INTRODUCTIO N1. Objective of the studying the Organization:Banking is one of the most sensitive businesses all over the world. Bank play very important role in the economy of a country and Pakistan in bi exemption. it influences and facilitates many different but integrated economic activities like resources mob imitation, poverty elimination, production and distribution of public finance, the economy of Pakistan is growing day by day with an accelerated pace, to meet the requirements of these pace sound banking system is needed so that one can meet the financial needs of individuals and corporation also the agricultural, industrial, business sectors. Allied bank was formally known as the Australasia bank established on 3rd December, 1942 in the city of Lahore, this is before the formation of Pakistan. it was formed 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, deposits come to RS.101.554 billion and total assets equal Rs.121.164 billion. In this report I have tried to cover all the necessary aspects of banking by ABL. The primary purpose of the internship is to fulfill the academic requirements of my study as it is compulsory to do practical work in an organization and to implement the tools that they have studied for the analysis, there are some secondary purposes associated like To gain practical knowledge and experience that will help in future to get good opportunities (jobs).Another objective of my work experience was to relate the gained knowledge from books and institute with working organization so that I can see the different between concepts and their implementations. To gain confidence, which usually lack when any one enter in any, firm for the first time, therefore work experience removes certain fears and flaws that can create problem for any student. This internship will provide me with the exposure of the finance field. The internship is considered as the most efficient tool for learning the procedures and processes of any sort of profession. As I being the management student, this internship would prove to be as the most suitable method of teach the management practices have studied the world class courses here at A.IO.U which I think will definitely be found in actual practice in any organization. The courses will relate to the real work in one or other aspects. The internships are meant to provide the students to apply their

learning's that they do in classes to the real situations. As I have intended to do my majors at finance so I will try to seek my personal attitude towards finance during this internship. Generally, it is noticed that there is remarkable difference between market knowledge and bookish knowledge although the concepts are same but their application is different. During my internship i tried to delineate this difference, and was personally curious about the feeling of professional financial work in an office environment. Banking is a wide field and the whole aspects of banking cannot be covered in the eight week period so i tried to cover the important aspects by using most important most fusible technique. However this study of ABLs will help the management to identify their weakness and strengths so that they can minimize the threats and can avail the benefit from the opportunities. This internship report will be source information for all those who are the interested in the study of financial and competitive position of ABL. The source of data in this report included interviews of management, customer response interviews and discussion with staff members and personal observation personal observations. In the way to write report required different secondary data sources included ABL annual reports brochures, manuals, website and business reviews. Time is the major factor which hinders the dynamics of bank processing's. Lack of documented material provide to be another constraints in this regard as most of the material is confidential, therefore, internees are not allowed to get "handouts" Most of the times people were not free to answer my queries or they were not interested it all in my work. No one is entitled to retrieve its result for any purpose except authorized bank I personnel for official purpose. Research student are not allowed to retrieve and use any confidential material for any purpose, as it is again the bank policy. Banks play a central and very important role in the monetary life of a country, thats why they are well thought-out as the livelihood of modern economy. Today no one can deny the importance of Banking in the economy. They facilitate and expedite trade and commerce and provide a variety of services that one cant imagine with out Banks. The requirement of the Master degree in Business Administration is fulfilled when an internship of eight weeks has been done. The dedicated students polishes there professional skills in there specialized field. Main purpose of this program is to make students familiar with the personal interaction in career settings and practical work as it fosters the development of communication skills to work practicallyo o

To analyze the performance of ABL at the branch level and bank level. To highlight the important features of financial products offered by ABL

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o o

To analyze the bank through different techniques i.e. Horizontal, Vertical. To apply the knowledge gained in practical field.

This report is a reflection on my experience when I was internee in ABL, main branch Abbottabad. Since its inception in 1942, ABL has maintained a steady growth over the sixty years span of its operations. After its nationalization in 1974, it was denationalized in 1991 and the employees became the owners of ABL, through the unique concept of ESOP (Employees Stock Ownership Scheme)

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Overview of the Allied Bank Limited2.1 Brief history of the OrganizationEstablished in December 1942 as the Australasia Bank at Lahore with a paid-up share

capital of PKR 0.12 million under the Chairmanship of Khawaja Bashir Bux, and his business associates, including Abdul Rahman Malik who was amongst the original Board of Directors, the bank had attracted deposits, equivalent to PKR 0.431 million in its first eighteen months of business. Total assets then amounted to PKR 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. In the early 1940s the Muslim community was beginning to realize the need for the active participation in the field of trade and industry. The Hindus had since the late 1880s 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. It was particularly galling for Khawaja Bashir Bux and Abdul Rahman Malik to hear the gibe that Muslims could not be successful bankers. They decided to respond to the challenge and took lead in establishing this first Muslim bank on the soil of Punjab that was to become Pakistan in December 1942; by the name of Australasia Bank Limited. 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 was the only fully functional Muslim Bank on Pakistan territory on August the 14th, 1947.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

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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 Banks 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 which became Bangladesh. The bank did well in despite losing lot of its assets. By the end of 1973 the bank had 186 branches in West Pakistan.

Allied Bank from 1974 to 1991

In 1974, the Board of Directors of Australasia Bank was dissolved and the bank was renamed as Allied Bank. The first year was highly successful one: profit exceeded the Rs 10 million mark; deposits rose by over 50 percent and approached Rs 1460 million. Investments rose by 72 percent and advances exceeded Rs 1080 million for the first time in bank history. 116 new branches were opened during 1974 and the Bank started participation in the spot procurement agriculture program of the Government. Those seventeen years of the Bank saw a rapid growth. Branches increased from 353 in 1974 to 748 in 1991. Deposits rose from Rs 1.46 billion, and Advances and investments from Rs 1.34 billion to Rs 22 billion during this period. It also opened three branches in the UK. ESOP Revolution (Employee stock ownership plan) under the philosophy of ESOP ownership of an enterprise is transferred to its employees who are in an advantageous position in running the enterprise. The added advantage of ESOP that it strengthens the workers stake in the free enterprise system, in job securities, better profitability & unique corporate culture symbolizing family feelings & professional fraternity. September 10,1991 is the historical date as on this date the bank became the countrys 1st bank to be reconstituted as an institution jointly owned by its employees through the unique concept of Employees Stock Ownership plan [ESOP] developed by the Allied Management Group headed by Mr. Khalid Latif enabled the bank staff to react creatively to the privatization challenge. More that 7500 staff members acquired a share in the bank. The articulation of the ESOP is a landmark in the financial history of Pakistan-indeed of the entire world .It is a practical step ensuring an increase in workers participation and in productivity a means for enhancing an equitable redistribution of financial assets & an effective strategy for achieving the cherished goal of national self-reliance.

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Privatization 1991 to 2008

As a result of privatization in September 1991, Allied Bank entered in a new phase of its history, as the worlds first bank to be owned and managed by its employees. In 1993 the First Allied Bank Modaraba (FABM) was floated. After privatization, Allied Bank registered an unprecedented growth to become one of the premier financial institutions of Pakistan. Allied Banks capital and reserves were Rs. 1.525 (Billion) and assets amounted to Rs. 87.536 (Billion) and deposits were Rs. 76.038 (Billion). Allied Bank enjoyed an enviable position in the financial sector of Pakistan and was recognized as one of the best amongst the major banks of the country. In August 2004 as a result of capital reconstruction, the Banks 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 clientele through its network of more than 700 branches. In May 2005 Ibrahim Leasing Limited was amalgamated by transfer to and vested in with and into Allied Bank Limited. ILL 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 8th

, 10

th

and 17

th

August in ISE,LSE & KES. Muhammad Aftab

Manzoor has taken charge as CEO and President of the Bank on August 13 2007. He is an ex- president of MCB Bank Ltd. Today, with its existence of over 60 years, the Bank has built itself a foundation with a strong equity, assets and deposit base. It offers universal banking services, while placing major emphasis on retail banking. The Bank also has the largest network of over 700 online branches in Pakistan and offers various technology- based products and services to its diverse clientele

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2.2 Nature of the Allied Bank Limited

Allied Bank Limited (ABL)is one of the dynamic commercial Bank of Pakistan by capturing largest market share amongst new Banks and has provided good value to its shareholders. Allied Bank limited (ABL) is principally engaged in the business of Banking (banking means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise;) as defined in the Banking companies ordinance, 1962 over the year; ABLhas proved its strength as a leading Banking sector entity. Allied bank engages in following function The borrowing, raising, or taking up of money; the lending or advancing of money either upon or without security; the drawing, making, accepting, discounting, buying, selling, collecting and dealing in bills of exchange, hundies, promissory notes, coupons, drafts, bills of lading, railway receipts, warrants, debentures, certificates, scrips (participation term certificates, term finance certificates, and such other instruments as may be approved by the State Bank) and other instruments, and securities whether transferable or negotiable or not; the granting and issuing of letters of credit, travellers cheques and circular notes; the buying, selling and dealing in bullion interest the buying and selling of foreign exchange including foreign bank notes; the acquiring, holding, issuing on commission, underwriting and dealing in stock, funds, shares, debentures, debenture stock, bonds, obligations, securities (participation term certificates, term finance certificates, and such other instruments as may be approved by the State Bank) and investment of all kinds; the purchasing and selling of bonds, scrips or other forms of securities (participation terms certificates, term finance certificates, and such other instruments as may be approved by the State Banks) on behalf of constituents or others, the negotiating of loans and advances; the receiving of all kinds of bonds, scrips of valuables on deposit or for safe custody the collecting and transmitting of money and securities;

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2.3 Business Volume of ABL:Rs in (Million) 2,005 2,006 2,007 2,008 2,009 Total Revenue 5,027 6,120 10,333 14,736 19,708 118,795 Deposit 61,657 83,319 , Advances 44,778 69,838 85,977, 99,179 100,780 Investments 22,104 17,239 25,708 28,625 39,431 Pre-tax Profit 1,902 28,243 2,859 3,347 2,210 After tax profit 1,103 1,923 2,022 2,250 2,681 131,83 9 143,037

Return per Share

8.78 12.76 13.42 7.48 8.92Source: ABL (www.abl.com.pk) website

25000 20000 15000 10000 5000 0

2005 2006 2007 2008 2009

From deposit point of view it can be concluded that from the year 2005 to 2009, the total deposits has increased about 100-110%, which shows a tremendous growth in deposit. From the table we also conclude the result of pre-tax profit which also show increase from 1.9 billion to 2.2 billion in 2008 it was 3.3 billion but in 2009 it decrease due to opening of new branches all over the Pakistan. The overall progress of the bank is very good in private sector. From the above table a conclusion can be made that bank sees up and down from earning per share but it is only due to opening of new branches, as the number of required branches once achieved the bank will increase its earning per share.

T. Revenu 5027.468 6120.734 10333.264 14736.175 19708.737

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3 Employee in ABL Bank

Year Employee

2004 2005 2006 2007 2008 2009 6768 6909 7139 8181 8325 8713

Staff Strength Permanent Temporary/on contract Banks own staff strength at the end of the year Outsourced Total Staff Strength

Total 8,713 142 8,855 2,835 11,690

No of Employee in ABL Abbottabad (BISE) Branch

Designation Assistant Voice President Officer in Grade-I Officer in Grade-II Officer in Grade-II I Senior Assistants Massagers Total

No s2 12 10 5 1 5 35

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Product/ service Lines of Allied bank of Pakistan4.1.1All-Time Banking

Allied Bank has introduced the Allied Cash last year also referred to as ATM card. The customer will now have the convenience of withdrawing cash from any of ABLs ATMs (Auto Taller Machine) conveniently located in major cities 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 account or printing an abbreviated (mini) statement showing the most recent eight transactions up to the previous working day. In order to obtain Allied Cash+ Card, the customers simply have to fill out prescribed Application form available at selected Allied Bank Branches in Karachi and Lahore. The dully-filled form should be handed over the Manager of the Branch where the customer is maintaining his account. Non-account holders would first have to open an account with Allied Bank to have access to this facility. The Customer can feel absolutely safe his Allied Cash + Card because it can only be used with the Personal identification Number (PIN), which is given to him by the bank. Graphical representations have been employed, where appropriate, for ease of understanding.

4.1.2Allied Umrah Aasan

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This unique scheme facilities those persons, who cannot afford to incur the lump sum expenses for Umrah. It allows the intending pilgrims (Aazmeen) to make payment of Umrah charges in monthly installments. Its salient features are:o o o o o

It is free of interest and markup. Using this scheme family, relatives and household servants can be sent for Umrah. Around 2500 Aazmeen are to be sent for Umrah every month. Lucky winners of the draw are duly informed by their respective branches. Total package for Aazmeen from Karachi is being Rs. 45,000. Aazmeen from Lahore and Islamabad will have to pay an extra Rs. 3,000/- for Airline fare. Umrah packages are of 10 days duration. The charges include Airline return ticket. Fee Visa, family accommodation and traveling within Saudi Arabia (Jeddah to Application for whole Family/Group can be filed through a single Application form.

o

o

Makka, Makka to Madina and Median to Jeddah).o

All applicants of a family/group are sent for Umrah even if only one member of that family/group is declared successful in the draw.o

Due to any reason if Umrah Applicant needs to withdraw his/her application, he/she will given a refund of all money deposited through installments till that time. At the time of submitting the application Aazmeen has to deposit Rs. 2,000 per

o

person as first installment. Rest of the money is to be deposited through monthly installments of Rs. 2,000/- person on every 5th day of the month.o

If an Applicant wins in the draw he/she is required to pay the balance amount through monthly installments on returning from Umrah. Aazmeen have to submit a copy of their NI Cards and Passports with the application. Applicants have to deposit the monthly installment using deposit slips still 5th of

o o

every month. Defaulters will not be included in the draw.

4.1.3Master CardsThe customer can now become the holder of a true Credit Card here in Pakistan. Allied Bank under license from Master Card International, U.S.A. issues its Master Card to

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anyone meeting the eligibility criteria. With the Allied Bank Master Card the customer is assured of a service meeting the highest international standards maintained by Master Card. The Allied Bank Master Card helps the customer pay without the complications of cash or checks. It doesnt cost the customer anything if he pays in full within the due date, but if he decides to spread the payments over several months a service charge @ 2.50% per month is charged. Allied Bank Master Card is safer than cash and simpler than checks. The customer has been an account holder with the Allied Bank to apply for the Allied Bank Master Card that is available to the customer for an initial fee of Rs. 2,000/- (Rs. 500/membership fee + Rs. 1,500/- annual fee). Once the customer obtains his card, he simply presents it at Shops, Supermarkets, Hotels, Pharmacies, Nursing Homes, restaurants, Petrol Pumps and hundreds of other establishments which display the familiar Master Card sign throughout Pakistan and abroad. Once purchases are made, the customer signs a voucher and thats it he is not required to take extra troubles. Every month the customer receives a statement showing details of transactions, outstanding and the minimum amount due. The statements also give the last date for payment so the customer can avoid paying service charges. In order to avoid disruption in use of the card, it is essential that a least minimum payable amount of the bill be paid regularly. In case the required payment is not received the operation of the Master Card is automatically, suspended by the system. In such case, the card is activated after receipt of overdue payment only.

4.1.4Allied Tahafuz Deposit SchemeBrings the customer unparalleled life insurance covers along with attractive monthly profit. Minimum Deposit amount Rs. 50,000/- or multiples thereof. Insurance cover up to Rs. 5,000,000/. As Competitive rate profit. The features of this scheme are: Prospective client who will maintain a return free deposit for at least 3 months shall eligible to avail interest free/mark-up free finance. Payment of profit on monthly basis, automatic renewal on face value. Life insurance up to 5 times of the customers deposit amount with no extra cost. Premium shall be paid by the bank. Full payment of claim in case of Death Permanent total Disability. Eligibility Age 18 to 64 years. No medical examination for deposit up to Rs. 500,000/- and age up to 60.

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4.1.5Allied Karzas Scheme (No Interest/Markup)Allied Bank moves a step forwards by introducing interest free banking through Allied Karzas Scheme. The aim of this scheme is to provide an opportunity to the depositors to take advantage of a real Riba Free economic environment and avail Prospective client will maintain a return free deposit for at least 3 months shall be eligible to avail interest free/mark-up free finance. Deposit amount Rs. 100,000/- and multiples thereof. Minimum deposit period, 3 months with automatic rollover facility. Premature encashment allowed, without any penalty/charge. Minimum deposit period for eligibility of finance, 3 months. Maximum period of finance, 6 months. Maximum period to avail finance 12 months from the maturity of deposit. Every month (30 days) completed by the deposit shall be taken into account for calculation of entitlement of finance. Finance proposal processing fee Rs. 100/- (non-refundable) plus documentation cost on actual basis. In case of default/delay in repayment @ 0.055% per day (20.075% p.a._ to be placed in charity A/C. Formula for calculation of entitlement of finance. Same amount of finance for half the period of deposit or same period of finance for half the amount of deposit.

4.1.6Home RemittancesThe Bank having a network of 755 branches all over Pakistan, undertakes to provide safe and instant payment of remittance from expatriates, routed through designated foreign exchange companies and correspondent banks with whom special arrangements have been made in this regard. Through the Allied Express Services, ABL ensures that beneficiaries Accounts in ABL branches are credited with in 48 hours of receiving home remittance information from overseas.

4.1.7Hajj ServicesThe 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

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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.

4.1.8Utility BillsAll 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 he evening banking on all working days. Bills can be paid through cash or checks. Consumers may drop bills with crossed checks into a drop box available at the branches under Checks Drop-in system.

4.1.9Agricultural FinancesBank under Agricultural Financing Schemes envisaged by he State Bank of Pakistan extend 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).

4.1.10 LockersAllied 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.

4.1.11 customer.

Imp clients/customers through large number of authorized branches

where trained and motivated staff is available to handle the business on behalf of

4.1.12 Allied Bank Rupee Travelers ChecksCarrying cash to strange alien location can prove to be risky as a single incident can render one without monetary backup of any sort. Hence banks introduce travelers checks in order to protect against any contingency.

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4.1.13 Seasonal FinanceRunning Finance is a short-term loan allowed by the bank for a period of one year. The running finance account can be operated and daily sale proceeds can be deposited into the account. The markup is recovered on the products of daily outstanding balance. The running finance is suitable for meeting day-to-day financial needs of the business. Cash Financeis allowed against pledge of goods. The delivery of goods is made against payment. Demand Finance is disbursed in lump sum or in accordance with the agreed disbursements schedule and it is repayable as per the agreed installments, which could be monthly,quarterly, biannual or annual.

ABL STRUCTURE5

Comments on Structure of ABL

Successful and profitable banking management depends on two principal factors. The manner in which the functions of banking, that is the acquiring of deposits, the investing or converting such deposits into earning assets, and the servicing of such deposits, are performed. The degree to which officers and employees contribute their talents to the progress and welfare of the bank in discharging duties and responsibilities.

5.1 Management HierarchyThe management hierarchy represents the different positions and designations in the hierarchy of the ABL. However, this is not the reporting hierarchy but merely represents the positions and grades on the basis of seniority and grades.

President

Senior Vice President

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Vice President Senior Executive Vice President

[rosodmemtPresidentExecutive Vice President Regional General Manager

Managerxecutive Vice President5.2 Functional Hierarchy

Branch Manager

The functional hierarchy represents the reporting order in the hierarchy of ABL. The hierarchy has president and directors at top management level and officers Grade I, II and Grade III at the lower level management of ABL. The middle level management consists of regional general Manager and Regional Controller of Operations. These positions are not fixed. Any person in the hierarchy above the branch manager can be appointed as RGM and controller operations.

President and CEO

Board of Director

Head of Departments

Regional General Manager

Controllers of operation Branch Manager

Office G-I, II and other lower Staff

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5.3 Structure of Head OfficeAllied Bank of Pakistan Head Office is situated in Karachi having branches, regional functionality, money circulation, and their human resources and so on. ABL has its offices and corporate branches spreader all over the country. Head Office is an administrative office to manage all its branches and offices, to manage their policy making body/decision making bodies which are given as under: a. Board of Directors b. Executive Committee c. Divisional Head Offices and Provincial Headquarters The head office has nine divisions which are divided in to different wings. The Head Office is responsible for central affaires and delegation of powers / authority to the Regional Headquarters. (Annexure Attached)

5.4 Board of DirectorsThe Board of Directors (BOD) of ABL is comprises of President, 3 SEVPs, 1 Representative of PBC, 1 representative of GOP, and 1 for private sector so it comprises of 7 persons.

5.5 Executive Committee

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The executive committee consists of President and nine members and one of the members also perform the functions of Secretary of the committee. The executive committee nominates the divisional Heads. This body monitors day to day affaires of the Bank and is sanctioning authority of financial and business proposal.

5.6 Divisional ChiefsThe Bank has nine division which are working under SEVP, EVP and divisional chiefs. These nine divisions are: Management Support Audit and inspection Treasury Management Marketing and Development Credit Policy Management Overseas Banking Special Assets Management Bank Secretariat

5.7 Provincial ChiefsTo enhance and manage the performance of banking system, the administration also has divided the power of sanctioning finance and other credit facilities through provincial chiefs by province-wise. The provincial head quarters of these chiefs are situated in Lahore, Karachi, Quetta and Peshawar. The ABL has 29 regions in four provinces and Azad Kashmir.

5.8 Regional Management CommitteeThe management has designed the banking structure into regions and their sub-divisions. To manage these regions, a Regional Management Committee is allocated which consists of the following designations, looks after the affaires of the regions. Business Chief Operational Chief Risk Management Chief

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Compliance Chief

6 Organization Branch Structure6.1 Structure of Balakot Branch.In ABL Balakot branch Balakot was opened in 1997. Mr. Shahid SVP is the chief Manager and Mr. Asim is operation manager who is AVP. There are 10 employees in Bank. At present branch is providing services in all areas of banking. relation at end of reports.) There are six departments in Abbottabad Branch i.e. Credit department Accounts department Deposit department Remittances department Cash department IT department Credit and Accounts department directly comes under the supervision of chief manager the rest of department answerable to manager operation and manager operation responsible to chief manager. There is foreign exchange department which works under deposit department (Annexure-III shows this

6.2 Staff order of this Branch

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The staff order of the branch is as follows: Branch Manager

Officer G-I

Officer G-II

Customer Service Manager

Manager Operation

Teller Messenger

Branch Manager is a head within the branch. Under branch manager there are four main designations i.e. Offices Grade-I, Officers Grade-II, Customer Service Manager and HR Manager. Officers Grade-II & II are also divided into these departments like credit department, account department, remittances department, cash department and IT department having their proper designations while customer service manager is also under branch manager has to take the responsibility to handle and motivate customer. Teller works under customer service manager. HR manager is also works under branch manager having responsibility to hire contract employees within local community and also to handle and manage payroll system for branch employees. Messenger and teller also works under HR manager.

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6.3 ABL Various Departmental Review:

Different departments of ABL are working which are given as under:

6.3.1 Current Saving DepartmentIn ABL current saving department mainly deals with cheques, vouchers and advices. First of all a cheque holder have to present his/her cheque to the person responsible for issuing the tokens. . Then cheque is passed on to the computer operator to entry it in computer. Afterward it will go for signature verification after which it will be given to cashier for payment.

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Computer Operations: In ABL the computer section have several duties that are as under. Daily T ransactions: To record all the transactions in case of deposits made by the people and also to record all the withdrawals made by the people or customers. Each transaction has to be recorded in its appropriate head of account with the help of prescribed codes. Vouchers: To record all the vouchers made by the remittance department, Remittance department have to prepare debit and credit vouchers for about every transaction recorded in their department. Then these vouchers are sent to computer operator to record those in computer. Advices: To record all advices received from other branches. Most of the-inter branch or intra branch- remittances are subject to ultimate receipt of advices from the corresponding branch to materialize the transactions. These advices also have to be recorded in computer. Statements: To close the daily record a number of statements have to be printed out. Statements like: Days transactions (sequence) Overdrawn facilitated a/c statement Markup sheet Inter branch transactions Detail of PLS and Current a/c Days transactions (a/c wise) Operative, Dormant, Inoperative and Unclaimed a/c All ATM transactions Detail of GL entries (official & non customer transactions) Summary of all a/c (debits, credits & balances) Profit due, transferred, disbursed, etc.

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6.3.2 Account DepartmentBank borrowing funds from outside parties is more important because the entire banking system is based on it. Receiving of deposits is a basic function of all commercial banks. Commercial banks do not receive these deposited for safekeeping purpose only. When the bank receives the amount of deposited as a depositor, it become the owner of it. The bank may therefore use these deposits, as it deems appropriate. But there is an implicit agreement that the amount owned by the bank will be paid back to the depositors on demand or after a specified period of time. The borrowed capital of the bank is than the bank own capital. Banks borrowing is mostly in the form of deposits. These deposits are lend-out to different parties. Larger the difference between the rate at which these deposits are borrowed and the rate at which they lend-out the greater will be the profit margin of the bank. Larger the funds lend-out the greater will be the return earned on them and greater the amount of return on these deposits earned greater will be the profit for the bank. It is because of this interrelated relationship. Deposits are referred to as the life blood small for any banking sector. Kinds of Account: There are numbers of account that ABL offers to its customer keeping in mind their needs and dealing. Saving Bank & PL Account: In Pakistan the saving Bank accounts are know as profit and profit and loss sharing accounts (PLS A/C) fowling the illumination of bank. The owners of such account are not allowed to withdraw money more than once are twice a week. In case of withdrawal of large sum, the depositor is required to give to prior notices a week or two. Thus the bankers are not required is always available to bank for giving to loans to their customers. Thus these deposits also serves as source of credit certain by the commercial banks. The rate or profit on this type of account varies from time to time. All the commercial banks declare the rate of profit every year that is paid on these accounts on the basis of their monthly credit balance. The bank will determine the proportion of profit & its decision will be final. Profit will be determined on daily product basis while it will be paid on monthly basis & will be paid on the minimum balance between the first day & last day of the month. Zakat will be deducted on the exceeding amount as exempted from the Zakat deduction. Taxes will be imposed according to the rules & regulation. In Pakistan post offices &

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national saving centers also maintain this savings bank account to encourage saving habits among the people. At the time of opening this account, a minimum amount of Rs.500 is to be deposited. Subsequently the account is opened & account number is located. The depositor is given a cheque book. The depositors who are wishing to close his account are required to present his cheques to the bank in order to draw the credit balance and to close the account. This type of account you can open joint account also which can be operated by anyone. Current Account: There is no limit of withdraw of money from these accounts. In practice the bankers do not allow any profit to such deposits in Pakistan. The customers are required maintaining the minimum credit balance in their account in case of failing incidental charges are recovered from defaulters. This is because the depositors may withdraw current deposits at any time and as such the bank is not entirely free to employ such deposits. In general, the bank allows the overdraft facilities to current account holders & the prevailing rate of markup is charged from these customers. In ABL the minimum amount required to open the current account is Rs. 500. No profit is paid to account beside this that the account holder has the facility to taking s much money as he wants. Individual account is opened in the name of the single personal one person on whose name it is opened only conduct it. While two opens joint account and partnership account are more person and the bank fallow their instructions for the conduct of the account. Similarly limited companies can also open their current account. Fixed Deposit Account/Term Deposits These deposits are also called as time deposits : because these deposits are based on the fixed duration. The period for which these deposits are kept with bank are ranged from seven days to ten years in light of the agreement between the customer and the banker. The profit allowed on these account depend on the duration longer the duration of the deposits the higher will be the rate of profit. The operation of fixed account is different from saving & current accounts. Every time money is deposited with the bank an application from filled and the bank issue a fixed deposit receipt for amount deposited along with specific period. Fixed deposit receipt is given to the depositor and the bank retains the counterfoil of the same receipt. Fixed term deposits may be in the joint names of two or more person. The payment to one of those people will not discharge by the bank without the authority of others.

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Opening and operation of bank account: As discuss earlier there is a prescribed procedure for opening different types of account. Following steps re followed while opening a new account. Application from for Opening of Accounting: A person who wishes to open a bank account is required to complete this from the personal information is to be furnished. The application signs the declaration to effect that he has understood the rules and regulation of the bank. Introduction: As required by the banking law the new customer needs to be introduced by the account holder of the same branch where the account is being opened. The manager or any other bank officer may introduce the new customer if they know them personally . Signature card: At the time of opening an account a specimen signature card containing two signature of the customer is required which the manager of the branch attaches with application form. During the operation of account the signature is verified when the cheque is presented for payment

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Cheque Book: After completing formalities for opening saving and current a cheque book s issued to the customer for withdrawing cash from his or her account at the time of need. The cheque contains minimum 25 pages & maximum 100 pages. The bank also charges excise duty on cheque book.

6.3.3 Advances Department

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Lending Principles : The basis function of the bank is to accept deposit and lend money to the borrowers against a spread so to be able to give some profit to the depositors as well as to earn profit for the bank. While lending the money to the borrowers the bank should observe the following lending principals: Safety Principle: It means that the landed money will come back along with interest or service charges etc. The borrower should not invest the money borrowed in unproductive or speculative business. Liquidity Principle: The money which has been landed to the borrower should be returned to the bank on demand or as per repayment schedule provided by the client. The sources of repayment should be clear and definite Purpose Principle: The purpose of the advances should be legitimate and productive. It should be ensured that the banks, funds are not being utilized for speculative business. The credit restrictions by the central bank should not be violated & it should also be ensured. It is always beneficial for the bank to finance for short-term requirements. Profitability Principle: The end result of every business activity should be to earn some profit. Similarly the bank must get some profit out of the activity of lending so that the depositors could get their shares as well as the shareholders could earn something for their investments.. Security Principle: The proposal should be dealt on its merit not on security. The security should be considered a safety for the bank only in case of unexpected emergencies. All the relevant documents of securities must be obtained & got valuation of the property or any other security should be assessed correctly. Spreading of Risk Principle: It is always safe for the bank to spread the risk in large number of borrowers instead of loaning huge amount to few big shots, it is better to obtain different types of securities instead of concentrating on one security.. National Interest and Suitability Principle: It is our moral as well as legal obligation to ensure that no loaning is running counter to national interest. It is also our duty to ensure that our lending policies are not against the social conditions or bindings

6.3.4 Credit Department

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The main function of the credit department is to lend money to the customer. Allied Bank Ltd. Lends money in the form of clean advances against promissory notes as well as secured advances against tangible and marketable securities. Beside these ABL also lend money against life policies and immovable property. Lien: Lien is the bank right to with hold property until the claim on the property is paid. The bank looks at their lien as a protection against loss or overdraft or any other credit facility. In ordinary lien the borrower remains the owner of the property, but the actual or constructive possession remains with the creditor or bank though the borrower has no right to sell it. By Cash Credit: In this the bank lends money to the borrower against tangible security. The total amount of the loan is not paid in one installment. The borrower has to pay markup on the amount borrowed. Cash credit is favorite loan for large commercial & industrial concern . By Overdraft: This the most common type of bank lending. When a borrower requires temporary accommodation, ABL allows its customer to withdraw an excess of the balance form their account which the borrowing customers have in credit and thus called overdraft. This facility is given to regular reliable & well established customer. When it is against collateral securities, it is called Secured Overdraft & when borrowing customer can not offer any collateral security except his personal security then the accommodation is called Clean Overdraft. Short Term Finance: Allied Bank Ltd. receives the saving of the people and lends it for short term to its customers. Short-term finance is generally given for a period of one year or less in durationdium Term Finance. The duration range of the intermediate term finance is from one year to three years. It is also called term loan. Intermediate term finance is usually given for the expansion of an existing business or for the purchase of new equipments. Long Term Finance:This type of finance is required for the period of more than five years. Long term finance is generally given for the compilation of big projects, for the construction of building and for the purchase of machineries.

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Producer of Applying for Loan: Any customer who applies for loan should have an account (usually current account) with ABL branch concerned. That account must be in running position. When approval from head office is given, branch gives tern & condition to the party. Bank does not advance 100% loan against a security, rather the profit margin is different in different type of loan.

6.3.5 Remittances DepartmentAnother important department in ABL Khyber Bazar Branch is Remittances Department. The remittances department transfers the funds from one bank to other bank and from one place to another place. In remittances department the collection take place. The ABL made payment of only open cheques on the counter and prohibits the payment of crossed cheques. ABL transfers money from one place to another by the following means: Mail Transfer: When a customer requests the bank to transfer his money from this

bank to any other bank or the branch of some other bank, the first thing he has to do is to fill an application form. In which he states that he/she wants to transfer the money from this bank to that bank by mail. If the customer is the account holder of the bank, operating personal will proceed further with steps like: Writing a debit voucher for a/c holders a/c Preparing an advice in favor of stated bank/branch Writing credit voucher for GL Mail the advice If the customer is not the account holder of this bank, then firstly, he has to deposit the money and than above procedure will be adopted to transfer his money.

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Telegraphic Transfer:

With the changing requirements of the customer, ABL has

introduced the fastest transfer of money. The sender is required to apply through a form in which he will give all the necessary details about the sender and beneficiary. The sender deposits the money to be transferred plus bank charges at the bank counter. The remittances officials send a telegram to concerned branch with specified code words and the receiving branch makes payment to the beneficiary. Vouchers are sent by ordinary mail to keep the record. On TT, no excise duty is charged only commission and telegram charges are charged. Pay Order: Pay order is the most convenient simple and secure way of transfer of money. It is issued by, drawn upon and payable by the same branch of the bank. It is neither transferable nor negotiable and as such it is payable to the payee named there in. The following are the parties to a pay order. Purchaser is a person, firm, company or local authority. Issuing/paying branch is one which issues/pays on presentation. Payee is a person named there in. Demand Draft: Demand Draft is another way of transfer of money from one bank to another bank. Unlike pay order, a form is required to be filled for the issuance of the demand draft in which necessary particulars about the beneficiary and sender are given. The sender deposits the amount of DD plus commission and other charges on the bank counter, from where he is given a receipt and in accordance with this receipt he is issued The following are the main essential of draft: It is a Negotiable Instrument. Filling a form and depositing the amount written on it prepare 2} Draft. It is a written order to its branches or to another bank to pay the stated amount on draft.

6.3.6 Cash DepartmentThis is the most important and critical department in a Bank. There are two basic functions performed by the cash department. These are

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Receipts: An individual who has account in the Bank can deposit money in his account. For deposit of the money the individual has to fill the deposit slip in which the account holder writes his name, Account number, amount of the money both in figures and in words. After filling the deposit slip the Cash amount along with the deposit slip is submitted with the cashier. The cashier collects the cash and counts it and after verification the cashier stamps the deposit slip. One part of the deposit slip is given back to the customer and the other part of the deposit slip remains with the bank for the record purposes. The cashier also record the deposits made by the customers in credit sheets daily. The deposits of all customers of the bank are controlled by mean of ledger account. Every customer has its own ledger account and has separate ledger cards in which his / her total record is kept. Bill collection is also one of the main functions of bank. Cashier has to prepare a list of bills serial number, a copy of which is to be sent to the corresponding organization. Payments: The procedure of clearance of a cheque or payments is as following. First of all the customer presents his cheque to the cashier The cashier records the account number and the amount, which is to be drawn. Then the cashier check the cheque number in the computer for the verification whether the account holder has such amount in his account which he is demanding or not. If the computer passes the cheque, the Passing officer signs the cheque and sent it to the cash counter then cashier pays the written amount to the customer and then in the end cashier records the amount paid in computer.

6.3.7 Foreign Currency DepartmentLike Pak rupees account the foreign currency has many accounts like Saving account Current account Term deposit account. The bank deal in three type of foreign currency account Dollar, Euro & Pound The account is open with 1000 dollar if it is less 5-dollar per month is deducted. For opening the account NIC & introduction is required of the same bank. If any person wants to import

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goods from foreign, an account is required and for international trading the FC is needed. ABL provide foreign currency on Pak rupee at booking rate and the central office sent Rates In foreign currency department the remittance is sent through Foreign Telegraphic Transfer. The account holder can sent the amount in foreign bank account. If any transaction is made the daily report is given to the central office Karachi daily. Different accounts can b open like joint account or company account. The thankful letter is sent for opening the foreign currency account to account holder and introducer. When any transaction is made the bank inform stock exchange daily. The foreign currency note is counted and recorded in the cash memo book. The people in the foreign country sent the amount through S.W.I.F.T. Weekly and monthly report of all the transaction is given to the stock exchange. Cheque book is also issued to the account holder & the foreign currency Account number is given to him. In this FBC & FBR is done. Debit Credit Voucher is used. The charges are deducted while closing the foreign currency account. And the cheque book is return while closing the account. The branch sent excess foreign currency to its main branch. If any branch needs foreign exchange they sent to this branch.

6.3.8 Clearing DepartmentIn clearing process, if the account holder of ABL receives the cheque of other bank like City Bank, Habib Bank Limited etc, and he submits it in ABL branch to be cashed. At the same time the clearing process starts. First the bank name. Cheque number and the amount are written in the register. After this three kind of stamps are required first bank name stamp, secondly clearing stamp of next date and If the cheque is not local then the inter city clearing stamp is required. Some cheques are local and some are outstation. The institution N.I.F.T. provides the services in clearing the cheque. They send the different cheque to different banks. The N.I.F.T service is only in few cities, like Karachi, Lahore, Rawalpindi. The cheque of inter city is send through N.I.F.T. And where, the N.I.F.T service is not available so the cheque is sent through T.C.S.

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The clearance of cheque is informed through advice. Some cheque is not passed so they should return so Rs. 100 is deducted and if the cheque is inter city then the postage charges is deducted. For this purpose the Debit & Credit voucher is used. When the cheque is cleared the today stamp is required. Some cheque is drawn on ABL. This is called outward clearing. These cheques will be entered in the outward clearing register. And the advice is sent for the clearance of cheques. The account holder account is credited.

Out Ward Bill for collection: OBC means the cheque of other banks. When they sent OBC the OBC is credit & OBR is debited and the advice is made on that time, one copy is remain in the bank and the other copy is sent to the related branch. When they realized the opposite entry is made. It is entered in the OBC register. The income A\c commission is credited, and postage

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FINANCE DEPARTMENT

&

ACCOUNT

Structure of ABL Finance & Account Division:ESVP heads finance division. This ESVP is also DH (Divisional Head) of this department. This division is responsible for keeping the records of all the transaction of different branches. There are 15 people working in this department for all branches of Allied bank and the final authority in this department is ESVP. Finance division is further divided into subdivision, which are Budget and Finance & DRC. The Finance Division (FND) is the hub of all financial information for maintaining statutory accounts and measuring the performance of the Bank. While ensuring overall financial management, financial control, financial reporting and accounting function, FND is responsible for maintaining the account records and systems in accordance with internal policies, regulatory requirements, corporate governance and international accounting standards. It also establishes policies and procedures relating to finance function, monitors returns / spreads and reports on various performance indicators including asset / liability mismatch.

6.4 Finance & Account Operations:The Banks management is responsible to establish and maintain an adequate and effective system of internal controls and procedures. The management is also responsible for evaluating the effectiveness of the banks internal control system that Covers material matters by identifying control objective and reviewing significant policies and procedures. The scope of Audit and Credit Risk Review Group (A & CRRG), independent from line management, inter-alia includes, review and assessment of the adequacy and effectiveness of the control activities across the bank as well as to ensure implementation of and compliance with all the prescribed policies and procedures. All

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significant and material findings of the internal audit reviews are reported to the Audit Committee of the Board of Directors. Note: Structure and Functions of the Finance Department (Annexure attached)

The Audit Committee actively monitors implementations to ensure that identified risks are mitigated to safeguard the interest of the bank. The Internal Controls Division under the ambit of Operations Group is entrusted with the responsibility of expediting rectification of irregularities and control lapses in branches operations and various controlling offices pointed out through audit reviews. Vigorous efforts are made by Operations Group to improve the Control Environment at grass root level by continuous review & streamlining of procedures to prevent & rectify control lapses as well as imparting training at various levels. The Compliance Group, through its regional offices, ensures adherence to the regulatory requirements and banks internal policies and procedures, with specific emphasis on KYC/AML. The Banks internal control system has been designed to provide reasonable assurance to the Banks management and Board of Directors. All Internal Control Systems, no matter how well designed, have inherent limitations that they may not entirely eliminate misstatements. Also projections of evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may eteriorate. However, control activities are ongoing process that includes identification, evaluation and management of significant risks faced by the Bank. Recognizing it to be an ongoing process, the management of Allied Bank is in the process of adopting an internationally accepted COSO (Internal Control Integrated) Framework with the assistance of a reputable advisory firm in accordance with SBP Guidelines on Internal Controls. The bank has already completed the detailed documentation of the existing processes and controls, together with a comprehensive gap analysis of the control design. The bank has addressed some of the major gaps identified during the exercise and is at an advanced stage of developing and implementing remediation plans for the remaining gaps. In addition, comprehensive management testing plans and framework are being developed for ensuring on-going operating effectiveness of key controls.

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Allied Bank expects the complete various stages of its Internal Control Program and achieve external auditors certification on internal controls over financial reporting in 2010. The Board of Directors being ultimately responsible for the internal control system endorses the management evaluation and efforts to adopt above mentioned internationally accepted standards in improving controls and processes to ensure better risk mitigation.

6.5 The Role of Financial Mangers:Almost every firm, government agency, and other type of organization have one or more financial managers. Financial managers oversee the preparation of financial reports, direct investment activities, and implement cash management strategies. Managers also develop strategies and implement the long-term goals of their organization. Work environment in Allied bank for financial manager: Working in comfortable offices, often close to top managers and to departments that develop the financial data those managers need, financial managers typically have direct access to state-of-the-art computer systems and information services. They commonly work long hours, often up to 50 or 60 per week. Financial managers generally are required to attend meetings of financial and economic associations and may travel to visit subsidiary firms or to meet customers. Financial managers of the bank play an increasingly important role in mergers and consolidations and in global expansion and related financing. The financial manager of the bank has specialized knowledge to reduce risks and maximize profit. ABL bank financial managers advise senior managers financial and other matters. The role of the financial manager, particularly in the bank, is changing in response to technological advances that have significantly reduced the amount of time it takes to produce financial reports. The CFO of the bank work on teams, acting as business advisors to top management. The team of CFO of the bank is will equipped with the latest computer technology to increase the efficiency of the bank financial operations. The CFO of the bank monitor and control the flow of cash receipts and disbursements to meet the business and investment needs of the bank. The example is cash flow projections

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are needed to determine whether loans must be obtained to meet cash requirements or whether surplus cash should be invested in interest-bearing instruments. The CFO of the bank also responsible of Risk and insurance programs to minimize risks and losses that might arise from financial transactions and business operations. They also manage the organizations budget. The other function of the bank CFO such as lending, trusts, mortgages, and investments, or programs, including sales, operations, or electronic financial services. He also establishes relationships with other financial institutions in terms of accounts, cash management and credit management to get new market for the bank and to attract business.

6.6 Use of Electronics data in decision making:The Electronic Technology Division (ETD) is responsible for managing the Bank's technology needs. This includes not just establishing and maintaining technology infrastructure for providing operational support to all units of the Bank, but also encompass introducing latest state-of-the-art technology-driven products and service delivery systems. In an age of ever increasing competitive pressures, technology support impacts service delivery standards and customer satisfaction levels. The value addition from this area has made a significant contribution towards successfully expanding and managing the customer base of the Bank. The ABL has a countrywide communications network utilizing Satellite, Radio and Leased Line links. Through it, the Local Area Network (LAN) in each branch is connected with the Wide Area Network (WAN) of the Bank. This has provided the Bank with on-line country wide ATM / Inter-branch transaction capability. The Bank, along with a foreign partner Bank, is the original co-founder of the first inter-Bank ATM switch in Pakistan, which is now known as "One-Link". During the year, a large number of new technology initiatives were successfully implemented. The every new branch opened during the year was operational with on-line Banking from day one. This included the ABL bank Offshore Banking Unit in Bahrain, ( which was linked to the Head Office and the Treasury via a Virtual Private Network (VPN). The Bank's existing systems were also updated. The list covers a wide range from upgrading the SWIFT connectivity of the Bank; to enhancing an Oracle based Human Resource

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Management Information System. New initiatives include developing an Oracle based application for State Bank of Pakistan reporting, Electronic Bills Payment System via the Bank's ATM network and the Internet. The technology area has ambitious plans for the future. The list includes Call Centers, Data Mining and Warehousing Project, and enhancement of the ATM network to the international CIRRUS network standards. The range of utility bills presently payable via the Internet and the ATM network is to be increased, subject to agreements with the utility companies. In addition to the above, the Bank will focus on improving customer service standards and products range by focusing on new and emerging e-commerce and internet related technologies. ABLhas an Electronic Technology System at Head Office Rawalpindi. This system provides services to the individual-to-individual Accounts Holders, information required by upper Management / State Bank & Government Departments. The Electronic Technology System provide following services: Online Banking Internet Banking Auto Teller Machine (ATM) Phone Banking Balance Transfer facility Online Availability Of Different Application Form Technology has played a pivotal role in meeting customer expectations, particularly with respect to speed and quality of service. ABLhas fully automated transitive processing systems for back-office support. Its branch network is connected online real time and its customers have access to off site as well as on site ATMs,all over Pakistan. Its phone Banking services and Internet Banking facility allows customers to enjoy routine-Banking services from any here any time in the world.

5.4 Mobilization of funds in ABL:

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The basic function of bank is accepting deposit and lending advances and the difference is the bank profit. For lending advances bank need money and this money comes from customer through deposit. So main source of funds in bank is deposit and same with Allied bank for mobilization of funds Allied bank top management make policies in the guidelines of SBP policy. The Allied bank top management, expert management and CFO do lot of working before introducing any scheme once they work on that scheme and take final decision than they launch that scheme. In Allied bank following schemes are used for mobilization of fund. Through which Allied bank raise fund. 1: C urrent Account. 2: Saving Account. 3: Term & fixed Deposit Account. (Rs. In Million) YEAR 2005 2006 2007 2008 2009 Fixed Deposits 6,762 13,275 37,999 40,349 29,997 Saving Deposits 42,241 49,911 57,854 64,698 81,605 Current Accounts 11,406 18,463 20,089 23,925 28,465 Other Deposits 66 97, 125 290 415 Total Deposits 163,140 81,748 116,068 129,264 140,484 www.abl.com.pk Fixed Deposits are continuously increasing from 2005 to 2008 while in 2009 it is decreasing. Saving deposits are increasing from 2005 to 2009 as well as current assets are increasing. The major change is in other deposits i.e. in 2005 these are 66,550, in 2006 these are at 97,829 have a continuous increase up till 2009 i.e. 415,904 a great change.

5.5 Generation of funds in ABLFinancial institution works for profit and specially commercial bank the primary objective is profit. And Allied bank also works for profit and this profit mostly comes from markup income and non markup income. Markup income means the difference between interests paid to depositors and receives interest from loan. And non markup income means the income receives by giving different types of services to customers receive commission on the services.

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Allied bank also generates funds through loaning / Investment & Commission / Exchange. Allied bank also invests in stock exchange and earns dividend this dividend income also the generation of funds of Allied bank. Allied bank also generate fund by dealing in foreign currencies.

(In Million) S.# Generation of Fund 200 5 1 Net Mark-up / Interest Income 407 200 6 448 2007 2008 2009 8780 1259 6 1514 3

3 7 2 Fee Commission & Brokerage Income 524 708 838 1013 1072 3 Dividend Income 37 26 51 109 137 4 Income from dealing in foreign currencies 112 180 356 5844 655 5 Other income 278 177 206 321 336 Total Income 502 7 558 1 1023 3

1462 6

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www.abl.com.pk

5.6 Sources of Fund in ABL:The sources by which Allied bank get fund are following. 1. Paid up capital, the reserve fund. 2. Deposits 3. Borrowing from non-deposit sources. All these sources are very important sources and through this bank have generated lot of fund. And through this Allied bank balance sheet figure goes up and these funds are used for advances and for investment purpose. These are main sources besides these main sources, Allied bank also gives different services to its clients which are in the shape of advances and also bank help them in there business in return of these loans bank gets interest and its commission which is also the source of funds. Allied bank make very strong policy in raising fund thats why every year the figure of these funds increase upward. (In Million)

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S.# YEAR 2005 2006 2007 2008 2009 01 Reserve Fund 2759 4317 5862 5814 6948 02 Deposits 61656 83318 118794 131839 143036 03 Borrowings 15903 13781 10562 14964 17553www.abl.com.p k

The bank has main three sources of funds: In 2005 reserve funds are 2759 which is increased to 6948 in 2009 which shows the growth of bank. In 2005 deposits are 61656 which is also in increasing up till 2009 i.e. 143036 and also the borrowings are 15903 in 2005 increasing continuously to 2009 i.e. 17553.

3.9 Allocation of Funds in ABL:(In Million) S.# SE CTOR 2005 2006 2007 2008 2009 01 Cash & balances with treasury Bank 6678 8762 11766 14879 13356 02 Balance with others Bank 2650 4847 5550 7333 3497 03 Lending to financial institutions 5770 2324 10172 8392 14444 04 Investment 22104 17239 25708 28625 39431 05 Advances 44777 69838 85976 99179 100780 06 Fixed assets 1979 2595 3192 3810 5128 Bank accept deposit and on these deposit bank gives interest for this interest and for his own profit bank allocate these fund in different sector. The main allocation of fund in Allied bank is lending advances from these bank earn interest income through which he pays to depositor and remaining difference is bank profit. Beside this bank also invest in other businesses but in the guideline of state bank. Allied bank always invests in safe investment due to which risk of loss is minimized. In Pakistan all the financial institution works under the guideline of state bank same with Allied bank that strictly follows the policies and restrictions of state bank of Pakistan. State bank of Pakistan has check and balance on banks that they not invest fund of depositor in risky investment. Due to these policies every bank maintain 8% of CRR (cash required return) with state bank of Pakistan which now 6% due to liquidity. Throwwww.abl.com.p k

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which depositor has trust on banks. Allied bank also maintains 6% CRR with state bank of total demand/time liability which help them in case of emergency.

5.8 Critical Analysis of Theoretical Concepts Financial statements (or financial reports) are formal records of a business' financial activities. These statements provide an overview of a business' profitability and financial condition in both short and long term. There are four basic financial statements:1. Balance Sheet - Also referred to as statement of financial condition, reports on a company's

assets, liabilities and net equity as of a given point in time.2. Income Statement - Also referred to as Profit or loss statement, reports on a company's

results of operations over a period of time.3. Cash FlowStatement - Reports on a company's cash flow activities, particularly its

operating, investing and financing activities.4. Statement of Stockholder's Equity - Reconciles the difference between net equity at two

different points in time. Financial statements provide information of value to company officials as well as to various outsiders, such as investors and lenders of funds. Publicly owned companies are required to periodically publish general-purpose financial statements that include a balance sheet, an income statement, and a statement of cash flows. Some companies also issue a statement of stockholders' equity and a statement of comprehensive income, which provide additional detail on changes in the equity section of the balance sheet. Financial statements issued for external distribution are prepared according to generally accepted accounting principles (GAAP), which are the guidelines for the content and format of the statements. In the United States, the Securities and Exchange Commission (SEC) has the legal responsibility for establishing the content of financial statements, but it generally defers to an

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independent body, the Financial Accounting Standards Board (FASB), to determine and promote accepted principles. Users of Financial Statements Financial statements are used by both internal and external users. 1. Internal Users: Are owners, managers, employees and other parties who are directly connected with a company. Owners and managers require financial statements to make important business decisions that affect its continued operations. Financial analysis is then performed on these statements to provide management with a more detailed understanding of the figures. These statements are also used as part of management's report to its stockholders, as it form part of its Annual Report. Employees also need these reports in making collective bargaining agreements (CBA) with the management, in the case of labor unions or for individuals in discussing their compensation, promotion and rankings. 2. External Users: Are potential investors, Banks, government agencies and other parties who are outside the business but need financial information about the business for a diverse number of reasons. Prospective investors make use of financial statements to assess the viability of investing in a business. Financial analysis are often used by investors and is prepared by professionals (Financial Analysts), thus providing them with the basis in making investment decisions. Financial institutions (Banks and other lending companies) use them to decide whether to grant a company with fresh working capital or extend debt securities (such as a long- term Bank loan or debentures) to finance expansion and other significant expenditures. Balance Sheet A balance sheet, also known as a "statement of financial position", reveals a company's assets, liabilities and owners' equity (net worth). The balance sheet, together with the income statement and cash flow statement, make up the cornerstone of any company's

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financial statements. If you are a shareholder of a company, it is important that you understand how the balance sheet is structured, how to analyze it and how to read it.

How the Balance Sheet Works The balance sheet is divided into two parts that, based on the following equation, must equal (or balance out) each other. The main formula behind balance sheets is: Assets = liabilities + shareholders' equity This means that assets, or the means used to operate the company, are balanced by a company's financial obligations along with the equity investment brought into the company and its retained earnings. Assets are what a company uses to operate its business, while its liabilities and equity are two sources that support these assets. Owners' equity, referred to as shareholders' equity in a publicly traded company, is the amount of money initially invested into the company plus any retained earnings, and it represents a source of funding for the business. It is important to note, that a balance sheet is a snapshot of the companys financial position at a single point in time. It's called a balance sheet because the two sides balance out. This makes sense: a company has to pay for all the things it has (assets) by either borrowing money (liabilities) or getting it from shareholders (shareholders' equity). The balance sheet is one of the most important pieces of financial information issued by a company. It is a snapshot of what a company owns and owes at that point in time. The income statement, on the other hand, shows how much revenue and profit a company has generated over a certain period. Neither statement is better than the other - rather, the financial statements are built to be used together to present a complete picture of a company's finances.

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FINANCIAL ANALYSIS

7 Financial AnalysisFinancial statement analysis is the principal mean of reporting the financial condition and the result of operations of an organization, or in other words we can say that financial analysis are carried out for the purpose of identifying the financial strengths and weaknesses of an organization by properly establishing the relationship between the balance sheet and income statement items. This analysis helps many parties in making decision who are interested in business activities. To improve the quality of decision making, proper analysis of these statements helps a lot. The firm itself and outsider providers of capital, creditors and investors all undertake financial statement analysis. The type of analysis varies according to the specific interests of the party involved. For example, suppliers are interested in liquidity of the firm. There claims are short term, and the ability of the firm to pay these quickly is best judged by an analysis of the firms liquidity. The claims of the bondholders, on other hand, are long term. So bond holders are more interested in cash-flow ability of the firm. Investors are commonly concerned with present and future earnings. As a result, investors usually focus on analyzing profitability. They would also be concerned with the firms financial conditions insofar as it affects the ability of the firm to pay dividend and avoid bankruptcy. Management also analyzes financial analysis for the purpose of internal control and to check the performance of the firm. Similarly government agencies analyze financial data for the tax purpose.

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Allied Bank Limited Balance Sheet From 2005 to 20092005 2006 2007 2008 2009 Rupees in thousands6,678,026 8,762,866 11,766,925 14,879,230 13,356,055 2,650,166 4,847,899 5,550,148 7,333,002 3,497,054 5,770,842 2,324,839 10,172,242 8,392,950 1,444,143 22,104,425 17,239,156 25,708,194 8,625,915 39,431,005 44,777,538 69,838,392 85,976,895 99,179,372 100,780,162 1,979,919 2,595,023 3,192,862 3,810,331 5,128,428 --1,425,986 1,459,716 2,732,641 3,812,788 5,535,038 85,386,902 107,167,540 145,099,907 166,033,588 182,171,885

ASSETSCash & balances with treasury Banks Balances with other Banks Lendings to financial institutions Investments Advances Operating fixed assets Deferred tax assets assets Other

LIABILITIESBills payable Borrowings from financial institutions Deposits and other accounts Sub-ordinated loans Liabilities against assets subject to finance lease Deferred tax liabilities Other liabilities973,703 1,227,093 1,315,680 1,839,077 2,627,051 15,903,055 13,781,555 10,562,338 14,964,087 17,553,525 61,656,607 83,318,795 118,794,690 131,839,283 143,036,707 - 1,000,000 2,999,700 2,998,500 2,997,300 37,350 14,159 1,459 806,753 526,866 567,217 736,298 471,519 962,592 1,282,980 2,271,393 2,603,113 3,219,796 80,340,060 101,151,448 136,512,477 154,980,358 169,905,898 5,046,842 6,016,092 8,587,430 11,053,230 12,265,987 1,141,680 1,255,848 1,507,018 2,004,333 3,006,499 2,759,599 4,317,301 5,862,074 5,814,754 6,948,336 - - - 1,799,979 2,144,810 3,901,279 5,573,149 7,369,092 9,619,066 12,099,645 1,145,563 442,944 1,218,338 1,434,164 166,342 5,046,842 6,016,093 8,587,430 11,053,230 12,265,987

NET ASSETS Share capital Reserves Un-appropriated profit Surplus on revaluation (Net to Tax)

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Allied Bank Limited Profit & Loss From 2005-20092005 2006 2007 2008 2009 Mark-up / return / interest earned 4,073,715 4,487,206 8,780,698 12596921 15143241 Mark-up / return / interest expensed 1,379,609 1,117,206 4,278,374 6977313 8685624 Net mark-up / interest income 2,694,106 3,370,000 4,502,324 5619608 6457617 Provision(Non-performing loans & Advances) 308,528 277,398 638,547 1128137 3920240 (Reversal) / provision for impairment in the Bad debts written off directly 7 - 308,528 315,471 601,992 1128513 3921741 Net mark-up / interest income after provisions 2,385,578 3,054,529 3,900,332 4491095 2535876 Non mark-up / interest income Fee, commission and brokerage income 524,775 708,377 838,561 1013660 1072868 Dividend income 37,658 26,318 51,143 109326 137079 Income from dealing in foreign currencies 112,808 180,992 356,218 584344 655761 Gain on sale of investments 540,193 99,825 112474 2361251 Other income 278,512 177,648 206,819 321758 336809 Total non-markup / interest income 953,753 1,633,528 1,552,566 2139254 4565496 3,339,331 4,688,057 5,452,898 6630349 7101372 Non mark-up / interest expenses Administrative expenses 1,436,304 1,845,179 2,591,985 3277353 4789536 Other charges 1227 138 1,832 6141 12051 Total non-markup / interest expenses 1437531 1,845,317 2,593,817 3283494 4801587 1901800 2,842,740 2,859,081 3346855 2299785 Profit before taxation 1901800 2,842,740 2,859,081 3346855 2299785 Taxation current 873,639 876,089 828,774 983875 98535 prior years' -188,247 - -233950 Deferred -74,904 43,611 196,558 113006 -245812 798735 919,700 837,085 1096881 -381227 Profit after taxation 1103065 1,923,040 2,021,996 2249974 2681012 Un-Appropriated profit brought forward - 1617597 1799979 Profit available for appropriation 1103065 1,923,040 2,021,996 3867571 4480991 Appropriations: Statutory reserve 220,613 384,608 404,399 Capital reserves (reserve for issue of bonus shares) 114,168 251,170 497,315 Revenue reserves 539,948 1,036,092 894,229 Proposed cash dividend 228,336 251,170 226,053 1,103,065 1,923,040 2,021,996 -value of investments 38,066 -36,555 376 1501 www.abl.com.p k

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7.3 Ratio AnalysisWith a greater understanding of the balance sheet and how it is constructed, it can be looked now at some techniques used to analyze the information contained within the balance sheet. The main way this is done is through financial ratio analysis. Financial ratio analysis uses formulas to gain insight into the company and its operations. For the balance sheet, using financial ratios (like the debt-to-equity ratio) can show a better idea of the companys financial condition along with its operational efficiency. It is important to note that some ratios will need information from more than one financial statement, such as from the balance sheet and the income statement. The main types of ratios that use information from the balance sheet are financial strength ratios and activity ratios. Financial strength ratios, such as the working capital and debt-to-equity ratios, provide information on how well the company can meet its obligations and how they are leveraged. This can give investors an idea of how financially stable the company is and how the company finances itself. Activity ratios focus mainly on current accounts to show how well the company manages its operating cycle (which include receivables, inventory and payables). These ratios can provide insight into the operational efficiency of the company.

7.3.1 Current RatioThis ratio indicates the business liquidity position over specific period of time. It measures ability to meet current debts with current assets. It is calculated as. Current Ratio = Current Assets / Current Liabilities 2005 2006 2007 2008 2009 C. Assets 15,099,034 15,935,604 27,489,315 30,605,183 31,297,252 C. Liabilities 16,876,758 15,008,648 11,878,018 14,964,087 20,180,576 Current Ratio 0.89 1.06 2.31 2.05 1.55 As we see the current ration of Allied bank we increase every year from 2005 to 2008 but if we see 2009 in that year downward tread current ration decrease from 2.05 in 2008 to 1.55 in 2009. in 2003 the current ratio is 0.89 which increase in 2006 to 1.06 due to decrease in current liabilities although current assets decreases in 2006 but current liabilities decrease

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more than current liabilities the reason of decrease in current assets is due to decrease in lending to financial institutions also in this year bank made less investment compare to last year. In 2008 bank also borrow less compare to last year. In 2009 current ration increase very high compare to other years. The reason is same that in this year current assets increase very much and current liabilities decrease very much compare to last year. This is due to the same reason of last year. In 2007 again current ration increase which is good sign for Allied bank. But in 2009 it decrease due to liquidity problem and this year Allied bank clear its bill which are due on him. ABL has maintained and constructed funds to settled short debts and is in sound position.2. 5 2 1. 5 1 0. 5 0 2005 2006 2007 2008 2009Last five year financial statements of ABL

7.3.2 Leverage RatioFinancial leverage is the extent to which a company is financed with debt. The amount of debt a company uses has both positive and negative effects. The more the debt, the more the company will have trouble in meeting in its obligations. Thus the more debt, the higher is the profitability of financial distress and bankruptcy. On the other hand debt is the major source of financing and banking industry typically uses the higher percentage of debt. Debt financing provides significant tax advantage and its transaction costs are low than that of equity. Leverage ratios measure the amount of financial leverage. Commonly used leverage ratios are debt to ratio, and debt to equity ratio. Financial leverage is concerned with the proportion of debts to its equity. Higher the leverage, higher the profitability as with the increase in leverage the financial risk increases.

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7.3.3 Debt RatioThis ratio shows the percentage of debt to the total assets. It also indicates the proportion of rights of the outsiders on the assets of the business. Debt Ratio = Total Debts / Total Assets 2,005 2,006 2,007 2,008 2,009 Total Debts 80,340,060 101,151,448 136,512,477 154,980,358 169,905,898 Total Assets 85,386,902 107,167,540 145,099,907 166,033,588 182,171,885 Debt Ratio 0.94 0.94 0.94 0.93 0.93 The debt ratio of Allied bank is very constant through out the last 5 years only little bit change in last 2 years compare to 2005, 2006 and 2007. this ration exhibit that slight increase in 2006 with gradual decrease over the next few years up to 2009, balance sheet indicates that substantially less than 95% of the organizations assets were financed by out side which has shown gradual decrease in 2007,2008,2009 from 94.08% in 2007 to 93.27% in 2009.0. 942 0.94 0. 938 0. 936 0. 934 0. 932 0.93 0. 928 0. 926 0. 924 2005 2006 2007 2008 2009

7.3.4 Debt to Total Capitalization RatioIt is the ratio which is also used to measure the financial leverage or risk of any business. It shows a proportion or percentage of business total debts to its shareholders funds.

Debt to Equity Ratio = Total Debts / Share holders Equity + debt 2005 2006 2007 2008 2009

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Total Debts Equity(D+E) Debt to Equity Ratio

80,340,06

101,151,44

136,512,47

154,980,35

169,905,898

0 8 7 8 3,901,279 5,573,149 7,369,092 9,619,066 12,099,645 20.59 18.15 18.53 16.11 14.04

The debt to equity ration shows Conservative approach to debt/equity ratio indicates smaller amount of funds came from shareholders equity than outsiders provided comparison between the years shows that the ratio has considerably decreased which shows credibility of the organization and stakeholders protection. In 2005 debt to equity ratio is 20.59 which decrease in 2006 to 18.15 in 2006 again rise due to increase in total debt in this year bank total deposit increase very much due to change in rate before this bank pays less interest rate but due to rate change in market Allied bank also change it and attract more customer. In 2008 this ration goes down and same trend in 2009 the reason is stakeholders investment in bank.25 20 15 10 5 0 2005 2006 2007 2008 2009

INTEREST COVERAGE RATIOAny business may measure its ability to pay interest out of its annual profit interest and taxes in number of times with the help of interest coverage ratio. If the ratios trend shows increasing trend, then definitely the business ability to pay interest enhances.

Interest Coverage= Earning before interest and taxes / Interest Expense 2005 2006 2007 2008 2009

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2005 2006 2007 2008 2009 Interest Expense 1,379,60 1,117,206 4,278,374 6,977,313 8,685,624 9 Interest Coverage 1.37 2.54 0.66 0.47 0.26 Profits before taxes available to cover interest expense have been fluctuating unevenly through 2005-2009. 1.37 In 2005, it increased to 2.54 in 2006. the reason of this increase is that this year Allied bank make huge profit this not only Allied bank but every bank this year make huge profit due to grooming of banking sector. Decrease was indicated in 2007 to 0.668, 0.479 and 0.264 in next respective years. sector.3 2.5 2 1.5 1 0.5 0 2005 2006 2007 2008 2009

In next all year this ration trend is

downward the main reason of this is increase in interest rate and also competition in banking

TOTAL ASSET TURNOVERThis ratio shows the efficiency of the business in relation to its total assets. In other words it indicates the revenue generated in n