ACKNOWLEDGMENT

All gratitude and thanks to almighty ALLAH the gracious, the most merciful
and beneficent who gave me courage to undertake and complete this task. I am
very much obliged to my ever caring and loving parents whose prayers have
enabled to reach this stage.

I am grateful to almighty ALLAH who made me able to complete the work

presented in this report. It is due to HIS unending mercy that this work moved
towards success.
I am highly indebted to my course instructor Mr. Qamar Ishtiaq for providing me
an opportunity to learn about the Banking system of Allied Bank Limited" which
is vital ingredient of M.com program. I am very great full to my teachers for
providing me guideline for the completion of this report.
I feel great pride and pleasure on the accomplishment of this report.

TABLE OF CONTENTS
ACKNOWLEDGMENT ----------------------------------------------------------------------------------------------------------------- 1
TABLE OF CONTENTS ----------------------------------------------------------------------------------------------------------------- 2
EXECUTIVE SUMMARY -------------------------------------------------------------------------------------------------------------- 3
CHAPTER# I ----------------------------------------------------------------------------------------------------------------------------- 4
INTRODUCTION OF THE STUDY --------------------------------------------------------------------------------------------------- 4
1.1 BACK GROUND OF THE STUDY ------------------------------------------------------------------------------------------ 4
1.2 PURPOSE OF THE STUDY ------------------------------------------------------------------------------------------------------ 4
1.3 SCOPE OF THE STUDY---------------------------------------------------------------------------------------------------------- 5
1.4 INTERNSHIP METHODOLOGY ------------------------------------------------------------------------------------------------- 5
1.5 SCHEME OF THE REPORT ------------------------------------------------------------------------------------------------------ 6
CHAPTER # 2 ---------------------------------------------------------------------------------------------------------------------------- 7
INTRODUCTION TO BANKING AND ---------------------------------------------------------------------------------------------- 7
ALLIED BANK LIMITED --------------------------------------------------------------------------------------------------------------- 7
2.1ORIGIN OF BANKING -------------------------------------------------------------------------------------------------------------- 7
2.2HISTORY OF BANKING ------------------------------------------------------------------------------------------------------------- 7
2.3DEFINITION OF BANKING --------------------------------------------------------------------------------------------------------- 8
2.4DEVELOPMENT OF BANKING IN PAKISTAN --------------------------------------------------------------------------------------- 9
2.5 ORGANIZATIONAL STRUCTURE: -------------------------------------------------------------------------------------------------- 9
2.6 MANAGETMENT HIERARCHY --------------------------------------------------------------------------------------------------- 13
2.7 BOARD OF DIRECTORS ---------------------------------------------------------------------------------------------------------- 14
2.8 BRANCH CHART OF ABL, WARSAK ROAD BRANCH ----------------------------------------------------------------- 15
2.9 BRANCH NET WORK------------------------------------------------------------------------------------------------------------ 16
CHAPTER NO 3 ----------------------------------------------------------------------------------------------------------------------- 18
WHAT I LEARNED ------------------------------------------------------------------------------------------------------------------- 18
3.1DEPOSIT DEPARTMENT --------------------------------------------------------------------------------------------------------- 18
CHAPTER 4 ---------------------------------------------------------------------------------------------------------------------------- 23
CRITICAL ANALYSIS ----------------------------------------------------------------------------------------------------------------- 23
4.1 FINANCIAL ANALYSIS ----------------------------------------------------------------------------------------------------------- 23
4.2 RATIO ANALYSIS ---------------------------------------------------------------------------------------------------------------- 24
4.3 SWOT ANALYSIS --------------------------------------------------------------------------------------------------------------- 29
CHAPTER 5 ---------------------------------------------------------------------------------------------------------------------------- 35
CONCLUSION AND RECOMMENDATIONS ----------------------------------------------------------------------------------- 35
5.1CONCLUSION -------------------------------------------------------------------------------------------------------------------- 35
5.2RECOMMENDATIONS------------------------------------------------------------------------------------------------------------ 36

EXECUTIVE SUMMARY
As per requirements of the University of Peshawar, the students completing the M.COM
course are required to submit the Internship report. During internship, the banking
various transaction was observed. The report has been written with reference to all
activities being conducting in Allied Bank.
The purpose of the study is to evaluate the working of the branch and assess the day to
day transaction. The evaluation is done in order to find out the problems in the working
of the bank affairs. The recommendations are based on the analysis of the data collected
during Internship both from primary and secondary data sources.
Allied Bank was established as a result of merger of four banks namely Australasian
Bank, Lahore Commercial Bank, Sarhad Bank and Pak Bank. The bank was disinvested
in 1991 and become the first ever bank in the world to be owned by its employees. The
bank has vast network of branches in Pakistan. The functional structures of the bank have
been divided under four provincial chiefs. The activates are further organized in zonal
and circle offices.
The management and organizational structures of ABL is in conformity with
organizational structure of other nationalized banks. This is because of face that ABL was
once operating in public sector. The board of directors is the main controlling body
looking the affairs of the bank. The Board consists of president, being nominated by the
government and 9 other directors.

CHAPTER# I
INTRODUCTION OF THE STUDY
1.1

BACK GROUND OF THE STUDY

Allied Bank Ltd. was established in 1942 and since then, it has expanded its network,
becoming one of the largest commercial bank of the country. It offers different services
to its customers. Initially it was knows as Australasia bank. The banks initially paid up
capital was Rs. 0.12 million and the bank started its operations at Lahore under the
chairmanship of Khawaja Bashir Bukhsh. In the first eighteen months, the Banks total
deposits rose to Rs. 0.431 million. Banks total assets at that were Rs. 0.572 million. In
1974, under the banks amalgamation scheme, three banks namely, Sarhad Bank, Pak
Bank and Lahore Commercial Bank were merged into Australia Bank and renamed as
Allied Bank of Pakistan Limited.
In 1991 under the newly introduced scheme of employee stock ownership program,
Allied Bank was sold to its employees. This was how the bank got privatized.
Allied bank is performing will in its operations. After its privatization its performance
improved. This year its total assets, advances, investments, deposits and profitability etc.
increased as compared to previous year.

1.2

Purpose of the Study

This study is a pre-requisite for the completion of the M.COM course at QACC
Department University of Peshawar. The other purposes to conduct this study include:
i)

Gathering the relevant information about ABL.

ii)

To observe, analyze and interpret the relevant data.

iii)

To work practically in an organization.

iv)

To develop interpersonal communication.

v)

To recommend remedies for the problems.

1.3

Scope of the Study

Internship at ABL was an excellent chance to understand how a bank operates. The main
focus of my study was on financial analysis and SWOT analysis in one of the branches of
ABL. Similarly different aspects of overall situation of ABL are also covered in this
report.

1.4

Internship Methodology

The methodology of the report for collection of data is primary as well as secondary. The
biggest source of information is my personal observation while working with staff and
having discussions with them. Formally arranged face to face interviews and discussions
also helped me in this regard.

1.4.1 Primary Data

The sources for primary data collection are as follows:
i)

Personal observation.

ii)

Interviews of staff.

1.4.2 Secondary Data

The sources for secondary data are as follows:
i.

Manuals.

ii.

Journals.

iii.

1.5

Annual reports.

Scheme of the Report

The scheme of the report is as follows:

Section-1 Consist of two chapters.
1

Chapter one includes background, purpose, scope, methodology and scheme of

the report.

Chapter two consists of origin of banking history of banking, and brief history of
ABL, development of banking in Pakistan and objectives of ABL.

Section-2 Review of organization, Consist of three chapters.

3

Chapter three describes the work I have done at ABL.

Section-3 Analysis, Consist of two chapters.

4

Chapter four describes the SWOT analysis and financial analysis of ABL i.e.
Ratio analysis.

Section-4 Consist of one chapter.

5

Chapter five is composed of Findings & Recommendations.

CHAPTER # 2
INTRODUCTION TO BANKING AND
ALLIED BANK LIMITED
2.1

Origin Of Banking

There are different opinions about the origin of the word Bank. According to some
authors the word Bank is derived from the Banco or Bancus which means a bench.
It was due to the fact that the Jews merchants in Liam body transacted their business of
money exchange on benches. If the business of anymerchant failed, the people destroyed
his Banco. From this practice the word Bankrupt has evolved. According to another
opinion, the word Bank is derived from the German word Back which means joint
stock fund. Later on this word Back was initialized into Bank or Banke.

2.2

History of Banking

As regards the growth of modern commercial bank, it can be traced as early as 600 BC.
G. Crowther in his famous book, An Outline of Money, has traced the history of
modern English commercial banking. According to him, the present day banker has
three ancestors; (1) the merchants (2) the goldsmiths and (3) the moneylenders.
2.2.1 The Merchants
The earliest stage in the growth of banking can be traced to the working of merchants. These
merchants were traders in commodities. They carried on the trading activities from one
place to another. It was risky for the traders to keep money with themselves for payment.
The traders with high reputation began to issue receipts, which were accepted as titles

of

money. These receipts or letters of transfer also called hundi in Indo Sub- Continent were

the first mode of payments. The merchants banking thus forms the earlier stage in the
evolution of modern banking.
2.2.2 The Goldsmiths:
The second stage in the growth of banking is normally traced to earlier goldsmiths. These
goldsmiths also called Seths in India used to receive gold and silver for safe custody. The
goldsmiths began to issue receipts for the metallic money (gold and silver) kept with
them. These receipts with the passage of time became payable to the bearer on demand.
In this way the goldsmiths note, become a medium of exchange and a mean of payment.
The goldsmiths, thus, can rightly be termed as the introducer of the modern bank note.
2.2.3 The Moneylenders
The third stage in the development of banking arose when the goldsmiths became the
moneylenders. By experience the goldsmiths (who were called money lenders) came to
know that they could keep a small proportion of the total deposits for meeting the
demands of customers for cash and the rest they could easily lend. In Economic
terminology, we can say that they allowed the overdraft facilities to their depositors.

2.3

Definition of Banking

Like many other subjects and social sciences no precise definition can be given from the
study of banking also. Different authors have defined and described this subject, keeping
in view the particular functions and modern banking, but the basic idea is the same.
Banking has now become multi-service organization with wider scope and area of its
influence. However, different writers give the following definitions of bank from time to
time.

Mr. Gilbert says, Bank is a dealer in capital or more peculiarly in money. He is an

intermediate party between borrower and lenders.
Mr. Kenly says, Bank is an institution which receives deposits and advances loans.
The definition in the banking companies Act 1962 is Bank means a person, transacting
the business of accepting for the purpose of lending or investment, of deposits of money
from the public repayable on demand or otherwise and withdrawal by cheques, drafts or
orders or otherwise and includes any post office saving Bank.

2.4

Development of Banking in Pakistan

Like any other institutions, at the time of freedom of Pakistan in 1947, it inherited a poor
and weak system of banking. It was due to the fact that most of the important sectors of
the economy including banking was controlled by Hindu nation. At the time of partitions,
these non-Muslim bankers transferred the bank resource to India. Bank staff mainly
consists of non-Muslim and also migrated to India. At the time of independence, there
were only two Pakistani Banks, i.e., Allied Bank Limited and Australasia Bank. At this
stage, Pakistan had 631 branches of scheduled bank and 411 offices of non-scheduled
banks. Even from these branches the money and other financial resources were
transferred to India because their Head Office were located in India, which also badly
affected the banking business of the country at early stage.

2.5 Organizational Structure:

2.5.1 Management and Organization of Allied Bank Limited
The ownership, management and control of all the commercial banks were taken over by
the Government of Pakistan on January 1, 1974. The financially weaker banks were

merged with the banks, which had strong footing. As a result of merger of banks, five
major banking companies were formed.
The management and organizational structure of the nationalized commercial banks have
uniformity. We describe this structure in brief: 1 Board of Directors
In the management of the banks, the Board of Directors is at the top of the controlling
bodies. Since there are no private shareholders now, so there is no general meeting of the
shareholders and are no elected directors. The Board now consists of a nominated
President, a Secretary and 9 other members. After nationalization of Banks in 1974, most
of the powers of Board have been transferred to the Banking Council and Executive
Board. The Secretary of the Board presents the Annual Report of the Bank.
2 Executive Board
The general direction and supervision of the affairs of commercial banks lies in their
respective Executive Boards. The Federal Government appoints the President, Secretary
and 9 other members of the Executive Board.
3 Chief Executive
The President is the administrative head of a bank. He presides over the meetings of the
Executive Board, manages and controls the affairs of the bank. The president holds office
at the pleasure of Federal Government.
4 Divisional Chiefs
In order to improve the management and operation of a bank, it has been split up into a
number of divisions. Each Division of a bank placed under the supervision and control of

10

Divisional Chief or Senior Executive Vice-President (SEVP) or Executive Vice-President

(EVP).
For sound business purpose, the main divisions of a commercial bank are as under:
(1)

International Division.

(2)

Personnel Division. (HRM division)

(3)

Inspection and Audit Division.

(4)

Credit Division.

(5)

Planning and Coordination Division.

(6)

General Division.

(7)

MIS Division (Now call IT Division).

(8)

Central division

5 Provincial Chiefs
In order to improve the performance of the banking system, each bank has a Provincial
Chief. The Provincial Chief has the powers for sanctioning finance and other credit
facilities.
6 Circle Executive
Each commercial bank has a number of circles. They are placed directly under the
supervision and control of the Chief Executive. The Chief Executive is usually SVP or
VP.

11

7 Zonal Heads
Each circle is divided into a number of zones. These zones are administered by Zonal
heads that hold the costs of VP and AVP.
8 Branch Managers
Each zone of a commercial bank is divided into several branches. The control and
supervision of each branch is mostly entrusted to AVP or officer of class II. A few big
and financially sound branches are even administered by SVPS and VPS.

12

2.6 MANAGETMENT HIERARCHY

13

2.7 Board of Directors

1. Tariq Mahmood
2. Muhammad Naeem Mukhtar

President & CEO

Chairman

3. Sheikh Mukhtar Ahmad

Director

4. Abdul Aziz

Director

5. Muhannad Waseem Mukhtar

Director

6. Muhammad Naeem Mukhtar

Director

7. Mubashir A. Akhtar

Director

8. Farrakh Qayyum

Director

9. Tasneem M. Noorani

Director

14

2.8 BRANCH CHART OF ABL, WARSAK ROAD BRANCH

15

2.9 Branch Net Work

Regions
Central 1 group
Gujrat Region
Sialkot Region
Gujranwala Region
Gulberg Region, Lahore
City Region, Lahore
Faisalabad Region
Sargodha Region
Central 2 Group
Jhang Region
Multan Region
Sahiwal Region
Bahawalpur Region
Rahimyar Khan Region
North Group
Abbottabad Region
Kohat Region
Peshawar Region
Mardan Region
Islamabad Region
Rawalpindi Region
Mirpur Region
Muzaffarabad Region
South Group
Hyderabad Region
Nawabshah Region
Sukkar Region
City Region, Karachi
Saddar & Society Region Karachi
Nazimabad Region, Karachi
Quetta Region
Total (Branches):

Branches
21
24
34
38
35
35
36
19
31
25
22
12
21
17
40
32
31
44
33
18
25
17
21
33
33
35
34
766

www.abl.com.pk

16

References:
https://abl.com/the-bank/company-information/board-of-directors/
https://abl.com/the-bank/company-information/
Personal observation and interview with, Branch Manager.
Personal observation and interview with (CSM).
Personal observation and interview with (MTO).
Personal observation and interview with (Assistant Cashier)

17

CHAPTER NO 3
What I Learned
I have done 8 weeks short internship and I have worked in only deposit Department,
because the time was very limited and banking sector is a very huge sector.

3.1 Deposit Department

The basic function of a bank is to accept the surplus of individuals, public sector,
and public institution and to honor Cheque drawn upon them.

3.1.1 How to Open an Account

The applicant is provided with a copy of rules and an application form along with
the KYC to open an account. The applicant in a manner prescribed and duly singed by
the applicant fills this form. An existing account holder of the bank must introduce the
application. A copy of ID card is attached with the specimen signature card.

The

application is presented at the branch with the initial amount of deposit for credit of his
account. Minimum amount to open an account is Rs. 1000. The amount is entered in the
passbook and is singed by the responsible officer of the bank. The documents are sent for
scrutiny to main office and ID card to NADRA. After approval of the documents account
opener fills another form for Cheque book. Printed Cheque book is allotted to him within
one week. He can withdraw money using this Cheque book. Online branches also fill a
separate form for credit card if the customer demands.

18

3.1.2 Classification of Deposits

The deposits can be classified under three main heads.
i.

Current Account

ii. Saving Account

iii. Fixed Deposit

i.

Current Account or Demand Deposits

Current account or demand deposit can be withdrawn by Cheque or transferred to

someone else by the depositor at any time without prior notice to the bank. This account
can be opened with a minimum of Rs.1000/. In such case the bank does not allow any
interest on it, because such deposits are meant for short period and can be withdrawn
without any prior notice. Current account best suits with businessmen. Current account
can be opened by or through.
a.

Partnership

b.

Limited Companies Account

c.

Welfare Account

d.

Individual Account

a.

Partnership Account
The assets of partnership are held partners of the firm, or by one of its member

acting on behalf of all members as trustees for all of them. A partner has an implied
power by law to open an account on behalf of his partnership firm, but not on his

19

individual name. The bank only honors that Cheque which confirms to the mandate
given to it by all the partners.

Procedure and Requirements for Opening Partnership Account

a.

Names of all partners are taken with their specimen signature.

b.

Instructions for operation are obtained from each partner.

c.

Signature of authorized partner is obtained.

d.

A letter of partnership, signed by all partners is obtained.

e.

In case all partners now authorize a partner who was not authorized to operate the
account. Thus the authority letter is obtained.

b.

Limited Companies Account

Before opening an account for a limited company the following documents are

obtained.
i.

The true copy of the certificate of incorporation.

ii.

True copy of the certificate of commencement of business (only in case of public

limited company).

iii.

Three copies of the memorandum and article of Association.

iv.

True copy of the resolution of the Board of Director regarding conduct of the
account.

20

3.2. Procedures and requirements for opening a Limited Company Account

i.

The certificate of incorporation and commencement certificate of business should

be called in original which are returned after inspection.

ii.

The specimen signature of the director named in the resolution authorized should
be obtained on specimen card.

iii.

In case the company is taken-over by the Government fresh instruction are

obtained from the managing director appointed by the government.

c.

Welfare Account
The Associations and welfare unions open such accounts.

Requirements for Opening Welfare Account

No registration certificate is needed but only a paper containing registration of the
Association is sufficient.

d.

Individual Account
Any individual can open individual account. Following are some requirements to

be fulfilled by the individual in order to be able to open an account with a bank.

Requirements for Opening an Individual account:
i.

National ID Card

ii.

Introducers reference

iii.

Rs.1000/- as initial amount to be credited to his account.

21

Procedure is the same as explained earlier in this chapter.

ii.

Saving Account
In saving account the basic purpose is to mobilize the saving trend in the lives of

people and to enable people to draw money within certain limits.

In saving account all ABL the customers are not allowed to draw a big amount at
once without any notice. The customer is bound to follow the rules and regulations of the
bank. Saving account can be opened with a minimum amount of 1000. Saving accounts
can be opened in following shapes.
1

Individual account

Joint account

iii.

Fixed Deposit Account

In case of fixed deposit account the time period of the account is in accordance of

the different fixed deposit schemes offered by the bank and according to wishes of the
customers. The customers cannot withdraw money from his/her account in accordance
and compliance of terms decided by the bank and the customer.
Currently ABL is offering two types of fix deposit accounts. These are called
Allied bank munafa certificates. These are divided into two types on the basis of income
groups
1)

Deposit of Rs.10, 000 to1, 00,000

2)

Deposit of Rs.1, 00,000 to10, 00,000 @

7% per annum
7.5% per annum

22

CHAPTER 4
CRITICAL ANALYSIS
4.1 Financial Analysis
Financial analysis is the process of identifying the financial strengths and weaknesses of
the firm by properly establishing relationships between the items of balance sheet and
profit & loss account. Financial analysis can be undertaken by management of the firm,
or by parties outsides the firm such as creditors, investors and others. The nature of
analysis is depending on the purpose of the analyst.

4.1.1 Trade Creditors

Trade creditors are interested in firms ability to meet their claims over a very short
period of time. Their analysis will, therefore, confine to the evaluation of the firms
liquidity position.

4.1.2 Suppliers of Long Term Debt

Suppliers of long-term debt on the other hand are concerned with firms long-term
solvency and survival. They analysis the firms profitability over time, its ability to
generate cash to be able to pay interest and repay interest and repay principal and the
relationship between various sources of funds (Capital structure relationship). Long-term
creditor do analyses the historical financial statements by they place more emphasis on
the firms projected financial statement s to make analysis about its future solvency and
profitability

23

4.1.3 Investors
Investors who have invested their money in the firms capital are most concerned about
the firms steady growth in earnings. As such, they concentrate on the analysis of the
firms present and future profitability. They are also interested in the firms finical
structure of the extent it influences the firms earnings ability and risk.

4.1.4 Management
Management of the firm would be interested in every aspect of the financial analysis. It is
their overall responsibility to see that the resources of the firm are used most effectively
and efficiently and that the firms financial condition is sound.

4.2 Ratio Analysis

Ratio analysis is powerful tool of financial analysis. A ratio is defined as: The quotient
of two mathematical expression and as the relationship between two or more things.
In financial ratio analysis a ratio is used as benchmark for evaluating the financial
position and performance of a firm.

Standards of Comparison
The ratio analysis involves comparison for a useful interpretation of the financial
statements. A single ratio I itself does not indicate favorable or unfavorable condition. It
should be compared with some standard. Such as past ratio calculated from the past
financial statements of the same firm.

24

4.2.1 LIQUIDITY RATIOS

4.2.1.1 Current Ratio

Year

2009

2010

2011

2012

2013

2014

Current
Assets

110,587,441

124,488,881

129,015,867

145,130,215

153,731,491

187,348,386

130,132,435

143,864,461

134,554,662

163,615,465

176,596,798

205,249,386

0.89

0.87

0.91

Current
Liabilities
Current

0.85

0.87

0.96

Ratio

Definition:
Current ratio is defined as current assets divide by current liabilities, which shows the
firm liquidity in the short run.1 Current ratio states that whether the firm is able to pay
its current liabilities with its current assets, if it do not so, then it should be insolvent in
the short run.
Formula
Current Ratio = Current Ratio / Current Liabilities
Interpretation:
If the current ratio of the firm is equal to or above than 1, then the firm is able to pay its
current liabilities with its current assets. The banking industry maintains the current ratio
of 0.902.

Van Horne, James C. and Wachowicz, JR., John M, (1998). Fundamentals of Financial Management.

11TH Edition. USA: Prentice-Hall, Inc P-127

25

The current ratio of Allied Bank Limited for six years is below 1, which means that if the
bank is liquidate in the short run than it will not be able to pay its current liabilities. But
on the other hand if we compare the current with the industry averages than it is good
enough because ABL current ratio is near to the industry ratio. The best current ratio is
for the year 2000, which is 0.96. The quality of the current ratio can be affected through
accounts receivable turnover ratio, which is very low for the six years; it means that we
cannot collect our receivables in time.

4.2.1.2 Cash Ratio

Definition:
Cash ratio is a more conservative option to know the short run liquidity of the firm. In
cash ratio the current assets are cash and marketable securities divided by current
liabilities. As we know that the marketable securities are the current assets, which are
extremely liquid and very near to cash. It is understood that the cash ratio should be less
than current and quick ratio.
Formula
Cash Ratio = Cash + Marketable Securities / Current Liabilities
Interpretation:
Due to the fact that the advances and other assets requires time to convert into cash.
Therefore to know that to what extent the firm is near to cash. Obviously the cash ratio is
less than the current ratio. In the first three years there is a negative trend and the best
ratio is for year 2013i-e 0.40.

26

Year

2009

2010

2011

2012

2013

Cash & Cash

Equilent

54,642,071
21,576,211

23,668,066

19,125,145

40,461,095

38,020,175

Marketable
Securities

2014

20,433,829
21,379,354

18,014,668

9,670,896

7,949,639

32,248,362

Current

205,249,386

Liabilities

130,132,435

143,864,461

134,554,662

163,615,465

176,596,798

Cash Ratio

0.33

0.29

0.21

0.30

0.40

0.37

4.2.2 Financial Leverage Ratios:

Debt to Assets Ratio:

Definition:
This ratio states to what extent the firm assets are financed through debt. The ratio is
calculated by dividing the firm total debt divide by total assets.
Formula
Debt to Assets ratio = Total Debt / Total Assets

Year

2009

2010

2011

2012

2013

2014

Total

134,470,442

148,849,739

139,138,976

142,181,022

183,104,472

215,040,240

139,991,644

154,716,101

155,211,116

168,623,155

191,821,032

225,387,212

Liabilities
Total Assets

27

Debt Ratio

0.961

0.962

0.896

0.843

0.955

0.954

This ratio is very important for creditors, because with the help of this ratio the creditors
can make the decisions whether to lend an advance to the bank or not.
The higher the debt ratio the greater the financial risk and vice versa. The ABL for six
financial years have very high debt ratio, which shows greater financial risk. For 2009
the debt ratio is 0.96, which shows that the 96% of the assets are financed through debt.
Similarly for six years more than 80% of the assets are financed through debt.
This ratio shows a red alert to the creditors of the bank and to those who want to lend to
the bank.

4.2.3 Profitability Ratios

4.2.3.1 Net Profit Margin
Definition:
This ratio gives a measure of net income Rupees generated by each Rupee of Markup
earned. It is desirable for the said ratio to high. NPM is greatly depends on the company
policies regarding use of common, preferred and debt financing, administration and
selling expenses, financial charges, minority interest, income from other sources etc. The
NPM is greatly depends on the efficiency of the company.

Markup

2009

2010

2011

2012

2013

2014

8,699,226

10,274,435

10,416,460

11,468,051

11,527,524

9,269,494

(18,413,317)

(17,046,421)

(16,265,284)

(16,540,219)

(15,445,588)

1,546,807

(212)

(166)

(156)

(144)

(134)

17

Earned
NProfit
Loss
NProfit

28

Margin

Formula
Net Profit Margin = Net Income / Markup earned
Interpretation:
Due to heavy losses in first five years of analysis the NPM is in negative. This is due to
the fact that the management is not efficient and due to the previous years losses hence
the ratio is in negative. In 2014 the NPM is 17% which shows that if the sale is Rs 100
the net profit is Rs 17 which is good comparing the previous five years of analysis. The
performance in 2014 is excellent due to the privatization of ABL. Due to the
privatization heavy layoffs and downsizing actions were taken. This restructuring or
rightsizing results in reduction in the number of banks and its employees.

4.3 SWOT Analysis

The main purpose of doing SWOT analysis is to highlight all aspect of the bank. We can
say that it is a tool to get a quick overview of banks strategic situation. It is an effective
technique for analyzing the strengths, weakness, and opportunities and threat of an
organization. It tells us about the firm position. It helps the readers to understand the
performance of the bank very easily. It forecast the future status and point out the
problems likely to come in achieving the specified objectives.
As like the other banks the ABL have some strength, weakness, opportunities and threats,
which are as under: -

29

4.3.1 Strengths
Strength is present within an organization and when utilized, become a means of
distinction from competitors.
1. ABL is a schedule commercial bank with good branch networks in NWFP.
2. Equipped with modern technology.
3. Trained & qualified professionals.
4. Low level of employee satisfaction and commitment.
5. Good banking relations with other financial institutions as well as with the
customers, which give positive results in goodwill & loyalty of the customers
towards the organization.
6. Courteous staff.
7. Regular training programmers for their employees, which are still very less in
majority of other banks.
8. Sound computer network.
9. Introduction of the Auto Cash Teller Machines (ATM).
10. First bank to privatize, which has, now become the leader in market with largest
online ATM network in the country.
11. Allied Direct Internet Banking offers the convenience to manage and control your

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banking and finances-whenever & wherever it is required.

4.3.2 Weaknesses
Weaknesses are the shortcoming in the structure or functioning of the bank and need to
be taken care of immediately. It is usually because of these weaknesses that the
competitors leave us behind in the race.
1. Centralized decision-making.
2. Excessive paper work & lengthy procedure for obtaining loan.
3. Absence of sound and organized marketing & MIS deptt.
4. Relying more on the rented building.
5. Improper selection of premises for branches i.e. Regional Office Peshawar is on
the 1st floor, which create problems for customers and especially for aged
customers.
6. The management is not dynamic like other banks e.g. Allied Bank, MCB and
UBL etc.
7. The employees are totally unaware about the latest technology.
8. The top management especially manager are not well educated therefore they
cannot perform their duties efficiently as well as effectively. Which may directly
affects the goodwill of the bank.
9. The recruitment process is very lengthy it should be trimmed & lack of

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transparent system of recruitment and selection.

10. Lengthy advancement procedures. For advancement every borrower either sole
proprietorship, partnership, joint stock companies, individual etc is require to
fulfill certain conditions for loan. Depending on the nature of loan sometimes the
loan process take too much time due to legal formalities such as documentation,
providing of guarantee, pledge, etc.
11. Lack of sound training system according to organizational goals.

4.3.3 Opportunities
Opportunities are always present in the external market whoever grab it first, is the
market leader. Means an external situation, which an organization can benefit from, is
called opportunity for that organization. ABL can grab the following opportunities
1. Opening of new branches inside as well as outside the boundaries.
2. Inter-branch transaction through computer network.
3. Providing new investment opportunities for the people of the country.
4. Serving new customers or expanding into new geographical markets or product
segments.
5. Customers feedback on different products and services has really improved the
banks performance and encouraged the atmosphere for other future policies.
6. Opening the business schools.

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7. Give information to the bank employees about the latest facilities. That they can
easily cope with the any situation.
8. Launching new marketing schemes to boost up the deposits. As well as to extend
the companys brand name or reputation to new geographic areas.
9. Sponsoring more and more games.
10. There is good opportunity for the bank to sponsor games on provincial and
national levels for its publicity. Just in 2006 they sponsor the Pak VS India
cricket series.
11. Training can enhance the employees skills

4.3.4 Threats
Threats are also part of your external environment and pose a constant danger to an
organizations operations. However, a proficient is the one that converts these threats
into opportunities.
1. Not adopting itself with the changing marketing strategies of other financial
institutions. I.e. Crore Patti of ABL, Car Aamed of UBL etc.
2. Closed and sick industries/projects financed by the Bank.
3. Slow industrialization in the country.
4. Changing political & economic conditions.
5. High turnover of already trained employees from the bank.

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6. Increasing foreign banks in the country. Which provide highly specialized and
attractive services provided by foreign banks to their customers
7. Un-consistency in government policies regarding to business and economic
sector.
8. Strict regulations by the government over credit facilities to the customers as to
meet the prudential regulations
9. And last but not least, slower economic growth rate of the country.
10. Increasing number of private foreign bank in the country.
11. The e- banking facility offered by different national and international banks is a
serious threat to ABL.
12. Global technology advancement.

References:
Annual Reports form 2009-2014
www.abl.com
https://abl.com/the-bank/performance-highlights/
https://www.google.com.pk/#q=abl+financial+statements+2014
SWOT Analysis from the report of Muhammad Tayab/MBA/ims, Peshawar

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CHAPTER 5
CONCLUSION AND RECOMMENDATIONS
5.1

Conclusion
Allied Bank of Pakistan limited (formerly Australasia Bank Limited) has

witnessed and experienced all political, economic, financial and technological changes,
which have taken place in the South Asian Region since it was incorporated in 1942 at
Lahore.
In 1947 when Bank was in nascent age, it had to undergo a traumatic event, which
divided Asian Sub-continent into two independent states namely Pakistan and India.
Allied Bank, being the only Muslim Bank on the soil of Pakistan, lost over 50% of its
operations and assets, which were on the soil of India.
The management undauntedly faced the multiple challenges resulting from huge human
and financial losses on the one hand and the payment system and banking facilities to all
sectors of economy on the other hand. The Bank also rendered valuable treasury services
for the Government OF Pakistan and despite many constraints played an effective role in
socio-economic uplift of the country.
In 1971 the Bank lost more than half of its assets and network due to secession of the
then East Pakistan. The Bank not only survived this serious crisis but also regained its
financial strength maintaining the growth rates in key performance indicators.

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1974 the Government of Pakistan nationalized all financial institutions in the country
Realizing the robust financial strength of Australasia Bank Limited among all the
nationalized financial institutions the government decided to merge three financially
weak institutions, namely Sarhad Bank Limited, Lahore Commercial Bank Limited and
Pak Bank Limited into Australasia Bank Limited and renamed it as Allied Bank of
Pakistan Limited.
Allied Bank remained in the Public Sector for eighteen (18) years, during which the
quality which the quality of its assets remained comparatively better among its peers.
During this period the Bank expanded its domestic network and also opened its first
foreign branch at London (U.K.) in 1977. The performances of the domestic and foreign
operations of Mulish Commercial Bank were merged into Allied Bank of Pakistan.
As a result of privatization in September 1991, Allied Bank entered in a new phase of its
history, as worlds first bank to be owned and managed by its employees.
Today allied Banks capital and reserves are Rs. 1.825 (B) and assets amount to Rs.
103.48 (B) and deposits are Rs. 111.44 (B). Allied Bank enjoys an enviable position in
the financial sector of Pakistan. As on date the quality of assets of the Bank is one of the
best amongst the major Banks of the country. Now ABL is one of the heading banks in
Pakistan. And enjoying the progress satisfactory.

5.2

Recommendations
Some of the recommendations are given here for its improvement.
1. Excessive paper work is nothing but waste of time. So excessive paper work i.e.

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lengthy procedures should be avoided.

2. When a good worker is paid the same salary, then why he will work hard, by
looking his colleagues, either he should be awarded with increments or special
prize.
3. The formally organized Mkg. & MIS departments should establish.
4. Forecasting needs to be introduced at Allied Bank Limited. Before making any
decision, it should properly forecast to see that the decision, which they are likely
to take, has any good or bad implications for the bank and for the economy as a
whole. It will help in better planning.
5. Planning is the name of thinking in advance. A scientific manager always tries to
know where he is & where he wants to reach in future. Planning helps determine
future personnel needs and attendant training programs. Without knowing what
managerial personnel will be needed and what experience to demand, an
enterprise cannot intelligently recruit people and train them.
6. The banks promotion policy should be based on experience, hard work and
capabilities of the workers etc. besides promotions these workers should also be
given some other incentives.
7. There is lack of co-ordination between upper Mgt. & the staff at branches & other
levels. So there should be proper co-ordination among them.
8.

(MBO) or management by objectives needs to be introduced in the bank

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immediately. It will help improve the functioning of the bank and will lead to
greater participation, and the workers and subordinates will be encouraged.

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