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SUBMITTED TO: Internship Coordinator IMS, BZU Multan SUBMITTED BY: Mahmood Khan MB-10-74 MBA (Morning) 7th Semester Session (2010-2013)

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Internship is the basic requirement of all business programs in nearly all of the business institutes and especially in Institute of Management Sciences, Bahauddin Zakariya University Multan. Internship is one of the crucial parts of the MBA course. Firstly the purpose of internship period is to become familiar with the practical world that what is actually happening in different national and multinational companies and how different activities are performed over there. Secondly, to cope the theoretical knowledge with the practical side that what is to be taught us in business institutes and how it is implemented in different enterprises? I have done my internship in Bank Alfalah Limited (Quaid-e-Azam Road, Multan Cantt Branch) since 2nd of July 2013 to 13th of August 2013. I gained a lot from this internship tenor under the kind supervision and guidance of my internship supervisor. During my whole time I was visited through different cells of the bank and was thoroughly briefed about the procedure and working by cordial senior staff of there. My report is all based on what I have learnt there. I hope that my report will given you good overlook of all the banking related matters.

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First of all I want to pay my gratitude to Almighty Allah WHO has enabled me to successfully accomplish my internship in Bank Alfalah Limited. I am very grateful to the whole team working over there in the organization that have provided me the opportunity to explore the practical applications of the techniques and methodologies concerned with the banking. All the department in charges and managers are very kind and helping especially, Mr. Aamir Ghori from Accounts Deptt, Mr. Muhammad Arif Bhatti from credit administration department have helped me a lot during my stay in the bank as an internee. Finally, I want to acknowledge Mr. Jawad Khan Durrani (Branch Manager) who has guided me all the way through my internship time and stay in the organization for six weeks. His guidance leads me to the awareness of hidden aspects of the banking sector and practices.

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I would like to dedicate this accomplishment offline to my beloved and caring parents, and to my teachers with the support of whom I am standing at this step of my life stairs.

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Table of Contents
Executive Summary BRIEF INTRODUCTION OF BANKING SECTOR COMPANY PROFILE Introduction and History Branches Network Credit Rating Message of the Chairman Board of Directors of Bank Alfalah Vision Statement Mission Statement Organogram of Bank Alfalah Product Line of Bank Alfalah 07-08 08-09 09-18


DEPARTMENT WORKED DURING INTERNSHIP Operations Department Account Opening Department Cash Dealing Department Remittance Department Clearing Department Accounts Department Trade Finance Department Credit Department APPLICATION OF CLASSROOM LEARNING ANALYSIS OF BANK ALFALAH SWOT Analysis PEST Analysis MY FINDINGS & SOLUTIONS RECOMMENDATIONS CONCLUSION IF I WAS MANAGER THERE? FINANCIAL ANALYSIS Common Size Analysis Financial Ratios Analysis Competitor Analysis


48-49 49-53

53-55 55-57 57 57-58 58-71

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I was lucky enough to avail this chance of doing an internship at Bank Alfalah Ltd. Quaid-eAzam Road, Multan Cantt Branch. This duration of internship was six weeks. During the training I was introduced to the functioning of all the departments operating in the branch. My report starts by discussing the brief history of banking in the human history. Then the report discusses the overview of my internship organization. It illustrates the history of Bank Alfalah, its chairman & board of directors. Detail information about the bank's branch network comes next. The financial performance of Bank Alfalah from the year 2011 is presented. List of bank's products and services is also mentioned in detail followed by a brief introduction to its various departments. Detail of my internship learning experience comes after that. It contains the information that I was able to gather and understand regarding the activities of the bank. Risks which the bank is facing are also discussed & after that in the last portion of the report I have presented the conclusions which are followed by my humble recommendations for the improvements.

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The banking sector plays a very important and vital role in the economy of any country. Generally the state bank of a country is responsible for policy making and overseeing all the activities being carried out in the banks. A lot of sources say that the word bank is derived from the word "bancus". They reason that the early Jews used to sit on benches and did transactions similar to what are carried in modern banks today. In addition to that the functions of the earlier banks were quite simple but in this modern world we see that the banks perform a wide variety of functions. Their role is not just limited to depositing money or issuing loans to different people or organizations. We see that the commercial banks today are involved in buying and selling of shares, debentures & various stocks. They sell different types of securities, bonds and deal in foreign exchange. Every bank issues credit cards to its customers as well. As stated earlier a bank plays a very vital role in the economy of a country. It serves as a channel through which the borrowers borrow money from the savers. They utilize the money and earn a return on that which is paid to the bank. The banks after deducting their intermediate costs give the lenders their share. In this way all the parties involved in this transaction are benefited.

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Bank Alfalah has gone through different phases over the years. Its name and been changed in the following sequence. Bank of Credit and Commerce and International (BCCI)1972 Habib Credit and Exchange Bank1992 Bank Alfalah1997 Bank of Credit & Commerce International (BCCI) was a Pakistan based bank, established by Mr. Agha Hassan Abdi from UBL, in association with U.A.E and Europe. BCCI has its branches in 74 different countries of the world. It had its 3 branches in Pakistan, Karachi, Lahore and Rawalpindi. The Lahore branch was opened on 15th December1978. This branch was opened at that time when some other international banks like Citi Bank, Bank of America, and American Express etc. were already working. But within a few years this branch crossed mostly all the other banks in case of deposits, advances, imports and exports dealings, guarantees, travelers cheque sales etc. In 1991, the BCCI was banned, when it was accused by European countries that the bank was involved in some illegal operations with Gulf countries. The major reason behind European accusation was that BCCI was of Islamic mode. Therefore, the bank was closed due to international pressure. In July 1991, the branches of BCCI in Pakistan at that time were taken over by The Ministry of Finance and SBP. All three branches were given under Habib Bank Limited after valuation of its assets for 15 million dollars, which were named as Habib Credit and Exchange Bank (HCEB) and these were working as subsidiary of Habib Bank Limited. Following the privatization in 1997, Habib credit and Exchange Bank assumed the new identity of Bank Alfalah on June 21st, 1997 as a public limited company under the Companies Ordinance 1984. Its banking operations commenced from November 1st, 1997. The bank is engaged in commercial banking and related services as defined in the Banking companies ordinance, 1962. The bank is currently operating through 282 branches. This includes 48 Islamic banking branches and 7 foreign branches in Bangladesh, two in Afghanistan and one offshore banking unit in Bahrain with the registered office at B.A.Building, I.I.Chundrigar, and Karachi. The bank is listed on the Karachi and Lahore Stock Exchange with a ticker name of BAFL. Hence Bank Alfalah has two types of branches in Pakistan: 1. Conventional Banking Branches 2. Islamic Branches

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The bank is currently operating through more than 471 branches which include 110 Islamic Banking branches, 7 foreign branches (5 in Bangladesh and 2 in Afghanistan) and 1 offshore banking unit in Bahrain, with the registered office at B.A.Building, I.I.Chundrigar, Karachi. Some of the main branches are located in all of the major cities including: Lahore, Kasur, Islamabad, Gawadar, Peshawar, Faisalabad, Quetta, D.I.Khan, Rawalpindi, Sargodha, Sukkur, Sialkot, Multan, Murree, Attock District, Gujranwala, Pirmahal, Mirpur Khas etc. Now 15 years after being incorporated, Bank Alfalah has emerged as one of the foremost financial institution in the region, endeavoring to meet the needs of tomorrow today, operating through 471 branches in 163 cities in order to provide creative, customized financial solutions to over 1 million consumers, corporations, institutions and government organizations.

PACRA, a premier rating agency of the country, has rated the bank For long term AA (double A) For short term A1+ (A one plus)

These ratings denote a very low expectation of credit risk, strong capacity for timely payment of financial commitments in the long term and by highest capacity for timely repayment in the short term, respectively.

H.H Sheikh Hamdan Bin Mubarak Al Nahayan is the chairman of Bank Alfalah Limited. He is the member of UAE's ruling family. Following is presented his unedited message from Bank Alfalah's official web site. Since the inception of Bank Alfalah, by the grace of the Almighty, we have moved rapidly in expanding our branch network and deposit base, along with making profitable advances and increasing the range of products and services. We have made a break-through in providing

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premier services at an affordable cost to our customers. Keeping in view our valued clients and the need for constant and effective communication of information, we have designed this website to be as user-friendly as possible. As we pursue the path of excellence, customer satisfaction remains our priority. It is only when we know our customers better, can we deliver a higher quality of services, thereby adding synergy to our existing management expertise, financial strength and profitability. This is yet another channel of communication for the delivery of quality products and services that enhance value to our stakeholders.

H.H Sheikh Hamdan Bin Mubarak Al Nahayan Mr. Abdulla Khalil Al Mutawa Mr. Abdulla Nasser Hawaileel Al-Mansoori Mr. Khalid Mana Saeed Al Otaiba Mr. Ikram Ul-Majeed Sehgal Mr. Nadeem Iqbal Sheikh Mr. Sirajuddin Aziz

Chairman Director Director Director Director Director Chief Executive Officer

To be the premier organization operating locally & internationality that provides the complete range of financial services to all segments under one roof. Bank Alfalah is one of the leading financial institutes; Bank Alfalah operates in Pakistan, Bangladesh, Afghanistan and Bahrain, and Bank Alfalah day by day increasing its products for all the segments in Pakistan i.e. for Businessmen, Industrialists, and Agriculturists and for the Government bodies in the country. Bank Alfalah is trying to reach each segment in Pakistan, and trying to provide its products at lowest charges and with easiest way, under one roof.

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To develop & deliver the most innovative products, manage customer experience, deliver quality services that contributes to brand strength, establishes a competitive advantage and enhances profitability, thus providing value to the stakeholders of the bank. In the above Mission the Management of Bank Alfalah emphasis on the following areas: To provide the new and more innovative products than the other banks to the customers. To take and manage the ideas of the valuable customer for the Bank This is a one of the main component of Bank Alfalah Mission Statement that to deliver high quality and quick services to the customers, who are keep great value for Bank Alfalah. Bank Alfalah tries to promote those activities which give the fruitful result to the customers and the stakeholder of the bank.

Branch Manager

Manager Operations

Manager Trade Finance

Credit Officer

Incharge Accounts

Remittance Officer

Account Opening Officer


Remittance Officer

Officer Imports

Officer Exports Trade Finance Officer

Chief Teller

Teller Teller

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(1)- List of Products Bank Alfalah provides various deposit accounts to fulfill the needs of its customers. The accounts are designed according to the requirements & needs of the customers. At present the bank is offering seven different types of accounts to the customers and these are briefly defined below: (i) Simple Current Account It is a non interest bearing checking account. The minimum account opening requirement is of Rs. 5,000 only. If gives you the facility of Free Online Banking. The VISA Debit/ATM card can be used at over 30 million outlets and at 1.5 million ATMs across the world. There is no restriction on number of withdrawals and on number of Deposits. (ii) PLS Savings Account It is a Profit & Loss sharing saving bank account. The minimum account opening requirement is of Rs. 100 only. Profit on saving accounts is credited to the customer account on half-yearly basis. The Debit card can be used to withdraw cash and make purchases at thousands of outlets across Pakistan which provides access to funds 24 hours a day. There is no restriction on number of withdrawals and number of deposits. (iii) Royal Profit Account (RP) The minimum deposit requirement is of Rs. 50,000 only. Higher returns on higher balances. There is no restriction on number of withdrawals and on number of deposits. Debit card can be used to withdraw cash and make purchases at thousands of hours a day. Profit is credited to the customer account on monthly basis. outlets across Pakistan which provides access to funds 24

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Basic Banking Account (BBA) The initial deposit for account opening is of Rs. 1,000 with no minimum balance requirement. It is a non interest bearing checking account. Maximum 2 deposits & 2 withdrawals through cheques are allowed. Debit card can be used to withdraw cash and make purchases at thousands of outlets across Pakistan which provides access to funds 24 hours a day. There is no restriction on ATM withdrawal.


Alfalah Kifayat Account Any Pakistani resident can open this account. This account is for individual/joint customers only. Other customers like companies, corporate etc are not eligible for opening of this account. Cheque books, VISA, Debit Cards are issued to the customers. There is no restriction on deposits or withdrawals. Minimum account opening balance of Rs. 10,000 only is required. Online banking facility is also available.


Alfalah Mahana Amdan Account This account is signed with a contract of 3 years with the bank. Minimum placement limit is Rs. 100,000/- and maximum placement limit is Rs.15, 000,000/-. Expected Rate of profit is 10% Per annum. Profit will be automatically credited on the 1st working day of each month into customers Current/PLS/RP/BBA account. Free Personal Accident Insurance coverage up to the deposit amount or Rs. 1,500,000/- whichever is lower. Customer can avail financing facility up to 90% of the deposit(as per banks policy) Any Pakistani resident over the age of 18 can open this account.


Alfalah Kamyab Karobar This account is designed for the businessmen. The minimum account opening balance of Rs. 25,000 only is required. This account is strategically divided into three tiers which are Silver, Gold and Platinum. The unique tier based structure ensures that the customers

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can avail smooth & cost efficient facilities based on their current level of deposits i.e. Higher the deposit, higher the number of free services. Some of the services are Free Online Transactions Free Pay order /Demand Drafts Free cash deposit across Pakistan SMS alerts on VISA Debit/ATM Card Gold VISA Debit/ATM Card with every account. (2) List of Bank Alfalah Services (i) Currency Exchange Bank Alfalah offers the facility of foreign currency being exchanged to local (Pakistani) currency. This comes under the foreign exchange department of the bank. (ii) Lockers Bank Alfalah provides safe deposit locker facility to its customers for safe keeping of their valuables like documents, securities and jewellery etc. Lockers are present in various sizes. They range from small, medium to large. Annual locker rent ranges from Rs.2, 000/- to Rs.4, 000/-. Locker rent is waived for customers maintaining a minimum deposit of Rs.2 million in current account or above US $25,000/- in a current account or US $50,000/in a savings account. (iii) Remittance Through Bank Alfalah's international correspondent banking relationships it provides direct and indirect foreign currency remittance facility around the world. (iv) Hilal/Debit Cards Bank Alfalah offers its customers with Hilal VISA cards that are accepted at all ATM machines around the world. These cards are Based on Islamic and not on the conventional credit card rules. (v) Credit Cards

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Bank Alfalah offers its customer with four types of conventional VISA Credit cards. These are namely: Platinum Card Titanium Card Gold/ Classic Card Supplementary Cards (vi) Home Loans Under this category Bank Alfalah at present is offering the following Products. (1) Buy Your Home Bank finances from 0 to 70% of the value of the property. Repayment period ranges from 3 to 25 years. (2) Build Your Home Bank provides you 100% of the construction cost in addition to 60% value of the plot. Repayment period ranges from 3 to 25 years. (3)- Renovate Your Home Financing of Rs. 3.50 million or 40% value of the home To be renovated. (4)- Start It Together Financing for buying a constructed house designed to assist Professionals who wish to buy a home early in their Careers. (5)- Easy Transfer 100% finance on the existing finance. Repayment period May be stretched to 25 years. (vii) Auto/Vehicle Loans Anyone can apply for auto loan at bank Alfalah if he is having income from following sources: Employment (Permanent/Contractual) Business (Partnership/Proprietorship) Co-Borrowers Income (Clubbing of Income)

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Features of the Auto Loan Plans: Quickest processing & Turn Around time in the Market Minimum Documentation Requirements Variable & Fixed rates to cater to every Budget No Termination Charges on car Replacement Discounted Insurance Rate with Free Tracking Device Balloon payment Options Deferred Insurance & Registration Charges 150 Cities Existence (viii) Alfalah Agri Finance
Bank Alfalah Limited acknowledging the vital role of agriculture in the economic development of Pakistan has designed Rural Finance Program named as "BANK ALFALAH ZARIE SAHULAT".

I did my internship at Bank Alfalah Limited Quaid-e-Azam Road, Multan Cantt Branch and the main departments of this bank in which I worked and their functions are as follows: Operations Department Account Opening Department Cash Dealing Department Remittance Department Clearing Department Accounts Department Trade Finance Department Credit Department

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Operation Department

Customer service



Account Opening




The detail of those departments that are controlled under operation department is as under. 1. Account Opening Department 2. Cash Dealing Department 3. Remittance Department 4. Clearing Department 5. Accounts Department

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Accounts opening department is one of the departments that come under the retail/general banking facilities provided by Bank Alfalah Corporate Branch. Some of the major deposit accounts opened by Bank Alfalah Corporate Branch are as follows: Major Deposit Account Products 1- Current Account Current Accounts are non interest bearing accounts that have a minimum account opening requirement of Rs 10,000. No zakat is deducted on the accounts balance. Furthermore all current account holders receive a Hilal debit card and there are no restriction on the number of withdraws or deposits made to and from the account. 2- Profit& Loss Saving Account Profit& Loss saving accounts can be opened with a minimum balance requirement of Rs 5,000 and profit is credited on a half yearly basis. There are no restrictions on the number of deposits and withdrawal made to and from the account and all account holders receive a Hilal debit card as well. Profit and loss saving account cannot be opened by a business corporation, however can be jointly opened by individuals. Profits are paid at 2% on all account balances. 3- Basic Banking Account (BBA) Basic Banking Account was introduced by banks on an order by the State Bank of Pakistan and is current in nature. There is no minimum balance requirement for BBA, however initial Deposit must be Rs 1000. Maximum two withdrawals and deposits are allowed by cheque, while there is no restriction on ATM withdrawals. 4- Royal Profit Account Royal profit accounts are opened with a minimum balance requirement of Rs 50,000. The basic aim of this account is that the higher the balance the higher the return, as profit is credited on a monthly basis. 5- Kifayat Account

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Kifayat account is another saving account product that can be opened with a minimum balance requirement of Rs 10,000, with a maximum limit of Rs 1 million. Profit is calculated on a monthly basis, while it is credited on quarterly basis. Bank Alfalah pays 7% pay interest on Kifayat Account. 5- Mahana Amdan Account Mahana Amdan account is Term Deposit Receipt (TDR) for three years that can be opened with a minimum balance requirement of Rs 100,000, with a maximum limit of Rs 15 million. Profits are paid at 10% pa, credited on a monthly basis. Other features of this account include free personal accident insurance and automatic renewal for another 3 years, after the expiry of original period. 7- Alfalah Kamyab Karobar Account This is the newly introduced account of bank Alfalah that can be opened with a minimum balance requirement of Rs 25000, and the most suitable business account. This account has the facility of free cheque book, gold ATM card, free online service, free first pay order and DD etc.Account holders lie in different tiers such as Silver, gold and Platinum according to their maintaining balance in account. Pre-Requisites for Account Opening FOR INDIVIDUALS/SELF EMPLOYED ACCOUNT CNIC Source of income (salary slip etc) NTN certificate (optional) Company letterhead or authorization (as required) FOR A PARTNERSHIP ACCOUNT Partnership Deed Partners CNIC Company Letterhead NTN certificate (optional) FOR COMPANIES ACCOUNT Memorandum of Association Article of Association Directors CNIC Company Letterhead NTN certificate (optional)

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ACCOUNT OPENING PROCESS 1. The Account Opening Form When a client comes to the bank, and makes a request for opening of an A/C. The officer says that first fill up a prescribed application form. 2. Completion of the Form The name, occupation, and complete address of the person opening the account are written in the columns that are provided in the form. Signatures are obtained from the customer where it is required. These signatures should be usual signatures and he would operate the account with them. 3. Introduction The introduction of a current account holder is accepted for the opening of either a current account or a saving account. The introducer should be Account Holder. The signature of the account-holder introducing the account is obtained at the place provided for in the account opening form. 4. Specimen Signature Card, Cheques Book Requisition, Online Form The signatures of the client are obtained on a specimen Signature card Cheque book requisition and online form. These specimen signature cards are obtained in duplicate with two signatures on each card from the customer. Every time a Cheque is received for a payment from the client, the signature on the Cheque are verified by comparing them with the Specimen Signature Card. 5. Signature Difference Form The signatures of the client are obtained on a signature difference form if his / her signatures differ from the computerized National Identity Card. 6. Vernacular Form The signature of the customer is also obtained on the vernacular form if he / she signs in a language other than English. 7. Verisys Then we do a Verisys, a verification system started by NADRA on the CNIC of the new account opener. A Verisys tells, if more information pertaining to the customer is needed to open the account or not. It is used mostly to verify the customer CNIC with Nadra. 8. Account Number When all the formalities are completed then the final approval of account has to be taken from the Branch Manager. After obtaining approval of the branch manager an account number is allotted to the customer all the information is entered into the computer. Then that account number is written on the Cheque Book, Specimen Signature cards and account opening form.

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9. Sending the form to Head Office After fulfill all the requirement and verify the form from operation manager the account opening form send to Head Office Karachi and make request to issue the printed cheque book. 10. Issuance Of A Cheque Book After opening an A/C with the bank, the A/C holder receive a letter of thanks from Head Office Karachi then after receiving this letter client come to bank and makes a request in the name of bank for the issuance of a Cheque book. The A/C holder mentions title of A/C, A/C number, signs it properly. Normally BAL issues a Cheque book having 25 leaves for Saving Account and 50 leaves Cheque Book to Current Account Holder. Every Cheque book also contains one leaf that is used for another issue of a Cheque book. 11. Entry Of A Cheque Book Before issuance of a Cheque book, the employee performs certain functions. They include: Stamping requisition slip that is in Cheque book. 12. Entry in the Cheque Book Issue Register Check whether or not a senior officer has verified the signatures, if not the first gets them verified. After entry in the manual register, the employee issues the Cheque book to the A/C holder with his/her signature on the register 13. Stop Payment If a customer looses their cheque book or ATM card, then that customer will have to come to the bank and firstly report the loss and then stop payment, by telling the series of cheque he has lost. By stopping payment, the customer is guaranteed that no illegal payment is made from their account. The process for stopping payment, after the customer tells that he has lost is cheque book is that he fills a Form B, which is same as a cheque book requisition form and an indemnity form, stating no responsibility on behalf of the bank if any illegal payment is made before the time of announcing a cheque book or ATM card lost. MY ACTIVITIES AND LEARNING IN ACCOUNT OPENING DEPARTMENT As a part of my internship I had to fill the different forms and also did the appropriate bank stamping to complete the forms and also learn about the Cheque Book issuing process after the opening of account. During the deal with customers first we asked from customer about their profession either a businessman, Job holder, student or a housewife in order to make estimate of their income. Different A/c is suitable for different customers such as BBA for student etc. Two types of A/c are;

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1-PERSONAL ACCOUNT This A/c is open with the name of person and he cant do any business transaction in it. A/c could be a Current, Saving or BBA etc. 2-BUSINESS ACCOUNT It is open with the name of account holder business and for doing business transactions and A/c type could be Current, RP (Saving), AKK, Kifayat, Agri etc. I have learned about these things. DORMANT ACCOUNT The A/c in which there is no transaction from previous six months is stated as Dormant Account We prepared a Notice to inform the customer that his account become dormant and he can Re Active it by responding. I also learn about this and how to prepare and send notice to the customers. KYCs (KNOW YOUR CUSTOMER) This is attached at the end of form and as name mentioned this include all the information about customer such as His Name, Account title, Account #, Nature of business, Estimated income, their Assets, Liabilities, other Bank account #s if they have etc . We Preview our Customer KYCs periodically (maximum period of preview is 12 months) by monitoring their types and # of transactions. For preview we fill the simple form manually then enter it in the system and a revised KYC is prepared. The complete set of preview contains Old KYC, Filled Form and new KYC. I filled the forms for KYC preview and learned about all of these above mentioned activities in account opening department.

This department of bank is mainly responsible for the handling of cash deposits and encashment of cheques issued by the account holders. The following are the sections of the cash dealing department Receipts of cash Encashment of cheques Cash receipt section

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The depositor uses depositor slip/vouchers for depositing the amount. Client fills these vouchers, fulfilling all requirements. Encashment of cheques Cheques encashment is made in four steps Receiving of cheques Verification of signatures Computer terminal process Payment of cash

Remittance is transfer of funds from one place to another or from one person to another. A Remittance is an important service provided by banks to customers as well as non- customers. Since it is not a free service it is a source of income for the bank. Parties involve in remittances Four parties involved in remittance: Remitter Remittee Issuing Bank Paying Bank Remitter One who initiates, or requests for a remittance. The remitter comes to the issuing or originating branch, asks for a remittance to be made, and deposits the money to be remitted. The bank charges him a commission for this service. He may or may not be the branch customer. Remittee

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A Remittee is also called the beneficiary, or the payee. The person in whose name the remittance is made. A remittee is also the one who receive the payment. Issuing Bank The bank that sends or affects the remittance, through demand drafts, pay orders, or Mail Transfers. Paying Bank Paying Bank also knows as the drawee branch. The branch on which the instrument is drawn. It has to make the payment (usually located in a different city country). Instrument used There are two main types of instruments that are used to transfer money, which are as follows: Pay order: Used to transfer money within the city Demand Draft: Used to transfer money outside the city

Pay Orders Pay orders are made to transfer money within the city and this is a safe way to transfer money as the person who makes the transfer through pay order pays in advance. The procedure that is carried out in transferring money through pay order is as follows: Procedure for Transferring Money through Pay Order The customer will come to the bank and fill in the pay order application, giving in the details to which account the money is being transferred, the amount etc and attach a cheque to pay for the pay order. Pay orders can also be made through cash but mainly it is made through cheque. The officer checks all the details in the application, makes out the charges for the transfer that the customer will pay and then make the pay order for the customer and pass the following entry: Customer A/c Pay order payable When the customer in favor of whom the pay order was made gives the pay order to his branch, the entries passed are: Pay order payable Customer A/c

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Demand Draft Demand Draft is another way in which customers can transfer money outside the city. There are two types of situations for transfer of money through demand drafts: Outward DDs When a customer comes to Bank Alfalah to make a DD to transfer money outside the city is known as outward DD. The customer will fill the details in a DD application form, and will attach a cheque or pay cash as he wish. Then the officer will check all the details and make a demand draft for the customer and pass the following entries: For Cheque Customer A/C Head Office Inward DDs This is the procedure adopted when the issuing branch sends copy of the instrument as an advice. When the bank receives the advice, the officer will pass the following entries: Head Office A/c DD Payable A/c When the customer comes with the DD to get his payment, the following entries are passed: DD Payable A/c Cash If that customer is a Bank Alfalah account holder then the following entries are passed: DD Payable A/c Customer Account Transfers This process is done for the local transfer of cheques. Transfers are conducted by Bank Alfalah SRA Branch, using its software Bank Smart. There are two types of transfers: 1. Internal Transfers 2. Online Transfers For Cash Sundry A/c Head Office

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Internal Transfers Internal transfers take place when a Bank Alfalah SRA Branch account holder draws a cheque in favor of another Bank Alfalah SRA Branch account holder. The process for internal transfer is as follows: 1. Officer of the bank receives the cheque and determine if the cheque is an internal transfer by looking at the branch code, if they are same then it is an internal transfer 2. The officer will post entries by credit the account in favor of whom the cheque was drawn and debit the account that drew it in the banks software. 3. The cheque will be sent for supervision to the operations manager for authentication of the entries 4. When supervised, the cheque will be affixed with the official stamps and kept with the bank. Processing Stamps Transfer cheques are processed by five types of stamps; 1-Transfer stamp (same day) 2-Bank Alfalah LTD 3-Banksmart 4-Signature verified 5-Payees A/c credited (on Back) Online Transfers All those transfers that take place when a Bank Alfalah account holder draws a cheque in favor of a Bank Alfalah SRA Branch account holders are known as online transfers. The process for online transfer is as follows: 1. The bank officer collects the cheque from the depositors. 2. Veritys if the accounts are online and need to be transferred online 3. Posts entries by debiting the account of the cheque, while crediting the account on the slip attached with the cheque. 4. Sends the cheque for supervision to the operations manager 5. When supervised, the cheque will be affixed with the official stamps and kept with the bank.

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The clearing department is responsible for the clearing of all cheques that are of other banks and branches that the bank receives daily and the different types of clearing are: Inward Clearing Outward Clearing Online Clearing Outward Bills for Collection Clearing process is defined as; A system by which banks exchange cheques and other negotiable instruments drawn on each other within a specific area and thereby secure payment for their clients through the Clearing House called NIFT at specified time in an efficient way. Each bank has collected cheques as behalf of their customer but these cheques are not drawn on their own bank so in the clearinghouse (NIFT) they hand over these cheques to respective banks on which these cheques are drawn. Similarly each bank receives cheques from other banks if any. Inward Clearing Inward clearing takes place when a Bank Alfalah Branch account holder drews a cheque in favor of a Non- Bank Alfalah account holder. The process for inward clearing is as follows: 1. Cheques are received by the operations department from NIFT 2. The bank officer verifies all particulars from the instruments and the system for sufficient balance etc. If any fault is found, then the officer will mark the cheques as a return, stating the reasons with them. 3. If no fault is found, then the officer will post these cheques in the system by debiting the customer account. 4. The particular of the returned cheques are entered in the O/W return of inward clearing register and returned to NIFT. Outward Clearing Cheques drawn by Non-Bank Alfalah customers in favor of Bank Alfalah Branch customer and deposited at SRA Branch are known as outward clearing cheques. The process for outward clearing is as follows: 1. Cheques are received by the operations department of Bank Alfalah Branch 2. The customer in favor of whom the cheque is drawn is credited 3. Clearing stamps are affixed on the cheque and sent to the other bank via NIFT.

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If any cheque returns the next days as a returned, the posted entries are reversed and the cheque is returned to the customer who presented it and is recorded in the cheque return register. Same Day Clearing This involves within city other banks local cheques process by same day clearing stamp and clear within same day and of above 2 lac. Basically this is the benefit provided to the customers. Regular Clearing This involves within or out of city other banks cheques process by next day clearing stamp. Intercity Clearing This involves other branches cheques which are of another city and received by air in which own branch is debit and other is credit. Online Clearing Online clearing takes place when a cheque is drawn by a Non-Bank Alfalah customer in favor of a Bank Alfalah customer but is deposited at Bank Alfalah Branch. The person, who had drawn this cheque, however should have an account in the Islamabad/Rawalpindi area. The process for online clearing is as follows: 1. The cheque is sent as an outward clearing via NIFT 2. When the cheque is cleared, it is credited to the Bank Alfalah account via the online transfer software. Special crossing and bank endorsement stamps and clearing stamp are affixed on the cheque which is to be cleared. Outward Bills for Collection (OBCs) There are some cheques that are drawn by a Non Bank Alfalah Account that is outside the twin city area in favor of Bank Alfalah Branch account holders and thus are treated as OBCs. Or in other words; When an instrument is drawn on a bank, which is located outside the city, its proceeds can be collected through a mechanism called Outward Bills for Collection (OBC) Process; The process for clearing of the OBCs is as follows:

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Cheques received by Bank Alfalah Branch The officer affixes the OBC stamp on the cheques and writes its individual number from the OBC register. Entries of all OBC cheques are written in an OBC register. An OBC letter is printed, which shows the cheque numbers, the branch drawn on and amount. Original Cheques are attached to these letter and sent to the main Bank Alfalah branch in that area by courier OBC send and its Realization OBC schedule is attached with the cheque and dispatched to the main branch of that city for collection. If they do not have any branch in that city, then cheque will be sent to the Collecting Agent of Bank Alfalah for that city, and if they do not have any collecting agent even, then cheque can be sent directly to the drawing branch. Instructions are given on the OBC schedule for the payment of that cheque. Contra-liability vouchers are also posted in the system. When OBC is realized, collection bank pays the amount through IBCA if it is the same bank or through DD if it is another bank. If DD is received against OBC, it is presented in the clearing for collection. If IBCA is received from the branch for the payment of OBC, certain vouchers are posted in the system. MY ACTIVITIES AND LEARNING IN CLEARING AND REMETENCEE DEPARTMENT As a part of my internship I have learnt all about these clearing and transfer processes by doing them practically. I learned how to make cheques and their receipts (slips) and also cash deposit slips by preparing them. Then I have done the stamping of all types of cheques and slips. I deal with customers by preparing for them slips and cheques. I also get knowledge about the process when the cheque is returned due to insufficient fund or other reasons then we return back the cheque to the party with attached MEMO and service charges are deducted from their account. I have also learnt all about these OBCs, DD and pay orders and how to make OBC by practically prepared it. I also made entry of OBCs sequence wise in the OBC register and also the entries of Pay Orders and DDs in register.

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Accounts department is a backend department at Bank Alfalah SRA Branch that performs the following functions; 1. Reports It generates reports like Statement of Account Activity (a report on the activity of all accounts at Bank Alfalah Branch), Statement of Affairs (a report on the assets and liabilities of Bank Alfalah Branch), Statement of Foreign Exchange (a report on the foreign exchange currencies at the bank) and Income Expenditure Statement (a report on the income and expenditures of Bank Alfalah Branch). These reports can be generated at daily, weekly, monthly, quarterly or yearly basis as required by the bank. 2. Income and Expense The department also needs to calculate the revenues and expenses, control expenditure and forecast profits every month. 3. Budget Formulation of yearly budgets & targets in consultation with the branch manager is also done by the accounts department. 4. Activity Checking Daily activity checking and monitoring is done by the accounts department of the whole bank 5. Storage of Records Accounts Department also has the duty to store vouchers and system generated reports. 6. Payments The accounts department is responsible to pay vendors on behalf of the bank with authorization from the branch manager. It also has to amortize large payments and calculate depreciation of branch assets. 7-Depreciation Record Accounts department also made a record of depreciation of fixed assets such as Office Equipment, Computers, Vehicles, Furniture and their invoices. MY ACTIVITIES AND LEARNING IN ACCOUNTS DEPARTMENT ACTIVITY CHECKING In the accounts department, I had to do daily activity checking and there are four stages in which activity checking takes place:

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1. Collecting vouchers, cheques etc from all departments 2. Sorting Vouchers 3. Checking Activity 4. Packing COLLECTING VOUCHERS The first stage of activity checking is collecting all vouchers, cheques, DDs, pay order, pay slips etc from all departments of the bank. Mainly vouchers come from the operations department. After collecting these vouchers etc from the departments, we need to check if all stamps are stamped on these vouchers etc. SORTING VOUCHERS After all vouchers are collected, they need to be sorted into different categories: 1. Income: Income vouchers 2. Expenditure: Expenses vouchers and payment vouchers 3. Others: Includes vouchers about excise duty, FED, teller, ATM, payables etc 4. Online: Contain online vouchers and online credit slips etc 5. Head Office (H.O): Includes HO vouchers and IBCA, DD advices 6. Bills Payable General (BPG): Includes vouchers and DD, Pay orders, Pay slips etc CHECKING ACTIVITY After sorting takes place, daily activity is checked using the statement of account activity, which contains all daily activity of the accounts in the bank. Activity checking is done by seeing if the values and account numbers in the sorted vouchers match that of the activity and whether or not there is any missing activity that is not in the vouchers. PACKING After the activity is checked, all sorted vouchers are counted, both debit and credit and then packed by totaling the vouchers. At the end of the completion of ticking a Summary is prepared which listed the daily total amount of # of cheques, vouchers and receipts etc. RECORDING OF DEPRECIATION And the other important work that I have learned is the Recording of Depreciation of Assets. We use the straight line method to record the depreciation by using Formula;

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Dep Amount = Purchase Amount % dep # of days 365 e.g. Dep Amount = 8000 20% 365 Different % of depreciation is given to different groups of Assets such as; ASSET HEAD Office Equipment Computers Vehicles Furniture % OF DEPRECIATION 20% 25% 25% 10% 31 = 136 Ans

After recording depreciation month wise to 31 July 2013, I match the total calculated depreciated Amount with the computerized prepared sheet each for all the assets heads in order to check out that the recording of all is correct and depreciated amount is tallied. I also checked out the INVOICE documents about the purchase of each asset.

Credit means belief or trust. The quality of being credible or trustworthy. Another words we can define credit as trust in ones integrity in money matters and ones ability to meet payment when due. The earnings of BAL are chiefly derived from interest charge and discounts. This department is the revenue generating department. Credit department basically has three segments. 1) 2) 3) Credit marketing department Credit administration department Trade finance services department Credit and advance department deals with extending loans (credit facility) to customers. State Bank of Pakistan (SBP) has prescribed regulations which are called PRUDENTIAL REGULATIONS. Every

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bank has to follow these regulations. If any bank violates the regulations it should be liable for penalties under the core spirit of SBP PR(S). The Bank Alfalah limited credit is extended on the basis of these rules and regulations. These regulations tells the term and conditions under which you can extend loans to the borrower and to what extent. CREDIT FACILITIES At BAL there are two types of credit facilities 1) 2) Funded facilities Non funded facilities FUNDED FACILITIES These are the facilities in which there is direct involvement of cash fund. Following are the funded facilities. 1) 2) 3) 4) 5) 6) 7) Current finance CF Term finance TF Finance against foreign bills FAFB Finance against packing and credit FAPC Finance against imported merchandise FIM Finance against trust receipt FATR Payment against document PAD Current Finance CF The extensively used financing mode at BAL is current finance (CF) current finance is used to finance both individuals and industries. Individual take current finance for their personal use while in industries. It is taken for fulfilling the requirement of working capital.

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Term Finance TF Term finance is for specified time period. Term finance is given for fixed asset financing. Finance against Foreign Bills FAFB In FAFB facility exporter take loan from bank on the behalf of their foreign export bills. Like exporter sends shipment but at that time he needs fund for the operation of the business. He may go to the bank and surrenders all the documents including L/C, Bill of lading etc. bank checks all the documents to be in accordance with terms and conditions. If they find no discrepancy, they give money to exporter but take some margin on it. Finance against Packing and Credit FAPC FAPC is taken for the preparation of consignment. It has two forms. 1) 2) Pre shipment Post shipment 1) Pre Shipment

Preshipment loans are export related working capital financing. 2) Post Shipment

Post shipment financing is essentially the receivable financing to the exporters till the period he is out of cash after the shipment. Finance against Imported Merchandise FIM This facility is allowed against the commodities imported from other countries usually through letter of credit. Some time importer does not have enough amounts for paying the imported merchandise therefore. He request to the bank to pay all dues to the exporter against the security of imported merchandise. Bank pays the amount and releases the goods, when the importer pays off its liability partially / fully.

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Finance against Trust Receipt FATR Finance is extended upon the trust receipt signed by borrower. Importer has to import the product. There are three conditions. 1) 2) Pay money and get thing Get fine facility And third is that if that client is trust worthy for bank believing on him based upon his past record. He releases the goods against the trust receipt. Trust receipt is given to the bank by the customer. The customer in turn commits that I will pay on such and such date. Bank pays all taxes and gets merchandise and then gives it to client. Bank do charges markup against such financing. FATR is for specific period of time. If client do not pay with in specified time then bank charges higher per day markup. Payment against Document PAD Payment against document is made by the banks as payment against L/C comes due payment is made for imported documents. For example when exporter sends all the document to importing bank as document reached, importing bank has to make payment within 24 hrs if the importer does not pays then bank charges markup per day. NON FUNDED FACILITIES The facilities where there is no direct involvement of banks fund. Following are the non funded facilities. 1) 2) Letter of credit L/C Letter of Guarantee L/G

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Letter Of Credit Importer bank issues a document on request stating that it will pay the exporter when exporter fulfill the terms of letter of credit L/C is off two types: 1) 2) Sight L/C Usance L/C Sight L/C Requires the importer / importing bank to pay as soon as it receives the clean documents from exporter. Usance L/C It extends time period (typically 60, 90, 120 days) to importing bank for payment. After specified time period importer have to pay. Letter of guarantee L/G. Bank gives guarantee in the behalf of person that I will pay in case of default. Credit Administration Process 1. Registration of charge The CAD manager has to register charge with security and exchange commission of Pakistan (SECP) of mortgage/ hypothecation within 21 days from the date execution of documents. 2. Securities/ Facilities Documentation The CAD manager has following options while securing credit. First exclusive Charges: In first exclusive charges, first the claim of bank is satisfied in the case of default of the borrower. Ranking Charges: In this, the ranking is given. The first on the ranking is satisfied and then comes the second and so on. Pledge: It confers physical possession of movables but not ownership. Hypothecation: It is a security for a debt, which remain in the possession of the borrower. Mortgage: It is a claim against real estate or fixed assets. The deposit of title deeds without documentation can create a mortgage.

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LCs, Bank Guarantees, other guarantees 3. Valuation A CAD manager can take value and evaluate security worth from the following sources Security Deposits Government securities Shares Mortgage of property/ assets Stock( under pledge, hypothecation) Source Computer prints out showing actual amount Face value or encashable value rates published by the government of Pakistan Stock exchanges rates in daily newspaper Valuation report by banks evaluator showing market value For pledge Karachi Cotton Association issues its rates. For hypothecation stock report submitted by borrower Life of book debts/receivable submitted by the borrower. Surrender value of life policies issued by insurance company As per terms of sanction advice

Book Debt/ Receivables Life Insurance Policy Any other security

4. Stock report Frequent submission of stock reports is necessary as per term of sanction advice. 5. Stock Inspection Verification of stock is made and it should be the same as given in stock report. The following are usually checked. Stock break up Evidence of ownership Quality/condition of warehouse Fire Protection adequacy Adequate protection from theft, burglary etc.

6. Insurance Assets charged to the bank should be insured through an approved insurance company. One month before expiry of the insurance policy, the concerned customers should be reminded to renew the policy.

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7. Search report All public/private limited companies are required to register banks charge over its current and fixed assets with SECP. Search report is prepared from the records of SECP showing the ranking of charges over borrowers assets to different banks. 8. Credit Information Bureau (CIB) State Bank of Pakistan requires banks to obtain detailed information from CIB, SBP when considering proposals of over Rs. 0.5 million to any borrower. In case CIB report indicates over exposure/ default in meeting obligation etc. The accommodation to the concerned borrower can be derived. 9. Borrower Basic Fact Sheet SBP requires that all facility application should be accompanied by the Borrowers Fact Basic Sheet as per approved format of SBP. Borrowers The following are the categories of the borrowers 1. Corporate Body The term Corporate Body will include: A company incorporated under the companies act. A corporation created by a ordinance/ a statute/ act of legislature a. Obtain memorandum and Articles of association of the company Whether company is public limited and quoted on stock exchange, not quoted on stock exchange is a private limited. Whether it is empowered to borrow? Are there any restrictions on the companys power to borrow? What are directors powers? b. Obtain board resolution and ensure that it contains Authorization to raise facilities Create Charge on company assets/pledge securities which are in companies name

2. Partnership The partnership deed is obtained. In its absence banks standard letter of partnership, duly signed by partners is obtained. Although all partners are jointly and severally liable for the debt of the firm, however, it is considered inexpedient to obtain personal guarantees for good business reason.

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3. Sole proprietorship It is owed by an individual and there being no formal procedure to be followed for setting the business so a declaration on the firm letter head evidencing proprietors name etc is taken.

4. Individual It is ensured that borrower is not suffering from any incapacity and is not a minor, insane or insolvent. These people are not capable of contracting and therefore any borrowing by them is unlawful.

5. Clubs, Associations, Trusts, Charitable societies Extra care is taken as these borrowers may enjoy legal protection, which is not available to others.

Trade Finance involves the import and export activities. This department provides protection to the rights of importer and exporter. The function of this department is to serve as a bridge between the importer and exporter in order to settle a transaction. When trade is taking place between the representatives of two countries (exporter and importer), the exporter involves his bank (the Advising Bank) in the transaction, as he wants to feel secure regarding timely payment of his goods in the required currency. On the other hand the importer involves his bank (the Issuing Bank), in order to get a sense of security regarding timely supply of the required product, in the required manner.

Trade Finance Department handles two activities: Import Export

IMPORT Import Department of BAL deals with the import of merchandise. Import can be defined as: The bringing of commodities into Pakistan from outside by sea, land or air.

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Requirement for the Importer These requirement / document must be fulfilled from importer before doing the import: NTN (National Tax Number) certificate Sale Registration Certificate Membership from Chamber Of Commerce Questionnaire duly filled in NIC (attested copy) Exports Exports are major sources of earning foreign exchange and play an important role in the economic development of the country. It helps to utilize excess resources of the country. Exports mean selling goods to another country. Exports of all eligible commodities through authorized banking channels are admissible under exchange control regulation. Requirement for the Exporter These requirement / document must be fulfilled from exporter before doing the export: Account holder of Bank Alfalah Limited Must be a Pakistani Membership from Chamber Of Commerce NTN (National Tax Number) certificate The person must have the Sales Tax Registration Certificate. Form E ( export form) dully filled in Sale Registration Certificate Methods of Doing International Trade Letter of Credit Contract

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LETTER OF CREDIT (L / C): 1) LETTER Of Credit (L / C) ADVISING Letter of Credit (LC) is a written and conditional undertaking by a bank on the behalf of applicant to the beneficiary to pay a certain amount at a certain date; if the stipulated terms and conditions are complied with. The process of International Trade starts with asking of importer to its bank for L/C. Then importers bank will be called as issuing bank. The issuing bank sends the L/C to Bank Alfalah Limited. A bank that receives the L/C is called an advising bank because after receiving the L/C, it performs the L/C advising function. A cover letter is prepared and is sent to the beneficiary of the L/C, advising him his L/C has reached Bank Alfalah Limited and he should collect it immediately. A copy of the L/C is sent along with the letter. 2) ISSUANCE OF E-FORMS Government has provided facility to exporter in taking E-Form from any bank and is a part of the exchange control mechanism of the State Bank of Pakistan. When an exporter receives an L/C, his next job is to get an E-form from an authorized Bank. On the E-form sent by the commercial bank following things are mentioned Description of the commodity Quantity of the commodity exported Amount realized Foreign bank charges Country of the importer 3) CERTIFICATION OF THE E-FORM After filling in the complete information about the goods to be exported, the exporter brings the Eform to the bank for verification. Bank issues E-form certification to exporter and he submits it to the custom officer along with E-form certification to certify E-form. 4) THE DOCUMENTS After getting the E-form verified the exporter starts preparing his shipment. Banks only deal in documents. In order to receive payment from his goods the exporter has to send certain documents to the issuing bank via his negotiating bank. These documents are. Bill of exchange: A bill of exchange is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or the bearer of the instrument. It is drawn by the exporter (drawer) and orders the importer or the importers bank (drawee) to pay to the order of Bank Alfalah Limited (payee) a

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specific amount. If the draft is drawn at sight, the importer must make the payment on receipt of the documents. If it is time draft, the payment must be made within the specified time limit.

Commercial Invoice The exporter prepares it. Its amount must tally with that of the L/C. It shows the name and address of the importer as well as the invoice number. This number is very significant as it is used in all the correspondence between the exporter and his bank. It also contains all the specifications of the commodity being exported. The standard definition of commercial invoice is that it is an itemized list of goods shipped to a buyer, stating quantities, prices, and shipping charges.

Bill Of Lading The shipping company or the airline that has been assigned the task of transporting the goods issues these. The shipper must ensure that the goods are shipped and handed over the right person when documents are presented to him. The standard definition of a bill of lading is contract between the seller of the goods and the carrier. The following are types of bill of lading: OCEAN Bill Of Lading Air Waybill Inland Bill Of Lading Packing List / Weight List The exporter prepares these lists in order to show that the consignment is according to the order of the buyer. It gives a detailed account of the manner in which the goods have been packed and the number of cartons they have been packed in. Certificate of Origin This document certifies the origin of the exported goods. In the case of exports from Pakistan, the certificate of origin shows that the country of origin of the goods is Pakistan. The certificate of origin is a document in which the exporter certifies to the place of origin of the goods to be exported. E-Form It is a necessity for all exports out of Pakistan. All commercial banks always issue the E-form in quadruplicate. Original: is sent to the custom officer

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Duplicate: Bank receive the duplicate Triplicate: is sent to the State Bank Of Pakistan Quadruplicate: is kept by the exporter for his personal record. Export Visa This document is required when the destination of consignment is Canada, America, and U.K. Different countries fix quota for different commodities and restrict imports of those goods with in a specific limit. Therefore visa is required which is in fact a permission to export goods to the specified countries.

Payment by importer Exporters bank sends all the documents negotiated in LC to importers bank. Once the shipment arrives in importing country, documents are kept with the bank until the importer makes full payment to bank. COLLECTION / NEGOTIATION: When the exporter comes to the bank with the documents, he has two options. Send them for collection Get Them negotiated Collection: The bank sends the documents on behalf of the exporter to the importers bank for payment. The payment is made in Pak Rupees and the exchange rate is the Buying rate of the day normally called the T.T. Clean Buying Rate. When the reimbursing bank is to pay Bank Alfalah Limited it credits its nostro account maintained with it (the reimbursing bank), and afterwards bank debits the exporters account with the local equivalent of the export proceeds calculated at the TT clean buying rate. Negotiation: The bank purchases the documents from the exporter i.e. the exporter gets them discounted before their maturity. For example, the drafts are at 90 days from B/L date. In simple words, the payment for the exports would be received after three months. The exporter might not want to block his funds for such a long time. He can get his documents negotiated the day he presents them to the bank. The exchange rate he will get will however be lower than the TT clean buying rate because the bank is paying him an amount that it is going to receive after three months itself. Contracts are not negotiated however in any case. This is because they are unsafe documents and the bank does not take the risk.

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Dispatch: The documents brought by the exporter are in the form of sets containing an original and a number of copies. The number of each document required by the importer is mentioned on the credit. Usually they are: Manually signed commercial invoice Bills of lading Packing list in quadruplicate Bill of exchange FILING: A separate file is maintained in each case and if the documents have been negotiated, it is titled FDBP that is the abbreviation of Foreign Documentary Bills Purchased. If the documents have been sent for collection, a file in the similar fashion is kept but it is labeled FDBC i.e. Foreign Documents Sent For Collection. CONTRACT: The exporter might export the goods based on a CONTRACT with the importer. In such a case, there is no surety to the exporter that the importer will make the payment. The importer might reject the goods on receipt and deny and payment to the exporter. Therefore, the contract is an unsafe document. There are two types of contracts. CAD (Cash against Documents): The documents are sent to the issuing bank. The issuing bank informs the importer that his documents have arrived. The importer deposits the amount of the contract with the bank and takes possession of his documents have arrived. The issuing bank then makes the payment to the exporters bank. DA (Documents Acceptance): Drawee takes documents and possession from the issuing bank and signs a bill of exchange in return giving his acceptance for payment on a specific maturity date. Now, if he does not make the payment to the issuing bank no payment is made to the exporter and there is no liability on either bank. Application of Class Room Learning During my Internship at Bank Alfalah Quaid-e-Azam Road, Multan Cantt Branch, I saw some practical application of some class room learning.

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I saw most of knowledge application in Trade finance department, Credit Administration Department. Operation department had less knowledge application. Trade Finance Department: At Trade Finance Department, I got a lot of practical exposure of studying International Finance. Since this department mostly deals with imports and exports, I saw the processing of letter of credit and the documents needed for imports and exports. Customers were coming for the purpose of their business and they were informed about the rules and regulation for importing and exporting. Letter of guarantees were also issued by the department. Credit Department: At the Credit Department, my practical learning was excellent. At this department, the loans are to be disbursed. So for this purpose a complete interview with borrower is conducted and borrower is asked about its financial strength then a CLP is made. Loan is disbursed after the complete study of financial reports such as balance sheet and income statement. Making of installments, interest charging and calculation and others all were practically performed at the department

During my internship I have to apply and learn the some concepts that I have learned during my classroom studies such as; The concept of debit and credit How to improve efficiency by proper time management Customer relationship management in order to satisfy the customer To learn and see different management practices How to manage the work pressure in the days of relatively high activities The ways by which organization provide employees satisfaction and motivation Practically calculate the depreciation of different fixed assets by using the straight line method etc.

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SWOT stands for Strengths, Weaknesses, Opportunities and Threats. SWOT analysis is the careful evaluation of organizations internal strengths and weaknesses as well as its environmental opportunities and threats. In SWOT analysis the best strategies accomplish an organizations mission by exploiting an organizations opportunities and strengths while neutralizing its threats and avoiding its weaknesses. During my internship I also observed these and conclude as follows: STRENGTHS The main strengths of the bank are as follows; Being the private organization its main aim is not to earn profit only but also to satisfy its customers and the slogan of BAL is also the representative of this purpose Bank Alfalah The Caring Bank. Bank has AA (Double A) and A1+ (A one plus) credit rating for Long term and short term loans respectively. These ratings denote a very low expectation of credit risk, strong capacity for timely payment of financial commitments in the long term and by highest capacity for timely repayment in the short term, respectively. Main source of profit for any financial institution is public saving which only comes from public confidence and BAL is getting this confidence which is one of the main strength of bank. Bank Alfalah is also getting fame in market due to its name ALFALAH which is leaving the Islamic and favorable impact on the minds of public. Consumer survey has selected Alfalah credit cards as the best product in the market with attributes of Affordability. Within very short period it has got a superb accomplishment which shows the competency of its top management.

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BAL is providing the facility of Money Gram to the all the people who are its customers or not and through this service it has got the leadership in Money Gram as no other bank is offering this service. WEAKNESSES Beside all these strengths I also noted some weaknesses which are described as below;

BAL is not offering the loan facility to the newly established businesses because it is the bank policy that it will give loan only to those people who are running their businesses from 3 years. BALs lending procedure is quite complicated that some people are hesitating to come as they are requiring a huge file of documents. BAL is not offering any credit facility to students. BAL is not offering the online facility to the customers having photo account. BAL is charging online charges for the transfer of money but some other banks not charges. OPPORTUNITIES It is mandatory to try to make progress with consistency as well as to adopt changes with of time; in order to cope up with both conditions.BAL has following opportunities;

Bank Alfalah is spreading its network outside the boundaries of Pakistan and it has new policies in the prudential policies. As BAL is providing the facility of Islamic Banking through its separate branches, there is a great chance to enhance its market share as the concept of Islamic Banking is gain popularity day by day. In addition to excellent routine banking, it has earned a good name by offering special Product like Car, Home finance, credit card facility. So the penetration of these products could enhance the market share. As the increase in overall business activity in the country, the investors are launching various types of Mega Projects especially in housing and textile the bank has a great opportunity to finance these projects at very profitable term.

The SBP has revised the interest policy and the interest rates have been linked with the KIBOR rates. Due to which the banks interest rate has been substantially increased which will greatly increase the banks profitability. THREATS

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Threats are negative trends in the external environmental factors. As one side environment provides opportunities to the organization, on the other side it also gives some threats. Some of the threats associated with BAL are as follows; One of the major threats to the bank is the strong competition facing by its major competitors like UBL, Askari Bank etc so BAL should try to update its products and policies in order to be remain successful. For last seven to eight years there is political stability in Pakistan but now again a new layer of political instability arises which effects almost all industries operations including banks. Due to economic instability like currency depreciation and inflation, the bank is constantly facing the threat, e.g. in case of inflation the people has low disposal income which means lower deposits in banks. Other investment opportunities like investment in property is giving people more return as compared to banks, it can decrease the deposits of banks. There is a trend of launching mega projects in the country. And every one is involved in this trend without taking any measure for the successfulness of these projects. This can result into the failure of this project which can make it difficult for the banks to recover their funds from these defaulters.

A PEST analysis is merely a framework that categorizes environmental influences as political, economic, social and technological forces. The analysis examines the impact of each of these factors (and their interplay with each other) on the business. PEST analysis is a useful strategic tool for understanding market growth or decline, business position, potential and direction for operations. The use of PEST analysis can be seen effective for business and strategic planning, marketing planning, business and product development and research reports. PEST also ensures that companys performance is aligned positively with the powerful forces of change that are affecting business environment. The observation of all these factors is described below; POLITICAL FACTORS The political environment of any country is greatly affecting the operations of its businesses and banking sector.

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Political factors perform an important role in the competition among the banks as the bank which better adopt the changes can survive the best. Political instability as now a days affected badly the operations of businesses and banks as well. The more influence of government impose the conditions on banks to work and perform according to their demand this could affect the profitability. ECONOMIC FACTORS Economic conditions of a country have strong influence on banking sector as the banks are mainly deal with money.

Economic conditions affect how easy or how difficult it is to be successful and profitable at any time because they affect both capital availability and cost, and demand for the banks. If demand is buyout and the cost of capital is low, it will be attractive for firms to invest and grow with expectations of being profitable. Economic situations directly affects the purchasing and spending power of public so banks are directly suffer from changes in economy. Due to economic instability like currency depreciation and inflation, the bank is constantly facing the threat, e.g. in cases of inflation the people have low disposal income which means lower deposits in banks. SOCIAL FACTOR The social arid cultural influences on business vary from country to country. The social structure of Pakistan is closely tied. The trend is now changing as the general public is educated and is pursuing professional goals. Customers are more aware of market conditions and available options and want to get best value for their money.

The socio cultural environment encapsulates demand and tastes, which vary with fashion and disposable income, and general changes, can again provide both opportunities and threats for particular companies and banks.

Banks should be aware of demographics changes as the structure of the population by ages, affluence, regions, and numbers working and so on can have an important bearing on demand as a whole and on demand for particular products and services.

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The businessmen and upper class people focus more on the banking service for their transactions, financing and deposits so banks have their services design according to them to be successful. TECHNOLOGICAL FACTORS Technology is widely recognised as part of the organization and the industry part of the model as it is used for the creation of competitive advantage. However, technology external to the industry can also be captures and used, and this again can be influenced by government support and encouragement.

Bank Alfalah has equipped its branches with all major IT tools being used in the industry like ATMs, fax machines, photocopiers, printers, latest computers and a good connectivity architecture. So this provides them competitive advantage.

IT information system provides the bank with the feasibility of their operations bank Alfalah has this well organized system. Online banking facility is the great success to the banking sector. Which one provided good online service is more successful like Alfalah.

The main vision of Bank Alfalah is to become a premier banking institution in not only Pakistan but also abroad. In achieving this mission, Bank Alfalah has been successful by increasing its revenues, deposit base and branches in Pakistan. Although there are no major problems at Bank Alfalah, some of the problems observed are as follows:
1-Technological Advancements Bank Alfalah has equipped its branches with all major IT tools being used in the industry like ATMs, fax machines, photocopiers, printers, latest computers and a good connectivity architecture, however it has been observed that when its time to work, there are many failures seen in the different devices used by Bank Alfalah, especially its connectivity architecture and remains offline with the main server, that creates problems for the customers.

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2-Training & Development There are effective training centers of Bank Alfalah at Karachi and Lahore. For Bank Alfalah SRA Branch, it employees get to train at the Lahore center. The problem with training and development is that it is only available for the officers of the bank and not for the lower staff members. 3-Job Advancements There is no job advancements procedure for lower staff members or junior executives that have joined recently at Bank Alfalah. The main problem that was observed was that the lower staff should be trained about the operations of the bank and also the junior executives should be given promotions by defining the criterias like performance etc. 4-Lack of Employees in some Departments Although Bank Alfalah is a very good employer of talented professionals at different branches, however, it was observed that there were some departments in the bank that lacked the number of professionals in it that resulted in efficiencies in that department 5-New Products Introduction Bank Alfalah has a wide variety of financial products to cater to the needs of its competitors; nonetheless the main problem seen is that it is not introducing innovative products like other banks in Pakistan, for example Standard Chartered Bank introduced a self depositing machine, a machine that can be used by consumers to deposit money at any time of the day. 6-Priority Banking Bank Alfalah does not have any priority banking department that can cater to the need to high end customer. At Bank Alfalah SRA Branch, there were no large companys accounts mainly because there was no department to develop relationships with large customers. 7-Amenities at Branch Providing amenities like a separate room for prayers because currently the employees pray in the conference room of the branch. Also separate rooms should be made for the account department for sorting of vouchers as it is also done in the conference room. 8-Incentive Schemes There are no incentive schemes for employees of Bank Alfalah like scholarship schemes for employees that want to pursue higher education. Bank Alfalah although gives a number of

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incentives to its employees, like personal loans at nominal markup but they are only provided to employees that are in higher ranks. Education fees are also returned by Bank Alfalah to its employees, after they have finished their studies.

Some of the recommendations that I would recommend to some of the problems discussed in the above section, that might increase the efficiency of both the operations and employees of Bank Alfalah are as follows 1-Technological Advancements Bank Alfalah should develop a modern connectivity architecture to effectively maintain an online connection of the branch with other branches and also the ATM link, which may include using modern technologies like fiber cables, routers etc. Also backup links should also be developed, Also a proper IT department should be established in all branches, with professional having the knowledge to maintain a secured connection with other banks. Also scheduled backups of data should be done within the bank. 2-Workshops and Counseling Work shop programs should be conducted in every city, rather than just two centers, for all Bank Alfalah employees. These workshops should relate to all aspects of banking and may also be conducted with other banks as a joint program. Also as parts of the human resource training, counseling programs should be started for junior executives or new entrants into the bank, introducing them to their prospects in this industry. The lower staff employed at Bank Alfalah should also be given a chance to succeed in life by training them in different simple jobs at the bank, which may include sorting of cheques, phone banking etc. 3-Incentives Incentive schemes should be developed for the employees that can help motivate them, which might include: Personal loans and car financing facilities for all ranks of employees. Scholarship programs for all employees. Introducing employee awards at branch and regional levels.

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Job rotation programs to enhance the skills of employees.

4-Priority Banking and Business Development Department There is no priority banking department at Bank Alfalah, like that of other bank. A priority banking department should be developed so as to give even more exclusive and customized services to high end customers with large deposit accounts. Also Business Development Department should be developed in all branches, so that they can actively find prospect customers to take up products from Bank Alfalah. 5-Innovative Products New and innovative products should be introduced by Bank Alfalah, like other bank such as Citibank and Standard Chartered Bank develops for their customer. For this purpose, special teams should be developed that include professional from all departments of the banks to come with ideas. This process will increase the number of ideas generated and even produce innovative products for the bank that might give them the edge. 6-Placements of Employees There are some departments in the bank that do not have enough employees, while some have more than needed. All this creates inefficiencies and so the operations manager should look at the department of the branch and see where inefficiencies lie, in consultation of with the heads of the departments and hire individuals where there are less employees or rotate employees from other departments. 7-Amenities in Branch There should be a prayer room developed in all branches as many employees want to pray, but do not have the proper place to do it. Also work like sorting, which takes up a lot of space should be done in a separate place and amenities like television and internet connection should be placed in the common room, so as to give employees a relaxing environment when they have a break.

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

If I were manager there I would like to apply some changes in the working of a bank. As I have noted that in some of the department there was over staffing while in others understaffing is there. Due to understaffing there is a lot of burden on one officer I would like to cover this problem by doing proper hiring in each department so that employees remain satisfied by the justification of their work, which as a result can increase the efficiency of a bank as it is correctly said that satisfied worker is a productive worker. I would also try to increase the customer satisfaction by providing them good service as I have noted during internship that sometimes customer become angry due to rude behavior of an officer this could affect the customer loyalty so I would like to cover it. I would also like to increase the advertisement of bank to attract more customers and to make them aware of our products.

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Purpose: Financial analysis of the organization involves the evaluation of the financial performance as depicted in the financial statements of the organization. To improve the quality of decision making, proper analysis of these statements helps a lot. Financial statement analysis helps in determining the financial conditions at any particular point in time and effectiveness of operations of a firm during a specific period. The BAL provides this information in the shape of its annual report for every financial year containing financial as well as non-financial information. The financial data of BAL is analyzed in the following two ways The given below types of analyses are used to measure firms performance over time. In the common size analysis we use the balance sheet and income statement and measure their performance as compared to other years and in the same year, by generating a percentage increase or decline. The following types are as follows: A. Common size analysis B. Financial ratio analysis

Common size analysis expresses comparison in percentage. For example, if cash is Rs 30,000 and the total asset is Rs 1, 00,000 then cash represents 30% of total assets. The use of common size analysis makes comparisons of firms for different sizes mush more meaningful. A small change in amount can results in a very substantial percentage change. This is the analysis where total assets are divided by all balance sheet items, and all income statement items are divided by net sales or revenue is called common size analysis. Common size analysis can give analyst valuable approaching into changes that have occurred in a firms financial condition and performance. As common size analysis gives us relative percentage of an item with respect to total, so the growth or

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decline in various items of balance sheet and income statement cannot be detected from common size percentages. It has the following types: Horizontal analysis Vertical analysis 1. Horizontal analysis Horizontal analysis compares each amount for a selected base year or we take each item of base year as 100% and compare with other it Horizontal analysis of balance sheet 2010 Assets Cash and balance with treasury 100% bank Balance with other banks 100% Lending to Financial Inst Investments Advances Operating fixed assets Deferred tax assets Other assets Total Assets Liabilities Bills payable Borrowings Deposits and other accounts Deferred tax lease Other liabilities Total liabilities Net Assets Shareholders equity 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 2011 111.04% 117.41% 96.04% 85.85% 112.54% 115.52% ---149.49% 106.11% 83.41% 64.48% 110.08% 15.10% 118.45% 106.16% 105.08% 123% 131.10% 71.05% 106.11% 106.16% 105.08% 2012 119.09% 123.62% 433% 112.05% 109.83% 121.55% ---243.62% 118.29% 91% 97.28% 118.88% 13.03% 104.98% 117.35% 136.45% 207.56% 148.58% 55.45% 143.60% 118.46% 136.45% 2011 % change 11.04% 17.41% -3.96% -14.15% 12.54% 15.52% ---49.49% 6.11% -16.59% -35.52% 10.08% -84.9% 18.45% 6.16% 5.08% 23% 31.10% 28.95% 6.11% 6.16% 5.08% 2012 19.09% 23.62% 333% 12.05% 9.83% 21.55% ---143.62% 18.29% -9% -2.72% 18.88% -86.97% 4.98% 17.35% 36.45% 107.56% 48.58% -44.55% 43.60% 18.46% 36.45%

Share capital 100% Reserves 100% Inappropriate profit 100% Total equity 100% Total liabilities and Total 100% equity Surplus 100%

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Since we are measuring the change between 2010, 2011 and 2012, the rupee amounts for 2010 become the base figure for expressing these changes in percentage form. For example, Cash and balance with treasury bank increased by figures Rs. 3,250,957 between 2010 and 2011. This increase expressed in percentage form is computed as follows

Other percentage figures are computed by the same formula. Conclusion: Total assets of BAL are increased 10.04% in 2011 and 19.09% in 2012 from 2010(base year). This increase is due to the major increase in Operating fixed assets. Cash and balance with treasury bank. Total assets increases more in 2012 as compared to 2011 from the base year. Lending to Financial Inst decreased by 3.96% in 2011 and increased by 333% in 2012. Total liabilities and Total equity increased by 6.16% in 2011 and 18.46% in 2012, and share capital of BAL increase to 23% in 2011 and 107.56% in 2012. Share capital increases more in 2012 as compared to 2011. Horizontal analysis of income statement 2010 2011 2012 2011 % change Markup Revenue Markup Expense Gross Profit Margin Provision for Advances Bad debts written off directly Total Provision Net Markup after provision Non-Markup/ Interest Income Fee and Commission Dividend Income Exchange income Gain on sale 100% 100% 100% 100% 100.40% 464.9% 192.79% 20.59% 78.73% 283.51% 214.90% 33.44% 0.04% 364.9% 92.79% -79.41% -21.27% 183.51% 114.90% 66.56% 100% 100% 100% 100% 100% 100% 100% 120.41% 122.32% 116.94% 85.87% 484.22% 149.08% 105.68% 137.92% 148.33% 119.03% 155.83% ---171.30% 100.72% 20.41% 22.32% 16.94% -14.13% 384.22% 49.08% 5.68% 37.92% 48.33% 19.03% 55.83% ---71.30% 0.72% 2012

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Other Income Total non mark-up income Total non-markup expense Profit Before Tax Taxation Profit After Tax Conclusion:

100% 100% 100% 100% 100% 100%

120.97% 96.82% 128.15% 39.57% 35.11% 41.57%

126.96% 93.70% 132.72% 22.40% 8.48% 28.65%

20.97% 21.19% 28.15% -60.43% -64.89% -58.43%

26.96% 40.46% 32.72% -77.6% -91.52% -71.35%

The Trend analysis that we conclude from the above table gives us a clear view of the banks income statement. Here we find an absolute increase in the gross profit. Gross profit increases by 16.94% in 2011 and 19.03%% in 2012. There is more increase in 2012. This is mainly due to the fact that BAL has a good control over its markup expenses, in relation to its total markup revenue. As we can see that markup expenses are gradually being increased, that ultimately gives boost to the gross profit of the bank from the base year. The markup expense stands as the cost of sales. The increase in the gross profit shows that the management has been able to gain control over the markup expenses then previous year this shows that the bank is moving in a trend where it would lead into the achievement of the goals it has set. The total income of the bank has increased from the base year mainly due to the fee and commission reduction, as they kept on an increase from the past few years. The bank tackled the situation, by reducing the markup expense, that balanced the effect and ultimately the profit after tax has increased. The ultimate increase in the profit after tax also comes due to the fact that BAL has relieved itself from the provisions against the balance sheet liabilities, which have reduced the expenditure 2. Vertical analysis Vertical analysis compares each amount with a base amount selected from the same year. Simply, we compare the items of balance sheet or income statement vertically by taking one item as 100% Vertical analysis of balance sheet 2010 Assets Cash and balance with treasury bank Balance with other banks Lending to Financial Inst Investments Advances 8.95% 5.85% 1.05% 26.90% 52.05% 2011 9.37% 6.18% 0.95% 21.77% 55.21% 2012 9.01% 5.84% 3.84% 25.49% 48.33%

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Operating fixed assets Deferred tax assets Other assets Total Assets Liabilities Bills payable Borrowings Deposits and other accounts Subordinate loans Deferred tax liabilities Other liabilities Total liabilities Shareholders equity Share capital Reserves Unappropriated profit Total equity surplus Total liabilities and Total equity

3.62% ---1.83% 100% 1.26% 6.45% 83.05% 0.98% 0.42% 2.90% 95.06% 1.97% 0.73% 1.47% 4.18% 0.74% 100%

3.94% ---2.57% 100% 1.00% 3.92% 86.17% 0.74% 0.06% 3.23% 95.12% 2.29% 0.91% 0.98% 4.18% 0.70% 100%

3.72% ---3.77% 100% 0.97% 5.30% 83.47% 1.95% 0.05% 2.57% 94.31% 3.47% 0.92% 0.69% 5.81% 0.60% 100%

Each asset in balance sheet is expressed in terms of total assets, and each liability and equity account is expressed in terms of Total liabilities and Total equity. For example, the percentage figure above for Cash and balance with treasury bank in 2011 is computed as follows:

Other percentage figures are computed by the same formula. Conclusion: Vertical analysis shows the proportionate percentage of different items of the balance sheet with respect to Total Assets. The vertical analysis of BAL shows that there are different assets and liabilities over the time period. This is due to many reasons. First of all the assets have changed and increased over the time period. The change in assets affects the overall vertical analysis as the

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change is analyzed with respect to assets. The major components in the balance sheet of banks are deposits, advances and investments, as the major expense and income occurred due to these respectively. So looking closely to these items investment increased from 2011 to 2012. On other hand the advances decreases in 2012. This is due to high interest rates in 2011 and lower interest rates in 2012. Investments, as being a non-interest source of income are more promising than advances that are becoming more profitable due to inclining interest rates. Bankers prefer to give advances when the interest rate was high but then prefer to invest in no interest income in 2012 when the income from investment was higher than the interest rate. The deposits are approximately same in both years. Only slightly increase in 2012. The cash in hand is decreasing from 2011 to 2012. Thus showing that now the bank is more liquid, and liquidity is inversely proportion to profit. The cash in hand should be invested in short term investments, so that the organization can earn profit on idle money. Now coming to the share holders equity, the equity has been increased from 4.18% to 5.81% in 2012 of total asset over the time period. This shows that more people are interested to invest in the BAL in 2012. In BAL share holder equity the major cause of increase is the revaluation of assets and increase in inappropriate profits. Reserves have decreased over the time period and share holder equity increased a little with respect to assets. Vertical analysis of income statement 2010 Markup Revenue Markup Expense Gross Profit Provision for Advances Provision for Investments Bad debts written off Net Markup Income Non-Markup Income Fee and Commission Dividend income Exchange income Gain on sale Unrealized gain 9.42% 0.25% 1.84% 8.00% 0.08% 6.83% 0.97% 2.95% 1.37% 0.58% 5.38% 0.70% 2.87% 1.94% ---100% 64.46% 35.54% 9.15% ---0.02% 26.31% 2011 100% 66.18% 33.82% 6.51% 4.78% 0.10% 22.37% 2012 100% 69.33% 30.67% 10.38% 0.9% 0.7% 19.22%

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Other Income Total non-markup income Total income Non-Markup Expenses Admin Expenses Other provisions Other charges Total non-markup expense Profit Before Tax Provision for Taxes Profit After Tax Conclusion:

4.00% 23.42% 49.74% 32.08% 0.02% 0.04% 32.15% 17.60% 5.45% 12.14%

4.03% 15.57% 37.95% 31.66% 0.09% 0.40% 32.15% 5.79% 1.59% 4.20%

3.68% 14.57% 33.79% 30.71% ---0.22% 30.93% 2.86% 2.52% 9.69%

The Vertical Analyses of Income Statement of BAL as given in the above table is showing a percentage change with respect of the sales or markup income. There is a consistent decreasing trend in 2012 in the banks gross profit. The main reason behind this is that the bank has not controlled its markup expenses in relation to total markup revenue. In simple words we can say that increase in the markup expenses resulting in the decrease gross profit. This can be because of decreasing interest rate on advances or decreasing interest rate on deposits to encourage savings. Markup expenses are actually cost of sale in case of a bank. Furthermore this decreasing trend in gross profit shows the banks management is not efficient in controlling markup expenses. So this decreasing trend of gross profit is a negative sign and the banks management should consider it and take some more actions to improve its position. Now if we take a look at the figure of total income of the bank, there is consisting decrease in it as well. As total income is the summation of both markup income and the non markup income. This decrease in total income is due to the decrease in the markup income. Many organizations total non markup income consists of fees and commissions, dividend income, exchange income and other income. If the look at the figure of non markup expense there is a decreasing trend and this increasing trend in these expense is due to the decrease in administrative expenses. Furthermore, the taxation percentage was high for 2011 but for 2012 the taxation percentage decreases due to decrease in profit before tax. The combine effect of all of these has resulted in lower percentage increase in the net profit as compare to decrease of gross profit.

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A financial ratio is an index that relates two accounting numbers and is obtain by dividing one number by other. One may consider that why there is a need to mingle with these ratios and not take the actual figures straightforwardly. Among various reasons one strong reason can be put forward that ratios help in comparison. When analysis is two compare the internal performance of the organization in relation to time, only ratios analysis is the viable option for them. Along with it, comparison with the other competitors in the same industry can only be carried out with the help of financial ratios. The number of financial ratios might be created in virtually unlimited, but there are certain basic ratios that are frequently used specially for measuring the banks performance. There are some ratios that are used for the analysis of the banks these are:



Advances To Deposit Ratio

This ratio is calculated by dividing the amount of advances by deposits. This ratio shows the relationship of advances to deposits. It means that what is the percentage of advances to deposit of a bank. Whether the advances are enough toms pay its liabilities.

Formula Advances Deposits 2006 28,319,401 51,684,984 = 2005 19,131,494 30,207,324 54.7 %

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= 2004

63.33 %

15,242,317 20,481,568 = 2003 10,327,324 15,820,473 = Interpretation

This ratio shows the decreasing trend except 2000 where it increase from 65.27 to 74.41. Overall this ratio shows that management is not aggressive toward advancing of loan.

74.41 %

65.27 %

Cash To deposit Ratio

The ration is calculating by dividing the cash on hand and cash with other banks by total deposits of the bank. This ratio shows the percentage of cash available as compared to deposits . this ratio tells that at any time if cash is needed to meet the liabilities of deposit liabilities to what percentage it is available.

Formula Cash on hand and cash with other bank Total Deposit 2006 1,122,962 51,684,984 = 2005 2.17%

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772,140 30,207,324 = 2004 324,503 20,481,568 = 2003 248,251 15,820,473 = Interpretation

This ratio is on increasing trend which is unfavorable. This shows that bank is not proper utilizing its deposits.






Equity To Assets
This ratio is calculating by dividing shareholders equity by total assets.

Formula Shareholders equity Total Assets 2006 1,615,777 65,167,031

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= 2005


1,361,292 40,098,095 = 2004 900,680 27,577,159 = 2003 3.26% 895,330 21,019,608 = Interpretation
This ratio shows continuously decreasing trend. It means that is not favorable for bank.



Equity To Deposits
This ratio shows the percentage of shareholders equity to total deposit. This ratio is calculating by shareholders equity by total deposits of the bank.

Formula Total Shareholders equity Total Deposits 2006 1,615,777 51,684,984

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= 2005

0.312 x

1,361,292 30,207,324 = 0.450x


900,680 20,481,568 = 0.439x


895,330 15,820,473 = 0.56x

This ratio shows decreasing trend except 2001 which increases from 4.39 to 4.50.



Deposit To Total Liabilities The deposit is calculating by dividing total deposits by total liabilities. This ratio shows the percentage of total deposits to total liabilities which is the major liability of the bank. Formula Total Deposits Total Liabilities

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2006 51,684,984 61,514,364 = 2005 30207324 37,938,411 = 2004 20,481,568 25,859,057 = 2003 15,820,473 19,293,328 = Interpretation This ratio increases in 2002 that is positive sign that bank has more funds to invest. In 2000 and 2001 this ratio becomes down it mean that management was not properly invest its funds. Investment To Total Assets
This ratio is calculating by dividing investment by total assets. This ratio shows the percentage of investment to total assets.






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Investment Assets 2006 24,694,397 65,167,031 = 2005 11,396,616 40,098,095 = 2004 4,967,542 27,577,159 = 18.01% 28.42% 37.89%


4,993,035 21,019,608 = 23.75%

The investment to total asset of bank alfalah indicates the portion of investment in banks total assets, in 2002 it is increasing which is not a favorable trend. This shows that management does not work properly and efficiently and not utilizing the assets fully by investment. In 2000 when the ratio decrease from 23.79 to 18.01 it mean management is properly utilizing the asset fully by investment.



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Net Profit Margin

This ratio is calculating by dividing profit after tax by total income. This ratio shows that what is the percentage of net profit to the total income.

Formula Profit after Tax Total Income 2006 446579 5245912 = 8.51%

2005 310,612 3769801 = 2004 215,350 2,529,896 = 2003 160,236 2,091,893 = 7.65% 8.51% 8.23%

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This ratio shows increasing trend which is favorable this shows management work efficiently. Management has ability to operate business with great success.

Operating Profit Margin

This ratio is calculated by dividing the operating profit by total income. This ratio shows that what is the percentage of operating profit to the total income.

Formula Operating Profit Total Income 2006 894653 5245912 = 2005 524,164 3769801 = 2004 398,930 2529896 = 2003 350,892 15.76% 13.90% 17.05%

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2091893 = Interpretation
Operating profit ratio shows the profits of a firm that earn on its income. In 2002 the trend of this ratio is 17.05% this is a favorable trend for the bank..


Gross Profit Margin

This ratio is calculated by dividing the gross profit by total income. This ratio shows that what is the percentage of gross profit to the total income.

Formula Gross Profit Total Income 2006 2133599 5245912 = 2005 1254727 3769801 = 2004 805855 2529896 = 31.85% 33.82% 40.67%

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2003 617550 2091893 = 29.52%

Return On Equity This ratio is calculating by dividing net profit by total equity. This ratio shows that how much the company is earning on shareholders equity. Formula Net Profit Total Equity 2006 445,679 1,615,777 = 2005 310,612 1,361,292 = 2004 215,350 900,680 = 23.90% 22.81% 27.58%

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2003 160,236 895,330 = Interpretation

In 2002 the ratio is increase from 22.81% to 27.58% . This shows that management is utilizing its equity in good way. So this is favorable for bank.


Return On Total Assets

This ratio is obtained by dividing net profit by total assets. This ratio shows that what percentage of earning the company is attaining on total assets.

Formula Net Profit Total Assets

2006 446579 65,167,031 = 2005 310,612 40,098,095 = 2004 0.774% 0.685%

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215,350 27,577,159 = 2003 160,236 21,019,608 = Interpretation

This ratio measure bank ability to utilize its assets to create profit by comparing profit with assets generates profit. This ratio shows decreasing trend. this mean that management is not properly using its assets.



Market Structure Bank Alfalah Limited The Bank Alfalah Limited Comes under the Monopolistic Competition Because; There are large numbers of Financial Institutions in the Market. Habib Bank Limited United Bank Limited Allied Bank Limited Muslim Commercial Bank Limited National Bank of Pakistan Bank of Khyber National Saving Centre Al-Faysal Bank Limited Saudi Pak Bank Limited Standard Charted Bank Limited

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First Women Bank Limited Bank Al-Habib Limited PICIC commercial Bank Limited KASB Bank Limited NIB Bank Limited Citi Bank Limited

There is large number of customers in the Market. In the Market there are number of substitutes are available National Saving Centre Stock Exchange Government Securities Advances

The products characteristics are different according to: Rate of Interest Mode of delivery Duration of delivery Services Communication The products are relatively homogenous Types of Accounts Credit Cards Debit Cards Car Finance Advances Consumer Durables Foreign Exchange dealings

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