Introduction
Allied Bank limited was the first Muslim bank to have been established in Pakistan. Established in last month of 1942 as the Australasia Bank in Lahore with a paid-up share capital of Rs. 0.12 millions under the Chairmanship of Khawaja Basher Bux, the Bank attracted deposits equivalent to Rs. 0.431 million in its first 18 months of business. Now a day, Allied Bank's paid up Capital and reserves increase than Rs. 130 million, deposits exceed Rs. 325 billion and total asset of bank exceed Rs. 418 billion.
Allied Bank is one of the largest banks of Pakistan, the headquarter of Allied bank is based in Lahore. Currently there are 735 branches of Allied Bank those are located across Pakistan in different cities. In 2004 the ownership of Allied Bank was given to the Ibrahim Group. Allied Bank has a large online system through which its branches are interconnected with each other. Allied Bank was established in 1942 and at that time it started working as Australian Bank. Allied Bank is a complete Muslim bank of Pakistan during and after the 2nd war of independence it was underwent in the unrest situation and destroyed by the riots in East Punjab. Due to strong influence during independence war all branches of Allied Bank that were located in the India shut down. After independence few branches were opened in the big cities of Pakistan these are Karachi, Rawalpindi, Sialkot, Sargodha, Peshawar, Jhang and Gujranwala while later on it was further extended and new branches were opened in Multan, Bahawalpur and Quetta. Despite the great damage that was experienced by the Allied Bank, this bank grows up and earns a profit of 50,000 during the years of 1947 – 1948. In late 70's Allied Bank had approximately 101 branches all over Pakistan. In 1971 when East Pakistan got apart Allied Bank lost its 51 established branches. But that miss happening could not stop Allied Bank to grow more and in the year 1973 Allied Bank grew up with 186 branches in the current Pakistan. During 1974 Australian bank was renamed as Allied bank limited as the board of directors was dissolved. Allied Bank was privatized in 1991 and it was the first bank of the world that was purchased by its employees. Later on, in 2004 Allied Bank was handed over to the Ibrahim Group. Today, with its history of over 60 years, the Bank has built itself organization with a strong equity, assets, goodwill and deposit base. It offers universal banking services, while placing major emphasis on retail banking. The Bank also has the largest wide network of 780 online branches in Pakistan and offers various technology-based products and services to its diverse clientele. The Bank is principally engaged in providing corporate banking facilities to Pakistan’s most valued corporations and institutions. Additionally, it also facilitate general banking services to commercial, agricultural, industrial and individual customers throughout Pakistan.89% of the Bank’s deposit base is composed of deposits from the backward areas. The Bank’s fundamental strengths lie in its strong lending capability, as well as providing a different variety of financial services, which has allowed ABL to diversify and enhance its deposit base.
Vision:
To become a dynamic and efficient organization providing integrated solutions in order to be the first choice bank for the customers.
Mission:
To provide value added services to our many customers.
To provide high tech innovative solutions to meet customers' problems.
To establish sustainable value through growth, effectiveness, efficiency and diversity for all stakeholders.
To provide a challenging working environment and reward dedicated group members according to their talent and performance.
To play good role in contributing towards the society.
Core Values:
Integrity
Excellence in services
Best performance
Innovation and growth
History of allied bank of Pakistan
The history of bank has been about dedication, commitment, professionalism and adapting to environmental changes, leading to its immense growth and stability. It’s these factors that have established it a Bank the rest look up to.
The pre Independence history 1942-1947
In the beginning 1940s, the Muslim community was beginning to realize the need for its active participation in the fields of business and industry. Since the late 1880s, Hindus had established a commanding presence in the areas of industry, trade and commerce and were especially dominating in the Sub-continent area. Banking, in particular, was the exclusive forte of Hindus and it was popularly and wrongly believed that Muslims were temperamentally unsuited for this profession. It was particularly upsetting for Khawaja Bashir Bux to hear that “Muslims could not be successful bankers”. He decided to step-up to that challenge and takes the lead in creating this first Muslim bank by the name Australasia Bank Limited in Punjab, which was to become Pakistan in 12th of the last month of 1942. Initial capital of the Bank amounted to Rs 0.121 million, which was increase to Rs. 0.50 million by the end of the first year of operation, and by the end of 30th June 1947 capital increased to Rs. 0.674 million and deposits increased to Rs 7.727 million.
Allied bank 1947-1974However, it was severely hit by the riots in East Punjab. The Bank was identified with the Pakistan Movement. At the time of independence all the branches in India, (Amritsar, Batala, Jalandhar, Ludhiana, and Angra (Agra)) were shut down. New branches were established in Karachi, Rawalpindi, Peshawar, Sialkot, Sargodha, Jhang, Gujranwala and Kasur. Later, the new network spread to Multan and Quetta as well. The Bank financed trade in cloth and food grains thus, played an important and creative role in reestablishing consumer supplies during the early months of 1948 affected by riots. Despite the complex conditions prevailing and the substantial set back in the Bank’s business in India, Australasia Bank made a profit of Rs. 50,000 during 1947-49.
By the end of 1970 it had 102 branches. Unfortunately, it lost 52 branches during the separation of East Pakistan. But the Bank did well despite losing a lot of sits assets and by the end of 1973 had 185 branches in West Pakistan.
Allied bank 1974-1991
In 1974, the Board of Directors of Australasia Bank was dissolved and was renamed as Allied Bank. The first year was highly successful; profit exceeded Rs. 10 million, deposits rose by over 50 percent and approached Rs. 1460 million. Investments rose by 71 percent and advances exceeded Rs. 1080 million for the first time in the banking history. 115 new branches were opened during 1974 and the Bank started participating in the Government’s spot procurement agriculture program. Those seventeen years saw a rapid growth for the Bank. Branches increased from 353 in 1974 to 748 in 1991. Deposits increased from Rs. 1.45 billion and Advances & Investments from Rs. 1.34 billion to Rs. 22 billion during this period. It also established three branches in the U.K.
Allied bank 1991-2004
As a result of privatization in September 1991, Allied Bank entered a new phase, and became the world’s first bank to be owned and managed by its employees. In 1993 the “First Allied Bank Modaraba” (FABM) was floated. After privatization, Allied Bank became one of the premier financial institutions of Pakistan.
Allied Bank’s capital and reserves were Rs. 1.525 billion; its assets amounted to Rs. 87.536 billion and deposits to Rs. 76.038 billion. Allied Bank enjoyed an enviable and good position in Pakistan’s financial sector and was recognized as one of the best amongst the major and large banks of the country. In August 2004, as a result of capital reestablishedment, the Bank’s ownership was transferred to a consortium comprising Ibrahim Leasing Limited and Ibrahim Group. Today, the Bank stands on a solid foundation built over 63 years of hard work and dedication, giving it a strong equity, an asset and deposit base and the ability to offer customers universal banking services with more focus on retail banking. The Bank has the largest network of online branches in Pakistan and offers different technology-based products and services to its diverse clientele through its wide network of more than 700 branches. In August 2004 as a result of capital reconstruction, the Bank’s ownership was transferred to a consortium comprising Ibrahim Leasing Limited and Ibrahim Group.
Allied bank 2005-2010
In May 2005, Ibrahim Leasing Limited dissolved and the company was vested into Allied Bank Limited. ALL the shareholders were issued ABL shares instead of the all shares held by them. An application for the listing of ABL shares in all the Stock Exchange Companies of Pakistan was made. Today, all Allied Bank Limited shareholders can trade in the Bank’s shares at their will.
Board of directors of allied bank
• Mohammad NaeemMukhtar (Chairman)
• Sheikh Mukhtar Ahmed (Director)
• Mohammad WaseemMukhtar (Director)
• Sheikh Jalees Ahmed (Director)
• Abdul Aziz Khan (Director)
• Mubashir A. Akhtar (Director)
• PervaizIqbal Butt (Directors)
• Khalid A. Sherwani (Chief Executive Officer)
• Muhammad Raffat (Company Secretary)
Management
• Khalid A. Sherwani (Chief Executive Officer)
• FareedVardag (Chief Risk Officer)
• Khawaja Mohammad Almas (Head, Core Banking Projects)
• Muhammad Yaseen (Group Chief, Treasury
• Mohammad Abbas Sheikh (Group Chief, Special Assets Management)
• Shafique Ahmed Uqaili (Group Chief, Human Resources)
• Muhammad JawaidIqbal (Group Chief, Corporate & Investment Banking)
• Tariq Mehmood (Group Chief, Operations)
• Muhammad ShahzadSadiq (Group Chief, Audit & CRR)
• Waheed-ur-Rehman (Group Chief, Compliance)
• Mujahid Ali (Group Chief, Information Technology)
• Muhammad Raffat (Company Secretary)
• Zia Ijaz (Group Chief, Commercial & Retail Banking)
Privatization
The management, anticipating the prior years’ provisioning in line with the ongoing banking sector reforms, has already initiated major re-engineering and re-organization of the Bank. The Bank had embarked upon a two-pronged strategy of adopting a rationalization program to bring down costs, introduce innovative products and offer specialized financial solutions and services to customers. Measures, which have already been implemented, are set out below:
• With the objective of achieving decentralization and cutting down expenses, the decision-making has been reduced from four to two tiers. 69 controlling offices, comprising of 4 provincial, 18 circle and 46 zonal offices have been consolidated into 16 regional offices.
• With a view to improving efficiency and right sizing the ABL network, 65 branches have been closed or merged.
• The corporate unit has been re-structured by reducing the number of divisions and redefining their functional responsibilities, so as to provide support to field operations.
• Treasury operations have been re-organized on a new technology platform.
• A centralized Special Asset Management Division has been established for expeditious recovery and settlement of non-performing loans.
• Expensive deposits have been reduced, improving the interest margin.
• Deposit mobilization through innovative products like “Tahfuz” (launched in February 2001) are being developed & implemented.
The implementation of the aforementioned steps has been successful in cutting down costs and improving efficiencies, resulting in enhanced operational profits. The Bank now plans to focus on further strategic objectives, as set out below:
a) Diversify products & service: Anticipating customer needs, ABL is increasing its efforts on new products and services through leveraging its extensive branch network. The Bank is introducing different types of financing structures tailored to the capital investment requirements of its corporate clients as well as small& medium sized enterprises.
b) Focus on consumer banking: Making use of its computerized network of branches, the Bank strategy to enhance its market share and profitability via focusing on consumer banking products and services as well as integrating e-banking into its delivery channels.
c) Increase employee productivity though training & new techniques: The Bank seeks to increase employee productivity through a combination of training events and implementation of modern human resource tools. Frequent in-house and external training programs are expected to help the Bank in maintaining and developing an efficient work force.
d) Improve credit assessment; loan monitoring & debt recovery: The management intends to improve asset quality by implementing strategies for identification, measurement and mitigation of risk, which will result in reducing the quantum of non-performing loans.
Political effects on allied bank
The chequered story of the Allied Bank of Pakistan took another turn on Monday when the State Bank Pakistan issued a Letter of Acceptance (LOA) to the consortium of Ibrahim Leasing Limited Group who had offered the highest bid of Rs14.1 billion for acquisition of 324 million additional shares. Under the deal per share price of ABL comes to a little over Rs43. The bank was first offered to the Allied Management Group, representing 7,500 employees in September 1992, at a negotiated price of Rs70 a share. The employees had offered Rs30 a share as the Muslim Commercial Bank was earlier sold out in March 1991 at Rs56 a share. The employees were persuaded to buy 25 per cent of the shares for which an overwhelming majority was offered house building and motorcycle purchase loans.
The buying consortium is now committed to make full payment of Rs14.2 billion within 30 days after which it will be given management of the bank. The ABL came into being in 1975 following the merger of a few banks after the midnight nationalization in 1974 on New Year's night. Its predecessor was Australasia Bank.
The history of the State Bank published in two volumes about a decade back gives an interesting account of many banks during the decade of the 50s and 60s, including that of Australasia Bank. Things went well for ABL till 1977. But after the promulgation of martial law in 1977, it also received its share of crony loaning like all other nationalized banks to help create a constituency for the military dictator, General ZiaulHaq. Mr Nawaz Sharif launched privatization with religious zeal in 1991. The Muslim Commercial Bank, a relatively small but a financially sound and well managed entity, was the first bank to be offered for privatization. The breakup value of MCB shares was then determined at Rs26.84 and its reference price was put at Rs56 in the bidding. Five parties offered bids. The National Group of a dozen businessmen offered the third highest bid, and after evaluation MCB was given to it in April 1991. At ABL, Khalid Latif, the chief executive, formed a management-employees group to seek ownership of the bank. In 1991 there were six bidders including General Habibullah Khattak, Fateh sons, Saeed Ahmad and the Ayesha group. Sartaj Aziz, the then finance minister, entered into negotiations with the employees-management group and decided to offer ABL under the Employees Stock Ownership Plan (ESOP) at Rs 70 a share.
Since there was considerable criticism of the Nawaz Sharif government for demanding Rs70 a share from the employees as against selling MCB at Rs56 a share, the prime minister offered a grant of Rs50 million to the Allied Management Group. After privatization in Sep 1991, the senior executives kept the employees out of the board of management. The bank's condition deteriorated and the executives started accusing each other. In July 1993 when the Nawaz Sharif government was dismissed, the ABL head office in Karachi presented the scene of a battlefield. Eventually in last month of 1992, Mr. Khalid Latif was dismissed and served a term of imprisonment. He was replaced by Mr. Shaukat Kazmi. But the latter too suffered the same fate. His name figured in the duty free shop scandal. He was reported to have left the country after November 1996 when Mr. Farooq Leghari dismissed the Benazir Bhutto government. Mr. Rashid Chowdhry, one of the founding fathers of the Allied Management Group, took over as chief in 1997. About Rs2 billion were offered as export refinance to one of the businessmen's group that was interested in acquiring control of the bank in 1991. With this money, the group acquired shares from the senior executives. The employees were forced and cajoled into selling their shares to the business group. For years, the bank did not offer its employees bonuses and increments and there was very little choice for them except to retain their shares. Simultaneously, two other groups also entered the scene. The State Bank found executives and business groups involved in objectionable business practices. Three executives were dismissed and declared ineligible for any bank job. The business group continues its business and borrows from the banks.
But the employees, now reduced to hardly 4,500, feel let down. They suffered for no fault of theirs because of the doings or others
Financial situation of allied bank of Pakistan
During the year ended FY09, the profitability of Allied Bank Limited has improved. The bank posted a profit after tax of Rs 7,122 million as compared to Rs 4,157 of FY08, showing a growth of 71%. This improvement in the profits of the bank also translated into the improvement in the ROA and ROE of ABL. The ROA in FY09 rose to 1.81% as compared t0 1.21% of FY08. Also the ROE increased tremendously by 43.86% in FY09 to reach 30.5% as compared to 21.2% in FY08.The net interest income of the bank increased by 40.6% to Rs 18,700 million in FY09 as compared to Rs 13,298 million in FY08. The non interest income also increases by 21.7% in FY09 to reach a level of Rs 5,958 million. The gross income to expense ratio has improved to 2.57 times during the year under review from 2.04 times in FY08. The markup earned on loans has increased from Rs 21,942 million in FY08 to Rs 30,141 million in FY09, whereas that earned on investments has also increased from Rs 6,618 million in FY08 to Rs 8,622 million in FY09. On the non interest income side, the income from fee, commission and brokerage has increased from Rs 2,307 million in FY08 to Rs 2,708 million in FY09. The interest income expensed by the bank has also increased mainly on deposits and call money borrowing. The overall interest income expensed has increased from Rs 17,272 million in FY08 to Rs 22,421 million in FY09. The major interest expense is that incurred in deposits which have increased from Rs 13,978 million in FY08, to Rs 17,946 million in FY09. Also the interest expensed in call money borrowings has increased from Rs 790 million in FY08 to Rs 1,158 million in FY09 showing an increase of 46%.The net interest income of the bank increased mainly due to the growth in average earning assets and improvement in deposit mix towards low cost core deposits. The asset base of ABL has increased. The total assets of the company have increased to Rs 418,374 million in FY09 as compared to Rs 366,696 million in FY08. There has been an increase in the gross advances by the bank. The gross advances have increased from Rs 223,640 million to Rs 249,987 million in FY09. The loans in Pakistan have increased from Rs 215,733 million in FY08 to Rs 243,166 million in FY09. The net investments in finance leases in Pakistan have also increased from Rs 768 million in FY08 to Rs 847 million in FY09. Even the gross investments of the bank have increased. In commercial and retail banking steps were taken to enhance focus on SME's, commercial and agricultural sectors with a view to diversify and increase its share in total loan book of the Bank. A team of well experienced agricultural credit officers were hired to further penetrate into the agricultural sector.
Another major component of the assets of the bank is the investments. The gross investments by the bank have increased from levels of Rs 84,602 million in FY08 to Rs 96,975 million in FY09. The investments on an average basis grew by 12.4%compared to 2008. Bank decided to revisit its investment portfolio with a view to rationalize exposure in certain segments with the intention to deploy resources into other profitable avenues. In this regard the exposure in open end mutual funds has been reduced from Rs 12,761 million (14.7% of total investments) in FY08 to Rs 4,348 million (4.6% of total investments) in FY09. The exposure in TFCs has increased by 98.4% to Rs 36,312 million (38.1% of total investments) inFY09 compared to Rs 18,302 million (21.1% of total investments) FY08.This was mainly due to reclassification of Bank's existing lending exposure as an outcome to adjust the circular debt. The Bank's Sukuk Portfolio includes exposure of Rs 3,190 million to Maple Leaf Cement Factory Limited. A major concern on ABL's balance sheet has been the rise in the Non Performing Loans. The loans have increased to Rs 16,281million FY09 as against Rs 13,772 million FY08, thus showing a net increase of Rs 2,509 million. The infection ratio of 6.5% in FY09 was slightly above 6.2% of the previous year; whereas coverage ratio remained at previous year's level of 77%. The bank has accounted for a provision of Rs 3,163 million against NPLs during the year under review. No benefit of FSV has been taken while determining the provision against NPLs as allowed under BSD Circular No. 10 of 2009 dated October 21; 2009.The deposit base of the bank has also increased. The deposits of the bank have increased from Rs 297,475 million in FY08 to Rs 328,875 million in FY09. During the year stable and low cost deposits remained the major focus of the business strategy. In order to accomplish the desired goal, new branches and existing branches are being built or renovated to improve the ambience. Service standards are being improved. Services like internet banking and online transfers are being launched to attract additional deposits. The bank has been able to restrict the cost of deposits to 6.2% in FY09 as against 5.2% during FY08.
The debt ratios of the bank have declined, indicating increasing equity portion of the bank's assets. Generally, this has been the trend in the entire banking industry perhaps due to higher interest rates resulting in higher cost of borrowings and the MCR requirements as proposed by the State Bank. The equity of the bank has increased from Rs 344349 million in FY08 to Rs 388414 million in Fy09. The debt to asset ratio has declined from 0.98 in FY04 to 0.93 in FY09. The debt to equity ratio has declined from 41.82 in FY04 to 12.96 in FY09. Also the deposits times' capital has decreased from 37.91 in FY04 to 10.98 in FY09.
The liquidity position of the bank looks favorable. The ratio of earning assets to assets of the bank has remained almost consistent around 85%. The ratio of advances to deposits has increased from levels of 41% in FY 04 to 63% in FY07 to 71% in FY09. The yield on earning assets has improved. The yield has increased from 5% in FY04 to 11% in FY09. The reason for these increases has been an increase in the interest income earned on advances, investments and lending to the financial institutions.
The solvency ratios of the bank have persistently shown an upward trend throughout 2004-2009. This indicates bright prospects of long-term sustainability of the bank. The solvency ratios of the bank for the last five years have been maintained in the vicinity of each other. The increasing equity portion of the bank explains this. This may be regarded as a move against the rise in deposits rates and a decrease in the banking spread of the banking sector. This healthy trend in solvency may be predicted to continue in the future.
During FY09the bank gave a dividend of Rs 4/ share on cash basis and proposed 1 bonus issue per share as compared to Rs 2.5/ share in Fy08 along with 1 bonus issue per share. The payout ratio has however declined from 66% in FY07 to 54% in FY08 to 50% inFY09. The EPS of the share has increased to RS 10.02 in FY09 as compared to Rs 5.85/ share in FY08. The following graph depicts the trend related to DPS and EPS of ABL
During the FY09 the price of ABL's stock has shown a fluctuating trend. The P/E ratio declined in FY08 to 4.9 from level of 17.2 in FY07. However it has improved to 5.9 in Fy09. The market value to book value ratio has also been declining. The ratio declined from 3.09 in FY07 to 1.01 in FY09.
A comparison of the stock price and the KSE 100 Index for the year FY09 for the stock shows that the price has moved in almost the same fashion as the index. The highest price reached by the stock was Rs 66.3 and the lowest price was Rs 19.85 during FY09.
Services of Allied bank
• Internet banking: Banking is now easy for you! Allied Direct Internet Banking offers you the convenience to manage and control your banking and finances - when you want, where you want! It's Simple, Convenient, Secure and Faster. So, just get clicking!
• Online banking: Allied Online provides a protective, efficient and convenient facility for making payments to beneficiary accounts from any of our branches countrywide. Corporate customers requiring fund collection or a disbursement facility can use it for cash management services.
• Corporate leasing: Allied Bank started lease operations when it integrated with Ibrahim Leasing Limited. Facilities include leases for machinery, commercial vehicles and equipments. The Bank provides lease facilities to corporate and commercial clients in all industrial enterprises for balancing, modernization, replacement and expansion schemes.
• ATM network: Additionally, Allied Bank is a member of the ‘one-LINK ATM sharing switch’ comprising of over 2,000 ATMs nationwide, therefore, giving its Allied Cash Shop Visa Debit Card holders access to even more ATMs across the country.
• Unclaimed deposited: In accordance with the Bank Companies Ordinance, 1962, Section 31, the Bank is liable to surrender to State bank of Pakistan, all unclaimed deposits and instruments which have not been operated/collected by the account holders for last 11 years.
All such customers/beneficiaries are requested to contact the concerned branch to re-activate their accounts/collect the instruments, failing which, the bank will be compelled to classify the same "UNCLAIMED" and surrender to SBP.
• Deposited account: following are the deposited account.
1. Profit and loss account
2. Current account
3. Allied business account
4. Allied rising star
5. Allied basic banking account
6. Allied e-saving account
7. Foreign currency deposited
8. Rewarding term deposited
9. Monthly profit plus
10. Allied advance profit scheme
11. Rewarding profit account
12. Behtar munafa account
13. Behtar munafa term deposited
14. Allied bachat sachem.
• SME: The Commercial and Retail Banking Group (CRBG) caters to the needs of commercial entities and small and medium enterprises. A dedicated team of Relationship Managers first identifies the specific needs of each customer segment, then designs and delivers a facilities package, which is in conjunction with those needs, and provides customers the full support and opportunity to take advantage of the various business prospects available in the market.
• Agriculture: The Bank, under the guidelines of the State Bank of Pakistan, extends short, medium and long term Agriculture loans facilities to farming community of Pakistan on easy terms to increase the credit flow to Farm and Non-Farm segments of Agriculture sector. Farm credit is extended for the purpose of production of crops to meet working capital expenses and Development of Agri. land. Non-Farm Credit facilities are offered for Livestock (Cow, Buffalos, Goats, and Sheep etc.), Poultry (Eggs, Day Old Chicks, Layer, Broiler, Hatchery) and fisheries (inland and marine, excluding deep sea fishing).
• Other services: Utility bill Customers can pay their utility bills (e.g. electricity, gas, telephone) at any of the Bank’s branches. For further convenience, bills are collected on all working days during normal banking hours and also at certain times during the evening. Bills can be paid with cash or check, plus customers can even drop crossed check in drop-boxes available at all branches.
SWOT Analysis:
SWOT is the abbreviation of four words these are “S” stands for strength “W” stand for weaknesses “O” stands for opportunities and “T” stand for threats. Strength and weaknesses are the internal factors of the organization and these are also known as the micro factors but the opportunities and threats are the external factors and these are known as the macro factors. Micro factors are the controllable factors but the macro factors are uncontrollable. The easiest way to know about any organization is the SWOT analysis. So to reveal the hidden factors I did a SWOT analysis of the Allied bank. It is not the SWOT analysis of ABL as a whole but only of the branch where I worked. Many aspects are same almost in every branch of the Allied bank.
• STRENGTHS
a) Large number of branches.
Allied bank has maximum number of branches in all over Pakistan. It has more than 735branches connected to each other through an online network and most of the branches are working at the main business points.
b) VARIETY in PRODUCTS
Allied Bank has a lot of products for almost all type of customers. So, it depends on the customer that which product he likes and in which sector he wants to invest depending on whether a person is salaried one or a businessman. It also gives the companies the facilities of collection accounts. ATM and Credit cards, online transfer, DD, TT, Rupee Traveler check are the main products available for customers.
c) ONLINE FACILITY
Allied bank is providing the facility of online banking. This facility allows a customer to send or deposit money through cash or check to an account of any other branch of ABL. It also gives the facility of balance inquiry and cash with drawl from a certain account of any other branch of ABL through check.
d) SECURE BANKING
The online banking feature provides less chances of fraud. Because whenever some transactions take place, they can be checked any time and their receipts are receipt.
e) LOCKERS FACILITY
Many banks provide the facility of lockers but not in their all branches but Allied bank is the only bank that provides the lockers facility to their customers at their all branches.
f) CUSTOMER CARE CENTER
Allied bank has customer care center for its customers. They have toll free numbers on which customers can dial and they have not to pay anything for it. This center also provides the facility to the customers on spot and helps them whatever the matter is.
g) FOREIGN EXCHANGE
Allied bank provides the facility of foreign exchange to its customer. The customers may also open their accounts in foreign currency. The bank provides the facility of letter of credit and other export/import facilities to its customers. The customers may get the facility of money exchange on the current rates. To get the latest rates, the head office provides them with the fax facility of daily rates of foreign currency.
h) SAME ACCOUNT NUMBER FACILITY
At Allied bank the customers the person who has more than one account can have the facility of the same account number only the suffix is changed. This facility provides the customer with easy remembering of the account number.
I) ACCOUNT OPENING an EASY PROCESS
At Allied bank it’s very easy to open an account just an introducer and a copy of NIC is required. Customer just needs to fill up account opening forms and can enjoy the facilities of any type of account the want. This is the strength of Allied bank facilitates allot its customers.
j) EMPLOYEES’ REPLACEMENT
In every branch of Allied bank the back up of every employee is there in case of emergency if some officer is not available at the bank, some other person will back him up. That person is always well familiar with the responsibilities of that officer.
k) LOW RATE OF INTEREST
Allied bank offers loans to its customers on very low rates. This offer invites the customers to do a business with Allied Bank Ltd.
• WEAKNESS
a) INCENTIVE SYSTEM
Most of the staff in the Allied Bank is not completely satisfied with the inducements. This dissatisfaction sometimes leads to less motivated employees in banking which in turn can affect its business efficiency. Moreover, permanent staff is not given any performance related incentives. As a result of this, an inefficient manager or employees earning is the same as an efficient employee who is the real asset for the organization.
b) INCREMENT IN WORKFORCE’S PAY
The other main weakness of the Allied bank is that there are mostly no annual increments to their employees’ salary. This thing leads to the dissatisfaction of employees.
c) LATE PROMOTIONS
The other thing that for the employee’s point of view is a weakness in Allied bank is that the employees are promoted after a big period against the schedules specified by the bank.
d) LOW PRODUCT CREDIBILITY
Allied Bank has still not got the edge where the consumers become loyal to its products and services. Mostly customers become its customers out of no reason than request from a personal banker. And talking about consumer banking, though credit cards awareness in our middle class society has gradually improved but not up to the point where they can compare the features that one Bank is offering and other is not. Truth must be said, most customers do not even know the points behind the term “interest free days”. The point is, consumers do not know of the product being offered so how can they rely on the product.
• OPPORTUNITIES
The Allied Bank is having a great opportunity to emerge as the best bank of the country by giving best possible services to its customers. The banking sector is improving day by day and consumer banking is making great revolutions in the banking sector. Allied Bank is still working in the corporate sector and it’s missing a big market share of consumer banking. If it enters this market then this bank can become the biggest and the most efficient bank of Pakistan.
• THREATS
a) COMPETITORS
Allied Bank has the many threats from their competitors in the banking sector, from the Govt. policies and from the current economic conditions of the country: The main competitors in the banking sector are the Bank-Alfalah, Faysal Bank, Muslim Commercial Bank, Prime Commercial Bank, bank of Punjab etc Due to the tough competition the bank is forced to sanction the loans at the reduced rates and other services at minimized cost This reduces the profit margin which is a big hurdle in the way of innovation and extended customer services.
b) GOVERNMENT POLICIES
Other threat which ABL: faces is the policies of the government. Tax charged on the Income of banking companies is much greater than on the income of other companies. The strict regulations issued by the central bank, revenue authorities and other concerned authorities are also a big threat to the bank. The Govt. revises the tax policies on continuous basis, which often are not in the interest of the industry including the banking sector.
c) POLITICAL CIRCUMSTANCES
Political conditions in Pakistan have been unstable since a very long time. Continuous changes of regimes in the political affairs are great threat towards the healthy growth of the whole industry.
d) TRADE and INDUSTRY CONDITIONS
Sudden increase and decrease in the trade and industry conditions and stock exchange business of the country also adversely badly affect the growth of banking sector. Unemployment, unfavorable balance of trade, decreased per capita income; inflation and deflation, recession and boom are the source to the handicapped progress of banking sector.
e) POLICIES of ABL
Another threat to the bank’s progress is its own policy. Bank is not concentrating on improving its whole process. There is still lack of highly educated staff in the bank. And the employees are given promotions on reference basis, which causes frustration among employees and overall graph of the performance comes down. So ABL should reconsider their policies so that the bank may remain in the race.
ATM & Branches Network in Pakistan
According To PACRA (Pakistan Credit Rating Agency Limited) the Rating of ABL IN 2011
PACRA
Positive Outlook
AA
Medium to long Term Rating. A1 +
Short Term Rating.
Interview by “ Saeeda Zarahit” Manager Allied Bank F-11 Markaz Islamabad
Q.1: What do you facilitate to your customers that makes Allied Bank unique?
Answer: Allied Bank is the first bank of Pakistan. And history tells us that Allied Bank is providing best services from its starting. In this modern era of banking, Allied Bank has always been offering new schemes and services to its customers. All branches of the bank are interconnected through internet. Allied bank is the biggest banking network in the country. It has competent employees, worker and staff. My staff knows mother tongue of the people the area.
Q.2: What is the contribution of Govt. with you?
Answer: State Bank of Pakistan controls all banks of the country. We are bounded to follow the policies of State Bank. In the light of the policies it becomes very easy to manage braches.
Q.3: What are your goals?
Answer: Our main objective is to provide best facilities to the customers so we never compromise on our customer services. Our object is to regulate the current deposit figure and to gain the target which is given us by the Allied Administration. We try to educate the people of backward areas to use the latest and modern technology of our Bank like internet banking etc.
The people of different areas are attached with agriculture. We tell them about the agriculture loan. So these people always keep their money in our bank. Our loan recovery is also going very well.
Q.4: What difficulties Allied Bank is facing today?
Answer: Due to the financial deficiency allied bank is facing difficulties to educated particularly plural people that are why it is difficult to introduce new schemes.
Q.5: How do you manage your branch?
Answer: Well, it’s very easy to manage a branch if u has a good cooperation with your staff members. So, it’s a team work. I have men and women in branch and we all are committed to give best available services to our customers. We say welcome our customers warmly and in a convincing way. So that customers also becomes cooperative. The branch is located in my home area that’s why it is easy for me to bring more and more customers. We, also invited in workshops regularly to learn new happens.
Allied Bank limited was the first Muslim bank to have been established in Pakistan. Established in last month of 1942 as the Australasia Bank in Lahore with a paid-up share capital of Rs. 0.12 millions under the Chairmanship of Khawaja Basher Bux, the Bank attracted deposits equivalent to Rs. 0.431 million in its first 18 months of business. Now a day, Allied Bank's paid up Capital and reserves increase than Rs. 130 million, deposits exceed Rs. 325 billion and total asset of bank exceed Rs. 418 billion.
Allied Bank is one of the largest banks of Pakistan, the headquarter of Allied bank is based in Lahore. Currently there are 735 branches of Allied Bank those are located across Pakistan in different cities. In 2004 the ownership of Allied Bank was given to the Ibrahim Group. Allied Bank has a large online system through which its branches are interconnected with each other. Allied Bank was established in 1942 and at that time it started working as Australian Bank. Allied Bank is a complete Muslim bank of Pakistan during and after the 2nd war of independence it was underwent in the unrest situation and destroyed by the riots in East Punjab. Due to strong influence during independence war all branches of Allied Bank that were located in the India shut down. After independence few branches were opened in the big cities of Pakistan these are Karachi, Rawalpindi, Sialkot, Sargodha, Peshawar, Jhang and Gujranwala while later on it was further extended and new branches were opened in Multan, Bahawalpur and Quetta. Despite the great damage that was experienced by the Allied Bank, this bank grows up and earns a profit of 50,000 during the years of 1947 – 1948. In late 70's Allied Bank had approximately 101 branches all over Pakistan. In 1971 when East Pakistan got apart Allied Bank lost its 51 established branches. But that miss happening could not stop Allied Bank to grow more and in the year 1973 Allied Bank grew up with 186 branches in the current Pakistan. During 1974 Australian bank was renamed as Allied bank limited as the board of directors was dissolved. Allied Bank was privatized in 1991 and it was the first bank of the world that was purchased by its employees. Later on, in 2004 Allied Bank was handed over to the Ibrahim Group. Today, with its history of over 60 years, the Bank has built itself organization with a strong equity, assets, goodwill and deposit base. It offers universal banking services, while placing major emphasis on retail banking. The Bank also has the largest wide network of 780 online branches in Pakistan and offers various technology-based products and services to its diverse clientele. The Bank is principally engaged in providing corporate banking facilities to Pakistan’s most valued corporations and institutions. Additionally, it also facilitate general banking services to commercial, agricultural, industrial and individual customers throughout Pakistan.89% of the Bank’s deposit base is composed of deposits from the backward areas. The Bank’s fundamental strengths lie in its strong lending capability, as well as providing a different variety of financial services, which has allowed ABL to diversify and enhance its deposit base.
Vision:
To become a dynamic and efficient organization providing integrated solutions in order to be the first choice bank for the customers.
Mission:
To provide value added services to our many customers.
To provide high tech innovative solutions to meet customers' problems.
To establish sustainable value through growth, effectiveness, efficiency and diversity for all stakeholders.
To provide a challenging working environment and reward dedicated group members according to their talent and performance.
To play good role in contributing towards the society.
Core Values:
Integrity
Excellence in services
Best performance
Innovation and growth
History of allied bank of Pakistan
The history of bank has been about dedication, commitment, professionalism and adapting to environmental changes, leading to its immense growth and stability. It’s these factors that have established it a Bank the rest look up to.
The pre Independence history 1942-1947
In the beginning 1940s, the Muslim community was beginning to realize the need for its active participation in the fields of business and industry. Since the late 1880s, Hindus had established a commanding presence in the areas of industry, trade and commerce and were especially dominating in the Sub-continent area. Banking, in particular, was the exclusive forte of Hindus and it was popularly and wrongly believed that Muslims were temperamentally unsuited for this profession. It was particularly upsetting for Khawaja Bashir Bux to hear that “Muslims could not be successful bankers”. He decided to step-up to that challenge and takes the lead in creating this first Muslim bank by the name Australasia Bank Limited in Punjab, which was to become Pakistan in 12th of the last month of 1942. Initial capital of the Bank amounted to Rs 0.121 million, which was increase to Rs. 0.50 million by the end of the first year of operation, and by the end of 30th June 1947 capital increased to Rs. 0.674 million and deposits increased to Rs 7.727 million.
Allied bank 1947-1974However, it was severely hit by the riots in East Punjab. The Bank was identified with the Pakistan Movement. At the time of independence all the branches in India, (Amritsar, Batala, Jalandhar, Ludhiana, and Angra (Agra)) were shut down. New branches were established in Karachi, Rawalpindi, Peshawar, Sialkot, Sargodha, Jhang, Gujranwala and Kasur. Later, the new network spread to Multan and Quetta as well. The Bank financed trade in cloth and food grains thus, played an important and creative role in reestablishing consumer supplies during the early months of 1948 affected by riots. Despite the complex conditions prevailing and the substantial set back in the Bank’s business in India, Australasia Bank made a profit of Rs. 50,000 during 1947-49.
By the end of 1970 it had 102 branches. Unfortunately, it lost 52 branches during the separation of East Pakistan. But the Bank did well despite losing a lot of sits assets and by the end of 1973 had 185 branches in West Pakistan.
Allied bank 1974-1991
In 1974, the Board of Directors of Australasia Bank was dissolved and was renamed as Allied Bank. The first year was highly successful; profit exceeded Rs. 10 million, deposits rose by over 50 percent and approached Rs. 1460 million. Investments rose by 71 percent and advances exceeded Rs. 1080 million for the first time in the banking history. 115 new branches were opened during 1974 and the Bank started participating in the Government’s spot procurement agriculture program. Those seventeen years saw a rapid growth for the Bank. Branches increased from 353 in 1974 to 748 in 1991. Deposits increased from Rs. 1.45 billion and Advances & Investments from Rs. 1.34 billion to Rs. 22 billion during this period. It also established three branches in the U.K.
Allied bank 1991-2004
As a result of privatization in September 1991, Allied Bank entered a new phase, and became the world’s first bank to be owned and managed by its employees. In 1993 the “First Allied Bank Modaraba” (FABM) was floated. After privatization, Allied Bank became one of the premier financial institutions of Pakistan.
Allied Bank’s capital and reserves were Rs. 1.525 billion; its assets amounted to Rs. 87.536 billion and deposits to Rs. 76.038 billion. Allied Bank enjoyed an enviable and good position in Pakistan’s financial sector and was recognized as one of the best amongst the major and large banks of the country. In August 2004, as a result of capital reestablishedment, the Bank’s ownership was transferred to a consortium comprising Ibrahim Leasing Limited and Ibrahim Group. Today, the Bank stands on a solid foundation built over 63 years of hard work and dedication, giving it a strong equity, an asset and deposit base and the ability to offer customers universal banking services with more focus on retail banking. The Bank has the largest network of online branches in Pakistan and offers different technology-based products and services to its diverse clientele through its wide network of more than 700 branches. In August 2004 as a result of capital reconstruction, the Bank’s ownership was transferred to a consortium comprising Ibrahim Leasing Limited and Ibrahim Group.
Allied bank 2005-2010
In May 2005, Ibrahim Leasing Limited dissolved and the company was vested into Allied Bank Limited. ALL the shareholders were issued ABL shares instead of the all shares held by them. An application for the listing of ABL shares in all the Stock Exchange Companies of Pakistan was made. Today, all Allied Bank Limited shareholders can trade in the Bank’s shares at their will.
Board of directors of allied bank
• Mohammad NaeemMukhtar (Chairman)
• Sheikh Mukhtar Ahmed (Director)
• Mohammad WaseemMukhtar (Director)
• Sheikh Jalees Ahmed (Director)
• Abdul Aziz Khan (Director)
• Mubashir A. Akhtar (Director)
• PervaizIqbal Butt (Directors)
• Khalid A. Sherwani (Chief Executive Officer)
• Muhammad Raffat (Company Secretary)
Management
• Khalid A. Sherwani (Chief Executive Officer)
• FareedVardag (Chief Risk Officer)
• Khawaja Mohammad Almas (Head, Core Banking Projects)
• Muhammad Yaseen (Group Chief, Treasury
• Mohammad Abbas Sheikh (Group Chief, Special Assets Management)
• Shafique Ahmed Uqaili (Group Chief, Human Resources)
• Muhammad JawaidIqbal (Group Chief, Corporate & Investment Banking)
• Tariq Mehmood (Group Chief, Operations)
• Muhammad ShahzadSadiq (Group Chief, Audit & CRR)
• Waheed-ur-Rehman (Group Chief, Compliance)
• Mujahid Ali (Group Chief, Information Technology)
• Muhammad Raffat (Company Secretary)
• Zia Ijaz (Group Chief, Commercial & Retail Banking)
Privatization
The management, anticipating the prior years’ provisioning in line with the ongoing banking sector reforms, has already initiated major re-engineering and re-organization of the Bank. The Bank had embarked upon a two-pronged strategy of adopting a rationalization program to bring down costs, introduce innovative products and offer specialized financial solutions and services to customers. Measures, which have already been implemented, are set out below:
• With the objective of achieving decentralization and cutting down expenses, the decision-making has been reduced from four to two tiers. 69 controlling offices, comprising of 4 provincial, 18 circle and 46 zonal offices have been consolidated into 16 regional offices.
• With a view to improving efficiency and right sizing the ABL network, 65 branches have been closed or merged.
• The corporate unit has been re-structured by reducing the number of divisions and redefining their functional responsibilities, so as to provide support to field operations.
• Treasury operations have been re-organized on a new technology platform.
• A centralized Special Asset Management Division has been established for expeditious recovery and settlement of non-performing loans.
• Expensive deposits have been reduced, improving the interest margin.
• Deposit mobilization through innovative products like “Tahfuz” (launched in February 2001) are being developed & implemented.
The implementation of the aforementioned steps has been successful in cutting down costs and improving efficiencies, resulting in enhanced operational profits. The Bank now plans to focus on further strategic objectives, as set out below:
a) Diversify products & service: Anticipating customer needs, ABL is increasing its efforts on new products and services through leveraging its extensive branch network. The Bank is introducing different types of financing structures tailored to the capital investment requirements of its corporate clients as well as small& medium sized enterprises.
b) Focus on consumer banking: Making use of its computerized network of branches, the Bank strategy to enhance its market share and profitability via focusing on consumer banking products and services as well as integrating e-banking into its delivery channels.
c) Increase employee productivity though training & new techniques: The Bank seeks to increase employee productivity through a combination of training events and implementation of modern human resource tools. Frequent in-house and external training programs are expected to help the Bank in maintaining and developing an efficient work force.
d) Improve credit assessment; loan monitoring & debt recovery: The management intends to improve asset quality by implementing strategies for identification, measurement and mitigation of risk, which will result in reducing the quantum of non-performing loans.
Political effects on allied bank
The chequered story of the Allied Bank of Pakistan took another turn on Monday when the State Bank Pakistan issued a Letter of Acceptance (LOA) to the consortium of Ibrahim Leasing Limited Group who had offered the highest bid of Rs14.1 billion for acquisition of 324 million additional shares. Under the deal per share price of ABL comes to a little over Rs43. The bank was first offered to the Allied Management Group, representing 7,500 employees in September 1992, at a negotiated price of Rs70 a share. The employees had offered Rs30 a share as the Muslim Commercial Bank was earlier sold out in March 1991 at Rs56 a share. The employees were persuaded to buy 25 per cent of the shares for which an overwhelming majority was offered house building and motorcycle purchase loans.
The buying consortium is now committed to make full payment of Rs14.2 billion within 30 days after which it will be given management of the bank. The ABL came into being in 1975 following the merger of a few banks after the midnight nationalization in 1974 on New Year's night. Its predecessor was Australasia Bank.
The history of the State Bank published in two volumes about a decade back gives an interesting account of many banks during the decade of the 50s and 60s, including that of Australasia Bank. Things went well for ABL till 1977. But after the promulgation of martial law in 1977, it also received its share of crony loaning like all other nationalized banks to help create a constituency for the military dictator, General ZiaulHaq. Mr Nawaz Sharif launched privatization with religious zeal in 1991. The Muslim Commercial Bank, a relatively small but a financially sound and well managed entity, was the first bank to be offered for privatization. The breakup value of MCB shares was then determined at Rs26.84 and its reference price was put at Rs56 in the bidding. Five parties offered bids. The National Group of a dozen businessmen offered the third highest bid, and after evaluation MCB was given to it in April 1991. At ABL, Khalid Latif, the chief executive, formed a management-employees group to seek ownership of the bank. In 1991 there were six bidders including General Habibullah Khattak, Fateh sons, Saeed Ahmad and the Ayesha group. Sartaj Aziz, the then finance minister, entered into negotiations with the employees-management group and decided to offer ABL under the Employees Stock Ownership Plan (ESOP) at Rs 70 a share.
Since there was considerable criticism of the Nawaz Sharif government for demanding Rs70 a share from the employees as against selling MCB at Rs56 a share, the prime minister offered a grant of Rs50 million to the Allied Management Group. After privatization in Sep 1991, the senior executives kept the employees out of the board of management. The bank's condition deteriorated and the executives started accusing each other. In July 1993 when the Nawaz Sharif government was dismissed, the ABL head office in Karachi presented the scene of a battlefield. Eventually in last month of 1992, Mr. Khalid Latif was dismissed and served a term of imprisonment. He was replaced by Mr. Shaukat Kazmi. But the latter too suffered the same fate. His name figured in the duty free shop scandal. He was reported to have left the country after November 1996 when Mr. Farooq Leghari dismissed the Benazir Bhutto government. Mr. Rashid Chowdhry, one of the founding fathers of the Allied Management Group, took over as chief in 1997. About Rs2 billion were offered as export refinance to one of the businessmen's group that was interested in acquiring control of the bank in 1991. With this money, the group acquired shares from the senior executives. The employees were forced and cajoled into selling their shares to the business group. For years, the bank did not offer its employees bonuses and increments and there was very little choice for them except to retain their shares. Simultaneously, two other groups also entered the scene. The State Bank found executives and business groups involved in objectionable business practices. Three executives were dismissed and declared ineligible for any bank job. The business group continues its business and borrows from the banks.
But the employees, now reduced to hardly 4,500, feel let down. They suffered for no fault of theirs because of the doings or others
Financial situation of allied bank of Pakistan
During the year ended FY09, the profitability of Allied Bank Limited has improved. The bank posted a profit after tax of Rs 7,122 million as compared to Rs 4,157 of FY08, showing a growth of 71%. This improvement in the profits of the bank also translated into the improvement in the ROA and ROE of ABL. The ROA in FY09 rose to 1.81% as compared t0 1.21% of FY08. Also the ROE increased tremendously by 43.86% in FY09 to reach 30.5% as compared to 21.2% in FY08.The net interest income of the bank increased by 40.6% to Rs 18,700 million in FY09 as compared to Rs 13,298 million in FY08. The non interest income also increases by 21.7% in FY09 to reach a level of Rs 5,958 million. The gross income to expense ratio has improved to 2.57 times during the year under review from 2.04 times in FY08. The markup earned on loans has increased from Rs 21,942 million in FY08 to Rs 30,141 million in FY09, whereas that earned on investments has also increased from Rs 6,618 million in FY08 to Rs 8,622 million in FY09. On the non interest income side, the income from fee, commission and brokerage has increased from Rs 2,307 million in FY08 to Rs 2,708 million in FY09. The interest income expensed by the bank has also increased mainly on deposits and call money borrowing. The overall interest income expensed has increased from Rs 17,272 million in FY08 to Rs 22,421 million in FY09. The major interest expense is that incurred in deposits which have increased from Rs 13,978 million in FY08, to Rs 17,946 million in FY09. Also the interest expensed in call money borrowings has increased from Rs 790 million in FY08 to Rs 1,158 million in FY09 showing an increase of 46%.The net interest income of the bank increased mainly due to the growth in average earning assets and improvement in deposit mix towards low cost core deposits. The asset base of ABL has increased. The total assets of the company have increased to Rs 418,374 million in FY09 as compared to Rs 366,696 million in FY08. There has been an increase in the gross advances by the bank. The gross advances have increased from Rs 223,640 million to Rs 249,987 million in FY09. The loans in Pakistan have increased from Rs 215,733 million in FY08 to Rs 243,166 million in FY09. The net investments in finance leases in Pakistan have also increased from Rs 768 million in FY08 to Rs 847 million in FY09. Even the gross investments of the bank have increased. In commercial and retail banking steps were taken to enhance focus on SME's, commercial and agricultural sectors with a view to diversify and increase its share in total loan book of the Bank. A team of well experienced agricultural credit officers were hired to further penetrate into the agricultural sector.
Another major component of the assets of the bank is the investments. The gross investments by the bank have increased from levels of Rs 84,602 million in FY08 to Rs 96,975 million in FY09. The investments on an average basis grew by 12.4%compared to 2008. Bank decided to revisit its investment portfolio with a view to rationalize exposure in certain segments with the intention to deploy resources into other profitable avenues. In this regard the exposure in open end mutual funds has been reduced from Rs 12,761 million (14.7% of total investments) in FY08 to Rs 4,348 million (4.6% of total investments) in FY09. The exposure in TFCs has increased by 98.4% to Rs 36,312 million (38.1% of total investments) inFY09 compared to Rs 18,302 million (21.1% of total investments) FY08.This was mainly due to reclassification of Bank's existing lending exposure as an outcome to adjust the circular debt. The Bank's Sukuk Portfolio includes exposure of Rs 3,190 million to Maple Leaf Cement Factory Limited. A major concern on ABL's balance sheet has been the rise in the Non Performing Loans. The loans have increased to Rs 16,281million FY09 as against Rs 13,772 million FY08, thus showing a net increase of Rs 2,509 million. The infection ratio of 6.5% in FY09 was slightly above 6.2% of the previous year; whereas coverage ratio remained at previous year's level of 77%. The bank has accounted for a provision of Rs 3,163 million against NPLs during the year under review. No benefit of FSV has been taken while determining the provision against NPLs as allowed under BSD Circular No. 10 of 2009 dated October 21; 2009.The deposit base of the bank has also increased. The deposits of the bank have increased from Rs 297,475 million in FY08 to Rs 328,875 million in FY09. During the year stable and low cost deposits remained the major focus of the business strategy. In order to accomplish the desired goal, new branches and existing branches are being built or renovated to improve the ambience. Service standards are being improved. Services like internet banking and online transfers are being launched to attract additional deposits. The bank has been able to restrict the cost of deposits to 6.2% in FY09 as against 5.2% during FY08.
The debt ratios of the bank have declined, indicating increasing equity portion of the bank's assets. Generally, this has been the trend in the entire banking industry perhaps due to higher interest rates resulting in higher cost of borrowings and the MCR requirements as proposed by the State Bank. The equity of the bank has increased from Rs 344349 million in FY08 to Rs 388414 million in Fy09. The debt to asset ratio has declined from 0.98 in FY04 to 0.93 in FY09. The debt to equity ratio has declined from 41.82 in FY04 to 12.96 in FY09. Also the deposits times' capital has decreased from 37.91 in FY04 to 10.98 in FY09.
The liquidity position of the bank looks favorable. The ratio of earning assets to assets of the bank has remained almost consistent around 85%. The ratio of advances to deposits has increased from levels of 41% in FY 04 to 63% in FY07 to 71% in FY09. The yield on earning assets has improved. The yield has increased from 5% in FY04 to 11% in FY09. The reason for these increases has been an increase in the interest income earned on advances, investments and lending to the financial institutions.
The solvency ratios of the bank have persistently shown an upward trend throughout 2004-2009. This indicates bright prospects of long-term sustainability of the bank. The solvency ratios of the bank for the last five years have been maintained in the vicinity of each other. The increasing equity portion of the bank explains this. This may be regarded as a move against the rise in deposits rates and a decrease in the banking spread of the banking sector. This healthy trend in solvency may be predicted to continue in the future.
During FY09the bank gave a dividend of Rs 4/ share on cash basis and proposed 1 bonus issue per share as compared to Rs 2.5/ share in Fy08 along with 1 bonus issue per share. The payout ratio has however declined from 66% in FY07 to 54% in FY08 to 50% inFY09. The EPS of the share has increased to RS 10.02 in FY09 as compared to Rs 5.85/ share in FY08. The following graph depicts the trend related to DPS and EPS of ABL
During the FY09 the price of ABL's stock has shown a fluctuating trend. The P/E ratio declined in FY08 to 4.9 from level of 17.2 in FY07. However it has improved to 5.9 in Fy09. The market value to book value ratio has also been declining. The ratio declined from 3.09 in FY07 to 1.01 in FY09.
A comparison of the stock price and the KSE 100 Index for the year FY09 for the stock shows that the price has moved in almost the same fashion as the index. The highest price reached by the stock was Rs 66.3 and the lowest price was Rs 19.85 during FY09.
Services of Allied bank
• Internet banking: Banking is now easy for you! Allied Direct Internet Banking offers you the convenience to manage and control your banking and finances - when you want, where you want! It's Simple, Convenient, Secure and Faster. So, just get clicking!
• Online banking: Allied Online provides a protective, efficient and convenient facility for making payments to beneficiary accounts from any of our branches countrywide. Corporate customers requiring fund collection or a disbursement facility can use it for cash management services.
• Corporate leasing: Allied Bank started lease operations when it integrated with Ibrahim Leasing Limited. Facilities include leases for machinery, commercial vehicles and equipments. The Bank provides lease facilities to corporate and commercial clients in all industrial enterprises for balancing, modernization, replacement and expansion schemes.
• ATM network: Additionally, Allied Bank is a member of the ‘one-LINK ATM sharing switch’ comprising of over 2,000 ATMs nationwide, therefore, giving its Allied Cash Shop Visa Debit Card holders access to even more ATMs across the country.
• Unclaimed deposited: In accordance with the Bank Companies Ordinance, 1962, Section 31, the Bank is liable to surrender to State bank of Pakistan, all unclaimed deposits and instruments which have not been operated/collected by the account holders for last 11 years.
All such customers/beneficiaries are requested to contact the concerned branch to re-activate their accounts/collect the instruments, failing which, the bank will be compelled to classify the same "UNCLAIMED" and surrender to SBP.
• Deposited account: following are the deposited account.
1. Profit and loss account
2. Current account
3. Allied business account
4. Allied rising star
5. Allied basic banking account
6. Allied e-saving account
7. Foreign currency deposited
8. Rewarding term deposited
9. Monthly profit plus
10. Allied advance profit scheme
11. Rewarding profit account
12. Behtar munafa account
13. Behtar munafa term deposited
14. Allied bachat sachem.
• SME: The Commercial and Retail Banking Group (CRBG) caters to the needs of commercial entities and small and medium enterprises. A dedicated team of Relationship Managers first identifies the specific needs of each customer segment, then designs and delivers a facilities package, which is in conjunction with those needs, and provides customers the full support and opportunity to take advantage of the various business prospects available in the market.
• Agriculture: The Bank, under the guidelines of the State Bank of Pakistan, extends short, medium and long term Agriculture loans facilities to farming community of Pakistan on easy terms to increase the credit flow to Farm and Non-Farm segments of Agriculture sector. Farm credit is extended for the purpose of production of crops to meet working capital expenses and Development of Agri. land. Non-Farm Credit facilities are offered for Livestock (Cow, Buffalos, Goats, and Sheep etc.), Poultry (Eggs, Day Old Chicks, Layer, Broiler, Hatchery) and fisheries (inland and marine, excluding deep sea fishing).
• Other services: Utility bill Customers can pay their utility bills (e.g. electricity, gas, telephone) at any of the Bank’s branches. For further convenience, bills are collected on all working days during normal banking hours and also at certain times during the evening. Bills can be paid with cash or check, plus customers can even drop crossed check in drop-boxes available at all branches.
SWOT Analysis:
SWOT is the abbreviation of four words these are “S” stands for strength “W” stand for weaknesses “O” stands for opportunities and “T” stand for threats. Strength and weaknesses are the internal factors of the organization and these are also known as the micro factors but the opportunities and threats are the external factors and these are known as the macro factors. Micro factors are the controllable factors but the macro factors are uncontrollable. The easiest way to know about any organization is the SWOT analysis. So to reveal the hidden factors I did a SWOT analysis of the Allied bank. It is not the SWOT analysis of ABL as a whole but only of the branch where I worked. Many aspects are same almost in every branch of the Allied bank.
• STRENGTHS
a) Large number of branches.
Allied bank has maximum number of branches in all over Pakistan. It has more than 735branches connected to each other through an online network and most of the branches are working at the main business points.
b) VARIETY in PRODUCTS
Allied Bank has a lot of products for almost all type of customers. So, it depends on the customer that which product he likes and in which sector he wants to invest depending on whether a person is salaried one or a businessman. It also gives the companies the facilities of collection accounts. ATM and Credit cards, online transfer, DD, TT, Rupee Traveler check are the main products available for customers.
c) ONLINE FACILITY
Allied bank is providing the facility of online banking. This facility allows a customer to send or deposit money through cash or check to an account of any other branch of ABL. It also gives the facility of balance inquiry and cash with drawl from a certain account of any other branch of ABL through check.
d) SECURE BANKING
The online banking feature provides less chances of fraud. Because whenever some transactions take place, they can be checked any time and their receipts are receipt.
e) LOCKERS FACILITY
Many banks provide the facility of lockers but not in their all branches but Allied bank is the only bank that provides the lockers facility to their customers at their all branches.
f) CUSTOMER CARE CENTER
Allied bank has customer care center for its customers. They have toll free numbers on which customers can dial and they have not to pay anything for it. This center also provides the facility to the customers on spot and helps them whatever the matter is.
g) FOREIGN EXCHANGE
Allied bank provides the facility of foreign exchange to its customer. The customers may also open their accounts in foreign currency. The bank provides the facility of letter of credit and other export/import facilities to its customers. The customers may get the facility of money exchange on the current rates. To get the latest rates, the head office provides them with the fax facility of daily rates of foreign currency.
h) SAME ACCOUNT NUMBER FACILITY
At Allied bank the customers the person who has more than one account can have the facility of the same account number only the suffix is changed. This facility provides the customer with easy remembering of the account number.
I) ACCOUNT OPENING an EASY PROCESS
At Allied bank it’s very easy to open an account just an introducer and a copy of NIC is required. Customer just needs to fill up account opening forms and can enjoy the facilities of any type of account the want. This is the strength of Allied bank facilitates allot its customers.
j) EMPLOYEES’ REPLACEMENT
In every branch of Allied bank the back up of every employee is there in case of emergency if some officer is not available at the bank, some other person will back him up. That person is always well familiar with the responsibilities of that officer.
k) LOW RATE OF INTEREST
Allied bank offers loans to its customers on very low rates. This offer invites the customers to do a business with Allied Bank Ltd.
• WEAKNESS
a) INCENTIVE SYSTEM
Most of the staff in the Allied Bank is not completely satisfied with the inducements. This dissatisfaction sometimes leads to less motivated employees in banking which in turn can affect its business efficiency. Moreover, permanent staff is not given any performance related incentives. As a result of this, an inefficient manager or employees earning is the same as an efficient employee who is the real asset for the organization.
b) INCREMENT IN WORKFORCE’S PAY
The other main weakness of the Allied bank is that there are mostly no annual increments to their employees’ salary. This thing leads to the dissatisfaction of employees.
c) LATE PROMOTIONS
The other thing that for the employee’s point of view is a weakness in Allied bank is that the employees are promoted after a big period against the schedules specified by the bank.
d) LOW PRODUCT CREDIBILITY
Allied Bank has still not got the edge where the consumers become loyal to its products and services. Mostly customers become its customers out of no reason than request from a personal banker. And talking about consumer banking, though credit cards awareness in our middle class society has gradually improved but not up to the point where they can compare the features that one Bank is offering and other is not. Truth must be said, most customers do not even know the points behind the term “interest free days”. The point is, consumers do not know of the product being offered so how can they rely on the product.
• OPPORTUNITIES
The Allied Bank is having a great opportunity to emerge as the best bank of the country by giving best possible services to its customers. The banking sector is improving day by day and consumer banking is making great revolutions in the banking sector. Allied Bank is still working in the corporate sector and it’s missing a big market share of consumer banking. If it enters this market then this bank can become the biggest and the most efficient bank of Pakistan.
• THREATS
a) COMPETITORS
Allied Bank has the many threats from their competitors in the banking sector, from the Govt. policies and from the current economic conditions of the country: The main competitors in the banking sector are the Bank-Alfalah, Faysal Bank, Muslim Commercial Bank, Prime Commercial Bank, bank of Punjab etc Due to the tough competition the bank is forced to sanction the loans at the reduced rates and other services at minimized cost This reduces the profit margin which is a big hurdle in the way of innovation and extended customer services.
b) GOVERNMENT POLICIES
Other threat which ABL: faces is the policies of the government. Tax charged on the Income of banking companies is much greater than on the income of other companies. The strict regulations issued by the central bank, revenue authorities and other concerned authorities are also a big threat to the bank. The Govt. revises the tax policies on continuous basis, which often are not in the interest of the industry including the banking sector.
c) POLITICAL CIRCUMSTANCES
Political conditions in Pakistan have been unstable since a very long time. Continuous changes of regimes in the political affairs are great threat towards the healthy growth of the whole industry.
d) TRADE and INDUSTRY CONDITIONS
Sudden increase and decrease in the trade and industry conditions and stock exchange business of the country also adversely badly affect the growth of banking sector. Unemployment, unfavorable balance of trade, decreased per capita income; inflation and deflation, recession and boom are the source to the handicapped progress of banking sector.
e) POLICIES of ABL
Another threat to the bank’s progress is its own policy. Bank is not concentrating on improving its whole process. There is still lack of highly educated staff in the bank. And the employees are given promotions on reference basis, which causes frustration among employees and overall graph of the performance comes down. So ABL should reconsider their policies so that the bank may remain in the race.
ATM & Branches Network in Pakistan
According To PACRA (Pakistan Credit Rating Agency Limited) the Rating of ABL IN 2011
PACRA
Positive Outlook
AA
Medium to long Term Rating. A1 +
Short Term Rating.
Interview by “ Saeeda Zarahit” Manager Allied Bank F-11 Markaz Islamabad
Q.1: What do you facilitate to your customers that makes Allied Bank unique?
Answer: Allied Bank is the first bank of Pakistan. And history tells us that Allied Bank is providing best services from its starting. In this modern era of banking, Allied Bank has always been offering new schemes and services to its customers. All branches of the bank are interconnected through internet. Allied bank is the biggest banking network in the country. It has competent employees, worker and staff. My staff knows mother tongue of the people the area.
Q.2: What is the contribution of Govt. with you?
Answer: State Bank of Pakistan controls all banks of the country. We are bounded to follow the policies of State Bank. In the light of the policies it becomes very easy to manage braches.
Q.3: What are your goals?
Answer: Our main objective is to provide best facilities to the customers so we never compromise on our customer services. Our object is to regulate the current deposit figure and to gain the target which is given us by the Allied Administration. We try to educate the people of backward areas to use the latest and modern technology of our Bank like internet banking etc.
The people of different areas are attached with agriculture. We tell them about the agriculture loan. So these people always keep their money in our bank. Our loan recovery is also going very well.
Q.4: What difficulties Allied Bank is facing today?
Answer: Due to the financial deficiency allied bank is facing difficulties to educated particularly plural people that are why it is difficult to introduce new schemes.
Q.5: How do you manage your branch?
Answer: Well, it’s very easy to manage a branch if u has a good cooperation with your staff members. So, it’s a team work. I have men and women in branch and we all are committed to give best available services to our customers. We say welcome our customers warmly and in a convincing way. So that customers also becomes cooperative. The branch is located in my home area that’s why it is easy for me to bring more and more customers. We, also invited in workshops regularly to learn new happens.
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