Allied Bank Report

CHAPTER 01
Internship Report on Allied Bank Limited Internship Report on Allied Bank Limited
Submitted by: Seep Nadeem Registration # FA05-BBA-100 Submitted by: Faiza Munir Supervised by: Mr.Jamil Registration # FA06-BBA-038Anwar Supervised by: Ms.Tabassam Rashid
(FINANCE) (FINANCE)
Department of Management Sciences COMSATS Institute of Information Technology Department of Management Sciences Abbottabad COMSATS Institute of Information Technology Abbottabad
July 2009
August 2010
Internship Report on Allied Bank Limited

(FINANCE)
Submitted by: Faiza Munir Registration # FA06-BBA-038
Supervised by: Ms.Tabbasam Rashid
This internship report is submitted in partial fulfillment of the requirements for the degree of Bachelors of Business Administration awarded by the COMSATS Institute of Information Technology.
Department of Management Sciences COMSATS Institute of Information Technology Abbottabad
August 2010
Department of Management Sciences COMSATS Institute of Information Technology

Abbottabad
Approval Sheet
.
Approval Committee
1. External Examiner
Mr. _________________________________________ Signature_______________
2. Supervisor
Mr. _________________________________________ Signature_______________
3. Head of Department 3
Mr. _________________________________________ Signature ________________
Dedication
All the efforts in compiling this report are dedicated to my beloved parents and my honorabl faculty members of CIIT Abbottabad, who helped me in this achievement
Table of Contents
Acknowledgements Abbreviation Executive Summary xii xiii xv
Topics CHAPTER 1
Page No.
Introduction to the Report ----------------------------------------------------------------- 01 1.1 Background of the Study -----------------------------------------------------------------01 1.2 Purpose of the Internship----------------------------------------------------------------- 01 1.3 Merits of the study ------------------------------------------------------------------------ 02 1.4 Scope of the Report------------------------------------------------------------------------02 1.5 Methodology of the Study --------------------------------------------------------------- 03 6
1.5.1
Primary data ---------------------------------------------------------------------- 03
1.5.2 Secondary data --------------------------------------------------------------------- 03 1.6 Limitations of the Report-----------------------------------------------------------------03 1.7 Scheme of the Report---------------------------------------------------------------------04 CHAPTER 2 Introduction to Allied Bank Limited --------------------------------------------------- 05 2.1 Historical background of Allied bank Limited-----------------------------------------05 2.2 Operational headquarters------------------------------------------------------------------07 2.3Visison Statement of Allied Bank Limited -------------------------------------------- 08 2.4 Mission Statement of Allied Bank Limited ------------------------------------------- 08 2.5 Credit Rating ------------------------------------------------------------------------------ 08 2.6 Awards and Achievements----------------------------------------------------------------08 2.7 Auditors ------------------------------------------------------------------------------------ 09 2.8 Functions of Allied Bank Limited-------------------------------------------------------- 09 2.9 Branch network-------------------------------------------------------------------------------10 2.10 Organizational Structure ----------------------------------------------------------------- 10 2.11 Ethical Values-------------------------------------------------------------------------------12 2.12 Objectives of Allied Bank Limited------------------------------------------------------ 12 2.13 Corporate Profile -------------------------------------------------------------------------12 2.14 Online system of Allied Bank Limited------------------------------------------------13 2.15 Secure Transfer of Money---------------------------------------------------------------13 2.16 Enhanced Managerial Activities--------------------------------------------------------13 2.17 Indulging In Healthy Competition--------------------------------------------------14 2.18 Branch Expansion Strategy----------------------------------------------------------14 2.19 Keeping Pace with 21st Century----------------------------------------------------14
CHAPTER 3 Products & Services Provided At Allied Bank Limited Bara Towers Branch Abbottabad -------------------------------------------------------------------------------- 15 7
3.1 Organization Structure of Bank Branch---------------------------------------------15 3.1.1 Location-------------------------------------------------------------------------------15 3.1.2 Number of Employees---------------------------------------------------------------16 3.2 Business Overview --------------------------------------------------------------------------16 3.3 Corporate and Investment Banking -------------------------------------------------------16 3.3.1 Corporate Banking -------------------------------------------------------------------16 3.3.2 Investment Banking ------------------------------------------------------------------16 3.4 Commercial and Retail Banking -----------------------------------------------------------17 3.5 SME Finance ---------------------------------------------------------------------------------18 3.6 Consumer Finance -------------------------------------------------------------------------- 18 3.7 Overall Financial Position ----------------------------------------------------------------- 18 3.8 Balance Sheet of the bank ----------------------------------------------------------------- 19 3.9 Profit and Loss Accounts ------------------------------------------------------------------ 20 3.10 Products and Services offered by Allied Bank Limited -------------------------------20 3.10.1 Products -------------------------------------------------------------------------------20 3.10.1.1 Behtar Munafa Account -------------------------------------------------- 20 3.10.1.2 Behtar Munafa Term Deposit -------------------------------------------- 21 3.10.1.3 Allied Munafa Account --------------------------------------------------- 21 3.10.1.4 Allied Bachat Scheme ----------------------------------------------------- 21 3.10.1.5 Allied e-Savers Accounts ------------------------------------------------- 22 3.10.1.6 Allied Business Account -------------------------------------------------- 22 3.10.1.7 Rewarding Term Deposit -------------------------------------------------- 22 3.10.1.8 Monthly Profit Plus -------------------------------------------------------- 22 3.10.2 Services ----------------------------------------------------------------------------- 23 3.10.2.1 Running Finance ------------------------------------------------------------23 3.10.2.2 Export Refinance Facility ------------------------------------------------ 23 3.10.2.3 Foreign Bill Purchase/Bill Discounting Facility ---------------------- 23 3.10.2.4 LC (Sight /Usance) -------------------------------------------------------- 23 3.10.2.5 FIM -------------------------------------------------------------------------- 23 3.10.2.6 Demand Finance Facility ------------------------------------------------- 23
3.10.2.7 Inland LC (Sight/Usance) ------------------------------------------------ 24 3.10.2.8 Letter of Guarantee ------------------------------------------------------- 24 3.10.2.9 Import Export ------------------------------------------------------------- 24 3.11 Financial Position of Branch ----------------------------------------------------------- 24 3.11.1 Total Advances ------------------------------------------------------------------- 24 3.11.2 Total Deposits -------------------------------------------------------------------- 24 CHAPTER 4 Analysis of Allied Bank Limited------------------------------------------------------------ 25 4.1 Financial Analysis ------------------------------------------------------------------------ 25 4.1.1 Common Size Analysis ----------------------------------------------------------- 25 4.1.1.1 Horizontal Analysis ------------------------------------------------------- 25 4.1.1.1.1 Interpretation ------------------------------------------------------------- 26 4.1.1.2 Vertical Analysis ----------------------------------------------------------- 27 4.1.1.2.1 Interpretation ------------------------------------------------------------- 28 4.1.2 Profitability Ratios ------------------------------------------------------------------ 29 1. Return On Assets (ROA)-------------------------------------------------------29 2. Return on Equity (ROE)--------------------------------------------------------30
3. 4. 5.
Credit to deposit ratio (CD ratio) ---------------------------------------------31 Capital adequacy ratio (CAR) -------------------------------------------------31 Non Performing Assets ratio ---------------------------------------------------32 Return On Capital Employed (ROCE)
6.
---------------------------------------33 7. Net interest margin (NIM) ----------------------------------------------------34 8. Operating profit margins (OPM) ---------------------------------------------35 9. Cost to income ratio -----------------------------------------------------------36 4.1.3 Efficiency ratios ------------------------------------------------------------------- 37 10. Profits per employee -----------------------------------------------------------37 11. Interest income per employee ------------------------------------------------38 12. Business per employee ------------------------------------------------------- 38
13. Business per branch ----------------------------------------------------------- 39 14. Employees per branch -------------------------------------------------------- 40 4.2 Comparison of Branch Performance with Overall Performance ---------------------40 4.3 Non-Financial Analysis of Branch ------------------------------------------------------ 41 4.3.1 Management Qualification -------------------------------------------------------- 41 4.3.2 Staff qualification ------------------------------------------------------------------ 41 4.3.3 Powers and independence of manager in terms of ----------------------------- 42 4.3.3.1 Credit limit ----------------------------------------------------------------- 42 4.3.3.2 Interest rates for deposits and advances -------------------------------- 42 4.3.4 Branch Location -------------------------------------------------------------------- 42 4.3.5 Infrastructure ------------------------------------------------------------------------ 42 4.3.6 MIS ----------------------------------------------------------------------------------- 42 4.3.7 Internal audit and control ---------------------------------------------------------- 43 4.4 SWOT Analysis --------------------------------------------------------------------------- 43 4.4.1 Overall SWOT Analysis ----------------------------------------------------------- 43 4.4.2 Branch SWOT Analysis ----------------------------------------------------------- 45 CHAPTER 5 Conclusion and Recommendations ------------------------------------------------------- 47 5.1 Conclusion --------------------------------------------------------------------------------- 47 5.2 Recommendations ------------------------------------------------------------------------ 48 REFERENCES ------------------------------------------------------------------------------- 51 LIST OF FIGURES 2.1 Organizational Structure of ABL -------------------------------------------------------- 11 3.1 Organizational Structure of Bank Branch ---------------------------------------------- 15 4.1 Return on Assets (ROA) ------------------------------------------------------------------ 29 4.2 Return on Equity (ROE) ------------------------------------------------------------------ 30
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4.3 Credit ti deposit Ratio (CD)--------------------------------------------------------------- 31 4.4 Capital Adequecy Ratio (CAR)----------------------------------------------------------- 32 4.5 Non-performing Assets Ratio (NPA) ---------------------------------------------------- 33 4.6 Return on Capital employed (ROCE) ---------------------------------------------------- 34 4.7 Net Interest Margin (NIM) ---------------------------------------------------------------- 35 4.8 Operating Profit Margin (OPM) -----------------------------------------------------------36 4.9 Cost to Income Ratio-------------------------------------------------------------------------37 4.10 Pofit per Employee--------------------------------------------------------------------------37 4.11 Interest income per Employee-------------------------------------------------------------38 4.12 Buniess per Employee----------------------------------------------------------------------39 4.13Buniess per Branch--------------------------------------------------------------------------39 4.14 Employee per Branch-----------------------------------------------------------------------40 LIST OF TABLES 3.1 Balance Sheet------------------------------------------------------------------------------- 19 3.2 Profit and Loss Accounts ----------------------------------------------------------------- 20 3.3 Total Deposits ------------------------------------------------------------------------------ 24 4.1 Horizontal Analysis of Balance Sheet --------------------------------------------------- 25 4.2 Vertical Analysis of Balance Sheet ------------------------------------------------------ 27 4.3 Return on Assets (ROA) ------------------------------------------------------------------ 29 4.4 Return on Equity (ROE) ------------------------------------------------------------------ 30 4.5 Credit ti deposit Ratio (CD)--------------------------------------------------------------- 31 4.6 Capital Adequecy Ratio (CAR)----------------------------------------------------------- 32 4.7 Non-performing Assets Ratio (NPA) ---------------------------------------------------- 33 4.8 Return on Capital employed (ROCE) ---------------------------------------------------- 33 4.9 Net Interest Margin (NIM) ---------------------------------------------------------------- 34 4.10 Operating Profit Margin (OPM) ----------------------------------------------------------35 4.11 Cost to Income Ratio------------------------------------------------------------------------36 4.12 Pofit per Employee--------------------------------------------------------------------------37 4.13 Interest income per Employee-------------------------------------------------------------38
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4.14 Buniess per Employee----------------------------------------------------------------------38 4.15Buniess per Branch--------------------------------------------------------------------------39 4.16 Employee per Branch-----------------------------------------------------------------------40 4.17Comparison-----------------------------------------------------------------------------------40 4.12 Management Qualification-----------------------------------------------------------------41 4.13 Staff Qualification---------------------------------------------------------------------------41 ANNEXURES Annexure A: Unconsolidated Balance Sheet 2009-2008 of ABL Annexure B: Unconsolidated Profit & Loss Accounts of ABL
Acknowledgements
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First of all, I express my humble thanks to the Almighty Allah without Whose help I am unable to accomplish any objective in my life. Who blessed me with an opportunity to get internship training in Allied Bank Limited. I am also thankful to all my teachers especially to my supervisor Ms.Tabassam Rashid and my advisor Mr. Faiza Sajjad as the knowledge imparted by them enables me to gain knowledge of the organization in the best way. I am grateful to the manager Mr. Mohammad Arif and staff of ABL Bara Tower Branch who helped me in completing my six week internship program. I would like to pay gratitude to every one who helped me in completing this internship report.
Faiza Munir
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Abbreviations
A ABL - Allied Bank Limited. ABL - CBG - Allied Bank Limited Corporate Banking Group. ABL - IBG - Allied Bank Limited Investment Banking Group. A D - After Death. AMG - Allied Management Group ATM - Automated Teller Machine B B.A - Bachelors of Arts BBA - Bachelors of Business Administration. BC - Before Christ. B Com - Bachelors of Commerce. C CAR - Capital Adequacy Ratio. CASA - Current & Saving Accounts. CBG - Corporate Banking Group CCU - Compliance and Control Unit CD - Credit to deposit CEO - Chief Executive Officer. CIIT - COMSATS Institute of Information Technology. CPBG - Consumer Personal Banking Group CRBG - Commercial and Retail Banking Group. E ESO- Employee Stock Ownership Plan F FIM - Finance Against Imported Merchandise. H HAIB- Habib Allied International Bank HBL - Habib Bank Limited. 14
I IBP - Institute of Pakistan Banking ICU - Internal Control Unit IS - Information System IT - Information Technology J JCR-VIS - Japanese Credit Rating - Virtual Information System. K KPMG - Klyneld Peat Marwick Goerdeler. L LC - Letter of Credit. N NIM - Net interest margin NII - Net interest income NPA - Non Performing Assets. NPL - Non Performing Loan. M M.A Economics - Masters in Economics MBA - Masters of Business Administration. MIS - Management Information System. O OPM - Operating profit margins P P.A - Per Annum PACRA - Pakistan Credit Rating Agency PKR - Pakistani Rupees. R ROA - Return on Assets S SBP - State Bank of Pakistan.
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SME - Small and Medium Enterprise. SWOT - Strength Weakness Opportunity Threat.
Executive Summary
For the completion of four year degree program of BBA (Bachelors of Business Administration) Honors, six weeks internship must be carried out in any organization. The student has to submit a comprehensive internship report at the end of internship. This internship report covers the financial and non financial aspects of the organization. The data on the report is gathered by interviewing the staff of Allied Bank Limited Bara Tower Branch as well as by using the ABLs website and annual report. The non financial analysis of the branch shows that the Management Information System of the branch is partially manual and partially computerized. The branch manager has limited or negligible powers in terms of credit limit. The financial analysis of ABL shows that the bank is properly utilizing its assets to earn maximum returns as well as its ability to earn profits on its total interest income has increased in 2009. Where as the ABL Bara Tower Branchs financial analysis shows that the branch performance is not satisfactory in terms of advances when compared with the overall banks average. It is recommended that the branch should focus more on its advances to attain the overall banks average. For this the branch should offer better loan schemes as well as the terms and conditions offered by the branch in context of credit should be flexible which will attract more borrowers. It should also focus on better advertising of the finance lease sector. The bank should increase the powers of the branch mangers in terms of credit limit.
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Introduction to the Report

The purpose of the six week internship at Allied Bank Limited Bara Tower Branch is to get insight into the general practices being done in the banking sector. The purpose to formulate the internship report is to help the students in performing specific tasks in a professional environment which will sharpen their professional aspect in their respective fields. The report on internship is also a requirement for awarding the degree as well.
1.1Background of the Study As far as the background of the study is concerned following aspects should be considered; To survive in todays cut throat competition of growing economy sound banking system is the need of the day, which must meet the financial needs of every sector prevailing in the country. Allied Bank Limited since 1942 has played a pivotal role in the development of Pakistan. Like other multinational banks, Allied Bank Limited has adopted a customer-oriented approach, in order to provide quality products according to customer needs and stands as a role model for the other banks. 1.2 Purpose of the Internship The primary purpose of the internship is to fulfil the academic requirements of the study. The secondary purpose of the internship is to evaluate the general banking practices, in corporate world and to compare these practices with the contemporary banking practices. The purpose of the study also is to have practical approach in the respective field and apply the theoretical knowledge to the real life situations, which thus enables a student to be a future banking practitioner. Besides this, some other purposes are associated, which includes; To give a comprehensive review of Allied Bank Limited.
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To evaluate the organization on the basis of the financial and other aspects. To identify the areas of the bank where there is some room for improvement. To present some feasible solutions for the problems prevailing in the organization. To apply the theoretical knowledge that is gained; in the practical field.
1.3Merits of the study Working in intense professional reputed organization ultimately boosts up the confidence of the internee. While performing in professional environment one can get a clear cut idea regarding the general banking practices. It has also helped in the practical application of the knowledge that is gained during the study. It also helped in gathering of financial data and then analyzing of data which is a very important aspect of a professional business administrator. This report also comprehensively encompasses most of the aspects of banking, followed by SWOT analysis, conclusion and recommendations that both benefit the organizations and the students as well.
1.4Scope of Work/Report It is a compulsory requirement for the award of Bachelors Degree in Business Administration. It will help the present and prospective students of the department in making assignments and writing reports on the Allied Bank Limited, evolution of baking, importance of banking and different operation that are prevailing in the dynamic organization. It can also provide help to Allied Bank Limiteds management in identifying their Strengths, Weaknesses, Opportunities and Threats. It can also provide assistance to students seeking financial data for analysis.
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1.5 Methodology of the Study The methodology adopted for the report was based on collection of data of both the types i.e. primary data and secondary data. 1.5.1 Primary data The primary data was collected through: Personal information gathering from the employees of the bank. First hand information was also gathered by observing the practices of the employees. Questions were also asked to the employees of different departments of the bank which also helped in gathering the primary data. 1.5.2 Secondary data The secondary data was collected through; Study of banks annual reports of year 2009. By studying different brochures of the bank. From the office memos within the bank. From advertisements of the bank that it offers. From customer guide vouchers. From the Banks website.
1.6 Limitations of the Report Allied bank has strict policies regarding the secrecy of the customers information. Due to this privacy policy of the bank it was very difficult to acquire all the data which was needed for the report. The second constrain was the time factor. However efforts were to acquire enough data from different sources in order to get a clear idea of the practical doings of the bank.
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1.7 Scheme of the Report This internship report is divided into five chapters as: Chapter one includes background, purpose, scope, limitations, methodology, and scheme of the report. Chapter two includes background and history of banking in Pakistan, background of Allied Bank Limited, its roles, functions and branches. Chapter three includes organizational structure of ABL, organizational charts and departments of Allied Bank Limited. Chapter four includes financial, SWOT analysis and findings based on work in chapter three. Chapter five includes recommendations of the study based on the analysis in the previous chapter.
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CHAPTER 2 Introduction to Allied Bank Limited

2.1 Historical Background of Allied Bank Limited Established in December 1942 as the Australasia Bank at Lahore with a paid-up share capital of PKR 0.12 million under the Chairmanship of Khawaja Bashir Bux, and his business associates, including Abdul Rahman Malik who was amongst the original Board of Directors, the bank had attracted deposits, equivalent to PKR 0.431 million in its first eighteen months of business. Total assets then amounted to PKR 0.572 million. Today Allied Bank's paid up Capital & Reserves amount to Rs. 10.5 billion, deposit exceeded Rs. 143 billion and total assets equal Rs. 170 billion. The Allied Bank's story is one of dedication, commitment to professionalism, adaptation to changing environmental challenges resulting into all round growth and stability, envied and aspired by many. Pre Independence In the early 1940s the Muslim community was beginning to realize the need for the active participation in the field of trade and industry. The Hindus had since the late 1880s established a commanding presence in these areas and industry, trade and commerce in the undivided Sub-continent was completely dominated by them. Banking, in particular, was an exclusive enclave of the Hindus and it was widely believed, and wrongly so, that Muslims were temperamentally unsuited for this profession. It was particularly galling for Khawaja Bashir Bux and Abdul Rahman Malik to hear the gibe that Muslims could not be successful bankers. They decided to respond to the challenge and took lead in establishing this first Muslim bank on the soil of Punjab that was to become Pakistan in December 1942; by the name of Australasia Bank Limited. The initial equity of the Bank amounted to Rs 0.12 million, which was raised to Rs 0.5 million by the end of first full year of operation, and by the end of 30 June 1947 capital increased to Rs. 0.673 million and deposits raised to Rs 7.728 million.
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Australasia Bank (1947 to 1974)
Australasia Bank was the only fully functional Muslim Bank on Pakistan territory on August the 14th, 1947. It had been severely hit by the riots in East Punjab. The bank was identified with the Pakistan Movement. At the time of independence all the branches in India, (Amritsar, Batala, Jalandhar, Ludhaina, Delhi and Angra were closed down. New Branches were opened in Karachi, Rawalpindi, Peshawar, Sialkot, Sargodha, Jhang, Gujranwala and Kasur. Later it network spread to Multan & Quetta. The Bank financed trade in cloth and food grains and thus played an important role in maintaining consumer supplies during riot affected early months of 1948. Despite the difficult conditions prevailing and the substantial set back in the Banks business in India, Australasia Bank made a profit of Rs 50,000 during 1947-48. By the end of 1970 it had 101 branches. Unfortunately it lost 51 branches in the separation of East Pakistan which became Bengladesh. The bank did well in despite losing lot of its assets. By the end of 1973 the bank had 186 branches in West Pakistan. Allied Bank (1974 to 1991)
In 1974, the Board of Directors of Australasia Bank was dissolved and the bank was renamed as Allied Bank. The first year was highly successful one: profit exceeded the Rs 10 million mark; deposits rose by over 50 percent and approached Rs 1460 million. Investments rose by 72 percent and advances exceeded Rs 1080 million for the first time in bank history. 116 new branches were opened during 1974 and the Bank started participation in the spot procurement agriculture program of the Government. Those seventeen years of the Bank saw a rapid growth. Branches increased from 353 in 1974 to 748 in 1991. Deposits rose from Rs 1.46 billion, and Advances and investments from Rs 1.34 billion to Rs 22 billion during this period. It also opened three branches in the UK. Privatization (1991 to 2004) As a result of privatization in September 1991, Allied Bank entered in a new phase of its history, as the worlds first bank to be owned and managed by its employees. In 1993 the First Allied Bank Modaraba (FABM) was floated.
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After privatization, Allied Bank registered an unprecedented growth to become one of the premier financial institutions of Pakistan. Allied Banks capital and reserves were Rs. 1.525 (Billion) and assets amounted to Rs. 87.536 (Billion) and deposits were Rs. 76.038 (Billion). Allied Bank enjoyed an enviable position in the financial sector of Pakistan and was recognized as one of the best amongst the major banks of the country. In August 2004 as a result of capital reconstruction, the Banks ownership was transferred to a consortium comprising Ibrahim Leasing Limited and Ibrahim Group. Today the Bank stands on a solid foundation of over 63 years of its existence having a strong equity, assets and deposits base offering universal banking services with higher focus on retail banking. The bank has the largest network of on-line branches in Pakistan and offers various technology based products and services to its diversified clientele through its network of more than 700 branches. Present situation
In May 2005 Ibrahim Leasing Limited was amalgamated by transfer to and vested in with and into Allied Bank Limited. ILL shareholders were issued ABL shares in lieu of the ILL shares held by them. Application for the listing of ABL shares in all the Stock Exchange Companies of Pakistan was made. ABL was formally listed and trading of the shares of the Bank commenced w.e.f. the following dates. Islamabad Stock Exchange - 8 August 2005 Lahore Stock Exchange - 10 August 2005 Karachi Stock Exchange - 17 2005 August Faisalabad Stock Exchange- 26 August 2008 The Board of Directors of Allied Bank has decided to appoint Khalid Sherwani as bank's President, it is reliably learnt. Sherwani has served as President Allied Bank from 20002007. His successor Mohammad Aftab Manzoor's term as President comes to an end in August. KARACHI (May 27, 2010).
2.2 Operational Headquaters There are Four Provincial Headquarters of Allied Bank Limited situated at Lahore 23
(Punjab), Karachi (Sind), Peshawar (NWFP & Azad Kashmir) and Quetta (Baluchistan). 2.3 Vision statement of Allied Bank Limited To become a dynamic and efficient bank providing integrated solutions and the first choice of bank for all customers. 2.4 Mission statement of Allied Bank Limited To provide value-added services to our customers. To provide high-tech innovative solutions to meet customer requirements
To create sustainable value through growth, efficiency and diversity for all stakeholders. To provide a challenging work environment, and reward dedicated team members. To play a proactive role in contributing towards the society.
2. 5 Credit Ratings PACRA Credit Rating Company has maintained the rating of ABL as AA for the medium to long term and A1+ (report June 2010). The standard rating scales definitions being used by PACRA and their applicable meaning are given below: Medium to long term rating AA very high credit quality rating denotes a very low expectation of credit risk. The capacity for timely payment of financial commitments. This capacity is not significantly vulnerable to foreseen events. Short term rating A1+ means obligations supposed by the highest capacity for timely repayment. 2.6 Awards and Achievements Corporate Finance House of the Year Allied Bank awarded Corporate Finance House of the Year 2008 (Banks) for the third consecutive year by CFA Association of Pakistan. Corporate Excellence Award Allied Bank received the 26th Corporate Excellence Award in Financial Institutions category by Management Association of Pakistan (MAP). The Bank was presented this 24
award in recognition of its Corporate Governance and Overall Management Best Practices. Best Domestic Investment Bank Allied Bank awarded Best Domestic Investment Bank of the Year Pakistan in The Asset Asian Awards 2009 by The Asset Magazine, Hong Kong. The awards recognize institutions that have made a significant contribution to the development of the finance industry in Asia. Corporate Report Award The Annual Report for the year 2008 of Allied Bank was awarded Certificate of Merit by the South Asian Federation Accountants (SAFA), an apex body of the SAARC countries. Best Equity House Pakistan Allied Bank recognized as the Best Equity House Pakistan (2008) in The Asset Asian Awards by The Asset Magazine, Hong Kong. The Asset Triple A Country Awards are Asias defining recognition for excellence in banking and finance. Corporate Report Award Allied Bank won the Best Corporate Report Award 2008, securing 2nd position for excellence in its publication of timely, informative, factual and reader friendly annual report.
2.7 Auditors M. Yousuf Adil Saleem & Co. KPMG Taseer Hadi & Co. Chartered Accountants Chartered Accountants
2.8 Functions of Allied Bank Limited Allied Bank offers the following services to its customers: Home Remittances Remittances Hajj Services Utility Bills Lockers 25
Commodity Operation
2.9 Branch Network

There are 800 domestic branches of Allied Bank Limited. Arrangements with large number of Correspondent Banks/Exchange Companies. Over200 branches for Foreign Currency Accounts. Over70 branches for trade finance. Large number of branches for Inland Remittances. Large number of branches for Rupee Travelers Cheques
2.10 Organizational structure The functional hierarchy represents the reporting order in the hierarchy of ABL. The hierarchy has president and directors at top management level and officers Grade I, II and Grade III at the lower level management of ABL. The middle level management consists of regional general Manager and Regional Controller of Operations. These positions are not fixed. Any person in the hierarchy above the branch manager can be appointed as RGM and controller operations The orizational structure of the Allied Bank Limited is better explained as the diagram given below;
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Chart # 2.1 Organizational structure of ABL.
President and CEO
Board of directors
Head of Department
Regional General Manager
Controllers of operation
Branch manager
Office G-I, II & Other Lower Staff
Source: www.abl.com
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2.11 Ethical Values Following are considered as the core ethical values of the bank. Integrity. Excellence in Service.
High Performance. Innovation and Growth.
2.12 Objectives of Allied Bank Limited Allied Bank Limited has following objectives; To maximize the profit that is earned by the dynamic organization. To provide services to their customers and assistance in the development of commerce and trade. To provide services to their communities.
2.13
Corporate Profile
Board of Directors Mohammad Naeem Mukhtar Sheikh Mukhtar Ahmad Mohammad Waseem Mukhtar Abdul Aziz Khan Sheikh Jalees Ahmed Farrakh Qayyum Mubashir A. Akhtar Pervaiz Iqbal Butt Mohammad Aftab Manzoor Chairman / Non Executive Director Non Executive Director Non Executive Director Independent Director Executive Director Government Nominee / Non Executive Director Independent Director Independent Director Chief Executive Officer
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Audit Committee Sheikh Mukhtar Ahmad Farrakh Qayyum Sheikh Jalees Ahmed Waheed-Ur-Rehman, FCA Legal Adviser Haidermota and Company, Advocates and Solicitors Chairman Member Member Company Secretary
2.14 Online system of Allied Bank Limited Online Banking facilities are available to customers maintaining accounts at all online branches across the country. The following facilities are available; Cash Deposit for immediate credit to remote branch. Remote Cheque Encashment from any online branch. Instant Funds Transfer between any 2 online branches. Remote Balance Enquiry and Statement of Account.
2.15 Secure transfer of money One of the major requirements of todays world is the safe transfer of their money from one city to another for this Allied Bank is efficiently taking part to ensure the safe transfer of the money thereby meeting the requirements of its customers. 2.16 Enhanced Managerial Activities In Pakistan the concept of professional management had not yet developed. But Allied Bank is considered to be the best pioneer in this regard that the bank has employed from very first day skilful and professional management which has ability to take quick and corrective decision and has flexibility to cope up with changing business and economic challenging conditions.
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2.17 Indulging In Healthy Competition When Allied Bank entered in the banking field, a new era of banking began and this era was the phase of competition. Clients are attracted towards those banks which used to provide better and quicker banking services. Keeping in view this approach ABL made a lot of changes and adopted a modern strategy to provide attractive services to the customers. The competition involved in by ABL was not only legitimize but also vital for industry. It consists of a wide and increasing range of services which were provided speedy, efficiently and with due courtesy 2.18 Branch Expansion Strategy The management decided to broaden the geographical coverage. Therefore besides the cities, the bank spread out the branches into small towns and the far-flung less developed areas to full its social responsibility. 2.19 Keeping Pace with 21st Century ABL has stepped into 21st century with confidence. ABL stood firm to provide the services, which the customers in the modern day expect from a bank. ABL is equipped with the latest technologies and has professional experience to face the future with determination and confidence. ABL has high aims and sense of direction in order to serve the country with zeal, devotion and enthusiasm.
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CHAPTER 3 Products & Services Provided At Allied Bank Limited Bara Towers Brach Abbottabad
3.1 Organization Structure of Bank Branch The organizational structure of bank branch is as follows: Figure 3.1: Organizational Structure of Bank Branch
MANAGER
CUSTOMER SERVICE MANAGER (1)
OFFICER (2) MG 11
TELLER (5)
MESSENGER (1)
Source: www.abl.com 3.1.1 Location This branch of ABL is located at Bara Tower Jinnahabad Mandian, Abbottabad.
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3.1.2 Number of Employees There are 10 employees at ABL Bara Tower branch. Out of which there is one branch manager, one customer services manager, two officers, five tellers and one messenger. 3.2 Business Overview Allied Bank Limiteds principal activities are to provide lending, depository and related Financial services which include credit risk management, foreign trade, treasury, corporate and merchant banking, retail banking, electronic banking, credit cards, marketing and customer service. The Bank operates through more than 750 branches in Pakistan. 3.3 Corporate and Investment Banking 3.3.1 Corporate Banking ABL - CBG offers a wide range of financial services to medium and large sized public and private sector entities. CBG has expertise in providing exemplary customized and personalized service to its Corporate Customers under the Relationship Management concept, which is basically catering to all the customer needs through One Window operations. CBG has strategically placed its presence in all major corporate hubs of the country namely Karachi, Lahore, Islamabad, Multan and Faisalabad. It presently enjoys a leading position in corporate lending in the country and has played a key role in economic development of the country by providing large facilities, long term, short term, working capital etc in all the key sectors of the economy. 3.3.2 Investment Banking ABL - IBG was established in 2005 and focuses on the Investment Banking market. It has the highest number of Successful Arrangement and Participation in Key Privatization
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& Acquisition Financing Transactions achieved by any Investment Banking Group in Pakistan. It has already penetrated the investment banking market by taking the lead in a number of major transactions and arranging funding of more than US$ 6 billion to date. ABL - IBG team consists of dedicated and young professionals with extensive experience, who provide various Advisory & Arrangement Services to Corporate Clients. ABL - IBG has played an active role in Debt Origination and Distribution through innovative and tailor made solutions for its target customer base. It is also well known for having successfully completed mandates in a timely manner, and is regarded as one of the most active Investment Banking entities in the country today. 3.4 Commercial and Retail Banking The Commercial and Retail Banking Group (CRBG) offers a variety of asset and liability-based retail products to its customers. The Groups main focus has been on introducing various financing and investment products for its valuable clientele, and contributing to the steady growth of the financial industry. CRBG consists of 4 geographic groups and is further divided across 27 regions in Pakistan. Each region is responsible for providing a quality service to its own customerbase. In recent years, the Group has been working to find alternate ways to bank for customers, and has installed more ATMs to its already strong and largest ATM network. CRBG is consistent in lifting the Banks brand image by emphasizing on good customer services and developing commercial assets and a cost effective deposit base. 3.5 SME Finance CRBG caters to the needs of commercial entities and small and medium enterprises. A dedicated team of Relationship Managers first identifies the specific needs of each customer segment, then designs and delivers a facility package, which is in conjunction
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with those needs, and provides customers the full support and opportunity to take advantage of the various business prospects available in the market. The credit facilities offered by the bank to SME include running finance, export refinancing, letter of credit, demand finance, FIM, foreign bill purchase/ bill discounting. 3.6 Consumer Finance Substantial ground work has been done by ABL to establish a strong consumer banking business. Furthermore professionals from across the industry have been recruited into areas of product development, sales, credit policy, research, consumer analytics, call centers and service quality departments. The consumer portfolio, comprising the debit card, credit cards, personal loans and mortgages will be established phase by phase. However, ABL is confident that its strengths, together with its largest network of online branches, a superior technology platform, a big customer base and the Consumer Personal Banking Group (CPBG), will take the Banks profitability to new heights. 3.7 Overall Financial Position Allied Bank has performed well despite various challenges faced by the country on domestic front and led by the global recessionary trend as the bank has posted an operating profit of Rs.9.8 billion, which is up by 10% over Rs.8.8 billion registered during 2009. Profit before and after tax stood at Rs.6.12 billion and Rs.4.16 billion respectively compared to Rs.5.95 billion and Rs.4.08 billion in 2008. Interest income of the Bank grew by 44% to reach Rs.30.6 billion led by earning assets growth coupled with the re-pricing of assets at higher interest rates. The banks operating expenses rose to Rs.8.4 billion or 36% as compared to 2008. Interest expense rose to Rs.16.6 billion depicting a rise of 64.1%. Expense to revenue ratio increased to 46.2% up from 2007s 41.1%. NPLs rose by 21.3% as compared to 2008 to reach Rs.13.8 billion. The bank registered a deposit growth of 13% to reach at Rs.297.5 billion mark in 2009. Despite the tough market conditions, the bank was not only able to maintain its Current & Saving
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Accounts (CASA) but also grew these by 8.1%, featured primarily by 14.8% growth witnessed in non-remunerative Current Accounts. Loan portfolio (gross) of the Bank grew by 25.3% to Rs.223.6 billion compared to Rs.178.5 billion in 2008. Loan portfolio is expected to further diversify among different products and business segments in the year 2009. The Earnings per Share of the Bank for the year ended 2009 is Rs.6.43 per share, up by 2% from last years Rs.6.31 per share. The banks Capital Adequacy Ratio (CAR) under Basel II Accord was registered at 10.90% compared to 10.26% in 2008. This shows banks focus on balance sheet strengthening while also ensuring regulatory compliance. 3.8 Balance Sheet of the Bank Table 3.1: Balance Sheet Rupees in Billion Dec 31, 2008 Assets Operating Fixed Assets Investments Other Assets Liabilities Current Deposits Saving Deposits Fixed Deposits Other Liabilities Equity 11,134 84,602 18,399 110,093 71,255 72,912 13,636 20,805 12,447 96,975 17,955 115,58 72,448 105,93 11061 25,891 Dec 31, 2009
Annual Report of Allied Bank for the year 2009
35
3.9 Profit and Loss Accounts Table 3.2: Profit and Loss Accounts Rupees in Billion Interest income Interest expenses Interest income after provision Non interest income Non interest expense Profit before tax Profit after tax Dec 31, 2008 13,298 17,273 8,393 4,897 6,360 6,121 4,157 Dec 31, 2009 18,700 22,422 10,854 5,958 8,885 10,536 7,122
Annual Report of Allied Bank for the year 2009 3.10 Products and Services Offered by Allied Bank Limited Allied Bank Limited offers a comprehensive range of banking products and services, to suit and serve customers in commercial, corporate, SME and consumer categories, the product and services includes: 3.10.1 Products 3.10.1.1 Behtar Munafa Account Account type: Chequing account. Investment: Upto Rs.5, 000,000 & above. Profit: Payable on monthly basis. Highest Profit: Upto 10.50% p.a. Eligibility: Individuals, and institutions. 24-hour phone banking service. Free internet banking facility. SMS transaction alerts. 36
Allied Cash + Shop Visa Debit Card.
3.10.1.2 Behtar Munafa Term Deposit Account type: Fixed term deposit. Investment: Upto Rs.5, 000,000 & above. Profit: Payable on maturity. Highest Profit: Upto 11% p.a. Eligibility: Individuals, and institutions. 3.10.1.3 Allied Munafa Account The applicable profit rate will be based on the amount maintained in the account
on an average monthly basis and the return will also be credited to the account on a monthly basis. Individuals, firms, companies, schools, hospitals, charitable organizations, etc., All profits payable are subject to applicable zakat and Govt. Levies and changes are welcome to open their account in this scheme. in the Banks policy from time to time. 3.10.1.4 Allied Bachat Scheme Maturity period: 7.5 years. Free internet banking facility. Minimum deposit: Rs. 50,000 (additional investment in multiples of Rs. Expected profit rate: Up to 13.33% p.a. Eligibility: All individuals and institutions.
10,000).
3.10.1.5 Allied e-Savers Accounts
37
Investment: Rs.10, 000 to Rs.500, 000. Profit: payable on half yearly basis. Expected profit rate: Up to 7.50% p.a. Eligibility: Individuals.
3.10.1.6 Allied Business Account Non-profit current account. 24 hours helpline service. Free internet banking facility. SMS transaction alerts. Allied Cash+Shop Visa Debit Card for cash withdrawals through any ATM
and debit transactions at various retail outlets. 3.10.1.7 Rewarding Term Deposit Account type: Term deposit. Term period: 1-12 months. Investment: Rs.25, 000 & above. Profit: Payable on maturity. Eligibility: Individuals & institutions.
3.10.1.8 Monthly Profit Plus Account type: Term deposit. Term period: 1 year. Profit: Payable on monthly basis. Minimum deposit amount: Rs.25, 000. Eligibility: Individuals & institutions (other than financial institutions). 3.10.2 Services
38
3.10.2.1 Running Finance These are short term credit facilities (maturity of up to one year) lent to customers to meet their day-to-day business/working capital requirements and finance their inventories, receivables, etc. 3.10.2.2 Export Refinance Facility This is mainly the same as RF, but as per the Terms and Conditions set by SBP, is meant exclusively for exporters. 3.10.2.3 Foreign Bill Purchase/Bill Discounting Facility This loan/facility is provided to exporters against their export bills under LC and a contract to facilitate their cash flow, while they are waiting receipt of their payments. 3.10.2.4 LC (Sight /Usance) This facility allows importers to import goods and machinery. 3.10.2.5 FIM These facilities allow customers to finance imported goods against pledge & trust receipts, backed by collaterals. 3.10.2.6 Demand Finance Facility This is a medium/long term credit facility available to establish new projects for BMR and capacity expansion with a repayment term of more than one year, which can be paid back in installments. This facility meets clients long term needs such as, financing factory constructions or machinery expenses. 3.10.2.7 Inland LC (Sight/Usance) This facility allows customers to purchase commodities within the country.
39
3.10.2.8 Letter of Guarantee On behalf of the customers, the Bank issues a guarantee in favour of the beneficiary, against the performance of a particular job/contract, within a particular time. 3.10.2.9 Import Export Allied Bank provides highly efficient trade finance services for import/export businesses through a large number of authorized branches where trained and motivated staff is available to handle the business on the customers behalf. 3.11 Financial Position of Branch 3.11.1 Total Advances ABL Bara Tower Branch has total advances of about Rs.4.177 million, which are fund base. The branch does not offer non fund base facilities. 3.11.2 Total Deposits ABL Bara Tower Branch has total deposits of about Rs.340, 210 million Table 3.3: Total Deposits
Deposits Current Saving Fixed Total deposits
June 6, 2009 Rupees in 000 82,510 128,427 129,273 340,210
CHAPTER 4 Analysis of Allied Bank Limited

4.1 Financial Analysis The analysis of financial data employs various techniques to emphasize the
40
comparative and relative importance of the data presented and to evaluate the position of the firm. 4.1.1 Common Size Analysis 4.1.1.1 Horizontal Analysis Table 4.1: Horizontal Analysis of Balance Sheet Formula used :( current year value-base year value)*100/ base year value 20092008 % Change 2008
2009 Assets Cash and balances with the treasury banks Balances with other banks Lendings to financial institutions Investments Advances Operating assets fixed 12459586 17986438 41834085 2 3162429 39818532 32887255 9 5497000 26,435,68 3 1280591 28122932 94673100 23738252 2
2008-2007 % Change
2007
12% -39% 78% 15% 11% 12% 0% 3% 14% 7% 43% 11% 120% 0% 41
23653754 2097611 15793183 82449475 21302010 8 11150129 1031049 17388612 36658392 1 2952490 27778151 29747454 3 2498000 -
-20.46447% 213.8027% -14.25715% -1.797303% 26.491033 % 47.71067% 55.646248 % 62.428814 % 14.518209 % -15.50757% 21.123954 % 12.69154% -0.040016% 0%
29739857 668449 18419241 83958463 168407280 7548628 662431 10705374 320109723 3494384 22933656 263972382 2499000 0
Deferred tax assets Other Assets Liabilities Bills payable Borrowings Deposits and other accounts Sub-ordinated loans Liabilities against assets subject to finance
Deferred liabilities Other liabilities Net Assets Represented by Share Capital Reserves
tax 3374 11067164 38842105 8 29919794 711008 6582845 12164662 25857515 0% -19% 13% 35% -89% 13% 44% 25% 172% 35% 13644838 34434802 2 22235899 6463644 5804776 8475791 20744211 1491688 22235899 0% 86.098312 % 14.694176 % 11.86049% 20% -4.064595% 21.581072 % 12.688887 % 1.4856608 % 11.86049% 0 7332059 300231481 19878242 5386370 6050713 6971308 18408391 1469851 19878242
Unappropriated profit
surplus on revaluation of assetsnet of tax 4062279 Total equity 29919794 4.1.1.1.1 Interpretation
Horizontal analysis of ABLs balance sheet shows that: Cash and balances with treasury banks are increased by 12% in 2009 as compared to base year 2008. Balances with other banks are decreased by 39% in 2009 as compared to base year 2008. Lending to FI is increased by 78% in 2009 as compared to base year. Investments are increased by 15% in 2009 as compared to base year. Advances are increased by 11% in 2009 as compared to base year 2008. Operating fixed assets are increased by 12% in 2009 as compared to base year 2008. Other assets are increased by 3% in 2009 as compared to base year 2008. Total assets are increased by 14.55% in 2009 as compared to base year 2008. Bills payable are increased by 7% in 2009 as compared to base year 2008. Borrowings are increased by 43% in 2009 as compared to base year 2008. Deposits and other accounts are increased by 11% in 2009 as compared to base year 2008. Other liabilities are decreased by 19% in 2009 as compared to base year 2008. Total liabilities are increased by 13% in 2009 as compared to base year 2008. Share capital is decreased by 89% in 2009 as compared to base year 2008. Reserves are increased by 13% in 2009 as compared to base year 2008. Unappropriated profit is increased by 44% in 2009 as compared to base year 2008. Surplus on revaluation of assets - net of tax is increased by
42
2009 as compared to base year 2008. Total equity is increased by 35% in 2009 as compared to base year 2008. 4.1.1.2 Vertical Analysis Table 4.2: Vertical Analysis of Balance Sheet Formula used: Each item*100/Base item in same year 2009 Assets Cash and balances with the treasury banks Balances with other banks Lendings to financial institutions Investments Advances Operating fixed assets Deferred tax assets Other Assets Liabilities Bills payable Borrowings Deposits and other accounts Sub-ordinated loans Liabilities against assets subject to finance Deferred tax liabilities Other liabilities Net Assets Represented by % 2008 % 2007 %
26,435,683 1280591 28122932 94673100 237382522 12459586 17986438 418340852 3162429 39818532 328872559 5497000 3374 11067164 388421058 29919794
6% 0% 7% 23% 57% 3% 0% 4%
23653754 2097611 15793183 82449475 21302010 8
6.5% 0.6% 4.3% 22% 58% 3% 0.3% 4.7%
29739857 668449 18419241 83958463 16840728 0
9.3% 0.2% 5.8% 26% 53% 2.4% 0.2% 3.3% 100% 1.1% 7.2% 82% 0.8% 0% 0% 2.3% 94% 6.2%
11150129 1031049 17388612 36658392 100% 1 0.8% 9.5% 79% 1.3% 0% 0% 2.6% 93% 7.2% 2952490 27778151 29747454 3 2498000 13644838 34434802 2 22235899
7548628 662431 10705374 32010972 100% 3 0.8% 7.6% 81% 0.7% 0% 0% 3.7% 94% 6.1% 3494384 22933656 26397238 2 2499000 0 0 7332059 30023148 1 19878242
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Share Capital Reserves Unappropriated profit
711008 6582845 12164662 25857515
0.2% 1.6% 2.9% 6.2% 1% 7.2%
6463644 5804776 8475791 20744211 1491688 22235899
1.8% 1.6% 2.3% 5.7% 0.4% 6.1%
5386370 6050713 6971308 18408391 1469851 19878242
1.7% 1.9% 2.2% 5.8% 0.5% 6.2%
surplus on revaluation of assetsnet of tax 4062279 Total equity 29919794
4.1.1.2.1 Interpretation The vertical analysis of ABLs balance sheet shows that in 2007 the cash and balances with treasury banks were 9.3% of total assets which have been reduced to 6.5% in 2008 and 6% in 2009. In 2007 balances with other banks were 0.2% of total assets which have been decreased to 0.6% in 2008, which has been reduce to 0% in 2009. In 2007 lending to FI was 5.8% of total assets which has been decreased to 4.3% in 2008, shows increase to 7%in 2009. In 2007 investments were 26% of total assets which have been decreased to 22% in 2008, which has been increased to 23 % of the total assets. In 2007 advances were 53% of total assets which have been increased to 58% of the assets in 2008, which has been decreased to 57% of the total assets. In 2007 deferred tax assets were 0.2% of total assets which have been increased to 0.3% in 2008, showing 0% decrease in 2009. In 2007 other assets were 3.3% of total assets which have been increased to 4.7% in 2008, showing 4% decrease regarding the total assets. In 2007 bills payable was 1.1% which has been reduced to 0.8% in 2008, showing constant trend in 2009 i.e. 0.8%. In 2007 borrowings were 7.2% of total assets which have been increased to 7.6% in 2008, showing increasing trend in 2009 i.e.9.5% of the total assets. In 2007 deposits and other accounts were 82% of total assets which have been reduced to 81% in 2008, which has been decreased to 79% of the total assets. In 2007 sub-ordinated loans were 0.8% of total assets which have been decreased to 0.7% in 2008, which has been increased to1.3% in 2009. In 2007 other liabilities were 2.3% of total assets which have been increased to 3.7% in 2008, showing decrease in 2009 i.e. 2.6%of the total assets. In 2007 total liabilities were 94% of total assets which have been constant in 2008 but are reduced to93% of the total assets in 2009. In 2007 share capital was 1.76% of total assets which
44
has been decreased to 1.8% in 2008, showing decrease in 2009 as 0.2% of the total assets. In 2007 reserves were 1.9% of total assets which have been decreased to 1.6% in 2008 and remain constant in 2009. In 2007 unappropriated profit was 2.2% of total assets which has been increased to 2.3% in 2008, showing 2.9% increase in 2009. In 2007 surplus on revaluation of assets - net of tax was 0.5% of total assets which has been increased to 0.4% in 2008, showing increase to 1% of the total assets in 2009. In 2007 total equity was 6.2% of total assets which has been decreased to 6.1% in 2008, shows increasing trend in 2009 i.e. 7.2% of the total assets. 4.1.2 Profitability Ratios
1.
Return on Assets (ROA):
ROA measures the firms ability to utilize its assets to create profits by comparing profits with the assets that generate the profits. Returns on asset ratio is the net income (profits) generated by the bank on its total assets (including fixed assets). The higher the proportion of average earnings assets, the better would be the resulting returns on total assets. It is computed as: ROA = Net profit/ Average total assets Table: 4.3
Serial No 1 Profitability Ratios Return on Assets (ROA) 2009 1.81% 2008 1.21% 2007 1.42%
Figure 4.1
45
Return on Assets (ROA) 2.00% 1.50% 1.00% 0.50% 0.00% 1 2 years 3 percentages
Return on Assets (ROA)
ROA of ABL was 1.42% in 2007 which has been decreased to 1.21 in 2008 which was increased in 2009 as represented as 1.81%. This shows that the banks ability to utilize its assets to create profits by comparing profits with the assets that generate the profits reduces in 2009 as compared to 2008, which is a good sign for the bank. 2. Return on Equity (ROE) The amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested.ROE is expressed as a percentage and calculated as: Return on Equity = Net Income/Shareholder's Equity Table: 4.4
Serial No 2 Profitability Ratios Return on Equity (ROE) 2009 30.50% 2008 21.20% 2007 23.54%
Figure: 4.2
46
Return on Equity (ROE) 40.00% 30.00% 20.00% 10.00% 0.00% 1 2 ye ars 3
percentages
Return on Equity (ROE)
ROE of ABL was 23.54 % in 2007 which has been decreased to 21.20% in 2008 which was increased in 2009 as represented as 30.50%. ROE changes due to interest rate declines reduced expenses faster than revenues, which caused ROE to increase.
3. Credit to Deposit Ratio (CD ratio) The ratio is indicative of the percentage of funds lent by the bank out of the total amount raised through deposits. Higher ratio reflects ability of the bank to make optimal use of the available resources. The point to note here is that loans given by bank would also include its investments in debentures, bonds and commercial papers of the companies (these are generally included as part of investments in the balance sheet). CD ratio = Credit/ Deposits Table: 4.5
Serial No 3 Profitability Ratios Credit to Deposit Ratio (CD) 2009 71.60% 2008 71.60% 2007 63.80%
Figure: 4.3
47
Credit to Deposit Ratio (CD) 75.00% 70.00% 65.00% 60.00% 55.00% 1 2 years 3 percentages
Credit to Deposit Ratio (CD)
CD ratio of ABL was 63.80% in 2007 which has been remained to 71.60% in 2008 and 2009. This shows that the bank has the ability to make optimal use of the available resources, which is good sign for the bank. 4. Capital Adequacy Ratio (CAR) A bank's capital ratio is the ratio of qualifying capital to risk adjusted (or weighted) assets. The SBP has set the minimum capital adequacy ratio at 9% on standalone as well as on consolidated basis latest by December 31, 2008. Banks are expected to raise their minimum Capital Adequacy Ratio (CAR) of 9% to 10% by December 31, 2009. A ratio below the minimum indicates that the bank is not adequately capitalized to expand its operations. The ratio ensures that the bank do not expand their business without having adequate capital. CAR = Tier I capital + Tier II capital/ Risk weighted assets Table: 4.6
Serial No 4 Profitability Ratios Capital Adequecy Ratio (CAR) 2009 72.00% 2008 72.00% 2007 64.00%
Figure: 4.4
48
Capital Adequecy Ratio (CAR) percentages 75.00% 70.00% 65.00% 60.00% 1 2 years 3 Capital Adequecy Ratio (CAR)
CAR of ABL was 64 % in 2007 which has been increased to 72% in 2008 and 2009. This shows that the bank is adequately capitalized to expand its operations and this is good sign for the bank.
5.
Non Performing Assets Ratio
The net non-performing asset to loans (advances) ratio is used as a measure of the overall quality of the banks loan book. Net NPAs are calculated by reducing cumulative balance of provisions outstanding at a period end from gross NPAs. Higher ratio reflects rising bad quality of loans. NPA ratio = Net non-performing assets/ Loans given Table: 4.7
Serial No Profitability Ratios Non-performing (NPA) Assets Ratio 6.52% 6.16% 6.36% 2009 2008 2007
Figure: 4.5
49
Non-performing Assets Ratio (NPA) 6.60% 6.40% 6.20% 6.00% 5.80% 1 2 years 3 percentages
Non-performing Assets Ratio (NPA)
Non performing asset ratio of ABL was 6.36% in 2007 which has been reduced to 6.16% in 2008 and 6.52% 2009. Higher ratio reflects rising bad quality of loans. 6. Return On Capital Employed (ROCE) A ratio that indicates the efficiency and profitability of a company's capital investments. ROCE should always be higher than the rate at which the company borrows; otherwise any increase in borrowing will reduce shareholders' earnings. Calculated as: EBIT/Total Assets Current Liabilities Table: 4.8 Serial No Profitability Ratios 6
2009
2008
2007
Return on capital employed (ROCE) 26.00% 19.00% 21.00%
Figure: 4.6
50
Return on capital employed (ROCE) percentages 30.00% 20.00% 10.00% 0.00% 1 2 years 3
Return on capital employed (ROCE)
ROCE of ABL was 21% in 2007 which has been reduced to 19% in 2008 and 26% 2009.
7.
Net Interest Margin (NIM)
The difference between interest income and expense is known as net interest income. It is the income, which the bank earns from its core business of lending. Net interest margin is the net interest income earned by the bank on its average earning assets. These assets comprises of advances, investments, balance with the SBP and money at call. It is computed as follows: NIM =
Serial No 7
Interest income Interest expenses/ Average earning assets Table: 4.9

Profitability Ratios Net Interest Margin (NIM) 2009 2.90% 2008 3.60% 2007 3.08%
Figure: 4.7
51
Net Interest Margin (NIM) 4.00% 3.00% 2.00% 1.00% 0.00% 1 2 years 3 percentages
Net Interest Margin (NIM)
NIM of ABL was 3.08% in 2007 which has been increased to 3.60% in 2008 and decreased to 2.90%. This shows that the net interest income earned by the bank on its average earning assets is more in 2008 as compared to 2009.
8.
Operating Profit Margins (OPM) Banks operating profit is calculated after deducting administrative expenses, which mainly include salary cost and network expansion cost. Operating margins are profits earned by the bank on its total interest income. For some private sector banks the ratio is negative on account of their large IT and network expansion spending. It is computed as: OPM = Net interest income (NII) operating expenses/ Total interest income Table: 4.10
Serial No 8
Profitability Ratios Operating Profit margin (OPM)
2009 48.60%
2008 36.59%
2007 44.40%
52
Figure: 4.8
Operating Profit margin (OPM) percentages 60.00% 40.00% 20.00% 0.00% 1 2 years 3 Operating Profit margin (OPM)
OPM of ABL was 44.40% in 2007 which has been reduced to 36.59% in 2008 and increased 48.60% in 2009. This shows that the profits earned by the bank on its total interest income are increased in 2009 as compared to 2008 which is a positive trend.
9.
Cost to Income Ratio Controlling overheads are critical for enhancing the banks return on equity. Branch rationalization and technology up gradation account for a major part of operating expenses for new generation banks. Even though, these expenses result in higher cost to income ratio, in long term they help the bank in improving its return on equity. The ratio is calculated as a proportion of operating profit including non-interest income (fee based income). Cost to income ratio =
Serial No 9
Operating expenses/ NII + non interest income Table: 4.11
Profitability Ratios Cost to Income Ratio
2009 39.00%
2008 46.20%
2007 41.10%
53
Figure: 4.9
Cost to Income Ratio percentages 50.00% 45.00% 40.00% 35.00% 1 2 years 3 Cost to Income Ratio
Cost to income ratio of ABL was 41.10% in 2007 which has been increased to 46.20% in 2008 and decreased to 39% in 2009. 4.1.3 Efficiency Ratios Table 4.4: Efficiency Ratios Table: 4.12
serial No 10 Ratios Profit employee Formulae per Net Income/ No of employees 2.83 2.18 1.837 2009 2008 2007
Figure: 4.10
Profit per employee Net Income/ No of employees 3 2 1 0 1 2 Years 3
Ratios
Profit per employee Net Income/ No of employees
Profits per employee of ABL were Rs 1.87 B in 2007, Rs.2.18 B in 2008 which have been increased to Rs. 2.83 B in 2009.
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Table: 4.13
serial No Ratios Formulae 2009 2008 2007
11
Interest income per Interest Income employee employees Figure: 4.11

Int e re s t In c o m e / N o o f e m loy ee s 3 2.5 2 Percentages 1.5 1 0.5 0 1 2 ye a rs 3
No
of 2.48 1.59 1.35
In te re s t Inc om e / N o o f e m lo y e e s
Interest income per employee of ABL was showing a positive trend with the years 2007 to 2009 with an increasing figures as given above. Table: 4.14
serial No 12 Ratios Formulae 2009 2008 2007
Business per Deposits+Advances+Investment employee No of employees
/ 77.5 84 64.3
55
Figure: 4.12
D e p o s its + A dva n c e s + In ves t m e n t / N o o f e m ploy e es 90 80 70 60 50 40 30 20 10 0 1 2 ye a rs 3
percentages
D ep os it s + A d va nc es + Inve s t m e nt / N o o f e m p lo y e es
Business per employee of ABL was Rs.64 B in terms of advances and in terms of deposits which have been increased in 2008 with a decrease figure of Rs.77.5 B in 2009. Table: 4.15
13
Business branch
per Deposits+Advances+Investment 867. / No of branches 4 Figure: 4.13

D e p o s its + A d va n c e s + In ves tm e n t / N o o f b ra n c h e s
790. 7
695.7
10 00 900 800 700 600 500 400 300 200 100 0 1 2 y e a rs 3
Rupess In billions
D e p o s its + A dva n c e s + In ve s t m e n t / N o o f b ra n c h es
Business per branch of ABL was Rs.695 B in terms of advances and in terms of deposits in 2007 which has been increased to Rs.790 B in terms of advances and in terms of deposits in 2008 with an increasing trend in 2009.
56
Table: 4.16
14
Employees per Total No of Employees / Total No 11.1 branch of branches 8 Figure: 4.14
Tot al N o o f E m p loy ee s / To ta l N o of b ran c h es 11 .3 11 .2 11 .1 No of employees 11 10 .9 10 .8 10 .7 10 .6 1 2 Ye a rs 3 To ta l N o of E m ploy ee s / To ta l N o of b ran c h e s
10.8 6
10.8
Employee per branch of ABL was 10.8 in 2007,10.86 in 2008 which has been increased to 11.18 employees in 2009, which means that each branch should have 10 to 11 employees. 4.2 Comparison of Branch Performance with Overall Performance: Table 4.17: Comparison Sr.No. Ratios Overall ABL Dec 31, 2009 (Rs. In 000) 1. Business per branch Total advances / branch 2. Total deposits branch Employees per branch 270,031.34 / 388,348.98 11.18 4,177 340, 210 10.86 Branch Dec 31, 2008 (Rs. In 000)
57
The performance of branch is good when compared with overall performance of ABL in terms of deposits but the branch performance is not satisfactory when compared the overall banks average in terms of advances. The branch advances are very much less than the average. 4.3 Non-Financial Analysis of Branch 4.3.1 Management Qualification Table 4.18: Management Qualification Management Branch Manager Qualification B Com Institute of Pakistan Banking (IBP) Part 1, 2 4.3.2 Staff Qualification Table 4.19: Staff qualification Staff Customer Services qualification B.A Messenger (1) B.A (1) MBA (1) M.A Economics (3) Graduates
Manager (CSM) Officers (2) Tellers (5)
(1) F.A Matric
4.3.3 Powers and Independence of Manager in Terms of
58
4.3.3.1 Credit Limit The branch manager has negligible of no power and independence in terms of credit limit. He can not even approve a loan of amount Rs.100, 000. This power is vested with the regional manager. 4.3.3.2 Interest Rates for Deposits and Advances The branch manager has negligible of no power and independence in terms of interest rates for deposits and advances. The interest rates for deposits and advances are set by SBP. 4.3.4 Branch Location This branch of ABL is located at Bara Tower Jinnahabad, Mandian, Abbottabad. 4.3.5 Infrastructure The infrastructure of ABL Bara Tower Branch consists of: Cash department which includes five staff members. Operational department which includes two staff members. IT department which includes one staff member. Locker room.
4.3.6 MIS The MIS of ABL Bara Tower Branch is partially manual and partially computerized. The computerized IS is automatically updated on daily basis where as manual IS is updated on weekly, monthly, quarterly, half yearly and yearly basis.
4.3.7 Internal Audit and Control 59
The staff work of ABL Bara Tower Branch is distributed in such a way that they
supervise each other. Staff members are dependent on each other in order to complete their work. There is Internal Control Unit (ICU) that conduct monthly audit. There is Compliance and Control Unit (CCU) which conduct audit after every There is another internal control unit which conduct audit annually.
three months
4.4 SWOT Analysis 4.4.1 Overall SWOT Analysis: Strengths: Allied bank is a bank which is owned by its own employees, this A feeling of ownership increases the productivity of every employee The bank has very strict rules and regulations about the customers complaints.
provokes a sense of responsibility in every single employee. and develops a sense of sincerity towards the bank. The customers are treated as very special persons in the bank; it also develops a sense of loyalty towards the bank. ABL has wide area network in all over the Pakistan, so that it covers a lot portion High motivation is the strength of Allied bank, since every employee feels that The job descriptions are clear that help the employees to perform their duties of cash transactions and make customer satisfied. the good he is delivering is not for bank only but is for him/her also. very well without any confusion
Weaknesses: 60
Advertisement of ABL is not such good as of other banks. ABL does not offer house loans, car loans as compared to other banks. No entertainment facilities are available for customers like news papers and The salary packages of first line managers are not much attractive. The ATMs of ABL are not working properly round the clock most of the time.
magazines, as sometimes customers have to wait for a long period of time.
Opportunities: As a result of different steps taken by the Government regarding the betterment of
the economy, small borrowers are attracted to get the financing and start small businesses. So, ABL has an opportunity to attract the customers by giving them attractive schemes. ABL has wide area network all over the Pakistan, if the bank can make it possible the fast delivery of fund from abroad through online banking, it can cover the major market of Pakistan. Threats: Major threat is the political influence. The banks three board of directors are of Another major threat in the banking sector is the continuous downfall of the
government, so that they can influence on the decisions of the ABL. country economy since the last few years. If this downfall remains for more few years it may be the great barrier in achieving the banks objectives. New private banks coped with new technology of IT.
4.4.2 Branch SWOT Analysis
61
Strengths: The main strength of ABL Bara Tower Branch is its location. The branch is in
locality of CIIT Abbotabad. Apart from this the branch is near by the posh areas like Jinnahabad and Habibullah. The branch staff is dependent on one and other and also has unity which increases their motivation and productivity. Weaknesses: The MIS of ABL Bara Tower Branch is not fully computerized. ATM of this branch is not working properly round the clock due to which No entertainment facilities for the customers like news papers and magazines. Inadequate space for customers. No automatic generators or lack of proper generators. The branch manager has very limited powers. The branch is not authorized to deal in foreign currency deposits.
customers have to face problem.
Opportunities: Due to attractive lending schemes of the bank the branch can also play a major Good financial schemes can also attract major account holders from the posd Round the clock online banking and ATMs can also help in attracting customers.
role in attracting small borrowers like small industries. areas due to easy access to the branch.
62
Threats: UBL branch located at main college road is a major threat for this branch. The Mezan and Al Habib bank branch located near Usmania are also threat for
ABL Bara Tower Branch.
63
CHAPTER - 05 Conclusion and Recommendations

5.1 Conclusion: The branch manager is usually given very little regarding sanction of advances and over draft whereas the responsibilities are numerous. The marketing efforts at the branch level are less disciplined and there are no integrated efforts from all the staff members. The mobilization of deposits is mainly considered as the responsibility of the branch manager but the rest of the staff is usually least interested The bank has been applying the modern concepts of management and marketing at both micro levels. The interior and exteriors of the branch have been changed but the staff of the branch has been found less motivated towards the organizational objectives. Employees of the branch are fed up with their work they feel bore from their daily work especially the manager. There is a lack of use of modern technology and most of the important tasks are performed manually. The decision making is still centralized as the middle and low level management is not taken into confidence. The promotional policy of the bank was observed as without any specific direction. Though the bank has defined its mission and vision but no specific plan has been designed so far. Most of the employees working in this branch are not much familiar with computer. They just know how to use their part of software if any problem comes in the computer they cant fix it.
64
The relationship between the employees of the branch is not that good because of which the whole environment of the branch becomes less favorable for work.
Miss utilization of office utilities, especially the telephone.
5.2 Recommendations The branch manager should arrange a training program for its existing employees to help them perform their duties more effectively because training is one of the important factors that affect the performance of employees therefore process of continuous training should be put in place. Management information system is operated only at the regional level. Bank should start its computerized system at the branch level as well to increase its accuracy and processing and to keep its own data up to the mark. The branch should try to enter into the market of Islamic banking it would increase its competitive edge over the other banks. Most of the bank employees, are sticking to one seat only with the aim that they become master of one particular job and are loosing their grip on other banking operation. In my opinion all the employees should have regular job experience all out-look towards banking. Recruitments should be strictly on merit basis and induction should be after proper and extensive training. Working environment, equipment, furniture and staff dressing should be according to the modern banking style. The bank should appoint customers relation officer where the volume of work is too high. This will give an impression to client for personal Banking. This will help in improving the image of the bank and hence will attract more clients. There must be a separate information counter in this branch of ABL. So that as the customer enters in he can clearly see someone who would help him. The market standing is not as strong as their competitors. For this ABL should opt for heavy advertisement both electronically and on print media to create public awareness. 65
The bank must ensure the participation of the staff in all promotional activities of
the bank to this end the bank must adhere to the policy of fringe benefits rapid promotion of capable management and official. The old age benefit of the bank employee must be increased to motivate fee staff. Consumer banking is the area bank is not dealing with and having a lot of opportunities for the bank. So it will be beneficial for the bank if it start dealing in auto loans, housing finance or any other consumer requirement. Short term lending of the bank has decreased in 2009 because the balance of the bank with other banks has increased to a great extent. It should be at least maintained so that the bank will be able to generate profit in short period of time. The net interest income of the bank is low because of increased expenses and as a result profit is also low. These expenses should be minimized and managed efficiently to generate more profits for the bank. As the business is expected to grow in the future so the bank needs to expand its space to accommodate additional customers. Further, customers, waiting for their turns, should be provided with proper seating arrangements and proper parking facility for staff and customers should be provided. The manager of the branch should delegated with some powers regarding the credit extending facilities to save the time of customers and to entertain more customers at the same time. Financing facilities in the bank are favorably given to those having huge bank balances whereas others having small accounts, who are in a real need are ignored. So financial facilities should be provided to those having small bank balances as well. It should be ensured that the ATMs are working round the clock with proper cash so that the problem of out of cash ATMs should be avoided and the customers can enjoy transactions round the clock. The bank should try to get all the branches online so that faster data transfer and The bank should try to get all the branches online so that faster data transfer and swift operations can be performed in lesser time. swift operations can be performed in lesser time.
66
As operating fixed assets have increased (offices, cars) yet according to ROA it is
implied that these assets are not used to their full capacity. So, the offices that are below capacity level should be sold to release money and they should be rented. And the replacement of cycle of cars should be lengthened. The bank should increase its investments and lending proportionately to each other as both carry different risk portfolio. So, that earning assets will be brought to their full earning capacity
References
ABL Annual Report (2009); Annual Report of Allied Bank Limited 2009 available on
website www.abl.com [accessed on June 06, 2010]. 67
ABL Quarterly Report (2009); Quarterly Report of Allied Bank Limited 2009 Gibson, Charles (2000); Financial Reporting & Analysis., tenth Edition. USA: Interview with Mr.Mohammad Arif ,branch Manager at Allied Bank Limited Bara Interview with Mr.Mubashir, Csutomer Service Manger at Allied Bank Limited Bara www.abl.com [accessed June 06, 2010] www.sbp.com.pk [accessed June 13, 2010] www.historyworld.net [accessed June 05, 2010] www.accountancy.com.pk [accessed June 15, 2010] www.qualisteam.com [accessed June 19, 2010]
available on website www.abl.com [accessed on June 08, 2010]. Mcgraw-Hill. Tower Tower.
Annexure A
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Annexure B
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Allied Bank Report

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CHAPTER 01

Internship Report on Allied Bank Limited

Submitted by: Faiza Munir Registration # FA06-BBA-038

Supervised by: Ms.Tabbasam Rashid

Department of Management Sciences COMSATS Institute of Information Technology Abbottabad

Department of Management Sciences COMSATS Institute of Information Technology

Mr. _________________________________________ Signature_______________

Mr. _________________________________________ Signature_______________

Mr. _________________________________________ Signature ________________

Primary data ---------------------------------------------------------------------- 03

Introduction to the Report

CHAPTER 2 Introduction to Allied Bank Limited

Australasia Bank (1947 to 1974)

2.9 Branch Network

Chart # 2.1 Organizational structure of ABL.

President and CEO

Regional General Manager

Office G-I, II & Other Lower Staff

High Performance. Innovation and Growth.

CUSTOMER SERVICE MANAGER (1)

Annual Report of Allied Bank for the year 2009

Allied Cash + Shop Visa Debit Card.

3.10.1.5 Allied e-Savers Accounts

Deposits Current Saving Fixed Total deposits

June 6, 2009 Rupees in 000 82,510 128,427 129,273 340,210

CHAPTER 4 Analysis of Allied Bank Limited

23653754 2097611 15793183 82449475 21302010 8

6.5% 0.6% 4.3% 22% 58% 3% 0.3% 4.7%

29739857 668449 18419241 83958463 16840728 0

Share Capital Reserves Unappropriated profit

711008 6582845 12164662 25857515

0.2% 1.6% 2.9% 6.2% 1% 7.2%

6463644 5804776 8475791 20744211 1491688 22235899

1.8% 1.6% 2.3% 5.7% 0.4% 6.1%

5386370 6050713 6971308 18408391 1469851 19878242

1.7% 1.9% 2.2% 5.8% 0.5% 6.2%

surplus on revaluation of assetsnet of tax 4062279 Total equity 29919794

Return on Assets (ROA):

Return on Assets (ROA)

Return on Equity (ROE) 40.00% 30.00% 20.00% 10.00% 0.00% 1 2 ye ars 3

Return on Equity (ROE)

Credit to Deposit Ratio (CD)

Non Performing Assets Ratio

Non-performing Assets Ratio (NPA)

Return on capital employed (ROCE) 26.00% 19.00% 21.00%

Return on capital employed (ROCE)

Net Interest Margin (NIM)

Interest income Interest expenses/ Average earning assets Table: 4.9

Net Interest Margin (NIM)

Profitability Ratios Operating Profit margin (OPM)

Operating expenses/ NII + non interest income Table: 4.11

Profitability Ratios Cost to Income Ratio

Profit per employee Net Income/ No of employees

Interest income per Interest Income employee employees Figure: 4.11

of 2.48 1.59 1.35

Business per Deposits+Advances+Investment employee No of employees

per Deposits+Advances+Investment 867. / No of branches 4 Figure: 4.13

10 00 900 800 700 600 500 400 300 200 100 0 1 2 y e a rs 3

Manager (CSM) Officers (2) Tellers (5)

(1) F.A Matric

4.3.3 Powers and Independence of Manager in Terms of

4.3.7 Internal Audit and Control 59

magazines, as sometimes customers have to wait for a long period of time.

Mr. ___________________________ Signature_

Mr. ___________________________ Signature_

Mr. _________________________ Signature