Contents

Contents..........................................................................................................................1 OBJECTIVES OF STUDYING THE ORGANIZATION.............................................8 ACHIEVEMENTS BY STUDY THIS ORGANIZATION .....................................9 ORIGIN AND GROWTH OF BANKING:.................................................................10 INTRODUCING BANKING:.................................................................................10 Modern Banking:.....................................................................................................11 OVERVIEW OF PAKISTANS BANKING SECTOR:.........................................13 ISLAMIC BANKING..............................................................................................14 FINANCIAL IMPACT............................................................................................15 BRIEF HISTORY OF ALLID BANK .......................................................................17 The Pre Independence Period (1942-1947)..............................................................17 Australasia Bank (1947-1973).................................................................................18 Allied Bank of Pakistan Limited (1974-1991).........................................................20 Allied Bank Limited (1991 to 2005)........................................................................21 Allied Bank Limited (2006 to Date)........................................................................22 NATURE OF THE ORGANIZATION AND BUSINESS ACTIVITIES ..............23 BUSINESS VOLUME OF LAST FIVE YEARS....................................................24 NUMBER OF EMPLOYEES BY CADRE VISE BREAK UP ............................24 PRODUCTS / SERVICES OFFERED BY ALLIED BANK .....................................24 DEPOSITS ..............................................................................................................25 Current Deposit Account..........................................................................................25 Salient Features....................................................................................................25 Purpose.................................................................................................................26 Deposit of Funds..................................................................................................26 Mark-Up...............................................................................................................26 PLS Saving Deposit Account...................................................................................26 Additional Benefits .............................................................................................26 Minimum & Maximum Balance..........................................................................26 Deposit of Funds..................................................................................................27 Profit.....................................................................................................................27 Foreign Currency Deposit Account..........................................................................27 Allied Business Account..........................................................................................28 Allied Basic Banking Account (ABBA) .................................................................28 Allied Bachat Scheme (ABS)...................................................................................29 Behtar Munafa Account (BMA) .............................................................................30 Salient Features....................................................................................................30 Behtar Munafa Term Deposit Account....................................................................31 Salient Features....................................................................................................32 Rewarding Term Deposit Account.......................................................................32 Salient Features...................................................................................................32 Rate of Profit ......................................................................................................33 Allied Munafa Account (AMA)...............................................................................33 Monthly Profit Plus .................................................................................................33 Salient Features....................................................................................................34 Allied E-Savers Accounts (ESA).............................................................................34 Salient Features....................................................................................................35 Foreign Deposits Schemes.......................................................................................35 1

Saving Accounts.......................................................................................................35 Fixed deposit............................................................................................................36 Current Deposits.......................................................................................................36 Rate of Interest.....................................................................................................36 ALLIED VISA CREDIT CARD.............................................................................36 Pioneer in Credit Cards........................................................................................37 Allied Visa Gold Credit Card...................................................................................37 Visa Platinum Credit Card ......................................................................................37 Features of Allied Visa Credit Card.....................................................................37 Buy Now, Pay Later.............................................................................................37 Flexible Repayment..............................................................................................37 Cash Advance Facility.........................................................................................38 Balance Transfer Facility.....................................................................................38 Supplementary Cards...........................................................................................38 Allied Easy Installments (AEI)................................................................................38 Credit Protection Plus...........................................................................................38 Zero Loss Liability...............................................................................................39 24-hour Allied Phone Banking.................................................................................39 ALLIED CASH+ CARD.........................................................................................39 How to Obtain: ....................................................................................................40 Activation Instructions.........................................................................................40 How to Use: .........................................................................................................40 Inserting the Card:................................................................................................41 Protect Your Card.................................................................................................41 Features................................................................................................................41 Get Cash...............................................................................................................41 No Fee' ATMs .....................................................................................................41 Shop Anywhere...................................................................................................42 Dine Out...............................................................................................................42 Enjoy Traveling....................................................................................................42 Fuel Up.................................................................................................................42 Stay Alert..............................................................................................................42 Round-the-clock cash withdrawals......................................................................43 Balance Inquiry & Mini Statement of Account....................................................43 Utility Bill payment facility.................................................................................43 Funds Transfer facility.........................................................................................43 Card Facilities: ....................................................................................................43 ALLIED ATM NETWORK....................................................................................44 1 LINK NETWORK............................................................................................44 M NET NETWORK ............................................................................................44 ONLINE BANKING...............................................................................................45 INTERNET BANKING...........................................................................................46 Simple and Convenient .......................................................................................46 Secure and Faster Secured ...................................................................................46 24 x 7 Access .......................................................................................................46 HELPLINE...........................................................................................................46 LETTER OF CREDIT.................................................................................................47 Parties Involved In a LC..........................................................................................48 Types of L C ........................................................................................................48

Types of L C.............................................................................................................48 Irrevocable LC......................................................................................................48 Revocable LC.......................................................................................................49 Red Clause LC.....................................................................................................49 Revolving LC.......................................................................................................49 LOCKER FACILITY...................................................................................................50 Criteria for Acquisition of Locker ..........................................................................50 Opening Farm.......................................................................................................51 Security.................................................................................................................51 Sizes of Lockers...................................................................................................51 HOME REMITTANCES ........................................................................................51 TRAVELER CHEQUES.........................................................................................52 UTILITY SERVICES..............................................................................................52 PAY ORDER...........................................................................................................53 HAJ SERVICES.......................................................................................................53 BANCASSURANCE...............................................................................................53 I'LM (Child Education Plan)....................................................................................53 Product Features and Benefits..................................................................................54 Illustration................................................................................................................54 Anmol Rishtey (Marriage Savings Plan).................................................................55 Product Features and Benefits..............................................................................55 Illustration............................................................................................................56 ORGANIZATIONAL STRUCTURE OF ALLIED BANK......................................57 ORGANOGRAM.....................................................................................................57 ORGANIZATIONAL STRUCTURE OF ABL 14 # CHUNGI ............................58 BRANCH MULTAN................................................................................58 BRANCH FUNCTIONS AND RESPONSIBILITIES............................................59 General Banking ..................................................................................................59 CURRENT DEPARTMENT ..............................................................................60 Account Opening..................................................................................................61 Procedure Of Account Opening...........................................................................61 Types Of Account....................................................................................................62 Individual Account..............................................................................................63 Joint Account.......................................................................................................63 Business Accounts................................................................................................64 Partnership Account.............................................................................................64 Limited Company Account..................................................................................65 Cheque Book Issuance.............................................................................................66 Closing Of Account .................................................................................................67 CASH DEPARTMENT...........................................................................................68 Sources Of The Cash................................................................................................68 Deposits ...............................................................................................................68 Prize Bonds, Febcs, Ndscs Etc.............................................................................68 Demand Draft And Telegraphic Transfer Commission.......................................68 Function of Cash Department..............................................................................69 Management Of Cash...........................................................................................69 Treatment Of Surplus Cash..................................................................................70 Treatment Of Cash Deficit...................................................................................70 Cash In Transit.....................................................................................................71 Insurance Of Cash................................................................................................71

Security Arrangements.........................................................................................71 CLEARING DEPARTMENT..................................................................................71 Inward Clearing....................................................................................................72 Outward Clearing.................................................................................................72 Clearing Process...................................................................................................73 Transfer Delivery.................................................................................................74 ACCOUNT DEPARTMENT .................................................................................74 Daily Customers Movement List.........................................................................75 BILLS / REMITTANCE DEPARTMENT .........................................................75 BILLS FOR COLLECTION................................................................................76 Inward Bills For Collection .................................................................................76 Outward Bills For Collection...............................................................................76 Commission..........................................................................................................77 REMITTANCES......................................................................................................77 Demand Draft (DD).............................................................................................77 Telegraphic Transfer(TT).....................................................................................77 Payment Order (PO).............................................................................................78 PROCESS FOR REMITTANCE.........................................................................78 Pak Account.............................................................................................................78 Remittances Outward...........................................................................................78 Remittances Inward..............................................................................................79 Remittance In Transit...........................................................................................79 FOREIGN EXCHANGE DEPARTMENT .............................................................79 ABL Foreign Currency Accounts............................................................................80 Criteria For Opening Foreign Currency Account................................................80 Features Of Foreign Currency Accounts..............................................................81 Foreign Bills And Remittance..................................................................................82 Mail Transfer........................................................................................................82 Foreign Currency Demand Draft..........................................................................82 Foreign Currency Telegraphic Transfer...............................................................82 ADVANCES/CREDIT FACILITY.........................................................................83 PLEDGE...............................................................................................................83 MORTGAGE.......................................................................................................84 HYPOTHECATION............................................................................................84 CHARGE.............................................................................................................84 Categories of Advances ...........................................................................................84 OVERDRAFT......................................................................................................85 CASH CREDIT....................................................................................................85 LOAN.......................................................................................................................85 FUNDS BASED FINANCING............................................................................85 PURPOSE ...............................................................................................................86 PURPOSE................................................................................................................88 SECURITY..............................................................................................................89 Primary Security.......................................................................................................89 Principle Security.....................................................................................................89 MARK-UP...............................................................................................................89 PERIOD...................................................................................................................89 REPAYMENT SCHEDULE...................................................................................89 IMPORTANT FEATURE.......................................................................................89 Export Refinance Facility ....................................................................................97

NON-FUND BASED FINANCING .......................................................................98 LETTER OF GUARANTEE...............................................................................99 PERFORMANCE BONDS ...............................................................................100 BID BONDS......................................................................................................100 Letter of Credit (Inland).....................................................................................101 Letter of Credit (Import)....................................................................................101 RECOVERY OF LOANS..................................................................................101 REVIEW OF VARIOUS DEPARTMENTS OF OVERALL ORGANIZATION.....................................................................................................102 COMMERCIAL AND RETAIL BANKING........................................................102 TREASURY...........................................................................................................103 RISK MANAGEMENT.........................................................................................104 AUDIT AND INSPECTION.................................................................................105 SPECIAL ASSET MANAGEMENT....................................................................106 FINANCE AND CORPORATE AFFAIRS...........................................................106 OPERATIONS.......................................................................................................107 INFORMATION TECHNOLOGY.......................................................................107 HUMAN RESOURCES.........................................................................................108 Recruitment........................................................................................................109 COMPLIANCE AND CONTROL........................................................................109 CONSUMER & PERSONAL BANKING GROUP..............................................112 CORPORATE INVESTMENT BANKING GROUP (CIBG)..............................112 Corporate Banking Group..................................................................................113 Corporate Leasing Group ..................................................................................113 Investment Banking Group................................................................................114 IBG Range of Services....................................................................................114 Financial Institutions Group...............................................................................115 CORPORATE AFFAIR GROUP......................................................................116 Function..............................................................................................................116 STRUCTURE OF FINANCE DEPARTMENT....................................................118 FINANCE & ACCOUNTING OPERATIONS.................................................120 Accounting System Of The Organization..........................................................120 Finance System Of The Organization................................................................121 Functions Of Finance Department.....................................................................121 The Role of Finance Group................................................................................121 Practical Illustration:.........................................................................................122 ROLE OF FINANCIAL MANAGER.................................................................123 Chief financial officers (CFOs)..............................................................................124 USE OF ELECTRONIC DATA IN DECISION MAKING..................................125 SOURCES OF FUNDS.........................................................................................126 GENERATION OF FUNDS.................................................................................128 ALLOCATION OF FUNDS..................................................................................129 CRITICAL ANALYSIS DURING INTERNSHIP....................................................129 ABL FIVE YEARS BALANCE SHEET..............................................................130 ABL FIVE YEARS INCOME STATMENT.........................................................131 RATIO ANALYSIS OF FIVE YEARS.................................................................132 Current Ratio......................................................................................................132 Quick Ratio........................................................................................................133 Rate of Lending................................................................................................134 Return on Deposit.............................................................................................135

Admin Cost to Deposit.....................................................................................136 Average Cost of Fund........................................................................................137 Spread...............................................................................................................138 Comparison of Markup Income to Total Income.............................................139 Infection Ratio........................................................................................................140 Classified Advances to Total Advances...........................................................140 Return on Equity..............................................................................................141 Return on Total Assets.....................................................................................142 Provisions to Classified Advances...................................................................144 Advances to Deposit Ratio (ADR) NET..........................................................145 Liquidity Ratio.......................................................................................................146 Cash Reserve Ratio (CRR)...............................................................................146 Invest in Securities (SLR)................................................................................147 INVESTORS RATIOS..........................................................................................148 Earning Per Share Ratio ..................................................................................148 Price Earning Ratio..........................................................................................148 Book Value per Share......................................................................................149 Dividend Payout Ratio ....................................................................................149 HORIZONTAL AND VERTICAL ANALYSIS...................................................150 Horizontal Analysis............................................................................................150 Vertical Analysis................................................................................................151 Income Statement...............................................................................................151 Balance Sheet.....................................................................................................151 HORIZONTAL ANALYSIS OF BALANCE SHEET..........................................152 ANALYSIS .......................................................................................................153 LIABILITIES.....................................................................................................155 SHARE CAPTIAL.............................................................................................156 RESERVES .......................................................................................................156 UN- APPROPRIATED PROFIT/ (LOSS).........................................................156 EQUITY.............................................................................................................157 HORIZONTAL ANALYSIS OF INCOME STATEMENT..................................157 ANALYSIS............................................................................................................157 MARK-UP /RETURN /INTEREST EARNED.................................................158 MARK-UP /RETURN /INTEREST EXPENSED.............................................158 NET MARKUP/INTEREST INCOME.............................................................159 NON INTEREST INCOME...............................................................................159 GROSS INCOME..............................................................................................159 OPERATING EXPENSES................................................................................159 PROFIT BEFORE PROVISION ......................................................................160 PROVISIONS AGAINST NON- PERFORMING ADVANCES.....................160 PROFIT BEFORE & AFTER TAXATION......................................................160 VERTICAL ANALYSIS OF BALANCE SHEET................................................161 ANALYSIS........................................................................................................162 LIABILITIES.....................................................................................................163 UN- APPROPRIATED PROFIT/ (LOSS).........................................................164 VERTICAL ANALYSIS OF INCOME STATEMENT .......................................165 ANALYSIS............................................................................................................166 MARK-UP /RETURN /INTEREST EARNED.................................................166 MARK-UP /RETURN /INTEREST EXPENSED.............................................167 NET MARKUP/INTEREST INCOME.............................................................167

FEE, COMMISSION, BROKERAGE & EXCHANGE INCOME...................167 OTHER INCOME..............................................................................................167 NON INTEREST INCOME...............................................................................167 GROSS INCOME..............................................................................................168 OPERATING EXPENSES................................................................................168 PROFIT BEFORE PROVISION ......................................................................168 PROVISIONS AGAINST NON- PERFORMING ADVANCES.....................168 PROFIT AFTER TAXATION...........................................................................168 ORGANIZATIONAL ANALYSIS FOR YEAR 2009 WITH REFERENCE TO OTHER BANKS ......................................................................................................168 FUTURE PROSPECTS OF THE ORGANIZATION...........................................169 Suggestions............................................................................................................170 SHORT-FALLS/ WEAKNESSES OF THE ORGANIZATION .........................171 Irregularities in Promotion.................................................................................172 Individual Difference.........................................................................................172 Strong Union......................................................................................................172 Organizational Structure....................................................................................172 Low Promotional Activity..................................................................................172 Reactive Approach.............................................................................................172 Rapid Changes....................................................................................................172 Low Motivation Level........................................................................................172 CONCLUSION..........................................................................................................173 RECOMMENDATIONS ....................................................................................174 REFERENCE.............................................................................................................178 ABL Publications...................................................................................................178 Books......................................................................................................................178 Internet Citations....................................................................................................178 ANNEXES ................................................................................................................179

OBJECTIVES OF STUDYING THE ORGANIZATION

There are so many objectives for studying this organization. These objectives are as follows: To fulfill the requirements of MBA Degree Study how much policies are applying in the organization Gain practical knowledge of banking and finance department Gain practical knowledge of banking and finance department Gain practical knowledge of banking and finance department Learn those factors which are the cause of changing strategies Observe the results when we do not apply the theory of banking I want to learn the result of good planning I want to learn how we prepare the performance report I want to learn the effect of good coordination between workers Learn the methods how we can apply the theory of finance in the organization I want to learn the method of account opening and I want to see the results of good training I want to learn also those strategies which make the work easy and which are helpful for achieving the goals of organization To make the financial Analysis To review the Finance & Accounting System 8

 To indicate the Short-false/weaknesses of the Finance Department To make the organizational analysis with reference to the industries To give the recommendation for improvement of the Finance & Accounting System

ACHIEVEMENTS BY STUDY THIS ORGANIZATION

After the study of this of this organization, I got lots of benefits like before the experience of this organization felt lack of confidence but due to this organization I overcome my this problems and learnt how interact with people. It polished my skills. It makes my personality more strong due to my clear views about my study. It increased my knowledge. It was the wonderful experience for me.

ORIGIN AND GROWTH OF BANKING:

INTRODUCING BANKING:

Banks are the most important financial institutions, which play a vital role throughout the worlds economic system. The term Bank is being used for a long time yet it has no precise definition. The basic reason is that commercial banks perform not just one but many types of functions. According to Chambers English Dictionary, the term Bank means a Bench or an institution or an exchange company. Caircross defines bank as a financial intermediary and a dealer to create credits. Banking is also defined as an institution for the collection of funds from the community and credit to its customers by way of advances against goods or securities, or by discounting bills for their useful purposes. In other words a bank is a custodian of wealth and people have faith in it to invest their funds wisely. Furthermore, bank is also responsible for its stockholders. Being a profit seeking business and not a community charity, these attempts to maximize the wealth of its shareholders. A bank is therefore a person, or a corporation that deals in credit, i.e., accepts deposits from the public withdrawals by cheques and advances loans by various sorts. The System of common settlement of receipts and payments, in the International Marketing Cycle appears, to have been derived from the school of thought of the ancient Romans temple banking, to develop trade and trading relations with each other nations.According to Crowder, bank is a dealer in debts his own and of other people. While in the words of Professor Hart A bank is one who in the ordinary course of his business receives money which he repays by honoring cheques of persons from whom or on whose account he received itProf. G.W. Gilbert

10

says A banker is a dealer in capital or more properly a dealer in money. He is an intermediate party between the borrower and the lender. He borrows from one party and lends to another After the historical development of banking in England, there was an emergence of a small number of large banks with wide network and an increase in the popularity of bank accounts and large-scale use of cheques. With the advent of Banks, along came the types of banks depending upon the need and operations of the bank. Categories of banks have been placed as commercial banks, saving banks, Merchant banks Mortgage banks, Consumer banks, Investment banks, and Central banks etc.These types were based on the variety of resources of money and the diversity in lending and investment operations.

Modern Banking:

Despite the classical origins, banking in its modern form and structure started in Britain when many of the Lombardy merchants came to England in the 14th and settled in the ports of the City of London now called Lombard Street. They were so resourceful that even the kings had to depend upon them for loans despite the fact that the Church was firmly against the usury. They dealt with only keeping the money in safe custody but also change money for the travelers or merchants engaged in foreign trade. The business of changing money was so lucrative that king Edward-111 established the office or Royal exchanger for changing foreign money at a profit for the benefit of the crown. Later when the merchants lost their confidence in the Royal Exchanger and the Royal mint, this business was taken over by the goldsmiths who, up to the time, were dealing in gold and silver. Since these goldsmiths required strong safes for the purpose of their business, they introduced necessary facilities of safekeeping of the valuable and cash of their customers. These goldsmiths are used receipt or notes to their depositors in respect of the cash or articles left with them. These were called goldsmiths notes, and carried an undertaking to return the money and articles to the depositors on demand. There was a considerable number of notes

11

circulation among the various classes of merchants and thus they can aptly called "Bank Notes" in there earliest form. Over a period, these goldsmiths discovered that large sums of money where left in their custody for long periods; therefore, this started the use of this cash to advance loans to other persons for a fixed period of time and at a considerably high rate of interest. Moreover, they further encouraged cash deposits by their customers by offering them a part of the profit earned on money. Thus began the issue and deposit banking. Some of the enterprising goldsmiths issued the check books, for the attraction of their customers; and thus another important step in the evolution of banking was taken. In 1972, however, English banking aced a great crisis when Charles-11 borrowed huge sums of money from the goldsmiths and later refused to pay them back. Therefore, a number of goldsmiths formed themselves into a corporation in 1965, known as the Bank of England. This bank lent $120000/- at 8% interest to William-111, who in return allowed a number of privilege to the bank specially the right to issue notes payable to bearer on demand up to the amount of this loan. This is known as fiduciary issue, not covered by gold. This new bank became a very serious competitor to the comparatively smaller private banks run by the London goldsmiths. By the year 1700, the Bank of England was not only issuing notes but also conducting accounts for customers. Being a joint stock bank by chart, its directors were conducting the business of like that of limited companies. The Bank of England was the only joint stock company, which was given the monopoly of issuing bank notes, though the original goldsmiths and other private bankers were operating very successfully outside the London, and receiving valuables and money for safekeeping,

And issued notes as evidence. This was effecting the position of the bank of England. Therefore, by an act past in 1708, the privilege to issue notes in England was Withdrawn form joint stock Banks and confined to the private banks with not more than six partners. This compelled the private bankers in London to develop the business of accepting money on deposits payable by cheques.

12

OVERVIEW OF PAKISTANS BANKING SECTOR:

Pakistan is a country with a well-established banking sector. State Bank of Pakistan is the Central Bank of the country and it was inaugurated on July 1st, 1948. At the time of partition the total number of commercial banks in Pakistan was 38. There were 2 Pakistani banks, 29 Indian banks and 7 exchange banks. Today the country boasts 45 commercial banks and 36 non-banking financial institutions (NBFIs) operating in Pakistan whose activities are regulated and supervised by State Bank of Pakistan. The commercial banks comprise of 4 nationalized banks, 2 privatized banks, 15 private sector banks, 20 foreign banks and 4 specialized banks. The financial sector in Pakistan comprises of commercial banks, non-banking financial institutions (NBFIs), leasing companies, modarbas, mutual funds, stock exchange and insurance companies. Under the prevalent legislative structure the supervisory responsibilities in case of banks and NBFIs falls within legal ambit of State Bank of Pakistan while the rest of the financial institutions are monitored by other authorities such as Securities and Exchange Commission and Controller of Insurance. In comparison with other emerging economies, Pakistan has a relatively underdeveloped financial sector in terms of the depth of the financial system and the extent of financial intermediation. The depth of a financial institution refers to the use of money and its near substitutes such as savings and time deposits, which is very low in Pakistan. There are many foreign banks operating in the country such as ABN AMRO, American Express Bank, Citibank, Standard Chartered Bank and many more. The foreign banks have a strong presence in all the major cities and are targeting high net worth individuals and blue chip companies. Their strategy is quite successful as they account for 34% of total sector profits, despite having only 15% of deposits and 16% of advances.

13

The recent wave of liberalization and financial reforms has raised questions about the future prospects of the financial industry in general and banking industry in particular. In just four years the banking industry has expanded tremendously and now there are more than two dozen commercial and investment banks functioning in the country.

ISLAMIC BANKING

Islamic banking refers to a system of banking or banking activity that is consistent with the principles of Islamic law (Sharia) and its practical application through the development of Islamic economics. Sharia prohibits the payment or acceptance of interest fees for the lending and accepting of money respectively, (Riba, usury) for specific terms, as well as investing in businesses that provide goods or services considered contrary to its principles (Haraam, forbidden). While these principles were used as the basis for a flourishing economy in earlier times, it is only in the late 20th century that a number of Islamic banks were formed to apply these principles to private or semi-private commercial institutions within the Muslim community.

Islamic banking has been defined as banking in consonance with the ethos and value system of Islam and governed, in addition to the conventional good governance and risk management rules, by the principles laid down by Islamic Shariah. Interest free banking is a narrow concept denoting a number of banking instruments or operations, which avoid interest. Islamic banking, the more general term is expected not only to avoid interest-based transactions, prohibited in the Islamic Shariah, but also to avoid unethical practices and participate actively in achieving the goals and objectives of an Islamic economy. Islam was the basis of creation of an independent state within the undivided Indo-Pak Sub-Continent. Since its creation, the people of Pakistan have held the demand for elimination of Riba from the financial system of Pakistan on the basis of Islamic

14

precepts. All Constitutions of Pakistan have incorporated, within the principles of policy, the elimination of Riba as an important objective of the State policy. Quaid-eAzam, the father of the nation, in his speech at the occasion of the inauguration of State Bank of Pakistan had expressed the desire for evolving an Islamic system of banking. Article 38(f) of the Constitution of the Islamic Republic of Pakistan provides: The State shall . Eliminate riba as early as possible. The Objectives Resolution, 1947, now a part of the Constitution, as well as principles of policy enunciated in the Constitution also require to establish an order in Pakistan [w]herein the Muslims shall be enabled to order their lives in the individual and collective spheres in accordance with the teachings and requirements of Islam as set out in the Holy Quran and Sunnah. The efforts undertaken in the 1980s to Islamize the economy at comprehensive / national level are considered as pioneering work in the Muslim world as this became important reference material for other countries which undertook the path towards introduction and establishment of an Islamic banking system. Since Pakistan started with an approach to convert the whole system into Islamic one, a number of amendments in relevant laws were introduced providing legal cover for Islamic financial products and services. Similarly, some new laws were introduced to allow new financial institutions or facilitate the existing ones. The legal and regulatory infrastructure developed during that era has proved to be invaluable asset as we keep on charting the present landscape of the industry today on the same.

FINANCIAL IMPACT

Islamic Banking Industry of Pakistan continued its progress during the year 2008. They have increased their share of assets in the overall banking system to 4.9% up to

15

December 2008. The growth is also reflected in increased share of deposits and financing & investment that stood at 4.8% and 4.4% respectively at the end of Dec 2008.

Currently, there are 6 full-fledge banks and 12 conventional Banks are offering Islamic Banking products through their Islamic Banking Branches. Hence, branch network of IBIs comprises of around 514 branches as on Dec 31, 2008.

16

BRIEF HISTORY OF ALLID BANK

Allied Bank formerly known as (Australasia Bank Limited) has gone through many thick and thins over the time. ABL is the first Muslim Bank established on territory that later on became Pakistan. It was established on December 3, 1942 as Australasia Bank at Lahore with capital of 0.12 million. At the time, the Banks total assets amounted to Rs. 0.572 million. Today, Allied Bank's paid up Capital & Reserves amount to Rs. 10.5 billion, deposits exceed Rs. 143 billion and total assets equal Rs. 170 billion. The Bank attracted deposits equivalent to Rs. 0.431 million in its first eighteen months of business. At that time the chairman was Kh. Bashir Baksh. ABLs story was one of the dedications, commitment to professionalism and adaptation to changing environmental changes.

The bank's history is divided into many phases. During 25 years of united Pakistan the bank advanced forward in all areas of its activities. 1970s were a difficult decade for all Banks of Pakistan. In 1971 East Pakistan was separated and Australasia Bank lost its 51 branches and a lot of capital as well. Nevertheless the growth remained steady.

In 1974 all the Banks were nationalized including Australasia Bank. The small provincial Banks were merged into Australasia Bank. On 1st July 1974 the new entity was renamed as Allied Bank of Pakistan Limited. Then it started its operations as Public sector financial institution.

The Pre Independence Period (1942-1947)

17

After 1942 the major change came to the institution was the partition of the subcontinent into two states namely India and Pakistan. This occurring caused the bank to work more aggressively. As Australasia Bank Limited was the only bank which came to Pakistan so it had to perform all the activities on its own, this was a tremendously hectic and troublesome task. As the result of this partition, the Australasia bank of Pakistan was seriously disturbed because it was deprived of over "50 percent of its assets and operational revenues. For the economic well being of the state it was huge responsibility of the bank to provide extended level of services in the best interest of the state. The bank felt and accepted its responsibility with great vigor and enthusiasm and therefore with the grace of Almighty the management achieved its target and made the bank a big success. In the early 1940s, the Muslim community was beginning to realize the need for its active participation in the fields of trade and industry. Since the late 1880s, Hindus had established a commanding presence in the areas of industry, trade and commerce and were especially dominating in the Sub-continent area. Banking, in particular, was the exclusive forte of Hindus and it was popularly and wrongly believed that Muslims were temperamentally unsuited for this profession. It was particularly upsetting for Khawaja Bashir Bux to hear that Muslims could not be successful bankers. He decided to step-up to that challenge and takes the lead in establishing this first Muslim bank by the name Australasia Bank Limited in Punjab, which was to become Pakistan in December 3, 1942. The initial equity of the Bank amounted to Rs 0.12 million, which was raised to Rs. 0.5 million by the end of the first year of operation, and by the end of 30th June 1947 capital increased to Rs. 0.673 million and deposits raised to Rs 7.728 million. The bank originally started its operation in the garage of Khawaja Bashir Bakshs bungalow (who was the chairman) near the Lahore Railway Station. But the success of Bank enforced the directors to open its another branch in Anarkali on 1st March 1944. Kh. Bashir was first chief executive.

Australasia Bank (1947-1973)

18

At independence the industrial and commercial sectors were underdeveloped but ABL contributed a lot in the development of these sectors. It was the only full functional Muslim Bank on the land of Pakistan. On August 14, 1947 bank was identified with Pakistan moment. Many of its Board of Directors was prominent Muslim League leaders. Jallandhar and Ludhiana branches were attacked by rioters because of Muslim staff appointed in these branches of bank. But when the Pakistan flags wee hoisted on the branches then all the banks in India were closed down. With this, the bank lost a lot of capital and its deposits and almost 6 branches. During 1948 new branches were opened at Karachi, Rawalpindi, Peshawar, Sialkot, Sargodha, Jhang, Gujranwala and Kasur. But later on its branches were spread to Multan and Quetta. At that time, the bank financed trade in cloth and food grains and thus maintained consumers supplies during the riot effected early months of 1948. Australasia Bank made a profit of 50,000/= in 1947-48. In 1963, Bank had 29 branches in various cities. And deposits were 89 million and advances were 66 million. Bank was mainly concerned with general banking and trade financing (including foreign exchange transactions). development of small and medium sized business houses. It helped a lot in In 1964, 13 new branches

were opened including 3 in East Pakistan. In 1965, 17 new branches were opened and over 83 % of gross profit for the year was earmarked for development expenditure in connection with opening of new branches. In 1966 bank opened 26 new branches and doubled its reserved funds. For the first time in history, its advances were increased to Rs. 160 million and deposits raised by almost 58 % exceeding Rs. 232 million marks. In 1966, Central Office was built in Karachi but Head Office remaining at Shah Chiragh Building, Lahore. 16 new branches were opened in 1967 and 20 in 1968. Respectively their funds were increased gradually. By the end of 1970 it had 101 branches. In 1970s Bank played an important part of agricultural area loans and other loans.

21 new branches were opened in 1971. But In that year another traumatic incident was the separation of East and West Pakistan. This crucial period of financial breakdown was dealt tactfully by the management of the Australasia Bank Limited. 19

Both the leadership and the employees of the institution worked with full devotion and rendered maximum services for the economic uplift. At the of time separation Australasia Bank lost its 51 branches and a lot of capital as well, which was a big loss. But the Bank did well despite losing a lot of its assets and by the end of 1973 had 186 branches in West Pakistan.

Allied Bank of Pakistan Limited (1974-1991)

Under the Nationalization Act of 1974, 14 scheduled banks were taken over by the Government. After the Nationalization Australasia Banks Board of Directors was dissolved and the bank was renamed as Allied Bank of Pakistan Limited. The Australasia Bank was merged with three financially weak institutions namely "Sarhad Bank Limited, Lahore Commercial Bank Limited and Pakistan Bank Limited. Altogether they were named as Allied Bank of Pakistan Limited. The bank took a momentous turn its history and was "Nationalized along with 13 more national banks under the Banks Nationalization Act 1974. Due to Nationalization the interior of the bank was redesigned and Executive board replaced Board of directors headed by the president and two members. The Executive board enjoyed all the powers to take decisions and supervise all the activities of the bank which the bank is competent to exercise. Under this Act all the deposits were taken in the responsibility of the Government of Pakistan and they were also guaranteed by the Government. Allied bank limited of Pakistan formerly registered as Australasia Bank limited in 1942 remained under public sector for 17 years. The working of Allied bank limited of Pakistan was appreciable during this period and due to its high performance the bank was fortunate to inaugurate its first and foremast foreign branch in London (U.K) in 1977. In 1980 the Bank of England granted Allied Bank recognition as a full fledge Bank under the U.K. Banking Act. In 1985, mainframe computer was installed and effective management system was developed. In 1989, new 13 branches were installed. The promising professionalism of the employees of the bank was proved when in "1989 UK operations of Muslim

20

Commercial Bank were merged into Allied Bank of Pakistan Limited. In 1991, 745 branches were working in all over the Pakistan. Those seventeen years saw a rapid growth for the Bank. Branches increased from 353 in 1974 to 748 in 1991. Deposits rose from Rs. 1.46 billion and Advances & Investments from Rs. 1.34 billion to Rs. 22 billion during this period. It also opened two other branches in the U.K.

Allied Bank Limited (1991 to 2005)

In November/ December 1990, the Government announced its commitments to the rapid privatization of the Banking sector. Allied Bank of Pakistan Limited was privatized in September 1991 under the concept of ESOP (Employee Stock Ownership Program). Allied Bank became the worlds first bank to be owned and managed by its employees. Allied bank of Pakistan Ltd entered a new phase of its history and major developments took place. After privatization the bank revamped its entire organizational structure. Allied Bank Limited entered a new phase of its history and on 9th September 1991

26% shares were sold to the Allied Management Group, which represented the employees of ABL at a price of Rs.70 per share. On 23rd August 1993, another 25% shares were sold to AMG at price of Rs.70 per share. This resulted in transfer of ownership from Government of Pakistan to AMG. In 1993 the First Allied Bank Modaraba (FABM) was floated. After Privatization the bank gained rapid growth in financial sector of the country and was the only bank to be owned and managed by its employees. The bank continued to pursue the policy of quality and dedication which in return resulted to earn the good name for the institution. Privatization policy gave the bank an exalted position and a major revenue growth was attained. Enhanced productivity and profitability added to the economy of Pakistan. In short span of time the bank achieved a successful turn around. In 1999, it transpired that one of the ABLs major defaulters had purchased about 35-40% of ABL shares from employees. In July 1999, SBP imposed restriction on

21

transfer of shares from employees to non-employees except on prior approval from SBP. On 20th August 2005 as a result of capital reconstruction, the Banks ownership was
transferred to a consortium comprising Ibrahim Leasing Limited and Ibrahim Group. The

Consortium of Ibrahim Leasing limited and Ibrahim Group, which has injected Rs.14.2 billion of the Allied Bank Limited for acquiring its 325 million additional shares, assumed the control of the bank. Speaking on the occasion, the State Bank of Pakistan Governor has termed the successful reconstruction of ABL as beneficial both for the organization as well as for the banking industry.

Allied Bank Limited (2006 to Date)

In May 2006 Ibrahim Leasing Limited was amalgamated by transfer to and vested in with and into Allied Bank Limited. I.L.L shareholders were issued ABL shares in lieu of the ILL shares held by them. Application for the listing of ABL shares in all the Stock Exchange Companies of Pakistan was made. ABL was formally listed and trading of the shares of the Bank commenced w.e.f. the following dates. Islamabad Stock Exchange Lahore Stock Exchange Karachi Stock Exchange 08 - 08 - 2006 10 - 08 - 2006 17 - 08 - 2006

Now all shareholders of Allied Bank Limited can trade in the shares of the Bank at their free will. In 2006 Branches at U.K. have been merged with Habib Bank Limited and renamed as Allied Habib International Bank. Today the Bank stands on a solid foundation of over 67 years of its existence having a strong equity; assets and deposits base offering universal banking services with higher focus on retail banking. The bank has the largest network of on-line branches in Pakistan and offers various technology-based products and services to its diversified clientele through its network of 779 branches throughout the Pakistan.

22

NATURE OF THE ORGANIZATION AND BUSINESS ACTIVITIES

According to of Banking Ordinance 1962, meaning of banking is as under: Banking company is a company which transacts the business of banking in Pakistan, mainly of accepting, for the purpose of lending and investments of deposits of money from the public, repayable on demand or otherwise and withdraw able by cheques, draft, order, or otherwise. Allied Bank is an organization that accepts deposits and repays to its customers on demand. Bank borrows money at lesser rate of profit and lends it to the borrowers at a higher rate of markup. Bank cannot lend all the money that has been deposited with it. It has to keep certain amount of the total deposits in cash in order to meet the cash requirements of the individuals and business concerns. It has to keep a certain ratio between liquidity and profitability to run its business smoothly and efficiently. Allied Bank is an established bank and also a commercial Bank. Allied Bank make financing on the projects including technical assistance, term finance and short & long term loans to the business industry. ABL is also financing on seasonal crops like cotton, wheat, rice, sugar cane, tobacco etc. The main business actives are as under: Granting loans and advances Accepting various types of deposits Transfer of money from place to place Undertaking foreign exchange business Collecting cheques and bills of exchange for the customers Collecting interest due, dividend, pensions, and other sum due to customers Providing safe custody and facilities to keep jewellery, documents, and securities etc Issuing of travelers cheques and letters of credit to give credit facilities to travel

23

BUSINESS VOLUME OF LAST FIVE YEARS

2005 154926 126392 69949 57657 9448 192 0.81 22.0 2006 192574 161410 119866 45269 12914 3090 6.88 10.6 2007 252027 206031 151705 47156 16230 4397 8.16 6.91 2008 320110 263972 178524 84151 18408 4076 6.31 6.36 2009 366695 297475 223640 84602 20805 4157 6.43 6.16

Total Assets (Rs. In Million) Total Deposits (Rs. In Million) Total Advances (Rs. In Million) Total Investments (Rs. In Million) Shareholders Equity (Rs. In Million) Net Profit:(Rs. In Million) EPS Non Performing Loan Ratio

NUMBER OF EMPLOYEES BY CADRE VISE BREAK UP

The Bank operates through a network of 779 branches in over 300 cities and towns. The bank has 850 executives along with 11108 staff members spread over 779 branches throughout the Pakistan established a high degree of cooperation and family feelings. The Break up of the designation is given below. The total staff strength at the end of year 2009 was as under: Permanent Temporary/ Contractual/ Trainee Outsourced Total staff Strength Cadre wise distribution is as under No. of Executive Officers Grade Clerical/Non clerical 850 5216 2259 8325 102 2681 _____ 11108

PRODUCTS / SERVICES OFFERED BY ALLIED BANK

24

Allied Bank is a Pakistan-based bank, engaged in commercial banking and related services. It offers a suite of banking products and services. The bank provides its customer various products & services, to cater there need of investments and other social or business requirements. These Product & Services offered by the bank are as follows:

DEPOSITS
This is the major source of the cash inflow. When someone deposits the cash in the Bank in any currency, it means that the cash is coming in the Bank. Deposits to the bank are as the backbone to the body of man it is lifeblood of a bank. The bank borrows money from general public by accepting or by an offering suitable rate of lit on them, or simply promise to repay on demand. When the bank receives the deposits, it becomes the debtor and client assumes position of creditor. At ABL the main thrust is on customer satisfaction. The Bank provides many opportunities to place the funds in variety of deposit accounts including foreign currency deposit account and offer a wide range of facilities and services tailored to suit the personal as well as domestic and foreign business requirements of its customers. The different deposit schemes offered by ABL are as follows:

Current Deposit Account

Allied Bank offers Current Account facility for individuals as well as for institutions and commercial customers. Free services for depositors maintaining minimum balance of Rs. 0.1 (M) in previous month.

Salient Features
Free Online Transactions Free issuance of Payment Orders Free Issuance of Deposit at Call Receipts Free issuance of cheque book at the time of account opening

25

Purpose
The purpose of this account is to provide the facility to the depositor that he can deposit or withdraw any amount of money from his balance at any time.

Deposit of Funds
Funds can be credited into the current deposit account in the form of cash, Cheques and other financial instruments drawn on any other Bank or any other branch of ABL.

Mark-Up
No Mark-up is given to the current deposit account holders. Furthermore the current accounts are exempted from Zakat.

PLS Saving Deposit Account

Allied Bank offers PLS Savings Account facility to its depositors with the following attractive features. Complementary ATM cards No service charges on active accounts Attractive return up to 5.00% per annum Free issuance of cheque book at the time of account opening

Additional Benefits
For depositors maintaining a minimum balance of Rs. 0.5 (M) in the previous month the following additional benefits are offered: Free Online Transactions Free issuance of Payment Orders Free Issuance of Deposit at Call Receipts

Minimum & Maximum Balance

Profit and Loss sharing Bank account can be opened with a minimum of Rs. 100. There are no limits on the maximum balance.

26

US Dollar Up to USD 1,000,000 Above USD 1,000,000 GBP Sterling Up to GBP 1,000,000 Above GBP 1,000,000 Euro Up to Euro 1,000,000 Above Euro 1,000,000

0.05% 0.25% 0.05% 0.25% 0.05% 0.25%

Deposit of Funds
Funds account other instruments can be deposited into this through financing drawn Cash, Cheques and

on any Bank or any other branch of ABL. The Bank will take care of to see that the credit and debit entries are correctly recorded in the accounts of the account holders but in case of any error, the Bank shall be responsible make the correct adjusting entries without noticing the account holder and recover any amount due from the account holders.

Profit
The profit is given after every six months and the rate of profit is announced semi annually. The overall profit of Bank for six months is determined and on that basis the rate of profit on this account is calculated. The profit is given to the account holder on the month wise product. It is determined on the minimum balance of account from 7th to 31st of every month.

Foreign Currency Deposit Account

Allied Bank offers the facility for opening Current, Savings and Term deposit Accounts. These accounts can be opened in US Dollar, Pound Sterling, and Euro at designated branches. The estimated rate of profit on US Dollar, Pound Sterling, and Euro is given below:

27

Allied Business Account

Allied Business Account now with current account depositor can make unlimited transactions via 779 online Allied Bank branches. On maintaining a daily minimum balance of just Rs. 50,000, enjoy unlimited freedom and convenience with numerous free services he can enjoy the following services FREE of charge: Free Deposit Free Pay Orders Free Withdrawals Free Funds Transfer Free Demand Drafts Free Internet Banking Free Telephonic Transfer No Cheque return charges Free Nationwide Real-time Online Banking

Allied Basic Banking Account (ABBA)

In order to provide basic banking facilities to low income people in Pakistan, Allied Bank has introduced Allied Basic Banking Account (ABBA). The features of the

28

ABBA are as under: Unlimited withdrawals from ATMs The statement of the account will be issued on yearly basis This account can be opened with an initial deposit of Rs 1,000/= The account is a non-remunerative account with no minimum balance requirement The account will be closed automatically if the balance remains zero continuously for one year.

Allied Bachat Scheme (ABS)

Allied Bachat Scheme (ABS) is a PLS Term Deposit Scheme based deposit scheme whereby depositor can double his investment in just 7.5 years. Salient Features Maturity Period: 7.5 years Minimum Deposit: Rs. 50,000/- with multiples of Rs. 10,000/ Expected rate of Profit: The deposit amount will be doubled in 7.5 years Eligibility: All individuals & institutions This scheme comes with the following schedule of profit rates:

29

No. of Years 1 1.5 2 2.5 3 3.5 4 4.5 5 5.5 6 6.5 7 7.5

ABL Projected Rates 7% 7.50% 8.00% 8.75% 10.00% 10.25% 10.50% 10.75% 11.00% 11.25% 11.50% 11.75% 12.00% 13.33%

Repayment Amount 53,500.00 55,625.00 58,000.00 60,937.50 65,000.00 67,937.50 71,000.00 74,187.50 77,500.00 80,937.50 84,500.00 88,187.50 92,000.00 100,000.00

Behtar Munafa Account (BMA)

Behtar Munafa Account is a profit bearing checking account with the payment of profit on a monthly basis.

Salient Features
Profit: Payable on monthly basis Highest Profit: Upto 10.50% p.a Account Type: Chequing Account Investment: Upto Rs.5,000,000 & above Free internet banking facility 24-hour phone banking service

30

 Allied Cash + Shop Visa Debit Card Eligibility: Individuals, and institutions The estimated rate of profit is given below:

Amount Up to Rs.5,000,000 Rs.5,000,001 to Rs.25,000,000 Rs.25,000,001 to Rs.50,000,000 Rs.50,000,001 to Rs.100,000,000 Rs.100,000,001 to Rs.250,000,000 Rs.250,000,001 to Rs.500,000,000 Rs.500,000,001 & above

Slabs Rates 5.00% 6.00% 7.00% 7.50% 8.00% 8.50% 9.00%

Amount Up to Rs. 5,000,000 Rs.5,000,001 to Rs.25,000,000 Rs.25,000,001 to Rs.50,000,000 Rs. 50,000,001to Rs. 100,000,000 Rs.100,000,001& Above

1 Month 3 Months 6 Months 5.00% 5.50% 6.00% 6.50% 7.00% 7.00% 7.50% 8.00% 8.50% 9.00% 7.50% 8.00% 8.50% 9.00% 9.50%

1 Year 8.50% 9.00% 9.50% 10.00% 10.50%

Behtar Munafa Term Deposit Account

If depositor wants to fix his money now to secure his future, this is the product for him.

31

Salient Features
Profit: Payable on maturity Highest Profit: Up to 11% p.a. Account Type: Fixed Term Deposit Investment: Up to Rs.5,000,000 & above Eligibility: Individuals, and institutions The estimated rate of profit is given below:

Rewarding Term Deposit Account

A term deposit scheme which gives a high rate of return and the flexibility of various tenure. Investment can be made with the minimum of PKR 25,000 only.

Salient Features
Term Period: 1-12 months Profit: Payable on maturity Account Type: Term Deposit Investment: Rs. 25,000 & above Eligibility: Individuals & Institutions

32

Rate of Profit
Deposit Amount Rs. 25,000 & Above 1 Month 7.00% 3 Months 9.00% 6 Months 9.50% 12 Months 10.50%

Amount Up to Rs. 5,00,000 to 5,000,000 Rs.5,000,001 to Rs.25,000,000 Rs.25,000,001 to Rs.50,000,000 Rs. 50,000,001to Rs. 100,000,000 Rs.100,000,001 to Rs.250,000,000 Rs.250,000,001 to Rs.500,000,000 Rs.500,000,000 & Above

Slabs Rates 5.00% 6.00% 7.00% 7.50% 8.00% 8.50% 9.00%

Allied Munafa Account (AMA)

The applicable profit rate would be based on slab of amounts maintained

on average monthly basis and the profit credited in the account on monthly basis. Individuals, Firms, Companies, Schools, Hospitals, Charitable Organization & NonGovt Organizations etc are free to open their account in this scheme. The estimated rate of profit is given below:

Monthly Profit Plus

33

Saving has now become all the more appealing with Monthly Profit Plus Scheme, which earns depositor monthly profit on investments. The scheme is designed for a period of 1 Year with the following profit rates: Tenure Profit Rate Profit Payment 1 Year 10.00% p.a. Rs.833 * per month

Salient Features
Amount up to Rs. 300,000 Rs. 300,001 up to Rs. 400,000 Rs. 400,001 up to Rs. 500,000 Amount: Rs.25, 000 Chequing Account for monthly profit credit SMS transaction alerts Free Online Transactions Free internet banking facility Allied Cash + Shop Visa Debit Card Eligibility: Individuals & Institutions (other than financial institutions) Slabs Rates 5.0% p.a. 6.0% p.a. 7.5% p.a. Account Type: Term Deposit Minimum Deposit

Allied E-Savers Accounts (ESA)

Allied e- Savers Account is a unique savings plan where depositor can earn returns as high as 7.5% with the flexibility of four withdrawals a month. The estimated rate of profit is given below:

34

Salient Features
SMS transaction alerts Free Online Transactions Free Telephonic Transfer No Cheque return charges Complementary ATM cards Free Internet banking facility 24 hours phone banking service Allied Cash + Shop Visa Debit Card No service charges on active accounts Free Nationwide Real-time Online Banking And for debit transactions at various retail outlets Including our largest network of ATMs across Pakistan Free issuance of cheque book at the time of account opening

Foreign Deposits Schemes

Deposit Schemes of Foreign Currency Accounts are very much related with Pak Rupees Accounts such as saving deposit, current deposit and fixed deposits. These accounts can be opened in US Dollar, Pound Sterling and Euro at designated branches.

Saving Accounts
In these accounts there is no Minimum limit for opening the account and the Bank offers certain rates of interests on all Foreign Currency Accounts.

35

Fixed deposit
Fixed deposit facility is also provided to clients. These deposits can be for three months, less than six months, six months, less than twelve months, twelve months, two years, three years, four years and for five years.

Current Deposits
Multiple withdrawals of any part of balance can be made on demand. Funds can be credited into the current deposit account in the form of cash, Cheques and other financial instruments drawn on any bank or other branch of ABL. The current account is suited to meet both domestic and business requirements of the customer.

Rate of Interest
Rates of Interests are different for different Currencies for different Periods.

ALLIED VISA CREDIT CARD

Welcome to the world of privileges, benefits and savings with Allied Visa Credit Card. In order to cater to people growing financial needs Allied Bank is proud to introduce Allied Visa Credit Card with The Lowest Service Charge ever! So now people can save money where it counts and spend lavishly at their favorite places with greater flexibility, convenience and most important-Affordability! With Allied Visa Credit Card, card holder can enjoy a variety of state-of-the-art features and unmatched value by spending at over 49,000 merchants across Pakistan and 27 million merchant outlets worldwide! And what more, he can also use his credit card at over 1 million ATMs internationally!

36

Pioneer in Credit Cards

Allied Bank is not only the pioneer in the credit card industry, but also the first free credit card launched by a completely Pakistani owned financial institution. Allied Bank issues two types of Visa Credit Card. 1. Allied Visa Gold Credit Card 2. Allied Visa Platinum Credit Card

Allied Visa Gold Credit Card

With Allied Visa Gold Credit Card every Pakistani can now enjoy the benefits of a Gold Card internationally with unmatched savings greater flexibility, convenience and security.

Visa Platinum Credit Card

With Allied Visa Platinum Credit Card, card holder can enjoy exceptional benefits and a host of local and international benefits like never before.

Features of Allied Visa Credit Card

The various features of Allied Visa Credit Card are following.

Buy Now, Pay Later

With Allied Visa Credit Card, card holder free credit period allows his to pay for their purchases up to 50 days after the date of purchase. So now he can buy all the things he wants - whenever he wants - at his own convenience.

Flexible Repayment

37

When paying credit card bill, Allied Visa Credit Card gives the option to card holder either pay the entire amount according to his statement or a minimum of 5% of total outstanding balance.

Cash Advance Facility

As an Allied Visa Credit Card member, card holder is entitled up to 75% of his available credit limit in cash. Just go to his nearest ATM with the VISA or PLUS sign and avail the facility of withdrawing cash 24 hours a day.

Balance Transfer Facility

In case card holder has outstanding balances on other cards, consolidate these on to his Allied Visa Credit Card with the lowest BTF rate and save more on his outstanding payments than ever before.

Supplementary Cards
The card holder can share the benefits of Allied Visa Credit Card with others also. The card holder can! Treat up to two people with supplementary credit cards and pass on the many privileges of his Allied Visa Credit Card to his chosen friends and family members.

Allied Easy Installments (AEI)

The Allied Easy Installments (AEI) plan provides card holder with the facility to pay his outstanding card balance in equal and affordable monthly installments spread over 3, 6, 12, 18, 24, 30 or 36 months.

Credit Protection Plus

38

With Credit Protection Plus, Allied Visa Credit Card provides payment cover against: Terminal Illness Death, due to accident or sickness Temporary Total Disability, due to sickness or accident Permanent and Total Disability, due to sickness or accident

Zero Loss Liability

The Allied Visa Credit Cards Zero Loss Liability feature protects card holder from paying for any unauthorized transactions on his Card in the event that it is lost or stolen. The card holder notifies Allied Phone Banking immediately on 0800-22522 (within Pakistan) or on 9221-5301094 (outside Pakistan) in case his Card is lost or stolen.

24-hour Allied Phone Banking

For any information and queries about Allied Visa Card, card holder calls Allied Phone Banking on 0800-22522. If card holder is calling from outside the country, please dial 9221-5301094.

ALLIED CASH+ CARD

Allied Bank introduced the Allied Cash+ card also referred to as ATM card. The account holders will now have the convenience of withdrawing cash from any of ABL multiple ATMs ("All-Time Banking" locations) conveniently located in major cities like Karachi and Lahore at any time of the day or night even on closed days/holidays. Other services include customer being able to inquire about the balance of his/her

39

account or printing an abbreviated (mini) statement showing the most recent eight transactions up to the previous working day.

How to Obtain:
In order to obtain an Allied Cash+ Card, The account holders simply have to fill out the prescribed Application form available in all Allied Bank Branches. The duly filled form should be handed over to the Manager of the Branch where account holders are maintaining their account. Non-account holders would first have to open an account with Allied Bank to have access to this facility. The account holders can feel absolutely safe about their Allied Cash+ Card because it can only be used with the Personal Identification Number (PIN) which is given to them by the bank. As a security measure, they should keep this number absolutely Confidential.

Activation Instructions
The card holder follows the instructions stated below so that they are able to use their Card at any merchant outlet or Visa ATMs. To activate Card, card holder call Allied Phone Banking Enter the PIN provided to them in order to use the Card at ATMs The card holder sign the signature panel on the back of their Card in permanent ink as soon as they receive it

How to Use:
The instructions appearing on the screen of ATMs have been designed to help the card holder in using the facility. Graphical representations have been employed, where appropriate, for ease of understanding the following simple guidelines would also be useful for the card holder. 40

Inserting the Card:

Insert Allied Cash+ Card in the Card Slot located at the front of the machine. The Card must be inserted with its face up as indicated on the machine.

Protect Your Card

Do not bend Card Avoid scratching or damaging the magnetic strip Destroy PIN mailer once they have seen their PIN Do not expose Card to direct sunlight and notify the Bank immediately of any irregularities Do not leave Card near a television or any other electrical or electronic gadget, which has a continuous magnetic field Do not disclose Card Account Number or Personal Identification Number (PIN) to anyone

Features
The various features of Cash+ Shop Visa Debit Card are following.

Get Cash
The people are always on the move, now their bank accounts are too. They can use their Allied Cash+ Shop Visa Debit Card to withdraw cash directly from their bank accounts from over 3,500 ATMs in Pakistan - including Allied Bank's largest network of ATMs - and over 1 million ATMs worldwide.

No Fee' ATMs
The card holder makes a transaction at a 1-Link or M NET ATM anywhere in Pakistan. But he will be charged the extra fee of Rs.15 in case of make the transaction 41

through other banks ATMs.

Shop Anywhere
The card holder use the Visa power of Allied Cash+ Shop Visa Debit Card to shop at over 49,000 retailers in Pakistan and over 27 million retailers internationally. He gets the card at Rs. 232 issuance fee. Pay no annual fee and no transaction fee, he get instant cash and check balances at ATMs nationwide with no ATM access fees.

Dine Out
The card holder go to all his favorite restaurants and order whatever he want without having to worry about how much cash he have in his pocket.

Enjoy Traveling
With Allied Cash+ Shop Visa Debit Card, the card holder can buy his plane tickets and do all his shopping abroad without worrying about spending too much or running out of cash.

Fuel Up
The card holder can fuel up his car without emptying wallet. Pay for all fuel purchases with Allied Cash+ Shop Visa Debit Card.

Stay Alert
The card holders are more secure and keep better track of their spending. With Allied Cash+ Shop Visa Debit Card, they can get SMS alerts when their make transactions on their Cards. They can also access the details of their transactions via internet banking at abl.com.

42

Round-the-clock cash withdrawals

The card holders can make withdrawals up to Rs. 25,000 in a day (depending upon their deposits) at any ATM across Pakistan. (The transaction limit is Rs.25, 000.)

Balance Inquiry & Mini Statement of Account

The ATM screen will reveal the balance in their accounts. A mini statement comprising last 8 transactions can also be obtained from the ATM.

Utility Bill payment facility

The card holders can pay telephone, electricity, and gas utility bills on any of ABL ATMs without having to wait in long queues outside branch.

Funds Transfer facility

They have power to transfer money from their accounts to any account of Allied Bank anywhere in Pakistan.

Card Facilities:
The Card may be used to withdraw money at any Automated Teller Machine (ATM), to access any additional banking services offered through the ATMs or to pay for goods and services at retailers or suppliers worldwide who display the VISA Plus sign and who accept the Card, subject to compliance with VISA rules and regulations as applicable from time to time. If the holder uses the Card for transactions outside Pakistan (including ATMs), the Card holder will also be liable for currency conversion and service fee, which is charged upfront at the time of the transaction. However, the Bank makes no warranty nor assumes any liability or responsibility for any limitation on conversion or availability of foreign exchange whether due to State Bank of Pakistan or otherwise.

43

ALLIED ATM NETWORK

Allied Bank has a largest network of over 522 ATMs installed in over 130 cities and towns across Pakistan , which continues to grow at a rapid pace.

1 LINK NETWORK
The 1-Link Switch has the 22 members. Allied Bank is a member of the 1-LINK ATM sharing switch comprising of over 2,000 ATMs nationwide, therefore, giving its Allied Cash+ Shop Visa Debit Card holders access to even more ATMs across the country.

M NET NETWORK
The Allied Cash+ Shop Visa Debit Card can also be used at M Net ATMs, for cash withdrawal. The M Net Switch has the following Bank members:

JS Bank Citibank HSBC Bank Bank of Punjab Bank of Khyber Prime Commercial Bank Habib Metropolitan Bank Muslim Commercial Bank First Women Bank Limited Saudi Pak Commercial Bank

44

ONLINE BANKING
Allied Online is a unique service offering from Allied Bank Limited.- Through Allied Online, The account holders account in Allied Bank is available to him from any of ABL branches countrywide. No matter where the account holder in the country and which branch his account is maintained, he can has his cheque enchased at any of 779 branches located in 350 cities. He can also use the service to deposit cash for instant credit into their accounts or any other account in Allied Bank from any branch.- Similarly account-to-account Funds Transfer facility is also available for instant remittance. His cheque drawn on a remote branch for credit into beneficiaries account or encashment up to a specified amount can also be presented at any branch by a 3rd party. Balance Inquiry and getting an Account Statement are additional services available to account holder from remote branches.

Allied Online provides a secure, efficient and convenient facility for making payments to beneficiary accounts from any of our branches countrywide. Corporate customers requiring funds collection or disbursement facility can use it for cash management services. Online Banking facilities are available to customers maintaining accounts at all online branches across the country. The following facilities are available:

Remote Balance Inquiry and Statement of Account Remote Cheque Encashment from any online branch Cash Deposit for immediate credit to a remote branch Instant Funds Transfer between any 2 online branches

45

INTERNET BANKING
Banking at fingertips! Allied Direct Internet Banking, offer the convenience to manage and control account holders banking and finances - when they want, where they want to! It's Simple, Convenient, Secure and Faster. So, just get clicking. Some features of Allied Direct are following:

Simple and Convenient

Easier navigation and help provided at every step so account holders can have most out of this service. With Allied Direct convenience is just a click away.

Secure and Faster Secured

Encrypted with latest tools and technologies, Allied Direct is the choice for secure and fast Internet Banking.

24 x 7 Access
The account holders now have access to their accounts 24 hours a day, 7 days a week. They transfer funds or even pay bills even if it's a holiday.

HELPLINE
Since the launching of Allied Cash+ Debit Card on January 27th 2004, Allied Bank embarked on the path of value added consumer products. Customer related services were being provided through our ATM-Wing situated at Central Office Karachi.

46

As the numbers of Allied Cash+ Card increased, so did the services related inquiries, complaints and requests from our customer. Hence, to facilitate and to offer Quality Service to ABL customer, Allied Bank decided to provide Toll Free Number Customer Services through 0800-22522.

LETTER OF CREDIT
Letter of credit is an instrument used for security of the payment, the documentary credit is essential these days for conducting safe and sound foreign trade. A documentary credit represents a commitment of a Banks to value honor cheques and other means of obligation against his customer to the amount of value of goods traded, on the presentation of the documents evidencing the bonafide conduct. One mode of payment is Letter of Credit (LC). It is a conditional undertaking by the Bank to make payment to the exporter if he fulfills the terms of credit by presenting the required documents to the bank in his country. In fact LC is a legal document on behalf of which the payment made by the importers bank to the exporters bank. Allied Bank of Pakistan is providing this service to its customers who have an account with the branch and other businessmen too. This facility has been recognized as a modern banking activity of all commercial banks that are included in the list of 6000 Banks internationally. An LC Document Normally Include Following Information:

The total amount of the LC The number of days for which the LC is valid The name of the banks, who are regulating all these dealings The name of foreign company, which is exporting the goods The name of the local company, which is importing the goods

47

 The details of the goods to be transacted including the amount, quality, mode of packing etc. The name of the carrier which will be used for the shipment of the goods to the importer

Parties Involved In a LC
There are normally five parties involved in a letter of credit: Buyer (known as the importer, account party or consignee) Buyers Bank (known as opening, or paying bank) Seller (known as the exporter, shipper, or beneficiary) Sellers bank (known as advising, confirming, negotiating bank) Carrier (known as the shipping company)

Types of L C

Types of L C

Irrevocable LC

Revocable LC

Red Clause LC

Revolving LC

Irrevocable LC
An irrevocable LC is one that is a definite undertaking by the issuing Bank that it cannot be cancelled or amended without the consent of all the parties to the credit.

48

This means that all the provisions for the payment, acceptance or negotiation contained in the credit shall be fulfilled if the documents and drafts/cheques are presented that comply with the terms and conditions of the credit. This type of LC is the most commonly used LC for the international trade purposes. The exporter feels him safe and assured that his payment will be met in time without delay.

Revocable LC
This type of credit is one that can be cancelled at any time by the issuing bank giving any reason to the negotiating bank, meaning that the importers bank shall not honor any cheques/drafts presented for payment. This type of LC is not so commonly used by the importers as most of the time there are instructions by the exporters to open and irrevocable LCs in their favor.

Red Clause LC
A special type of LC in which the issuing bank authorizes the exporters bank to make an advance payment to the exporter up to the limit said therein. This type is used in case of import of some goods for which exporter demands an n advance payment before the shipment is made.

Revolving LC
This type of LC is opened in case the importer is indulging in import of many goods frequently and to avoid himself of opening a new LC for every transaction, he opens a revolving LC. The main function of a revolving LC is that it is not binding to one transaction, rather it is made useful for different amount that are too paid to the exporters. The maximum amount is said on the LC and the bank accepts the responsibility to honor all cheques/drafts with in this limit. According to the international trade policy of the GOP it is prescribed that no person or a company can import or export until it gets itself registered with the Export

49

Promotion Bureau (EPB) and gets a valid certificate of registration. On being granted the certificate he is eligible to import or export from the country. For an importer to open a LC for the first time has to make an application to the State Bank of Pakistan, through a scheduled commercial bank for grant of the permission to open a LC. This importer on getting of the permission is also not bound to open the LC from the same bank. He is free to go to any bank that suits him for the purpose. All imports must be done under observance of all rules and regulations that are prescribed by SBP and Government, which are subject to change from time to time.

LOCKER FACILITY
Allied Bank Lockers are available, at an annual fee, in four different sizes small, medium, large and extra large. Locker holders are not required to have an account with the Bank. The list of Lockers is maintained in the register. In this register the name of locker holder is mentioned along with the locker number. The key is provided to the locker holder called the Normal or Ordinary key. The Bank keeps himself one key himself. When the locker holder wants to operate to the locker, then he will operate the locker firstly entering the name in the register along with the initials. The date and time of the transaction will also be recorded in the register. Then the leaving time will also be recorded in the register. The key, which is with the Bank, is called Master key and the key, which is kept by the holder, is called normal key. A locker cannot be operated with one single key. Both the master and normal keys are required for operating the lockers. If the key is lost from the locker holder, then the locker holder will pay the entire recovery fee and the client launches FIR. If person wants to operate the locker, he will operate it alone.

Criteria for Acquisition of Locker

There are certain criteria for acquiring the locker facility.

50

Opening Farm
There are opening farms, which are filled by the client to get the locker facility. In this form the name is mentioned along with the signatures of the locker holder. In the locker number is also mentioned on the farm.

S. #

Locker Size

Annual Rent

Maximum Loss Coverage / Limit

Security
Certain security is kept by the while providing the locker facility. This security is in shape of the

1 2 3 4 cash.

Small Medium Large Extra Large

Rs.1,500/Rs.2,000/Rs.4,000/Rs.5,000/-

Rs.500,000/Rs.1,000,000/Rs.1,500,000/Rs.2,000,000/-

Sizes of Lockers
There are four sizes of lockers, small, medium, large, or extra large, on which certain security is made and the locker holder pays the following amount of rent annually.

HOME REMITTANCES
Allied Bank has rolled out its state-of-the-art e-Remittance services to facilitate international remittances sent to Pakistan by overseas Pakistanis. ABL has been significantly important in originating home remittances to Pakistan, and is continuously working to develop innovative ideas for maximizing its reach to all Pakistanis living abroad. Allied Bank has identified several strategic partners in the

51

main overseas markets, and will be providing a fully automated, end-to-end solution for non-resident Pakistanis. ABLs real-time online branch network one of the largest networks in Pakistan, consists of over 779 branches in 350 cities, and provides domestic distribution of remittances to customers receiving money in Pakistan. A host of top international banks, exchange houses and funds transfer companies from across the world, including the Middle East, Europe, Asia-Pacific and North America, have been involved to make this a quality service. By implementing a fully automated, straight-through processing facility, Allied Bank is in a position to activate an innovative set of remittance products. A host of options is available to non-resident Pakistanis under this service, including direct credit to account, cash payment over the counter and issuance of the Allied Express cheque, a payment instrument that can be honored across the entire ABL network of branches.

TRAVELER CHEQUES
Allied Bank issues Traveler Cheques both in foreign currency and in Pak rupees. The traveler Cheques issues in foreign currency are called ABL Traveler Cheques while those issues in Pak Rupees are known as ABL Rupee Traveler Cheques. Denomination: ABL Rupee Traveler Cheques are issued in the denominations of Rs 1,000, Rs. 5,000, Rs 10,000 and Rs. 50,000. Service Charges: The bank charges Rs 20 on the issuance of traveler cheque of any denomination. Requirement: The Bank requires Identity Card on the issuance of the Traveler Cheque. Verification: Client makes one sign on the Traveler cheque when he is purchasing it and the other sign is made when he will cash the cheque.

UTILITY SERVICES
The banks also provide its customers the non-banking services, such as Collection of Utility bills, etc. Customers can pay their utility bills (e.g. electricity, gas, telephone) at any of the Banks branches. For further convenience, bills are collected on all

52

working days during normal banking hours and also at certain times during the evening. Bills can be paid with cash or cheque, plus customers can even drop crossed cheques in drop-boxes available at all branches. Furthermore, customers can also pay their bills using any of the Banks ATMs or via Internet Banking for SSGC and SNGP bills.

PAY ORDER
Allied Bank provides another reason to transfer your money using pay order facilities. Pay orders are a secure and easy way to move your money from one place to another.

HAJ SERVICES
The bank serves the intending pilgrims by helping them in performing their religious obligation. The Hajj forms and other related services are provided by the bank. However the terms and conditions for accepting the Hajj forms from intending pilgrims are in accordance with the Hajj Policy announced by the government each year. Hajj applications are available with all branches during Hajj season, immediately after the Government of Pakistan announces the Hajj policy.

BANCASSURANCE
Allied Bank offers to the parents have provided for the best possible education, a virtuous upbringing and fulfilled their child's dreams so far. They aspire to give them the best when it's time for their wedding and like every parent. They desire to fulfill their most cherished dream with help of I'LM (Child Education Plan) and Anmol Rishtey (Marriage Savings Plan).

I'LM (Child Education Plan)

Education costs that are already exorbitant will further soar because of uncontrollable inflation. Saving adequately and then prudentially investing those savings will give

53

parents the financial ability to fulfill the promise of a better education to their children, even if they are not around to see it. Allied Bank, with EFU Life Assurance Ltd, introduces ILM, a savings plan that helps them meet their child's future education expenses. Be it an aspiring lawyer, a caring doctor or a skilled engineer - whatever their child aspires to become tomorrow, Allied Bank make sure it comes true. ILM (Child Education Plan) ensures their promise of better education gets fulfilled no matter what the future holds for them. The earlier they start saving the better their child's future will be. So build a steady saving from as low as Rs.6, 000 per annum with ILM After all, they work hard to earn their money; it's only fair that their money should work hard for their in return.

Product Features and Benefits

Education Bonus Freedom to customize 14 Day Free-Look Period Fund Acceleration Premium (FAP) Continuation Benefit Regular Education Fund Benefit Accidental Death and Disability Benefit up to Rs. 5,000,000

Illustration
For a 35 year old male, plan with a 25 year term, an annual premium of Rs. 15,000 and a built-in Accidental Death and Disability benefit (providing sum assured of Rs. 147,400), the expected cash values would be as follows:

54

Policy @ 6% p.a.unit @ 8% p.a.unit growth rate growth rate Year 1 3,485* 3,550* 2 14,581 14,927 3 29,290 30,216 4 44,858 46,705 5 61,336 64,488 10 159,437 176,784 15 294,524 345,996 20 477,484 597,038 25 728,356 972,393

@10% p.a.unit growth rate 3,616* 15,276 31,159 48,607 67,775 196,103 407,431 750,438 1,309,840

* The policy cannot be surrendered until two full years premiums have been paid. A portion of premium is invested in earlier years.

Anmol Rishtey (Marriage Savings Plan)

Parents can start as early as when their child is born or when their daughter is in her teens. The earlier they start saving, the more easily they will be able to meet the expenses of her big day. They can build a steady saving from as low as Rs. 6,000 per annum with Anmol Rishtey. Allied Bank, with EFU Life Assurance Ltd, introduces Anmol Rishtey, a Marriage Savings Plan that helps them meet the expenses of their child's most important day.

Product Features and Benefits

Marriage Support Bonus Freedom to Customize 14 Day Free-Look Period Continuation Benefit Engagement Bonus Fund Acceleration Premium (FAP) Accidental Death and Disability Benefit up to Rs. 5,000,000 55

Illustration
For a 35 year old male, Anmol Rishtey plan with a 25 year term, an annual premium of Rs. 15,000 and a built-in Accidental Death and Disability benefit (providing sum assured of Rs. 147,400), and the expected cash values would be as follows:
Policy Year 1 2 3 4 5 10 15 20 25 @ 6% p.a.unit growth rate 3,485* 14,581 29,290 44,858 61,336 159,438 293,587 478,105 727,312 @ 8% p.a.unit growth rate 3,550* 14,927 30,216 46,705 64,488 176,784 344,967 597,585 971,139 @10% p.a.unit growth rate 3,616* 15,276 31,159 48,607 67,775 196,103 406,304 750,878 1,308,294

*The policy cannot be surrendered until two full years premiums have been paid. A portion of premium is invested in earlier years.

56

ORGANIZATIONAL STRUCTURE OF ALLIED BANK

The organization has wide horizontal and vertical structure; its main offices are given under:

ORGANOGRAM
Board of Directors

Audit Committee 57

President

Internal Audit

Corporate & Invest.

Commercial & Retail Banking

Consumer Banking

Treasury

Risk Management

Special Asset Management

Finance

Operations

Information Technology

Human Resources

Compliance And Control

Corporate Affairs

ORGANIZATIONAL STRUCTURE OF ABL 14 # CHUNGI BRANCH MULTAN

Branch Manager

58

Customer Service Manager

Credit Manager

Incharge Cash

Customer Manager

Trade Finance

Incharge Accounts

Cash Officer

Incharge Short -Term

Import Officer

Incharge Mortgage

Export Officer

BRANCH FUNCTIONS AND RESPONSIBILITIES

General Banking
General banking is one of the major departments of Allied Bank, Ltd. It consists of sub department, which are following:

Current Department Cash Department Clearing Department

59

Accounts Department Remittance Department Foreign Exchange Department

General Banking

Current Department

Cash Department

Clearing Department

Accounts Department

Remittance Department

Foreign Exchange Department

CURRENT DEPARTMENT
This department maintains all formalities of the accounts and accounts holder, like accounts name, account holder's name, code No., and full address. Different cheques debit and credit voucher come from different departments like Token, Clearing, Remittance, Cash, and Foreign Exchange, Advance and posted against different accounts. A working Journal called Manual is prepared daily which shown the balance accounts of all parties. Mark-up and profit are calculated daily. That would be debited or credited from or to Account holder's account after specific period of time. Mark-up is 60

debit from the account after every three month and profit is credited to accounts after every 6 month. New accounts are also opened in this department. Following are the three accounts, which are maintained by this department. Current Account Saving Account Fixed Account

Account Opening
It is most important department of bank and its major source of income for bank. Operation officers deal in this department. Following procedure is adopted for this purpose.

Procedure Of Account Opening

It is very simple and quick procedure. A person who wants to open an account must have the introduction of banks staff or any already existing account holder of the bank. The customer is required to fill an account opening form (AOF). Then signatures of the introducer are verified from S.S. Card (signature specimen) before opening account. AOF is very standard and up to the mark which contains almost whole information about customers. Customer is guide to fill all columns of AOF. All formalities and requirements are completed and verified, and all supportive documents are taken and checked according to the nature of account. If any formality is incomplete, cheques book is not issued until it is fulfilled.

If a person cannot sign write his / her hand thumb impression is affixed marked, which is attested by one male or two female witnesses. Thumb impression for female right hand and for male left hand. Account number is allotted to the customer and all particular such as nature of account, opening date, initial deposit, title of accounts are written in register.

Account is opened

in the system (Bank Excel) by putting all the particulars of the

customers in the system. Specimen Signature Cards are handed over to in charge of

61

operations department for record and verification. The letter of thanks is sent to customer for confirmation of address and other particulars of customer and one copy is attached to AOF. After complete procedures finally the manager of bank signs the AOF and these forms are filed in a proper sequence.

They also have to give identity letter Copies of CNIC. Passport size Photograph One place on the form other is on S.S. Card they have non-bearer cheque. On their cheques book a stamp is affixed on it there is written. Thumb impression should be fixed in front of an officer of the bank.

Cheque book request forward by fax to Central Office, Karachi, and cheque books will received after three days and delivered to the customer on the desk by taking their signature or if some one else want to take on the behalf of account holder then he must come with introduction letter duly attested his signature by the account holder along with copy of CNIC.

The bank does not make payment of a cheque bearing a six months or older date. If an account is not operated in six months. It is called dormant account.

Types Of Account
The bank has different types of account exist.

Types Of Account

Individual Account

Joint Account

Business Account

62

Sole Proprietor Account

Partnership Account

Limited Company Account

Private Limited Company Account

Public Limited Company Account

Individual Account
Any individual or proprietor of business can open an individual account at ABL. PLS (profit and loss sharing) saving accounts can be opened with the minimum balance Rs. 5000/- with expected profit rate is 2.5%. Following requirements has to be fulfilled for this account. Signature of customer on back of AOF Customer signature admitted by officer Mention next of kin (Nominee) Name and A/C # of introducer Verified sign of introducer C.N.I.C photocopy attached Letter of thanks

Joint Account
When different people want to or need to share a single account it is called joint account. The names of persons are written on the title of A/C and on S.S. card. Single person cannot open joint A/C. Both persons have to sign on cheque. When two or more person neither partner nor trustee open account in their name is joint account.

63

Requirements Sign of both customers on back of AOF Sign on joint A/C # mandate Name and A/C # of introducer C.N.I.C. copies of both members Mode of operation

Business Accounts
There are three different types of business accounts which are as under. 1. Sole Proprietor Account 2. Partnership Account 3. Limited Company Account

Sole Proprietor Account

This account is for that person who has his own business and he must be the solely owner of the business. When the owner of the firm operating singly, open an account on his own name. Requirements Companies stamp Sole proprietorship declaration Declaration of proportion companies letterhead Sign on AOF and CNIC copy and Verified signature of introducer

Partnership Account
Account title will be the name of the partnership firm. Requirements

64

 Sign of customers on back of AOF CNIC copies of partners Partnership deed (certified copy) duly attested by notary public Partnership mandate (prescribed format) Companies rubber stamp The A/C is opened in the firm name and all partners designate one or two persons to act behalf of the partnership firm all acts of the firm jointly and severely.

Limited Company Account

There are two different types of accounts of Limited company which are as under.

Private Limited Company Account

The Private Limited Company Account is one of the Limited company account along with following requirements. Requirements List of directors on companies letter head CNIC copies of all directors Sing of all directors on back of AOF and List of memorandum and article of association Request on companies letter head dully attested by chairman Copy of board resolution and Companies rubber stamp Director should attest copy of certificate of incorporation; co register an office stamp should be affix. Latest form 29 (if director is to be changed or in case of his death, this kind of form is filled, it includes information that a new director has how much number of shares with him

Public Limited Company Account

The Public Limited Company Account is one of the Limited company account along

65

with following requirements. Requirements Certificate of commencement of business Same as home documents Club / Society / Association Stamp of directors CNIC copies Certified copy of resolution Memorandum and article of association List of heads on companies letter head Bank account opened in their name with ABL Name of person to be specified for the operation in account The manner in which the account shall be operated Letter of registration These concerns are non-trading in nature. They have their own rules and regulation and their affairs are mentioned by the committee called as a governing body or managing committee

Cheque Book Issuance

When the account is opened, then the customer is given a cheque book to sign upon and to cash money. It proceeded as under; all the account opening formalities must be completed before issuance of cheque book. Particulars of the cheque book requisition should be completed containing title of account, account number, type of currency, and number of leaves and signature to the customer. Signatures of the customer are verified on the requisition. Allied Bank is now offering inter-net banking and customer who has availed this facility can apply for cheque book by using his I.D. without going into branch. If customer is unable to collect his cheque book, then he can give authority to the third person to collect his cheque book on his behalf by signing on the back of the requisition.

66

Cheque Book is taken out from the safe / locker. It is assured that series of the cheque book. Particulars are entered in the cheque book issuance register. Account number is stamped on very leave of the cheque book and those leaves are counted. Name of account holder is written on the cover of the cheque book. And requisition on the cheque book for further issuance is properly filled, stamped and signed by officer of the bank. Cheque book is delivered to the customer and his signature on the cheque book issuance register. Earlier the banks were charging a fee for issuance of cheque book but now whenever a new account is opened, the account holder issued a cheque book free of charge. Now Allied Bank Limited, is issuing cheque books in the name of customer i.e. customer name is printed on the leaves of cheque book. Allied Bank issues the following cheque book. Saving account - 25 leaves Current account 50 to 100 leaves Current account 25 leaves Foreign currency $ 10 leaves Foreign currency 10 leaves Loose cheques are also issued in some cases. Number of leaves can be increased on the request up to 100 leaves.

Closing Of Account
When a customer wants to close an account he has to given a hand written application to the head of the operations department to close his account plus remaining leaves of cheque book. The manager first verifies the sign of account holder, and then closing is done from the registers on the computer where the account was opened. In the file of the account holder his account opening form is crossed. For this closing a fee of Rs. 150/- is charge in ABL.

67

CASH DEPARTMENT
Cash department deals with the cash, which either comes in the Bank or goes out side the Bank. Cash can be in any form of currency.

Sources Of The Cash

There are different sources through the cash inflows the Bank. These sources are as follows: Deposits Prize Bonds, Febcs, Ndscs Etc Demand Draft And Telegraphic Transfer Commission

Deposits
This is the major source of the cash inflow. When someone deposits the cash in the Bank in any currency, it means that the cash is coming in the Bank.

Prize Bonds, Febcs, Ndscs Etc

Prize bonds, FEBCs, and NDSCs are other sources of cash. These instruments are sold to the general public and cash is received from them. Though this cash is ultimately transferred to SBP but still the Bank has to manage this cash.

Demand Draft And Telegraphic Transfer Commission

These are the second major sources of the cash inflow of the Bank. When the Bank

68

issues the DDs, TTs and on-line transaction within ABL all over the country on the behalf of customer then the Bank takes certain charges as commission. These DDs and the TTs can be issued in any currency on the demand of the customer.

Function of Cash Department

This department performs the two main function. Cash receipts Cash payments In cash department depositors use deposit slip for depositing the amount into their accounts. The officer checks if the deposit slip is properly filled up containing title of account, A/C number, date and amount in words and figures. Detail on both counter file and cash receipt voucher should be the same. Cash receiving officer, after twice counted and matched with the deposit slips will handover cash to the customer. The cash details are written on the back of the deposit slip and are also entered in cash receiving register. Cash received stamp is affixed on the face of the deposit slip along with the signature of the cash receiving officer. Deposit slip and cash receiving register is given to the officer in the cash department. The officer cash department both on cash receipt and cash receiving register do again proper checking. Officer cash department signs both the deposit slip and register. Deposit slip is credited and posted in the concerned account in the system. Counter folio is given the deposition as receipt. One consolidated cash debit voucher is posted in the system to balance the cash. Now in ABL they are not using the stamps for receipts / payments. They are using Flat Bed Printers and sing on this printed stamp.

Management Of Cash
It is necessary for every branch to maintain a specific amount of cash with it at any time, so that when a customer comes to get cash, he may get it promptly. If a branch is not able to maintain such appropriate level if cash then it will have a bad effect on

69

its repute and it will not be able to fulfill the customer expectations. So effective management of cash is very necessary for every Bank. ABL has put an appropriate limit on its branches that they should keep that minimum level of cash with them at any time. This limit is different for main branch and other sub-branches. ABLs cash management team offers a full range of transactional banking services, from collections to cross-border payments, from customized services to comprehensive industry expertise. Having the largest real-time online branch network in Pakistan, combined with a host of value-added services, ABL is uniquely positioned to meet the demanding requirements of global corporate, public sector enterprises and top-tier domestic companies. With its collaborative approach to building and implementing solutions, ABL is committed to giving its customers the best service possible.

Treatment Of Surplus Cash

The surplus cash means the cash, which is over and above the limit of any particular branch. It may happen that a branch may have the surplus cash with it. If a sub branch has surplus cash with it than that of limit, then it will transfer it to the main branch on daily bases. If the main branch has the surplus limit then he will transfer the surplus money to head office in Karachi through the SBP. If these surplus funds remain with the main branch, they will be of no use and will act as idle money because they are earning no profit. So these funds are remitted to Central Office, Karahci, where they are invested and will earn profit for the Bank. The main branch earns the profit on the funds, which it remits to the head office. Currently this rate of profit is 13%. There is no profit given on the funds which the sub-branches which they transfer to the main branch.

Treatment Of Cash Deficit

As surplus of the cash occurs, similarly the deficit can also be there in the Bank. It means that the cash shortage is there in the branch. To cover this shortage the patterns are followed. If shortage is there in sub-branch, then it may take the cash

70

from the main branch. If the main branch has the shortage of cash, then it may take the funds from the head office. The head office charges certain rate of profit, which is 13 % on the funds, which it remits to the main branch. There is no profit charged by the main branch on the funds provided to the sub-branches.

Cash In Transit
The cash, which is transferred from any sub-branch to Main branch or from main branch to SBP is called cash in transit. There is limit of cash in transit on main branch. This limit is of Rs. 20 millions i.e. main branches can take the cash from any sub-branch or can transfer the cash to SBP up to the limit to the 20 millions.

Insurance Of Cash
All the cash of the Bank is insured. The major companies, which insure the cash, include Adam jee Insurance Corporation, General Insurance Company and East West Insurance Company. The Central Office pays all the expenses of the insurance of cash.

Security Arrangements
Few years earlier, the Bank has its own guards for the transfer of the cash from main branch to SBP or from sub-branch to the main branch. But now the Bank has hired a security company for the transference of cash. is different for different amounts of cash. This company is Brinks. The commission which is charged by the Brinks Company varies from place to place and

CLEARING DEPARTMENT
The process by which cheque exchanged between the collecting and paying bank and the ensuing financial settlement is called clearing. This facility is provided by the state bank of Pakistan for off-setting of cross obligations between the different banks.

71

The Bank is the member of the Clearing House and receives Cheques, demand drafts and other negotiable instruments for presentation of its payment by the branch of a drawee bank located within the city other then ABL. The proceeds of the clearing instruments are credited into the account of the customer. The clearing facility is available on all working days.

Wherever the clearing facility is not available or the drawee institution is not the member of clearing house the Bank receives Cheques, demand draft or negotiable instruments for collection and upon receipt of payment from the drawee the same is credited into the account of the customer. Clearing may be outward or inward.

Inward Clearing
When cheques, drafts, etc, of our Branch presented to us for clearing by the SBP. Cheque to be honored by bank. Suppose a customer deposits cheque in ABL 14 # Chungi Branch Multan, drawn on Habib Bank Multan 14 # Chungi branch. Then the representative of ABL 14 # Chungi Branch Multan will take this cheque to the Clearing house in SBP, where representatives of all banks gather daily. Now in first clearing this cheque will be exchanged with the representative of Habib Bank Multan 14 # Chungi branch. In the second clearing, if the cheque is honored, he will tell it to the ABL representative and so the SBP credits the account of ABL 14 # Chungi Branch Multan and debits the Habib Bank Multan 14 # Chungi branch through the clearing account. This is called Outward Clearing.

Outward Clearing
The cheque of other banks, which the account holder deposit in their accounts is, sends for collection. Suppose a person deposits a cheque in Habib Bank Multan 14 # Chungi branch, drawn on any ABL 14 # Chungi Branch Multan, let it be the ABL 14 # Chungi Branch Multan. The representative of HBL will exchange this cheque with the ABLs representative in the first clearing in Clearing House. If the cheque is

72

honored by the ABL 14 # Chungi Branch Multan then SBP will debit and credit the respective accounts. This is called Inward Clearing.

Clearing Process
Here the local cheques are received that are drawn on ABL. All the cheques are received on one counter along with the paying slips duly filled in properly containing particulars of cheque and account holder. Counter folio of paying slip is handed over to the customer by putting stamp for cheque received for collection for Allied Bank on it duly signed by officer. These are then entered in clearing register and cheques for collecting are entered in OBC register and handed over the bills department of collection. Clearing officer checks and verifies title of all the cheques deposited by the customer to confirm the good title of the cheques. Cheques are scrutinized properly and paying slips are separated from cheques. Special crossing, endorsement and clearing stamps are affixed on the cheques. Cheques of each bank are sorted and arranged Branch wise. All the cheques are then entered into the clearing system of bank. Print out of the clearing is taken and details are attached with the cheque of each bank. Details of these banks are then entered into the clearing schedule containing number of cheques presented and their total amount against the name of each bank. Then total number of cheques presented to all banks and their total amount is written on the foot of that schedule, which is tallied with the clearing register. Next morning, these cheques are delivered to the respective banks in clearing house of SBP between 10:00 AM. In the same manner, other banks present there clearing drawn on Allied Bank. Total number of cheques and their amount delivered to other banks are received from them are written on the clearinghouse schedule and handed over to the officer clearing house SBP. Cheques / DD received in clearing are given to the officer cash department of the Branch for their repayment. After I proper scrutiny of cheques, verification of signatures and confirmation of balance in the account, officer cash department pays these cheque by canceling and posting them in the system.

73

If any cheque is not passed due to insufficient balance or any other reason, officer cash department returns the same cheque by attaching a cheque return memo containing reason for return. This cheque is entered into the cheque returned register and bank charges are deducted according to the schedule of charges. Second clearing is called at 1:30 PM to check the fate of the cheques presented to other banks in the morning. If any cheque is to return, that is delivered to the same bank in second clearing. In the same manner, if any cheque presented by Allied Bank in first clearing is returned, they receive it and once again give schedule of clearing figure to the officer-clearing house SBP containing number of cheques and their amount delivered and received unpaid.

Transfer Delivery
The clearing between the ABLs own branches within one city is called Transfer Delivery. During this clearing Pak Account is not involved. In ABL, it is done twice in a week. The Bank charges no commission from its customers for this transfer delivery.

ACCOUNT DEPARTMENT
Every Transaction, which takes place, is recorded in the computer. Transaction takes place through different vouchers which are finally posted to computer. As I already wrote that total branch was computerized so all transaction in different department would be made on computer. Each department. prepare a summary of daily transaction 'at is forwarded to Account dept. Since all voucher from differ-it department also forwarded to current department. So this department will tally it such transaction with current department after maintaining the ledger each department. The department take care about bookkeeping, maintains ledger and current accounts of different dept. Following are the different functions performed by this department. Calculation of mark-up of different advances

74

 To maintain all accounts of different department Calculation of profit of different investment schemes Preparation of daily position report of cash and every account Preparation of different type of reports for State Bank of Pakistan Preparation of monthly, quarterly, semiannually and yearly balance sheet of the branch The most important function is the checking and tallying daily summaries of different departments with ledger's balance If any kind of renovation or construction or rebuilding is done, all is paid from the accounts department. Like petrol for the car of EVP or VP, this department pays all stationery charges, medical allowance, etc

Daily Customers Movement List

All the changes that are made in accounts of customer are shown in the daily customer movement list. By using this list, people of accounts department can prepare the vouchers. Account department performs following activities. Voucher preparation Budgeting and fixed assts Employers benefit Expenditure approval Preparation of daily, weekly, monthly, and annual statement. The bank does not make payment of a cheque bearing a six-month or older date. If an account is not operated in six months, it is called dormant account.

BILLS / REMITTANCE DEPARTMENT

Bills for collection means the Cheques or DDs / TTs / POs which are received from or sent to other branches outside the city for collection, drawn on any other Bank. Bills for collection may be inward or outward.

75

BILLS FOR COLLECTION

There are two types of bills for collection which are as under.

Inward Bills For Collection

Suppose a customer of ABL Tariq Road Branch Karachi deposits a cheque drawn in the name of Habib Bank Multan Cant Branch. Now the ABL Tariq Road Branch Karachi will send this cheque to ABL Main Branch Multan for collection from Habib Bank Branch. Now ABL Main Branch Multan will collect this cheque from Habib Bank Branch through clearing, and will remit the amount to the Tariq Road Branch Karachi. This is called Inward Bills for Collection (inland) for ABL Main Branch Multan. It will be recorded in Inward Bills Collection Register. In the same way if the cheque is received for collection drawn on any other Bank from Foreign Branch of ABL, then this will be called as Foreign Inward Bills for Collection. It will also be recorded in Inward Bills Collection Register.

Outward Bills For Collection

When any branch of ABL sends a cheque or DD/TT/PO to main branch ABL in another city for collection from any other Bank, then it is known as Outward Bills for Collection. Suppose a person deposits a cheque in ABL 14 # Chungi Branch Multan drawn on Habib Bank Karachi branch. Now ABL 14 # Chungi Branch Multan will send this cheque to ABL main branch Karachi for collection from Habib bank Lahore branch. ABL main branch Karachi will collect this cheque through clearing from Habib Bank branch through clearing and will remit the amount to ABL 14 # Chungi branch Multan. This is called) Outward Bills for Collection (inland) and it will be recorded in Outward Bills Collection Register. In the same way, if ABL 14 # Chungi branch Multan sends any cheque or DD/TT/PO to its foreign branch for collection from any other Bank, then it will be called as Foreign Outward Bills for Collection and will also be recorded in Outward Bills Collection Register.

76

Commission
The rate of commission for both Inward and Outward Bills for Collection is .25 %, with a limit of minimum of Rs.20, plus courier charges.

REMITTANCES
Remittances means, the transfer of cash from one place to other place through paper transaction. Remittances may be inward and outward. The remittances can be made through the following mode of transference. Demand Draft (DD) Telegraphic Transfer (TT) Payment Order (PO)

Demand Draft (DD)

It is a kind of cheque, which is issued by the ABL to the other banks, or other branches of the ABL on the demand of the client. On the Demand Draft there are different heads mentioned on that. Such as the amount to be sent, the name of the person to whom it is to be sent. It is very convenient and safe method of sending the money from one place to another. The businessman to transfer or send the money from one place to another usually uses it. If one person issues the DD in the name of other person, then it can be transferred to the account of the second person easily. DD can be in Pakistani Rupee or in any Foreign Currency. When DD is issued, it is given to the person, who wanted to make it. At that time Bank will have no concern with that DD but an advice is sent to the concerned branch that we have issued the DD of such amount and on the name of this person, and you will pay him on the demand of the client. This DD can be closed before the issuing the amount. On issuance the DD, Bank takes some commission.

Telegraphic Transfer(TT)

77

It is also a way of sending the money from one place to another. Like DD certain farms are to be filled. In this the message sill not is sent through the paper, but with the help of the fax or things like that. All other processes are same as of the DD.

Payment Order (PO)

It is an order issued by the Bank and payable on itself, through this client can easily transfer the money from one person to another within the same city. It is a written document on which the certain commission is to be paid and certain documents are filled by the client. For this certain amount is needed to deposit with the Bank.

PROCESS FOR REMITTANCE

All branches of ABL deal with each other through a central account named as Pak Account.

Pak Account
Pak Account is maintained in Central Office Karachi. In Central Office there is an account of every branch and all these accounts of all branches are maintained through this Pak Account. In Pak Account, a specific code has been allotted to every branches account. These Pak Account controls all the remittances made by different branches. Remittances may be outward or inward.

Remittances Outward
Suppose a person comes to the ABL 14 # Chungi Branch Multan and asks to make a Demand Draft (DD) of Rs.50, 000/- in the name of beneficiary whose Bank is ABL Tariq Road Branch Karachi. Now the ABL 14 # Chungi Branch Multan will receive the cash and prepare the DD of Rs.50, 000/- and will send it to the ABL Tariq Road Branch Karachi. At the same time it will also prepare an advice and send it to the Central Office. In this advice, the ABL 14 # Chungi Branch Multan will tell the

78

Central Office that it has sent a DD of amount Rs. 50,000/- to the ABL Tariq Road Branch Karachi, so make its account debited by Rs. 50,000/- and make the account of ABL Tariq Road Branch Karachi credited with the same amount This is called Remittances Outward.

Remittances Inward
Similarly when the ABL Mall Branch, Lahore sends a DD/TT/PO or cheque to ABL 14 # Chungi Branch Multan Cant Branch then it will be remittances inward for this branch. This type its account will be credited by central office in Pak-Account and the account of ABL Tariq Road Branch Karachi will be debited. This is called Remittances Inward.

Remittance In Transit
Suppose the ABL Main Branch, Multan wants to send the surplus fund to the central office Karachi. This branch will first deposit the funds in the State Bank of Pakistan, which will transfer these funds to central office, Karachi. Here the SBP acts as a cash agent. Now the ABL Multan, Branch will send an advice to central office, Karachi that it had remitted that many amounts through SBP. This is called Remittance in Transit. Now the SBP Multan, Branch will remit this fund to the SBP Karachi, Branch and from there, funds will be ultimately transferred to the central office. In the same way when ABL Multan, Branch requires the funds then Central Office will remit these funds through SBP and will send an advice to the ABL Multan, Branch. The funds will be ultimately transferred from SBP Multan, Branch to ABL Multan, Branch. This is also Remittance in Transit.

FOREIGN EXCHANGE DEPARTMENT

In the very beginning of this era people were not aware of foreign exchange. All the foreign money was kept at hand and this idle money did not contributed in the 79

Pakistan economy at that time. But in 1991 foreign department introduced was introduced by the government of that time. After being introduced people deposited their currency in the Bank. It was the amount equal to the total Pak Rupees that were in the circulation in the economy of Pakistan. After the foreign currency accounts were opened, the economy gradually improved because foreign currency contributed a lot. Before the facility of foreign currency accounts, nearly 60% foreign currency was held by the people as idle.

ABL Foreign Currency Accounts

In Allied Bank Limited, Foreign Currency account can be opened in four major currencies; US Dollar Pound Sterling EURO

Criteria For Opening Foreign Currency Account

There are not hard and fast rules for becoming the Foreign Currency Account holder. Bank wants only introduction of the Client and very little about the background. I.D card is also not necessary, if someone has; well and good, otherwise no restriction will be there for him. Minimum requirements are not also fixed F.C. Accounts. It can be operated by 10$ only. requirement. The transfer of credits to a foreign country to settle debts or accounts between resident of home country and those of the foreign country or the foreign bills currencies etc used to settle such accounts. But other Banks may have some limits on minimum

80

Features Of Foreign Currency Accounts

There will be legal protection for the account holders. According to foreign exchange rules and regulation every citizen of Pakistan, either within the Pakistan or outside the Pakistan, can open the foreign currency account. Resident firms and Resident Companies including investment Banks can open Foreign Currency Accounts. All foreign nationals and foreign Companies in Pakistan or abroad can open Foreign Currency Accounts. Currency can be deposited by: Remittance received from abroad Traveler Cheques Foreign Currency Notes Foreign currency bearer Certificates There will be no restriction and questioning to him about the currency, which he wants to deposit that from where he got that money. No Zakat will be deducted on these accounts; no Income Tax deduction, no Wealth Tax deduction will be there. These incentives reinforce and motivated the people to invest in foreign currency accounts rather to keep the foreign currency idle. Foreign currency accounts can easily be transferred from one person to another, one place to another, with in the ABL Branches or in other Bank. This facility is not available in Pak Rupee account. The account holder can transfer the funds freely, in any currency to any part of the world. Traveler Cheques can be issued for abroad to the account holders without any limit. Foreign currency Accounts can be used for payment of purchases at Duty Free shops. Foreign Exchange Bearer Certificates and U.S. Dollar Bearer Certificates can be purchased from Foreign Currency Accounts. Opening of Foreign Currency Foreign Accounts in the joint names of residents/non-residents is permissible.

81

Foreign Bills And Remittance

There are three types of foreign bills and remittance. Mail Transfer Foreign Currency Demand Draft Foreign Currency Telegraphic Transfer

Mail Transfer
As it is clear from its name that in this case the transfer of money (in the shape of a document) takes place through mail. The procedure is like TT, that is instructions are given to the receiving bank that inter office account should be debited and 'edited to the mentioned partys account. It is slower as compared to the TT. Records are maintained in the same way as of telegraphic transfer, commission is also charged in the same manner but at a different rate.

Foreign Currency Demand Draft

Allied bank can transfer funds to the remotest fart of the country for payment / credit to the account of the customer himself or a third party, through Telegraph Transfer for the payment on the same or next day.

The Bank also issues the Demand draft for remittance of fund by customer. The Demand draft can be issued in favor of the purchaser himself or a third party. It is secured and convenient to send/carry, instead of cash.

Foreign Currency Telegraphic Transfer

In this case the authority is given to one bank from another bank on the behalf of the customers through telecommunication to debit their inter office account with them and credit his/her or party's account mentioned in telegraphic transfer (T.T.) This is the fastest way of transferring money from one place to another within the country as well as out side the country.

82

As we know that when a bank issues a T.T. it is given some service to the customers, so service charges for issuing T.T'S, credit vouchers are prepared. Crediting the cable charges and a debit advice is made for the party telling them that so much services charge has been deducted from your account with us. All the TT'S are serially numbered. There are two types of TT'S.

1. Incoming TT'S 2. Out-going TT'S So far both types of T.T'S separate registers are maintained. While issuing a TT a confidential code no. called the test numbers is also being given to TT by two authorized officers and this code number is only under stood by the two other authorized officers in the receiving bank. By this test some multiplications 'C done which confirm the instructions in the body of T.T.

ADVANCES/CREDIT FACILITY
Advances department of a bank provides many facilities to various individuals and businessmen against charging the interest from them. It is the usual practice of the back level it examines the perusal characteristics of the borrower and the reputation and scope of the business; he is doing or going to start. . However, there are four ways normally used to seem the account. 1. Pledge 2. Mortgage 3. Hypothecation 4. Charge

PLEDGE
Pledge is a contract between the borrower and the back whereby the goods are transferred into the banker's possession while the ownership remains in the possession

83

of the borrower. This possession remains with the bank until the payment of loan is dully made. In case of default, the back can sale the goods after giving the notice.

MORTGAGE
Mortgage is a contract whereby the interest in any specified immovable property is transferred to the banker in order to give the security for the payment of debts.

HYPOTHECATION
Hypothecation is a term where goods are charged for the purpose of security. But the possession and ownership remains with the owner of the goods.

CHARGE
In case of public limited the property is the ownership of the shares holders. So that property cannot be taken as mortgage. For this purpose charge is used. Every public or private limited is registered at Security and Exchange Commission of Pakistan. If a bank wants to give loan to the public or private limited company, bank will create the charge on property of company in SECP. This charge could be 1st or 2nd and so on or Pari Pasu. In case of 1st, 2nd charge if company is liquidated property of the company will be sold by the government after sale claim of bank that has 1st charge will be satisfied and after that claim of 2nd charge bank. If each bank has Pari Pasu charge then the amount realized after sale is equally divided between all banks.

Categories of Advances
The bank can make the advances in the following three ways. 1. 2. 3. Overdraft Loan Cash Credit

84

OVERDRAFT
Under

such arrangement the customer is allowed to withdraw the amount excessive

from his balance. But the limit of amount is sanctioned by the manager and given for a fixed period.

CASH CREDIT
These advances are made against the security of the goods which may be made like in the form pledge or hypothecation. The bank credits the borrower's account with the amount making as loan. The amount can not be withdrawn in lump sum. While interest is paid on the amount withdrawn from the bank.

LOAN
When the bank makes the advances in a lump sum, to be repaid in lump sum or in forms of installments with interest at any future date, is known as loan. These loans may be of short and long term.

TYPES OF LOANS The Bank provides the facility of two types of financing. 1. 2. Funds based Financing Non Funds based Financing

FUNDS BASED FINANCING

The type of Financing in which the funds of the Bank are directly involved is called Funds based Financing. There are following types of Funds based Financing. 1. Cash Finance 2. Running Finance 3. Demand Finance 4. Housing Finance 85

5. Agricultural Finance 6. IDA Financing 7. Demand Finance to Staff 8. Allied Equity Building Plan 9. Finance for Government Operations 10. Finance Against Local Manufactured Machinery 11. Demand Finance against Foreign Currency Account 12. Finance Under Small Business and Small Industries

CASH FINANCE
Cash finance is the account of the Bank. It is like the current account. In this account a certain amount of cash is available for the borrowers at all the times. A limit is first sanctioned to the borrower and then, on his needs, the amount is transfer from cash finance account to the borrowers current account from where he can withdraw the money. This transfer of cash from the Banks cash finance account to the borrowers current account is just the paper transaction and the borrower takes the finance in no time. PURPOSE Cash finance is normally giver for seasonal needs e.g. in Cotton season, Rice season etc. But in some cases it can be given for regular needs. SECURITY Following securities are required by the Bank. Primary Security The primary security required by the Bank is stocks. But unlike running finance, in which the stock is hypothecated, here the stock is pledged by the Bank. The stock pledged is kept with the Bank at the cost of the borrower. Usually the stocks are kept

86

at the warehouses of the Borrower Company, but certain representative of Bank as Inspector is always there to keep a check on the stock. Principle Security Like running finance, some collateral security is taken as principle security. MARK-UP The Mark-up of cash finance is normally 14%, but is negotiable. PERIOD The maximum period for cash finance is one year. REPAYMENT SCHEDULE Repayment of the loan is made after the completion of loaning period, along with the markup.

RUNNING FINANCE
PURPOSE Running Finance is short-term loan usually given for the working capital management. The running finance is suitable for meeting day to day financial needs of the Business. The running finance account can be operated and daily sale proceeds can be deposited into the account. SECURITY The Bank requires following types of securities in running finance. Primary Security The primary security requires by the Bank is stock. Bank hypothecates a specific amount of stock, that is, stock remains in the custody of borrower, but the lien is of Bank. The borrower is responsible for keeping and managing the stock well and providing the regular stock reports to the Bank. The Bank advances a certain percentage of the value of the hypothecated stock as loan after keeping some margin. Personal Guarantees 87

Under the SBP laws, ABL can give the loan to the extent of Rs. 50,000 on two personal guarantees along with the primary security. Principle Security If the loan required by the borrower is greater than Rs. 50,000 then the Bank requires some collateral security along with the Primary security. The security taken as collateral is usually immovable. However, according to ABL laws, the agricultural land cannot be taken as collateral security. In some rare cases it may also happen that a creditworthy firm may keep some moveable security as collateral but provided that it is very easily encashable, e.g. defense saving certificates etc. MARK-UP Normally the cost of running finance is 14% but it is negotiable and may vary. 1-% rebate is given to a client who gives three times more business to Bank than his limit. PERIOD Running finance is usually given for a period of one or less than one year. REPAYMENT SCHEDULE The borrower has to repay the loan on the daily sail proceeds of stock. It is necessary for the borrower to adjust the account on the date of expiry of loan period. However, Bank may give a period of one month after the maturity of loaning period, so that the borrower may repay the loan during this period. This period is called Date of Final Adjustment.

DEMAND FINANCE
PURPOSE Demand finance is usually given for the financing of new Projects. For example, if a person wants to open the Floor mill or textile mill, he can get the demand finance from the Bank. MODE OF FINANCE Demand finance is given in installments to the borrower. First installment is given to purchase the land, then second installment is given for the construction of building and finally the remaining amount is paid to the supplier to install the Machinery.

88

SECURITY The Bank requires the following types of securities. Primary Security No primary security is required as the finance is given for the new projects and the Borrower Company has no existing stocks with it. Principle Security Like running and cash finance, some collateral security is required as principle security. This collateral may be land, building or machinery. MARK-UP Normally 14% but negotiable. PERIOD Demand finance is usually given for the long-term period e.g. for two years, five years or even up to fifteen years. REPAYMENT SCHEDULE The repayment of loan is made in installments. A grace period of one year is given, after the maturity of loaning period. But this grace period can be extended to two years. The installments may be quarterly, semi annually or annually. The markup is also included in these installments. IMPORTANT FEATURE Demand finance is given on the basis of debt equity ratio which 40-60. It is standard ratio. It means that a borrower can finance 60 percent of its project cost through demand finance scheme. But the remaining 40 percent should be financed himself.

HOUSING FINANCE
PURPOSE The Bank extends Housing Finance to customers, under the scheme envisaged by the State Bank of Pakistan. The housing finance can be given for the following purposes:

89

 For the construction of new houses or flats. For the purchase of new houses or flats. SECURITY The housing finance is given to the customers against the mortgage of land or building. The mortgaged land may that one on which the hose is to be built or it may be any other. LIMIT The housing finance can be made to a person once in his or her lifetime. The finance is considered for an amount of more than Rs. 150,000 and up to Rs. 300,000. The finance is admissible maximum up to 60% of the value of the house or flat to be constructed or purchased. PERIOD The housing finance is given for a maximum period of 15 years. REPAYMENT The hosing finance is repayable in the installments and has to be paid back during the maximum period of 15 years.

AGRICULTURAL FINANCE
PURPOSE The Bank under agricultural financing scheme envisaged by the State Bank of Pakistan extends short, medium and long-term credit. The Bank gives two types of credits, i.e. farm and non-farm credit. Farm credits are extended for production (inputs) and the development purposes. Non-farm credits are allowed for livestock (goats, sheep and cattle), poultry, factory including social forestry and fisheries (inland) and marine excluding deep-sea fishing).

90

LIMIT Agricultural finance is given on the basis of cultivated area. Bank normally advances Rs. 2,000 per acre (cultivated). But this amount varies from crop to crop i.e. different for "Rabbi" and "Kharif" crops. PERIOD The agricultural finance is given for both short and long-term periods. RATE OF MARKUP For short-term agricultural finance the rate of markup is 11%. For long term and high value financing, the rate is normally 14% but it is negotiable.
TYPE OF LOAN Production loan (including sugar cane loan) up to the maximum of Rs. 25,000/Production loan (including sugar cane loan) above Rs. 25,000/Production loan (including sugar cane loan) up to Rs. 50,000/- against guarantee of two creditworthy parties. Financing against guarantees of Processing Units Tractor Other development loans MARK-UP 12% per annum 12% per annum 14% per annum 14% per annum 11% per annum 13% per annum

Selection Criteria be a Pakistani & have a CNIC preferably be an account holder with ABL have a permanent residence and be a self-cultivator not be a defaulter of any other Financial Institution / Clear ECIB be able to produce proper securities and be reputable in the business have Repayment Capacity Amount of Finance Value of agricultural land/Pass Book 91

 50% of Residential/Commercial property in municipal limit. 80% of PIU or 50% of last 3 years average Sale Price or Market Value 90% of DSCs / SSCs / TDR / SNDR Insurance Insurance facility is available for all Farm and Non Farm Loans except orchards. Insurance premium amount of subsistence holding farmers availing loans for following 5 major crops will be reimbursed by the Government of Pakistan. Maize Wheat and Rice / Paddy Cotton and Sugar Cane

INTERNATIONAL DEVELOPMENT AGENCY FINANCING (IDA)

PURPOSE International Development Agency provides finances to the different Banks in Pakistan to encourage the industry. These Banks then forward this finance to their customers. Allied Bank also has such financing scheme. IDA gives this finance on confessionals rates, normally ranges from 6% to 7%. ABL then gives this finance to its customers. SECURITY The Bank gives this finance by mortgaging land, building or machinery. MARK-UP The Bank charges 14% markup on this financing. From this 14%, SBP charges 2-3% from the Bank. PERIOD IDA finance is given for long term basis. The maximum period of this financing is 10-12 years.

92

REPAYMENT Repayment is made on installments, which may be semiannually or annually.

DEMAND FINANCE TO STAFF

PURPOSE This scheme has been started to give the benefit only to the employees of Allied Band Limited. If any employee of ABL wants to start a new project then he will be given the demand finance on the priority bases. SECURITY Some collateral security is required such as land building or machinery. MARK-UP AND PERIOD The Mark-up is less than 14% but not fixed. The demand finance to staff is given for long term period. It may be up to 15 years. REPAYMENT SCHEDULE Repayment is made in installments. The installment may be quarterly, semi annually or annually.

ALLIED EQUITY BUILDING PLAN

PURPOSE The equity building plan has specially been designed to help accelerate the industrial pace in the country. The plan is primarily designed to provide financial assistance to those professionals, technocrats and overseas Pakistanis who are planning to set up their own industrial units. Through this executive plan the investors will be able to build up their 30% to 40% equity over a specific period of time and after taking 60% to 70% from the Bank, will be able to put up their own industrial projects. SALIENT FEATURES

93

Equity investment can be made both in local as well as well foreign currency. Plan periods are 3 years and 5 years in local currency and 18 months 24 months in foreign currency. Minimum monthly deposit in local currency for 3 years plan would be Rs. 8,000 and for five years Rs. 5,000. For both plan periods the monthly deposits would be acceptable in the multiple of Rs. 1,000. Minimum monthly deposit in U.S. Dollars would be $ 680 and $ 515 for 24 months and 18 months plan period, respectively. Similarly, minimum monthly deposit in Pound Sterling would be 360 Pounds and 280 Pounds for 18 months and 24-month plan period, respectively. ADVISORY FACILITY The Bank will also extend on request of the investors consulting/advisory facility in selection of project free of cost. RATE OF RETURN The deposit installments for the first year will be placed in PLS-SB Deposit Account and thereafter transferred to PLS-TDR Account for the remaining period of investment. The rate of return on PLS-SB and PLS-TDR will be in accordance with the half yearly rates of profit declared by the Bank.

FINANCE FOR GOVERNMENT COMMODITIES OPERATIONS

The Bank gives finance to the Government for purchase of different commodities. The Government then sells these commodities and repays the loan to the Bank. For example Bank may give finance to the Government to import wheat and when Government sells this wheat to the floor mills, it repays the loan to the Bank. In addition to above mentioned financing schemes, the following finances schemes are also available, which will be discussed in Foreign Exchange Department. Export Finance

94

 Finance Against Foreign Bills Negotiated Finance Against Foreign Bills Purchased Finance Against Documents (Sight) Finance Against Imported Merchandize Finance Against Inward Bills purchased

FINANCE AGAINST LOCALLY MANUFACTURED MACHINERY

PURPOSE This scheme has been started by State Bank of Pakistan. The basic purpose of this scheme is to encourage the local manufacturers and to boost up the local industry. Usually people buy the machinery of out side the country due to non-availability of that in Pakistan. To produce the machinery in the Pakistan this scheme is introduced so that people will buy it from their own country. SECURITY Land, building and machinery are mortgaged with the Bank. MARK-UP To encourage the investors the Mark-up on this scheme is comparatively very low, which 12.0%.

PERIOD The maximum period for which this finance is given is 8 years. A grace period for the repayment of loan is also given which is maximum of two years. REPAYMENT The repayment of loan is made in installment, which may be semi annually or annually. The amount, which the ABL finances to borrower, is refund to it by SBP. The ABL acts only as the Sponsor. So the periodic installment of the repayment of the loan is paid back to SBP.

95

PROCESS OF GIVING THE FINANCE TO THE BORROWER

According to the scheme the total finance is not given to the borrower once. Instead of it, he is given the finance in three different installments and these installments are subjected to the installation of the machinery. Allied Bank Limited has no recognized supplier (manufacturer of machinery). So the client himself goes to any supplier, gets quotations of machinery from him and shows these quotations to the Bank. Then the Banks Engineers visit the supplier and examines his capability of installing the machines. After his approval, the quotations are accepted and loan is sanctioned to the borrower. As a first installment, a cheque of normally 30% of total finance is given to the borrower. In response the supplier installs the 50% of machinery. After this, another cheque of 40% of total finance is given to the borrower and at this time the supplier installs the remaining 50% of machinery. The remaining 30 % of finance will be given to the borrower when the project starts working.

DEMAND FINANCE AGAINST FOREIGN CURRENCY ACCOUNT

PURPOSE To attract the foreign currency, ABL has offered this scheme. This scheme is useful for those Foreign currencies account holders who dont want to in cash their currency, but at the same time want to start a new project. So they can get the required finance against their foreign currency.

SECURITY The security for this scheme is the foreign currency of the borrower, which is prevailing in his foreign currency accounts. The Bank advances a certain percentage of the foreign currency as loan after keeping its margin. The Bank charges a Lien on this Foreign Currency Account of the borrower. MARK-UP Mark-up of this scheme is 13.0%.

96

PERIOD Demand finance against foreign currency is given for one-year period. REPAYMENT SCHEDULE No installments are made on the repayment of the loan. After the completion of the loaning period (i.e. one-year) his whole amount along with the markup is paid back.

FINANCE UNDER SMALL AND MEDIUM ENTERPRISES

The Commercial and Retail Banking Group (CRBG) caters to the needs of commercial entities and small and medium enterprises. A dedicated team of Relationship Managers first identifies the specific needs of each customer segment, then designs and delivers a facility package, which is in conjunction with those needs, and provides customers the full support and opportunity to take advantage of the various business prospects available in the market. The Bank advances the loan of minimum Rs. 25,000 and of maximum Rs. 50,000. The loan is repayable in installments which may be quarterly or semiannually. If some one wants to start a very small business, e.g., a shopper making factory, a plastic toys making factory, etc, then he can take finance from the Bank through this scheme. The maximum limit of finance given by this scheme is of Rs. 300,000. Following are the main credit facilities offers by ABL.

Export Refinance Facility

This is mainly the same as RF/CF, but as per the Terms and Conditions set by SBP, is meant exclusively for exporters.

RF / CF
These are short term credit facilities (maturity of up to one year) lent to customers to meet their day-to-day business/working capital requirements and finance their inventories, receivables, etc. Generally, in addition to collateral security, these facilities also entail security in the form of hypothecation of stocks and receivable/pledge of stocks.

97

Foreign Bill Purchase/Bill Discounting Facility

This loan/facility is provided to exporters against their export bills under LC and a contract to facilitate their cash flow, while they are waiting receipt of their payments.

LC (Sight / Usance)
This facility allows importers to import goods and machinery.

Fim / Fatr
These facilities allow customers to finance imported goods against Pledge & Trust Receipts, backed by collaterals.

Demand Finance Facility

This is a medium/long term credit facility available to establish new projects for BMR and capacity expansion with a repayment term of more than one year, which can be paid back in installments. This facility meets clients long term needs such as, financing factory constructions or machinery expenses.

Inland LC (Sight/ Usance)

This facility allows customers to purchase commodities within the country.

Letter of Guarantee (LG)

On behalf of the customers, the Bank issues a guarantee in favor of the beneficiary, against the performance of a particular job/contract, within a particular time.

Import Export
Allied Bank provides highly efficient trade finance services for import/export businesses through a large number of authorized branches where trained and motivated staff is available to handle the business on the customers behalf.

NON-FUND BASED FINANCING

98

The type of financing in which the funds of the Bank are not involved is called "NonFund Based Financing". Under non-fund based financing, the following schemes are available in Allied Bank Limited. Letter Of Guarantee Performance Bonds Bid Bonds Letter Of Credit (Inland) Letter Of Credit (Import)

LETTER OF GUARANTEE
The Bank issues the letter of guarantee in local and foreign currency and thereby undertakes the responsibility on behalf of the customer for the debt, default or miscarriage by the customer, whether such requirement is domestic or overseas. There are many types of Letter of Guarantee. Suppose a person wants to purchase pesticides from Pan Pacific on credit and Pan Pacific says to him that we will provide you the pesticides, if you give us the bank guarantee, so that if you will not be able to pay the amount on the specific date, the bank will pay the amount on your behalf. So that person will come to the Bank and the Bank will give him the guarantee after fulfilling its requirements. The Bank also issues the Letter of Guarantee in favor of collector of custom. Suppose person imports some inventory as raw material, but the collector of custom says that this imported inventory is not the raw material but the finished goods. So he charges the custom duty on this inventory by considering it as the finished goods. As the custom duty on the imported finished goods inventory is more than the raw material, so the importer will protest it and the matter is taken to the court.

SECURITY

99

The Bank issues the Letter of Guarantee by either mortgaging the security or keeping the security as collateral. worthiness of the customer. PERIOD Normally the Letter of Guarantee is issued for the period up to 1 year. COMMISSION The Bank charges a commission fee on the issuance of Letter of Guarantee which is o.45% quarterly. Besides this, the Bank may also issue the Letter of Guarantee by hypothecating the stock. The type of security depends upon the credit

PERFORMANCE BONDS
Performance Bond is a type of guarantee which a Bank issues in the favor of technical know how of its customer. Suppose a person engaged in construction, made an agreement to construct a building within six months. Now suppose, if the owner of the building is not satisfied with the technical ability of the constructor and he is not sure that the constructor will be able to construct the building within six months, and then he may ask the constructor to make him available with the Bank guarantee. Now the Bank issues the performance bonds on seeing the technical abilities of the customer and gives guarantee that he will construct the house within a period of six months.

BID BONDS
Bid bond is also a type of guarantee that is issued in support of the customer who is getting a contract from any company. Suppose a person gets a contract from corporation of worth one million and promises to pay the amount of contract in four installments. But the corporation may ask him to give the Bank guarantee. So the contractor comes to the Bank and the Bank issues the Bid bond in his favor and gives guarantee that the contractor will pay the amount of contract. Bid bonds are issued in both local and foreign currency.

100

Letter of Credit (Inland)

The Bank in order to finance commerce and trade extends its prestige financial strength by establishing overseas letters of credit, on behalf of the customers and thereby undertakes to pay the amount stated on the letter of credit or accepts a bill of exchange on behalf of customer, in return for delivery of the commercial and shipping documents.

Letter of Credit (Import)

The Bank, in order to finance trade and commerce within the country establishes inland letter of credit and thereby undertakes to pay the amount stated on behalf of its customer, in return for the delivery of commercial and other documents provided there documents are strictly in accordance with the terns and conditions of the letter of established by the Bank.

RECOVERY OF LOANS
If the loans are not returned within their maturity period, then Bank adopts the following process. First of all the Bank will personally request the customer to repay the loan. After this, first legal notice is sent to the customer. If the customer does not respond to this first legal notice, then after fifteen days the second legal notice is sent to him. In the third step the Bank sue the customer in the court. Two types of courts have been setup under two difference ordinances, especially to hear and decide recovery suits i.e. 1. 2. Special Courts (banking) Banking Tribunals

Special courts were established under the banking companies (recovery of loans) ordinance 1979 to hear allowed interest-based system of Financing.

101

REVIEW OF VARIOUS DEPARTMENTS OF OVERALL ORGANIZATION

Departments

Commerci al And Retail Banking Treasury

Risk Management

Special Audit and Inspection Asset Managem ent

Finance And Corporate Affairs Operation s

Consumer Information Technology Human Resources Compliance and Control & Personal Banking

Corporate Investment Banking Group Corporate Affair Group

COMMERCIAL AND RETAIL BANKING

The Commercial & Retail Banking Group (CRBG) offers a variety of asset and liability-based retail products to its customers. The Groups main focus has been on introducing various financing and investment products for its valuable clientele, and contributing to the steady growth of the financial industry.

102

CRBG consists of 4 geographic groups and is further divided across 27 regions in Pakistan. Each region is responsible for providing a quality service to its own customer-base. CRBG is consistent in lifting the Banks brand image by emphasizing on good customer services and developing commercial assets and a cost effective deposit base. The Commercial and Retail Banking Group (CRBG) focuses of keeping pace with the accelerated growth and development in the banking industry and growing specialization in providing various products and services to variety of target markets. CRBG is consistent in lifting the Banks brand image by emphasizing on good customer services and developing commercial assets and a cost effective deposit base. In recent years, the Group has been working to find alternate ways to bank for customers, and has installed more ATMs to its already strong and largest ATM network. During 2008, CRBG also saw a phenomenal growth of 28 percent in liabilities. The Group launched effective campaigns and showed 13 percent growth in Current Accounts & Saving Accounts (CASA). Besides an addition of senior level resources to the team, more Management Trainee Officers were also hired into the Group to bring in more quality and skill. Major objectives of the group are: Decentralization with appropriate empowerment of the team members directly dealing with the customers the serve them in more efficient and effective manner. Evolve a business plan taking into consideration the network, its geographical spread and the available business opportunities in the given areas. Facilitate the agricultural sector and associated ancillary business. CRBG is consistent in lifting the Banks brand image by emphasizing on good customer services and developing commercial assets and a cost effective deposit base.

TREASURY
The Treasury group is actively involved in fund management through transaction in inter bank market and management of investments in government securities and equities. The group is also responsible for managing regulatory reserve requirements.

103

The group has qualified and experienced professionals who have specialized expertise in treasury functions, which they utilize to maximize the returns. The group is divided into: Money Market Desk Capital Market Desk Foreign Exchange & Treasury Market Unit

RISK MANAGEMENT
Risk Management is an integral part of ABL business and activities, with the key responsibility to identify, analyze, monitor, review and report the principal risks to which the Bank is exposed. The Bank has revamped its risk management process, and established a Risk Management Group (RMG) in June 2006. The primary objectives of Risk Management Group (RMG) are to understand the risk profile of various businesses, to initiate and propose risk policies, risk measurement methodologies and risk limits in order to aggregate and control credit, market and operational risks across the Bank. In pursuance of these objectives, RMG has taken up the challenge to faster a proactive risk culture by creating the following risk management functions by business specialization: Credit Risk Operational Risk Market Risk Credit Administration Risk Architecture Portfolio Management All these functions are operating in tandem to improve and maintain the health of the lending portfolio and keeping aggregate risk within the Banks overall risk taking capacity.

104

The Risk Management Group continues to promote sound business decisions consistent with the Banks risk tolerance levels and drives the maximization of longterm shareholder return.

AUDIT AND INSPECTION

In the context of changes in regulatory requirements, the role of internal audit has become very pivotal as a second line of defense against financial indiscipline and mismanagement besides an integrated system of internal control. As a part of good governance practice, the Audit and Inspection Group primarily performs its functions independent of the management and reports to the Audit Committee of the Board of Directors. To transform internal audit function of Allied Bank Limited in to an IT enabled risk based audit and management consultancy function providing value added services and management consultancy to the board and senior management. ABL mission is to provide an independent, objective assurance and consulting services to management designed to add value and improve operations of the bank, dedicated to providing assistance to the management in effectively and efficiently accomplishing its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes. ABL is at the threshold of change in respect of its administrative infrastructure, technology base, management philosophy, and control environment under the leadership of new management of the Bank. A recent landmark achievement in this dimension has been the de-layering / restructuring of field organization undertaking operational activities of the Bank The Audit and Inspections group is expected to perform a wide range of audits, which interlaid include the following:

105

 Financial Audit Operational Audit Compliance Audit Management Audit Information System Audit

SPECIAL ASSET MANAGEMENT

Special Asset Management (SAM) focuses on reducing level of Non-Performing Loans to an optimum level within minimum possible time. It persuades defaulting borrowers through constant and regular follow-ups by way of dialogues aiming at amicable settlements. The structure of SAM group is as follows: Central SAM Wing Legal Affairs Wing SAM Branches

FINANCE AND CORPORATE AFFAIRS

Finance Group plays a central role in strategic decision making, transparent financial reporting and enhancing the economic value of the Bank. It also provides support to the business groups in performance analysis and launching new products and initiatives. Taxation Corporate Affairs Planning and MIS Financial and Regulatory Reporting

106

OPERATIONS
Operations Group, apart from re-engineering the existing procedures to ensure safe and smooth conduct Banks operational activities also focuses on supporting the fields offices in pursuit of their business objectives and goals while maintaining adequate controls from a risk perspective. Operations Group is divided into the following five areas Alternative Delivery Channels provides innovative and value added I.T. based solutions to the Banks clients. Branch Operations supports the field functionaries through procedural manuals, branches rationalization, fully automated inter branch & nostro accounts reconciliations. It also provides support Hajj & Zakat matters. During 2006, it has developed a number of new procedural manuals including ATM, Allied Online, Remittances, Cash & Teller etc. Treasury Operations supports Treasury front office in settlement of its trading/investment activities in Foreign Exchange, Money Market and Stock Market besides providing operational support in cash management to the branches and other business areas of the Bank. Establishment caters to the Banks requirements for printed stationary, operating and fixed assets, insurance and security arrangements at the central office level. Engineering is responsible for the purchase of new properties and

construction/renovation of the existing/newly hired premises

INFORMATION TECHNOLOGY
Allied Bank is committed to serving its clients with banking solutions based on state of art technology. Over the past few years, the Bank has taken strategic decision to concentrate on technology. Going into this direction the Bank has recruited highly experienced professionals to accomplish the Banks technology requirements. 107

ABL has a separate Group for Information Technology which looks after the entire banks automation. The banks major achievement in automation is that 100% branches are computerized and inter-connected and these branches offer the customers full range of online banking services. The bank also offers most of the currently sought after technology based products including Internet Banking. The IT Group is presently structured in four areas namely: Operations Core Banking T24 Software Services Office Automation / Technical Services But with the launch of the Core Banking project driven from our Head Office at Lahore, the IT Group will be re-structured very shortly. A complete revamping of the IT Group is underway to cater to the expansion of activities within the IT Group and to create capacity for the Core Banking Project. Moreover, the IT Group will extend its support to the newly created Regional Offices as well. The new IT Organization is expected to grow both vertically and horizontally and a substantial number of new hiring will take place to fill the gaps within the new organization chart

HUMAN RESOURCES
Human Resources (HR) Group focuses on the objectives of developing, implementing, and supporting programs and processes which add value to the Banks human assets, leading to improved employee welfare empowerment growth and retention, while being committed to its management and overall satisfaction for its customers, employees and shareholders. In line of these objectives, the Group is divided, with major functions, among following: Personnel Staff Finances and Salary

108

 Disciplinary Action Cases Management Development Employees Funds and Benefits Planning and Performance Management

Recruitment
After the Privatization of ABL central office at Karachi is dealing with the appointments to different officers posts. And the central office also fills other executive posts. For certain posts the executives also have right to appoint the qualified persons. But the main criteria of appointment are by test and interviews. Allied Bank has a criteria already prepared for the appointments of employees. Criteria The candidates must be the citizens of Pakistan and the state of Jammu and Kashmir should not be more than 25 and less than 18. However in certain cases the age can be relaxed. Normally the citizen for under developed areas of Pakistan has the age relaxation. The executives also have the power to employ an over age person etc.

COMPLIANCE AND CONTROL

Compliance and Control Group was formed to oversee the implementation of all the relevant laws, regulations and procedures of the Bank, besides, making the Internal Controls more effective so that the branches operate within the framework of the internal and external rules and regulations. ABL is committed to comply with all the Laws, Rules and Regulations affecting banks in Pakistan. Compliance Group has the prime responsibility to ensure adherence to all rules & regulations as well as policies & procedures across the institution. Our objective is to create a good compliance culture by inculcating values from top to the bottom that encourage compliance in all our business activities. In order to ensure independence of the functions from the business activities and in line with the requirements of the State Bank the Chief Compliance Officer reports directly to the CEO.

109

The basic purpose of new compliance structure is to safeguard ABL throughout its business cycle and to protect its reputation against any compliance risk / lapses. The Compliance Group places significant emphasis on businesses to adhere to legal, regulatory and internal policies of the Bank, and conduct periodic self-testing to ensure compliance to these requirements. Compliance Group, through Group Heads / Regional Heads and Compliance Officers, acts as an enabler and facilitator to achieve desired compliance status in the Bank. We also conduct Compliance Testing exercises to ensure adherence to these regulations and policies. The Compliance Group has been re-structured effective February 2009 and is now operating through following offices:-. GC-Compliance Group at Central Office Karachi. GH-Compliance - North at Rawalpindi. RH-Compliance Peshawar. (under jurisdiction of GH-Compliance-North) GH- Compliance - Central-I at Lahore. GH- Compliance - Central II at Multan. GH- Compliance - South at Karachi RH-Compliance Quetta (under jurisdiction of GH-Compliance-South) The Group will perform the following functions in the revised set up: Compliance functions as required by SBP in terms of PRs. i.e. effective Compliance of: Guidelines for KYC. SBP Prudential Regulations Anti Money Laundering Laws and Regulations. Relevant Provisions of existing Laws and Regulations. Monitor and report suspicious transactions to President / Chief Executive Officer of the bank/DFI and other related agencies. Compliance will be responsible to ensure adherence to banks own policies. The Compliance Group will visit the branches through a structured Regulatory

110

Controls Check list which has been finalized. This list contains all the points resulting in violations to Banking Company Ordinance 1962, Prudential Regulations, SBP directives and other laws listed by SBP in Inspection Report. The periodical visits will be on quarterly basis.

Implementation / Rectification of Management Audit Reports of COK/ HOL based groups. SBP Inspection Coordination during inspection of branches, post report compliance monitoring and all other related matters. Compliance / tracking / monitoring of Management Letters of external auditors, SBP letters, Internal Audit, FMU and all other issues from various agencies shall be taken care of and major areas of concern shall be discussed in MANCO for resolution. Compliance risk reviews at all the groups of the bank and to ensure that there is no regulatory violation across the bank. Sign off all the policies, product programs, procedures and manuals initiated by all the groups of the bank and vetting of circulars. Management / coordination of Internal Control (COSO) project. Off-site monitoring through the Discoverer facility, for accounts opened / CNICs verification / monitoring / tracking information/ transactions being reflected in the statement of Affairs etc. On-site monitoring through periodical visits for physical verification and compliance testing in order to ensure compliance of SBP and our banks instructions as well as policies/procedure/practices.

111

Today the bank is proudly heading towards its goal of putting in place the COSO framework and to be compliant with the international accounting standards of PCAOB. A detailed exercise is in progress through a reputed consultant to align all the processes with internationally accepted standards. These controls will facilitate the bank in achieving its objectives and implementing the best international practices in its journey to success. Compliance Group is playing an effective role as a Coordinator for implementation of the framework.

CONSUMER & PERSONAL BANKING GROUP

The consumer portfolio, comprising the debit card, credit cards, auto loans, personal loans and mortgages will be established phase by phase. However, we are confident that, with our strengths, coupled with Allied Banks largest network of online branches, a superior technology platform and a big customer base, CPBG will contribute immensely towards the Banks profitability. The consumer portfolio, comprising the debit card, credit cards, auto loans, personal loans and mortgages will be established phase by phase. However, we are confident that, with our strengths, coupled with Allied Banks largest network of online branches, a superior technology platform and a big customer base, CPBG will contribute immensely towards the Banks profitability.

CORPORATE INVESTMENT BANKING GROUP (CIBG)

The Corporate Investment Banking Group (CIBG) holds the Banks loan portfolio and enjoys a leading position in corporate lending in the country. It offers a wide range of financial services to medium and large sized public and private sector entities. These services include, providing and arranging tenured financing, corporate advisory, underwriting, cash management, trade products, corporate finance products and customer services on all bank related matters. The Bank has played a key role in the countrys economic growth by providing a vast amount of funds to large industrial and corporate sectors of the economy. And

112

because it has played a big part in major investment and corporate banking transactions, Allied Bank is considered one of the top investment banks in the country today. Corporate & Investment Banking Group consist on following four sub departments: Corporate Banking Group Corporate Leasing Group Investment Banking Group Financial Institution Group

Corporate Banking Group

CBG offers a wide range of financial services to medium and large sized public and private sector entities. CBG has expertise in providing exemplary customized and personalized service to its Corporate Customers under the Relationship Management concept, which is basically catering to all the customer needs through One Window operations. CBG has strategically placed its presence in all major corporate hubs of the country namely Karachi, Lahore, Islamabad, Multan and Faisalabad. It presently enjoys a leading position in corporate lending in the country and has played a key role in economic development of the country by providing large facilities, long term, short term, working capital etc in all the key sectors of the economy. Despite being a late entrant in Corporate Banking, CBG has not only able to position itself as one of the prime banks for the existing clientele but also created and cemented new relationships with several top tier names in the market.

Corporate Leasing Group

Allied Bank started lease operations when it integrated with Ibrahim Leasing Limited. Facilities include leases for machinery, commercial vehicles and equipments. The Bank provides lease facilities to corporate and commercial clients in all industrial enterprises for balancing, modernization, replacement and expansion schemes . Leasing is a popular mode of financing because of its distinctive features like tax 113

shield, preserve working capital, easy documentation and less processing time. Lease applications are processed at all Bank branches in Pakistan.

Investment Banking Group

ABL-IBG was established in 2006 and focuses on the Investment Banking market. It has the highest number of Successful Arrangement and Participation in Key Privatization & Acquisition Financing Transactions achieved by any Investment Banking Group in Pakistan. It has already penetrated the investment banking market by taking the lead in a number of major transactions and arranging funding of more than US$ 6 billion to date. ABL-IBG is reputable for building business on the basis of strong corporate relationships and showing a clear understanding of Structured Finance. The team consists of dedicated and young professionals with extensive experience, who provide various Advisory & Arrangement Services to Corporate Clients. ABL-IBG has played an active role in Debt Origination and Distribution through innovative and tailor made solutions for its target customer base. It is also well known for having successfully completed mandates in a timely manner, and is regarded as one of the most active Investment Banking entities in the country today.

IBG Range of Services

114

Financial Institutions Group

ABL Financial Institutions team shows a strong commitment to product and business development. Their client portfolio includes top domestic names, important regional players, top global financial institutions, covers banks, NBFIs, leasing companies, modarabas, microfinance, the insurance sector and specialist money transfer companies. ABL dedicated team of Financial Institution professionals brings a wealth of local and international expertise to all facets of this complex industry, and can serve as your single point of contact for a comprehensive set of products and services, including: Advising Payments Guarantees Negotiation Discounting Confirmation 115

 Trade finance L/C Issuance Reimbursement Inbound trade services Payment and collection solutions Bilateral Key Exchange Arrangements International remittances with immediate processing capability As their institutional customers face continuing challenges, they look to ABL for comprehensive transactional banking solutions, greater operational efficiency and broad geographic coverage.

CORPORATE AFFAIR GROUP

Corporate Affairs Group is responsible for compliance of all legal and statutory corporate requirements under Corporate and Banking laws and Regulations. Besides arranging Board of Directors and Shareholders meetings, it co-ordinates meetings of the Strategic Planning & Monitoring Committee of the Board, and Management Committee. During the year 2006, Corporate Affairs Group coordinated a number of activities related to change in organizational structure, corporate identity and formation of committees of Board and Management Shares Wing a part of Corporate Affairs manages shareholders matters and coordinates with the Shares Registrar for the transfer and issue of Banks shares.

Function

Corporate Affairs Wing

116

 To deal Corporate matters with Security and Exchange Commission of Pakistan, Company Registration Office Lahore. Stock Exchanges and State Bank of Pakistan. To provide informations to external Auditors and SBP Auditors To assist Company Secretary in all Corporate and Board Affairs To assist Company Secretary in implementation of the decision of the Board To keep liaison with Govt. nominee and non-employee Directors of the Bank To monitor corporate cases under proceedings at Higher Courts against the Bank To obtain approvals through circulation on emergent proposals from the Directors To assist Group Chief in carrying out different assignments entrusted by the President To arrange meetings of the Management Committee and prepare agenda for such meetings To arrange meetings of the Board of Directors and preparation of the Agenda for such meetings

To provide information to Credit Rating Agency and co-ordinate with them in the process of Entity Rating To co-ordinate with Share Wing and Finance Group for arranging AGM/Extra Ordinary General meetings To arrange meetings of the Strategic Planning & Monitoring Committee and prepare Agenda for such meetings To maintain record of Board of Directors, S. P. & M. C. Other Committees 117

along with former Executive Board To affix company seal on Powers of Attorney, Shares and other documents as & when required and keeping its record

Shares Wing
To maintain the record of ABL shares To supervise Government Compensation Bonds To coordinate with Registrar and To arrange AGM / EOGM To issue new share certificates for lost, stolen and transfer of shares To liaise and correspond with Central Depository Company of Pakistan Limited To make correspondence relating to ABL Shares with Employees / Legal Wing / Registrar / shareholders To obtain approval through circulation on the cases from the Corporate Affairs Committee on lost, stolen, transfer of shares To make arrangements for floatation of shares & TFCs and payment of dividend on behalf of public limited companies

STRUCTURE OF FINANCE DEPARTMENT

The structure of Finance Department working in Central Office Karachi is described below.

Board Of Directors

118 President (CEO)

Group Chief Finance

Group Head Taxation

Group Head Financial & Regulatory Reporting

Group Head Planning & MIS

Regional Heads

Branches

Number of employees working in the Finance Department: 40 The cadre wise detail of the employees is given as under:

Group Chief Group Head Financial analyst Officers (MG-9) Officers (MG-10)

01 01 02 08 10

119

Officer (MG-11) Others staff

07 11

The financial analyst perform analysis of financial reports of the Bank and presents results to the Group Head for observation and taking corrective measures and decision making. The Group Head supervises all financial operational matters of the branches and is directly responsible to Group Chief. All other staff is support staff and performs as per duties lists provided by the Group Head.

FINANCE & ACCOUNTING OPERATIONS

All accounting operations are being done at branch/ unit level. It is computer based accounting operation system as there are large numbers of transactions, which are not possible in manual accounting system. Professionally skilled personnel are doing these operations, computer equipment and computer generated reports, which provide various information for classifying and summarizing the data. The reports generated by all branches are submitted to Finance division for onward consolidation to compile financial results. i.e. periodical financial reports such as Balance Sheet, Profit and loss , Cash flow statement etc.

Accounting System Of The Organization

The accounting system of the organization consists of double entry system in which contra vouchers are passed for each entry in the system reflecting its credit and debit impact for each head of account being involved for accomplishment of a transaction. In the branch the entry officer enters his transaction by vouching contra entries and same are authenticated by branch manager operations or any other authorized officer after ascertaining its genuineness and correctness. The system then automatically 120

segregates them according to Income/Expenditure and Balance Sheet which are executed at the end of day after completion of all transactions from each terminal. The print of these reports is taken at day end step on daily basis in order to check wrong impact of any entry and necessary correction entries are passed on next working day after calling all the working of the day by the branch manager operations.

Finance System Of The Organization

From the accounting information, the finance department makes decisions to invest the funds generated. These investments are in corporate sector, in capital and money markets. The treasury department and shares department makes decisions about investment of funds generated.

Functions Of Finance Department

The main functions of Finance Department in the ABL are summarizing the business transactions recorded and classified by the branches and communicate the information contained in the system to decision makers. It formulates the annual budgets such as capital budget, cash budget etc. It provides information about economic resources, claims to resources and changes in resources and claims. It provides information useful in assessing amount, timing and uncertainty of future cash flows. It provides information useful in making decisions to all functional departments of the Bank such as Administration Department to recruit staff at low cost, to Operation division to minimize the operational cost of the organization, to Marketing department to market low cost deposit and sell the products which give more return and similarly to all other departments which play pivotal role in achieving organizational goals.

The Role of Finance Group

Finance Group plays a central role in strategic decision making, transparent financial reporting and enhancing the economic value of the Bank. It also provides support to the business groups in performance analysis and launching new products and initiatives.

121

Finance Group has three major areas: Planning and MIS arm of the Finance Group translates financial and operational data into strategic information for an efficient and effective decision making. Financial and Regulatory Reporting arm of the Finance Group provides timely, relevant and reliable information to the shareholders, regulators and other stakeholders while following the statutory requirements and international best practices. Taxation wing of the Finance Group manages the Bank wide tax matters and endeavors to bring tax efficiency while complying with the tax laws.

Practical Illustration: In the following illustration, I will explain how the accounting information generated, recorded and used.
Suppose Allied Bank provided a small finance to the M/S ABC Company of the value of Rs. 03 millions. So, Bank officer will assess either the documentation (Collateral) of this facility is overall complete or not. The bank officer / credit officer will complete the file of the company whose the bank provided the facility of small finance. After this the credit officer will record the data of the company in the Account register in manual form and also recorded in the software of the company. The credit officer will include the necessary information about the concerning party in the account register and in the software of the bank. The bank will provide the account number and cheque book to the party. The party will withdraw the amount from the bank as per demand. In terms of accounting information as in used manner, the credit officer or branch bank will provide the list of Advances given to the parties to the Regional level. And at the end of the month, regional level branch collects all the advancing parties in a systematic way from all its

122

branches. The region of that bank will send this document to the head office as a used document. So this is about how the accounting information generated, recorded and used in the bank.

ROLE OF FINANCIAL MANAGER

Almost every firm, government agency and other type of organization has one financial one or more financial managers. Financial managers oversee the preparation of financial reports, direct investment activities, and implement cash management strategies. Management also develops strategies and implements the long term goals of their organization. The duties of financial managers vary with their specific titles, which include controller, treasure or finance officer, credit manager, cash manager, risk and insurance manager and manager of international banking. Controllers direct the preparation of financial reports, such as income statements, balance sheets, and analyses of future earnings or expenses, that summarize and forecast the organizations financial position. Controllers also are in charge of preparing special reports required by regulatory authorities. Often, controllers oversee the accounting, audit and budget departments. Treasurers and finance officers offers direct the organizations budgets to meet its financial goals. They oversee the investment of funds, manage associated risks, supervise cash management activities, execute capital raising strategies to support a firms expansion, and deal with mergers and acquisitions. Credit managers oversee the firms issuance of credit, establishing credit-rating criteria, determining credit ceilings, and monitoring the collection of past due accounts.

Financial mangers play an increasingly important role in mergers and consolidations and in global expansion and related financing. These areas require extensive, specialized knowledge to reduce risks and maximize profit. Financial managers

123

increasingly are hired on a temporary basis to advise senior mangers on these and other matters. In fact, some small firms contracts out all their accounting and financial functions to companies that provide such services. The role if the financial manger, particularly in business, is changing in response to technological advances that have significantly reduced the amount of time it takes to produce financial reports. Financial managers ideas on how perform more data analysis and use it to offer senior mangers ideas on how to maximize profits. They often work on teams, acting as business advisors to top management. Financial mangers need to keep abreast if latest computer technology to increase the efficiency of their firms financial operations. The role of financial managers in helping create new business models should encompass the following components and activities: Providing the data and financial insights which underpin the creation of new business models Specifically focusing on the financial organization to develop and enhance business acumen and to use it in the development of new business models Pressing the organization to assess, develop and leverage managers with high business acumen, who may or may not reside within the financial function Redesigning both the financial and the broader organization to leverage organizational assets - financial and otherwise but including human capital assets - to have the most immediate impact on supporting the enhancement and creation of new business models

Chief financial officers (CFOs)

Chief financial officers (CFOs), for example, are the top financial executives of an organization. They oversee all financial and accounting functions and formulate and 124

administer the organizations overall financial plans and policies. In small firms, CFOs usually handle all financial management functions. In large firms, they direct these activities through other financial managers who head each financial department. CFOs must be prepared to support new organizational structures and emerging operational models if they wish to achieve a position of leadership or retain parity. They must align their financial resources with corporate objectives and take a strategic approach to financial management to both enable enterprise growth and support business change. And, they must assess their financial reporting capabilities and procedures to make sure they conform to the corporate governance and compliance requirements of multiple countries.

USE OF ELECTRONIC DATA IN DECISION MAKING

Use of electronic data in the fast and speedy period, every one in this world wants quick and accurate result. So different sectors departments and companies use electronic data for decision-making. The Bank has comprehensive Management information system (MIS) from where the management takes data to control and make decisions about business i.e. to observe daily fluctuations in deposits, advances, number of accounts and borrowers at particular point of time. The data is updated daily automatically on the site. The management can take corrective measures plus controls the business strategy. The business promotion and enhancement decisions are taken by the use of electronic data from use of electronic sources such as e- mails, faxes, internet etc. The LINUX, UNIX AND COBOL, software is being used in the Bank.

The Bank has an information Technology division who are providing IT services to the branches. The data from branches is transferred through on line to Head Office through executing Day End steps which have given to all branches who performing

125

successfully. The computer generated reports are then forwarded to each division for their study and necessary action. The commonly referred to as a cycle of inquiry illustrates the basic steps in the application of data to inform instructional decision-making.

Strategic Management Executives & Directors Decisions Information

Tactical Management Business Unit Management & Self Directed Teams

Operational Management Operating Managers & Self Directed Teams

SOURCES OF FUNDS
The sources of funds in Allied Bank Ltd are share capital, Reserves and liabilities 126

created from deposits collected from customers and borrowing from financial institutions. The funds mobilized are from following sources. Corporations Autonomous bodies Govt. enterprises and departments Commercial banks and non banks institutions Individuals (self employed, salaried persons, and private individuals) from corporate bodies The last five years figures are given as under: (Rs. In Million) Sources of Fund Share Capital Share Premium Reserves LIABILITIES Borrowings Deposit Accounts
YEAR 2005 YEAR 2006 YEAR 2007 YEAR 2008 YEAR 2009

4405 10640 717

4489 4316 1377

4489 4316 1817

5386 3419 2632

6464 2341 3463

12538 9664 18410 22934 27778 126392 161410 206031 263972 297475

Analysis Share capital is in continuous increasing trend from 2005 to 2009. This increase is due to condition enforced. By SBP for maintaining capital adequacy ratio (CAR) and to enhance its financial worth. So the bank has issued right shares as well as bonus

127

shares to general public and its employees. Increased share capital provide a vide margin for fixing per party limit as envisaged in Prudential Regulations. With the increase in balance sheet footings Reserves, deposits and borrowings are also increasing steadily during last five years.

GENERATION OF FUNDS
The funds are generated in shape of interest income earned by advances portfolio of branch , non interest income from commission , brokerage , other miscellaneous heads and investment in different sectors of economy such as corporate investment in shares, NIT units, Mutual Funds, Ordinary Shares of listed Companies and Modarabas, Pakistan Market Treasury bills, Pakistan Investment Bonds, TFC, WAPDA Bonds and Mudaraba. The funds generated in last 5 Years are mentioned below: (Rs. In Million) Generation of Fund Interest Income before Provision Interest Income Gross Profit Operating Expense Provision / Taxation Net Profit Analysis The results show that there is increasing trend in each kind of funds generation due to increasing in volume of advances, investments, commission, exchange earning, brokerage fee and dividend income.
YEAR 2005 YEAR 2006 YEAR 2007 YEAR 2008 YEAR 2009

4451 1740 6191 4115 1884 192

7867 1940 9807 4264 2453 3090

10423 2449 12872 5289 3186 4397

11108 3920 15029 6174 4779 4076

14011 4152 18163 8399 5607 4157

128

ALLOCATION OF FUNDS
Bank has invested funds in, SMEs , Agricultural, fertilizer, pesticides , textiles and manufacturing industries, commodity , consumer , corporate ,TFC, debentures ,shares ,bonds , mutual funds and others sectors of economy.
YEAR 2005 YEAR 2006 YEAR 2007 YEAR 2008 YEAR 2009

Allocation Of Funds Cash & Balance with other Banks Lending to Financial Institutions Investment Advances Fixed Assets Analysis

1232 0 1617 5 5765 7 6994 9 2552

18035 5777 45269 11986 6 4721

24745 19050 47156 15170 5 6445

30408 18419 84151 17852 4 7549

25751 15793 84587 223640 11134

Allied Bank allocate majority of funds on administrative expense. Other allocation of funds is other provision or write offs, other charges, total non mark-up or interest expenses and taxes these are major factors where Allied Bank allocates its funds. Funds allocation is increasing gradually with the increase in balance sheet footing.

CRITICAL ANALYSIS DURING INTERNSHIP

During my internship at ABL, I found all the process interesting, innovative ,cohesive ,adventurous and full of learning. All the procedure and process was in accordance

129

with policies of bank and prudential regulations; however some disparities and anomalies in practical were observed: Dress Code was not observed in letter and spirit ATM machine was either out of cash or out of order Insurance of the hypothecated/pledged stocks was arranged by bank officials instead of customers Bank officials are habitual of sitting late and it is not possible to close the working within time due to voluminous transactions Specific timing set for dealing with customer was not observed due to shortage of staff and the small customer were found annoyed for getting late Although complaint register for customers was maintained in accordance with guidelines of SBP but most of the complaints were dealt outside due to prospective complications Newly deployed staff was ignorant of the policy and true procedure and instead taking interest in banks work they are engaged in the process of switching to other banks

ABL FIVE YEARS BALANCE SHEET

Assets Cash and balance with treasury banks and other banks Lending to financial institutions Investments Advances Operating fixed assets Other assets Total Assets Gross Provision against NPL Provision against diminution in investment Total Assets-Net of provision Liabilities Customer Deposits Inter Bank Borrowings Bills Payable

Year 2005 12320 16175 57657 69949 2552 7073 165726 (10464) (336) 154926 126392 12538 2534

Year 2006 18035 5777 45269 119866 4721 7908 201575 (8659) (342) 192574 161410 9694 2449 130

Year 2007 24745 19050 47156 151705 6445 10800 259902 (7672) (203) 252027 206031 18410 2278

Year 2008 30408 18419 84151 178524 7549 11368 330419 (10117) (192) 320110 263972 22934 3494

Year 2009 25751 15793 84602 223640 11134 18399 379315 (10668) (1956) 366695 297475 27778 2952

Other Liabilities Sub- ordinated loans Total liabilities Net Assets/Liabilities Represented by Share capital Share Premium Reserves Un-appropriated profit/(loss) Equity Tier -1
Surplus on revaluation of assets

3206 144671 10256 4405 10640 717 (6314) 9448 808

4472 178025 14550 4489 4316 1377 2732 12914 1636

5119 2500 234339 17688 4489 4316 1817 5608 16230 1458

7332 2499 300231 19878 5386 3419 2632 6971 18408 1470

13636 2498 344340 22356 6464 2341 3463 8537 20805 1550

ABL FIVE YEARS INCOME STATMENT

Year 2005
Mark up /Return/Interest Earned Mark up /Return/Interest Expensed

Year 2006 9892 2025 7867 1471 196 273 1940 9807 4264 5543 15 (694) 4834 (1744) 3090

Year 2007 17216 6793 10423 1636 540 273 2449 12872 5289 7583 9 (913) 6661 (2264) 4397

Year 2008 21201 10093 11108 2258 1585 77 3920 15029 6174 8855 28 (2874) 5953 (1877) 4076

Year 2009 30571 17273 13298 3266 1571 59 4896 18195 8431 9764 82 (3561) 6121 (1964) 4157

Net markup/Interest Income Fee, Commission , Brokerage & Exchange Income

Capital Gain & Dividend Income

5245 794 4451 1520 65 155 1740 6191 4115 2076 (1594) 482 (290) 192

Other Income Non Interest Income Gross Income Operating expenses Profit before provision Donations Provisions- (expense)/reversal Profit before Taxation Taxation Profit/(Loss) after taxation

131

RATIO ANALYSIS OF FIVE YEARS

Current Ratio
Basically this ratio is a measure of liquidity calculated by dividing the firms current assets by its current liabilities Current Assets Current Ratio Calculations 25,751,365 2009 = 30,730,641 30,408,306 2008 = 26,428,040 24,745,022 2007 = 20,688,432 18,034,542 2006 = 12,142,405 12,320,491 2005 = 15,072,793 Year 2005 0.82 Year 2006 1.49 Year 2007 1.20 Year 2008 1.15 Year 2009 0.84 = 0.82 = 1.49 = 1.20 = 1.15 = 0.84 = Current Liabilities

132

It can be seen that the liquidity of the bank is being increased by passing time but in year 2009, as its the last year for my analysis; there is decreases of 0.31 Points from last year 2007. But in year 2006, there is also higher percentage of current ration as compared with year 2009. But in remaining years i-e, 2005 and 2005, the bank has the lower percentage of current ratio. So in last three year from 2006 to 2009, the bank has maintained the good ratio due to available of better current assets.

Quick Ratio
Basically this ratio is a measure of quick ratio calculated by dividing the firms quick assets by its current liabilities. Quick Assets Quick Ratio = Current Liabilities Calculations 23,653,754 2009 = 30,730,641 29,739,857 2008 = 26,428,040 23,039,577 2007 = 20,688,432 14,742,504 2006 = 12,142,405 10,842,519 2005 = 15,072,793 = 0.72 = 1.21 = 1.11 = 1.13 = 0.77

133

Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

0.72

1.21

1.11

1.13

0.77

The capability of liquidity which shows that the trend of quick ratio is also increasing likes current ratio. In year 2005, the ratio of the bank was 0.72, but in year 2005, the percentage decreased in the total bank ratio. In year 2006, the ratio of the bank is increasing by 0.54% from last year 2005. But in year 2007, the ratio of the bank is decreased up to at 0.49 that was decreasing by 0.05% from last year. But in year 2009, the ratio of the bank is decreases by 0.07 points from last year.

Rate of Lending
Basically this ratio is a measure rate of lending calculated by dividing the firms markup, return, interest earned by its investment + advances + lending to financial institutions *100. Markup/Return/Interest Earned Rate of Lending = Investment + Advances + lending to Financial Institutions * 100 Calculations 305,940,020 2009 = 311,247,982 270,784,984 2008 = 21,201,422 210,037,114 2007 = 17,215,507 161,554,412 2006 = 9,892,051 * 100 = 6.12 * 100 = 8.20 * 100 = 7.83 * 100 = 9.83

134

132,980,832 2005 = 5,244,210 Year 2005 Year 2006 Year 2007 Year 2008 Year 2009 * 100 = 3.94

3.94

6.12

8.20

7.83

9.83

The capability of liquidity which shows that the trend of quick ratio is also increasing likes current ratio. In year 2005, the ratio of the bank was 3.94, but in year 2005, the percentage decreased in the total bank ratio. In year 2006, the ratio of the bank is increasing from last year 2005. But in year 2007, the ratio of the bank is increasing up to at 0.49. But in year 2009, the ratio of the bank is increased by the total bank ratio.

Return on Deposit
Basically this ratio is a measure of rate of lending calculated by dividing the firms markup, return, interest expensed by its borrowing + deposits & other accounts * 100. Markup/Return/Interest Expensed Return on Deposit = Borrowing + Deposits and other accounts * 100 Calculations 16,549,601 2009 = 325,252,694 10,019,004 2008 = 286,906,038 6,793,101 2007 = 224,441,749 2,024,659 2006 = * 100 = 135 1.18 * 100 = 3.03 * 100 = 3.49 * 100 = 5.09

171,601,276 794,105 2005 = 138,930,182 Year 2005 Year 2006 Year 2007 Year 2008 Year 2009 * 100 = 0.57

0.57

1.18

3.03

3.49

5.09

The capability of rate of lending which shows that the trend of rate of lending ratio is also increasing likes current ratio. In year 2005, the ratio of the bank was 0.57, but in year 2005, the percentage decreased in the total bank ratio. In year 2006, the ratio of the bank is increasing from last year 2005. But in year 2007, the ratio of the bank is increasing up to at 3.03. But in year 2009, the ratio of the bank is increased by the total bank ratio.

Admin Cost to Deposit

Basically this ratio is a measure of admin cost to deposit calculated by dividing the firms administrative expenses by its deposits & other accounts * 100.

Administrative Expenses Admin Cost to Deposit = Deposits and other accounts * 100 Calculations 8,145,506 2009 = 297,474,543 6,018,346 2008 = 263,972,382 5,290,578 2007 = 206,031,324 * 100 = 2.57 * 100 = 2.28 * 100 = 2.74

136

4,259,532 2006 = 161,907,491 4,108,172 2005 = 126,391,752 Year 2005 Year 2006 Year 2007 Year 2008 Year 2009 * 100 = 3.25 * 100 = 2.63

3.25

2.63

2.57

2.28

2.74

The capability of admin cost to deposit which shows that the trend of admin cost to deposit ratio is decreasing after year 2005. In year 2005, the ratio of the bank was 3.25, but in year 2005, the percentage increased in the total bank ratio. In year 2006, the ratio of the bank is decreasing from last year 2005. But in year 2008, the ratio of the bank is decreasing up to at 0.97. But in year 2009, the ratio of the bank is increased by the comparison 2008 up to at 0.46.

Average Cost of Fund

Basically this ratio is a measure of Average cost of fund calculated by adding the firms return on deposit by its admin cost to deposit. Average Cost of Fund Calculations = Return on Deposit + Admin Cost to Deposit

2009 2008 2007

= = =

5.09 + 2.74 3.49 + 2.28 3.03 + 2.57

= = =

7.83 5.77 5.60

137

2006 2005

= =

1.18 + 2.63 0.57 + 3.25

= =

3.81 3.82

Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

3.82

3.81

5.60

5.77

7.83

It can be seen that the average cost of fund the bank is being increased by passing time but in year 2009, as its the last year for my analysis; there is increases of 2.23 Points from last year 2007. But in year 2009, there is also higher percentage of average cost of fund as compared with previous years. But in remaining years i-e, 2005 and 2006, the bank has the lower percentage of average cost of fund. So in last three year from 2007 to 2009, the bank has maintained the good ratio due to available of better average cost of fund.

Spread
Basically this ratio is a measure of spread of fund calculated by subtracting the firms rate of lending by its average cost of fund. Spread Calculations 2009 = 9.83 - 7.83 = 2.00 = Rate of Lending Average Cost of Fund

138

2008 2007 2006 2005

= = = =

7.83 - 5.77 8.20 - 5.60 6.12 - 3.81 3.94 - 3.82

= = = =

2.06 2.60 2.31 0.12

Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

0.12

2.31

2.60

2.06

2.00

The capability of spread ratio which shows that the trend of spread ratio is increasing after year 2005. In year 2005, the ratio of the bank was 0.12, but in year 2007, the percentage increased in the total bank ratio. In year 2006, the ratio of the bank is increasing from last year 2005. But in year 2009, the ratio of the bank is decreased by the comparison 2008 up to at 0.06.

Comparison of Markup Income to Total Income

Basically this ratio is a measure of comparison of markup to total income calculated by dividing the firms net markup/return/interest income after provisions by its total income * 100. Comparison of Markup Income to Total Income = Net Markup/Return/Interest Income after provisions Total Income * 100

139

Calculations 10,829,279 2009 = 14,998,413 8,467,576 2008 = 12,387,675 9,717,535 2007 = 12,166,603 7,287,314 2006 = 9,226,897 2,913,461 2005 = 4,617,947 Year 2005 Year 2006 Year 2007 Year 2008 Year 2009 * 100 = 63.09 * 100 = 78.98 * 100 = 79.87 * 100 = 68.35 * 100 = 72.20

63.09

78.98

79.87

68.35

72.20

The capability of comparison of markup income to total income which shows that the trend of comparison of markup income to total income ratio is increasing after year 2005. In year 2005, the ratio of the bank was 63.09, but in year 2005, the percentage decreased in the total bank ratio. In year 2006, the ratio of the bank is increasing from last year 2005. But in year 2008, the ratio of the bank is decreasing up to at 11.52. But in year 2009, the ratio of the bank is increased by the comparison 2008 up to at 3.85.

Infection Ratio
Classified Advances to Total Advances
Basically this ratio is a measure of classified advances to total advances calculated by dividing the firms classified advances by its Total advances * 100.

140

Classified Advances Classified Advances to Total Advances = Total Advances * 100 Calculations 1,372,155 2009 = 213,020,108 2,712,936 2008 = 320,109,723 583,305 2007 = 252,026,776 399,608 2006 = 192,169,660 1,519,682 2005 = 154,926,483 Year 2005 Year 2006 Year 2007 Year 2008 Year 2009 * 100 = 0.98 * 100 = 0.21 * 100 = 0.23 * 100 = 0.85 * 100 = 0.64

0.64

0.85

0.23

0.21

0.98

The capability of infection ratio which shows that the trend of infection ratio is variable after year 2005. In year 2005, the ratio of the bank was 0.64, but in year 2008, the percentage decreased in the total bank ratio. In year 2006, the ratio of the bank is increasing from last year 2005. But in year 2009, the ratio of the bank is increased by the comparison 2008 up to at 0.77.

Return on Equity
Measuring earning power on shareholders book value investment. Another summary measure of overall firm performance is return on equity. Basically this ratio is a measure of return on equity calculated by dividing the firms net profit after tax by its paid up capital + reserves * 100. 141

Net Profit after Tax Return on Equity Calculations 4,093,861 2009 = 5,804,776 4,076,158 2008 = 6,050,713 4,397,250 2007 = 6,133,209 3,090,133 2006 = 5,693,484 156,085 2005 = 716,562 * 100 = 21.78 * 100 = 54.27 * 100 = 71.70 * 100 = 67.37 * 100 = 70.53 = Paid up Capital + Reserves * 100

Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

21.78

54.27

71.70

67.37

70.53

There is a rise in ROE from year 2005 to year 2007 due to upward trend in profitability but from 2008, it is decreasing gradually. The year 2009 remained recession period and global economy collapsed. Hence financial crisis have huge negative impact on all banks, having operations in Pakistan. However The Banks RoE was rated as one of the top 40 in the world, besides other ratings by UKs The Banker, published by Financial Times London.

Return on Total Assets

This ratio means that how many assets are used to generate net income. So increasing ratio shows good position on any firm. Basically this ratio is a measure of return on

142

total deposit calculated by dividing the firms net profit after tax by its total assets * 100. Net Profit after Tax Return on Total Assets Calculations 4,093,861 2009 = 366,568,444 4,076,158 2008 = 320,109,723 4,397,250 2007 = 252,026,776 3,090,133 2006 = 192,169,660 156,085 2005 = 154,926,483 * 100 = 0.10 * 100 = 1.61 * 100 = 1.74 * 100 = 1.27 * 100 = 1.12 = Total Assets * 100

Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

0.10

1.61

1.74

1.27

1.12

The capability of Return on Total Assets which shows that the trend of Return on Total Assets ratio is variable after year 2005. In year 2005, the ratio of the bank was 0.10, but in year 2007, the percentage increased in the total bank ratio. In year 2006, the ratio of the bank is increasing from last year 2005. But in year 2009, the ratio of the bank is decreased by the comparison 2008 up to at 0.15.

143

Provisions to Classified Advances

Basically this ratio is a measure of provisions to classified advances calculated by dividing the firms provisions of bed debts by its nonperforming loans * 100.

Provision of bed debts Provisions to Classified Advances = Non Performing loans * 100 Calculations 2,736 2009 = 1,372,155 1,187 2008 = 2,712,936 136,189 2007 = 583,305 160,059 2006 = 399,608 44,294 2005 = 1,519,682 Year 2005 Year 2006 Year 2007 Year 2008 Year 2009 * 100 = 2.91 * 100 = 40.05 * 100 = 23.35 * 100 = 0.04 * 100 = 0.20

2.91

40.05

23.35

0.04

0.20

The capability of provisions to classified advance which shows that the trend of return on provisions to classified ratio is variable after year 2005. In year 2005, the ratio of the bank was 2.91, but in year 2006, the percentage increased in the total bank ratio.

144

In year 2006, the ratio of the bank is increasing from last year 2005. But in year 2009, the ratio of the bank is increased by the comparison 2008 up to at 0.16.

Advances to Deposit Ratio (ADR) NET

Basically this ratio is a measure of advances to deposit calculated by dividing the firms advances by its deposit * 100. Advances Advances to Deposit = Deposit * 100 Calculations 213,020,108 2009 = 297,474,543 168,407,280 2008 = 263,972,382 144,033,634 2007 = 206,031,324 110,946,972 2006 = 161,907,491 59,484,812 2005 = 126,391,752 Year 2005 Year 2006 Year 2007 Year 2008 Year 2009 * 100 = 47.06 * 100 = 68.52 * 100 = 69.91 * 100 = 63.80 * 100 = 71.61

47.06

68.52

69.91

63.80

71.61

Net advances are calculated by subtracting provisioning for NPL from gross advances. These ratios are almost the same from 2006 to 2009 .The banking system shrinking liquidity during the last quarter of 2009 which made deposit retention extremely challenging. The capability of advances to deposit which shows that the 145

trend of return on advances to deposit ratio is increasing after year 2005. In year 2005, the ratio of the bank was 47.06, but in year 2009, the percentage increased in the total bank ratio. In year 2006, the ratio of the bank is increasing from last year 2005. But in year 2009, the ratio of the bank is increased by the comparison 2008 up to at 7.81.

Liquidity Ratio

Cash Reserve Ratio (CRR)

Basically this ratio is a measure of cash reserve calculated by dividing the firms cash reserve ratio with treasury bank by its deposit * 100. Cash & Balance with Treasury Bank Cash Reserve Ratio = Deposit * 100 Calculations 23,653,754 2009 = 297,474,543 29,739,857 2008 = 263,972,382 23,039,577 2007 = 206,031,324 14,742,504 2006 = 161,907,491 10,842,519 2005 = 126,391,752 * 100 = 8.58 * 100 = 9.11 * 100 = 11.18 * 100 = 11.27 * 100 = 7.95

Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

8.58

9.11

11.18

11.27

7.95

146

It can be seen that the liquidity of the bank is being increased by passing time but in year 2009, as its the last year for my analysis; there is decreases of 3.23 Points from last year 2007. But in year 2006, there is also higher percentage of current ration as compared with year 2009. So in last three year from 2006 to 2009, the bank has maintained the good ratio due to available of better current assets.

Invest in Securities (SLR)

Basically this ratio is a measure of investment in securities calculated by dividing the firms investment in approved government securities with treasury bank by its deposit * 100. Investment in Approved Government Securities Invest in Securities (SLR) = Deposit * 100 Calculations 82,433,998 2009 = 297,474,543 83,958,463 2008 = 263,972,382 46,953,241 2007 = 206,031,324 44,830,058 2006 = 161,907,491 57,321,020 2005 = 126,391,752 * 100 = 45.35 * 100 = 27.69 * 100 = 22.79 * 100 = 31.81 * 100 = 27.71

Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

45.35

27.69

22.79

31.81

27.71

147

It can be seen that the liquidity of the bank is being increased by passing time but in year 2009, as its the last year for my analysis; there is decreases of 3.23 Points from last year 2007. But in year 2006, there is also higher percentage of current ration as compared with year 2009. So in last three year from 2006 to 2009, the bank has maintained the good ratio due to available of better current assets.

INVESTORS RATIOS

Earning Per Share Ratio

This ratio which is investors ratio shows how much the bank is earning on its shares issued. Earning per Share = net profit after taxation dividend to preferred stock holder Out standing common stock Year 2005 0.38 Year 2006 4.35 Year 2007 6.18 Year 2008 5.73 Year 2009 5.85

Earning per share is also on rise, because of increased profits every year. And this is showing greater confidence and attraction for the investors. But in 2008, it decreased slightly due to provisioning for NPL .EPS for 2009 is up only by 2% from last year that is mainly due to decrease in un appropriated profit because of impairment loss in equity market.

Price Earning Ratio

Price Earning Ratio

Share Price_____

Earning per Share

Year 2005 Year 2006 12.6 Year 2007 9.5 Year 2008 17.2 Year 2009 4.9

148

In 2009, P/E ratio decreased drastically by quickly absorbing the political shocks peaked at 15676 level in April (11.37% rise from 31st Dec 2007), and thereafter, experienced the worst fall of the decade .The market exhibited a fall of 58.3% to close at a level of 5865 and resultantly ABLs share decreased from Rs.156 to Rs.31.Stock markets world over depicted a sorry picture of worse year in the history of financial markets and that is the reason behind fall in P/E ratio.

Book Value per Share

This ratio provides an assessment of how investors view the firms performance. Firms expected to earn high returns relative to their risk typically sell at higher market to book multiples.

Book value per share

stockholders equity- preferred stock Common Stock Outstanding

Year 2005 23.3

Year 2006 32.4

Year 2007 39.4

Year 2008 36.9

Year 2009 34.6

The banks book value per share remained almost the same.

Dividend Payout Ratio

Dividend Payout Ratio

Dividend per Share

Earning per Share

149

Year 2005 -

Year 2006 36%

Year 2007 46%

Year 2008 66%

Year 2009 54%

This ratio shows positive trend from year 2006 to year 2008 which is due to high profitability of the bank. And hence, dividend per share remained high during these years because of profitability. So investors were also very keen in investment in share/stock of the bank. But in year 2009, cash dividend and bonus issue were decreased due to the plunge of equity market.

HORIZONTAL AND VERTICAL ANALYSIS

Financial statement information is used by both external and internal users, including investors, creditors, managers, and executives. These users must analyze the information in order to make business decisions, so understanding financial statements is of great importance. Several methods of performing financial statement analysis exist. This article discusses two of these methods: horizontal analysis and vertical analysis.

Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information. The horizontal analysis compares specific items over a number of accounting periods. For example, accounts payable may be compared over a period of months within a fiscal year, or revenue may be compared over a period of several years. These comparisons are performed in one of two different ways. The method of performing horizontal financial statement analysis compares the percentage difference

150

in certain items over a period of time. The rupee amount of the change is converted to a percentage change. For example, a change in operating expenses from PKR1, 000 in period one to PKR1, 050 in period two would be reported as a 5% increase. This method is particularly useful when comparing small companies to large companies.

Vertical Analysis
The vertical analysis compares each separate figure to one specific figure in the financial statement. The comparison is reported as a percentage. This method compares several items to one certain item in the same accounting period. Users often expand upon vertical analysis by comparing the analyses of several periods to one another. This can reveal trends that may be helpful in decision making. An explanation of Vertical analysis of the income statement and vertical analysis of the balance sheet follows. Vertical analysis compares each amount with a base amount selected from the same year. For example, if advertising expense were $1,000 in 1997 and sales were $100,000, the advertising would have been 1% of sales.

Income Statement
Performing vertical analysis of the income statement involves comparing each income statement item to sales. Each item is then reported as a percentage of sales. For example, if sales equals PKR10, 000 and operating expenses equals PKR1, 000 then operating expenses would be reported as 10% of sales.

Balance Sheet
Performing vertical analysis of the balance sheet involves comparing each balance sheet item to total assets. Each item is then reported as a percentage of total assets. For example, if cash equals $5,000 and total assets equals $25,000, then cash would be reported as 20% of total assets.

151

HORIZONTAL ANALYSIS OF BALANCE SHEET

BASE YEAR =2004 FORMULA =YEAR /BASE YEAR*100 Assets Cash and balance with treasury and other banks Lending to financial institutions Investment-net Advances -net Operating fixed assets Other assets
Total Assets-Net of provision

YEAR 2004 100% 100% 100% 100% 100% 100%

YEAR 2005 110.0% 105.3% 140.7% 146.3% 98.3% 101.6% 131.8%

YEAR 2006 160.9% 37.6% 110.3% 273.5% 181.8% 113.6% 163.9%

YEAR 2007 220.8% 124.0% 115.3% 354.2% 248.3% 155.2% 214.5%

YEAR 2008 271.4% 119.9% 206.1% 414.2% 290.8% 163.3% 272.4%

YEAR 2009 229.8% 102.8% 202.9% 523.8% 428.9% 264.4% 312.0%

Liabilities Customer Deposits Inter Bank Borrowings Bills Payable Other liabilities Total Liabilities Represented by Share capital Reserves Un-appropriated profit/(loss) Equity-Tier 1
Surplus on revaluation of assets

100% 100% 100% 100% 100%

110.7% 470.5% 143.0% 113.1% 119.1%

141.3% 363.8% 138.1% 157.7% 146.5%

180.4% 690.9% 128.5% 180.6% 192.9%

231.1% 860.7% 197.1% 258.6% 247.1%

260.4% 1042.5% 166.6% 480.5% 283.4%

100% 100% 100% 100% 100% 100%

414.3% 2035.7% -97.3% 194.0% 90.3% 258.0%

422.2% 42.1% 265.2% 182.8% 366.1%

422.2% 86.4% 333.3% 163.0% 445.0%

506.6% 107.4% 378.1% 164.3% 500.1%

608.0% 131.5% 427.3% 173.3% 562.5%

1020.6% 1099.4% 1084.6% 1040.5%

Total Equity

152

ANALYSIS ASSET CASH AND BALANCE WITH TREASURY ANDOTHER BANKS

It has an increasing trend. In year 2004 we assume the cash and balance with treasury banks is 100% and take it as base year to make a comparison. In year 2005 cash balance with treasury banks is 110%. It improves in year 2006 and become 160.9% due to increase in cash in hand in local currency, foreign currency, local currency current account with state bank of Pakistan and in local currency current account with national bank of Pakistan. It further increases in year 2007 and 2008.but in 2009 %age becomes 229% of the cash of balance with treasury banks in year 2004. This percentage is low as compare to that figure of year 2008 because of the liquidity crunch in year 2009.

LENDING TO FINANCIAL INSTITUTIONS

It includes call money lending ,letter of placements ,repurchase agreement and certificate of investment Due to decline in repurchase agreement lending and placements it has decreasing trend and it comes to 37.6% in year 2006 In year 2007 there is an improvement the ratio is now 124%. It is because of an increase in call money repurchase agreement lending, certificate of investment and placements. In year in 2008 it is decreasing because of high rate of SLR and CRR to be maintained with State Bank of Pakistan. In year 2009, this ratio shows slight decrease as no certificate of investment was present due to liquidity problems.

INVESTMENT
Investment portfolio is classified into three categories i.e. held for trading, held to maturity and available for sale There is a increase in investment in 2005 but decline in 2006 due to break down of stock exchanges and the values of investments were impaired .In 2007, it exhibited again rising trend In 2008 it is increasing remarkably but in 2009 it shows decreasing trend due to liquidity problems and impairment loss in market value of investments.

153

ADVANCES
Advances of the bank are showing an increasing trend due to credit expansion in corporate, SME and consumer loans in pace with its deposits. In 2005 it was 146.3 % and then gradually it improves till 2009 to reach at a remarkable figure of 523.8% despite worsening of business and economic environment faced by banking industry Loan portfolio (gross) of the Bank grew by 25.3% to Rs.223.6 billion in 2009compared to Rs.178.5 billion last year. Loan portfolio is expected to further diversify among different products and business segments in the year 2009. The management is also watchful of impact of loan books growth on capital adequacy. NPL ratio has improved to 6.2% from last years 6.4%. The loan loss coverage ratio works out to 77.5% compared to last years 89.1%.

OPERATING FIXED ASSET

Operating fixed assets comprise of capital work in progress, property and equipment and intangible assets and shows an increasing trend because of expansion, renovation and technological advancements by the new management and reaches at a remarkable figure of 428.9% in 2009.

OTHER ASSETS
Other assets increases from 2004 to 2009 continuously due to increase in advances, taxation, branch adjustment account, and deferred cost. It pattern is as 101.6%, 113.6 %, 155.2%, 163.3% and 264.4% respectively. It keeps on increases due to change in above items from year to year.

154

LIABILITIES

CUSTOMER DEPOSITS
Customer Deposits are the main source of funding .It has an increasing trend. Fixed deposits, saving deposits, current account and sundry deposits both in local and foreign currencies increases due to continuous growth in clientage up to year 2009 despite slower pace of growth and tight competitions in market especially National Saving Centers which were offering high rate of return. The bank registered a deposit growth of 13% in 2009 to reach at 297.5 billion marks in the presence of shrinking liquidity environment .This increased ABLs share by 40 basis points in only one years time to reach 7.8% in only one year.

BORROWING FROM FINANCIAL INSTITUTIONS

It has an increasing trend continuously from year 2005 to year 2009 except in 2006 due to repayment of its debts.. Because bank realized need to invest more and more in different sectors like purchase of NIT Units, lending to commercial corporate and agri sectors. Thats why the ratio moves up word continuously. The major chunk of

155

borrowings involves secured financing from SBP under export finance scheme and LTF-EOP

BILLS PAYABLE
It shows a mixed trend .From 2005 to 2007, it shows decreasing trend but in 2008,it posted a record high of 197.1%.Such kind of liabilities are spontaneous liabilities which increase/decrease with the time being.

OTHER LIABILITIES
These liabilities include mark up/interest payable, accrued expenses, adjustment accounts, dividend payable and different employees provisions .It shows an increasing trend with the increase in balance sheet footings .It is maximum in 2009 due to highly cost deposits and inter bank borrowings in a liquidity shortage era.

SHARE CAPTIAL
Share capital is in continuous increasing trend from 2005 to 2009. This increase is due to condition enforced by SBP for maintaining capital adequacy ratio (CAR) and to enhance its financial worth. So the bank has issued right shares as well as bonus shares to general public and its employees. Increased share capital provides a vide margin for fixing per party limit as envisaged in Prudential Regulations .It is pertinent to mention that Ibrahim Fibres Ltd and Ibrahim Agencies(pvt) Ltd ,related parties of the Bank hold 40.46% and 9.12% ordinary shares ,respectively ,as at December 31,2009.

RESERVES
The reserves show mixed trends .It were maximum in 2005 from where it declined drastically and from 2006 to 2009, they present a stable position.

UN- APPROPRIATED PROFIT/ (LOSS)

Un appropriated profit is increasing continuously due to continuous growth and posted a high of 131.5% in 2009

156

EQUITY
Equity of the bank which is the sum of share, capital, reserves, un appropriated profit and surplus on revaluation of assets shows continuous growth from the base year 2004 to 2009 and reflects remarkable increment at 562.5% in 2009 which depicts sound financial health of bank.

HORIZONTAL ANALYSIS OF INCOME STATEMENT

BASE YEAR =2004 FORMULA =YEAR /BASE YEAR*100 Year 2004
Mark up /Return/Interest Earned Mark up /Return/Interest Expensed

Year 2005 105.2% 68.74% 116.21% 246.35% 5.35% 49.52% 81.19% 103.66% 99.20% 113.75% -183.2% 197.92% -51.05% 49.74%

Year 2006 198.43% 175.32% 205.40% 238.41% 16.14% 87.22% 90.52% 164.18% 102.80% 303.72% -79.77% 506.70% -307.04% 800.51%

Year 2007 345.35% 588.13% 272.14% 265.15% 44.48% 87.22% 114.27% 215.50% 127.50% 415.50% -104.94% 698.21% -398.59% 1346.50%

Year 2008 425.29% 873.85% 290.02% 365.96% 130.56% 24.60% 182.92% 251.61% 148.84% 485.20% -330.34% 624.00% -330.45% 1055.95%

Year 2009 613.25% 1433.76% 365.82% 408.75% 129.40% 18.84% 193.74% 304.08% 202.48% 535.01% -409.31% 641.61% 345.77% 1076.94%

100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

Net markup/Interest Income Fee, Commission , Brokerage & Exchange Income

Capital Gain & Dividend Income

Other Income Non Interest Income Gross Income Operating expenses Profit before provision
Provisions- (expense)/reversal

Profit before Taxation Taxation Profit/(Loss) after taxation

ANALYSIS

157

MARK-UP /RETURN /INTEREST EARNED

It increases in year 2004 to year 2009 due to increase in volume of advances and investments .In 2009 it grew by 44% to reach Rs.30.6 billion led by earning assets growth coupled with the re-pricing of the assets at higher interest rate .With the quality of growth given priority ,average earning assets rose by 21%.

MARK-UP /RETURN /INTEREST EXPENSED

It increases in year 2004 to year 2009 due to increase in the volume and interest on deposits. In 2009, it is maximum at 1433.76% from the base year 2004.Mark-up / interest expense in 2009S rose to Rs.16.6 billion depicting a rise of 64.1%. Effective, June 1, 2009, all the banks were required to pay a minimum of 5% on PLS deposits, which interalia led to increase in cost of deposit, which rose to 5.1% from last years 4.0%. The banking industry experienced shrinking liquidity this year, which, therefore, led to deposits pressure. Given the liquidity issues and the State Bank of Pakistans move to raise its policy rate (Discount rate), though in staggered manner, by 500 basis points, the low cost deposit mobilization became even more daunting. Yet, the bank was able to restrict rise in its cost of deposits by approximately 110 basis points, which is well below the rise witnessed in yield on average earning assets.

158

NET MARKUP/INTEREST INCOME

This shows also increasing trend and stages a record high of 365.82% in 2009. Net mark-up / interest income, as a result, rose by over 26% to Rs.14.0 billion as Interest rate spread grew to reach remarkably above 5.7% compared to 5.1% last year.

NON INTEREST INCOME

This income includes Fee, commission, brokerage income, dividend income, income from dealing in foreign currencies and gain on sale of securities. In 2009 Non markup income grew by 5.9% to Rs.4.2 billion, contributing 23% to gross income. The core fee, commission and brokerage income grew by over 19% to Rs.1.98 billion. Amidst global recession and weakening economy, the bank was still able to grow its investment banking fee income remarkably by 24% to Rs.299 million. Account maintenance charges fell by 23% to Rs.314 million primarily due to easing out of minimum account balance requirement for the depositors convenience. Despite turbulence witnessed in equity and money market, the bank managed to record a capital gain and dividend income flat at Rs.1.6 B compared to last year. Income from dealing on foreign currencies also improved by over 18%.

GROSS INCOME
This income is also showing increasing trend in pace with cumulative effect of net mark up/interest income and non interest income from year to year .Gross income staged a record high in 2009 to reach at 304% and shows healthy signs of growth .

OPERATING EXPENSES
Continuous hike is observed in the operating expenses from year 2004 to 2009 which comprises mainly administrative expenses. In 2009 banks operating expenses increased by 36% to Rs.8.4 billion. Voluntary Retirement Scheme (VRS), Employee benefits, planned expansion with lot of emphasis on IT infrastructure and renovation of branch network complemented by the high inflation are the primary reasons for such an increase. Various expenses, including VRS, tend to have a long term impact

159

on improving banks operating efficiency and in turn, on business retention as well as quality growth.

PROFIT BEFORE PROVISION

It is showing increasing trend from year 2004 through 2009 due to increase in mark up income and expansion of advances portfolio and also rise in non mark up income. The bank, despite economic challenges in 2009 has registered an impressive operating profit of Rs.9.8 billion, which is up by 10% over last year.

PROVISIONS AGAINST NON- PERFORMING ADVANCES

It is in increasing trend in year 2006 to 2009 because of increase in the volume of advances and has negative impact on the profitability of bank. However NPL ratio is on decreasing side and has improved to 6.2% from last years 6.4%which is a good omen.

PROFIT BEFORE & AFTER TAXATION

It is showing increasing trend from year 2005 through 2007 due to increase in mark up income and expansion of advances portfolio and also rise in non mark up income. During this period business of the bank increased tremendously hence income increased .In 2009 profit before and after taxation stood at RS.6.12 billion and Rs.4.16 billion respectively compared to Rs.5.95 billion and RS.4.08 billion last year .These results show a strong resilience by the bank to the tough challenges.

160

VERTICAL ANALYSIS OF BALANCE SHEET

YEAR 2004 9.5% 13.1% 34.7% 34.6% 2.2% 5.9% 100.0% 97.2% 2.3% 1.5% 2.4% 0.0% 103.4% 0.9% 7.3% -5.5% -4.1% 0.8% -3.4% YEAR 2005 8.0% 10.4% 37.0% 38.4% 1.6% 4.6% 100.0% 81.6% 8.1% 1.6% 2.1% 0.0% 93.4% 2.8% 3.0% -4.1% 6.1% 0.5% 6.6% YEAR 2006 9.4% 3.0% 23.3% 57.7% 2.5% 4.1% 100.0% 83.8% 5.0% 1.3% 2.3% 0.0% 92.4% 2.3% 2.4% 1.4% 6.7% 0.8% 7.6% YEAR 2007 9.8% 7.6% 18.6% 57.2% 2.6% 4.3% 100.0% 81.7% 7.3% 0.9% 2.0% 1.0% 93.0% 1.8% 1.9% 2.2% 6.4% 0.6% 7.0% YEAR 2008 9.5% 5.8% 26.2% 52.6% 2.4% 3.6% 100.0% 82.5% 7.2% 1.1% 2.3% 0.8% 93.8% 1.7% 1.6% 2.2% 5.8% 0.5% 6.2% YEAR 2009 7.0% 4.3% 22.5% 58.1% 3.0% 5.0% 100.0% 81.1% 7.6% 0.8% 3.7% 0.7% 93.9% 1.8% 1.6% 2.3% 5.7% 0.4% 6.1%

Assets Cash and balance with treasury and other banks Lending to financial institutions Investment-net Advances -net Operating fixed assets Other assets
Total Assets net of provision

Liabilities Customer Deposits Inter Bank Borrowings Bills Payable Other liabilities Sub-ordinated loans Total Liabilities Represented by Share capital Reserves n-appropriated profit/(loss) Equity-Tier 1
Surplus on revaluation of assets

Total Equity

161

ANALYSIS

ASSETS

CASH AND BALANCE WITH TREASURY AND OTHER BANKS

The cash and balance with treasury and other banks is almost the same from 2004 to 2008 but in 2009 it reduces to 7% because of liquidity problems and better cash management.

LENDING TO FINANCIAL INSTITUTIONS

Share of Lending to financial institutions shows a mixed trend from 2004 to 2009 which depends mainly upon monetary policy, banks own policy, CRR & SLR ratios.

INVESTMENTS
From 2004 to 2009, investments are varying at different ratios at the cost of advances .In 2005, investment portion was at its peak at 37%, but after the privatization of bank since 2006, share of investment shows somewhat decreasing trend .This is because of low return, speculated business of stock exchange and overall risk factor.

ADVANCES
Advances portfolio shows increasing trend from 2004 to 2009 because of increase in its equity, increase in deposit base with a view to achieve high returns. The major chunk of the banks assets is exposed to advances being a remunerative business .The advances include all the categories including corporate, SME, Agri and consumer loans.

OPERATING FIXED ASSETS

Operating fixed assets comprise of capital work in progress, property and equipment and intangible assets .It shows a mixed trend from 2004 to 2009 because of priorities 162

of the management .The share of operating fixed assets is maximum at 3 % in year 2009 due to expansion, renovation and technological advancements.

OTHER ASSETS
The proportion of other assets which comprises accrued income, advance rent ,suspense account and advance taxation remain almost the same from 2004 to 2009. It pattern is as 5.9%, 4.6 %, 4.1%, 4.3%, 3.6% and 5.0% respectively.

LIABILITIES

CUSTOMER DEPOSITS
Customer deposits are of prime importance and are considered the back bone of the financial health of a bank .The ratio of customer deposits remain almost the same from 2004 to 2009 in pace with increase in the size of balance sheet .Despite the tough market competition and slower pace of growth in 2009, the bank increased its market share and registered a deposit growth of 13 % over last year.

INTER BANK BORROWINGS

The major chunk of borrowings involves secured financing from SBP under export finance scheme and LTF-EOP .It shows almost the same range from 2005 to 2009 which depends mainly upon the banks needs government policy at different mark up rates.

BILLS PAYABLE
They represent spontaneous liabilities which increase or decrease with the time being. The proportion of bills payable shows a mixed trend ranging from 0.8% to 1.6% which is lowest in 2009 at 0.8%

163

OTHER LIABILITIES
These liabilities include mark up/interest payable, accrued expenses, adjustment accounts, dividend payable and different employees provisions .It shows an increasing trend with the increase in balance sheet footings .The proportion of other liabilities is maximum in 2009 at 3.7% due to highly cost deposits and inter bank borrowings in a liquidity shortage environment.

SUB ORDINATED LOANS

The Bank has issued unsecured sub-ordinated Term Finance Certificates, which will contribute towards Tier II capital for minimum capital requirements (MCR) as per guidelines set by the SBP, under BSD Circular No. 12, dated August 24, 2004, to support the Banks growth. This loan although remains the same in absolute terms but its share decreases substantially from 2006 to 2009 due to increase in the size of balance sheet.

SHARE CAPITAL
Although the Share capital shows increasing trend from 2005 to 2009 but its share in the total balance sheet shows stability from 2007 to 2009 .The reason behind increase in share capital in 2005 at 2.8% is that of amalgamation of Ibrahim Leasing & First Allied Bank Mudarba in Allied Bank .

RESERVES
The reserves follow almost same trend as share capital which are maximum in 2004 at 7% but after that its share declines substantially to 1.6% in 2008 and 2009.

UN- APPROPRIATED PROFIT/ (LOSS)

After the take over of the bank by Ibrahim Group, its un appropriated loss at 5.5% in 2004 ultimately converted into profit at 1.4% in 2006 and thereby increasing its share at maximum ratio of 2.3% in 2009 which shows continuous growth.

164

TOTAL EQUITY
Equity of the bank which is the sum of share, capital, reserves, un appropriated profit and surplus on revaluation of assets was negative in 2004 due to continuous losses but after privatization of bank in 2005 ,a substantial increase in the share of total equity is witnessed which decreases slightly from 7.6% to 6.1% in the years 2006 to 2009.

VERTICAL ANALYSIS OF INCOME STATEMENT

Year 2004
Mark up /Return/Interest Earned Mark up /Return/Interest Expensed

Year 2005 75.05% 11.37% 165

Year 2006 83.60% 17.11%

Year 2007 87.55% 34.54%

Year 2008 84.40% 40.18%

Year 2009 86.20% 48.70%

69.93% 16.20%

Net markup/Interest Income Fee, Commission , Brokerage & Exchange Income Capital Gain & Dividend Income Other Income Non Interest Income Gross Income Operating expenses Profit before provision Donations Provisions- (expense)/reversal Profit before Taxation Taxation Profit/(Loss) after taxation

53.73% 8.65% 16.82% 4.60% 30.07% 83.79% 58.19% 25.60% -12.20% 13.38% -7.96% 5.42%

63.72% 21.76% 0.93% 2.23% 24.91% 88.63% 58.91% 29.72% -22.82% 6.90% -4.15% 2.75%

66.49% 12.43% 1.66% 2.31% 16.40% 82.89% 36.03% 46.85% 0.13% -5.87% 40.86% 14.74% 26.12%

53.00% 8.32% 2.74% 1.39% 12.45% 65.46% 26.90% 38.56% 0.05% -4.64% 33.87% 11.51% 22.36%

44.22% 8.99% 6.31% 0.31% 15.60% 59.83% 24.58% 35.25% 0.11% -11.44% 23.70% -7.47% 16.23%

37.49% 9.21% 4.43% 0.17% 13.80% 51.30% 23.77% 27.53% 0.23% -10.04% 17.26% -5.54% 11.72%

ANALYSIS

MARK-UP /RETURN /INTEREST EARNED

It shows substantial growth from the year 2004 to year 2009 due to increase in volume of advances and investments .The pattern of increase ranges from 69.93% in 2004 to 86.20% in 2009 .With the quality of growth given priority , average earning assets rose by 21% in 2009 over last year.

166

MARK-UP /RETURN /INTEREST EXPENSED

It increases in year 2004 to year 2009 (except 2005) due to increase in the volume and interest on deposits and inter bank borrowing whereas in 2005 interest rates were at their minimum. Mark-up / interest expense rose to Rs.16.6 billion in 2009 depicting a rise of 64.1% over last year. Effective, June 1, 2009, all the banks were required to pay a minimum of 5% on PLS deposits, which interlaid led to increase in cost of deposit, which rose to 5.1% from last years 4.0%. Given the liquidity issues and the State Bank of Pakistans move to raise its policy rate (Discount rate), though in staggered manner, by 500 basis points, the low cost deposit mobilization became even more daunting.

NET MARKUP/INTEREST INCOME

Although net mark up /interest income is increasing every year but its share in the total mark up /non mark up income shows mixed trend i.e. increasing from year 2004 to 2006 and then decreasing behavior from 2006 to 2009 .In 2009 ,this ratio stands at the minimum level of 37.49% due o slackness of economy .

FEE, COMMISSION, BROKERAGE & EXCHANGE INCOME

This ratio shows mixed trend i.e. increase from 2004 to 2005 and decrease from 2006 to 2009 which depend mainly upon the policy, opportunities and trade activities.

OTHER INCOME
Other income which represents gain on sale of fixed assets and miscellaneous income shows decreasing trend from year to year as the bank is in the renovation and expanding phase and instead of selling the fixed assets, it is in the process of acquiring the fixed assets.

NON INTEREST INCOME

This income includes Fee, commission, brokerage income, dividend income, income from dealing in foreign currencies and gain on sale of securities. Although non interest income increased year to year but is contribution in the total mark up /non mark up income shows decreasing trend and stands at minimum level of 13.80% in 2009.

167

GROSS INCOME
Gross Income which is the total impact of net mark up/interest income and non interest income also follows the same pattern of both constituents i.e. it shows almost decreasing trend from 2004 to 2009 and stands at minimum level of 51.30% in 2009.

OPERATING EXPENSES
Operating expenses which are actually increasing from year to year show mixed trend in percentage terms when seen from vertical analysis. It remains stable from 2004 to 2005 at 58.91% and 58.91% of total interest/non interest income from where it declines to 26.90% in 2007 and 23.77% in 2009.

PROFIT BEFORE PROVISION

Profit before provision which is the difference of gross income and operating expenses shows mixed trend from 2004 to 2009. In percentage terms, it increases from 2004 to 2006 at the ratio of 25.60% to 46.85 % and afterwards shows decreasing trend from 2007 to 2009.

PROVISIONS AGAINST NON- PERFORMING ADVANCES

Provision against NPL follows the same pattern as the volume of advances in percentage terms i.e. they increase or decrease with the share of advances. In this way, provision increases from 2004 to 2005, decreases from 2006 to 2007, increases to 11.44% in 2008 and the decrease slightly to 10.04% in 2009.

PROFIT AFTER TAXATION

It shows mixed trend with maximum percentage in 2006 at 26.12% and then decreases gradually to achieve level of 11.97% in 2009 .This is because of slow down of economy ,increase in operating expenses and provision for loan losses which ultimately declined the percentage profitability of bank.

ORGANIZATIONAL ANALYSIS FOR YEAR 2009 WITH REFERENCE TO OTHER BANKS

168

Key Indicators Total Deposits Total Advances Total NPL's Total Assets Net Profit Equity

ABL 297.5 B 223.6 B 13.8 B 366.6 B 4.16 B 22.3 B

NBP 625 B 413 B 56.5 B 817.7 B 15.4 B 102.5 B

Bank Names HBL MCB 597 B 330 B 456 B 262 B 40 B 18.3 B 717.3 443.6 B 15.6 B 15.3 B 75 B 58.4 B

UBL 484 B 371 B 27 B 605 B 8.45 B 49.4 B

The global financial crisis, brewing for a while, really started to show its effects in the middle of 2008 and blasted into full blown catastrophe in 2009.Around the world stock markets have fallen, large financial institutions have collapsed or been bought out, and governments in even the wealthier nations have had to come up with rescue packages to bail out their financial systems. Going forward, the banking sector faces a significant challenge in maintaining its deposit base and attracting new deposits, given three rounds of increase in of return on National saving centre instruments. Our banking sector is quite resilient and has been able to with stand different types of market shocks and adverse macro economic conditions .The capability has been achieved through continuous financial reform process distinctly pursued during the past few years. Therefore, there should be not any cause of concern about the stability of banking system in near future. Allied bank is amongst the five major commercial banks in Pakistan but stands in the last when compared with its competitors/peers in terms of total assets, equity and profitability. But important thing that distinguishes it from all banks is its NPL ratio which is smallest from all banks and depicts the high quality of its assets. Furthermore the rate of growth is higher than other banks because of its privatization and management control by Ibrahim Group in 2005 which changed its equity from minus Rs.4.869 Billion in 2004 to Rs.20.805 Billion in 2009.

FUTURE PROSPECTS OF THE ORGANIZATION

The year 2009 is expected to pose a tough market environment. Shortage of rains can seriously impact overall GDP growth. The tight monetary policy is impacting the credit appetite of the private sector. Slowdown in the US economy will after the

169

countrys exports with a ripple effect on the manufacturing sector. The documentation drive, which is good for the country over a long period of time, is being expectantly viewed with concern by certain segments. The combined impact of these factors may cause a slowdown of economic activity in certain pockets of the economy. And there are some other factors which de-motivated the foreign investors not to invest in the Pakistan. These factors are such as Terrorism situation, suicide Blasts in the country, high rate of inflation, law in order situation in Pakistan. On the positive side, the resolution of issues in the energy sector, pragmatic handling of the documentation drive by the government and continuous efforts to normalize international relations should bring positive results. Allied Bank is well positioned and flexible enough to operate effectively in the changing scenario. We will continuer to broaden our customer base, harnessing the growing strength of the ABL brand and expand the IT platform to provide value based propositions to our customers. Some future plans of ABL are as follows: Right sizing of the employees By closing unprofitable branches By introducing a merit based selection More installation of ATMs in every major city of the country Makes improvement in latest computer software in all the branches Purchase of Sick Units, rebuild them and make them profit earning institutions Shares Investment Scheme i.e. Bank will trade in shares of different renowned companies to earn profit

Suggestions
Following are some suggestions for the future plans. Promotions made conditional with qualification

170

 Most of the bank employees are sticking to one seat only, with the result that they become master of one particular job and loose their grip on other banking operations. In my opinion all the employees should have regular job experience all outlook towards banking. The promotion policy should be adjusted Should make serious actions for workload of the employees ABL of Pakistan should introduce a program for the employees for the high quality of services which are offered in the bank Staff turnover particularly of trained staff results in financial and other losses the amount spent by the bank on employment, induction and training of outgoing officers constitutes to beat till another officer should ready prove his work. The exodus of bank officers in the past has worsened the situation Every year some of the employees should be sent for training to other countries and employees from other branches should be brought here. More reading material should be brought / provided in the reference Room, it should be relevant and its purpose should be to educate the employees with the advance studies in their field. The employees should be provided the opportunities to attend and participate in seminars and lectures on banking The Bank should keep the proper check on stock which is hypothecated The Bank should try to give more loans to the small borrowers as the past history shows that most of the loans given to the corporate borrowers have converted into bad debts The Bank has a lot of financing schemes but there is very little advertisement of these schemes. So Bank should increase its advertisement When giving the loan, the Bank must carefully analyze the past six months transaction history of the borrower. This will help in judging the dealing behavior and financial status of the client. In most cases, this thing is not properly done and it is the major reason of default of many clients.

SHORT-FALLS/ WEAKNESSES OF THE ORGANIZATION

There are some points that can be shortfalls for Allied Bank.

171

Irregularities in Promotion
In ABL there is no smooth and continuous promotion system. Unfair means are used in order to get the promotion especially the promotion of the managers.

Individual Difference
In ABL the individual difference have strong impact on the organizations performance. So with the passage of time individual differences are increasing which are undermining the good will of the organization.

Strong Union
Union has strong impact on performance of ABL. So the top management is unable to punish the violators and shrieks.

Organizational Structure
In this organizational the organizational structure is bureaucratic which a barrier in rapid and effective decision making is.

Low Promotional Activity

The majority of people are not well aware about the products of ABL. It is due to their low services of promotional activity.

Reactive Approach
ABL management has adopted reactive approach their responses to the customer is very slow and are reluctant to take initiative before the problems arise.

Rapid Changes
The rapidly changing environment in the banking sector and the quick response of the other banks to these changing can be shortfalls for ABL.

Low Motivation Level

There is low motivation in the employees of the bank.

172

CONCLUSION
Allama Iqbal Open University Islamabad has provided me with the opportunity to work as an internee in Allied Bank which is one of the largest bank in Pakistan. I feel proud to represent my department in this type of true banking. I get a lot of experience from Allied Bank during my visit I come to how the different activities take place, what are these procedures and processes. Allied Bank is on the way of progress. It has been earning a healthy profit with the strong financial position and good will in the market. The management is professionally qualified and experienced. ABL produce products of high quality for the consumers in Pakistan. During my visit, I observed that there is flat style of management in the bank. This is favorable for the employees of the bank because it is increasing their productivity. There are training programs that are offering to the employees of the bank after a specific period of time on continuous basis. So the bank considers its employees as valuable assets. When I talk about the culture of the bank, the bank has strong cultures in respect that employees are implementing all the rules and regulations without any intervention and pressure. There is centralization in decision making. The people who have authority to mold people at their own will take all the decision. There is favorable climate for the participation of lower level. Finally I got practical knowledge about Banking & Finance policies from ABL, 14 # Chungi Branch Multan. After completing my internship I feel precious in my knowledge. Practical work of finance, deposit, advances, cash, remittance, Govt. section, clearing department, HRM, account opening, and performance report gave me a skill to doing something practical for banking & finance. Which I read from books, I saw these theories into the practical shape; I competed my internship with practical work. This practical work is worth for me. Certainly this practical work will give me benefit in my practical life and service. In this sense I am grateful to Finance department of Allied Bank 14 # Chungi Branch Multan.

173

RECOMMENDATIONS
In the last text, proposals are given to maximize the services to be rendered. Recommendations are enlisted to paramount the number of consumer ship. To give height to the satisfaction level of the clients different proposals are presented Employees inside the branches should change their attitude toward the customer. It has bee observed that customer do not get the same warm welcome and importance that he wants Employee appraisal is a major part of good and effective banking and finance. It consists of systematic evaluation of an individual with respect to his personal traits and characteristics, his on job performance and his potential for development Deposits should be taken at a lower cost and given at higher interest rate. Expenditures should be controlled which are very high and unnecessary. ABL management should adopt pro-active approach to survive in this sector. Bank should make a plan to gear up its recovery efforts on war footing and reorganize the recovery function of global bases Bank must let potential customers know that all attraction for banking exist, this is done by promotional activities. Bank should open more branches in the remote areas of the country to get deposits and idle resources. Bank should provide similar facilities to all its branches big cities. The standard of service and other facilities are far better as compared to smaller cities Bank should adopt such an induction plan that when a customer opens his account with the bank, he should be supplied with a booklet which enables him to know the procedure of filling the Cheques and pay-in-slip etc. It will save a lot of time of the bank staff afterward during of the conduct of the account of that customer

174

 The billing system of Allied Bank of Pakistan should be improved to facilitate the customers and workers. The work should be divided among the staff e.g. collection of bills, countering of cash and then entry of these The area left under consideration was that there was lack of proper marketing & advertising and the clients of the institution were not properly informed about the reconstruction, which is partly due to lack of proper training and development programs The bank should also continue investing more on projects like IT and others. Most of the banks use IT to generate competitive advantage and technological advancement in products and procedures is crucial to improve the internal operations The staff working in Allied Bank is a blend of world class young, energetic individuals and experienced people. To bring best out of them the bank should provide them with the in house and out source training on regular bases Image and artifacts are the first impression given by any institution to its customers and it should be delightful for its customers when they step in the organization. For example, a pleasant and friendly atmosphere emanated from dedicated customer services. This was done so that the first glimpse of the bank towards its customer should be inspiring and convey the message of a hospitable environment Another weakness regarding this was that the old branches of the bank were not attended properly in this context. The previous buildings were not given much attention and they are lacking of some of the major advanced technological requirements which are mandatory to perform according to the standards and practices widespread in the banking industry. The management is demanded to concentrate upon the old property and equipment, and their proper renovation in addition with the complete assistance of the technological base

175

 Products like student loan, personal loans and small cottage industry loans should be presented to the students and small businessmen. By the launch of these products the Allied Bank can make tremendous progress in the financial services offered by them The customers entering any branch of Allied Bank should be warmly greeted and catered immediately. To give better services to the customers the bank timings should be increased if required in some particular areas where the customers are present in large number. This will help to assist the customers in a beneficial way Consumers are the major asset of any institution. To gain maximum advantage utmost privilege should be given to them. Following the same footings Allied Bank should extend the personalized services for its customers tremendously. The daily transactions should be made more quicker to save the time of the customer. Every customer should be given eminent facilities to retain them Overseas branching network should be enhanced specially in Middle East and Europe to take advantage of the opportunities present in that part of the world, and to import ideas to Pakistan to make banking a memorable experience rather than an upsetting one. This will aid in the extension of operations overseas. The people of Pakistan as well as foreigners living in these areas will be facilitated more easily The employees of the Allied Bank should be facilitated with different incentive schemes so that they should work with more dedication and commitment. The staff should be given small accomplishment awards in their small achievements. This will act as a tool for developing the skills of the employees. Performance related pay and Teamwork Rewards should be introduced. And the incentive plans should not conflict with the divisions of overall strategy. Incentives schemes should not only compensate employees for their commitment, dedication and loyalty, but should serve the mission and vision statement objective of the bank

176

 For providing extended level of relief to the clients 24 hour paying-in machines can be installed. This service will be able to aid the customers to deposit their money at any time One of the far reaching aspect on which the management should work is the factor of Islamic banking. It should be started to provide services to the people of Pakistan by Allied Bank. This service will receive greater appreciation from the customers. Initialization of this service will indeed bring immense number of customers to the bank. Its a fast growing niche 24 hour telephone banking is in operation but they are providing very limited services. Allied Bank should provide full range of services from balance inquiry to premium tailored services for the further ease of the customers. This will help the customers to acquire information regarding their accounts and similar information at any time. This will add to increase the clientele of the Allied Bank The bank is liable to equip and update its employees in order to achieve the targets through training. To enhance the sense of loyalty towards the bank employees should be involved in every activity taking place in the institution. The staff should be instructed about the new technologies coming in the market and they should be rehearsed to become the masters. The employees of the bank should be polished in such a way that they should display excellence and comprehensively manage the tasks. As the staff of the organization is the reflection so quality human resource should be recruited with the proper academic background. Tacit knowledge is an important part and is only comes from experience and doing things properly, so the more employees are trained to be focused, and their job definition is more clear, its very likely that they will deliver the tacit elements with much more productivity These are some recommendations, which have to be made possible to escape from the threats and weaknesses and the risks in environment that surrounds the Bank. The management do considers the policy matter that is not helping the Bank, but are still

177

in practice due the absence of prudentially regulated system to protect them and the Bank.

REFERENCE
My experience Collected data from Allied Bank Regional office Multan.

ABL Publications
Allied Bank Annual Report of 2005 Allied Bank Annual Report of 2006 Allied Bank Annual Report of 2007 Allied Bank Annual Report of 2008 Allied Bank Annual Report of 2009 Allied Bank of Pakistan Limited.1942-1973 (Volume 1, 1942-1973) Allied Bank of Pakistan Limited.1974-1990 (Volume 2, 1974-1990) Allied Bank of Pakistan Limited.1991-1999 (Volume 3, 1991-1999)

Books
Some books are also including in my references.
Principles of Corporate Finance by Richard a. Brealey and Stewart c.

Myers Principles of Financial Management by Gittman

Credit Management (Commercial Bank Management by Peter S. Rose)

Internet Citations

www.abl.com www.nbp.com.pk www.answers.com

178

ANNEXES
Last five year Financials of the ABL attached Organogram of the ABL is attached Organogram of the Branch is attached Organogram of the Accounts / Finance Department attached

179