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Hasham Ahmed

REPORT ON THE BANK OF PUNJAB

NAME

ID

HASHAM AHMED

2102055

SECTION

Submitted to:

Mr.

HAIDER MEHMOOD

Course:

Money and Banking


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INTRODUCTION

OF

THE BANK OF PUNJAB

Hasham Ahmed

Introduction:
Established in 1989, in pursuance of The Bank of Punjab Act 1989 and was given the status of scheduled bank in 1994. The Bank of Punjab is working as a scheduled commercial bank with its network of 266 branches at all major business centers in the country. The Bank provides all types of banking services such as Deposit in Local Currency, Client Deposit in Foreign Currency, Remittances and Advances to Business, Trade, Industry and Agriculture. The Bank of Punjab has indeed entered a new era of science to the nation under experience and professional hands of its management. The Bank of Punjab plays a vital role in the national economy through mobilization of hitherto untapped local resources, promoting savings and providing funds for investments. Attractive rates of profit on all types of deposits, opening of Foreign Currency Accounts and handling of Foreign Exchange business such as Imports, Exports and Remittances, Financing, Trade and Industry for working capital requirements and money market operations are some facilities being provided by the Bank. The lending policy of Bank is not only cautious and constructive but also based on principles of prudent lending with maximum emphasis on security. As agriculture is considered as backbone of our economy the Bank of Punjab has introduced "Kissan Dost Agriculture Finance Scheme" to small farmers.

Hasham Ahmed

History
The Bank of Punjab started functioning with the inauguration of its first branch of 7Egerton Road, Lahore on November 15, 1989. The architect of the bank Mr. Nawaz Sharif then, the Chief Minister of Punjab, performed the inauguration. In Pakistan, over long periods of time the gap in saving and investment and balance of trade deficit has posed serious threat to the target levels of growth The ailments related to the budgetary deficit and public debt, both foreign and domestic are in addition. Interestingly even such adverse circumstances growth of real sector during the preceding year registered a favorable change, which speaks of hidden potential and strength of economy Fortunately, the banking sector of the country has the well organized and properly institutionalized system, which is the major vehicle not only for mobilization of resources to finance trade, agriculture, and industry but also for the effective conduct of monetary policy. The emergence of new bank on the national scene in the early 1990s has done two important services to the nation. The saving base of the economy has effectively enlarged and hence the investment opportunities have increased. The services of the banks in the fact of severe competition have improved considerably so that now consumer are left with extensive choice to do or undo their business relations with these banks keeping in view quality of their services. The Bank of Punjab is working as a scheduled commercial bank with its network of 266 branches at all major business centers in the country. The Bank provides all types of banking services such as Deposit in Local Currency, Client Deposit in Foreign Currency, Remittances, and Advances to Business, Trade, Industry and agriculture. The Bank of Punjab has the privilege to discharge its responsibilities towards national progress and prosperity. Within the couple of years of its scheduling, the bank has not only carved out for itself prominent niche in the mainstream banking of the country but in certain areas it has the distinction of taking the lead. . Hasham Ahmed 5

Constitutional Base:
The Bank of Punjab was established under the provisions of Section 28 of Federal List included in the 4th schedule of the Constitution of the Islamic Republic of Pakistan 1973. The Bank was established under the Act of Punjab Assembly viz. The Bank of Punjab Act 1989. The Bill to this effect was passed by the Provincial Assembly on July 3, 1989 and was passed to, by Governor Punjab in accordance with the Provisions of the Constitution on July 26, 1989. The Act provided for the foundation on which the edifice of the bank was erected. It also included and provided for various modalities concerning the structure, the organization and scope of the bank laying down its objective share capital and principle of lending. The Act defines rules for the following. 1. Short title, extent, and commencement. 2. Establishment and incorporation of the Bank. 3. Share Capital. 4. Register of Shareholders. 5. Qualification of Shareholders. 6. Government to be shareholders. 7. Head Office of the Bank. 8. Board of Director. 9. Managing Director. 10. Qualification and disqualification of the directors. 11. Removal of Directors. 12. Terms of office of directors. 13. Vacancies. 14. General and special meetings. 15. Votes of the shareholders. 16. Business, which the Bank is authorized to transact. 17. Business, which the Bank is not authorized to transact. 18. Auditors / Governments auditors. 19. Right and duties of the auditors. Hasham Ahmed 6

20. Liquidations of the Bank. 21. Powers of the Board to make byelaw.

SCOPE OF THE BANK OF PUNJAB

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

Management of the Bank.


At the level of Decision-making and implementation, senior management of the bank is drawn from highly accomplished bankers with rich experience in the banking profession both domestic and international. The entire responsibilities of policy formulation and management have been placed, under the law, with the Board of Director. Furthermore it will be heartening to know that Mr. Nawaz Sharif, during his chief Minister ship of the province of Punjab issued special instructions to the political and executives echelons not to interfere in The Bank of Punjab, thereby ousting the possibility any pressure which may be put on the management of the bank in respect of recruitment of staff or provision of credit. These instructions have become an essential part of the culture of the bank.

CORPORATE INFORMATION (The Bank of Punjab)


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Name: Registration # Registration Date: CRO

The Bank of Punjab 00000013054/19891102 15- 11 - 1989 Lahore

Auditors A.F. Ferguson & Co. Chartered Registered Office 7-Egerton Road, Lahore Pakistan

Mission Statement
To exceed the expectations of our stakeholders by leveraging our relationship with the Hasham Ahmed 8

government of Punjab and delivering a complete range of professional solutions with a focus on program driven products and services in the agriculture and middle tire markets through a motivated team.

Vision Statement
To be a customer focused bank with service excellence.

Business Volume
These are the quick facts of the business in October 2007. At that instant BOPs business volume is as under. Assets(Current + Fixed) Loans Deposits US$ 2.7 Billion US$ 1.7 Billion US$ 2.3 Billion PKR 164.7 Billion PKR 103.7 Billion PKR 140.3 Billion

Business Volume in terms of Investment, Current & Fixed Assets, Share Capital, Revenues, Deposits, Advances, Income, and EPS for the last 5 years is as under: 2003 43,621 3,675 3052 11,458 34,938 18,344 831 6.86 7 2004 66,320 5,488 4,420 16,198 54,724 39,439 1,368 9.08 8 2005 111,154 10,912 6,777 18,026 88,465 63,624 2,353 10.01 13 2006 164,855 18,603 10,659 28,233 137,728 101,320 3,804 13.14 13 2007 234,974 26562 15,110 73,462 191,968 133,894 4,446 10.51 6

Total assets Revenue Shareholder's Equity Investment Deposits Advances (net) Income EPS (Rs/share) ROI

RS (M) RS (M) RS (M) RS (M) RS (M) RS (M) RS (M) Rs %

Over last five years, Pakistan economy grown with real pace. Because of which record growth in Banking sector.

B a la n c e S h e e t O v e r v ie w

450,000 400,000 350,000 300,000 Rs. (M) 250,000 200,000 6,777 4,420 3052 54,724 34 ,93 8 43 ,62 1 20 03 66,320 2004 111 ,15 4 1 6 4 ,8 5 5 88 ,4 6 5 1 3 7 ,7 2 8 10,659

1 5 ,1 10

19 1 ,9 68

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150,000 100,000 50 ,000 0

23 4 ,9 74

2005

2006

2007

Imcome Statement Overview


30,000 25,000 20,000 Rs (M) 15,000 10,000 5,000 3,675 0 1,002 831 2,353

10,912

18,603

5,488

4,769

1,736 1,368

26562

3,165

3,804

4,846

2003

2004

2005

2006

2007

BODs,Total Revenues Net profit before taxand Employees Management Inc om e


Staff Strength
The total number of employees in the organization is 3859. Which is increasing. Regular hirings are taking place.

4,446

Core Values

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Integrity
10

4,

Dedication Transparency Team work

OBJECTIVES
The Bank of Punjab being a commercial bank performs all those function as are attributed to such banking institutions both in the areas of resources mobilization and investment. It is providing funds for commerce, trade, industry, and agriculture but its main emphasis is on accelerated development of agro-based industry. So the main objective of the bank is to channelize the resources into sectors, which have suffered from neglect. Other objectives included. 1. To provide speedier services to the common man. 2. To provide the highest rate of return to the shareholders by achieving good profitable growth. 3. To enter into financing contracts and to mobilize resources in local and now in foreign currencies consistent with the objects of the bank

ORGANIZATIONAL STRUCTURE
BOARD OF DIRECTORS

CHAIRMAN Hasham Ahmed 11

SENIOR EXECUTIVE VICE PRESIDENT

EXECUTIVE VICE PRESIDENT

VICE PRESIDENT

ASSISTANT VICE PRESIDENT

OFFICER GRADE-I

OFFICER GRADE-II

OFFICER GRADE-III

CASH OFFICER

Board of Directors (BOP)


01 02 03 04 MR. JAVED MAHMOOD MR. SAJJAD HUSSAIN MR. SOHAIL AHMAD MR. ALMAN ASLAM 12 CHAIRMAN ACTING PRESIDENT DIRECTOR DIRECTOR

Hasham Ahmed

05 06 07

MR. ANEEQ KHAWAR MR. SHAFQAT ELLAHI MR. SHAFQAT MAHMOOD

DIRECTOR DIRECTOR DIRECTOR

01

MR. RAZA SAEED

SECRETARY TO THE BOARD

BOP Top Level Management


Mr. Naveed Hafeez Shaikh Mr. Nadeem Amir Mr. Sharjeal Masud Mr. Muhammad Salim Mirza Mr. Shaheen N. Qureshi Dr. Shahid A. Zia Mr. Feisal Azmat Khan Mr. Muhammad Hanif Mr. Salman Saeed Mr. Moazzam M Maneka

Acting General Manager HR General Manager Finance General Manager Operations General Manager Treasury General Manager Special Assets General Manager T.R.C. & P Division General Manager IT Head Audit & Inspection Head Credit Policy Head Agriculture Credit Department

DIVISION AND DEPARTMENTS

DIVISION

DEPARTMENTS

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ADMINISTRATION OPERATIONS BUSINESS DEVELOPMENT CREDIT INTERNATIONAL FINANCE RECOVERY AUDIT & INSPECTION TREASURY

ORGANIZATION & METHODS INFORMATIONAL & TECHNOLOGY OFFICERS TRAINING INSTITUTE SHARES LAW STATIONERY PLANNING RESERCH & PUBLICATION

HEADED BY: -

HEADED BY: -

GENERAL MANAGER

CHIEF MANAGER

REGIONAL CHIEFS BRANCH NETWORK REGIONAL NET-WORK

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There are 266 branches of the BOP in all over Pakistan; the detail of the network is described below:

FAISALABAD
Total Branches 39

LAHORE
Total Branches 66

GUJRANWALA
Total Branches 46

MULTAN
Total Branches 62

KARCHI / QUETTA
Total Branches 06

RAWALPINDI
Total Branches 42

Head office, 7-Egerton Road, Lahore 042 9200421-33 Officers Training Institute, Lahore (042) 5714180 5755625 Main Branch, Lahore (042) 9200419 9200383 9200351

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SERVICES PROVIDED TO CUSTOMERS

The following are the services being provided to the claim

Acceptance of deposits Granting of loans Transaction Foreign Exchange Services Remittance Collection SPEDFAX- instant Fund Transfer Service Lockers facility Utility Services

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

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Critical Analysis epts


This part of report is the essence of the internship, as this will help other students to better understand the working environment of the bank by finding the relationship between what is written in the books and what is actually going on in fields. The theory written in the books in cases is not implemented as it is. In some cases theory is implemented with a little modification but in other cases theory has nothing to do with practice. In accounting, banks dont prepare worksheet, but part of worksheet is prepared like trial balance, but little differences, theory and practice has substantial relationship. The securities for the loans are handled in the same way as theory says like mortgage, pledge, hypothecation, advances against insurance policies or liquidation procedure is the same. The difference is there in the case of loans. Theory talks about four or five terms of loans that is cash finance, overdraft, loans etc., but in practice there are some more terms used like running finance, demand finance etc. All other concepts of remittances, bills, foreign exchange deposits, letters of credit are in accordance with theory almost. So for a internee it is more important to learn new things which he/she has never heard about in his/her course book. To me, Theory gives you the direction to understand the processes and the terminologies going across the World using best business practices in a broader view covering each and every aspect of possible business scenarios. On the contrary practical life is specific, enclosed in a jar. In practical professionalism and firms environment is each and every thing. Professional life only builds on the knowledge based on books even though it may only use 1% of the theoretical knowledge.

Computer system
The system has not totally shifted on computer. Manual procedure is still there hence computer facility is not fully availed. There should be a system at each counter for quick processing.

Right person for right job


During my internship I have observed the person who has came as customer Relationship Officer was acting as Cashier. It should not be like this. The person should be posted according to his qualification, profession skills and experience.

Customer problem
People have to wait for en-cashing their cheques for about 10-20 minutes, which is not good for the reputation of bank, the delay is due to manual work. Therefore I suggest that computers and other electronic machines should be installed in bank so that time could be saved.

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Deficiency in management
I felt at some places the BOP need to have employees, because a lot of work is to be done by a single employee that will result in work overload and employee might not perform his/her job with full devotion. To analyze the financial position of BOP, different tools are use, which includes Ratio Analysis, Common size Analysis of the last five years.

Introduction and Importance of Financial Analysis


Financial analysis involves the use of various financial statements. These statements do several things. First the balance sheet and the second is income statement. The balance sheet summarizes the assets, liabilities, and owners equity of a business at a point in time, while the income statement summarizes revenues and expenses of a firm over a particular period of time. A conceptual framework for financial analysis provides the analyst with an interlocking means for structuring the analysis.

Financial Statements (2006-07)


Balance Sheet
Balance Sheet As of DEC 31, 2007 2006 2007 Rupees in 000 Assets Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments Advances Operating fixed assets Deferred tax assets - Other assets Liabilities Bills payable Borrowings Deposits and other accounts Sub-ordinated loans - Liabilities against assets subject to finance lease Deferred tax liabilities Hasham Ahmed 18 14,054,859 3,722,089 11,846,823 28,233,211 101,319,954 2,068,744 3,609,457 164,855,137 856,448 6,989,424 137,727,606 40,988 298,616 14210302 1927662 2450000 73461695 133893585 3252759 5778192 234974195 937647 17842915 191968909 40321 2205530

Other liabilities Net Assets Represented By Share capital Reserves Unappropriated profit Surplus on revaluation of assets - net

2,816,341 148,729,423 16,125,714 2,902,490 4,537,232 3,219,246 10,658,968 5,466,746 16125714

2983079 215978401 18995794 4230379 7427232 3452842 15110453 3885341 18995794

Income Statement
Income Statement As of the year ended Dec 31, 2007 2006 Rupees in 000 Mark-up/return/interest earned Mark-up/return/interest expensed Net mark-up/ interest income Provision against non-performing loans and advances Provision for diminution in the value of investments Bad debts written off directly Net mark-up/ interest income after provisions Non Mark-up/interest Income Fee, commission and brokerage income Dividend income Income from dealing in foreign currencies Gain on sale and redemption of securities Unrealized gain / (Loss) on revaluation of investments classified as held for trading Other income Total non-markup/interest income Non Mark-up/interest Expenses Administrative expenses Provision against lending to financial institutions Provision against off balance sheet items Hasham Ahmed 19 11,579,036 7,508,795 4,070,241 340,626 33,000 100 373,726 3,696,515 473,212 1,385,875 239,804 389,063

2007 17,539,094 13,939,377 3,599,717 1,616,421 24,479 246,869 1,887,769 1,711,948 653,512 1,804,878 377,233 2,039,535

466,435 2,954,389 6,650,904 1,751,970 130,000 175

547,635 5,422,793 7,134,741 2,250,777 292

Other charges Total non-markup/interest expenses Extra ordinary/unusual items Profit Before Taxation Taxation - Current - Prior years (19,921) - Deferred Profit After Taxation Unappropriated profit brought forward Transfer from surplus on revaluation of fixed assets - net of tax Profit available for appropriation Basic Earnings per share - Rupees Diluted Earnings per share - Rupees

38 1,882,183 4,768,721 4,768,721 880,997 83,469 964,466 3,804,255 169,817 6,174 175,991 3,980,246 9.01 9.01

37,950 2,289,019 4,845,722 4,845,722 169,252 250,772 400,103 4,445,619 3,219,246 5,866 3,225,112 7,670,731 10.51 10.51

Financial Business Summary (5Yrs)


2003 Operating Results Markup/ return/ interest earned Markup/ return/ interest expenses Net markup income Non-markup based Income Non-markup based expenses Provision against NPLs Net profit before tax Net profit after tax Balance Sheet Total Assets Advances (net) Hasham Ahmed Rs in m Rs in m 20 43,621 18,344 66,320 39,439 111,15 4 63,624 164,85 5 101,32 0 234,974 133,894 Rs in m Rs in m Rs in m Rs in m Rs in m Rs in m Rs in m Rs in m 1,664 484 1,180 831 1,002 8 1,002 689 2004 2,555 719 1,836 1,097 1,150 47 1,736 1,368 2005 6,125 2,669 3,456 1,331 1,291 331 3,165 2,353 2006 11,579 7,509 4,070 2,954 1,882 374 4,769 3,804 2007 17,539 13,939 3,600 5,423 2,289 1,888 4,846 4,446

Investments Shareholders Equity Revaluation Reserve Deposits Borrowings from FIs

Rs in m Rs in m Rs in m Rs in m Rs in m

11,458 3,052 2,155 34,938 2,684

16,198 4,420 3,419 54,724 2,832

18,026 6,777 6,893 88,465 6,791

28,233 10,659 5,467 137,72 8 6,989

73,462 15,110 3,885 191,969 17,843

Graphical Representation of Financial Summary (Income statement)


Operating Results

BOPs income statement for the last five years represents a high growth in it.
RS in Millions

25,000

20,000

Its all due to the increase in equity , and increase in the deposits of the bank.

15,000

10,000

5,000

Rise in the Markup Interest earning income results rise up in the profit of bank represents increase in lending by the bank.
0 2003 2004 Total Income/ Revenues Total Expenses

2005 Net profit before tax

2006

2007

Net profit after tax

Graphical Representation of Financial Summary (Balance Sheet)

Deposits are almost rose around 300% in last 5 years.

upto
250,000

Balance Sheet

As last 5 years were really good for banking sector. Assets of the banks are risen upto 400% particularly in 2007 just because of crescent towers.

200,000

Rs in Millions

150,000

100,000

50,000

0 2003 Total Assets Investments 2004 2005 Deposits 2006 2007

Shareholders Equity

Borrowings from FIs

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Common Size Analysis


Horizontal Analysis
This type of analysis represents the percent change in specific line item of the Income statement or the balance sheet from the last year. This analysis is used to comment on the growth of specific line item in the industry or the firm. 2003 Operating Results Markup/ return/ interest earned Markup/ return/ interest expenses Net markup income Non-markup based Income Non-markup based expenses Provision against NPLs Net profit before tax Net profit after tax Balance Sheet Total Assets Advances (net) Investments Shareholders Equity Revaluation Reserve Deposits Borrowings from FIs Hasham Ahmed % % % % % % % % % % % % % % % 22 -24.399 105.78 5 9.0678 54.994 4.0918 2 -575 56.886 2 58.780 8 32.296 4 63.906 5 27.605 2 22.575 4 55.916 5 31.973 8 51.937 4 34.8728 32.6842 8 35.7298 5 24.2479 5 12.8695 7 82.9787 2 42.2811 1 49.6345 34.2264 8 53.4876 6 29.2628 7 30.9502 3 36.9698 7 36.1559 8 5.22598 9 58.2857 1 73.0610 7 46.875 17.5807 7 10.9217 7 85.8006 45.1500 8 41.8614 5 40.3350 3 38.0123 9 10.1409 1 34.7794 50.3989 6 38.1405 1 58.2977 5 47.1025 1 33.98141 64.4559 9 46.12956 15.086 54.9424 5 31.4027 6 11.4973 3 33.6338 9 38.1440 6 -13.0556 45.52831 17.78069 80.19068 1.588939 14.43995 2004 2005 2006 2007

32.5746 9 29.84117 37.2049 24.3282 36.1527 3 61.56789 36.4199 3 29.45731 -26.0838 -40.7207 35.7683 3 28.25508 2.83302 3 60.83058

Graphical Representation (Income Statement)


Total earnings mark-up & non mark-up were rising 33% from last year. As deposits and the lendings of the Income Statement banks are rising up.
180.00 160.00 140.00 120.00 Percentage 100.00 80.00 60.00

Administrative expenses are increased with a great pace in last few years because of high rate of inflation. Rise in expenses results decrease in the 22% percent profit from last year.

40.00 20.00 0.00 2003 2004 2005 Total Expense 2006 2007

Total Earnings (Markup/Non Markup)

Net profit after tax

Graphical Representation (Balance Sheet)


Total assets were increased in last few years. 22% increase in the assets from the last year represents growth in the Bank.
Percentage

B alance Sheet
45.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00 2003 2004 Total Assets 2005 2006 Deposits 2007

As bank increase their paid up capital because of which SOE increase at the end of 2006. BOP is grabbing the confidence of their customers results increase in the deposits.

Shareholders E quity

Vertical Analysis
It represents the percent of a line item (expenses, tax, interests, dividends) impacts on total revenues. 2003 Markup/ return/ interest earned Non-markup based Income Markup/ return/ interest expenses Hasham Ahmed % % % 66.6 9 33.3 1 19.4 0 23 2004 69.96 30.04 19.69 2005 82.15 17.85 35.80 2006 79.67 20.33 51.67 2007 76.38 23.62 60.70

Non-markup based expenses Provision against NPLs Net profit before tax Net profit after tax

% % % %

40.1 6 0.32 40.1 6 27.6 2

31.49 1.29 47.54 37.46

17.31 4.44 42.45 31.56

12.95 2.57 32.81 26.17

9.97 8.22 21.10 19.36

Graphical Representation
Markup interest earned is increased because of increase in 30% lendings from the last year. Net profit before and after tax is decreased because of huge rise up in the admin expenses.
Vertical Analysis
90.00 80.00 70.00 60.00 %age 50.00 40.00 30.00 20.00 10.00 0.00 2003 2004 2005 2006 Non-markup based Income Non-markup based expenses Net profit before tax 2007

Ratio Analysis

Markup/ return/ interest earned Markup/ return/ interest expenses Provision against NPLs Net profit after tax

Ratio analysis is used to calculate the profitability, liquidity/leverage etc. of the firm. From ratio analysis it is possible to predict future variances. Following ratios of BOP has been calculated: Ratios 2003 2004 2005 2006 Gross spread ratio Profit before tax to total income Markup/ Interest cover ratio Profit after tax to total income Total assets turnover Return on avg total assets (after tax) Price earning ratio EPS (Non dilutive) Dividend per share Market value per share Capital adequacy Ratio No. of branches Staff Strength Gross margins Net margin Hasham Ahmed % % times % times % times Rs./share Rs./share Rs./share % No. No. % % 24 71 49.8 5.15 34.26 0.06 1.88 5.09 6.86 2.5 34.95 15.5 241 3,019 4.00% 3.30% 72 59.19 5.08 46.65 0.06 2.49 7.25 9.08 4 65.9 12.83 253 3,144 3.51% 3.41% 56 66.11 2.79 49.16 0.07 2.65 10.23 10.01 5.2 102.45 12.78 266 3,430 4.19% 3.99%

2007 21 53.71 1.65 49.27 0.1 2.22 9.31 10.51 3.5 97.8 9.69 272 3,859 3.30% 3.16%

35 67.89 1.94 54.16 0.09 2.76 7.71 13.14 3.25 101.25 10.09 266 3,681 3.10% 3.03%

Net Interest Margin Total revenue Equity / Assets RoE Cost/Income

% % % % %

3.23% 5.50% 11.60 % 16.20 % 49.80 %

3.34% 5.34% 11.90 % 21.00 % 38.10 %

3.90% 5.39% 12.10 % 21.90 % 26.90 %

2.95% 4.81% 10.80 % 25.50 % 26.40 %

3.09% 4.91% 10.30% 25.40% 24.70%

Gross spread ratio


Gross spread ratio defines the total spread of interest between borrowing and lending. Spread: Difference between funded revenue as a percentage of average earning assets and the cost of funds as a percentage of average paying funds. The higher the spread the higher will be the profit margin. GSR= Rev/CGS GSR= (Mark-up earned Mark-up Expense)/Mark-up earned GSR is 2nd highest all over the globe in Pakistan. GSR of the bank is decreasing because of the decrease in margin, a SBP rise up the interest rates on the deposits.
80 71 70 60 50 40 30 20 1 0 0 2003 2004 2005 2006 2007 35 21 72

56

Gross spread ratio

Profit before tax to total income


Operating income less operating cost (profit before tax). This ratio tells what percent of total income is earned before paying all the taxes.

BOP has a high value of profit before tax to total income and Hasham Ahmed 25

80

they are decreasing after 2006 because of increase in admin expenses and righting off the bad debts. The main reasons for reduction in the profitability were additional provision against NPL due to the elimination of benefit of FSV and downturn in consumer and individual banking.

Mark-up/ Interest cover ratio


This ratio tells what percent of interest is covered from the total income of a firm or a bank. It tells the ability of a bank to pay its mark-up to the depositors.. MP/Interest EBIT/Mark-up cover ratio=
6 5 4 3 2 1 0 2003 2004 2005 2006 2007 5.15 5.08

2.79 1.94

1.65

Mar kup/ Inter est cover r atio

Profit after tax to total income


60

P rof it after tax to total income

This ratio analysis tells profitability of a firm after paying all the taxes to total income. Profitability of BOP is increased because of decrease in the tax paid to the govt and of high spread ratio. BOP negotiated their taxes with the government and only paid 20% tax in 2006 and only 8% in 2007 instead of 35%

50 40 30 20 10 0 2003 34.26

54.16 46.65 49.16 49.27

2004

2005

2006

2007

P rofit after tax to total income

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Total assets turnover


Asset turnover= Net Income/ Total assets This ratio tells the turnover of the asset to generate income. This ratio is increased during last few years which represent increase in the turnover by assets.
0.12 0.1 0.09 0.08 0.07 0.06 0.04 0.02 0 2003 2004 2005 2006 2007 0.06 0.06 0.1

Total assets turnover

Return on Total assets (after tax)


This ratio gives an idea of returning net profit generated by the bank in comparison with assets. Return on assets= Profit after tax / Total Assets This ratio is decreasing in the last year because of decrease in Profit as expenses raised up.

3 2.65 2.49 2.22 2 2.76

2.5

1.88

1.5

0.5

0 2003 2004 2005 2006 2007

The decrease was mainly due to increased equity as Return on avg totalof increase in a result assets (after tax) minimum capital requirements and additional provision due to withdrawal of benefit of FSV for most types of advances.

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Price earning ratio


Price Earning Ratio= Market price of a share/ EPS From this ratio it is analyzed what % of EPS is the part of MPS. What percent earned from a share equivalent to the worth of 1 RS MPS by the bank or a firm.
12 10.23 9.31 8 7.25 6 5.09 4 7.71

10

0 2003 2004 2005 2006 2007

P rice earning ratio

Earning Per Share


EPS = Net Income/ total shares Through this ratio it can be analyzed what percent of 1RS share is earned.
Rs. Per Share 120 100 80 60 40 20 0 6.86 2.5 2003 65.9 102.45 101.25

97.8

34.95 9.08 4 2004 10.01 5.2 2005 13.14 3.25 10.51 3.5 2007

2006

EPS (Non dilutive) Market value per share

Dividend per share

Capital adequacy Ratio

18

Capital adequacy ratio informs lending up to a certain ratio of equity. 28

16 14 12 10

15. 5 12. 78 12. 83 10. 09 9. 69

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8 6 4 2 0 2003 2004 2005 2006 2007

Capital adequacy Ratio

This ratio is set by the State Bank of Pakistan.

Net Interest Income


Difference between funded revenue as a percentage of average earning assets and the cost of funds as a percentage of average paying funds.

4.50% 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 2003 2004 2005 2006 2007 3.30% 3.41% 3.03% 3.99%

3.16%

Net Interest Mar gin

Return on equity
Profit before tax as a percentage of total equity. The decrease was mainly due to increased equity as a result of increase in minimum capital requirements and additional provision due to withdrawal of benefit of FSV for most types of advances.
30.00% 25.00% 21.00% 16.20% 21.90% 25.50% 25.40%

20.00% 15.00% 10.00%

5.00% 0.00% 2003 2004 2005 2006 2007

RoE

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Cost/Income
Operating cost includes all expenses charged to arrive at profit before tax excluding cost of funds, provisions and head office expenses. Head office expenses are not considered since all banks do not account for head office expenses in their financial statements. Operating income means funded and nonfunded revenue less cost of funds and provisions.
60.00%

50.00%

49.80%

40.00%

38.10% 26.90% 26.40% 24.70%

30.00%

20.00%

10.00%

0.00% 2003 2004 2005 2006 2007

As administrative costs are increased because of which results decrease in the cost to Income ratio.

Cost/ Incom e

Hasham Ahmed

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In the light of the Knowledge obtained during internship and studying the organization, the following recommendations may prove to be successful to the bank. In order to capture a considerable share in the banking sector of the country, the prime objective should be awareness in the general public. For this it should launch a well-planned advertising campaign in the general public. Physical facilities in a bank also play their role in enhancing its grade and sound image. The bank should keep these facilities like furniture, parking facilities for the customer. Salaries of the officers must be compatible to other private banks so that the BOP can attract professionals, intelligent persons. The Bank of Punjab should minimize its expenses. Special awards should be given to the hardworking employees who performed extra-ordinary in the bank. The bank should come up with new and innovative products. It would be advisable to make these products while keeping in mind the gap between what people want and what their banks are providing them. The Bank of Punjab should concentrate more on advances than on investments The bank should come up with such products or services in which the customers would not have to come to the bank at any stage i.e. Telephone Banking etc. The Bank of Punjab should use the latest technology because the bank which can provide speedy, accurate and standard services in the delivery of products, loans etc. to the customers will be successful e.g. computerization, fax installation. Hasham Ahmed 31

The authority should be delegated to the manager level. MIS should be improved by connecting all regional offices and branches to the head office through a network for timely delivery of information. Management of Bank of Punjab should try to avoid the political influences and should give loans on merit. The bank should make a plan to gear up its recovery function on war fooling and recognize the recovery function. The Bank of Punjab should give some extra credit to concern to professional qualifications such as MBA(IT)s, M.B.As, C.As A.C.M.As at the time of recruitment and selection. Interview should be conducted while recruiting personnel, to consider the personality characters, communications skills and sociability. The bank should adopt a policy to accommodate and facilitate the research scholars who want to study the banking affairs. The universities and other institutions can help to launch the studies regarding banking business. All possible efforts should be made to protect the bank from the interruption of Provincial government. There should be an association of employees to convey the voice of the employees to the administration.

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The Bank of Punjab is contributing a lot towards the industrial development and capital formation in the country. As it is exhibit from the data regarding the banks financial performance as shows in the financial performance as shows in the financial analysis, that bank is sharing major banking business of the country. Further more the policies and schemes as are introduced and carried on by the bank are of great source of help in its trading and non-trading growth They facilitate trade both inside and outside the country. The Bank if Punjab has endeavored to remain in the forefront of modern financial institutions and has consistently shows tremendous growth in all area of its activity. However after scheduling, due to its emphasis on consolidation and controlled lending, the growth of profit has somewhat declined. But the bans performances are in line with its set goals. The policies of the bank are uniform and going very smoothly. The employees are given all the possible facilities and generous compensation. In return employees are stressed for their best efficiency. Merit policy prevails in all the activities of the bank. Administration has studied the administration of all other banks, and all their problems and drawbacks are planned to be avoided. Therefore, the policies of the management are progressive and proper. The progressive approach and trend towards progress and prosperity reflects that bank will touch the zenith of development and progress. The dedicated, enthusiastic and motivated employees can bring that time even earlier.

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