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EXECUTIVE SUMMARY
Allied Bank has 700 branches in Pakistan in 250 Cities and main objective is to provide its customers with safe, secure and reliable service through wide range of products. The report covers all the product information provided by the bank: Profile of banking industry, in this regard I tried to given the information of banking industry. Profile of company, in the profile of the company I am trying to giving all the possible available information of the Allied Bank Ltd. Company business process, in this section I tried to elaborate all the functions that are performed by each department of Allied Bank Ltd and as well as discuss about the key products of the Allied Bank that are highly involved in the progress of Bank. SWOT analysis of company, in the section, I humbly stated the strength and weakness and as well as opportunity and threats of the organization. It is very difficult to pin out weakness of the Allied Bank but I tried our level best in this regard. Problems and recommendations, in this portion of the report I discuss about some problems and as well as give some suggestions and recommendations to over come these problems. It might be helpful for the Allied Bank. I believe that this report will provide some very important information regarding my departments (Account opening department, Bills/ Remittance department, foreign trade department, accounts department and as well about the Credits Department). I also describe my experiences in these departments and I am sure it would be helpful for all. The SWOT analysis is covered in the report to show the standing of the company in the recent market.
Public Sector Commercial Banks
National Bank of Pakistan NBP First Women Bank Limited FWB The Bank of Khyber KB The Bank of Punjab BOP
Local Private Banks
- Allied Bank of Pakistan
- Askari Commercial Bank Limited
- Bank Alfalah Limited
- Bank Al Habib Limited
- Faysal Bank Limited
- Prime Commercial Bank Limited
- Saudi Pak Commercial Bank Ltd
- PICIC Commercial Bank Limited
- Soneri Bank Limited
- Union Bank Limited
- Muslim Commercial Bank Limited
- Union Bank Limited
- Mashreq Bank
In the meanwhile, western banks started entering into the business. They, with the support of ruling elite, concentrated on the big business, leaving the routine business to the local banks. This reduced the profitability of the local banks.
Introduction of Allied Bank Limited
Vision
became Pakistan. Established in December 1942 as the Australasia Bank at Lahore with a paid-up share capital of Rs. 0.12 million under the Chairmanship of Khawaja Bashir Bux, the Bank had attracted deposits, equivalent to Rs. 0.431 million in its first eighteen months of business. Total assets then amounted to Rs. 0.572 million. Today Allied Bank's paid up Capital & Reserves amount to Rs. 10.5 billion, deposit exceeded Rs. 143 billion and total assets equal Rs. 170 billion. The Allied Bank's story is one of dedication, commitment to professionalism, adaptation to changing environmental challenges resulting into all round growth and stability, envied and aspired by many. The Pre independence history (1940 to 1947) In the early 1940s the Muslim community was beginning to realize the need for the active participation in the field of trade and industry. The Hindus had since the late 1880s established a commanding presence in these areas and industry, trade and commerce in the undivided Sub-continent was completely dominated by them. Banking, in particular, was an exclusive enclave of the Hindus and it was widely believed, and wrongly so, that Muslims were temperamentally unsuited for this profession.
It was particularly galling for Khawaja Bashir Bux to hear the gibe that “Muslims could not be successful bankers”. He decided to respond to the challenge and took lead in establishing this first Muslim bank on the soil of Punjab that was to become Pakistan in December 1942; by the name of Australasia Bank Limited.
The initial equity of the Bank amounted to Rs 0.12 million, which was raised to Rs 0.5 million by the end of first full year of operation, and by the end of 30th June 1947 capital increased to Rs. 0.673 million and deposits raised to Rs 7. million. Australasia Bank (1947to1974) Australasia Bank was the only fully functional Muslim Bank on Pakistan territory on August the 14th, 1947. It had been severely hit by the riots in East Punjab. The bank was identified with the Pakistan Movement. At the time of independence all the branches in India, (Amritsar, Batala, Jalandhar, Ludhaina, Delhi and Angra (Agra)) were closed down. New Branches were opened in Karachi, Rawalpindi, Peshawar, Sialkot, Sargodha, Jhang, Gujranwala and Kasur. Later it network spread to Multan & Quetta. The Bank financed trade in cloth and food grains and thus played an important role in maintaining consumer supplies during riot affected early months of 1948. Despite the difficult conditions prevailing and the substantial set back in the Bank’s business in India, Australasia Bank made a profit of Rs 50,000 during 1947-48. By the end of 1970 it had 101 branches. Unfortunately it lost 51 branches in the separation of East Pakistan. The bank did well in despite losing lot of its assets.
By the end of 1973 the bank had 186 branches in West Pakistan.
Allied Bank (1974 to 1991) In 1974, the Board of Directors of Australasia Bank was dissolved and the bank was renamed as Allied Bank. The first year was highly successful one: profit exceeded the Rs 10 million mark; deposits rose by over 50 percent and approached Rs 1460 million. Investments rose by 72 percent and advances exceeded Rs 1080 million for the first time in bank history. 116 new branches were opened during 1974 and the Bank started participation in the spot procurement agriculture program of the Government. Those seventeen years of the Bank saw a rapid growth. Branches increased from 353 in 1974 to 748 in
- Deposits rose from Rs 1.46 billion, and Advances and investments from Rs 1.34 billion to Rs 22 billion during this period. It also opened three branches in UK. Allied Bank (1991 to 2004) As a result of privatization in September 1991, Allied Bank entered in a new phase of its history, as the world’s first bank to be owned and managed by its employees. In 1993 the “First Allied Bank Modaraba (FABM) was floated.
After privatization, Allied Bank registered an unprecedented growth to become one of the premier financial institutions of Pakistan. Allied Bank’s capital and reserves were Rs. 1.525 (Billion) and assets amounted to Rs. 87.536 (Billion) and deposits were Rs. 76.038 (Billion). Allied Bank enjoyed an enviable position in the financial sector of Pakistan and was recognized as one of the best amongst the major banks of the country. In August 2004 as a result of capital reconstruction, the Bank’s ownership was transferred to a consortium comprising Ibrahim Leasing Limited and Ibrahim Group.
Today the Bank stands on a solid foundation of over 63 years of its existence having a strong equity, assets and deposits base offering universal banking services with higher focus on retail banking. The bank has the largest network of on-line branches in Pakistan and offers various technology based products and services to its diversified clientele through its network of more than 700 branches. (2005 To date) In May 2005 Ibrahim Leasing Limited was amalgamated by transfer to and vested in with and into Allied Bank Limited. ILL shareholders were issued ABL shares in lieu of the ILL shares held by them. Application for the listing of ABL shares in all the Stock Exchange Companies of Pakistan was made. ABL was formally listed and trading of the shares of the Bank commenced w.e.f. the following dates. Islamabad Stock Exchange 8 th^ August 2005 Lahore Stock Exchange 10 th^ August 2005
Grade MG 11 Qualification MA (Islamiyat)
Name MRS ROZINA AMIN Designation Officer Grade MG 12 Qualification Graduation
Name KHURAM ZESHAN Designation Cash officer Grade MG 12 Qualification MA (ENGLISH)
Name ABDUL JABBAR Designation Head cash department Grade MG 12 Qualification Matric
SWOT ANALYSIS
STRENGTHS
Allied Bank is considered to be a very sound bank in the financial circles. Allied bank, where the customers can safely keep their money as long as they want. I am pointing some of the major strengths of the bank:
- COMPASSIONATE CUSTOMER SERVICE
The officers of Allied Bank are considered as one of the most able professionals in the banking world (some belong to BCCI). However, they have added some local flavor in accordance with their targeted segmented. Especially, in High Street Branch, I observed that they interact with their clients as if they are their personal friends and discuss about their problems as their own.
As a result of the compassionate and personalized services of the officers, the clients’ perception for Allied Bank is very high. They have trust and feel themselves to be secure while banking with Allied Bank.
Allied Bank has opened all its branches at commercial areas so that the customers or clients face no problems in reaching to the bank.
The bank is focusing on Trade Financing; it attaches great significance to the development and maintenance of healthy correspondent relationships with other banks and financial institutions. Towards this pursuit, Allied Bank has developed excellent business relations with foreign banks, whose support in terms of lines of credit extended to the bank, has enabled it to handle the ever-growing trade volumes.
Allied Bank’s objective has been to expand its branch network to meet clients’ needs. It is heartening to note that in just three years, which is considered the infancy stage in the industry, the bank has increased the branch network to 750. The expansion program is strategically important to increase customer base and to approach different customer segments.
Allied Bank has got a reliable and easy to use internal computer system. Every information regarding the transactions in customers’ deposits has been computerized. Currently, bank excel is being practiced.
- Bank is financially strong and has a huge deposit reserve.
All the opportunities of the 21st century are to be availed in the information technology. Information technology is the future. Therefore Allied Bank should emphasize much on IT, especially the E Banking. Bank can design a universal account like other foreign banks, to enhance online facilities.
- EXTENSION OF BRANCH NETWORK
Allied Bank growing business requires an extensive branch network. There are great opportunities for Allied Bank for the expansion of its business.
Allied Bank has introduced a number of financial schemes including special Hari Bhari. During the last few years, Allied Bank’s deposits have been increasing which is a very healthy sign. But in 2007 its deposits decreased a little bit. Therefore, with the commencement of new schemes there can even be a greater increase in its deposits.
- Bank can extend its network in other countries.
- It can enhance its profitability by making use of new technology.
- It has the opportunity to introduce new products and services
- New technology can help it enhance profitability.
THREATS
• ECONOMIC CONDITIONS
Despite the difficult circumstances that confronted the banking sector in particular and the country in general, Allied Bank has been still highly profitable. But, the facts can’t be denied and there might be an adverse impact of such situation.
Allied Bank is facing a strong competition by its major competitors; Union Bank and Askari Commercial Bank. Business of these banks is also growing with very high pace.
The SWOT analysis of the bank signifies that its strengths overcome its weaknesses and its opportunities are more than its threats. This is a positive sign for any organization.
PROBLEMS IN ALLIED BANK LIMITED
- Bank is facing a high tax rate, which affects its profitability and attractiveness for new entrants.
- Middle class and low income group have limited access to bank credit.
- Weak internal controls, non-merit based recruitments and high administrative costs affected the performance of bank.
RECOMMENDATIONS
- Mostly banks are endeavoring to bring to its customers new and improved products and services that provide efficient and effective solutions such as web-based e-banking allows its customers to access its banking services via internet. Corporate customers can efficiently conduct their day-to-day business transactions including account balance queries, account details, account statements, fund transfers, issuance of payment order and demand drafts and many more via an automated, secure, versatile and a straight through processing platform. I would like to recommend Allied Bank Ltd. to provide this facility to their customers as well.
- The SWIFT system (Society for Worldwide Inter bank Financial Telecommunication) has been introduced for speedy services in the area of home remittances. The system has built-in features of computerized test keys, which eliminates the manual application of tests that often cause delay in the payment of home remittances.
- In my point of view Allied Bank Limited should bring swift facility in their all branches.
- There should be central complaint cell in bank in order to reduce the people’s complaints and foster the ratio of productivity.
- Money laundering and white-collar crimes are on the rampant. Aggressive and comprehensive mechanism should be set-up to save the bank
- General working conditions ought to be improved.
- Allied Bank needs to improve its website. More information relating to financial performance of the bank should be available on the website.
- Management should distribute work equally among different employees. Some of the employees are overburdened while some sections are overstaffed.
Ratio Analysis is an important and age-old technique of financial analysis. It simplifies the comprehension of financial statements. Ratios tell the whole story of changes in the financial condition of business. It provides data for inter firm comparison. Ratios highlight the factors associated with successful and unsuccessful firm. They also reveal strong firms and weak firms, over- valued and under valued firms.
It helps in Planning and forecasting. Ratios can assist management, in its basic functions of forecasting, planning, co-ordination, control and communication. Ratio analysis also makes possible comparison of the performance of different divisions of the firm. The ratios are helpful in decision about their efficiency of otherwise in the past and likely performance in future. A ratio also helps in Investment decisions in the investors and lending decisions in the case of bankers etc.
Types of Ratios
Following the main types of ratios that we are going to calculate in this assignment,
- Liquidity Ratios
- Leverage Ratios
- Profitability Ratios
- Activity Ratios 1. Liquidity Ratios
The liquidity of a firm is measured by its ability to satisfy its short term obligation as they come due. Liquidity refers to the solvency of the firm’s overall financial position-the ease with which it can pay its bills.
Current Ratio
One of the most commonly cited financial ratios, measures the firm’s ability to meet its short term obligations. It is expressed as follows:
Current Assets
Current Ratio = ---------------------
Current Liabilities
Current ratio is a general and quick measured of liquidity of firm. It represents the margin of safety or cushion available to the auditor. As the chart is showing in 2007 current ratio was 1.05 then it decreased in 2008 to 1.02 then in 2009, current ratio was 1.05 again. So it shows banks ability to pay for current liabilities decrease in 2008 but then bank was able to fulfill this deficiency in 2009.
2. Leverage Ratios
Debt to Total Asset
The debt ratio measures the proportion of total assets financed by the firm’s creditors. The higher this ratio, the greater the amount of other people’s money being used to generate profits. The ratio is calculated as follow:
Total Liabilities
Debt Ratio = ---------------------
Total Assets
Chart shows that Debt to total asset ratio increased in 2008 i.e. bank invest more from deposits of customers may be due to increase of interest rates people invest more. But than in 2009 suddenly ratio decreased may be because of increase in company assets.
Debt to Equity Ratio
Total Liabilities
Debt to Equity Ratio = -----------------------
The net profit margin measures the percentage of each sales dollar remaining after all cost and expenses other than interest, taxes, and preferred stock dividends are deducted. The net profit margin is calculated as follows:
Net Profit
Net Profit Margin = -------------------
Sales
Net profit margin measures the percentage of each sale rupee remaining after all costs and expenses other than interest, taxes, and preferred stock dividends are deducted. It represents the “pure profits” earned on each sales rupee. In 2004, the net profit margin was 3.65% it increased in2005 to 30.81% but decreased in 2006 to 25.54% while it decreased enormously in next year and in 2007, net profit margin was 19.23%. Above decreasing trend shows company is not getting favorable profits.
Return on total assets(ROI)
The return on total asset, often called the return on investment, measures the overall effectiveness of management in generating profit with its available assets. The higher the firm’s return on total assets, the better it is for bank. The return on total assets is calculated as follows:
Net Profit/ (Loss) after tax
Return on Asset = ----------------------------------
Total Asset
Return on asset measures the firm’s ability to utilize its assets to create profits by comparing profits with the assets that generate the profits. The higher the firm’s return on assets, the better will be the position of firm. In 2007, the return on asset was 1.27% it increased in 2008 to 1.13% in 2009 it again increased to 1.70%. Which shows that the firm is generating more profits by utilizing its assets more efficiently year by year?
Return on equity
The return on common equity measures the return earned on the common stock holders’ investment in the firm. Generally, the higher this return, the better off is the owners. Return on common equity is calculated as follows:
Net Profit/ (Loss) after tax
Return on Equity = ----------------------------------
Shareholder’s Equity
This ratio is one of the most important ratio used for measuring the over efficiency and performance of the firm as the primary objective of firm is to maximize its profits. This ratio is of great importance to shareholders as well as management of the company. This shows that how well the company’s reserved is being efficiently used. A high return on equity shows the firm’s acceptance of investment opportunities and effective expense management. In 2007 return on equity was 22.14%% it decreased in 2008 to 19.98% and increased in 2009 to 27.51%.Downward trend in 2008 is due to lending money more from creditors deposit and less from company reserve, But trend increases in 2009 due to efficient use of company reserves.
- Activity Ratios
Activity ratios measure the spread with which various accounts are converted into sales or cash inflows or outflows.
Total Asset Turnover
The total asset turnover indicates the efficiency with which the firm uses its assets to generate sales. Total asset turnover is calculated as follows:
Net Sales
Total Asset Turnover = -------------------
Total Asset
Foreign currency accounts can be opened either as savings accounts or current accounts.
- Pls Saving Account: Saving account are designed to mobilizing savings primarily from a large number of individuals and household.Any one or more individuals or partners can open a PLS saving account with the Bank.
There are four sub types of each account which are as follows:
a) Individual Account: This type of account is for the customers who are interested in personal/ individual account and such customers can be a salaried person, a sole proprietor who does not want to open their account on the name of company, a housewife. b) Sole Proprietor Account: This type of account is only for the customers who want to operate an account on the name of their company. c) Joint Account: This type of account is for the customers who want to operate joint account and this type of customer can be a house wife, a salaried person, a sole proprietor and a student as well.
d) Partnership Account: This type of account is limited only for the partners of one business and maximum limit of partners for an account is three.
ACCOUNT OPENING FORM
The first step is to fill an “account opening form” by the applicant. Following information is to be given:
CURRENCY OF ACCOUNT:
One of the following choices is to be ticked:
Rs., US$, P.Stg, DM, J Yen
TYPE OF ACCOUNT:
The account opened can be PLS/SAVING, CURRENT, ROYAL PROFIT ACCOUNT.
TITLE OF ACCOUNT:
It shows the name of the person in whose name account is to be opened. Once an account is opened in a specific name, it can never be changed.
PERSONAL ACCOUNT:
The account can be opened as individual or joint account.
JOINT ACCOUNT:
In case of joint account more than one person can operate the account. However instructions are to be concerning the operation of the account i.e.: Jointly: In this case account cannot be operated if signature of anyone of the account holder is missing. Either or survivor: In this case if anyone of the account holder of the joint account passes away the survivor cannot operate the account without getting the succession certificate. Anyone of us:
Under this instruction account can be operated with the signatures of any of the joint account holders. Following information is also given on the account opening form: Name in block letters In case of joint account the names of both account holders are to be mentioned. Father’s/husband’s name Occupation: The applicant must give exact description of occupation e.g. instead of writing businessman, the nature of business is to be written. Name and address of employer Nationality Country of residence Telephone number N.I.C Number Passport number (if any) Date and place of issue required in case of N.I.D as well as Passport. NOMINEE NEXT OF KIN: The name, address and relation are to be specified. This information is required to get information concerning account holder in case he cannot be contacted. The form is not accepted if this information is missing.
TYPE OF ORGANIZATION: One of the following choices is to be ticked:
- Limited company
- Public
- Private
- Partnership
- Club/society/association
- Sole proprietorship
- Others
