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Home APNA PINDI BHATTIAN EDUCATION PICTURE GALLARY CONTACT US Thursday, November 3, 2011 Internship Report Dubai Islamic Bank For (B&F) Students ACKNOWLEDGEMENT

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 bankers of DIBPL, F-10 Markaz Branch Islamabad provided me with all assistance, information, advice and suggestions that I needed which contributed importantly to this report.

Naveed Talib 03227817451

1. EXECUTIVE SUMMARY

As per the requirements for the degree of MBA at AIOU, I got an opportunity to get eight weeks internship exposure. Dubai Islamic 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 Dubai Islamic Bank in particular.

In this report, there is an introduction of Dubai Islamic Bank. In introduction, there is history of Dubai Islamic 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. OBJECTIVES OF STUDYING THE ORGANIZATION Overview After the completion of degree MBA (Banking & 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 banking and 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 Dubai Islamic Bank as my learning organization. Objectives that I want to achieve Objectives 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 Dubai Islamic 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 and Banking and Finance. 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. OVERVIEW OF THE ORGANIZATION

Dubai Islamic 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. Dubai Islamic 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. Dubai Islamic 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.

3.1 HISTORY OF DUBAI ISLAMIC BANK PAKISTAN LTD.

Thirty years ago Dubai Islamic 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.

3.2 Nature of the organization

Dubai Islamic 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 Dubai Islamic 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 Dubai Islamic Bank makes different adjustments to update business operations. The Bank has also played an important role in financing the countrys growing trade, which has expanded through the years as diversification took place. Dubai Islamic Bank Pakistan Ltd. maintains its position as Pakistan's one of the premier bank determined to set higher standards.

3.3 bUSINESS VOLUME

Dubai Islamic Banks 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 Dubai Islamic Bank PJSC, UAE (The holding Company).

FIVE Years performance of DIB

Table: Business VolumeYears Total Assets 497 8434

2005

2006

2007

2008

2009

21308 32050 35368 4322 16114 25459 27981

Deposits (Rs in Million) -

Advances (Rs in Million) Investments 833 418

3274 2974

11348 18074 20590 3019 2823 6018 -633 -412 -0.35 25 470 6776 -568 -369 0.38 36 722 -272 -182 352 277

Shareholder' Equity

3917 5126 -0.89 17 350

Pre-Tax Profit/ (Loss) (Rs in Million) After-Tax Profit/ (Loss) (Rs in Million) Earning Per Share (Rs) Number of Branches 5 -2.09 10 225

Number of Employees 120

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. 3.4 NUMBER OF EMPLOYEESDESIGNATION President NO OF EMPLOYEES

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

Figure: organization chart of DUBAI ISLAMIC BANK Pakistan LTD.

designation for higher level office president senior executive vice president executive vice president

vice president

assistant vice president

GRADE I OFFICER

GRADE II OFFICER

GRADE III OFFICER

3.5 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. Dubai Islamic 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 Account Dubai Islamic 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.

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: v Receipts of customer's deposits v Collection of his cheques drawn on other banks v Making payments through cheques drawn on it v Making remittances v Foreign trade service

3.5.2 International Banking

Dubai Islamic 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 DIBPLs relationship with the correspondents to support trade, treasury and other key business areas, thereby contributing to the banks profitability.

3.5.2.1 DEMAND DRAFTS:

It is a safe, speedy and reliable way to transfer money; customers can now purchase DIBPLs Demand Drafts at very reasonable rates. Any person 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 Travelers 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 Travelers 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.

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 Postshipment 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 banks belief in its client's capabilities, and its commitment to the country.

3.5.3.3 Loan Structuring and Syndication:

Dubai Islamic 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 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 customers sales collection will be channeled through networking of DIBPL branched spread across the country. This will enable the customer to manage their companys 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, DIBPLs 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: Investment into the capital market Introduction of capital market accounts (under process) DIBPLs involvement in capital markets is expected to increase its earnings, which would result in better returns offered to account holders.

4. ORGANIZATIONAL STRUCTURE

4.1 STRUCTURE OF THE DUBAI ISLAMIC BANK PAKISTAN LTD.

In Dubai Islamic Bank, the head is called Chairman of the Bank. And after Chairman there is Six Broad of Directors. Dubai Islamic Bank has Eleven Groups which control the working of the Divisions, Wing, Department, Section and Regional of the Dubai Islamic Bank. In DIBPL, Department is called Wings.

4.2 Organization Hierarchy of DIB F-10MARKAZ BRANCH

I worked in Dubai Islamic 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. 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 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 bankers primary contract to repay money received for this customers account usually by honoring his cheque. 4.3.1.3 Types of Cheques Some specific types of cheque are being entertained in the clearing department of LOCAL CHEQUE DIBPL.

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 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 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) b) c) L/C dealing. Foreign currency accounts dealing. Foreign Remittance dealing.

DIBPL is committed to offering its business customers the widest range of options in the area of money transfer. If you are a commercial enterprise then our Letter of Credit service is just what you are looking for. With competitive rates, security, and ease of transaction, DIBPL Letters of Credit are the best way to do your 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 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

Banks 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 Dubai Islamic 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 (a report on the income

and expenditures of DIBPL, F-10 Markaz Branch, Islamabad). These reports can be generated at daily, weekly, monthly, quarterly or yearly basis as required by the bank.

Income and Expense 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.

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 shareholders wealth.

5.4 Use of Electronic data in Decision-making

In todays contemporary business, critical and timely decision making is a must and important too. Todays bank use sophisticated softwares 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 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 todays highly technologically advanced industry. Some of the innovations that the banking industry is looking forward are:

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 8,394,130 239,509,391

2006

2007

2008 2009

3,091,135

4,138,243 21,230,697 273,173,841

3,452,031 13,690,222 300,732,858 3,733,124 5,844,389

222,345,067

2,233,671 12,723,830 129,714,891

Bills Payable Borrowings Deposits & 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 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 6,144,628 627,618 2006 2007 2008 2009 43,788,628

50,569,481 6,781,683 147,363

60,940,798 7,925,370 1,245,369 33,633,735 4,926,604 1,573,905

20,947,333 5,099,195 875,113

Mark-up income Non-mark-up income Other 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 12,731,952 12,456,653 56,502,210 149,999,325 10,502,990 5,633,051 29,436,378 18,380,738 3,452,059 8,8491,564 171,198,992 11,922,324 6,013,097 32,687,335 21,581,043 3,315,500 75,9732,38 192,671,169 13,773,293 -

2006

2007

2008

2009 27,859,360

8,989,186 24,789,070 9,713,369 27,050,493 57,416,255 118,864,010 6,620,067 3,851,529

19,708,518 3,183,957 35,503,196 83,931,400 4,280,504 3,226,959

Cash & balances with treasury banks Balances with other banks Lending to financial institutions Investments Advances

Fixed assets Deferred tax assets Other 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 Lendings 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. 6.0 FINANCIAL ANALYSIS 6.1 FIVE YEAR BALANCE SHEET

2005

2006

2007

2008

2009

(Rupees in 000) ASSETS 27,859,360 12,731,952 12,456,653 56,502,210 149,999,325

10,502,990 5,633,051 29,436,378 18,380,738 3,452,059 8,8491,564 171,198,992 11,922,324 6,013,097 32,687,335 21,581,043 3,315,500 75,9732,38 192,671,169 13,773,293 8,989,186 24,789,070 9,713,369 27,050,493 57,416,255 118,864,010 6,620,067

3,851,529

19,708,518 3,183,957 35,503,196 83,931,400 4,280,504 3,226,959

Cash & balances with treasury banks Balances with other banks Lending to financial institutions Investments Advances Fixed assets Deferred tax assets Other assets

154,834,534

248,313,793

275,685,541

328,895,152 348,990,764

LIABILITIES 8,394,130 239,509,391 3,222,106 1,921,338 7,305,496 4,138,243 21,230,697 273,173,841 3,220,858 1,379,809 9,531,860 3,452,031 13,690,222 300,732,858 2,571,169 208,465 11,291,280 3,733,124 5,844,389 222,345,067

3,091,135

3,223,355 484,066 5,219,666

2,233,671 12,723,830 129,714,891 1,899,480 275,834 2,275,344

Bills Payable Borrowings Deposits & other accounts Sub- Ordinated loans Lia against asset subj to finance lease Deferred tax liabilities Other liabilities

331,946,025 16,219,844

149,655,669 240,849,667 263,443,596 312,675,308 NET ASSETS 5,261,484 7,464,126 12,241,945 17,044,739

PRESENTED BY 5,000,000 2,749,533 2,823,072 10,572,605 1,669,340

6,500,000 2,414,833 4,851,840 13,766,673 2,453,171

7,995,000 3,166,056 3,447,467 14,608,52 2,436,216

3,000,300 1,851,218 1,886,845 7,464,124 6,738,063

2,500,000 1,008,772 860,300 6,387,372 4,369,072

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) 20,947,333 6,559,398 14,387,935

1,515,354

185,707 14,297 32,807 1,748,165 12,639,770

5,099,195 1,273,863 1,008,988 875,113 8,257,159

20,896,929

8,878,801 32,243 8,284_ 8,919,328 11,977,601 11,977,601 4,950,000 847,958 (15,729) 5,782,229 6,195,372

5,892,902

45,496 12,133,770

10,48 33,633,735 10,321,768 23,311,967

2,446,739

(245,881) 23,069 2,223,927 21,088,040

4,926,604 1,718,478 1,205,638 1,573,905 9,424,625 30,512,665

11,195,133 198,298 63,206 11,456,637 19,056,028 19,056,028 7,154,002

(1,098,709) 291,291 6,346,584 12,709,444

9,161,747

43,221 21,914,412

21.51

43,788,628

13,634,912 30153,716

3,075,723

(709,461) 5,284 2,371546 27,782,170

6,144,628 2,891,755 1,333,840

1,169,515

(4,464) 627,618 12,162,892 39,945,062

13,443,441 (17,283) 208,327 13,634,485 26,310,577 26,310,577 8,695,598 530,652 61,981 9,288,231 17,022,346

19,372,523

-------------36,394,869

20.88 50,569,481 16,940,011 33,629,470

4,723,084

(40,248) 39,899 4,722,735 28,906,735

6,781,683 3,263,246 1,042,827 2,341,690

(31,964) 147,363 13,544,845 42,451,580

14,205,911 168,027 17,141

14,391,079 28,060,501 28,060,501 8,311,500 391,497 323,731 9,026,728 19,033,773

32,074,677

39,007 51,147,457

23.34 60,940,798 23,884,768 37,058,030

10,590,565

373,249 4,000 ____-___ 10,970,814

26,087,216

7,925,370 2,878,932 3,969,057 395,427

1,707 1,245,369 16,415,862 42,503,078

18,171,198 747,521 583,361 19,502,080 23,000,998 23,000,998 11,762,650 (4,220,240) 7,542,408 15,458,590

45,344,188

130,456 60,933,234

17.48

Mark-up / return / interest earned Mark-up / return / interest expensed Net mark-up / return / interest income

Provision against non-performing advances Provision for / (reversal of) diminution in the value of Investments Provision against off balance sheet obligations Bad debts written off directly Net mark-up /interest income after provisions

i)

Non mark-up / interest income

Fee, commission and brokerage income Dividend income Income from dealing in foreign currencies Gain on sale of securities-net

Unrealized gain/(loss) on revaluation of investments Classified as held for trading Other income Total non-markup / interest income

ii)

Non mark-up / interest expense

Administrative expenses Other provisions / write offs Other charges Total non-markup / interest expenses

Extra ordinary / unusual items iii) Taxation - Current - Prior years - Deferred Profit before taxation

iv)

Profit after taxation

Unappropriated profit brought forward Transferred from surplus on revaluation of fixed assets on account of incremental depreciation Profit 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. 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 in000) 2005 2006 2007 2008 2009 19,425,608 29,526,710 33,228,530 29,328,629

Current Assets 340,134 Current liabilities Current Ratio 2.85

7,550,223

119,340 1.54 1.15

4,903,849 1.09 1.13

16,952,908

26,983,946

CURRENT RATIO

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 19,425,608 29,526,710 33,228,530 29,328,629 3,899,901

Current Assets 340,134 Current liabilities Net Working Capital

7,550,223

119,340 220,794

4,903,849 2,646,374

16,952,908 2,472,700

26,983,946 2,542,764

NET WORKING CAPITAL

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 companys 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 Total Assets 2006 2007 2008 2009 21,308,247 16,952,908 32050073 26,983,946 35,368,894 29,328,629

497,393

8,434,280 4,903,849

Total liabilities 119,340 Debt Ratio

0.2399 0.5814 0.7956 0.8419 0.8292

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 Stockholders Equity

(Rupees in 000) 2005 Total Debt Total Equity 2006 2007 2008 2009 16,952,908 5,126,230 26,983,946 6,017,780 29,328,629 6,776,030

119,340 418,185

4,903,849 3,917,480

Debt to Equity Ratio

0.285 1.252 3.307 4.484 4.328

DEBT TO EQUITY RATIO

INTERPRETATION

Debt to equity ratio is the relationship borrowed funds and owners 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 firms 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 Net Profit Revenue 2006 2007 2008 2009 1,702,234 4,378,862 1,903,377 5,056,948 1,545,859 6,094,079

619,537 2,094,733

1,270,944 3,363,373

Net Profit Margin

29.57% 37.79% 38.87% 37.64% 25.37%

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 firms 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 Net Profit

2006

2007

2008

2009

(After Tax Profit) Total Equity

619,537

1,270,944

1,702,234

1,903,377

1,545,859

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%

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 Net Profit

2006

2007

2008

2009

(After Tax Profit) Total Assets

619,537

1,270,944

1,702,234

1,903,377

1,545,859

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%

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 Ratio Investment to Total Assets = Investment / Total Assets

(Rupees in 000) 2005 Investment Total Assets 2006 2007 2008 2009 2,974,087 21,308,247 0.14 0.09 3,019,266 32,050,073 0.08 2,822,723 35,368,894

113,930 497,393

832,925 8,434,280 0.22 0.10

Investment to Total Assets

INVESTMENT TO ASSET RATIO

INTERPRETATION

This 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 2009 11,347,979 16,114,461 18,073,501 25,458,910 20,589,613 27,980,906

Total Advances 3,195,575 Total Deposit 4,655,717 Advances to Deposit Ratio

3,273,957 4,322,621

68.64% 75.74% 70.42% 70.99% 73.58%

ADVANCES TO DEPOSIT RATIO

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 Cash 2006 2007 2008 2009 1,992,425 2,691,572 2,932,264 25,980,906

944,465

719,833

Total Deposit 4,655,717 Cash to Deposit Ratio

4,322,621

16,114,461

25,458,910

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 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 5,126,230 6,017,780 8,136,700 35,368,894

Equity 418,185 Total Assets

3,917,480

497,393

8,434,280

21,308,247

32,050,073

Equity to Total Assets

47.50% 46.45% 24.06% 18.78% 19.16%

EQUITY TO ASSETS

INTERPRETATION

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 5,126,230 6,017,780 8,136,700

Equity 248,997

3,917,480

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

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 Net Profit (After Tax Profit) 619,537 1,270,944 59,089,274 1,702,234 70,907,129 1,903,377 81,543,198 1,545,859 89,697,510 2005 2006 2007 2008

No of Ordinary Shares 49,241,062

Earning Per Share (EPS) 12.58 21.51 24

23.34 17.23

EARNING PER SHARE

INTERPRETATION

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 companys 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 Net Profit (After Tax Profit) Total Investment 619,537 2,489,976 1,270,944 3,615,847 1,702,234 5,304,464 1,903,377 6,927,063 1,545,859 8,136,700 2006 2007 2008 2009

Return on Investment 24.88% 35.15% 32.09% 27.48% 18.99%

RETURN ON INVESTMENT

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 Net Profit (After Tax Profit) Total Fixed Assets 619,537 55,323,146 1,270,944 57,771,911 1,702,234 63,513,271 1,903,377 76,219,359 1,545,859 81,775,832 2006 2007 2008 2009

Return on Fixed Assets 1.12% 2.20% 2.68% 2.50% 1.89%

RETURN ON FIXED 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 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 stockholders 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.

Dubai Islamic Bank Pakistan Ltd. Balance Sheet Vertical Analysis (Rs 000) For the year ended Dec 31, 200

ASSETS 2005 % %

2006 %

2007 %

2008 %

2009

Cash & balances with treasury banks Balances with other banks Investments-net Lending to financial institutions Advances- net Operating Fixed assets Deferred Tax Assets Other assets-net 9.00 26.99 17.08

1.90 39.92 3.45 1.66 5.56 27.17 2.82 46.43 4.10 1.60 6.40 22.03 3.62 49.77 1.52 4.27 4.92 27.70 2.82 44.65 3.40 4.07 13.03 12.45 12.38 12.32

4.69 20.89 2.09 50.50 2.96 0.39 5.45 Total Assets LIABILITIES Bills Payable Borrowings Deposits & other accounts Liabilities against asset subject to finance lease Deferred tax liabilities-net Other liabilities 1.42 2.19 91.84 0.003 0.006 4.55 100 100 100 100 100

0.35 1.72 92.06

0.003 0.89 4.96 1.92 2.12 90.2 .002 0.43 5.80 1.09 1.68 91.65 0.005 0.78 4.79

1.45 5.65 87.36 .003 0.00 5.54

Total liabilities 100

100

100

100

100

NET ASSETS PRESENTED BY

Share capital Reserve Unappropriated profit

Surplus on revaluation of assets 10.65 23.38 19.81 53.84 46.16 7.95 18.20 22.48 48.63 51.37 8.65 16.94 39.14 64.73 35.27 7.00 13.56 38.98 59.55 40.46

8.75 19.46 51.19 79.40 20.60 Total Liabilities and Equity 100 100 100 100 100

Dubai Islamic 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 earned Mark-up / return / interest expensed 31.31 100 30.69 100 31.63 100 33.50 100 39.19 Net mark-up / return / interest income 68.69 69.31 68.37 66.50 60.81 Provision against non-performing advances Provision for diminution in the value of Investment 100

Provision against off balance sheet obligations Bad debts written off directly 7.23 0.89 0.068 0.16 8.348 7.27 (0.73) 0.07 6.97 (1.61) 0.01 5.37 (0.08) 0.08 9.34 0.61 0.006 7.96 Net mark-up /interest income after provisions 60.34 62.34 63.00 57.16 52.85 Non mark-up interest income 6.98 9.34 6.97

Fee, commission and brokerage income Dividend income Income from dealing in foreign currencies Gain on sale of securities-net Unrealized gain/(loss) on revaluation of investments Classified as held for trading Other income Total non-markup / interest income 24.34 6.08 4.81 -

4.17 39.40 14.65 5.11 3.58 2.58

4.68 30.60 13.93

6.56 3.02 2.65

(0.01) 1.42 27.57 13.41 6.45 2.06 4.67

(0.06) 0.29 26.78 13.21 3.16 6.64 1.04

0.21 0.23 26.54

99.74 92.94 90.58 83.95 70.64

Non mark-up / interest expense Administrative expenses Other provisions / write offs Other charges Total non-markup / interest expenses 42.38 0.15 0.04 42.57 33.29 0.59 0.19 34.06 30.48 (0.04) 0.47 30.92 28.09 0.33 0.03 28.46 26.21 0.41 0.85 31.73

Profit before Taxation 57.17 58.88 59.66 55.49 38.91 Taxation Current - Prior years - Deferred 4.04 (0.07) 21.21 (3.27) 0.87 1.20 0.14 0.77 0.64 (6.92) 27.60 18.87 21.06 17.85 12.11 Profit After Taxation 29.43 40.01 38.60 37.64 26.68 19.03 16.44 19.72 23.63

Unappropriated profit brought forward Transferred from surplus on revaluation of fixed assets 28.13 0.22 0.13 0.08 0.21 Profit available for appropriation 57.78 67.38 82.84 101.14 101.29 27.24 44.24 63.42 74.40 on account of incremental depreciation

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 Lendings 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.

6.5 HORIZONTAL ANALYSIS In horizontal analysis different periods 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. Dubai Islamic Bank Pakistan Ltd. Balance Sheet Horizontal Analysis (Rs 000)

For the year ended Dec 31, 200

ASSETS 2007 Base 2005

2005 2008

2006 2009

2007

Base 2005 % % Base 2005 20052005 Base 2005 Base 2005

Cash & balances with treasury banks Balances with other banks Lending to financial institutions Investments-net Advances- net Operating Fixed assets Other assets-net 100 100 100 100 100 100 10.43 31.02 41.33 (10.85) 100

17.58 2.41 13.25 20.67 (7.80) (6.73) 50.87 7.65 167.74 14.31 12.26 2.32 (20.02) (19.09) 21.35 6.58 43.73 11.35 20.41 (40.25) (15.50) 15.55 24.12 7.69 Total Assets 100.0 9.94

00

20.01

100

7.29

23.37

LIABILITIES Bills Payable Borrowings Deposits & other accounts Liabilities against asset subject to finance lease Deferred tax liabilities-net Other liabilities 100 100 100 100 100 100 509.2 33.66 8.30 (20.41) (46.51) 6.49

(33.41) (6.99) 17.94 153.52

113.56 16.07

44.71 274.09 6.24 (24.67) (100) 28.17

24.60 (90.90) 25.17 (32.15) 25.14 23.45 Total liabilities 100.0

.0 100

9.89 16.75 10.75 (24.69)

NET ASSETS PRESENTED BY Share capital Reserve

Unappropriated profit

Surplus on revaluation of assets 100 100 100

100 20.00 2.54 91.91 46.7 (24.29)

15.00 13.64 41.37 30.59 62.81 10.00 26.43 15.68 17.46 (55.18)

19.35 30.22 16.35 25.35 (41.89) Total Liabilities and Equity 100 (11.93) 49.38 100.0 10.24 41.95

Dubai Islamic Bank Pakistan Ltd. Profit & Loss Account Horizontal Analysis (Rs 000) For the year ended Dec 31, 200

2005 2007 Base 2005 2008

2006 2009

2007

Base 2005

2005 2005

2005 % 2005 Base 2005 2005 2005 205 2005 Mark-up / return / interest earned Mark-up / return / interest expensed 100 31.12 100 Base Base

35.12 14.67 21.46 20.93 40.96 35.23 22.48 Net mark-up / return / interest income 100.0 111111100.00 29.35 11.53 66.50 10.84 30.15 Provision against non-performing advances Provision for diminution in the value of Investment

Provision against off balance sheet obligations Bad debts written off directly 100 100 100 100 100 25.70 188.54 25.71 -77.09 6.64 -94.33 53.56 655.09 99.14 124.23 -265.22 -92.13 -89.97 133.13 175.25 40.35 -35.45 55.16 Net mark-up /interest income after provisions 100.0 31.74 4.05 57.16 -9.14 40.75 46.25 53.56

Non mark-up interest income Fee, commission and brokerage income Dividend income Income from dealing in foreign currencies Gain on sale of securities-net Unrealized gain/(loss) on revaluation of investments Classified as held for trading Other income Total non-markup / interest income

100 100 100 100

100 100 100 24.72 68.27 10.63 (14.37)

125.57

(60.12) 29.50 10.37 12.85 (21.82) 100.23

616.04 (76.52) 11.36 17.75 (36.04) 285.6 (83.04)

(502) 745.10 21.19 20.89 64.23 236.25 (75.16)

(302) 421.23

25.36

100.0 30.91 6.27 83.95 0.12 27.26

Non mark-up / interest expense Administrative expenses Other provisions / write offs Other charges Total non-markup / interest expenses 100 100 100 100 20.08 (108.72) 229.60 19.01 5.67 1072.21 (91.77) 5.55 29.27 344.88 347.19 36.88

24.25 362.21 204.10 60.25 Profit before Taxation 100.0 58.88 55.49 35.51 70.29

Taxation Current - Prior years - Deferred 100 100 21.55 (148.30) 46.35 (4.42) (26.22) 422.31 41.95 (100) (1403.62) 90.25 (1254) Profit After Taxation 37.64 (18.73) 52.45 100.0 33.93 11.82 40.36 100

Unappropriated 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 101.14 19.13 72.65 100.0 66.07 40.38

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 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 Revenue Rupees in Millions Banks NBP 20,587 BAF DIBPL 2009 2008 2009 2009 32,585 2008 2009 19,393

Total Liabilities

Total

2008 14,687 25,368 2536542,503

40,354 26269342396419,503

21,937 17,781

17,858 12,565

15,365 15323 10,362 8,542 15,368

12,324 21,854 43,971 18,574 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 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 thats 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 employees 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 banks 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)

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. Its 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 dont 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. 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 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. 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

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. 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, Dubai Islamic 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

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