Internship Report On The Bank Of Punjab

The Bank of Punjab

1

The Bank of Punjab

Topics

Page No.

Mission Statement

3

History

4

Constitutional Base

6

Scope of the Bank

8

Management of the Bank

9

Emblem

9

Objectives

10

Future Outlook

11

Subsidiaries & Sponsorship

13

2

The Bank of Punjab

Be a dynamic resource of economic development and growth for stakeholders through service excellence achieving high standards of professionalism, dedication integrity and team work.

Core Values

Integrity Dedication 3

The Bank of Punjab

Transparency Team work History The Bank of Punjab started functioning with the inauguration of its first branch of 7-Egerton Road, Lahore on November 15, 1989. The architect of the bank Mr. Nawaz Sharif then, the Chief Minister of Punjab, performed the inauguration. In Pakistan, over long periods of time the gap in saving and investment and balance of trade deficit has posed serious threat to the target levels of growth The ailments related to the budgetary deficit and public debt, both foreign and domestic are in addition. Interestingly even such adverse circumstances growth of real sector during the preceding year registered a favorable change, which speaks of hidden potential and strength of economy Fortunately, the banking sector of the country has the well organized and properly institutionalized system, which is the major vehicle not only for

4

The Bank of Punjab

mobilization of resources to finance trade, agriculture, and industry but also for the effective conduct of monetary policy. The emergence of new bank on the national scene in the early 1990s has done two important services to the nation.

 The saving base of the economy has effectively enlarged and hence the investment opportunities

have increased.

 The services of the banks in the fact of severe competition have improved considerably so that now consumer are left with extensive choice to do or undo their business relations with these banks keeping in view quality of their services. The Bank of Punjab is working as a scheduled commercial bank with its network of 243 branches at all major business centers in the country. The Bank provides all types of banking services such as Deposit in Local Currency, Client Deposit in Foreign Currency, Remittances, and Advances to Business, Trade, Industry and Agriculture. The Bank of Punjab has indeed entered a new era of science to the nation under experience and professional hands of its management. The Bank of Punjab plays a vital role in the national economy through mobilization of

5

The Bank of Punjab

hitherto untapped local resources, promoting savings and providing funds for investments. Attractive rates of profit on all types of deposits, opening of Foreign Currency Accounts and handling of Foreign Exchange business such as Imports, Exports and Remittances, Financing, Trade and Industry for working capital requirements and money market operations are some facilities being provided by the Bank. The lending policy of Bank is not only cautious and constructive but also based on principles of prudent lending with maximum emphasis on security. As agriculture is considered as backbone of our economy the Bank of Punjab has introduced "Kissan Dost Agriculture Finance Scheme" to small farmers. The Bank of Punjab has the privilege to discharge its responsibilities towards national progress and prosperity. Within the couple of years of its scheduling, the bank has not only carved out for itself prominent niche in the mainstream banking of the country but in certain areas it has the distinction of taking the lead. In the short span of time the Bank has been able to evolve a distinct corporate culture of its owned-based policies, which are realistic and are on highly professional footings.

Scope of the Bank. 6

The Bank of Punjab

Being a commercial Bank, The Bank of Punjab performs all such functions as are attributed to commercial banking institution both in the area of resource mobilization, loans, and investment. The Bank is thus providing all type of advances to business, trade, and industry on seasonal and annual basis, and is ensuring, through the prudent policy, the safety and protection of its loan portfolios, as the resources base of the bank expands, project financing will also be brought into its fold.

Management of the Bank. At the level of Decision-making and implementation, senior management of the bank is drawn from highly accomplished bankers with rich experience in the banking profession both domestic and international. The entire responsibilities of policy formulation and management have been placed, under the law, with the Board of Director. Furthermore it will be heartening to know that Mr. Nawaz Sharif, during his chief Minister ship of the province of Punjab issued special instructions to the political and executives echelons not to interfere in The Bank of Punjab, 7

The Bank of Punjab

thereby ousting the possibility any pressure which may be put on the management of the bank in respect of recruitment of staff or provision of credit. These instructions have become an essential part of the culture of the bank.

Emblem & Objectives EMBLEM. The sun rising over the five wavy lines symbolizes the dawn of new era of progress and prosperity for the land of five rivers and hence for Pakistan. Furthermore the main objectives of the inclusion of cotton flowers and the spikes of wheat in the emblem is firstly to represent the fact that the economy of the Punjab stands on its agriculture produces especially cotton and wheat and secondly to highlight the emphasis which the bank is to place on development of agro-based industry. OBJECTIVES. The Bank of Punjab being a commercial bank performs all those function as are attributed to such banking institutions both in the areas of resources mobilization and investment. It is providing funds for commerce, trade, industry, and agriculture but its main emphasis is on accelerated development of agro-based industry. So the main objective of 8

The Bank of Punjab

the bank is to channelize the resources into sectors, which have suffered from neglect. Other objectives included. 1. To provide speedier services to the common man. 2. To provide the highest rate of return to the shareholders by achieving good profitable growth. 3. To enter into financing contracts and to mobilize resources in local and now in foreign currencies consistent with the objects of the bank.

YEAR 2003 & FUTURE OUTLOOK

The newly elected Government has pledged to continue economic reforms and policies of the previous regime resulting in the Government’s enhanced ability to engineer its economic future, which reinforces the confidence that has emerged during 2002. The success and growth, however, largely depends on the degree to which the Government can deliver on its political agenda and how smoothly the transition of power can work towards

9

The Bank of Punjab

bringing about a greater degree of optimism amongst investors and the business community. Although The Bank of Punjab are optimistic about the future outlook for Pakistan and are confident that expected GDP growth target will

be

achieved yet the geopolitical situation particularly with reference to Iraq the year 2003 appears to be far more challenging where the factors beyond our control may adversely affect our economy. Moreover, the prevailing money market scenario with extremely low interest rates and stagnant private sector credit is a serious deterrent to the banking sector growth. This situation will force the banks to shift their focus from conventional banking approach to retail based consumer finance products and service and the banks taking lead in this shift process will be least affected by the prevailing unfavorable interest rate scenario. The mission to transform The Bank of Punjab into a modernized business oriented institution is sailing smoothly and in this direction by now computerization of 156 branches has been completed successfully while the remaining 87 branches will also be computerized before the 2003 year end. Moreover, during 2003 we will also introduce ATM facility at our selected branches for which your bank has joined MCB switch and the agreement has

10

The Bank of Punjab

been signed. In addition to offering ATM facility we have aggressively embarked on providing real time inter-branch banking services within 2003.

SUBSIDIARIES AND SPONSORSHIP

The bank is one of the sponsors of Trust Management Services Pvt. Limited besides being a co-sponsor of Trust Modaraba a Modaraba company incorporated in Pakistan under the Modaraba companies and Modaraba (Floatation and control) Ordinance, 1980. Authorized Modaraba

11

The Bank of Punjab

Fund and paid up Fund of the said unit in Rs. 500 million and Rs. 150 million respectively.

The Bank is one of the sponsors of Trust Leasing Corporation Limited a public limited company established under the Companies Ordinances, 1984. Authorized paid up capital of the company is Rs. 250 million and Rs. 100 million respectively.

First Punjab Modaraba Services (Pvt) Ltd. established in Pakistan under Companies Ordinance. 1984 and register under Moderate Companies and Modaraba (Flotation and Control) Ordinance, 1980 is wholly owned subsidiary of the bank. Authorized fund of this Modaraba is Rs. 500 million where as paid up fund is Rs 200 million.

12

The Bank of Punjab

Topics

Page No.

Management Hierarchy

14

Categories of Services

15

Division and Departments

17

Regions

18

13

The Bank of Punjab

DIVISION AND DEPARTMENTS

DEPARTMENTS

DIVISION

♦

ADMINISTRATION

♦

ORGANIZATION & METHODS

♦

OPERATIONS

♦

INFORMATIONAL & TECHNOLOGY

♦

BUSINESS DEVELOPMENT

♦

OFFICERS TRAINING INSTITUTE

♦

CREDIT

♦

SHARES

♦

INTERNATIONAL

♦

LAW

♦

FINANCE

♦

STATIONERY

♦

RECOVERY

♦

PLANNING RESERCH & PUBLICATION

♦

AUDIT & INSPECTION

♦

TREASURY

HEADED BY: -

HEADED BY: -

GENERAL MANAGER

CHIEF MANAGER

REGIONAL CHIEFS 14

BRANCH

The Bank of Punjab

REGIONAL NET-WORK

FAISALABAD Total Branches

34

GUJRANWALA Total Branches

43

KARCHI / QUETTA

LAHORE Total Branches

64

MULTAN Total Branches

60

RAWALPINDI 15

The Bank of Punjab

Total Branches

05

Topics

Total Branches

36

Page No.

Administration

21

Operations

22

Business Development

23

Credit

24

International

25

Finance

26

Recovery

27

Audit And Inspection

28

16

The Bank of Punjab

Administration/Human Resource Division G.M

Admin & Establishment

Officer’s Training Institute

This division deals with the problems relates to the staff administration. The main function of this department is to arrange a comprehensive training program for recruited staff. Others function includes: ♦ Recruitment ♦ Staff remuneration ♦ Placing the staff ♦ Providing

and

defining

the

opportunities

for

career

development and growth ♦ Devising and implementing services rules. ♦ Promotion and demotion 17

The Bank of Punjab

♦ Suspension and termination ♦ Transportation ♦ Security, health and benefits.

Operations Division G.M Computer Dept.

Stationary Dept.

Engg. & Maintenance

O & M Department

This Division is concerned with the operational working in general banking, which is concerned with the routine working of the bank. Any problem or ambiguity arise in any branch working are rectified and suggested for correction by this division. This Division usually takes technical procedures involved the decisions like commissions. And also.

♦ The maintenance of the existing building owned by the bank. 18

The Bank of Punjab

♦ Opening new branches and their maintenance. ♦ It also deals with the stationery problems of the bank.

Business Development Division G.M

Marketing Cell

PRP Department

It is the other name of the marketing division. It promotes the bank cause i.e. deposits and work for the over all development of the bank. Deposits are the lifeblood of any bank. Without deposits bank cannot perform any function of banking. This division fixes the deposits target of every branch by keeping and eye over the potential customers in the area. It gives motivation to branches to achieve their targets through different campaigns and schemes like cash prizes and special increments. It publishes a bulletin in which those branches are encouraged who achieves their monthly targets. The main function is to develop and attract the customers and depositors. It also manages:

19

The Bank of Punjab

♦ Advertising policy ♦ Sales promotion. ♦ Schemes offered by the bank.

Credit Division G.M Agriculture Credit Wing

This division control over all credit operations like sanction of loans, Inland Bill Purchased (IBP) and also keeps check over securities mortgage, hypothecating or pledge. It also fix the rate of mark-up and other decisions concerning with the credit. There is a credit committee, which consists of senior officers; Branches send the credit proposal to head office credit division. Credit committee approves it after making a through analysis. It also

♦ Prepare the policies regarding the sanctioning loan

20

The Bank of Punjab

♦ Monitor loans and credit ♦ Look after the portfolio of the bank ♦ Define credit limits against specified securities.

International Division G.M International wing

Forex Money Market Investment

Engg. & Maintenance This division is providing important services to the bank regarding the matters of International Trade, Import, Export Letters of Credit, Travelers cheque etc.

21

The Bank of Punjab

♦ It develops “ Correspondent Relationship” with others on commission basis and this helps to deal with the clients having import export business. ♦ It handles treasury operations. ♦ The Marketing and Spot Inspection cell, which were introduced by the bank, are showing positive results in terms of achieving foreign currency deposit targets and other foreign related business.

Finance Division G.M Balance Sheet Results Monitoring SBP Affairs, and Compliance. Shares Dept.

Company Affairs It controls the routine financial matters. The permission of special expenditure incurred in the branches, and other such cases. The daily position and HO Extracts are daily sent to this division by all the branches. This division not only estimates the profit and loss of every branch but also

22

The Bank of Punjab

prepare overall income statement and balance sheet of the complete bank. It also keeps record of total deposits of the bank and then their classification in the form of loans into different sectors of economy. The basic functions are: ♦ Monitoring the fiscal and financial policies of the bank. ♦ Deals in exploring means for investing surplus bank funds. ♦ Maintenance and investment of Gratuity and Pension Funds of the employees.

Recovery Division G.M

Law Department

The recovery division, which was established in 1994 to assist in regularizing the difficult loan accounts, has rendered valuable services in this respect. To effect recoveries in an efficient manner, a policy has been framed in accordance with the guidelines issued by the State Bank of Pakistan Moreover, recovery cells at regional levels have been set up to

23

The Bank of Punjab

assist the head office. This division looks after the matters of recovery of loans with the assistance of legal advisors.

Audit and Inspection G.M Division

Audit of Branches

Rectification and Persuasion

This department ensures appropriate system of checks and balances. It checks all the irregularities, errors and forgeries if any, under the rules and regulations formed by the Government of Punjab. For this purpose it doesn’t only keep and eye on the branches in their vicinity but also conduct surprise

24

The Bank of Punjab

and comprehensive audits of the branches. This strategy has improved working at the branch level. It not only points out the discrepancies but also tries to solve it. Surprise audit maintain a good check on the over all working of the branch especially of the side of finance.

Topics

Page No.

Service Provide to Customer

30

Deposit Section

31

Nature of Deposit

33

Account Opening Section

34

Clearing Department

35

Remittance Department

37 25

The Bank of Punjab

Advances/Credit Department

43

Securities for Advances

44

Agriculture & Economy

50

SERVICES PROVIDED TO CUSTOMERS The following are the services being provided to the claims. ♦ Acceptance of deposits ♦ Granting of loans ♦ Transaction Foreign Exchange Services ♦ Remittance – Collection ♦ SPEDFAX- instant Fund Transfer Service ♦ Lockers facility ♦ Utility Services

26

The Bank of Punjab

The Bank of Punjab attaches specials importance to the fee earning business and business base remuneration. As part of diversification of the banks utility services, the collection of bills of INSTAPHONE (mobile phone network) was added to existing collection arrangements for WAPDA, SUI GAS, WASA, PTCL, and PAKTEL. By using bank’s extensive branch network, effort have been to made to maximize the exploitation of this source in view of its rich potential of yielding business and deposit direct earning of commission.

DEPOSIT SECTION In modern times very few business enterprises are carried out solely with the capital of the owners. Borrowing funds from different sources has becomes an essential feature of today business enterprise. But in the case of a entire banking system is based on it. The borrowed capital of the bank is much greater then their own capital. Banks borrowing is mostly in the form of deposits. These deposits are lent out to different parties. The larger the difference between the rate at which the deposits are borrowed and the rate

27

The Bank of Punjab

at which they is lent out the greater of the profit margin of the bank. Furthermore, the larger the deposit the larger will be the funds available for employment; larger the funds lent out the greater will be the profit of the bank. To receive the deposit is the basic function of all commercial banks. The bank does not receive these deposits for save keeping purpose only, but they accept deposits as debts. When banks receive deposit from a customer, the relationship of a debtor and creditor is established where by the customer become the creditor and the bank a debtor. When the bank receives amount of deposit as a debtor, it becomes the owner of it. It may, therefore use it as deems appropriate. But there is an implicit agreement that the amount owned would be paid back by the bank to the depositor after a specified period.

NATURE OF DEPOSITS ♦ CURRENT DEPOSITS ♦ PROFIT & LOSS SHARING ACCOUNT ♦ SHORT NOTIC TERM DEPOSITS ♦ CALL DEPOSIT ♦ TERM DEPOSIT RECEIPTS (TDR). 28

The Bank of Punjab

CURRENT DEPOSITS: In this type of account the client to allowed to deposit or withdraw money as and when he likes. Because of their nature, these deposits are treated as the current liabilities of the bank. There is not profit on such deposits. Usually this type of account is opened by the business.

PROFIT & LOSS SHARING ACCOUNT. This type of accounts is one step towards the Islamization of banking system in Pakistan. There are two types of PLS Accounts. ♦ PLS Saving Account ♦ PLS-TDR (Profit & Loss Sharing Term Deposit Receipts). PLS saving accounts can be opened with the minimum sum of Rs. 100 and PLS-TDR account can be opened for a sum of Rs. 1000 or above. Profit is paid on both types of the PLS account on half yearly basis. Under PLS saving account the depositor undertakes to share profit or loss on the deposits earned or sustained by the bank. Secondly the bank is at the liberty to invest the funds of the deposits in any avenue, it deems fit. The PLS deposits are invested in non-interested channels.

29

The Bank of Punjab

SHORT NOTICE TERM DEPOSITS (SNTD) This kind of deposit is for a short period. The depositor may withdraw his deposit at any time by giving seven days notice to the bank. This type of deposit facilitates the depositor to withdrawn his amount with interest of the deposited period.

CALL DEPOSIT Call deposits are the sorts of deposits, which are deposited with the banker against any tender. This is without interest deposit. This may be with interest provided the depositor has agreed to keep this amount with the bank for some fixed period.

TERM DEPOSIT RECEIPTS (TDR) This type of deposit is same as the SNTD. The difference is that SNTD is for short period (7- 30 days) while TDR is for long period (1 month up to 5 years).

ACCOUNT OPENING SECTION

30

The Bank of Punjab

Account opening is the first step towards establishing a relationship between the customer and the bank. The Bank of Punjab is offering basically two types of account: ♦ CURRENT DEPOSIT ACCOUNT ♦ PROFIT & LOSS SHARING ACCOUNT The necessary condition for a customer, who wants to open an account with the bank, is introduction, which is preferably by the bank officers or any account holder of the bank. The different categories of accounts that are available are as under.

♦ INDIVIDUAL account ♦ Joint Account ♦ Partnership Account ♦ Limited Company Account ♦ Clubs, Society, Association, or Trust Account ♦ SNTD ♦ TDR ♦ Foreign Currency Deposit

CLEARING DEPARTMENT 31

The Bank of Punjab

Clearing is the most important department of the bank performing various function.

Clearing House: A clearinghouse is an organization of the member banks, working under SBP and which is for the purposes of setting inter banks claim resulting from transmission of funds from one bank to another. The branch cheque/instruments are credited into the account of the customer. The clearing can be: ♦ Outward ♦ Inward

Outward Clearing The instrument collected or stored bank wise and a schedules is prepared separately for each bank mentioning the total number of instruments and the amount of the instruments. Then these are recorded in a register called “OUTWARD CLEARING REGISTER” then a main schedule is prepared showing the total number of cheque and their aggregate amount being presented in the clearing.

32

The Bank of Punjab

The cheque/instruments are handed over the clearing branch. Central clearing branch issue CREDIT ADVICE to the branch for passing credit to its customer immediately. The branch on receiving credit advice debits the clearing account and credit the respective customer accounts.

Inward Clearing On receiving cheque/instruments from central clearing branch, the in charge checks the number and amount of cheque received in clearing must tally with the main schedule received from central clearing branch. These cheque/instrument are entered in “INWARD CLEARING REGISTER” for the cheque/instrument passed in clearing is a credit advice for the aggregate amount of cheque passed in clearing is prepared, drawn on central clearing branch.

Reserves at State Bank of Pakistan. Deposit held by bank at SBP serves as check clearing and collection balances. Rather than physically transferring funds between banks, check clearing and collection can be done by simply debiting or crediting a bank’s account at SBP.

REMITTANCE DEPARTMENT

33

The Bank of Punjab

Remittance is a major function of the bank. It is the transfer of money from one place to another place. The need for remittance is commonly felt in commercial life particularly and in everyday life generally. By proving this service to the customers the Bank of Punjab earns a lot of income in the form of service charges.

The Bank of Punjab deals with the following type of remittances:  Demand Draft (DD)  Mail Transfer (MT)  Telegraphic Transfer (TT)  Pay Order Now we discuss all these in detail: -

DEMAND DRAFT (DD): Demand draft is a written order given by the one branch of a bank on behalf of customer to another branch of the same bank to a certain amount to the certain person.

Procedure for Prepare Demand Draft. 1. A draft voucher is filled which contains the following information 34

The Bank of Punjab

 Name of the parties involved  Date  Amount to be sent  Account number (if DD is crossed) 2. A credit voucher is filled in order to get the excise duty and exchange commission. 3. The sender deposits the total amount of the two vouchers i.e. the debit and credit vouchers. 4. Then the cashier sends the cash receipt voucher to the accounts department and the account records the amount paid in his cash scroll. 5. Accountant gives the DD leaf along with the DD voucher to his assistant who records the sender’s name, amount and receiver’s name. After writing all the information in the DD register he gives it to the officer along with the DD for authentication. 6. After authentication the DD is handed over to the sender and bank sends the advice to the concerned branch. So when the party presents the DD in the concerned branch its payment could be made.

Parties involved in the Demand Draft 35

The Bank of Punjab

The following parties are involved in demand draft; 1. Purchaser or Sender The purchaser is the person who sends the money to a particular person payable at a certain branch. 2. Issuing or Drawing Branch The branch from where the demand draft is issued to another branch of the same bank. 3. Drawer Branch Branch in which the draft has drawn and called upon to pay the amount. 4. Payee The person who is entitled to receive the amount after presenting the demand draft in the drawer branch.

MAIL TRANSFER (MT): It is the transfer of money from one branch to another branch of the same bank through mail service. In mail transfer there is no need of advice as the amount is directly credited to the receiver’s account.

36

The Bank of Punjab

Procedure 1. First a voucher is filled in whish the sender writes the amount to be sent, name, account number of the receiving person with the branch name and date. 2.

A credit voucher is filled in order to deduct exchange, postage charges according to the amount of the mail transfer.

3. The sender deposits the total amount in the cash department. 4. The cash officer gives the vouchers to the officer after affixing received cash stamp and writing the amount in red ink. 5. Then the officer writes the amount paid in the cash scroll and gives the MT to his assistant. 6.

MT leaf is filled according to the information provided in credit voucher. He also writes the same information in the MT register. Then he gives the MT leaf and MT register to the officer for authentication.

TELEGRAPHIC TRANSFER (TT): This is the most urgent method of remitting the money from one place to another place. This method is used when the sender desires to send urgently, in this case the sender request the manager of the branch to issue TT.

37

The Bank of Punjab

Procedure; For sending the TT the manager and officer apply a test. In the test the manager and officer uses a coding technique. They write their own code numbers, which is allotted, to them as the bank branch code. After making all the conformation the concerned branch makes the payment to the receiver. If the sender wants to convey the same message through telephone then he has to pay the charges of telephone along with the TT charges. First the person deposit the TT amount along with the charges through the credit voucher then his TT sent to the relevant branch.

Pay Order (PO): A pay order is a written order issued by the bank on its own branch, drawn upon and payable by itself to pay a specified sum of money to the person. The purpose of a pay order is to transfer the fund from one place to another. It is usually not issued in favor of the parties of other cities. Usually the pay order is issued for the local transfer of money from one person to another or from the person to any other department. It is used for different purposes. The purpose may be the repairs of the branch or renovation of the branch.

38

The Bank of Punjab

Procedure. The procedure of a pay order varies with the nature of the purpose. If the work is of huge amount then first the manager writes a letter to the Zonal Chief in order to get sanction of the work. Then the advertisement of the work is given in the newspaper in order to invite the contractors. But if the work is small then the branch manager has discretionary power to select the party whose rate is lowest. After finishing the work the contractor submits the bill of work on his stamp pad. Then the bank issues a pay order, against the pay order the contactor gets the amount from the issuing branch.

39

The Bank of Punjab

ADVANCES / CREDIT DEPARTMENT “Major source of bank’s Income” It is the loan function, which produces the major person of bank’s income, and as such it is the major areas of professional banker’s concern and attention.

Principles while advancing Basically there are five principles that must be duly observed while advancing money to borrowers. ♦ Safety ♦ Liquidity ♦ Disposal ♦ Remuneration ♦ Suitability

Forms of Lending Many there are two types of advances: ♦ Short-term (maturity within one year)

40

The Bank of Punjab

♦ Long term (maturity with the period of more than one year)

However they are further classified as: ♦ Running Finance ♦ Demand Finance ♦ Cash Finance ♦ Letter of Guarantee

Running Finance This form of finance was previously known as “overdraft”. When a customer requires the temporary accommodation, his bank allows withdrawal his account in excess of credit balance, which the customer has in its account, a running finance occurs. The accommodation is thus allowed collateral security. When it is against collateral securities, it is called a “Secured Running Finance” and when the customer cannot offer any collateral security except his personal security, accommodation is called a “Clean Running Finance.” The customer is in advantageous position in running finance because he has to pay the mark-up only the balance outstanding against him on daily product basis.

Demand Finance. 41

The Bank of Punjab

This is common form of financing to commercial and industrial concerns and is mad available either against pledge or hypothecation of goods produce or merchandise. In Demand Finance the party is financed up to a certain limit either at once or as and when required. The party due to facility of paying mark-up only on the amount it actually utilizes prefers this form of financing. ♦ Ordinary Shares ♦ Preferred Shares It can be ♦ Quoted or Unquoted ♦ Registered ♦ Bearer ♦ Inscribed

Advances Against Immovable Property (Mortgage). A mortgage is the transfer of and interest in specific immovable property for the purpose of securing the payment of the money, advanced or to be advanced. By way of loan, and existing debts or the performances of the engagement this may rise the pecuniary liability.

42

The Bank of Punjab

The transfer is called the ‘mortgager’ and the transferee the ‘mortgagee’ the principal money and interest of which payment is secured for the time being and instrument by which the transfer is effected, is called the letter of the mortgage deed.

Availability of adequate flows of credit for industry and agriculture are a sine qua non for the growth and development of an economy. This acquires added importance when agriculture is the mainstay of the economy as also the sector where the bulk of the poor are concentrated. Growth and productivity in Pakistan's agriculture has slowed down in recent years and is, 43

The Bank of Punjab

therefore, of serious concern given its importance for the economic prosperity of the country. Apart from various other weaknesses in the infrastructural support of the agricultural sector, inadequacy and lack of efficacy of credit, flows to support agriculture related activities has been a major constraining factor.

Agriculture is the largest sector of the economy. It contributes 25 percent to GDP, provides raw materials to 80 percent of industry and employment to over 50 percent of the population. This is a sector that has the shortest gestation period for investments and, therefore, a remarkable capacity to bring about a turn around in the economy. This important sector in Pakistan is suffering from a number of maladies and is consequently witnessing stagnation in productivity.

Due to policy and administrative exigencies, the savings in the agriculture sector remain low and, therefore, the sector has perpetually remained capital starved. The pricing of input and output in agriculture over the years has forced the majority of farmers in Pakistan to plough back their incomes into agriculture and non-institutional credit, and has more often than not served to sap their potential earnings. Needless to say, that shortage 44

The Bank of Punjab

of savings and lack of availability of capital is one of the major reasons for poverty in the country. The agricultural and rural sectors in Pakistan in general and in Punjab in particular are, therefore, suffering from severe under-development. Under a desirable development model, Punjab can: ♦ Increase agricultural production to meet the country's requirement of essential foods items and industrial raw materials. ♦ Develop agro-based industry in the rural sector for economic value addition; ♦ Generate additional employment opportunities in rural as well as adjacent small towns/cities; ♦ Control massive migration to the urban centers that in turn is causing a number of social, administrative (i.e. law and order) and economic problems for the urban areas. ♦ Elevate poverty and improve the income generating capacity of the

agri-based population.

Never before in the history of Pakistan, has the development of the agricultural and food sectors been as critical as at this juncture and appropriate short and long term measures are necessary for its revival, sustenance and stability. Supply of credit by Financial Institutions for

45

The Bank of Punjab

meeting the specific needs of agriculture and rural sectors are essential components for improvement in both short and long-term development of the country. This has assumed even greater importance in the present situation of declining water availability. Per acre, production is plummeting. The per acre yield of most of the crops is stagnant rather diminishing. The most important factors responsible for this downward trend in productivity are: -

FACTORS RESPONSIBLE FOR LOW YIELD PER ACRE:

*

Imbalanced fertilizer use

*

Lack, availability of certified, and good quality seeds

*

Improper control of pests and weeds

SCARCITY AND INEFFICIENT USE OF WATER:

*

Natural and mechanical water resources.

NON-USE OF MECHANIZED FARMING PRACTICES:

46

The Bank of Punjab ♦ LACK OF EDUCATION AND RESOURCES, MOTIVATION TO USE ADVANCED TOOLS FOR AGRICULTURE: ♦ HIGH COST, LOW OUT PUT, UNSKILLED LABOUR INTENSIVE ♦ NON-AVAILABILITY OF CREDIT AND FINANCIAL ASSISTANCE TO THE AGRICULTURE SECTOR .

The importance of availability of credit to the agriculture sector has always been recognized by Government and given Top Priority. Specialized institutions have been in place for a number of years. However, these institutions have failed to realize the full potential from the sector and at times contributed to its further deterioration. It is therefore of paramount importance that The Bank of Punjab through well thought out policies ensures that it does not repeat the follies of the past.

A number of institutions are in the field yearning to obtain results. We in The Bank of Punjab will support the role of the Government in providing much needed support to the agriculture sector but with a difference. The difference being that instead of subsidizing the needs we will be active participants in economically viable projects thereby safeguarding the investments of the Bank.

A precondition to lending by the Bank will be an undertaking from the customers/borrowers not to borrow from any other source whatsoever. 47

The Bank of Punjab

This is important to ensure against any multiple borrowing and more importantly to restrain the borrower from falling into a debt trap.

The Bank of Punjab has been at the forefront in contributing to the Agriculture Sector at a limited scale and has initiated schemes in harmony with the State Bank of Pakistan approved/eligible programmes for the assistance/help of the agriculture farmers.

Presently, the Bank is financing farmers in some specific areas only. The State Bank of Pakistan has expanded the scope of its scheme and included a number of items eligible for credit under Agri-finance Schemes.

In terms of the importance, priority and current needs. We have short listed the items from the State Bank of Pakistan's list provided under cover of its Circular letter No. ACD/1044/1050/PD/P-08/2001 dated 26.04.2001.

The list of eligible items for Agri-Credit is mainly divided in two sectors; i.e.

►Farm Credit. And ►Non-Farm Credit Farm Credit is further bifurcated into: ♦ Short-Term

48

The Bank of Punjab

♦ Medium-Term ♦ Long-Term Credit. The priority items, which are recommended for inclusion in our schemes, are given here under; EXISTING:

(Kissan Dost Agriculture Finance Scheme) Product

/purpose of Finance) Seeds, Fertilizers, Pesticides, Herbicides, Weedicides. All types of labor and water charges are already embodied in our package financing, i.e., 8000 Per Acres (no change) PROPOSED: (Product /purpose of Finance) 1.

Orchard and Nursery

2.

Manual Sprayers

3.

Sericulture

4.

Apiculture

EXISTING:

Tractors (Product/purpose of Finance)

PROPOSED: (Product & Purpose of Finance) Tube-Well

49

The Bank of Punjab

Installation of Tube-Well, water management, equipment, modules & culvert, lining of channels etc. Solar energy plants and pumps for irrigation, equipment for sprinkle/trickle/drip irrigation system. Mechanization Support Agri-implements, Equipment, i.e. trailers and thrashers, power tillers, power & boom sprayers, ploughs and cultivators, ridggers / drills, rotavators, diggers, saw machines for crates making, press machines for wheat straw and dry fodders. Farm Transport Lease finance for purchase of Motor Cycles and small Vans for Milk and other agri products transportation to local market. Islah-e-Arazi Precision land leveling & reclamation, soil improvement, embankment, land formation and land improvement, laser leveling etc.

For the time being, we do not propose to extending Non-Farm Credit, i.e. for big Dairy Farms, Poultry Farm but will accommodate existing borrowers and established small individual farmers by financing livestock. (Goat, sheep, cattle & fattening animals) on a limited scale to revive,

50

The Bank of Punjab

accelerate and supplement the income generating capacity of the small farmers.

Topics

Page No. 51

The Bank of Punjab

Deposit

59

Advances

60

Investment

61

Capital & Reserve

62

Total Assets

63

Profit

64

Growth of Shareholders

65

Categories of Shareholders

66

52

The Bank of Punjab

Years

Deposits (Rs in Million)

1995

12116

1996

14256

1997

15797

1998

17101

1999

15019

2000

17028

2001

19034

2002

23767

23767

2002 2001

19034 17028

2000 1999

15019 17101

1998 1997 1996 1995

Years Deposits (Rs in Million

15797 14256 12116

Years

Deposits (Rs in Million)

1995

2909

1996

4208

53

The Bank of Punjab 1997

5065

1998

5612

1999

6151

2000

6144

2001

5772

2002

6621

5612

6151 6144

6621 5772

5065 4208 2909

1995

1996

1997

1998

1999

2000

Years

Deposits (Rs in Million)

1995

6649

1996

5435

1997

5919

1998

6581

1999

4991

2000

7866

2001

2002

54

The Bank of Punjab 2001

5970

2002

8295

8295

7866 6649 5435

1995

1996

5919

6581

5970 4991

Years

Deposits (Rs in Million)

1995

1389

1996 1997

1998

1999 1509 2000

1997

1672

1998

1795

1999

1823

2000

2180

2001

2391

2002

2313

2001

2002

55

The Bank of Punjab

2500 2000 1500 1000 500 0

Years

Deposits (Rs in Million)

1995

14340

1996

16419

1997

18512

1998

19886

1999

18215

2000

21275

2001

24802

2002

29532

56

The Bank of Punjab

30000 25000 20000 15000 10000 5000 0 1995

Deposits (Rs in Million 1996

1997

1998

1999

2000

2001

Years

Deposits (Rs in Million)

1995

174

1996

151

1997

163

1998

123

1999

28

2000

356

2001

222

2002

283

2002

57

The Bank of Punjab

Years 1995

1996

1997

Deposits (Rs in Million 1998

1999

2000

2001

Years

Deposits (Rs in Million)

1995

2691

1996

3955

1997

5389

1998

5389

1999

5389

2000

5896

2001

6436

2002

5891

2002

58

The Bank of Punjab

5389

5389

5389

6436 5891 5896

3955 2691

1995 1996 1997 1998 1999 2000 2001 2002

1

Categories

No of Share Holders

Shares Held

Percentage

Directors/CEO/Spouse

4

11576

0.01

Provincial Govern

1

51781427

51.57

Foreign funds

50

3052275

3.04

Individuals

5659

14378263

14.32

Insurance Companies

4

3453355

3.44

Financial Institutions

28

5881765

5.85

NBFI

103

16547565

16.48

Modaraba & Modaraba Management Co

8

9279

0.01

Others

28

5299821

5.28

TOTAL

5891

100415326

100

59

The Bank of Punjab

0.01 5.28 0.01 16.48 5.85 51.57 3.44 14.32

3.04

Directors /CEO/Spouse Foreign funds Insurance Companies NBFI Others

Provincial Govern Individuals Financial Institutions Modaraba & Modaraba Management Co

Topics

Page No.

Summarized Balance sheets

68

Comparative Balance sheets

69

Summarized PLS Accounts

71

Comparative PLS Accounts

72

Trend Analysis

41

Ratio Analysis

86

60

The Bank of Punjab

THE BANK OF PUNJAB SUMMARISED BALANCE SHEET Rs. In Million

For the Years ASSET CURRENT ASSETS Cash Balance with other Banks Account Receivable Advances TOTAL CURRENT ASSETS LONG TERM INVESTMENT Fixed Asset Capital work in progress TOTAL FIXED ASSETS Deferred Tax Debt OTHER ASSETS TOTAL ASSETS

2002

2001

2000

19999

1998

2814341

4448268

1483412

2021955

1746493

3170272

432575

458204

2071514

1968484

7479833 6620988 2008543 4

6776167 5771526 1742853 6

2911000 1750000 4644966 6143664 6150648 4111500 1099628 11994117 12471437 0

8294651

5969947

7865794

4990619

6580583

388788

274059

248575

230646

233601

5048

2136

2641

33749

44807

393836

274059

251216

264395

278408

758930 2953285 1

185070 942955 2480270 3

192077 881108 2018647 5

961312 555210 1821044 19885638 3 61

The Bank of Punjab CURRENT LIABILITIES

Notes Payable Account Payable Accrued Liabilities Other Liabilities TOTAL CURRENT LIABILITIES Deferred Liabilities Long Term Liabilities TOTAL LIABILITIES

250144

162545

130480

1289547

2509262

312319

64240 731756

18804 686653

535706

2335687

3377264

872378 543309 1074567 10009548 4 67345 27857 429930 415076

978505 12115327 10995790

117435 2376701 1903473 7 7 2622013 22411998 8

1702841 2 1800691 7

1004154 1357499 1452 2363105 2858324 3

851880 1327231 447 2179558 2018647 5

3000

3000

7091933

4273426

1639175 18090723 3

STOCK HOLDERS EQUITY

Share Capital Reserves Unappropriated Profit Stock Holder Equity Total Liabilities & Equity

979662 1275191 05 2390705 2480270 3

851880 774436 971049 1020343 225 136 1823154 1794915 1821490 19885638 7

THE BANK OF PUNJAB COMPARATIVE BALANCE SHEET Rs. In Million

For the Years ASSETS CCURRENT ASSETS Cash Balance with other Banks Account Receivable Advances TOTAL CURRENT ASSETS LONG TERM INVESTMENT Fixed Asset Capital work in progress TOTAL FIXED ASSETS Deferred Tax Debt OTHER ASSETS TOTAL ASSETS

2002-2001 Rs (In Million) (1633927) 2737697 703666 849462 2656898 2324704 114729 2912 119777 (185070) (184025) 4730148

%AGE (93%) 139% 15% 20.6% 21% 35% 49% 7% 43% (96%) (33%) 23.7%

2001-2000 Rs (In Million) 2964856 (25629) 3865167 (372138) 6432256 (1895847) 25484 (505) 22843 (7007) 61847 4616228

%AGE 170% (1.3%) 83% (9%) 51% (29%) 11% (1.12%) 8.2% (3.6%) 11% 23% 62

The Bank of Punjab CURRENT LIABILITIES

Notes Payable Account Payable Accrued Liabilities Other Liabilities TOTAL CURRENT LIABILITIES Deferred Liabilities Long Term Liabilities TOTAL LIABILITIES

87599 (1219715) 45436 45103

16% (12%) 163% 11%

32065 2196943 18804 150947

6% 21% 67% 36%

1041577

9.5%

2398759

22%

117435 4732280 3808140

3914% 110% 21%

2006325 4405081

47% 24%

24492 82308 1447 27600 3780540

3% 8% 1064% 105% 19%

127782 (52040) (442) 211147 4616228

16.5% (5%) (32.5%) 11.7% 23%

STOCK HOLDERS EQUITY

Share Capital Reserves Unappropriated Profit Stock Holder Equity Total Liabilities & Equity

THE BANK OF PUNJAB COMPARATIVE BALANCE SHEET Rs. In Million

For the Years ASSETS CCURRENT ASSETS Cash Balance with other Banks Account Receivable Advances TOTAL CURRENT ASSETS LONG TERM INVESTMENT Fixed Asset Capital work in progress TOTAL FIXED ASSETS Deferred Tax Debt OTHER ASSETS TOTAL ASSETS

2000-1999 Rs (In Million) (538543) (1613310) 1161000 (6984) (997837) 2875175 17929 (31108) (13179) 192077 (80204) 1976032

%AGE (31%) (82%) 25% (.16%) (8%) 44% 8% (69%) (4.7%) (100%) (14%) 10%

1999-1998 Rs (In Million) 275462 103030 (2894966) 2039148 (477320) (1589964) (2955) (11058) (14013) 406102 (1675195)

%AGE 15.7% 5.23% (62%) 50% (3.8%) (24%) (1.2%) (24.6%) (5%) 73% (8.4%)

63

The Bank of Punjab CURRENT LIABILITIES

Notes Payable Account Payable Accrued Liabilities Other Liabilities TOTAL CURRENT LIABILITIES Deferred Liabilities Long Term Liabilities TOTAL LIABILITIES

(741898) (10433355) (67345) 105776

(136%) (104%) (241%) 25%

329069 736126 39488 14854

60% 7% 141% 3.5%

(11136822)

(101%)

1119537

10%

(3000) 9936479 1615164

(100%) 232% 10%

2818507 (1698970)

66% (9%)

0 356182 22 356404 1971568

0% 35% 163% 20.4% 10%

77444 (49294) (89) 28239 (1670731)

10% (5%) 65% 1.5% 8.4%

STOCK HOLDERS EQUITY

Share Capital Reserves Unappropriated Profit Stock Holder Equity Total Liabilities & Equity

THE BANK OF PUNJAB SUMMARISED PROFIT & LOSS ACCOUNT Rs. In Million

For the Years

2002

2001

2000

19999

1998

Service Revenue Mark up/Interest, Discount & Returned Earned

2069555

2172956

1934794

2260770

2259608

60320

51937

61395

60637

58521

Dividend Income

189051

109804

161307

71258

46738

Other Operating Income

104581

58647

47300

25725

26150

Total Service Revenue

2423507

2393344

2204796

2425299

2391017

996335

1113151

1083344

1510145

1755443

1392644

1259790

999004

912797

635100

Fee Commission & Brokerage

Less: Cost /Return on Deposit

Gross Income

64

The Bank of Punjab

Less: Operating Expenses Administrative Expenses

901041

837055

678675

722009

601368

76076

39286

143059

81230

(123615)

(23472)

0

0

0

27273

1574

200

33

0

337

Total Operating Expenses

955219

876541

821767

803239

505363

Operating Profit

437425

383249

177237

109558

129737

Other Income

43154

28480

21967

17269

7561

Other Charges

4664

1460

690

2088

1683

431844

421275

319639

124739

135615

147870 185030

162220

96500

12500

283979

157419

28239

123115

Provision against nonperforming advances Provision for diminution in value of investment Bad Debts

Profit Before Tax

Less: Tax Profit After Tax

236245

THE BANK OF PUNJAB COMPARATIVE PROFIT & LOSS ACCOUNT Rs. In Million

For the Years Service Revenue

2002-2001 Rs (In Million)

2001-2000

%AGE

Rs (In Million)

%AGE

Mark up/Interest, Discount & Returned Earned

(103401)

(4%)

238162

10%

Fee Commission & Brokerage

8383

15%

(9458)

(17%)

Dividend Income

79247

170%

(51503)

(110%)

Other Operating Income

45934

175%

11347

43.39%

Total Service Revenue

30163

1%

188548

8%

Less: Cost /Return on Deposit

(116816)

(7%)

29807

1.6%

Gross Income Less: Operating Expenses

132854

21%

260786

41%

63986

10.6%

158380

26%

Administrative Expenses

65

The Bank of Punjab

Provision against nonperforming advances

36790

30%

(103773)

(84%)

(23472)

(86%)

0

0%

1374

407.7%

167

49.5%

Total Operating Expenses

78678

15.5%

54774

11%

Operating Profit

54176

41.7%

206012

159%

Other Income

14674

194%

6513

86%

Other Charges

3204

190%

770

46%

10569

8%

101636

75%

37160

297%

22810

183%

47734

38.7%

78826

64%

Provision for diminution in value of investment Bad Debts

Profit Before Tax

Less: Tax Profit After Tax

THE BANK OF PUNJAB COMPARATIVE PROFIT & LOSS ACCOUNT Rs. In Million

For the Years Service Revenue

2000-1999 Rs (In Million)

1999-1998

%AGE

Rs (In Million)

%AGE

Mark up/Interest, Discount & Returned Earned

(325976)

(15%)

1162

1%

Fee Commission & Brokerage

758

.71%

2116

3.61%

Dividend Income

90049

193%

24520

52%

Other Operating Income

21575

82.5%

(425)

(1.6%)

Total Service Revenue

(220503)

(9%)

34282

1.4%

Less: Cost /Return on Deposit

(426801)

(24%)

(245298)

(14%)

Gross Income Less: Operating Expenses

86207

13.6%

277697

43.7%

(43334)

(7%)

120641

20%

61929

50%

204945

166%

Administrative Expenses Provision against nonperforming advances

66

The Bank of Punjab

Provision for diminution in value of investment

0

(0%)

(27273)

(100%)

33

10%

(337)

(100%)

Total Operating Expenses

18528

3.6%

297976

59%

Operating Profit

67579

52%

(20179)

(15.5%)

Other Income

4598

61%

9708

128%

Other Charges

(1398)

(83%)

405

24%

194900

143%

(10976)

(8%)

65720

525%

84000

572%

129180

105%

(94976)

(77%)

Bad Debts

Profit Before Tax

Less: Tax Profit After Tax

Comparative Financial Statement Comparative

financial

statement

present

financial

information for the current period and one or more past periods. In comparative analysis the statements predict about the movements and trends of the business with respect to past years, whether there is increase in the business activities or decrease. It may also help to comments about the future expectations of the ways in which the financial and operating performance will go. There are two type of comparative financial statement analysis.  Horizontal Analysis  Trend Percentage Analysis

67

The Bank of Punjab

Horizontal Analysis Comparison of two or more years’ financial statement is called Horizontal Analysis. It shows the changes between years both in rupee and percentages form. So in this way it facilitates the analyst to predict about the ways if the business in which it is going. It emphasis the proportional relationship between the reporting periods, rather than with in the reporting period. In this report I shall use this type of comparative financial statement analysis to analyze the performance of The Bank of Punjab.

Trend Percentage Analysis Trend percentages state the several years’ financial data in terms of a base year. The base years equals to 100% with all other stated as some percentage of this base year. In this way it predict good and easy way information about the business activities. By simple looking at these percentages one can see the ways in which the business in going on whether the business is making performance or not.

Comments on Comparative Analysis of 2002-2001 The results that I have perceived from the Comparative Analysis of Balance Sheet and Profit & Loss Account of 2002-01.

68

The Bank of Punjab

From Balance Sheet ∗ The current assets increased by 21%, this is mainly due to a higher increase in Balance with other Banks i.e. 139%but cash is reduced which is not good for the Short term solvency of the bank. Account receivable also increases as compared to last year but other assets decrease i.e. 33%. ∗ Total Assets are increased by 23.7%. ∗ Fixed Assets are increased by 43%. ∗ The increase in Balance with other banks by 139% is a good sign for the short-term solvency of the bank. ∗ The Account receivable is increased by 15% in this period. As a whole total assets and total liabilities plus owner’s equity is increased by 19% which corresponds with the increase in service revenue.

From Profit and Loss Account ∗ The service revenue of the bank is increased by 1% than that of 2001, with the decrease of –7% in the cost return on deposits. So service decreased less than that of return on deposits. ∗ This less decrease, service revenue than that of return on deposits results in an increase of 21% of Gross profit. 69

The Bank of Punjab

∗ The other income of the bank also increased in 2002 then that of in 2001. These are increased by 194%. ∗ As the service revenue increased, the administrative expenses also increased by 11%. ∗ Overall profit after tax also increased by 39% in 2002 then that of 2001.

Comments on Comparative Analysis of 2001-2000 From Balance Sheet ∗ The current assets increased by 51%, this is mainly due to a higher increase in cash i.e. 170% but balance with other bank is reduce which is not good for the Short term solvency of the bank. Account receivable also increases as compared to last year. ∗

Total Assets are increased by 23%.

∗ Fixed Assets are increased by 8.2%. ∗ The decrease in Balance with other banks by –1.3% is not good sign for the short-term solvency of the bank.

70

The Bank of Punjab

∗ The Account receivable is increased by 83% in this period. As a whole total assets and total liabilities plus owner’s equity is increased by 23% which corresponds with the increase in service revenue.

From Profit and Loss Account ∗ The service revenue of the bank is increased by 8% than that of 2000 ∗ This less decrease, service revenue than that of return on deposits results in an increase of 41% of Gross profit. ∗ The other income of the bank also increased in 2001 then that of in 2000. These are increased by 86%. ∗ As the service revenue increased, the administrative expenses also increased by 26%. ∗ Overall profit after tax also increased by 64% 2001 then that of 2000.

Comments on Comparative Analysis of 2000-1999 The results that I have perceived from the Comparative Analysis of Balance Sheet and Profit & Loss Account of 2000-1999.

From Balance Sheet

71

The Bank of Punjab

∗ The current assets decreases by -8%, this is mainly due to a higher decrease in Balance with other Banks i.e. -82% and cash is also reduced by -31%, which is not good for the Short-term solvency of the bank. Account receivable increase as compared to last year but other assets decrease i.e. 14%. ∗ Total Assets are increased by 10%. ∗ Fixed Assets are increased by 8%. ∗ The decrease in Balance with other banks by -82% is not a good sign for the short-term solvency of the bank. ∗ The Account receivable is increased by 25% in this period.

From Profit and Loss Account ∗ The service revenue of the bank is decreased by -9% than that of 1999, with the decrease of –15% Mark up interest on deposits. So service decreased less than that of Mark-up Interest. ∗ This less decrease, service revenue than that of mark-up on deposits results in an increase of 14% of Gross profit. ∗ The other income of the bank increased highly in 2000 then that of in 1999. These are increased by 61%. 72

The Bank of Punjab

∗ As the service revenue decreased, the administrative expenses also decreased by -7%. Overall profit after tax also increased by 105% in 2000 then that of 1999.

Comments on Comparative Analysis of 1999-98 The results that I have perceived from the Comparative Analysis of Balance Sheet and Profit & Loss Account of 1999-98.

From Balance Sheet ∗ The current assets decreases by –3.8%, this is mainly due to a higher decrease in Account Receivable but increased in Balance with other Banks i.e. 5% and cash is also increased by 15.7% which is good for the Short term solvency of the bank. ∗ Total Assets are decreased by -8.4%. ∗ Fixed Assets are also decreased by -1.2%. ∗ The Account receivables are decreased by -62% in this period.

From Profit and Loss Account ∗ The service revenue of the bank is increased by 1% than that of 1998, with the decrease of –14% in the cost return on deposits. So service decreased less than that of return on deposits. 73

The Bank of Punjab

∗ This less decrease, service revenue than that of return on deposits results in an increase of 43.7% of Gross profit. ∗ The other income of the bank also increased in 1999 then that of in 1998. These are increased by 128%. ∗ As the service revenue increased, the administrative expenses also increased by 20%. ∗ Overall profit after tax decreased by -77% in 1999 then that of 1998.

THE BANK OF PUNJAB TREND PERCENTAGES For the Years ASSETS CCURRENT ASSETS Cash Balance with other Banks Account Receivable Advances TOTAL CURRENT ASSETS

2002/1998 2001/1998 2000/1998 1999/1998 161% 161% 161% 160% 161%

254% 21% 141% 140% 139%

84% 23% 62% 149% 88%

115% 105% 37% 150% 96% 74

The Bank of Punjab LONG TERM INVESTMENT Fixed Asset Capital work in progress TOTAL FIXED ASSETS Deferred Tax Debt OTHER ASSETS TOTAL ASSETS

126% 166% 11% 141% 00% 136% 148%

90% 117% 04% 98% 96% 169% 124%

119% 106% 05% 90% 100% 158% 101%

75% 98% 75% 94% 00% 173% 91%

46% 12% 230% 176%

30% 25% 67% 165%

24% 03% 00% 129%

160% 107% 241% 103%

21%

30%

08%

110%

3914% 556% 144%

00% 445% 13%

00% 398% 99%

100% 165% 90%

129% 133% 1067% 131% 143%

126% 125% 3% 133% 124%

110% 130% 328% 121% 101%

110% 95% 165% 101% 91%

CURRENT LIABILITIES

Notes Payable Accounts Payable Accrued Liabilities Other Liabilities TOTAL CURRENT LIABILITIES Deferred Liabilities Long Term Liabilities TOTAL LIABILITIES STOCK HOLDERS EQUITY

Share Capital Reserves Unappropriated Profit Stock Holder Equity Total Liabilities & Equity

THE BANK OF PUNJAB TREND PERCENTAGES For the Years

2002/1998

2001/1998 2000/1998 1999/1998

Service Revenue Mark up/Interest, Discount & Returned Earned

91%

96%

85%

100%

Fee Commission & Brokerage

103%

88%

104%

103%

Dividend Income

404%

234%

345%

152%

Other Operating Income

399%

224%

180%

98% 75

The Bank of Punjab

Total Service Revenue

101%

100%

92%

101%

Less: Cost /Return on Deposit

56%

63%

61%

86%

Gross Income Less: Operating Expenses

219%

198%

157%

143%

Administrative Expenses

149%

139%

112%

120%

61%

31%

115%

65%

Provision for diminution in value of investment

(86%)

0%

0%

0%

Bad Debts

467%

59%

9%

0%

Total Operating Expenses

189%

173%

162%

159%

Operating Profit

337%

295%

136%

84%

Other Income

570%

376%

290%

228%

Other Charges

277%

86%

40%

124%

318%

310%

235%

91%

1182%

1480%

1297%

772%

230%

191%

127%

22%

Provision against nonperforming advances

Profit Before Tax

Less: Tax Profit After Tax

Graphically Presentation of trend Percentages This table and graph shows the trend of Total current Assets, Total Fixed Assets, and Total Assets during the years 1998-02

No of Years 2002 2001 2000 1999 1998 96% 100% Total Current Assets 161% 139% 88% 141% 98% 90% 94% 100% Total Fixed Assets 148% 124% 101% 91% 100% Total Assets

76

The Bank of Punjab

180% 160% 140% 120% 100% 80% 60% 40% 20% 0% 2002

2001

Total Current Assets

2000

1999

Total Fixed Assets

1998

Total Assets

This table and graph shows the trend of Gross Income, profit before tax, and Net income.

No of Years Gross Income Profit before Tax Net Income

2002 2001 2000 1999 1998 219% 198% 157% 143% 100% 318% 310% 235% 91% 100% 230% 191% 127% 22% 100%

77

The Bank of Punjab

350% 300% 250% 200% 150% 100% 50% 0% 2002

2001

2000

1999

1998

Gross Income Profit before Tax Net Income

This table and graph shows the trend of current Liabilities, Deferred Liabilities and Long Term Liabilities during the period 1998-02

No of Years 2002 2001 2000 1999 1998 21% 30% 08% 110% 100% Current Liabilities Long Term Liabilities 556% 445% 398% 165% 100% 144% 13% 99% 90% 100% Total Liabilities

78

The Bank of Punjab

600%

500%

400%

300%

200%

100%

0% 2002

2001

Current Liabilities

2000

1999

Long Term Liabilities

1998

Total Liabilities

RATIO ANALYSIS The relationship of one item to another expressed in simple mathematical form is known as a ratio. A single ratio in itself is meaningless because it does not furnish a complete picture. A ratio becomes meaning full when compared with some standard. So we have taken ratios and percentage of the BOP based in its record of the past financial and operating performance. On the following pages, I make the analysis of the financial statements of BOP by using related items for the last five years.

79

The Bank of Punjab

Profitability vs. Investment

Net profit after taxes / Total assets Return on Assets Return on Deposits Net profit after taxes / Deposits Net profit after taxes / Equity Return on Equity

No of Years 2002 2001 .96% . 95% Return on Assets Return on Deposits 1.19% 1.24% 12.01% 9.88% Return on Equity

2000 1999

1998

.70% . 15% . 61% .92% . 39% 2.8% 7.2% 1.54% 6.7%

Remarks. The return on assets shows a increasing trend, which is good sign for the BOP. Return on deposits is also not stable; in starting years it increases and then decreases and knows again increase. This is due to an increase in deposits and less increase in profit. The ROE ratio of five years of BOP indicates that the profitability of the bank with equity is increasing day by day. This looks to be very positive sign.

Profitability Ratios.

Gross Profit Margin Operating Profit Margin

Gross profit / Income Operating profit / Income

80

The Bank of Punjab

Net Profit Margin

Net profit

No of Years Gross Profit Margin Operating Profit Margin Net Profit Margin

/ Income

2

2

2

1

002

001

000

999

57% 18% 11%

52% 16% 9%

45% 8% 7%

37% 5% 1%

1998 27% 6% 5%

Remarks. The net profit margin of five years indicates that the income of the BOP after paying its non-productive expenses is increasing year by year, which is a very good sign for the bank. As I see the operating profit of the bank shows a increasing trend in ratio. This shows that the earning capacity of the bank is increasing year by year.

Earning Per Share

Earning Per Share Profit after Tax / No of Shares

No of Years Earning Per Share

2

2

2

1

002

001

000

999

2.83

2.41

1.85

.33

1998 1.59

81

The Bank of Punjab

Comments Earning of BOP shows the increasing trend. This shows that the earning capacity of a single share is increasing and shareholders are earning increase every year. This is very good sign for BOP. This ratio should be as high as possible because it has a great importance for an investor to invest in the Bank of Punjab.

Regulatory Ratios:

Advances to Deposits Ratio Advances / Deposits Cash / Deposits Cash to deposits Ratio

No of Years

2

2

2

1

002

001

000

999

Advances to Deposits Ratio 28% 30% 36% 36% 12% 23% 9% 13% Cash to deposits Ratio

1998 33% 42%

Remarks. Advances to deposits ratio of The Bank of Punjab shows that the portion of loan in total deposit of the bank is not stable, 1st three year from 1998 to 2001 increase then decrease. It means that the credit (advances) 82

The Bank of Punjab

circulation of the bank has fallen from 36% to 28% during the last five years, which is a not good sign. And the cash to deposits ratio is also decrease from 42% to 12%.

Capital adequacy Ratios: Equity to Asset Ratio Total Equity / Total Assets Equity to Deposit Ratio Total Equity / Deposits

No of Years

2

2

2

1

002

001

000

999

8% 10% 11% 10% Equity to Asset Ratio Equity to Deposit Ratio 10% 13% 13% 12%

1998 9% 3%

Remarks. This ratios is showing increasing trend, in 2002 it decreased. This means that deposit of the banks are decreased in 2002 and assets are also decreased in 2002, which is not good for the Bank of Punjab.

Efficiency Ratios: Deposits to total liabilities Ratio Deposits/Total Liabilities Investment to Total Assets Ratio Investments / Total Assets

83

The Bank of Punjab

No of Years

2

2

2

1

002

001

000

999

Deposits to total liabilities Ratio 91% 85% 95% 92% Investment to Total Assets Ratio 28% 24% 27% 27%

Topics

1998 94% 34%

Page No.

Strengths

92

Weaknesses

94

Opportunities

96

Threats

97

84

The Bank of Punjab

In the light of the Knowledge obtained during internship and studying the organization, the following recommendations may prove to be successful to the bank.  In order to capture a considerable share in the banking sector of the country, the prime objective should be awareness in the general public. For this it should launch a well-planned advertising campaign in the general public.  Physical facilities in a bank also play their role in enhancing its grade and sound image. The bank should keep these facilities like furniture, parking facilities for the customer.  Salaries of the officers must be compatible to other private banks so that the BOP can attract professionals, intelligent persons.  The Bank of Punjab should minimize its expenses.  Special awards should be given to the hardworking employees who performed extra-ordinary in the bank.

85

The Bank of Punjab

 The bank should come up with new and innovative products. It would be advisable to make these products while keeping in mind the gap between what people want and what their banks are providing them.  The Bank of Punjab should concentrate more on advances than on investments  The bank should come up with such products or services in which the customers would not have to come to the bank at any stage i.e. Telephone Banking etc.  The Bank of Punjab should use the latest technology because the bank which can provide speedy, accurate and standard services in the delivery of products, loans etc. to the customers will be successful e.g. computerization, fax installation.  The authority should be delegated to the manager level.  MIS should be improved by connecting all regional offices and branches to the head office through a network for timely delivery of information.  Management of Bank of Punjab should try to avoid the political influences and should give loans on merit.  The bank should make a plan to gear up its recovery function on war fooling and recognize the recovery function.

86

The Bank of Punjab

 The Bank of Punjab should give some extra credit to concern to professional qualifications such as MBA(IT)’s, M.B.A’s, C.A’s A.C.M.A’s at the time of recruitment and selection.  Interview should be conducted while recruiting personnel, to consider the personality characters, communications skills and sociability.  The bank should adopt a policy to accommodate and facilitate the research scholars who want to study the banking affairs. The universities and other institutions can help to launch the studies regarding banking business.  All possible efforts should be made to protect the bank from the interruption of Provincial government.  There should be an association of employees to convey the voice of the employees to the administration.

87

The Bank of Punjab

88

The Bank of Punjab

The Bank of Punjab is contributing a lot towards the industrial development and capital formation in the country. As it is exhibit from the data regarding the bank’s financial performance as shows in the financial performance as shows in the financial analysis, that bank is sharing major banking business of the country. Further more the policies and schemes as are introduced and carried on by the bank are of great source of help in its trading and non-trading growth. They facilitate trade both inside and outside the country. The Bank if Punjab has endeavored to remain in the forefront of modern financial institutions and has consistently shows tremendous growth in all area of its activity. However after scheduling, due to its emphasis on consolidation and controlled lending, the growth of profit has somewhat declined. But the ban’s performances are in line with its set goals. The policies of the bank are uniform and going very smoothly. The employees are given all the possible facilities and generous

89

The Bank of Punjab

compensation. In return employees are stressed for their best efficiency. Merit policy prevails in all the activities of the bank. Administration has studied the administration of all other banks, and all their problems and drawbacks are planned to be avoided. Therefore, the policies of the management are progressive and proper.

The progressive approach and trend towards progress and prosperity reflects that bank will touch the zenith of development and progress. The dedicated, enthusiastic and motivated employees can bring that time even earlier.

90

The Bank of Punjab

91