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Virtual University of Pakistan

MONEY AND BANKING

Report on Bank Alfalah Limited

Submitted to: Submitted by:

Dr. Talat Afza Ashfaq Ahmad

Date of Submission: MC070400641

January 05th 2009

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ACKNOWLEDGEMENTS

All thanks to Almighty Allah for empowering me to accomplish this project and
enabling me to learn through this opportunity.

Taking this opportunity, I would like to thank my respected instructor Dr. Talat Afza
for providing me not only literature knowledge but also insight about banking sector in
Pakistan through practical examples and her personal expertise. Her mix of literature with
current news and happenings in Pakistan provided me an in-depth knowledge of banking
sector in Pakistan and I believe these learning will guide me throughout my career.

I am greatly thankful to Area Manager, Bank Alfalah Limited, The Mall,

Rawalpindi for being kind by providing me all necessary information about the bank and
guiding me in accomplishing this project.
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EXECUTIVE SUMMARY

Bank Alfalah is one of the fastest growing banks in Pakistani Environment with more
than 195 branches in 74 cities of Pakistan. The bank offers wide range of products for both
individuals as well as corporate. Its main products for individuals are current, savings and
fixed accounts, credit and debit cards, and home, personal and car financing schemes.
Whereas it’s corporate products are current, savings and fixed accounts, Guarantees, and
short-term as well as long-term loans. The bank also invests in Governmental, SBP securities
as well as shares of different companies. The bank is currently eyeing on evolving sector of
Agri-loans and planning to open its branches in rural areas as well. During this project, we
will be discussing its various operations and products. Then we will analyze its financial
statements to see how it financially is operating.
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TABLE OF CONTENTS

Serial # Chapter Page

Chapter I Introduction 1

Chapter II Products and Services 4

Chapter III Common Sized Analysis 20

Chapter IV Financial Ratio Analysis 28

Chapter V Conclusion 35

Bibliography 37

Appendix
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INTRODUCTION

Bank Alfalah, from the time of its inception in 1997 has committed to building long
lasting relationships by keeping customer satisfaction at the apex of all its policies and
decisions. Service excellence, innovative products, and meeting the changing needs of our
valued customers have been the driving forces at the Bank. Fortified with the strength of the
Abu Dhabi Group, Bank Alfalah has evolved in a short span of time into a socially
responsible and leading financial service provider. The corporate strategy of Bank Alfalah
includes contributing to society as an important objective to be pursued as a matter of duty.
This organizational philosophy and employee attitude is also reflective in the corporate
slogan: "The Caring Bank". BAL care reaches out not only to its customers but also to the
society in general in which it operates. For instance, the Bank supports various charities and
has also undertaken beautification projects in various cities of Pakistan. All of this, besides
being a matter of great pride, has also provided recognition to the BAL brand name and
inspired trust and confidence in both existing as well.

VISION

To be the premium organizations operating locally and internationally that provides the
complete range of financial services to all segments under one roof

MISSION

To develop & deliver the most innovative products, mange customer experience, deliver
quality service that contributes to brand strengths, establishes a competitive advantage and
enhances profitability, thus providing value to the stakeholders of the bank.
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HISTORY

Bank Alfalah Limited was incorporated on June 21st, 1997 as a public limited
company under the Companies Ordinance 1984. Its banking operations commenced
from November 1st, 1997. The bank is engaged in commercial banking and related services
as defined in the Banking companies’ ordinance, 1962. The Bank is currently operating
through 195 branches in 74 cities, with the registered office at B.A.Building, I.I.Chundrigar,
Karachi.

Since its inception, as the new identity of H.C.E.B after the privatization in 1997, the
management of the bank has implemented strategies and policies to carve a distinct position
for the bank in the market place.

Strengthened with the banking of the Abu Dhabi Group and driven by
the strategic goals set out by its board of management, the Bank has invested in
revolutionary technology to have an extensive range of products and services.

During the past Five years, we have emerged as one of the foremost financial
institution in the region endeavoring to meet the needs of tomorrow today.

The Bank has been awarded a credit rating of AA (double A) and an A1+ (A one
plus) in the long and short term respectively. These ratings are indicative of very low
expectation of credit risk and a strong capacity for timely payment of financial commitments.
Further, unsecured subordinate debt (Term Finance Certificate) of Bank has been awarded a
credit rating of AA- (double A minus).
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BOARD OF DIRECTORS

H.E. Sheikh Hamdan Bin Mubarak Al Nahayan

Chairman

Mr. Abdulla Nasser Hawalileel Al-Mansoori

Director

Mr. Abdull Khalil Al Mutawa

Director

Mr.Khalid Mana Saeed Al Otaiba

Director

Mr. Sirajuddin Aziz

Director & CEO

MANAGEMENT

Chief Executive Officer

Co-Chairman Central Management Chief Operating Officer

Committee Branch Banking & SME

Group Head Group Head

Corporate & Investment Banking Islamic Banking
Group Head Group Head
Consumer Finance Operations
Group Head Group Head
Credit & Collections Training & Development
Group Head General Manager
Commercial Banking Legal Affairs Division & Company Secretary
Group Head
Chief Financial Officer
Audit & Inspection Division
General Manager
Head of Information Technology
Human Resource & Quality Assurance
Executive In charge General Manager
Establishment & Administration Credit Monitoring Division
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MARKETING STRATEGIES

Bank Alfalah has a Business Division that takes care of marketing strategies.
Whenever a new product or service is launched this division makes use of the common
media modes to advertise about that specific product or service.

Following are a few ways of advertising by Bank Alfalah Limited.

1. Printed advertisements in newspapers and billboards.

2. Newsletters that come out on weekly basis informing of the happenings to general
public.
3. Electronic media used for advertising
4. Sponsorship of various events like World Open Squash 2006, Bank Alfalah Cup 2003
etc.
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PRODUCTS AND SERVICES

CREDIT CARDS

 Alfalah VISA Card

Bank Alfalah Credit Card is globally accepted and welcomed at locations
displaying the VISA logo. It is accepted at nearly 29 million locations in more than
150 countries around the globe and over 22,000 Bank Alfalah’s establishments in
Pakistan.

 Platinum Card
It is accepted at nearly 29 million locations in more than 150 countries around the
globe and at over 22,000 establishments in Pakistan.

 Titanium

Titanium MasterCard is globally accepted and welcomed at locations displaying

the MasterCard logo.

 Gold & Silver

A perfect card combination for all segments of salaried & professional
individuals.

 Students Card

For the first time in Pakistan, Bank Alfalah introduces a credit card for
Students. This card is for the students who aree enrolled in a professional university
(as per Bank Alfalah’s approved list) with 15 years of schooling experience.
Minimum age should not be less than 17 years
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 VISA MINI

The Mini credit card is a durable companion card to your full-sized Bank Alfalah
credit card. It works just like your regular-sized card and has the same account, expiry
date and the benefits. The Mini credit card attaches easily to your key ring, cellular
phone or any other carry along device that is most convenient to you.

 Women cards

The liability of this card depends on what basis this card has been applied for:

• If the female is applying on her own income basis, she herself will be liable to
pay for the amount spent through the card(s).
• If the female is a house wife and does not have any direct income source, she
can apply for the card through the person responsible for the household.

HOME LOANS

 Home Start

The crown jewel of BAL’s Home Finance scheme, the golden opportunity for
someone starting a career to buy an already constructed housing unit early in life!
BAL offers a moratorium of upto 3 years in principal payments, for a financing of
upto 20 years.

 Home Start

Home Start is specially designed for young professionals to own a quality asset.
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 Home Buyer

With this facility, customer no longer need to just dream about the home they
want for their family. BAL will provide them upto 80% of the purchase price of the
property. Payment period ranges from 3 to 20 years.

 Home Construct

BAL provides up-to 100% of the construction cost, enabling customer to say
good-bye to rent forever! Even if they don't have a plot, BAL will provide upto 60%
of the value of the plot that they have selected to purchase!

OTHER SERVICES

 Remittances
Inward/outward remittances services are provided by Bank Alfalah e.g. TT,
Demand Draft etc. They provide foreign as well as domestic remittances. There are
approximately 187 corresponding banks like ABN Amro NV, Abu Dhabi commercial
Bank, etc. which coordinate with Bank Alfalah in terms of remittances.)

 Safe Deposit Lockers

Bank Alfalah provides safe deposit lockers facilities to its customers for safe
keeping of their valuables like documents, securities and jewellery etc. They give
various sizes to choose from small to extra large: small, medium & large. Annul
locker rent ranges from Rs.1,000/- to Rs.3,500/. Locker rent is waived for customers
maintaining a minimum deposit of Rs.2 million. Current account or above US
$25,000/- in a current account or US $ 50,000/- in a savings account
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 Phone Banking

"Alfalah Phone Banking” is available to all customers on a countrywide basis.

Customers can dial 111-225-111 (without any city code/prefix) from their respective
cities i.e. 75 cities where Bank Alfalah is present, and get prompt services from the
Centralized Phone Banking Services. Customers enjoy 24x7 Round the Clock Phone
Banking Services.

 Agri Finance

Bank Alfalah Ltd. (BAL) Agri finance program has been named as "Bank
Alfalah Zarie Sahulat”. Bank Alfalah Ltd is extending this service to the clients on a
competitive markup rate. BAL model is in letter and spirit based on SBP instruction.
The scheme now covers financing of a multitude of activities related to crop
production, harvesting, transportation, marketing, storage, processing, packing,
export, agri development, working capital and fixed investment financing of agri non
crop activities, storage, silos, etc. making it quite exhaustive and comprehensive. The
products have been, therefore, designed keeping in mind objectivity of practical
applicability in market scenario and to cater to the most commonly demanded items
of agricultural financing by farmers.

ALFALAH HILAL CARD (DEBIT CARD)

In our endeavor to give customers versatile banking options to fulfill their financial
needs, Bank Alfalah Limited presents the Alfalah Hilal Card, the first Visa Electron
International Debit Card which gives customer an unlimited access to their current / savings
account with a simple swipe, at millions of retail shops and ATMs, worldwide. The Alfalah
HilalCard comes with a host of conveniences and benefits combined with the wide reach of
Visa Network enabling it to be accepted at more than 840,000 ATMs and 13 million retail
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outlets around the world, making it the most acceptable Debit Card available in Pakistan.
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ACCOUNTS OFFERED BY BANK ALFALAH LIMITED

SAVINGS AND CURRENT DEPOSIT ACCOUNTS

Bank Alfalah Ltd provides savings and current deposit accounts to its customers.

 Current Account:

• Non-interest bearing checking account.

• Minimum account opening requirement of Rs. 10,000 only.
• Free debit card can be used to withdraw cash, make purchases at thousands of
outlets across Pakistan that provides access to funds 24 hours a day.
• No restriction on number of withdrawals and on number of deposits

 PLS Savings Account:

• Profit & Loss Sharing Saving Bank Account.

• Minimum account opening requirement of Rs. 5,000 only.
• No restriction on number of withdrawals and number of deposits.
• Profit on saving accounts is credited to the customer account on half-yearly basis.

 Notice Deposits Accounts

This account is provided in two categories, one for 7-29 days and other for 30
days. For individuals and corporations the rate is 2%

 Royal Profit:

• Minimum Deposit requirement of Rs. 50,000 only.

• Higher returns on higher balances.

• Profit is credited to the customer account on monthly basis.

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 Alfalah Mahana Amdan

Alfalah Mahana Amdan is a 3-year TDR with expected rate of profit of 10% p.a.
This term deposit will provide an opportunity to individual/joint customers to enjoy
higher returns that will automatically be credited to his/her current/PLS/RP/BBA
account on 1st working day of each month.
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BALANCE SHEET ANALYSIS

 Assets Analysis:
Assets of bank increased from 65bn to almost 99bn in 2002:2003 period. This
increase was baked by overall increasing trend in all of bank’s assets. Cash and
balances with banks doubled but that doubling was mainly due to bank regulations.
Earning assets out of cash deposits with other banks increased from 798mn to
1,197mn during same period. Chart below shows that it actually decreased as
compared to total assets during same period. Same trend was followed by balances
account.

Cash and balances with treasury banks

10.00% 8.51%
8.00% 6.97%
6.00% Cash and
balances with
4.00% treasury banks
2.00%
0.00%
2003 2002

Investments

37.55%
40.00%
29.21%
30.00%

20.00% Investments
10.00%

0.00%
2003 2002
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Investments in securities and T-bills increased during 2003 by approx. 4.5bn

but it showed decreasing trend during same period as compared to total assets.
Almost 50% of these investments are made in T-bills that have a very low interest
rate as compared to other bonds such as PIB. This means bank will have more cash
in hand in coming years to invest in other options with higher returns when theses
securities mature.

Advances

52.00% 49.74%
50.00%
48.00%
46.00% Advances
43.46%
44.00%
42.00%
40.00%
2003 2002

Advances done mainly in industrial sector are increasing from 43.5% in 2002
to almost 50% of total assets in 2003. This trend was due to increasing contribution of
bank in short term investments such as LCs, and LGs, in foreign trade sector. Also
bank being a commercial bank has invested more in short term secure loans such as
consumer loans, car and house financings and other short term loans that are
increasing its overall investments in this sector.

Other assets decreased from 1.9% to 1.6% during 2002:2003 that is good sign
since these assets are dividends, interest and other such receivables that have no
further income option attached to them.
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Earning Assets*

90.00% 89.70%
89.50%
89.00%
88.31% Earning Assets*
88.50%
88.00%
87.50%
2003 2002

Ratio of earning assets decreased from almost 90% of total assets in 2002 to
88.3% in 2003. This is mainly because bank’s deposits in current accounts with
treasury banks increased and also bank’s policy to increase branches network
increased its fixed assets which currently are not recorded as earning assets though
these assets generated a return of more than Rs. 1bn through their revaluation that
was added to their total worth.

 Liabilities Analysis:
Borrowings from financial institutions

15.00% 13.86%

9.81%
10.00% Borrowings from
financial
5.00% institutions

0.00%
2003 2002

Borrowings from financial institutions mainly from SBP increased in 2003

because of bank’s increasing interest in export related activities. Banks borrowed
form SBP export refinance scheme to support its export related operations.
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Deposits and other accounts

85.00% 84.02%
84.00%
83.00%
Depos its and
82.00% 81.00% other accounts
81.00%
80.00%
79.00%
2003 2002

Bank deposits decreased slightly in 2003 as compared to total liabilities but in

actual, these increased from Rs. 51.7bn to Rs.76.7bn in 2003. This increased mainly
consisted of depositor’s investments in savings accounts and fixed deposits that
collectively consisted of 70% of total deposits with the bank. This trend shows that
people are more interested in bank’s savings products than its current accounts.
Another factor may be that most of its depositors are households that like to keep
their money in savings accounts than their current account.

 Equity Analysis:

Share capital

46.97%
50.00%
40.00%
27.38%
30.00%
Share capital
20.00%
10.00%
0.00%
2003 2002

Overall, shares capital equity portion of bank showed healthy growth

increasing from 27.4% in 2002 to 47% in 2003. In actual figures, it doubled in 2003
when bank did its first IPO. Its reserves and un appropriated profit also increased
during same period showing an upward trend in bank’s equity portion.
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Reserves

18.56%
20.00%

15.00%
10.01%
10.00% Reserves
5.00%

0.00%
2003 2002

Bank’s reserves account almost doubled during 2003. This amount was kept
in bank for their future investment options that was done in Award telecom Ltd. A
subsidiary of Bank Alfalah Ltd.
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ROLE OF STATE BANK OF PAKISTAN AS CENTRAL BANK

The State bank was established on July 1, 1948. Since its establishment besides
performing its traditional functions, it is undertaking a number of developmental and
promotional functions in the best interest of the country. Like a Central Bank in any
developing country, State Bank of Pakistan performs both the traditional and developmental
functions to achieve macro-economic goals.

The state bank of Pakistan was originally established to perform the traditional
functions of central bank of a country, monopoly of note issue, acting as a banker to the
government, controller of credit, functioning lender of the last resorts.

The non-traditional or promotional functions, performed by the State Bank include

development of financial framework, institutionalization of savings and investment,
provision of training facilities to bankers including Bank Alfalah Ltd, and provision of credit
to priority sectors. The State Bank also has been playing an active part in the process of
islamization of the banking system of all the banks in the country including Bank Alfalah
Ltd.

Building up a sound banking system: For rapid economic development of a country

the building up a sound financial system is necessary. The State Bank of Pakistan
immediately after its establishment in 1948 took up this task. The start was made with
establishment of national bank of Pakistan. Since then the total number of domestic
scheduled banks has increased to eight thousand. These banks, Bank Alfalah is one of them,
are playing a prominent role in the mobilization of savings in rural and urban areas of the
country.
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Credit targets:

The State Bank of Pakistan gives targets to Commercial Banks including Bank
Alfalah Ltd for providing loans in the field of agriculture, industry, housing every year. The
prescribing of credit targets for these priority sectors has greatly helped in raising
productions.

The State Bank of Pakistan looks into a lot of different ranges of banking to deal with
the changes in economic climate and different purchasing and buying powers. Here are some
of the banking areas that the state bank looks into;

• State Bank’s Shariah Board Approves Essentials and Model Agreements for Islamic
Modes of Financing
• Procudure For Submitting Claims With SBP In Respect of Unclaimed Deposits
Surrendered By Banks/Dfis.
• Banking Sector Supervision in Pakistan
• Micro Finance
• Small Medium Enterprises (SMEs)
• Minimum Capital Requirements for Banks
• Remittance Facilities in Pakistan
• Opening of Foreign Currency Accounts with Banks in Pakistan under new scheme.
• Handbok of Corporate Governance
• Guidelines on Risk Management
• Guidelines on Commercial Paper
• Guidelines on Securitization
• SBP.Scheme for Agricultural Financing
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CONCLUSION

Bank Alfalah since its incorporation in 1997 has emerged as a prominent bank with
focus on customer satisfaction and enhancing value to customers. The bank is following its
vision to be a premier bank of choice for customers and is certainly showing to follow these
guidelines. Pakistani environment, especially economic indicators along with State Bank of
Pakistan’s regulations are favoring growth of Pakistan and Bank Alfalah is fully availing this
opportunity to expand his operations and grow to be one of the best banks in Pakistan.

Bank Alfalah has offered many services to its customers in Pakistan. These services
are for corporate clients and are participating in foreign trade of Pakistani especially with
textile sector. Bank has launched many products for individuals as well in a very shortest
span of time.

The bank since its incorporation is expanding that depicts from its financial
statements. Its assets are growing with its major investments in governmental securities such
as Pakistan Investment Bonds and more than half of its short-term investments in T-Bills
issued by SBP. The bank also deals with shares of many organizations. Its major consumer
side business is in car financing that offers attractive rates.

The bank is growing so its number of branches is also growing that results in
increasing fixed assets of the bank. The bank earned extraordinary gains from its non-interest
operations that were mainly because of its sale of PIBs in market. This action increased
bank’s net income and it was able to increase ties EPS up to Rs. 10.2, highest in its history.
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The bank has its assets growing so is assets turnover. Its debt ratio is increasing due
to increasing response from depositors. The bank has reduced its NPLs and is able to reduce
its risk on debts. Its earning assets ratio also increased just because of its growing trend
towards consumer and commercial financing of secure debt areas.

We can say that the bank has bright future to grow especially when it has now found
new horizons of rural areas and Agri-financing that will further improve its chances to grow.
The bank needs to follow its vision and invest in its HR and IT assets so that it can
effectively utilize these vital assets that play a very important role in bank’s growth.
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BIBLIOGRAPHY

• www.bankalfalah.com

• www.dawn.com

• www.jang.com.pk

• www.sbp.org.pk

• lib.washington.edu

• www.lib.uiowa.edu

• www.financeprofessor.com

• www.businessrecorder.com

• www.accountancy.com.pk

Personal Sources:

Area Manager,
Bank Alfalah Limited, The Mall, Rawalpini.