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ACKNOWLEDGEMENT
All thanks to Allah Almighty, the benevolent and compassionate, who blessed me with
the power & capabilities and remained contented on all intricacies found during the
successful completion of my task.
I’m grateful to my family members whose heart felt prayers and appreciation have
always been an asset and a great source of inspiration of me. It could be complicated for
me to accomplish to task without their shadow of love.
I’m also obliged to respected Chairman Mr. Shoukat Malik who furnished me this
prolific opportunity to avail a practical experience, which is application of theory in
“Internship” and also to revered teacher Mr. Sadiq Shahid who provided his full support
and guidance for this 6-8 week internship program.
I also extend my thanks to Mr. Mirza Aftab Baig along with all the Branch Staff for their
encouraging response and guidance to make my internship as a real learning experience.
Muhammad Zuhair Altaf
MBC-08-36
2
Table of Contents
 Executive Summary……………………………….............
 Introduction………………………………………………..
o Central Background Information…………..
o Company Background……………………….
o Vision & Mission……………………………..
o Organizational Hierarchy (Chart)………….
o Board of Directors…………………………...
 Departments Worked During Internship………………..
o Account opening……………………………...
o Remittances…………………………………..
o Credit Marketing ……………………………
o Credit Administration department (CAD)…
o Trade Finance………………………………..
 Application of Class Room Learning…………………….
 Learning as an Internee……………………………….......
 Marketing Analysis……………...………………………...
 Human Resource Assessment……………………………..
 SWOT Analysis……………………………………………
 PEST Analysis……………………………………………..
 Financial Analysis…………………………………………
o Horizontal and Vertical Analysis…………...
o Ratio Analysis………………………………...
 Recommendations………………………………………….
 Conclusion………………………………………………….
 Bibliography……………………………..............................
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Executive Summary
Pakistan after getting its independence, did not inherit a strong banking industry and
since then saw a number of events in the industry, like the nationalization of banks in the
1970’s. However, the banking industry of Pakistan has been grown over the past few
years, mainly because of the consistent policies implemented by the Government of
Pakistan, including the privatization of banks in Pakistan. Also the State Bank of
Pakistan’s, monetary policy has been very friendly toward the banking industry. But in
2008 because of world economic crisis, the economy of country was in crisis so the all
businesses went down so as the banks ‘business result in lower performance and
profibility. There are a number of different banks established in Pakistan, including local
incorporated commercial banks, foreign incorporated commercial banks, development
financial institutions, investment banks, discount & guarantee houses, housing finance
companies, venture capital companies, micro finance banks and Islamic banks.
Bank Alfalah was incorporated in 1997 and was privatized by the Government of
Pakistan. The Abu Dhabi Group bought the majority shares of the bank and so got the
rights to control the bank’s operations. Since the privatization of the bank, Bank Alfalah
has implement different policies to make it one of the best banks of Pakistan, which
included introducing new products and services and increase its operations by opening
new branches in Pakistan.
Today Bank Alfalah is operating in more than 95 cities of Pakistan and operating its
foreign branches in Bangladesh, Afghanistan and Bahrain. The total employees of Bank
Alfalah in 2008 were 7,584.There are only 2% increase in employees this year as
compared to previous year because of the conditions of Pakistan’s economy. The
financial statistics of Bank Alfalah are quite good as their human resource. The profit
after taxation for Bank Alfalah in 2008 amounted to Rs.1, 301 million and its total assets
for 2008 amounted to Rs.348, 990 million. The book value and earning per share of the
bank have decreased this year. The over all performance of BAFL is decreased in 2008.
Bank Alfalah promotes its products and services through print and electronic media.
Bank Alfalah also promotes itself by sponsoring different events.
I did my six weeks internship at Bank Alfalah, Abdali road branch and worked in Credit
administration department, Trade Finance Department, Credit marketing department,
Account opening department and remittances department. The over all experience at the
bank was good. A lot of things have been learnt, some of which relate to classroom
learning. Alfalah is expanding its network all over the Pakistan yet there are many
untapped areas. The competitors of BAFL are also in aggressive position. The Economic
and Political conditions of the country are very disturbing; the high inflation and law and
order situation affects every business including Alfalah. Social and technological issues
are of secondary importance but they also can not be neglected. BAFL is focusing
positively regarding technological issues but it should also keep its eye on the social
cultural factors also.
Some of the recommendations include promotion on the basis of merit, loans to students
and scholarship programs for its employees. Lastly Bank Alfalah has seen a rapid growth
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in its activities by introducing a range of products and services and showing its presence
in the country by opening new branches and in future should keep this momentum and
always strive to become the best.
Introduction
Central Background Information
Banking is one of the most sensitive businesses all over the world. Banks play an
important role in the economy and are considered as the backbone of an economy in
every country and Pakistan is no exemption. Banks are custodian to the assets of the
general masses. The banking sector plays a significant role in a contemporary world of
money and economy. It influences and facilitates many different but integrated economic
activities like resources mobilization, poverty elimination, production and distribution of
public finance.
Pakistan has a well-developed banking system, which consists of a wide variety of
institutions ranging from a central bank to commercial banks and to specialized agencies
to cater for special requirements of specific sectors. The country started without any
worthwhile banking network in 1947 but witnessed phenomenal growth in decades to
come. By 1970, it had acquired a flourishing banking sector. Nationalization of banks in
the seventies was a major upset to domestic banking industry of the country, which
changed the whole complexion of the banking industry. With irrational decision at the
top, all the commercial banks were made subservient to the political leadership and the
bureaucracy. The commercial banks thus lost their assets management equilibrium,
initiative and growth momentum. They ceased to be a business concern and became big
bureaucracies. The era of nineties was the climax of privatization, deregulation and
restructuring in the domestic banking industry and financial institutions. The Muslim
Commercial Bank was the first bank to privatize. Followed by Allied Bank limited,
United Bank Limited and Habib Bank Limited have all been privatized.
Today, the banking sector is providing financial solutions to the masses and is growing
and becoming a solid partner in the development of the Pakistani economy, this growth
potential has seen different acquisitions in the banking sector, with the Standard
Chartered and Union Bank being the most prominent.
Company Background
Bank Alfalah has gone through different phases over the years. Its name and been
changed in the following sequence.
Bank of Credit and Commerce and International (BCCI)—1972
Habib Credit and Exchange Bank—1992
Bank Alfalah—1997
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Bank of Credit & Commerce International (BCCI) was a Pakistan based bank,
established by Mr. Agha Hassan Abdi from UBL, in association with U.A.E and Europe.
BCCI has its branches in 74 different countries of the world. It had its 3 branches in
Pakistan, Karachi, Lahore and Rawalpindi. The Lahore branch was opened on 15th
December1978. This branch was opened at that time when some other international
banks like Citi Bank, Bank of America, and American Express etc. were already
working. But within a few years this branch crossed mostly all the other banks in case of
deposits, advances, imports and exports dealings, guarantees, traveler‘s cheque sales etc.
In 1991, the BCCI was banned, when it was accused by European countries that the bank
was involved in some illegal operations with Gulf countries. The major reason behind
European accusation was that BCCI was of Islamic mode. Therefore, the bank was closed
due to international pressure.
In July 1991, the branches of BCCI in Pakistan at that time were taken over by The
Ministry of Finance and SBP. All three branches were given under Habib Bank Limited
after valuation of its assets for 15 million dollars, which were named as Habib Credit and
Exchange Bank (HCEB) and these were working as subsidiary of Habib Bank Limited.
Following the privatization in 1997, Habib credit and Exchange Bank assumed the new
identity of Bank Alfalah on June 21st, 1997 as a public limited company under the
Companies Ordinance 1984. Its banking operations commenced from November 1st,
1997. The bank is engaged in commercial banking and related services as defined in the
Banking companies ordinance, 1962. The bank is currently operating through 282
branches. This includes 48 Islamic banking branches and 7 foreign branches in
Bangladesh, two in Afghanistan and one offshore banking unit in Bahrain with the
registered office at B.A.Building, I.I.Chundrigar, Karachi. The bank is listed on the
Karachi and Lahore Stock Exchange with a ticker name of “BAFL”.
Credit Rating
PACRA, a premier rating agency of the country, has rated the bank
For long term „
AA‟ (double A)
For short term
A1+ (A one plus)
These ratings denote a very low expectation of credit risk, strong capacity for timely
payment of financial commitments in the long term and by highest capacity for timely
repayment in the short term, respectively. Further, the unsecured subordinated debt (Term
Finance Certificates) of the bank has been awarded a credit rating of AA- (double a
minus).
Bank Alfalah has expanded its branch network and deposit base, along with making
profitable advances and increasing the range of products and services. Bank Alfalah is the
5th largest bank of Pakistan in terms of its assets that are 6% of the total banking sector
assets. The banking sector has expanded rapidly in Pakistan along with the fast paced
economic growth. The increased competition in the banking sector has encouraged the
Banks to come up with services that could satisfy the needs of a large consumer base.
The result has been increased profitability of all banks.
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Strengthened with the banking of the Abu Dhabi Group and driven by the strategic
goals set out by its board of management, the Bank has invested in
revolutionary technology to have an extensive range of products and services. This
facilitates its commitment to culture of innovation and seeks out synergies with clients
and service providers to ensure uninterrupted services to its customers. It perceives the
requirements of its customers and matches them with quality products and service
solutions. During the past twelve years, it has emerged as one of the foremost financial
institution in the region endeavoring to meet the needs of tomorrow today.
The bank also entered into other dimensions of financial services –brokerage, asset
management, and insurance – through its subsidiaries, which are in their development
phase and would require sometime before emerging as material contributors to BAL‘s
revenue stream.
Vision & Mission
Vision
To be the premier organization operating locally & internationality that provides the
complete range of financial services to all segments under one roof.
Mission
To develop & deliver the most innovative products, manage customer experience, deliver
quality services that contributes to brand strength, establishes a competitive advantage
and enhances profitability, thus providing value to the stakeholders of the bank.
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Organizational Hierarchy:
Chief Executive Officer
Co-Chairman Central Management Committee
Group Heads
Regional Managers
Area Managers
Hub Managers
Branch Managers
It’s a general hierarchy of bank which is showing about the main authorities of Bank
Alfalah Limited who are controlling its management in Pakistan. Bank’s management is
divided into different groups, regions and areas. Co-chairman is providing supervision to
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group heads that are responsible for controlling the affairs of different groups. After
group heads in the hierarchy, there are regional, hub and area managers who are
managing and guiding the working of different branches of bank.
Board of Directors
The board of directors has the authority in guiding Bank affairs and in making general
policies. Some directors are the personnel of the Bank Alfalah Limited follows.
H.E. Sheikh Hamdan Bin Mubarak Al Chairman
Nahayan
Mr. Abdulla
Mansoori
Nasser
Hawalileel
Al- Director
Mr. Abdull Khalil Al Mutawa
Director
Mr.Khalid Mana Saeed Al Otaiba
Director
Mr. Ikram Ul-Majeed Sehgal
Director
Mr. Nadeem Iqbal Sheikh
Director
Mr. Sirajuddin Aziz
Director & CEO
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Departments Worked During Internship
I did my internship at Bank Alfalah Abdali Road, for a total duration of six weeks and the
departments that I worked during this time are as follows:
 Account opening
 Remittances
 Credit Marketing
 Credit Administration department (CAD)
 Trade Finance
Accounts Opening Department
Accounts opening department is one of the departments that come under the retail/general
banking facilities provided by Bank Alfalah Abdali road. Some of the major deposit
accounts opened by Bank Alfalah Abdali road are as follows:
Major Deposit Account Products
Current Account
Current Accounts are non interest bearing accounts that have a minimum account
opening requirement of Rs. 10,000. No zakat is deducted on the accounts balance.
Furthermore all current account holders receive a Hilal debit card and there are no
restriction on the number of withdraws or deposits made to and from the account.
Profit& Loss Saving Account
Profit& Loss saving accounts can be opened with a minimum balance requirement of Rs.
5,000 and profit is credited on a half yearly basis. There are no restrictions on the number
of deposits and withdrawal made to and from the account and all account holders receive
a Hilal debit card as well. Profit and loss saving account cannot be opened by a business
corporation, however can be jointly opened by individuals. Profits are paid at 2% on all
account balances.
Basic Banking Account (BBA)
Basic Banking Account was introduced by banks on an order by the State Bank of
Pakistan and is current in nature. There is no minimum balance requirement for BBA,
however initial deposit must be Rs 1000. Maximum two withdrawals and deposits are
allowed by cheque, while there is no restriction on ATM withdrawals.
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Royal Profit Account
Royal profit accounts are opened with a minimum balance requirement of Rs 50,000. The
basic aim of this account is that the higher the balance the higher the return, as profit is
credited on a monthly basis. The profit paid to account holders is as follows:
Profits paid on Royal Profit Account
Amount
Profit pa.
From Rs.50,000 to 999,999
2.50%
From Rs.1,000,000 to 4,999,999
3.50%
Rs.5,000,000 and above
Negotiable
Kifayat Account
Kifayat account is another saving account product that can be opened with a minimum
balance requirement of Rs 10,000, with a maximum limit of Rs 1 million. Profit is
calculated on a monthly basis, while it is credited on quarterly basis. Bank Alfalah pays
7% pa interest on Kifayat Account.
Mahana Amdan Account
Mahana Amdan account is Term Deposit Receipt (TDR) for three years that can be
opened with a minimum balance requirement of Rs 100,000, with a maximum limit of Rs
15 million. Profits are paid at 10% pa, credited on a monthly basis. Other features of this
account include free personal accident insurance and automatic renewal for another 3
years, after the expiry of original period.
Alfalah Education
Alfalah education is a one year TDR that can be purchased by people having school
going children’s. A person can purchase a unit for Rs 100.000, with a maximum of 3
years. This TDR pays 7%, paid at maturity and gives an additional advantage of giving
monthly school fee of the children’s if the breadwinner of the family dies.
Basic Requirements for Account Opening
The basic requirements to open an account for individuals/self employed are as follows:
 CNIC
 Source of income (salary slip etc)
 NTN certificate (optional)
 Company letterhead or authorization (as required)
The basic requirement to open an account for a partnership:
 Partnership Deed
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 Partners CNIC
 Company Letterhead
 NTN certificate (optional)
The basic requirement to open an account for companies:
 Memorandum of Association
 Article of Association
 Directors CNIC
 Company Letterhead
 NTN certificate (optional)
Internal Codes for Bank Alfalah Accounts
Some of the major account opened at Bank Alfalah Abdali road and their internal codes
are as follows:
Internal Codes for Some Accounts
Account Type
Code
Current Account
010*****
Profit& Loss Account
020*****
BBA Account
0189****
Royal Profits
029*****
Current Account USD
018*****
Major Work Done by Account Opening
Department
Stop Payment
If a customer looses their cheque book, then that customer will have to come to the bank
and firstly report the loss and then stop payment, by telling the series of cheque he has
lost. By stopping payment, the customer is guaranteed that no illegal payment is made
from their account. The process for stopping payment, after the customer tells that he has
lost is cheque book is that he fills a ‘Form B’, which is same as a cheque book requisition
form and an indemnity form, stating no responsibility on behalf of the bank if any illegal
payment is made before the time of announcing a cheque book lost.
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Bank Statement and Bank Balance
A bank statement tells the whole activity of a bank account over a period of time.
Customers often come and want their bank statements and have to fill a form, relating to
the time period for which the bank statement is needed. As part of my internship, I was to
assist the customer to fill the ‘Bank Statement Form’ and printed statement is given
through the banks software. Often customers want to know their accounts balance over
the phone and thus I had to tell them their account balances using the banks information
system ‘Bank Smart’.
Account Opening
Whenever a customer comes to open their account, they have to fill a relationship
contract with the bank. As part of my internship I had to fill these forms and then use the
appropriate bank stamps to complete these forms. Also as part of the relationship form, I
also had to do a ‘Verisys’, a verification system started by NADRA on the CNIC of the
new account opener. A ‘Verisys’ tells, if more information pertaining to the customer is
needed to open the account or not. Furthermore as all relationship forms have to be sent
to Karachi, a central location, for all account relationship forms.
Remittances
The need of remittance is commonly felt in today’s business. A major function of any
bank is to “transfer of funds form one place to another”.
There are two main types of instruments that are used to transfer money, which are as
follows:
 Pay order: Used to transfer money within the city
 Demand Draft: Used to transfer money outside the city
Pay Order
Pay orders are made to transfer money within the city and this is a safe way to transfer
money as the person who makes the transfer through pay order pays in advance. The
procedure that is carried out in transferring money through pay order is as follows:
Procedure for Transferring Money through Pay Order
The customer will come to the bank and fill in the pay order application, giving in the
details to which account the money is being transferred, the amount etc and attach a
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cheque to pay for the pay order. Pay orders can also be made through cash but mainly it
is made through cheque.
The officer checks all the details in the application, makes out the charges for the transfer
that the customer will pay and then make the pay order for the customer and pass the
following entry:
Customer A/c
Pay order payable
When the customer in favor of whom the pay order was made gives the pay order to his
branch, the entries passed are:
Pay order payable
Customer A/c
Demand Draft
Demand Draft is another way in which customers can transfer money outside the city.
There are two types of situations for transfer of money through demand drafts:
Outward DD’s
When a customer comes to Bank Alfalah to make a DD to transfer money outside the city
is known as outward DD. The customer will fill the details in a DD application form, and
will attach a cheque or pay cash as he wish.
Then the officer will check all the details and make a demand draft for the customer and
pass the following entries:
For Cheque:
For Cash:
Customer A/C
Sundry A/c
Head Office
Head Office
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Inward DD’s
This is the procedure adopted when the issuing branch sends copy of the instrument as an
advice. When the bank receives the advice, the officer will pass the following entries:
Head Office A/c
DD Payable A/c
When the customer comes with the DD to get his payment, the following entries are
passed:
DD Payable A/c
Cash
If that customer is a Bank Alfalah account holder then the following entries are passed:
DD Payable A/c
Customer Account
Foreign Remittances
Another type of remittances is foreign exchange transfer from another country to a Bank
Alfalah account in Pakistan, through SWIFT. Bank Alfalah for foreign exchange
transfers takes the help of Citi Bank for routing.
Procedure for Foreign Transfers
The customer will come to Citibank to transfer money to Pakistan. The entries passed
will be:
Customer A/c
Citibank A/c
Citibank will then transfer that money to Bank Alfalah Karachi. The entries are:
Citibank A/c
Bank Alfalah Nostro A/c (khi)
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Later Bank Alfalah will transfer the Nostro A/c money into the demand account.
Nostro A/c Bank Alfalah
Demand A/c
Now when the customer will come to take his money, the following entries will be made:
Demand A/c
Customer A/c
CREDIT MARKETING DEPARTMENT
Credit means belief or trust. “The quality of being credible or trustworthy”. Another
words we can define credit as “trust in one’s integrity in money matters and ones ability
to meet payment when due”.
Credit marketing department deals with extending loans (credit facility) to customers
before sanction advice. State Bank of Pakistan (SBP) has prescribed regulations which
are called “PRUDENTIAL REGULATIONS”. Every bank has to follow these
regulations. If any bank violates the regulations it should be liable for penalties.
The Bank Alfalah limited credit is extended on the basis of these rules and regulations.
These regulations tells the term and conditions under which you can extend loans to the
borrower and to what extent.
CREDIT FACILITIES
At BAL there are two types of credit facilities
 Funded facilities
 Non funded facilities
FUNDED FACILITIES
These are the facilities in which there is direct involvement of cash fund. Following are
the funded facilities.
 Current finance “CF”
 Term finance “TF”
 Finance against foreign bills “FAFB”
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 Finance against packing and credit “FAPC”
 Finance against imported merchandise “FIM”
 Finance against trust receipt “FATR”
 Local bills discounted “LBD”
Current Finance “CF”
The extensively used financing mode at BAL is current finance (CF) current finance is
used to finance both individuals and industries.
Individual take current finance for their personal use while in industries. It is taken for
fulfilling the requirement of working capital.
Term Finance “TF”
Term finance is for specified time period. Term finance is given for fixed asset financing.
Finance against Foreign Bills “FAFB”
In FAFB facility exporter take loan from bank on the behalf of their foreign export bills.
Like exporter sends shipment but at that time he needs fund for the operation of the
business. He may go to the bank and surrenders all the documents including L/C, Bill of
lading etc. bank checks all the documents to be in accordance with terms and conditions.
If they find no discrepancy, they give money to exporter but take some margin on it.
Finance against Packing and Credit “FAPC”
FAPC is taken for the preparation of consignment. It has two forms.
 Pre shipment
 Post shipment
1)
Pre Shipment
Pre shipment loans are export related working capital financing.
2)
Post Shipment
Post shipment financing is essentially the receivable financing to the exporters till the
period he is out of cash after the shipment.
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Finance against Imported Merchandise “FIM”
This facility is allowed against the commodities imported from other countries usually
through letter of credit. Some time importer does not have enough amount for paying the
imported merchandise therefore. He request to the bank to pay all dues to the exporter
against the security of imported merchandise. Bank pays the amount and releases the
goods, when the importer pays off its liability partially / fully.
Finance against Trust Receipt “FATR”
Finance is extended upon the trust receipt signed by borrower. Importer has to import the
product. There are three conditions.
 Pay money and get thing
 Get fine facility
And third is that if that client is trust worthy for bank believing on him based upon his
past record. He releases the goods against the trust receipt. Trust receipt is given to the
bank by the customer. The customer in turn commits that I will pay on such and such
date. Banks pays all taxes and gets merchandise and then gives it to client. Bank do
charges markup against such financing. FATR is for specific period of time. If client does
not pay with in specified time then bank will charge higher per day markup.
Local Bills Discounted LBD
Payment against documents or local bills is made by the banks as payment against L/C
comes due payment is made for imported documents. For example when seller of phutti
(raw cotton) gives all the documents or bills to bank as to get bills discounted in which he
gets immediately payment which he would receive after the season.
NON FUNDED FACILITIES
The facilities where there is no direct involvement of banks fund. There are two types of
unfunded credit line facility, which are as follows:
 Letter of Credit (LC)
 Letter of Guarantee (LG)
Letter of Credits
A letter of credit is a written undertaking by a bank (issuing bank) given at the request
and accordance of a buyer (the applicant) to the seller (the beneficiary) to a fact payment
up to a stated amount of money within prescribed time limit provided that the terms and
conditions are complied with. Letter of Credits issued in the international trade business.
There are two types of Letter of Credits:
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Usance LC
Usance LC is a form of LC, whereby the bank engages to honor the beneficiary usance
draft on an acceptance that the items are in accordance with the conditions. Payment is
made against acceptance.
Sight LC
Theses are letter of credit where the bank engages to honor the beneficiary’s sight draft
upon presentation provided that the documents are in accordance with the conditions of
the L/C. This is a more safe form of letter of credit as payment is made against the
documents.
Letter of Guarantees
Letter of guarantees is a guarantee that the bank gives to an organization on behalf of the
bank. Letter of Guarantee’s are mainly used when a tender for a specific job is filled by a
customer. There are three main types of LG’s:
Bid Bond
Bid Bond are filled at the time of filling out the tender and states that if the company is
given the tender, it will start working on it and will not walk away.
Performance Bonds
Performance Bonds are issued to the beneficiary, to guarantee him that the applicant of
the tender will perform the contract under a specific period of time. Performance bonds
are issued after the tender is approved of the applicant.
Mobilization against LG (MALG):
This is a guarantee that the bank gives when the beneficiary (the firm that issued the
tender) that pays an advance of tender to the applicant (the firm that gets the tender), that
he will return that advance amount.
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Flow Chart of Processing of fresh proposal
1. Interview
prospective
borrower
1. Interview prospective borrower in
the presence of credit Manager.
2. Receive request stating the
amount, type, tenor and purpose
of facilities as well as repayment
and securities offered.
2. Receipt of request
Prepare visit report
Viable
3. Prepare visit report to assess
whether the borrower is a good
credit risk.
3a. Refuse
Request
3a. Where proposal is not viable then
refuse request.
4. Where proposal is viable allocate
task to credit officer.
4. Request given
to credit officer
A
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A
5. Request Credit
Report
5. Request CIB and other credit
report from SBP and other banks
respectively.
Irregularity
6. Where irregularity found return
proposal
to
customer
for
regularization/ rectification.
6. Return proposal
6a. Where the above not regularized
decline proposal.
Regularize
6a. Decline
proposal
7. Where irregularity not found
prepare CLP providing all
necessary details.
7. Prepare Credit
Line Proposal
(CLP)
B
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B
8. Perform a comparative analysis
of audited three years reports.
Also prepare spread sheet for
various ratios.
8. Spread Sheet
8a. Check proposal for compliance
with prudential regulations.
Prudential
Regulatio
ns
8a. Refer case
9. Where regulation complied with
and credit manager gives his
approval, sign and forward CLP
to Credit Manager.
10. Receive the above and cross
check information in CLP with
that financial statements and
spread sheet.
9. Sign / Forward
10. Cross- check
Information
11. Sign and forward CLP with
attachments to Branch manager
where financial analysis proves to
be favorable.
11. Sign/ forward
with attachments
C
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C
12. Sign CLP/
Pass documents
to BCC
12. After necessary review and
discussion with credit manager,
sign and forward documents to
the secretary BCC.
13. Enter
Proposal
13. Receive proposal form, enter in
the relevant register and allot
control number.
13a. Conform
limits
13a.Ascertain whether the proposal is
within the predefined sanctioning
limits of BCC.
Scrutiny
14. Make photocopies of CLP and
provide to members of BCC.
14. Make copies
15. Present CLP with audited
financial statements etc. in
session held by BCC to discuss
risk/ rewards and other factors
associated with credit proposal.
15. Present CLP
D
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D
Consensus
/Satisfied
15a. Reject
proposal
16. Forward
CLP
15a.Seek consensus of member of
BCC where consensus not
obtained reject proposal.
16. Where consensus obtained if
within the pre-defined limits of
BCC. If not recommend sanction
and forward to credit division for
approval of H.O.
17. Retain
photocopy
17. Retain a set of photocopy of CLP.
18. Receive
Sanction advice
from credit
division
18. On receipt of sanction advice
from credit division retain one
copy for record and forward
original to concerned credit
officer. Prepare “Offer Letter”
and
proceed
with
other
documents.
END
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Alfalah Branded Products
Karobar Finance
Alfalah Karobar Finance is short term facility that is only provided to individuals and
sole proprietors. This facility also has one year validity with markup charged on the
amount used. This facility again provides individuals to maintain their working capital
management and is again given to individuals for a security. Karobar finance is type of
current financing with difference i.e., in karobar finance, the individual has to clear all his
balance in his account, once in a year.
Milkiat Finance
Alfalah Milkiat Finance is a long term facility that is provided to SMEs and there are four
main types of facilities provided:
 Acquisition of rented commercial/industrial property
 Construction on an owned commercial/industrial plot
 Purchase of a commercial/industrial property
 Renovation of owned commercial property
Some of the features of Milkiat finance are as follows:
 Tenure of 2-15 years except for renovation, which is for 2-4 years
 Mark up of (KIBOR+5%)
 Financing from Rs 0.5 million to Rs 30 million
 Eligibility age should be less than 65, with 3 years of existing business
Quick Finance
Alfalah Quick Finance is another short term and a type of current financing facility that is
only provided to individuals for the fulfillment of personal or family needs. The financing
is given against the deposits and government securities up to the 90% of the cash value of
security. Financing is made from 50,000 up to 25 million.
25
The five C’s of Credit
i) Capital:
The capital & resources of the borrower his capital structure and the gearing ratios either
borrower Under-capitalized? Does the borrower have its own resources to fall back on, in
case of need?
ii) Capacity:
Capacity or the capability of the borrower to manage his business profitably and the
capacity to repay the advances and service the facilities according to agreed terms. Is the
borrower in a capacity to borrow? Or is there any legal complication?
iii) Collateral:
The security provided against the facilities. Is the security provided: Adequate,
Realizable, Marketable, Valuable, Storable, Non-perishable, Durable, and
Transferable/with clear Title.
iv) Character:
Are the borrower's personal character, market standing and reputation impeccable? Has
he met his part commitments? Does he have good bank reference?
v) Conditions:
Have the conditions of lending been drawn up taking into account all possibilities Is the
sector/industry in decline, is growing or it has reached at plateau? Is there a market for
the products and the market size to justify production plans and sales forecasts? Are the
economic conditions feasible generally and for the business, in particular?
26
Credit Administration Department (CAD)
Taking cognizance of the sustained progression of the bank business and the inherent risk
factors attached to expansion, the management felt a need for setting up of independent
Credit Administration Department (CAD) in its branches so as to minimize the losses
occurring from giving credit.
According to the Bank Chairman Review
“Conservative yet dynamic credit policy”
While adhering to the above policy it is imperative that the perfection of
security and enforceability of support documents are ensured for affective Management.
Its main purpose is to streamline the working of CAD to mitigate the chances of losses
arising from incomplete security and documents covering advances.
It is suggested that CAD headed by a manager is to be set up in branches meeting the
following criteria
“Aggregate funds and non-fund based credit portfolio of
RS.500 million and above and minimum number of borrowing customers being twenty
five”.
The personnel of CAD are furthered advised to keep themselves update by the latest
instruction/regulation issued from Head Office, State Bank of Pakistan and Other
regulatory institutions.
27
Flow Chart
Pre-Disbursement Functions
Start
Receive sanction advice from credit
manager
Obtain Security as per Sanction
advice
Check all Facilities Documents
Complete registration of the Bank’s
charge over security with SECP/ Gov
authorities
Appraise Relationship/
credit manager and
branch manager
Any exception to the
terms and conditions
of sanction advice,
ensure waiver
obtained for
competent authority
If
Complete
A
28
A
Complete Standard facilities and security
documentation
Lodge security and documents attested by
the concerned credit manager
Feed limits in the system
Release facilities
END
29
Flow Chart
Post-Disbursement Functions
Start
Obtain relevant reports such as stock report,
insurance report etc. As per sanction advice
Review and monitor system generated
reports and other instruction periodically
Correct recovery mark up and other changes
relating to credit facility (ies)
Preparation and submission of statements to
SBP, HO, and other institutions
Safe keeping and periodical balancing of prestamped documents/stamps papers
Issuance of guarantees
END
30
Credit Administration Process
1. Registration of charge
The CAD manager has to register charge with security and exchange commission of
Pakistan (SECP) of mortgage/ hypothecation within 21 days from the date execution of
documents.
2. Securities/ Facilities Documentation
The CAD manager has following options while securing credit.
 First exclusive Charges: In first exclusive charges, first the claim of bank is
satisfied in the case of default of the borrower.
 Ranking Charges: In this, the ranking is given. The first on the ranking is satisfied
and then comes the second and so on.
 Pledge: It confers physical possession of movables but not ownership.
 Hypothecation: It is a security for a debt, which remain in the possession of the
borrower.
 Mortgage: It is a claim against real estate or fixed assets. The deposit of title
deeds without documentation can create a mortgage.
 LCs, Bank Guarantees, other guarantees
3. Valuation
A CAD manager can take value and evaluate security worth from the following sources
Security
Deposits
Source
Computer
amount
Government securities
Face value or encashable value rates
published by the government of Pakistan
Shares
Stock exchanges rates in daily newspaper
Mortgage of property/ assets
Valuation report by bank’s evaluator
showing market value
Stock( under pledge, hypothecation)
For pledge Karachi Cotton Association
issues its rates. For hypothecation stock
report submitted by borrower
31
prints
out
showing
actual
Book Debt/ Receivables
Life of book debts/receivable submitted by
the borrower.
Life Insurance Policy
Surrender value of life policies issued by
insurance company
Any other security
As per terms of sanction advice
4. Stock report
Frequent submission of stock reports is necessary as per term of sanction advice.
5. Stock Inspection
Verification of stock is made and it should be the same as given in stock report. The
following are usually checked.
 Stock break up
 Evidence of ownership
 Quality/condition of warehouse
 Fire Protection adequacy
 Adequate protection from theft, burglary etc.
6. Insurance
Assets charged to the bank should be insured through an approved insurance company.
One month before expiry of the insurance policy, the concerned customers should be
reminded to renew the policy.
7. Search report
All public/private limited companies are required to register bank’s charge over its
current and fixed assets with SECP. Search report is prepared from the records of SECP
showing the ranking of charges over borrower’s assets to different banks.
8. Credit Information Bureau (CIB)
State Bank of Pakistan requires banks to obtain detailed information from CIB, SBP
when considering proposals of over Rs. 0.5 million to any borrower. In case CIB report
indicates over exposure/ default in meeting obligation etc. The accommodation to the
concerned borrower can be derived.
9. Borrower Basic Fact Sheet
SBP requires that all facility application should be accompanied by the Borrower’s Fact
Basic Sheet as per approved format of SBP.
32
Borrowers
The following are the categories of the borrowers
1. Corporate Body
The term “Corporate Body” will include:
 A company incorporated under the companies act.
 A corporation created by a ordinance/ a statute/ act of legislature
a. Obtain memorandum and Articles of association of the company
 Whether company is public limited and quoted on stock exchange, not quoted on
stock exchange is a private limited.
 Whether it is empowered to borrow?
 Are there any restrictions on the company’s power to borrow?
 What are directors’ powers?
b. Obtain board resolution and ensure that it contains
 Authorization to raise facilities
 Create Charge on company assets/pledge securities which are in companies name
2. Partnership
The partnership deed is obtained. In its absence bank’s standard letter of partnership, duly
signed by partners is obtained. Although all partners are jointly and severally liable for
the debt of the firm, however, it is considered inexpedient to obtain personal guarantees
for good business reason.
3. Sole proprietorship
It is owed by an individual and there being no formal procedure to be followed for setting
the business so a declaration on the firm letter head evidencing proprietor’s name etc is
taken.
4. Individual
It is ensured that borrower is not suffering from any incapacity and is not a minor, insane
or insolvent. These people are not capable of contracting and therefore any borrowing by
them is unlawful.
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5. Clubs, Associations, Trusts, Charitable societies
Extra care is taken as these borrowers may enjoy legal protection, which is not available
to others.
Trade Finance Department
Trade Finance involves the import and export activities. This department provides
protection to the rights of importer and exporter. The function of this department is to
serve as a bridge between the importer and exporter in order to settle a transaction. When
trade is taking place between the representatives of two countries (exporter and importer),
the exporter involves his bank (the Advising Bank) in the transaction, as he wants to feel
secure regarding timely payment of his goods in the required currency. On the other hand
the importer involves his bank (the Issuing Bank), in order to get a sense of security
regarding timely supply of the required product, in the required manner.
Trade Finance Department handles two activities: Import
 Export
IMPORT
Import Department of BAL deals with the import of merchandise. Import can be defined
as:
“The bringing of commodities into Pakistan from outside by sea, land or air.”
Requirement for the Importer
These requirement / document must be fulfilled from importer before doing the import: NTN (National Tax Number) certificate
 Sale Registration Certificate
34
 Membership from Chamber Of Commerce
 Questionnaire duly filled in
 NIC (attested copy)
Exports
Exports are major sources of earning foreign exchange and play an important role in the
economic development of the country. It helps to utilize excess resources of the country.
“Exports mean selling goods to another country.”
Exports of all eligible commodities through authorized banking channels are admissible
under exchange control regulation.
Requirement for the Exporter
These requirement / document must be fulfilled from exporter before doing the export: Account holder of Bank Alfalah Limited
 Must be a Pakistani
 Membership from Chamber Of Commerce
 NTN (National Tax Number) certificate
 The person must have the Sales Tax Registration Certificate.
 Form E ( export form) dully filled in
 Sale Registration Certificate
Methods of Doing International Trade
 Letter of Credit
 Contract
35
LETTER OF CREDIT (L / C):
1) LETTER Of Credit (L / C) ADVISING
Letter of Credit (LC) is a written and conditional undertaking by a bank on the behalf of
applicant to the beneficiary to pay a certain amount at a certain date; if the stipulated
terms and conditions are complied with.
The process of International Trade starts with asking of importer to its bank for L/C.
Then importer’s bank will be called as issuing bank. The issuing bank sends the L/C to
Bank Alfalah Limited. A bank that receives the L/C is called an advising bank because
after receiving the L/C, it performs the L/C advising function. A cover letter is prepared
and is sent to the beneficiary of the L/C, advising him his L/C has reached Bank Alfalah
Limited and he should collect it immediately. A copy of the L/C is sent along with the
letter.
2) ISSUANCE OF E-FORMS
Government has provided facility to exporter in taking E-Form from any bank and is a
part of the exchange control mechanism of the State Bank of Pakistan. When an exporter
receives an L/C, his next job is to get an E-form from an authorized Bank.
On the E-form sent by the commercial bank following things are mentioned
 Description of the commodity
 Quantity of the commodity exported
 Amount realized
 Foreign bank charges
 Country of the importer
3) CERTIFICATION OF THE E-FORM
After filling in the complete information about the goods to be exported, the exporter
brings the E-form to the bank for verification. Bank issues E-form certification to
exporter and he submits it to the custom officer along with E-form certification to certify
E-form.
4) THE DOCUMENTS
After getting the E-form verified the exporter starts preparing his shipment. Banks only
deal in documents. In order to receive payment from his goods the exporter has to send
certain documents to the issuing bank via his negotiating bank. These documents are.
36
Bill of exchange:
A bill of exchange is an instrument in writing containing an unconditional order, signed
by the maker, directing a certain person to pay a certain sum of money only to, or to the
order of, a certain person or the bearer of the instrument. It is drawn by the exporter
(drawer) and orders the importer or the importer’s bank (drawee) to pay to the order of
Bank Alfalah Limited (payee) a specific amount. If the draft is drawn at sight, the
importer must make the payment on receipt of the documents. If it is time draft, the
payment must be made within the specified time limit.
Commercial Invoice
The exporter prepares it. Its amount must tally with that of the L/C. It shows the name
and address of the importer as well as the invoice number. This number is very
significant as it is used in all the correspondence between the exporter and his bank. It
also contains all the specifications of the commodity being exported. The standard
definition of commercial invoice is that it is an itemized list of goods shipped to a buyer,
stating quantities, prices, and shipping charges.
Bill Of Lading
The shipping company or the airline that has been assigned the task of transporting the
goods issues these. The shipper must ensure that the goods are shipped and handed over
the right person when documents are presented to him. The standard definition of a bill
of lading is contract between the seller of the goods and the carrier.
The following are types of bill of lading:
 OCEAN Bill Of Lading
 Air Waybill
 Inland Bill Of Lading
37
Packing List / Weight List
The exporter prepares these lists in order to show that the consignment is according to the
order of the buyer. It gives a detailed account of the manner in which the goods have
been packed and the number of cartons they have been packed in.
Certificate of Origin
This document certifies the origin of the exported goods. In the case of exports from
Pakistan, the certificate of origin shows that the country of origin of the goods is
Pakistan. The certificate of origin is a document in which the exporter certifies to the
place of origin of the goods to be exported.
E-Form
It is a necessity for all exports out of Pakistan. All commercial banks always issue the Eform in quadruplicate.
 Original: is sent to the custom officer
 Duplicate: Bank receive the duplicate
 Triplicate: is sent to the State Bank Of Pakistan
 Quadruplicate: is kept by the exporter for his personal record.
Export Visa
This document is required when the destination of consignment is Canada, America, and
U.K. Different countries fix quota for different commodities and restrict imports of those
goods with in a specific limit. There fore visa is required which is in fact a permission to
export goods to the specified countries.
Payment by importer
Exporters bank sends all the documents negotiated in LC to importers bank. Once the
shipment arrives in importing country, documents are kept with the bank until the
importer makes full payment to bank.
38
COLLECTION / NEGOTIATION:
When the exporter comes to the bank with the documents, he has two options.
 Send them for collection
 Get Them negotiated
Collection:
The bank sends the documents on behalf of the exporter to the importer’s bank for
payment. The payment is made in Pak Rupees and the exchange rate is the Buying rate of
the day normally called the T.T. Clean Buying Rate. When the reimbursing bank is to pay
Bank Alfalah Limited it credits its nostro account maintained with it (the reimbursing
bank), and afterwards bank debits the exporter’s account with the local equivalent of the
export proceeds calculated at the TT clean buying rate.
Negotiation:
The bank purchases the documents from the exporter i.e. the exporter gets them
discounted before their maturity. For example, the drafts are at 90 days from B/L date. In
simple words, the payment for the exports would be received after three months. The
exporter might not want to block his funds for such a long time. He can get his
documents negotiated the day he presents them to the bank. The exchange rate he will get
will however be lower than the TT clean buying rate because the bank is paying him an
amount that it is going to receive after three months itself.
Contracts are not negotiated however in any case. This is because they are unsafe
documents and the bank does not take the risk.
Dispatch:
The documents brought by the exporter are in the form of sets containing an original and
a number of copies. The number of each document required by the importer is mentioned
on the credit. Usually they are:
 Manually signed commercial invoice
 Bills of lading
39
 Packing list in quadruplicate
 Bill of exchange
Filing:
A separate file is maintained in each case and if the documents have been negotiated, it is
titled FDBP that is the abbreviation of Foreign Documentary Bills Purchased. If the
documents have been sent for collection, a file in the similar fashion is kept but it is
labeled FDBC i.e. Foreign Documents Sent For Collection.
CONTRACT:
The exporter might export the goods based on a CONTRACT with the importer. In such
a case, there is no surety to the exporter that the importer will make the payment. The
importer might reject the goods on receipt and deny and payment to the exporter.
Therefore, the contract is an unsafe document. There are two types of contracts.
CAD (Cash against Documents):
The documents are sent to the issuing bank. The issuing bank informs the importer that
his documents have arrived. The importer deposits the amount of the contract with the
bank and takes possession of his documents have arrived. The issuing bank then makes
the payment to the exporter’s bank.
DA (Documents Acceptance):
Drawee takes documents and possession from the issuing bank and signs a bill of
exchange in return giving his acceptance for payment on a specific maturity date. Now, if
he does not make the payment to the issuing bank no payment is made to the exporter and
there is no liability on either bank.
40
Application of Class Room Learning
During my Internship at Bank Alfalah Abdali Road, I saw some practical
application of some class room learning.
I saw most of knowledge application in Trade finance department, Credit Administration
and Credit marketing. Operation department had less knowledge application.
Trade Finance Department:
At Trade Finance Department, I got a lot of practical exposure of studying
International Finance. Since this department mostly deals with imports and exports, I saw
the processing of letter of credit and the documents needed for imports and exports.
Customers were coming for the purpose of their business and they were informed about
the rules and regulation for importing and exporting. Letter of guarantees were also
issued by the department.
Credit Department:
At the Credit Department, my practical learning was excellent. At this
department, the loans are to be disbursed. So for this purpose a complete interview with
borrower is conducted and borrower is asked about its financial strength then a CLP is
made. Loan is disbursed after the complete study of financial reports such as balance
sheet and income statement. Making of installments, interest charging and calculation
and others all were practically performed at the department.
41
Learning as an Internee
My internship experience has given me a realistic preview of my field of education. Now
I feel that I am better prepared to enter the world of professional work. I have come to
know and been appreciated by a number of professionals who are lending their services
to the banking sector for more than a decade. I feel honored that I have worked with such
experienced professionals. I must admit that such interaction in this respectable
professional community will help me in seeking out job opportunities in the near future.
Each task I performed was a different experience in itself. By the end of it, I must say I
realize my potentials, I have realized that earning money is not so easy after all, it takes a
lot of hard work and devotion, and not to forget time. And I now know that if I want I can
make things possible, and I also know how good it feels to having accomplished
something and being appreciated for it. I definitely have learnt things, which will impact
my career and my character.
The overall experience of my internship was very good; I have learnt the sense of
responsibility in its literal meaning. I am now capable of dealing with different sort of
customers, and how to be patient while doing so. Besides this I also gained knowledge
about banking which I previously lacked and many more products being offered by the
bank. So in a nutshell, this internship gave me the experience, which would no doubt
boost my confidence to work in future.
42
Marketing Analysis
This is an age of competition. Numerous organizations are providing financial services to
the customer. These days everyone is facing pressure of competitors. In this world of
growing competition, the only way to survive and grow, for an organization, in the
market place is the proper marketing and promotion of its products. Same is the case with
banking companies. There is large number of foreign and local banks working in the
country and it has been noticed that they are emphasizing much on their marketing
strategies. In this scenario, the key for a bank to succeed and attract its customers is
adequate promotion of its products &services. BAFL for the promotion of its new and
existing products invest heavily, it advertises its product through:
 Electronic media i.e. television
 Print media i.e. newspaper
 Billboards
 Business magazines
 Website
 Sponsorship
Electronic
The major way in which today’s organizations promote its products and services is
through television, not only because it’s economical but also because the visual and audio
aids help in promoting its product.
Television ads for Bank Alfalah mainly try to emphasis the ‘The Caring Bank’, message
in its advertisements, by showing how its services can help you with the different
financial problems that you face in your every day life. For example, an advertisement
showed how Bank Alfalah Credit Cards helped a couple when they had no cash left
during a shopping trip or how a father happily shows his family a new car that he had
financed from Bank Alfalah.
Another major way in which Bank Alfalah advertises its products electronically is
through its website, which is designed in an effective manner with detailed information,
so that visitors can effectively know about the different services that the bank provides.
43
Print
Print advertisements are another major way in which Bank Alfalah advertises its product
to the masses. Print media advertisements are mainly printed in major English and Urdu
newspapers across Pakistan.
The messages of these advertisements are mainly of new financial services that the bank
may introduce over time.
Sponsorships
Bank Alfalah also gives a significant consideration not only to its product publicity but
also to the creation of public relations. Bank has proves its public goodwill by
contributing money and time to public service and activities. Bank Alfalah has been
sponsoring different sporting tournament, especially cricket which is the most popular
sports activity of Pakistanis and is watched by millions whenever there is a tournament
featuring the Pakistani cricket team and is thus a great way to advertise their products.
Some of the tournaments that Bank Alfalah has sponsored over the year are as follows:
Series Sponsored By Bank Alfalah
Series
Year
Pakistan Vs England
2005
Pakistan Vs West Indies
2006
Pakistan VS South Africa
2007
Now a days, BAFL is sponsoring the cricket rankings updates on Ten Sports.
44
Human Resource Assessment
Bank Alfalah Ltd. has worked hard to build its human resource team and ensure that the
quality of newly inducted staff is not comprised with growth. For recruitment and
selection bank‘s policy is to hire suitable candidates. By suitable candidates bank refers
to candidates having proper educational qualification, experience and background.
Bank Alfalah not only is one of the fastest growing bank in Pakistan, that provides its
customers with a number of financial services, but is also a great employer of human
resources, that provides its employees with a conducive environment that not only is
No. of Employees 2001-2008
8000
6543
5218
6000
3352
4000
2000
7371 7584
959 1504
2133
0
2001 2002 2003 2004 2005 2006 2007 2008
challenging but also helps them in applying and gaining knowledge.
The above figures show that all prospect employees feel confidence in Bank Alfalah as
their prospective employer. Bank Alfalah, as a response to this confidence has three ways
of employing prospect employees for their organization.
Batch Trainees
BAL prefers to hire candidates having MBA degree for credits. For relationship officers,
education qualification is not very important. Their family background and
communication skills are more important. Bank hires fresh MBAs from prestigious
Universities in batches of 20-25 officers. Bank hires officers in range 1. Then depending
upon their job performance they are promoted to next range. More facilities and
increments are given along with promotion. Bank‘s policy is to give cash rewards and
salary increments for increasing the employees ‘satisfaction.
45
Direct Induction of Fresh Candidates
Through direct induction of fresh candidates, Bank Alfalah is able to employ fresh
postgraduate candidates for its organization and the process is registering one’s CV on
their data base on their website, it automatically becomes a part of their resource pool that
allows them to match applicant’s skills and competencies with the right placement
options.
Every year Bank Alfalah opens its doors for about 30 fresh post-graduates to join the
ranks of Management Trainee officers’ with the Bank. The MTO scheme is a highly
competitive and sought after induction scheme, in which short-listed applicants appear in
a written test followed by a panel interview. Successful candidates then receive
comprehensive training in essential areas of branch banking at the Bank‘s state-of-the-art
training facility at Karachi and Lahore, prior to their posting at various branch locations.
Preferred educational background for entry into the MTO scheme includes an MBA
degree, MA Economics or M.Com from reputable Pakistani or foreign institutions with
GPA of 3 plus, or equivalent. Strong personal character, as well as communication and
interpersonal skills are essential pre-requisites to succeed as an MTO.
Experienced Professionals
Based on requirements of experienced staff, Bank Alfalah also recruits talent from the
marketplace. Bank Alfalah offers competitive salary / benefits to worthy professionals at
all levels who wish to join hands with Bank Alfalah.
Training
Bank Alfalah’s management believes in developing the potential of the Bank’s
employees to the fullest extent. Training & Development Centre of the Bank are housed
in state of the art facilities at Karachi and Lahore of provide training to its employees. It
is obligatory for each staff member of the bank to attend at least two days of training in a
calendar year, with training programs in the following areas:
 Consumer Banking and Operations
 Credit Marketing & Proposals
 Credit Administration/Documentation
 Marketing and Selling Skills
 Customer Service Skills
 Leadership and Management Skill
 Personal Effectiveness and Skills
46
Furthermore training programs have also been introduced for fresh entrants into the bank,
to help them in learning and performing their new tasks.
Benefits provided by Bank Alfalah
Some of the monetary and non monetary benefits that Bank Alfalah provides to its
employees are as follows:
 Attractive Salary Package
 Employee Provident Fund
 Gratuity Fund
 Medical Insurance
 Bonuses
 Life Insurance
 Promotions
 Various types of Staff Loans
 Assistance in Pursuing Higher Education
 Cash Rewards on completing IBP Diploma
47
SWOT Analysis
SWOT is stands for strengths, weaknesses, opportunities and threats. SWOT analysis is a
careful evaluation of an organization’s internal strengths and weaknesses as well as its
environmental opportunities and threats. In SWOT analysis the best strategies accomplish
an organization’s mission by exploiting an organization’s opportunities and strengths
while neutralizing its threats and avoiding its weakness. During my internship I also
observe these factors of bank and made a conclusion which is as follows:
Strengths:
Main strengths of bank are describe follows due to which bank is becoming successful
day by day and now is on the fifth largest and successful bank in Pakistan in the bank’s
ranking after NBP, MCB, UBL and HBL.
 Being the private organization its main aim is not to earn profit but also to satisfy
its customers and slogan of BAL is also the representative of this purpose as Bank
Alfalah “The Caring Bank”.
 Bank has AA (Double A) and A1+ (A one plus) Credit Rating for long term and
short term loans respectively.
 Main source of profit for any financial institution is public saving which only
comes from public confidence and BAL is getting this confidence which is one of
the main strengths of bank
 Bank Alfalah is also getting fame in the market due to its name “ALFALAH”
which is leaving the Islamic and favorable impact on the minds of public.
 BAL is providing the facility of Money Gram to its entire people who are its
customer or not and through this service it has got the leadership in Money Gram
because any other bank is not offering this service.
 With in very short period it has got a superb accomplishment which shows the
competency of top management.
 Personnel of Alfalah are well trained and highly skilled.
 Bank Alfalah has a wide network of branches at the ideal locations, catering the
financial needs of its clients.
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 The management of the bank is very much concerned with the development and
improvement of the working environment. The bank has state of the art and
purpose built branches where all the modern technologies are provided to get the
efficiency of the workforce and the customer satisfaction.
Weaknesses:
Beside all these strengths I also noted some weaknesses in the operations of bank Alfalah
which are described below:
 BAL is that it is not offering the loan facility to newly established businesses
because it’s the BAL policy that it will loan only to that people who are running
their businesses from 3 years.
 BAL’s lending procedure is quite complicated that some people hesitate to come
as they are requiring a huge file of documents.
 Bank Alfalah is not offering any credit facility for students.
 BAL is not offering the online facility to account holders having photo account.
 Bank Alfalah is charging online charges for transfer of money but some other
banks not charge online transfer charges.
 Majority of the workforce consists of young professional, they lack in their
experience. And sometimes lack of experience becomes a hurdle while serving to
the customers. It is the point where they feel difficulty while competing with the
other banks.
 It was observed that at present the motivation level of the employees is not very
much.
 The increased workload has resulted in the reduced efficiency of the employees.
Because now the time required for completing the tasks for a single customer has
been increased. As a result the environment of the branch has become very messy.
.
49
Opportunities:
It is mandatory to try to make progress with consistency as well as to adopt changes with
needs of time, in order to cope up with both conditions.
 Bank Alfalah is spreading its network outside the boundaries of Pakistan and it
has more opportunities to extend this network as State Bank of Pakistan has
prescribed new policies in the prudential regulations.
 In addition to excellent routine banking, it has earned a good name by offering
special products like car, home and credit cards facility. So the penetration of
these products could enhance market shares.
 There is a very good growth trend in the Islamic banking in the country and in the
world as well. BAL has the advantage of having Islamic Banking network and the
growth in this particular field can be very fruitful for the bank, bank has an
opportunity to introduce new products and services in Islamic banking.
Threats:
Threats are the negative trends in external environmental factors. As on one side
environment provides opportunities to one organization, on the other hand it also has to
face some threats. Bank Alfalah also has to face this situation.
 Other foreign financial institutions like City Bank, HSBC etc also having strong
banking policies and there’s a chance that people might move toward these
financial institutions to secure their investments, transactions and related services.
 For last seven year there is political stability in Pakistan but now again a new
layer of political instability arises which effects almost all industries including
Banks.
 Due to economic instability like currency depreciation and inflation, the bank is
constantly facing a threat e.g. in case of inflation the people have low disposal
income which means lower deposits in banks.
 Other investment opportunities like investment in property and gold are giving
people more return as compare to banks; it can decrease the deposits of bank.
50
PEST Analysis
A broad view of market is important when management is interested in introducing better
services for customers. Rapid technological change, global competition and the diversity
of buyers preferences in many markets require the constant attention of the market
vouchers to identify promises business opportunities, see the shifting requirements of the
buyers, evaluate changes in competitors positioning and guide the choice of which buyers
to target and classify them according to respective segments.
Identification of external and macro factors that influence buyers and thus change the size
and composition of market overtime involves initially building customer profiles. These
influences include:
 Political environment
 Economic Indicators
 Socio cultural environment
 Technological factors
Political Environment
The events in the last couple of years; ever since the sacking of Chief Justice Iftikhar
Choudhary, Pakistan has faced crisis after crisis, including the lawyers’ movement,
violence in Karachi, the Lal Masjid debacle, militancy in FATA and NWFP and its
impact on other parts of the country, the return of Benazir Bhutto and her subsequent
assassination, and current ongoing military operation in Swat– all the above events
indubitably made a huge impact on the economy.
Stability and law and order situation under the political regime is very important for the
economy as a whole. The present state of the government in Pakistan is directly affecting
the policies of banks. Continuous political changes have disrupted the policies and
objectives as each regime brings with it its own agenda. Organizations need time to
adjust to one regime and then work with it towards economic enhancement. Due the
wrong policies of the government, the talibanization also develop in Pakistan and become
the international issue in Pakistan and badly affected the Pakistan repute in the world and
promote the uncertain conditions for the business in the Pakistan. Due to this the
investors are not interested in the Pakistan.
51
Economic Indicators
The economy of any country directly influences any financial organization. Economic
indicators include Gross Domestic Product (GDP), inflation, balance of payment, debt of
the government.
Pakistan’s economy has witnessed the most challenging period after posting six
consecutive years of healthy economic growth. However, the strong fundamentals were
compromised to prevailing global crises that’s shacked the confidence of global investors
and FDI flowing in the country. The steep rise in oil prices to U$ 147 a barrel, soaring
inflation hitting a 24% mark, huge fiscal deficits and balance of payments issues coupled
with plummeting forex reserves added to the economy’s move to an unstable growth
trajectory.
Also the load shading is another factor that affects the Pakistan economy badly. This not
the end of the story after this Pakistan’ economy face lot of problems like bomb attacks in
Pakistan no electricity and the unstable government, due to this the investor are not invest
in the Pakistan and the existing business men are loosing their business unit due to the
loss.
Due to this poor economy, businesses are reaping low profits and stock market is in great
danger. Pakistan’s foreign debts are rising day by day so such a situation is a big
challenge for banking institution to survive. The financial crisis in Pakistan has made the
management of BAFL tensed to work in such an environment.
Socio cultural environment
A low saving culture has offset the huge population advantage this is enjoyed by
Pakistan. Also culture is dedicated by the religion, and in Pakistan a significant segment
of the population is reluctant to accept interest for their deposits due to the negative
religious implications of such an act. About 70% of Pakistan’s population is based on
rural areas and literacy rate of the country is very much low, thus making it harder for
banks to mobilize their deposits within these regions.
However, in today world, the customers are becoming more intelligent and through
media they keep themselves up to date. Thus, the lifestyle and expectations of the
customers from the service provider is increasing day by day.
52
Technological Factors
Banks in the developed world have been turning to heavy IT investments, which
differentiate their products, provide response times, enhance accessibility and improve
customer satisfaction. Though investing in state-of-the-art host banking solution, ATM
and POS (point of sale) networks, visa, MasterCard, and, smart cards, telebanking,
internet banking and now mobile banking are common IT investment in the developed
world, it is now that these products and services are gaining faster acceptance in Pakistan.
In BAFL technology has great effect on the working environment. BAFL is always
willing to introduce new computer systems for keeping its staff up to date. With the
successful implementation of new centralized database system, the bank also achieved
remarkable progress in business process re-engineering, turnaround time compliance by
centralizing outward remittances, account opening and credit administration.
53
Financial Analysis
Horizontal &Vertical Analysis
Balance Sheet of Bank Alfalah Limited
Assets
Cash and balances with
treasury banks
Balances with other banks
Lending to financial
institutions
Investments
Advances
Other assets
Operating fixed assets
Deferred tax asset
TOTAL ASSETS
LIABILITIES & EQUITY
Bills payable
Borrowings from financial
institutions
Deposits and other
accounts
Subordinated loans
Liabilities against assets
subject to finance lease
Other liabilities
Deferred tax liabilities
TOTAL LIABILITIES
REPRESENTED BY
Share capital
Reserves
Unappropriated profit
Surplus on revaluation of
assets
Total EQUITY
Total Liabilities and
Equity
2004
2005
2006
2007
2008
19,708,518
24,788,625
27,859,360
29,436,378
32,687,335
3,183,957
9,713,369
12,731,952
18,380,738
21,581,043
27,050,493
12,456,653
3,452,059
3,315,500
35,503,196
57,425,700
56,502,210
88,491,564
75,973,238
88,931,400
118,864,010
149,999,325
171,198,992
192,671,169
3,226,959
3,851,529
5,633,051
6,013,097
8,989,186
4,280,504
6,620,067
10,502,990
11,922,324
13,773,293
154,834,534
248,313,793
275,685,541
328,895,152
348,990,764
2,233,671
3,733,124
3,091,135
4,138,243
3,452,031
12,723,830
5,844,389
8,394,130
21,230,697
13,690,222
129,714,891
222,345,067
239,509,391
273,173,841
300,732,858
1,899,480
3,223,355
3,222,106
3,220,858
2,571,169
-
-
-
-
-
-
2,725,344
5,219,666
7,305,496
9,531,860
11,291,280
275,834
484,066
1,921,338
1,379,809
208,465
149,573,050
240,849,667
263,443,596
312,675,308
331,946,025
2,500,000
3,000,000
5,000,000
6,500,000
7,995,000
1,008,772
2,351,218
2,749,533
2,414,833
3,166,056
860,300
1,386,845
2,823,072
4,851,840
3,447,467
892,412
726,063
1,669,340
2,453,171
2,436,216
5,261,484
7,464,126
12,241,945
16,219,844
17,044,739
154,834,534
248,313,793
275,685,541
328,895,152
348,990,764
54
Income Statement of Bank Alfalah Limited
2004
2005
2006
2007
2008
Mark-up/return/interest earned
5,620,203 12,246,811
NON MARK-UP /INTEREST INCOME
Fee, Commission and
brokerage income
675,868
1,158,747
Dividend income
52,539
52,014
Income from dealing in
Foreign currency
218,820
290,091
Gain on sale of securities
Unrealized (loss) /gain on
revaluation of Investments
Other income
572,822
744,518
Total Non mark-up/ Interest
income
1,520,049
2,245,370
TOTAL INCOME
7,140,252 14,492,181
EXPENSES
Mark-up/return/interest earned
expensed
2,434,459
7,204,992
Provision against nonperforming loans and
advances-net
370,208
402,298
Provision for the diminution in
the value of investments
2,165
(23,163)
Bad debts written off directly
351
512
NON MARK-UP/ INTEREST EXPENSES
Administrative expenses
2,677,635
4,313,023
Other Provisions/Write Offs
10,125
Other charges
1,700
21,104
Total non mark-up/ Interest
expenses
2,679,335
4,344,252
Extraordinary / Unusual items
PBT
1,653,734
2,563,290
Taxation
-Current
586,159
592,635
-Prior years
(20,751)
1,037
-Deferred
(3,663)
267,524
TOTAL EXPENSES
6,048,263 12,790,087
PAT
1,091,989
1,702,094
21,191,470
25,783,871
31,046,583
1,804,998
2,429,599
2,539,321
37,393
64,722
300,943
386,997
474,510
914,845
180,751
2,053,192
424,220
(27,599)
(14,929)
(181,571)
842,099
1,031,372
1,247,669
3,224,639
6,038,466
5,245,427
24,416,109
31,822,337
36,292,010
15,232,886
16,620,963
20,331,194
697,690
2,370,867
2,035,997
-
-
1,479,062
1,537
5,844
28,298
5,874,745
8,272,587
10,471,399
6,959
28,582
43,306
9,565
122,758
5,918,051
8,289,111
10,622,739
2,565,945
4,535,552
1,794,720
476,226
1,726,810
1,730,051
-
(221,797)
55
-
(100,874)
427,902
-321,487
(1,014,835)
22,653,418
28,692,108
34,990,709
1,762,691
3,130,229
1,301,301
Horizontal Analysis of Balance Sheet
Assets
Cash and balances with treasury banks
Balances with other banks
Lending to financial institutions
Investments
Advances
Other assets
Operating fixed assets
Deferred tax asset
TOTAL ASSETS
LIABILITIES & EQUITY
Bills payable
Borrowings from financial institutions
Deposits and other accounts
Subordinated loans
Liabilities against assets subject to
finance lease
Other liabilities
Deferred tax liabilities
TOTAL LIABILITIES
REPRESENTED BY
Share capital
Reserves
Unappropriated profit
Surplus on revaluation of assets
Total EQUITY
Total Liabilities and Equity
2004
2005
2006
2007
2008
100.00
125.78
141.36
149.36
165.85
100.00
305.07
399.88
577.29
677.81
-
100.00
46.05
12.76
12.26
100.00
161.75
159.15
249.25
213.99
100.00
133.66
168.67
192.51
216.65
100.00
119.35
174.56
186.34
278.57
100.00
154.66
245.37
278.53
321.77
-
-
-
-
-
100.00
160.37
178.05
212.42
225.40
100.00
167.13
138.39
185.27
154.55
100.00
45.93
65.97
166.86
107.60
100.00
171.41
184.64
210.60
231.84
100.00
169.70
169.63
169.57
135.36
-
-
-
-
-
100.00
191.52
268.06
349.75
414.31
100.00
175.49
696.56
500.23
75.58
100.00
161.02
176.13
209.05
221.93
100.00
120.00
200.00
260.00
319.80
100.00
233.08
272.56
239.38
313.85
100.00
161.20
328.15
563.97
400.73
100.00
81.36
187.06
274.89
272.99
100.00
141.86
232.67
308.28
323.95
100.00
160.37
178.05
212.42
225.40
56
Comments on Horizontal Analysis of Balance Sheet
Assets:
The assets of the BAFL have been growing very fast since its inception. This growth is
the result of the massive expansion policy the management has been following ever since
the inception of BAFL.
One of the important ingredients of any commercial bank‘s growth is increase in most of
current assets that is a good sign as it increases their liquidity. Let us first have a look at
the liquid assets.
In earning asset, the lending to financial institutions is decreasing whereas the other
investments and advances continuously. However the investments have increased in 2008
with decreasing rate. Increase in the fix assets might be due to branch expansion.
Liabilities:
As regards the liability section of the balance sheet chief liability of commercial bank is
its deposits it generates from its customer. The ratio of increase in deposits in 2008 is
21.24% which is low as compare to increase in 2007 which is 25.96%, it is concluded
that the deposits are increasing but at decreasing rate. . The other encouraging ratio we
observe in liability section is borrowing from financial institution which shows
decreasing in 2005 and 2006 but it shows an increase 2007 and 2008 which proves
financial strength and its credit worthiness in the money market.
Equity:
Bank‘s Share Capital as well as unappropriate profits is increasing at increasing rate till
2007 but in 2008 the capital share decreased slightly by 0.2% and unappropriate profits
by 163%.
57
Vertical Analysis of Balance Sheet
Assets
Cash and balances with treasury banks
Balances with other banks
Lending to financial institutions
Investments
Advances
Other assets
Operating fixed assets
Deferred tax asset
TOTAL ASSETS
LIABILITIES & EQUITY
Bills payable
Borrowings from financial institutions
Deposits and other accounts
Subordinated loans
Liabilities against assets subject to
finance lease
Other liabilities
Deferred tax liabilities
TOTAL LIABILITIES
REPRESENTED BY
Share capital
Reserves
Unappropriated profit
Surplus on revaluation of assets
Total EQUITY
Total Liabilities and Equity
2004
2005
2006
2007
2008
12.73
9.98
10.11
8.95
9.37
2.06
3.91
4.62
5.59
6.18
-
10.89
4.52
1.05
0.95
22.93
23.13
20.50
26.91
21.77
57.44
47.87
54.41
52.05
55.21
2.08
1.55
2.04
1.83
2.58
2.76
2.67
3.81
3.62
3.95
-
-
-
-
100.00
100.00
100.00
100.00
100.00
1.44
1.50
1.12
1.26
0.99
8.22
2.35
3.04
6.46
3.92
83.78
89.54
86.88
83.06
86.17
1.23
1.30
1.17
0.98
0.74
-
-
-
-
1.76
2.10
2.65
2.90
3.24
0.18
0.19
0.70
0.42
0.06
96.60
96.99
95.56
95.07
95.12
1.61
1.21
1.81
1.98
2.29
0.65
0.95
1.00
0.73
0.91
0.56
0.56
1.02
1.48
0.99
0.58
0.29
0.61
0.75
0.70
3.40
3.01
4.44
4.93
4.88
100.00
100.00
100.00
100.00
100.00
-
-
58
Comments on Vertical Analysis of Balance Sheet:
After analyzing the Balance Sheet, we can see that balances with other banks are
increased in percentage from 5.59 to 6.18 as well as the cash balance with the bank is
also increased 8.95 to 9.37 that is a good sign for management. Lending to Financial
Institutions is continuously decreasing from 10.89 in 2005 to 0.95 in 2008. There is a
decrease in percentage of lending to financial institutions is not a good sign.
On liability side, borrowings from financial institutions are also decreased that is very
positive sign as far as banks financial health is concerned. Borrowings are decreased by
6.46% in 2007 to 3.92% in 2008. More over there is an increase in deposits from year
2007 to 2008 which shows the faith and trust of people on BAL. Deposits are increased
from 83.06% in 2007 to 86.17% in 2008.
59
Horizontal Analysis of Income Statement
2004
2005
2006
2007
2008
Mark-up/return/interest earned
100.00
217.91
377.06
458.77
552.41
NON MARK-UP /INTEREST INCOME
Fee, Commission and brokerage
income
100.00
171.45
267.06
359.48
375.71
Dividend income
100.00
99.00
71.17
123.19
572.80
Income from dealing in Foreign
currency
100.00
132.57
176.86
216.85
418.08
Gain on sale of securities
100.00 1,135.92
234.70
Unrealized (loss) /gain on
revaluation of Investments
100.00
54.09
657.89
Other income
100.00
129.97
147.01
180.05
217.81
Total Non mark-up/ Interest income 100.00
147.72
212.14
397.25
345.08
TOTAL INCOME
100.00
202.96
341.95
445.68
508.27
EXPENSES
Mark-up/return/interest earned
expensed
100.00
295.96
625.72
682.74
835.14
Provision against non-performing
loans and advances-net
100.00
108.67
188.46
640.41
549.96
Provision for the diminution in the
value of investments
100.00 (1,069.88)
68,316.95
Bad debts written off directly
100.00
145.87
437.89 1,664.96
8,062.11
NON MARK-UP/ INTEREST EXPENSES
Administrative expenses
100.00
161.08
219.40
308.95
391.07
Other Provisions/Write Offs
100.00
0.69
282.29
Other charges
100.00
1,241.41
2,547.41
562.65
7,221.06
Total non mark-up/ Interest
expenses
100.00
162.14
220.88
309.37
396.47
Extraordinary / Unusual items
PBT
100.00
155.00
155.16
274.26
108.53
Taxation
-Current
100.00
101.10
81.25
294.60
295.15
-Prior years
100.00
(5.00)
486.12
0.00
1,068.85
-Deferred
100.00 (7,303.41) (11,681.74) 8,776.60 27,705.02
TOTAL EXPENSES
100.00
211.47
374.54
474.39
578.52
PAT
100.00
155.87
161.42
286.65
119.17
60
Comments on Horizontal Analysis of Income Statement:
Income:
The income of the BAL shows the increasing trend till 2007 but in 2008 its over all
income has decreased by 167.48% as compare to 2007 mainly because of the perceiving
world economic crisis and also by the Pakistan’s economy crisis. Due to increasing
provisions, the profibility of the bank decreases a lot.
Expense:
The expenses of the bank are increasing as operations of the bank increases. The
expenses have been increasing with an increasing rate since last three years. The
expenses increased 104%in 2008 as compared to 100% increase in 2007.
61
Vertical Analysis of Income Statement
2004
Mark-up/return/interest earned
78.71
NON MARK-UP /INTEREST INCOME
Fee, Commission and brokerage
income
9.47
Dividend income
0.74
Income from dealing in Foreign
currency
3.06
Gain on sale of securities
0.00
Unrealized (loss) /gain on
revaluation of Investments
Other income
8.02
Total Non mark-up/ Interest
income
21.29
TOTAL INCOME
100.00
EXPENSES
Mark-up/return/interest earned
expensed
34.09
Provision against non-performing
loans and advances-net
5.18
Provision for the diminution in the
value of investments
0.03
Bad debts written off directly
0.00
NON MARK-UP/ INTEREST EXPENSES
Administrative expenses
37.50
Other Provisions/Write Offs
Other charges
0.02
Total non mark-up/ Interest
expenses
37.52
Extraordinary / Unusual items
PBT
23.16
Taxation
-Current
8.21
-Prior years
(0.29)
-Deferred
(0.05)
TOTAL EXPENSES
84.71
PAT
15.29
62
2005
2006
2007
2008
84.51
86.79
81.02
85.55
8.00
7.39
7.63
7.00
0.36
0.15
0.20
0.83
2.00
1.59
1.49
2.52
0.00
0.74
6.45
1.17
(0.11)
(0.05)
(0.50)
5.14
3.45
3.24
3.44
15.49
13.21
18.98
14.45
100.00
100.00
100.00
100.00
49.72
62.39
52.23
56.02
2.78
2.86
7.45
5.61
-
-0.16
-
-
4.08
0.00
0.01
0.02
0.08
29.76
24.06
26.00
28.85
0.02
0.08
0.07
-
0.15
0.18
0.03
0.34
29.98
24.24
26.05
29.27
17.69
10.51
14.25
4.95
4.09
1.95
5.43
4.77
0.01
(0.41)
0.00
(0.61)
1.85
1.75
(1.01)
(2.80)
88.26
92.78
90.16
96.41
11.74
7.22
9.84
3.59
Comments on Vertical Analysis of Income Statement:
The vertical analysis of income side of income statement demonstrate that major factor of
the total income is interest earned which contributes more than 75% in 2004 and 80% in
2005 to 2008, whereas fee, commission and brokerage income makes major part of total
non-mark up interest income and its proportion to total non-mark up interest/income is
decreasing every year but in 2006 it increased little, here we observe that total non mark
up income is decreased in 2008, which is good sign for the bank as bank is earning more
from its primary functions.
Non- mark up interest expensed is the major component of total expense in 2004, and in
non mark up expense admin expenses contribute 44.27%. But from 2005 till 2006,
interest expensed in the major part because the deposits of the banks shows increase and
as bank has to pay on interest bearing liabilities.
63
RATIO ANALYSES
Ratio simply means one number expressed in terms of another. A ratio is a statistical
yardstick by means of which relationship between two or various figures can be
compared or measured. It is defined as a systematic use of ration to interpret the financial
statements so that the strengths and weaknesses of a firm, as well as historical
performance and current financial condition, can be determined.
Profibility Ratios
BAFL is following the trend of
industry in terms of declining
profits due to rising provisions.
ROA
ROE
Net profit
margin
Gross
spread ratio
The mark-up increased by 20.4%,
while the mark-up expense
increased by 22.3%, limiting
the net mark-up growth to 17%
to
Rs
10,715
million.
Provisions
showed
a
considerable increase and a
new provision for diminution
in value of investments is
included in 2008 which valued
Rs. 1,479 million. The bad
debts directly written off
increased by 4.8 times in 2008
compared to last year and
valued Rs. 28 million.
The
non-mark-up
interest
income declines slightly, thus
contributing
insignificantly
towards creating a variance in
the two years. Administrative
expenses swelled by 26.6% due
to the expansion in branch
network during FY08, inline
with the inflationary pressures.
PAT was Rs 1301 million in
2004 2005 2006 2007 2008
0.86 0.84 0.67 1.04 0.38
26.89 30.65 20.37 25.72 9.17
19.14 13.89
8.31 12.14
4.19
56.96 41.17 28.12 35.54 34.51
ROA
1.2
1
0.8
0.6
0.4
0.2
0
2004
ROE
2005
2006
Net profit margin
2007
2008
Gross spread ratio
60
50
40
30
20
10
0
2004
64
2005
2006
2007
2008
FY08 as compared to Rs 3130 million in FY07 which is down by 58.4%.
Return on Average Total Assets= (Net Profit after Tax / Avg. Total Assets)*100
Return on assets (ROA) measures the firm’s overall effectiveness in generating profits
with its available assets. This ratio indicates how well management is utilizing firm’s
assets to make profit. ROA shows decreasing trend in starts but it increased in 2007 and
reaches 1.04% to its peak and now it decreases drastically and reaches 0.38%.
Return on Equity (ROE) = (Net Profit after Tax / Shareholder’s Equity)*100
ROE measures the shareholder’s return earned on their investment in the firm. This ratio
indicates how profitable a company is by comparing its net income to its average
shareholder’s equity. ROE was at maximum 30.65% in FY05 but in 2008 it reaches to
lowest 9.17% from 25.72% of FY07.
Net Profit Margin = (Net Profit after Tax / (Sales))*100
Net profit margin measures the percentage of sales revenue remaining after all cost and
expenses, including interest and taxes have been deducted. The net profit margin has also
decreased to considerable low level of 4.19% from previous year’s 12.14%.
Gross Spread Ratio = Net Mark up Income / Gross Mark up Income
Gross spread ratio measures the percentage of sales revenue earned to the gross mark up
after deducting the markup expense. Gross spread ratio has decreased slightly compared
to 2007 and it was lowest 28.12% in 2006.
Debt Management Ratios
Debt Ratio = Total Liabilities /
Total Assets
Debt to equity
Debt Ratio
Deposit times
capital
65
2004 2005 2006 2007 2008
28.43 32.27 21.52 19.28 19.47
0.97 0.97 0.96 0.95 0.95
24.65 29.79 19.56 16.84 17.64
Debt ratios tell us about the firm’s overall debt position and as well as it mixes of equity
and debt. These ratios will
Debt Ratio
also give general idea about
the level of financial risk
faced by firm.
0.97
This ratio measures the
0.96
portion of total assets
financed by the firm’s
0.95
creditors. Higher this ratio,
0.94
the greater the amount of
2004 2005 2006 2007 2008
other people’s money being
used in an attempt to
generate profits. Even though debt ratio is in decreasing trend but this ratio is very high.
Higher this ratio means higher the financial risk so it’s a negative sign for bank.
Debt to equity compares
the debt size as compared
to equity. The Debt to
equity is lowest in FY07
and it has increased slightly
in 2008.
However the deposits make
the 90.5% of the total debt.
The ratio of deposit time
capital shows the deposit
size as compare to the
invested capital.
Debt to equity
Deposit times capital
40
30
20
10
0
2004
2005
2006
2007
2008
The debt management figures show that the assets of the bank have become less
leveraged till 2007. This was due to the fact that the debt has increased but equity has
increased by a greater percentage in recent years. But it increased slightly in 2008. Equity
increased by 5%in FY08. However, liabilities rose by 6.1%.
Liquidity Ratios
2004 2005 2006 2007 2008
Earning assets
0.80 0.82 0.79 0.80 0.77
The advance to deposit ratio to assets
(ADR) ratio is bank’s financial Advance to
68.56 53.46 62.63 62.67 64.07
ratio which is used to test the deposit
company financial position by keeping in view its advances and deposits. Strength of
bank is judged that how much bank is capable to grasp the saving of people and how
66
many people are interesting
to take loan facility from
bank as profit of bank
depends on higher advances
and advances comes from
deposits of customers.
The figures for FY08 show
that the bank has further
improved
its
liquidity
position. Advances have
grown by 12.5% from 171
million to 192 million
during this period.
Earning assets are interest
generating assets. The ratio
of earning assets to asset
shows the proportion of
interest generating assets to
the total assets.
Advance to deposit
80
60
40
20
0
2004
2005
2006
2007
2008
2007
2008
Earning assets to assets
0.84
0.82
0.8
0.78
0.76
0.74
2004
2005
2006
The ratio of earning assets to total assets for the bank shows remarkable fluctuation,
suggesting careful management of and investment in interest generating assets. Within
earning assets, however, the bank shows a gradual trend of movement of capital into and
away from lendings to other financial institutions.
Solvency Ratios
The solvency situation for
the industry as a whole has
shown marked improvement
in recent years caused by
increasing profitability and
fresh inflows of capital till
FY07. However, the figures
for the bank show that there
is a slight decline in the
solvency position in 2008 as
a result of high growth in
deposits. The situation was
worse in 2005 when the 3%
of assets was equity
Equity to assets
Equity to deposits
Earning assets to
deposits (times)
2004 2005 2006 2007 2008
3.40 3.01 4.44 4.93 4.88
4.06 3.36 5.11 5.94 5.66
0.98
0.96
0.97
1.03
Earning assets to deposits
1.1
1
0.9
0.8
2004
67
2005
2006
2007
2008
0.90
financed.
This situation, however,
has improved in 2006
because of increases in
equity, which gained
financed almost 4% of
assets.
Equity to assets
Equity to deposits
8.00%
6.00%
4.00%
2.00%
Earning
assets
in
comparison to deposits
0.00%
declined from around
2004
2005
2006
2007
2008
1.03 in FY07 to 0.90 in
FY08. This is caused by
the fact that while deposits have shown tremendous growth over the period under study,
the bank has maintained a consistent approach with respect to its earning assets and has
not expanded them to the same extent.
Activity Ratios
2004 2005 2006 2007 2008
Activity ratios show that how
efficiently an organization is
using its resources.
Total Asset
Turnover
3.6
4.9
7.6
7.8
8.8
Total Asset Turnover = Sales (Revenue) / Total Assets
Total asset turnover indicates
Total Asset Turnover
the efficiency with which firm
10
uses it assets to generate sales
(revenue). The higher the firm’s
8
total assets turnover the more
6
efficiently its assets have been
4
used. This measure is probably
2
of
greatest
interest
to
0
management,
because
it
2004
2005
2006
2007
2008
indicates whether the firm’s
operations
have
been
financially efficient. In last five years Total Asset Turnover shows its increasing trend, so
it’s good sign and shows that bank using its assets efficiently.
68
Market Ratios
Banks have dominated the capital markets of Pakistan because of their superlative
performance. They comprise one third of the total capitalization of the KSE.
Book value per Share = Total Shareholder’s Equity / No. of Outstanding Shares
Book value is of limited to the investment analyst since it is based on historical costs.
Book value per share is
showing mix trend and in
2004 2005 2006 2007 2008
FY08 it has decreased to Book Value per share 21.05 24.88 24.48 24.95 21.32
21.32 because of large Earning per share
3.9 3.92 2.91 3.92 1.63
increase in no of share
outstanding from 650,000
in FY07 to 799,500 in
Book Value per share
Earning per share
FY08. However equity has
also increased slightly by
30
25
5%.
Earning Per Share (EPS) =
Earning
/
No.
of
Outstanding Shares
20
15
10
5
0
2004
2005
2006
2007
2008
The firm’s EPS are
generally of interest to
present shareholders. EPS represent the earning on behalf of each outstanding share of
common stock. EPS decreased in 2008 significantly due to lower earning which is 58.4%
decreased as compared to last year.
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Recommendations
After doing internship of six weeks in Bank Alfalah Limited, I would like to give some
recommendations to count over some problems.
 Bank should prefer to promote worker on the basis of their talent and avoid going
for personal like and dislikes. It can be harmful for the organization in the long
run.
 In Bank Alfalah, there is misdistribution of work; some people are over burdened
with the work. So I suggest that there should be fair distribution of work in all the
departments.
 Bank Alfalah is only dealing in Money Gram; it should also starting providing the
service of other money transfer lines like Western Union.
 BAL should provide loan to students at low mark up rate and easy terms &
conditions.
 Bank Alfalah Limited needs to use more marketing channels such as radio to
make the public aware of its products and services. In the presence of intense
competition Bank Alfalah Limited has to realize the importance of marketing.
 Bank Alfalah has equipped its branches with all major IT tools being used in the
industry like ATM’s, fax machines, photocopiers, printers, latest computers and a
good connectivity architecture, however it has been observed that when its time to
work, there are many failures seen in the different devices used by Bank Alfalah,
especially its connectivity architecture and remains offline with the main server,
that creates problems for the customers
 There are no incentive schemes for employees of Bank Alfalah like scholarship
schemes for employees that want to pursue higher education. Bank Alfalah
although gives a number of incentives to its employees, like personal loans at
nominal markup but they are only provided to employees that are in higher ranks.
Education fees are also returned by Bank Alfalah to its employees, after the have
finished their studies.
70
 Bank Alfalah Ltd should continuous to expand its business, by increasing its
deposit portfolio through aggressive market penetration strategies.
 The top management should immediately start thinking in terms of rotating the
employees in various departments, as this transforms work force into human
capital, if a particular individual keeps on employing his\her efforts in one sphere
of banking it would not only create a sense of monotony, but also not help
improving the skills of Bank Alfalah Limited employees.
 Bank Alfalah Limited should evolve a very serious management policy to attract
multinational corporations as its clients. This action, if actualized, would not only
prove to be highly profit generating, but it would also contribute a lot towards
BAFL‘s image building.
 Bank Alfalah limited has the web site, which has not been updated. The web site
is very less informative and it won’t leave a good impression on the visitor. So I
suggest that it should be updated to meet the requirements of the visitors.
 Participative management concept should be adopted, where ideas from the
employees should also be taken, not only for developing products but also on
service, efficiency, employee morale etc. in order to improve them.
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Conclusion
At present there is no such organization in the world that is free from problem and
challenges. Every concern has to strive and struggle a lot to be more profitable and to get
more competitive edge.
It has been twelve years since the establishment of Bank Alfalah, and since its
establishment it has aimed to become the leading bank of Pakistan by that provides
outstanding services to its customers. The bank has seen phenomenal growth in the past
few years by opening more branches in the country, increasing the deposit base, while
also increasing the assets and profits of the bank. The services that Bank Alfalah provides
have a great market penetration not only because of their features but also the profit and
markup rates that they charge. The management of BAFL is taking strategic steps to
enable the bank to emerge as a strong and progressive institution. It is continuing to
make efforts to refine its products and operations to make them more compatible. New
deposit schemes have been introduced and an action plan to maintain revenue growth in
future.
As the business and economic conditions remain uncertain, BAL continues to develop the
new products like it has been doing in past.
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Bibliography
Web Resources
Bank Alfalah (www.bankalfalah.com)
Wikipedia (www.wikipedia.com)
State Bank of Pakistan (www.sbp.org.pk)
Google (www.Google.com)
Reports & Papers
Annual Report Bank Alfalah 2008
Issues in Pakistan’s Economy by S. Akbar Zaidi
International Finance by Maurice D. Levi
Bank Alfalah Limited. (2009). Alfalah Mahana Amdan Plus [Brochure].
Bank Alfalah Limited. (2009). Alfalah Quick Finance [Brochure].
Bank Alfalah Limited. (2009). Alfalah Milkiat Finance [Brochure].
Bank Alfalah Limited. (2009). Alfalah Karobar Finance [Brochure].
73