The Bank of Punjab

Presented to:

PROF. Sir Farukh Naveed Sb.

Presented by:

Adil Nisar

Bs commerce 7th (mor)

Session 2007-11

Roll No. 28

DEPARTMENT OF COMMERCE

THE ISLAMIA UNIVERSTY BAHAWALPUR

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 The Bank of Punjab

First of all a great thanks to Almighty Allah, Who enable me to complete this

task and then I am thankful to my Respected Teachers for providing such a

friendly atmosphere and guideline during our four years stay at the University

not only for the Academic Affairs but all other social and future prospective by

sharing their remarkable experiences.

It was such a pleasant Experience to Work in THE BANK OF PUNJAB I

own my gratitude and thankful to all those who helped me in preparing this

internship Report by sharing there best of knowledge.

It is due to endless efforts of seniors and fellow members at THE BANK

OF PUNJAB who provided me every favor and the last but not the least I am

really very thankful to my beloved parents who have always been a source of

inspection for me.

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 The Bank of Punjab

To be the customer Focused Bank with service Excellence.

Be a dynamic resource of economic development and growth for stakeholders

through service excellence achieving high standards of professionalism,

dedication integrity and team work.

Our customer as our first priorot

Profitablity for the prosperity of stakeholders that

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allows us to constantly invest, improve and success

Excellence I every thing we do

Integrity I all our dealings

Respect in our customer and each other

The Bank Of Punjab started functioning with the inauguration of its first

branch of 7-Egerton Road, Lahore on November 15, 1989. The architect of the

bank Mr. Nawaz Sharif then, the Chief Minister of Punjab, performed the

inauguration.

In Pakistan, over long periods of time the gap in saving and investment

and balance of trade deficit has posed serious threat to the target levels of growth

the ailments related to the budgetary deficit and public debt, both foreign and

domestic are in addition. Interestingly even such adverse circumstances growth

of real sector during the preceding year registered a favorable change, which

speaks of hidden potential and strength of economy

Fortunately, the banking sector of the country has the well organized and

properly institutionalized system, which is the major vehicle not only for

mobilization of resources to finance trade, agriculture, and industry but also for

the effective conduct of monetary policy.

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The emergence of new bank on the national scene in the early 1990s has done

two important services to the nation.

The saving base of the economy has effectively enlarged and hence the

investment opportunities have increased.

The services of the banks in the fact of severe competition have improved

considerably so that now consumer are left with extensive choice to do or undo

their business relations with these banks keeping in view quality of their services.

The Bank of Punjab is working as a scheduled commercial bank with its network

of 243 branches at all major business centers in the country. The Bank provides

all types of banking services such as Deposit in Local Currency, Client Deposit in

Foreign Currency, Remittances, and Advances to Business, Trade, Industry and

Agriculture. The Bank of Punjab has indeed entered a new era of science to the

nation under experience and professional hands of its management. The Bank of

Punjab plays a vital role in the national economy through mobilization of

hitherto untapped local resources, promoting savings and providing funds for

investments.

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Attractive rates of profit on all types of deposits, opening of Foreign Currency

Accounts and handling of Foreign Exchange business such as Imports, Exports

and Remittances, Financing, Trade and Industry for

working capital requirements and money market operations are some facilities

being provided by the Bank. The lending policy of Bank is not only cautious and

constructive but also based on principles of prudent lending with maximum

emphasis on security. As agriculture is considered as backbone of our economy

the Bank of Punjab has introduced "Kissan Dost Agriculture Finance Scheme"

to small farmers.

The Bank of Punjab has the privilege to discharge its responsibilities towards

national progress and prosperity. Within the couple of years of its scheduling,

the bank has not only carved out for itself prominent niche in the mainstream

banking of the country but in certain areas it has the distinction of taking the

lead. In the short span of time the Bank has been able to evolve a distinct

corporate culture of its owned-based policies, which are realistic and are on

highly professional footings.

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. He Bill to this effect was passed by the Provincial Assembly on

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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.

Short title, extent, and commencement.

Establishment and incorporation of the Bank.

Share Capital.

Register of Shareholders.

Qualification of Shareholders.

Government to be shareholders.

Head Office of the Bank.

Board of Director.

Managing Director.

Qualification and disqualification of the directors.

Removal of Directors.

Terms of office of directors.

Vacancies.

General and special meetings.

Votes of the shareholders.

Business, which the Bank is authorized to transact.

Business, which the Bank is not authorized to transact.

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Auditors / Governments auditors.

Right and duties of the auditors.

Liquidations of the Bank.

Powers of the Board to make byelaw.

Being a commercial Bank, The Bank of Punjab performs all such functions as

are attributed to commercial banking institution both in the area of resource

mobilization, loans, and investment. The Bank is thus providing all type of

advances to business, trade, and industry on seasonal and annual basis, and is

ensuring, through the prudent policy, the safety and protection of its loan

portfolios, as the resources base of the bank expands, project financing will also

be brought into its fold.

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.

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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.

EMBLEM:
The sun rising over the five wavy lines symbolizes the dawn of new era of

progress and prosperity for the land of five rivers and hence for Pakistan.

Furthermore the main objectives of the inclusion of cotton flowers and the spikes

of wheat in the emblem is firstly to represent the fact that the economy of the

Punjab stands on its agriculture produces especially cotton and wheat and

secondly to highlight the emphasis which the bank is to place on development of

agro-based industry.

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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.

To provide speedier services to the common man.

To provide the highest rate of return to the shareholders by achieving good

profitable growth.

To enter into financing contracts and to mobilize resources in local and now in

foreign currencies consistent with the objects of the bank.

The newly elected Government has pledged to continue economic reforms

and

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policies of the previous regime resulting in the Government’s enhanced ability to

engineer its economic future, which reinforces the confidence that has emerged

during 2007. The success and growth, however, largely depends on the degree to

which the Government can deliver on its political agenda and how smoothly the

transition of power can work towards bringing about a greater degree of

optimism amongst investors and the business community.

Although The Bank of Punjab are optimistic about the future outlook for

Pakistan and are confident that expected GDP growth target will be achieved

yet the geopolitical situation particularly with reference to Iraq the year 2008

appears to be far more challenging where the factors beyond our control may

adversely affect our economy. Moreover, the prevailing money market scenario

with extremely low interest rates and stagnant private sector credit is a serious

deterrent to the banking sector growth. This situation will force the banks to

shift their focus from conventional banking approach to retail based consumer

finance products and service and the banks taking lead in this shift process will

be least affected by the prevailing unfavorable interest rate scenario.

The mission to transform The Bank of Punjab into a modernized business

oriented institution is sailing smoothly and in this direction by now

computerization of 156 branches has been completed successfully while the

remaining 87 branches will also be computerized before the 2008 year end.

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Moreover, during 2008 we will also introduce ATM facility at our selected

branches for which your bank has joined MCB switch and the agreement has

been signed. In addition to offering ATM facility we have aggressively embarked

on providing real time inter-branch banking services within 2008.

The bank is one of the sponsors of Trust Management Services Pvt. Limited

besides being a co-sponsor of Trust Modaraba a Modaraba company

incorporated in Pakistan under the Modaraba companies and Modaraba

(Floatation and control) Ordinance, 1980. Authorized Modaraba Fund and paid

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

The Bank is one of the sponsors of Trust Leasing Corporation Limited a public

limited company established under the Companies Ordinances, 1984. Authorized

paid up capital of the company is Rs. 250 million and Rs. 100 million

respectively.

First Punjab Modaraba Services (Pvt) Ltd. established in Pakistan under

Companies Ordinance.1984 and register under Moderate Companies and

Modaraba (Flotation and Control) Ordinance, 1980 is wholly owned subsidiary

of the bank. Authorized fund of this Modaraba is Rs. 500 million where as paid

up fund is Rs 200 million.

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BOARD OF DIRECTORS

CHAIRMAN

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SENIOR EXECUTIVE VICE PRESIDENT

EXECUTIVE VICE PRESIDENT

VICE PRESIDENT

ASSISTANT VICE PRESIDENT

OFFICER GRADE-I

OFFICER GRADE-II

OFFICER GRADE-III

CASH OFFICER

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The services in The Bank of Punjab are classified in different categories.

Category A:
President

Executive Vice President (EVP)

Senior Vice President (SVP)

Vice President (VP)

Assistant Vice President (AVP)

Category B:
Officer Grade I

Officer Grade II

Officer Grade III

Cash Officer

Category c:

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Clerical Staff

Category D:
Non-Clerical Staff

Driver

Guards

Gate Keepers

Tea Boy

DIVISION DEPARTMENTS

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ADMINISTRATION ORGANIZATION & METHODS

OPERATIONS INFORMATIONAL & TECHNOLOGY

BUSINESS DEVELOPMENT OFFICERS TRAINING INSTITUTE

CREDIT SHARES

INTERNATIONAL LAW

FINANCE STATIONERY

RECOVERY PLANNING RESERCH &

AUDIT & INSPECTION PUBLICATION

TREASURY

HEADED BY: - HEADED BY: -

GENERAL MANAGER CHIEF MANAGER

REGIONAL CHIEFS

BRANCH
NETWORK

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FAISALABAD LAHORE
Total Branches 34 Total Branches 64

GUJRANWALA MULTAN
Total Branches 43 Total Branches 60

KARCHI / QUETTA RAWALPINDI

Total Branches 05 Total Branches 36

G.M

Admin & Officer’s Training

Establishment Institute
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This division deals with the problems relates to the staff administration. The

main function of this department is to arrange a

comprehensive training program for recruited staff. Others function includes:

Recruitment

Staff remuneration

Placing the staff

Providing and defining the opportunities for career development and growth

Devising and implementing services rules.

Promotion and demotion

Suspension and termination

Transportation

Security, health and benefits.

G.M

Computer Dept:
Stationary Dept:
Engg & Maintenance

O & M Department

This

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Division is concerned with the operational working in general banking, which is

concerned with the routine working of the bank. Any problem or ambiguity arise

in any branch working are rectified and suggested for correction by this division.

This Division usually takes technical procedures involved the decisions like

commissions. And also,

The maintenance of the existing building owned by the bank.

Opening new branches and their maintenance.

It also deals with the stationery problems of the bank.

G.M

Marketing PRP
Cell Department
It is the other name of the marketing division. It promotes the bank cause i.e.

deposits and work for the over all development of the bank. Deposits are

the lifeblood of any bank. Without deposits bank cannot perform any function of

banking. This division fixes the deposits target of every branch by keeping and

eye over the potential customers in the area. It gives motivation to branches to

achieve their targets through different campaigns and schemes like cash prizes

and

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special increments. It publishes a bulletin in which those branches are

encouraged who achieves their monthly targets. The main function is to develop

and attract the customers and depositors. It also manages:

Advertising policy

Sales promotion.

Schemes offered by the bank.

G.M

Agriculture Credit

This division control over all credit operations like sanction of loans,

Inland Bill Purchased (IBP) and also keeps check over securities mortgage,

hypothecating or pledge. It also fix the rate of mark-up and other decisions

concerning with the credit.

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There is a credit committee, which consists of senior officers; Branches

send the credit proposal to head office credit division. Credit committee

approves it after making a through analysis. It also

Prepare the policies regarding the sanctioning loan

Monitor loans and credit

Look after the portfolio of the bank

Define credit limits against specified securities.

G.M

International

Forex Money
Market
Investment

Engg &
Maintenance

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This division is providing important services to the bank regarding the matters

of International Trade, Import, Export Letters of Credit, Travelers cheque etc.

It develops “Correspondent Relationship” with others on commission basis and

this helps to deal with the clients having import export business.

It handles treasury operations.

The Marketing and Spot Inspection cell, which were introduced by the bank, are

showing positive results in terms of achieving foreign currency deposit targets

and other foreign related business.

G.M

Balance Sheet
Results
Monitoring
SBP affairs and

Shares Dept.

Company Affairs

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It controls the routine financial matters. The permission of special

expenditure incurred in the branches, and other such cases. The daily position

and HO Extracts are daily sent to this division by all the branches. This division

not only estimates the profit and loss of every branch but also prepare overall

income statement and balance sheet of the complete bank. It also keeps record of

total deposits of the bank and then their classification in the form of loans into

different sectors of economy. The basic functions are:

Monitoring the fiscal and financial policies of the bank.

Deals in exploring means for investing surplus bank funds.

Maintenance and investment of Gratuity and Pension Funds of the employees.

G.M

Law
Department

The recovery division, which was established in 1994 to assist in

regularizing the difficult loan accounts, has rendered valuable services in this

respect.

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To effect recoveries in an efficient manner, a policy has been framed in

accordance with the guidelines issued by the State Bank of Pakistan Moreover,

recovery cells at regional levels have been set up to assist the head office. This

division looks after the matters of recovery of loans with the assistance of legal

advisors.

G.M

Audit of Rectification
and
Branches
Persuasion

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This department ensures appropriate system of checks and balances. It checks

all the irregularities, errors and forgeries if any, under the rules and regulations

formed by the Government of Punjab. For this purpose it doesn’t only keep and

eye on the branches in their vicinity but also conduct surprise and

comprehensive audits of the branches. This strategy has improved working at

the branch level. It not only points out the discrepancies but also tries to solve it.

Surprise audit maintain a good check on the over all working of the branch

especially of the side of finance.

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The following are the services being provided to the claims.

Acceptance of deposits

Granting of loans

Transaction Foreign Exchange Services

Remittance – Collection

SPEDFAX- instant Fund Transfer Service

Lockers facility

Utility Services

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,

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SUI GAS, WASA, PTCL, and PAKTEL. By using bank’s extensive branch

network, effort have been to made to maximize the exploitation of this source in

view of its rich potential of yielding business and deposit direct earning of

Commission.

In modern times very few business enterprises are carried out solely with the

capital of the owners. Borrowing funds from different sources has becomes an

essential feature of today business enterprise. But in the case of an entire

banking system is based on it. The borrowed capital of the bank is much greater

then their own capital. Banks borrowing is mostly in the form of deposits.

These deposits are lent out to different parties. The larger the difference

between the rate at which the deposits are borrowed and the rate at which they

are lent the greater of the profit margin of the bank. Furthermore, the larger the

deposit the larger will be the funds available for employment; larger the funds

lent out the greater will be the profit of the bank.

To receive the deposit is the basic function of all commercial banks. The

bank does not receive these deposits for save keeping purpose only, but they

accept deposits as debts. When banks receive deposit from a customer, the

relationship of a debtor and creditor is established where by the customer

become the creditor and the bank a debtor.

When the bank receives amount of deposit as a debtor, it becomes the owner of

it. It

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may, therefore use it as deems appropriate. But there is an implicit agreement

that the amount owned would be paid back by the bank to the depositor after a

specified period.

CURRENT DEPOSITS

PROFIT & LOSS SHARING ACCOUNT

SHORT NOTIC TERM DEPOSITS

CALL DEPOSIT

TERM DEPOSIT RECEIPTS (TDR).

CURRENT DEPOSITS:
In this type of account the client to allowed to deposit or withdraw money

as and when he likes. Because of their nature, these deposits are treated

as the current liabilities of the bank. There is not profit on such deposits. Usually

this type of account is opened by the business.

PROFIT & LOSS SHARING ACCOUNT:

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This type of accounts is one step towards the Islamization of banking system in

Pakistan. There are two types of PLS Accounts.

PLS Saving Account

PLS-TDR (Profit & Loss Sharing Term Deposit Receipts).

PLS saving accounts can be opened with the minimum sum of Rs. 100 and

PLS-TDR account can be opened for a sum of Rs. 1000 or above. Profit is paid

on both types of the PLS account on half yearly basis.

Under PLS saving account the depositor undertakes to share profit or loss

on the deposits earned or sustained by the bank. Secondly the bank is at the

liberty to invest the funds of the deposits in any avenue, it deems fit. The PLS

deposits are invested in non-interested channels.

SHORT NOTICE TERM DEPOSITS (SNTD)

his kind of deposit is for a short period. The depositor may withdraw his

deposit at any time by giving seven days notice to the bank. This type of deposit

facilitates the depositor to withdrawn his amount with interest of the deposited

period.

CALL DEPOSIT

Call deposits are the sorts of deposits, which are deposited with the banker

against any tender. This is without interest deposit. This may be with interest

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provided the depositor has agreed to keep this amount with the bank for some

fixed period.

TERM DEPOSIT RECEIPTS (TDR)

This type of deposit is same as the SNTD. The difference is that SNTD is for

short period (7- 30 days) while TDR is for long period (1 month up to 5 years).

Account opening is the first step towards establishing a relationship

between the customer and the bank. The Bank of Punjab is offering basically

two types of account:

CURRENT DEPOSIT ACCOUNT

PROFIT & LOSS SHARING ACCOUNT

The necessary condition for a customer, who wants to open an account

with the bank, is introduction, which is preferably by the bank officers or any

account holder of the bank. The different categories of accounts that are

available are as under.

INDIVIDUAL account

Joint Account

Partnership Account

Limited Company Account

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Clubs, Society, Association, or Trust Account

SNTD

TDR

Foreign Currency Deposit

Clearing is the most important department of the bank performing various

functions.

Clearing House:
A clearinghouse is an organization of the member banks, working under

SBP and which is for the purposes of setting inter banks claim resulting from

transmission of funds from one bank to another. The branch cheque/instruments

are credited into the account of the customer. The clearing can be:

Outward

Inward

Outward

The instrument collected or stored bank wise and a schedules is prepared

separately for each bank mentioning the total number of instruments and the

amount of the instruments. Then these are recorded in a

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register called “OUTWARD CLEARING REGISTER” then a main schedule is

prepared

showing the total number of cheque and their aggregate amount being presented

in the clearing.

The cheque/instruments are handed over the clearing branch. Central

clearing branch issue CREDIT ADVICE to the branch for passing credit to its

customer immediately. The branch on receiving credit advice debits the clearing

account and credits the respective customer accounts.

Inward

On receiving cheque/instruments from central clearing branch, the in

charge checks the number and amount of cheque received in clearing must tally

with the main schedule received from central clearing branch.

These cheque/instrument are entered in “INWARD CLEARING

REGISTER” for the cheque/instrument passed in clearing is a credit advice for

the aggregate amount of cheque passed in clearing is prepared, drawn on central

clearing branch.

Reserves at State

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Deposit held by bank at SBP serves as check clearing and collection balances.

Rather than physically transferring funds between banks, check

clearing and collection can be done by simply debiting or crediting a bank’s

account at SBP.

Remittance is a major function of the bank. It is the transfer of money from one

place to another place. The need for remittance is commonly felt in commercial

life particularly and in everyday life generally.

By proving this service to the customers the Bank of Punjab earns a lot of

income in the form of service charges.

The Bank of Punjab deals with the following type of remittances: -

Demand Draft (DD)

Mail Transfer (MT)

Telegraphic Transfer (TT)

Pay Order

Now we discuss all these in detail: -

DEMAND DRAFT (DD):

Demand draft is a written order given by the one branch of a bank on behalf of

customer to another branch of the same bank to a certain amount to the certain

person.

Procedure for Prepare Demand Draft.

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A draft voucher is filled which contains the following information

Name of the parties involved

Date

Amount to be sent

Account number (if DD is crossed)

A credit voucher is filled in order to get the excise duty and exchange

commission.

The sender deposits the total amount of the two vouchers i.e. the debit and credit

vouchers.

Then the cashier sends the cash receipt voucher to the accounts department and

the account records the amount paid in his cash scroll.

Accountant gives the DD leaf along with the DD voucher to his assistant who

records the sender’s name, amount and receiver’s name. After writing all the

information in the DD register he gives it to the officer along with the DD for

authentication.

After authentication the DD is handed over to the sender and bank sends the

advice to the concerned branch. So when the party presents the DD in the

concerned branch its payment could be made.

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Parties involved in the Demand Draft

The following parties are involved in demand draft;

Purchaser or Sender

The purchaser is the person who sends the money to a particular person payable

at a certain branch.

Issuing or Drawing Branch

The branch from where the demand draft is issued to another branch of the

same bank.

Drawer Branch

Branch in which the draft has drawn and called upon to pay the amount

Payee

The person who is entitled to receive the amount after presenting the demand

draft in the drawer branch

MAIL TRANSFER (MT):

It is the transfer of money from one branch to another branch of the same bank

through mail service. In mail transfer there is no need of advice as the amount is

directly credited to the receiver’s account.

Procedure

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First a voucher is filled in whish the sender writes the amount to be sent, name,

account number of the receiving person with the branch name and date.

A credit voucher is filled in order to deduct exchange, postage charges according

to the amount of the mail transfer.

The sender deposits the total amount in the cash department.

The cash officer gives the vouchers to the officer after affixing received cash

stamp and writing the amount in red ink.

Then the officer writes the amount paid in the cash scroll and gives the MT to his

assistant.

MT leaf is filled according to the information provided in credit voucher. He

also writes the same information in the MT register. Then he gives the MT leaf

and MT register to the officer for authentication.

TELEGRAPHIC TRANSFER

This is the most urgent method of remitting the money from one place to another

place. This method is used when the sender desires to send urgently, in this case

the sender request the manager of the branch to issue TT.

Procedure:

For sending the TT the manager and officer apply a test. In the test the manager

and officer uses a coding technique. They write their own code numbers, which is

allotted, to them as the bank branch code. After making all the conformation the

concerned branch makes the payment to the receiver. If the sender wants to

convey the same message through telephone then he has to

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pay the charges of telephone along with the TT charges. First the person deposit

the TT amount along with the charges through the credit voucher then his TT

sent to the relevant branch.

Pay Order

A pay order is a written order issued by the bank on its own branch, drawn upon

and payable by itself to pay a specified sum of money to the person. The purpose

of a pay order is to transfer the fund from one place to another. It is usually not

issued in favor of the parties of other cities. Usually the pay order is issued for

the local transfer of money from one person to another or from the person to any

other department. It is used for different purposes. The purpose may be the

repairs of the branch or renovation of the branch.

Procedure:

The procedure of a pay order varies with the nature of the purpose. If the work

is of huge amount then first the manager writes a letter to the Zonal Chief in

order to get sanction of the work. Then the advertisement of the work is given in

the newspaper in order to invite the contractors. But if the work is small then the

branch manager has discretionary power to select the party

whose rate is lowest. After finishing the work the contractor submits the bill of

work on his stamp pad. Then the bank issues a pay order, against the pay order

the contactor gets the amount from the issuing branch.

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“Major source of bank’s Income”

It is the loan function, which produces the major person of bank’s income, and

as such it is the major areas of professional banker’s concern and attention.

Principles while advancing

Basically there are five principles that must be duly observed while

advancing money to borrowers.

Safety

Liquidity

Disposal

Remuneration

Suitability

Forms of Lending:
Many there are two types of advances:

Short-term (maturity within one year)

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

However they are further classified as:

Running Finance

Demand Finance

Cash Finance

Letter of Guarantee

Running Finance:

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This form of finance was previously known as “overdraft”. When a customer

requires the temporary accommodation, his bank allows withdrawal his account

in excess of credit balance, which the customer has in its account, a running

finance occurs. The accommodation is thus allowed collateral security. When it is

against collateral securities, it is called a “Secured Running Finance”

and when the customer cannot offer any collateral security except his personal

security, accommodation is called a “Clean Running Finance.” The customer is

in advantageous position in running finance because he has to pay the mark-up

only the balance outstanding against him on daily product basis.

Demand Finance:
This is common form of financing to commercial and industrial concerns

and is mad available either against pledge or hypothecation of goods produce or

merchandise. In Demand Finance the party is financed up to a certain limit

either at once or as and when required. The party due to facility of paying mark-

up only on the amount it actually utilizes prefers this form of financing.

Securities for Advances:

Pledge

Hypothecation

Guarantee

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Indemnity

Charge

Advances against “ Stock Exchange Securities

Advances against immovable property “Mortgage”

\
Pledges
“The bailment of goods as security for the payment of the debt and the

performance of a promise is called pledge”

Pledge is the characteristic mode of taking goods as the security and the pledge

occurs when the goods or document of the title thereto or the securities are

delivered by the customer to his banker to be held as security for the repayment

of the advance.

In a pledge, the ownership remains with the pledger but the pledgee has

the exclusive possession of the property until the advances in repaid in full, while

in case of default the pledgee has the power of sale after giving due notice.

People with the safe custody of goods, when entrusted with the goods for the

specific purpose may not make the valid pledge.

Hypothecation:

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“A legal transaction where by goods may be made available as the

security for a debt without transferring either the property or the possession to

the ledger.”

When the property in goods is in charged as the security for a loan from

the bank but the ownership and the possession is left with the borrower, the

goods are said to be hypothecated. The essence of the hypothecation is that

neither the property in the goods nor the possession of them passes to the lender,

but the security is guaranteed by means of Letter of Hypothecation, which

usually provides for a banker’s charge of the hypothecated goods.

Guarantee
“A contract to perform the promise, or discharge the liability of the third

person in case of his default”

This is so when an application for the advances cannot offer any tangible

security, the banker may rely on the personal guarantees to protect himself

against loss and advances or overdraft to the applicant. Therefore a guarantee

may be either written or Oral. The Grantee is a promise by one person called

the guarantor or security to another for answering the present or future debt if a

second person called the “Principal Debtor”.

Indemnit

“A contract by which one party promises to save the other from loss

caused

43
 The Bank of Punjab
to him by the conduct of the promisor himself or by any other person is called

the contract of indemnity”

Thus in an indemnity, the promisor is the only person who becomes liable

to the promise if the latter suffers a loss on account of his doing something at the

express desire of the former.

Charg
When immovable property of one person is by act of parties, or operation

of law, made security for payment of money to another, and the transaction does

not amount to mortgage, the latter person is said to have the charge on the

property, and all the provisions herein before contained which apply to a simple

mortgage shall, so far as may be apply to such charge.”

This means that a charge is a right of payment out of certain property.

The charge can be created by the act of parties or by the operation of the law

and although the property is made a security the payment of loan, is still not he

mortgage.

Advances against Stock Exchange Securities:

44
 The Bank of Punjab
Stock Exchanges Securities is the vast term which covers all gilt edged

securities such as:

Federal and Provincial Government Bonds

Post trust or Municipal Bonds

Shares and debentures

Banker, as security for advances to the customer, frequently accepts these

securities. Advances can be against:

Preference Shares

Ordinary Shares

Preferred Shares

It can be

Quoted or Unquoted

Registered

Bearer

Inscribed

Advances against Immovable Property (Mortgage):

A mortgage is the transfer of and interest in specific immovable property for the

purpose of securing the payment of the money, advanced or to be advanced. By

way of loan, and existing debts or the performances of the engagement this may

rise the pecuniary liability.

45
 The Bank of Punjab
The transfer is called the ‘mortgager’ and the transferee the ‘mortgagee’ the

principal money and interest of which payment is secured for the time being and

instrument by which the transfer is effected, is called the letter of the mortgage

deed.

Availability of adequate flows of credit for industry and agriculture are a

sine qua non for the growth and development of an economy. This acquires

added importance when agriculture is the mainstay of the economy as also the

sector where the bulk of the poor are concentrated. Growth and productivity in

Pakistan's agriculture has slowed down in recent years and is, therefore, of

serious concern given its importance for the economic prosperity of the country.

Apart from various other weaknesses in the infrastructural support of the

agricultural sector, inadequacy and lack of efficacy of credit, flows to support

agriculture related activities has been a major constraining factor.

Agriculture is the largest sector of the economy. It contributes 25 percent

to GDP, provides raw materials to 80 percent of industry and employment to

over 50 percent of the population. This is a sector that has the

Shortest gestation period for investments and, therefore, a remarkable capacity

to bring about a turn around in the economy .This important sector in Pakistan

is

46
 The Bank of Punjab
suffering from a number of maladies and is consequently witnessing stagnation

in productivity.

Due to policy and administrative exigencies, the savings in the agriculture

sector remain low and, therefore, the sector has perpetually remained capital

starved. The pricing of input and output in agriculture over the

years has forced the majority of farmers in Pakistan to plough back their

incomes into agriculture and non-institutional credit, and has more often than

not served to sap their potential earnings. Needless to say, that shortage of

savings and lack of availability of capital is one of the major reasons for poverty

in the country. The agricultural and rural sectors in Pakistan in general and in

Punjab in particular are, therefore, suffering from severe under-development.

Under a desirable development model, Punjab can:

Increase agricultural production to meet the country's requirement of essential

foods items and industrial raw materials.

Develop agro-based industry in the rural sector for economic value addition;

Generate additional employment opportunities in rural as well as adjacent small

towns/cities;

Control massive migration to the urban centers that in turn is causing a number

of social, administrative (i.e. law and order) and economic problems for the

urban areas.

Elevate poverty and improve the income generating capacity of the agri-based

population.

Never

47
 The Bank of Punjab
before in the history of Pakistan, has the development of the agricultural and

food sectors been as critical as at this juncture and appropriate short and long

term measures are necessary for its revival, sustenance and stability. Supply of

credit by Financial Institutions for meeting the specific needs of agriculture and

rural sectors are essential components for improvement in both short and long-

term development of the country. This has assumed even greater importance in

the present situation of declining water availability. Per acre, production is

plummeting. The per acre yield of most of the crops is stagnant rather

diminishing. The most important factors responsible for this downward trend in

productivity are: -

FACTORS RESPONSIBLE FOR LOW YIELD PER ACRE:

                       *          Imbalanced fertilizer use

                       *          Lack, availability of certified and good quality seeds

                      *          Improper control of pests and weeds

SCARCITY AND INEFFICIENT USE OF WATER:

           * Natural and mechanical water resources.

NON-USE OF MECHANIZED FARMING PRACTICES:

LACK OF EDUCATION AND RESOURCES, MOTIVATION TO USE

ADVANCED TOOLS FOR AGRICULTURE:

HIGH COST, LOW OUT PUT, UNSKILLED LABOUR INTENSIVE

NON-AVAILABILITY OF CREDIT AND FINANCIAL ASSISTANCE TO

THE AGRICULTURE SECTOR

48
 The Bank of Punjab
The importance of availability of credit to the agriculture sector has always been

recognized by Government and given Top Priority. Specialized institutions have

been in place for a number of years. However, these

Institutions have failed to realize the full potential from the sector and at times

contributed to its further deterioration . It is therefore of paramount importance

that The Bank of Punjab through well thought out policies ensures that it does

not repeat the follies of the past. 

A number of institutions are in the field yearning to obtain results. We in

The Bank of Punjab will support the role of the Government in providing much

needed support to the agriculture sector but with a difference. The difference

being that instead of subsidizing the needs we will be active

participants in economically viable projects thereby safeguarding the

investments of the Bank.

A precondition to lending by the Bank will be an undertaking from the

customers/borrowers not to borrow from any other source whatsoever. This is

important to ensure against any multiple borrowing and more importantly to

restrain the borrower from falling into a debt trap.

The Bank of Punjab has been at the forefront in contributing to the

Agriculture Sector at a limited scale and has initiated schemes in harmony with

the State Bank of Pakistan approved/eligible programmes for the assistance/help

of the agriculture farmers.

49
 The Bank of Punjab
             Presently, the Bank is financing farmers in some specific areas only. The

State Bank of Pakistan has expanded the scope of its scheme and included a

number of items eligible for credit under Agri-finance Schemes.

            In terms of the importance, priority and current needs. We have short

listed the items from the State Bank of Pakistan's list provided under cover of its

Circular letter No. ACD/1044/1050/PD/P-08/2001 dated 26.04.2001.

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

          

  ►Farm Credit. And

  ►Non-Farm Credit 

Farm Credit is further bifurcated into:

Short-Term

Medium-Term

Long-Term Credit.

The priority items, which are recommended for inclusion in our schemes, are

given here under;

FARM CREDIT (SHORT

XISTING:    

(Kissan Dost Agriculture Finance Scheme) Product /purpose of Finance) Seeds,

Fertilizers, Pesticides, Herbicides, Weedicides, All types of labor and water

charges are already embodied in our package financing, i.e., 8000 Per Acres (no

change) 

50
 The Bank of Punjab
PROPOSED:

                        (Product /purpose of Finance)

1.         Orchard and Nursery      2.         Manual Sprayers

3.         Sericulture                      4.         Apiculture

Farm Credit (Medium & Long

EXISTING:                        Tractors

                       (Product/purpose of Finance)

PROPOSED:

                        (Product & Purpose of Finance)

                        Tube-Well

  Installation of Tube-Well, water management, equipment, modules &

culvert, lining of channels etc. Solar energy plants and pumps for irrigation,

equipment for sprinkle/trickle/drip irrigation system.

Mechanization Support:

                                             Agri-implements, Equipment, i.e. trailers and

thrashers, power tillers, power & boom sprayers, ploughs and cultivators,

ridggers / drills, rotavators, diggers, saw machines for crates making, press

machines for wheat straw and dry fodders. 

Farm Transport:                                           

51
 The Bank of Punjab
Lease finance for purchase of Motor Cycles and small Vans for

Milk and other agri products transportation to local market.

Islah-e-Arazi:

     Precision land leveling & reclamation, soil improvement, embankment, land

formation and land improvement, laser leveling etc.                 

Non-Farm Credit: (Livestock

  For the time being, we do not propose to extending Non-Farm Credit,

i.e. for big Dairy Farms, Poultry Farm but will accommodate existing borrowers

and established small individual farmers by financing livestock. (Goat, sheep,

cattle & fattening animals) on a limited scale to revive, accelerate and

supplement the income generating capacity of the small farmers.

52
The Bank of Punjab

53
 The Bank of Punjab

Years Deposits (Rs in Million)

2005 23767

2006 34938

2007 54724

2008 88465

2009 137728

Deposits of Bank of Punjab

137728

88465

Deposits (Rs. In Million) 54724

34938

23767 Series9
Series8
Series7
Series6
2009 Series5

2008

Year 2007

2006

2005 54
The Bank of Punjab

Years Advances (Rs in Million)

2005 6621

2006 18344

2007 39439

2008 63624

2009 101320

55
 The Bank of Punjab
Years Investment (Rs in Million)

2005 8295

2006 11458

2007 16198

2008 18026

2009 28233

BOP Investments

20000
18026
18000
16198
16000

14000

12000 11458

Values 10000
8295
8000
5970
6000

4000
2001 2002 2003 2004 2005
2000

0
5 6 7 8 9
Year 2005 2006 2007 2008 2009
Investments (Rs. Million) 8295 11458 16198 18026 28233

56
 The Bank of Punjab

Years Capital (Rs in Million)

2005 1795

2006 1823

2007 2180

2008 2940

2009 4537

Years Assets (Rs in Million)

2005 29533

2006 43621

2007 66320

2008 111154
57
2009 164855
 The Bank of Punjab

BOP Total Assets

120000
111154

100000

80000

66320

Values 60000

43620
40000
29525
24803
20000

2001 2002 2003 2004 2005

0
1 2 3 4 5
Year 2005 2006 2007 2008 2009
Total Assets (Rs. Million) 29533 43621 66320 111154 164855

58
The Bank of Punjab
Years Profit (Rs in Million)

2005 284

2006 689

2007 1368

2008 2353

2009 3804

BOP Profits

2500 3804

2005 2006 2007 2008 2009

2000

1500 2353

Values

1000
1368

500
284 689

0
Year Profit (Rs.Million)
Series1 2005 284
Series2 2006 689
Series3 2007 1368
Series4 2008 2353
Series5 2009 3804

Growth (Rs in
Years
Million)

2005 1290

2006 2684

2007 2832

59
 The Bank of Punjab
2008 6791

2009 6989

No of

Categories Share Shares Held Percentage

Holders

Directors/CEO/Spouse 4 11576 0.01

Provincial Govern 1 51781427 51.57

Foreign funds 50 3052275 3.04

Individuals 5659 14378263 14.32

60
 The Bank of Punjab
Insurance Companies 4 3453355 3.44

Financial Institutions 28 5881765 5.85

NBFI 103 16547565 16.48

Modaraba &

Modaraba 8 9279 0.01

Management Co

Others 28 5299821 5.28

TOTAL 5891 100415326 100

61
 The Bank of Punjab

Balance Sheet

as at December 31, 2009

Restated

62
 The Bank of Punjab
Note 2009 2008

Rupees in ‘000’

Assets

Cash and balances with treasury banks 14,054,859

8,787,387

Balances with other banks 3,722,089

9,367,595

Lendings to financial institutions 11,846,823

7,593,681

Investments 28,233,211 18,026,181

Advances 101,319,954 63,623,705

Operating fixed assets 2,068,744

1,715,061

Deferred tax assets - -

Other assets 3,609,457 2,040,568

164,855,137 111,154,178

Liabilities

Bills payable 856,448 478,001

Borrowings 6,989,424 6,791,007

Deposits and other accounts 137,727,606

8,465,051

Sub-ordinated loans _ _

Liabilities against assets subject to finance lease 40,988

55,403

63
 The Bank of Punjab
Deferred tax liabilities 298,616

220,177

Other liabilities 2,816,341

1,474,425

148,729,423 97,484,064

Net assets 16,125,714 13,670,114

Represented by

Share capital 2,902,490 2,349,719

Reserves 4,537,232

2,940,399

Unappropriated profit 3,219,246

1,486,755

10,658,968 6,776,873

Surplus on revaluation of assets 5,466,746

6,893,241

16,125,714 13,670,114

Rs. In Million

64
 The Bank of Punjab
For the Years 2009-2008 2008-2007

Rs Rs
%AGE %AGE
Assets (In Million) (In Million)

Cash and balances with treasury

5267472 60% 2964856 170%
banks

Balances with other banks 5645506 (60%) (25629) (1.3%)

Lendings to financial institutions

703666 15% 3865167 83%

Investments 849462 20.6% (372138) (9%)

Advances 2656898 21% 6432256 51%

Operating fixed assets

2324704 35% (1895847) (29%)

Deferred tax assets - - 25484 11%

Other assets 2912 7% (505) (1.12%)

Liabilities

Bills payable (184025) (33%) 61847 11%

Borrowings 4730148 23.7% 4616228 23%

Deposits and other accounts

Sub-ordinated loans - - 32065 6%

Liabilities against assets subject

(1219715) (12%) 2196943 21%
to finance lease

Net assets

117435 3914%

65
 The Bank of Punjab
Represented by 4732280 110% 2006325 47%

Share capital 3808140 21% 4405081 24%

Reserves

Reserves 82308 8% (52040) (5%)

Unappropriated Profit 1447 1064% (442) (32.5%)

Stock Holder Equity 27600 105% 211147 11.7%

Total Liabilities & Equity 3780540 19% 4616228 23%

Rs. In Million

For the Years 2007-2006 2006-2005

ASSETS

Cash and balances with Rs Rs

%AGE %AGE
treasury banks (In Million) (In Million)

Balances with other banks (538543) (31%) 275462 15.7%

Lendings to financial
(1613310) (82%) 103030 5.23%
institutions

Investments 1161000 25% (2894966) (62%)

Advances (6984) (.16%) 2039148 50%

Operating fixed assets

(997837) (8%) (477320) (3.8%)

Deferred

66
 The Bank of Punjab
tax assets 2875175 44% (1589964) (24%)

Other assets 17929 8% (2955) (1.2%)

Liabilities (31108) (69%) (11058) (24.6%)

Bills payable (13179) (4.7%) (14013) (5%)

Borrowings 192077 (100%)

Deposits and other accounts (80204) (14%) 406102 73%

Sub-ordinated loans 1976032 10% (1675195) (8.4%)

Liabilities against assets subject

to finance lease

Net assets (741898) (136%) 329069 60%

Represented by (10433355) (104%) 736126 7%

Share capital (67345) (241%) 39488 141%

Reserves 105776 25% 14854 3.5%

Reserves (11136822) (101%) 1119537 10%

Unappropriated Profit (3000) (100%)

Stock Holder Equity 9936479 232% 2818507 66%

Total Liabilities & Equity 1615164 10% (1698970) (9%)

For the Years 2009 2008 2007 2006 2005

Service Revenue

67
 The Bank of Punjab
Mark up/Interest,

Discount & Returned 2069555 2172956 1934794 2260770 2259608

Earned

Fee Commission &

60320 51937 61395 60637 58521
Brokerage

Dividend Income 189051 109804 161307 71258 46738

Other Operating Income 104581 58647 47300 25725 26150

Total Service Revenue 2423507 2393344 2204796 2425299 2391017

Less: Cost /Return on

996335 1113151 1083344 1510145 1755443
Deposit

Gross Income 1392644 1259790 999004 912797 635100

Less: Operating Expenses

Administrative Expenses 901041 837055 678675 722009 601368

Provision against non-

76076 39286 143059 81230 (123615)
performing advances

Provision for diminution

(23472) 0 0 0 27273
in value of investment

Bad Debts 1574 200 33 0 337

Total Operating
955219 876541 821767 803239 505363
Expenses

Operating Profit 437425 383249 177237 109558 129737

Other Income 43154 28480 21967 17269 7561

Other

68
 The Bank of Punjab
Charges 4664 1460 690 2088 1683

Profit Before Tax 431844 421275 319639 124739 135615

Less: Tax 147870 185030 162220 96500 12500

Profit After Tax 283979 236245 157419 28239 123115

Rs. In Million

For the Years 2009-2008 2008-2007

Rs Rs
Service Revenue %AGE %AGE
(In Million) (In Million)

Mark up/Interest, Discount &

(103401) (4%) 238162 10%
Returned Earned

Fee Commission & Brokerage 8383 15% (9458) (17%)

Dividend Income 79247 170% (51503) (110%)

Other Operating Income 45934 175% 11347 43.39%

Total Service Revenue 30163 1% 188548 8%

Less: Cost /Return on Deposit (116816) (7%) 29807 1.6%

Gross Income 132854 21% 260786 41%

Less: Operating Expenses

Administrative Expenses 63986 10.6% 158380 26%

Provision against non- 36790 30% (103773) (84%)

69
 The Bank of Punjab
performing advances

Provision for diminution in

(23472) (86%) 0 0%
value of investment

Bad Debts 1374 407.7% 167 49.5%

Total Operating Expenses 78678 15.5% 54774 11%

Operating Profit 54176 41.7% 206012 159%

Other Income 14674 194% 6513 86%

Other Charges 3204 190% 770 46%

Profit Before Tax 10569 8% 101636 75%

Less: Tax 37160 297% 22810 183%

Profit After Tax 47734 38.7% 78826 64%

Rs. In Million

For the Years 2007-2006 2006-2005

Rs Rs
Service Revenue %AGE %AGE
(In Million) (In Million)

Mark up/Interest, Discount &

(325976) (15%) 1162 1%
Returned Earned

Fee Commission & Brokerage 758 .71% 2116 3.61%

Dividend

70
 The Bank of Punjab
Income 90049 193% 24520 52%

Other Operating Income 21575 82.5% (425) (1.6%)

Total Service Revenue (220503) (9%) 34282 1.4%

Less: Cost /Return on Deposit (426801) (24%) (245298) (14%)

Gross Income 86207 13.6% 277697 43.7%

Less: Operating Expenses

Administrative Expenses (43334) (7%) 120641 20%

Provision against non-

61929 50% 204945 166%
performing advances

Provision for diminution in

0 (0%) (27273) (100%)
value of investment

Bad Debts 33 10% (337) (100%)

Total Operating Expenses 18528 3.6% 297976 59%

Operating Profit 67579 52% (20179) (15.5%)

Other Income 4598 61% 9708 128%

Other Charges (1398) (83%) 405 24%

Profit Before Tax 194900 143% (10976) (8%)

Less: Tax 65720 525% 84000 572%

Profit After Tax 129180 105% (94976) (77%)

Comparative Financial Statement

71
 The Bank of Punjab
Comparative financial statement present financial information for

the current period and one or more past periods. In comparative analysis the

statements predict about the movements and trends of the business with respect

to past years, whether there is increase in the business activities or decrease. It

may also help to comments about the future expectations of the ways in which

the financial and operating performance will go.

There are two type of comparative financial statement analysis.

Horizontal Analysis

Trend Percentage Analysis

Comparison of two or more years’ financial statement is called Horizontal

Analysis. It shows the changes between years both in rupee and percentages

form. So in this way it facilitates the analyst to predict about the ways if the

business in which it is going. It emphasis the proportional relationship between

the reporting periods, rather than with in the reporting period.

In this report I shall use this type of comparative+

e financial statement analysis to analyze the performance of The Bank of Punjab.

Trend percentages state the several years’ financial data in terms of a

base year. The base years equals to 100% with all other stated as some

percentage of this base year. In this way it predict good and easy way

72
 The Bank of Punjab
information about the business activities. By simple looking at these percentages

one can see the ways in which the business in going on whether the business is

making performance or not.

The results that I have perceived from the Comparative Analysis of

Balance Sheet and Profit & Loss Account of 2009-08.

From Balance Sheet

The current assets increased by 60%, this is mainly due to a higher increase in

Balance with other Banks i.e. 60%but cash is reduced which is not good for the

Short term solvency of the bank. Account receivable also increases as compared

to last year but other assets decrease i.e. 33%.

Total Assets are increased by 23.7%.

Fixed Assets are increased by 43%.

The increase in Balance with other banks by 139% is a good sign for the short-

term solvency of the bank.

The Account receivable is increased by 15% in this period.

As a whole total assets and total liabilities plus owner’s equity is increased by

19% which corresponds with the increase in service revenue.

From Profit and Loss Account

73
 The Bank of Punjab
The service revenue of the bank is increased by 1% than that of 2008, with the

decrease of –7% in the cost return on deposits. So service decreased less than

that of return on deposits.

This less decrease, service revenue than that of return on deposits results in an

increase of 21% of Gross profit.

The other income of the bank also increased in 2009 then that of in 2008. These

are increased by 194%.

As the service revenue increased, the administrative expenses also increased by

11%.

Overall profit after tax also increased by 39% in 2009 then that of 2008.

Comments on Comparative Analysis of 2007-2006

From Balance Sheet

The current assets increased by 51%, this is mainly due to a higher increase in

cash i.e. 170% but balance with other bank is reduce which is not good for the

Short term solvency of the bank. Account receivable also increases as compared

to last year.

Total Assets are increased by 23%.

Fixed Assets are increased by 8.2%.

The decrease in Balance with other banks by –1.3% is not good sign for the

short-term solvency of the bank.

The Account receivable is increased by 83% in this period.

74
 The Bank of Punjab
As a whole total assets and total liabilities plus owner’s equity is increased by

23% which corresponds with the increase in service revenue.

From Profit and Loss Account

The service revenue of the bank is increased by 8% than that of 2008

This less decrease, service revenue than that of return on deposits results in an

increase of 41% of Gross profit.

The other income of the bank also increased in 2009then that of in 2008. These

are increased by 86%.

As the service revenue increased, the administrative expenses also increased by

26%.

Overall profit after tax also increased by 64% 2009 then that of 2008.

Comments on Comparative Analysis of 2006-2005

The results that I have perceived from the Comparative Analysis of

Balance Sheet and Profit & Loss Account of 2006-2005.

From Balance Sheet

The current assets decreases by -8%, this is mainly due to a higher decrease in

Balance with other Banks i.e. -82% and cash is also reduced by -31%, which is

not good for the Short-term solvency of the bank. Account receivable increase as

compared to last year but other assets decrease i.e. 14%.

Total Assets are increased by 10%.

Fixed Assets are increased by 8%.

75
 The Bank of Punjab
The decrease in Balance with other banks by -82% is not a good sign for the

short-term solvency of the bank.

The Account receivable is increased by 25% in this period.

From Profit and Loss Account

The service revenue of the bank is decreased by -9% than that of 2007, with the

decrease of –15% Mark up interest on deposits. So service decreased less than

that of Mark-up Interest.

This less decrease, service revenue than that of mark-up on deposits results in an

increase of 14% of Gross profit.

The other income of the bank increased highly in 2008 then that of in 2007.

These are increased by 61%.

As the service revenue decreased, the administrative expenses also decreased by -

7%.

Overall profit after tax also increased by 105% in 2008 then that of 2007

Comments on Comparative Analysis of 2007-2006

The results that I have perceived from the Comparative Analysis of

Balance Sheet and Profit & Loss Account of 2007-2006.

From Balance Sheet

76
 The Bank of Punjab
The current assets decreases by –3.8%, this is mainly due to a higher decrease in

Account Receivable but increased in Balance with other Banks i.e. 5% and cash

is also increased by 15.7% which is good for the Short term solvency of the bank.

Total Assets are decreased by -8.4%.

Fixed Assets are also decreased by -1.2%.

The Account receivables are decreased by -62% in this period.

From Profit and Loss Account

The service revenue of the bank is increased by 1% than that of 2006, with the

decrease of –14% in the cost return on deposits. So service decreased less than

that of return on deposits.

This less decrease, service revenue than that of return on deposits results in an

increase of 43.7% of Gross profit.

The other income of the bank also increased in 2007 then that of in 2006. These

are increased by 128%.

As the service revenue increased, the administrative expenses also increased by

20%.

Overall profit after tax decreased by -77% in 2007 then that of 2006

77
 The Bank of Punjab
THE BANK OF PUNJAB

TREND PERCENTAGES

For the Years 2009/2005 2008/2005 2007/2005 2006/2005

ASSETS

CCURRENT ASSETS

Cash 161% 254% 84% 115%

Balance with other Banks 161% 21% 23% 105%

Account Receivable 161% 141% 62% 37%

Advances 160% 140% 149% 150%

TOTAL CURRENT ASSETS 161% 139% 88% 96%

LONG TERM INVESTMENT 126% 90% 119% 75%

Fixed Asset 166% 117% 106% 98%

Capital work in progress 11% 04% 05% 75%

TOTAL FIXED ASSETS 141% 98% 90% 94%

Deferred Tax Debt 00% 96% 100% 00%

OTHER ASSETS 136% 169% 158% 173%

TOTAL ASSETS 148% 124% 101% 91%

CURRENT LIABILITIES

Notes Payable 46% 30% 24% 160%

Accounts Payable 12% 25% 03% 107%

Accrued Liabilities 230% 67% 00% 241%

Other Liabilities 176% 165% 129% 103%

TOTAL CURRENT 21% 30% 08% 110%

78
 The Bank of Punjab
LIABILITIES

Deferred Liabilities 3914% 00% 00% 100%

Long Term Liabilities 556% 445% 398% 165%

TOTAL LIABILITIES 144% 13% 99% 90%

STOCK HOLDERS EQUITY

Share Capital 129% 126% 110% 110%

Reserves 133% 125% 130% 95%

Unappropriated Profit 1067% 3% 328% 165%

Stock Holder Equity 131% 133% 121% 101%

Total Liabilities & Equity 143% 124% 101% 91%

THE BANK OF PUNJAB

TREND PERCENTAGES

For the Years 2009/2005 2008/2005 2007/2005 2006/2005

Service Revenue

Mark up/Interest, Discount &

91% 96% 85% 100%
Returned Earned

Fee Commission & Brokerage 103% 88% 104% 103%

Dividend Income 404% 234% 345% 152%

Other Operating Income 399% 224% 180% 98%

Total

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 The Bank of Punjab
Service Revenue 101% 100% 92% 101%

Less: Cost /Return on Deposit 56% 63% 61% 86%

Gross Income 219% 198% 157% 143%

Less: Operating Expenses

Administrative Expenses 149% 139% 112% 120%

Provision against non-

61% 31% 115% 65%
performing advances

Provision for diminution in

(86%) 0% 0% 0%
value of investment

Bad Debts 467% 59% 9% 0%

Total Operating Expenses 189% 173% 162% 159%

Operating Profit 337% 295% 136% 84%

Other Income 570% 376% 290% 228%

Other Charges 277% 86% 40% 124%

Profit Before Tax 318% 310% 235% 91%

Less: Tax 1182% 1480% 1297% 772%

Profit After Tax 230% 191% 127% 22%

Graphically Presentation of trend Percentages

This table and graph shows the trend of Total current Assets, Total Fixed

Assets, and Total Assets during the years 1998-02

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 The Bank of Punjab
No of Years 2009 2008 2007 2006 2005

Total Current Assets 161% 139% 88% 96% 100%

Total Fixed Assets 141% 98% 90% 94% 100%

Total Assets 148% 124% 101% 91% 100%

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

and Net income.

No of Years 2009 2008 2007 2006 2005

Gross Income 219% 198% 157% 143% 100%

Profit before Tax 318% 310% 235% 91% 100%

Net Income 230% 191% 127% 22% 100%

2002 2001 2000 1999 1998

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 The Bank of Punjab

This table and graph shows the trend of current Liabilities, Deferred

Liabilities and Long Term Liabilities during the period 1998-02

No of Years 2009 2008 2007 2006 2005

Current Liabilities 21% 30% 08% 110% 100%

Long Term Liabilities 556% 445% 398% 165% 100%

Total Liabilities 144% 13% 99% 90% 100%

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 The Bank of Punjab

RATIO ANALYSIS

The relationship of one item to another expressed in simple mathematical

form is known as a ratio. A single ratio in itself is meaningless because it does not

furnish a complete picture. A ratio becomes meaning full when compared with

some standard. So we have taken ratios and percentage of the BOP based in its

record of the past financial and operating performance. On the following pages,

I make the analysis of the financial statements of BOP by using related items for

the last five years.

Profitability vs. Investment

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 The Bank of Punjab
Return on Assets Net profit after taxes / Total assets

Return on Deposits Net profit after taxes / Deposits

Return on Equity Net profit after taxes / Equity

No of Years 2009 2008 2007 2006 2005

Return on Assets .96% . 95% .70% . 15% . 61%

Return on Deposits 1.19% 1.24% .92% . 39% 2.8%

Return on Equity 12.01% 9.88% 7.2% 1.54% 6.7%

Remarks.

The return on assets shows a increasing trend, which is good sign for the

BOP. Return on deposits is also not stable; in starting years it increases and then

decreases and knows again increase. This is due to an increase in deposits and

less increase in profit. The ROE ratio of five years of BOP indicates that the

profitability of the bank with equity is increasing day by day. This looks to be

very positive sign.

Profitability Ratios.

Gross Profit Margin Gross profit / Income

Operating Profit Margin Operating profit / Income

Net Profit Margin Net profit / Income

No of Years 2009 2008 2007 2006 2005

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 The Bank of Punjab
Gross Profit Margin 57% 52% 45% 37% 27%

Operating Profit Margin 18% 16% 8% 5% 6%

Net Profit Margin 11% 9% 7% 1% 5%

Remarks.

The net profit margin of five years indicates that the income of the BOP

after paying its non-productive expenses is increasing year by year, which is a

very good sign for the bank. As I see the operating profit of the bank shows a

increasing trend in ratio. This shows that the earning capacity of the bank is

increasing year by year.

Earning Per Share

Profit after Tax / No of

Earning Per Share
Shares

No of Years 2009 2008 2007 2006 2005

Earning Per Share 2.83 2.41 1.85 .33 1.59

Comments

Earning of BOP shows the increasing trend. This shows that the earning

capacity of a single share is increasing and shareholders are earning increase

every year. This is very good sign for BOP. This ratio should be as high as

possible because it has a great importance for an investor to invest in the Bank of

Punjab.

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 The Bank of Punjab
Regulatory Ratios:

Advances to Deposits Ratio Advances / Deposits

Cash to deposits Ratio Cash / Deposits

No of Years 2009 2008 2007 2006 2005

Advances to Deposits Ratio 28% 30% 36% 36% 33%

Cash to deposits Ratio 12% 23% 9% 13% 42%

Remarks.

Advances to deposits ratio of The Bank of Punjab shows that the portion

of loan in total deposit of the bank is not stable, 1st three year from 2005 to 2009

increase then decrease. It means that the credit (advances) circulation of the

bank has fallen from 36% to 28% during the last five years, which is a not good

sign. And the cash to deposits ratio is also decrease from 42% to 12%.

Capital adequacy Ratios:

Equity to Asset Ratio Total Equity / Total Assets

Equity to Deposit Ratio Total Equity / Deposits

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 The Bank of Punjab
No of Years 2009 2008 2007 2007 2005

Equity to Asset Ratio 8% 10% 11% 10% 9%

Equity to Deposit Ratio 10% 13% 13% 12% 3%

Remarks.

This ratios is showing increasing trend, in 2009 it decreased. This means

that deposit of the banks are decreased in 2009 and assets are also decreased in

2009, which is not good for the Bank of Punjab.

Efficiency Ratios:

Deposits to total liabilities Ratio Deposits/Total Liabilities

Investment to Total Assets Ratio Investments / Total Assets

No of Years 2009 2008 2007 2006 2005

Deposits to total liabilities Ratio 91% 85% 95% 92% 94%

Investment to Total Assets Ratio 28% 24% 27% 27% 34%

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Topics Page No.

Strengths 92

Weaknesses 94

Opportunities 96

Threats 97

STRENGTHS

The major shares of BOP is owned by the Govt. of the Punjab, so it can develop

a good image & trust among it customers.

Stability of Bank is strength of any bank. The Bank of Punjab has stable growth

since its establishment.

The Bank provides the loan facility on sound basis that is very crucial for any

bank to recover the loan. The Bank of Punjab has conservative policy for

advances. So there are very less bad debts.

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 The Bank of Punjab
Personal selling has key role in banking service. The officers of the Bank of

Punjab go to the potential customers to develop the business. By the relationship

with customers, they achieve the deposit targets.

The promotion criteria of the bank are on the basis of the efficiency and passing

the diploma examination of Pakistan Institute of Bankers.

Entry in gains book if world record, rapid growth in expansion in short span of

time, 243 branches in Pakistan.

It is the policy of the management that requirements are made according to the

principles of merit. The bank to train them in gives the staff banking. The past

percentage of the candidates of Bank of Punjab is the highest among the entire

commercial every year.

People have trust in the Bank of Punjab because govt. of Punjab 52% shares of

the bank.

There is no union in the Bank of Punjab.

Working environment is good. Officers and managers work together as a team.

They are very cooperative with each other.

The bank has very good branch network in Punjab and now after scheduling the

bank is opening its more branches in other provinces.

Higher management is experienced.

The management style of the management is flexible.

Profit rate is high as comparative to other banks.

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 The Bank of Punjab

WEAKNESSES

The Bank of Punjab is centralized organization. The authority is not given to the

branch level. Managers have to take permission from the Regional office or

Head office for credit. Manager had to get permission if they have to given more

rate of profit to the customers. So the customers have to wait for days, which

may cause the change of customers. Managers cannot negotiate with customers

without the permission of head office.

The Bank of Punjab has less modern technology. Only few branches are

computerized. Due to lack of modern technology, the bank’s services are low and

foreign banks have large market share. In this era modern technology is very

necessary for competitions.

Salaries of the officers are less as compared to other private banks.

The Bank of Punjab has very less promotional activities. Their advertising

campaign is very low. They only use personal selling.

The Bank of Punjab has very less staff in the branches of South Punjab as

compared to Upper Punjab. This creates the problem employees have to spent

most of their time in the bank to complete even their daily routine work. They

have to sit till 7:00 to 8:00 PM before going back to their homes. For this reason

their normal life is disturbing which create the irritation in the behavior of

employees.

The bank’s expenses are increasing at very high rate.

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 The Bank of Punjab
The Bank of Punjab has less interest in foreign exchanges. And BOP has less

number of expert officers in the foreign exchange business.

Mostly small branches are going in loss.

The Bank of Punjab has only six regional office in whole Pakistan. It is very

difficult to control all branches in one region.

The Bank of Punjab is deviating from the basic banking principles, because the

basic function of bank is to accept the deposit and advance loans. But analysis of

financial statement of BOP shows that advances are less as compared to

investment.

BOP is not taking keen interest in the marketing of traveler cheque than others

bank. BOP is loosing its share due to the less interest.

OPPORTUNITIES

Although commercial banks have launched many products but a gap exist

between the customer’s want and what the banks are providing. This is an

opportunity for the Bank of Punjab to move in and fill the gap between the ideal

bank and the current service offerings by aggressive advertising, consumer

friendly attitude products and service for attracting customers.

The Bank has opportunity to expand the branch network all over the country,

and it would be able to develop business and can start many other schemes for

investment.

The Bank has opportunity to use latest technology for providing good services to

customers.

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 The Bank of Punjab
There is an opportunity for more businesses if the BOP opens its branches in

foreign countries.

There is an opportunity for more businesses if the BOP offered credit cards.

Different multinational are establishing their businesses in Pakistan. So there is a

lot of potential for future businesses.

THREATS

The salaries of the officers of the Bank of Punjab are less as compared to other

private banks. It may cause transfer of the experts from the Bank of Punjab to

other banks.

Expansion of newly establishment banks like Picic Bank, Union Bank, Al-Falah

Bank, Askari Commercial Bank etc. and their better performance may cause

loss of the marker share of the BOP. According to the World Bank report, the

Pakistan has become an “over banked” economy. With the cutthroat competition

for deposits in the industry, the battle is on for the market share. The concept of

24 hours banking, Telephone and On-Line Banking, Automatic Teller Machine

(ATM), and credit card are a direct result of the intense competition. But the

BOP is far behind the above –mentioned services and will not provide better

services as compared to other banks; it will lose its market share.

The Bank of Punjab is also forced to give loans on potential basis. Due to this the

recovery of such loans may become very difficult.

Promotional activities of the BOP are nor sufficient. Due to this it may lose

market share.

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 The Bank of Punjab

In the light of the Knowledge obtained during internship and studying the

organization, the following recommendations may prove to be successful to the

bank.

In order to capture a considerable share in the banking sector of the country, the

prime objective should be awareness in the general public. For this it should

launch a well-planned advertising campaign in the general public.

Physical facilities in a bank also play their role in enhancing its grade and sound

image. The bank should keep these facilities like furniture, parking facilities for

the customer.

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 The Bank of Punjab
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.

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.A’s, C.A’s A.C.M.A’s at the time of

recruitment and selection.

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 The Bank of Punjab
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

The Bank of Punjab is contributing a lot towards the industrial

development and capital formation in the country. As it is exhibit from the data

regarding the bank’s financial performance as shows in the financial

performance as shows in the financial analysis, that bank is sharing major

banking business of the country. Further more the policies and schemes as are

introduced and carried on by the bank are of great source of help in its trading

and non-trading growth.

They

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 The Bank of Punjab
facilitate trade both inside and outside the country. The Bank if Punjab has

endeavored to remain in the forefront of modern financial institutions and has

consistently shows tremendous growth in all area of its activity. However after

scheduling, due to its emphasis on consolidation and controlled lending, the

growth of profit has somewhat declined. But the ban’s performances are in line

with its set goals.

The policies of the bank are uniform and going very smoothly. The

employees are given all the possible facilities and generous 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.

INTRODUCTION OF THE BRANCH

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 The Bank of Punjab
Chishtian is historical city of south Punjab, Branch of BOP is situated at the
highway road of Chishtian. The team of branch in the supervision of an
energetic, highly qualified person Mr. Javeed is an excellent and very nice
combination of an experienced persons and manager of branch. (Mr. Atiq,
and young and energetic (Mr. Faisel, Miss Ayesha Saddique), all are
hardworking, motivated, professional and committed with their duties. They
are working strictly with the core values of the Bank of Punjab and have been
appreciate. Chishtian is famous about its cotton growing. There is lot of
cotton ginning factories in the surrounding areas of Chishtian city, there is
also Adam Sugar Mills and Gulestan Textile Mills; the backbone of southern
Punjab economy. There is also lot of shopping bazaars and plazas like
bazaar, Noor bazaar, Nya Bazar etc.

BOP main branch is dealing in cash departement’ General banking’ Bills’

Remittance.

LINE UP of the BRANCH

 Mr. Javeed Officer Grade-I Manager

 Mr. Atiq Officer Grade-! Manager
OPNS
 Mr. Faisel Officer Grade-III
 Mr. Ayesha Officer Grade-III
 Mr. Mumtaz Cash Officer
 Mr. Ashfaq Cashier
 Mr. Muhammad Yassen Gunman
 Mr. Shah Imtiaz Muhammad Gunman

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