Askari Commercial Bank Internship Report 151z5s

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Internship Report

INTRODUCTION

ACCORDING TO BANKING COMPANIES ORDINANCE 1962

“Banking means the accepting, for the purpose of lending, or

investment, of deposits of money from the public, repayable on demand or otherwise, and withdraw able by cheque, draft, order or otherwise.”

“Banking companies mean companies which transact the business of banking in Pakistan.”

COMMERCIAL BANK

“The commercial bank receives surplus money from the public and

lend to others who needs funds. Bank collects cheque, bills of exchange etc from customers. It transfers money from one place to another. It provides agency and general utility services. Purpose of commercial bank is to earn profit.”

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HISTORY OF ASKARI COMMERCIAL BANK The banking sector has witnessed a dramatic change during the last ten years with the development of Askari Bank, which is not only redefining priorities and focus of the banks, but also threatening the domination of traditional players. The story begins with the incorporation of Askari Commercial Bank limited in Pakistan on October 09, 1991, Askari Bank Commenced (begin) to operations in April 1992, as a public limited company. The bank is listed on the Karachi, Lahore and Islamabad Stock Exchanges and the initial public offering was over subscribed by 16 times. While capturing the target market share amongst the view banks, Askari has provided good value to its shareholders. Its share price has remained approximately 12% higher than the average share price of quoted banks during the last four years.

Askari Bank has expanded into a nation wide presence of 83 Branches, and an Offshore Banking Unit in Bahrain. A shared network of over 800 online ATMs covering all major cities in Pakistan s the delivery channels for customer service. As on December 31, 2004, the Bank had equity of Rs. 6.016 billion and total assets of Rs. 107.168 billion, with over 475,000 banking customers, serviced by a total staff of 2,118.

Askari Bank is the only bank with its operational head office in the twin cities of Rawalpindi-Islamabad, which have relatively limited opportunities as compared to Karachi and Lahore. This

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created its own challenges and opportunities, and forced as to evolve an outward-looking strategy in of Askari market emphasis. As a result, Askari developed a geographically diversified assets base instead of a concentration and heavy reliance on business in the major commercial centers of Karachi and Lahore, where most other banks have their operational Head offices.

MOTIVATION OF ASKARI COMMERCIAL BANK While successfully penetrating the key domestic markets through strategic expansion and business diversification they remain alive to the challenge emanating from the development in the

global

engendered

financial by

markets;

greater

the

deregulation

opportunities and

and

increased

threats

customer

expectations. These provide them the impetus (moment) to make the best use of available resources, including modern technologies, to meet the challenges ahead. Historically, Askari’s core marketing focus for its asset base has been the middle and upper middle business houses (including wholesalers and manufacturers) operating in the large urban centers of Pakistan, which are primarily oriented towards foreign trade. This segment constitutes significant revenues to the bank. The liability side remains focused on the middle and upper middle class retired and serving government and armed forces personal and mid-size business houses. Their corporate banking division was established in April 1999 with the primary focus on servicing large corporate and multinational companies (MNCs). Benefiting from the bank’s growing

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balance sheet size, this division B now gaining momentum and their long-term aim D to develop it into an independent. Strategic business unit (SBU)… This would the bank to acquire, develop and specialized abilities, and enhance their focus on serving the emerging needs of the corporate clients. With this branch network of 75 and further expected increase in future, the ATM’s facility and internet Banking, Askari Bank’s reach is ever increasing. In recognition of this reach, they have set up a retail-banking group in July 2000, the mobile ATM’s facility is first time started by Askari commercial bank in 2005 dedicated to serving the urban consumer market; Askari is committed to aggressively market this segment. The strategy is to provide their customers with a basket of innovative products to meet their varying needs.

Askari Commercial Bank is the only Private Sector bank that has been approved by the World Bank as a Participating Financial Institution for the US$ 200 million Line of Credit sanctioned (authorized) to the Government of Pakistan for the Financial Sector Deepening and Intermediation Project.

Askari's emphasis on further broadening its core foreign trade business translated into handling a higher volume of Export and Import business of Rs. 36 billion ing a growth of 42% over the pervious year. This enhanced foreign trade business was secured

due

to

excellent

customer

services

and

efficient

international settlement arrangements with our correspondent banks.

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Askari Bank is operating throughout Pakistan. Most of the branches are connected through our State of the Art, On-line Communications Network, which gives the bank a competitive edge in providing instant services to its clientele. We also offer direct access to the latest Foreign Exchange Rates through our Online Communications.

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FIELD OF ACTIVITIES THE BANK BASICALLY WORKS UNDER THREE GROUPS NAMED AS 1) Corporate banking and financial institutions group 2) Retail banking group 3) Operations and credit group.

1-CORPORATE BANKING AND FINANCIAL INSTITUTION

GROUP This Group is responsible for serving the needs of large corporate clients in public and private sector, managing correspondent banking relationships and undertaking money market transactions. The Group is organized in three divisions namely Corporate and Merchant Banking Division, International Division And Treasury.

CORPORATE AND MERCHANT BANKING DIVISION This Division is engaged in provision of financing facilities to large corporate clients including multinationals. Principal activities include syndicated

loans,

guarantees,

and

working

capital

finance,

underwriting and advisory services. The Division has played an important

role

in

providing

development

finance

for

the

modernization and expansion of the country's core industries. Credit risk is well diversified with exposures in sectors like fuel & energy, chemicals, textiles and fertilizers. Three units have been set-up at Karachi, Lahore and Rawalpindi for sales and operations, which are ed by centralized marketing from the Head Office.

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INTERNATIONAL DIVISION Mainly

responsible

for

managing

correspondent

banking

relationships and planning overseas operations, the Division plays a vital role in extending foreign trade transactions to the branches. The Bank became a member of SWIFT in the Year 2000 and is also a contributor to the equity of Pakistan Export Finance Guarantee Agency Ltd With a network of 167 correspondents spread over 95 countries worldwide, the Bank continued to reinforce its leadership position in trade finance, transacting business of over Rs. 70 billion, during this year. Through the concerted efforts of this Division, we are a participating Bank under the "Pakistan Trade Enhancement. Facility"

of

the

International

Finance

Corporation,

and

our

customers are entitled to avail of the "Political Risk Guarantees Scheme" extended by the Asian Development Bank.

TREASURY Responsible for managing Bank’s liquidity and foreign exchange transactions, our Treasury in one of the most active in the market. Through reported transactions, purchase of Government paper and foreign exchange trading, the Division adds substantially to the Bank's sustained earnings.

2-RETAIL BANKING GROUP

Retail banking group was formed in 2000, this group is responsible for serving the needs of the retail market. Focusing on individual consumers and small and medium size enterprises, for purpose of

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product differentiation, the group is managed in three business arms. Investments products unit, Asset products unit, And the credit cards division.

INVESTMENT PRODUCTS UNIT Responsible for developing and managing brands which serve the investment needs of the consumer market, this unit focuses on deposit mobilization, provision of value added services based on modern technology and undertaking the centralized marketing and advertising for the Bank. This unit is also actively involved in the acquisition business and has signed-up over 300 merchants nationwide which offers shopping discounts to the Bank's Privilege Card .

Askari Bank's Value Plus is a unique deposits , which offers handsome monthly profits, accidental insurance cover, partial liquidity on all time deposits and free Privilege Card hip. The Unit is also istering the sales and distribution, including arrangement for strategic partnership alliances for Askari- i-Net Banking, the first internet banking in Pakistan, which allows routine banking transactions from any where in the World, round the clock, over the internet.

ASSET PRODUCTS UNIT This Unit is engaged in the development and management of retail credit schemes. The consumer market in Pakistan has not only grows exponentially over the last decade or so, but the needs of

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this segment have become extremely diverse. In order to sustain competition, it is but imperative to continue offering innovative consumer credit schemes. With the launch of Askari Bank's Personal Finance an Askar (auto-loans), this unit is emerging as a significant contributor to the Bank's loan growth. The unit also isters the first e-commerce banking solution in Pakistan, under the brand name ASK-IBL online. This is a b2b automated credit transaction module, offering merchandise credit to retailers on goods purchased form one of the largest distributors n the country. Strong collection and prudent risk management policies have restricted delinquencies to very low levels.

CREDIT CARDS DIVISION This

Division

manages

Askari

Master

Card

brand

and

is

headquartered at Karachi. With a new fully automated transaction processing system, the brand was re-launched in 2001, ed by an aggressive advertising campaign and strong sales team network. The product now has portfolio of nearly 20,000 cards, in less than one year. The brand is accepted worldwide and over 3,000 locations in Pakistan.

3-

OPERATIONS AND CREDIT GROUP

A function group mainly responsible for development of systems and procedures, process re-engineering, automation and credit management. The group is organized in three divisions,

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System and operations division Electronic technology divisions And the credit division

SYSTEM AND OPERATIONS DIVISIONS This group has been instrumental in development of procedures and manuals for various operating requirements of the bank. After careful

mapping

of

the

existing

process

flows,

the

division

recommends automation and re-engineering requirements. To improve transaction efficiencies. The division is active in providing equipment procurement and development of new branches. The protection of fixed assets of the bank is also managed by the by this division, as directs function. During year 2001, the division has

proposed

improvement

of

several

cost

our

existing

cutting

initiatives

procedures

and

based

upon

documentation

reduction. Seven new branches have been opened during this year. The division successfully implements the model branch concept during 2001, which has been proved to be a milestone towards improving our customer service standards and achieving process uniformity with optimum resource utilization.

ELECTRONIC TECHNOLOGY DIVISION This division operates as the backbone for all operational functions in the bank. Responsible primarily for the development of banking software and provision of computer hardware to all business units, the division also engaged in the development of technology based value added customer service products. The division has helped the

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bank in playing the pioneering role in offering Internet banking service e-commerce solution and on-line banking. The division provides

online real

time branch

connectivity and

has full-

automated transaction processing programmers in the place. The division is focusing on use of data-warehousing technology to enhance the relationship management program of the bank.

CREDIT DIVISION Providing extensive to branches for credit istration, control and monitoring, the division has played a pivotal role in helping the bank achieve a remarkable loan Growth of 31%, with well diversified risk exposures. Most of the loans are of shot -term trade financing on a secure and selfliquidating basis. The division has a special assert management team, which is responsible for ensuring low ratio of bad debts, effective monitoring of delinquent advances and close follow-up of recoveries. Bank's head office credit committee, reviews the credit quality and pricing on regular basis not only to ensure healthy credit growth but also the management of bank's risk assets in almost prudent and profitable manner

Taking into the expanding branch network and the increasing customer base, credit istration was strengthened by decentralizing the delegation of lending authorities at the regional and area management level.

The decentralization has benefited the bank and its customer tremendously as the new arrangements now provide for faster

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credit delivery, focused credit development, and more effective monitoring

and

controls.

Further

steps

are

being

taken

to

streamline credit appraisal procedures and training to credit officers at all levels.

HUMAN RESOURCE DIVISION Strategically, perhaps the most important division at the head office is

responsible

for

human

resource

management,

including

recruitment staff training and evaluation. The division also handles matters relating to istration. This division operates on future oriented strategy focusing on employee’s personal and professional growth.

Staff development activities are geared to enhance their capabilities for applying the knowledge and facts towards development of practical situations. Under our human resource management policy, we develop and groom our management personal for positions of greater responsibilities analytical, interpersonal, conceptualized and specialized skills to enable them understand cause-and-effect relationships and to think logically.

Staff is given on the-the -job as off-site training in diverse areas of banking and management. Our hiring philosophy is based upon meritocracy and selecting the right person for the right job. We lay greater emphasis on employee’s honesty and integrity besides technical competence. Candidates are selected through well defined and systematic selection procedure.

FINANCE DIVISION

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Responsible for bookkeeping and s, this division at head office, prepare all financial return and the MIS through its management-reporting wing. The division is actively involved in preparing market comparative analysis, consolidation of bank's budgets, its monitoring and constant review of various financial indicators.

Finance division works as the backbone for the bank's operations. The division, which reports directly to the president and chief executive of the bank, has been instrumental in preparation of banks

business

plans

and

future

strategies.

The

budgetary

performance are constantly reviewed and through a sophisticated " monthly performance report” which is a computer based program, the division provides feed back to the senior on strategic issue like reasons for budgetary variance and methods to arrest negative performance factors.

Preparing the bank's annual s and coordinating external audit is also a direct function of the finance division. Through the dedicated efforts of staff at this division, the bank has been winning various awards foe the best presentation of the annual s and also the management has also been able to monitor and review the bank's performance in proactive manner.

AUDIT DIVISION The audit division reports directly to the board through the executive committee, which is also the audit committee. The audit division is completely independent of the management and is responsible

for

checking

and

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on

the

management

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compliance with the boards policies and directives, as also the prudential regulations and other directives of the SBP. However their role is not intended to just that of fault finding; but also guiding and assisting branches in improving their operations.

The division is responsible for evaluating every aspect of the bank's operations with the goal of improving the effectiveness of risk management and internal control. There is also a regional audit function attached to each area office; the nature of this business is of more quality assurance rather than strictly audit. The regional audit report to the area manager, and assist them in ensuring that there is proper compliance with all the relative directives, and also that customer service standards are maintained and improved, at the branches in the area.

The system of regional and area offices has been introduced since 1999 for effective supervision and control of branches. The scope of the system also spans the development and management of bank's business and activities, on a regional basis.

The bank's branch network has been divided into 6 regions:

1) North region 2) Comparison of Islamabad and Rawalpindi area and the north area. 3) Central region 4) Comprising of Lahore and East area. 5) South region: and

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6) West region

A process of effective decentralization has been implemented, with delegation

of

authority

and

greater

responsibility

and

ability. Under this system the regional heads have the primary

responsibility

for

business

development,

profitability

productivity, operational efficiency and credit quality.

The system helps the customers through quick decision-making and fast product delivery. It has now enabled the bank to further expand and diversify its geographical reach and business activities.

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THE MISSION, VISION & OBJECTIVE

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THE MISSION STATEMENT: To be the leading private sector bank in Pakistan With an international presence, Delivering quality services Through innovative technology An effective resource management In a modern and progressive organization Culture of meritocracy, maintain High ethical and professional standards, With providing enhance value to all our stakeholders, And contributing to society

VISION To be the leading bank in the region...

CORE VALUES The intrinsic values, which are corner stones of Askari corporate behavior, are:

•

Commitment

•

Integrity

•

Fairness

•

Team-work

•

Service

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OBJECTIVES OF THE ACBL As Askari Bank looks ahead to the future by moving through the decade of the 1990's its efforts are guided by a broad framework of corporate objectives, which are as follows:

Askari is committed to its identity of " security & trust " and will endure to uphold this image at al the times.



It will endure to provide its customers with as many creative financial services and products, as is required. As today customer demands a package of services suited to his particular business, Askari plans to develop different and new products to cater to the customer's demand. Askari bank has they strength to be a market leader.



Bank will keep standing and by and develop, its human capital base. It is planning to provide all the required training to

its

staff

towards

achieving

a

higher

level

of

professionalism. Askari will continue striving to build a strong, motivated and dedicated work force where total commitment will be towards customer's satisfaction and wealthy growth of organization.

Askari bank will endure to provide a competitive return to its shareholders and will strive to maximize its share value. The enhancement in its capital and returns will be a continuous process. Askari bank is interested in being one of the most financially viable institutions. So it lays great emphasis on gradual building up to a healthy deposit mix. In the years ahead, the bank will enhance its focus on growth through operational efficiency, creating strategic alliances developing well-structured networking system innovating new products,

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marketing

and

sales

efforts

improving

customer service, achieving greater employee motivation and providing the best value to its stakeholders - will make it a leader in the corporate world.

HOW CHALLENGE BE DELIVERED These objectives and guiding mission will be achieved through •

Focused objective

•

Winning as a team

•

Excellence in delivery

•

Relentless quality

•

Upward rising sales

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CODE OF BUSINESS PRINCIPLES Askari code of business principles is to: •

Deliver solutions that meet customers financial need;

•

Build and sustain a high performance culture;

•

Build trusted relationships with all shareholders;

•

Build and manage the bank’s portfolio of businesses to achieve strong and sustainable shareholder returns; and

•

Create and leverage strategic assets and capabilities for competitive advantage.

CORPORATE PHILOSOPHY “The Challenge... to bring a dream to life” From knowing Askari customers' requirements to understanding employee needs, from utilizing modern technology to making responsible social contributions, from enhancing stake-holders' value to practicing corporate ethics, Askari is continuously and consistently striving to address newer challenges with a single motivation - the power to inspire and be inspired. 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

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scope of operations and the relationship with employees, clients and competitors. With over 14 years of experience in trade finance and an extensive international branch network, Askari Commercial Bank is committed to help the customer succeed in every competitive environment. To keep pace with changing needs, ACBL 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.

CUSTOMER RELATIONSHIPS "Before we discover, we must explore"

Knowing Askari customers and their needs is the key to Askari

business

success.

Askari

products

and

services

are

structured to touch and improve the quality of lives of all segments of society. Service quality standards are designed and monitored to ensure a consistent and convenient customer experience. Askari client relationship managers are well equipped and well trained to provide most efficient and personalized service to each and every customer. Askari products and services are as diverse as Askari market segments. Askari have structured and syndicated financing arrangements, working capital finance, Balancing-Modernization Replacement (BMR) facilities, financing of international trade, consumer credit, small business loans, credit cards and unparalleled investment products for the individual saver. Askari Bank is proud of the pioneering role in providing the most modern technological services to its customer base, which today exceeds 150,000 relationships. IBA University of the Punjab Lahore

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EMPLOYEE RELATIONSHIPS "Unusual effort on part of the employees who are apparently ordinary workers is one of the key indications of a superior enterprise" Askari staff is Askari most valuable asset. The human resource philosophy at Askari Bank focuses on multi-talent hiring, professional grooming, requisite training and meritocracy based reward system. Askari lays great emphasis on the development and nurturing of "Askari Culture", a cohesive teamwork, where each relies on the strength of the other and together they achieve common objectives. Staff welfare has always been a priority. New initiatives like hospitalization

plan,

car

buy-back

facility

and

home

loan

insurance have added new dimensions to the staff-care policy and motivated them to out-perform Askari competitors. Employee productivity enhancement is organized through extensive

in-house

and

external

training

programs.

Askari

continue to offer opportunities for people to develop their knowledge, skills and personalities, thus ensuring greater selffulfillment and progression in the organization.

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TECHNOLOGICAL INNOVATION "Modern science is not an option, it is an obligation” Technology is rapidly changing the way Askari think, act and does business. It has played a pivotal role in enhancing customer expectations, particularly with respect to speed and quality of service. Askari enjoy a strategic competitive advantage over all domestic players

by

virtue

of

Askari

leadership

in

technological

innovations. Askari have fully automated transaction-processing systems

for

back-office

.

Askari

branch

network

is

connected on-line real-time and Askari customers have access to off-site as well as on-site ATMs, all over Pakistan. Askari Phone Banking service and Internet Banking facility allows customers to enjoy routine banking services from anywhere in the world, 365 days a year, 24 hours a day. Askari have also pioneered commerce venture in Pakistan through a major retail distributor. Askari focusing

qualified on

and

data

experienced

warehousing

to

technology enhance

team the

is

now

Customer

Relationship Management (CRM) program

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ETHICAL VALUES "Professionalism without integrity is like a book without pages" Because the right may not always be obvious, Askari must be guided in every action by a set of well-defined values, governing Askari decisions. Askari understand that its commitment to satisfy customers’ needs must be fulfilled within a professional and ethical framework. Askari subscribe to a culture of high ethical standards, based upon development of right attitudes. The following primary core values provide the guiding principles for Askari corporate behavior: •

Commitment

•

Integrity

•

Fairness

•

Team-work

•

Service

As part of Askari internal communications program, these core values are inculcated in Askari employees through internal memos, posters and most importantly leading by example.

CORPORATE CITIZENSHIP "The greatest of life's pleasures are shared"

•

Askari role as a responsible corporate citizen is as important to ACBL as the products and services they offer.

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ACBL •

Internship Report Askari have made useful contributions in the areas of

sports,

culture,

poverty

alleviation,

health

&

medical

sciences, education and scientific research. •

Askari was one of the co-sponsors of the 9th South Asian Federation Games, held at Islamabad in the Year 2003. Askari have also sponsored various sports tournaments at both amateur and professional level.

•

Askari contributions to the NGOs dedicated to the treatment and welfare of the blind is a ray of hope in the darkness. Askari have made donations to the drug-addiction control programs and Askari efforts to help Aids Awareness programs and contributions to the mental and social welfare of women and children have won much acclaim.

•

Askari participated in IUCN Water conservation initiative and have helped in creating better understanding about the country on the international platform by cosponsoring the first interactive encyclopedia on Pakistan.

GROWTH "There is no sin punished more implacably by nature than the sin of resistance to change"

Askari live in a moment of history where everything is changing so fast that Askari begin to see the present only when it is already disappearing. Askari customer needs are changing and their expectations are growing. Technology is fast proliferating the distribution channels and now banking services can be accessed from multiple

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points. Askari believe that balanced growth is the key to survival in today's global banking environment. From a humble beginning with just 7 branches in 1992, today Askari enjoy a network of 73 outlets in Pakistan, spread across the country. A network of self-service ATMs s these outlets. Askari total assets now exceed Rs.50.9 billion and Askari have over 17 products and services to match Askari customers' individual needs. Bank's equity base stands at Rs. 2.58 billion with 20% growth over the last 5 years. The human resource capital of the bank today exceeds 1,200 employees. As part of Askari growth strategy Askari is now extending Askari banking services to the remote and rural areas.

CORPORATE ACHIEVEMENT "Winning isn't everything, it's the only thing.”

Amidst tough competition, Askari efforts to go an extra mile in providing superior services to Askari customers have been acknowledged at the national as well as international levels. These

acknowledgements

serve

as

a

great

source

of

encouragement and appreciation at one hand and inspire ACBL to perform even better, on the other. The Global Finance Magazine has honored Askari with the “The Best Bank in Pakistan” award. Askari won the Euro money and Asia money awards as early as 1994, 1995 and 1996. Askari have Al+, the highest possible credit rating, for the short-term obligations, and Askari long-term rating stands at AA. Askari won IBA University of the Punjab Lahore

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the prestigious "Best Presented Annual s" award from the Institute of Chartered ants in Pakistan, and The Institute of Cost and Management ants, Pakistan, for the services sector, for 2000. Askari have also received prizes during the

last

four

years

from

the

South

Asian

Federation

of

ants (SAFA) for the "Best Presented Annual s" for the financial sector, in the SAARC region. Askari was the first bank in Pakistan to offer Internet Banking services and b2b e-commerce solutions for merchants looking to purchase on credit.

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MANAGEMENT SYSTEM CORPORATE INFORMATION MANGERIAL POLICIES

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ORGANOGRAM BOARD OF DIRECTORS

Executive Committee

Internal Audit

President and Chief Executive

Corp. Banking & Fin. Inst. Group

Operating and credit group

International

Credit

Rawalpind i/Islamaba d

Treasury

Electronic Technology

North

Corporate and Merchant Banking

Systems and Operations

Lahore

Data Reporting

East

Legal Affairs

South I

Regions

Retail Banking Group

Credit Cards

Asset Products

Planning and Corporate affairs

Investment products

Human Resource

Finance

South II

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CORPORATE INFORMATION Board of Directors Lt. Gen. Waseem Ahmed Ashraf

Chairman

Lt. Gen. (R) Masood Perwaiz

Chairman Executive committee

Mr. Kalim-ur-Rehman

President & Chief Executive

Brig (R) Mohammad Shiraz Baig

Director

Brig (R) Muhammad Bashir Baz

Director

Brig (R) Asmat Ullah Khan Niazi

Director

Brig (R) Mohammad Safdar Ali

Director

Mr. Javed Ahmad Noel

Director

Mr. Zafar Alam Khan Sumbal

Director/Secretary

Mr. Shahid Hafeez Azmi

Director

Mr. Mohammad Afzal Munif, FCA

Director

Mr. Tariq Iqbal Khan, FCA

Director (NIT Nominee)

Audit Committee Mr. Muhammad Afzal Munif, FCA

Chairman

Brig (R) Muhammad Shiraz Baig

Member

Brig (R) Asmat Ullah Khan Niazi

Member

Mr. Zafar Alam Khan Sumbal

Secretary

Auditors A.F.Ferguson & Co Chartered ants

Legal Advisors Rizvi,Isa, Afridi & Angell IBA University of the Punjab Lahore

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Registrar & Share Transfer Office M/s THK Associates (Private) Limited Ground Floor, Modern Motors House, Beau mount Road, Karachi, 75530 Tel : (021) 5689021, 5686658, 5685681 Fax: (021) 5655595

E-Mail: [email protected] ed Office /Head Office AWT Plaza, The Mall, P.O.Box 1084, Rawalpindi. Tel: (051) 9063000

Fax: (051) 9272455

Website: www.askaribank.com.pk

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MANGERIAL POLICIES A. Financial policies B. Procurement policies C. Marketing policies D. Promotional policies E. Lending policies F. Personal policies

FINANCIAL POLICIES The financial policies of any bank are the most important policies through which the whole banking activity is conducted. These policies are primarily conducted on: •

Source of funds

•

Use of funds

SOURCE OF FUNDS: The bank finance policy is acquiring funds from the following sources: •

Deposits of holders.

•

Interest on advances and loans granted to the borrowers.

•

Income and commission from the services provided by the bank.

•

Bank open various types of s for its customers Services are provided for earning.

•

Interest income and commission bank providing the services to its customer.

USE OF FUNDS: IBA University of the Punjab Lahore

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necessary. The bank seeks the best way for making investment to got more profit with the maximum security. The bank has an investment portfolio in which it allocate its funds for crediting to borrowers, investment in the stock market, investment in the real estate property etc. for allocation of funds a bank has to follow some banking policies and the prudential regulations of SBP these are: A bank has to maintain a liquidity with central bank ,i.e. 25 %of its total deposits. A bank cannot invest all of its funds otherwise it will be difficult to meet urgent needs. A substantial part of funds is received from interest on loans and advances. Before granting a loan the bank analyze and observe the borrower and conduct a complete ratio analysis. Bank prepare credit line for this purpose the major thing is granting an advance is the security offered by the borrower and its actual market value.

PROCUREMENT POLICIES Procurement

policies

are

more

concerned

with

manufacturing

organizations. In bank industry that is service industry procurement means the procurement of funds from various sources such as deposits. It involves attracting and holding the funds of the depositors. After the acquisition of funds, the bank invest the acquire funds. One alternative is to lend its money and earned interest markup or invest in govt. securities etc. as already mentioned in the above paragraph the major sources of funds for a bank are the deposit of the general and the other sources of income includes

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interest or markup charges received for various services offered by the bank to its clients. A bank tries to attract maximum no. Of s so that it can increase it’s deposits and these lending ability. In order to get maximum no. of s the staff of the bank must be efficient as compared to the other banks and the manager of the branch must take personal interest in attracting deposits. Good quality of the service is the key to success.

MARKETING POLICIES Marketing policies are also one of the most important policies because they are related to the growth of the organization. Marketing for a bank would mean:

1. Creation of new product and services. 2. The bank marketing must be consumer oriented.

Following are the marketing policies of the ACBL.

a. Keeping the track of latest development in the world and

incorporating

the

latest

and

most

modern

equipment to make the banking procedures simple and easy for the customers. b. Development of products for the customers. c. Giving good services and maintaining good relations with the customers.

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These policies can be implemented by providing the right product and service to the customer at the right place, at the right time, at the right price. It is necessary for the managers to keep in touch with consumers, observe their needs and develop products, which meet their needs.

PROMOTIONAL POLICIES Public relation and advertising has assumed a great importance in the modern banking business. As for as promotional activities are concerned, the main objective of the bank is to inform the existing clients and other people about its new products or change in the existing services. ACBL establishes its purpose through:

1. Direct with customers. 2. Relation with business organizations. 3. Community relations.

LENDING POLICIES Every bank has its own lending policies except for those, which are common for all the banks, i.e. the policies, which are imposed on all the commercial banks by the SBP, are known as prudential regulations. The lending policies of ACBL are as follows:

1. The bank only invests in those sound and viable projects, which have good rate of return. 2. Bank prefers to advance loan to their holders. 3. Loan is given to reliable person only.

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4. No political loan is sanctioned by bank. 5. Any holder can apply for running finance or demand finance. The manger apprises the past record of holder and his credit worthiness. If he finds any thing wrong he can refuse to sanction the amount. 6. The bank while taking security prefers govt. Securities to shares. 7. It also advances working capital loans.

PERSONAL POLICIES Personal policies have an important role in the success of an any organization. ACBL have its proper personal policies. Good personal policies motivate the employees towards hardworking. Following are the main personal policies of ACBL: 1. Selection of employees on merit 2. Selection of capable employees. 3. Attractive salary package for motivation of employees. 4. To train and develop the future management of the bank. 5. Every employee must have certain set of clearly defined duties 6. Effective communication at al levels of the organization.

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DEPARTMENTS GENERAL BANKING DEPARTMENT CREDIT DEPARTMENT FOREIGN EXCHANGE DEPARTMENT

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Banking

procedures

are

divided

between

various

departments. Different departments do their jobs in occurrence with the bank policies. In ACBL each branch is divided into various departments. Head of department manages each department & officials of the branch follow procedures.

The departments working within a branch are as:

GENERAL BANKING DEPARTMENT opening department Remittances department Cash department Clearing department PRIVILEGE BANKING DEPARTMENT Online banking Lockers

CREDIT DEPARTMENT

FOREX DEPARTMENT Import department Export department Foreign currency department

S DEPARTMENT IT- DEPARTMENT

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OPENING DEPARTMENT Opening In-charge

Officer

Officer

Functions of Opening Department

•

Providing opening form according to the customer's requirements,

•

Guide the customer about the requirements of the opening and form filling,

•

Check the forms whether they are correctly completed or not,

•

Preparing checklist,

•

Stamping on the form,

•

Maintaining opening ,

•

Pasting of forms in after release from general banking in charge,

•

Issuance of cheque books,

•

Issuance of s maintenance certificate,

•

Closure of

•

Verification of signature in case of cheque presented before releasing of opening from SS card is not yet scanned

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IMPORTANCE OF INTRODUCTION FOR A\C OPENING Introductory references As soon as a person opens an with the bank, the banker customer relationship is established. In such situation this is advisable the banker should not open new s of unknown persons unless references regarding the integrity and responsibility

of

the

purposed

persons

are

obtained

from

respectable parties. Failure to exercise this care may result in serious consequences not only for the banker concerned but also for the other bankers and general public. It is not sufficient to obtain the reference but its genuineness must also be verified. Omission of this may have serious consequences. In practice we see that there is tough competition among bankers for procurement of deposits, so to press a prospective new customer to find the desired reference may offend him, yet he is to be welcomed by the banker as a source of fresh deposits. But these practical difficulties have to be handled tactfully because the risk involved to carry out this requirement partially or wholly may lead to undesirable results.

PRECAUTIONS TO AVOID FRAUD If preliminary necessary inquiries mentioned above are not made and is opened, it is possible that an undesirable person is provided with a chequebook to defraud innocent people or the person being an undercharged bankrupt may put the banker in difficult situation.

1.

SAFEGUARD AGAINST UNINTENTIONAL OVERDRAFT

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Sometimes due to misreading of the balance an may be inadvertently overdrawn or the credit entry of customer is placed into the of another person by mistake who happens to have withdrawn that amount. in all such cases the amount can only be realized if the person is man of integrity.

2.

INQURIES ABOUT CUSTOMERS

Have all necessary information with him regarding his Generally a banker is asked by another banker to give his opinion about his customer’s financial position. Therefore, it is beneficial for the both that the banker should customers.

3.

PROOFS FOR REASONABLE CARE AND INQUIRY

Under section 131 of negotiable instrument act, 1881 a collecting banker is protected provided he collects the cheques of his customers in good faith and without negligence. But if the banker fails to make preliminary inquiries he may be deprived of statutory protection, being guilty of negligence.

OPENING PROCEDURE &PRECAUTIONS:KNOW YOUR CUSTOMERS The objective of knowing a customer is to have a fair idea about the identity, financial resources, and general information about the customer at the time when the relationship is established. A banker must have following information about the customer: Customer name: Enter complete name as mentioned in original ID card /other business documents.

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Nature of business /profession: if customer is of salaried class enter his employer name. If the customer is a businessman, trader, sole proprietor, enter the business name, for example “Jamil Traders”etc.also enter the customer’s title/position and address of the business/employer. Address with P.O.BOX is not acceptable. Similarly remarks like “Private service”, “business” are not acceptable, rather specify what type of company/business the customer is associated with for example Manager Philips Electrical Company.

Address: Enter the complete business/residential address. With in the brackets you may also provide prominent address identification marks for ease of physically locating the address.

Numbers: Enter home, official, mobile, fax number and e-mail address (if available). Banker can the number by giving the customer a courtesy call or by sending him a e-mail.

Other/ secondary/ mailing address: Some customer may volunteer their parents or siblings’ addressor second home address or a mailing address other than a permanent address.

Special instructions: Clear-cut special instructions must be obtained from customers. If the customer has not given any special instruction specified column

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must be cancelled by drawing a line, as this column must not be left blank in any circumstance.

Existing/other bankers: Almost most all the bankers usually have a banking relationship with another bank. In case of customer who does not have an existing banking relationship, or does not want to disclose the existing relationship, then it is strongly recommended that at least for some time this particular must be kept under observation.

TYPES OF S 1) S OF GENERAL CUSTOMERS

•

Minor

•

Illiterate person

•

t

2) OF SPECIAL PERSONS

•

Proprietorship

•

Partnership

•

Limited company’s

•

s of club societies and associations

•

Agent’s s

•

Trust

•

Liquidator’s executer’s and ’s

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REMITTANCE DEPARTMENT Functions of remittances department

The functions of remittance departments is to handle with the following instruments:

•

Pay Order

•

Demand Draft

•

Pay slip

•

Telegraphic Transfer

•

Payment of Remittances

•

Cancellation of pay order & demand draft

The remittance department deals with the transfer of money from one place to another. This department deals with the local currency transfer only. ACBL provides these services to both customers & non-customers

Remittance can be made through:

1) Instrument transfer 2) Electronic transfer 3) Mail transfer

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Instruments of the Remittances Departments

PAY ORDER Pay order issued from one branch only be payable from the same branch. It is normally issued for payment in the same city. It is normally referred as banker's cheque

Get the application form. Issue pay order after recovering cheques. Do necessary vouchering. Make entry in PO issue . All pay order shall be crossed" payees only".

Charges on issue of Pay Order

Amount (Rs)

Charges (Rs)

Less then 100,000

50

Above

Nil

100,000

Duplicate Pay Order:

Check the record to insure that payment has not been effected. Get application for issuing of duplicate PO. Recover charges. Issue duplicate pay order.

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DEMAND DRAFT It is an instrument on demand for which value has been received, issued by the branch of the bank drawn i.e. payable at some other place(branch) of the same bank. In case of agency arrangementdemand draft can also be issued by one branch of the bank payable to other branch of the other bank e.g. DD issued by ACBL payable by MCB.

Charges on issue of Demand Draft

Amount (Rs)

Charges (Rs)

1 - 10,000

25

10,000 – 100,000

50 or .1%

100,000 - 1000,000

200 or .07%

Over 1000,00

1000 or .05%

PAY SLIP The bank for settlement of it own payment issue pay slip. •

No excise duty

• No commission

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CASH DEPARTMENT All physical movement of cash in the bank is made through the cash department. Normally cash department performs following functions

Receipt Payments Act according to any standing instructions Transfer of funds from one to another Handling of ATM Verification of signatures Posting Handling of prize bond

Cash receipt section In this section the cashier in following manner receives cash:

Process of deposits

Fill- up deposit slip

Cashier counts the amounts and fulfills other requirement

IBA University of the Punjab Lahore

Deposited on Receipt Customer

Cashier counts the amount and fulfills other requirements

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Cash payment section In this section honoring the cheque through following process makes payment.

Process of payment

Cheque is presented at token counter

Cashier counts the amount & payment is made

Two signatures on back of the cheque by customer

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Cheque is recorded & token # is allotted

Cancellation officer cancels cheque

Posting is made

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CLEARING DEPARTMENT MEANING OF CLEARING The word clearing has been derived from the word “Clear” and is defined as “ a system by which banks exchange cheques and other negotiable instruments drawn on each other within a specific area and thereby secure payment for their clients through the Clearing House At specified time” in an efficient way”.

1. Since clearing does not involve any cash etc. and all the transaction take place through book entries , the number of transaction can be unlimited. 2. No

cash

is

needed

as

such

the

risk

of

robbery,

embezzlements and pilferage are totally eliminated. 3. As major payments are made through clearing, the banks came manage cash payments at the counters with a minimum amount of cash in vaults. 4. A lot of time, cost and labor are saved. 5. Since it provides an extra service to the customer of banks without any service charges or costs, more and more people are inclined and attracted towards banking.

CLEARING HOUSE It is a place where representatives of all banks sit together and interchange their claims against each other with the help of controlling staff of State Bank of Pakistan And where there is no branch of State Bank of Pakistan the designated branch of National

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Bank of Pakistan act as controlling member instead of State Bank of Pakistan

HIP CEASES It ceases to be a scheduled Bank. It is not able to meet its liabilities. State Bank of Pakistan or Central Govt. prohibits it to receive fresh deposits.

RULES AND REGULATIONS HAVE CLEARING HOUSE: Timing:(Monday through Saturday) i.

1st Clearing at 10:00 a.m.

ii.

2nd Clearing at 2.30 p.m.

Each bank will send competent representative to exchange the cheques. Each bank is required to insure that all cheques and other negotiable instruments are properly stamped and suitably discharged An objection memo must accompany each and every cheque when return unpaid duly initialed. Each bank is required to maintain sufficient funds in the principal with SBP to meet the payment obligations. The State Bank of Pakistan debit the of each member of the clearinghouse with the proportionate working expenses incurred on the operation of clearing house. These expenses are very nominal.

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.

OUTWARD CLEARING AT THE BRANCH: The following points are to be taken into consideration while an instrument is accepted at the counter to be presented in outward clearing:

The name of the branch appears on its face where it is drawn o. It should be stale or post dated or without date. Amount in words and figures does not differ. Signature of the drawer appears on the face of the instrument. Instrument is not mutilated. There should be no material alteration ,if so, it should be properly authenticated. If

order

instrument

suitably

indorsed

and

the

last

endorsee’s being credited. Endorsement is in accordance with the crossing if any. The amount of the instrument is same as mentioned on the paying-in-slip and counterfoil. The title of the on the paying-in-slip is that of payee or endorsee (with the exception of bearer cheque).

If an instrument is in order than our bank special crossing stamp is affixed across the face of the instrument. Clearing stamp is affixed on the face of the instruments, paying-in-slip and counterfoil (The stamp is affixed in such a manner that half appears on counterfoil and paying-in-slip). The instrument is suitably discharged, where a

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bearer cheque does not require any discharge and also an instrument in favor a bank not need be discharged. The instrument along with pay-in-slip is retained while the counterfoil is given to the customer duly signed. Then the following steps are to be taken:

1. The particulars of the instrument and the pay-in-slip or credit voucher are entered in the outward clearing . 2. Serial no. Is given to each voucher. 3. The is balanced; the credit vouchers are balanced from the instruments and are released to the respective departments against acknowledgement in the . 4. The instruments are arranged bank wise. 5. The schedules are prepared in triplicate, two copies which are attached with the relevant instrument and the third is kept as office copy. 6. The house page is prepared from schedules in triplicate. 7. The schedules and house pages are signed by the house incharge with branch stamp. 8. The grand total of the house page is taken and agreed with that of the outward clearing . 9. The instrument along with duplicate schedule and house page are sent to the main office. However the amount is kept in float till final status of various instruments is known from respective paying banks in second dealing.

The entry of the instrument returned unpaid is made in Cheques returned . If the instrument is not to be presented again in

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clearing then a covering memo is prepared. The covering memo along with returned instrument and objection memo is sent to the customer who sent the same to his .

INWARD CLEARING OF THE BRANCH: 1. The particulars of the instruments are compared with the list. 2. The instruments are detached and sort out department wise. 3. The entry is made in the inward clearing (serial no. Instrument no. no. Is written). 4. The instruments are sent top the respective departments 5. The instruments are scrutinized in each respect before honoring the same.

OUTWARD CHEQUES RETURNED UNPAID: These are the cheque returned unpaid by us in inward clearing. due to some objections.

INWARD CHEQUES RETAINED UNPAID: These are the cheques retained unpaid to us which were lodged by us in Outward Clearing.

RETURN OF CHEQUES AFTER CLEARING HOUSE: Suppose all cheques received in the inward clearing are ed and later on it is found that a cheque should have been returned, in such cases, we the collecting branch and request them not to make payment against the proceeds of the cheque which was not returned unpaid by us in due time. the cheque with objection memo along with a covering letter is sent to the collecting branch, making

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request to issue a payment order in favour to balance the Cashcum-day book we may debit suspense sundry debtors with the approval of the manager. When the payment order is received, it is lodged in clearing and suspense , sundry debtors is adjusted accordingly.

SPECIAL CLEARING: In addition to the normal clearing function at Clearing house it is mutually agreed to hold an extra clearing at the clearing house on the particular day and time which is known as “special clearing” it is arranged due to the rush of work arising out of say, more Holidays declared by the Central Govt. at a time, but normally special clearing is he4ld on last working day of our half yearly and yearly closing i.e. 30th June and 31st Dec. every year.

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ONLINE BANKING Online banking means that the customer of ACBL can deposit / withdraw funds in / from other branches of ACBL. Askari bank provides online facility to all its branches.

ONLINE CHARGES Amount of Deposits

Charges ( Rs)

25,000 or below

50

25,000 - 200,000

100

200,001 - 500,000

250

500,001 - 2000,000

500

Above 2000,000

750

LOKERS Askari bank offers facility of lockers to its customers.

There are three sizes of lockers available:

CHARGES Size of lockers

Rent of locker (Rs) p.a.

Large

2500

Medium

1500

Small

1000

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CREDIT DEPARTMENT Although the study of money is important for the understanding of the way in which our economic system operates, we must recall this point that most exchange transactions in this system are carried on today without the use of actual money, i.e. Those are carried on by means of credit and credit instruments rather than money. While money still forms the basis of credit and deferred payments, it is necessary to examine the nature of credit operations, and the instruments and institutions trough, which these operations are carried on, in considerable detail.

THE NATURE OF CREDIT On the surface, credit operation appears to be of many kinds, but they all have a fundamental similarity. In credit transactions, one party to the transaction, the creditor, turns over to the debtor a certain amount of money, commodities or services at the present time and relies on the debtor to repay an equivalent amount, usually the money in the future plus interest at some future time.

THE BASIS OF CREDIT There has been much discussion, concerning the essential basis of credit or borrowing operation. Some writers on the subject have stoutly insisted that confidence is the basis of all grants of credit, that if one did not have confidence that the borrower would repay a loan one would never thinks of making the loan, save on grounds of friendship of philanthropy. Others have held property, rather than confidence is the basis of all genuine credit transactions. Some insist that character is the essential factor, while still other writers

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have indulged in a propensity of alliteration by sating that the bases of credit are character, capital and capacity; or the man and the means; or reliability and resources.

TYPES OF CREDIT The verities of credit may be classified in numerous waysaccording to the status of eh debtor, according to the status of the creditor, according to the time for which the credit is granted, and so on; but the most fruitful classification usually indicates the use to which the credit is put.

1.Public and Private Credit: In the first place, a distinction is usually made between public and private credit. Public credit comprises the promises to pay off governmental bodies, that is, their acquisition of goods in the present in return for promises to pay in future; and private credit refers to the promises to pay all non-government debtors. Among the sub-classes of private credit, the most significant are band credit, commercial credit and consumption credit.

2. Band Credit: In

Comprehends

all

kinds

of

promises

to

pay

off

banking

institutions, including demand deposits, time deposits, notes, bankers, acceptances, cash, letters of credit, debentures, and bonded obligations. Frequently, the term bank credit is restricted in use to refer only to the demand deposit liabilities of the commercial banks, and one must constantly be on guard to recognize the employment of the term in this restricted sense. As a sub-class of bank credit, central bank credit is of outstanding importance in IBA University of the Punjab Lahore

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system

it

includes

the

central

bank's

circulating notes and its deposit liabilities, the better consisting chiefly of the reserve balances of the commercial banks.

3. Investment Credit. The credit structure, business if found upon examination to consist very largely of two forms of credit. Investment credit is extended through loans, the proceeds of which are put into the fixed assets of a business enterprise. If the owners of business cannot themselves furnish all of the capital necessary for investments in land, buildings and equipment. Obviously what they need is loans of capital running over a considerable period of years.

4. Commercial credit In addition to seeking credit in long term investment in fixed assets, most business periodically ask for credit in the form of short term loans. Commercial credit is business supplier for current business operations, such as manufacturing and marketing of goods. It often take more business capital than business can themselves supply to pay for raw materials, to make the outlays for wages and to carry inventories of finished goods until they can be converted into cash. To help finance such operations short-term loans usually running from thirty days to six months are negotiated. Commercial loans like investment loan must ultimately be paid out of accumulated earnings of a business. But if the business earnings are of immediate future, such loans can be safely made and promptly paid. Commercial loans are base done quick assets, such as raw material and finished goods, which are in constant process of liquidation and thereby provide the cash with to extinguish loans.

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5. Consumers credit and producers’ credit Consumers credit involves advance of purchasing power for economic goods to consumers for consumption purposes. Its distinguish characteristic lies in the factor that the things acquired by the debtors as result of the loans are not supposed to furnish them with the means of repaying the loans the loan must be repaid out of the income of the borrowers.

TYPES OF CREDIT INSTRUMENTS There are various types of credit instruments. The more important credit instruments are as follows:

Bills of exchange: A bill of exchange is define by negotiable instruments act as "an instrument in writing, containing an unconditional order, signed by the maker, directing a certain person, to pay certain sum of money, only to or to the order of a certain person, or to the bearer the instrument".

Cheque: A Cheque is defined “a bill of exchange drawn on specific banker and not expresses to be payable otherwise than on demand." Cheques may be of various types, which are as follows: Bearer cheque Order cheque Open cheque Crossed cheque Marked cheque

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Drafts: These are bills of exchange issued by a banker on his branch office. Banks draft like bills of exchange, are of great importance in the financing of trade, especially foreign trade

Promissory note: It

is

an

instrument

in

writing

containing

an

unconditional

undertaking, signed by the maker, to pay the certain sum of money only to or to the order of a certain person to the bearer of the instrument. a promissory note in order to be the so, must fulfill all conditions.

Letter of credit: A letter of credit as name signifies does one person or bank to another requesting the letter to pay any amount of money up to a certain limit to the person write a letter named in the letter or in whose favor the letter is written. In this letter generally a date is fixed upto only the addressee should make which advances. Thus a letter of credit remains in force upto a certain date only. Generally banks grant this letter of credit.

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FOREIGN EXCHANGE DEPARTMENT The term "foreign exchange" is used to denote either a foreign currency or the rate at which one currency is converted into another or the means & methods by which one currency is exchanged for another.

Functions of Foreign Currency Department Foreign exchange department performs following functions:

•

Foreign Bills for collection (FBC)

•

Foreign telegraphic transfer (FTT)

•

Foreign Demand Draft (FDD)

•

TDR

•

Issuance of Proceed realization certificate

•

Inward remittances

•

Daily Reporting

Requirement of Funds Transfer For transfer of fund in foreign currency, a person must have his in foreign exchange in the bank. Requirement of opening is $500 or any other currency equivalent to $500.

Types of currency

Interest p.a.

Dollar

.25%

Pound sterling

2%

Euro

1%

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THE CORPORATE AND INVESTMENT BANKING DIVISIONS CBD & IBD are strongly positioned across priority markets with a distinct strategy for developing corporate business. Our strategic framework generates sustainable returns based on strong market presence and financial solutions ranging from debt and equity

market

transactions

to

syndicate

finance,

and

from

transaction banking to corporate finance advisory services.

2004 was challenging year due to historic lows in interest rates, particularly for corporate business. The Corporate Banking Division (CBD) undertook a number of dept re-pricing swap transactions, aimed at reducing the financial burden of its key client portfolios and also managed advisory and loan arrangement activities. The major new relationships cover telecommunications, oil and gas, and chemicals sectors. CBD has dedicated marketing and units functioning at Karachi and Lahore. In order to enhance focus on relationship management, and service quality, more dedicated staff is being assigned.

The investment banking activity mainly covers, debt / capital markets,

advisory

services

and

trading

(both

equities

and

derivatives).After the initial start-up phase, the capital market desk, based at Karachi, increased the volume of capital market related transactions.

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The corporate and investment banking will continue to play a major role in loan syndications, structured financing and debt / capital raising transactions with the objective of providing entire range of corporate and investment banking solutions to its valued clients under one umbrella.

AWARD AND ACHIEVEMENTS In 1994, 1996 and 1997 the bank received Euro money and Asia money awards. Askari has A1+ rating for short-term obligations the highest possible for the category, while the long-term rating stands at AA. Askari Bank Won the prestigious “Best presented Annual s” awards for 2000 and 2001 from the institute of cost and Management ants of Pakistan, for the services sector.

Mr. Kalim-ur-Rahman, President Askari Bank, with group having award of 'The Best Retail Bank of Pakistan 2004'

For the past four years, the Bank has received prizes from the South Asian Federalism of ants for “The Best presented Annual s” for the financial sector, in the SAARC region. Over the years, Askari Bank has proved its strength as a leading banking sector entity, by achieving the following firsts in Pakistan banking.

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Internship Report First Pakistani Bank to offer on-line real-time banking on a countrywide basis.

ii)

First bank with a nation-wide ATM network First bank to offer Internet Banking services First Bank to offer e-commerce solutions. The Askari Commercial Bank Limited has been declared “The

Best Bank in Pakistan” by the Global finance, an international financial magazine of high repute as a result of their latest study of Banks in the Emerging Markets. This is the 2nd consecutive year that the magazine has selected their bank for this prestigious Award. The award will be presented to the Bank on the occasion of the World Bank IMF meetings in Washington this autumn. While the magazine will be formally announcing the names of the award winning Banks in its May 2002 issue, they have already issued press information for the international media, giving names of the award winning banks, including the Askari commercial Bank limited.

Over the years, we have received several awards for the quality of our banking service to individuals and corporate.

These Include: Best Commercial Bank Consumer Choice award 2005 by The Consumers Association of Pakistan Best Retail Bank in Pakistan award 2004 & 2005 by The Asian Banker Best Corporate Report 1st prize awarded for 2000, 01, 03 & 04 by Institute of Chartered ants of Pakistan (ICAP)

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Pakistan (ICMAP) Corporate Excellence awards for 2002 & 03 The Management Association of Pakistan (MAP) Best Corporate / Institutional Internet Bank in Pakistan award for 2004 by Global Finance magazine Best Consumer Internet Bank in Pakistan award for 2002, 03 & 04 by Global Finance magazine The Best Bank in Pakistan award for 2001 & 02 by Global Finance Magazine Best Presented s Ranking prizes awarded from 1997 to 2002 by South Asian Federation of ants (SAFA) Commercial Bank of the Year award for 1994 & 96 by Asia money magazine Best Domestic Bank in Pakistan award for 1995 by Euro money

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PRODUCTS AND SERVICES

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PRODUCT AND SERVICES The product & services of askari commercial bank limited are developed keeping in view the customers needs & wants, & the expectation

that

the

customer

attaches

with

its

financial

institutions.

A product ACBL includes all those services which customer normally required for effectively managing his business.

ACBL offers the following financial services to its customers.

1) Deposits 2) Advances 3) Products 4) International banking services 5) Agency services to customers

1)

DEPOSITS

One of the basic functions of commercial banking is to receive deposits. ACBL accepts deposits in both local & foreign currency.

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Local currency deposits

•

Current

•

PLS Saving

•

Term Deposit

•

Notice Deposit

•

Askari Faida

•

Askari Special Deposit

•

Value Plus Saving

•

Askari Advantage

Current

A current is a running & active , which may be operated upon any number of transactions during a working day. The banker undertakes to repay these on demand & therefore theses are called demand deposits.

Transaction fee

The bank charges no transaction fees if the minimum balance requirement is met. However, if the average balance falls below the min. balance then the fees is charged at the rate of Rs. 10 per transaction.

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Saving s

The saving is usually opened by lower or middle class people so that they can meet their future contingencies, as the objective of such is to promoting the habit of thrift among people, the bank impose certain restrictions on withdrawals from the saving s.

Transaction fees

Transaction fees are charged of Rs. 20 per transaction if the min balance is not met.

2. ADVANCES Advances are major sources of earning of income for commercial banks. Banks attracts surplus balances from the customers at low interest rates & makes advances at higher interest rates to the individuals or business firms.

ACBL offer these facilities in two forms:

•

Funded facilities

•

Non- Funded facilities

Funded facilities

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In funded facilities the bank actually advance money against further repayment. These facilities are known as cash credits.

Non- Funded facilities

Non- Funded facilities are those in which bank substitutes its own credit for its customers. ACBL offers to its customers are large number of non-funded facilities. These facilities includes:

1. Guarantee 2. Latter of credit

Irrevocable letter of credit



Revocable letter of credit



Sight letter of credit

Usance letter of credit

3. PRODUCTS

PERSONAL FINANCE Personal Finance is a parameter driven product for catering to the needs of the general public belonging to different segments. One can avail unlimited opportunities through Askari Bank's Personal Finance. With unmatched finance features in of loan amount, payback period and most affordable monthly installments, Askari Bank's Personal Finance makes sure that one gets the most out of

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his/her loan. Once a good credit history is established, the door to opportunity opens much wider.

MORTGAGE FINANCE Askari "Mortgage Finance" offers the convenience of owning a house of choice, while living in it at its rental value. The installment plan

has

carefully

designed

to

suit

both

the

budget

&

accommodation requirements. It has been designed for enhancing financing facility initially for employees of corporate companies for purchase/

construction/

renovation

of

house.

The

maximum

financing amount is Rs. 10 million with a repayment tenure upto 20 years.

BUSINESS FINANCE In pursuance of the National objectives to review the economy of the country, ACBL is providing loans to small and medium size business enterprises under Askari Bank's Business Finance Scheme. Our goal is to offer a loan, which enables business community to receive the financing required by them based on their cash flows. Ore valued customers can enjoy the convenience of getting financing

on

attractive



with

the

minimum

processing

turnaround time.

ASKCAR (Car Finance) Yet another of our products, Askar offers the most convenient and affordable vehicle- financing scheme, which provides our valuable customers an opportunity to own a brand new vehicle of their IBA University of the Punjab Lahore

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choice. With minimum down payment, lowest insurance rates and widest range of available car makes and models, Askcar offers the best value to our esteemed customers.

ASKCARD ASKCARD means freedom, comfort, convenience and security, so that you can have retail transactions with complete peace of mind. ASKCARD is your new shopping companion which enhances your quality of life by letting you do shopping, dine at restaurants, pay your utility bills, transfer funds, withdraw and deposit cash through ATM anywhere, anytime.

TRAVELLER CHEQUES The range of our products and value added services enhances with introduction of Rupee Travellers Cheques (RTCs) launched in March 2002. In spite of our constraint on issuing higher denomination of RTCs against restrictions imposed by the Central Bank of Pakistan we have been striving to attain our shares with sizeable portfolio. Total volume handled by the department during the year 2004 is Rs. 798 Million.

ASKPOWER Askpower represents a useful tool with which to make secure payments without the need to have any , a debit or credit card. This card comes with a number of unique features and diversified usage capabilities like cash withdrawal from ATMs, payment of utility bills through ATMs and internet Banking, transfer

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of balance to another card and refill option. The prepaid card is enjoying a great success all over the country.

VALUE PLUS The first liability product launched by this unit is showing a remarkable acceptability in the market. The growth of this product is witnessed by its share, which has presently reached at Rs. 1,079 Million even after lowering down the profit rates due to sufficient liquidity in the market.

ASKARI MASTER CARD NO ING FEE

When you successfully apply for an Askari MasterCard, we will not charge you any ing Fee. It’s almost like you are getting it for FREE!

GLOBAL ACCEPTABILITY

Your card provides you with service at thousands of locations in Pakistan, and at over 23 million establishments worldwide. As an added convenience, you will have the benefit of receiving your monthly billing in Pak Rupees, regardless of the currency of purchase.

Think of the freedom this gives you!

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24-HOUR CUSTOMER SERVICE

With Askari MasterCard, you are always a phone call away from the assistance you need. To speak to one of our friendly Customer Service representatives, please call our UAN 111-000-787 for Karachi, Lahore or Rawalpindi/ Islamabad.

LOW SERVICE CHARGES

Your Askari MasterCard provides you the experience of revolving your spending at comparatively low service charges. In addition, the same rate also applies to cash advance obtained on your Askari MasterCard.

ZERO LOSS LIABILITY

Please report loss or theft of your Askari MasterCard immediately at our Customer Services UAN 111-000-787 for Karachi, Lahore and Rawalpindi/Islamabad. Once you have ed the loss of your credit card, your liability against its fraudulent use will be limited and we will send a replacement card within 48 hours of reporting.

SUPPLEMENTARY CARDS FOR YOUR LOVED ONES

Save yourself the inconvenience of applying for a separate Askari MasterCard for your loved ones by requesting supplementary cards when you apply for your own card. You will receive a consolidated monthly statement, which covers all the cards. This offer is available for your loved ones over 18 years of age.

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CASH ADVANCE FACILITY

Cash advance facility is available for Askari MasterCard holders. You can get up to 80% of your sanctioned credit limit as cash advance in Pakistan or anywhere else in the world. The facility is available at all ATMs displaying the Cirrus logo around the world and in Pakistan. You may also avail this facility at designated branches of Askari Commercial Bank, during banking hours.

BALANCE TRANSFER FACILITY

With Askari MasterCard, you can avail an incredible offer of a Balance Transfer at the exclusive rate of just 1.5%* per month. A special privilege exclusively for Askari MasterCard

FREE TRAVEL INSURANCE

Just purchase your travel tickets on Askari MasterCard and you are automatically covered under our Travel Insurance Plan (in case of personal accident resulting in death or permanent disablement) for up to Rs.8,000,000/- on a Gold Card and Rs.4,000,000/- on a Silver Card.

STRESS FREE TRAVELLING

When you purchase your airline tickets for international travel on Askari MasterCard you get: —

UPto * Rs.10,000 insurance cover for flight delays

exceeding 6 hours.

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Upto* Rs.10,000 insurance cover for baggage delays

exceeding 6 hours.

— Upto* Rs.20,000 as baggage loss claim.

(*Certain conditions apply)

COMPLIMENTARY CIP & RAWAL LOUNGE FACILITIES

The next time you travel internationally, be a privileged guest at the CIP lounge of Quaid-e-Azam International Airport, Karachi and RAWAL Lounge of Islamabad International Airport. Your Askari MasterCard entitles you to a host of Complimentary services like;

— Snacks and Beverages

— Free Internet, phone and fax facilities

— Newspapers and magazines

— Flight details information

— Cellular phone charger connections

— So, no matter where you are going, you are always assured of a red carpet welcome.

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DISCOUNT AT AVARI HOTELS

Your Askari MasterCard entitles you to the following exciting discounts* at Avari Hotel in Karachi, Lahore and Dubai: — 60% on Room Rack Rates

— 10% on Restaurants

— 15% on Hall Rentals

— 15% on Family Health Club hip only

— 15% at the Business Center

— 10% on Conferences / Meetings Package Rate (cannot be used in conjunction with Hall Rentals

— 10% at Beauty Saloon

— 10% on Rent a Car

*(Where available. Certain conditions apply)

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AGRICULTURE BANKING The role of agriculture in Pakistan economy is of pivotal nature. Due to diverse geographical and climatic conditions the country has tremendous potential for growth and development in agriculture. However, adequate and timely financial assistance to the farmers will improve production potential of agriculture sector in the country. The modern concept of agricultural credit envisages establishment of an efficient institutional credit system to serve as a package of credit, supplies and knowledge for the overall strength of the farmers who at present suffer from low productivity and financial

insecurity.

A

successful

credit

evaluation

system,

therefore, should have the basic ingredients to provide adequate amount at the right time and in the right form to help farmers in making a productive use of loan funds.

ASKARI KISSAN AGRICULTURE FINANCE PROGRAM

The Askari Kissan Agriculture Finance Program (AKAFP) has been designed to meet ON FARM / OFF FARM credit requirements of farmers

on

the

most

convenient,

flexible,

easy



and

conditions. The program features:

A

broad

array

of

credit

lines

designed

to

meet

farming

requirements. Repay and borrow at your convenience on revolving credit basis at lowest mark-up rates renewal able after three years. Convenient repayment based on cash flow abilities. Availability of leased Tractors / Transport without Land / Collateral.

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NO HIDDEN COST. Availability of interest free package for inputs and tractors etc. No Pre-adjustment penalties. Earn prompt payment Bonuses and reduce financial costs. Insurance cover of leased assets, animals, crops and life assurance of borrowers.

PRODUCTS

Askari Kissan Ever Green Finance Askari Kissan Tractor Finance Askari Kissan Aabpashi Finance Askari Kissan Livestock Development Finance Askari Kissan Farm Mechanization Finance Askari Kissan Farm Transport Finance Ask Card

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FINANCIAL ANALYSIS

OBJECTIVES OF FINANCIAL STAEMENTS ING POLICIES BALANCE SHEET INCOME STATEMENT TREND ANALYSIS COMMON SIZE ANALYSIS RATIO ANALYSIS GRAPHS OF STEADY GROWTH

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OBJECTIVES OF FINANCIAL STSEMENTS “Financial statements are like a firm perfume – to be sniffed but not to swallowed.” “Abraham Brillof”

The firm itself and outside providers of capital – creditors, and investors – all take benefit from the firm’s financial statements. The type of analysis varies according to the specific interest of the party involved. Similarly objectives of the financial statements analysis vary from person to person. Trade creditors are primarily interested in the liquidity of the firm. Their claims are short , and the ability of the firm to pay their claims quickly is best judged by an analysis of the firm’s liquidity. Bondholders are more interested in the cash flow ability of the firm to service a debt over a long period of time. They may evaluate their ability by analyzing the capital statement of the firm. Investors usually focus on the profitability of the firm. They would be concerned with the financial conditions insofar as it’s affects the ability of the firm to pay dividends and avoid bankruptcy. Management employees financial analysis for the purpose of internal control and to better provide what capital suppliers seek in financial conditions and performance from the firm Management needs to undertake the financial analysis in order to plan and control effectively. Financial ratios are the tools, which are used to analyze the financial conditions and performances. Finally, financial statement analysis deals with the outcomes of the past decisions and leads to the future planning.

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ING POLICIES CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise cash and balances treasury banks and balances with other banks.

REVENUE RECOGNITION

Mark-up and return on investments and advances is recognized on accrual basis except for income which is required to be carried forward in compliance with Prudential Regulations issued by the State Bank of Pakistan. ADVANCES Advances are stated net of provisions for non-performing advances. The management keeping

in

view

the requirements of the

Prudential Regulations issued by the State Bank of Pakistan determines provision for non-performing advances. In addition a general provision is maintained on a judgmental basis. Advances are written off when there is no realistic prospect of recovery.

INVESTMENTS In accordance with the requirements of BSD circular No. 11 dated 04 August 2004 securities for which ready quotations are available on Reuters Page (PKRV) or Stock Exchanges are valued at market value and he resulting surplus/deficit is kept in a separate and is shown below the shareholders’ equity in the balance sheet. Investments where ready quotations are not available are stated at cost less permanent diminution in value thereof.

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Had there been no change in ing policy, surplus arising on revaluation of investment would have been higher by 54.04 million as at December 31, 2004. Investments are classified as follow:

Held to maturity Held for trading Available for sale

CAPITAL WORK-IN-PROGRESS, OPERATING FIXED ASSETS AND DEPRECIATION

Capital work-in-progress is stated at cost. Fixed assets are stated at cost less accumulated depreciation except for freehold land, which is stated at cost. Depreciation is computed over the estimated useful lives of the related assets are sates set out in note. The cost of assets is depreciated on the diminishing balance method, except for vehicles, carpets and renovation costs which are depreciated on a straight-line basis. Depreciation is charged for the full month on purchase/acquisition of an asset while no depreciation is charged in the month of disposal of a n asset. Maintenance and normal repairs are charged to income as and when incurred. Major renewals and improvements are capitalized. Gains and losses on disposal of fixed assets are taken to the profit and loss .

Assets held under finance lease are ed for by recording the assets an related liabilities at the amounts determined on the basis of lower of fair value of the assets and the present value of

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minimum lease payments. Finance charge is allocated to ing periods in a manner o as to provide a constant periodic rate of charge on the outstanding liability. Depreciation is charged on leased assets on the basis similar to that of owned assets.

TAXATION Current tax is the expected tax payable on the taxable income for the year using tax rates enacted at the balance sheet date and any adjustment to tax payable of previous years. Deferred tax is provide for using the balance sheet liability method providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities using tax rates enacted at the balance sheet date. A deferred tax asset is recognized only to the extent that it is probable that future taxable profit will be available and credits can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

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STAFF RETIREMENT BENEFITS DEFINED BENEFIT PLAN

The Bank operates an approved funded gratuity scheme for all its permanent employees. Contributions are made in accordance with the actuarial recommendation. The actuarial valuation is carried out periodically using “Projected Unit Credit Actuarial Cost Method”. The actuarial gains/losses of one ing period are recognized in the following ing period.

DEFINED CONTRIBUTION PLAN The Bank operates a recognized provident funds scheme for all its permanent employees for which equal monthly contributions are made both by the Bank and by the employees to the fund at the rate of 8.33% of basic salaries of the employees.

COMPENSATED ABSENCES

The bank grants compensated absence of 15 days per annum to all its permanent employees. Annual provision for liabilities towards vested compensated absences is made on the basis of 1st drawn basic salary.

FOREIGN CURRENCIES Foreign currencies are translated into Rupees at exchange rats on the date of transaction. Assets and liabilities in foreign currencies are

translated

into

Pak

Rupees

at

the

rates

of

exchange

approximating those ruling at the Balance Sheet date except those

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covered by forward exchange contracts, which are converted at contracted rates. Exchange gains and losses are taken to the profit and loss .

PROVISION OF CONTINGENCIES Provision for guarantee claims and other off balance sheet obligations is recognized when intimated and reasonable certainty exists for the Bank to settle the obligations. Debating the customer’s recognizes expected recoveries. Charge to profit and loss is stated net off expected recoveries.

OFF-SETTING Financial assets and financial liabilities are only offset and the net amount is reported in the financial statements when there is a legally enforceable right to set-off the recognized amount and the bank intend either to settle on a net basis, or to realize the assets and to settle the liabilities simultaneously.

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BALANCE SHEET AND INCOME STATMENT

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BALANCE SHEET AS ON DEC.31 2004

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2004

2003

ASSETS: Cash and balances with treasury bank

8,762,866

6,678,026

Balances with other banks

4,847,899

2,650,166

Lending to financial institutions

2,324,839

5,770,842

Investments

17,239,157

22,104,425

Advances

69,938,041

44,777,538

Other assets

1,459,716

1,425,986

Operating fixed assets

2,595,023

1,979,919

107,167,541

85,386,902

1,227,093

973,703

Borrowing from financial institution

13,781,555

15,903,055

Deposits and other s

83,381,795

61,656,607

LIABILITIES: Bills payable

Sub-ordinated loans Liabilities against assets subject to finance lease

1,000,000 14,159

37,350

1,282,981

962,592

526,865

806,753

101,151,448

80,340,060

6,016,093

5,046,842

Head office capital s

1,255,848

1,141,680

Capital reserve

4,317,301

2,759,599

5,573,149

3,901,279

442,944

1,145,563

6,016,093

5,046,842

Other liabilities Deferred Tax Liabilities

Net Assets Represented by:

Un remitted profits

Surplus on revaluation of securities-net of tax

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Internship Report ASKARI COMMERCIAL BANK LIMITED PROFIT AND LOSS FOR THE YEAR ENDED 31ST DECEMBER, 2004

Mark-up/return / interest earned Mark-up/return / interest expensed Net mark-up / interest income Provision against non performing loans and advances Provision for diminution in the value of investments Bad debts written off directly Net mark-up / interest income after provisions NON MARK- UP/ INTEREST INCOME Fee, commission and brokerage income Dividend income Income from dealing foreign currencies Other income Total non mark-up / interest income NON MARK-UP / INTEREST INCOME istrative expense Other provisions / write offs Other charges Total non mark-up / interest expense Extra ordinary unusual items PROFIT BEFORE TAXATION Taxation – Current Prior years Deferred Profit after Taxation Inappropriate profit brought forward Profit available for appropriation APPROPRIATIONS: Transfer to: Statutory reserves Capital reserves (reserves for the issue of bonus shares) Revenues Reserves Proposed cash dividend Un-appropriated profit carried forward Basic earning per share - (Rupees)

IBA University of the Punjab Lahore

2004 2003 (Rupees in thousand) 4,487,206 4,073,715 1,117,206 1,379,609 3,370,000 2,694,106 277,398 308,528 38,066 7 315,471 308,528 3,054,529 2,385,578 649,988 26,318 180,992 776,230 1,633,528 4,688,057

524,775 37,658 112,808 278,512 953,753 3,339,331

1,845,179 138 1,845,317 2,842,740 2,842,740 876,089 43,611 919,700 1,923,040 1,923,040

1,436,304 1,227 1,437,531 1,901,800 1,901,800 873,639 (74,904) 798,735 1,103,065 1,103,065

384,608 251,170 1,036,092 251,170 1,923,040 15.31

220,613 114,168 539,948 228,336 1,103,065 8.78

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TREND ANALYSIS (Horizontal Analysis)

FINANCIAL SUMMARY

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Trend Analysis, also called Horizontal Analysis of the financial statements is one directional- upward or downward analysis and involves the computation of the percentage relationship that each statement item bears to the same item in the base year

Profitability Total Income Interest income Interest exp Fee, comm. Exch.Income Other income Spread Operating expenses Operating Profit Non performing assets Profit b/f tax Taxation Profit after taxation

2000 2001 2002 2003 2004 (Rs in million) 3840 3213 2274

5047 4251 2902

5704 4858 3017

5028 4074 1380

6121 4487 1117

506

677

299

638

831

122 939

119 1349

247 1841

317 2694

802 3370

680

854

1093

1438

1845

886

1291

1595

2210

3158

134

283

351

308

315

752 436

1008 458

1244 557

1902 799

2843 920

316

551

687

1103

1923

The operating expenses of the bank has been increased with sharp margin, the ACBL is newly born bank of only 14 years old and is growing rapidly so, we can say that the reason behind the rapid increase of its operating expenses may be the expansion of business. In order to get handsome profit the expenses are necessary as it is shown by the fact that if the bank’s operating expenses have been increased then, there is also an increase in the profit before income tax and profit after income tax.

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SHAREHOLDER’S FUNDS

2000 Shareholder’s Funds Total share holders fund Share capital Reserves Surplus on ROA

2001

2002

2003

2004

(Rs in million)

2155

2579

4173

5047

6016

986 1229 (60)

1036 1521 22

1087 1940 1146

1142 2760 1145

1256 4317 443

2003

2004

TREND ANALYSIS 2000

2001

Shareholder’s Funds Total share holders fund Share capital Reserves

2002 %AGE

100

119.6

193.6 234.2

279.2

100 100

105.0 123.7

110.2 157.8

127.4 351.2

115.8 224.6

The shareholder’s fund of the bank is continuously increasing, as the bank is running on profit, therefore, the business take interest in this project and wish to participate in it. The bank’s share capital and reserves are also increasing with the expansion of business.

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LIABILITIES

2000

2001 2002 2003 (Rs. in million)

2004

30360

41200

51732

61657

83319

2882

3222

3392

7329

9777

-

-

-

-

1000

11016

11354

7055

2003

2004

Liabilities Customers deposits Refinance borrowings Subordinated loans Other liabilities

3058

3980

TREND ANALYSIS 2000

2002

PERCENTAGE

Liabilities Customers deposits Refinance borrowings Other liabilities

2001

100

135.7

170.4

203.0

274.4

100

111.7

117.7

254.3

340.0

100

130.1

360.2

371.3

230.7

New if we analyze the liability side of the bank we see that the bank’s deposits are going on increasing since its birth which is a very healthy sign for the bank as the bank’s basic business is to deal in money. The increase in deposits show that the people have interest in the bank and deposit their fund in the bank without any hesitation.

However it has not been mentioned here that how

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many of the deposit are current and how many of them have fixed nature but we can say that it is a very important source of the bank to earn profit. As the banks usually earn through interest or mark ups imposed on the deposits they keep with themselves.

ASSETS 2000

2001 2002 2003 (Rs. in million)

2004

17893

23292

30035

44778

69938

8651

11706

26737

22104

17239

10056

13436

10061

15099

15936

641

723

1663

1980

2595

1213

1824

1817

1426

1460

38454

50980

70313

85387

107168

Assets Advances Investments Cash, short funds and statutory deposits with SBP Operating fixed assets Other assets Total assets

Now we will discuss the assets side of the bank. The liquidity position is essentially important for the bank, as it must have all the time sufficient funds to meet the demands for the money that may be made on it. It is the protection against the risk that losses may develop if banks are forced to sell or liquidate creditworthy assets in an adverse market. The current liquidity position of the bank has improved as indicated by the percentages shown in the table below.

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TREND ANALYSIS 2000 Assets

2001 2002 2003 (Rs. in million)

2004

Advances

100

130.2

167.8

250.2

390.9

Investments Cash, short funds and statutory deposits with SBP Operating fixed assets Other assets

100

135.3

309.1

255.5

199.3

100.0

150.1

158.4

Total assets

100

133.6

100

112.7

259.4

308.9

404.8

100

150.3

149.8

117.5

120.4

100

132.5

182.8

222.0

278.7

An upward trend in deposits accompanied by a upward trend in advances too, and mark up revenues means in effective credit policies, efficient credit collection resulting in healthy financial development. The property plant and equipment is the kind of asset, which is required by the service business only to increase its network therefore the ratio of the bank’s plant and equipments as compared with the other important particulars of the assets is high. But here one thing should be mentioned that it is the policy of the bank not to start the business on the rented premises. The bank has mostly started business on its own premises. The other assets of the bank are also showing a good amount that means that bank is in position to earn money from every available source.

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BUSINESS TRANSACTED

2000 Business Transacted Imports Exports Guarantees

2001

2002

2003

2004

(Rs. In billion) 26.2 30.6 4.8

32.0 38.8 6.2

40.2 47.3 14.2

48.7 56.8 14.4

75.2 70.1 25.3

2003

2004

TREND ANALYSIS

2000 Business Transacted Imports Exports Guarantees

2001

2002

(PERCENTAGE)

100 100 100

122.1 126.8 129.2

153.4 154.5 295.8

185.8 185.6 300.0

287.0 229.1 527.1

Now we will discuss the business transacted opt the bank in of import and exports we see that imports and exports through ACBL are continuously on increase which is a very health sign for the banking business as the banks earn major portion of their profit through imports and exports. It shows the efficiency of the credit department. The reasons for this improvement may be •

Careful scrutinizing of all the documents

•

Intelligent corresponding with the customer

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Internship Report True 7 C’s analysis of the customer such as his business

and moral character •

Granting facility to selected customers who rate well on the selected criteria for loan disbursement.

This improvement in imports and exports is extremely large if we compare it with the figures of 2000.

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COMMON SIZE ANALYSIS (VERTICAL ANALYSIS)

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COMMON SIZE ANALYSIS An analysis of percentage financial statements where all balance sheet items are divided by total assets and all income statements items are divided by net sales or revenues. In addition to other financial ratios over time, it is often useful to express balance sheet items and income statement items as percentages. Common –size Analysis, also called Vertical Analysis, or Component Percentage, or 100 percent Statements as each statement is reduced to the total of 100 and each individual item is stated as a percentage of the total of 100.

Profitability Total Income Interest income Interest exp Fee, comm. Exch.Income Other income Spread Operating expenses Operating Profit Non performing assets Profit b/f tax Taxation Profit after taxation

2000 2001 2002 2003 2004 (Vertical Analysis) 100 83.6 59.2

100 84.2 57.5

100 85.2 52.9

100 81.0 27.4

100 73.3 18.2

13.2

13.4

5.24

12.7

13.6

3.18 24.4

3.94 26.7

4.33 32.3

6.30 53.6

13.1 55.0

17.7

16.9

19.2

28.6

30.1

23.1

25.6

27.9

43.9

51.6

3.49

5.61

6.15

6.12

5.15

19.6 11.3

19.9 9.07

21.8 9.76

37.8 15.9

46.4 15.0

8.23

10.9

12.0

21.9

31.4

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INTERPRETATION The most important component of any profit and loss of a banking concern is its mark up expenses it has to pay for servicing the depositors. The foregoing data shows that the markup expenses absorb about 85% of the revenues (a favorable position). This shows that the bank has been successful in •

Selling larger volumes of higher profit items.

•

Increasing economy in procurement

•

Adopting other effective and more profitable deposit raising policies at a lower lost.

The interest expense of the ACBL is 18.2% of the total revenue of the bank in 2004, which is remarkable as the bank is earning about 85% of the revenue as interest income.

We have handsome

margin between the interest income and the interest expense of the bank. The data shows that the bank’s other income %age is not as much high rather it is very low which shows that the bank does not rely on other sources for its profit but it earns major portion of its income through its basic business.

The bank seems to have increased control over its operating expenses, i.e. non-mark up expenses as these now absorb only 30% on average of the total revenues, that is a very healthy sign for the bank. In the net shell, it would not be wrong to say that the bank has improved its financial position and operating efficiency over the last years. The profit after tax is showing about 31.4% of the total revenues of the bank although the margin of profit is not too much high but it is

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shown from the data that the bank is going on increasing its profit after tax over the year.

LIABILITIES AND OWNER’S EQUITY (Vertical Analysis) 2000

2001 2002 2003 (Vertical Analysis)

2004

5.29

4.82

5.69

5.65

5.38

2.42 3.02

1.93 2.84

1.48 2.64

1.28 3.09

1.12 3.86

74.6

76.9

70.5

69.0

74.5

Total share holders fund Share capital Reserves Customers deposits Refinance borrowings Other liabilities

7.08

6.02

4.62

8.21

8.74

7.52

7.43

15.0

12.7

6.31

Total

100

100

100

100

100

INTERPRETATION The liabilities and owner’s equity are side components of the bank showing the relationship as compared with the total of the liabilities and owner’s equity. The bank’s shareholders fund is showing percentage more than the share capital, which shows that the bank own capital is lees than the shareholders capital. However it is also evident from the data that the %age is decreasing of the overall %age of the share capital over the last two or three years. But it is also seen that the share capital %age as compared to the total liabilities of the bank has also been decreased. So we can say that the same conditions are prevailing regarding the share capital and the shareholders fund.

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Among the assets of the bank the highest %age is of the customer deposits. The bank’s management seems to have adopted a very effective marketing policy, as the deposits of the bank constitute about 75% of the total assets of the bank. In the last year, this figure stood at 69% of the total resource. This shows the high level of products and associated services provided by the bank.

ASSETS (Vertical Analysis)

2000

2001 2002 2003 (Vertical Analysis)

Advances

46.5

45.7

42.7

52.4

65.2

Investments Cash, short funds and statutory deposits with SBP Operating fixed assets Other assets

22.4

22.9

38.0

25.8

16.1

26.1

26.3

14.3

17.6

14.8

1.67

1.42

2.36

2.32

2.42

3.15

3.57

2.58

1.67

1.36

100

100

100

100

100

Assets

Total assets

2004

INTERPRETATION

On one hand Advances have also increased from 52% in the previous year to 65% in the current year which may indicate that

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the bank utilize the funds raised in the other activities primarily lending to the financial institutions as it is the most secure source of financing available in the economy.

Cash, short term funds and statutory deposits with SBP are also increasing. The property plant and equipment of the bank is showing a little portion of the bank’s total assets. In the last the bank is over all showing a good financial health and is going on healthy tracks in near future it has no risk of bankruptcy. Although the bank is showing good results but we can’t say that these are the best conditions prevailing in the bank as we are unaware of the market conditions and can’t compare it with other banks.

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RATIO ANALYSIS

PROFITABILITY RATIOS LIQUIDITY RATIOS ASSET QUALITY RATIOS PORTFOLIO MANAGEMENT CAPITAL ADEQUACY RATIO CAPITAL GEARING RATIOS

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PROFITABILITY RATIOS The continued viability of any bank depends on its ability to earn an appropriate

return

on

its

assets

and

capital.

Good

earning

performance enables a bank to fund its operations, remain competitive in the market and increase or decrease in market funds.

RETURN ON CAPITAL FUND Formula

=

Net mark up Received Capital Funds

2004

=

3370000

=

60.47%

=

69.06%

=

54.13%

5573149 2003

=

2694106 3901279

2002

=

1638357 3026550

70 68 66 64 percentage 62 60 58 56 2002

2003

2004 year

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INTERPRETATION This ratio relates the net profits to the amount of capital funds that have been employed in making that profit.

The above given ratios suggest that the profitability of the bank has increased

very in

the year 2003

indicating more profitable

operations of the bank. While discussing the trend analysis, we mentioned that the mark up charges have increased in some proportion but the mark up earned by the bank resulting increase in the profit available on the capital funds employed. This ratio showing a very good financial position of the bank.

RETURN ON INVESTMENT Formula

=

Net income after taxes Total Assets

2004

=

3370000

=

1.79%

=

1.29%

=

0.98%

5573149 2003

=

1103065 85386902

2002

=

686994 70313073

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2 1.5 percentage

1 0.5 0 2002

2003

2004 year

INTERPRETATION This ratio indicates the profit earned by the bank on the resources employed. As far as ACBL is concerned, we observe an increase in the utilization of the resources. It has increased to 1.29 % in the year 2003 from 0.98 % in the year 2002, It has increased to 1.79 % in the year 2004 from 1.29 % in the year 2003, the reason behind the slight increase in the increase of profit may be due to the efforts of the management.

RETURN ON RISK ASSETS Formula

=

Net income after taxes Total risk assets

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=

1923040

=

2.75%

=

2.46%

=

2.36%

69938041 2003

=

1103065 44777538

2002

=

550051 23291367

2.8 2.7 2.6 2.5 percentage 2.4 2.3 2.2 2.1 2002

2003

2004 year

INTERPRETATION This ratio, with some fluctuation in 2003 came up from 2.46% in 2003 to2.75 % in the year 2004. It is indicating active utilization in the form of advances. The bank is finding it difficult to keep the level of its expenses less in proportion to the advances it has disbursed. Lending, no doubt is the core function of a banking concern. But the bank should find out effective ways of credit provisions affecting less on profitability of the operations. Non-mark up revenues should also be increased in the face of lower credit disbursements resulting in more.

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RETURN ON DEPOSITS Formula

=

Net income before taxes Total Deposits

2004

=

2842740

=

3.41%

=

3.08%

=

2.47%

83318795 2003

=

1901800 61657000

2002

=

1244022 41200166

4 3 percentage 2 1 0 2002

2003

2004 year

INTERPRETATION Interpret This ratio indicates to what extent deposits which represent funds mobilization on the part of the bank contribute towards income generation. Although the other ratios regarding the profitability are showing satisfactory position of the bank but still bank need to increase its utilization of resources in order to

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increase its profitability because the banks have to pay heavy taxes on their profit.

OPERATING EXPENSES TO NET REVENUE

Formula

=

Operating Expenses Net Revenue

(Rs. In million) 2004

=

1845

=

30.1%

=

28.6%

=

19.2%

6121 2003

=

1438 5028

2002

=

1093 5704

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35 30 25 20 percentage 15 10 5 0 2002

2003

2004 year

INTERPRETATION This ratio signifies the proportion of the revenues that is used to cover the operating expenses of the bank. The ratios calculated above gives a good picture of the bank’s operations. This ratio is increasing from year 2002 to 2004 and giving a bright picture of the profits for the bank. With respect to the banking expansions this ratio is showing a very good picture as we know the expansions required lot of expansions, although the operating expenses of the bank are increasing as we have seen in the trend ratio but their proportion of increase is not alarming.

In short, the bank in an attempt to maintain at a good level of liquidity, has a low level of profitability but there is a continuous push in the profits and there are chances that the bank will reach at a point of high liquidity and profitability.

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LIQUIDITY RATIOS The liquidity position of a bank is like a reservoir. It may be adequate, although nearly depleted, just before the start of the rainy season. Or it may be inadequate, although three quarters full just before the summer drought. Liquidity can be defined as:

“The bank’s ability not only to meet possible deposit withdrawals but also to provide for the legitimate needs of the economy as well”

ADVANCES TO DEPOSITS RATIO Formula

=

Advances Total Deposits

2004

=

69938041

=

83.9%

83318795 2003

=

44778000

=

58.6%

=

72.62%

61657000 2002

=

30035484 51731506

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100 80 60 percentage

40 20 0 2002

2003

2004

year

INTERPRETATION

It demonstrate the degree to which bank has already used up its available resources to accommodate the credit needs of its customers.

This ratio, a comparison of funds generation and its funds mobilization, indicates the total loans sanctioned by the bank in relation to total amount of money deposited with the bank stands at 83.9% compared with the last year figure of 58.6%. This shows that the bank has greater potential to advance additional loans. Total loan able funds roughly measured by the deposits are sufficient to enable the bank to make additional loans without recourse to more or less continuous borrowing. At present, the bank has got a relatively small amount of advances as compared with its deposits raised. One reason for fewer advances is the

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cautious and selective approach on the part of the management while deciding upon credit proposals.

DUE FROM BANKS TO TOTAL ASSETS Formula

=

Due from banks Total Assets

2004

=

2324839

=

2.17%

=

6.75%

=

4.86%

107167541 2003

=

5770842 85386902

2002

=

3414470 70313073

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8 7 6 5 percentag 4 e 3 2 1 0 2002

2003

2004

year

INTERPRETATION

It is an indication of ACBL’s funds management policies. The funds allocation to the financial institutions has increased to a great extent despite the fact that still it holds a small proportion relevant to the total resources raised by the bank. It is a positive indicator in the sense that the financing to the banks are the most secure ways of lending. Considering the economic conditions of the country, it seems to be the best alternative available to the bank. In the current year this ratio has been reduced to the little extent. Although it is declining but the situation might not be alarming.

DUE FROM BANKS TO DUE TO BANKS Formula

=

Due from banks Due to Banks

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=

2324839

=

16.87%

=

36.29%

=

29.79%

13781555 2003

=

5770842 15903055

2002

=

3414470 11460394

40 30 percentage 20 10 0 2002

2003

2004 year

INTERPRETATION

It shows the relationship between what the bank owes from other banks and what is due to it.

An unfavorable condition has been

observed in this ratio in the current year showing the fact that the bank has to seek fewer funds from the financial institutions owing to the strong liquid financial position. This ratio is going on increasing in last year but decreasing in current year, which involves a slight risk. In the phase of economic instability, the bank’s management should be efficient to access the risk involved in lending and they should control this ratio.

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DUE TO BANKS TO TOTAL DEPOSITS Formula

=

Due to banks Total deposits

2004

=

13781555

=

16.54%

83318795 2003

=

15903055

=

25.79%

=

22.15%

61656607 2002

=

11460394 51732000

30 25 20 percentage 15 10 5 0 2002

2003

2004 year

INTERPRETATION This ratio is an indicative of the proportion of the lending from the financial institutions in relation to the total funds raised by the bank in the form of deposits.

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This ratio for ACBL is 16.54% in the year 2004. There has been a significant decline in this ratio as previously the bank depended slightly more on the borrowings from financial institutions. It shows that the bank is concentrating on raising funds from depositors and trying to relies less on the borrowed funds.

•

It is a favorable indication in the sense that the bank has large potential to ask for borrowed funds in the phase of tight liquidity position.

•

Further more, it shows the efficiency of the marketing department to have created so much of deposits that the bank does not need to look at the financial institutions for help in improving its liquid position.

•

There is another favorable aspect of this declining tendency. The rate of interest offered to the depositors is very low in comparison with the interest to be paid to the financial institutions for their funds. A decline in this ratio means less mark up burden on the bank resulting in less financial risk for the bank.

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COVERAGE RATIO Coverage ratio measures the capacity of the bank to cover its interest charges, which are the main obligations on the bank.

INTEREST COVERAGE RATIO Formula

=

Earning before int. & Tax Interest Exp.

2004

=

4688057

=

2.54 times

=

2.32 times

=

2.13 times

1845317 2003

=

3339331 1437531

2002

=

2336537 1092515

INTERPRETATION It shows whether the bank is earning enough profit before mark up charges to be paid to the financiers and the taxation obligations due to the government in order to remain solvent.

The above figure shows the acceptable capacity on the part of the bank to cover its interest payments. It has increased as compared

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with the last year. This increase in the ratio is a sign of improvement for the bank. But this is a short-term perspective of the bank’s financial position. In view of the long run financial perspective, this ratio is good for the bank.

CAPITAL ADEQUACY RATIOS CAPITAL FUNDS TO TOTAL ASSETS RATIO

Formula

=

Capital Funds Total Assets

2004

=

5573149

=

5.20%

=

4.57%

=

4.30%

107167541 2003

=

3901279 85386902

2002

=

3026550 70313073

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6 5 4 percentage 3 2 1 0 2002

2003

2004 year

INTERPRETATION This ratio indicates the extent of the funds employed by the bank in the total resources as shown in the balance sheet. This ratio has been decreased in the current year with a very low margin.

Capital Fund to Risk Assets Ratio Formula

=

Capital Fund Risk Assets

2004

=

5573149

=

7.97%

=

8.71%

=

10.07%

69938041 2003

=

3901279 44777538

2002

=

3026550 30035484

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12 10 8 percentage

6 4 2 0 2002

2003

2004 year

INTERPRETATION This ratio take into the difference between cash and marketable securities & other kind of assets. Cash & marketable securities, which are risk less items, are excluded to find out the true picture of the capital adequacy. In case of ACBL the ratio is decreasing.

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GRAPHS OF STEADY GROWTH THE GRAPHS OF GROWTH ARE SHOWN FOR THE LAST FIVE YEARS, FROM 2000 TO 2004

PROFIT BEFORE TAX (Rs. In million)

PROFIT BEFOR TAX

3000 2500 2000 1500 1000 500 0 2000

2001

2002

2003

2004

The above graph shows that the profit before tax of the Askari Commercial Bank shows a trend of increase and continuous increase in the profit before tax of the bank, it goes on increasing every year and its ratio has not been fall since the last five years. In 2004 the profit before tax increased with greater margin as compared to the previous four years.

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DEPOSITS (Rs. In million)

DEPOSITS

90000 80000 70000 60000 50000 40000 30000 20000 10000 0 2000

2001

2002

2003

2004

Askari Commercial Bank is known to be the leading bank in the private sector. Customers’ shows a lot of loyalty to the bank, therefore, the deposits of the bank go on increasing every year and its ratio has not been fall since the last five years.

LOANS AND ADVANCES (Rs. In million) 80000 70000 60000 ADVANCES

50000 40000 30000 20000 10000 0 2000

2001

2002

2003

2004

The Askari Commercial Bank has adequate amount of money as result of deposits it keeps with itself of their valuable customers. It IBA University of the Punjab Lahore

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keep a certain percentage of money in order to meet the day to day transactions of the bank and lend reaming amount as advances and loans which is very important source of business for the bank. The graph shows that the capacity of the bank to lend the advances and loans is going on increasing since the last five years and is highest in the year 2004.

INVESTMENTS (Rs. In million)

INVESTMENTS

30000 25000 20000 15000 10000 5000 0 2000

2001

2002

2003

2004

The Askari Commercial Bank is showing a mix trend of increase and decrease in the investments of the bank, it goes on increasing from year 2000 to 2002 and its ratio is highest in 2002. From 2002 it starts declining.

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TOTAL ASSETS (Rs. In million) 120000 TOTAL ASSETS

100000 80000 60000 40000 20000 0 2000

2001

2002

2003

2004

Total Assets of the bank are increasing every year with the expansion in the business .In 2004 the assets of the bank has been increased more than twined a time as compared to the year 2000.which clearly shows the rapid expansion of the bank.

EARNING PER SHARE

(In Rupees) EARNINGS PER SHARE

18 16 14 12 10 8 6 4 2 0 2000

2001

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2003

2004

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The earning per share of the bank is also showing good position and is enough to satisfy the shareholders of the bank, the number of the shareholders fund has also been increased from the last five years. The graph shows that the bank’s earning per share ratio is highest in the year 2004 and is lowest in the year 2000.

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SWOT ANALYSIS

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SWOT ANALYSIS An

analysis

indicating

towards

the

organizations

strengths,

weaknesses, opportunities and threat is termed as SWOT Analysis. Such an analysis is very important for the management in retaining the strength, overcoming the weaknesses, capitalizing over the emerging market opportunities, and carving ways to successfully tackle with the threats and ultimately converting them in the strengths for the organization.

During six weeks of my stay at Askari Commercial Bank, Shahalam Market Lahore, I have come across the following SWOT analysis of the bank.

STRENGTHS LEADING PRIVATE SECTOR BANK: Askari commercial bank is the leading private sector bank in the banking network in Pakistan with many of them online branches in major cities of the country

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AUTOMATIC OPERATIONS: The operations performed by the bank are highly automated that result in assurance for the customers that their transactions are completed reliably, efficiently and securely.

FULL DAY BANKING One can avail the benefit of the services provided at the bank till 5:00 P.m. which is highly useful for those customers who find it difficult to leave their officers in the morning..

ATM NETWORK The bank has the largest ATM Network cross the country. The customers of ACBL withdraw access their funds any time at all the ATM Sites with ASKCASH Logo.

CUSTOMIZED SOLUTIONS The management of the bank believes in customer focused banking rather than the product oriented banking. The products and services designed by the bank are specifically tailored to the individual needs of its customers.

CUSTOMER ORIENTED BANKING The priority banking centres of the bank offer an unmatched where the customer receives highly privileged services in a highly elegant environment. It gives the chance of experiencing new standards in banking. Designed specially for those who appreciate only the finest things in life, Priority Banking offers the very highest levels of personalized banking to match customer’s unique status.

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ELECTRONIC BANKING The revolution in the banking in the form of electronic banking operations have opened avenues of excellent, efficient and quick services saving the time and costs of the customers and fortunately ACBL is among those few banks who are already reaping the benefits of electronic transactions.

ELECTRONIC FUNDS TRANSFER ACBL

management

is

quite

prepared

to

adopt

the

latest

advancements in technology resulting in revolution in the banking operations such as check clearing process, computer based teller equipment,

automatic

teller

machines,

and

electronic

funds

transfers among the others.

PHONE BANKING Phone banking service is very attractive for those classes of customers who don’t have time to personally come to the bank i.e. banking on the phone line thus saving the precious time of the customers.

ETHICAL CONCERNS AND PUBLIC IMAGE The organizations showing concern for the people, ethics, and environment enjoy good public reputation and are able to reap the benefits in the long run. ACBL management is quite sensitive to this issue.

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WEAKNESSES In my opinions these are the points that might be detrimental to the efficiency and profitability of the bank.

NOT HIGHLY AUTOMATED The bank has still some of the traditional ways of operations in this advanced technological environment.

MANUAL BOOK-KEEPING Although the bank has computerized ing system but, still the bankers use to make their entries in the ing .

LOW JOB SATISFACTION Understanding and the effective management of the human resources is the most difficult challenge faced not only by the bank but by all the organizations. Even though the people have been sacrificed in the new organizational developments, it is becoming clear that the true lasting competitive advantage comes through human resources and how they are managed. ACBL seems to not focusing on this highly critical issue as the job satisfaction level of the employees working at ACBL, was quite low.

LACK OF SPECIALISATION This famous and useful concept given by Adam Smith in 1776 seems to be missing in the bank. The employees are constantly rotated from one job to another job of totally different characteristic

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in the view of giving them the know-how of the working in all the departments. But I think this is not a very good tactics used by the management. Otherwise the situation might be like this ‘Jack of all and master of none.’

CENTRALIZATION There is a high degree of centralisation in the bank. Almost all the decision-making is in the hands of the upper management. But centralisation is effective up to a certain level otherwise it becomes inefficient and at times costly too. I personally observed that delay occurred in the operations of the employees only due to the fact that they had not got any instructions from the head office.

LACK OF TRAINING FACILITIES Presently there is no specific training program arranged for the new recruiters. They have to learn based on their observations and also their mistakes. It takes a bit time for the fresh one to learn the banking the result is huge amount of blunders, mistakes etc. resulting in monetary and non-monetary losses for the bank. There is pressure not only on the new learner but also on the person placed upon with this responsibility.

OPPORTUNITIES Apart from the ones discussed in External Factors Evaluation Matrix, the bank is facing the following threats and opportunities currently:

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These are positive external environmental factors effecting the organization. •

It deals in bulk business.

•

A large amount of foreign investment is attracted.

•

Strong potential for growth

•

Steady increase in Customer Deposits

•

Overseas Operations

•

Branches In Remote Areas

•

Islamic Banking

•

Sharp increase in imports and exports

THREATS High Employees Turnover

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As discussed above, the job satisfaction level of the employee is very low resulting in high turnover, which is bad for any organization as there are huge monetary and non-monetary costs involved in the fresh recruitments.

High charges The schedules of charges indicate that the fees charged by the bank on the various services it provides are extremely high. It may result in decrease in the number of its exiting customers. Further more, this could be very alarming situation for the bank in case some of the competitors grasped the opportunity and lowered its rates. The result would be either the lost of market share or decrease in the charges resulting in lowering the bank’s income.

Less attractive rate of return Commercial banks face considerable competition in attracting deposits from individuals or small investors. In contrast, the Govt. of Pakistan national saving scheme offers attractive rates of return (approx. 16 to 18 percent annually) on 10-15 year fixed s, which banks find difficult to match.

Stiff Competition SCB is currently facing strict competition from the foreign banks especially the American who banks enjoy a good market position. Collectively U.S. banks hold approximately 9 percent of all commercial banks' assets. operating in Pakistan:

At present, three American banks are

American Express Bank; Bank of America

and Citibank.

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Less Experienced Staff Owing to huge turnover of the employees, the no. of experienced and well trained staff is very low. Majority of the staff working in the bank branches is quite young and inexperienced. If the bank failed to bring down its high employees turnover, then it would be lacking the most important resources of any organization i.e. the experienced staff.

STRATEGIC MANAGEMENT

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Internship Report art

and

science

of

formulating,

implementing

and

evaluating cross-functional decisions that enable an organization to achieve its objectives.”

STATEGIC MANAGEMENT PROCESS:

Perform External Audit

Develop Vision & Mission

Establish Long term objectives

Generate Evaluate, and select strategies

Implement strategies Management Issues

Implement strategies Marketing, Finance, MIS Issues

Measure and evaluate performanc e

Perform internal audit

Stage1_________________Stage2___________________Stage3

The strategic management process consist of three stages 1. Strategy Formulation 2. Strategy Implementation 3. Strategy Evaluation

STARTEGY FORMULATION STAGE:

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The strategy formulation stage includes the development of vision

and

mission,

identification

of

organization

external

opportunities, identification of the organizational internal strengths and weaknesses, establishment of long term objectives, generation of alternative strategies and selection of the pertinent strategies to pursue in the long run. On the other hand, this stage also describes about the selection of business, allocation of available resources, expansion of operations, entering into the new markets and the conditions of mergers and t ventures.

STARTEGY IMPLEMENTATION STAGE: This stage requires a firm to establish annual objectives, devise policies, motivate employees and allocate resources so that formulated strategies can be executed. As for the purpose of achieving long term objectives the annual objectives are described and the policies are established for them. By implementation of strategies, it is evident that employees and the managers put the formulated strategies to action. That’s why this stage is also called an action stage of strategic management.

STRATEGY EVALUATION STAGE: It is the final stage in the strategic management process. The strategies, which are implemented at the second stage, are now evaluated as hey are working in accordance with the objectives or not. Besides it, all strategies are subject to future modification because external and internal factors are constantly changing.

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EXTERNAL AUDIT: The purpose of an external audit is to develop a finite list of opportunities that could benefit the organization and threats that should be avoided. There are lots of factors, which are involved in determining the external environment, but certain key variables are taken that offer actionable responses. The organization should have to respond either offensively or defensively to the factors by formulating strategies that take advantage of external opportunities or that minimize the impact of potential threats.

KEY EXTERNAL FACTORS: External forces/ factors can be divided into five broad categories 1. Economic forces 2. Social, Cultural, demographic and environmental forces 3. Political, Governmental and Legal forces 4. Technological forces 5. Competitive forces

OPPORTUNITIES FOR ASKARI COMMERCIAL BANK

These are positive external environmental factors effecting the organization. •

It deals in bulk business.

•

A large amount of foreign investment is attracted.

•

Strong potential for growth

•

Steady increase in Customer Deposits

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• •

Branches In Remote Areas

•

Islamic Banking

•

Sharp increase in imports and exports

THREATS FOR ASKARI COMMERCIAL BANK •

High Employees Turnover

•

High charges

•

Less attractive rate of return

•

Stiff Competition

•

Less Experienced Staff

EXTERNAL FACTOR EVALUATION MATRIX: This Matrix summarizes and evaluates economic, social, culture, and demographic, environmental, political, governmental, legal, technological

and

competitive

information.

It

shows

the

opportunities and threats that are faced by an organization.

Weights: 0.0 = Not Important 1.0 = Very Important Rating: 1 = The Response Is Poor 2 = The Response Is Average 3 = The Response Is Above Average 4 = The Response Is Superior

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EXTERNAL FACTOR EVALUATION MATRIX

Weights

Rating

Weighted Score

0.10

3

0.30

0.10

4

0.40

0.05 0.05

2 4

0.10 0.20

6. Overseas Operations 7 Branches In Remote Areas

0.15 0.03 0.02

3 3 2

0.45 0.09 0.04

8 Islamic Banking

0.01

1

0.01

9. Sharp increase in imports and exports

0.04

3

0.12

0.05 0.05

2 2

0.10 0.10

0.15 0.10 0.10 1.00

3 3 2

0.45 0.30 0.20 2.86

Key External Factors Opportunities 1 It deals in bulk business. 2. A large amount of foreign

investment is attracted 3. Strong potential for growth 4. Imports are increasing 5. Steady increase in Customer Deposits

Threats 1. High Employees Turnover 2. High charges 3. Less attractive rate of return 4. Stiff Competition 5. Less Experienced Staff

TOTAL

Explanation:

The above Matrix depicts the opportunities and threats that are faced by the bank. The weighted score of EFE Matrix of the bank is 2.86 that is above average (2.5). So it shows that the bank is responding to the existing opportunities and threats in banking industry.

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INTERNAL AUDIT All organizations have strengths and weaknesses in their functional areas of business. For analyzing the internal situation of the organization with regard to its management, marketing, finance, operations

and

research

and

development,

internal

audit

is

performed. The internal audit is executed parallel to the external audit. This process provides more opportunity for the participants and the managers to understand the key areas within an organization.

Key internal forces: 1. Marketing 2. Finance 3. ing 4. Management 5. Management Information System 6. Production/Operations

STRENGTHS OF ASKARI COMMERCIAL BANK LEADING PRIVATE SECTOR BANK: AUTOMATIC OPERATIONS: FULL DAY BANKING ATM NETWORK CUSTOMIZED SOLUTIONS CUSTOMER ORIENTED BANKING ELECTRONIC BANKING ELECTRONIC FUNDS TRANSFER PHONE BANKING ETHICAL CONCERNS AND PUBLIC IMAGE

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WEAKNESSES OF ASKARI COMMERCIAL BANK

NOT HIGHLY AUTOMATED MANUAL BOOK-KEEPING LOW JOB SATISFACTION LACK OF SPECIALISATION CENTRALIZATION

LACK OF TRAINING FACILITIES

INTERNAL FACTOR EVALUATION MATRIX: This strategy-formulation tool summarizes and evaluates the major strengths and weaknesses in the functional area of a business and it also provides a basis for identifying and evaluating relationships among those areas. Intuitive judgments are required in developing an IFE Matrix

Weights: 0.0

= Not Important

1.0

= All Important

Rating: 1 = Major Weakness 2 = Minor Weakness

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4 = Major Strength

INTERNAL FACTOR EVALUATION MATRIX

Key Internal Factors

Weights

Rating

Weighted Score

Internal Strength 1. LEADING PRIVATE SECTOR BANK 2. AUTOMATIC OPERATIONS 3 FULL DAY BANKING 4 ATM NETWORK 5. CUSTOMIZED SOLUTIONS 6.CUSTOMER ORIENTED BANKING 7. ELECTRONIC BANKING 8 ELECTRONIC FUNDS TRANSFER 9 PHONE BANKING 10 ETHICAL CONCERNS AND PUBLIC IMAGE Internal Weaknesses

0.10 0.05 0.06 0.04 0.05 0.07 0.04 0.05 0.03 0.05

3 4 4 3 4 4 3 4 4 4

0.30 0.20 0.24 0.12 0.20 0.28 0.12 0.20 0.12 0.20

1 NOT HIGHLY AUTOMATED 2 MANUAL BOOK-KEEPING 3 LOW JOB SATISFACTION

0.05 0.10 0.05

2 1 2

0.10 0.10 0.10

4. LACK OF SPECIALISATION 5. CENTRALIZATION

0.05 0.06

2 2

0.10 0.12

6. LACK OF TRAINING FACILITIES

0.15

2

0.30

Total

1.00

2.80

Explanation:

The above Matrix comprises the strengths and weaknesses of Bank Askari Commercial Bank and the weighted score of the bank is 2.80 that is above average (2.5) so it depicts that the bank has strong internal position

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THE COMPETITIVE PROFILE MATRIX: The Competitive Profile Matrix (M) identifies a firm’s major competitors and its particular strengths and weaknesses in relation to a sample firm’s strategic position. In M critical success factors are taken that include both internal and external issues. In a M, the rating and total weighted score for rival firms can be compared with the sample firm.

Weights:

0.0

= Not Important

1.0

= Very Important

Rating:

1 = Major Weakness 2 = Minor Weakness 3 = Minor Strength 4 = Major Strength

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COMPETITIVE PROFILE MATRIX

Critical

Askari

Bank

Bank

Alfalah

Weight Rating Score

Rating Score

0.16

3

0.48

2

0.32

Branch network Market share

0.12

2

0.24

3

0.36

0.09

4

0.36

4

0.36

Service quality

0.10

4

0.40

3

0.30

Advertising

0.05

2

0.10

3

0.15

Online facility

0.09

3

0.27

3

0.27

Full day

0.12

3

0.36

2

0.24

0.15

3

0.45

3

0.45

0.12

4

0.48

3

0.36

Success Factors Customer satisfaction

banking Employee satisfaction Financial position TOTAL

3.14

2.81

EXPLANATION:

In the above Matrix, the position of Askari bank is stronger as compared to its rival Bank Alfalah. 3.14 is the total of average weighted score that reveal the relative strength of the firm against

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its competitor. The total weighted score of Bank Alfalah is 2.81 that show better position. But as compared to Askari Bank it is slightly less.

STRATEGY-FORMULATION FRAMEWORK: Strategy-Formulation Framework can be integrated into three-stage decision making framework

THE INPUT STAGE: External Factor Evaluation (EFE) Matrix Competitive Profile Matrix (M)

Internal Factor Evaluation (IFE) Matrix

THE MATCHING STAGE:

Threats-Opportunities-Weaknesses-Strengths (TOWS) Matrix Strategic Position and Action Evaluation (SPACE) Matrix Boston Consulting Group (BCG) Matrix Internal-External (IF) Matrix Grand Strategy Matrix

THE DECISION STAGE:

Quantitative Strategic Planning Matrix (QSPM)

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THE STRATEGIC POSITION AND ACTION EVALUATION (SPACE) MATRIX: The SPACE Matrix is an important matching tool. It’s four-quadrant framework

indicates

that

whether

aggressive,

conservative,

defensive, or competitive strategies are most appropriated for a specific organization. Internal dimensions [FS] and [CA] External dimensions [ES] and [IS].

Assign a numerical value ranging from +1 (worst) to +6 (best) to each of the variables that make up the FS and IS dimensions. Assign a numerical value ranging from –1 (best) to –6 (worst) to each of the variables that make up the ES and CA dimensions.

Aggressive Strategic: Market penetration, market development, product development, backward integration, forward integration, horizontal integration, conglomerate diversification, concentric diversification, horizontal diversification, or a combination strategy.

Conservative strategies: Are best options for the firm that lies in this quadrant. Most often include

market

penetration,

market

development,

product

development, and concentric diversification.

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Defensive strategies: Include retrenchment, divestiture, liquidation, and concentric diversification.

Competitive strategies: Include backward, forward, and horizontal integration; market penetration; market development; product development; and t ventures.

SPACE MATRIX OF ASKARI BANK FINANCIAL STRENGTH Investment decreased Strong Liquidity Position Strong Cash flow position The Revenues increased Net Income After Tax increased Net Profit Margin increased Return On Equity

+1 +6 +4 +4 +4 +4 +2 +25

INDUSTRIAL STRENGTH Strong potential for growth Computerized Banking system Potential for further increase in profits Growth prospects for Islamic Banking Electronic Banking

+6 +2 +6 +2 +18

ENVIROMENTAL STABILITY High Inflation rate Political Instability Competition from Foreign and Local banks Similar Products offered at higher rate by other banks Changes in laws by government Strict SBP regulations

-1 -3 -2 -4 -3 -4 -17

COMPETITIVE ADVANTAGE

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High quality services -1 Customer oriented banking Vast product variety First ever free visa card Strong top management

-2 -2 -1 -1 -7

CONCLUSION ES Average is –17/6 = -2.8 IS Average is +18/5 = +3.6 CA Average is –7/5 = -1.4 FS Average is +25/7 = +3.5 Directional Vector Coordinates: x-axis: (-1.4)+(+3.6) = +2.2 y-axis: (-2.8)+(+3.5) = +0.7

Conservative

+6 +5 +4

Aggressive

+3 +2 +1

(2.5, 0.75)

CA

IS -6 -5 -4 -3 -2 -1 -1 -1

Defensive

+1 +2 +3 +4 +5 +6

-2 -3 -4 -5 -6

Competitive ES

EXPLANATION: Directional vector of the Bank is located in aggressive quadrant (upper-right quadrant). It shows that the bank has excellent

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position to use its strengths, take advantage of external opportunities, overcome internal weaknesses, and avoid external threats.

Therefore,

market

penetration,

market

development,

product development, backward integration, forward integration, horizontal

integration,

conglomerate

diversification,

concentric

diversification, horizontal diversification, or a combination strategy can be feasible according to specific circumstances.

THE BOSTON CONSULTING GROUP (BCG) MATRIX: The BCG Matrix graphically portrays differences among divisions in of relative market share position and industry growth rare. Relative market share position is defined, as the ratio of a division’s own market share in a particular industry to the market share held by the largest rival firm in that industry.

QUESTION MARKS: Division in Quadrant I have a low relative market share position, yet they compete in a high-growth industry. Generally these firms’ cash needs are high and their cash generation is low. These businesses are called Question Marks because the organization must decide whether to strengthen them by pursuing an intensive strategy (market penetration, market development, or product development) or to sell them.

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STARS: Firm that lies in this Quadrant (often called Stars) represent the organization’s

best

long-run

opportunities

for

growth

and

profitability. Divisions with a high relative market share and a high industry growth rate should receive substantial investment or maintain or strengthen their dominant positions. Forward, backward, and horizontal integration; market penetration; market development; product development; and t ventures are appropriate strategies for these divisions to consider.

CASH COWS: The organization that lies in this Quadrant has a high relative market share position but compete in a low- growth industry. Called Cash because they generate cash in excess of their needs, they are often milked. Product development or concentric diversification may be attractive strategies for strong Cash Cows. However, as a Cash Cow division becomes

weak,

retrenchment

or

divestiture

can

become

appropriate.

DOGS: The organization that lies in this Quadrant has a low relative market share position and competes in a slow- or no- market-growth industry; they are Dogs in the firm’s portfolio. Because of their weak internal and external position, these businesses are often IBA University of the Punjab Lahore

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liquidated, divested, or trimmed down through retrenchment. When a division first becomes a Dog, retrenchment can be the best strategy to pursue because many Dogs have bounced back, after strenuous asset and cost reduction, to become viable, profitable divisions.

BCG MATRIX Division

Revenues

Percent

Profits

(000)

Revenues

(000)

Percentage

Percentage Market Share

Car

Percentage Growth Rate

2,167,252

33%

371,276

34%

45%

+16

2,758,321

42%

393,116

36%

58%

+15

656,743

10%

109,199

10%

8%

-2

985,115

15%

218,398

20%

15%

+16

Finance Credit Card Islamic Banking Home Loan

Interpretation:

Car finance division and Islamic Banking have a low market share position, yet they compete in a high growth industry. These businesses are called as Question Marks, because the organization has to decide whether to strengthen them by pursuing an intensive

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strategy (Market development, Market Penetration, Or Product Development) or to sell them.

Credit

Cards

represents

the

organizations

best

long-run

opportunities for growth and profitability. Credit card division has a high market share position and a high industry growth rate, therefore the bank should invest more in this division to maintain or strengthen

their

dominant

position.

Forward,

Backward,

and

Horizontal Integration, Market Penetration, Market Development, and Product Development are the appropriate strategies for this Credit Card Division. Home Loan division has a low Market Share Position and competes in a slow or no market growth industry; they are dogs in the firm’s portfolio. Because of their weak internal and external position, the businesses are often divested or trimmed through retrenchment.

GRAND MATRIX:

The Grand Matrix has become a popular tool for formulating alternative strategies. All organizations can be positioned in one of the grand strategy matrix’s four strategy quadrants. A firms division can be likewise positioned. Grand Strategy matrix is based on two evaluative dimensions

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Rapid Market Growth

Quadrant II 1. 2. 3. 4. 5. 6.

Quadrant I

Market Development Market Penetration Product Development Horizontal Integration Divestiture Liquidation

Weak Competitive Position

Quadrant III 1. 2. 3. 4. 5.

1. 2. 3. 4. 5. 6. 7.

Market Development Market Penetration Product Development Forward Integration Backward Integration Horizontal Integration Concentric Diversification

Strong Competitive Position

Quadrant IV

Retrenchment Concentric Diversification Horizontal Diversification Divestiture Liquidation

1. Concentric Diversification 2. Horizontal Diversification 3. Conglomerate Diversification 4. t Venture

Slow Market Growth

Interpretations: Bank falls in the first quadrant of the Grand Strategy Matrix. The Bank is in excellent strategic position. For the bank, continuous concentration on the current market (Market Development, Market Penetration) and products (Product Development) is an appropriate strategy. If the bank is highly committed to a single product, then concentric diversification may reduce the risk associated with a narrow product line the bank can afford to take advantage of the opportunities in several areas. It can take risk aggressively when necessary.

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Quantitative Strategic Planning Matrix Strategic Alternatives

Key Factors Opportunities

MP Weight AS TAS

Advancement in Islamic Banking 0.05 Expand Branch Network 0.05 Enhance Product Portfolio 0.05 Get Into E-Business 0.05 Provide Financial Consultancy 0.10 Threats Government Policies 0.10 Strict SBP Regulations 0.20 2nd Hand Car Finance By City Bank 0.15 Cash Card Introduced By MCB 0.10 Branches of Nationalized Banks in all Cities of0.05 Pakistan 1.0 Strengths Bank Name 0.05 Credit Card 0.10 Strong Top Management 0.05 Aggressive Banking 0.15 Bad Debt Ratio 0.05 Committed Workforce 0.05 Financial Ratios 0.05 Customer Satisfaction 0.05 Islamic Banking 0.05 Weaknesses No International Branch Network 0.05 Weak IT Structure 0.05 Trade Through NOSTRO s 0.05 Less Job Rotation 0.05 ATM not available In Every Branch 0.10 No Marketing Department 0.10 1.0 Sum Total Attraction Score

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PD AS TAS

2 2 1 2

0.10 0.10 0.05 0.20

1 1 3 1

0.05 0.05 0.15 0.10

1 1 4 2 2

0.10 0.20 0.60 0.20 0.10

3 3 4 1

0.60 0.45 0.40 0.05

2 4 1 2 2 1 2 4 3

0.10 0.40 0.05 0.30 0.10 0.05 0.10 0.20 0.15

4 3 4 4 1 3 3 3 4

0.20 0.30 0.20 0.60 0.05 0.15 0.15 0.15 0.20

1 2 2 1 4 4

0.05 0.10 0.10 0.05 0.40 0.40 4.10

3 1 1 3 3

0.15 0.05 0.05 0.30 0.30 4.70

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AS = Attractiveness Score Attractiveness Score: 1 = not attractive 2 = somewhat attractive; 3 = reasonably attractive 4= Highly Attractive MP= Market Penetration

Internship Report

TAS = Total Attractiveness Score

PD=Product Development

Interpretation: The Bank must consider two alternative strategies i.e. Market Penetration, and Product Development. The total attractiveness score of Market Penetration is 4.10 and for Product Development is 4.70. Therefore the strategy which the Bank must adopt is Product Development as the total Attractiveness score of this strategy is the highest i.e. it appears to be the most attractive and suitable for the bank.

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TRAINING PROGRAMME



INTERNSHIP EXPERIENCES



DIFFICULTIES FACED…

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INTERNSHIP EXPERIENCES One of the most important aims of the student life is to express himself / herself correctly and adequately. This was the believe in my mind when I first decided to go to Askari commercial Bank to complete my internship program.

Determined, Confident and Persistent in the pursuit of knowledge and learning, I was on my way to Askari Commercial Bank, Shahalam market Branch in the early morning of July 1, 2005. Just a day before, I had taken my class of 3rd semester. Normally I wanted rest and recreation after the tiring class in June but this time I was anxiously waiting for the start of my internship.

FIRST WEEK I started my internship from "General Banking" in the first week. The General banking is basically divided into the following sub departments, which are as follows:

•

opening

•

Bills and remittances

•

Clearing

•

Term deposit

•

Cash department

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The first day of exposure to the practical field was at the (sub department) opening. The relationship of customer starts with this department. every one is not allowed to come and open an in the bank, for this purpose there should be an introducer who himself is the holder in the same branch. He has to introduce the new client by g the opening form and then his signature are verified.

Applicant's fills the opening form and provides it to the bank with photocopy of I.D. card and signatures card.

Then the banker inquires the about the option of opening a t or individual. If the customer wants to open t then either it is "either or survivor" (i.e. Only one persons signature is sufficient) or tly (i.e. Both should sign the cheque).

opening: Although the procedure of opening an in a bank is a quite complicated job but I am going to tell you only the basic necessities for opening the , which are as follows:

•

Introduction

•

National I.D. card

•

Personal data

•

Details of dealing with other banks.

These are some of the basic requirements for opening the .

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Issuance of chequebook Once the is opened, ACBL issues the chequebooks to the customer so that they could withdraw their money whenever they like. The producer of issuance of the chequebook is as follows:

For the customer who already has an with the bank, the lastly consumed chequebook requisition slip with the help of which a new chequebook is issued. And the person who is going to open a new for the first time gets the chequebook free without any requisition slip.

For the new depositors the cheque book is not issued at the time of opening of , rather it is issued after three days but, as the most of the customers are from the armed forces so the usually get the cheque earlier. ACBL issues the chequebooks for both the local and foreign currency s.

I remained there in the -opening department for one week and daily I learnt a new thing I come to know about the details of the opened by the banks,

which

I

have

explained

in

previous

portion

of

"Departments".

In the start I have stated the opening procedure and issuance of cheque book in a very comprehensive way, now let me tell u the further related detail of opening

•

First of all a customer come and gets the information regarding the opening of . After getting the proper

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of any kind whatever he wants •

He fills the from regarding the opening of which is in fact a request.

•

S.S card is filled which contains the signature that will be used in future in order to identify that you are the same particular person who perfectly eligible for receiving the benefits.

•

The S.S card and the application form is verified and the verification stamp is imposed on it.

•

After verification the application forms are pasted in the file with the serial, no which is actually the no. Allocated to the respective customers.

•

The chequebook is issued to the customer after three days.

•

A letter of thanks is posted to the customer as well as the introducer.

The

introducer

is

thanked

for

the

two

perspectives. First he should be thanked that because of him the bank get another customer and the second reason behind sending the letter to him is that if the customer had fraudulently get the signature of that person as an introducer then he should come to know that some one has used his name as well as signature for his personal benefit and without the consent of him (introducer). •

The procedure for opening the comes to an end after sending the letter of thanks.

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Active and inactive The becomes Inactive if there is no debit transaction. becomes active if there is credit transaction.

SECOND WEEK In the second week I was shifted to the TDR (Term Depots Receipts) department. It was again a good experience to work with the officer here. First of all he told me about the basics of the TDR.

Deposit is lifeblood of a commercial bank. The main function of a commercial bank is to channelize the saving from the savers to the ultimate s of the funds. This process of collecting saving is called "deposit mobilization".

Deposits are of two types one is the demand deposit and the other one is time deposit (these have been explained in detail in the "department" portion). As the name signifies the demand deposit is payable on demand so no interest or benefit is given on such deposits but the time deposit is a kind of deposit, which gives you a benefit in of cash. Most of the people who have surplus money with them especially the landlords deposit their money in such s.

Term deposits are payable on demand with certain maturity. Different percentages of profit are given in the time deposit (the detail is given in the Marketing Mix)

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These are called fixed deposit because they are fixed and no transaction is allowed till maturity. In fix deposit you can open an A/c of the same title only than A/c number will be changed. While in other s the A/c can't be opened under the same title even in other branch of the same Bank.

Profit calculation The Head office determines the provisional rates of the Profit. Every bank has its own interest rate; usually established banks have low interest rates then the non-established banks as the have to attract the Customers.

There are different types of s, which are shown in provisional rates of profit on “PLS deposit” and rate of return minimum balance, and maturity is also shown in it. After every six months the rates are revised on PLS deposit

On fixed deposit the interest is given on the Principle amount only while on other profit and loss deposits the interest is given on profit an principle amount (provided that the interest has not been received in the given time). On fixed deposits the month is started from the day from which you deposit the amount.

As the interest rates vary frequently you will calculate the interest on the rate which is applicable during that particular duration. It happens that sometimes the interest rate remains the same. But during the year 2004 the interest rates were changed two times within six months. First of all the interest rates were changed at the

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start of the year and then these rates were changed again in the month of the February i.e. these were changed twice in the six months. The changing in the interest rate depends upon the will of the Head office, which has the power to change them at any time.

Zakat is deducted on the first of Ramdan. However, the Bank can't deduct the Zakat if you have given Affidavit (declaration regarding not to deduct Zakat on Stamp paper).

Tax is deducted which is known as withholding tax only at the time of deposit e.g. When you will deposit Rs.100,000 you will have to give additional money of Rs. 300/- as the withholding tax. (The rate of withholding tax is 0.3%). If you have National Tax Number NTN then 0.3% withholding tax is exempt.

The rate of withholding tax on profit is 10% i.e. if you are going to get a benefit of Rs. 10,000 then you will receive the cash of Rs. 9,000 as the remaining amount will be deducted as the tax.

For non-residents the tax and Zakat is exempt (visa is required as the

proof

that

the

particular

person

is

really

a

non-

resident).similarly Christians has not to pay the tax, they have to pay the tax only.

Askari Bachat Certificates are tax-free.

The calculation of interest is done manually on the card and then you feed (debit) it in the bank's (Profit Saving ) and

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will be credited in the customer's . A computerized voucher is prepared which will be used as the record.

If there is any mistake in the Debit Credit that will be checked out through Daily Balance Sheet of the Particular department.

For easy operations Customer prefer to give instruction that their interest should be credited to their A/c otherwise a manual voucher will be made that will be cashed on cash counter every time when you come to take the interest.

Record keeping The record of the TDR is although feed in the computer but there is also a hard copy of the record. The verified TDR forms are pasted with serial number of receipt given to the customer (the receipt of the form regarding the deposit of the amount).

Askari Bachat Certificates are attached or pasted in the file according to the date. The date may be of any month and any year i.e if there is a card of the 8th then on this card you will find the only 8th date of any month and any year in which the card was issued.

THIRD WEEK In the third week of my internship I was shifted to the Clearing section and Bills for collection section as well. Three days I worked with the "Clearing" and then with the "Bills for collection" section.

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CLEARING This is a "Inter-city clearing" i.e the cheques of Lahore city from different banks like National Bank of Pakistan, Standard Chartered Bank, Muslim Commercial Bank are deposited here. The deposited cheque is received carefully by checking the title of cheque, date, amount, and signature on the cheque. All the cheques go to the State Bank of Pakistan. Everyday NIFT receives all cheques and arranges them. By establishment of NIFT a lot of time, cost and labor is saved. The cheques are stamped carefully. Two stamps are required on the cheques

•

Clearing stamp

•

Payee's will be credited

If any stamp is missed or unclear, SBP returned one the cheque with reason. When the cheques are deposited they enter all the cheques on the computer with number and these figures go to SBP.

There are four types of Balances in the computer

•

Available balance

•

Float amount

•

Block amount

•

Ledger balance

NIFT collects all the cheques at 2:00 pm. After that the computer department give clearing sheet that is checked in clearing.

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Same day clearing All the cheques are cleared in coming day. But same day cheques are cleared other same day when it is deposited. The same day cheque amount is 50,000 below this amount the cheque, can't be cleared in the same day.

Clearing house It is a p[lace where representatives of all scheduled banks sit together and interchange their claim against cash other with the help of controlling staff of "state Bank of Pakistan" where there is no branch of State Bank of Pakistan, the designated branch of State of Pakistan.

So, system by which banks exchange cheques and other negotiable instruments drawn on each other within specific area and there by secure payment for their clients through the clearing house at specific time In an efficient way.

BILLS FOR COLLECTION Two types of cheques are deposited here

•

Outstation cheques

•

Askari other branch cheques (local)

Outstation cheques mean different cities cheques are deposited and Local means Askari's other Branches like cantt, circular road, defence, Gulberg etc. Are deposited. All cheques numbers on the computer and these figures go to SBP.

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The cheques are cleared in 5-6 days. Because "NIFT" receives and delivered to SBP where these cheques are cleared in 3 days and deliver to the banks, which mention on the cheques.

The cheques require three stamps

•

Askari crossing stamp

•

OBC number

•

Payee's will be credited.

If the cheques are returned due to some reasons, a returned memo. Random is filled and entries are recorded on the .

FOURTH WEEK In the fourth week of internship I was transferred to the "Remittances department". I met there with a quite sophisticated personality, she tells me about the issuance, procedure and the entries of the demand drafts and pay orders.

DEMAND DRAFT It is an instrument payable on demand for which value has been received, issued by the branch of the bank drawn. Demand draft is payable at some other branches of the same bank. But Askari Bank contract with MCB so ACBL's demand draft is payable at MCB also.

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Demand draft is very useful because there is no chance o fraud. The person deposit cash and get demand draft. It is used for outstation payment.

Issuance of demand draft On the application form following particulars are given: •

Name of beneficiary

•

Amount

•

Mode of payment

•

The place where DD is drawn

•

Signature

•

Name and address of the beneficiary

Request shall be made on standard application form. The customer writes his name, address, I.D number, and phone number on the backside of the application form. Commission is charged as per schedule of charges. The issuance of DD is computerized and the amount is automatically protect graphed drawing printing for the avoidance of forgery.

The withholding tax and excise duty is deducted as per schedule. when the customer depots cash in the cash department, he got voucher from the cash department and gave it to the person who makes the DD.

Payment of DD When a person brings DD (which have been drawn on you), you will check it from your DD payable record and ask the customer to sign twice at the back of the DD so that it could be confirmed that he is

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the eligible person for receiving the benefit, along with this you obtain the ID of that person it and then make the payment. After making the payment entry is made in the that this DD has been paid.

DD payable Every day you receive an IBCA from different banks and it contains a list of DDs, which have been drawn on you. Banker records it in DD payable . These DD are those, which other branches have drawn on your bank.

Payment of DD from Suspense A/c. The payment of DD is made from the suspence in the following cases:

•

The amount of DD is paid from suspence a/c if advice is not received yet.

•

If a DD is to be cancelled on the wish of the customer, in such a case the payment will be made from suspence A/c.

Cancellation of DD Following procedure is followed for the cancellation of the DD.

•

Obtain the application in writing for the cancellation of DD along with the original DD.

•

the signature of the applicant, which should tally, with the signature on the application form (for opening the DD).

•

Mark caution on DD issued or on computerized entry.

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Internship Report Make the payment from suspence .

Inform the Drawee bank regarding the cancellation and ask for IBCA. Inter Branch Credit Advice is the advice regarding the payment (refund) of the amount which Drawer bank have sent to them (which was deposited by the customer against the demand draft).

•

When a demand draft is made, an IBCA is sent to the Drawee bank regarding the payment.

Types of DD DD’s are of the following types:

•

Crossed DD: In the case of crossed DD the amount is deposited to the A/c of the benificiary.

•

Open DD: Incase of open DD the amount is handed over to the benificiary at the cash counter.

TELEGARPH TRANSFTER The transfer of funds from one branch to another branch of the same bank is called telegraphic transfer. The bank apply test on telegraphic

transfer.

The

applicant

receives

Commission

and

charges, if the Applicant’s is in ACBL, he pays no charge above Rs. 100,000/If he has no in the ACBL then he has to pay charges according to the amount e.g. for Rs. 100,000/- the charges are Rs. 250/-

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If the of benificiary is in another bank, his bank will present The TT to ACBL through for payment.

PAY ORDER Pay order issued from one branch can only be payable from the same branch. Pay order is used for same city payment. E.g. If ACBL (Main Branch) issued pay order it is only payable for Main Branch of ACBL.

Procedure •

Applicant fill the application

•

After paying charges he gets voucher and pay order is issued

•

All pay orders shall be crossed "payee's A/c only".

Cancellation •

The applicant give application for cancellation

•

Charges are recovered from the applicant.

FIFTH WEEK In the second last week of my internship I worked for two days in the "ATM section" and then in the "s section".

SECTION I worked three days in s department but as it is a confidential department so they did not give me enough in

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formation regarding their working. First day I sorted out the cheques of ACBL

with the help of the serial number and the

nature of the and arrange them in sequence. After that i checked the activity which contains the title of the cheque, amount, date etc. s department maintains the record of expenses of all the departments, it also maintain the record of all the employees regarding their basic salary, increment, benefits etc. It is the backbone of ACBL On the next day Is worked in the mail dispatch section, the person appointed here asked me to arrange the letters and to write the mailing address on the envelopes and then to put the letters into the envelops. It was an interesting job but, the single thing which I learned from here was that, I learnt by heart the addresses of many branches of the ACBL, which helped me to complete the Marketing Mix portion of the same report where I have given the detail of the Place of the ACBL. On the following day I repeated the same job and did nothing else.

ATM SECTION I worked two days in ATM department. The countrywide network of automated teller machine carrying the brand name "ASKCASH".

The branch network is corrected on-line real time and its customers have access to off-sites as well as on-site atms all over Pakistan. Being a part of the first inter-bank ATM switch in Pakistan with ABN AMRO and Habib bank, the customer now here have access to about 90 atms through the country.

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For ATM cards first the customer open in the bank after that he/ she fills the application form for the ATM. the Head office send a ATM cards in a ATM department but pin codes are sent in other department. So in this way the customer gates his/ her ATM cards.

ATM means "24 hours services" the customers get money at any time at any place but during my period the function of ATM were held by the Head office for three days. The branch has no authority to held the machine, if it is not working; the Head office knows the reason for it. On the whole, it is an excellent strategy of ACBL and to sign a strategic partnership with ABN-AMRO for ATM sharing arrangement is first time in Pakistan.S

SIXTH WEEK In the last week I was shifted to the "foreign exchange" department. For the first three days I worked there but in the last three days I was shifted again to the -opening department due to the absence of one of the opening officer. Therefore I was sent back to the -opening department.

THE PROBLEMS I FACED Doing the internship was a wonderful experience for me but as far as preparation of the report is concerned it was the most difficult part of the project. Preparing for report become most difficulty and IBA University of the Punjab Lahore

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tedious as most of the information was not available not only on net but also from the bank also. I was unable to get the following material.

History of the bank



Career ladder



Job description

I was fortunate to have a wonderful Annual report of the bank. Especially it was rested according to the circular of the State Bank of Pakistan, therefore, it was quite easy for me to analyse the income statements of the bank. There are some other necessary requirements for doing the financial analysis of the income statements i.e.,

Information about the trends prevailing in the market,



And information regarding the positions of the competitors of the bank that is the reason that I was unable to depict the true picture of the financial position of the bank.



We are also unaware about the off balance sheet finance of the bank so, can say nothing regarding the true liabilities of the bank

Anyhow, it was a very learning experience for me that I will never in my entire life.

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CONCLUSIONS AND RECOMMENDATIONS

After spending six weeks at different departments of the bank, interacting with the employees, getting their views, observing the organizational structure and design, I have come up with the following suggestions that in my view, will definitely improve a few weaknesses observed in the bank by me. IBA University of the Punjab Lahore

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Flexible Policies The bank should be adopt flexible policies, specially in the areas of the recruitment, promotions, evaluation of the employees otherwise the high turnover observed in the bank will continue to create problems for the bank now and in the future.

Job security The employees in the organization should be insured job security so that there is no pressure on the employees while performing their tasks.

Permanent Hiring The fresh hiring should be made permanent so that they are secured of their future. Further the allowances and perquisites attached with the permanent jobs will also increase the motivation level of the employees.

Job Training Programs The bank should place emphasis on the organization of effective training and development programs for its new as well as existing employees so that these are gradually updated regarding the recent developments in the field of banking.

Perquisites and Allowances The number of allowances and perquisites for the employees should be increased to ensure that they put their body and soul in the jobs assigned to them.

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Revival of the Charges The rates for the various charges provided by the bank should be brought down a bit, as it would result in increase in the number of customers of the bank.

Adoption of Effective technology The current unibank system used by the bank is very slow in processing so my view is that the bank should try to adopt some other but more effective form of technology in order to provide comfort to the customers as well as the staff.

Decentralization The higher authorities should form team-based management rather than centralized management. It would result in improvement in uplifting the morale of the employees. They will be more motivated and involved in all their operations resulting in overall effectiveness of the organization.

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