd, 2015

Ending date of internship: February 14th, 2015

Training duration and departments:

Customer services department 3rd January 2015 to 20th January 2015

Remittance department: 21nd January 2015 to 5th February 2015

Clearing department: 6th February 2015 to 14th February 2015

I worked in three departments during my internship program which are following:

Account opening department

Remittance department

Clearing department

Account opening Department:

My first learning in this department is that I have gain is what is the procedure of account opening? Being an internee I was not allowed to open the account for customer because this task required professional experience. Miss Mamoona rauf is the in charge of this department. He guides me regarding methods and procedure of account opening. I also filled some forms of account opening for the customers. There are many types of accounts are opened like; individual, sole proprietorship, partnership, business accounts, companies account. There are Current deposit account, saving account and fixed deposit account.

Process of account opening:

Account opening form includes all the necessary information and details must be examined. First of all account opening form filled .There are different important information related to form includes account title, mailing address, contact numbers and permanent address. There is some personal information which includes gender, marital status, nationality, country, applicant’s name and father/husband‘s name. Know your customer form is also filled in which value of transaction, sources of fund and transaction mode. Some documents are required

which is following; photocopies of CNIC, passport size photographs, photo copy of mother/father ‘s CNIC, pay slip, student card and other documents according to account’s nature.SS card on which customer’s sign is required is also attached with form. At the end manger’s signature and stamped on the account opening form. When all the documents completed it sends to head offices.

Remittance department:

I have spent two weeks in this department. In this department I have just observed the activities, because internees are not allowed to perform any task. Miss Hina is the in-charge of this department. I learned that remittance can be made by:

Pay order

(PO)

Demand draft (DD)

Call deposit receipt (CDR)

Payment order

Pay order is drawn on the city in which it is being presented. It is neither negotiable nor transfer anybody. It must be payable to the payee name therein Branch manager has approval for unlimited issuance of pay orders. Branch teller module is a system which use for issuance of pay order. The process of issuance of payment order is following;

Teller receives fund transfer application (FTA) along with cash from the client than verifies FTA to certify that all the compulsory information has been provided. It is essential to count cash and verify that all the notes to be real than appends the cash received stamp on FTA and bring acknowledgement to client. So the application is sent to GBO for more processing.

If transaction amount exceeds the GBO’s limit than branch operational manager approves the transaction. GBO uses Branch teller module to issue a payment order. Since issuing the PO all details of beneficiary must be entered in the system than complete the transaction and signs the PO & FTA.

Demand draft:

Demand draft is drawn on the branch in which it is being offered.GBO perform this duty. The bank provides this facility to the account holders and non account holder.DD charges differ for both. It is made in the favor of remitter and beneficiary. Head office account would be debit and remitter account would be credit at the time of issuance. After that head office account is debit and remitter account would be credit at the presented time

Call Deposit Receipt:

Call deposit receipt is used for tender. The call deposits are offered on the agreement as assurance or safety from the bank that money is deposited in the bank. It is made in favor of contacting parties or any other person. There is no interest rate is applicable to the customer. CDR has some related information like applicant and beneficiary name, account name, amount, date of issue and authorized signature. The authority letter sends for collection in form of demand draft or pays order and call deposit order.

Clearing Department

I spent two weeks in clearing department. This department is under the supervision of Mr. Talha. Collection and payment of Cheques, demand draft and pay order is cleared in this department. All clearing related working is computerized. The clearing cheques and slips are entered in the separate ledger.

The cheques number and name of branch on which is drawn is must be checked. The cheques are stamped carefully appended because sometimes it has been returned. Inward and outward clearing is main two types of clearing. Inward clearing is that in which our bank’s cheques are presented in other banks and outward clearing is that in which other cheques are presented in our branch. NIFT is an agent carries Inward Clearing instruments to the Central Processing Unit (CPU).Deposit slip is filled for deposit of crossed cheque and related instrument that customer needs to deposit by bank. If cheque is returned than a memo is attached with cheque on which reasons are mentioned for returning of cheques. There are three types of clearing; normal clearing, same day clearing, inter city

Knowledge gained:

I obtain lot of knowledge about the account opening department. How we can open new accounts and its whole process. There are some documents like photographs; CNIC photocopies etc. are required for this process and process of issuance of cheque books. I learned about how accounts are closed, bank sends reminder letter to accountholder before close of accounts. I learned more about how clearing is made and know the difference between intercity cheques and transfer cheque.

Skills Learned:

I learned many new skills by the internship program which is very helpful for opportunities of employment and able to meet any competition.

It helps to prepare both by giving us the experience and skills to build a strong and the confidence to give an outstanding interview. When we discuss our knowledge, skills and abilities, we can speak from experience, not conjecture. We improved our ability to work under pressure by internship.

Our communication skills get better by the working in this organization. Communication with manager and colleague with remain our self in the loop of office communications. Team work skills improve by the working within many people. When we talk with different kind of customers, our communication skills would be improved.

The ability to dealing customer would improve. My problem solving techniques also improved by the internship program and improves written and verbal skills. By the Internship program, I gain a lot of knowledge and experienced for success in future and improved the interpersonal skills.

Attitudes Observed/Values Gained:

I got the practical experience about how to work in an organization. It gives me the opportunity to shape my behavior, attitude and my thoughts. I learnt the expert attitude of the people by internship program

.It is necessary to know the importance of our effort and time because students have no value of time in student life. In reality, professional life is different from student life. We act like professional. Be pleasing and polite attitude is one of the important factor for successful employment. Know when to listen and when to speak .Contribute to the formal and productive employment. Don’t detract from it. We manage our self in moments of stress, maintain a positive attitude.

Hard working employees are capital of organization and are inclined to wipe off on all and it has positive impact on all over the association. When we show the enthusiastic attitude towards colleague than it makes good atmosphere at this work place.

I learned new techniques regarding this field. Punctual attitude is best for professional life. Now I am cable to work with efficiently and effectiveness so we can show responsible and cooperative attitude.

Most challenging task performed:

The Filling of account opening is very challenging task to me because I face some difficulties at the beginning. Some errors are occurs repeatedly like over writing, omitting some fields, unintended spell mistakes because everything is totally new to me. But with the passage of time I learned much about the whole task.

In order to analysis the financial performance of the bank, investors and management use the ratio analysis in which following ratios are calculated:

1) Net profit Margin

Introduction Net profit margin is the percentage of revenue remaining after all operating expenses, interest, taxes and preferred stock dividends have been deducted from company’s total revenue.

Formula:

Net profit margin= Net profit after tax/net Sales*100

Calculation:

2012 2013 2014

Net profit after tax=1,938,007

Net Sales=24,227,721

=Net profit after tax/net Sales)*100

=(1,938,007 /24,227,721)*100

=8%

8%



=Net profit after tax/net Sales)*100 =(1,633,841/24,666,024)*100

=7%

7%



=Net profit after tax/net Sales)*100 =(2,787,449 /29,521,719 )*100

=9%

9%

Graphical Representation:

Interpretation

The net profit margin of BOP is decreasing in 2013 is 7 % due to increase in the non mark-up interest expenses and taxes which are not efficient to converting revenue into actual profits. The net profit margin of BOP is increasing in 2012 and 2014 respectively. Due to decreasing in non mark-up interest expenses and taxes are proficient to converting its revenue into actual profits. As we know, the profitability of business will be higher when the net profit margin ratio high. `

2) Gross spread ratio:

Introduction Gross spread ratio looks at the spread of interest between borrowing and lending. Banks make money by borrowing short-term money from depositors and then using these funds to make long-term loans to businesses, consumers and homeowners. One way to analyze gross profit rates of banks is to look at the spread between the loan rates and deposit rates. Further, through ratio analysis, you can use the gross spread ratio to determine the profitability, liquidity and leverage of a bank

Formula:

Gross spread ratio=spread/revenue*100

Spread=interest earned-interest expensed

Calculation:

2012 2013 2013

Spread=2,143,106

Revenue= 24,666,024

=Spread/Revenue*100

=2,143,106/24,666,024*100

=8.68%

8.68%

Spread=4,019,034

Revenue=24,227,721

=Spread/Revenue*100

=4,019,034 /24,227,721*100

=16.58%

16.58%

Spread=8,995,936

Revenue== 29,521,719

=Spread/Revenue*100

=8,995,936/29,521,719 *100

=30.47%

30.47%

Working of Gross spread ratio:

Spread=Interest earned-interest expensed

2012) Spread =24,666,024-22,522,918=2,143,106

2013) Spread= 24,227,721- 20,208,687= 4,019,034

2014) Spread = 29,521,719 -20,525,783= 8,995,936


Interpretation

The gross spread ratio of BOP is 8.68%, 16.58%& 30.47% in years 2012, 2013 & 2014.It is viewing that the gross spread ratio of BOP is not constant and is going to increase day by day due to decrease in interest expenses. This ratio was low in 2012 but due to decrease in interest expenses and increase in 2013 and 2014 that is a good sign for the BOP.

3)Non interest income to total income ratio

IntroductionNon Interest / Total Income ratio measures the proportion of bank's total income that have been generated by non-interest related activities (e.g. fees and commission, trading gains, fore activities etc).

Formula:

Non interest income to total income ratio=Non interest income/total income*100

Total income= interest income + interest earned

Calculation:

2012 2013 2014

Non interest income=3,190,745 Non interest income=3,596,226 Non interest income=2,790,430

Total Income=27,856,769

=non-Interest income/Total income*100

=3,190,745/27,856,769*100

=11.45%

11.45%

Total Income=27,823,947

=non- Interest income/Total income*100

=3,596,226/27,823,947*100

=12.92

12.92%

=Total Income=32,312,149

=non-Interest income/Total income*100

=2,790,430/32,312,149*100

=8.63%

8.63%

Working of total income:

Total income=interest income + interest earned

2012) Total Income= 3,190,745+24,666,024 = 27,856,769

2013) Total Income= 3,596,226 +24,227,721= 27,823,947

2014) Total Income =2,790,430 +29,521,719 =32,312,149


Interpretation

This graph is shows that the non interest income to total income ratio of BOP for the year of 2012 is 11.45% and for the year of 2013 it is 12.92% & in 2014 it is 8.63% . It is showing that this ratio of BOP is not constant in all over the years. It indicates that non mark-up income is how percent of total income of the BOP. In 2014, this ratio is low but in 2012 and 2013.this ratio is high it means in 2014 BOP is not gaining more non interest income like commission ,brokerage income & income from dealing in foreign currencies etc due to which this ratio is decreasing in 2014.

4)Spread Ratio

Introduction An options trading strategy. It involves buying options and then selling a different quantity of options. The options that are sold have different strike prices but have the same expiration dates. They can be either puts or call

Formula:

Spread Ratio= interest earned/interest expensed

Calculation:

2012 2013 2014

Interest earned=24,666,024

Interest expense=22,522,918

=interest earned/interest expensed

= (24,666,024/22,522,918)

=1.09 times

1.09

Interest earned= 24,227,721

Interest expense= 20,208,687


= (24,227,721/ 20,208,687)

= 1.19 times

1.19

Interest earned=29,521,719



= (29,521,719/ 20,525,783

=1.43 times

1.43


Interpretation

The spread ratio of BOP is 1.09, 1.19 &1.43 times for three years respectively. It is showing that the spread ratio of BOP is not constant and increasing day by day. This ratio is much high in 2014.It is showing that the interest expenses in 2012 and 2013 are more than 2014 that is becoming cause the decrease the ratio in these years.

5)Return on assets

Introduction An indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. Calculated by dividing a company's annual earnings by its total assets, ROA is displayed as a percentage. Sometimes this is referred to as "return on investment".

Formula:

Return on assets=Net profit after tax/Average total assets*100

Calculation:

2012 2013 2014

Net profit after tax= 1,633,841

Average Total Assets=166,055,527

= Net profit after tax/ Total assets *100

=1,633,841/166,055,527*100

= 0.98%

0.98%


Average Total Assets= 176,349,072

= Net profit after tax/ Total assets *100

=191,938,007/176,349,072*100

= 1.09%

1.09%


Average Total Asset=210185094

= Net profit after tax/ Total assets*100

=2,787,449/210185094*100

3=1.32%

1.32%

Working of total assets:

Total assets:

Details 2012 2013 2014

Cash and balances with treasury banks

Balances with other banks

Due from financial institutions

Investments

Islamic financing and related services

Operating fixed assets

Deferred tax assets

Other assets

Total Assets

17,298,251

3,101,170

1,562,946

129,518,999

149,605,002

3,473,491

13,070,614

14,480,581

332,111,054

23,820,864

4,265,296

11,407,448

123,956,143

157,285,598

3,514,801

12,627,352

15,820,643

352,698,145

23,622,411

2,239,170

32,748,623

154,874,757

170,312,593

5,490,121

9,845,426

21,237,087

420,370,188

Average total assets:

Formula:

=Total assets/2

Year 2012:332,111,054/2=166,055,527

Year 2013: 352,698,145/2=176,349,072

Year 2014: 420,370,188/2=210,185,094


Interpretation

Return on assets ratio indicates that how the bank can make use of its assets for generating much profit. The graph shows that the ratio is 0.98%, 1.09% & 1.32% in the year 2012, 2013& 2014 respectively. This ratio shows varying trend in assets and profits with the passage of time. In 2013 & 2014 organization’s position is very well but in 2012 it is not good. There are increasing trend in 2013 & 2014 but it would be decrease in2012.It is indicating that the management of BOP is not using its assets in an professional manner in generating earnings and revenues for the BOP.

6) Du Pont returns on assets

Introduction An expression that breaks return on equity (ROE) down into three parts: profit margin, total asset turnover and financial leverage. It is also known as "DuPont Analysis".

Formula:

Du Pont return on assets= (Net profit/net sales)*(Net sales /average total assets)*100

Calculation:

Calculation:

2012 2013 2014

Net income= 1,744,556

Net sales=24,666,024

Average Total Assets= 166,055,527

= ((net income/net sales)*

(net sales /total assets))*100

= ((1,744,556/24,666,024)*

(24,666,024/166,055,527

)*100

= (0.010)*100

=1.03 %

1.03


Net sales= 24,223,658



(net sales/total assets))*100

= ((1,914,720/ 24,223,658)*

(24,223,658/176,349,072

=(0.010)*100

= 1.08%

1.08


Net sales= 29,517,673



(net sales/total assets))*100

= ((2,841,535/ 29,517,673)*

(29,517,673/210,185,094)*100

= (0.013)*100

= 1.34%

1.34

Working of total assets:

Total assets

Details 2012 2013 2014



17,298,251

3,101,170

23,820,864

4,265,296

23,622,411

2,239,170


Investments



Deferred tax assets

Other assets

Total Assets

1,562,946

129,518,999

149,605,002

3,473,491

13,070,614

14,480,581

332,111,054

11,407,448

123,956,143

157,285,598

3,514,801

12,627,352

15,820,643

352,698,145

32,748,623

154,874,757

170,312,593

5,490,121

9,845,426

21,237,087

420,370,188

Average total assets:

Formula:

=Total assets/2

Year 2012: 332,111,054/2=166,055,527

Year 2013: 352,698,145/2=176,349,072

Year 2014: 420,370,188/2=210,185,094


Interpretation

The graph of Du Pont return on Assets ratio shows 1.03%, 1.08% & 1.03% in the year 2012, 2013& 2014.This ratio shows varying trend in assets and profits with the passage of time. In 2013 & 2014 organization’s position is very well but in 2012 it is not good. In 2012, the management of BOP is not using its assets in an efficient manner due to which this ratio is decreasing and is not generating much revenue for BOP.

7) Return on total equity

Introduction The amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested.

Formula:

Return on total equity=net profit after tax/total equity

Calculation:

2012 2013 2014

Net profit after tax = 1,633,841

Total Equity= (6,266,95,7)

=Net profit after tax/ Total equity*100

== 1,633,841 / (6,266,95,7)*100

=-26.07 %

26.07


Total equity= 8,399,06


=1,938,007 / 8,399,06*100

= 23.74%

23.74


Total Equity= 8,519,221


=2,787,449/ 8,519,221*100

=32.71%

32.71

Working of total equity:

Total equity

Details 2012 2013 2014

Share capital

Reserves

Accumulated losses

Total equity

5,287,974

1,187,433

(12,742,364)

(6,266,95,7)

10,551,132

1,539,659

(11,250,885)

8,399,06

15,551,132

2,081,243

(9,113,154)

8,519,221


Interpretation

This ratio shows the profitability of bank from the investor’s point of view. It reveals that how the bank can generate its profit by the stockholder’s investment. The return on equity ratio is 26.07, 23.74% &32.71% for the year 2012, 2013 & 2014 respectively. It is showing that the ratio is very well year 2012 and decrease in year 2013. There are increasing trend in 2014 which is good signal for gaining more profit

8) Debt Ratio

IntroductionA financial ratio that measures the extent of a company’s or consumer’s leverage. The debt ratio is defined as the ratio of total debt to total assets, expressed in percentage, and can be interpreted as the proportion of a company’s assets that are financed by debt

Formula:

Debt ratio=Total liabilities/Total assets*100

Calculation:

Formula:

Debt ratio=Total liabilities/Total assets*100

Calculation:

2012 2013 2014

Total liabilities=319,739,551

Total assets= 332,111,054

=Total liabilities/total assets*100

=(401,043,481/420,370,188)*100

=96%

96

Total liabilities= 339,216,847

Total assets= 352,698,145


=(339,216,847/352,698,145)*100

=96%

96

Total Liabilities= 401,043,481

Total Assets= 420,370,188


=(319,739,551/332,111,054)*100

=96%

96

Working of total liabilities:

Total liabilities

Details 2012 2013 2014

Bill payable

Borrowings

Deposits and other account

Sub-ordinate loans

Liabilities against assets subject finance

Deferred tax liability

Other liabilities

Total liabilities

1,500,709

44,683,826

266,055,781

-

3,601

-

7,495,634

319,739,551

1,506,335

22,802,482

306,560,767

-

2,386

-

8,344,877

339,216,847

1,727,731

44,742,624

342,290,763

2,000,000

1,128

-

10,281,235

401,043,481

Working of Total Assets:

Total Assets

Details 2012 2013 2014




Investments



Deferred tax assets

Other assets

Total Assets

17,298,251

3,101,170

1,562,946

129,518,999

149,605,002

3,473,491

13,070,614

14,480,581

332,111,054

23,820,864

4,265,296

11,407,448

123,956,143

157,285,598

3,514,801

12,627,352

15,820,643

352,698,145

23,622,411

2,239,170

32,748,623

154,874,757

170,312,593

5,490,121

9,845,426

21,237,087

420,370,188


Interpretation

The graph is shows that the debt ratio constant in all years which is 96 %.It’s showing that BOP is using much debt to finance its assets. Its ratio is too much which is dangerous signal for BOP position. It needs to decrease to its debts because high debt shows the BOP has high risk of default due to which investors will not like the BOP.

9) Debt /earnings ratio

Formula:

Debt to equity ratio=Total liabilities/ shareholders equity

Calculation:

2012 2013 2014


Shareholders equity= (6,266,95,7)

=Total liabilities/ shareholders


Shareholders Equity= 8,399,06


Shareholders Equity= 8,519,221

= total liabilities/ shareholders

equity

= 319,739,551 (6,266,95,7)

= -51.02

-51.02

=total liabilities/ shareholders equity

= 339,216,847/ 8,399,06

= 40.38

40.38

equity

= 401,043,481/8,519,221

= 47.07

47.07

Working of total equity:

Total equity

Details 2012 2013 2014

Share capital

Reserves

Accumulated losses

Total equity

5,287,974

1,187,433

(12,742,364)

(6,266,95,7)

10,551,132

1,539,659

(11,250,885)

8,399,06

15,551,132

2,081,243

(9,113,154)

8,519,221


Interpretation

This ratio shows the relationship between borrower‘s funds and owner’s equity. This ratio is not constant in all over the years. In 2012 the debt is negative which is -51.02its shows that the bank reducing its debt to boost investment in future high cash flow sates. Every 47.07 rupee of long term debt is being backed by an investment of one rupee by the shareholder. The bank utilizes 40.38 &47.07 rupees of debt in 2013 & 2014 respectively.

10) Time interest earned ratio

Introduction A metric used to measure a company's ability to meet its debt obligations. It is calculated by taking a company's earnings before interest and taxes (EBIT) and dividing it by the total interest payable on bonds and other contractual debt. It is usually quoted as a ratio and indicates how many times a company can cover its interest charges on a pretax basis. Failing to meet these obligations could force a company into bankruptcy.Also referred to as "interest coverage ratio" and " fixed-charged coverage."

Formula:

Time interest earned ratio=Earnings before interest and tax/interest expense

Calculation:

2012 2013 2014

Earnings before interest and tax= 23,926,810


=Earnings before interest and tax/ interest expense)

=23,926,810/ 22,522,918

= 1.06 times

2.45

Earnings before interest and tax= 23,,209,969


=Earnings before interest and tax/ interest expense)

= 23,,209,969/ 20,208,687

= 1.14 times

1.14

Earnings before interest and tax= 24,832,446


=Earnings before interest and tax /interest expense)

= 24,832,446/ 20,525,783

= 1.20 times

1.20

Working of Earning before interest and tax

Earnings before interest and tax=profit before tax + interest expensed

2012) EBIT= 1,403,892+22,522,918= 23,926,810

2013) EBIT = 3,001,282+20,208,687= 23,, 209,969

2014) EBIT = 4,306,663+20,525,783= 24,832,446


Interpretation

This ratio shows that the interest covered in 2012, 2013 & 2014 are 2.45, 1.14 & 1.20 times earning for covered its interest charges respectively. The interest covered rapidly in 2012

11) Advances/Deposits ratio

IntroductionFor banks, it is how much they have coming in (deposits) vs. how much they have going out (loans). The more money the bank has loaned out generates more interest income provided the loans are to secure borrowers. Deposits are obligations (debts) the bank has to the depositors.

Formula:

Advances/deposits ratio=Advances/deposits

Calculation:

2012 2013 2014

Advances= 149,605,002

Deposits= 266,055,781

= Advances/Deposits

=

= 0.56 times

Advances= 157,285,598

Deposits= 306,560,767

= Advances/ Deposits

= 157,285,598/ 306,560,767

= 0.51 times

Advances= 170,312,593

Deposits= 342,290,763

= Advances/ Deposits

= 170,312,593/342,290,763

= 0.49 times

0.56 0.51 0.49


Interpretation

This diagram is showing the advances to deposits ratio. This ratio is in 2012, 2013 & 2014 are 0.56, 0.51 & 0.49times respectively. This ratio is varying in all years and decreasing day by day. The standard for this ratio is 1:1.The declining trend of this ratio shows inefficient use of deposit and services of loan to borrower.BOP needs to increase its liquidity position and improvement in profit.

12) Operating cash flow ratio

Into ruction

The operating cash flow ratio can gauge a company's liquidity in the short term. Using cash flow as opposed to income is sometimes a better indication of liquidity simply because, as we know, cash is how bills are normally paid off.Formula:

Operating cash flow ratio=cash flow from operation/current liabilities

Calculation:

2012 2013 2014

Operating cash flow= 20,546,543

Current liabilities= 319735950

=Operating cash flow/Current liabilities

= 20,546,543/319,739,551

= 0.06 times

0.06


Current liabilities= 339214461


= 3,731,609/339,216,847

= 0.011 times

0.011


Current liabilities= = 399042353


= 32,357,443 / 401,043,481

= 0.08times

0.08

Working of current liabilities:

Current liabilities

Details 2012 2013 2014

Bill payable

Borrowings

Deposits and other accounts

Other liabilities

Total current liabilities

1,500,709

44,683,826

266,055,781

7,495,634

319,739,551

1,506,335

22,802,482

306,560,767

8,344,877

339,216,847

1,727,731

44,742,624

342,290,763

10,281,235

401,043,481


Interpretation

The graph reveals the operating cash flow of BOP in three years. The operating cash flow ratio is 0.06, 0.01, 0.08 times in 2012, 2013 & 2014. BOP has not constant in all of the years. The standard of this ratio is 1 if it becomes less than one than it considered as operating cash flow is not enough to cover its liabilities so the declining trend in OCF ratio is not efficient for BOP. Therefore BOP should get better its liquidity position by adding more assets in organization.

13. Dividend per Share

Formula:

DPS = Dividends amount / number of equity shares

BOP is not pay the dividend so its cannot b calculated

14) Earnings per share

Introduction

A valuation ratio of a company's current share price compared to its per-share earnings.

Formula:

Earnings per share=net profit after tax /outstanding shares

Calculation:

2012 2013 2014


Outstanding shares = 5,094,641

=Net profit after tax/outstanding shares = 1,744,556/5,094,641

= 34.2 share

34.2 per share


Outstanding shares = 5,094,641

=Net profit after tax/outstanding shares = 1,914,720/ 5,094,641

= 37.5 per share

37.5 per share


Outstanding shares = 919,860

= net profit after tax /outstanding shares

= 2,841,535/ 5,094,641

= 55.7 per share

55.7 per share


Interpretation

The earnings per share ratio shows the overall profitability of business .In 2012, 2012 & 2013; this ratio is 34.2, 37.5 & 55.7 R.s per share respectively. When net profit is increased with the passage of time than EPS also increased like here is in the year 2014.

15) Price earnings ratio

Formula:

P/E = Market value per share/ earnings per share

Calculation:

2012 2013 2014

Market value per share= 12.09

Earnings per share= 34.2

=Market value per share/earnings per share

= 12.09/34.2

=0.353

0.353

Market value per share = 16.05



=16.05/37.5

=0.428

0.428

Market value per share =12.74



=12.74/55.7

=0.228

0.228


Interpretation

The graph shows that the price earnings per share is 0.353,0.428and 0.228 in 2012,2013 and 2014 respectively.its shows that the price eranings ratio of the bop is good in 2013 not in 2012 and 2014.

BOP is important part in the banking sector of Pakistan. It acts as an important part in country’s economic growth.BOP would offer better-quality products for enlarge its customer circle and retain its good will.BOP needs to consume its essential resources to build up its new and inventive products.

It would boost customer experience by providing new products and services, by providing best ATM services and new and special credit schemes in upcoming tenure. BOP would build more well-situated products and services for the customers to take out money through ATMs. BOP needs to improve its current structure and network by the development of country.BOP increases its network and ATM services in all over the Pakistan.

BOP would bring in new IT related superior products to its customer and focus on new and different products in future. It will raise its market share by large profit and great good will.BOP has reasonable and large amounts of assets and profits for existing in the country. Its management is very well and well-organized to assemble its precondition. It will get better its customer services and financial position by new and modern ideas. Financial health of BOP is

very good and is expected to be improved in the future.BOP have great up gradation system .The future prospects of BOP are very inventive and well managed.

BOP is very well organized and successful organization due to its experienced staff and strong structure.BOP follows its both statements, vision and mission statements and faces many challenges by the self motivation. It has long term relationship with client due to supportive staff team. As a financial analyst I concluded that some ratios are good for BOP while some ratios are not good. These ratios are as following:

The Net Profit Margin of BOP in all of the years is good. Gross Spread ratio is suffering to better position. Non interest income to total income is better in all year. Spread ratio is good in all the years. Return on assets is better in all the years.

Du punt ROA ratio is well in all the years. Return on equity is good in all the years. Debt ratio is very high. Debt /Equity ratio is growing to negative to better position. Advances /Deposits ratio is not good. Operating cash flow is not good for the bank. Bank of Punjab not pay dividend. Earnings per share are good in all the years. Price earning ratio is better in all the years.

Now BOP is at the top position in spite of these obstacles. BOP takes away these obstacles it reached at the highest position.

The banks have to focus on development of its policies or rules and regulations to congregate the current problems by the market and its competitor. BOP needs to keep its market share by given that improved services to its customers as a financial analyst. I will suggest that some basic points should be improved that are as following:

MCB can increase the net profit margin by decreasing its non mark-up interest expenses and taxes. Interest expenses would be increase for obtain better gross spread ratio. If utilization of assets is in efficient manner than return on asset ratio and du Pont ratio can increase.

MCB limited bank need to decrease its debts to manage the debt ratio because a high debt is not a good sign for bank. Debt to equity ratio is also very high so it should decrease its debt because the equity investors will not invest in it due to high debt. It can increase its advances/deposits ratio by giving advances to the customers.MCB needs to improve its liquidity by increasing assts for operating cash flow.

Muhammad Arif Chaudhary & Sohail Afzal. (2008) .Advanced Accounting. Lahore. Pakistan. Munir Ahmad (M.A)

Investopedia. Return on assets (ROA) http://www.financeformulas.net/Return_on_Assets.html

BOP. (2015) https://www.bop.com.pk/bop/about_bop.asp

Handouts of Corporate finance (622)

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www.kse.com.pk

http://www.kse.com.pk/

https://www.bop.com.pk/bop/about_bop.asp

http://www.financeformulas.net/Return_on_Assets.html

www.sbp.org.pkwww.bop.com.pk

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http://www.bop.com.pk/

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