Professional Documents
Culture Documents
Definition of bank:-
“A bank includes a body of person, who carry on the business of banking” Or “A
bank maybe as an institution dealing mainly in money and credit. It accepts deposits from
one class of people at a lower rate of interest and industry for meeting the requirements.
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This provides finance for successfully carrying on various stages of production as well as
distribution.”
An over view of banking industry in Pakistan:-
At the time of independence the areas of Pakistan were producing only food grains
and agricultural raw material. For Indo-Pak sub continent, there were practically no
industries and whatever raw material was produced was being exported from Pakistan.
How ever commercial banking facilities were provided fairly well here. There were 487
offices of scheduled banks in the territories now constituting Pakistan.
It was very difficult for Pakistan to run its own banking system immediately.
Therefore in accordance with the provision of Indian independence Act 1974, an expert
committee was appointed to study the issue. On the recommendation of committee Reserve
Bank of India continued to function in Pakistan, till 30th September 1984, so that problem
of time and demand, liability, coinage, currencies exchange etc be settled between India
and Pakistan. It was decided that Pakistan will take over the management of public debt
and exchange control from reserve Bank of India on 1st April 1948, and that India notice
would continue to be legal tender to Pakistan till 30th September 1948.
Following the announcement of independence plan in June 1947, the Hindus
residing in the territories now comprising Pakistan started transferring their assets to India.
Moreover the banks including those having the registered offices in Pakistan transferred to
India in order to bring a collapse of new state. By 30th June 1948, the number of offices of
scheduled banks in Pakistan declined from 487 to only 195.
There were 19 non-Indian foreign banks with the status of small branch offices,
which were engaged solely in export of crops from Pakistan institutions i.e., Habib Bank
and Australia Bank.
The nationalization of Banks in Pakistan since January 01st, 1947 has heralded a
new era of development and progress. It has taken a complete banking system with effect
form January 1981. Privatization process of state owned banks and enterprises started in
1991.
Recent trends in banking industry:-
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2.1-History:-
Allied Bank is the first Muslim bank, to have been established on the territory that
became Pakistan. Established in December 1942 as the Australasia Bank at Lahore with a
paid-up share capital of Rs. 0.12 million under the Chairmanship of Khawaja Bashir Bux,
the Bank had attracted deposits, equivalent to Rs. 0.431 million in its first eighteen months
of business. Total assets then amounted to Rs. 0.572 million. Today Allied Bank's paid up
Capital & Reserves amount to Rs. 10.5 billion, deposit exceeded Rs. 143 billion and total
assets equal Rs. 170 billion. The Allied Bank's story is one of dedication, commitment to
professionalism, adaptation to changing environmental challenges resulting into all round
growth and stability, envied and aspired by many.
established a commanding presence in these areas and industry, trade and commerce in the
undivided Sub-continent was completely dominated by them. Banking, in particular, was
an exclusive enclave of the Hindus and it was widely believed, and wrongly so, that
Muslims were temperamentally unsuited for this profession.
The initial equity of the Bank amounted to Rs 0.12 million, which was raised to Rs
0.5 million by the end of first full year of operation, and by the end of 30th June 1947
capital increased to Rs. 0.673 million and deposits raised to Rs 7.728 million.
Australasia Bank (1947 to 1974)
It had been severely hit by the riots in East Punjab. The bank was identified with the
Pakistan Movement. At the time of independence all the branches in India, (Amritsar,
Batala, Jalandhar, Ludhaina, Delhi and Angra (Agra)) were closed down. New Branches
were opened in Karachi, Rawalpindi, Peshawar, Sialkot, Sargodha, Jhang, Gujranwala and
Kasur. Later it network spread to Multan & Quetta. The Bank financed trade in cloth and
food grains and thus played an important role in maintaining consumer supplies during riot
affected early months of 1948. Despite the difficult conditions prevailing and the
substantial set back in the Bank’s business in India, Australasia Bank made a profit of Rs
50,000 during 1947-48. By the end of 1970 it had 101 branches. Unfortunately it lost 51
branches in the separation of East Pakistan. The bank did well in despite losing lot of its
assets. By the end of 1973 the bank had 186 branches in West Pakistan.
August 2004 as a result of capital reconstruction, the Bank’s ownership was transferred to a
consortium comprising Ibrahim Leasing Limited and Ibrahim Group.
Today the Bank stands on a solid foundation of over 63 years of its existence
having a strong equity, assets and deposits base offering universal banking services with
higher focus on retail banking. The bank has the largest network of on-line branches in
Pakistan and offers various technology based products and services to its diversified
private Individuals.
Vision
To become a dynamic and efficient bank providing integrated solutions in order to
be the first choice bank for the customers
Mission
• To provide value-added services to our customers
• To provide high-tech innovative solutions to meet customers requirements
• To create sustainable value through growth, efficiency and diversity for all
stakeholders
• To provide a challenging work environment and reward dedicated team
members according to their abilities and performance
• To play a proactive role in contributing towards the society
Values
Integrity
Excellence in service
High performance
Innovation and growth
2.3-Business volume:-
Deposits:-
Different types of the deposits offered by the bank are:-
1-Customers
Fixed deposits
Savings deposits
2-Current accounts
Remunerative
Non–remunerative
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3-Financial Institutions
Remunerative deposits
4-Particulars of deposits
In local currency
In foreign currencies
Advances:-
These are:-
1. Loans, cash credits, running finances, etc(In Pakistan)
2. Net investment in finance lease (In Pakistan)
3. Bills discounted and purchased (excluding treasury bills)
Payable in Pakistan
Payable outside Pakistan
Investments:-
The management determines the appropriate classification of its investments at the time
of purchase and classifies these investments as held for trading, available for sale or held to
maturity. These are initially recognized at cost, being the fair value of the consideration
given including the acquisition cost.
Held for trading
These are securities which are either acquired for generating a profit from short-term
fluctuations in market prices or dealer’s margin or are securities included in a portfolio in
which a pattern of short-term profit taking exists. These include the following:-
1-Ordinary shares of listed companies
2-Available–for–sale securities
Market Treasury Bills
Federal Investment Bonds
Pakistan Investment Bonds
Ordinary shares/certificates of listed companies
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Total investment by ABL for the year 2007 is Rs. 83, 958,463 Million.
2.4-Employees:-
In ALLIEDBANK LIMITED, BLUE AREA BRANCH 29 employees are
working. In COMMERCIAL & SME ASSETS 10 employees are working.
At overall level the number of employees with respect to different years is given
below:-
Year Employees
2007 6,909
2006 6,768
2005 6,859
2004 7,082
2003 7,212
2.5-Products:-
Allied Bank is providing different types of products to its customers. Some of these
are given below with their details.
These are divided into further categories. These are discussed below.
1-Deposit Products
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I. Current account
II. Allied Business Account
III. PLS Saving Deposits
IV. Allied Basic Banking Account
V. Foreign Currency Deposits
VI. PLS Term Deposit Account
VII. Allied Munafa Account
VIII. Behtar Munafa account (BMA)
IX. Behtar Munafa Term Deposit (BMTD)
X. Mahana Aamdani Package
XI. Allied Bachat Scheme (ABS)
XII. Allied e-Savers Accounts (ESA)
I. Online banking
II. Allied cash and shop visa card
III. Internet
IV. Helpline
3-Consumer Products
I. Visa credit card
4-Lending Products
I. Seasonal finance
II. Agricultural finance
III. Import and Export Business/Trade finance
IV. Running finance
V. Demand finance
5-Corporate leasing
1-Deposit Products:-
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I-Current Account:-
Allied Bank offers Current Account facility for individuals as well as for
institutions and commercial customers. There are free Online Transactions, Demand
Draft/TT/Pay Order for depositors maintaining an average monthly balance of Rs. 2.500
(M) & above.
Additional Benefits:-
24 hours helpline service
Free Internet Banking facility
SMS transaction alerts
ATM/Debit Card for cash withdrawals through any ATM and debit transactions at
various retail outlets
Allied Bank offers PLS Savings Account facility to its customers with the following
attractive features.
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In order to provide basic banking facilities to its lower-middle class customers, Allied
Bank has introduced the “Allied Basic Banking Account” (ABBA).
Allied Bank offers the facility of opening Current, Savings and Term deposit
Accounts. Foreign Currency accounts can be opened in US Dollar, Pound Sterling, Euro,
and Japanese Yen at designated branches.
Allied Bank offers the following rates in its normal term deposit account:-
PLS Term 1Month 2Months 6Months 1Year 2Year 3Year 4Year 5Year
Deposit
Up to Rs. 4.00% 6.50% 7.00% 8.00% 8.10% 8.25% 8.80% 8.50%
5,000,000
Rs.5,000,001 4.50% 7.00% 7.50% 8.50% 8.60% 8.75% 8.30% 9.00%
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to
Rs.25,000,000
Rs.25,000,001 5.00% 7.50% 8.00% 9.00% 9.10% 9.25% 9.30% 9.50%
to
Rs50,000,000
Rs50,000,001 5.50% 8.00% 8.50% 9.25% 9.35% 9.50% 9.55% 9.75%
to
Rs100,000,000
Allied Munafa Account is a profit bearing checking account with the payment of
profit on a monthly basis. The estimated rate of profit is given below:
Slabs Rates
Rs 0.5(M) to less than Rs 5 (M) 5.00%
>Rs 5(M) to Rs 25 (M) 6.00%
>Rs 25(M) to Rs. 50 (M) 7.00%
>Rs 50(M) to Rs. 100 (M) 7.50%
>Rs 100(M) to Rs. 250 (M) 8.00%
Silent Features:-
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 & Non-
Govt. Organizations etc are free to open their account in this scheme.
Behtar Munafa Account is a profit bearing checking account with the payment of
profit on a monthly basis. The estimated rate of profit is given below:
Salient Features:-
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 Organizations etc are
free to open their account in this scheme.
Allied Bank offers following rates in its Behtar Munafa Term Deposit.
Special Benefits:-
Profit to be credited in the depositor’s PLS saving A/C and can be withdrawn
through ATM free of charge
Free transfer of monthly profit to any branch of ABL all over the Pakistan
Allied Bachat Scheme (ABS) is a PLS Term Deposit Scheme based deposit scheme
whereby you can double your investment in just 7.5 years.
Allied e- Savers Account is a unique savings plan where you can earn returns as
high as 7.5% with the flexibility of 4 withdrawals a month. So wake up to the world of modern
banking and open an account now.
Slabs Rates
Rs. 400,001 up to Rs. 500,000 7.505
Rs. 300,001 up to Rs. 400,000 6.00%
Rs. 200,001 up to Rs. 300,000 5.00%
Up to Rs. 200,000 5.00%
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Additional Benefits:-
24 hours phone banking service.
Free Internet Banking facility.
ATM/Debit Card for cash withdrawals through any ATM including our largest
network of ATMs across Pakistan and for debit transactions at various retail outlets.
First free cheque book - A/c Payee only.
XIII-PLS Account:-
Allied Bank offers the PLS Savings Account facility to its customers with the following
attractive features:-
Attractive return of up to 1.00% per annum
Free Online Transactions, DD/TT/PO for depositors maintaining an average
monthly balance of Rs. 2,500 (M) & above.
2-Alternative delivery channels:-
I-Online banking:-
Allied Online is a unique service offering from Allied Bank Limited. Through
Allied Online, account in Allied Bank is available from any of branches country-wide.
Allied Online provides a secure, efficient and convenient facility for making payments to
beneficiary accounts from any of branches country-wide. It can be used for cash
management services by corporate customers requiring funds collection or disbursement
facility.
Enchased facility is available at any of over 700 branches located in 250 cities.
Cheque drawn on a remote branch for credit into beneficiary’s account or encashment up to
a specified amount can also be presented at any branch by a 3rd party.
II-Allied cash and shop visa card:-
Allied Visa and Shop visa card are used by customers to:-
Withdraw cash directly from bank account from over 2,500 ATMs in Pakistan -
including Allied Bank's largest network of ATMs - and over 1 million ATMs
worldwide.
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To 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.
To go to all favorite restaurants and order whatever customer wants.
To enjoy traveling without carrying cash. With your Allied Cash + Shop Visa Debit
Card, customer can buy plane tickets and do all shopping abroad without worrying
about spending too much or running out of cash.
III-Internet:-
Banking at fingertips! Allied Direct Internet Banking offers the convenience to
manage and control banking and finances - when customer wants, where he wants to!
It's Simple, Convenient, Secure and Faster.
Some features of Allied Direct are:-
Simple and Convenient
Secure Secured & encrypted
24hoursx7days in a week Access
3-Consumer Products:-
and equipments. The Bank provides lease facilities for balancing, modernization,
replacement and expansion schemes to corporate and commercial clients in all industrial
enterprises.
Leasing is a popular mode of financing due to its distinctive features like tax shield,
preserve working capital, easy documentation and less processing time. It is available at all
branches of the bank.
5-Lending Products:-
I-Seasonal finance:-
Seasonal Finance facility is allowed against pledge of produce of Cash Crops
harvested in that particular crop season. The delivery of pledged stocks/goods is made
against appropriate cash payment.
II-Agricultural finance:-
Bank under Agricultural Financing Scheme envisaged by the State Bank of Pakistan
extends short, medium and long term, farm and non-farm credits. The farm credits are
extended for production (inputs) and 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). Details are as below:-
1-Production Loans:-
Inputs like seeds, fertilizers, pesticides, weed acids, herbicides, labor charges, water
charges, vegetables, Floriculture etc.
Working capital finance to meet expenses of various natures attributable to farming.
2-Development Loans:-
3-Non-Farm Loans:-
Livestock
Poultry
Fisheries
Forestry
2.6-Services:-
Allied Bank Limited is providing different types of services to its customers. These
are listed and explained below:-
I. Home remittances
II. Remittances
III. Utility bills
IV. Lockers
V. Commodity operations
VI. Hajj services
I-Home remittances: -
The Bank having a network of over 750 branches all over Pakistan, undertakes to
provide safe and instant payment of remittance from expatriates, routed through designated
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foreign exchange companies and correspondent banks with whom special arrangements
have been made in this regard. Through the Allied Express Service, Allied Bank ensures
that beneficiaries' Accounts in Allied bank branches are credited with in 48 hours of
receiving home remittance information from overseas
II-Remittances:-
Allied Bank can transfer funds to the remotest part of the country for
payment/credit to the customer himself or a third party, through Telegram/Telex/Tele fax
for payment/credit on the same/next day. Telegraphic transfers can also be made abroad in
Foreign Currency. Carrying cash to strange alien location can prove to be risky as a single
incident can render one without monetary backup of any sort. Hence traveler’s cheques are
introduced by banks in order to protect against any contingency.
Telegraphically Transfer:-
Banks are offering various types of products related to funds transfer in Pakistan,
assuring the fastest delivery of Funds around the Globe, through Telex, SWIFT and other
Electronic Media. Allied Bank with its large network spread all over the country is sharing
quite a sizeable Funds transfer business in the domestic market.
Bank has recently moved to optimize the use of electronic media to handle Funds Transfer
with speed. Even the shift over to "SWIFT" is at hand and a network has been established
by Central Office.
Demand Draft:-
A draft is one of the most popular Banking instrument in the trade circles to settle
business deals and transferring funds from one place to another. Allied Bank has taken
radical steps for a speedy Issuance/Payment of Drafts through automation and introduction
of a more simplified system based procedure
Pay Orders:-
Pay order is a Bank instrument issued by a Bank in Pak Rupees at the request of a
customer to transact payment to a named payee through banking channel.
Generally payments against such cheques (Pay orders) are restricted to "Payees Account"
and as such are required to be enrooted through a Bank Account locally
Traveler Cheques, ABRTC:-
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III-Utility bills:-
All branches of the Bank collect utility bills of electricity, gas and telephones. For
convenience of the customers, Utility Bills are collected by the branches during banking
hours and also in the evening-banking on all working days. Bills can be paid through Cash
or Cheques. Consumers may drop bills with crossed Cheques into a drop box available at
the branches under "Cheque Drop-in" system.
Utility Bill payment facility - Pay your telephone, electricity, and gas utility bills on
any of our ATMs without having to wait in long queues outside your branch.
IV-Lockers:-
Allied Bank Lockers are available in three different sizes Small, Medium and Large
on a yearly fee. Locker holders need not have an account in the Bank.
Safe Deposit Lockers' Insurance:-
The Bank has already informed its Safe Deposit Locker Holders through half yearly
Statement of Accounts as on 30-06-2007 that the Bank has arranged insurance cover at its
own cost subject to the terms and conditions of the insurance policy for the losses sustained
and discovered by reasons of damage, destruction or loss by fire, burglary and locker
breaking.
Maximum insurance ceiling provided for each category of lockers is mentioned
hereunder:-
S. No. Size Annual Locker Rent Maximum Loss
(Current) Coverage / Limit
1 Small 1,500 Rs.500,000/-
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V-Commodity operations:-
It is a Cash Credit Financing to Government Department for procurement of various
commodities, as per allocation of the limits by SBP on Government of Pakistan Guarantee.
VI-Hajj services:-
The Bank serves the intending pilgrims by helping them in performing this 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 Hajj policy is
announced by the Government of Pakistan.
3-Organizational Structure
3.1-Structure of organization:-
Here is the structure of the organization. Management of the Allied Bank Limited
was changed after the privatization if the Bank. Board of directors is the strategic body of
the bank which is responsible for overall decisions of the bank.
Audit committee is consisted of the following members:-
Mr Farrukh Qayyun Chairman
Mr M Naeem Mukhtar Member
Mr Abdual Aziz Khan Member
Board of directors:-
Management of the Allied Bank Limited was changed after the privatization if the
Bank.
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Name Designation
Mohammad Aftab Manzoor CEO
Mohammad Naeem Mukhtar Chairman
Abdul Aziz Khan Director
Sheikh Jalees Ahmed Director
Pervaiz Iqbal Butt Director
Farrakh Qayyum Director
Mohammad Waseem Mukhtar Director
Sheikh Mukhtar Ahmed Director
Tasneem M. Noorani Director
Nazrat Bashir Director
Mubashir A. Akhtar Director
Management:-
Name Designation
1. Asim Tufail Group Chief, Consumer & Personal Banking
2. Iqbal Zaidi Group Chief, Compliance
3. MohammadAftab Manzoor Chief Executive Officer
4. Muhammad Yaseen Group Chief, Treasury
5. Shafique Ahmed Uqaili Group Chief, Human Resources
6. Tahir Hassan Qureshi Chief Financial Officer
7. Waheed ur Rehman Company Secretary
8. Fareed Vardag Chief Risk Officer
9. Mohammad Abbas Sheikh Group Chief, Special Assets Management
10. Muhammad Jawaid Iqbal Group Chief, Corporate & Investment
11. Mujahid Ali Banking
12. Syed Shahid Raza Group Chief, Information Technology
13. Tariq Mehmood Head, Business Transformation Team
14. Zia Ijaz Group Chief, Operations
Group Chief, Commercial & Retail Banking
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Branch network:-
Allied Bank has 741 branches within the Pakistan. Its registered office is situated in
Lahore where as principle offices are given below:-
Central Group:-
Regions Number of Branches
Faisalabad 35
Sargodha 35
Gulberg, Lahore 34
Gujaranwala 34
City, Lahore 33
Multan 31
Sahiwal 25
Sialkot 23
Bahawalpur 22
Gujrat 21
Jhang 18
RahimYar Khan 12
Total 323
North Group:-
Regions Number of Branches
Rawalpindi 40
Peshawar 40
Mir Pur 33
Mardan 32
Islamabad 30
Abbotabad 20
Muzaffarabad 18
Kohat 17
Total 230
South Group:-
Regions Number of Branches
Sadar, Karachi 32
Nazimabad, 32
City,Karachi 31
Quetta 31
Hyderabad 24
Sukkur 21
Nawabshah 17
188
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Cash
Account Opening
Remittances
Clearing
Online
Foreign Currency
Advances
Bills
29 employees are working in Allied Bank Limited, Blue Area branch. These are
headed by Chief branch manager. 15 other employees are also working in the Main cash
department which is also headed by Chief branch manager.
6. Online
7. Remittances
1-Advances department:-
Different types of advances are offered by the bank. These are:-
1. Loans
2. Cash credits
3. Running finances, etc(In Pakistan)
4. Net investment in finance lease (In Pakistan)
5. Bills discounted and purchased (excluding treasury bills)
Payable in Pakistan
Payable outside Pakistan
Institutions
Functions of the Account Opening Department:-
Some functions of the account opening department are given below:
Opening of accounts of individuals, companies, clubs, partnerships etc.
Issuing of cheque books after the account opening within 6 days.
Issuing of ATM Debit Cards to account holders.
Issuing of Master Cards to accounts holders.
Mostly company accounts are handled by the CSM.
6-Online:-
Online Banking facilities are available to customers maintaining accounts at all
online branches across the country.
Functions of the Online Department:-
The following functions are performed by the online department:-
1. Cash Deposit for immediate credit to remote branch.
2. Remote Cheque Encashment from any online branch.
3. Instant Funds Transfer between any 2 online branches.
4. Remote Balance Enquiry and Statement of Account.
In Addition to the above, account holders of all online branches can obtain Allied
Bank's Allied Cash+ Card for use at ATMs as well as at Debit Card POS terminals.
7-Commercial and SME assets, CAD:-
Office of Commercial and SME Assets is the part of the Blue Area Corporate
Branch. Here 13 employees are working. This department is headed by Head Commercial
and SME Assets. Relationship manager and Assistant Relationship managers are working
under him. Organogram of the department is given below.
Nature of the security varies with the nature of facility provided to the customer,
some facilities require heavy security and some may not.
Generally the loan is secured against the following securities:
1. Mortgage
2. Hypothecation
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3. Pledge
4. Lien
Post partition Pakistan also adopted the same procedure under the Land Revenue
Act 1967.these records pertained only for revenue but do not inherited title of the property.
There was need to adopt the law which gives a right of Title to an owner. Subsequently
Transfer of Property Act 1882 (TPA) was also adopted by Govt of Pakistan.
Under the revenue Record following books are kept.
Register Haqdaraan maintained at Village level by Patwari.
Intiqlat maintained at Tehsil level by Tehsildaar.
Similarly where Provincial Govt has notified the cities, TPA 1882 applies and in
such cities sale and purchase take place through sale deed.
The land/property which exists in the village or outside notified areas, the
documents that shows the present status of the land is called FARD, and its record is
maintained by Patwari at the village for which it is related to. Documents which show the
transfer approval of ownership, is called the Intiqal, and it is held at the Tehsil Office of
Revenue department headed by Tehsildaar.
The lands falling in the area where TPA is applicable, ownership of the title of
property is evidenced through “Sale Deed”. This sales deed is registered with the Sub-
registrar whose office is usually located at Tehsil or at a place notified by Provincial
Governments.
Similarly Govt has established institutions like CDA/DHA/LDA/KDA responsible
for development of their cities. Records of such lands whether
commercial/industrial/Residential are maintained by such authorities. Lands to these
Authorities have been transferred by Revenue departments. Title of ownership of lands
located in these areas is evidenced through Allotment letter /Transfer letter etc. Such
authorities upon complete transfer of their rights execute a Sale deed registered with Sub
Registrar in favor of their allottee.
Similarly Housing Societies also work in the same manner described for CDA.
Many societies are also working in cities that do not hold any NOC from relevant
authorities. Any allotment /transfer letter is illegal through them; therefore care should be
taken to analyze Title of the property.
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1. Equitable Mortgage
2. Registered Mortgage
1-Equitable Mortgage:-This Mortgage the customer deposits the original title deed to the
bank and this title deed is the document through which the property is acquired. A specific
document is signed from the customer is called the MOTD (Memorandum of deposit of
Title deed). If the land does exist in the city then the Equitable Mortgage is only done,
customer has the title document Sales deed, there is no need to create the registered
mortgage in this situation.
Public and private limited company: In case of the company, the charge is also
registered to the SECP, that the following land has been mortgaged.
Advantage of Mortgage:
When the value of money falls, the value of land rises, “so therefore it forms a
sound and reliable security.
Disadvantage of Mortgage:
The laws relating to the immovable property are very complex. It is difficult for the
bank to sell it for recovering the dues.
Valuation of the Property is also a complex task, because marketability of the land
also varies with respect to location.
Preliminary Enquires before Creating the Mortgage:
Investigation of the Title
Search for Prior Charges
Value of the Property
Appropriate Form of charges
Registration of Charge to SECP, if the borrower is Public limited Company.
Free hold or lease hold property
Hypothecation:-
Hypothecation is also the kind of security in which the charge is created on the
movables goods and against which the facility is provided to the customer. In
Hypothecation the possession and owner ship remains to the customer but over charge is
created on it. If customer fails to repay the amount due on it, we have the right to sell these
movable items for recovering our amount. A special document is signed, between the bank
and the customer in this concern is called the letter of hypothecation
In case of a small medium enterprises / corporation, hypothecation charge may be
created on its receivables, as well as its current and fixed present and future asset. Charge
can also be on the following.
1. Charge over stocks of the company
2. Charge over receivable of the company
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5. The securities received will immediately be entered in the safe-in / safe-out register
maintained. A separate page shall be allocated for each customer. The register will
be initialed by the Supervisor and Departmental Head
6. In case where ranking charge registered by CAD with Registrar Joint Stock
Companies as per RA requirement and where subsequently NOC(s) are received for
conversion of ranking of charge into first Pari Passu charge the Departmental Head
will ensure that NOCs are received through CBG from all the existing charge
holders. He will then pass these NOCs to the Supervisor for preparing Form–16
(Annexure E) and supplemental letter of hypothecation agreement for registration
of the NOCs with Registrar of Joint Stock Companies. The Form–16 and the
supplemental agreement will be signed by the authorized signatory of the customer
and signatures shall be verified before submitting the same to the Registrar of Joint
Stock Companies.
7. The authorized representative of FBL will submit the documents to the Registrar
Joint Stock Companies for registering the same.
Pledge:-
It is also the kind of security in which the charge on movable is created. The
difference between the pledge and hypothecation is that in the case of pledge, the
ownership and control remains to the bank, not to the customer. The bank keeps the control
of the goods by the specified Muccudums, who work on behalf of the bank to keep check
and balance of the pledge goods. When the customer and bank signed this agreement, a
special document is signed between them called the pledge.
NO charge is registered to the Registrar Joint Stock Companies (in case of
corporation) when any assets are pledged, why?
A pledge specially involves control over assets and does not require to be registered
with the Registrar of Joint Stock Companies. The apparent reason for the same is that the
bank enjoys physical control of the goods / movable assets. On the other hand, however,
hypothecation of assets is required to be registered with the Registrar. Therefore, if
hypothecation of stocks is registered in favor of any other financial institution before the
stocks being pledged with FBL, then the other financial institution will have a priority
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charge even on the stocks already pledged with FBL. Hence, CAD will review search
report of the customer to whom credit facility is being allowed against pledge of stocks to
ensure that the customer’s stocks are not already hypothecated to any other financial
institution.
Lien:-
Lien is the kind of security created on most liquid assets; this is considered more
secure charge as compared to pledge and Hypothecation, because the encashment of this
security is more easily compared to other described securities.
In these types of security, CAD signs from the customer the letter of lien.
Lien can be marked on the: Customer account
National saving certificates etc
Accounting operations:-
It is said that accounts department is the backbone of the bank. It plays a vital role
in performing different banking functions. The accounts department of ABL is performing
its function computerized. The working in accounts department mainly depends upon
voucher system. For each and every transaction-taking place in the bank vouchers are
prepared and through these voucher contra entries are passed under different heads.
Accounts department controls the expenses and their right allocation of such expenses to
the right and appropriate accounts.
Functions of the account department:-
Following functions cover the working of the Accounts Department:-
1. Accounts – Vouchers for Expenses/Billing.
2. Treasury – Foreign Currency dealings, cash & funds management
3. HRD (Human Resource Department) – Employee salaries/Loans/Provident
fund.
4. Financial Control Unit – SBP (State Bank of Pakistan) cheques.
5. Reconciliation Control Unit.
6. ATM – automated Teller Machine.
7. Tax deduction and collection.
8. General services department.
9. Reporting (daily, weekly, monthly, quarterly, half-yearly, annually)
10. Maintain and update the ledgers for term deposits
11. Update general ledger
12. Prepare & printout different period statements.
5. Funds management.
6. Analysis of Accounts.
7. Implement effective budgetary controls, and analysis of their variances.
8. Checking, verifying, examining and scheduling the invoices of work done as
per term and condition.
9. Responsible for Budget Preparation, cash flow, financial statement, local
and foreign payments.
10. Preparation of reports for lenders.
11. Dealing with customers regarding all payments matters in local currency as
well as foreign currency and keeping records of loans.
Some others are given below:-
A-Daily reports:-
1-Daily Reports:-This report summarizes the daily position of all the main heads of the
bank i.e. different report deposits, TDR/NDR, cash etc.
2-Balance Sheet: This report also summarizes the balance sheet heads of the bank up to
the last working day.
3-Summary sheet:-This report is sent to the reconciliation unit. It summarize the all the
head that have been credited to the Central Branch Control (CBC) Account. It is prepared
on branch wise basis.
4-Reconciliation report:-This is prepared in order to reconcile any outstanding and
exceptional entry reported by the other branches through the reconciliation unit made by
any of the functional department of the bank.
5-Treasury Reporting: This report summarizes the exchange deals made for the foreign
currency with the customer and the head office for reporting the head office the stock of
such currencies and the balances of the Nostro and vostro accounts.
6-SBP Reconciliation Statement: This report is used in order to report the balance of the
FBL with the SBP in the current account with SBP. As the banks have to keep liquid cash
with the SBP so this report list any increase/decrease of the balance with the SBP.
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7-Advances: This report summarizes the figures of the deposit accounts as well as the loan
accounts of the customer with the bank.
8-Statement of Financing: This report summarizes the amount of financing extended to
the customers.
9-Detailed trial balance: This report summarizes all the balances in the different heads in
the income, expenses, deposits, financing and other related heads.
10-Daily expense vouchers: This report summarizes the daily expenses.
B-Weekly Reports:-
1-Balance sheet:-The balance sheet is prepared on the basis of the whole week activity by
using the General Ledger of the weekend.
2-Trial Balance:-This is same as of the daily trial balance but is prepared with the span of
one week by using the General Ledger of the weekend.
3-Deposit Comparative Position:-This report summarizes the comparative position of the
different deposit accounts category, TDR/NDR, and foreign currency accounts.
4-Risk Assets Liabilities Statement:-This statement summarizes the status of liabilities of
the bank, status of risk assets ( short term and long term), status of risk assets ( consumer
finance) like net lease value, net deposit, net financing amount, financing against FE 25 and
SBP refinance position.
5-Daily Statement of Deposits:-It states the retail deposits (current account, margin
account, and foreign deposits), hot deposits (deposits of security on loaning in big amount
in current account), and cash in hand in both local and foreign currency.
C-Monthly statements:-
1-Profit and loss statement:-This statement is the income statement prepared for the
month summarizing the revenue generated and the expenses incurred during the month.
2-General Ledger:-This ledger has the detailed information of all the heads in deposit,
financing, TDR/NDR, expenses, income and other related accounts. This is a very
extensive report prepared by the system.
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D-Quarterly Statements:-
1-Tax Statements: These statements include staff tax statement, services tax statement and
supplier’s tax statement.
2-Reconciliations:-Reconciliation of Inter Branch is done by matching ledger entries to the
statement entries. When an entry is properly matched, the date under which it is appearing
in the ledger is noted against the entry in the statement and ledger vice versa. The
matching, investigation, and reconcilement of all accounts entries are done as frequently as
the statement is received.
Finance system of the organization
Financial system of ABL includes from how to generate finance & where to utilize it.
The primary focus of ABL financial system is on automating processes within the bank and
to develop robust databases that will provide a ‘single source of truth’ for all internal and
external exporting reporting. These databases will form the foundation on which other
applications will be built.
3-Report of Financial Statements:-
For obtaining credit, party has to submit the last two to five years Balance Sheet
and Profit & Loss Statement (Income Statement) duly attested to authorized auditors. It is
preferred that the statements should be properly prepared and audited by Chartered
Accountants that give the true picture of the business. But in some cases as I observed in
ABL most of the clients who lie in the category of Consumer Banking Client don’t have
their Financial Statements.
In Such case ABL has to prepare the financial statement on the behalf of customer
and it is mentioned in other relative documents that the financials submitted are self / un-
audited. There is a high percentage of risk involved in it.
4-Comparative Statement of Financial Conditions:-
This form is in tabular form and as the name indicates it helps in analyzing the
financial condition of the firm from all perspectives. In this form bank has to do the ratio
analysis of the financial statements submitted.
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a. Capital Resources
b. Deposits
c. Advances
d. Investments
Generation of funds:-
Deposits act as a backbone of bank. It is the lifeblood of every bank. These deposits
are Source of generating funds for the bank and for the general public to meet the financial
needs.
The bank accepts the deposits at a low rate of interest and lends it at higher rate of
interest, the difference between the lending and accepting rate is the source of income for
the bank.
Profitability of ABL for the last five years
Years Profitability
2007 5,640,497
2006 2,751,431
2005 3,033,00
2004 192,000
2003 386,000
2002 (1,069,00)
The basic objective of the report is to observe that whether the techniques that we
read in the books are being used practically or not. It is because sometimes, it is heard that
there is a difference between theory and practice. But I personally believe that it cannot be
true. Theory is based on practical experiences and observation s of the writer.
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1. The bank is following the same techniques, rules, policies and strategies to get
different goals and aims.
2. Bank is following the different ways of investment which we studied in the Subject
of Investment.
3. Accounting and costing principles are followed.
4. Policies of the State bank of Pakistan are being implemented to do the business of
the banking.
5. Competition is prevailing. Bank is making efforts at all levels to get competitive
edge on its rival banks.
At the whole level what we studied in the books is practically done. Theoretical
concepts emerged from the practical activities and vice versa.
7-Financial Analysis
Represented by:-
Share capital (4,869,00) 4,404,642 4,404,642 4,488,642 5,386,370
Share 1,063,000 10,640,031 4,316,324
premium
Reserves - 716,562 1,019,899 6,133,209 6,050,713
Un- (6,490,000) (6,313,635) 1,658,829 5,607,796 6,971,308
appropriated
profit/
Accumulated
losses
9,447,600 11,399,694 16,229,647 18,408,391
Surplus on 895,000 808,244 1,635,542 1,458,106 1,469,851
revaluation
of assets
10,255,844 13,035,236 17,687,753 19,878,242
Earning per (10.55) (10.08) 3.63 0.81 6.89
share(EPS)
Price per - - - - 12.55
earning ratio
- - - - 87
Non mark–
up/interest income
7.3:-Ratio analysis:-
“It is essentially concerned with the calculation of relationships which after
proper identification and interpretation may provide information about the
operations and state of affairs of a business enterprise.” OR
To evaluate a firm’s financial condition and performance, the financial analyst needs to
perform “checkups” on various aspects of a firm’s financial health. A tool frequently used
during these checkups is a Financial Ratio “which relates two pieces of financial data by
47
dividing one quantity by the other.” We calculate ratios because in this way we get a
comparison that may prove more useful than the raw numbers by themselves.
Some of the ratios are given below and they are calculated as well:-
A-Liquidity Ratios:-
These are used to measures the firm’s ability to meet short term obligations. They
compare short term obligations with short term resources available to meet these
obligations. These include the following ratios:
1-Current ratios
2-Acid test ratios
1-Current Ratio:-
Current assets normally include cash, marketable securities, accounts receivable and
inventories. Current liabilities consist of accounts payable, short term notes payable, short-
term loans, current maturities of long term debt, accrued income taxes and other accrued
expenses. It shows a firms ability to cover its current liabilities with its current assets.
Liquidity ratios measure a firm’s ability to meet short-term obligations and pay back the
contractual obligations on the due date.
current ratio except that it excludes inventories—presumably the least liquid portion of
current assets from the numerator.
Acid-test ratio = cash+ marketable securities + accounts receivable / Current
liabilities
=18035+5777+44830/12143
=5.65
Interpretation:-
Quick ratio/Acid test ratio is found by dividing the most liquid current assets (cash,
marketable securities and accounts receivable) by current liabilities. This ratio shows that
the ABL has assets of value 5 to meet the current liabilities of value 0.65.
=7534/192170
=0.04
Interpretation:-
This is less then the zero which shows that the bank has enough capital and assets to
meet its liabilities. As the ratio is less then zero than it depicts that the management is
efficient in using assets of the ABL.
C-Profitability Ratios:-
These are divided in to given types:-
1-Return on Investment Ratio
2-Return on Equity Ratio
1-Return on Assets Ratio:-
This ratio compares unfavorably to a median value for the industry.
Return on Asset Ratio = Net income / Total assets.
Interpretation:-
An improvement in the Return on investment or Earning power of the firm if there
is an increase in turnover on assets, an increase in the net profit margin, or both. If this ratio
is high then it shows that the assets are more efficiently used by the Bank. We see that this
ratio was 0.34 in 2005 and rose to 1.75 in 2007. This shows that now assets are more
efficiently used in 2007.
2-Return on Equity Ratio:-
Return on equity compares net profit after taxes to the equity that shareholders’
have invested in the firm. This ratio tells the earning power on shareholders’ book value
investment and is frequently used in comparing two or more firms in an industry.
Return on Equity ratio = Net profit after taxes / shareholders’ Equity)
4397250/19878242 (100)
=22
Interpretation:-
A high return on equity often reflects the firm’s acceptance of strong investment
opportunities and effective expense management. And higher the return on equity might
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simply be the result of assuming excessive financial risk. In the table we see that this ratio
for the year 2007 is 22 while for the year 2006 it is 8. This shows that now ABL is much
stronger to accept investments opportunities.
D-Loans to Deposits:-
The loans to deposits ratio measures the total loans outstanding as a percentage of
total deposits. This figure is determined as follows for 2007:
Loans to Deposits = Loans or Advances / Deposits
=119506/161907
=0.74
=74
Interpretation:-
The lower this ratio indicates a bank is loaned up and its liquidity is high. The
higher this ratio indicates a bank is loaned up and its liquidity is low. This ratio is gradually
increasing & that’s not very good. The higher the ratio, the more risky a bank may be to
higher defaults. This ratio has risen from 44 in 2005 to 74 in 2007
Overall this ratio should be higher from stockholders point of view or management
point of view but should be low from creditor’s point of view. If deposits are increased the
ratio will increase. So more deposits are available for investments and equity is also
increased. It is 13.28 for 2007 and was 11.65 in 2006. Increase in ratio shows that the
deposits have increased.
F-Loan Loss Coverage Ratio:-
This ratio tells that how many bad debts should happen but these bad debts should
not increase means the organization should earn that much that it should be able to cover
bad debts. This figure is determined as follows:
Loan Loss Coverage Ratio = Provision against Loans & Advances / Profit/ (Loss)
Before Taxation
Interpretation:-
In 2004 ABL loan loss coverage ratio is -0.01, which is not good, and show the
instability of the organization. But from 2005 ABL start improving and till now it’s
improved to 0.23. This ratio should be higher, higher the ratio means less bad debts which
means loans have been recovered. It is good sign for management as well as creditors point
of view.
G-Net Profit/ (Loss) / Advances Ratio:-
This ratio is determined as follows for 2007:
Net Profit/ (Loss) / Advances
=4397250/168407280
=2.6%
For 2006
=4076158/144033634
=2.8%
Interpretation:-
This ratio should be higher. Higher the ratio shows the improvement of business of
the organization. In 2006 this ratio is 2.8% but in 2007 this ratio is 2.6.
H-Dividend Yield ratio:-
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This indicates the return that investors are obtaining on their investment in the form
of dividends. This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price. It is interesting to note
that there is strong correlation between dividend yields and market prices. Invariably, the
higher the dividend, the higher the market value of the share. The dividend yield ratio
compares the dividend per share against the price of the share and is calculated as:
/stock price
7.4:-Financial ratios:-
cost ratio
Capital adequacy -14 -17 -12 17 11
ratio
At overall level the Allied Bank Limited is showing profit. The above tables of
different ratios with respect to years are showing:-
Bank has more adequate capital as compared to the previous years.
After the tax the profits are raising each year.
Advance to deposits ratios are also raising. It is 74% in 2007.
Return on equity is 29% in 2007.
Capital is now more then enough for utilization.
Income to expense ratio is also rising which shows that the expenses are less as
compared to income.
statements are expressed as a percentage of the base year amount. The resulting figures are
called index numbers and this analysis is also called index analysis.
1. The Assets of the ABL balance sheet show the constant growth in every year. In
Balance Sheet the base year is 2003 and all financial items are 100(percent) for that
year. Items for subsequent years are expressed as an index relative to that year.
From that analysis we can easily judge the performance of ABL and showing
constant growth, which means that management, used its resources efficiently and
effectively. The assets were 100 in 2003 and they rose to 265 in 2007. This shows
the continuous raise in the assets of the bank.
2. Liabilities at the same time are also increasing.
3. Borrowings from financial institution in 2003 is 100% and in 2004 that is 470%
which is greater.
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4. In 2005 it reached to 284% and in 2006 it is 286% that is 164% increased from
2002.
5. Same is the case with deposits & other accounts. They are constantly increasing
every year. ABL working on several policies and trying to adopt and implement the
policies through which they can reduce their liabilities.
6. Share capital of the ABL is increasing every year. In 2004 share capital is 414%
which is increased to 506% in 2007.
7.6:-Vertical analysis:-
“An analysis of percentage financial statements where all balance sheet items are
divided by total assets, all income statement items are divided by net sales or
revenues.”
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Net assets
Represented by:-
Share capital 2.29 1.78 1.68
Share premium 2.25 - -
Reserves 0.53 2.43 1.89
Un-appropriated 0.09 2.23 2.18
profit/Accumulated
losses
Surplus on 0.85 0.58 0.46
revaluation of assets
100% 100% 100%
Income
Net Provision (29.308) (5.938) (4.094) (12.805)
Net Mark–up/ Interest 55.551% 73.450% 56.447% 39.939%
Income after provisions
Non mark–up/interest
income
Strengths:-
ABL has always looked upon the customer’s demand and preferences while
introducing new Islamic based products. That is why it has some strong points that
others don’t have as follows:-
Bank is providing a high quality service to its customers.
Large numbers of branches.
The bank enjoys competitive profitability in the industry.
ABL Bank has captured majority of potential customers in Pakistan.
ABL Bank is Successive and Market oriented.
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In the list of banking industry the Allied bank is at number 5 in respect of its
Balance Sheet and overall its size.
ABL Bank is investing large amount of funds on HR development and training.
Customer default rate is lower as compared to other banks.
Bank Al-Falah:-
PACRA, a premier rating agency of the country, has rated the Bank “AA” Entity
Rating for Long Term and A1= for the short term. These rating denote a very low
expectation of credit risk, strong capacity for timely payment of financial commitments in
the long term and by highest capacity for timely repayment in the sort term, respectively.
Further, the unsecured subordinated debt (Term Finance Certificate) has been awarded
credit rating of “AA”.
ABN AMRO:-
Pakistan Credit Rating Agency (PACRA), has upgraded rating of bank with long
term rating of ‘AA’ and short term rating at ‘A1+’ .These ratings represent very high credit
quality, a low expectation of credit risk and a highest capacity for timely payment of
financial commitments. These ratings are pertinent to the senior unsecured creditors
(depositors) of the Bank.
and a highest capacity for timely payment of financial commitments. These ratings are
pertinent to the senior unsecured creditors (depositors) of the Bank.
7.10-Future prospects:-
1. Bank is going to expand its branches network throughout the country.
2. Policies are made to upgrade the IT system of the bank to solve the problems
occurring in its prevailing IT system.
3. In future the Allied Bank is going to focus on loans to the agriculture sector as it is
the major part of the economy.
4. Allied Bank is going to develop its Human Resource Department. For this purpose
the bank is going the recruit more employees.
5. Allied Bank Limited is also going to expand its branches at an international level
particularly in Golf countries.
6. The Bank will concentrate on growing earnings over the long term at a rate which
will place it favorably when compared with its peer group.
7. Bank will focus on investing its delivery platforms, technology, people and bran to
support the future value of the Bank.
Employee’s turnover is high. Many people are leaving this bank because of getting
less salary as compared to some other private banks.
ATM machines are not always up to dated.
Low motivational level; non-aggressive marketing.
Employees’ dissatisfaction due to improper reward system.
It is not providing the Islamic modes of financing to the customer.
9-Recommendations
The problems which the CAD staff is facing due to new IT system UNIBANK must
be solved as soon as possible. The proper training arrangements must be done
monthly in this concern.
Not only by fulfilling training needs but also the financial needs by giving them
more salary and benefits they can also keep them satisfied, because if they will be
satisfied then the customers will also be satisfied.
Competent team must be recruited and trained in order get competitive advantage.
This is the time of extensive competition and ABL is surrounded by many
competitors. It has an opportunity to do aggressive marketing to increase its
business.
New branches must be open on further cities by doing the complete market
analysis.
Aggressive and proactive management style should be followed to increase HR
efficiency.
Stuck up portfolio of Finances should be effectively reduced.
Fund Investments should be made after careful analysis.
ABL should try to make more
Effort to increase it’s Advances by offering slightly low interest rate as compared to
it’s competitors.
Try to increase current level of equity financing.
Better cost control measures to reduce other expenses.
ABL should remove all the complaints of its customers by properly giving job
description of each and every employee, by giving properly training and developing
ethical standard in employees, so that they should deal the customers with cool
mind and should be able to solve their problems.
HR must focus on Succession Planning, and motivational level of employees must
be checked on different scales for reducing the employees’ turnover.
10-Conclusion
Banking sector in Pakistan has grown stronger and healthier during the past years.
Due to economic growth, high service charges, financial liquidity, reduction in tax rate and
interest rate of deposits and increase in spread rate have increased the bank profitability
significantly. Corporate interest in Islamic banking is still in initial stages but it is growing
that will obviously be beneficial for the ABL growth. The customer interest is increasing in
ABL, which is the positive sign for the Bank. Ratio analysis shows that the Bank overall
profitability has increased as compared to the previous years that are due to privatization of
the bank. Bank is at number 5 in balance sheet and branch network of the bank. Overall
bank is enjoying profits with a great trust of its customers.
11-References
In the preparation of the report following resources are used by me:-
Data related to products, services, history is taken from the website of the bank.
Financial reports are collected from the annual reports of the bank.
SWOT analysis is done with the help of Branch Manager, Relationship Manager
and Head of Commercial and SME Assets of the Allied Bank Limited.
65
KSE website.
Employees of the Allied Bank Limited.
Sir Muhammad Waseem (Investment Teacher)
Sir Sajjad Hussain (Head C & SME Assets)
Miss Ammana Akram (Relationship Manager of ABL)
Miss Marya Iftikhar (Relationship Manager of ABL)
2-Annexes
66
67
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Board of Directors
Audit Committee
President
Internal Audit
Treasury
Risk management
Special Asset
Management
Finance
Operations
Information
Technology
Human Resource
Corporate
Compliance and Affairs
Control
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Cash
Account Opening
Remittances
Clearing
Online
Foreign Currency
Advances
Bills
Marketing Operation
RM RM RM
Processing Officer