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CREDIT DEPARTMENT

We have discussed the definition of a bank as a party whose responsibility is to accept deposits from people and credits to deserving clients. We have already discussed the role of operations department in detail. The primary function of operations department is to accept the deposits from the people who have those deposits in the form of savings etc. Now we will switch to the second role of the bank i.e. to advance loans. Advancing loans refers to the function of a bank to provide finance to those individuals as well as corporate bodies who are in need of funds in order to meet their domestic or commercial purposes. This allimportant function of the bank is performed by the Credit Department. The credit department is also termed as Assets Side of the bank.

DIVISION OF CREDIT DEPARTMENT IN ACBL:


The primary function of credit department is to advance loans to different categories and types of clients as per their requirement. But due the modern era of specialization and complex operations of business it is inevitable for a bank to divide its credit department into sub departments so that they can perform their specialized functions more efficiently as well as can mitigate the risk on the part of bank. These sub departments make it easy for a banker to perform his operations rather quickly and safely. So on the basis of functionality and task the credit department as a whole can be divided into the following five departments:

Credit Marketing. Credit Processing. Credit Admin Department (CAD). Credit Risk Management. Special Assets Management.

CREDIT MARKETING:

Credit Marketing is the first sub department under the head of Credits Department. The purpose and function of this department is to attract the potential customers. This department is of vital importance because there are almost over two dozen banks are performing their functions in Pakistan and under this tough competition attracting a customer to avail a credit facility from a particular bank is really a task to achieve. Credit Marketing in ACBL is done through different tools including telemarketing, advertisements etc. However an important thing not to forget is under such a tough competition and tight monetary measures of SBP, ACBL have achieved various milestones in the previous years including Best Commercial Bank Consumer Choice award 2005 by The Consumers
Association of Pakistan and Best Retail Bank in Pakistan award 2004 & 2005 by The Asian Banker. These awards reflect the quality of credit marketing department through which these

awards were made possible.

CREDIT PROCESSING:
Credit processing department is quite adjacent to Credit Marketing department in ACBL. Credit processing department is responsible for processing credit applications received in ACBL for different types of loans. This department works side by side to credit marketing department to achieve the common object of quality credit.

RETAIL BANKING GROUP (RBG):


In ACBL both the above departments are amalgamated under the Retail Banking Division and are collectively known as RBG. RBG is responsible for serving the banking needs of the retail market comprising of individual consumers and small and medium sized enterprises. These market segments are gaining increasing importance since the margins in the corporate and commercial banking segments have reduced to unprecedented levels, while margins in retail banking, though considerably reduced, are still much better than the former.

CREDIT ADMINSTRATION DEPARTMENT:


CAD has significant importance in all these five branches of credit department. As its name emphasize, this department is responsible for advancing commercial loans to various business concerns depending upon the nature and requirement of the business. This department not only advances the loans but also has the administrative tools to monitor the requirement, proper utilization and in time repayments of the advances given to the customers. The various activities performed by this department includes the following: Evaluation of a clients potential regarding the requested credit limit through Site Visits and calculation of projected financial statements. Preparation of Credit Line Proposals (CLP) including the suggested facilities for a particular customer. Getting approvals from various committees including branch credit committee and regional office etc. Renewal of credit facilities to various parties keeping in view the total exposure and risk elements minimized.

CREDIT RISK MANAGEMENT:


This department consists of professionals including upper management personnel and their task is to ensure that while going for an exposure whether all the risk mitigating steps are duly performed or not. They have the authority to alter any proposals if they find it unsuitable keeping in view the risk mitigation factor.

SPECIAL ASSETS MANAGEMENT:


This division is dealing primarily at corporate level and has the responsibility of dealing with corporate clients in accordance with the bank policies.

TYPES OF CREDIT:
Credit can be divided into various categories and types depending upon the nature, size tenor etc. but following are the three major types of credit advanced by ACBL: 1. Consumer Credit. 2. Commercial & Corporate Credit. 3. Agricultural Credit.

CONSUMER CREDIT
Consumer credit refers to the credit facilities advanced to the individuals as well as small entrepreneurs to meet their personal as well as business requirements. Disbursement of these types of loans is the responsibility of the RBG of ACBL.

MODES OF FINANCING:
Following are three types of financing modes commonly used in ACBL:

Term Finance. Running Finance. Cash Finance.

TERM FINANCE:
Term finance refers to loans that are advanced for a particular time period subject to regular and periodic repayments. Term finance is usually financed for more than one year. It is a loan account opened in the name of the borrower. The amount of finance is credited to borrower's

personal account by debiting the Term Finance Account. The amount of Finance is disbursed in lump sum. Partial transactions are not allowed in the Term Finance account. The repayment of Term Finance is usually in installments and besides other documents a letter of installments is taken from the borrower at the time of disbursement. By that letter, the borrower binds himself to pay the installments at regular intervals. The amount of installments includes principal plus markup for repayment period. Term finance includes the following three broad categories of products offered by ACBL: I. PERSONAL FINANCE. II. MORTGAGE FINANCE (UPTO Rs. 30M). III. EDUCATION FINANCE.

I. PERSONAL FINANCE:
Personal Finance is a parameter driven product for catering to the needs of the general public belonging to different segments. One can avail unlimited opportunities through Askari Bank's Personal Finance. With unmatched finance features in terms of loan amount, payback period and most affordable monthly installments, Askari Bank's Personal Finance makes sure that one gets the most out of his/her loan. Once a good credit history is established, the door to opportunity opens much wider.
Featuring:
Loan amount upto 500,000 Repayment period from 1 to 5 years Fixed monthly repayment Competitive Rates No pre-payment penalties Shortest processing time Servicing available at all ACBL branches And certainly unmatched service quality

II. MORTGAGE FINANCE:


Ever since the inception of life, shelter has been rated among the primary needs of mankind. Owning a home for oneself still remains an exclusive dream for many. Askari Bank has made the realization of your dream to have a house of your very own possible. Whether you plan to build a house, tailor made to your requirements or buy a constructed house, Askari mortgage finance enables you to pursue your goal without any problems.

Featuring: Finance limit upto Rs. 10,000,000/Tenure: Upto 20 years Markup Servicing: Monthly Life/Property Insurance Early settlement charges NIL Balance Transfer Facility

III. EDUCATION FINANCE:


ACBL has recently introduced a new finance package for the students who can avail education finance facility to share their education burden with ACBL. Under this scheme loans are granted to the students on really low mark up rates returnable in easy installments after their education.

RUNNING FINANCE:
It is allowed to the borrower under a pre-sanctioned limit. A Current Account is opened and the conduct of this account is kept under review for a period of three to six months. The borrower can draw cheques from his Current Account but maximum upto the amount of limit sanctioned to him. The amount outstanding against the borrower is shown as debit in the 'Balance' column of the running finance account. The borrower may draw cheque on this account for a partial amount. In case a Running Finance Account is fully adjusted on particular date before the expiry of the stipulated period, the limit will have to be got renewed if a letter of continuity is not obtained from the borrower at the time of sanction. Running finance is usually advanced to meet the working capital requirements of a business. Following two facilities are offered by ACBL under running finance: I. SMART CASH. II. BUSINESS FINANCE.

SMART CASH:
This is a running finance facility offered by ACBL. Under this facility a customer can draw upto Rs. 500,000 any time within the limits.
This personal line of credit would be set up with a specified credit limit upto Rs. 500,000/You can withdraw cash from your credit line as and when you require. The mark-up is charged only on the utilized amount and for the number of days the credit is used. The markup is lower than a credit card. Personal loan and balance transfer facility. Finance Amount: Up to Rs. 500,000/- revolving credit line Minimum gross salary Rs. 25,000/-

BUSINESS FINANCE:
In pursuance of the National objectives to review the economy of the country, ACBL is providing loans to small and medium size business enterprises under Askari Bank's Business Finance Scheme. Their goal is to offer a loan, which enables business community to receive the financing required by them based on their cash flows. Ore valued customers can enjoy the convenience of getting financing on attractive terms with the minimum processing turnaround time.
Three good reasons why you should avail this facility: Enjoy the flexibility of either small business finance upto Rs. 3,000,000/Medium business finance SMEs upto Rs. 75,000,000/Protect your business from immediate cash flow constraints.

CASH FINANCE:
This type of finance is allowed to the borrower against the hypothecation or pledge of moveable property/stock of the borrower. In majority of cases this finance is allowed against pledge of stock. The amount of finance is credited to borrower CD account and he/she utilizes it for business purposes. The pledge is allowed against cash repayment.

PROCEDURE OF DISBURSING LOAN:


The customer desirable of loan facility contact the bank through RBG office at Gulberg. The applicant fills the application form along with the required documents (checklist attached). After filling the application form the applicant has to open account with the Gulberg branch and has to sign the charge documents in the presence of the guarantor. The case along with documents is than get approval of incharge RBG and then sent to CPU (Central Processing Unit) for further processing. CPU after their necessary documentation refers the case to Head Office Rawalpindi where it gets final approval from RBG head. The approved case is then again returned to the CPU that sends that back to the branch. The branch then attach the following documents with the approved case file: Limit Sheet. Disbursement Authorization Certificate (DAC).

REQUIRED DOCUMENTS: RBG:


1) Checklist. 2) Amortization Schedule. 3) Undertaking from customer. 4) Undertaking to not use the funds for IPO etc. 5) Borrower Basic Fact Sheet (BBFS). 6) Telephone Verification. 7) Post-dated Cheques from Customer.

CPU:
8) Credit Sanction Advise (CSA). 9) Disbursement / Satisfaction Letter. 10) Resident Verification Report. 11) Office Verification Report. 12) Guarantor Residence Verification Report. 13) Guarantor Office Verification Report. 14) CIB report from SBP.

OTHER CONDITIONS:
The instructions written on the CSA have to be followed at all the times and in all respects. Because that is the document that shows the whole scenario of any applicant including his personal information, approved limits, gross and net yields and other conditions and instructions regarding that particular customer from H.O. Guarantors are not required if the applicant is an army personnel as the banks prime founder is Army Welfare Trust.

COMMERCIAL & CORPORATE CREDIT


Commercial credit refers to the credit facilities granted to the small, medium and large scale business concerns in order to meet their current as well as future obligations. This is very vital part of the credit department because majority of the revenues are generated through these operations. Credit Admin Department (CAD) is responsible for all the issues relating to the disbursement of such credit facilities.

CREDIT FACILITIES:
Credit facilities to commercial clients can be divided into two broad categories: A). Non-Funded Facilities. B). Funded Facilities.

NON-FUNDED FACILITIES:
Non funded facilities refers to those credit facilities that are not advanced on cash basis rather the bank provides a facility to the customer to use the money which he never owns and then return it back to the bank as accordance with the agreement. Following are the two non-funded facilities offered by the bank: 1). 2). Letter of Credit (L/C). Letter of Guarantee (L/G).

LETTER OF CREDIT (L/C):


Letter of Credit is an instrument widely used to settle the transactions involving two or more countries. L/C is a conditional undertaking given by a bank to the exporter to pay a certain some of money after a particular time period and certain terms and conditions against stipulated documents. We will discuss L/C in detail in foreign trade Department.

LETTER OF GUARANTEE (L/G):


Letter of Guarantee is a document issued by the bank to a beneficiary on behalf of its customer giving a guarantee that he will perform a particular task in accordance to the terms and conditions settled mutually between them and if the customer will not perform his obligation, the bank will compensate the injured party.

TYPES OF GUARANTEES:
Guarantees are divided into following three categories: 1. Bid Bond. 2. Performance Bond. 3. Mobilization Advance.

BID BOND:
It is a guarantee issued by the bank on behalf of the customer to a third party assuring him that the customer is a valid party for any tendering purposes. This guarantee is usually of a nominal amount and usually asked by the concerns to avoid unnecessary competition.

PERFORMANCE BOND:
It is a guarantee issued by the bank in favor of a beneficiary giving him assurance that customer will perform his obligations on his part and if he failed to do so then bank will compensate the injured party.

MOBILIZATION ADVANCE:
This type of guarantee is issued by the bank on behalf of the customer as an advance to make sure that the party is genuine and will not commit any fraud during the course of work. This type of guarantee is usually issued for heavy and long tenor projects and usually required by the government departments.

FUNDED FACILITIES:
Funded facilities refer to those facilities that are advanced to a customer in the form of cash. The customer can utilize these facilities in order to meet his various types of regular and onetime transactions. Following are some of the funded facilities that ACBL advances to his commercial customers: 1. Running Finance (R/F). 2. Finance against imported Merchandise (FIM). 3. Finance Against Trust Receipts (FATR). 4. Finance Against Packing Credit (FAPC). 5. Cash Finance (C/F pledge or hypothecation).

RUNNING FINANCE (R/F):


Running finance refers to a credit facility that is advanced to a customer to meet his working capital requirements. If a customer is out of funds for a particular time period regularly due to the difference between the debtors and creditors average payback period then he can ask the bank for R/F to minimize his deficiency in funding problems.

FINANCE AGAINST IMPORTED MERCHANDISE (FIM):


FIM is a facility that is advanced to the importers. When the documents reached the custody of bank from the exporter bank, the bank ask the importer to make the payment of L/C amount and get his documents cleared from the bank so that he can release his merchandise from the customs. Now if at that point of time the importer is out of funds then he will request the bank to advance him a loan and keep the imported goods as a security for that loan. The bank will advance him a loan under FIM and will take over the imported goods from the customs department. When the importer will make the payment to bank the bank will release his goods.

FINANCE AGAINST TRUST RECEIPTS (FATR):


FATR is a facility that is reciprocal to FIM. Under FATR the loan is granted to the importer only on the Trust Receipts signed by him that he will make the payment to the bank after such time period and nothing is kept as security. Here the bank advances a loan to the customer merely on trust basis but this facility is usually advanced to regular and good customers.

FINANCE AGAINST PACKING CREDIT (FAPC):


FAPC is a facility available for the exporter. Exporter receives an order from the importer of a product and he has to deliver the goods to the importer within an agreed time period. Now the exporter reaches the bank and asks for a loan to manufacture the products, as he does not have the resources to produce that product. The bank will advance him a loan to manufacture these products and payback that loan when the export proceeds will be realized. In order to encourage the exports not only the commercial banks but SBP also has introduced a scheme termed as Export refinance Scheme. Under this scheme the loans to exporters are disbursed by the commercial banks on the discounted rates. SBP provides these funds to the commercial banks that then advance these funds as loans to exporters.

CASH FINANCE (C/F PLEDGE OR HYPOTHECATION):


C/F refers to a funded facility that is disbursed to a customer against the pledge or hypothecation of particular stock of the customer. The bank has the control over the pledged stock and the goods are released when the client makes the payment.

EXCESS OVER LIMIT (EOL):


Excess over limit is not a unique facility as its own rather it refers to a facility that is advanced to a customer up and over his approved limit. At time it may happen that apart from his regular lines a customer may ask for some extra credit facility to fulfill some sort of obligations. Under this scenario bank may grant him, for a short period of time, credit facility to fulfill his obligations.

ONE TIME TRANSACTION (OTT):


OTT means a credit facility granted to a customer not on regular basis but just to complete a single transaction at a particular time. This type of facility is usually advanced to new customers and usually the cash margin is 100% in those sorts of transactions.

PROCEDURE OF DISBURESMENT OF LOAN


CREDIT APPLICATION & ACCOUNT OPENING:
First of all the client gives an application regarding the credit facilities he is willing to obtain. The client also has to open an account with ACBL Gulberg branch. Borrower must submit an application for finance on prescribed form to the bank that application should contain the following details: Borrowing from other bank or any other financial institution. Business commitment for next one year. Purpose of borrowing should be there that should be productive one.

ININTIAL ANALYSIS & SITE VISITS (QUALITATIVE ASSESSMENT):


As the application reached the CAD they analyze the viability of the potential customer i.e. they first assess that whether the customer is really in need of the requested facilities and further more does he meet the criteria of the bank for such facilities or not. After their initial view some of the authorized officers of the bank then make a site visit of the manufacturing facilities of the customer who has requested for the loan so that the potential of the customer can be judged. Following are some of the points to be considered while making a site visit: Potential Capacity of the manufacturing facilities. Management of the Organization. Growth potential of the concern. Comparative position as compared to Industry. Title and Condition of the Collateral Offered.

FINANCIALS AND PROJECTIONS (QUANTITATIVE ASSESSMENT):


After the site visits the visiting officer, suggesting about go or no go decision, prepares a visit report. It includes the basic assessment that he has made during the site visit. When the visiting officer gives a green signal in the visit report, the next step is to ask for the current and projected financial statements from the customer. These figures are then further processed to come up with a precise current and future position of the customer. A detail document is then drawn termed as branch comments regarding the quantitative viability of the proposal.

VALUATION OF SECURITIES / COLLATERALS:


It is vital for a bank to mitigate the risk at the time of advancing any credit facility. One of the steps in this regard is to ask for the securities. The customer offers some collateral against the loan. The bank on his own parameters then values these collaterals.

WAYS OF SECURING LOANS:


Bank adopts different ways of securing loans depending upon the nature of collateral offered and nature of business concerns. On the basis of collaterals the assets are secured in the following ways:

Immovable Properties are Mortgaged. Moveable Properties are Pledged. Liquid Securities are Lien Marked.

On the basis of nature of business concerns the following ways are adopted:

Properties are mortgaged in Sole Proprietorship and Partnership. Charge is created in case of Private or Public limited companies.

PROCESS OF MORTGAGE:
In order to mortgage a property the following steps are taken: First market value (MV) of the property is evaluated. Then Forced Sale Value (FSV) of the property is determined (FSV is value of property that is expected to be realized if the property is sold in auction or emergency basis). FSV is usually 15% less than the MV. After determining FSV the bank, in order to mitigate the risk, establishes a Margin on the value of property and this margin is usually of 30% of FSV of property. At last usually 70% of FSV of the property is advanced to the client.

PROCESS OF CHARGE CREATION:


Charge is created in case of corporate entities. It means that at the time of liquidation or insolvency of the company bank has the right to recover his amount by selling that property on which the charge is created.

In order to create the charge the following steps are adopted: First bank asks for the documents of the property on which the charge is to be created by the bank. This step ensures that the property is under ownership and control of the customer or not. Next the bank verifies the documents from his own sources that whether the documents delivered by the client are clear from any sort of dispute or case etc. After the clearance from the court and other officials involved bank creates a charge on the documents of property and register that charge from SECP (Securities & Exchange Commission of Pakistan).

CATEGORIES OF CHARGE:
Charge can be divided into two main categories: A. FIXED CHARGE. B. FLOATING CHARGE.

FIXED CHARGE:
Fixed charge means that bank has the right on a particular property and the borrower cannot make any transaction with that property. The property is ceased in case of fixed charge.

FLOATING CHARGE:
In case of floating charge the borrower can revolve the property on which the charge is created but overall right of the bank remains the same.

TYPES OF CHARGE:
Charge can be divided into following five types: First Charge. Second charge. Exclusive Charge. Pari Bassu Charge. Joint Pari Bassu Charge.

PREPARATION OF CREDIT LINE PROPOSAL (CLP):


After discussing the projection with the department head a proposal is prepared by CAD officer to get the approval of branch credit committee as well as head office (Regional Office) approval along with the required documents. The CLP includes the following: Basic information of the customer. Proposed and Existing facilities (if any). Rate of mark up on all the facilities. Gross and Net Yield from the customer. Any other credit facilities availed by the customer from other banks. Details of securities / collaterals offered by the client and their proposed value. Any conditions included by the credit committee of branch or R.O. Approval from the branch and Head Office.

PREPARATION OF FACILITY OFFER LETTER (FOL):


Once the CLP got approved it is known as CSA (Credit Sanction Advice). The last step is to prepare facility offer letter (FOL) to the client giving the details of the facilities approved with the mark up rates etc. this letter also includes all the terms and conditions imposed by the bank on the customer that he has to follow if he will accept the offer.

DISBURSEMENT OF CREDIT:
When the customer reaches the bank with FOL duly signed by all the required signatories, the credit line is disbursed to him.

FOREIGN TRADE DEPARTMENT


Foreign trade department of a bank refers to a department, which provides his services relating to the activities of trade between two or more countries. Foreign trade department of ACBL deals with following three activities. EXPORTS. IMPORTS. FOREIGN CURRENCY OPERATIONS.

EXPORT DEPARTMENT
ACBL helps Pakistani exporters in the form of extending loans to exporters and giving administrative guidance to them. The interested parties report goods against L/C. Bank collect the covering documents, send the same to importers in foreign countries in accordance with the terms and conditions laid down in L/C. Importers in the country retire the documents against cash to the negotiating bank.

PARTIES OF EXPORTS:
Parties concerned in exports are: Exporter (Seller) Importer (Buyer) Bank Importers bank/Applicant bank/Issuing bank. Exporters Bank/Beneficiary Bank/negotiating bank. Advising bank.

FORMS OF EXPORTS:
Export under letter of credit (L/C) Export under Collection.

EXPORT UNDER LETTER OF CREDIT:


The method of making payment through letter of credit has greatly facilitated commercial relations between the importer and exporter. When the contract is made between exporter and importer, exporter tells the name of his bank to importer for opening of L/C. Usually the amount is sent directly from importers bank to exporters bank. Same time importer bank contacts with an advising bank. Actually letter of credit is a written undertaking by bank given to the seller at the request and on the instructions of the buyer to pay at sight or at a determined future date a stated amount within a prescribed time limit and against stipulated documents.

EXPORT UNDER COLLECTION:


This is called lodgment. Exporter reaches the bank with the documents and asks the bank to collect the export proceeds on his behalf from the importer. Now there are two ways available with the bank in this regard: 1. To send the documents for collection. 2. To purchase the foreign bill (Bill of Exchange) from the exporter and make him payment and realize the amount of exports from the importer. Document required for exports are: Bills of exchange Invoice Packing list Certificate of origin Bill of lading/air-way bill Copy of contract between importer and exporter Duplicate and triplicate copy of E form Copy of any other required document

FOREIGN DOCUMENTARY BILLS FOR COLLECTION (FDBC):


FDBC refers to the documents sent by the bank on behalf of the exporter to realize the exports proceeds from the importer. When the documents are sent for collection this process is termed as lodgment. When the exports proceeds realized from the importers bank, the equivalent in Pak Rs has to be credited to exporters account after deducting the charges and bank commission etc.

FOREIGN BILL PURCHASED (FBP):


The process of FBP is quite similar to FBP but the only difference is that amount is credited to the customer account as soon as the documents are lodged and when the proceeds are realized any difference due to the change in conversion rate of currency is settled.

PROCEDURE OF EXPORTS
The process of exports can be elaborated under the following steps.

RECEIPT OF L/C:
The process of export starts with the receipt of L/C by the bank. The issuing bank sends the L/C to ACBL through an advising bank. When an L/C is received, it is filed in a separate file. Test procedure is also applied at this stage. Afterwards banker prepares a cover letter, which is sent to beneficiary of L/C informing him that his L/C has reached the bank and he should collect it immediately. A copy of L/C is also sent along with the letter.

ISSUANCE OF E-FORM:
When an exporter receives an L/C, his next job is to get an E-form from an authorized bank. It is parts of exchange control mechanism of SBP. The E-forms are quadruplicate and are serially numbered. E-Form is document issued by the bank to the exporter to obtain the undertaking of the exporter that on the realization of exports proceeds in foreign currency, the whole amount will be surrendered to SBP and the exporter will receive equivalent in Pak Rs. It is a security document. After getting it, an exporter must get it certified with in 14 days. The exporter fills in the form following information of his exports: The commodity The quantity The price The land customs part The port of export The port of destination Terms of shipment Mode of payment Export registration number, etc.

CERTIFICATION OF E-FORM:
After filling the form from the front side, the exporter brings the E-form to the bank for verification. The bank verifies the contents of the E-form based on the documents. SBP has given authority to banks for this purpose. The bank stamps all the four copies of form. The bank to verify an E-Form performs following steps: Stamp on the side of the E-Form confirming the term of shipment e.g. FOB, CIF etc. Verify the stamp and signatures of the customer. Enter the E-Form #, Party Name and amount in E-Form Verification Register. Issue certificates to customer depending upon the mode of shipment.

PREPARATION OF SHIPMENT AND DOCUMENTS:


After getting the E-form verified, the exporter starts arrangements for preparing shipment. In order to receive payment for his goods, the exporter has to send certain documents to the issuing bank via his negotiating bank. Important documents are as follows. Diary Bill of exchange Commercial invoices Bill of Lading/ Airway Bill/ Railway Receipt Packing List Certificate of Origin Shipping Advice, etc. Customer Request. E-form. Bill of Exchange. Insurance Documents.

At the time of shipment, exporter submits E-form to custom department. The custom authorities keep the original form and sends remaining copies to bank. Bank gives one copy to the exporter and retains other two copies out of which one copy is sent to SBP on the realization of exports.

SCRUTINY:
It requires meticulous attitude of incharge officer. When the exporter presents his documents to the bank, they are always scrutinized. If there are discrepancies in the documents, these are noted down on a scrutiny sheet. They are then pointed out to the exporter and he is asked to provide correct documents.

ENTRY INTO REGISTER:


After shipping the goods exporter reaches the bank in order to instruct bank to make necessary arrangements for realization of exports proceeds. Bank then dispatch the documents to his corresponding bank in the country of importer to collect the export proceeds. At the time of dispatching documents an entry is made in FDBC Lodgment Register with the details.

DISPATCH OF DOCUMENTS:
The documents brought by the exporter are in the form of sets containing an original and a number of copies. The bank keeps additional copies with itself along with E-form and original L/C in its own record. Afterwards bank dispatches the documents to the issuing bank through courier service.

REALIZATION OF EXPORT PROCEEDS:


When the documents are sent to the foreign bank, it becomes an obligation of the issuing bank to make the payment. In case of sight L/C, payment is made within 12 days of receipt of documents by the issuing bank. However, in case of usance L/C, an acceptance or maturity is sent to the negotiating bank in which issuing bank gives an undertaking that it will make payment on maturity date. After exports proceeds are realized, payment is made to exporter at T.T Buying Rate. Rupees and the exchange rate is the buying rate of that day called the T.T Buying Rate. When the corresponding bank collects the proceeds from importer he gives a credit to our reimbursing bank after deducting his charges. Now reimbursing bank gives a credit to ACBLs treasury for the exports proceeds. Treasury after receiving the proceeds intimates our branch through an IBCA (Inter Branch Credit Advice). Gulberg branch then gives a debit to H.O M.O. account and gives customer credit.

ISSUANCE OF EPRC:
Last step in this regard is to issue Exports Proceeds Realization Certificate (EPRC) to customer in which it is mentioned that the customer has routed exports business of this much amount from our branch and we have deducted these charges as instructed by SBP. The purpose of EPRC is that the customer can claim exemption in the taxes and duties, which he has already paid from CBR.

IMPORT DEPARTMENT
Being an under developed country, Pakistan requires machinery and other goods from foreign countries. Government announces its imports policy every year. ACBL through its foreign correspondence establish confirmed and irrevocable letter of credit on request of its client. The bulk of import trade now-a-day is mostly financed through L/C. the method of making payment through letter of credit has greatly facilitated commercial relations between the importer and exporters bank. That gives guarantee for disbursement of amounts to the exporters. After the establishment of L/C the exporters dispatch goods and documents are deposited in the bank of the exporters country. Foreign bank dispatch the documents to ACBL, which deals in transfer of money to foreign country.

LETTER OF CREDIT
Letter of credit is an instrument widely used for settling the transactions involving the trade of two or more countries. It is an undertaking given by a bank to the exporter that the payment for the contract will be paid to him upon the fulfillment of certain terms and conditions. Import department deals with L/C in two following ways:

ORIGINATING PARTICULAR OF L/C:


SETTLEMENT

Name of Issuing Bank Name of Advising Bank Name of Exporter Name of Importer Date of L/C Amount of L/C Merchandise Clause Expiry date of L/C Date of Shipment Mode of Shipment Detail of Documents Transportation from-to Freight prepaid or not Types of L/C, either Revocable or Irrevocable Cost of Goods Partial shipment Trans-shipment (stay at any place other than destination, is allowed or not)

Any other required detail.

TYPES OF LETTER OF CREDIT


Following are the main types of L/C:

REVOCABLE L/C:
It on be amended or cancelled at any time without notification to the seller.

IRREVOCABLE L/C:
It can be amended or cancelled only with the agreement of the issuing bank, confirming bank and the seller.

CONFIRMED L/C:
When exporter demands from importer to involve a third bank to confirm the payment, in case importers bank fails confirmed L/C. The terms and conditions of confirmed and irrevocable credit cannot be uttered without the consent of all parties there to.

TRANSFERABLE L/C:
The letter of credit that can be transferred to (one or more) other beneficiaries by original beneficiary is known as transferable letter of credit.

CLEAN L/C:
If there are no conditions and restrictions attached to the bill and the issuing bank makes payment up to the limit of credit, the letter is said to be clean L/C. This is done when importer and exporter have continued business for a long time and have full confidence upon each other.

IRREVOCABLE L/C:
Irrevocable letter of credit is the most popular form of L/C as it is most secured from the all parties point of view. 99% of the L/Cs opened by the banks in the present times are irrevocable. Following are two further categories of irrevocable L/C:

1. SIGHT L/C.
2. USANCE L/C. SIGHT L/C:
Sight L/C is a letter of credit where documents are delivered to the customer against the immediate payment from customer. Usually a time of 7 to 12 days are allowed to the importer to make arrangement for the funds.

USANCE L/C:
Usance L/C is a letter of credit where the documents are delivered to the customer against a promise to pay the amount after a particular time period. Customer usually accepts a Bill of Exchange for the tenor agreed between the bank and importer. The customer makes payment after the tenor is expired.

PROCESS OF IMPORT
1. REQUIRMENTS FOR OPENING L/C:
Before the submission of L/C application, an importer will have to fulfill the following conditions: It is essential that he should be an account holder of the bank where he will establish letter of credit. He must be member of chamber of commerce or register importer with chief controller of imports and exports or with EPB. Position of import license. Importable merchandise; should not be restricted. L/C should be established with 60 days from the date of which the license issued, excluding of the issuing date. Merchandise should be shipped within 12 months from the date of issue of import license. Insurance amount should be covered locally. Importer must have limit with the bank. He had deposited L/C margin within the bank, usually 30% of L/C. This margin may be 25-50% and may be Nil depending upon the credibility of client. The customer fills the L/C opening form and is checked by the L/C opening officer. Signature of the customer is verified. 4. H.S. Code of the commodity is checked that whether the import of such commodity is permitted by SBP or not. 5. L/C vouchers are passed. 6. L/C text is prepared and handed over to the SWIFT department for transmission. 7. Finally the L/C is transmitted to the advising bank in the country of exporter.

FOREIGN CURRENCY ACCOUNTS


Foreign Currency Accounts is the last sub department of Foreign Trade Department. All the activities of general banking in terms of foreign currency are performed at this desk. Following are some of the activities performed at FCY Accounts desk: Account Opening in FCY. Issuance of DD in FCY. Foreign Telegraphic Transfer (FTT). Inward Foreign Telegraphic transfer (IFTT). Foreign Bill for Collection (FBC).

ACCOUNT OPENING IN FCY:


The process of account opening is same as it is explained in the operations department for FCY accounts.

ISSUANCE OF DD IN FCY:
The process of issuance of DD in FCY is same as explained in the operation department. At the time of issuance of FDD the branch sends a message termed as 110 message to the corresponding bank that authenticates that the DD is genuine. It includes Instrument No, Beneficiary Name and Account No. Bank charges 17$ on each transaction of FDD.

FOREIGN TELEGRAPHIC TRANSFER (FTT):


TT is the fastest way of transferring money through banks. FTT refers to transferring money from one country to another. The transfer is executed through SWIFT messages.

PROCEDURE OF FTT:
When a customer reaches bank to transfer funds the following particulars are required: 1. Name of the Beneficiary. 2. Bank of the Beneficiary. 3. A/C No. 4. SWIFT code of bank.

After customer provides the above mentioned detains a SWIFT message is sent to our corresponding bank depending upon the currency of transfer. These banks maintain NASTRO A/c of our bank. We give a debit to customer account and corresponding banks NASTRO A/c is credited. Following are the banks with whom ACBL Gulberg maintain its NASTRO A/c for different currencies: CURRENCY US$ CORRESPONDING BANK Citi Bank New York American Express New York GBP Euro Canadian $ Australian $ Standard Chartered Bank London GMBH Frankfurt Germany Royal Bank of Canada Common Wealth Bank of Australia

INWARD FOREIGN TELEGRAPHIC TRANSFER (IFTT):


IFTT refers to remittances received by our bank from foreign remitters. The process is same as of FTT from remitter point of view. When the amount is credited to our NASTRO A/c the corresponding bank intimates the same to our Treasury Office that later respond to us through IBCA by crediting our H.O. A/c. we then Dr H.O A/c and gives a credit to customer account.

FOREIGN BILL FOR COLLECTION (FBC):


FBC are FCY cheques that are deposited by our customers in their accounts. These cheques are drawn on other banks. The procedure of lodging these cheques as clearing is different for different currencies.

US$:
Cheques of USD drawn on any bank inside Pakistan are sent to Saima Trade Center Karachi Branch. They then lodge the cheques for collection i.e. cheques are sent to their drawn branches. Those branches then give a credit to our NASTRO A/c and then corresponding bank work similar to IFTT procedure.

Cheques of USD drawn on any bank outside Pakistan are sent to Tufail Road Branch. They then lodge the cheques for collection i.e. cheques are sent to their drawn branches. Those branches then give a credit to our NASTRO A/c and then corresponding bank work similar to IFTT procedure.

GBP:
Cheques of GBP drawn on local banks are directly sent through routing to their branches for clearance. Those cheques that are drawn on foreign banks are first sent to Standard chartered Bank Karachi through routing and then the process of USD cheques are repeated.

EURO:
Cheques of euro currency are sent to the banks directly whether drawn on local or foreign banks through routing.

TRAVELLERS CHEQUES:
ACBL has agreement with American Express Bank in regard of traveler cheques. The branch ask for the stock of TCs and the Amex Bank automatically debit our NASTRO A/c. then at the time of issuance of these cheques we gives a debit to the customer account. ACBL charges 1% commission on such cheques.

RETURN ON FCY ACCOUNTS:


TITLE OF ACCOUNT US$ GBP EURO RETURN P.A. 0.75% 2.00% 1.00%

DAILY POSITION TO TREASURY:


Last task of FCY desk is to send the daily cash and NASTRO A/C position to treasury Karachi. This daily position shows the transactions that take place throughout the day in terms of foreign currencies.

WORK DONE BY ME
As for as work done by me is concern I join the Askari commercial bank limited (ACBL) as an internee at 17 July 2006. During my stay at branch I have been routed through different departments and I had performed various activities in these departments. The details of these departments and respective activities are as under:

ACCOUNTS DEPARTMENT
Following are the activities I had performed in accounts department:

ACTIVITY:
Activity is the main function of accounts department that is very much time consuming and level of responsibility is very much high. The process of activity is as follow: First all the vouchers of previous day are sorted by a couple of people so that they can be separated on the basis of type of account e.g. PLS Saving, Current Account, ASDA etc. These vouchers are then rearranged to start the activity. After arranging these vouchers the next step is to tally the vouchers with the computer generated details of all the financial activities along with: Date. A/c no. Name of the Party. Opening Balance. Voucher No. Instrument No. Nature of transaction (Cash, Clearing, Transfer) Closing Balance.

FOREIGN TRADE DEPARTMENT


During my stay in foreign trade department I had performed the following activities:

ISSUANCE OF E-FORMS:
In exports department I used to issue E-Form to the customers who reaches the bank with the request from their respective companies. After issuance an entry in E-Form issue I also make register.

VARIFICATION OF E-FROM:
After filling the E-Form form front side the customer came back to bank to verify the form. I used to verify the forms according to the procedures already mentioned in the foreign trade department portion. An entry is also made in E-Form verification register at that point of time.

ISSUANCE OF CERTIFICATES:
After verifying the export forms the next step is to issue certificates to the customer so that he can clear the goods from the customs department and I used to issue these certificates as well.

LODGMENT OF DOCUMENTS:
When the documents are lodged by the bank for collection a covering letter is prepared specifying the details about the collection. I used to prepare that covering letter as well and process off lodgment was also performed by me under the supervision of department staff.

PREPARATION OF EPRC:
I also used to prepare Exports Proceeds Realization Certificate (EPRC) for different concerns in the system involving various technicalities.

FILLING E-FORM:
E-Forms are issued in a set of four. Two of them are returned to branch out which one is sent to SBP and the branch as record keeps one copy. But before sending a copy to SBP it has to be filled from backside as well by the bank. I used to fill these forms so that they can be reported to SBP at the month end.

FILLING I-FORM:
Just like export form (E-Form) another form is also prepared by the bank termed as IForm (import form). As its name implies it is filled by import department and I used to fill that form as well.

CREDIT DEPARTMENT
I have spent major time of my internship in credits department. It was really an excellent experience learning the concepts, tips, techniques of the banks while granting and monitoring credit facilities. Before joining credit department I have little knowledge about the credit facilities advanced by the banks but after working in the credit department I really come up with a new exposure and experiences that how that whole process practically works and what are the important factors in this regard.

PROJECTION:
Projection refers to an activity in which the forecasted financial statements are prepared on the basis of data supplied by the customer. I used to prepare these financial statements using various MS Office tools like MS Excel. These sort of activities really helped me in improving my computer skills.

COMMENTS ON FINANCIALS:
I also used to comment on the financial statements of the customers who ask for loans from our branch. It was really a great opportunity for me to apply my knowledge I have learnt in my college course of Business Finance. I have seen the practical significance of these things during my internship.

PREPARATION OF CLP:
I was also involved in preparing Credit Line Proposals (CLP) for different customers that are really a core activity of the credit department. During my work I learned very much about the credit facilities

PREPARATION OF FOL:
I have also prepared facility offer letters for various customers that was really helpful for me to understand the different terms and conditions on which the loans are advanced. This really provided me a new exposure about the credit department workings.

CUSTOMER RELATIONSHIP MANAGEMENT:


During my stay in credit department the branch was refunding the money to unsuccessful candidates of a housing scheme. This was the responsibility of credit department to refund the amount in the form of DDs. I was given the seat to perform this task. During this process I had a great experience of customer dealing and relationship management.

MONTHLY REPORTING:
At the end of every month the department sends a report to SBP stating the names and outstanding amounts of loans of those people who are availing credit facilities from Gulberg branch. I assisted the concerned person involved in the preparation of these reports.

OPERATIONS DEPARTMENT
ISSUANCE OF CHEQUE BOOK:
During my stay in operations department I have spent a couple of days at account opening desk where I used to issue chequebooks to various clients.

STAMPING ON A/C OPENING FORM:


After the account opening form is filled by the customer it needs proper stamping by the concern officer before presenting it to incharge for approval. I also have experienced this activity along with the concern officer of bank.

CLEARING DEPARTMENT ACTIVITIES:


I have performed some activities in clearing department as well. These activities includes jotting of clearance cheques, stamping on outward clearance etc.

FINANCIAL ANALYSIS
The strength of any organization in real times can be appraised by analyzing its statement of accounts. The financial statement of any organization shows the result of its operation and its positions in business. The financial statement of any business includes: The Balance Sheet. Profit & Loss Account. Cash Flow Statements. We can judge the potential and market standing of any concern by calculating its ratios and horizontal and vertical analysis.

FINANCIAL ANALYSIS OF ACBL:


Askari commercial bank is no doubt one of the leading commercial banks in Pakistan. It has really shown progressive improvement in all respects over the time. In order to evaluate the banks potential I have divided the analysis in to two classes:

Horizontal & Vertical Analysis. Ratios Analysis.

HORIZONTAL ANALYSIS
BALANCE SHEET
2004 8,762,866 4,847,899 2,324,839 17,239,157 69,938,041 2,595,023 1,459,716

ASSETS
Cash at bank Balance with the other banks Lending to financial institutions/call money Investment Advances Operating fixed assets Other assets 2005 11,766,925 5,550,148 10,172,242 25,708,194 85,976,895 3,192,862 2,732,641

TREND % Change 3,004,059 34.28 702,249 14.49 7,847,403 337.55 8,469,037 49.13 16,038,854 22.93 597,839 23.04 1,272,925 87.20

Total Assets

107,167,541

145,099,907 37,932,366

35.40

LIBILITIES
Bill payable Borrowing from financial institution Deposits and other accounts Liabilities against assets subject to finance lease Other liabilities Deffered tax liabilities Sub-ordinated loans 1,227,093 13,781,555 83,318,795 14,159 1,282,981 526,865 1,000,000 1,315,680 10,562,338 118,794,690 1,459 2,271,393 567,217 2,999,700 8,587,430 1,507,018 5,862,074 1,218,338 8,587,430 88,587 -3,219,217 35,475,895 -12,700 988,412 40,352 1,999,700 2,571,337 251,170 1,544,773 775,394 2,571,337 7.22 -23.36 42.58 -89.70 77.04 7.66 199.97

Total liabilities

101,151,448
6,016,093 1,255,848 4,317,301 442,944 6,016,093

136,512,477 35,361,029

34.96
42.74 20.00 35.78 175.05 42.74

Net Assets
Represented by: Share capital Reserves Unappropriated Profit Surplus on revaluation of securities

Total

HORIZONTAL ANALYSIS
PROFIT & LOSS A/C

ITEMS Mark-up/return/interest earned Mark-up /return/interest expensed Net mark-up/interest income Provision for impairment in investments Bad Debts Provision against non-performing loans &advances Net mark-up/interest income after provisions Non mark-up/interest income Fees, comm.& Brokerage Dividend income Income from dealing in foreign currencies Gain on the sale of investment Other income Total non mark-up interest income Non mark-up expenses Administrative expenses Other (charges)/income Total non mark-up expenses Profit (loss) before taxation PROFIT AFTER TAXATION Unappropriated profit brought forward Profit available for appropriation 2004 4,487,206 1,117,206 2005 8,780,698 4,278,374

TREND % Change 4,293,492 95.68 3,161,168 282.95

3,370,000 4,502,324 1,132,324


38,066 7 277,398 (36,555) 638,547 (74,621) (7) 361,149

33.60
(196.03) (100.00) 130.19

3,054,529 3,900,332
708,377 26,318 180,992 540,193 177,648 4,688,057 1,845,179 138 2,842,740 1,923,040 1,923,040 838,561 51,143 356,218 99,825 206,819 5,452,898 2,591,985 1,832 2,859,081 2,021,996 2,021,996

845,803
130,184 24,825 175,226 (440,368) 29,171 764,841 746,806 1,694

27.69
18.38 94.33 96.81 (81.52) 16.42

1,633,528 1,552,566

(80,962) (4.96)
16.31 40.47 1,227.54

1,845,317 2,593,817

748,500
16,341 98,956 98,956

40.56
0.57 5.15

5.15

VERTICAL ANALYSIS
PROFIT & LOSS A/C
An analysis of percentage financial statements where all balance sheet items are divided by total assets and all income statements items are divided by net sales or revenues.

Vertical analysis of Profit and loss account as on December 31,2005


ITEMS Mark-up/ return/interest earned Mark-up/ return/interest expensed Net mark-up/interest income Provision against non-performing advance and loans Provision for diminution in the value of investments Bad debt s written off directly Net mark-up/interest income after provisions Non mark-up/interest income Fee, commission and brokerage income Dividend income Income from dealing in foreign currencies Other income Total non mark-up/ interest expense Non markup/interest expense Administrative expenses Other provisions and write offs Other charges Total non-markup/interest expense Extraordinary/unusual items Profit before taxation Profit after taxation Unappropriated profit brought forward Profit available for appropriation
2004 2005

100% 24.89% 75.10% 6.18% 0.84% 0% 68.07% 14.48% 0.59% 4.03% 17.93% 36.40%

100% 48.72% 51.28% 7.27% 0.42% 0.00% 44.42% 9.55% 0.58% 4.06% 5.77% 17.68%

41.12% 0% 0.00% 41.12%

29.52% 0.00% 0.02% 29.54%

63.35% 42.86% 42.86%

32.56% 23.03% 23.03%

VERTICAL ANALYSIS
BALANCE SHEET

Vertical analysis of Balance sheet as on December 31,2005


Assets 2004 2005

Cash and balances with treasury banks Balances with other banks Lending to financial institutions Investments Advances Other assets Operating fixed assets Deferred tax assets Total assets

8.10% 4.52% 2.17% 16.08% 65.26% 1.36% 2.42% 0.00% 100%

8.11% 3.83% 7.01% 17.72% 59.25% 1.88% 2.20% 0.00% 100%

Liabilities Bills payable Borrowings from financial institution Deposits and other accounts Sub-ordinated loans Liabilities against assets subject to finance lease Other liabilities Deferred tax liabilities Net Assets Represented by Share capital Reserves Unappropriated profit 1.15% 12.85% 77.74% 0.93% 0.01% 1.20% 0.49% 5.61% 0.96% 7.74% 87.02% 2.20% 0.00% 1.66% 0.42% 6.29%

1.17% 4.03% 5.20%

1.04% 4.04% 5.08%

RATIO ANALYSIS
The ratio analysis is the most powerful tool of financial analysis. Ratio simply means one number expressed in terms of another. Ratio analysis involves methods of calculating and interpreting financial ratios to analyze and monitor the firms performance. Ratio analysis of the firms financial statements is of interest to shareholders, creditors and the firms own management. Both present and prospective shareholders are interested in the firms current and future level of risk and return, which directly affects share price. The firms creditors are interested primarily in the short-term liquidity of the company and its ability to make interest and principal payments. In order to calculate these ratios I have divided these ratios into following categories:

PROFITABLITY RATIOS. LIQUIDITY RATIOS. LEVERAGE RATIOS. MARKET RATIOS.

PROFITABILITY RATIOS
Profitability ratios measure the results of business operations or overall performance and effectiveness of the firm. 1). Earning per Share = Net Profit after Tax___ No. Of Outstanding Shares 2004: 1,923,040,000 125,584,737 = Rs 15.31 per share 2005: 2,021,996,000 150,701,684 = Rs 13.42 per share

2). Return On Total Assets =

Net Profit after tax Total Assets

2004:

1,923040 107167540 = 0.179 or 1.79 %

2005:

2021996 145099907 = 0.139 or 1.39 %

3). Return on Shareholders funds = Net Profit after tax Shareholders fund 2004: 1923040 6016000 = 0.345 or 34.5 % 2005: 1103000 5047000 = 0.274 or 27.4 %

4). Return On Deposits =

Net Profit before tax Total deposits

2004:

2842740 83318795 = 3.411%

2005:

2859081 118794690 = 2.41 %

LIQUIDITY RATIOS
The liquidity of a bank is measures by its ability to satisfy its short-term obligation as they come due. Liquidity refers to the solvency of the banks overall financial positionthe ease with which it can pay its bills. 5). Current Ratio = 2004: Current Assets Current Liabilities

73218597 33472184 =2.19:1

2005:

94842799 40018059 =2.37:1

6). Advance to Deposits Ratio = 2004: 69838392 83318795 = 83.82% 2005: 85976895 118794690 = 72.37%

Advances Total deposit

LEVERAGE RATIOS
The debt position of the bank indicates the amount of others people money being used to generate profits. 7). Interest coverage ratio = Income before interest and tax Interest expense 2004: 4688057 1845317 = 2.54 2005: 5452898 2593817 = 2.10

8). Proprietary ratio = 2004: 5573149 107167540 = 0.052:1 2005: 7369092 145099907 = 0.051:1

Equity Total assets

MARKET RATIOS
Market ratios relate the banks market value, as measured by its current share price, to certain accounting values. 9). Price/Earning Ratio = 2004: 94 15.31 = 6.14 2003: 128.83 13.42 =9.6 Market Price of share Earning per share

10). Book Value per share = 2004: 5573149000 125584737 = 44.38 per share 2003: 7369092000 150701684

Common Equity No of O/S share

= 48.90 per share

COMMENTS ON ANALYSIS

On the basis of above detailed analysis of financial statements of ACBL I have come up with the following conclusion:

HORIZONTAL ANALYSIS:
Horizontal analysis represents the comparative study of the last two years of Profit & Loss A/C and Balance Sheet. We can clearly observe that as compared to 2004 the overall position of financials of ACBL has improved impressively. There is a 35% increase in the total assets as compared to the previous years. It means that only within one year ACBL has shown great performance. The significant thing to observe is that total advances (whether short term or long term) has increased almost 200 million (about 23% increase as compared to previous year) that shows the significant portion in the overall exposure in the economy. Similarly if we study the liabilities side of the Balance Sheet overall deposits has increased about 42% as compared to last year that shows impressive marketing strategies and healthy returns on deposits of ACBL. It also shows the great public trust on the sound policies of ACBL. The bank also has paid heavy dividends in cash as well as in the form of bonus shares to its shareholders. Looking briefly into the profit & loss account of the bank we can see that overall canvas reflects a positive panorama. The profitability of the bank has increased as compared to previous year by 5%. An important thing to consider over here is that there were only 7Million bad debts reported last year, which are now zero. It shows the bank sound credit policies and secured procedures so that the funds gathered from the public are not wasted.

VERTICAL ANALYSIS:
Vertical analysis is a method to compare the two years performance in terms of percentages of net revenues. Just like horizontal analysis the vertical analysis also shows good positive results in comparison to last year. Lending operations and investments has increased as compared to last year. Looking into liability side of the bank we can see that majority of the short, as well as long-term liabilities are lesser as compared to last year. Deposits have significantly increased as already mentioned.

RATIO ANALYSIS:
Ratio analysis is a powerful tool to analyze the position of a firm in all respects. There are profitability tests, liquidy and leverage ratios and market ratios as well that can present the true picture of the concern. I have calculated ratios for the previous two years of ACBL to have a comparison of the two successive years.

Following are my observations about the ratios of the bank:

PROFITABILITY RATIOS:
First ratio is Earning Per Share ratio that represents the rupee amount earned on each share. EPS of Askari Bank in 2004 was Rs 15.31, which in 2005 decreased to Rs 13.42. Although the ratio has decreased as compared to the last year but it does not means that the profitability is negative. We can see that the profits are increasing but due increase in number of shares the ratio has decreased a bit but it is still a very healthy one. Return on Total Assets ratio measures the overall effectiveness of management in generating profits with its available assets. The higher the companys return on total assets, the better it is. In 2004 the return on total assets of Askari Bank was 1.79%, which again decreased to 1.39% in 2005, which is again due to the expansion of the assets of the bank. Return on equity ratio represents the return earned on the shareholders investment in the firm. From the above analysis it is visible that in 2004 the shareholders of Askari Bank earned 34.5 paisas on each rupee that decreased to 27.4 paisas in 2005. Generally the higher the return the better it is for owners. Return on Deposits ratio shows that to what extent deposits in the bank contribute towards the income generation. In 2004 it was 3.41%, which again decreased to 2.41% in 2005.

LIQUIDITY RATIOS:
Current ratio measures the liquidity of the company .A current ratio of 2:1 is acceptable. From the above calculations it is clearly visible that in 2004 current ratio was 2.19 that rose to 2.37 in 2005, which is very much suitable. Advances to Deposits ratio indicates the total loan sanctioned by the bank in contrast to the total amount of money deposited with the bank. In 2004 the bank stands at 83.82%, which decreased to 72.37% in 2005 showing that bank has greater potential to give additional loans and advances.

LEVERAGE RATIOS:
Leverage ratios calculated are slightly negative as compared to the previous year indicated in the two years analysis.

MARKET RATIOS:
Market ratios includes two ration first price/earning ration and the second one is book value per share and both of them has shown the good positive results.

SUGGESTIONS AND IMPROVEMENTS


During my stay at ACBL Gulberg Branch, I observed that working environment equipments, furniture and staff dressing are according to modern banking style. The overall environment is very nice. The staff comprise of young and educated persons, especially they are very much cooperative and helpful to interns. The bank is performing quite satisfactory in the financial market because of its effective marketing. It is also evident from its present review and financial analysis that it is making progress by leaps and bounds. Management control over operating expenses, considerably increase in deposits and after tax profit showing that ACBL has a very prosperous present and future. It is paying proper attention to up-grade customer services and trying to convert entire structure of bank according to international banking sector. Bank has good management for training special training and transfer from one seat to another and from one branch to another to cope with day-to-day changes in banking sector. However, for further improvement I will suggest following points: Bank should provide opportunities for services to new talent. So, it should advertise its new vacancies and selection should be done on competitive basis by test and interviews. More female candidates should be employed. Their pay scales should be revised. There is a criticism on the banking management that the salaries of the employees are decreasing in every succeeding year. And I think this will shake the confidence and working habit of the employees. There is another recommendation about the bank that there is no proper timing of the bank and there is made an unnecessary delay in the banking transactions, which might not be a good sign for the bank from future prosperity point of view. Most of the bank employees, are sticking to one seat only with the result that they become master of one particular job and loose their grip on other banking operation. In my opinion all the employees should have regular job experience all out-look towards banking. The promotion policy should be adjusted. Bank should give some more incentive to its employees in order to remove the conflict between lower and higher officers. As such system should be designed that every employee who has some problems with his officers can communicate it to the higher management and some steps must be taken to improve that. Proper attention should be paid to upgrade customer services Recruitments should be strictly on merit basis and induction should be after proper and extensive training.

Young, qualified and energetic staff should replace old and lazy staff. Foreign branches should be opened in order to capture the international market and to earn international repute for the bank.

CONCLUDING REMARKS
SWOT ANALYSIS
An analysis indicating towards the organizations strengths, weaknesses, opportunities and threat is termed as SWOT Analysis. Such an analysis is very important for the management in retaining the strength, overcoming the weaknesses, capitalizing over the emerging market opportunities, and carving ways to successfully tackle with the threats and ultimately converting them in the strengths for the organization. During six weeks of my stay, I have come across the following SWOT analysis of the bank.

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

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

FULL DAY BANKING:


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

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

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

CUSTOMER ORIENTED BANKING:


The priority banking centers of the bank offer an unmatched where the customer receives highly privileged services in a highly elegant environment. It gives the chance of

experiencing new standards in banking. Designed specially for those who appreciate only the finest things in life, Priority Banking offers the very highest levels of personalized banking to match customers unique status.

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

ELECTRONIC FUNDS TRANSFER:


ACBL management is quite prepared to adopt the latest advancements in technology resulting in revolution in the banking operations such as check clearing process, computer based teller equipment, automatic teller machines, and electronic funds transfers among the others.

PHONE BANKING:
Phone banking service is very attractive for those classes of customers who dont have time to personally come to the bank i.e. banking on the phone line thus saving the precious time of the customers.

ETHICAL CONCERNS AND PUBLIC IMAGE:


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

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

MANUAL BOOKKEEPING:
Although the bank has computerized accounting system but still the bankers use to make their entries in the accounting register.

LOW JOB SATISFACTION:


Understanding and the effective management of the human resources is the most difficult challenge faced not only by the bank but also by all the organizations. Even though the people have been sacrificed in the new organizational developments, it is becoming clear that the true lasting competitive advantage comes through human resources and how

they are managed. ACBL seems to not focusing on this highly critical issue, as the job satisfaction level of the employees working at ACBL was quite low.

LACK OF SPECIALISATION:
This famous and useful concept given by Adam Smith in 1776 seems to be missing in the bank. The employees are constantly rotated from one job to another job of totally different characteristic in the view of giving them the know-how of the working in all the departments. But I think this is not a very good tactics used by the management. Otherwise the situation might be like this Jack of all and master of none.

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

LACK OF TRAINING FACILITIES:


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

OPPORTUNITIES:
SUPPORT FROM THE ARMY:
The bank has the support from the army and has good financial position in the market therefore having a good position to expand their business.

THREATS:
HIGH EMPLOYEES TURNOVER:
As discussed above, the job satisfaction level of the employee is very low resulting in high turnover that is bad for any organization as there are huge monetary and nonmonetary costs involved in the fresh recruitments.

HIGH CHARGES:

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

LESS ATTRACTIVE RATE OF RETURN:


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

COMPETITION:
ACBL is currently facing strict competition from the other banks.

LESS EXPERIENCED STAFF:


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

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