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Chapter 1

Introduction of BANK OF PUNJAB

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Topics Page No.

 Mission Statement 3

 Core Value 3

 Scope of the Bank 3

 Management of the Bank 3

 Objectives 4

 Organization Structure 6

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1.1 Mission Statement

Be a dynamic resource of economic development and growth for stakeholders through

service excellence achieving high standards of professionalism, dedication integrity and

team work.

1.2 Core Values

 Integrity

 Dedication

 Transparency

 Team work

1.3 Scope of the Bank.

Being a commercial Bank, The Bank of Punjab performs all such functions as are

attributed to commercial banking institution both in the area of resource mobilization,

loans, and investment. The Bank is thus providing all type of advances to business, trade,

and industry on seasonal and annual basis, and is ensuring, through the prudent policy,

the safety and protection of its loan portfolios, as the resources base of the bank expands,

project financing will also be brought into its fold.

1.4 Management of the Bank.

At the level of Decision-making and implementation, senior management of the bank is

drawn from highly accomplished bankers with rich experience in the banking profession

both domestic and international.

The entire responsibilities of policy formulation and management have been placed,

under the law, with the Board of Director. Furthermore it will be heartening to know that

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Mr. Nawaz Sharif, during his chief Minister ship of the province of Punjab issued special

instructions to the political and executives echelons not to interfere in The Bank of

Punjab, thereby ousting the possibility any pressure which may be put on the

management of the bank in respect of recruitment of staff or provision of credit. These

instructions have become an essential part of the culture of the bank.

1.5 OBJECTIVES.

The Bank of Punjab being a commercial bank performs all those function as are

attributed to such banking institutions both in the areas of resources mobilization and

investment. It is providing funds for commerce, trade, industry, and agriculture but its

main emphasis is on accelerated development of agro-based industry. So the main

objective of the bank is to channelize the resources into sectors, which have suffered

from neglect. Other objectives included.

1 To provide speedier services to the common man.

2 To provide the highest rate of return to the shareholders by achieving good

profitable growth.

3 To enter into financing contracts and to mobilize resources in local and now in

foreign currencies consistent with the objects of the bank.

Subsidiaries and Sponsorship

The bank is one of the sponsors of Trust Management Services Pvt. Limited besides

being a co-sponsor of Trust Modaraba a Modaraba company incorporated in Pakistan

under the Modaraba companies and Modaraba (Floatation and control) Ordinance, 1980.

Authorized Modaraba Fund and paid up Fund of the said unit in Rs. 500 million and Rs.

150 million respectively.

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The Bank is one of the sponsors of Trust Leasing Corporation Limited a public limited

company established under the Companies Ordinances, 1984. Authorized paid up capital

of the company is Rs. 250 million and Rs. 100 million respectively.

First Punjab Modaraba Services (Pvt) Ltd. was established in Pakistan under

Companies Ordinance. 1984 and register under Moderate Companies and Modaraba

(Flotation and Control) Ordinance, 1980 is wholly owned subsidiary of the bank.

Authorized fund of this Modaraba is Rs. 500 million where as paid up fund is Rs 200

million.

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1.6Organization structure

DIVISION AND DEPARTMENTS

DIVISION DEPARTMENTS

♦ ADMINISTRATION ♦ ORGANIZATION & METHODS

♦ OPERATIONS ♦ INFORMATIONAL &

♦ BUSINESS DEVELOPMENT TECHNOLOGY

♦ CREDIT ♦ OFFICERS TRAINING

♦ INTERNATIONAL INSTITUTE

♦ LAW
♦ FINANCE
♦ PLANNING RESERCH &
♦ RECOVERY
PUBLICATION
♦ AUDIT & INSPECTION

♦ TREASURY

HEADED BY: - HEADED BY: -

GENERAL MANAGER CHIEF MANAGER

REGIONAL CHIEFS

BRANCH 6
NETWORK
REGIONAL NET-WORK

FAISALABAD LAHORE
Total Branches 34 Total Branches 64

GUJRANWALA MULTAN
Total Branches 43 Total Branches 60

KARCHI / QUETTA RAWALPINDI


Total Branches 05 Total Branches 36

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Chapter 2
FUNCTIONS OF DIVISIONS

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2.1 Administration/Human Resource Division

G.M

Admin & Officer’s Training


Establishment Institute

]This division deals with the problems relates to the staff administration. The main

function of this department is to arrange a comprehensive training program for recruited

staff. Others function includes:

♦ Recruitment

♦ Staff remuneration

♦ Placing the staff

♦ Providing and defining the opportunities for career development and

growth

♦ Devising and implementing services rules.

♦ Promotion and demotion

♦ Suspension and termination

♦ Transportation

♦ Security, health and benefits.

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2.2 Operations Division

G.M

Computer Dept.

Engg. & Maintenance

O & M Department

This Division is concerned with the operational working in general banking, which is

concerned with the routine working of the bank. Any problem or ambiguity arise in any

branch working are rectified and suggested for correction by this division. This Division

usually takes technical procedures involved the decisions like commissions. And also.

♦ The maintenance of the existing building owned by the bank.

♦ Opening new branches and their maintenance.

♦ It also deals with the stationery problems of the bank.

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2.3 Business Development Division

G.M

Marketing PRP
Cell Department

It is the other name of the marketing division. It promotes the bank cause i.e. deposits and

work for the over all development of the bank. Deposits are the lifeblood of any bank.

Without deposits bank cannot perform any function of banking. This division fixes the

deposits target of every branch by keeping and eye over the potential customers in the

area. It gives motivation to branches to achieve their targets through different campaigns

and schemes like cash prizes and special increments. It publishes a bulletin in which

those branches are encouraged who achieves their monthly targets. The main function is

to develop and attract the customers and depositors. It also manages:

♦ Advertising policy

♦ Sales promotion.

♦ Schemes offered by the bank.

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2.4 Credit Division

G.M

Agriculture Credit Wing

This division control over all credit operations like sanction of loans, Inland Bill

Purchased (IBP) and also keeps check over securities mortgage, hypothecating or pledge.

It also fix the rate of mark-up and other decisions concerning with the credit.

There is a credit committee, which consists of senior officers; Branches send the

credit proposal to head office credit division. Credit committee approves it after making a

through analysis. It also

♦ Prepare the policies regarding the sanctioning loan

♦ Monitor loans and credit

♦ Look after the portfolio of the bank

♦ Define credit limits against specified securities.

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2.5 International Division

G.M

International wing

Forex Money
Market
Investment

Eng. &
Maintenance

This division is providing important services to the bank regarding the matters of

International Trade, Import, Export Letters of Credit, Travelers cheque etc.

♦ It develops “ Correspondent Relationship” with others on commission basis and

this helps to deal with the clients having import export business.

♦ It handles treasury operations.

♦ The Marketing and Spot Inspection cell, which were introduced by the bank, are

showing positive results in terms of achieving foreign currency deposit targets

and other foreign related business.

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2.6 Finance Division

G.M

Balance Sheet
Results Monitoring
SBP Affairs, and
Compliance.

Company Affairs

It controls the routine financial matters. The permission of special expenditure incurred in

the branches, and other such cases. The daily position and HO Extracts are daily sent to

this division by all the branches. This division not only estimates the profit and loss of

every branch but also prepare overall income statement and balance sheet of the complete

bank. It also keeps record of total deposits of the bank and then their classification in the

form of loans into different sectors of economy. The basic functions are:

♦ Monitoring the fiscal and financial policies of the bank.

♦ Deals in exploring means for investing surplus bank funds.

♦ Maintenance and investment of Gratuity and Pension Funds of the employees.

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2.7 Recovery Division

G.M

Law
Department

The recovery division, which was established in 1994 to assist in regularizing the difficult

loan accounts, has rendered valuable services in this respect. To effect recoveries in an

efficient manner, a policy has been framed in accordance with the guidelines issued by

the State Bank of Pakistan Moreover, recovery cells at regional levels have been set up to

assist the head office. This division looks after the matters of recovery of loans with the

assistance of legal advisors.

2.8 Audit and Inspection

G.M

Audit of Rectification
Branches and Persuasion

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This department ensures appropriate system of checks and balances. It checks all

the irregularities, errors and forgeries if any, under the rules and regulations formed by

the Government of Punjab. For this purpose it doesn’t only keep and eye on the branches

in their vicinity but also conduct surprise and comprehensive audits of the branches. This

strategy has improved working at the branch level. It not only points out the

discrepancies but also tries to solve it. Surprise audit maintain a good check on the over

all working of the branch especially of the side of finance.

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Chapter 3
Business Operations

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3.1 SERVICES PROVIDED TO CUSTOMERS
The following are the services being provided to the claims.

♦ Acceptance of deposits

♦ Granting of loans

♦ Transaction Foreign Exchange Services

♦ Remittance – Collection

♦ SPEDFAX- instant Fund Transfer Service

♦ Lockers facility

♦ Utility Services

The Bank of Punjab attaches specials importance to the fee earning business and business

base remuneration. As part of diversification of the banks utility services, the collection

of bills of INSTAPHONE (mobile phone network) was added to existing collection

arrangements for WAPDA, SUI GAS, WASA, PTCL, and PAKTEL. By using bank’s

extensive branch network, effort have been to made to maximize the exploitation of this

source in view of its rich potential of yielding business and deposit direct earning of

commission.

3.2 Deposit Section


In modern times very few business enterprises are carried out solely with the capital of

the owners. Borrowing funds from different sources has becomes an essential feature of

today business enterprise. But in the case of a entire banking system is based on it. The

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borrowed capital of the bank is much greater then their own capital. Banks borrowing is

mostly in the form of deposits.

These deposits are lent out to different parties. The larger the difference between the rate

at which the deposits are borrowed and the rate at which they is lent out the greater of the

profit margin of the bank. Furthermore, the larger the deposit the larger will be the funds

available for employment; larger the funds lent out the greater will be the profit of the

bank.

To receive the deposit is the basic function of all commercial banks. The bank does not

receive these deposits for save keeping purpose only, but they accept deposits as debts.

When banks receive deposit from a customer, the relationship of a debtor and creditor is

established where by the customer become the creditor and the bank a debtor. When the

bank receives amount of deposit as a debtor, it becomes the owner of it. It may, therefore

use it as deems appropriate. But there is an implicit agreement that the amount owned

would be paid back by the bank to the depositor after a specified period.

3.3 NATURE OF DEPOSITS

• CURRENT DEPOSITS

• PROFIT & LOSS SHARING ACCOUNT

• SHORT NOTIC TERM DEPOSITS

• CALL DEPOSIT

• TERM DEPOSIT RECEIPTS (TDR).

3.3.1 CURRENT DEPOSITS:

In this type of account the client to allowed to deposit or withdraw money as and when he

likes. Because of their nature, these deposits are treated as the current liabilities of the

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bank. There is not profit on such deposits. Usually this type of account is opened by the

business.

3.3.2 PROFIT & LOSS SHARING ACCOUNT.

This type of accounts is one step towards the Islamization of banking system in

Pakistan. There are two types of PLS Accounts.

♦ PLS Saving Account

♦ PLS-TDR (Profit & Loss Sharing Term Deposit Receipts).

PLS saving accounts can be opened with the minimum sum of Rs. 100 and PLS-

TDR account can be opened for a sum of Rs. 1000 or above. Profit is paid on both types

of the PLS account on half yearly basis.

Under PLS saving account the depositor undertakes to share profit or loss on the deposits

earned or sustained by the bank. Secondly the bank is at the liberty to invest the funds of

the deposits in any avenue, it deems fit. The PLS deposits are invested in non-interested

channels.

3.3.3 SHORT NOTICE TERM DEPOSITS (SNTD)

This kind of deposit is for a short period. The depositor may withdraw his deposit at any

time by giving seven days notice to the bank. This type of deposit facilitates the depositor

to withdrawn his amount with interest of the deposited period.

3.3.4 CALL DEPOSIT

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Call deposits are the sorts of deposits, which are deposited with the banker against any

tender. This is without interest deposit. This may be with interest provided the depositor

has agreed to keep this amount with the bank for some fixed period.

3.3.5 TERM DEPOSIT RECEIPTS (TDR)

This type of deposit is same as the SNTD. The difference is that SNTD is for short period

(7- 30 days) while TDR is for long period (1 month up to 5 years).

3.4 ACCOUNT OPENING SECTION

Account opening is the first step towards establishing a relationship between the

customer and the bank. The Bank of Punjab is offering basically two types of account:

♦ CURRENT DEPOSIT ACCOUNT

♦ PROFIT & LOSS SHARING ACCOUNT

The necessary condition for a customer, who wants to open an account with the

bank, is introduction, which is preferably by the bank officers or any account holder of

the bank. The different categories of accounts that are available are as under.

♦ INDIVIDUAL account

♦ Joint Account

♦ Partnership Account

♦ Limited Company Account

♦ Clubs, Society, Association, or Trust Account

♦ SNTD

♦ TDR

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♦ Foreign Currency Deposit

3.5 CLEARING DEPARTMENT


Clearing is the most important department of the bank performing various function.

• Clearing House:

A clearinghouse is an organization of the member banks, working under SBP and which

is for the purposes of setting inter banks claim resulting from transmission of funds from

one bank to another. The branch cheque/instruments are credited into the account of the

customer. The clearing can be:

♦ Outward

♦ Inward

• Outward Clearing

The instrument collected or stored bank wise and a schedules is prepared separately for

each bank mentioning the total number of instruments and the amount of the instruments.

Then these are recorded in a register called “OUTWARD CLEARING REGISTER” then

a main schedule is prepared showing the total number of cheque and their aggregate

amount being presented in the clearing.

The cheque/instruments are handed over the clearing branch. Central clearing branch

issue CREDIT ADVICE to the branch for passing credit to its customer immediately. The

branch, on receiving credit advice debits the clearing account and credit the respective

customer accounts.

• Inward Clearing

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On receiving cheque/instruments from central clearing branch, the in charge checks the

number and amount of cheque received in clearing must tally with the main schedule

received from central clearing branch.

These cheque/instrument are entered in “INWARD CLEARING REGISTER” for the

cheque/instrument passed in clearing is a credit advice for the aggregate amount of

cheque passed in clearing is prepared, drawn on central clearing branch.

• Reserves at State Bank of Pakistan

Deposit held by bank at SBP serves as check clearing and collection balances. Rather

than physically transferring funds between banks, check clearing and collection can be

done by simply debiting or crediting a bank’s account at SBP.

3.6 REMITTANCE DEPARTMENT

Remittance is a major function of the bank. It is the transfer of money from one place to

another place. The need for remittance is commonly felt in commercial life particularly

and in everyday life generally.

By proving this service to the customers the Bank of Punjab earns a lot of income in the

form of service charges.

The Bank of Punjab deals with the following type of remittances: -

 Demand Draft (DD)

 Mail Transfer (MT)

 Telegraphic Transfer (TT)

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 Pay Order

Now we discuss all these in detail: -

3.6.1 DEMAND DRAFT (DD):

Demand draft is a written order given by the one branch of a bank on behalf of customer

to another branch of the same bank to a certain amount to the certain person.

Procedure for Prepare Demand Draft.

1. A draft voucher is filled which contains the following information

 Name of the parties involved

 Date

 Amount to be sent

 Account number (if DD is crossed)

2. A credit voucher is filled in order to get the excise duty and exchange

commission.

3. The sender deposits the total amount of the two vouchers i.e. the debit and

credit vouchers.

4. Then the cashier sends the cash receipt voucher to the accounts department

and the account records the amount paid in his cash scroll.

5. Accountant gives the DD leaf along with the DD voucher to his assistant who

records the sender’s name, amount and receiver’s name. After writing all the

information in the DD register he gives it to the officer along with the DD for

authentication.

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6. After authentication the DD is handed over to the sender and bank sends the

advice to the concerned branch. So when the party presents the DD in the

concerned branch its payment could be made.

Parties involved in the Demand Draft

The following parties are involved in demand draft;

1. Purchaser or Sender

The purchaser is the person who sends the money to a particular person payable at

a certain branch.

2. Issuing or Drawing Branch

The branch from where the demand draft is issued to another branch of the same

bank.

3. Drawer Branch

Branch in which the draft has drawn and called upon to pay the amount.

4. Payee

The person who is entitled to receive the amount after presenting the demand draft in

the drawer branch.

3.6.2 MAIL TRANSFER (MT):

It is the transfer of money from one branch to another branch of the same bank through

mail service. In mail transfer there is no need of advice as the amount is directly credited

to the receiver’s account.

Procedure
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• First a voucher is filled in whish the sender writes the amount to be sent, name,

account number of the receiving person with the branch name and date.

• A credit voucher is filled in order to deduct exchange, postage charges according

to the amount of the mail transfer.

• The sender deposits the total amount in the cash department.

• The cash officer gives the vouchers to the officer after affixing received cash

stamp and writing the amount in red ink.

• Then the officer writes the amount paid in the cash scroll and gives the MT to his

assistant.

• MT leaf is filled according to the information provided in credit voucher. He also

writes the same information in the MT register. Then he gives the MT leaf and

MT register to the officer for authentication.

3.6.3 TELEGRAPHIC TRANSFER (TT):

This is the most urgent method of remitting the money from one place to another place.

This method is used when the sender desires to send urgently, in this case the sender

request the manager of the branch to issue TT.

Procedure;

For sending the TT the manager and officer apply a test. In the test the manager and

officer uses a coding technique. They write their own code numbers, which is allotted, to

them as the bank branch code. After making all the conformation the concerned branch

makes the payment to the receiver. If the sender wants to convey the same message

through telephone then he has to pay the charges of telephone along with the TT charges.

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First the person deposit the TT amount along with the charges through the credit voucher

then his TT sent to the relevant branch.

3.6.4 Pay Order (PO):

A pay order is a written order issued by the bank on its own branch, drawn upon and

payable by itself to pay a specified sum of money to the person. The purpose of a pay

order is to transfer the fund from one place to another. It is usually not issued in favor of

the parties of other cities. Usually the pay order is issued for the local transfer of money

from one person to another or from the person to any other department. It is used for

different purposes. The purpose may be the repairs of the branch or renovation of the

branch.

Procedure.

The procedure of a pay order varies with the nature of the purpose. If the work is of huge

amount then first the manager writes a letter to the Zonal Chief in order to get sanction of

the work. Then the advertisement of the work is given in the newspaper in order to invite

the contractors. But if the work is small then the branch manager has discretionary power

to select the party whose rate is lowest. After finishing the work the contractor submits

the bill of work on his stamp pad. Then the bank issues a pay order, against the pay order

the contactor gets the amount from the issuing branch.

3.7 ADVANCES / CREDIT DEPARTMENT

A “Major source of bank’s Income”

It is the loan function, which produces the major person of bank’s income, and as such it

is the major areas of professional banker’s concern and attention.

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Principles while advancing

Basically there are five principles that must be duly observed while advancing money to

borrowers.

♦ Safety

♦ Liquidity

♦ Disposal

♦ Remuneration

♦ Suitability

Forms of Lending

Many there are two types of advances:

♦ Short-term (maturity within one year)

♦ Long term (maturity with the period of more than one year)

However they are further classified as:

♦ Running Finance

♦ Demand Finance

♦ Cash Finance

♦ Letter of Guarantee

3.7.1 Running Finance

This form of finance was previously known as “overdraft”. When a customer

requires the temporary accommodation, his bank allows withdrawal his account in excess

of credit balance, which the customer has in its account, a running finance occurs. The

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accommodation is thus allowed collateral security. When it is against collateral securities,

it is called a “Secured Running Finance” and when the customer cannot offer any

collateral security except his personal security, accommodation is called a “Clean

Running Finance.” The customer is in advantageous position in running finance because

he has to pay the mark-up only the balance outstanding against him on daily product

basis.

3.7.2 Demand Finance.

This is common form of financing to commercial and industrial concerns and is mad

available either against pledge or hypothecation of goods produce or merchandise. In

Demand Finance the party is financed up to a certain limit either at once or as and when

required. The party due to facility of paying mark-up only on the amount it actually

utilizes prefers this form of financing.

♦ Ordinary Shares

♦ Preferred Shares

It can be

♦ Quoted or Unquoted

♦ Registered

♦ Bearer

♦ Inscribed

3.7.3 Advances Against Immovable Property (Mortgage).

A mortgage is the transfer of and interest in specific immovable property for the purpose

of securing the payment of the money, advanced or to be advanced. By way of loan, and

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existing debts or the performances of the engagement this may rise the pecuniary

liability.

The transfer is called the ‘mortgager’ and the transferee the ‘mortgagee’ the principal

money and interest of which payment is secured for the time being and instrument by

which the transfer is affected, is called the letter of the mortgage deed.

Availability of adequate flows of credit for industry and agriculture are a sine qua non for

the growth and development of an economy. This acquires added importance when

agriculture is the mainstay of the economy as also the sector where the bulk of the poor

are concentrated. Growth and productivity in Pakistan's agriculture has slowed down in

recent years and is, therefore, of serious concern given its importance for the economic

prosperity of the country. Apart from various other weaknesses in the infrastructural

support of the agricultural sector, inadequacy and lack of efficacy of credit, flows to

support agriculture related activities has been a major constraining factor.

Agriculture is the largest sector of the economy. It contributes 25 percent to GDP,

provides raw materials to 80 percent of industry and employment to over 50 percent of

the population. This is a sector that has the shortest gestation period for investments and,

therefore, a remarkable capacity to bring about a turn around in the economy. This

important sector in Pakistan is suffering from a number of maladies and is consequently

witnessing stagnation in productivity.

Due to policy and administrative exigencies, the savings in the agriculture sector remain

low and, therefore, the sector has perpetually remained capital starved. The pricing of

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input and output in agriculture over the years has forced the majority of farmers in

Pakistan to plough back their incomes into agriculture and non-institutional credit, and

has more often than not served to sap their potential earnings. Needless to say, that

shortage of savings and lack of availability of capital is one of the major reasons for

poverty in the country. The agricultural and rural sectors in Pakistan in general and in

Punjab in particular are, therefore, suffering from severe under-development. Under a

desirable development model, Punjab can:

♦ Increase agricultural production to meet the country's requirement of essential

foods items and industrial raw materials.

♦ Develop agro-based industry in the rural sector for economic value addition;

♦ Generate additional employment opportunities in rural as well as adjacent small

towns/cities;

♦ Control massive migration to the urban centers that in turn is causing a number of

social, administrative (i.e. law and order) and economic problems for the urban

areas.

♦ Elevate poverty and improve the income generating capacity of the agri-based

population.

Never before in the history of Pakistan, has the development of the agricultural and food

sectors been as critical as at this juncture and appropriate short and long term measures

are necessary for its revival, sustenance and stability. Supply of credit by Financial

Institutions for meeting the specific needs of agriculture and rural sectors are essential

components for improvement in both short and long-term development of the country.

This has assumed even greater importance in the present situation of declining water

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availability. Per acre, production is plummeting. The per acre yield of most of the crops is

stagnant rather diminishing. The most important factors responsible for this downward

trend in productivity are: -

FACTORS RESPONSIBLE FOR LOW YIELD PER ACRE:

* Imbalanced fertilizer use

* Availability of certified and good quality seeds

* Improper control of pests and weeds

SCARCITY AND INEFFICIENT USE OF WATER:

* Natural and mechanical water resources.

NON-USE OF MECHANIZED FARMING PRACTICES:

♦ LACK OF EDUCATION AND RESOURCES, MOTIVATION TO USE

ADVANCED TOOLS FOR AGRICULTURE:

♦ HIGH COST, LOW OUT PUT, UNSKILLED LABOUR INTENSIVE

♦ NON-AVAILABILITY OF CREDIT AND FINANCIAL ASSISTANCE TO

THE AGRICULTURE SECTOR

The importance of availability of credit to the agriculture sector has always been

recognized by Government and given Top Priority. Specialized institutions have been in

place for a number of years. However, these institutions have failed to realize the full

potential from the sector and at times contributed to its further deterioration..

The list of eligible items for Agri-Credit is mainly divided in two sectors; i.e.

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►Farm Credit. And

►Non-Farm Credit

Farm Credit is further bifurcated into:

♦ Short-Term

♦ Medium-Term

♦ Long-Term Credit.

The priority items, which are recommended for inclusion in our schemes, are given here

under;

EXISTING: (Kissan Dost Agriculture Finance Scheme) Product /purpose of

Finance) Seeds, Fertilizers, Pesticides, Herbicides, Weedicides. All types of labor and

water charges are already embodied in our package financing, i.e., 8000 Per Acres (no

change)

PROPOSED:

(Product /purpose of Finance)

1. Orchard and Nursery 2. Manual Sprayers

3. Sericulture 4. Apiculture

EXISTING: Tractors

(Product/purpose of Finance)

PROPOSED:

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(Product & Purpose of Finance)

Tube-Well

Installation of Tube Well, water management, equipment, modules & culvert, lining of

channels etc. Solar energy plants and pumps for irrigation, equipment for

sprinkle/trickle/drip irrigation system.

Mechanization Support

Agri-implements, Equipment, i.e. trailers and thrashers, power tillers, power & boom

sprayers, ploughs and cultivators, ridggers / drills, rotavators, diggers, saw machines for

crates making, press machines for wheat straw and dry fodders.

Farm Transport

Lease finance for purchase of Motor Cycles and small Vans for Milk and other agri

products transportation to local market.

slah-e-Arazi

Precision land leveling & reclamation, soil improvement, embankment, land formation

and land improvement, laser leveling etc.

For the time being, bank does not propose to extending Non-Farm Credit, i.e. for big

Dairy Farms, Poultry Farm but will accommodate existing borrowers and established

small individual farmers by financing livestock. (Goat, sheep, cattle & fattening animals)

on a limited scale to revive, accelerate and supplement the income generating capacity of

the small farmers.

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Chapter 4
PERFORMANCE

4.1 Deposits

Deposits (Rs in
Years
Million)
2002 12116
2003 14256
2004 15797
2005 17101
2006 15019
2007 17028

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2008 19034
2009 23767

2009 23767

2008 19034
17028
2007
2006 15019

2005 17101

2004
15797 Years
2003 14256 Deposits (Rs in Mill ion

2002 12116

4.2 Advances

Deposits (Rs in
Years
Million)
2002 2909
2003 4208
2004 5065
2005 5612
2006 6151
2007 6144

37
2008 5772
2009 6621

6621
6151 6144
5612 5772
5065
4208

2909

2002 2003 2004 2005 2006 2007 2008 2009

4.3 Investment

Deposits (Rs in
Years
Million)
2002 6649
2003 5435
2004 5919
2005 6581
2006 4991
2007 7866
2008 5970
2009 8295

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7866 8295

6649 6581 5970


5919
5435
4991

2002 2003 2004 2005 2006 2007 2008 2009

4.4 Capital & Reserves

Deposits (Rs in
Years
Million)
2002 1389
2003 1509
2004 1672
2005 1795
2006 1823
2007 2180
2008 2391
2009 2313

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2500

2000

1500

1000

500

4.5 Total Assets

Deposits (Rs in
Years
Million)
2002 14340
2003 16419
2004 18512
2005 19886
2006 18215
2007 21275
2008 24802
2009 29532

40
30000

25000

20000

15000

10000

5000

0
Deposits (Rs in Million

2002 2003 2004 2005 2006 2007 2008 2009

4.6 Profit

Deposits (Rs in
Years
Million)
2002 174
2003 151
2004 163
2005 123
2006 28
2007 356
2008 222
2009 283

41
Years Deposits (Rs in Million

2002 2003 2004 2005 2006 2007 2008 2009

4.7 Growth of Shareholder

Deposits (Rs in
Years
Million)
2002 2691
2003 3955
2004 5389
2005 5389
2006 5389
2007 5896
2008 6436
2009 5891

42
5389 5389 6436
5896 5891 2002
5389
2003
3955
2691 2004
2005
2006
2007
2008
2009
1

4.8 Categories of Shareholders

No of Share
Categories Shares Held Percentage
Holders
Directors/CEO/Spouse 4 11576 0.01
Provincial Govern 1 51781427 51.57
Foreign funds 50 3052275 3.04
Individuals 5659 14378263 14.32
Insurance Companies 4 3453355 3.44
Financial Institutions 28 5881765 5.85
NBFI 103 16547565 16.48
Modaraba & Modaraba
8 9279 0.01
Management Co
Others 28 5299821 5.28

43
TOTAL 5891 100415326 100

0.01 5.28 0.01


16.48

5.85
51.57
3.44

14.32
3.04
Directors/CEO/Spouse Provincial Govern
Foreign funds Individuals
Insurance Companies Financial Institutions
NBFI Modaraba & Modaraba Management Co
Others

Chapter 5
FINANCIAL STATEMENTS AND ANALYSIS

44
5.1 Balance Sheet

THE BANK OF PUNJAB


SUMMARISED BALANCE SHEET
Rs. In Million
For the Years 2009 2008 2007 2006 2005
ASSET
CURRENT ASSETS
Cash 2814341 4448268 1483412 2021955 1746493
Balance with other Banks 3170272 432575 458204 2071514 1968484
Account Receivable 7479833 6776167 2911000 1750000 4644966
Advances 6620988 5771526 6143664 6150648 4111500
TOTAL CURRENT 2008543 1742853 1099628 1199411
12471437
ASSETS 4 6 0 7
LONG TERM
8294651 5969947 7865794 4990619 6580583
INVESTMENT
Fixed Asset 388788 274059 248575 230646 233601
Capital work in progress 5048 2136 2641 33749 44807
TOTAL FIXED ASSETS 393836 274059 251216 264395 278408
Deferred Tax Debt 185070 192077
OTHER ASSETS 758930 942955 881108 961312 555210
2953285 2480270 2018647 1821044
TOTAL ASSETS 19885638
1 3 5 3
CURRENT LIABILITIES
Notes Payable 250144 162545 130480 872378 543309
Account Payable 1289547 2509262 312319 1074567 10009548

45
4
Accrued Liabilities 64240 18804 67345 27857
Other Liabilities 731756 686653 535706 429930 415076
TOTAL CURRENT 1211532
2335687 3377264 978505 10995790
LIABILITIES 7
Deferred Liabilities 117435 3000 3000
2376701 1903473 1702841
Long Term Liabilities 7091933 4273426
7 7 2
2622013 2241199 1800691 1639175
TOTAL LIABILITIES 18090723
8 8 7 3
STOCK HOLDERS
EQUITY
Share Capital 1004154 979662 851880 851880 774436
Reserves 1357499 1275191 1327231 971049 1020343
Unappropriated Profit 1452 05 447 225 136
Stock Holder Equity 2363105 2390705 2179558 1823154 1794915
2858324 2480270 2018647 1821490
Total Liabilities & Equity 19885638
3 3 5 7

5.2 Horizontal Analysis

THE BANK OF PUNJAB


COMPARATIVE BALANCE SHEET
Rs. In Million
For the Years 2009-2008 2008-2007
ASSETS Rs Rs
%AGE %AGE
CURRENT ASSETS (In Million) (In Million)
Cash (1633927) (93%) 2964856 170%
Balance with other Banks 2737697 139% (25629) (1.3%)
Account Receivable 703666 15% 3865167 83%
Advances 849462 20.6% (372138) (9%)
TOTAL CURRENT ASSETS 2656898 21% 6432256 51%
LONG TERM INVESTMENT 2324704 35% (1895847) (29%)
Fixed Asset 114729 49% 25484 11%
Capital work in progress 2912 7% (505) (1.12%)
TOTAL FIXED ASSETS 119777 43% 22843 8.2%
Deferred Tax Debt (185070) (96%) (7007) (3.6%)

46
OTHER ASSETS (184025) (33%) 61847 11%
TOTAL ASSETS 4730148 23.7% 4616228 23%
CURRENT LIABILITIES
Notes Payable 87599 16% 32065 6%
Account Payable (1219715) (12%) 2196943 21%
Accrued Liabilities 45436 163% 18804 67%
Other Liabilities 45103 11% 150947 36%
TOTAL CURRENT
1041577 9.5% 2398759 22%
LIABILITIES
Deferred Liabilities 117435 3914%
Long Term Liabilities 4732280 110% 2006325 47%
TOTAL LIABILITIES 3808140 21% 4405081 24%
STOCK HOLDERS EQUITY
Share Capital 24492 3% 127782 16.5%
Reserves 82308 8% (52040) (5%)
Unappropriated Profit 1447 1064% (442) (32.5%)
Stock Holder Equity 27600 105% 211147 11.7%
Total Liabilities & Equity 3780540 19% 4616228 23%

Horizontal Analysis (Balance Sheet)

THE BANK OF PUNJAB


COMPARATIVE BALANCE SHEET

Rs. In Million

For the Years 2007-2006 2006-2005


ASSETS Rs Rs
%AGE %AGE
CURRENT ASSETS (In Million) (In Million)
Cash (538543) (31%) 275462 15.7%
Balance with other Banks (1613310) (82%) 103030 5.23%
Account Receivable 1161000 25% (2894966) (62%)
Advances (6984) (.16%) 2039148 50%
TOTAL CURRENT ASSETS (997837) (8%) (477320) (3.8%)
LONG TERM INVESTMENT 2875175 44% (1589964) (24%)
Fixed Asset 17929 8% (2955) (1.2%)
Capital work in progress (31108) (69%) (11058) (24.6%)
TOTAL FIXED ASSETS (13179) (4.7%) (14013) (5%)
Deferred Tax Debt 192077 (100%)
OTHER ASSETS (80204) (14%) 406102 73%
TOTAL ASSETS 1976032 10% (1675195) (8.4%)

47
CURRENT LIABILITIES
Notes Payable (741898) (136%) 329069 60%
Account Payable (10433355) (104%) 736126 7%
Accrued Liabilities (67345) (241%) 39488 141%
Other Liabilities 105776 25% 14854 3.5%
TOTAL CURRENT
(11136822) (101%) 1119537 10%
LIABILITIES
Deferred Liabilities (3000) (100%)
Long Term Liabilities 9936479 232% 2818507 66%
TOTAL LIABILITIES 1615164 10% (1698970) (9%)
STOCK HOLDERS EQUITY
Share Capital 0 0% 77444 10%
Reserves 356182 35% (49294) (5%)
Unappropriated Profit 22 163% (89) 65%
Stock Holder Equity 356404 20.4% 28239 1.5%
Total Liabilities & Equity 1971568 10% (1670731) 8.4%

5.2.1 Profit & Loss Account

THE BANK OF PUNJAB


SUMMARISED PROFIT & LOSS ACCOUNT
Rs. In Million
For the Years 2009 2008 2007 2006 2005
Service Revenue
Mark up/Interest, Discount
2069555 2172956 1934794 2260770 2259608
& Returned Earned
Fee Commission &
60320 51937 61395 60637 58521
Brokerage
Dividend Income 189051 109804 161307 71258 46738
Other Operating Income 104581 58647 47300 25725 26150
Total Service Revenue 2423507 2393344 2204796 2425299 2391017
Less: Cost /Return on
996335 1113151 1083344 1510145 1755443
Deposit
Gross Income 1392644 1259790 999004 912797 635100
Less: Operating Expenses

48
Administrative Expenses 901041 837055 678675 722009 601368
Provision against non-
76076 39286 143059 81230 (123615)
performing advances
Provision for diminution in
(23472) 0 0 0 27273
value of investment
Bad Debts 1574 200 33 0 337
Total Operating Expenses 955219 876541 821767 803239 505363
Operating Profit 437425 383249 177237 109558 129737
Other Income 43154 28480 21967 17269 7561
Other Charges 4664 1460 690 2088 1683
Profit Before Tax 431844 421275 319639 124739 135615
Less: Tax 147870 185030 162220 96500 12500
Profit After Tax 283979 236245 157419 28239 123115

Horizontal Analysis (P&L A/c)

THE BANK OF PUNJAB


COMPARATIVE PROFIT & LOSS ACCOUNT

Rs. In Million
For the Years 2009-2008 2008-2007
Rs Rs
Service Revenue %AGE %AGE
(In Million) (In Million)
Mark up/Interest, Discount &
(103401) (4%) 238162 10%
Returned Earned
Fee Commission & Brokerage 8383 15% (9458) (17%)
Dividend Income 79247 170% (51503) (110%)
Other Operating Income 45934 175% 11347 43.39%
Total Service Revenue 30163 1% 188548 8%
Less: Cost /Return on Deposit (116816) (7%) 29807 1.6%
Gross Income 132854 21% 260786 41%
Less: Operating Expenses
Administrative Expenses 63986 10.6% 158380 26%

49
Provision against non- performing
36790 30% (103773) (84%)
advances
Provision for diminution in value
(23472) (86%) 0 0%
of investment
Bad Debts 1374 407.7% 167 49.5%
Total Operating Expenses 78678 15.5% 54774 11%
Operating Profit 54176 41.7% 206012 159%
Other Income 14674 194% 6513 86%
Other Charges 3204 190% 770 46%

Profit Before Tax 10569 8% 101636 75%

Less: Tax 37160 297% 22810 183%


Profit After Tax 47734 38.7% 78826 64%

Horizontal Analysis (P&L A/c)

THE BANK OF PUNJAB


COMPARATIVE PROFIT & LOSS ACCOUNT

Rs. In Million
For the Years 2007-2006 2006-2005
Rs Rs
Service Revenue %AGE %AGE
(In Million) (In Million)
Mark up/Interest, Discount &
(325976) (15%) 1162 1%
Returned Earned
Fee Commission & Brokerage 758 .71% 2116 3.61%
Dividend Income 90049 193% 24520 52%
Other Operating Income 21575 82.5% (425) (1.6%)
Total Service Revenue (220503) (9%) 34282 1.4%
Less: Cost /Return on Deposit (426801) (24%) (245298) (14%)
Gross Income 86207 13.6% 277697 43.7%
Less: Operating Expenses
Administrative Expenses (43334) (7%) 120641 20%
Provision against non- performing
61929 50% 204945 166%
advances
Provision for diminution in value
0 (0%) (27273) (100%)
of investment

50
Bad Debts 33 10% (337) (100%)
Total Operating Expenses 18528 3.6% 297976 59%
Operating Profit 67579 52% (20179) (15.5%)
Other Income 4598 61% 9708 128%
Other Charges (1398) (83%) 405 24%

Profit Before Tax 194900 143% (10976) (8%)

Less: Tax 65720 525% 84000 572%


Profit After Tax 129180 105% (94976) (77%)

Comparative Financial Statement

Comparative financial statement present financial information for the current period and

one or more past periods. In comparative analysis the statements predict about the

movements and trends of the business with respect to past years, whether there is increase

in the business activities or decrease. It may also help to comments about the future

expectations of the ways in which the financial and operating performance will go.

There are two type of comparative financial statement analysis.

 Horizontal Analysis

 Trend Percentage Analysis

Horizontal Analysis

Comparison of two or more years’ financial statement is called Horizontal Analysis.

It shows the changes between years both in rupee and percentages form. So in this

way it facilitates the analyst to predict about the ways if the business in which it is

going. It emphasis the proportional relationship between the reporting periods, rather

than with in the reporting period.

51
In this report I shall use this type of comparative financial statement analysis to

analyze the performance of The Bank of Punjab.

Trend Percentage Analysis

Trend percentages state the several years’ financial data in terms of a base year. The base

years equals to 100% with all other stated as some percentage of this base year. In this

way it predict good and easy way information about the business activities. By simple

looking at these percentages one can see the ways in which the business in going on

whether the business is making performance or not.

Comments on Comparative Analysis of 2009-2008

The results that I have perceived from the Comparative Analysis of Balance Sheet and

Profit & Loss Account of 2009-08.

From Balance Sheet

∗ The current assets increased by 21%, this is mainly due to a higher increase in

Balance with other Banks i.e. 139%but cash is reduced which is not good for

the Short term solvency of the bank. Account receivable also increases as

compared to last year but other assets decrease i.e. 33%.

∗ Total Assets are increased by 23.7%.

∗ Fixed Assets are increased by 43%.

∗ The increase in Balance with other banks by 139% is a good sign for the

short-term solvency of the bank.

∗ The Account receivable is increased by 15% in this period.

As a whole total assets and total liabilities plus owner’s equity is increased by 19% which

corresponds with the increase in service revenue.

52
From Profit and Loss Account

∗ The service revenue of the bank is increased by 1% than that of 2008, with the

decrease of –7% in the cost return on deposits. So service decreased less than

that of return on deposits.

∗ This less decrease, service revenue than that of return on deposits results in an

increase of 21% of Gross profit.

∗ The other income of the bank also increased in 2009 then that of in 2008.

These are increased by 194%.

∗ As the service revenue increased, the administrative expenses also increased

by 11%.

∗ Overall profit after tax also increased by 39% in 2005 then that of 2009.

Comments on Comparative Analysis of 2008-2007

From Balance Sheet

∗ The current assets increased by 51%, this is mainly due to a higher increase in

cash i.e. 170% but balance with other bank is reduce which is not good for the

Short term solvency of the bank. Account receivable also increases as

compared to last year.

∗ Total Assets are increased by 23%.

∗ Fixed Assets are increased by 8.2%.

53
∗ The decrease in Balance with other banks by –1.3% is not good sign for the

short-term solvency of the bank.

∗ The Account receivable is increased by 83% in this period.

As a whole total assets and total liabilities plus owner’s equity is increased by 23% which

corresponds with the increase in service revenue.

From Profit and Loss Account

∗ The service revenue of the bank is increased by 8% than that of 2007

∗ This less decrease, service revenue than that of return on deposits results in an

increase of 41% of Gross profit.

∗ The other income of the bank also increased in 2001 then that of in 2007.

These are increased by 86%.

∗ As the service revenue increased, the administrative expenses also increased

by 26%.

∗ Overall profit after tax also increased by 64% 2001 then that of 2007.

Comments on Comparative Analysis of 2008-2009

The results that I have perceived from the Comparative Analysis of Balance Sheet

and Profit & Loss Account of 2008-2009.

From Balance Sheet

∗ The current assets decreases by -8%, this is mainly due to a higher decrease in

Balance with other Banks i.e. -82% and cash is also reduced by -31%, which

is not good for the Short-term solvency of the bank. Account receivable

increase as compared to last year but other assets decrease i.e. 14%.
54
∗ Total Assets are increased by 10%.

∗ Fixed Assets are increased by 8%.

∗ The decrease in Balance with other banks by -82% is not a good sign for the

short-term solvency of the bank.

∗ The Account receivable is increased by 25% in this period.

From Profit and Loss Account

∗ The service revenue of the bank is decreased by -9% than that of 2009, with

the decrease of –15% Mark up interest on deposits. So service decreased less

than that of Mark-up Interest.

∗ This less decrease, service revenue than that of mark-up on deposits results in

an increase of 14% of Gross profit.

∗ The other income of the bank increased highly in 2005 then that of in 2009.

These are increased by 61%.

∗ As the service revenue decreased, the administrative expenses also decreased

by -7%.

Overall profit after tax also increased by 105% in 2005 then that of 2009.

Comments on Comparative Analysis of 2007-2008

The results that I have perceived from the Comparative Analysis of Balance Sheet

and Profit & Loss Account of 2007-2008.

From Balance Sheet

55
∗ The current assets decreases by –3.8%, this is mainly due to a higher decrease

in Account Receivable but increased in Balance with other Banks i.e. 5% and

cash is also increased by 15.7% which is good for the Short term solvency of

the bank.

∗ Total Assets are decreased by -8.4%.

∗ Fixed Assets are also decreased by -1.2%.

∗ The Account receivables are decreased by -62% in this period.

From Profit and Loss Account

∗ The service revenue of the bank is increased by 1% than that of 2008, with the

decrease of –14% in the cost return on deposits. So service decreased less than

that of return on deposits.

∗ This less decrease, service revenue than that of return on deposits results in an

increase of 43.7% of Gross profit.

∗ The other income of the bank also increased in 2005 then that of in 2009.

These are increased by 128%.

∗ As the service revenue increased, the administrative expenses also increased

by 20%.

∗ Overall profit after tax decreased by -77% in 2005 then that of 2009.

56
5.3 Vertical Analysis (Balance Sheet)

THE BANK OF PUNJAB


TREND PERCENTAGES

For the Years 2009/2005 2008/2005 2007/2005 2006/2005


ASSETS
CCURRENT ASSETS
Cash 161% 254% 84% 115%
Balance with other Banks 161% 21% 23% 105%
Account Receivable 161% 141% 62% 37%
Advances 160% 140% 149% 150%
TOTAL CURRENT ASSETS 161% 139% 88% 96%
LONG TERM INVESTMENT 126% 90% 119% 75%
Fixed Asset 166% 117% 106% 98%
Capital work in progress 11% 04% 05% 75%
TOTAL FIXED ASSETS 141% 98% 90% 94%
Deferred Tax Debt 00% 96% 100% 00%
OTHER ASSETS 136% 169% 158% 173%
TOTAL ASSETS 148% 124% 101% 91%
CURRENT LIABILITIES
Notes Payable 46% 30% 24% 160%
Accounts Payable 12% 25% 03% 107%
Accrued Liabilities 230% 67% 00% 241%

57
Other Liabilities 176% 165% 129% 103%
TOTAL CURRENT
21% 30% 08% 110%
LIABILITIES
Deferred Liabilities 3914% 00% 00% 100%
Long Term Liabilities 556% 445% 398% 165%
TOTAL LIABILITIES 144% 13% 99% 90%
STOCK HOLDERS EQUITY
Share Capital 129% 126% 110% 110%
Reserves 133% 125% 130% 95%
Unappropriated Profit 1067% 3% 328% 165%
Stock Holder Equity 131% 133% 121% 101%
Total Liabilities & Equity 143% 124% 101% 91%

5.4 Trend Analysis (Profit & Loss A/c)

THE BANK OF PUNJAB


TREND PERCENTAGES

For the Years 2009/2005 2008/2005 2007/2005 2006/2005

Service Revenue
Mark up/Interest, Discount &
91% 96% 85% 100%
Returned Earned
Fee Commission & Brokerage 103% 88% 104% 103%
Dividend Income 404% 234% 345% 152%
Other Operating Income 399% 224% 180% 98%
Total Service Revenue 101% 100% 92% 101%
Less: Cost /Return on Deposit 56% 63% 61% 86%
Gross Income 219% 198% 157% 143%
Less: Operating Expenses
Administrative Expenses 149% 139% 112% 120%
Provision against non- performing
61% 31% 115% 65%
advances
Provision for diminution in value
(86%) 0% 0% 0%
of investment
Bad Debts 467% 59% 9% 0%

58
Total Operating Expenses 189% 173% 162% 159%
Operating Profit 337% 295% 136% 84%
Other Income 570% 376% 290% 228%
Other Charges 277% 86% 40% 124%
Profit Before Tax 318% 310% 235% 91%
Less: Tax 1182% 1480% 1297% 772%
Profit After Tax 230% 191% 127% 22%

Graphically Presentation of trend Percentages

This table and graph shows the trend of Total current Assets, Total Fixed

Assets, and Total Assets during the years 2005-09

No of Years 2009 2008 2007 2006 2005


161 139 96
Total Current Assets 88% 100%
% % %
Total Fixed Assets 141% 98% 90% 94% 100%
Total Assets 148% 124% 101% 91% 100%

59
180%

160%

140%

120%

100%

80%

60%

40%

20%

0%
2009 2008 2007 2006 2005

Total Current Assets Total Fixed Assets Total Assets

This table and graph shows the trend of Gross Income, profit before tax, and Net

income.

No of Years 2009 2008 2007 2006 2005


Gross Income 219% 198% 157% 143% 100%
Profit before
318% 310% 235% 91% 100%
Tax
Net Income 230% 191% 127% 22% 100%

60
350%

300%

250%

200%

150%

100%

50%

0%

2009 2008 2007 2006 2005

Gross Income Profit before Tax Net Income

This table and graph shows the trend of current Liabilities, Deferred Liabilities

and Long Term Liabilities during the period 2005-09

No of Years 2009 2008 2007 2006 2005


Current Liabilities 21% 30% 08% 110% 100%
Long Term Liabilities 556% 445% 398% 165% 100%
Total Liabilities 144% 13% 99% 90% 100%

61
600%

500%

400%

300%

200%

100%

0%

2002 2001 2000 1999 1998

Current Liabilities Long Term Liabilities Total Liabilities

5.5 RATIO ANALYSIS

The relationship of one item to another expressed in simple mathematical form is known

as a ratio. A single ratio in itself is meaningless because it does not furnish a complete

picture. A ratio becomes meaning full when compared with some standard. So we have

taken ratios and percentage of the BOP based in its record of the past financial and

operating performance. On the following pages, I make the analysis of the financial

statements of BOP by using related items for the last five years.

Profitability vs. Investment

62
Return on Assets Net profit after taxes / Total assets
Return on Deposits Net profit after taxes / Deposits
Return on Equity Net profit after taxes / Equity

No of Years 2009 2008 2007 2006 2005


.
Return on Assets .96% . 95% . 15% . 61%
70%
1.24 .
Return on Deposits 1.19% . 39% 2.8%
% 92%
12.01 9.88 7.2 1.54
Return on Equity 6.7%
% % % %
Remarks.

The return on assets shows a increasing trend, which is good sign for the BOP.

Return on deposits is also not stable; in starting years it increases and then decreases and

knows again increase. This is due to an increase in deposits and less increase in profit.

The ROE ratio of five years of BOP indicates that the profitability of the bank with equity

is increasing day by day. This looks to be very positive sign.

Profitability Ratios.

Gross Profit Margin Gross profit / Income


Operating Profit Margin Operating profit / Income
Net Profit Margin Net profit / Income

200 200 200 200


No of Years 2005
9 8 7 6
Gross Profit Margin 57% 52% 45% 37% 27%
Operating Profit Margin 18% 16% 8% 5% 6%
Net Profit Margin 11% 9% 7% 1% 5%

63
Remarks.

The net profit margin of five years indicates that the income of the BOP after

paying its non-productive expenses is increasing year by year, which is a very good sign

for the bank. As I see the operating profit of the bank shows a increasing trend in ratio.

This shows that the earning capacity of the bank is increasing year by year.

Earning Per Share

Earning Per Share Profit after Tax / No of Shares

200 200 200 200


No of Years 2005
9 8 7 6
Earning Per Share 2.83 2.41 1.85 .33 1.59

Comments

Earning of BOP shows the increasing trend. This shows that the earning capacity

of a single share is increasing and shareholders are earning increase every year. This is

very good sign for BOP. This ratio should be as high as possible because it has a great

importance for an investor to invest in the Bank of Punjab.

Regulatory Ratios:

Advances to Deposits Ratio Advances / Deposits

64
Cash to deposits Ratio Cash / Deposits

200 200 200 200


No of Years 2005
9 8 7 6
Advances to Deposits Ratio 28% 30% 36% 36% 33%
Cash to deposits Ratio 12% 23% 9% 13% 42%

Remarks. Advances to deposits ratio of The Bank of Punjab shows that the portion

of loan in total deposit of the bank is not stable, 1st three year from 2005 to 2007 increase

then decrease. It means that the credit (advances) circulation of the bank has fallen from

36% to 28% during the last five years, which is a not good sign. And the cash to deposits

ratio is also decrease from 42% to 12%.

Capital adequacy Ratios:

Equity to Asset Ratio Total Equity / Total Assets


Equity to Deposit Total Equity / Deposits

Ratio

200 200 200 200


No of Years 2005
9 8 7 6
Equity to Asset Ratio 8% 10% 11% 10% 9%
Equity to Deposit
10% 13% 13% 12% 3%
Ratio

Remarks

65
This ratios is showing increasing trend, in 2009 it decreased. This means that deposit of

the banks are decreased in 2009 and assets are also decreased in 2009, which is not good

for the Bank of Punjab.

Efficiency Ratios:

Deposits to total liabilities Ratio Deposits/Total Liabilities


Investment to Total Assets Ratio Investments / Total Assets

200 200 200 200


No of Years 2005
9 8 7 6
Deposits to total liabilities Ratio 91% 85% 95% 92% 94%
Investment to Total Assets Ratio 28% 24% 27% 27% 34%

Chapter 6

66
SWOT ANALYSIS

SWOT ANALYSIS

6.1 STRENGTHS

 In the bank service quality standards are designed and monitored to ensure a
consistent and convenient customer experience.
 Products and services are as diverse as market segments. Bank has structured and
syndicated financing arrangements, working capital finance, financing of
international trade, consumer credit, small business loans, credit cards and ATM
cards.
 The human resource philosophy at BOP Bank focuses on multi-talent hiring,
professional grooming, requisite training and merit based reward system.
 Staff welfare has always been a priority. New initiatives like hospitalization plan,
home loan insurance have added new dimensions to the staff-care policy and
motivated them to out-perform competitors.
 Bank enjoys a strategic competitive advantage over all domestic players by virtue
of its leadership in technological innovations.

67
 Bank has fully automated transaction-processing systems for back-office support.
 Bank's branch network is connected on-line real-time and customers have access
to off-site as well as on-site ATMs, all over Pakistan.
 Bank also is pioneer in e-commerce venture in Pakistan through a major retail
distributor.
 From a humble beginning with just 10 branches in 1993, today bank enjoys a
network of 242 outlets, spread across the country. A network of self-service
ATMs supports these outlets.

6.2 WEAKNESSES
 Bank is providing credit facilities only to the urban areas not too much attention is
paid to the rural areas.
 As Pakistan is agriculture country but no special schemes for the agri- loans.
 Bank is not giving emphasis on the small-scale businesses, which are large in
number in Pakistan.
 There is enormous difference between the bank-lending rate and return on
deposits.
 The procedure and documentation while sanction loan is thorny, which is a barrier
for advances.
 Bank gives targets to employees for deposits due to this reason they pay more
attention to fulfil these targets to save their jobs. This distracts their attention from
their duties.
 No job security is there for the employees, and no union exits to secure them.
 BOP has only agency arrangements with the foreign banks, no branch exists
outside the Pakistan, while their main competitors have their own branch network
outside the Pakistan.
 To improve the services and to remove the problems of customer the bank has no
customer complaint department.
 Limited locker facility is there, which does not fulfil the requirements of customer
and charges of lockers are also very high.

68
OPPORTUNITIES

 Bank has a small branch network so The Bank of Punjab can increase its turnover
though increase the number of branches.
 Bank has no foreign branches so it should open its branches outside the country
especially in U.K, U.S.A and in U.A.E.
 Facilities like financing of housing should also be offered to general public
especially in the urban areas.
 In agrarians cities like Rahim Yar Khan there is a potential for giving credit
facilities to farmers.
 To increase its advances bank should focus small scale industries and choose one
among them and then a special scheme of lending should be introduced for that
particular small scale industry.
6.4 THREATS
 Law and order situation in Pakistan is faulty that is why people are not confident
to invest anywhere.
 The markets rates are now at extremely low levels, with very little chance of their
going up during the rest of the year. The low interest rate means low profits for
the banks.
 Saving rate in Pakistan is very low i.e.15% as compared to 30% in China and
40% in Malaysia.
 As the banking procedures are complicated that is why general public takes
interest into other options of investments like in shares of companies and in Term
Finance Certificates.
 Now the world is a global village so competitors may rise from anywhere in the
world at anytime.
 In near future the world is going to be free trade zone so the concept of "survival
of the fittest" will be in action.

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 After the 11 September incident and due to terrorist activities in Pakistan the
economy is moving very slow. It means less investment and as a result low loan
demands.
 High rate of taxes on banking companies.
 SBP have a heavy penalty on banks for violating the Prudential Regulation. So it
requires greater care while advancing.
 Increasing ATM trend among the banks also requires attention of the management
to this side.

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Chapter 7
CONCLUSION AND RECOMMENDATION

7.1 CONCLUSION

The Bank of Punjab is contributing a lot towards the industrial development and capital

formation in the country. As it is exhibit from the data regarding the bank’s financial

performance as shows in the financial performance as shows in the financial analysis, that

bank is sharing major banking business of the country. Further more the policies and

schemes as are introduced and carried on by the bank are of great source of help in its

trading and non-trading growth.

They facilitate trade both inside and outside the country. The Bank if Punjab has

endeavored to remain in the forefront of modern financial institutions and has

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consistently shows tremendous growth in all area of its activity. However after

scheduling, due to its emphasis on consolidation and controlled lending, the growth of

profit has somewhat declined. But the bank’s performance is in line with its set goals.

The policies of the bank are uniform and going very smoothly. The employees are given

all the possible facilities and generous compensation. In return employees are stressed for

their best efficiency. Merit policy prevails in all the activities of the bank. Bank

Management has studied the administrative policies of all other banks, and all their

problems and drawbacks are planned to be avoided. Therefore, the policies of the

management are progressive and proper.

The progressive approach and trend towards progress and prosperity reflects that bank

will touch the zenith of development and progress. The dedicated, enthusiastic and

motivated employees can bring that time even earlier.

7.2 Recommendation
 Survive in the Market
The bank should not relay on its present sources and facilities but also it should establish
new ways of acquiring, managing and sharing market information to survive in the
industry and to earn profits.
 Computer Specialis
The bank should increase the computer specialist at branch level.
 Customer Compliant Department
The bank should improve the services and remove the problems of customer by making a
vast customer complaint department.
 Locker Facility
The bank should increase locker facility and decrease the charges of lockers.

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 Security Measurement
Bank has low security measurement in branches. Bank should increase the number of
guards and other technical security tools.
 Improve and Update Website
The Bank should improve and keep the up to date information on web site.
 Hire New Talent
Instead of preferring the old employees of the other banks, management should hire new
and well-educated talent. This will contribute to the long-term benefits of the bank.
 Credit Policy
Credit policy should cover both the rural and as well as urban areas. Credit facilities
should be enhanced to small-scale businesses.
 Bonus
Employees who perform extraordinary and achieve more than their targets should be

given bonus.

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