Internship Report: BANK ALFALAH LIMITED Submitted By: Muhammad Ali Haider Roll # 01-211071-048 Section: “D” Evening BBA (Hons) 1 The evolution of Bank Alfalah signifies a movement from concept to reality; a reality to bring about a change in the banking industries of Pakistan; offering an alternative way of banking; providing people an opportunity to practice beliefs in their financial matters. Following privatization, Bank Alfalah emerged as new identity of Habib Credit and Exchange Bank with a revived purpose and commitment. Charged with the strength of Abu Dhabi consortium and under the leadership of His Highness Sheikh Nahayan Mabarak Al-Nayayan, the bank has already made significant contributions in building and strengthening both corporate and retail banking sector in Pakistan. At present the bank has expanded its operations across Pakistan in 74 cities with 189 operational branches. However, it has total 195 branches that include 23 Islamic Banking branches, five overseas branches three in Bangladesh and two in Afghanistan and one offshore banking unit in Bahrain. It is pertinent to note that all of its branches commenced their operations in “Real Time Online Mode”. Today Bank Alfalah is the fifth largest Banking operation in Pakistan. Since its inception, it has registered the fastest growth rate ever witnessed by any Banking operation in Pakistan. Bank Alfalah continues to grow in a robust manner amidst considerable volatility in the banking industry. The bank is striving to prosper in terns of financial returns and the value it continues to provide its shareholders especially when tighter spreads are exercised and margin are compressed due to high interest rates as a tool to curb inflationary pressures. The profit before provisions and taxation of your bank for the year 2008 stood at Rs. 3.264 billion which was 10% higher than that of last year. The deposit 2 grew by 7.7% and stood at a figure of Rs. 239.509 billion while advance portfolio grew by 26% and showed a figure of Rs. 149.999 billion. . The most valuable asset of any financial institution is its human resource. Bank Alfalah has at present a dedicated and commendable workforce of around 6,543 staff members other than outsourced. The training and development centre remains at the helm of imparting training and related skills, not to only fresh recruits but also to existing employees. Bank Alfalah has in place the state-of-the-art Training and Development Center both in Lahore and Karachi for equipping the personnel of Bank Alfalah with tools that help carve a brighter future. Its philosophy in this regard is that training is indispensable in not only enhancing organizational effectiveness but also individual job satisfaction. Bank Alfalah has lined up a number of innovative products. These include Alfalah credit cards, Alfalah Hilal cards, Bank Alfalah Car finance and Leasing, Alfalah Milkiat finance, Alfalah Karobar finance, Bank Alfalah Home finance, Alfalah Zarie sahulat, Money gram, Alfalah Phone banking and online baking. Designing the product portfolio of bank in response to the customer’s preferences, the product like Royal Profit, Alfalah kifayat scheme, are prime examples of quality and innovation providing timely banking opportunities to the customers of bank. Being an active player in banking sector in Pakistan, they are confident that with the commitment of their team they will be able to gain the reputation of the fastest paced financial institution. To make their banking solutions become accessible to more and more people, they have embarked upon a rapid expansion program, aiming to provide a networking that makes the services available to any of their customers in all the major urban centers of Pakistan- with a view to go international in the near future. 3 With their key indicators of progress already soaring to new heights, the bank is committed to dedicate all its energies, resources and time to bring higher value and satisfaction to their customers, employees and shareholders. The graph of bank is going up and up every year. The ratio of profit is increasing at good percentage. The bank is serving the people at high level of standard by going according to the whishes of the customers. 4 Internship is the basic requirement of all business programs in nearly all of the business institutes and especially in Bahria University. It is actually the basic requirement of the course of BBA (Honors). 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 (F-8 Markaz Branch Islamabad) since 16th of July 2009 to 15th of September. 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. 5 All praises, thanks and acknowledgements are for CREATOR; the ALMIGHTY ALLAH Who has bestowed upon human being the crown of creation and has endowed him with knowledge and wisdom. I offer thanks to the Holy PROPHET (PBUH) WHO is the beacon of enlightment and the greatest benefactor the mankind ever had. Who brought for us revelation and unlimited knowledge and civilized the barbarian human being. I would like to present a token of thanks for the staff members of Bank Alfalah Limited Garden Town Branch, Lahore, who were cooperative to me in the completion of this report and provide me their complete guidance. As banks are very much sensitive about their secrecy, even then after taking an understanding, they let me handle their delicate operations. My special thanks to Mr. Irfan Butt (branch manager), Mr. Nadir (operations manager), Miss ammara (accounts department), Mr. Abid shah (loan department), Miss. Nida (account opening) who gave me a horde of useful information and treated me extraordinarily at each step of my learning over there. 6 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. 7 Table of Contents Introduction to Bank Alfalah Ltd……………………………………...…….……9 History & Present Status of BAL……………….…………………..…………….11 Mission Statement……………………………………………………………..…..16 Vision Statement…………………………….……………………………………..17 Company Management Systems………………………………………………….20 Organization’s Structure……………………………………………………...…..23 Fields and Activities…………………………………………………………….....25 Administrative/Management Styles……………………………………………...36 Work Done by Me……………………………………………………………...….41 Financial Highlights……………………………………………………………...101 Ratio Analysis………………………………………………………………….....103 Marketing Mix of BAL…………………………………………………………..148 Recommendations…………………………………………………………….….181 Conclusions……………………………………………………………………….183 8 INTRODUCTION TO BANK ALFALAH Bank Alfalah Limited was incorporated 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 the in Islamic Banking banking, Companies commercial banking and related services as defined in Ordinance, 1962. The Bank is currently operating through 195 branches in 74 cities, with the registered office at B.A.Building, I.I.Chundrigar, Karachi. Management of Bank Alfalah accepted the challenge to transform this bank into a highly professional, most efficient & service oriented institution. The management has been successful in fulfilling the undertaken challenge. It has been successful in making a significant contribution to both corporate and retail banking in Pakistan. Over the years, its emphasis on growth has resulted in a strong entity capable of offering high quality services to a wide spectrum of clients, in a highly challenging business environment. Its strategy is to maximize the synergies of branch network through an optimal allocation of financial resources in the face of dynamic challenges of present financial environment. Strengthened with the banking of the Abu Dhabi Group and driven by the strategic goals set out by its board of management, the Bank has invested in revolutionary technology to have an extensive range of products and services. This facilitates their commitment to a culture of innovation and seeks out synergies with clients and service providers to ensure uninterrupted services to its customers. The bank perceives the requirements of its customers and matches them with quality products and service solutions. During the past ten years, we have emerged as one 9 of the foremost financial institution in the region endeavoring to meet the needs of tomorrow today. Bank Alfalah Limited has continued its upward climb in pursuit of excellence. Strengthened by the backing of the Abu Dhabi Group and driven by strategic goals set out by its Board and management, Bank Alfalah Limited increasingly inspires trust and confidence of all its clients. Within a short span of time the bank has carved a significant niche for itself in the banking industry. These achievements have been preceded by concerted effort to provide highest levels of service and value to our customers. The bank aims to further enhance performance standards through implementation of innovations in both products as well as customer care, by discovering newer avenues of client benefit. This customer-focused strategy has enabled Bank Alfalah Limited to evolve as a single source financial service provider of corporate and retail banking services. Bank Alfalah reputation has been built on its tradition of high quality and the expertise of its extremely motivated and qualified staff. With strategic mergers and acquisition, Bank Alfalah has become a leading player in the global banking arena. The Bank Alfalah Limited team comprises of dedicated professionals equipped with a diverse array of skills, vast experience and pro customer attitudes. The management concentrates its energies on making informed economic decisions, translating it into greater returns for our investors and customers. This prudent attitude has created a synergistic organizational structure leading to improvements in profitability and a sustainable competitive advantage for the bank. A Highly Responsive Product Portfolio is not only comprehensive but also customizable to match the needs and preferences of the customers. These characteristics of the portfolio have helped Bank Alfalah Limited to face challenging economic conditions. The product lineup continues to fulfill and satisfy the banking requirements 10 of not just the conventional consumer, but the demanding financial needs of the corporate sector as well. Today, as Pakistan moves into the 21st century with its ambitious expansion and development programs, Bank Alfalah is here to join the efforts to help the country meet its growth objectives. The bank offers an extensive range of financial services specifically designed to cater to the needs of its successful associations with the Government and Private Sector. HISTORY AND PRESENT STATUS OF BANK ALFALAH 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. In 1991, the BCCI was banned, when 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. Then, its 3 Pakistani branches were taken over by the Government of Pakistan, which were named as Habib Credit and Exchange Bank (HCEB) and these were working as subsidiary of Habib Bank Limited. Following the privatization in July 1997, Habib credit and Exchange Bank assumed the new identity of Bank Alfalah on February 25, 1998. It is now Abu Dhabi based bank as the family of H. E. Sheikh Hamdan Bin Mabarak Al-Nahayan purchased 70% of its shares and 30% shares remained with Habib Bank on behalf of Government of Pakistan. Since its inception, as the new identity of H.C.E.B after the privatization in 1997, the management of the bank has implemented strategies and policies to carve a distinct position for the bank in the market place. Since 1997, the bank has made great strides towards growth and profitability. BAL network has expanded from 3 in 1997 to 195 as on March 2009. The deposit base 11 moved from less than Rs.9 billion to over Rs. 227 billion, advance from 5.8 billion to 109 billion. Being a bank that is focused on financing of foreign trade, volume of foreign trade business has grown from Rs. 5.8 billion to over Rs. 190 billion as on December 2008. Charged with the strength of Abu Dhabi consortium, and under the leadership of His Highness Sheikh Nahayan Mabarak Al-Nahayan, Minister of Higher Education and Scientific Research, Government of Abu Dhabi, and a prominent member of Royal Family, the bank is energized with the vision, envisaging the development of various sectors in Pakistan. Commercial Banking Scenario in Pakistan The function of commercial banking and application of the fundamental principle of the depositor bank relationship have remind essentially the same since about 500 B.C. bank operation methods and procedures, on the other hand , have undergone a constant process of evaluation because of economic growth, the mounting volume of transaction and greater use of banking feasibilities. At the time of independence there were practically no industries and resources so it was very difficult of Pakistan to run its own banking system immediately. There were 487 offices of scheduled banks in the territories now constituting Pakistan. Therefore in accordance with the provision of India independence Act of 1947, and expert committee was appointed to study the issue. The committee recommended that the “Reserve bank of India” should continue to function in Pakistan until 30th September 1948. It was also stipulated that Pakistan would take over the management of public debt and exchange control “Reserve bank of India” on 1st April 1948. Then Indian notes would continue to be legal ender in Pakistan till 30th September1948. By 30th June 1948, the number of offices of scheduled banks in Pakistan decline from 487 to 195. In order to 12 establish a full-fledged control bank the Governor General of Pakistan Quaid-E-Azam Muhammad Ali Jinnah, inaugurated the state bank of Pakistan on July1st, 1948. At the time of independence in 1947, there were 38 scheduled banks with 195 offices in “Pakistan” but by December 31, 1973, there were 14 scheduled Pakistani commercial banks with 3,233 offices all over Pakistan & 74 offices in foreign countries. Nationalization of Banks was not done 1st January 1974 under the Nationalization act 1974, due to certain objectives. But it had negative effects on efficiency of the banking sector afterwards a privatization Commission was set up on January 22, 1991, the commission transferred many banks to the private sector i.e., MCB & ABL. The government approved & permitted the establishment of 10 new private banks in 1991; hence many new private banks have incorporated, since then, BANK ALFALAH in one of the namely established private scheduled banks in Pakistan. The fact show that the commercial banking has made tremendous progress and achieve a phenomenal growth since independent and that commercial bank have duly played a vital role as mobilize of people saving to constitute the most important source of financing in country economy. As the result of these contributing factors methods and practices necessary to handle the increase volume of detail work have been developed while an other and quicker method have been adopted in order to cope with the increase volume , much in which has been accomplished without unduly increasing cost of doing business. During to last 20 years we have experience a constant transaction from the old to the new from manual to mechanical method and procedure, from old establish practices to current techniques and to a more scientific approach to the solution of the problems brought about day to day changes in business practices. 13 Commercial banks operating in the country can be divided into four distinct categories, private banks, foreign banks, privatized banks and nationalized commercial banks (NCB’s). The number of private banks has remained almost constant ever since they commenced operations in early nineties. However, ownership of a number of private banks has changed over the years. Lately, with the take over of Prudential Bank and Platinum Bank by the new sponsors their names were changed to Saudi Pak Commercial Bank and KASB Bank respectively. Earlier, ownership of Union Bank and Schon Commercial Bank changed. While the new sponsors of Union Bank preferred to continue with the same name, the buyers of Schon Commercial Bank changed its name to PICIC Commercial Bank. Union Bank acquired the operation of Emirates Bank International (EBI) in Pakistan. The scheme of amalgamation was notified by the central bank on September 03, 2002 and Union Bank settled the amalgamation price of US$ 37 million on September 09, 2002. Union Bank had acquired Pakistan operations of Bank of America in year 2000 and American Express credit card business in Pakistan in year 2001. In the NCBs category two banks — Habib Bank and National Bank of Pakistan — have been left after the privatization of United Bank. National Bank of Pakistan has been listed at local stock exchanges and parts of its shares were off loaded. The GOP is actively pursuing the privatization of Habib Bank, through sale of its 26% shares along with transfer of management. The remaining shares of the GOP in Muslim Commercial Bank and Bank Alfalah were also sold. The GOP sold majority shares of Allied Bank of Pakistan in early nineties but has not been able to off load its remaining shares in the bank. United Bank's privatization demands specific mention for two reasons: 1) 2) It was the largest transaction, and A large part of sale proceeds was received in foreign exchange. The consortium comprising of Abu Dhabi Group and Bestway Group has acquired 51% shares of the bank along with management control. Since October 2002 the bank has been working under the new sponsors. 14 Meezan Bank was created as a result of merger of Al-Meezan Investment Bank and Societe Generale. The first ever license to operate as a Scheduled Islamic Commercial Bank was granted to Meezan Bank on January 31, 2002. Pakistan operations of Societe Generale were amalgamated into Meezan Bank on May 01, 2002. The number of foreign banks operating in Pakistan has been declining constantly since the GOP decided to freeze foreign currency accounts in May 1998. The total number of foreign banks in the country has reduced to half since the freezing of foreign currency accounts. The positive point is that most of the foreign banks were able to sell their Pakistan operations at attractive prices. 15 To develop & deliver customer the most innovative deliver products, manage experience, quality services that contributes to brand strength, establishes a competitive advantage and enhances profitability, thus providing value to the stakeholders of the bank“ 16 “To be the premier organizations operating locally and internationally that provides the complete range of financial Services to all segments under one roof.” 17 OBJECTIVES OF BANK ALFALAH The objectives of Bank Alfalah are as follows: • To please their customers by fulfilling the financial needs as best as possible, they believe in placing the client at the center of business and all of the products and services. For this the management has adopted the strategy of • • • • “Caring for you… Our Customers” To get maximum share of the market To price the products optimally To expand more the network of branches in several other cities of Pakistan as well as in the other countries of the world. • • To reinforce a corporate culture that fosters learning, creativity and flexibility. To invest further in banking innovations which include Islamic banking, SME, Home Loans and other areas of product development to provide higher levels of services and value to the clients. 18 Message From, H. E. Sheikh Hamdan Bin Mabarak Al-Nahayan Chairman & Board of Director Dear Colleagues Bank Alfalah was launched on 25th February 1997 and with that we launched for ourselves, the challenge to transform this bank into a highly professional, and most efficient and service oriented institution. The-state-of the-art technology we plan to put in place will be complemented and supported by the personal touch which we are committed to add all spheres of our customer related services. Therefore necessity of improving the quality of our human resource will remain on top of our priorities for all times to come. We hope, you all will make the best use of this web site, which will provide a medium for you to express your views on, different banking related subjects. My greetings and best wishes to you all. H. E. Sheikh Hamdan Bin Mabarak Al-Nahayan 19 COMPANY MANAGEMENT SYSTEM Management means the administration and the governing body that is concerning the whole organization. All the decision and strategies are been proposed and evaluated the management of the organization. At Bank Alfalah, the management is pretty strong and there is lot centralization in the whole network of the bank. The management at Bank Alfalah has been divided into 3 major parts. i-e, Board of Directors, the Top management, and the group of middle managers, supervisors and the employees. The Board of Directors: The upper most part of the management is the Board of Directors or the Executives. The Board of Directors are responsible for the first phase of the management process, i-e, planning. So, all the decisions and the strategies are being proposed and implemented under the instructions and the supervision of the board of directors or the executives. Also the policies and the overall objectives of the Bank are being proposed at this level of the organization. The Top Management: The top management involves the branch managers and the chief managers of the bank including the operations managers as well. The major responsibilities include the strategy formulating for the bank and supervising the whole staff at the branch. They define and interpret the objectives and vision and then formulate policies for their completion. 20 The middle management, supervisors and the employees: Departmental heads constitute this level of management at Bank Alfalah. They are directly responsible for planning and controlling the activities of officers. Finally, the employees whose activities are monitored and controlled according to the desired objectives. THE OVERALL MANAGEMENT BOARD OF DIRECTORS H. E. Sheikh Hamdan Bin Mabarak Al-Nahayan Mr. Mohammad Saleem Akhtar Mr. Abdullah Khalil Al-Mutawa Mr. Omar Z. Al-Askari Mr. Abdullah Naseer Hawaileel Al-Mansoori Mr. Nadeem Iqbal Sheikh Mr. Ikram Ul-Majeed Sehgal - Chairman - Chief Executive Officer - Director - Director - Director - Director - Director THE CORE GROUP Board Advisory Committee Mr. Abdullah Khalil Al Mutawa Mr. Khalid Mana Saeed Al Otaiba Mr. Ganpat Singhvi Mr. Bashir A. Tahir 21 Central Management Committee Mr. Mohammad Saleem Akhtar Mr. Pervaiz A. Shahid Mr. Sirrajuddin Aziz Mr. Mohammad Yousaf Mr. Ijaz Farooq Mr. Bakhtiar Khawaja Mr. Arfa Waheed Maklik Mr. Adil Rasheed Mr. Shakeel Sadiq Mr. Adnan Anwar Khan Mr. Shahid M. Murtaza Mr. Nadeemul Haq (Chairman) Corporate Information Mr. Hamid Ashraf Mr. Zahid Ali H. Jamal Taseer Hadi Khalid & Co. (Chartered Accountants) B A Building, I. I. Chundrigar Road, P. O. Box 6773, Karachi. www.bankalfalah.com - Company Secretary - Chief Financial Officer - Auditors - Head Office 22 Chief Executive Officer Executive In charge Credit Card Credit Audit Internation al Banking Marketing Finance 23 Branch Setup Assistant Credit Marketing Credit Admin Operations Mng.Ops Consumer Finance Agri Finance Help Desk CD Accounts Consumer Banking IT Accounts CRO’S Bkg/Ops/ Cash Cust serv Clearing/ Collection 24 Peons Guards Driver Others FIELDS AND ACTIVITIES A support functions Group, mainly responsible for development of systems and procedures, process-re-engineering, automaton and credit management. The Group is organized in three divisions i.e. Systems and Operations Division, Human Resource Division and the Credit Division. CREDIT DIVISION Providing extensive support to branches for credit administration, control and monitoring, the Division has played a pivotal role in helping the Bank achieve a remarkable loan growth of with well-diversified risk exposure. Most of the loans are for short-term trade financing on a secure and self-liquidating basis. The Division has a special Assets Management team, which is responsible for ensuring low ratio of bad debts, effective monitoring of delinquent advances and close follow-up for recoveries. Bank’s Head Office Credit Committee (H.O.C.C) reviews the credit quality and pricing on regular basis not only to ensure healthy credit growth but also the management of Bank’s risk assets in a most prudent and profitable manner. SYSTEMS and OPERATIONS DIVISION This Division has been instrumental in developments of procedures and manuals for various operating requirements of the Bank. After careful mapping of existing process flow, the Division recommends automation and re-engineering requirements to improve transaction efficiencies. The Division is active in providing equipment procurement support and development of new branches. This Division, as a direct function also manages the protection of fixed assets of Bank. Technological innovation: 25 “Modern science is not an option, it is an obligation” Technology is rapidly changing the way we think, act and do business. Is has played pivotal role in enhancing customer expectation, particularly with respect to speed and quality of service. Alfalah bank enjoys a strategic competitive advantage overall domestic players by virtue of its leadership in technological innovation. Phone banking service and Internet banking facility allows customer to enjoy routine banking services from anywhere in the world. 365 days a year, 24 hours a day. CREDIT CARD DIVISION The Bank’s product portfolio is designed to remain flexible and adapt itself to changing customer needs. Bank endeavor in this regard is to actively explore newer avenues of offering higher value to our clients, whom bank feel deserve nothing less. The Bank Alfalah Credit Card success story has made the institution proud. In acquiring business, we have signed over 15,959 merchants by 31 st December 2008 posting a growth of 16.2% in the corresponding period over last year. Bank Alfalah has launched various unique credit card schemes to cater to numerous segments. HUMAN RESOURCE DIVISION Strategically, perhaps the most important Division at the Head Office is responsible for human resource management, including recruitment, staff training and evaluation. This division is also handles matters relating top administration. This Division operates on a future oriented strategy focusing on employee’s personal and professional growth. Staff development activities are reared to enhance their capabilities for applying the knowledge and fats towards development of practical solutions. Under our Human Resource management policy, Alfalah develops and grooms the management personnel for position of greater responsibility analytical, interpersonal, and conceptual and specialization skills to enable them to understand the cause-and-effect relationships and to think logically. The hiring philosophy is based upon meritocracy and selecting the right person for the right job. Alfalah laid great emphasis on the employee honesty and integrity besides technical competence and, candidates are selected through well defined & systematic selection procedure. 26 Dedicated Professionals: “Unusual efforts on the part of the employees who are apparently ordinary workers is one of the key indicates of the superior enterprise” Staff is the most valuable asset of any organization. The human resource philosophy at Alfalah bank focus on multi-talent hiring, professional grooming, requisite training and meritocracy based reward system. Staff welfare has been a priority. Employee productivity enhancement is organized through in-house and external training programs. Bank continues to offer opportunity for people to develop their knowledge, skills and personalities, thus ensuring greater self-fulfillment and progression in the organization. In short bank Alfalah team comprise of dedicated professionals equipped with a diverse array of skills and vast experience. The management concentrates its energies on making informed economic decisions, translating it into greater returns for our investors and customer. The prudent attitude has created a synergistic organizational structure leading to improvements in profitability and a sustainable competitive advantage for the bank. Training & Development: Bank Alfalah is committed to the personal welfare and professional development of all our team members. Proper training of human resource is essential, not only for the more productive and satisfied work force but for also homogenous corporate culture. The bank continuous to follow its strategy of hiring batches of young and energetic Management Trainees who are sent to our Training and Development Center for training in all areas of banking. Our Training and Development Center is a state of the art facility with an impressive faculty. 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 set of well-defined values, governing our decision. Alfalah bank understands that 27 its commitment to satisfy customer needs must be fulfilled within in a professional and ethical framework. FINANCE DIVISION Finance Division is responsible for bookkeeping and accounts. This Division is the head office and manages all financial returns and the MIS through its Management Reporting Wing. The Division is actively involved in preparing market comparative analysis, consolidation of Bank’s budgets, monitoring and constant review of various financial indicators. Financial Division works as the backbone for Bank’s operations. The Division, which reports directly to the President And Chief Executive of the Bank’s, has been instrumental in preparation of Bank’s business plans and future stratigies.the budgetary performances are constantly reviewed and trough a sophisticated “Monthly Performance Report” (MPR) which is a computer based program, the Division provides feedback to the senior management on strategic issues like reasons for budgetary variances and methods to arrest negative performance factors. Preparing the Bank’s Annual Accounts and coordinating external audits is a direct function of the Finance Division. Through the dedicated efforts of staff at this division, the Bank has been winning various awards for the Best Presentation of its Annual Accounts and also the management has been able to monitor and review the Bank’s performance in procreative manner. AUDIT DIVISION The Audit Division reports directly to the Board through the Executive Committeewhich are also the Audit Committee. The Audit Division acts completely independent of the management and is responsible for checking and reporting on the Management’s compliance with the Board’s policies and directives, as also the Prudential Regulations and other directives of the SBP. However, their role is not intended to be just that of fault- finding; but also guiding and assisting branches in improving their operations. POLICY FORMULATION AND PROCESS MEETINGS 28 At Bank Alfalah, policies as mentioned earlier, are been formulated at the Executive level of the organization. Policies for any organization constitute a major part in the overall long term functioning of the bank. In short we can say that policies and the objectives are the lifeblood of the organization in long run. Though policy formulation is in the prescribed hands yet the policies formulated by the top level have been very successful as indicated by the success pattern of the bank so far. Then these policies are transformed into the hands of the top-level management. The top management is been suggested to make the policies implemented keeping in view the long-term objectives of the organization. Also the views from the middle managers and employees are encouraged as well for the purpose of removing flaws form the system. For these very purpose meetings arte held almost weekly at the branches level and also in case of any contingent dispute resolving the meeting scan be called at any time during the branch timings. POLICIES OVERVIEW AT BANK Since the inception of Bank Alfalah Limited in 1997, by the grace of almighty, the bank has moved rapidly in expanding its branch network and deposit base, along with making profitable advances and increasing its range of products and services. It has made a breakthrough in providing premier services at an affordable cost to our customers. Managerial policies followed by the bank have a direct contribution in its success. The Board and Management of the Bank have implemented strategies and policies to carve a distinct position for the Bank in the market place. In a bid to satisfy Bank Alfalah’s shareholders and valued clients, the management initiated the process of realization of the Bank's vision by consolidating its financial position and creating a large and diversified business base. Bank Alfalah has made notable progress in business volume, efficiency, and profitability following its increased involvement in trade finance, commercial lending, and foreign exchange and money market operation. Major policies hat have been made and implemented at Bank Alfalah are: Consumer Banking Policy 29 Alfalah’s policy regarding consumer-banking policies includes the development through the electronic consumer banking operations. Likewise, Bank Alfalah has created a niche for itself in the marketplace. It is planning to introduce new consumer products like credit cards, e-banking etc. Lending Policy Bank Alfalah pursues a conservative yet dynamic credit policy. This strategy has enabled the bank to have a high quality risk portfolio. Bank prefers to finance exporters because of less risk involved. Bank Alfalah manages the credit risk, liquidity risk, market risk and other operational risks very efficiently. For this very purpose Bank Alfalah has got an effective credit line proposals system to be sanctioned to the clients on demand. Selection of Clients Management is very selective of clients. All of the references are carefully checked to learn about a potential client before establishing a relationship. References are excellent sources of new accounts as they give an opportunity to learn about a potential client before establishing a relationship. This policy helps in protecting the integrity of the bank. It ensures good relationship with the clients. Services and Product Polices Bank Alfalah provides a vast variety of services to its clients. Some of those policies are discussed below: i. Credit Facility In this service the loans are provided to the customers by the bank to meet revenue shortfalls. ii. Stop Payment Instructions 30 It is one of the most important services provided by the bank to its clients. In case the account holder has lost his/her cheque he can issue the stop payment instructions to the bank. The bank till further instructions will not honor the cheque. iii. Deposits The bank offers different types of Deposits to its account holders. a. b. c. Alfalah Musharakah Saving Account Current Account Musharakah Time Deposits On PLS Basis iv. Drafts, Telephonic Transfers, Pay Orders These are the facilities that the bank offers its customers and, at times, to the people who do not maintain an account with the bank, that is, ordinary people. For offering these services the bank charges commission besides the government taxes and duties. Trade Department Policy Bank Alfalah’s focus is on “Foreign Trade” as its primary market of business. It maintains high emphasis on enlarging its Correspondent Banking network besides aiming to enhance the scope and level of cooperation with existing correspondents. The Trade finance department has efficiently done management of the changing trade policies by the central bank over there. 31 Marketing Policy Bank Alfalah inverts heavily for the marketing policies and orientation, for the publicity of its new products/services. It uses television advertisements, newspaper as well as various promotional schemes to attract customers. The Bank sponsors a number of sporting and community development initiatives to play its part as a responsible corporate citizen Promotion and Incentives Bank hires officers in range 1. Then depending upon their job performance they are promoted to next range. More facilities and increments are given along with promotion. The bank gives a car facility to the officers of range 5. Bank’s policy is to give cash rewards and salary increments for increasing the employees’ satisfaction. Also with the expansion of the branch network growth in the current era, more and more opportunities have been provoked not only for the young generation but also for the employees of the bank. Accounting Policies Bank Alfalah has adopted almost the same accounting procedures that other financial institutions are adopting at this time. These accounting procedures or Accounting policies are made according to Generally Accepted Accounting Principles, the GAAP. The process flow and the usage of the policies in the day wise routine are mandatory for all the employees working in the specified departments at the branch. Recruitment Policy Hiring is mainly of two types i.e. direct hiring and promotion from lower levels. Bank’s policy is to hire suitable candidates. By suitable candidates bank refers to 32 candidates having proper educational qualification, experience and background. It is the policy of the bank that “President” of the bank will be the representative of major stakeholders/owners. Board of Directors is representative of sponsors. Bank is reluctant in making direct appointment of senior executives. EVPs are promoted from lower levels. Every year Bank Alfalah opens its doors for about 30 fresh post-graduates to join the prestigious ranks of Management Trainee officers with the Bank. The MTO scheme is a highly competitive and sought after induction scheme, in which short-listed applicants appear in a written test followed by a panel interview. Successful candidates then receive comprehensive training in essential areas of branch banking at the Bank’s state-of-the-art training facility at Lahore and Karachi, prior to their posting at various branch locations. Preferred educational background for entry into the MTO scheme includes an MBA degree, MA Economics or M.Com from reputable Pakistani or foreign institutions with GPA of 3 plus, or equivalent. Strong personal character, as well as communication and interpersonal skills are essential pre-requisites to succeed as an MTO. Training and Development Policy Bank Alfalah’s policy is to take special interest in recruitment and training. This training is been given in two instances, i-e, the Off-job training and the On-job Training. To impart technical skills to its staff “Training and Development Center” offers programs in several skill areas. Its employees attend seminars and courses offered by “Institute of Bankers”. Alfalah also offers various computer-training courses to its employees. It is obligatory for each staff member of the bank to attend a minimum number of training courses during the course of a year. Wherever the Training Department is unable to provide focused training for certain groups of staff, reputable external training providers are invited to fill the gap Quality assurance services Service excellence is one of the priorities of Bank Alfalah. A separate quality assurance department is to be established as well very soon for the removal of little flaws 33 that are still prevailing at some of the branches regarding facilities for the consumers. The focus of the bank is to develop new areas of activities along with traditional banking activities of resource mobilization and credit disbursement. Growth Policy Bank Alfalah emphasizes on growth along with providing best quality customer service. Bank’s policy is to maximize the synergies of branch network through optimal allocation of financial, human and other resources to compete in the marketplace. Liquidity Policy Bank Alfalah maintains positive and healthy liquidity. Bank’s policy is to keep surplus liquidity in fixed income securities issued by the Federal Government of Pakistan. If necessary it can be easily converted into cash. Investments Policies Bank Alfalah investment policies are based on federal and provincial securities, debentures, and participation term certificates treasury bills and blue chip share of joint stock companies. Job Satisfaction Job satisfaction is the major important factor to be considered while evaluating any organization. To evaluate an organization’s strength and repute in the industry, job satisfaction is the key factor as well like that of growth and development in the monetary terms. During my internship program, I observed being in touch with most of the employees over there, that all the employees are working with devotion that is the basis for job satisfaction. In addition all the employees are satisfied with the working ambiance, with 34 the salaries and with the increments and promotions. Only thing to be mentioned out over here is the workload and the employee timings for their job. Some of the employees are over burdened with the work. But that does not impact the overall job satisfaction of the organization. Bank takes much care of its employees because they are precious assets of it. Bank celebrates birthdays of all employees, arrange trips and give them opportunity for recreation and enjoyment. Bank hires officers in range 1. Then depending upon their job performance they are promoted to next range. More facilities and increments are given along with promotion. The bank gives a car facility to the officers of range 5. Bank’s policy is to give cash rewards and salary increments for increasing the employees’ satisfaction. Also with the expansion of the branch network growth in the current era, more and more opportunities have been provoked not only for the young generation but also for the employees of the bank. At Bank Alfalah the employees are very much satisfied with the job and the overall working conditions of the bank, so in due response, the bank is enjoying high efficiency in managing the time delays in reporting and working operations. 35 ADMINISTRATIVE/MANAGEMENT STYLES Management at Bank Alfalah Ltd. is very much keen towards maintaining the decorum of the cooperative culture within the organization and also with the clients of the bank. The way managers treat the employees and an operative is outstanding at bank Alfalah. This is the reason why each and every employee is pretty much satisfied with the job. MANAGEMENT STYLES Management must have to adopt some administrative style to get all the activities to be done effectively and efficiently. As far as the management styles at Alfalah Bank are concerned, there is both centralization and decentralization to some extent. Management must adopt some administrative style to get all the activities done effectively and efficiently. As far as the management style at Bank Alfalah Limited Township Branch is concerned, there is centralization to a certain extent and decentralization in some other areas. 36 Management refers to the universal process of effectively and efficiently getting activities completed with and through other people. It is a process by which certain basic functions, that are planning, organizing, leading and controlling, are performed to achieve the desired objectives of the organization. These functions are being performed at three levels in Bank Alfalah. • Managerial level Administrative style of Branch Manager is authoritative. His authoritative style is the requirement of administration. For the implementation of strategies and getting all the activities to be done properly with an organized environment, unity of command was the requirement of the time. In his absence, I observed the environment of uncertainty and deregulation in the bank to a little extent. • Department Head level Department heads are responsible for the overall operations of the department assigned. There is a sign of good delegation of authority for decision-making in Alfalah Bank at this level. Department managers always ask his subordinates before referring the solution to a problem to the Branch Manager. So at this level employees are very much contended to their work. • Staff level At the staff level, as employees are satisfied to the work assigned and authority structure, so management at this level is concerned to the decisions of the department heads level. 37 IMPACT OF MANAGEMENT STYLE ON EMPLOYEES Management styles have a great impact on the overall working of an organization. The key issues, which can arise due to strong authoritative actions by the management, can be of the following nature: o Absenteeism o Irresponsible behavior o Coordination o Reporting time delays o Turnover But at Bank Alfalah Ltd. these issues have never been provoked till now. This is due to the fact that employees have been given equal importance as been given to high level operatives. The following important aspects need consideration. • Motivation The term motive implies action to satisfy a need. Motivation can be defined as a willingness to expend energy to achieve a goal or a reward. The management styles adopted by the bank affect greatly, and employees are motivated in order to enhance their performance and achieve the derived goals. • Morale and Productivity The employees of the bank possess high morale, and thus exhibit high productivity. The employees are happy and are also productive workers. Job attitudes and morale are quite positive for two reasons. Firstly employees gain 38 social satisfaction from interactions at the work place. Working conditions and supervision are good; secondly high morale results from high motivation to produce. In other words we can say that management should put its eggs in the basket that creates a high-motivated work force. • Job efficiency and satisfaction Consequently the overall impact of the well-equipped management styled organization is the job efficiency and job satisfaction. At Bank Alfalah the employees are very much satisfied with the job and the overall working conditions of the bank, so in due response, the bank is enjoying high efficiency in managing the time delays in reporting and working operations. THE STRATEGICAL HIERARCHY The Strategic management model provides a conceptual basis for applying strategic management. Alternate strategies that an enterprise could pursue can be categorized into 4 actions: • • • • Integration Strategies Intensive Strategies Diversification Strategies Defensive Strategies 39 Integration Strategies: Forward integration, backward integration, and horizontal integration are sometimes collectively referred to as vertical integration strategies. Vertical integration strategies allow a firm to gain control over distributors, suppliers, and/or competitors. Intensive Strategies: Market penetration, market development, and product development are sometimes referred to as “intensive strategies” because they require intensive efforts to improve a firm’s competitive position with existing products. Diversification Strategies: Concentric, horizontal and conglomerate are some of the strategies, which are inculcated under the head of diversification strategies. Overall, diversification strategies are becoming less and less popular as organizations are finding it more and more difficult to manage diverse business activities. Defensive Strategies: Another way to pursue strategies is through the defensive way, which includes joint venture, retrenchment, divestiture and liquidation strategies. 40 WORK DONE BY ME I was been assigned by our department, Bank Alfalah Ltd, Garden Town Branch, Lahore as my internship organization. There I worked for about eight weeks. I worked in three departments. I started up with account opening (operations), where I worked for about three weeks and learned about different types of accounts, and how to open a new account, etc. I was working under the supervision of the Manager Operations, Mr. Raheel Yaqoob at my internship in that department. After working in Operations, I was moved to Credits, where I learned that how finance is advanced to the clients and different types of facilities the bank is providing to its customers. There I worked for about two weeks with Mr. Ateeq-ur-Rehman Sidu officer of CAD Department Mr. Ahmed Moin Lodhi officer of car Finance Department and under supervision and training of the employees working as the finance officers as well. 41 Garden Town Branch has got a wide range of excellent services departments been supervised under the best ambiance and a very well educated staff. The following list is showing the main departments at Garden Town Branch • • • • • • Operations Department Agri Finance Department Car Finance Department Accounts Department IT Department The Credit Administration Department Now, I am going to discuss the six departments with which I was in touch during my internship program. That is, the Account Opening department, the Remittance department the car finance department, the Accounts department and the Credits department. THE ACCOUNT OPENING DEPARTMENT Borrowing funds from different sources has become an essential feature of today’s business enterprises. But in the case of bank borrowing funds from outside parties is more vital because the borrowed capital of a bank is much greater their own capital. Banks borrowing is mostly in the form of deposits. These deposits are lent out to different parties such deposit creation is done through open an account in the bank. The department that is responsible for opening and closing an account assumes immense significance and holds a central place in the basic banking operations. The Account opening department was the very first experience of my practical life being working with a bank, during my internship with Bank Alfalah Ltd. This department is the best way to start with the banking career or training. This is because the ways you deal with the customers give a lot exposure to you for the coming 42 days in banking because the bankers are always in contact with customers as customers are the biggest source of assets for the bank. I really enjoyed my stay at this department as I got to interact with the customers directly for the first time. I was given under the supervision of Mr. Naveed Khalid, who is the Incharge of Accounts Opening. During my stay at this department I got to fill the forms of individuals who wanted to get their accounts opened at Bank Alfalah Limited, fill the cheque and deposit slips of customers who were not literate enough or needed instructions, and I also got the opportunity to give advice to the customers regarding the requirements of account opening and the benefits of opening an account with Bank Alfalah Limited. Working with the Accounts opening department gave me a lot of courage as it taught me the way that you should deal with the customers of the bank. Now coming towards the documentations, stuff requirement at this department for the accounts opening process. Types of Account ♦ Current Account. ♦ Saving Account. ♦ Notice Deposit. ♦ Term Deposit. • Current Account The current account is the most common account and the most preferred amongst business concerns. The theoretical explanation for this would be that they can function more efficiently but since in reality there are no restrictions on any withdrawal. The only reason we can think of is that current account facilitates online banking which saves time to a considerable extent. No interest is being credited to the customer’s accounts that are 43 maintaining the current accounts with the bank. Current account enables the client to do cash transactions in a more efficient manner. There is no interest on these accounts. It is only for transaction purposes. They paid on demand. Where a banker accepts, paying all checks drawn against him to extend of the balance in the accounts. As there is no profit paid on this account, it is also called checking account because cheque can be drawn on it. Current account is mostly opened for business. The minimum balance requirement for opening the current account is Rs. 10,000. • BASIC BANKING ACCOUNT: • • • • • Initial deposit for account opening is Rs. 1,000 with no minimum balance requirement. Non interest bearing checking account. Maximum 2 deposits & 2 withdrawals through cheque are allowed. Free 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. No restriction on ATM withdrawal. • The PLS Savings Account: The purpose of this account is to introduce the habit of saving individuals in the neighborhood. The profit on saving accounts is paid on the basis of profit and loss sharing at 2 % per month. The minimum balance requirement for opening the account is Rs.5000. The PLS savings Account is meant for those people who have got an aptitude towards earning some profit on their amount deposited for sometime with the bank. Individuals who wish to earn profit/interest on their investment normally maintain the profit and loss sharing account but in order to earn interest the client is required to keep 44 his/her deposits with the bank for some time. For this purpose, there are some restrictions on withdrawal of money from a Profit and Loss sharing account but in general banking practice there is no restriction on any with drawl from a Profit and Loss sharing account. The interest/profit is paid half yearly. • NOTICE DEPOSITS Notice Deposits are kind of fixed deposits. The minimum balance requirement for opening the account is Rs. 5000 and payment is drawn on maturity of the specific period. NOTICE DEPOSIT IS OF TWO TYPES. ♦ One for which a prior notice of 30 days and is required from the customer before withdrawing deposited amount and for which rate return is 4.00%. ♦ Second for which a prior notice of 30 days and above is required from the customer before withdrawing deposited amount and for which the rate of return is 4.50 %. • TERM DEPOSIT A term deposit is a deposit that is made of a certain period of time. At the end of specific period the customer is allowed to with draw the principal amount. The rate of return of this account varies from 3.25 % to 6.50 %. The term deposit account varies from one month to 3 years and the minimum balance requirement is Rs. 50,000. PROFIT CALCULATION METHODS DAILY PRODUCT BASIS Deposited Amount × Rate of return 45 365 (No. of days in a year) AVERAGE MONTH BALANCE Sum of daily end Balance × Rate of return No. of days in month MINIMUM MONTH BALANCE Any minimum balance during the month is taken for calculating profit SAVING A/C (05 DAYS _ MINIMUM MONTHLY BALANCE). Minimum Balance of first 5 days is compared to the minimum balance of the minimum balance of remaining 25 days. Less balance is calculated for profit. The amount of profit is given to deposits in three ways: ⇒ Cash payment (only in case of term Deposits). Or as per customer By sending bank draft to depositor’s home address or officers or whichever The depositor’s account is credited at maturity. requirement. ⇒ is specified as mailing address. ⇒ Amount of Deposits & Other Accounts in 2008 Fixed Deposits…………………………………. Rs.88.851 billion Saving Deposits………………………………... Rs78.893 billion Current Accounts. ………………………………Rs58.234 billion Others……………………………………………Rs. 3.616 billion Financial institutions 46 Remunerative Deposits…………………………. Rs. 9.892 billion Non-Remunerative Deposits……………………..Rs. 0.021 billion Particulars of Deposits & Other Accounts In Local Currency………………………………… Rs. 214.824 billion In Foreign Currencies……………………………. Rs. 24.685 billion Total Deposits………………………………… Rs. 239.509 billion The main document in this department is, of course, the Account Opening Form. Particulars at the Account Opening Form: In the account opening form the client is required to provide the following information. The first part establishes the currency in which the account is to be maintained / operated. The currencies include o Pakistani rupee. o U.S. dollar o Pound sterling o Euro The second part then establishes the preference regarding the type of account to be maintained. The various choices offered are 47 o Savings account o Current account. o Royal profit For the chequing account, there are different types of account holders are required for all these types of account holders. The operation/procedure requirement that is needed for “Individual Account” differs greatly from the “Joint Accounts” proprietorship A/C, Partnership A/C, Private Limited Company A/C and Public Limited Company A/C. Now, during my internship at the Account Opening department at Bank Alfalah Ltd. Garden Town Branch, I found out the following documentation and writings are required in order to open an account with us: The first thing mentioned at the account opening form is the Title of the account. Title of the account is to be written in block letters. By title of an account we mean the name (either of the individual or of the business concern) with which the account is to be opened and operated. The client is supposed to provide the information whether the account would be maintained singly (only one person operates the account) or jointly (two or more than two persons maintain the account). The name of the person who intends to operate the account. Provision of either Father’s or the Husband’s name is also a pre-requisite. Occupation of the prospective account holder. 48 The name and complete address of the employer. Nationality of the Account opener Country of residence is to be specified. Contact numbers both the cellular and the landline numbers are to be provided in addition to the segregation of the residential and the office phone as well. The national identity card, of course is an integral part of the account opening application. Passport number, if the prospective client has got one. Another requirement is the date and place of issue of the national identity card. The prospective client also has to provide the name, address and relationship of any one of his/her close relatives in order to facilitate the communication problem. The clients often have a misconception that there next of kin might, if some peculiar circumstances arise, get the profit out of his account but this is not the case. The name and address of a close relative is only recorded in order to undertake necessary communication when needed. In case of a business concern there are two more things that are to be provided by the business. Type of organization The various types of organization which are present in Pakistan at present are: 49 Public Limited Company Private Limited Company Partnership Association/Club/Society Sole-Proprietorship Some special documentation is also required like the certifications regarding the incorporation and commencement of business and the Form 29. The business concerns also have to give their full name, brief description of the business, date of incorporation, and place of incorporation, national tax number, telephone number and fax number. The choice of either the deduction or non-deduction of zakat also needs to be highlighted. Zakat is deducted out of a Musharakah savings account and not in the case f the current accounts... Details of other accounts maintained with other branches of Bank Alfalah Ltd. or other banks are also to be given. The name, signatures, and account number of the introducer is a very essential prerequisite in order to facilitate the opening of an account. The introducer is a person who already has an account in the same branch. It can also be a person from the staff of the branch as well. This introduction is the mandatory requirement in order to open an account in order to trace out the defaulter in case of defaults. 50 Then the client also has to put forth the instructions regarding as to whether the account would be maintained on the basis of ‘either or survivor’, ‘jointly’ or ‘any one of us’. After this three signatures of the client are needed and if it is an account of a business concern then the rubber stamp of the company/organization is also needed below the three signatures. In case of a joint account all the persons unanimously might give the right to operate the account to one person. This right is also termed as mandate for joint account. If the mandate is given to a person all join account holders must sign as an evidence of their approval. The names of persons are written on the title of A/C and on S.S. card. INDIVIDUAL ACCOUNT Any individual or proprietor of business can open an individual account at BAL. PLS (profit and loss sharing) saving accounts can be opened with the minimum balance Rs. 5000/- with expected profit rate is 2% on Rs. 25,000 or above. Following requirements has to be fulfilled for this account. Signature of customer on back of AOF. Mention next of kin (nominee) Name and A/C # of introducer. Verified sign of introducer. Customer signature admitted by officer. N.I.C photocopy attached. Letter of thanks. 51 JOINT ACCOUNT When different people want to or need to share a single account it is called joint account. The names of persons are written on the title of A/C and on S.S. card. Joint A/C cannot be opened by single person. Both persons have to sign on cheque. When two or more person neither partner nor trustee open account in their name is joint account. REQUIREMENTS Sign of both customers on back of AOF Sign on joint A/C # mandate Name and A/C # of introducer NIC copies of both members. Mode of operation. In case of account opened by a business concern there are some documents that are needed to be attached with the account opening form. The details of these documents are given below. Limited Company: Copy of certificate of incorporation Memorandum and Articles of Association List of Director’s Copy of the board resolution Certificate of Commencement of Business Copies of CNICs of Director’s Latest copy of Form-29 52 Partnership: Partnership deed certified copy NIC photocopies of all partners. Partnership mandate for account signed by all the partners A letter duly signed by all the partners containing the operating instructions of the account also has to be taken. Club/Society/Association: Copy of rules/ by-laws Copy of registration (if applicable) List of Executive member management committee/management board etc Certified copy of Resolution NIC of all members of the management body Sole Proprietorship / Individual: NIC/ Passport photocopy Letter from Proprietor confirming “sole proprietorship” Term and Conditions Governing the Account Account (I) Each Account will be allotted a distinctive number, which should be quoted in all correspondence with the bank relating to the account. 53 (II) The account should be subject to the applicable laws of Pakistan and prevailing rules, regulations and directives of the State Bank of Pakistan. Minimum Balance Subject to the regulations of State Bank of Pakistan, the customer should maintain a minimum credit balance in the account as may be prescribed by Bank from time to time. The bank reserves the right to close the account after giving 14 days notice if the customer fails to maintain the required minimum balance in the account. Deposits (I) All deposits in the account should be accompanied by pay in slip showing the correct title & account number to be credited. (II) If the amount indicated on the deposit slip differs from that “later cash account” the banks count shall be final and conclusive. (III) Proceeds of a cheque deposited in the account for collection will be value dated after receipt of the proceeds thereof. (IV) In receiving cheque/instruments the bank acts only a collective agent of the customer & assumes no responsibility for the realization of such cheques/instruments. The bank may refuse to accept such cheques/instruments drawn in favor of third party. The customer shall not draw against unclear cheques/instruments though credited. (V) The bank shall recover return cheque charges at the rate fixed by the bank by dividing the account on every cheque deposited for collection and return unpaid. (VI) The bank is realizes the services of other bank, customer do so for account and the sole risk of the customer. The bank assumes no liability should the instruction is transmits is not carried by such banks. 54 (VII) The bank shall not be responsible for the delay or loss in transit of any cheque not for any act, omission, neglect, default, and failure of any correspondent bank, agent or sub agent or for any reason beyond the control of the bank. Withdrawals (I) Withdrawals from the account shall only be made by using cheque books supplied by the bank at the request of the customer. The bank reserves the right to withdraw cheque book facility without notice if in the opinion of the bank the account is not being maintained or operated in accordance with these terms and conditions or for any other reason. (II) The customer shall exercise care when drawing cheques and agree that cheques will not be drawn in a manner which may enable a cheque to be altered in a manner which is not readily detectable. (III) The customer shall ensure safe keeping of the cheque book and shall not allow access to the cheque book to any unauthorized person. In case of loss or theft of the chequebook or any cheque leaf, the customer will inform the bank, if he will not then he will be himself responsible for any loss. Minor’s Account In respect of an account opened in the name of a minor, the bank shall be entitled to act on the instructions received from the guardian name on the account opening form, irrespective of whether the minor account holder continues to be a minor or not unless the bank receives written instructions from the guardian or a notice to the contrary from an appropriate authority. Statement of Account 55 The bank shall quarterly or at such other interval as it may deem fit send to the customer statement of account and the customer shall check the entries made therein. In case of any discrepancy or error in the statement of account, the customer will notify the bank within 14 days of receipt of the statement. Hold Mail Facility Upon written request of the customer, the bank may in its sole discretion provide a hold mail facility. The customer hereby waives his right to question any detail appearing in the hold mail communication or statement of account irrespective of their actual receipt. The customer accepts all risks and responsibilities in this regard. Stop Payment Instructions The bank may, in its absolute discretion, accept stop payment instructions from customer if a cheque is reported lost or stolen, provided the necessary details of the lost/stolen cheque given by the customer. Death of a Customer In case of death of individual customer, the bank will permit no withdrawal from that account after receiving notice of customer’s death, except on production of a succession certificate or other court order from a court of competent jurisdiction. Now, there are some documents that are always there with the account opening forms. These things need to be filled in by the customers efficiently and carefully. These are: Signature Specimen Card. Cheque Book Requisition. 56 The Signature specimen card basically contains information that is basically a repertoire of information given in the account opening form, but in this card the client vividly puts his signatures as a specimen, which are scanned and stored in an intelligent terminal for future use and reference. The Cheque Book requisition basically serves as an application to issue a Chequebook. The client also fills it up and submits it along with the account opening form as a result of which he is issued a Chequebook once his account is approved. As regards the Chequebook one of the most important entries in a Chequebook requisition is the series number of Cheques that correspond with the numbers of the cheques contained in the Chequebook issued to the client Procedure of Opening an Account 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. If he/she wants to open a PLS A/C, then he/she has to fill a form according to the account. Completion of The Form: The name, occupation, and complete address of the person opening the account are written in the columns are provided in the form. One signature of the person is taken on the face of the form and one is taken on the backside. These signatures should be usual signatures and he would operate the account with them future. Introduction: 57 The introduction of a current account holder is accepted for the opening of either a current account or a solving account. The introduction of saving bank account is accepted only for saving bank accounts. The signature of the account-holder introducing the account is obtained at the place provided for in the account opening form. Specimen Signature Card (S. S. Card): It is card on which specimen of applicant’s signature are taken for future reference. Every time a cheque is presented for payment, the signature on the cheque is verified by comparing it with S.S Card. In case of joint account two applicants can sign on one SS card. In case of more than two joint account holders more than one SS card are required. Account Number: As now a days Bank Alfalah has acquired centralized banking system where all the branches are directly connected to Head office. When customers give all the information about him, this information is entered into centralized data base. When this procedure is completed, the system automatically generated the account number of that customer. Due to this system the process of account opening becomes fast and also there is no chance of any mistake. The account numbers of various accounts start with the following series Account title Current account Saving account Royal profit account Term deposit account Account number 01 02 029 03 58 Car finance account Agri finance account 0191 0141 Issuance Of Cheque book: After opening an A/C with the bank, the A/C holder once again makes a request in the name of bank for the issuance of a chequebook. The A/C holder mentions title of A/C, A/C number, sign it properly and mentions the no of leaves he requires. Normally BAL issues a chequebook having at least 25 leaves. Every chequebook also contains one leaf that is used for another issue of a Chequebook Bank Alfalah issues the following chequebooks. o Saving account - 25 leaves o Current account - 50 leaves o Current account - 25 leaves o Foreign currency $ - 10 leaves o Foreign currency £ - 10 leaves Loose cheques are also issued in some cases. Entry Of cheque book: Before issuance of a chequebook, the employee performs certain functions. They include: o Stamping every leaf with specific A/C number. o Enters it in the chequebook issue register. 59 o Check whether or not a senior officer has verified the signatures, if no then first he gets them verified. o If the check book is of photo account then be sure that each and every leaf of cheque book should carry photo account stamp After entry in the manual register, the employee issues the chequebook to the A/C holder after his/her signature on the register. Filling Of Account Opening Forms: For current and saving account, separate files are maintained in which the forms are pasted or punched in numerical order and kept under lock and key in fireproof steel or safe. This is because these forms are the basic documents of the contract with the customer. Maintaining the Computer Record: After opening of account, all information regarding the account is entered into the computer. Currently, a program named Bank Smart is being used for this purpose. Record of all the transactions regarding the account of a customer is kept updated in the computer. Procedure Followed In Order To Close An Account: Now, coming towards the procedure for the closing of an account at Bank Alfalah, the following steps will be followed. The client who wishes to close an account first has to give an application, duly signed on the pre-printed application of the bank. The client has to attach this 60 application with the liability form (explained below). The client can also give an application on a plain paper, but correct signatures are very necessary. Then it has to be made sure that if the account to be closed is a saving or Royal Profit then the account balance before closing should be zero. In case of these two types of accounts the bank does not take any closing charges. If a client wishes to close a current account then the bank charges Rs.150, so at the time of closing the balance should be Rs.150. Along with the application to close the account client’s Chequebook is also received from him and then it is destroyed in order to prevent any misuse in the future. A liability form is filled and sent to the Credit Department in order to Cheque that the customer does not owe the bank a single penny in any regard. A debit voucher and a credit voucher are also attached to the liability form. When the Credit department approves that the customer does not owe any money to the bank and the form is returned to the account opening department then the original account opening form pasted in the ledger when the account was opened is marked ‘account closed’ along with the date on which it is so marked. One thing has to be taken into immediate consideration that the account number allotted to the client (who has closed his account), after closure of the account becomes useless and is not allotted to any one in the future. After approval of the liability form, it is sent to the Cash Department so that the officer who scanned it in the first place could return the specimen signature card to the account-opening department. 61 Once the S. S. Card is received back from the concerned official then the liability form, the client’s application along with the specimen signature card is pasted in the ledger right along side the original account opening form. The form has to be pasted with the original account opening form even if the account was opened a decade ago. In the computer as well all the entries and records related to that particular account is permanently deleted by using the ‘close account’ option. Important Documents Used In the Account Opening Department Liability Form This particular form is used when an account is to be closed. The staff of account opening department, after filling in the name and account number of the client forwards this form to the credit department and the trade finance department who upon receipt of such liability form make required scrutiny so as to check whether or not the customer owes some money to the bank or not. Account Statement Request Form This small form is used to request for the account statement for the desired period. The client gets this Performa from the account-opening department and then, after filling it up, gives it to the computer section that gives the statement to the client in printed form. Vernacular Form This form basically functions as a thank you letter (and also as a request) on behalf of the customer if he wants to operate his account by doing signatures in a language other than that of English. In this particular form the client gives his 62 assurance in writing that he would indemnify the branch against any loss that may be caused by reason of his signing in a language other than that of English. Issuance Requisition This requisition is used by the staff to order for any thing (e.g. stationary) they need. They write the type and quantity of the stationary they need, get it signed by the Manager Operations, give it to the person in-charge of issuance of stationary who on receipt of this requisition (duly signed) issues the stationary. Debit And Credit Vouchers These two vouchers are basically used when an account has to be closed. The debit voucher shows as to how much amount has to be taken from the client’s account and the credit voucher shows as to how much amount has to be credited as Bank’s income, in order to facilitate the account closing process. Application To Close The Account This is a pre printed application of the bank in which the client fills in the account number, the title of the account and the type of account and requests the branch manager to close his account with the Bank. Application To Change The Address This is again a pre printed request form in which the client fills in his name, account number, telephone number/s and the new address so that he could communicate with the bank and receives all the notices, statements and other necessary document which the bank might send through mail depending upon the circumstances. 63 Discrepancies: If there is fond any discrepancy in any of the following particulars then the form will not be entertained: 1. Date of account opening 2. Account opening Approval 3. Customer Name 4. Joint Name (in case of joint account) 5. Mailing Address 6. Alternate Mailing Address 7. Telephone Number 8. Nationality 9. NIC / Passport 10. Currency of Account 11. Related Account Information 12.Zakat Deduction Authorization 13. Hold Mail 14.Either or Survivor Instructions 15. Next of Kin Information 16. Proof of Guardianship in case of Minor’s Account 17. Thirty Party Mandate 18. Specimen Signature Card 19. Check Book Ordered 20. Introducer’s Name and Account number 21. Introducer’s Signature Verification 22. Segment Code mentioned 23. Signature on Bank’s Terms and Conditions 24.Account Type My experiences during internship in Accounts Opening Department: During my internship at Bank Alfalah Ltd, Garden Town Branch, my experience was very good while working in the said department that is the Accounts Opening Department. This was the first ever experience of my life regarding working in any professional environment with practical people working around. Mr. Naveed Khalid (Incharge of Account Opening) was very much keen in telling me all the details of all the workings of that accounts opening department. I was being supervised by sir Naveed at that critical time who was a very ebullient person and make me lighten up to a greater extant. Being a former PU student, university fellow and admirer of Hailey College of Commerce, he went very supportive to me. He was also very 64 hardworking and supportive type of a colleague to me. He taught me each and every thing that can happen in the accounts opening department also direct me about the procedures of other banks dealings. Whenever he was busy in doing a work regarding the accounts opening things he never forgot to tell me what he is doing and what is the purpose of doing that thing. During my stay at the accounts opening department, I got a chance to open some accounts after the approval and due verification from my supervisor Mr. Naveed Khalid. He told all the stamps, which have to be incorporated in the account opening form, to me. I did mistakes as well while opening of accounts regarding stamping at the correct place and writing account titles. But he never ever said a word to me regarding that. This is the thing, which I observed that employees at Bank Alfalah are very cooperative and supportive. This is the reason why the customer satisfactions provoking all along in the branches of the bank. Remittance Department Remittance department comes under the category of the ‘Domestic Banking’. By remittance we mean transfer of money from one city to another. Hence this department deals with the transfer of money using different mode from one place to another. PARTIES TO A REMITTANCE • REMITTER One who make a remittance. He comes to the issuing or originating branch, ask for a remittance to be made, and deposits the money to be remitted. The bank charges him for the remittance. He may or not be the bank’s customer. • REMITEE 65 Also sometimes called the beneficiary, or the payee (the person to whom the remittance is made/ the one who receives the payment.) • ISSUING BANK The bank that affect the remittances, through the Demand Drafts, Telegraphic Transfer, or Mail Transfer. • PAYING BANK Also known as the drawee branch (The branch on which the instrument is drawn. It has to make the payment). Usually located in a different city or country. PRINCIPAL DUTIES: - The principal duties this department is performing are as follows 1. Pay Slips 2. Pay orders 3. Demand Drafts (DD) 4. Rupee Travelers Cheque (RTC) 5. Money Gram DEMAND DRAFTS Demand Drafts (DD) are a bill of exchange. It is an instrument in writing signed by the banker containing an unconditional order to pay certain amount to or to the order of certain person for payment on demand or otherwise as future determinant time. If it is made through cheque than it is necessary that person must be account holder while in case of cash any person can make. It consists of four copies. 66 1) 2) 3) 4) Original copy which is given to account holder. DD advice is sent to the central branch. Third copy is for reconciliation. Last copy is sent to head office for reconciliation. PURPOSE: AS THE NAME SUBJECTS DD IS CITY. MADE ON THE REQUEST OF THE CUSTOMER (WHICH MAY OR MAY NOT BE THE ACCOUNTHOLDER OF THE BANK) IN FAVOR OF ANOTHER CUSTOMER OR PARTY IN SOME OTHER THUS IT IS A MODE OF PAYMENT USED BY ONE CUSTOMER TO PAY ANOTHER WHO MUST BE RESIDING IN SOME OTHER CITY. PAYMENT PAYMENT OF DD CAN BE MADE THROUGH ALL MODES I.E. TRANSFER, CASH, CHEQUE COLLECTION (ALL BRANCHES IN PAKISTAN) ETC. RECORD No manual record of the demand draft is kept; only the record is saved in the computer at the time of making the demand draft. DD APPLICATION SLIP On the DD application slip enter the Date Branch name draft no. (which is entered after the computer entry) 67 In favor of (the name of the person or party) Drawn on (the city name and the branch code of BAL ) Amount in words as well as in figures Commission charged is entered Signatures of the applicant are taken Then it is signed by the in charge remittance and the customer deposits the money against this slip. The DD slip is available with the attached forms. Scrutiny Of application Form: There should be our bank’s branch at the place where payment is desired to be made. Full name of the payee should be mentioned. Amount in words and figure should not differ. Purchaser’s name address and telephone numbers are complete. COMPUTER ENTRY In the system enter into the ‘DD’ section then enter the • • • • • • • Name of the person who is being favored Branch code at which draft will be drawn Bank code of that branch Name of the person to whom the draft is being issued The account no of the issues (if he/she has an account with our branch) The total amount of the demand draft is entered The commission charged is entered (computer usually perform this job automatically) 68 Entry of DD: Entry in BAL GTN branch Yellow slip DD Payable credit H.off debit --------------------------------------------------------------------------------------------------- Entry in H.off Karachi branch H.off debit DD credit --------------------------------------------------------------------------------------------------- Issuance Pink Slip H.off credit DD debit ------------------------------------------------------------------------------------------------------- Entry when customer will draw amount from DD 69 DD payable debit Customer credit ----------------------------------------------------------------------------------------------------------- The DD number appears at the end which is entered on the ‘demand draft application form for record purpose. Now press yes for the print of DD, which is in two, parts both are given to the customer. When the computer record has been saved now the advices are made in the favor of the bank on which DD will be drawn. The advices for BAL branches are sent directly to that branch through mail. PAY ORDER Pay order is also a bank instrument a bill of exchange. The pay orders are usually used for the payment within the city. The pay orders issued from one branch of bank can only be drawn at the same branch, that’s why it is generally referred to as Banker’s cheque. There is a separate slip for the pay order application. All the procedures for the pay orders are similar to the demand drafts except the charges and the record keeping which are given below 70 RECORD KEEPING: The record of the pay orders is kept in both the computers and manually in registers. The computer record keeping system is similar to that of the demand drafts. Where as in register you enter the • • • • • Date on which the pay order is issued. Pay order number. Payee, to whom the pay order is being issued. Amount of pay order is entered then the officer signs it. Date of the payment and the remarks are taken. Entry of issuance “pay order” Customer debit Pay order credit ------------------------------------------------------------------------------ Entry when customer get amount from “pay order” 71 Pay order debit Customer credit --------------------------------------------------------------------------------- Following are the parties to a pay order: i) Purchaser: Is a person, firm, company or local authority ii)Issuing / paying branch: this issues / pays on presentation. iii) Payee: is a person named therein. PAY SLIPS The bank for the settlement of its own payment uses this instrument. There are no charges for the pay slips. They are used to meet the miscellaneous expenses of the bank. The pay slips can only be drawn on the same branch of the bank. No manual or computer record of the pay slips is kept. Only the record of the counter file of the slip is maintained as a record at the bank of which two signatures of the beneficiary are taken. On the pay slip Enter the name of the party as ‘Messrs’ The reasons of payment i.e. repair, releases of security etc are written as ‘on account of’. 72 Signs and stamp of the beneficiary are taken. The payment of the pay slips can be made through any of clearing, transfer (same city branches), cheque, and cash. Collection (all branches within Pakistan) the pay slips can issue to both minors and majors. On the slip the signatures of two authorized bank officials are must. RUPEE TRAVELERS CHEQUES These are the banks instruments issued to only major account holders of the bank. TC’s are issued to the facilities the customers during the travel. There are the three copies of the travels cheque application. The white copy, which is also known as ‘agreement’, remains with the customer with the agreement at the back of it. This copy is must to be shown lost for the reimbursment. The yellow copy is for the record and the blue one is for the head office. According to the government policies only the RTC’s of rupees 10,000 & 5,000 are being offered to the customers .The amount in the RTC (the application for rupee travelers cheque) is entered in multiples of 10000 as per request of the customer but separate cheque are issued against it each of RS. 10,000 or in multiples of 5,000 as per request of the customer but separate cheque are issued against it each of RS. 5,000. All the travelers’ cheque is credited by the head office ‘HO’ accounts. The payment mode used for the traveler’s cheque can be cash. Transfer, authority letters, collection (all branches in Pakistan), the president of the bank and it already signs cheque is also signed by an authorized person at the bank. ISSUING BRANCH The branch that is issuing the TC will take the signs of the customer on upper part of the cheque. 73 The issuing bank send one copy of RTC application to head office and keeps other with it after entering all the account opening conditions i.e. NIC.no, NTC.no, address, phone no, name etc into the system. PAYING BRANCH: On the next date when the cheque is presented in the paying branch (any BAL branch in PK) same signatures on the lower part of the cheque are taken and the bank officer cheque whether they match or not. MONEY GRAM Bank Alfalah Limited, in collaboration with money gram offer remittance services to Pakistan. “It’s basically a person to person money transfer service that allows consumer to receive money in just a few minutes.” PROCEDURE • • • • Person must have reference no. Person must tell reference no. and compute the simple form. Person has to show NIC and tell compute introduction after that he can obtain money. THE CREDITS DEPARTMENT The sum of money that a bank makes available to client in excess of any deposit. Credit means belief or trust. “The quality of being credible or trustworthy”. Another words we can define credit as “trust in one’s integrity in money matters and ones ability to meet payment when due”. 74 Purpose of Credits Earnings of a bank are dependent on CREDITS, because: • • A bank receives (borrows) deposits. It pays cost on these deposits. On the other hand bank lends the deposits to borrowers and charges interest on the lending. This function is performed by CREDITS in any bank Credit philosophy at BAL “Banking is an art of striking between risk and revenue” “The extension of a credit facility should add value to the bank’s assets.” Importance of Credits CREDITS are the most important department of a bank. Performance of all other departments is dependent upon “Credits”. It attracts corporate accounts, as a company prefers to do import and export business from the banks from where it is availing limit (credit) facilities. Risks involved in Lending Though lending is main source of earnings for any bank but it is risky as well. Whenever money is advanced to any customer there is always a risk involved of default. To minimize the risk involved BAL gives loans to credible customers. Sub Division of Credits CREDITS are further sub divided into two sections: 75 • • Credits Marketing Credits Administration The above-mentioned two sections perform the overall activities of credits. Role of each section is discussed below: Credits Marketing: Marketing personnel is responsible for attracting customers to bank for advancement of loan facilities. They must have complete information of trends in the industry. However several precautions are followed to give loans to only credible customers, as the aim of bank is to recover the money at time and through earnings of the client and through liquidation of securities. Bank Alfalah Ltd. always prefers to give loans to credible customers. For this BAL requires information about: Basic “Cs” of a Credit: Character Who is the borrower (company)? What is its reputation for honesty, integrity and willingness to pay? Capacity How is the business managed? What are its strength weaknesses? What is the business capacity to generate the funds to repay? Capital How solid are its financial and human resources? Are financial resources matched with adequate human resources? 76 Conditions What is the condition of company within the economic cycle? Will the economic and business conditions impact the borrower’s ability to repay? Collateral What is the real liquidation value of the collateral? If the creditor is forced to use thee collateral as payment, what value will be realized at liquidation? Carelessness While evaluating, disbursing and monitoring of the credit, professional standards and tools are not exercised. Complacence When the information and data base on which decisions are to be made, are accepted without any critical evaluation Connivance While certain adverse aspects observed in the operating performance, financial position, debt servicing, etc. are not accounted for which tacit understanding of favoring the client. Concealment When certain important facts are deliberately and willfully conceal from the management which could have undermined security, credit recovery and bilateral relationship with borrower. Collusion When a bank officer and borrower willfully join their hands for achieving some ulterior motives Corruption When official matters are dealt with for financial and non- financial benefits at the cost of the lender Credit Line Proposal: 77 A CLP is prepared on the basis of above facts. It is forwarded to HEAD OFFICE. If HO is satisfied then it gives a “CREDIT ADVICE”. Offer Letter: On the basis of credit advice the branch prepares an “offer letter”. This letter gives a detail of the terms and conditions such as duration of facility, securities, mark up etc. • • After fulfilling the entire formalities loan is advanced. After the disbursement of loan marketing personnel keeps track of every activity of the party. They continuously observe the financial statements of the customer. Detail of credit line proposal prepared by marketing personnel is given below: Credit Administration It is the second section of CREDITS. It performs very important functions for the bank. After the approval of CREDIT LINE PROPOSAL, it comes to Administration section. The Administration decides the terms and conditions regarding securities offered against the facility given to a client. It is a highly responsible task because in case of default liquidation of securities is an important source for bank for recovery of loan amount. Other important functions such as adjustment of loans are also handled by administration section. Nature of the Risk Exposed To a Bank • • • Credibility of the sponsors Financial standing Professional capability 78 • • • • • • • • • • • • • • • • • . Willful management Credibility of credentials, data and information Reliability of the basis assumptions underlying business and financial projections misappropriation Unauthorized advances to sister concern, affiliates undertaking Agent transactions Product obsoleteness, waning market and threatening market environment Inconsistent and ineffective marketing plans and business strategies Obsolescence of the technology and lack of adaptability High interest rates Liquidity risk Inconsistent government tariff policies and their impact on the selling price, cost of production, profitability etc International environment and inter-country business risk Currency exchange rates deterioration Credibility and poor performance of Muccadams Credibility of surveyors, evaluators, pre-delivery inspectors Over capitalization Credibility of the auditing firms Types of borrowers Individuals Existing account holders staff members Close relatives of staff members Business sponsored by staff members Employees of other banks 79 Joint accounts Businesses Entities Sole proprietorship Partnership Limited liabilities Company Joint venture Group account\s Others Clubs and associates Government bodies Traders Contractors Transport, storage and warehousing Property dealers Manufacturers While lending to any of these parties the credit officer of BAL has to check the following things. 1. COMPANY: Where a company is a borrower the credit officer must ask and keep on record following information: The certificate of incorporation The memorandum and articles of association The certificate of commencement of business and The last annual report containing accounts and balance sheet, to ensure that the company is legally qualified to do business. To ensure that the company is currently existing and is in good standing. Credit officer should check with the registrar of joint stock companies, and request the borrower to furnish certified80 List of shareholders (current) List of directors With public limited company verify its existence and standing on the stock Exchange. It is important that the borrowing company and its directors should have requisite authorization and power to borrow which should be reflected in the memorandum and article of association Also see “corporate resolution to borrow”. 2. PARTNERSHIP Where the borrower is a partnership, the credit officer must ask to see, following documents; Original partnership agreement/deed and the original certificate of registration which will contain the name of the partners and the date of their joining the partnership. An individual financial statement from each partner along these, also obtain the following document: normal loan documents signed by all partners continuing guarantee duly signed by all partners Resolution/authorization to borrow and execute loan documents, signed by all partners. A letter signed by all partners, requesting the bank to extend credit facilities to the firm Certified copy of the partnership deed and certification of registration. 3. INDIVIDUAL Lending to an individual the credit officer must ask him to see. His financial statements for, at least the previous three years. 81 A continuing guarantee. The decision of extending credit to an individual borrower is necessarily a decision for the officer concerned based on the reputation and credit standing as a client. Depending on the amount advanced, the loan should be secured by a pledge, hypothecation, or mortgage. 4. GOVERNMENT Where the government is a borrower, the credit officer must ensure that the documents of indebtedness are signed by an officer of the government who is duly authorized in writing and or by the rules of business. Legal counsel’s opinion should be taken in these cases. Credit Line Proposal (CLP): A CLP contains and takes into consideration following information: • Types of Proposal: o New o Renewal o Revision o Single transaction • • • • • • Names of owners and their shareholding Nature of business Existing and proposed limit for funded and non-funded facility Group Exposure for both funded and non-funded facility Purpose of each facility and Repayment Security both existing and proposed 82 Customer Profile: • LEGAL STATUS: It specifies legal status such as: o Individual o Proprietor o Partnership o Limited liability company • • • • • Date if Incorporation Date of Account opening and Account Number History of Relationships with Bank History of Borrowing Relationship Information of whether account opening formalities are complete or not Line of Business/Main Products: Following information is required in this regard Sales break-up in various cities Market share Competitive brands Industry Profile and Market Position Summary of key Financials: It includes following ratios: 83 Sales/Revenue, Net Profit Total Assets, Liabilities Working Capital, Current Ratio Paid-up Capital, Reserves, Net Worth ROE, Debt-to-Equity Ratio Days Receivables, Days Payables, Days Inventory Details of Allied Accounts Background of Directors Management Central Risk (as reported by CIB) Liability Details: It includes liabilities with Allied Concerns and with other banks both funded and non-funded. Performance during Last One Year: Following questions are considered: Are acceptance paid on due date Are all the instruments of TFs paid as per schedule Audit exceptions related to credit matters only Are checks returned due to lack of funds 84 Account Statistics for the previous year: It shows: Maximum balance Minimum balance Date of latest adjustment of CF Branch Comments and Recommendations: Based on all of the above facts and information branch gives its comments and recommends different suitable facilities. Credit Division Comments and Recommendations: Based on all of the above facts and information, credit division gives its comments and recommends different facilities. Prudential Regulations Compliance Checklist pertaining to Credit: Following matters are to be checked: Limit of bank’s exposure to a single person Limit of bank’s exposure against clean facilities Linkage between a borrower’s equity and total borrowing from bank Maintenance of debt-to-equity ratio 85 Opening of Account: It’s required that every reasonable effort is to be made for determining the true character of every would-be account holder. Weight age to Credit Report: Due weight age is to be given to the credit report relating to the borrower and his group. Latest report is obtained from CIB of SBP for funds and non-fund facility provided. Minimum information of the borrower: For this purpose bank asks for BASIC FACT SHEET. Financial Summary It contains: • • • Balance Sheet Income Statement Cash Flow Statement Security Analysis Sheet It contains analysis of the security offered for availing the facility. Industry Overview 86 It provides an overview of the industry in which a company is operating. Financial Analysis Sales & Profitability ratios, Activity Ratios, Leverage Ratios and Liquidity Ratios are calculated. More over utilization of the plant capacity over the years is also calculated TYPES OF FACILITIES These facilities are either: • • Fund Based Non-Fund Based Various types of funded and non-funded facilities are given below: Fund Based Facilities: Funded facility is that facility in which the bank funds are physically involved. • Cash Finance/Running Finance Cash Finance/Running Finance: It is a short-term facility given to companies for working capital requirements (raw material, WIP, finished goods, receivables). It is a revolving limit. In this facility a 87 specific limit is given to the customer. He is given withdrawing right up to that limit. He can avail the facility by playing within that limit. Mark-up is charged on the outstanding amount. Marketing personnel keeps a check that whether or not a party is adjusting the limit and then withdrawing the amount or not. If not then there is something wrong and the facility availed is being misused. Non fund based facilities: It is a facility in which funds of bank are not involved. However a non-funded facility can become funded at any time. • Letter of guarantee Letter of Guarantee: It is a non-fund based facility hence no funds from the bank side are involved in it. Parties involved: Three parties are involved: • • • Principal: to whom bank is giving guarantee on beneficiary’s behalf. Beneficiary: in whose favor guarantee is given. Guarantor: it is the bank that is giving the guarantee. In this facility bank guarantees the payment of loan amount if the beneficiary fails to perform his or her duty at the settled time. 88 SECURITIES: Lending is very risky for any bank. Bank covers the risk involved in lending by keeping a suitable security, which can be tangible as well as intangible. Bank always prefers a security that is marketable as well as sustains its value (not perishable). Types of Securities: Following are various types of securities Pledge Hypothecation Mortgage 1. Pledge: It is the bailment of delivery of goods from one person to another for some specific purpose. Two parties are involved: Pledger i.e. the borrower/customer Pledgee i.e. the bank Possession is with the bank. Bank keeps the goods in its go downs. Mucaddams are responsible for the security of the pledged goods. Borrower is entitled to get back the goods after the repayment of loan. In case of non-payment bank has the right to sell the goods. Surplus on sale is paid back to the pledger. 89 In case of deficit after the sale, bank always has the recourse to the court of law to recover the deficit. Documents required for C.F. Pledge Legal stamps documents required: • • • • • • Agreement of finance Promissory note Letter of guarantee Memorandum of deposit of title deed Letter of hypothecation Letter of continuity Letters without Stamp: • • • • Letter of arrangement Letter of disbursement Letter of authority SBP regulation undertaking 90 Margin: Bank keeps a margin or cushion for every facility advanced. The margin differs from case to case depending upon several other factors. Precautions: Following are some of the precautions, which are taken by the bank: Banker looks closely at the NATURE OF COMMODITY. The commodity should not be perishable. It should be marketable. Banker should have complete knowledge about the market value of the commodity pledged. Price should not fluctuate. Banker must take store the pledged commodity in proper go downs under suitable conditions Banker must take precautions in valuing the commodity. There are approved valuers for this purpose. The commodity should not be over valued because it will lead to difficulty in the recovery of loan amount at the time of liquidation. 2. Hypothecation: It is an agreement to give charge on goods or documents of title to these goods without conferring possession to the lender. 91 Lender neither has possession nor ownership. • Security is created through a letter of hypothecation, which contains information such as description of goods, and value of goods. Documents required for C.F. Hypothecation Legal stamp documents required: • • • • • Promissory note Letter of Hypothecation Letter of guarantee Letter of continuity Agreement of finance Letters without Stamp: • • • • Letter of arrangement Letter of disbursement Letter of authority SBP regulation undertaking Periodical Stock Reports: Bank requires periodical stock reports from the borrower. Stop Orders: The bank can issue “stop orders” against the trading of hypothecated stock. 92 Precautions: Lender/bank should go for surprise visits to check stocks. Stock should be insured against all possible risks such as theft, fire etc. Lender should put the nameplate, which signifies that stock has been hypothecated. Before lending bank should make sure that stocks have not been already hypothecated with any other bank. It can be confirmed from the registrar. 3. Mortgage: It is the transfer of specific right in an immovable property for securing a payment of money advanced or to be advanced as a loan or for the performance of an agreement or settling a future liability. Parties: Mortgager: Who transfers specific rights to the mortgagee. He can get back the specific rights after the repayment of loan. Mortgagee: He is the lender i.e. bank. Mortgage Deed: Mortgage deed is that document through which the mortgage is executed Property Documents for mortgage • Legal advice about property documents 93 • • • • • • • • • • Title deeds (original documents of property Aux Sajra (location site map) NEC (non-encompress certificate) PT 1 in favor of borrower PT 1 in favor of bank MoTD (Mortgage of title deeds) Agreement to create mortgage Letters submit to registrar Irrevocable general power of attorney (IGPA) Valuation report Transfer of Legal Title: According to this there can be two types of mortgage. i. Legal Mortgage: Title is legally transferred to mortgagee. Mortgage is to be registered in case the loan amount is greater than Rs.100. After the payment of loan, legal title is transferred back to the mortgager It is executed by the “mortgage deed”, which is signed by the mortgager and 2 witnesses. This mortgage deed is registered with the revenue officer. It is mentioned in the mortgage deed that legal title will be transferred to the mortgager. 94 ii. Equitable Mortgage The original deeds are submitted with the mortgagee with an intention of creating its equitable interest in that property. Mortgager cannot sell the property without the consent of the mortgagee. Process: The original title deeds are submitted with the bank with the covering letter stating that these documents are submitted with the bank for the purpose of creating an equitable mortgage. It is to be registered with the Registrar of Joint Stock Companies within 21 days of the mortgage agreement. GUIDE LINE OF CREDIT POLICY Total outstanding financing facilities by banking company to single person shall not at any point of time exceed 30% of bank’s unimpaired capital. No banking company shall make loans or advances against the security of its own shares. No banking company shall grant unsecured loans / advances on the guarantee of, o Any of its directors. o Family member of director o Any private company in which banking company is interested. In arriving at exposure per person weight age of 50% shall be given to o Documentary credit opened by bank. o Guarantees/bonds other than repayment guarantees. In arriving at per party exposure 90% of o Deposit of party with bank under lien. 95 o Face value of FIBs lodged by the party as collateral. o Pak rupee equivalent of face value of special US Dollar bonds converted at official rate, lodged by the party as collateral shall be deducted. Aggregate exposure of bank against all its clean facility shall not at any point exceed the amount of bank’s capital and general reserve. Advances given to the employees of bank in accordance with their entitlement. While granting any accommodation, bank shall ensure the total accommodation availed by any borrower from banks / financial institution does not exceed 10 tines of the capital and reserve of the borrower. A borrower who is prepared to inject fresh equity irrespective of the fact that its equity is negative is eligible to obtain finance from bank to the extent of 10 time’s fresh injected equity. No banking company allow financing facilities whether fund based / non funded against the shares of companies which are not in central depository system. My experience at the Credit Department: Corporate credits was the second last department in which I was been rotated. The most important department in any bank is considered to be the Credits department. This is, in my opinion, is also true due to some reasons. Firstly the reason being that in credits department, the decision-making skills of a person are explored. When you need to make a decision regarding the credit proposal after due verification, this will give a little stress to your mind either to sanction the financing or not? Credits involve very technological procedures and also a lot of exciting activities because each case varies from the other one. You never become unenthusiastic because you get an opportunity to walk around new bits and pieces every time. 96 In this department I worked under the supervision of Mr. Ateeq-ur-Rehman Sidu (Credits Officer). He was also very supportive to me. He taught me the credit line proposal from the first step till the end of its filling process. In the nutshell, the credits department contributed a lot towards my decision-making and learning skills. CLEARING DEPARTMENT: Clearing is the arrangement to which collection of cheque, bills and other instruments payable or deliverable at or through the offices of the members of the clearinghouses for credit of the customer’s account for speedy and economic collections. The clearinghouse members are authorized to send their cheque and instruments in the clearinghouse established in the State Bank of Pakistan. Clearing house is the gathering of all the members of different banks and institutions where they deliver or receive the instruments drawn on them for their clearances through their branches in the city. Advantages of clearing: 1) Systematic arrangement for the collection and clearance of cheque. 2) Speedy and economic collection and clearance of cheque. 3) Clearance of cheque and other instruments of different branches of different banks in a systematic way without any flow or mistake. 4) The collection and clearance of government bills, instruments and cheque. 5) The collection of government revenue through cheque, pay orders and drafts payable through State Bank of Pakistan and National Bank of Pakistan. 97 6) It avoids the difficulties and cumbrances faced by the branches if they collect the instruments directly from branch to branch. 7) Confidence among the clearing members is produced. Role of State Bank of Pakistan in clearing: • State Bank of Pakistan gives the license end enlist them as clearing house members authorizing to submit their clearance cheque and instruments through the clearing house established as the office of State Bank Of Pakistan in particular city. • • • The clearinghouse advantages are given in the big cities where the State Bank office is available. Where State Bank of Pakistan office is not available the clearinghouse functions in the National bank of Pakistan branch. However the procedure is the same. The State Bank of Pakistan provides the facility to member banks for clearances of their cheque drawn on different branches of banks in different parts of their cities. It would have been more cumbersome and time consuming if they had been dealing from branch to branch. • State Bank of Pakistan is a banker’s bank; it deals in a parental attitude and provides space staff and technique to clear the bills and cheque of the member bank. • • • State Bank of Pakistan maintains the statuary reserve of different banks in their accounts and all the clearances are made by the debit and credit of these accounts. All the payments and receipts are settled to these accounts without any difficulty. The State Bank of Pakistan chalks out clearing house timings and its procedures. CLEARING OUTWARD 98 When the customer deposits cheque & other instruments of other banks for collection, we send the cheque in outward clearing. PROCEDURE: • • • • • • Cheque are receives duly entered on pay-in-slip. Counter foils are returned to customer after signature. Crossing stamp is fixed on the Cheque is fixed on cheque and pay-in-slip. Clearing stamp with next date is fixed on the cheque and pay-in-slip. Endorsement stamp is fixed on the reverse of the instruments. Depositor’s account number shall be mentioned on the reverse of the instruments for the future reference. Endorsement and pay-in-slip are signed by an officer. • • • • • • • • All the instruments ate entered in clearing register. The officer concerned will enter the cheque in computer system. Clearing register is generated by the computer system. Clearing summary is produced and computer also generates bank wise schedules. The cheque is sorted bank wise and respective schedule id attached with these cheque. Total of bank wise schedule will tally with total in clearing register and clearing summary. All cheques along with bank wise summary are sent to main branch where a revised summary is prepared. The representative of the bank takes all the cheque of all the branches to the branches to the clearinghouse at State Bank of Pakistan. CLEARING HOUSE 99 In the clearinghouse the representatives of all the banks gather and exchange their instruments. They enter the total amount of cheque delivered and received in their summary sheets. The total of schedule received tally with the total of summary. Clearing cheques received from other banks are sent to branches, which will clear the cheque and instruments to the respective accounts. Some cheque is returned unpaid with the reasons mentioned in the cheque return memo. IBCA for net amount is sent to main branch. In the 2nd house clearing cheque are returned and exchange by the representatives of the banks. A summary is prepared for cheque received and delivered and net position is ascertained. Amounts are settled through SBP accounts. After cheque is returned, the main branch sends IBCA for net amounts to the branches. Computer entries are made for (-) credits for returns and debits to Main office A/C. 100 FINANCIAL HIGHLIGHTS For the year ended the Bank’s profit before provision and taxation stood at Rs. 3,263.635 million as compared to Rs.2,965.588 million for the previous comparable period, which is 10% higher than that of last year . This increase in profit is primarily attributable to overall increase in business volume. The Bank has successfully carved in the market an enviable niche for its consumer products. Auto Finance, Credit Cards and Home Loans have significantly contributed to the profit and growth in addition to contributions made by the core banking activities during the period under review. Bank is indisputably market leader in some of these initiatives. Bank continues to make significant in-roads into the Agri-rural finance, SME, corporate and investment banking sectors of the economy. With expanding network of branches, bank is ideally poised and positioned to carry forward the success. It acquired the operations of Shamil Bank of Bahrain’s B.S.C, Bangladesh operations for US$ 17.88 million under an agreement dated November 1, 2004. The entire undertaking of the Bangladesh operations including all the properties, assets and liabilities and all the right and obligations were taken over. It has also successfully obtained license to establish 101 banking operations in Kabul, Afghanistan. It continues to strengthen its presence in the market place and as of June 30, 2007, bank has a nationwide network of 195 branches that includes 23 Islamic Banking branches and five overseas branches 3 in Bangladesh, 2 in Afghanistan and one offshore banking unit in Bahrain. Bank’s plan is to add more branches to the network during the 2nd half of 2007. PACRA, a premier rating agency of the country, has rated the Bank ‘AA’ (double A), Entity Rating for Long Term and A1+ for the Short Term. 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. Further, the unsecured subordinated debt (Term Finance Certificates) of the Bank has been awarded a credit rating of AA- (double a minus). In compliance with the requirement of State Bank of Pakistan, Bank has in place an approved integrated risk management framework for managing risk, market risk, liquidity risk and operational risk as evidence by its Board approved” Risk Management and Internal Control” manual and a dedicated Risk Management Division (RMD) has been created with the Head RMD reporting directly to the Chief Executive Officer, Risk management Division has been structured to address credit, market and operational risk and a team of suitable person has been hired. In summary, Bank had successful half-year results, as of June 30, 2009. This was achieved primarily due to its long-standing and stable customer base, coupled with the Management’s well-defined, focused strategies and positioning. Accordingly the Board would like to thank its valued clients and Correspondents and also to acknowledge the support of the State Bank of Pakistan, Ministry of Finance and other regulatory authorities for their invaluable support, which has greatly facilitated its work. The Board would also like to place on record its appreciation for the hard work, dedication, professionalism and sincere efforts of the senior management, officers and staff of the Bank. 102 RATIO ANALYSIS Ratio analysis includes calculating different ratios for the organization of the figures taken from its financial statements. The basic purpose of ratio analysis is that absolute figures often give misleading image so comparison with other figures is necessary which can be done through ratio analysis. The ratios may be: • • • Balance Sheet ratios Income Statement ratios Mixed 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. “Profitability reflects not only the quantity and trend in earning but also the factors that may affect the 103 sustainability earnings.” or quality of NET PROFIT RATIO Net Profit after Tax X 100 Net markup/interest income after provisions 2007 1325389 100 21194254 = 6.25% x 2008 3506737 x 100 25816457 = 13.58% Significance: o It is a more specific measure of sales profit ability. It is used to measure over all profit ability and hence it is very useful to proprietors. o The ratio is very useful as if the net profit is not sufficient, the firm shall not be able to achieve a satisfactory return on its investment. o It also indicates firms, capacity to face adverse economic conditions such as price competitions, low demand etc. o Higher is better is the profitability. 104 Analysis: The above ratio indicates that the proportion of profit has seen increase over the years from 6.25% in 2007; to 13.58% in 2008 the increase is significant. So it is a healthy sign for bank. 7 OPERATING EXPENSE RATIO Non Mark Expense Gross Income X 100 2007 15235688 100 3290623 = 436% x 2008 16645178 x 100 6142240 = 271% Significance This ratio shows how well the organization is managing its operating cost. Operating expenses are those expenses which are incurred indirectly for the generation of revenue. A large portion of these expenses is the administrative expenses which are incurred on management of the organization. It is necessary to cut down these expenses especially when interest rates on advances are declining leaving a narrower margin for payment of such expense. So Lower it is better it is. 105 Analysis Operating expenses for the bank decreased in 2008 from 436% in 2007 to 271%in 2008 and which is a good sign as it shows decreased costs of the banks and hence increased net income. 500.00% 400.00% 300.00% 200.00% 100.00% 0.00% 2007 2008 2007 2008 ADMIN EXPENSE TO TOTAL DEPOSITS Administrative expenses Total deposit 2007 5952637 100 239480772 = 2.49% = 3.07%% x 2008 8383322 x 100 273172088 X 100 Significance 106 This ratio measures bank’s ability to cover administrative expenses by spreading over large number of depositors. Total deposits have been used as base as they are main business activity of bank. A declining trend is desirable. Analysis In 2007 bank’s administrative expenses were 2.49% and in 2008 they are on rising side i.e. 3.07% should try to control its expenses. it’s not good for the bank. Bank 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 2007 2008 2007 2008 TOTAL ASSET TURN OVER Interest- markup- return earned Total Assets 2007 21194254 100 275511483 = 7.96% x 2008 25816457x 100 330679872 = 7.81%% Significance This ratio indicates the efficiency with which total assets have been utilized to generate net interest income. If a bank has ROA on a 107 higher side but the relation of net interest income to total assets is not very significant, this may translate into the fact that bank is relying on sources of income other than interest income which is not a healthy sign. Analysis It is decreasing which is unfavorable. It means bank is not able to utilize its assets efficiently in generating its main stream income. It was 7.96% in 2007, 7.81% in 2008. 8.00% 7.95% 7.90% 7.85% 7.80% 7.75% 7.70% 2007 2008 2007 2008 RETURN ON ASSETS Net profit after tax Total assets 2007 1906672 275511483 = 0.69% Significance ROA is the most comprehensive measure of bank’s earning capacity. Net profit margin ignores ‘efficiency concept’ while total asset x 100 2008 5004600x 100 330679872 =1.51% x 100 108 turn over ignores earning perspectives. ROA takes both perspectives into account. That’s why it is most widely used indicator for representing the earnings of bank over time period. Higher it is better it is. An increasing trend of this ratio signifies increased efficiency of management of a bank to improve upon its earnings capacity. Analysis As this ratio explains how much you are utilizing your assets. In year 2008 it is improved from 1.151% to 0.69%. But still it is not very good, so bank should try to improve it. 1.60% 1.40% 1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0.00% 2007 2008 2007 2008 RETURN ON EQUITY Net profit after tax x 100 Share Holder’s Equity 2007 1325389x 100 11827209 = 11.21% Significance 109 2008 3506737x 100 17414154 = 20.14%% 25.00% 20.00% 15.00% 2007 2008 10.00% 5.00% This is another0.00% measure of overall performance of bank. This 2007 2008 ratio is of great importance to the present and prospective shareholders as well as the management of the company. As the ratio reveals how well the resources of a firm are being used, higher the ratio better it is. Analysis In real sense ordinary shareholders are the real owners of the company (preference shareholders have a preference over ordinary shareholders in the payment of dividend as well as capital. Preference shareholders get a fixed rate of dividend irrespective of the quantum of Profit Company).The rate of dividend very with the availability of profit in case of ordinary share only. Thus ordinary shareholders are more interested in the profitability of the company. Return of equity of BAL is showing a good situation in year 2008 as compare to year 2007. In year 2007 the return on equity of BAL was 11.21 % and in year 2008 it was 20.14%, this increase shows that company is utilizing its funds properly relating to its previous year. 110 NON INTEREST INCOME TOTAL ASSETS Non interest income Total assets x 100 2007 3290623x 100 275511483 = 1.19% 2008 6142240x 100 330679872 = 1.86% Significance Non interest income represents fees, commission, brokerage, and other income and extra ordinary or unusual items if they represent income. Non interest income is also an important source of banks earnings. While analyzing this ratio the trend of non interest income to total assets should be considered. Whether the bank has maintained this ratio at a reasonable level or are there any significant changes over time? If this ratio increases significantly, then there is a problem with the bank in generating revenue from its mainstream activities. But on the other hand, high non interest income can also represent a positive point for a bank. This income represents a diversification from earnings generated from the taking and placement of money, which is subject to interest rate and credit risk. An emphasis on fee income is another global trend along with the growth of capital and rising ROA's. Analysis This ratio is increasing in the year 2008 but shows decreasing in year 2007. Over all non markup income is increasing for the Bank. It is a positive sign. 111 2.00% 1.50% 1.00% 0.50% 0.00% 2007 2008 2007 2008 NON INTEREST EXPENSE TO TOTAL ASSETS Non markup expense Total assets x 100 2007 = 0.93% 2554019x 100 275511483 1.50% 1.00% 2008 = 1.37% 4535382x 100 330679872 2007 0.50% 0.00% Significance 2008 2007 2008 Non interest expenses represent operating expenses such as administrative expenses, staff salaries and other charges plus extra ordinary and unusual items if they represent expense. Lower this ratio better it is for the bank. If the level of non interest expense to total 112 assets is high this will also distort the ROA of the bank. Non interest expense is a very critical number. Analysis This ratio is good when it is low. This ratio is higher in year 2008. It shows non mark up expense in increasing and it should be controlled. RISK ASSET TURN OVER RATIO Net mark up after provision Risk assets 2007 3296623x 100 149942717 = 2.19% Significance 2008 6142240x 100 171031183 = 3.59% Advances are the main use of bank’s assets. So it is necessary that bank earns sufficient value of income on its investment of risk assets. So a steadily rising trend is desirable. 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% Analysis 2007 2008 2007 2008 In year 2008 it is higher than 2007. This is a good sign. 0.00% 113 LIQUIDITY RATIOS Liquidity represents the ability of a bank to efficiently and economically accommodate deposits withdrawal as well as fund increase in assets. A bank has a liquidity potential when it has the ability to obtain sufficient funds in a timely manner at a reasonable cost. Illiquidity is a primary factor leading to a bank’s failure whereas high liquidity helps otherwise weak institutions to remain funded during the period of difficulty. “Liquidity reflects the adequacy of the institution’s current and prospective sources of liquidity and funds management practices.” CURRENT RATIO Current Assets Current Liabilities 2007 259122914x 100 254203477 = 1.02 Significance 2008 311886135x 100 302091341 = 1.03 Current ratio may be defined as the relationship between current asset and current liabilities. This ratio is also known as working capital ratio. It is a measure of general liquidity and is most widely used to make the analysis for a short-term financial position or liquidity of a 114 bank. It represents the margin of safety or cushion available to the creditors. It is an index of the bank’s financial stability. It is also an index of the strength of working capital. A relatively high current ratio is an indication that the bank is liquid and has the ability to pay its current obligations in time as and when they become due. On the other hand, a relatively low current ratio represents that the liquidity position of the bank is not good and the bank shall not be able to pay its current liabilities in time without facing difficulties. An increase in the current ratio represents improvement in the liquidity position of bank while a decrease in the current ratio indicates that there has been deterioration in the liquidity position of the bank. A ratio equal or near to 2: 1, i.e., current assets double the current liabilities, is considered to be satisfactory. The idea of having doubled the current assets as compared to current liabilities is to provide for the delays and losses in the realization of current assets. However, the rule of 2 : 1 should not be blindly followed while making interpretation of the ratio, because banks having less than 2 : 1 ratio may be having a better liquidity than even banks having more than 2 : 1 ratio. This is so because the current ratio measures only the quantity of current asset and not the quality of current assets. If a bank’s current assets include debtor which are not recoverable, the current ratio may be high but it does not represent a good liquidity position. Analysis: BAL has maintained its liquidity position over the years. In 2007 and 2008 there is increment in ratio which shows it have current assets to pay current liabilities. 115 1.03% 1.03% 1.03% 1.02% 1.02% 1.02% 1.02% 1.02% 1.01% 2007 2008 ADVANCES TO TOTAL DEPOSITS Advances 2007 2008 x 100 Deposits 2007 149942717x 100 239480772 = 62.61% 100 2008 1171031183x 273172088 =62.62% 62.74% 62.61% 2007 2008 Significance 62.48% 116 2007 2008 This is perhaps the most important ratio as far as financial analysis of a bank is concerned. Advances represents lending to general public and deposits represent amount borrowed from general public. Both these items represent core activities of a bank. A bank is there to accept deposits and lend to general public. Deposits represent source of banks funds and advances are use of funds. This ratio compares the major source of a bank's funds with the major use of it. It signifies that how much deposits the bank has mobilized from general public and to what extent has made use of these deposits. Credit risk is the most recognizable risk associated with banking and granting credit is the primary activity of a bank but at the same time interest earned on advances is the major source of banks earnings. Although the bank wants to maximize its earnings, but it can never lend the entire amount received through deposits. It has to keep a certain proportion of its deposits in cash form with it as well as with SBP to meet the day to day requirements of its customers. So there is a trade off between risk and return. If the bank wants to increase return, it will go towards more lending thereby enhancing risk and if the bank focuses on liquidity, it will have to forego return. Current accounts to are the lowest cost source of funds. The bank should strive to attract current accounts to increase this ratio, so as to control its interest expense. The bank should decide upon the mix of its sources and uses after taking into consideration the CRR and SLR requirements and demographics of its depositors. Analysis We can see that for every one rupee deposit loan is given with the ratio 62. It is good but it needs to be improved as increasing loans is always good source of earning for a bank. 117 DEPOITS TO TOTAL ASSETS = deposits / total asset 2007 239480772x 100 275511483 = 86.92% Analysis This ratio explains how much deposits are in percentage and trend shows a decrease from 2007 to 2008. 2008 273172088x 100 330679872 =82.61% 87.89% 86.29% 84.69% 83.10% 81.50% 79.90% 2007 2008 2007 2008 118 INTEREST COVERAGE RATIO Earning before interest and tax Financial charges 2007 15235688 1906672 = 7.99 2008 5004600 16645178 =3.32 7.99% 6.39% 4.79% 2007 3.20% 1.60% 0.00% Significance 2008 2007 2008 This ratio measures bank’s ability to pay financial charges. Interest expense is main expense of bank just like cost of goods sold. So higher the ratio better is the ability of bank to pay this compulsory obligation and hence better is the liquidity potential of bank. Analysis We observe a decreasing trend which is not favorable. 119 PORTFOLIO MANAGEMENT RATIOS Portfolio refers to the assets held by an investor taken as a group. From banking point of view it means how the bank is maintaining its advances, investments and lending to financial institutions with respect to its total assets. The portfolio of the bank should be so that it contribute to overall profitability of the bank “Portfolio management deals with managing Advances, investments and lending to financial Institutions with respect to the total assets of the Bank”. ADVANCES TO TOTAL ASSET RATIO Advances x 100 Total Assets 2007 149942717 *100 275511483 = 54.42% 2008 171031183 330679872 =51.72% Significance This ratio indicates proportion of advance to total assets. This is main earning assets of bank. It has two distinct features. It is most risky earning asset and highest return getting asset. As we know, a proper balance should be maintained between risk and return so bank should 120 attain such level of advances. However a rising trend is desirable. It indicates banks ability to compete in the market and generate sufficient subsequent deposits. Analysis Over the last two years bank is showing decrease in ratio i.e.54.42%, 51.72%. It is not good sign as it shows decrease in advances and hence earnings of the bank decrease but risk is also decreasing as there is inverse relationship between risk and return. 55.93% 54.33% 52.73% 51.14% 49.54% 2007 2008 2007 2008 GEARING RATIOS These ratios measure the extent to which bank’s resources have been geared by debt i.e. financed by debt in relation to share holder’s equity. It takes into account total debt, capital employed, shareholder’s funds and total assets and then on the basis of all these the proportion of debt is compared and it helps in understanding that what proportion of needs should be met by debt and how much through equity. “These ratios measure the extent to which banks 121 Resources have been geared by debt i.e. financed By debt in relation to share holder’s equity”. Following ratios have been calculated: 1. Debt to equity ratio 2. Debt to capital employed ratio 3. Debt to total assets ratio DEBT TO EQUITY RATIO Long term debt x 100 Shareholders founds 2006 263684274 *100 11827209 = 22.29% 2008 313265718 17414154 =17.98% 22.37% 20.77% 19.18% 17.58% 15.98% 14.38% 12.78% 11.19% 9.59% 7.99% 6.39% 4.79% 3.20% 1.60% 0.00% 2007 2008 2007 2008 122 Significance It shows amount of long term debt per rupee of equity. In case of manufacturing concern, acceptable ratio is 40:60. This ratio high lights composition of capital employed of bank. In a banking concern this ratio could be 3:1 Analysis Debt equity ratio of BAL is showing decreasing trend. It means that company is trying to rely on its own resources and increasing its Capital. DEBT TO TOTAL ASSET Total debt x 100 `Total assets 2007 263684274 *100 275511483 = 95.7% 2008 313265718*100 330679872 =94.73% 123 95.88% 94.28% 2007 2008 SIGNIFICANCE 92.68% 2007 2008 This ratio indicates the extent to which assets have been financed by debt. This ratio has a direct bearing on financial risk of bank. In manufacturing concerns 50% is a desirable proportion of assets financed by debt. However a banking concern, ratio up to 90% is acceptable as whole structure of banking is based on funds provided by the depositors. Analysis This ratio for bank is same over years and 94% assets are financed through debt. SHAREHOLDER’S EQUITY TO TOTAL ASSET = Shareholder’s equity/ Total assets 124 2007 11827209 *100 275511483 = 4.29% 2008 17414154*100 330679872 =5.27% Analysis This ratio shows that how much bank’s assets are financed by internal resources. In year 2008 it is improved from 4.29% to 5.27%, which is not bad but bank should focus to improve this ratio. 6.39% 4.79% 3.20% 1.60% 0.00% 2007 2008 THE S.W.O.T ANALYSIS2008 BANK ALFALAH LTD. OF 2007 ISLAMIC BANKING: Key External Forces: External forces can be divided into four broad categories: 125 Social, cultural, demographic, and environmental Forces Political, governmental, and legal forces Economic forces Technological forces, and Competitive forces While performing an external audit, our company gathered the competitive intelligence and information about social, cultural, demographic, economic, political, and technological forces as well. The overall motive was to consider and evaluate the Opportunities and Threats for the company Following can be some of the key opportunities and threats for Bank Alfalah. Opportunities The opportunities on which bank Alfalah can capitalize upon are delineated as under. 1) Extension of Local Branch Network One of the biggest opportunities for bank Alfalah Limited is to extend its branch network in Pakistan. The essential pre-requisites for a vast branch network are all there; sponsors have the money, managerial expertise are available, and last but not the least any bank with ‘Bank Alfalah Limited written in blue at its front is accepted in the market’. 2) Establishing Foreign Branch Network Going global could have been termed as a fad a few years ago, but now for those business organizations that want to survive and thrive globalization has become the order 126 of the day. In order to increase the bottom line figure, it really is crucial. But the senior management would start implementing this course of action once they feel that they have got a strong hold in Pakistan. 3) Capitalizing On Information Technology The information revolution has certainly made its inroads in almost all human functions. If Bank Alfalah Limited’s senior management and the IT division make a concerted effort to make best possible use of this miracle of human mind it would enable Bank Alfalah Limited to harness unexplored benefits of immense magnitude. 4) Unexplored Market of Multinational Corporations Unfortunately in spite of unprecedented image building efforts, Bank Alfalah Limited still is an unattractive bank for big multi nationals functioning in Pakistan. If the management is able to develop a strong relationship with such MNC’s then it would open doors of huge and unimaginable opportunities for Bank Alfalah Limited. If even a single MNC becomes a corporate client of Bank Alfalah Limited i.e. it deposits its revenue with Bank Alfalah Limited, pays its salaries through Bank Alfalah Limited, does trade dealings through Bank Alfalah Limited, and avails credit facilities offered by Bank Alfalah Limited, it would make a world of difference to Bank Alfalah Limited. 5) Customers are more willing Muslims are more consciously differentiate the Islamic-base banking from interestbase banking. That is why there is large caution of expansion. THREATS 127 The predominant threats Bank Alfalah is facing at the moment are discussed in the following lines. 1) Private Sector Banks Bank Alfalah Limited is at present facing really tough competition from not only the first line international banks (ABN AMRO, Standard Chartered, Citi Bank) but is also having a neck to neck race with other privatized banks such as Askari Commercial Bank Limited, Union Bank, Prime Commercial Bank, Faysal Bank Limited, Bank Al-Habib Ltd etc. All the new schemes launched by these banks and their plans to expand branch networks are a real threat for Bank Alfalah Limited. 2) New Trade Polices Introduction of new trade policies and laws are also been a source of threats to the organization due to the imposition of new rules and terrifies, previous maintained regulations have to be amended. 3) Network Expansion By Foreign Banks Foreign banks have a lot of plus points as compared to Pakistani banks (state owned and private); they have better products, better and personalized service, desirable interest rates, foreign branch network, but they definitely lack in local branch network (in Pakistan). Literary no foreign bank has been able to expand its network to far-fetched places of Pakistan. Pakistani banks (private banks in general and state owned banks in particular) are spread all over Pakistan. This is an intangible asset for Pakistani banks. But if any of the foreign banks expands it network, backed by their traditional powerful service, then it might prove to be the start of downfall for Bank Alfalah Limited, unless 128 and until Bank Alfalah Limited raises its level of service and product feasibility to the international standards. 4) If Pakistani Banks (Especially State Owned Banks), Backed By Huge Network Improve the Service They Give And Their Employee Skill Set State owned banks like National Bank of Pakistan and Habib Bank Limited have huge networks, they have the experience, but the only set back they have is below par service and lack of motivation amongst the employees. If their corporate strategy is altered, and the managerial policy is revitalized, enabling them to improve upon the service they give and enabling them to convert their work force into human capital then such financial institutions backed up by their huge networks pose a potential threat to Bank Alfalah Limited. So, Bank Alfalah Limited should endeavor to expand their branch network as efficiently as possible and as soon as possible. 5) Terrorist Image of the Country After the 9 / 11 incident every kind of transaction that uses to take place with the outside world has assumed a different mode. The trade finance transactions are the bread and butter for the commercial bank, were also hampered by that terrorist attack on 11th of September i.e. the magnitude of orders the exporters were receiving decreased by a great deal, but as far as our image in the international community is concerned there is still a considerable room for improvement. If this situation further aggravates rather than improving, the trade finance business would really be hampered, and one of the major earning avenues for Bank Alfalah Limited will loose its footings. This fact poses a real threat to the sanctity of Bank Alfalah Limited. 6) Inconsistency in Government Policies 129 This is a phenomenon that could hamper smooth functioning of any organization working in a particular country. Although the sponsors of Bank Alfalah Limited --- AlNahayan Family --- are really committed to invest more and more in the country but still any drastic change in either the economic policies like increase in taxation rates, or any change in the foreign policy, which could hurt Pakistan’s image could also shake the investor confidence and also could lead to a decrease in the repute of the entire banking sector of Pakistan. STRENGTHS The predominant strengths of Bank Alfalah Limited are 1) Humble Management The senior management of Bank Alfalah Limited is considerably humble. Their humility is an integral part of the organizational culture of the bank. The modern management techniques have discarded the bureaucratic style of management in which employees were treated as servants if not as slaves. In the contemporary business world employees are said to be the biggest and the most crucial assets of a business concern, specifically if we are talking about a service industry and this is precisely the management policy Bank Alfalah Limited follows. The humility of the management serves as a big morale booster and encouragement catalyst for all employees in general and new inductees in particular. 2) Strength And Commitment Of Sponsors Bank Alfalah Limited is a project of Al-Nahayan family, which is a renowned Abu Dhabi based investor family. The first project of this particular family was Bank of Credit and Commerce International (which later on became on of the most renowned 130 banks of the Muslim world). BCCI was acquired by Habib Bank Limited (a nationalized bank) and as a result BCCI became Habib Credit and Exchange Bank (H.C.E.B). The bank functioned under this particular name for six years and then Al-Nahayan family bought 70% of its shares from Habib Bank Limited and renamed the institute as Bank Alfalah Limited. Thus in real terms the same family reinvested in their lost project and tried to rejuvenate their brainchild. This reinvestment shows the investor’s trust, commitment, and perseverance to transform Bank Alfalah Limited into one of the strongest financial houses of Pakistan. The “Al-Nahayan” family is a royal family and this fact further adds to the bank’s inherent strength. 3) ‘Kaizan’ Kaizan is a process of continuous improvement in production and every aspect of value added (Japanese). In a very short time span the management of Bank Alfalah Limited has been able to develop its image in a very effective and efficient manner. Through the laborious efforts of the top management and the employees, the entire organization as a whole has been able to continuously add its prestige as a reliable, service oriented, and flourishing financial institution. When we compare the image of Habib Credit and Exchange Bank with that of Bank Alfalah Limited we find a world of difference, and when we compare the image of Bank Alfalah Limited at its inception with its present image we find an even greater difference. This fact proves the thesis that there has been continuous value addition. The number of individuals and corporate entities that feel comfortable while dealing with Bank Alfalah Limited is increasing on a daily basis. 4) Phenomenal Growth In Profitability, Branch Network And Deposit Portfolio 131 In the very first year of its inception Bank Alfalah Limited closed its operations at a deposit portfolio of Rs. 7 billion, at the end of the second year the deposit portfolio had risen to Rs. 14 billion. Thus Bank Alfalah Limited is growing at a multiplier rate of 50%. The profit before provisions and taxation of your bank for the year 2006 stood at Rs. 3.264 billion which was 10% higher than that of last year. The deposit grew by 7.7% and stood at a figure of Rs. 239.509 billion while advance portfolio grew by 26% and showed a figure of Rs. 149.999 billion. When Bank Alfalah Limited started its operations it only had three branches and in a short time span the branch network has expanded to 195. 5) Vastly Experienced Management The people who occupy the top positions in Bank Alfalah’s management hierarchy are certainly no mugs at what they do. Rather they are as capable and as competent as they come. Their superior management skills certainly do create a synergistic effect when coupled with the enormous amount of trust sponsors have put in the management. One of the most evident proofs of above average management expertise are the deposit portfolio growth, profitability growth, and branch network growth figures shown under the previous heading. 6) Highly Trained Human Resource Department; Transformation Of Work Force Into Human Capital One of the most significant catalysts, management of BAL had incorporated---and it still is incorporating---in the organization, when H.C.E.B was transformed into Bank Alfalah Limited, was induction of young and energetic business graduates. This was done in order to achieve quite a few objectives; one was to raise the overall skill level of the work force so that service provision could be improved and the second objective was to reduce the average age of Bank Alfalah Limited’s employees so that an overall sense of change is trickled down to the grass root level of the organization. Bank Alfalah Limited 132 has an excellent selection / recruitment and training program which are undertaken at its Training and Development Center, Human Resource Division Karachi. 7) Superior Consumer Finance In contemporary banking consumer finance has assumed immense significance, as it is that department of a commercial bank whose personnel directly and extensively deal with the client body. One of the most predominant sub departments of consumer finance is Alfalah Car Finance. The customer interface is greater in the consumer finance department, and the diligent staff of Bank Alfalah limited enriched with its superior service and relationship skills attracts / persuades these clients to develop relationship with Bank Alfalah Limited in the arena of corporate banking as well. Thus a strong consumer finance department really helps the bank to expand its corporate banking business. 8) Crucial Location Of Branches All the forty five branches of Bank Alfalah Limited are located at extremely crucial and vital locations, which is indeed a very significant factor towards earning more profit. Moreover all of the branches are very well furnished which is an integral characteristic of a good bank in this age of consumerism. 9) Image Building Activities Activities such as building of Alfalah Square at Liberty Lahore, the China Khan at the Alfalah Square, Alfalah Mini Golf Course, and Shahdin Manzil (proposed main branch, Lahore at The Mall, under construction) have really contributed a lot towards the image building process of Bank Alfalah Limited. Such activities also make people aware of the rejuvenation process of Bank Alfalah Limited. Such activities are classified as 133 strength because they involve people in the change process that contributes a lot towards building customer loyalty. WEAKNESSES The chief weaknesses are enlisted as under 1) Small Size Bank Alfalah Limited is small in size; there is no doubt about this fact. Although, as I mentioned in the strengths section, the branch network is expanding at a phenomenal rate but still the size is not big enough as compared to some of the big banks present in the market. Bank Alfalah limited has 189 branches in the whole of Pakistan. A huge branch network is always an invaluable asset for any bank. Customers simply love it when they could see another branch of their own bank at every turn they take. Extensive branch network might reduce per branch profit but it is very likely to raise the overall profit figure for the entire organization as a whole. 2) Lack of Research Cell There should be a research cell in the bank, which should be engaged in gathering the information about the present actions of its competitors 3) Uneven treatment with customers Customers having accounts with small amounts are not given same services and dealing given to those with high accounts. 4) Skill Set Of Employees Is Not Up To The Mark As There Is No Job Rotation 134 The contemporary banking all over the world has taken a unique turn i.e. they have made job rotation an integral part of their management philosophy. Job rotation adds value to every single employee, as he is able to perform a variety of jobs related to banking profession. Moreover job rotation increases the human capital pool of the organization as every one is trained in more than one sphere of banking. Bank Alfalah Limited completely lacks this. 5) Foreign Banks Still Are A Little More Prestigious Although Bank Alfalah Limited is continuously adding to its prestige, but still it can not be rated as a bank with the same repute as International Banks functioning in Pakistan, for instance ABN AMRO Bank, Citi Bank and Standard Chartered Grindlays. Banks function as custodian of people’s possessions, act as their agents, represent clients in trade dealings outside the country, and give different types of guarantees and in all of these transactions repute plays a central role. And when it comes to repute foreign banks have a little more of it as compared to Bank Alfalah Limited. 6) Bank Alfalah Limited Does Not Possess Foreign Network Foreign banks and some local banks having international network have this edge over Bank Alfalah Limited. Banking transactions regarding trade finance constitute a very important part of contemporary banking and moreover they are said to be the bread and butter for the commercial bank. Bank Alfalah Limited, for such transactions has to rely on its correspondents and agents in other countries, and naturally has to pay them some remuneration --- an expense banks having foreign network do not have to incur. 7) No Advertising in Electronic Media 135 Bank Alfalah does embark upon occasional sales promotion activities, it also gives advertisements in the print media, but it has never flashed an advertisement on the television screen, which is said to be the strongest of all Medias. Some other commercial banks are really capitalizing on the power of this media; examples are Askari commercial bank, Muslim commercial bank, Habib Bank Limited etc. INDUSTRY ANALYSIS: 1) External Factor Evaluation (EFE) Matrix External factor evaluation matrix is a very useful tool towards assessing as to what are the factors that constitute the set of the most significant opportunities and threats. I found it considerably enlightening because of its two dimensional approach towards assessing an organization i.e. this particular matrix not only considers the relative importance of the opportunities and threats by assigning them weights but it also allots the factors rates on a one to four scale depending upon the kind response the organization is giving to the opportunities and threats. In the summer break I did my internship at Bank Alfalah Limited, Garden Town Branch so assessing the opportunities and threats for Bank Alfalah Limited did not pose any serious difficulties. But since I was also suppose to weight and rate the opportunities and threats I had to go to the bank in order to get some views from the members of the organization as to what do they think about the relative importance of the factors and what is their view point regarding their organization’s response to these opportunities and threats. The resultant score of 2.23 shows an average External position of the bank. 136 OPPORTUNITIES Extension Of Local Branch Network Establishing Foreign Branch Network Capitalizing On Information Technology Unexplored Market Of MNC’s More customers are willing THREATS Private Sector Banks New Trade Policies Network Expansion By Foreign Banks Pakistani Banks Improve Their Services Terrorist Image Of The Country Inconsistency In Government Policies TOTAL WEIGHT 0.15 0.10 0.10 0.10 0.05 WEIGHT 0.10 0.05 0.10 0.05 0.10 0.10 1.00 RATING 3 1 3 3 1 RATING 3 1 3 3 2 3 WEIGHTED SCORE 0.45 0.10 0.30 0.30 0.05 WEIGHTED SCORE 0.03 0.05 0.30 0.15 0.20 0.30 2.23 2) Internal Factor Evaluation (IFE) Matrix The IFE matrix is constructed as a summary step to performing the Internal Audit / Assessment. Its basic purpose is to list down the major Strengths and Weaknesses of an organization. Other than these factors, its construction is more or less similar to that of the EFE Matrix. As I have mentioned before, I did my internship at Bank Alfalah Limited, Garden Town Branch. Therefore I have taken the Strengths and Weaknesses of Bank Alfalah Limited to construct this matrix. The resultant score of 3.15 shows the strong position of the bank internally. 137 STRENGTHS Humble Management Commitment Of Sponsors ‘Kaizan’ Phenomenal Growth In Profitability Vastly Experienced Management Highly Trained HR Superior Consumer Finance Crucial Location Of Branches Image Building Activities WEAKNESSES Small Size Lack of research cell Uneven treatment with customers Skill Set Of Employees Is Not Up To The Mark Foreign Banks Still Are A Little More Prestigious Bank Does Not Possess Foreign Network No Advertising In Electronic Media TOTAL WEIGHT 0.06 0.08 0.10 0.05 0.02 0.05 0.10 0.02 0.02 WEIGHT 0.15 0.05 0.05 0.15 0.04 0.02 0.04 1.00 RATING WEIGHTED SCORE 3 0.18 3 0.24 4 0.4 4 0.2 2 0.04 3 0.15 3 0.3 4 0.08 1 0.02 WEIGHTED RATING SCORE 3 0.45 4 0.2 2 0.1 3 4 1 4 0.45 0.16 0.02 0.16 3.15 3) Competitive Profile Matrix The Competitive Profile Matrix identifies a firm’s major competitors and their particular strengths and weaknesses in relation to a sample firm’s strategic position. First of all the critical success factors are determined and examined. Rates and weights are assigned to each factor. Rate are company based which means the significance and importance of such factors with in a firm whereas weights are industry based which means their relative importance in an industry. So weights from 0.0 to 1.0 are assigned to each critical success factor and the total of such weights should not exceed 1. On the other hand rates are assigned from 1 to 4, 1 being the minimum and 4, the maximum. Each factors weight is multiplied by the factors rate and hence the weighted score is observed. 138 Here advertising, turnover, organizational culture, market share etc are considered to be the various critical success factors. For comparison with Bank Alfalah Limited, I have chosen Askari Commercial Bank and Muslim Commercial Bank. The reason for such a choice is simple. As Bank Alfalah Limited is a local bank; its primary competitors are the other local private banks. Other than Bank Alfalah Limited, these two banks are providing the best services to the general public. BANK ASKARI ALFALAH COMMERCIAL MCB BANK WEIGHT LIMITED Wt. Wt. Wt. Rating Rating Rating Score Score Score Market Share 0.03 2 0.06 2 0.06 3 0.09 Price Competitiveness 0.02 3 0.06 2 0.04 2 0.04 Advertising 0.15 3 0.45 3 0.45 3 0.45 Financial Position 0.03 4 0.12 4 0.12 3 0.09 Variety 0.02 4 0.08 2 0.04 3 0.06 Of Products Online Banking 0.05 0 0 3 0.15 4 0.2 Location 0.15 3 0.45 1 0.15 1 0.15 Domestic Networking 0.1 4 0.4 2 0.2 2 0.2 International Network 0.05 0 0 4 0.2 4 0.2 Customer Loyalty 0.1 4 0.4 3 0.3 3 0.3 Environment 0.05 3 0.15 4 0.2 3 0.15 & Decor Customer 0.15 4 0.6 3 0.45 2 0.3 Relationship Efficiency 0.05 3 0.15 3 0.15 3 0.15 of Staff Brand Recognition 0.05 2 0.1 2 0.1 3 0.15 TOTAL 1 3.02 2.61 2.53 CRITICAL Sr. SUCCESS No. FACTORS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 139 4) The Strengths-Weaknesses-Opportunities-Threats SWOT matrix: SWOT matrix is formulated by considering and evaluating the strengths, weaknesses, opportunities and threats of an organization. Through proper and keen observation, the following factors are been initialized for the SWOT analysis of Bank Alfalah Ltd. STRENGTHS WEAKNESSES 1. 2. 3. 4. 5. 6. 7. 8. 9. OPPORTUNITIES 1. 1. Extension Of Local Branch Network 2. Establishing Foreign 2. Branch Network 3. Capitalizing On 3. Information Technology 4. Unexplored Market Of MNC’s 4. 5. More customers are willing THREATS 1. Small Size 2. Lack of research cell Humble Management Commitment Of Sponsors 3. Disproportionate Presence Of Old Staff ‘Kaizan’ 4. Skill Set Of Employees Is Phenomenal Growth In Not Up To The Mark Profitability 5. Foreign Banks Still Are A Vastly Experienced Little More Prestigious Management 6. Bank Does Not Possess Highly Trained HR Foreign Network Superior Consumer Finance 7. No Advertising In Crucial Location Of Electronic Media Branches Image Building Activities SO STRATEGIES WO STRATEGIES Expansion of branch network to increase 1. Increase Branch profitability Communications Capturing the market Network currently held by the 2. Product development foreign banks 3. Expansion to foreign More investment in the countries to facilitate projects of Multi National Expatriates in transmitting companies money More Advertisement to 4. Training of the existing promote the employees to increase their increasing branch network efficiency and effectiveness ST STRATEGIES WT STRATEGIES 140 5) Strategic Position and Action Evaluation (SPACE) Matrix This four-quadrant framework indicates whether aggressive, conservative, defensive, or competitive strategies are most appropriate for an organization. The axes of the SPACE matrix represent two internal dimensions (financial strength [FS] and competitive advantage [CA]) and two external dimensions environmental stability [ES] and industry strength [IS]). These four factors are the most important determinants of an organization’s overall strategic position. For Bank Alfalah Ltd. this matrix is been drawn using the following critical success factors 1. Private Sector Banks 2. New trade policies 3. Network Expansion By Foreign Banks 4. Pakistani Banks Improve Their Services 5. Terrorist Image Of The Country 6. Inconsistency In Government Policies 1. High customer loyalty 1. Increase the marketing to and experience can be the customers to meet the use to avoid disasters and competitors claims breakdown in service 2. Decrease the number of 2. More effective leadership personnel to avoid the to increase competitive threat of takeovers and relative advantage 3. Increasing employee 3. Increased profits to be retention through the used to open new introduction of attractive branches to compete with pay and benefits competitors 4. Opening new branches in business related hubs 141 Ratings Average Financial Strength (FS) Bank’s revenue increased by 74 % Bank’s profits increased by 43.5 % Return on assets have also increased showing effectiveness of bank in proper utilization of its assets Return on equity has increased indicating that the bank has become more attractive for its investors Industry Strength (IS) Growth and Profit potential Deregulation provides geographic & product freedom & increases competition in banking industry Environmental Stability (ES) High inflation and Technological changes Political instability Competitive pressure and Demand variability Competitive Advantage (CA) Becoming increasingly Competitive Bank’s customer base is expanding and strong Customer loyalty Providing services all over Pakistan 4 3 3.50 4 4 3 3.50 3 -4 -3 -3 -3.33 -2 -3 -3 -2.67 DIRECTIONAL VECTOR COORDINATES X - axis: Industry Strength + Competitive Advantage 3.50 + (-2.67) = 0.83 Y - axis: Financial Strength + Environmental Stability 3.50 + (- 3.33) = 0.17 142 5 Conservative 4 3 2 1 Aggressive -4 -3 -2 -1 0 1 2 3 4 -1 -2 -3 Defensive -4 -5 Competitive From the examination and evaluation of the above mentioned SPACE matrix for Bank Alfalah Ltd.,it can be represented that the bank is currently been falling into the region of being AGGRESSIVE, which shows the banks is in an excellent position to use its internal strengths to take advantage of external opportunities overcome internal weaknesses and avoid external threats. 6) Boston Consulting Group (BCG) Matrix 143 This matrix enhances multidivisional firms’ efforts to formulate strategies. It stresses that autonomous divisions (or profit centers) constitute the business portfolio. It states that a firm’s divisions may compete in different industries requiring separate strategy. This matrix • Graphically portrays differences among divisions • Focuses on market share position and industry growth rate • Manages business portfolio through relative market share position and industry growth rate Relative market share position is defined as “Ratio of a division’s own market share in a particular industry to the market share held by the largest rival firm in that industry” Relative Market Share Position High 1.0 High 1.0 Medium 0.5 Low 0.0 Industry Sales Growth Rate Stars II Bank Alfalah Medium 0.5 Limited Question Marks I Cash Cows III Dogs IV Low 0.0 144 7) Internal – External Matrix This matrix is a continuation and an advanced form of the Boston Consulting Group (BCG) Matrix. The same interpretation goes for this matrix as well. The non-availability of the department wise data limits me to construct only a rough sketch of the matrix. THE IFE TOTAL WEIGHTED SCORES (3.15) Strong Average 3.0 to 2.0 to 4.0 2.99 (2.23)THE EFE TOTAL WEIGHTED SCORES 4.0 High 3.0 to 4.0 3.0 Medium 2.0 to 2.99 2.0 Low 1.0 to 1.99 1.0 VII VIII IX IV V VI I 3.0 II 2.0 III Weak 1.0 to 1.99 1.0 Bank Alfalah 145 8) The Grand Strategy Matrix: The upcoming details and evaluation will show a grand strategy matrix for Bank Alfalah Ltd. based on the observation. Quadrant II 1. Market development 2. Market penetration 3. Product development 4 Horizontal integration WEAK COMPETITIVE POSITION Quadrant I 1.Market development 2. Market penetration 3. Product development 4. Forward integration 5. Backward integration 6. Horizontal integration 7. Concentric diversification STRONG COMPETITIVE POSITION 5. Diversification 6. Liquidation Quadrant III 1. Retrenchment 2. Concentric diversification 3. Conglomerate diversification 4. Divestiture 5. Liquidation Quadrant IV 1. Concentric diversification 2. Horizontal diversification 3. Conglomerate diversification 4. Joint Venture RAPID MARKET GROWTH 146 SLOW MARKET GROWTH According to my observation while working with Bank Alfalah Ltd.,It have experienced and evaluated that my bank lies in the first quadrant of the Grand Strategy Matrix,i-e, Quadrant I. This is because Bank Alfalah is enjoying a moderate rapid growth in the market and the competitive strategy position as well in the industry. So for this purpose, we can say that Bank Alfalah is in an excellent strategic position. So continued concentration on current markets and products are appropriate strategies. Also Bank Alfalah Ltd. can afford to take risks and advantages of external opportunities in many areas, this is the reason that now Bank Alfalah Ltd, has started the ISLAMIC banking in the countries like Afghanistan and Bangladesh. So market development, market penetration and product development are appropriate strategies. 147 MARKETING MIX OF BANK ALFALAH LTD. Marketing mix is a set of tools you need for establishing your detailed marketing plans and forecasting your sales to pursue the marketing objectives in the target markets. Thus marketing mix of any organization is very much important in order to ascertain the overall functioning of the organization. Bank Alfalah has a strong marketing mix structure for its branches growth. Marketing mix of Bank Alfalah will be focusing the following major aspects: Product Price Place Promotion PRODUCT Due to trend setting and innovative banking, Bank Alfalah presents a range of quality products with revolutionary perks and convenience. Alfalah provides a wide range of products/ services to its customers, which can be compared with any foreign, or national bank in terms of quality and reliability. The acceptability of these products is very much effective to the customers. Bank Alfalah has now achieved a competitive 148 advantage over other banking institutions by offering a complete range of banking solution for its valued customers. As per current laws and State Bank of Pakistan’s regulations, customers are required to provide proof of their identity and a satisfactory introduction to open any Bank Account. Term Deposit account can be opened by providing a copy of national identity card only. Here is an overview of different products and services formulated by Bank Alfalah. Nature of Accounts Offered No doubt in saying that the basic function around which the banks operations circulate constitute the opening of accounts and ultimately enhancing the deposit base for the branch. Accounts offered by the banks for the deposits of customers constitute the basis of their operations and develop the basic relationship between a banker and customer. Deposit Products Likewise, Bank Alfalah has formulated a number of accounts for the deposits of customers, with unique features. These are: • Current Accounts This account offers unlimited deposit and withdrawal facility to facilitate business transactions. There is absolutely no limit on number of transactions deposits and withdrawals. Individuals, partnerships, companies, associations, clubs, societies, and NGOs are eligible to open current account. 149 • PLS SAVINGS Accounts Saving account is the most common account for individuals. Saving accounts are designed to mobilize savings primarily from a large number of individuals and households. Any one or more individuals or partners can open a PLS saving account with the bank. • ROYAL PROFIT: Royal profit is a highly yield rupee account intended to provide higher rates of profit to high net worth customers and greater flexibility and convenience in terms of transactions. • • BASIC BANKING ACCOUNT: Initial deposit for account opening is Rs. 1,000 with no minimum balance requirement. • Non interest bearing checking account. Maximum 2 deposits & 2 withdrawals through cheque are allowed. Free 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. • • • No restriction on ATM withdrawal. 150 • Alfalah Education: Alfalah Education is a Term Deposit product with No Additional Cost (NAC) education insurance cover for account holders with school going children. Alfalah Education Account , beside offering competitive return on TERM DEPOSIT , offers tuition fee reimbursement of children for 15 years of schooling or up to their 20th birthday, in the unfortunate event of the death (either through accident, illness or natural causes) of the main breadwinner (account holder) parent. Alfalah Education offers a competitive return on term deposit and secondly, it creates a contingency provision for our school going youth’s education in the hapless event of the death of any major breadwinner. The product seems rewarding in the current scenario of increasing number of children of school going age and the general public interest in quality education of their off springs. • Alfalah Mahana Amdan: Alfalah Mahana Amdan is a 3 year TDR with expected rate of profit of 10% p.a. This term deposit will provide an opportunity to individual/joint customers to enjoy higher returns that will automatically be credited to his/her current/PLS/RP/BBA account on 1st working day of each month. This facility is not available for business and corporate customers. • Alfalah Kifayat :( more than a saving account) Features: 151 • Any Pakistani resident over the age of 18 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 • • • • • Minimum balance requirement for opening this account is Rs. 10,000/- with a maximum of Rs Card/POS machine. There is no restriction on deposit transactions. The bank will issue the first cheque book of 25 leaves and a Debit card free of cost. Profit will be calculated on monthly minimum balance basis and will be credited in the account on quarterly basis. No profit shall be payable for a particular month, if the minimum balance for any particular day of said month falls below the amount of Rs. 10,000/-. 1, 000,000/Three debit transactions are allowed in a month either through cheques or Debit • • All service charges are as per the prevailing ‘Schedule of Charges’. Only one account per customer will be allowed across all branches of Bank Alfalah. • NOTICE DEPOSITS These are the short-term deposits of customers where the notice is to be given to the bank prior to the withdrawal. Profit rates for these deposits are: 07 - 29 days 30 days & above 4.00% 4.50% • TERM DEPOSITS Term deposit is a fixed PLS account where the profit rates increase with the amount as: 152 Tenures 1 Month 3 Months 6 Months 1 Year 2 Years 5 Years Rates of profit 3.50% 4.00% 4.25% 4.75% 6.00% 6.50% Salient features: • • • • Short to long term deposits Choice of term 1,3,6,12,26 & 36 Minimum balance required Rs. 50,000/Profit paid on maturity of respective term profit rates increase with tenure and amount • FOREIGN CURRENCY ACCOUNTS Due to the increasing globalize business; all leading commercial banks have been offering foreign currency accounts to their customers. Bank Alfalah has done it by facilitating its customers to have their foreign currency accounts in the bank. At present, BAL offers US Dollar & UK Pound accounts and profit is being paid on half yearly basis. • ON-LINE SERVICE 153 Bank Alfalah provides on-line services to its customers. At present, this service facilitates the customers to deposit and transfer their amounts from one branch to another of BAL. It is being planned to launch a universal account to update this facility and make it more extensive. OTHER CONSUMER PRODUCTS Besides the accounts variety that has been mentioned in the previous sections, Bank Alfalah Islamic Banking provides a wide range of products that are purely Islamic based. These products fall in the category of Musharakah, Maharajah based financing, that is related to the trade concerns and not the interest based financing or mark up thing. • ALFALAH VISA CARDS (FREE forever) Your Bank Alfalah Credit Card is your partner everywhere and is globally accepted and welcomed at locations displaying the VISA logo. It is accepted at nearly 30 million locations in more than 150 countries around the globe and over 18,000 Bank Alfalah’s establishments in Pakistan. Alfalah VISA lets you pay for shopping, travel, entertainment, meals and much more. Card members are facilitated through a number of promotions from time to time. In addition, there are a number of strategic business partnerships with leading local and international brands for purchase of home appliances at exciting Step-BY-Step (SBS) monthly installment plan with free home delivery at lowest interest rates. • ALFALAH HILAL CARD (Debit Card) 154 In our endeavor to give you versatile banking options to fulfill your financial needs, Bank Alfalah Limited presents you the Alfalah Hilal Card, the first Visa Electron International Debit Card which gives you an unlimited access to your current / savings account with a simple swipe, at millions of retail shops and ATMs, worldwide. The Alfalah HilalCard is globally accepted welcomed at all locations displaying the VISA/ ELECTRON/PLUS logos with self-printing POS terminals. Your card is accepted at nearly 13 million physical locations in more than 130 countries round the globe with above 14,000 major establishments in Pakistan. What's more, it is easy to operate and can be used on any electronic self-printing POS machine where VISA is accepted, locally and internationally. No more hassle of remembering your PIN for retail transactions and no need to go to the ATM for cash withdrawal, one swipe and your transaction is complete. • CAR FINANCE Financing a car at Alfalah Bank is very easy with the due favor of no collateral requirement. Alfalah Car is a consumer-financing scheme that enables a customer to own his desired car at easily affordable and flexible installation with minimum down payment and insurance. All maintenance and insurance expenses are borne by the bank because of the reason that the ownership of the car is still with the bank even after the signing of the contract. The bank is just receiving the rentals from the customers. All businessmen, Corporate Employees, Salaried and self-employed professionals having net take home income in excess of three times the monthly installment are eligible to take the advantage of this scheme. The customer is able to finance their vehicle(s) the smart way with us. Bank will purchase the vehicles(s) of the customer’s choice and later rent to the client at a pre agreed rental amount. Ownership of the vehicle(s) is transferred to the client upon 155 satisfactory payment of all the rentals by the time the customer’s security deposits period expires. • ALFALAH AGRI FINANCE Bank Alfalah Ltd. (BAL) agri finance program has been named as "Bank Alfalah Zarie Sahulat”. Bank is extending this service to the clients on a competitive markup rate. BAL model is in letter and spirit based on SBP instruction. The scheme now covers financing of a multitude of activities related to crop production, harvesting, transportation, marketing, storage, processing, packing, export, agri development, working capital and fixed investment financing of agri non crop activities, storage, silos, etc. making it quite exhaustive and comprehensive. The products have been, therefore, designed keeping in mind objectivity of practical applicability in market scenario and to cater to the most commonly demanded items of agricultural financing by farmers • Alfalah Karobar finance a) AKF is a Running Finance facility between Rs 0.50M to Rs 10.0M. b) Tailor-made product for SMEs for their working capital financing based on the cash flow methodology. (Our Edge = Better pricing, quicker TAT and low processing charges.) c) At Bank Alfalah, 65 branches are designated to deal with AKF business in the entire country. 156 d) The purpose of the AKF is financing procurement of raw material, finished goods and receivables of SME businesses. MONEYGRAM Bank Alfalah limited, in collaboration with Money Gram, offers remittance service to Pakistan. Money Gram is person to person money transfer service that allows consumers to receive money in just a few minutes. Money Gram is available in over 156 countries and in more than 40,000 locations worldwide. With Money Gram your money is transferred immediately and usually arrives at the receiving end within 10 minutes, other services can take days or weeks. There are no complicated procedures and you do not need a bank account or a credit card. What’s more, the receiver is handed the cash immediately. SOME SERVICES OF BANK ALFALAH LTD. In addition to the above mentioned products offerings by the bank, we are engaged in providing some extraordinary facility services to our customers as well. The details are as under: • Bank Alfalah Rupee Traveler Cheques Rupee traveler’s cheques are being pioneered by MCB Bank limited initially but these days many banks are engaged in providing this service to the clients. Rupee traveler cheques are been issued at different denominations at Bank Alfalah. 157 • Relationship Banking Relationship banking is basically a term been used for the purpose of the banking 365 days all along and 24 hours a day. The Bank prides itself on recognizing and fulfilling the varied financial needs of its customers. In doing so, it tries to develop and build upon relationships that are based on mutual trust and confidence: the very essence of what they call "Relationship Banking". A customer can operate his account from any branch in the country, or through its 24-hour ATMs. • Bank Alfalah Lockers Before disclosing the details of lockers facility by the bank, a quote needs to be mentioned, “If your jewellery has been giving you sleepless nights, and the prize bonds tucked in the bottom drawer make you feel tense, it's time to discover peace of mind.” Bank Alfalah provides safe deposit locker facility to its customers for safe keeping of their valuables like documents, securities and jewellery etc. For the snatching of the peace of mind, Bank Alfalah is the best Trustee amongst all. Because of the reasons that the bank is providing extraordinary services for the easy lockers. • The online Banking Contrary to other banking organizations, Bank Alfalah is constantly engaged in finding new ways to facilitate its customers and to increase its customer net. THE BANK ALFALAH’s ON-LINE BANKING is a competitive edge for them; because in this service they provide a facility to their customer that they can operate transfer their amount 158 on a phone call! All the requirements for inquiries, transactions, suggestions and complaints are handled over the phone. • Phone Banking 24 hours UAN connectivity with unmatched ease and convenience servers our customers efficiently through interactive Voice Response delivering cards, PIN generation and other services. • Automated Teller Machines (ATMs) The ATM’s are provoking new ways to attract the customers through facilitating transactions. The Auto Teller Machines at Bank Alfalah are continuously running and delivering instant cash facilities to the customers any time in the day. Its ATMs allow the customers an access to their money 24 hours a day, 7 days a week, giving you flexibility to bank at your convenience. Miscellaneous Services: o Issuance of Pay Order o Issuance of Demand Draft o Collection of Local, outstation and foreign bills o Import export facilitation PRICE The term pricing refers to: “The key to pricing is to Build value into the product and price it accordingly.” 159 Bank Alfalah has to face the ever-increasing competition in the fabric industry. As the number of competitors are increasing day by day but still Bank Alfalah enjoys a reasonable market share with the facts of providing excellent services amongst the competitors. BAL provides different products and services to its customers, which have been discussed in previous section. Pricing of products means the commission to be paid by the customer in return of services provided by the bank. The price paid for the services mainly include: • • • Mark up Bank charges Fees and bank commission etc. These charges and commissions are prescribed on Schedule of Bank Charges (SOC) that keeps on changing time-to-time, and issued by the bank periodically (generally after six months).The price charged for all the products and all the services is given in complete detail in the schedule of bank charges for Islamic banking are as follows: PLACE Pricing refers to the following methodologies taken by an organization: “Various activities the company undertakes to make the product accessible and available to the target customers” Also, “Its can be viewed as set of interdependent organization involved in the process of making a product or service available for use or consumption” 160 Place refers to the means by which our customer acquires your product. This includes the actual place it is purchased (the shop, the telephone, the web page, the warehouse) as well as the actual route of distribution. Simply place refers how you will sell your product to your customers. The objective of Bank Alfalah’s has always been to expand its branch network to meet clients’ needs as has been mentioned clearly in the mission statement of the bank. . Bank is well positioned and geographically poised, to cater for increased business demands, from its existing potential clientele. Bank Alfalah has 195 branches, spread all over Pakistan covering major business centers and principle cities. Bank plans to add more branches to his growing network in the ensuing years. At present, Bank Alfalah has opened all its branches at commercial and business areas or near to commercial areas so that the customers or clients face no problem in reaching the bank. Head Office of Bank Alfalah is situated in Karachi. The detail description of its branches is as follows: No. 1 Branch Name Abbottabad Address 191, Supply Bazar, Main Mansehra Road, Abbottabad PABX 6 FAX No 0992-344723- 0992-344728 1 Ahmedpur East Branch Plot#188, Block XI, Kutchery Road, Ahmedpur East (062) 2275504-8 (062) 2275503 1 Arifwala Branch 47/D, Zain Palace, 0457-835711- 0457-835717 Qaboola Road, 13 161 Arifwala 1 Attock Branch Zila Council Chowk, Attock City 057-2701557- 057-2700248 Building, Kutchery 58 1 Bahawalnagar Shop # 6, Ghallah (063) Mandi, Bahawalnagar 2272005-8 (063) 2277437 1 Bahawalpur Branch Ground Floor, Bldg.No.V/912, Circular Road, Bahawalpur 062-2889922- 062-2889874 25 1 Bahawalpur Branch Ground Floor, Bldg.No.V/912, Circular Road, Bahawalpur 062-2889922- 062-2889874 25 1 Bhalwal Branch Burewala Liaqat Shaheed Road, Bhalwal 95-C, AL-Aziz Market, College Road, Burewala 048-6642647 048-6643709 1 067-3771901- 067-3771905 04 0543-555206- 0543-555220 218 1 Chakwal City trade Centre, Tehsil Chowk, Rawalpindi Road, Chakwal 1 Chaman Branch Trunch Road, Chaman, Balochistan 0826-613440 0826-613488 1 Karachi Main Branch B. A. Building I.I.Chundrigar 021-2414030- 021-2417006 39 162 Road, Karachi 2 Cloth Market Branch Luximidas Street, Karachi Clifton Branch Fl-10, Block 5, KDA Scheme 5, Khayaban-eRoomi, Clifton, Karachi 021-2401621- 021-2401627 26 021-5833779 - 021-5879175 82 3 4 Shahrah-e-Faisal Branch Progressive Square, Block 6, PECHS, Shahrahe-Faisal, Karachi 021-4313536- 021-4313539 38 5 Jodia Bazar Branch Gulzar Manzil, Jodia Bazar, NP/12/49-50, Mohammad Shah Street, Karachi 021-7532482- 021-2401627 84 6 Korangi Branch Plot No ST 4/2, Sector 12-B, Aiwan-e-Sanat, Korangi, Industrial Area, Karachi 021-5050964,- 021-5050653 387 7 M.A.Jinnah Road Branch Plot No.23/1, Zelin 021-2750627- 021- 2750 629 Place, (Habib Bank Bldg.)M.A.Jinnah, Road / Abdullah Haroon Road, Karachi 8 8 SITE Branch Siemens 021-2582114- 021-2582113 163 Chaurangi, S.I.T.E. Karachi 9 116 021-6950805- 021-6986051 06 North Karachi Branch Plot No SA-1 (ST 1/1/) Sector 12-B, Gabol Town, North Karachi, Industriail Area, Karachi 10 Paper Market Branch Plot No.S.R.7/23, Campbell Street, Paper Market, Karachi 021-2211353- 021-2211243 58 11 Gulshan-e-Iqbal Branch Ground Floor, Sumera Apartments, Plot SB-15, Block 13B, KDA Scheme No 24, Gulshan-eIqbal, Karachi 021-4984937 021-4984971 12 Stock Exchange Branch 18-20, Karachi Stock Exchange, Building, Stock Exchange Road, Karachi 021-241751519 13 North Napier Road Branch Ground Floor, Building at Surv.No.35 / Sheet, No.NP-10 (Old Surv.No.A26/5), 021-2544021- 021-254006 24 164 Napier Quarters, Karachi 14 Bahadurabad Branch 1-3, Prime Arcade, 021-4128577- 021-4129676 Bahadur Shah Zafar Road, Bahadurabad, Karachi 81 15 Timber Market Siddiq Wahab Road, Old Haji Camp, Karachi 021-7750635- 021-7733463 9 021-5304167 16 Defence, Karachi Plot No 40 & 42, 26th Commercial street, Defense Housing Authority, Phase V, Karachi 17 PECHS Federal B Area 154-S, Block 2, PECHS, Karachi C-28, Block 13, Federal B Area, Karachi 021-4538423- 021-4314221 24 021- 6344700 021-6803043 18 19 Eidgah Branch, Karachi 166, M.A. Jinnah Road, Near Light House, Karachi Z-111,112, Adamjee Nagar, Tipu Sultan Road, Karachi 021-2217290- 021-2217244 4 021-4398457- 021-4398456 9 20 Tipu Sultan Road 21 Marriot Road Murad Khan Road, Marriot Road, Karachi 021-2414138- 021-2412082 40 165 22 Hyderi Al-Burhan Circle, Block E North Nazimabad, Karachi 021-6626066 23 Gulistan-e-Jauhar 30-31, Saima Classic, Rashid Minhas Road, Karachi 021-4815926- 021-4815924 7 24 Korangi bypass (D. H. A. Phase I) 114, 9th East Street, D. H. A. Phase I, Karachi KB-28, Haji Ishaq Market, Main Hawksbay Road, Karachi 021-5887571- 021-5887574 73 021-2355873 25 Hawksbay Road 26 Shershah Branch D-283, Main Shershah Road, SITE, Karachi 021-2585001- 021-2585005 4 021-5034451- 021-5030875 3 (021) 4386052-5 (021) 4386056 27 Landhi Branch, Karachi Area 5-D, Sctor 36-E, Landhi Township, Karachi 124/A, Block 2, P.E.C.H.S, Main, Tariq Road, Karachi 28 Tariq Road Branch 29 Malir Cantt Branch Old Malir Cantonment Library, Cantt Bazar, Malir Cantt, Karachi 021- 4904601 021-4904602 166 30 Gulshan Chowrangi Branch Sani Arcade, Block 3, Gulshane-Iqbal, Karachi 021-4988695 021-4985729 31 Garden East Branch, Silver Jubilee Karachi Apartment, 194/2/1, Britto Road, Near Ismailia Jamat Khana, Garden East, Karachi 021-2238704, 2238717, 2238722, 2238605 021-2225941 32 DHA Phase IV, Karachi Plot No. 80, 10th Commercial Street, Phase IV, Defence Housing Authority, Karachi 021-5312832- 021-5312837 35 33 Gizri Sea View K-4/3, Bazar Area 021-5868991- 021-5867149 Clifton, Karachi 93 97 (021) 6708980-83 (021) 6708978 Sahil Promenade, 021-5364095- 021-5371259 Block 3, Scheme 5, Clifton, Karachi 34 35 Nazimabad "Al-Kausar Homes, Plot # 2, Block-III, SubBlock “E”, Nazimabad, Karachi 1 L. D. A. Plaza Branch Kashmir Road Lahore 042-630 6201- 0425, 042-630 5614-18 6307836,0426301193,0426368905 167 2 Gulberg, Lahore Branch Defence Lahore Branch 125/E-1,GulbergIII, Lahore G-9, Commercial Area, Phase-I, ICCHS (Defence), Lahore Cantt. Lahore 042-5877800- 042-5754900 5 042-5729723- 042-5729727 26 3 4 Circular Road, Branch Township Branch Circular Road, Lahore 47, B/1, Block 10, Akber Chowk, Township, Lahore 042-763825658 042-5152831- 042-5113716 6 042-7704961 042-7728074 5 6 Badami Bagh Branch 29-30,PECO Road, Badami Bagh, Lahore 7 Allama Iqbal Town Branch 36, College Block, 042-543 2961- 042-5432960 Allama Iqbal Town, Lahore Hilal-e-Ahmar Complex, Shah Alam Market, Lahore 5 042-7673401- 042-7673409 6 8 Shah Alam Market 9 Shadman Branch Bunglow No. 88, Shadman - 1, Lahore 042-7538116- 042-7538119 18 10 Tufail Road, Lahore Cantt Lahore Stock Exchange 50/3, Tufail Road, 042-6689016- 042-6688374 Lahore Cantt Lahore Stock Exchange 19 68 Basement Level 2, 042-6307461- 042-6307469 11 168 Building, 19, Khayaban-e-Iqbal, Lahore 12 IBD- New Garden Town Awami Complex, Block 1, New Garden Town, Lahore 042-5846374- 042-5846386 81 13 Baghbanpura, Lahore 268, G.T. Road, Baghbanpura, Lahore 13, Ravi Road, Lahore Raiwind Road, Lahore Faysal Chowk, Lahore 042-6844006- 042-6844010 9 042-7708661- 042-7708660 5 14 Ravi Road, Lahore Thoker Niaz Beg Shahdin Manzil Liberty Market 15 16 042-601 2000 042-6012081 17 10-C, Commercial 042-5789431- 042-5755226 Area, Liberty Market, Gulberg III, Lahore 34 18 Azam Cloth Market Rehman Centre, Akbar Block, Azam Cloth Market, Lahore 042-7643851- 042-7643860 54 19 Shadbagh 37,Umer Din Road, Wassanpura, Lahore 042-7616252- 042-6260295 56 20 Defence Extension Divine Centre, Near Bhatta 042- 570 0301-9 042-570 0311 169 Chawk, New Airport Road, Lahore Cantt 21 Urdu Bazar Shahdara Branch Urdu Bazar, Lahore Main G.T Road, Shahdara Chowk, Lahore 042- 7210644 042- 7210647 22 (042) 7900290 (042) 7900291 23 Walton Road Branch E-28/A, Main Walton Road, Lahore (042) 6602334-8 (042) 6687391 24 Brandreth Road Branch 91-A, Brandreth Road, Near Australia Building, Lahore 042-7674115- 042-7671633 18 25 Ghari Shahu Branch 99-A, Allama Iqbal (042) 6310973 (042) 6360962 Road, Ghari Shahu, Lahore 26 DHA Phase II Branch, Lahore 65 CCA, Phase II, 042-5748846- 042-5748849 DHA, Lahore Central Commercial Market, Model Town, Lahore 47 042-5884670- 042-5884675 72 27 Model Town, Lahore 13 Bank Square, 28 Cavalry Ground, Lahore 35 Main Boulevard, Officers Housing Scheme, Cavalry Ground Lahore 042-6610531- 042-6610536 32, 6610534 170 29 Chuburji 24, Niaz View Scheme, Rewaz Garden, Chuburji, Lahore (042)7356640- (042)7222236 42 30 Main Market Gulberg 32-E-Main Market, 042-5786955- 042-5786964 Gulberg II, Lahore 59 Islamabad Branch Awan Arcade, Jinnah Avenue, Blue Area, Islamabad 051-2873345- 051-2279897 8 1 2 I-10, Markaz, Islamabad F-7, Markaz F-10, Markaz 4-A,I-10 Markaz, Islamabad 5-A, Markaz, F-7, Islamabad 4-D, Urfi Centre, F-10 Markaz, Islamabad 051-4435804- 051-4435807 6 051- 265 3941-49 051-2809 703- 051-2809 702 711 051-280 4102- 051-280 4106 104 051-4862563- 051-4862567 6 051-2253002- 051-2854932 3 051-7151673, 051-2260270 051-265 3940 3 4 5 Islamabad Stock Exchange 101, W. Waqas Plaza, Blue Area, Islamabad Plot No. 34, I-8 Markaz, Islamabad 39, G-9 Markaz, Mauve Area, Islamabad Shop # 2 & 3 AlMarkaz, Islamabad 6 I-8 Markaz, Islamabad 7 G-9 Markaz, Islamabad 8 F-8 Markaz, Islamabad Babar Center, F-8 2854615 171 1 The Mall , Rawalpindi B.A. Building, 8 The Mall, Rawalpindi 051-5700038- 05140,0515566084,0515566086 051-442408085 5700042,0515700029,0515700037 2 Satellite Town Branch B/20 North Star Plaza, Murree, Road, Satellite Town, Rawalpindi 3 Jinnah Road , Rawalpindi College Road A-351, Jinnah Road, Rawalpindi Rawalpindi 051-5775325- 051-5775324 28 051-5762 0008 051-5762 007 4 5 Chaklala Scheme III 59, Shah Plaza, Branch Chaklala Scheme III, Rawalpindi 051-5766003- 051-5766005 Commercial Area, 4 6 Lalazar Branch Tulsa Road, Lalazar, Rawalpindi 051-5522904- 051-5527814 5 051-5468401- 051-5468403 02 7 Peshawar Road Branch Plot No. 400/2, Gammon House, Peshawar Road, Rawalpindi 8 Airport Road 7- Fazal Town, Rawalpindi (051)5781484- (051)5781483 Airport Link Road, 5 1 Peshawar Branch Peshawar City Branch 6-B, Saddar Road, 091-5287051- 091-5287058 Peshawar Cantt. 7 091-251794-6 091-251380 Park-in Hotel Building, 2 172 Peshawar City 3 Hayatabad Hayatabad, Jamrud Road, Peshawar 091-5822903- 091-5822908 Karkhano Market, 907 4 G. T. Road 10451046,Hashtnagri, Opp: Sarhad Chamber of Commerce, G.T.Road, Peshawar 091- 2593003 091-2593001 1 Quetta Branch Hazar Gunji M. A. Jinnah Road, Quetta Truck Stand, Hazar Gunji, Quetta 081-2827567 081-2460520 081-2827562 081-2460519 2 3 Cut Piece Cloth Market Shahra-e-Iqbal, Quetta, Balochistan Arbab Plaza, Double Road, Quetta 081-2834425 081-2827270 4 Double Road (081) 2441961-62, 2441662 (081) 2441665 1 Chichawatni Rai House, 1, Railway Road, Chichawatni 040-5487802- 040-5487807 5 047- 6337704- 047- 6337706 05 (0943) 414367, (0943) 412988 1 Chiniot Chitral Branch 1-A, Shahrah-eQuaid-e-Azam D.C. Office Road, Opposite 1 173 Mountain Inn Hotel, Attalique Bazar, Chitral 1 414396 Daharki Branch 1285-1287, Zafar Bazaar, Daharki, Taluka & Town Daharki 0723-641255 0723-644040 1 Daska Dera Ismail Khan Gujranwala Road, 052- 6616834- 052- 6619650 Daska 5 0966-720606- 0966-720612 610 3666-B, Kashmir Chowk, North Circular Road, Dera Ismail Khan 1 1 Dera Ghazi Khan Branch B.A. Building, Jampur Road, Deara Ghazi Khan Ground Floor, State Life Bldg. Liaqat Road, Faisalabad 064 2468201-6 064 - 2468104 1 Faisalabad Branch 041-2617436- 041-2617432 9 2 Peoples Colony 237-B, D-Ground, Peoples Colony No 1, Faisalabad 041-8722636- 041-8722184 Commercial Area, 39 3 Susan Road 25-Z-101, Susan Road, Madina Town, Faisalabad 041-8556 673- 041-8556679 5 041-2540801- 041-2540806 3 4 Rail Bazar, Faisalabad P-81, Rail Bazar, Faisalabad 174 5 Yarn Market Branch P-229, Tikka Gali No. 2, Montgomery, Bazar, Faisalabad 041-2621486 041-2621487 6 Minerva Road Branch Shop No. 16 & 17, 041-2540763- 041-2540759 Golden Market, New Grain Market, Minerva Road, Faisalabad 5 7 Sheikhupura Road, Faisalabad P-352-A, Gulistan 041-8582141- 041-8582147 Colony II, Millat Chowk, Sheikhupura Road, Faisalabad 3 1 Gawadar Branch Name Gilgit Branch Airport Road, Gawadar Address e-Azam, Near, Radio Station, Jutial, Gilgit 0864-211783 PABX 07 FAX No No. 1 Shahrah-e-Quaid- 05811-51904- 05811-51903 1 Gojra P-86, Block III, Bohar Wali Gali, Gojra 046-3517876- 046-3517878 77 051-3515704- 051-3515703 707 1 Gujar Khan 58-D & 59-C, Akbar Kiani Shopping Mall, G.T. Road, Gujar Khan 1 Gujranwala Branch B XII-7S-145, 055-3859931- 055-3856471 175 Krishan Nagar, G.T. Road, Gujranwala 1 33 Gujrat Branch Kotla Branch G.T.S Chowk, G.T. Road, Gujrat Bhimber Road, Kotla Arab Ali Khan, Tehsil Kharian, Dist. Gujrat 053-3530069 0537-586892 053-3530319 0537-586337 2 3 Dinga Thana Road, Dinga, Distt. Gujrat (053) 7404844-46 0547-540801 (053) 7404840 1 Hafizabad Branch Hangu Railway Road, Hafizabad Saif ur Rehman Bunglow, Kohat Road, Main Bazar, Hangu 0547-540804 1 0925-624641- 0925-624644 Market, Opp: DCO 43 1 Haripur Main Shahrah-eHazara, G.T. Road, Haripur (0995) 627451-2 063- 2256457 (0995) 627831 1 Haroonabad Branch 15/16-C, Ghalla Mandi, Haroonabad 063-2256458 PROMOTION 176 Promotion is a term that refers to the following statement: “Steps taken by the company to enhance its sales by focusing the target markets” Thus we can say that promotion can be categorized into different categories based on the above mentioned marketing perspective definition of promotion. So advertisement, sales force, billboards etc are major sources through which the promotion scheme can be implemented. This is an age of competition. Numerous organizations are providing financial services to the customer. These days every one is facing pressure of competitors. In this world of growing competition, the only way to survive and grow, for an organization, in the market place is the proper marketing and promotion of its products. Same is the case with banking companies. There is large number of foreign and local banks working in the country and it has been noticed that they are emphasizing much on their marketing strategies. In this scenario, the key for a bank to succeed and attract its customers is adequate promotion of its products &services. The bank can attract and retain its customers through: Sales Promotion Advertisement Direct Marketing Public Relations The most prominent and important way to attract a large number of customers is the advertisement of bank and its products/services. Bank Alfalah has adopted different approaches for the accomplishment of this purpose. For example, formation of Alfalah Mini Golf near Gulberg is a major step taken by BAL. It not only provides a source of recreation to the people but it serves as a major source of marketing for the bank. Due to 177 Bank Alfalah’s assistance for the construction of fountain in Liberty Market Square, it is named as Bank Alfalah Square. BAL Square, for being situated in such a business and commercial area has its unusual importance and has resulted into bank’s promotion. Construction of Shaahdin Manzil as main branch Lahore is going to be the revolutionary step for Bank Alfalah. It would not serve just as a main branch only, but it would also be a great source of ever growing marking and promotion of bank. Bank Alfalah issued its own rupee travellers cheques with highest denomination during the course of my internship. I have seen some colored advertisements of RTC’s in some well-known magazines like Herald. Also, some fascinating advertisements have been printed on Daewoo City Busses, which serves as a dynamic source of marketing. However, one drawback or shortcoming is that, Banl Alfalah has formalized a lot of products and services for its customers, even more than other commercial banks, but any advertisement on electronic media has not been seen. Since, Bank Alfalahs major competitor, Union Bank Limited has started large media campaign, so keeping in view these threats; Bank Alfalah is emphasizing more on its advertisement. Along with the advertisement, the bank is providing personal services to its clients with maximum security as other banks provide. Bank also encourages the public relation policy of marketing. Some brochures and promotional material has been printed but it is distributed mainly through the clients who visit the branch for their day-to-day business or through the customers who come to get information about new schemes launched by the bank. 178 RECOMMENDATIONS It was an interested experience to do internship in Bank Alfalah Limited. The staff was highly cooperated and due to their help I learned big deal about modern banking. I suggest that such an internship program highly integrative for the students of commerce education so that the students should be enquired with the knowledge of practice world .I 179 do summarize that it would be a great help to me in selection of job or future field of work. Here I am putting some suggestions, which will enable the bank to compete with other banks more effectively & efficiently. t is observed that the employees were overburdened so they have to stay I at branch till late at night. In this way their efficiency is affected and hiring more employees can reduce their work. The employees should be signed jobs for specific period and than they should shifted to other department so that they gain knowledge of other jobs. Bank Alfalah Limited should properly advertise and Communicate to public about the services provided by it, so that more customers will be attracted. The bank’s management should give more incentives and pay scale of officers should be revised & improved. System and operations should be more defined and organized. IT draw backs should be improved. Administration drawbacks should be improved by the strict control of general issues. Audit should be held internally. Rather there should be an Audit Department in the branch to make audit on daily basis. This can become as helpful as different banks are having this department of their own. 180 Lockers, ATM, all these facilities should be provided to attract more customers. Expenditures must be control, which are very high. CONCLUSIONS If I have to express my experience of internship in Bank Alfalah Limited Garden Town Branch Lahore I would briefly say: 181 Bank Alfalah is a good Organization in the way that anybody can join it for his/ her longterm career. Overall working environment is comfortable. Management of branch cares a lot of its employees and considers them as the Asset of bank. Behavior of senior executive of bank is very polite and they are caring about the individual’s career and their growth. However management is very demanding about the targets but good reward at the achievement of assigned targets is awarded. Employees at Bank Alfalah are quite efficient. As Garden Town Branch is a new one, its employees have to bring their bank among the list of good banks. Therefore, they work more than their working hours and it is all according to their will. It also shows their loyalty, commitment to organization. Employees are given the benefits like bonus, gratuity funds, loans, increments, and medical. All the customers are entertained individually. Same kind of behavior and attention is given to all the customers. Getting ideas for improvement from customer side is a new idea and that is working very well in Bank Alfalah Ltd. All the customers are asked to fill a suggestion form and the standards of the bank are improved through them. Prioritizing its product portfolio in line with its corporate and consumer needs and wants the bank is committed to develop products that give more value to its customers in both the sectors. In bank, all the work is done on computers. All the entries are made in computer. Balance is fed into the computer. This increases efficiency of the bank. During my internship training I gathered information regarding how a successful bank operational aspect decorticated with the practical. 182 I found my internship training at Bank Alfalah Limited Garden Town Branch Lahore to be a very rewarding experience. The training was beneficial because it helpful me to aware a real life working environment. So far my learning is concerned; all the employees at branch were quite cooperative. They helped me to understand the activities of a bank to possible extent. Their good attitude gave me more confidence to learn more and to ask if I have any query in my mind. Besides their ever going activities they never get irritant by my questioning. I had made an honest efferent to present the working & operation of Bank Alfalah Limited Garden Town Branch Lahore in simplest way. I feel pleasure that I have really gained a lot during 8 weeks & enjoyed working with experienced cooperative & intelligent staff. 183