Internship report of the Bank of Punjab

Virtual University of PakistanEvaluation Sheet for Internship Report

SPRING 2014FINI619: Internship Report (Finance)

Credit Hours: 3Evaluation CriteriaResult

Report writingPass

Presentation & Viva voce

Final Result

Name of Student: Mustansar Azim

Students ID: Mc110202847

PassDear Mustansar,

Your report has been evaluated and accepted. You have done a Good work. Carefully read Lesson No.6 and prepare your presentation slides accordingly. Template of PPTs is available in downloads link for your guidance about how to prepare the presentation slides. Very soon an assignment will be opened for PPTs submission. Regularly check course announcement and assignment page for this.

Prepare well for your presentation & viva voce session just like you prepared your internship report.

Important Points:You should read your report thoroughly at least 3 to 4 times or until you understand all the details given in it before delivering the presentation.

You should clearly understand that how to interpret the results.

You should have full command on the activities that you have performed during your internship and mention in this report (in Training Program).

Keep checking your VU Gmail account. You will be informed about presentation and viva voce call by email.

For any relevant query and information, you can contact us via MDB, Email (fini619@vu.edu.pk), SKYPE and telephone (92-042-36373047-49 (Extension: 8855) in this regard.

You may also contact us via SKYPE. We are providing you additional facility for communication. You are advised to send us your SKYPE ID via your VU email so that we add and send you request. Also note your SKYPE ID preferably be your VU ID. Internship Report The Bank of PunjabA REPORT SUBMITTED TO THE DEPARTMENT OF MANAGEMENT SCIENCES, VIRTUAL UNIVERSITY OF PAKISTAN IN PARTIAL FULFIMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTERS IN BUSINESS ADMINISTRATION Submitted by:

Mc110202847 Mustansar Azim Spring 2014 05.08.2014 Department of management sciences,

Virtual university of Pakistan

Dedication

I would like to dedicate my work to my dear mother,

To her struggled life and daily household routine,

Inspired and motivated me

In every step of life

Acknowledgement

By the Grace of Almighty Allah, I have completed my internship period for the degree of MBA. First of all I am thankful to Almighty Allah for his countless blessings who is the most Merciful the most Beneficial.

I would like to acknowledge and thankful to all whom helped me during my student career. I would appreciate support and cooperation of my dear Mona, family and guidance of teachers. I would like to acknowledge all my Virtual university teachers for their great lectures and appreciate their efforts that able me today to reach at this stage.

I would like to acknowledge and appreciate to all staff of The Bank of Punjab for their kind cooperation and support. I would like to express my great appreciation to branch manager Mr. Nadeem Mirza.

I would like to offer my special thanks to branch operation manager Mr. Mlik Amjad, Mr. Irfan Kyani and cashier Mr. Raja Jhanzaib for their kind support and guidance for the completion of this paper. I am particularly grateful for the assistance provided by Mr. Mohsin in remittances and clearing departments.

Executive summary

This is an internship report of The Bank of Punjab, its brief history, product line, introduction of its different departments; its last three years ratio analysis, conclusion and recommendations according to mine learning and understanding during internship program.

I have used primary (such as direct observation and discussion with bank staff) as well as secondary data (such as annual reports, brochures of bank and internet) for the preparation of the report.

During my training session I observed that the customers are ignored due to work burden which would be due to poor management therefore there should be training program for employees monthly. Technology is old and should be improved for efficient and effective operation.

Ratio analysis is used as a method of analysis and it includes net profit margin, debt ratio, debt to equity ratio, return on assets, return on equity, spread ratios, price earning ratio and earning per share etc. All the calculations and working can be found in ratio analysis part.

Result of data analyzed show that an increasing trend in net profit margin, gross spread ratio, spread ratio, non interest to interest income, return on asset and return on equity. Debt ratio is too much high. Equity is too much low. Advance to deposit ratio, times interest earned, operating cash flow ratio and earnings per share is not in good position and declining.

The report found, that the organization is growing and not in very strong position yet. The major weak areas require future investigation and diagnosis of problem and then remedial action by management.

Recommendations discussed include that the bank can improve its profitability by:

Increasing equity

Increasing advances

Decreasing non performing loan and interest expense

Decreasing debt

Improve its operation for the improvement of operating cash flow

Table of contentChapter.1. Brief introduction of organizations business sector 112. Overview of the Organization 13 a. Brief history 13 b. Organizational Hierarchy chart .. 14 c. Business volume (Total number of stock, shares, bonds/ commodities, future contracts planned for a particular period, etc.). . 15 d. Product lines . 16 e. Competitors.....17

f. Brief Introduction of all the departments 18 g. Comments on the organizational structure ........................ 22Chapter.3. Plan of my internship program 23Chapter.4. Training program 26a. Reason for selecting the organization: Why did you choose this specific organization (the organization in which you done your internship) and how

Will it benefit your career goals...26b. Duties performed: Describe in detail the duties and responsibilities that you have performed during your internship either on daily or periodical basis i.e. on weekly basis 27OR

Describe in detail the description of the project (s) assigned to you during the internship program

Chapter.5. Learning experiences 34 a. Knowledge Gained: Briefly describe the knowledge you gained/acquired as a result of your training experience and relate this knowledge to what you learned in specific courses at Virtual University of Pakistan. .. 34 b. Skills Learned: Describe the skills and any career-specific abilities you increased during your training. Discuss any skills that you learned as part of a course at Virtual University of.. 34 c. Attitudes Observed/Values Gained..35 d. Most Challenging Task Performed35Chapter.6. Ratio analysis 36Chapter.7. Future Prospects of the Organization 62Chapter.8. Conclusion 64Chapter.9. Recommendations for improvement 66Chapter.10. References & Sources 68 entries found.

Brief introduction of organizations business sector

The bank of Punjab is a banking company and comes under banking sector. Banking companies ordinance 1962 section 5(b) define bank as, Banking means the accepting for the purpose of lending or investment of deposits of money from the public, repayable on demand or otherwise, an draw able by checks, drafts order or otherwise.

In other words a bank is a institution which accepts deposit on lower interest rate and give advances at higher rate of interest.

History

At the time of independence, the immediate task of the Government of Pakistan was to establish a Central Bank so it should have an independent currency and banking system. As the newly sovereign infant state had to tackle innumerable complex problems arisen on account of the Sub-continent, it was decided with India that the Reserve Bank of India would continue to act as the Central bank and currency authority for Pakistan till the establishment of its own Central Bank. The transitional arrangement of having one Central bank for two independent countries was promulgated by Governor General of undivided India on August 14, 1947 by an order called Monetary System and Reserve Bank Order 1947.

The Governor General of Pakistan late Quaid-e-Azam Muhammad Ali Jinnah issued order for the establishment of State Bank of Pakistan on 1st July, 1948. This order of 1948 has been substituted by the State Bank of Pakistan Act, 1956 which requires the Bank to regulate the monetary and credit system of Pakistan and to foster its growth in the best national interest with a view to securing stability and full utilization of the countrys productive resources and to perform not only the usual Central Banking functions but will also be entrusted with the prosperity, stability and growth of domestic economy.

Growth of banking in Pakistan

At the time of partition, the total number of commercial banks was 38, out of these the Pakistani banks were 2, Indian Banks 29 and exchange banks 7. The total deposits of Pakistani banks stood at Rs. 800.0 million whereas the advances were Rs. 198.0 million.

Commercial Banking in Pakistan

Commercial banks play a key role in the generation of economic, resource mobilization, short term self-liquidating loans to finance business, agriculture and industry. At the time of independence most of commercial banks were the branches of foreign banks. There were only two commercial banks, Habib Bank and Australasia Bank. With the establishment of State Bank there were visible signs of improvement in the banking and other financial institution in Pakistan.

The banking system of Pakistan now comprises commercial banks, foreign commercial banks, development financial institutions, and investment banks, leasing companies, discount houses and modarabas.

According to our countrys perspective which is still in the initial stages of economic development, a well organized banking system is the need of the day. There is acute shortage of capital in Pakistan. The banks can play an important role in promoting capital formation, in controlling speculation and in directing physical resources into desired channels.

In advanced countries of the world like America, Japan, Germany, the rate of capital formation ranges from 12% to 25% of their Gross National Product whereas in Pakistan the rate of savings has varied from 12% to 17.6% only. In order to accelerate the rate of economic development, the banks by launching a vigorous campaign both in villages and cities can mobilize the idle savings and can increase the investment rate.Overview of the Organization

a. Brief history

The Bank of Punjab was established in 16 November, 1989 pursuant of The Bank of Punjab Act 1989 and was given the status of retail bank in 1994. The Bank of Punjab was founded by Tajammul Hussain and it functions as a scheduled commercial bank. The Government of Punjab is a majority shareholder of the Bank of Punjab. It has a network of 334 branches in major business centers throughout the country. It is the 7th largest commercial bank of Pakistan. It provides a wide range of banking products and services including deposits, trade, industry and agriculture.

First Punjab Modarba (FPM) a wholly owned subsidiary of bank was established in 1992 and is being managed by Punjab Modarba services (Pvt) Ltd.

During the year 2013, The Bank of Punjab entered into a new era by setting up new Islamic Banking Operations.

b. Organizational Hierarchy chart

c. Business volume

2013 Rs. mn2012 Rs mn. 2011 Rs mn

Balance sheet

Total assets352698332111280998

Advances157286149605127130

Investments12395612951992581

Equity125771073310135

Reserves9051638638

Deposits306561266056237897

Borrowings228024468424964

Operating Results

Interest earned242282466620685

Interest expense202092252321073

Net markup income40192143(388)

Non-markup base income359631911990

Non-markup base expense528045583711

Provision against NPLs(673)(965)(3164)

Net profit/loss before tax30011404523

Net profit/loss after tax19381634348

Other information

EPS2.362.630.66

No. of branches334306284

Staff strength609254914999

Breakup value per/share5.584.824.55

d. Product lines Products and Services

The Bank of Punjab is offering a wide range of products and services, customized to the needs of respective target markets, through its nationwide network. The Bank keeps a close eye on its product lines and regular revamping takes place in a line with market dynamics.

Retail Banking

PLS saving bank account

PLS pension direct account

PLS saving profit plus account

BOP senior citizen saving account

Corporate premier account

PLS supreme saving account

Current deposits-------- BOP Tijarat Account

BOP Life current Account

BOP Salary plus Account

Saving Deposits

Term deposit

Agriculture credit department

Corporate banking

Commercial banking

Islamic Banking

Payment services

e. Competitors

Muslim Commercial Bank

Allied Bank Limited

United Bank Limited

Habib Bank Limited

Faissal Bank Limited

Bank Alfalah

Askari Bank

Summit Bank

f. Brief Introduction of all the departments

Departments of the Bank of Punjab

The Bank of Punjab as a whole organization has following important departments:

Retail Banking Department

Corporate Department

Special Asset Management Department (SAM)

Credit Administration Department

Credit Risk Management Department

Marketing Department

Operation Management Department

Human Resource Management Department

Finance Department

Information Technology Department

Audit and Inspection Department

Law Department

Retail Banking Department

Retail banking department deals with its individual and corporate customers. It deals with day to day transaction. It provides different kind of product and services such as PLS saving accounts, corporate and individual accounts, credit card, and debit card ATM cards etc.

Corporate and Investment Department

Corporate and investment department deals with relationships with their corporate customers and also deals with making decision regarding investments in different portfolios.

Special Asset Management Department (SAM)

While recognizing the importance of early regularization of NPLs, a comprehensive strategy has been implemented to recover and restructure the NPLs by ensuring adherence to the following principles:

Banks approved credit policy manual

SBP guidelines and prudential regulations

Where applicable, prior due diligence to ensure acceptable NPV/IRR

Credit Administration Department

Credit administration department deals with credit. Its main function is to facilitate and monitor the individual and corporate loans.

Credit Risk Management Department

Corporate Risk management is a structured and disciplined approach aligning strategy, people, processes, technology and knowledge for evaluating and managing uncertainty that an organization faces as it creates value. The banks risk strategy is based on clear understanding of various risks, disciplined risk assessment and measurement procedure and continuous monitoring. The policies and procedures established for this purpose are continuously benchmarked with best practices and SBP guidelines.

Marketing Department

For the preparation and implementation of marketing strategy, the organization has a separate marketing department for the fulfillment of needs of customers.

Operation Management Department

Operation management department controls processes for the convenience of customers. It controls cash activities, cheques, clearing remittances and other activities.

Human Resource Management Department

The Bank of Punjab, while recognizing the importance of effective Human Resource management system, has implemented comprehensive HR policies with a view to encourage a healthy competitive working environment. Human Resource strategies of the bank are based on the principles of merit, transparency and equal opportunity for all to help transform individual hard work of staff members into cohesive team effort.

The Human Resource Policies have been formulated in a manner to ensure recruitment of best talent available in the market, continuously imparting quality training and patronage of the career of each staff member. The overall goals set in the Strategic Business Plan are broken into individual goals and communicated down the line with a comprehensive mechanism of monitoring Key Performance Indicators (KPIs). The Human Resource polices ensure that each and every staff contributing toward the achievement of organizational goals is adequately rewarded.

Finance Department

Finance department deals with all financial matters of the organization. It includes the decisions related to investments capital budgeting and capital structure etc.

Information Technology Department

The bank fully acknowledges the role and importance of information technology in the modern banking. The Bank has a network of 334 online branches along with 166 ATMs to help customers enjoy the convenience of 24/7 banking services. The branch network has been provided with backup connectivity arrangements to ensure uninterrupted online services to the clients. Further, the Bank has a comprehensive IT Security Policy to ensure safety of customers data and facilitate execution of banking transactions in a secured environment. A Disaster Recovery Site has also been established in line with the Business Continuity Plan of the Bank. A robust Management Information System has been made available by the Banks IT Division, providing timely and valuable information to assist the Management in decision making. In order to further strengthen its core banking operations, the process for acquiring of a state of the art core banking software is in progress.

Audit and Inspection Department

Internal audit and inspection department deals with the annual audit relevant to financial statement as well as the personnel.

Law Department

Law department deals with the lawsuits against organization. Competent and prudent lawyers hired for this purpose.

g. Comments on the organizational structure

The structure of The Bank of Punjab is fulfilling the requirement of an organization. The management of bank is fully aware and understands the international as well as national level change in economy therefore; they arrange and organize their hierarchy according to this change.

The Bank of Punjab is structured as divisions and departments and each and every division and department controlled by its head or manager. Each department reports to central department, central department reports to the head office. Communication among departments and head office and between department is very easy and friendly therefore, very effective.

Plan of my internship program I did my internship at The Bank of Punjab GTS chock cantt. Branch Jhelum. The branch code is 2110.The branch is fully centralized through computerized system. The branch operations are controlled by branch manager. Operations of branch are managed by operation manager with the help of other officers and cashiers. Following is the hierarchy of branch:

The bank of Punjab Jhelum cantt. Branch has following departments:

Remittances department

Clearance department

Advance department

Cash department

Accounts departmentStarting and ending dates of internship programI started my internship program on 06 June, 2014 and ended it 18 July, 2014.

Names of departmentsS no. Department week Date

1Introduction to General Banking 1 6-13 June

2Account opening 2 13-20 June

3Remittances and Clearing 3- 420 June 04July

4

5Cash department

Deposit &Marketing 5

6 04- 11 July

11 - 18

The duration of internship was 6 weeks and I have got almost awareness of all the major departments of a branch.

In week one, I was introduced to all the staff of the branch and observe how the work is taking place in it. In this starting week I learned how to fill a debit, credit voucher and cheque.

In week two, I got training in account opening department. I learned here how to open an account, how to operate and close an account.

In week three and four I worked in remittances department. Here I learned how to make a remittance instrument and observed its entry in the system.

In week four, I worked with clearing department where I learned inward and outward clearing process.

Finally week five, I got training in cash department where I learned how cash received and making payment to customers.In last week I revised all the activities done during training and got experience of deposit and marketing. I visited a customer at his work place for deposit with the branch manager. Here I also learned marketing techniques.

Training program a. Reason for selecting the organization:

Internship would be a capstone experience for a student which gives the opportunity to integrate the knowledge and practical experience simultaneously before face to real work environment. It provides a ground for students to enhance their managerial as well as analytical skills in real life work environment under experienced supervision.

Following are the main reasons for the selection of the organization:

As the Bank of Punjab is a government organization and due to a lot of work, a student can learn a lot here.

To get practical exposure of working environment

To get practical experience of computerized environment

To enhance the interpersonal communication skills and how to handle the stressful condition in work place

To get practical observation of organizational hierarchy and communication process between the organization

To integrate the theoretical knowledge and real world work place

To enhance my understanding about banking and its role in developing economy

My internship program will be very helpful and beneficial in my career. I learned here how an organization runs. Here I cleared a lot of concepts with practical experience. I learned and observed technical aspects of many courses which I was studied during study. I enhance here my interpersonal communication skills, managerial skills and leadership qualities which would be benefit me in my future career. During training I learned moral values and business ethics which would be also helpful in my career.

b. Duties performed:

sS no. Department week Date

1Introduction to General Banking 1 6-13 June

2Account opening 2 13-20 June

3Remittances and Clearing 3- 420 June 04July

4

5Cash department

Deposit &Marketing 5

6 04- 11 July

11 - 18

I started my internship on 6th June, 2014 and ended it on 18 July, 2014 at the Bank of Punjab. In first week I was introduced by operation manager to all the employees and told me their designation and visited to all the departments. The branch operation manager briefed me about some rules and regulations about branch. He told me working hours and working days of branch. He said to me that I should stay on reception at least a week for the better understanding of branch working. First week I learned how to fill a debit voucher, credit voucher and a checque. I learned how to communicate with seniors and how to deal and convince the customers. This first week provide me a ground for next weeks where I worked real work of banking.

Account opening department

In second week from 13 June to 20 June 2014, I worked in account opening department. Here I learned how to open an account for new customer or close the account for existing one.

Types of accounts

There are basic three types of accounts:

Current account

Profit and loss account

Fixed account

Types of account holder:

Following are the main categories of accounts:

Individual account

Joint account

Partnership account

Company account

Club, society, Association or Trust account

Individual account

Any individual or proprietor of a business can open an individual account in the Bank of Punjab. This account only operated by individual. Individual has to an account opening form, a copy of National Identity Card, if a person is illiterate than two passport size photos are also required.

Joint account

When more than one person opens a single account it is called a joint account. The names of both persons are written on the title of account. It would be operated by both persons.

Partnership account Partnership account can be opened with Bank of Punjab. Account title will be the name of partnership firm. Copy of partnership deed, copy of registration certificate and authorized signature of partners are the requirements of the partnership account.

Company account Private and public limited companies can also open an account with bank of the name of company. Following documents are required to open an account for companys name:

One copy of certificate of incorporation

Memorandum and Article of Association

List of directors of company

Copy of board resolution

The companys certificate of commencement of public company

Signature specimen cards

Club, society, Association or Trust account

Any club, society, association or trust can open a bank account at their name.

Account opening procedure

Following are the essential steps for account opening:

Account opening form:

When the customer approaches to bank for account opening of any kind, an account opening form is provided and filled by him. He/ She should have fill in the form the required information being asked in different sections in the form. Form has to be signed by customers at different section of the form by the account opening officer.

Completion of form:

Account opening form is rechecked by bank officer and than verified by branch operation manager.

Signature specimen card (SSC):

Signature specimen card is compulsory for opening the any bank account. This car holds the authorized signatures of all account holders for a particular account. After taking two signatures on the card, the card is verified by the bank officer. After this verification SSC is uploaded on database where it is used whenever it is required.

Computerized verification of customer:

All customers identity and record is being verified through online verification system by bank officer. An online database is provided by NADRA to the bank to verify each customer.

Verification

After fulfilling the entire requirement, the form is verified by branch operation manager and branch manager. Than all information and data is uploaded on banks operating system. After being uploaded the information by operation manager, the system allots the account number to the customer against his request.

Issuance of letter of thanks

After account being opened, a letter of thanks is issued to customer for his interest in banks services.

Issuance of cheque book:

The cheque book request is uploaded online. It is issued by branch itself within a week. Issuance of ATM card:

The Bank of Punjab provides the ATM facility to its customers. They can withdraw their money any time through ATM machines. For the issuance of ATM, either customer has to mark the option on account opening form while submission, otherwise an additional form is filled by him. In 10 to 15 days branch will receive ATM from head office which is given to customer.

Procedure for closing an account:

If a customer wants to close his/ her account he should fill up a account closing form and sign then after taking the approval by branch manager, the account would be closed.

Remittances and Clearing department:

I worked in remittances and clearing departments from 20 June to 04 July. The bank of Punjab also provides the facility to transfer money. Following instruments are used for transferring money.

Demand draft (DD)

Pay order

Telegraphic Transfer (TT)

Mail Transfer (MT)

During internship I learned and introduced all these instruments. I observed that how to make DD, pay order, TT and MT. DD is a written order to pay certain amount by the bank branch on behalf of customer to other bank branch. The customer fills the application form which include sender name, beneficiary name and account number. The customer deposits the amount of deposit than DD is given to customer.

Pay order are issued for local or with in city for the transfer of money.

TT is instant transfer of funds. Customer can transfer funds from one place to other place through telecommunication. MT is the transfer of funds from one place to other place in the shape of document through mail. Its procedure is similar to TT.

I also worked in clearing department. Here I observed how clearing of cheques takes place. A national institutional facilitation technology (NIFT) is a leading service provider in IT industry for modern payment system in Pakistan. The major function of clearing department is to receive the cheques which are drawn on some other banks. The bank accepts the cheques and collects the amount drawn by other bank through clearing. The bank charges some fee for providing this service.

Cash department

I also got some experience of cash department. I worked here from 04 July to 11 July 17, 2014.Cash department consists of three main parts. Cash receipt, Token department and cash payment. One cashier for cash receipt, one cashier for cash payment and a officer for assigning token number are work in this department.

Deposit and Marketing departmentI got working experience of deposit and marketing department from 11 July to 18 July 17, 2014. Here I observed how to convince a customer to deposit their funds. Customers of foreign remittances are specially target for the deposit. I also went with manager to a customer for the collection of deposit. In this department I also learned marketing techniques.

Learning experiences:a. Knowledge Gained:

The internship program was the practical and real experience of all the courses that I was studied at Virtual University of Pakistan.

As I completed my internship program in a banking organization, in this regard the money and banking course taken at Virtual University was very helpful to me. I learned

about money and financial system and how they work collectively in an economy. I gained knowledge about banking industry and how it works for the growth and development of countrys economy. I experienced and analyzed the financial statements of a bank.

b. Skills Learned:

.I learned and enhanced my communication and managerial skills during my internship program. I observed the practical applications of basic and advanced accounting concepts which I was learned during my study at Virtual University of Pakistan. I got practical exposure of my specialization subjects to real life financial statements analysis. I practiced how to analyze and interpret the annual reports for different users for better decision making.

I enjoyed the computerized environment of the bank and saw practical working of concepts which I studied in the subject introduction to computing and information system during study.

I observed and enjoyed the knowledge and practical experience about the organizational behavior which was subject and part of our course. In this scenario, I got experience how to work with diverse work force with different backgrounds. I learned that how to work within the team and as a team player how to perform well.

In nutshell, the internship program was a real life and observed experience of all the courses which were the part of our course at Virtual University of Pakistan.c. Attitudes Observed/Values Gained:

During my internship program I gained some golden values which would be helpful for the success in my career even throughout life. Hardworking is the value which I observed and learned from all banks staff. I learned integrity and honesty from the seniors during internship. I learned motivation and cooperation during work. I learned how to remain calm and work effectively during stressful working environment. d. Most Challenging Task Performed:

I think internship program was itself a challenging task. In first week it was very difficult to me to face customers. In first week I did my duty at reception where I engaged in so many customers. The most challenging and difficult task was to convince the customers to open an account in this bank which has already account in another bank.

Ratio analysis

Ratio analysis is very helpful tool for internal (Managers, employees etc) as well as external users (Creditors, shareholders and customers etc).

Internal users use ratios for planning control and to understand that how firm can get its funds from various sources.

External users like trade creditors focus on liquidity of firm, bondholders focus on long term cash flow of the firm and shareholders focus on profitability and long term health of the firm.

I did financial statement analysis of The Bank of Punjab for the years of 2011, 2012 and 2013. I got these statements from annual reports. Annual reports were downloaded from the web site of the Bank of Punjab.

1. Net Profit marginNet Profit = Profit after TaxationsTotal Revenue = Markup/return/interest earnedFormula:

Net Profit margin = Net Profit/ Total Revenue* 100 Year 2011 Year 2012 Year 2013

347973/20685011*100=

1.68 % 1633841/24666024*100=

6.62 % 1938007/24227721=

7.80 %

Working: Net profit and total revenue is taken from the profit and loss account

Interpretation:

Net profit margin is increasing from previous two years as shown in graph. In 2011, the net profit margin was very low which was 1.68% then later years 2012 and 2013 it was increased. Higher profit margin indicates more profitable the company. It also shows that the company has better control over its cost. The bank has controlled its expenses in 2013 as compared to previous years therefore as a result increase in net profit margin.2. Gross Spread RatioGross Spread Ratio= Net Markup Margin / Interest Earned Year 2011 Year 2012 Year 2013

(388260) / 20685011*100=

-1.88 % 2143106 / 24666024*100=

8.69 % 4019034/ 24227721=

16.59 %

Working: Net Markup Margin = Markup/ Interest Earned - Markup/ Interest Expense

2011= 20685011 21073271 = (388260)

2012= 24666024 22522918 = 2143106

2013= 24227721 20208687 = 4019034

Interest Earned = 2011= 20685011

2012= 24666024

2013= 224227721

Interpretation:The graph is showing that the gross spread ration of BOP for the FY2011, 2012 and 2013 is respectively -1.877, 8.688 and 16.588 which is showing an increasing trend. This is good sign for the BOP. The management has controlled its interest expense.3. Spread Ratio Spread Ratio= Interest Earned/Interest expense

Year 2011 Year 2012 Year 2013

20685011/21073271*100=

0.98 times 24666024/22522918*100=

1.09 times 24227721/20208687=

1.19 times

Working: Interest Earned and Interest expense are taken from profit and loss account

Interpretation:The graph is showing the spread ratio for the FY2011, 2012 and FY2013 which is 0.98, 1.09 and 1.19 times respectively. An increasing trend is shown in the graph which is showing that management has controlled its interest expenses as compared to interest earnings.4. Non-Interest income to Total Income Ratio

Non-Interest Income to Total income ratio = Non-interest income / Total interest income Year 2011 Year 2012 Year 2013

1989708 / 22674719 *100=

8.78 % 3190745 / 27856769 *100=

11.45 %3596226 / 27823947 * 100=

12.92 %

Working:

Total income = total non interest income + total interest income2011 = 1989708 + 20685011 = 22674719

2012 = 3190745 + 24666024 = 27856769

2013 = 3596226 + 24227721 = 27823947Total non interest income

2011 = 1989708

2012 = 3190745

2013 = 3596226

Interpretations:The graph is showing a positive trend in non interest income to total income which was 8.78 %, 11.45 % and 12.92 % for the FY2011, 2012 and 2013 respectively. It is showing that how non mark up income like commission, brokerage income, fees and other bank charges contributing in banks profit. It is a good indicator for bank.5. Return on AssetsNet Income = Net profit after tax

Average total Assets= Opening assets + closing assets / 2

Formula:

Return on Assets= Net Income/ Average Total Assets*100 Year 2011 Year 2012 Year 2013

347,973/255,093,902*100=

0.14 % 1,633,841/306,554,292.5*100

= 0.53 % 1,938,007/342,404,599.5*100= 0.57 %

Working: Items taken from profit and loss account and Balance sheet

Net income for FY2011: 347,973

Net income for FY2012: 16, 33,841Net income for FY2013: 1,938,007Average total assets = Opening assets + closing assets / 2

Average assets for FY 2011: 229,190,273 + 280,997,531 / 2

= 255,093,902

Average assets for FY 2012: 280,997,531 + 332,111,054 / 2

= 306,554,292.5Average assets for FY 2013: 332,111,054 + 352,698,145 = 342,404,599.5

Interpretation:

Return on Assets (ROA) is a measure of profit per dollar of assets. An increasing trend on ROA but the ratio is very low yet. The company earns 0.57 % on each rupee of investment so the earnings of year 2013 are greater and growing than previous years. It is indicating that the management is not utilizing its assets efficiently. 6. The Du Pont Return on AssetsDupont Return on Assets =

Net Profit / Net Sales * Net Sales / Average total Assets or = Net profit margin * Total asset turnover

Average total Assets = according to balance sheet Year 2011 Year 2012 Year 2013

1.68 % * 0.08 =

0.14 % 6.62 % * 0.08 =

0.53% 7.80 % * 0.07 =

0.55 %

Working: Net Profit margin

2011 = 1.68 %

2012 = 6.62 %

2013 = 7.80%

Net Sales / Average total Assets

2011 = 20,685,011 / 255,093,902 = 0.08 times

2012 = 24,666,024 / 306.554, 292.5 = 0.08 times

2013 = 24,227,721 / 342,404,599.5 = 0.07 times

Interpretation:

The graph is showing the ratio of the dupont return on assets for the FY2011, 2012 and FY2013 which is 0.14 %, 0.53 % and 0.57 %. The ratio is very low but and upward trend. The management is not utilizing its assets for the generating the revenues.7. Return on EquityNet income = net profit after taxation

Total Equity = total shareholders fund

Return on Equity=Net Income/ Total Equity

Year 2011 Year 2012 Year 2013

347973/ (6864911)*100=

-5.07 % 1633841/(6266957)*100=

-26.07 % 1938007/576748*100=

336.13%

Working:

Net income is taken from profit and loss account and total equity is taken from balance sheet

Total equity = share capital + reserves + UN appropriated profit / loss 2011 = 5287974 + 1914956 + (14067841) = (6864911)2012 = 5287974 + 1187433 + (12742364) = (6266957)2013 = 10551132 + (263158) + 1539659 + (11250885) = 576748

Interpretation:

Return on equity (ROE) is a measure of profit per dollar of equity. The graph is showing the ROE for the FY 2011, 2012 and FY2013 is-5%, -26.07% and 336.13%respectively. In last two years ROE was negative but in FY2013 an increasing trend on ROE. 8. Total Debt Ratio Total Debt Ratio = Total Debt / Total Assets

Year 2011 Year 2012 Year 2013

270244941/280997531*100=

96.16 %319739551/332111054* 100=

96.27 %339216847/352698145 *100=

96.17 %

Working: Items taken from Balance sheet

Total Debt = bill payable + borrowing from financial institutions + deposits and other accounts + liabilities against finance lease + other liabilities

2011 = 850569 + 24963566 + 237896700 +7831 +6506275 = 2702249412012 = 1500709 + 44683826 + 266055781 + 3601 + 7495634 = 3197395512013 = 1506335 + 22802482 + 306560767 + 2386 + 8344877 = 339216847Total Assets = cash and balances with treasury banks + balances with other banks + lending to financial institutions + Investments + Advances + operating fixed assets + other assets

2011 = 16698333 + 3607107 + 7447375 + 92581306 + 127129501 + 3597483 + 13886769 +16049657 = 280997531 2012= 17298251 + 3101170 + 1562946 + 129518999 + 149605002 + 3473491 + 13070614 +14480581= 332111054 2013 = 23820864 + 4265296 + 11407448 + 123956143 + 157285598 + 3514801 + 12627352 + 15820643 = 352698145

Interpretation:

Debt ratio is the measure of debt with the total assets. The Bank of Punjab has almost 96 % debt against its total assets from last three years. Which means BOP financing more through debt and it is too high and not good indicator for the BOP. The higher this ratio indicates the higher the financial risk.9. Debt Equity Ratio

Debt Equity Ratio= Total Debt / Total Equity

Year 2011 Year 2012 Year 2013

270224941/(6864911)=

-39.4 times 319739551/(6266957)=

-51.09 times 339216847/576748=

588.15 times

Working:

Items taken from Balance sheet

Total Debt = bill payable + borrowing from financial institutions + deposits and other accounts + liabilities against finance lease + other liabilities

2011= 850569 + 24963566 + 237896700 +7831 +6506275 = 2702249412012= 1500709 + 44683826 + 266055781 + 3601 + 7495634 = 3197395512013= 1506335 + 22802482 + 306560767 + 2386 + 8344877 = 339216847Total equity = share capital + reserves + UN appropriated profit / loss 2011 = 5287974 + 1914956 + (14067841) = (6864911)2012 = 5287974 + 1187433 + (12742364) = (6266957)2013 = 10551132 + (263158) + 1539659 + (11250885) = 576748

Interpretation:

As discussed in debt ratio that the debt is too much high. In debt- equity ratio we compare debt with equity. As graph is showing, an increasing trend of debt-equity ratio. Debt exceeds 588.15 times in 2013 which is very critical situation for company.10. Times Interest Earned Ratio Times Interest Earned Ratio = EBIT / Interest

Year 2011 Year 2012 Year 2013

21596018 / 21073271=

1.02 times 23926810 / 22522918=

1.06 times 23209969 / 20208687=

1.15 times

Working: Items taken from profit and loss account

EBIT = Profit before Tax + Interest expense

2011 = 522747 + 21073271 = 21596018

2012 = 1403892 + 22522918 = 23926810

2013 = 3001282 + 20208687 = 23209969

Interest = 2011 = 21073271

2012 = 22522918

2013 = 20208687

Interpretation:

Times Interest Earned (TIE) ratio refers to the ability of the firm to cover its interest obligations from EBIT. The graph is showing that the TIE of BOP for the FY2011, 2012 and FY2013 is 1.02, 1.06 and 1.15 times respectively which should be at least 1.5. The company has not (very low) enough EBIT to meet its interest expenses. TIE of company is not in good position.11. Advance / Deposit Ratio

Advance / Deposit Ratio = Net Advances / Total Deposits Year 2011 Year 2012 Year 2013

127129501/237896700=

0.53 times 149605002/266055781=

0.56 times 157285598/306560767=

0.51 times

Working: items taken from balance sheet

Interpretation:

The advance to deposit ratio is used to calculate a lending institutions ability to cover widrals made by customers. The graph is showing that the advance to deposit ratio of BOP for the FY2011, FY2012 and FY2013 which was 0.53, 0.56 and 0.51 times respectively. These indicate that the BOP is not using its deposits efficiently in advancing to borrowing. The ratio should be 1:1. 12. Operating Cash Flow Ratio

Operating Cash Flow Ratio = CF from Operation/ Current Liabilities Year 2011 Year 2012 Year 2013

32984625 / 203709219=

0.16 times20546543 / 241238175 =

0.09 times3,731,609 / 247,832,961 = 0.02 times

Working:

Cash flow from operation (taken from cash flow statement):

2011 = 329846252012= 205465432013= 3731609 Current liabilities are taken from maturities of assets and liabilities

2011 2012 2013

Bill payable85056915007091,506,335

Borrowings2405589943968561220,664,408

Deposits172757623190565772219,222,506

Portion of liabilities against assets finance lease402610841,270

Other liabilities604110253020495,036,442

Total203709219241238175247,832,961

Details of Current liabilities for FY2011

Up to 1 monthOver 1month to 3 monthsOver 3 months to 6 monthsOver 6 months to 1 year

Bills payable 850,569 850,569

Borrowings 19,456,240 2,879,451 1,652,900 67,30824,055,899

Deposits and other accounts 38,876,481 45,516,576 38,553,721 49,810,845 172,757,623

Liabilities against assets subject to finance lease 323 660 1,022 2,021 4,026

Deferred tax liability - - - - 0

Other liabilities5,439,033 - -602,069 6,041,102

Total current liabilities 203,709,219

Details of Current liabilities for FY2012

Up to 1 monthOver 1month to 3 monthsOver 3 months to 6 monthsOver 6 months to 1 year

Bills payable 1,500,709 1,500,709

Borrowings 38,017,652 3,281,043 2,561,926 7,940 43,868,561

Deposits and other accounts 45,984,904 46,197,025 47,609,208 50,774,635 190,565,772

Liabilities against assets subject to finance lease 84 171 266 563 1084

Deferred tax liability - - - - 0

Other liabilities 4,779,158 25,514 - 479,377 5,302,049

Total current liabilities 241,238,175

Details of Current liabilities for FY2013Up to 1 monthOver 1month to 3 monthsOver 3 months to 6 monthsOver 6 months to 1 year

Bills payable 1,506,3351,506,335

Borrowings14,833,2284,979,0672,243,41710,69622,066,408

Deposits and other accounts62,249,48358,503,52846,700,45051,769,045219,222,506

Liabilities against assets subject to finance lease982013116601270

Deferred tax liability - - - - 0

Other liabilities4,529,3582,3332,852501,8995,036,440

Total current liabilities247,832,961

Interpretation:

The graph is showing the operating cash flow ratio for the FY2011, FY2012 and FY2013 which is 0.16 times, 0.09 times and 0.02 times respectively. The graph is showing the downward trend from previous two years. The ration is less than 1 which means the organization is not generating enough cash from its operation to meet its liabilities13. Dividend P/ Share

In last three years the bank of Punjab had not paid any dividend to its shareholders.Interpretation:Due to some losses in previous years the bank of Punjab is not in position to announce dividend to its shareholders which is not good sign for the company.The BOP has not enough earnings to pay its shareholders.

14. Earning Per ShareEarning Per Share = Net Income / Total Share Outstanding

Year 2011 Year 2012 Year 2013

347973/528797=

Rs. 0.66 1633841/ 528797=

Rs. 3.09 1938007/ 10,55,113 =

Rs. 1.84

Working:

Interpretation:

The graph is indicating EPS for the FY2011, FY2012 and FY2013 is 0.66, 3.09 and 1.84 respectively. An improving trend was seen in 2012 where EPS increased 3.09 from 0.66 then again in 2013 decrease at Rs. 1.84.15. Price Earnings Ratio Price Earnings Ratio = Current Market Price p/share/ EPS

Year 2011 Year 2012 Year 2013

5.41 / 0.66 =

8.20 times 10.7 / 3.06 =

3.50 times 11.02 / 1.84 =

6.0 times

Working:

Current market price per share is taken from www.kse.com.pk

Interpretation:

The graph is indicating price earnings for theFY2011, FY2012 and FY2013 is 8.20 times, 3.50 times and 6.00 times respectively. The graph is indicating the upward trend in price earning ratio. This is the price which the market is willing to pay for its earnings. This is good for company.Future Prospects of the Organization

The government of Punjab is the majority shareholder of the bank of Punjab. The bank of Punjabs future is attached with government policies and economic factors. In past, the bank had faced financial crisis and loss. In recent previous two years the government of Punjab supported the bank therefore; it is growing toward growth and prosperity gradually. The management has the strategies and policies to maintain growth towards all prospects of business and achieve the benchmark performance.

The bank had increased its net markup income in 2012 and 2013 as compared to previous years. The bank has decreased the non performing loan, increased the non interest income. The bank has increased the number of branches in the remote areas. It has also increase the product range according to need of customers and with market change. The bank has increased its total assets in preceding years. As the capital adequacy ratio remained below from last three years, but Government of Punjab as majority shareholder of bank had injected equity to regain its equity at minimum level prescribed by the State bank of Pakistan. For the efficient and effective operations the bank had increased its human capital. It had arranged the training program according the need and change in the market scenario.

Keeping in view of previous two years trend, I can say that the banks management has the strategies for growth and for this purpose the government of Punjab is playing a supporting role. It is a good sign for the growth and development of bank. The management has the plan the new products for their customers and expanding their geographical reach to remote areas. Introducing Islamic banking, online banking and SMS banking are good step for the growth of organization. The following new projects are in progress and expected to made operational in 2014

SMS banking

Utility bills payment system

POS acquiring network

Branchless banking

Internet banking

Mobile banking

In future the bank will follow its strategies for business expansion, improvement in asset quality, efficiency in internal control, rebuilding the brand image and strengthening the equity base. Conclusion

During internship, I concluded following problems related to my training and organization internal structure.

Old technology and methods are used in operations and work environment.

Customers are ignored

No proper human resource department

Communication between junior and high rank staff is poor

Staff is lethargic and lack of motivation

Trainees and interns are not properly guided

According to the ratios conducted from the FY2011, FY2012 and FY2013 following are the conclusions: The net profit margin of the bank of Punjab is growing and increasing every year which is good indicator for organization.

Gross spread is good and improving every year because management controlled its interest expenses. Spread ratio is also good and improving every year because it meets its interest expenses.

Non interest income is increasing every year and non interest income to total income is increasing and good for bank.

Return on assets is low and increasing.

Du Pont on return on asset is also very low increasing trend.

Return on equity is good and has increasing trend from previous years

Debt ratio is very high for all years

Debt to equity ratio is extremely high.

Times interest earned is not good and improving.

Advance to deposit ratio is not good and very low

Operating cash flow ratio is very low

Dividend is not paid from previous three years which is not good and not attractive for investors.

Earnings per share declined in FY2013. Price earnings ratio is good and increasingRecommendations for improvementFollowing steps should be taken to improve the internal operation and maintain the image of the organization:

There should be up gradation of technology and structure the environment friendly to workforce for effective and efficient work.

Customers should be first priority. There should be customers relationship management department in every branch level for the satisfaction of customers need and wants.

Employees are the human capital for any organization and should be managed properly therefore, there should be a human resource management department in every branch level to observe their needs proper guidance.

There should be a smooth way of communication through out the organization. Suggestions from employees should be encouraged and managed.

There should be training sessions monthly. Job rotation should be done to avoid boredom.

Interns are the future of any industry therefore; there should be proper department for their coaching and encouragement.

In nutshell, as a financial analyst I would like to give some recommendations from improvement as per my understanding:

The bank of Punjab can increase its profitability to decrease the non performing loans and advances and non interest expenses.

The BOP can increase its spread ratios to decrease the interest expense.

The management should utilize its assts to increase and improve return on assets and the du pont on return on assets.

The BOP should decrease its debt ratio as well as debt equity ratio. High debt ratio and high debt equity ratio leads to high leverage and high financial risk which could cause bankruptcy so BOP should decrease its debt to increase the equity.

BOP should increase its advances to earn more profit from its deposits for the improvement of profitability. The BOP should increase its operating cash flow with improve its operation and improve its liquidity to reduce its short term borrowings.

References & Sources

Financials . (n.d): The Bank of Punjab: Retrieved June 15, 2014, From : http://bop.com.pk/view.aspx?id=1106Nasir, M.S (2009). Money Banking and Finance, Faisalabad, ; Wasim Azam

Chairman

Director

Director

Director

Director

Director

President

Director

Audit

Committee

Chairman

Secretary

to

The Board

Member

Member

Branch Manager

Officer

Grade I

Officer

Grade II

Business development officer

Cashier

Cashier

Branch Operational Manager

PAGE 69

_1333935460.xls

_1333935757.xls

_1333936361.xls

_1467065990.xls

_1468687344.xls

_1334089876.xls

_1333935983.xls

_1333936144.xls

_1333935607.xls

_1333935676.xls

_1333935533.xls

_1333935274.xls

_1333935391.xls

_1333934841.xls