The Bank of Punjab - Build and cultivate your own community 旁遮普银行的建立和培养自己的社区

The Bank of Punjab - Build and cultivate your own community 旁遮普银行的建立和培养自己的社区 www.vustudents.ning.com Virtual University of Pakistan Evaluation Sheet for Internship Report Spring 2011 FINI619: Internship Report (Finance) Credit Hours: 3 Evaluation CriteriaResultName of Student: Report writingPass Presentation & Viva voceStudent’s ID: Final Result 1 www.vustudents.ning.com PASS Dear Student, keeping in view of your over all work, you are declared PASS in your written work. Start preparing for presentation & viva voce and improve your work according to the given instructions and guidelines available at VULMS of your course under the icon DOWNLOADS after clicking COURSE WEBSITE at VULMS. Also read lesson # 7 of this course in this for effective preparation of your presentation slides. See evaluated INTERNSHIP REPORT, follow the guidelines and instructions and remove deficiencies (if any) till your presentation according to the given instructions. Your concepts regarding your internship work and ratio analysis should be very strong for delivering an effective presentation.For any further guidance about your presentation and viva, ask your queries via MDB or email at fini619@vu.edu.pk The Bank of Punjab Main Branch Circular Road, Near Fawara Chowk, Gujrat (011) 2 www.vustudents.ning.com Fall 2009_Spring 2011 Submission Date:th 5 August, 2011 Virtual University of Pakistan Dedication 3 www.vustudents.ning.com I dedicate this report to my loving mother and sister and friends without whose help and encouragement it would not have been possible. For me accomplish this task within the specific time limit. I was provided with every facility by my mother who was necessary in order to complete this challenge assignment. Acknowledgement 4 www.vustudents.ning.com I am very thankful to “Almighty Allah” the most beneficent, the most mercy full who has given the strength to complete this task. I am also thankful to branch manager and operational manager respectively of the bank of the Punjab circular Road near Fawara Chowk Gujrat. Without whose guidance and support it would not have been possible for me to accomplish this assignment. Furthermore, I am indebted to the staff of the staff of the Bank of the Punjab. Circular Road Near Fawara Chowk, Gujrat. From whom I have gained much experience regarding operational work of bank is concerned. The last but not the last I convey my credit and thankfulness to the virtual universities Authorities. Without whose well in time support and guidance it would be much difficult for me to achieve this task successfully. Executive Summary 5 www.vustudents.ning.com The bank of Punjab (BOP) established in 1989 and got the status of scheduled bank in 1994. The bank of Punjab offer number of products in their customer. There are 293 braches of BOP in the whole country. Functionally the bank of Punjab is divided in the division and the each division is headed bye the general managers. The government of the Punjab holds the majority of the shares in BOP. It is doing business in commercial banking and the retail banking. Corporate banking treasury and investment and trade finance. The shares of BOP are traded in all three stock Exchanges of the Pakistan. rdthMy internship program period is 23 April 2011 to 6 June 2011. During internship, I worked in Accounts opening Department, Accounts Department, Clearing Department, Remittance Department, Advance and Credit Department and Bill for Collection Department. As for as the different ratios of the Bank Of the Punjab, they all give the healthy sign regarding financial position of the Bank as well as the operation results of the different financial years. All ratios are fully in accordance with the banking industry’s standard and norm which is a yard stick to measure the performance of any bank. These ratio depict and indicate that the financial strength of the on a higher side and further prospect of the Bank is brighter. At the end the conclusion and the recommendations are the part of the report. Bibliography is the part, which contain all the references from I, obtained data to prepare this report. Table of Contents Title Page…………………………………....................................................01Chapter 01 6 www.vustudents.ning.com Introduction of Banking………………………………………………...... 08 Chapter 02 Overview of the Bank of Punjab ??????????????????????2.1History……………………………………………......09 ???????????????????????2.2Vision and Mission Statements………………………10 2.3Organizations Hierarchical Chart……….....................11 2.4Business Volume……………………………………..12 2.5Product Lines …...........................................................13 2.6Competitors………………………………………......16 2.7Introduction of All departments……………………...16 2.8Functional Hierarchy of BOP…………………………19 2.9Comments on Structure………………………………..20Chapter 03 Internship Program 3.1Introduction Of circular Road Main Branch …………21 3.2Starting and ending dates of internship ………….……21 3.3Name of training departments and duration…………...21Chapter 04 Training Program 4.1Training Program…………………………….………..22 Chapter 05 Ratio Analysis 5.1Financial Statements of BOP ………………………….27Chapter 06 Future Prospects of BOP…………………………………………………….56 Chapter 07 Conclusion……………….…………………………………………………...57 Chapter 08 Recommendations………………………………………………………........58 Chapter 09 Bibliography ……………………………………………………………….…59 Introduction of Banking in Pakistan 7 www.vustudents.ning.com Banking plays a major role in a country’s economy. After partition of India and Pakistan British government’s commission distribute the reserves between Pakistan and India. In August 1947, various Banks transferred their headquarters and funds to India. Before partition of Pak-o-Hind, some Banks were operated which were Chartered Bank, Grind-lays Bank, Imperial Bank of India, Australasia Bank and Habib Bank. After the independence of Pakistan, Muslim Commercial Bank Limited, Bank of Bahawalpur Limited, Punjab National Bank and National Bank of Pakistan were providing banking facilities to general public. The State Bank of Pakistan was inaugurated by our great leader Muhammad Ali Jinnah. stOn 1 July 1948. Australasia Bank and Habib Bank were providing facilities to the Pakistan’s nation. After some period, Australasia Bank Limited was converted into Allied Bank of Pakistan. State Bank of Pakistan is a Central Bank of Pakistan. Other Banks are Commercial Banks, Specialized Bank and Investment Banks. Now a day in Pakistan, fifty four banks are operated with thousands of branches. Banks are providing Banking facilities to their customers and clients by offering different services and packages. Pakistan’s banking sector consisting of Islamic Banks, Private Banks, Public Sector Banks, and Micro Finance Banks. These Banks are doing Corporate Banking, Trade Financing, Lease Financing and some Banks are providing online banking facilities, ATM facility and money transfer facilities also. Banking sector is a back bone of our economy. If this sector is making progress than whole economy is also growing a lot. Our Agricultural sector, Industrial sector, Mining sector, Export sector all depend on the banking industry because Banks provide long term funds as well as short term funds to all these sectors to meet out their short term as well as long term requirement. Hence, banking progress is necessary indeed. Overview of the Organization 8 www.vustudents.ning.com History The Bank of Punjab started functioning with the inauguration of its first branch of 7-Egerton Road, Lahore on November 15, 1989. The founder of the bank Mr. Nawaz Sharif performed the inauguration. The Bank of Punjab is working as a scheduled bank with its 273 branches in all major cities of the country. The bank provides all types of banking services such as Deposit in Local currency, Client Deposits in Foreign currency, Remittances and Advances to businesses, trade, industry and agriculture. The Bank of Punjab ahs entered into a new era of science to the nation under the experienced and professional hands of its management. The Bank of Punjab has played a vital role in the national economy through mobilization of untapped local resources, promoting savings and providing funds for investments.The Bank of Punjab has played a vital role in the economy through mobilization of untapped local resources, promoting savings and providing funds for investment.The Bank of Punjab has the privilege to discharge its responsibilities towards national prosperity and progress. Within the couple of years of its scheduling, the bank has not only carved out for itself prominent niche in the mainstream banking of the country but in certain areas it has the distinction of taking the lead. In short span of time the Bank has been able to evolve a distinct corporate culture through of its owned-based policies, which are realistic and are on highly professional footings. Vision and Mission statement 9 www.vustudents.ning.com Vision Statement “To be a customer focused bank with service Excellence” Mission Statement “To exceed the expectation of our stakeholders by Leveraging our relationship with the government of Punjab and delivering a complete range of professional Solutions with a focus on program driven products And services in the agriculture and middle markets Through a motivated team" Organizational Hierarchy chart 10 www.vustudents.ning.com Chairman Board of Directors Chief Executive Officer Executive Committee Executive InchargesArea Manager NorthArea Manager South 11 www.vustudents.ning.com Business Volume Total Number of Stock Holders Directors0 Provincial Government269,686,662Associated Companies0 Foreign Shareholders37,567,609Individuals62,526,255 Insurance Companies/Modaraba Mutual Funds32,993,540 Leasing Companies957,701 Charitable Trust273,911 Cooperative Societies16,011 NIC Units3,205,607 ICP99,00 Joint Stock Companies19,846,888Others101,713,292 Total number of shares528,798,376 Product Line 12 www.vustudents.ning.com Deposits Products •Current Account •Basic Banking Account •Tijarat Account (LCY) •Supreme Current Account (FCY) •Young Loin Saving Account ( New Product 2010 ) Profit Loss Sharing Term Account Profit and Loss sharing Term Accounts offered by Bank of Punjab are: •PLS Saving Account •Senior Citizen Account •Gharayloo Saving Account •Ziada Munafa Saving Account •PLS-Saving Profit plus Account •Corporate Premium Account •Supreme Saving Account (PLS) •Supreme Saving Account (FCY) •Corporate Premium Account Consumer Finance Types of consumer finance offered by Bank of Punjab are: •Aasaih Loan •Quick Cash •Car Loan •House Loan •Small Cash Personal Loan •BOP Motorcycle Loan 13 www.vustudents.ning.com Commercial Finance The Bank of Punjab offers following Commercial Financing Loans: •Running Finance •Cash Finance •Demand Finance •CNG Filling Station Scheme •Auto Lease Financing Scheme •Car Lease Financing Scheme •Karobar Barao Scheme •Fertilizers Dealers Financing Scheme •Ali Akbar Group_ Franchise Financing Scheme •Atlas Honda Limited _Authorized Dealers Financing Scheme •Financing Scheme_ Purchase of Office/ShopsElectronic Banking Electronic Banking provides non-stop banking convenience, twenty four hours a day, seven days a week. •Visa Debit Card •Internet Banking •ATM Network •BOP Quick pay •Call Center Services The Bank of Punjab is dedicate in its efforts to provide a quality banking experience to our customer via a range of unique Banking Services •Commercial Banking •Online Banking •Cash Management Services •Utility Bills •Lockers •Treasury •Western union Money Transfer 14 www.vustudents.ning.com Agriculture Credit Agriculture credit is provided to the farmers and livestock organizations. Bank of Punjab provides following agriculture loans with a specific markup rate: •Green Tractor Lease Finance •Agri Finance Branch •Agri Finance Scheme •Kissan Dost Finance Scheme •Second Hand Tractor Lease Finance Scheme•Kissan Dost Aabiari Scheme •Kissan Dost Mechanization Support Scheme•Kissan Dost Farm transport Scheme •Kissan Eslahi-e-Erazi Scheme •Kissan Dost Live Stock Development Scheme •Livestock Breed Improvement Trough VVW •Kissan Dost Commercial Agro Services •Kissan Dost Agri Mall Finance Scheme •Corporate Farming Finance Scheme •Commercial Lease Finances Tractor Scheme•Demand Finance Sheds Construction and Civil Work•Lease Finance Facility for Milked Animals•Running Finance Livestock Poultry •Kissan Dost Model dairy Farms (PDDC) •Kissan Dost Model Milk Centre (PDDC) •Kissan Dost Green House Finance Facility•Kissan Dost Cold Storage Finance Facility•Scheme for Controlled Shed •Lease Finance Facility for Installation of Bio-gas Plant•Group Finance to Small farmers •Clean Credit Facility through Syngenta Franchises•Zarkaashat Drip Irrigation System •Markup of Schemes Trade Finance Trade finance is a loan provided to the importers and exporters to make their transaction effective. This enhances the global business. The Bank of Punjab makes some 15 www.vustudents.ning.com trade processing centers to cooperate the exporters and also to the importers in different cities of Pakistan such as Lahore, Islamabad, Rawalpindi and Karachi. Competitors The competitors of the Bank of Punjab are the other commercial banks in Pakistan such as: Muslim Commercial Bank Limited, Soneri Bank Limited, United Bank Limited, Allied Bank Limited, Askari Bank Limited, Faisal Bank Limited, Standard Chartered Bank Limited, Habib Bank Limited, Habib Metropolitan Bank Limited, And Bank Al-Habib Limited Introduction to All Departments The departments and divisions of Bank of Punjab are as follows: •Retail Banking Division •Special Assets Management Division •Credit Administration Division •Human Resource Division •Finance division •Information Technology Division •Operations Division •Credit Risk Management Division •Corporate Banking Division •Control and Compliance Division •Training, Research, Communication and Public Division •Consumer banking Division •Audit and Inspection Division 16 www.vustudents.ning.com •Law Division Retail Banking Division Retail banking division of the bank deals with the customers and executes their transaction directly. It provides the services of saving account, mortgage loans, personal loans, debit cards, accounts checking, credit cards, ATM cards. Special Assets Management Division The Bank will invest on behalf of its clients and give them access to a wide range of traditional and alternative product offerings that would not be to the average investor. It includes the automatic sweep of cash balances into a money market fund, as well as brokerage services. Credit Administration Division In this division, banks deals with the credit, banks give loans to individuals and to the corporations. Human Resource Division This division performs the duty of hiring the employees, training the employees as well as retaining the employees and if necessary, firing the employees. Finance Division This division controls the overall activities relating to finance i.e. monitoring the investment activities, financing activities, Debit and Credit of funds and reasons there of with proofs. Information Technology Division 17 www.vustudents.ning.com This department controls and record the data related with the bank. The backup of all branches is sent to IT department on daily basis. Operations Division This division controls the whole operation of all the branches and controls the cash activities, cheques, account opening and other things about operations.Training, Research, Communication & Public Division This division conducts research on new products, trains newly hired employees, train old employees on new and innovative circulars in banking sector. It also provides training on customer relation management. Audit and Inspection Division This department of bank includes the Audit of all the branches; they do audit of the branches and give some opinions to execute their transactions. Law Division In this division of BOP, lawyers are employee to solve the cases of the bank. 18 www.vustudents.ning.com International Rtail Banking Credit Administration Finance Audit HR IT President of DivisionDivisionDisionDivisionDivisionDivisionDivisionBOP RegionsCommercial Report to Regional Assets State Bank of PakistanTeams Management Hub Branches 19 www.vustudents.ning.com Functional Hierarchy of the Bank of Punjab Chairperson of Board of Governor President of BOP International Retail Banking Special Assets Management Credit Administration Audit HR Finance IT President of DivisionDivisionDivisionDivisionDivisionDivisionDivisionDivisionBOP Risk RegionsCommercial Corporate RCAD Regional Report to ManagementAssets Assets DepartmentTeamsState Bank of Pakistan ManagementManagement Areas Hub Branches 20 www.vustudents.ning.com Comment on Organizational Structure of Bank of Punjab Division of Labor The structure of the Bank of Punjab is divided into division and these divisions are further divided into departments. This type of structure helps the management in controlling the operations of the bank effectively. Each division is responsible for its respective duties. Span of Control Span of control among hierarchical structure is clearly defined. Each department reports to the central department and then this central department reports to the head office.Communication Communication among the organizational departments is easy. Horizontal and vertical communication among departments is very effective. 21 www.vustudents.ning.com Plan of your internship program Bank of Punjab Main branch Circular Road, Near Fawara Chowk, Gujrat Bank of Punjab opened its branch Circular Road, Near Fawara Chowk, Gujrat in 2003. The code of branch is 011. Operations of the branch are controlled by Branch Manager and Operations Manager. Staff of the branch is consist on Branch System Administrator, Operations Staff (including Grade I officer, Grade II officer, Grade III officer and two cash officers).Starting and ending dates of Internship: I started internship on 23rd April, 2011 which ended on 6th June, 2011Name of training departments and duration: The duration of the internship program was six weeks. The staff of the branch was much cooperative. They imparted me training in all departments of the branch i.e. Accounts Opening, Accounts Department, Remittance Department, Clearing Department, Bills / Collection, Credit and Advance. . From 23rd April, 2011 to 29th April, 2011. I worked in Accounts Opening Department in which I learnt how to open an account, how to close an account and how to operate an account. From 30th April, 2011 to 6th May, 2011. I worked in Accounts Department in which I learnt how to use Manual Faction of Accounts Department. From 7th May, 2011 to 14th May, 2011. I worked in Remittance department where at I learnt and worked in Entry of remittance instruments in the system and preparation of physical instruments From 15th May, 2011 to 22nd May, 2011. I worked in Clearing Department where at I learnt about Inward Clearing, Outward clearing. From 23rd May, 2011 to 30th May, 2011. I worked in Bill for Collection department where at I learnt about Outward Bill for Collection (OBC) and Inward Bills for Collection (IBC). From 31st May, 2011 to 6th June, 2011. I worked in Advance and Credit (Finance department) where at I learnt about the allocation of funds in different portfolios. 22 www.vustudents.ning.com Training program First Day in Bank of Punjab rdI started my internship program on 23 April, 2011 at the bank of Punjab which ended on th6 June, 2011. On first day of my program I was briefed by the branch manager about different branches of the bank I was also told the major rules and regulations which were being observed by the management of the bank I was also giving some briefing by the Manager Operation which proved as a miles stone during my internship program. I also met different members of the staff in different branches of the bank where at I SWOT for basic knowledge about those branches. Then I started my working in accounting opening department. Account Opening Department rdthIn this department, I worked for the period from 23 April, 2011 to 29 April, 2011. Account Opening Procedure: Account Opening Form Customer approach to bank and an account opening is given to him for competing and signed by the account holder at different places of the form. Completion of the Form Account form is completed in all respect and checked by the bank officer and is duly signed by the customer which is also verified by the Operation Manager.Specimen Signature Card (SSC) Signature specimen card is compulsory for opening an account in the bank. Without getting signature of customer you can not open the account. Signature Difference Form If client signature differs from the CNIC, the signature of the client is taken on a signature difference form 23 www.vustudents.ning.com Computerized Checking The bank officer connected via internet to the NADRA website checks the record of his customer’s social life. If the record of the person is ok, then the officer of the bank authenticates the record under his signature and stamp and send it to the Branch Manager Account Number Account number is written on the cheque book requisition. After completion of all procedures, the bank prepares a letter and sends it to the client at his postal address to pay gratitude to the customer. Cheque Book Issuance The first cheque book consists of 25 leaves and no charges are deducted from the account the account of client. There after bank sends a recommendation for 25, 50 and 100 leaves with different prices and charges are deducted from the account of clients.Procedure for Closing of an account If customer wants to close the account, he fills up an account closing form and signs there in, account balance should be zero, approval is taken from the Branch Manager Specimen card is taken back and is attached with the form and account is closed. Procedure of issuance of Bank Statement A requisition slip is taken from the customer duly signed and the period from which the customer wants to take the statement. After verification of signature Bank Statement is issue to the customer and Rs. 55 are deducted from account of customer Procedure for ATM/PIN Issuance Bank of Punjab provides the ATM facility to its Customers and they can withdraw their amount at any time through ATM. For issuance of ATM, customer has to sign an ATM form and Bank office make an entry in the system and within 15 days bank receives ATM card from Head Office which is given to the customer. 24 www.vustudents.ning.com Accounts Department When I completed my training in Account Opening Department, the Branch Manager sent me to Account Department. I worked in Accounts Department from 30th April, 2011 to 6th May, 2011. Account department is responsible for budgeting keeping record of the revenue and expenses all transaction that are take place in the bank and their physical prove (voucher) are come to the account department next day these voucher are also posted to computer and the computer generated report of daily transaction is created in IT department and then they send to the account department to match or tell to computer generated report and their voucher of daily transaction and save it as a physical record that these transaction are take place in the bank at following date. The report generated by the accounts department on a daily, weekly, monthly, bi-yearly and yearly is written in a proper format. It is neither necessary nor possible to get acquainted by all of these reports in a short period of time. Some of the common reports are: Monthly Assets & Liabilities, Monthly Budget Review Report, Monthly Monitory statement, Monthly Performance Review Report and Monthly fixed investment. For these statements, five reports carry extreme importance. The five reports are: Daily position of advances and deposit, Statement of affairs, Daily exchange position report, fixed assets statement and Monthly review of performance. The account department of BOP has to record even the minor expenses of the branch like tea for staff, stationery for the branch. Remittance Department I worked in Remittance Department from 7th May, 2011 to 14th May, 2011 Remittance department transfers the fund form one bank to another bank and one place to another place. In this department collection take place. The bank of Punjab makes payment of only open cheque on the counter and prohibits the payment of crossed cheques. Bank of Punjab transfer money from one place to another place by way of payment order, demand draft, inward collection, outward collection. Demand Draft An order to pay money to the payee who is residing outside the city, Demand draft can be for a customer who may or may not have and account in the bank but the other person’s 25 www.vustudents.ning.com account must be maintained with the bank for which the payer has demanded the demand draft. Payment Order Pay order is order money but this payment is to be made within city. In other words it can be said that the payee and the payer should be in one city. In pay order payment can be made in cash, clearing and transfer. Clearing Department thndI worked in clearing department from 15 May, 2011 to 22 May, 2011. I learnt their about clearing of different cheques and remittance handling. I was told there the main objects of clearing. I received all the clearing cheques and made a schedule of these cheques after making entries in outward and inward clearing registers and sent the same to main branch where at all the cheques were sent to NIFT(National Institutional Facilitation Technology)NIFT NIFT stand for National Institutional Facilitation Technologies. Clearing house of SBP has shifted a part of its work to private institution names NIFT. NIFT collets cheques, demand draft, pay order, travelers cheques etc. from all branches of different banks within city through its carriers and send them to the branches on which these are drawn for clearing. NIFT prepare a sheet for each branch and send it to each branch as well as to State Bank of Pakistan where accounts of Banks are settled. Types of clearing Inward clearing: When cheques of other Banks are deposited in our bank, after clearing these cheques through NIFT by the other Banks on which these are down. Accounts of customers are credited. Outward clearing: When cheques of our bank are deposited in other Banks and these cheques are sent to us for verification, we debit the of our client after verification their account. 26 www.vustudents.ning.com Bill for Collection Department I worked in Bill for Collection from 23rd May, 2011 to 30th May, 2011.Bill for collection is the clearing procedure for cheque, draft, bill of exchange, and promissory note in case that a collection branch and a paying branch are located in different clearing areas. Bill of collection provides service to their customer to get payment from the nearer bank at nominal chargers. Advance and Credit Department stthI was worked in advance and credit department from 31 May, 2011 to 6 June, 2011. Advances and credit department is the most important department in the bank in this department advances are giving to the business man, exporter etc. before giving advance, credit worthiness of the borrower is taken into account i.e. character, capacity, collateral, credit terms etc. advances are also given to different banks. Principles while Advancing Five principle that must be properly pragmatic while advancing money to borrowers i.e. safety, liquidity, disposal, remuneration and suitability Calculation of Liquidity ratio Calculation of liquidity ratio i.e. Current ratio and Quick ratio Types of Lending There are three types of lending short term, medium term and long term. However they are further classified i.e. Running finance, Demand Finance, Cash Finance and Letter of Guarantee 27 www.vustudents.ning.com Ratio Analysis Ratio analysis is helpful to the management of the organization as well as for the investors and creditors. An investor keeps an eye on the company’s financial statement and makes decisions whether to invest funds in that company or not. Similarly a creditor also analysis the financial statements and makes decisions whether to grant loan or not. Financial Statements I used Financial Statements of Bank of the Punjab for the last three years 2006, 2007 and 2008 because Bank of the Punjab have no Financial Statements of 2009 and 2010, due to court case Financial Statements of Bank of the Punjab for the last three years 2006, 2007 and 2008 are, The Bank of Punjab Profit and Loss AccountstAs on 31 December 200620072008 Rs. (000)Rs. (000)Rs. (000) Markup/ return/interest earned 11,643,96317,539,53817,752,652 Markup/return/ interest expensed7,573,72213,939,37716,614,000 Net markup/interest income4,070,2413,600,1611,138,652 Provision against non-performing loans and 340,6261,616,42118,863,580 advances-net Provision for diminution in the value of 33,00024,479388,757 investments Bad debts written off directly100246,869---- 373,7261,887,76919,252,337 Net markup/interest income after 3,696,5151,712,392(18,113,685) provisions NON MARK-UP/INTEREST INCOME 28 www.vustudents.ning.com Fee, commission and brokerage income473,212659,488579,520Dividend income1,385,8751,812,8702,025,160Income from dealing in foreign currencies 239,804377,233324,327 Gain on Sale of Securities389,0632,039,535733,787Unrealized Gain / Loss on Revaluation of --------------- Investments classified as held for tradingOther income466,435547,635526,186 Total non mark-up/interest income2,954,3895,436,7614,188,980 6,650,9047,149,153(13,924,705)NON MARK-UP/ INTEREST EXPENSES Administrative expenses1,751,9702,255,3422,808,835Provision against lending to financial 130,000--------10,101 Institution Provision against off Balance Sheet Items175292----Provision against receivable from NIT----------Other charges 3837,950114,700 Total non- markup/ interest expenses (1,882,183)(2,293,584)(2,933,636) 4,768,7214,855,569(16,858,341)Extraordinary /unusual items--------------------------PROFIT BEFORE TAXATION4,768,7214,855,569(16,858,341)Taxation For the year –Current880,997170,700207,600-Deferred For prior year –Current--(19,921)1,052,000-Deferred83,469250,7728,033,001 964,466401,5516,773,401PROFIT AFTER TAXATION3,804,2554,454,018(10,084,940)Un-appropriate profit b/f169,8173,226,9613,468,956Reversal of Excess management fee accrued ---------6,250 last year Transfer from surplus on revaluation of Fixed 6,1745,8665,572 assets – net of tax 175,9913,232,8273,468,278Profit available for appropriation 3,980,2467,686,845(6,616,662) 29 www.vustudents.ning.com The Bank of Punjab Balance Sheet stAs on 31 December 200620072008 Rs. (000)Rs. (000)Rs. (000) ASSETS: Cash and Balances with treasury Banks14,054,85914,210,30210,685,058 Balances with other Banks3,722,0891,927,6622,178,455Lending's to financial institutions11,846,8232,450,000633,333 Investments28,233,21173,461,69322,689,608Advances 101,319,954133,899,143131,724,113Other assets 3,609,4575,789,1166,122,406Operating fixed assets2,068,7443,252,7593,471,838Deferred Tax assets -------------------8,388,162Total Assets164,855,137234,990,675185,892,973LIABILITIES Bills payable856,448937,6471,219,801 Borrowings from financial institutions 6,989,42417,842,91512,278,773 Deposits and Other accounts137,727,606191,968,377164,071,732Subordinated Loans ------------------- Liabilities against assets subject to 40,98840,32130,632 finance lease Other liabilities 2,816,3412,983,9774,564,481Deferred Tax liabilities 298,6162,205,530-------Total Liabilities148,729,423215,978,767182,165,419Net Assets16,125,71419,011,9083,727,554 Represented By: Share Capital2,902,4904,230,3795,287,974Reserves4,537,7327,427,2327,427,232 Un-appropriate Profit3,219,2463,468,956(7,674,257)Total Equity10,658,96815,126,5675,040,949 30 www.vustudents.ning.com Surplus on Revaluation of Assets5,466,7463,885,341(1,313,395 ) Analysis For the analysis, management and the investors make some ratio analysis, in which Liquidity Ratios, Profitability Ratios, Market Ratios, Activity Ratios, Leverage ratios are familiar. Ratios In order to analysis the financial performance of the bank, investors and management use the ratio analysis in which following ratios are calculated: 1.Liquidity Ratios 2.Leverage Ratios 3.Profitability Ratios 4.Activity Ratios 5.Market Ratios Liquidity Ratios Liquidity ratios means to measure short term solvency of the company. Ability of the company to pay off its short term debt. Following ratios are calculated in order to measure the short term solvency of the company •Current Ratio •Acid Test Ratio •Working Capital Current Ratio Current Assets = Cash and Balance with Treasury Banks + Balance with other Banks +Lending to Financial Institution + Short Investment + Short Advances + Other Assets Current Liabilities = Bill Payables + Short Borrowing + Short Deposit + Other Liabilities Current Ratio = Current Assets / Current liabilities Year 2006Year 2007Year 2008 31 www.vustudents.ning.com =Rs.122,347,224 / Rs. 94,274,512=Rs.173,120,729/ Rs.140,202,371=Rs.128,967,953/ Rs.107,914,057 = 1.3 : 1= 1.23 : 1= 1.19 : 1 Workings: For 2006 Current Assets= 14,054,859 + 3,722,089 + 11,846,823 + 20,501,978 +68,612,018 + 3,609,457 = Rs.122, 347, 224 Current Liabilities = 856, 448 + 6, 989, 424 + 83, 612, 299 + 2,816, 341 = Rs. 94,274,512 For 2007 Current Assets= 14,210,302 +1,927,662 + 2,450,000 + 65,857,861 + 82,885,788+ 5,789,116 = Rs.173, 120,729 Current Liabilities= 937,647 + 15,857,522 + 120,423,225 + 2,983,977 = Rs. 140,202,371 For 2008 Current Assets= 10,685,057 + 2,178,455 + 633,333 + 20,038,517 + 89,323,454 + 6,109,137 =Rs. 128,967,953 Current Liabilities= 1,219,801 + 10,601,169 + 91,528,830 + 4,564,257 = Rs. 107,914,057 Graphical Representation: 32 www.vustudents.ning.com 1.3 1.28 1.26 1.24 1.22 Current Ratio1.2 1.18 1.16 1.14 1.12 200620072008 Explanation: The standard of this ratio is 2:1, means current assets are twice the current liabilities. But Bank of Punjab has a lower current ratio to the standard rate. In 2006 it was 1.3, in 2007, 1.23 and in 2008 it will be 1.19 which is more than the 2007 but lesser the 2006.Acid Test Ratio Current Assets = Cash and Balance with Treasury Banks + Balance with other Banks +Lending to Financial Institution + Short Investment + Short Advances + Other Assets Current Liabilities = Bill Payables + Short Borrowing + Short Deposit + Other Liabilities Prepaid expenses = Advances, deposits, advance rent and other prepayments Acid Test Ratio = Current Assets – (Inventories + prepayments) / Current liabilities Year 2006Year 2007Year 2008 = Rs.122, 347, 224- Rs.102, 571/Rs. = Rs.173, 120,729- Rs. 159,438/ =Rs. 128,967,953-Rs.161,553/ 94,274,512Rs. 140,202,371Rs. 107,914,057 = 1.29= 1.23= 1.19 Workings: For 2006 Current Assets= 14,054,859 + 3,722,089 + 11,846,823 + 20,501,978 +68,612,018 + 3,609,457 = Rs.122, 347, 224 33 www.vustudents.ning.com Current Liabilities = 856, 448 + 6, 989, 424 + 83, 612, 299 + 2,816, 341 = Rs. 94,274,512 Prepaid Expenses = Rs.102, 571 For 2007 Current Assets= 14,210,302 +1,927,662 + 2,450,000 + 65,857,861 + 82,885,788+ 5,789,116 = Rs.173, 120,729 Current Liabilities= 937,647 + 15,857,522 + 120,423,225 + 2,983,977 = Rs. 140,202,371 Prepaid Expenses = Rs.159, 438 For 2008 Current Assets = 10,685,057 + 2,178,455 + 633,333 + 20,038,517 + 89,323,454 +6,109,137 =Rs. 128,967,953 Current Liabilities= 1,219,801 + 10,601,169 + 91,528,830 + 4,564,257 = Rs. 107,914,057 Prepaid Expenses = Rs.161, 553 Graphical Representation: 1.3 1.28 1.26 1.24 1.22Acid Test Ratio 1.2 1.18 1.16 1.14 200620072008 34 www.vustudents.ning.com Explanation: As the Acid test ratio from year 2006 to 2008 is: Rs.1.29, Rs. 1.23 and Rs 1.19 respectively. In all three years acid test ratio is slight more than is standard ratio. It must be 1:1 in order to proof the short term solvency of the bank to pay off is short term bank. Working capital Working Capital = Current Assets – Current LiabilitiesYear 2006Year 2007Year 2008 =Rs.122,347,224-Rs. 94,274,512=Rs.173,120,729- Rs. 140,202,371=Rs. 128,967,953– Rs.107,914,057 = Rs.28,072,712= Rs.32,918,358= Rs.21,053,896 Workings: For 2006 Current Assets = Rs.122, 347, 224 Current Liabilities = Rs. 94,274,512 For 2007 Current Assets = Rs.173, 120,729 Current Liabilities = Rs. 140,202,371 For 2008 Current Assets = Rs. 128,967,953 Current Liabilities = Rs. 107,914,057 Graphical Representation: 35 www.vustudents.ning.com 35000000 30000000 25000000 20000000 Working Capital15000000 10000000 5000000 0 200620072007 Explanation: The working capital is rapidly increasing from 2006 to 2007. Because the current assets of BOP are rapidly, increase. In 2008 it declined but not in a rapid as it grow 2006 to 2007. Leverage Ratios These ratios show the capital structure of the firm. Through these ratios we find that how the firm finance their activities. It is more important for the lender to assess that the firm can repay the loan amount ort not. Increasing debt increases the likelihood of bankruptcy of the firm. Following ratios falls under this category, •Time Interest Earned •Debt Ratio •Debt to Equity Ratio •Debt to Tangible Net Worth •Total Capitalization Ratio Time Interest Earned Ratio: Time Interest Earned = Profit before tax + Interest Expense (EBIT) / Interest Expense Year 2006Year 2007Year 2008 =Rs.4,768,721/Rs.7,573,72=Rs.4,855,569/Rs.13,939,37=(Rs.16,832,906)/Rs.16,614,000 27= -1.01 = 0.63= 0.35 Working 36 www.vustudents.ning.com Given in the Profit and Loss Account For 2006 Profit before tax+Interest Expense = Rs.4, 768,721 Interest Expense = Rs.7, 573,722 For 2007 Profit before tax+Interest Expense = Rs. 4,855,569 Interest Expense = Rs. 13,939,377 For 2008 Profit before tax+Interest Expense = Rs. -16,832,906 Interest Expense = Rs. 16,614,000 Graphical Representation: 0.8 0.6 0.4 0.2 0 -0.2Time Interest Earned -0.4 -0.6 -0.8 -1 -1.2 200620072008 Explanation: The Time Interest Earned Ratio of BOP is not better. The ratio is consistently is declining even in 2008 it went negative. This graph is showing that the bank EBIT is not enough to cover its interest expenses. Debt Ratio Total Debt= Bills Payable + Borrowings from financial institutions + Deposits & other accounts + Subordinate Loans + Liabilities 37 www.vustudents.ning.com against assets subject to finance lease + deferred tax liabilities+ Other liabilities Total Assets = Given in the Balance Sheet Debt Ratio = (Total Debt / Total Assets) * 100 Year 2006Year 2007Year 2008 =Rs.148,729,423/Rs.164,855,13=Rs.215,978,767/Rs.234,990,67=Rs.182,165,419/Rs.185,909,120 75= 97.99% = 90.21%= 91.90% Working For 2006 Total Debt= 856,448 + 6,989,424 + 137,727,606 + 0 + 40,988+298,616+2,816,341 = Rs.148,729,423 For 2007 Total Debt= 937,647 + 17,842,915 + 191,968,377 + 0 +40,321+2,205,530+2,983,977`= Rs.215,978,767 For 2008 Total Debt= 1,219,801, + 12,278,773 + 164,072,532 + 0 + 30,632+ 0 +4,564,481 = Rs. 182,165,419 Graphical Representation: 98.00% 96.00% 94.00% 92.00%Debt Ratio 90.00% 88.00% 86.00% 200620072008 Explanation: Debt ratio is measure of debt with the total assets. The graph shows that the debt ratio is consistently increasing that indicates the dependence on debt is increasing and in 2008 it 38 www.vustudents.ning.com is at the higher level. From 2007 to 2008 it rapidly increased. In 2008 the total Debt was the almost 97% of Total Assets. Debt / Equity Ratio Total Debt= Bills Payable + Borrowings from financial institutions + Deposits & other accounts + Subordinate Loans + Liabilities against assets subject to finance lease + deferred tax liabilities+ Other liabilities Total Equity= Share Capital + Reserves + Un-appropriated Profit Debt to Equity Ratio = Total Debt / Total Equity Year 2006Year 2007Year 2008 =Rs.148,729,423/Rs.10,658,96=Rs.215,978,767/Rs.15,126,56=Rs.182,165,419/Rs.5,040,949 87= 36.13 = 13.95= 14.27 Working For 2006 Total Debt = 856,448 + 6,989,424 + 137,727,606 + 0 + 40,988+298,616+2,816,341 = Rs.148,729,423 Total Equity= 2,902,490 + 4,537,232 + 3,219,246 = Rs.10,658,968 For 2007 Total Debt = 937,647 + 17,842,915 + 191,968,377 + 0 +40,321+2,205,530+2,983,977 = Rs.215,978,767 Total Equity= 4,230,379 + 7,427,232 + 3,468,956 = Rs.15,126,567 For 2008 Total Debt = 1,219,801, + 12,278,773 + 164,072,532 + 0 + 30,632+ 0 +4,564,481 = Rs.182,165,419 Total Equity= 5,287,974 + 7,427,232 + (– 7,658,686 (Loss)) = Rs.5,040,949 39 www.vustudents.ning.com Graphical Representation: 40 35 30 25 20Debt to Equity Ratio 15 10 5 0 200620072008 Explanation: As we already observed that the debt is increasing, in this graph we compare it with the equity. We find the consistent increase in the debt to equity ratio. In 2008 it was at the higher level. The debt exceeded the equity.Debt to Tangible Net Worth Tangible Net Worth = Total Assets – Liabilities – Intangible Assets Debt to Tangible Net Worth = Total Debt / Tangible Net Worth Year 2006Year 2007Year 2008 =Rs.145,614,466/Rs.16,095,24=Rs.210,789,260/Rs.18,993,72=Rs.177,601,738/Rs.3,735,61385= 47.54 = 9.05= 11.10 Working For 2006 40 www.vustudents.ning.com Tangible Net Worth= 164,855,137 – 148,729,423 – 30,466 = Rs.16,095,248 For 2007 Tangible Net Worth= 234,990,675 – 215,978,767 – 18,183 = Rs.18,993,725 For 2008 Tangible Net Worth= 185,909,120 – 182,165,995 – 7,512 = Rs.3,735,613 Graphical Representation: 50 40 30 Debt to Tangible Net Worth20 10 0 200620072008 Explanation: As the graph is showing that the debt to tangible net worth ratio is increasing. From 2006 to 2007 it slightly increased but from 2007 to 2008 it rapidly increased due to the increase in debt. So the BOP has not Net Tangible Net Worth to cover the Debt. 41 www.vustudents.ning.com Total capitalization Ratio Long Term DebtTotal Capitalization Ratio = Long Term Debt + Shareholder's Equity Year 2006Year 2007Year 2008 =Rs.36,296,156/ Rs.46,955,124=Rs.55,571,712/Rs. 70,698,279=Rs. 46,755,209/ Rs.51,796,158 = 0.9026 Times= 0.7729 Times = 0.7860 Times Long Term Debt= Deposit and other account + Liabilities against assets subject to finance lease + Deferred tax liabilities + other liabilities Working For 2006 Long Term Debt= 35,880,568+ 23168+298,616+ 93,804 = Rs.36,296,156 = 36,296,156/ (36,296,156+10,658,968) = 36,296,156/ 46,955,124 For 2007 Long Term Debt= 53,219,973+30615+2,205,530+115,594 = Rs.55,571,712 =55,571,712/ (55,571,712 + 15,126,567) =55,571,712/ 70,698,279 For 2008 Long Term Debt=46,555,790+19859+0+ 179,560 = Rs.46,755,209 = 46,755,209/ (46,755,209+ 5,040,949) = 46,755,209/51,796,158 Graphical Representation: 42 www.vustudents.ning.com 92.00% 90.00% 88.00% 86.00% 84.00% 82.00%Total Capitalization80.00%Ratio78.00% 76.00% 74.00% 72.00% 70.00% 200620072008 Explanation: The total capitalization ratio compares the total debt with the sum of debt and equity. The low capitalization ratio indicates the financial fitness of the firm. According to the graph, I can see that the ratio in 2008 is higher. In 2007, it was at the lowest level in selected years. Profitability Ratios Profitability ratios measure the earning ability of the firm. Following ratios are calculated: •Net Profit Margin •Return on Assets •DuPont Return on Assets •Operating Income Margin •Return on operating Assets •Return on Total Equity •Gross Profit Margin Net Profit Margin Net Profit = Profit after Taxation Total Revenue = Markup/ return/interest earned 43 www.vustudents.ning.com Net Profit Margin = Net Profit / Total Revenue Year 2006Year 2007Year 2008 = Rs.3,804,255 / Rs.11,643,963= Rs.4,454,018 / Rs. 17,539,538= (Rs.10,084,940) / Rs.17,752,652 = 32.67%= 25.39%= -56.81%Working For 2006 Net Profit = Rs.3,804,255Total Revenue = Rs.11,643,963 For 2007 Net Profit = Rs.4,454,018Total Revenue = Rs.17,539,538 For 2008 Net Profit = Rs.-10,084,940Total Revenue = Rs.17,752,652Graphical Representation: 40.00% 30.00% 20.00% 10.00% 0.00% -10.00%Net Profit Margin-20.00% -30.00% -40.00% -50.00% -60.00% 200620072008 Explanation: 44 www.vustudents.ning.com The net profit margin is declining from 2006 to 2008, as shown in graph. In 2006 the net profit margin is 32.67% which is higher in selected three years. After this it start to decline and in 2008 The Bank of Punjab has to bear a loss. Return on Assets Net Profit = Profit after Taxation Total Assets = Given in the Balance Sheet ROA = Net Income / Total AssetsYear 2006Year 2007Year 2008 = Rs.3,804,255 / Rs.164,855,137= Rs.4,454,018 / Rs.234,990,675= (Rs.10,084,940)/ Rs.185,892,973 = 2.31%= 1.895%= -5.425% Working For 2006 Net Profit = 3,804,255 Total Assets = 164,855,137 For 2007 Net Profit = 4,454,018 Total Assets = 234,990,675 For 2008 Net Profit = 10,084,940 Total Assets = 185,892,973 Graphical Representation: 45 www.vustudents.ning.com 3.00% 2.00% 1.00% 0.00% -1.00%Return on-2.00%Assets -3.00% -4.00% -5.00% -6.00% 200620072008 Explanation: It is simple Return on Assets, which calculate through net income, and total assets but the result is same as in Du-Pont ROA. It is showing the consistent decline in the return on Assets. DuPont Return on Assets Ratio Net Profit = Profit after Taxation Total Revenue = Markup/ return/interest earnedTotal Assets = Given in the Balance Sheet Du-Pont ROA = (Net Income / Total Revenue) x (Total Revenue / Total Assets) Year 2006Year 2007Year 2008 = (3,804,255/11,643,963) x = (4,454,018/17,539,538) x = (-10,084,940/17,752,652) (11,643,963/164,855,137)(17,539,538/234,990,675)x (17,752,652/185,892,973) = 2.31%= 1.894%= -5.425%Working For 2006 Net Profit = 3,804,255 Total Revenue = 11,643,963 Total Assets = 164,855,137 For 2007 Net Profit = 4,454,018 Total Revenue = 17,539,538 Total Assets = 234,990,675 46 www.vustudents.ning.com For 2008 Net Profit = -10,084,940 Total Revenue = 17,752,652 Total Assets = 185,892,973 Graphical Representation: 3.00% 2.00% 1.00% 0.00% -1.00%DuPont Return-2.00%on Assets -3.00% -4.00% -5.00% -6.00% 200620072008 Explanation: DuPont ROA Analysis is the approach to calculate the Return on Assets by taking Net Income, Total Revenue and Total Assets. It shows the effect of revenue on the net income and the total assets. When we calculate the DuPont ROA of BOP, we find consistently the decline in the return on assets. Net Profit Margin is Declining on the other hand the total Asset were not generating enough revenue. Therefore, the Return on Assets decline in 2008 and it goes to negative. Operating Income Margin Operating Income Margin = Earnings Before tax + interest expenses / Total Revenue Year 2006Year 2007Year 2008 =Rs.4,768,721/Rs.11,643,96=Rs.4,855,569/Rs.17,539,53=( Rs.2,443,41)/Rs.17,752,652 38= -1.376% = 40.95%= 27.68% Working 47 www.vustudents.ning.com For 2006 Earnings Before tax = 4,768,721Total Revenue = 11,643,963 For 2007 Earnings Before tax = 4,855,569Total Revenue = 17,539,538 For 2008 Earnings Before tax = -16,858,341Total Revenue = 17,752,652 Graphical Representation: 60.00% 40.00% 20.00% 0.00% -20.00%Operating income Margin-40.00% -60.00% -80.00% -100.00% 200620072008 Explanation: Graph show a decline in the revenues. In 2006 BOP generate enough revenue but in 2008 the provision pf non performing loans decline the profit even it went in negative which is -94.96%. Return on Operating Assets 48 www.vustudents.ning.com Operating Assets = Cash and Balance with Treasury Banks + Balance with other Banks +Lending to Financial Institution + Advances + Operating fixed Assets Return on Operating Assets = EBIT / Operating Assets Year 2006 Year 2007Year 2008 = Rs. 4,768,721/ Rs.133,012,469= Rs. -16,858,341/Rs.148,692,796= Rs.4,855,569/Rs.155,739,866 = 3.58%= -11.33%= 3.12% Working For 2006 Earnings Before tax = Rs. 4,768,721 Operating Assets = 14,054,859 + 3,722,089 +11,846,823+101,319,954+2,068,744 = Rs.133, 012,469 For 2007 Earnings Before tax = Rs. 4,855,569 Operating Assets = 14,210,302 + 1,927,662 + 2,450,000 + 133,899,143 + 3,252,759 = Rs.155, 739,866 For 2008 Earnings Before tax = Rs. -16,858,341 Operating Assets = 10,685,057 + 2,178,455 + 633,333+131,724,113+3,471,838 = Rs.148, 692,796 Graphical Representation: 49 www.vustudents.ning.com 4.00% 2.00% 0.00% -2.00% Return on-4.00%Operating -6.00%Assets -8.00% -10.00% -12.00% 200620072008 Explanation: As the Return on Operating Assets from year 2006 to 2008 is: 3.58%, 3.12% and -11.33% respectively. As for as index analysis concern return on operating assets has been an decreasing from 2006 to 2008.it is much below standard in banking industry. Return in Total Equity Average Stockholder Equity = Share Capital + Reserves + Un-appropriated Profit ROE = (Net Income / Average Stockholder Equity) * 100 Year 2006Year 2007Year 2008 =Rs.3,804,255/Rs.10,658,96=Rs.4,454,018/Rs.15,126,56=(Rs.10,084,940)/Rs.5,040,94987= -200.06% = 35.69%= 29.45% Working For 2006 Net Profit = 3,804,255 Average Stockholder Equity = 2,902,490+4,537,232+3,219,246 = 10,658,968 For 2007 Net Profit = 4,454,018 50 www.vustudents.ning.com Average Stockholder Equity = 4,230,379+ 7,427,232+ 3,452,842 = 15,110,453 For 2008 Net Profit = -10,084,940 Average Stockholder Equity = 5,287,974+7,427,232+(-7,674,257) = 5,040,949 Graphical Representation: 50.00% 0.00% -50.00% -100.00%Return on Equity-150.00% -200.00% -250.00% 200620072008 Explanation: Return on Owner’s Equity in the year 2006 is 35.69%, in the year 2007 is 29.35% and in the year 2008 is -200.6% which shows an decreasing trend to a lesser extent from year on year basis as well as it is not meet the standard of banking industry. Gross Profit Margin Gross Profit Margin = (Gross Profit / Total Revenue) * 100 Year 2006Year 2007Year 2008 =Rs.4,070,241/Rs.11,643,96=Rs.3,600,161/Rs.17,539,53=Rs.1,138,652/Rs.17,752,65238= 6.41% = 34.96%= 20.53% Working 51 www.vustudents.ning.com Give in the Profit and Loss Account For 2006 Gross Profit = Net markup/interest income = Rs.4, 070,241Total Revenue = Markup/ return/interest earned = Rs.11, 643,963 For 2007 Gross Profit = Net markup/interest income = Rs.3, 600,161Total Revenue = Markup/ return/interest earned = Rs.17, 539,538 For 2008 Gross Profit = Net markup/interest income = Rs. Rs.1, 138,652 Total Revenue = Markup/ return/interest earned = Rs. 17,752,652Graphical Representation:35.00% 30.00% 25.00% 20.00% Gross Profit Margin15.00% 10.00% 5.00% 0.00% 200620072008 Explanation: 52 www.vustudents.ning.com This ratio also shows the decline in revenue of BOP. In 2006 it nearly 35% but after 2006 it start to decline and in 2008 it merely 6.41%. Because the revenue of the BOP declines so the Gross Profit automatically decline. Activity Ratios Activity ratios measure a firm’s ability to convert different accounts within their balance sheets into cash or sales. •Total Assets Turnover •Fixed Assets Turnover Total Assets Turnover Total Assets Turnover Ratio = Interest or Markup / Total Assets Year 2006Year 2007Year 2008 =Rs.11,643,963/Rs.164,855,13=Rs.17,539,538/Rs.234,990,67=Rs.17,752,652/Rs.185,892,97375= 0.095 times = 0.071 times= 0.075 times Working Give in the Profit and Loss Account and Balance Sheet For 2006 Markup/ return/interest earned = Rs.11, 643,963Total Assets = Rs.164, 855,137 For 2007 Markup/ return/interest earned = Rs.17, 539,538Total Assets = Rs. 234,990,675 For 2008 Markup/ return/interest earned = Rs.17, 752,652Total Assets = Rs. 185,892,973 Graphical Representation: 53 www.vustudents.ning.com 0.1 0.08 0.06 Total Assets Turnover 0.04Ratio 0.02 0 200620072008 Explanation: Total Asset turnover ratio measures the firm’s effectiveness in generating the revenue from its investments in total assets. The graph is showing the increase in the total assets turnover ratio. But its not real growth because when we analyze the Financial Statements of BOP we find that in 2007 the income and assets increased so the ratio also increased but in 2008 income decreased whereas the assets decrease with more ratio. So this factor caused the increase in the total assets turnover in 2008. Fixed Assets Turnover Fixed Assets Turnover Ratio = Interest or Markup / Fixed Assets Year 2006Year 2007Year 2008 =Rs.11,643,963/Rs.2,068,74=Rs.17,539,538/Rs.3,252,75=Rs.17,752,652/Rs.3,471,838 49 = 5.11 times = 5.63 times= 5.39 times Working Give in the Profit and Loss Account and Balance Sheet For 2006 Interest or Markup = Rs.11, 643,963 Fixes Assets = Operating Fixes Assets = Rs.2, 068,744 For 2007 Interest or Markup = Rs.17, 539,538 Fixes Assets = Operating Fixes Assets = Rs.3, 252,759 54 www.vustudents.ning.com For 2008 Interest or Markup = Rs. Rs.17, 752,652 Fixes Assets = Operating Fixes Assets = Rs.3, 471,838 Graphical Representation: 5.7 5.6 5.5 5.4 5.3 Fixed Assets5.2Turnover Ratio 5.1 5 4.9 4.8 200620072009 Explanation: The fixed asset turnover ratio measures the company's effectiveness in generating sales from its investment in fixed assets. The graph shows the decline in fixed assets turnover. It means that the generation of revenue on the fixed assets is declining. The Bank of Punjab is not using its fixed assets effectively. Market Ratios Market ratios are commonly used by the investors to access the performance of a business as an investment and also the cost of issuing stock. •Dividend per share •Earning per Share •Price / Earning Ratio Dividend per share 55 www.vustudents.ning.com Dividend per share = Dividend paid to Shareholders / Number of shares outstandingNote: Bank of Punjab has not paid dividend so this ratio is not calculatedEarning Per Share Earning Per Share = Net Income / Average No. of Shares Outstanding Year 2006Year 2007Year 2008 =Rs.3,804,255,000/Rs.289,602,365=Rs.4,454,018,000/Rs.423,037,901=(Rs.10,084,940,000)/Rs.528,797,376 = Rs.13.14= Rs.10.53 =Rs.(-19.07 ) Graphical Representation: 15 10 5 0 Earning Per Share -5 -10 -15 -20 200620072008 Explanation: The earning per share was 13.14 in 2006, which decrease in 2007, and was 10.53. But in 2008 due to loss the dividend per share went in negative its mean that in 2008 shareholders have to bear a loss. Price / Earning Ratio Price to Earning Ratio = Market Price per Share / Earning per Share Year 2006Year 2007Year 2008 56 www.vustudents.ning.com = 101 / 13.14 = 97.85 / 10.53= 13.20 / -19.07 = Rs.7.69= Rs.9.29= Rs.( -6.50) Representation: 10 8 6 4 2Price Earning0Ratio -2 -4 -6 -8 200620072008 Explanation: The P/E ratio was 7.69 in 2006. In 2007, it increased due to the decline in market price so the shares of BOP look more attractive in 2007 because the P/E ratio is higher but in 2008 as we already have seen in DPS and EPS calculation the P/E ratio went in negative. In 2008, BOP has to bear a loss so the DPS and EPS declined so the P/E ratio was also decreased Future Prospects of the OrganizationThe success and growth of Bank of Punjab depends on the Government’s political agenda and its efforts to bring about a greater degree of optimism amongst investors and business community. 57 www.vustudents.ning.com The prevailing money market scenario with extremely low rates of interest and stagnant private sector credit is a serious hurdle for banking sector in Pakistan. This situation will force banking sector to shift their focus from conventional banking approach to retail banking. Banking taking lead in this shift process will be least affected by the prevailing unfavorable interest rate scenario. The mission to transform The Bank of Punjab into a modernized business oriented organization is sailing smoothly and in this direction by now computerization of 243 branches has been completed successfully. Bank of Punjab has decided to fix facility of ATM at its selected branches for which it has joined hands with MCB. Bank is highly keen to offer the facility of inter branch banking services within year 2011. Conclusion Internship is an interesting program, which gave me the practical touch of the banking field. Through this, I learnt that what is the banking and its activities. I learnt from the 58 www.vustudents.ning.com bank officer and understood the operations of banking. This training program enhanced my knowledge about the banks. Ratio analysis shows that the year 2008 problematic for the BOP. As in this year, BOP has to bear the loss. Main reason of this loss is the non-performing loans and the other as well as Hamish Khan scandal. The other reason is increasing debt. Due to this, the bank has to pay more interest on the debt. This factor increased the interest expenses. In 2008 the EPS and DPS more declined so the P/E ratio also declined so the Shares of BOP were not attractive for the investors. Therefore, the Bank of Punjab has to become dependent on the debt. The administrative expenses almost 60% increased from 2006 to 2008. It seems that the management of the BOP almost fails to overcome the administrative expenses. This thing also decreased the profit. The investments, which are the part of earning assets, also decline. Therefore, the sources of the other income also decreased. Almost 90% branches of BOP are located in Punjab even in Karachi the hub of economic activities of Pakistan only 11 branches. Therefore, the market coverage of BOP is much lower. The political factor cannot be avoided in this regard because the Government of Punjab holds the majority of the shares so the government intervenes in the bank activities. Recommendations for Improvement An organization considered to be lucky whose bad debts are recovered, the bank of Punjab having too much bad debts due to preference of loans to dictators. 59 www.vustudents.ning.com My opinion to raise the profit of BOP, first they recover their bad debts. If they do it, Then their profitability ratio will exceed. In my analysis, BOP consumes their operating incomes as regarding the year 2008. I will not say to close their costs because these are not to be closed but these are to be reduced.According to statements of 2008, in Bank of Punjab having no much shares of investors. The bank of Punjab depends on the debt, who improves the price to earnings ratio. For the life of the bank, the upper management will make some strong strategies, who compete it from the competitors. In my internship program, I see mostly the persons of government job holders make their accounts in the branch. No much account of social individuals are come to open their account in the bank. Therefore, my opinion is to motivate the individuals to open their accounts in BOP. To become profitable the BOP should overcome its non-productive expenses. Its management has to take effective decision to reduce its administrative expenses. The bank has to control the non-performing loans, which are the main reason of this heavy loss in 2008. As name shows, “Bank of Punjab” refers to the Punjab provision only, and a head office in Karachi (Sindh). It is essential for BOP to make its branches in the whole country of Pakistan because the competitors are spread over the country. This is very important for BOP to reduce the operating cost. Therefore, the operating profit will increase. The management of BOP should focus on short-term deposits. Bibliography For the analysis and the brief history of the Bank of Punjab, his financial Statements, I attain data by using internet from different websites, in which, 60 www.vustudents.ning.com History of The Bank of Punjab Retrieved 10 June 2011 from Bank of Punjab web site Product Detail. Retrieved 15 June 2011 from Bank of Punjab web site Annual Report, Retrieved 20 June 2011 from Bank of Punjab web site BOP Financial Statements 2006 BOP Financial Statements 2007 BOP consolidated Report 2008 Banking Ratios, Obtained from the site: 61