CHAPTER # 1 Introduction of the Organization

1. INTRODUCTION Faysal Bank is operations in Pakistan since 1987, first as a branch set-up of Faysal Islamic Bank of Bahrain and then in 1995 as a locally incorporate Pakistani bank under the present name of Faysal Bank Limited. On January 1, 2002, Al Faysal Investment Bank Limited, another group entity in Pakistan, merged into Faysal Bank Limited which resulted in a larger, stronger and much more versatile institution. In fact it has the highest share capital amongst private banks in Pakistan and is amongst the largest in terms of equity. Faysal Bank Limited is a full service banking institution offering consumer, corporate and investment banking facilities to its customers. The Banks widespread and growing network of branches in the four provinces of the country and Azad Kashmir, together with its corporate offices in major cities, provides timely and differentiated services in an effective manner. The strength and stability of Faysal Bank Limited is evident through the Credit Rating assigned by JCR-VIS Credit Rating Company Limited of AA (Double A) for long to medium term and A-1+ (A One Plus) for short term. The majority share holding of Faysal Bank Limited is held by Ithmaar Bank B.S.C an investment bank listed in Bahrain. The remaining shareholders comprise of general public, NIT and other Pakistani institutions.

1.1 VISION Excellence in all that we do.

1.2 MISSION Achieve leadership in providing financial services in chosen markets through innovation. 1.3 Group Information Ithmaar Bank B.S.C. is licensed by the Central Bank of Bahrain and listed on the Bahrain Stock Exchange (ITHMR). It has a paid-up capital of US$360 million, total equity of US$1.1 billion and is a full investment bank with its direct business covering the Middle East and North Africa (MENA) region, as well as South Asia, Asia-Pacific and Europe. Besides holding significant investments in the banking, financial services and real estate sectors in different markets, the main activities of the Bank include underwriting (equity and other financings), private equity (structuring, participation and portfolio management), Islamic financing, private banking, and advisory services covering project financing, investments, capital markets and mergers & acquisitions. 1.4 Capital and Ownership The majority share holding of Faysal Bank Limited is owned by companies of the Dar Al Maal Al Islami Trust (DMI) including Shamil Bank of Bahrain E.C. The remaining shareholders comprise of the general public, NIT and other Pakistani institutions. The Banks shares are quoted on the Karachi and Lahore Stock Exchanges. 1.5 Conformity to Islamic Shariaa The Holy Quran outlines for Muslims a complete code of life for dealing individually or collectively. This is future amplified by saying and practice of Holy Profit(May be upon him) From these guidelines , an Islamic economic system can be elaborated upon, aimed at creating a socially, economically and politically viable and just environment supporting the universal well being of humanity
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In this context all functions of the bank are performed in strict adherence to the principles of Islamic Shariaa. In order to ensure such conformity of Shariaa, the Bank operations are checked and monitored by its Religion Supervisory Board to whom the management reports periodically. In case of new operations and activities prior approval of Religious Supervisory Board is invariably obtained by the bank management. The Religious Supervisory Board of the bank itself comprises eminent scholars of Islamic Shariaa from Bahrain, Egypt, Saudi Arabia, Turkey, and Pakistan possessing in-death knowledge of the conditions in which the Bank operates. The Groups Religion Board, composed also of many internationally renowned Islamic Scholars, provides advice from time on issue that pertain to Group level implementation The members of the board are highly respected individuals who have substantial knowledge and experience of corporate law and regulatory practices and running successful businesses, industries and financial sector enterprises. The day to day affairs of the bank are managed by professionally qualified and experienced finance, business and banking professionals with substantial exposure in their respective fields of specialization providing the bank with a fine blend of expertise in various financials/banking disciplines under one roof. 1.6 PRODUCTS AND SERVICES FBL is offering a wide range of banking products and services to public and private sector corporations, partnerships, individuals, professional, and expatriate Pakistan working abroad. These include:

1.2.1 Faysal Savings Account Faysal Savings is specially designed to cater to the need of those who like to earn on their hard earned savings. This account provides convenience for the account holders.

1.2.2 Faysal Sahulat Faysal Sahulat is a transactional account specially designed for individuals and business customers who seek instant access to their funds at any FBL branch in Pakistan. 1.2.3 Rozana Munafa Plus Rozana Munafa Plus is a savings account in which profit is calculated on day end balance, and is disbursed on a monthly basis. The customer gets benefited because it provides customer with the option of a high value, monthly profit account.

1.2.4 Basic Banking Account As per SBP prudential communicated via BPD circular No.30, Faysal Bank has introduced the Basic Banking Account (BBA) to cater the needs of low income groups having the following features. 1.2.5 Faysal Moavin Savings Account Faysal Moavin is a Savings account made for genuine individual savers. Faysal Moavin offers the perfect combination of savings account matched with the flexibility of a current account. 1.2.6 Faysal Premium

Faysal Premium is a savings account specially designed for high value deposits with attractive profit rates. 1.2.7 Faysal Izafa Faysal Bank realizes that every customer's financial needs are different. As a result, the Faysal Izafa Term Deposit is designed to provide individuals and corporate customers an opportunity to grow their money securely and earn attractive profits. 1.2.8 Faysal Mahfooz Sarmaya Faysal Bank endeavors to build and strengthen customer relationships by providing innovative banking products and services. To provide convenience and value to customers with foreign currency related needs, Faysal Bank's Mahfooz Sarmaya foreign currency account offers attractive features: 1.2.9 FCY Saving Plus FCY Saving Plus is a new foreign currency savings account with attractive profit rates where customers get their profit on a monthly basis. 1.2.10 Consumer Finance Products Faysal Car Finance Faysal Housing Finance Faysal Finance

1.2.11 Faysal House Finance Product Features

Buying a new home.

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Building a new home. Buy a Land plus construction. Remodeling or Renovation of Existing home.

1.2. 12 Corporate and Investment Banking Corporate Financing SME Finance Trade Financing Treasury & Capital Markets Investment Banking Agricultural Financing Cash Management

1.2.13 Corporate Financing Faysal Bank Limited is fully geared to meet the changing economic challenges present in Pakistan. FBL is ever striving to build meaningful relationships with its customers and become partners in their growth and progress by acting as financial advisors and consultants as well as financiers. Its Corporate Finance Group extends both short and long term financing facilities designed to fulfill the individual need of each corporate customer. 1.2. 14 Small and Medium Enterprise Financing Small and Medium Enterprise (SME) unit of the Bank is geared towards catering to the banking requirements of small to medium businesses in a timely and therefore cost effective manner. All the branches of Faysal Bank are equipped to speedily attend incoming financing

requests from SMEs. FBL helps its customers grow from strength to strength by acting as their bankers and financial advisors.

1.2.15 Trade Financing Faysal Bank has established a strong presence globally in Trade Financing through its network, affiliates and correspondents. The Bank has conveniently maintained relationships with major banks in the international financial market and continues to develop new ones wherever needed. Its Trade Finance services include a full range of import, export and guarantee products, thus offering tailor-made solution to fit the individual need of each customer. 1.2.16 Treasury and Capital Markets Faysal Bank's Treasury is one of the leading market makers in quoting competitive prices in all major currencies and provides dynamic corporate and institutional marketing teams with up-to-date market information. The banks cutting edge is the in-time advice and execution of deals for its customers. Faysal Bank's treasury team strives to satisfy the customer's financial needs in a timely and a flawless manner. Faysal Bank has earned immaculate reputation in the field of Capital Markets, which is quite evident from its track record and market share in this area. 1.2.17 Investment Banking With the ever-changing business environment in Pakistan, companies need expert partners with a keen understanding of business to help achieve profit objectives. At Faysal Bank, the leaders of businesses and institutions are offered, corporate advisory services and a wide array of tools to help them accomplish their goals. The bank advises and facilitates the arrangement of commercial paper, syndications, mergers, acquisitions and underwriting
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arrangements amongst many others. Whether the customers require financing of a project or managing of investments, it can guide them through the markets and tailor a solution to meet their specific needs. 1.2.18 Agricultural Financing Faysal Bank offers specialized products for the agricultural sector. All of its branches located in agricultural areas of Pakistan are equipped to help the local farmers improve their yield and methods of farming by offering timely and affordable modes of financing to suit their needs. To increase its outreach into agricultural regions of Pakistan, Faysal Bank has entered into strategic partnership with the specialized entities engaged in the Agro related supplies and services. 1.2.19 Cash Management Faysal Bank's Cash Management department has emerged as one of the leading cash management solution providers in strategic markets such as local corporates, multi-national companies, and mid-tier markets. Faysal Bank's role in these segments, span the entire spectrum of services including, but not limited to Strategic Receivables/Payables Management, Corporate Electronic Banking, Payroll and Fund Management Services, Dividend Processing, and Process Re-engineering. Success of Cash Management services is primarily attributable to its focus on providing streamlined and customized solution that adds value to business process of its clients. 1.2.20 PocketMate Visa Debit Card Combining the wide acceptability of a credit card and the thoughtful prudence of an ATM card, Faysal Bank PocketMate is the most convenient way to carry cash. No more fear of overspending. No more searching for the nearest ATM. PocketMate Visa Debit Card provides customers with the freedom of world wide acceptability at over 27 million merchant
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outlets as an ATM card operative at all ATMs in Pakistan plus at over 1 Million ATMs worldwide bearing VISA logo. 1.2.21 Travelers Cheques Customers can purchase American Express, US Dollar and Pound Sterling Travelers cheques at selected branches of Faysal Bank. 1.2.22 Transfer of Funds Customers can deposit and withdraw cash from any branch of Faysal Bank, regardless of which branch the account is in. Customers need only to carry their cheque book. 1.2.23 Money Transfer through SWIFT and Western Union Service Customers of Faysal Bank can now easily and speedily transfer funds in foreign currency through the SWIFT system installed at the Bank. Customers who receive money transfers from overseas through the Western Union service can now withdraw their funds through any Faysal Bank branch. 1.2.24 Safe Deposit Lockers At Faysal Bank, customers are offered Safe Deposit Lockers in a pleasant and secure environment. All lockers are discretely placed within the Banks professionally guarded premises. Lockers are available in three different sizes to suit individual customer needs at reasonable rentals. Faysal Bank also offers an added insurance feature with locker. 1.2.25 Non Stop Banking All branches of Faysal Bank remain open for business from 9 a.m. to 5 p.m. from Monday to Thursday and Saturday. On Friday, the bank is open from 9 a.m. to 12.30 p.m. and then again

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from 3 p.m. to 5 p.m. To suit customer needs, FBL has extended its banking hours on Saturdays. Now customers can enjoy its consistent and quality service from 9 a.m. to 5 p.m.

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CHAPTER # 2 DEPARTMENTLIZATION

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2 DIFFERENT DEPARTMENTS OF FBL Different departments of Faysal Bank are as under: 2.1.1 Operations Department Operations Department is subdivided into following four departments: Remittance Cash Account Opening Customer Service

2.1.2 Agri-Finance Department This department provides agriculture loans to the formers at nominal rates with easy terms. It includes short term financing for fertilizers, seeds, pesticides etc and long term financing for purchase of harvesting machines and installation of tube-wells etc. 2.1.3 Credit Administration Department This department supervises the loans either given or received in the form of deposits. It administers the conditions imposed at the time of delivering of loan like security etc. 2.1.4 Marketing Department It peruse the customers to make business with the bank either in the form of deposits or by applying for financing. Different tools and techniques of marketing are used such as making

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contact personally with the customers, advertisement through television, news papers and on the website. 2.1.5 Consumer and Finance Department This department provides loans to the ultimate consumer in the form of car leasing, house financing and as well as personal loans. Besides this it also administers the loans already given. 2.1.6 Documentary Credit and Foreign Trade Department This department provides assistance to customers regarding foreign trade, such as it deals with the international companies and provides goods and services required by customers. The kind of assistance it provides includes letter of credit facility, guarantor and also helps in foreign remittances.

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CHAPTER # 3

WORK DURING INTERNSHIP WORK DURING INTERNSHIP

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Departments, I served During my internship at FBL, I got a chance to work in three main departments. These are: Clearing Department Account Opening Remittance

3.1 Clearning I started my internship in the clearing department where my supervisor was Madam Shabnam Riaz. I spent 4 weeks in this department. During my stay in this department, my supervisor told me the basics and the practical work involved in cheque clearing and cheques received for collection purposes. I would like to start from cheque clearing. The major things involved in this context are to be discussed here. 3.1.1 Types of Clearing The Clearing process is of two types: Inward clearing Outward clearing

The clearing facility is provided by the state bank of Pakistan for offsetting of cross obligations between the different banks. The facility is now handed over to NIFT abbreviated as National Institutional Facilitation Technologies Pvt. Limited. I will discus both clearing through SBP and through NIFT and their roles after discussing inward and outward clearing.

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 Inward Clearing Inward clearing is where the FBL customer draws cheque in the favor of a non- FBL customer. The inward clearing process decreases the deposits of the bank. In FBL, inward clearing is now centralized and the CPU (Central Processing Unit) at the Mall does all the inward clearing like verification of cheques, stamping and posting etc. In case of any difficulty, the CPU sends faxes to the respective FBL branches regarding the confirmation of client and also the signature verification of the client. The branches then reply to the faxes after necessary verification and fax them back if the status of the client is ok and ask the CPU to make the payment. In case of any difference in the signatures of the client as per stored signature database, the bank carefully monitors and discourages the payment of such doubtful cheque. The branch only maintains all the correspondence with the CPU in a separate file named as Inward Clearing to CPU. Outward Clearing Outward clearing means cheques drawn by non- FBL customers in favor of the FBL customers and deposited in one of the branches of the FBL. The outward clearing increases the deposits of the bank.The outward cheque clearing process is now centralized meaning there by all the posting of the cheques is done at the CPU. When a branch receives cheques to be sent for local clearing, the following work is done: Counter foil of the pay-in slip signed by an authorized officer of the branch bearing the stamp Received for Clearing is returned to the customer for his/her record. The cheques received at the counter are then given to the clearing department for the purpose of clearing.

The clearing officer does all the necessary scrutiny of the cheques like:

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Checks the date of the cheque. This is the most important thing in the cheque clearing process. The post dated cheques should not be received for clearing. They should be received on the date mentioned on the cheques.

The amount in words and figures must be matched. The account title must be same on the cheque and the banks copy of the deposit slip. The cheques are checked for crossing whether it is simple crossing or payee account crossing. In simple crossing, the cheque is deposited in the account but it can be endorsed in favor of another party other than the name of the payee on the cheque. In account payee crossing, the amount must be credited in the account bearing the name on the cheque.

The clearing officer also checks that there should not be any cutting and overwriting on the cheques.

The cheque should not be mutilated. If so, the stamp of Mutilation Guaranteed must be affixed at the back of the cheque and is duly signed by the authorized officer.

After looking for the necessary components of the cheque, the next procedure is to affix stamps on the cheque and the deposit slips. 3.1.2 Stamping on the Cheques and Deposit Slips For cheques, two stamps are affixed:

Payees Account Credited on the back of the cheque. Clearing Stamp on the front of the cheque.
For deposit slips, only one stamp is used:

Clearing stamp.

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The stamps are duly signed by the authorized officer of the bank. In FBL new garden town branch, the manager operations Mr. Ahsan Iqbal Sheikh signs the stamps.

The date on the clearing stamp is always one day ahead, because the cheques are presented in the concerned branches the next day for payment. 3.1.3 Preparation of Excel Sheet All the cheques are entered in the excel sheet in lots of 50. In the excel sheet, following are the fields that are filled:

Cheque amount. Deposit slip amount. Depositors account number.

3.1.4 Jotting After the preparation of excel sheet the cheques and the deposit slips are separated and jotting of cheques and deposit slips is separately done in order to assure that the total of all cheques agrees to the total of deposit slips/vouchers. 3.1.5 Cheques ready to sent for clearing After jotting of cheques, the cheques are bundled in lots of 50 and a bundle cover is attached to the cheques which are provided by the NIFT containing the following information:

Bank /Branch code. No. of Instruments. Date. Amount of total cheques.

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Signature by the Manager Operations

After preparing bundle covers, a sheet is prepared named as Outward cheques for Clearing which includes the total number of instruments and the deposit slips and the consolidated amount of the cheques. The sheet is duly signed by the Manager Operations and is then attached with the bundle of cheques and the deposit slips and send for the purpose of clearing to the CPU Mall where these cheques are again scrutinized and entries are posted in the system. After posting the cheques, the NIFT riders come to CPU and collect the cheques for clearing. 3.1.6 Filing of Documents NIFT sends daily scroll sheet to the banks branches which contains the detail of both inward and outward cheques returns. This sheet is kept along with the print out of daily excel sheets in a separate file named as Outward Cheques for Clearing. 3.1.7 Same Day Clearing The practice of issuing SBP cheque on behalf of the customers for the purpose of same day adjustment adopted by the banks have been dis-continued and a system has been introduced for same day clearing through NIFT. 3.1.8 Pre- Requisites for Same Day Clearing The following are the requirements for availing this facility: Same day clearing is restricted to instruments valued at Rs. 500,000/- and above and received by 10:00 AM. The depositor must make specific request to the branch for same day clearing.

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The same day clearing is restricted to the branches that are designated only will ensure that the timings in this respect are strictly followed.

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3.1.9 Cheques Returned in Outward Clearing The cheques which are sent for local clearing may be returned for the following reasons: Funds Insufficient Signatures Differs Dormant Account Stop Payment by the Drawer etc.

The returned cheques are entered in the separate register called Returned Cheques in Outward Clearing the day when they received. After making the entries, the client is called for the collection of such cheques. If the client does not come to the bank after the reasonable time period, the cheque is then dispatched to the customer along with the letter containing the details of the cheque like cheque date, cheque number and the reason for return of the cheque. The photocopy of both the cheque and the letter is kept in a file called Returned Cheques Dispatched. If the client comes to collect the cheque, photocopy of the cheque and the return memo is also kept and then receiving of the client is taken on the cheque return register and the photocopies of both the cheque and the return memo are kept in a file named as Returned Cheques. Now I would like to discuss the procedure of clearing through State Bank of Pakistan and the role of NIFT in the clearing process.

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3.10 Cheques on Collections Cheques for collection are those which are not included in the local clearing. They are outsidcity cheques. There treatment is somewhat different as compared to local clearing cheques.
Procedure for Cheques on Collection (COCs)

The collection is also handled by the clearing officer. When the concerned staff at the counter collects the cheque for collection purposes, the customers copy of the deposit slip is returned by affixing the stamp Cheque Received Subject to Realization, which means that on the realization of the cheque, amount will be transferred to the customers account. The same scrutiny of the cheques is done as in the case of clearing. Stamping of the cheques The following stamps are used for collection:
Crossing stamp of Faysal Bank Limited on the face of the cheque.

Payees Account will be Credited on Realization stamp on the back of the cheque. Outward Collection Number stamp on the back of the cheque. The same stamp is also affixed on the deposit slip.

Entries in the Register After stamping, the entries of the cheques are made in a register called Outward Bills for Collection (OBC). The register contains the following fields:

Date. Beneficiary Name.

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Cheque Number. Account Number. Amount. Bank Name and Address.

Posting Entries in the System After stamping and entries, the cheques are posted in the system. The software used for this purpose in Faysal Bank is SYMBOLS. After posting of cheques, the letters are printed from the system containing the address, name, cheque number, amount of the cheque. The letter is stamped with the Faysal Bank crossing stamp and is duly signed and stamped by the authorized officer, here in this case is the Manager Operations of the bank. The stamps are also signed by him. Collection Area where FBL has its Branch For those outside city areas, where Faysal bank has its branches, cheques on collection are sent to these branches which collects the funds from the branches on which cheque is drawn and then credits the same in the customer account. This branch sends those cheques in its local clearing and after the clearing process the funds are transferred to the customers account. Collection Area where FBL has no Branch Those areas where FBL has no branch, the cheques are directly sent to the branches on which the cheques are drawn. These branches draws a Demand Draft in favor of Faysal Bank which when received by the branch lodge in the local clearing for the release of funds.
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 Time Period for Collection Where FBL has a Branch Where FBL has no Branch 3 Days 7 Days

Filing of Documents After the preparation of the letters and cheques, the photocopies of the cheques and the letters and also the deposit slips are kept for the banks record and are maintained in the file called Cheques on Collection (COC). The cheques along with the original letters are then dispatched to the respective branches for collection purpose. Reminders for Delayed COCS The cheques which are sent for collection, if not realized after a reasonable period of time, reminders are issued to the respective banks branches. For record purposes, photocopies of reminders are maintained in the file called COC Reminders. Realization of COCS When cheques are sent for collection, they are treated as a liability for the bank. When COC gets realized, the entries are made in the OBC (Outward Bills for Collection) register bearing the realization date. The realized cheques on collection are also kept in separate file called as COC Realized. COC Returned Those cheques which are returned in the collection are recorded in the returned register in the collection returns portion.
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3.2 ACCOUNT OPENING After working in the clearing department, I was moved to the account opening department where my supervisor was Madam Rabia Shafqat. She told me the basics of account opening. I spent one week in this department. The things which I have learned in this department are shown as below: 3.2.1 Procedure of Account Opening Account opening is the most important department of a bank; the reason is that it is where a customer- banker relation starts. The procedure which I am going to explain is the general procedure of account opening which is applicable to all categories of accounts. The required documentation is discussed after the procedure for each category of account. The three significant steps in the account opening process are:

Obtaining the Required Documents. Proper Introduction of the Account. Know your Customer (KYC) details.

The following procedure is followed for account opening purposes:

Introduction of Account. Introduction by Staff. Obtaining CNIC from the Customer. CNIC Verification from NADRA. Verification of the Customers Name. Occupation/ Employment Evidence. Customer Profile Form (CPF).
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Verification of signatures on Account Opening Form and SSC (Signature Specimen Card).

Signature Scanning from AOF/SSC. Sending Documents to CPU. Initial Deposit. Letter of Thanks. Issuance of Cheque Book.

Introduction of Account Introduction of an account is one the essentials from State Bank of Pakistan. The introduction of an account can be given by the Faysal Banks existing customer and in this case the bank ensures that the account is at least 3-6 months old with satisfactory conduct. The account opening officer verifies the signature of the introducer from the system containing his/her information. Introduction by Staff The introduction of the new customer can be given by the permanent staff member of the bank. In this case the name of such staff member is provided on the AOF [CRF] by means of a notation underneath the introducers column Personally Known to me. Obtaining CNIC from Customer After the introduction of the account, the customer is given the account opening form and he/she fills out the necessary columns which are required for the purpose of account opening. After filling out the form, photocopy of the CNIC is obtained from the customer. The account opening officer ensures in this case that CNIC must not be expired. For expired CNICs,

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customer has to submit copy of expired CNIC and a NADRA receipt in evidence of having applied for renewal of CNIC. CNIC Verification from NADRA The CNICs of the customers are verified through the NADRAS specialized software which is called as VERISYS. This software is being used in FBL for the purpose of the confirmation of the clients information regarding address, name, CNIC number etc. which is provided by him/her in the account opening form. Verification of the Customer Name The persons name whose account is to be opened is confirmed from the following two documents:
OFAC (Office for Foreign Asset Control). Concerned Party List (CPL).

The OFAC and the CPL contains the list of those customers which have been blocked for any kind of financial and public dealings. Occupation/Employment Evidence The occupation or the employment evidence is obtained from the customer in the shape of a letter confirming occupation, alternatively a business card (only subject to on spot verification) or a valid student ID (If student account is being opened). Customer Profile Form (CPF) The customer profile form serves the purpose of identifying the customers various credentials such as how marketed, past banking history, introducers particulars, expected transactional activity and average amount of transactions etc.
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The CPF also pinpoints based on the above parameters as a derived conclusion whether the customer is rated as an average risk as (or) higher than average risk customer by the bank. The completion of this form as a part of KYC strategy is fundamental to account opening formalities.
Verification of Signatures on AOF and SSC

The signatures on the completed AOF and SSC must match with each other. The account opening officer must give reasonable attention for the purpose of verification of the signatures. This is manually done by the officer without using the system. Signature Scanning from AOF and SSC It is a decentralized activity. The branch is responsible for the scanning of signatures from SSC and AOF. The scanned signatures are recorded in the database of the system and are promptly considered for future transactions of the customer. Stamping of the Account Opening Form After gathering the necessary information from the customer along with the documents and internal documentation of the bank, the stamping is done on the AOF. The following stamps are required for this purpose:

A/c Opening in my Presence stamp. OFAC/CPL Checked stamps. B.M and O.M stamps and their signatures. Original Seen stamp on ID cards.

Sending Documents to CPU After stamping on the account opening form, the account opening set is sent to the Central Processing Unit (CPU) for the purpose of the verification of the account opening documents
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because the account opening process is also centralized. The account opening set contains the following things:

Cheque Book Requisition. SSC (Signature Specimen Card). A/c Opening Form.

Initial Deposit After the confirmation from CPU after three working days that the account has been opened for the customer, the account number is allotted to the customer and the customer deposits an initial amount in cash. Cheques may only be accepted as part of the initial deposit in the case of undoubted customers and on the personal responsibility of the branch manager. Letter of Thanks Letter of thanks is the letter issued by the bank to the customer for two purposes:

First purpose is to say thanks to the customer for opening the account in their bank. Second purpose is to confirm the address provided by the customer while opening the account.

Issuance of Cheque Book Cheque book is issued to the customer after sending the letter of thanks when the customer comes with the letter of thanks and requests for the issuance of the cheque book. A cheque book (usually having 25 leaves) is issued to the customer. The first cheque book is issued free of cost, but the subsequent are charged Rs. 5/- for every leaf. The procedure in this manner is to complete the cheque book requisition containing title of account, account number, type of currency and signature of the customer. Signature of the customer on the cheque book
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requisition is verified through the system. Particulars are entered in the cheque book issuance register. After taking these necessary steps, the customer is given the cheque book and the concerned staff takes the customers signatures on the cheque book issuance register and affix stamp of signature verification. After verifying signatures from the system, the account opening person signs the stamp and issues the cheque book after taking signatures of the account holder on the cheque book requisition acknowledging that he/she has taken the cheque book. Closing of Account At any time the customer can come to the bank and ask for the closing of the account. For this purpose, the following requirements are to be fulfilled:

Filling the Closing A/c Form. The cheque Book is Torne. Nil the A/c of the Customer.

After doing this, the documents which are to be sent to the Central Processing Unit (CPU) are:

A/C Opening Form. Inter Office Memorandum (IOM) containing the basic details of the Account Holder. Closing A/c Form. Statement describing the Nil A/c.

The CPU confirms the credentials of the account holder and after necessary verification, closes the account of the customer and confirms the branch via fax.
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3.2.2 Categories of Accounts An account can be opened in any of the following categories:

An Individual Account. Joint Account. Proprietorship Account. Limited Company Account. Partnership. Club, Society, Association and Trust.

3.2.3 Documentation In Case Of Limited Company Accounts Photocopies of National Identity Cards of each Director. Copy of Companys Memorandum and Articles of Association. List of Directors. Copy of Board Resolution. Certificate of Incorporation. Power of Attorney/ Mandate.

3.2.4 Documentation In case of Partnership Account Certified Copy of Partnership Deed. Power of Attorney/ Mandate (If Required). Attested Copy of Registration Certificate with the registrars of Firms. CNIC Copy of Partners. Partnership Mandate.
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Original Authority Letter of Partners Favoring Persons Authorized to Operate the Account.

3.2.5 Documentation In Case of Club, Society, Association or Trust Certified Copy of (By- laws rules and Regulations and Certificate of Registration). Certified Copy of the Resolution of the Governing Body for Opening the Account and Authorizing the person(s) to operate the Account. Copy of CNIC of Authorized Persons. Undertaking signed by all Authorized Persons Mentioning Intimation to the Bank in case of change of Authorized Persons Operating the Account.

3.2.6 Documentation In Case of Individual/ Proprietorship Copy of CNIC. Copy of Services Card or any other proof of employment. Power of Attorney. Declaration of Proprietorship.

3.2.7 Documentation In Case of Joint Account Copy of CNIC. Completed Signature Specimen Card. Power of Attorney. Income Proof. Any Other.
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3.3 REMITTANCE DEPARTMENT In the last week of my internship I was moved to the remittances department where my supervisor was Mr. Siddiq Ahmed. He was very encouraging personality and helped me in each and every way to know the domain of remittances and the practical work involved in it. Before discussing in depth about the remittances, I should first define the term remittance: It refers to the transfer of money from an individual, usually a person who has emigrated from his/her city or country of origin, to another individual, usually a relative who remains at home. Remittances are financial flows arising from the movement or transfers of money from one place to another within or outside the city or country. Remittances contribute to economic growth and to the livelihoods of needy people worldwide. Moreover, remittance transfers can also promote access to financial services for the sender and recipient, there by increasing financial and social inclusion. My supervisor told me that the remittance includes the following things: Pay Orders. Demand Drafts. Travelers Cheques. Tele-graphic Transfer through SWIFT. Western Union Money Transfer.

3.3.1 Pay Orders

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Pay order abbreviated as P.O is a negotiable instrument (such as a draft) which instructs a payer bank to pay a certain sum to a third party within the city. It is a payment instrument which is used by the banks to settle payment obligations on behalf of their customers. This instrument is guaranteed by the bank for its full value and is similar to a demand draft. In FBL, P.O is payable at any of the Faysal banks branch in Pakistan. Payment through pay order is a confirmed payment. The reason is that when pay order is made, the applicant who has an account with the Faysal bank is debited and the amount is added to the pay order account. And from that account, the beneficiary account is credited for the amount of pay order. FBL only issues Payee Account Only pay orders. Pay orders in cash are not issued in FBL. 3.3.2 Validity Pay order is valid for 6 months after the date of issue. If the customer does not claim the payment within 6 months of the issue then the amount of the pay order is included in the Unclaimed Account and the amount stays there for 10 years. 3.3.3 Procedure for the Issuance of Pay Order When a customer comes for the issuance of pay order, the processing steps includes the following: The customer is given the Funds Transfer- Application Form. The customer fulfills the application form which includes the following details:
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Transaction Details.

It includes Amount in Figures and Words.

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 o o

The desired Currency. Mode of Payment.

Beneficiary Details (In whose favor P.O is issued). Applicants Detail (Who Requests for P.O).

The filled form along with the cheque is given to the remittance officer who verifies the form through the following stamps: o Sign Verification (Where the customer has done the Signatures) on the application form. o Transfer Posted (Means amount is transferred from the Applicants account to the Beneficiaries Account). o Time Stamp (Contains the Date and the Time of Receiving of Application).

The remittance officer then makes the necessary entries in the system by debiting the account of the applicant and crediting the account of the beneficiary. The commission is deducted at the time of issuance of the P.O. The commission charges are flat Rs. 80/-which are charged to the applicants account. After the entries, the P.O is ready to be given to the customer. 3.3.4 Demand Draft A demand draft referred to as DD is a bankers own draft drawn upon another banker as per agency arrangement (or) upon one of its own branches payable on presentation by the drawee bank.

35

Types

Local DD. Foreign DD.

Local DD In FBL, local demand drafts are not issued. Local DDs are those which are issued by the banks for the settlement of funds between the cities. Foreign DD Foreign currency demand drafts are issued in FBL. Foreign DD is the bankers own draft drawn upon another bank/ correspondent bank in a country other than the country from where it is issued and drawn and payable in currency of the country in whose bank/ branch it is drawn. For this purpose, the bank has maintained its Nostro A/c with Standard Chartered Bank, HSBC and Mashriq Bank for demand draft Purposes. FBL does its remittance in abroad with HBL. Through Nostro account, outward remittance in DD takes place. I will explain the term Nostro A/C for outward and Vostro A/c for inward remittances as follows: 3.3.5 Nostro A/c To best remember it is Our account with them in their currency. Nostro accounts are usually in the currency of the foreign country. This allows for easy cash management because currency does not need to be converted.

36

3.3.6 Vostro A/c To best remember it is Their account with us in our currency. These accounts are maintained by the correspondent banks in the currency of the country in which the account is opened. These accounts are also known as Loro Account. For the purpose of inward foreign currency demand drafts, FBL is maintaining Vostro account of Shamil Bank of Behrain and Qatar International Islamic Bank. 3.3.7 Travelers Cheques Traveler cheques (TC) is form of currency cheques for travelers which is convenient to carry and incase of misplace or lost one can easily have their cash again. In previous years businessmen were mostly carrying their cash in form of currency notes, usually they were worried about their cash, and it shouldnt be stolen or lost by them. For those reasons and for the comfort of the business community internationally countries decided to issue them travelers cheques, and now a days business community could use it easily without any fear of lost and steal. In Faysal Bank, the travelers cheques are issued at the selected branches. In Faysal Bank new garden town branch, travelers cheques are not issued. 3.3.8 Telegraphic Transfer through SWIFT It is largely the obsolete method of transferring funds through a telegraph or telex link from one country to another. With the help of this service a customer can transfer money to the bank account of a beneficiary in most foreign countries of the world also called wire transfer; it has been replaced by secure cable and wireless telecommunications networks. In FBL, the transfer of funds through this medium is implemented through SWIFT which is the standard in all banks of the industry. The telegraphic transfer is of two types:
37

Local TT. Foreign TT.

Local TT

In local telegraphic transfer, the funds are transferred from one city to another. The local transfer system is not been used in FBL. The method was that the customer who wanted to avail this facility was given the funds transfer application. The person who wanted to remit the money used to provide the details of the receiving person. The transaction was done between the banks. The bank remitting the money used to credit the account of the person sending the money and the paying bank used to debit such account and made payment to the receiving person. The payments were done on the counters. The NIC of the persons were taken in that kind of transactions. This system has not been used today because the SBP has started restricted the counter payments due to the fraudulent nature of the transaction.
Foreign TT

The foreign telegraphic transfer means the transfer of funds to a foreign country. Both inward and outward is done at FBL. The foreign TT is done through SWIFT which is acting as a quickest mode for the transfer of funds to abroad. The TT is only done account to account in FBL. The procedure for the foreign TT followed by the remittance officer is explained as: The customer comes to the bank for the purpose of TT. The customer is given the Funds Transfer Form on which the customer provides the details like:
o o

Amount of the Transaction in Words and Figures. The Desired Currency.

38

o o o

Beneficiary Details to whom the funds are to be transferred. Beneficiary Banks details in the abroad. Applicants Details.

After filling out the information, the customer signs the form and hands it over to the remittance officer along with the cheque.

The remittance officer in the scrutiny process assures himself that the requirements of the Anti- Monet Laundering (AML) regulation of the SBP in this context are fulfilled.

The name of the person who is remitting is confirmed from the Office for Foreign Asset Control (OFAC) list.

The Know Your Customer (KYC) requirements are duly accounted for. The remittance officer makes sure that the purpose of the remittance must be provided by the customer.

The charges of TT are deducted from the account which is flat 16 US dollars. The stamping is done on the form and the remittance officer signs the form. The form also gets signed by the operations manager.

The completed form along with the cheque is sent to the FBL head office where all the SWIFT operations are taken place. The head office makes all the dealing with the correspondent banks in abroad for the purpose of TT.

39

3.3.9 THE ROLE OF SWIFT IN TELEGRAPHIC TRANSFER SWIFT stands for the Society for Worldwide Interbank Financial Telecommunication, a member-owned cooperative through which the financial world conducts its business operations with speed, certainty and confidence. Over 8,300 banking organizations, securities institutions and corporate customers in more than 208 countries are the members of SWIFT and every day exchange millions of standardized financial messages. Its role is two-fold. They provide the proprietary communications platform, products and services that allow its customers to connect and exchange financial information securely and reliably. They also act as the catalyst that brings the financial community together to work collaboratively to shape market practice, define standards and consider solutions to issues of mutual interest. SWIFT enables its customers to automate and standardize financial transactions, thereby lowering costs, reducing operational risk and eliminating inefficiencies from their operations. By using SWIFT customers can also create new business opportunities and revenue streams. SWIFT has its headquarters in Belgium and has offices in the world's major financial centers and developing markets. SWIFT is solely a carrier of messages. It does not hold funds nor does it manage accounts on behalf of customers, nor does it store financial information on an ongoing basis. As a data carrier, SWIFT transports messages between two financial institutions. This activity involves the secure exchange of proprietary data while ensuring its confidentiality and integrity. 3.3.10 Services Provided by SWIFT SWIFT network provides the following services to the banks: The exchange of real-time messages using XML standards.
40

The exchange of bulk messages (e.g. non-urgent and low value payments). A secure browser for accessing account information.

3.3.11 Joining SWIFT In Pakistan the banks get the membership of SWIFT through State Bank of Pakistan. The Financial documents along with the registration application are submitted to State Bank and from where these are transferred to the SWIFT. membership to the Bank. Following are the steps below to learn how to join SWIFT, connect to the SWIFT network and become fully operational. Procedure Every client has its own SWIFT BIC code, in order to identify Financial Institutions. BIC stands for Bank Identifier Code. To transfer messages securely and efficiently, the client bank connects through SWIFTNet network by the assigned SWIFT BIC code. SWIFT clients can configure their existing email infrastructure to pass email messages through the highly secure and reliable SWIFTNet network instead of the open Internet. SWIFTNet Mail is intended for the secure transfer of sensitive business documents, such as invoices, contracts and signatories, and is designed to replace existing telex and courier services, as well as the transmission of security-sensitive data over the open Internet. SWIFT code The SWIFT code is 11 characters made up of: After verification SWIFT gives the

41

4 characters: Bank code (only letters). 2 characters: 3166-1 alpha 2 country code (only letters). 2 characters: location code (letters and digits). 3 characters: Branch code, optional (xxx for primary office) (letters and digits).

Procedure for International Clearing Outward Transfer For the purpose of outward transfer, as the foreign bank branch receives the SWIFT message, the Nostro account is debited for the banks record. The transferee has account with the foreign bank, the funds simply transfers to the transferees account. Inward Transfer For the purpose of inward transfer, as the domestic bank branch receives the SWIFT message, the Vostro account is debited for the banks record. The transferee has account with the domestic bank, the funds simply transfers to the transferees account. Western Union Money Transfer The Western Union Company, under the Western Union, Orlandi Valuta and Vigo brands, touches people around the world with 379,000 Agent locations in 200 countries and territories. Hundreds of millions of people currently live outside of their home countries and use Western Union services to remain connected to their families and homelands. Western union money transfer is a fastest way to receive money worldwide. There are other banks and institutions that are dealing in Western Union. They include National Bank of Pakistan, Pakistan Postal Service, Dollar East, and Master Currency etc.

42

FBL acts as agent between the sender and the receiver. Only receiving money option is there in FBL.

Procedure of Payment The Western Union is a counter payment which means that the sender of the money does not need to have an account with FBL. The procedure followed by the remittance officer in this context is as follows: The person who wants to receive money is given the Western Union Money Transfer form. The person fulfils the following details on the form: Date. MTCN (Money Transfer Control Number). It is a unique number which is given to the person remitting the money abroad by the money exchanger of that particular country. Sender Name. The name of the sender must include the surname. Sender Country. Amount in PKR (Approximate Amount). Receiver Contact.

43

When the customer completes the form, the remittance officer asks for the photocopy of the valid identity card of the receiving person. If the ID card is not available, the photocopy of the passport is taken from the customer. The officer then makes the needed entries in the Western Union software which is installed at FBL. The entries are made in the software in the form called as To Receive Money. After making the entries, the print out of the form is taken, the officer signs the western union form. The money transfer form is kept by the bank for its own record purposes. The customer is given the To Receive Money form and the customer puts his/her signatures on the form and takes the payment from the counter by presenting such form and photocopy of ID card. At the remittance department, my supervisor also told me how to issue a term deposit receipt because this was also the responsibility of the remittance officer. 3.3.12 Term Deposit Receipt (TDR) TDR is an amount of money either in Pak rupee or foreign currency kept for a fixed term subject to profit and loss. The receipt is a non- negotiable item. The minimum amount for opening a TDR is Rs. 25000. 3.3.13.WrackRate Wrack rate is the normal rate which is decided on the basis of KIBOR. It is a bi-annually rate. This rate is given to most of the customers. There is no special approval for this rate. This rate is negotiable on the basis of the amount of investment. 3.3.14 Grid Rate Grid rate is the special rate which is given to the prime customers and is determined on daily basis. In FBL, the approval is to be taken from the area manager for providing such rate to the customer.
44

3.3.15 Processing of a New TDR When the customer comes to the bank for the opening of a new TDR, then the following procedure is adopted for this purpose: The customer is given the Term/Notice Deposit- Application Form. The customer fulfills the form which contains the following fields: o Title Account. o Amount of Investment in Words and Figures. o Term/Notice Deposit Duration. o Profit Payment Frequency (Monthly, Quarterly, Half Yearly, Yearly, and On Maturity). After filling the application form, the customer signs the form and hands it over to the remittance officer. The remittance officer after scrutiny of the form affixes the following stamps on the form: Time Stamp. Sign Verification stamp

After stamping, an Inter Office Memorandum (IOM) is prepared which contains the TDR amount, its tenure, profit rate, account number. The IOM is duly signed by the branch manager and the manager operations. The completed form, IOM and the profit rate approval sheet from the branch manager or area manager is sent to the FBL head office (Karachi) for the approval of TDR.
45

3.3.16 Redemption of TDR On the date of maturity, the customer has the option to re-invest the amount. There are three options available to the customer: Principal Re-investment. Principal plus Profit Re-investment. No Re-investment.

3.3.17 Premature withdrawal of TDR The premature withdrawal occurs where the customer encashes the TDR before the expiry of the term (Maturity). imposed as: 3.4 NEW THINGS LEARNED My internship experience has given me a realistic preview of my field of education. Now I feel that I am better prepared to enter the world of professional work. I feel honored that I have worked with such experienced professionals. I must admit that such interaction in this respectable professional community will help me in seeking out job opportunities in the near future. Each task I performed was a different experience in itself. By the end of it, I must say I realize my potentials, I have realized that earning money is not so easy after all, it takes a lot of hard work and devotion, and not to forget time. I definitely have learned things, which will impact my career and my character. The overall experience of my internship was very good; I have learnt the sense of responsibility in its literal meaning. I am now capable of dealing with different sort of customers, and how to be patient while doing so. Besides this I also gained
46

Penalty is imposed on the premature encashment. The penalty is

knowledge about banking which I previously lacked and many more products being offered by the bank. So in a nutshell, this internship gave me the experience, which would no doubt boost my confidence to work in future.

47

CHAPTER # 4 FINANCIAL ANALYSIS

48

Faysal Bank Summarized Balance Sheet of 5 years Years Assets: Cash Balance with other Banks Lending to Fin. Institutions Investment net of provision Loans and advances Other Assets Operating Fixed Assets Differed Tax Assets Total Assets _ 141277421 6872032 3708451 7078102 31553108 87346401 2204368 2514959 _ 11547040 1 7207998 2883040 4608205 22525358 74468644 1537764 2239392 _ 11066358 2 6696726 2045887 10742841 23887864 62035978 2371825 2882441 _ 5048395 3564030 4417378 2866278 648660 872132 2008 2007 2006 2005 2004

1150280 5 11218501 5137325 4 29626223 1473952 1158407 1183315 1030352 160936 7853822 1 47606397

Liabilities: Bills Payable Borrowings from Fin. Institutions Deposits and Other Accounts Sub-ordinated loans Liabilities against assets subject to financial lease Deffered tax liability Other Liabilities Total Liabilities Net Assets 2406927 9995855 102067422 1000000 _ 7827 2691466 6951421 125120918 16156503
49

4516125 14965037 74413641

1193309 15295730 74595564 _

905637 8478048

430862 6529810

5646032 9 31332172 _ 18434 166442 _ 2294899 1318437 16404

14664 1839860 5924440 10167376 7 13796634

122549 1269113 3527023 96003288 14660294

6832378 9 39627685 1021443 2 7978712

Share Holders Equity Share Capital Capital Reserve Unappropriated Profit & Reserves Total Equity of the Bank Surplus on Revaluation of Assets Total Share Holders Equity Total Liabilities And Equity 5296445 3567033 1481668 10345146 5811357 16156503 141277421 4237157 3079527 1815643 9132327 4664307 13796634 11547040 1 3684484 2516211 1938651 8139346 6520948 14660294 11066356 2 2912635 2259101 1079492 6251228 3963204 1021443 2 2647850 2115989 846016 5609855 2368857 7978712

7897134 8 47606397

50

Faysal Bank Vertical Analysis of Balance Sheet 2008 Assets Cash An Balance With Treasury Banks Balance With Other Banks Lending To Financial Institutions Investment Advances Operating Fixed Assets Deferred Tax Assets-Net Other Assets Total Assets Liabilities Bill Payable Borrowing From Financial Institutions Deposits And Other Accounts Sub-Ordinate Loans Liabilities Against Assets Subject To Finance Lease Deferred Tax Liabilities-Net Other Liabilities Total Liabilities Share Capital Reserves Inappropriate Profit Minority Interest 1.70% 7.07% 72.11% 0.70% 0.00% 1.90% 4.92% 88.43% 3.74% 2.52% 1.06% 0.05%
51

2007

2006

2005

2004

4.86% 2.62% 5.01% 22.33% 61.82% 1.78% 0.00% 1.56% 100%

6.24% 2.49% 3.99% 19.50% 64.49% 1.93% 0.00% 1.33% 100%

6.05% 1.84% 9.70% 21.58% 56.05% 2.60% 0.00% 2.14% 100%

6.39% 4.51% 5.59% 14.94% 63.63% 3.00% 0.00% 1.92% 100%

6.02% 1.36% 1.83% 23.56% 62.23% 2.48% 0.33% 2.16% 100%

3.91% 12.96% 64.25% 0.00% 0.01% 1.59% 5.13% 87.86% 3.66% 2.66% 1.64% 0.08%

1.07% 13.82% 67.40% 0.00% 0.11% 1.14% 3.18% 86.75% 3.32% 2.27% 1.75% 0.00%

1.14% 10.73% 71.49% 0.00% 0.02% 0.21% 2.90% 86.51% 3.68% 2.86% 1.36% 0.00%

0.90% 13.71% 65.81% 0.00% 0.03% 0.00% 2.76% 83.24% 5.56% 4.44% 1.77% 0.00%

Surplus On Revaluation Of Assets Total Liabilities And Equity

4.11% 100%

4.03% 100%

5.55% 100%

5.01% 100%

4.97% 100%

Faysal Bank Ltd Horizontal Analysis of Balance sheet

52

Years Assets Cash An Balance With Treasury Banks Balance With Other Banks Lending To Financial Institutions Investment Advances Operating Fixed Assets Deferred Tax Assets-Net Other Assets Total Assets Liabilities Bill Payable Borrowing From Financial Institutions Deposits And Other Accounts Sub-Ordinate Loans Liabilities Against Assets Subject To Finance Lease Deferred Tax Liabilities-Net Other Liabilities Total Liabilities Share Capital Reserves Unappropriated Profit Minority Interest Surplus On Revaluation Of Assets Total Liabilities And Equity

2008

2007

2006

2005

2004

239.75% 571.71% 811.58% 281.26% 294.82% 212.53% 0.00% 213.94% 296.76%

251.47% 444.46% 528.38% 200.78% 251.36% 189.24% 0.00% 149.24% 242.55%

233.63% 315.40% 1231.79% 212.93% 209.39% 243.59% 0.00% 230.19% 232.45%

176.13% 549.44% 506.50% 105.18% 169.62% 200.23% 0.00% 147.29% 165.88%

100% 100% 100% 100% 100% 100% 100% 100% 100%

558.62% 153.08% 325.15%

1048.15 % 229.18% 236.79%

276.95% 234.24% 238.08%

210.19% 129.83% 180.19%

100% 100% 100%

47.71% 1617.36% 527.27% 315.26% 200.02% 168.57% 177.89% 78.12% 245.32% 296.76%
53

89.39% 1106.48 % 449.37% 256.02% 160.02% 145.53% 224.29% 100.00% 196.90% 242.55%

747.06% 762.49% 267.51% 242.26% 139.15% 118.91% 229.15%

112.37% 100.00% 174.06% 172.41% 110.00% 106.76% 127.59%

100%

100 % 100% 100% 100% 100%

259.55% 232.45%

167.30% 165.88%

100% 100%

Faysal Bank Ltd Summarized Income Statement Of 5 years Years Mark Up / Interest Income Fee, Commission And Brokerage 2008 11610781 743913
54

2007 9728046 603667

2006 6319498 581854

2005 2753451 397064

2004 2074611 251189

Income Divided Income Income After Dealing In Foreign Currencies Other Income Total Income: Less: Mark Up / Interest Expenses Gross Profit Less: OPERATING EXPENSES Administrative Expenses Provision Against Non Performing Loans Bad Debts Written Off Directly Other Provisions / Write Offs Other Charges Total Operating Expenses Profit Before Tax Less: Tax Profit After Tax 6061 9855 4613095 2697827 425719 2272108 32857 2416535 3870340 1053768 2816572 2220 1412024 4018476 902338 3116138 2799747 1797432 1866584 517027 67 1150 2377098 2207470 454000 1753470 1428830 -19026 1134672 51609 1118 834754 208097 141 1742 11935 1056669 2745272 593928 2151344 1221217 313597 43821 13933329 7459392 6473937 1249522 120992 447708 12149935 6089255 6060680 721804 95451 -1024 7717583 3309989 4407594 697499 162444 5050 4015508 1118118 2897390 763697 107473 2554 3199524 946485 2253039

Faysal Bank Ltd Vertical analysis of Income statement Years Mark Up / Interest Income 2008 100.00
55

2007 100.00

2006 100.00

2005 100.00

2004 100.00

Fee, Commission And Brokerage Income

6.41

6.21

9.21

14.42

12.11

10.52 Divided Income Income After Dealing In Foreign Currencies 2.70

12.84

11.42

25.33

36.81

1.24

1.51

5.90

5.18

0.38 Other Income 120.00 Total Income: 64.25 Less: Mark Up / Interest Expenses 55.76 Gross Profit

4.60

-0.02

0.18

0.12

124.90

122.12

145.84

154.22

62.59

52.38

40.61

45.62

62.30

69.75

105.23

108.60

Less: OPERATING EXPENSES 24.11 Administrative Expenses Provision Against Non Performing Loans 15.48 5.31 -0.30 1.87 10.03 19.19 22.61 41.21 40.24

0.00 Bad Debts Written Off Directly 0.05 Other Provisions / Write Offs Other Charges 0.08

0.00

0.00

0.04

0.01

0.00

0.00

0.00

0.08

0.34

0.04

0.04

0.58

56

39.73 Total Operating Expenses 23.24 Profit Before Tax 3.67 Less: Tax 19.57 Profit After Tax

24.84

22.34

86.33

50.93

39.79

63.59

80.17

132.33

10.83

14.28

16.49

28.63

28.95

49.31

63.68

103.70

Faysal Bank Ltd Horizontal analysis of Income statement Years 2008 559.66 Mark Up / Interest Income Fee, Commission And Brokerage Income 296.16 240.32 231.64 158.07 100 2007 468.91 2006 304.61 2005 132.72 2004 100

159.91 Divided Income Income After Dealing In Foreign Currencies 291.79

163.61

94.51

91.33

100

112.58

88.81

151.15

100

1715.78 Other Income 435.48 Total Income: Less: Mark Up / Interest Expenses 788.12

17529.68

-40.09

197.73

100

379.74

241.21

125.50

100

643.35

349.71

118.13

100

57

287.34 Gross Profit Less: OPERATING EXPENSES 335.40 Administrative Expenses Provision Against Non Performing Loans 863.75

269.00

195.63

128.60

100

223.61

171.17

135.93

100

248.45

-9.14

24.80

100

0.00 Bad Debts Written Off Directly 347.93 Other Provisions / Write Offs 82.57 Other Charges 436.57 Total Operating Expenses 98.27 Profit Before Tax 71.68 Less: Tax 105.61 Profit After Tax

47.52

0.00

792.91

100

0.00

0.00

0.00

100

275.30

18.60

9.64

100

228.69

133.63

224.96

100

140.98

146.38

80.41

100

177.42

151.93

76.44

100

130.92

144.85

81.51

100

58

4.2 RATION ANNALYSIS Short Term Liquidity Analysis: Current Ratio Current ratio =Current Assets/Current liabilities

Year Current ratio

2004 1.49

2005 1.588

2006 1.48

2007 1.75

2008 2.08

59

Current Ratio 2.5 2 1.5 1 0.5 0 2004 2005 2006 Years 2007 2008

Current Ratio

Interpretation: Current ratio is used to assess the short term debt paying ability of the firm. FBL in starting was not good in paying its short term debt but now in 2008 it is very good in short term paying ability .Its reason is FBL now have much focus on deposits and reserves, now they can

Quick Acid Test Ratio Acid-test ratio =Current assets Inventory/Current liabilities Year Quick acid test ratio 2004 2005 2006 2007 2008

1.35

1.48

1.37

1.75

2.0

Quick Acid Test Ratio 2.5 2 1.5 1 0.5 0 2004

60

Quick Acid Test Ratio

2005 2006 2007

2008

Interpretation: Acid test ratio is useful in measuring the liquidity position of the firm. It is more liquid ratio than current ratio. Here the result of current ratio and Acid test ratio is almost same because the reason is that FBL has no inventory so, the result of both ratios are same.

Cash Ratio Cash ratio =Cash Equivalents + Marketable Securities/Current liabilities

Year Cash Ratio

2004 0.113

2005 0.178

2006 0.121

2007 0.161

2008 0.163

Cash Ratio 0.2 0.15 0.1 0.05 0 2004 2005 2006 Years 2007 2008 Cash Ratio

61

Interpretation: The cash ratio indicates the immediate liquidity of the firm. A high cash ratio indicates that the firm is not using its cash in a better way. While the cash ratio which is too low could indicate an immediate problem with paying bills. The cash ratio of FBL in 2007 and in 2008 is remain stable. Working Capital Working capital= Current asset Current liabilities

Year Working capital(Rs )

2004 1525389 1

2005 2836702 2

2006 3532790 4

2007 4750053 0

2008 7030864 6

Working Capital 80000000 60000000 40000000 20000000 0 2004 2005 2006 2007 2008 Years

Working Capital

Interpretation: It is also used to indicate the short term solvency of the business. The higher the ratio the better the position of company in debt paying. The working capital ratio of FBL is sharply increases every year from 2004 to 2008 because its liabilities are decreases.

62

Profitability Analysis Ratio:

Net Profit Margin Net profit margin = Net profit / Total income

Year NPM (%)

2004 23.13%

2005 35.70%

2006 35.08%

2007 23.79%

2008 9.15%

Net Profit Margin 40.00% 30.00% 20.00% 10.00% 0.00% 2004 2005 2006 2007 2008 years

Net Profit Margin

Interpretation: This ratio is used to measure the profit return on sales. It is used to measure net income generated by each rupee of sale. The higher the ratio the better the company in profitability. The ratio of FBL is going to decrease from 2006 to 2008; this thing indicates that FBL is not in position in profitability.

63

Return on Average Asset Return on average assets = Net operating income/ Total assets

Year ROA (%)

2004 5.11%

2005 2.78%
Return on Assets

2006 3.25%

2007 2.5%

2008 1.77%

6.00% 4.00% 2.00% 0.00% 2004 2005 2006 2007 2008 year Return on Assets

Interpretation: It is also called firms return on investment (ROI). It measures the overall effectiveness of management in generating profit with its available assets. Higher this ration better is company, but FBL ROA show decreasing trend expect of 2004. This show that FBL is not in good in profitability.

64

Return on Equity Return on equity (ROE) = Net Income/ Average stockholders equity

Year ROE (%)

2004 44.22%

2005 29.57%

2006 42.74%

2007 32.67%

2008 23.33%

Return on total Equity 60.00% 40.00% 20.00% 0.00% 2004 2005 2006 2007 2008 Years Return on total Equity

Interpretation: It measures the overall effectiveness of management in generating profit with its Shareholders equity. Shareholders of the bank may be interested in this ratio as to check the firms effectiveness in using the capital provided by them. This ratio measure both common and preferred shareholders. Higher this ratio, more effective the firm is .Return on total asset ratio of FBL shows decreasing trend.
65

Return on Common Equity Return on common equity = Net income/ Average total asset

Year Return on common equity

2004

2005

2006

2007

2008

44.22%

29.57%

42.74%

32.67%

23.33%

Return on Common Equity 60.00% 40.00% 20.00% 0.00% 2004 2005 2006 2007 2008 Years Return on Common Equity

Interpretation: It measures the return only to the common shareholders. The Return on equity of FBL is decreasing in 2007 and in 2008. Its mean that the profit by using common equity is decreasing.

66

Long term Solvency Ratio: Debt Ratio Debt Ratio = Total Liabilities/Total Assets

Year Debt Ratio (%)

2004

2005

2006

2007

2008

83.24%

86.57%

86.75%

88.05%

88.56%

Debt Ratio 90.00% 88.00% 86.00% 84.00% 82.00% 80.00% 2004 2005 20062007 2008 year

Debt Ratio

67

Interpretation: The debt ratio indicates the percentage of assets financed by creditors, and how well creditors are protected in case of solvency. The lower the ratio the better the company position in long term liability. Here the debt ratio of FBL is going to increase from 2004 to 2008, so, this thing is not better for FBL. Debt to Equity Ratio Debt equity ratio =Total liabilities/Shareholders Equity

Year Debt to Equity ratio

2004

2005

2006

2007

2008

706%

117.9%

109%

108.9%

119.6%

Debt To Equity Ratio 800% 600% 400% 200% 0% 20042005200620072008 year Debt To Equity Ratio

Interpretation: It also tells that creditors are protected in case of insolvency. The lower the ratio the better the company's debt position. Debt/Equity Ratio indicate the outsider's portion of equity. The outsider's proportion in total equity is decreasing each year in previous 5 years but it is still very bad for FBL because its proportion is so high.

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Analysis for the Investor: Earnings per Share Earning per share (EPS) = Net Income/ Weighted average no of shares outstanding

Year EPS

2004 8.12

2005 6.02

2006 8.33

2007 6.65

2008 4.29

EPS(Rs) 10 8 6 4 2 0 2004 2005 2006 Years 2007 2008 EPS(Rs)

Interpretation: It represents the number of rupee earned on behalf of each outstanding share of common stock. The graph shows the decreasing trend in 2007 and in 2008 while in 2006 the ratio is high but after that decreases.

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Price Earning Ratio Price earning ratio = Market price of common stock per share/ Earning per share.

Year P/E (%)

2004 4.43%

2005 7.23%

2006 8.89%

2007 9.10%

2008 15.35%

Price Earning Ratio 20.00% 15.00% 10.00% 5.00% 0.00% 2004 2005 2006 2007 2008 Years

Price Earning Ratio

Interpretation: It measures the amount investors willing to pay for each rupee of the firms earning. It also shows the degree of confidence of investors on firm. Higher this ratio higher is the investors confidence. Here this ratio indicates the increasing trend from 2004 to 2008 and its better for company.

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Dividend Payout Ratio Dividend payout =Dividend per Common share/Diluted earning per share

Year Dividend payout ratio

2004

2005

2006

2007

2008

55.42%

74.75%

42.01%

75.19%

58.27%

Dividend Payout Ratio 80.00% 60.00% 40.00% 20.00% 0.00% 2004 2005 2006 2007 2008 Years

Dividend Payout Ratio

Interpretation: This ratio indicates that from earnings what percent of it given to outsiders inform of dividends. Here it shows that from 100 Rs earnings a big portion of it is given to outsiders. This thing FBL is very attractive for investors.

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Dividend Yield Dividend Yield =Dividend per common share/ Market price per common share

Year Dividend yield ratio (%)

2004

2005

2006

2007

2008

12.50%

10.34%

4.72%

8.26%

3.79%

Dividend Yield 12.50% 15.00% 10.00% 5.00% 0.00% 2003 2004 2005 2006 Years Dividend Yield 12.50%

Interpretation: This ratio indicates that from investment how much dividend is generated. The higher the ratio the better the position of company. Here the ratio has decreasing trend from 2004 to 2008 and it is very disappointed for investors.

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Book Value per Share (Rs) Total stockholder equity preferred stock equity/ No. of common shares outstanding

Year Book Value per share(Rs)

2004 21.19

2005 21.46

2006 22.02

2007 21.55

2008 19.53

Book Value Per Share(Rs) 23 22 21 20 19 18 2004 2005 2006 Years 2007 2008

Book Value Per Share(Rs)

Interpretation: It indicates the amount of stockholders equity that relates to each share of outstanding common stock. It also compare with market price per share. If book value is less than market price per share its mean it is overprice share bur if book value is high than market value per share than it is under price.

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4.3 SWOT ANALYSIS

Strengths FBL has strong background because it is backup by sheikh of Saudi Arabic. FBL has much focus on personal marketing for this purpose they send letters to every client whenever they launch any new product or service. The software which is used in FBL is managed in Singapore. Its deposits are 48 cruor in Rahim Yar Khan branch , it is on second in R.Y.K The bank has established a good branch network within a short span of time. FBL has a countrywide network of online branch banking business and ATMs in all major cities of the country. Bank has well-developed intra-net and inter-net communication network. FBL offer Pocket mate card which is acceptable worldwide at more than 10 lack ATM machines. During the year Faysal bank was placed in the top 25 performing companies by the Karachi Stock Exchange (KSE) for the year 2003. The annual report of Faysal bank for 2006 won the first price in the Best Corporate Rewards

Weaknesses Bank has no adequate number of branches as compared to its competitors like Askari Bank etc. To improve the services and to handle the problem of customers, the bank has no customer complaint department. The procedure and documentation for loaning is very difficult. No job security is there for the employees, and no union exits to secure them. As every person in the bank has his/her own computer in the branch but he or she are not well equipped with the knowledge of using the computer efficiently. Bank has no grievance-handling department for the internal problems of the employees. Due to lack of computer specialist at branch level it has to take assistance from the head office so in case they waste their lot of time.

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Opportunities FBL can introduce special schemes of lending for potential small industries. Increase the capacity of branch instead of going towards overstaffing. Bank has no foreign branches so it should open its branches outside the country FBL has applied for a license for separate "Islamic banking branches" Barclays' which is an American bank wants to takeover FBL, in this situation there overall system become international.

Threats SBP levy heavy penalties on bank in case of violating the prudential regulations especially in case of advances. Now the other players of banking are also providing the modern technology based services like online and Internet banking facility so there is no more competitive advantage in this area The bank stop it's working in case of system failure or in load shading. Responding to the SBP's l regulations management takes too much care while granting loans. Because of takeover of Barclays it is a big threat that the top management will totally change. Because the takeover of Barclays new and strike rules and regulations will impose on employees.

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CHAPTER # 5 CONCLUSION AND RECOMMENDATIONS

76

5.1 CONCLUSION Faysal Bank Limited is a full service banking institution that offers consumer, corporate and investment banking facilities to its customers. The bank offers a variety of consumer products such as auto finance, home loans, saving schemes and debit cards. The bank also offers specialized products for the agricultural sector. Its trade finance services include a range of import, export and guarantee products. The bank also offers services such as cash management, automated teller machines, travelers cheque, transfer of funds, safe deposit lockers and non stop banking. Faysal Bank continues to pursue a goal of improving upon its risk management procedures with the aim of attaining full compliance of the State Bank of Pakistan guidelines. I observed Faysal Bank Limited a financially sound bank. Its profits are increasing year by year. Its staff is very good and sincere with bank. Faysal Bank views specialization and service excellence as the cornerstone of its strategy. The people at Bank realize that innovation, creativity, reliability, customized services and their execution are the key ingredients for their future growth They are aware that they have stepped into 21st century and they must meet its challenges by acquiring the highest level of technology. They will thus be accelerating their technological advance to enable them to distribute their products and services through most efficient and modern technology means.

5.2 RECOMMENDATIONS Global competition, customer attrition and the pressures to reduce the operating costs have created a harsh environment for the worlds financial institutions. Banks face many
77

challenges in todays dynamic market place. In a global economy, bank needs efficient development of products that can quickly satisfy a more demanding customer base and build long term customer trust. Customers now have many choices than ever before. Many institutions are struggling to find the right mix of retail and commercial strategies as well as the optimal way to combine their self service, online and branch channels. In order to cope with todays turbulent environment, Faysal Bank must adopt a strategic approach toward information and process management that enables customer centricity, demonstrates a commitment to world class customer service and improve the depth of their relationship with customers. I have a very limited knowledge to give suggestions about the bank. But my stay in Faysal Bank as an internee has given the chance to explore different aspects of the organization. In view of these aspects, I have some suggestions for the bank which are as follows: Faysal Bank should increase the efficiency and effectiveness of their marketing campaigns. Faysal Bank should have a close look on regularity measures of anti-money laundering. Effective implementation of corporate governance is the key for sustainability of banking sector. Faysal Bank should also consider this point. The promotion criterion in Faysal Bank is not satisfactory. It must initiate reasonable steps for the improvement of this system and should develop a performance based reward system.

One way to retain customers is to offer a wide range of services such as tax advice, free life insurance equivalent to amount deposited, shares portfolio management and
78

fund management facility etc. Banks should have a slightly different mix of services and means of providing these such that customers can choose the mix that suits them best. The top management should immediately start thinking in terms of rotating the employees in various departments, as this transforms work force into human capital. If a particular individual keeps on employing his/ her efforts in one sphere of banking it would not only create a sense of monotony and boredom, but also let the employees not interested in polishing their skills. One of the most pressing needs of the time is to advertise the products and services in the electronic media. Faysal Bank Limited has not yet employed advertisement in electronic media as a full fledge marketing tool, It should start doing this as a mean to attract potential customers.

/.. 5.3 RFERENCES

Van horne,j.c and j.m wachowicz 1998. Jr.12th edition, fundamental of financial

management new jersey: prentice-hall.

Barely,Richard a, and stewart c.myers.2004.principles of corporate finance,8th ed.new

York:mcgraw-hill.

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 Emery,d.r, j.d finnerty and j.d stowen,(1998). Principles of financial management (1st ed).

New jersey:prentice-hall.
m.y.khan and p.k.jain, financial management3rd edition,mcgraw hill.

Online reference

Http:/www.faysalbank.com http:/www.google.com.pk http:/www.brecorder.com

http:www.kse.com

ANNEXTURE
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Faysal Bank Summarized Balance Sheet of 5 years Years Assets: Cash Balance with other Banks 6872032 3708451
81

2008

2007

2006

2005

2004

7207998 2883040

6696726 2045887

5048395 3564030

2866278 648660

Lending to Fin. Institutions Investment net of provision Loans and advances Other Assets Operating Fixed Assets Differed Tax Assets Total Assets _

7078102 31553108 87346401 2204368 2514959 _

4608205 22525358 74468644 1537764 2239392 _ 11547040 1

10742841 23887864 62035978 2371825 2882441 _ 11066358 2

4417378

872132

1150280 5 11218501 5137325 4 29626223 1473952 1158407 1183315 1030352 160936 7853822 1 47606397

141277421

Liabilities: Bills Payable Borrowings from Fin. Institutions Deposits and Other Accounts Sub-ordinated loans Liabilities against assets subject to financial lease Deffered tax liability Other Liabilities Total Liabilities Net Assets Share Holders Equity Share Capital Capital Reserve Unappropriated Profit & Reserves Total Equity of the Bank Surplus on Revaluation of Assets 5296445 3567033 1481668 10345146 5811357
82

2406927 9995855 102067422 1000000 _ 7827 2691466 6951421 125120918 16156503

4516125 14965037 74413641

1193309 15295730 74595564 _

905637 8478048

430862 6529810

5646032 9 31332172 _ 18434 166442 _ 2294899 1318437 16404

14664 1839860 5924440 10167376 7 13796634

122549 1269113 3527023 96003288 14660294

6832378 9 39627685 1021443 2 7978712

4237157 3079527 1815643 9132327 4664307

3684484 2516211 1938651 8139346 6520948

2912635 2259101 1079492 6251228 3963204

2647850 2115989 846016 5609855 2368857

Total Share Holders Equity Total Liabilities And Equity

16156503 141277421

13796634 11547040 1

14660294 11066356 2

1021443 2

7978712

7897134 8 47606397

Faysal Bank Ltd Summarized Income Statement Of 5 years Years Mark Up / Interest Income Fee, Commission And Brokerage Income 2008 11610781 743913
83

2007 9728046 603667

2006 6319498 581854

2005 2753451 397064

2004 2074611 251189

Divided Income Income After Dealing In Foreign Currencies Other Income Total Income: Less: Mark Up / Interest Expenses Gross Profit Less: OPERATING EXPENSES Administrative Expenses Provision Against Non Performing Loans Bad Debts Written Off Directly Other Provisions / Write Offs Other Charges Total Operating Expenses Profit Before Tax Less: Tax Profit After Tax -

1221217 313597 43821 13933329 7459392 6473937

1249522 120992 447708 12149935 6089255 6060680

721804 95451 -1024 7717583 3309989 4407594

697499 162444 5050 4015508 1118118 2897390

763697 107473 2554 3199524 946485 2253039

2799747 1797432

1866584 517027 67

1428830 -19026

1134672 51609 1118 -

834754 208097 141 1742

6061 9855 4613095 2697827 425719 2272108 32857 2416535 3870340 1053768 2816572 2220 1412024 4018476 902338 3116138

1150 2377098 2207470 454000 1753470

11935 1056669 2745272 593928 2151344

84