CHAPTER 1

INTRODUCTION
Internship is an integral part of all the management courses at Comsats Institute of
Information Technology, Abbottabad Campus. The Students of MBA (Finance) are also
required to undergo an internship program of 8 weeks in any Foreign or Domestic Bank
of the country. Comprehensive report writing follows the internship. The internee is
required to submit an internship report to the Head of Management Science Department,
which is properly evaluated. The internee is also required to undergo a viva-voca, in
which he/she is asked about the different activities he/she has performed in the
organization.
To fulfill my academic requirement of MBA (Finance) course, I did my internship in
Askari Bank Ltd., Abbottabad Branch. Although the internship was carried out in the
entire bank departments, like
Deposits Department
Bills & Remittances
Accounts Department
Credits Department

1.1 Purpose of the study

Apart from the degree requirement of MBA, the basis idea of this report is to analyze the
activities preformed by the bank during the internship, also to analyze the operations
carried out in each department especially Deposits Department & Credits Department of
Askari Bank Ltd., Abbottabad Branch. Besides the analysis, certain recommendations are
also made for the improvement.
In addition this study would be helpful for the students of banking and finance as well as
professional bankers to gain an additional insight into the banking sector of our country.

1
1.2 Background of the study
Banks play extremely important role in modern economic activities in the form of trade
and commerce by providing short-term loans and in managing exports and imports. Thus
a well-developed banking sector is a pre requisite for the development of a country like
Pakistan.
Pakistan’s economy remained buoyant during fiscal 2006 despite the impact of a sharp
rise in international oil prices and massive spending or rehabilitation and reconstruction
activities after the earthquake of October 2005.
Though the economy of Pakistan is passing through a difficult phase, presently it requires
a growing banking sector in order to curb the macro economic imbalances of budget
deficits, acceleration of economic growth and reduction in unemployment.
The banking sector in Pakistan has shown good progress during last years and has
increased in size. As a result of increase in size, the banks are now adopting new
approaches to their existing banking operations, keeping in view changes in demand of
time and emphasizing more on personalized service, electronic fund transfer, auto teller
machine and evening banking.

1.3 Purpose of the report

The purpose of the report is to critically evaluate the operations of each department of
Askari Commercial Bank at branch level. The internship was carried out to evaluate the
efficiency o\f management structure. Based on the analysis certain recommendations are
made for the improvement.
The study was carried out and the report being presented for the fulfillment of degree
requirement of Master in Business Administration (MBA) at the Comsats Institute of
Information Technology, Abbottabad Campus.

1.4 Scope of the study

The main focus of the study is to describe the working of Askari Bank at branch level. An
evaluation of selected departments is carried out, and after some critical analysis
recommendations are given.

2
1.5 Methodology of the study
The study makes use of one kind of data, secondary source.

1.5.1 Secondary Data

Certain types of information such as the background details of the organization can be
obtained from available published records, the web site www.askaribank.com of the
organization and other sources. Other types of written information such as company
policies, procedures and rules can be obtained from the organization’s records and
documents. The advantage of this data is that we don’t have to search for the needed
information and the disadvantage of this data is that the information may not be up to
date as changes occur in the organization time. For this report the secondary data is taken
from annual reports of 2006.

Askari Report of
ASKARI BANK LIMITED
for the year ended December 31, 2006

3
CHAPTER 2
INTRODUCTION OF ASKARI BANK

2.1 History of Askari Bank Limited

Askari Bank was incorporated in Pakistan on October 9, 1991, as a public limited

company. It commenced operations on April 1, 1992, and is principally engaged in the
business of banking, as defined in the Banking Companies Ordinance, 1962. The Bank is
listed on the Karachi, Lahore and Islamabad Stock Exchanges and its share have
consistently remained amongst the highest quoted in the banking sector in Pakistan.

Askari Bank has expanded into a nation-wide presence of 121 branches, including 6
dedicated Islamic Banking Branches, and an Off-Shore Banking Unit in Bahrain. A
shared network of over 1,300 on-line ATMs covering all major cities in Pakistan supports
the delivery channels for customer service. As at December 31, 2006, the Bank had an
equity of Rs.11.1 billion and total assets of Rs.166.0 billion, with over 665,000 banking
customers, serviced by our 4,585 employees.

2.2 Mission statement

To be the leading private sector bank in Pakistan with an international presence,
delivering quality service through innovative technology and effective human resource
management in a modern and progressive organizational culture of meritocracy,
maintaining high ethical and professional standards, while providing enhanced value to
all our stake-holders, and contributing to society.

2.3 Vision Statement

To be the Bank of first choice in the region

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2.4 Objective of Askari Bank Limited
 The aim is to channels the private saving and public funds for investment
purpose.
 The bank is committed to its identity of “Security and Trust” and will
endeavor to uphold this image at all the times.
 Askari Bank Limited is interested in being one of the more financially
viable institutions. Therefore, it lays emphasis on gradual building up of a healthy
deposit mix.

2.5 Business & Operations Review

During 2006, Askari Bank continued with its growth momentum and posted substantial
earnings despite highly competitive business environment. Although monetary tightening
helped in reducing inflationary pressures in the economy during fiscal 2006, aggregate
demand remained high as indicated by the strong GDP growth, high growth in private
sector credit, sluggish decline in core inflation and large external account deficit. In a
highly competitive environment, Askari Bank continually reviewed its policy pertaining
to the sectoral exposures to derive optimum competitive advantage, maintain the risk
profile and achieve greater customer satisfaction.

On the operations side, during the year under review, Askari Bank’s has taken various
initiatives to improve the ways of doing business. The significant ones include re-
organization of management structure and technology initiatives. The primary objective
of re-organization is to consolidate and align internal capacities to best serve each
business segment. The technology initiatives are aimed to improve the service quality
standards and strengthen control environment and to prepare the Bank for the future
challenges.

5
2.6 Corporate Banking
This business is managed by a central corporate banking division based at head office
Rawalpindi and supported by dedicated marketing and back office units in Karachi,
Lahore and Rawalpindi. The division maintains a diverse portfolio and primarily offers
structured financing solutions to cater for the business needs of its clients. During 2006,
corporate banking further expanded its customer base and new relationships were
established in telecommunications sector, fuel and energy, and fertilizer sector. In order
to enhance focus on relationship management and service quality, more dedicated and
experienced staff is being assigned to this division.

The corporate Banking will continue to play a major role in loan syndications and
structured financing transactions with the objective of providing a range of corporate
banking solutions to its valued clients.

Products

• Loan syndications (arranger/co-arrangers & lead manager)

• Structured finance

• Equity financing

• Working capital financing

• Corporate finance advisory services

• Debt swaps

• Balance sheet restructuring

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2.7 Investment Banking
The investment banking activity mainly coves, debt/capital markets, advisory services
and trading (both equities and bonds). This division also offers advisory and loan
syndication services. Equity Market transactions are handled by Capital Market Desk,
based at Karachi, which include equity portfolios segregated into trading, investment and
futures, and continuous funding system (CFS). Investment banking participated in
various debt and capital raising instruments during the year.
Products

• Commercial paper

• Debt capital markets

• Capital raising

• Trading activity (equities and derivatives)

• Discretionary Portfolio management

2.8 Consumer Banking Services

During 2006, the consumer banking services offered by the Bank were reorganized by
combining consumer financing business and credit card business under one umbrella and
were renamed as consumer banking services group. The reorganization is aimed to bring
in business synergies and to enable active cross sale of different product to the same
market segment.

2.9 Consumer financing

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Consumer financing offers auto, mortgage, personal and business finance as the core
products, this business grew by 28% during 2006. The Bank’s debit card with the brand
name of ASKCARD registered an increase of 25% in the number of cards issued. Also,
Rupee Traveler Cheques float increased by 55% during 2006.

Products

• AskCard (Debit/ATM card)

• AskPower (Prepaid card)

• Askari Bank’s mortgage finance (Home loans)

• Askari Bank’s business finance (Business loans)

• Askari Bank’s personal finance

• SmartCash

• Askar (auto loans)

• Askari Pouch ‘N’ pay (on-line utility bill payment services)

• Askari Value Plus (flexible deposit accounts)

• Cash Management Services

• Rupee traveler cheques

• Askari investment certificates

2.10 Credit Cards

Despite strong competition, the credit card business, under the MasterCard brand,
maintained its growth in all areas of the business. Net card issuance increased by 59%
during the year, cards in force crossed 230k and its loan portfolio increased by 36%,
while NPLs remained well within the industry norms.

8
Askari MasterCard’s rewards program continues to offer attractive features to our valued
customers. Also, strategic alliances with leading service providers in the market benefit
Askari MasterCard customers with exclusive travel and leisure facilities.

Products

• Askari MasterCard (credit card facility)

• Balance Transfer Facility

• Smart Installment Plan

2.11 Treasury and International operations

The monetary tightening aimed at reducing inflationary pressures and fostering economic
growth was reflected in the money market conditions throughout the year. In order to
manage the money market liquidity, SBP used the combination of Overnight Money
market operations (OMOs) and increased cash reserve requirement. During the year,
discount rate was also increased by 50 bps. As a result the overnight rates remained under
pressure during most of 2006.

The bank increased its overall foreign trade business during 2006/ the import business
increased to Rs.119.3 billion, i.e. growth of 11% over last year, while the exports
increased by 6% over last year, to Rs.97.3 billion.

Products

• Foreign Currency Accounts

• Foreign Trade Services (Import & Export)

• Import & Export Financing

• Travelers Cheque Issuance

9
 • Foreign remittances (Demand Draft/Telegraphic Transfer) Inward & Outward

• Sale & Purchase of Foreign Currency Cash

• Issuance of Guarantees & Bid Bonds

• Handling of Securities

• Offshore Banking Services

2.12 Offshore Banking Unit

During the year, Askari Bank’s Offshore Banking Unit (OBU) in Bahrain increased its
share of contributions in the overall earnings of the Bank. The OBU remains on a
constant look out for opportunities on the international scene, which are both profitable
and provide the Bank with a strategic edge. OBU enhances our capability in terms of
offering a wider range of services to our customers, and also acts as a look-out for new
business opportunities and relationships in the international markets.

2.13 Advances and Credit quality

Askari Bank’s funded credit portfolio increased by 16% to close at Rs.102.73 billion as
compared to 23% last year as the Bank remained watchful of the impact of growth of risk
assets on capital adequacy.

A review of the securities held against credit limits reveals that the credit portfolio of the
Bank is well collateralized, with adequate exposure being covered by securities of liquid
nature, such as deposits, trade documents, equity or debt instruments, guarantees from
yeare, Bank’s non-performing advances increased to Rs.3.6 billion, from 2.3 billion last
year due to further downgrade of certain large exposures. Consequently NPLs as a
percentage of gross advances increased from 2.7% to 3.6%. However, despite this
increase, the percentage is well within the industry average.

During 2006, Askari Bank made net provisions or Rs.1, 128 million. Also during the
year, the method of making general provision, on credit portfolio other than consumer
portfolio, was standardized, as explained in audited financial statements. General
provisions against consumer finance portfolio continue to be made in accordance with the

10
guidelines provided in SBP Prudential Regulations for Consumer Finance. The
cumulative provisions at the close of 2006 increased to Rs.3.5 billion. These provisions
provide 97% coverage to the total NPLs as compared to 102% last year.

Products

• Term Loans

• Overdrafts

• Short term facilities for local trading

• Cheque purchase facility(foreign & local)

• Letters of Credit (Domestic as well

• Guarantees

• Pledge loans

• Finance Against Trust Receipts

• Stand by letters of credit

• Financing against foreign bills

• Foreign currency financing

• Export re-finance from SBP- Finance Against Packing Credit I&II

• Finance against Imported Merchandize

2.14Departmentation
Departmentation means grouping of jobs into some logical arrangement. Departmentation
is a mean for better performance of different activities of the organization as well as the
effective management of each unit. The basis for departmentation in Askari Bank
Limited is geographical as well as functional.

11
2.15 Departmentation at Head Office

At the Head Office, various departments have been established in corporate function of
similar nature. The head of each division is responsible to the President of ABL.

2.15.1 Human Resource Division

The most important division at the head office is the human resource division. It performs
the functions of recruitment, staff training and evaluation.

2.15.2. Finance Division

This division is responsible for book keeping and accounts. It prepares all financial
returns through its Management Reporting Wing. It is actively involve in preparing
market comparative analysis, consolidation of Banks budgets, its monitoring and constant
review of various financial indicators. Preparing the Banks Annual Accounts and
coordinating external audits is also a direct function of Finance.

2.15.3. Corporate Division

This division is engaged in the provision of the financing facilities to large corporate
clients including multinationals. Principle activities include syndicated loans, guarantees,
and working capital finance, underwriting and advisory services.

2.15.4 International Division

They are responsible for managing correspondent relationships and planning for the
overseas operations. This division plays vital role in the Foreign Trade Transactions.

2.15.5 Treasury Division

They are responsible for managing money market and foreign exchange transactions.
Conditions in the money market and foreign exchange market were very challenging and
volatile during 2004. The low interest rate environment that dominated the first half of
2004, changed with the rising interest rates in the international market.

2.15.6 Credit Card Division

The Credit Cards Division (CCD) is responsible for managing the Credit Cards business
of the Bank. CCD is headquartered in Karachi, as a separate strategic business unit (SBU)

12
of the Bank, with all internal functions including credit, operations, marketing, sales,
finance and audit, performed independently. Its present focus is on managing the ‘Askari
MasterCard’ brand, accepted worldwide and at over 4000 locations in Pakistan. This
product was successfully re-launched in 2001, with a new fully automated transaction
processing system, supported by a focused marketing campaign, achieving monthly
profitability in record time.

2.15.7 Systems and Operation Division

This division has been instrumental in development of procedures and manuals for
various operating requirements of the Bank. The division recommends automation and
re-engineering requirements to improve transaction efficiencies. This division also
manages the protection of fixed assets of the bank.

2.15.8 Audit Division

The Audit Division acts independent of the Management and is responsible for checking
and reporting on the Management compliance with the Board’s policies and directives
and other directives of State Bank of Pakistan (SBP). This Division is responsible for
every aspect of Bank’s operations with the goal of improving the effectiveness of risk
management and internal control.

2.15.9 Legal Affairs Department

The Legal Affairs Department is mainly engaged in advising the Bank on applicable laws
and the negotiations of contracts, and providing legal assistance by reviewing, examining
and scrutinizing various documents and matters connected therewith the department
carries out analysis, prepare research studies, drafts, address legal queries and advise on
pre contractual investigations.

2.15.10 Asset Products Division

The Asset Products Division (APD) is responsible for the development and managing of
retail credit schemes, and is presently offering several innovative consumer credit
products. In order to cater for the increasing demand for retail credit, APD, during 2003,
started five more retail asset units, taking the total number to ten, country-wide.

13
APD currently offers six products: Personal Finance, Business Finance, Mortgage
Finance, Revolve Credit Line, Car Financing and Consumer Durables Financing – in
association with major suppliers of consumer products. All these products have been well
received and volumes have been building steadily. Computer Loans were launched in
July 2002 to promote IT Technology in the country.

2.15.11 Investment Product Division

The Investment Product Division (IPD) is responsible for developing and managing the
brands that serve the investment needs of the customer market. It focuses on deposit
mobilization and provision of value added services based on modern technology cards.
The division continuously makes an effort to provide value added services and products
to the clients.

IPD offers a range of products designed to cater for diverse customer needs, such as:
ASKCARD (Debit Card), Cash Management Services, Rupee Travelers Cheques and
customer deposit products such as Askari Bank’s Value Plus.

2.15.12 Credit Division

This division provides extensive support to branches for credit administration, control
and monitoring, and has played a pivotal role in helping the Bank to achieve a remarkable
loans growth. Most of the loans are for short term trade financing. This Division has a
Special Assets Management team, which is responsible for low ratio of bad debts,
effective monitoring of delinquent advance and close follow up of recoveries.

14
Branch Network

President, Chief Executive

Regions/Areas

North Region

Central Region

Rawalpindi North
/ Islamabad Area

East Lahore
Area Area

West South-1
Region South-2

15
2.17 Control of Branch

The system of regional and area offices has been introduced since 1999 for the effective
supervision and control of branches. The scope of the system also spans the development
and management of the Bank’s business and activities, on a regional basis. Under this
system, the Regional Heads have the primary responsibility for business development,
profitability, productivity, operational efficiency and credit quality. It has now enabled
the Bank to further expand and diversify its geographical reach and business activities.
Geographically, the bank is divided into the following regions and 74 branches.

2.18 Rawalpindi/Islamabad

This region comprises of 22 branches located in the twin cities of Rawalpindi and
Islamabad, of which 5 at Chaklala scheme 111, raja bazaar and satellite town, were
opened in the year 2002. This expansion is primarily targeted to reach household, small
and medium enterprise customers of the region.

This region continues to contribute the largest portion of the total bank deposits base.
With the untiring efforts of the team, this otherwise non-commercial region booked large
guarantee business, which is almost 50% of the entire bank. Despite limited investment
avenues, this region has increased its assets base and trade business significantly.

This region achieved good growth in all areas of activity particularly in foreign trade and
guarantee business.

16
2.19 North Region (Peshawar)

This region covers 8 branches. Significant portion of the business activities carried out in
N.W.F.P. was in the hands of Afghan immigrants, who are leaving for their homeland.
This has adversely affected business of imports, exports and real estate.

All these factors have adversely affected business in the region. However, with the new
openings in the shape of development of Afghanistan, the bank’s economic activity has
revived and results in the generation of deposits and trading business.

Even with limited potential for credit and foreign trade, this region made useful
contributions to the bank’s deposits and foreign trade business. The team’s rigorous
efforts to raise low cost deposits and attention to remedial management resulted in the
revival if delinquent accounts and reversal of markup suspense, which partly accounts for
the sharp increase in profits during 2004.

2.20 Central Region (Lahore)

This region now covers 41 branches located in

• Lahore Area I

• Lahore Area II

• Faisalabad Area

• Multan Area

• Gujranwala Area

. The region serves both households and business community around Lahore and carries
the advantage of matching its deposit generation with deployment.

2.21 East

This region has the largest number of branches 15 in comparison with any other region of
the bank, stretching from Rahim Yar khan in the south to Gujrat in the north. During the
one year branch was added to this region in the city of Gujrat.

17
 2.22 South-I

This region comprises of 37branches out of which 7 were opened during the last two
years.

The region’s strength lies in the fact that it manages 12 of the main branches of Karachi,
which have contributed significantly towards the bank bottom line as well as trade related
volumes to the bank. It has one each branch in Gawadar, Sukkar, Dharki and Ghotki.

2.23 South-II

In appreciation of the depth and dimension of Karachi market, south region was split in
two regions south-I and south-II. This region started off with 37 branches. This region
has excellent potential for deposits, advances as well as foreign trade. Of all the graphical
regions of the bank, south-II posted the strongest all-round growth.

2.24 West

Operating with 7 branches in the comparatively less developed province of Baluchistan,

this region relies heavily on retail customers with some potential for deposit mobilization.
The marketing philosophy reflectsBoardtheofcore
Directors
value of serving the customer. Though small
in its quantum, the region attained excellent growth in its profits and advances.
Executive
Audit
Committee
2.25 Departmentation at Head Office
President’s Support President &
Office Chief Executive

Group Head
Operations & credit
Credits
Group Head Corp.
Region/ Group head
Bank& financial
Institute Area Retail Banking
Corporate Banking
Bills Investment Products
Term
Exports Produscts
Merchant Banking Electronic
Deposi
System
International Human
Technology Asset Products
Resource
& ts
Remittances
18
Treasury Credit Cards Finance
Operati
Legal Affairs
Source: Askari Bank Limited Newsletter

2.26 Corporate Profile

Lt. Gen. Waseem Ahmed Ashraf Chairman

Lt. Gen. (R) Masood Parwaiz Chairman Executive Committee
Mr. Kalim-ur-Rahman President & Chief Executive
Brig (R) Muhammad Shiraz Baig Director
Brig (R) Asmat Ullah Khan Niazi Director
Brig (R) Muhammad Bashir Baz Director
Brig (R) Shaukat Mahmood Chaudhari Director
Mr. Zafar Alam Khan Sumbal Director
Mr. Kashif Mateen Ansari Director
Mr. Muhammad Najam Ali Director
Mr. Muhammad Afzal Munif Director
Mr. Tariq lqbal Khan Director (NIT Nominee)

Auditors

Ford Rhodes Sidat Hyder & Co Chartered Accountants

Legal Advisors

Rizvi. Isa, Afridi & Angell

Registrar & hare Transfer Office

19
Askari Associates (Private) Limited,

6th Floor, AWT Paza, the Mall,

P.O. Box 678, Rawalpindi,

Tel: (051) 9272442-44

Fax: (051) 9272447

Registered Office/Head Office

AWT Plaza, the Mall,

P.O.Box No. 1084,

Rawalpindi-Pakistan.

Tel: 9051) 9272150-53

Fax: (051) 9272455

E-Mail: Askari@isb.compol.com

Web Site: www.askaribank.com.pk

Askari Report of

20
 ASKARI BANK LIMITED
for the year ended December 31, 2006

2.27 Organizational Chart of Askari Bank Limited

Organizational Chart is the visual representation of Organizational Structure.
Organizational Chart is prepared to show formal organization relationships, which are
intended to prevail. It shows who supervises whom and how the various units are related
to each other. It also shows main line of communication, downward flow of authority and
upward flow of responsibility.
Organizational chart of Askari Bank gives us the view that how greater delegation of
authority can be made possible at different levels.

A board of directors comprising of 11 director heads of Bank. Board of Directors in a

limited company with large number of shareholders, they are elected by the shareholders
using their voting rights. They are responsible for the affairs of the company including
operation management and control of company business, taking important decisions and
formulating broad polices and objectives of company.

21
 2.28 Organization chart of Askari Bank Limited

Chief Executive

Manager Operations

Audit

Incharge
In charge Incharge In charge
Incharge Incharge In charge
Forex advance Remittanc
Deposits Cash Accounts
Computer s es

FC Loans &
Credit
Account Imports Exports Advance Bills Remittances
Cards
s s

Account Cheque Term

Opening Posting Deposits

22
SORUCE: ASKARI BANK Newsletter

CHAPTER 3

ABBOTTABAD BRANCH ANALYSIS

Following are the departments at the Abbottabad branch

3.1 Deposit department

3.2 Computer department

3.3 Cash department

3.4 Remittance department

3.5 Credit and advance department

3.6 Foreign exchange department

3.7 Dispatch department

3.8 Accounts department

3.9 Types of Accounts

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3.1 Deposit Department

This department deals with retail banking i.e. opening customers account. Without
opening an account, customer cannot operate in the bank. Once the account is opened
relationship between customer and bank is created. Following functions are performed by
the deposit department at Abbottabad Branch.

3.1.1 Opening of an account

A relationship is created between the customer and bank when an account is opened.
Certain document is required for account opening. These include the filling of account
opening form that require the introducer, N.I.C copy, signature specimen card, form
A/form B and deposit slip.

3.1.2 Issuance of Cheque books

Whenever an account is opened at the bank, the customer is given a cheque book by
filling form A. This includes the accountholder account number that is stamped on every
page. The date is stamped too. The charges are debited from accountholder as RS two per
leaf. For a new cheque book, the account holder detaches the requisition leaf from old
one and presented to bank.

In case of loss of a cheque book, the customer informs the bank and required to fill the
form B for issuance of new cheque book.

3.1.3 Issuance of bank statement

The bank issues statement to the account holder periodically that possesses their account
information.

3.1.4 Closing of an account

When a customer wants to close account, he/she requires giving direction to the bank and
returning the cheque book.

24
3.1.5 Lockers

Deposit department allots lockers to the customers. There are three types of lockers.
Small, medium and large size lockers. A person willing for having locker should have
minimum of Rs.10, 000 in his/her account.

Size Charges Per Year Refundable

3.2 1. Small Rs.1000 500
2. Medium 1500 500
3. Large 2500 500
Computer Department

Askari Bank limited Abbottabad Branch is fully computerized. The main task of the
computer officer is to look after and monitor the branch working. The functions are
following

 Introduction to new programs

 Proper training to the user at branch

 Assisting branch to produce daily reports

 Co-coordinating between the head office and branch

Daily operations are based on their system UNIBANK. It was purchased from United
Bank Limited .Its run in COBOL language with “UNIX” as its operating system. The
computer database in branch helps to keep record of all transactions taking place. Also
handles automated teller machine.

3.3 Cash Department

One of the most important functions of the cash department is the honoring of cheque for
deposit of money. The cash department is responsible for the two functions.

 Firstly the honoring of cheques and verification of the signature of the

customer and then payment of the money.

25
  The second function is the deposit of money in the customer’s account
using deposit slip, which the customer fills it.

3.3.1 Cheque

Cheque is a written order of a depositor upon the bank to pay or orders of the designated
party, a specified sum of money on demand. Cheque is of two types.

26
3.3.2 Open cheque

Cheques that are paid at the counter in cash. These are of two types

 Bearer cheque that authorize the drawer to be paid.

 Order cheque that has some order restricted to a particular person.

3.3.3 Crossed Cheque

Here no payment is done at the counter. It is done through account. The cheque has
parallel two lines.

3.4 Remittance Department

Remittance through banks has become popular due to the safety and easy source.
Remittance department acts as an agent on behalf of the customer in safe transferring of
money to different cities and countries.

This department performs following functions

3.4.1 Outward bills for collection (OBC) and,

3.4.2 Inward bill for collection (IBC)

OBC stands for outward bill for collection. The checks outside the city for collection are
honored.

IBC standards for Inward Bill for Collection. The checks inside the city for collection are
honored.

3.4.3 Demand draft

DD stands for Demand Draft. It is made on demand in the favor of party by the
bank to the bank, locally & out side the city.

27
3.4.4 Telegraphic transfer

TT means Telegraphic Transfer. It is the quickest & fastest mode of transfer of

money. This involves transfer of funds to other cities with telegraphic message.

3.5 Credit and advance Department

Credit is one of the most important departments in the bank as it provides money to the
bank. A bank is a profit seeking institution. Its income depends upon the type and nature
of credit facilities provided to customers. The formation of credit has made it more
effective.

3.5.1 Askari Bank Limited provides two modes of financing

• Non Fund Based Financing

• Fund Based Financing

• Non Fund Based Financing

In non-fund based financing the funds of bank are not involved. There are three types of
non-fund based facility provided by Askari Bank Limited

• Letter of Guarantee

• Financial Guarantees

• Performance Guarantees.

3.6 Foreign Exchange Department

This department is a separate bank into itself, carrying out all the functions of a bank.
Foreign currency accounts are opened; deposits & withdrawals are done here. It deals in
foreign remittance. It also works to facilitate the export and import business by opening
letter of credit and interacting with Foreign Bank to carry out to transaction. The
following functions are carried by this department.

28
3.6.1 Foreign currency accounts

Askari Bank Limited deals with three types of foreign currency accounts

 US Dollar account

 Pound Sterling

 Euro

3.7 Dispatch department

Abbottabad Branch mainly holds the clerical functions of the bank. It deals in the mailing
of the official documents in and out of the branch. It also maintains the mail record.

The functions performed by dispatch department are following

 Receiving mails

 Sending mails out

 Maintenance of mail dispatch register

 Maintaining the record of stamps and postal envelops

The dispatch officer performs the two in one job as he/she maintains the mailing system
and also delivered the mail to the required officer.

3.8 Account Department

It plays vital role in bank operations. This department deals with the record keeping of
voucher daily. Also keep the track of expenses incurred; verifications of utility bills and
disbursement of salaries & staff. The safekeeping & provision of stationery is also the
responsibility of this branch.

29
3.9 Types of accounts

An account is the creation of relationship between the person and the bank. There are a
number of accounts that are provided to the customer according to their need.

Following are the accounts:

3.9.1 Current account (CD)

The minimum account opening limit is Rs.5000/- the distinguishing feature is that it has
“no profit and no interest”. The code number for such an account is “01010”.

3.9.2 Saving account (PLS)

The minimum account opening limit is Rs.2500/- such account is for those people who
want to save money and earn interest on their deposits. The profit is calculated on
monthly basis and credited on six monthly bases. The profit is calculated on the lowest
balance during the month. The account code for the cheques is “01010”.

3.9.3 Askari special deposit account (ASDA)

The minimum amount required to open an account is Rs.50, 000/- profit is calculated on
daily basis and credited on monthly basis. The code No. for cheques is “01165”.

Term Deposit or Fixed Deposit

In this term deposit or fixed deposit the amount deposited cannot be removed before the
date of maturation. Deposit can be from 1 month to 6 months. Interest is given which is
more than interest on the saving deposits.

Notice Deposit

In notice deposit the money is saved for 7-10 days and interest is given every day. The
funds can be called at any time and the profit is given for the numbers of days, they were
kept there.

30
Joint account

It is the account of two or more persons who are neither partners nor trustees. Here the
authorization for the operation of the account is required at the time of opening such
account.

Proprietorship

Here the applicant needs to fill in separate form “declaration for proprietorship concern”.
All the essential documents are collected by bank.

Partnership

The applicants are required to submit the copies of “partnership deed”, national tax form,
license to commence business etc.

Company account

Here the names of the directors and company are required for account opening. The
documents required are the article of memorandum and association, list of directors,
commencement certificate.

Club society

A club has to certify that it was resolved to open an account. Signatures and stamps are
required.

31
CHAPTER 4

FINANCIAL ANALYSIS

4.1 Introduction
The importance of financial statement analysis lies in their utility to satisfy the question
in the mind of stakeholders. Different classes of people are interested in the financial
statements with a view to assessing the economic and financial position of any business
or industrial concern in term of profitability, liquidity or solvency etc. for example, the
commercial banks are mainly interested in short term liquidity and profitability while
prospective investors may be investors may be interested in long terms liquidity and
solvency.

Financial statements among other things include balance sheet and income statement.
Balance sheet presents assets and liabilities of the business at a given date. Besides
showing the ability of the business to service the loans on the strength of its financial
structure and its profitability, helps in judging the impact of financial and fiscal support.

Purpose of Financial Analysis

The analysis of Financial Statements (FS) is to examine past and current financial data so
the company’s performance and financial position can be evaluated and future risk and
potentials can be estimated. The analysis can yield valuable information about tends and
relationship, the quality of a company’s earnings, and its financial strengths and
weaknesses.

32
 4.3 Financial Highlights 2006

Rupees in million 2006 2005 +/- Chang

Profit
Operating profit 4475 3461 + 29.30%
profit before taxation 3347 2859 + 17.07%
profit after taxation 2250 2022
+ 11.28%
Balance Sheet
Shareholders’ funds 11,053 8813 + 25.42%
Deposits from customers 131,839 118,795 + 10.98%
Advance to customers 99,179 85,977 + 15.36%
Total assets 166,033 145,100
+ 14.43%
Information per ordinary share
Earnings (Rs.) 11.23 10.09 + 11.30%
Cash dividend (Rs.) 1.00 1.50 - 33.33%
Stock dividend (%)
50.00 33.00 + 51.52%
Net asset value at year end (Rs.)
55.16 43.98 + 25.42%
Market value at year end (Rs.)
104.95 126.80 - 17.23%
Capital adequacy ratio (%)
10.93 11.18 - 2.24%

Source: Annual Report of 2006

4.4 Balance sheet

as at December 31, 2006

33
Rupees in thousand 2006 2005

Assets

Cash and balances with treasury banks 11,766,925

Balances with other banks 7,333,002 5,550,148
Lending to financial institutions 8,392,950 10,172,242
Investments 28,625,915 25,708,194
Advances 99,179,372 85,976,895
Operating fixed assets 3,810,331 3,192,862
Deferred tax assets - -
Other assets 3,812,788 2,732,641
166,033,588 145,099,907

Rupees in thousand 2006 2005

Liabilities

Bills payable 1,839,077 1315680

Borrowings 14964087 10562338
Deposits and other accounts` 131,839,283 118,794,690
Sub-ordinate loans 2998500 2999700
Liabilities against assets subject to finance lease - 1459

Deferred tax liabilities 736,298 567,217

Other liabilities 2603113 2045340
166,033,588 145,099,907

4.5 Profit and Loss Account

For the year December 31, 2006

34
 Rupees in thousand 2006 2005
Mark-up/return/interest earned. 12,596,921 8,780,698
Mark-up/return/interest expensed 6,977,313 4,278,374
Net mark-up/interest income 5,619,608 4,502,324
Provision against non-performing loans and advance 1,128,137 638,547
Provision / for impairment in the value of investments 376 (36,555)
Bad debts written off directly - -
1,128,513 601,992
Net mark-up/interest income after provisions 4,491,095 3,900,332
Non mark-up/interest income
Fee, commission and brokerage income 1,013,660 838,218
Dividend income 109,326 51,143
Income from dealing in foreign currencies 584,344 356,218
Gain on sale of securities-net 112,474 100,407
Unrealized loss on revaluation of investments (2,308) (582)
Other income 321,758 206,819
Total non-mark/interest income 2,139,254 1,552,566
Non mark-up/ interest expenses 6,630,349 5,452,898
Administrative expenses 3,277,353 2,591985
Other provisions/write offs - -
Other charges 6,141 1,832
Total non-mark 3,283,494 2,593,817

Profit before taxation 3,346,588 2,859,081

Taxation - current 983,875 828,774

- prior years’ - (188,247)

-deferred 113,006 196,558

1,096,881 837,085
Profit after taxation 2,249,974 2,021,996

Un appropriated brought forward 1,617,597 1,538,432

Profit available for appropriation 3,867,571 1,538,432
Basic/diluted earnings per share – Rupees 11.23 10.09

35
4.6 Analysis

The financial data of Askari Bank Limited is analyzed in the following two ways
4.6.1 Common Size Analysis
4.6.2 Ratio Analysis

Common size analysis and ratio analysis are techniques that can be used to identify trends
in financial statement; common size analysis is also useful in comparative analysis, and
some source of industry data.

4.6.1 Common Size Analysis

There are following two types of common size analysis

4.6.1.1 Vertical Analysis
4.6.1.2 Horizontal Analysis

4.6.1.1 Vertical analysis of Assets

Vertical analysis shows the year performance by comparing all the items with the total assets and
the owner’s equity. Here the figures show that the cash increased 0.85 in 2006 as compared to
2005. This figure has been improved from last years. Other assets are increased 0.41 in 2006.
And other figures also increased in 2006.

Vertical Assets Analysis

36
Rupees in thousand 2006 2005 2006 2005

Assets
Cash and balances with treasury banks 14,879,230 11,766,925 8.961578 8.109533

Balances with other banks 7,333,002 5,550,148 4.416577 3.82503

Lending to financial institutions 8,392,950 10,172,242 5.054971 7.010509

Investments 28,625,915 25,708,194 17.24104 17.71758

Advances 99,179,372 85,976,895 59.73452 59.25358

Operating fixed assets 3,810,331 3,192,862 2.294916 2.200458

Deferred tax assets - - 0 0

Other assets 3,812,788 2,732,641 2.296369 1.883282

166,033,588 145,099,907 100 100

Vertical Analysis of Liabilities

Rupees in thousand 2006 2005 2006 2005

Liabilities

Bills payable 1,839,077 1315680 1.107654 0.906741

Borrowings 14964087 10562338 9.012687 7.279355

Deposits and other accounts` 131,839,283 118,794,690 79.40519 81.87096

Sub-ordinate loans 2998500 2999700 1.80569 2.067334

Liabilities against assets subject to finance lease - 1459 0 0.001006

Deferred tax liabilities 736,298 567,217 0.443463 0.390915

Other liabilities 2603113 2045340 1.567823 1.409608

Total Liabilities 166,033,588 145,099,907 100 100

4.6.1.2 Horizontal analysis of Assets

Horizontal analysis compares each amount with a base amount for a selected base year. The base
year item we take 100%. This is good tool the vertical analysis to understand change of each
percentage.

Assets Analysis

37
Rupees in thousand 2006 2005 2006 2005

Assets

Cash and balances with treasury banks 14,879,230 11,766,925 126.4496 100.00

Balances with other banks 7,333,002 5,550,148 132.1226 100.00

Lending to financial institutions 8,392,950 10,172,242 82.50836 100.00

Investments 28,625,915 25,708,194 111.3494 100.00

Advances 99,179,372 85,976,895 115.3558 100.00

Operating fixed assets 3,810,331 3,192,862 119.339 100.00

Deferred tax assets - - 0 100.00

Other assets 3,812,788 2,732,641 139.5276 100.00

Total Assets 166,033,588 145,099,907 114.4271 100.00

Liabilities Analysis
Rupees in thousand 2006 2005 2006 2005

Liabilities

Bills payable 1,839,077 1315680 131.7815 100.00

Borrowings 14964087 10562338 141.674 100.00

Deposits and other accounts` 131,839,283 118,794,690 110.9808 100.00

Sub-ordinate loans 2998500 2999700 99.96 100.00

Liabilities against assets subject to finance lease - 1459 - 100.00

Deferred tax liabilities 736,298 567,217 129.8089 100.00

Other liabilities 2603113 2045340 127.2704 100.00

Total Liabilities 166,033,588 145,099,907 114.4271 100.00

4.6.2 Ratio analysis

Financial ratios Year 2005 Year 2006

Return on average shareholders funds % 27.7 22.6
Return on average assets (RoA) % 1.6 1.4
Profit before tax ratio % 32.5 26.6

38
Gross spread ratio % 51.3 44.6
Income / expense ratio times 1.4 1.3
Advance to deposits % 72.4 75.2
Price earning ratio times 9.6 9.3
Dividend yield ratio % 1.2 1.0
Dividend payout ratio % 11.2 8.9

4.7 Financial Review

4.7.1 Profit

Askari Bank successfully maintained the growth pattern during 2006. The Bank’s
operating profit was recorded at Rs.4.47 billion compared to last year’s Rs.3.46 billion,
an increase of 29% in operating profit (i.e. profit before provisions and taxation) over last
year. Pre-tax profit grew by 17% while profit after tax increased by 11%, over last year.
So core banking profits increased by 29% over last year and continue to be the primary
source of Bank’s profits.

4.7.2 Non mark-up / non interest income

The non mark-up / non interest income recorded an increase of 38% over last year.
Analysis of components of non mark-up / non interest income reveals that ‘fee,
commission and brokerage income’ increased by 21% benefited by the substantial
increase in foreign trade and guarantees business and overall business and overall
increase in banking operations, while ‘income from dealing in foreign currencies,
increased by a significant 64% over the previous year.

4.7.3 Operating Expenses

During the year, the operating expenses increased by 26% over last year. The increase
was primarily attributable to the expansion plan actively pursued by the Bank. Although,
the operating expenses increased, cost to income ration (CIR) registered slight

39
improvement confirming that the increase in income was more than the increase in
operating expenses.

4.7.4 NPLs and Provisions against NPLs

NPLs increased by 54% during the year to Rs.3,656 million from Rs.2,373 million from
last year due to further downgrade of few large exposures. While these NPLs are being
closely monitored for revival/recovery, Rs.1, 128 million have been appropriated as
provisions against non-performing advances, against previous year’s Rs.639 million.
During the year, the basis of general provision was revised from judgmental to consistent
basis and now general provision is maintained @0.5% on all performing advances except
consumer advances-general provision on consumer advances is maintained as per SBP
prudential regulations for consumer finances.

4.7.5 Current, Savings and other deposits

Customer deposits increased to Rs.131.8 billion by end 2006, an increase of 11% over
last year. A comparison of deposits by type reveals that current accounts i.e. non-
remunerative accounts increased by 19% followed by saving deposit accounts, which
increased by 11% over the previous year. The deposits increased by 6%.

4.7.6 Earnings per share (EPS)

Earnings per share increased by 11% from Rs.10.09 last year-restated for issue of bonus
shares during the year, to Ts.11.23 at the close of year.

4.7.7 Return on average assets

40
Return on average assets was 1.4% at the close of 2006, showed 13% decrease from 1.6%
last year due to increase in average assets by 23% as compared to last year in which
average assets increased by 31%.

4.7.8 Shareholders’ funds

The aggregate shareholders’ funds increased to Rs.11, 053 million by end 2006 from
Rs.8, 813 million last year-restated for change in appropriation policy more fully
explained in note 5.1 of the audited financial statements. The increase was contributed by
the profits earned during the year, and the unrealized surplus on revaluation of
investments, mainly equity portfolio. The return on average shareholders funds decreased
to 22.6% from 27.7% last year, mainly 77% increase in provisions for non-performing
advances.

4.7.9 Capital adequacy

The capital adequacy ratio at 10.93% showed decline at the close of 2006 as against
11.18% at the close of 2005. This fall was mainly attributable to increase in risk weighted
assets and change in accounting policy for recognition of dividends. CAR at current
levels is considered as comfortable over the minimum requirements of 8% and for further
expansion in risk assets.

Askari Report of
ASKARI BANK LIMITED
for the year ended December 31, 2006

41
4.8 SWOT ANALYSIS

SWOT is abbreviations that show the strengths, weaknesses, opportunity and threats for
an organization. It is the knowledge of the factors that indicates the ups and downs of an
organization. It also involves the evaluation of the future position and forces affecting the
organization.

With this background, Askari Bank Limited has been sorted out for its strengths,
weaknesses, opportunities and threats confronted in the period of internship.

4.8.1 STRENGTHS

1. The bank is spreading its branches all over the country very rapidly.

2. It has a largest international correspondent network.

3. It offers product innovation day by day.

4. It offers a range of products to enhance retail banking.

5. It is workings in Islamic banking sector.

6. The bank has achieved many awards for its sound management.

4.8.2 WEAKNESSES
1. The selection criteria for employees are not on merit basis.

2. It has high markup rates, thus discouraging the middle investors.

3. The upward communication channel is not satisfactory.

4. The branch is overstaffed.

5. Major account benefits are for army officials.

6. Feedback from employees is weak.

42
4.8.3 OPPORTUNITIES
The means and ways for an organization to remove its loopholes. These are to be
recognized with the circumstances.

1. Different products should be offered for customers with attractive

packages.

2. For the customer ease, the banking hours should be increased.

3. Lowering the credit card rates to lower income group.

4. Telephonic banking service should be launched for customer facility.

5. The installment rates on automobiles are to be lowered.

6. The bank buildings need to be renovated.

4.8.4 THREATS
These indicate the pinch points after which the production and profitability of any
organization hampers. These are the obstacles in the external environment. Some
obstacles are found against the banking practice of ABL.

1. Increase in the growth of other private and foreign banks in the country.

2. Uncertainty in the economy affects the investors.

3. Political influence on the bank.

4. The effects of inflation on the deposits.

5. High rates of turnover as people struggle for the best.

6. Rapid growth of global technology and techniques.

7. New technology is expensive.

8. Rising trend of interest free banking.

43
CHAPTER 5

FINDINGS/ RECOMMENDATION

5.1 FINDINGS

Findings are based on eight weeks internship at Askari Bank Limited, Abbottabad
branch. Certain points are noted by observation during internship. These are as following

5.1.1 Communication System

Communication is the lifeblood for an organization. It is important for efficient

management. But the communication at Askari Bank Limited is weak and mainly
downward. There is no upward communication. The communication flows from the
authority to sub ordinates. But the voice of the employees does not reach to the vice
president or manager. There is no proper feedback system so the authority knows the
opinion of the employees.

5.1.2 Performance oriented environment

The bank environment is conductive, cooperative and goal oriented. The staff works as a
team in sound environment. All the employees are very cooperative to each other. If an
employee needs any guidance, the operation manager openly helps him/her.

5.1.3 Branch network

The bank has 74 branches and rapidly increasing with the time. It has successfully
opened an offshore at Bahrain. But these branches are mainly at the big cities of the
country. The distribution of the branches is not even. Some cities has three to four
number of branches while there are some areas where its not working.

44
5.1.4 Branch spacing

The spacing requires expansion. The employees are seated congested .If the customers
exceed more than fifteen in number, then the branch get filled with lot of disturbance.

5.1.5 Interacting the services of computer experts

The computer department is of great value to the bank. Although the experts look out for
new innovations but at Askari Bank Limited, they are just running the approved program
with no innovation. They are using the UNIBANK program that has been developed by
Union Bank in 1990.

5.1.6 Marketing through media

Media is the most effective source of marketing Askari Bank Limited is not using
effectively media as a marketing tool. Although they are advertising at the television but
it is seen rarely. Moreover, the advertisement did not clear the operations clearly. The
bank should adopt the policy of sponsorship for the games and other functions.

5.1.7 Credit Rating

During the year, the Pakistan credit rating agency upgraded the bank’s long term entity
rating from AA to A1+( the highest possible) and maintained the short term rating at
A1+.moreover the bank won many awards. It has won the award of being “The Best
Retail Bank in Pakistan” for the year 2003.In year 2004; it has won the award for “The
Best Consumer Internet Bank in Pakistan”.

45
5.1.8 On-line Banking

The banking world is converting to on line banking to facilitate the customers. In

Pakistan, Askari Bank Limited is the first bank that offers the service of on-line banking.
The deposits can be transacted on its site. Another facility is the account checking on-
line.

5.1.9 Mark-up Charges

This is the main tool to attract customers as to make flexible advances and loans. In this
bank the mark-up charges are high than the other banks. This high rate discourages the
customer. Especially, the mark-up on credit card is very high i.e. 75%.

5.1.10 Merits in Selection

The bank is largely influenced by the military. The selection process is also affected by
this influence. Manly the army background people are recruited. They are given priority
than the others.

5.1.11 Equal facilities to all Branches

Although the bank is spreading its branches rapidly; but the facilities are limited to the
big cities only. Mostly branches lack technical facilities. Some branches have staff
problems as well.

5.1.12 Promotion and increment policy

Mostly the promotion is given on the basis of authority concern. The employees are not
assessed for promotion. There are no such criteria for the improvement of employee.

46
5.1.13 Turnover rate

Most of the employees plan to go abroad or in search of another job. This rate is
increasing due to low incentives for the employees. The employees compared the
incentives to other banks. And get result of being given low incentives.

5.1.14 ATM

The branch is installed with ATM system but it works often. Most of the time it is
jammed or having technical problem.

5.2 RECOMMENDATIONS

5.2.1 Effective communication

The bank should develop an effective communication channel through meetings and
counseling with all the employees. This will create a feedback system through which the
management will know about the employees’ demands and opinion.

5.2.2 Computerization

The bank requires adopting new technology based computer system. It will be helpful to
employees. It will speed up the work. it is seen that a lot of work at the bank is paper
based. It needs to be reduced by installment of advance computer system.

5.2.3 Marketing tools

A separate department is needed whose function will be the marketing. Proper plans
should be workout in case of launching new product or services.

47
5.2.4 Revision of markup charges

If the markup rates on holding accounts especially the special accounts are kept at
moderate rate, then it will facilitate customers. More profit will be earned on nominal
rates. It will help the foreign investors too.

5.2.5 Merit in selection

The selection should be on merit based. First priority should be given on educational
background and skills. It would be better if the selection is test based. Now they are
selecting through test but still the interview plays a big role. Here again the referential
comes first.

5.2.6 Full facilities to all branches

When ever a new branch is opened, it should be provided with all the technical facilities.
All the branches should be serving the same products and services. There are certain
branches that are not having ATM. Some branches lack the facility of certain accounts.

5.2.7 Performance based promotion

The increments and promotion should be given through performance evaluation. Every
employee should have the performance appraisal report that evaluates his/her conduct.

5.2.8 Incentives for employees

The incentives for the employees need to be revised as to develop the policy that satisfies
the employees. This step is necessary as to reduce the turnover rate.

5.2.9 Introducing fresh graduates

With the advancement in the methods and techniques; it is necessary to introduce fresh
people in the banking field. This will bring new ideas and concepts for effective work.

48
5.2.10 Smart work

There are certain officers that are too good for the job while the others lack the ability to
work properly. Smart work concept should be followed which show the right person for
the right job. This will increase the efficiency.

5.2.11 ATM arrangement

The ATM system should be installed at all the branches as some branches lack this
service. The bank should adopt the one link ATM system as to facilitate the customers.

49
Conclusions

With the globalization in the world, an environment of competition is created that require
continuous struggle and hard work in every field. Banking sector has adopted new
techniques with the passage of time in order to compete in this world.

ABL is one such commercial bank that is successfully operating in its field. It is a private
sector bank that offers modern services to customers. It is expanding its branches and
business all over the country with over 74 branches. A system of regional management is
in place to ensure the improvement in productivity. They are aware to the changes and
growth taking place in the global financial market, the opportunities and threats
endangered by grater deregulation in economy. They are alive to the expectations of he
customers. Therefore, first priority is given to the customer satisfaction. For this purpose,
new methods are adopted to face the challenges.

It aims to be the leading bank in the country. It is moving towards its goals. It has won
many awards in the banking world. It achieves its target and playing active role in social
sector as well. Certain programs are launched that help the poor community. It is
successfully creating the relationship with the nation. It offers diverse services to
customers of any status and age.

The performance of the bank is improving with the time. Its profitability is increased
during the year 2004, but still it requires improvement in infrastructure and technology.
Certain policies need to be revised as to enhance its operations. The bank aims at a
prosperous future by “inspiring relationship” and work for the betterment.

50
5.4 Reference:

1. ABL Abbottabad Branch

2. ABL Newsletter, January 2006

3. Annual Report 2006, ABL

Persons interviewed are:

4. Mr. Abid Ali Operation Manager

5. Mr. Hasseb Credit Officer

6. Mr. Nasir Remittance Officer

7. Mr. Zaheer Dispatch Officer

8. Mr. Waseem Gul Account Openers

51