1.

1 History of the Bank of Punjab

The Bank of Punjab (BOP) was established in 1989 and was given the status of
scheduled bank in 1994. The Bank of Punjab is working as a scheduled
commercial bank with a network of almost 272 branches at all over major
locations in the Pakistan.

1.1.1Nature of the Organization

The Bank of Punjab is a banking organization, which provides all types of

banking services such as Deposits in Local Currency and Foreign Currency,
Remittances, Advances to business, Trade, Industry and Agriculture.

The Bank of Punjab has definitely entered in a new era of science to the nation
under experience and professional hands of its management. The BOP plays a
vital role in the national economy through mobilization of till now available
local resources, promoting savings and providing funds for investments. The
bank offers attractive rates of profit on all deposits, opening of foreign currency
accounts and handling of foreign exchange business for example imports,
exports, remittances, financing, trade and industry for working capital
requirements and money market operations.

1.1.2Branches Networks

The BOP today has 272 well furnished branches in all over the Pakistan. The
branches of BOP are divided according to the following regions:

Classification of Regions & Number of Branches

Sr. Region Name No. of Branches
#
1 Corporate Region 1
2 Lahore Region –South 34
3 Lahore Region – North 33
4 Rawalpindi Region 38
5 Faisalabad Region 43
6 Gujranwala Region 45
7 Multan Region 64
8 Peshawar Region 7
9 Karachi Region 7

1
 Total Branches 272
Source: http://www.bop.com.pk/

1.2 Business Volume

Business Volume in terms of Investment, Current & Fixed Assets, Share
Capital, Revenues, Deposits, Advances, Income, and EPS for the last 5 years is
as under:

1.2.1Bank’s Growth, Profit & Loss (Rupee)

Items 2004 2005 2006 2007 2008

Income 2,869,338,029.73 7,840,303,996.67 17,835,532,927.95 28,518,593,936.67 35,041,452,374.16

Expenses -1,676,959,562.82 -4,462,674,531.28 -11,951,293,782.43 -21,769,277,662.42 -29,691,225,055.73

Profit 1,192,378,466.91 3,377,629,465.39 5,884,239,145.52 6,749,316,274.25 5,350,227,318.43

Growth 123% 183% 74% 15% -21%

2
 Graphical Representation

40
35 Income

30 Income
25
20 Income
15
10
Rs. Billions
Income Profit
Profit Profit Profit
5 Income Profit
0
-5 Expenses
Expenses
-10
-15 Expenses
-20
-25 Expenses

-30 Expenses
-35
2004 2005 2006 2007 2008
Years

5 Growth
4
3
2 1.83
1 0.74
1.23 0.15
Rate

0
2004 2005 2006 2007 2008 -0.21
-1
-2
-3
-4
-5

Years

3
 1.2.2Bank’s Assets, Investment, Deposit & Advances

Particulars 2004 2005 2006 2007 2008

Total assets 66,320 111,154 164,855 235,001 185,909
Shareholder's
4,420 6,777 10,659 18,996 3,743
Equity
Investment 16,198 18,026 28,233 73,462 22,690
Deposits 54,724 88,465 137,728 191,968 164,072
Advances (net) 39,439 63,624 101,320 133,899 131,724

INVESTMENT ADVANCES (NET) DEPOSIT

2,000
1,900
1,800
1,700 DEPOSIT
1,600
1,500
1,400
1,300
Rs. Hundreds1,200
1,100 ADVANCES (NET)
1,000
900
800
700
600
500
INVESTMENT
400
300
200
100
0
Years

2004 2005 2006 2007 2008

1.2.3Earning Per Share

4
 Particulars 2004 2005 2006 2007 2008
EPS (Rs/share) 9.08 10.01 13.14 8.42 -19.07

EPS
20
18
16
14
12
10
8
Rate 6
4
2
0
-2
-4
-6
-8
-10
-12
-14
-16
-18
-20
2004 2005 2006 2007 2008
Yea
rs

Comments:
The Bank’s total advances, deposit & investment are increasing from 2004 to
2007 and banks also show a reasonable progress in these four years but the
growth rate decreased in 2006, 2008 & reaches at negative in 2008. The earning
per share increase in 2004, 2005 and 2006 but it decrease in 2007 but remain
positive. In 2008 the earning per share decreases and reaches at negative
(Rs.19.07/share).

The BOP show better progress up to 2006 – the major reason is the favorable
market condition and boom in banking sectors and over all good political
situations. As global environment get changes then the Pakistan’ banking sector
also effected.

1.3 BOP’s Management and Employees

5
 1.3.1 Staff Strength
At present, the total number of employees in the organization is 4918.
2008 2007 2006 2005 2004
GRADE No. GRADE No. GRADE No. GRADE No. GRADE No.
PRESIDEN PRESIDEN PRESIDE PRESIDE
PRESIDENT 1 1 1 1 1
T T NT NT
SEVP 3 SEVP 1 SEVP 1 SEVP 1 SEVP 1
EVP 7 EVP 4 EVP 3 EVP 2 EVP 1
EOC 11 EOC 8 EOC 6 EOC 7 EOC 5
SVP 15 SVP 14 SVP 13 SVP 12 SVP 10
VP 50 VP 40 VP 35 VP 30 VP 28
AVP 259 AVP 200 AVP 170 AVP 150 AVP 125
OOC 56 OOC 47 OOC 40 OOC 35 OOC 31
OG-I 408 OG-I 380 OG-I 350 OG-I 330 OG-I 340
OG-II 296 OG-II 280 OG-II 270 OG-II 255 OG-II 245
RM 160 RM 140 RM 120 RM 110 RM 90
OG-III 504 OG-III 490 OG-III 430 OG-III 450 OG-III 420
ACO 208 ACO 150 ACO 146 ACO 140 ACO 134
CO 640 CO 600 CO 425 CO 400 CO 350
JO 512 JO 500 JO 430 JO 400 JO 425
C/NC 1788 C/NC 1700 C/NC 1680 C/NC 1600 C/NC 1600
TOTAL 4918 TOTAL 4555 TOTAL 4120 TOTAL 3923 TOTAL 3806

STAFF STRENGTH

5600
4918
4900 4555
3806 3923 4120
4200
3500
# OF Employees 2800
2100
1400
700
0

Years

2004 2005 2006 2007 2008

1.3.2 Board of Directors (BOP)
Sr. # Name Status
01 Mr. Safdar Javaid Syed Chairman

6
 02 Mr. Naeem-Ud-Din Khan President
03 Mr. Tariq Mehmood Pasha Director
04 Mr. Azhar Hamid Director
05 Mr. Shafqat Ellahi Director
06 Mr. Shafqat Mahmood Director
07 Mr. Waqar Ahmed Khan Director
08 Mr. Raza Saeed Secretary

1.3.3 BOP Top Level Management

Sr. # Name Designation

1 Mr. Khalid Siddiq Trimizey Deputy Chief Executive Officer
2 Mr. Sajjad Hussain Head of Special Project
3 Mr. Shahid Waqar Mahmood Head Retail Banking
4 Mr. Nadeem Amir Chief Financial Officer
5 Mr. Sharjeal Masud General Manager Operations & IT
6 Mr. Zalmai Azam Durrani General Manager Broad Base Liability
7 Mr. S. M. Atif Head Consumer Banking Division (CBD)
8 Mr. Azhar Hussain Dilawari Head IT
9 Mr. Khawar S.Ansari Head Treasury
10 Mr. Ijaz ur Rehman Qureshi Head of Audit & RAR
11 Mr. Main Muhammad Sharif Head CAD
12 Mr. Salman Saeed Head Credit Policy
13 Mr. Moazzam M Maneka Head Agriculture Credit Department
14 Mr. Amir Hameed Head TPC
15 Mr. Sajid Arif Nomani Head Establishment
16 Mr. Irfanuddin Head C&CD
17 Mr. Moghis Bokari Head Human Resource
18 Mr. Abdul Razzaq Chief Risk Officer
19 Mr. Hafeez ud Din Head SAM
20 Mr. Liaquat Ali Country Commercial Head
21 Mr. Momin Hyat Advisor Islamic Banking
22 Mr. Ahmed Tariq Azam Head Corporate

7
1.3.4 AUDIT COMMITTEE
Mr. Kasir Zulifqar Khan Chairman
Mr. Salman Siddique Member
Mr. Khurram Iftikhar Member

1.3.5 AUDITORS
Ford Rhodes Sidat Hydar & Co., Charter Accountants

1.3.6 REGISTERD OFFICE

7- Egerton Road, Lahore – Pakistan
PBX + 92 (42) 9200421 – 432
WEBSITE: www.bop.com.pk
UAN: 111-200-100
REGISTRAR:
M/s corplink (Pvt) Ltd
Wings Arcade, 1-k (Commercial) Model Town, Lahore.
Ph: 042-5839182

1.4 CORPORATE GOAL

Organizational goal and strategy define the purpose and competitive techniques
that set it apart from others organizations. Goals are often written down as an
enduring statement of company intent.
A strategy is the plan of action that describes the resource allocation and
activities for dealing with the environment and for reaching the organizational
goal. Goals and strategies define the scope of operations and the relationship
with employees, clients and competitors.

With over 140 years of experience in trade finance and an extensive

international branch network, The Bank of Punjab is committed to help the
customer succeed in every competitive environment. To keep pace with
changing needs, BOP constantly review its comprehensive cash, trade and
treasury products and services, ensuring that a full range of flexible and
innovative services is always available for the customer wherever they trade.

8
1.5 VISION STATEMENT

“To be a customer focused bank with service excellence.”

1.6 MISSION STATEMENT

As it is said that an organization’s culture, products, services, employees, their
attitude, philosophy, self-concept, markets and environment throws light on the
corporate mission, so one of the business executives at the bank, based on his
personal observation and judgment, carved the following mission of The Bank
of Punjab as

“To exceed the expectations of our Stakeholders by leveraging our

relationship with the Government of Punjab and delivering the complete
range of professional solutions with the focused on program driven products
and Services in the agriculture and middle tier markets through a motivated
team.”

1.7 OBJECTIVES:
The main objective is
“To offer outstanding value to the customers by providing a knowledgeable,
efficient and reliable service in a personal, helpful and responsive-manner”

The objectives of The Bank of Punjab carving way towards the mission are:

 To be fast, focused, and determined.

 Its tough out there- we face brutal challenge from both global
competitors and local banks.
 Like leopard- be more agile, move swiftly, respond faster, and work
smarter.
 Creating values for the customers, shareholders and employees.
 Customer satisfaction and delight is given the top priority as we are for
the customers and not the customers for us.

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1.8 CORE VALUES

Our Customer as our first priority

Profitability for the prosperity of our stakeholders that
allows us to constantly invest, improve and
succeed

Corporate Social Responsibility to Enrich the Lives of community where

we operate
Recognition and Reward for the talented and high performing
employees
Excellence in every thing we do
Integrity in all our dealings
Respect for our customers and each other

10
Chapter No. 2
Product Line

11
 2.1 Deposit Products:

2.1.1 Current Account:

The Bank of Punjab offered Current Account to its value customers. A current
deposit account is a running account which is continuously in operation by
customer through all working days of the bank. The BOP does not pay interest
on these deposits. Customers can withdraw and deposit money with out any
notice to the bank. It is suitable for the people who have to make frequent
receipts and payments through cheques. Business people who may be
individuals, firms, limited companies, public body and clubs can open this
account.

Interest:
Interest is not paid on current account balance.
Service Charges:
The Bank may claim Service Charges if minimum balance is not maintained.
The amount of service charges is deducted from debit voucher.

2.1.2 BOP Basic Banking Account:

The minimum initial deposit will be Rs.1000 for BOP Basic Banking Account.
The BBA’s has the following features.
 No profit will be Payable.
 No fee (service charges) for maintaining such accounts will be charged.
 There will be no limit for maintain minimum balance. In the cases, there
balance in BBA does remain "NIL" for a continuous 6 month period, such
accounts will be closed.
 Account holder will be allowed maximum of two deposit transactions and
two withdrawals, free of charge either through cash/through clearing per
month otherwise service charges of a regular banking account shall be
applicable for that month as per Bank's Schedule of Charges.
 Unlimited free of charge ATM withdrawals from Bank's own ATM's will be
allowed. In case of withdrawals from BBA though the ATM Machine of
other Banks, the Charges of these Banks shall be applicable for such

12
 transaction.
Note:
If any existing customer desire to get his regular banking account converted
into Basic Banking Account, he / she may kindly contact the branch where his /
her account is being maintained. The facility for conversion into BBA will be
provided free of charge

2.1.3 PLS Account:

In Pakistan this account was introduced in July 1, 1985. People who do not
need money in near future invest money in this account. This is an operating
account. The deposits are invested in non-interest areas of business. Bank
declares profit rate for this account half yearly on the basis of its networking
results.

The rates of profit may vary period to period. In case of profit or loss it is
distributed among all PLS account holder. Average balance during a calendar
month will be taken to determine the deposit slabs and applicable profit rate for
that month. The BOP PLS Account has also some following features.

Further, calculation of Profit or Loss is made for each calendar month. Amount
can be withdrawn 8 times in a calendar month.

Service Charges:
Service Charges can be claimed by the bank if minimum balance is not
maintained.
Zakat:
Zakat is deducted at 1st of Ramadan.
Withholding Tax:
Withholding Tax at the rate notified by the Government of Pakistan from time
to time will be deducted out of profit payable to the Account Holders.

PLS Savings Accounts may also be opened by charitable institutions, for

Provident Funds and other funds of benevolent nature by Local Bodies,
Autonomous Corporations, Companies, Associations, Societies, Educational

13
 Institutions, and Firms etc.
2.1.4 saving plus Account:
People who want to save their income open the saving bank account. They can
earn income on their present saving. There is a guarantee of reasonable rates of
return on saving bank account. Customer can withdraw money through cheque.
Account holder is paid interest at the end of June and December at fixed rate on
minimum monthly balance. Account holder is allowed to withdraw a limited
amount of money at a time. A notice before 7 days is required for withdrawal
of a lump sum amount or more than the specified limit.

2.2 Loan Products:

2.2.1 Commercial Finance:

i. Running Finance:
Running Finance Facility is the form of lending, where customer is allowed to
borrow money from a Banker up to a certain limit either at once or when it is
required. Running financing is

 Against Pledge of Shares

 Against Government Securities
 Against Hypothecation of Stocks

Purpose:

Running Finance Facility is for purchase of animals, cost of feed, medicines

and other running expenses of the Farm. Running Finance Facility will be
provided for following type of Live stock Farming:

 Calves Fattening Farms

 Broilers Farming.
 Layer Farming.
 Fish Farming.
 Semen Production Unit.

14
a. Against Pledge of Shares:
The running finance provides by the BOP to it customers are generally
extended to companies or individuals on selective basis against pledge of
tangible securities such as Shares. Such financing is supportive to secondary
Capital Market concept.

The facility is required to be adjusted periodically or within the period as

specified in the Sanction Advice. Given that Stock Market in Pakistan is
volatile, banks are required to cease from extending loans to the market players
who are engaged in speculations for short term “Gains”, which quite often they
fail to make, consequently rendering the facility to non-performing ultimately.

POLICY:
 Advances against shares shall not be allowed to take exposure against the
security of share issued by them.
 Provide unsecured credit to finance subscription towards floatation of
share capital.
 Take exposure against sponsor director’s shares (issued in their own
name or in the name of their family members) of banks/DFIs.
 Take exposure on any one person (whether singly or together with other
family members or companies owned and controlled by him or his family
members) against shares of any commercial bank/DFI in excess of 5% of
paid up capital of the share issuing bank/DFI.
 Take exposure against the shares of listed companies that are not
members of the Central Depository System.

Advances approved shall be within “Per Party Limit” (i.e, 30% of un-impaired
equity of Bank for fund based and non fund based subject to condition that the
maximum outstanding against fund based exposure doest not exceed 20% of
Bank’s equity) and supported by positive CIB/DFIs confidential reports. Loans
exceeding Rs.500, 000/- (Total Accommodation) shall not be more than 10
times of Borrowers’ Equity i.e. Capital and Reserves minus losses and 04 times
in case of fund based facility, as disclosed in their balance sheets.

15
Financing shall be allowed against shares registered in the name of “Borrower”,
however in case the shares tendered for pledge are registered in the name of a
“Third Party”, the letter of lien shall be signed by the Third Party and not by the
Borrowers.

The Head RACD conducts a monthly review of financing against shares and
exercise vigilance over:-
 Market Rates of pledged shares.
 Their marketability
 Dividend /Bonus declarations etc.

b. Against Government Securities:

Government Securities include Defense Saving Certificates (DSCs), Special
Saving Certificates (SSCs), Regular Income Certificates (RICs), US Dollar
Bonds & NIT Units etc, issued by National Saving Centre Government of
Pakistan / National Investment Trust.

Large amount of funds representing “Provident Fund”, Benevolent Fund

collections are invested in the Government Securities, which are yielding better
return compared to placements with Commercial Banks.

The BOP also extends credit facilities against pledge of “Deposit Certificates”
or other instruments of value issued in the name of Individuals, Joint Holders
Public Bodies.

POLICY:
 All Credit Financing against pledge of Securities require Credit
Limit approved by Credit Committee, even if 100% covered by cash or
collateral.
 Documents complete in all respect duly vetted by Bank’s legal
counsel signature verified shall be obtained ensuring their validity in a
“Court of Law”. Signatures shall be verified in pencil on each document.

16
c. Against Hypothecation of Stocks:
Industrial organizations have to invest a large sum of money to build stocks of
raw material to up keep their manufacturing line. This is appropriate to create
liquidity limitation in the Financial Balance Sheet of the customer. In order to
manage such financial shortfall in their cash flow they usually resort to
borrowings from Banks against Hypothecation of raw material/semi or finished
goods held by them in their stocks.

The BOP in such cases although do not have a physical custody of the goods,
however have a legal Charge/Lien established, thereon, providing a legal
recourse to the Bank to take custody of the stocks, in the event the borrowers
default to repay the loan or fail to meet their obligations, as agreed.

POLICY:
Advances against hypothecation of goods is subject to the policies as applicable
to other loans, and as spelled out in the Credit Policy Manual of BOP with the
exceptions given below:-

 Stock Reports, duly signed by borrowers, are received

periodically at a frequency as spelled out in the DAC/Credit Proposal etc.
 Limits are adjusted by CAD in the system in accordance with the
Drawing Power worked out each time a stock reports is received and value
of stocks reassessed by applying latest Pricing Index.
 Negative Variance between the net value of stocks (i.e, market
value less margin) and the outstanding advance shall be reported to the
relationship/Risk Manger, who shall advise the borrowers to cover the
shortfall by additional stocks or adjust the facility accordingly.

ii. Demand Finance:

The BOP provides Credit facilities extended against registered mortgage of
property (i.e, land/buildings constructed or to be constructed) is by nature
classified as a Secured Advance. A formal charge on the property is established
and recorded with the Registrar Land and Property termed as registered
mortgage. Advances are also made against equitable mortgage of property,

17
whereby the original title Deeds are deposited with the Bank as Security and
the charge is registered with the Registrar SECP.

POLICY:
 Facilities are disbursed or allowed to be availed by the customers
only on receipt of a formal DAC issued by RCAD & duly signed by CAD
Head.
 CAD shall issue DAC only when charge Documents & Securities
as spelled out in the Sanction Advice have been received and lodged in the
safe vault, however in rare cases DAC shall be issued where some of the
secondary nature documents are not received for acceptable reasons and
that the deferment is approved for a specified period by the level of the
authority.
 Formal approval for deferment of specified documents from
Credit Committee shall be necessary, in terms of Credit Policy.
 DAC issued where receipt of some of the documents is deferred
shall clearly highlight the deferment approval and the period of
deferment. Extension in the deferment period, if required further shall
require appropriate level of credit approval.

iii. Cash Finance:

This facility is being provided by the Bank of Punjab to generally against
pledge of goods. Under this type of financial accommodation the facility
amount is disbursed in specially opened account for the purpose. The pledged
goods are released to the borrower against cash payment only. In case the
goods pledged are seasonal in nature, the customer would be required to adjust
the facility before the season ends. Rollover shall not be allowed.

POLICY:
 Basic criteria to qualify for advances against pledge of goods are
as follows:-
 Facility is disbursed in specially opened CF A/C for the purpose.
 It shall be ensured that Goods tendered for pledge are:
•Free from credit restrictions imposed by State Bank of Pakistan

18
 •Not perishable, do not require special Storing
arrangements/conditions and have short expiry period.
 Easily marketable and their price is not highly fluctuating. If so
higher margins shall have to be approved & retained.
 Where variation in pricing is observed during periodic evaluation,
the customer shall be advised to make good the shortfall in the drawing
power.

 Where variation in pricing is observed during periodic evaluation,

the customer shall be advised to make good the shortfall in the D.P.
 The borrowers hold an absolute un-encumbered title to the goods

2.2.2 Consumer Finance:

i. BOP Aasaish Loan:

BOP Aasaish Loan is Personal Loan Facility to purchase Consumer Durable
Goods of selected companies on bank's panel for personal use, repayable on
easy monthly installments.

FEATURES:
 0% Mark up for 12 months
 0% down payment
 Free Home Delivery
 Quick Processing
 No Product Insurance
 No Hidden Cost
 No Prepayment penalty
 Financing Amount up to RS. 500000/-
 Tenure 12, 18,24 & 36 months

ii. Quick cash:

The loan can be taken for higher education of your children abroad or for
daughter's wedding. Quick Cash Loan makes the dreams come true.

19
FEATURES:
 This facility is provided to salaried individuals through their bank
accounts.
 Customers can get RS. 50000/- to 500000/- based on its income.
 Tenure is one year, removal subject to satisfactory conductor
account.
 Life insurance of borrowers will be mandatory.

iii. Car Loan:

The Car Loan facility is available to a Government employee/ Pvt. Employee /
Businessmen / Professionals for purchase of brand new locally manufactured /
assembled cars for personal use & light commercial vehicles.

The Car Loan facility ranges from Rs.200000/- to Rs.5000000/-. The tenure of
loan is 01 year to 05 years. Insurance will be mandatory and mark up rate will
be based on floating rate. Salaried person whose age is "between" 25 to 59 can
apply for this loan. Minimum take home salary is 10000.

iv. House Loan:

House Loan facility is provided to Government employee/ Pvt. Employee /
Businessmen / Professionals to renovate a house with minimum Rs.25000/- and
for purchasing a house with minimum Rs.100, 000/- loan. Life insurance of
borrowers will be mandatory. Mark up rate will be based on floating rate.
Salaried person of same criteria can apply for the loan.

v. Smart Cash Personal Loan:

BOP smart cash personal loan scheme is personal DF facility for bank's target
market for meeting their personal needs, repayable through monthly
installment. Maximum limit for this loan is Rs.500, 000/-. Maximum tenure for
the loan is 5 years. Mark up and insurance policy is same as for other loan.

vi. Furniture and Crockery Loan:

BOP Furniture and Crockery Financing Scheme is a financing scheme for the

20
purchase of Furniture and Fixture Crockery. Maximum limit of the loan which
can be drawn is Rs.5000000/- The mark up rate shall be based on KIBOR.
Loan shall be repaid through easy monthly installments. The tenure for the loan
is minimum 36 months and maximum 60 months.

2.2.3 Agriculture Credit:

i. Green Tractor Lease Finance Scheme (New):

Lease Finance Facility for Purchase of Tractor under Green Tractor Scheme
2008-2009.
In the wake of Chief Minister, Punjab's agenda for promotion of Agriculture
Sector, Government of Punjab has decided to provide 10,000 Tractors to small
farmers on subsidized rates. A subsidy of Rs.200, 000/- per tractor will be
provided to the farmers declared successful through computerized balloting.
The scheme has been titled as "Green Tractor Scheme 2008-09".

In order to facilitate farmers and to grasp maximum business, The BOP’s

Management has approved a special product titled as "LEASE FINANCE
FACILITY FOR PURCHASE OF TRACTOR UNDER GREEN TRACTOR
SCHEME 2008-09" with following terms & conditions:

Eligibility:
 All Farmers who have been declared successful through
computerized balloting.
 The applicant should be a resident, owner/self cultivator of
minimum 05 Acres of agriculture land free from all encumbrances.
Existing BOP borrowers having land under.
 Bank's charges are also eligible under this scheme.
 The applicant should not be a defaulter of any Financial
Institution.

Price of Tractor:
The price of Green Tractor would be less by Rs.200, 000/- from market price of

21
tractor. Subsidy of Rs.200, 000/- will be provided by Govt. of Punjab directly
to Tractor Manufacturers.

Manufacturers of Tractor:
Government of Punjab has approved M/s Millat Tractors (Pvt.) Ltd. and Al-
Ghazi Tractors Limited as Local Manufacturers of tractors for the scheme.
Amount of Finance:
The amount of finance will be equal to the price of locally manufactured tractor
less subsidy amount of Rs.200, 000/- to be provided by the Government of
Punjab. However, maximum amount of facility will not exceed the ex - factory
price of tractor.

Security:
 Leased Asset (Tractor) itself (Tractor will be registered solely in
the name of The Bank of Punjab).
 Charge on Agriculture Land through Agri. Pass Book. Two
written satisfactory market checking reports
Insurance:
Asset Insurance and Life assurance of the Borrower (assigned to BOP) as per
Bank's policy (Insurance, Registration and evaluation charges (if any) etc shall
be borne by the farmer. MARK-UP 15% Per Annum.
Validity:
05 Years from the date of disbursement.
Repayment:
10 Equal Half Yearly Installments (Principal + Mark up)

ii. Kisan Dost Agree Finance Schemes:

Purpose of this scheme is Provision of financial facility to farmers for purchase
of inputs (Seed, fertilizers, pesticides, fungicides e.t.c). Eligibility Criteria are
Resident Self Cultivator having maximum 50 acres, the applicant should not be
defaulter of any other Bank and property should be free from any
encumbrances. Amount for loan is Maximum Rs.500, 000/- according to per
acre limit of the crop. For Security, Charge on Agriculture Land through Agri.
Pass Book or Registered / Equitable mortgage of urban property assessed by

22
PBA’s approved surveyor and cleared by Bank’s legal counsel, is necessary.

iii. Kisan Dost Tractor Finance Scheme:

Purpose of this scheme is Provision of financial facility to the farmers and non
farmers (those who provide tractors to farmers on rental basis for various
tractor related operations), for purchase of Tractor on Lease Finance Basis.
An Eligibility Criteria is Resident Self Cultivator. Amount for loan is
Maximum Rs. 750,000/-For Security Lease Tractor (to be registered in the
name of Bank), Charges on Agriculture Land through Agri. Pass Book and One
personal guarantee of reputable person. Two written satisfactory Market
checking reports are necessary. The Lessee will arrange comprehensive
insurance of tractor and Life assurance of lessee under the Bank’s charge.
Mark-up rate is 15% per annum. Repayment should be done within five year.

iv. Kisan Dost Aabrari Scheme:

Purpose for this scheme is Provision of financial facility to the farmers for
installation of Tube well, turbines etc. An eligibility criterion is Resident Self
Cultivator having maximum 50 acres. Amount for loan is Maximum Rs.500,
000/-.

For Security Lease Assets i.e. Engine, Tube well and other related implements
(The vendor will issue receipt in the name of Bank), Charge on Agriculture
Land through Agri. Pass Book, One personal guarantee of reputable person
acceptable to Bank. And two written satisfactory market checking reports are
necessary. The Lessee will arrange comprehensive insurance of
implements/assets and Life assurance of lessee under the Bank’s charge. Mark-
up rate is 15% per annum. Repayment should be done within four to five years.

v. Mechanization Support Scheme:

Provision financial facility to the farmers for purchase of Agricultural
Implements e.g. Trolley, thresher, plough, etc. Eligibility criteria is, Resident
Self Cultivator having acres. Amount of loan is Maximum Rs.500, 000/-.

vi. Farm Transport Scheme:

23
The purpose of the scheme is Provision of financial facility to the farmers for
purchase of Farm Transport Vehicles e.g. Small Pickups, Vans and small
chillers. Eligibility Criteria is Resident Self Cultivator having acres. Loan
would be provided up to Maximum Rs.500, 000/-.

24
vii. Islah-E-Arazi Scheme:
Provision of financial facility to the farmers for development of their non
productive lands into productive ones by conductive on farm works of Land
leveling, laser leveling, and land improvement, clearance of jungle and land
reclamation. An eligibility criterion is Resident Self Cultivator having acres.
Amount of loan will be Maximum Rs.500, 000/-.

viii. Live Stock Development Scheme:

Provision of financial facility for purchase of animals (Milk & meat production,
cattle farming, Poultry Farming and Fish farming) to the farmers and non
farmers (those who have their own live stock farm/fish farm for commercial
purposes)

ix. Live Stock Scheme:

(Finance for live stock breed improvement through village veterinary)

Provision of financial facility to the Village Veterinary Workers (trained by

Live Stock and Dairy Development Department) for purchase of Artificial
Insemination kits on lease finance basis

Village Veterinary Workers having diploma certificate and recommendations

from Live Stock and Dairy Development Department, Gove of Punjab are
eligible for this. Loan amount is maximum Rs.45, 000/- or 90% of purchase
price of kit and bicycle.

x. Commercial Agro Services Finance Scheme:

Provision of financial facility to the commercially viable entities with
immaculate track record for acquisition of Agri implements and equipments i.e.
tractor trolleys, harvesters etc. for providing agri services to farmers.
Commercially viable entities with immaculate track record with the Bank/Other
financial institutions will be eligible. On case to case basis but not to exceed
80% of the value of equipments / implements

25
Security:
 Leased Assets (Vehicles/Tractors will be registered in the name of Bank
or Receipt of equipments will be issued in the name of Bank).
 Bank charge on or Bank’s Charge on urban property through registered
and equitable mortgage.
 One personal guarantee of reputable person. Two written satisfactory
market checking.

There are also some others agriculture based products in The Bank of Punjab,
which are offering by the bank to its customer but may not be discussing in the
report because of time limits.

26
 2.3 Services:
These are the services provided by the BOP.

 ATM Facility

 Letter of Credit

 Pay Order

 On-Line Banking

 E-Banking

 Debit Card

 Consumer Financing

 Agriculture Financing

 Corporate Financing

 Commission free Remittance

 Demand Drafts

 Lockers Facility

2.3.1 Automated Teller Machine (ATM):

Through the ATM’s Customers have access to the various services such as
withdrawal, balance enquiry and mini statements. Complete security is ensured
because access to the account is only possible by entering a four digit personal
identification number (PIN) known only to the account holder. Cash
withdrawal limit is up to Rs.20, 000 per day. Annual charges of ATM is
Rs.250/- per card.

2.3.2 Letters of Credit:

BOP is offering its business customers the widest range of option in the area of
money transfer. BOP’s letter of credit service is with competitive rates,
security, and ease of transaction, BOP Letter of credit is the best way to do the
business transactions.

2.3.3 Pay Order:

BOP provides transfer of money using different facilities. Its pay orders are a

27
secure and easy way to move the money from one place to another. The charges
for this service are extremely competitive.

2.3.4 Online Banking:

BOP is currently offering window-based online banking to its customers, which

gives access to information on their accounts and the liability to act on the
latest information received over the net.
2.3.5 E – Banking:
BOP is currently offering window-based online banking to its customers, which
gives access to information on their accounts and the liability to act on the
latest information received over the net.

2.3.6 Demand Drafts:

BOP provides safe, speedy and reliable way to transfer money at vary
reasonable rates. Any person whether an account holder of the bank or not, can
purchase a Demand Draft from a bank branch.

2.3.7 Lockers:

It is one of the utility services that BOP provides to their customers for keeping
jewellery, important documents and other valuables.

28
 Chapter No. 3
Organizational Hierarchy

29
 3. Organizational Hierarchy

I have completed my internship duration at Samanabad Branch, Faisalabad

partially.

Head Office

Regional CAD Regional Offices

Area Offices

Branches

30
 3.1 Organogram of Head Office, Lahore

BOARD OF DIRECTOR

Company Sec.

President

Board Risk CEO

Board Audit Board HR Head of HR
Management Secretariat
Committee Committee
Committee

Business Head of
Head of Manager Compliance
Audit& & Internal
RAR Control

Head of Risk
DCEO &Credit
Policy

Chief
Financial
Officer

Head of
Operations
& IT

Head of Head of
Head of Special Head of
Treasury Corporate Head of Head of
Strategic Assets Islamic
& Equity & Retail Commerci Agri-Head
Developme Manageme Banking &
Capital Investmen Banking al Banking
nt nt Management
market t Banking

31
 3.2 Organogram of Faisalabad Region

REGIONAL OFFICE & BRANCH NETWORK

Head
Retail
Banking

REGIONAL CHIEF
(FSD)

AREA
MANAGE
R

AREA OPERATIONS BRANCH

MANAGFER MANAGER

LIABILITY
DEVELOPMENT

OPERATIONS
MANAGER

REMITTANC
GENERAL CASH CASH
E/ TELLER
BANKING RECEIPTS PAYMENTS
CLEARING

32
 3.3 Hierarchical View of Management Samanabad Branch

In samanabad Branch, total numbers of employees are seven. The branch was headed by
Branch Manager Mr. Abdul Malik. The flow of responsibilities and designations are
shown in management’s hierarchy.

MR. ABDUL MALIK

BRANCH MANAGER

MR. MUHAMMAD JAMIL

OPERATIONAL MANAGER

MR. FAISAL MASOOD MR. RANA AATIF ZAHEER

OPERATIONS OFFICER JUNIOR OFFICER

MR. ALI EHSAN UL HAQ MR. M. ANSAR BUTT

BILLING OFFICER CASH OFFICER

MR. SHEHZAD ILYAS MR. TEHSEEN AHMED

CASH OFFICER OG__III

GAURD GAURD

33
3.4 Review of various Departments of the Bank of Punjab:

The major departments/divisions in the Bank of Punjab are mentioned below:-

 Human Resource Division.

 Finance Division
 Agriculture Credit Department.
 Audit & RAR Division.
 Credit Administration Department.
 Control & Compliance Division.
 SAM (Special Assets Management) Division
 Corporate & Investment Banking Group
 Commercial Banking Group
 Credit Risk Management Division
 Operations Division
 Law Department
 Liability Development Division
 Consumer & SME Division
 Financial Institutions Division.
 Retail Banking Division
 Liability Development Division
 Treasury Division

3.4.1Human Resource Division:

The Human Resource Division (HRD) of the Bank of Punjab is situated at
Head Office, Lahore and headed by the Head of Human Resource (Mr. Moghis
Bokhari).

The HRD has, in addition to its administrative function, a direct responsibility

to become a strong supporter of change and development in the Bank. Human
Resource Division creating and monitoring an expanded range of HR policies
and providing comprehensive personnel services in support of management to
achieve their objectives.

34
The HR Division is playing a vital role in developing good human resource for
the bank and supporting overall organization to accomplish the organizational
goals through its high-quality human resource policies and talented team of HR
professionals. The HR Division performing the following majors functions.

Functions of Human Resource Division:

i. Recruitment & Selection:

The most important function of the HR-Division is recruitment & Selection.
The motive of HR is to “hire the right person, right time at right place”. Further
the BOP is an equal opportunity employer so, that it provides job opportunities
to all with out any discretion.

a. Forecasting Future Workforce Needs:

Recruitment phase starts with forecasting the future workforce needs. For this
purpose BAD (Business Activity Data) system is used, made up in Ms excel.
Regional offices send Business Activity Data after each year quarter. For
instance in this Activity Data there is a detail of activities such as average daily
payment of vouchers in a branch, average daily vouchers of utility bills,
Average daily PLS accounts opened, average daily lockers operated and other
activity detail of average daily branch operations of all the branches of the
region. The BAD assist the HR Manager to analysis the human need for future.

b. Internal Recruitment:
Internal Recruitment means collecting the pool of candidates from within the
organization. Bank of Punjab uses the methods of Job Posting / Word of
mouth / Referrals.

c. External Recruitment:
If there won't be enough inside candidates to fill the anticipated openings the
employer may want to forecast the availability of outside candidates. For this
purpose market surveys and unemployment in the country is analyzed.

35
 d. Selection Process:
 Advertisement
 Scrutinizing of Applications
 Developing various types of reports for recruitment purpose
 Designing of written test for fresh positions.
 Conducting of Interviews.
 Short Listing / Merit List
 Preparation of proposal for appointment.
 Offering Appointment Letter

After joining, orientation is conducted. Employees who are totally

inexperienced are also provided training for some time. In orientation job
environment is described such as who will supervise the new employee, his job
duties and performance criteria are defined.

ii. Training & Development:

Training process in the Bank of Punjab starts with Training need analysis. All
the Branches have the responsibility to observe their employees and assess the
training needs in employees. Human Resource department of the Bank of
Punjab forward the Performa for training need analysis to branches. And
accordingly immediate supervisors of each employee assess their training need.

After the TNA (Training Need Analysis) OTI (Officers Training Institute) are
advised to plan the training pattern for next six months as per TNA
requirement. The training calendar is designed both internally and externally
means both the BOP HR department and Training institute plan the training
calendar mutually. Afterwards it is approved by competent authorities' i.e.
HRD committee. Regions report to the head office the nominees for the training
maximum 25 at a time. At the end the list is sent to Head HR for approval.

iii. Benefits & Compensation:

Different type compensation and benefits are given to the employees of the
BOP. These rewards include intrinsic and extrinsic rewards. Satisfaction

36
 derived from the job itself, such in one’s work, a feeling of accomplishment, or
being apart of a team. Extrinsic rewards include benefits provided by the
employer, usually money, promotion, or benefits. Compensation and benefits
were given according to the performance appraisal. This was done on monthly
annual and semi annual basis. Benefits were given according to the nature of
the job. Benefits for the executive/ managers posts include

• Salary raise
• Allowances in the shape of money
• Telephone
• Fuel facility
Benefits which were given to normal jobs include promotion, salary raise,
allowances. A residential scheme was also under consideration.

iv. Performance Appraisal:

Performance appraisal Means measuring the performance discussing it with
employee and taking corrective actions to remove that deficiency. Performance
appraisal is done annually at BOP. Performance appraisal has following steps
in The Bank of Punjab are

Step 1
Performance standards in Punjab bank are in the form of Duty List, Job
Description and Goals and objectives. General Manager and Chief Manager set
these goals.
Step 2
Goals are discussed with employee when ever there is a change in job goals or
job activities. To let the employee know what is expected of him.
Step 3
To measure the performance is main soul of Performance appraisal. For this
purpose one standardized method is used called PA (Performance Appraisal)
Form.
Step 4
At this level difference between Actual performance and Performance goal is
measured. The difference is assessed gradually with time as the subordinated

37
 perform their duties and report to supervisor. Supervisors observe their
subordinates that how efficiently they are doing the tasks assigned and what are
their peer’s opinions about their behavior this builds up the perception in the
appraiser’s mind and he matches it with what was expected from the employee.
Step 5
To remove the deficiencies in performance corrective actions are taken.
Employees are counseled and asked to discuss their problems which they are
facing.

v. Promotion:
Promotion criteria in Punjab Bank are based on the marks achieved out of
hundred on different assessment basis, which are;

 50 marks are for Performance appraisal. It is in the form of A, B, C, D rankings.

Immediate Supervisor fills the performance appraisal form.
 10 marks for current qualification of the employee. e.g. if a clerical or non
clerical staff worker after a few years of job experience has done graduation,
now he deserves to be promoted to officer level like junior officer in the bank.
 10 marks for Banking Diploma of IBP. If an employee has done that he gets ten
marks straight. There are 3 stages of Diploma. A person clearing 2 stages will
get 6.7 marks out of ten.
 10 marks for experience. A person needs minimum 3 years experience to qualify
for promotion at next level. And if he has more years of experience he will get
more marks out of ten.
 20 marks are for potential assessment. It judges that how much potential a person
has to hold a designation. It depends on employee’s personality, attitude and
behavior mainly. A person having leadership quality, has a good responsibility
level, has complete control over his tasks means he has the potential to move to
next level. Potential assessment is done through supervisor’s remarks.
Supervisor gives an assessment report in which he gives his comments about
his subordinate.

The marks necessary to promote out or cut off marks are usually 60 or above
out of 100. If a person gets above average marks for instance 95 marks he is

38
worthy to be promoted but also encouraged and uplifted. He can be given
appreciation letter or a good ranking etc.

3.4.2 Agriculture Credit Department:

In order to facilitate and provide credit facility to agriculture sector, the
Agriculture Credit Department (ACD) is playing its role. The major focus of
this department is to facilitate the farmers by providing short term, medium
term & long term finances.
The BOP not only provides credit facility but also provides mechanical
instruments to the farmers.

3.4.3 Audit & RAR Division:

In the days of complicated banking operations and to safeguard the interest of
public and share holder the Audit & RAR division playing a vital role. The
Audit & RAR division covers all over the organization risk and compliance.
Further, this division keeps banking operations in line with State Bank of
Pakistan’s instructions.

3.4.4 Credit Administration Department:

Credit Administration Department (CAD) has seven Regional Credit
Administration Departments (RCADs) in all seven regions which assisting the
advances segment of the Bank of Punjab. The major functions of CAD are:

 Disbursement of Credit Facilities including Preparation of

Security/Charge documents, perfection of collateral, Ensure compliance of
SBP regulations/Credit Policy, Circulars & Issuance of Disbursement
Authorization Certificate (DAC).
 Regular monitoring of Collateral & Asset based portfolio through
Weekly Roosters/Diaries, Credit Maintenance, Identify exceptions and
follow for the rectification of the same.
 MIS related to Credit & Credit Admin. Department.
 Monitoring of Mark up accruals, recoveries thereof.
 Liaison with various outside agencies.

39
3.4.5 Control & Compliance Division:
Control & Compliance Division (CCD) is situated at Head Office level. This
division major working is to regularize the banking operations matters. The
irregularities found by the Auditor are regularized by the Control &
Compliance Division. Further, it ensures that banking operations are correct
and according to the State Bank of Pakistan requirements.

3.4.6 SAM (Special Assets Management) Division:

Mostly bank provides advances against secured collateral but mostly some
loans default and the SAM division perform its duties in management of these
assets which generate in response of default. The SAM saves the Bank’s
interest by managing these assets.

3.4.7 Corporate & Investment Banking Group:

The BOP provides advances to almost all sector of the economy. The bank
provides loan facility to the large scale of business-called corporate clients such
as Textile Sector, Fisheries, Telecommunications, and Industries etc. The bank
also invests its fund in different types of project initiated by the Govt. and also
invests in stock exchange and foreign currency etc.

3.4.8Credit Risk Management Division:

The difference between the deposit and advances is the income of the bank
while providing the credit facility to customer the risk is mitigate by the Credit
Risk Management Division. The major function or role of the CRMD is to
secure the Bank’s interest and minimize the risk.

3.4.9 Operations Division:

In order to control all banking operations in all the branches an operations
division is functioning. The operations division ensures that all the functions
and operations of the bank are fulfill the SBP requirement.

40
 Chapter No. 4
Structure & Functions of the
Finance/Account Department

41
 Structure & Functions of the Finance/Account
Division/Department:

GENERAL
MANAGER / CFO

PA to GM/CFO

Chief Manager
M. Iqbal Shahzad

Liquidity & Fund HO ATM Expenses

SBP Reporting
Management Reconciliation Reconciliation Confirmation Fixed Assets
Department
Department Department Department Department

Five Staff Fours Staff Six Staff Three Staff Three Staff Two Staff
Members Members Members Members Members Members

Executive Incharge
Mansoor Zaighum

Taxation Accounts Financial

Department Department Reporting

Fours Staff Three Staff Two Staff

Members Members Members

The management of BOP comprises of two types i.e. Chairman’s Secretariat &
President Secretariat. Chairman’s secretariat deals with finance division. Mr.
Nadeem Amir is Chief Financial Officer / General Manager of finance division
of mentioned secretariat. The financial analyst related to BOP matters of
chairman’s secretariat is Mr. Masroor Zaigham. The manager of Chief Manager
of finance division is Mr. Muhammad Shahzad. The finance division deals in
authenticity of cheques, proper utilization of funds, preparation of day end
statements, online banking, collection of mails, opening & closing account of
customers & companies etc.

42
4.1 The Role of CFO / Financial Manager:
“The person who manages the financial resources of a business is called
Financial Manager.”

In traditionally, the role of financial manager or CFO is known as account

manager but not as a result of dramatically changes in business operations the
functions of the account manager or accountant has been enlarged.

Approximately every firm, government agency, and other type of organization

have one or more financial managers who supervise the preparation of financial
reports, direct investment activities, and implement of cash management
strategies. At present due to a large usage of I.T and computers in the business
for managing record and organize the data the most of the time of the Financial
Manger / CFO is spend in developing and implementing the strategies of their
organizations.

Duties of Financial Manager:

The duties of financial managers differ with their specific titles, which include
controller, treasurer or finance officer, credit manager, cash manager, and risk
and insurance manager. Controllers direct the preparation of financial reports
that summarize and forecast the organization’s financial position, such as
income statements, balance sheets, and analyses of future earnings or expenses.
Controllers also are in charge of preparing special reports required by
regulatory authorities. Often, controllers oversee the accounting, audit, and
budget departments.

Treasurers and finance officers direct the organization’s financial goals,

objectives, and budgets. They supervise the investment of funds, manage
related risks, supervise cash management activities, execute capital- raising
strategies to support a firm’s expansion, and deal with mergers and
acquisitions.

Credit managers watch over the firm’s issuance of credit, establishing credit-
rating criteria, formative credit ceilings, and monitoring the collections of past-

43
due accounts. Managers specializing in international finance develop financial
and accounting systems for the banking transactions of the organizations.

4.2 Use of electronic data in decision making:

Electronic data/information provides exact values and figures as per need to the
top level management. The electronic data enables the management to know
about the business up to date position. Through this they can measure exact
profit and loss accounts, assets and liabilities of the bank as well as branch level
from where the management can decide what should be kept and not.

The bank use UNIX-BOP 2001 software for generations of various types of
reports and for recording all banking operations related transactions. This
software assists the lower level management to top level management by
providing various reports i.e Quarterly Cash Report,
daily/weekly/monthly/yearly Statement of Affair as per requirement of branch,
region, area and overall bank.
Practical Illustration of Daily Position Report (Samanabad,
Faisalabad)
Dated: 29-07-2010
MIS 1002
Branch Wise

Daily Position Heading Amount

Balance with Banks 0.00
Balance with SBP 0.00
Bills Purchased & Discount 100,000.00
Cash on Hand 14,219,917.00
Cash On Hand FCY 0.00
Current Deposits FCY 0.00
Demand Deposits 172,262,062.03
Export Re-Finance 0.00
Fixed Deposits FCY 0.00
General Advances 20,930,252.27
PLS Other Accounts 85,070,493.91

44
 PLS Overdue TDR 0.00
PLS Staff A/Cs 1,785,096.55
Profit Plus/CPA Accounts 15,195,344.34
Saving Deposits FCY 0.00
Staff Finance 10,454,164.00
TDR Six Months to < 1 Year 6,659,174.00
TDR 1 Year and Above 133,605,261.00
TDR Less than Six Months 37,714,709.00

Through this top level management is able to decide which product should be
taken into course for further level or which should stop. Further, electronic data
make management capable to take decision at any point of time.

4.3 Sources and Generations of Funds:

The major sources of funds for the BOP are:
 Public Source

 Money Market

 Corporate Sector and Government Institutions

Sources & Generation of Funds Last Five Years

Sources of 2004 2005 2006 2007 2008
Funds ------Rs. in Million-----
Borrowings from
financial 2,831,605 6,791,007 6,989,424 17,842,915 12,278,773
institutions
Deposits from
Govt. &
Corporate Sector 54,724,311 88,465,051 137,727,606 191,968,909 164,072,532
and General
Public

Total 57,555,916 95,256,058 144,717,030 209,811,824 176,351,305

45
 Sources of Funds
250000000

200000000

150000000
Rs. (M)

100000000

50000000

0
1 2 3 4 5
2004 2005 2006 2007 2008

Years

Comments:

The major sources of funds are Govt. sector and general public as shown in the
above diagram that the funds of the Bank of Punjab increase from 2004 to
2007. But in 2008 the deposits of the Bank of Punjab decrease but not as much
that it can affect the business of the BOP.

4.4 Allocation of Funds:

BOP’s funds are allocated to the following departments. The banks major focus
is on short term financing. Major allocations of funds are on these divisions.

Long Term Financing

Short Term Financing

From the above it is further sub distributed to

• Agriculture financing
• SME & Consumer financing
• Corporate financing

Allocation of Funds Last Five Years

46
 Allocation of 2004 2005 2006 2007 2008
Funds Rs. In Million
Lending to
financial 1,019,488 7,593,681 11,846,823 2,450,000 633,333
institutions
Investments 16,197,505 18,026,181 28,233,211 73,461,695 22,711,980

Advances 39,438,923 63,623,705 101,319,954 133,893,585 131,731,158

Total 17,216,993 25,619,862 40,080,034 75,911,695 23,345,313

Allocation of Funds
80000000
70000000
60000000
50000000
Rs. (M)
40000000
30000000
20000000
10000000
0
2004 1 20052 20063 2007 4 2008 5

Years

47
 Lending to financial institutions Investments Advances
160,000,000

140,000,000
120,000,000
(M)
100,000,000
Rs.
80,000,000
60,000,000

40,000,000
20,000,000
0
2004 2005 2006 2007 2008

Years

Comments:
The major allocations of the funds are in form of advances to general public &
corporate, commercial & SME sectors and the 2nd large form for allocation of
funds is investment.

As mentioned in the above schedule and diagram, the Bank of Punjab’s

allocations of funds is more in 2006 & 2007 but due to market conditions the
allocation of funds in 2008 is lesser than 2007 & 2006.

48
 Chapter No. 5
Financial Analysis

49
Financial Analysis:
In order to analyze the financial position of the Bank of Punjab, while using
financial statements i.e. Balance Sheet and Income Statement of last five years
(2004 to 2008), I have conducted Ratio Analysis, Vertical analysis and
Horizontal Analysis.

Introduction and Importance of Financial Analysis:

Financial analysis involves the use of various financial statements. First the
balance sheet and the second is income statement.

The balance sheet summarizes the assets, liabilities, and owner’s equity of a
business at a point in time, while the income statement summarizes revenues
and expenses of a firm over a particular period of time. A conceptual
framework for financial analysis provides the analyst with an interlocking
means for structuring the analysis.

50
 5.1 Balance Sheet of Five Years (2004 to 2008)
2004 2005 2006 2007 2008
Assets ----------Rs. In Million -----------
Cash and balances with
5,579,566 8,787,387 14,054,859 14,210,302 10,685,057
treasury banks
Balances with other banks 2,118,242 9,367,595 3,722,089 1,927,662 2,178,455
Landings to financial
1,019,488 7,593,681 11,846,823 2,450,000 633,333
institutions
Investments 16,197,505 18,026,181 28,233,211 73,461,695 22,711,980
Advances 39,438,923 63,623,705 101,319,954 133,893,585 131,731,158
Other assets 1,277,201 2,040,568 3,609,457 5,805,097 6,109,137

Operating fixed assets 689,486 1,715,061 2,068,744 3,252,759 3,471,838

Total Assets 66,320,411 111,154,178 164,855,137 235,001,100 185,909,120

Liabilities
Bills payable 267,113 478,001 856,448 937,647 1,219,801
Borrowings from financial
2,831,605 6,791,007 6,989,424 17,842,915 12,278,773
institutions
Deposits and other accounts 54,724,311 88,465,051 137,727,606 191,968,909 164,072,532
Liabilities against assets
81,795 55,403 40,988 40,321 30,632
subject to finance lease
Other liabilities 567,540 220,177 298,616 3,009,984 4,564,257

Deferred tax liability 8,964 1,474,425 2,816,341 2,205,530 0

Total Liabilities 58,481,328 97,484,064 148,729,423 216,005,306 182,168,995

Net Assets 7,839,083 13,670,114 16,125,716 18,995,794 3,743,125

Share capital 1,506,230 2,349,719 2,902,490 4,230,379 5,287,974

Reserves 2,770,645 2,940,399 4,537,232 7,427,232 7,427,232
Inappropriate profit 143,590 1,486,755 3,219,246 3,452,842 (7,658,686)
4,420,465 6,776,873 10,658,968 15,110,453 5,056,520
Surplus on revaluation of
3,418,318 6,893,241 5,466,746 3,885,341 (1,313,395)
assets
T. Liab. & Share capital 61,899,646 104,377,305 154,196,169 219,890,647 180,855,600

5.2 Income Statement (Profit & Loss Statement) of Five Years

(2004 to 2008)
2004 2005 2006 2007 2008
----------Rs. In Million -----------
Mark-up/return/interest earned 2,555,039 6,125,093 11,643,963 17,539,094 17,752,969
Mark-up/return/interest 719,074 2,668,739 7,573,722 13,939,377 16,614,000

51
expensed
Net mark-up/return/interest
1,835,965 3,456,354 4,070,241 3,599,717 1,138,969
income
Provision against non-
46,940 327,373 340,626 1,616,421 18,863,580
performing advances
Provision for diminution in the
- 33,000 24,479 366,387
value of investments
- Bad debts written off directly 121 3,623 100 246,869 -
47,061 330,996 373,726 1,887,769 19,229,967
Net mark-up/return/interest
1,788,904 3,125,358 3,696,515 1,711,948 (18,090,998)
income after provisions
Non mark-up/interest income
Fee, commission and brokerage
172,873 255,149 473,212 653,512 577,630
income
Dividend income 554,218 753,669 1,385,875 1,804,878 2,020,896
Income from dealing in foreign
41,311 93,208 239,804 377,233 324,328
currencies
Other income 328,361 228,749 466,435 2,039,535 733,787
Total non mark-up/interest
1,096,763 1,330,775 2,954,389 5,422,793 4,182,826
income
Total Income 2,885,667 4,456,133 6,650,904 7,134,741 (13,908,172)
Non mark-up/interest expenses
Administrative expenses 1,116,097 1,274,971 1,751,970 2,250,777 2,799,933
Provision against off balance
364 175 292 114,700
sheet items
Provision against receivable
32,046 4,744 -
from NIT
Other charges 1,217 11,461 38 37,950 10,101
Total non mark-up/interest
1,149,724 1,291,176 1,882,183 2,289,019 2,924,734
expenses
Profit before taxation 1,735,943 3,164,957 4,768,721 4,845,722 (16,832,906)
Taxation
- Current 225,916 668,700 880,997 169,252 207,600
- Deferred 141,853 143,015 83,469 250,772 (8,033,001)
367,769 811,715 964,466 400,103 (6,773,401)
Profit after taxation 1,368,174 2,353,242 3,804,255 4,445,619 (10,059,505)
Inappropriate profit brought
forward 101,699 143,590 169,817 3,219,246 3,452,842
Transfer from surplus on
revaluation of fixed assets - net 3,166 6,174 5,866 5,572
of tax
101,699 146,756 175,991 3,225,112 3,458,414
Profit available for
1,469,873 2,499,998 3,980,246 7,670,731 (6,601,091)
appropriation

52
 5.3 Ratio Analysis:

Ratio analysis is used to calculate the profitability, liquidity/leverage etc. of the firm.
We can predict future variances with the help of financial ratios.

Ratios Criteria 2004 2005 2006 2007 2008

1 Gross spread ratio % 72.00 56.00 35.00 21.00 6.42

2 Cost to Total Income % 39.20 26.97 26.79 25.37 54.96
Profit before tax to
3 % 59.19 66.11 67.89 53.71 (316.29)
total income
Profit after tax to
4 % 46.65 49.16 54.16 49.27 (189.03)
total income
Return on avg. equity
5 % 36.62 42.03 43.64 34.50 (1.00)
(after tax)
Return on avg. equity
6 % 20.97 21.88 25.54 25.32 (0.88)
adj. (after tax)
Return on avg. total
7 % 2.49 2.65 2.76 2.22 (0.05)
assets (after tax)
Advances (net) to
8 % 72.00 72.00 74.00 70.00 80.29
deposits ratio
Markup/ Interest
9 times 5.08 2.79 1.94 1.65 1.32
cover ratio
10 Total assets turnover times 0.06 0.07 0.09 0.10 0.12
11 Price earning ratio times 7.25 10.23 7.71 9.31 (0.60)
Market value per RS per
12 65.90 102.45 101.25 97.80 11.50
share share
RS. per
13 EPS (Non dilative) 9.08 10.01 13.14 8.42 (19.07)
share
RS. per
14 Dividend per share 4.00 5.20 3.25 3.50 0.00
share
15 Dividend – Cash % 0.00 0.00 0.00 0.00 0.00
16 Dividend Yield Ratio % 6.07 5.08 3.21 3.58 0.00
Dividend Payout
17 % 44.00 52.00 25.00 33.00 0.00
Ratio

53
 Graphical Representation of above-mentioned Ratios

90.00
80.00
70.00
60.00
% 50.00
40.00
30.00
20.00
10.00
0.00
2004 2005 2006 2007 2008
Years
Gross Spread Ratio Cost To Total Income Ratio Advances to Deposit Ratio

Comments:
BOP’s income statement for the last three years represents a high growth in it
but in 2008 the rate of growth is decreased. Gross Spread ratio measure profit
after deducting cost of goods sold. Gross spread ratio carry the same trend as
explained in above paragraph of net profit after tax ratio. Here the GSR is
decreasing from 2004 to 2008. It’s all due to the decrease in equity, and
increase in the deposits of the bank. Rise in the Markup Interest earning income
results rise up in the profit of bank represents increase in lending by the bank.
Gross spread ratio defines the total spread of interest between borrowing and
lending.

Spread: Difference between funded revenue as a percentage of average earning

assets and the cost of funds as a percentage of average paying funds. The higher
the spread the higher will be the profit margin.

• GSR= Rev/CGS

• GSR= (Mark-up earned – Mark-up Expense)/Mark-up earned

• GSR is 2nd highest all over the globe in Pakistan.

54
 • GSR of the bank is decreasing because of the decrease in margin, a SBP
rise up the interest rates on the deposits.

Ratios Criteria 2004 2005 2006 2007 2008

Markup/ Interest
times 5.08 2.79 1.94 1.65 1.32
coverage ratio
Total assets turnover times 0.06 0.07 0.09 0.10 0.12

Price earning ratio times 7.25 10.23 7.71 9.31 (0.60)

Mark-up /Interest Coverage Ratio (%)

Markup/ Interest coverage ratio

2008
10%

2007
13% 2004
40%

2006
15%
2005
22%

Comments:

This ratio tells what percent of interest is covered from the total income of a
bank. It tells the ability of a bank to pay its mark-up to the depositors.
MP/Interest cover ratio= EBIT/Mark-up. The Markup Interest Cover Ratio of
the Bank of Punjab was greater in 2004, 2005 but it decrease in 2006 & 2007.
Subsequently in 2008 it was decreasing & becoming difficult for the
management due to present banking crises and BOP’s internal affairs.

Interest coverage ratio= EBIT/interest expense

Total assets turnover= sales/total assets

Price earning ratio= market price per share/earning per share

55
 Total Assets Turnover Ratio (%)

Total assets turnover

0.12
0.10
0.08
0.06
0.04
0.02
0.00
2004 2005 2006 2007 2008 Years
Total assets turnover
0.06 0.07 0.09 0.10 0.12

Comments:

This ratio tells the turnover of the asset to generate income. This ratio is
increased during last few years which represent increase in the turnover by
assets. Total asset turnover shows that by investment of Rupee One in average
total assets, of the entity how much sale is generated. This ratio shows the
usage of total assets and it should be maximum. The total assets of the Bank of
Punjab is increasing from 2004 to 2008 because of this reason the assets
strengthen the Bank.

56
 Price Earning Ratio (%)

Price earning ratio

12.00
10.00
8.00
6.00
4.00
2.00
0.00
(2.00)
2004 2005 2006 2007 2008
Price earning ratio 7.25 10.23 7.71 9.31 (0.60)

Comments: Years

From this ratio it is analyzed what % of EPS is the part of MPS. What percent
earned from a share equivalent to the worth of 1 RS MPS by the bank. The
price earning ratio in 2004 was 7.25 %, it increase in 2005 up to 10.23% - the
major reasons of this was expansion in the business banking sector. The Price
Earning Ratio decreased in 2006, 2007 and it become negative in 2008 as major
reason of this the changing scenario of the world economy and financial crises
of the country.

Ratios Criteria
2004 2005 2006 2007 2008

Market value per

Rs per share 65.90 102.45 101.25 97.80 11.50
share
Rs. per
EPS (Non dilative) 9.08 10.01 13.14 10.51 (19.02)
share
Rs. per
Dividend per share 4.00 5.20 3.25 3.50 0.00
share

EPS= net income--preferred dividends/common stock outstanding

57
 Earning per Share (Rs.)

EPS
20
18
16
14
12
10
8
6
Rate

4
2
0
-2
-4
-6
-8
-10
-12
-14
-16
-18
-20

2004 2005 2006 2007 2008

Years

Comments:

Through this ratio it can be analyzed what percent of 1Rs. share is earnedThe
EPS from 2004 to 2006 increased and show good value of the share it
decreased in 2008 because of stained reputation of the BOP.

Market Value per Share (Rs.)

Market value per share

120.00
100.00
80.00
60.00
40.00
20.00
0.00
Market value per 2004 2005 2006 2007 2008
share 65.90 102.45 101.25 97.80 11.50

58
 Comments:

The Market value per share increases in the year of 2005 & 2006.The Market
Ratio tell the business position in the market. The Market values per share
dramatically decreased in 2008 due to economics scenario.

Dividend per Share (Rs.)

Dividend per Share

6.00
5.00
4.00
3.00
2.00
1.00
0.00 2004
2005 2006 2007 2008
4.00 5.20 3.25 3.50 0.00
Dividend Per share

Comments:

The Bank pay dividend per share up to 2007 but in 2008 due to loss the bank
could not pay any dividend. The reasons for not paying dividend in 2008 as a
large amount of provision were present against NPL.

Ratios Criteria 2004 2005 2006 2007 2008

Dividend - Cash % 0.00 0.00 0.00 0.00 0.00

Dividend Yield Ratio % 6.07 5.08 3.21 3.58 0.00

Dividend Payout Ratio % 44.00 52.00 25.00 33.00 0.00

Dividend yield ratio= dividends per share/market price per share

Dividend payout ratio= dividends per share/EPS

59
 5.4 Horizontal Analysis of Five Years Balance Sheet
This type of analysis represents the percent change in specific line item of the
balance sheet from the last year. This analysis is used to comment on the
growth of specific line item in the industry or the firm.
2004 2005 2006 2007 2008
Assets
Cash and balances with treasury
100.0% 57.5% 151.9% 154.7% 91.5%
banks
100.0% 342.2% 75.7% (9.0)% 2.8%
Balances with other banks
100.0% 644.9% 1062.0% 140.3% (37.9)%
Lending's to financial institutions
100.0% 11.3% 74.3% 353.5% 40.2%
Investments
100.0% 61.3% 156.9% 239.5% 234.0%
Advances
100.0% 59.8% 182.6% 354.5% 378.3%
Other assets
100.0% 148.7% 200.0% 371.8% 403.5%
Operating fixed assets
100.0% 67.6% 148.6% 254.3% 180.3%
Total Assets

Liabilities

Bills payable 100.0% 79.0% 220.6% 251.0% 356.7%

Borrowings from financial
100.0% 139.8% 146.8% 530.1% 333.6%
institutions
Deposits and other accounts 100.0% 61.7% 151.7% 250.8% 199.8%
Liabilities against assets subject to
100.0% (32.3)% (49.9)% (50.7)% (62.6)%
finance lease
Other liabilities 100.0% (61.2)% (47.4)% 430.4% 704.2%

Deferred tax liability 100.0% 16348.3% 31318.4% 24504.3% (100.0)%

Total Liabilities 100.0% 66.7% 154.3% 269.4% 211.5%

Net Assets 100.0% 74.4% 105.7% 142.3% (52.3)%

Share capital 100.0% 56.0% 92.7% 180.9% 251.1%

Reserves 100.0% 6.1% 63.8% 168.1% 168.1%
Inappropriate profit 100.0% 935.4% 2142.0% 2304.7% (5433.7)%
100.0% 53.3% 141.1% 241.8% 14.4%
Surplus on revaluation of assets 100.00% 101.66% 59.93% 13.66% (138.42)%
Total Liabilities & Share
100.0% 68.6% 149.1% 255.2% 192.2%
Capital

Graphical Representation of Balance Sheet (Horizontal Analysis)

60
300.0%
250.0%
200.0%
150.0%
100.0%
50.0%
0.0% 2008
2004 2005 2006 2007
-50.0%
-100.0%

Total Assets Total Liabilities Net Assets

Comments:

Total assets were increased in last few years. 22% increase in the assets from
the 2nd last year represents growth in the Bank but in last years the growth is
declining. As bank increase their paid up capital because of which SOE
increase at the end of 2006.BOP is grabbing the confidence of their customers
results increase in the deposits during the year of 2007. But in 2008 due to
financial crises and uncertainty the customer of the BOP decrease. As
compared to 2004 in Year 2005 there is an increase of 67.6% in total assets of
the bank. This increase is due to increase in both foreign & local currency cash
and balances with the treasury banks in hand. Advances also increased by
61.3% in the form of loans, cash credits and running finances. But in 2008 there
is decrease in total assets, advances & total liabilities due to stoppage of
advances.

As compare to 2004 in 2005, 2006 & 2007 total liabilities have increased by
66.7%, 154.3% & 269.4% respectively. This increase is due to increase in bills
payable, borrowings from SBP & other financial institution. The other major
reason of increasing liabilities is deposits accounts. But in 2008 the liabilities
are decreased as decrease in deposit of the Bank.

61
 5.5 Horizontal Analysis of Five Years Profit & Loss Statement:

2004 2005 2006 2007 2008

Mark-up/return/interest earned 100.0% 139.7% 355.7% 586.5% 594.8%

Mark-up/return/interest expensed 100.0% 271.1% 953.3% 1838.5% 2210.5%
Net mark-up/return/interest income 100.0% 88.3% 121.7% 96.1% -38.0%
Provision against non-performing 100.0% 597.4% 625.7% 3343.6% 40086.6%
advances
Provision for diminution in the 100.0% - - - -
value of investments
- Bad debts written off directly 100.0% 2894.2% (17.4)% 203924.0% -
100.0% 603.3% 694.1% 3911.3% 40761.8%
Net mark-up/return/interest 100.0% 74.7% 106.6% (4.3)% (1111.3)%
income after provisions

Non mark-up/interest income

Fee, commission and brokerage 100.0% 47.6% 173.7% 278.0% 234.1%
income
Dividend income 100.0% 36.0% 150.1% 225.7% 264.6%
Income from dealing in foreign 100.0% 125.6% 480.5% 813.2% 685.1%
currencies
Other income 100.0% (30.3)% 42.0% 521.1% 123.5%
Total non mark-up/interest 100.0% 21.3% 169.4% 394.4% 281.4%
income
Total Income 100.0% 54.4% 130.5% 147.2% (582.0)%
Non mark-up/interest expenses
Administrative expenses 100.0% 14.2% 57.0% 101.7% 150.9%
Provision against off balance sheet 100.0% (100.0)% (51.9)% (19.8)% 31411.0%
items
Provision against receivable from
100.0% (85.2)% (100.0)% (100.0)%
NIT
Other charges 100.0% 841.7% (96.9)% 3018.3% 730.0%
Total non mark-up/interest
100.0% 12.3% 63.7% 99.1% 154.4%
expenses
Profit before taxation 100.0% 82.3% 174.7% 179.1% (1069.7)%
Taxation
- Current 100.0% 196.0% 290.0% (25.1)% (8.1)%
- Deferred 100.0% 0.8% (41.2)% 76.8% (5762.9)%
100.0% 120.7% 162.2% 8.8% (1941.8)%
Profit after taxation 100.0% 72.0% 178.1% 224.9% (835.3)%
Inappropriate profit brought
100.0% 41.2% 67.0% 3065.5% 3295.2%
forward
Transfer from surplus on
revaluation of fixed assets - net of 100.0%
tax
100.0% 44.3% 73.1% 3071.2% 3300.6%
Profit available for appropriation 100.0% 70.1% 170.8% 421.9% (549.1)%

62
Graphical Representation of Income Statement (Horizontal Analysis)

300.0%
200.0%
100.0%
0.0%
-100.0% 2004 2005 2006 2007 2008
-200.0%
-300.0%
-400.0%
-500.0%
-600.0%
-700.0%
-800.0%
-900.0%

Total Income
Total non mark-up/interest expenses
Profit after taxation

Comments:

Total earnings mark-up & non mark-up was rising 33% in 2007 year. As
deposits and the lending of the banks are rise up but in 2008 the total earning is
increasing but at decreasing return. Administrative expenses are increased with
a great pace in last few years because of high rate of inflation. At present the
Profit of the BOP is affected badly and decreases 835% in 2008 because of
global economic recession. But the major reason of decreasing profit is
promising against NPL. As compared to 2004 in years 2005, 2006 & 2007
profit increased by 72.0%, 178.1%, & 224.9% respectively, it is due to: Markup /
interest earned are increased by 3% as compare to 2004 but the profit decrease
by 835.3% in 2008.

63
 5.6 Vertical Analysis of Five Years Balance Sheet

2004 2005 2006 2007 2008

Assets
Cash and balances with treasury 8.4% 7.9% 8.5% 6.0% 5.7%
banks
3.2% 8.4% 2.3% 0.8% 1.2%
Balances with other banks
1.5% 6.8% 7.2% 1.0% 0.3%
Lending to financial institutions
24.4% 16.2% 17.1% 31.3% 12.2%
Investments
59.5% 57.2% 61.5% 57.0% 70.9%
Advances
1.9% 1.8% 2.2% 2.5% 3.3%
Other assets
1.0% 1.5% 1.3% 1.4% 1.9%
Operating fixed assets
100.0% 100.0% 100.0% 100.0% 100.0%
Total Assets

Liabilities

Bills payable 0.4% 0.4% 0.5% 0.4% 0.7%

Borrowings from financial
4.3% 6.1% 4.2% 7.6% 6.6%
institutions

Deposits and other accounts 82.5% 79.6% 83.5% 81.7% 88.3%

Liabilities against assets subject to
0.1% 0.0% 0.0% 0.0% 0.0%
finance lease

Other liabilities 0.9% 0.2% 0.2% 1.3% 2.5%

Deferred tax liability 0.0% 1.3% 1.7% 0.9% 0.0%

Total Liabilities 88.2% 87.7% 90.2% 91.9% 98.0%

Net Assets 11.8% 12.3% 9.8% 8.1% 2.0%

Share capital 2.3% 2.1% 1.8% 1.8% 2.8%

Reserves 4.2% 2.6% 2.8% 3.2% 4.0%
Inappropriate profit 0.2% 1.3% 2.0% 1.5% (4.1)%
6.7% 6.1% 6.5% 6.4% 2.7%

Surplus on revaluation of assets 5.15% 6.20% 3.32% 1.65% (0.71)%

93.3% 93.9% 93.5% 93.6% 97.3%

Total Liabilities & share Capital

64
 Graphical Representation of Balance Sheet (Vertical Analysis)

102.0%
100.0%
98.0%
96.0%
94.0%
92.0%
90.0%
88.0%
86.0%
84.0%
82.0%
80.0%
2004 2005 2006 2007 2008

Total Assets
Total Liabilities
Total Liabilities & Share Capital

Comments:

Comparing figure from 2004 to 2008:

Here Total Assets includes: Current Assets + Fixed Assets + Other Assets.
Where Current Assets contain: All assets excluding Fixed Assets and Other
Assets. Current assets of the bank have increasing trend in 2006 (8.5%). This
increase is due to increase in: cash and balances with treasury banks, balances
with other banks, advances. In 2007 and 2008 bank need the current assets more
to fund their day-to-day operations. This decrease in current assets is due to
decrease in: local and foreign currency cash and balances with the treasury
banks, balances with other banks in current and deposit accounts form, loans,
cash credits and running finances. Deposits with State Bank of Pakistan are
maintained to comply with the statutory requirements issued from time to
time. Fixed operating assets increased in 2008 as compare to 2004.

This increase is due to increase in capital work-in-progress, property and

equipment. Fixed assets are the long-term base of the bank’s operation strategy,

65
represented by all the equipment, facilities. Total liabilities of the Bank of
Punjab have the increasing trend over all. Total liabilities have increased from
2004 to 2008 but there is a slight decrease in 2006 and 2007. Increase in
liabilities is due to: Borrowings, subordinated loans, other liabilities and
deposits and other accounts.

66
 5.7 Vertical Analysis of Five Years Income Statement
2004 2005 2006 2007 2008
Mark-up/return/interest earned 89% 137% 175% 246% -128%
Mark-up/return/interest expensed 25% 60% 114% 195% -119%

64% 78% 61% 50% -8%

Net mark-up/return/interest income
Provision against non-performing 2% 7% 5% 23% -136%
advances
Provision for diminution in the value of 0% 0% 0% 0% -3%
investments
- Bad debts written off directly 0% 0% 0% 3% 0%
2% 7% 6% 26% -138%
Net mark-up/return/interest income 62% 70% 56% 24% 130%
after provisions

Non mark-up/interest income

6% 6% 7% 9% -4%
Fee, commission and brokerage income
Dividend income 19% 17% 21% 25% -15%
Income from dealing in foreign 1% 2% 4% 5% -2%
currencies
Other income 11% 5% 7% 29% -5%

38% 30% 44% 76% -30%

Total non mark-up/interest income
Total Income 100% 100% 100% 100% 100%
Non mark-up/interest expenses
Administrative expenses 39% 29% 26% 32% -20%
Provision against off balance sheet 0% 0% 0% 0% -1%
items
Provision against receivable from NIT 1% 0% 0% 0% 0%
Other charges 0% 0% 0% 1% 0%

40% 29% 28% 32% -21%

Total non mark-up/interest expenses
Profit before taxation 60% 71% 72% 68% 121%
Taxation
- Current 8% 15% 13% 2% -1%
- Deferred 5% 3% 1% 4% 58%
13% 18% 15% 6% 49%
Profit after taxation 47% 53% 57% 62% 72%

4% 3% 3% 45% -25%
Inappropriate profit brought forward

Transfer from surplus on revaluation of 0% 0% 0% 0% 0%

fixed assets - net of tax
4% 3% 3% 45% -25%

51% 56% 60% 108% 47%

Profit available for appropriation

67
Comments:
Comparing figures from 2004 to 2008:

Profit available for appropriation has the increasing trend from 2004 to 2007
but in 2008 it show decrease. In 2004 profit is after taxation 47% of total
income which, gradually increase by 53%, 57%, 62% & 72 %. Markup /
return / interest expensed have increased in four years from 2004 to 2007
increase but markup interest expensed decrease in 2008 till negative. This
decrease is due to major decrease in fee, commission and brokerage income,
dividend income and other income. Administrative expenses have decreased
from 2004 to 2008. This decrease in administrative expenses due to decrease in
personnel cost, premises cost and other operating cost.

68
 5.8 Organizational Analysis with reference to the Banks listed
on the Stock Exchange:

FINANCIAL ANALYSIS FOR THE YEAR OF 2008 WITH

REFERENCE TO COMPETITORS
The Bank of BANK BANK AL- ALLIED
Askari Bank
Punjab ALFALAH HABIB BANK
----- Rs. In Million -------
Mark-
up/return/interest 17,752,969 18,393,313 31,046,583 14,604,237 1,975,203
earned
Mark-up/ return/
16,614,000 10,650,719 20,331,194 (8,002,884) 1,361,738
interest expensed
Net mark-
up/return /interest
(18,090,998) 3,669,997 10,715,389 6,435,687 602,247
income after
provisions
Total non mark-
4,182,826 2,707,000 5,245,427 2,416,304 492,345
up/interest income

Total Income (13,908,172) 6,376,997 12,417,459 7,851,991 1,094,592

Total non mark-up/

2,924,734 5,915,615 10,622,739 (4,374,426) 983,367
interest expenses

Profit before
(16,832,906) 461,382 1,794,720 3,533,387 111,225
taxation
Profit after taxation (10,059,505) 386,225 1,301,301 2,366,623 54,710
Profit available for
(6,601,091) 2,531,035 6,177,727 2,366,623 89,784
appropriation
Total Assets 185,909,120 206,191,138 348,990,764 177,329,929 216,277,802

Total Liabilities 182,168,995 193,219,775 331,946,025 165,651,265 16,351,965

Net Assets 3,743,125 12,971,363 17,044,739 11,678,664 5,275,837

Share capital 5,287,974 4,058,774 7,995,000 4,785,388 5,694,844

Reserves 7,427,232 7,667,141 3,166,056 3,079,078 18,040

Inappropriate profit (7,658,686) 308,980 3,447,467 2,047,596 71,744

Surplus on revaluation
(1,313,395) 936,468 2,436,216 1,665,205 (508,791)
of assets
Total Liabilities &
180,855,600 12,971,363 17,044,739 11,678,664 5,275,837
share Capital

69
 Comparison of Markup Interest Earned & Expensed for
the years 2008

35,000,000
30,000,000
25,000,000
20,000,000
15,000,000
10,000,000
5,000,000
Rs. in Million
0

(5,000,000)
(10,000,000)
(15,000,000)
(20,000,000)
(25,000,000) ASKARI BANK ALLIED
BANK OF ALFALAH BANK AL- BANK
PUNJAB BANK HABIB

Mark-up/return/interest 17,752,969 18,393,313 31,046,583 14,604,237 1,975,203

earned
Mark-up/return/interest 16,614,000 10,650,719 20,331,194 (8,002,884) 1,361,738
expensed
Net mark-up/return/interest (18,090,998) 3,669,997 10,715,389 6,435,687 602,247
income after provisions

Comments:

In the above diagram The Bank of Punjab show growth in mark-up interest
earned as compare to Bank Al Habib & Allied Bank but it is less as compare to
Askari Bank & bank Alfalah. The decreasing the interest earned income of the
BOP is due to the marketing conditions and as the Bank Alfalah & Askari Bank
has gain the major market share through their up to dated & innovative product
of customer support. As concern with BOP the – the BOP has political
influence of Govt. of Punjab and it has major funds of Govt. therefore, the
managers have loose grip on private business. This is the major reason of low
income as compare to successive competitors.

The Interest income of BOP has negative slop due to a large provision against
NPLs. Interest expensed of Bank Al-Habib is in negative as compare to the
BOP further it has low market share. If we compare the Bank of Punjab with
Allied Bank we see that the business of the Allied Bank is low as BOP.

70
 Comparison of Total Income for the Year 2008

Total Income (2008)

15,000,000
BANK ALFALAH
12,500,000

10,000,000 BANK AL-HABIB

ASKARI BANK
7,500,000

5,000,000
ALLIED BANK
Rs. Million 2,500,000
0

(2,500,000)

(5,000,000)

(7,500,000)

(10,000,000)

(12,500,000)

(15,000,000)
BANK OF PUNJAB
(17,500,000)

BANK OF ASKARI ALLIED

PUNJAB BANK BANK ALFALAH BANK AL-HABIB BANK

Comments:

The total income of the BOP is decreased in the year of 2008 as compare to its
competitors – as the BOP has to face problems & pressure from Govt. and
political parties ultimately resultant of negative progress. The major advances
providing by the management to various industries on political basis are the
major cause of the decreasing trend in the total income of the Bank of Punjab.
The total income of Bank Alfalah is greater out of five competitive
organizations.

71
 Comparison of Assets & Liabilities for the Year 2008

Assets & Liabilities

400,000,000

350,000,000

300,000,000

Rs. in Million 250,000,000

200,000,000

150,000,000

100,000,000

50,000,000
0

BANK OF ASKARI BANK BANK AL- ALLIED

PUNJAB BANK ALFALAH HABIB BANK

Total Assets Total Liabilities Net Assets

Comments:

The total assets of the Bank of Punjab are lower than Bank Alfalah, Askari
Bank and Allied Bank but greater than Bank Al-Habib. The total Assets are
close to the Askari Bank & Allied Bank. The Net Assets of the BOP as
compare to the above-mentioned competitors is lower but close to Allied Bank.
The total assets of BOP shows that the bank has its worthiness and can grow in
the market if these assets are properly utilized.

72
 Comparison of Profit available for Appropriation for the
Year2008

8,000,000
6,000,000
4,000,000
2,000,000
0
Rs. in Million

(2,000,000) BANK OF ASKARI BANK BANK AL- ALLIED

(4,000,000) PUNJAB BANK ALFALAH HABIB BANK
(6,000,000)
(8,000,000)
Profit available for appropriation

Comments:

The BOP has no profit in the year of 2008 as compare to its competitors
mentioned above diagram. The Bank Alfalah is gaining major profit in 2008
compare to its competitors. The loss which has to bear BOP is due to some Non
Performing Loans and minor administrative cost and due to these the bank has
loss.

73
 5.9 Future Prospects of the Bank of Punjab:

BOP’s share is currently trading at PKR 21 (approx) in 2009 but in before

December 2008 the BOP share was up to Rs.130 in the stock exchange market.
It show highest market price in its history. But it decreased at the end of 2008
up to Rs.11.50/share.

In light of the growth track of BOP it can be analyzed that it will minor grow in
the end of 2009. Through different estimations and by viewing remarks of
analysts it is expected that it would grow up to PKR 50 by December 2009.

The BOP’s management has been changed at present as a result of changes in

Govt of Punjab. The new management of the BOP has entered in with the new
style and new competitive strategies with strong vision of implementation. It
will hopefully control the position of the BOP up to end of December 2009 and
the Bank once again will show profit in its statements and profit graph will
arise in coming months.

110.00 102.45 101.25

100.00 97.80
90.00
80.00
70.00
Rs. in Million
60.00
65.90
50.00 50.00
40.00
30.00
20.00
10.00 11.50
0.00
2004 2005 2006 2007 2008 E-2009
Years

Market value per share

Further, BOP going to launch many products and services to support the customer
and to raise the profit of the Bank. Recently, the bank has planned to hire the
services of Business Development Officers along with Relationship Managers.

74
 Chapter No. 6
SWOT Analysis of the
Organization

75
6. SWOT Analysis of the Organization:
The overall assessment of an organization’s strengths, weaknesses,
opportunities and threats is called SWOT analysis.

In SWOT analysis the best strategies accomplish an organization’s mission by:

 Exploiting an organizations opportunities and strength.

 Neutralizing it threats.

 Avoiding or correcting its weakness.

SWOT analysis is one of the most important steps in formulating strategy using
the organization mission as a context; managers assess internal strengths
distinctive competencies, weakness, external opportunities and threats. The
goal is to then develop good strategies and exploit opportunities and strengths
neutralize threats and avoid weaknesses.

6.1 Strength:
Bank is in its growing stages so there is good financial position.
Professional & committed workforce
Low cost than other major banks
Increase the no. of branches in the country
Successfully launching new products lines
Well experienced & qualified staff
Efficient internal communication system
Each department in the bank is fully allowed to take adequate decisions
of its own, saving the time & help in achieving the objectives

6.2 Weaknesses:
Although the BOP has many strength but it also has some following
weaknesses:

76
  Lack of proper internal controls due to lack of strong system is
one of the major weakness of BOP. It is also pointed by the auditors in
their review.

 The employees’ turnover of BOP is greater the major reason is

due to not market commensurate salary and benefits.

 BOP has formulized a lot of products and services for its

customers, even more than other commercial banks, but there is only little
advertisement on electronic media which creates hindrance for the
promotion of the products and services.

 Some of the employees were burdened with over work. So I think

that the work should be distributed according to their post and capabilities.

 The BOP has recruited much fresh blood in the Bank who has not
sufficient skills and experience to run the business of the bank. This is the
sensitive weakness of the bank.

 The BOP is maintaining large deposit of Govt. departments and

low deposit of private sector. Any change in the Govt. can badly affect the
Bank of Punjab.

 The profitability of the BOP is declining which is alarming for the

BOP and creating worst image in the market

6.3 Opportunities:
 Extension of international network of the branches
 Introduction of innovative products
 Growing market
 ATM facility for all customers
 More incentives should be given to skilled staff
 Use of new technology used to increase the staff efficiency of work
 Adoption of new methods of training and recruitment
 Introduction of new schemes of deposits
 Profit can be increased through effective and efficient marketing

77
6.4 Treats:
Uncertain economic conditions
 Action taken by competitors
 Strong competition in the market
 Deposit growth can be slowdown due to the lack of customer trust
on BOP
 Changing in the government policies and instability of the
government
 More investment in agriculture sector
 Risk of online banking

78
 Chapter No. 7
Conclusion and
Recommendations

79
 Conclusion:
The Bank of Punjab is one of the largest Banks with a network of 272 online
branches in the country. In the previous years from 2004 to 2007 it generates
more deposit and provides a large amount of advances to various sectors in the
country wide. The BOP providing excellence services to customer as customer
focus bank with a personnel of tremendous skills and hardworking. The total
assets of the BOP increased by 67.6% in the year of 2005 and further it also
increased in 2006 by 148.6% & 254.6% in the year of 2007. The bank’s assets
show increasing trend from 2005 to 2007 but in 2008 the BOP’s assets
decreased by 180.3%. The total liabilities as compare to total assets shows
increasing trend by 66.7%, 154.3% & 269.4% in 2005, 2006 & 2007 but total
liabilities of the BOP also decreased by 211.5% in 2008.
The mark up interest earned income is showing increasing trend since 2004 to
2008 and non mark up income is also increasing since 2004. But the total
income decrease in the end of 2008 due to a heavy provisioning against non
performing advance. The profit after tax increased by 72%, 178.1% & 229.9%
in 2005, 2006 & 2007, respectively as compare to 2004 and the profit after tax
decreased by (835.3%) in 2008. The Bank’ financial statements shown progress
in last four years (2004-2007) but the condition in 2008 is much alarming for
the bank. As concerned the reputation of the Bank of Punjab in the banking
sector its reputation is destroying. Now, the new management of the BOP is
performing and taking the present position of the BOP as challenge although
they are performing well and beating the market with excellence services and
strategies but they have to face many problems.

80
Recommendations:
On the basis of the financial analysis and SWOT analysis of the BOP with
context to market condition and competitors, I analyze that in spit of the
weaknesses, present condition of the BOP & market scenario the BOP can
overcomes these difficulties and meets the current challenges by addition of the
following suggestion/recommendations:

 All the opportunities of the 21st century should be availed by the BOP in
the information technology. Information technology is the future of this
dynamic world. Therefore BOP should emphasize much on IT, especially
on E-Banking. Bank can design a universal account like other foreign
banks, to enhance online facilities.

 Small and Medium Enterprises (SME) should be targeted by

launching more products.

 The training of staff regarding new changes in the banking sector

and surrounding should be conducted by the BOP.

 Although BOP has Management Information System (MIS) but it

should be more supportive and user friendly. The Management Information
System should be there especially to coordinate the working among
Branches, Region and head office divisions.

 BOP should utilize professional recruitment services. The service

can attract more skilful workforce. It can make recruitment processes time
efficient and cost effective. And bring all the recruitment activities at a
single platform. This service can be a great source of publicity for Bank
also.

 BOP should start its operation in credit card. These cards are very
helpful for the ordinary customer in general and the business people in
particular. To make it mores secure and to eliminate the misuse of it, the
management is required to keep proper security against the card.

 BOP should adopt new compensation trends which include:

Compensation should also be based on the relative worth of the job for the

81
organization. Job based salary surveys and Industry surveys should be
conducted to decide Compensations. Compensations should be based on
government policies and regulation and according to inflation level in the
country.

 Else than tangible rewards intangible rewards such Work life

balance (Providing good leave structure, Flexible times for lunch break and
Baby day care centers etc), Inspiration and career opportunities for all
employees, should be provided.

 The services charges should be minimized to compete with the

competitors by excellence customer services.

 Presently, in order to enhance the deposit of the Bank, the BOP

doesn’t have staff at lower level for getting more deposit in CASA & other
terms deposit. Therefore, Bank should hire the services of Business
Development Officers particularly for this assignment.

 Although bank has its Quality Assurance Department (QAD) but

it should be further strengthen up to branch level. There should be an
information desk to provide the information and to receive the complaints
of the customer in the bank. At present there is no complaint box available
in the branches and not any person appointed to hear the complaints.

 The Bank should avoid Bad Debts. Great care should be taken
while extending the advances. Advances should be awarded against
reasonable collaterals; their market value should be greater to the loan
granted.

82
Chapter No. 8
References

83
 10. References:

Reference material used for compiling this report is gathered from personal
discussion, syllabus books, internet, official web site of the Bank, annual
reports of different Banks & magazine of BOP, etc.

Personal Conversation:

The various type of information was gathered by personal discussion with the
following officials:-

Branch Manager Samanabad Branch Faisalabad,

Books

I. The Analysis of Financial Statements (Syllabus Book)

II. Managerial Finance (Syllabus Book)

Magazine and Newsletter

Quarterly Newsletters of The Bank of Punjab

Annual Reports

I. Five years Annual Reports of The Bank of Punjab from 2004 to 2008.

II. Askari Bank Ltd (Annual Report 2008)

III. Allied Bank (Annual Report 2008)

IV. Bank Alfalah Ltd. (Annual Report 2008)

V. Bank Al – Habib (Annual Report 2008)

84
Chapter No. 9
Glossary

85
DAC: disbursement authorisation certificate

DFI: department of financial institutions

TFC: term finance certificate

CIB: credit information bureau

CAD: credit administration department

PBA: profit and loss banking account

BOP: bank of Punjab

RCAD: regional credit administration department

RAR: risk assessment return

DF: demand finance

QAD: quality assurance department

CASA: civil aviation safety authority

SME: small and medium enterprises

MIS: management information system

NPLs: non performing loans

SAM: Special Assets Management

ACD: Agriculture Credit Department

CCD: Control & Compliance Division

CRMD: credit and risk management division

EPS: earning per share

86