third askari 3

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Table of Contents

EXECUTIVE SUMMARY:.........................................................................................................................II

1.2. A WARDS & A CHIEVEMENTS ___________________________________________________________ 21.3. T HE VISION ______________________________________________________________________ 51.4. T HE M ISSION _____________________________________________________________________ 51.5. C ORE VALUES ____________________________________________________________________ 51.6. C ORPORATE PHILOSOPHY _____________________________________________________________ 51.7. I NSPIRING R ELATIONSHIPS _____________________________________________________________ 51.15. C ODE OF BUSINESS PRINCIPLES ________________________________________________________ 8

BALANCE SHEET........................................................................................................................................26AND ___________________________________________________ 26

ASKARI COMMERCIAL BANK LIMITED......................................27ASKARI COMMERCIAL BANK LIMITED...................................29

TREND ANALYSIS ___________________________________________ 30

SHAREHOLDERS FUNDS.......................................................................................................................31

I. LIABILITIES ____________________________________________________________________ 32TREND ANALYSIS............................................................................................................33PERCENTAGE....................................................................................................................33TREND ANALYSIS............................................................................................................35

LIABILITIES AND OWNERS EQUITY.................................................................................................40

PROFITABILITY RATIOS........................................................................................................................43

RETURN ON CAPITAL FUND.........................................................................................................43INTERPRETATION.................................................................................................................................44RETURN ON INVESTMENT..................................................................................................................44

Total Assets.....................................................................................45

INTERPRETATION.................................................................................................................................45RETURN ON RISK ASSETS...................................................................................................................45Total risk assets........................................................................................46

INTERPRETATION.................................................................................................................................46RETURN ON DEPOSITS.........................................................................................................................47

Total Deposits.....................................................................................................................................47OPERATING EXPENSES TO NET REVENUE......................................................................................48

Net Revenue.................................................................................................................................48INTERPRETATION.................................................................................................................................48

COVERAGE RATIO.....................................................................................................................55INTEREST COVERAGE RATIO............................................................................................................55INTERPRETATION.................................................................................................................................55

CAPITAL ADEQUACY RATIOS.................................................................................................56CAPITAL FUNDS TO TOTAL ASSETS RATIO...................................................................................56

INTERPRETATION.................................................................................................................................56

INTERPRETATION............................................................................................................................576.FINDINGS.................................................................................................................................................60


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E XECUTIVE SUMMARY :

This report is about the internship program at Askari Bank AWT Plaza Saddar Rawalpindi. It discusses Departments in which I have completed my internship & have

learned a lot of practices and procedures.

The purpose of internship with Askari was to understand the overall environment of the

big organization in Banking Sector. Askari is one of the largest banking institutions in

Pakistan providing a variety of services and products and improving its efficiency and

customer loyalty with every increase in profitability.

This report is divided into several chapters, where chapter one company profile is

discussed including the historical background is discussed. Every company has mission,

vision and some core values; these are discussed in the next chapter. Chapter two consist

of companys subsidiaries are discussed in details. In the next step overview of different

departments is given. Chapter three comprises of the focused department which finance.

Then the business analysis of the company is presented further more the financial

performance of the company is presented with ratio analysis. Every company has some

key indicators contributing to business the key indicators of the company are discussed.

And finally the SWOT analysis is presented.

.

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Askari Commercial Bank

1. INTRODUCTION

1.1. Askari Commercial Bank Limited (Brief History)Askari Commercial Bank Limited (ACBL) works as a Unit of Army Welfare Trust

was established for the Welfare of Army Officials. The office of Army Welfare Trust is

situated at AWT Plaza, Rawalpindi. AWT offers the AWT Saving Scheme to the army

officials only. AWT has its units as under:

1. Askari Associates.

2. Askari Leasing.

3. Askari General.

4. Private Business.

5. Textile Mills.

6. Cement Industry.

7. Askari Commercial Bank.

Incorporated in Pakistan on October 09, 1991. The bank obtained business

commencement certificate on February 26, 1992 and started operations form April 1,

1992, as public limited company, and has since expanded into a nation-wide

presence of 51 branches, supported by a network of online ATMs. The Bank is

listed on the Karachi, Lahore and Islamabad Stock Exchanges and the initial

public offering was over subscribed by 16 times. Askari Commercial Bank is

scheduled Commercial Bank and is principally engaged in the business of banking as

defined in the Banking Companies Ordinance 1962.

Askari Commercial Bank limited continues to scale new heights in all areas of its

operations. The safety and security of depositors funds, high productivity and optimum

use of technology are the hallmarks of its corporate strength.

While capturing the largest market share amongst the new banks, Askari has provided

good value to its shareholders. Share price of ACBL has remained approximately 12%

higher than the average share price of quoted banks during the last four years.

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Askari Bank is principally engaged in the business of banking as defined in the Banking

Companies Ordinance, 1962.

Askari Bank is the only bank with its operational Head Office in the twin cities of

Rawalpindi-Islamabad, which have relatively limited opportunities as compared to

Karachi and Lahore. This created its own challenges and opportunities, and forced us to

evolve an outward-looking strategy in terms of our market emphasis. As a result, we

developed a geographically diversified assets base instead of a concentration and heavy

reliance on business in the major commercial centers of Karachi and Lahore, where most

other banks have their operational Head Offices.

1.2. Awards & Achievements

Commercial Bank of the Year

Award for 1994 & 1996 by Asia money Magazine

Best Domestic Bank of Pakistan

Award for 1995 by Euro money

The Best Bank in Pakistan

Award for 2001 & 2002

By Global finance magazine

Best Consumer Internet Bank in Pakistan

Award for 2002, 2003 and 2004.

By Global Finance Magazine

Best Corporate/ Institutional Internet Bank in Pakistan

Award for 2004

By Global Finance Magazine

Best Corporate Report

1st prize award for 2000, 01, 02 &03

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By Institute of Chartered Accountants of Pakistan (ICAP) & Institute of Cost and

Management Of Pakistan

Best Presented Accounts

Ranking Prizes Award from 1997 to 2002By South Asia Federation of Accountants (SAFA)

Best Presented Annual Report

1st prize from 1997 to 2003

By National council of culture and Arts (NCCA)

Best Retail Bank in Pakistan

Award for 2003 by Asian Banker

Corporate ExcellenceAward for 2002, 2003

By Management Association of Pakistan (MAP)

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Organizational Chart

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1.3. The Vision

To be the Bank of First Choice in the Region

1.4. The Mission

To be the leading private sector bank in Pakistan with an international

presence, delivering quality service through innovative technology and

effective human resource management in a modern and progressive

organizational culture of meritocracy, maintaining high ethical and

professional standards, while providing enhanced value to all our

stakeholders, and contributing to society .

1.5. Core Values

The intrinsic values, which are corner stones of our corporate behavior, are:

Commitment

Integrity

Fairness

Team-work

Service

1.6. Corporate Philosophy

The Challenge.... to bring a dream to life .

1.7. Inspiring Relationships

From knowing our customer requirements to understanding employee needs, from

utilizing modern technology to making responsible social contributions, from enhancing

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stake-holders value to practicing corporate ethics We are continuously and consistently

striving to address newer challenges with a single motivation:

1.8. Inspiring Customer relationships

"Before we discover, we must explore" . Knowing our customers and their needs is the

key to our business success. Our products and services are structured to touch and

improve the quality of lives of all segments of society. Service quality standards are

designed and monitored to ensure a consistent and convenient customer experience. Our

client relationship managers are well equipped and well trained to provide most efficient

and personalized service to each and every customer. Askari Bank is proud of the

pioneering role in providing the most modern technological services to its customer base,which today exceeds 150,000 relationships

1.9. Inspiring employee relationship

" Unusual effort on part of the employees who are apparently ordinary workers is one of

the key indications of a superior enterprise . Our staff is our most valuable asset. The

human resource philosophy at Askari Bank focuses on multi-talent hiring,

professional grooming, requisite training and meritocracy based reward system. We

lay great emphasis on the development and nurturing of "Askari Culture", a cohesive

team work, where each relies on the strength of the other and together they achieve

common objectives.

1.10. Inspiring technological innovation

"Modern science is not an option, it is an obligation. Technology is rapidly changing theway we think, act and do business. It has played a pivotal role in enhancing customer

expectations, particularly with respect to speed and quality of service.We enjoy a

strategic competitive advantage over all domestic players by virtue of our leadership

in technological innovations. We have fully automated transaction processing systems

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for back-office support. Our branch network is connected on-line real-time and our

customers have access to off-site as well as on-site ATMs, all over Pakistan.

Our Phone Banking service and Internet Banking facility allows customers to enjoy

routine banking services from anywhere in the world, 365 days a year, 24 hours a day.

We have also pioneered ecommerce venture in Pakistan through a major retail

distributor.

1.11. Inspiring ethical values

"Professionalism without integrity is like a book without pages"

Because the right may not always be obvious, we must be guided in our every action

by a set of well-defined values, governing our decisions. We understand that our

commitment to satisfy customers needs must be fulfilled within a professional and

ethical framework. We subscribe to a culture of high ethical standards, based upon

development of right attitudes.

1.12. Corporate citizenship

"The greatest of life's pleasures are shared".Our role as a responsible corporate citizen is

as important to us as the products and services we offer. We have made useful

contributions in the areas of sports, culture, poverty alleviation, health & medical

sciences, education and scientific research We are one of the co-sponsors of the 9th

South Asian Federation Games, now schedule to be held at Islamabad in the Year 2003.

We have also sponsored various sports tournaments at both amateur and professional

level. Our contributions to the NGOs dedicated to the treatment and welfare of the blindis a ray of hope in the darkness. We have made donations to the drug-addiction control

programs and our efforts to help support Aids Awareness programs and contributions to

the mental and social welfare of women and children have won much acclaim.

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1.13. Inspiring growth

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

We live in a moment of history where ever thing is changing so fast that we begin to see

the present only when it is already disappearing. Our customer needs are changing and

their expectations are growing. Technology is fast proliferating the distribution channels

and now banking services can be accessed from multiple contact points. We believe that

balanced growth is the key to survival in today's global banking environment. From a

humble beginning with just 7 branches in 1992, today we enjoy a network of 50 outlets,

spread across the country.

1.14. Inspiring corporate achievement

"Winning isn't everything, it's the only thing. Amidst tough competition, our efforts to go

an extra mile in providing superior services to our customers have been acknowledged at

the national as well as international levels. These acknowledgements serve as a great

source of encouragement and appreciation at one hand and inspire us to perform even

better, on the other. We have been honored with the "The Best Bank in Pakistan" award

by the Global Finance Magazine. We won the Euromoney and Asiamoney awards as

early as 1994, 1995 and 1996. We have Al+, the highest possible credit rating, for the

short-term obligations, and our long-term rating stands at AA.

1.15. Code of Business Principles

Our Code of Business Principles is to:

Deliver solutions that meet customers financial needs;

Build and sustain a high performance culture;

Build trusted relationships with all stakeholders;

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Build and manage the Banks portfolio of business to achieve strong and

sustainable shareholders returns; and

Create and leverage strategic assets and capabilities for competitive advantage

1.16. Objectives

To achieve sustained growth and profitability in all areas of business.

To build and sustain a high performance culture, with a continuous improvement

focus.

To develop a customer-service oriented culture with special emphasis on

customer care and convenience.

To build an enabling environment, where employees are motivated to contribute

to their full potential.

To effectively manage and mitigate all kinds of risks inherent in the banking

business.

To maximize use of technology to ensure cost-effective operations, efficient

management information system, enhanced delivery capability and high service

standards.

To manage the Bank's portfolio of businesses to achieve strong and sustainableshareholder returns and to continuously build shareholder value.

To deliver timely solutions that best meet the customers financial needs.

To explore new avenues for growth and profitability.

1.17. Strategic Planning

1. To comprehensively plan for the future to ensure sustained growth and

profitability.

2. To facilitate alignment of the Vision, Mission, Corporate Objectives and

Corporate Philosophy, with the business goals and objectives.

3. To provide strategic initiatives and solutions for projects, products, policies and

procedures.

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4. To provide strategic solutions to mitigate weak areas and to counter threats to

profits.

5. To identify strategic initiatives and opportunities for profit.

6. To create and leverage strategic assets and capabilities for competitive advantage .

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2. DEPARTMENTS

2.1. DEPOSITS DEPARTMENT

Deposit is the functional unit of a Commercial Bank. No bank can run its operations

without deposits. Main function of a commercial bank is to channelize saving from the

savers to the ultimate users of funds. The process of collecting saving is called Deposit

Mobilization.

Two board categories of deposits with reference to time period are:

Demand Deposit

These are payable on demand. They include current account, sundry deposit (e.g. marginaccount) and call deposit receipt. No profit is given on demand deposits.

Time Deposit

Payable on demand with certain maturity. Attracts profit with respect to time.

2.1.1. TYPE OF ACCOUNTS

There are three types of accounts dealt in the ACBL

2.1.2. PLS Saving Bank Account

Saving deposits were introduction to inculcate and encourage the of saving among people

of small means in order to achieves of Islamisation of the banking system in the country,

the government authorized the banks to accept Saving Deposit on profit and loss sharing

basis. Deposits received under this scheme are invested in non-interest bearing advances

and other avenue so as to eliminate the element of interest.

2.1.3. Current Account

A current account is a running account, which is continuously in operation, by the

customer on all working days of the bank. The customer deposits without the current

deposits without previous notice to the bank.

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2.1.4. PLS Term Deposit

Fixed or term deposits are the major source of funds of a commercial bank. Term

deposits, as the name implies, are deposits kept with a bank for a certain period of time.

They are not payable on demand like the current deposit. The depositor can only

withdraw them after the specified period of time. The persons or firms trust, religious

bodies, which have surplus funds keep the money in fixed deposits with bank.

2.2. REMITTANCE DEPARTMENT

The need of remittance is commonly felt is commercial life particularly and in everyday

life generally. The main function of the remittance department is to transmit money from

one place to another. By providing this service to the customer, bank earns a lot of

income. Also customer is able to meet its day to day financial requirements.

2.2.1. Demand Draft

It is an instrument payable on demand for which value has been received, issued by the

branch of the bank drawn i.e. payable at some other place (branch) of the same bank. If

two banks are involved then the DD is sent to other bank but in other case it is handed

over to the applicant.

2.2.2. Telegraphic Transfer (TT)

It is the quickest way of transfer of funds from one place (Branch) to other place

(Branch) of the same bank. Generally, a mail transfer advice reaches the drawer branch

the next day through courier services. But sometimes, a customer demands that his funds

should be transferred through the quickest means. In such cases, transfer of funds

message is passed through telephone or telegram.This mode of transfer was used before online. Online system is very effective for this

purpose now-a-days. In Askari Commercial Bank online system is used.

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2.2.3. Pay Order

It is an instrument issued for payment in same city. Pay order issued from on e branch

can only be payable from the same branch. It is normally referred to as bankers cheque.

It is also called confirmed cheque, because bank issues this on it own guarantee.

2.2.4. Pay Slip

It is an instrument issued by the bank for the settlement of its own payment. It is used for

payment by the bank to anyone (may be employees) in this case only one bank is

involved. He is the issuer as well as the payer.

No Excise Duty

No Commission

2.2.5. Outward Bills for Collection

The bills, which are received by the bank and sent to other cities (branches) for the local

clearing in that city, are called Outward Bills for Collection.

2.2.6. Inward Bills for Collection

The bills, which are received by the bank from other branches out of the city for local

clearing, are called Inward Bills for Collection.

2.2.7. On Line Transaction

Askari Bank has provided the facility of on line transaction. In this case the accounts and

their details in the other branches of ACBL can be displayed on computer which is

connected through server to the computer at the other end. Commission is charged on

providing this service this is beneficial as it takes very little time in the transference of

funds. This facility is available all the branches of Askari Bank except Bhai Pheru

Branch.

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2.3 . CLEARING

The word clearing has been derived from the word Clear and is defined as a system

by which banks exchange cheques and other negotiable instruments draw on each other

within a specified area and thereby secure payment for their client through the clearing

house at specified time in an efficient way.

Since clearing does not involve any cash etc and the entire transaction take place through

book entries, the number of transactions can be unlimited. No cash is needed as such the

risks of robbery, embezzlements and pilferage are totally eliminated. As major payments

are made through clearing, the banks can manage cash payment at the counters with a

minimum amount of cash in vaults.

2.3..1 Clearing House (National Institution of FacilitationTechnologies)

It is a place where representatives of all scheduled banks sit together and interchange

their claims against each other with the help of controlling staff of State Bank of Pakistan

and where there is no branch of State Bank of Pakistan the designated branch of National

Bank of Pakistan acts as controlling member instead of State Bank of Pakistan.

2.3..2 Procedure of Settlement

Presume that ACBL got the cheques which are drawn on HBL, NBP and MCB for

amounts Rs. 50,000/-, Rs. 15,000/- respectively, its total being amounts Rs.95,000/-, it

means that this amount is to be credited to ACBL A/C with S.B.P. on the other hand the

cheques drawn on ACBL are from HBL, NBP and MCB of Rs.15,000/-, Rs.75,000/- and

Rs.30,000/- respectively, its total being Rs.1,20,000/-, it means that this amount is to be

debited from ACBL account. The difference between Rs.95,000/- credit and debit

Rs.1,20,000/- debit is Rs.25,000/- debit which means the house is against ACBL for

Rs.25,000/-.

Hence ACBL A/C with State Bank of Pakistan will be debited with Rs.25,000/- and the

contra will be other banks accounts respectively. This called as Debit and Credit Rule.

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2.3..3 Outward Clearing at the Branch

If an instrument is in order then out banks special crossing stamp is affixed across the

face of the instrument. Clearing stamps is affixed on the face of the instruments, paying-

in-slip and counterfoil (The stamp is affixed in such a manner that half appears on

paying-in-slip and half on counterfoil). The instrument is suitably discharged, where a

bearer cheque does not required any discharge and also an instrument in favor of a bank

need not be discharged. The instrument along with paying-in-slip is retained while the

counterfoil is given to the customer duly signed.

2.3..4 Inward Clearing of the Branch

The particulars of the instruments are compared with the list. The

instruments are detached and sort out department wise. The entry is made

in the Inward Clearing Register (serial number, instrument number,

account number, amount of the instrument is written). The instruments are

sent to the respective departments against acknowledgement in the

Inward Clearing Register. The instruments are scrutinized in each respect

before honoring the same

2.4. Retail Banking Division

Retail banking division is also working separately. Its basic features are the consumer

finance products, among them ACBL Saddar is offering following products only.

2.4.1. Askari Banks Personal Finance You can avail of unlimited opportunities through Askaris Bank Personal

Finance. No matter what you need is, Askari Bank has more ways to serve you

than ever before. Askari bank is now offering you Askaris Bank Personal

finance, a loan that is perfect solution for most of the needs.

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2.4.2. Askari Banks Smart Cash

ASKSMART Cash is ideal credit line you need to maximize your financial freedom. No

matter you are a salaried individual or a self-employed businessman or professionals, it is

answer to all financial challenges.

It is not an ordinary personal loan or overdraft facility, rather it is an unmatched flexible

credit line that poses no complications and presents no worries.

2.4.3. Askari Mortgage Finance

Askari Mortgage finance offers the convenience of owing the house of own choice while

living it at its rental value. Customer pay the price of property in affordable installments

for a fixed period of time simply pay rental for residence. The installment plan has been

carefully designed to suit budget and accommodation requirements.

2.4.4. Askari Banks Business Finance

Through this loan available up to 60% of the assessed market value of customer

residential property. Customer has to pay only mark up on the daily outstanding loan

balance.

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3 Business and Operations Review

Benefited by the highly conducive economic environment, Askari Bank continued its

growth momentum and posted substantial gains during 2004. The positive economic

trends during the year, particularly the broad based recovery by the manufacturing sector

and the low interest rates led to a record growth in the private sector credit demand,

which increased by Rs. 325 billion during fiscal 2004. Also, net consumer credit grew

strongly by Rs. 75.6 billion during fiscal 2004 as against Rs. 48.6 billion in the previous

year, an increase of 56%. The highest growth in consumer credit was financing for

consumer durables followed by automobiles and personal loans. The increase in

consumer credit also had an expansionary effect on corporate finance, as the demand for

automobiles and consumer durables, particularly electronic items, pushed up production

in these sectors.

Askari Bank was well poised to take advantage of these positive developments in the

country. Corporate business accounted for 59% of the total credit disbursed during the

year followed by SME (21%) and commodity financing (13%). Retail and agriculture

credit accounted for 7% of the total credit disbursed during 2004. In a highly competitive

environment, the Bank continually reviewed its policy pertaining to the sectoral

exposures to derive optimum competitive advantage, maintain the risk profile and

achieve greater customer satisfaction.

3.1. Corporate and Investment Banking

2004 was a challenging year due to historic lows in interest rates, particularly for

corporate business. The Corporate Banking Division (CBD) undertook a number of debt

re-pricing swap transactions, aimed at reducing the financial burden of its key client

portfolios and also managed advisory and loan arrangement activities. The major new

relationships cover telecommunication, oil and gas, and chemicals sectors. CBD has

dedicated marketing and support units functioning at Karachi and Lahore. In order to

enhance focus on relationship management, and service quality, more dedicated staff is

being assigned. The investment banking activity mainly covers, debt / capital markets,

advisory services and trading (both equities and derivatives). After the initial start-up

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phase, the capital market desk, based at Karachi, increased the volume of capital market

related transactions. During 2004, as a result of the positive stock market sentiment, the

capital market transactions contributed substantially to the Banks earnings. Investment

Banking also participated in various debt and capital raising instruments during the year.

Progress on the setting-up of an Asset Management Company was slow because of

delays in receiving statutory approvals. However, we now see the company becoming

operational in the third quarter of 2005. The corporate and investment banking will

continue to play a major role in loan syndications, structured financing and debt / capital

raising transactions with the objective of providing entire range of corporate and

investment banking solutions to its valued clients under one umbrella.

3.2. Retail BankingDuring the year, the Retail Banking Group registered healthy growth (167%) in its asset

book comprising of auto, mortgage, business, personal and household financing. Keeping

in view the fast growing operations of retail banking, the Group re-organized its

marketing and customer support structure by creating dedicated Retail Banking Units

(RBU) in addition to the Retail Banking Centers (RBC). The 5 RBCs, in Rawalpindi,

Peshawar, Lahore, Karachi and Quetta are now supported by 19 RBUs which operate

from the branches in proximity of the RBCs. In addition to the asset book, other retail banking products showed healthy increases. The Banks debt card with the brand name

of ASKCARD registered a growth of 23% in the number of cards issued. Askari Bank

pioneered product of electronic utility bills payment service was further expanded and

now covers electricity bills for Islamabad and Peshawar, and gas bills for the south

regions, in addition to the bills of the largest telephone utility company. The transaction

volume on electronic utility bills payment facility increased more than 5 times during

2004.

3.3. Credit Cards

Amidst strong competition, the credit card business, under the MasterCard brand,

recorded good growth in all areas of operation. Net card issuance increased by 59%

during the year and cards in force (CIF) crossed the 100k mark. Transaction volume

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increased by 39%, while the Credit Cards loan portfolio increased by 34%. NPLs on

account of the loans portfolio remained well within the industry norms. For the first time

in Pakistan, Askari Bank introduced the Platinum Card in addition to the existing Gold

and Silver. The Platinum Card facility offers certain exclusive leisure and travel related

facilities to its members.

3.4. Treasury and International operations

Conditions in the money market and foreign exchange market were very challenging and

volatile during 2004. The low interest rate environment that dominated the first half of

2004, changed with the rising credit demand in the manufacturing, retail, services and

agriculture sectors, increase in inflation, and rising interest rates in the international

market. Similarly, the Rupee / Dollar exchange rate witnessed a volatile situation,

reflected by the fact that the Rupee started the year 2004 at 57.40 against US Dollar,

reached 61.00 in October and gradually receded to 59.46 in December. The main reasons

for this volatility were the bulging trade deficit, higher oil prices and repayment of

expensive foreign debts by the Government of Pakistan (GoP). Dollar premiums in the

forward were negative in the first half of the year; but gradually shifted to positive in the

second half due to the weakening of the Rupee. Money market remained liquid with

volatility in interest rates. Weighted average yields of 6 months Treasury Bills rose to3.73% p.a. in November from 1.64% p.a. in January 2004, thus reflecting a net increase

of 209 bps. The intense competition along with the deregulation and liberalization of the

money and foreign exchange markets, has placed the Treasury in a demanding position,

and it is now under pressure to be more innovative in undertaking arbitrage and

derivative transactions to maintain (and increase) its share in the overall earnings of the

banks. The Treasury management has established a Mid Office to measure, manage and

mitigate the risk elements associated with the Treasury activities. The IT system and the

human resource skills have been upgraded so that the Treasury can manage the risk

better, and also advice and services to the branches and their customers. The increase in

overall foreign trade of the country during 2004 also enabled the Bank to achieve a

healthy growth. Banks import business increased to Rs. 75.2 billion, i.e. 54% over last

year, while the exports increased by 24% over last year, to Rs. 70.1 billion.

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3.5. Offshore Banking Unit

Askari Banks first Offshore Banking Unit (OBU) has started making a positive

contribution to the Banks overall earnings. During 2004, OBU completed its first year of

operations and recorded more than four times increase in its asset base to USD 47

million, from USD 11 million last year. The OBU enhances our capability in terms of

offering a wider range of services to our customers and also acts as a look-out for new

business opportunities and relationships in the international markets.

3.6. Advances and Credit quality

The low interest rates and the substantial growth in large scale manufacturing were the

primary factors behind the tremendous increase in private sector credit during the year.

Askari Banks credit portfolio increased by 55%, to close at Rs. 71.718 billion. A review

of the securities held against credit limits reveals that the credit portfolio of the Bank is

well collateralized, with about 44% of the exposure being covered by securities of liquid

nature, such as deposits, trade documents, equity or debt instruments, guarantees from

government or financial institutions, etc.

Consequent to substantial recoveries during the year, Banks non-performing advances

reduced by 14% to Rs. 1.101 billion, from Rs. 1.278 billion last year. The NPLs ratio as a

percentage of gross advances also reduced from 2.76% to 1.54%. During 2004, Askari

Bank made further provisions of Rs. 277 million in compliance with the revised

provisioning guidelines issued by the State Bank of Pakistan, and also to build up the

general provisions as a measure of prudence. The cumulative provisions increased to Rs.

1.780 billion, thereby increasing the coverage of total provisions to total NPLs to 162%,

against 122% last year.

3.7. Information Technology

In the age of increasing competitive pressures, technology support impacts service

delivery standards and customer satisfaction levels. The value addition from this area has

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made a significant contribution towards successfully expanding and managing the

customer base of the Bank.

During 2004, various technology initiatives were successfully implemented. The

seventeen new branches opened during the year were operational with on-line bankingfrom day one. A dedicated customer call center, named as the Askari Customer Care

Center, became operational during the year. It aims at providing one window service to

our valued customers in terms of their telephonic enquiries. During the year, Askari

Banks co-founded ATM switch, One-Link, the largest ATM switch in Pakistan, linked

up with M-net, the second largest switch. As a result, the Banks customers can now

access their accounts through more than 800 online ATMs throughout Pakistan. Making

crucial, timely, strategic decisions is a must to stay ahead in todays competitive banking

environment. The Banks Data Warehouse is a step towards providing the management

with accurate, up-to-date information enabling them to make timely and prudent

decisions. The data warehousing project will also assist the already operational customer

call center to operate more effectively. Askari Banks central Electronic Technology

Division was relocated to a custom built premises in Islamabad which offers an excellent

environment to work, and much improved communication links with the various

branches and operating units of the Bank, countrywide.

3.8. Regulatory environment & CAR

The year saw many initiatives on the policy and regulatory front which would have an

impact on the Banks business in the years to come. The State Bank of Pakistan (SBP)

issued revised prudential regulations which became effective from January 1, 2004. The

revised prudential regulations have, inter alia, resulted in higher provisioning

requirements against the NPLs. At the same time the new regulations provide greater

flexibility to banks to meet the credit requirements of the consumer, microfinance andSME sectors. The scope of the capital adequacy ratio (CAR) has been extended and

capital requirement for market risk, in addition to the existing credit risk, has also been

introduced.

SBP has enhanced the minimum paid-up capital requirement for banks from Rs. 1.0

billion to Rs. 1.5 billion by December 31, 2004, and Rs. 2.0 billion by December 31,

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2005. As of year end 2004, Askari Bank is fully compliant with all the above

requirements and the management of the Bank is fully cognisant of the steps being

introduced to promote good governance practices among banks, and to establish effective

anti-money laundering processes in keeping with international requirements.

3.9. People at ACBL

The Bank fully recognizes its committed and competent work force as the primary asset

in providing value addition to its other stakeholders. Human resource functions are

accordingly being modernized and reviewed in accordance with our strategic direction

and objectives. Staff training and motivation is carried out on a continuous basis

throughout the year, based on the assessed training needs, particularly in the areas of

knowledge enhancement and skills. In-house training courses are conducted at the

Banks training center. During 2004, 1337 staff attended various training courses spread

over 222 working days. Staff at the middle and senior levels are frequently nominated for

outside training programs conducted by institutions both locally and abroad. Overseas

training was stepped up during 2004 and as many as 11 staff members attended seminars

and workshops overseas. Additionally, 129 staff attended various courses and training

programs conducted by local training institutions.

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4. SWOT ANALYSIS

SWOT (Strength, Weaknesses, Opportunities & Threats) analysis of ACBL is described below:

4.1. Strengths

ACBL has got a well-developed on-line system in most of its branches.

Remittance Department is working very efficiently in transferring the funds of

people due to this system.

The bank has also started ATM facility in most of its branches. 24-hour banking

is new trend in Pakistan and ACBL has also started Online Banking transactions

which facilitate the customers in every part of the Pakistan where ACBL has its

branch.

One distinctive feature of the bank is that it is the only bank working for the

welfare of army officers, which was established by Army Welfare Trust.

The productivity of the bank is very good. Bank is providing a high qualityservice to its customers.

In a short of Period of time ACBL has taken the attention of the traders of the

Saddar Market and show big addition in its accounts.

The ACBL has no restriction on any kind of exchange of currency on the

availability of the cash.

4.2. Weaknesses

ACBL has lesser number of branches as compared to other banks. Now it has

only 78 branches. Due to this problem, army officers can not avail the benefits of

their own bank.

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The human resource department is not performing the function of selection and

recruitment very effectively. Selection process is not on merit due to which

competent persons cannot be selected.

Bank is not introducing new products and new saving schemes. Bank should

boost the product development and increase the range of facilities offered for

customers.

Bank is weak in its credit management. Bank should lend to very sound parties

and increase its payment rate.

Currently Branch has no ATM which is also a weakness as compared to other

banks present in the market.

The Branch has little space which some time may create problem.

4.3. Opportunities

Govt. is taking very bold steps to promote IT in Pakistan. ACBL has an

opportunity to improve in technology.

Stock exchange is very volatile and takes immediate effect. So, in the time of crises, conservative investors return to saving deposits.

ACBL is surrounded by many competitors. It has an opportunity to do aggressive

marketing to increase its business.

ISI is situated near the Branch which is a big opportunity for the Branch for its

consumer products like Personal Finance etc.

Foreign Currency being opened soon by the branch is a big incentive for the

traders of the Saddar market.

4.4. Threats

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ACBL has many competitors, which are continuously increasing its products and

marketing aggressively. It may cause its customers to shift to competitors.

Some other banks have competent taskforce, which is also a threat for ACBL.

Because human resource is the most valuable resources.

The absence of ATM is a big threat as others banks have their ATMs.

The Old accounts in other banks of traders are threat for the ACBL

because it increases others turnover.

Low Salary Package is also threat as compared to others banks like MCB

and Bank Alfalah.

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5. FINANCIAL ANALYSIS

BALANCE SHEET & INCOME STATEMENTTREND ANALYSIS

COMMON SIZE ANALYSIS

RATIO ANALYSIS

BALANCE SHEET

ANDINCOME STATMENT

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ASKARI COMMERCIAL BANK LIMITED

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28

BALANCE SHEET AS ON DEC.31 2007 2007 2006ASSETS:

Cash and balances with treasury bank 8,762,866 6,678,026

Balances with other banks 4,847,899 2,650,166

Lending to financial institutions 2,324,839 5,770,842

Investments 17,239,157 22,104,425

Advances 69,938,041 44,777,538

Other assets 1,459,716 1,425,986Operating fixed assets 2,595,023 1,979,919

107,167,541 85,386,902

LIABILITIES:

Bills payable 1,227,093 973,703

Borrowing from financial institution 13,781,555 15,903,055

Deposits and other accounts 83,381,795 61,656,607Sub-ordinated loans 1,000,000

Liabilities against assets subject to finance lease 14,159 37,350Other liabilities 1,282,981 962,592

Deferred Tax Liabilities 526,865 806,753

101,151,448 80,340,060

Net Assets 6,016,093 5,046,842

Represented by:

Head office capital accounts 1,255,848 1,141,680

Capital reserve 4,317,301 2,759,599

Un remitted profits

5,573,149 3,901,279

Surplus on revaluation of securities-net of tax 442,944 1,145,563

6,016,093 5,046,842


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ASKARI COMMERCIAL BANK LIMITEDPROFIT AND LOSS ACCOUNT

FOR THE YEAR ENDED 31 ST DECEMBER, 2007

2007 2006

(Rupees in thousand)Mark-up/return / interest earned 4,487,206 4,073,715Mark-up/return / interest expensed 1,117,206 1,379,609

Net mark-up / interest income 3,370,000 2,694,106Provision against non performing loans and advances 277,398 308,528Provision for diminution in the value of investments 38,066 -Bad debts written off directly 7 -

315,471 308,528 Net mark-up / interest income after provisions 3,054,529 2,385,578NON MARK- UP/ INTEREST INCOMEFee, commission and brokerage income 649,988 524,775Dividend income 26,318 37,658Income from dealing foreign currencies 180,992 112,808Other income 776,230 278,512Total non mark-up / interest income 1,633,528 953,753

4,688,057 3,339,331NON MARK-UP / INTEREST INCOMEAdministrative expense 1,845,179 1,436,304Other provisions / write offs - -Other charges 138 1,227Total non mark-up / interest expense 1,845,317 1,437,531

2,842,740 1,901,800Extra ordinary unusual items - -PROFIT BEFORE TAXATION 2,842,740 1,901,800Taxation Current 876,089 873,639

Prior years - -Deferred 43,611 (74,904)

919,700 798,735Profit after Taxation 1,923,040 1,103,065Inappropriate profit brought forward - -Profit available for appropriation 1,923,040 1,103,065APPROPRIATIONS:Transfer to:Statutory reserves 384,608 220,613Capital reserves (reserves for the issue of bonus shares) 251,170 114,168Revenues Reserves 1,036,092 539,948Proposed cash dividend 251,170 228,336

1,923,040 1,103,065Un-appropriated profit carried forward - -Basic earning per share - (Rupees) 15.31 8.78

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TREND ANALYSIS (Horizontal Analysis)

FINANCIAL SUMMARY

Trend Analysis, also called Horizontal Analysis of the financial statements is one

directional- upward or downward analysis and involves the computation of the

percentage relationship that each statement item bears to the same item in the base year

30

2003 2004 2005 2006 2007Profitability (Rs in million)

Total Income 3840 5047 5704 5028 6121Interest income 3213 4251 4858 4074 4487Interest exp 2274 2902 3017 1380 1117Fee, comm.Exch.Income 506 677 299 638 831

Other income 122 119 247 317 802

Spread 939 1349 1841 2694 3370Operating expenses 680 854 1093 1438 1845Operating Profit 886 1291 1595 2210 3158

Non performing assets 134 283 351 308 315Profit b/f tax 752 1008 1244 1902 2843Taxation 436 458 557 799 920Profit after taxation 316 551 687 1103 1923


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The operating expenses of the bank has been increased with sharp margin, the ACBL is

newly born bank of only 21 years old and is growing rapidly so, we can say that the

reason behind the rapid increase of its operating expenses may be the expansion of

business. In order to get handsome profit the expenses are necessary as it is shown by the

fact that if the banks operating expenses have been increased then, there is also an

increase in the profit before income tax and profit after income tax.

SHAREHOLDERS FUNDS

31

2003 2004 2005 2006 2007ShareholdersFunds (Rs in million)

Total share holdersfund 2155 2579 4173 5047 6016

Share capital 986 1036 1087 1142 1256Reserves 1229 1521 1940 2760 4317Surplus on ROA (60) 22 1146 1145 443


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TREND ANALYSIS

The shareholders fund of the bank is continuously increasing, as the bank is running on

profit, therefore, the business take interest in this project and wish to participate in it. The

banks share capital and reserves are also increasing with the expansion of business.

I. LIABILITIES

32

2003 2004 2005 2006 2007ShareholdersFunds %AGE

Total share holdersfund 100 119.6 193.6 234.2 279.2

Share capital 100 105.0 110.2 115.8 127.4Reserves 100 123.7 157.8 224.6 351.2


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TREND ANALYSIS

33

2003 2004 2005 2006 2007Liabilities (Rs. in million)

Customersdeposits 30360 41200 51732 61657 83319

Refinance borrowings 2882 3222 3392 7329 9777

Sub-ordinatedloans - - - - 1000

Other liabilities 3058 3980 11016 11354 7055

2003 2004 2005 2006 2007

Liabilities PERCENTAGE

Customersdeposits 100 135.7 170.4 203.0 274.4

Refinance borrowings 100 111.7 117.7 254.3 340.0

Other liabilities 100 130.1 360.2 371.3 230.7


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New if we analyze the liability side of the bank we see that the banks deposits are going

on increasing since its birth which is a very healthy sign for the bank as the banks basic

business is to deal in money. The increase in deposits show that the people have interest

in the bank and deposit their fund in the bank without any hesitation. However it has not

been mentioned here that how many of the deposit are current and how many of them

have fixed nature but we can say that it is a very important source of the bank to earn

profit. As the banks usually earn through interest or mark ups imposed on the deposits

they keep with themselves.

ASSETS

34

2003 2004 2005 2006 2007Assets (Rs. in million)

Advances 17893 23292 30035 44778 69938

Investments 8651 11706 26737 22104 17239Cash, short funds andstatutory deposits withSBP

10056 13436 10061 15099 15936

Operating fixed assets 641 723 1663 1980 2595

Other assets 1213 1824 1817 1426 1460

Total assets 38454 50980 70313 85387 107168


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Now we will discuss the assets side of the bank. The liquidity position is essentially

important for the bank, as it must have all the time sufficient funds to meet the demands

for the money that may be made on it. It is the protection against the risk that losses may

develop if banks are forced to sell or liquidate creditworthy assets in an adverse market.

The current liquidity position of the bank has improved as indicated by the percentages

shown in the table below.

TREND ANALYSIS

An upward trend in deposits accompanied by a upward trend in advances too, and mark

up revenues means in effective credit policies, efficient credit collection resulting in

healthy financial development.

The property plant and equipment is the kind of asset, which is required by the service

business only to increase its network therefore the ratio of the banks plant and

35

2003 2004 2005 2006 2007Assets (Rs. in million)

Advances 100 130.2 167.8 250.2 390.9

Investments 100 135.3 309.1 255.5 199.3

Cash, short funds andstatutory deposits withSBP

100 133.6 100.0 150.1 158.4

Operating fixed assets 100 112.7 259.4 308.9 404.8

Other assets 100 150.3 149.8 117.5 120.4

Total assets 100 132.5 182.8 222.0 278.7


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equipments as compared with the other important particulars of the assets is high. But

here one thing should be mentioned that it is the policy of the bank not to start the

business on the rented premises. The bank has mostly started business on its own

premises. The other assets of the bank are also showing a good amount that means that

bank is in position to earn money from every available source.

BUSINESS TRANSACTED

TREND ANALYSIS

36

2003 2004 2005 2006 2007

BusinessTransacted (Rs. In billion)

Imports 26.2 32.0 40.2 48.7 75.2

Exports 30.6 38.8 47.3 56.8 70.1Guarantees 4.8 6.2 14.2 14.4 25.3


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Now we will discuss the business transacted opt the bank in terms of import and exports

we see that imports and exports through ACBL are continuously on increase which is a

very health sign for the banking business as the banks earn major portion of their profit

through imports and exports. It shows the efficiency of the credit department. The

reasons for this improvement may be

Careful scrutinizing of all the documents

Intelligent corresponding with the customer

True 7 Cs analysis of the customer such as his business and moral character

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

loan disbursement.

This improvement in imports and exports is extremely large if we compare it with the

figures of 2003.

COMMON SIZE ANALYSIS(VERTICAL ANALYSIS )

37

2003 2004 2005 2006 2007

BusinessTransacted

(PERCENTAGE )

Imports 100 122.1 153.4 185.8 287.0Exports 100 126.8 154.5 185.6 229.1Guarantees 100 129.2 295.8 300.0 527.1


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COMMON SIZE ANALYSIS

An analysis of percentage financial statements where all balance sheet items are divided by total assets and all income statements items are divided by net sales or revenues .

In addition to other financial ratios over time, it is often useful to express balance sheet

items and income statement items as percentages. Common size Analysis, also called

Vertical Analysis, or Component Percentage, or 100 percent Statements as each

statement is reduced to the total of 100 and each individual item is stated as a percentage

of the total of 100.

38

2003 2004 2005 2006 2007Profitability (Vertical Analysis)

Total Income 100 100 100 100 100Interest income 83.6 84.2 85.2 81.0 73.3Interest exp 59.2 57.5 52.9 27.4 18.2Fee, comm.Exch.Income 13.2 13.4 5.24 12.7 13.6

Other income 3.18 3.94 4.33 6.30 13.1Spread 24.4 26.7 32.3 53.6 55.0Operating expenses 17.7 16.9 19.2 28.6 30.1Operating Profit 23.1 25.6 27.9 43.9 51.6

Non performing assets 3.49 5.61 6.15 6.12 5.15Profit b/f tax 19.6 19.9 21.8 37.8 46.4Taxation 11.3 9.07 9.76 15.9 15.0Profit after taxation 8.23 10.9 12.0 21.9 31.4


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INTERPRETATION

The most important component of any profit and loss account of a banking concern is its

mark up expenses it has to pay for servicing the depositors. The foregoing data showsthat the markup expenses absorb about 85% of the revenues (a favorable position). This

shows that the bank has been successful in

Selling larger volumes of higher profit items.

Increasing economy in procurement

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

lost.

The interest expense of the ACBL is 18.2% of the total revenue of the bank in 2007,

which is remarkable as the bank is earning about 85% of the revenue as interest income.

We have handsome margin between the interest income and the interest expense of the

bank. The data shows that the banks other income %age is not as much high rather it is

very low which shows that the bank does not rely on other sources for its profit but it

earns major portion of its income through its basic business.

The bank seems to have increased control over its operating expenses, i.e. non-mark up

expenses as these now absorb only 30% on average of the total revenues, that is a very

healthy sign for the bank. In the net shell, it would not be wrong to say that the bank has

improved its financial position and operating efficiency over the last years.

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The profit after tax is showing about 31.4% of the total revenues of the bank although the

margin of profit is not too much high but it is shown from the data that the bank is going

on increasing its profit after tax over the year.

LIABILITIES AND OWNERS EQUITY(Vertical Analysis)

40

2003 2004 2005 2006 2007(Vertical Analysis)

Total share holdersfund 5.29 4.82 5.69 5.65 5.38

Share capital 2.42 1.93 1.48 1.28 1.12Reserves 3.02 2.84 2.64 3.09 3.86Customers deposits 74.6 76.9 70.5 69.0 74.5Refinance

borrowings 7.08 6.02 4.62 8.21 8.74

Other liabilities 7.52 7.43 15.0 12.7 6.31

Total 100 100 100 100 100


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INTERPRETATION

The liabilities and owners equity are side components of the bank showing the

relationship as compared with the total of the liabilities and owners equity. The banks

shareholders fund is showing percentage more than the share capital, which shows that

the bank own capital is lees than the shareholders capital. However it is also evident from

the data that the %age is decreasing of the overall %age of the share capital over the last

two or three years. But it is also seen that the share capital %age as compared to the total

liabilities of the bank has also been decreased. So we can say that the same conditions are

prevailing regarding the share capital and the shareholders fund.

Among the assets of the bank the highest %age is of the customer deposits. The banksmanagement seems to have adopted a very effective marketing policy, as the deposits of

the bank constitute about 75% of the total assets of the bank. In the last year, this figure

stood at 69% of the total resource. This shows the high level of products and associated

services provided by the bank.

ASSETS (Vertical Analysis)

41

2003 2004 2005 2006 2007Assets (Vertical Analysis)

Advances 46.5 45.7 42.7 52.4 65.2

Investments 22.4 22.9 38.0 25.8 16.1

Cash, short funds andstatutory deposits withSBP

26.1 26.3 14.3 17.6 14.8

Operating fixed assets 1.67 1.42 2.36 2.32 2.42

Other assets 3.15 3.57 2.58 1.67 1.36

Total assets 100 100 100 100 100


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INTERPRETATION

On one hand Advances have also increased from 52% in the previous year to 65% in the

current year which may indicate that the bank utilize the funds raised in the other

activities primarily lending to the financial institutions as it is the most secure source of

financing available in the economy.

Cash, short term funds and statutory deposits with SBP are also increasing. The property

plant and equipment of the bank is showing a little portion of the banks total assets.

In the last the bank is over all showing a good financial health and is going on healthy

tracks in near future it has no risk of bankruptcy. Although the bank is showing goodresults but we cant say that these are the best conditions prevailing in the bank as we are

unaware of the market conditions and cant compare it with other banks.

RATIO ANALYSIS

PROFITABILITY RATIOS

LIQUIDITY RATIOS

ASSET QUALITY RATIOS

PORTFOLIO MANAGEMENT

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CAPITAL ADEQUACY RATIO

CAPITAL GEARING RATIOS

PROFITABILITY RATIOS

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

return on its assets and capital. Good earning performance enables a bank to fund

its operations, remain competitive in the market and increase or decrease in

market funds.

RETURN ON CAPITAL FUND

Formula = Net mark up Received

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Capital Funds

2007 = 3370000 = 60.47%

55731492006 = 2694106 = 69.06%

39012792005 = 1638357 = 54.13%

3026550

56

58

60

62

64

6668

70

2005 2006 2007

year

percentage

INTERPRETATION

This ratio relates the net profits to the amount of capital funds that have been employed

in making that profit.

. While discussing the trend analysis, we mentioned that the mark up charges have

increased in some proportion but the mark up earned by the bank resulting increase in the

profit available on the capital funds employed. This ratio showing a very good financial

position of the bank.

RETURN ON INVESTMENT

Formula = Net income after taxes

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Total Assets

2007 = 3370000 = 1.79%

55731492006 = 1103065 = 1.29%

853869022005 = 686994 = 0.98%

70313073

0

0.5

1

1.5

2

2005 2006 2007

year

percentag

e

INTERPRETATION

This ratio indicates the profit earned by the bank on the resources employed. As far as

ACBL is concerned, we observe an increase in the utilization of the resources. It has

increased to 1.29 % in the year 2006 from 0.98 % in the year 2005, It has increased to

1.79 % in the year 2007 from 1.29 % in the year 2006, the reason behind the slight

increase in the increase of profit may be due to the efforts of the management.

RETURN ON RISK ASSETS

Formula = Net income after taxes

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Total risk assets

2007 = 1923040 = 2.75%

699380412006 = 1103065 = 2.46%

447775382005 = 550051 = 2.36%

23291367

2.1

2.2

2.3

2.4

2.5

2.6

2.7

2.8

2005 2006 2007

year

percentage

INTERPRETATION

This ratio, with some fluctuation in 2006 came up from 2.46% in 2006 to2.75 % in the

year 2007. It is indicating active utilization in the form of advances. The bank is findingit difficult to keep the level of its expenses less in proportion to the advances it has

disbursed. Lending, no doubt is the core function of a banking concern. But the bank

should find out effective ways of credit provisions affecting less on profitability of the

operations. Non-mark up revenues should also be increased in the face of lower credit

disbursements resulting in more.

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RETURN ON DEPOSITS

Formula = Net income before taxes

Total Deposits

2007 = 2842740 = 3.41%

833187952006 = 1901800 = 3.08%

616570002005 = 1244022 = 2.47%

41200466

0

1

2

3

4

2005 2006 2007

year

percentage

INTERPRETATIONInterpret This ratio indicates to what extent deposits which represent funds mobilization

on the part of the bank contribute towards income generation. Although the other ratios

regarding the profitability are showing satisfactory position of the bank but still bank

need to increase its utilization of resources in order to increase its profitability because

the banks have to pay heavy taxes on their profit.

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OPERATING EXPENSES TO NET REVENUE

Formula = Operating Expenses

Net Revenue

(Rs. In million)

2007 = 1845 = 30.1%

61212006 = 1438 = 28.6%

50282005 = 1093 = 19.2%

5704

0

5

10

15

20

25

30

35

2005 2006 2007

year

percentage

INTERPRETATION

This ratio signifies the proportion of the revenues that is used to cover the operating

expenses of the bank. The ratios calculated above gives a good picture of the banks

operations. This ratio is increasing from year 2005 to 2007 and giving a bright picture of

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the profits for the bank. With respect to the banking expansions this ratio is showing a

very good picture as we know the expansions required lot of expansions, although the

operating expenses of the bank are increasing as we have seen in the trend ratio but their

proportion of increase is not alarming.

In short, the bank in an attempt to maintain at a good level of liquidity, has a low level of

profitability but there is a continuous push in the profits and there are chances that the

bank will reach at a point of high liquidity and profitability.

LIQUIDITY RATIOS

The liquidity position of a bank is like a reservoir. It may be adequate, although nearly

depleted, just before the start of the rainy season. Or it may be inadequate, although three

quarters full just before the summer drought.

Liquidity can be defined as:

The banks ability not only to meet possible deposit withdrawals but also to provide for the legitimate needs of the economy as well

ADVANCES TO DEPOSITS RATIO

Formula = Advances

Total Deposits

2007 = 69938041 = 83.9%

833187952006 = 44778000 = 58.6%

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616570002005 = 30035484 = 72.62%

51731506

0

20

40

60

80

100

2005 2006 2007

year

percentage

INTERPRETATION

It demonstrate the degree to which bank has already used up its available resources to

accommodate the credit needs of its customers.

This ratio, a comparison of funds generation and its funds mobilization, indicates the

total loans sanctioned by the bank in relation to total amount of money deposited with the

bank stands at 83.9% compared with the last year figure of 58.6%. This shows that the

bank has greater potential to advance additional loans. Total loan able funds roughly

measured by the deposits are sufficient to enable the bank to make additional loans

without recourse to more or less continuous borrowing. At present, the bank has got a

relatively small amount of advances as compared with its deposits raised. One reason for

fewer advances is the cautious and selective approach on the part of the management

while deciding upon credit proposals.

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DUE FROM BANKS TO TOTAL ASSETS

Formula = Due from banks

Total Assets

2007 = 2324839 = 2.17%107167541

2006 = 5770842 = 6.75%

853869022005 = 3414470 = 4.86%

70313073

0

12

3

4

5

6

7

8

2005 2006 2007

year

percentag

e

INTERPRETATION

51


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It is an indication of ACBLs funds management policies. The funds allocation to the

financial institutions has increased to a great extent despite the fact that still it holds a

small proportion relevant to the total resources raised by the bank. It is a positive

indicator in the sense that the financing to the banks are the most secure ways of lending.

Considering the economic conditions of the country, it seems to be the best alternative

available to the bank. In the current year this ratio has been reduced to the little extent.

Although it is declining but the situation might not be alarming.

DUE FROM BANKS TO DUE TO BANKS

Formula = Due from banks

Due to Banks

2007 = 2324839 = 16.87%

137815552006 = 5770842 = 36.29%

159030552005 = 3414470 = 29.79%

11460394

0

5

10

15

20

25

30

35

40

2005 2006 2007

year

percentage

52


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INTERPRETATION

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

to it. An unfavorable condition has been observed in this ratio in the current year

showing the fact that the bank has to seek fewer funds from the financial institutions

owing to the strong liquid financial position. This ratio is going on increasing in last year

but decreasing in current year, which involves a slight risk. In the phase of economic

instability, the banks management should be efficient to access the risk involved in

lending and they should control this ratio.

DUE TO BANKS TO TOTAL DEPOSITS

Formula = Due to banks

Total deposits

2007 = 13781555 = 16.54%83318795

2006 = 15903055 = 25.79%

616566072005 = 11460394 = 22.15%

51732003

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0

5

10

15

20

25

30

2005 2006 2007

year

percentage

INTERPRETATION

This ratio is an indicative of the proportion of the lending from the financial institutions

in relation to the total funds raised by the bank in the form of deposits.

This ratio for ACBL is 16.54% in the year 2007. There has been a significant decline in

this ratio as previously the bank depended slightly more on the borrowings from financial

institutions. It shows that the bank is concentrating on raising funds from depositors and

trying to relies less on the borrowed funds.

It is a favorable indication in the sense that the bank has large potential to ask for

borrowed funds in the phase of tight liquidity position.

Further more, it shows the efficiency of the marketing department to have created

so much of deposits that the bank does not need to look at the financial

institutions for help in improving its liquid position.

There is another favorable aspect of this declining tendency. The rate of interest

offered to the depositors is very low in comparison with the interest to be paid to

the financial institutions for their funds. A decline in this ratio means less mark up

burden on the bank resulting in less financial risk for the bank.

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COVERAGE RATIO

Coverage ratio measures the capacity of the bank to cover its interest charges, which are

the main obligations on the bank.

INTEREST COVERAGE RATIO

Formula = Earning before int. & Tax

Interest Exp.

2007 = 4688057 = 2.54 times

18453172006 = 3339331 = 2.32 times

14375312005 = 2336537 = 2.13 times

1092515

INTERPRETATION

It shows whether the bank is earning enough profit before mark up charges to be paid to

the financiers and the taxation obligations due to the government in order to remain

solvent.

The above figure shows the acceptable capacity on the part of the bank to cover its

interest payments. It has increased as compared with the last year. This increase in the

ratio is a sign of improvement for the bank. But this is a short-term perspective of the

banks financial position. In view of the long run financial perspective, this ratio is goodfor the bank.

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CAPITAL ADEQUACY RATIOS

CAPITAL FUNDS TO TOTAL ASSETS RATIO

Formula = Capital Funds

Total Assets

2007 = 5573149 = 5.20%

1071675412006 = 3901279 = 4.57%

85386902

2005 = 3026550 = 4.30%70313073

0

1

2

3

4

5

6

2005 2006 2007

year

percentage

INTERPRETATION

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

low margin.

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Capital Fund to Risk Assets Ratio

Formula = Capital Fund

Risk Assets

2007 = 5573149 = 7.97%

699380412006 = 3901279 = 8.71%

447775382005 = 3026550 = 10.07%

30035484

0

2

4

6

8

10

12

2005 2006 2007

year

percentage

INTERPRETATION

This ratio take into account the difference between cash and marketable securities &

other kind of assets. Cash & marketable securities, which are risk less items, are excludedto find out the true picture of the capital adequacy. In case of ACBL the ratio is

decreasing.

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5. PERSONAL EXPERIENCE

Good Judgement comes from experience. Experience comes from bad judgement

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One of the most important aims of the student life is to express himself / herself correctly

and adequately. This was the belief in my mind when I first decided to go to Askari

Commercial Bank to complete my internship program.

Determined, Confident and Persistent in the pursuit of knowledge and learning, I was on

my way to Askari Commercial Bank , Saddar Branch in the early morning of July 18,

2005.

I stepped up the branch with the passion for learning and full commitment. The first thing

that impressed me was the layout of the branch. . Apart from me, a no. of other interns

have also joined the bank for internship. Being a student of Finance, Financial

Institutions are the interest of any finance student. Bank is also one of them. The rapid

expansion of Banking network across the Pakistan is getting attention of the most of

young and fresh graduates who want to enter in the Banking Sector. My experience in the

bank was a unique. I came across to know different aspects of the banking business and

how it is being run. Pakistani banks have done remarkably good progress for a last few

years. The reason behind this was the good credit facilities given to the customers,

progress of Private Sector Banks, flexible policies of the State Bank of Pakistan. Internal

environment of the Bank has quite different as it looks, where every one has to be alert,

agile and ready to face all the challenges. Sometimes for me it seems to me a useless

work just doing nothing and showing you are the busiest person. This is strategy beingimplemented by most of employees in most of the organizations just to pass the time or

wasting time. Another thing which came to in my experience was that staff if cooperative

to only customers not to each other. That is the big thing which I observed because it

affects on their performance appraisals, which form the basis of promotions.

The first week I spent on the Accounts Opening Department, where I came across to

know different aspects of customer dealing and satisfying their queries.

The Next two weeks I spent in the clearing department to closely observe how the

clearing is done for inward and outward, and also the role of NIFT (National Institution

of Facilitation Technologies), how IBCA (Interbank credit Advice) are made a processed

and I must say in the middle of my internship, clearing department helped me lot in

learning new things.

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The fourth week I spent in the Remittance Department for me here to learn there were

not ample opportunities because of limited operations in Remittance here in ACBL.

Although I got awareness about the computerized system UNI Bank, they are using.

The last two weeks I spent in the Accounts department, perhaps this is the most

challenging department in term of work in ACBL Saddar Branch. Here the moments of

relaxation are very less and all the time you have to do the work. The major task included

checking all the vouchers of previous day sort them and arrange them in proper heads

and file them along with the Computer generated reports. Here the basic thing which I

learnt is the chart of accounts ACBL is using for different expenses and revenue

accounts, etc.

On the whole it was good experience for me that it helped me to think other aspects that

how can I avail other opportunities as after doing the Bank internship for getting job the

banking sector would be the my last choice.

6. FINDINGS

The ACBL Saddar branch is a new branch with just five months of existence and

it has to do a lot to take attention of people and shop keepers in Saddar Branch.

Because Banks like Habib Bank and Muslim Commercial bank has been serving

for a long time. The ACBL has to set new standards in this regard just to sustain

and maintain its image.

The bank has little space and small staff so it has to follow certain strategies,

among one of them is that it is not entertaining the Salary Accounts because for

the branch like Saddar it is a burden and handle such accounts because the

amount stays in account for only two or three days.

Credit Department is not currently present and it is a difficult task for the branchto have because of small space built in future if it will be in pipeline it will be a

big opportunity for the bank to have because Saddar is a market where the clients

for credit are present.

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Although branch is not dealing in credit cards, there is at least drop box for credit

card payments just to facilitate the customers.

The Selection of staff for a new branch is not properly done because for a new

branch to commence you need energetic, well trained people to handle daily

affairs.

7. RECOMMENDATIONS

The ATM machine should be installed as soon as possible because the no of card

holders is continuously increasing and it will save customers extra charges for

utilizing others ATMs.

In order to earn more revenue ACBL has to attract corporate customers from the

Saddar Market.

Currently ZTBL has been doing term financing in ACBL and it has to attract

more corporations for term financing in order to earn more revenue.

The ISI which is situated very near to branch should be a major target for the

branch, although the staff here is giving consideration to it, but the branchauthorities has not a master plan to attract all the major account holders because

bank is present to facilitate armed forces and its associated offices.

Salary Package of the employees should be revised and it should be such enough

that it will satisfy employees and boost their motivation level and commitment to

the work.

Retail banking division in the branch currently not showing good performance it

has to make certain efforts to promote its operation and increase its business.

The Staff should be trained enough to meet the current standards of the customer

dealing and satisfaction as implemented by other banks like Bank Alfalah.

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References:

Annual Report of Askari Commercial Bank Limited

Financial Review of Banking Sector by State Bank of Pakistan

Askari Commercial Bank Website

Standard Operating Procedures of Askari Commercial Bank

Help of Bank Staff of Askari Commercial Bank AWT Plaza Saddar.

third askari 3

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