Chapter # 1

Introduction

[1]

ZTBL History

Zarai Taraqiati Bank Limited (ZTBL) erstwhile Agricultural Development Bank of Pakistan

(ADBP) is the premier financial institution geared towards the development of agriculture sector

through provision of financial services and technical knowhow. The restructuring of former

ADBP is being carried out with the aim to uplift the agriculture and rural sector by raising farm

productivity, streamlining the institutional credit and increasing income generating capacity of

the farming community. ZTBL was incorporated as a Public Limited Company on 14th

December, 2002 through repeal of ADB Ordinance of 1961.

The new corporate structure redefines the bank's status as a public limited company registered

under companies Ordinance'1984 with an independent Board of Directors which aims at

ensuring good governance, autonomy, delivering high quality

ZTBL is a key R.F.I of Pakistan providing affordable, rural and agriculture financial/non-

financial services to the rural Pakistan, comprising 68 % of the total population. The Bank

through a country-wide network of 358 branches is serving around half a million clients annually

and over one million accumulated account holders with the average loan size of around

Rs.89,000 serving 65%, 31% & 4 % of subsistence, economic and large growers respectively.

The total assets of the Bank stand at Rs.84 billion with authorized capital of Rs.25 billion as of

31.12.2005, with a nation-wide working strength comprises 5500 employees. The share of ZTBL

in total national institutional agricultural credit remains around 35%.

ZTBL was incorporated as a Public Limited Company on 14th December, 2002 through repeal

of formal Agricultural Development Bank of Pakistan Ordinance of 1961. Thereby transforming

the bank as a corporate entity to serve as a R. F.I.

[2]

Transformation of ZTBL to R.F.I of the country and road to excellence

Healthy and well-functioning rural finance markets are directly related to achieving the two key

national policy objectives of accelerating rural/agriculture growth and reducing poverty. The

realization of these objectives depends on the simultaneity of developments in rural finance and

non-financial markets to foster the creation of diverse sources of rural finance to build

sustainable financial institutions, and stimulate products and capital flows in the rural sector. For

this, rural finance must be seen as an integral part of equitable development within a framework

of macroeconomic stability. The ongoing corporatize restructuring lays the basis for fundamental

reforms for rural finance market development.

The recurring financial drain, pursuing the old rural finance paradigm and the narrowing fiscal

space have also promoted a shift in Government strategy that now seeks viable intermediaries for

enhancing outreach.

For the majority, access to affordable rural finance services is also important to enable them to

compete in the post-World Trade Organization scenario. Inability to compete because of high

financial costs could reduce income of the majority of farmers and rural clients, particularly the

small and subsistence clients. Lack of access to affordable rural finance services will also

prevent the clients from switching to non-farm activities.

The ZTBL restructuring plan covering the following; (i) governance: establish an environment

that facilitates good governance and accountability; (ii) systems: modernize operations through

use of technology, networking, and communication tools; (iii) business processes: streamline

products and delivery systems so as to reduce transaction costs, simplify operations, and increase

[3]

outreach; (iv) products and services: introduce products and services that are financially

economically viable; (v) human resource development: improve standards and skills of

management and staff and strengthen training capacity; and (vi) IT: establish new hardware and

software platform to support MIS, accounting system including forensic accounting, and risk

management functions.

The reforms shall establish ZTBL as a key R.F.I of the country, aiming to outreach annual rural

clientele to 600,000 by the end of year 2008. By expanding its private sector role, the bank aims

to establish network of high tech rural and agri. financial services through intermediations under

public private participation and whole-sale -retail lending mechanism.

[4]

Board of director

Muhammad Zaka Ashraf President ZTBL

Muhammad Saleem Khan Director

Muhammad Javed Malik Director

Iskandar Muhammad Khan Director

Muhammad Zakria Kasi Director

Ejaz Hussain Rathore Director

Mr.jan Ali khan Junejo Director

Mr.Mansoor Khan Director

[5]

Corporate Vision

Dedicated to serve the needs of the farming community, by delivering financial products and

technical services on a competitive and sustainable basis, in a convenient, efficient and

professional manner, leading to success of the Bank and the farmers

Corporate Mission

To play effective role in the promotion of economic growth, by enhancing the availability of

credit to the agriculture sector, through reliable access to sustainable financing, special lending

programs, technical assistance, and other products & services, and to promote career

development opportunities for increasing professionalism and technical proficiencies of

employees.

Corporate Objectives

Develop and operate as a financially and operationally sustainable R.F.I of the country.

Assist rural community, particularly the small farmers, in raising their productivity and income

levels through timely delivery of credit, advisory and ancillary services.

Build ZTBL's image as a proactive, client friendly, financially & operationally sustainable with

indigenous product deployment.

Establish and provide backward and forward linkages to strengthen agri. value added commodity

[6]

chains.

Engage in public - private and wholesale - retail partnership to deepen outreach and reduce

operating cost.

To function as a rural commercial bank to mobilize rural capital formation and to commercialize

the agri. sector by delivering the true value of credit to the client. Provide a wide range of risk

insurance products to its clients.

Open up it venues of operation to Domestic & International Banking Industry to avail

comparative advantages.

Branches

ZTBL has a large network of branches, which extend to the remotest areas of the country,

currently with an integrated network of 342 branches; ZTBL gives direct access to a

comprehensive range of better banking facilities

[7]

Subsidiary

Kissan support Services Ltd was incorporated as a ZTBL owned subsidiary with an authorized

capital of Rs.100 million fully subscribed by the bank it aim at providing support to ZTBL

management to focus on core banking business and assign non-core activates to its subsidiary.

KSSL Vision

Dedicated to serve the needs of the farming community, by delivering financial products and

technical services on a competitive and sustainable basis, in a convenient, efficient and

professional manner, leading to success of the Bank and the farmers

KSSL Mission

To play effective role in the promotion of economic growth, by enhancing the availability of

credit to the agriculture sector, through reliable access to sustainable financing, special lending

programmers, technical assistance and other products & services and to promote career

development opportunities for increasing professionalism and technical proficiencies of

employees.

[8]

Chapter # 2

Products and Services Offered by ZTBL

[9]

Crop Maximization Project

An agreement was executed between Ministry of Food & Agriculture (CMP-II M1NFA) and

ZTBL on 06.6.2009 for implementation of Crop Maximization Project-II in which both have

agreed to participate in establishment and Operationalization of Revolving Fund.

To implement the decision a new saving scheme under the name and style of “MINFA

Revolving Fund Deposit Account” (MRFDA), “M1NFA Special Saving Deposit Account”

(MSSDA.) and Member Farmers Saving Account (MFSA) have been exclusively designed for

Government's Crop Maximization Project-TI (CMP-II M11'JFA).

Crop Loan Insurance Scheme

ZTBL has launched Crop Loan Insurance scheme (CLIS) as per instructions of Government/

SBP.

Kissan Dost Scheme

Kissan Dost Scheme (KDS) has been launched with immediate effect on concessional rate of

mark-up for financing crop production loans, (seed, fertilizer, pesticides & other etc.). The

financing would be for one season crops i.e. either Rabi or Kharif.

Sada bahar scheme

In order to facilitate the farmers and provide the timely inputs (seed, fertilizer, pesticides,

insecticides, POL and labour charges etc) for crops loan under Sada Bahar Scheme(SBS) are

[10]

provided. Besides, working capital for dairy, poultry and fishery are provided to the interested

borrowers under the scheme.

White Revolution- ZTBL & Nestlé

Zarai Taraqiati Bank Ltd has been financing Milk Processing Units for UHT as well as

pasteurized besides conventional dairy farming in the country since long. Bank has now

embarked upon to bring white revolution in the country through integration of dairy farmers and

milk processors.

In order to increase milk supply, mitigate poverty in the country and improve the living standard

of the rural populace, as a first step, modalities of Strategic Partnership of Bank with M/s. Nestlé

Pakistan Ltd. have been worked out and an agreement to this effect has been executed.

Green Revolution Scheme

In order to achieve the aim of providing farm machinery and implements to encourage the

mechanized farming for the enhancement of agriculture productivity as compared with

traditional tillage system a Memorandum of Understanding between Zarai Taraqiati Bank Ltd.

and Department of Agriculture.

[11]

Red Meat Financing Package for Sheep/ Goat Rearers

Pakistan’s economy is predominantly agrarian. The agriculture sector contributes 21% to the

GDP. Livestock being the largest sub-sector of the agriculture accounts for 50% of value

addition. 35 million rural populations depend directly on this sector. Thus this scheme has been

launched to promote this sector.

Awami Zarai Scheme (AZS)- Farm Credit

Mandatory for all new borrowers and optional for existing borrowers of crop production loan

under Sada Bahar Scheme to avail revolving limit under Awami Zarai Scheme to get inputs

through M/s Kissan Support Services Limited (KSSL) - a subsidiary of ZTBL under kind

system.

Financing Package for Karachi

A financing package for the branches falling under Karachi Zone has been notified through

which financing for Fisheries, Dairy, Poultry Farming, Feed Mill, Horticulture, Vegetable raising

& Nursery for Orchards, Covered Horticulture, Cut Flower, Ornamental Plants, Agri. Machinery,

Irrigation Schemes & Milk Collection CentresS, is advanced to accelerate the ir development.

Rural Development Scheme

In order to provide Credit Assistance for Dairy, Poultry, Sheep & Goat Farming in the rural areas

of the State of Azad Jammu & Kashmir, a Memorandum of Understanding between Zarai

Taraqiati Bank Limited and Azad Kashmir Small Industries Corporation has been signed. The

following are the salient features of the scheme.

[12]

Banking Services

ZTBL also provide complete banking services to its customers it has a large network of 342

branches nationwide. Services provided at branches are..

Current Account

This is a business account by nature under which there is no restriction of cash withdrawals and

deposit in a day or period under current account. it is a non-remunerative account so attracts no

profit on its balance kept with the bank.

Saring Saving Deposit Account

This is a sharing account by nature under which profit is paid on PLS-sharing saving at rates

declared but the bank from time to time.

Zarai Bachat Account

This scheme is offered to individual sole proprietors firms and limited companies minimum

initial deposit for ZBA is Rs.20000].

Business Deposit Account

Bank accept money from general public for opening of business deposit account by allowing

facilities of current account as well as of PLS saving bank account

[13]

Chapter # 3

Internship Experience

[14]

Duties and Responsibilities

As an internee you have to do many things instead of just one or tow responsibilities, as I was

getting under the two person, that why I had to help the manger as well as to the deputy manager

of the head office branch. So my duties and responsibilities changed from time to time. the

internship has no doubt been a great learning experience for me. as part of my rotation I was

assigned to work in the different department of ZTBL

My main duties which I performed are as fellows

Internal audit of vouchers

Preparation of vouchers\

Cash collection

Cheque management

File management

Accounts maintenance

Tax and interest calculation

I joined the ZTBL as an internee, so I had to perform different duties to assist my advisors and

office staff.

I was working under the supervision of tow person at the time first one is the finance manger and

the second person was the deputy manager head office branch

[15]

Head office Accounts Department

Function

This department deals with the preparation or maintenance of head office employee payroll after

deduction medical allowance house rent allowance conveyance allowance utility bills

This department also provides advance and loan on the specified rate of interest to their own

employees clerical or non clerical car loan motorcycle loan and house building loan and advance

payment of salaries etc

The function of this department is to deal with employee fund unit payment unit and inter branch

reconciliation unit too.

Major tasks learnt

I was placed In accounts department I learnt the various function carried out by the department

and got an opportunity to help in the various daily weekly and monthly activates under the

supervision of deputy manager.

Payroll Calculation

In the payroll unit department I had the opportunity to maintain or preparation of gross salaries

after deduction for each clerical and non clerical employees of the head office branch on the

basis of different allowance and the rate allowable to the employees.

[16]

Fund Allotment

The activities I performed and learnt in the employers fund unit were

Maintenance of books of accounts

Finalization of financial statement of these trust funds

Entertaining the best way for investment of surplus fund in approved schemes

Maintenance of employee’s contributory fund general provident fund contributory

provident fund, employee’s provident fund.

Payment Orders

The activates I performed and learnt in the payment unit are

To make payments at head office level

Maintain account books

Response of advices H.O.level

Collection of zakat from branches and deposit in state bank of Pakistan

Collection of federal tax duty

Maintains of vouchers

Deduction of withholding tax from the parties

Data processing

To coordinate with the auditors in respect of head office audit

[17]

Inter Branch Reconciliation

I learnt the transaction make in branch to branch and head office to branch and vice versa. All

Outstanding entries in inter branch transaction account and in suspense account are reconciled

and taken into the proper head of account whit in a maximum period of time 30 days from the

date of recording transaction.

Settlement and adjustment of outstanding entries mean unsettled entries that are incurred due to

the following reasons wrong branch contra code. Advice to not reach to concerns on time wrong

contra date wrong.

Central Accounts Department

Function

Formulation of accounting policies and procedures with a view to present the true financial

position of the bank in financial statement Formulate and maintain accounting policies and

procedures manual In line with applicable accounting standards ensure dissemination and

implementation across the bank

Preparation of financial statements as per requirement of state bank of Pakistan and security and

exchange commission of Pakistan

[18]

Major task learnt

I had the opportunity to work in the central accounts department under the supervision of

assistant manager central accounts department and leart a lot regarding the procedure required to

formulate the policies these procedure are as follows

Providing guidelines for adjustment of suspense account

Devise accounting procedure regarding accounting in the branches as wells at the head

office

To arrange payment to the external auditors

Coordinate with the external auditors

Prepare bank charges schedule and circulation thereof amongst the branches and

submission to SBP on half yearly basis

Coordinate with the credit rating company for providing information for credit rating of

the bank

Maintain the personal file of the employees

Tax

During my internship I were placed in the tax unit of central account department I performed the

following task

Guide branches for settlement of tax issues

Pursue the tax refund case with income tax officer

Preparation of annual tax statement

Coordinate with the tax consultant

[19]

Budgeting and Funds Management Department

Function

To arrange adequate recourses for maintenance of adequate liquidity for efficient disbursement

trimly discharge of liabilities and operation of the bank Preparation of financial plan for bank

credit limit funds and their application.

Major task learnt

I was placed in the budgeting and funds management department and carried out the different

activities regarding budget like budget planning budget analysis and funds reconciliation.

Budget Planning

During my internship In ZTBL I worked under the supervision of assistant manager in the

budget planning unit and learnt the experience to plan for the budget for the budget

Plan for the budget and budgeting techniques’ were assigned the following task

Revise department polices

Procedure for financial management

Develop budget planning process and parameters

Communicate with the administrative and governance group on the budget process and

budget issue

Issuing of budget call memos

[20]

Budget Analysis

In the budget department I learnt the analysis coordinating and assessing data reflecting

performance of department wise financial activities.

And had the opportunity to see the different monitoring trends in expenses for ensuring financial

discipline. And step taken by the remedial administrative financial for excess expenditure and

communication with administrative and governance groups and develop assumption and strategy

for the future budget cycle

Fund Reconciliation

I already had the experience of reconciliation of bank account that I performed in the accounts

department also for the reconciliation funds unit and further I had the opportunity for responding

to the advices issued but the branches relating to unit claimed deposit and preparation of daily

cash position relating to remittance of funds monitoring of reconciliation of bank account of

branches with other commercial bank

[21]

Regulatory reporting department

Function

Compliance to the statutory reporting requirement

Periodic financial reporting to the management

Prompt and accurate analysis to aid decision making

Improve effectiveness in meeting statutory reporting obligation

Major task

I were placed in the regulatory reporting department and learnt different activities carried in the

same department.

Reporting

I was placed in the reporting regulatory reporting department for one week and I learnt the

various activities carried out by the concerns and report them to the top level management like

implementation of internal reporting mechanism. Coordinating redesign system of data

capturing, Its consolidation and subsequent reporting as per regulatory requirement.

[22]

Head office Model Branch

The head office model branch is like a commercial bank. head office model branch is a fully

computerized branch.

I was placed in the depositing department I learnt various function carried out by the

department and got an opportunity to help in daily activity the depositing department handled by

two officers

Major task learnt

I was placed in the depositing department I learnt various function carried out by the

department and got an opportunity to help in daily activity the depositing department handled by

two officers.

Daily Activities

Debit and credit vouchers are posted pertaining to customer deposit

Cheque are issued to customers are daily basis

Accounts are closed and activated by the department

Cheque received and clearing are also deposited by the deposit department

Signature of the customers is also up to date from this department

The maintain and look after the account opening files of the customers

Change in address or customers missing CNIC and changes in also are checked

[23]

Demand Draft

It is an instruments payable on demand for which values has been received issued by the branch

of the drawers bank payable at some other place of the same bank if the tow banks are involved

then the DD are sent to another bank.

Procedure and issuance of DD is like

DD can be issued by filling application from the customer. Then bank apply some charges such

as commission excise duty according to the schedule of charges, if he fills the tax exemption

from tax is not charged then the cashier account the amount and sign the DD application and

enter in the register

Maintains of Cheque Book

Cheque books are maintained on daily basis’ also made the cheque book the procedure of

maintain the cheque book is that if account is newly open the cheque book requisition slip is

filled by the customers there is clearly mention the leaves of the cheque book.

Daily number of customers gives request for new cheque book if the customer has an old cheque

book then he will fill the cheque that is present in the cheque book and give it the cheque book

issuance counter. Time for receiving new one in one week.

[24]

Business Deposit Account (BDA)

Bank accepts money from general public for opening of business deposit account by following

facilities of current account as well as PLS saving bank account

Feature of BDA

Minimum initial deposit is Rs.10000

No limited transaction

Zakat will be deducted

Income tax as source will be deducted rate of return announced by head office

will be applicable on daily product basis

Learning

Positive learning

This internship increase our exposure

We learn how to make public relatio

The team work is very much effective for the efficiency

The way we should dress up in a corporate level is improved

Good image building skill

Willingness to compromise and show flexibility

Maintains time

Marinating stress

[25]

Computer skill during internship significant portion of my work was on computer

and due to this I got full command on MS office

Knowledge about ZTBL business after working in the ZTBL I came know about

the banking businesses and their working style

Knowledge about the organization culture

Knowledge about the organization policies and rules

Knowledge about the reward system of the bank

How to perform the task under pressure and rush areas

Ability to deal with complexity

Self confidence after dealing with the customers and colleagues

Negative learning

Officers does not sometimes take care about Ego of their subordinates

Employees used to give their work load to internee and this become Burdon for internee

No proper place for offering prayer

Without any reference they did not call any internee for internship

Unsatisfactory working condition

On time incentives are not granting

Food provided in the cafeteria is not hygiene

Lengthy credit processing and documentation procedure

[26]

Experience

I joined the ZTBL after completing my two semester of MBA fiancé though six week was a

short time to properly understand all the function of the department but I learned and understand

the most of the them.

Working ZTBL was a great experience and I learned a lot and staff was very cooperative and

they helped me at each and every step general things which I learned during internship were

discipline and rules and regulation of bank.

I learned the business communication that how to communicate with branches and distant

office’s also learned that how to handle work load and I learned how to deal with customers

Internship developed confidence in my personality and I learned how to interact with

organization employees customers how information passes from upward to downward and

downward to upward in organization hierarchy.

[27]

Chapter # 4

Business Analysis

[28]

SWOT Analysis of ZTBL

SWOT is useful tool for providing a framework for analysis of an organization SWOT stands for

strength weakness opportunities and threats it is a common approach to make assessment in

terms of internal and external environment of the organization and to formulate strategies

analyzing its internal strength and weakness external opportunities and threats coming up is the

SWOT analysis for the ZTBL.

Strengths

ZTBL is a key player in delivering high quality and viable financial services to the rural

population and thus playing a significant role in national development

ZTBL has a visible role in turning around agriculture sector in terms of farm

mechanization, self sufficiency in wheat rice cotton sugarcane dairy

Market leader in the agriculture credit with over one million Clint base

Bank has a wide spread network in rural areas with 25 zonal office 342 branches and

1269 MCO to provide agriculture credit to farming community at their doorstep

Bank loans are fully secured mostly against tangible security

Adequate legal provision is available for securing bank credit advancement

ZTBL has a well trained experienced and dedicated manpower mobile credit officer

ZTBL has established IT organization structure compiling with good market practice and

well established knowledge of IT business processes for bank core competence

[29]

Weaknesses

Due to sharp fluctuation 111 prices of agricultural produce at the time of harvest, ZTBL

borrowers' often fetch low price as compared to their investments which adversely affect

the recoveries.

Huge portion of Non-performing loan portfolio.

The Bank has weak deposit base due to inadequate products, less attractive rates of

return, improper infrastructure and location of branches outside commercial areas.

Announcement of relief packages, declaration of certain areas as calamity affected by the

Government including write-offs and delays in reimbursement of claims adversely

affects

the recoveries and the financial health of the Bank.

Increasing restrictions by the regulator on various business activities including capped

mark-up rates.

Political and extraneous influences in operational/administrative matters of the Bank.

Bank's business is more prone to natural calamities, therefore, recovery of Bank's dues

are at risk.

Low margin of profit over the funds borrowed from SBP.

Restriction of disbursement up to 90% of the amount recovered each year resulting in

gradual decrease in disbursement.

No effective tool/authority with the Bank for quick recovery of outstanding dues.

Lack of centralized computer system to prepare management information reports and

financial statements.

[30]

Lack of motivational factor i.e. career advancement, effective appraisals and effective

awards distribution to the staff.

Lack of training, development process and updating of IT system IS hampering the

working capacity of the employees.

The major weakness of some units IS limited no. of employees carrying the unit work

activities.

Decision making process is very slow

In this computerized banking era Central Accounts Department still working manually,

which ultimately leads to low performance.

Lack of proper implementation of strategy to get the exact/desired results. \

Opportunities

In the week of current global food crisis, an opportunity has arisen to grow more food.

Worldwide there is more focus on agriculture and scope of heavy investment in this

Sector.

Bridge huge untapped gap between agriculture credit required by the agriculture sector &

availability of funds from formal resources.

Extension of outreach to 6.6 million farms yet untapped for farm credit facilities.

Developing a proper marketing strategy would help the farmers in getting maximum

price for their products which would ultimately result into efficient repayment of bank's

[31]

loan.

Increased agriculture credit will lead to maximum production of food and attractive rates

to the growers resulting in good returns to ZTBL.

Potential for marketing of new product lines on commercial basis.

Exploit potential for expansion through mobilization of rural & urban savings.

To extend outreach to bring larger land area under cultivation with preferential

consideration for small provinces.

Introduction of specific projects like Corporate Farming or other mechanics of bulk

financing for onward lending to small farmers.

Appraisal system should be implemented to motivate the employees of the unit.

Threats

Government had imposed ban on arrest of small defaulters. Similarly the Bank was

authorized to disposal of mortgaged properties, agriculture lands under LACIP Act or

through Recovery & Finance Ordinance 200 I which has been suspended in case of small

farmers. This imposition has adversely affected the Bank's performance as the lending is

directly linked with recovery of dues.

Agriculture is open to calamities, vagaries, therefore in the event of drought or floods etc.

areas are declared as calamity hit and bank has to defer its recoveries. Such calamities

have badly affected bank's recoveries in Baluchistan and Sindh provinces during last

many years.

Success of different GOs especially Rural Support Programs (RSPs) is providing new

[32]

innovative channels for lending/savings with flexible repayment schedules.

ZTBL's inability to dispose collateral due to statutory limitations.

Accumulation of PLs and increasing trend in SAM (Special Asset Management)

portfolio with slow pace of recovery.

Civil unrest and law and order problems in various part of the country expose the Bank to

operational ri k.

Current recession in the economy due to fuel and food crisis resulting in delayed recovery

of Bank's dues affecting the sustainability of the Bank.

Competitor Banks are increasing their market share with latest Information &

Communication technology solutions.

As ZTBL is a government owned entity, so there is a pressure from Government while

giving loans.

[33]

Risk Management

The primary objective of risk management is to support senior management 111 correctly

identifying, adequately measuring, effectively limiting and properly monitoring and controlling

risk taking throughout the Bank. The Bank ensures systematic and integrated risk management.

This is based on the following structured process risk identification, risk measurement, risk

management and control, risk monitoring and risk reporting.

Credit Risk

Credit risk is the risk that arises from the potential that an obligor is either unwilling to perform

on an obligation or its capability to execute such obligation is impaired resulting in economic

loss to the Bank. Principally, exposures are only approved when reasonably assured for

repayment capacity of counter party. Standardized procedures are adopted and under no

circumstances it exceeds approved credit lines. The Bank credit appraisal structure comprises of

well-defined credit appraisal, approval and review methods for the purpose of prudence in its

lending operations and ensuring credit across the bank. The Bank pays particular concentration

to the management of NPLs. An independent Special Asset Management (SAM) department is

operational at the head office.

[34]

Market Risk

Market risk is the risk of loss arising from movements in market variables including observable

variables such as interest rates, exchange rates and equity indices, and others which may be only

indirectly observable such as volatilities and correlations.

The Bank is not involved in commercial activities like underwriting, trading and discounting

operations. The Bank operates foreign currency transactions through SBP 111 local currency by

paying exchange fluctuation risk fee to the SBP. The Bank is not exposed to interest rate risk as

it has a fixed lending rate portfolio of advances and investments/placements are being placed in

held to maturity securities/investments. Correspondingly the borrowing from SBP is in the

process of restructuring. Liquidity position of the Bank is closely monitored by the Asset

Liabilities Management Committee (ALCO) on periodic basis.

Foreign Exchange Risk

The Bank is not directly exposed to foreign exchange risk as the Bank is not engaged in foreign

operations. Foreign transactions, i f any, are undertaken through S B P.

Equity position Risk

The Bank is not exposed to equity position risk as all the shares are held by Federal and

Provincial Governments. Its securities are not publicly traded.

[35]

PROFIT LOSS ACCOUNT FOR THE YEARS ENDED DECEMBER 31,2008,2009 & HORIZONTAL ANALYSIS

FINANCIAL YEARS % Incr IOcr 10 Incr 2008 2009 2010 2008 & 09 08 & 09

Mark-up/return/interest earned 6,822,719 5

,996,030

7,022,360 (12.12) 17.12 Mark-up/return/interest expensed 391,738 2 3,418,023 615.47 21.95 Net mark-up/interest income 6,430,981 3 3,604,337 (50.35) 12.87 Provision against non-performing

loans and advances 4,731,992 1 3,090,206 (62.65) 74.86 Write offs under Government relief packages 1

,482,448

567,445 (61.72) 3 3,657,651 12.55

Net mark-up/interest income after provisions 1,698,989 (5 (53, (103.32) (5.53)

NON MARK-UP/INTEREST Fee, commission and brokerage

income

3,157 2,544 2,338 (19.42) (8.08) Dividend income 6,458 6,458 2,153 - (66.66) Other income 828,519 5 5,729,582 565.53 3.91

Total non mark-up/interest income 838,134 5 5,734,073 558.97 3.82 2,537,123 5 5,680,759 115.47 3.92

I

N

MARK-UP/INTEREST

EXPENSES Administrative expenses 2,612,337 2 3,788,935 5.67 37.26 Provision/(reversal) for diminution in

the

" value of investments, net (585) 10,110 (686) (1,828.21 ) (106.79) Provision against other assets 12,936 2,048,971 72,149 15,739.29 (96.48)

Other charges 3,802 306 5,849 (91.95) 1,811.58 Total non mark-up/interest ex pens 2,628,490 4,819,839 3,866,247 83.37 (19.78)

(91,367) 646,803 1,814,512 (807.92) 180.54 U USUAL ITEM - 30,366 PROFIT BEFORE TAXATION (91,367) 646,803 1,784,146 (807.92) 175.84 Taxation - Current 38,434 217,539 631,484 466.01 190.29

- Prior years - 8,285 - Deferred (607) 9,458 111,561 (1,658.15) 1,079.54

37,827 226,997 751,330 500.09 230.99 PROFIT AFTER TAXATION (129,194) 419,806 1,032,816 (424.94) 146.02

Unappropriated profit brought

forward

861,549 702,355 1,008,200 (18.48) 43.55

Profit available for appropriation 732,355 1,122,161 2,041,016 53.23 81.88

Basic earnings per share (Rupees) (0.11 ) 0.350 0.870 (418.18) 148.61

Horizontal Analysis

[36]

ZARAI TARAQIATI

BANK LIMITED

Blance sheet as at December 31, 2008, 2009, 2010

FINANCIAL YEARS % Iner lDer % Iner lDer 2008 2009 2010 2008 & 09

2009

2008 & 09

2009 ASSETS Rupees in '000

Cash and balances with treasury

banks

1,585,421 1,295,464 2,103,682 -18.29 62.39 Balances with other banks 7,813,844 7,781,056 11,943,898 -0.42 53.50 Investments 12,820,668 5,634,499 7,604,233 -56.05 34.96 Advances 52,925,286 60,839,057 61,313,006 14.95 0.78 Operating fixed assets 690,141 817,003 865,293 18.38 5.91 Deferred tax assets 1,829 -100.00 Other assets 6,667,463 9, I 00, 195 9,556,224 36.49 5.01

Total Assets 82,504,652 85,467,274 93,386,336 3.59 9.27 LIABILITIES

Bills payable 235,741 276,333 392,726 17.22 42.12 Borrowings 51,257,213 51,257,213 51,257,213 0.00 Deposits and other accounts 2,644,647 2,882,384 4,323,150 8.99 49.99 Sub-ordinated loans 3,204,323 3,204,323 3,204,323 Deferred tax liability - 7,629 119,191 Other liabilities 12,100,331 14,239,221 19,134,241 17.68 34.38

Total Liabilities 69,442,255 71,867,103 78,430,844 3.49 9.13 Share capital 11,869,612 11,869,612 11,869,612 Reserves 245,387 359,348 565,911 46.44 57.48 Unappropriated profit 702,355 1,008,200 1,834,453 43.55 81.95 Surplus on revaluation of assets 245,043 363,011 685,516 48.14 88.84

Total Liabilites & S.H.E. 82,504,652 85,467,274 93,386,336 3.59 9.27

[37]

ZARAI T ARAQIA TI BANK LIMITED PROFIT AND LOSS ACCOUNT FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 & 2010

VERTICAL ANALYSIS

FINANCIAL YEARS Taking 2008 as Base 2008 2009 2010 2008 2009 2010

Mark-uplreturn/interest earned 6,822,719 5,996,030 7,022,360 100 87.88 102.93 Mark-up/return/interest expensed 391,738 2,802,785 3,418,023 100 715.47 872.53

Net mark-up/interest income 6,430,981 3,193,245 3,604,337 100 49.65 56.05 Provision against non-performing loans and

advances 4,731,992 1,767,234 3,090,206 100 37.35 65.30 Write offs under Government relief packages 1,482,448 567,445

3,249,682 3,657,651

et mark-up/interest income after

provisions 1,698,989 (56,437) (53,314) 100 -3.32 -3.14 NON MARK-UP/INTEREST INCOME

Fee, commission and brokerage income 3,157 2,544 2,338 100 80.58 74.07 Dividend income 6,458 6,458 2,153 100 100.00 33.34 Other income 828,519 5,514,077 5,729,582 100 665.53 691.55

Total non mark-up/interest incom 838,134 5,523,079 5,734,073 100 658.97 684.15

2,537,123 5,466,642 5,680,759 100 215.47 223.91 XON MARK-UP/I TEREST EXPENSES

Administrative expenses 2,612,337 2,760,452 3,788,935 100 105.67 145.04 Provision/(reversal) for diminution in the

value of investments, net (585) 10,110 (686) 100 -1728.21 117.30 Provision against other assets 12,936 2,048,971 72,149 100 15839.29 557.74 Other charges 3,802 306 5,849 100 8.05 153.85

Total non mark-up/interest expens 2,628,490 4,819,839 3,866,247 100 183.37 147.09 (91,367) 646,803 1,814,512 100 -707.92 -1985.96

U USUAL ITEM 30,366 PROFIT BEFORE TAXATION (91,367) 646,803 1,784,146 100 -707.92 -1952.72

Taxation - Current 38,434 217,539 631,484 100 566.01 1643.03 - Prior years 8,285 - Deferred (607) 9,458 111,561 100 -1558.15 -18379.08

37,827 226,997 751,330 100 600.09 1986.23

PROFIT AFTER TAXATION (129,194) 419,806 1,032,816 100 -324.94 -799.43 Unappropriated profit brought forward 861,549 702,355 1,008,200 100 81.52 117.02

Profit available for appropriation 732,355 1,122,161 2,041,016 100 153.23 278.69

(0.11 ) 0.350 0.870

Vertical Analysis

[38]

BALANCE SHEET AS AT DECEMBER 31, 2008, 2009, & 2010

VERTICAL ANALYSIS

FINANCIAL YEARS Taking 2008 as Base 2008 2009 2010 2008 2009 2010

ASSETS Rupees in '000 Cash and balances with treasury

banks

1,585,421 1,295,464 2,103,682 100 81.71 132.69 Balances with other banks 7,813,844 7,781,056 11,943,898 100 99.58 152.86 Investments 12,820,668 5,634,499 7,604,233 100 43.95 59.31 Advances 52,925,286 60,839,057 61,313,006 100 114.95 115.85 Operating fixed assets 690,141 817,003 865,293 100 118.38 125.38 Deferred tax assets 1,829 100 Other assets 6,667,463 9,100,195 9,556,224 100 136.49 143.33

Total Assets 82,504,652 85,467,274 93,386,336 100 103.59 113.19 LIABILITIES

Bills payable 235,741 276,333 392,726 100 117.22 166.59 Borrowings 51,257,213 51,257,213 51,257,213 100 100.00 100.00 Deposits and other accounts 2,644,647 2,882,384 4,323,150 100 108.99 163.47 Sub-ordinated loans 3,204,323 3,204,323 3,204,323 100 100.00 100.00 Deferred tax liability - 7,629 119,191 Other liabilities 12,100,331 14,239,221 19,134,241 100 117.68 158.13

Total Liabilities 69,442,255 71,867,103 78,430,844 100 103.49 112.94 Share capital 11,869,612 11,869,612 11,869,612 100 100.00 100.00 Reserves 245,387 359,348 565,911 100 146.44 230.62 Unappropriated profit 702,355 1,008,200 1,834,453 100 143.55 261.19 Surplus on revaluation of assets 245,043 363,011 685,516 100 148.14 279.75

Total Liabilites & S.H.E. 82,504,652 85,467,274 93,386,336 100 103.59 113.19

ZTBL Ratio Analysis

Financial Ratios of ZTBL

[39]

Ratios 2008 2009 2010

Current Ratio 4.97 ') ')

2.20 .J . .J

Working Capital 46026416 44018633 38805564

Cash ratio 81.06% 47.5% 43.36%

Total Assets turn over 0.08 0.04 0.04

Gross profit margin 94.26% 53.26% 51.33%

Net profit margin -1.89% 7% 14.71%

Return on Assets 0% 0.5% 1%

Return on equity -1% 3% 7%

Debt Ratio 84.42% 84.09% 83.99%

Equity Ratio 5.42 4.81 5.24

Coverage ratio 0.77 1.23 1.52

ZTBL ratio Analysis

[40]

Current Ratio=current assets/current liabilities

year Current assts Current liabilities Current ratio

2008 57621721 11595305 4.97

2009 63125633 19107000 3.3

2010 71203314 32397750 2.20

Interpretation: current ratio of bank is decreased in the year 2010.in 2008 liquidity position of

bank was very good but it very much above the benchmark of 2 so some assets are kept idol due

to more increase in current liabilities in year 2009 and 2010 liquidity ratio is decreasing which is

not good but current ratio is still good and banks liquidity is good

20082009

2010

0

10000000

20000000

30000000

40000000

50000000

60000000

70000000

80000000

year

Current assts

Current liabilities

Current ratio

yearCurrent asstsCurrent liabilitiesCurrent ratio

Working Capital

[41]

Net working capital=current assts-current liabilities

year Current assts Current liabilities Working capital

2008 57621721 11595305 46026416

2009 63125633 19107000 44018633

2010 71203314 32397750 38805564

20082009

2010

0

10000000

20000000

30000000

40000000

50000000

60000000

70000000

80000000

year

Current assts

Current liabilities

Working capital

yearCurrent asstsCurrent liabilitiesWorking capital

Working capital is continuously decreasing and it shows poor management of working capital.

Management should take necessary steps this decreasing trend.

Cash Ratio

Cash ratio=cash equivalents/current liabilities

[42]

Year Cash and cash

equivalents

Current liabilities Cash ratio

2008 9399265 11595305 81.06%

2009 9076520 19107000 47.5%

2010 1447580 32397750 43.36%

20082009

2010

0

5000000

10000000

15000000

20000000

25000000

30000000

35000000

Year

Cash and cash equivalents

Current liabilities

Cash ratio

YearCash and cash equivalentsCurrent liabilitiesCash ratio

Interpretation: Cash ratio decreased during the financial period of 2008 to 2010 but decrease is

due to the payment for current and fixed liabilities

Total Assets turn over

Total assets turn over=mark up revenue/average total assets

[43]

Year Mark up revenue Total assets Total assts turnover

2008 6434981 83847887 0.08

2009 3193245 85467274 0.04

2010 3604337 93386336 0.04

20082009

2010

0100000002000000030000000400000005000000060000000700000008000000090000000

100000000

Year

Mark up revenue

Total assts turnover

YearMark up revenue Total assts turnover

Assets turn over ratio is decreased in 2009 and is same in 2010 so management should take

action for properly utilization of assets of bank are not efficiently used by the management.

Gross Profit Margin

Gross profit margin=gross profit/net revenue*100

[44]

Year Gross profit Gross revenue G.P margin

2008 6434981 6822719 94.26%

2009 3193245 5996030 53.26%

2010 3604337 7022360 51.33%

20082009

2010

0

1000000

2000000

3000000

4000000

5000000

6000000

7000000

8000000

Year

Gross profit

Gross revenue

G.P margin

YearGross profitGross revenueG.P margin

Gross profit margin of bank is continuously decreasing each year which is not favorable this is

because due to the decrease in markup income bank should take necessary steps to increase sales.

Net profit margin

Net profit margin=net income/net revenue*100

[45]

Year Net income Net revenue Net profit margin

2008 129194 6822719 -1.86%

2009 419806 5996030 7%

2010 1032816 7022360 14.71%

20082009

2010

-1000000

0

1000000

2000000

3000000

4000000

5000000

6000000

7000000

8000000

Year

Net income

Net revenue

Net profit margin

YearNet incomeNet revenue Net profit margin

Net profit of bank was negative in 2008 but now from 2009 it is increasing which is a good sign

bank should decrease its expense its and should increase its sale in order to be more profitable.

Return on Assets

Return on assets=net income/total assets

[46]

Year Net income Total assets Working capital

2008 129294 83847887 0%

2009 419806 85467274 0.5%

2010 1032816 93386336 1%

20082009

2010

0100000002000000030000000400000005000000060000000700000008000000090000000

100000000

Year

Net income

Total assets

Working capital

YearNet incomeTotal assetsWorking capital

In 2008 ROA was 0% which was an alarming figure and it is increased in 2009 and 2010 but

percentage is very low. it shows that assists are not fully utilized and earning are not generated

by assets.

Debt Ratio

Debt ratio=total liabilities/total assets*100

[47]

year Total liabilities Total assets Debt ratio

2008 70785490 83847887 84.42%

2009 71867703 85467274 84.09%

2010 78430844 93386336 83.99%

20082009

2010

0100000002000000030000000400000005000000060000000700000008000000090000000

100000000

year

Total liabilities

Total assets

Debt ratio

yearTotal liabilities Total assetsDebt ratio

Debt to assets ratio is decreased from 84.42% to 83.99% which is good. it shows that most of

bank are obtained from creditors.ZTBL capital structure is week it mostly assets are financed by

creditors so bank long term debt position is week.

Return on Equity

Return on equity=net income/average stockholder equity

[48]

Year Net income Average stockholder

equity

Return on equity

2008 129194 13062397 -1%

2009 419806 14955492 3%

2010 1032816 14955492 7%

2008 2009 2010-2000000

0

2000000

4000000

6000000

8000000

10000000

12000000

14000000

16000000

YearNet income

Average stockholder equity Return on equity

YearNet income Average stockholder equity Return on equity

Return was -1% in 2008 it increased in 2009 and 2010 profitability is very low dew to increasing

costs and reducing profits.Manaegment policies are weak so profitability is not very good its

improving.

Equity Ratio

Equity ratio=total liabilities/total stockholder equity

[49]

year Total liabilities Total stockholder

equity

Equity ratio

2008 70785490 13062397 5.42

2009 71867703 14955492 4.81

2010 78430844 14955492 5.24

20082009

2010

0

10000000

20000000

30000000

40000000

50000000

60000000

70000000

80000000

year

Total liabilities

Total stockholder equity

Equity ratio

yearTotal liabilities Total stockholder equityEquity ratio

Debt to equity ratio is decreased from 5.42 to 5.24 which is not good because equity is decreased

and in result management control over bogusness is also decreasing.

Coverage Ratio

Coverage ratio=EBIT/interest expense

[50]

year EBIT Interest expense Coverage ratio

2008 300371 391739 0.77

2009 3449588 2802785 1.23

2010 5202169 3418023 1.52

20082009

2010

0

1000000

2000000

3000000

4000000

5000000

6000000

year

EBIT

Interest expense

Coverage ratio

yearEBITInterest expenseCoverage ratio

ZTBL is able to pay its interest expenses and its coverage ratio is also increasing but its shows

very less increase. Now bank should take necessary steps to increase its incomes in order to pay

its interest obligation on time

[51]

Chapter # 5

Major Problems

Major problem are Observed

Paper work and the file work need to be computerized

[52]

Some employees are not following the bank timing properly

Date of bank is being updated on weekly batch basis instead of daily basis

No ATM services are provided by the bank

Lack of the computer skill in employees

Branches and incomplete information to head office

Non responsive attitude of ho department lack of proper implementation of strategy to the

get the desired result

Senior employee ask juniors for their personal work during the office hours

Recommendation to Problems

[53]

The tendency of late coming must be controlled which reflect and adversely on the image

of the insinuation and has posed a serious problem

Promotion are made on the base of vacant seats first and then seniority not on the bases

of the performance of the employess.promotion should be on the basis of performance

ZTBL should start online banking and ATM services for their customers

Distribution of work in not on equity basis work has not been allocated properly some

workers to work hard. so I suggest that steps should be taken to allocate the work

properly

The employee should be fair with the internees there must not be gender discrimination

Senior employee should not ask juniors for their personal work senior management

should discourage this practice

Stress management course should be added in the presentation course of employees

All the outstanding entries should be settled within the specified time as bank is currently

paying penalties against outstanding transaction

ZTBL can easily compete its competitor by offering new innovative products

There should be proper training for new employees

Loan procedure should not be cumbersome and should be made easier. so as to made ease

for customer.

Student who are eligible for internship should be selected on the basis of merit,

Communication among the different department as well as among the different branches

of ztbl should be improved I have observed in some case the bank was unable to

understand the message sent by another branch.

Conclusion

[54]

ZTBL is the best option among all the company and reason being that it is well established

organization there are more chance to learn as compare to a newly merged company. While

among the proceeding company has government touch in its management style and some

companies were at slugged phase, management ZTBL rules are specified and implemented on all

the regardless of their designation there is homogeny in all regulation aspects. There are a time to

time motivational rewards increments and acknowledgment

Bibliography

[55]

ZTBL accounts manual 2010 Islamabad

ZTBL annual reports 2008-2009-2010

ZTBL operation manual 2010 Islamabad

ZTBL staff regulation 2010 Islamabad

ZTBL Islamabad Pakistan at a glance 2008-2009-2010

www.ztbl.com.pk

Staff of the ZTBL Islamabad head office

[56]