EXECUTIVE SUMMARY

This study has been undertaken to apply theoretical concepts in working environment
of Islamic Bank Alfalah (BAF). In this study, some of the major aspects of the bank
has been analysed and reported so that the readers could understand. This study
answers to some questions such as, how is the strategic, organizational, and financial
health of the Islamic bank Alfalah Timergara branch? What are the Weaknesses of the
bank and what are its Strengths? What are Threats to the bank? What are the
Opportunities of the bank?
The first perspective was to do an accurate and detailed ratio analysis of the bank for
the last five years i.e., 2017, 2018, 2019, 2020 and 2021. Ratio analysis used as a kind
of check through which an analyst measures different financial statements of the
bank. Ratio analysis provides an accurate financial health of the bank, which
transform ratios into actual readable information.
Second perspective was to do Strengths, Weaknesses, Opportunities and Threats
analysis (SWOT analysis) of the bank. SWOT analysis measures that what are other
non-financial conditions of the bank. It looks upon the managerial performance of the
bank. SWOT analysis shows that what are the factors which depends upon the
performance of the bank, how BAF can improve its performance?
And last perspective was to do Political, Economic, Socio-Cultural, and
Technological analysis of the BAF, (PEST analysis). PEST analysis focuses on the
major macro-economic factors of the state on the banking operations of the BAF.
How these macro-economic factors can affect the performance of the BAF.
Sources of Collecting Data
There are two major forms of data collection. Primary and secondary data.
Sources of Primary Data Collection
 Own observations inside the bank.
 Discussions with staff of the bank.
 Discussions with our university teachers.
 Discussions with university senior students.
Sources of Secondary Data Collection
 Annual reports of the Bank Alfalah
 Manual of the Islamic Bank Alfalah
 Previous internship reports

i
Management of BAF strictly follows the rules of our country Pakistan, suppose rules
of State Bank of Pakistan, as we know that every financial organization should follow
the law and regulations of Security and Exchange Commission or Central Bank of the
state. BAF organizational analysis have shown that there is a strong coordination
among every level of management and all activities of the Bank are performed under
the rules of State Bank of Pakistan.
As we know that Bank Alfalah is an Islamic banking system, so it operates under the
guidelines of Islamic Shariah and Jurisprudence. In this report thesis, it has been
analysed that the current economic and political environments of Pakistan have badly
affected the growth and profitability of the Bank, mainly when focus on the global
pandemic COVID-19, and the political destabilization in Pakistan.
This study has several significant contributions to readers. First, the study can help
internees and customers of the Islamic bank Alfalah to gain basic knowledge about
how the Islamic bank Alfalah operates. Second, financial statement analysis of the
bank provides accurate information to readers through which we could be able to
compare trend of the bank in different financial ratios. Third, financial analysis of this
bank can also provide useful information about how the Global Pandemic COVID-19
has affected performance of the bank. In last, this study has an updated and latest look
on the Islamic bank Alfalah Organizational operations and financial activities.

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 TABLE OF CONTENTS
EXECUTIVE SUMMARY ...................................................................................... i
Sources of Collecting Data ......................................................................................... i
Sources of Primary Data Collection ........................................................................... i
Sources of Secondary Data Collection ....................................................................... i
CHAPTER 01 INTRODUCTION .............................................................. 1
1.1 Background of the Study ..................................................................................... 1
1.2 Purpose of the Study............................................................................................ 1
1.3 Objectives of the Study ....................................................................................... 1
1.4 Scope of the Study ............................................................................................... 2
1.5 Methodology of the Study ................................................................................... 2
1.6 Limitations of the Study ...................................................................................... 2
CHAPTER 02 LITRATURE REVIEW ...................................................... 4
2.1 Definition of Bank ............................................................................................... 4
Major functions of the bank ...................................................................................... 5
2.2 WHAT IS ISLAMIC BANKING? ...................................................................... 5
2.3 INTRODUCTION TO ISLAMIC BANK ALFALAH ....................................... 6
2.3.1 Company Information of BAF ...................................................................... 7
2.3.2 Credit Rating ................................................................................................. 7
2.4 TYPES OF BANKS ............................................................................................ 8
2.4.1 Central Bank .................................................................................................. 8
2.4.2 Commercial Bank .......................................................................................... 8
2.4.3 Public Commercial Banks ............................................................................. 9
2.4.4 Private Commercial Bank ............................................................................. 9
2.4.5 Industrial Banks ............................................................................................. 9
2.4.6 Agricultural Banks ........................................................................................ 9
2.4.7 Development Banks ...................................................................................... 9
2.4.8 Savings Banks ............................................................................................... 9
2.4.9 Foreign Banks.............................................................................................. 10
2.4.10 Exchange Banks ........................................................................................ 10
2.5 VISION STATEMENT OF BANK ALFALAH............................................... 10
2.6 MISSION STATEMENT OF BANK ALFALAH ............................................ 10
2.7 VALUES ........................................................................................................... 10
2.8 AIMS OF ISLAMIC BANK ALFALAH ......................................................... 11

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2.9 BANK ALFALAH MOODS OF FINANCE .................................................... 11
2.9.1 Alfalah Murabaha Finance .......................................................................... 12
2.9.2 Alfalah Ijarah ............................................................................................... 12
2.9.3 Alfalah Musharaka ...................................................................................... 12
2.9.3.1 Features of Alfalah Home Musharaka...................................................... 12
2.9.4 Eligibility Criteria........................................................................................ 13
2.9.5 Required Documents ................................................................................... 13
2.9.4 Alfalah Car Ijarah ........................................................................................ 13
2.10 ORGANIZATIONAL SHAPE..................................................................... 13
2.10.1 Organization structure of Islamic financial institution Alfalah ................. 14
2.10.2 Automated Teller (ATM) .......................................................................... 14
2.10.3 Operations department .............................................................................. 14
2.10.3.1 Clearing .................................................................................................. 15
2.10.3.2 Inward clearing ....................................................................................... 15
2.10.3.3 Outward clearing .................................................................................... 15
2.10.3.4 Online clearing ....................................................................................... 16
2.10.3.5 Outward payments for clearing (OBC) .................................................. 16
2.10.3.6 Transfers ................................................................................................. 17
2.10.3.7 Inner transfer .......................................................................................... 17
2.10.3.8 Online switch .......................................................................................... 17
2.10.3.9 Remittances ............................................................................................ 18
2.10.3.10 Pay order............................................................................................... 18
2.10.3.11 Call for Drafts ....................................................................................... 18
2.10.3.12 Outward dd's ......................................................................................... 18
2.10.3.13 Inward dd's ........................................................................................... 18
2.10.3.14 Foreign remittances .............................................................................. 19
2.10.3.15 Cash transfers ....................................................................................... 19
CHAPTER 03 MY EXPERIENCES ....................................................... 20
3.1 WEEK FIRST.................................................................................................... 20
3.2 WEEK SECOND .............................................................................................. 21
3.2.1 Account opening.......................................................................................... 21
3.2.2 Remittances ................................................................................................. 22
3.3 WEEK THIRD .................................................................................................. 22
3.3.1 What is a Cheque? ....................................................................................... 22

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 3.3.2 Requirement for a Cheque ........................................................................... 23
3.3.3 Forms of Cheques ........................................................................................ 23
3.3.4 Clearing of cheques ..................................................................................... 23
3.3.5 Distribution of Cheques............................................................................... 23
3.4 WEEK FOURTH .............................................................................................. 23
3.5 WEEK FIFTH ................................................................................................... 25
3.6 WEEK SIXTH ................................................................................................... 26
3.7 WEEK SEVENTH ............................................................................................ 28
3.7.1 Demand Draft .............................................................................................. 28
3.7.2 Pay Order ..................................................................................................... 28
3.8 WEEK EIGHT .................................................................................................. 29
CHAPTER 04 FINANCIAL STATEMENT ANALYSIS ......................... 30
4.1 FINANCIAL ANALYSIS ................................................................................. 30
4.1.1 Balance Sheet .............................................................................................. 30
4.1.3 Consolidated Balance Sheet ........................................................................ 31
4.1.4 Vertical Analysis of Consolidated Balance Sheet ....................................... 33
4.1.5 Horizontal Analysis of Consolidated Balance Sheet ................................... 34
4.1.2 Income Statement ........................................................................................ 36
4.1.3 Vertical Analysis of Income Statement ....................................................... 37
4.1.4 Horizontal Analysis of Income Statement ................................................... 38
4.2 RATIO ANALYSIS .......................................................................................... 39
4.3 LIQUIDITY RATIOS ....................................................................................... 40
4.3.2 Current ratio ................................................................................................ 40
4.3.3 Quick ratio ................................................................................................... 41
4.3.4 Cash Ratio ................................................................................................... 43
4.4 LEVERAGE RATIOS ...................................................................................... 45
4.4.1 Debt to Equity Ratio .................................................................................... 46
4.4.2 Debt to Total Assets .................................................................................... 47
4.4.3 Debt to Tangible Net Worth ........................................................................ 49
4.5 PROFITABILITY RATIOS .............................................................................. 51
4.5.1 Net profit margin ......................................................................................... 51
4.5.2 Return on Assets .......................................................................................... 53
4.5.3 DuPont analysis for return on assets ........................................................... 54
Computation of DuPont Analysis for Return on Assets....................................... 54

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 4.5.4 Return on Equity ......................................................................................... 56
Computation of DuPont Analysis for Return on Equity ...................................... 58
4.5.5 Total Asset Turn Over ................................................................................. 60
4.5.6 Deposits growth Ratio ................................................................................. 62
4.5.8 Equity Multiplier ......................................................................................... 63
4.5.9 Earnings Per Share (EPS) ............................................................................ 65
4.5.10 Spread Ratio .............................................................................................. 66
4.6 STRATEGIC ANALYSIS ................................................................................ 69
4.6.1 SWOT Analysis ........................................................................................... 69
4.6.1.1 Strengths ................................................................................................... 69
4.6.1.2 Weaknesses .............................................................................................. 72
4.6.1.3 Opportunities ............................................................................................ 73
4.6.1.4 Threats ...................................................................................................... 74
4.7 PEST Analysis ................................................................................................... 74
4.7.1 Political ........................................................................................................ 75
4.7.2 Economic ..................................................................................................... 75
4.7.3 Sociocultural ................................................................................................ 76
4.7.4 Technological .............................................................................................. 77
CHAPTER 05 RECOMMENDATIONS AND CONCLUSION .................. 78
5.1 Conclusion ......................................................................................................... 78
5.2 Recommendations ............................................................................................. 78
5.2.1 Better training program ............................................................................... 79
5.2.2 Customer services........................................................................................ 79
5.2.3 Computerized banking system .................................................................... 79
5.2.4 Communication ........................................................................................... 80
5.2.5 Job analysis.................................................................................................. 80
5.2.6 Electronic data processing audit .................................................................. 80
5.2.7 Working conditions ..................................................................................... 80
5.2.8 Promotion .................................................................................................... 81
5.2.9 Market visits ................................................................................................ 81
5.2.10 Activities assignments ............................................................................... 81
5.2.11 Employee motivation ................................................................................ 81
5.2.12 Employees training and development ....................................................... 82
5.3 References ...................................................................................................... 83

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 LIST OF FIGURES

Figure 2.1 Functions of a Commercial Bank ................................................. 5

Figure 2.2 Organization Flow Chart ........................................................... 7

Figure 4.1 Current Ratio .......................................................................41

Figure 4.2 Quick Ratio .........................................................................43

Figure 4.3 Cash Ratio ...........................................................................44

Figure 4.4 Trend in Liquidity Ratios .........................................................45

Figure 4.5 Debt to Equity Ratio ...............................................................47

Figure 4.6 Debt to Total Asset ................................................................49

Figure 4.7 Debt to Tangible Worth ...........................................................50

Figure 4.8 Trend in Leverage Ratio ..........................................................51

Figure 4.9 Net Profit Margin ..................................................................53

Figure 4.10 Return on Assets ..................................................................54

Figure 4.11 DuPont analysis for return on assets ...........................................56

Figure 4.12 Return on Equity ..................................................................58

Figure 4.13 DuPont analysis for Return on Equity .........................................60

Figure 4.13 Total Assets Turn Over ..........................................................62

Figure 4.14 Deposits Growth Ratio...........................................................63

Figure 4.15 Equity Multiplier .................................................................64

Figure 4.16 Earning Per Share ................................................................66

Figure 4.17 Spread Ratio .......................................................................68

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 LIST OF TABLES
Table 2.1 Bank Alfalah Moods of Finance ..................................................12

Table 4.1 Consolidated Balance Sheet (Rs in millions) ...................................32

Table 4.2 Vertical Analysis of Consolidated Balance Sheet ..............................34

Table 4.3 Horizontal Analysis of Consolidated Balance Sheet ...........................35

Table 4.4 Income Statement (Rs in millions) ...............................................36

Table 4.5 Vertical Analysis of Income Statement (Rs in millions) ......................37

Table 4.6 Horizontal Analysis of Income Statement (Rs in millions) ...................38

Table 4.7 Summary of Ratio Analysis .......................................................39

Table 4.8 Current Ratio ........................................................................40

Table 4.9 Quick Ratio ..........................................................................42

Table 4.10 Cash ratio ...........................................................................43

Table 4.11 Debt-to-Equity Ratio ..............................................................46

Table 4.12 Debt to Total Assets ...............................................................48

Table 4.13 Debt to Tangible Net Worth .....................................................50

Table 4.14 Net Profit Margin ..................................................................52

Table 4.15 Return on Assets ...................................................................53

Table 4.16 DuPont Return on Assets .........................................................55

Table 4.17 Return on Equity ...................................................................57

Table 4.18 DuPont Return on Equity .........................................................59

Table 4.19 Total Assets Turnover ............................................................61

Table 4.20 Deposits to Growth Ratio ........................................................63

Table 4.21 Equity Multiplier ..................................................................64

Table 4.22 Earnings Per Share (EPS) ........................................................65

Table 4.22 Spread Ratio ........................................................................67

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 LIST Of ABBREVIATIONS
BAF Bank Alfalah
BM Branch Manager
BoD Board of Directors
CEO Chief Executive Officer
CL Credit Lines
CSO Cash Services Officer
CSO Customer Services Officer
DD Demand Draft
EFT Electronic Funds Transfer
HBL Habib Bank Limited
Kd Cost of Debt
LoC Letter of Credit
MCB Muslim Commercial Bank
MTN Medium Term Note
NBP National Bank of Pakistan
NIFT National Institutional Facilitation Technologies
OM Operations Manager
PEST Political, Economic, Sociocultural and Technological
PSE Pakistan Stock Exchange
PSO Payment System Operator
RRR Required rate of return
SECP Securities and Exchange Commission Pakistan
SWOT Strengths, Weaknesses, Opportunities and Threats
TFC Term Finance Certificate
TSO Teller Services Officer
TT Telegraph Transfer
UBL United Bank Limited

ix
CHAPTER 01 INTRODUCTION
1.1 Background of the Study
In the current mass competitive environment in the domestic market, practical skills
are the real empowerment of any candidate or employee because every organization
will tend to give preference to those candidates who are skilful. Throughout the globe
candidates of practical skills, soft skills and managerial skills are to be preferred
against the new unskilled candidates in the market. Working environment must be
required to utilize potential skills and exercise techniques and to learn that, how to
solve problems? Skilful labour or candidates increase per capita income of the due to
work force efficiency and less cost of training and development (Marcelo Mello).
In theoretical background we learn different terminologies, definitions, theories,
concepts, and know some skills about banking sectors operations and activities, but all
are in a hypothetical environment without any practical experiences in any work
environment or organization. So, for the purpose to enlarge our practical skills and
knowing of knowledge in a practical sense, we ought to entertain our core knowledge
inside a financial organization, like BAF. Therefore, we are reporting this thesis
documents on the behalf of BAF internship report.
1.2 Purpose of the Study
There are certain purposes of this report thesis, on the base of which this study has
been conducted. First, reporting of this study possesses a motive that is to demonstrate
that how is the actual ground of the Islamic bank Alfalah (BAF), like a practical
workplace environment as compared to theoretical window. Certain aspects of the
bank have been mined for the purpose to make a report from valid information of the
bank’s operations. Second, this study was conducted to analyze some major aspects of
the bank to understand that how actually a bank works, what are the operational
activities of the BAF. Third, to analyse financial health of the BAF means that to
analyse overall financial position of the BAF. To measure that how was the financial
health of the bank in all previous five years. Financial analysis tells us that how micro
and macro-economic variables have changed the financial position of the bank mainly
the overall banking system of Pakistan. How has the global pandemic COVID-19
affected overall strategic and financial position of the BAF?
1.3 Objectives of the Study

1
There are some useful objectives behind this study. First, to identify and analyse the
financial health and operations of Islamic Ban Alfalah (BAF). Secondly to examine
the internal and external environments through as Strengths, Weaknesses,
Opportunities and Threats (SWOT) and to do analysis of Political, Economic,
Sociological and Technological PEST as approaches of analysis to analyse the BAF’s
external position. Third to integrate the theories and concepts which were learnt in
hypothetical space during our studies with the practical works which we practiced in
the branch of BAF Timergara. In last, to become familiar with the real organizational
behaviour that how to be entertained inside in an organization.
One of the predominant objectives of an internship is to reveal you to a selected
process and profession. There are a few benefits at the back of this report. First, to
measure operations of the bank. Second, to analyse financial health of the bank while
using certain techniques and methods. Third, to observe corporate form of the bank
like to study the SWOT and PEST structures. monetary fitness of Islamic bank
Alfalah. Secondly to do SWOT and PEST analysis of Islamic bank Alfalah to study
the internal and external surroundings.
1.4 Scope of the Study
Scope of the study is limited to analyse functional analysis, to study history and
products of BAF. To study operational and organizational background of BAF.
1.5 Methodology of the Study
Sources of Primary Data Collection
 Own observations inside the bank.
 Discussions with staff of the bank.
 Discussions with our university teachers.
 Discussions with university senior students.
Sources of Secondary Data Collection
 Annual reports of the Bank Alfalah
 Manual of the Islamic Bank Alfalah
 Previous internship reports
 Various books of the campus library
 Financial journals
 Books of university library
1.6 Limitations of the Study
2
This report has a very conservative analysis on the Islamic Bank Alfalah. There are
certain reasons due to which the report has been produced in narrow form.
 Less accessibility of information
All the information of the Islamic Bank Alfalah was not accessible due to
strict regulations of the management of the Islamic Bank Alfalah.
 Busyness of the firm
Bank Alfalah Timergara branch is very busy in its regular operations, due
which we cannot collect all the relevant information in just one go.
 Limited Time
Time was the most important limitations regarding collection of the data for
this study because, an internee would not be able to analyze any bank just in
two months, equivalently in eight weeks. Due to limited time the scope of the
study is further shrunken.

3
CHAPTER 02 LITRATURE REVIEW
2.1 Definition of Bank
Asrar H. Siddiqi has stated three different approaches in definition of the bank as a
financial institution in his book, “Banking Law and Practices in Pakistan”. Latin
approach, German approach, and Jewish approach. According to different nations,
times, and cultures these three approaches demonstrate among the three different
definitions.
Latin Approach: In Latin the word bank is nominated as “Banque” which means that
a “Bench”. It is popular in Latin culture the word Banque was used when people were
discussing their domestic financial or economic problems with each other while
setting on a bench. In old, there was barter system, in which people were compelled to
buy and sell products and exchange goods for goods. There were certain problems in
this type of exchange system such exchange behaviour and lack of transferability of
commodities and lack of sub-division of goods. To solve these problems, there was a
need of financial intermediary or an institution (Bank) to align the required rate of
exchange among both customers of different products.
German Approach: In German, the word bank is derived from the word “Banc”
which means a Joint Stock of funds. These stocks were needed because to mobilize
them among two sectors of the society such as income surplus sector and income
deficit sector. Income surplus sectors are those sectors which have income more than
their expenditures. Income surplus sectors tend to invest in today market for the
purpose to balance expenditures in future inflation. Similarly, income deficit sectors
are those entities who need funds in demand for specific period with the minimum
amount of required rate of return (RRR), which is the cost of debt for the deficit
sector (Kd).
*Joint Stock: joint stock means junk or collection of funds, collected by a single
entity, suppose a bank, and then to distribute these funds among income demanded or
deficit sectors of the state, for the purpose to run their regular operations or
businesses. Financial intermediary (Banks) advances these funds in form of assets
securitization such Stocks (collection of shares), Bonds (Short-term and Long-term)
and Debentures (Non-collateralized bonds) as tailor made substance among both
sectors of the state or society.

4
*Barter System: the traditional form of business in which people were lived on to
exchange goods for goods, simply to survive on “Give and Take” in their businesses,
this system was known as barter system.
J. FABBOZI says that “Bank is a financial institution which acts to accept funds
from income surplus sectors and to advance those deposited funds to income deficit
sectors on a specific exchange rate, also called spread of the bank” (The basics of
finance).

Income Surplus Sectors. Financial

Income Deficit Sectors.
Intermediary.
(Savers/ Investors) (Commercial Bank) Household

Figure 2.1 Functions of a Commercial Bank

Major functions of the bank
 Accepting Deposits
 Advancing Loans
 Facilitating Currency Exchanges
 Safe Locker Facility
 Investment Advice
Banks are the most important parts of a country’s economy. When banks are
performing appropriately and promoting loan schemes so the overall economy of the
state will move in a very positive manner.
2.2 WHAT IS ISLAMIC BANKING?
Islamic banking means that, a banking system which runs its financial operations
without Reba (interest-based financing), the system is which truly based on Islamic
Shariah (Badawy & Manuela, 2005). It is based interest-free financial operations or
activities in an economic society (Badawy & Manuela, 2005). Islamic banking is not
only avoided interest-based financial transactions but also prohibited unethical
practices of loan creation and does not participate in those activates which do not
come under Islamic Shariah, proposed by (Chong, et al, 2006). Islamic banking
achieves its goals and objectives under the compliance of Islamic economy, stated by
(Dar, et al., 2000). Islamic banking system, which is unlike to commercial or
conventional banking system, was the basic creation of Pakistan. When Pakistan came

5
into being the founder of the Islamic Republic of Pakistan Quaid -e- Azam was keen
interested in Islamic banking, the motive was to remove the interest-based financial
system from the country. Since from the creation of Pakistan, the people of Pakistan
have also demand to eliminate Reba (interest-based financing) from the financial
system of Pakistan, from that time the elimination of Reba (interest-based financing)
is the important objective of the state policy, in order to enable the Muslim to live in
the individual and collective spheres in accordance with teaching and requirement of
Islam and live under the Shariah of Islam, the Holy Quran and Sunnah (Lodhi, et al.,
2005).
Islamic banking was not too famous at first in Pakistan, it emerges after 1970, main
efforts started in 1980, when Pakistan allow a private company to do their investments
in Pakistan. Since from twenty century Islamic banking may be able to reach to
growth ratio of 11-15% according to different researchers and economist point of
view (AAOIFI, 2010). In 2008 the continued progress of Islamic banking they
increase their share of an asset in the overall baking system by 4.9%, and their
financing deposits and investment move up to at 4.4% respectively (Abdouli, et al,
1991).
Most of the commercial banks in Pakistan, offering services based on Islamic banking
system, division across the country to offer a wide range of Shariah-compliant
product and services base on certain mood of Islamic financial system, such as
Murabah, Musharaka, Modaraba, Ijarah, Slam, and Istisna. Islamic banking provides
product and services to fulfil customers’ demands, based on Shariah (Chapra & Umar,
2009).
2.3 INTRODUCTION TO ISLAMIC BANK ALFALAH
The Islamic bank Alfalah was incorporated on June 21st, 1997, as a public limited
company under the Companies Ordinance 1984. Islamic Bank Alfalah was installed in
Pakistan in 2003, (Bank Alfalah limited). Bank Alfalah offers products and services to
its customers based on Islamic Shariah, for the purpose to fulfil its consumers’ needs
(BAF, 2021). Muslim countries follow Islamic rules (Shariah) due to which their
people avoid conventional banking system, because conventional banking systems are
based on interest-based financing, to safe their investments from restricted and
prohibited ways, as supposed by (Alam & Mohammed, 2003). The basic objective of
Islamic banking system is to offer merchandise to its consumer that's primarily based

6
on Shariah to introduce Islamic economic solution. Bank Alfalah usually aware of the
consumer to satisfy the desires of its customers in an Islamic way (BAF, 2021). Bank
Alfalah stands at the second position within the country with their working income
above RS1.6 billion. Islamic bank Alfalah achieves extra fulfilment in a very short
time with a mass of 730 branches throughout the globe (BAF, 2021).
Islamic Bank Alfalah, has operating services in many Muslim countries, including
United Arab Emirates, Pakistan, Bangladesh, Bahrain, and Afghanistan.
2.3.1 Company Information of BAF
Board of Directors HH Sheikh Nahyan
Mabarak Al Nahayan
Chairman/Director

Abdulla Nasser Hawaileel Al Abdulla Khalil Al Mutawa

Mansoori Director
Director

Khalid Mana Saeed Al Otaiba Khalid Quraishi

Director Director

Dr. Gyorgy Tamas Ladics Dr. Ayesha Khan

Director Director

Atif Aslam Bajwa

President CEO/Director

Figure 2.2 Organization Flow Chart

2.3.2 Credit Rating
The Bank has been assigned an entity rating of ‘AA+’ (Double A Plus) for the long-
term and ‘A1+’ (A-One Plus) for the short-term by PACRA, with outlook assigned as
‘Stable’. Furthermore, the unsecured Tier 1 Capital (Term Finance Certificate) of the
Bank has been awarded a credit rating of ‘AA- ‘(Double A Minus), with ‘Stable’
Outlook by VIS Credit Rating Company Limited (VIS). PACRA has assigned AAA
(Triple-A) rating to the Bank’s Medium-Term Note (MTN), which is a Rated,

7
Secured, Listed, Redeemable Fixed Rate Term Finance Certificate (TFCs). The
assigned ratings reflect the Bank’s diversified operations, healthy financial risk
profile, strong sponsors, and existing market presence. These ratings denote a very
low expectation of credit risk, a strong capacity for timely repayment of financial
commitments in the long-term, and the highest capacity for timely repayment in the
short-term, respectively, (BAF, 2021).
2.4 TYPES OF BANKS
Basically, banks accept deposits from the public in various ways to advance such
money to the needed sectors in the form of debt instruments to them in their
businesses or in the form of equity (Stocks and Shares) for the purpose of earning the
money. Due to the different types of resources, lending and investment different kinds
of banks have been formed (Siddiqi, 1983).
2.4.1 Central Bank
The central financial institution, acts as a financial regulatory body, additionally
called reserve bank or financial authority, which manage over the production and
distribution of cash and credit for the country or institutions of the country. Central
regulates as an authoritative body to regulate all financial activities, operations, and
economic policies for the smooth progress of the economy of the state.
In modern economics, central bank is simply responsible for the formation of rules
regarding macro-economic policies such as monetary policy, fiscal policy, budget
policy and the law of members of the bank. It acts basically as a government's bank.
The primary functions financial institution continues the deposit account of all
different banks which carry out the pastime within the country superior their money to
other banks while needed.
Central bank faces problems in certain situations. The significant role of Central bank
is to provide guidance to the one bank and protect banks from financial crisis or
panics. Therefore, it is also called a banker's bank (Andersen & Bollerslev, 1997).
A central bank develops rules and regulations for commercial and other non-
commercial banks and streamlines its activities in a country. It keeps accounts of all
types of banks and provides cash service to them when they have not enough cash. It is
called by different names in different countries. In Pakistan it is called State Bank of
Pakistan (SBP) (Siddiqi, 1983).
2.4.2 Commercial Bank

8
Commercial banks are those financial institutions, who collects deposits from the
surplus sector of the society and advanced these deposits to income deficit sector of
the state on a specific exchange or spread rate (interest rate) depending upon the terms
and conditions of deposition. These banks also fulfil the financial needs of the
business entities. These banks have been classified as public commercial banks and
private commercial banks.
2.4.3 Public Commercial Banks
Public commercial bank is a banking system under which majority of shares or stocks
belong to Government of that the state of the bank. Examples may include Khyber
bank and National Bank of Pakistan.
2.4.4 Private Commercial Bank
In private commercial bank most of the shares belong to private individuals.
Examples include Habib Bank Limited and Allied Bank Limited (Siddiqi, 1983).
2.4.5 Industrial Banks
Industrial banks fulfil the financial need of industries inside the state where the bank
is present, providing loans in both short-term and log-term to industrial sectors of the
state. The industries require funds for expansion, modernization. Examples of
industrial banks are, Industrial Bank of Pakistan, Pakistan Industrial Finance
Corporation, Industrial Investment and Finance Corporation (Siddiqi, 1983).
2.4.6 Agricultural Banks
Agricultural banks provide funds in both medium-term and long-term to farmers to
enable them to serve their agriculture needs, such as purchasing tractors, seeds,
fertilizers, pesticides, and other agricultural products. Examples include Zaria
Taramite Bank (Siddiqi, 1983).
2.4.7 Development Banks
Development banks provide funds to those firms, who needs to fulfil their needs and
dreams of expansion businesses in development sectors in economies of different
countries, such as Asian Development Bank. Modern development banks are the
creation of Brazil, Russia. India, China and South Africa (BRICS) block who aim to
provide loans to less develop countries. The subscription of shares and debenture are
also carried out by this bank. Examples include Pakistan Kuwait Investment Company
Limited and Pak China Investment Company (Siddiqi, 1983).
2.4.8 Savings Banks
9
Saving banks have been established to aware people towards saving the excess
money. The money deposited in the accounts of such banks is only repayable upon
completing the maturity period. Saving banks had been frequently designed to inspire
low-earnings people to save small amount of money and have get award to banks to
create further earnings and profits. The authentic feature of savings banks to service
consumers was restricted to money savings. Savings banks invest funds in
government and corporate debt. (Buchs, 1999). Examples include Post Office Saving
Bank and National Saving Organization (Siddiqi, 1983).
2.4.9 Foreign Banks
A foreign bank is a type of bank that is obligated to follow the regulations of both the
home country and those countries where it operates, because the foreign bank branch
has loan limits based on the total bank capital, they can provide more loans than
subsidiary banks. That is because the foreign bank, while possibly small in one
market, is technically part of a larger bank. Hence, it enjoys the capital base of the
larger entity (Abarbanell & Meyendorff, 1997).
2.4.10 Exchange Banks
Exchange bank also known as Foreign Exchange (forex or FX) is the financial
institution, which is trading one currency for another. For example, one can swap the
U.S. dollar for the euro. Foreign exchange transactions can take place on the foreign
exchange market, also known as the Forex Market. The forex market is the largest,
most liquid market in the world, with the massive exchange of trillions of dollars
every day. There is no centralized location, rather the forex market is an electronic
network of banks. Arbitragers, brokers, OTC, and other small institutional exchangers
are the trading figures in exchange banking system. (Mostly trading through brokers
or banks) (Bradford, 2012).
2.5 VISION STATEMENT OF BANK ALFALAH
“To inspire and empower people to do things differently and shape their own path in
life and business”.
2.6 MISSION STATEMENT OF BANK ALFALAH
“We look at the market with fresh eyes to find new opportunities, and seek new ways
of enabling our customers to succeed and advance the world of finance”
2.7 VALUES
YOU – CUSTOMER CARE

10
Bank Alfalah always put the customer and their needs at a front and centre.
YOUR NEEDS – COLLABORATION
Bank Alfalah do all what its management can to understand and anticipate what will
help its customers find their own way and achieve their ambitions.
YOUR WAY – CREATIVITY AND INNOVATION
Bank Alfalah do things differently, challenging the status quo to find new and better
ways to move ourselves and our customers forward.
THE RIGHT WAY – CONDUCT AND INTEGRITY
Bank Alfalah always act with integrity and transparency in everything it offers to do.
It is the cornerstone of the bank Alfalah’s business and brand.
Corporate values are one of the most important aims for an organization to keep it
strong against the rest of the organizations. Islamic Bank Alfalah has excellency in
customer service, creativity, integrity, respect, teamwork, and professionalism, which
play an integral, vital role in the fulfilment of the bank's mission. Clearly, these values
are not new at any organization. Every bank gives high priorities to customer care,
corporate values, and professionalism. Islamic Bank Alfalah continuously recognizing
the importance of corporate values, the individual contributions from all employees
have made bank what it is today. In addition to the corporate values, bank urges to
provide all those having an interest in the bank with several criteria by which they can
access the bank, (BAL, 2021).
2.8 AIMS OF ISLAMIC BANK ALFALAH
The basic aim of Islamic Bank Alfalah is to maximize the wealth of shareholders and
to build economical values normal dating for the highlight on their financial services
and to support its customers take part in each region. They may be private or public
zone. Islamic bank Alfalah is trying to make a valid portfolio surroundings for its
clients in whom they can effortlessly invest in a present and new mission for
maximum returns in the future, (BAL, 2021).

2.9 BANK ALFALAH MOODS OF FINANCE

Bank Alfalah has certain products offer to its customers in a more efficient way. Such
as.

11
Table 2.1 Bank Alfalah Moods of Finance
1. Alfalah Murabaha finance

2. Ijarah finance
3. Alfalah Mushraka home

4. Alfalah car ijarah

2.9.1 Alfalah Murabaha Finance

Bank Alfalah provides product to local import and export on basis of Murabaha to
facilitate small and medium sized enterprises, some other commercial and corporate
entities. Islamic bank Alfalah offers it on basic price which is KIBOR (Karachi
interbank offer rate) for every deal. It remains fixed throughout the deal, individual
portion to import and export with name Alfalah Murabaha finance (Import), Alfalah
Murabaha Finance (EXPORT) (BAL, 2020).
2.9.2 Alfalah Ijarah
Sometimes customers may have a long plan for future investment under specific
purposes such as to mitigate future risk regarding inflation, investment for the purpose
to enlarge future consumptions etc. Bank Alfalah offers Ijrah is a prime mood of
finance to facilitate small and medium enterprises, commercial and corporate entities
for the long and medium-term fixed asset financing, such as financing a project, plant,
and machinery, equipment's, vehicles purchase, etc. Ijrah means a (lease) it’s like an
agreement or a contract whereby one party agrees to transfer their assets to another
party, for specific time which they agree to deal with each other. (BAL, 2021).
2.9.3 Alfalah Musharaka
Musharaka home is another mood of finance of bank Alfalah, in which the bank
offers solutions for those customers who have financing problems, specifically
regarding home financing. Islamic Bank Alfalah provides the facility to their
customer for house financing which ensures the principle of shariah the base on
diminishing Musharaka which is without any sort of Reba (interest-free financing)
(BAL, 2021).
2.9.3.1 Features of Alfalah Home Musharaka
Home Musharaka house financing may have the period in between 3-20 years or
more, in which customers refund the total amount to the bank. The required financing
for an employed person is from 50 to 75%, and for an individual is maximum from 50

12
to 75%. Bank Alfalah offers a competitive price with the rest of the banks they cannot
charge the hidden charges from their customer (BAL, 2021).
2.9.4 Eligibility Criteria
A client must be a Pakistani nationalist. The age limit for a job holder is between 23
to 60 years, and for a jobless is up to 70. Their income must be meeting with the
required amount. (BAL, 2021).
2.9.5 Required Documents
Customer must have two CNIC photocopies with the property documents of the
owner. If a customer is an employee, then the last 12 months' salary slips are required,
and for a non-salaried person their other income proof is required (BAL, 2021).
2.9.4 Alfalah Car Ijarah
Alfalah car Ijarah is one of the most popular products of Islamic Bank Alfalah, based
on Islamic Shariah. Alfalah Auto finance offers an elastic financing option for those
who want their own car. It gives the facilities to the customer to calculate payment
method based on their total net income. Alfalah car ijarah is completely interest free.
The benefit of auto financing is that the bank offers the so many options to their
clients, to select a suitable option which, they can easily cover within in their income.
Bank provides a range for returning of lone 5 to 7 years (BAL, 2021).
2.10 ORGANIZATIONAL SHAPE
Enterprises both small and medium-sized and joint-stock corporations need to use
appropriate organizational shape. An organization can define each hierarchy inside
the specification of the employment. A well-organized structure allows a corporation
to discover every employee's process that is match inside an average device.
Organizing is one of the most critical functions of control (Cooper, 1986). It plays a
key function inside the organization, for the purpose to perform and to achieve goals
of an organization. For each growing enterprise organizational shape is critical as it
gives steering and clarity to an enterprise approximately a selected human useful
resource problem, like managerial authority. Any financial institution needs to comply
with the complex organizational structures because of it offers economic services and
products to their clients. Organizational shape gives the ability to a bank to provide a
ramification of financial offerings (Blau, 1974).

13
2.10.1 Organization structure of Islamic financial institution Alfalah
The top-level management of Islamic bank Alfalah make proper financial decisions
for prosperity of the institution by collectively directing the organization's affairs, in
contrary with assembling the perfect hobby of its shareholder and relevant
stakeholder. At the same time as the Chairman of Islamic Bank Alfalah has a vital
role which enhance the bank’s image in the market. The Chairperson's important
responsibilities consist of chairing conferences of the Board of Directors (BOD),
placing assembly agendas at the side of the employer Secretary, coping with, and
offering management to the Board of directors, and appearing as an immediate agent
of communication between the Board of Directors and the organization’s
management, via the Chief Executive Officer (CEO). Operational branches of the
organization are all under the responsibility of the chief executive officer who
manages their branch. The supervision of the chief executive officer has a supervisory
work responsibility which manages day by day operations of different departments to
satisfy business desires. Supervise and guide a group of experts to maximize revenue
and to expand safe and wonderful constructive environment for the staff of
organization. They are responsible for all of the functions of that branch office,
including hiring employees, overseeing the approval of loans and loans creation lines
of credit (LOC), marketing, building a rapport with the community to attract business,
assisting with customer relations, and ensuring that the branch meets its goals and
objectives in a timely manner (Cooper, 1986).
2.10.2 Automated Teller (ATM)
Islamic Bank Alfalah helps its clients from provision of self-banking services with the
assist of computerized Teller Machine. Islamic bank Alfalah restoration superior
Automated Teller Machine with every branch across the country. Automatic Teller
Machine offers a verity of facilities consisting of cash deposits, coins withdrawals,
fund transfers; stability inquires, and account statements. All ATMs of Islamic bank
Alfalah relate to a satellite tv for pc-based communique device to satisfy client
demands and available services for 24 hours (BAL, 2021).
2.10.3 Operations department
Every interest within the operation department isn't like each other, that why financial
institution offers a man or woman branch to everyone. but in a small branch, most of

14
these jobs are done with the aid of one department called the operation department
now and again it's also known as the transact department (Gouldner, 1959).
2.10.3.1 Clearing
Bank receives one-of-a-kind cheques from a distinct bank for clearing. The clearing
branch is responsible to clean a lot of these cheques that come during daytime at the
bank, which are the following (BAL, 2021).
2.10.3.2 Inward clearing
Whilst Islamic bank Alfalah account holder draw's cheque to a person who has no
longer Account in Islamic bank Alfalah acknowledged is Inward clearing. Inward
clearing is a facility provided by the BAF Timergara branch when the bank receives a
cheque singed by a drawee, drawn to a payee who has account in another bank and
BAF therefore provides this facility to its client is known is inward clearing. The
clearing of the cheque may skip through the subsequent.
(a) The operations department receives inward clearing cheques from National
Institutional Facilitation Technologies (NIFT Private Limited).
(b) The responsible officer of bank verifies all those units that are required for inward
clearing, if there had been some fault is located the officer will mark the cheque to
return returned with mentioning motive which might be on inward clearing cheques.
(c) If there had been no fault located on inward clearing cheque the officer will
publish cheques into the machine to debiting purchaser account.
(d) When some of these techniques are carried out after bank keep those inwards
clearing cheques in a clearing sign up and back it to NIFT (BAL, 2021).
* NIFT: National Institutional Facilitation Technologies is a clearing house, was
incorporated in September 1995 in Pakistan. NIFT is one of the largest clearing
houses in Pakistan. NIFT has been licensed by State Bank of Pakistan (SBP) as a
Payment System Operator (PSO) under the PSE/EFT act 2007. NIFT provides
electronic platform of clearing of transactions.
2.10.3.3 Outward clearing
That form of clearing in which the BAF Timergara branch receives a cheque from
BAF Timergara branch’s account holder and signed to be drawn to a payee who has
account in another bank which we called the outgoing cheque. The clearing of this
sort is known as outward clearing. There are certain requirements for outward
clearing.

15
(a) The operation department will acquire cheques from the patron for clearing.
(b) The cheque is credited from the consumer account whose have in prefer.

(c) When all the technique is executed, the officer affixed a stamp on it, sent to bank
though NIFT for clearing, when cheque go back on the next days., the financial
institution posted entries reversed and go back to a patron who’s presented and
recorded it on the cheque go back register (BAL, 2021).
2.10.3.4 Online clearing
Sometime Non-Islamic financial institution Alfalah client can draw a cheque in desire
of bank Alfalah customer, but it should be deposited in a passive financial institution
wherein have a customer account. For online clearing the manner is as follows
(a) For outward clearing, cheque is sent to NIFT.
(b) While there may be no fault is in the cheque the bank officer credited it via on-line
transfer software (BAL, 2021).
2.10.3.5 Outward payments for clearing (OBC)
On occasion cheque may be drawn from non-Islamic bank ALFAH which isn't inside
the metropolis, for clearing that cheque is treated as OBC. which can fallow seven
steps for clearing which are the following.
(a) The financial institution obtained a cheque from the purchaser.
(b) The OBC stamp set over on the cheque, offers its person number for the access in
the OBC sign in.
(c) The bank officers make entries for all those cheques, and write them an OBC
check in.
(d) After finishing the entries procedure, the bank officer gives facts to the gadget for
creating OBC latter to expose man or woman cheque range, branch to attract amount
from it.
(e) For clearing cheques, the financial institution officer sand original cheque and
connect those latter to the principal branch of Islamic financial institution Alfalah.
(f) At last sanding area branch clean the quantity from non-Islamic financial
institution Alfalah they send it again to inter department credit score recommendation
to that financial institution which has patron account to credit score the amount to
patron account (BAL, 2021).

16
2.10.3.6 Transfers
Islamic bank Alfalah provide switch facilities to its purchaser to transfer their cheque
with help of using software of T24. There may be two types of switches (BAL, 2021).
2.10.3.7 Inner transfer
When an Islamic bank Alfalah account holder draws a cheque to every other Islamic
financial institution Alfalah account holder, the manner is referred to as inner switch.
it may observe the subsequent steps.

(a) The bank officer gather cheque from client to pick out from branch code that
cheque branch code is matching to branch code or now not. If the code has been fits
similarity with department code, then it's far an inner switch.
(b) After identity, the officer post entries, credit score the patron account from whom
cheque is drawn in debit any other account of the patron with the assist of the usage of
bank software.
(c) The operation supervisor supervises the cheque and makes their access into the
device.
(d) After supervised the cheque the legitimate stamp will affix over on cheque and
maintain it with bank (BAL, 2021).
2.10.3.8 Online switch
When an Islamic bank Alfalah account holder attracts a cheque in favour of any other
account holder of Islamic bank Alfalah to transfer the amount to that client account is
known as a web transfer. The procedure may also comply with the following steps
that are the subsequent.
(a) Bank collects cheques from those consumers who want to deposit the quantity.
(b) The bank officer completes the verification in as manner which needs for on-line
switch.
(c) The operation supervisor submits entries in the account, whilst to debit one
account and credit score some other account with connected the cheque.
(d) The operation supervisor will supervise the cheque, when all the required manner
is finished, the respectable stamp will affix over on cheque.
(e) The financial institution officer continues the cheque within the financial
institution (BAL, 2021).

17
2.10.3.9 Remittances
Monetary establishments used two kinds of contraptions to transfer patron money
from one bank to some other financial institution, that's the following.
Pay order: while customers want to transfer their cash within the city, they used the
pay order instrument of the bank.
Call for Draft: when a person wants to send cash for the different motives out of the
town or the city, they use the call for Draft facility of bank (BAL, 2021).
2.10.3.10 Pay order
While someone wants to send their cash in a safe way to any other man or woman
inside the metropolis. They used the pay order facilities of the financial institution to
make their switch. the person that wants to pay the order pays earlier to the bank. For
pay order, the subsequent steps may be carried to transfer the cash (BAL, 2021). That
are the following manner for shifting money via pay order.
The customer fills the pay order utility at financial institution, deliver the required
statistics e.g., detail of account, and quantity. attach cheque with pay order slip, or pay
order particularly made through cash. The financial institution officer will check all
the required element get hold of cheque or cash from the client for a pay order. (BAL,
2021)
2.10.3.11 Call for Drafts
Any other important facility offers by the Islamic bank Alfalah (BAF) to its clients, to
transfer their funds outdoor the city with a safe way to fulfil their wants. In situations
clients can use call for drafts for shifting their cash (BAL, 2021).
2.10.3.12 Outward dd's
When a consumer comes to Islamic financial institution Alfalah wants to switch their
cash outdoor the city, additionally called outward DD. For completing the system
client will come to his department fill DD application write all the essential statistics
on it, connect cheque or coins as he desires with it. The Islamic bank Alfalah officer
will check the application if there has been no fault found at the utility the officer
makes demand draft for the client to transfer their cash to some other branch of
Islamic financial institution Alfalah (BAL, 2021) .
2.10.3.13 Inward dd's
Sometimes there may be a want to ship recommendation to every other department
for reputation of the transfer. In advice, and the bank to ship a replica of the device to

18
any other bank. whilst financial institution gets and accepts the advice the access
might also take area. the subsequent entries are done for Inward DD's.
Head office A/c and DD payable A/c for gating bills of DD'S the purchaser may
additionally pass from the entries.DD Payable A/c cash A/C.
If a customer has already an account in Islamic financial institution Alfalah then the
following are surpassed. DD Payable A/c consumer Account (BAL, 2021).
2.10.3.14 Foreign remittances
Most of the Pakistani human beings work in another country. Islamic bank Alfalah
presents every other sort of facility to its clients who in foreign to exchange in switch
their money to Islamic bank Alfalah account in Pakistan. The procedure can be
finished thru the help of Citi bank (BAL, 2021).
2.10.3.15 Cash transfers
There are two types of cash withdraw and deposit in Islamic Bank Alfalah, in which
the BAF Timergara branch facilitates its customer to withdraw certain amount of
money form their respective accounts. Cash transfer forms are following.
 Islamic bank Alfalah department account holder to deposit cash into their
account or with draw coins from their account. This is a general facility
provided to each account holder to deposit amount of money and withdraw on
demand or use of the client or customer.
 Similarly, due to loss of time the account holders can withdraw or deposit
money to their accounts through an online system, by use of mobile phone
application, to save their time and make their transaction as soon as possible
without involving in any physical activity at the bank branch (BAL, 2021).

19
CHAPTER 03 MY EXPERIENCES
Our experiences were about operational activities inside the work environment of the
BAF Timergara branch. In this branch there are three major departments such as
Human Resources Management (HR) department. In this department there was
hierarchal employment structure which was consist of Branch Manager of the bank
(BM) and Operations Manager of the branch (OM). Second, there was marketing
department which consist of Customer Services Officer (CSO) manages customers of
the branch, sales services of the bank, dealing with customers and offering them
products of the bank. Similarly, there is Teller Services Officer (TSO) who directly
communicates with customers of the bank and deal them with their required activities
in the bank.
In last, the financial department, in which all financial activities of the bank were
entertained such as accepting deposits, drawing of cheques, transacting bills of
exchanges and demand drafts. In this department Cash Services Officer (CSO) works
to do different financial or cash related activities in the bank such as receiving of cash
and making entries of the accounts of the clients.
3.1 WEEK FIRST
Experiences regarding my first week in the BAF Timergara branch were very
different because I was not aware that how actually a bank as, what are the operations
of the bank and so on. At first day, I recognised that why a bank is situated at the front
of the roadside. The reason I found that, banking sectors are providing quick services
at the door to their customers where locality of the bank is important. There should be
an ease for the customers to join the bank for different business-related services and
facilities.
BAF Timergara branch is situated at the right corner of Shaheed Chowk Timergara.
The location of BAF Timergara branch is very important it provides facilities to its
clients with an ease because customers can access the branch easily. Efficient and
quick facilities of the bank increases customer satisfaction. Customer satisfaction
switches customers loyalty and customers’ loyalty is the goal of the bank’s
management.
In the first week at BAF Timergara branch, I learned the functional activities of the
bank. I learned that who is responsible for internal operations of the bank. I become
aware of the operations activities of the BAF Timergara branch. I understood the

20
hierarchy and office placement inside the branch. BAF hierarchy consist of branch
manager, operation manager, and customer service officer. There are different
individual offices for these officers and managers, where they perform their duties
with their faith and honesty.
In the first week of work experiences, I learned timings of the BAF Timergara branch.
BAF has a regular work time schedule five days in a week. The BAF Timergara
branch opens at 9:00 am and closes every day at 5:00 pm. BAF management takes a
break for one hour from 1:00 pm to 2:00 pm, which is the break of prayer and launch
time. BAF Timergara branch takes care of the bank’s clients, therefore bank
management follow rules of opening and closing timing to facilitate customers.
3.2 WEEK SECOND
The operation manager of the BAF Timergara branch Mr: Hassan Khan, has
supervised me for this internship program for two months. I learned from him that
what are duties of the operation manager of BAF at Timergara branch. Generally,
there may be similar duties of the branch manager or the operations manager of the
bank inside the functional structure, but I have tried to specify this task to the BAF
Timergara branch to cover my internship programme and thesis. Some of the
operational responsibilities of the operations manager of the BAF Timergara branch
are as under:
3.2.1 Account opening
There are certain requirements through which an operation manager will create an
account on demand for the respective customers of the bank.
 CNIC
The certificate of nationality of the customers is required for the operation
manager to create to process the creation of the account creating for the client.
Banking sectors follow rules of the state therefore during crating of any sort of
account, a customer should ensure the nationality through Computerized
National Identity Card.
 Account Identification
Customer should ensure that what sort of account a customer is going to
create, whether current account, savings account, business account or an
individual account. Different sorts of accounts have different features and

21
 facilities for the customers. Therefore, they should ensure the account
specification.
 Minimum Deposits are required
As per the security rules of the BAF, an account holder must possess specific
minimum number of deposits in his / her account. Operation manager ensures
these requirements to the account holder to process the account further.
3.2.2 Remittances
Dealing with an account of remittances is also one of the major activities of the
operation manager. Remittances are accounts through foreign citizens of Pakistan
send their deposited amount to their home country. On the provisions of remittances
facility, a state collects certain minimum amount of tax.
Workplace learning: one day I asked the operation manager that, if without intention
I commit a mistake and create a problem in the bank, then what will the management
do to me? They will ask me for repair the problem. They will punish me. What the
management will do? The operation manager gave me a good reply that is “Mr:
Hamayoon everything will happen here with you, will be a part of your learning, you
must not be discouraged, the management ought to facilitate you as an internee”.
3.3 WEEK THIRD
The operation manager added my learning objectives by understanding with bank’s
clearing department i.e., clearing of Cheques of the BAF. In this department I learned
practically that how cheques should be cleared, what are forms of cheques etc.

3.3.1 What is a Cheque?

Dr. Asrar H. Siddiqi has written in his book of “Banking laws and practices in
Pakistan” that a “cheque is a bill of exchange which is drawn on a specified
banker and not expressed to be payable otherwise than on demand”. Cheque is
used a medium of exchange, a transfer tool of money through which an
account holder processes his / her transaction with another party on demand
such as payment of money. The person who signs a cheque to transfer amount
of money is known as “Drawer” who is the account holder in the bank to
transfer funds to another account. Drawer should write the amount of transfer
money in both words and digits and then proceed to the cashier for stamping
and cashing the required demanded amount to the “payee”, a person who
receives amount of money from a drawer, is known as payee.

22
3.3.2 Requirement for a Cheque
There are some necessary obligations for a cheque to be exercised in the bank. Some
of these requirements are as under.
 Name of the account holder (Drawer’s name)
 Name of the bank in which the drawer has an account (BAF
Timergara)
 Name of the person who receives money (Payee’s name)
 Signatures of Drawer (Account holder) and Drawee (Bank)
 Stamp of the cashier in the bank
3.3.3 Forms of Cheques
In Pakistan cheques have two different forms
 Open cheques
Those cheque which can be processed and payable at the counter of the
bank are known as open cheques. There are no security restrictions in
exercising of open cheques.
 Crossed cheques
Crossed cheques are restricted cheques which cannot be exercised or
paid on the counter of the bank. These cheques need proper
investigation to realize cheques for payment process.
3.3.4 Clearing of cheques
Clearing is lengthy process, as we have discussed earlier in chapter 2 of this
report. Clearing is the responsibility of the cashier who accepts amount of
deposits written in the cheque and cash them to tally the process of the cheque.
Cheques have different form on the base which their clearing process is
different.
3.3.5 Distribution of Cheques
Distribution of cheques means to place different forms of cheques from the
whole, collected in a single day or month. BAF collects different cheques such
as open cheques, crossed cheques, local and intercity cheques, and so on. This
is the responsibility of the cashier to process cheques and distribute them and
save them in a safe locker of the bank.
3.4 WEEK FOURTH

23
In week four of my internship program the operation manager taught me
responsibilities of the branch manager of the BAF Timergara branch. Branch manager
of the firm or the bank is considered head of the subsidiary of the firm like the Islamic
Bank Alfalah Timergara branch manager. Following are some of the major
responsibilities of the branch manager.
 Developing Loans
Branch of the bank has responsibilities on the liabilities side of the bank.
Branch manager must increase Advancing of loans with different regional
packages to create high revenues for the bank. Advancement of loans further
generate revenues in the form regular interest earning od the bank loan
schemes. This is an important responsibility of the branch manager to increase
loan advances.
 Distribution of ATM Cards
Cards of Automatic Teller Machine (ATM) distribution to the respective
candidates or clients of the bank is the duty of the branch manager of the bank.
The branch manager contacts those candidates and verify their cards and
distribute among them.
 Deposits Achievements
Branch has also another important responsibility to achieve high deposits.
Main branch of the BAF advance these deposits to other financial and
manufacturing organizations in form of assets securitization to generate
further profits in long-term.
Asset securitization: asset securitization is a financial activity which means to
provide loans to different sectors as a tailor maid process. In more simple
words assets securitization means to cut large amount of loan packages to
small advancing tools and to fix with requirements of depositors and investors.
Some organizations need loans for long-term and others may need in short-
term. Similarly, some organizations need funds in form equity, like in stocks
and shares while other may need funds in form of debt like bonds and
debentures. So, to process these kind of transaction as known as assets
securitization.

24
  Sales increase
Branch manager of the BAF supervises sales department of the branch to
increase sales of the bank through offering of products to clients. In our
region, where civilians are Islamic, they would deal in products and services
based Islamic Shariah. This is the responsibility of the branch manager to
design business plan in which bank should offer products based on Islamic
law, such as Alfalah car Ijarah, Alfalah Musharaka, Modaraba and so on.
 Communication with main branch of BAF
Branch manager has the responsibility to keep communication with the main
branch on banking operations, business planning and customers’ growth of the
bank. Branch manager should be an ambassador of the branch to the main
branch of the BAF. Branch produce performance appraisal profile of the
branch employees.
3.5 WEEK FIFTH
In week five of my internship programme, the operation manager added some
additional experiences in my workplace duties. In this week he taught me that what is
posting? Why a bank should do posting facility for its clients? What is the procedure
of posting in the branch?
Posting: posting is a form of financial activity in which a clerks or auditors keep a
record of all the financial transactions of the clients individually. Posting shows that
how much amount of money has been debited in the account, means total amount of
the deposits made by the client within period of one year. The bookkeeper or accounts
auditor of the bank save the deposits in a computerized account with the actual date
and time of the transaction.
Similarly, at the crediting side the auditor or the bookkeeping clerk saves the total
amounts, in that computerized account of the client, which shows that how much
amount has been withdrawal by the client in the given period of one year. It shows
that the amount of money withdraws by the client. Bookkeeper saves the transaction
with a proper date and time automatically using a computerized software of the
branch. At the end of the year, which is proper as closing of the bank, the auditor
creates a ledger account of the client in which the auditor mentions the overall debited
and credit transactions of the client for the given period of one year. Keeping all the
financial transaction of the client for one ear in a specific account which shows total

25
deposits and withdrawals of the account holder is simply know as posting of the
account.
Posting is a larger process, in which the auditor making all financial entries for the
client and reconciles the required transactions and keep the accounts up to date, form
which the bank financial manager creates financial reports. These reports
encompasses that how the bank summarizes its transactions with in one year. Balance
sheets and income statements of the bank can be created from these reports produced
by the posting department of the branch by internal auditors and bookkeepers of the
bank.
In my experiences, I did not perform this activity as my own because it needed high
experiences and a person on the job in the bank. Because I as an internee was not able
to use software of the BAF Timergara branch general ledger and journal account of
the clients. Customer services officer of the BAF Timergara branch collects the
deposits from the clients, save them in a specific account of the client and process this
entry to the posting officer of the bank.
3.6 WEEK SIXTH
In week sixth of my internship programme, I learned some of the interesting digital
banking systems and mobile applications of the bank Alfalah. Bank Alfalah is a very
digitalized bank in Pakistan. BAF offers numerous online banking facilities to its
respective clients. Some the digital banking offerings are following.
1) Alfa Mobile application
Alfa mobile application is one the most important facility of the BAF which
provides efficient facility with an ease to its clients. Alfa mobile application
can be downloaded from Google play store, which needs phone number of the
candidate, email account of the account holder, account number in the bank of
the account holder for verification and authentication purposes.
Alfa application can send R.s 1,000,000 (1 million) at a time. This transfer of
fund does not to come to the bank and sign cheque for the payee. It simply
needs a mobile phone and internet facility to transfer such a huge lump-sum
amount of many in a single move. Alfa application ensures expenses made by
the client. Through Alfa application a client can pay for bills, fund transfer,
pay for shopping expenses and can pay for educational dues online to the
respective institutes.

26
 Alfa application review a client’s account information and provide updates
every month to the account holder of the BAF. Through Alfa a client can pay
for credit card and debit card bills and can review cards details.
2) ATM (Automatic Teller Machine)
Automatic Teller Machine provides a card called ATM card, through which a
client withdraws amount of money from any bank, where there is an ATM
booth. Following are some of the features of ATM.
 ATM Booth
To process any transaction through ATM there is an ATM booth required, in
which the card should swipe. Th machine booth ask for the verification code
of the account holder, which is commonly known as passcode or password of
the account holder. When the machine tallies the passcode of the account
holder then it starts further processes such as checking of balance of the
account, ask for withdrawal of amount and generate a transaction slip for the
client to ensure the credit amount from the balance on a specific date and time.
 Withdrawal Limit
At a time, a candidate can withdraw cash amount of R.s 35,000. In the year
2021, bank Alfalah has transacted R.s 39 billion, in which total amount of
pensioners are R.s 460K. BAF has transacted these amounts from 10,000+
ATMs around Pakistan, (BAF 2021). BAF ATMs provide facilities in
different card such as, Visa card, MasterCard and Union pay cards.
 International Use
Alfalah ATM cards can be used internationally. If a Pakistani resident is
willing to use his / her ATM card outside Pakistan like in UAE and in Saudi
Arabia, then there will be no restriction, but the client will be facilitated
internationally.
 ATM Requirements
a) Need CNIC of the candidate.
CNIC verification is important for the bank to ensure the regional status
and residency of the client.
b) Form filling
A candidate should fill a form at the branch of the bank, in which he must
ensure his account sort, whether the client is holding current account or

27
 savings account. In the filling of form candidate must specify his / her age
according to their CNICs.
c) ATM fee
Candidate must pay fee of R.s 200 per ATM card one time, at the branch
of the bank along with the above filling and required documents. For
regular services the bank charges 2% per month and 24% per annum on
ATMs services.
3.7 WEEK SEVENTH
In week seventh of my work experiences at the BAF Timergara branch, the operation
manager added another important financial activity of the bank’s branch. Operation
manager suggests me to know about two different tasks i.e., Demand draft and Pay
order.
3.7.1 Demand Draft
Demand draft is a form of facility provided by the bank to facilitate clients to send
funds from their deposited amounts in the bank. In demand draft a client used to send
certain amount of money from one branch of the bank to another branch of the same
bank. In short it is known as DD. Demand Drafts are used on the demand of the
account holder of the bank.
In DD, an account holder who is a client of the branch (bank), signs a draft, a demand
draft form to specify amount of money and to withdraw from another branch. The
person or the party who signs a DD is known as drawer. The body which further
exercise the amount of DD is known as drawee or simply a bank. That person who
receives that certain amount of money from a DD transaction is known as Payee.
3.7.2 Pay Order
Pay order is another important financial instrument used in banking for the purpose of
transferring of funds. Pay order should be exercise in the same city of the bank. Pay
orders are not negotiable instruments, these are orders from the respective clients of
the bank. In these orders, clients of the bank instruct the bank to place an order and set
an amount of money to be sent to another party (third party).
There are certain requirements for issuing of the pay order.
1) Account number of the drawer (account holder)
2) Signature of the drawer
3) Signature of the drawee (Bank)

28
 4) Stamps of the drawee (Bank)
5) Specific date
6) Specific city
3.8 WEEK EIGHT
In the last week of my internship process I did three things. First, in this week I
learned that what is a Telegraph Transfer (TT), how this (TT) will be processed and
who is responsible to perform this duty in the BAF Timergara branch. Telegraph
Transfer is a form of making a financial entry in the bank, in which a branch manager
summarizes all outward transactions of the bank made in a day. Telegraph transfer is
a form of clearing house activity in which branch manager of the subsidiary firm clear
all the transactions made by the firm in a single day. The BAF Timergara branch does
not exercise this type of activity because this is mostly transacted by the national
banks inside Pakistan, through national banks transfer funds among different banks.
This is a very important activity done by the government body that’s why the
operations manager of the BAF added this in my learning objectives.
Second, in this week I summarized all my learning objectives and activities exercised
by the branch on the base of which I needed to make a detailed report. In this week
my all data regarding my internship processes and all relevant materials in the bank to
make a detailed report. In this report the operations manager guides me to produce an
internship thesis. Collection of data regarding financial analysis, SWOT, and PEST
analysis of the bank.

29
CHAPTER 04 FINANCIAL STATEMENT ANALYSIS
In this chapter we have covered three main areas such as, financial statement analysis
or ratio analysis, Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis
and Political, Economic, Sociocultural and Technological, (PEST) analysis of the
Islamic bank Alfalah (BAF). These were three major areas in which we have focused
to observe the Islamic Bank Alfalah as a private organization and analyze it financial
and strategic positions. In financial analysis we have analyzed last five years financial
performance of the BAF, in which we have covered a detailed ratio analysis of the
bank.
In addition to the financial analysis, strategic analysis has been done in which we
have observed external and internal environments of the bank regarding SWOT and
PEST analysis. SWOT and PEST analysis of the BAF provide detailed information
about present and future scenarios of the bank, which can affect strategic performance
of the bank.
4.1 FINANCIAL ANALYSIS
Financial analysis means that the analysis which evaluates and transform a firm’s
ratios to a meaningful information in the form of Balance sheet, Income statement and
Cash flow statement. This information is meaningful to the overall stakeholders of the
firm such as Government, shareholders, investors, creditors, managers, employees,
and general customers and so on. Suppose that each bank is a financial organization
deals with financial projects, reports, and ratios. For the purpose to show the financial
health of the bank, management form financial statements of the bank, once in a year.
For example, Balance sheet summarizes financial position at a specific point of time.
Income statement suggests total revenues generated in year along with total expenses
in that year, (Ch. Gibson, 13th edition). Following are two major financial statement
are analysed, balance sheet and the profit and loss account.
4.1.1 Balance Sheet
Balance sheet is one of the major forms of financial statements which summarizes the
financial position of the bank or any other financial institution at a particular point of
time. Balance sheet possesses all the assets on the left-hand side of firm’s sheet and
liabilities on the right-hand side of the firm together for a specified year. In balance
sheet all assets must be equal a dollar amount of all liabilities plus owner equity of the
firm for that specific point in time of the year. This claim has been derived from the

30
accounting equation, (A= L+O.E); Assets = Liabilities + Owner Equity. As supposed
in the book of fundamentals of accounting by Meigs and Meigs 9th edition.
Assets of the balance sheet consist of Cash and cash equivalents, balances with other
banks of the main branch of the bank, lending to financial institutions, investments,
advances made by the bank each year, operating fixed assets and other long-term
assets of the bank. Balance sheet balances all assets on the left side exactly equals to
the right-hand side to the total of liabilities, that’s why it known as balance sheet. A
financial accountant must balance left-hand side and right-hand side of the firm’s
balance sheet. In contrast to assets of the firm, liabilities of the bank are payable
accounts, borrowings from other entities, deposits of investors and other clients,
subordinated loans, and tax liabilities on the bank. These are the major liabilities of
the firm for which a branch manager must strive to allocate all resources (assets) to
utilize these assets and fix them against these liabilities.
In 15th century, an Italian mathematician named Monk Luca Pacioli was the first
mathematician who invented Balance sheet for accounting calculations of the firm in
which he proposed that a firm’s resources should be listed separately from all claims
on the firm. In simple words it means that to make separate entries from all the assets
of the firm in corresponds with all liabilities on the firm.
4.1.3 Consolidated Balance Sheet
Consolidated balance is an extended form of the firm’s balance sheet in which the
firm’s management and auditors summarizes all the assets and liabilities of the firm
along with overall subsidiaries of the firm in a single balance sheet. Making a single
balance sheet for both, all subsidiaries and parent company is simply known as
consolidated balance sheet.
As supposed in the annual reports of the Bank Alfalah, it is represented that
consolidated balance sheets are summarizing financial data of the bank with overall
subsidiaries in that country where it operates. Consolidated balance sheet summarizes
data of financial performance for the last five years of the bank. In the annual report
of the BAF (2021), it has summarized data of previous six years i.e., from 2016 to
2021. In this report thesis I have summarized last five years of the bank as
consolidated balance sheet from 2017 to 2021.

31
 Table 4.1 Consolidated Balance Sheet (Rs in millions)
Assets 2021 2020 2019 2018 2017
Cash and balances with
105,606 99,348 100,732 82,408 70,381
treasury banks
Balances with other banks 9,783 6,234 4,710 3,875 3,754
Lending’s to financial
35,982 77,306 71,435 62,172 48,896
institutions
Investments – net 809,214 547,090 299,098 277,660 400,733
Advances - net 673,881 577,316 511,236 501,636 400,655
Operating fixed assets and
40,615 32,261 30,344 19556 17,628
Intangible assets
Deferred tax assets 2,304 - - - -
Assets held for sale - - - 23,589 26,821
Other assets 56,936 45,319 47,756 35,321 29,959
Total Assets 1,734,321 1,384,874 1,065,311 1,006,218 998,828
Liabilities
Bills Payable 22,826 22,571 17,169 35,988 20,883
Borrowings from
383,809 314,960 102,842 123,738 207,194
Financial Institutions
Deposits & Other
1,139,045 881,767 782,284 702,895 644,985
Accounts
Subordinated loans 7,000 7,000 11,987 11,989 4,991
Deferred tax liabilities - 1,361 3,451 2,071 3,154
Liabilities directly
associated with the assets - - - 20,435 24,759
held for sale
Other Liabilities 81,640 66,197 59,550 33,455 27,063
Total Liabilities 1,634,320 1,293,856 977,283 930,571 932,929
Equity
Share Capital 17,772 17,772 17,772 17,774 16,076
Reserves 29,954 27,680 26,046 23,051 18,157
Unappropriated Profit 40,836 35,057 32,843 27,470 54,253
Surplus on revaluation 11,441 10,509 11,367 7,383 7,315
Liabilities +
1,734,323 1,384,873 1,065,311 1,006,218 998,729
Shareholders’ equity

32
4.1.4 Vertical Analysis of Consolidated Balance Sheet
Common size analysis is the form of financial statement analysis of the firm in which
a financial analyst compares each item of the balance sheet in percentage with the
base amount of total assets of that year item. Suppose for a balance sheet, it will
compare that how much change has been occurred in total cash with respect to total
assets of the bank for that year. Common size analysis compares each item of balance
sheet with the base item of that year to analyse the common position of the bank
balance sheet items with respect to total assets of the bank for that year.
Common size analysis defines percentage change of short-term and long-term assets
of the bank or any other financial institution with the percentage total assets of the
bank for that year. Suppose the percentage ratio of cash for the year 2017
demonstrates that how much percentage amount of the cash are in the total assets of
the bank for the year 2017. Similarly, all other items are showing that how much
proportion does each item have in the total assets of the firm for that specific year.
Other items like balances with other banks, lending to financial institutions,
investments, and advances etc. all these items show the percentage proportion in total
assets of the bank balance sheet for the given year, (Jorden 9th edition).
Additionally, J. Fabbozi has stated in his book (The basics of Finance) that in
common size analysis we should compare the net results of each balance sheet items
with a specific base year for all preceding years of the analysis. This leads us to
analyse that how much change has been occurred in the next year with respect to a
base year let suppose in cash of the BAF, as compared to the base year. In the given
table we can easily compare that how much the cash has been increased for the next
three years (2018 and 2019) as compared to the cash percentage of the year 2017.
There is a net decrease in the cash of the BAF for the year 2020 and 2021 as
compared to the rest of the years also with the base year. In these percentage ratios
each stakeholder of the firm can be easily demonstrate the trend analysis and
differences of the ratios, which gives meaningful information to the overall
stakeholders of the firm.
We have searched different books, research articles and internet sources, but we failed
to fine that who was the actual founder of the vertical and horizontal analysis. Some
financial analysts and authors have used these two methods of analysis, which help us

33
 a lot to determine the financial condition of the any financial institution in percentage
comparison with each year.
Table 4.2 Vertical Analysis of Consolidated Balance Sheet
Assets 2021 2020 2019 2018 2017
Cash and balances with treasury
6.09 7.17 9.45 8.19 7.046
banks
Balances with other banks 0.56 0.45 0.44 0.39 0.376
Lending’s to financial
2.07 5.58 6.70 6.18 4.89
institutions
Investments – net 46.7 39.5 28.08 27.6 40.12
Advances - net 38.9 41.7 47.99 49.9 40.11
Operating fixed assets and
2.34 2.33 2.84 1.94 1.76
Intangible assets
Deferred tax assets 0.13 - - - -
Assets held for sale - - - 2.34 2.68
Other assets 3.28 3.27 4.48 3.51 2.99

Total Assets 100% 100% 100% 100% 100%

Liabilities
Bills Payable 1.32 1.63 1.612 3.58 2.09
Borrowings from Financial
22.1 22.74 9.654 12.3 20.7
Institutions
Deposits & Other Accounts 65.7 63.67 73.43 69.9 64.6
Subordinated loans 0.4 0.505 1.125 1.19 0.5
Deferred tax liabilities - 0.098 0.324 0.21 0.32
Liabilities directly associated
- - - 2.03 2.48
with the assets held for sale
Other Liabilities 4.71 4.78 5.59 3.32 2.71
Equity
Share Capital 1.02 1.283 1.668 1.77 1.61
Reserves 1.73 1.999 2.445 2.29 1.82
Unappropriated Profit 2.35 2.531 3.083 2.73 5.43
Surplus on revaluation 0.66 0.759 1.067 0.73 0.73
Liabilities + Shareholders’
100% 100% 100% 100% 100%
equity
4.1.5 Horizontal Analysis of Consolidated Balance Sheet
Horizontal analysis is also called Index Size analysis. In this analysis a financial manager
tries to compare each amount of the balance sheet for other next years to compare with
the base year of the firm to determine an annualized percentage change. How much a
firm’s assets are changed in the next year when we compare it with a base year?
Similarly, same is the case with overall liabilities of the firm. In comparison with the

34
previous year how much percentage change has been occurred, because in percentage
each stakeholder of the firm will be easily understood.
Horizontal analysis shows that how much percentage has been occurred in respect to
the base year of the firm. Suppose in this report we are analysing that how much
percentage has been occurred in the assets of the bank for all years as compared to the
base year 2017. In addition, same proposition has been made by Van Horne
(fundamentals of financial management 13th edition) which says that horizontal
analysis compares the firm financial condition to the specific base year from which an
analyst easily find the difference through a trending analysis among different ratios.
Table 4.3 Horizontal Analysis of Consolidated Balance Sheet
Assets 2021 2020 2019 2018 2017
Cash and balances with
150.05 141.15 143.12 117.09 100%
treasury banks
Balances with other
260.60 166.06 125.46 103.22 100%
banks
Lending’s to financial
73.59 158.10 146.09 127.15 100%
institutions
Investments – net 201.93 136.52 74.64 69.29 100%
Advances - net 168.19 144.09 127.60 125.20 100%
Operating fixed assets
230.40 183.01 172.13 110.94 100%
and Intangible assets
Deferred tax assets 0.23 (100) (100) (100) 100%
Assets held for sale (100) (100) (100) 87.95 100%
Other assets 190.05 151.27 159.40 117.90 100%
Total Assets 174.54 138.65 106.66 100.73 100%
Liabilities
Bills Payable 109.304 108.08 82.22 172.3 100%
Borrowings from
185.241 152.01 49.64 59.72 100%
Financial Institutions
Deposits & Other
176.6 136.71 121.3 109 100%
Accounts
Subordinated loans 140.252 140.25 240.2 240.2 100%
Deferred tax liabilities (100) 43.152 109.4 65.66 100%
Liabilities directly
associated with the assets (100) (100) (100) 82.54 100%
held for sale
Other Liabilities 301.666 244.6 220 123.6 100%
Equity
Share Capital 110.55 110.55 110.5 110.6 100%
Reserves 164.972 152.45 143.4 127 100%
Unappropriated Profit 75.2696 64.618 60.54 50.63 100%
Surplus on revaluation 156.405 143.66 155.4 100.9 100%
Liabilities +
173.653 138.66 106.7 100.7 100%
Shareholders’ equity

35
4.1.2 Income Statement
This account is also called Income statement of the firm or a bank. This was also
invented by the Italian mathematician Monk Luca Pacioli. Income statement
possesses all revenues and expenses of the firm in a particular period such as for one
year. In this account, an accountant obliged to collect revenues from which removes
all expenses made by the firm each year. At the end of the entries a firm management
will receive net income for the firm. If this entry is an absolute positive number, so
this will be known as net income. On the other had if this statement is in absolute
negative numbers so this will be known as net loss of the firm for the given period.
Profit and loss account of the bank is only one sheet record of the bank statements,
which possesses all revenues and expenses of the bank in a particular year. Profit and
loss account shows that how is the firm net profitability situation. Does the bank have
a net profit or loss? Analysing the common size analysis of the BAF profit and loss
account we will easily compare that how much is the net percentage change in the
bank’s ratios as compared to the base item of the bank.
Table 4.4 Income Statement (Rs in millions)
Particulars 2021 2020 2019 2018 2017

Mark-up Interest
100,182 92,616 92,519 59,672 56,920
income
Non-mark-up /
16,474 12,795 10,357 10,431 9,381
interest income

Total income 116,656 105,411 102,876 70,103 66,301

Mark-up / return /
54,134 47,911 47,623 27,746 27,354
expenses

Non-mark-up /
36,840 32,032 29,843 24,713 25,425
interest expenses

Provisions and
2,312 7,589 3,029 27 523
write-offs- net

Taxation 9,154 7,403 9,686 6,993 5,678

Net Income 14,216 10,476 12,695 10,624 8,367

36
4.1.3 Vertical Analysis of Income Statement
An income statement vertical analysis shows us that the percentage change of each
item in proportion with the total percentage of total income. A financial analyst
compares the proportion of all items in total income of the income statement. In the
following analysis I have compared all the income statement items with total income,
which means how proportions of all revenues and expenses have in total income.
Suppose the value of revenue Mark-up interest income for the year 2021, shows that
this item has 85.88% proportion in total income of the same year, which is 100%.
This simply demonstrate how much proportion does the mark-up income have in total
income. Similarly, the analysis methodology went on further to measure all income
statement ratios in percentage proportions with total income. For this I summarized
total revenues of the BAF from which I have gotten the value of total income.
Furthermore, from total income I have removed all expenses which gives a result of
net income at the end of table.
Table 4.5 Vertical Analysis of Income Statement (Rs in millions)

Particulars 2021 2020 2019 2018 2017

Mark-up Interest
85.88 87.86 89.9 85.12 85.85
income
Non-mark-up / interest
14.12 12.14 10.1 14.88 14.15
income

Total income 100% 100% 100% 100% 100%

Mark-up / return /
46.4 45.5 46.3 39.6 41.3
expenses
Non-mark-up / interest
31.6 30.4 29 35.3 38.3
expenses
Provisions and write-
1.98 7.2 2.94 0.04 0.789
offs- net

Taxation 7.85 7.02 9.42 9.98 8.56

Net Income 12.2 9.94 12.3 15.2 12.6

37
4.1.4 Horizontal Analysis of Income Statement
As we analysed the below horizontal sized table of the income statement, we can
easily find a percentage increase in almost all the relevant ratios of the income
statement, with respect to the ratios of the base year (2017). In horizontal analysis we
keep one specific year as base year and then do further analysis to compare all other
ratios and identify that whether these ratios are increased or decreased in respect to
the base year of the analysis.
Suppose if we analyse the situation of all mark-up interest earning, which is the
revenue of the bank, so we can easily understand that revenues are increasing for the
next four years, from 2018 to 2021 as compared to the base year of 2017.
Horizontal analysis shows the percentage results, which are easy to understand.
Similarly, this situation is going onwards for all ratios which demonstrate that how
much percentage change has been made in other years as compared to the base year.
There is a similar analysis for all other income statement items which are compared
with the ratios of the base year. This measures that how much change has been
occurred in the following years as compared to the base year of the income statement.
Table 4.6 Horizontal Analysis of Income Statement (Rs in millions)

Particulars 2021 2020 2019 2018 2017

Mark-up Interest
176.00 162.71 162.54 104.83 100%
income
Non-mark-up /
175.61 136.39 110.4 111.19 100%
interest income

Total income 175.95 158.99 155.17 105.73 100%

Mark-up / return /
197.90 175.15 174.1 101.43 100%
expenses
Non-mark-up /
144.90 125.99 117.38 97.2 100%
interest expenses
Provisions and
442.06 1451.1 579.16 5.16 100%
write-offs- net
Taxation 161.22 130.38 170.59 123.16 100%

Net Income 169.91 125.21 151.73 126.98 100%

38
4.2 RATIO ANALYSIS
Ratio analysis is an index measurement which relates two numbers with each other to
find a firm's financial condition and performance. It translates that in what position a
firm's financial health is. In ratio analysis certain tools and techniques are used to
analyse financial position of the Bank Alfalah. Ratios are financial variables through
which an analyst measures that how a bank of any other financial has performed with
a benchmark as a base year. Ratio analysis shows different of the bank on different
times (years) and illustrates that how financial performance of the bank has moved
within certain previous years i.e., for the last five years (2017, 2018, 2019, 2020 and
2021). The following are some major ratios have been analysed. These ratios show
the financial of the Bank Alfalah, on different angles and perspectives. Trending
analysis give comparatively data analysis due which readers can be able to understand
them easily and annualize the data of the bank to do actual comparison with a specific
benchmark (Base year).
Table 4.7 Summary of Ratio Analysis
Ratios 2021 2020 2019 2018 2017
Current ratio 1.06 1.07 1.09 1.08 1.00
Quick ratio 0.08 0.09 0.18 0.15 0.13
Cash ratio 0.06 0.07 0.11 0.09 0.07
Debt to equity 16.34 14.21 11.10 12.30 14.17
Debt to total asset 0.94% 0.93% 0.91% 0.92% 0.93%
Debt to tangible net worth 27.51 22.02 16.94 16.59 19.36
Net profit margin 22.73% 18.21% 22.97% 25.07% 21.48%
Return on assets 8.19% 7.56% 11.92% 10.55% 8.37%
DuPont return on assets 1.31% 1.21% 1.99% 1.48% 1.22%
Return on equity 14.21% 11.50% 14.42% 14.04% 12.71%
DuPont return on equity 0.22 0.18 0.24 0.19 0.18
Total assets turnover 1.00 0.06 0.08 0.06 0.05
Deposits to growth ratio 29.17% 12.71% 11.29% 8.97% 1.61%

Equity multiplier 17.34 15.21 12.10 13.30 15.17

Earnings Per Share 8.00 5.89 7.15 6.60 5.24

Spread ratio 45.96% 48.26% 48.53% 53.26% 51.58%

39
4.3 LIQUIDITY RATIOS
Liquidity ratios are that form of ratios which measures a firm’s ability to meet its
short-term obligations. Those ratios which are concerning with liquid assets of the
bank or any other organization, from which a firm is balancing its short-term
obligations or liabilities. Financial analysts are interested to measure a firm liquid
assets or short-term assets to derive a firm ability for short-term solvency, C. H.
Gibson.
4.3.2 Current ratio
Current ratio says that the ability of a firm to balance or correspond short-term debts
or current debts (liabilities) of the firm with current assets. Current ratio shows that
how much a firm has ability to pay for its obligations (Liabilities) in short run.
Formula
=

Table 4.8 Current Ratio

Years 2021 2020 2019 2018 2017
Ratios 1.06 1.07 1.09 1.08 1.00

“Current Assets” current assets are those assets which generated a company in a
given period of one year. Those assets which have maturity period less than one year,
not more than one year. These assets are cash and cash equivalents, marketable
securities, and lending to financial institutions etc.

“Current liabilities” those liabilities which have maturity period less than one year,
known as current liabilities. These liabilities should be paid by the firm within one
year. Liabilities such as bills payable, borrowings and deposits etc, (Van Horne, 13
edition).
Interpretation
Current ratios of BAF have an increasing trend for the following two years, starting
from 2017 to 2019. As we analyse the cash of BAF for the next three years in the
balance sheet, we will find a net increase in the cash, as financial analysts believe that
cash and cash equivalents are the most liquid assets of a firm. If these liquid assets are
increasing ultimately, it will be reason of net increase in current ratio because the
formula says that current ratio is equal to current assets minus current liabilities. If

40
current assets are increasing so current liabilities will be decreasing which further
pushes a firm to increase its current ratio.
In contrast, there is a decrease in current ratio for the next two years i.e., 2020 and
2021. The reason is that declination in current ratio occurs due to increase in
borrowings of the firm and decrease in short-term assets. As we assumed the balance
sheet of BAF 2021, we have found that there is an increasing trend in short-term
borrowings of the bank, due to which liabilities are increased. Increase in liabilities
leads to decrease in current assets, which further put pressure on current ratio, as
suggests the formula, (Charles H. Gibson 13th edition).

CURRENT RATIO

1.09
1.1 1.08
1.07
1.08 1.06
1.06 2021
1.04 2020
Results

1.02 1
2019
1
2018
0.98
2017
0.96
0.94
2021 2020 2019 2018 2017

Years

Figure 4.1 Current Ratio

4.3.3 Quick ratio
That form of liquidity ratio which measures a firm’s liquidity with more liquid assets
against current liabilities of the firm. Quick ratio is a little more conservative ratio of
the firm as compared to current ratio, because in this ratio an analyst uses quick assets
of the bank and removes some of the bank’s overall current assets. In measuring quick
ratio of the bank, an analyst would be interested into calculate the bank’s liquidity
with liquid assets, an analyst would ignore to calculate overall current assets against
of current liabilities of the bank. Therefore, an analyst uses a conservative approach to
derive short-term liquidity while ignoring inventory or current assets as whole,
(Gibson 13th edition).

41
 Formula

“Liquid assets” those assets which are very easy to be converted into cash, is known
as liquid assets, i.e., Cash and cash equivalents, balances with other banks and lending
to financial institutions. This a specific case because of the banking sectors. Mostly
for the calculation of quick ratio we minus inventory from current assets of the firm’s
balance sheet and divide it on current liabilities. Since a bank is a service institution
and doesn’t possess any assets in the form of inventory so we simply add the first
three items of the balance sheet to derive quick assets and further use these quick
assets for the calculation of the quick ratio.
Table 4.9 Quick Ratio
Years 2021 2020 2019 2018 2017
Ratios 0.08 0.09 0.18 0.15 0.13

Interpretation
As we have noticed the above calculations, which shows that quick ratio of the bank
has a consistent increase for three years at the beginning (2017, 2018 & 2019)
respectively. Similarly, ratios further prove that there is a decline in the quick ratio for
the next two years (2021 & 2021) respectively.
Increase in quick ratio is because of two major reasons such as increase in sales and
increase in inventory turnover, increase in payment of short-term liabilities and
improvement in collections (short-term debt and account receivables). A good quick
ratio is off to 1.0 or above. Which indicates that a firm can pay-off its short-term
liabilities without selling of fixed assets or long-term assets.
Bad quick ratio is that ratio which below than 1.0. BAF has a net increasing trend in
quick ratio because of increase in its current assets like cash balances with other banks
and lending to financial institutions and remember that the liabilities structures fir that
three years don’t have increased as compared to the liquid assets side of the BAF. Due
to which the quick ratio is consistently increased for the first three years. In contrast,
for the next two years the liquid assets are still increasing but the quick ratio graph has
net annual decline why_? Because the liabilities side items are increased almost
double after 2019 as compared to 2017 liabilities. As we know that increase in
liabilities and decrease in debt or accounts collections lead to decrease quick ratio as a

42
valid reason. There is another important thing which is Credit terms, the strict are the
credit terms the quicker will be collections of credits or short-term assets in the form
of accounts receivables and marketable receivables.

QUICK RATIO

0.18
0.18
0.15
0.16
0.13
0.14
2021
Results

0.12
0.09
0.1 0.08 2020
0.08 2019
0.06 2018
0.04
2017
0.02
0
2021 2020 2019 2018 2017

Years

Figure 4.2 Quick Ratio

4.3.4 Cash Ratio
It is the most conservative liquidity index as compared to the above two ratios. Here
an analyst just measures the actual cash holdings of the firm. An analyst will ignore
all other current assets of the firm and will analyse only cash of the bank. This
determines that how much of liabilities can be paid by only cash and cash equivalents.
Table 4.10 Cash ratio
Formula

“Cash and cash equivalents” those are the most liquid assets of the bank. These are
either cash or very near to be converted into cash such T-bills, certificate of deposits,
bankers’ acceptances, and commercial papers etc, (J. Fabbozi).
Table 4.10 Cash ratio
Years 2021 2020 2019 2018 2017
Ratios 0.06 0.07 0.11 0.09 0.07

43
Interpretation
Cash ratio means that to pay your liability of each dollar amount from your current
assets, in other words it means to pay the amount of liability from each available cash
resources. From the table the bank has cash reserves (assets) for years, 2017, 2018,
2019, 2020 & 2021, respectively.
As measured in the above graphical representation, the cash ratios have a decline
trend for the last five years. There are many causes due to which the cash ratios are
shrunken. First, BAF has increased its short-term liabilities for the given period of
last five years (2017-2021). Increase in short-term liabilities will decrease cash ratio
as per statement of the formula of the cash ratio. There is a little increase in cash ratio
in between the period of years 2018 and 2019, because if we investigate the balance
sheet liabilities side so we will find that BAF has increased deposits account and
increased other liabilities in between that period. As we know that increase in
liabilities will ultimately decrease cash ratio for the bank.

CASH RATIOS

0.115
0.12 0.11

0.1 0.09

0.07 2021
0.08
0.06 2020
Results

0.06 2019

0.04 2018
2017
0.02
Ratios
0
2021 2020 2019 2018 2017

Years

Figure 4.3 Cash Ratio

44
 TREND IN LIQUIDITY

1.2

0.8
Results

2017

Years
0.6
2018
0.4
2019
0.2
2020
0
Current Ratio 2021
Quick Ratio
Cash Ratio

2021 2020 2019 2018 2017

Figure 4.4 Trend in Liquidity Ratios

4.4 LEVERAGE RATIOS
These ratios are also called long-term debt paying abilities of the firm. There are two
major forms of financing a firm (Debt and Equity), on the base of their pros and cons,
a firm’s manager opts to raise funds in different forms. Suppose debt financing is
very easy to collect for business bit there must be a charge of regular payment of
interest to debtors or creditors. Due to funds in debt forms and interest payment
which is risk so for a certain level a finance manager would not consider it more
beneficial, there the manager will try to raise funds in equity form. In equity there is
the creation of ownership such as upcoming shareholders of the firm increases.
Ownership creation is another important risk for the firm which the firm manager
ought to mitigate it.
For the purpose to maintain the optimal level in the firm’s management or ownership
structure along with funds raising, a manager must give priority to both methods of
financing debt and equity financing. For example, to raise funds of 60% in debt
financing and allocate the remaining 40% funds from equity financing. But the
payment of regular interest on debt amount and ownership creation in equity
financing must not be ignored. Therefore, to maintain optimal level a firm needs to
collect long-term debt, (Gibson 13th edition).
Optimal level: in financial management optimal level if the firm means that the mix
and blend of both method of financing such debt financing and equity financing, in

45
which financial manager of the firm manages to create such a mix in which the firm
can be able to maximize wealth of the firm through maximization of profits,
I, as a student of finance here by to measure long-term debt paying abilities of the
BAF. So, we need to measure some of the leverage ratios.
4.4.1 Debt to Equity Ratio
Debt to equity is form of leverage ratio which determines that how much are total
liabilities on the firm and how much ratio of shareholders’ equity does a firm have
against these liabilities. Debt to equity ratio answers certain questions that how a firm
can pay its long-term debt by using only shareholders’ equity. Can a firm be able to
pay its debt in long-term? This simply means that how much a firm has shareholders’
equity amount to protect long-term liabilities on the firm as offered by creditors.
Calculations of long-term paying abilities are very important because a firm’s
manager must correspond its short-term assets with short-term debt paying abilities
i.e., T-bills, Government bonds and corporate bonds.
Similarly, a firm manager must consider long-term assets with long-term debt such as
Stocks, shares, and bonds. Because this correct investigation will lead to decrease a
firm risk, there are different features of short-term asset and long-term assets, due to
which a manager cannot use short-term assets for long-term debt or liabilities. And
same is the case with short-term and long-term liabilities against their respective
asset’s situations.
Formula

“Shareholders’ equity” shareholders’ equity is an ownership proportion of the firm’s

shareholders’ in the total assets of the firm.

Table 4.11 Debt-to-Equity Ratio

Years 2021 2020 2019 2018 2017
Ratios 16.34 14.21 11.10 12.30 14.17

Interpretation
Normal rate of debt-to-equity ratio is from 2.00 to 2.50. as if we assume the above
stated tabulated results and graphical representations, we will find that these ratios are
not favourable ratios of BAF because all are high than that of normal rate which is
2.50. Values of debt-to-equity ratio decreased for the next two years starting from

46
2017 to 2019. These ratios give a little more favourable results as compared to the last
two years., as a result, long-term debt paying ability of Islamic Bank Alfalah are
decreased, and the chance of long-term solvency has increased.
Decrease in debt-to-equity ratios have a common reason that when number of
investments of shareholders are decreasing so it will exert downward pressure on
debt-to-equity because the liabilities are increasing as the denominator is small so due
to high value of numerator the ultimate result will be high. In debt-to-equity it is
important to note that high results are unlike to the ratio measures because high ratio
can be more dispersed from the normal. Smaller the ratio will translate that the best
condition of the firm, (Gibson 13th edition).

DEBT TO EQUITY RATIOS

20
16.34
14.21 14.17
15 12.3
11.1 2021
Rsults

2020
10
2019

5 2018
2017
0
2021 2020 2019 2018 2017

Years
Figure 4.5 Debt to Equity Ratio
4.4.2 Debt to Total Assets
Debt to total asset ratio is a form of Leverage ratios which is simply known as Debt
ratio. Debt ratio means that total part of creditors’ debt in total assets of the firm. It
means that how much ratio of the creditors’ credit are contain in total assets of the
firm. Debt ratio states how much ratio has been contributed by creditors in the firm’s
total assets. Debt ratio measures that how creditors of the firm will be protected from
solvency in long-term.
Debt ratio calculates that how much debt has been used as a source of finance by the
management of the firm. Similarly, it also suggests that how much assets do a firm
have to balance its long-term debt or liabilities.

47
 Formula

= ∗

“Total debt” debt are liabilities on the firm of the creditors, on which the firm pay
regular interest in periodic form. Debt states that how much of the firm have loans or
liabilities. Total debt states both long-term and short-term of the firm.
“Total assets” combination of both long-term and short-term assets of the firm are
known total assets of the firm. Those assets which have maturity value more than one
year, assets held by the firm for long-term are called long-term assets.
Table 4.12 Debt to Total Assets
Years 2021 2020 2019 2018 2017
Ratios 94.24% 93.43% 91.73% 92.48% 93.41%
Interpretation
Debt ratio purely depends upon assets and liabilities. There is a direct variation
between debt ratio and assets of the firm. Suppose if all other things are constant,
increase in assets will give much better debt ratio and vice-versa. Creditors of the
bank have provided amount equivalently to each rupee amount of the bank assets,
such as 93.41%, 92.48%, 91.73%, 93.43% and 94.24% in every hundred rupees in the
last four years from 2017 to 2021, respectively.
As graphically represented by the ratios, that the bank’s credit situation has been
decreased for beginning of three years 2017, 2018 and 2019. For the next two years,
2020 and 2021 the ratio has an upward graph of increasing. This shows a zigzag or
volatile movement in credit creation by creditors to the bank.
*Results in Percentage in calculations of this ratio we have used percentages, which is
not a part in the formula, we did this because to show the results in actual readable
form. This method has been used by Fabozzi and Gibson. Sole motive of calculation
in this form was to make difference easily in percentages.

48
 DEBT TO TOTAL ASSETS

94.24%
94.50%
94.00% 93.43% 93.41%
93.50%
93.00% 92.48% 2021
Results

92.50% 2020
91.73%
92.00% 2019
91.50% 2018
91.00% 2017
90.50%
90.00%
2021 2020 2019 2018 2017

Years

Figure 4.6 Debt to Total Asset

4.4.3 Debt to Tangible Net Worth
Debt to tangible net worth is a form of long-term debt paying ability, which measures
that how can a firm protects its creditors from solvency in long run. This is a
conservative form of debt paying ability because this ratio measures only the overall
tangible assets of the firm. From the formula it is concluded that intangible assets are
thrown out. Debt to tangible net worth ratio gives more conservative results as
compared to both, debt to total assets which also known as debt ratio and debt to
equity ratio.
Intangible assets: those assets which do not possess any physical form such as
copyrights, patent rights, trade name and trademarks. Therefore, these assets are
removed to illustrate the calculation of long-term paying abilities, (C. Gibson 13th
edition).

Formula

=
−
“Intangible assets” those assets which do not possess any physical worth or value, but
a firm can provide them as services such as copyrights, patent rights, selling of
business technologies and models etc.

49
Table 4.13 Debt to Tangible Net Worth
Years 2021 2020 2019 2018 2017
Ratios 27.51 22.02 16.94 16.59 19.36
Interpretation
Debt to tangible net worth ratio determines that how much a firm have tangible assets
to balance long-term debt paying abilities (liabilities in long-term). As stated above
Debt to tangible net worth ratio is decreased in the period of 2017 and 2018. Even
though total assets of BAF have increased from the period 2017 to 2018. Why is this
decline occurred? To answer the question there is one specific point that is, skimming
the balance sheet of BAF for that same period there is a net decrease in liabilities of
the BAF, due to which the value of shareholders’ equity is increased. Increase in
value of shareholder further decreases debt to tangible net worth because of increasing
the value of denominator and decreasing the value of numerator.
Similarly, for the next four years, from 2018 to 2021 there is an increasing trend in the
value of debt to tangible net worth because of regular increase in liabilities. Keeping
all other things constant, when liabilities are increasing there will be a net increase in
debt to tangible net worth ratio. However, increase shareholders’ equity and decrease
in tangible assets will decrease this ratio. As represented below in the graph.

DEBT TO TANGIBLE NET WORTH

27.51
30
25 22.02
19.36 2021
20 16.94 16.59
Results

2020
15
2019
10
2018
5 2017
0
2021 2020 2019 2018 2017

Years

Figure 4.7 Debt to Tangible Worth

50
 TREND IN LEVERAGE

27.51
22.02
3000.00% 19.36
16.94 16.59
2500.00% 16.34
14.21 14.17
2000.00% 11.1 12.3
Results

1500.00%
1000.00% Debt to Tangible Net Woeth
500.00% 94.24% 93.43% 91.73% 92.48% 93.41% Debt Ratio
Debt to Total Assets
0.00%
2021 2020 2019 2018 2017
Years

Debt to Total Assets Debt Ratio Debt to Tangible Net Woeth

Figure 4.8 Trend in Leverage Ratio

4.5 PROFITABILITY RATIOS
Profitability Ratios calculate the strength an organization’s income and compare it
with the base to explain every factor which may contribute to earnings of income such
as assets, sales, or capital. Always stockholders look to these ratios, because
organizations utilize these assets to generate favourable returns on them.
Organizations generate revenues and provide as a proportional share amount of
dividends on the base of shareholders’ shares, (C. Gibson, 13th Edition).
4.5.1 Net profit margin
Net profit margin is the form of ratio, which helps an analyst to determine or measure
profitability of the firm, whether the firm is profitable or not. Profitability ratio is a
kind of check, through which an analyst can measure the profitable health of a
corporation. This ratio elaborates that how much profits have been returned from the
sales of the corporation. Simply it means that Net profit from Net sales, (J. Fabozzi).
Financial Managers along with overall top-level management are keen to generate
more profits as much as they can through increase of sales. As mentioned by above
that sales have a direct impact on the ratio of Net profit margin. Keeping all others
constant, if sales are increasing there will be an upward trend in net profit margin
ratios.

51
 Formula

= ∗

“Net profit” net profit means the deduction of all expenses from the total revenues of
the firm with in given period of one year. Net profit summarizes total revenues of the
firm and then deduce all expenses from them, the remaining amount will be known as
net profit of the firm. Similarly, for a bank net profit is an item from which interest
mark-up and non-mark-up expenses and taxation has been deduced, so the remaining
amount will be called net profit of the bank.
“Total Income” total income means total revenues of the firm, from which there is no
single item has been deduced or conducted, like expenses, taxes, and interest
payments etc. There is difference for calculating this value for a bank, this can be
calculated as total revenues minus interest expenses plus interest income.
Table 4.14 Net Profit Margin
Years 2021 2020 2019 2018 2017
Ratios 22.73% 18.21% 22.97% 25.07% 21.48%

Interpretation
The graph shows variable and a volatile curve of generation of profits which is
increased after 2017-18, and then decreased for the next two years 2019-20. Again,
the ratio has a decrease curve for the next year 2021. A very zig-zag movement is
presented by the profitability ratio of Bank Alfalah.
This increase and decrease in net profit margin ratios are based on increase and
decrease in net profit and total income. As shown in the table that the ratio is
increased between the period of 2017 and 2018, this is because of increase in net
profit of the BAF. For the next year of 2019, net profit is decreased because the
percentage increase in ratio of total income is more than the percentage in value of
net profit. It means that if we investigate the cash flow statement of the BAF, we will
find that net profit ratio does not increase as much increased occurred in value of net
income which almost equal to a percentage increase of 30.44% as compared to an
increase of 19.49% in net profit, of the BAF for the same period.
As we know that net profit margin ratio is based on purely creation of more sales.
How much profits have been made from total generation of sales? If sales are
increasing so there is any increase in profits or not, (Van Horne, 13th edition).

52
 NET PROFIT MARGIN

30.00% 25.08%
22.73% 23%
25.00% 21.48%
18.21% 2021
20.00%
Results

2020
15.00%
2019
10.00%
2018
5.00%
2017
0.00%
2021 2020 2019 2018 2017

Years

Figure 4.9 Net Profit Margin

4.5.2 Return on Assets
Return on assets is form of profitability ratio which is known as ROA in short form.
This ratio means that how much return in the form sales or revenues are made by
utilization of total assets of the firm. It measures the overall effectiveness in
generating profit with available all assets of the firm i.e., the earning power of all the
invested capital. The efficient utilization of the resources of firm can generate high
ratios of return on assets. Simply what and how much the firm have invested (assets
utilization or investments) and how much is the return, as presented below, Fabbozi
13th edidtion.

Formula

= ∗

Table 4.15 Return on Assets

Years 2021 2020 2019 2018 2017
Ratios 8.19% 7.56% 11.92% 10.55% 8.37%

Interpretation
It means that the ratio of returned on assets has been increased annually for the next
three years, from the beginning of the year 2017 to 2019. The reason is that there is
an increasing trend in net profits of the bank for the same given period. For the year
2020, there is a decline in this ratio because of net decline net profits of the bank for
the same period. Similarly, there is a slight declined in this ratio just for the next one

53
year. At the end the ratio has a net increase again for the year 2021 because net profits
of the bank for the same year have increased due to which there is an increase in this
ratio, (BAF 2021).

RETURN ON ASSETS

11.92%
12.00% 10.55%

10.00% 8.19% 8.37%

7.56% 2021
8.00%
Results

2020
6.00%
2019
4.00% 2018
2.00% 2017

0.00%
2021 2020 2019 2018 2017

Years

Figure 4.10 Return on Assets

4.5.3 DuPont analysis for return on assets
DuPont analysis is a form of analysis in which an investor or a financial manager
measures the impact of Net profit margin and Total assets turnover on Return on
assets. DuPont analysis shows an analyst that what are the percentage increase or
decrease in total return on assets. How an increase in net profit margin and total assets
turnover increase in return on assets?
DuPont analysis as a famous formula was invented by F. Donaldson Brown, in 1914,
who an employee in DuPont corporation. Brown had tried to measure that how return
on assets will be affected by the net profit from total utilization of assets. How much
assets are turned over and how much profits have been made?
Computation of DuPont Analysis for Return on Assets
The analysis of DuPont was invented by corporation named DuPont corporation. It is
developed from the combination of two ratios (Net profit margin and total asset
turnover) through an organization’s manager determines that what are the impacts of
each on the return on assets ratio. For return on assets that combination is Net profit

54
margin which should be multiply with total assets turnover, to give us the appropriate
percentage results of change in return on assets ratios.
There is a direct variation in both ratios of return on assets (Net profit margin & Total
assets turnover) and DuPont analysis of the return on assets ratio. Increase in one ratio
will cause increase in DuPont ratio and vice-versa. If both are increasing so the
ultimate result will cause a net increase in the other.
Suppose if there the total assets turnover ratio is increasing, due to some other
additional factors, then what will happen to return on assets ratio in DuPont analysis.
Similarly, if there is an increase in Net profit margin ratio, so ultimately it will push
high the DuPont ratio of the return on assets. And for negative trend this same
criterion will reverse in negative form, like decrease in will cause decrease in another.
Formula

= ∗
“Net profit margin” it a profitability ratio which tells that how much amount of
profits have been generated while generating total amount of sales/revenues. How
much profit are gained through generating of sales of the firm.
“Total assets turnover” this ratio indicates that how much sales have been
generated by the efficient utilization of total assets of the firm. Assets of the bank
means that all left-hand side items of the bank’s balance sheet such as cash,
balances, all current assets, and long-term assets. In this ratio a financial analyst
tries to measure that how much of the firm total assets are utilized to generate
revenues for the firm.
Table 4.16 DuPont Return on Assets
Years 2021 2020 2019 2018 2017
Net profit
22.73% 18.21% 23% 25.08% 21.48%
margin
Total assets
5.77% 6.68% 8.68% 5.93% 5.69%
turnover
DuPont for
return on 1.31% 1.21% 1.99% 1.48% 1.22%
assets

Interpretation
DuPont analysis shows that how can a firm generate profits from net utilization of
assets. Utilization of assets help to increase sales increase of the firm, sales increase

55
leads to increase profits of the firm. To determine that how a firm had utilized it assets
to generate profits.
As shown in the graph that the ratio of net profit margin and total assets turnover are
increased from 2017 to 2018 due to which we have a net increase in DuPont analysis
ratio for the year 2018, as compared to 2017. For the next year, net profit margin has a
slight decrease but again the DuPont analysis has an increase ratio why? Because for
that same year the ratio of return on assets are increased. For the year 2020, both
ratios are decreased due to which there is a net decline in ratio of DuPont analysis. In
last, for the year 2021, there is a decrease in ratio of total assets turnover but still the
ratio of DuPont analysis has a net increased ratio, why? Because there is an increase
of net profit margin as compared to the previous year. As result, we can claim that the
net increase and decrease in the ratios of DuPont analysis is purely based on the
percentage in both net profit margin and total assets turnover ratios.
*Between the period of 2019 and 2020 there is a decline in DuPont ratio because if
the above graph and table are analysed then an analyst will be able to understand that
there is a decrease in both ratios of return on assets. This decrease further has
decreased the DuPont ratio as represented in the graph below.

DuPont RETURN ON ASSETS

25.08%
22.73% 23%
30.00% 21.48%
18.21%
25.00%

20.00%
Results

15.00% 8.68%
5.77% 6.68% 5.93% 5.69%
10.00%
Net prfoit margin
5.00% 1.31% 1.21% 1.99% 1.48% 1.22%
DuPont Analysis
0.00%
2021 2020 2019 2018 2017

Years
DuPont Analysis Total assets turn over Net prfoit margin

Figure 4.11 DuPont analysis for return on assets

4.5.4 Return on Equity
Return on equity is that form of ratio which measure the profitability in relation to the
equity ratio, which means that how much number of shareholders’ shared amount of

56
rupees (equity) have been invested and how much is the return from them? Return on
equity is a more conservative form of ratio because it deals in the equity of the
shareholders, unlike to total assets of the firm. Measuring this value, a financial
analyst would restrict to measure only the equity of shareholders’, that how much
return can be obtained through utilization of shareholders’ equity, (Gibson, 13th
Edition).
Formula

= ∗

Table 4.17 Return on Equity

Years 2021 2020 2019 2018 2017
Ratios 14.21% 11.50% 14.42% 14.04% 12.71%

Interpretation
Above the graphical representation has shown that the bank earned net profit of an
amount of on each (as shown in the graph) hundred rupees of equity in all previous
four years respectively. It is a high return for shareholders, which is also attractive for
potential investors in the market.
The profit-generating ability in relation to equity of the bank increased for the start of
two years, as compared to 2017, respectively. The reason for this increasing trend in
the return on equity ratio is because of increase in profits of the firm. Profits of the
firm are increased in a high proportion as compared to the increase in equity of the
firm for the given period. Similarly, it has a decline in 2020 as compared to the
previous two years, 2018 and 2019. The reason for this decline is the bank has a net
decrease profit for the year 2020. The profits are decreased for this year and there is a
net increase in equity of the shareholders due to which the ratio has a net decline. In
last, this ratio again increased because there is an increase in profit of the bank for the
year 2021. Shareholders’ equity also has been increased but the overall proportion has
increased.

57
 RETURN ON EQUITY

14.21% 14.42% 14.04%

15.00% 12.71%
11.50%

10.00%
Results

5.00%

0.00%
2021 2020 2019 2018 2017
Years

2021 2020 2019 2018 2017

Figure 4.12 Return on Equity

Computation of DuPont Analysis for Return on Equity
DuPont analysis or return on equity can be achieved through multiplication of DuPont
of return on assets with equity multiplier. DuPont analysis for equity ratio is the
multiplication mix of net profit margin, total assets turnover and equity multiplier. So,
for easy analysis we should make the formula easy to understand further, we will
multiply DuPont return on assets with equity multiplier to get DuPont return on
equity, because DuPont return on asset is equal to the multiplication of net profit
margin and total asset turn over.
DuPont analysis gives a combined result for return on equity which states that how
the return on equity has been affected due to the overall differences in these two
ratios. DuPont analysis for return on equity shows that how a net increase in DuPont
return on assets and equity multiplier ratio. If these two ratios are increasing so they
will increase the DuPont ratio for return on equity, as an ultimate result.

Formula

= ∗ . ∗

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Table 4.18 DuPont Return on Equity
Years 2021 2020 2019 2018 2017
Net profit
22.73% 18.21% 23% 25.08% 21.48%
margin
Total assets
5.77% 6.68% 8.68% 5.93% 5.69%
turnover
Equity multiplier 17.34 15.21 12.10 13.30 15.17
DuPont return
22.74% 18.50% 24.15% 19.78% 18.54%
on equity

Interpretation
Dupont analysis of return on equity shows that how the multiplication of three ratios
can affect the overall results of the ratio. If there is increasing in any ratio and the
remaining are not changed so the ultimate result will increase ratio of return on
equity. For example, the DuPont ratio for return on equity has increased in the year
2018 and 2019 because of the net increase in both net profit margin and total assets
turnover ratios, however there is a slight decrease in ratio of equity multiplier which is
the part of the overall DuPont calculations.
For the next year of 2020 the DuPont ratio has a net decrease despite of increase
equity multiplier ratio of the same year why? Because if we investigate the table
above, we understand that there is a net decrease in both net profit margin and return
on assets ratios for the same year of 2020. This phenomenon has affected net result of
the DuPont return on equity. In last again the ratio of DuPont return on equity

59
 DuPont FOR RETURN ON EQUITY

30.00%

25.00%

20.00%

15.00%
Results

Years
2017
10.00%
2018
5.00% 2019
0.00% 2020
Net profit 2021
margin Total assets
turnover Equity
multiplier DuPont
return on
equity

2021 2020 2019 2018 2017

Figure 4.13 DuPont analysis for Return on Equity

4.5.5 Total Asset Turn Over
It is an activity of profitability ratio that identifies the sale generations of a firm while
utilization of total assets of the firm. The higher the ratio the better it is in generating
the sale. Total asset turnover ratio gives results in form of time percentages, that is in
how many times revenues are recovered from utilizations of total assets.
Total asset turnover ratio used as a check to measure the efficient utilization of assets
in generating revenues of the firm. Suppose if this ratio is high so the ultimate results
will be favourable which indicates that assets are efficiently utilised due to which
revenues of the firm will increase. Similarly, if this ratio is low so this means that
assets are not utilized efficiently, and revenues will be decreased. (Gibson, 13th
Edition).
Formula

= ∗

“Net sales” net sales are those sales which are obtained from deducing return of
products and discounts from the total sales or revenues of the firm are called net sales.

60
“Average total assets” those assets which are obtained from the addition of current
year and previous year and then take their average.

Table 4.19 Total Assets Turnover

Years 2021 2020 2019 2018 2017
Ratios 1.00 0.06 0.08 0.06 0.05

Interpretation
Investigating the above tabulated results, BAF has an increasing trend in ratio of total
turnover ratio, for the next three years, 2017, 2018 and 2019 respectively. This is
because the BAF has a net increase in total assets for the respective years, due to
which it has a net increasing effect. It means that increase in total assets will
positively change in total assets turnover ratio, and vice-versa.
Similarly, for the year 2020 this ratio is decreased because of total assets are
increased with a high margin but there is no effective increase in revenues of the bank
for the same year. So due to increase in denominator (total assets) of the bank has
decreased total asset turnover ratio because of less effective increase in revenues. In
last, the bank has a net increase in total assets turnover for the year 2021, almost high
than the rest of the years, because of high increase in revenues of the bank for the
same year. All these information can be obtained from proper investigation of the
Balance sheet of the BAF 2021.

61
 TOTAL ASSET TURNOVER

1
1

0.8
Results

0.6

0.4

0.2 0.06 0.08 0.06 0.05

0
2021 2020 2019 2018 2017

Years

Figure 4.13 Total Assets Turn Over

4.5.6 Deposits growth Ratio
Growth in deposits should be drawn from the following formula, which says that
how growth are changes annually.
Formula

= ∗

“Deposits” deposits are the amount keep by the customers with a specified bank for
either current or savings accounts. These accounts are discussed earlier in chapter 2 of
this report. Deposit amounts of the bank are considered liabilities of the bank because
these are customers’ amount, through which they earn periodic return in the form of
the bank spread which is also known as interest rate of the bank.
“Current year deposits” those deposits which are made by the customer in the year of
the bank’s operation, or those deposits which are in the current year, the going year
deposits. For example, total deposits of the Bank Alfalah in this year 2021. An analyst
will analyse deposits current for this year of 2021 because due to International
Financial Reporting Standards (IFRS) each financial organization should close their
financial activities once at the end of the year, last of December. That’s an analyst
will consider each item of the balance sheet produced in 2021 for analysis in the year
of 2022.

62
“Previous year deposits” those deposits which were made by the customers’ of the
bank in previous, like total deposits of the Bank Alfalah in the year of 2020.

Table 4.20 Deposits to Growth Ratio

Years 2021 2020 2019 2018 2017
Ratios 29.17% 12.71% 11.29% 8.97% 1.61%

Interpretation
The deposits to growth ratio simply show that how a bank perform, if the bank
performance is good so ultimately it will be able to increase deposits due to flow of
customers and vice-versa. Deposits to growth simply depended upon the
performance of the bank which leads to attract clients which further tend to increase
its deposits. How a bank can be able to increase current deposits as compared to
previous year deposits.
A financial analyst uses this ratio as a benchmark to determine that how a bank will
increase its deposits. Deposits are liabilities on the bank of the depositors or creditors,
as stated by C.H Gibson that banks advance deposits to derive future income and
profits with specific spread earnings.

DEPOSITS TO GROWTH RATIO

29.17%
30.00%

25.00%
2021
20.00%
2020
Results

12.71%
15.00% 11.29% 2019
8.97%
10.00% 2018
5.00% 1.61% 2017

0.00%
2021 2020 2019 2018 2017

Years

Figure 4.14 Deposits Growth Ratio

4.5.8 Equity Multiplier
Equity multiplier is a form of financial ratio, which demonstrates that how much of
the total assets are consist of shareholders’ equity. This ratio illustrates that number of
the shareholders’ equity in total amount of the assets of the bank.

63
 Formula

Table 4.21 Equity Multiplier

Years 2021 2020 2019 2018 2017
Ratios 17.34 15.21 12.10 13.30 15.17

Interpretation
Equity multiplier ratio shows that how much proportion do shareholders own in total
assets of the bank. The equity multiplier ratio has a decreasing trend from 2017 to
2019. The reason for this trending decrease is that the proportion of shareholders’
equity has been increased more than a net increase in total assets of the bank for the
given period. If we analyse the balance sheet of the BAF we will easily find that the
equity proportion is almost increased up to 33.17%. in contrast, the total assets of the
bank are increased up to 6.71%.
Similarly, there is a net increasing trend in this ratio for the next two years. 2020 and
2021. The reason is that, if we analyse the balance sheet of the BAF for that period
we will find that the assets side of the bank has been increased up to 62.81% which
more than 13.60% of the net increase in the equity of shareholders.

EQUITY MULTIPLIER

17.34
18
15.21 15.17
16 13.3
14 12.1
12
Results

10
8
6
4
2
0
2021 2020 2019 2018 2017

Years
2021 2020 2019 2018 2017

Figure 4.15 Equity Multiplier

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4.5.9 Earnings Per Share (EPS)
Earnings per share ratio is a form of profitability ratio. In this ratio a financial analyst
measures that how much profit does a firm has earned of per share of common stocks
(numbers of outstanding shares). This ratio indicates that how much profits are earned
on each share of the stocks, if the EPS ratio is high, this will indicate that a firm has a
net profit increased. Similarly, if the EPS ratio is less or decreased this will give the
result that the firm is not profitable for that respective period.
Formula

= :

Table 4.22 Earnings Per Share (EPS)

Years 2021 2020 2019 2018 2017
Ratios 8.00 5.89 7.15 6.60 5.24
Interpretation
EPS ratios depend upon changes in profits and increase or decrease in number of
outstanding shares. For example, if we kept profit is the same for a year and only
increase number of shares, which is a devisor I the formula, so ultimately at the end of
the result we will find a net decrease in the EPS. Again, if we control number of
shares and change the profits of the firm, so accordingly the EPS will change with it.
If we analyse the above tabulated data so there is an increasing trend in the EPS
because, there is a regular increase in the ratio of profits of the BAF from 2017 till
2019. Although, number of shares are also increased but the ratio of profits is
increased almost 51.73%, due to which we have a net increasing trend the EPS.
Similarly, for the year 2020 EPS has a decline because of the decrease in the profits,
almost 8.068% as compared with the previous year, of the firm for that year. Number
of shares are increased and profits in that respect are decreased as shown in the
balance sheet of the BAF 2021. Therefore, the EPS has net decline for the year.
At the end of the analysis there is another hike (increase) in the EPS of the BAF
because the profits are increased to almost 35.72% for the year 2021, while number of
shares are the same for that year, as shown in the balance sheet of the firm. This
increase in profits has increased the net result of the EPS, which can be observed in
the figure below.

65
 EARNING PER SHARE

8
8 7.15
6.6
7 5.89
5.24 2021
6
Results

2020
5
4 2019
3 2018
2 2017
1
0
2021 2020 2019 2018 2017

Years

Figure 4.16 Earning Per Share

4.5.10 Spread Ratio
Spread ratio is a form of profitability ratio, which illustrates that how much a firm has
earned (interest earned) from total interest income of the firm. Interest income as
compared to interest earned. A firm’s total generation of interest income but using this
ratio an analyst would like to measure that how much interest is earned from total
interest income of the firm.
“Interest income” interest income means the net revenues of the bank from utilization
of assets such as advancing of loans, signing of mortgages and other financial
securities of the bank in a specific year. Banks income comes from advancing of
loans, means to give loans to income deficit sectors on demand on a specific ratio of
interest also called spread of the bank for a specific period called maturity period.
According to the time banks advance these amounts at a specific interest rate, which
is the interest income of the bank.
“Interest earned” interest earnings of the bank are the amount of money gain from the
total interest income of the bank. Suppose a bank earns interest income which is
revenue of the firm from which the bank is further removes it expenses, the remaining
amount will be known as interest earned. How much amount has been earned from
total interest income of the bank?

66
 Formula

Table 4.22 Spread Ratio

Years 2021 2020 2019 2018 2017
Ratios 45.96% 48.26% 48.53% 53.26% 51.58%
Interpretation
Spread ratio, as supposed by the formula, depends upon two major variables of the
firm, interest income and interest earned. If all other things are constant and w
increase income of the firm so the ultimate results will lead to increase in net value of
spread ratio. On the other hand, increasing interest earning of the firm will lead to
decrease spread ratio of the firm.
If we investigate the above tabulated values, there is increasing value for the first two
years from 2017 to 2018, this is because of the increase in ratio of interest income
which is equal to 7.98% between the two given years. Which is more the increase in
interest earnings of the firm for the same two years which is equal to almost 4.83% of
the bank.
Similarly for the next three years there is a net decreasing trend of the bank spread
ratio, because of regular increase in interest earnings of the firm since 2018 till 2021.
This leads to decrease the spread ratio because analysing the income statement of the
firm there is a high proportional increase in interest earnings of the bank as compared
to the ratio of interest income of the bank.

67
 SPREAD RATIO

53.26%
54.00%
51.58%
52.00%
2021
50.00% 48.26% 48.53%
Results

2020
48.00%
45.96% 2019
46.00% 2018

44.00% 2017

42.00%
2021 2020 2019 2018 2017

Years

Figure 4.17 Spread Ratio

TREND IN PROFITABILITY

100%
90%
80%
70%
60%
50%
Series5
40%
30% Series4
20% Series3
10% Series2
0%
Series1

Figurer 4.18 Trend in Profitability

68
4.6 STRATEGIC ANALYSIS
4.6.1 SWOT Analysis
SWOT analysis was introduced by Albert Humphrey, who was an American
businessman and business management consultant, proposed by (Sophie Humphrey
and Kathryn Weston 2015). Strength, Weaknesses, Opportunities, and Threats, in
short form SWOT. Organizational decisions should be taken on the base of accurate
SWOT analysis. Organizations to find their current position and identify that what the
strength, weakness, opportunities, and threats to the management while taking
massive steps in the competitive global environment. Management must design
strategies to be combatant in the market. In the work environment management need
to implement those strategies in the market, which may oblige the organization to
achieve goals of the firm. As financial analysts research certain risks to financial
institutions, such exchange rates differentials, political risks, inflation, Direct Foreign
Investments DFIs and Portfolio investment decline, switching off domestic customers,
government policies, tax rates and credit creation risk and so on. For the purpose to
align operations and stepping towards the major goals of the firm, top level
management needs to draw a line between SW and OT (Strength & Weaknesses) as
compared to (Opportunities & and Threats). This alignment or balance is required
because Strengths and Weaknesses of the firm are concerned with internal
environments of the firm and are in present time. A strategic manager must consider
those factors which are affecting firm from internal background. Similarly,
Opportunities and Threats are factors which affecting a firm from external
environment, and these are also related to the future position of the firm. Strategic
analysts must work on this area to hedge a firm from external future imbalances.
Appropriate SWOT analysis will empower a firm to be competitive against
operational and market risks. It gives the best advantage to the organization which
decreases the chance of bankruptcy. It helps to find out what's working well and
what's not well. These are the big issues for an organization, but SWOT analysis is a
simple technique that may able the organization to find out (David, 2003).
4.6.1.1 Strengths
Strength, as suggest from the term, which means that capabilities and power of the
firm that distinguishes you from your competitors in the market. Strengths are
motivations to an organization’s staff to access to those areas which are certainly

69
strong from other competitors. Strength is the internal part of any organization;
depends upon organization assets, processes, and people. Islamic Bank Alfalah has a
core strength of providing Halal Banking services to its customer (Dealtry, 1992).
Halal is an Arabic word which means an allowed or permissible act or business.
Islamic bank Alfalah offer those products to their customer which is under Islamic
Shariah.
As we can claim that customers are the potential assets to any organization. Customer
satisfaction is one the most important objectives of Islamic bank Alfalah, because
customer value creates customer satisfaction. Customer satisfaction furthers
customer’s loyalty which in turn enhance value of the bank (BAF) and increase the
market share price of the bank. The customer service officers of Islamic bank Alfalah
treat friendly to their customers to discuss and solve their problems in proper way,
that’s why Islamic bank Alfalah win customer satisfaction award in Pakistan, in 2018
(BAL,2021).
Dealing and treating method of the Islamic bank Alfalah is very impressive. Decent
treating of an officer of Islamic bank Alfalah may enlarges the perception of the
customer to feel secure while banking with Islamic bank Alfalah. This was our
personal observation inside the Bank Alfalah Timergara branch. A well-organized
Customers Service Officer (CSO) can enhance image of the bank because, CSO deals
directly with customers.
Location means that how easy customers or client can access a firm or bank (BAF).
Well-known location helps the target needed customers and fulfil their needs with an
easy access. For example, the Islamic bank Alfalah Timergara branch is being situated
in the business hub of the district which accessible to the overall market of the bank.
Global trade or foreign trade is another important goal of the Islamic bank Alfalah
because the bank management wants to increase foreign trade and to maintain a
healthy and friendly relationship with other financial intuitions (Global, international),
to easily transfer funds throughout the globe for different beneficial purposes (BAL,
2021).
Bank Alfalah has excellent network of banking throughout Pakistan as compared to
other Islamic banks. Bank Alfalah wide network has a sole motive to access domestic
customers. Islamic bank Alfalah has also one of the main objectives to expand its
branch network throughout the country to fulfil its customers’ needs and satisfaction.
Bank Alfalah is one of the largest private banks in Pakistan with a network of 779
70
branches in more than 200 cities across Pakistan. Islamic bank Alfalah is consider one
of the growing banks in Pakistan. The main aim of extension to increase customer in
number and approach to different segments of the customers (BAL, 2021).
Islamic Bank Alfalah is a very digitalized bank in Pakistan. Islamic Bank Alfalah has
a well-developed computerized system. All information of the customers, regarding
transactions, deposits and online services are performed through a computer (BAL,
2021).
Islamic Bank Alfalah has a very good reputation in every financial sector of the
country. This is due the excellency regarding auto finance, agricultural finance, and
industrial finance etc (BAL, 2021). Islamic Bank Alfalah provides satisfactory
environment to its customer. Bank employees were treated to their customer as a
guest, given proper place for sitting (Own Observation).
Customer satisfaction is the main aim and objective of Islamic bank Alfalah. The
officer of Islamic bank Alfalah treat friendly to their customer give much space to
customers to discuss and solve their problem in a proper way, that’s why Islamic bank
Alfalah win in 2018 customer satisfaction award in Pakistan (BAL,2021)
Trust of customers can be built through their satisfaction from management of the
organization. It is truly related to top level management that how they care about their
customers’ interests. Treating of an officer of Islamic bank Alfalah may higher the
perception of customers to feel secure while banking with Islamic bank Alfalah.
The good location gives help to target needed customers and fulfil their needs with
easy access. For example, the Islamic bank Alfalah Timergara branch is being situated
in the business hub of the district, so it is very easy for the concerned customers to
have an easy access to the bank. This leads to satisfaction of the customers, due to
which customers can be switched-on for long-term.
Management of Islamic bank Alfalah focuses to increase foreign trade business to
maintain and develop a healthy and friendly relationship with other financial intuition,
to easily transfer of their fund throughout the globe (BAL, 2021).
Bank Alfalah is one of the largest banks in Pakistan, with a network of 790 branches
across more than 200 cities in the country. The aim of extension is to increase
customer in numbers and approach to different customer segment. Islamic Bank
Alfalah has a well-developed computerized system. Customers all information
regarding the transactions, deposits and online banking is performed through a

71
computer. Bank Alfalah is equipped with latest banking technology which facilitating
its customers.
The reputation of Islamic Bank Alfalah in every domestic sector in Pakistan is
excellent, whether in auto finance, industrial and agriculture finance. Islamic Bank
Alfalah provides a satisfactory work environment to its customers. Bank employs
treat customers in a better way, they are well-mannered and giving much space to
their clients, which we have observed in the branch Timergara, (BAF, 2021).
Islamic Bank Alfalah gives more attention to provide better services to the customer
to facilitate and encourage them to be switched-on always with the bank. Islamic
Bank Alfalah gives much attention to suggestions of the customers.
4.6.1.2 Weaknesses
There are also some weaknesses to the Islamic Bank Alfalah in organizational sector,
in the market competition and in management. Due to some of those constraints and
weaknesses, the management of Islamic bank Alfalah does not able to achieve its
goals in all the way easy. Management must consider these weaknesses at the core
objectives to manage properly to overcome issues regarding weaknesses of the bank
and allow the bank to progress further. Islamic bank Alfalah has also some
weaknesses which are the following. I have my own observations only restricted to
the branch of Timergara.
Advertisement was the first major weakness of the management of the BAF
Timergara branch, management has a very less attention to the advertisement and
other awareness campaigns. Advertisement attracts attention of the people toward
product and services, offered by the bank. The bank also pays little attention to
awareness seminars in school, colleges, and university campuses in our region (Dir
Lower). Most of its customers are unaware of the bank’s product and services. Islamic
Bank Alfalah has not advertisement like other Islamic banks, such as MCB, Taqwa
Islamic bank etc.
The environment, inside the bank shows that there was burden of responsibility for
some employs at specific areas. To decrease employs problems, management needs to
distribute the work structure in such a way so that the problems of employs to be
solved. Commitment, for any organization should be the most important aspect for an
organization, that how your organization services provide a satisfactory response

72
towards customers. In Islamic bank Alfalah, some of their staff members were not
very committed to their position.
The Islamic bank Alfalah makes the deal with the insurance company on behalf of its
customers suppose for car financing but once the car is financed the customer comes
in a direct contact with the insurance company instead of the bank, which makes the
customer go through a lot of problems faced by the virtue of the insurance company.
This leads to dissatisfaction of the customers, due to which customers are switching.
Islamic Bank Alfalah has not a well-developed department of risk management; they
were facing a shortage of employees and resources.
4.6.1.3 Opportunities
Due to provision of permissible and halal banking system, Islamic Bank Alfalah got
tremendous popularity in a very short time, in the domestic market in Pakistan. There
are some opportunities which may be able Islamic Bank Alfalah to stand among the
top global financial institutions in Pakistan. Information technology play an important
role in the 21st century. To save time, mass the customers do their banking through
internet, which is called E-banking. Islamic Bank Alfalah need to design and provide
advanced information technology to their customer for easy access through online
facilities. Advancement in technology is the opportunity to the Islamic bank Alfalah,
as we know that Islamic bank Alfalah is digitalized bank and can lead further in the
financial technology (Fintech).
There are many Islamic banks in Pakistan but most of them do not have an effective
branch channel. Islamic Bank Alfalah has an extensive branch channel across all the
country which may give the opportunity to capture the market and give stability to the
business.
Growing Islamic Bank Alfalah is twice against growth in conventional banking. This
growth is because se we know that majority of the Pakistan population is a Muslim.
They prefer all economic and financial activities to be based on Shariah and Islamic
law. Therefore, people are diverting to Islamic economic system as compared to
conventional banking system.
Islamic Bank Alfalah is already the market leader and has brought its rate down to
8.5%. So, the market department should increase its potential and get as many
customers as possible through corporate deals, discounts for organizations, and

73
promotional campaigns. They can utilize their brand image and bank reputation to
maintain their image in the domestic market of Pakistan.
The Islamic Bank Alfalah should involves it financing agent, who should deal with
the complaints of the customer from the insurance company and should help the
customer in solving their problems.
4.6.1.4 Threats
Threats are attached to the operations of any business firm, in different forms. These
threats lead to impact the organization in negative form. Organizations need to take
proper action to be competitive in market. Organizations should be alarmed against
issues effecting growth of the organization. (Dealtry, 1992).
The following are threats for Islamic Bank Alfalah.
Due to the outburst of the Global Pandemic COVID-19 the global economies
shrunken. Due the lockdowns and fair of prevailing the pandemic people tend to stay
home. This effected the trading activities in the stock market. Which also impacted on
conventional and Islamic banking system of the world. Similarly, this too effected the
economic condition inside Pakistan. The income level of individuals was low, people
adjust their daily income on the daily expense, due to which the saving habit of the
people is very low. People credit their amount from their account. When people lower
their income, it directly affects the business environment in the state. In present days
economic condition is one of the big threats for Islamic Bank Alfalah (Adeyemi et al,
2016). Alhamdulillah, we have been recovered from the global pandemic in the recent
days, but this has affected the domestic as well as the global economies.
Islamic Bank Alfalah is facing a very strong competitive environment, such as
Muslim commercial Bank (MCB), United Bank Limited (UBL), Habib Bank, etc.
These Banks already have a strong position in the market, and grow their business day
by day, but SWOT analysis signifies that Islamic Bank Alfalah that its strength can
defect its weakness and its opportunities have more than its threats (own observation).
Most other Islamic Banks and other insurance companies offer insurance on Shariah
base, fulfil all these principles of Islamic law. It may capture most part of the market.
Most of the customer's contract with other insurance companies.
4.7 PEST Analysis
PEST analysis is an important popular business analysis tool. PEST analysis is very
effective and easy to use to analyse a business firm. PEST analysis stands for

74
Political, Economic, Sociocultural, Technological, Legal, and Environmental. PEST
analysis is an extremely easy analysis in using. It gives more effective feedback to the
organization. In PEST analysis, the chosen organization may analyse six different
major perspectives. Political, Economic, Sociocultural and Technological. By doing
PEST analysis you unlock a powerful understanding of how a given business is
performing from every angle. As stated above, PEST analysis is a business analysis
tool that looks at things from six crucial viewpoints. To conduct a PEST analysis, you
find as much information as you can about the business and separate it between the
six categories. The key to getting PEST analysis right understands what each category
stands for (Khan, 1986).
4.7.1 Political
Political analysis is very important for all organizations, under which political
environment they operate. Because Political environment changes the economic and
operational form of the any organization. Political factors are major factors which
influence overall functional background of the firm. The impact of nationalization has
an abundant and massive impact on the business activities of the firm. Bad political
environment creates issues regarding major and macro, such Privatization and
Nationalization decisions of the country. The political environment of Pakistan is not
stable due to which financial institutions face macro problems, such policy rates,
exchange rates, tax, and interest issues.
Political destabilizations decrease foreign investments in DFIs (Direct Foreign
Investments) and Portfolio investments, which effect on financial markets and
institutions. When DFIs and portfolio investments are increasing in a country so
ultimately this will lead to put pressure on net GDP and exchange of the country. This
simply means that a country currency will depreciate where inflation will go high due
to this type of situations in a state.
4.7.2 Economic
The economy is considered the backbone of the country. If there is economic stability
in the country, it will bring change, the country will move towards development in all
sectors such education, infrastructure, health, rehabilitation, and R&D (Research and
Development). But in Pakistan, the economic condition is always in negative phase.
There is a daily decline in the economy of Pakistan. Disability in exchange rates, the
disposable income is decreasing, and the rate of unemployment is growing. If we look

75
at these factors, we can easily identify that the economic condition of Pakistan is not
looking batter.
Macroeconomic decisions in a state also have a direct impact on operations of all
financial institutions. Economic decisions like exchange rate stabilization, inflation
rates, housing sales and overall economic growth. These decisions impact directly
banking sectors for example if the interest is increasing due to the federal decision in
a state, so banks will increase interest rates for deposits due to which the value of
currency will increase, if all other things are constant. Similarly, tax decisions also
influence banking sectors, if tax are increasing due to economic decisions of the state
so there will problems to foreign investors and ultimately foreign investments will
decrease which further put pressure on the economy.
4.7.3 Sociocultural
Consumer is an important part of any business. Due to bad economic conditions, most
people do not save their money in banks. Their expenses are more than their income.
If the economic conditions of Pakistan were strong, people would have motivated to
savings which leads to increase in investing activities, but in Pakistan, the situation is
going in the opposite direction. Where people have less attention to save income and
then take major investment decisions. The population of Pakistan is growing day by
day, current employment is less than population growth, and people regularly change
their attitude towards employment.
Due to sociocultural factor people of the state are risk averse, which means that
entrepreneurial societies are not developing in a state where there is less risk-taking
environment. Entrepreneurial societies help a country to bring many innovations in
production and in services sectors of the country. Entrepreneur society leads to major
exports of both goods and services of the country. For example, Amazon and apple
are the topmost rated brands in the world which is a global demand of countries
throughout the globe. This helps the American economy to do a huge number of
exports and can achieve massive amount of dollars inflow. Weak sociocultural
environment leads to decrease entrepreneurial society of any state. These factors also
influence the baking sectors of Pakistan, which further decrease all the investment and
economic activities if the Islamic bank Alfalah.

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4.7.4 Technological
Technological advancement is one the key major perspective of the banking sectors
because it leads that how easily services of the bank can be used. In technological
perspective the Islamic bank Alfalah has major advancements, such as digital banking
(E-banking), online banking, latest banking software and mobile applications. In this
perspective bank Alfalah has a comparatively positive advantage against its
competitors. As we are familiar with the current market situations, technological
development and advancement is one of the major keys to progress and lead to
success of any business, firm, organization or even a country.

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CHAPTER 05 RECOMMENDATIONS AND CONCLUSION
5.1 Conclusion
As the bank operates under Islamic jurisprudence and Shariah it offers products and
services to its customers truly based on Islamic Shariah, to fulfil customer needs. It
plays a vital role in the development of the economy in Muslim countries. It provides
job opportunities to people, provides funds financing to firms, and participate in
different trades and investments.
 Decision making process of the Islamic bank Alfalah is efficient. There is an
effective communication between employees of the bank. Bank has strong
coordination and good control over the activities. The Islamic bank Alfalah
(Timergara branch) has strict compliance with rules. Top level management make
the policy for facilitation of customers while efficiently the subordinated
management implements those policies.
 Trending analysis have shown that is an increasing and decreasing trend in the
different ratios are 0ccured in the last five years of the BAF from 2017 to 2021.
There are valid reasons are provided which transform the information of the bank
statements and support the trending analysis in all ratios. The analysis has been
done in Chapter 04. Suppose the trending analysis in the liquidity ratios, why and
how this up down trending? So, the authentic reasons are provided in the
interpretation of the ratios. Similarly, the trending analysis in leverage ratios, why
the up down movements in these ratios? For this we have provided reasons in
interpretation analysis of the ratios in chapter 04 of this internship report. There is
also another increasing trend in deposit growth ratio. There is a decreasing trend
in debt to total ratio. There is an increasing trend in profitability ratio. There is a
generally increasing trend in the Reserve ratio. There is an irregular trend in the
growth ratio.
 In an extension of the network of bank’s branches, growth occurred in banking,
and strong promotional campaign were the areas in which the bank has some
favorable condition.
5.2 Recommendations
We have our little experiences in the bank on the base of which we cannot
recommend all the issues together. But there are some core recommendations we must
express them. The first recommendation will be the HR department. Human resource

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management is one most important assets of any organization, because it manages,
coordinates, and supervises the overall operations of the bank. Goals, Mission, Vision,
and major decisions are fully depended upon it. If the organization has proper and
talented Human Resources Management, it can easily reach to its destination without
facing any difficulties. Leadership skills and styles are the core variables which
impact the overall movement of the organization. Based on analysis l have some
suggestions, if these were followed it will help in positive feedback on profitability
and other sectors of which it can lead the development of bank with rest of other
Bank.
5.2.1 Better training program
During my internship in Islamic Bank Alfalah, I have notified that the training
program was not too well. Specially in marketing department. Marketing is one of the
most important assets of the Bank because it shows the brand of the bank to the
customers in the market. If the marketing department is effective, ultimately it will
enhance the image of the bank while attracting customers. The Bank employs were
less able to motivate customers toward the Bank. The Islamic Bank Alfalah needs to
give proper training to those employs to make them able to know how to take proper
decisions in complex situation, improve their conversation, convincing power,
adopted modern technique to enhance their employees' capabilities.
5.2.2 Customer services
Customers need efficient, facilitative, and direct services from any organization.
Management of each organizations need to keep eyes on every opportunity to avail to
improve their organization. During my internship program of as an internee in
Islamic Bank Alfalah we learned that enhancing customer service can lead the bank to
attract more customers towards it. Giving equality to all customers on every aspect to
make them loyal towards Bank. Customer care is one of the important strategies of
the bank management to deal efficiently with the customers because customer are the
long-term assets of the branch of the bank due to which the bank can create high
deposits.
5.2.3 Computerized banking system
Digitalization is the prime need of today’s market. Digitalization saves time of
customers while doing any transaction or financial activity in the bank. Every
customer wants to save time. Islamic Bank Alfalah needs to provide latest computer

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service in which customer can be able to do banking from online. Providing these
types of facilities, a bank can create flow of customers to easily access to their
account in one touch or by one phone call.
5.2.4 Communication
Generally, customers attracted to those salespersons who have effective
communication skills. Therefore, the management of Islamic Bank Alfalah needs to
concentrate on its communication. Batter communication will ensure the bank to set
objective according to its employee's capabilities. Good communication leads to
reduce conflicts in workplace environment and improve teamwork environment
which then helps to achieve long-term goals of the firm. BAF should maintain
effective communication inside the management teams and framework and should
create a positive communication with external environments of the bank. This can be
traced from a research paper with the title of “The influence of workplace
environment on worker’s welfare, performance and productivity” (Emmanuel
Majekodumni Ajala 2012).
Customer services officers have a distinct role in making an efficient communication
with the clients and customers of the bank. Bank Alfalah must ensure to hire those
officers who can effectively attain customers of the bank. Similarly, the bank should
promote those officers who have consistently positive performance. These employees
help BAF’s management to enhance value of the bank through a strong and effective
communication.
5.2.5 Job analysis
Every employee of the Bank is different from each other, everyone has their own
knowledge, skills, and capabilities in their work. A proper job analysis will give help
to identify individual needs evaluating their job to make better their performance.
5.2.6 Electronic data processing audit
In Islamic Bank Alfalah has no audit is carried out on the bank computer system.
There should be an Electronic Data Processing (EDP) audit so that any material
discrepancies resulting from fraud or error can be deducted.
5.2.7 Working conditions
Working area is comparatively smaller as compared to the needs of the branch. As a
result, there is a lesser working space provided to employees. They must work for
about eight hours and sometimes even longer. The congested place affects their

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efficiency at work. It is suggested that better working conditions should be provided
for effective and efficient results. Simply when performance is good, the end results
will be good as well.
5.2.8 Promotion
The management of Islamic Bank Alfalah does not give proper attention to promotion
and publicity. They do not have proper advertisements like other banks, due to lack of
advertisements, most of their own customer is unawares from most of the product
which offers by Islamic Bank Alfalah. Advertisements make the customer aware of
products and make their attention towards it. The website of Islamic Bank Alfalah
also does not give the proper information about the product like features, benefits, etc.
Islamic Bank Alfalah has needed to draw their proper attention towards promotion
and publicity.
5.2.9 Market visits
Bank work as financial institutions in the market, as financial institution it is
obligatory to know the importance of the market in which they offer services to their
respective clients, to collect information about customer financial and business
position, the reputation of the market that in what position the market is standing
nowadays? For finding these information banks have need market specialists, but
Islamic Bank Alfalah assigns this task to their newly recruited employees. These
employs do not have proper knowledge and experiences about how to survey on the
market? Islamic Bank Alfalah should analyse the through professional analysts and
researchers of the financial markets.
5.2.10 Activities assignments
During my internship program at Islamic Bank Alfalah Timergara branch, I noticed
that there were not actual assignments of tasks of activities. The function of the
operation department is done by the accounting department, it creates confusion when
the bank takes conflict decision-making. To avoid such confusion Islamic Bank
Alfalah should distribute all activities to their employees to reduce confusion and give
efficiency and effectiveness to the organization.
5.2.11 Employee motivation
Motivation is a tool which leads to changes in every aspect of the organization. To
motivate employees about their responsibility and achievement make them advance as

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compared to employs of other firms. Islamic Bank Alfalah should use the following
motivators for their efficiency.
 IT skills
Providing the latest IT skills such as hardware and software in the Islamic Bank
Alfalah helps employees to easily access data with high speed.
 Forecasting techniques
Islamic Bank Alfalah need to motivate and train its employees to do future predictions
to make management better which can meet those needs in the future.
 Encourage depositors
Most of the bank employees give more attention to big depositors (big clients). Small
depositors are also important for the bank. Bank employees should give equal
attention to small depositors, to encourage them to savings and investments with the
bank.
 Employees’ awareness
Employees must be aware of the management’s achievements in long run. Islamic
Bank Alfalah manager must inform their employees at every level from the very basic
goal to the ultimate mission and value of the organization.
 Motivate saving
In Pakistan people have less attention towards savings and investing funds in different
financial assets. Islamic Bank Alfalah should motivate those people toward saving in
various investment schemes. It results Islamic Bank Alfalah can capture a portion of
non-saving people will lead to more customers.
5.2.12 Employees training and development
Islamic Bank Alfalah should give proper training to its employees about their job.
Employees are the most important asset of any organization because organization
goals and objectives depend on an employee's performance. Better recruitment and
selection processes can help a firm to attain intelligent employees. Employees lead to
reduce efforts and cost of the firm in each sector of the firm operations. Skilful
employees are more important because they can run the bank through efficient ways.
Better performance of the employees of the firm lead to enhance value of the firm, in
case of production and profitability and wealth maximization of the firm.

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