ACKNOWLEDGEMENT ACKNOWLEDGEMENT First of all I am thankful to "ALMIGHTY ALLAH" Who gave me the strength, patience, courage and enthusiasm needed to write and complete this report, and countless salutations to upon the Holy Prophet Muhammad (PBUH), the sea of knowledge who has guided His Ummah to seek knowledge from cradle to grave. Then to my friends who assisted me in this effort and we worked daylong to accomplish this assignment. I have a debt of gratitude to all my teachers who taught me throughout my academic career. The preparation of this report was a massive undertaking but the highly competent and experienced management of Askari Bank for provided me with all assistance, information, advice and suggestions that I needed which contributed importantly to this report. Altaf Hussain 11111111111 1
Transcript
ACKNOWLEDGEMENTACKNOWLEDGEMENT
First of all I am thankful to "ALMIGHTY ALLAH" Who gave me the strength, patience,
courage and enthusiasm needed to write and complete this report, and countless salutations
to upon the Holy Prophet Muhammad (PBUH), the sea of knowledge who has guided His
Ummah to seek knowledge from cradle to grave.
Then to my friends who assisted me in this effort and we worked daylong to accomplish this
assignment. I have a debt of gratitude to all my teachers who taught me throughout my
academic career.
The preparation of this report was a massive undertaking but the highly competent and
experienced management of Askari Bank for provided me with all assistance, information,
advice and suggestions that I needed which contributed importantly to this report.
Altaf Hussain
11111111111
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1. EXECUTIVE SUMMARY1. EXECUTIVE SUMMARY
As per the requirements for the degree of MBA at AIOU, I got an opportunity to get eight weeks
internship exposure. Askari Bank, F-10 Markaz, Islamabad provides me the chance to have this
experience with a prestigious institution. During my internship I was rotated in the various
departments in order to get in depth idea of how the bank functions. This report thoroughly
outlines and explains my observations, findings and analysis and my knowledge of the banking
sector in general and Askari Bank in particular.
In this report, there is an introduction of Askari Bank. In introduction, there is history of Askari
Bank, strong commitment and loyal service, highly trained professionals, and credit rating. The
report also includes the details of the products offered by DIBPL which includes Takaful plan
and other Islamic Compliance products. This report also focuses the general banking of DIBPL
which includes Cash department, Remittances section, Account opening, Debt cards etc.
Subsequent to it this report contains my experience and learning that what I have learned from
this internship and what was my experience regarding this internship. The report also contains
my analysis that I scrutinize in the organization by using two method SWOT and Financial
analysis. With the help of these methods I have some suggestions and recommendations to
improve the performance of the Bank, which also mentioned in this report. By following these
suggestions bank can improve their product market and can easily gain the attraction and
satisfaction of customers. Not only the customers, bank also can improve the satisfaction and
performance level of its employees by these suggestions.
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2. OBJECTIVES OF STUDYING THE ORGANIZATION2. OBJECTIVES OF STUDYING THE ORGANIZATION
OverviewAfter the completion of degree MBA (Finance) I want to enter and check the practical work
according to my specialization. For that purpose I selected the banking sector because I have
done specialization in finance.
Second and next main objective of studying organization; I want to enter in practical field and
want to learn that which discipline is required for leading a successful future life. I think I am
very lucky person that I selected Askari Bank as my learning organization.
Objectives that I want to achieveObjectives that I want to achieve by studying the organization are as follows:
First of all I want to check the practical work according to my degree specialization.
During my internship in Askari Bank I have learnt that how to use the knowledge in
practical field.
Secondly I want to learn that how to mange an organization and how to mange the
finance for a financial organization, as my degree is related to Financial Management.
Customers dealing is another major objective that I want to achieve. During my
internship I learnt that how to deal with customer.
Financial institution is a place where every type of businessmen visits, so during my
internship in DIBPL I met with many businessmen and learnt that how different
businesses run.
And another main objective that I want to achieve that how an organization consist with
different departments and how different functions are done in different departments of an
organization.
Through this internship I learned many things. It was a great experience for me to
comprehend the working environment. During this period I face different types of working
conditions, which will help me to know that, how to handle these conditions in future.
Through this internship I am able to do work in all departments of Bank because I know all
rules, policies, and responsibilities, which mentioned in DIBPL departments and products of
these departments so I achieved 80% of my objective
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3. OVERVIEW OF THE ORGANIZATION3. OVERVIEW OF THE ORGANIZATION
Askari Bank is the leading Islamic bank operating in Pakistan. Its balance sheet size is
improving with the passage of time. It has redefined its role and has moved from a public
sector organization into a modern Islamic bank. The Bank's services are available to
individuals, corporate entities. While it continues to act as investor of public funds and it has
diversified its business portfolio and is today a lead player in the debt equity market,
corporate investment banking, retail and consumer banking, treasury services and is showing
growing interest in promoting and developing the country's small and medium enterprises
and at the same time fulfilling its social responsibilities, as a corporate citizen.
In today's competitive business environment, DIBPL need to redefine its role and shed the
public sector bank image, for a modern Islamic bank. It is listed in Securities and Exchange
Commission of Pakistan in 2006.
Askari Bank is today a progressive, efficient, and customer focused institution. It has
developed a wide range of consumer products, to enhance business and cater to the different
segments of society. Some schemes have been specifically designed for the low to middle
income segments of the population.
It has taken various measures to facilitate overseas Pakistanis to send their remittances in a
convenient and efficient manner. More recently it has started Electronic Home Remittances
Project. This project introduces technology based system to handle inward remittances
efficiently, by ensuring that the Bank's branches keep a track of the remittance received from
abroad till its final receipt. A number of initiatives have been taken, in terms of institutional
restructuring, changes in the field structure, in policies and procedures, in internal control
systems with special emphasis on corporate governance, adoption of Capital Adequacy
Standards under Basel II framework, in the up gradation of the IT infrastructure and
developing the human resource. Askari Bank has built an extensive branch network with 36
branches in Pakistan. The Bank's financial performance has been remarkable. In 2006, total
assets are estimated at Rs 8434280000, while deposits have grown to nearly Rs 4322621000.
The increase in profit was achieved through strong growth in core banking income. The
Bank maintains a sound loan portfolio diversified in nature to counter the risk of credit
concentration.
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3.1 HISTORY OF ASKARI BANK PAKISTAN LTD. 3.1 HISTORY OF ASKARI BANK PAKISTAN LTD.
Thirty years ago Askari Bank created history by becoming Worlds first Islamic Bank. Today
Islamic Banking has become one of the fastest growing economic sectors with over 300 financial
institutions; with assets estimated over at 300 billion US Dollar providing Islamic Financial
Services. Despite huge growth to the sector DIB is continued to be the pioneer and leader to
date. Since its inception DIB has evolved retail bank to a fully fledged bank catering to almost
all the requirements of the customers in providing to Sharia Compliant solutions locally and
internationally. It has constantly upgraded its services to individuals and companies who always
remain a valuable asset.
By combining the best Islamic traditional values with high standards technology and innovation,
DIB is committed to comply with not only fully transactions of financial dealings. DIB is also
committed to provide customer-satisfaction oriented job.
For its outstanding performance and contribution for Islamic financing, DIB received the best
Islamic Bank award in the Middle East Award 2006; by both Euro moneys Islamic Finance
Weekly and Gulf Wealth Forum. DIB has also awarded the bank of the year 2006 Banker
Awards.
DIBPL has started its operations since 2005. At that time the scale of business and number of
branches were very short. But just within the time period of five years, now DIB has an
extensive network of branches, a wide range of Islamic Compliant Products, well-managed
communication system and good return from operations.
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3.2 NATURE OF THE ORGANIZATION3.2 NATURE OF THE ORGANIZATION
Askari Bank Pakistan Ltd. is a public Organization. It implements the policies of SBP. Its basic
objective is to maximize the profit. It has major impacts on Pakistan economy with special
emphasis on fostering Pakistan's economic growth through aggressive and balanced lending
policies, technologically oriented products and services offered through its network of branches.
It deals with Revenue, collection and payments of salaries. It is a complete Islamic, retail and
corporate bank as well.
The Askari Bank is an Islamic institute which offers a variety of products according to the Sharia
principles and instructions. All the products and services are regulated by Sharia Board. If they
find someone violating the rules, they penalize. The Askari Bank makes different adjustments to
update business operations.
The Bank has also played an important role in financing the country’s growing trade, which has
expanded through the years as diversification took place. Askari Bank Pakistan Ltd. maintains its
position as Pakistan's one of the premier bank determined to set higher standards.
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3.3 BUSINESS VOLUME3.3 BUSINESS VOLUME
Askari Bank’s business volume is expanding day by day and now it becomes leading
bank of the Islamic Banking Sector. The authorized capital of the Bank is Rs.6776 million
divided into ordinary shares of Rs 10 each. The Bank is a subsidiary of Askari Bank PJSC, UAE
(The holding Company).
FIVE YEARS PERFORMANCE OF DIB FIVE YEARS PERFORMANCE OF DIB
Products of bank include all those services which a customer can use effectively in his general
and business. Askari Bank Pakistan Ltd. F-10 Markaz branch offers a wide range of banking
services to public and private sector corporations, partnerships, individuals and others.
3.5.1.1 Current AccountAskari Bank Pakistan Ltd. is offering current account facility for its valued customers. This type
of account is suitable for businessmen and those customers who need financing with regular
intervals. Because they make receipts and payments in large quantity.
3.5.1.2 Regular Savings Account
DIBPL is offering another type of account which is named by regular savings account. DIBPL is
paying profit on this type of account according to volume of deposit. And another attracting
option is that profit is offered on monthly, quarterly, semi-annually and annually basis.
3.5.1.3 Saving Plus Account
Another type of account which DIBPL is offering is saving plus account. On this type of account
DIBPL is giving profit on comparatively higher rates than regular.
3.5.1.4 Saving Special Account
This is another type of account is offering by DIBPL to facilitate its valued customers. This type
of account has some special characteristics as compared to regular and plus. The profit margin is
higher than other types of accounts.
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3.5.1.5 Fixed Deposit/ Term Deposit
DIBPL is offering fixed deposit account according to the Sharia principles. Here in fixed deposit account deposited amount is invested and finally share of profit or loss is distributed between bank and customer.
SERVICES OF DIBPL
Services are output of the firm, which are in intangible form and the back bone of any
organization to earn profit. However, there are some basic services which DIBPL, F-10 branch
at present offers to his customers include:
Receipts of customer's deposits
Collection of his cheques drawn on other banks
Making payments through cheques drawn on it
Making remittances
Foreign trade service
3.5.2 International Banking
Askari Bank Pakistan Ltd. is at the forefront of international banking in
Pakistan, which is proven by the fact that DIBPL has its branches in all of the
major financial capitals of the world. Additionally, we have recently set up
the Financial Institution Wing, which is placed under the Risk Management
Group. The role of the Financial Institution Wing is: -
To effectively manage DIBPL exposure to foreign and domestic
correspondence manage the monetary aspect of DIBPL’s relationship with
the correspondents to support trade, treasury and other key business areas,
thereby contributing to the bank’s profitability.
3.5.2.1 DEMAND DRAFTS:
It is a safe, speedy and reliable way to transfer money; customers can now
purchase DIBPL’s Demand Drafts at very reasonable rates. Any person
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whether an account holder of the bank or not, can purchase a Demand Draft
from a bank branch.
3.5.2.2 MAIL TRANSFERS:
Money is safely and quickly moved by using DIBPL Mail Transfer service. And
DIBPL also offered the most competitive rates in the market.
3.5.2.3 PAY ORDER:
DIBPL provides another reason to transfer money using its facilities. Pay orders are
a secure and easy way to move money from one place to another. And as usual,
charges for this service are extremely competitive.
3.5.2.4 TRAVELER'S CHEQUES:
Negotiability: Pak Rupees Traveler’s Cheques are a negotiable instrument.
Validity: There is no restriction on the period of validity.
Availability: At 36 branches of DIBPL all over the country.
Encashment: At all branches of DIBPL.
Limitation: No limit on purchase.
Safety: DIBPL Traveler’s Cheques are the safest way to carry money.
3.5.2.5 LETTER OF CREDIT:
DIBPL is committed to offering its business customers the widest range of
options in the area of money transfer. In a commercial enterprise Letter of
Credit service is just what customers are looking for. With competitive rates,
security, and ease of transaction, DIBPL Letters of Credit are the best way to
do business transactions.
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TRADE FINANCES & OTHER BUSINESS LOANS
3.5.3 CORPORATE FINANCE:
3.5.3.1 Working Capital and Short Term Loans:
DIBPL specializes in providing Project Finance – Export Refinance to
exporters Pre-shipment and Post-shipment financing to exporters – Running
In balance sheet of bank the most important item is earning assets. There are four earning assets.
Bank has strong earning assets like advances investments and lending to financial institutions
has major percentage in of assets of bank. In liability and equity analysis the borrowing from
financial institutions and deposits have major portion and reserve and share capital has major
portion in equity. Out of the three earning assets (lending to financial institutions, advances and
investments) only advances have recorded a growth while Lending’s to financial institutions and
Investments fell respectively.
Analysis of balance sheet shows increase or decrease in each item as a percentage of assets
means that assets are chosen as key figure. As we have seen in the table the interest expense is
increasing with the turnover so the bank is more utilizing on advances. As for as the fixed
liabilities of company are concern they are showing increasing trend and same is case with the
current and long term liabilities.
CRITICAL ANALYSIS
6.0 FINANCIAL ANALYSIS
6.1 FIVE YEAR BALANCE SHEET
2005 2006 2007 2008 2009
(Rupees in 000)ASSETSCash & balances with treasury banksBalances with other banksLending to financial institutionsInvestmentsAdvancesFixed assets Deferred tax assetsOther assets
InvestmentsProvision against off balance sheet obligationsBad debts written off directly Net mark-up /interest income after provisions
i) Non mark-up / interest income Fee, commission and brokerage incomeDividend incomeIncome from dealing in foreign currenciesGain on sale of securities-netUnrealized gain/(loss) on revaluation of investments Classified as held for tradingOther income
Extra ordinary / unusual itemsiii) Profit before taxation
Taxation - Current - Prior years - Deferred
iv) Profit after taxation
Unappropriated profit brought forwardTransferred from surplus on revaluation of fixed assets on account of incremental depreciationProfit available for appropriation
Basic and diluted earning per share-after tax
(Data Source: DIB Financial Statements)
6.3 RATIO ANALYSIS
Ratios provide the means of showing the relationship, which exists between,
figures of the Balance Sheets and Income Statements. The analysis is
undertaken to assess important characteristics of business like liquidity,
solvency and profitability. A study of these aspects enables drawing
conclusions as to financial requirements and capabilities of business units.
Ratios may be classified in a number of ways to suit any particular purpose.
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Different kinds of ratios are selected for different types of situations. Some of
the ratios calculated for DIBPL are given below.
6.3.1 LIQUIDITY RATIO
Comparison gives an indication of the short-term debt paying ability of an
entity. Since a bank is also a business firm so to maintain adequate liquidity
is also crucial to carry out business activity.
6.3.1.1 Current Ratio
It is used to measure the ability of an enterprise to meet its current liabilities
out of current assets.
Current Ratio = Current Assets / Current Liabilities
(Rupees in’000)
2005 2006 2007 2008 2009
Current Assets 340,134 7,550,223 19,425,608
29,526,710
33,228,530
Current liabilities
119,340 4,903,849 16,952,908
26,983,946
29,328,629
Current Ratio
2.85 1.54 1.15 1.09 1.13
CURRENT RATIO
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INTERPRETATION
The current ratio of DIBPL, for the year 2009, is 1.13 times of current
liabilities. It is good to meet the short-term obligations, when compared with
the current ratio 2008, which is 1.09 times of current liabilities. The company
should maintain minimum limit of current ratio for Bank i.e.1.
6.3.1.2 Net Working Capital
Working capital compares current assets to current liabilities, and serves as the liquid reserve
available to satisfy contingencies and uncertainties. A high working capital balance is mandated
if the entity is unable to borrow on short notice. The ratio indicates the short-term liquidity of a
business and in determining if a firm can pay its current liabilities when due.
Net Working Capital = Current Assets – Current Liabilities
(Rupees in ‘000)
2005 2006 2007 2008 2009
Current Assets 340,134 7,550,223 19,425,608
29,526,710
33,228,530
Current liabilities
119,340 4,903,849 16,952,908
26,983,946
29,328,629
Net Working Capital
220,794 2,646,374
2,472,700
2,542,764
3,899,901
NET WORKING CAPITAL
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INTERPRETATION
Net working capital of 2009 increases from year 2008. This is safety cushion to
creditors. The volume of net working capital is showing positive trends.
6.3.2 DEBT RATIOS / SOLVENCY RATIONS
Solvency is a company’s ability to meet its long-term obligations as they
become due. An analysis of solvency concentrates on the long-term financial
and operating structure of the business.
6.3.2.1 Debt to Asset / Debt Ratio
Provides information about the company's ability to absorb asset reductions arising from losses
without endangering the interest of creditors.
Debt Ratio = Total Liabilities / Total Assets
(Rupees in ‘000)
2005 2006 2007 2008 2009
Total Assets 497,393 8,434,280 21,308,247
32050073 35,368,894
Total liabilities 119,340 4,903,849
16,952,908
26,983,946
29,328,629
Debt Ratio 0. 0.5814 0.7956 0.8419 0.8292
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DEBT RATIO
INTERPRETATION
Creditors prefer low debt ratio, debt ratio shows that how much asset the
company has to honor their obligations. This ratio is increased from 0.8419
to 0.8292. This is a good for the company because the company has 1 asset
to pay 0.8292 debts.
6.3.2.2 Debt to Equity Ratio
Indicates how well creditors are protected in case of the company's insolvency. The debt to
equity is a significant measure of solvency since a high degree of debt in a capital structure may
make it difficult for the company to meet interest chargers and principal payments at maturity.
Debt to Equity Ratio = Total Debt / Total Stockholder’s Equity
(Rupees in ‘000)
2005 2006 2007 2008 2009
Total Debt 119,340 4,903,849 16,952,908
26,983,946
29,328,629
Total Equity 418,185 3,917,480 5,126,230 6,017,780 6,776,030
Debt to Equity Ratio
0.285 1.252 3.307 4.484 4.328
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DEBT TO EQUITY RATIO
INTERPRETATION
Debt to equity ratio is the relationship borrowed funds and owner’s capital
and equity multiplier is the relationship between total assets and total
equity. But it is good that the ratio is decreasing in 2009 than 2008. The
overall leverage position is showing better trend as compare to previous
years.
6.3.3 PROFITABILITY RATIOS
This ratio shows that what percentage of net profit to the total income is.
6.3.3.1 Net Profit Margin
This ratio measures the firm’s profitability of sales/ interest earned after taking account of all
expenses and income taxes. This ratio can be calculated as:
Net Profit Margin = Net Profit / Revenue *100
(Rupees in ‘000)
2005 2006 2007 2008 2009
Net Profit 619,537 1,270,944 1,702,234 1,903,377 1,545,859
Total Deposits 655,717 8,322,621 16,114,461 25,458,910
25,980,906
Equity to Total Deposits
37.97% 47.07% 31.81% 23.64% 31.32%
EQUITY TO DEPOSITS
INTERPRETATION
41
This ratio shows that how much equity part is there in total structure. The
capital advocacy requirement is 28%. The bank was not fulfilling the
requirement in 2005 & 2006 but now bank has 31.32%, which is good.
6.3.4.6 Earning Per Share
Earning Per Share = Net Income / No of Ordinary Shares
(Rupees in ‘000)
2004 2005 2006 2007 2008
Net Profit(After Tax Profit)
619,537 1,270,944 1,702,234 1,903,377 1,545,859
No of Ordinary Shares
49,241,062
59,089,274
70,907,129 81,543,198
89,697,510
Earning Per Share (EPS)
12.58 21.51 24 23.34 17.23
EARNING PER SHARE
INTERPRETATION
42
As their earnings per common share is good year by year it mean that
results of the ratio indicate that firm has paid a handsome return on
investment showing the profit generations. Because the company’s net
income is increasing gradually. As shown above the bank basic earning per
share is increasing due to increase in net income. This shows how mush
profit each share has earned in any particular year. It is most important ratio
for peoples who decide about investing their money. Although it decreased
in 2009 but the overall performance is good.
6.3.3.3 Return on Total Investment
Measures the income earned on the shareholder's investment in the business.
Return on Investment = Net Income / Total Investment
(Rupees in ‘000)
2005 2006 2007 2008 2009
Net Profit(After Tax Profit)
619,537 1,270,944 1,702,234 1,903,377 1,545,859
Total Investment
2,489,976 3,615,847 5,304,464 6,927,063 8,136,700
Return on Investment
24.88% 35.15% 32.09% 27.48% 18.99%
RETURN ON INVESTMENT
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INTERPRETATION
It is decreasing every year with different rate. This condition is not good for
DIBPL because every investor want to earn high income on his investment.
6.3.3.3 Return on Fixed Assets
Measures the company's ability to utilize its fixed assets to create profits.
Return on Fixed Assets = Net Income / Average Fixed Assets *100
(Rupees in ‘000)
2005 2006 2007 2008 2009
Net Profit(After Tax Profit)
619,537 1,270,944 1,702,234 1,903,377 1,545,859
Total Fixed Assets
55,323,146
57,771,911
63,513,271 76,219,359
81,775,832
Return on Fixed Assets
1.12% 2.20% 2.68% 2.50% 1.89%
RETURN ON FIXED ASSETS
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INTERPRETATION
The results show that the Return on Asset are decreased which show that
the DIBPL Assets are not properly utilize in 2009 or may be there are no
proper environment for Banking sector because in 2008 Pakistan face the
economic crisis its assets to create profits.
6.4 VERTICAL ANALYSIS
In vertical analysis a significant item of a financial statement is used as a base value, and all
other items of the financial statement are compared to it. In balance sheet, total assets are
assigned 100%. Each asset account is expressed as a percentage of total assets. Total liabilities
and stockholder’s equity is also assigned 100%. Each liability and equity account is then net
income is given the value of 100% and all other amounts are evaluated in comparison to net
sales. The resulting figures are then given a common size statement.
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Askari Bank Pakistan Ltd.Balance Sheet
Vertical Analysis (Rs 000)For the year ended Dec 31, 200…
ASSETS2005 2006 2007 2008 2009
% % % % %
Cash & balances with treasury banksBalances with other banksInvestments-netLending to financial institutionsAdvances- netOperating Fixed assetsDeferred Tax Assets Other assets-net
17.089.0026.991.9039.923.451.66
-
12.325.5627.172.8246.434.101.60
12.386.4022.033.6249.771.52
-4.27
12.454.9227.702.8244.653.40
-4.07
13.034.6920.892.0950.502.960.395.45
Total Assets 100 100 100 100 100
LIABILITIES Bills PayableBorrowingsDeposits & other accountsLiabilities against asset subject to finance leaseDeferred tax liabilities-netOther liabilities
1.422.1991.840.0030.0064.55
0.351.7292.060.0030.894.96
1.922.1290.2.0020.435.80
1.091.6891.650.0050.784.79
1.455.6587.36.0030.005.54
Total liabilities 100 100 100 100 100
NET ASSETS PRESENTED BY
Share capital Reserve Unappropriated profit
Surplus on revaluation of assets
10.6523.3819.8153.8446.16
7.9518.2022.4848.6351.37
8.6516.9439.1464.7335.27
7.0013.5638.9859.5540.46
8.7519.4651.1979.4020.60
Total Liabilities and Equity 100 100 100 100 100
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Askari Bank Pakistan Ltd.Profit & Loss Account
Vertical Analysis (Rs 000)For the year ended Dec 31, 200…
Net mark-up / return / interest income 68.6 69.3 68.3 66.50 60.81Provision against non-performing advancesProvision for diminution in the value of InvestmentProvision against off balance sheet obligationsBad debts written off directly
7.230.890.0680.168.348
7.27(0.73
)-
0.07
6.97(1.61
)-
0.01
9.34(0.08)
-0.089.34
6.980.610.006
-7.96
Net mark-up /interest income after 60.3 62.3 63.0 57.16 52.85Non mark-up interest incomeFee, commission and brokerage incomeDividend incomeIncome from dealing in foreign currenciesGain on sale of securities-netUnrealized gain/(loss) on revaluation of investments Classified as held for tradingOther incomeTotal non-markup / interest income
Profit before Taxation 57.1 58.8 59.6 55.49 38.91Taxation – Current - Prior years
- Deferred
23.634.04(0.07
21.21(3.27
)
19.721.200.14
16.440.770.64
19.03-
(6.92)27.60 18.87 21.06 17.85 12.11
Profit After Taxation 29.43
40.01
38.60
37.64 26.68Unappropriated profit brought forwardTransferred from surplus on revaluation of fixed
assets on account of incremental depreciation
28.130.22
27.240.13
44.24-
63.420.08
74.400.21
Profit available for appropriation 57.78
67.38
82.84
101.14
101.29
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In balance sheet of bank the most important item is earning assets. There are four earning assets.
Bank has strong earning assets like advances investments and lending to financial institutions
has major percentage in of assets of bank. In liability and equity analysis the borrowing from
financial institutions and deposits have major portion and reserve and share capital has major
portion in equity. Out of the three earning assets (lending to financial institutions, advances and
investments) only advances have recorded a growth while Lending’s to financial institutions and
Investments fell respectively.
Vertical analysis of profit and loss shows increase or decrease in each item as a percentage of
sales means that sales are chosen as key figure. As we have seen in the table the interest expense
is increasing with the turnover so the bank is more utilizing on expenses. Net Interest income
was 10% higher this year to Rs 37.058 billion owing to volume growth. The interest earned in
the 12 months of 2008 is 21% higher than that of 2008 but it was matched by more than
proportionate increase in the interest expenses, which rose by 41%. So in vertical analysis the net
interest income is decreased in 2009 as compare to 2008.
DIBPL directors give some of reasons in increasing in interest expenses.
Firstly, the banks have been imposed a minimum of 5% deposit rate on all the savings
schemes. This had previously been left at the banks' discretion as to how much they have
to pay. A few of the banks have also been penalized by the SBP for acting like cartel in
deposits.
Secondly, there has been other attractive scheme from the National Savings, which
offered better rates and drained the liquidity from banking sector.
Furthermore, the economy was going through high inflation, so the people were not too
optimistic about saving in banks as the money was losing its value very fast.
Administrative expenses shows decreasing trend also the profit after tax is in decreasing
position during last two years, that position in not good for the company. Only profit available
for appropriation is increasing as compare to previous years, which is 101.29% in 2009.
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6.5 HORIZONTAL ANALYSIS
In horizontal analysis different period’s data is compared and in one year item is selected and item is compared with the same category of item of next period. In this analysis the year should be consecutive for the analysis and then percentage difference is taken to see the performance over the period of time. This analysis is used to evaluate the trend in the accounts over the year.
Askari Bank Pakistan Ltd.Balance Sheet
Horizontal Analysis (Rs 000)For the year ended Dec 31, 200…
ASSETS 2005 2006 2007 2008 2009Base 2005 Base 2005 Base 2005
20052005
Base 2005 Base 2005
Cash & balances with treasury banksBalances with other banksLending to financial institutions Investments-netAdvances- netOperating Fixed assetsOther assets-net
100 100 100 100 100 100 100
10.43 31.02 41.33 (10.85) 17.58 2.41 13.25
20.67(7.80)(6.73)50.877.65
167.7414.31
12.262.32
(20.02)(19.09)21.356.5843.73
11.3520.41
(40.25)(15.50)15.5524.127.69
Total Assets 100.0 9.94 20.01 7.29 23.37
LIABILITIES Bills PayableBorrowingsDeposits & other accountsLiabilities against asset subject to finance leaseDeferred tax liabilities-netOther liabilities
100100100100100100
509.233.668.30
(20.41) (46.51) 6.49
(33.41)(6.99)17.94153.52113.5616.07
44.71274.096.24
(24.67)(100)28.17
24.60(90.90)25.17
(32.15)25.1423.45
Total liabilities 100.0 9.89 16.75 10.75 (24.69)NET ASSETS PRESENTED BY Share capital Reserve Unappropriated profit
Surplus on revaluation of assets
100100100
100
20.002.5491.91
46.7 (24.29)
15.0013.6441.3730.5962.81
10.0026.4315.6817.46
(55.18)
19.3530.2216.3525.35
(41.89)
Total Liabilities and Equity 100.0 10.24 41.95 (11.93) 49.38
49
Askari Bank Pakistan Ltd.Profit & Loss Account
Horizontal Analysis (Rs 000)For the year ended Dec 31, 200…
Net mark-up / return / interest income 100.0 29.35 11.53 10.84 30.15Provision against non-performing advancesProvision for diminution in the value of InvestmentProvision against off balance sheet obligationsBad debts written off directly
100100100
100 100
25.70188.5425.71-77.096.64
53.56-94.3353.56655.0999.14
124.23-265.22-92.13-89.97
133.13
46.25175.2540.35-35.4555.16
Net mark-up /interest income after 100.0 31.74 4.05 -9.14 40.75Non mark-up interest incomeFee, commission and brokerage incomeDividend incomeIncome from dealing in foreign currenciesGain on sale of securities-netUnrealized gain/(loss) on revaluation of
investments Classified as held for tradingOther incomeTotal non-markup / interest income
