The Bok Report

7/29/2019 The Bok Report

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Chapter-1 Introduction to the Report

An Internship Report on The Bank of Khyber 1

CHAPTER NO. 1

INTRODUCTION

In this chapter I shall try to provide a comprehensive introduction to

the study covering the background, purpose, scope, methodology and scheme

of the report.

The Bank of Khyber was established through an Act of Khyber

Pakhtunkhwa (KPK) Assembly called, The Bank of Khyber Act 1991,

passed in June 1991. The bank was formally launched on November 01, 1991.

In 1994, the bank acquired the status of scheduled bank. The Head Office ofthe bank is situated at 24-The Mall, Peshawar Cantt, Peshawar.

This internship report has been written on The Bank of Khyber, G.T.

Road Branch, Peshawar.

1.1 BACKGROUND OF STUDY

Banks play significant role in mobilizing savings and investments thus

taking great part in the capital formation process. Their role in the

development of a country has increased with the advent of modern technology.

Today is the age of information technology, which has made the banking

sector to work more efficient and effective. Advanced ways of transferring and

receiving money nationwide and internationally like money transfer, ATM,

western union and centralized systems are some of the applications of this

technology.

1.2 PURPOSE OF STUDY This report is based on Internship carried out for the partial fulfillment

of the degree requirement of the MBA Course completion at CFCBE,CECOS

University, Peshawar.

The purpose of the study is to do practical work in field and apply theknowledge gained through class room lecture to the real life situation.

To analyze Bank of Khyber, G.T. Road Branch, Peshawar and performdifferent tasks and other analysis.


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To make relevant recommendation in the light of the analysis made. To study how the bank is making use of information technology in its

day to day operations.

1.3 SCOPE OF STUDY

The internship of eight weeks is not long enough for understanding the

overall functioning of any organization. However main emphasis of this study

is on the working of the Bank of Khyber G.T. Road Branch, Peshawar .My

internship is like simple touch to all the activities within this branch because it

is very difficult for the internee to study everything in detail due to shortage of

time and lack of authority to access.

1.4 METHODOLOGY OF RESEARCH

In my preparation of this report, following data collection techniques

have been used i.e. Primary data & Secondary data.

PRIMARY DATA

The data which is collected for the first time and exists in the raw form

is called the primary data. The information, such as perceptions & attitudes ofemployees are best obtained by talking to them, by observing events, peoples

and objects or by administering questionnaires to the individuals. Such data

gathered for research from the actual site of occurrence of events is in fact

primary data.

During my internship at BOK G.T. Road Branch, Peshawar I gathered

this data through:

i.

Personal observation.ii. Sitting with staff members.iii. Interviews with staff members.

SECONDARY DATA

The data gathered from existing resources is called secondary data. The

information such as the background details of the organization can be obtained

from available published records. The website of the organization, its

achievements & other sources, different types of written information such as


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organization policies, procedures & rules can be obtained from organizations

records & documents.

Secondary data was mainly collected through:

I. Annual reports of the Bank of Khyber.II. Brochures.

III. Manual of the bank.IV. Internet.

1.5 SCHEME OF REPORT

The report has been divided into nine sections:

1.5.1 SECTION-I

Chapter No.1

This chapter is about the introduction of report i.e. the background of

study, purpose of study, scope of study, methodology of research, and scheme

of the report.

1.5.2 SECTION-II

Chapter No.2

This chapter consists of the history i.e. definition and evolution of

banking, banking sector in Pakistan, banking sector in Khyber Pakhtunkhwa

(KPK). It also includes the introduction of The Bank of Khyber, its vision,

mission, objectives, organizational structure and chart are also discussed here.

1.5.3 SECTION-III

Chapter No.3

This chapter gives information about the Head Office of the Bank of

Khyber. It gives information about the different divisions in the Head Office

and the human resource policies.

1.5.4 SECTION-IV

Chapter No.4

This chapter concentrates on the operations at the Bank of Khyber G.T.

Road Branch, Peshawar. It gives the information about the different


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departments of the G.T. Road Branch, Peshawar and gives an overview of the

operations at different departments.

1.5.5 SECTION-VChapter No.5

This is the financial analysis chapter of the report. It elaborates

different methods of financial analysis i.e. liquidity ratios, profitability ratios,

common size analysis etc.

1.5.6 SECTION-VI

Chapter No.6

This chapter deals with the analysis of organization i.e administrative

analysis.

1.5.7 SECTION-VII

Chapter No.7

This chapter belongs to the SWOT analysis of the organization. In this

chapter strengths, weaknesses, opportunities and threats to the Bank of Khyber

are discussed.

1.5.8 SECTION-VIII

Chapter No.8

This chapter concentrates on the various problems of The Bank of

Khyber. Some suggestions and recommendations are also made and forwarded

for resolving these problems and making improvement.

1.5.9 SECTION-IX

Chapter No.9

This chapter concentrates on some of the problems of The Bank of

Khyber and gives certain plans for implementation for resolving these

problems.


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Chapter-2 History of Banking


CHAPTER NO. 2

HISTORY OF BANKING

Banks are very common nowadays. Almost every town has one or

more banks. They are so common that even a layman can understand the

functions of bank. The banking system has evolved through centuries. In fact

in the beginning, banks used to perform very limited functions, they have

evolved from very small beginnings and now engulf almost every aspect of

human life.

2.1 DEFINITION AND EVOLUTION OF BANKING

The word Bankis derived from the words Bancus or Banque that

means a bench. The explanation of this origin is attributed to the fact that the

Jews in Loombardy transacted the business of money exchange on benches in

the market place. Other authorities hold the opinion that the word Bank is

derived from the German word Back, which means joint stock fund. Later

on when the Germans occupied major part of Italy, the word Back was

initialized into Bank.

The banking business originated from the tradition of deposit of

valuables with the goldsmiths for safety purposes. The goldsmiths found it

appropriate to invest the same into profitable ventures for obtaining some

profits on it. As the wisdom progressed, the depositors realized their right for

entitlement for a share in return on the investment of their deposits with the

goldsmith and started asking for the same. This was the beginning of the

banking business in ancient times.

The conventional of the banks is defined as to obtain deposits from the

customers and lend it to the financing of the business. The banker used to keep

a cushion between the cost for obtaining the deposits and return on which the

amounts were made available to the business for financing purpose. This

cushion was said to be the profit of the banks that covered the administrative

costs and fair return on the investment.

With the passage of time, the functions of the banks kept on changing


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and the appropriate function of the bank in current economic situation is that

these are financial inter-mediator between the resources of the funds and

ultimate uses of it. It links the sources and resources. This is not necessary that

the funds are involved in linking of the sources and resources. Some time the

bankers commitment provides the required facility.

The development in the capital market has enlarged the activities of the

money market and new avenues of the business have opened. The complexity

of the foreign exchange transaction has geared the banking business into

profitable ventures. The banks play a major role in the regulation of the fiscal

policies and the control of the economy. A diversified role of the banks can be

visualized in the prevailing economic condition of the world.

2.2 BANKING SECTOR IN PAKISTAN

At the time of independence, there were particularly no industries, and

whatever raw material was produced was being exported from Pakistan.

However, commercial banking facilities were provided fairly well here. There

were 487 offices of scheduled banks in the territories now constituting

Pakistan.

As new country without resources it was very difficult for Pakistan to

run its own banking system immediately. Therefore, in accordance with the

provision of Indian Independence Act of 1947, an Expert Committee was

appointed to study the issue. The Committee recommended that the Reserve

Bank of India should continue to function in Pakistan until 30th September

1948, so that the problems of time and demand liability, coinage, currencies,

exchange etc. are settled between India and Pakistan.

In order to make necessary arrangements for the assumption of control

an Expert committee was appointed to recommend necessary steps, including

the required legislation to establish a Central Bank for Pakistan.

The foreign expert advised that due to acute shortage of qualified staff

the establishment of a Central Bank was not practicable; but he recommended

a Currency Board until such time as conditions become favorable. However,

contrary to recommendations, the Government of Pakistan decided to establish


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a full-fledged Central Bank. Consequently the Governor General of Pakistan

and the Father of the nation, Quaid-e-Azam Muhammad Ali Jinnah,

inaugurated the State Bank of Pakistan on 1ST July, 1948, after the State Bank

of Pakistan order was promulgated on 12th May, 1948. Thus a landmark was

made in the history of banking when the State Bank of Pakistan assumed full

control of banking and currency in Pakistan.

The first important task which the State Bank of Pakistan had to attend

was the issue of currency notes and withdrawal of Reserve Bank of India notes

with over printing there of government of Pakistan, which had been in

circulation in Pakistan so far.

As the central bank of the country, the State Bank addressed itself with

the equally urgent task of creating a national banking system. In order to attain

this goal it provided every help and encouragement to Habib Bank to expand

its network of branches, and also recommend to government the establishment

of a new bank which could serve as an agent of the State Bank. As a result, the

National Bank of Pakistan came into being in 1949; and by 1952 it became

strong enough to take over the agency function from the Imperial Bank of

India.

In order to develop sound banking and weeding out weak institutions,

the Banking Companies (Control) Act was promulgated in 1949, empowering

the State Bank to control the operations of banking companies in Pakistan,

including preparation of the required trained man power. Further, the State

Bank restricted the opening of new branches by foreign banks in port towns or

in big cities from where trade was being carried out with foreign countries,

while Pakistani banks were allowed to open as many branches as possible

within the country.

Development of agriculture largely depends on agricultural finance, but

the scheduled banks were not very willing to undertake this risky venture.

Therefore, the State Bank of Pakistan sponsored the establishment of

Agricultural Development Bank to attend exclusively to agriculture finance.

During 1956-1958 a new Pakistani Bank was registered and scheduled as the

National Bank limited; and government also established Pakistan Industrial


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Credit and Investment Corporation, a new institution in the field of industrial

finance.

The expansion in the banking and credit facilities was further enlarged

when during 1959-60 two more Pakistani banks, namely Eastern Mercantile

Bank Limited and Union Bank Limited were established and scheduled.

Another very significant event in the development of banking in

Pakistan was the appointment of the Credit Inquiry Commission in 1959 to

examine the scope and working of the institutions providing credit facilities to

agriculture, trade, commerce and industry, recommend measures for further

improvements.

More Pakistani scheduled banks continued to be established, which

included the Commerce Bank Limited and the Standard Bank Limited. By

June, 1965, the number of scheduled banks stood at 36.

Besides this growth, specialized credit and financial institutions have

also developed over the years, and cater the needs of specific sectors. National

Investment Trust; People Finance Corporation; Inquiry Participation Fund; and

National Development Finance Corporation; Bankers Equity Limited, Small

Business Finance Corporation etc are contributing their due share in the

countrys economic life.

A new concept of interest free banking was introduced in 1981 and by

now it has been established on sound footing, and new trends and techniques

are being implemented to make this system result oriented. New products and

their systematic consumption are making Pakistani banking comparable to

their several modern counterparts anywhere in the developed world.

2.3BANKING SECTOR IN Khyber Pakhtunkhwa(KPK)

The Khyber Pakhtunkhwa is a land of geographical diversity ranging

from glacial mountain ranges in the north to arid and semi arid regions in the

south. This geographical diversity holds a significant potential for

development of agriculture, industry, forestry, hydro electricity and tourism.

The Bank of Khyber is the first KPK based bank and assists in the

development of sound business in the areas of growth.


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There are about 22 Pakistani scheduled banks operating in the KPK

having 1147 branches or about 15 % of all the branches of scheduled Pakistani

banks, in the country. In addition 3 foreign scheduled banks with a total of 3

branches are also operating in the province. Historically banks in the KPK

have been able to mobilize substantial amounts of the total deposits of the

country. However their share of investment in the province has not been

proportional as the development process has gathered pace over the years,

investment within the province has also increased creating a demand for

banking services. A large expatriate community from KPK residing overseas

especially in the Middle East are also offering opportunities to banks operating

in the province.

2.4 BACKGROUND OF BANK OF KHYBER

The Bank of Khyber was established through an Act of the KPK

Assembly called, The Bank of Khyber Act 1991, passed in June 1991. The

bank was formally launched on November 01, 1991. In 1994, the bank

acquired the status of scheduled bank. The Head Office of the Bank is situated

at 24-The Mall, Peshawar Cantt. Peshawar.

2.5.1 VISION OF BOK

To become a Leading Bank providing efficient and dynamic services

in both Islamic and Conventional banking through expanded nationwide

network.

2.5.2 MISSION OF BOK

To increase shareholders value and provide excellent service andinnovative products to customers through effective corporate governance,

friendly working environment and contributing towards an equitable

socioeconomic growth.

2.5.3 CORE VALUES OF BOK

Highest quality of service.

Professionalism.


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Integrity. Team work. Innovation & utilization of latest technology. Corporate social responsibility.

2.5 OBJECTIVES OF BANK OF KHYBER

Objectives are the ends towards which activities are aimed. In fact

these are the results to be achieved. The Bank of Khyber has also certain

objectives. These have been taken from the information memorandum and are

stated here in the same words. These are

i. Promotion of savings and investment in the KPK.ii. To mobilize private savings and public funds for diverting the same

into productive channels and ensure their availability.

iii. To promote industrial, agricultural and socio-economic processesthrough the active participation of private and public sector in the province.

iv. Help under developed areas and create opportunities, especially in therural areas of the province. Further, to guide and assists the people of KPK

savings in the province as well as in other parts of Pakistan.

v. Create a diversified and sound portfolio for utilization for idle fundsand their investments in the existing and new ventures especially in the

pioneering of high-tech agro based expert oriented and engineering projects to

ensure maximum returns.

The Bank of Khyber has been created with the objectives of providing

banking facilities to all segments of the population of the province particularly

and the country as a whole. With this objective, the bank has opened a total of

74 branches including 36 Islamic branches through out Pakistan. 43 branches

including 24 Islamic branches in the province of KPK. The branches cover all

divisions and important commercial centers of the province. Furthermore 17

branches including 4 Islamic branches in Punjab, 8 branches including 3

Islamic branches in Sindh ,2 branches both Islamic in Baluchistan,2 branches

including 1 Islamic branch in Islamabad and 2 Islamic branches in AJK are


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also operating. These branches cover almost all the divisions of KPK and

important commercial centers of the country. The expansion is under way and

branches of BOK are being opened in all districts as well as in all important

commercial centers.

2.6 ORGANIZATIONAL STRUCTURE

The organizational structure is defined as the set of elements that can

be used to configure an organization. The technology, environment, size, and

strategy can all influence an organizational structure. It is also the framework

that defines the boundaries of the formal organization and within which the

organization operates. The organizational structure of Bank of Khyber is also

achieving specific corporate objectives. The general superintendence and

direction of the affairs and business of the bank has been entrusted to the

Board of Directors (BoD).

2.6.1 BOARD OF DIRECTORS

The existing Board of Directors comprises the following:

i. Mr.Attaullah Khan Chairmanii. Dr. Bilal Mustafa ManagingDirector/CEOiii. Mr. Mir Javed Hashmat Executive Directoriv. Sahibzada Saeed Ahmad Directorv. Mr.Muhammad Asif Directorvi. Mr.Muhammad Maqsood Khan Directorvii. Mr.Maqsood Ismail Directorviii. Mr.Amjad Pervez Director

2.6.2 MANAGEMENT

The day to day operations of the Bank are run by a capable team led by

Mr. Attaullah Khan who is a competent, well-qualified and highly respected

senior civil servant having a vast experience of 32 years in management,

administration and planning. Over the past few years, he has gathered a team

of professionals and well qualified senior executives of the bank. These


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executives have been selected from foreign and local private and public sector

banks.

The Bank of Khyber emphasizes on lean, efficient and professionally

managed organization, with a strong private sector orientation. It competes for

business on commercially competitive terms with other banks in the province.

2.6.3 EMPLOYEES

The bank has currently hired a total of 4585 employees. They include

PhDs, postgraduates including MBAs from foreign and local universities and

graduates. The bank provides them with On the Job Training, as well as

exposure to advance courses and seminars conducted by the Institute of

Bankers in Pakistan and other professional institutes. The bank places high

priority on professional education and encourages its employees to sit in the

professional examinations conducted by the Institute of Bankers in Pakistan.

2.7 ORGANIZATIONAL CHART

The Bank of Khyber is a centralized organization in which little

authority is given to the lower levels of management. The Head Office of the

Bank of Khyber has two divisions and each division has its own set of

departments. These are

i. Banking Operation Divisionii. Personnel and Establishment Division

These are further classified for the purpose of administrative convenience.

The organizational structure of Bank of Khyber is given below in the

following chart.


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CHART: THE ORGANIZATIONAL STRUCTURE

Chart-2

Branches 29

Monitoring & Recovery Department

Credits Department

Foreign Exchange Department

Account & Treasury Department

Branch Operation Department

Banking Operation Division

Public Relation Department

P & E Department

Micro Finance Unit

Computers

Investment

Personnel & Establishment Division

Managing Committee

Managing Director

Board of Directors

Source: The Bank of Khyber Annual Report 2011

THE BANK OF KHYBER

Branches

74


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Chapter-3 The Head Office


CHAPTER NO. 3

THE HEAD OFFICE

3.1 THE HEAD OFFICE

The Head Office of the Bank of Khyber is situated at 24-The Mall,

Peshawar Cantt, Peshawar. The Head Office is fully equipped with latest

equipment and technology and controls all the activities of the bank. It

contains different divisions and provides us all the important information

about the different activities related to the Head Office and about different

branches of the bank.

3.2 DIFFERENT DIVISIONS IN HEAD OFFICE

The division is the process of grouping jobs according to some logical

arrangements. The manner in which the activities should be divided and

formed into specialized groups is usually referred to the divisions. The BOK

has used the most common base for divisions and has several divisions at the

Head Office. These divisions contain different departments.

The following are some of the divisions at Head Office:

i. The Banking Operation Division.ii. The Marketing Division.iii. The Islamic Banking Division.iv. The Credit Division.v. The RRMC and RD Division.vi.

The Internal Audit Division.

vii. The Treasury and Investment Division.viii. The Finance Division.ix. The Information Technology Division.x. The Human Resource Division.

i. THE BANKING OPERATION DIVISION

The Banking Operation Division is mainly responsible to manage the

operations i.e. work processing functions in the bank. This Division has a


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pivotal role, as it has to work in close coordination with almost all other

divisions or departments for smooth functioning of the bank. It controls

branch operation and international banking departments. The role played by

the branch operation division is important; they propose operational policies,

procedures and ensure strict compliance of the same through liaison with

international banking.

The banking operation division not only provides guidance to the

branches enabling them to provide quick and error free customer service and

maintains service standards but also identifies training needs of their staff and

suggests in-house training programs. It is also responsible to maintain internal

security, proper cash vaults, test keys, customer records and computer security

features in the branches and also to allocate annual operational target and

monitor performance of staff against set objectives. This division works like a

bridge between SBP and branches for implementation of its relevant rules and

procedures as circulated from time to time.

ii. THE MARKETING DIVISION

The Marketing Division of the Bank is responsible for the formulationand implementation of marketing strategy of the Banks products both on

assets and liabilities side keeping in view the business environment of the

province in particular and the country as a whole. It works to popularize the

Banks deposit schemes and loan products amongst the people with a view to

improve business and overall image of the Bank. The division works in close

coordination with the branches and other divisions and departments of the

bank towards the implementation of the marketing strategy and achievement ofthe assigned targets.

The division is comprised of three departments viz. research and

development department, customer relations department and product

promotions department. The responsibility of the research and development

department is to search and develop new products according to the

requirement of the market. The customer relations department is responsible

for the implementation of the marketing strategy. The product promotion


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department has been assigned with the promotion of the products through

electronic and print media and through other means of promotion.

The division has developed consumer finance products as well as

conventional products. These are in addition to Agri Products which have been

developed for the agriculture sector of the economy. Searching for good

corporate clients is the core activity of the division, which is receiving full

attention of the relevant department with a result oriented approach.

iii. THE ISLAMIC BANKING DIVISION

The Bank of Khyber has started Islamic Banking by converting all

assets and liabilities of Hayatabad Branch Peshawar on 27th Ramadan (22ndNovember 2003). At present it has a total of 36 Islamic Banking branches.

These branches are now working according to the guidelines of Shariah

Supervisory Board. The Aims and target of the IBD is to implement the

decision of the Board of Directors to gradually convert the whole bank into an

Islamic Bank within three years under the supervision of the Shariah

Supervisory Board as per rules and regulations of the SBP. To achieve the

target, Islamic banking division has devised an action plan for expansion andconversion of the whole bank into an Islamic Bank within a laid down

framework and to develop the business in various areas. Presently Islamic

Banking Branch is offering Ijara, Murabah, Diminishing Musharakha and

Guarantees as Islamic finance services and investing the idle funds through

Treasury in the Capital. While the consumer financing schemes under Islamic

modes of financing are Housing Finance Scheme, House Construction

Scheme, Export scheme, Foreign exchange Accounts etc.

iv. THE CREDIT DIVISION

There has been a remarkable growth in core business of the Bank and

the Credit Division has played very effective role in this regard. The credit

division of the bank continuously reviews its policy frameworks in accordance

with the tough competition faced in the wake of reducing mark up rates and

increased liquidity in market. Credit monitoring is being strengthened with a

view to develop early warning signals through constant monitoring of loans


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from different angles and risk management plan is being developed giving a

rating to the clients based on industry status, financial strength of the clients

security offered, repayment behavior among other factors. The conventional

loans, micro and consumer finance, Islamic mode of financing are the salient

characteristics of BOK credit schemes whereas the agricultural lending policy

is being formulated with new features. Introduction of new schemes like house

finance, car finance and other financing schemes will definitely improve and

enhance the credit portfolio. The BOK has strengthened its grip on the target

market for these schemes.

The Micro lending operations in the Bank are structured in a separate

department called the Micro Finance Department under the credit division of

the Bank. It aims to be the largest Micro Finance provider in the KPK on

sustainable basis. Its main objective is providing access to financial services by

the low income and disadvantaged segment of the society.

v. THE RRMC AND RD DIVISION

The main responsibilities of the division include the recovery of all

regular as well as bad debts of the bank. As a part of the re-engineering of thedivision, a full fledged collection unit was established whose major

assignment is to follow-up the delayed accounts from the very first day of

default in order to mitigate the risk of further infection. The division

coordinates closely with credit division as ongoing feed back on performance

of various segments of the portfolio is critical for fine tuning of underwriting

credit initiation criteria.

The division is responsible for the capacity planning, hiring of the staffbased on number of accounts and training programs in order to ensure better

understanding by the collection officers of the imperatives of handling the

customers according to the banks policy. They must also understand the

product in order to effectively negotiate with customers the terms of

perspective settlements and regularization of infected account.

Moreover, the KPK Provincial Assembly amended BOK Act 1991 and

put the bank under the ambit of Land Revenue Act of the province, which isbeing utilized as a deterrent tool for recovery of infected loans of the bank.


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The actions under the Land Revenue Act have proved useful especially

towards recovery in accounts involving smaller accounts.

vi. THE INTERNAL AUDIT DIVISIONThe auditing is a systematic examination of all books and records in

order to ascertain or verify and to report upon the facts regarding its

operations. The Internal Audit Division works independent of the management

and reports to the Audit Committee of the Board. The audit committee

comprises of two wings i.e. the Head Office & Field Audit Department and

The Inspection & Implementation Department. The former ensures audit

according to the plan and the later is responsible for inspections andimplementation and follow up action.

The main function of internal audit division of a bank is to conduct

independent appraisal of all activities aiming to add value. Every activity of

the bank falls with in the scope of the internal audit. The prime objective of

internal auditor is to examine, evaluate, and manage to control and eventually

to mitigate the risk. In addition, the internal audit division advises and

recommends senior management for improvements in internal control and riskmanagement system.

vii. THE TREASURY AND INVESTMENT DIVISION

The Treasury and Investment Division has developed a reputation as a

proven market player. Treasury remained the main source of revenue

generation for the bank. Investment department is responsible for managing

the banks equity portfolio. The division is also responsible for day-to-day

management of liquidity for the bank.

Owing to rising trends in interest rates, treasury prioritized investment

in corporate bonds offering float rate at KIBOR. Besides return on government

securities that also saw rising trend, COT contributed handsome return in

profit of the treasury. The swap market did not offer any significant

opportunities for interest arbitrage. The overall currency exposure is being

managed prudently and effectively while generating sustainable exchange

earnings. The financial markets of the country continue to develop; the bank


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expects significant opportunities to arise for division by trading, funding and

gapping areas.

viii. THE FINANCE DIVISIONThe Finance Division is responsible for bookkeeping and accounts,

overall fiscal management, financial control, financial reporting and

accounting functions of the bank. The Finance Division ensures that the

accounting records and systems are maintained in accordance with internal

policies, regulatory requirements and international accounting standards. It

establishes policies and procedures relating to the finance function, monitors

returns on earning assets and reports on various performance indicatorsincluding asset/liability mismatch. The division directs control of the

budgeting process in accordance with the annual plans, policies, management

directives and strategy, ensuring that quality budgeting and forecasts are drawn

up and consolidated for approval.

The Finance Division exercises budgetary control on all expense and

income items at both the Head Office and branch level, ensuring the effective

monitoring arrangements are in place in respect of adherence to budget orforecasts. It monitors capital adequacy in accordance with regulatory

directives. The division maintains the financial databank and carries out

industry financial analysis vis--vis banks strengths and opportunities.

ix. THE INFORMATION TECHNOLOGY DIVISION

The Information Technology Division of the bank was established in

1994 and all the branches were successfully automated by the year 1998. The

Information Technology division has progressed in the last eight years and

trying its best to abreast in the field of fast developing technology. In order to

achieve its goals, the management has decided to start On-Line Banking in the

very near future, this will facilitate the customers of the BOK and they will be

able to transfer money between any two branches through out the country. The

bank beside this works in the field of information technology and gets

advantages from the technology in a more advanced way to build a strong

means of communication between the different branches. The BOK has


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launched its ATM service in some of the branches for their customers so that

they may draw money easily in non-banking hours.

x. THE HUMAN RESOURCE DIVISIONThe Human Resource Division is strategically the most important

contributor to organizational effectiveness. It is responsible for human

resource management, including areas like recruitment, training, performance

appraisals and career development. HRD acts on the conviction that people at

Bank of Khyber are the most important assets for the bank.

The division tries to create an environment of mutual trust and dignity.

It plans to hire, develop and retain the human resource base with the right levelof skills and talent to meet current and future business needs. The HRD aims

to transform the bank into a modern and dynamic bank, highly professional

and efficient, fully equipped to play a meaningful role, on sustainable basis in

the economic and social development of KPK as well as the country.

In addition to the above, the bank acknowledges professional acumen,

experience and expertise of its staff through regular financial benefits in the

shape of competitive salaries, cash awards, promotions, academic

sponsorships and other incentives so as to boost their morale for greater input

towards betterment of the bank.

3.3 HUMAN RESOURCE POLICIES

Human Resource Management is the part of the organization that is

concerned with the staffing, training, development, motivation and

maintenance of employees. It is a step-by-step process, which is followed by

many companies all over the world. The HRM strategy includes the following

steps.

3.3.1 SELECTIONS AND RECRUITMENT

Selection is the process of choosing from amongst the candidates from

within the organization or from outside, the most suitable person for current

position or for future positions. Recruitment is the process of discovering

potential candidates for actual or anticipated organizational vacancies.


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Pakistan Banking and Finance Commission has designed recruitment

policy. This commission serves as an employment agency. The bank sends

their recruitment criteria to the commission and rest of the legal requirement

and procedures are carried out by it. This commission conducts competitive

exams and after announcing the results then qualified candidates are called for

the interviews. If they clear the interview they can then be appointed in the

required bank. The BOK for the appointment of office cadre strictly follows

Recruitment Policy. MBAs and Economists are preferred for this job.

3.3.2 TRAINING

Training is a learning experience that seeks a relatively permanentchange in an individual that will improve his or her ability to perform on the

job. Training need usually rise when there is a gap between actual and desired

performance. These training needs are usually assessed through training needs

surveys, which range from simple questionnaires where employees assess their

own needs, to elaborate and testing of skills.

The Institute of Bankers in Pakistan (IBP) arranges training programs

for all the banks including the Bank of Khyber, to upgrade their managementskills. IBP also arranges seminars, conferences and training programs for 1 to

2 or more days. IBP conducts three exams in the full service of a banker; Part

I, Part II, and Part III. It is called DAIBP (Diploma Associates, Institute of

Bankers in Pakistan). Initially the time period for the exams was eight years

but now there is no such restriction. This facility is only provided to permanent

employees. If a banker clears all the papers in the first chance he would get a

cash prize. After clearing part I, a lower grade officer is given the option oftaking the cash prize or a promotion. In grade II only the cash prize is offered.

For improving the skills and knowledge of its employees, the management of

the BOK has on the job training, job rotation, and off the job training.


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i. ON THE JOB TRAINING

Normally, given by a senior employee or supervisor, the trainee is

shown how to perform the job and allowed to do it under the trainers

supervision. The bank provides them with on the job training, as well as

exposure to advance courses and seminars conducted by the IBP and other

professional Institutes. The bank places high priority on professional education

and encourages its employees to sit in the professional examinations

conducted by IBP.

ii. JOB ROTATION

Job Rotation is defined as the practice of periodically rotating jobassignment. It enables the employees to work on different positions and get an

overall picture of the banks operations.

iii. OFF THE JOB TRAINING

Off the job training in BOK includes conferences, seminars, meetings

and refresher courses. This mode of training is done to enable employees to

upgrade their knowledge to new developments in profession, and also to

broaden their outlook and train them in new techniques.

3.2.3 SUPERVISION AND PERFORMANCE APPRAISAL

A formal assessment of how well an employee is doing his or her job,

supervision of the employees whether new or old is necessary in any

organization. BOK has designed many forms for the performance evaluation.

Each employee has to fill them and has to keep them updated. They are then

asked on weekly and monthly basis to present these forms and after this, their

performance is evaluated.

3.2.4 ALLOWANCES AND BENEFITS

The BOK allows the following allowances:

i. House rent allowances.ii. Conveyance allowances or maintenance allowances.iii. Utilities allowances.iv. Cost of living allowances.

v. Medical allowances.


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Benefits are the things of value other than compensation that an

organization provides to its workers. The BOK allows to executives and

managers only, the following benefits.

i. Residential telephoneii. Bank cariii. Residential facilities

3.2.5 PROMOTIONS

i. Promotions to various posts are made on merit and no employee shallhave a claim to be promoted by virtue of seniority alone.

ii. No employee is eligible for promotion to the next higher grade till hehas completed at least three years service in a grade.

iii. The MD on the recommendation of the Promotion Committeeapproves promotions up to the grade of Joint Director.

iv. Junior officers (Grade III) who pass DAIBP Part I have the option ofpromotion to the next higher grade, or avail the cash award as prescribed from

time to time.

3.2.6 RETIREMENT, TRANSFER AND TERMINATION

An employee can take early retirement before the maximum age limit

subject to the condition that he has completed a service of 25 years. The

maximum age limit for retirement is 60 years at BOK. The arrangements of

post retirements contributory provident fund are also carried out by personnel

offices; personnel section is responsible for transfer. Transfers are due for each

employee after three years.

If a person is not performing satisfactory in a specific job he might be

transferred to another job which may be relatively easier. BOK hires

employees on contract basis. These employees are required to do well in

probationary period if they dont perform well they are eventually laid offor

terminated due to their consistent poor performance.


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3.2.7 DISCIPLINARY RULES

The Bank of Khyber has framed certain disciplinary rules to keep the

employees on the stated policies, rules and regulations. Upon violation of these

rules penalties are also imposed on the defaulters.

For the normal functioning of the organization, the general rules are:

i. Observance of rules and regulationsii. Maintenance of secrecyiii. Conduct of service.iv. Fraud and forgeries.v. Disobedience to any lawful and reasonable order of the supervisor .


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Chapter-5 Financial Analysis


CLEARING DEPTREMITTANCES DEPT

CASHDEPT

ADVANCES

DEPT

GENERAL BANKING

OPERATIONAL MANAGER

MANAGER

ACCOUNTSDEPT

CHAPTER NO. 4

DEPARTMENTS AT BRANCH LEVEL

The Bank of Khyber has a branch network of 74 branches spread

through out the country. The branches are situated in major cities of the

country and are controlled by its Head Office. The G.T. Road Branch,

Peshawar of the Bank of Khyber was established in 1992. It gained the

confidence of the local residents and business people in a short span of time

and became a major source of earning for the Bank. Businessmen and rest of

the community patronize it due to its efficient services and innovative

products.

CHART: THE OPERATIONAL CHART

BANK OF KHYBER G.T. ROAD BRANCH, PESHAWAR

Source: The Bank of Khyber G.T. Road Branch, Peshawar


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4.1 ACCOUNTS DEPARTMENT

The accounts department is concerned with the different activities in

the bank. This department deals with the customers account and many other

activities in the bank. Accounts are opened here and maintained by them.

4.1.1 OPENING OF AN ACCOUNT

Opening of an account is the establishment of banker-customer

relationship. Before a banker open a new account, he should determine the

perspective customers integrity, respectability, occupation and the nature of

business by the introductory references. The main objective of all the banks is

to accept and mobilize deposits of money from the public and to lend or invest

them into the most profitable avenues possible.

TYPES OF ACCOUNT

The following are different types of the accounts:

i. Current Deposit Accountii. Saving Deposit Account

iii. Term Deposit Account.iv. Security Deposit Receiptv. Khyber Monthly Scheme.

vi. Regular Aamdani Scheme.vii. Zabardast Aamdani Scheme.

i. Current Deposit Account

The Bank of Khyber Current Deposit Account allows the facility of

unlimited withdrawals up to the extent of the balance in account. The balance

in current accounts are payable on demand. Any amount can be withdrawn

without prior notice and there is no restriction on number of transactions

during the day. All the individuals including foreigners, firms and corporate

bodies are entitled to open and maintain current account. The distinguishing

feature is that there is no profit and no interest on current account.


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ii. Saving Deposit Account

The Bank of Khyber Saving Deposit Account allows the account

holder the facility of multiple withdrawals while accruing profit on his deposit.

Profit is paid bi-annually on minimum monthly balance, which is announced

in July and January respectively. The withdrawals from this account are

allowed on demand i.e. without any prior notice of withdrawal.

Different types of Saving Deposit Accounts are given below:

i. Profit & Loss Saving Account.ii. Special Deposit Account.iii. PLS 7 Days Notice Deposits.iv. PLS 30 Days Notice Deposits.

iii. Term Deposit Account

The Bank of Khyber Term Deposit Account offers the benefits of

attractive returns with high liquidity option to take profit monthly, quarterly,

bi-annually, annually or at maturity. The profit is accrued on a daily product

basis. There is no penalty for premature encashment. However, in case of early

encashment the rate of the previous tender will be applied. The option of

partial liquidity is allowed i.e. withdrawal to a certain percentage from the

fixed deposit without disturbing the remaining deposit is allowed. The term or

fixed deposits are accepted by the bank which mature between one month to

five years.

iv. Security Deposit Receipts

This is a security deposit usually initialized by the Govt. or Private

contractors for auctions etc. This is submitted along with quotation to the

concerned department or organization. The banks dont pay interest on it.

v. Khyber Monthly Scheme

In Khyber Monthly Scheme, the Bank of Khyber gives monthly interest

on amount deposited with the bank. It is a kind of fixed deposit and the

customers will have to keep the deposits for a period of 5 years.

vi. Regular Aamdani Scheme

In Regular Aamdani Scheme, the Bank of Khyber gives interest after


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six months on amount deposited with the bank. It is a kind of fixed deposit and

the customers will have to keep the deposits for a period of 5 years.

vii. Zabardast Aamdani Scheme

In Zabardast Aamdani Scheme, the Bank of Khyber gives monthly

interest on amount deposited with the bank. The amount required for opening

this account is Rs.100, 000/- and the customers will have to keep the deposits

for a period of 3 years.

4.1.2 CLOSING OF BANK ACCOUNT

When a customer wants to close his account, he comes to the bank and

checks his account in the accounts department. When the department provides

information about the account, then he is required to give in writing the

directions for closing the account. He is also required to give the unutilized

cheque leaves to the bank officer or give in writing that he has closed it and

bank will deduct the charges of account closing and then close the account.

4.1.3 ISSUANCE OF CHEQUE BOOK

For New Account Holder

The customer has to fill a form. Entries are made in the register and the

account holder is given an account number, which is stamped on every page of

the cheque. The form is signed by the banker and kept in records. Charges for

the cheque book can either be paid or deducted from account.

For an Old Account Holder

In this case, the account holder has to detach the requisition leaf from

the old Cheque book, fill it and give it to the bank employee responsible for

issuing cheque books. The bank employee will issue cheque book by writing

the customers account number on all Cheque leaves and also record the

distinctive number of the Cheque book on the required slip received from the

client.

Loss of Cheque Book

In such circumstances, it is the customers duty to inform the bank at

once the customer must mention the issued cheque number to avoid any fraud

too. The customer is then required to fill a form. The leaf of the Cheque isattached to the form mentioning charge of loosing the Cheque book and


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issuing a new Cheque book. Again it is signed and kept in records.

4.1.4 THE BANK STATEMENT

The Bank issues a statement to its account holders, at the time of first

deposit, and then periodically according to the demand of the account holder.

It may be monthly, quarterly or bi-annually.

4.1.5 LOCKERS

Another function of the accounts department is renting out lockers to

the customers for safe keeping of their valuables. The person who is eligible

for having a locker is an account holder of the bank. When the account holder

doesnt want to use the locker anymore, he can simply return the key and the

security deposit is then refunded.

There are three different types of lockers which are given in the table.

TABLE : TYPES OF LOCKERS AND ITS CHARGES

No. SIZE CHARGES PA SECURITY

1. Small 750 1000

2. Medium 1000 1500

3. Large 1500 2000

Source: The Bank of Khyber G.T.Road Branch,Peshawar

Actually there are two keys. One is Master Key and second is

Customer Key. The authorized bank person first opens the locker with the help

of the master key and then the customer opens it with his key. The account

holder can operate the locker personally or through authorized representative.

4.2 CASH DEPARTMENT

Cash department owes its importance to the fact that it is a major point

of contract between the bank and the customer, the Banks most valued

relationships. Cash department mainly deals with receipt and payment of cash.

Thus in this department there are basically two main functions as explained


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below:

4.2.1 CASH RECEIPT

Cash into the bank is recorded in the receipt book. The amount is

written in slip, filled by the client himself along with the counter file and the

cash is handed over to the officer dealing with the client who after counting

the cash, signs and stamps on the receipt and hands it over to the depositor and

the amount is credited to the account holder by the ledger keeper.

4.2.2 CASH PAYMENT

When a person comes with a cheque to the bank, the bank will honor

his claim if the amount claimed is available in his account. Withdrawals from

the account or other payments are recorded by the cashier in the cash payment

register, after proving genuineness of the instrument. After the closing of the

normal banking hours the cash is balanced and placed in the safe, which is

housed in the strong room.

4.2.3 CHEQUES

A Cheque is defined as a bill of exchange drawn on a specified banker

and not expressed to be payable otherwise than on demand.There are two types of cheques, one is Open Cheque, which is paid

across the counter in cash. There are another two types of open Cheques; one

is Bearer Cheque, in which the payment can be made to the person carrying the

Cheque and the other is Order Cheque Rewrite, it is also encashable on the

counter but its holder must satisfy the banker that I am the person of which the

order has been placed.

The second is Crossed Cheque; it is done through drawing two parallellines across the face of the Cheque. The payment in this case is credited to the

account, not through the counter of the drawer bank. It is deposited into the

account of person in whose favor it is drawn.

4.3 REMITTANCES DEPARTMENT

One of the important functions of a bank is to transfer funds for

customers from one location to another. The function of remitting funds is

performed by remittances department. Instruments used by The Bank of


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Khyber for remittances include:

4.3.1 TELEGRAPHIC TRANSFER:

Telegraphic transfer is an electronic system of transferring fund. This is

the quickest mode of transferring funds. The procedure followed is; first the

customer fills a form where the customers writes down his name and address,

the amount to be transferred, the name of the branch to which the funds are

transferred, and the name of account number of beneficiary, for which it is

prepared and a message is sent to the drawee branch. The funds can be

immediately withdrawn almost half an hour after the funds are remitted. The

charges for sending the funds through TT are the same irrespective of the

amount of funds send, so it is beneficial for customers who need quick transfer

of huge amount.

4.3.2 DEMAND DRAFT

A draft is defined as an order Cheque drawn by one branch of a bank

upon another branch of the same bank. It is a common mode of funds transfer.

It is different from telegraphic transfer in the sense; the funds are not

immediately transferred to the collecting branch at the receipt of the draft. The

collecting branch will credit the account of the beneficiary at the receipt of

advice from the issuing branch. The procedure for demand draft is just same as

above. The bank prepares draft, and gives it to the customer who will himself

choose the mode to send it to beneficiary. The draft will be recorded in the

Draft issuance register. The demand draft can be open, which is encashable at

branch cash counter after properly identifying the true beneficiary.

4.3.3 MAIL TRANSFER

It is just like a DD, the only thing differentiating it from DD is that DD

is physically handed over to the customer and upon presenting the draft the

amount can be withdrawn. But in case of mail transfer one branch sends

instructions to another named branch ordering it to credit the amount to the

account of the person in whose favor the amount is deposited.


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4.3.4 PAY ORDER

Pay Order is just like DD except that pay orders is made for local

transfer of money whereas DD is meant for remittances of funds from one city

to another. Pay order is the most convenient, simple and secure way of

transferring of money.

4.4 CLEARING DEPARTMENT

The bank along with their daily business activity also provides the

facility of collecting credit claims for customers. Main functions of the

clearing department are to interchange and settle the credit claims. The

functions of clearing-house were performed by the central bank of the country

but now this function is performed by NIFT.

4.5 ADVANCES DEPARTMENT

A bank is a profit seeking institution. It attracts surplus balance from

the customer at low rate of interest and makes advances at a higher rate of

interest to the individuals and business firms. Credit extensions are the most

important activity of all financial institutions, because it is the main source of

earnings. Advances department is one of the most sensitive and important

department of the bank. The major portion of the profit is usually earned

through this department. The job of this department is to make proposals about

the loans. The various types of advances provided by the bank are:

i. RUNNING FINANCE

Running finance is a type of short term loan. It is given to meet the

working capital requirements of a business. The loan is normally repayable

with in a period of one year and markup is charged on it and this can be

renewed.

ii. DEMAND FINANCE

Demand finance is a fixed amount of financing accommodation,

allowed to the borrower for a fixed period, repayable in month or quarterly

installments, at a fixed future date. The customer has to pay mark-up on the

entire amount, whether withdrawn or not. It is a long term loan and the time

period for these types of loans is from one to ten years.


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iii. ADVANCE AGAINST SALARIES

The Advance against salaries facility is available to the government

and semi government employees up to fifteen salaries. The time for advance

against salaries is four years. These facilities are available to the BOK clients

on attractive terms and conditions. The BOK provides personalized services

and ensures to fulfill the clients needs.

iv. MICRO FINANCE

The Bank has perusal development activities as primary objectives.

The strategy for financing small scale enterprise, the Bank of Khyber

specifically focused on fulfilling financing needs of micro enterprises in the

country with the establishment of an independent department Micro Business

Development department in April 1995. The Bank has also established

linkages with various international organizations like Pak Holland metal

Project working for promotion of micro enterprises in the country, to promote

the economic conditions of citizens by providing loans to them on easy

installments for the growth of their businesses and for the establishment of

new industries.

v. AGRICULTURAL LOANS

The Bank of Khyber also provides various types of agriculture loans

for the formers to improve their economic condition by producing more crops

in limited resources. The Bank of Khyber provides loans for the formers to

purchase various types of agriculture equipment, fertilizers and other things

related to agriculture. The time period for these types of loans is two years and

after two years they are renewed.

vi. CONSUMER FINANCE

The Bank of Khyber provides various types of consumer financing

schemes like electronics and other types of equipment for their customers.

Through this, the organization looks forward to serving their customers in an

even more efficient manner by providing them attractive terms and conditions

and a technologically superior product range to choose from. The time periodfor these types of schemes is two years and markup is charged.


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vii. HOUSE FINANCE

The Bank of Khyber has made this dream of a house come true by its

house-financing scheme i.e. Suhana Ghar. Whether one plans to build a house,

tailor made to ones requirements or buy a constructed house. The Bank of

Khyber mortgage finance enables them to pursue it without any problems. The

Bank of Khyber mortgage finance offers the customer, the convenience of

owing a house of his own choice while living in it at its rental value. The

customers pay the price of their property in affordable installments for a fixed

time period simply as they pay monthly rent for their residence. The

installment plan has been carefully designed to suit both their budget and their

accommodation requirements. The time period is from one to ten years and

markup is charged on it.

viii. CAR FINANCE

The Bank of Khyber also provides the car financing scheme because it

is another dream of every person to have his own car. The bank gives the cars

to their customers on the monthly installments for five years period of time

and markup is charged on it.


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CHAPTER- 5

FINANCIAL ANALYSIS

5.1 Liquidity Ratios

Liquidity ratios measure the ability of a firm to meet its short-term

obligations. They indicate how quickly and easily a company can obtain cash

for its needs. Following liquidity ratios have been calculated for Bank of

Khyber:

5.1.1 Current Ratio

Current ratio is simply current assets divided by current liabilities.

Current assets include cash, accounts receivable, marketable securities,

inventories, and prepaid items. Current liabilities include accounts payable,

notes payable, salaries payable, taxes payable, current maturities of long-term

obligations and other current accruals. Short-term creditors and management

are interested in this ratio.

Years2007 2008 2009 2010 2011

Current Assets 25672561 27004975 29372558 36790065 48800434

Current Liabilities 23552808 23081176 25765402 32848273 41709773

Current Ratio1.09 1.17 1.14 1.12 1.17


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INTERPRETATION:

This ratio shows a firms ability to cover its current liabilities with its

current assets. The Bank of Khyber has consistently grown in current ratio,

especially during the last four years. This growth shows a good liquidity

position of BOK.

As can be seen from the table and the graph, the current ratio of Bank of

Khyber is showing mixed trend. 1st decreased and then again increased. Its

current ratio is highest in Year 2008 & 2011. In Year 2007, current ratio was

lowest at 1.09, meaning that if in 2007, The Bank of Khyber had Re.1 as

current liability; it had 1.09paisas in current assets to pay its current liability.

5.1.2 QUICK RATIO

The quick ratio measures the firms ability to meet current obligations

based on the most liquid assets. Most liquid assets include cash, marketable

securities, and accounts receivable.

1.18


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Years 2007 2008 2009 2010 2011

Current Asset-

Inventory

25437033 26774164 29114904 36461583 45463653

Current

Liabilities 23552808 23081176 25765402 32848273 41709773

QUICK RATIO

1.09 1.16 1.13 1.11 1.09

INTERPRETATION:

The quick ratio measures the firms ability to meet current obligations

based on the most liquid assets. Most liquid assets include cash, account

receivable etc. This means that inventories and any prepayment are deducted

from current assets to arrive at the figure of liquid assets. The Bank of Khyber

acid test ratios are equal in 2007 and 2011.

From the table and the graph, it is clear that the trend for quick ratio is the

same as that for the current ratio i.e., quick ratio too has improved over time

and it has become almost constant in Year 2008&10. In Year 2008, quick ratio

was highest at 1.16, meaning that if in 2008, The Bank of Khyber had Re.1 as


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current liability; it had Rs.1.16 in most liquid assets to pay its current liability.

5.1.3 Cash Ratio

Cash ratio shows the ability of the firm to pay its current liabilities

through cash. It is the most conservative form of liquidity ratios. Management

and short-term creditors are the most interested parties in this ratio.

Years 2007 2008 2009 2010 2011

Cash 5181618 5077859 4637772 3941793 6256466

Current

Liabilities 23552808 23081176 25765402 32848273 41709773

Cash Ratio 0.22 0.22 0.18 0.12 0.15


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INTERPRETATION:

Cash ratio shows the ability of the firm to pay its current liabilities

through cash. It is the most conservative form of liquidity ratios. As can be

observed from the table in the year 2007&2008, cash ratio was highest at 0.22,

meaning that if in 2007&08, BOK had Re.1 as current liability; it had 0.22 in

cash to pay its current liability. A lower cash ratio shows that cash is not lying

idle and it is being managed properly. BOK has managed the cash in last three

years quite impressively.

5.1.4 Leverage Ratio

Leverage ratios show the extent to which the firm is financed by debt.

The financial analyst uses debt ratios to assess the relative size of a firms debt

load and the firms ability to pay off the debt.

Years 2007 2008 2009 2010 2011

Total Debt 24182304 23863488 26636119 32823133 41319935

Total

Equity 2430382 5965872 4681216 5738310 6176373

Debt to

Equity

Ratio

9.95 4.00 5.69 5.72 6.69


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INTERPRETATION:

From the table and the graph, it can be seen that The Bank of Khyber is

a little leveraged Bank. The Bank of Khyber debt to equity ratio is showing a

mixed trend; first increasing and then again decreasing. Debt to equity ratio is

highest in Year 2007, meaning that its total debts are more than itsshareholders equity. This is because of the fact that the deposits made by the

customers in Year 2007 were far greater than the deposits in the preceding

years. And deposits make up the largest liability of the banks, and that is the

main reason that The Bank of Khyber is a little leveraged bank.

Years 2007 2008 2009 2010 2011

Total Debt 24182304 23863488 26636119 32823133 41319935

Total Assets 27211260 29829360 31336611 39075158 51012265

Debt to Total

Asset Ratio

0.88 0.80 0.85 0.84 0.81


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INTERPRETATION:

After decreasing in Year 2008 to 0.80, the debt to asset ratio of The Bank of

Khyber again rose to 0.85 in Year 2009. This means that in Year 2009, 85%

of The Bank of Khyber assets were financed from debt and the rest 15% were

financed from equity.

5.2 Profitability Ratios

Profitability ratios measure how the Banks returns compare to its sales,

asset, investments, and equity. Profitability ratios measure how much bank

revenue is eaten up by expenses, how much a bank earns relative to the sales

generated, and the amount earned relative to the value of the firms assets and

equity. Management is also interested in profitability ratios.

5.2.1 Net Profit Margin

The net profit margin is a measure of the banks profitability of sales

after taking account of all expenses and income taxes. It tells us a banks net

income per rupee of sales. It measures the percentage of net income in net

sales. This ratio shows the management of direct expenses as well as the

management of other expenses in the bank. If this ratio is high, it means that

the bank is managing all of its expenses effectively.


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Years 2007 2008 2009 2010 2011

Net

Profit

90032 351706 752470 328997 5416965

Net

Sales

176534 234471 376235 671422 2851034

NPM 0.51 1.52 2.02 0.49 1.90

INTERPRETATION:

The net profit margin of The Bank of Khyber 2011 FY is 197%, which is

higher than net profit margin in FY 2010. In FY 2011, each rupee of total

revenue generated only 197 paisas of net profit. Net profit margin increased in

Year 2011.


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5.2.2 Asset Turnover Ratio

This ratio indicates the ability of a bank to use assets to generate sales.

It shows how much sales each rupee invested in assets, generates. If this ratio

is high, it means that the bank is using its assets effectively. If this ratio is low,

it means that there is something wrong in asset management.

Years 2007 2008 2009 2010 2011

Net Sales 176534 234471 376235 671422 2851034

Avg Total

Asset 271591 173682 124355 388105 507301

Asset

Turnover

Ratio0.65 1.34 3.02 1.73 5.62


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INTERPRETATION:

The Bank of Khyber asset efficiency ratio is showing a mixed/unstable

trend, which means that with the passage of time; The Bank of Khyber is not

managing its assets effectively. In Year 2007, asset efficiency ratio is 6.4,

meaning that The Bank of Khyber generated 64 paisas of revenue from each

rupee invested in its assets whereas in year 2011 it is 5.62.

5.2.3 Return on Investment

The return on assets ratio indicates how much income each rupee of

assets produces on average. It shows whether the business is investing in its

assets effectively. Objective of investment is to earn money. By using this

ratio, the firm wants to calculate the net effect of its investment.

Years 2007 2008 2009 2010 2011

Net Profit 236284 15631 12435 3881 5073

Avg Total

Asset

271591 173682 124355 388105 507301

Return on

Investment 0.87 0.09 0.10 0.01 0.01


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INTERPRETATION:

It is observable from the table and the graph that The Bank of Khyber

ROI is highest in the Year 2007. Each rupee of assets is producing on average

87 paisas of income. By using this ratio, the Bank wants to calculate the net

effect of its investment.

5.2.4 Return on Equity

For publicly traded companies, the relationship of earnings to equity or

return on equity is of prime importance since management must provide a

return for the money invested by shareholders. Return on Equity (ROE) is a

measure of how well management has used the capital invested by

shareholders. Return on Equity tells us the percentage return for each rupee

invested by shareholders. A high return on equity often reflects the firms

acceptance of strong investment opportunities and effective expense

management.


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Years 2007 2008 2009 2010 2011

Net Profit 90032 351706 752470 328997 541696

Avg Share

Holder

Equity

750266 8792650 12541167 2990882 10833920

Return on

Equity 0.12 0.04 0.06 0.11 0.05

INTERPRETATION

This is clear from the table and the graph that in Year 2007, the shareholders

of The Bank of Khyber got 12% return on the funds invested by them, which

again is the highest amongst the five years data reported.


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5.2.5 COMMON SIZE ANALYSIS OF BALANCE SHEET

ASSETS 2007 2008 2009 2010 2011

Cash and balances with treasury banks

5.78 4.510 4.107 3.107 10.00

Balances with other banks

13.710 12.54 10.73 6.110 2.105

Lending to financial institutions

10.16 10.61 8.13 4.66 5.04

Investments 31.47 210.106 2.86 46.18 310.08Advances

33.88 33.104 40.34 30.50 35.100

Other assets

0.52 8.310 6.13 4.610 3.102

Operating fixed assets

0.35 0.71 5.107 2.61 2.20

Deferred tax assets

5.01 0.21 1.26 1.17 0.08

Liabilities

Bills payable

0.55 1.17 0.310 0.31 0.55

Borrowing from financial institutions

15.810 4.44 2.100 13.26 5.610

Deposits and other accounts

70.10 72.56 78.101 67.72 72.80

Other liabilities

2.31 2.63 2.84 3.05 2.43

Deferred tax liabilities

_ _ _ 3.05 _

Share capital

Reserves2.16 4.43 4.58 1.12 1.07

Inappropriate profit

0.02 0.74 0.76 _ _

Surplus on revaluation of securities

(net of tax)

1.210 1.03 3.18 12.88 1.12


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Chapter-6 The Analysis of Organization


CHAPTER NO. 6

THE ANALYSIS OF ORGANIZATION

6.1 THE ANALYSIS

The analysis plays an important role in evaluating an organizations

performance. In data analysis we will elaborate on the various statistical tests

and the interpretation of the results of the analysis.

To analyze the data we have following objectives.

Getting a feel for the data i.e. The feel for the data will givepreliminary ideas of how good scales are, how will the coding and entering of

data have been done.

Testing the goodness of data i.e. the objective is testing the goodness ofdata, can be accomplished by submitting the data for factor analysis, obtaining

the split half reliability of the measures and so on.

Testing the hypothesis developed for the research i.e. hypothesistesting, are achieved by choosing the appropriate menus of the software

programs to test each of the hypotheses using the relevant statistical test. The

results of these tests will determine whether or not the hypothesis

substantiated.

Analysis is an important section of any report, so for this purpose

different techniques and procedures have to be followed for analysis. The

analysis of the report constitutes different areas, which are given below.

6.2 ADMINISTRATIVE ANALYSIS

6.2.1 CENTRALIZATION

BOK has a centralized structure. There is no delegation of authority to

the lower management / staff. In order to improve the performance of the staff

and to build their confidence, some authority must be delegated to the lower

management.


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6.2.2 NEGLIGENCE OF RULES AND REGULATIONS

It has been noted that the Banks officers usually neglect the rules and

regulations either intentionally or unintentionally; because these have not been

properly communicated to them. Their prompt communication must be

ensured and the employees must be informed about the penalties in case of

negligence.

6.2.3 IMPROPER DISTRIBUTION OF DUTIES

In BOK there is improper distribution of duties and responsibilities. It

is being observed that sometimes an officer of the same grade might have less

or more responsibility than another officer of his grade.

6.2.4 PRODUCT RATES

When BOKs product rates are compared with the competitors, one can

notice that they either have the same or lower rates. So in order to attract the

customers, BOK must offer rates above the market to have a better market

share.

6.2.5 POOR JOB ROTATION

Branch officers are not properly rotated. It is noted that an experiencebanker from Accounts section doesnt know about the work of remittance

department. So they must be rotated in all the departments of the banking in

order to get familiar with the working of different departments and to have a

know- how of the whole system.

6.2.6 SLOW CAREER GROWTH

Promotion is one of the motivational tools; promotion policy of Bank

of Khyber is very slow. The opportunities for upward advancement are very

few.

6.2.7 WORKING SETUP

It is observed that there are some deficiencies in the branch setup,

which creates extra disturbance, and excessive movement, which in turn affect

the efficiency of employees and thus that of the whole organization also.


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6.2.8 LACK OF SPECIALIZED TRAINING

In BOK training is provided on the basis of generalization rather than

specialization. After completion of training a person is inducted into a specific

field. Due to lack of knowledge he faces difficulty to perform the assigned job.

6.2.9 SEPARATION OF ACTIVITIES

There is no separation of activities e.g. clearing of cheques. This is

partially done in cash department and partially in accounts. This creates

confusion and conflicts. In order to avoid mishaps, there should be complete

separation of activities.

6.2.10 SPACE SHORTAGE

It is observed that branches suffer from space shortage. The seating

arrangement is not sufficient as compared to the number of employees and

customers.


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Chapter-7 SWOT Analysis


CHAPTER NO. 7

THE SWOT ANALYSIS

The SWOT stands for Strengths, Weaknesses, Opportunities and

Threats. It is a useful tool for assessing and analyzing an organizations overall

situation. This approach attempts to balance the internal strengths and

weaknesses of an organization with the opportunities and threats that the

external environment presents.

7.1 STRENGTHS

Strengths refer to the positive aspects of the bank. Due to these points,

the bank is having competitive advantage over competitors. These points

contribute to the growth and profitability of Bank of Khyber.

i. In a short time, the bank has entered the line of largest operating bank in thecountry.

ii. Rapid spreading of branches all over Pakistan.iii. Having large international correspondent Network.iv. The bank operates under experienced and high-class management.v. Offers handsome salary and allowances to keep its employees satisfied/

motivated.

vi. To enhance deposits, offers attractive mark-up rates.vii. Offers a range of products to its customers to increase its marketability in

order to broaden its customers base and improve profitability.

viii. Offers ATM, Western Union and online banking facilities to its customers inmajor cities of the country.

ix. Having a credit division responsible for efficient and effective identification,control and management of credit risk, through sound and prudent lending

policies.

x. Bank of Khyber has its own Web page by www.BOK.com.pk thus offeringInternet banking facilities to its valued customers.


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7.2 WEAKNESSES

Weakness in any organization doesnt mean that the organization lacks

administrative and operational functioning. It simply indicates the loopholes in

an organization. These weaknesses must be identified in order to overcome

them in the future. Some of such weak spots are uncovered and are listed

below.

i. No specific advertising campaigns planned and executed for buildinginstitutional good will or promoting its products.

ii. Still the product offered are in a narrow range, alternatives are easily found.iii. High mark-up rates, thus discouraging the middle class borrowers.iv. Insufficient motivational programs for employees in the organization exist.v. A number of branches are equipped with latest technology, but some of the

branches still lack the facilities.

vi. No clear feed back system for employees.vii. Promotion for products is limited to big cities.viii. No service of utility bills collectionix. ATM service (not in all branches).

7.3 OPPORTUNITIES

Opportunities are the external circumstances, events, or situations that

offer and organization the chance to achieve its objectives.

i. New style of management.ii. Introduction of new products and services.iii. Introduction of new technology.iv. New deposits schemes.v. The possibility of extending banking hours.vi. The possibility of hiring fresh graduates with appropriate skills.vii. Offering of tele-banking services to the customers through local telephone

exchanges.

viii. The bank can extend more loans to the agriculture sector.ix. Bank should take interest in the new market segments like I.T business etc.x. If new schemes are introduced for the overseas Pakistanis, they can get the

business of remittances more than any other bank or hundi business.


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7.4THREATS

These indicate the pinch points, the edges after which the

production and profitability margin of any organization hampers. These are the

obstacles in the external environment. Similar obstacles are found against the

banking practice of Bank of Khyber.

i. Increase in growth of other private & foreign banks in the country i.e. BankAlfalah.

ii. Uncertainty in economy, a drawback for investors.iii. Political influence and their vested interest.iv. Due to inflation, reduction in saving accounts.v. High rate of turnover due to employees leaving for foreign services.vi. Rapid downsizing, reducing people confidence in private banks.vii. Rapid rate of global technology and slow pace of acquiring them.viii. Expensive modern technology.ix. Unstable political conditions.x. Comparatively less mark up rates on loans.

For the SWOT analysis we can conclude that the management of the

bank should adopt systematic planning for the bank growth, talking with the

all management levels of the bank to discover new segments of the customers,

offering new schemes for its customers. Similarly Bank of Khyber can have

more customers as compared to the other banks, if they give proper attention

to every customer & their needs, then it will become one of the leading &

comprehensive banks of the country.


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Chapter-8 Findings and Recommendations


CHAPTER NO. 8

FINDINGS AND RECOMMENDATIONS

Presently in the Bank of Khyber, a centralized system of decision

making is prevailing. President and Executive Committee take most of the

decisions without taking the middle and lower management into confidence.

Sometimes the implementers do not feel easy with these decisions. The lower

staff intensively fe

Documents

The Bok Report