MONEY & BANKING MGT411“Practical knowledge of banking”

PREPARED BY: MC070400829 NOORUDDIN

TEACHER: DR. TALAT AFZA

Executive Summary______________________________________________

Soneri Bank Limited (the Bank) is engaged in banking services, and operates 118 branches,

including four Islamic banking branches in Pakistan. The Bank operates in four segments:

corporate finance, trading and sales, retail banking and commercial banking. Corporate

finance includes syndicated financing and services provided in connection with mergers and

acquisitions, underwriting, privatization, securitization, research, debt, equity, syndication,

initial public offering (IPO) and secondary private placements. Trading and sales segment

includes fixed income, equity, foreign exchanged, commodities, credit, funding, own position

securities, brokerage debt and prime brokerage. Retail banking segment includes retail

lending and deposits, banking services, private lending and deposits, trust and estates

investment advice and merchant/commercial/corporate cards. Commercial banking includes

projects finance, real estate, export finance, trade finance, factoring and leasing.

The essence of business philosophy is to cater to the banking requirements of small &

medium sized entrepreneurs, providing them qualitative & competitive services with

emphasis on encouraging exports. Nearly forty percent of our credit portfolio is related to

export financing and credit decisions are taken within 48 hours that is why we say:

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“We have more time for you”

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Table of Contents___________________________________________________

Executive Summary…………………………………………………….2

1) Bank Introduction & History …………………………………….4

2) Organizational Structure of Bank………………………………….7

3) Product & Services Offered………………………………………...9

4) Balance Sheet Analysis…………………………………………..16

5) Central Bank Role………………………………………………..23

6) Conclusion……………………………………………………….28

7) Bibliography……………………………………………………..29

Appendix………………………………………………………………30

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1.1 BANK INTRODUCTION & HISTORY

Incorporated on September 28, 1991 the first Branch of Soneri Bank Limited formally

opened doors for operations in Lahore on April 16, 1992 followed by Karachi Branch on

May 09,1992. The bank now operates with 117 branches spread all over Pakistan including

the Northern Areas of the country where no other private bank has ventured so far.

Expansion of branches is based on a policy of maintaining a balance between the urban and

rural areas with a view to offering services even in the remote areas of Pakistan. Pleasant and

sophisticated atmosphere has been provided in the branches which are all fully air-

conditioned and computerized.

The bank is looking forward to attain further growth through activating the areas of SMEs

and Agricultural Credit.

The Pakistan Credit Rating Agency Limited (PACRA) has maintained bank’s credit rating at

“AA-” for the long term and “A1+” for the short term and “A+” for the Term Finance

Certificates reflecting bank’s well maintained risk profile with preserved sound asset quality.

We take this opportunity to thank the Ministry of Finance and State Bank of Pakistan for

their continued support and guidance.

Registered Office

Rupali House 241-242, Upper Mall Scheme

Anand Road, Lahore – 54000

HEAD OFFICE:

5

87, Shahrah-e-Quaid-e-Azam,

P.O. Box No. 49, Lahore.

Tel: 6368142-48 Fax: 6368138

Swift: SONEPKKALHR E-mail: main.lahore@soneribank.com

CENTRAL OFFICE:

5th Floor, Al-Rahim Tower,

I.I. Chundrigar Road, P.O. Box No. 5856, Karachi.

Tel: 2439562-67, 2444401-05 Fax: 2439561 2446661

Swift: SONEPKAXXX E-mail: info@soneribank.com

1.2 CORPORATE INFORMATION

Chairman

Mr. Alauddin Feerasta

Chief Executive Officer

Mr. Safarali K. Lakhani

Directors

Mr. Nooruddin Feerasta

Mr. Inam Elahi

Mr. S. Ali Zafar

Mr. Abdul Hayee

Mr. Shahid Anwar (NIT Nominee)

Mr. Manzoor Ahmed (NIT Nominee)

Company Secretary

Mr. Abdul Hayee

Audit Committee

Mr. Nooruddin Feerasta (Chairman)

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Mr. S. Ali Zafar (Member)

Mr. Shahid Anwar (Member)

Mr. Abdul Hayee (Member & Secretary)

Auditors

A.F. Ferguson & Co.

Chartered Accountants

Legal Advisor

Manan Associates, Advocates

Registrar and Share Transfer Agent

THK Associates (Private) Ltd.

Ground Floor, State Life Building No. 3

Dr. Ziauddin Ahmed Road, Karachi-75530

UAN: +9221-111-000-322

Fax: +9221-5655595

STOCK EXCHANGE : SNBL

PRESENT PRICE :

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2.1 ORGANIZATIONAL STRUCTURE

TOP LEVEL MANAGEMENT

8

MR ALAUDDIN FERMR. ALAUDDIN FEERASTA

MR. SAFAR ALI K LAKHANI

CEO

MR. NOORUDDIN FEERASTA

DIRECTOR

MR. S. ALI ZAFAR

DIRECTOR

MR. IMAM ELAHI

DIRECTOR

MR. ABDUL HAYEE

DIRECTOR

MIDDLE & LOWER MANAGEMENT

9

DIRECTORS

GRADE I GRADE 2

GRADE 3

AUDITORS SECRETARY

SEVP EVP

VP AVP

3.1 PRODUCTS & SERVICES OFFERED

The following are the services and products offer by the bank to facilitate customer in

providing them their savings in order to make future investment and growth for the

organization

SPECIAL NOTICE DEPOSITS

Period Rate of Return

Minimum investment of Rs. 10,000/- Profit payment on maturity as well as rollover of profit

7 days 6.00% p.a

30 days 8.00% p.a

PLS SONERI SAVINGS ACCOUNTS

DESCRIPTIONRate of Return

p.a

Minimum balance of Rs. 5,000/- must be maintain per month on daily basis other wise Incidental Charge of Rs. 50/- will be deducted.Profit payment is on half yearly basis.

Balance Upto Rs. 100,000 5.00 %.

Balance Over Rs. 100,000 but upto Rs.1.0 Million 8.00 %.

Balance Over Rs. 1.0 Million but upto Rs. 10.0 Million 10.00 %.

Balance Over Rs. 10.0 Million 12.00 %.

PLS TERM DEPOSITS

DESCRIPTIONRate of Return

p.a

Minimum investment of Rs. 10,000 Profit payment according to term, Profit rollover facility available.

Term 1 month 8.00 %.

Term 3 month 9.00 %.

Term 6 month 10.00 %.

Term 1 year 11.00 %.

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Term 2 years 12.50 %.

Term 3 years 13.00 %.

CERTIFICATES OF DEPOSITS

DESCRIPTION %age

Pre mature encashment will be made on the return of PLS Term Deposit. Minimum period after which encashment will be made is 90 days

Soneri Savings Certificates (3 Years Term - New Scheme) Profit Payment on Half Yearly basis, minimum deposit start from Rs. 10,000/-

11.50%

Golden Deposit Certificates (5 Years Term) Profit Payment on monthly basis, minimum deposit start from Rs. 10,000/-

10.25%

Diamond Deposit Certificates (New Scheme ef 1.1.2009)1 YearProfit Payment on monthly basis, minimum deposit start from Rs. 10,000/-

12.00%

Diamond Deposit Certificates (New Scheme ef 1.1.2009)2 YearProfit Payment on monthly basis, minimum deposit start from Rs. 10,000/-

13.00%

Diamond Deposit Certificates (New Scheme ef 1.1.2009)3 YearProfit Payment on monthly basis, minimum deposit start from Rs. 10,000/-

14.00%

Diamond Deposit Certificates (3 Years Term - Old Scheme)1 Year Profit Payment on monthly basis, minimum deposit start from Rs. 10,000/-

11.50%

Diamond Deposit Certificates (3 Years Term - Old Scheme)2 Year Profit Payment on monthly basis, minimum deposit start from Rs. 10,000/-

12.00%

Diamond Deposit Certificates (3 Years Term - Old Scheme)3 Year Profit Payment on monthly basis, minimum deposit start from Rs. 10,000/-

13.00%

Soneri Premium Deposit (12 Months Period) NEW Profit Payment on maturity, minimum deposit start from

15.00%

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Rs. 10,000/-

NOTE “ANNUALISED RATES OF EXPECTED PROFIT FOR DIFFERENT TYPES

OF PLS DEPOSITS

CURRENT ACCOUNTS

TermRate of Return

p.a

Current Deposit AccountFree Statement of Account Every Six MonthMinimum balance requirement Rs.10,000/-FREE ATM Card, Online Banking, T-Banking etc

NIL

Basic Banking AccountFree Statement of Account Every Six MonthNo Minimum, 4 Cheques Issuance any additional will be charge FREE ATM Card, Online Banking, T-Banking etc

NIL

ISLAMIC BANKING PRODUCT

DESCRIPTION Profit p.a

Soneri Jari Account (Islamic Banking Product)Free Statement of Account Every Six MonthNo minimum or maximum limitFREE ATM Card, Online Banking, T-Banking etc

NIL

Soneri Bachat AccountFree Statement of Account Every Six MonthInitial starting investment of Rs. 100, Profit payment on quarterly basis.fFREE ATM Card, Online Banking, T-Banking etc

Profit calculated on monthly

average

Soneri Munafa AccountFree Statement of Account Every Six MonthNo minimum or maximum limitFREE ATM Card, Online Banking, T-Banking etc

Profit calculated on daily product

Soneri Meaadi AccountMinimum deposit of Rs.10,000/- for period 1, 2,3,4,5 years and quarterly and halfyearly. Fund utilize on the basis and in accordance with the Shariah Principle

Profit payment at the quarterly after deduction of exp and management

fee

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E BANKING & CARDS

DESCRIPTION Charges

Simple ATM CardFree for the first time, Issuance Charges Rs. 200 + Ex. Duty Rs. 15 charges on 1Link ATMs and Rs. 5 on Balance Inquiry on M Net, POS Transaction allowed, Rs. 25,000/- daily limit for withdrawing cash and 250,000 on Fund transfer facility

NIL

Visa Classic CardFree for the first time, Issuance Charges Rs. 200, 3% on purchase on POS terminal, Can be used outside the country (conversion rate applied), 2 Year Expiry from the date of Issue, Daily limit for withdrawing cash is Rs. 35,000/- and for Fund transfer Rs. 250,000/

150 p a

Visa Gold CardMinimum Balance requirement for issuance of card is Rs. 50,000/- for the last six month, Rs. 500, 3% on purchase on POS terminal, Can be used outside the country (conversion rate applied), 2 Year Expiry from the date of Issue, Daily limit for withdrawing cash is Rs. 50,000/- and for Fund transfer Rs. 250,000/. Running Finance Facility available (condition applied). Easy to use every where

500 p.a

Online BankingFree for all the customer, no charges applied. Simple Balance Inquiry,

NIL

Fund Transfer Fund transfer within the same bank is Free upto 250,000/- . 1Link member banks the charge per transaction is Rs. 50/-

Utility Bills PaymentUtility bills can be paid through bank ATM Machine, KESC, SSGC, PTCL, Warid etc

Telephone Banking24 Hour Telephone Banking Service available for national and international customer

Cheque Free BankingNow customer can withdraw money from their account without having cheque. All they need to do is to give there atm card to the online banking teller at bank can

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cash upto 300,000

NOTE “WITHDRAWL ABOVE RS 25,000/- PER DAY WILL LEVY WITHHOLDING TAX.

CONSUMER FINANCING

DESCRIPTION Markup Rate

Soneri Car FinanceFor Cars upto 1800 CC Rs. 1.0 MFor Cars exceeding 1800 CC Rs. 2.0 MDown Payment On finance of upto Rs. 1.0 M : Minimum 15% of Car Price.On finance exceeding Rs. 1.0 Mbut not more than Rs. 2.0 M : Minimum 20% of Car Price.Payment PeriodPayment period upto 5yearsProcessing FeeRs. 2000/- per application up front (Refundable)Prepayment Penalty2% on outstanding principal

17%

Soneri Ghar FinanceFinancing Amount:Purchase / Construction of residential property up to Rs. 5,000,000/-Extension / Renovation on own property up to Rs. 2,000,000/-Fee and Legal ChargesProcessing fee Rs. 2,500/- or 0.50% of the finance amount which ever higherEligibility:Confirmed Permanent Employee/ Self Employed Professionals / Business person.Minimum length of confirmed service with present employer must be at least for 5 years.Minimum length of practice by Self Employed Professionals / Business person must be at least for 2 years.Applicant’s age must not be more than 60 years at the time of maturity of the finance being applied for.Monthly repayment installments not to exceed 40% of the net take home salary / 40% of declared monthly

Floating markup rate @4.5%

prevailing SBP discount rate @

16.5%

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income.Should have no over due track record from any bank in PakistanLife insurance cover for the loan amount.

Soneri Personal FinanceEligibiltySalaried persons in permanent employment with legal entities approved by the Bank who meet our other conditions to qualify for the finance.Maximum Amount of FinanceRs. 500,000/- or Five times of applicant’s one month gross salary

19.00% p.a

DOMESTIC BANKING CHARGES

Term Charges

REMITTANCE

Drafts, MTs and TTs drawn & payable on our own branches:Telex Charges = Rs, 50/- Postages = Rs. 30/-

Upto Rs. 10,000/ - 0.20 Min or Rs. 30/- Rs.10,001/= to Rs.100,000/- 0.15% Minimum Rs.50/=Over Rs.100,000/=0.055% Minimum Rs.200/=

PayordersCancellation Charges = Rs. 25/- Issuance of Duplicate = Rs. 50/-

Intercity upto 500,000/- Rs.100/-and over Rs 200/-

Same day outward clearingCheque return charge due to

In Town Rs. 250/-Other branches

Rs. 150/- instrument

Inland LC Advising Rs. 500/-

0.40 per quarterMinimum Rs. 400

per quarter

Duplicate Statement of Account Rs 50/-

Issuance of Bank Account Certificate Rs. 50/-

Issuance of Bank Balance Confirmation Certificate Rs. 100/-

BILLS 0.20 or Rs.25/-

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Through own branchesplus courier

Through branches of other banks0.35 or Rs.45/-

plus courier

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4.1 BALANCE SHEET ANALYSIS

ITEMS 2007 (000’s)

2006 (000’s)

ASSETSCash and Balance with Treasury Banks 1 5,861,205 5,551,302

Balances with Other Banks 2 4,349,673 6,603,003

Lending to financial and Other Institutions 3 3,175,009 3,193,405

Investment – net 4 19,181,562 16,724,253

Advances – net 5 40,154,449 35,412,248

Operating fixed assets 6 2,150,955 1,929,885

Deferred tax assets - -

Other assets – net 1,981,207 1,315,578

Total assets 76,854,060 70,729,674

LIABILITIESBills payable 1,640,514 957,576

Borrowings 5,865,471 8,916,437

Deposits and other accounts 60,150,128 53,000,647

Sub-ordinated loans 1,198,800 1,199,280

Liabilities against assets subject to finance lease - -

Deferred tax liabilities – net 425,398 338,698

Other liabilities 963,270 705,133

Total liabilities 70,240,581 65,117,771

Net assets (Total assets –Total liabilities) 6,610,479 5,611,903

REPRESENTED BY:Share Capital 4,114,222 3,116,835

Reserves 1,876,669 1,676,602

Unappropriated profit 238,775 400,853

6,229,666 5,194,290

Surplus on revaluation of assets – net of tax 380,813 417,613

6,610,479 5,611,903

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ASSETS – Use of Funds

CASH & BALANCES WITH TREASURY BANKS

1 2007 (000’s)

2006 (000’s)

In Hand,

Local currency (Including NPB of Rs. 12,514 (M)

1,145, 416 988,046

Foreign currency 320,153 234,429In Transit,

Local currency 8,425 -Foreign currency 5,991 4,915With State Bank of PakistanLocal currency current account(SBP Act, 1956 U/s 36: banking companies to maintain a local currency reserve)

3,921,377 3,499,831

Foreign currency current account(Represent foreign currency maintained with SBP)

176,509 166,039

Foreign currency deposit account against foreign currency deposits mobilized(Foreign currency cash reserve maintain with SBP under FE-25 scheme. The foreign currency cash reserve comprises of an amount equivalent to at least 5% of Bank’s foreign currency deposit)

165,663 509,376

With National Bank of PakistanLocal currency current account 117,671 148,666

5,861,205 5,551,302

BALANCES WITH OTHER BANKS 2 2007 (000’s)

2006 (000’s)

In Pakistan,

On current account(Markup 10 to 10.75% with maturity 3 months)

1,139,420 1,242,424

On deposit account 2,000,000 4,100,000

Outside Pakistan,

On current account 1,210,253 1,260,579

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LENDING TO FINANCIAL & OTHER INSTITUTIONS

3 2007 (000’s)

2006 (000’s)

Call money lendings(Markup 9.75% - 10.25% maturity upto 3 months)

1,500,000 1,750,000

Repurchase agreement lendings(Markup 11.18% - 11.20% p.a ordinary shares)

1,675,009 1,443,405

INVESTMENTS 4 2007 (000’s)

2006 (000’s)

Available for sale(Market T-bills, Pak Investment bond, Fed. Investment bonds, Fully paid-up ordinary shares, Units of mutual funds, Fully paid-up preference shares

13,576,889 10,915,744

Held by maturity 5,687,141 5,892,884

Investment at Cost 19,264,030 16,808,628

Less: Provision of diminution in value of invest. (5,700) (5,700)

Investment (net of provision) 19,258,330 16,802,928

Surplus/(deficit) on revaluation of available sale securities

(76,768) (78,675)

Total investments at market value 19,181,562 16,724,253

ADVANCES 5 2007 (000’s)

2006 (000’s)

Loan, cash credits, Rf’s etc in Pakistan 37,218,507 32,287,262

Bills discounted and purchased

Payable in Pakistan 298,483 585,220

Payable outside Pakistan 3,288,234 2,955,877

Advances – gross 40,805,224 35,828,359

Provision of non performing advances (650,775) (416,111)

Advances – net of provision 40,154,449 35,412,248

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OPERATING FIXED ASSETS 6 2007 (000’s)

2006 (000’s)

Capital work-in-progress 184,256 71,026

Advances to suppliers and contractors 1,949,595 1,858,859

Intangible assets 17,104 -

2,150,955 1,929,855

LIABILITIES – SOURCE OF FUNDS

Bills Payable 7 2007 (000’s)

2006 (000’s)

Bills Payable - In Pakistan 1,640,516 957,576

Borrowings 8 2007 (000’s)

2006 (000’s)

In Pakistan 4,895,707 8,498,663

Outside Pakistan 969,764 417,774

5,865,471 8,916,437

Deposits & Other Accounts 9 2007 (000’s)

2006 (000’s)

Customers

Fixed deposits 18,498,298 16,205,806

Savings deposits 28,610,361 21,132,755

Current Accounts 10,377,688 9,503,116

Call deposits 127,181 178,556

Margin deposits 524,604 391,239

Special exporter account - 3,273

Others 117,334 83,914

Total customers 58,255,466 47,498,659

Financial Institutions

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Fixed deposits 1,675,959 4,867,758

Savings deposits 218,425 634,003

Current accounts 278 227

Total financial institutions 1,894,662 5,501,988

Total deposits & other accounts 60,150,128 53,000,647

Sub –Ordinated Loans – Unsecured 9 2007 (000’s)

2006 (000’s)

Listed Term Finance Certificates 1,198,800 1,199,280

Deferred Tax Liabilities 10 2007 (000’s)

2006 (000’s)

Accelerated Tax depreciation 222,339 186,074

Surplus on revaluation of fixed assets 231,922 250,791

Prov. For diminution in the value of investments 1,995 1,995

Prov. Against non-performing advances - 65,639

Deficit on revaluation of securities 26,868 30,533

425,398 338,698

Other Liabilities 11 2007 (000’s)

2006 (000’s)

Markup /return/interest payable in local currency 577,809 536,250

Markup /return/interest payable in foreign currency 1,068 1,585

Unearned commission and income on discounted bills 19,155 17,630

Accured expenses 47,109 27,469

Current taxation (provision less payments) - 54,350

Branch adjustment account 238,329 -

Provision for employees compensated absences 55,583 37,770

Others 24,217 30,079

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963,270 705,133

Share Capital 12 2007 (000’s)

2006 (000’s)

Authorized Capital (Ordinary shares of Rs. 10/ each) 500,000,000 500,000,000

Issued Subscribe Paid up Capital

Opening Balance 3,116,835 1,653,494

Shares issued during the year 997,387 1,463,341

Closing Balance 4,114,222 3,116,835

Major Share holders as at 31st

Major share holders Number ofShares held

% of Shareholding

National Investment (Unit) Trust 96,669,576 23.50%

Trustee – Alauddin Feerasta Trust 83,427,820 20.28%

Trustee- Feerasta Senior Trust 81,320,110 19.77%

Trustee- Alnu Trust 40,669,629 9.89%

302,087,135 73.44%

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Surplus/(Deficit) on Revaluation of Assets 13 2007 (000’s)

2006 (000’s)

Fixed Assets 430,713 465,755

Securities (49,900) (48,142)

Surplus of revaluation of fixed asset - net of tax

Surplus on 1st Jan 716,546 770,457

Transfer to unappropriated profit & Related deferred tax liability

(53,911) (53,911)

As on dec 31st 662,635 716,546

Less: related deferred tax liability (231,922) (250,791)

430,713 465,755

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5.1 CENTRAL BANK ROLE

Regulation R-1 – LIMIT ON EXPOSURE TO SINGLE PERSON

The total outstanding exposure (fund based and non-fund based) by a bank / DFI to any single person shall not at any point in time exceed 30% of the bank’s / DFI’s equity (as disclosed in the latest audited financial statements), subject to the condition that the maximum outstanding against fund based exposure does not exceed 20% of the bank’s / DFI’s equity.

Soneri Bank adhere the Regulation R-1 not to expose its fund and non-fund based exceed to 30%

Regulation R-2 – LIMIT ON EXPOSURE AGAINST CONTINGENTLIABLITIESContingent liabilities of a bank / DFI shall not exceed at any point in time 10 times of its equity. Following shall not constitute contingent liabilities for the purpose of this regulation:(a) Bills for collection.(b) Obligations under Letters of Credit and Letters of Guarantee to the extent of cash margin retained by the bank / DFI.(c) Letters of credit/guarantee where the payment is guaranteed by the State Bank of Pakistan / Federal Government or banks / DFIs rated at least ‘A’ by a credit rating agency on the approved panel of State Bank of Pakistan or Standard & Poors, Moody’s or Fitch-Ibca.(d) Non-fund based exposure to the extent covered by liquid assets.(e) Claims other than those related to provision of facilities (fund based or non-fund based) to the banks’ / DFIs’ constituents, where the probability of conversion of these claims into liabilities are remote. Soneri Bank adhere the Regulation R-2 and maintained bank’s credit rating at “AA-” for the long term and “A1+” for the short term and “A+” for the TFC.

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Regulation R-3 – MINIMUM CONDITIONS FOR TAKING EXPOSUREWhile considering proposals for any exposure (including renewal, enhancement and rescheduling / restructuring) exceeding such limit as may be prescribed by State Bank of Pakistan from time to time (presently at Rs 500,000), banks / DFIs should give due weightage to the credit report relating to the borrower and his group obtained from Credit Information Bureau (CIB) of State Bank of Pakistan.

Soneri Bank adhere the Regulation R-3 and all the branches requires to obtain CIB from SBP before disbursing any loans.

Regulation R-4 – MINIMUM CONDITIONS AGAINST UNSECURED FINANCING FACILITIESBanks / DFIs shall not provide unsecured / clean financing facility in any form of a sum exceeding Rs 500,000/- (Rupees five hundred thousand only) to any one person.

For the purpose of this regulation, following shall be excluded / exempted from the per party limit of Rs 500,000/- on the clean facilities:

(a) Facilities provided to finance the export of commodities eligible under Export Finance Scheme.

(b) Financing covered by the guarantee of Pakistan Export Finance Guarantee Agency.

(c) Loans / advances given to the employees of the banks / DFIs in accordance with their entitlement / staff loan policy.

(d) Investment in COIs / inter bank placements with NBFCs, provided the investee NBFC is rated ‘A+’, ‘A’ or ‘A-’ for long-term rating and at least ‘A2’ for short-term rating or equivalent by a credit rating agency on the approved panel of the State Bank of Pakistan or Standard & Poors, Moody’s and Fitch-Ibca.

Soneri Bank adhere the Regulation R-4 and all the branches providing running finance or personal finance unsecured loan amount does not exceed the required figure i.e Rs.500,000/-

Regulation R-5 – MINIMUM CONDITIONS AGAINST UNSECURED FINANCING FACILITIESWhile taking any exposure, banks / DFIs shall ensure that the total exposure (fund-based and / or non-fund based) availed by any borrower from financial institutions does not exceed 10 times of borrower’s equity as disclosed in its financial statements

It is expected that at the time of allowing fresh exposure / enhancement / renewal, the current assets to current liabilities ratio of the borrower shall not be lower than 1:1. However, in exceptional cases, banks / DFIs may relax this ratio upto 0.65:1

Soneri Bank adhere the Regulation R-5 and all the branches before disbursing loans checks the borrower equity does not exceed 10 times

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Regulation R-6 – EXPOSURE AGAINST SHARES /TFC’S AND ACQUISITION OF SHARES(a) take exposure against the security of shares / TFCs issued by them.

(b) provide unsecured credit to finance subscription towards floatation of share capital and issue of TFCs.

(c) take exposure against the non-listed TFCs or the shares of companies not listed on the Stock Exchange(s). However, banks / DFIs may make direct investment in non-listed TFCs.

(d) take exposure on any person against the shares / TFCs issued by that person or its subsidiary companies. For the purpose of this clause, person shall not include individual.take exposure against ‘sponsor director’s shares’ (issued in their own name or in the name of their family members) of banks / DFIs.

(f) take exposure on any one person (whether singly or together with other family members or companies owned and controlled by him or his family members) against shares of any commercial bank / DFI in excess of 5% of paid-up capital of the share issuing bank / DFI.

(g) take exposure against the shares / TFCs of listed companies that are not members of the Central Depository System.

(h) take exposure against unsecured TFCs or non-rated TFCs or TFCs rated below ‘BBB’ or equivalent. Exposure may, however, be taken against unsecured / subordinated TFCs, which are issued by the banks / DFIs for meeting their minimum capital requirements, as per terms and conditions stipulated in BSD Circular No. 12 of August 25, 2004.

B) ACQUISITION OF SHARES:

i) Banks / DFIs shall not own shares of any company / scrips in excess of 5% of their own equity. Further, the total investments of banks in shares should not exceed 20% of their own equity.

i) The banks/DFIs may also take exposure in future contracts to the extent of 10% of their equity on aggregate basis.

Soneri Bank adhere the Regulation R-6

Regulation R-7 – GUARANTEES

The requirement of security can also be waived by the banks / DFIs in cases of guarantees issued to Pakistani firms and companies functioning in Pakistan against the back to back / counter guarantees of branches of guarantee issuing bank / DFI or banks / DFIs rated at least

26

‘A’ or equivalent by a credit rating agency on the approved panel of State Bank of Pakistan or Standard & Poor, Moody's, and Fitch-Ibca.

Soneri Bank adhere the Regulation R-7 and maintain US$250,000 subject to internal credit control and providing SBP with FE-25 statement frequently

REGULATION R-8 -CLASSIFICATION AND PROVISIONING FOR ASSETS

In addition to the time-based criteria prescribed in Annexure-IV, subjective evaluation of performing and non-performing credit portfolio shall be made for risk assessment and, where considered necessary, any account including the performing account will be classified, and the category of classification determined on the basis of time based criteria shall be further downgraded. Such evaluation shall be carried out on the basis of credit worthiness of the borrower, its cash flow, operation in the account, adequacy of the security, inclusive of its realizable value and documentation covering the advances….

Soneri Bank adhere the Regulation R-8 and provide necessary information to SBP on time to time basis regarding performing and non-performing credit portfolio

REGULATION R-9 -ASSUMING OBLIGATIONS ON BEHALF OF NBFCs

The total amount of guarantees issued by an NBFC, and accepted by the banks, on the strength of which the exposure will be allowed by the commercial bank / DFI, will not exceed per party limit of the bank / DFI as mentioned in Regulation R-1. Before taking exposure against the guarantee of NBFC, banks / DFIs shall ensure that total guarantees issued by an NBFC in favour of banks / DFIs do not exceed 2.5 times of capital of the NBFC as evidenced by the latest available audited financial statements

Soneri Bank adhere the Regulation R-9 and doesnot exceed 2.5 times of capital of NBFC

REGULATION R-10- FACILITIES TO PRIVATE LIMITED COMPANY

Banks / DFIs shall formulate a policy, duly approved by their Board of Directors, about obtaining personal guarantees of directors of private limited companies. Banks/DFIs may, at their discretion, link this requirement to the credit rating of the borrower, their past experience with it or its financial strength and operating performance.

Soneri Bank adhere the Regulation R-10 and make sure proper documents should be obtain before facilitating private limited company

REGULATION R-11- PAYMENT OF DIVIDEND

Banks / DFIs shall not pay any dividend on their shares unless and until:(a) they meet the minimum capital requirements as laid down by the State Bank of Pakistan from time to time;

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(b) all their classified assets have been fully and duly provided for in accordance with the Prudential Regulations and to the satisfaction of the State Bank of Pakistan; and(c) all the requirements laid down in Banking Companies Ordinance, 1962 relating to payment of dividend are fully complied.

Soneri Bank adhere the Regulation R-11 provide its shareholder regular dividend as well as right shares according to the banking companies ordinance, 1962

REGULATION R-12- MONITORING

While extending fund based facilities to borrowers against hypothecation of stock and / or receivables on pari-passu basis, banks / DFIs shall obtain monthly statements from borrowers that contain a bank-wise break-up of outstanding amounts with the total value of stocks and receivables there-against.

Soneri Bank adhere the Regulation R-12 and provide provide necessary statements on monthly basis which contains the information as per laid down under this regulation

REGULATION R-13- MARGIN REQUIREMENTS

Banks / DFIs are free to determine the margin requirements on facilities provided by them to their clients taking into account the risk profile of the borrower(s) in order to secure their interests. However, this relaxation shall not apply in case of items, import of which are banned by the Government. Banks / DFIs are advised not to open import letter of credit for these items in any case till such time the lifting of ban on any such item is notified by the State Bank of Pakistan.

Soneri Bank adhere the Regulation R-13 and before opening any LC it will obtain special code from SBP and follow the instructions as laid under.

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6.1 CONCLUSION

Soneri Bank was incorporated in 1992 as a public limited company with paid up capital of Rs.300(M). Over the last 16 years the bank has achieved sustained growth with a network of 117 branches across the country. The equity stands at Rs. 6.610(bn) and total assets of PKR Rs. 76.854 (bn) at the close of the year 2007.

My personal experience with the bank is that when I visited Soneri Bank head office which is located at 5 th Floor, Central Office, Al Rahim Tower , 1.1 Chundrigar Road, Karachi, I have being overwhelmed by the staff and when I request them to assist me in my report assignment of my Virtual University they offer me with great help. Firstly, I have being introduced by different department of the bank i.e The General Manager’s office of the South region is on the 2nd Floor of the same building than they have Soneri Bank Data Center at 7 th

Floor alongwith is the HR Department on the same floor and than they have other miscellaneous department on different floor. For more detail they asked me to visit any branch manager which will help in this context further. So, I visited Senior staff member of Soneri Bank Limited Garden Branch he assist me with all the necessary information on the part of the bank.

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6.1 BIBLIOGRAPHY

Money and banking , Dr Talat Afza, Lecture Notes

Soneri Bank, Annual Reports

o Year 2005 (Audited)

o Year 2006 (Audited)

o Year 2007( Audited)

o Year 2008 3rd Quarter (Unaudited)

State Bank of Pakistan Prudential Regulation for Corporate and Commercial

Banking

State Bank of Pakistan BPRD Circulars

PACRA Rating for Banking and Other Financial Institutions

How to write Annual Report By Joane Fritz, About.com

Writing on the Job: A Norton Pocket Guide By John C. Brereton & Margaret A.

Mansfield.

Effective Writing, Stunning Sentences, Powerful Paragraphs and Riveting Reports By

Bruce and Ross-Larson

Dawn Newspapers for updated information

Instruction Circulars of Soneri Bank Limited

Economic Reviews for Banks and their activities.

State Bank of Pakistan, Website, http://www.sbp.gov.pk

Soneri Bank website, http://www.soneribank.com

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7.1 APPENDIX

Soneri Bank Annual Report for the Year 2007 is available at the following link. Due to the

size and requirement it will not appended with this report

Direct Link to Download

http://www.soneribank.com/soneribank/html/anualreport2007.pdf

State Bank of Pakistan Prudential Regulations for Commercial Banking can be download as

follows.

Direct Link to Download

http://www.sbp.org.pk/publications/prudential/PRs-Corporate.pdf

The Pakistan Credit Rating Agency Limited (PACRA) banking rating methodology can be

download as follows

Direct Link to Download

http://www.pacra.com/RMethodology/Bank%20Rating%20Methodology.pdf

The Pakistan Credit Rating Agency Limited (PACRA) bank loan and recovery rating can

be download as follows

Direct Link to Download

http://www.pacra.com/RMethodology/BLR%20Methodology.pdf

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