Internship Report

On
Bank Alfalah Limited

Prepared By

Sher afsar
Reg # 10PCR02772

Internship Report
Start Date for Internship:
1st Oct 2012
End Date for Internship:
30 Nov 2012
DEPARTMENT OF MANAGEMENT SCIENCES
Allama Iqbal Open University

DEDICATION

All the efforts in compiling this report are dedicated To My Beloved Parents, Brothers, Friends &
My Honorable Faculty Members of Department of Management sciences, as they helped me in
this Achievement.

ACKNOWLEDGEMENT
Countless thanks to Almighty Allah (The most merciful the most beneficial). The only creator of
universe who enabled me to complete this report, in spite of various difficulties. All respects to
the Holy Prophet (P.B.U.H) who enable us to recognize our greater and whose spiritual teachings
guide us in every matter of the life.
I would like to express my gratitude to the Department of Business Administration for giving me
the opportunity and arranging such an extensive internship program.
I would also like to acknowledge my debts to those officersBank Alfalah limited, of who have
been extremely helpful for me.
First of all Mr. Asif, He has been a permanent source of encouragement and guidance. His helpful
nature did not restrict me to the premises to the branch but extended to any place and any matter I
needed his support on.
In short, I would always be thankful to all the managers and officers, for their courteous and
compassionate treatment given to me

Executive Summary
Pakistan after getting its independence, did not inherit a strong banking industry and since then
saw a number of events in the industry, like the nationalization of banks in the 1970s. However
today, the banking industry of Pakistan has been growing over the past few years, mainly because
of the consistent policies implemented by the Government of Pakistan, including the privatization
of banks in Pakistan. Also the State Bank of Pakistans, monetary policy has been very friendly
toward the banking industry.
There are a number of different banks established in Pakistan, including local incorporated
commercial banks, foreign incorporated commercial banks, development financial institutions,
investment banks, discount & guarantee houses, housing finance companies, venture capital
companies, micro finance banks and Islamic banks.
Bank Alfalah was incorporated in 1997 and was later privatized by the Government of Pakistan.
The Abu Dhabi Group bought the majority shares of the bank and so got the rights to control the
banks operations. Since the privatization of the bank, Bank Alfalah has implement different
policies to make it one of the best banks of Pakistan, which included introducing new products
and services and increase its operations by opening new branches in Pakistan.
Today Bank Alfalah is operating in more than 70 cities of Pakistan and operating its foreign
branches in Bangladesh, Afghanistan and Bahrain. The total employees of Bank Alfalah in 2006
were 6,543, which was an increase of 25% from the past year. The increase in the number of
employees joining Bank Alfalah shows that people feel confident in Bank Alfalah as a prospect
employer.The financial statistics of Bank Alfalah are also as impressive as their human resource.
The profit after taxation for Bank Alfalah in 2006 amounted to Rs 1,762,691 (000) and its total
assets for 2006 amounted to Rs.275,685,541 (000). The stock prices and earning per share of the
bank have also increased over the years. Bank Alfalah promotes its products and services through
print and electronic media. Bank Alfalah also promotes itself by sponsoring different events.
For Bank Alfalah, it has to compete in an industry that has grown in 2006 by almost 17% in
overall assets and profits growth was 33% from the previous year in 2006. The major competitors
of Bank Alfalah, pose close competition and are mainly large nationally incorporated banks and a
few international banks, that all want to become the leading banks of Pakistan, by creating some
edge in the industry. To create this edge, technology has played an important role in the industry
4

as banks are continuously trying to improve its products and services by introducing innovative
products.
I did my six weeks internship at Bank Alfalah wah cantt Branch and worked in account opening
department, operations department, accounts department, home loans department, car finance
department and credits department.
Some of the work that I did in these departments included collecting cheques, filling account
opening forms, activity checking and making a borrowers basic fact sheet.
Although there were no such big problems found in the working of Bank Alfalah, there were
some problems in training of the employees, incentive schemes and product innovation.
Some of the recommendations include workshops for employees, job rotation, teams work to find
innovative products and scholarship programs for employees.
Lastly Bank Alfalah has seen a rapid growth in its activities by introducing a range of products
and services and showing its presence in the country by opening new branches and in future
should keep this momentum and always strive to become the best.

TABLE OF CONTENTS
1. OVERVIEW OF THE ORGANIZATION
1.1 Central Background Information
1.2Company Background
1.3 Vision
1.4 Mission
1.6 Operational Analysis
1.7 Checking Accounts
2. INTERNSHIP PROGRAM
2. Departments Worked During Internship
2.1 Accounts Opening Department
2.2 Major Deposit Account Products
2.3Car Financing
2.4Accounts Department
2.5Operations Department

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08
09
09
10
12
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17
17
23
25
30

3. FINANCIAL ANALYSIS OF BAFL

3.1 Horizontal &Vertical Analysis
3.2Income Statement of Bank Alfalah Limited
3.3 Horizontal Analysis of Balance Sheet
3.4 Vertical Analysis of Balance Sheet
3.5 Horizontal Analysis of Income Statement
3.6 Vertical Analysis of Income Statement
3.7 Ratio analysis
3.7.1 Profibility Ratios
3.7.2 Debt Management Ratios
3.7.3 Liquidity Ratios
3.7.4 Solvency Ratios
3.7.5 Activity Ratios
3.7.6 Market Ratios

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37
38
40
42
44
46
46
47
48
49
51
52

4. SWOT ANALYSIS OF BALF

4.1 Strength
4.2 Weaknesses
4.3 Opportunities
4.4Threats

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55
56
56

5. CONCLUSION
Conclusion
Recommendations
References

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58
59
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1 Introduction
1.1 Central Background Information
Banking is one of the most sensitive businesses all over the world. Banks play an important role
in the economy and are considered as the backbone of an economy in every country and Pakistan
is no exemption. Banks are custodian to the assets of the general masses. The banking sector plays
a significant role in a contemporary world of money and economy. It influences and facilitates
many different but integrated economic activities like resources mobilization, poverty elimination,
production and distribution of public finance.
Pakistan has a well-developed banking system, which consists of a wide variety of institutions
ranging from a central bank to commercial banks and to specialized agencies to cater for special
requirements of specific sectors. The country started without any worthwhile banking network in
1947 but witnessed phenomenal growth in decades to come.
By 1970, it had acquired a flourishing banking sector. Nationalization of banks in the seventies
was a major upset to domestic banking industry of the country, which changed the whole
complexion of the banking industry. With irrational decision at the top all the commercial banks
were made subservient to the political leadership and the bureaucracy. The commercial banks thus
lost their assets management equilibrium, initiative and growth momentum. They ceased to be a
business concern and became big bureaucracies. The era of nineties was the climax of
privatization, deregulation and restructuring in the domestic banking industry and financial
institutions. The Muslim Commercial Bank was the first bank to privatize. Followed by Allied
Bank limited, United Bank Limited and Habib Bank Limited have all been privatized.
Today, the banking sector is providing financial solutions to the masses and is growing and
becoming a solid partner in the development of the Pakistani economy, this growth potential has
seen different acquisitions in the banking sector, with the Standard Chartered and Union Bank
being the most prominent. Standard Chartered acquired an 80.86% interest in Union Bank
Limited for a cash consideration of US$413 million1. Other acquisitions include ABN AMRO
acquiring 93.4% interest in Prime Bank for Rs. 13.8 billion 2 and Temasek Investment Holding of
Singapore taking up a stake in PICIC Commercial Bank. Temasek also has its stake in NIB Bank.

1
2

1.2Company Background
Bank Alfalah Limited (BAL) is a private bank in Pakistan owned by the Abu Dhabi Group.
Bank Alfalah was incorporated on June 21, 1997 as a public limited company under the
Companies Ordinance 1984. Bank Alfalah is registered at both Karachi and Lahore Stock
Exchange with a ticker name of BAFL. Its banking operations commenced from November 1,
1997. The bank is engaged in commercial banking and related services as defined in the Banking
companies ordinance, 1962, with the registered office at B.A.Building, I.I.Chundrigar Road,
Karachi.
Since its inception, as the new identity of H.C.E.B (Habib Credit and Exchange Bank Limited)
after the privatization in 1997, the management of the bank started implementing strategies and
policies to carve a distinct position for the bank in the market place.
This was further strengthened with a partnership with the Abu Dhabi Group which owns 70% of
Bank Alfalah shares. This allowed the bank to invest more in revolutionary technology to increase
its range of products and services, perceiving the requirements of their customers and matching
them with quality products and service solutions.

1.3 Vision
To be the premier organization operating locally & internationality that provides the complete
range of financial services to all segments under one roof.

1.4 Mission
To develop & deliver the most innovative products, manage customer experience, deliver quality
services that contributes to brand strength, establishes a competitive advantage and enhances
profitability, thus providing value to the stakeholders of the bank.

1.5 Board of Directors:

H.E. Sheikh Hamdan Bin Mubarak Al Nahayan

Mr. Mohammad Saleem Akhtar

Mr. Abdulla Nasser Hawalileel Al-Mansoori

Mr. Abdulla Khalil Al Mutawa

Mr. Ikram Ul-Majeed Sehgal

Mr. Khalid Mana Saeed Al Otaiba

Mr. Nadeem Iqbal Sheikh

Now 10 years after being incorporated, Bank Alfalah has emerged as one of the foremost financial
institution in the region, endeavoring to meet the needs of tomorrow today, operating through 198
branches in 74 cities nationwide, with total employees exceeding 6000. Bank Alfalah also
expanded its network internationally by opening branches in Afghanistan, Bangladesh and
Bahrain to further improve its image as a premier banking institution.

Figure 1: Celebrating 10 Years of Bank Alfalah

Source: Bank Alfalah Website

1.6 Operational Analysis

Bank Alfalah is operating with an extensive network of 198 branches nationwide that are spread
all over the four provinces, Different varieties of services that each branch is equipped to provide
include:

Branch/Retail Banking:
Example: Deposits, Remittances, Lockers

Consumer Banking:
Example: Credit Cards, Auto Loans, Home Loans

Electronic Banking:
Example: Phone Banking, ATM's, Online Banking

Corporate Banking:
Example: Short/Long Term Finance, Trade Finance, Structured Finance

Treasury Finance:
Example: Money Market, FOREX Market, Investments, Govt. Securities

Some of the major cities of Pakistan and the number of branches located in these cities are as
follows

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Table 1: Cities where Bank Alfalah has its branches

City
Islamabad
Karachi
Lahore
Peshawar
Quetta
Rawalpindi

Number of Branches
8
35
30
4
4
8

Source: Bank Alfalah Website

As Bank Alfalah is operating with such as extensive network of branches, it is not possible for it
to control all activities of its different branches from one main location, that is their head office in
Karachi, so due to this reason they have divided their branches in two areas: the north and south,
these two areas are further divided into different areas, each controlled and monitored by their
respective area office. There are 9 area offices in the northern area.
Each branch of Bank Alfalah comes under an area office, for example, the area office of Bank
Alfalah I-8 Markaz is located in Rawalpindi. The area offices are responsible for authorizing its
branches on providing different services to its customers. Each branch has to first get an approval
from the area office before providing any service to its customers. For example, a car financing
application needs to be approved by the area office before any legal documents or order for a car
is placed by the bank.
Furthermore Bank Alfalah is also operating 7 foreign branches in three countries, namely
Bangladesh, Afghanistan and Bahrain.
Another major part of operations for Bank Alfalah includes remittances that come from abroad
and are thus considered as home remittances. Some of banks with which Bank Alfalah has agency
agreements are as follows:

Union National Bank, Abu Dhabi, U.A.E

First Gulf Bank, Abu Dhabi, U.A.E

Alfalah Exchange Company, Abu Dhabi, U.A.E

U.A.E Exchange Center, Abu Dhabi, U.A.E

Bank Alfalah has also established relationships with other internationally renowned banks are part
of Bank Alfalah list of correspondence banks. The total numbers of banks that are included in this
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list of correspondence are 170, in all major countries of the world and help Bank Alfalah in
providing services to its customers.
Furthermore Bank Alfalah is also a member of MoneyGram, a service that facilitates speedy
transfer of remittances on a person-to-person basis and SWIFT (Society for Worldwide Integrated
Financial Transfers), a service that facilitates banks to transfer important messages or financial
transfers securely and speedily to other banks. Both these services are recognized globally, with
members from all over the world.
Bank Alfalah being a member of both these services reiterates its commitment of providing its
customers with the state of the art services.

1.7 Checking Accounts

There are the main types of checking accounting that banks provide:

Basic Banking Account (BBA)

Current Account

Profit & Loss Account (Pls A/c)

Basic Banking Account (BBA)

These accounts have no minimum balance requirement and can be opened by just Rs. 1000 3. A
customer with a BBA, does receives an ATM card but the account cannot be turned to an Online
Account. The segment that this account is targeted is towards the salaried individuals that have
just started their professional careers, students or any other individual that may want to open an
account with a small amount of money.
Current Account
Current accounts are another type of account that banks offer, this account does not provide any
profit on it and neither zakat is deducted on this account. This account can be turned into an
Online Account and its customers also receive an ATM card. The major segments of this account
are sole proprietors, partnerships, companies (both private& public) and any other individual that
wants to open their account and not earn profit or pay zakat on their balances.
Profit & Loss Account
Profit and loss accounts are one of the basic accounts that give interest to its customers deposits.
These accounts pay interest annually and zakat is also deducted on these accounts. ATM card are
3

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also provided to these accountholders. The main segment targeting these accountholders are
people that want to save money which might include household etc. This account does not target
companies however.

1.8 Car Financing

Car financing facility is a very popular facility with all bank customers as it facilitates them to pay
for their car over a period of time (1-5 yrs). Today banks provide additional facilities of insurance
and tracking devices in cars as well. The main segments of people to whom this service is targeted
are salaried individuals, businessmen and other individuals with a high disposable income.

1.Home Loans
A home loan is a product that eases the way how a banks customers purchase their home. Home
loans provide the facility to purchase a new home, construct a new home or renovate a current
home. Home loans are a long term loan and the main segments of population targeted include
high paid salaried individuals and businessmen that are below the age of 65 and some banks even
provide home loans to Pakistanis living abroad.

Credit Cards
Credit Cards are todays one of the most selling product that banks offer. There are three major
types of credit cards:

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Table 2: Types of credit cards and their market segments

Credit Card
Silver
Gold
Platinum

Market Segment4
Salaried and self employed individuals starting
their careers
Salaried individuals or self employed
individuals with high income
For exclusive customers of the bank with huge
deposits or very high income

1.9.1 Growth Rate for the entire Industry

Since the present democratic government, which came into power in 2002, it has implemented a
number of policies for social and economic reform in the country that will reap favorable results
for the future to come, and one of these policies was the privatization of commercial banks in the
country. This favorable policy has led to a massive growth in the banking sector.
According to a report published by the State Bank of Pakistan, the total assets for 2006, for all
banks overall were Rs. 4,280,030 (Million), a growth of 16.87% from the previous year.

1.9.2 Advanced technological products and services

Automatic Teller Machines (ATM) and ATM cards have been the biggest innovations that have
simply changed the way people today are now making their personal transaction. With ATM
cards, people can take out money from their accounts at any time, from any bank that they want
to, at their convenience.
ATM cardholders can take money out of their accounts, from any 1 link network ATM, the
largest ATM network of the country. Other ATM networks include Mnet and Cirrus. Today all
banks are members of 1 link, while most of them are members of Mnet and Cirus.
Internet Banking is another major technological product introduced by different banks of
Pakistan. With the help of internet banking, customers with the convenience of their own personal
computers can transfer money from their accounts, view their balances and a lot more.
SMS and Phone Banking is another major advancement in the products and services introduced
by banks. Telephone banking can be done 24/7, with the help of banking assistants, while SMS
banking can be done at the customers convenience.

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1.9.3 Automation of operational tasks

Technical advancements have also impacted the daily operations of banks in Pakistan. Online
transfer of money between branches has increased the efficiency of exchange of money between
different account holders of the same bank.
Simple tasks such as balance inquiry and bank statements have become as easy as a click of a
button with highly sophisticated information systems.
All banks today have their own information systems that they can use in almost all departments
like clearing, account opening, car leasing and remittances.

1.9.4 Decision Making Tools

In todays contemporary business, critical and timely decision making is a must and important
too. Todays bank use sophisticated softwares that not only help in operations but also improves
decision making by providing different reports, which can produced at different periods of time,
that can help employees at every level of the banks administration.

Innovation
Innovation is a must in modern times, as it will help banks to compete in todays highly
technologically advanced industry. Some of the innovations that the banking industry is looking
forward are:

More advanced means of connectivity between branches through better and advanced
software and hardware to maintain connections with banks in remote areas and during
natural calamities in Pakistan. These might include better connection through WiFi or
WiMax, both new technologies.

More advanced information systems in banks that are more secured than before to
eliminate any chances of fraud and which are even more user friendly to help employees
to use them not only to make critical decisions but also satisfy customer need in a more
timely manner.

Advancements in online transfer from inter branch to an even more helpful inter bank
transfers.

Automation of simple operations task that will not only improve efficiency but also reduce
costs like stationery and courier services, like automation of check books etc.

All banks in Pakistan starting internet, mobile and telephone banking in its operations.
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Chapter 2

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2. Departments Worked During Internship

I did my internship at Bank Alfalah I-8 Markaz, for a total duration of six weeks and the
departments that I worked during this time are as follows:

Accounts Opening

Operations

Accounts

Home Finance

Credits

Car Financing

2.1 Accounts Opening Department

Accounts opening department is one of the departments that come under the retail/general
banking facilities provided by Bank Alfalah I-8 Markaz. Some of the major deposit accounts
opened by Bank Alfalah I-8 Markaz are as follows:

2.2 Major Deposit Account Products

Current Account
Current Accounts are non interest bearing accounts that have a minimum account opening
requirement of Rs 10,000. No zakat is deducted on the accounts balance. Furthermore all current
account holders receive a Hilal debit card and there are no restriction on the number of withdraws
or deposits made to and from the account.

Profit& Loss Saving Account

Profit& Loss saving accounts can be opened with a minimum balance requirement of Rs 5,000
and profit is credited on a half yearly basis. There are no restrictions on the number of deposits
and withdrawal made to and from the account and all account holders receive a Hilal debit card as

17

well. Profit and loss saving account cannot be opened by a business corporation, however can be
jointly opened by individuals. Profits are paid at 2% on all account balances.

Basic Banking Account (BBA)

Basic Banking Account was introduced by banks on an order by the State Bank of Pakistan and is
current in nature. There is no minimum balance requirement for BBA, however initial deposit
must be Rs 1000. Maximum two withdrawals and deposits are allowed by cheque, while there is
no restriction on ATM withdrawals.

2.2.1Royal Profit Account

Royal profit accounts are opened with a minimum balance requirement of Rs 50,000. The basic
aim of this account is that the higher the balance the higher the return, as profit is credited on a
monthly basis. The profit paid to account holders is as follows:
Table 3: Profits paid on Royal Profit Account

Amount

Profit pa.

From Rs.50,000 to 999,999

2.50%

From Rs.1,000,000 to 4,999,999

3.50%

Rs.5,000,000 and above

Negotiable

Source: Bank Alfalah

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Kifayat Account
Kifayat account is another saving account product that can be opened with a minimum balance
requirement of Rs 10,000, with a maximum limit of Rs 1 million. Profit is calculated on a
monthly basis, while it is credited on quarterly basis. Bank Alfalah pays 7% pa interest on Kifayat
Account.

Mahana Amdan Account

Mahana Amdan account is Term Deposit Receipt (TDR) for three years that can be opened with a
minimum balance requirement of Rs 100,000, with a maximum limit of Rs 15 million. Profits are
paid at 10% pa, credited on a monthly basis. Other features of this account include free personal
accident insurance and automatic renewal for another 3 years, after the expiry of original period.
of giving monthly school fee of the childrens if the breadwinner of the family dies.

Basic Requirements for Account Opening

The basic requirements to open an account for individuals/self employed are as follows:

CNIC

Source of income (salary slip etc)

NTN certificate (optional)

Company letterhead or authorization (as required)

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The basic requirement to open an account for a partnership

Partnership Deed

Partners CNIC

Company Letterhead

NTN certificate (optional)

The basic requirement to open an account for companies:

Memorandum of Association

Article of Association

Directors CNIC

Company Letterhead

NTN certificate (optional)

Internal Codes for Bank Alfalah Accounts

Some of the major account opened at Bank Alfalah I-8 Markaz and their internal codes are as
follows:
Table 4: Internal Codes for Some Accounts

Account Type
Current Account
Profit& Loss Account
BBA Account
Royal Profits
Current Account USD

Code
010*****
020*****
0189****
029*****
018*****

Source: Bank Alfalah I-8 Markaz

Major Work Done by Account Opening Department

Stop Payment
If a customer looses their cheque book, then that customer will have to come to the bank and
firstly report the loss and then stop payment, by telling the series of cheque he has lost. By
stopping payment, the customer is guaranteed that no illegal payment is made from their account.

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The process for stopping payment, after the customer tells that he has lost is cheque book is that
he fills a Form B, which is same as a cheque book requisition form and an indemnity form,
stating no responsibility on behalf of the bank if any illegal payment is made before the time of
announcing a cheque book lost.
As part of my internship, I was to assist a customer towards the whole process of stopping
payment.

Bank Statement and Bank Balance

A bank statement tells the whole activity of a bank account over a period of time. Customers often
come and want their bank statements and have to fill a form, relating to the time period for which
the bank statement is needed.
As part of my internship, I was to assist the customer to fill the Bank Statement Form and
produce the statement through the banks software and print it as well.
Often customers want to know their accounts balance over the phone and thus I had to tell them
their account balances using the banks information system Bank Smart.

Account Opening
Whenever a customer comes to open their account, they have to fill a relationship contract with
the bank. As part of my internship I had to fill these forms and then use the appropriate bank
stamps to complete these forms. Also as part of the relationship form, I also had to do a Verisys,
a verification system started by NADRA on the CNIC of the new account opener. A Verisys
tells, if more information pertaining to the customer is needed to open the account or not.
Furthermore as all relationship forms have to be sent to Karachi, a central location, for all account
relationship forms, I had to develop a list of daily forms sent and their quantity.

Home Finance
Bank Alfalah has introduced home loans as part of their consumer banking and some of the
products that come under home finance are:

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Major Home Finance Products

Buy your Home

Bank Alfalah gives its customers the facility to purchase their own home, with 80% of the
financing coming form the bank.

Build your Home

Bank Alfalah gives the facility to build your home on a plot that you have purchased and even if
havent purchased a plot yet, Bank Alfalah will provide 60% of the plots value to its customer.

Renovate your Home

When you have your home, you wish to furnish and renovate your home with the best of
accessories available; Bank Alfalah provides you with the facility of renovating your home, with a
loan of 40% of your surveyed home value.

Start it Together
This product is especially designed for young professional starting their careers. With Bank
Alfalah start it together, these professional can purchase a home and get a moratorium of up to 3
years.

Easy Transfer
With Bank Alfalah easy transfer, customers can now transfer their existing home loan from any
other bank to Bank Alfalah. Bank Alfalah will on your behalf pay the other bank and will start a
repayment schedule according to Bank Alfalahs rates and conditions.

Features of Home Finance

Some of the features of Bank Alfalah home finance are as follows:

A tenure of 3 to 20 years (renovation tenure for 10 years)

For people between the age of 23 to 65

Facility of home loans range from 0..5 million to 50 million (renovation facility for 3.5
million)

Financing up to 80% of property value while 50% of plot value

Fixed and Variable rates of markup

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Fixed rate for one year @ 11.5% Salaried and @ 13.5% Businessmen and expatriate
Pakistanis

Procedure for a Home Loan

The process for a home loan starts when a customer provides all the required documents like an
allotment letter, bank statements, tax returns, authority to mortgage from a housing authority etc.
All these documents go to the Credit Information Bureau (CIB), a State Bank Department that
provides a Customer Credit Information Report (CCIR), explaining it the customer is a credit risk
or not.
After the CCIR is received, the bank does a private valuation of the property, which determines
the amount of loan that will be provided to the customer. These documents provide the basis for a
Credit Line Proposal (CLP) that determines the amount of loan provided to the customer and
other important information relating to the loan finance.
When the customer signs and approves the CLP, Documentation Control Centre (DCC) will get in
touch with the customer to complete finance & security documentation pertaining to the home
finance.
Later a pay order is made and provided to the customer and all papers relating to the property are
given to the DCC, while other documents go to the bank that gives the loan.
During my internship, I had to make Credit Line Proposals for different customers that had a loan
in progress.

2.3Car Financing
Car financing has become one of the most selling financial products of almost all banks. People
prefer getting their cars financed rather than paying upfront because it is convenient and lessens
the burden of paying a huge sum of money upfront. Some of the features of Bank Alfalah Car
Financing are:

Tenure of 1-5 years

Minimum down payment- starting from 10% of car value

5 % extra at time of pre-mature payment.

Insurance facility from three different insurance companies

Tracking devices with all Suzuki Mehran and all Toyota Models

Fixed mark up rates

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Co borrowers facility

The mark up rates for all locally build new cars is a follows:
Table 5: Mark up Rates for Car Financing

Financing Product

1Yr

2Yr

3Yr

4Yr

5Yr

Car Loan for Brand New Vehicles

14.00%

14.50%

15.00%

15.50%

15.50%

Source: Bank Alfalah Website

Procedure for Car Financing

The procedure for car financing starts when a customer comes and asks for a plan for a specified
car. When he receives this plan, he will fill an application form for a car financing, stating the car
he wants to finance, its color, personal details and two references. They also pay a processing fee
which is non refundable.
The bank then conducts a verification of the two references, which for Bank Alfalah I-8 Markaz is
conducted in Rawalpindi. A Verisys is also conducted on the applicants CNIC and a Customer
Credit Information Report is taken from the CIB.
After the verification process is completed, a Credit Line Proposal (CLP) is generated by Bank
Alfalah I-8 Markaz, to be sent to the Area Office for a final approval with all other documents as
well. The final authority of passing the application remains with the Area Office.
After the Area Office approves the application, the customer will make the down payment, give
the bank post dated cheques and sign a legal document with the bank.
When this process is complete, a quotation is sent to the car dealer for the specified car, insurance
documents are sent to the specified insurer. Later on the car is registered with the Excise and
Taxation Officer and is given a number.
When all this process is complete, the key to the car is handed over to the customer with all
documents relating to the car. When the tenure for the car financing is completed, the bank issues
a NOC to the customer.
As part of my internship I had to complete the final legal document signed by the customer, by
writing in detail about the car, the financing period and witnesses pertaining to the agreement etc.

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2.4Accounts Department
Accounts department is a backend department at Bank that performs the following functions
1. Reports
These reports can be generated at daily, weekly, monthly, quarterly or yearly basis as required
by the bank.
2. Income and Expense
The department also needs to calculate the revenues and expenses, control expenditure and
forecast profits every month.
3. Budget
Formulation of yearly budgets & targets in consultation with the branch manager is also done
by the accounts department.
4. Activity Checking
Daily activity checking and monitoring is done by the accounts department of the whole bank
5. Storage of Records
Accounts Department also has the duty to store vouchers and system generated reports.
6. Payments
The accounts department is responsible to pay vendors on behalf of the bank with
authorization from the branch manager. It also has to amortize large payments and calculate
depreciation of branch assets.

Activity Checking
In the accounts department, I had to do daily activity checking and there are four stages in which
activity checking takes place:
1. Collecting vouchers, cheques etc from all departments
2. Sorting Vouchers
3. Checking Activity
4. Packing
Collecting Vouchers
The first stage of activity checking is collecting all vouchers, cheques, DDs, pay order, pay slips
etc from all departments of the bank. Mainly vouchers come from the operations department.

25

After collecting these vouchers etc from the departments, we need to check if all stamps are
stamped on these vouchers etc.
Sorting Vouchers
After all vouchers are collected, they need to be sorted into eight categories:
1. Customer Debit: Includes debit vouchers and cheques
2. Customer Credit: Includes credit vouchers and credit slips
3. Income: Income vouchers
4. Expenditure: Expenses vouchers and payment vouchers
5. Others: Includes vouchers about excise duty, FED, teller, ATM, payables etc
6. Online: Contain online vouchers and online credit slips etc
7. Head Office (H.O): Includes HO vouchers and IBCA, DD advices
8. Bills Payable General (BPG): Includes vouchers and DD, Pay orders, Pay slips etc
Checking Activity
After sorting takes place, daily activity is checked using the statement of account activity, which
contains all daily activity of the accounts in the bank. Activity checking is done by seeing if the
values and account numbers in the sorted vouchers match that of the activity and whether or not
there is any missing activity that is not in the vouchers.
Packing
After the activity is checked, all sorted vouchers are counted, both debit and credit and then
packed by totaling the vouchers.

Credits Department
The credit departments of Bank Alfalah work with both SMEs and corporate clients. There are
two major categories of credit line facilities that Bank Alfalah provide to its customers

Funded Credit Line Facility

Unfunded Credit Line Facility

Funded Credit Line Facility

There are three major products that come under the funded credit line facility:
26

Current Finance

Karobar Finance

Milkiat Finance

Current Finance
Current Finance is a short term facility mainly provided to companies. It provides the customers
with the funds over a period of time, mainly one year. The main advantage of the current finance
facility is that markup is only charged on the utilized part of the finance facility and is mainly
used by companies for their working capital management.
The bank to provide this facility keeps a security; mainly a mortgaged property and can provide
60% of its assessed value as funds.

Karobar Finance
Alfalah Karobar Finance is another short term facility that is only provided to individuals and sole
proprietors. This facility also has one year validity with markup charged on the amount used.
This facility again provides individuals to maintain their working capital management and is
again given to individuals for a security. The conditions for current finance and karobar finance
are same with one big difference, which is that in karobar finance, the individual has to clear all
his balance in his account, once in a year.

Milkiat Finance
Alfalah Milkiat Finance is a long term facility that is provided to SMEs and there are four main
types of facilities provided:

Acquisition of rented commercial/industrial property

Construction on an owned commercial/industrial plot

Purchase of a commercial/industrial property

Renovation of owned commercial property

Some of the features of Milkiat finance are as follows:

Tenure of 2-12 years except for renovation, which is for 2-4 years

Mark up of (KIBOR+4%)

Financing from Rs 0.5 million to Rs 20 million, renovation financing up to 3.5 million

Eligibility age should be less than 65, with 3 years of existing business
27

Procedure for Milkiat Finance

All documents are gathered from the customer, and then they are sent to the CIB, which sends a
CCIR to the bank. Other forms of verification also take place in this process. Later a valuation is
done of the property to see how much financing can be provided.
After the valuation process is complete, a CLP is made by the bank, which with other documents
is sent for approval to the area office.
When the area office approves the application, the customer is called into the bank to give the
security papers to the bank and also gets all legal documents are signed and the money is
transferred to the bank.

Unfunded Credit Line Facility

There are two types of unfunded credit line facility, which are as follows:

Letter of Credit (LC)

Letter of Guarantee (LG)

Letter of Credits
A letter of credit is a written undertaking by a bank (issuing bank) given at the request and
accordance of a buyer (the applicant) to the seller (the beneficiary) to a fact payment up to a stated
amount of money within prescribed time limit provided that the terms and conditions are
complied with. Letter of Credits issued in the international trade business.
There are two types of Letter of Credits:

Usance

Sight

Usance
Usance LC is a form of LC, whereby the bank engages to honor the beneficiary usance draft on an
acceptance that the items are in accordance with the conditions. Payment is made against
acceptance.
Sight LC
Theses are letter of credit where the bank engages to honor the beneficiarys sight draft upon
presentation provided that the documents are in accordance with the conditions of the L/C. This is
a more safe form of letter of credit as payment is made against the documents.
28

Letter of Guarantees
Letter of guarantees is a guarantee that the bank gives to an organization on behalf of the bank.
Letter of Guarantees are mainly used when a tender for a specific job is filled by a customer.
There are three main types of LGs:
Bid Bond: Bid Bond are filled at the time of filling out the tender and states that if the company
is given the tender, it will start working on it and will not walk away
Performance Bonds: Performance Bonds are issued to the beneficiary, to guarantee him that the
applicant of the tender will perform the contract under a specific period of time. Performance
bonds are issued after the tender is approved of the applicant.
Mobilization against LG (MALG): This is a guarantee that the bank gives when the beneficiary
(the firm that issued the tender) that pays an advance of tender to the applicant (the firm that gets
the tender), that he will return that advance amount.

Process for LCs & LGs

The process for LCs and LGs is a ten step process:
1. A request letter for the facility is received by the bank
2. All documents pertaining to the facility are received
3. Documents are looked over by the lawyers
4. CCIR is received from the CIB
5. A CLP is made
6. Borrowers Basic Fact Sheet (BBFS) is made
7. Credit Facility Application Form is filled by the customer
8. Documents are sent to the Area Office for approval
9. Documents relating to the security is kept by the bank
10. Letter is issued to the customer

Types of Securities
Some of the types of securities that the bank may keep as a part of security for both funded and
unfunded credit line facilities are:

Mortgage of Property

Pledge of Stocks

Hypothecation of Stocks
29

Lien on Stocks & Securities

As part of my internship I had to make BBFS and CLP for different applicants that had applied
for an unfunded credit line facility.

2.5Operations Department
The operations department is responsible for three major activities:

Clearing

Transfers

Remittances

In large branches of Bank Alfalah, all these jobs are done by different departments, but as Bank
Alfalah I-8 Markaz is a small branch, all these jobs are done by one department, known as
operations. Operations department is sometimes also known as the Transact department.

Clearing
The clearing department is responsible for the clearing of all cheques that the bank receives daily
and the different types of clearing cheques that come in the bank are:

Inward Clearing

Outward Clearing

Online Clearing

Outward Bills for Collection

Inward Clearing
Inward clearing takes place when a Bank Alfalah I-8 Markaz account holder drews a cheque in
favor of a Non- Bank Alfalah account holder. The process for inward clearing is as follows:
1. Cheques are received by the operations department from NIFT
2. The bank officer verifies all particulars from the instruments and the system for sufficient
balance etc. If any fault is found, then the officer will mark the cheques as a return,
stating the reasons with them.
3. If no fault is found, then the officer will post these cheques in the system by debiting the
customer account.

30

4. The particular of the returned cheques are entered in the O/W return of inward clearing
register and returned to NIFT.

Outward Clearing
Cheques drawn by Non-Bank Alfalah customers in favor of Bank Alfalah I-8 Markaz customer
and deposited at I-8 Markaz Branch are known as outward clearing cheques. The process for
outward clearing is as follows:
1. Cheques are received by the operations department of Bank Alfalah I-8 Markaz
2. The customer in favor of whom the cheque is drawn is credited
3. Clearing stamps are affixed on the cheque and sent to the other bank via NIFT.
If any cheque returns the next days as a returned, the posted entries are reversed and the cheque is
returned to the customer who presented it and is recorded in the cheque return register.

Online Clearing
Online clearing takes place when a cheque is drawn by a Non-Bank Alfalah customer in favor of a
Bank Alfalah customer but is deposited at Bank Alfalah I-8 Markaz. The person, who had drawn
this cheque, however should have an account in the Islamabad/Rawalpindi area. The process for
online clearing is as follows:
1. The cheque is sent as an outward clearing via NIFT
2. When the cheque is cleared, it is credited to the Bank Alfalah account via the online
transfer software.

Outward Bills for Collection (OBC):

There are some cheques that are drawn by a Non Bank Alfalah Account that is outside the twin
city area in favor of Bank Alfalah I-8 Markaz account holders and thus are treated as OBCs. The
process for clearing of the OBCs is as follows:

Cheques received by Bank Alfalah I-8 Markaz

The officer affixes the OBC stamp on the cheques and writes its individual number from
the OBC register.

Entries of all OBC cheques are written in an OBC register.

An OBC letter is printed, which shows the cheque numbers, the branch drawn on and
amount.
31

Original Cheques are attached to these letter and sent to the main Bank Alfalah branch in
that area by courier

When that area branch clears the amount from the Non-Bank Alfalah branch, it sends an
Inter Branch Credit Advice (IBCA) to Bank Alfalah I-8 Markaz and the officer at the
branch credits the customer account with that amount

Transfers
Transfers are conducted by Bank Alfalah I-8 Markaz Branch, using its software Bank Smart.
There are two types of transfers:
1. Internal Transfers
2. Online Transfers

Internal Transfers
Internal transfers take place when a Bank Alfalah I-8 Markaz account holder draws a cheque in
favor of another Bank Alfalah I-8 Markaz account holder. The process for internal transfer is as
follows:
1. Officer of the bank receives the cheque and determine if the cheque is an internal transfer
by looking at the branch code, if they are same then it is an internal transfer
2. The officer will post entries by credit the account in favor of whom the cheque was drawn
and debit the account that drew it in the banks software.
3. The cheque will be sent for supervision to the operations manager for authentication of the
entries
4. When supervised, the cheque will be affixed with the official stamps and kept with the
bank.

Online Transfers
All those transfers that take place when a Bank Alfalah account holder draws a cheque in favor of
a Bank Alfalah I-8 Markaz account holders are known as online transfers. The process for online
transfer is as follows:
1. The bank officer collects the cheque from the depositors.
2. Verifys if the accounts are online and need to be transferred online
3. Posts entries by debiting the account of the cheque, while crediting the account on the slip
attached with the cheque.
32

4. Sends the cheque for supervision to the operations manager

5. When supervised, the cheque will be affixed with the official stamps and kept with the
bank.

Remittances
There are two main types of instruments that are used to transfer money, which are as follows:

Pay order: Used to transfer money within the city

Demand Draft: Used to transfer money outside the city

Pay Order
Pay orders are made to transfer money within the city and this is a safe way to transfer money as
the person who makes the transfer through pay order pays in advance. The procedure that is
carried out in transferring money through pay order is as follows:

33

Chapter 3

34

Financial Analysis
3.1 Horizontal &Vertical Analysis

Balance Sheet of Bank Alfalah Limited

Assets
Cash and balances with
treasury banks
Balances with other banks
Lending to financial
institutions
Investments
Advances
Other assets
Operating fixed assets
Deferred tax asset
TOTAL ASSETS
LIABILITIES & EQUITY
Bills payable
Borrowings from financial
institutions
Deposits and other accounts
Subordinated loans
Liabilities against assets
subject to finance lease
Other liabilities
Deferred tax liabilities
TOTAL LIABILITIES
REPRESENTED BY
Share capital
Reserves
Unappropriated profit
Surplus on revaluation of
assets
Total EQUITY
Total Liabilities and
Equity

2007

2008

2009

2010

2011

19,708,518
3,183,957

24,788,625
9,713,369

27,859,360
12,731,952

29,436,378
18,380,738

32,687,335
21,581,043

35,503,196
88,931,400
3,226,959
4,280,504

27,050,493
57,425,700
118,864,010
3,851,529
6,620,067

12,456,653
56,502,210
149,999,325
5,633,051
10,502,990

3,452,059
88,491,564
171,198,992
6,013,097
11,922,324

3,315,500
75,973,238
192,671,169
8,989,186
13,773,293

154,834,534

248,313,793

275,685,541

328,895,152

348,990,764

2,233,671

3,733,124

3,091,135

4,138,243

3,452,031

12,723,830
129,714,891
1,899,480

5,844,389
222,345,067
3,223,355

8,394,130
239,509,391
3,222,106

21,230,697
273,173,841
3,220,858

13,690,222
300,732,858
2,571,169

2,725,344
275,834
149,573,050

5,219,666
484,066
240,849,667

7,305,496
1,921,338
263,443,596

9,531,860
1,379,809
312,675,308

11,291,280
208,465
331,946,025

2,500,000
1,008,772
860,300

3,000,000
2,351,218
1,386,845

5,000,000
2,749,533
2,823,072

6,500,000
2,414,833
4,851,840

7,995,000
3,166,056
3,447,467

892,412
5,261,484

726,063
7,464,126

1,669,340
12,241,945

2,453,171
16,219,844

2,436,216
17,044,739

154,834,534

248,313,793

275,685,541

328,895,152

348,990,764

35

3.2

Income Statement of Bank Alfalah Limited

2007
5,620,203

Mark-up/return/interest earned
NON MARK-UP /INTEREST INCOME
Fee, Commission and
brokerage income
675,868
Dividend income
52,539
Income from dealing in Foreign
currency
218,820
Gain on sale of securities
Unrealized (loss) /gain on
revaluation of Investments
Other income
572,822
Total Non mark-up/ Interest
income
1,520,049
TOTAL INCOME
7,140,252
EXPENSES
Mark-up/return/interest earned
expensed
2,434,459
Provision against nonperforming loans and advancesnet
370,208
Provision for the diminution in
the value of investments
2,165
Bad debts written off directly
351
NON MARK-UP/ INTEREST EXPENSES
Administrative expenses
2,677,635
Other Provisions/Write Offs
Other charges
1,700
Total non mark-up/ Interest
expenses
2,679,335
Extraordinary / Unusual items
PBT
1,653,734
Taxation
-Current
586,159
-Prior years
(20,751)
-Deferred
(3,663)
TOTAL EXPENSES
6,048,263
PAT
1,091,989

2008
12,246,811

2009
21,191,470

2010
25,783,871

2011
31,046,583

1,158,747
52,014

1,804,998
37,393

2,429,599
64,722

2,539,321
300,943

290,091

386,997
180,751

474,510
2,053,192

914,845
424,220

744,518

(27,599)
842,099

(14,929)
1,031,372

(181,571)
1,247,669

2,245,370
14,492,181

3,224,639
24,416,109

6,038,466
31,822,337

5,245,427
36,292,010

7,204,992

15,232,886

16,620,963

20,331,194

402,298

697,690

2,370,867

2,035,997

(23,163)
512

1,537

5,844

1,479,062
28,298

4,313,023
10,125
21,104

5,874,745
43,306

8,272,587
6,959
9,565

10,471,399
28,582
122,758

4,344,252

5,918,051

8,289,111

10,622,739

2,563,290

2,565,945

4,535,552

1,794,720

592,635
1,037
267,524
12,790,087
1,702,094

476,226
(100,874)
427,902
22,653,418
1,762,691

1,726,810

1,730,051
(221,797)
(1,014,835)
34,990,709
1,301,301

-321,487
28,692,108
3,130,229

36

3.3 Horizontal Analysis of Balance Sheet

2007

Assets
Cash and balances with treasury banks
Balances with other banks
Lending to financial institutions
Investments
Advances
Other assets
Operating fixed assets
Deferred tax asset
TOTAL ASSETS
LIABILITIES & EQUITY
Bills payable
Borrowings from financial institutions
Deposits and other accounts
Subordinated loans
Liabilities against assets subject to
finance lease
Other liabilities
Deferred tax liabilities
TOTAL LIABILITIES
REPRESENTED BY
Share capital
Reserves
Unappropriated profit
Surplus on revaluation of assets
Total EQUITY
Total Liabilities and Equity

100.00
100.00

100.00
100.00
100.00
100.00

2008

2009

2010

125.78
305.07
100.00
161.75
133.66
119.35
154.66

141.36
399.88
46.05
159.15
168.67
174.56
245.37

149.36
577.29
12.76
249.25
192.51
186.34
278.53

2011
165.85
677.81
12.26
213.99
216.65
278.57
321.77

100.00

160.37

178.05

212.42

225.40

100.00
100.00
100.00
100.00

167.13
45.93
171.41
169.70

138.39
65.97
184.64
169.63

185.27
166.86
210.60
169.57

154.55
107.60
231.84
135.36

100.00
100.00
100.00

191.52
175.49
161.02

268.06
696.56
176.13

349.75
500.23
209.05

414.31
75.58
221.93

100.00
100.00
100.00
100.00
100.00
100.00

120.00
233.08
161.20
81.36
141.86
160.37

200.00
272.56
328.15
187.06
232.67
178.05

260.00
239.38
563.97
274.89
308.28
212.42

319.80
313.85
400.73
272.99
323.95
225.40

37

Comments on Horizontal Analysis of Balance Sheet Assets:

The assets of the BAFL have been growing very fast since its inception. This growth is
the result of the massive expansion policy the management has been following ever since
the inception of BAFL.
One of the important ingredients of any commercial banks growth is increase in most of
current assets that is a good sign as it increases their liquidity. Let us first have a look at
the liquid assets.
In earning asset, the lending to financial institutions is decreasing whereas the other
investments and advances continuously. However the investments have increased in
20011 with decreasing rate. Increase in the fix assets might be due to branch expansion.

Liabilities:
As regards the liability section of the balance sheet chief liability of commercial bank is its
deposits it generates from its customer. The ratio of increase in deposits in 2011 is 21.24%
which is low as compare to increase in 2010 which is 25.96%, it is concluded that the
deposits are increasing but at decreasing rate. . The other encouraging ratio we observe in
liability section is borrowing from financial institution which shows decreasing in 2008 and
2009 but it shows an increase 2010 and 2011 which proves financial strength and its credit
worthiness in the money market.

Equity:

Banks Share Capital as well as unappropriate profits is increasing at increasing rate till
2010 but in 2011 the capital share decreased slightly by 0.2% and unappropriate profits
by 163%.

38

3.4 Vertical Analysis of Balance Sheet

Assets
Cash and balances with treasury banks
Balances with other banks
Lending to financial institutions
Investments
Advances
Other assets
Operating fixed assets
Deferred tax asset
TOTAL ASSETS
LIABILITIES & EQUITY
Bills payable
Borrowings from financial institutions
Deposits and other accounts
Subordinated loans
Liabilities against assets subject to
finance lease
Other liabilities
Deferred tax liabilities
TOTAL LIABILITIES
REPRESENTED BY
Share capital
Reserves
Unappropriated profit
Surplus on revaluation of assets
Total EQUITY
Total Liabilities and Equity

2007

2008

2009

2010

12.73
2.06

9.98
3.91
10.89
23.13
47.87
1.55
2.67

10.11
4.62
4.52
20.50
54.41
2.04
3.81

8.95
5.59
1.05
26.91
52.05
1.83
3.62

22.93
57.44
2.08
2.76

2011
9.37
6.18
0.95
21.77
55.21
2.58
3.95

100.00

100.00

100.00

100.00

100.00

1.44
8.22
83.78
1.23

1.50
2.35
89.54
1.30

1.12
3.04
86.88
1.17

1.26
6.46
83.06
0.98

0.99
3.92
86.17
0.74

1.76
0.18
96.60

2.10
0.19
96.99

2.65
0.70
95.56

2.90
0.42
95.07

3.24
0.06
95.12

1.61
0.65
0.56
0.58
3.40
100.00

1.21
0.95
0.56
0.29
3.01
100.00

1.81
1.00
1.02
0.61
4.44
100.00

1.98
0.73
1.48
0.75
4.93
100.00

2.29
0.91
0.99
0.70
4.88
100.00

39

Comments on Vertical Analysis of Balance Sheet:

After analyzing the Balance Sheet, we can see that balances with other banks are
increased in percentage from 5.59 to 6.18 as well as the cash balance with the bank is
also increased 8.95 to 9.37 that is a good sign for management. Lending to Financial
Institutions is continuously decreasing from 10.89 in 2008 to 0.95 in 2011. There is a
decrease in percentage of lending to financial institutions is not a good sign.
On liability side, borrowings from financial institutions are also decreased that is very
positive sign as far as banks financial health is concerned. Borrowings are decreased by
6.46% in 2010 to 3.92% in 2011. More over there is an increase in deposits from year
2010 to 2011 which shows the faith and trust of people on BAL. Deposits are increased
from 83.06% in 2010 to 86.17% in 2011.

40

3.5 Horizontal Analysis of Income Statement

2007
100.00

Mark-up/return/interest earned
NON MARK-UP /INTEREST INCOME
Fee, Commission and brokerage
income
100.00
Dividend income
100.00
Income from dealing in Foreign
currency
100.00
Gain on sale of securities
Unrealized (loss) /gain on
revaluation of Investments
Other income
100.00
Total Non mark-up/ Interest income
100.00
TOTAL INCOME
100.00
EXPENSES
Mark-up/return/interest earned
expensed
100.00
Provision against non-performing
loans and advances-net
100.00
Provision for the diminution in the
value of investments
100.00
Bad debts written off directly
100.00
NON MARK-UP/ INTEREST EXPENSES
Administrative expenses
100.00
Other Provisions/Write Offs
Other charges
100.00
Total non mark-up/ Interest
expenses
100.00
Extraordinary / Unusual items
PBT
100.00
Taxation
-Current
100.00
-Prior years
100.00
-Deferred
100.00
TOTAL EXPENSES
100.00
PAT
100.00

2008
217.91

2009
377.06

2010
458.77

2011
552.41

171.45
99.00

267.06
71.17

359.48
123.19

375.71
572.80

132.57

176.86
100.00

216.85
1,135.92

418.08
234.70

129.97
147.72
202.96

100.00
147.01
212.14
341.95

54.09
180.05
397.25
445.68

657.89
217.81
345.08
508.27

295.96

625.72

682.74

835.14

108.67

188.46

640.41

549.96

(1,069.88)
145.87

437.89

1,664.96

68,316.95
8,062.11

219.40

391.07
282.29
7,221.06

161.08
100.00
1,241.41

2,547.41

308.95
0.69
562.65

162.14

220.88

309.37

396.47

155.00

155.16

274.26

108.53

101.10
(5.00)
(7,303.41)
211.47
155.87

81.25
486.12
(11,681.74)
374.54
161.42

294.60
0.00
8,776.60
474.39
286.65

295.15
1,068.85
27,705.02
578.52
119.17

41

Comments on Horizontal Analysis of Income Statement:

Income:
The income of the BAL shows the increasing trend till 2010 but in 2011 its overall
income has decreased by 167.48% as compare to 2010 mainly because of the perceiving
world economic crisis and also by the Pakistans economy crisis. Due to increasing
provisions, the profibility of the bank decreases a lot.

Expense:
The expenses of the bank are increasing as operations of the bank increases. The expenses
have been increasing with an increasing rate since last three years. The expenses increased
104%in 2011 as compared to 100% increase in 2010.

42

3.6 Vertical Analysis of Income Statement

2007
78.71

Mark-up/return/interest earned
NON MARK-UP /INTEREST INCOME
Fee, Commission and brokerage
income
9.47
Dividend income
0.74
Income from dealing in Foreign
currency
3.06
Gain on sale of securities
0.00
Unrealized (loss) /gain on
revaluation of Investments
Other income
8.02
Total Non mark-up/ Interest income
21.29
TOTAL INCOME
100.00
EXPENSES
Mark-up/return/interest earned
expensed
34.09
Provision against non-performing
loans and advances-net
5.18
Provision for the diminution in the
value of investments
0.03
Bad debts written off directly
0.00
NON MARK-UP/ INTEREST EXPENSES
Administrative expenses
37.50
Other Provisions/Write Offs
Other charges
0.02
Total non mark-up/ Interest
expenses
37.52
Extraordinary / Unusual items
PBT
23.16
Taxation
-Current
8.21
-Prior years
(0.29)
-Deferred
(0.05)
TOTAL EXPENSES
84.71
PAT
15.29

2008
84.51

2009
86.79

2010
81.02

2011
85.55

8.00
0.36

7.39
0.15

7.63
0.20

7.00
0.83

2.00
0.00

1.59
0.74

1.49
6.45

2.52
1.17

5.14
15.49
100.00

(0.11)
3.45
13.21
100.00

(0.05)
3.24
18.98
100.00

(0.50)
3.44
14.45
100.00

49.72

62.39

52.23

56.02

2.78

2.86

7.45

5.61

0.01

0.02

4.08
0.08

24.06

28.85
0.08
0.34

-0.16
0.00

29.76
0.07
0.15

0.18

26.00
0.02
0.03

29.98

24.24

26.05

29.27

17.69

10.51

14.25

4.95

4.09
0.01
1.85
88.26
11.74

1.95
(0.41)
1.75
92.78
7.22

5.43
0.00
(1.01)
90.16
9.84

4.77
(0.61)
(2.80)
96.41
3.59

43

Comments on Vertical Analysis of Income Statement:

The vertical analysis of income side of income statement demonstrate that major factor of
the total income is interest earned which contributes more than 75% in 2007 and 80% in
2008 to 2011, whereas fee, commission and brokerage income makes major part of total
non-mark up interest income and its proportion to total non-mark up interest/income is
Decreasing every year but in 2009 it increased little; here we observe that total non mark
up income is decreased in 2011, which is good sign for the bank as bank is earning more
from its primary functions.
Non- mark up interest expensed is the major component of total expense in 2007, and in
non mark up expense admin expenses contribute 44.27%. But from 2008 till 2009,
interest expensed in the major part because the deposits of the banks shows increase and
as bank has to pay on interest bearing liabilities.

44

3.7 RATIO ANALYSIS

Ratio simply means one number expressed in terms of another. A ratio is a statistical
yardstick by means of which relationship between two or various figures can be
compared or measured. It is defined as a systematic use of ration to interpret the financial
statements
so that the strengths and weaknesses of a firm, as well as historical performance and
current financial condition, can be determined.

45

3.7.1 Profibility Ratios

BAFL is following the

trend of industry in
terms of declining
profits due to rising
provisions.

Rs 3130 million in FY07 which is

down by 58.4%.

The mark-up increased

by 20.4%, while the
mark-up expense
increased by 22.3%,
limiting the net markup growth to 17% to Rs
10,715 million.
Provisions showed a
considerable increase
and a new provision for
diminution in value of
investments is included
in 2011 which valued
Rs. 1,479 million. The
bad debts directly
written off increased by
4.8 times in 2011
compared to last year
and valued Rs. 28
million.
The
non-mark-up
interest
income
declines slightly, thus
contributing
insignificantly
towards creating a
variance in the two
years. Administrative
expenses swelled by
26.6% due to the
expansion in branch
network
during
FY08, in line with the
inflationary
pressures. PAT was
Rs 1301 million in
FY08 as compared to
46

ROA
ROE
Net profit
margin
Gross spread
ratio

1.2
1
0.8
0.6
0.4

2007
0.86
26.89

0.2
0
2007

ROE

19.14
56.96

2008

2009

2010

2011

N et profit m argin G ros s s pread r

60
50
40
30
20
10
0

2007

2008

2009

2010

2011

Return on Average Total Assets= (Net Profit after Tax / Avg.

Total Assets)*100
Return on assets (ROA) measures the firms overall effectiveness in
generating profits with its available assets. This ratio indicates how
well management is utilizing firms assets to

47

make profit. ROA shows decreasing trend in starts but it increased in 2010 and reaches
1.04% to its peak and now it decreases drastically and reaches 0.38%.
Return on Equity (ROE) = (Net Profit after Tax / Shareholders Equity)*100
ROE measures the shareholders return earned on their investment in the firm. This ratio
indicates how profitable a company is by comparing its net income to its average
shareholders equity. ROE was at maximum 30.65% in FY05 but in 2011 it reaches to
lowest 9.17% from 25.72% of FY07.
Net Profit Margin = (Net Profit after Tax / (Sales))*100
Net profit margin measures the percentage of sales revenue remaining after all cost and
expenses, including interest and taxes have been deducted. The net profit margin has also
decreased to considerable low level of 4.19% from previous years 12.14%.
Gross Spread Ratio = Net Mark up Income / Gross Mark up Income
Gross spread ratio measures the percentage of sales revenue earned to the gross mark up
after deducting the markup expense. Gross spread ratio has decreased slightly compared
to 2010 and it was lowest 28.12% in 2006.

3.7.2 Debt Management Ratios

Debt Ratio = Total Liabilities /

Total Assets

Debt to equity
Debt Ratio
Deposit times
capital

2007 2008 2009 2010

28.43 32.27 21.52 19.28
0.97 0.97 0.96 0.95

2011
19.47
0.95

24.65 29.79 19.56 16.84

17.64

Debt ratios tell us about the firms overall debt position and as well as it mixes of equity
and debt. These ratios will also give general idea about the level of financial risk faced by
firm.
This ratio measures
the
portion of total
assets
financed by the firms
Creditors. Higher its ratio,
the greater the amount of
other peoples money being
used in an attempt to
generate
Profits.
Even
though debt ratio is in
decreasing
trend but this
ratio is very high. Higher
this ratio means higher the
financial risk so its a
negative sign for bank.
Debt to equity compares the
debt size as compared to
equity. The Debt to equity is
lowest in FY07 and it has
increased slightly in 2011.

Debt Ratio
0.97
0.96
0.95
0.94
2007

2008

2009

Debt to equity

2010

2011

Deposit times capital

40
30
20
10
0
2007

2008

2009

2010

However the deposits make

the 90.5% of the total debt.
The ratio of deposit time capital shows the deposit size as compare to the invested capital.

2011

The debt management figures show that the assets of the bank have become less leveraged
till 2010. This was due to the fact that the debt has increased but equity has increased by a
greater percentage in recent years. But it increased slightly in 2011. Equity increased by 5%in
FY08. However, liabilities rose by 6.1%.

3.7.3 Liquidity
Ratios

Earning assets
to assets
Advance to
deposit

2007

2008

2009

2010

2011

0.80

0.82

0.79

0.80

0.77

The advance to
68.56 53.46 62.63 62.67
deposit ratio (ADR)
ratio
is
banks
financial ratio which
is used to test the
company financial position by keeping in view its advances and
deposits. Strength of bank is judged that how much bank is
capable to grasp the saving of people and how many people are

64.07

interesting to take loan facility from bank as profit of bank

depends on higher advances and advances comes from deposits
of customers.

The figures for FY08 show

that the bank has further
improved
its
liquidity
position.
Advances
have
grown by 12.5% from 171
80
million to 192 million during 60
this period.
40

Advance to deposit

20
0

Earning assets are

interest
2007
2008
2009
2010
2011
generating assets. The
ratio
of earning assets to asset
shows the proportion of
interest generating assets to
the total assets.
Earning assets to assets
The ratio of earning assets to
total assets for the bank
0.84
shows
remarkable
0.82
0.8
fluctuation,
suggesting 0.78
careful management of
and 0.76
investment
in
interest 0.74
generating assets.
Within
2007
2008
2009
2010
2011
earning assets, however, the
bank shows a gradual trend of movement of capital into and away from lendings to other
financial institutions.

3.7.4 Solvency
Ratios
The
solvency
situation for the
industry as a whole
has shown marked
improvement
in
recent years caused
by

Equity to assets
Equity to deposits
Earning assets to
deposits (times)

2007 2008
3.40 3.01
4.06 3.36
0.98

0.96

2009
4.44
5.11

2010
4.93
5.94

2011
4.88
5.66

0.97

1.03

0.90

increasing profitability and fresh inflows of capital till FY07.

However, the figures for the
bank show that there is a
slight decline in the solvency
position in 2011 as a result
of high growth in deposits.
Earning assets to deposits
The situation was worse in
2008 when the 3% of assets
1.1
was equity
financed.
1

This situation, however, has

improved in 2009 because of
increases in equity, which

0.9
0.8
2007

2008

2009

2010

2011

gained financed
almost
4% of assets.
Earning
assets
in
comparison to
deposits
declined from around 1.03
in FY07 to 0.90 in FY08.
This is caused by the fact
that while deposits have
shown tremendous growth
over the period
under
study, the bank
has
maintained
a consistent

Equity to assets
Equity to deposits
8.00%
6.00%
4.00%
2.00%
0.00%
2007

2008

2009

2010

2011

approach with respect to its earning assets and has not expanded them to the same extent.

3.7.5 Activity Ratios

Activity ratios show that how

efficiently an organization is
using its resources.

2007 2008
Total Asset
Turnover

3.6

4.9

2009

2010

2011

7.6

7.8

8.8

Total Asset Turnover = Sales (Revenue) / Total Assets

Total asset turnover indicates the efficiency with which firm uses it assets to generate
sales (revenue). The higher the firms
total assets turnover the more
Total Asset Turnover
efficiently its assets have been
used. This measure is probably
10
of
greatest
interest
to
8
management,
because
it
6
indicates whether the firms
4
operations have been financially
2
efficient. In last five years Total
0
Asset Turnover
shows its
2007
2008
2009
2010
2011
increasing trend, so its good
sign and shows that bank using
its assets efficiently.

3.7.6 Market Ratios

Banks have dominated the capital markets of Pakistan because of their superlative
performance. They comprise one third of the total capitalization of the KSE.

Book value per Share = Total Shareholders Equity / No. of Outstanding Shares
Book value is of limited to the investment analyst since it is based on historical costs.
Book value per share is
showing mix trend and
2007 2008 2009 2010 2011
in FY08 it has decreased
Book Value per share
21.05 24.88 24.48 24.95 21.32
to 21.32 because of large
Earning per share
3.9 3.92 2.91 3.92
1.63
increase in no of share
outstanding from 650,000 in FY07 to 799,500 in FY08. However equity has also increased
slightly by 5%.
Earning Per Share (EPS) =
Book Value per share

Earning
/
No.
Outstanding Shares

Earning per share

of
30
25
20

The

firms

are

15

to

10

EPS

represent the earning on

behalf of each outstanding

generally

EPS

of interest

present shareholders.

2007

2008

2009

2010

2011

share of common stock.

EPS decreased in 2011
significantly due to lower earning which is 58.4% decreased as compared to last year.

Chapter 4

4. SWOT Analysis
SWOT is stands for strengths, weaknesses, opportunities and threats. SWOT analysis is a
careful evaluation of an organizations internal strengths and weaknesses as well as its
environmental opportunities and threats. In SWOT analysis the best strategies accomplish
an organizations mission by exploiting an organizations opportunities and strengths
while neutralizing its threats and avoiding its weakness. During my internship I also
observe these factors of bank and made a conclusion which is as follows:

4.1 Strengths:
Main strengths of bank are describe follows due to which bank is becoming successful
day by day and now is on the fifth largest and successful bank in Pakistan in the banks
ranking after NBP, MCB, UBL and HBL.
Being the private organization its main aim is not to earn profit but also to satisfy its
customers and slogan of BAL is also the representative of this purpose as Bank Alfalah
The Caring Bank.
Bank has AA (Double A) and A1+ (A one plus) Credit Rating for long term and short
term loans respectively.
Main source of profit for any financial institution is public saving which only comes from
public confidence and BAL is getting this confidence which is one of the main strengths
of bank
Bank Alfalah is also getting fame in the market due to its name ALFALAH which is
leaving the Islamic and favorable impact on the minds of public.

BAL is providing the facility of Money Gram to its entire people who are its customer or
not and through this service it has got the leadership in Money Gram because any other
bank is not offering this service.
With in very short period it has got a superb accomplishment which shows the
competency of top management.

Personnel of Alfalah are well trained and highly skilled.

Bank Alfalah has a wide network of branches at the ideal locations, catering the financial
needs of its clients.
The management of the bank is very much concerned with the development and
improvement of the working environment. The bank has state of the art and purpose built
branches where all the modern technologies are provided to get the efficiency of the
workforce and the customer satisfaction.

4.2Weaknesses:
Beside all these strengths I also noted some weaknesses in the operations of bank Alfalah
which are described below:
BAL is that it is not offering the loan facility to newly established businesses because its
the BAL policy that it will loan only to that people who are running their businesses from
3 years.
BALs lending procedure is quite complicated that some people hesitate to come as they
are requiring a huge file of documents.
Bank Alfalah is not offering any credit facility for students.
BAL is not offering the online facility to account holders having photo account.
Bank Alfalah is charging online charges for transfer of money but some other banks not
charge online transfer charges.
Majority of the workforce consists of young professional, they lack in their experience.
And sometimes lack of experience becomes a hurdle while serving to the customers. It is
the point where they feel difficulty while competing with the other banks.
It was observed that at present the motivation level of the employees is not very much.
The increased workload has resulted in the reduced efficiency of the employees. Because now the time
required for completing the tasks for a single customer has been increased. As a result the environment
of the branch has become very messy.

4.3 Opportunities:
It is mandatory to try to make progress with consistency as well as to adopt changes with
needs of time, in order to cope up with both conditions.
Bank Alfalah is spreading its network outside the boundaries of Pakistan and it has more
opportunities to extend this network as State Bank of Pakistan has prescribed new
policies in the prudential regulations.
In addition to excellent routine banking, it has earned a good name by offering special
products like car, home and credit cards facility. So the penetration of these products
could enhance market shares.
There is a very good growth trend in the Islamic banking in the country and in the world as
well. BAL has the advantage of having Islamic Banking network and the growth in this
particular field can be very fruitful for the bank, bank has an opportunity to introduce new
products and services in Islamic banking.

4.4 Threats:
Threats are the negative trends in external environmental factors. As on one side
environment provides opportunities to one organization, on the other hand it also has to
face some threats. Bank Alfalah also has to face this situation.
Other foreign financial institutions like City Bank, HSBC etc also having strong banking policies and
theres a chance that people might move toward these financial institutions to secure their investments,
transactions and related services.
For last seven year there is political stability in Pakistan but now again a new layer of political
instability arises which effects almost all industries including Banks.

Due to economic instability like currency depreciation and inflation, the bank is
constantly facing a threat e.g. in case of inflation the people have low disposal income
which means lower deposits in banks.
Other investment opportunities like investment in property and gold are giving people
more return as compare to banks; it can decrease the deposits of bank.

Chapter 5

Conclusion
The economy of the country is booming and with the investment favorable policies and
their smooth implementation, the role of banks in todays economy have become an
important one.
The banking industry is also reaping the fruits of this economic boom by growing rapidly
over the past few years. There are a number of mergers happening in the economy with
foreign investments coming into the banking sector.
It has been ten years since the establishment of Bank Alfalah, and since its establishment
it has aimed to become the leading bank of Pakistan by that provides outstanding services
to its customers.
The bank has seen phenomenal growth in the past few years by opening more branches in
the country, increasing the deposit base, while also increasing the assets and profits of the
bank.
The services that Bank Alfalah provides have a great market penetration not only because
of their features but also the profit and markup rates that they charge. Also the products
that Bank Alfalah provides cater to sector of the economy.
The top management of the bank is always developing strategies that cope with
unexpected challenges to deliver products and services more efficiently
Furthermore, as the bank is growing, the number of employees at Bank Alfalah are
increasing, which shows that Bank Alfalah is being considered as a an employer, that
provides its employees with a challenging environment to work in, where they can
harness their full potential and shows confidence as an employer by the employees of the
bank.
Lastly to become the leading bank of Pakistan, Bank Alfalah has to benchmark its
services to its major competitors in the industry or the market leader in the industry and
provide a continuous mean of improvement in its existing products and services, while
introducing new ones to the industry.
In the last section, I would like to give some recommendations and is hoped that if they
are implemented will bring benefits to Bank Alfalah.

5.1 Recommendations
Some of the recommendations that I would recommend to some of the problems
discussed in the above section, that might increase the efficiency of both the operations
and employees of Bank Alfalah are as follows

5.1.1 Technological Advancements

Bank Alfalah should develop a modern connectivity architecture to effectively maintain
an online connection of the branch with other branches and also the ATM link, which
may include using modern technologies like fiber cables, routers etc. Also backup links
should also be developed,
Also a proper IT department should be established in all branches, with professional
having the knowledge to maintain a secured connection with other banks. Also scheduled
backups of data should be done with in the bank.

5.1.2 Workshops and Counseling

Work shop programs should be conducted in every city, rather than just two centers, for
all Bank Alfalah employees. These workshops should relate to all aspects of banking and
may also be conducted with other banks as a joint program.
Also as parts of the human resource training, counseling programs should be started for
junior executives or new entrants into the bank, introducing them to their prospects in this
industry.
The lower staff employed at Bank Alfalah should also be given a chance to succeed in
life by training them in different simple jobs at the bank, which my include sorting of
cheques, phone banking etc.

Incentives
Incentive schemes should be developed for the employees that can help motivate them,
which might include:

Personal loans and car financing facilities for all ranks of employees.

Scholarship programs for all employees.

Introducing employee awards at branch and regional levels.

Job rotation programs to enhance the skills of employees.

Priority Banking and Business Development Department

There is no priority banking department at Bank Alfalah, like that of other bank. A
priority banking department should be developed so as to give even more exclusive and
customized services to high end customers with large deposit accounts. Also Business
Development Department should be developed in all branches, so that they can actively
find prospect customers to take up products from Bank Alfalah.

Innovative Products
New and innovative products should be introduced by Bank Alfalah, like other bank such
as Citibank and Standard Chartered Bank develops for their customer. For this purpose,
special teams should be developed that include professional from all departments of the
banks to come with ideas. This process will increase the number of ideas generated and
even produce innovative products for the bank that might give them the edge.

Placements of Employees
There are some departments in the bank that do not have enough employees, while some
have more than needed. All this creates inefficiencies and so the operations manager
should look at the department of the branch and see where inefficiencies lie, in
consultation of with the heads of the departments and hire individuals where there are
less employees or rotate employees from other departments.

Amenities in Branch
There should be a prayer room developed in all branches as many employees want to
pray, but do not have the proper place to do it. Also work like sorting, which takes up a
lot of space should be done in a separate place and amenities like television and internet
connection should be placed in the common room, so as to give employees a relaxing
environment when they have a break.

REFERENCE
Web Resources

Bank Alfalah (www.bankalfalah.com)

Wikipedia (www.wikipedia.com)

State Bank of Pakistan (www.sbp.org.pk)

Google (www.Google.com)

Reports & Papers

Annual Report Bank Alfalah 2011

Issues in Pakistans Economy by S. Akbar Zaidi

International Finance by Maurice D. Levi

Bank Alfalah Limited. (2012). Alfalah Mahana Amdan Plus [Brochure].

Bank Alfalah Limited. (2012). Alfalah Quick Finance [Brochure].

Bank Alfalah Limited. (2012). Alfalah Milkiat Finance [Brochure].

Bank Alfalah Limited. (2012). Alfalah Karobar Finance [Brochure].