Internship Report
On The
Bank of Punjab

Supervised by: Dr. Ghulam Abbas

Submitted by: Muhammad Farhan Ahmad

Student of BBA (Hons)

BBA-023R13-135

Session 2013-2017

Specialization: Finance

DEPARTMENT OF BUSINESS ADMINISTRATION

INSTITUTE OF SOUTHERN PUNJAB, MULTAN

ACKNOWLEDGEMENT

I am thankful to Almighty Allah who enables me to accomplish this task with due care.

I also want to pay tribute to my worthy teachers who are the main source of enlighten to our mind. I am thankful to them as they prepared us for looking at the matters of life widely with open minds. This report is one of the sources of giving us knowledge about “The Bank of Punjab, Hussain Agahi Branch Multan”

I am also thankful to ISP who provides us a platform to polish our skill and provide a quality of education in our door step.

I must mention our dear respondents for their co-operation because without their co-operation it was not possible for me to complete this report. The completion of this report project is a result of hard wok

DEDICATION

I dedicate this report to my parents without whose help and encouragement it would not have been possible for me to accomplish this task within the specific time limit I was provided with every facility by my parent which were necessary in order to complete this challenging assignment.

DECLARATION

I declare that this report is constructed on my own efforts, whatever I had learned during my internship period from Hussain Agahi Branch Multan. I agree that I had not copied this material from any external sources. All the data which is included in this report is gathered from my personal visit during internship session.

Sobia Tabassum

Student of BBA (Hons)

BBA-023R13-135

Session: 2013-2017

Specialization: Finance

APPROVAL CERTIFICATE

The board of examiners approved internship report and recommend to award the degree of BBA (Hons) in Finance as the student has successfully defended viva voice.

External Examiner .........................................

Internal Examiner .........................................

Dean/Chairman ..........................................

Date of Viva ..........................................

Abstract

The Bank of Punjab has been working vigorously to meet the challenges to provide the maximum facilities to its customer in the whole country. A measure of this understanding is progressive measure such as expanding network of BOP branches. BOP has gained a prestige & possesses quite good history behind it being a leading bank in

Pakistan

. This bank has been very good in terms of providing excellent services in

Pakistan

when need arose. The purpose of studying the organization is to have practical demonstration over business principles especially the financing system. The real objectives of studying the organization are based on following facts;

Chapter 1: Overview of the Organization

1.1 History

1.2 Authorized Capital:

1.3 Paid up Capital:

1.4 Nature of the Organization

1.5 Business Volume

1.6 Number of Employees

1.7 Vision

1.8 Mission

1.9 Competitors

Chapter 2: Organizational Structure

2.1 Organizational Structure at Head Office Level

2.1.1 Board of Directors

2.1.2 Executive Board

2.1.3 Chief Executive

2.1.4 Divisional Chiefs

2.1.5 Provisional Chiefs

2.1.6 Circle Executive

2.1.7 Zonal Heads

2.1.8 Branch Managers

2.2. Various Departments at Branch

2.2.1 Cash Department

2.2.2 Clearing Department

2.2.3 Bills Department

2.2.4 Information Technology Department

2.3 Retail Banking Department

2.4 Foreign Exchange Department

2.4.1 Letter of Credit

2.4.2 Information in LC document

2.4.3 Parties involved in a letter of credit

2.5 Advance Department

2.5.1 Types of Advances

2.6 Treasury Product & Services

2.7 Agency Services

Chapter 3: Structure of the Finance Department

3.1 Number of Employees working in the Finance Department

3.2 Finance & Accounting Operations

3.2.1 Accounting Operations

3.2.2 Functions of Accounts Department

3.3 Accounting System of the Organization

3.3.1 Report Preparation

3.3.2 Daily Reports:

3.3.3 Reconciliations

3.3.4 Vouchers

3.4 Finance System of the Organization

3.4.1 Report of Financial Statements

3.4.2 Comparative Statement of Financial Conditions

3.4.3 Use of Electronic Data In Decision Making

3.5 Sources of Funds

3.6 Generation of Funds

3.7 Critical Analysis of the Theoretical Concept Relating to Practical Experiences

Chapter 4: Analysis

4.1 Financial Analysis:

4.2 Financial Statements:

4.3 Balance Sheet

4.4 Income Statement

4.5 The Objectives of Financial Statement Analysis:

4.6 Caution About Ratio Analysis

4.7 Financial Analysis

4.8 Ratio Analysis

4.8.1 Ratios to Determine Strength & Weaknesses

4.9 Horizontal Analysis

4.9.1 Analysis of Balance Sheet

4.9.2 Analysis of Income Statement

4.10 Vertical Analysis

4.10.1 Vertical Financial Statement Analysis

4.10.2 Vertical Analysis of Balance Sheet

4.10.3 Vertical Analysis (Income Statement)

4.11 Findings on the Basis of Financial Analysis

4.12 SWOT Analysis

4.12.1 Strengths

4.12.2 Weaknesses

4.12.3 Opportunities

4.12.4 Threats

4.13 PEST Analysis

4.13.1 Political Factors

4.13.2 Economic Factors

4.13.3 Socio Cultural Factors

4.13.4 Technological Factors

Chapter 5: Conclusions & Recommendations

5.1 Conclusions

5.2 Recommendations

References

Chapter 1 :

Overview of the Organization

The Bank of Punjab was established in 1989, in pursuance of The Bank of Punjab Act 1989 and was given the status of scheduled bank in 1994.The Bank of Punjab started functioning on November 15, 1989. It was established under the provision of section 28 of the Federal list included in the 4^th scheduled of the constitution of the Islamic Republic of Pakistan 1973.

Some Key Information about the BOP

Date Established 1989

President Mr. Naeem Uddin Khan

Representative Office Tehran

Associated Company Oman United Exchange Company, Muscat

Offshore Banking Unit Export Processing Zone, EPZ Branch, Karachi,

Pakistan

Head Office 7-Egerton Road, Lahore (Pakistan) Tel :( 042)9201121 Fax

1.1 History:

The Bank was established under an act of the Punjab Assembly viz. The Bank of Punjab Act, 1989. The bill to this effect was passed by Provisional Assembly on July 3, 1989 and assented to by Governor Punjab in accordance with the provision of the constitution on July 26. 1989. This act provided for the foundation for which the structure of Bank was erected. It also included and provided for various modalities concerning the structure, the organization and the scope of the Bank laying down the objectives, share capital and principles of lending.

The entire responsibility of policy formulation and management has been placed, under the act, with the Board of Directors. The Board is headed by the Chairman / Managing Directors appointed by the Govt. that runs the affairs of the Bank as per guidelines provided by the Board.

The Board of Directors fully participates in policy formulation of the Bank and meets every third month for this purpose. To deal with day-to-day operational matters, Board constituted a Managing Committee comprising of six of its members, including the Managing directors and five other Directors who meet at least once every month.

1.2 Authorized Capital:

At the time of establishment in 1989 the authorized capital was Rs.200, 000,000 divided into 20,000,000 shares of Rs. 10 each.

1.3 Paid Up Capital:

Paid up capital were Rs. 851,880,000 divided into 851, 88000 shares of Rs.10 each.

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.

1.4 Nature Of The Organization

The Bank of Punjab is one of the largest commercial bank in the country. The nature of the organization is to be customer focused bank with service excellence. The Bank of Punjab exceed the expectation of stakeholders by leveraging relationship with the Government of Punjab and delivering a complete range of professional solution with a focused on program driven products and services in the agriculture and middle through a motivated team.

A Bank, like the society it serves should be dynamic as banking is about people customers with their needs and opportunities and staff with skills, experience and resources. The Bank of Punjab has shown dynamism since its inception. There have been many changes in the structure, functions and the services provided. These changes reflect the changing requirements of our developing economy as a whole and those of Industry, Commerce and private Individuals.

1.5 Business Volume

As for as business volume of the firm is concerned, the financial analysis of balance sheet and profit & loss statement of last five years reflects a progressive business volume given under:

Rs in ‘000
	2011	2012	2013	2014	2015
Deposits	138,859,857	158,263,495	185,071,502	230,256,627	289,226,299
Advances	87,043,273	72,808,106	100,170,415	146,249,184	204,810,470
Investments	31,516,328	69,244,328	56,516,760	54,953,728	63,026,944
Total Assets	173,722,465	183,003,466	216,924,418	272,612,663	347,048,951
Total liabilities	163,397,575	171,931,749	203,040,045	255,248,632	325,380,681
Total Equity	10,324,890	11,071,717	13,884,373	17,364,031	21,668,270
Total Income	5,843,644	7,172,629	11,600,023	11,907,345	19,125,944
Profit After Taxation	(190,570)	914,555	2,635,618	3,701,544	5,949,032

Source: Annual reports of BOP

The business volume of the firm since inception to 2011 can be analyzed by the graph 1 which shows that the Total income & Profit after taxation for the last five years in (Annexure “A”). It highlights that the Income & Profit of the firm is increasing gradually, indicating business growth expansion every year.

1.6 Number of Employees

The number of employees working in BOP is Eight Thousand two hundred and fifty four (8254) as on June 2011. The staff is quite efficient and qualified in its respective field. Most of them are professional degree holders.

Headquarters Pakistan

Industry Banking

Type Public Company

Status Operating

2013 Revenue $242,000,000

Founded 1989

Website http://www.bop.com.pk

President 01

SEVP 06

EVP 13

SVP 36

VP 73

AVP 248

OG-1 906

OG-11 2232

OG-111 4739

1.7 Mission Statement

To exceed the expectation of our stakeholders by leveraging our relationship with the Government of Punjab and delivering a complete range of professional solutions with the focus on programme driven products and services in the Agriculture and Middle Tier Markets through a motivated team.

1.8 Vision Statement

To be customer focused bank with service excellence service excellence.

1.9 Competitors

· Allied Bank Limited.

· Bank Al-Habib Limited.

· Habib Bank Limited

· United Bank Limited.

Chapter 2 :

Organizational Structure

The organizational structure of the organization is conventional. In the organizational structure of domestic operations of the bank was reformed and decentralized on the basis of provinces.

As a result provincial headquarters were established at Karachi, Lahore, Rawalpindi and Faisalabad in order to meet the needs of sanctioning loans and other facilities to the trade, industry and agriculture of each province.

2.1 Organizational Structure At Head Office Level

2.1.1 Board of Directors

In the management of the banks, the board of directors is at the top of the controlling body. Since there are no private share holders now, so there is no general meeting of the share holders and no elected directors. The BOD consists of a nominated President, a Secretary, and 9 other members. The board has limited administrative powers because after the Nationalization Act 1974, most of powers are transferred to the Banking Council and Executive Board.

2.1.2 Executive Board

The general direction and supervision of the affairs of commercial banks lies in their respective Executive Boards. An EB also consists of a President, a Secretary, and 9 other members, appointed by the Federal Government.

2.1.3 Chief Executive

The President of the Executive Board is the Chief Executive. He is the administrative head of a bank and presides over the meetings of Executive Board.

2.1.4 Divisional Chiefs

In order to improve the management and operation of a bank, it has been split up into a numbers of divisions. Each division of a bank is placed under the supervision and control of Divisional Chief (also called the Senior Executive Vice President or Executive Vice President)

2.1.5 Provisional Chiefs

In order to improve the performance of banking system, each bank has a Provisional Chief. PC has the powers for sanctioning finance and other credit facilities. Each headquarter is situated in each province e.g. in Lahore, Peshawar, Quetta, and Karachi.

2.1.6 Circle Executive

Each commercial bank has a number of circles placed directly under the control and supervision of Chief Executive.

2.1.7 Zonal Heads

Each circle is divided into a number of zones. These zones are administered by Zonal Heads who hold the posts of Vice President or Assistant Vice President.

2.1.8 Branch Managers

Each zone of commercial bank is divided into several branches. The control and supervision of each branch is mostly entrusted to Assistant Vice President or Officer G-II.

The Bank of Punjab is one of the largest commercial bank. Organizational structure of BOP is comprised of different departments which are following and the Organogram of BOP at head office level is shown in the ANNEXURE “B” and at branch level is shown in the ANNEXURE “C”

Board of Directors

Board of Directors governs the Bank’s Affairs, which currently consists of President and Chief Executive Officer and seven Directors. The CEO has an overall responsibility for the strategic direction, government relations and to manage the portfolio of business and its functions.

2.2. Various Departments at Branch

2.2.1 Cash Department

This is sensitive department of the branch. No other person is allowed to enter in the premises of cash department. As obvious from name that this department deals in cash deposits and payments. Cash department is performing its functions/duties manually. For payments and receipts, it has to maintain certain sheets, books of accounts and various ledgers, which are as under:

Ø Cash received voucher sheet

Ø Cash paid voucher sheet

Ø Token register

Ø Transaction ledger

Ø Pay-In-Slip record

Ø Cheque book record

Ø Cash balance book

2.2.2 Clearing Department

This department welcomes the cheques and other negotiable instruments drawn upon local branches of other banks. State Bank of

Pakistan

has a clearinghouse, in which the bank representative brings cheques and other Institutions and mutual claims of each bank on other are off set and a settlement is made by the payments. Clearing system is helpful for both the customers and bank in saving of time, labor and currency involvement.

2.2.3 Bills Department

This department basically deals in bills, which come in bank for collection. The bills are cheques, call deposit, drafts and pay order. These bills are from outstation branches of The Bank of Punjab or of other banks. This department provides services to customers at low charges to get their amounts from the nearest branch.

Head Of Bills

There are two main heads of the bills i.e.

· Outward Bills For Collection (OBC)

· Inward Bill For Collection (IBC)

2.2.4 Information Technology Department

The IT department is responsible for the smooth functioning of the Software system used by the Bank. The software being used by BOP is termed as BS i.e. Banking System. The network used by the BOP is LAN (Local area network) while other branches are also using WAN (wide area network). The software used by the BOP is “SPARC”. If we get a detailed overview of the functional responsibilities of the IT department the following areas are covered:

· General, Application, and Administrative control.

· End of day/Month/Half year/Year reports.

· Error Reporting.

· Program Update.

· BS testing.

· BS release update.

· User PC backup.

· BS user setup.

· E-Mail user setup.

· Anti-Virus Installation and Up-Date.

· Communication link to branches.

2.3 Retail Banking Department

Retail banking involves small level banking. Retail banking is the ministry of the Punjab and thus the key to the bank of Punjab’s success. The bank of the Punjab is around the corner no matter where you are.

In addition, the bank of Punjab brings you a wide range of unique products & services designed to provide you convenience and satisfaction.

Retail banking includes different kinds of service to customer in different departments, which are as follow:

· Foreign exchange department

· Advance department

· Deposit department

· Cash department

· Accounts department

· Clearing department

· Bills and remittances department

2.4 Foreign Exchange Department

The main function of foreign exchange department in The Bank of Punjab is to facilitate the imports and exports by opening up of letter of credit. Foreign exchange department also deals in the foreign currency.

The bank provides two types facilities regarding letter of credit to its customers.

· Fund based

· Non-fund based.

The bank charge nominal commission on financing the import and export shipment.

The main benefits for its opening are:

· Increased balances.

· Commission.

· New business opportunities.

2.4.1 Letter of Credit

A letter of credit is defined as under

“Undertaking by the importer’s bank to exporter that the draw in accordance with terms and conditions of the credit, will be honored if presented with in the validity of the credit.”

It is a conditional undertaking by the Bank to make payment to the exporter if he fulfills the terms of credit by presenting the required documents to the bank in his country. In fact LC is a legal document on behalf on which the payment made by the importer’s bank to the exporter’s bank.

National Bank of Pakistan is providing this service to its customers who have an account with the branch and other businessmen too. This facility has been recognized as a modern banking activity of all commercial banks that are included in the list of 6000 Banks internationally.

2.4.2 Information in LC document

· The name of the local company, which is importing the goods

· The name of foreign company, which is exporting the goods

· The details of the goods to be transacted including the amount, quality, mode of packing etc.

· The total amount of the LC

· The number of days for which the LC is valid

· The name of the banks, who are regulating all these dealings

· The name of the carrier which will be used for the shipment of the goods to the importer

· The bill of shipment number

2.4.3 Parties involved in a letter of credit

There are normally six parties involved in a letter of credit:

Ø Buyer (known as the importer or consignee)

Ø Buyer’s Bank (known as opening, or paying bank)

Ø Seller (known as the exporter, or beneficiary)

Ø Seller’s bank (known as advising, confirming, negotiating bank)

Ø Carrier (known as the shipping company)

Ø Insurance Company

2.5 ADVANCE DEPARTMENT

“The function of advances department of BOP is to lend money in the form of clean advances”. Against promissory notes, as well as secured advances against tangible and marketable securities. The bankers prefer securities, which are free of risk of depreciation. Advances to a variety of customers are the sure method of enhancing income and promoting expansion of a Bank.

2.5.1 Types of Advances

Different types of Advances, which are currently being provided and offered by BOP, are as follows:

1. Cash Finance

2. Running Finance

3. Demand Finance

4. Small Finance

5. Agriculture Finance

6. Housing Finance

7. Lease Finance

· Cash Finance

It is seasonal finance and is related to trade. It is type of sale transaction at price set up by mutual consultation of bank and the client, e.g. a client applies for grant of Rs. 1000/- for purchasing price of wheat, the bank will purchase at a price of Rs. 1000/- and will keep it in its own go down. Client or party also bears all other expenses of freight, insurance; rent of go down, etc. we can also say that it is the pledge of goods in go down under lock and key.

It may be allowed within discretionary powers of the branch managers to first class parties keeping in view their credit worthiness, overall business and average balance maintained in their account. It is usually made against securities of commodities hypothecated or pledged by the bank.

· Running Finance

RF is normally advanced to small businessmen and the small income people for their day-to-day business requirements. This loan is granted against mortgage of immovable property and hypothecation of stocks in trade. The account of this finance is opened like current account and the Cheque book is issued to the client.

The loan is disbursed normally for one year with the provision of renewal at the time of expiry of one year.

· Demand Finance

It is a very wide term so it is called long term financing. Demand finance is granted for purchase of fixed assets e.g. plants, machinery and building etc. It is a mutual arrangement of sales transaction between the Bank and the client.

BOP deals and provides demand finance to its customers. The recent demand finance scheme announced by BOP is Aasaish loan. People can take the electronic products through bank without any mark-up.

· Small Finance

These are the loans, which are sanctioned for small size projects. The loan may be “call loans” or “loans payable at short notice”. These are the loans repayable which bear no maturity date. They can be paid at any time other assets normally secure these loans.

These are widely used in the financing of seasonal increase in the working capital and the temporary financing of capital expenditure these loans are obtained by manufacturing concerns to meet the financing of working capital expenditures.

· Agriculture Finance

The essence of the scheme was to overcome the traditional difficulties being faced by small farmers in availing credit from the financial institutions and banks.

· Purpose

All loans given to meet short-term agriculture production requirements of the farmers.

Agriculture finance would be treated as:

ü Seed

ü Fertilizer

ü Pesticides

Maximum finance limit

All the finances are given on merit for each case after assessing the genuine requirements of the farmers for agro inputs based on their existing and future cropping plan of their lands at an approximate rate as per following standard.

Per acre 4,000/- app but not exceeding than 50,000/- crop year.

80% of value of agriculture land of the farmer as per his agriculture pass book, which were is less.

Mode of finance

The selected farmers who qualify for the scheme and are approved for the purpose of finance will be given a special Cheque book of Kissan Dost Account along with a letter for the maximum amount he can withdraw from his account

Mode of finance

Mark-up

All finances will be allowed at commercial mark-up rate of financing i.e. 0.49 paisas per 1,000/- per day.

Loan approving authority

Regional Chief approves the finance with the help of Branch Manager

· Housing Finance

Bank launches housing schemes titled BOP house loan for all segments of society particularly low and middle classes. SBP has amended its policy on housing finance to facilitate banks in developing and marketing their housing finance products.

BOP house loan is a long-term finance facility for purchase of house or construction of house on self-owned plot or for renovation / home improvement.

· Lease Finance

The Bank of Punjab also provides finance on leasing basis. Some down payment is required at initial stage and then remaining amount can be paid in installments. This facility is especially for salaried and middle income people.

BOP has recently announced a car loan facility against lease finance.

BOP car loan

In order to equip a field force with new products of financing for credit expansion and in the line with the policy of SBP for consumer financing, BOP is launching car loan scheme. This scheme will also overcome the competition of other banks and will also meet the growing demands of our customers / general public.

2.6 Treasury Product & Services

Punjab Bank prides itself on being of first choice for exporters wanting to encase their export proceed. BOP offers the best rates in the market, and cut down our own spread in order to offer competitive rates for imports also. Bop is the largest treasury in

Pakistan

in terms of PKR / $ volume. They are the lead providers of foreign exchange in

Pakistan

The Bank of Punjab Treasury marketing unit is ready to quote very competitive rates for the following products:

ü Bill discounting

Sale & purchase of Government Treasury Bills and Pakistan Investment Bonds.

2.7 Agency Services

BOP provides following agency services to its customers:

Collection and payment of Cheques
Collection of dividend
Purchase and sale of securities and shares
Execution of standing orders
Acting as trustee or executor
Make transfer of funds

General Utility Services

BOP performs general utility services as follows:

Foreign exchange business
Locker facility
Debit card
Act as referee
Accepting of bills for collection
Issuer of travelers Cheques
Supplier of trade information
Safe custody of valuables
ATM

Chapter 3 :

Structure of the Finance Department

The Finance department of BOP is headed by Group Chief Financial Officer who is responsible for finance functions of the organization. The organogram of the finance department is shown in the ANNEXURE “D”.

The reporting line of Finance Department is included as the there is CFO at the top of management level of Finance Department. All the activates of finance are controlled and manage by him. Then is a VP of finance section.

3.1 Number of Employees Working in the Finance Department

Number of employees working in the finance department of BOP is eighty (80).

Group Chief Financial Officer 1

Country Head 1

Regional Manager 9

Assistant Manager 19

OG-111 38

Operational Staff 22

3.2 Finance & Accounting Operations

Finance is the art and science of managing money. The primary responsibility of finance division is to provide reliable, consistent and timely information to management, shareholders, regulators and internal business groups to help them take appropriate decisions for improved performance of the bank.

The vision of Finance Department -- a highly automated and fully integrated Bank, that is customer centric and capable of meeting all external and internal customer expectations.

3.2.1 Accounting Operations

It is said that accounts department is the backbone of the bank. It plays a vital role in performing different banking functions. The accounts department of BOP is performing its function computerized. The working in accounts department mainly depends upon voucher system.

For each and every transaction-taking place in the bank vouchers are prepared and through these voucher contra entries are passed under different heads. Accounts department controls the expenses and their right allocation of such expenses to the right and appropriate accounts. There are two types of vouchers prepared for this purpose, which are

· Petty voucher

· Adjustment voucher

3.2.2 Functions of Accounts Department

Following functions cover the working of the Accounts Department:

· Accounts – Vouchers for Expenses/Billing.

· Treasury – Foreign Currency dealings, cash & funds management

· HRD (Human Resource Department) – Employee salaries/Loans/Provident fund.

· Financial Control Unit – SBP (State Bank Of Pakistan) cheques.

· Reconciliation Control Unit.

· ATM – Automated Teller Machine.

· Tax deduction and collection.

· General services department.

· Reporting (daily, weekly, monthly, quarterly, half-yearly, annually)

· Maintain and update the ledgers for term deposits

· Update general ledger

· Prepare & printout different period statements

· To maintain record of accounts according to accounting principles.

· To maintain inventory records.

· Preparation of comparative statement.

· Preparation of cash forecast.

· Funds management.

· Analysis of Accounts.

· Implement effective budgetary controls, and analysis of their variances.

· Checking, verifying, examining and scheduling the invoices of work done as per term and condition.

· Responsible for Budget Preparation, cash flow, financial statement, local and foreign payments.

· Preparation of reports for lenders.

§ Dealing with customers regarding all payments matters in local currency as well as foreign currency and keeping records of loans.

3.3 Accounting System of the Organization :

BOP is following the “BOP entry system” of accounting. This system is helpful in maintaining the proper books of accounts according to prudential accounting system. It segregates the entries according to their proper allocated account heads.

The accounts department of BOP is performing its function computerized. Different books of accounts relating with other departments are maintained here through computer software. With the help of these books of accounts, accountant prepares daily, weekly, monthly, quarterly, semi-annually and yearly financial statements.

3.3.1 Report Preparation

The accounts department has to prepare the report for the internal control as well as for the financial reporting purpose. For this reason there are many different types of reports prepared by the accounts department. These reports vary from each other depending upon the information reported and the period for which these reports are prepared. These reports are prepared by using the general Ledger that is updated by the system during the EOD (end of day) process. Some of the reports are as follows:

3.3.2 Daily Reports:

· Daily Position: This report summarizes the daily position of all the main heads of the bank i.e. different deposits, TDR/NDR, cash etc

· Balance Sheet: This report also summarizes the balance sheet heads of the bank up to the last working day. (The format is attached in the annexure).

· Summary Sheet: This report is sent to the reconciliation unit. It summarize the all the head that have been credited to the Central Branch Control (CBC) Account. It is prepared on branch wise basis.

· Reconciliation Reports: This is prepared in order to reconcile any outstanding and exceptional entry reported by the other branches through the reconciliation unit made by any of the functional department of the bank.

· Treasury Reporting: This report summarizes the exchange deals made for the foreign currency with the customer and the head office for reporting the head office the stock of such currencies and the balances of the Nostro and vostro accounts.

· SBP Reconciliation Statement: This report is used in order to report the balance of the BOP with the SBP in the current account with SBP. As the banks have to keep liquid cash with the SBP so this report list any increase/decrease of the balance with the SBP.

3.3.3 Reconciliations

Reconciliation of Inter Branch is done by matching ledger entries to the statement entries. When an entry is properly matched, the date under which it is appearing in the ledger is noted against the entry in the statement and ledger vice versa. The matching, investigation, and reconcilement of all accounts entries are done as frequently as the statement is received.

3.3.4 Vouchers

Each and every transaction in the bank is made through vouchers; the final place is accounts department for recording these vouchers. Officer in the accounts departments arranges these vouchers according to heads of accounts. These vouchers are of two types:

· Debit Vouchers

· Credit Vouchers

These two vouchers are again classified into three following types of vouchers:

· Cash Voucher

· Clearing Voucher

· Transfer Voucher

All the daily transaction in cash, transfer and clearing is done through these vouchers. A sheet is prepared on which all the vouchers, passed during any one working day are consolidated and summarized. This sheet is called supplementary sheet. It provides help in preparing Cash Book.

There are two types of supplementary sheets:

3.4 Finance System of the Organization:

Financial system of BOP includes from how to generate finance & where to utilize it. The primary focus of BOP financial system is on automating processes within the bank and to develop robust databases that will provide a ‘single source of truth’ for all internal and external exporting reporting. These databases will form the foundation on which other applications will be built.

3.4.1 Report of Financial Statements

For obtaining credit, party has to submit the last two to five years Balance Sheet and Profit & Loss Statement (Income Statement) duly attested to authorized auditors. It is preferred that the statements should be properly prepared and audited by Chartered Accountants that give the true picture of the business. But in some cases as I observed in BOP most of the clients who lie in the category of Consumer Banking Client don’t have their Financial Statements.

In Such case BOP has to prepare the financial statement on the behalf of customer and it is mentioned in other relative documents that the financials submitted are self / un-audited. There is a high percentage of risk involved in it.

3.4.2 Comparative Statement of Financial Conditions

This form is in tabular form and as the name indicates it helps in analyzing the financial condition of the firm from all perspectives. In this form bank has to do the RATIO ANALYSIS of the financial statements submitted.

All the analysis that is covered by this form is described below:

Liquidity Analysis
Activity Analysis
Profitability Analysis
Debt Analysis
Vertical and Horizontal Assessment of Profit & Loss Statement
Vertical and Horizontal Analysis of Balance Sheet

3.4.3 Use of Electronic Data In Decision Making

In BOP, to record the financial data, they have designed special software, which fulfill the entire accounting requirement according to international standard. The software used by the BOP is “SPARC”.

The software being used by BOP is termed as BS i.e. Banking System. The network used by the BOP is LAN (Local area network) while other branches are also using WAN (wide area network). In addition to this signature verification software is there, online report browser is there, exchange server software etc. All the transactions occur through this system.

3.5 Sources of Funds

Funds are the main element for carrying out the operations in any business concern. Its importance remains evident in the banking sector as well. The following are the main sources of funds for BOP.

As on 31^st December Rs in ‘000
	2011	2012	2013	2014	2015
Capital Resources	10,324,890	11,071,717	13,884,373	17,364,031	21,668,270
Deposits	138,859,857	158,263,495	185,071,502	230,256,627	289,226,299
Advances	87,043,273	72,808,106	100,170,415	146,249,184	204,810,470
Investments	31,516,328	69,244,328	56,516,760	54,953,728	63,026,944

Source: Annual report of BOP

3.6 Generation of Funds

Deposits act as a backbone of bank. It is the lifeblood of every bank. These deposits are source of generating funds for the bank and for the general public to meet the financial needs. The bank accepts the deposits at a low rate of interest and lends it at higher rate of interest, the difference between the lending and accepting rate is the source of income for the bank. Profitability of BOP for the last five years is

As on 31^st December Rs in ‘000
	2015	2014	2013	2012	2011
Profit after taxation	5,949,32	3,701,544	2,635,618	667,092	507,058

Source: Annual report of BOP

Comments:

Profit after tax has been derived from the annual of BOP of previous years. In the above mentioned figures the profit after tax has been continuously increased from 2011 to 2015. It shows that the assets were properly used to generate main element like profit after tax. Investments has earned according to the market situation. In result the earning per share and dividend per share both increased.

3.7 Critical Analysis of the Theoretical Concept Relating to Practical Experiences

To observe that whether the techniques that we read in the books are being used practically or not. It is because sometimes, it is heard that there is a difference between theory and practice. But I personally believe that it cannot be true. Theory is based on practical experiences and observation s of the writer.

So I think that if there is really a difference between bookish theories and the practices in an organization it may be because there are some deficiencies in that particular organization that was my objective of specially studying the Finance Department of BOP and it is also because my specialization is in Finance.

Theoretical concepts which vary from my practical experiences are following.

· At least 24 hour’s login transaction detail update in uni-bank.

· Critical failures in electronic transaction system.

· To maintain clients, violaty basic banking practices e.g.

· Acceptance of cash beyond banking hours.

· Issuing of instruments / honoring of instruments beyond time / office hours.

Chapter 4 Analysis

4.1 Financial Analysis:

Financial Analysis is a process which involves reclassification and summarization of information through the establishment of ratios and trends. Financial analysis involves the use of various financial statements

4.2 Financial Statements:

“Financial statements are like a perfume to be sniffed but not swallowed”

These statements do several things.

4.3 Balance Sheet

Balance sheet represents a snapshot of the firm’s financial position at moment in time. It summarizes the assets, liabilities and owner equity of a business at a moment in time, usually the end of a year or a quarter.

Total assets = Total liabilities + Owner equity

4.4 Income Statement

Income statement (Profit & Loss Statement) depicts a summary of the firm’s profitability over time. It summarizes the revenues and expenses of the firm over a particular period of time, again usually a year or a quarter ending with net income or loss for the period.

4.5 The Objectives of Financial Statement Analysis:

The overall objective of financial statement analysis is the examination of a firm’s financial position and returns in relation to risk. This must be done with a view to forecasting the firm’s future prospective.

4.6 Caution about Ratio Analysis

Before discussing ratios, we should consider the following cautions:

· A single ratio does not provide sufficient information from which to judge the overall performance of the firm. Only when a group of ratios is used can reasonable judgment be made. However, if an analysis is concerned only with certain aspects of a firm’s financial position, one or two ratios may be sufficient.

· The financial statement being compared should be dated at the same point in time during the year. If they are not, the effects of seasonally may produce erroneous Conclusions and decisions.

· It is preferable to use audited financial statement for ratio analysis. If the statement has not been audited, the data contained in them may not reflect the firm’s true financial condition.

· The financial data being compared should have been developed in the same way. The use of differing accounting treatments especially relative to inventory and depreciation can distort the result of ratio analysis, regardless of whether cross-sectional or time series analysis is used.

· When the ratios of the firm are compared with those of another or with those of the firm itself over time, results can be distorted due to inflation.

4.7 Financial Analysis

Five Years Balance Sheet

PARAMETERS	VALUES
	2011	2012	2013	2014	2015
ASSETS	(RUPEES IN THOUSAND)
Cash and balances with treasury banks	6678026	8762866	11766925	14879230	13356055
Balances with other banks	2650166	4847899	5550148	7333002	3497054
Lendings to financial institutions	5770842	2324839	10172242	8392950	14444143
Investments	22104425	17239156	25708194	28625915	39431005
Advances	44777538	69938041	85976895	99179372	100780162
Operating Fixed Assets	1979919	2595023	3192862	3810331	5128428
Deferred Tax Assets	--	--	--	--	--
Other Assets	1425986	1459716	2732641	3812788	5535038
Total Assets	85386902	107164540	145099907	166033588	182171885
LIABILITIES	(RUPEES IN THOUSAND)
Bills Payable	973703	1227093	1315680	1839077	2627051
Borrowings	15903055	13781555	10562338	14964089	17553525
Deposits and other Accounts	61656607	83318795	118794690	131839283	143036707
Sub-coordinated Loans	--	1000000	2999700	2998500	2997300
Liabilities against assets subject to Finance Lease	37350	14159	1459	--	--
Deferred Tax Liabilities	806753	526865	567217	736298	471519
Other Liabilities	962592	1282981	2045340	2603113	3219796
Total Liabilities	80340060	101151448	136512477	154980358	169905898
Owner’s Equity	(RUPEES IN THOUSAND)
Share Capital	1141680	1255848	1507018	2011333	3006499
Reserves	2759599	4317301	4470530	5814754	6948336
Unappropriated Profit	--	--	1617597	1799979	2144810
Surplus on revaluation of assets – Net of Tax	1145563	442944	1218338	1434164	166342
Total Owner’s Equity	5046842	6016093	8587430	11053230	12265987
	85386902	107167540	145099907	166033588	182171885

Data Source BOP Annual Report.

FIVE YEARS INCOME STATEMENT

PARAMETERS	VALUES
	2011	2012	2013	2014	2015
Mark-up / Return/ Interest earned	4073715	4487206	8780698	12596921	15143241
Mark-up / return / interest expensed	1379609	1117206	4278374	6977313	8685624
Net Mark-up / interest income	2694106	3370000	4502324	5619608	6457617
Provision against non-performing loans and advances	308528	277398	638547	1128137	3920240
Provision for Impairment in the value of investments	--	38066	(36555)	376	1501
Bad debts written off directly	--	7	--	--	--
	308528	315471	601992	1128513	3921741
Net mark-up / interest income after provisions	2385578	3054529	3900332	4491095	2535876
Non mark-up / interest income
Fee, commission and brokerage income	524775	649988	838561	1013660	1072868
Dividend Income	37658	26318	51143	109326	137079
Income from dealing in foreign currencies	112808	180992	356218	584344	655761
Gain on sale of securities - net	--	--	100407	112474	2361251
Unrealized loss on revaluation of investments	--	--	(582)	(2308)	1728
Other Income	278512	779230	206819	321758	336809
Total non-mark-up / interest income	953753	1633528	1552566	2139254	4565796
	3339331	4688057	5452898	6630349	7101672
Non Mark-up / Interest Expense
Administrative expenses	1436304	1845179	2591985	3277353	4789536
Other provisions/ write offs	--	--	--	--	--
Other charges	1227	138	1832	6141	12051
Total non-markup / interest expenses	1437531	1845317	2593817	3283494	4801587
	1901800	2842740	2859081	3346855	2299785
Extra ordinary / Unusual items	--	--	--	--	--
Profit Before Taxation	1901800	2842740	2859081	3346855	2299785
Taxation –Current	873639	876089	828774	983875	98535
- Prior Years	--	--	(188247)	--	(233950)
- Deffered	(74904)	43611	196558	113006	(245812)
	798735	919700	837085	1096881	(381227)
Profit After Taxation	1103065	1923040	2021996	2249974	2681012
Unappropriated profit brought forward	--	--	1538432	1617597	1799979
Profit available for appropriation	1103065	1923040	3560428	3867571	4480991

Data Source BOP Annual Report.

4.8 Ratio Analysis

“Ratio analysis is changing amount comparisons to ratios and then comparing those ratios to a known standard.”

When analyzing financial statement, it is best to reduce amount comparisons to percentages or ratios so that it has an easy way to judge those comparisons and if it compares those ratio results with what it knows to be good, fair or bad, it has a way of determining the health of a business.

To evaluate a firm’s financial condition and performance, the financial analyst needs to perform “checkups” on various aspects of a firm’s financial health. A tool frequently used during these checkups is a Financial Ratio “which relates two pieces of financial data by dividing one quantity by the other.”

It calculates ratios because in this way it gets a comparison that may prove more useful than the raw numbers by themselves.

4.8.1 Ratios To Determine Strength & Weaknesses

Everyone in the business of analyzing financial statements has a few favorite ratios they utilize when determining the strengths or weaknesses of a specific financial statement. The ratios that are used could change depending upon the industry the business is in, the size of the business, the accounting method that is used by the business and the amount of the credit desired and how healthy the company is.

If you are dealing with a high risk business, you will probably want to use more ratios than if you were dealing with a healthy, low risk business. The Ratio analysis of the BOP for the five years from 2011 to 2015 years is given below.

Liquidity Ratio

Current Ratio

Current assets divided by current liabilities. It shows a firms ability to cover its current liabilities with its current assets. Liquidity ratios measure a firm’s ability to meet short-term obligations and pay back the contractual obligations on the due date.

Current ratio = Current assets / Current liabilities

111, 855,137 / 148, 729,423

0.7520

Acid-Test Ratio

Current assets less inventories divided by current liabilities. It shows a firm’s ability to meet current ability to meet current liabilities with its most liquid asset. This ratio serves as a supplement to the current ratio in analyzing liquidity. This ratio is the same as the current ratio except that it excludes inventories—presumably the least liquid portion of current assets from the numerator.

Acid-test ratio = Current assets - Inventories / Current liabilities

Liquidity Ratio	2011	2012	2013	2014	2015
Calculation	9081772/8732425	104293815/99327443	140356028/133672408	159222996/151640949	176187458/166214583
Current ratio	1.04	1.05	1.05	1.05	1.06
Acid-test ratio	1.04	1.05	1.05	1.05	1.06

BOP’s current ratio for the year 2011 is 1.04 and for the year 2012 is 1.05, which shows the increase of 0.01. It means the organization is going towards in profitable direction. The current ratio of five years shows that the organization in stable position. Quick ratio/Acid test ratio is found by dividing the most liquid current assets (cash, marketable securities and accounts receivable) by current liabilities.

For BOP this ratio is consistent throughout the years. The declining ratio might be a sign of a deteriorating financial condition of the company. An improving ratio might indicate an improving financial situation.

Leverage Ratio

Debit-to-Equity Ratio

The debt-to-equity ratio is computed by simply dividing the total debt of the firm (including current liabilities) by its shareholders’ equity. The lower the ratio, the higher the level of the firm’s financing that is being provided by shareholders and the larger the creditor cushion (margin of protection) in the event of shrinking asset values or outright losses.

Debit-to-Equity ratio = Total debt / Shareholders’ equity

Leverage Ratio	2011	2012	2013	2014	2015
Calculation	72371714/5046842	9210590/6016093	121082763/8587430	158834915/11053230	180677988/12265987
Debit-to-Equity Ratio	14.34	14.95	14.10	14.37	14.73

Leverage ratio follows debt/equity ratio and debt/total asset ratio. Total debts are equal to current liability + long term debt. The debt/equity ration compares total liabilities/ total equities. The debt/equity ratio in this case for the year 2011 is 14.34 and for the year 2012 is 14.95, which is slightly increased. In 2013, 14.10 which is deteriorated 0.85 from 2012. In 2014, 2015 that was 14.37 &14.73 which show the gradual increase in Debit-to-Equity Ratio. These all changes are due to increase & decrease in total debts in every year but the total equities of the BOP show the constant growth The debt /equity ratio is a significant measure of solvency.

Debit-to-Total-Asset Ratio

This ratio is derived by dividing a firm’s total debt by its total assets. This ratio serves a similar purpose to the debt-to-equity ratio. It highlights the relative importance of debt financing to the firm by showing the percentage of the firm’s assets that are supported by debt financing.

Debt-to-Total-Asset ratio = Total debt / Total assets

Leverage Ratio	2011	2012	2013	2014	2015
Calculation	72371714/8514318	9210590/10233989	121082763/13453640	158834915/174543862	180677988/198547240
Debit/Total Asset Ratio	0.85	0.90	0.90	0.91	0.91

In 2011, the debt/total asset ratio is 0.85 which is slightly increased 0.90 in 2012 due to increase in total debts. But from 2012-2015 that’s remain same which shows the stability of the organization and also show the constant growth of total debts and total assets in every year.

Long-term Debt-to-Total Capitalization Ratio

This ratio tells the relative importance of long-term debt to the capital structure (long-term financing) of the firm. Where total capitalization represents all long-term debt and shareholders’ equity.

Long-term debt-to-Total capitalization = Long-term debt / Total capitalization

Leverage Ratio	2011	2012	2013	2014	2015
Calculation	100756544/85386902	78232304/107167540	4062797/145099907	34867053/166033588	36434377/182171885
Long-term Debt / Total Capitalization Ratio	1.18	0.73	0.28	0.21	0.20

This ratio is constantly decreasing every year which is the great achievement for BOP and that’s just all because BOP adopting that policies which reduces the long term debts every year. In 2015 BOP liabilities against subject to finance lease reached at 0 that’s why Long-term Debt-to-Total Capitalization Ratio is 0 in 2015.

Equity Capital-to-Total Assets

Equity capital to total assets is a common measure used to analyze capital adequacy of a bank. This ownership provides the cushion against the risk of using debt and leverages.

Equity Capital-to-Total Assets = Shareholders Equity / Total Assets

Leverage Ratio	2011	2012	2013	2014	2015
Calculation	5046842/85386902	6016093/107167540	8587430/145099907	11053230/166033588	12265987/182171885
Equity Capital-to-Total Assets	0.059	0.056	0.059	0.067	0.067

In 2011 Equity to Capitalization Ratio is 0.059 which is gradually changed in 2012, 2013 as 0.056 & 0.59 but in 2014, 2015 it is reached at 0.067 & 0.067. This reduction in ratio is very minor and overall show the stability of the organization. The higher the ratio then more cushions is there and lower cushion with lower ratio.

Rate Paid on Funds:

The Rate Paid on Funds is determined by dividing total interest expense by total earning assets. This indicates what percentage or rate of interest is paid from assets. This figure is determined as follows:

Rate Paid on Funds = Total Interest Expense / Total Earning Assets

	2011	2012	2013	2014	2015
Calculation	1437531/1671548	1845317/2599000	2593817/4550556	3283494/5863380	4801587/1143250
Rate Paid on Funds	0.86	0.71	0.57	0.56	0.42

This ratio is constantly decreasing every year as shown in the table which is very good for the organization. This rate should be lower means more assets are from creditors’ side if rate is higher and there is less owner participation and less deposits means the bank is not reputed and efficient one. So this ratio should be lower.

Net Profit/ (Loss) / Advances Ratio

This ratio is determined as follows

Net Profit/ (Loss) / Advances

	2011	2012	2013	2014	2015
Calculation	1103065/44777538	1923040/69938041	2021996/85976895	2249974/99179372	2681012/100780162
Net Profit/(Loss) / Advances	0.025	0.027	0.024	0.0023	0.027

This ratio should be higher, higher the ratio shows the improvement of business of the organization. In 2011 this ratio is critical (0.025) but from 2012 this ratio is constantly changes. In 2013 it is 0.024 decreased from 2014 but in 2015 it is 0.023 which shows that organization is overall improving.

Income / Expenditure Ratio

This figure is determined as follows

	2011	2012	2013	2014	2015
Calculation	3339331/1901800	4688057/2842740	5452898/2859081	6630349/3346855	7101672/2299785
Income / Expenditure	1.76	1.65	1.91	1.98	3.09

Income of the BOP is increasing comparatively more than the expenses. That’s why this ratio is increasing every year which is very good because it shows the profitability of the organization.

4.9 Horizontal Analysis

“An analysis of percentage financial statements where all balance sheet or income statement figures for a base year equal 100.0(percent) and subsequent financial statement items are expressed as percentage of their values in the base year.”

The horizontal analysis of income statement gives us the information on the magnitude of absolute changes in profit and expenses. The horizontal analysis of income statement gives the same picture as the vertical analysis of income statement, namely, fluctuating behavior. But the sharp improvement in profitability is easily distinguished

PARAMETERS	VALUES
	2011	2012	2013	2014	2015
ASSETS	( VALUES IN % )
Cash and balances with treasury banks	100	131.2	176.2	222.8	200
Balances with other banks	100	182.9	209.4	276.6	131.9
Lendings to financial institutions	100	40.2	176.2	145.4	250
Investments	100	77.9	116.3	129.8	178.3
Advances	100	156.1	192	221.4	225
Operating Fixed Assets	100	131	161.2	192.4	259
Deferred Tax Assets	--	--	--	--	--
Other Assets	100	102.3	191.6	267.3	388.1
TOTAL ASSETS	100	125.5	169.6	194.4	213.3
LIABILITIES
Bills Payable	100	126	135.1	188.8	269
Borrowings	100	86.6	66.4	94.0	110
Deposits and other Accounts	100	135.1	192.6	213	231
Sub-coordinated Loans	100	--	--	--	--
Liabilities against assets subject to Finance Lease	100	37.9	3.9	--	--
Deferred Tax Liabilities	100	65.3	70.3	91.2	58.4
Other Liabilities	100	133	212	270	334
TOTAL LIABILITIES	100	126	169.9	292	211.4
Owner’s Equity
Share Capital	100	110	132	175.5	263.3
Reserves	100	156.4	161.9	210.7	251.7
Unappropriated Profit	100	--	--	--	--
Surplus on revaluation of assets – Net of Tax	100	38.6	106.3	125.1	14.5
Total Owner’s Equity	100	119.2	170.1	219	243
	100	125.5	169.9	194.4	213.3

This technique is also known as comparative analysis. It is conducted by setting consecutive balance sheet, income statement or statement of cash flow side-by-side and reviewing changes in individual categories on a year-to-year or multiyear basis. The most important item revealed by Comparative financial statement analysis is trend. A comparison of statements over several years reveals direction, speed and extent of a trend.

4.9.1 Analysis of Balance Sheet

In balance sheet, management views the three major aspects of the organization.

Ø Assets

Ø Liabilities

Ø Equities

Assets

The Assets of the Bank of Punjab balance sheet show the growth every year. In Balance Sheet Cash and balance with treasury banks & Operating fixed asset increase in every year. Cash and balance with treasury banks in 2011 is 131.2% and in 2013 that is 176.2% which is 45% increased in 2013. In 2014 that is 222.8% that was also increased from the previous year. In 2015 that was 200%, which was 22.8%, decreased as compare to 2014, that means that management is not utilizing the resources efficiently & effectively.

Operating fixed asset in 2012 is 131%, that is 31% increase from 2011 and in, 2013, 2014, 2015 that is 161.2%, 192.4%, and 259% that shows the gradual increase.

Liabilities

As the asset of the Bank of Punjab are increasing and decreasing every year, liabilities at the same time also increasing and decreasing.

Bills payable in 2011 is 37.1% and in 2012 that is 46.7% which is 9.6% greater from 2011. In 2013 it reached to 50.1% and in 2014 it reached 70%. In 2015 it also increased.

In the borrowings in 2012 borrowings from financial institutions is 126% that is 26% increase as compare to 2011 and in 2012 that is 135.1%, in 2014 it reached 188.8%, and 269%, in 2015 it also increase that is too much. This means that management is not utilizing the resources efficiently & effectively

Deferred liabilities is constantly increased from 2012 to 2014 and reached 91.2% in 2014. But In 2015 it is decreasing as compare to 2014. As it increased from 2012 to 2014 that is not good management of the organization needs to reduce there deferred liabilities. But in 2015 and reached to 58.4% that is good for the bank.

Comments

Cash and cash with other banks has decreasing pattern in 2015 and is increased in 2011 to 2014, it means that the deposits are lass as compared to previous years and ultimately interest earned in terms of revenue is less as compared to previous years. BANK OF PUNJAB has increased its total assets from 2011 to 2015 that is a positive factor. Liabilities of BOP have increased from year 2011 to 2015 of approximately 100% that shows burden of debt on bank. Surplus on revaluation of assets gives additional gain to BOP and increases the value of assets.

4.9.2 Analysis of Income Statement

Horizontal Analysis (Income Statement)

PARAMETERS	VALUES ( VALUES IN % )
	2011	2012	2013	2014	2015
Mark-up / Return/ Interest earned	100	110.2	215.5	309.2	371.7
Mark-up / return / interest expensed	100	64.2	310.1	505.7	629.6
Net Mark-up / interest income	100	125.1	167.1	208.6	239.7
Provision against non-performing loans and advances	100	89.9	206.97	365.7	1270.6
Provision for Impairment in the value of investments	100	--	--	--	--
Bad debts written off directly	100	--	--	--	--
	100	102.3	195.1	365.8	1271.1
Net mark-up / interest income after provisions	100	128	163.5	188.3	106.3
Non mark-up / interest income
Fee, commission and brokerage income	100	123.9	159.8	193.2	204.4
Dividend Income	100	69.9	135.8	290.3	364
Income from dealing in foreign currencies	100	160.4	315.8	517.99	581.3
Gain on sale of securities - net	100	--	--	--	--
Unrealized loss on revaluation of investments	100	--	--	--	--
Other Income	100	278.7	74	115.5	120.9
Total non-mark-up / interest income	100	171.3	162.8	224.3	478.7
	100	140.4	163.3	198.6	212.7
Non Mark-up / Interest Expense
Administrative expenses	100	128.5	180.5	228.2	333.5
Other provisions/ write offs	100	--	--	--	--
Other charges	100	109	149	500.4	982.2
Total non-markup / interest expenses	100	128.4	180.4	228.4	334.
	100	149.5	150.3	175.98	120.9
Extra ordinary / Unusual items	100	--	--	--	--
Profit Before Taxation	100	149.5	150.3	175.98	120.9
Taxation –Current	100	100.3	94.9	112.6	12.3
- Prior Years	100	--	--	--	--
- Deffered	100	-58.2	-262.4	-150.9	328.2
	100	115.1	104.8	137.3	-47.7
Profit After Taxation	100	174.3	183.3	203.97	243.1
Unappropriated profit brought forward	100	--	--	--	--
Profit available for appropriation	100	174.3	322.8	350.6	406.2

In horizontal analysis of income statement Net mark up/Interest income is constantly increasing in 2012, 2013, 2014 as 128%, 163.5%, 188.3%. In 2014 mark-up / non interest income recorded an increase of 38% over last year. Analysis of components of non mark-up / non interest income reveals that ‘fee, commission and brokerage income’ increased by 21% benefited by the substantial increase in foreign trade and guarantees business and overall increase in banking operations, while income from dealing in foreign currencies increased by significant 64% over the previous year. But in 2015 it decreased and reached to 106.3, which is not good and show that how much Bank of Punjab is improving with every year. In case with items of Non mark up/ Interest income. Fee, Commission and brokerage income, Dividend Income, Income from dealing in foreign currencies, other income is increasing constantly every year.

4.10 Vertical Analysis

“An analysis of percentage financial statements where all balance sheet items are divided by total assets and all income statement items are divided by net sales or revenues.”

4.10.1 Vertical Financial Statement Analysis

In vertical financial statement analysis, the various components of balance sheet express as the percentages of the total asset of the company. This can be done for the income statement, but here items are related to net sales. The gross and net profit margins, taken up earlier, are examples of this type of expression, and the procedure can be extended to include all the items on the income statement.

The expression of individual financial statement items as percentages of totals helps the analyst to spot trends with respect to the relative importance of these items over time. In the common size income statement, turnover is expressed as 100% and every item in the income statement is expressed as a percentage of turnovers (sales or total incomes in case of banks).

4.10.2 Vertical Analysis of Balance Sheet

PARAMETERS	VALUES
	2011	2012	2013	2014	2015
ASSETS	(RUPEES IN THOUSAND)
Cash and balances with treasury banks	7.82	8.17	8.1	8.96	7.3
Balances with other banks	3.1	4.52	3.82	4.41	1.91
Lendings to financial institutions	6.7	2.16	7.01	5.05	7.9
Investments	25.8	16.0	17.7	17.2	21.6
Advances	52.4	65.2	59.2	59.7	55.3
Operating Fixed Assets	2.31	2.42	2.2	2.29	2.8
Deferred Tax Assets	--	--	--	--	--
Other Assets	1.67	1.36	1.88	2.29	3.03

LIABILITIES
Bills Payable	1.14	1.14	0.9	1.10	1.4
Borrowings	18.6	12.8	7.27	9.0	9.6
Deposits and other Accounts	72.2	77.7	81.8	79.4	78.5
Sub-coordinated Loans	--	0.93	2.0	1.8	1.64
Liabilities against assets subject to Finance Lease	0.04	0.01	0.00001	--	--
Deferred Tax Liabilities	0.94	0.49	0.39	0.44	0.25
Other Liabilities	1.12	1.19	1.4	1.56	1.7

Owner’s Equity
Share Capital	1.33	1.17	1.03	1.2	1.6
Reserves	3.23	4.0	3.0	3.5	3.8
Unappropriated Profit	--	--	13.10	1.0	1.1
Surplus on revaluation of assets – Net of Tax	1. 3	0.41	0.83	0.86	0.09

In vertical financial statement analysis, the various components of balance sheet express as the percentages of the total asset of the company. This can be done for the income statement, but here items are related to net sales.. In balance sheet, management view the three major aspects of the organization.

· Assets

· Liabilities

· Equities

4.10.3 Vertical Analysis (Income Statement)

PARAMETERS	VALUES (RUPEES IN THOUSAND)
	2011	2012	2013	2014	2015
Mark-up / Return/ Interest earned	121.99	95.7	161	189.98	213.2
Mark-up / return / interest expensed	41.3	23.83	78.5	105.2	122.3
Net Mark-up / interest income	80.68	71.88	82.6	84.76	90.9
Provision against non-performing loans and advances	9.24	5.92	11.7	17.01	55.2
Provision for Impairment in the value of investments	--	0.81	-0.67	.0057	.021
Bad debts written off directly	--	.00015	--	--	--
	9.24	6.73	11.04	17.02	55.22
Net mark-up / interest income after provisions	71.4	65.16	71.53	67.7	35.71
Non mark-up / interest income
Fee, commission and brokerage income	15.7	13.9	15.4	15.3	15.1
Dividend Income	1.23	0.56	0.94	1.65	1.93
Income from dealing in foreign currencies	3.38	3.86	6.53	8.81	9.23
Gain on sale of securities - net	--	--	1.84	1.7	33.25
Unrealized loss on revaluation of investments	--	--	-0.011	-0.035	0.024
Other Income	8.34	16.56	3.79	4.85	4.74
Total non-mark-up / interest income	28.6	34.84	28.47	32.26	64.3

Non Markup / Interest Expense
Administrative expenses	43.01	39.36	47.53	49.43	67.44
Other provisions/ write offs	--	--	--	--	--
Other charges	0.037	0.0029	0.336	0.093	0.17
Total non-markup / interest expenses	43.05	39.36	47.57	49.5	67.6
	56.95	60.64	52.4	5048	32.38
Extra ordinary / Unusual items	--	--	--	--	--
Profit Before Taxation	56.95	60.64	52.4	50.48	32.38
Taxation –Current	26.16	18.69	15.2	14.8	1.387
- Prior Years	--	--	-3.45	--	-3.29
- Deffered	-2.24	0.93	3.60	17.04	-3.46
	23.92	19.62	15.35	16.54	-5.37
Profit After Taxation	33.03	41.02	37.1	33.9	37.75
Unappropriated profit brought forward	--	--	28.21	24.4	25.35
Profit available for appropriation	33.03	41.02	65.29	58.33	63.1

In vertical analysis of income statement Net mark up/Interest income is only decreasing in 2010. Otherwise it is continuously increasing every year. In 2011 it is 107.28%, which is 112.13% in 2012. It is decrease in 2013 and reached 110.32% & in 2014 & 2015 it is reached at 115.43% & 125.12%, which is very good, and show that how much Bank of Punjab is improving with every year.

4.11 Findings on the Basis of Financial Analysis

On the basis of analysis which have been done there are following findings

1 Balance sheet shows that deposits are increasing as well as advances are also increasing so expenses are increasing.

1. Management is not too efficient to control the expenses.

2. As we see that in vertical analyses of income statement interest incomes are increasing and interest expenses are decreasing but overall administrative expenses are increasing.

3. Another problem is that every year the amount of cash is decreasing as shown in the vertical analyses of balance sheet.

4.12 SWOT Analysis

SWOT analysis is an acronym that stands for strengths, weakness, opportunities, and threats SWOT analysis is careful evaluation of an organization’s internal strengths and weakness as well as its environment opportunities and threats.

“SWOT analysis is a situational which includes strengths, weaknesses, opportunities and threats that affect organizational performance.”

“The overall evaluation of a company strengths, weaknesses, opportunities and threats is called SWOT analysis.”

In SWOT analysis the best strategies accomplish an organization’s mission by:

1. Exploiting an organizations opportunities and strength.

2. Neutralizing it threats.

3. Avoiding or correcting its weakness.

SWOT analysis is one of the most important steps in formulating strategy using the organization mission as a context; managers assess internal strengths distinctive competencies and weakness and external opportunities and threats. The goal is to then develop good strategies and exploit opportunities and strengths neutralize threats and avoid weaknesses.

4.12.1 Strengths

· The Bank officers of BOP are considered as one of the most able professionals in the banking world (some belong to BCCI). However, they have added some local flavour in accordance with their targeted segmented. In my observation that they interact with their clients as if they are their personal friends and discuss about their problems as their own.

· As a result of the compassionate and personalized services of the officers, the clients’ perception for BOP is very high. They have trust and feel themselves to be secure while dealing with BOP.

· BOP has opened all its branches at commercial areas so that the customers or clients face no problems in reaching to the bank. For example, Ali Pur Branch is being situated in business and commercial hub of Multan as big volume in trade.

· BOP has got a reliable and easy to use internal computer system. Every information regarding the transactions in customers’ deposits has been computerized. Data are properly maintained.

4.12.2 Weaknesses

· Lack of proper internal controls is one of the major weaknesses of BOP. It is also pointed by the auditor in his review.

· BOP has formulized a lot of products and services for its customers, even more than other commercial banks, but any advertisement on electronic media has not been seen.

· I observed during my internship that some of the employees were burdened with over work. So I think that the work should be distributed according to their post and capabilities.

4.12.3 Opportunities

· Satisfy dynamic consumer needs, BOP has made significant in roads in its entire service spectrum. A lot of products have been introduced especially in Retail Banking (Agriculture side) and people are increasingly becoming loyal to the bank and because of feasible transactions. Optimum pricing and branding strategies of the bank are helping to make customer feel secure and convenient.

· All the opportunities of the 21st century are to be availed in the information technology. Information technology is the future of this dynamic world. Therefore BOP should emphasize much on IT, especially on E-Banking. Bank can design a universal account like other foreign banks, to enhance online facilities.

4.12.4 Threats

· Despite the difficult circumstances that confronted the banking sector in particular and the country in general, BOP has been still highly profitable.

· But, the facts can’t be denied and there might be an adverse impact of such situation.

· BOP is facing a strong competition by its competitors, Business of all these Banks are growing at very high pace.

4.13 Pest Analysis

PEST analysis of any industry investigates the important factors that affect the industry and influence the companies operating in the sector. PEST stands for Political, Economic, Social and Technological analysis. The PEST Analysis is a tool to analyze the forces that drive the industry and how those factors can influence the industry.

4.13.1 Political Factors

Government policies affect the banking sector. Sometimes looking into the political advantage of a particular party, the Government declares some measures to their benefits like waiver of short-term agricultural loans, to attract the farmer’s votes. By doing so the profits of the bank get affected. Various banks in the cooperative sector are open and run by the politicians. They exploit these banks for their benefits. Sometimes the government appoints various chairmen of the banks. Various policies are framed by the SBP looking at the present situation of the country for better control over the banks

Focus On Regulations of Government

Government affects the performance of banking sector most by legislature and framing policy .government through its budget affects the banking activities securitization act has given more power to banking sector against defaulting borrowers.

Monetary Policy

Bank Rate: The Bank Rate has been retained unchanged

Repo Rate It has been reduced under the Liquidity Adjustment Facility (LAF)

Reverse Repo Rate : It has been reduced under LAF by 25 basis points from 3.5% to 3.25% with immediate effect. RBI has retained the option to conduct overnight or longer term repo/reverse repo under the LAF depending on market conditions and other relevant factors.

FDI Limit

The move to increase Foreign Direct Investment FDI limits to 49 percent from 20 percent during the first quarter of this fiscal came as a welcome announcement to foreign players wanting to get a foot hold in the Indian Markets by investing in willing Indian partners who are starved of net worth to meet CAR norms. Ceiling for FII investment in companies was also increased from 24.0 percent to 49.0 percent and have been included within the ambit of FDI investment

4.13.2 Economic Factors

Banking is as old as authentic history and the modern commercial banking are traceable to ancient times., banking has existed in one form or the other from time to time. Every year SBP declares its 6 monthly policy and accordingly the various measures and rates are implemented which has an impact on the banking sector. Also the Union budget affects the banking sector to boost the economy by giving certain concessions or facilities. If in the Budget savings are encouraged, then more deposits will be attracted towards the banks and in turn they can lend more money to the agricultural sector and industrial sector, therefore, booming the economy. If the FDI limits are relaxed, then more FDI are brought in India through banking channels

Growing Economy / GDPIt is great news that today the service sector is contributing more than half of the Indian GDP. It takes PAKISTAN one step closer to the developed economies of the world. Earlier it was agriculture which mainly contributed to the GDP. The Pakistani government is still looking up to improve the GDP of the country and so several steps have been taken to boost the economy. Policies of FDI

Low Interest Rates

SBP controls the Interest rate, which is based on several monetary policies. Recently SBP has reduced the interest rate which stimulates the growth rate of banking industry. Call money rates (borrowing & lending) were in the range of 1.50/3.47 per cent as compared with 5.25/11.00 per cent on the corresponding date of last year

Inflation Rates

Inflation represents a rise in general level of prices of goods and services over a period of time. It leads to erosion in the purchasing power of money. Resultantly, each unit of currency buys fewer goods and services.

Different fiscal and monetary policies have curbed the Inflation rate. To fight against the slowdown of the Economy, Government of Pakistan & SBP took many fiscal as well as monetary actions. Clubbed with fiscal & monetary actions, decreasing commodity prices, decreasing crude prices and lowering interest rate, we expect that Indian Economy could again register a robust growth rate in the year 2013-14

4.13.3 Socio Cultural Factors

Socio culture factors also affect the business. They show in which people behave in country. Socio-cultural factors like taboos, customs, traditions, tastes, preferences, buying and consumption habit of people, their language, beliefs and values affect the business. Banking industry is also operates under this social environment and it is also affect by this factor.

These factor are changing continuously people’s life style, their behavior, consumption pattern etc. is changing and also creating opportunities and threat for banking industry. There are some socio-culture factors that affect banking in India have been analyzed below.

Shift towards Nuclear Family

Attitude of people of Pakistan is changing. Now, younger generation wants to remain separate from their parents after they get married. Joint families are breaking up. There are many reasons behind that. But banking sector is positively affected by this trend. A family need home consumer durables like freeze, washing machine, television, bike, car, etc. so, they demand for these products and borrow from banks. Recently there is boost in housing finance and vehicle loans. As they do not have money they go for installments. So, banks satisfy nuclear families wants.

Change In Life Style

Life style of Pakistan is changing rapidly. They are demanding high class products. They have become more advanced. People want everything car, mobile, etc.. what their fore father had dreamed for. Now teenagers also have mobile and vehicle. Even middle class people also want to have well furnished home, television, mobile, vehicle and this has opened opportunities for banking sector to tap this change. Everything is available so it has become easy to purchase anything if you do not have lump sum.

Population

Increase in population is one of the important factor, which affect the private sector banks. Banks would open their branches after looking into the population demographics of the area. Percentage of deposit in any branches of banks depends upon the population demographic of that area. About 70% of population is below 35 years of age. They are in the prime earning stage and this increase the earning of the banks. Deposits showed a subdued growth during 2004-05.Income distributions also affects the operations and overall business of private sector banks.

Literacy Rate

Literacy rate in Pakistan is very low compared to developed countries. Illiterate people hesitate to transact with banks. So, this impacts negatively on banks. But there is positive side of this as well i.e. illiterate people trust more on banks to deposit their money; they do not have market information. Opportunities in stocks or mutual funds. So, they look bank as their sole and safe alternative

4.13.4 Technological Factors

Technology in Banks

Technology plays a very important role in bank’s internal control mechanisms as well as services offered by them. It has in fact given new dimensions to the banks as well as services that they cater to and the banks are enthusiastically adopting new technological innovations for devising new products and services.

ATM

The latest developments in terms of technology in computer and telecommunication have encouraged the bankers to change the concept of branch banking to anywhere banking. The use of ATM and Internet banking has allowed ‘anytime, anywhere banking’ facilities. Automatic voice recorders now answer simple queries, currency accounting machines makes the job easier and self-service counters are now encouraged.

Credit card facility has encouraged an era of cashless society. Today MasterCard and Visa card are the two most popular cards used world over. The banks have now started issuing smartcards or debit cards to be used for making payments. These are also called as electronic purse. Some of the banks have also started home banking through telecommunication facilities and computer technology by using terminals installed at customers home and they can make the balance inquiry, get the statement of accounts, give instructions for fund transfers, etc.

It Services & Mobile Banking

Today banks are also using SMS and Internet as major tool of promotions and giving great utility to its customers. For example SMS functions through simple text messages sent from your mobile. The messages are then recognized by the bank to provide you with the required information. All these technological changes have forced the bankers to adopt customer-based approach instead of product-based approach. Technology advancement has changed the face of traditional banking systems. Technology advancement has offer 24X7 banking even giving faster and secured service.

Core Banking Solutions

It is the buzzword today and every bank is trying to adopt it is the centralize banking platform through which a bank can control its entire operation the adoption of core banking solution will help bank to roll out new product and services.

Chapter 5:

Conclusions & Recommendations

5.1 Conclusions:

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.

Furthermore the policies and schemes as are introduced and carried on by the bank are of great source of help in its trading and non-trading growth They facilitate trade both inside and outside the country. The Bank of 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.

By analyzing the financial statements of the bank, I came across to know that it is one of the most growing banks in the subcontinent. Now they should carry on with the present management which took it from one of the ordinary bank to this level. No doubt professionalism and internal controls of the bank are one of the major issues which may results some major losses to the bank. Bias in hiring’s and between colleagues should be removed.

5.2 Recommendations

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.

· Salaries of the officers must be compatible to other private banks so that the BOP can attract professionals, intelligent persons.

· 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 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 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 of Punjab should give some extra credit to concern to professional qualifications such as MBA (IT)’s, M.B.A’s, C.A’s A.C.M.A’s at the time of recruitment and selection.

· Interview should be conducted while recruiting personnel, to consider the personality characters, communications skills and sociability.

· The bank should adopt a policy to accommodate and facilitate the research scholars who want to study the banking affairs. The universities and other institutions can help to launch the studies regarding banking business.

· All possible efforts should be made to protect the bank from the interruption of Provincial government.

· There should be an association of employees to convey the voice of the employees to the administration.

Internship Report On The Bank of Punjab

Internship ReportOn TheBank of Punjab

ACKNOWLEDGEMENT

DEDICATION

I dedicate this report to my parents without whose help and encouragement it would not have been possible for me to accomplish this task within the specific time limit I was provided with every facility by my parent which were necessary in order to complete this challenging assignment.

Abstract

CONTENTS

Chapter 1 :

Overview of the Organization

President Mr. Naeem Uddin Khan

1.1 History:

1.2 Authorized Capital:

1.3 Paid Up Capital:

1.4 Nature Of The Organization

1.5 Business Volume

1.6 Number of Employees

1.7 Mission Statement

To exceed the expectation of our stakeholders by leveraging our relationship with the Government of Punjab and delivering a complete range of professional solutions with the focus on programme driven products and services in the Agriculture and Middle Tier Markets through a motivated team.

1.8 Vision Statement

To be customer focused bank with service excellence service excellence.

1.9 Competitors

· Allied Bank Limited.

· Bank Al-Habib Limited.

· Habib Bank Limited

· United Bank Limited.

Chapter 2 :

Organizational Structure

2.1 Organizational Structure At Head Office Level

2.1.1 Board of Directors

2.1.2 Executive Board

2.1.3 Chief Executive

2.1.4 Divisional Chiefs

2.1.5 Provisional Chiefs

2.1.6 Circle Executive

2.1.7 Zonal Heads

2.1.8 Branch Managers

2.2. Various Departments at Branch

2.2.1 Cash Department

2.2.2 Clearing Department

2.2.3 Bills Department

2.2.4 Information Technology Department

2.3 Retail Banking Department

2.4 Foreign Exchange Department

2.4.1 Letter of Credit

2.4.2 Information in LC document

2.4.3 Parties involved in a letter of credit

2.5 ADVANCE DEPARTMENT

2.5.1 Types of Advances

· Demand Finance

· Small Finance

· Agriculture Finance

· Purpose

· Housing Finance

· Lease Finance

2.6 Treasury Product & Services

Chapter 3 :

Structure of the Finance Department

3.1 Number of Employees Working in the Finance Department

3.2 Finance & Accounting Operations

3.2.1 Accounting Operations

3.2.2 Functions of Accounts Department

3.3 Accounting System of the Organization :

3.3.1 Report Preparation

3.3.2 Daily Reports:

3.3.3 Reconciliations

3.3.4 Vouchers

3.4 Finance System of the Organization:

3.4.1 Report of Financial Statements

3.4.2 Comparative Statement of Financial Conditions

3.4.3 Use of Electronic Data In Decision Making

3.5 Sources of Funds

3.6 Generation of Funds

3.7 Critical Analysis of the Theoretical Concept Relating to Practical Experiences

Chapter 4

Analysis

4.1 Financial Analysis:

4.2 Financial Statements:

4.3 Balance Sheet

4.4 Income Statement

4.5 The Objectives of Financial Statement Analysis:

Internship Report
On The
Bank of Punjab