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Internship Report of Dubai Islamic Bank 2013
Citation preview
ACKNOWLEDGEMENTACKNOWLEDGEMENT
First of all I am thankful to "ALMIGHTY ALLAH" Who gave me the strength, patience,
courage and enthusiasm needed to write and complete this report, and countless salutations
to upon the Holy Prophet Muhammad (PBUH), the sea of knowledge who has guided His
Ummah to seek knowledge from cradle to grave.
Then to my friends who assisted me in this effort and we worked daylong to accomplish this
assignment. I have a debt of gratitude to all my teachers who taught me throughout my
academic career.
The preparation of this report was a massive undertaking but the highly competent and
experienced management of Askari Bank for provided me with all assistance, information,
advice and suggestions that I needed which contributed importantly to this report.
Altaf Hussain
11111111111
1
1. EXECUTIVE SUMMARY1. EXECUTIVE SUMMARY
As per the requirements for the degree of MBA at AIOU, I got an opportunity to get eight weeks
internship exposure. Askari Bank, F-10 Markaz, Islamabad provides me the chance to have this
experience with a prestigious institution. During my internship I was rotated in the various
departments in order to get in depth idea of how the bank functions. This report thoroughly
outlines and explains my observations, findings and analysis and my knowledge of the banking
sector in general and Askari Bank in particular.
In this report, there is an introduction of Askari Bank. In introduction, there is history of Askari
Bank, strong commitment and loyal service, highly trained professionals, and credit rating. The
report also includes the details of the products offered by DIBPL which includes Takaful plan
and other Islamic Compliance products. This report also focuses the general banking of DIBPL
which includes Cash department, Remittances section, Account opening, Debt cards etc.
Subsequent to it this report contains my experience and learning that what I have learned from
this internship and what was my experience regarding this internship. The report also contains
my analysis that I scrutinize in the organization by using two method SWOT and Financial
analysis. With the help of these methods I have some suggestions and recommendations to
improve the performance of the Bank, which also mentioned in this report. By following these
suggestions bank can improve their product market and can easily gain the attraction and
satisfaction of customers. Not only the customers, bank also can improve the satisfaction and
performance level of its employees by these suggestions.
2
2. OBJECTIVES OF STUDYING THE ORGANIZATION2. OBJECTIVES OF STUDYING THE ORGANIZATION
OverviewAfter the completion of degree MBA (Finance) I want to enter and check the practical work
according to my specialization. For that purpose I selected the banking sector because I have
done specialization in finance.
Second and next main objective of studying organization; I want to enter in practical field and
want to learn that which discipline is required for leading a successful future life. I think I am
very lucky person that I selected Askari Bank as my learning organization.
Objectives that I want to achieveObjectives that I want to achieve by studying the organization are as follows:
First of all I want to check the practical work according to my degree specialization.
During my internship in Askari Bank I have learnt that how to use the knowledge in
practical field.
Secondly I want to learn that how to mange an organization and how to mange the
finance for a financial organization, as my degree is related to Financial Management.
Customers dealing is another major objective that I want to achieve. During my
internship I learnt that how to deal with customer.
Financial institution is a place where every type of businessmen visits, so during my
internship in DIBPL I met with many businessmen and learnt that how different
businesses run.
And another main objective that I want to achieve that how an organization consist with
different departments and how different functions are done in different departments of an
organization.
Through this internship I learned many things. It was a great experience for me to
comprehend the working environment. During this period I face different types of working
conditions, which will help me to know that, how to handle these conditions in future.
Through this internship I am able to do work in all departments of Bank because I know all
rules, policies, and responsibilities, which mentioned in DIBPL departments and products of
these departments so I achieved 80% of my objective
3
3. OVERVIEW OF THE ORGANIZATION3. OVERVIEW OF THE ORGANIZATION
Askari Bank is the leading Islamic bank operating in Pakistan. Its balance sheet size is
improving with the passage of time. It has redefined its role and has moved from a public
sector organization into a modern Islamic bank. The Bank's services are available to
individuals, corporate entities. While it continues to act as investor of public funds and it has
diversified its business portfolio and is today a lead player in the debt equity market,
corporate investment banking, retail and consumer banking, treasury services and is showing
growing interest in promoting and developing the country's small and medium enterprises
and at the same time fulfilling its social responsibilities, as a corporate citizen.
In today's competitive business environment, DIBPL need to redefine its role and shed the
public sector bank image, for a modern Islamic bank. It is listed in Securities and Exchange
Commission of Pakistan in 2006.
Askari Bank is today a progressive, efficient, and customer focused institution. It has
developed a wide range of consumer products, to enhance business and cater to the different
segments of society. Some schemes have been specifically designed for the low to middle
income segments of the population.
It has taken various measures to facilitate overseas Pakistanis to send their remittances in a
convenient and efficient manner. More recently it has started Electronic Home Remittances
Project. This project introduces technology based system to handle inward remittances
efficiently, by ensuring that the Bank's branches keep a track of the remittance received from
abroad till its final receipt. A number of initiatives have been taken, in terms of institutional
restructuring, changes in the field structure, in policies and procedures, in internal control
systems with special emphasis on corporate governance, adoption of Capital Adequacy
Standards under Basel II framework, in the up gradation of the IT infrastructure and
developing the human resource. Askari Bank has built an extensive branch network with 36
branches in Pakistan. The Bank's financial performance has been remarkable. In 2006, total
assets are estimated at Rs 8434280000, while deposits have grown to nearly Rs 4322621000.
The increase in profit was achieved through strong growth in core banking income. The
Bank maintains a sound loan portfolio diversified in nature to counter the risk of credit
concentration.
4
3.1 HISTORY OF ASKARI BANK PAKISTAN LTD. 3.1 HISTORY OF ASKARI BANK PAKISTAN LTD.
Thirty years ago Askari Bank created history by becoming Worlds first Islamic Bank. Today
Islamic Banking has become one of the fastest growing economic sectors with over 300 financial
institutions; with assets estimated over at 300 billion US Dollar providing Islamic Financial
Services. Despite huge growth to the sector DIB is continued to be the pioneer and leader to
date. Since its inception DIB has evolved retail bank to a fully fledged bank catering to almost
all the requirements of the customers in providing to Sharia Compliant solutions locally and
internationally. It has constantly upgraded its services to individuals and companies who always
remain a valuable asset.
By combining the best Islamic traditional values with high standards technology and innovation,
DIB is committed to comply with not only fully transactions of financial dealings. DIB is also
committed to provide customer-satisfaction oriented job.
For its outstanding performance and contribution for Islamic financing, DIB received the best
Islamic Bank award in the Middle East Award 2006; by both Euro moneys Islamic Finance
Weekly and Gulf Wealth Forum. DIB has also awarded the bank of the year 2006 Banker
Awards.
DIBPL has started its operations since 2005. At that time the scale of business and number of
branches were very short. But just within the time period of five years, now DIB has an
extensive network of branches, a wide range of Islamic Compliant Products, well-managed
communication system and good return from operations.
5
3.2 NATURE OF THE ORGANIZATION3.2 NATURE OF THE ORGANIZATION
Askari Bank Pakistan Ltd. is a public Organization. It implements the policies of SBP. Its basic
objective is to maximize the profit. It has major impacts on Pakistan economy with special
emphasis on fostering Pakistan's economic growth through aggressive and balanced lending
policies, technologically oriented products and services offered through its network of branches.
It deals with Revenue, collection and payments of salaries. It is a complete Islamic, retail and
corporate bank as well.
The Askari Bank is an Islamic institute which offers a variety of products according to the Sharia
principles and instructions. All the products and services are regulated by Sharia Board. If they
find someone violating the rules, they penalize. The Askari Bank makes different adjustments to
update business operations.
The Bank has also played an important role in financing the country’s growing trade, which has
expanded through the years as diversification took place. Askari Bank Pakistan Ltd. maintains its
position as Pakistan's one of the premier bank determined to set higher standards.
6
3.3 BUSINESS VOLUME3.3 BUSINESS VOLUME
Askari Bank’s business volume is expanding day by day and now it becomes leading
bank of the Islamic Banking Sector. The authorized capital of the Bank is Rs.6776 million
divided into ordinary shares of Rs 10 each. The Bank is a subsidiary of Askari Bank PJSC, UAE
(The holding Company).
FIVE YEARS PERFORMANCE OF DIB FIVE YEARS PERFORMANCE OF DIB
Table: Business Volume
Years 2005 2006 2007 2008 2009
Total Assets 497 8434 21308 32050 35368
Deposits (Rs in Million) - 4322 16114 25459 27981
Advances (Rs in Million) - 3274 11348 18074 20590
Investments - 833 2974 3019 2823
Shareholder' Equity 418 3917 5126 6018 6776
Pre-Tax Profit/ (Loss) (Rs in Million) - -633 -568 -272 352
After-Tax Profit/ (Loss) (Rs in Million) - -412 -369 -182 277
Earning Per Share (Rs) - -2.09 -0.89 -0.35 0.38
Number of Branches 5 10 17 25 36
Number of Employees 120 225 350 470 722
Source: DIB annual report 2009
DIBPL top line (operating revenue) is 352 million in 2009 which is showing a unique
achievement of this organization. In 2008, the DIB was suffering loss of 272 million due to
heavy investment in infrastructure and other resources. DIB has improved its growth by over
200%. In 2007, the bank was suffering a loss of 568 million which is more than twice from
2008. These trends show that how efficiently and effectively working and improving its
standards by offering a wide variety of Islamic Compliant products and by bringing innovations.
Despite of profitability trends, here we can also see the flow of deposits, advances and
investment. The earning per share loss is recovered by the bank with very rapid approach.
7
3.4 NUMBER OF EMPLOYEES
DESIGNATION NO OF EMPLOYEES
President
Senior Executive vice president
Executive vice president
Vice president
Assistant vice president
Branch Manager
Manager Operations
Credit Manager
Manager Finance
Manager Marketing
Manager Foreign Exchange
Manager Consumer Finance
Legal Advisor
IT Officer
Cash Officer
Accounts Officer
Clearing Officer
BDO
Teller
TOTAL
1
1
1
1
1
36
36
36
15
36
20
15
36
80
75
50
68
94
95
722
8
3.5 PRODUCT LINES & SERVICES3.5 PRODUCT LINES & SERVICES
3.5.1 PRODUCTS OF DIBPL:
Products of bank include all those services which a customer can use effectively in his general
and business. Askari Bank Pakistan Ltd. F-10 Markaz branch offers a wide range of banking
services to public and private sector corporations, partnerships, individuals and others.
3.5.1.1 Current AccountAskari Bank Pakistan Ltd. is offering current account facility for its valued customers. This type
of account is suitable for businessmen and those customers who need financing with regular
intervals. Because they make receipts and payments in large quantity.
3.5.1.2 Regular Savings Account
DIBPL is offering another type of account which is named by regular savings account. DIBPL is
paying profit on this type of account according to volume of deposit. And another attracting
option is that profit is offered on monthly, quarterly, semi-annually and annually basis.
3.5.1.3 Saving Plus Account
Another type of account which DIBPL is offering is saving plus account. On this type of account
DIBPL is giving profit on comparatively higher rates than regular.
3.5.1.4 Saving Special Account
This is another type of account is offering by DIBPL to facilitate its valued customers. This type
of account has some special characteristics as compared to regular and plus. The profit margin is
higher than other types of accounts.
9
3.5.1.5 Fixed Deposit/ Term Deposit
DIBPL is offering fixed deposit account according to the Sharia principles. Here in fixed deposit account deposited amount is invested and finally share of profit or loss is distributed between bank and customer.
SERVICES OF DIBPL
Services are output of the firm, which are in intangible form and the back bone of any
organization to earn profit. However, there are some basic services which DIBPL, F-10 branch
at present offers to his customers include:
Receipts of customer's deposits
Collection of his cheques drawn on other banks
Making payments through cheques drawn on it
Making remittances
Foreign trade service
3.5.2 International Banking
Askari Bank Pakistan Ltd. is at the forefront of international banking in
Pakistan, which is proven by the fact that DIBPL has its branches in all of the
major financial capitals of the world. Additionally, we have recently set up
the Financial Institution Wing, which is placed under the Risk Management
Group. The role of the Financial Institution Wing is: -
To effectively manage DIBPL exposure to foreign and domestic
correspondence manage the monetary aspect of DIBPL’s relationship with
the correspondents to support trade, treasury and other key business areas,
thereby contributing to the bank’s profitability.
3.5.2.1 DEMAND DRAFTS:
It is a safe, speedy and reliable way to transfer money; customers can now
purchase DIBPL’s Demand Drafts at very reasonable rates. Any person
10
whether an account holder of the bank or not, can purchase a Demand Draft
from a bank branch.
3.5.2.2 MAIL TRANSFERS:
Money is safely and quickly moved by using DIBPL Mail Transfer service. And
DIBPL also offered the most competitive rates in the market.
3.5.2.3 PAY ORDER:
DIBPL provides another reason to transfer money using its facilities. Pay orders are
a secure and easy way to move money from one place to another. And as usual,
charges for this service are extremely competitive.
3.5.2.4 TRAVELER'S CHEQUES:
Negotiability: Pak Rupees Traveler’s Cheques are a negotiable instrument.
Validity: There is no restriction on the period of validity.
Availability: At 36 branches of DIBPL all over the country.
Encashment: At all branches of DIBPL.
Limitation: No limit on purchase.
Safety: DIBPL Traveler’s Cheques are the safest way to carry money.
3.5.2.5 LETTER OF CREDIT:
DIBPL is committed to offering its business customers the widest range of
options in the area of money transfer. In a commercial enterprise Letter of
Credit service is just what customers are looking for. With competitive rates,
security, and ease of transaction, DIBPL Letters of Credit are the best way to
do business transactions.
11
TRADE FINANCES & OTHER BUSINESS LOANS
3.5.3 CORPORATE FINANCE:
3.5.3.1 Working Capital and Short Term Loans:
DIBPL specializes in providing Project Finance – Export Refinance to
exporters Pre-shipment and Post-shipment financing to exporters – Running
finance – Cash Finance – Small Finance – Discounting & Bills Purchased –
Export Bills Purchased / Pre-shipment.
3.5.3.2 Medium term loans and Capital Expenditure
Financing:
DIBPL provides financing for its clients’ capital expenditure and other long-
term investment needs. By sharing the risk associated with such long-term
investments, DIBPL expedites clients’ attempt to upgrade and expand their
operation thereby making possible the fulfillment of our clients’ vision. This
type of long term financing proves the bank’s belief in its client's capabilities,
and its commitment to the country.
3.5.3.3 Loan Structuring and Syndication:
Askari Bank Pakistan Ltd. leadership in loan syndicating stems from ability to
forge strong relationships not only with borrowers but also with bank
investors. Because syndicate partners understand the asset criteria, DIBPL
help borrowers meet substantial financing needs by enabling them to reach
12
the banks most interested in lending to their particular industry, geographic
location and structure through syndicated debt offerings. Syndication
capabilities are complemented by capital strength and by industry teams,
who bring specialized knowledge to the structure of a transaction.
3.5.3.4 Cash Management Services:
With DIBPL Cash Management Services (in process of being set up), the
customer’s sales collection will be channeled through networking of DIBPL
branched spread across the country. This will enable the customer to
manage their company’s total financial position right from desktop
computer. They will also be able to take advantage of outstanding range of
payment, ejection, liquidity and investment services. In fact, DIBPL is
committed to provide everything, which takes to manage cash flow more
accurately.
3.5.4 SHORT TERM INVESTMENTS:
DIBPL now offers excellent rates of profit on all its short term investment accounts.
Whether the funds are invested for 3 months or 1 year, DIBPL’s rates of profit are
extremely attractive, along with the security and service only DIBPL can provide.
3.5.5 EQUITY INVESTMENTS:
DIBPL has accelerated its activities in the stock market to improve its
economic base and restore investor confidence. The bank is now regarded as
the most active and dominant player in the development of the stock
market. DIBPL is involved in the following:
13
Investment into the capital market
Introduction of capital market accounts (under process)
DIBPL’s involvement in capital markets is expected to increase its
earnings, which would result in better returns offered to account
holders.
4. ORGANIZATIONAL STRUCTURE4. ORGANIZATIONAL STRUCTURE
4.1 STRUCTURE OF THE ASKARI BANK PAKISTAN LTD. 4.1 STRUCTURE OF THE ASKARI BANK PAKISTAN LTD.
In Askari Bank, the head is called “Chairman” of the Bank. And after Chairman there is Six
Broad of Directors. Askari Bank has Eleven Groups which control the working of the Divisions,
Wing, Department, Section and Regional of the Askari Bank. In DIBPL,
“Department” is called “Wings”.
14
Corporate & Investment
Banking Group
Corporate & Investment
Banking Group
Chairman & President
Chairman & President
Credit Management
Group
Credit Management
Group
Audit & Inspection Group
Audit & Inspection Group
Compliance GroupCompliance Group
President’s SecretariatPresident’s Secretariat
Board of DirectorsBoard of Directors
Secretary Board of Directors
Secretary Board of Directors
4.2 ORGANIZATION HIERARCHY OF DIB F-10MARKAZ BRANCH
I worked in Askari Bank Pakistan Limited as an internee for two months. During internship, I
rotated in different departments where I learned about these departments. The branch manager
monitors the whole branch to develop efficiency and effectiveness. The different department's
details are listed below.
BranchManager
DepositsDept
E-Remittances
Clearance Dept
Account Opening
Bills Section
AdvancesDept
HRDept
PensionDept
CashDept
15
HRM & Administration
Group
HRM & Administration
Group
Operation Group
Operation Group
Commercial & Retail Banking
Group
Commercial & Retail Banking
Group
Treasury Management
Group
Treasury Management
Group
Special Assets Management
Group
Special Assets Management
Group
Overseas Management
Group
Overseas Management
Group
I.T. GroupI.T. Group
There are seven departments are operating in F-10 Markaz Branch. In deposits section, various
kinds of deposits are made in routine and reported to head office. The deposit section is very
efficient and active. In remittances section deals with external and internal remittances to
facilitate the customers. Remittances are transferred through pay order, bank draft and telegram
transfer. In clearance department, cheques are cleared through clearing house by using the
facility of NIFT.
In advances department, bank makes different kind of advances and offer attractive Islamic
compliance products to attract customers. In other departments, HR department functions the
recruitment, performance appraisal, training and other relevant jobs. In cash department, the
collection and payment of cash is made.
(NOTE: Organogram is attached in annexes.)
4.3 VARIOUS DEPARTMENTS DETAILS 4.3 VARIOUS DEPARTMENTS DETAILS
DIBPL have a different department so I am going to explain the performance of every
department.
4.3.1 CASH DEPARTMENT
Cash department performs the following functions
4.3.1.1 Receipt
The money, which either comes or goes out from the bank, its record should be kept. Cash
department performs this function. The deposits of all customers of the bank are controlled by
means of ledger accounts. Every customer has its own ledger account and has separate ledger
cards.
4.3.1.2 Payments
It is a banker’s primary contract to repay money received for this customer’s account usually by
honoring his cheque.
4.3.1.3 Types of Cheques
16
Some specific types of cheque are being entertained in the clearing department of
DIBPL.
LOCAL CHEQUE
By local cheque we mean collection of cheque from the banks which are the members of the
clearinghouse and which are located within the city.
OUT STATION CHEQUE
By out station cheque we mean collection of cheque from the banks which are situated outside
the city. It means that presenting bank and the bank on which the cheque is drawn are not
situated in the same city.
4.3.2 CLEARANCE DEPARTMENT
A clearing house is an association of commercial banks set up in given locality for the purpose
of interchange and settlement of credit claims. The function of clearinghouse is performed by the
central bank of a country by tradition or by law. In Pakistan, the clearing system is operated by
the SBP. If SBP has no office at a place, then NBP, as a representative of SBP act as a
clearinghouse.
The easy, safe and most efficient way is to offset the reciprocal claims against the other and
receive only the net amount owned by them. This facility of net inter bank payment is provided
by the clearinghouse.
The representatives of the local commercial banks meet at a fixed time on all the business days
of the week. The meeting is held in the office of the bank that officially performs the duties of
clearinghouse. The representatives of the commercial banks deliver the cheques payable at other
local banks and receive the cheques drawn on their bank. The cheques are then sorted according
to the bank on which they are drawn. A summary sheet is prepared which shows the names of
the banks, the total number of cheques delivered and received by them. Totals are also made of
all the cheques presented by or to each bank. The difference between the total represents the
17
amount to be paid by a particular bank and the amount to be received by it. Each bank then
receives the net amount due to it or pays the net amount owed by it.
2.2.1 In-word clearing Books:
The bank uses inward clearing register for the purpose of recording all the details of the cheques
that the other banks have issued on the bank.
2.2.2 Out-Word Clearing Books:
The bank uses outward clearing register for the purpose of recording all the details of the
cheques that the bank has delivered to other banks.
4.3.3 ADVANCES DEPARTMENT
DIBPL give loans to the borrowers for different purposes. These loans are given for various
sectors for different periods. Small Finance, Cash Finance, Personal Loans, Demand Finance,
Running Finance, Corporate Finance, Export Import Financing, House Building Finance.
4.3.4 REMITTANCE DEPARTMENT
Another important department in the bank is remittances. People send their money to the other
persons and organizations through various way i.e. Bank draft, Telegraphic Transfer, Mail
Transfer, Coupons, Govt. Draft and Western Union Money Transfer etc. It works both inward
and outward.
DIBPL offers the following forms of remittances.
Demand Draft
Telegraphic Transfer
Pay Order
Mail Transfer
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Safe custody of specimen signature book
Preparation of periodical statements
Any other work/ duty assigned by manager
4.3.5 DEPOSITS DEPARTMENT
Customers keep their savings in PLS Saving Accounts and businessmen save their money in
bank Current Accounts. DIBPL gives profit on saving accounts and special saving accounts.
4.3.6 FOREIGN EXCHANGE DEPARTMENT:
This department mainly deals with the foreign business. The main functions of this department are:
a) L/C dealing.
b) Foreign currency accounts dealing.
c) Foreign Remittance dealing.
DIBPL is committed to offering its business customers the widest range of options in the area of
money transfer. If a commercial enterprise then Letter of Credit service is just what it looking
for. With competitive rates, security, and ease of transaction, DIBPL Letters of Credit are the
best way to do its business transactions
This department deals with the foreign currency accounts which mainly include dollar account,
euro account etc.
4.3.7 PRIVILEGE BANKING DEPARTMENT
4.3.7.1 Online Banking
19
This department is functioning only in online branches in the bank. This is a
fast track banking system in modern banking. DIBPL is also trying to
enhance this facility for their customers.
4.3.7.2 Utility Services
Keeping in view the difficulties faced by general public DIBPL has taken the
initiative to provide service for collection/receipt of utility bills on behalf of
WAPDA, Sui Gas and PTCL from 9.00 am to 5.00 pm all the branches through
out the countries are observing this practice to ease the long queues lined-
up at the counters of banks.
4.3.8 COMPLIANCE DEPARTMENT
Role of branch compliance department is to reconcile the prescribed frequencies, investigate
long pending reconciliation item, and ensure correct treatment every half year and clearing
system service branch-in major cities. Internal control is the integration of the activities, plans,
attitudes, policies and efforts of the people of the bank working together to provide reasonable
assurance that the organization will achieve its objectives and mission.
4.3.9 HUMAN RESOURCES MANAGEMENT DEPARTMENT
Human Resources Management Department works for the betterment of the employees.
Enhances skills, training management, service benefits, wages, medical facilities, staff loans are
basic functions of this department.
4.3.10 INFORMATION TECHNOLOGY DEPARTMENT
20
Bank’s data collection and information system run by Regional Data Collection Center. This
department manages staff training programs regarding computer.
4.3.11 ISLAMIC BANKING
The year 2005 marked the first year of Islamic banking operations. During the year under
review, in addition to active participation in various Sukuk transactions, DIBPL has extended its
Islamic Banking Operations Network.
5. STRUCTURE OF FINANCE & ACCOUNTS DEPARTMENT
Accounts department is a backend department at Askari Bank,-10 Markaz; Islamabad performs
the following Accounting Operation:
Reports
It generates reports like Statement of Account Activity (a report on the activity of all accounts),
Statement of Affairs (a report on the assets and liabilities), Statement of Foreign Exchange (a
report on the foreign exchange currencies at the bank) and Statement of Profit and Loss. These
reports can be generated at daily, weekly, monthly, quarterly or yearly basis as required by the
bank.
Income and Expense
21
The department also needs to calculate the revenues and expenses, control expenditure and
forecast profits every month.
Budget
Formulation of yearly budgets & targets in consultation with the branch manager is also done by
the accounts department.
Activity Checking
Daily activity checking and monitoring is done by the accounts department of the whole bank.
Storage of Records
Accounts Department also has the duty to store vouchers and system generated reports.
Payments
The accounts department is responsible to pay vendors on behalf of the bank with authorization
from the branch manager. It also has to amortize large payments and calculate depreciation of
branch assets.
5.3 The role of financial managers in establishing relationship
This is a senior role and the Relationship Manager will manage a portfolio of complex
borrowing corporate clients as well as being the primary point of contact for the banks
relationships with the Hedge Fund Sector. The role will report to the Head of Corporate
Banking.
The ideal candidate will maximize opportunities to strengthen and leverage existing relationships
as well as continue to maintain and ensure high levels of customer satisfaction and retention all
the while generating new recommendations. The successful candidate will be experienced in
developing growth plans and expanding the divisions borrowing and non-borrowing
relationships within the hedge fund sector.
22
Strong working knowledge of commercial banking products, loan agreements, security and other
credit requirements, particularly with respect to the mutual and hedge fund sectors is preferred.
Essential qualifications include at least 10 years banking experience with at least 5 years in a
direct commercial customer contact role: in depth experience in structuring financing
transactions with the mutual and hedge fund sectors; experience in structuring financing
transactions with the property sector will be considered an asset. Financial manger in
establishing relationship always gives priority of his organization these benefits:
Maximization of profit.
Earning per share maximization.
Increase of sale
Welfare
Reduce in cost
Maximization of shareholder’s wealth.
5.4 Use of Electronic data in Decision-making
In today’s contemporary business, critical and timely decision making is a must and important
too. Today’s bank use sophisticated software’s that not only help in operations but also improves
decision making by providing different reports, which can produced at different periods of time,
that can help employees at every level of the banks administration.
5.4.1 Technical Methods that Affect the Industry
The banking industry of Pakistan is at the forefront of modernizing its daily operations by
introducing the latest technologies in its operations. Some of the technical methods that are used
and affect the banking industry are as follows:
Advanced technological products and services
Automation of operational tasks
23
Decision making tools
5.4.2 Advanced technological products and services
Automatic Teller Machines (ATM) and ATM cards have been the biggest innovations that have
simply changed the way people today are now making their personal transaction. With ATM
cards, people can take out money from their accounts at any time, from any bank that they want
to, at their convenience.
ATM cardholders can take money out of their accounts, from any ‘1 link’ network ATM, the
largest ATM network of the country. Other ATM networks include ‘Mnet’ and ‘Cirrus’. Today
all banks are members of ‘1 link’, while most of them are members of Mnet and Cirus.
Internet Banking is another major technological product introduced by different banks of
Pakistan. With the help of internet banking, customers with the convenience of their own
personal computers can transfer money from their accounts, view their balances and a lot more.
5.4.3 Automation of operational tasks
Technical advancements have also impacted the daily operations of banks in
Pakistan. Online transfer of money between branches has increased the efficiency of exchange of
money between different account holders of the same bank.
Simple tasks such as balance inquiry and bank statements have become as easy as a click of a
button with highly sophisticated information systems.
All banks today have their own information systems that they can use in almost all departments
like clearing, account opening, car leasing and remittances.
5.4.4 Innovation
Innovation is a must in modern times, as it will help banks to compete in today’s highly
technologically advanced industry. Some of the innovations that the banking industry is looking
forward are:
24
More advanced means of connectivity between branches through better and advanced
software and hardware to maintain connections with banks in remote areas and during
natural calamities in Pakistan. These might include better connection through WiFi or
WiMax, both new technologies.
More advanced information systems in banks that are more secured than before to
eliminate any chances of fraud and which are even more user friendly to help employees
to use them not only to make critical decisions but also satisfy customer need in a more
timely manner.
Advancements in online transfer from inter branch to an even more helpful inter bank
transfers.
Automation of simple operations task that will not only improve efficiency but also
reduce costs like stationery and courier services, like automation of check books etc.
5.5 SOURCES OF FUNDS
2005 2006 2007 2008 2009Bills PayableBorrowingsDeposits & other accounts
(Data Source: DIB Financial Statements)
The analysis of the balance sheet of the bank shows that current liabilities increases over the
period of time, the increase in liabilities and increase in loan shows that company wants to have
more cash in hand rather than lending it to others and losing the return on that investment. As for
as the fixed liabilities of company are concern they are showing increasing trend and same is
case with the current and long term liabilities but the increasing trend in assets is lower than the
2,233,671 12,723,830 129,714,891
25
increasing trend in liabilities which in not a good position for the bank as shown in the table
borrowing are more increase in 2009.
5.6 GENERATION OF FUNDS
2005 2006 2007 2008 2009Mark-up incomeNon-mark-up incomeOther income
(Data Source: DIB Financial Statements)
In generation of funds of DIB, the most important source is mark-up income. There are three
earning revenues. Banks earning are mark-up income, non-mark-up income and other income. In
2005, the mark-up income is 20947333 which show a good strength of DIBPL. With the passage
of time the revenue of DIBPL is increasing with good figures and market share. The revenue
generated by the DIBPL is invested in the market to maximize its market share and to increase
its profitability index. In last five years the trends in generation of funds are positive and
remarkable.
5.6 ALLOCATION AND MOBILIZATION OF FUNDS
Allocation and mobilization of funds refers to the composition of funds in different sectors. How
many funds are used in acquiring assets, to pay the short term and long term obligations, for
investment purposes, to expand the business volume, to acquiring latest machinery and updated
technology, to pay the dividend etc. The finance department of DIBPL allocates the funds in
different sectors according to the policies of the management. Allocation of funds provides a
track how funds shape inflow and outflow in DIBPL.
2005 2006 2007 2008 2009Cash & balances with treasury banksBalances with other banksLending to financial institutionsInvestmentsAdvances
20,947,333 5,099,195 875,113
19,708,518 3,183,957 - 35,503,196 83,931,400 4,280,504 - 3,226,959
26
Fixed assets Deferred tax assetsOther assets
154,834,534 248,313,793 275,685,541 328,895,152 348,990,764 (Data Source: DIB Financial Statements)
In balance sheet of bank the most important item is earning assets. There are four earning assets.
Bank has strong earning assets like advances investments and lending to financial institutions
has major percentage in of assets of bank. In liability and equity analysis the borrowing from
financial institutions and deposits have major portion and reserve and share capital has major
portion in equity. Out of the three earning assets (lending to financial institutions, advances and
investments) only advances have recorded a growth while Lending’s to financial institutions and
Investments fell respectively.
Analysis of balance sheet shows increase or decrease in each item as a percentage of assets
means that assets are chosen as key figure. As we have seen in the table the interest expense is
increasing with the turnover so the bank is more utilizing on advances. As for as the fixed
liabilities of company are concern they are showing increasing trend and same is case with the
current and long term liabilities.
CRITICAL ANALYSIS
6.0 FINANCIAL ANALYSIS
6.1 FIVE YEAR BALANCE SHEET
2005 2006 2007 2008 2009
(Rupees in 000)ASSETSCash & balances with treasury banksBalances with other banksLending to financial institutionsInvestmentsAdvancesFixed assets Deferred tax assetsOther assets
19,708,518 3,183,957 - 35,503,196 83,931,400 4,280,504 - 3,226,959
27
154,834,534 248,313,793 275,685,541 328,895,152 348,990,764
LIABILITIES Bills PayableBorrowingsDeposits & other accountsSub- Ordinated loansLia against asset subj to finance leaseDeferred tax liabilitiesOther liabilities
149,655,669 240,849,667 263,443,596 312,675,308 331,946,025 NET ASSETS 5,261,484 7,464,126 12,241,945 16,219,844 17,044,739
PRESENTED BY Share capital Reserve Un appropriated profit
Surplus on revaluation of assets-net of Tax
12241945 7,464,126 12,241,945 16,219,844 17,044,739
(Data Source: DIB Financial Statements)
6.2 FIVE YEAR PROFIT AND LOSS
STATEMENT
2005 2006 2007 2008 2009
(Rupees in 000)
Mark-up / return / interest earnedMark-up / return / interest expensed Net mark-up / return / interest income
Provision against non-performing advancesProvision for / (reversal of) diminution in the value of
2,233,671 12,723,830 129,714,891 1,899,480 - 275,834 2,275,344
2,500,000 1,008,772 860,300 6,387,372 4,369,072
20,947,3336,559,39814,387,935
1,515,354
185,70714,297
32,807 1,748,16512,639,770
5,099,1951,273,8631,008,988
---
875,1138,257,159
20,896,929
8,878,80132,243
8,284_ 8,919,32811,977,601
-11,977,6014,950,000847,958
(15,729)5,782,2296,195,372
5,892,902
45,49612,133,770
10,48
33,633,73510,321,76823,311,967
2,446,739
(245,881) - 23,0692,223,92721,088,040
4,926,6041,718,4781,205,638 - - - 1,573,9059,424,62530,512,665
11,195,133 198,298 63,206 11,456,63719,056,028 -19,056,028 7,154,002(1,098,709) 291,291 6,346,58412,709,444
9,161,747
43,22121,914,412
21.51
43,788,628 13,634,912 30153,716 3,075,723
(709,461) - 5,2842,37154627,782,170
6,144,6282,891,7551,333,8401,169,515 (4,464) 627,61812,162,89239,945,062
13,443,441 (17,283) 208,327 13,634,48526,310,577 -26,310,577 8,695,598 530,652 61,9819,288,23117,022,346
19,372,523
--------------36,394,869
20.88
50,569,48116,940,01133,629,470
4,723,084
(40,248) - 39,899 4,722,73528,906,735
6,781,6833,263,2461,042,8272,341,690
(31,964) 147,36313,544,84542,451,580
14,205,911 168,027 17,141 14,391,079 28,060,501 -28,060,501 8,311,500 391,497 323,731 9,026,72819,033,773
32,074,677
39,00751,147,457
23.34
60,940,79823,884,76837,058,030
10,590,565
373,249 4,000____-___10,970,81426,087,216
7,925,3702,878,9323,969,057 395,427
1,7071,245,36916,415,86242,503,078
18,171,198 747,521 583,361 19,502,08023,000,998 -23,000,99811,762,650 - (4,220,240) 7,542,408 15,458,590
45,344,188
130,45660,933,234
17.4828
InvestmentsProvision against off balance sheet obligationsBad debts written off directly Net mark-up /interest income after provisions
i) Non mark-up / interest income Fee, commission and brokerage incomeDividend incomeIncome from dealing in foreign currenciesGain on sale of securities-netUnrealized gain/(loss) on revaluation of investments Classified as held for tradingOther income
Total non-markup / interest income
ii) Non mark-up / interest expenseAdministrative expensesOther provisions / write offsOther charges
Total non-markup / interest expenses
Extra ordinary / unusual itemsiii) Profit before taxation
Taxation - Current - Prior years - Deferred
iv) Profit after taxation
Unappropriated profit brought forwardTransferred from surplus on revaluation of fixed assets on account of incremental depreciationProfit available for appropriation
Basic and diluted earning per share-after tax
(Data Source: DIB Financial Statements)
6.3 RATIO ANALYSIS
Ratios provide the means of showing the relationship, which exists between,
figures of the Balance Sheets and Income Statements. The analysis is
undertaken to assess important characteristics of business like liquidity,
solvency and profitability. A study of these aspects enables drawing
conclusions as to financial requirements and capabilities of business units.
Ratios may be classified in a number of ways to suit any particular purpose.
29
Different kinds of ratios are selected for different types of situations. Some of
the ratios calculated for DIBPL are given below.
6.3.1 LIQUIDITY RATIO
Comparison gives an indication of the short-term debt paying ability of an
entity. Since a bank is also a business firm so to maintain adequate liquidity
is also crucial to carry out business activity.
6.3.1.1 Current Ratio
It is used to measure the ability of an enterprise to meet its current liabilities
out of current assets.
Current Ratio = Current Assets / Current Liabilities
(Rupees in’000)
2005 2006 2007 2008 2009
Current Assets 340,134 7,550,223 19,425,608
29,526,710
33,228,530
Current liabilities
119,340 4,903,849 16,952,908
26,983,946
29,328,629
Current Ratio
2.85 1.54 1.15 1.09 1.13
CURRENT RATIO
30
INTERPRETATION
The current ratio of DIBPL, for the year 2009, is 1.13 times of current
liabilities. It is good to meet the short-term obligations, when compared with
the current ratio 2008, which is 1.09 times of current liabilities. The company
should maintain minimum limit of current ratio for Bank i.e.1.
6.3.1.2 Net Working Capital
Working capital compares current assets to current liabilities, and serves as the liquid reserve
available to satisfy contingencies and uncertainties. A high working capital balance is mandated
if the entity is unable to borrow on short notice. The ratio indicates the short-term liquidity of a
business and in determining if a firm can pay its current liabilities when due.
Net Working Capital = Current Assets – Current Liabilities
(Rupees in ‘000)
2005 2006 2007 2008 2009
Current Assets 340,134 7,550,223 19,425,608
29,526,710
33,228,530
Current liabilities
119,340 4,903,849 16,952,908
26,983,946
29,328,629
Net Working Capital
220,794 2,646,374
2,472,700
2,542,764
3,899,901
NET WORKING CAPITAL
31
INTERPRETATION
Net working capital of 2009 increases from year 2008. This is safety cushion to
creditors. The volume of net working capital is showing positive trends.
6.3.2 DEBT RATIOS / SOLVENCY RATIONS
Solvency is a company’s ability to meet its long-term obligations as they
become due. An analysis of solvency concentrates on the long-term financial
and operating structure of the business.
6.3.2.1 Debt to Asset / Debt Ratio
Provides information about the company's ability to absorb asset reductions arising from losses
without endangering the interest of creditors.
Debt Ratio = Total Liabilities / Total Assets
(Rupees in ‘000)
2005 2006 2007 2008 2009
Total Assets 497,393 8,434,280 21,308,247
32050073 35,368,894
Total liabilities 119,340 4,903,849
16,952,908
26,983,946
29,328,629
Debt Ratio 0. 0.5814 0.7956 0.8419 0.8292
32
DEBT RATIO
INTERPRETATION
Creditors prefer low debt ratio, debt ratio shows that how much asset the
company has to honor their obligations. This ratio is increased from 0.8419
to 0.8292. This is a good for the company because the company has 1 asset
to pay 0.8292 debts.
6.3.2.2 Debt to Equity Ratio
Indicates how well creditors are protected in case of the company's insolvency. The debt to
equity is a significant measure of solvency since a high degree of debt in a capital structure may
make it difficult for the company to meet interest chargers and principal payments at maturity.
Debt to Equity Ratio = Total Debt / Total Stockholder’s Equity
(Rupees in ‘000)
2005 2006 2007 2008 2009
Total Debt 119,340 4,903,849 16,952,908
26,983,946
29,328,629
Total Equity 418,185 3,917,480 5,126,230 6,017,780 6,776,030
Debt to Equity Ratio
0.285 1.252 3.307 4.484 4.328
33
DEBT TO EQUITY RATIO
INTERPRETATION
Debt to equity ratio is the relationship borrowed funds and owner’s capital
and equity multiplier is the relationship between total assets and total
equity. But it is good that the ratio is decreasing in 2009 than 2008. The
overall leverage position is showing better trend as compare to previous
years.
6.3.3 PROFITABILITY RATIOS
This ratio shows that what percentage of net profit to the total income is.
6.3.3.1 Net Profit Margin
This ratio measures the firm’s profitability of sales/ interest earned after taking account of all
expenses and income taxes. This ratio can be calculated as:
Net Profit Margin = Net Profit / Revenue *100
(Rupees in ‘000)
2005 2006 2007 2008 2009
Net Profit 619,537 1,270,944 1,702,234 1,903,377 1,545,859
Revenue 2,094,733 3,363,373 4,378,862 5,056,948 6,094,079
Net Profit Margin
29.57% 37.79% 38.87% 37.64% 25.37%
34
NET PROFIT MARGIN
INTERPRETATION
From the calculation it is very much clear that the performance of DIBPL is very good still to
2007. And the trend is upward. It tells us a firm’s net income per rupee of revenue. As the trend
is upward it shows the high profits in revenue per rupee in case of DIBPL. It is because of high
advances the DIBPL has given to the people but in 2008 the ratio trend is downward which not
good for DIBPL.
6.3.3.2 Return on Equity
Measures the income earned on the shareholder's investment in the business.
Return on Equity = Net Income / Average Total Equity
(Rupees in ‘000)
2005 2006 2007 2008 2009
Net Profit(After Tax Profit)
619,537 1,270,944 1,702,234 1,903,377 1,545,859
Total Equity 2,489,976 3,615,847 5,304,464 6,927,063 8,136,700
Return on Equity
24.88% 35.15% 32.09% 27.48% 18.99%
35
RETURN ON EQUITY
INTERPRETATION
It is decreasing every year with different rate. This condition is not good for
DIBPL because every investor want to earn high income on his investment.
6.3.3.3 Return on Total Assets
Measures the company's ability to utilize its assets to create profits.
Return of Total Assets = Net Income / Average Total Assets *100
(Rupees in ‘000)
2005 2006 2007 2008 2009
Net Profit(After Tax Profit)
619,537 1,270,944 1,702,234 1,903,377 1,545,859
Total Assets 55,323,146
57,771,911
63,513,271 76,219,359
81,775,832
Return on Total Assets
1.12% 2.20% 2.68% 2.50% 1.89%
36
RETURN ON TOTAL ASSETS
INTERPRETATION
The results show that the Return on Asset are decreased which show that
the DIBPL Assets are not properly utilize in 2009 or may be there are no
proper environment for Banking sector because in 2008 Pakistan face the
economic crisis.
6.3.4 BANK SPECIAL RATIO
6.3.4.1 Investment to Asset RatioInvestment to Total Assets = Investment / Total Assets
(Rupees in ‘000)
2005 2006 2007 2008 2009
Investment 113,930 832,925 2,974,087 3,019,266 2,822,723
Total Assets 497,393 8,434,280
21,308,247 32,050,073
35,368,894
Investment to Total Assets
0.22 0.10 0.14 0.09 0.08
37
INVESTMENT TO ASSET RATIO
INTERPRETATIONThis ratio indicates that out of total asset how much bank utilize its
asset for further investing. This ratio in decrease in 2009, which is not useful
for the bank to enhance its revenues.
6.3.4.2 Advances to Deposit Ratio
Advances to Deposit Ratio = Total Advances / Total Deposit
(Rupees in ‘000)
2005 2006 2007 2008 2009Total Advances
3,195,575 3,273,957
11,347,979
18,073,501
20,589,613
Total Deposit 4,655,717 4,322,621
16,114,461
25,458,910
27,980,906
Advances to Deposit Ratio
68.64% 75.74% 70.42% 70.99% 73.58%
ADVANCES TO DEPOSIT RATIO
38
INTERPRETATION
Loans or advances are the major assets of a bank while deposits are major
liabilities of a bank. Higher ratio shows the better solvency of bank.
6.3.4.3 Cash to Deposit Ratio
Cash to Deposit Ratio = Cash / Deposit
(Rupees in ‘000)
2005 2006 2007 2008 2009
Cash 944,465 719,833 1,992,425
2,691,572 2,932,264
Total Deposit 4,655,717 4,322,621 16,114,461 25,458,910
25,980,906
Cash to Deposit Ratio
20.29% 16.65% 12.36% 10.57% 11.29%
CASH TO DEPOSIT RATIO
INTERPRETATION
This ratio shows that how much cash you have to pay the liabilities
(deposits). As this ratio show that company has fewer amounts of cash than
39
deposits. It also indicates that bank is investing so the bank is enhancing its
business. But at the same time it could be risk for bank for liquidation.
6.3.4.4 Equity to Assets
Equity to Assets = Equity / Total Assets
(Rupees in ‘000)
2005 2006 2007 2008 2009
Equity 418,185 3,917,480 5,126,230
6,017,780 8,136,700
Total Assets 497,393 8,434,280 21,308,247 32,050,073
35,368,894
Equity to Total Assets
47.50% 46.45% 24.06% 18.78% 19.16%
EQUITY TO ASSETS
INTERPRETATION
40
This ratio shows the position of equity in total assets of business. This ratio is
in increasing trend. But the bank should increase its equity by increasing the
wealth of shareholders.
6.3.4.5 Equity to Deposits
Equity to Deposit = Equity / Deposits
(Rupees in ‘000)
2005 2006 2007 2008 2009
Equity 248,997 3,917,480 5,126,230 6,017,780 8,136,700
Total Deposits 655,717 8,322,621 16,114,461 25,458,910
25,980,906
Equity to Total Deposits
37.97% 47.07% 31.81% 23.64% 31.32%
EQUITY TO DEPOSITS
INTERPRETATION
41
This ratio shows that how much equity part is there in total structure. The
capital advocacy requirement is 28%. The bank was not fulfilling the
requirement in 2005 & 2006 but now bank has 31.32%, which is good.
6.3.4.6 Earning Per Share
Earning Per Share = Net Income / No of Ordinary Shares
(Rupees in ‘000)
2004 2005 2006 2007 2008
Net Profit(After Tax Profit)
619,537 1,270,944 1,702,234 1,903,377 1,545,859
No of Ordinary Shares
49,241,062
59,089,274
70,907,129 81,543,198
89,697,510
Earning Per Share (EPS)
12.58 21.51 24 23.34 17.23
EARNING PER SHARE
INTERPRETATION
42
As their earnings per common share is good year by year it mean that
results of the ratio indicate that firm has paid a handsome return on
investment showing the profit generations. Because the company’s net
income is increasing gradually. As shown above the bank basic earning per
share is increasing due to increase in net income. This shows how mush
profit each share has earned in any particular year. It is most important ratio
for peoples who decide about investing their money. Although it decreased
in 2009 but the overall performance is good.
6.3.3.3 Return on Total Investment
Measures the income earned on the shareholder's investment in the business.
Return on Investment = Net Income / Total Investment
(Rupees in ‘000)
2005 2006 2007 2008 2009
Net Profit(After Tax Profit)
619,537 1,270,944 1,702,234 1,903,377 1,545,859
Total Investment
2,489,976 3,615,847 5,304,464 6,927,063 8,136,700
Return on Investment
24.88% 35.15% 32.09% 27.48% 18.99%
RETURN ON INVESTMENT
43
INTERPRETATION
It is decreasing every year with different rate. This condition is not good for
DIBPL because every investor want to earn high income on his investment.
6.3.3.3 Return on Fixed Assets
Measures the company's ability to utilize its fixed assets to create profits.
Return on Fixed Assets = Net Income / Average Fixed Assets *100
(Rupees in ‘000)
2005 2006 2007 2008 2009
Net Profit(After Tax Profit)
619,537 1,270,944 1,702,234 1,903,377 1,545,859
Total Fixed Assets
55,323,146
57,771,911
63,513,271 76,219,359
81,775,832
Return on Fixed Assets
1.12% 2.20% 2.68% 2.50% 1.89%
RETURN ON FIXED ASSETS
44
INTERPRETATION
The results show that the Return on Asset are decreased which show that
the DIBPL Assets are not properly utilize in 2009 or may be there are no
proper environment for Banking sector because in 2008 Pakistan face the
economic crisis its assets to create profits.
6.4 VERTICAL ANALYSIS
In vertical analysis a significant item of a financial statement is used as a base value, and all
other items of the financial statement are compared to it. In balance sheet, total assets are
assigned 100%. Each asset account is expressed as a percentage of total assets. Total liabilities
and stockholder’s equity is also assigned 100%. Each liability and equity account is then net
income is given the value of 100% and all other amounts are evaluated in comparison to net
sales. The resulting figures are then given a common size statement.
45
Askari Bank Pakistan Ltd.Balance Sheet
Vertical Analysis (Rs 000)For the year ended Dec 31, 200…
ASSETS2005 2006 2007 2008 2009
% % % % %
Cash & balances with treasury banksBalances with other banksInvestments-netLending to financial institutionsAdvances- netOperating Fixed assetsDeferred Tax Assets Other assets-net
17.089.0026.991.9039.923.451.66
-
12.325.5627.172.8246.434.101.60
12.386.4022.033.6249.771.52
-4.27
12.454.9227.702.8244.653.40
-4.07
13.034.6920.892.0950.502.960.395.45
Total Assets 100 100 100 100 100
LIABILITIES Bills PayableBorrowingsDeposits & other accountsLiabilities against asset subject to finance leaseDeferred tax liabilities-netOther liabilities
1.422.1991.840.0030.0064.55
0.351.7292.060.0030.894.96
1.922.1290.2.0020.435.80
1.091.6891.650.0050.784.79
1.455.6587.36.0030.005.54
Total liabilities 100 100 100 100 100
NET ASSETS PRESENTED BY
Share capital Reserve Unappropriated profit
Surplus on revaluation of assets
10.6523.3819.8153.8446.16
7.9518.2022.4848.6351.37
8.6516.9439.1464.7335.27
7.0013.5638.9859.5540.46
8.7519.4651.1979.4020.60
Total Liabilities and Equity 100 100 100 100 100
46
Askari Bank Pakistan Ltd.Profit & Loss Account
Vertical Analysis (Rs 000)For the year ended Dec 31, 200…
2005 2006 2007 2008 2009% % % % %
Mark-up / return / interest earnedMark-up / return / interest expensed
10031.31
10030.69
10031.63
10033.50
10039.19
Net mark-up / return / interest income 68.6 69.3 68.3 66.50 60.81Provision against non-performing advancesProvision for diminution in the value of InvestmentProvision against off balance sheet obligationsBad debts written off directly
7.230.890.0680.168.348
7.27(0.73
)-
0.07
6.97(1.61
)-
0.01
9.34(0.08)
-0.089.34
6.980.610.006
-7.96
Net mark-up /interest income after 60.3 62.3 63.0 57.16 52.85Non mark-up interest incomeFee, commission and brokerage incomeDividend incomeIncome from dealing in foreign currenciesGain on sale of securities-netUnrealized gain/(loss) on revaluation of investments Classified as held for tradingOther incomeTotal non-markup / interest income
24.346.084.81
-
-4.1739.40
14.655.113.582.58
-4.6830.60
13.936.563.022.65
(0.01)
1.4227.57
13.416.452.064.67
(0.06)0.2926.78
13.213.166.641.04
0.210.2326.54
99.7 92.9 90.5 83.95 70.64Non mark-up / interest expenseAdministrative expensesOther provisions / write offsOther chargesTotal non-markup / interest expenses
42.380.150.0442.57
33.290.590.1934.06
30.48(0.04
)0.4730.92
28.090.330.0328.46
26.210.410.8531.73
Profit before Taxation 57.1 58.8 59.6 55.49 38.91Taxation – Current - Prior years
- Deferred
23.634.04(0.07
21.21(3.27
)
19.721.200.14
16.440.770.64
19.03-
(6.92)27.60 18.87 21.06 17.85 12.11
Profit After Taxation 29.43
40.01
38.60
37.64 26.68Unappropriated profit brought forwardTransferred from surplus on revaluation of fixed
assets on account of incremental depreciation
28.130.22
27.240.13
44.24-
63.420.08
74.400.21
Profit available for appropriation 57.78
67.38
82.84
101.14
101.29
47
In balance sheet of bank the most important item is earning assets. There are four earning assets.
Bank has strong earning assets like advances investments and lending to financial institutions
has major percentage in of assets of bank. In liability and equity analysis the borrowing from
financial institutions and deposits have major portion and reserve and share capital has major
portion in equity. Out of the three earning assets (lending to financial institutions, advances and
investments) only advances have recorded a growth while Lending’s to financial institutions and
Investments fell respectively.
Vertical analysis of profit and loss shows increase or decrease in each item as a percentage of
sales means that sales are chosen as key figure. As we have seen in the table the interest expense
is increasing with the turnover so the bank is more utilizing on expenses. Net Interest income
was 10% higher this year to Rs 37.058 billion owing to volume growth. The interest earned in
the 12 months of 2008 is 21% higher than that of 2008 but it was matched by more than
proportionate increase in the interest expenses, which rose by 41%. So in vertical analysis the net
interest income is decreased in 2009 as compare to 2008.
DIBPL directors give some of reasons in increasing in interest expenses.
Firstly, the banks have been imposed a minimum of 5% deposit rate on all the savings
schemes. This had previously been left at the banks' discretion as to how much they have
to pay. A few of the banks have also been penalized by the SBP for acting like cartel in
deposits.
Secondly, there has been other attractive scheme from the National Savings, which
offered better rates and drained the liquidity from banking sector.
Furthermore, the economy was going through high inflation, so the people were not too
optimistic about saving in banks as the money was losing its value very fast.
Administrative expenses shows decreasing trend also the profit after tax is in decreasing
position during last two years, that position in not good for the company. Only profit available
for appropriation is increasing as compare to previous years, which is 101.29% in 2009.
48
6.5 HORIZONTAL ANALYSIS
In horizontal analysis different period’s data is compared and in one year item is selected and item is compared with the same category of item of next period. In this analysis the year should be consecutive for the analysis and then percentage difference is taken to see the performance over the period of time. This analysis is used to evaluate the trend in the accounts over the year.
Askari Bank Pakistan Ltd.Balance Sheet
Horizontal Analysis (Rs 000)For the year ended Dec 31, 200…
ASSETS 2005 2006 2007 2008 2009Base 2005 Base 2005 Base 2005
20052005
Base 2005 Base 2005
Cash & balances with treasury banksBalances with other banksLending to financial institutions Investments-netAdvances- netOperating Fixed assetsOther assets-net
100 100 100 100 100 100 100
10.43 31.02 41.33 (10.85) 17.58 2.41 13.25
20.67(7.80)(6.73)50.877.65
167.7414.31
12.262.32
(20.02)(19.09)21.356.5843.73
11.3520.41
(40.25)(15.50)15.5524.127.69
Total Assets 100.0 9.94 20.01 7.29 23.37
LIABILITIES Bills PayableBorrowingsDeposits & other accountsLiabilities against asset subject to finance leaseDeferred tax liabilities-netOther liabilities
100100100100100100
509.233.668.30
(20.41) (46.51) 6.49
(33.41)(6.99)17.94153.52113.5616.07
44.71274.096.24
(24.67)(100)28.17
24.60(90.90)25.17
(32.15)25.1423.45
Total liabilities 100.0 9.89 16.75 10.75 (24.69)NET ASSETS PRESENTED BY Share capital Reserve Unappropriated profit
Surplus on revaluation of assets
100100100
100
20.002.5491.91
46.7 (24.29)
15.0013.6441.3730.5962.81
10.0026.4315.6817.46
(55.18)
19.3530.2216.3525.35
(41.89)
Total Liabilities and Equity 100.0 10.24 41.95 (11.93) 49.38
49
Askari Bank Pakistan Ltd.Profit & Loss Account
Horizontal Analysis (Rs 000)For the year ended Dec 31, 200…
2005 2006 2007 2008 2009Base 2005
Base 2005
Base2005
Base2005
Base2005
Mark-up / return / interest earnedMark-up / return / interest expensed
100100
31.1235.12
14.6721.46
20.9340.96
35.2322.48
Net mark-up / return / interest income 100.0 29.35 11.53 10.84 30.15Provision against non-performing advancesProvision for diminution in the value of InvestmentProvision against off balance sheet obligationsBad debts written off directly
100100100
100 100
25.70188.5425.71-77.096.64
53.56-94.3353.56655.0999.14
124.23-265.22-92.13-89.97
133.13
46.25175.2540.35-35.4555.16
Net mark-up /interest income after 100.0 31.74 4.05 -9.14 40.75Non mark-up interest incomeFee, commission and brokerage incomeDividend incomeIncome from dealing in foreign currenciesGain on sale of securities-netUnrealized gain/(loss) on revaluation of
investments Classified as held for tradingOther incomeTotal non-markup / interest income
100100100100
100 100 100
24.7268.2710.63
(14.37)
125.57(60.12)29.50
10.3712.85
(21.82)100.23
616.04(76.52)11.36
17.75(36.04)285.6
(83.04)
(502)745.10
21.19
20.8964.23236.25(75.16)
(302)421.2325.36
100.0 30.91 6.27 0.12 27.26
50
Non mark-up / interest expenseAdministrative expensesOther provisions / write offsOther chargesTotal non-markup / interest expenses
100100
100 100
20.08(108.72)229.6019.01
5.671072.21(91.77)
5.55
29.27344.88347.19
36.88
24.25362.21204.10 60.25
Profit before Taxation 100.0 58.88 55.49 35.51 70.29
Taxation – Current - Prior years
- Deferred
100100
100
21.55(148.30)
46.35
(4.42)(26.22)422.31
41.95(100)
(1403.62)
40.3690.25(1254)
Profit After Taxation 100.0 33.93 11.8237.64
(18.73) 52.45Unappropriated profit b/f transferred
Trans from surplus on revaluation of fixed assets on account of incremental depreciation
100
100
111.45
(100)
65.57
100
41.37
234.44
100.45
175.88
Profit available for appropriation 100.0 66.07 40.38 19.13 72.65
The horizontal analysis of the balance sheet of the bank shows that current assets increases over
the period of time, the increase in cash and decrease in loan shows that company wants to have
more cash in hand rather than lending it to others and losing the return on that investment. as for
as the fixed assets of company are concern they are showing increasing trend and same is case
with the current and long term liabilities but the increasing trend in assets is lower than the
increasing trend in liabilities which in not a good position for the bank .as shown in the table
borrowing are more increase in 2009.
The horizontal analysis of Profit & Loss account of years 2007-2009 shows a continuous
decrease in mark up, non mark up and also there is a rapid and huge decrease in the profits in
2008. The administrative expenses have been decrease in 2008 but again it will increase in 2009.
The income after tax is decrease, which was 19% lower than the income earned in 2008. The
bank profits before tax are increasing trend, which is 18% higher than the previous year of 2008.
The management of the bank gives many reasons of the radical change in profitability. First of
all, adverse economic conditions domestically, the law and order, power shortages, record high
inflation, liquidity in the banking system, steep rise in interest rates, increase in government
borrowing from the central bank, rising import bill and resulting growth in fiscal deficit.
The interest expense is also increase in 2008-2009. The management give different reasons that
the banks have been imposed a minimum of 5% deposit rate on all the savings schemes. This
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had previously been left at the banks' discretion as to how much they have to pay. A few of the
banks have also been penalized by the SBP for acting like association in deposits. Secondly,
there has been other attractive scheme from the Savings, which offered better rates and drained
the liquidity from banking sector. Furthermore, the economy was going through high inflation,
so people were not too optimistic about saving in banks as the money was losing is value very
fast. The provisions against non-performing loans were 124% higher as compared to 2007. The
advances recorded an increase because the bank was lending though very prudently due to
increasing NPLs (Non-performing loans). Along with the increase in Advances, the composition
has also changed a bit. A shift from long-term to short-term loans is observed.
7.0 ORGANIZATIONAL ANALYSIS WITH REFERENCE TO
THE COMPETITORS IN TERMS OF TOTAL ASSETS, TOTAL
LIABILITIES AND TOTAL REVENUE
DIBPL is one of the leading Islamic Banks with Islamic compliant products. It has earned a
good market share in a very short span of time due to its efficient and effective management and
proactive market approach. There are a lot of its competitors in market trying to dominate its
market strength and share. Here DIBPL is compared with NBP and BAF in terms of its total
assets, total liabilities and total revenue etc.
Total Assets Total Liabilities Total Revenue
Rupees in Millions
Banks 2009 2008 2009 2008 2009 2008NBP 40,354
262693423964
32,585 19,393 14,687 25,368
2536542,
20,587
BAF 21,937 17,858 15,365
15323
12,324 21,854
43,971
18,574
DIBPL 17,781 12,565 10,362 8,542 15,368 12,654
(Source: Annual reports of various banks)
As per the table, the total assets of NBP are 40354 million in 2009 which are maximum in
volume as compared to BAL and DIBPL. In 2009, the total assets of DIBPL are 17781 which
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show a positive trend as compare to 2008. Similarly the trends of all banks from 2008 to 2009
are positive and show a good change in terms of quantity.
The volume of liabilities of NBP is higher as compared to other banks due to its extensive
branching and networking. The volume of all the banks shows positive trends from 2008 to
2009. This is because of new projects, increase in short term and long term liabilities.
The volume of NBP is high as compared to other banks like BAL and DIBPL in terms of
quantity due to its extensive products networking and the other reason is that because it plays the
functions as an agent of the government. DIBPLs volume of revenue is comparatively lower as
compared lower then its competitors. Because DIBPL has recently established in 2005 that’s the
reason its volume of revenue is lower.
8.0 FUTURE PROSPECTS OF DIBPL
DIBPL remains committed to the interest of all stake holders including its employees, owners,
regulators and Pakistani nation. DIBPL has defined strategy on where and how want to proceed
in the years to come. With the implementation of the new ‘Core Banking Package’, DIBPL will
completely automate its functions which in turn will appreciably enhance work efficiency.
DIBPL will continue to diversify customer segments thereby increasing product offering. DIBPL
committed towards the employee’s empowerment / development will continue DIBPL believe
that a motivated and well trained work force is necessary to ensure sustenance and growth. On
the business side its main focus would be to reduce non-performing loans and increase deposits.
DIBPL remain committed to its Vision, Mission & core values and its strategy for the future
includes recovery efforts and revival of non-performing loans, deposit mobilization,
consolidation of loans, expense management and tapping into untapped markets by increasing
our network both domestically and internationally. Customer service will remain its main focus
of Operations management.
Finally DIBPL extend its appreciation to the bank’s staff for their commitment, dedication and
hard work in achieving these excellent results. DIBPL would like to express its sincere reverence
to the Board members whose valuable guidance has always enlightened in decision making.
Finally DIBPL would like to express its appreciation to stakeholders, regulators and its valued
customers for their support and continued confidence in DIBPL.
(Source DIBPL annual report 2009)
53
9.0 WEAKNESSES OF THE ORGANIZATION WITH MAIN FOCUS ON FINANCIAL MANAGEMENT
Customer Satisfaction: In DIBPL customer dealing is well, but during rush hour the
customer has to wait for a long time for their turn. It’s quite hard for a new customer or
potential customer to get the required information.
Poor record management and filing system: During my internship I observed that filing
system of branch is not good. When certain record is needed the staff has to struggle to find
it out and a lot of time is wasted.
Unequal distribution of work: Work is not equally distributed. On one hand some
employee have to work all day without relaxing while some others have nothing to do at all.
This not only creates confusion among employees but also hurting and disturbing for overall
setup of the bank. And above all it results in dissatisfaction among customers as well.
Difference between theory and practice: A vast difference exists between theory and
practice and DIBPL has written procedure but practical work done by employees is a bit
different from written procedures.
Bank duty to maintain secrecy: They don’t care about maintaining secrecy, especially
during the rush hours. They speak loudly about the account position and while getting
clearance of cheque the person can easily get the whole information from the ledge. The
deposit clerk must be careful while passing any cheque. In this regard another shortfall is in
giving the information about the balance on telephone.
Excessive paper work: It is notified that due to the lengthy procedure of paper work the
bank employee are over burdened. They are unable to give proper attention to the clients and
face difficulties in getting their job done. One reason for lengthy procedure and excessive
paper work in the bank is the lack of computerized technology.
54
More accounts fewer deposits: Efficient banking is one, which does not emphasize on
number of accounts but on greater amount of deposits. DIBPL is more interested in
increasing its number of account irrespective to its deposit.
Delegation of authority: Manager has very limited authority; he has to take the approval
from his management authority i-e. In case of advance he has to take the approval of general
and regional manager. The other problem is created, when the manager is not present in his
office, the customer having to wait for hours. This discourages both customer and officers
because they have to suffer a lot.
Lack of specialized training: DIBPL does not provide adequate facility of specialized
training to their staff. Training is generalized rather than specialized. As the worker finishes
his training, he is inducted into a specific field without having great deal of knowledge about
the field.
.
10.0 CONCLUSION
DIBPL is an effectively operating and profit making organization and carrying out its activities
under a specified system of procedure. The main regulatory body is State Bank of Pakistan,
which provides policy guidelines and ensures that the money market operates on sound
professional basis. While the head office specifies the whole procedure of function and
operations. This procedure has been modernized with the passage of time with a view to
streamline the approach and underlying procedure for effective overhauling of its own
capabilities so as to bring them at par with international practices.
There are people who are motivated towards their work but on the whole, it seems like
employees do not work on time and enjoys wasting their time, which is a big hurdle in its way to
progress. Also working at the bank, I also found out that all the departments are not linked
together. Employees usually hide their work from other employees as its match going on and
whoever does the best would be awarded. That should not be the case. All the departments
should work as team not as individuals, so that the whole branch would get benefit out of it. So
55
there is a lack of teamwork, also due to this weakness of the branch, its customers are not
satisfied. I talked to many clients of the bank but most of them were not satisfied with the
services provided specially in the departments namely Account department, Cash department
and Bill collection section. So I would suggest to the employees to work whole- heartedly and
show keen interest in their work.
11.0 RECOMMENDATIONS AND SUGGESTIONS
Here I am giving some suggestions, which in my view can add some input for efficiency and
better performance of DIBPL as an organization in general and F-10 Markaz Branch in
Particular
The recommendations are as follows:
In my opinion the process of a transaction should be short in order in
save time for both customers and the bank.
Staff strength should be enhanced and professional qualified persons
should be recruited.
It is recommended that proper training be provided to the staff
members that will ultimately increase the performance of Bank over
all.
It is suggested that promotion be given to the staff in due time and on
the basis of performance to provide job satisfaction.
The bank should spend more on renovation of the branches to improve
environment and atmosphere to attract the customers.
Sitting arrangement, air conditioning and new furniture should be
facilitated
The Bank should introduce the computers software to cope the heavy
load of work and better control.
56
Extra counters should be established in order to facilitate during the
rush days the difficulties faced by the bank staff as well as the
customers.
All Branches of the Bank must be online.
All the departments should be established separately.
Bank can increase its profit ratio by reducing extra expenditures and to
enhance the volume of advanced especially retail loans.
I done internship, I recommend that security level in the bank should
be enhanced especially where I got internship and operation of Mobile
phones must not be allowed inside the Bank.
Bank should take step to establish separate counters for the old age
employees and pensioners.
The Bank should locate new market for its operational activities in the
country as well as abroad.
The Bank should increase profit rate on deposits and saving schemes
especially for pensioners and old age citizens.
For improvement of internal control and system the compliance wing
and surprise inspection system should work more effectively.
To avoid complaints and leaving the bank job number of staff should
be enhanced and their salaries should be leveled to the
private/multinational banks.
Double shift system should be introduced to improve attitude and
behavior of the employees.
Payment of salaries should be made separately to accommodate the
valued customers and depositors.
For collection of utility bills i.e. Electricity bills, Telephone bills, Water
and Gas bills separate cash receipt counter must be established.
Procedure of receiving loans should be easy and short time to facilitate
the borrowers and enhance the profitability of the Bank
57
12.0 REFERENCES
www.dibpl.com.pk
www.dibpl.com.pk/An_Report.htm
www.sbp.org.pk
www.askarebank.com.pk
www.mcb.com.pk
www.bankalfalah.com
www.hbl.com.pk
www.ubl.com.pk
www.abl..com.pk
www.dailytimes.com.pk
Irshad, M. (2007). Money Banking and Finance, Nayyar Asad Printers.
58
Siddiqui, A. H. (1998). Practice and law of Banking in Pakistan (2nd Ed), Karachi Decent
Print Enterprises.
Van Horne, J.C and J.M Wachowicz, JR.11th Edition, “Fundamental of Financial
Management” New Jersey: Prentice-Hall, Inc.1998.
Management Brief, January 2008 published by Human Resources
Management and administration Group, Askari Bank Pakistan Ltd.
Head Office Karachi.
Financials-Half Yearly Account June 30, 2008.
Economic Indicators Pakistan, January 2008 published by Economic
Research Wing, Credit Management Group, DIBPL Head Office Karachi.
Annual Report 2005,2006,2007,2008, 2009 published by DIBPL, Head
Office Karachi.
Brochure- DIBPL Awards & Achievements.
Financial Review of Banking Sector by State Bank of Pakistan
Interviews of Bank staff of DIBPL
ORGANOGRAM OF DIBPL
59
Corporate & Investment
Banking Group
Corporate & Investment
Banking Group
Chairman & President
Chairman & President
Credit Management
Group
Credit Management
Group
Audit & Inspection Group
Audit & Inspection Group
Compliance GroupCompliance Group
President’s SecretariatPresident’s Secretariat
Board of DirectorsBoard of Directors
Secretary Board of Directors
Secretary Board of Directors
60
HRM & Administration
Group
HRM & Administration
Group
Operation Group
Operation Group
Commercial & Retail Banking
Group
Commercial & Retail Banking
Group
Treasury Management
Group
Treasury Management
Group
Special Assets Management
Group
Special Assets Management
Group
Overseas Management
Group
Overseas Management
Group
I.T. GroupI.T. Group
ORGANOGRAM OF F-10 MARKAZ BRANCH
BranchManager
DepositsDept
E-Remittances
Clearance Dept
Account Opening
Bills Section
AdvancesDept
HRDept
PensionDept
CashDept
61