Meezan Bank
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Table of Contents
Introduction....................................................................................4 Objectives........................................................................................................................4 Overview of the Organization..........................................................................................5 Brief History of the Organization................................................................................5 Nature of the Organization...............................................................................................9 The Meezan Team........................................................................................................9 Business Segments of the Bank...................................................................................9 VISION AND MISSION...............................................................................................10 SERVICE MISSION......................................................................................................11 ORGANIZATIONAL STRUCTURE............................................................................11 SHARIAH ADVISORY BOARD..............................................................................14 BOARD OF DIRECTORS........................................................................................15 ORGANIZATIONAL STRUCTURE OF THE BRANCH............................................16
ACCOUNTS DEPARTMENTS..................................................17 STRUCTURE AND FUNCTIONS ..............................................................................17
OBJECTIVE:...............................................................................17 FUNCTIONS:............................................................................................................17 DATA CONTROLLING:...........................................................................................17 Aspects of Data Controlling .....................................................................................18 REPORTING AND EXPENSE:................................................................................18 BUDGETARY PERFORMANCE:............................................................................19 ACCOUNT OPENING AT MEEZAN BANK..............................................................23 Business Account.......................................................................................................23 Sole proprietor accounts: ..........................................................................................23 Document required.........................................................................................................23 Partnership account: ..................................................................................................24 Document required:.......................................................................................................24 Limited company accounts: ......................................................................................24 Document required:.......................................................................................................24 Personal Account.......................................................................................................25 Club Society Account................................................................................................26 Accounts On the Basis Of Currency..........................................................................27 RUPEE CURRENT ACCOUNT...............................................................................28 DOLLAR SAVING ACCOUNT................................................................................32 KAROBARY MUNAFA ACCOUNT.......................................................................34 MEEZAN BACHAT ACCOUNT..............................................................................35 CERTIFICATE OF ISLAMIC INVESTMENT.............................................................37 Invest in Certificate of Islamic Investment................................................................37 MEEZAN AMDAN CERTIFICATE.........................................................................38 MONTHLY MUDARBA CERTIFICATE.....................................................................40
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MEEZAN PROVIDENCE CERTIFICATE...................................................................41 DOLLAR MUDARABAH CERTIFICATE..................................................................43 CAR IJARAH-AUTO FINANCE.................................................................................45 Car Ijarah also features Used Vehicles!.....................................................................45
WORKING CAPITAL FINANCE.............................................47 Murabaha.......................................................................................................................47 Istisna’a..........................................................................................................................48 PROJECT FINANCING, EXPANSION AND BMR....................................................49 Diminishing Musharakah...........................................................................................49 Ijarah..............................................................................................................................50 ISLAMIC EXPORT REFINANCE SCHEME..............................................................51 LETTER OF GUARANTEE FACILITY..................................................................51 Letter of Guarantee Facility.......................................................................................51 ADVISORY SERVICES................................................................................................53 MONEY TRANSFER....................................................................................................55 DOLLAR MUDARABAH CERTIFICATE..................................................................56 DOLLAR SAVING ACCOUNT....................................................................................58 MEEZAN BANK TREASURY.....................................................................................59
CREDIT ADMINISTRATION DEPARTMENT......................62 “CONSERVATIVE YET DYNAMIC CREDIT POLICY”...........................................62 The overall objective of the department is to provide independent assurance to branch management and head office credit monitoring division that lending activities are properly controlled and monitored.......................................................62 CAR IJARAH................................................................................................................68
OBJECTIVE:...............................................................................68 THE PRODUCT :........................................................................68 Previous employer.........................................................................................................73 TREASURY AND INVESTMENT...............................................................................75 Money Market............................................................................................................75 Foreign Exchange Market..........................................................................................75 Investment..................................................................................................................75 Government Securities...............................................................................................76 Custodianship.............................................................................................................76 Financial Advisory Services......................................................................................76 ONLINE BANKING.....................................................................................................77 PHONE BANKING.......................................................................................................77 HOME FINANCE.........................................................................................................79 Buy Your Home.........................................................................................................79 Build Your Home.......................................................................................................79 Renovation Your Home..............................................................................................80 Start it Together..........................................................................................................80 Transfer......................................................................................................................80
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Steps To Arrange a Home..........................................................................................81
FINANCIAL STATEMENT ANALYSIS...................................83 BALANCE SHEET ......................................................................................................84 HORIZONTAL ANALYSIS OF BALANCE SHEET...............................................88 COMMENTS ON HORIZONTAL ANALYSIS OF BALANCE SHEET................92 VERTICAL ANALYSIS OF BALANCE SHEET.....................................................95 COMMENTS ON VERTICAL ANALYSIS OF BALANCE SHEET......................98 INCOME STATEMENT..............................................................................................101 HORIZONTAL ANALYSIS OF INCOME STATEMENT.....................................104 COMMENTS ON HORIZONTAL ANALYSIS OF INCOME STATEMENT.......107 VERTICAL ANALYSIS OF INCOME STSTEMENT...........................................109 COMMENTS ON VERTICAL ANALYSIS OF INCOME STATEMENT.............112
RATIO ANALYSIS....................................................................114 Return on Equity..........................................................................................................114 Return on Assets...........................................................................................................115 Net Spread Margin.......................................................................................................116 Net Other Income Margin............................................................................................117 Earnings per Share.......................................................................................................118 Stock Dividend Percentage..........................................................................................120 Market Price per Share.................................................................................................121 Price Earning Ratio......................................................................................................122 Net Profit before Tax Margin ......................................................................................123 Net Profit after Tax Margin..........................................................................................124 Operating Expenses to Income....................................................................................125 Financing to Deposit Ratio..........................................................................................126 Book Value per Share...................................................................................................127
SWOT ANALYSIS.....................................................................129 STRENGTHS..............................................................................................................129 WEAKNESSES...........................................................................................................130 OPPORTUNITIES.......................................................................................................132 THREATS....................................................................................................................133 RECOMMENDATIONS.............................................................................................134
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Introduction Objectives
Internship is an integral part of MBA program. It provided me the opportunity to develop practical know how of concepts which before that were only in theoretical form. My internship in Meezan Bank Limited, Abdali Road, Branch, Multan was full of learning regarding various aspect of banking. The report contains practical knowledge, which I gained during my internship. Meezan Bank limited is one of the largest private banks in Pakistan, and it has bright future forward. All information in this report is based on my observation, interviews and practical involvement in different tasks during my internship in Bank.
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Overview of the Organization Brief History of the Organization 1947 The inception of Pakistan as the first Islamic Republic created in the name of Islam. 1980 CII presents report on the elimination of Markup genuinely considered to be the first major comprehensive work in the world undertaken on Islamic banking and finance. 1985 Commercial banks transformed their nomenclature stating all Rupee Saving Accounts as markup-free. However, foreign currency deposits in Pakistan and foreign loans continued as before. 1991 Procedure adopted by banks in 1985 was declared un-Islamic by the Federal Shariat Court (FSC). The Government and some banks/DFIs made appeals to the Shariat Appellate Bench (SAB) of the Supreme Court of Pakistan. 1997 Al-Meezan Investment Bank is established with a mandate to pursue Islamic Banking. Mr. Irfan Siddiqui appointed as first and founding Chief Executive Officer.
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1999 The Shariat Appellate Bench of the Supreme Court of Pakistan rejects the appeals and directs all laws on markup banking to cease. The government sets up a high level commission, task forces and committees to institute and promote Islamic banking on parallel basis with conventional system. 2001 The Shariah Supervisory Board is established at Al-Meezan Investment Bank led by Justice (Retd.) Muhammad Taqi Usmani as chairman. State Bank of Pakistan sets criteria for establishment of Islamic commercial banks in private sector and subsidiaries and stand-alone branches by existing commercial banks to conduct Islamic banking in the country.
2002 Meezan Bank acquires the Pakistan operations of Societe Generale and concurrently Al Meezan Investment Bank converts itself into a full fledged Islamic commercial bank. The first Islamic banking license is issued to the Bank and it is renamed Meezan Bank. President General Pervez Musharraf inaugurates the new Islamic Commercial Bank at a formal ceremony in Karachi. 2003 Meezan Bank establishes itself as the pioneer of Islamic Banking in Pakistan and quickly establishes branches in all major cities of the country. A wide range of products are developed and launched consolidating the Bank’s position as the premier Islamic Bank of
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the country Al Meezan Investment Management Limited (AMIM), the asset management arm of Meezan Bank, introduces Meezan Islamic Fund (MIF), the country’s first openend Islamic Mutual Fund. 2004 The State Bank establishes a dedicated Islamic Banking Department (IBD) by merging the Islamic Economics Division of the Research Department with the Islamic Banking Division of the Banking Policy Department. A Shariah Board has been appointed to regulate and approve guidelines for the emerging Islamic Banking industry. The Government of Pakistan awards the mandate for debut of international Sukuk (Bond) offering for USD 500 million. The offering is a success and establishes a benchmark for Pakistan. Meezan Bank acts as the Shariah Structuring Advisor for this historic transaction. 2005 Meezan Bank becomes the first customer of Islamic Insurance (Takaful) by signing the first Memorandum of Understanding MoU with Pak-Kuwait Takaful Company Limited (PKTCL). The signing of this MoU has ushered Pakistan into a new era of Islamic Insurance (Takaful). 2006 A number of new dedicated Islamic Banks, namely Bank Islami and Dubai Islamic Bank, commence operations in Pakistan.Meezan continues its leadership position in the industry by more than doubling it branch network to a total of 62 branches in 21 cities, clearly
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establishing itself as the largest Islamic Bank of the country. Meezan Bank, becomes the first Islamic bank to introduce 8 am to 8 pm banking at selected branches in Karachi. 2007 Meezan Bank opens up its 100th branch. Two new dedicated Islamic Banks start operations in Pakistan, namely Emirates Global Islamic Bank and Dawood Islamic Bank. 2008 With 166 Branches (including 35 sub-branches) in 40 cities across Pakistan, Meezan Bank is clearly positioned as the leading Islamic Bank in the country. Work starts on the construction of Meezan Bank’s new Head Office building.The financing and investment portfolio of local Islamic banks reached Rs. 185 billion in December 2008 compared to Rs. 137.6 billion in December 2007. Market share in the overall banking increased to five per cent at end December 2008 compared with four per cent at end December 2007. Total assets of Islamic banking reached Rs. 271.1 billion in December 2008 compared to Rs. 205.2 billion in December 2007.
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Nature of the Organization Meezan Bank is a commercial bank which receives deposits from the people who have it spare and invests it with those who are in need of them. It has got the license of commercial banking from the State Bank of Pakistan and is registered under the legislation of Banking Companies Ordinance 1962. It has dedicated itself to do business of banking according to islamic rules and regulations and is supervised by a Shariah Board who keeps an eye on the operations of the bank and ensures that the same must be in accordance with the teachings of islam and there must be no element of Riba in it.
The Meezan Team Meezan Bank is managed by a team of professional bankers committed to the cause of Islamic Banking. This single unifying factor unleashes the tremendous power of a dedicated and motivated team committed to fulfilling the Vision and Mission of this Bank.
Business Segments of the Bank •
Corporate and Investment Banking
•
Commercial and SME
•
Consumer Finance
•
Treasury & Financial Institutions
•
Asset Management (managed through a subsidiary Al Meezan Investment Management Limited.)
Retail Banking is organized in three Regions across Pakistan, namely South Region, Central Region and North Region.
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VISION AND MISSION
VISION
Establish Islamic banking as banking of first choice to facilitate the implementation of an equitable economic system, providing a strong foundation for establishing a fair and just society for mankind.
MISSION
To be a premier Islamic bank, offering a one-stop shop for innovative value added products and services to our customers within the bounds of Shariah, while optimizing the stakeholders value through an organizational culture based on learning, fairness, respect for individual enterprise and performance.
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SERVICE MISSION To develop a committed service culture which ensures the consistent delivery of our products and services within the highest quality service parameters, promoting Islamic values and ensuring recognition and a quality banking experience to our customers.
ORGANIZATIONAL STRUCTURE
SHARIAH SUPERVISORY BOARD
BOARD OF DIRECTORS
AUDIT
COMMITTEE
Shariah Advisor Internal Audit (Dr. Muhammad Imran Usmani) (Mr. Zia-ul-Hasan)
Product Development & Shariah Compliance (Mr. Ahmed Ali Siddiqui)
PRESIDENT & CEO (Mr. Irfan Siddiqui)
Risk Management (Mr. Syed Ali Azhar Naqvi) Legal Affairs (Mr. Atique Ahmed Siddiqui)
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Compliance (Mr. Saleem Wafai)
Administration (Mr. Munawar Rizvi)
Branch Expansion (Mr. Munawar Rizvi)
PRESIDENT & CEO Mr. Irfan Siddiqui)
CHIEF OPERATING OFFICER (Mr. Ariful Islam)
BRANCH NETWORK
BUSINESS SEGMENT
SUPPORT
SOUTH
CORPORATE
FINANCE
(Mr. Abdul Ghaffar Memon)
(Mr. Zubair Haider)(Mr. Shabbir Hamza)
CENTRAL
INVESTMENT BANKING
OPERATION
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(Mr. Rizwan Ata)
(Mr. Syed Amir Ali)
(Mr. Arshad
NORTH
COMMERCIAL BANKING
I.T
(MR. Saleem Khan)
(Mr. Shoaib Qureshi)
(Mr. Faiz-
Majeed)
ul-Rehman)
SME
HUMAN RESOURCES (Mr. Salim Khowaja)
(Mr. Irfan
Ali Hyder)
TREASURY & FINANCIAL
TRAINING
INSTITUTION
(Mr. M. Abdullah Ahmed)
(Mr. M. Sohail Khan)
CONSUMER BANKING
SERVICE QUALITY
(Mr. Muhammad Raza)
(Mr. Asadullah Ch.)
ALTERNATE DISTRIBUTION CHANNELS (Mr. Omer Salimullah)
MARKETING (Mr. M. Sohail Khan)
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SHARIAH ADVISORY BOARD
The letter and spirit of Islamic Banking rest upon absolute adherence to the Shariah. The foundations of a strong Shariah underpinning at Meezan Bank were laid from the beginning. A world renowned Shariah Supervisory Board and a highly qualified and experienced in house Shariah Advisor are fundamental aspects of the Bank's core USP. The primary role of this board is to maintain and further strengthen this commitment and to ensure strict Shariah compliance in all the Bank's operations. The members of the Shariah Supervisory Board of Meezan Bank are Internationallyrenowned scholars, serving on the boards of many Islamic banks operating in different countries. The members of the Board are: •
Justice (Retd.) Muhammad Taqi Usmani (Chairman)
•
Dr. Abdul Sattar Abu Ghuddah
•
Sheikh Essam M. Ishaq
•
Dr. Muhammad Imran Ashraf Usmani (Advisor)
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BOARD OF DIRECTORS
The Board of Directors of Meezan Bank are:
•
H. E. Sheikh Ebrahim Bin Khalifa Al-Khalifa (Chairman) (Minister of Housing, Ministry of Housing, Kingdom of Bahrain)
•
Naser Abdul Mohsen Al-Marri (Vice Chairman)
•
Jassar Dakheel Al-Jassar
•
Rana Ahmed Humayun
•
Mohammed Azzaroog Rajab
•
Ahmed Abdul Rahim Mohamed
•
Nawal Ahmed
•
Alaa A. Al-Sarawi
•
Irfan Siddiqui (President & Chief Executive Officer)
•
Ariful Islam (Chief Operating Officer)
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ORGANIZATIONAL STRUCTURE OF THE BRANCH
Mr. Asim Saleem Regional Manager / Branch Manager
Mr. Naveed Bari Assistant Branch Manager
Operations Department
CAD Department
SMEG. Department Consumer
Mr. Naveed Bari
Mr. Zahid
Miss. Faiza
Mr. Rizwan
(Manager)
(Manager)
(Manager)
(Manager)
Department
IT / HR Department
Corporate Department
Mian Wasf Ali Babar
Tariq Mehmood Ansari
Department Head
Department Head
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ACCOUNTS DEPARTMENTS STRUCTURE AND FUNCTIONS Accounts department in the bank works as an internal audit department of the organization. All the vouchers prepared and all the cheques that are processed are finally come to the accounts department where these are sorted and summarized.
OBJECTIVE:
The objective of this department is to conduct the internal audit and to provide exact information of daily transactions.
FUNCTIONS: Three main functions of accounts department are as follow:
Data controlling Reporting and expense Budgetary performance review and analysis
DATA CONTROLLING:
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The main features of data controlling are:
To match physical data with computer generated data
To check authorization control of transactions
Is the data property authorized
To keep a track of record of all transactions (physical data) for future evidence
To arrange the data in some order to facilitate or to ease the process of data Retrieval
Aspects of Data Controlling 1: Customer activity 2: General ledger
Dual effect of transactions is stated like debit credit. Firstly receiving of voucher then main sorting is done which is done on the basis of main numbering.
REPORTING AND EXPENSE: The major reports generated by this section are:
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Daily branch position
Daily position of deposits and advances
Daily MIS report (management information system)
Daily foreign currency account report
Daily fund rupee position report
Statement of affairs
Weekly reports are of foreign exchange and then monthly and quarterly reports are made. Daily branch position of bank is not faxed and is kept with the bank. Daily foreign currency report is faxed to treasury. The bank deal in three foreign currencies that are: US dollar, EURO and GBP (stands for Great Britain Pound). Daily fund rupee position is faxed to the state bank. Statement of affairs is not faxed.
BUDGETARY PERFORMANCE: This section includes the disbursements, which are as follows:
Modes of remittances:
Demand draft D.D
Telegraphic transfer T.T
Pay order slip
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They are also called BPG bills payable general.
Demand draft is for outstation purpose .It secures the payment because at first, the cash is deposited in the bank and then draft is made. Demand draft is having four copies, which are kept as follow:
One is kept with the customer. (Gray copy) One with bank (photo copy) One with the head office (pink) One with the entity being financed (yellow)
Pay order is for local transfer of money that is within the city.
Two other ways of disbursement in the bank are
Pay slip
Cash payment voucher
Pay slip is used when the bank has to pay less then Rs.5000
Cash payment voucher is used by the bank when it has to pay more than Rs.5000.
In the accounts section I came to know about some other terms like
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Provision
Rupee travelers cheque
Deposit certificate
Inter branch credit advice
Inter branch debit advice
Outward bills for collection
Inward bills for collection
Society for world wide transactions
Term finance
Provisions are the amount kept separately to be debited for the expenses of bank. Deposit certificates are being taxed as Simple deposit-----------3% tax Services deposit----------5% tax
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ACCOUNT OPENING AT MEEZAN BANK This accounts at Meezan Bank are divided into three categories. These are as follows. •
Business Account
•
Personal Account
•
Club Society Account
Business Account This account is related to the business community. This account is also further subdivided into three categories. •
Sole proprietor account
•
Partnership account
•
Limited Company account
Sole proprietor accounts: These account are the account opened by businesses, which are owned by single persons. The following documents are required to open the account. Document required •
Introducer of account who is already account holder of the bank
•
Copy of NIC
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•
Request on letterhead of the company
•
Every signature must be stamped with company stamp
•
Declaration of sole proprietorship
Partnership account: These are the accounts specifically opened for the partnership firms. The documents required for this type of account are as follows.
Document required: •
Introducer of account who is already account holder of the bank
•
Copy of NIC of the entire partners
•
Request on letterhead of the firm
•
Every signature must be stamped with company stamp
•
Partner ship deed
•
Partnership mandate
•
Limited company accounts: This account is related to limited companies either public limited or private limited. The documents required to open this type of account are as follows:
Document required: •
Introducer of account who is already account holder of the bank
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•
Copy of NIC of all the Directors
•
Request on letterhead of the company
•
Copy of certificate of Incorporation
•
Memorandum and Article of Association
•
List of Director
•
Copy of Board Resolution [prescribe format]
•
Certificate of Commencement of Business.
•
Latest copy of Form A-29
•
Power of Attorney/Mandate [if required]
Personal Account The accounts related to persons other than companied and partnership firms are called personal accounts. These are further subdivided into three categories:
Personal account
Joint account
Personal account: Personal account is own by only one person and not more then this. This account can be current or saving depending upon the will of the customer. Documents required •
Introduction of nay account holder of BAL or any other bank
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•
Copy of NIC
Joint account: Joint accounts are those accounts that are owned by 2 or more persons. This account may also be either saving or current depending on the customer’s will.
Documents required: •
Introduction of nay account holder of BAL or any other bank
•
Copy of NIC of all the member of joint account
Club Society Account The account opened by any NGO or any non-profit firm falls in this category. For opening of such type of account the bank has to get permission from the head office. If head office gives permission, the bank opens this account other wise refuse to do so.
Documents required: •
Copy of rules
•
Certificate copy of resolution [prescribed format]
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Accounts On the Basis Of Currency This account is also divided into two categories. These are as follows: •
Local Currency account
•
Foreign Currency Account
Local Currency account: The account dealing with the local currency is called local currency account.
Foreign Currency Account: The account dealing with the foreign currency is called foreign currency account. This account is further subdivided into following.
USD
GBP
Euro
JPY
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RUPEE CURRENT ACCOUNT (RIBA FREE) Meezan Bank is offering Riba-Free Current Account, a flexible Rupee based account that is ideal for individuals and businesses looking for Shariah compliant banking and professionalism both under one roof. The Meezan Bank Current Account is a comprehensive Halal method of acquiring a secure and easily maintainable Riba Free bank account. Bundled with 24/7 and special banking services, the Meezan Bank Current Account is an innovative value added account which provides customers both ease of utility and unmatched service quality. Key features of the Riba -Free Current Account •
Free Online Banking services at all Meezan Bank branches nationwide
•
Instant access to funds at any online branch
•
No restriction on withdrawals or number of transactions
•
Bank balance certificates & duplicate statements of account
•
Stop Payment & Hold Mail instructions
•
24/7 Card your ATM & Debit Card in one
•
24/7 Call Center with complete Tele-banking services
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•
Personal financial consultancy services
•
Specialized 8 to 8 Banking at selected branches
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RUPEE SAVING ACCOUNT A unique bank account that offers the opportunity to earn Halal profits, while enjoying a range of added benefits. It can be opened with a minimum amount of only Rs.10000. The profit on this account is calculated and paid on a monthly basis, and comes with a variety of free benefits, no restrictions on transactions, priority banking and more. •
Minimum amount required to open account = Rs.10,000
•
Riba Free COII Holders may open accounts without any minimum balance requirements
Riba Free Rupee Saving Account works under the principles of Mudarabah and is strictly in conformity with the rules of Islamic Shariah. Profit calculation and all banking transactions are in strict adherence to the Islamic Shariah, monitored by our Shariah Advisor and the Shariah Supervisory Board Key features Apart from first class service and personalized attention that our customers get when they bank with us, we offer the following additional conveniences: •
Instant access to funds at any online branch.
•
Free Online Banking services at all Meezan Bank branches nationwide
•
No restriction on withdrawals or number of transactions
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•
Bank balance certificates & duplicate statements of account
•
Stop Payment & Hold Mail instructions
•
24/7 Card your ATM & Debit Card in one
•
24/7 Call Center with complete Tele-banking services
•
Personal financial consultancy services
•
Specialized 8 to 8 Banking at selected branches
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DOLLAR SAVING ACCOUNT Meezan Bank is pleased to offer Riba-Free Dollar Saving Account, a foreign-currency based investment opportunity that is set up on the principles of Shariah and as a result is free from the element of markup. With a minimum of only $100 you can open a Dollar Saving Account with us under a Mudarabah arrangement that is strictly in conformity with the principles of Islamic Shariah. The return earned on the Mudarabah pool is calculated every month and the profit ratio for all investors is declared at the beginning of the month. If you maintain a minimum average monthly balance of $ 500, you shall be eligible to receive profits that shall be disbursed to you every month. Additional Features Apart from first class service and personalized attention that our customers get when they bank with us, we offer the following additional conveniences to our customers: •
Personalized cheque books
•
No restriction on withdrawals or number of transactions.
•
24/7 Call Center with complete Tele-banking services
•
Monthly profit payment
•
Taking stop payment instructions
•
Taking hold mail instructions
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•
Issuance of duplicate statement of account
•
Personal financial consultancy services
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KAROBARY MUNAFA ACCOUNT Karobari Munafa is a savings account specifically tailored for large Corporate or Govt. controlled entities. It allows customers to earn higher returns on surplus cash balances. It has no preset transaction limits and comes with a variety of free packaged benefits. Key Features •
Profit will be calculated on a Daily Product Basis
•
Minimum balance requirement for account opening is Rs. 1 Million
•
No restriction on deposits and withdrawals
•
Free facilities: chequebooks and payorders
•
Dedicated account / relationship manager
The Karobari Munafa Account works under the principles of Mudarabah and is strictly in conformity with the rules of Islamic Shariah. Profit calculation and all banking transactions are in strict adherence to the Islamic Shariah, monitored by our Shariah Advisor and the Shariah Supervisory Board.
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MEEZAN BACHAT ACCOUNT Meezan Bachat Account is a unique saving account that provides high monthly returns with the flexibility to withdraw savings if needed. Thus Meezan Bachat Account offers a higher expected rate of return with the convenience of a savings account. With a Meezan Bachat Account, you are entitled for a higher the profit with a higher account balance. You receive profit even if your balance falls below Rs. 25,000/- in any one month. Profit is credited to your account every month and is calculated with reference to the minimum balance maintained in the account during the preceding month. The Riba-Free Meezan Bachat Account works under the principles of Mudarabah and is strictly in conformity with the rules of Islamic Shariah. Profit calculation and all banking transactions are in strict adherence to the Islamic Shariah, monitored by our Shariah Advisor and the Shariah Supervisory Board. Key Features •
Highest expected rate of return
•
Riba-free profit paid every month
•
Minimum balance for account opening is just Rs.25,000/-
•
Maximum balance limit for getting highest profit rate is Rs. 1,000,000/-
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•
Waiver of application fee for Car Ijarah & Easy Home for accounts with minimum balance of Rs. 500,000
•
Free Online Banking services at all Meezan Bank branches nationwide
•
Free bank balance certificates.
•
24/7 Card your ATM & Debit Card in one
•
24/7 Call Center with complete Tele-banking services
•
24/7 Internet Banking – free and instant access to your account(s) anytime & anywhere
•
Personal financial consultancy services.
•
Specialized 8 to 8 Banking at selected branches
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CERTIFICATE OF ISLAMIC INVESTMENT The Riba Free Certificate of Islamic Investment Certificate is a Shariah compatible investment certificate with a minimum investment of Rs. 50,000 and tenures from 3 months to 5 years. Profit on investment may be earned on the following basis: •
Monthly profit on 1, 2, 3 and 5 years (Minimum Investment Rs. 200,000)
•
Quarterly profit on 1, 2, 3 and 5 years
•
At maturity profit payment for all tenures
•
Withdraw your investment any time during the course of your investment. (Profit shall be paid only after completion of one month of investment)
Riba-Free Certificate of Islamic Investment (COII) works under the principles of Mudarabah and is strictly in conformity with the rules of Islamic Shariah. Profit calculation and all banking transactions are in strict adherence to the Islamic Shariah, monitored by our Shariah Advisor and the Shariah Supervisory Board.
Invest in Certificate of Islamic Investment Riba-Free COII is available at all branches of Meezan Bank Ltd. We invite you to visit any of our branches to experience the comfort of our personalized service. To make an investment the bank requires customers to maintain either a current or a saving account
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with Meezan Bank. In order to open an account, fill in the Account Opening Form, bring in the required documents, and get introduced by an existing banker. Additional Features Enjoy a range of valuable features including: •
High and very competitive returns
•
Long-term security ensured
•
Pre-mature withdrawal options available
•
Free Online Banking services at any of our branches
•
24/7 Call Center with complete Tele-banking services
•
Specialized 8 to 8 Banking at selected branches
MEEZAN AMDAN CERTIFICATE The Riba-Free Meezan Aamdan Certificate (MAC) is a long-term deposit certificate with an exceptionally high monthly profit designed especially for those individuals and corporations who are in need of regular stream of monthly income. MAC is a monthly income (mahana aamdani) certificate with a variety of free packaged benefits. Working under the principles of Mudarabah, the Meezan Aamdan Certificate and is strictly in conformity with the rules of Islamic Shariah. Profit calculation and all banking transactions are in strict adherence to the Islamic Shariah, monitored by our Shariah Advisor and the Shariah Supervisory Board.
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Key Features Enjoy a range of valuable features including: •
High and very competitive returns
•
Ensured Long-term security
•
Minimum investment amount: Rs. 100,000/-
•
Special attraction for Widows and Senior citizens with minimum investment of PKR 50,000/-
•
Available tenures of 5½ years and 7 years
•
Profit payment on monthly basis.
•
Pre-mature withdrawal options available.
•
Free cheque book
•
Free ATM withdrawals on investment of Rs.500,000/- and above ( 5 per month)
•
Free Online Banking services at all Meezan Bank branches nationwide
•
Free Internet banking facility
•
24/7 Call Center with complete Tele-banking services
•
Specialized 8 to 8 Banking at selected branches
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MONTHLY MUDARBA CERTIFICATE Riba Free Monthly Mudarabah Certificates is a flexible rupee based investment which has been designed to give you a monthly return. The minimum investment required is only Rs. 100,000 and you receive profit for each complete month of investment with the Bank. Working under the principles of Mudarabah and in strict conformity with the rules of Islamic Shariah, the Profit calculation of Monthly Mudarabah Certificates and all other banking transactions are in strict adherence to the Islamic Shariah, monitored by our Shariah Advisor and the Shariah Supervisory Board. The weightages used for profit calculation of the Monthly Mudarabah Certificate are in the following tiers: •
Rs. 100K up to Rs. 4.99 Mn
•
Rs. 5.00 Mn up to Rs. 9.99 Mn
•
Rs. 10 Mn up to Rs. 49.99 Mn
•
Rs. 50 Mn up to Rs. 99.99 Mn
•
Rs. 100 Mn up to Rs. 499.99 Mn
•
Rs. 500 Mn & above
40
Additional Features During your relationship with us, you would be entitled to receive the following additional benefits. •
A 100% halal investment in strict compliance with Shariah
•
Monthly profit payment to your current or saving account with us
•
Pre-mature withdrawal options available
•
Bank balance certificates
•
Free Online Banking services at all Meezan Bank branches
•
24/7 Call Center with complete Tele-banking services
•
Personal financial consultancy services
•
Specialized 8 to 8 Banking and Ladies Banking at selected branches
MEEZAN PROVIDENCE CERTIFICATE Meezan Providence Certificate is a long-term investment certificate specially designed to cater to the needs of corporate and business concerns for purposes of investing their Provident, Pension and Gratuity Funds. As any prudent investor, your main concerns would be total security along with the best returns possible, especially as these funds are a trust from your employees and one that bears an important responsibility.
41
Meezan Providence rests on the well known and solid financial strength of Meezan Bank, which has a strong and credible balance sheet with excellent operating profitability, including a capital adequacy ratio that has placed the Bank at the top of the industry, a long-term entity rating of A+, and a short-term entity rating of A1. Furthermore, our sterling track record shows consistently beneficial and highly competitive returns for our broad range of investors. Finally, comes the benefit of truly Halal returns, a benefit you may not have had the opportunity to enjoy before and one that you can now pass on to your employees, many of whom would be grateful for such an opportunity. Riba-Free Meezan Providence Certificate (MPC) works under the works under the principles of Mudarabah and is strictly in conformity with the rules of Islamic Shariah. Profit calculation and all banking transactions are in strict adherence to the Islamic Shariah, monitored by our Shariah Advisor and the Shariah Supervisory Board. Key Features Enjoy a range of valuable features including: •
A 100% halal investment in strict compliance with Shariah
•
High Returns
•
Long-term security ensured
•
Minimum investment amount: PKR 1,000,000
42
•
Available tenures of 2, 3, 5 and 7 years
•
Pre-mature withdrawal options available
DOLLAR MUDARABAH CERTIFICATE The Riba Free Dollar Mudarabah Certificate is a flexible dollar based investment which has been designed under the principles of Mudarabah and is strictly in conformity with the
rules
of
Islamic
Shariah.
The Certificate works under the principles of Mudarabah and is strictly in conformity with the rules of Islamic Shariah. Profit calculation and all banking transactions are in strict adherence to the Islamic Shariah, monitored by our Shariah Advisor and the Shariah Supervisory Board. Key Features Enjoy a range of valuable features including: •
High and very competitive returns
•
Six monthly profit payment to your current or saving account with us
•
Long-term security ensured. Minimum investment amount: USD 10,000/-
43
•
Available tenures of 3 months, 6 months, 1 year, and 3 years
•
Pre-mature withdrawal options available
•
Bank balance certificates
•
24/7 Call Center with complete Tele-banking services
•
Personal financial consultancy services
44
CAR IJARAH-AUTO FINANCE Car Ijarah, Pakistan’s First Islamic Car Financing As a step towards Meezan Bank’s mission to provide a one-stop shop for innovative value added Shariah compliant products, Meezan Bank’s Car Ijarah unit provides a car financing, based on the principles of Ijarah and is free of the element of markup. Car Ijarah is Pakistan’s first Markup Free car financing based on the Islamic financing mode of Ijarah (Islamic leasing). This product is ideal for individuals looking for car financing while avoiding an markup-based transaction. Meezan Bank’ Car Ijarah is a car rental agreement, under which the Bank purchases the car and rents it out to the customer for a period of 3 to 5 years, agreed at the time of the contract. Upon completion of the lease period the customer gets ownership of the car against his initial security deposit.
Car Ijarah also features Used Vehicles! In addition to our leasing of new cars, Meezan Bank also provides the unique opportunity of leasing second hand, both locally assembled and imported vehicles. This feature is specifically designed as a highly economical option. The Used Car Ijarah facility is made available at a minimum-security deposit as low as 20%. Financing of used cars are subject to a selection criteria. Shariah Compliance
45
Car Ijarah, designed under the supervision of Meezan Banks Shariah Supervisory Board, is unique to car leasing facilities provided by other banks. Key Features of Car Ijarah •
Low monthly rental
•
Rental paid after delivery, not in advanced
•
Fastest processing and delivery
•
Tracker option available
•
Minimum security deposit as low as 10%
•
All new, used, local, imported and luxury vehicles can be financed
46
WORKING CAPITAL FINANCE Working Capital Finance Solutions (for short term financing requirements) Parts of the wide range of Shariah complaint solutions for the customers are Murabaha and Istisna’a, designed to meet working capital requirements. For example, if you need finance for purchasing raw materials for your industry or are trading in goods then you could use Mudarabah or Istisna’a to meet your financial needs.
Murabaha One of the most common modes of finance employed by Islamic Banks, Murabaha is based on the exact requirements of each customer. It can be defined as a sales transaction where Meezan Bank purchases the commodity and sells it after adding an agreed profit. Thus, it is not a loan given on markup - it the sale of a commodity on a deferred price. Hence Murabaha involves the purchase of a commodity by Meezan Bank on behalf of a customer and the subsequent resale to the customer on cost-plus-profit basis. The cost and profit margin to the bank is expressly disclosed to the customer. Simply put, rather than advancing money to the customer, Meezan Bank buys the commodity from a third party and sells it to the customer at an agreed price, which includes an element of profit.
47
So what is the difference between Murabaha and a Sale? A simple sale in Arabic is called Musawamah - a sale that does not involve disclosing or referring to the cost of goods sold. However, when the cost price is disclosed to the client, it is called Murabaha.
Istisna’a Istisna’a is a sale transaction where a commodity is transacted before it comes into existence. It is an order to manufacture a specific commodity for the purchaser. The manufacturer (our customer) uses its own material to manufacture the required goods. In Istisna’a, price is fixed with the consent of all parties involved. Similarly all other necessary specifications of the finished product are agreed beforehand. Istisna’ as a mode of financing Istisna Finance is used to cater for the working capital requirements of a business involved in the manufacturing of goods. It is ideally suited for exporters and manufacturers who have export orders in the shape of Sight/Usance Letter of Credit/ Sight Export Contract D/P/ Usance Export Contract D/A.
48
PROJECT FINANCING, EXPANSION AND BMR
Project Financing, Expansion or BMR Requirement Solutions (For medium and long term financing requirements) Two of the most commonly used Islamic financing solutions availed by businesses today, Diminishing Musharakah and Ijarah are ideal for expansion of businesses, BMR requirements or other medium to long term financing requirements.
Diminishing Musharakah Using this financing model, Meezan Bank and the customer participate in the joint ownership of an asset. The asset is divided into a number of units and the customer periodically purchases these units from the bank over a specified period. Over time, the customer purchases all units owned by the bank, making him or her sole owner of the asset or the commercial enterprise. Diminishing Musharakah is most commonly used for the financing of fixed assets, projects, homes and automobiles.
49
Ijarah In contrast to diminishing musharakah, this mode of financing is based on the provision of the required tangible assets, such as property, machinery, etc, on rental for an agreed period of time. The concept is similar to “leasing”, which is common in conventional banking. However there are some specific prohibitions which render conventional leasing to be forbidden under Shariah.
Ijarah is commonly used for long and medium term fixed asset financing, project financing and for retail products such as homes and automobiles.
50
ISLAMIC EXPORT REFINANCE SCHEME
Islamic Export Refinance Facility The launch of this product made Meezan Bank the first Islamic bank in Pakistan to offer Refinance facilities with complete compliance to Shariah. This product provides for all the unique requirements of exporters and is available in both PartI and Part-II as per the original Export Refinance Scheme of the State Bank of Pakistan.
LETTER OF GUARANTEE FACILITY
A complete range of products and services for importers and exporters are available. Based on various modes of Islamic Finance, the solutions have been designed to suit the needs of our customers. Some of the key services offered include:
Letter of Guarantee Facility •
Products for Exporters •
Export bills for collection
51
•
•
Export (Sight) bills purchase under Salam Arrangement
•
Export (Usance) bills purchase under Murabaha Arrangement
Products for Importers •
Sight Letter of Credit
•
Usance Letter of Credit
52
ADVISORY SERVICES
Realizing the increasingly diverse needs of our customers for advisory and structured finance transactions, a specialized unit focusing on Investment Banking has been established at Meezan Bank. The Investment Banking department provides unique structuring capability using complex Shariah structures for transactions so as meet customer need. Meezan Bank as torchbearer of Islamic Banking has made a significant contribution in the Investment Banking industry by playing leading roles in business transactions amounting to PKR 53 billion in the year 2007. Key Services •
Syndication Structuring
•
Privatization Mandates
•
Mergers & Acquisitions
•
Advisory Services
53
54
MONEY TRANSFER The Meezan Bank’s remittance services are simple and reliable. They are available at your doorstep through a wide and efficient network of corresponding banks worldwide. Only leading global financial institutions form this network of correspondent banks. Advantages of Meezan Home Remittance: •
Quick Remittance in major currencies i.e. USD, GBP, EUR, JPY, CHF, SGD, AUD
•
Extensive branch network in all major cities of Pakistan
•
Instant online transfer within our branch network without any charges
•
Free Internet banking facility
Easy Guidelines for Money Transfer If you wish to remit money to Pakistan, simply give instructions to your existing bank for money transfer by providing the name of your preferred Meezan Bank branch and beneficiary account number.
55
DOLLAR MUDARABAH CERTIFICATE The Riba Free Dollar Mudarabah Certificate is a flexible dollar based investment which has been designed under the principles of Mudarabah and is strictly in conformity with the
rules
of
Islamic
Shariah.
The Certificate works under the principles of Mudarabah and is strictly in conformity with the rules of Islamic Shariah. Profit calculation and all banking transactions are in strict adherence to the Islamic Shariah, monitored by our Shariah Advisor and the Shariah Supervisory Board. Key Features Enjoy a range of valuable features including: •
High and very competitive returns
•
Six monthly profit payment to your current or saving account with us
•
Long-term security ensured. Minimum investment amount: USD 10,000/-
•
Available tenures of 3 months, 6 months, 1 year, and 3 years
•
Pre-mature withdrawal options available
•
Bank balance certificates
•
24/7 Call Center with complete Tele-banking services
56
•
Personal financial consultancy services
57
DOLLAR SAVING ACCOUNT Meezan Bank is pleased to offer Riba-Free Dollar Saving Account, a foreign-currency based investment opportunity that is set up on the principles of Shariah and as a result is free from the element of markup. With a minimum of only $100 you can open a Dollar Saving Account with us under a Mudarabah arrangement that is strictly in conformity with the principles of Islamic Shariah. The return earned on the Mudarabah pool is calculated every month and the profit ratio for all investors is declared at the beginning of the month. If you maintain a minimum average monthly balance of $ 500, you shall be eligible to receive profits that shall be disbursed to you every month. Additional Features Apart from first class service and personalized attention that our customers get when they bank with us, we offer the following additional conveniences to our customers: •
Personalized cheque books
•
No restriction on withdrawals or number of transactions.
•
24/7 Call Center with complete Tele-banking services
•
Monthly profit payment
58
•
Taking stop payment instructions
•
Taking hold mail instructions
•
Issuance of duplicate statement of account
•
Personal financial consultancy services
MEEZAN BANK TREASURY Meezan Bank’s treasury is guided by Shariah with the objective of reviewing, streamlining, and controlling the bank’s domestic and international treasury related operations. Treasury caters to the branches and customers for their entire foreign exchange requirement with efficiency and professionalism. Ready/ spot as well as all forward cover services are provided to branches/customers within Shariah guidelines. Customers are also provided advice on a regular basis about the currency movement by our dealing room augmented by market outlook (without any commitment & obligation) Treasury has enhanced its market activity with increased depth and enhanced volumes, making an impact in the inter-bank FX market. Due to its good relationship with other treasuries, the institution has the ability to generate sufficient amount of liquidity at a time through inter-bank market on Shariah-approved Musharaka basis. Meezan Bank conducts Commodity Murhaba transaction to optimize its returns on its dollar portfolio, besides participating in local/ international sukuk issues, e.g. WAPDA, Qatar, Dubai sukuks, etc. This treasury is the only treasury in Pakistan with a mandate to
59
provide Shariah compliant investment opportunities in capital market that provides halal income ultimately to shareholders Treasury Contact Details: •
Amal Zehra (Corporate Dealer):
[email protected] •
Ahmed Usman Sheikh (Corporate Dealer):
[email protected] •
Osama Niaz Ahmed (Dealer, Interbank):
[email protected] •
Zia ur Rehman (Senior Dealer, Corporate Treasury):
[email protected] •
Raza Zaidi (Dealer, Interbank)
[email protected] •
Murad Dhanani (Senior Dealer, Corporate Treasury):
[email protected]
60
•
Sara Saiyed (Chief Dealer, Interbank):
[email protected] •
Mr. Yasir Ali Khoso (Dealer, Interbank):
[email protected]
61
CREDIT ADMINISTRATION DEPARTMENT The chairman of the Bank in his review for 2007 annual report define the credit policy of Bank as: “CONSERVATIVE YET DYNAMIC CREDIT POLICY” OBJECTIVE: The overall objective of the department is to provide independent assurance to branch management and head office credit monitoring division that lending activities are properly controlled and monitored.
FUNCTIONS:
•
Documentation
•
Lodgment of documents and cash collateral
•
Reimbursement audit certificate
•
Limit input in bank smart
•
Post disbursement monitoring
•
Monitoring of irregular doubtful and bad debts
62
•
Reporting
Here it is necessary that we must have an overview of at least the most important documents that are relevant to this department. DOCUMENTATION •
Sanction advice
•
Facility offer letter
•
General documentation
•
Standard charge documents
•
Legal document pertain to properties
•
Cash collateral
•
Charge with SECP
•
Other securities
•
Insurance covers
•
Guarantees
Now we discuss above separately. ♦ Sanction advice A type of document which is made when the senior officer of bank discuss all the confidential terms & condition that the demanded facility should be provided or not so
63
we can say that it is a day of final decision that facility should be provided or not. At that time borrower worthiness is checked according to that decision made.
♦ Facility offer letter When this is decided that loan should provided to borrower than branch made facility offer letter that what type of facility should be provided & document are required from borrower according to this facility. ♦ General documents After facility offer letter general document are checked these document consist of •
Complete account opening form
•
Facility request letter
•
BBFS
•
CIB
•
Credit opinion
•
Search report
•
Audited /unedited financial
•
Borrower’s profile
•
Checklist of state bank regulation
•
Board resolution to borrow
•
Memorandum and article of association
64
At this stage all the past records are checked & verified to ensure that past record of the borrower matches with data provided in request letter. The most important document, which is checked is CIB report. In this report all the past loan of borrower are showed and their repayment record is also mentioned. The company polices are also collected and their aim is checked that whether the company is working in the same direction which it has mentioned. ♦ Standard charge document
CF (Current finance)
TF (Term finance)
FAPCI (Finance against packing facility)
FAFB (Finance against foreign)
LBP (Local bill purchase)
FBP (Foreign bill purchase)
SLA (Sight letter of credit)
ULE (Usance letter of credit)
FIM (Finance against import)
FATR (Finance against trust receipt)
GUARANTEE
65
In this stage we see that what type of facility he or she want to take or what type of facility he or she already have. Is the requirement according to nature of business &all facility term & condition are change accordingly to that. Legal document pertain to properties
Title deeds
Copy of record of rights
Copy of mutation
NEC
PTI
AkS shajra
Site plan
Valuation
Site visit report
Power of attorney
Agreement to create mortgage
Token mortgage
Predisbursment lawyers opinion
Perfection certificate of lawyer
66
These all documents are taken from borrower & bank make a file of these documents. These documents are most because when some time bank have to take legal action against borrower then bank know that who are the owner or partner of the company what property is for mortgage its paper are taken and these all the things are provided to bank own lawyer which finally decided that is everything right and he make a certificate or borrower can bring this certificate himself from the recommended lawyer of bank. Cash collateral
Lien on deposits
Lien of deposits
Guarantees
Personal guarantees of borrower
Personal guarantees of mortgagors
Counter guarantees
Cross corporate guarantees
Guarantees are most important thing because in this document it is written that who is responsible in case of default. Personal Guarantees are consider most important because mention person has to pay whenever he is alive.
67
CAR IJARAH OBJECTIVE: The main objective of the car finance department is to finance all the cars manufactured or assembled in Pakistan at a very reasonable markup. THE PRODUCT : I have presented the procedure of car finance department in question answer form because in my opinion it will better explain the whole of the procedure. Can I avail the car loan facility? Yes, you can avail the car loan facility from Meezan Bank to purchase a brand new car if you are:
Pakistani national identity card holder
Over 20 years of age maximum 60 years in case of salaried and 62 is case of a businessperson at the time of maturity of the loan.
Salaried, businessman or self employed.
Which cars can I apply this loan for? All brand new Pakistani assembled / manufactured cars (unregistered) How much loan facility can I avail?
68
Minimum amount is Rs 200,000/- and maximum is Rs.2000,000/What is the period of loan? The loan can be availed from 1 year to 5 years with early adjustment facility at any time before the maturity. How much initial down payment do I have to make? 20% of the value of car What other charges do I have to pay? You have to pay one time fee of Rs 3000/- being amount of processing and documentation charges and first year’s insurance premium. Who will insure the car? Meezan Bank has made arrangements with the top insurance companies who are offering special lowest insurance rates for Meezan Bank clients. How do I repay the loan? You will repay the loan by making easy equal monthly installments to Meezan Bank in the form of post-dated cheques. Can I repay the loan before the maturity? Yes, you have the option to repay the loan at any time during the tenure of the loan. What is the security of the loan?
69
The car is the security, which will be hypothecated in the favors of bank and a lien will be marked with the register. What if I want the car in the name of my family member? You can include your spouse, children (18 years and above) or parents as co applicants for the car loan and the car can be registered in the names. What documents are required to get a car loan sanctioned? Our representatives will discuss the documents you are required to submit in detail. An indicative list is given below:
Two passport size photographs
Copy of national I.D card
Bank statement for last six months
Salary certificate (in English) specifying the name, date of joining, designation and salary details (for salaried individuals)
Business proof (for a business person)
Current utility bill of your residence in Pakistan
Copy of the national ID card of the co-borrower (if the car is to be in the name of the co-borrower)
How is it difficult from other financing schemes available in Pakistan? •
Easily affordable & flexible installments
70
•
Flexibility of adjustment at any time during the tenure
•
Quick processing
•
Minimum down payment
•
Minimum insurance
What is the first step I need to take? Call or visit ort ask your family member to visit any of our branches in Pakistan
This was the whole concept which is clearly defined here .now the details of the application form are given that what is included and what is needed to be filled in the form under the following heads: Personal details •
Full name
•
Fathers/husband name
•
Date of birth
•
National ID card no
•
National tax no
•
Marital status
•
No of dependents
•
Educational qualifications
71
•
Current residential address
•
If rented, monthly rent
•
Residential telephone no
•
Residential status
•
Type of accommodation
•
Residing since
•
Permanent home address
•
Personal mobile ph no
•
Existing car
•
Make and model of current car
•
Car status
Employment details (for salaried individuals)
Name of present employer
Address
Current designation
Employed since
Business telephone no
Fax no.
Official mobile no.
72
Previous employer
Name of the employer
Address
Last designation held
Service tenure
Office telephone no
Fax no.
Business details ( for professional and self-employed individuals ) •
Name of business
•
Nature of business
•
Constitution of firm
•
Address
•
Established since
•
Registered with
•
National tax no
•
Business telephone no
Mobile phone no Income details •
Regular monthly gross income (cost of equitation of dependents)
73
•
Guaranteed bonus
•
Other monthly income
•
Source of other monthly income
•
Average monthly savings
74
TREASURY AND INVESTMENT Money Market •
Short term money market inter-bank trading.
•
Active Treasury Bills trading in secondary market.
•
Forward – forward inter-bank money market trading.
•
Money market linked lending to and borrowing from corporate clients.
Foreign Exchange Market •
Active trading in ready and forward USD/PKR.
•
Active quotations of foreign exchange rates in fifteen major currencies.
•
Information in respect of prevailing rates of most of the currencies of the world for corporate clients and individuals.
•
Forward – Forward foreign exchange rates of USD/PKR.
•
Active swap trading in USD/PKR and other major currencies such as EUR, GBP, JPY and CHF.
Investment •
Active Investment in treasury bills (TBs).
•
Active Trading in Pakistan Investment Bonds (PIBs).
75
•
Active investment in Certificate of Investment (COIs)
•
Active investment in Terms Finance Certificates (TFCs)
Government Securities •
Efficient service for individuals and corporate clients for buying and selling govt. securities on their appropriate requests.
Custodianship •
Investment Securities Portfolio Accounts of Customers for holding on their behalf Treasury Bills, Pakistan Investment Bonds.
Financial Advisory Services •
Briefing on current information available in market in respect of prevailing rates of USD/PKR.
•
Briefing on current information available in market in respect of foreign exchange rates of major foreign currencies.
•
Future expectations and sentiments on major foreign currencies including Pak.Rs.
76
ONLINE BANKING
Meezan Bank now offers the facility of on-line banking to its customers through its countrywide network of branches. Customers can use the ATMs or the banking counters of any branch for day-to-day banking needs, irrespective of branch where they maintain their accounts.
For Corporate customers centralized Cash Management facility is also offered through on-line banking.
PHONE BANKING "Meezan Phone banking” is available to all customers on a countrywide basis. Customers can dial 111-225-111 (without any city code/prefix) from their respective cities i.e. 21 cities where Meezan Bank is present, and get prompt services from the Centralized Phone Banking Services. Customers enjoy 24x7 Round the Clock Phone Banking Services.
77
Meezan Bank is the first bank in Pakistan to offer Centralized UAN connectivity from 21 cities to its Call Center with Hunting & ACD facilities.
78
HOME FINANCE
PRODUCTS OF HOME FINANCE
Buy Your Home With this facility, you no longer need to just dream about the home you want for yourself and your family .We will provide you up to Rs: 7.50 million or 70% of the purchase price of the property (whichever is less), so that you can realize your dream and enter the reality
of
owning
a
home!.
Payment period ranges from 3 to 20 years
Build Your Home Family! No problem. We will provide you up to Rs:7.50 million, or 70% of the estimated value of constructed property to enable you to say good-bye to rent forever! Even You have a plot, and need finance to construct a home, which excites everyone in your if you don't have a plot, we will provide you up to 60% of the value of the plot that you have selected
to
purchase!
Do
we
excite
your
imagination?
Payment period ranges from 3 to 20 years.
79
Renovation Your Home You already own a home, but need extra space for a growing family. Simply apply for financing of up to Rs: 2.50 million or 30% of the surveyed value of your home (whichever is less) and get yourself the extra space. You can stretch payments for up to 7 years
Start it Together The crown jewel of our Home Finance Scheme, the golden opportunity for someone starting a career to buy an already constructed housing unit so early in life! We offer a moratorium of up to 3 years in Principal payments, for a financing of up to 20 years. You service only the mark-up element initially, and principal repayment starts after the end of monitories period. Home Start is specially designed for young people to have there own home
Transfer Does your existing installment on a home finance leave you with nothing to spend? You need not worry any more because we have genuinely low rates and payment options that could leave more funds with you each month. With our BTF, repaying your home finance
80
will not make you break into a sweet! Transfer up to Rs: 7.50 million or 100 % of the existing
finance,
whichever
is
less.
Stretch your repayment period for up to 20 years again.
Steps To Arrange a Home •
We provide you with all the information you need about Meezan Bank Home Finance. This can be through a face-to-face meeting with our Relationship Officer, or over the telephone, or through the post.
•
You give us some basic information about your income and the amount you need so that we can give you an agreement in principle.
•
Once you have decided on the amount you want, you complete an application form and pass it on to us, together with the required documents.
•
We make some inquiries about your financial circumstances.
•
We carryout a valuation of the property and verification of your income
•
Once we have carried out all the initial processing, we send you our offer through a “Facility Advice Letter”.
•
You sign the Facility Advice Letter and return it to us.
•
Our Documentation Control Center will get in
touch with you to complete
Finance & Security documentation including legal opinion on the title, documents of the property and also the insurances. •
You sign the Finance Agreement and Charge documents.
81
•
Our legal advisor will accompany you to the Registrar’s office on the appointed date with our cheque against the financing for conveyance of the property and your
home
finance
begins.
82
FINANCIAL STATEMENT ANALYSIS
83
BALANCE SHEET 2008
2007
2006
2005
(000)
(000)
(000)
(000)
5763710
5644028
5897394
3956938
1344974
3729549
4134875
2855823
18108000
8850000
3700000
----------
2004
(000)
Assets Cash and bank balances 2623588
Balances with other banks 1751083
Due from financial --------institutions
84
Investments
14286949
10535186
2877554
1606490
39768481
34576339
27031016
19740886
1880515
1032963
531262
305585
4123441
2810494
2266522
2210100
85276070
67178559
46438623
30675822
1057017
1192160
563228
260732
4008496
2415606
4285212
2981714
1429053
Financing 12339745
Operating fixed assets 204737
Other assets 1349184
Total assets 19697390
Liabilities
Bills payable 196145
Due to other institutions 2862139
85
Deposits and other accounts 70233875
54582353
34449441
22769262
-----------
----------
-----------
-----------
-----------
----------
-----------
-----------
453038
430377
398304
170274
3548666
2851407
1979079
1469258
5974978
5706656
4763359
3024582
13769807
Subordinated loans -----------
Liabilities against assets ----------subject to finance lease
Deferred tax liabilities 769631
Other liabilities 286
Net assets 2098382
Presented by:
86
Share capital
4925961
3779897
3779897
2036582
845022
720785
528085
407235
1346017
Reserves 256578
Unappropriated profits
5701141219228
448427
527123
258325
87
HORIZONTAL ANALYSIS OF BALANCE SHEET 2008
2007
2006
2005
(%)
(%)
(%)
(%)
207
204
208
151
87
213
276
163
489
239
100
000
999
737
204
112
2004
(%)
Assets
Cash and bank balances 100
Balances with other banks 100
Due from financial 000 institutions
Investments 100
88
Financing
322
280
223
160
922
506
260
149
307
210
169
164
551
621
287
133
140
84
150
104
398
251
165
000
000
000
100
Operating fixed assets 100
Other assets 100
Liabilities
Bills payable 100
Due to other institutions 100
Deposits and other accounts 512 100
Subordinated loans
000
000
89
Liabilities against assets
000
000
000
000
59
56
52
22
242
195
135
100
286
273
228
144
367
281
281
151
330
281
206
159
000 subject to finance lease
Deferred tax liabilities 100
Other liabilities 000
Net assets 100
Presented by:
Share capital 100
Reserves 100
90
Unappropriated profits
221
472
174
204
100
91
COMMENTS ON HORIZONTAL ANALYSIS OF BALANCE SHEET
Horizontal analysis of balance sheet shows that the cash and bank balances of Meezan Bank Limited increased from year 2004 to year 2005 and then to year 2 006 but in the year 2007 and year 2008 these balances remain almost stable. So far as balances with other banks is concerned, they gradually increased to year 2006 then they started decreasing in year 2007 and in year 2008 they fell to the extent of 87 % of that of year 2004. It may be because in year 2008 the amounts due from financial institutions is considerably increased as compared to that of previous years. In my opinion this is not a good sign. It shows that the liquidity of the bank is decreased in the year 2008 and this amount is given as a loan to other financial institutions. The profit on these funds will definitely be low as compared to the profit that might be earned from the bank’s own customers but now this profit would be transferred to other financial institutions.
The figure of investments also show remarkable increase from year to year which shows that bank is trying not to keep its funds idle. The amount of financing is also increased from the year 2004 to year 2008 continuously which is a healthy sign.
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The amount of operating fixed assets is increased continuously which is the evidence that bank is increasing its branch net work nation wide and in order to meet the infrastructure requirements of this network, the bank has to increase its operating fixed assets.
Other assets of the bank are increased at a regular pace from year 2004 to year 2008 which shows that the bank is fully aware of the emerging requirements of its network.
The amount of bills payable is increased from year 2004 to the year 2008 which shows that bank is entering into contracts with other businesses for earning profits. Similarly, the amounts due to other institutions is increased up to year 2006 but in the year 2007 this amount is decreased to 84 % of that of year 2004 but in year 2008 this amount is increased again to 140 %. Overall this situation shows that bank is relying on its own funds rather than borrowing from other institutions.
The major liability of the bank i.e. deposits and other accounts is considerably increased from year 2004 to year 2008 which shows that the customers are confident about the stability of the bank and there is an awareness among the customers about the Islamic way of banking.
The amount of net assets i.e. total assets less liabilities, on the whole is satisfactory because this figure is increased from year 2004 to year 2008. in year 2008 this figure is 286 % to that of year 2004 which shows that the net assets have satisfactorily increased.
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During all these years, the bank arranged capital by issuing extra shares from time to time. Increase in share capital was not because of the funds needed by the bank but it was also because the bank has distributed in the form of stock dividend. This also shows that the bank wanted to save the liquid reserve to earn more profits by investing these funds in its core operations.
The situation of reserves and unappropriated profits is also satisfactory and shows that the bank has saved the sufficient amount of reserves to preserve its capital structure.
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VERTICAL ANALYSIS OF BALANCE SHEET 2008
2007
2006
2005
(%)
(%)
(%)
(%)
6.75
8.40
12.68
12.88
1.57
5.54
8.89
9.29
21.22
13.17
7.97
0.00
16.74
15.68
6.18
5.22
2004
(%)
Assets Cash and bank balances 13.31
Balances with other banks 8.89
Due from financial 0.00 institutions
Investments 7.21
95
Financing
46.63
51.47
58.22
64.36
2.20
1.53
1.14
0.98
4.83
4.18
4.86
7.20
1.23
1.77
3.36
0.85
4.69
3.59
9.22
9.72
81.26
74.18
74.21
000
000
000
62.62
Operating fixed assets 1.02
Other assets 6.80
Liabilities Bills payable 0.96
Due to other institutions 14.53
Deposits and other accounts 82.36 69.88
Subordinated loans
000
000
96
Liabilities against assets
000
000
000
000
0.53
0.64
0.84
0.55
4.15
4.24
4.24
4.76
7.00
8.50
10.26
9.86
5.77
5.61
8.12
6.62
0.98
1.07
1.12
1.30
0.67
1.80
0.95
1.69
000 subject to finance lease
Deferred tax liabilities 3.86
Other liabilities 0.00
Net assets 10.65
Presented by: Share capital 6.81
Reserves 1.27
Unappropriated profits 1.27
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Total Assets
100
100
100
100
100
COMMENTS ON VERTICAL ANALYSIS OF BALANCE SHEET In the year 2004, the cash and bank balances were13.3 percent of the total assets whereas the balances with other banks were 8.89 percent. However the amounts due from other financial institutions were zero percent. This shows that in this year which was actually the second year of the bank’s operations, the scope of its operations was very limited. Similarly the amount of investments was 7.21 percent, operating fixed assets were 1.02 percent and the other assets were only 6.80 percent. However the percentage of Financing was62.6 percent of the total assets which shows that the bank was able to extend 62.6 percent of its total funding as loans in the form of Islamic financing.
Bills payable is the year 2004 were only 0.96 percent, the balance due to other institutions was 14.53 percent and the deferred tax liability was 3.86 percent. However the largest amount of liability was deposits and other accounts which were up to 70 percent of total assets. This shows that the bank was not so much efficient in managing its
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funds because the amount extended to customers was about 62 percent but the deposits received by the bank from the customers were about 70 percent.
The total amount of shareholders’ funds was about 9 percent which shows that the bank was able, from its very beginning, to operate on an optimal capital structure.
In the year 2005, the cash and bank balances, balances with other banks, investments, operating fixed assets, and other assets show a little improvement on the whole but the amount of financing could not be improved very much. However there was a positive change of about 2 % in the amount of financing which is not sufficient when it is compared with the amount of deposits and other accounts which were increased from 70 percent in 2004 to 74 percent in 2005
The situation goes downward in the year 2006 when the percentage of deposits and other accounts to total assets was 74.18 percent but the percentage of financing to total assets was only 58.22 percent. This shows that the customers trusted on the bank and increased the amount of deposits in islamic banking but the bank, on the other hand, could not be equally efficient.
The situation remained continued in the year 2007 and the year 2008 where the percentage of deposits increased to 82 percent whereas the percentage of financing decreased to 47 percent. However the bank also realized the situation and started utilizing
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the funds in other investments and lending to other financial institutions. This move of the bank tried to balance the situation which was created by under utilization of the funds collected from the customers.
100
INCOME STATEMENT 2008
2007
2006
2005
2004
(Rupees in Millions)
Profit earned on financings, investments and placements
6803
4573
2704
1459
(3088)
(2451)
(1464)
(690)
3714
2121
1240
768
534
Return on deposits and other dues expensed (250)
Net spread earned 284
Less
Provision against non-
101
performing financings (net)
(428)
(435)
(121)
(68)
(288)
(0.8)
(1.2)
29.8
2997
1685
1117
729
707
1347
690
622
3705
3033
1807
1351
(2713)
(1764)
(1027)
(718)
(16)
Provision for diminution in value of investments and impairment (1.7)
Net spread after provisions 265
Other Income 365
Total Income 630
Less
Other expenses (409)
102
Profit Before Tax
992
1269
780
633
(371)
(305)
(175)
(213)
621
963
604
419
220
Less
Taxation 4
Profit after tax 224
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HORIZONTAL ANALYSIS OF INCOME STATEMENT 2008
2007
2006
2005
2004
(Rupees in Millions)
Profit earned on financings, investments and placements
1274%
856%
506%
273%
1235
980
586
276
1308
747
437
270
100%
Return on deposits and other dues expensed 100
Net spread earned 100
Less
Provision against non-
104
performing financings (net)
2675
2719
756
425
16941
47
71
1853
1131
636
422
275
194
369
25
170
588
481
287
214
668
431
251
176
100
Provision for diminution in value of investments and impairment 100
Net spread after provisions 100
Other Income 100
Total Income 100
Less
Other expenses 100
105
Profit Before Tax
451
577
355
287
9275
7625
4375
5425
277
430
270
187
100
Less
Taxation 100
Profit after tax 100
Year 2004 is taken as a base year
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COMMENTS ON HORIZONTAL ANALYSIS OF INCOME STATEMENT Horizontal analysis of income statement shows that the profit earned on financing, investments and placements has considerably increased over the years. Similarly the return on deposits and other dues expensed was also increased with the same pace. The situation depicts that the bank has been beneficial on the whole.
The most crucial situation that is obvious from the bank’s income statement is the amount of provision against the non performing financings. This amount has increased over the years at an alarming rate. It shows the bank’s inefficiency in the formulation and implementation of credit and collection policy.
Another item on the income statement that has decreased the bank’s net income to a large extent is the provision fore diminution in value of investments and impairment. This amount is increased up to 16941 % in 2008 as compared to that of 2004. The bank should seriously consider that the investment must be made carefully so that there may not be such a huge decline in their value.
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The other income of the bank has not played a considerable role in the income statement however, the amount of other expenses are increased to a large extent as compared to that of year 2004. We shall analyze later in the vertical analysis that what is the percentage of these two items with respect to the total revenue.
Lastly, the figure of profit after tax shows an increase of 277 % from that of the year 2004. The analysis shows that the profit continuously increased from the year 2004 to 2007 but in the year 2008 this ratio decline to a large extent.
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VERTICAL ANALYSIS OF INCOME STSTEMENT 2008
2007
2006
2005
2004
(Rupees in Millions)
Profit earned on financings, investments and placements
100%
100%
100%
100%
45
54
54
47.29
55
46
46
52.71
6.29
9.51
4.47
4.66
100%
Return on deposits and other dues expensed 46.82
Net spread earned 53.18
Less
Provision against nonperforming financings (net) 3.00
109
Provision for diminution in value of investments and impairment
4.23
0.02
0.04
2.04
44
36.85
41.31
50
10.39
29.46
25.52
42.64
54.46
66
66.83
92.59
39.88
38.57
38
49.21
14.58
27.75
28.85
43.39
0.32
Net spread after provisions 49.63
Other Income 68.35
Total Income 118
Less
Other expenses 76.59
Profit Before Tax 41.20
110
Less
Taxation
5.45
6.67
6.47
14.60
9.13
21.06
22.34
28.72
0.75
Profit after tax 42
Profit earned on financings, investments and placements is taken as a base
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COMMENTS ON VERTICAL ANALYSIS OF INCOME STATEMENT
The vertical analysis of the year 2004, the second year of the bank’s operations, shows that the return by the bank to its deposit holders is about 47 %. Ultimately the gross profit earned by the bank on the financing was 53 %. Provisions for non performing financing kept by the bank was about 3 percent and provision for diminution in the value of investments and impairment was only about 0.32 percent. The other income of the bank was about 68 percent but this item has not added much in the net income of the bank because the percentage of other expenses was about 78 percent. Hence the net income of the bank after tax remained at 42 percent.
In the year 2005, the situation remained almost the same except that the other income of the bank was declined to the percentage of about 43 percent of gross revenue whereas the other expenses were also declined to 49 percent. In this year the net income after tax of the bank was decreased to 29 percent.
In the year 2006 the return paid by the bank was increased to 54 percent leaving a net spread of 46 percent for the bank. The other income of the bank was decreased again to
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an extent of 25.52 percent and the other expenses were 38 percent of the gross revenue. In this year the net income of the bank was decreased further to 22.34 percent.
In the year 2007, the situation remained almost the same with the exception that the provision for non performing loans was considerably increased which is not a good sign. However in this year the net income remained almost equal to that of year 2006.
The year 2008 has not been proved a good year in the history of the bank. Although in this year the net spread earned by the bank was 55 % but the percentage of other income of the bank was decreased with an alarming rate. In this year the percentage of other income was only 10 % but the percentage of other expenses was about 40 percent. This fact has worsened the situation on the whole and the bank’s net income decreased to the maximum of only 9.13 percent which is the lowest of all the previous years.
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RATIO ANALYSIS Return on Equity Return on Equity
=
Net Profit after Tax / Stockholders’ Equity
2008
=
(621187 / 6341097) x 100
=
9.80 %
2007
=
(963501 / 5719910) x 100
=
16.84 %
2006
=
(604251 / 4756409) x 100
=
12.70 %
2005
=
(419455 / 2970940) x 100
=
14.12 %
2004
=
(224358 / 1860920) x 100
=
12.06 %
This ratio shows the profit earned by the company as a percentage of the amount of equity capital invested by the company in the business. In the year 2004 this ratio was about 12 percent but this ratio seems to fluctuate in the later years. In the year 2005, this ratio is improved to 14 percent but again in the year 2006 it is declined to about 12 percent. This is because the company has increased the amount of capital in 2006 but the net profit after tax could not be increased according to that ratio. However in the year
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2007 the ratio was increased to the maximum of all the previous years in spite of an increase in the stockholders’ equity. This is because the net profit was increased proportionately to that. However in the year 2008, the situation is not so good because in this year, the amount of profit declined and the company again has issued the equity capital in the form of bonus shares.
Return on Assets Return on Assets
=
Net Profit after Tax / Total Assets
2008
=
(621187 / 85276070) x 100
=
0.73 %
2007
=
(963501 / 67178559) x 100
=
1.43 %
2006
=
(604251 / 46438623) x 100
=
1.30 %
2005
=
(419455 / 30675822) x 100
=
1.37 %
2004
=
(224358 / 19697390) x 100
=
1.14 %
Return on assets is the ratio that shows the percentage of net profit after tax to total assets. This ratio is also called the return on investments because investment by the
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company in the business is always in the form of different types of assets. This ratio of Meezan Bank Limited shows that the return earned by the bank on its total investments is decreasing from year to year. This is because the bank has continuously increasing its investments in the total assets but against that investment the bank is not earning sufficient amount of profits. The situation is somewhat better in the year 2007 where because of highest of all the years’ profits, the return percentage is 1.43. The bank should consider the situation and should try to rectify this.
Net Spread Margin Net Spread Margin =
Net return on Loans and Advances / Total Assets
2008
=
(2997559 / 85276070) x 100 =
3.52 %
2007
=
(1685888 / 67178559) x 10
=
1.98 %
2006
=
(1117229 / 46438623) x 100 =
1.66 %
2005
=
(729831 / 30675822) x 100
=
2.38 %
2004
=
(265266 / 19697390) x 100
=
1.35 %
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This ratio shows the gross earnings on financing less the return paid to the deposit holders as a percentage of total assets. This is some sort of gross profit ratio because the earning on financing is the main revenue of the bank where the return paid to deposit holders is the cost of those funds. Here this ratio shows that the situation was better in the year 200 but in the year 2006 it is again declined. Then in the year 2007 it again became better while in the year 2008 surprisingly this ratio is the highest. Although the net profit after tax in this year is lesser than that of the previous years but this ratio shows that the bank has become efficient in its core operations and the problem lies with its other income and other expenses as we have already seen in the vertical analysis of the income statement for the year 2008.
Net Other Income Margin Net Other Income Margin =
Net Other Income / Total Assets
2008
=
(707908 / 85276070) x 100
=
0.83 %
2007
=
(1347893 / 67178559) x 100 =
2.01 %
2006
=
(690561 / 46438623) x 100
1.49 %
=
117
2005
=
(622151 / 30675822) x 100
=
2.03%
2004
=
(365093 / 19697390) x 100
=
1.85 %
Net other income margin is the percentage that shows the return earned by the bank from the sources other than its core operations. Keeping in view the intense competition among the banks today, a bank must seriously concentrate on the other sources because in this sheer competition a bank is not in a position to earn premium revenue on the finances provided. For Meezan Bank, this ratio shows that there have been the fluctuations in other income from year to year but the situation is very bad in the year 2008 where this ratio is the minimum of all the previous years. This is the reason that the overall performance of the bank declined in this year.
Earnings per Share Earnings per Share
=
Net Profit after Tax / Number of Shares
2008
=
(621187 / 492596.1)
Issued
=
Rs.1.26 per Share
118
2007
=
(963501 / 377989.7)
=
=
(604251 / 377989.7)
=
=
(419455 / 203658.2)
=
=
(224358 / 134601.7)
=
Rs.1.96 per Share
2006 Rs.1.88 per Share
2005 Rs.1.46 per Share
2004 Rs.1.67 per Share
EPS is the ratio that measures how many rupees the company has earned against one ordinary share issued to the shareholders. The greater is the ratio, the better it would be. It is because the company will have the greater amount of profits per share to pay as dividend to the shareholders. This ratio is the most important ratio from the shareholders’ point of view because they also want to know that how much the company is going to pay them against the number of shares they are having. For Meezan Bank, this ratio improved from the year 2004 to the year 2007 with a little exception in 2005 but in the year 2008 this ratio fell to the minimum of Rs.1.26 per share which is because the company has issued bonus shares to its shareholders as a stock dividend.
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Stock Dividend Percentage 2008
=
8.6 %
2007
=
20 %
2006
=
10 %
2005
=
16 %
2004
=
15 %
Over the years from 2004 to 2008, the bank has been paying the stock dividend instead of cash dividend. Although this is not a good sign but we can say that since this is because of the consent of the shareholders that’s why it is compromisable. This ratio shows that the bank has been paying sufficient amount of dividend to the shareholders from the year 2004 to the year 2007 but in the year 2008 this ratio is declined. This was because in the year 2008, the bank had not earned a handsome amount of profits to justify the larger stock dividends. Anyways, in my opinion, the bank should consider the situation and try to declare dividend in the form of cash also.
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Market Price per Share 2008
=
Rs.21.48 per Share
2007
=
Rs.38.55 per Share
2006
=
Rs.19.50 per Share
2005
=
Rs.23.25 per Share
2004
=
Rs.16.70 per Share
The market price per share has been fluctuating from year to year but the overall impact on the market price is encouraging. However we suggest that the bank should stop paying stock dividends as this increases the number of shares in circulation and the ultimate result will be the decline in the market price.
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Price Earning Ratio Price Earning Ratio =
Market Price per Share / Earnings per Share
2008
=
21.48 / 1.26
=
17.03
2007
=
38.55 / 1.96
=
15.12
2006
=
19.50 / 1.88
=
10.51
2005
=
23.25 / 1.46
=
15.92
2004
=
16.70 / 1.67
=
10.02
The price earnings ratio is commonly used to assess the owner’s appraisal of share value. This ratio measures the amount that investors are willing to pay for each rupee of company’s earnings. The level of this ratio indicates the degree of confidence that investors have in the firm’s future performance. The highest the P/E ratio; the greater the investor confidence in the company. The figures calculated above show that the investors’ confidence in the company is increasing year by year as this ratio is increasing from
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earlier years to the later years. In the year 2006, this ratio was decreased but soon after that this ratio was improved in 2007 and became even better in 2008.
Net Profit before Tax Margin 2008
=
13.21 %
2007
=
21.43 %
2006
=
22.98 %
2005
=
30.42 %
2004
=
24.56 %
Net profit before tax margin represents the profit earned before tax as a percentage of gross revenue. The need to calculate this ratio is that the actual performance of the bank is measured before tax and not after tax. So this ratio shows that the profit earned by the bank increased in the year 2005 but in the later years this ratio continued to decline and in the year 2008 this ratio was only 13.21 percent as compared to that of year 2004 where it was about 25 percent.
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Net Profit after Tax Margin 2008
=
8.27 %
2007
=
16.27 %
2006
=
17.80 %
2005
=
20.15 %
2004
=
24.94 %
Net profit after tax margin was about 25 percent in the year 2004 whereas it started decreasing gradually in the subsequent years. The main reason for this decrease in the net profit was increase in the other expenses and also because of an increase in the amount of taxation. Although the better measure for the efficiency of the management is the net profit before tax margin but since that profit is not on the disposal of the management so it is better to calculate the net profit after tax margin so that the disposable income of the organization should be measured. And this ratio shows that the efficiency of the organization is going decreasing year by year.
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Operating Expenses to Income 2008
=
73.36 %
2007
=
67.71 %
2006
=
73.40 %
2005
=
71.21 %
2004
=
77.24 %
The operating expense to income ratio shows that the organization has been able to control its operating expenses over the year from 2004 to 2008. This ratio was 77.27 percent in the year 2004 and in the year 2008 it is ended with a little decrease to 73.36 percent. In spite of the stability of this ratio the net profit margin of the bank declined to a considerable extent. This was because of an increase in the other expenses of the organization. So the bank should focus to decrease its operating expenses so that its net profit should be improved.
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Financing to Deposit Ratio 2008
=
51.62 %
2007
=
56.90 %
2006
=
65.68 %
2005
=
73.86 %
2004
=
69.97 %
Financing to deposit ratio is perhaps the most critical ratio for a commercial bank. This ratio represents the amount extended as a loan by a bank to its clients compared to deposits that the bank receives from its deposit holders. As per the definition of a commercial bank, the bank is an institution that receives money from those who have it spare and lends it to those who are in need of them. This ratio of Meezan Bank has been declining from the year 2004 to the year 2008. The bank should seriously consider this ratio because these are the core operations of the bank. If the bank could not fully utilize the funds received from the deposit holders it would have to suffer a loss of its net income.
126
Book Value per Share Book Value per Share =
Stockholders’ Equity / No. of Common Shares
Issued
2008
=
6341 M / 4925 M
=
Rs.1.29 per Share
2007
=
5720 M / 3779 M
=
Rs.1.95 per Share
2006
=
4763 M / 3779M
=
Rs.1.97 per Share
2005
=
3025 M / 2036 M
=
Rs.1.49 per Share
2004
=
2098 M / 1346 M
=
Rs.1.56 per Share
Book value per share is the ratio that shows that how much value of assets the bank has to pay to its shareholders in the event of its winding up. If we compare the book value per share with the market value per share we see that although the book value per share is
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much lesser than the market value even then the shareholders are willing to pay much higher price for the share of the bank. It shows that the shareholders have confidence in the company that the company will the prosperous in the future. However since the market price has declined recently, therefore the company should take corrective actions so that the confidence of the shareholders should be maintained.
128
SWOT ANALYSIS Meezan Bank being a quality organization strives to provide quality to all its stakeholders, customers, employees and environment. In Pakistan, it is operating in a very volatile economic and political environment. I have summarized its major strengths, weaknesses, opportunities and threats in the following paragraphs.
STRENGTHS •
MBL has this privilege to be the first in the Islamic Banking sector which gives MBL a competitive edge over all other banks and being the pioneer of this industry MBL is enjoying major share of it.
•
Being an Islamic bank, MBL has a wide national network. As an emerging markets bank, it has branches in all the major cities of Pakistan with the facility of online banking, it is very easy for its customers to transact all over the country.
•
Online banking service means that a customer can withdraw and deposit his money at any branch in the country. Where this service is not present, cheque has to be presented only in that branch on which they are drawn. But with this facility,
129
a person has access to its funds at any branch of the bank. That would mean that any person who has an account with the bank, has an account in 24 branches of it. It provides a lot of comfort and convenience to the customers.
•
There are many value added features in the products offered by the bank. ATM cards are provided with every account. Other features are present in the various products. The priority customers enjoy a much-pampered status at the bank.
•
The employees at the bank provide impeccable customer service to their customers. For them “the customer is the king’. Customers are treated with great respect and honored to the utmost degree.
•
The working environment of the bank is very friendly and cooperative. There is no bossiness in the higher management. The upper management consults its staff in making decisions and provides them independence in their job areas. For the objective is performance and not conformance with the boss.
WEAKNESSES •
Till the last year, MBL had a totally different perspective. The management was of the view that the customer should come to them and they don’t need to go to the customer. But in this era of mass marketing and advertising, it is not possible to stay in competition without these took. The bank has now changed its
130
perception arid has started an effective marketing and advertising strategy. But the previous gaps are still there and there is lack of awareness in the people about the bank and its products. The bank needs to improve on its marketing and advertising areas.
•
It was observed in the bank that the degree of satisfaction of the employees was quite low. First of all, the pays are lower those offered in other banks. Secondly, the employees are given targets that are too difficult to achieve. For example, the targets given to the personnel in sales and services department are higher than any other bank in the country, be it a local bank or a foreign bank. This makes the job too stressful and tensed It is good to keep the people under a continuous move, but to overstress them can be harmful to them and as well as to the organization.
•
Due to the dissatisfaction of staff, there is high turnover among them. People who find other alternatives do not stay with the bank. Therefore, the bank incurs loss on their training and development. The bank should provide incentives to its employees so that they show more loyalty. For example, there is no commission provided to the sales personnel which otherwise is a general rule all over the world.
•
There are no sorts of training programmes for the employees. The employees who are newly appointed are straight away placed at their positions with no prior
131
orientation. This creates problem for new personnel because they find difficult to understand the environment and culture of the organization.
•
The decision-making is carried out the upper management level and the subordinates are not included in this process. This creates a sense of insecurity in the lower managers and that is why there is a lack of loyalty among the personnel. Although the upper management is very friendly with the lower managers but that is only to the extent of cordial relationships.
OPPORTUNITIES •
The economic conditions are improving in the country. The foreign exchange reserve has crossed the level the $ 14 Billions, which is something that was never achieved in the past. The stock exchange index has also crossed fifty years high recently touching 10,000 this year. This provides a better environment for investment and growth. This would give a push to incomes of the population, which would increase the level of savings.
•
There is an inflow of foreign investment in the country. This would increase the industrial growth Pakistan. The Islamic banks are important part of money markets and this improvement will definitely effect their positions as well. Due to the growth in the industrial sector, there will be an increase in the production of
132
this sector. The levels of deposits of industrial accounts would rise due to this factor.
THREATS •
Right now there are a few banks that are providing islamic banking services in addition to the Meezan Bank. These banks include Bank Islami, Al-Barkah Bank and some branches of Bank Alfalah which are dedicated for islamic banking services. That’s why we can say that although there is no intense threat for the Meezan Bank in the near future but it is not difficult to say that more banks may enter in this field as the awareness of islamic banking is increasing among the public. Therefore the Meezan Bank should not be contented to its present market share but should strive for providing better and better and modern services.
•
Due to the increase in the number of conventional commercial banks, there is an increase in competition. Also there is a lot of aggressive marketing by the competitor banks. This is also a threat for MBL.
133
RECOMMENDATIONS
Meezan Bank is renowned for being first in Islamic banking. With such competitive edge in the banking industry, it holds a very strong position among its competitors. Its continuous innovation and adaptation to its changing environment has allowed it to stand amongst the best of the lot. But I would like to give certain recommendations in this perspective:
First of all, I would I like to suggest that the bank must pursue a very aggressive marketing and advertising strategy so that it can create awareness in the general public about its Islamic products and services
Secondly, there is a need for creating satisfaction among employees. They do not feel any attachment to the organization. There is a requirement for building up their loyalties so that the bank can curtail the dissatisfaction and turnover among employees.
The personnel in the bank should not be overstressed with workload. The workload is of a destructive level. At that level of load the employees loose all the comfort in their work and remain tense and frustrated.
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There is need of a new branch in the Lahore Main area. In our marketing research, many traders told us that they really wanted such a good bank to open a branch in that area. These traders have transactions of millions in a day that is why it is not easy for them to carry that amount of cash. If MBL opens a branch in that area, it can take hold of all those big accounts with a lot of daily transactions.
Job training is a very important aspect that MBL is lacking in. New employees are recruited directly without any prior training or orientation. The result is that they do not understand the organizational structure and culture and become frustrated in their start. This reduces their productivity and efficiency. If such a training programmed is started, then the new employees would feel more comfortable and adapt easily to the environment.
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Introduction....................................................................................4 Objectives........................................................................................................................4 Overview of the Organization..........................................................................................5 Brief History of the Organization................................................................................5 Nature of the Organization...............................................................................................9 The Meezan Team........................................................................................................9 Business Segments of the Bank...................................................................................9 VISION AND MISSION...............................................................................................10 SERVICE MISSION......................................................................................................11 ORGANIZATIONAL STRUCTURE............................................................................11 SHARIAH ADVISORY BOARD..............................................................................14 BOARD OF DIRECTORS........................................................................................15 ORGANIZATIONAL STRUCTURE OF THE BRANCH............................................16
ACCOUNTS DEPARTMENTS..................................................17 STRUCTURE AND FUNCTIONS ..............................................................................17
OBJECTIVE:...............................................................................17 FUNCTIONS:............................................................................................................17 DATA CONTROLLING:...........................................................................................17 Aspects of Data Controlling .....................................................................................18 REPORTING AND EXPENSE:................................................................................18 BUDGETARY PERFORMANCE:............................................................................19 ACCOUNT OPENING AT MEEZAN BANK..............................................................23 Business Account.......................................................................................................23 Sole proprietor accounts: ..........................................................................................23 Document required.........................................................................................................23 Partnership account: ..................................................................................................24 Document required:.......................................................................................................24 Limited company accounts: ......................................................................................24 Document required:.......................................................................................................24 Personal Account.......................................................................................................25 Club Society Account................................................................................................26 Accounts On the Basis Of Currency..........................................................................27 RUPEE CURRENT ACCOUNT...............................................................................28 DOLLAR SAVING ACCOUNT................................................................................32 KAROBARY MUNAFA ACCOUNT.......................................................................34 MEEZAN BACHAT ACCOUNT..............................................................................35 CERTIFICATE OF ISLAMIC INVESTMENT.............................................................37 Invest in Certificate of Islamic Investment................................................................37 MEEZAN AMDAN CERTIFICATE.........................................................................38 MONTHLY MUDARBA CERTIFICATE.....................................................................40
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MEEZAN PROVIDENCE CERTIFICATE...................................................................41 DOLLAR MUDARABAH CERTIFICATE..................................................................43 CAR IJARAH-AUTO FINANCE.................................................................................45 Car Ijarah also features Used Vehicles!.....................................................................45
WORKING CAPITAL FINANCE.............................................47 Murabaha.......................................................................................................................47 Istisna’a..........................................................................................................................48 PROJECT FINANCING, EXPANSION AND BMR....................................................49 Diminishing Musharakah...........................................................................................49 Ijarah..............................................................................................................................50 ISLAMIC EXPORT REFINANCE SCHEME..............................................................51 LETTER OF GUARANTEE FACILITY..................................................................51 Letter of Guarantee Facility.......................................................................................51 ADVISORY SERVICES................................................................................................53 MONEY TRANSFER....................................................................................................55 DOLLAR MUDARABAH CERTIFICATE..................................................................56 DOLLAR SAVING ACCOUNT....................................................................................58 MEEZAN BANK TREASURY.....................................................................................59
CREDIT ADMINISTRATION DEPARTMENT......................62 “CONSERVATIVE YET DYNAMIC CREDIT POLICY”...........................................62 The overall objective of the department is to provide independent assurance to branch management and head office credit monitoring division that lending activities are properly controlled and monitored.......................................................62 CAR IJARAH................................................................................................................68
OBJECTIVE:...............................................................................68 THE PRODUCT :........................................................................68 Previous employer.........................................................................................................73 TREASURY AND INVESTMENT...............................................................................75 Money Market............................................................................................................75 Foreign Exchange Market..........................................................................................75 Investment..................................................................................................................75 Government Securities...............................................................................................76 Custodianship.............................................................................................................76 Financial Advisory Services......................................................................................76 ONLINE BANKING.....................................................................................................77 PHONE BANKING.......................................................................................................77 HOME FINANCE.........................................................................................................79 Buy Your Home.........................................................................................................79 Build Your Home.......................................................................................................79 Renovation Your Home..............................................................................................80 Start it Together..........................................................................................................80 Transfer......................................................................................................................80
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Steps To Arrange a Home..........................................................................................81
FINANCIAL STATEMENT ANALYSIS...................................83 BALANCE SHEET ......................................................................................................84 HORIZONTAL ANALYSIS OF BALANCE SHEET...............................................88 COMMENTS ON HORIZONTAL ANALYSIS OF BALANCE SHEET................92 VERTICAL ANALYSIS OF BALANCE SHEET.....................................................95 COMMENTS ON VERTICAL ANALYSIS OF BALANCE SHEET......................98 INCOME STATEMENT..............................................................................................101 HORIZONTAL ANALYSIS OF INCOME STATEMENT.....................................104 COMMENTS ON HORIZONTAL ANALYSIS OF INCOME STATEMENT.......107 VERTICAL ANALYSIS OF INCOME STSTEMENT...........................................109 COMMENTS ON VERTICAL ANALYSIS OF INCOME STATEMENT.............112
RATIO ANALYSIS....................................................................114 Return on Equity..........................................................................................................114 Return on Assets...........................................................................................................115 Net Spread Margin.......................................................................................................116 Net Other Income Margin............................................................................................117 Earnings per Share.......................................................................................................118 Stock Dividend Percentage..........................................................................................120 Market Price per Share.................................................................................................121 Price Earning Ratio......................................................................................................122 Net Profit before Tax Margin ......................................................................................123 Net Profit after Tax Margin..........................................................................................124 Operating Expenses to Income....................................................................................125 Financing to Deposit Ratio..........................................................................................126 Book Value per Share...................................................................................................127
SWOT ANALYSIS.....................................................................129 STRENGTHS..............................................................................................................129 WEAKNESSES...........................................................................................................130 OPPORTUNITIES.......................................................................................................132 THREATS....................................................................................................................133 RECOMMENDATIONS.............................................................................................134
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Introduction Objectives
Internship is an integral part of MBA program. It provided me the opportunity to develop practical know how of concepts which before that were only in theoretical form. My internship in Meezan Bank Limited, Abdali Road, Branch, Multan was full of learning regarding various aspect of banking. The report contains practical knowledge, which I gained during my internship. Meezan Bank limited is one of the largest private banks in Pakistan, and it has bright future forward. All information in this report is based on my observation, interviews and practical involvement in different tasks during my internship in Bank.
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Overview of the Organization Brief History of the Organization 1947 The inception of Pakistan as the first Islamic Republic created in the name of Islam. 1980 CII presents report on the elimination of Markup genuinely considered to be the first major comprehensive work in the world undertaken on Islamic banking and finance. 1985 Commercial banks transformed their nomenclature stating all Rupee Saving Accounts as markup-free. However, foreign currency deposits in Pakistan and foreign loans continued as before. 1991 Procedure adopted by banks in 1985 was declared un-Islamic by the Federal Shariat Court (FSC). The Government and some banks/DFIs made appeals to the Shariat Appellate Bench (SAB) of the Supreme Court of Pakistan. 1997 Al-Meezan Investment Bank is established with a mandate to pursue Islamic Banking. Mr. Irfan Siddiqui appointed as first and founding Chief Executive Officer.
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1999 The Shariat Appellate Bench of the Supreme Court of Pakistan rejects the appeals and directs all laws on markup banking to cease. The government sets up a high level commission, task forces and committees to institute and promote Islamic banking on parallel basis with conventional system. 2001 The Shariah Supervisory Board is established at Al-Meezan Investment Bank led by Justice (Retd.) Muhammad Taqi Usmani as chairman. State Bank of Pakistan sets criteria for establishment of Islamic commercial banks in private sector and subsidiaries and stand-alone branches by existing commercial banks to conduct Islamic banking in the country.
2002 Meezan Bank acquires the Pakistan operations of Societe Generale and concurrently Al Meezan Investment Bank converts itself into a full fledged Islamic commercial bank. The first Islamic banking license is issued to the Bank and it is renamed Meezan Bank. President General Pervez Musharraf inaugurates the new Islamic Commercial Bank at a formal ceremony in Karachi. 2003 Meezan Bank establishes itself as the pioneer of Islamic Banking in Pakistan and quickly establishes branches in all major cities of the country. A wide range of products are developed and launched consolidating the Bank’s position as the premier Islamic Bank of
6
the country Al Meezan Investment Management Limited (AMIM), the asset management arm of Meezan Bank, introduces Meezan Islamic Fund (MIF), the country’s first openend Islamic Mutual Fund. 2004 The State Bank establishes a dedicated Islamic Banking Department (IBD) by merging the Islamic Economics Division of the Research Department with the Islamic Banking Division of the Banking Policy Department. A Shariah Board has been appointed to regulate and approve guidelines for the emerging Islamic Banking industry. The Government of Pakistan awards the mandate for debut of international Sukuk (Bond) offering for USD 500 million. The offering is a success and establishes a benchmark for Pakistan. Meezan Bank acts as the Shariah Structuring Advisor for this historic transaction. 2005 Meezan Bank becomes the first customer of Islamic Insurance (Takaful) by signing the first Memorandum of Understanding MoU with Pak-Kuwait Takaful Company Limited (PKTCL). The signing of this MoU has ushered Pakistan into a new era of Islamic Insurance (Takaful). 2006 A number of new dedicated Islamic Banks, namely Bank Islami and Dubai Islamic Bank, commence operations in Pakistan.Meezan continues its leadership position in the industry by more than doubling it branch network to a total of 62 branches in 21 cities, clearly
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establishing itself as the largest Islamic Bank of the country. Meezan Bank, becomes the first Islamic bank to introduce 8 am to 8 pm banking at selected branches in Karachi. 2007 Meezan Bank opens up its 100th branch. Two new dedicated Islamic Banks start operations in Pakistan, namely Emirates Global Islamic Bank and Dawood Islamic Bank. 2008 With 166 Branches (including 35 sub-branches) in 40 cities across Pakistan, Meezan Bank is clearly positioned as the leading Islamic Bank in the country. Work starts on the construction of Meezan Bank’s new Head Office building.The financing and investment portfolio of local Islamic banks reached Rs. 185 billion in December 2008 compared to Rs. 137.6 billion in December 2007. Market share in the overall banking increased to five per cent at end December 2008 compared with four per cent at end December 2007. Total assets of Islamic banking reached Rs. 271.1 billion in December 2008 compared to Rs. 205.2 billion in December 2007.
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Nature of the Organization Meezan Bank is a commercial bank which receives deposits from the people who have it spare and invests it with those who are in need of them. It has got the license of commercial banking from the State Bank of Pakistan and is registered under the legislation of Banking Companies Ordinance 1962. It has dedicated itself to do business of banking according to islamic rules and regulations and is supervised by a Shariah Board who keeps an eye on the operations of the bank and ensures that the same must be in accordance with the teachings of islam and there must be no element of Riba in it.
The Meezan Team Meezan Bank is managed by a team of professional bankers committed to the cause of Islamic Banking. This single unifying factor unleashes the tremendous power of a dedicated and motivated team committed to fulfilling the Vision and Mission of this Bank.
Business Segments of the Bank •
Corporate and Investment Banking
•
Commercial and SME
•
Consumer Finance
•
Treasury & Financial Institutions
•
Asset Management (managed through a subsidiary Al Meezan Investment Management Limited.)
Retail Banking is organized in three Regions across Pakistan, namely South Region, Central Region and North Region.
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VISION AND MISSION
VISION
Establish Islamic banking as banking of first choice to facilitate the implementation of an equitable economic system, providing a strong foundation for establishing a fair and just society for mankind.
MISSION
To be a premier Islamic bank, offering a one-stop shop for innovative value added products and services to our customers within the bounds of Shariah, while optimizing the stakeholders value through an organizational culture based on learning, fairness, respect for individual enterprise and performance.
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SERVICE MISSION To develop a committed service culture which ensures the consistent delivery of our products and services within the highest quality service parameters, promoting Islamic values and ensuring recognition and a quality banking experience to our customers.
ORGANIZATIONAL STRUCTURE
SHARIAH SUPERVISORY BOARD
BOARD OF DIRECTORS
AUDIT
COMMITTEE
Shariah Advisor Internal Audit (Dr. Muhammad Imran Usmani) (Mr. Zia-ul-Hasan)
Product Development & Shariah Compliance (Mr. Ahmed Ali Siddiqui)
PRESIDENT & CEO (Mr. Irfan Siddiqui)
Risk Management (Mr. Syed Ali Azhar Naqvi) Legal Affairs (Mr. Atique Ahmed Siddiqui)
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Compliance (Mr. Saleem Wafai)
Administration (Mr. Munawar Rizvi)
Branch Expansion (Mr. Munawar Rizvi)
PRESIDENT & CEO Mr. Irfan Siddiqui)
CHIEF OPERATING OFFICER (Mr. Ariful Islam)
BRANCH NETWORK
BUSINESS SEGMENT
SUPPORT
SOUTH
CORPORATE
FINANCE
(Mr. Abdul Ghaffar Memon)
(Mr. Zubair Haider)(Mr. Shabbir Hamza)
CENTRAL
INVESTMENT BANKING
OPERATION
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(Mr. Rizwan Ata)
(Mr. Syed Amir Ali)
(Mr. Arshad
NORTH
COMMERCIAL BANKING
I.T
(MR. Saleem Khan)
(Mr. Shoaib Qureshi)
(Mr. Faiz-
Majeed)
ul-Rehman)
SME
HUMAN RESOURCES (Mr. Salim Khowaja)
(Mr. Irfan
Ali Hyder)
TREASURY & FINANCIAL
TRAINING
INSTITUTION
(Mr. M. Abdullah Ahmed)
(Mr. M. Sohail Khan)
CONSUMER BANKING
SERVICE QUALITY
(Mr. Muhammad Raza)
(Mr. Asadullah Ch.)
ALTERNATE DISTRIBUTION CHANNELS (Mr. Omer Salimullah)
MARKETING (Mr. M. Sohail Khan)
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SHARIAH ADVISORY BOARD
The letter and spirit of Islamic Banking rest upon absolute adherence to the Shariah. The foundations of a strong Shariah underpinning at Meezan Bank were laid from the beginning. A world renowned Shariah Supervisory Board and a highly qualified and experienced in house Shariah Advisor are fundamental aspects of the Bank's core USP. The primary role of this board is to maintain and further strengthen this commitment and to ensure strict Shariah compliance in all the Bank's operations. The members of the Shariah Supervisory Board of Meezan Bank are Internationallyrenowned scholars, serving on the boards of many Islamic banks operating in different countries. The members of the Board are: •
Justice (Retd.) Muhammad Taqi Usmani (Chairman)
•
Dr. Abdul Sattar Abu Ghuddah
•
Sheikh Essam M. Ishaq
•
Dr. Muhammad Imran Ashraf Usmani (Advisor)
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BOARD OF DIRECTORS
The Board of Directors of Meezan Bank are:
•
H. E. Sheikh Ebrahim Bin Khalifa Al-Khalifa (Chairman) (Minister of Housing, Ministry of Housing, Kingdom of Bahrain)
•
Naser Abdul Mohsen Al-Marri (Vice Chairman)
•
Jassar Dakheel Al-Jassar
•
Rana Ahmed Humayun
•
Mohammed Azzaroog Rajab
•
Ahmed Abdul Rahim Mohamed
•
Nawal Ahmed
•
Alaa A. Al-Sarawi
•
Irfan Siddiqui (President & Chief Executive Officer)
•
Ariful Islam (Chief Operating Officer)
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ORGANIZATIONAL STRUCTURE OF THE BRANCH
Mr. Asim Saleem Regional Manager / Branch Manager
Mr. Naveed Bari Assistant Branch Manager
Operations Department
CAD Department
SMEG. Department Consumer
Mr. Naveed Bari
Mr. Zahid
Miss. Faiza
Mr. Rizwan
(Manager)
(Manager)
(Manager)
(Manager)
Department
IT / HR Department
Corporate Department
Mian Wasf Ali Babar
Tariq Mehmood Ansari
Department Head
Department Head
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ACCOUNTS DEPARTMENTS STRUCTURE AND FUNCTIONS Accounts department in the bank works as an internal audit department of the organization. All the vouchers prepared and all the cheques that are processed are finally come to the accounts department where these are sorted and summarized.
OBJECTIVE:
The objective of this department is to conduct the internal audit and to provide exact information of daily transactions.
FUNCTIONS: Three main functions of accounts department are as follow:
Data controlling Reporting and expense Budgetary performance review and analysis
DATA CONTROLLING:
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The main features of data controlling are:
To match physical data with computer generated data
To check authorization control of transactions
Is the data property authorized
To keep a track of record of all transactions (physical data) for future evidence
To arrange the data in some order to facilitate or to ease the process of data Retrieval
Aspects of Data Controlling 1: Customer activity 2: General ledger
Dual effect of transactions is stated like debit credit. Firstly receiving of voucher then main sorting is done which is done on the basis of main numbering.
REPORTING AND EXPENSE: The major reports generated by this section are:
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Daily branch position
Daily position of deposits and advances
Daily MIS report (management information system)
Daily foreign currency account report
Daily fund rupee position report
Statement of affairs
Weekly reports are of foreign exchange and then monthly and quarterly reports are made. Daily branch position of bank is not faxed and is kept with the bank. Daily foreign currency report is faxed to treasury. The bank deal in three foreign currencies that are: US dollar, EURO and GBP (stands for Great Britain Pound). Daily fund rupee position is faxed to the state bank. Statement of affairs is not faxed.
BUDGETARY PERFORMANCE: This section includes the disbursements, which are as follows:
Modes of remittances:
Demand draft D.D
Telegraphic transfer T.T
Pay order slip
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They are also called BPG bills payable general.
Demand draft is for outstation purpose .It secures the payment because at first, the cash is deposited in the bank and then draft is made. Demand draft is having four copies, which are kept as follow:
One is kept with the customer. (Gray copy) One with bank (photo copy) One with the head office (pink) One with the entity being financed (yellow)
Pay order is for local transfer of money that is within the city.
Two other ways of disbursement in the bank are
Pay slip
Cash payment voucher
Pay slip is used when the bank has to pay less then Rs.5000
Cash payment voucher is used by the bank when it has to pay more than Rs.5000.
In the accounts section I came to know about some other terms like
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Provision
Rupee travelers cheque
Deposit certificate
Inter branch credit advice
Inter branch debit advice
Outward bills for collection
Inward bills for collection
Society for world wide transactions
Term finance
Provisions are the amount kept separately to be debited for the expenses of bank. Deposit certificates are being taxed as Simple deposit-----------3% tax Services deposit----------5% tax
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ACCOUNT OPENING AT MEEZAN BANK This accounts at Meezan Bank are divided into three categories. These are as follows. •
Business Account
•
Personal Account
•
Club Society Account
Business Account This account is related to the business community. This account is also further subdivided into three categories. •
Sole proprietor account
•
Partnership account
•
Limited Company account
Sole proprietor accounts: These account are the account opened by businesses, which are owned by single persons. The following documents are required to open the account. Document required •
Introducer of account who is already account holder of the bank
•
Copy of NIC
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•
Request on letterhead of the company
•
Every signature must be stamped with company stamp
•
Declaration of sole proprietorship
Partnership account: These are the accounts specifically opened for the partnership firms. The documents required for this type of account are as follows.
Document required: •
Introducer of account who is already account holder of the bank
•
Copy of NIC of the entire partners
•
Request on letterhead of the firm
•
Every signature must be stamped with company stamp
•
Partner ship deed
•
Partnership mandate
•
Limited company accounts: This account is related to limited companies either public limited or private limited. The documents required to open this type of account are as follows:
Document required: •
Introducer of account who is already account holder of the bank
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•
Copy of NIC of all the Directors
•
Request on letterhead of the company
•
Copy of certificate of Incorporation
•
Memorandum and Article of Association
•
List of Director
•
Copy of Board Resolution [prescribe format]
•
Certificate of Commencement of Business.
•
Latest copy of Form A-29
•
Power of Attorney/Mandate [if required]
Personal Account The accounts related to persons other than companied and partnership firms are called personal accounts. These are further subdivided into three categories:
Personal account
Joint account
Personal account: Personal account is own by only one person and not more then this. This account can be current or saving depending upon the will of the customer. Documents required •
Introduction of nay account holder of BAL or any other bank
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•
Copy of NIC
Joint account: Joint accounts are those accounts that are owned by 2 or more persons. This account may also be either saving or current depending on the customer’s will.
Documents required: •
Introduction of nay account holder of BAL or any other bank
•
Copy of NIC of all the member of joint account
Club Society Account The account opened by any NGO or any non-profit firm falls in this category. For opening of such type of account the bank has to get permission from the head office. If head office gives permission, the bank opens this account other wise refuse to do so.
Documents required: •
Copy of rules
•
Certificate copy of resolution [prescribed format]
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Accounts On the Basis Of Currency This account is also divided into two categories. These are as follows: •
Local Currency account
•
Foreign Currency Account
Local Currency account: The account dealing with the local currency is called local currency account.
Foreign Currency Account: The account dealing with the foreign currency is called foreign currency account. This account is further subdivided into following.
USD
GBP
Euro
JPY
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RUPEE CURRENT ACCOUNT (RIBA FREE) Meezan Bank is offering Riba-Free Current Account, a flexible Rupee based account that is ideal for individuals and businesses looking for Shariah compliant banking and professionalism both under one roof. The Meezan Bank Current Account is a comprehensive Halal method of acquiring a secure and easily maintainable Riba Free bank account. Bundled with 24/7 and special banking services, the Meezan Bank Current Account is an innovative value added account which provides customers both ease of utility and unmatched service quality. Key features of the Riba -Free Current Account •
Free Online Banking services at all Meezan Bank branches nationwide
•
Instant access to funds at any online branch
•
No restriction on withdrawals or number of transactions
•
Bank balance certificates & duplicate statements of account
•
Stop Payment & Hold Mail instructions
•
24/7 Card your ATM & Debit Card in one
•
24/7 Call Center with complete Tele-banking services
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•
Personal financial consultancy services
•
Specialized 8 to 8 Banking at selected branches
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RUPEE SAVING ACCOUNT A unique bank account that offers the opportunity to earn Halal profits, while enjoying a range of added benefits. It can be opened with a minimum amount of only Rs.10000. The profit on this account is calculated and paid on a monthly basis, and comes with a variety of free benefits, no restrictions on transactions, priority banking and more. •
Minimum amount required to open account = Rs.10,000
•
Riba Free COII Holders may open accounts without any minimum balance requirements
Riba Free Rupee Saving Account works under the principles of Mudarabah and is strictly in conformity with the rules of Islamic Shariah. Profit calculation and all banking transactions are in strict adherence to the Islamic Shariah, monitored by our Shariah Advisor and the Shariah Supervisory Board Key features Apart from first class service and personalized attention that our customers get when they bank with us, we offer the following additional conveniences: •
Instant access to funds at any online branch.
•
Free Online Banking services at all Meezan Bank branches nationwide
•
No restriction on withdrawals or number of transactions
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•
Bank balance certificates & duplicate statements of account
•
Stop Payment & Hold Mail instructions
•
24/7 Card your ATM & Debit Card in one
•
24/7 Call Center with complete Tele-banking services
•
Personal financial consultancy services
•
Specialized 8 to 8 Banking at selected branches
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DOLLAR SAVING ACCOUNT Meezan Bank is pleased to offer Riba-Free Dollar Saving Account, a foreign-currency based investment opportunity that is set up on the principles of Shariah and as a result is free from the element of markup. With a minimum of only $100 you can open a Dollar Saving Account with us under a Mudarabah arrangement that is strictly in conformity with the principles of Islamic Shariah. The return earned on the Mudarabah pool is calculated every month and the profit ratio for all investors is declared at the beginning of the month. If you maintain a minimum average monthly balance of $ 500, you shall be eligible to receive profits that shall be disbursed to you every month. Additional Features Apart from first class service and personalized attention that our customers get when they bank with us, we offer the following additional conveniences to our customers: •
Personalized cheque books
•
No restriction on withdrawals or number of transactions.
•
24/7 Call Center with complete Tele-banking services
•
Monthly profit payment
•
Taking stop payment instructions
•
Taking hold mail instructions
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•
Issuance of duplicate statement of account
•
Personal financial consultancy services
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KAROBARY MUNAFA ACCOUNT Karobari Munafa is a savings account specifically tailored for large Corporate or Govt. controlled entities. It allows customers to earn higher returns on surplus cash balances. It has no preset transaction limits and comes with a variety of free packaged benefits. Key Features •
Profit will be calculated on a Daily Product Basis
•
Minimum balance requirement for account opening is Rs. 1 Million
•
No restriction on deposits and withdrawals
•
Free facilities: chequebooks and payorders
•
Dedicated account / relationship manager
The Karobari Munafa Account works under the principles of Mudarabah and is strictly in conformity with the rules of Islamic Shariah. Profit calculation and all banking transactions are in strict adherence to the Islamic Shariah, monitored by our Shariah Advisor and the Shariah Supervisory Board.
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MEEZAN BACHAT ACCOUNT Meezan Bachat Account is a unique saving account that provides high monthly returns with the flexibility to withdraw savings if needed. Thus Meezan Bachat Account offers a higher expected rate of return with the convenience of a savings account. With a Meezan Bachat Account, you are entitled for a higher the profit with a higher account balance. You receive profit even if your balance falls below Rs. 25,000/- in any one month. Profit is credited to your account every month and is calculated with reference to the minimum balance maintained in the account during the preceding month. The Riba-Free Meezan Bachat Account works under the principles of Mudarabah and is strictly in conformity with the rules of Islamic Shariah. Profit calculation and all banking transactions are in strict adherence to the Islamic Shariah, monitored by our Shariah Advisor and the Shariah Supervisory Board. Key Features •
Highest expected rate of return
•
Riba-free profit paid every month
•
Minimum balance for account opening is just Rs.25,000/-
•
Maximum balance limit for getting highest profit rate is Rs. 1,000,000/-
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•
Waiver of application fee for Car Ijarah & Easy Home for accounts with minimum balance of Rs. 500,000
•
Free Online Banking services at all Meezan Bank branches nationwide
•
Free bank balance certificates.
•
24/7 Card your ATM & Debit Card in one
•
24/7 Call Center with complete Tele-banking services
•
24/7 Internet Banking – free and instant access to your account(s) anytime & anywhere
•
Personal financial consultancy services.
•
Specialized 8 to 8 Banking at selected branches
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CERTIFICATE OF ISLAMIC INVESTMENT The Riba Free Certificate of Islamic Investment Certificate is a Shariah compatible investment certificate with a minimum investment of Rs. 50,000 and tenures from 3 months to 5 years. Profit on investment may be earned on the following basis: •
Monthly profit on 1, 2, 3 and 5 years (Minimum Investment Rs. 200,000)
•
Quarterly profit on 1, 2, 3 and 5 years
•
At maturity profit payment for all tenures
•
Withdraw your investment any time during the course of your investment. (Profit shall be paid only after completion of one month of investment)
Riba-Free Certificate of Islamic Investment (COII) works under the principles of Mudarabah and is strictly in conformity with the rules of Islamic Shariah. Profit calculation and all banking transactions are in strict adherence to the Islamic Shariah, monitored by our Shariah Advisor and the Shariah Supervisory Board.
Invest in Certificate of Islamic Investment Riba-Free COII is available at all branches of Meezan Bank Ltd. We invite you to visit any of our branches to experience the comfort of our personalized service. To make an investment the bank requires customers to maintain either a current or a saving account
37
with Meezan Bank. In order to open an account, fill in the Account Opening Form, bring in the required documents, and get introduced by an existing banker. Additional Features Enjoy a range of valuable features including: •
High and very competitive returns
•
Long-term security ensured
•
Pre-mature withdrawal options available
•
Free Online Banking services at any of our branches
•
24/7 Call Center with complete Tele-banking services
•
Specialized 8 to 8 Banking at selected branches
MEEZAN AMDAN CERTIFICATE The Riba-Free Meezan Aamdan Certificate (MAC) is a long-term deposit certificate with an exceptionally high monthly profit designed especially for those individuals and corporations who are in need of regular stream of monthly income. MAC is a monthly income (mahana aamdani) certificate with a variety of free packaged benefits. Working under the principles of Mudarabah, the Meezan Aamdan Certificate and is strictly in conformity with the rules of Islamic Shariah. Profit calculation and all banking transactions are in strict adherence to the Islamic Shariah, monitored by our Shariah Advisor and the Shariah Supervisory Board.
38
Key Features Enjoy a range of valuable features including: •
High and very competitive returns
•
Ensured Long-term security
•
Minimum investment amount: Rs. 100,000/-
•
Special attraction for Widows and Senior citizens with minimum investment of PKR 50,000/-
•
Available tenures of 5½ years and 7 years
•
Profit payment on monthly basis.
•
Pre-mature withdrawal options available.
•
Free cheque book
•
Free ATM withdrawals on investment of Rs.500,000/- and above ( 5 per month)
•
Free Online Banking services at all Meezan Bank branches nationwide
•
Free Internet banking facility
•
24/7 Call Center with complete Tele-banking services
•
Specialized 8 to 8 Banking at selected branches
39
MONTHLY MUDARBA CERTIFICATE Riba Free Monthly Mudarabah Certificates is a flexible rupee based investment which has been designed to give you a monthly return. The minimum investment required is only Rs. 100,000 and you receive profit for each complete month of investment with the Bank. Working under the principles of Mudarabah and in strict conformity with the rules of Islamic Shariah, the Profit calculation of Monthly Mudarabah Certificates and all other banking transactions are in strict adherence to the Islamic Shariah, monitored by our Shariah Advisor and the Shariah Supervisory Board. The weightages used for profit calculation of the Monthly Mudarabah Certificate are in the following tiers: •
Rs. 100K up to Rs. 4.99 Mn
•
Rs. 5.00 Mn up to Rs. 9.99 Mn
•
Rs. 10 Mn up to Rs. 49.99 Mn
•
Rs. 50 Mn up to Rs. 99.99 Mn
•
Rs. 100 Mn up to Rs. 499.99 Mn
•
Rs. 500 Mn & above
40
Additional Features During your relationship with us, you would be entitled to receive the following additional benefits. •
A 100% halal investment in strict compliance with Shariah
•
Monthly profit payment to your current or saving account with us
•
Pre-mature withdrawal options available
•
Bank balance certificates
•
Free Online Banking services at all Meezan Bank branches
•
24/7 Call Center with complete Tele-banking services
•
Personal financial consultancy services
•
Specialized 8 to 8 Banking and Ladies Banking at selected branches
MEEZAN PROVIDENCE CERTIFICATE Meezan Providence Certificate is a long-term investment certificate specially designed to cater to the needs of corporate and business concerns for purposes of investing their Provident, Pension and Gratuity Funds. As any prudent investor, your main concerns would be total security along with the best returns possible, especially as these funds are a trust from your employees and one that bears an important responsibility.
41
Meezan Providence rests on the well known and solid financial strength of Meezan Bank, which has a strong and credible balance sheet with excellent operating profitability, including a capital adequacy ratio that has placed the Bank at the top of the industry, a long-term entity rating of A+, and a short-term entity rating of A1. Furthermore, our sterling track record shows consistently beneficial and highly competitive returns for our broad range of investors. Finally, comes the benefit of truly Halal returns, a benefit you may not have had the opportunity to enjoy before and one that you can now pass on to your employees, many of whom would be grateful for such an opportunity. Riba-Free Meezan Providence Certificate (MPC) works under the works under the principles of Mudarabah and is strictly in conformity with the rules of Islamic Shariah. Profit calculation and all banking transactions are in strict adherence to the Islamic Shariah, monitored by our Shariah Advisor and the Shariah Supervisory Board. Key Features Enjoy a range of valuable features including: •
A 100% halal investment in strict compliance with Shariah
•
High Returns
•
Long-term security ensured
•
Minimum investment amount: PKR 1,000,000
42
•
Available tenures of 2, 3, 5 and 7 years
•
Pre-mature withdrawal options available
DOLLAR MUDARABAH CERTIFICATE The Riba Free Dollar Mudarabah Certificate is a flexible dollar based investment which has been designed under the principles of Mudarabah and is strictly in conformity with the
rules
of
Islamic
Shariah.
The Certificate works under the principles of Mudarabah and is strictly in conformity with the rules of Islamic Shariah. Profit calculation and all banking transactions are in strict adherence to the Islamic Shariah, monitored by our Shariah Advisor and the Shariah Supervisory Board. Key Features Enjoy a range of valuable features including: •
High and very competitive returns
•
Six monthly profit payment to your current or saving account with us
•
Long-term security ensured. Minimum investment amount: USD 10,000/-
43
•
Available tenures of 3 months, 6 months, 1 year, and 3 years
•
Pre-mature withdrawal options available
•
Bank balance certificates
•
24/7 Call Center with complete Tele-banking services
•
Personal financial consultancy services
44
CAR IJARAH-AUTO FINANCE Car Ijarah, Pakistan’s First Islamic Car Financing As a step towards Meezan Bank’s mission to provide a one-stop shop for innovative value added Shariah compliant products, Meezan Bank’s Car Ijarah unit provides a car financing, based on the principles of Ijarah and is free of the element of markup. Car Ijarah is Pakistan’s first Markup Free car financing based on the Islamic financing mode of Ijarah (Islamic leasing). This product is ideal for individuals looking for car financing while avoiding an markup-based transaction. Meezan Bank’ Car Ijarah is a car rental agreement, under which the Bank purchases the car and rents it out to the customer for a period of 3 to 5 years, agreed at the time of the contract. Upon completion of the lease period the customer gets ownership of the car against his initial security deposit.
Car Ijarah also features Used Vehicles! In addition to our leasing of new cars, Meezan Bank also provides the unique opportunity of leasing second hand, both locally assembled and imported vehicles. This feature is specifically designed as a highly economical option. The Used Car Ijarah facility is made available at a minimum-security deposit as low as 20%. Financing of used cars are subject to a selection criteria. Shariah Compliance
45
Car Ijarah, designed under the supervision of Meezan Banks Shariah Supervisory Board, is unique to car leasing facilities provided by other banks. Key Features of Car Ijarah •
Low monthly rental
•
Rental paid after delivery, not in advanced
•
Fastest processing and delivery
•
Tracker option available
•
Minimum security deposit as low as 10%
•
All new, used, local, imported and luxury vehicles can be financed
46
WORKING CAPITAL FINANCE Working Capital Finance Solutions (for short term financing requirements) Parts of the wide range of Shariah complaint solutions for the customers are Murabaha and Istisna’a, designed to meet working capital requirements. For example, if you need finance for purchasing raw materials for your industry or are trading in goods then you could use Mudarabah or Istisna’a to meet your financial needs.
Murabaha One of the most common modes of finance employed by Islamic Banks, Murabaha is based on the exact requirements of each customer. It can be defined as a sales transaction where Meezan Bank purchases the commodity and sells it after adding an agreed profit. Thus, it is not a loan given on markup - it the sale of a commodity on a deferred price. Hence Murabaha involves the purchase of a commodity by Meezan Bank on behalf of a customer and the subsequent resale to the customer on cost-plus-profit basis. The cost and profit margin to the bank is expressly disclosed to the customer. Simply put, rather than advancing money to the customer, Meezan Bank buys the commodity from a third party and sells it to the customer at an agreed price, which includes an element of profit.
47
So what is the difference between Murabaha and a Sale? A simple sale in Arabic is called Musawamah - a sale that does not involve disclosing or referring to the cost of goods sold. However, when the cost price is disclosed to the client, it is called Murabaha.
Istisna’a Istisna’a is a sale transaction where a commodity is transacted before it comes into existence. It is an order to manufacture a specific commodity for the purchaser. The manufacturer (our customer) uses its own material to manufacture the required goods. In Istisna’a, price is fixed with the consent of all parties involved. Similarly all other necessary specifications of the finished product are agreed beforehand. Istisna’ as a mode of financing Istisna Finance is used to cater for the working capital requirements of a business involved in the manufacturing of goods. It is ideally suited for exporters and manufacturers who have export orders in the shape of Sight/Usance Letter of Credit/ Sight Export Contract D/P/ Usance Export Contract D/A.
48
PROJECT FINANCING, EXPANSION AND BMR
Project Financing, Expansion or BMR Requirement Solutions (For medium and long term financing requirements) Two of the most commonly used Islamic financing solutions availed by businesses today, Diminishing Musharakah and Ijarah are ideal for expansion of businesses, BMR requirements or other medium to long term financing requirements.
Diminishing Musharakah Using this financing model, Meezan Bank and the customer participate in the joint ownership of an asset. The asset is divided into a number of units and the customer periodically purchases these units from the bank over a specified period. Over time, the customer purchases all units owned by the bank, making him or her sole owner of the asset or the commercial enterprise. Diminishing Musharakah is most commonly used for the financing of fixed assets, projects, homes and automobiles.
49
Ijarah In contrast to diminishing musharakah, this mode of financing is based on the provision of the required tangible assets, such as property, machinery, etc, on rental for an agreed period of time. The concept is similar to “leasing”, which is common in conventional banking. However there are some specific prohibitions which render conventional leasing to be forbidden under Shariah.
Ijarah is commonly used for long and medium term fixed asset financing, project financing and for retail products such as homes and automobiles.
50
ISLAMIC EXPORT REFINANCE SCHEME
Islamic Export Refinance Facility The launch of this product made Meezan Bank the first Islamic bank in Pakistan to offer Refinance facilities with complete compliance to Shariah. This product provides for all the unique requirements of exporters and is available in both PartI and Part-II as per the original Export Refinance Scheme of the State Bank of Pakistan.
LETTER OF GUARANTEE FACILITY
A complete range of products and services for importers and exporters are available. Based on various modes of Islamic Finance, the solutions have been designed to suit the needs of our customers. Some of the key services offered include:
Letter of Guarantee Facility •
Products for Exporters •
Export bills for collection
51
•
•
Export (Sight) bills purchase under Salam Arrangement
•
Export (Usance) bills purchase under Murabaha Arrangement
Products for Importers •
Sight Letter of Credit
•
Usance Letter of Credit
52
ADVISORY SERVICES
Realizing the increasingly diverse needs of our customers for advisory and structured finance transactions, a specialized unit focusing on Investment Banking has been established at Meezan Bank. The Investment Banking department provides unique structuring capability using complex Shariah structures for transactions so as meet customer need. Meezan Bank as torchbearer of Islamic Banking has made a significant contribution in the Investment Banking industry by playing leading roles in business transactions amounting to PKR 53 billion in the year 2007. Key Services •
Syndication Structuring
•
Privatization Mandates
•
Mergers & Acquisitions
•
Advisory Services
53
54
MONEY TRANSFER The Meezan Bank’s remittance services are simple and reliable. They are available at your doorstep through a wide and efficient network of corresponding banks worldwide. Only leading global financial institutions form this network of correspondent banks. Advantages of Meezan Home Remittance: •
Quick Remittance in major currencies i.e. USD, GBP, EUR, JPY, CHF, SGD, AUD
•
Extensive branch network in all major cities of Pakistan
•
Instant online transfer within our branch network without any charges
•
Free Internet banking facility
Easy Guidelines for Money Transfer If you wish to remit money to Pakistan, simply give instructions to your existing bank for money transfer by providing the name of your preferred Meezan Bank branch and beneficiary account number.
55
DOLLAR MUDARABAH CERTIFICATE The Riba Free Dollar Mudarabah Certificate is a flexible dollar based investment which has been designed under the principles of Mudarabah and is strictly in conformity with the
rules
of
Islamic
Shariah.
The Certificate works under the principles of Mudarabah and is strictly in conformity with the rules of Islamic Shariah. Profit calculation and all banking transactions are in strict adherence to the Islamic Shariah, monitored by our Shariah Advisor and the Shariah Supervisory Board. Key Features Enjoy a range of valuable features including: •
High and very competitive returns
•
Six monthly profit payment to your current or saving account with us
•
Long-term security ensured. Minimum investment amount: USD 10,000/-
•
Available tenures of 3 months, 6 months, 1 year, and 3 years
•
Pre-mature withdrawal options available
•
Bank balance certificates
•
24/7 Call Center with complete Tele-banking services
56
•
Personal financial consultancy services
57
DOLLAR SAVING ACCOUNT Meezan Bank is pleased to offer Riba-Free Dollar Saving Account, a foreign-currency based investment opportunity that is set up on the principles of Shariah and as a result is free from the element of markup. With a minimum of only $100 you can open a Dollar Saving Account with us under a Mudarabah arrangement that is strictly in conformity with the principles of Islamic Shariah. The return earned on the Mudarabah pool is calculated every month and the profit ratio for all investors is declared at the beginning of the month. If you maintain a minimum average monthly balance of $ 500, you shall be eligible to receive profits that shall be disbursed to you every month. Additional Features Apart from first class service and personalized attention that our customers get when they bank with us, we offer the following additional conveniences to our customers: •
Personalized cheque books
•
No restriction on withdrawals or number of transactions.
•
24/7 Call Center with complete Tele-banking services
•
Monthly profit payment
58
•
Taking stop payment instructions
•
Taking hold mail instructions
•
Issuance of duplicate statement of account
•
Personal financial consultancy services
MEEZAN BANK TREASURY Meezan Bank’s treasury is guided by Shariah with the objective of reviewing, streamlining, and controlling the bank’s domestic and international treasury related operations. Treasury caters to the branches and customers for their entire foreign exchange requirement with efficiency and professionalism. Ready/ spot as well as all forward cover services are provided to branches/customers within Shariah guidelines. Customers are also provided advice on a regular basis about the currency movement by our dealing room augmented by market outlook (without any commitment & obligation) Treasury has enhanced its market activity with increased depth and enhanced volumes, making an impact in the inter-bank FX market. Due to its good relationship with other treasuries, the institution has the ability to generate sufficient amount of liquidity at a time through inter-bank market on Shariah-approved Musharaka basis. Meezan Bank conducts Commodity Murhaba transaction to optimize its returns on its dollar portfolio, besides participating in local/ international sukuk issues, e.g. WAPDA, Qatar, Dubai sukuks, etc. This treasury is the only treasury in Pakistan with a mandate to
59
provide Shariah compliant investment opportunities in capital market that provides halal income ultimately to shareholders Treasury Contact Details: •
Amal Zehra (Corporate Dealer):
[email protected] •
Ahmed Usman Sheikh (Corporate Dealer):
[email protected] •
Osama Niaz Ahmed (Dealer, Interbank):
[email protected] •
Zia ur Rehman (Senior Dealer, Corporate Treasury):
[email protected] •
Raza Zaidi (Dealer, Interbank)
[email protected] •
Murad Dhanani (Senior Dealer, Corporate Treasury):
[email protected]
60
•
Sara Saiyed (Chief Dealer, Interbank):
[email protected] •
Mr. Yasir Ali Khoso (Dealer, Interbank):
[email protected]
61
CREDIT ADMINISTRATION DEPARTMENT The chairman of the Bank in his review for 2007 annual report define the credit policy of Bank as: “CONSERVATIVE YET DYNAMIC CREDIT POLICY” OBJECTIVE: The overall objective of the department is to provide independent assurance to branch management and head office credit monitoring division that lending activities are properly controlled and monitored.
FUNCTIONS:
•
Documentation
•
Lodgment of documents and cash collateral
•
Reimbursement audit certificate
•
Limit input in bank smart
•
Post disbursement monitoring
•
Monitoring of irregular doubtful and bad debts
62
•
Reporting
Here it is necessary that we must have an overview of at least the most important documents that are relevant to this department. DOCUMENTATION •
Sanction advice
•
Facility offer letter
•
General documentation
•
Standard charge documents
•
Legal document pertain to properties
•
Cash collateral
•
Charge with SECP
•
Other securities
•
Insurance covers
•
Guarantees
Now we discuss above separately. ♦ Sanction advice A type of document which is made when the senior officer of bank discuss all the confidential terms & condition that the demanded facility should be provided or not so
63
we can say that it is a day of final decision that facility should be provided or not. At that time borrower worthiness is checked according to that decision made.
♦ Facility offer letter When this is decided that loan should provided to borrower than branch made facility offer letter that what type of facility should be provided & document are required from borrower according to this facility. ♦ General documents After facility offer letter general document are checked these document consist of •
Complete account opening form
•
Facility request letter
•
BBFS
•
CIB
•
Credit opinion
•
Search report
•
Audited /unedited financial
•
Borrower’s profile
•
Checklist of state bank regulation
•
Board resolution to borrow
•
Memorandum and article of association
64
At this stage all the past records are checked & verified to ensure that past record of the borrower matches with data provided in request letter. The most important document, which is checked is CIB report. In this report all the past loan of borrower are showed and their repayment record is also mentioned. The company polices are also collected and their aim is checked that whether the company is working in the same direction which it has mentioned. ♦ Standard charge document
CF (Current finance)
TF (Term finance)
FAPCI (Finance against packing facility)
FAFB (Finance against foreign)
LBP (Local bill purchase)
FBP (Foreign bill purchase)
SLA (Sight letter of credit)
ULE (Usance letter of credit)
FIM (Finance against import)
FATR (Finance against trust receipt)
GUARANTEE
65
In this stage we see that what type of facility he or she want to take or what type of facility he or she already have. Is the requirement according to nature of business &all facility term & condition are change accordingly to that. Legal document pertain to properties
Title deeds
Copy of record of rights
Copy of mutation
NEC
PTI
AkS shajra
Site plan
Valuation
Site visit report
Power of attorney
Agreement to create mortgage
Token mortgage
Predisbursment lawyers opinion
Perfection certificate of lawyer
66
These all documents are taken from borrower & bank make a file of these documents. These documents are most because when some time bank have to take legal action against borrower then bank know that who are the owner or partner of the company what property is for mortgage its paper are taken and these all the things are provided to bank own lawyer which finally decided that is everything right and he make a certificate or borrower can bring this certificate himself from the recommended lawyer of bank. Cash collateral
Lien on deposits
Lien of deposits
Guarantees
Personal guarantees of borrower
Personal guarantees of mortgagors
Counter guarantees
Cross corporate guarantees
Guarantees are most important thing because in this document it is written that who is responsible in case of default. Personal Guarantees are consider most important because mention person has to pay whenever he is alive.
67
CAR IJARAH OBJECTIVE: The main objective of the car finance department is to finance all the cars manufactured or assembled in Pakistan at a very reasonable markup. THE PRODUCT : I have presented the procedure of car finance department in question answer form because in my opinion it will better explain the whole of the procedure. Can I avail the car loan facility? Yes, you can avail the car loan facility from Meezan Bank to purchase a brand new car if you are:
Pakistani national identity card holder
Over 20 years of age maximum 60 years in case of salaried and 62 is case of a businessperson at the time of maturity of the loan.
Salaried, businessman or self employed.
Which cars can I apply this loan for? All brand new Pakistani assembled / manufactured cars (unregistered) How much loan facility can I avail?
68
Minimum amount is Rs 200,000/- and maximum is Rs.2000,000/What is the period of loan? The loan can be availed from 1 year to 5 years with early adjustment facility at any time before the maturity. How much initial down payment do I have to make? 20% of the value of car What other charges do I have to pay? You have to pay one time fee of Rs 3000/- being amount of processing and documentation charges and first year’s insurance premium. Who will insure the car? Meezan Bank has made arrangements with the top insurance companies who are offering special lowest insurance rates for Meezan Bank clients. How do I repay the loan? You will repay the loan by making easy equal monthly installments to Meezan Bank in the form of post-dated cheques. Can I repay the loan before the maturity? Yes, you have the option to repay the loan at any time during the tenure of the loan. What is the security of the loan?
69
The car is the security, which will be hypothecated in the favors of bank and a lien will be marked with the register. What if I want the car in the name of my family member? You can include your spouse, children (18 years and above) or parents as co applicants for the car loan and the car can be registered in the names. What documents are required to get a car loan sanctioned? Our representatives will discuss the documents you are required to submit in detail. An indicative list is given below:
Two passport size photographs
Copy of national I.D card
Bank statement for last six months
Salary certificate (in English) specifying the name, date of joining, designation and salary details (for salaried individuals)
Business proof (for a business person)
Current utility bill of your residence in Pakistan
Copy of the national ID card of the co-borrower (if the car is to be in the name of the co-borrower)
How is it difficult from other financing schemes available in Pakistan? •
Easily affordable & flexible installments
70
•
Flexibility of adjustment at any time during the tenure
•
Quick processing
•
Minimum down payment
•
Minimum insurance
What is the first step I need to take? Call or visit ort ask your family member to visit any of our branches in Pakistan
This was the whole concept which is clearly defined here .now the details of the application form are given that what is included and what is needed to be filled in the form under the following heads: Personal details •
Full name
•
Fathers/husband name
•
Date of birth
•
National ID card no
•
National tax no
•
Marital status
•
No of dependents
•
Educational qualifications
71
•
Current residential address
•
If rented, monthly rent
•
Residential telephone no
•
Residential status
•
Type of accommodation
•
Residing since
•
Permanent home address
•
Personal mobile ph no
•
Existing car
•
Make and model of current car
•
Car status
Employment details (for salaried individuals)
Name of present employer
Address
Current designation
Employed since
Business telephone no
Fax no.
Official mobile no.
72
Previous employer
Name of the employer
Address
Last designation held
Service tenure
Office telephone no
Fax no.
Business details ( for professional and self-employed individuals ) •
Name of business
•
Nature of business
•
Constitution of firm
•
Address
•
Established since
•
Registered with
•
National tax no
•
Business telephone no
Mobile phone no Income details •
Regular monthly gross income (cost of equitation of dependents)
73
•
Guaranteed bonus
•
Other monthly income
•
Source of other monthly income
•
Average monthly savings
74
TREASURY AND INVESTMENT Money Market •
Short term money market inter-bank trading.
•
Active Treasury Bills trading in secondary market.
•
Forward – forward inter-bank money market trading.
•
Money market linked lending to and borrowing from corporate clients.
Foreign Exchange Market •
Active trading in ready and forward USD/PKR.
•
Active quotations of foreign exchange rates in fifteen major currencies.
•
Information in respect of prevailing rates of most of the currencies of the world for corporate clients and individuals.
•
Forward – Forward foreign exchange rates of USD/PKR.
•
Active swap trading in USD/PKR and other major currencies such as EUR, GBP, JPY and CHF.
Investment •
Active Investment in treasury bills (TBs).
•
Active Trading in Pakistan Investment Bonds (PIBs).
75
•
Active investment in Certificate of Investment (COIs)
•
Active investment in Terms Finance Certificates (TFCs)
Government Securities •
Efficient service for individuals and corporate clients for buying and selling govt. securities on their appropriate requests.
Custodianship •
Investment Securities Portfolio Accounts of Customers for holding on their behalf Treasury Bills, Pakistan Investment Bonds.
Financial Advisory Services •
Briefing on current information available in market in respect of prevailing rates of USD/PKR.
•
Briefing on current information available in market in respect of foreign exchange rates of major foreign currencies.
•
Future expectations and sentiments on major foreign currencies including Pak.Rs.
76
ONLINE BANKING
Meezan Bank now offers the facility of on-line banking to its customers through its countrywide network of branches. Customers can use the ATMs or the banking counters of any branch for day-to-day banking needs, irrespective of branch where they maintain their accounts.
For Corporate customers centralized Cash Management facility is also offered through on-line banking.
PHONE BANKING "Meezan Phone banking” is available to all customers on a countrywide basis. Customers can dial 111-225-111 (without any city code/prefix) from their respective cities i.e. 21 cities where Meezan Bank is present, and get prompt services from the Centralized Phone Banking Services. Customers enjoy 24x7 Round the Clock Phone Banking Services.
77
Meezan Bank is the first bank in Pakistan to offer Centralized UAN connectivity from 21 cities to its Call Center with Hunting & ACD facilities.
78
HOME FINANCE
PRODUCTS OF HOME FINANCE
Buy Your Home With this facility, you no longer need to just dream about the home you want for yourself and your family .We will provide you up to Rs: 7.50 million or 70% of the purchase price of the property (whichever is less), so that you can realize your dream and enter the reality
of
owning
a
home!.
Payment period ranges from 3 to 20 years
Build Your Home Family! No problem. We will provide you up to Rs:7.50 million, or 70% of the estimated value of constructed property to enable you to say good-bye to rent forever! Even You have a plot, and need finance to construct a home, which excites everyone in your if you don't have a plot, we will provide you up to 60% of the value of the plot that you have selected
to
purchase!
Do
we
excite
your
imagination?
Payment period ranges from 3 to 20 years.
79
Renovation Your Home You already own a home, but need extra space for a growing family. Simply apply for financing of up to Rs: 2.50 million or 30% of the surveyed value of your home (whichever is less) and get yourself the extra space. You can stretch payments for up to 7 years
Start it Together The crown jewel of our Home Finance Scheme, the golden opportunity for someone starting a career to buy an already constructed housing unit so early in life! We offer a moratorium of up to 3 years in Principal payments, for a financing of up to 20 years. You service only the mark-up element initially, and principal repayment starts after the end of monitories period. Home Start is specially designed for young people to have there own home
Transfer Does your existing installment on a home finance leave you with nothing to spend? You need not worry any more because we have genuinely low rates and payment options that could leave more funds with you each month. With our BTF, repaying your home finance
80
will not make you break into a sweet! Transfer up to Rs: 7.50 million or 100 % of the existing
finance,
whichever
is
less.
Stretch your repayment period for up to 20 years again.
Steps To Arrange a Home •
We provide you with all the information you need about Meezan Bank Home Finance. This can be through a face-to-face meeting with our Relationship Officer, or over the telephone, or through the post.
•
You give us some basic information about your income and the amount you need so that we can give you an agreement in principle.
•
Once you have decided on the amount you want, you complete an application form and pass it on to us, together with the required documents.
•
We make some inquiries about your financial circumstances.
•
We carryout a valuation of the property and verification of your income
•
Once we have carried out all the initial processing, we send you our offer through a “Facility Advice Letter”.
•
You sign the Facility Advice Letter and return it to us.
•
Our Documentation Control Center will get in
touch with you to complete
Finance & Security documentation including legal opinion on the title, documents of the property and also the insurances. •
You sign the Finance Agreement and Charge documents.
81
•
Our legal advisor will accompany you to the Registrar’s office on the appointed date with our cheque against the financing for conveyance of the property and your
home
finance
begins.
82
FINANCIAL STATEMENT ANALYSIS
83
BALANCE SHEET 2008
2007
2006
2005
(000)
(000)
(000)
(000)
5763710
5644028
5897394
3956938
1344974
3729549
4134875
2855823
18108000
8850000
3700000
----------
2004
(000)
Assets Cash and bank balances 2623588
Balances with other banks 1751083
Due from financial --------institutions
84
Investments
14286949
10535186
2877554
1606490
39768481
34576339
27031016
19740886
1880515
1032963
531262
305585
4123441
2810494
2266522
2210100
85276070
67178559
46438623
30675822
1057017
1192160
563228
260732
4008496
2415606
4285212
2981714
1429053
Financing 12339745
Operating fixed assets 204737
Other assets 1349184
Total assets 19697390
Liabilities
Bills payable 196145
Due to other institutions 2862139
85
Deposits and other accounts 70233875
54582353
34449441
22769262
-----------
----------
-----------
-----------
-----------
----------
-----------
-----------
453038
430377
398304
170274
3548666
2851407
1979079
1469258
5974978
5706656
4763359
3024582
13769807
Subordinated loans -----------
Liabilities against assets ----------subject to finance lease
Deferred tax liabilities 769631
Other liabilities 286
Net assets 2098382
Presented by:
86
Share capital
4925961
3779897
3779897
2036582
845022
720785
528085
407235
1346017
Reserves 256578
Unappropriated profits
5701141219228
448427
527123
258325
87
HORIZONTAL ANALYSIS OF BALANCE SHEET 2008
2007
2006
2005
(%)
(%)
(%)
(%)
207
204
208
151
87
213
276
163
489
239
100
000
999
737
204
112
2004
(%)
Assets
Cash and bank balances 100
Balances with other banks 100
Due from financial 000 institutions
Investments 100
88
Financing
322
280
223
160
922
506
260
149
307
210
169
164
551
621
287
133
140
84
150
104
398
251
165
000
000
000
100
Operating fixed assets 100
Other assets 100
Liabilities
Bills payable 100
Due to other institutions 100
Deposits and other accounts 512 100
Subordinated loans
000
000
89
Liabilities against assets
000
000
000
000
59
56
52
22
242
195
135
100
286
273
228
144
367
281
281
151
330
281
206
159
000 subject to finance lease
Deferred tax liabilities 100
Other liabilities 000
Net assets 100
Presented by:
Share capital 100
Reserves 100
90
Unappropriated profits
221
472
174
204
100
91
COMMENTS ON HORIZONTAL ANALYSIS OF BALANCE SHEET
Horizontal analysis of balance sheet shows that the cash and bank balances of Meezan Bank Limited increased from year 2004 to year 2005 and then to year 2 006 but in the year 2007 and year 2008 these balances remain almost stable. So far as balances with other banks is concerned, they gradually increased to year 2006 then they started decreasing in year 2007 and in year 2008 they fell to the extent of 87 % of that of year 2004. It may be because in year 2008 the amounts due from financial institutions is considerably increased as compared to that of previous years. In my opinion this is not a good sign. It shows that the liquidity of the bank is decreased in the year 2008 and this amount is given as a loan to other financial institutions. The profit on these funds will definitely be low as compared to the profit that might be earned from the bank’s own customers but now this profit would be transferred to other financial institutions.
The figure of investments also show remarkable increase from year to year which shows that bank is trying not to keep its funds idle. The amount of financing is also increased from the year 2004 to year 2008 continuously which is a healthy sign.
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The amount of operating fixed assets is increased continuously which is the evidence that bank is increasing its branch net work nation wide and in order to meet the infrastructure requirements of this network, the bank has to increase its operating fixed assets.
Other assets of the bank are increased at a regular pace from year 2004 to year 2008 which shows that the bank is fully aware of the emerging requirements of its network.
The amount of bills payable is increased from year 2004 to the year 2008 which shows that bank is entering into contracts with other businesses for earning profits. Similarly, the amounts due to other institutions is increased up to year 2006 but in the year 2007 this amount is decreased to 84 % of that of year 2004 but in year 2008 this amount is increased again to 140 %. Overall this situation shows that bank is relying on its own funds rather than borrowing from other institutions.
The major liability of the bank i.e. deposits and other accounts is considerably increased from year 2004 to year 2008 which shows that the customers are confident about the stability of the bank and there is an awareness among the customers about the Islamic way of banking.
The amount of net assets i.e. total assets less liabilities, on the whole is satisfactory because this figure is increased from year 2004 to year 2008. in year 2008 this figure is 286 % to that of year 2004 which shows that the net assets have satisfactorily increased.
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During all these years, the bank arranged capital by issuing extra shares from time to time. Increase in share capital was not because of the funds needed by the bank but it was also because the bank has distributed in the form of stock dividend. This also shows that the bank wanted to save the liquid reserve to earn more profits by investing these funds in its core operations.
The situation of reserves and unappropriated profits is also satisfactory and shows that the bank has saved the sufficient amount of reserves to preserve its capital structure.
94
VERTICAL ANALYSIS OF BALANCE SHEET 2008
2007
2006
2005
(%)
(%)
(%)
(%)
6.75
8.40
12.68
12.88
1.57
5.54
8.89
9.29
21.22
13.17
7.97
0.00
16.74
15.68
6.18
5.22
2004
(%)
Assets Cash and bank balances 13.31
Balances with other banks 8.89
Due from financial 0.00 institutions
Investments 7.21
95
Financing
46.63
51.47
58.22
64.36
2.20
1.53
1.14
0.98
4.83
4.18
4.86
7.20
1.23
1.77
3.36
0.85
4.69
3.59
9.22
9.72
81.26
74.18
74.21
000
000
000
62.62
Operating fixed assets 1.02
Other assets 6.80
Liabilities Bills payable 0.96
Due to other institutions 14.53
Deposits and other accounts 82.36 69.88
Subordinated loans
000
000
96
Liabilities against assets
000
000
000
000
0.53
0.64
0.84
0.55
4.15
4.24
4.24
4.76
7.00
8.50
10.26
9.86
5.77
5.61
8.12
6.62
0.98
1.07
1.12
1.30
0.67
1.80
0.95
1.69
000 subject to finance lease
Deferred tax liabilities 3.86
Other liabilities 0.00
Net assets 10.65
Presented by: Share capital 6.81
Reserves 1.27
Unappropriated profits 1.27
97
Total Assets
100
100
100
100
100
COMMENTS ON VERTICAL ANALYSIS OF BALANCE SHEET In the year 2004, the cash and bank balances were13.3 percent of the total assets whereas the balances with other banks were 8.89 percent. However the amounts due from other financial institutions were zero percent. This shows that in this year which was actually the second year of the bank’s operations, the scope of its operations was very limited. Similarly the amount of investments was 7.21 percent, operating fixed assets were 1.02 percent and the other assets were only 6.80 percent. However the percentage of Financing was62.6 percent of the total assets which shows that the bank was able to extend 62.6 percent of its total funding as loans in the form of Islamic financing.
Bills payable is the year 2004 were only 0.96 percent, the balance due to other institutions was 14.53 percent and the deferred tax liability was 3.86 percent. However the largest amount of liability was deposits and other accounts which were up to 70 percent of total assets. This shows that the bank was not so much efficient in managing its
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funds because the amount extended to customers was about 62 percent but the deposits received by the bank from the customers were about 70 percent.
The total amount of shareholders’ funds was about 9 percent which shows that the bank was able, from its very beginning, to operate on an optimal capital structure.
In the year 2005, the cash and bank balances, balances with other banks, investments, operating fixed assets, and other assets show a little improvement on the whole but the amount of financing could not be improved very much. However there was a positive change of about 2 % in the amount of financing which is not sufficient when it is compared with the amount of deposits and other accounts which were increased from 70 percent in 2004 to 74 percent in 2005
The situation goes downward in the year 2006 when the percentage of deposits and other accounts to total assets was 74.18 percent but the percentage of financing to total assets was only 58.22 percent. This shows that the customers trusted on the bank and increased the amount of deposits in islamic banking but the bank, on the other hand, could not be equally efficient.
The situation remained continued in the year 2007 and the year 2008 where the percentage of deposits increased to 82 percent whereas the percentage of financing decreased to 47 percent. However the bank also realized the situation and started utilizing
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the funds in other investments and lending to other financial institutions. This move of the bank tried to balance the situation which was created by under utilization of the funds collected from the customers.
100
INCOME STATEMENT 2008
2007
2006
2005
2004
(Rupees in Millions)
Profit earned on financings, investments and placements
6803
4573
2704
1459
(3088)
(2451)
(1464)
(690)
3714
2121
1240
768
534
Return on deposits and other dues expensed (250)
Net spread earned 284
Less
Provision against non-
101
performing financings (net)
(428)
(435)
(121)
(68)
(288)
(0.8)
(1.2)
29.8
2997
1685
1117
729
707
1347
690
622
3705
3033
1807
1351
(2713)
(1764)
(1027)
(718)
(16)
Provision for diminution in value of investments and impairment (1.7)
Net spread after provisions 265
Other Income 365
Total Income 630
Less
Other expenses (409)
102
Profit Before Tax
992
1269
780
633
(371)
(305)
(175)
(213)
621
963
604
419
220
Less
Taxation 4
Profit after tax 224
103
HORIZONTAL ANALYSIS OF INCOME STATEMENT 2008
2007
2006
2005
2004
(Rupees in Millions)
Profit earned on financings, investments and placements
1274%
856%
506%
273%
1235
980
586
276
1308
747
437
270
100%
Return on deposits and other dues expensed 100
Net spread earned 100
Less
Provision against non-
104
performing financings (net)
2675
2719
756
425
16941
47
71
1853
1131
636
422
275
194
369
25
170
588
481
287
214
668
431
251
176
100
Provision for diminution in value of investments and impairment 100
Net spread after provisions 100
Other Income 100
Total Income 100
Less
Other expenses 100
105
Profit Before Tax
451
577
355
287
9275
7625
4375
5425
277
430
270
187
100
Less
Taxation 100
Profit after tax 100
Year 2004 is taken as a base year
106
COMMENTS ON HORIZONTAL ANALYSIS OF INCOME STATEMENT Horizontal analysis of income statement shows that the profit earned on financing, investments and placements has considerably increased over the years. Similarly the return on deposits and other dues expensed was also increased with the same pace. The situation depicts that the bank has been beneficial on the whole.
The most crucial situation that is obvious from the bank’s income statement is the amount of provision against the non performing financings. This amount has increased over the years at an alarming rate. It shows the bank’s inefficiency in the formulation and implementation of credit and collection policy.
Another item on the income statement that has decreased the bank’s net income to a large extent is the provision fore diminution in value of investments and impairment. This amount is increased up to 16941 % in 2008 as compared to that of 2004. The bank should seriously consider that the investment must be made carefully so that there may not be such a huge decline in their value.
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The other income of the bank has not played a considerable role in the income statement however, the amount of other expenses are increased to a large extent as compared to that of year 2004. We shall analyze later in the vertical analysis that what is the percentage of these two items with respect to the total revenue.
Lastly, the figure of profit after tax shows an increase of 277 % from that of the year 2004. The analysis shows that the profit continuously increased from the year 2004 to 2007 but in the year 2008 this ratio decline to a large extent.
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VERTICAL ANALYSIS OF INCOME STSTEMENT 2008
2007
2006
2005
2004
(Rupees in Millions)
Profit earned on financings, investments and placements
100%
100%
100%
100%
45
54
54
47.29
55
46
46
52.71
6.29
9.51
4.47
4.66
100%
Return on deposits and other dues expensed 46.82
Net spread earned 53.18
Less
Provision against nonperforming financings (net) 3.00
109
Provision for diminution in value of investments and impairment
4.23
0.02
0.04
2.04
44
36.85
41.31
50
10.39
29.46
25.52
42.64
54.46
66
66.83
92.59
39.88
38.57
38
49.21
14.58
27.75
28.85
43.39
0.32
Net spread after provisions 49.63
Other Income 68.35
Total Income 118
Less
Other expenses 76.59
Profit Before Tax 41.20
110
Less
Taxation
5.45
6.67
6.47
14.60
9.13
21.06
22.34
28.72
0.75
Profit after tax 42
Profit earned on financings, investments and placements is taken as a base
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COMMENTS ON VERTICAL ANALYSIS OF INCOME STATEMENT
The vertical analysis of the year 2004, the second year of the bank’s operations, shows that the return by the bank to its deposit holders is about 47 %. Ultimately the gross profit earned by the bank on the financing was 53 %. Provisions for non performing financing kept by the bank was about 3 percent and provision for diminution in the value of investments and impairment was only about 0.32 percent. The other income of the bank was about 68 percent but this item has not added much in the net income of the bank because the percentage of other expenses was about 78 percent. Hence the net income of the bank after tax remained at 42 percent.
In the year 2005, the situation remained almost the same except that the other income of the bank was declined to the percentage of about 43 percent of gross revenue whereas the other expenses were also declined to 49 percent. In this year the net income after tax of the bank was decreased to 29 percent.
In the year 2006 the return paid by the bank was increased to 54 percent leaving a net spread of 46 percent for the bank. The other income of the bank was decreased again to
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an extent of 25.52 percent and the other expenses were 38 percent of the gross revenue. In this year the net income of the bank was decreased further to 22.34 percent.
In the year 2007, the situation remained almost the same with the exception that the provision for non performing loans was considerably increased which is not a good sign. However in this year the net income remained almost equal to that of year 2006.
The year 2008 has not been proved a good year in the history of the bank. Although in this year the net spread earned by the bank was 55 % but the percentage of other income of the bank was decreased with an alarming rate. In this year the percentage of other income was only 10 % but the percentage of other expenses was about 40 percent. This fact has worsened the situation on the whole and the bank’s net income decreased to the maximum of only 9.13 percent which is the lowest of all the previous years.
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RATIO ANALYSIS Return on Equity Return on Equity
=
Net Profit after Tax / Stockholders’ Equity
2008
=
(621187 / 6341097) x 100
=
9.80 %
2007
=
(963501 / 5719910) x 100
=
16.84 %
2006
=
(604251 / 4756409) x 100
=
12.70 %
2005
=
(419455 / 2970940) x 100
=
14.12 %
2004
=
(224358 / 1860920) x 100
=
12.06 %
This ratio shows the profit earned by the company as a percentage of the amount of equity capital invested by the company in the business. In the year 2004 this ratio was about 12 percent but this ratio seems to fluctuate in the later years. In the year 2005, this ratio is improved to 14 percent but again in the year 2006 it is declined to about 12 percent. This is because the company has increased the amount of capital in 2006 but the net profit after tax could not be increased according to that ratio. However in the year
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2007 the ratio was increased to the maximum of all the previous years in spite of an increase in the stockholders’ equity. This is because the net profit was increased proportionately to that. However in the year 2008, the situation is not so good because in this year, the amount of profit declined and the company again has issued the equity capital in the form of bonus shares.
Return on Assets Return on Assets
=
Net Profit after Tax / Total Assets
2008
=
(621187 / 85276070) x 100
=
0.73 %
2007
=
(963501 / 67178559) x 100
=
1.43 %
2006
=
(604251 / 46438623) x 100
=
1.30 %
2005
=
(419455 / 30675822) x 100
=
1.37 %
2004
=
(224358 / 19697390) x 100
=
1.14 %
Return on assets is the ratio that shows the percentage of net profit after tax to total assets. This ratio is also called the return on investments because investment by the
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company in the business is always in the form of different types of assets. This ratio of Meezan Bank Limited shows that the return earned by the bank on its total investments is decreasing from year to year. This is because the bank has continuously increasing its investments in the total assets but against that investment the bank is not earning sufficient amount of profits. The situation is somewhat better in the year 2007 where because of highest of all the years’ profits, the return percentage is 1.43. The bank should consider the situation and should try to rectify this.
Net Spread Margin Net Spread Margin =
Net return on Loans and Advances / Total Assets
2008
=
(2997559 / 85276070) x 100 =
3.52 %
2007
=
(1685888 / 67178559) x 10
=
1.98 %
2006
=
(1117229 / 46438623) x 100 =
1.66 %
2005
=
(729831 / 30675822) x 100
=
2.38 %
2004
=
(265266 / 19697390) x 100
=
1.35 %
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This ratio shows the gross earnings on financing less the return paid to the deposit holders as a percentage of total assets. This is some sort of gross profit ratio because the earning on financing is the main revenue of the bank where the return paid to deposit holders is the cost of those funds. Here this ratio shows that the situation was better in the year 200 but in the year 2006 it is again declined. Then in the year 2007 it again became better while in the year 2008 surprisingly this ratio is the highest. Although the net profit after tax in this year is lesser than that of the previous years but this ratio shows that the bank has become efficient in its core operations and the problem lies with its other income and other expenses as we have already seen in the vertical analysis of the income statement for the year 2008.
Net Other Income Margin Net Other Income Margin =
Net Other Income / Total Assets
2008
=
(707908 / 85276070) x 100
=
0.83 %
2007
=
(1347893 / 67178559) x 100 =
2.01 %
2006
=
(690561 / 46438623) x 100
1.49 %
=
117
2005
=
(622151 / 30675822) x 100
=
2.03%
2004
=
(365093 / 19697390) x 100
=
1.85 %
Net other income margin is the percentage that shows the return earned by the bank from the sources other than its core operations. Keeping in view the intense competition among the banks today, a bank must seriously concentrate on the other sources because in this sheer competition a bank is not in a position to earn premium revenue on the finances provided. For Meezan Bank, this ratio shows that there have been the fluctuations in other income from year to year but the situation is very bad in the year 2008 where this ratio is the minimum of all the previous years. This is the reason that the overall performance of the bank declined in this year.
Earnings per Share Earnings per Share
=
Net Profit after Tax / Number of Shares
2008
=
(621187 / 492596.1)
Issued
=
Rs.1.26 per Share
118
2007
=
(963501 / 377989.7)
=
=
(604251 / 377989.7)
=
=
(419455 / 203658.2)
=
=
(224358 / 134601.7)
=
Rs.1.96 per Share
2006 Rs.1.88 per Share
2005 Rs.1.46 per Share
2004 Rs.1.67 per Share
EPS is the ratio that measures how many rupees the company has earned against one ordinary share issued to the shareholders. The greater is the ratio, the better it would be. It is because the company will have the greater amount of profits per share to pay as dividend to the shareholders. This ratio is the most important ratio from the shareholders’ point of view because they also want to know that how much the company is going to pay them against the number of shares they are having. For Meezan Bank, this ratio improved from the year 2004 to the year 2007 with a little exception in 2005 but in the year 2008 this ratio fell to the minimum of Rs.1.26 per share which is because the company has issued bonus shares to its shareholders as a stock dividend.
119
Stock Dividend Percentage 2008
=
8.6 %
2007
=
20 %
2006
=
10 %
2005
=
16 %
2004
=
15 %
Over the years from 2004 to 2008, the bank has been paying the stock dividend instead of cash dividend. Although this is not a good sign but we can say that since this is because of the consent of the shareholders that’s why it is compromisable. This ratio shows that the bank has been paying sufficient amount of dividend to the shareholders from the year 2004 to the year 2007 but in the year 2008 this ratio is declined. This was because in the year 2008, the bank had not earned a handsome amount of profits to justify the larger stock dividends. Anyways, in my opinion, the bank should consider the situation and try to declare dividend in the form of cash also.
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Market Price per Share 2008
=
Rs.21.48 per Share
2007
=
Rs.38.55 per Share
2006
=
Rs.19.50 per Share
2005
=
Rs.23.25 per Share
2004
=
Rs.16.70 per Share
The market price per share has been fluctuating from year to year but the overall impact on the market price is encouraging. However we suggest that the bank should stop paying stock dividends as this increases the number of shares in circulation and the ultimate result will be the decline in the market price.
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Price Earning Ratio Price Earning Ratio =
Market Price per Share / Earnings per Share
2008
=
21.48 / 1.26
=
17.03
2007
=
38.55 / 1.96
=
15.12
2006
=
19.50 / 1.88
=
10.51
2005
=
23.25 / 1.46
=
15.92
2004
=
16.70 / 1.67
=
10.02
The price earnings ratio is commonly used to assess the owner’s appraisal of share value. This ratio measures the amount that investors are willing to pay for each rupee of company’s earnings. The level of this ratio indicates the degree of confidence that investors have in the firm’s future performance. The highest the P/E ratio; the greater the investor confidence in the company. The figures calculated above show that the investors’ confidence in the company is increasing year by year as this ratio is increasing from
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earlier years to the later years. In the year 2006, this ratio was decreased but soon after that this ratio was improved in 2007 and became even better in 2008.
Net Profit before Tax Margin 2008
=
13.21 %
2007
=
21.43 %
2006
=
22.98 %
2005
=
30.42 %
2004
=
24.56 %
Net profit before tax margin represents the profit earned before tax as a percentage of gross revenue. The need to calculate this ratio is that the actual performance of the bank is measured before tax and not after tax. So this ratio shows that the profit earned by the bank increased in the year 2005 but in the later years this ratio continued to decline and in the year 2008 this ratio was only 13.21 percent as compared to that of year 2004 where it was about 25 percent.
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Net Profit after Tax Margin 2008
=
8.27 %
2007
=
16.27 %
2006
=
17.80 %
2005
=
20.15 %
2004
=
24.94 %
Net profit after tax margin was about 25 percent in the year 2004 whereas it started decreasing gradually in the subsequent years. The main reason for this decrease in the net profit was increase in the other expenses and also because of an increase in the amount of taxation. Although the better measure for the efficiency of the management is the net profit before tax margin but since that profit is not on the disposal of the management so it is better to calculate the net profit after tax margin so that the disposable income of the organization should be measured. And this ratio shows that the efficiency of the organization is going decreasing year by year.
124
Operating Expenses to Income 2008
=
73.36 %
2007
=
67.71 %
2006
=
73.40 %
2005
=
71.21 %
2004
=
77.24 %
The operating expense to income ratio shows that the organization has been able to control its operating expenses over the year from 2004 to 2008. This ratio was 77.27 percent in the year 2004 and in the year 2008 it is ended with a little decrease to 73.36 percent. In spite of the stability of this ratio the net profit margin of the bank declined to a considerable extent. This was because of an increase in the other expenses of the organization. So the bank should focus to decrease its operating expenses so that its net profit should be improved.
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Financing to Deposit Ratio 2008
=
51.62 %
2007
=
56.90 %
2006
=
65.68 %
2005
=
73.86 %
2004
=
69.97 %
Financing to deposit ratio is perhaps the most critical ratio for a commercial bank. This ratio represents the amount extended as a loan by a bank to its clients compared to deposits that the bank receives from its deposit holders. As per the definition of a commercial bank, the bank is an institution that receives money from those who have it spare and lends it to those who are in need of them. This ratio of Meezan Bank has been declining from the year 2004 to the year 2008. The bank should seriously consider this ratio because these are the core operations of the bank. If the bank could not fully utilize the funds received from the deposit holders it would have to suffer a loss of its net income.
126
Book Value per Share Book Value per Share =
Stockholders’ Equity / No. of Common Shares
Issued
2008
=
6341 M / 4925 M
=
Rs.1.29 per Share
2007
=
5720 M / 3779 M
=
Rs.1.95 per Share
2006
=
4763 M / 3779M
=
Rs.1.97 per Share
2005
=
3025 M / 2036 M
=
Rs.1.49 per Share
2004
=
2098 M / 1346 M
=
Rs.1.56 per Share
Book value per share is the ratio that shows that how much value of assets the bank has to pay to its shareholders in the event of its winding up. If we compare the book value per share with the market value per share we see that although the book value per share is
127
much lesser than the market value even then the shareholders are willing to pay much higher price for the share of the bank. It shows that the shareholders have confidence in the company that the company will the prosperous in the future. However since the market price has declined recently, therefore the company should take corrective actions so that the confidence of the shareholders should be maintained.
128
SWOT ANALYSIS Meezan Bank being a quality organization strives to provide quality to all its stakeholders, customers, employees and environment. In Pakistan, it is operating in a very volatile economic and political environment. I have summarized its major strengths, weaknesses, opportunities and threats in the following paragraphs.
STRENGTHS •
MBL has this privilege to be the first in the Islamic Banking sector which gives MBL a competitive edge over all other banks and being the pioneer of this industry MBL is enjoying major share of it.
•
Being an Islamic bank, MBL has a wide national network. As an emerging markets bank, it has branches in all the major cities of Pakistan with the facility of online banking, it is very easy for its customers to transact all over the country.
•
Online banking service means that a customer can withdraw and deposit his money at any branch in the country. Where this service is not present, cheque has to be presented only in that branch on which they are drawn. But with this facility,
129
a person has access to its funds at any branch of the bank. That would mean that any person who has an account with the bank, has an account in 24 branches of it. It provides a lot of comfort and convenience to the customers.
•
There are many value added features in the products offered by the bank. ATM cards are provided with every account. Other features are present in the various products. The priority customers enjoy a much-pampered status at the bank.
•
The employees at the bank provide impeccable customer service to their customers. For them “the customer is the king’. Customers are treated with great respect and honored to the utmost degree.
•
The working environment of the bank is very friendly and cooperative. There is no bossiness in the higher management. The upper management consults its staff in making decisions and provides them independence in their job areas. For the objective is performance and not conformance with the boss.
WEAKNESSES •
Till the last year, MBL had a totally different perspective. The management was of the view that the customer should come to them and they don’t need to go to the customer. But in this era of mass marketing and advertising, it is not possible to stay in competition without these took. The bank has now changed its
130
perception arid has started an effective marketing and advertising strategy. But the previous gaps are still there and there is lack of awareness in the people about the bank and its products. The bank needs to improve on its marketing and advertising areas.
•
It was observed in the bank that the degree of satisfaction of the employees was quite low. First of all, the pays are lower those offered in other banks. Secondly, the employees are given targets that are too difficult to achieve. For example, the targets given to the personnel in sales and services department are higher than any other bank in the country, be it a local bank or a foreign bank. This makes the job too stressful and tensed It is good to keep the people under a continuous move, but to overstress them can be harmful to them and as well as to the organization.
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Due to the dissatisfaction of staff, there is high turnover among them. People who find other alternatives do not stay with the bank. Therefore, the bank incurs loss on their training and development. The bank should provide incentives to its employees so that they show more loyalty. For example, there is no commission provided to the sales personnel which otherwise is a general rule all over the world.
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There are no sorts of training programmes for the employees. The employees who are newly appointed are straight away placed at their positions with no prior
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orientation. This creates problem for new personnel because they find difficult to understand the environment and culture of the organization.
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The decision-making is carried out the upper management level and the subordinates are not included in this process. This creates a sense of insecurity in the lower managers and that is why there is a lack of loyalty among the personnel. Although the upper management is very friendly with the lower managers but that is only to the extent of cordial relationships.
OPPORTUNITIES •
The economic conditions are improving in the country. The foreign exchange reserve has crossed the level the $ 14 Billions, which is something that was never achieved in the past. The stock exchange index has also crossed fifty years high recently touching 10,000 this year. This provides a better environment for investment and growth. This would give a push to incomes of the population, which would increase the level of savings.
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There is an inflow of foreign investment in the country. This would increase the industrial growth Pakistan. The Islamic banks are important part of money markets and this improvement will definitely effect their positions as well. Due to the growth in the industrial sector, there will be an increase in the production of
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this sector. The levels of deposits of industrial accounts would rise due to this factor.
THREATS •
Right now there are a few banks that are providing islamic banking services in addition to the Meezan Bank. These banks include Bank Islami, Al-Barkah Bank and some branches of Bank Alfalah which are dedicated for islamic banking services. That’s why we can say that although there is no intense threat for the Meezan Bank in the near future but it is not difficult to say that more banks may enter in this field as the awareness of islamic banking is increasing among the public. Therefore the Meezan Bank should not be contented to its present market share but should strive for providing better and better and modern services.
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Due to the increase in the number of conventional commercial banks, there is an increase in competition. Also there is a lot of aggressive marketing by the competitor banks. This is also a threat for MBL.
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RECOMMENDATIONS
Meezan Bank is renowned for being first in Islamic banking. With such competitive edge in the banking industry, it holds a very strong position among its competitors. Its continuous innovation and adaptation to its changing environment has allowed it to stand amongst the best of the lot. But I would like to give certain recommendations in this perspective:
First of all, I would I like to suggest that the bank must pursue a very aggressive marketing and advertising strategy so that it can create awareness in the general public about its Islamic products and services
Secondly, there is a need for creating satisfaction among employees. They do not feel any attachment to the organization. There is a requirement for building up their loyalties so that the bank can curtail the dissatisfaction and turnover among employees.
The personnel in the bank should not be overstressed with workload. The workload is of a destructive level. At that level of load the employees loose all the comfort in their work and remain tense and frustrated.
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There is need of a new branch in the Lahore Main area. In our marketing research, many traders told us that they really wanted such a good bank to open a branch in that area. These traders have transactions of millions in a day that is why it is not easy for them to carry that amount of cash. If MBL opens a branch in that area, it can take hold of all those big accounts with a lot of daily transactions.
Job training is a very important aspect that MBL is lacking in. New employees are recruited directly without any prior training or orientation. The result is that they do not understand the organizational structure and culture and become frustrated in their start. This reduces their productivity and efficiency. If such a training programmed is started, then the new employees would feel more comfortable and adapt easily to the environment.
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