FINANCIAL RISK

MANAGEMENT
Financial Risk Management

[DATE]
[COMPANY NAME]
[Company address]
 Section 1: Overview of the Organization

Askari Bank Limited

A. Brief History:

Askari Bank Pakistan was incorporated in October 9th, 1991, as a Public Limited Company. It

commenced operations on April 1st, 1992, and is principally engaged in the business of banking

as defined in the Banking Companies Ordinance, 1962. The Bank is listed on Karachi, Lahore

and Islamabad Stock Exchanges. Askari Bank has expanded into a network of 226 branches /

sub-branches, including 31 devoted Islamic banking branches, and a wholesale bank branch in

Bahrain. A shared network of 4,713 online ATMs covering all major cities in Pakistan supports

the delivery channel for customer service. As at December 31st, 2009, the Bank had equity of

PRs. 14.95 Billion and total assets of PRs. 254.33 Billion, with 984,485 banking customers,

serviced by 6,159 employees.

B. Vision:

“To be the bank of first choice in the region”

C. Mission Statement:

“To be the leading private sector bank in Pakistan with an international presence, delivering

quality service through innovative technology and effective human resource management in a

modern and progressive organizational culture of meritocracy, maintaining high ethical and

professional standards, while providing enhanced value to all our stake-holders, and contributing

to society”

D. Askari Bank’s Code of Ethics and Conduct:

It is stated in Askari Bank’s Code of Ethics and Conduct:

“Employees must safeguard confidential information which may come to their possession during

the discharge of their responsibilities. Respect for customers’ confidential matters, merits the

same care as does the protection of the Bank’s own affairs or other interests.”

E. Nature of the Bank:

 In the year 2009, Askari Bank had 1,200,000,000 shares (ordinary shares of Rs. 10 each) as authorized

capital. From which 67,500,000 shares were fully paid in cash and 439,846,635 shares were issued as

bonus shares. The Group consists of Askari Bank Limited, the holding company, Askari

Investment Management Limited, a wholly owned subsidiary company and Askari Securities

Limited, a partly owned subsidiary company. Askari Investment Management Limited (AIML)

was incorporated in Pakistan on May 30, 2005 as a public limited company. AIML is a Non-

Banking Finance Company (NBFC), under license by the Securities and Exchange Commission

of Pakistan (SECP) to undertake asset management and investment advisory services under the

Non-Banking Finance Companies and Notified Entities Regulations, 2007 (NBFC & NE

Regulations). The license was obtained on September 21, 2005. Askari Securities Limited (ASL)

was incorporated in Pakistan on October 1, 1999 under the Companies Ordinance, 1984 as a

public limited company and obtained corporate membership of the Islamabad Stock Exchange on

December 24, 1999. The Bank acquired 74% of Ordinary Shares of ASL on October 1, 2007.

F. Product Lines:

I. CUSTOMER BANKING SERVICES.

 ASKARI MAHANA BACHAT ACCOUNT (1+3 YEARS TERM).

 ASKARI ROSHAN MUSTAQBIL DEPOSIT.

 ASKARI DEPOSIT MULTIPLIER ACCOUNT.

 VALUE PLUS DEPOSITS.

 ASKARI CARD.

 TRAVELERS CHEQUES.
  SMART CASH.

 PERSONAL FINANCE.

 MORTGAGE FINANCE.

 BUSINESS FINANCE.

II. ISLAMIC BANKING SERVICES.

III. AGRICULTURE FINANCE SOLUTION.

 ASKARI KISSAN AGRI FINANCE PROGRAM.

 KISSAN EVER GREEN FINANCE.

 KISSAN TRACTOR FINANCE.

 KISSAN AABPASHI FINANCE

 KISSAN LICE STOCK DEVELOPMENT FINANCE.

 KISSAN FARM MECHANIZATION FINANCE.

 KISSAN FARM TRANSPORT FINANCE.

G. Competitors:
1. Bank Alfalah Ltd.

2. Faysal Bank Ltd.

3. National Bank of Pakistan Ltd.

4. Muslim Commercial Bank Ltd.

5. Allied Bank Ltd.

6. Meezan Bank Ltd.

 Section 2: Analysis on Askari Bank Limited

A. CAMELS:
Askari Bank’s Current Strategy Fulfill the Banks needs for CAMELS analysis. They are as

Follows;

 To comprehensively plan for the future to ensure sustained growth and profitability.

 To facilitate alignment of the Vision, Mission, Corporate Objectives with the business goals

and objectives.

 To provide strategic initiatives and solutions for projects, products, policies and procedures.

 To provide strategic solutions to strengthen weak areas and to counter threats to profits.

 To identify strategic initiatives and opportunities for profit.

 To create and leverage strategic assets and capabilities for competitive advantage.

B. Vertical Analysis of financial Position:

Year 2017: Amount in PRs 000;
 Total Assets: 656,708,369.
 Total Liabilities: 624,272,878.
 Total Capital/Equity: 27,400,895.
Year 2018: Amount in PRs 000,
 Total Assets: 706,532,042.
 Total Liabilities: 673,023,135.
 Total Capital/Equity: 33,508,907.
Year 2019: Amount in PRs 000,
 Total Assets: 833,208,006.
 Total Liabilities: 790,952,162.
  Total Capital/Equity: 42,255,844.
2017 % 2018 % 2019 %
Assets
Cash & Balances 44,239,325 6.7% 49,187,645 6.9% 63,039,290 7.6%
Balances with other 3,193,835 0.5% 4,093,402 0.6% 7,886,702 1%
banks
Lendings to FIs 2,250,000 0.3% - - 20,405,972 2.4%
Investment 314,956,748 48% 260,233,987 37% 305,435,633 37%
Advances 258,693,086 39% 343,107,147 43% 372,913,863 45%
Fixes assets 10,728,827 1.6% 12,791,827 1.8% 19,696,568 2.4%
Intangible assets 842,869 0.1% 741,361 0.1% 808,994 0.1%
Assets held for sale 80,720 0.01% 80,720 0.01% 80,720 0.01%
Deferred tax assets 100,755 0.02% 3,773,779 0.5% 2,489,752 0.3%
Other assets 22,465,073 3.4% 32,522,174 4.6% 40,450,512 5%

Liabilities
Bills Payable 10,769,262 1.7% 15,512,880 2.3% 15,768,947 2%
Borrowings 71,587,311 11.5% 52,702,323 7.8% 51,187,681 7%
Deposits 525,808,308 84% 573,635,856 85% 679,299,486 86%
Financial lease - - - - - -
Subordinated debts 4,992,800 0.8% 9,993,600 0.7% 9,992,000 1.3%
Deferred tax - - - - - -
Liabilities
Other Liabilities 11,115,197 1.8% 21,178,476 2.5% 34,704,048 4%

Share Capital 12,602,602 39% 12,602,602 38% 12,602,602 30%

Reserves 11,840,757 37% 15,543,179 46% 19,366,260 46%
Unappropriated 2,849,878 8% 3,713,929 11% 5,986,556 14%
profit
Surplus on 5,142,254 16% 1,649,197 5% 4,300,426 10%
evaluation of assets

 Interpretation of Vertical Analysis:

Like any another bank, Askari banks most of the assets are investments in different projects and

advances to other financial institutions and also to general public.

Liabilities of Askari Bank mostly comprise of Deposits from different sources.

As for the capital, it is mostly Share Capital and reserves that are held by the State Bank of

Pakistan.
 C. Horizontal Analysis of financial Position:

 Taking 2017 as Base year for Horizontal analysis:

2017 % 2018 % 2019 %

Assets
Cash & Balances 44,239,325 100% 49,187,645 111% 63,039,290 143%
Balances with other 3,193,835 100% 4,093,402 128% 7,886,702 247%
banks
Lendings to FIs 2,250,000 100% - - 20,405,972 907%
Investment 314,956,748 100% 260,233,987 83% 305,435,633 97%
Advances 258,693,086 100% 343,107,147 133% 372,913,863 144%
Fixes assets 10,728,827 100% 12,791,827 119% 19,696,568 184%
Intangible assets 842,869 100% 741,361 88% 808,994 96%
Assets held for sale 80,720 100% 80,720 100% 80,720 100%
Deferred tax assets 100,755 100% 3,773,779 3746% 2,489,752 2471%
Other assets 22,465,073 100% 32,522,174 145% 40,450,512 180%

Liabilities
Bills Payable 10,769,262 100% 15,512,880 144% 15,768,947 146%
Borrowings 71,587,311 100% 52,702,323 74% 51,187,681 72%
Deposits 525,808,308 100% 573,635,856 109% 679,299,486 129%
Financial lease - - - - - -
Subordinated debts 4,992,800 100% 9,993,600 200% 9,992,000 200%
Deferred tax - - - - - -
Liabilities
Other Liabilities 11,115,197 100% 21,178,476 191% 34,704,048 312%

Share Capital 12,602,602 100% 12,602,602 100% 12,602,602 100%

Reserves 11,840,757 100% 15,543,179 131% 19,366,260 164%
Unappropriated 2,849,878 100% 3,713,929 130% 5,986,556 210%
profit
Surplus on 5,142,254 100% 1,649,197 32% 4,300,426 84%
evaluation of assets
D. PACRA Rating:
Askari Bank has the following Entity Ratings from the Pakistan Credit Rating Agency Limited

(PACRA): Definitions By PACRA: A1+: Obligations supported by the highest capacity for

timely repayment. AA: Denote a very low expectation of credit risk. they indicate very strong

capacity for timely payment of financial commitments. This capacity is not significantly

vulnerable to foreseeable events. A plus (+) appended to a rating, denotes relative status within

major rating categories.

E. SWOT Analysis:
Strengths:

 Holds a sound repute in the financial circle

 Personalized services of the staff to the employees

 Located in the commercial area, so that the customers face no problems in reaching to the

bank.

 Maintaining the healthy correspondent relationships with foreign banks.

 Provide a record business in exports sector.

 It has a reliable and easy to use internal computer system.

 All the transactions and information regarded the customer’s deposits has been computerized.

Currently, Unibank System is being practiced for this purpose. Now Askari Bank is decided

to change the Unibank System.

 ACBL has launched its Mobile ATM Bus Service, which is the Pakistan’s First Mobile ATM

Bus Service. No other bank has taken initiative of mobile ATM Bus yet.
Weaknesses:

 No advertisement on electronic media has been seen yet.

 Some of the employees are burdened with over work.

 Division of work and description of job is not properly defined to each and every staff

member.

 The management system in ACBL is quite centralized leaving all the decision-making

activities to the upper management only. Employee empowerment is also over looked due to

such management policy.

 Division of work and description of job is not properly defined to each and every staff

member.

 In Askari Bank the individual difference has strong impact on the organization’s performance

due to wrong criteria of selection of employees.

Opportunities:

 All the opportunities of the 21st century are to be availed in the information technology.

Information technology is the Future. Therefore ACBL should emphasize much on IT.

 ACBL should emphasize on E - Banking. In which Bank can design a universal account like

other foreign banks, to enhance online facilities.

 Askari Bank’s growing business requires an extensive branch network. There are great

opportunities for ACBL for the expansion of its business.

 ACBL growing business requires further expansion of branch network which would, in

return, open great opportunities for ACBL for the expansion of its business. ACBL can also

extend its network in other countries.

 There is a large pool of free MBA graduates who can be hired to achieve professionalism on

its organizational culture.

 ACBL can expand its market segmentation geographically by extending its banking services

to remote areas where the banking needs of people have not been previously met.

Threats:

 Political instability is also threat for the bank because instability leads to lower business. The

same situation is prevailing in Pakistan.

 In our county, the rate of inflation is increasing along with the unemployment. So due to

increase in price of the products, the savings of the nation is decreasing with passage of time.

So it is threat for the banking sector.

 Increase in competition due to increasing number of foreign banks offering highly

specialized and attractive services.

 Extensive promotional campaigns run by competitors are another threat for ABL.