INTRODUCTION

1. Objective of the studying the Organization:

Banking is one of the most sensitive businesses all over the world. Bank play very important
role in the economy of a country and Pakistan in bi exemption. it influences and facilitates
many different but integrated economic activities like resources mob imitation, poverty
elimination, production and distribution of public finance, the economy of Pakistan is
growing day by day with an accelerated pace, to meet the requirements of these pace sound
banking system is needed so that one can meet the financial needs of individuals and
corporation also the agricultural, industrial, business sectors. Allied bank was formally
known as the Australasia bank established on 3rd December, 1942 in the city of Lahore, this
is before the formation of Pakistan. it was formed with a paid up share capital of RS.0.12
million under the Chairmanship of Khawaja Bashir Bux, the bank had attracted deposits,
equivalent to RS.0.431 million in its first eighteen months of business. Total assets then
amounted to Rs.0.572 million, deposits come to RS.101.554 billion and total assets equal
Rs.121.164 billion. In this report I have tried to cover all the necessary aspects of banking by
ABL. The primary purpose of the internship is to fulfill the academic requirements of my
study as it is compulsory to do practical work in an organization and to implement the tools
that they have studied for the analysis, there are some secondary purposes associated like
To gain practical knowledge and experience that will help in future to get good opportunities
(jobs).Another objective of my work experience was to relate the gained knowledge from
books and institute with working organization so that I can see the different between
concepts and their implementations. To gain confidence, which usually lack when any one
enter in any, firm for the first time, therefore work experience removes certain fears and
flaws that can create problem for any student. This internship will provide me with the
exposure of the finance field. The internship is considered as the most efficient tool for
learning the procedures and processes of any sort of profession. As I being the management
student, this internship would prove to be as the most suitable method of teach the
management practices have studied the world class courses here at A.IO.U which I think will
definitely be found in actual practice in any organization. The courses will relate to the real
work in one or other aspects. The internships are meant to provide the students to apply their
learning's that they do in classes to the real situations. As I have intended to do my majors at
finance so I will try to seek my personal attitude towards finance during this internship.
Generally, it is noticed that there is remarkable difference between market knowledge and
bookish knowledge although the concepts are same but their application is different. During
my internship i tried to delineate this difference, and was personally curious about the feeling
of professional financial work in an office environment. Banking is a wide field and the
whole aspects of banking cannot be covered in the eight week period so i tried to cover the
important aspects by using most important most fusible technique. However this study of
ABL’s will help the management to identify their weakness and strengths so that they can
minimize the threats and can avail the benefit from the opportunities. This internship report
will be source information for all those who are the interested in the study of financial and
competitive position of ABL. The source of data in this report included interviews of
management, customer response interviews and discussion with staff members and personal
observation personal observations. In the way to write report required different secondary
data sources included ABL annual reports brochures, manuals, website and business reviews.
Time is the major factor which hinders the dynamics of bank processing's. Lack of
documented material provide to be another constraints in this regard as most of the material
is confidential, therefore, internees are not allowed to get "handouts"
Most of the times people were not free to answer my queries or they were not interested it all
in my work. No one is entitled to retrieve its result for any purpose except authorized bank I
personnel for official purpose. Research student are not allowed to retrieve and use any
confidential material for any purpose, as it is again the bank policy. Banks play a central and
very important role in the monetary life of a country, that’s why they are well thought-out as
the livelihood of modern economy. Today no one can deny the importance of Banking in the
economy. They facilitate and expedite trade and commerce and provide a variety of services
that one can’t imagine with out Banks. The requirement of the Master degree in Business
Administration is fulfilled when an internship of eight weeks has been done. The dedicated
students polishes there professional skills in there specialized field. Main purpose of this
program is to make students familiar with the personal interaction in career settings and
practical work as it fosters the development of communication skills to work practically
o To analyze the performance of ABL at the branch level and bank level.
o To highlight the important features of financial products offered by ABL

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o To analyze the bank through different techniques i.e. Horizontal, Vertical.
o To apply the knowledge gained in practical field.
This report is a reflection on my experience when I was internee in ABL, main branch
Abbottabad. Since its inception in 1942, ABL has maintained a steady growth over the sixty
years span of its operations. After its nationalization in 1974, it was denationalized in 1991
and the employees became the owners of ABL, through the unique concept of ESOP
(Employees Stock Ownership Scheme)

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2 Overview of the Allied Bank Limited

2.1 Brief history of the Organization

Established in December 1942 as the Australasia Bank at Lahore with a paid-up share
capital of PKR 0.12 million under the Chairmanship of Khawaja Bashir Bux, and his
business associates, including Abdul Rahman Malik who was amongst the original Board of
Directors, the bank had attracted deposits, equivalent to PKR 0.431 million in its first
eighteen months of business. Total assets then amounted to PKR 0.572 million. Today Allied
Bank's paid up Capital & Reserves amount to Rs. 10.5 billion, deposit exceeded Rs. 143
billion and total assets equal Rs. 170 billion. The Allied Bank's story is one of dedication,
commitment to professionalism, adaptation to changing environmental challenges resulting
into all round growth and stability, envied and aspired by many. In the early 1940s the
Muslim community was beginning to realize the need for the active participation in the field
of trade and industry. The Hindus had since the late 1880s established a commanding
presence in these areas and industry, trade and commerce in the undivided Sub-continent was
completely dominated by them. Banking, in particular, was an exclusive enclave of the
Hindus and it was widely believed, and wrongly so, that Muslims were temperamentally
unsuited for this profession. It was particularly galling for Khawaja Bashir Bux and Abdul
Rahman Malik to hear the gibe that Muslims could not be successful bankers. They decided
to respond to the challenge and took lead in establishing this first Muslim bank on the soil of
Punjab that was to become Pakistan in December 1942; by the name of Australasia Bank
Limited. The initial equity of the Bank amounted to Rs 0.12 million, which was raised to Rs
0.5 million by the end of first full year of operation, and by the end of 30th June 1947 capital
increased to Rs. 0.673 million and deposits raised to Rs 7.728 million. Australasia Bank was
the only fully functional Muslim Bank on Pakistan territory on August the 14th, 1947.It had
been severely hit by the riots in East Punjab. The bank was identified with the Pakistan
Movement. At the time of independence all the branches in India, (Amritsar, Batala,
Jalandhar, Ludhaina, Delhi and Angra (Agra)) were closed down. New Branches were
opened in Karachi, Rawalpindi, Peshawar, Sialkot, Sargodha, Jhang, Gujranwala and Kasur.
Later it network spread to Multan & Quetta. The Bank financed trade in cloth and food

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grains and thus played an important role in maintaining consumer supplies during riot
affected early months of 1948. Despite the difficult conditions prevailing and the substantial
set back in the Bank’s business in India, Australasia Bank made a profit of Rs 50,000 during
1947-48.By the end of 1970 it had 101 branches. Unfortunately it lost 51 branches in the
separation of East Pakistan which became Bangladesh. The bank did well in despite losing
lot of its assets. By the end of 1973 the bank had 186 branches in West Pakistan.

Allied Bank from 1974 to 1991 In 1974, the Board of Directors of Australasia Bank
was dissolved and the bank was renamed as Allied Bank. The first year was highly
successful one: profit exceeded the Rs 10 million mark; deposits rose by over 50 percent and
approached Rs 1460 million. Investments rose by 72 percent and advances exceeded Rs 1080
million for the first time in bank history. 116 new branches were opened during 1974 and the
Bank started participation in the spot procurement agriculture program of the Government.
Those seventeen years of the Bank saw a rapid growth. Branches increased from 353 in 1974
to 748 in 1991. Deposits rose from Rs 1.46 billion, and Advances and investments from Rs
1.34 billion to Rs 22 billion during this period. It also opened three branches in the UK.
ESOP Revolution (Employee stock ownership plan) under the philosophy of ESOP
ownership of an enterprise is transferred to its employees who are in an advantageous
position in running the enterprise. The added advantage of ESOP that it strengthens the
workers stake in the free enterprise system, in job securities, better profitability & unique
corporate culture symbolizing family feelings & professional fraternity. September 10,1991
is the historical date as on this date the bank became the country’s 1st bank to be
reconstituted as an institution jointly owned by its employees through the unique concept of
Employees Stock Ownership plan [ESOP] developed by the Allied Management Group
headed by Mr. Khalid Latif enabled the bank staff to react creatively to the privatization
challenge. More that 7500 staff members acquired a share in the bank. The articulation of the
ESOP is a landmark in the financial history of Pakistan-indeed of the entire world .It is a
practical step ensuring an increase in workers participation and in productivity a means for
enhancing an equitable redistribution of financial assets & an effective strategy for achieving
the cherished goal of national self-reliance.

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Privatization 1991 to 2008 As a result of privatization in September 1991, Allied
Bank entered in a new phase of its history, as the world’s first bank to be owned and
managed by its employees. In 1993 the First Allied Bank Modaraba (FABM) was floated.
After privatization, Allied Bank registered an unprecedented growth to become one of the
premier financial institutions of Pakistan. Allied Bank’s capital and reserves were Rs. 1.525
(Billion) and assets amounted to Rs. 87.536 (Billion) and deposits were Rs. 76.038 (Billion).
Allied Bank enjoyed an enviable position in the financial sector of Pakistan and was
recognized as one of the best amongst the major banks of the country. In August 2004 as a
result of capital reconstruction, the Bank’s ownership was transferred to a consortium
comprising Ibrahim Leasing Limited and Ibrahim Group. Today the Bank stands on a solid
foundation of over 63 years of its existence having a strong equity, assets and deposits base
offering universal banking services with higher focus on retail banking. The bank has the
largest network of on-line branches in Pakistan and offers various technology based products
and services to its diversified clientele through its network of more than 700 branches. In
May 2005 Ibrahim Leasing Limited was amalgamated by transfer to and vested in with and
into Allied Bank Limited. ILL shareholders were issued ABL shares in lieu of the ILL shares
held by them. Application for the listing of ABL shares in all the Stock Exchange Companies
of Pakistan was made. ABL was formally listed and trading of the shares of the Bank
commenced w.e.f. the 8th , 10th and 17th August in ISE,LSE & KES. Muhammad Aftab
Manzoor has taken charge as CEO and President of the Bank on August 13 2007. He is an
ex-president of MCB Bank Ltd. Today, with its existence of over 60 years, the Bank has built
itself a foundation with a strong equity, assets and deposit base. It offers universal banking
services, while placing major emphasis on retail banking. The Bank also has the largest
network of over 700 online branches in Pakistan and offers various technology-based
products and services to its diverse clientele

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 2.2 Nature of the Allied Bank Limited

Allied Bank Limited (ABL) is one of the dynamic commercial Bank of Pakistan by capturing
largest market share amongst new Banks and has provided good value to its shareholders.
Allied Bank limited (ABL) is principally engaged in the business of Banking (“banking
means the accepting, for the purpose of lending or investment, of deposits of money from the
public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or
otherwise;) as defined in the Banking companies’ ordinance, 1962 over the year; ABL has
proved its strength as a leading Banking sector entity. Allied bank engages in following
function The borrowing, raising, or taking up of money; the lending or advancing of money
either upon or without security; the drawing, making, accepting, discounting, buying, selling,
collecting and dealing in bills of exchange, hundies, promissory notes, coupons, drafts, bills
of lading, railway receipts, warrants, debentures, certificates, scrips (participation term
certificates, term finance certificates, and such other instruments as may be approved by the
State Bank) and other instruments, and securities whether transferable or negotiable or not;
the granting and issuing of letters of credit, traveller’s cheques and circular notes; the
buying, selling and dealing in bullion interest the buying and selling of foreign exchange
including foreign bank notes; the acquiring, holding, issuing on commission, underwriting
and dealing in stock, funds, shares, debentures, debenture stock, bonds, obligations,
securities (participation term certificates, term finance certificates, and such other
instruments as may be approved by the State Bank) and investment of all kinds; the
purchasing and selling of bonds, scrips or other forms of securities (participation terms
certificates, term finance certificates, and such other instruments as may be approved by the
State Banks) on behalf of constituents or others, the negotiating of loans and advances; the
receiving of all kinds of bonds, scrips of valuables on deposit or for safe custody the
collecting and transmitting of money and securities;

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 2.3 Business Volume of ABL:
Rs in (Million)
2,005 2,006 2,007 2,008 2,009
Total Revenue 5,027 6,120 10,333 14,736 19,708
118,795 131,83
Deposit 61,657 83,319 , 9 143,037
Advances 44,778 69,838 85,977, 99,179 100,780
Investments 22,104 17,239 25,708 28,625 39,431
Pre-tax Profit 1,902 28,243 2,859 3,347 2,210
After tax profit 1,103 1,923 2,022 2,250 2,681
Return per Share 8.78 12.76 13.42 7.48 8.92
Source: ABL website (www.abl.com.pk)

25000

20000

15000

10000

5000

0
2005 2006 2007 2008 2009
T. Revenu 5027.468 6120.734 10333.264 14736.175 19708.737
From deposit point of view it can be concluded that from the year 2005 to 2009, the total
deposits has increased about 100-110%, which shows a tremendous growth in deposit. From
the table we also conclude the result of pre-tax profit which also show increase from 1.9
billion to 2.2 billion in 2008 it was 3.3 billion but in 2009 it decrease due to opening of new
branches all over the Pakistan.
The overall progress of the bank is very good in private sector. From the above table a
conclusion can be made that bank sees up and down from earning per share but it is only due
to opening of new branches, as the number of required branches once achieved the bank will
increase its earning per share.

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3 Employee in ABL Bank

Year 2004 2005 2006 2007 2008 2009

Employee 6768 6909 7139 8181 8325 8713

Staff Strength Total

Permanent 8,713
Temporary/on contract 142
Bank’s own staff strength at the end of the year 8,855
Outsourced 2,835
Total Staff Strength 11,690

No of Employee in ABL Abbottabad (BISE) Branch

Designation No s
Assistant Voice President 2
Officer in Grade-I 12
Officer in Grade-II 10
Officer in Grade-III 5
Senior Assistants 1
Massagers 5
Total 35

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4 Product/ service Lines of Allied bank of Pakistan

4.1.1All-Time Banking
Allied Bank has introduced the Allied Cash last year also referred to as ATM card. The
customer will now have the convenience of withdrawing cash from any of ABL’s ATMs
(Auto Taller Machine) conveniently located in major cities at any time of the day or night
even on closed days/holidays. Other services include customer being able to inquire about
the balance of his/her account or printing an abbreviated (mini) statement showing the most
recent eight transactions up to the previous working day.

In order to obtain Allied Cash+ Card, the customers simply have to fill out prescribed
Application form available at selected Allied Bank Branches in Karachi and Lahore. The
dully-filled form should be handed over the Manager of the Branch where the customer is
maintaining his account. Non-account holders would first have to open an account with
Allied Bank to have access to this facility. The Customer can feel absolutely safe his Allied
Cash + Card because it can only be used with the Personal identification Number (PIN),
which is given to him by the bank. Graphical representations have been employed, where
appropriate, for ease of understanding.

4.1.2Allied Umrah Aasan

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 This unique scheme facilities those persons, who cannot afford to incur the lump sum
expenses for Umrah. It allows the intending pilgrims (Aazmeen) to make payment of Umrah
charges in monthly installments. Its salient features are:
o It is free of interest and markup.
o Using this scheme family, relatives and household servants can be sent for Umrah.
o Around 2500 Aazmeen are to be sent for Umrah every month.
o Lucky winners of the draw are duly informed by their respective branches.
o Total package for Aazmeen from Karachi is being Rs. 45,000. Aazmeen from
Lahore and Islamabad will have to pay an extra Rs. 3,000/- for Airline fare.
o Umrah packages are of 10 days duration. The charges include Airline return
ticket.
o Fee Visa, family accommodation and traveling within Saudi Arabia (Jeddah to
Makka, Makka to Madina and Median to Jeddah).
o Application for whole Family/Group can be filed through a single Application form.
All applicants of a family/group are sent for Umrah even if only one member of that
family/group is declared successful in the draw.
o Due to any reason if Umrah Applicant needs to withdraw his/her application,
he/she will given a refund of all money deposited through installments till that
time.
o At the time of submitting the application Aazmeen has to deposit Rs. 2,000 per
person as first installment. Rest of the money is to be deposited through monthly
installments of Rs. 2,000/- person on every 5th day of the month.
o If an Applicant wins in the draw he/she is required to pay the balance amount
through monthly installments on returning from Umrah.
o Aazmeen have to submit a copy of their NI Cards and Passports with the application.
o Applicants have to deposit the monthly installment using deposit slips still 5th of
every month. Defaulters will not be included in the draw.

4.1.3Master Cards
The customer can now become the holder of a true Credit Card here in Pakistan.
Allied Bank under license from Master Card International, U.S.A. issues its Master Card to

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anyone meeting the eligibility criteria. With the Allied Bank Master Card the customer is
assured of a service meeting the highest international standards maintained by Master Card.
The Allied Bank Master Card helps the customer pay without the complications of cash or
checks. It doesn’t cost the customer anything if he pays in full within the due date, but if he
decides to spread the payments over several months a service charge @ 2.50% per month is
charged. Allied Bank – Master Card is safer than cash and simpler than checks.
The customer has been an account holder with the Allied Bank to apply for the Allied Bank –
Master Card that is available to the customer for an initial fee of Rs. 2,000/- (Rs. 500/-
membership fee + Rs. 1,500/- annual fee). Once the customer obtains his card, he simply
presents it at Shops, Supermarkets, Hotels, Pharmacies, Nursing Homes, restaurants, Petrol
Pumps and hundreds of other establishments which display the familiar Master Card sign
throughout Pakistan and abroad.
Once purchases are made, the customer signs a voucher and that’s it he is not required to take
extra troubles. Every month the customer receives a statement showing details of
transactions, outstanding and the minimum amount due. The statements also give the last
date for payment so the customer can avoid paying service charges.
In order to avoid disruption in use of the card, it is essential that a least minimum payable
amount of the bill be paid regularly. In case the required payment is not received the
operation of the Master Card is automatically, suspended by the system. In such case, the
card is activated after receipt of overdue payment only.

4.1.4Allied Tahafuz Deposit Scheme

Brings the customer unparalleled life insurance covers along with attractive monthly
profit. Minimum Deposit amount – Rs. 50,000/- or multiples thereof. Insurance cover up to -
Rs. 5,000,000/. As Competitive rate profit. The features of this scheme are:
Prospective client who will maintain a return free deposit for at least 3 months shall eligible
to avail interest free/mark-up free finance. Payment of profit on monthly basis, automatic
renewal on face value. Life insurance up to 5 times of the customer’s deposit amount with no
extra cost. Premium shall be paid by the bank. Full payment of claim in case of Death
Permanent total Disability. Eligibility Age – 18 to 64 years.
No medical examination for deposit up to Rs. 500,000/- and age up to 60.

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 4.1.5Allied Karzas Scheme (No Interest/Markup)
Allied Bank moves a step forwards by introducing interest free banking through Allied
Karzas Scheme. The aim of this scheme is to provide an opportunity to the depositors to take
advantage of a real Riba Free economic environment and avail
Prospective client will maintain a return free deposit for at least 3 months shall be eligible to
avail interest free/mark-up free finance.
Deposit amount Rs. 100,000/- and multiples thereof.
Minimum deposit period, 3 months with automatic rollover facility.
Premature encashment allowed, without any penalty/charge.
Minimum deposit period for eligibility of finance, 3 months.
Maximum period of finance, 6 months.
Maximum period to avail finance 12 months from the maturity of deposit. Every month (30
days) completed by the deposit shall be taken into account for calculation of entitlement of
finance. Finance proposal processing fee Rs. 100/- (non-refundable) plus documentation cost
on actual basis. In case of default/delay in repayment @ 0.055% per day (20.075% p.a._ to
be placed in charity A/C. Formula for calculation of entitlement of finance.
Same amount of finance for half the period of deposit or same period of finance for half the
amount of deposit.

4.1.6Home Remittances

The Bank having a network of 755 branches all over Pakistan, undertakes to provide
safe and instant payment of remittance from expatriates, routed through designated foreign
exchange companies and correspondent banks with whom special arrangements have been
made in this regard. Through the Allied Express Services, ABL ensures that beneficiaries’
Accounts in ABL branches are credited with in 48 hours of receiving home remittance
information from overseas.

4.1.7Hajj Services

The Bank serves the intending pilgrims by helping them in performing this religious
obligation. The Hajj forms and other related services are provided by the bank. However, the

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terms and conditions for accepting the Hajj forms from intending pilgrims are in accordance
with the Hajj Policy announced by the government, each year. Hajj applications are available
with all branches during Hajj season, immediately after the Hajj policy is announced by the
Government of Pakistan.

4.1.8Utility Bills

All branches of the Bank collect utility bills of electricity, gas and telephones. For
convenience of the customers, Utility Bills are collected by the branches during banking
hours and also in he evening banking on all working days. Bills can be paid through cash or
checks. Consumers may drop bills with crossed checks into a drop box available at the
branches under “Checks Drop-in” system.
4.1.9Agricultural Finances
Bank under Agricultural Financing Schemes envisaged by he State Bank of Pakistan
extend short, medium and long term, farm and non-farm credits. The farm credits are
extended for production (inputs) and development purposes. Non-farm credits are allowed
for livestock (goats, sheep and cattle), poultry, factory including social forestry and fisheries
(inland and marine excluding deep sea fishing).

4.1.10 Lockers
Allied Bank Lockers are available in three different sizes Small, Medium and Large
on a yearly fee. Locker holders need not have an account in the Bank.

4.1.11 Imp clients/customers through large number of authorized branches

where trained and motivated staff is available to handle the business on behalf of
customer.

4.1.12 Allied Bank Rupee Travelers Checks

Carrying cash to strange alien location can prove to be risky as a single incident can render
one without monetary backup of any sort. Hence banks introduce traveler’s checks in order
to protect against any contingency.

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 4.1.13 Seasonal Finance
Running Finance is a short-term loan allowed by the bank for a period of one year. The
running finance account can be operated and daily sale proceeds can be deposited into the
account. The markup is recovered on the products of daily outstanding balance. The running
finance is suitable for meeting day-to-day financial needs of the business.
Cash Finance is allowed against pledge of goods. The delivery of goods is made against
payment.
Demand Finance is disbursed in lump sum or in accordance with the agreed disbursements
schedule and it is repayable as per the agreed installments, which could be monthly,quarterly,
biannual or annual.

ABL STRUCTURE

5 Comments on Structure of ABL

Successful and profitable banking management depends on two principal factors. The manner in
which the functions of banking, that is the acquiring of deposits, the investing or converting such
deposits into earning assets, and the servicing of such deposits, are performed. The degree to
which officers and employees contribute their talents to the progress and welfare of the bank in
discharging duties and responsibilities.

5.1 Management Hierarchy

The management hierarchy represents the different positions and designations in the
hierarchy of the ABL. However, this is not the reporting hierarchy but merely represents the
positions and grades on the basis of seniority and grades.

President

Senior Vice President

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 Vice President

Senior Executive Vice President

[rosodmemtPresident

Executive Vice President

Regional General Manager

Managerxecutive Vice
President
5.2 Functional HierarchyBranch Manager
The functional hierarchy represents the reporting order in the hierarchy of ABL. The
hierarchy has president and directors at top management level and officers Grade I, II and
Grade III at the lower level management of ABL. The middle level management consists of
regional general Manager and Regional Controller of Operations. These positions are not
fixed. Any person in the hierarchy above the branch manager can be appointed as RGM and
controller operations.

President and CEO

Board of Director

Head of Departments

Regional General Manager Controllers of operation

Branch Manager

Office G-I, II and other lower Staff

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5.3 Structure of Head Office

Allied Bank of Pakistan Head Office is situated in Karachi having branches, regional
functionality, money circulation, and their human resources and so on. ABL has its offices
and corporate branches spreader all over the country. Head Office is an administrative office
to manage all its branches and offices, to manage their policy making body/decision making
bodies which are given as under:
a. Board of Directors
b. Executive Committee
c. Divisional Head Offices and Provincial Headquarters
The head office has nine divisions which are divided in to different wings. The Head
Office is responsible for central affaires and delegation of powers / authority to the Regional
Headquarters. (Annexure Attached)

5.4 Board of Directors

The Board of Directors (BOD) of ABL is comprises of President, 3 SEVPs, 1
Representative of PBC, 1 representative of GOP, and 1 for private sector so it comprises of 7
persons.

5.5 Executive Committee

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 The executive committee consists of President and nine members and one of the
members also perform the functions of Secretary of the committee. The executive committee
nominates the divisional Heads. This body monitors day to day affaires of the Bank and is
sanctioning authority of financial and business proposal.

5.6 Divisional Chiefs

The Bank has nine division which are working under SEVP, EVP and divisional
chiefs. These nine divisions are:
Management Support
Audit and inspection
Treasury Management
Marketing and Development
Credit Policy Management
Overseas Banking
Special Assets Management
Bank Secretariat

5.7 Provincial Chiefs

To enhance and manage the performance of banking system, the administration also
has divided the power of sanctioning finance and other credit facilities through provincial
chiefs by province-wise. The provincial head quarters of these chiefs are situated in Lahore,
Karachi, Quetta and Peshawar. The ABL has 29 regions in four provinces and Azad
Kashmir.

5.8 Regional Management Committee

The management has designed the banking structure into regions and their sub-divisions. To
manage these regions, a Regional Management Committee is allocated which consists of the
following designations, looks after the affaires of the regions.
• Business Chief
• Operational Chief
• Risk Management Chief

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• Compliance Chief

6 Organization Branch Structure

6.1 Structure of Balakot Branch.

In ABL Balakot branch Balakot was opened in 1997. “Mr. Shahid” SVP is the chief
Manager and Mr. Asim is operation manager who is AVP. There are 10 employees in Bank.
At present branch is providing services in all areas of banking. (Annexure-III shows this
relation at end of reports.)
There are six departments in Abbottabad Branch i.e.
Credit department
Accounts department
Deposit department
Remittances department
Cash department
IT department
Credit and Accounts department directly comes under the supervision of chief manager the
rest of department answerable to manager operation and manager operation responsible to
chief manager. There is foreign exchange department which works under deposit department

6.2 Staff order of this Branch

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 The staff order of the branch is as follows:

Branch Manager

Officer G-I Officer G-II Customer Service Manager Manager

Operation

Teller Messenger

Branch Manager is a head within the branch. Under branch manager there are four main
designations i.e. Offices Grade-I, Officers Grade-II, Customer Service Manager and HR
Manager. Officers Grade-II & II are also divided into these departments like credit
department, account department, remittances department, cash department and IT department
having their proper designations while customer service manager is also under branch
manager has to take the responsibility to handle and motivate customer. Teller works under
customer service manager. HR manager is also works under branch manager having
responsibility to hire contract employees within local community and also to handle and
manage payroll system for branch employees. Messenger and teller also works under HR
manager.

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 6.3 ABL Various Departmental Review:

Different departments of ABL are working which are given as under:

6.3.1 Current Saving Department

In ABL current saving department mainly deals with cheques, vouchers and advices.
First of all a cheque holder have to present his/her cheque to the person responsible for
issuing the tokens. . Then cheque is passed on to the computer operator to entry it in
computer. Afterward it will go for signature verification after which it will be given to
cashier for payment.

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Computer Operations: In ABL the computer section have several duties that are as under.
Daily Transactions: To record all the transactions in case of deposits made by the people
and also to record all the withdrawals made by the people or customers. Each
transaction has to be recorded in its appropriate head of account with the help of
prescribed codes.
Vouchers: To record all the vouchers made by the remittance department, Remittance
department have to prepare debit and credit vouchers for about every transaction
recorded in their department. Then these vouchers are sent to computer operator to
record those in computer.
Advices: To record all advices received from other branches. Most of the-inter branch or
intra branch- remittances are subject to ultimate receipt of advices from the
corresponding branch to materialize the transactions. These advices also have to be
recorded in computer.
Statements: To close the daily record a number of statements have to be printed out.
Statements like:

 Day’s transactions (sequence)

 Overdrawn facilitated a/c statement

 Markup sheet

 Inter branch transactions

 Detail of PLS and Current a/c

 Day’s transactions (a/c wise)

 Operative, Dormant, Inoperative and Unclaimed a/c

 All ATM transactions

 Detail of GL entries (official & non customer transactions)

 Summary of all a/c (debits, credits & balances)

 Profit due, transferred, disbursed, etc.

22
 6.3.2 Account Department

Bank borrowing funds from outside parties is more important because the entire
banking system is based on it. Receiving of deposits is a basic function of all commercial
banks. Commercial banks do not receive these deposited for safekeeping purpose only. When
the bank receives the amount of deposited as a depositor, it become the owner of it. The bank
may therefore use these deposits, as it deems appropriate. But there is an implicit agreement
that the amount owned by the bank will be paid back to the depositors on demand or after a
specified period of time.

The borrowed capital of the bank is than the bank own capital. Bank’s borrowing is
mostly in the form of deposits. These deposits are lend-out to different parties. Larger the
difference between the rate at which these deposits are borrowed and the rate at which they
lend-out the greater will be the profit margin of the bank. Larger the funds lend-out the
greater will be the return earned on them and greater the amount of return on these deposits
earned greater will be the profit for the bank. It is because of this interrelated relationship.
Deposits are referred to as the “life blood small” for any banking sector.
Kinds of Account: There are numbers of account that ABL offers to its customer keeping in
mind their needs and dealing.
Saving Bank & PL Account: In Pakistan the saving Bank accounts are know as profit and
profit and loss sharing accounts (PLS A/C) fowling the illumination of bank. The owners of
such account are not allowed to withdraw money more than once are twice a week. In case of
withdrawal of large sum, the depositor is required to give to prior notices a week or two.
Thus the bankers are not required is always available to bank for giving to loans to their
customers. Thus these deposits also serves as source of credit certain by the commercial
banks. The rate or profit on this type of account varies from time to time. All the commercial
banks declare the rate of profit every year that is paid on these accounts on the basis of their
monthly credit balance. The bank will determine the proportion of profit & its decision will
be final. Profit will be determined on daily product basis while it will be paid on monthly
basis & will be paid on the minimum balance between the first day & last day of the month.
Zakat will be deducted on the exceeding amount as exempted from the Zakat deduction.
Taxes will be imposed according to the rules & regulation. In Pakistan post offices &

23
national saving centers also maintain this savings bank account to encourage saving habits
among the people. At the time of opening this account, a minimum amount of Rs.500 is to be
deposited. Subsequently the account is opened & account number is located. The depositor is
given a cheque book. The depositors who are wishing to close his account are required to
present his cheques to the bank in order to draw the credit balance and to close the account.
This type of account you can open joint account also which can be operated by anyone.
Current Account: There is no limit of withdraw of money from these accounts. In practice
the bankers do not allow any profit to such deposits in Pakistan. The customers are required
maintaining the minimum credit balance in their account in case of failing incidental charges
are recovered from defaulters. This is because the depositors may withdraw current deposits
at any time and as such the bank is not entirely free to employ such deposits. In general, the
bank allows the overdraft facilities to current account holders & the prevailing rate of
markup is charged from these customers. In ABL the minimum amount required to open the
current account is Rs. 500. No profit is paid to account beside this that the account holder has
the facility to taking s much money as he wants. Individual account is opened in the name of
the single personal one person on whose name it is opened only conduct it. While two opens
joint account and partnership account are more person and the bank fallow their instructions
for the conduct of the account. Similarly limited companies can also open their current
account.
Fixed Deposit Account/Term Deposits: These deposits are also called as time deposits
because these deposits are based on the fixed duration. The period for which these deposits
are kept with bank are ranged from seven days to ten years in light of the agreement between
the customer and the banker. The profit allowed on these account depend on the duration
longer the duration of the deposits the higher will be the rate of profit. The operation of fixed
account is different from saving & current accounts. Every time money is deposited with the
bank an application from filled and the bank issue a fixed deposit receipt for amount
deposited along with specific period. Fixed deposit receipt is given to the depositor and the
bank retains the counterfoil of the same receipt. Fixed term deposits may be in the joint
names of two or more person. The payment to one of those people will not discharge by the
bank without the authority of others.

24
Opening and operation of bank account: As discuss earlier there is a prescribed procedure
for opening different types of account. Following steps re followed while opening a new
account.
Application from for Opening of Accounting: A person who wishes to open a bank
account is required to complete this from the personal information is to be furnished.
The application signs the declaration to effect that he has understood the rules
and regulation of the bank.
Introduction: As required by the banking law the new customer needs to be introduced by
the account holder of the same branch where the account is being opened. The
manager or any other bank officer may introduce the new customer if they know

them personally.
Signature card: At the time of opening an account a specimen signature card containing two
signature of the customer is required which the manager of the branch attaches with
application form. During the operation of account the signature is verified when the

cheque is presented for payment.

Cheque Book: After completing formalities for opening saving and current a cheque book s
issued to the customer for withdrawing cash from his or her account at the time of
need. The cheque contains minimum 25 pages & maximum 100 pages. The bank also
charges excise duty on cheque book.

6.3.3 Advances Department

25
Lending Principles: The basis function of the bank is to accept deposit and lend money to
the borrowers against a spread so to be able to give some profit to the depositors as well as to
earn profit for the bank. While lending the money to the borrowers the bank should observe
the following lending principals:
 Safety Principle: It means that the landed money will come back along with interest or
service charges etc. The borrower should not invest the money borrowed in unproductive
or speculative business.
 Liquidity Principle: The money which has been landed to the borrower should be
returned to the bank on demand or as per repayment schedule provided by the client. The
sources of repayment should be clear and definite
 Purpose Principle: The purpose of the advances should be legitimate and productive. It
should be ensured that the banks, funds are not being utilized for speculative business.
The credit restrictions by the central bank should not be violated & it should also be
ensured. It is always beneficial for the bank to finance for short-term requirements.
 Profitability Principle: The end result of every business activity should be to earn some
profit. Similarly the bank must get some profit out of the activity of lending so that the
depositors could get their shares as well as the shareholders could earn something for
their investments..
 Security Principle: The proposal should be dealt on its merit not on security. The
security should be considered a safety for the bank only in case of unexpected
emergencies. All the relevant documents of securities must be obtained & got valuation
of the property or any other security should be assessed correctly.
 Spreading of Risk Principle: It is always safe for the bank to spread the risk in large
number of borrowers instead of loaning huge amount to few big shots, it is better to
obtain different types of securities instead of concentrating on one security..
 National Interest and Suitability Principle: It is our moral as well as legal obligation to
ensure that no loaning is running counter to national interest. It is also our duty to ensure
that our lending policies are not against the social conditions or bindings

6.3.4 Credit Department

26
 The main function of the credit department is to lend money to the customer. Allied
Bank Ltd. Lends money in the form of clean advances against promissory notes as well as
secured advances against tangible and marketable securities. Beside these ABL also lend
money against life policies and immovable property.

 Lien: Lien is the bank right to with hold property until the claim on the property is paid.
The bank looks at their lien as a protection against loss or overdraft or any other credit
facility. In ordinary lien the borrower remains the owner of the property, but the actual or
constructive possession remains with the creditor or bank though the borrower has no
right to sell it.

By Cash Credit: In this the bank lends money to the borrower against tangible security. The
total amount of the loan is not paid in one installment. The borrower has to pay
markup on the amount borrowed. Cash credit is favorite loan for large commercial &

industrial concern.
By Overdraft: This the most common type of bank lending. When a borrower requires
temporary accommodation, ABL allows its customer to withdraw an excess of the
balance form their account which the borrowing customers have in credit and thus
called overdraft. This facility is given to regular reliable & well established customer.
When it is against collateral securities, it is called “Secured Overdraft” & when
borrowing customer can not offer any collateral security except his personal security
then the accommodation is called “Clean Overdraft”.

 Short Term Finance: Allied Bank Ltd. receives the saving of the people and lends it
for short term to its customers. Short-term finance is generally given for a period of one
year or less in durationdium Term Finance. The duration range of the intermediate term
finance is from one year to three years. It is also called term loan. Intermediate term
finance is usually given for the expansion of an existing business or for the purchase of
new equipments.

 Long Term Finance: This type of finance is required for the period of more than five
years. Long term finance is generally given for the compilation of big projects, for the
construction of building and for the purchase of machineries.

27
Producer of Applying for Loan: Any customer who applies for loan should have an
account (usually current account) with ABL branch concerned. That account must be
in running position. When approval from head office is given, branch gives tern &
condition to the party. Bank does not advance 100% loan against a security, rather the
profit margin is different in different type of loan.

6.3.5 Remittances Department

Another important department in ABL Khyber Bazar Branch is Remittances

Department. The remittances department transfers the funds from one bank to other bank and
from one place to another place.
In remittances department the collection take place. The ABL made payment of only open
cheques on the counter and prohibits the payment of crossed cheques. ABL transfers money
from one place to another by the following means:

Mail Transfer: When a customer requests the bank to transfer his money from this
bank to any other bank or the branch of some other bank, the first thing he has to do
is to fill an application form. In which he states that he/she wants to transfer the
money from this bank to that bank by mail. If the customer is the account holder of
the bank, operating personal will proceed further with steps like:

 Writing a debit voucher for a/c holder’s a/c

 Preparing an advice in favor of stated bank/branch

 Writing credit voucher for GL

 Mail the advice

If the customer is not the account holder of this bank, then firstly, he has to deposit the
money and than above procedure will be adopted to transfer his money.

28
Telegraphic Transfer: With the changing requirements of the customer, ABL has
introduced the fastest transfer of money. The sender is required to apply through a
form in which he will give all the necessary details about the sender and beneficiary.
The sender deposits the money to be transferred plus bank charges at the bank
counter. The remittances officials send a telegram to concerned branch with specified
code words and the receiving branch makes payment to the beneficiary. Vouchers are
sent by ordinary mail to keep the record. On TT, no excise duty is charged only
commission and telegram charges are charged.
Pay Order: Pay order is the most convenient simple and secure way of transfer of money. It
is issued by, drawn upon and payable by the same branch of the bank. It is neither
transferable nor negotiable and as such it is payable to the payee named there in. The
following are the parties to a pay order.

 Purchaser is a person, firm, company or local authority.

 Issuing/paying branch is one which issues/pays on presentation.

 Payee is a person named there in.

Demand Draft: Demand Draft is another way of transfer of money from one bank to another
bank. Unlike pay order, a form is required to be filled for the issuance of the demand
draft in which necessary particulars about the beneficiary and sender are given. The
sender deposits the amount of DD plus commission and other charges on the bank
counter, from where he is given a receipt and in accordance with this receipt he is
issued The following are the main essential of draft:

It is a Negotiable Instrument.

Filling a form and depositing the amount written on it prepare 2} Draft.

It is a written order to its branches or to another bank to pay the stated amount on draft.

6.3.6 Cash Department

This is the most important and critical department in a Bank. There are two basic
functions performed by the cash department. These are

29
Receipts: An individual who has account in the Bank can deposit money in his account. For
deposit of the money the individual has to fill the deposit slip in which the account
holder writes his name, Account number, amount of the money both in figures and in
words. After filling the deposit slip the Cash amount along with the deposit slip is
submitted with the cashier. The cashier collects the cash and counts it and after
verification the cashier stamps the deposit slip. One part of the deposit slip is given
back to the customer and the other part of the deposit slip remains with the bank for
the record purposes.
The cashier also record the deposits made by the customers in credit sheets daily. The
deposits of all customers of the bank are controlled by mean of ledger account. Every
customer has its own ledger account and has separate ledger cards in which his / her total
record is kept. Bill collection is also one of the main functions of bank. Cashier has to
prepare a list of bills’ serial number, a copy of which is to be sent to the corresponding
organization.

Payments: The procedure of clearance of a cheque or payments is as following. First of all

the customer presents his cheque to the cashier The cashier records the account number and
the amount, which is to be drawn. Then the cashier check the cheque number in the
computer for the verification whether the account holder has such amount in his account
which he is demanding or not. If the computer passes the cheque, the Passing officer signs
the cheque and sent it to the cash counter then cashier pays the written amount to the
customer and then in the end cashier records the amount paid in computer.

6.3.7 Foreign Currency Department

Like Pak rupees account the foreign currency has many accounts like

 Saving account

 Current account

 Term deposit account.

The bank deal in three type of foreign currency account Dollar, Euro & Pound
The account is open with 1000 dollar if it is less 5-dollar per month is deducted. For opening
the account NIC & introduction is required of the same bank. If any person wants to import

30
goods from foreign, an account is required and for international trading the FC is needed.
ABL provide foreign currency on Pak rupee at booking rate and the central office sent Rates
In foreign currency department the remittance is sent through Foreign Telegraphic Transfer.
The account holder can sent the amount in foreign bank account. If any transaction is made
the daily report is given to the central office Karachi daily.
Different accounts can b open like joint account or company account. The thankful
letter is sent for opening the foreign currency account to account holder and introducer.
When any transaction is made the bank inform stock exchange daily. The foreign currency
note is counted and recorded in the cash memo book. The people in the foreign country sent
the amount through S.W.I.F.T. Weekly and monthly report of all the transaction is given to
the stock exchange. Cheque book is also issued to the account holder & the foreign currency
Account number is given to him. In this FBC & FBR is done. Debit Credit Voucher is used.
The charges are deducted while closing the foreign currency account. And the cheque book is
return while closing the account. The branch sent excess foreign currency to its main branch.
If any branch needs foreign exchange they sent to this branch.

6.3.8 Clearing Department

In clearing process, if the account holder of ABL receives the cheque of other bank
like City Bank, Habib Bank Limited etc, and he submits it in ABL branch to be cashed. At
the same time the clearing process starts. First the bank name. Cheque number and the
amount are written in the register. After this three kind of stamps are required first bank
name stamp, secondly clearing stamp of next date and If the cheque is not local then the inter
city clearing stamp is required.

Some cheques are local and some are outstation. The institution N.I.F.T. provides the
services in clearing the cheque. They send the different cheque to different banks. The
N.I.F.T service is only in few cities, like Karachi, Lahore, Rawalpindi. The cheque of inter
city is send through N.I.F.T. And where, the N.I.F.T service is not available so the cheque is
sent through T.C.S.

31
The clearance of cheque is informed through advice. Some cheque is not passed so they
should return so Rs. 100 is deducted and if the cheque is inter city then the postage charges is
deducted. For this purpose the Debit & Credit voucher is used. When the cheque is cleared
the today stamp is required. Some cheque is drawn on ABL. This is called outward clearing.
These cheques will be entered in the outward clearing register. And the advice is sent for the
clearance of cheques. The account holder account is credited.

Out Ward Bill for collection: OBC means the cheque of other banks. When they sent OBC
the OBC is credit & OBR is debited and the advice is made on that time, one copy is remain
in the bank and the other copy is sent to the related branch. When they realized the opposite
entry is made. It is entered in the OBC register. The income A\c commission is credited, and
postage

32
 FINANCE & ACCOUNT DEPARTMENT

Structure of ABL Finance & Account

Division:
ESVP heads finance division. This ESVP is also DH (Divisional Head) of this department.
This division is responsible for keeping the records of all the transaction of different
branches. There are 15 people working in this department for all branches of Allied bank and
the final authority in this department is ESVP. Finance division is further divided into
subdivision, which are Budget and Finance & DRC.

The Finance Division (FND) is the hub of all financial information for maintaining
statutory accounts and measuring the performance of the Bank. While ensuring overall
financial management, financial control, financial reporting and accounting function, FND is
responsible for maintaining the account records and systems in accordance with internal
policies, regulatory requirements, corporate governance and international accounting
standards. It also establishes policies and procedures relating to finance function, monitors
returns / spreads and reports on various performance indicators including asset / liability
mismatch.

6.4 Finance & Account Operations:

The Bank’s management is responsible to establish and maintain an adequate and effective
system of internal controls and procedures. The management is also responsible for
evaluating the effectiveness of the bank’s internal control system that
Covers material matters by identifying control objective and reviewing significant policies
and procedures. The scope of Audit and Credit Risk Review Group (A & CRRG),
independent from line management, inter-alia includes, review and assessment of the
adequacy and effectiveness of the control activities across the bank as well as to ensure
implementation of and compliance with all the prescribed policies and procedures. All

33
significant and material findings of the internal audit reviews are reported to the Audit
Committee of the Board of Directors.
Note: Structure and Functions of the Finance Department (Annexure attached-)

The Audit Committee actively monitors implementations to ensure that identified risks are
mitigated to safeguard the interest of the bank. The Internal Controls Division under the
ambit of Operations Group is entrusted with the responsibility
of expediting rectification of irregularities and control lapses in branches’ operations and
various controlling offices pointed out through audit reviews. Vigorous efforts are made by
Operations Group to improve the Control Environment at grass root level by continuous
review & streamlining of procedures to prevent & rectify control lapses as
well as imparting training at various levels. The Compliance Group, through its regional
offices, ensures adherence to the regulatory requirements and bank’s internal policies and
procedures, with specific emphasis on KYC/AML. The Bank’s internal
control system has been designed to provide reasonable assurance to the Bank’s management
and Board of Directors. All Internal Control Systems, no matter how well designed, have
inherent limitations that they may not entirely eliminate misstatements. Also projections of
evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions or that the degree of compliance with the
policies or procedures may eteriorate. However, control activities are ongoing process that
includes identification,
evaluation and management of significant risks faced by the Bank. Recognizing it to be an
ongoing process, the management of Allied Bank is in the process of adopting an
internationally accepted COSO (Internal Control – Integrated) Framework with the
assistance of a reputable advisory firm in accordance with SBP Guidelines on Internal
Controls. The bank has already completed the detailed documentation of the existing
processes and controls, together with a comprehensive gap analysis of the control design.
The bank has addressed some of the major gaps identified during the exercise and is at an
advanced stage of developing and implementing remediation plans for the remaining gaps. In
addition, comprehensive management testing plans and framework are being developed for
ensuring on-going operating effectiveness of key controls.

34
Allied Bank expects the complete various stages of its Internal Control Program and achieve
external auditors’ certification on internal controls over financial reporting in 2010.
The Board of Directors being ultimately responsible for the internal control system endorses
the management evaluation and efforts to adopt above mentioned internationally accepted
standards in improving controls and processes to ensure better risk mitigation.

6.5 The Role of Financial Mangers:

Almost every firm, government agency, and other type of organization have one or more
financial managers. Financial managers oversee the preparation of financial reports, direct
investment activities, and implement cash management strategies. Managers also develop
strategies and implement the long-term goals of their organization.

Work environment in Allied bank for financial manager:

Working in comfortable offices, often close to top managers and to departments that develop
the financial data those managers need, financial managers typically have direct access to
state-of-the-art computer systems and information services. They commonly work long
hours, often up to 50 or 60 per week. Financial managers generally are required to attend
meetings of financial and economic associations and may travel to visit subsidiary firms or to
meet customers.

Financial managers of the bank play an increasingly important role in mergers and
consolidations and in global expansion and related financing. The financial manager of the
bank has specialized knowledge to reduce risks and maximize profit. ABL bank financial
managers advise senior managers financial and other matters.

The role of the financial manager, particularly in the bank, is changing in response to
technological advances that have significantly reduced the amount of time it takes to produce
financial reports. The CFO of the bank work on teams, acting as business advisors to top
management. The team of CFO of the bank is will equipped with the latest computer
technology to increase the efficiency of the bank financial operations.

The CFO of the bank monitor and control the flow of cash receipts and disbursements to
meet the business and investment needs of the bank. The example is cash flow projections

35
are needed to determine whether loans must be obtained to meet cash requirements or
whether surplus cash should be invested in interest-bearing instruments. The CFO of the
bank also responsible of Risk and insurance programs to minimize risks and losses that might
arise from financial transactions and business operations. They also manage the
organization’s budget.

The other function of the bank CFO such as lending, trusts, mortgages, and investments, or
programs, including sales, operations, or electronic financial services. He also establishes
relationships with other financial institutions in terms of accounts, cash management and
credit management to get new market for the bank and to attract business.

6.6 Use of Electronics data in decision making:

The Electronic Technology Division (ETD) is responsible for managing the Bank's
technology needs. This includes not just establishing and maintaining technology
infrastructure for providing operational support to all units of the Bank, but also encompass
introducing latest state-of-the-art technology-driven products and service delivery systems.
In an age of ever increasing competitive pressures, technology support impacts service
delivery standards and customer satisfaction levels. The value addition from this area has
made a significant contribution towards successfully expanding and managing the customer
base of the Bank. The ABL has a countrywide communications network utilizing Satellite,
Radio and Leased Line links. Through it, the Local Area Network (LAN) in each branch is
connected with the Wide Area Network (WAN) of the Bank. This has provided the Bank
with on-line country wide ATM / Inter-branch transaction capability. The Bank, along with a
foreign partner Bank, is the original co-founder of the first inter-Bank ATM switch in
Pakistan, which is now known as "One-Link".
During the year, a large number of new technology initiatives were successfully
implemented. The every new branch opened during the year was operational with on-line
Banking from day one. This included the ABL bank Offshore Banking Unit in Bahrain,
( which was linked to the Head Office and the Treasury via a Virtual Private Network (VPN).
The Bank's existing systems were also updated. The list covers a wide range from upgrading
the SWIFT connectivity of the Bank; to enhancing an Oracle based Human Resource

36
Management Information System. New initiatives include developing an Oracle based
application for State Bank of Pakistan reporting, Electronic Bills Payment System via the
Bank's ATM network and the Internet.
The technology area has ambitious plans for the future. The list includes Call Centers,
Data Mining and Warehousing Project, and enhancement of the ATM network to the
international CIRRUS network standards. The range of utility bills presently payable via the
Internet and the ATM network is to be increased, subject to agreements with the utility
companies. In addition to the above, the Bank will focus on improving customer service
standards and products range by focusing on new and emerging e-commerce and internet
related technologies.
ABL has an Electronic Technology System at Head Office Rawalpindi. This system
provides services to the individual-to-individual Accounts Holders, information required by
upper Management / State Bank & Government Departments.

The Electronic Technology System provide following services:

 Online Banking
 Internet Banking
 Auto Teller Machine (ATM)
 Phone Banking
 Balance Transfer facility
 Online Availability Of Different Application Form

Technology has played a pivotal role in meeting customer expectations, particularly

with respect to speed and quality of service.
ABL has fully automated transitive processing systems for back-office support. Its
branch network is connected online real time and its customers have access to off site as well
as on site ATMs, all over Pakistan. Its phone Banking services and Internet Banking facility
allows customers to enjoy routine-Banking services from any here any time in the world.

5.4 Mobilization of funds in ABL:

37
The basic function of bank is accepting deposit and lending advances and the difference is
the bank profit. For lending advances bank need money and this money comes from
customer through deposit. So main source of funds in bank is deposit and same with Allied
bank for mobilization of funds Allied bank top management make policies in the guidelines
of SBP policy. The Allied bank top management, expert management and CFO do lot of
working before introducing any scheme once they work on that scheme and take final
decision than they launch that scheme.
In Allied bank following schemes are used for mobilization of fund. Through which Allied
bank raise fund.
1: Current Account.
2: Saving Account.
3: Term & fixed Deposit Account.
(Rs. In Million)
YEAR 2005 2006 2007 2008 2009
Fixed Deposits 6,762 13,275 37,999 40,349 29,997
Saving Deposits 42,241 49,911 57,854 64,698 81,605
Current Accounts 11,406 18,463 20,089 23,925 28,465
Other Deposits 66 97, 125 290 415
Total Deposits 163,140 81,748 116,068 129,264 140,484

www.abl.com.pk
Fixed Deposits are continuously increasing from 2005 to 2008 while in 2009 it is decreasing.
Saving deposits are increasing from 2005 to 2009 as well as current assets are increasing.
The major change is in other deposits i.e. in 2005 these are 66,550, in 2006 these are at
97,829 have a continuous increase up till 2009 i.e. 415,904 a great change.

5.5 Generation of funds in ABL

Financial institution works for profit and specially commercial bank the primary objective is
profit. And Allied bank also works for profit and this profit mostly comes from markup
income and non markup income. Markup income means the difference between interests paid
to depositors and receives interest from loan. And non markup income means the income
receives by giving different types of services to customers receive commission on the
services.

38
Allied bank also generates funds through loaning / Investment & Commission / Exchange.
Allied bank also invests in stock exchange and earns dividend this dividend income also the
generation of funds of Allied bank. Allied bank also generate fund by dealing in foreign
currencies.

(In Million)
S.# Generation of Fund 200 200 2007 2008 2009
5 6
1 Net Mark-up / Interest Income 407 448 8780 1259 1514
3 7 6 3
2 Fee Commission & Brokerage Income 524 708 838 1013 1072
3 Dividend Income 37 26 51 109 137
4 Income from dealing in foreign currencies 112 180 356 5844 655
5 Other income 278 177 206 321 336
Total Income 502 558 1023 1462 1734
7 1 3 6
www.abl.com.pk

5.6 Sources of Fund in ABL:

The sources by which Allied bank get fund are following.
1. Paid up capital, the reserve fund.
2. Deposits
3. Borrowing from non-deposit sources.
All these sources are very important sources and through this bank have generated lot of
fund. And through this Allied bank balance sheet figure goes up and these funds are used for
advances and for investment purpose.
These are main sources besides these main sources, Allied bank also gives different services
to its clients which are in the shape of advances and also bank help them in there business in
return of these loans bank gets interest and its commission which is also the source of funds.
Allied bank make very strong policy in raising fund that’s why every year the figure of these
funds increase upward.
(In Million)

39
S.# YEAR 2005 2006 2007 2008 2009
01 Reserve Fund 2759 4317 5862 5814 6948
02 Deposits 61656 83318 118794 131839 143036
03 Borrowings 15903 13781 10562 14964 17553

www.abl.com.pk

The bank has main three sources of funds:

In 2005 reserve funds are 2759 which is increased to 6948 in 2009 which shows the growth
of bank. In 2005 deposits are 61656 which is also in increasing up till 2009 i.e. 143036 and
also the borrowings are 15903 in 2005 increasing continuously to 2009 i.e. 17553.

3.9 Allocation of Funds in ABL:

(In Million)
S.# SECTOR 2005 2006 2007 2008 2009
01 Cash & balances with treasury Bank 6678 8762 11766 14879 13356
02 Balance with others Bank 2650 4847 5550 7333 3497
03 Lending to financial institutions 5770 2324 10172 8392 14444
04 Investment 22104 17239 25708 28625 39431
05 Advances 44777 69838 85976 99179 100780
06 Fixed assets 1979 2595 3192 3810 5128
www.abl.com.pk
Bank accept deposit and on these deposit bank gives interest for this interest and for his own
profit bank allocate these fund in different sector. The main allocation of fund in Allied bank
is lending advances from these bank earn interest income through which he pays to depositor
and remaining difference is bank profit. Beside this bank also invest in other businesses but
in the guideline of state bank. Allied bank always invests in safe investment due to which
risk of loss is minimized. In Pakistan all the financial institution works under the guideline of
state bank same with Allied bank that strictly follows the policies and restrictions of state
bank of Pakistan. State bank of Pakistan has check and balance on banks that they not invest
fund of depositor in risky investment. Due to these policies every bank maintain 8% of CRR
(cash required return) with state bank of Pakistan which now 6% due to liquidity. Throw

40
which depositor has trust on banks. Allied bank also maintains 6% CRR with state bank of
total demand/time liability which help them in case of emergency.

5.8 Critical Analysis of Theoretical Concepts

Financial statements (or financial reports) are formal records of a business' financial
activities. These statements provide an overview of a business' profitability and financial
condition in both short and long term. There are four basic financial statements:

1. Balance Sheet - Also referred to as statement of financial condition, reports on a company's

assets, liabilities and net equity as of a given point in time.
2. Income Statement - Also referred to as Profit or loss statement, reports on a company's
results of operations over a period of time.
3. Cash Flow Statement - Reports on a company's cash flow activities, particularly its
operating, investing and financing activities.
4. Statement of Stockholder's Equity - Reconciles the difference between net equity at two
different points in time.
Financial statements provide information of value to company officials as well as to
various outsiders, such as investors and lenders of funds. Publicly owned companies are
required to periodically publish general-purpose financial statements that include a balance
sheet, an income statement, and a statement of cash flows. Some companies also issue a
statement of stockholders' equity and a statement of comprehensive income, which provide
additional detail on changes in the equity section of the balance sheet. Financial statements
issued for external distribution are prepared according to generally accepted accounting
principles (GAAP), which are the guidelines for the content and format of the statements. In
the United States, the Securities and Exchange Commission (SEC) has the legal
responsibility for establishing the content of financial statements, but it generally defers to an

41
independent body, the Financial Accounting Standards Board (FASB), to determine and
promote accepted principles.

Users of Financial Statements

Financial statements are used by both internal and external users.

1. Internal Users: Are owners, managers, employees and other parties who are directly
connected with a company. Owners and managers require financial statements to make
important business decisions that affect its continued operations. Financial analysis is then
performed on these statements to provide management with a more detailed understanding of
the figures. These statements are also used as part of management's report to its stockholders,
as it form part of its Annual Report.
Employees also need these reports in making collective bargaining agreements (CBA) with
the management, in the case of labor unions or for individuals in discussing their
compensation, promotion and rankings.

2. External Users: Are potential investors, Banks, government agencies and other parties
who are outside the business but need financial information about the business for a diverse
number of reasons.
Prospective investors make use of financial statements to assess the viability of
investing in a business. Financial analysis are often used by investors and is prepared by
professionals (Financial Analysts), thus providing them with the basis in making investment
decisions.
Financial institutions (Banks and other lending companies) use them to decide
whether to grant a company with fresh working capital or extend debt securities (such as a
long-term Bank loan or debentures) to finance expansion and other significant expenditures.

Balance Sheet
A balance sheet, also known as a "statement of financial position", reveals a
company's assets, liabilities and owners' equity (net worth). The balance sheet, together with
the income statement and cash flow statement, make up the cornerstone of any company's

42
financial statements. If you are a shareholder of a company, it is important that you
understand how the balance sheet is structured, how to analyze it and how to read it.

How the Balance Sheet Works

The balance sheet is divided into two parts that, based on the following equation, must equal
(or balance out) each other. The main formula behind balance sheets is:
Assets = liabilities + shareholders' equity

This means that assets, or the means used to operate the company, are balanced by a
company's financial obligations along with the equity investment brought into the company
and its retained earnings.
Assets are what a company uses to operate its business, while its liabilities and equity
are two sources that support these assets. Owners' equity, referred to as shareholders' equity
in a publicly traded company, is the amount of money initially invested into the company
plus any retained earnings, and it represents a source of funding for the business. It is
important to note, that a balance sheet is a snapshot of the company’s financial position at a
single point in time.
It's called a balance sheet because the two sides balance out. This makes sense: a company
has to pay for all the things it has (assets) by either borrowing money (liabilities) or getting it
from shareholders (shareholders' equity).
The balance sheet is one of the most important pieces of financial information issued
by a company. It is a snapshot of what a company owns and owes at that point in time. The
income statement, on the other hand, shows how much revenue and profit a company has
generated over a certain period. Neither statement is better than the other - rather, the
financial statements are built to be used together to present a complete picture of a company's
finances.

43
 FINANCIAL ANALYSIS

7 Financial Analysis

Financial statement analysis is the principal mean of reporting the financial condition and the
result of operations of an organization, or in other words we can say that financial analysis
are carried out for the purpose of identifying the financial strengths and weaknesses of an
organization by properly establishing the relationship between the balance sheet and income
statement items. This analysis helps many parties in making decision who are interested in
business activities. To improve the quality of decision making, proper analysis of these
statements helps a lot. The firm itself and outsider providers of capital, creditors and
investors all undertake financial statement analysis. The type of analysis varies according to
the specific interests of the party involved.
For example, suppliers are interested in liquidity of the firm. There claims are short term, and
the ability of the firm to pay these quickly is best judged by an analysis of the firm’s
liquidity. The claims of the bondholders, on other hand, are long term. So bond holders are
more interested in cash-flow ability of the firm. Investors are commonly concerned with
present and future earnings. As a result, investors usually focus on analyzing profitability.
They would also be concerned with the firm’s financial conditions insofar as it affects the
ability of the firm to pay dividend and avoid bankruptcy. Management also analyzes
financial analysis for the purpose of internal control and to check the performance of the
firm. Similarly government agencies analyze financial data for the tax purpose.

44
 Allied Bank Limited
Balance Sheet
From 2005 to 2009

2005 2006 2007 2008 2009

ASSETS Rupees in thousands
Cash & balances with treasury Banks 6,678,026 8,762,866 11,766,925 14,879,230 13,356,055
Balances with other Banks 2,650,166 4,847,899 5,550,148 7,333,002 3,497,054
Lending’s to financial institutions 5,770,842 2,324,839 10,172,242 8,392,950 1,444,143
Investments 22,104,425 17,239,156 25,708,194 8,625,915 39,431,005
Advances 44,777,538 69,838,392 85,976,895 99,179,372 100,780,162
Operating fixed assets 1,979,919 2,595,023 3,192,862 3,810,331 5,128,428
Deferred tax assets - - - - -
Other assets 1,425,986 1,459,716 2,732,641 3,812,788 5,535,038
85,386,902 107,167,540 145,099,907 166,033,588 182,171,885
LIABILITIES
Bills payable 973,703 1,227,093 1,315,680 1,839,077 2,627,051
Borrowings from financial institutions 15,903,055 13,781,555 10,562,338 14,964,087 17,553,525

Deposits and other accounts 61,656,607 83,318,795 118,794,690 131,839,283 143,036,707

Sub-ordinated loans - 1,000,000 2,999,700 2,998,500 2,997,300
Liabilities against assets subject to 37,350 14,159 1,459 - -
finance lease
Deferred tax liabilities 806,753 526,866 567,217 736,298 471,519
Other liabilities 962,592 1,282,980 2,271,393 2,603,113 3,219,796
80,340,060 101,151,448 136,512,477 154,980,358 169,905,898
NET ASSETS 5,046,842 6,016,092 8,587,430 11,053,230 12,265,987
Share capital 1,141,680 1,255,848 1,507,018 2,004,333 3,006,499
Reserves 2,759,599 4,317,301 5,862,074 5,814,754 6,948,336
Un-appropriated profit - - - 1,799,979 2,144,810
3,901,279 5,573,149 7,369,092 9,619,066 12,099,645
Surplus on revaluation (Net to Tax) 1,145,563 442,944 1,218,338 1,434,164 166,342
5,046,842 6,016,093 8,587,430 11,053,230 12,265,987
45
 www.abl.com.pk

Allied Bank Limited

Profit & Loss
From 2005-2009
www.abl.com.pk
2005 2006 2007 2008 2009
Mark-up / return / interest earned 4,073,715 4,487,206 8,780,698 12596921 15143241
Mark-up / return / interest expensed 1,379,609 1,117,206 4,278,374 6977313 8685624
Net mark-up / interest income 2,694,106 3,370,000 4,502,324 5619608 6457617
Provision(Non-performing loans & Advances) 308,528 277,398 638,547 1128137 3920240
(Reversal) / provision for impairment in the – - -
value of investments – 38,066 -36,555 376 1501
Bad debts written off directly 7 - -
308,528 315,471 601,992 1128513 3921741
Net mark-up / interest income after provisions 2,385,578 3,054,529 3,900,332 4491095 2535876
Non mark-up / interest income
Fee, commission and brokerage income 524,775 708,377 838,561 1013660 1072868
Dividend income 37,658 26,318 51,143 109326 137079
Income from dealing in foreign currencies 112,808 180,992 356,218 584344 655761
Gain on sale of investments 540,193 99,825 112474 2361251
Other income 278,512 177,648 206,819 321758 336809
Total non-markup / interest income 953,753 1,633,528 1,552,566 2139254 4565496
3,339,331 4,688,057 5,452,898 6630349 7101372
Non mark-up / interest expenses
Administrative expenses 1,436,304 1,845,179 2,591,985 3277353 4789536
Other charges 1227 138 1,832 6141 12051
Total non-markup / interest expenses 1437531 1,845,317 2,593,817 3283494 4801587
1901800 2,842,740 2,859,081 3346855 2299785
Profit before taxation 1901800 2,842,740 2,859,081 3346855 2299785
Taxation – current 873,639 876,089 828,774 983875 98535
– prior years' – – -188,247 - -233950
– Deferred -74,904 43,611 196,558 113006 -245812
798735 919,700 837,085 1096881 -381227
Profit after taxation 1103065 1,923,040 2,021,996 2249974 2681012
Un-Appropriated profit brought forward - – – 1617597 1799979
Profit available for appropriation 1103065 1,923,040 2,021,996 3867571 4480991
Appropriations:
Statutory reserve 220,613 384,608 404,399
Capital reserves (reserve for issue of bonus shares) 114,168 251,170 497,315
Revenue reserves 539,948 1,036,092 894,229
Proposed cash dividend 228,336 251,170 226,053 46
1,103,065 1,923,040 2,021,996
7.3 Ratio Analysis
With a greater understanding of the balance sheet and how it is constructed, it can be
looked now at some techniques used to analyze the information contained within the balance
sheet. The main way this is done is through financial ratio analysis.
Financial ratio analysis uses formulas to gain insight into the company and its operations. For
the balance sheet, using financial ratios (like the debt-to-equity ratio) can show a better idea
of the company’s financial condition along with its operational efficiency. It is important to
note that some ratios will need information from more than one financial statement, such as
from the balance sheet and the income statement.
The main types of ratios that use information from the balance sheet are financial
strength ratios and activity ratios. Financial strength ratios, such as the working capital and
debt-to-equity ratios, provide information on how well the company can meet its obligations
and how they are leveraged. This can give investors an idea of how financially stable the
company is and how the company finances itself. Activity ratios focus mainly on current
accounts to show how well the company manages its operating cycle (which include
receivables, inventory and payables). These ratios can provide insight into the operational
efficiency of the company.

7.3.1 Current Ratio

This ratio indicates the business liquidity position over specific period of time. It measures
ability to meet current debts with current assets. It is calculated as.

Current Ratio = Current Assets / Current Liabilities

2005 2006 2007 2008 2009
C. Assets 15,099,034 15,935,604 27,489,315 30,605,183 31,297,252
C. Liabilities 16,876,758 15,008,648 11,878,018 14,964,087 20,180,576
Current Ratio 0.89 1.06 2.31 2.05 1.55

As we see the current ration of Allied bank we increase every year from 2005 to 2008 but if
we see 2009 in that year downward tread current ration decrease from 2.05 in 2008 to 1.55 in
2009. in 2003 the current ratio is 0.89 which increase in 2006 to 1.06 due to decrease in
current liabilities although current assets decreases in 2006 but current liabilities decrease

47
more than current liabilities the reason of decrease in current assets is due to decrease in
lending to financial institutions also in this year bank made less investment compare to last
year. In 2008 bank also borrow less compare to last year. In 2009 current ration increase very
high compare to other years. The reason is same that in this year current assets increase very
much and current liabilities decrease very much compare to last year. This is due to the same
reason of last year. In 2007 again current ration increase which is good sign for Allied bank.
But in 2009 it decrease due to liquidity problem and this year Allied bank clear its bill which
are due on him. ABL has maintained and constructed funds to settled short debts and is in
sound position.

2.5

1.5

0.5

0
2005 2006 2007 2008 2009
Last five year financial statements of ABL

7.3.2 Leverage Ratio

Financial leverage is the extent to which a company is financed with debt. The
amount of debt a company uses has both positive and negative effects. The more the debt, the
more the company will have trouble in meeting in its obligations. Thus the more debt, the
higher is the profitability of financial distress and bankruptcy. On the other hand debt is the
major source of financing and banking industry typically uses the higher percentage of debt.
Debt financing provides significant tax advantage and its transaction costs are low than that
of equity. Leverage ratios measure the amount of financial leverage. Commonly used
leverage ratios are debt to ratio, and debt to equity ratio.
Financial leverage is concerned with the proportion of debts to its equity. Higher the
leverage, higher the profitability as with the increase in leverage the financial risk increases.

48
7.3.3 Debt Ratio
This ratio shows the percentage of debt to the total assets. It also indicates the proportion of
rights of the outsiders on the assets of the business.

Debt Ratio = Total Debts / Total Assets

2,005 2,006 2,007 2,008 2,009
Total Debts 80,340,060 101,151,448 136,512,477 154,980,358 169,905,898
Total Assets 85,386,902 107,167,540 145,099,907 166,033,588 182,171,885
Debt Ratio 0.94 0.94 0.94 0.93 0.93

The debt ratio of Allied bank is very constant through out the last 5 years only little bit
change in last 2 years compare to 2005, 2006 and 2007. this ration exhibit that slight increase
in 2006 with gradual decrease over the next few years up to 2009, balance sheet indicates
that substantially less than 95% of the organizations assets were financed by out side which
has shown gradual decrease in 2007,2008,2009 from 94.08% in 2007 to 93.27% in 2009.

0.942
0.94
0.938
0.936
0.934
0.932
0.93
0.928
0.926
0.924
2005 2006 2007 2008 2009

7.3.4 Debt to Total Capitalization Ratio

It is the ratio which is also used to measure the financial leverage or risk of any business. It
shows a proportion or percentage of business total debts to its shareholders funds.

Debt to Equity Ratio = Total Debts / Share holders Equity + debt

2005 2006 2007 2008 2009

49
Total Debts 80,340,06 101,151,44 136,512,47 154,980,35 169,905,898
0 8 7 8
Equity(D+E) 3,901,279 5,573,149 7,369,092 9,619,066 12,099,645
Debt to Equity Ratio 20.59 18.15 18.53 16.11 14.04

The debt to equity ration shows Conservative approach to debt/equity ratio indicates smaller
amount of funds came from shareholders equity than outsiders provided comparison between
the year’s shows that the ratio has considerably decreased which shows credibility of the
organization and stakeholders’ protection. In 2005 debt to equity ratio is 20.59 which
decrease in 2006 to 18.15 in 2006 again rise due to increase in total debt in this year bank
total deposit increase very much due to change in rate before this bank pays less interest rate
but due to rate change in market Allied bank also change it and attract more customer. In
2008 this ration goes down and same trend in 2009 the reason is stakeholders investment in
bank.

25

20

15

10

0
2005 2006 2007 2008 2009

INTEREST COVERAGE RATIO

Any business may measure its ability to pay interest out of its annual profit interest and taxes
in number of times with the help of interest coverage ratio. If the ratio’s trend shows
increasing trend, then definitely the business ability to pay interest enhances.

Interest Coverage= Earning before interest and taxes / Interest Expense

2005 2006 2007 2008 2009

50
 2005 2006 2007 2008 2009
Interest Expense 1,379,60 1,117,206 4,278,374 6,977,313 8,685,624
9
Interest Coverage 1.37 2.54 0.66 0.47 0.26

Profits before taxes available to cover interest expense have been fluctuating unevenly
through 2005-2009. 1.37 In 2005, it increased to 2.54 in 2006. the reason of this increase is
that this year Allied bank make huge profit this not only Allied bank but every bank this year
make huge profit due to grooming of banking sector. Decrease was indicated in 2007 to
0.668, 0.479 and 0.264 in next respective years. In next all year this ration trend is
downward the main reason of this is increase in interest rate and also competition in banking
sector.

3
2.5

2
1.5
1

0.5
0
2005 2006 2007 2008 2009

TOTAL ASSET TURNOVER

This ratio shows the efficiency of the business in relation to its total assets. In other words it
indicates the revenue generated in number of time by utilizing all assets.
TAT= total revenue / Total Assets

51
 2005 2006 2007 2008 2009
Net 4,073,715 4,487,206 8,780,698 12,596,921 15,143,241
sales
Total 85386902 107,167,540 145,099,907 166,033,588 182,171,885
Assets
TAT 0.04 0.04 0.06 0.07 0.08

ABL has shown consistent development in ability to general sales using available assets.
With slight decrease in 2007 as compared to 2006 and 2005. ABL has shown improvement
and increase in total assets turn over which is a healthy contribution. 6% in 2007, 7.6% in
2008 and 8.3% in 2009. The reason of improvement is that total assets of Allied bank goes
up every year which due to opening of new branches.

0.09
0.08
0.07
0.06
0.05
0.04
0.03
0.02
0.01
0
2005 2006 2007 2008 2009

NET PROFIT MARGIN

This ratio indicates the earning capacity of business in percentage against its total revenue. In
other words, we can say that a company is earning net amount in rupees against every Rs.100
of revenue generated. If the net margin profit increases its shows the increase in the
profitability state of business.

Net profit margin= Net profit after taxes / total revenue *100

2005 2006 2007 2008 2009

52
Net profit after taxes 1,103,065 1,923,040 2,021,996 2,249,974 2,681,012
Net sales 4,073,715 4,487,206 8,780,698 12,596,921 15,143,24
1
Net profit margin 27.07 42.85 23.02 17.86 17.70
Return on sale increased from 27% to 42.85% in 2006. In the following years despite of
increase in sales, net profit has decreased, to 23.03% in 2007, 17.86% in 2008 and 17.7% in
2009. Possible reason may be increase in operating expenses and increase in inflation rate.

45
40
35
30
25
20
15
10
5
0
2005 2006 2007 2008 2009

LIQUIDITY QUCIK RATIO

Quick Assets refer to the most liquid assets which readily be converted into cash. Quick
assets to deposits ratio show how much liquid money is in hand to meet obligations without
going to the creditors or the money market. The minimum Cash Reserve Requirement by
SBP for commercial banks is 5% & 15% in the form of Govt. securities.
Liquidity Quick Ratio = Quick Assets / Total Deposits x 100
2005 2006 2007 2008 2009
Quick Assets 6,678,026 8,762,866 11,766,925 14,879,230 13,356,055
Total Deposits 61,656,607 83,318,795 118,794,690 131,839,28 143,036,707
3
Liquidity Quick Ratio 10.84 10.51 9.90 11.28 9.34

In our case, the ratio is much above the benchmarked level and ranges between 38 – 48%. It
reflects very positively on the liquidity of the Bank. Bank is well equipped to pay back in
case all the deposits are called without going to the debtors.

53
 12
10
8
6
4
2
0
2005 2006 2007 2008 2009

RE
TURN ON INVESTMENT
It shows the net profit earned against utilization of total assets in term of percentage. This is
an important ratio to measure the profitability as well as optimal utilization of available
assets.

ROI= Net profit after taxes / Total assets * 100

2005 2006 2007 2008 2009

Net profit after taxes 1,103,065 1,923,040 2,021,996 2,249,974 2,681,012

Total Assets 85386902 107,167,540 145,099,907 166,033,588 182,171,885

ROI 1.29 1.79 1.39 1.35 1.47

ROI has shown uneven variations in 2005, 2006 and 2007 with considerable stability in 2008
and 2009. In general again country economic condition, competition in banking sector and
organizational restructuring may be the affective causes.

1.5

0.5

0
2005 2006 2007 2008 2009

54
 ADVANCES TO DEPOSITS RATIO
A steady increase in the advances has been observed over the years. It is a very good sign as
deposit money is not sitting idle and is used in a viable manner. The gap in deposits and
advances figures is because of investment in securities, bank preferably invests in govt.
securities, which are risk free. The Bank seems to be a regular borrower from the inter bank
market; the bank borrowing are increasing over the years but this increase can be neglected
because the balance sheet shows the bank borrowing figure of the last day of income year,
this might have been returned the very next day, so it is not as such alarming.

Advances to Deposits ratio =Advances / Deposits + Borrowed Funds x 100

2005 2006 2007 2008 2009

Advances 44,777,538 69,838,392 85,976,895 99,179,372 100,780,162
Borrowings 15,903,055 13,781,555 10,562,338 14,964,087 17,553,525
Deposits 61,656,607 83,318,795 118,794,690 131,839,283 143,036,707
Advances to Deposits 57.73 71.92 64.46 66.55 62.75

In the year 2005 the ration is 57.73 which is increasing in the year 2006 i.e. 71.92. in the year
2007 there is a decline at 64.46 then again increase in year 2008 at 66.55. in the year 2009 it
is on 62.75 which is in decrease.

80

60

40

20

0
2005 2006 2007 2008 2009

GROSS PROFIT MARGIN

The gross profit is calculated by subtracting the mark up expenses from its markup
income. The above ratios indicated the amount earned by NBP against each Rs. 100 of
markup in order to meet the operating expenses of the business.

55
 Gross profit margin= Gross profit / Net sales

2005 2006 2007 2008 2009

Gross profit 2,694,106 3,370,000 4,502,324 5,619,608 6,457,617

Net sales 4,073,715 4,487,206 8,780,698 12,596,92 15,143,241

1
Gross profit margin 0.66 0.75 0.51 0.44 0.42

With considerable increase in 2006 from 66% to 75% profits have decreased in the following
years to 42.64% in 2009 due to competition in the banking sector and fluctuation in the
economic stability has caused this decrease in gross profits.

0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
2005 2006 2007 2008 2009

RETURN ON EQUITY
The percentage earning after paying taxes by any business against its shareholder’s funds can
be measured with the help of return on equity. If there is an increase in ROE, it shows the
stability of the business in terms of profit earning.

ROE= Net profit after taxes / Shareholders equity * 100

2005 2006 2007 2008 2009

Net profit after taxes 1,103,065 1,923,040 2,021,996 2,249,974 2,681,012
Shareholders equity 3,901,279 5,573,149 7,369,092 9,619,066 12,099,645
Return on Equity 28.27 34.50 27.43 23.39 22.15

56
Return on shareholders equity has substantially decreased in 2007 and onwards from 34.5%
in 2006 to 22.16% in 2009. Again possible reasons might be increased competition among
banks and fluctuating economic conditions of the country. Highest return was achieved in
2004 with increase from 28.27% in 2005 to 34.5% in 2006.

40
35
30
25
20
15
10
5
0
2005 2006 2007 2008 2009

CAPITAL ADEQUACY RATIO

Total eligible regulatory capital held 38.1 76,680,848 63,960,748

Total risk weighted assets 38.2 586,894,116 555,979,573
Capital adequacy ratio 13.07% 11.50%

FIXED ASSETS TO NET SALE

This ratio is used to calculate the relation between the total sales to total fixed assets that
mean how much sales to fixed assets. the following formula is used to measured it.
FAT= Net Sales / Fixed Assets (Rs in thousand)

Particulars 2005 2006 2007 2008 2009

Net sales 4,073,715 4,487,206 8,780,698 12596921 15143241
Fixed Assets 1,979,919 2,595,023 3,192,862 3,810,331 5,128,428
FAT 2.06 1.73 2.75 3.31 2.95

57
The relation b/w the fixed assets to net sale in FY-05 is 2.06 that is almost doubled to assets
which is positive sign of organization development in next FY-06 it reduced and again 2.75
in FY-07 and tend to increase in FY-08 and again decline in FY-09

3.5
3
2.5
2
1.5
1
0.5
0
2005 2006 2007 2008 2009

INCOME TO EXPENSE RATIO

The income to expenses ratio used to measure the efficiency of bank how much expenses
paid by bank to generate the income. In other word it shows relation between total income
and total expenses and the following formula is used to calculate it.
Income to Expense Ratio = Total income /Expense (Rs in thousand)

Particular 2005 2006 2007 2008 2009

Total Income 5,027,468 612,734 10,333,264 14,736,175 19,708,737
Total Expenses 2,817,140 2,962,523 6,872,191 10,260,807 13,487,211
Debt Ratio 1.785 0.207 1.504 1.436 1.461

In the above table the performance of bank is batter in FY-05 but it decreased in FY-06 to
due high competition and inflation the revenue is not increased and expenses increased and
lead to decrease the bank performance. However in the FY-07 the performance of bank is
increased by cuts in expenses and increased in revue and reach to batter position.

58
 2

1.5

0.5

0
2005 2006 2007 2008 2009

CURRENT ASSETS TO NET SALES

This ratio is used to measure the performance of bank current assts to its income. What is
total income in use of current assets? Hara it is concluded that how much current asset is
productive to generate the sales. The following way is used to calculate it.

CAT= Net Sales /Total Current Assets (Rs in thousand)

Particulars 2005 2006 2007 2008 2009

Net sales 4,073,715 4,487,206 8,780,698 12596921 15143241
Current Assets 15,099,03 15,935,604 27,489,31 30,605,182 18,297,252
4 5
CAT 0.270 0.282 0.319 0.412 0.828

In connection to current assets to sales the performance of bank is batter in FY-05 which
gradually increased in the nest four year. It shows the batter management of current
utilization for generation of revenue. In FY-09 the Total current assets to income is high and
almost doubled to base year of 05. in the FY-09 the international economic recession but still
bank performance is batter in relation to its current assets, that show the management assets
best placement

59
 0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
2005 2006 2007 2008 2009

NOTE
Overall ABL has best performed in 2006 with increased net profits, return on equity, it is
best to compare ratios with industry averages. Onwards 2006 ABL has converted their
operations into fast growing institution in Pakistan. The result can be seen in the years 2007
to 2009 but it is expected that the financial position will grow up in the year 2008.

60
 HORIZANTAL ANALYSIS OF
ALLIED BANK
BALANCE SHEET FOR THE LAST FIVE YEARS
ENDED 31 DECEMBER 2005 TO 2009

Rupees in thousands 2005 2006 2007 2008 2009

Assets
Cash & balances with treasury Banks 100 131.22 176.2 222.81 200
Balances with other Banks 100 182.93 209.43 276.7 131.96
Lending’s to financial institutions 100 40.29 176.27 145.44 250.3
Investments 100 77.99 116.3 129.5 178.39
Advances 100 155.97 192.01 221.49 225.07
Operating fixed assets 100 131.07 161.26 192.45 259.02
Deferred tax assets
Other assets 100 102.37 191.63 267.38 388.16
100 125.51 169.93 194.45 213.35
Liabilities
Bills payable 100 126.02 135.12 188.87 269.8
Borrowings from financial institutions 100 86.66 66.42 94.1 110.38
Deposits and other accounts 100 135.13 192.67 213.83 231.99
Sub-ordinated loans
Liabilities against assets subject to 100 37.91 3.91
finance lease
Deferred tax liabilities 100 65.31 70.31 91.27 58.45
Other liabilities 100 133.28 235.97 270.43 334.49
100 125.9 169.92 192.91 211.48
Net assets 100 119.21 170.15 219.01 243.04
Represented by
Share capital 100 110 132 175.56 263.34
Reserves 100 156.45 212.42 210.71 251.79
Unappropriated profit 100 142.85 188.89 246.56 310.15
Surplus on revaluation of assets – net 100 38.67 106.35 125.19 14.52
of tax
100 119.21 170.15 219.01 243.04

www.abl.com.pk

61
Horizontal analysis balance sheet
In the above analysis, for horizontal analysis we take year 2005 as a base, and all the other
values are shown/calculated in percentage in subsequent years.
Assets:
As we can see that cash balances at bank, with treasury and with other banks has been
increased from the year 2005 to 2008 very sharply, but in the year 2009, it falls to 200 and
132. the reason of this is In the year 2009, a major investment has been made in the
expansion phase. It can be clearly seen from the heading investment, operating fixed assets
and other assets. The generation of funds has been invested in order to expand the business in
2009. The investment was increased from 129% to 178% operating fixed assets from 192%
to 259% and other assets 267% to 388% in the same year. It is a sharp increase. Even in the
previous years 2006 to 2008. The rapid increase in the above heading was seen but not as
much as in the year 2009, which justifies the decrease in cash balances at bank, with treasury
and other banks.
Lending to financial institutions was reduced to 40% in the year 2006 and then rapid increase
was seen in 2007 but in the year 2009, a tremendous fall was recovered. The same reason can
be predicted. So far as the advances are concerned, there was continuous increase from year
2006 to 2008, but in the year 2009, the position looked like stagnant. It shows the reliance of
the bank is to expand the business. However, if we look overall assets situation, we can see a
constant growth from the year 2006 to 2009. Hence, we can conclude that the bank’s assets
position had been increasing year to year which lead to stability as well as growth.

Liabilities:
The position of liabilities was very much similar to the assets. Bills payables, deposits and
other accounts and other liabilities had shown a synonymous type of trends. The trends were
continuously seen and shown in the following paragraph with figures.
Bills payable were increased to 269% in the year 2009 as compare to year 2005 but from
various increasing steps of 126% in2006, 135% in 2007 and 188% in 2008. Similarly,
deposits were tends to increased to 135%, 192%, 213% and 231% in the years 2006, 2007,
2008 and 2009 respectively. It clearly had shown the attraction of new clients towards ABL.
Other liabilities were also shown the similar trend and raised to 334% from 2005 to 2009.

62
However, borrowing from financial institutions had fallen in the year 2006 and 2007 but
there is increased in year 2008 and 2009. it may be the change in the methods of borrowing
by the treasury department of the ABL. Liabilities against assets subject to finance lease had
reduced very quickly from 2005 to 2006 and even in the year 2007, the bank had no such
liability. Deferred tax liabilities had shown uneven increase or decrease. It may be due to
change amount of provision against deferred taxation. The net assets figure showed the best
trends in the year 2006 as sharp increase were recorded. Afterwards, the trend of increase
was not stopped but at a lower rate was observed.

Equity:
The share capital of the ABL was increased from year to year but in 2009 a rapid fund
raising was seen through issuing of new shares. The trust of investors enabled to bank to
raise equity and to expand the network of ABL banking system in various parts of the
country. As in the ratio analysis we have also observed the expansion phase of ABL was
2007 to 2009. in the same manner, the reserves of the bank directly proportionate to the share
capital. The surplus on revaluation of assets was reduced to 38% in the year 2006 and then
increased very quickly in the year 2007 to 106% but in the year 2009; the surplus was
reduced to 14%. The cause of reduction was transferring the surplus to reserves as well as the
amortization against such surplus.

63
 HORIZANTAL ANALYSIS OF
PROFIT AND LOSS STATEMENT FOR LAST FIVE YEARS
ENDED 31 DECEMBER 2005 TO 2009

2005 2006 2007 2008 2009

Mark-up / return / interest earned 100 110.15 215.55 309.22 371.73
Mark-up / return / interest expensed 100 80.98 310.11 505.75 629.57
Net mark-up / interest income 100 125.09 167.12 208.59 239.69
Provision against non-performing 100 89.91 206.97 365.65 1270.63
loans and advances
(Reversal) / provision for impairment 100
in the
100 102.25 195.12 365.77 1271.11
Net mark-up / interest income after 100 128.04 163.5 188.26 106.3
provisions
Non mark-up / interest income
Fee, commission and brokerage 100 134.99 159.79 193.16 204.44
income
Dividend income 100 69.89 135.81 290.31 364.01
Income from dealing in foreign 100 160.44 315.77 518 581.31
currencies
Unrealized gain/loss on revaluation of
investments
Other income 100 63.78 74.26 115.53 120.93
Total non-markup / interest income 100 171.27 162.78 224.3 478.69
100 140.39 163.29 198.55 212.66
Non mark-up / interest expenses
Administrative expenses 100 128.47 180.46 228.18 333.46
Other provisions / write offs
Other charges 100 11.25 149.31 500.49 982.15
Total non-markup / interest expenses 100 128.37 180.44 228.41 334.02
100 149.48 150.34 175.98 120.93
Extra ordinary / unusual items
Profit before taxation 100 149.48 150.34 175.98 120.93
Taxation – current 100 100.28 94.86 112.62 11.28
– prior years'
– deferred 100 -58.22 -262.41 -150.87 328.17
100 115.14 104.8 137.33 -47.73
Profit after taxation 100 174.34 183.31 203.97 243.05
Unappropriated profit brought
forward
Profit available for appropriation 100 174.34 183.31 350.62 406.23

64
Appropriations:
Transfer to:
Statutory reserve 100 174.34 183.31 0 0
Capital reserves (reserve for issue of 100 220 435.6 0 0
bonus shares)
Revenue reserves 100 191.89 165.61 0 0
Proposed cash dividend 100 110 99 0 0
Unappropriated profit carried B/F 100 174.34 183.31 0 0
Basic/ diluted earnings 100 145.33 152.85 85.19 101.59
www.abl.com.pk

HORIZONTAL ANALYSIS INCOME STATEMENT

Markup/return/interest earned:
The markup and interest income was slightly increased in the year 2006 but rapid increase
was recorded in the subsequent years and even it went up to 371% in the year 2009 as
compare to year 2005. The fast increase may be due to increase in investment in those
portfolio, which yielded higher returns. It may also be due to increase in the advances and
loans given to the businessmen and various clients of ABL.

Markup/return/interest expensed
the depositors trend towards ABL and expansion of the business put the trend over the period
2005 to 2009 in such a manner that it increased tremendously from year to year, especially
this rapid trend was observed in the year 2008 i.e. 505% as compare to 310% in the year
2007. Obviously the increase in the deposits of the ABL the markup/interest expense ratio
was increased.

Net markup/ interest income

This head of income is derived by subtracting the interest/markup expense from
interest/markup income. The trend here was looked to be very attractive and consistent,
125% in the year 2006, 167% in 2007, 208% in 2008 and 239% in 2009. from this we can
conclude that ABL was making optimal utilization of available deposits and able to generate
attractive profits.

65
Provision against non-performing loans and advances:
The rapid and fast increase in provision against Provision against non-performing loans and
advances caused by issuing new loans and advances to attract customers. As we have already
discussed in various parts of the report that in the last few year, the competition environment
has been created, which in turn competes to introduce new products. ABL was succeeded to
add new clients and customers. It is a fact that increase in receivables put impact on chances
of bad debts that may be the reason for increase in the Provision against non-performing
loans and advances especially in the year 2008 and 2009.
Fee, commission and brokerage income:
The last paragraph enumerated that ABL was successful by attracting new customers. The
functionality of the bank was also increased which ultimately increased the fee, commission
and brokerage income. The trend of increase was very consistent as 134% in year 2006,
159% in 2007, 193% in 2008 and 204% in 2009.

Dividend income
Dividend income earned by the bank on account of investment made in stock markets. The
rapid increase in the dividend income clearly indicates the policy of treasury department to
make more investment in the risky business to get higher profitability. The policy of ABL
looked very successful as the dividend income was 364% in 2009 when we compare it to
year 2005. However, the major change was observed in the year 2008 when a tremendous
increase was indicated.

Income from dealing in foreign currencies

According to an article published in the management accountant edition NOV-DEC 2009,
the business of foreign currency exchange was groomed in the last five year with a swing.
The same trend can be seen from this analysis. The reason is to introduce a lot of branches to
deal in foreign exchange, especially in the year 2008. In the same year, another reason might
be the depreciation of local currencies against world reputed currencies like US dollars, UK
pounds and EUROS.

Other income

66
Other income of the bank should be directly proportionate to increase in interest income as
well as increase in the clients/customers of the bank. However, the trend in the ABL was
quite opposite in the year 2006, which fell to 63% as compare to year 2005. but afterwards,
the trend was established and a continuous increase was seen. The reason may be the total
reliance of the bank on interest income.

Non-markup/interest expenses
Non markup/interest expenses head includes administrative expenses, other provisions/write-
off and other charges, but the major portion is administrative expenses. The trend was looked
alike the interest and non-interest income. The growth in the ABL not only increased the
income portion but also increased the expenses portion. The constant increase up to year
2008 was recorded, but in 2009, the rapid increase was seen. The reason may be the same it
the expansion phase of the ABL.

Profit before taxation and after taxation

The profit before taxation was increased to 149% in the year 2006 as compare to base year
2005. In the year 2007, a slight increase was recorded. But in the year 2007, again a rapid
increasing trend was observed. However, 2009 was the year in which before taxation profit
fell down to 120% as compare to 175% in 2005. The possible reason may be introduction of
new branch in various cities resulting increase in operating cost. When operating cost
increasing trend was higher than revenue generation, then definitely impact in the form of
reduction in profits can be there. The same was observed here.
So far as, profit after taxes is concerned, it shows a similar trend of increasing. It was
because of adjustments of provision for taxations current as well as provisions for deferred
taxation. The continuous increase in after tax profit went up to 243% in year 2009 as
compare to 2003% in 2008, 183% in 2007 and 174% in 2006 keeping in view the year 2005
as base.

Basic/diluted EPS
EPS in the years 2006 and 2007 was ideally increased but in the year 2008 it fell down to
85%. However, the slight increasing trend continuous. The decreases in EPS may be issue of

67
new shares fro fund raising and introduction of new branches of the ABL throughout the
country. But year 2009 against showed the growth in EPS as compare to year 2008.

68
 VERTICAL ANALYSIS OF
BALANCE SHEET FOR THE LAST FIVE YEARS
ENDED 31 DECEMBER 2005 TO 2009
Assets 2005 2006 2007 2008 2009
Cash balances with treasury Banks 8 8 8 9 7
Balances with other Banks 3 5 4 4 2
Lending’s to financial institutions 7 2 7 5 8
Investments 26 16 18 17 22
Advances 52 65 59 60 55
Operating fixed assets 2.34 2.42 2.2 2.29 2.81
Other assets 1.67 1.36 1.88 2.3 3.04
100 100 100 100 100

Liabilities
Bills payable 1 1 1 1 2
Borrowings from financial institutions 19.79 13.62 7.74 9.65 10.33
Deposits and other accounts 76.74 82.37 87.02 85.07 84.18
Sub-ordinate loans 0.99 2.19 1.93 1.76
Liabilities against assets subject to finance 0.74 0.23 0.02
lease
Deferred tax liabilities 1 0.52 0.41 0.47 0.28
Other liabilities 1.19 1.26 1.66 1.67 1.89
Net assets 100 100 100 100 100
Represented by
Share capital 29.26 22.53 20.45 20.83 24.84
Reserves 70.73 77.46 79.54 60.45 57.42
Un-Appropriated profit 18.71 17.72
Surplus on revaluation of assets – net of tax 100 100 100 100 100
www.abl.com.pk

VERTICAL ANALYSIS OF BALANCE SHEET

69
Assets
In the vertical analysis the total value of assets are taken as a base in order to calculate
percentage share of each head of account in the assets.
The overall picture of the assets looked very stable. Cash and balance with treasury bank and
with other banks showed a similar view. However, in the year 2009, the total percentage of
cash balances declines to 7.33% with treasury and 1.92% to other banks. Lending to the
financial institutions is only head of account under assets, which gave uneven idea. In the
year 2004 it declined to 2.17 but thin in 2007 it increased to 7.01. Similarly in 2008 it
reduced to 5.05 but again 2009 enhanced to 7.93. Keeping in view the base as total assets we
can conclude that major portion of assets comprised of advances, about more than a half of
total assets in each year. In year 2005, share of advances was 52.44% in 2006, 65.17% in
year 2007, 59.25% in year 2008, 59.73% in year 2009. The total share was 55.32%. Another
considerable contribution was of investment i.e. one quarter of total assets in approximation.
Remaining about 25% share of total assets related to cash balances with treasury bank, with
other bank lending’s to other financial institution and other assets. The overall positions of
assets are not fluctuating.
Liabilities
The major portion of total liabilities was of deposits and other accounts that was a good sign
for ABL. In 2005, the deposits were about 76.74% of total liabilities, the share in year 2006
and 2007 tend to increase as in 2007, and total percentage of total assets was recorded at
87.02%. However, in the year 2008, the share was declined by 2% and then in 2009 by 1%.
The diversion was transferred to borrowings from financial institution. The share of bills
payable seemed to be very much stable as 1.21% in 2005 to 1.55% in year 2009 with slight
increase and even decrease in year 2007.
Subordinated loans share in year 2005 was nil, but from the year 2006 to 2009, it contributed
between 1% to 2% shares to total liabilities. The remaining 2% to 3% share of total liabilities
comprised of liabilities against assets subject to finance lease, deferred taxation and other
liabilities. The liabilities against assets subject to finance lease were terminated in the year
2008 and also not found in 2009. The percentage share of deferred tax liabilities decreased to
0.28% in the year 2009 as compare to 1% in year 2005. In short we can conclude that ABL
was able to maintain its liabilities with stability.
Shareholders equity

70
From this section one thing looked very clear that in the year 2005 to 2008, the ABL has not
any unappropriated profit. It means that after distribution of dividend. Bank’s policy is to
transfer all the revenue reserves to ‘Reserves Account’. However, in the year 2008, the
balance sheet showed unappropriated profit of 17% to 18%. But overall reserves remained
constant. The major portion of the equity section was also recorded as reserve. The portion of
share capital during this period tend to decrease due to high profitability, but in 2009 the
issue of large amount shares converted the share to 24.85% as against in the year 2009

VERTICAL ANALYSIS OF

71
 PROFIT AND LOSS STATEMENT FOR LAST FIVE YEARS
ENDED 31 DECEMBER 2005 TO 2009
Administrative expenses 2005 2006 2007 2008 2009
Mark-up / return / interest earned 81.03 73.31 84.98 85.48 76.84
Non mark up income
Fee, commission and brokerage income 10.44 11.57 8.12 6.88 5.44
Dividend income 0.75 0.43 0.49 0.74 0.7
Income from dealing in foreign currencies 2.24 2.96 3.45 3.97 3.33
Gain on sale of investments 0 8.83 0.97 0.76 11.98
Unrealized gain/loss on revaluation of 0 0 0 -0.02 0.01
investments
Other income 5.54 2.9 2 2.18 1.71
Total non-markup / interest income 18.97 26.69 15.02 14.52 23.16
Total markup and non mark up income 100 100 100 100 100
Mark up expenses 27.44 18.25 41.4 47.35 44.07
Non mark up expenses
Administrative expenses 28.57 30.15 25.08 22.24 24.3
Other provisions / write offs
Other charges 0.02 0.02 0.04 0.06
Total non-markup / interest expenses 28.59 30.15 25.1 22.28 24.36

PROVISIONS
Provision (Non-performing loans & advances) 6.14 4.53 6.18 7.66 19.89
(Reversal) / provision for impairment in the
value of investments 0.62 -0.35 0.01
Bad debts written off directly
6.14 5.15 5.83 7.66 19.9
Total expenses markup and non mark up 62.17 53.56 72.33 77.29 88.33
Profit before taxation 37.83 46.44 27.67 22.71 11.67
Taxation – current 17.38 14.31 8.02 6.68 0.5
– prior years' -1.82 -1.19
– deferred -1.49 0.71 1.9 0.77 -1.25
57.9 82.32 19.57 15.72 -4.39
Profit after taxation 21.94 31.42 19.57 15.27 13.6
www.abl.com.pk

VERTICAL ANALYSIS OF INCOME STATEMENT

72
For the whole income statement the combination of both markup/interest and non-
markup/income was taken as a base. As we can see in the above analysis the total markup
and non-markup income showed 100% in each year. All the other corresponding figures are
based on it.

Income
As earlier discussed, the income group was consisted of both markup income and non-
markup income. The above analysis clearly indicated a major portion of total income was a
markup income. And it should be as the business of banking is based upon it. In the year
2005, the share of markup income was 81.03% but it was reduced to 73.31% because of
diversion towards gain on sale of investment. In the year 2007 and 2008 it again remained
increased and stable. But again in year 2009, it fall down and the same reason was record. In
short, we can conclude that ABL was succeeded to maintain the share of markup income to
its total income. In the year 2006 and 2009, the decline was affected by gain on sale of
investment.
The non-markup income portion was about 20% in each year except in 2006 and 2009
against due to gain on Sales of investment. The non-markup income comprised of fee,
commission and brokerage income, dividend, income from dealing in foreign currencies gain
on sales of investment (almost negligible) and other income. The combination of all of these
non-markup income portion showed same picture except fee, commission and brokerage
income whose share were started to decline from the year 2007 to 2009. However, the year
2006 and 2009 figures were offset by gain on sale of investment as 8.83% in 2006 and
11.98% in 2009 as against 0.97% in year 2007 and 0.76% in 2008.
The total expenses (both markup and non-markup) share to total income was 62.17%, thus
leasing 37.83% profit before taxation. However, the ABL was succeeded to reduce the share
of expenses to 53.56% leaving 46.44% for PBT. But from the year 2007 to 2009, the trend of
expenses tends to increase. The increase in operating cost was due to expansion and
introduction of new branches as discussed earlier. The tremendous increase in total expenses
was recorded in the year 2007 by 18% but afterwards by 4% in 2008 and further 11% in
2009 the PBT for the year 2009 was minimum i.e. 11.67% as compare to all of the years
mentioned in the profit. The decline in the PBT was not due to decrease in profitability but
due to excessive operating cost incurred for expansion. Its ultimate effect is predicted to

73
coming one or two years. Definitely, when all the branches will operate at its capacity level,
the PBT share shall increase.
In the year 2005, the proportion of both markup and non-markup looked same but year 2006
showed a different picture. Its operating (non-markup) expenses portion was 30% as against
just 18% markup. The reason may be again the expansion phase, but onwards, the portion of
markup income was more as compare to non-markup portion. Its reasons may be that the
ABL was succeeded to hold major portion of business and to attract the depositors to make
their investment there. Ultimate result can be seen from portion of markup expenses
enhancement.
The PAT share showed the same trend as we have discussed in PBT figures. The basic
emphasis of the bank is PBT rather than PAT. As it is a fact that higher profit higher
taxation. The bank was also succeeded to implement the policy of provision for taxation in
good manner as that can be judged from PAT. Finally we can conclude that profitability and
financial position of ABL were tend to increase from year to year and showed very stable
position.

Organizational Analysis of “Allied Bank” with other top players

74
 Rs. ( Billion)
NBP HBL UBL ABL
Balance Sheet 2007 2008 2009 2007 2008 2009 2007 2008 2009 2007 2008 2009
Cash& bank Bal. 121 142 119 84 89 77 39 49 71 42 60 35
Invest. 180 140 157 187 120 107 115 66 62 125 64 69
Advances 320 316 269 346 349 317 289 255 210 191 198 180
Assets 668 635 578 653 590 529 499 436 358 385 343 299
Deposits 523 502 463 528 459 433 392 344 297 288 257 229
Equity 97 82 76 63 53 41 39 33 24 50 42 24

Income Statement
Gross revenues 32.8 39.9 30.5 29 36.2 29.9 21.9 26.4 18.5 19.9 25.1 19.6
Net interest income 23.9 27.8 21.2 21.8 27.7 22 15 19.1 13.1 15.1 20.1 13.8
Non interest Income 8.9 12.2 9.4 7.2 8.5 7.9 6.9 7.3 5.4 4.8 5 5.8
Admin. expenses 10.4 13.4 11.2 12.9 15.4 14.1 9.7 11.6 8.4 4.6 6.5 6.5
Pre Tax Profit 22.2 26.3 19.1 16.1 18.8 13.8 11.4 14.5 9.7 16.7 18.5 13
Net Income 14.8 17 12.7 10.2 12.7 9.7 7.4 9.7 6.2 11.6 12.1 8.9
Loan deposit 61% 63% 58% 65% 76% 73% 74% 74% 71% 66% 77% 79%
Mkt Share advances 11% 11% 10% 11% 13% 11% 10% 9% 8% 6% 7% 7%

In Percentage
NBP HBL UBL ABL
200 200 200 200 200 200 200 200 200 200 200 200
Balance Sheet 7 8 9 7 8 9 7 8 9 7 8 9
Mkt share
Deposit 12 13 12 12 12 11 10 9 8 6 7 7
Capital
adequacy 14 13 12 10 9 8 8 8 7 13 12 8
Return on
assets 2.9 2.7 2.2 2.1 2.2 1.8 2 2.2 1.7 4 3.5 3
Return on
Equity 20 21 17 22 24 23 25 29 25 31 29 38
Interest spread 1.8 6.1 5 4.1 5.9 5.2 3.7 6 4.8 4.8 7.6 5.5
Fee/Pre tax 40 46 49 44 45 57 60 50 55 29 27 44
Revenue
Expenses 315 297 272 225 235 212 225 227 219 431 387 303
Current share 261. 174.
price 244 - - 5 - 3 - - 381 - -
Share o/s min 709 - - - 690 - 648 - 546 - -
27. 17.9 18. 13.8 14. 9.3 28. 22. 17.
EPS 7 24 2 19.7 4 6 15.2 9 9 3 2 4
Price earning 8.0 13.
Ratio 8 13.3 11.5 5
Market Cap.Pk 173 180 113 208

75
Rs.

The banking sector is dominated by National Bank Limited, Allied Bank Limited, Habib
Bank Limited, United Bank Limited and MCB Bank Limited. The balance sheet indicates the
trend of growth of deposits for the players. As can be witnessed from the above that the
deposit growth rate has been fluctuating over the last 5 years. A major decline was seen in
the growth of deposits for ABL in 2008, when it fell from 28% to 13%. The reason cited for
this slowdown was the slow growth of M2.The advance growth rate for the top players has
shown a similar trend, all the fluctuations for all the banks have been witnessed in the same
direction. As can be observed ABL's performance in terms of advances growth rate has been
better from the top players during the last 5 years. The advances of ABL grew by 11% in
FY09 as compared to 5.58% of NBP and -4% of UBL and MCB each during the year under
review. Another major trend seen in the banking sector has been the growth in profits after
tax for the top players. It can be clearly seen that the growth in PAT of ABL has been much
above the other top players. During FY09 there was a growth of 71% in ABL's PAT, as
compared to 14% of UBL and 2% of MCB. Another major comparison between ABL and
the other top players is that in the growth of the net interest income. Even in this area ABL
has outperformed other major players. The growth in the net interest income is 41% in FY09
as compared to 18% of UBL, 16% of MCB and 3% of NBP. In case of the non-interest
income, the growth for ABL has been in line with that of its peer except for NBP whose
growth though has fluctuated but still is above the other players in the market. The growth in
non-interest income for ABL in FY09 is around 22%, as compared to 45% of NBP

76
Future-Prospects:

The recent economic trends suggest the possibility of a modest recovery during 2010. The
major impetus for growth is expected to come from the services sector, while LSM has also
lately shown signs of recovery. The positive improvement in macroeconomic indicators,
mainly inflation and contraction in external imbalances bodes well for the revival of
economic activity. However, risks to these improvements remain as inflationary pressures
have not completely abated, the commodity prices may spur again to unmanageable levels
and foreign inflows (for instance from Friends of Democratic Pakistan (FoDP) and other
bilateral arrangements) may not materialize on time. Meanwhile, the severe energy shortages
and the sensitive security situation remain a major threat to the potential output of the
economy. The rising fiscal slippages, deficit of 1.5% of GDP for 2010 as compared to 1.1%
in 2009 poses another challenge. A sizeable portion of it also relates to increasing
expenditure on defense and security. The continuing pressure in the operation environment
suggests that the challenges for the banking sector would persist in 2010. ABL, while
remaining prudent under the circumstances would continue to emphasis on improving cost
effective deposit mix, building risk weighted assets by ensuring quality and optimizing costs
to pursue the strategy of maintaining steady growth.

77
SHORT FALLS / WEAKNESSES OF THE ORGANIZATION
A short falls/weakness is defined as an area in an organization where the organization is not
as good at doing something as its competitors or a thing which an organization lacks thus
putting the organization at disadvantage in comparison to its competitors. Based on the above
definition Allied Bank Limited has the following weaknesses
• Employees at branch level are not properly motivated to work by heart. They take all
the routine activities as a boring job.
• ABL has centralized power system.
• Lack of international branch network
• There is less communication between different levels of management

• The selection criteria for employees are not on merit basis.

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

• Major account benefits are for army officials.

1: Total Quality Management: -

Ours is the age of cutthroat competition, scarcity of resources, technological advancement,
integration of financial services, expansion of economic markets and cultural diversity. In
these complicated and conflicting financial and economic scenarios the need of TQM in the
ranks of domestic Banking industry is indispensable. The middle management should need to
have basic understandings about complicated management processes, crisis management
tools, marketing/product strategies, financial and treasury management techniques, financial
discipline, soundness and transparency of Banking system. Human resource administration
and above all genuine leadership qualities to adequately operate within a highly sensitive and
complicated industry.
There is urgent need of having TQM in the realm of Allied Bank. At the dawn of WTO and
increasing chances of investment Banking among the SARRC countries the TQM is the need

78
of the hour. Allied Bank must pay attention to this shift and start thinking strategically for
providing high quality products and services to customers. According to a study from
Business Communications Company, Inc. the changing Global Commercial Banking
Industry Structure, total commercial Banking assets are expected to climb at an average
annual growth rate [AAGR] of 7.1% from $6,772 billion in 2003 to $9,537 billion in2009.
The Allied Bank should determine where improvement is needed, how service can be
improved and where operating system breakdowns occur, why they occur and how they can
be avoided.
2: Wastage of time: -
There is major problem of wastage of time of customer due to less injection of stag where
needed
3: Reward System: -
The employees are really upset about their salaries and promotions, the reward
system is not up to standard as other organization are.

4: Employee Involvement: -
The employees are not involved in decision-making. Give very little chance to employees in
decision making only those who are near to manager are involve in this procedure.
5: Wastage of Stationary: -
Another problem that I observed is wastage of stationary like Account opening
Forms. Deposit slips, ATM forms, Online Form etc. and other type of stationary.

6: Extra telephone calls budgets: -

The telephone calls budget is also; very high which cannot be ignorable. Employees
sometime use it as it looks like free.

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Conclusion

ABL is a leading market player in the financial sector in Pakistan.

 Despite of the fast changing market conditions and narrowing of traditional
lucrative margins on loans, ABL is a bit slow in committing itself to seek out
new opportunities and make its existing operations more efficient.
 The Electronic Technology Department (ETD) needs further improvement, developments
and technologies by including new products and services.
 Although Phonic Banking, Online Banking, Internet Banking, Balance Transfer Facility,
ATM (Auto Teller Machine), Online Availability of Different Application Form. All of
them continue to receive encouraging response from the consumers but still considerable
attention is required for further improvement.
 The ETD staff working at branch level is not fully trained because their technological
skills are less developed for which the Bank along with the ETD has to make a complete,
sound and separate training program to develop their skills. As staff being the principal
asset of the Bank, should be groomed through professional development.

Knowledge of Risk Management is Missing: -

The main purpose of financial and Banking organization is to create valuable system
by interacting with its environments, customers, constituents, suppliers, technology,
competition, economy, government, etc. A valuable system is created by the conversion of a
available resources i.e. human, financial, physical, and intangible assets into goods and
services that fulfill the needs of the customers and save the vest interests of Banking and
financial organization. Risk management performs all these diversified but integrated work
to achieve maximum out-put. Managing risk is actually managing the organization, planning,
organizing, directing and controlling organization systems and resources to achieve
objectives. Managing risk must come from within and act to change the organization and its
response to changes in the environment.

80
 Now many domestic Banks are hiring experts of risk management to secure their
precious assets. Allied Bank Pakistan has created risk management group at head office but
they must adopt this police at regional level to save the best interests of the Bank and
enhance the chances of investments.

81
Recommendations

Recommendations are supposed to be the most important part of internship report. A good
report is said to be completed and important only when recommendations are given. To get
suggestions, discussions have been conduct with the staff of ABL officers. The cooperative
staff helped me a lot and provided me the basis for recommendations and also pointed out
some areas, where the change for the development is essential.
Despite of the fast changing market conditions and reduction of traditional profitable margins
on loans, Allied Bank Limited is a bit slow in commit itself to seek out new opportunities
and make its existing operations more efficient. For that purpose, I suggest the following
recommendations.

The Bank should plan to enhance its ATMs and Internet Banking Services with new features
like inter-branch funds transfer, and the payment of utility bills more quickly as they are
doing. The Bank should also plan to setup a call center and Data Warehouse to enhance the
timeliness and quality of services.

 The future focus of the ABL should be to improve the automation of the accounting
processes and enhance the quality and effectiveness of MIS.
 Although the Bank’s products and Services are structured to cover and improve the
quality of lives of all important towns and cities but the Bank should also start to explore
new markets in the smaller towns in the rural areas of Pakistan for its Retail Banking
products, supported by technology based services.
 The ABL should increase press coverage and advertising to create effectively market it’s
corporate as well as product/Brand image.
 The H.R.M Department of the ABL should effectively increase its focus on providing in
house training staff, which should be conducting training services all, year around to
enhance professionalism and employee development.

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 The marketing policies and strategies should be clearly written and communicated to all
the staff members. The Branch Managers must make the use of the staff in pursing the
organizational objectives.

1 Employees’ training
To increase the efficiency and effectiveness, the management should arrange timely training
sessions so that the employees get the complete knowledge of how to deal with the customers
and work well in team as well as individually.
The ETD(Electronic Technology Department) staff working at branch level is not fully
trained because their technological skills are less developed for which the bank along with
the ETD has to make a complete, sound and separate training program to develop their skills.
As staff being the principal asset of the bank, should be groomed through counties
professional development.

2 Improvements needed in ETD

The Electronic Technology Department (ETD) needs further improvement, developments
and technologies by including new products and services.

3 New Features
The bank should plan to enhance its ATMs and Internet Banking Services with new features
like inter-branch funds transfer, and the payment of utility bills. The Bank should also plan to
setup a call center and Data Warehouse to enhance the timeliness and quality of services.

4 Technology
Although Phonic Banking, Online Banking, Internet Banking, Balance Transfer Facility,
ATM (Auto Teller Machine), Online Availability of Different Application Form continue to
receive encouraging response from the consumers but still considerable attention is required
for further improvement.

5 Refresher courses
The employees of the bank should frequently conduct meaningful refresher courses,
workshops and seminars so as to improve the knowledge of staff. Because of the new

83
technological developments and severe competition the HRD should train their staff to cope
with the new changes. This will be beneficial for the bank’s productivity.

6 Automation
The future focus of the ABL should be to improve the automation of the accounting
processes and improve the quality and effectiveness of MIS.

7 Explore New Markets

Although the Bank’s products and Services are structured to cover and improve the quality of
lives of all important towns and cities but the Bank should also start to explore new markets
in the smaller towns in the rural areas of Pakistan for its Retail banking products, supported
by technology based services such as online banking and ATMs.

8 Improve advertising
The Allied Bank Limited should increase press coverage and advertising to create effectively
market it’s corporate as well as product/Brand image.

9 Organization Environment
To motivate bank’s employees and for attracting more customers, bank should maintain an
attractive and effective environment so that employees feel comfortable while working and it
will result in an increase in the efficiency of the bank.

10 H.R.M Department
The H.R.M department of the Allied Bank Limited should effectively increase its focus on
providing in house training staff, which should be conducting training services all year round
to improve professionalism and employee development. The need for proper human resource
is felt badly.

11 Marketing Policies and Strategies

84
The marketing policies and strategies must be clearly written and communicated to all the
staff members. The Branch Managers must make the use of the staff in pursing the
organizational objectives.

12 Participation of the Staff

The Bank must ensure the participation of the staff in all the promotion activities of the bank.
The Bank should encourage ownership behavior so that everyone feels responsible for
performance and reputation of the Bank. To this end the bank must adhere to the policy of
fringe benefits, rapid promotions of the capable managers and officials to motivate the staff.

13 Reshaping the Portfolio

The Bank must reshape its portfolio of business by investing in higher growth areas,
extending and developing its core competencies and moving out of week and non-core
segment.

14 Provide Customer Satisfaction

In order to earn a striking profit in future, and to compete in a highly competitive
environment, the Allied Bank Limited must constantly provide customer satisfaction my
delivering products and services through innovative technology and effective human
resource management. The Allied Bank Limited can achieve all this through aggressive
marketing, by adding diversified skills to its ETD team, prudent management of its risk
portfolio, strong collection and recovery efforts, and a strict focus on controlling operating
costs.

15 Motivation
Every human being needs appreciation in every aspect. It’s the duty of management to
motivate and appreciate their employees. This will result in loyalty, and improve the
performance of the staff.

85
References
• Annual Report of ABL 2009.
• Annual Report of ABL 2008.
• Annual Report of ABL 2007.
• Annual Report of ABL 2006.
• Annual Report of ABL 2005.
• Annual Report of ABL 2004.
• A Review from Daily “The News”.
• Iffland, Charles & Langueton, Pierre. (1996) International Banking, Irwin Book
Co., New York.
• Khan Rana, Safdar Hussain & Khan Rana, Ahmad Shabir. (1991) Banking
Currency and Finance, Ilmi Kutab Khana, Lahore.
• Sardar Aslam (1999) Banking & Finance Principal (Retd) Govt College of
commerce Abbottabad...
• Saeed, M Nasir. (1994) Economics of Pakistan, Ilmi Kutab Khana, Lahore.
• Siddiqi, Asrar H. (1998) Practice and Law of Banking in Pakistan, 6th Ed, Royal
Book Co, Karachi.
• www.AlliedBank.com.pk
• www.sbp.org.pk

86
Annexure – I ABL Structure

87
MANAGEMENT HIERARCHY

President

Senior Vice President

Vice President

Executive Vice President

Senior Executive Vice

President [rosodmemtPresident

Regional General Manager

Managerxecutive Vice
President

Branch Manager

88
 Annexure – II

FUNCTIONAL HIERARCHY

President and CEO

Board of Director

Head of Departments

Regional General Manager Controllers of Operation

Branch Manager

Office G-I, II and other lower Staff

89
Annexure- III Structure of Branch

90
STRUCTURE OF ABL

President

Board Of Directors

Group Operation Chief Credit Committee

Committee
Regional Operations Regional Management
Chief

Operation Manager At
Branch Regional Business Chief
& Regional Risk
Management Chief

91
 Annexure – IV

STAFF ORGANIZATION OF THE BRANCH

Branch Manager

Officer G-I Officer G-II Customer Service Manager HR Manager

Teller Messenger

92
 Annexure – V

ORGANOGRAM OF FINANCE DEPARTMENT

Credit Control Officer

Account Payments Billing Cashiers Receipts

Officer Officer Officer Officer

93