Internship Report Al Baraka

CHAPTER 01

Introduction to Report

The report has been written as a result of internship work done at Bank AlBaraka Haripur during the period July-August 2014. The core objective of this report is to discuss the banking operations, organization behavior and to present the detailed analysis of financial performance of the bank. Along with this, the unique selling point of bank AlBaraka, The Islamic Banking will also be discussed in comparison with commercial banking system

1.1Background of the study

The study has been carried as a requirement of the degree with CIIT, the internship is done to get the practical knowledge of business operations and business policies. And to learn how an organization behaves in today’s dynamic environment and how response to such turbulence affect the performance of the organization.

1.2Purpose of the study

The purpose of the study is to give comprehensive review of the ABPL to analyze the operational procedure and financial aspects of banking organization. Besides that, the purpose of the study is

To compare the Islamic mode of banking with commercial banking To study banking operations and customer care that a banking organization has To analyze the financial performance of the organization To recommend the suggestions or the improve

1.3 Data collection methodology

Data has been recorded during the period of internship work at the bank. Data has revealed a lot about banking tactics, market scope, bank services to fill the market imperfections, and the implications of its current business policy on the financial performance of the bank

1.3.1 Primary data

Personnel at AlBaraka were highly cooperative in providing data. Data is collected by means of

Personal observations during the eight-week internship program. Interviews and Discussion with the Bank personnel.

The primary data collected included

use and tactics of financial instruments reporting procedures

1

1.3.2 Secondary data

Financial analysis has been done through the secondary data. that consist on the financial statements collected and the background of the organization through

Websites Journals Pamphlets books

1.4 Limitations

Though it was a great opportunity to learn the practical application of business theories and formulas the study has to be restricted due to

1.4.1 Available time

In the period of 40 days the study couldn’t go behind the activities done in regular routine. This has lemmatized the learning on banking behavior on seasonal changes, its dealing with headquarter and financial adjustment s during the year.

1.4.2 Secrecy issues

Due to the banking policies and commitments with its customers bankers do not reveal the information publicly so most of the times some of the information is kept secret.

1.5 Scheme of the study conductedInternship report is divided to reflect following aspects of study

Chapter One

Includes introduction to the report, objectives, limitations, merits, methodology

Chapter two

It includes background and history of banking services in Pakistan, Historical background of Al Baraka Pakistan Limited, Organizational Structure, roles, functions and branches.

Chapter Three

Is about the Financial Position and Products and services provided by Al – Baraka Bank Pakistan Limited (ABPL)

Chapter FourThis chapter discusses the financial analysis, SWOT analysis and findings of the study.

2

Chapter Five

Gives feasible and constructive recommendations for different departments of AIB Branch, Haripur.

3

CHAPTER 2

Introduction to AlBaraka Islamic Bank Limited

2.1Formulation of the bank

Al Baraka Banking Group is a Bahrain Joint Stock Company, it is listed on Bahrain stock exchange and Nasdaq Dubai. It is a leading international Islamic bank with Standard long term and short-term credit ratings of BBB- and A3 respectively. ABG offers wide range of services in the form of retail, corporate and investment banking and treasury services which are in accordance with the principles of the Islamic Sharia. The authorized capital of ABG is US$1.5 billion, while total equity amounts to about US$1.8 billion. Al Baraka Bank (Pakistan) Limited 29 branches of Al Baraka Islamic Bank B.S.C. since 1991. In October 2010, it acquired Emirates Global Islamic Bank to form Al Baraka Bank (Pakistan) Limited now present with a total of 110 branches.

2.2 Background

Al Baraka Banking Group was founded in 2002 in Manama, Bahrain. It is a JSC and is listed on the Bahrain Stock Exchange and NASDAQ Dubai, it offers retail, corporate and investment banking and treasury services on the basis of the principles of the Shari'a in 12 countries.

2.3 International presence

The global network of Al Baraka Banking Group is expanded in 12 countries, under the AlBaraka and other brand names.

2.3.1 Al Baraka today

Al Baraka has started with Islamic Finance with a steady growth in beginning. It is now making a progress in the Pakistani banking sector. From a meager 0.3% share in 2003, Islamic banking institutions (IBIs) have now captured around 9.9% of the total asset in the banking industry as of June 2012

2.4 Al Baraka (Pakistan) Limited (ABPL)

Al Baraka (Pakistan) Limited (ABPL) has been formed as a result of the first merger in the Islamic Banking sector of Pakistan. The merger took place between the branch operations of Al Baraka Islamic Bank (AIB) Bahrain, Al Baraka Islamic Bank Pakistan (AIBP) and Emirates Global Islamic

4

http://www.albaraka.com/default.asp?action=article&ID=375

Bank (Pakistan), and thus from 1 November 2010, the operations of the merged entity began in 2013, the Bank has a national presence in Pakistan with a network of 94 branches in more than 42 cities across the country.

2.4.1 Islamic banking

Al Baraka Islamic Bank is one of the pioneers of Islamic Banking in Pakistan. It has been operating in the country since 1991 as branch operations of Al Baraka Islamic Bank Bahrain. During this period since its presence in the country, the bank effectively developed and sustained its identity as one of the pioneers in providing Shariah based banking products and services. . Islamic Banking to a system of banking or banking activity that is consistent with the principles of Islamic law (Sharia) and its practical application through the development of Islamic economics. While the modern/conventional principles of banking have been used for prospering the banking businesses but since then Muslim community is seeking its way out leading to Sharia compliance. Fees for renting money, also called Riba, usury being Haram in Sharia as well as investing in activities that provide products or services considered against to Islamic principles (Haraam, forbidden).

All policies, procedures, products and services of ABPL are approved by the bank's Shariah Advisory Committee headed by Justice (R) Khalil urRehman. Further research and study is brought consistently to remove any loophole at the presnt banking practices of Islamic banks.

2.4.2 Vision

Al Baraka says

“We believe that society needs a fair and equitable financial system which rewards effort and contributes to the development of the community”.

2..4.3 Mission

Al Baraka underlying mission is to meet the financial needs of communities across the world by conducting business ethically in accordance with the Shariah, practicing the highest professional standards and sharing the mutual benefits with the customers, staff and shareholders who participate in our business success.

2.4.4 Core values

Partnership – their shared beliefs create strong bonds that form the basis of long term relationships with customers and staff.

Driven – they have the energy and perseverance it will take to make an impact in our customer’s lives and for the greater good of the society.

Neighbourly – they value and respect the communities we serve. Our doors are always open; our customers always experience a warm-hearted, hospitable welcome and accommodating service.

5

Peace of Mind –customers are rest assured that their financial interests are being managed by us to the highest ethical standards.

2.5 Strategic planning

Bank alBaraka is highly committed with shariah compliance all the time. It focused on following key areas for Shariah governance and compliance framework for Islamic banking industry of Pakistan. Bank AlBaraka does not provide full spectrum of banking products and services, it is rather committed to provide innovative products that are not contrary to the principles of Islam. Now a days it has become a major challenge for banks to provide ongoing services continuously to remain competitive in the market. In this race AlBARAKA Pakistan has not been the winner and is struggling in the market. With a vision for complying services, dedication to Islamic principles of banking, increasing network in different countries, and innovative product line, Al Baraka Bank (Pakistan) Limited is committed to the Banking Industry in Pakistan.

2.6 Corporate profile

Full name

Al-Baraka Islamic Bank Pakistan (Al-Baraka Islamic Bank Pakistan)

Headquarters162 Bangalore Town, Main Shahrah-e-Faisal; Karachi; Sindh

Status: Non-Listed

Legal Form: Public Limited Company

Operational Status: Operational

Financial Auditors: Ernst & Young Ford Rhodes Sidat Hyder (2010)

Incorporation Date: April 28, 2008

Total Employees: 1,400

2.7 World ranking of the bank

Capital intelligence, a leading market rating agency has rated bank consistent at BB+. In Pakistan bank has been rated as A by JCR-VIS, for long term and A+ for short term ratings. This rating shows high future growth perspective and strong support from principal shareholders.

6

2.8 Organization hierarchy

Board of Directors

Chairman

MahmudJameel Hassoubah

Vice Chairrman

Adnan Ahmed Yousif

Directors

Abdul Latif Abdul Rahim Janahi Moosa Abdulaziz Shehadah Othman Ahmed Suliman Abdul Hameed Mohideen Nazer Ashraf Al Ghamrawi

Director Executive Committee

Adel Saud Dehlawi Othman Ahmed Suliman

Members

Adnan Ahmed Yousif Abdul Latif Abdul Rahim Janahi

Audit Committee

Chairman

Mohamed Isa Al Mutaweh

Members

Moosa Abdulaziz Shehadah Abdul Hameed Mohideen Nazer Ashraf Al Ghamrawi

Source: self made

2.9 Bank AlBaraka unique selling preposition

AlBaraka unique selling point are it consistency in compliance with shariah board. ABPL offers customers Islamic mode of banking filling the gap in Pakistan banking market for Islamic mode of banking

7

2.10 Bank AlBaraka prizes and contributions

Al Baraka Banking Group won the first prize for its Implementation of and Compliance with Corporate Governance Principles at its Head office and subsidiary banks. The prize also recognized Al Baraka’s contribution to the development of Islamic banking, its outstanding achievements in the field and for its regional as well as global standing.

Source Gulf Daily News, November, 2010.

AlBaraka achievements include LARIBA Award for Excellence in Achievement” in 2012, “best Islamic financial institution 2014” by global finance magazine.

8

Chapter 3

Products and Services at AlBaraka Bank Haripur Branch3.1 Products

3.1.1 Deposit accounts

3.1.1.1 Al Baraka Basic Banking Account

As most of the banking accounts require minimum balance requirements and other restrictions, so most of the people do not want worry of balance limits. This account does not requires such criteria. Salient features of this account are mentiond beloow.

Special features

It is a current account with no minimum balance requirements

No profit / return will be paid to the depositor on the balance maintained in the account

Can be opened with minimum of Rs. 100

No minimum balance requirement and no penalty for low balances

Qarz is the basic Islamic principle on which The ABPL Basic Banking Account is based, using this account the customer becomes the lender and the bank becomes the borrower. ABPL has a commitment invests customer funds with utmost care in Riba free business activities only, they are payable on demand, with no addition or penalty.

3.1.1.2 Al Baraka Current Account

Al Baraka current account has been designed so as to help its customers in with day to day business transactions and personal service needs conveniently

There are no minimum balance charges

There is no limit for deposits and withdrawals

ATM card issue is free with unlimited access to all ATMs, nationwide.

Qarz is the basic Islamic principle on which The ABPL Basic Banking Account is based, using this account the customer becomes the lender and the bank becomes the borrower. ABPL has a commitment invests customer funds with utmost care in Riba free business activities only, they are payable on demand, with no addition or penalty.

3.1.1.3 Al Baraka Savings Account

Al Baraka Savings Account is consist of all facilities of an investment i.e. income, security and growth. This account is specifically designed to meet the requirements of individuals and business entities.

9

Does not include charges for minimum balance

Calculation of profits are made monthly average basis

Profit can be acquired by the customer on monthly basis.

No limits for withdrawl as well as deposits

Customers can earn high profit by keepin high deposits with the bank.

ATM card issue is free of cost and can be accessed to ATM Network, nationwide

Underlying concept of the saving account of Al Baraka is Islamic concept of Mudarabah. Following this principle the customeris considederd to be Rab-ul-Maal (Investor) and the bank becomes Mudarib (Fund Manager). It is made sure that customer deposits are being invested in business which are legal, profitable and Shariah compliant. The profit/loss is shared on a pre determined ratios which are calculated each year. As Fund Manager, the bank is entitled to a part of the profit as a service fee, whereas profit distribution is made on the basis of weightages assigned to the investment of depositors and shareholders at the beginning of each month.

3.1.1.4 Al Baraka Khazana Account

For those looking for higher profits on this account profit is calculated on average monthly balance product basis and distributed on a monthly/quarterly basis.

It is started with minimum investment of Rs. 100,000/-

Investment should be in PKR

limitless deposits and withdrawals can be made

Profit is assigned on monthly/quarterly basis and is calculated on a average monthly balance product basis

Profits are higher as much as balance is high

Underlying principle of Al Baraka Khazana Account is Mudarabah.

Al Baraka Term Deposit

Al Baraka Term Deposit is a perfect solution for customers seeking high profits in a Shariah compliant way which can secure future. Sales offices at AL Baraka happily assist in designing an investment plan their customers

It is strated with minimum investment: Rs. 25,000/-

Investment should be in PKR

It can also be in Other currencies likeUSD, GBP, EURO & AED

Available tenures: 1 month, 3 months, 6 months, 1- 5 years

Payment of profit: Quarterly, Bi-Annually, Annually or Maturit

10

Al Baraka Term Deposit is based on the Islamic concept of Mudarabah.

3.1.1.5 Al Baraka Mahana Amadani

For those customers who are interested in continuous flow of incone Mahana Amadani which gives competitive profit earnings on savings.

With a minimum investment/ savings of Rs. 50,000, you can enjoy monthly returns.

Profit is calculated monthly

Payment of profit is made monthly

It can be open in Pak Rupee

Time period is 1 Year to 5 Years

Al Baraka Mahana Amadani is based on the Islamic concept of Mudarabah.

3.1.1.6 Al Baraka Business Plus

Al Baraka Business Plus’ account is mainly for the business customers. By maintaining Rs. 100,000/-, an account holder can avail free services of the Al Baraka Business Plus Account. Profit is calculated on monthly average balance. Moreover there is a guiding team for a customer who give financial advice on benefits and use of this account.

Free Services:

ATM Card Cheque Books Duplicate Bank Account Statements Pay Orders Online Banking Transactions Hold Mail Facility e-Statement, continuous Phone Banking & SMS Banking

Al Baraka Business Plus is based on the Islamic concept of Mudarabah.

3.1.1.7 Al Baraka Senior Citizens Account

Al Baraka Senior Citizens Account has been designed to enable senior citizens to independently carry out the day- to- day banking transactions with convenience and confidence. This account is suitable for senior citizens who wish to have healthy returns on their savings. Al Baraka Senior Citizens Account comes along with a wide range of free services and benefits.

The account provides multiple privileges to the account holder. These are mentioned below

It is opened in Pakinstani currency

Profit is calculated on the basis of weigtages assigned so that account of higher balance can receive higher profit.

11

Profit is calculated daily, its effect is revealed on monthly basis in respective accounts.

There is no requirement of minimum or maximum balance.

Unlimited withdrawals and deposits can be made.

Higher returns will be allocated on having balance above RS 25000, below that normal weightages will be assigned.

First check book is made available to customer free of cost.

Senior citizen account holders will be given annual lockers, payorders and demand draft on discounted rates.

All other charges as per Bank’s schedule of charges.

Al Baraka Senior Citizens Account is offered on the basis of Mudarabah principles of Islamic Banking.

Mudarabah is a special kind of partnership where one partner gives money to another for investing in Shariah compliant avenues. The investment comes from the first partner who is called Rabb-ul-mal (Customer), while the management and work is an exclusive responsibility of the other, who is called Mudarib (Bank).

The Bank will announce weightings and profits sharing ratios 3 days before the beginning of the month. The Bank will share the profit at the gross income level and will subsequently credit the proportionate profit in the customer’s account at the end of the month. In case of loss, the customer will bear the loss as per the ratio of his investment.

Latest profit sharing ratios and weightings are available on our website or can be obtained from any branch of Al Baraka Bank

3.1.1.8 Al Baraka Mahana Barkah Account

For the people who are salaried, self employed, professional or even retired, this is the savings account. Ideal for individuals who wish to:

Place their savings in a Shariah compliant savings scheme.

Save on regular basis and expect good returns on daily balance.

Have the liberty of having no limitation on cash withdrawals.

Invest with an absolute peace of mind!

To qualify for Al Baraka Mahana Barkah Account profit rate minimum balance of PKR 10,000 and maximum of PKR 5.0 million is required to be maintained during that month otherwise normal savings account rate will be applicable.

Profit calculation on daily balance and credited in the account on monthly basis. Free first Al Baraka Union Pay Debit Card. Free e- statement.

12

Free Phone banking services through which pay orders can be places and, cheque books, stop payments, ATM card replacement, duplicate bank statements at an exceptional discount.

All other charges as per bank’s Schedule of Charges.

Al Baraka Mahana Barkah Account is offered on the basis of Mudarabah principles of Islamic Banking.

The Bank will announce weightages and profits sharing ratios 3 days before the beginning of the month. The Bank will share the profit at the gross income level and will subsequently credit the proportionate profit in the customer’s account at the end of the month. In case of loss, the customer will bear the loss as per the ratio of his investment.

3.1.1.9 Tifl-Young Savers Account

Tifl- Young Savers Account is being offered to youngsters to help them learn the importance of saving at an early age. it is designed in such a way that it aims to become every youngster’s first bank account. It caters to the new generation’s future financial needs gradually and conveniently. Through the benefits of this account, youngsters are motivated to save more because of the returns they will get based on their savings.

3.1.2 Consumer Finance

3.1.2.1 ABPL Auto Ijarah

Al Baraka Islamic Auto Finance is one of the most distinctive Shariah compliant products offered by Al Baraka Bank (Pakistan) Limited. It allows to get a vehicle of choice with comfort and complete peace of mind. This product is ideal for individuals looking for car financing without compromising their beliefs and values. Al Baraka Islamic Auto Finance is designed to cater to all the needs regarding the purchase of a brand new, used or an imported vehicle for your personal use. Now you can steer yourself onto the right path effortlessly.

3.1.2.2 Rahnuma Travel Services

Rahnuma Travel Services has been designed to assist the travelers world wide. This service enables the customers to enjoy the journey convinently and reliably

Rahnuma Travel Services provides a solution for travelling through VISA processing, accommodation and hotel reserving transfers and many other privilages to the customers. Al Baraka Bank Pakistan Limited has made agreements with leading and reliable travel agents to bring unmatched travel products for its customers that are interest-free as well as convenient and less costly. Complete travel service packages are available for various destinations i.e. Umrah, Hajj, Dream Destinations for Dubai & Malaysia.

Profit on finances is zero percent

Easy installment plan of 6 & 12 months

No Security Deposit

13

There is no requirement of advance payments

Documentation is easy and processing is faster.

Benefits

Rahnuma Hajj Packages – 2014

There are three packages provided by bank for Hajj 2014 17, 25 and 40 days

Rahnuma Umrah Packages – 2015

Rahnuma packages include different packages like Super Economy, economy, economy plus, premium and standard package for 2015

Rahnuma Dream Destinations – 2014

it provides packages for different destinations like Malaysia, Dubai, Thialand (for 9days and 7 days)

3.1.2.3 Sarparast Family Takaful Plan

Al Baraka Bank (Pakistan) Ltd. in association with Pak-Qatar Family Takaful Limited is offering an exclusive product “Sarparast – Family Takaful Plan”. Sarparast is a Shariah Compliant savings and investments plan exclusively designed to cater to your Takaful needs. Saving for long-term needs in the future.

Al Baraka’s Sarparast, safeguards your future, while giving you the financial freedom you deserve. It helps you plan necessary events of your life from marriage to education, retirement to vacations or pure savings in accordance with the Islamic principles.

Al Baraka’s account holder enjoys following benefits:

There is no requirement of large documentations accounts are processed according on basis of copy of CNIC. There is no requirement of medical examination for account opening

3.2 Services

3.2.1 Banking through telephone

Al Baraka’sfacilitates its customers and answers queries through service of telephone. Bank is equipped with the latest tecknology and softwares to access the information readily. Al Baraka makes this service secure through various security measures. This service makes it cost effective and convenient.

3.2.1.1Financial Transactions (Local Currency Only)

Bank Al Baraka issues Pay Order (PO)/ Demand Draft (DD) and request for a Pay Order or a Demand Draft can be made through telephone and can collect from any branc of Al Baraka in Pakistan

14

http://www.albaraka.com.pk/downloads-documents/Rehnuma%20Travel%20Services/2014/Dream%20Destination/Rahnuma%20%20Malaysia%20Package%202014.pdf

http://www.albaraka.com.pk/downloads-documents/Rehnuma%20Travel%20Services/2015/umrah/Rahnuma%20Super%20%20Economy%20package-2015.pdf

3.2.1.2Funds Transfer

Transfer funds from one account to another. Both accounts must be linked to our Business Relationship Number (BRN). You can transfer up to Rs.100,000/- in a single day.

Balance & Transaction Inquiry

3.2.1.3Service Requests

To make banking experience more convenient, requests for the following can be placed over the phone:

Duplicate Bank Statement

Request for cheque Book

3.2.1.4Inquiry

Following inquiry can be made on phone :

Product (s) / Service (s)

Monthly account related profit rates

Currency exchange rates

Branch & ATM location

3.2.1.5Complaints

Our Phone Banking Officers are receives complaints from its customers. ABPL values its customers so it identifies ways to help improve its service. If for any reason customers are dissatisfied with the service, a complaint can be registered on phone.

3.2.2 SMS Banking

Al Baraka Bank (Pakistan) Limited provides a banking solution;SMS Banking is a smart way to access account(s) especially for people on the go. It enables immediate access to account(s) 24 hours a day, 7 days a week, custoners have to register theirselves for SMS Banking and get complete control of your account.

1.2.2.1 Use Al Baraka’s SMS Service for:

Account balance inquiry, Mini statement (last five transactions Credit/Debit), Cheque book request,PIN change request can be made

On the spot transaction credit / debit alerts about your account on any mobile phone you carry- avoiding any misuse of account. Maximum of six accounts can be tagged to the same mobile number within the same Business Relationship.

15

3.2.3 eStatements

To enable the customers to access their accounts by thereselves, Al Baraka Bank (Pakistan) Limited (ABPL) provides eStatement that allows to access account(s) statements online. This service is available for all the rupee and foreign currency account holders,

3.2.3.2 Security

ABPL’s eStatement has been made digitally secured through ‘VeriSign’.

3.2.4 Inter Bank Fund Transfers

IBFT is a service for transferring funds instantly from one account to another account. The need for IBFT service has grown with growing businesses and awareness, education. It has reduced the hassle of writing cheques, making Payment Orders (or demand drafts etc.), it is also less costly

There is no prior registration requirement to use IBFT on ATMs

If you need to transfer Funds from your account, you will need an Al Baraka ATM Card to transfer funds through IBFT on ATMs.

However, if you need to receive funds through IBFT, there is no need for an ATM card- your unique 13 digit account number will be all that will be needed.

The funds can be transferred to any account of the member banks on 1-Link IBFT network.

Charges will be applicable according to Schedule of Charges (SOC).

There is a daily limit of PKR 250,000/- on IBFT transactions

3.2.5 Utility Bill Payments through ATMs

For utility bills payments , Al Baraka customers are able to pay their Utility Bills through ATMs, at their convenience without fretting over parking space or bank timings.

Al Baraka account holders can enjoy round the clock convenience of paying utility bills via any of the Al Baraka ATMs across the country. Customers can make payments of utility bills not only on the counter but also through Al Baraka ATM for this customer needs to have AL Baraka Union Pay Debit Card. Multiple bills can paid through single account. This service is freee of cost.

3.2.6 Safe Deposit Lockers

The underlying concept of safety lockers are based on Islamic principle of Amanat. Customers keep their valuables with Al Baraka for the trust Al Baraka maintains with its customers.

Al Baraka is commited to put values foremost, hence providing with banking solutions.

3.2.6.2 Levies

Fees and charges will be levied according to the prevailing Schedule of Bank Charges, while taxes and Zakat will be applicable according to Government regulations and directives of State Bank of Pakistan.

16

With this product line ABPL Haripur is serving the community

17

CHAPTER 04

Analysis of Al Baraka Pakistan LimitedReport evokes analysis of Al Baraka’s present position through its financial as well as SWOT analysis.

4.1 Financial statement analysis of ABPLFour year analysis of financial statements are made to acquire complete understanding on Bank Al-Baraka’s performance in the highly dynamic business environment. For the purpose of comparison two type of analysis have been done in the report

Common size analysis Ratio analysis

4.1.1 Common size analysis

Items on the balance sheet have been compared and analyzed to show the prevailing trends through vertical as well as horizontal analysis of balance sheet and income statement

4.1.1.1Vertical analysis

Asset are compared to total assets, liability to total liabilities and stockholder equity to total stockholder equity

4.1.1.1Analysis of Assets

Chart 4.1: ABPL Assets 2011

5%

10%

36%

40%

4%

1%3%

Assets 2011 Cash and balances with treasury banks

Balances with other banks

Due from financial institutions

Investments

Islamic financing and related assets

Operating fixed assets

Deferred tax assets

Other Assets

18

Source: Self generated

Chart 4.2: ABPL Assets 2012

6%

9% 1%

37%

39%

4%

2% 2%

Assets 2012Cash and balances with treasury banks



Investments



Deferred tax assets

Other Assets


Chart 4.3:ABPL Assets 2013

7%

19%

25%

42%

3% 2% 2%

Asset 2013Cash and balances with treasury banks



Investments



Deferred tax assets

Other Assets


19

InterpretationVertical analysis of balance sheet shows that the bank’s cash and reserve with the treasury bank has slightly increasing trend from 2011 to 2013 i.e. from 5% to 13%. Similarly the bank’s lending to financial institutions has increased from 2011 to 2013(5% to 7%). The bank’s balance with other banks also increased from 10% to 19% in three years (2011 to 2013) The net investments decreased from 36% in 2011 to 25% in 2013. The advances rate showed an increase in 2011 to 2013 (40% to 42%) and in 2012 it decreased by 1%.

20

4.1.1.1.2 Analysis of liabilities and equity

Chart 4.4: Liability and Equity 2011

1%

2%

80%

3%

11%

1%

2%

liability and equity 2011Bills payable

Due to financial institutation

Deposits and other accounts

Sub-ordinated loans

Liabilities against assets subject to finance leases

Deferred tax liabilities

Other liabilities

Share capital

Discount on issuance of shares

Reserves

Accumulated loss

Surplus/(Deficit) on revaluation of asssets-net of tax


21

Chart 4.5: Liability and Equity 2012

1%

3%

80%

2%

11%

1%3%

liability and equity 2012

Bills payable



Sub-ordinated loans



Other liabilities

Share capital


Reserves

Accumulated loss



Chart 4.6:Liability and Equity 2013


InterpretationOn the liability side the bills payable of the bank remained constant at 1%. The banks borrowings does not shows much fluctuation The Bank’s deposits ratio is considerably good and remained constant. Share capital of the Bank decreased in 2013 as compared to 2012-11 (12% to 10%) Reserves of the Bank Decreased to 0.094% from 0.11% in 2011 and 2012.

22

4.1.1.2Horizontal analysis

Three year trend in the some of the major liabilities of bank have been plotted here for comparison purpose. It shows that in 2012 there is a noticeable reduction in equity holding of the bank and in 2013 deposits and accounts have shown an increase.

23

1%

3%

80%

1%

2%

9%

1%3%

liability and equity 2013Bills payable



Sub-ordinated loans



Other liabilities

Share capital


Reserves

Accumulated loss


Figure 4.7 Horizontal Analysis of Income Statement

2011 2012 20130%

20%

40%

60%

80%

100%

120%

140%

Deposits and other accountsequity


Figure 4.8:Trends in Net IncomeIncome statement has been analyzed horizontally for the comparison purpose. From chart below, it shows a highly declining net income from 2011 to 2012. In 2013 loss have been covered.

2011 2012 2013

-200%

-150%

-100%

-50%

0%

50%

100%

150%

Net profit/loss

Net profit/loss


24

4.1.2Ratio analysis

4.1.2.1 Profitability ratio

4.1.2.1.1 Net profit margin

Table 4.1:Net Profit Margin

Description 2013 2012 2011 2010

Net profit -41231 -644940 410370 1039595

return on Islamic financing

6201186 12970318 16798188 18168220

ratios -0.66% -4.97% 2.44% -5.72%


ABPL is continuously showing loss from 2 years, though this loss has been reduced in 2013 but it is still not showing a good performance.

4.3.1.2 Return on asset

Table 4.2:Return on Assets

Description 2013 2012 2011 2010

Net Profit -41231 -644940 410370 1039595

Avg Total assets

87759404 73812558 66654364 40263057

Return on asset

-0.04% -0.87% 0.61% -2.58%


It tells the efficiency of assets utilized by generating income. The results of the Bankshows that Except from 2011, ABPL is failing to generate profits from its assets.

4.3.1.3 Return on equity

Table 4.3:Return on Equity

Description 2013 2012 2011 2010

25

NP -41231 -644940 410370 1039595

EQUITY 5,935073 6,273310 6,321872 4806018

Return on equity

-0.69% -10.28% 6.49% -21.63%


4.3.2 Solvency ratio

4.3.2.1Leverage ratio

Table 4.4:Leverage Ratio

Description 2013 2012 2011 2010

T.A 87759404 73812558 72545064 60,763,664

DEBT 81,911,211 67,847,098 66,020,396 54,644,587

Leverage ratio o.93:1 0.91:1 0.91:1 0.89:1


Bank is showing a high leverage ratio. This shows assets of the bank are financed by its debt that includes upto 80% deposits from customer. It has also increased the risk of ABPL

4.3.2.1 Debt/ Equity ratio

Table 4.5: Debt/Equity Ratio

Description 2013 2012 2011 2010

Debt 81,911,211 67,847,098 66,020,396 54,644,587

Equity 5,848,193 6,019,460 6,524,668 6,119,077

Debt/ Equity ratio

14:1 11.2:1 10.1:1 8.93:1


4.3.3 Efficiency ratios

4.3.3.1 COST / INCOME RATIO

26

Description 2013 2012 2011

Operating Expense 2247137 2105964 1926488

Net Revenues. 1791138 1545891 1697956

Cost / Income Ratio 125% 136% 113%


Cost to revenue ratio reveals high operating expenses while showing inefficiency in its performance.

4.2 SWOT analysisSWOT is useful tool to make assessments in terms of internal and external environment of the organization and to formulate strategies by analyzing its internal strengths and weaknesses, external opportunities and threats.

4.2.1Strengths

4.2.1.1 Commitment to Islamic Shariah

ABPL is striving to develop and an integrated Islamic Financial System . Core philosophy of ABPL is the compliance with Shariah principles. At this point ABPL has succeeded in implementing the corporate principles and guidelines from the experts like Religious scholars and monitor its performance. The Banks activities and operations are regularly monitored by its Shariah Advisory Board.

4.2.1.2 Experienced and Qualified Staff

During the research it has been observed that the staff/personnel of the organization is qualified and experienced. Many they have a good knowledge and experience in the fields of management and practice.

4.2.1.3 Good PR with Customers

There is a good relationship among the workforce at all levels. ABPL makes a fair PR with its customers.

4.2.1.4 Quick delivery of services

Customers get highly satisfied with AlBaraka’s quick services and open heartedly guidance over their concerns relating to their financial decisions.

27

4.2.1.5 Job Satisfaction

Job satisfaction is one of the important factors for the employees to retain the valuable employees.their employees are satisfied with the work environment.

4.2.1.6 Friendly environment

The environment of the organization is very friendly. People over here are very cooperative, not only with the customers but among themselves as well.

4.2.2 Opportunities

4.2.2.1Growing business

Due to growing business in the area, potential customers are increasing these days. This is a great opportunity for AlBaraka to capture the market share.

4.2.3 Weaknesses

4.2.3.2 Lack of Awareness

Al Baraka has still not succeeded in the very basic stage of marketing i.e. Awareness of concept and benefits of its products. Its products are considered to be the same as in conventional banking system and are known to be “so-called Islamic Banking”.

4.2.3.3 Weak top management

Top management is very week in decision making. Most often it fails in maintaining its market presence and recognition.

4.2.3.4 Unavailability of ATM

ATM now has been a major facility a bank can provide to its customers. Al-Baraka is far away in providing this facility to its customers. Though it issues ATM cards but unavailability of its own ATM in many areas doesn’t allow many of its potential customers to opt for its services.

4.2.4 Threats

4.2.4.1 Good job opportunities outside.

The other organizations of similar nature are offering more salaries and benefit packages to their employees. So, there is a threat to the organization that their current employees may leave it.

28

4.2.4.2Uncertainty about future change

An uncertainty about the future changes among the employees results in dissatisfaction and demotivation of the employees, which is a serious threat to the organization.

4.2.4.3 Loss of customers

AL-Baraka fails to retain its valuable customers and they leave away when a dissatisfied employees, of whom they are clients, leaves his job.

29

Chapter 5 Conclusion and Recommendations

The Al – Baraka Islamic Bank is a new emerging bank and it is trying to get market share in the presence of national and foreign banks operating in the country. After observing this ABPL following outcomes have been concluded.

5.1 Conclusion and arguments

5.1.1 Centralized decision making

The decision making is still centralized as recommendations from middle and low level employees are not considered.5.1.2 Huge expenses

ABPL has huge operating expenses. These expenses are proven to be ineffective to generate profits for the bank5.1.3Less employees

ABPL should hire more competent staff to capture market share and generate business relations5.1.4Low employee Retention

Employee leaves whenever they are offered better salaries taking away the large deposits and competent abilities5.1.5 Slow recruitment

The recruitment process is very lengthy and leads to the short of working staff.5.1.6 DisciplineThe marketing efforts at the branch level are less disciplined and there are no integrated efforts from all the staff members.5.1.7ATM

ABPL is suffering from a huge threat i.e. it does not have its own ATM in many cities.5.1.8Less motivated staff The bank has been applying the modern concepts of management and marketing at both micro levels. The interior and exteriors of the branch have been changed but the staff of the branch has been found less motivated towards the organizational objectives.5.2 RecommendationsDuring the period of internship at ABPL and observing its environment some of the strengths and weaknesses have been observed. On the basis of this observation there are some recommendations particularly related to the ABPL, Haripur Branch, and can be applicable to the ABPL whole as well..

30

From the analysis of financial statement it has been analyzed that ABPL performance is not markably good. ABPL is posing several loopholes and weaknesses mentioned

5.2.1 Training programsEmployees Training programs must be introduced on continuous basis so thatEmployees have understanding with the latest developments especially with the customers.

5.2.2 Incentive for employeesBank should introduced incentive plans for employees on regular basis so that if employees may work whole heartedly for the welfare of their organization. While giving incentives qualification, work, experience, hard work and such other factor must be considered.

5.2.3 Efficient management of assetsMismanagement of resources must be avoided as much as possible as it decreases profit but also discourage hard worker and honest employees.

5.2.4 New, qualified bloodFresh graduates must be recruited. As the combination of Experienced and fresh can produce better results and it will improve the efficiency of management.

5.2.5 Awareness programABPL is going towards mobile banking but the problem is that a common client has no idea of its usage due to lack of marketing. a proper marketing programe must be launched for client’s awareness.

5.2.6 Use of marketing toolsBanks different schemes must be conveyed to the targeted customers so that to have a reasonable share in market.

5.2.7 Employees salariesTo motivate the employees their remuneration/salaries should be made at par with top tier Banks.

5.2.8 PublicityAggressive publicity campaign must be introduced through press and Electronic media for new products and scheme by initiating vigorous marketing policy.

5.2.9 Customer awareness

Bank should adopt such an induction plan that when a customer opens his account with the bank he should be supplied with a booklet which enables him to know the procedure of filing the cheques, pay-in-slip etc. It will save a lot of time of the bank staff afterward during the conduct of the account of that customer.

31

5.2.10 Staff behavior

The attitude of the bankers with all of their customers should be same; pay more attention and good service to some of the customers may neglect a major portion of customers. All the customers should be treated equally..5.2.11 Effective use of bank resources

Misuse of telephone internet, fax machines and other facilities available to the employees of the bank must be handled properly.

5.2.12 Recruitment criteria

In ABPL mostly recruitments are done through recommendations or references of employees. Recruitment should be strictly on merit with no other favor given to any candidate. Selection should be on the basis of test and interview.

5.2.13 Scholarship programs

Scholarship programs should be designed for senior employees and branch managers.The AIB should get into contract with top foreign universities. Every year the bank should finance and send their senior managers for further education abroad. After completion of higher education employees will be in a better position to attain the strategic objectives of the bank and increase the overall business and profitability portfolio of the bank.

32

ReferencesBrigham.E.F & Houston.J.F (2011); Fundamentals of Financial Management 11e: South-Western Cengage Learning.

Van Horne.J & Wachowicz.J.M (2008); Fundamentals of Financial Management 13e : Financial Times

Nasir.M.S (2003); Money, Banking and Finance: Kitab Markaz

Brigham.E.F & Ehrhardt.M.C.(2014); Financial Management;Theory & Practice 13e;South-Western College

Lewis.M.K; Handbook of Islamic Banking Products & Services

www.albaraka.com (Accessed: 10 Decemeber, 2014).

33

ALBARAKA BANK (PAKISTAN) LIMITED

STATEMEND OF FINANCIAL POSITION

AS ON 31 DECEMBER 2013

2013 2012 2011 2010

(Rupee s' 000)

Restated

ASSETS

Cash and balances with treasury banks 5,727,407 4,221,381 3,945,481 4,460,257

Balances with other banks 16,565,377 6,712,477 7,577,186 7,409,620

Due from financial institutions 0 1,100,000 0 80000

Investments 22,161,963 27,421,461 26,179,416 15,617,589

Islamic financing and related assets 37,020,644 28,728,448 29,155,476 27,652,687

Operating fixed assets 2,725,753 2,629,176 2,798,165 3,030,269

Deferred tax assets 1,431,064 1,292,139 1,030,852 1,029,055

Other Assets 2,127,196 1,707,476 1,858,488 1,484,187

Total87,759,40

473,812,55

872,545,06

460,763,66

4

34

LIABILITIES

Bills payable 725,609 746,651 451,030 427,600

Due to financial institutation 2,201,945 1,991,738 1,736,120 2,756,892

Deposits and other accounts 75,647,097 63,278,655 61,559,026 49,324,209

Sub-ordinated loans 1,158,571 0 0

Liabilities against assets subject to finance leases 0 0 5,123 19,303

Deferred tax liabilities 0 0 0

Other liabilities 2,177,989 1,830,054 2,269,097 2,116,583

Total Liabilities 81,911,21

167,847,09

866,020,39

654,644,58

7

CAPITAL/OWNER'S EQUITY

Share capital 8,935,200 8,935,200 8,935,200 8,935,200

Discount on issuance of shares -767,290 -767,290 -767,290 -767,290

Reserves 82,074 82,074 82,074

Accumulated loss -2,419,224 -2,366,445 -1,723,543 -2,052,024

5,830,760 5,883,539 6,526,441 6,115,886

Surplus/(Deficit) on revaluation of asssets-net of tax 17,433 138,414 -1,7733,19

1

Total 5,848,193 6,021,953 6,524,668 6,119,077Total Liabilities & Owner's equity Equity

87,759,404

73,869,051

72,545,064

35


STATEMEND OF FINANCIAL POSITION

Vertical AnalysisAS ON 31 DECEMBER 2013

ASSETS 2013 2012 2011Cash and balances with treasury banks 7% 6% 5%Balances with other banks 19% 9% 10%Due from financial institutions 0% 1% 0%Investments 25% 37% 36%Islamic financing and related assets 42% 39% 40%Operating fixed assets 3% 4% 4%Deferred tax assets 2% 2% 1%Other Assets 2% 2% 3%Total 100%

LIABILITIESBills payable 1% 1% 1%Due to financial institutation 3% 3% 2%Deposits and other accounts 86% 86% 85%Sub-ordinated loans 1% 0% 0%Liabilities against assets subject to finance leases 0% 0% 0%Deferred tax liabilities 0% 0% 0%Other liabilities 2% 2% 3%Total Liabilities 93% 92% 91%

CAPITAL/OWNER'S EQUITYShare capital 10% 12% 12%Discount on issuance of shares -1% -1% -1%Reserves 0% 0% 0%Accumulated loss -3% -3% -2%

7% 8% 9%Surplus/(Deficit) on revaluation of asssets-net of tax 0% 0% 0%

Total 7% 8% 9%Total Liabilities & Owner's equity Equity

36


STATEMEND OF FINANCIAL POSITION Vertical

AnalysisAS ON 31 DECEMBER 2013horizontal

201200%201300

%2011 2012 2013

ASSETSCash and balances with treasury banks 100% 107% 145%Balances with other banks 100% 89% 219%Due from financial institutionsInvestments 100% 105% 85%Islamic financing and related assets 100% 99% 127%Operating fixed assets 100% 94% 97%Deferred tax assets 100% 125% 139%Other Assets 100% 92% 114%Total 100% 102% 121%

LIABILITIESBills payable 100% 166% 161%Due to financial institutation 100% 115% 127%Deposits and other accounts 100% 103% 123%Sub-ordinated loansLiabilities against assets subject to finance leases 100% 0% 0%Deferred tax liabilitiesOther liabilities 100% 81% 96%Total Liabilities 100% 103% 124%

CAPITAL/OWNER'S EQUITYShare capital 100% 100% 100%Discount on issuance of shares 100% 100% 100%Reserves 100% 100% 100%Accumulated loss 100% 137% 140%

100% 90% 89%Surplus/(Deficit) on revaluation of asssets-net of tax 100% -7807% -983%

37

Total 100% 92% 90%

Total Liabilities & Owner's equity Equity 100% 102% 121%

38

Documents

Internship Report Al Baraka