Alfalah-Bank-Internship (NUML)

8/7/2019 Alfalah-Bank-Internship (NUML)

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ACKNOWLEDGEMENT

All thanks to Allah Almighty, the benevolent and compassionate, who blessed me with

the power & capabilities and remained contented on all intricacies found during the

successful completion of my task.

Im grateful to my family members whose heart felt prayers and appreciation have

always been an asset and a great source of inspiration of me. It could be complicated for

me to accomplish to task without their shadow of love.

Im also obliged to respected Mr. Jabbar Qureshi who furnished me this prolific

opportunity to avail a practical experience, which is application of theory in Internship

and also to my teacher Mr. Saeed Ahmad who provided his full support and guidance

for this 6 week internship program.

I also extend my thanks to Mr.Fahad Balouch and Mr. Waqas Chaudary along with

all the Area Staff for their encouraging response and guidance to make my internship as a

real learning experience.

Naeem Iqbal

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Table of Contents

3

Page No.

Executive Summary............. 04

Introduction.. 05

o Central Background Information.. 05

o Company Background. 05

o Vision & Mission.. 07

o Organizational Hierarchy (Chart). 08

o Board of Directors... 09 Departments Worked During Internship.. 10

o Account opening... 10

o Remittances.. 13

o Credit Marketing 16

o Credit Administration department (CAD) 27

o Trade Finance.. 34

Application of Class Room Learning. 41

Learning as an Internee....... 42

Marketing Analysis...... 43

Human Resource Assessment.. 45

SWOT Analysis 48

PEST Analysis.. 51

Financial Analysis 54

o Horizontal and Vertical Analysis... 54

o Ratio Analysis... 64

Recommendations. 70

Conclusion. 72 Bibliography.............................. 73


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Executive Summary

Pakistan after getting its independence, did not inherit a strong banking industry and

since then saw a number of events in the industry, like the nationalization of banks in the

1970s. However, the banking industry of Pakistan has been grown over the past few

years, mainly because of the consistent policies implemented by the Government of

Pakistan, including the privatization of banks in Pakistan. Also the State Bank of

Pakistans, monetary policy has been very friendly toward the banking industry. But in

2008 because of world economic crisis, the economy of country was in crisis so the all

businesses went down so as the banks business result in lower performance and

profibility. There are a number of different banks established in Pakistan, including localincorporated commercial banks, foreign incorporated commercial banks, development

financial institutions, investment banks, discount & guarantee houses, housing finance

companies, venture capital companies, micro finance banks and Islamic banks.

Bank Alfalah was incorporated in 1997 and was privatized by the Government of

Pakistan. The Abu Dhabi Group bought the majority shares of the bank and so got the

rights to control the banks operations. Since the privatization of the bank, Bank Alfalah

has implement different policies to make it one of the best banks of Pakistan, whichincluded introducing new products and services and increase its operations by opening

new branches in Pakistan.

Today Bank Alfalah is operating in more than 95 cities of Pakistan and operating its

foreign branches in Bangladesh, Afghanistan and Bahrain. The total employees of Bank

Alfalah in 2008 were 7,584.There are only 2% increase in employees this year as

compared to previous year because of the conditions of Pakistans economy. The

financial statistics of Bank Alfalah are quite good as their human resource. The profitafter taxation for Bank Alfalah in 2008 amounted to Rs.1, 301 million and its total assets

for 2008 amounted to Rs.348, 990 million. The book value and earning per share of the

bank have decreased this year. The over all performance of BAFL is decreased in 2008.

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Bank Alfalah promotes its products and services through print and electronic media.

Bank Alfalah also promotes itself by sponsoring different events.

I did my six weeks internship at Bank Alfalah, Abdali road branch and worked in Credit

administration department, Trade Finance Department, Credit marketing department,Account opening department, Human Resource department and remittances department.

The over all experience at the bank was good. A lot of things have been learnt, some of

which relate to classroom learning. Alfalah is expanding its network all over the Pakistan

yet there are many untapped areas. The competitors of BAFL are also in aggressive

position. The Economic and Political conditions of the country are very disturbing; the

high inflation and law and order situation affects every business including Alfalah. Social

and technological issues are of secondary importance but they also can not be neglected.

BAFL is focusing positively regarding technological issues but it should also keep its eye

on the social cultural factors also.

Some of the recommendations include promotion on the basis of merit, loans to students

and scholarship programs for its employees. Lastly Bank Alfalah has seen a rapid growth

in its activities by introducing a range of products and services and showing its presence

in the country by opening new branches and in future should keep this momentum and

always strive to become the best.

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Introduction

Central Background Information

Banking is one of the most sensitive businesses all over the world. Banks play an

important role in the economy and are considered as the backbone of an economy in

every country and Pakistan is no exemption. Banks are custodian to the assets of the

general masses. The banking sector plays a significant role in a contemporary world of

money and economy. It influences and facilitates many different but integrated economic

activities like resources mobilization, poverty elimination, production and distribution of

public finance.

Pakistan has a well-developed banking system, which consists of a wide variety of

institutions ranging from a central bank to commercial banks and to specialized agencies

to cater for special requirements of specific sectors. The country started without any

worthwhile banking network in 1947 but witnessed phenomenal growth in decades to

come. By 1970, it had acquired a flourishing banking sector. Nationalization of banks in

the seventies was a major upset to domestic banking industry of the country, which

changed the whole complexion of the banking industry. With irrational decision at the

top, all the commercial banks were made subservient to the political leadership and the

bureaucracy. The commercial banks thus lost their assets management equilibrium,

initiative and growth momentum. They ceased to be a business concern and became big

bureaucracies. The era of nineties was the climax of privatization, deregulation and

restructuring in the domestic banking industry and financial institutions. The Muslim

Commercial Bank was the first bank to privatize. Followed by Allied Bank limited,

United Bank Limited and Habib Bank Limited have all been privatized.

Today, the banking sector is providing financial solutions to the masses and is growing

and becoming a solid partner in the development of the Pakistani economy, this growth

potential has seen different acquisitions in the banking sector, with the Standard

Chartered and Union Bank being the most prominent.

Company Background

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Bank Alfalah has gone through different phases over the years. Its name and been

changed in the following sequence.

Bank of Credit and Commerce and International (BCCI)1972

Habib Credit and Exchange Bank1992

Bank Alfalah1997

Bank of Credit & Commerce International (BCCI) was a Pakistan based bank,

established by Mr. Agha Hassan Abdi from UBL, in association with U.A.E and Europe.

BCCI has its branches in 74 different countries of the world. It had its 3 branches in

Pakistan, Karachi, Lahore and Rawalpindi. The Lahore branch was opened on 15th

December1978. This branch was opened at that time when some other internationalbanks like Citi Bank, Bank of America, and American Express etc. were already

working. But within a few years this branch crossed mostly all the other banks in case of

deposits, advances, imports and exports dealings, guarantees, travelers cheque sales etc.

In 1991, the BCCI was banned, when it was accused by European countries that the bank

was involved in some illegal operations with Gulf countries. The major reason behind

European accusation was that BCCI was of Islamic mode. Therefore, the bank was closed

due to international pressure.

In July 1991, the branches of BCCI in Pakistan at that time were taken over by The

Ministry of Finance and SBP. All three branches were given under Habib Bank Limited

after valuation of its assets for 15 million dollars, which were named as Habib Credit and

Exchange Bank (HCEB) and these were working as subsidiary of Habib Bank Limited.

Following the privatization in 1997, Habib credit and Exchange Bank assumed the new

identity of Bank Alfalah on June 21st, 1997 as a public limited company under the

Companies Ordinance 1984. Its banking operations commenced from November 1st,1997. The bank is engaged in commercial banking and related services as defined in the

Banking companies ordinance, 1962. The bank is currently operating through 321

branches. This includes 60 Islamic banking branches and 8s foreign branches in

Bangladesh, two in Afghanistan and one offshore banking unit in Bahrain with the

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registered office at B.A.Building, I.I.Chundrigar, Karachi. The bank is listed on the

Karachi and Lahore Stock Exchange with a ticker name of BAFL.

Credit Rating

PACRA, a premier rating agency of the country, has rated the bank

For long term AA (double A)

For short term A1+ (A one plus)

These ratings denote a very low expectation of credit risk, strong capacity for timely

payment of financial commitments in the long term and by highest capacity for timely

repayment in the short term, respectively. Further, the unsecured subordinated debt (Term

Finance Certificates) of the bank has been awarded a credit rating of AA- (double aminus).

Bank Alfalah has expanded its branch network and deposit base, along with making

profitable advances and increasing the range of products and services. Bank Alfalah is the

5th largest bank of Pakistan in terms of its assets that are 6% of the total banking sector

assets. The banking sector has expanded rapidly in Pakistan along with the fast paced

economic growth. The increased competition in the banking sector has encouraged the

Banks to come up with services that could satisfy the needs of a large consumer base.

The result has been increased profitability of all banks.

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 its commitment to culture of innovation and seeks out synergies with clients

and service providers to ensure uninterrupted services to its customers. It perceives the

requirements of its customers and matches them with quality products and service

solutions. During the past twelve years, it has emerged as one of the foremost financial

institution in the region endeavoring to meet the needs of tomorrow today.

The bank also entered into other dimensions of financial services brokerage, asset

management, and insurance through its subsidiaries, which are in their development

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phase and would require sometime before emerging as material contributors to BALs

revenue stream.

Vision & Mission

Vision

To be the premier organization operating locally & internationality that provides the

complete range of financial services to all segments under one roof.

Mission

To develop & deliver the most innovative products, manage customer experience, deliver

quality services that contributes to brand strength, establishes a competitive advantage

and enhances profitability, thus providing value to the stakeholders of the bank.

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Organizational Hierarchy

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Chief Executive Officer

Co-Chairman Central Management Committee

Group Heads

Regional Managers

Area Managers

Hub Managers

Branch Managers


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Its a general hierarchy of bank which is showing about the main authorities of Bank

Alfalah Limited who are controlling its management in Pakistan. Banks management is

divided into different groups, regions and areas. Co-chairman is providing supervision to

group heads that are responsible for controlling the affairs of different groups. After

group heads in the hierarchy, there are regional, hub and area managers who are

managing and guiding the working of different branches of bank.

Board of Directors

The board of directors has the authority in guiding Bank affairs and in making general

policies. Some directors are the personnel of the Bank Alfalah Limited follows.

H.E. Sheikh Hamdan Bin Mubarak Al

Nahayan

Chairman

Mr. Abdulla Nasser Hawalileel Al-

Mansoori

Director

Mr. Abdull Khalil Al Mutawa Director

Mr.Khalid Mana Saeed Al Otaiba Director

Mr. Ikram Ul-Majeed Sehgal Director

Mr. Nadeem Iqbal Sheikh Director

Mr. Sirajuddin Aziz Director & CEO

Departments Worked During Internship

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I did my internship at Bank Alfalah Abdali Road, for a total duration of six weeks and the

departments that I worked during this time are as follows:

Account opening

Remittances

Credit Marketing

Credit Administration department (CAD)

Trade Finance

Accounts Opening Department

Accounts opening department is one of the departments that come under the retail/general

banking facilities provided by Bank Alfalah Abdali road. Some of the major depositaccounts opened by Bank Alfalah Abdali road are as follows:

Major Deposit Account Products

Current Account

Current Accounts are non interest bearing accounts that have a minimum account

opening requirement of Rs. 10,000. No zakat is deducted on the accounts balance.

Furthermore all current account holders receive a Hilal debit card and there are no

restriction on the number of withdraws or deposits made to and from the account.

Profit& Loss Saving Account

Profit& Loss saving accounts can be opened with a minimum balance requirement of Rs.

5,000 and profit is credited on a half yearly basis. There are no restrictions on the number

of deposits and withdrawal made to and from the account and all account holders receive

a Hilal debit card as well. Profit and loss saving account cannot be opened by a business

corporation, however can be jointly opened by individuals. Profits are paid at 2% on all

account balances.

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Basic Banking Account (BBA)

Basic Banking Account was introduced by banks on an order by the State Bank of

Pakistan and is current in nature. There is no minimum balance requirement for BBA,

however initial deposit must be Rs 1000. Maximum two withdrawals and deposits are

allowed by cheque, while there is no restriction on ATM withdrawals.

Royal Profit Account

Royal profit accounts are opened with a minimum balance requirement of Rs 50,000. The

basic aim of this account is that the higher the balance the higher the return, as profit is

credited on a monthly basis. The profit paid to account holders is as follows:

Profits paid on Royal Profit Account

Amount Profit pa.

From Rs.50,000 to 999,999 2.50%

From Rs.1,000,000 to 4,999,999 3.50%

Rs.5,000,000 and above Negotiable

Kifayat Account

Kifayat account is another saving account product that can be opened with a minimum

balance requirement of Rs 10,000, with a maximum limit of Rs 1 million. Profit is

calculated on a monthly basis, while it is credited on quarterly basis. Bank Alfalah pays

7% pa interest on Kifayat Account.

Mahana Amdan Account

Mahana Amdan account is Term Deposit Receipt (TDR) for three years that can be

opened with a minimum balance requirement of Rs 100,000, with a maximum limit of Rs

15 million. Profits are paid at 10% pa, credited on a monthly basis. Other features of this

account include free personal accident insurance and automatic renewal for another 3

years, after the expiry of original period.

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Alfalah Education

Alfalah education is a one year TDR that can be purchased by people having school

going childrens. A person can purchase a unit for Rs 100.000, with a maximum of 3

years. This TDR pays 7%, paid at maturity and gives an additional advantage of giving

monthly school fee of the childrens if the breadwinner of the family dies.

Basic Requirements for Account Opening

The basic requirements to open an account for individuals/self employed are as follows:

CNIC

Source of income (salary slip etc)

NTN certificate (optional)

Company letterhead or authorization (as required)

The basic requirement to open an account for a partnership:

Partnership Deed

Partners CNIC

Company Letterhead


The basic requirement to open an account for companies:

Memorandum of Association

Article of Association

Directors CNIC

Company Letterhead


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Internal Codes for Bank Alfalah Accounts

Some of the major account opened at Bank Alfalah Abdali road and their internal codes

are as follows:

Internal Codes for Some Accounts

Account Type Code

Current Account 010*****

Profit& Loss Account 020*****

BBA Account 0189****

Royal Profits 029*****

Current Account USD 018*****

Major Work Done by Account Opening Department

Stop Payment

If a customer looses their cheque book, then that customer will have to come to the bank

and firstly report the loss and then stop payment, by telling the series of cheque he has

lost. By stopping payment, the customer is guaranteed that no illegal payment is made

from their account. The process for stopping payment, after the customer tells that he has

lost is cheque book is that he fills a Form B, which is same as a cheque book requisition

form and an indemnity form, stating no responsibility on behalf of the bank if any illegal

payment is made before the time of announcing a cheque book lost.

Bank Statement and Bank Balance

A bank statement tells the whole activity of a bank account over a period of time.

Customers often come and want their bank statements and have to fill a form, relating to

the time period for which the bank statement is needed. As part of my internship, I was to

assist the customer to fill the Bank Statement Form and printed statement is given

through the banks software. Often customers want to know their accounts balance over

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the phone and thus I had to tell them their account balances using the banks information

system Bank Smart.

Account Opening

Whenever a customer comes to open their account, they have to fill a relationship

contract with the bank. As part of my internship I had to fill these forms and then use the

appropriate bank stamps to complete these forms. Also as part of the relationship form, I

also had to do a Verisys, a verification system started by NADRA on the CNIC of the

new account opener. A Verisys tells, if more information pertaining to the customer is

needed to open the account or not. Furthermore as all relationship forms have to be sent

to Karachi, a central location, for all account relationship forms.

Remittances

The need of remittance is commonly felt in todays business. A major function of any

bank is to transfer of funds form one place to another.

There are two main types of instruments that are used to transfer money, which are as

follows:

Pay order: Used to transfer money within the city

Demand Draft: Used to transfer money outside the city

Pay Order

Pay orders are made to transfer money within the city and this is a safe way to transfer

money as the person who makes the transfer through pay order pays in advance. The

procedure that is carried out in transferring money through pay order is as follows:

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Procedure for Transferring Money through Pay Order

The customer will come to the bank and fill in the pay order application, giving in the

details to which account the money is being transferred, the amount etc and attach a

cheque to pay for the pay order. Pay orders can also be made through cash but mainly it

is made through cheque.

The officer checks all the details in the application, makes out the charges for the transfer

that the customer will pay and then make the pay order for the customer and pass the

following entry:

Customer A/c

Pay order payable

When the customer in favor of whom the pay order was made gives the pay order to his

branch, the entries passed are:

Pay order payable

Customer A/c

Demand Draft

Demand Draft is another way in which customers can transfer money outside the city.

There are two types of situations for transfer of money through demand drafts:

Outward DDs

When a customer comes to Bank Alfalah to make a DD to transfer money outside the city

is known as outward DD. The customer will fill the details in a DD application form, and

will attach a cheque or pay cash as he wish.

Then the officer will check all the details and make a demand draft for the customer and

pass the following entries:

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For Cheque: For Cash:

Customer A/C Sundry A/c

Head Office Head Office

Inward DDs

This is the procedure adopted when the issuing branch sends copy of the instrument as an

advice. When the bank receives the advice, the officer will pass the following entries:

Head Office A/c

DD Payable A/c

When the customer comes with the DD to get his payment, the following entries are

passed:

DD Payable A/c

Cash

If that customer is a Bank Alfalah account holder then the following entries are passed:

DD Payable A/c

Customer Account

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Foreign Remittances

Another type of remittances is foreign exchange transfer from another country to a Bank

Alfalah account in Pakistan, through SWIFT. Bank Alfalah for foreign exchange

transfers takes the help of Citi Bank for routing.

Procedure for Foreign Transfers

The customer will come to Citibank to transfer money to Pakistan. The entries passed

will be:

Customer A/c

Citibank A/c

Citibank will then transfer that money to Bank Alfalah Karachi. The entries are:

Citibank A/c

Bank Alfalah Nostro A/c (khi)

Later Bank Alfalah will transfer the Nostro A/c money into the demand account.

Nostro A/c Bank Alfalah

Demand A/c

Now when the customer will come to take his money, the following entries will be made:

Demand A/c

Customer A/c

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CREDIT MARKETING DEPARTMENT

Credit means belief or trust. The quality of being credible or trustworthy. Another

words we can define credit as trust in ones integrity in money matters and ones ability

to meet payment when due.

Credit marketing department deals with extending loans (credit facility) to customers

before sanction advice. State Bank of Pakistan (SBP) has prescribed regulations which

are called PRUDENTIAL REGULATIONS. Every bank has to follow these

regulations. If any bank violates the regulations it should be liable for penalties.

The Bank Alfalah limited credit is extended on the basis of these rules and regulations.

These regulations tells the term and conditions under which you can extend loans to the

borrower and to what extent.

CREDIT FACILITIES

At BAL there are two types of credit facilities

Funded facilities

Non funded facilities

FUNDED FACILITIES

These are the facilities in which there is direct involvement of cash fund. Following are

the funded facilities.

Current finance CF

Term finance TF

Finance against foreign bills FAFB

Finance against packing and credit FAPC

Finance against imported merchandise FIM

Finance against trust receipt FATR

Local bills discounted LBD

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Current Finance CF

The extensively used financing mode at BAL is current finance (CF) current finance is

used to finance both individuals and industries.

Individual take current finance for their personal use while in industries. It is taken for

fulfilling the requirement of working capital.

Term Finance TF

Term finance is for specified time period. Term finance is given for fixed asset financing.

Finance against Foreign Bills FAFB

In FAFB facility exporter take loan from bank on the behalf of their foreign export bills.

Like exporter sends shipment but at that time he needs fund for the operation of the

business. He may go to the bank and surrenders all the documents including L/C, Bill of

lading etc. bank checks all the documents to be in accordance with terms and conditions.

If they find no discrepancy, they give money to exporter but take some margin on it.

Finance against Packing and Credit FAPC

FAPC is taken for the preparation of consignment. It has two forms.

Pre shipment

Post shipment

1) Pre Shipment

Pre shipment loans are export related working capital financing.

2) Post Shipment

Post shipment financing is essentially the receivable financing to the exporters till the

period he is out of cash after the shipment.

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Finance against Imported Merchandise FIM

This facility is allowed against the commodities imported from other countries usually

through letter of credit. Some time importer does not have enough amount for paying the

imported merchandise therefore. He request to the bank to pay all dues to the exporter

against the security of imported merchandise. Bank pays the amount and releases the

goods, when the importer pays off its liability partially / fully.

Finance against Trust Receipt FATR

Finance is extended upon the trust receipt signed by borrower. Importer has to import the

product. There are three conditions.

Pay money and get thing

Get fine facility

And third is that if that client is trust worthy for bank believing on him based upon his

past record. He releases the goods against the trust receipt. Trust receipt is given to the

bank by the customer. The customer in turn commits that I will pay on such and such

date. Banks pays all taxes and gets merchandise and then gives it to client. Bank do

charges markup against such financing. FATR is for specific period of time. If client doesnot pay with in specified time then bank will charge higher per day markup.

Local Bills Discounted LBD

Payment against documents or local bills is made by the banks as payment against L/C

comes due payment is made for imported documents. For example when seller of phutti

(raw cotton) gives all the documents or bills to bank as to get bills discounted in which he

gets immediately payment which he would receive after the season.

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NON FUNDED FACILITIES

The facilities where there is no direct involvement of banks fund. There are two types of

unfunded credit line facility, which are as follows:

Letter of Credit (LC)

Letter of Guarantee (LG)

Letter of Credits

A letter of credit is a written undertaking by a bank (issuing bank) given at the request

and accordance of a buyer (the applicant) to the seller (the beneficiary) to a fact payment

up to a stated amount of money within prescribed time limit provided that the terms and

conditions are complied with. Letter of Credits issued in the international trade business.

There are two types of Letter of Credits:

Usance LC

Usance LC is a form of LC, whereby the bank engages to honor the beneficiary usance

draft on an acceptance that the items are in accordance with the conditions. Payment is

made against acceptance.

Sight LC

Theses are letter of credit where the bank engages to honor the beneficiarys sight draft

upon presentation provided that the documents are in accordance with the conditions of

the L/C. This is a more safe form of letter of credit as payment is made against the

documents.

Letter of Guarantees

Letter of guarantees is a guarantee that the bank gives to an organization on behalf of the

bank. Letter of Guarantees are mainly used when a tender for a specific job is filled by a

customer. There are three main types of LGs:

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Bid Bond

Bid Bond are filled at the time of filling out the tender and states that if the company is

given the tender, it will start working on it and will not walk away.

Performance Bonds

Performance Bonds are issued to the beneficiary, to guarantee him that the applicant of

the tender will perform the contract under a specific period of time. Performance bonds

are issued after the tender is approved of the applicant.

Mobilization against LG (MALG):

This is a guarantee that the bank gives when the beneficiary (the firm that issued the

tender) that pays an advance of tender to the applicant (the firm that gets the tender), thathe will return that advance amount.

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Flow Chart of Processing of fresh

proposal

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1. Interview prospective

borrower in the presence of creditManager.

2. Receive request stating theamount, type, tenor and purposeof facilities as well as repaymentand securities offered.

3. Prepare visit report to assesswhether the borrower is a goodcredit risk.

3a. Where proposal is not viable thenrefuse request.

4. Where proposal is viableallocate task to credit officer.

5. Request CIB and other creditreport from SBP and other banksrespectively.

6. Where irregularity foundreturn proposal to customer forregularization/ rectification.

6a. Where the above not regularizeddecline proposal.

7. Where irregularity not foundprepare CLP providing allnecessary details.

8. Perform a comparativeanalysis of audited three yearsreports. Also prepare spread sheetfor various ratios.

8a. Check proposal forcompliance with prudentialregulations.

9. Where regulation compliedwith and credit manager gives hisapproval, sign and forward CLPto Credit Manager.

10. Receive the above and crosscheck information in CLP withthat financial statements andspread sheet.

11. Sign and forward CLP withattachments to Branch managerwhere financial analysis proves tobe favorable.

12. After necessary review anddiscussion with credit manager,sign and forward documents tothe secretary BCC.

13. Receive proposal form, enterin the relevant register and allot

control number.

13a.Ascertain whether the proposal iswithin the predefined sanctioninglimits of BCC.

14. Make photocopies of CLP and

provide to members of BCC.

15. Present CLP with auditedfinancial statements etc. in sessionheld by BCC to discuss risk/rewards and other factorsassociated with credit proposal.

1. Interviewprospective borrower

2. Receipt of request

Prepare visit report

Viabl

e

3a. RefuseRequest

4. Request givento credit officer

A

5. Request CreditReport

A

Irregulari

ty

6. Return proposal

Regularize

6a. Declineproposal

7. Prepare CreditLine Proposal

(CLP)

B

8. Spread Sheet

B

9. Sign / Forward

8a. Refer ca

Prudenti

alRegulations

10. Cross- checkInformation

11. Sign/ forwardwith attachments

C

12. Sign CLP/Pass documentsto BCC

C

D

13. EnterProposal

Scrutin

y

14. Make copies

15. Present CLP

13a. Conformlimits


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15a.Seek consensus of member ofBCC where consensus notobtained reject proposal.

16. Where consensus obtained ifwithin the pre-defined limits of

BCC. If not recommend sanctionand forward to credit division forapproval of H.O.

17. Retain a set of photocopy ofCLP.

18. On receipt of sanction advicefrom credit division retain onecopy for record and forwardoriginal to concerned creditofficer. Prepare Offer Letterand proceed with otherdocuments.


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15a. Reject

proposal

D

Consens

us/Satisfied

16. ForwardCLP

17. Retainphotocopy

18. ReceiveSanction advice

from creditdivision

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Alfalah Branded Products

Karobar Finance

Alfalah Karobar Finance is short term facility that is only provided to individuals and

sole proprietors. This facility also has one year validity with markup charged on the

amount used. This facility again provides individuals to maintain their working capital

management and is again given to individuals for a security. Karobar finance is type of

current financing with difference i.e., in karobar finance, the individual has to clear all his

balance in his account, once in a year.

Milkiat Finance

Alfalah Milkiat Finance is a long term facility that is provided to SMEs and there are four

main types of facilities provided:

Acquisition of rented commercial/industrial property

Construction on an owned commercial/industrial plot

Purchase of a commercial/industrial property

Renovation of owned commercial property

Some of the features of Milkiat finance are as follows:

Tenure of 2-15 years except for renovation, which is for 2-4 years

Mark up of (KIBOR+5%)

Financing from Rs 0.5 million to Rs 30 million

Eligibility age should be less than 65, with 3 years of existing business

Quick FinanceAlfalah Quick Finance is another short term and a type of current financing facility that is

only provided to individuals for the fulfillment of personal or family needs. The financing

is given against the deposits and government securities up to the 90% of the cash value of

security. Financing is made from 50,000 up to 25 million.

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The five Cs of Credit

i) Capital:

The capital & resources of the borrower his capital structure and the gearing ratios either

borrower Under-capitalized? Does the borrower have its own resources to fall back on, in

case of need?

ii) Capacity:

Capacity or the capability of the borrower to manage his business profitably and the

capacity to repay the advances and service the facilities according to agreed terms. Is the

borrower in a capacity to borrow? Or is there any legal complication?

iii) Collateral:

The security provided against the facilities. Is the security provided: Adequate,

Realizable, Marketable, Valuable, Storable, Non-perishable, Durable, and

Transferable/with clear Title.

iv) Character:

Are the borrower's personal character, market standing and reputation impeccable? Has

he met his part commitments? Does he have good bank reference?

v) Conditions:

Have the conditions of lending been drawn up taking into account all possibilities Is the

sector/industry in decline, is growing or it has reached at plateau? Is there a market for

the products and the market size to justify production plans and sales forecasts? Are the

economic conditions feasible generally and for the business, in particular?

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Credit Administration Department (CAD)

Taking cognizance of the sustained progression of the bank business and the inherent risk

factors attached to expansion, the management felt a need for setting up of independent

Credit Administration Department (CAD) in its branches so as to minimize the losses

occurring from giving credit.

According to the Bank Chairman Review

Conservative yet dynamic credit policy

While adhering to the above policy it is imperative that the perfection of security and

enforceability of support documents are ensured for affective Management.

Its main purpose is to streamline the working of CAD to mitigate the chances of losses

arising from incomplete security and documents covering advances.

It is suggested that CAD headed by a manager is to be set up in branches meeting the

following criteria

Aggregate funds and non-fund based credit portfolio of RS.500 million and above and

minimum number of borrowing customers being twenty five.

The personnel of CAD are furthered advised to keep themselves update by the latest

instruction/regulation issued from Head Office, State Bank of Pakistan and Other

regulatory institutions.

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Receive sanction advice from creditmanager

Start

Obtain Security as per Sanction

advice

Check all Facilities Documents

Complete registration of the Bankscharge over security with SECP/ Gov

authorities

Appraise Relationship/credit manager andbranch manager

Any exception to theterms and conditionsof sanction advice,

ensure waiver obtainedfor competent

authority

IfComplet

e

A

Flow Chart Pre-DisbursementFunctions

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Complete Standard facilities and securitydocumentation

A

Lodge security and documents attested by theconcerned credit manager

Feed limits in the system

Release facilities

END

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Flow Chart Post-Disbursement Functions

34

Start

Obtain relevant reports such as stock report,insurance report etc. As per sanction advice

Review and monitor system generatedreports and other instruction periodically

Correct recovery mark up and other changesrelating to credit facility (ies)

Preparation and submission of statements toSBP, HO, and other institutions

Safe keeping and periodical balancing of pre-

stamped documents/stamps papers


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Credit Administration Process

35

Start

Obtain relevant reports such as stock report,insurance report etc. As per sanction advice

Review and monitor system generatedreports and other instruction periodically

Correct recovery mark up and other changesrelating to credit facility (ies)

Preparation and submission of statements toSBP, HO, and other institutions

Safe keeping and periodical balancing of pre-

stamped documents/stamps papers

Issuance of guarantees

END


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1. Registration of charge

The CAD manager has to register charge with security and exchange commission of

Pakistan (SECP) of mortgage/ hypothecation within 21 days from the date execution of

documents.

2. Securities/ Facilities Documentation

The CAD manager has following options while securing credit.

First exclusive Charges: In first exclusive charges, first the claim of bank is

satisfied in the case of default of the borrower.

Ranking Charges: In this, the ranking is given. The first on the ranking is satisfied

and then comes the second and so on.

Pledge: It confers physical possession of movables but not ownership.

Hypothecation: It is a security for a debt, which remain in the possession of the

borrower.

Mortgage: It is a claim against real estate or fixed assets. The deposit of title

deeds without documentation can create a mortgage.

LCs, Bank Guarantees, other guarantees

3. Valuation

A CAD manager can take value and evaluate security worth from the following sources

Security Source

Deposits Computer prints out showing actual amount

Government securities Face value or encashable value rates

published by the government of Pakistan

Shares Stock exchanges rates in daily newspaper Mortgage of property/ assets Valuation report by banks evaluator

showing market value

Stock( under pledge, hypothecation) For pledge Karachi Cotton Association

issues its rates. For hypothecation stock

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report submitted by borrower

Book Debt/ Receivables Life of book debts/receivable submitted by

the borrower.

Life Insurance Policy Surrender value of life policies issued by

insurance company

Any other security As per terms of sanction advice

4. Stock report

Frequent submission of stock reports is necessary as per term of sanction advice.

5. Stock Inspection

Verification of stock is made and it should be the same as given in stock report. The

following are usually checked.

Stock break up

Evidence of ownership

Quality/condition of warehouse

Fire Protection adequacy

Adequate protection from theft, burglary etc.

6. Insurance

Assets charged to the bank should be insured through an approved insurance company.

One month before expiry of the insurance policy, the concerned customers should be

reminded to renew the policy.

7. Search report

All public/private limited companies are required to register banks charge over its

current and fixed assets with SECP. Search report is prepared from the records of SECP

showing the ranking of charges over borrowers assets to different banks.

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8. Credit Information Bureau (CIB)

State Bank of Pakistan requires banks to obtain detailed information from CIB, SBP

when considering proposals of over Rs. 0.5 million to any borrower. In case CIB report

indicates over exposure/ default in meeting obligation etc. The accommodation to the

concerned borrower can be derived.

9. Borrower Basic Fact Sheet

SBP requires that all facility application should be accompanied by the Borrowers Fact

Basic Sheet as per approved format of SBP.

Borrowers

The following are the categories of the borrowers

1. Corporate Body

The term Corporate Body will include:

A company incorporated under the companies act.

A corporation created by a ordinance/ a statute/ act of legislature

a. Obtain memorandum and Articles of association of the company Whether company is public limited and quoted on stock exchange, not quoted on

stock exchange is a private limited.

Whether it is empowered to borrow?

Are there any restrictions on the companys power to borrow?

What are directors powers?

b. Obtain board resolution and ensure that it contains

Authorization to raise facilities

Create Charge on company assets/pledge securities which are in companies name

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2. Partnership

The partnership deed is obtained. In its absence banks standard letter of partnership, duly

signed by partners is obtained. Although all partners are jointly and severally liable for

the debt of the firm, however, it is considered inexpedient to obtain personal guarantees

for good business reason.

3. Sole proprietorship

It is owed by an individual and there being no formal procedure to be followed for setting

the business so a declaration on the firm letter head evidencing proprietors name etc is

taken.

4. Individual

It is ensured that borrower is not suffering from any incapacity and is not a minor, insane

or insolvent. These people are not capable of contracting and therefore any borrowing by

them is unlawful.

5. Clubs, Associations, Trusts, Charitable societies

Extra care is taken as these borrowers may enjoy legal protection, which is not available

to others.

Trade Finance Department

Trade Finance involves the import and export activities. This department provides

protection to the rights of importer and exporter. The function of this department is to

serve as a bridge between the importer and exporter in order to settle a transaction. When

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trade is taking place between the representatives of two countries (exporter and importer),

the exporter involves his bank (the Advising Bank) in the transaction, as he wants to feel

secure regarding timely payment of his goods in the required currency. On the other hand

the importer involves his bank (the Issuing Bank), in order to get a sense of security

regarding timely supply of the required product, in the required manner.

Trade Finance Department handles two activities:-

Import

Export

IMPORT

Import Department of BAL deals with the import of merchandise. Import can be defined

as:

The bringing of commodities into Pakistan from outside by sea, land or air.

Requirement for the Importer

These requirement / document must be fulfilled from importer before doing the import:-

NTN (National Tax Number) certificate

Sale Registration Certificate

Membership from Chamber Of Commerce

Questionnaire duly filled in

NIC (attested copy)

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Exports

Exports are major sources of earning foreign exchange and play an important role in the

economic development of the country. It helps to utilize excess resources of the country.

Exports mean selling goods to another country.

Exports of all eligible commodities through authorized banking channels are admissible

under exchange control regulation.

Requirement for the Exporter

These requirement / document must be fulfilled from exporter before doing the export:-

Account holder of Bank Alfalah Limited

Must be a Pakistani

Membership from Chamber Of Commerce

NTN (National Tax Number) certificate

The person must have the Sales Tax Registration Certificate.

Form E ( export form) dully filled in

Sale Registration Certificate

Methods of Doing International Trade

Letter of Credit

Contract

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LETTER OF CREDIT (L / C):

1) LETTER Of Credit (L / C) ADVISING

Letter of Credit (LC) is a written and conditional undertaking by a bank on the behalf of

applicant to the beneficiary to pay a certain amount at a certain date; if the stipulated

terms and conditions are complied with.

The process of International Trade starts with asking of importer to its bank for L/C.

Then importers bank will be called as issuing bank. The issuing bank sends the L/C to

Bank Alfalah Limited. A bank that receives the L/C is called an advising bank because

after receiving the L/C, it performs the L/C advising function. A cover letter is prepared

and is sent to the beneficiary of the L/C, advising him his L/C has reached Bank Alfalah

Limited and he should collect it immediately. A copy of the L/C is sent along with the

letter.

2) ISSUANCE OF E-FORMS

Government has provided facility to exporter in taking E-Form from any bank and is a

part of the exchange control mechanism of the State Bank of Pakistan. When an exporter

receives an L/C, his next job is to get an E-form from an authorized Bank.

On the E-form sent by the commercial bank following things are mentioned

Description of the commodity

Quantity of the commodity exported

Amount realized

Foreign bank charges

Country of the importer

3) CERTIFICATION OF THE E-FORM

After filling in the complete information about the goods to be exported, the exporter

brings the E-form to the bank for verification. Bank issues E-form certification to

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exporter and he submits it to the custom officer along with E-form certification to certify

E-form.

4) THE DOCUMENTS

After getting the E-form verified the exporter starts preparing his shipment. Banks only

deal in documents. In order to receive payment from his goods the exporter has to send

certain documents to the issuing bank via his negotiating bank. These documents are.

Bill of exchange:

A bill of exchange is an instrument in writing containing an unconditional order, signed

by the maker, directing a certain person to pay a certain sum of money only to, or to the

order of, a certain person or the bearer of the instrument. It is drawn by the exporter

(drawer) and orders the importer or the importers bank (drawee) to pay to the order of

Bank Alfalah Limited (payee) a specific amount. If the draft is drawn at sight, the

importer must make the payment on receipt of the documents. If it is time draft, the

payment must be made within the specified time limit.

Commercial Invoice

The exporter prepares it. Its amount must tally with that of the L/C. It shows the name

and address of the importer as well as the invoice number. This number is very

significant as it is used in all the correspondence between the exporter and his bank. It

also contains all the specifications of the commodity being exported. The standard

definition of commercial invoice is that it is an itemized list of goods shipped to a buyer,

stating quantities, prices, and shipping charges.

Bill Of Lading

The shipping company or the airline that has been assigned the task of transporting the

goods issues these. The shipper must ensure that the goods are shipped and handed over

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the right person when documents are presented to him. The standard definition of a bill

of lading is contract between the seller of the goods and the carrier.

The following are types of bill of lading:

OCEAN Bill Of Lading

Air Waybill

Inland Bill Of Lading

Packing List / Weight List

The exporter prepares these lists in order to show that the consignment is according to the

order of the buyer. It gives a detailed account of the manner in which the goods have

been packed and the number of cartons they have been packed in.

Certificate of Origin

This document certifies the origin of the exported goods. In the case of exports from

Pakistan, the certificate of origin shows that the country of origin of the goods is

Pakistan. The certificate of origin is a document in which the exporter certifies to theplace of origin of the goods to be exported.

E-Form

It is a necessity for all exports out of Pakistan. All commercial banks always issue the E-

form in quadruplicate.

Original: is sent to the custom officer

Duplicate: Bank receive the duplicate

Triplicate: is sent to the State Bank Of Pakistan

Quadruplicate: is kept by the exporter for his personal record.

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Export Visa

This document is required when the destination of consignment is Canada, America, and

U.K. Different countries fix quota for different commodities and restrict imports of those

goods with in a specific limit. There fore visa is required which is in fact a permission to

export goods to the specified countries.

Payment by importer

Exporters bank sends all the documents negotiated in LC to importers bank. Once the

shipment arrives in importing country, documents are kept with the bank until the

importer makes full payment to bank.

COLLECTION / NEGOTIATION:

When the exporter comes to the bank with the documents, he has two options.

Send them for collection

Get Them negotiated

Collection:

The bank sends the documents on behalf of the exporter to the importers bank for

payment. The payment is made in Pak Rupees and the exchange rate is the Buying rate of

the day normally called the T.T. Clean Buying Rate. When the reimbursing bank is to pay

Bank Alfalah Limited it credits its nostro account maintained with it (the reimbursing

bank), and afterwards bank debits the exporters account with the local equivalent of the

export proceeds calculated at the TT clean buying rate.

Negotiation:

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The bank purchases the documents from the exporter i.e. the exporter gets them

discounted before their maturity. For example, the drafts are at 90 days from B/L date. In

simple words, the payment for the exports would be received after three months. The

exporter might not want to block his funds for such a long time. He can get his

documents negotiated the day he presents them to the bank. The exchange rate he will get

will however be lower than the TT clean buying rate because the bank is paying him an

amount that it is going to receive after three months itself.

Contracts are not negotiated however in any case. This is because they are unsafe

documents and the bank does not take the risk.

Dispatch:

The documents brought by the exporter are in the form of sets containing an original and

a number of copies. The number of each document required by the importer is mentioned

on the credit. Usually they are:

Manually signed commercial invoice

Bills of lading

Packing list in quadruplicate

Bill of exchange

Fi l ing:

A separate file is maintained in each case and if the documents have been negotiated, it is

titled FDBP that is the abbreviation of Foreign Documentary Bills Purchased. If the

documents have been sent for collection, a file in the similar fashion is kept but it is

labeled FDBC i.e. Foreign Documents Sent For Collection.

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CONTRACT:

The exporter might export the goods based on a CONTRACT with the importer. In such

a case, there is no surety to the exporter that the importer will make the payment. The

importer might reject the goods on receipt and deny and payment to the exporter.

Therefore, the contract is an unsafe document. There are two types of contracts.

CAD (Cash against Documents):

The documents are sent to the issuing bank. The issuing bank informs the importer that

his documents have arrived. The importer deposits the amount of the contract with the

bank and takes possession of his documents have arrived. The issuing bank then makes

the payment to the exporters bank.

DA (Documents Acceptance):

Drawee takes documents and possession from the issuing bank and signs a bill of

exchange in return giving his acceptance for payment on a specific maturity date. Now, if

he does not make the payment to the issuing bank no payment is made to the exporter and

there is no liability on either bank.

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Application of Class Room Learning

During my Internship at Bank Alfalah Abdali Road, I saw some practical

application of some class room learning.

I saw most of knowledge application in Trade finance department, Credit Administration

and Credit marketing. Operation department had less knowledge application.

Trade Finance Department:

At Trade Finance Department, I got a lot of practical exposure of studying

International Finance. Since this department mostly deals with imports and exports, I saw

the processing of letter of credit and the documents needed for imports and exports.

Customers were coming for the purpose of their business and they were informed about

the rules and regulation for importing and exporting. Letter of guarantees were also

issued by the department.

Credit Department:At the Credit Department, my practical learning was excellent. At this

department, the loans are to be disbursed. So for this purpose a complete interview with

borrower is conducted and borrower is asked about its financial strength then a CLP is

made. Loan is disbursed after the complete study of financial reports such as balance

sheet and income statement. Making of installments, interest charging and calculation

and others all were practically performed at the department.

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Learning as an Interne

My internship experience has given me a realistic preview of my field of education. Now

I feel that I am better prepared to enter the world of professional work. I have come to

know and been appreciated by a number of professionals who are lending their services

to the banking sector for more than a decade. I feel honored that I have worked with such

experienced professionals. I must admit that such interaction in this respectable

professional community will help me in seeking out job opportunities in the near future.

Each task I performed was a different experience in itself. By the end of it, I must say I

realize my potentials, I have realized that earning money is not so easy after all, it takes a

lot of hard work and devotion, and not to forget time. And I now know that if I want I can

make things possible, and I also know how good it feels to having accomplished

something and being appreciated for it. I definitely have learnt things, which will impact

my career and my character.

The overall experience of my internship was very good; I have learnt the sense of

responsibility in its literal meaning. I am now capable of dealing with different sort of

customers, and how to be patient while doing so. Besides this I also gained knowledge

about banking which I previously lacked and many more products being offered by the

bank. So in a nutshell, this internship gave me the experience, which would no doubt

boost my confidence to work in future.

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Marketing Promotion Tools

This is an age of competition. Numerous organizations are providing financial services to

the customer. These days everyone 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. BAFL for the promotion of its new and

existing products invest heavily, it advertises its product through:

Electronic media i.e. television

Print media i.e. newspaper

Billboards

Business magazines

Website

Sponsorship

Electronic

The major way in which todays organizations promote its products and services is

through television, not only because its economical but also because the visual and audio

aids help in promoting its product.

Television ads for Bank Alfalah mainly try to emphasis the The Caring Bank, message

in its advertisements, by showing how its services can help you with the different

financial problems that you face in your every day life. For example, an advertisement

showed how Bank Alfalah Credit Cards helped a couple when they had no cash left

during a shopping trip or how a father happily shows his family a new car that he had

financed from Bank Alfalah.

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Another major way in which Bank Alfalah advertises its products electronically is

through its website, which is designed in an effective manner with detailed information,

so that visitors can effectively know about the different services that the bank provides.

Print

Print advertisements are another major way in which Bank Alfalah advertises its product

to the masses. Print media advertisements are mainly printed in major English and Urdu

newspapers across Pakistan.

The messages of these advertisements are mainly of new financial services that the bank

may introduce over time.

Sponsorships

Bank Alfalah also gives a significant consideration not only to its product publicity but

also to the creation of public relations. Bank has proves its public goodwill by

contributing money and time to public service and activities. Bank Alfalah has been

sponsoring different sporting tournament, especially cricket which is the most popular

sports activity of Pakistanis and is watched by millions whenever there is a tournament

featuring the Pakistani cricket team and is thus a great way to advertise their products.Some of the tournaments that Bank Alfalah has sponsored over the year are as follows:

Series Sponsored By Bank Alfalah

Series Year

Pakistan Vs England 2005

Pakistan Vs West Indies 2006

Pakistan VS South Africa 2007

Now a days, BAFL is sponsoring the cricket rankings updates on Ten Sports.

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No. of Employees 2001-2008

9591504

21333352

52186543

7371 7584

0

2000

4000

6000

8000

2001 2002 2003 2004 2005 2006 2007 2008

Human Resource Assessment

Bank Alfalah Ltd. has worked hard to build its human resource team and ensure that the

quality of newly inducted staff is not comprised with growth. For recruitment and

selection banks policy is to hire suitable candidates. By suitable candidates bank refers

to candidates having proper educational qualification, experience and background.

Bank Alfalah not only is one of the fastest growing bank in Pakistan, that provides its

customers with a number of financial services, but is also a great employer of human

resources, that provides its employees with a conducive environment that not only is

challenging but also helps them in applying and gaining knowledge.

The above figures show that all prospect employees feel confidence in Bank Alfalah as

their prospective employer. Bank Alfalah, as a response to this confidence has three ways

of employing prospect employees for their organization.

Batch Trainees

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BAL prefers to hire candidates having MBA degree for credits. For relationship officers,

education qualification is not very important. Their family background and

communication skills are more important. Bank hires fresh MBAs from prestigious

Universities in batches of 20-25 officers. 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. Banks policy is to give cash rewards and

salary increments for increasing the employees satisfaction.

Direct Induction of Fresh Candidates

Through direct induction of fresh candidates, Bank Alfalah is able to employ fresh

postgraduate candidates for its organization and the process is registering ones CV on

their data base on their website, it automatically becomes a part of their resource pool that

allows them to match applicants skills and competencies with the right placement

options.

Every year Bank Alfalah opens its doors for about 30 fresh post-graduates to join the

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 Banks state-of-the-art

training facility at Karachi and Lahore, 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.

Experienced ProfessionalsBased on requirements of experienced staff, Bank Alfalah also recruits talent from the

marketplace. Bank Alfalah offers competitive salary / benefits to worthy professionals at

all levels who wish to join hands with Bank Alfalah.

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Training

Bank Alfalahs management believes in developing the potential of the Banks

employees to the fullest extent. Training & Development Centre of the Bank are housed

in state of the art facilities at Karachi and Lahore of provide training to its employees. It

is obligatory for each staff member of the bank to attend at least two days of training in a

calendar year, with training programs in the following areas:

Consumer Banking and Operations

Credit Marketing & Proposals

Credit Administration/Documentation

Marketing and Selling Skills

Customer Service Skills

Leadership and Management Skill

Personal Effectiveness and Skills

Furthermore training programs have also been introduced for fresh entrants into the bank,

to help them in learning and performing their new tasks.

Benefits provided by Bank Alfalah

Some of the monetary and non monetary benefits that Bank Alfalah provides to its

employees are as follows:

Attractive Salary Package

Employee Provident Fund

Gratuity Fund

Medical Insurance

Bonuses

Life Insurance

Promotions

Various types of Staff Loans

Assistance in Pursuing Higher Education

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SWOT Analysis

SWOT is stands for strengths, weaknesses, opportunities and threats. SWOT analysis is a

careful evaluation of an organizations internal strengths and weaknesses as well as its

environmental opportunities and threats. In SWOT analysis the best strategies accomplish

an organizations mission by exploiting an organizations opportunities and strengths

while neutralizing its threats and avoiding its weakness. During my internship I also

observe these factors of bank and made a conclusion which is as follows:

Strengths

Main strengths of bank are described as follow, due to which bank is becoming

successful day by day and now is one of the fifth largest and successful bank in Pakistan

in the banks ranking after NBP, MCB, UBL and HBL.

1 Being the private organization its main aim is not to earn profit but also to satisfy

its customers and slogan of BAL is also the representative of this purpose as Bank

Alfalah The Caring Bank.

2 Bank has AA (Double A) and A1+ (A one plus) Credit Rating for long term and

short term loans respectively.

3 Main source of profit for any financial institution is public saving which only

comes from public confidence and BAL is getting this confidence which is one of

the main strengths of bank

4 Bank Alfalah is also getting fame in the market due to its name ALFALAH

which is leaving the Islamic and favorable impact on the minds of Pakistani

public.

5 BAL is providing the facility of Money Gram to its entire people who are its

customer or not and through this service it has got the leadership in Money Gram

because any other bank is not offering this service.

6 With in very short period it has got a superb accomplishment which shows the

competency of top management.

7 Personnel of Alfalah are well trained and highly skilled.

8 Bank Alfalah has a wide network of branches at the ideal locations, catering the

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financial needs of its clients.

9 The management of the bank is very much concerned with the development and

improvement of the working environment. The bank has state of the art and

purpose built branches where all the modern technologies are provided to get the

efficiency of the workforce and the customer satisfaction.

Weaknesses:

Beside all these strengths I also noted some weaknesses in the operations of bank Alfalah

which are described below:

1 . BAL is that it is not offering the loan facility to newly established businesses

because its the BAL policy that it will loan only to that people who are running

their businesses from 3 years.

2 BALs lending procedure is quite complicated that some people hesitate to come

as they are requiring a huge file of documents.

3 Bank Alfalah is not offering any credit facility for students.

4 BAL is not offering the online facility to account holders having photo account.

5 Bank Alfalah is charging online charges for transfer of money but some otherbanks not charge online transfer charges.

6 Majority of the workforce consists of young professional, they lack in their

experience. And sometimes lack of experience becomes a hurdle while serving to

the customers. It is the point where they feel difficulty while competing with the

other banks.

7 It was observed that at present the motivation level of the employees is not very

much.

8 The increased workload has resulted in the reduced efficiency of the employees.

Because now the time required for completing the tasks for a single customer has

been increased. As a result the environment of the branch has become very messy.

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Opportunities:

It is mandatory to try to make progress with consistency as well as to adopt changes with

needs of time, in order to cope up with both conditions.

1 Bank Alfalah is spreading its network outside the boundaries of Pakistan and it

has more opportunities to extend this network as State Bank of Pakistan has

prescribed new policies in the prudential regulations.

2 In addition to excellent routine banking, it has earned a good name by offering

special products like car, home and credit cards facility. So the penetration of

these products could enhance market shares.

3 There is a very good growth trend in the Islamic banking in the country and in theworld as well. BAL has the advantage of having Islamic Banking network and the

growth in this particular field can be very fruitful for the bank, bank has an

opportunity to introduce new products and services in Islamic banking.

Threats:

Threats are the negative trends in external environmental factors. As on one side

environment provides opportunities to one organization, on the other hand it also has to

face some threats. Bank Alfalah also has to face this situation.

Other foreign financial institutions like City Bank, HSBC etc also having strong

banking policies and theres a chance that people might move toward these

financial institutions to secure their investments, transactions and related services.

For last seven year there is political stability in Pakistan but now again a new

layer of political instability arises which effects almost all industries including

Banks.

Due to economic instability like currency depreciation and inflation, the bank is

constantly facing a threat e.g. in case of inflation the people have low disposal

income which means lower deposits in banks.

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Other investment opportunities like investment in property and gold are giving

people more return as compare to banks; it can decrease the deposits of bank.

PEST Analysis

A broad view of market is important when management is interested in introducing better

services for customers. Rapid technological change, global competition and the diversity

of buyers preferences in many markets require the constant attention of the market

vouchers to identify promises business opportunities, see the shifting requirements of the

buyers, evaluate changes in competitors positioning and guide the choice of which buyers

to target and classify them according to respective segments.

Identification of external and macro factors that influence buyers and thus change the size

and composition of market overtime involves initially building customer profiles. These

influences include:

1 Political environment

2 Economic Indicators

3 Socio cultural environment

4 Technological factors

Political Environment

The events in the last couple of years; ever since the sacking of Chief Justice Iftikhar

Choudhary, Pakistan has faced crisis after crisis, including the lawyers movement,

violence in Karachi, the Lal Masjid debacle, militancy in FATA and NWFP and its

impact on other parts of the country, the return of Benazir Bhutto and her subsequent

assassination, and current ongoing military operation in Swat all the above events

indubitably made a huge impact on the economy.

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Stability and law and order situation under the political regime is very important for the

economy as a whole. The present state of the government in Pakistan is directly affecting

the policies of banks. Continuous political changes have disrupted the policies and

objectives as each regime brings with it its own agenda. Organizations need time to

adjust to one regime and then work with it towards economic enhancement. Due the

wrong policies of the government, the talibanization also develop in Pakistan and become

the international issue in Pakistan and badly affected the Pakistan repute in the world and

promote the uncertain conditions for the business in the Pakistan. Due to this the

investors are not interested in the Pakistan.

Economic Indicators

The economy of any country directly influences any financial organization. Economic

indicators include Gross Domestic Product (GDP), inflation, balance of payment, debt of

the government.

Pakistans economy has witnessed the most challenging period after posting six

consecutive years of healthy economic growth. However, the strong fundamentals were

compromised to prevailing global crises thats shacked the confidence of global investors

and FDI flowing in the country. The steep rise in oil prices to U$ 147 a barrel, soaring

inflation hitting a 24% mark, huge fiscal deficits and balance of payments issues coupled

with plummeting forex reserves added to the economys move to an unstable growth

trajectory.

Also the load shading is another factor that affects the Pakistan economy badly. This not

the end of the story after this Pakistan economy face lot of problems like bomb attacks in

Pakistan no electricity and the unstable government, due to this the investor are not invest

in the Pakistan and the existing business men are loosing their business unit due to the

loss.

Due to this poor economy, businesses are reaping low profits and stock market is in great

danger. Pakistans foreign debts are rising day by day so such a situation is a big

challenge for banking institution to survive. The financial crisis in Pakistan has made the

management of BAFL tensed to work in such an environment.

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Socio cultural environment

A low saving culture has offset the huge population advantage this is enjoyed by

Pakistan. Also culture is dedicated by the religion, and in Pakistan a significant segment

of the population is reluctant to accept interest for their deposits due to the negative

religious implications of such an act. About 70% of Pakistans population is based on

rural areas and literacy rate of the country is very much low, thus making it harder for

banks to mobilize their deposits within these regions.

However, in today world, the customers are becoming more intelligent and through

media they keep themselves up to date. Thus, the lifestyle and expectations of the

customers from the service provider is increasing day by day.

Technological Factors

Banks in the developed world have been turning to heavy IT investments, which

differentiate their products, provide response times, enhance accessibility and improve

customer satisfaction. Though investing in state-of-the-art host banking solution, ATM

and POS (point of sale) networks, visa, MasterCard, and, smart cards, telebanking,

internet banking and now mobile banking are common IT investment in the developed

world, it is now that these products and services are gaining faster acceptance in Pakistan.

In BAFL technology has great effect on the working environment. BAFL is always

willing to introduce new computer systems for keeping its staff up to date. With the

successful implementation of new centralized database system.

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Financial Analysis

Horizontal &Vertical Analysis

Balance Sheet of Bank Alfalah Limited

Income Statement of Bank Alfalah Limited

61

2004 2005 2006 2007 2008

Assets

Cash and balances withtreasury banks 19,708,518 24,788,625 27,859,360 29,436,378 32,687,335

Balances with other banks 3,183,957 9,713,369 12,731,952 18,380,738 21,581,043Lending to financialinstitutions

-27,050,493 12,456,653 3,452,059 3,315,500

Investments 35,503,196 57,425,700 56,502,210 88,491,564 75,973,238

Advances 88,931,400 118,864,010 149,999,325 171,198,992 192,671,169

Other assets 3,226,959 3,851,529 5,633,051 6,013,097 8,989,186

Operating fixed assets 4,280,504 6,620,067 10,502,990 11,922,324 13,773,293

Deferred tax asset

TOTAL ASSETS 154,834,534 248,313,793 275,685,541 328,895,152 348,990,764

LIABILITIES & EQUITY

Bills payable 2,233,671 3,733,124 3,091,135 4,138,243 3,452,031Borrowings from financialinstitutions 12,723,830 5,844,389 8,394,130 21,230,697 13,690,222Deposits and otheraccounts 129,714,891 222,345,067 239,509,391 273,173,841 300,732,858

Subordinated loans 1,899,480 3,223,355 3,222,106 3,220,858 2,571,169Liabilities against assetssubject to finance lease

- - - - -

Other liabilities 2,725,344 5,219,666 7,305,496 9,531,860 11,291,280

Deferred tax liabilities 275,834 484,066 1,921,338 1,379,809 208,465

TOTAL LIABILITIES 149,573,050 240,849,667 263,443,596 312,675,308 331,946,025

REPRESENTED BY

Share capital 2,500,000 3,000,000 5,000,000 6,500,000 7,995,000

Reserves 1,008,772 2,351,218 2,749,533 2,414,833 3,166,056

Unappropriated profit 860,300 1,386,845 2,823,072 4,851,840 3,447,467

Surplus on revaluation ofassets 892,412 726,063 1,669,340 2,453,171 2,436,216

Total EQUITY 5,261,484 7,464,126 12,241,945 16,219,844 17,044,739

Total Liabilities and

Equity 154,834,534 248,313,793 275,685,541 328,895,152 348,990,764


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Horizontal Analysis of Balance Sheet

62

2004 2005 2006 2007 2008

Mark-up/return/interest earned 5,620,203 12,246,811 21,191,470 25,783,871 31,046,583

NON MARK-UP /INTEREST INCOME

Fee, Commission andbrokerage income 675,868 1,158,747 1,804,998 2,429,599 2,539,321

Dividend income 52,539 52,014 37,393 64,722 300,943Income from dealing inForeign currency 218,820 290,091 386,997 474,510 914,845

Gain on sale of securities - - 180,751 2,053,192 424,220Unrealized (loss) /gain onrevaluation of Investments - - (27,599) (14,929) (181,571)

Other income 572,822 744,518 842,099 1,031,372 1,247,669Total Non mark-up/ Interestincome 1,520,049 2,245,370 3,224,639 6,038,466 5,245,427

TOTAL INCOME 7,140,252 14,492,181 24,416,109 31,822,337 36,292,010

EXPENSES

Mark-up/return/interest earnedexpensed 2,434,459 7,204,992 15,232,886 16,620,963 20,331,194Provision against non-performing loans andadvances-net 370,208 402,298 697,690 2,370,867 2,035,997Provision for the diminution inthe value of investments 2,165 (23,163) - - 1,479,062

Bad debts written off directly 351 512 1,537 5,844 28,298

NON MARK-UP/ INTEREST EXPENSESAdministrative expenses 2,677,635 4,313,023 5,874,745 8,272,587 10,471,399

Other Provisions/Write Offs - 10,125 - 6,959 28,582

Other charges 1,700 21,104 43,306 9,565 122,758Total non mark-up/ Interest

expenses 2,679,335 4,344,252 5,918,051 8,289,111 10,622,739

Extraordinary / Unusual items

PBT 1,653,734 2,563,290 2,565,945 4,535,552 1,794,720

Taxation

-Current 586,159 592,635 476,226 1,726,810 1,730,051

-Prior years (20,751) 1,037 (100,874) - (221,797)-Deferred (3,663) 267,524 427,902 -321,487 (1,014,835)

TOTAL EXPENSES 6,048,263 12,790,087 22,653,418 28,692,108 34,990,709

PAT 1,091,989 1,702,094 1,762,691 3,130,229 1,301,301


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2004 2005 2006 2007 2008

Assets

Cash and balances with treasury banks 100.00 125.78 141.36 149.36 165.85

Balances with other banks 100.00 305.07 399.88 577.29 677.81

Lending to financial institutions - 100.00 46.05 12.76 12.26

Investments 100.00 161.75 159.15 249.25 213.99

Advances 100.00 133.66 168.67 192.51 216.65

Other assets 100.00 119.35 174.56 186.34 278.57

Operating fixed assets 100.00 154.66 245.37 278.53 321.77

Deferred tax asset - - - - -

TOTAL ASSETS 100.00 160.37 178.05 212.42 225.40

LIABILITIES & EQUITY

Bills payable 100.00 167.13 138.39 185.27 154.55

Borrowings from financial institutions 100.00 45.93 65.97 166.86 107.60Deposits and other accounts 100.00 171.41 184.64 210.60 231.84

Subordinated loans 100.00 169.70 169.63 169.57 135.36Liabilities against assets subject tofinance lease

- - - - -

Other liabilities 100.00 191.52 268.06 349.75 414.31

Deferred tax liabilities 100.00 175.49 696.56 500.23 75.58

TOTAL LIABILITIES 100.00 161.02 176.13 209.05 221.93

REPRESENTED BY

Share capital 100.00 120.00 200.00 260.00 319.80

Reserves 100.00 233.08 272.56 239.38 313.85Unappropriated profit 100.00 161.20 328.15 563.97 400.73

Surplus on revaluation of assets 100.00 81.36 187.06 274.89 272.99

Total EQUITY 100.00 141.86 232.67 308.28 323.95

Total Liabilities and Equity 100.00 160.37 178.05 212.42 225.40

Comments on Horizontal Analysis of Balance Sheet

Assets:

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The assets of the BAFL have been growing very fast since its inception. This growth is

the result of the massive expansion policy the management has been following ever since

the inception of BAFL.

One of the important ingredients of any commercial banks growth is increase in most of

current assets that is a good sign as it increases their liquidity. Let us first have a look at

the liquid assets.

In earning asset, the lending to financial institutions is decreasing whereas the other

investments and advances continuously. However the investments have increased in 2008

with decreasing rate. Increase in the fix assets might be due to branch expansion.

Liabilities:

As regards the liability section of the balance sheet chief liability of commercial bank is

its deposits it generates from its customer. The ratio of increase in deposits in

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