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Internship Report

United Bank LimitedBranch: (0301) Sooter Mandi Faisalabad.

Ph: 041-9200454; 041-9201348

Submitted By :

Ashraf Ali

Roll No. 218

Reg. No: 2003-GCUF-625-7

PROGREAMME: M.Com (FINANCE) SESSION: 2005-2007

Department Of Commerce,

G.C. University Faisalabad.

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CONTENTS Page No.

ACKNOWLEDGEMENT 03

INTRODUCTION 04

ORGANIZATIONAL STRUCTURE 06

ACCOUNT OPENING POLICY 09

ACCOUNT OPENING PROCEDURE 10

CLEARING & COLLECTION MANAGEMENT 11

NATIONAL INSTITUNAL FACILITION

TECHNOLOGIES (Pvt) Ltd (NIFT) 12

PROCEDURE FOR INWARD CLEARING 14 PROCEDURE FOR OUTWARD CLEARING 16

CHEQUES RETURNED UNPAID 18

INTRODUCTION TO UNIVERSAL TELLER SYSTEM

AND ONE WINDOW OPERATION 20

PAY ORDER 22

DEMAND DRAFT 24

PAYMENT OF CHEQUES 27 ISSUANCE OF CHEQUE BOOK 30

PROCEDURE FOR UTILITY BILLS 33

FINANCIAL STATEMENT ANALYSIS 36

RECOMMENDATIONS 64

CONCLUSION 65

BIBLIOGRAPHY 66

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ACKNOWLEDGEMENT

By the grace of almighty Allah, who enable me to complete this report. I am very

much gratified to the management of UBL for providing the astounding learningenvironment. It is an enormous matter of inner satisfaction for me that I have learned

a lot of experience regarding Banking from here in a very short period.

I would like to acknowledge the following people for helping me to complete this

project. Mr. Muhammad Hussain Dogar (Branch Manager) is very polite and

courteous personality. He always positively enforced me to learn more and more.

With the attachment of following people, I have learned about different type of

activities performed by a banker now days.Abid Hussain Branch Operation Manager.

Raza Ahmad Farooqi Supervisor (Bills/Remittance/Cash)

Usman Bashir Clearing Department.

Abdul Hafiz and Cash Officer

Muhammad Imran Cash Officer

I am very thankful to all of above-mentioned persons who are very much co-

operative, and they provide me the detail information of all routine activities.

Ashraf Ali

Roll. No. 218

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UBL has asset of over Rs.300 billion and a solid track record of forty six ( 48 ) years

in addition to the convenience of over 1000 branches serving you throughout the

country and also at several overseas locations.

Date Established

November 7, 1959

Chairman

His Highness Shaikh Nahayan Mabarak Al Nahayan

Deputy Chairman

Sir Muhammad Anwar Perez OBE

President & CEO

Mr. Atif R. Bokhari

Branches

1056 Domestic, 15 Overseas Branches

Representative Offices

Tehran

Subsidiary

United Bank AG Zurich, Switzerland

United National Bank Limited, UK (joint venture with NBP)

Associated Company

Oman United Exchange Company, Muscat

Offshore Banking Unit

Export Processing Zone, EPZ Branch, Karachi, Pakistan

Head Office

State Life Insurance Corp. Building # 1,

I.I. Chundrigar Road; Karachi, Pakistan

P.O. Box No.4306Phone: (92-21) 111-825-111

Gram: UNITED

Fax: (92-21) 241349

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ORGANIZATIONAL STRUCTURE OF

UNITED BANK LIMITED

Organization Chart at Branch Level

Area Manager (A.M)

Internal Audit Branch Manager or Area Operational Manager

Credit Committee

Customer Deposit

Cash &Clearing

Bills &Remittances

Marketing Advances Accounts

I.T ForeignExchange

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Management HierarchyManag ement Hierarchy

PresidentPresident

Senior Executive Vice President (SEVP)Senior Executive Vice President (SEVP)

Executive Vice President (EVP)Executive Vice President (EVP)

Senior Vice President (SVP)Senior Vice President (SVP)

Vice President (VP)Vice President (VP)

Assistant Vice President (AVP)Assistant Vice President (AVP)

Officer Grade 1 (OG 1)Officer Grade 1 (OG 1)



Operational Staff Operational Staff

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UBL SETUP

BOARD OF DIRECTORS

EXECUTIVE COMMITTEE

Treasury &CapitalMarket

CorporateBanking

InvestmentGroup

Consumer Banking

HumanResource

Mgt.

FinanceDepartment

MarketingDepartment

ITDepartment

Audit&

Inspection

Service&

Quality

AgriLoans

CommercialBanking

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ACCOUNT OPENING POLICY

All customers account will require proper introduction either from UBL staff, existing

customer of branch / bank or of another bank. An employee of the branch / bankintroducing the account must know the account holder and must posses

sufficient information on the new account holder.

The signature of introducer if not holding account at branch must be verified from

another branch / bank prior to issuance of chequebook.

Initial deposit required for opening of account is Rs. 500/-

Later of thanks shall be sent the account holder (if other than bank own staff) for

correctness of address.Name and address of nominee (next of kin) must also be obtained in the case of an

individuals account.

Blank columns in account opening form and SS Cards must be crossed or mark

VOID.

PLS Saving Account shall be opened for individuals (single or joint) or charitable

institutions.

PLS Saving Account shall not be opened in the name of illiterate pardahnashinladies.

9. In case of illiterate person the introducer shall also verify the thumb impression

on the Account Opening Form.

10. In case of NIC does not contain photograph, photocopy of any other document

such as passport / driving license etc containing photograph shall be obtained.

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ACCOUNT OPENING PROCEDURE

1. Customer fills in the account opening form, chequebook, and ATM and UB

online request, SS Cards and submits relevant documentation per banks

requirement.

2. Account opening form and other documents should be signed in the presence

of officer designated to open accounts.

3. The customer provides original NIC / Passport along with its photocopy for

attestation by the designated officer. The original documents are returned to

customer after attestation.

4. Designated officer scrutinizes the account opening form and SS Card. Blank

spaces on AOF and SS Card are crossed out.

5. Ensure account-opening instructions are clear and specific.

6. Interview the customer to ensure genuineness of the information provided.

7. Documents are complete in all aspects otherwise if any document is missing

or incomplete should be referred to the AM / BM for deferral approval.

8. If deferral is approved it should be recorded in the register maintained with the

designated officer and monitored by the AOM / BM / OM.9. The missing / incomplete documents must be completed at an early date and

submitted to hub.

10. The designated officer approves account opening form.

11. Branch shall allot account number from Account Opening / Closing register

manually.

12. Computerized branch inputs the details of new account in the system.

13. Account number is noted on account opening form, specimen signature cardsand all other documents.

14. Customer fills in the Pay-in-slip and deposits cash with the teller.

15. Initial deposit is noted on account opening form.

16. SS Card is scanned (Computerized branch only).

17. Manual branch fills in ABC form containing details / profile of customer and

forwards to hub to update in the system.

18. Letter of thanks shall be prepared / mailed to customer.

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CLEARING & COLLECTION MANAGEMENT

Clearing transaction is inward when Cheque drawn on customer accounts is

presented at other banks and outward when Cheque drawn on other banks but

presented at the user bank branch.

CLEARING HOUSE.

Clearing house refers to the function whereby commercial banks

exchange and settle for Cheque, bill of exchange, draft and other banking

instruments drawn against each other received by them for collection and clearancefrom their customers.

PROCESS.

Suppose a person receives a Cheque of bank X and deposits it in his

bank named bank Y. Now bank X is a debtor of bank Y. in everyday life there is large

numbers of Cheque drawn and received. So banks become debtors and creditors to

each other. The easiest way to set off these claims is to receive or pay the netamount. This process is called clearing and the function is performed by central

bank.

FEATURES.

No physical transfer of money.

Saves time and effort.

Minimizes the use of cash.Security to the banking system/customer.

Promotes trade and commerce.

Encourage acceptability of Cheque and other instruments.

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National Institutional Facilitation Technologies (Pvt) Ltd (NIFT)

Previously, State Bank of Pakistan / National Bank of Pakistan (remote areas

specially) were serving as the Clearing House for the commercial banks in the

country. The representatives of different banks were required to gather physically at

clearing-house in the evening of each working day and exchange Cheque, drawn on

each other.

Recognizing the need for speedy processes and for incorporating latest technology

in service industry, NIFT was incorporated in September 1995 as a joint venture

between six major banks and private investors group:

The clearing arrangement of all commercial banks operating in Pakistan have been

outsourced to NIFT which enable it to centralize the entire process of Cheque

exchange by the banks regarding inward / outward intercity and same day clearing.

INTERCITY CLEARING

NIFT is also providing Intercity Clearing service for the following cities:

- Lahore - Islamabad

- Rawalpindi - Faisalabad

- Karachi - Hyderabad

- Multan - Peshawar

- Gujarat - Gujranwala

Cheque of above-mentioned cities may be sent for collection through NIFT in

Intercity Clearing in place of OBC. The OBC is commission-based collection service

and time-consuming whereas intercity is a relatively speedy service. The lodgmentprocedure for Intercity clearing (preparing the Bundle Cover and Summary Sheet) is

the same as for Outward Clearing. However one additional stamp of INTERCITY

CLEARING is affixed on the face of the instrument and it must be packed in

respective citys envelope provided by the NIFT.

SAME DAY CLEARING

The simple Outward Clearing is normally a two-day process. However, within cityNIFT also provides Same Day Clearing service against additional charges provided

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the collecting and drawee branches are registered as SAME DAY CLEARING

branch. This service is usually offered to valued customers for Cheque amounting to

Rs.500, 000 and above. The customers account will receive credited same day to

the debit of H.O. account against charges Rs.300 per Cheque.

LOCAL COLLECTION

In villages / remote areas, where clearinghouse services are not available, even the

crossed Cheque are being presented on the counter of the paying banks by

representative of collecting banks directly and upon clearance, customer accounts

are credited. It is printed to note that this system consists of arrangements between

banks and the customer is not involved.

DISCHARGES BY COLLECTING BANKS

Discharge means the endorsement stamp affixed on the back of Cheque / other

instrument before lodging the same in Outward Clearing. It signifies that the

collecting banker is truly maintaining payees account and account and is acting as

agent

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PROCEDURE FOR INWARD CLEARING

Computerized branches (NIFT / Clearing Cell)

1. The cheques and other instruments drawn on the same

branch are received from NIFT / Clearing Cell along with forwarding schedule

showing number and amount of instruments enclosed.

2. The cheques and other instruments are handed over to

respective departments to scrutinize / check for any discrepancy such as:

a. Validity (State / post dated).

b. Amount in words and figure agree.

c. Beneficiary and bank properly endorse cheque.

d. Bears presenting banks clearing and crossing stamp.

e. Addition / alteration / cutting, if any, on cheque(s) and other instrument(s),

is authenticated.

3. If cheques are found in order, signature(s) are verified against Unibank system.

4. The cheques are posted in the respective accounts in Unibank system against

available balance through the financial option of the clearing.

5. The signature of issuing officers on Pay Orders, Draft, Mail Transfers, TT

Receipts, RTCs and Tezraftar cheques are verified.

6. The draft drawn / payable on branch are posted in DD Reconciliation module.

7. In case of Rupee Travelers Cheque(s), circulars issued by Head Office regarding

lost or stolen RTCs must be checked before making payment.

8. The following transaction is passed:

Dr. CD /PLS Saving Customer a/c

Bills Payable PO/DD/MT/TTR 4210,4240,4250,4260

Head Office a/c IBDA (Tezraftar cheques)Other Asset RTCs paid 7880

Other Asset DD paid advice 7530

Cr. Head Office a/c IBCA

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9. The branch will ensure that total number and amount of cheques / instruments

received through NIFT / Clearing Cell agrees with the amount shown on NIFT /

Clearing Cell forwarding schedule.

10. The dishonored cheques / instruments are returned along with the cheque

returning memo (showing specific reason of return) duly signed and after entry in

the Cheque Returned Register (as per cheque returning procedure).

11. The cheque returning charges are recovered as per schedule of charges.

12. The paying branch issues Inter Branch Credit Advice (IBCA) for the cheques /

instrument paid i.e. total value of instruments received less the amount of

dishonored cheques delivered to Clearing Cell / NIFT.

13. The NIFT / Clearing Cell responds the IBCA received and disburses funds to

cheque presenting banks / branches.

14. The returned cheques are returned to the cheque presenting banker / branches

along with the cheque returning memo .

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PROCEDURE FOR OUTWARD CLEARING

Computerized Branches

1. The teller receives deposit slip and cheque(s) drawn on any other bank / UBL

branch in the city and scrutinizes deposit slip / cheque(s) for the following:

a. Amount of cheque(s) agrees with amount on deposit slip.

b. Amount in words / figures on cheque / deposit slip agree.

c. Cheque is bearer, in favor of account holder or endorsed.

d. Crossing and Clearing stamps if previously affixed are cancelled.

e. Cheque is not state / post dated / mutilated.

f. Cutting / alteration / addition on deposit slip, if any, is authenticated by the

depositor.g. Cutting / alteration / addition on deposit slip, if any, is authenticated by the

drawer.

h. Detail on both part of deposit slip tally and bear depositors signature.

i. Deposit slip bears same days date otherwise date should be corrected and

authenticated by the depositor.

2. In case any discrepancy is found, deposit slip and cheque shall be returned to

the depositor for correction.3. The teller affixes bank crossing and (next working days) clearing stamp on

the face of the cheque(s), and endorsement stamp on the reverse.

4. The Clearing / Transfer delivery cheques are entered in Unibank system

under single entry option or batch entry option.

5. The Unibank system requires posting and value date entered besides thefollowing:

Customer a/c and number, drawee Bank / Branch code, cheque number andamount.

6. After entry in the system counter foil is delivered to the depositor duly

stamped Clearing with date branch name and code and signed by the Teller.

7. In branches where the volume does not warrant immediate entry in the

Unibank system may enter the cheques in Unibank system during intervals.

8. Endorsement on reverse of instruments is signed by the Supervisor /

officer.

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CHEQUES RETURNED UNPAID

When dishonoring a cheque whether on account of:

Legal bar to payment

For want of funds or

For some technical irregularity

The banker must be careful in selecting the reason to avoid as for as possible the

damage. The objection should not be at variance with the actual facts.

Category of objections.

Sufficiency of funds Availability of funds Regularity of cheques

Usually following objections are applied in case of insufficiency of funds. Funds not sufficient Exceed arrangement Refer to drawer Account closed Full cover not received

Funds not sufficient

It is applied when funds in the customers account are insufficient to meet the

cheque which has been presented to the banker.

Exceed arrangement

Where the payment of the cheque would over draw the balance in excess of the

agreed sanctioned limit.

Refer to drawer

It is one of the common objections when a cheque is returned for want of funds. By

applying this objection the bank is just saying we are not paying go back to the

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drawer and ask why/? Or go back to the drawer and ask him to pay this is said to be

the milder objection and does not disclose the secrecy of the account.

Account closed

They are far more serious cases where they are justified because I imply that the

drawer was intentionally issuing cheques for the account, which has been closed,

and there is no possibility of this cheques being meet.

Full cover not received

It means that money is not available immediately. Under these conditions before

returning the cheques banker must sure that there is no credit in the bank, which has

not, yet reached the account.

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INTRODUCTION TO UNIVERSAL TELLER SYSTEM AND ONE

WINDOW OPERATION

Responsibilities Of Teller To provide outstanding customer service within standard turn around time. To follow limits / guidelines for cash. To process counter transaction (effectively and efficiently) To verify customer signature, post transactions and to handle balance

enquiries. To maintain effective and efficient service delivery and quality. To maintain one bank one team concept in the branch.

Reporting Line

Tellers position falls under Operations so he reports to branch operation manager.

Teller indirectly reports to branch manager.

Teller Must Be Aware Of:

Product range Bank charges Demand draft, local / foreign procedure Travelers cheques local and foreign Cash deposits and withdrawal, local and foreign currency Cash deposits-clearing and collections Utility bills Fixed and Notice Deposits Sale and purchase of Government Securities Stop payments Holding cash in accordance with the limits

Compliance Management For Teller

The teller has to comply strictly with the following: - PPI circulars

Operation manuals Regulatory rules (SBP)

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PROFESSIONAL ETHICS

Secrecy Loyalty with the organization

Loyalty with customers Job knowledge To behave not as an individual, but as an organization Integrity Honesty Discipline Never deceive customers / staff members Obey seniors and give respect to juniors Create good image of the bank First deserve than desire

HOUSE KEEPING

The people who work at counter are the most important people and counter are the

most important place for the customers because: It is the front most place People visit this part of the total establishment 90-95 % of business transactions are done at the counter

Customers usually perceive service standards before they actually receive.

Before commencing business each day teller must ensure:

Counter should give a tidy and clean look. Counter Glass should not be dirty and stained, creating a bad image. Teller should keep his service tangibles neat and clean. All stamps at Tellers counter must be legible and in perfect condition. Application form, deposit slips and product brochures must be available on

the counter. Ballpoints should always be available at the counter for customers.

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ISSUANCE OF PAY ORDER(Computerized Branch)

Procedure:

1. Request for issuance of Pay Order shall be received on our standard

application remittance form. Customers written request can also be used as

source document.

2. In case of walk-in customer, the application shall be fill in the following details: Name of beneficiary.

Amount of pay order. His address and telephone number. Shall attach photocopy of CNIC, which shall be compared with original before

attestation.

3. If our bonafides account holder, his signature on the

prescribed place with account number shall be obtained.

4. The cash officer / teller shall check remittance form ensuring

that all required information is provided and it is signed.5. Charges as per effective SOC shall be applied.

6. If pay order is to be issued against cash, amount of pay

order and charges shall be received in cash after proper counting.

7. Cash officer affix Received cash stamp (preferably red ink

pad should be used) and sign (preferably in red ink) in acknowledgement of

having received amount of pay order and charges. Amount of pay order shall be

written in figure and amount of charges shall be circled.

8. In case cheque is tendered along with remittance form, debit

voucher for the charges shall be prepared and both cheque and debit voucher

shall be posted in the ledger/system, subject to the availability of clear / effective

credit balance and transfer stamp shall be affixed on both vouchers.

9. Now Pay Order shall be issued by the system by selecting

the following option: Banking Option 1 Financial Transaction.

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Option 7 Bills and Remittances. Option 4 Pay Order. Option 1 Issuance.

System shall ask for mode of transaction cash / transfer. If PO to be issued is against transfer, feed document number of debit voucher.

The amount debited shall appear, feed name of beneficiary, amount of PO. Purchasers name shall automatically appear. If Pay Order to be issued is against cash, select mode as Cash, feed total

amount of money received (with commission), amount of Pay Order, name of

the beneficiary and name of purchaser.

Account code Title of account Entry

6020-01 Customer A/C or Cash Debit

4210-01 Bills Payable A/C (Pay Order issued) Credit

0640-27 Commission Income on Pay Order issued Credit

10. System prepares and maintains Pay Order issue register.

11. Supervisor shall opt for banking, financial transaction; option 7 for bills and

remittances; option 4 Pay Order; option 3 verification/supervision after checking

the following: Name of beneficiary. Amount of Pay Order applied.

Name of the purchaser. Quality of printing.

12. System prints name of the branch and date automatically.

13. Pay Order is protectographed by the system.

14. The blank leaves are printed as payees A/C only.

15. Pay Order shall be handed over to the purchaser and his acknowledgement shall

be obtained on the respective counter bankers portion.

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DEMAND DRAFT

According to Sec 85-A NIA 1881 A demand draft is written order to pay money

drawn by one office of a bank upon another office of the same bank, for a sum of money payable to or to the order (of a specified person) on demand.

Demand draft can be issued to customers as well as to non-customers against cash,

cheque and letter of instruction.

NIA = Negotiable Instruments Act.

Remittances by walk-in customers

To discourage the use of banking channels for Money Laundering transfer of illegalmoney and financing of terrorist activities the following measures should be taken

immediately:

All walk in customers requesting any type of transfer of funds using uniremote, TT,

MT, DD or pay order should be requested to prove identification by providing original

CNIC / Passport along with the photocopy.

The teller / officer shall verify the photocopy and return the original to the customer.

The photocopy of CNIC / Passport shall be attached with the application.

Procedure for issuance of Demand Draft

Purchaser is asked to fill up remittance form containing columns for: -

Date

Branch

Choices of mode of remittance i.e. demand draft, pay order, MT, TT or Uniremote

(customer is required to tick among the given choices).

Type of Currency i.e. PKR, Euro, JPY, US$ others (customer is required to tick

among the given choices).

Amount in figures and amount in words.

Beneficiary details

Beneficiarys name Beneficiarys account number

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Beneficiarys NIC / Passport No. Banks name and address City

Country Applicants signature Lower half of remittance form is meant for bank use only, it contains following

columns. Principal amount Telex charges Fax charges Commission Withholding tax Total deduction Commission charges are calculated accordingly and written in the cage

provided on Remittance form. Purchaser is asked to deposit the cash. Teller receives the cash for demand draft including commission, excise duty

and affixes Received Cash stamp on demand draft application form. Demand draft application serves the purpose of H.O credit voucher. Remittance form is entered in receiving cashiers book and given to supervisor. Demand draft instrument is prepared (two types of demand draft leaves are in

use one is for Rs. 5000 and over and other for below Rs.5000.

Name of drawee Spoke branch and its Hub branch will be written on instrument.

Demand draft is signed by two attorney officers single attorney branch may issue

demand draft for amount below Rs.5000.

After completion of all the formalities demand draft is handed over to the purchaser.

Acknowledgement is obtained on the back of counterfoil of demand draft block and

on demand draft application form.

Following entries are passed.

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At the close of counter hours remittance form and voucher for al the demand drafts

issued during the day will be sent to Hub (off line branches).

At Hub IBCA will be generated through system and mailed / processed through IBEXto the drawee Hub.

IBCA above Rs. 50000 will be tested / authenticated before dispatch.

Issuance of demand draft against cheque

Account holder of a branch tenders a cheque along with the demand draft

application form for purchase of demand draft. Cheque is drawn for the amount of

demand draft plus commission.

Cheque is sent to deposit in charge for posting in the ledger. If there is no

discrepancy and funds are available in a/c, cheque is posted (in blue ledger /

system).

Demand Draft application form cheque and voucher for commission are stamped

with cash transfer stamp and entry is made. (In system / Transfer Book).

Remaining procedure is the same as in case of issuance against cash.

Payment of Demand Draft

Demand draft can be presented for payment:

Over the counter for payment in cash.

For credit of payees account in the branch.

Through clearing.

Account code Nature Entry

6020-01 Customer Account Or Cash Debit

5610-01 Head Office A/C By IBCA or TEZIBEX Credit

0640-24 Income Account Commission on Demand Draft Credit

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PAYMENT OF CHEQUES

Payment of money deposited by the customer is one of the most functions of

banking. This paying function is one, which is distinguishing mark of a banker anddifferentiates him from other institutions, which receive money from the public.

1. Payment in due course

The banker gets legal protection only when payment is in Due Course see 10 of

NIA 1881 says payment in due course means payment in accordance with the

apparent tenor of the instrument in good faith and without negligence to any

person in possession thereof under circumstances which do not afford areasonable ground of believing that he is not entitled to receive payment of the

amount therein mentioned.

It is contractual obligation of a banker to honor his customers cheques if the

following essentials are fulfilled.

2. Cheque should be in proper form

The customer contracts reciprocally that in drawing his cheques he will draw

them in such a form as will enable the banker to fulfill his obligation, and

therefore, in a form which is clear and free from ambiguity. The banker must see

that the customer / holder have not changed the form of the cheque.

3. Cheque should not be crossed

A crossed cheque cannot be honored over the counter to any person but a

collecting banker. If a paying banker honors a crossed cheque contrary to the

crossing, the true owner may require the banker to pay him such damages as he

might have sustained by the bankers action.

4. Cheque should be drawn on the particular branch

Only the branch of the bank particularly mentioned on the cheque where the

customer is maintaining his account can make the payment of a cheque. If

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arrangements have been made; encashment of a customers cheque can be had

at a branch other than the one where he maintains his account.

5. Cheque should not be mutilated

When a cheque is torn, worn out or doesnt give sufficient evidence of the

customers intention, it is called a mutilated cheque

The banker should see that the cheque presented for encashment is not

mutilated, because if the banker ignores this point, he becomes liable. However

mutilation by accident may be excused if drawer declared about his fact.

6. No unauthorized material alterations

Banker must not pay a cheque bearing apparent material alterations not duly

authorized by the drawer under his full signature, specimen of which has been

supplied to the banker before hand.

7. Funds must be sufficient and available

See 31 of NIA 1881 lay down that the drawee of a cheque having sufficient

funds of the drawer in his hands. The customer also has the right to over draw up

to a limit not yet reached (arrangements).

8. The cheque should be neither post dated nor stale

Post dated cheque

If a cheque bears a date later than that on which the holder presents it at the

bank, it is called a post dated cheque. Banker should not honor it for the

following reasons.

a) Customer may make stop payment before the due date of cheque.

b) Banker has no right to debit customers account before the due date of the

cheque.

c) If a post dated cheque is paid customers account balance will be reduced, in

this case if a second cheque (regular) of the same customer is presented it will

be wrongfully dishonored on the ground of insufficiency of funds.

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Stale cheque

A cheque is said to be stale when it has been in circulation for unreasonable long

period. Banker in Pakistan regards a cheque stale, when remains outstanding for more than six months. The banker may honor a stale cheque after getting it

confirmed by the drawer.

9. Cheque should be presented during banking hours

Cheque should be presented on working day and during banking hours. Any

change in business hours must be notified before hand.

10. No legal bar prohibiting payment

The banker should see none of the following clauses apply on the cheque

presented for payment.

a) Payment stopped by the drawer.

b) Knowledge of any defect in the title of the person who is presenting

the cheque for payment.

c) Notice of insolvency, insanity or death; or in case of company notice

of its winding up received by the banker.

d) Knowledge that the customer contemplates breach of trust or an act

of insolvency.

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ISSUANCE OF CHEQUE BOOK

INTRODUCTION.

To facilitate the customers to withdraw cash from their accounts or to settle their financial obligations, chequebook is provided to account holders. Cheques drawn by

customers have legal implications under Negotiable Instruments Act; therefore all the

best precautions must be exercised in the safe custody of the chequebook.

POLICY.

1. Cheque books against new account should be issued against instruction

on account opening form/ authority letter signed by the customer and after the

account opining form is completed in all respect and approved by the designated

officer the chequebook request should be processed.

2. Cheque books against an already existing account would be issued only

against the chequebook requisition extracted from the previous chequebook else

upon receipt of customer written request. Incase if the prior is lost/misplaced,

however extra charges for the same would be charged. Signatures are verified

on the same.

3. The designated officer / Teller on receipt of cheque book requisition /

request letter shall writes date of receipt and time and checks the cheque book

disposal instructions, whether cheque book shall be collected: - Personally. Through Authorized agent. Should be dispatched through courier. If no instruction is given it shall be deemed that the chequebook shall be

collected personally or through an authorized agent.

4. The undelivered chequebooks should be kept under dual control.

5. For dormant account the customer, in person, presents the chequebook

requisition. The AOM/BM//OM/SB Supervisor shall follow the procedure for

operation of dormant accounts to satisfy himself about the genuineness of the

applicant.

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viii. Accounts where there are insufficient balance, debit block is marked on the

same.

ix. Upon customer receipt the cheque serial is recorded in the system, which

after the customer signature is verified on the acknowledgement.

x. Chequebooks along with the customer request are passed on the supervisor

to approve the serial maintenance in the system.

xi. In the chequebooks request register the release date is mentioned along with

the officer in charge of the delivery of the chequebook.

xii. The original chequebooks request is than sent with the day end voucher.

DISPOSAL OF UN-COLLECTED CHEQUE BOOKS.

1. The chequebooks requisition shall bear a notation or rubber stamp stating, If the cheque book is not collected with in 60 days, In order to protect your interest,

the bank shall cancel the cheque book and charges for new cheque book shall be

borne by you.

2. All un-collected chequebooks shall be kept under lock and key during the day

in a box or in a drawer and overnight shall be kept in main vault or safe.

3. The chequebooks, which remained uncollected beyond 60 days shall becancelled, two officers shall prepare a complete list of such chequebooks, once in

a month, showing the following details. Date. Branch Name. Customer Name. Account Number. Cheque Book leaves numbers.4. The chequebooks shall be cancelled by tearing off the signatures portion.

5. Notation of cancellation of chequebooks shall also be made in thechequebook issuance register in RED along with the destruction date.

6. The original list shall be kept, in a file in main vault/safe along with the

chequebook over night.

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PROCEDURE FOR UTILITY BILLS (CASH)

Procedure:

1. The customer/depositor submits the utility bills and cash to the Teller.

2. The Teller reviews the utility bill ensures payment is being made within due

date otherwise total amount surcharge/penalty shall be received from the

customer/depositor. Teller will not entertain request of customer/depositor to accept partial receipt.

Any utility bill not containing amended amount duly authenticated by the

authorized bank officer would be treated a full amount received by the Teller.3. Teller counts the cash and stamps the bill at appropriate place in

acknowledgement of Cash Received-Utility Bills with date and signatures.

Amount in figure shall be circled to restrict any addition.

4. Bill amount exceeding any Tellers limit shall be forwarded to Supervisor for

review and counter sign.

5. Counter foil of the bill meant for the customer/depositor shall be separated

and handed over to him.6. Computerized branches Teller enter / post the transaction in UNIBANK.

7. The Teller of manual branches shall enter transaction in prescribed scroll.

8. After physical verification of cash received and balancing with the

Unibank/scroll register, a consolidated transaction is passed.

9. Following accounting vouchers shall be prepared and passed over to the Hub

branch for posting along with the detailed summery sheet.

HUB/Spoke branches (Computerized)

i. Debit Cash Utility Bills

Credit CD Collection a/c System

Credit Income a/c Commission generated

(Handling Charges Utility Bills)

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Procedure:

1. Two collection Accounts for T&T and Electric

Supply Corporation shall be opened in each branch. One Main collection Account

of utility company and other for cheque collection.

2. After realization of the proceeds of the

cheques funds shall be transferred to main collection account.

3. Cheques dropped for Gas Collection are notsent in clearing by the branch. These cheques are entered in scroll and sent to

Gas Co. along with Stub.

4. Drop box shall be opened each day beforeend of counter hours.

5. Cheques drawn on own branch and for

payment of gas bills shall be separated.

6. Posting for the cheques drawn on our branch

shall be made in respective account and credit shall be given to main collection

account.

7. Cheques drawn on other branches shall be

sent in clearing. On realization proceed shall be credited to main collection

account.

8. Manual Branches shall make entry in scroll, in

computerized Branches entry shall made in the system:

Banking >

14. Utility Collection >

1. Entry >

4. Transfer

9. Online branches shall Uniremote their days collection of each utility company to

Hub branch separately, while Offline Branches shall transfer days collection of

each utility co. through Parking Account.

10. Hub branch shall transfer total collection of the Hub Branches in the main system

account of the company.

11. Stub of Utility Bills shall be transferred as per Service Level Agreement.

12. Teller will be the custodian of paid receipt of Utility Bills.

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FINANCIAL STATEMENT ANALYSIS

OFUNITED BANK LIMETED

FOR THE YEARS OF 2004-05-06

Contents Page No.

Balance Sheet 37-37

Profit and Loss Account 38-39

SWOT Analysis 40-43

Horizontal Analysis 44-45

Comments On Horizontal Analysis 46-48

Trend Analysis 49-49

Quarterly Trend Analysis 50-54

Ratios Analysis 55-62

Summery of Financial Ratios 63-63

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UNITED BANK LIMITED

BALANCE SHEETS AS AT DECEMBER 31, 2004-2005-2006

Particulars 2006 2005 2004Rs. (000) (Rs.000) (Rs.000)

ASSETSCash and balance with treasury banks 48,939,840 34,062,679 23,844,435

Balance with other banks 14,034,476 12,729,207 17,699,334Lendings to financial institutions 29,572,070 17,867,552 18,360,633Investments 67,260,338 63,026,944 54,953,728Advances 247,309,893 204,810,470 144,151,055Other assets 10,062,466 7,829,770 4,439,580Fixed assets 5,234,463 4,449,324 3,969,006Deferred tax asset - net 906,661 2,273,005 5,194,892Total Assets 423,320,207 347,048,951 272,612,663LIABILITIESBills payable 4,560,649 4,159,964 3,811,284Borrowings from financial institutions 38,544,920 21,790,480 11,975,684Deposits and other accounts 335,077,873 289,226,299 230,256,627Sub-ordinated loans 5,998,344 3,999,192 3,500,000Liabilities against assets to financial lease - - 228Other liabilities 9,275,034 6,204,746 5,704,749Total Liabilities 393,456,820 325,380,681 255,248,632PRESENTED BY:Share capital 6,475,000 5,180,000 5,180,000Reserves 8,298,873 6,225,461 5,915,928Unappropriated profit 12,429,853 7,350,813 3,274,439Surplus on revaluation of assets 2,659,661 2,911,996 2,993,664Total shareholder's funds 29,863,387 21,668,270 17,364,031

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UNITED BANK LIMITEDPROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31, 2005

2005 2004(Rupees in '000)

Mark-up / return / interest earned 20,158,860 9,233,881Mark-up / return / interest expensed 6,045,948 1,732,760Net mark-up / interest income 14,112,912 7,501,121

Provision against loans and advances - net 1,277,002 435,414Provision / (reversal) for diminution in value of investments net 112,666 (100,381)Bad debts written off directly 38,140 3,841

1,427,808 338,874Net mark-up / return / interest income after provisions 12,685,104 7,162,247Non mark-up / interest income

Fee, commission and brokerage income 2,543,739 1,654,475Dividend income / gain on sale of investments 583,982 1,102,510Income from dealing in foreign currencies 675,109 668,085Other income 1,210,202 1,072,756

Total non mark-up / return / interest income 5,013,032 4,497,82617,698,138 11,660,073

Non mark-up / interest expensesAdministrative expenses 7,874,013 6,794,311Other provisions / write offs / (reversals) 335,409 (34,422)Other charges 7,066 10,456

Total non mark-up / interest expenses 8,216,488 6,770,345Extraordinary items - -Profit before taxation 9,481,648 4,889,728

Taxation - Current - for the year 498,748 283,083Taxation - Current - for prior years 78,614 285,201Taxation - Deferred 2,955,254 619,900

3,532,616 1,188,184Profit after taxation 5,949,032 3,701,544

Unappropriated profit brought forward 3,274,439 1,384,4909,223,471 5,086,034Transfer from surplus on revaluation of fixed assets - net of tax 94,148 94,214Profit before appropriations 9,317,619 5,180,248AppropriationsTransfer to:Statutory reserve (1,189,806) (740309)Capital reserve - -Revenue reserve - -Final cash dividend for the years ended December 31, 2004(Rs.1.50 per share) and 2003 (Rs.2.25 per share) declaredSubsequent to the year end (777,000) (1165500)

(1,966,806) (1905809)Unappropriated profit carried forward 7,350,813 3274439

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(Rupees)Basic and diluted earnings per share 11.48 7.15

UNITED BANK LIMITED

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31, 2006

2006 2005(Rupees in '000)

Mark-up / return / interest earned 32,991,603 20,158,860Mark-up / return / interest expensed 12,126,809 6,045,948Net mark-up / interest income 20,864,794 14,112,912

Provision against loans and advances - net 1,972,936 1,277,002

Provision / (reversal) for diminution in value of investments net 74,573 112,666Bad debts written off directly 269,349 38,140

2,316,858 1,427,808Net mark-up / return / interest income after provisions 18,547,936 12,685,104

Non mark-up / interest incomeFee, commission and brokerage income 3,876,799 2,543,739Dividend income 837,338 202,343Income from dealing in foreign currencies 659,726 675,109Gain on sale of securities 280,864 382,419Unrealized gain/ (loss) on revaluation of investments classified as

held for trading (3,335) (780)Other income 1,296,996 1,210,202

Total non mark-up / return / interest income 6,948,388 5,013,03225,496,324 17698136

Non Mark-up / Interest ExpensesAdministrative expenses 10,952,275 7,874,013Other provisions / write offs / (reversals) 226,313 335409Other charges 25,980 7,066

Total non mark-up / interest expenses 11,204,568 8,216,488Extraordinary items - -Profit before taxation 14,291,756 9,481,648

Taxation - Current - for the year 3,412,791 498,748Taxation - Current - for prior years 45,225 78,614Taxation - Deferred 1,365,508 2,955,254

4,823,524 3,532,616Profit after taxation 9,468,232 5,949,032Unappropriated profit brought forward 7,350,813 3,274,439

16,819,045 9,223,471Transfer from surplus on revaluation of fixed assets - net of tax 94,454 94,148Profit available for appropriation 16,913,499 9,317,619

(Rupees)Basic and diluted earnings per share 14.62 9.19

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SWOT ANALYSIS

INTERNAL STRENGTHS

Ownership of Strong Group

The UBL is under the ownership of two very strong (financially) group (The Abu

Dhabi Group & the Best way Group). The Chairman of the bank is His Highness

Sheikh Nahayan Mubarak Nahayan who is leading role of Abu Dhabi Group. Abu

Dhabi Group has also the ownership of Al-Falah Bank, and recently launched a GSM

Mobile Network company named WARID TELECOM. In Pakistan the largest FDI

(Foreign Direct Investment) is of the Abu Dhabi Group.

The Deputy Chairman of the UBL is Sir Mohammad Anwar Pervaiz (OBE) who is the

leading role of Best way Group. This group has started its business in England and

emerges in the top ten large business entities of England. This group recently

installed the Cement Plant of Pakistan in Tehsil Chowk Saidan Shah District

Chakwal.

Huge DepositsThe bank has stable growth in deposits since its emergence. The UBL is the second

largest bank in Pakistan and because of its 48 years long existence it is the

trustworthy bank in Pakistan and outside Pakistan.

Advances on Sound Basis

The loan facility provided by the bank is on sound basis. They have many checks

and documentation that secure their money after advancing. With their strategy there

are very less chances of non-recovery from the debtor.Infrastructure

Because of its 1000 Domestic and 15 Overseas Branches they have very good

infrastructure and are prevailing now outside Pakistan also. UBL continually looks for

ways to become more efficient and to increase their profit margins.

Brands

UBL has launched their products and varied services with particular brand names

that is now-a-days a competitive strategy in its own. They are launching same

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Schemes that are already existent in the banking sector but because of giving them

brand names they are creating unique identity. Their popular brands are UBL Wallet

(ATM Card), UBL Address (house loan), UBL Drive (car financing), UBONLINE

(online banking services), HAMRAH (traveler Cheque), Click N Remit, TezRaftar

(remittance service) etc.

Fast Service

Another very important aspect of UBL is its fast service. Everything goes very

quickly. If you are looking for a loan, or you want to deposit money or you want to

pay your bills their services are so fast that they respond the customers very quickly.

Like other banks customers do not have to wait for the long time.

Financial

UBL has financial strength as they are gaining profit from the advances that they

provide to the organizations.

Services

UBL is providing lot of services to its customers like incase of remittances they have

services like Click N Remit online service, TezRaftar is an other remittance service,

UB-ONLINE is their online service. Money Gram is their service for foreign currency

remittance from outside Pakistan and Hamrah is their service regarding rupee

Traveler Cheque.

Promotion Criteria

The promotion criterion of employees is made up of passing the Diploma

Examination of Pakistan Institute of Bankers (IBP).

Good Reputation

Because of its quality management, marketing, innovation in products and services

they have established a good reputation in the banking sector.

INTERNAL WEAKNESSES

Centralization

UBL is centralized. It means authority is not delegated to branch level. Manager

cannot take initiative regarding different decisions such that for giving finance.

Low Promotional Activity

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The majority of people are not well aware about the products of UBL. It is due to

their very low services of promotional activity.

Low Motivation Level

There is low level of motivation in the employees of the bank

Reactive Approach

UBL Management has opted reactive approach they respond to the market very

slow and are reluctant to take initiative before the problem arise.

EXTERNAL OPPERTUNITIES

Mobile Banking

Mobile banking is a concept that has started to find its roots in the banking sector.

So it is a big opportunity for UBL to avail this chance at big level.

International Expansion

Opportunities exist for expansion of UBL chains in the International Arena, in

particular in Germany and Europe. Particular Invention must be given to the

individual countrys customs and cultural practices to be successful.

Trade Shows

UBL should organize trade shows for the promotion of export for that they should

finance the companies those who wanted to internationalize and wanted to

introduce their product and services outside Pakistan.

Liberalization

Liberalization is a concept that in under discussion around the world as this is

going to be implemented by WTO in a few years to come. With the liberalization

many industries are expected to be open in Pakistan and with free trading lot of

trade activity is expected. So keeping in view these perspectives there is great

opportunity for UBL to be stronger.

Sociocultural

An external opportunity exists in efforts to improve the social environment of local

communities and society in general by offering innovative, community

involvement programs.

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EXTERNAL THREATS

Rapid Changes

The rapidly changing environment in the banking sector and the quick response of

the other banks to these changes can be a threat for UBL.

Customer Behavior

What customer really wants is a difficult thing to identify as to identify the customer

perception and its behavior is complex procedure. So the changing needs of thecustomer can be a threat for the banks.

Governmental Policies

Changing Governmental Policies instability in Politics can be seen as a threat for

the banking sector.

Competition

Competition can be the greatest threat for the UBL. As old banks have started

changes and many new banks are emerging as a strong entity so UBL will face astrong threat from this competition unless the adopt pro active approach to

handle these threats.

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BALANCE SHEET

For the years of 2004-05-06

HORIZONTAL ANALYSIS

Particulars Change %Age Change %Age2004-2005 2005-2006

ASSETS Rs. (000) Rs. (000)Cash and balance with treasury banks 10,218,244 42.85 14,877,161 43.68Balance with other banks (4,970,127) -28.08 1,305,269 10.25Lendings to financial institutions 493,081 -2.69 11,704,518 65.51Investments 8,073,216 14.69 4,233,394 6.72Advances 60,659,415 42.08 42,499,423 20.75Other assets 3,390,190 76.36 2,232,696 28.52Fixed assets 480,318 12.10 785,139 17.65

Deferred tax asset - net (2,921,887) -56.25 (1,366,344) -60.11Total Assets 74,436,288 27.30 76,271,256 21.98

LIABILITIESBills payable 348,680 9.15 400,685 9.63Borrowings from financial institutions 9,814,796 81.90 16,754,440 76.89Deposits and other accounts 58,969,672 25.61 45,851,574 15.85Sub-ordinated loans 499,192 14.62 1,999,152 49.99Liabilities against assets to financial lease (288) -100.00 0 0.00Other liabilities 499,997 8.76 3,070,288 49.48Total Liabilities 70,132,049 27.48 68,076,139 20.92

PRESENTED BY:Share capital 0 0.00 1,295,000 25.00Reserves 309,533 5.23 2,073,412 33.31Unappropriated profit 4,076,374 124.49 8,079,040 185.69Surplus on revaluation of assets (81,668) -2.73 (252,335) -8.67Total shareholder's funds 4,304,239 24.79 8,195,117 37.82

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BALANCE SHEETHORIZONTAL ANALYSIS COMMENTS

ASSETS:

Cash is increased from 2004 to 2006.it shows that the liquidity position

of the bank is going to be strong, so it is good sign for the bank. Therefore

bank has strong liquidity position.

There is decreasing trend in balance with other banks in 2005 which is

a negative sign. But in 2006 the bank takes necessary steps to increase this

trend.

In the field of investment there is increasing trend with the passage of

time. It is common term of finance more investment more return.

As we know that main source of profit of a bank is the difference

between the percentages of interest, Banks pay less rate of interest thanreceiving the interest from the customers. In this case advance to customers

increases from 2004 to 2006. It means that UBL running very well .

As UBLs earnings increased yearly, than bank can purchase more and

more of fixed assets more assets mean that bank has more capacity to pay

off its liabilities. There is increasing trend in field of fixed assets. It is due to

purchase of new assets.

Other assets have an increasing trend which is a positive sign.

Increase in assets increase the worth of organization.

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LIABILITIES:There is increasing trend in deposits and other accounts which shows the

credibility of the bank.

Borrowings have increasing trends. Borrowings are increasing year by year. I

think UBL doing this for increasing his profits, because his borrowings power

increase while UBL pay its obligations in well form.

Bills payable have also increasing trend, it increases current liabilities. But

variability in increasing trend not more. It show that bank take necessary

steps to control this increasing trend.

Other liability has an increasing trend not good because increase in liability

decreases the liquidity position of the bank. The increasing trend in 2004-05 is

only 8.76%, but in 2005-06 this is increase by 49.48%.

Share capital remains same in 2004-05 but in 2005-06 it is increase by 25%

that shows the creditability of bank.

The UBL is increasing its reserves and Un-appropriated profit in order to

increase its lending power, which is good sign,

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PROFIT AND LOSS A/CHORIZONTAL ANALYSIS COMMENTS

INCOME:

Interest income has increasing trend, but in 2004-05 it increases by 88.14%,while in 2005-06 it increases by decreasing rate at 47.84%. It means thatinterest received by the bank is decreasing with the passage of time. It is notgood for a banking company.

UBL provide many services for their customers and also act as an agent of the customer. The banks receive fee and commission after their services;bank is taking more fees as compared to previous years 2004 and 2005. Thisis good for the ban.

Non-funded income in2004-05 increase only by 11.45%, but in 2005-06 it isincrease by 38.61%. This shows the investment of bank in healthyorganization.

EXPENSES:

There is huge increase in Net provision against loans and bad debts in 2004-

05 by 321.34% which decrease its net interest income. But in 2005-06 this

condition has change and net provision increase by decreasing rate at

62.27%.

Administrative expenses of UBL also grew by 16% in 2004-05 due to

continued investment in the consumer business, technology and premises.

Admin.

Expenses grew by 39% in 2005-06 due to ongoing investment in upgrading

the Banks branch network.

Tax increases which are not bad because it is interrelated with profit, if profit

increased, tax also increase.

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Profit after interest and taxation 386.10 160.72 100

Quarterly Trend AnalysisBank Level

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PROFITABILITY RATIOS:

Return on Equity Capital: = (Net profit after taxPreference dividend) X100Equity share capital

Particulars 2004 2005 2006Rs. (000) Rs. (000) Rs. (000)

N.P.A.T 3,701,544 5,949,032 9,468,232Equity share capital 17,364,031 21,668,270 29,863,387ROE: 21.32% 27.46% 31.71%

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Return on Equity

21.32

27.46

31.71

0

4

8

12

16

20

24

28

32

2004 2005 2006

Years

Percenta

ge

Years

Ratio

This ratio reveals how well the resources of a firm are being used, higher the ratio,

better are the results. ROE relatively increases from 2004 to 2006. The reason

behind is that the bank increase rate of revenues in 2005-06 as compare to the rate

of increase in expenditures.

Earning per share: = Net profit after taxPreference dividendNo. of equity shares


N.P.A.T 3701544 5949032 9468232No. of eq uity shares 518,000,000 518,000,000 647,500,000EPS ratio: Rs. 7.15 Rs. 11.48 Rs. 14.62

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Earning Per Share

7.15

11.48

14.62

0

4

8

12

16

2004 2005 2006

Years

Rupee Years

Ratio

E.P.S. calculated for a number of years indicates whether or not the earning power

of the company has increased. E.P.S. of bank relatively increases from 2004 to

2006. Because there is no increase in share capitals in the year 2005 but increase in

profit. In 2006 there is increase in share capital due to issuance of bonus shares.

But, relatively greater increase in net profit as compare to no. of shares.

Dividend pay-out ratio: = Dividend per equity shareEPS


Dividend per share Rs.1.50 Rs. 2.50 Rs. 3.00EPS: Rs. 7.15 Rs. 11.48 Rs. 14.62Dividend pay out ratio: 20.98% 21.78% 20.52%

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Dividend Pay-out Ratio

20.98 21.78 20.52

0

4

8

12

16

20

24

2004 2005 2006

Years

Percenta

ge

Years

Ratio

To find the extent in which EPS has been used for paying dividend and to know what

portion of earnings has been retained in the business. A lower pay-out ratio means a

stronger financial position of the company. The reason behind is that the board of

directors of bank has proposed a cash dividend increase in respect of 2006 of Rs.

3.00 per share (2005: cash dividend Rs. 2.50 per share).

Return on Assets: = Net profit after tax X100Total assets


N.P.A.T 3,701,544 5,949,032 9,468,232Total assets 272,612,663 347,048,951 423,320,207Return on assets ratio: 1.35% 1.71% 2.24%

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Return on Asset

1.35

1.71

2.24

0

1

2

3

2004 2005 2006

Years

Percentage

Years

Ratio

This ratio shows that the return is larger in 2005 and 2006 as compared to return on

assets in the year 2004. interest and discount on loans which is the major source of

revenue for bank has increased in 2005 and2006 as compared to 2006,

Another reason of increasing in return is the increasing in lending rate and

decreasing in financial cost. NPAT increasing rate (2004-05: 60.72%) is more than

the increasing rate of total assets (2004-05: 27.30%).

ANALYSIS FOR LIQUIDITY

Current ratio: = Current assets__ Current liabilities

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Debt Equity Ratio

14.69 15.0513.18

03

6

9

12

15

18

2004 2005 2006

Years

Percentage

Years

Ratio

The purpose is to get an idea of the cushion available to outsider on the liquidation of

the firm. The lower the ratio, the higher the level of the firms financing that is beingprovided by shareholders. If the owners interest is greater than that of creditors, the

financial position is considered to be sound. Debt-equity ratio increase of bank in

(2005: 15.02) but decreases in (2006:13.18) as compare to (2004:14.69)

Reasons behind is that increase in borrowings from financial institutions by 81.96%

in 2005. But in 2006 debt-equity ratio show a good position of bank because

shareholders equity increase as bank issued as bonus shares which increase his

internal equity.

Fixed Assets-to-Shareholders funds Ratio: = Fixed Assets______ Shareholders Funds


External equity 255,248,632 325,380,681 393,456,820Shareholders equity 17,364,031 21,668,270 29,863,387

Debt-equity ratio: 14.69 15.02 13.18

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Interest Coverage Ratio

1.72

2.15 2.28

0

1

2

3

4

2004 2005 2006

Years

Times Years

Ratio

The higher the ratio, the greater the likelihood that the company could cover itsinterest payment without difficulty. It also shows the firms capacity to take on new

debt. A high ratio assures the lender a regular and periodical interest income. I.C.R.

relatively increases from 2004 to 2006. The reasons of increasing this ratio are,

increasing the EBIT due to increase in Non mark-up / interest income.

NOTE: An interest coverage ratio of only 1 indicates that earnings are just sufficient

to satisfy the interest burden.

Summery of

Financial Ratios Analysis


EBIT 11660073 17698136 25496324Interest expenses 6770345 8216488 11204568

Interest coverage ratio 1.72 times 2.15 times 2.28 times

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Ratios 2006 2005 2004

Return on Equity % 31.71% 27.46% 21.32%Earnings per share (Rs.) 14.62 11.48 7.15Dividend pay-out ratio 20.52% 21.78% 20.98%Return on assets 2.24% 1.71% 1.35%Current ratio 2.15 :1 2.49 :1 3.79 :1Debt-equity ratio 13.18 15.02 14.69Fixed assets-to-shareholders funds 0.18:1 0.21:1 0.22:1Interest coverage ratio 2.28 times 2.15 times 1.72 times

RECOMMENDATIONS

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2005 has been declared as a Year of Deposit by the Top Management. As a step

to realize this, we are pleased to announce the national re-launch of the much

awaited UBL Profit Certificate of Deposit (COD), now with a new features addition of Monthly Profit Payment.

To accommodate the banking need of low income group, United Bank Limited is

pleased to launch the UBL Basic Banking Account Scheme (UBL BBA) from

February 25, 2006 across its branch network all over Pakistan. This is primarily

aimed toward helping the low income group to benefit from the banking services

without having the pressure to maintain specific balance amount with the banks.

In order to diversify revenue sources UBL in the process of establishing Islamic

Banking and Insurance operations which represent a natural extension of our

business. These businesses will not only create longer-term shareholder value but

also enable UBL to offer an additional array of services to our customers. We expect

Islamic banking operations to commence in 2006 with the insurance business to

follow in 2007.

BIBLIOGRAPHY

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REFERENCE: From Books

Financial Management

By: James C. Van Horne

Financial Statement Analysis

By: Charles H. Gibson

Advanced Accounts

By: M. A. Ghani

REFERENCE: From Websites and Bank

www.ubl.com.pk

Annual reports of the bank.

REFERENCE: From Persons

Raza Ahmed Farooqi. (Supervisor)

Usman Bashir. (Officer Grade II)
http://www.ubl.com.pk/http://www.ubl.com.pk/http://www.ubl.com.pk/

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