Chapter-1

INTERNSHIP REPORT ON BANK OF KHYBER

1.1

INTRODUCTION

Report writing is an essential part of internship and in this chapter I mention about the aim or
purpose of study, how it is helpful for us, what is the scheme of study and lastly what types of
research methodology is use in this chapter.

1.2

BACKGROUND OF THE STUDY

This is an essential academic requirement to complete an internship program of eight weeks in

an organization of repute. The internship is followed by report writing which is an integral part
in fulfillment of requirements for the students of Bachelor of Business Administration (BBA) at
Institute of Management Studies (IMS), University of Peshawar (UOP). A report encompasses
the experience of the internee, his learning, and analysis in light of which recommendations are
made. The report is then submitted to the Research and Development Division (R&DD) of
Institute of Management Studies, University of Peshawar.

1.3

PURPOSE OF STUDY

The purpose of the study is to work in real life situation and to apply management skills.
In this context its objectives are:

To understand the operations and to analyze the financial statements of The Bank of
Khyber i.e. how do they operate?

To understand various operations of The Bank of Khyber regarding finance and its
functions i.e. financial analysis.

To analyze The Bank of Khyber and perform SWOT and financial analysis of The
Bank of Khyber.

To make possible recommendations in light of the analysis.

1.4

SCOPE OF STUDY

The study is confined to the overall review of The Bank of Khyber in order to know the
performance of this organization and its operations performed.
As discussed the study is restricted to an overview of basic operations carried at The Bank of
Khyber. So the report does not include detailed description of all of the operations which were
done at BOK. However, the financial and SWOT analysis have been carried out for bank as a
whole.

1.5

LIMITATIONS OF STUDY

This study was conducted in accordance with the objectives of the study. The study may not
include broad explanations of facts and figures due to the nature of the study. Secondly the bank
keep its of information secret. Also the availability of required data was a problem as all the
documents and files are kept strictly under lock and key due to their confidential nature. Thirdly,
the problem of short time period also makes the analysis restricted as one cannot properly
present and write a detailed comprehensive report in a short period of time to describe each and
every operation of The Bank of Khyber.

1.6

RESEARCH METHODOLOGY

The methodology reported for collection of data is primary as well as secondary data. The
biggest source of information is the personal observation while working with staff and having
discussion with them. Formally arranged interviews and discussions also helped me in this
regards. Two types of data were collected namely;

Primary Data

Secondary Data

Chapter-2
REVIEW OF THE BANK OF KHYBER
2.1

INTRODUCTION

As in the previous chapter I have write about purpose, importance, limitation and research
methodology of internship. In this chapter I mention the different aspects of BOK regarding its
history, introduction, vision statement, mission statement, core values, objective, human resource
management and training activities, products and services, and its structure.

2.2

HISTORY OF THE BANK OF KHYBER

The Bank of Khyber is one of such bank which came in to being after passing of a Resolution in
the provincial Assembly of KPK in 1991. The focus on point for the establishment of the bank is
to provide employment opportunities for the man and the power of this province & to provide
financial assistance to the people of KPK, who are engaged in the small, medium and large scale
business. most if the nationalized commercial bank have their head offices in the province other
then KPK ,which is the main hindrance to availing loan in time from these banks. The bank has
to take formal approval from their H/O in order to advance loans to their customer or to make
some transactions within the branches. Therefore it was felt that there was a great need to have a
bank which has its Head Office in the same province also, so that there could be time delay,
communication gap or provisioning of documents to have advance loans expeditiously, initially,
the bank of Khyber had agency arrangements with ABL and MCB for clearing and collecting
cheques from other banks, but with the grace of Almighty Allah and the hard work of its
management, it become a scheduled bank .it started its operation in SBP and to have a clearing
officer of its own for clearing purposes and tackling of other matter with SBP. Presently, this
bank has started to work as an agent for its entire corporate main branch became the first
authorized dealer to deal in foreign exchange business and trade services/finance. The BOK
corporate main branch also provided its services to its different branches, which had
import/export businesses but were not authorized for such business, the licenses were also
availed for The Bank Of Khyber Civil Secretariat branch and other branches in KPK, the Bank
of Khyber has its network of branches in Islamabad, Lahore, Muzzaffarabad, Rawalpindi
3

Karachi also. The bank of Khyber is providing loans to the private as well as public organization,
not only for the prosperity of the people but also the development of KPK in this way, job
opportunities surface in different sectors, mainly for the people of KPK.
Besides, the running Finance & Demand Finance facilities, it has started loaning for small
clusters, which has a separate controlling department called the Micro Finance Department
(MFD) .MFD has been introduced to cover the businesses, which are on a small scale either in
the shape of shops, small projects or home level projects of ladies, like embroidery beauty
parlors & stitching centers. After they provide two guarantors to the BOK, like currently issuing
Khud kifalat Scheme.
The SBP has recently allowed the opening of banks and branches based on pure Islamic Banking
System in the country. For the said purpose an Islamic Banking Department has been established
by the SBP to provide necessary guidance to the bank and concerned staff. They have also
instructed all the banks to introduce necessary steps for promotion of Islamic banking division
has been established by the Bank of Khyber to evaluate and implement policy and procedural
matters to cater to Islamic banking demand of our valued customers. The recruitment of suitable
staff for Islamic banking operation and their necessary training arrangement are as under process.

2.3 INTRODUCTION TO B.O.K

The Bank of Khyber was established through an Act of KPK assembly called, The BOK Act,
1991, passed in June 1991 the Bank was formally launched on November 01, 1991.
The Bank of Khyber initially started as a provincial Bank and later declared as Scheduled
Commercial Bank by SBP in September, 1994.

2.4

B.O.K VISION STATEMENT

To become a Leading Bank providing efficient and dynamic services in both Islamic and
Conventional banking through expanded nationwide network.

2.5

B.O.K MISSION STATEMENT

To increase shareholders value and provide excellent service and innovative products to
customers through effective corporate governance, friendly work environment and contributing
towards an equitable socioeconomic growth.

2.5.1 CORE VALUES

Highest quality of service

Professionalism

Integrity

Team Work

Innovation and utilization of latest technology

Risk Mitigation

Corporate Social Responsibility

2.5.2 OBJECTIVES

Provide value added services through operational expansion, geography and upgraded
systems

Build and manage a diversified equity portfolio promising optimum returns

Mobilize funds in a cost effective manner to meet the financing needs

Achieve sustainable growth and be competitive in commercial operations

Undertake Islamic & Conventional banking services and participation in financing

syndicates

Build a corporate culture of equality, trust and team spirit as we remain dedicated to be a
socially responsible organization

2.6 PRODUCTS & SERVICES OFFERED BY BOK

DEPOSITE SCHEMES

Khyber Pak Munafa Scheme (Islamic Banking)

Current Benefit Account

Be-Baha Mahana Amadni

Maala Maal Munafa Scheme

Regular Amdani Scheme

Zabardast Amdani Scheme

Foreign Currency Deposit

Special Cheque Encashment

Khyber Rupee Traveler

Agreement With First Remit

NIC forms

ADVANCES

Financing Options
Corporate Financing

Commercial Financing

SME Financing

Consumer Financing

Project Financing

Micro Finance

Agriculture Financing

Cash Finance

Running Finance

Demand Finance

Trade Finance

Export Refinance

House / Auto / Salary Loan

Letter of Credit

Products

Letter of Guarantee

AGRICULTURE CREDIT SCHEMES

Sada Bahar Zarai Loan Scheme

Credit Guarantee Scheme

Agriculture Refinance Loan Scheme

Livestock Loan Scheme

Dairy Marketing Loan Scheme

Dairy Storage Loan Scheme

Tractor Loan Scheme

Tube Well Loan Scheme

Farm Machinery Loan Scheme

ISLAMIC BANKING

Murabaha

Musharaka

Mudaraba

Ijara

Ijara wa Iqtana

Istisna

Deposit Schemes

Bill collection under Wakala

ATM SERVICES
In order to keep pace with advancements in the field of technology, The Bank of Khyber has
joined the electronic platform of 1link switch. This will facilitate consumers by providing them
access to their funds through the existing ATM network of the country.
ONLINE BANKING
The Bank of Khyber offers Online Banking Facility to its customers at branches all over
Pakistan. Cash may be accepted at a branch for crediting accounts at another branch; Cheques
can be paid by a branch by debiting the customers account at another branch.
Following facilities are available at The Bank of Khybers online program for its customers:

Cheque Encashment

Cash Transfer

Transfer of Funds through Cheques between branches.

2.7 SOURCE OF BOK

The Bank of Khyber release funds for the purpose of his business from the following sources.
1. Capital
2. Reserves
3. Liquid Assets
4. International Bank
5. Inter Bank
6. Deposits
1. Capital: The main source of fund realization of the BOK is its own capital. The bank uses its capital for
the purpose of investment, lending and other activities to earn profit.
2. Reserve Fund: It is the rule of the BOK that when they earn profit. He does divided whole the trading profit
some portion of such profit which are undivided profit are keep as reserve by bank.
3. Liquid Assets: The bank required to maintain liquid assets as instruction by State Bank of Pakistan
percentage. So this amount also use as funds.
4. International Banks: The Bank of Khyber also borrows money or realizes funds from international banks to meet
their requirements.
5. Inter Bank: The Bank of Khyber also deal or release funds from other banks like.

Allied Bank Ltd.

8

Muslim Commercial Bank Ltd.

UBL

NBP Etc.

2.8 STRUCTURE OF BOK

BOK has its head office in Peshawar and the management of BOK is in the hands of BODs as
given in the below table.
Table BOARD OF DIRECTORS

Name

Designation

Mr. Attaullah Khan

Chairman

Mr. Bilal Mustafa

Managing Director & CEO

Mr. Sahibzada Saeed Ahmad

Director

Mr. Maqsood Ismail Ahmad

Director

Mr. Mir Javed Hashmat

Director

Mr. Sajjad Ahmad

Director

Mr. Javed Akhtar

Director

Mr. Asad Muhammad Iqbal

Director

(Source: Annual report of BOK 2012)

2.9 BRANCH STRUCTURE

An individual branch of BOK follows the following level of hierarchy.

Branch Manager
Operations Manager
General Banking (Operation) Department
Account Opening Department
Cash Department
Remittances Department
Bills Department
Clearing Department
Credit Department
9

SUMMARY
The bank of Khyber came into being in 1991, especially for the people of KPK who have small,
medium, and large scale business. So they can get loan or advances and make transaction in easy
way. Initially the BOK has agency arrangement with MCB and ABL but now it becomes a
schedule bank. BOK is now the first authorized dealer of foreign exchange and trade services.
Their network services are spread all over the country. They have Micro finance department
which controls the loan for a small scale business like Khud kifalat Scheme. Now a days
BOK is working on opening of Islamic banking branches for which Islamic banking department
(made by SBP) give guidance to them. The BOK also has Vision statement, Mission statement,
core values, and objective that focuses to maximize their profit and to compete with their
competent. The HRM department plays a significant role in capacity building, experience
sharing, strengthening analytical, policy making and skill up gradation. The BOK offers different
products and services like deposits schemes, Advances, Agriculture credit schemes, Islamic
banking, ATM services and online banking. The sources of BOK are capital, Reserve, Liquid
Assets, International banks, Inter Bank and Deposits. Structure of BOK starts from chairman to
clerical staff. The Bank of Khyber Civil secretariat branch has mainly two departments one is
General banking department and other is Credit department, where as general banking
department further contains account opening, cash, remittances, bills, clearing departments.

10

CHAPTER- 3

FIELDS OF ACTIVITIES
3.1 INTRODUCTION
This chapter consists of different activities or daily routine work done in the bank. Here I write
about the activities performed at different department like account opening, remittances, clearing
and cash.

3.2 ACCOUNT OPENING ACTIVITY

The department that is responsible for opening and closing an account assumes immense
significance and holds a central place in the basic banking operations. The Account Opening
incharge at BOK civil secretariat branch is Shehzad Gull.
Details of the Account Opening Form
In the account opening form the client is required to provide the following information. The first
part establishes the currency in which the account is to be maintained. The currency includes

Pakistani rupee

U.S. dollar

Pound sterling

Euro

Japanese yen

The second part then establishes the preference regarding the type of account to be maintained.
The various choices are

Profit and Loss sharing/ Savings account

Joint account

Current account

The information to be provided in the account opening form is as follows

Title of the account is to be written in block letters.

11

The client is to provide the information whether the account would be maintained single
or jointly.

Name of the person who intends to operate the account.

Provision of Fathers/Husbands name is a pre requisite.

Occupation of the prospective account holder is also to be written.

Name and complete address of the employer is to be written.

Telephone number is must.

The CNIC is an integral part of the opening of the account.

Passport number, if the prospective client has got one.

Another requirement is the date and the place of issue of the national identity card.

The prospective client also has to provide the name, address and relationship of any one of
his/her close relatives in order to facilitate the communication problem.

The client must give information about who introduce him to the bank.

Also introduce next of kin but it is only for personal account.

In case of a business concern there are two more things that are to be provided by the
business.

Issuance of Account Number

When all the formalities are completed then the final approval of account has to be taken from
the branch manager. After obtaining approval of the branch manager an account number is
allotted to the customer and all the information is entered into the computer. Then that account
number is printed on the Cheque Book, S.S Cards and account opening form.
Issuance of a Cheque Book
After opening an A/C with the bank, the account holder once again makes a request in the name
of the bank for the issuance of the cheque book. The account holder mentions title of account, its
number, sign it properly and mentions the no. of leaves he requires. Normally BOK issues a
cheque book having at least 25 leaves. Every cheque book also contains one leaf that is used for
another issue of a cheque book. This is called requisition leaf.

12

Entry of a Cheque Book

This includes

Stamping every leaf with specific account number

Enters it in the cheque book issue register

After entry in the register the employee issues the cheque book to the account holder after
his/her signature on the register.

Recording in Computer
After opening the account, all information regarding the account is entered into the computer.
Currently, a program named Ubank plus is being used for this purpose.

3.3 REMITTANCES
What is remittance?
Remittances section is essentially a part of operations of a bank. The word remit means transfer
of funds. When one party having an account in some bank remits funds (either in form of
demand drafts, pay orders, online transfer etc.) to a party who has an account in the same bank.

Mediums used for sending remittances

In remittances, the alternates of checks are used as checks can be easily dishonored due to a no.
of reasons so, in order to avoid it the alternatives to checks are used for remittances. Following
alternatives of checks are used:

Demand drafts (DD)

Payment orders (PO)

Rupee traveler check (RTC)

Telegraphic transfer (TT)

Call deposit receipt (CDR)

Online Transfer of Funds

13

3.4 CLEARING ACTIVITY

Every bank performs the function of paying and collecting.
What is clearing?
Every bank performs the function of paying and collecting. The cheque drawn on other
bank by the customers of the bank is collected by the bank for or without charging fee is called
clearing. The bank through the clearinghouse (State Bank of Pakistan) performs the function of
clearing.
Clearing House
A clearing house is a place where the representative of all banks get together to settle the
payment and receipts of Cheques drawn on each other. One of the basic economic functions of
the bank is to receive deposits and to honour the cheques drawn upon them. So, cheques are a
most commonly used instrument for making payments by account holders.
Now the question arises that how these cheques and other negotiable instruments drawn on one
bank are deposited in other banks and money is transferred from one bank to another. Clearing
House has provided this facility.
Clearing house facilitates different banks to get their cheques drawn upon other banks to be
cleared. The clearing incharge at BOK civil secretariat branch is Muneeb Ahmad sadique.
Functions of Clearing in Branch
To accept transfer, transfer delivery and clearing Cheques from the customers of the branch and
to arrange for their collection.
Types of Clearing

Outward Clearing

When cheques and other negotiable instruments drawn upon other banks like MCB,
HBL, UBL of the same city are presented in The Bank of Khyber to deposit them in the
respective payees accounts, these instruments are lodged in outward clearing of The Bank of
Khyber.

14

When the cheques are presented in BOK to be deposited in their respective payees accounts,
different stamps are put on cheques before their lodgement in outward clearing.

Inward Clearing
Cheques drawn on BOK Civil Secretariat Branch, sent by other banks, constitute the

inward clearing of BOK Civil Secretariat Branch. After having all the stamps and dates of
cheques confirmed, the concerned drawers accounts are debited and main branchs account is
credited by the total amount.
Reasons why cheque may not be entertained or returned in clearing
The clearing incharge when found any problem in the cheque then he returned it. And for this
Bank of Khyber have a Memorandum which is called Objection Memo. It consists of following
reasons.

Effects not cleared. May be presented again.

Exceeds arrangements.

Full cover not received.

Payment stopped by drawer.

Payees endorsement irregular/illegible required.

Drawers signature differed/required.

Alteration in date/figure words require drawers full signature.

Cheque is post dated/out of date/mutilated.

Amount in word and figure differs.

Crossed cheque must be presented through a bank.

Clearing stamp requires cancellation.

Addition to bank discharge should be authenticated.

Cheque crossed, account payee only.

Collecting banks discharge irregular required.

Clearing banks endorsement required.

Advice not received.

Account closed.

Insufficient fund.
15

Not dawn on us.

Title of account required.

Second/Third signature required.

Non-resident account form A-7 required.

Payees endorsement irregular/illegible required.

Vernacular endorsement requires translation and Banks confirmation.

Funds drawn against not yet received, present again.

Drawer deceased.

Cheque incomplete.

Revenue stamp required.

Endorsement requires Banks guarantee confirmation.

Other ___________________.

3.5 CASH ACTIVITY

Cash department of BOK is given the complete responsibility of handling all receipts and
disbursement of cash, as a result of transaction in both local and foreign currencies, and near
cash items such as traveller cheque etc. The cash incharge at BOK civil secretariat branch is
shah-e-nam.
Major functions of cash handling department are

Cash receipts

Encashment of cheque

16

SUMMARY
This chapter is about how we can open account in the BOK civil secretariat branch and for
fulfillment of form customer must give different documents, mention about type of account and
in which currency the customer want to open account. When account opening officer gathered all
information and document and taking approval from branch manager then he creates account and
issue account number. With account number he also present cheque book to customer and make
entry in their record. In remittances the bank transfer funds from one customer to another
customer on their will. For remittances different mediums are used that are demand draft,
payment order, rupee traveler, cheque, telegraphic transfer, call deposit receipts and online
transfer of funds. Cheques are the main instrument of a banks therefore its clearing also play
important role in banking and for this clearing houses are used. Clearing house consist of
member from all banks and settle the payment and cheque drawn. The bank has two types of
cheques one is outward cheque (When cheque are drawn upon other banks) and other is inward
cheque (When cheque are drawn at BOK civil secretariat branch, sent by other banks).
Furthermore I also mention the reasons that why cheque are not entertained or returned. Cash
department is responsible for handling of cash in both local and foreign currencies. The major
function of cash handling is cash receipts and encashment of cheque.

17

CHAPTER-4

ANALYSIS OF BOK
4.1 INTRODUCTION
This chapter describes the financial and SWOT analysis of the BOK to analyze the Bank
financial statement and to make recommendations which are mentioned in the next
chapter.
4.2 FINANCIAL STATEMENTS
Financial Statements of BOK for three years 2010, 2011 and 2012 are,
The Bank of Khyber
Balance Sheet
As on 31st December
2010

2011

2012

Rs. (000)

Rs. (000)

Rs. (000)

ASSETS:
Cash and Balances with treasury
Banks

5,080,521

2,802,781

3,108,819

Balances with other Banks

1,501,883

1,527,561

1,649,512

Lending's to financial institutions

2,562,093

1,800,566

1,501,000

Investments

19,852,730

36,684,689

45,671,700

Advances

18,238,333

22,287,799

26,692,766

Other assets

1,993,869

1,764,158

2,060,473

Operating fixed assets

1,121,554

1,301,822

1,359,149

443,320

255,090

134,219

50,794,303

68,424,466

82,177,638

Deferred Tax assets

Total Assets

18

LIABILITIES
Bills payable

280,665

281,292

558,026

Borrowings

2,894,759

10,391,732

7,420,113

Deposits and Other accounts

36,981,351

45,548,423

60,043,083

Subordinated Loans

----------

----------

----------

Liabilities against assets subject to

finance lease

----------

----------

----------

1,237,155

1,837,525

2,429,617

----------

----------

----------

Total Liabilities

41,393,930

58,058,972

70,450,839

Net Assets

9,400,373

10,365,494

11,726,799

5,004,001

8,228,001

9,001,433

Reserves

548,039

722,501

937,541

Un-appropriate Profit

52,079

749,925

836,654

Total Equity

5,604,119

9,700,427

10,775,628

Advances against share subscription

3,224,000

----------

----------

572,254

665,067

951,171

9,400,373

10,365,494

11,726,799

Other liabilities
Deferred Tax liabilities

Represented By:
Share Capital

Surplus on Revaluation of Assets

Table BOK BALANCE SHEET

(Source: Annual report of BOK 2010, 2011, 2012)

19

The Bank of Khyber

Profit and Loss Account
2010

2011

2012

Rs. (000)

Rs. (000)

Rs. (000)

Markup/return/interest earned

4,207,155

6,946,827

7,204,937

Markup/return/interest expensed

2,925,066

4,551,942

4,611,172

Net markup / interest income

1,282,089

2,394,885

2,593,765

48,916

42,092

38,528

(371,682)

202,532

139,585

----------

----------

----------

(322,766)

244,624

19,252,337

1,604,855

2,150,261

2,415,652

172,565

232,828

241,008

74,848

223,114

236,354

Provision against non-performing

loans and advances-net
Provision for diminution in the
value of investments
Bad debts written off directly

Net markup / interest income

after provisions

NON MARK-UP / INTEREST

INCOME
Fee, commission and brokerage
income
Dividend income

20

Income from dealing in foreign

30,761

56,285

141,968

(285,934)

169,383

295,317

1,431

(16,742)

192

Other income

66,006

65,142

61,276

Total non-mark-up/ interest

59,677

730,010

976,115

1,664,532

2,880,271

3,391,767

Administrative expenses

943,680

1,468,480

1,657,560

Other provisions / write offs

(5,705)

87,970

114,310

Other charges

13,416

38,363

50,679

Total non- markup/ interest

951,391

1,594,813

1,822,549

713,141

1,285,458

1,569,218

----------

----------

----------

currencies
Gain / loss on Sale of Securities
Unrealized Gain / Loss on
Revaluation of Investments
classified as held for trading

income

NON MARK-UP / INTEREST

EXPENSES

expenses

Extraordinary /unusual items

21

713,141

1,285,458

1,569,218

-Current

89,631

271,550

496,234

-Prior year

2,040

26,306

(7,772)

-Deferred

57,984

115,294

5,555

PROFIT BEFORE TAXATION

Taxation

494,017
563,486

872,308

1,075,201

(398,710)

52,079

749,925

Profit available for appropriation

164,776

924,387

1,825,126

Earnings per share Basic and

1.13

1.41

1.19

PROFIT AFTER TAXATION

Un-appropriate profit b/f

Diluted (in Rupees)

Table BOK PROFIT LOSS ACCOUNT

(Source: Annual report of BOK 2010, 2011, 2012)

22

4.3 RATIOS ANALYSIS

1.

Liquidity Ratios

2.

Leverage Ratios

3.

Profitability Ratios

4.4 LIQUIDITY RATIOS

Liquidity ratios means to measure short term solvency of the company. Ability of the company
to pay off its short term debt. Following ratios are calculated in order to measure the short term
solvency of the company

Current Ratio
Acid Test Ratio
Working Capital

Current Ratio
Current Ratio = Current Assets / Current liabilities
Year 2010

Year 2011

Year 2012

=Rs.47,235,560/
Rs.39,876,390

=Rs.65,103,396/
Rs.56,221,447

=Rs.78,623,797/
Rs.68,021,222

= 1.18 : 1

= 1.15 : 1

= 1.15 : 1

Table CURRENT RATIO

Graph CURRENT RATIO

(Source: Annual report of BOK 2010, 2011, 2012)

Explanation:
The standard of this ratio is 2:1, means current assets are twice the current liabilities. But Bank
of Khyber has a lower current ratio to the standard rate. In 2010 it was 1.18, in 2011, 1.15 and in
2012 it was 1.15.

23

Acid Test Ratio

Acid Test Ratio = Current Assets (Inventories + prepayments +
Advances) / Current liabilities
Year 2010

Year 2011

Year 2012

= Rs. 47,235,560-

=Rs.65,103,396Rs.24,088,365/

=Rs.78,623,797Rs.28,193,766/

Rs. 56,221,447

Rs. 68,021,222

= 0.7

= 0.7

Rs.20,800,426/Rs.
39,876,390
=0.6
Table ACID TEST RATIO
Graph ACID TEST RATIO

(Source: Annual report of BOK 2010, 2011, 2012)

Explanation:
As the Acid test ratio from year 2010 to 2012 is: Rs.0.6, Rs. 0.7 and Rs 0.7 respectively. In all
three years acid test ratio is slight less than standard ratio .It must be 1:1 in order to proof the
short term solvency of the bank to pay off is short term liability.
Working capital
Working Capital = Current Assets Current Liabilities

Year 2010

Year 2011

Year 2012

=Rs.47,235,560Rs.39,876,390

=Rs.65,103,396Rs.56,221,447

=Rs.78,623,797
Rs. 68,021,222

= Rs.7,359,1708

= Rs.8,881,949

= Rs.10,602,575

Table WORKING CAPITAL

Graph WORKING CAPITAL

(Source: Annual report of BOK 2010, 2011, 2012)

Explanation:
The working capital is rapidly increasing from 2010 to 2012. Because the current assets of BOK
are rapidly, increase.
24

4.5 LEVERAGE RATIOS

These ratios show the capital structure of the firm. Through these ratios we find that how the
firm finance their activities. It is more important for the lender to assess that the firm can repay
the loan amount or not. Increasing debt increases the likelihood of bankruptcy of the firm.
Following ratios falls under this category,

Time Interest Earned

Debt Ratio

Debt to Equity Ratio

Debt to Tangible Net Worth

Total Capitalization Ratio

Time Interest Earned = Profit before tax + Interest Expense (EBIT) /

Interest Expense
Year 2010

Year 2011

Year 2012

=Rs.713,141/
Rs.2,925,066

=Rs.1,285,458/
Rs.4,551,942

=Rs.1,569,218/

= 0.24

= 0.28

Rs.4,611,172
= 0.34

Time Interest Earned Ratio:

Table TIME INTREST EARNED

Graph TIME INTREST EARNED

(Source: Annual report of BOK 2010, 2011, 2012)

Explanation:
The Time Interest Earned Ratio of BOK is not better. The ratio is consistently is increasing till
2012. This graph is showing that the bank EBIT is not enough to cover its interest expenses.

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Debt Ratio = (Total liabilities / Total Assets) * 100

Year 2010

Year 2011

Year 2012

=Rs.41,393,930/
Rs.50,794,303

=Rs.58,058,972/
Rs.68,424,466

=Rs.70,450,839/
Rs.82,177,638

= 81.49%

= 84.85%

= 85.73%

Debt Ratio
Table DEBT RATIO

Graph DEBT RATIO

(Source: Annual report of BOK 2010, 2011, 2012)

Explanation:
Debt ratio is measure of debt with the total assets. Shows that the debt ratio is consistently
increasing that indicates the dependence on debt is increasing. In 2012 it is at the higher level
from 2010 and 2011. In 2012 the total Debt was the almost 85.73% of Total Assets.

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Debt / Equity Ratio

Debt to Equity Ratio = Total liability / Total Equity
Year 2010

Year 2011

=Rs.41,393,930/Rs.5,604,119 =Rs.58,058,972/
Rs.9,700,427
= 7.386
= 5.985

Year 2012
=Rs.70,450,839/
Rs.10,775,628
= 6.538

Table DEBT / EQUITY RATIO

Graph DEBT / EQUITY RATIO

(Source: Annual report of BOK 2010, 2011, 2012)

Explanation:
As we already observed that the debt is increasing, in this graph we compare it with the equity.
We find the different debt to equity ratio. In 2010 it was at the higher level. Then in 2011 it was
at lower level. The D/E ratio in 2010, 2011 and 2012 is 7.386, 5.985, and 6.538 respectively.

4.6 PROFITABILITY RATIOS

Profitability ratios measure the earning ability of the firm. Following ratios are calculated:

Net Profit Margin

Return on Assets

Operating Income Margin

Return on Total Equity

Gross Profit Margin

Net Profit Margin = Net Profit / Total Revenue

Year 2010

Year 2011

Year 2012

=Rs.563,486/
Rs.4,207,155

= Rs.872,308 /

=Rs.1,075,201/
Rs.4,611,172

= 13.39%

Rs. 6,946827
= 12.56%

= 23.32%

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Net Profit Margin

Table NET PROFIT MARGIN

Graph NET PROFIT MARGIN

(Source: Annual report of BOK 2010, 2011, 2012)

Explanation:
The net profit margin first decrease then increases. In 2010 the net profit margin is 13.39%
which is greater than 2011 but smaller than 2012. In 2012 The Bank of Khyber moves toward the
good position.

Return on Assets
ROA = Net Income / Total Assets
Year 2010

Year 2011

Year 2012

=Rs.563,486/
Rs.50,794,303

Rs.872,308/
Rs.68,424,466

=Rs.1,075,201/
Rs.82,177,638

= 1.11%

= 1.27%

= 1.31%

Table RETURN ON ASSETS

Graph RETURN ON ASSETS

(Source: Annual report of BOK 2010, 2011, 2012)

Explanation:
It is showing the consistent increase in the return on Assets.

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Operating Income Margin

Operating Income Margin = Earnings Before tax + interest
expenses / Total Revenue
Year 2010

Year 2011

Year 2012

=Rs.713,141/

=Rs.1,285,458/

=Rs.1,569,218/

Rs.4,207,155

Rs.6,946,827

Rs.4,611,172

= 16.95%

= 18.50%

= 34.03%

Table OPERATING INCOME MARGIN

Graph OPERATING INCOME MARGIN

(Source: Annual report of BOK 2010, 2011, 2012)

Explanation:
It shows that the revenue is increasing each preceding year. And that is why operating income
margin also increases.
Return in Total Equity
ROE = (Net Income / Stockholder Equity) * 100
Year 2010

Year 2011

Year 2012

=Rs.563,486/
Rs.5,604,119

=Rs.872,308/
Rs.9,700,427

=Rs.1,075,201/
Rs.10,775,628

= 10.05%

= 8.99%

= 9.98%

Table RETURN IN TOTAL EQUITY

Graph RETURN IN TOTAL EQUITY

(Source: Annual report of BOK 2010, 2011, 2012)

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Explanation:
Return on Owners Equity in the year 2010 is 10.05%, in the year 2011 is 8.99% and in the year
2012 is 9.98% which shows that it does not meet the standard of banking industry.
Gross Profit Margin
Gross Profit Margin = (Gross Profit / Total Revenue) * 100

Year 2010

Year 2011

Year 2012

=Rs.1,282,089/
Rs.4,207,155

=Rs.2,394,885/
Rs.6,946,827

=Rs.2,593,765/
Rs.4,611,172

= 30.47%

= 34.47%

= 56.24%

Table GROSS PROFIT MARGIN

Graph GROSS PROFIT MARGIN

(Source: Annual report of BOK 2010, 2011, 2012)

Explanation
This ratio also shows the incline in gross profit margin of BOK. In 2010 it nearly 30% and in
2011 it reaches to 34.47% because the revenue of the BOK is higher than all three years. In 2012
it has 56.24%.

6.7 SWOT ANALYSIS

According to my personal experience of the bank Ive done the following SWOT analysis of The
Bank of Khyber.

4.7.1 STRENGTHS OF BOK

1.. Out of the way customer orientation
One of the main strengths of BOK is their policy of implementing the highest Degree of
Customer Orientation. The Bank of Khyber employees make incessant efforts to satisfy their
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customers in every possible imaginable way. Whenever an existing or a potential new customer
comes to BOK he/she is propose to be entertained with drinks / tea / coffee and the employees
and personnel pay their full attention to the customer obliging him/her out of the usual way
sometimes.
2. No language barrier between customer and BOK employee
If a customer comes to BOK who cannot speak English or Urdu properly then BOK employees
communicate with him / her in his / her own mother tongue to make him understand and grasp
things easily and quickly in his / own home language.
3. Capable Work Force
The Bank of Khyber have efficient and effective workforce. That is able to do work at each
position right from Cash officer to remittance Incharge, online, clearing, foreign exchange etc.
Job rotation takes place within each branch periodically.

4.7.2 WEAKNESSES
There seems to be almost no weaknesses in the organization structure and the way it is
conducting its operations. It seems almost flawless but a few weaknesses do exhibit themselves
from time to time which I found in the Civil Secretariat Branch. These are listed below.
1. Weak Human Resource Management
The HR management of The Bank of Khyber is weak as employees are not given much rewards
and benefits. The working hours of BOK employees are from 9am to 5pm and they even stretch
sometimes to 8pm but they are not paid accordingly. Employees salary doesnt justify their long
tedious working hours and the efforts they put to make BOK the most successful commercial
bank in Pakistan.
2. Non- flexible increment pay scale
The increment scale in BOK is very non-flexible. Employees salary is seldom raised even if
they accomplish something really outstanding for the bank.

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3. No risk allowance
Cash handling is the most important and sensitive job in banking. In this regard there is no
special risk allowance for cash officer handling cash preparing daily except his/her Monthly pay.
This is discouraging the employees because other banks like bank Alflah and MCB paying Rs.
5,000/= monthly allowance known as risk allowance.

4.7.3 OPPORTUNITIES
1. Bringing technological breakthroughs in the banking sector of Pakistan
The Bank of Khyber has numerous no. of opportunities on the avenue these days. As it is an
excellent learning organization which accepts new traditions and culture readily, therefore it has
good opportunities regarding bringing technological breakthroughs in the banking sector of
Pakistan, e.g. BOK introduced the Bank software which contains the entire database of the bank
regarding its everyday transactions and connects its network to other banks.
2. Memorandum of understanding
Memorandum of understanding is actually a facility agreement between the individual bodies
and The Bank of Khyber. The Bank of Khyber acts on the behalf of the organizations to whom
agreement is to be made.
The bank of Khyber issue services of car finance and home finance. In which they made
agreement with different parties.
These kinds of Memorandum of understanding are beneficial for bank of Khyber in terms of
clients and customers. For example a customer who comes with intention of getting loan or
information, he might be impressed with The Bank of Khyber personal services or products. He
might starting transactions with BOK or might become a regular customer.

4.7.4 THREATS
1. Rapid growth of other commercial banks of Pakistan
The major threat BOK faces is from other banks like UBL which has recently merges with
Standard Chartered (a multinational bank) of Pakistan. It has adapted new trends and techniques
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from the Western nation. UBL is developing vastly and is a constant threat to BOK and
moreover different banks come in front of this.
2. Pakistans unstable economy
Pakistans unstable economy is also a constant threat to BOK. Terrorist attacks has aroused a
massive callousness in Pakistan and in a matter of days Pakistans major cities have been
victimized by sheer acts of terrorism and this contributes a lot in the declining of Pakistans
already dwindling economy.
3. Ever increasing Inflation
Inflation is increasing day by day in Pakistan and hence is a major threat to the banking industry
of Pakistan.

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SUMMARY
This chapter contains the findings of both financial analysis and SWOT analysis. For financial
analysis we have ratio analysis and ratio analysis has three sub ratios i.e. liquidity ratio, leverage
ratio and profitability ratio.
In liquidity ratio firstly I find Current ratio which is almost lower than the standard current ratio.
Secondly find Acid Test ratio and it is also slightly less than the standard acid test ratio. At last I
find Working Capital ratio which is increasing year to year.
The leverage ratio has three different ratios. Firstly Time Interest Earned ratio which is not much
better but show consistent increase as year passes. Second ratio is Debit ratio which is higher in
2012 than in 2010 and 2011. The third one is Debit to Equity ratio and D/E ratio in 2010, 2011,
2012 is 7.38, 5.98 and 6.53 respectively.
Profitability ratio also contains some ratios i.e. first one is Net Profit margin on finding its values
I found that it first decrease and then increases. The second is Return on Assets ratio which
shows consistent increase in the return of assets. Third one is Operating Income Margin and after
calculation it shows that it increases with the preceding year. Fourthly Return on Total Equity
and it shows that it does not meet the standard of banking industry. Lastly the Gross Profit
Margin and it shows inclination in the gross profit margin from 2010 to 2012.
In SWOT analysis we have strengths, weaknesses, opportunities, threats. The strengths of BOK
are state art building, customer orientation, extra services provided by its staff, due to same
province there is no language barriers between staff and customer and also have capable work
force. Its weaknesses are weak human resource management, late promotion of employees, non
flexible increment pay scale, no risk allowance, no separate customer service section. Its
opportunities are bringing technological break outs in the banking sector of Pakistan and
memorandum of understanding. Its threats are rapid growth of other commercial banks in
Pakistan, Pakistan unstable economy and ever increasing inflation.

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CHAPTER-5

CONCLUSION AND RECOMMENDATIONS

5.1 CONCLUSION
I concluded that the Bank of Khyber views specialization and services as the corner stone of its
strategy. The hardworking, creativity, cooperativeness and customized services by their staff are
the key ingredients for their success. The times spent as internee at BOK were no doubt as a
source of great learning for me about many things particularly working of different departments
in bank like account opening, clearing, remittances, cash and credit . The internship do help me
to attain loads of knowledge about the predominant function performed by banking sectors, but
also impart a lot of training as regards the set of behavior traits that distangioush a particular
person from the rest of lot in professional environment. I also understand how to do work in
pressure and risky situations. The bank is an important part of a country economy. It also safe
money and give profit to people who have excess cash. Mainly the bank of Khyber is a
provincial bank of province KPK so therefore all the transactions of KPK government are done
through this bank.

5.2 RECOMMENDATIONS
As bank is financial institution and need customer attraction and customer retention due to the
competitive environment so the bankers already watch out their customers requirements and try
their best to fulfill them.

But as an internee my recommendations are as follows

The bank pays high profit to its customers and provides excellent services but there is a
lack of publicity of its services on part of its clients.

The pay of Banks employees is less than other banks, which is an indication of
discouragement among employees.

The employees have no direct access to higher authority and a large hierarchy of persons
is involved. This creates frustration in employees in solving their problems.
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The size of almost all branches of the bank is very small. It creates difficulty for the
customers as well staff members for proper dealings, which always gives congested
atmosphere.

The grading system of the bank is not fair and the criteria for grading system are not
mentioned. Due to unfair grading the employees of the bank are not happy.

If any customer has complaint towards the Bank, there is not any complaints cell for
solving the customers problem. So there should complaints cell in every branch.

They must make a simple account opening form because a long form doesnt like by both
customer and staff.

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BIBLIOGRAPHY
Books
James C. Van Horne, John M. Wachowicz, JR, 2008, Fundamentals of Financial Management.
Institute of bankers in Pakistan Journal, Volume 73, Issues 3-4.
The Bank of Khyber, 2010, 2011, 2012, Annual reports.

Websites
The Bank of Khyber, Products and services (on-line) Available from: http://www.bok.com.
Quickratio.org, quick ratio analysis (on-line) Available from: http://www.quickratio.org/QuickRatio-Analysis.html.
Miniwebtool.com, financial calculator (on-line) Available from:
http://www.miniwebtool.com/financial-calculators/.
Investopedia US, A Division of Value Click, Inc., Liquidity ratios, Leverage ratios and
profitability ratios (on-line) Available from: http://www.investopedia.com/search/.
The Blogger, Return on assets (on-line) Available from: http://financialaccounting.blogspot.com/2011/02/return-on-assets_18.html.
Farlex inc., finance and accounting (on-line) Available from: http://financialdictionary.thefreedictionary.com/.
Wikimedia foundation, incorporation, banking (on-line) Available from:
http://en.wikipedia.org/wiki/Accounting
Accounting simplified.com, analysis of financial statement (on-line) Available from:
http://accounting-simplified.com/.

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