Meezan Bank Report Final q912

ABSTRACT

The history of interest-free banking can be divided into two parts. First, when it still remained an idea; second, when it became a reality. The literature of the period begins with evaluations and ends with attempts at finding ways and means of correcting and overcoming the problems encountered by the existing banks. During the last few decades interest-free banking attracted more attention, partly because of the political interest it created in Pakistan and partly because of the emergence of young Muslim economists.Meezan bank is the first Islamic bank and is therefore recognized as one of the pioneer banks that promotes Riba-free (interest free) banking activities all over the country. The bank has developed an extraordinary research and development capability by combining investment bankers, commercial bankers, Shariah scholars and legal experts to develop innovative, viable, and competitive value propositions that not only meet the requirements of today’s complex financial world, but do so with the worldclass service excellence which customers demand, all within the bounds of Sharia.

Table of Contents 2

Acknowledgement…………………………………………………….6 Executive Summary…………………………………………………..7 Introduction…………………………………………………………….8 Shariah Board…………………………………………………………..9 Introduction to Meezan Bank……………………………………….10 Vision & mission………………………………………………………12 Staff (Gulgashat Branch Multan)…………………………………..13 Organizational structure……………………………………………..14 Islamic banking…………………………………………………………15 Islamic mode of finance By Meezan bank………………………..16 s offered by Meezan Bank…………………………………18 Three main departments of the branch…………………………….23 Personal banking department………………………………………..25 Clearing………………………………………………………………….21 Remittance………………………………………………………………26 Cash Department……………………………………………………….31 Investment certificate issued by meezan bank…………………..32 Products by meezan bank …………………………………………..33 Services by meezab bank …………………………………………….38 Financial services by meezan bank…………………………………39 SWOT Analysis…………………………………………………………47 Conclusion………………………………………………………………52

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ACKNOWLEDGEMENT

I am thankful to ALLAH, Who has given the ability to show my skills. I am thankful to the management and the staff of “MEEZAN BANK Ltd”, who provided me valuable information during my internship and given me chance to take a step towards the practical life. Moreover, I am thankful to commerce department who provided me an opportunity to excel my skills. Special Thanks to Mr.Waqas Ahmad Nizami (Area Manager), Mr. Behzad Karim Khan (Branch Manager) Mr. Shafique Hussain (Operation Manager) for their unconditional and help in making me learn in a good environment, who also provided me valuable information regarding my first fieldwork of management. The last but not least, I would feel incomplete without thanking to my parents who pray for my brilliant success and bright future.

THANK YOU ALL

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EXECUTIVE SUMMARY

In the first I have discussed about the introduction of the Meezan Bank, Basic Functions of Meezan Bank and vision & mission of Meezan Bank Ltd. Then I introduced Meezan Bank (Gulgashat Branch Multan). I have also mentioned the Islamic modes of financing, products, packages, which the Meezan Bank Ltd. offers to its customers and then I have given a brief overview of different s opened and Investment Certificates issued by Meezan Bank Ltd and cheque clearing and remittance, stop payment, financial services and ATM functions. And in the last I have shown the conclusion of this report regarding my internship. And in last I also mentioned some important references and web sights from where I get the help during preparation of my report of internship.

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INTRODUCTION

Meezan Bank is publicly listed company, first incorporated on January 27, 1997. It started operations as an Islamic investment bank in August of the same year, which has been licensed by the “State Bank of Pakistan” to operate as an Islamic Commercial bank on 31st January 2002. State Bank of Pakistan granted the Nations first full-fleged commercial banking license of Islamic Banking to Meezan bank Ltd. It was a new era in banking Sector history in Pakistan that Meezan Bank Ltd adheres strictly to the principles of Islamic Shariah with absolutely no compromise, and is recognized as Pakistan’s truly premier Islamic Bank. Meezan Bank is operating approximately more than 400+ branches in 100 plus different cities. In addition, the “State Bank of Pakistan” itself governs the activities of Meezan Bank and its Shareholders. Meezan bank Ltd has a strong Balance sheet with excellent operating profitability, including a capital adequacy ratio that has placed the Bank at the top of industry.

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INTRODUCTION TO MEEZAN BANK LTD Meezan Bank To be a premier Islamic bank offering a one-stop shop for innovative valueadded product and services to our customers within the bounds of Shariah, while optimizing the stake holder’s value through an organizational culture based on learning, fairness, respect for individual enterprises and performances .

1997: Al Meezan Investment Bank is established with a mandate to pursue Islamic Banking. Mr. Irfan Siddiqui appointed as first and founding Chief Executive Officer.

1999: The Shariat Appellate Bench of supreme court of Pakistan reject the appeal and direct all laws on interest banking to cease but the Government set in a high level commission, task and committees to institute and promotes Islamic banking .

2001: Muhammad Taqi Usmani as a chairmen established the shariah supervisory Board at Al Meezan Investment Bank. State Bank of Pakistan set a criteria of Islamic commercial bank in private sector and subsidiaries and stand alone branches by existing commercial banks to conduct Islamic banking in the country.

2002:

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Al Meezan convert itself in to a full fledge Islamic commercial bank. The first Islamic banking license is issued to the bank and is renamed Meezan Bank. President general Pervaz Musharraf.

2003-----2009: •

Meezan Bank established itself a pioneer of Islamic Banking in Pakistan and wide range of products are developed.

•

The state Bank establishes a dedicated Islamic banking development by merging the Islamic economic division.

•

Meezan bank becomes the first customer of Islamic issuance by g the first memorandum of understanding MOU with Pak Kuwait Takafalcompany ltd.

•

Meezan banks become the first Islamic bank to introduce 8am to 8pm banking at selected branches in Karachi.

•

Meezan banks open up its 166 branches in 40 cities across Pakistan. Works start on the construction of Meezan Banks new Head Office building

2010: •

Meezan Bank and Indus Motors launch Toyota Cars Financing

•

Meezan Bank launches "Meezan Business Plus", a Mudarabah based Business

•

Meezan Bank distributes gift bags to Hajjis

•

Meezan Bank establishes 150 ATMs across Pakistan!

2011: This is the second consecutive year in which Meezan Bank has been awarded Best Islamic Bank in Pakistan and Best Trade Finance Bank in Pakistan by Asset Triple A. These awards highlight Meezan Bank’s continuous growth and successful year of 2011 in which Meezan Bank announced a growth of 106 % in its Profit-after-

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tax (Dec-2011), a deposit figure of over Rs. 170 billion and held the 9th largest bank branch network in Pakistan.

2012: In May 2012, Meezan Bank - the premier Islamic Bank, completed 10 years of Islamic Banking in Pakistan. The Bank has been consistently recognized as the Best Islamic Bank in Pakistan by various local and international institutions over the past several years:

2014: Alhamdulillah continuously increasing branch network

Shariah Board Meezan Bank has a very high-caliber “Shariah Supervisory Board”, comprises of internationally renowned Islamic Scholars. The “Shariah Supervisory Board” regularly reviews the bank’s activities and approves all new products. The bank also has a resident Shariah advisor. Dr. Muhammad Imran Usmani, who monitors day-today transactions of the bank. The Shariah Board comprises of the following : •

Justice (Retd.) Muhammad Taqi Usmani (Pakistan)-Chairman.

•

Dr. Abdul Sattar Abu Ghuddah (Saudi Arabia).

•

Sheikh Essam M. Ishaq (Bahrain).

•

Dr. Muhammad Imran Ashraf Usmani (Pakistan).

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VISION AND MISSION STATEMENT

Our Vision Establish Islamic banking as banking of first choice to facilitate the implementation of an equitable economic system, providing a strong foundation for establishing a fair and just society for mankind.

Our Mission To be a premier Islamic bank, offering a one-stop shop f or innovative value-added products and services to our customers within the

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bounds of Shariah, while optimizing the stakeholders value through an organizational culture based on learning, fairness, respect for individual enterprise and performance.

STAFF (MEEZAN BANK LTD GULGASHAT BRANCH MULTAN)

Names

Designations

Behzad Karim Khan

Branch Manager

Shafique Hussain

Operation Manager

Nadeem Ansari Muhammad Naveed

Cash Deposit Incharge Clearing & Remittance

Abdul Ghafoor

Operation Officer

Waqas Hussain

Personal Banking Officer

Saadat Hussain

Officer

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Ahsan Usman

Officer

Shahbaz Khan

Quality Controller

Bahadur Ali

Development Officer

Usman Mahmood

Development Officer

Umair Abdullah

Rider

Dildar

Tea Boy

ORGANIZATIONAL STRUCTURE As I already introduced Meezan bank Ltd (Main Branch Multan). So, this Branch is comprises of a Branch Manager, who reports to the Area Manager about the work & performance of the branch employees. A separate area has been set aside for operations which are monitor by an Operation Manager, who reports to Branch Manager about daily cash transactions, clearance, remittances & s opening. There are also PBO (Personal Banking Officer) and BDOs (Business Development Officers), who are directly related to Branch Manager and reports him about customer relationship & services provided to them, and about deposits targets of concerned bank.

Branch Manager

Operation Manager

Chief Cash Officer

Cash Deposit Officer

s Opening Officer

Liability Sales

Personal Banking Officer

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BDOs Cash Officer

Sorter

Clearing Officer

Remittance Officer

Islamic Banking The interest free system envisages the gainful use of one’s saving with other on the basis of profit and loss sharing in a defined manner. Effective from Jan 01, 1981, the Nationalized commercial banks and now all other commercial banks in Pakistan have introduced the profit and loss sharing (PLS) Deposit Scheme features of which as under . •

PLS- Saving s

•

PLS Term Deposit s

•

Investment Of PLS Deposits

RIBA The word Riba means excess, increase or addition, which correctly interpreted according to Shariah terminology, implies any excess compensation without due consideration . (This definition of Riba is derived from Quran and is unanimously accepted by all Islamic scholars) .Islamic

Mode of Finance 13

1 ) Musharkah It means a relationship established under a contract by the mutual consent of the parties for sharing of profits & losses in the t business. It is an agreement under which the Islamic Bank provide the funds which are mixed with the funds of the business enterprise & others. The profit is distributed among the partners in preagreed ratios, while the loss is borne by each partner strictly in proportion to respective capital contributions.

2) Mudarabah Where one party provides the funds while the other provides expertise and management. The latter is referred to as the Mudarib. Any profits accrued are shared between the two parties on a pre-agreed basis, while loss is borne only by the provider of the capital.

3) Murabaha It means a sale on mutually agreed profit. It is a contract of sale in which the seller declares his cost & profit. Islamic Banks have adopted this as a mode of financing. As a financing technique, it involves a request by the client to the bank to purchase certain goods for him.

4) Ijarah Ijarah or leasing is the transfer of usufruct for a consideration which is rent in case of hiring of assets or things and wages in case of hiring of persons.

5) Musawamah

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It is a general & regular kind of sale in which price of the commodity to be traded is bargained between seller and the buyer without any reference to the price paid or cost incurred by the former. It can be used where the seller is not in a position to ascertain precisely the cost of commodities that he is offering to sell.

6) Istisna It is a contractual agreement for manufacturing goods & commodities.Istisna’a can be used for providing the facility of financing the manufacture or construction of houses,plants,projects and buildings of bridges, roads and highways.

s Offered by Meezan Bank Ltd on Mudarabah basis The Bank is the Manager (Mudarib) of the funds deposited by the customers. The Customer is an Investor (Rab-ul-Mal), and the bank allocates the funds received from the customers to a deposit pool. These funds from the pool are utilized to provide financing to customers under Islamic modes that include, but are not restricted to, Murabaha and Ijarah.

Profit Distribution Structure:

Source Investment Pool

Investment/Financing Murabah Ijarah

Depositors

Funds

Diminishing Musharakah

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Bank

Profits

Profits

The Gross Income will be shared between the bank (as Mudarib) and Depositors (Rab-ul-Mal) in a predetermined ratio (%) of the actual profit earned.

MEEZAN BANK LTD offers different types of s on Mudarabah Basis. These are as under: 1) Current s Currents s are the business s offered to all types of business owners. The bank doesn’t earn any type of profit from these s but these are opened only due to the facilitation of the customers. Current s can be opened tly, singly, company etc. Free online services from all branches. No restrictions on number of transactions of withdrawals.

2) Saving s Saving s are opened due to the saving of money. The bank also provides profit to the customers. That profit is calculated & paid on monthly basis. If during the month average deposits falls below 1000/-, then no profit no Loss.

3) KMA (Karobari Munafa s) KMA s are offered specially to those customers who have valuable business and earn 1 million each month. So, the bank facilitates them with free cheques book, free ATM card, free Telephone Banking and free Internet Banking. The minimum

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investment for this is 1 million. And the bank provides them profit at different rates.

4) MBA (Meezan Bachat s) This required minimum investment of 25000. This is opened for all customers, who can operate it easily. In these s bank also provides profits to the customers. These s also provide facility of withdraw of cash any time.

5) US Dollar Saving s These s are opened for those customers who are residents of Pakistan but earning outside of the country anywhere so he deposits his amount in dollar or other currency and our bank provides him more profit as compared to the local investors & on monthly basis. The minimum investment for this is $500. These all current and saving s can be opened in any category of the following types of s; •

Individual s

•

t s

•

Minor

•

Sole Proprietorship s

•

Illiterate Customer

•

Partnership s

•

Staff s.

1. Individual s s of Individuals, who are resident or non-resident, are

to be opened under

this category.

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2. t s t is an in the names of two or more persons (other than Partners or Trustees). In case of death, cheques signed by DECEASED Holder presented for payment will not be entertained and therefore must be returned. When the balance of t is repayable to either party or survivor, the Specimen Signature Card should be marked to effect the arrangement.

3. Minor A person who has not attained the age of 18 years is minor. However, incase Court has appointed a Guardian for the property of a Minor, and then the period of his / her maturity extends to the age of 21.

4. Sole Proprietorship s A formally stamped written request on the official Letter Head of the Business / Firm of the Sole Proprietor in order to open a Sole Proprietor must be submitted along with AOF (s Opening Form). Additional care must be taken while opening of sole proprietor . Beside other documents the customer should be ask to produce the original NTN (National Tax Number) certificate issued to his name in the capacity as sole proprietor of said firm.

5. Illiterate Customer s These types of s are opened only for those persons who are illiterate. This is also known as “PHOTO ”, that during opening this we paste the current port size photographs with AOF (s Opening Form).

6. Partnership s

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Partnership is an association of two or more persons who have agreed to share profits of a business carried on by all or by any one of them acting for all. The and conditions must be spelled out in the “Partnership Deed” formally agreed upon among Partners by incorporating the same in the Deed. The g and delegation of powers of those authorized to operate the should be clearly stated on the AOF documentation in accordance with Partnership Deed.

7. Staff s Staffs can open only one saving or current singly or tly with his / her spouse at the time of appointment in the respective branch of Meezan Bank Limited. The will be opened for the purpose of salary disbursement (like salary, bonus, increments, allowance or any form of reimbursement from Meezan Bank Limited against services rendered by employee).

WEEKLY WORK There are 3 main departments at the branch: 1. Personal Banking Department 2. Clearing & Remittances Department 3. Cash Department

1st and 2nd Week PERSONAL BANKING DEPARTMENT opening and closing is the function of customer services department. The bank’s

customers

includes

(partnership/proprietorship),

individuals

Autonomous

(single

corporations,

or

t),

Limited

firm

companies,

Charitable Institutions, associations, Educational Institutions or local bodies

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Basic for Opening opening is the basic and first relationship, which is established between Bank and the customer. In opening extreme care has to be exercised in case of completion of opening documentation. Whenever a client comes in the bank in order to open an the first information that is given to him/her about the types of s, which can be opened, so far this purpose the client is given detailed information about the s and their respective profit rates. Documentation of Opening an . 1. Individual s: 

Copy of CNIC.



Any proof of Income (salary slip/ NTN).



Any Utility Bill (for Address Verification).

2. Proprietorship : 

Copy of CNIC.



Proof of proprietorship (NTN Certificate).



Opening Request & Proprietorship letter on Firms



Any Utility Bill (for Address Verification).

Letter Head.

3. Minor : 

Copy of CNIC of Guardian.



Copy of Birth Certificate.



CNIC copy of Guardian.

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4. Partnership s: 

ed Partnership Deed (Certified Copy).



Letter of Authority & Mandate.



Copies of CNICs of all partners.



opening Request Letter on firm’s Letter Head.

5. Limited Company: 

Copy of Certificate of Incorporation.



List of Directors.



Memorandum & Articles of Association.



Board Resolution.



Certificate of Commencement of Business (for Public Ltd. Co.).



Copies of CNICs of all Directors/Signatories.



Latest copy of certified Form-29

6 . t s: 

National Identity card of all Applicants.



Signature of all Applicants.



Zakat Affidavit of all Applicants (Zakat Examption).



Operation of clearly mentioned.



The options available to operate the are:



tly



Either or Survivor

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

Other(s)(Please specify)

.NOTE: •

These all documents are required original, bank itself get the photocopy of these documents.

•

Housewives/Students/Retired Personal: Documents as requested by branch.

Procedures For Opening There are four steps which consist on it. These are… 1) CIF 2) KYC 3) s 4) CDD First of all, after inquiring from the customer what type of he/she wants to open, the opening form is got filled from the customer and signed it. Along with the opening form, the customer is also signed two Specimen Signatures Cards. After fulfilling all the formalities of opening, the computer generated number is given to the customer that is of special series depending on the type of . Requisition Slip A requisition slip is given to the customer to sign it so that the customer can get cheque book. Chequebook is issued after one day of receiving the requisition slip.

Letter of Thanks After opening the “A Letter Of Thanks” is send to the customer in order to thank the customer for opening an in the Bank. This letter tells all the information regarding his/her s, which are kept very confidential.

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Opening After an is opened, an entry is made in the opening , which has the following columns: •

Date

•

Number

•

Name & Address

•

Telephone Number

•

Initial Deposit

Customer Services/Relation Officer enters the new opened in computer and the Specimen signature Cards are also scanned so that whenever a cheque of the respective comes for encashment, the signatures can be verified.

3rd and 4th Week OPERATIONS DEPARTMENT Functions Performed •

Clearing

•

Remittance

Clearing & Remittance It was performed as following

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1) Intercity: Intercity function are performed by NIFT & state bank of Pakistan Intercity Lodgment Process •

Letter

•

Stamping(clearing,intercity,payee A\C credit

•

Bundle cover with packing envelope

•

System entry

When cheque is clear it is realized in system and adjustment entries are done in system. Charges Lodgment Charges FED

150 24

Total

174

2) OBC Where NIFT & SBP is not OBC is performed functions. All about lodgment process is same but when OBC is realized then dd\Po is received which is lodged in local clearing. OBC Charges Lodgment Charge Courier Charges FED

150 100 40

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Total

290

CLEARING In clearing process, if the holder of MBL receives the cheque of other bank like City Bank, Habib Bank Limited etc, and he submits it in MBL branch to be cashed. At the same time the clearing process starts. First the bank name, Cheque number and the amount are written in the . After this three kind of stamps are required first bank name stamp, secondly clearing stamp of next date and If the cheque is not local then the inter city clearing stamp is required. Some cheques are local and some are outstation. The institution N.I.F.T. provides the services in clearing the cheque. They send the different cheque to different banks.. The cheque of inter city is send through N.I.F.T. And where, the N.I.F.T service is not available so the cheque is sent through T.C.S. The clearance of cheque is informed through advice. Some cheque is not ed so they should return so Rs. 100 is deducted and if the cheque is inter city then the postage charges is deducted. Inward Clearing In the morning, the bank receives its own cheques, which have been presented by the customers in some other bank to be deposited in their . NIFT provides the facility of bringing cheques for inward and also takes the cheques of outward clearing to other banks. The cheques received in inward clearing are the cheques drawn on bank and the bank has to pay for them. For this purpose the bank makes clearing in computer by checking the balances of the respective customer, if their balances are up to the mark then that cheque is cleared and the respective customer is debited with the respective amount. If the balances are short then that cheque is bounced back to the related bank. Reasons for returning a cheque •

All required stamps of Clearing, Crossing and Endorsement are not present on cheques.

•

Cheque is post date.

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•

Refer to drawer

•

Effects not cleared, may be presented again

•

Amounts in words and figures differ.

If any of these reasons exists then that cheque is returned through NIFT and deducts Rs. 300 from customer’ as cheque returned charges. Then the report of returning any cheque is sent through fax to the head office Karachi. After this put the entry in Cheque return showing the following columns: •

Date

•

Title of

•

number

•

Cheque number

•

Bank and Branch name

•

Reason to return

Outward Clearing All the cheques of other banks which are deposited to MBL are presented in outward clearing. This is said as outward clearing because they are presented on the very next day after depositing a cheque. Services Provided By Clearing Function •

Transfer of amount

•

Telling balances

•

Issuing cheques books

REMITTANCE

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Another important department in MBL is Remittances Department. The remittances department transfers the funds from one bank to other bank and from one place to another place. In remittances department the collection take place. The MBL made payment of only open cheques on the counter and prohibits the payment of crossed cheques. MBL transfers money from one place to another by the following means: •

Pay order

•

Inward collection

•

Outward collection

A) Pay Order (Payable at any branch) Pay order is an order to pay money but this payment is to be made within city and other as well. Because MBL pay order is payable at any MBK branch in Pakistan The original copy of the pay order is given to the customer and carbon copy is kept with bank for office record. B) Inward Collection When the bank receives cheques of any other bank from its any branch situated in the some other city, and then those have been dealt as inward collection

5th and 6th Week CASH DEPARTMENT The cash department is the most important department of the bank. It receives cash from customers and then deposits it into the s of the customers and maintained their balances. There are two basic functions performed by the cash department. These are

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1. Receipts An individual who has in the Bank can deposit money in his . For deposit of the money the individual has to fill the deposit slip in which the holder writes his name, number, amount of the money both in figures and in words. After filling the deposit slip the Cash amount along with the deposit slip is submitted with the cashier. The cashier collects the cash and counts it and after verification the cashier stamps the deposit slip. One part of the deposit slip is given back to the customer and the other part of the deposit slip remains with the bank for the record purposes The cashier also record the deposits made by the customers in credit sheets daily. The deposits of all customers of the bank are controlled by mean of ledger . Every customer has its own ledger and has separate ledger cards in which his / her total record is kept.

2. Payments First of all the customer presents his cheque to the cashier. The cashier records the number and the amount, which is to be drawn. Then the cashier check the cheque number in the computer for the verification whether the holder has such amount in his which he is demanding or not. If the computer es the cheque, the ing officer signs the cheque and sent it to the cash counter then cashier pays . In cash department following books are maintained. •

Scroll book

•

Paying book

•

Cash balance book

Scroll Book

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When cash is received at the customer it is recorded in the scroll book. Paying Cash Book The cashier makes entry in the paying cashbook when cash is paid. Cash Balance Book The consolidated figure of receipt and payment of cash is entered in cash balance book.

Investment Certificate Issued by Meezan Bank Ltd. To facilitate the customer through opening s of different types, Meezan Bank also issues some investment certificates through which they could benefit customer. The customer could easily invest in different types of certificates of different investments and could get profit at attractive rates. These certificates are as under:

1. Certificate of Islamic Investment-COII. These certificate requires the minimum investment of 50,000/=. These certificates are of three types one of them is for 3 months-5 years and the profit distribution of this type certificate is at the maturity of payment. 2nd is for 1year-5 years and profit distribution of this is quarterly and the 3rd and last which is for 5 years and profit distribution is on monthly basis but its investment is minimum 200,000/= rupees.

2. Monthly Mudarabah Certificate-MMC. The Monthly Mudarabah Certificate is the flexible investment product, which has been designed to give customers a monthly return, which is purely halal. These certificates require the investment of 100,000/= rupees, and the profit distribution is on monthly basis. As the investment increases the distribution rate also increases.

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3. Meezan Aamdan Certificate-MAC. Meezan Aamdan Certificate (MAC) is the long term investment with high monthly profit especially designed for those individuals and corporations who are in need of regular stream of monthly income. MAC is therefore, a monthly income (Mahana Aamdani) certificate with a variety of free packaged benefits. The minimum investment for this certificate is 1, 00,000/= rupees. These are issued for two different tenures i.e. for 51/2 and 7 years. The 7 year certificate has more attractive profit distribution as compared to 51/2.

4. Meezan Providence Certificate. These certificates are issued only for institutions, ed or uned Employee Provident / Gratuity / Pension Fund, Which wants invest in such reputed and Islamic organization to earn totally Riba-free profit? The minimum investment required for this type of certificate is 1 Million. This certificate bears different tenures; it starts from 2 years to 7 years. As the tenure grows the rate of profit also increases.

5. Dollar Mudarabah Certificate. This Monthly Mudarabah Certificate is same as the above Monthly Mudarabah Certificate, but the difference is this certificate requires investment in Dollars and that is $ 10,000/=. And the profit is distributed in Dollars.

PRODUCTS OF MEEZAN BANK 1) Rupee Current Meezan Current is a Rupee-based current that provides you the convenience of putting your money in a Riba-free and accessing it without

30

any restrictions on withdrawal while enjoying a host of professional conveniences from Meezan Bank. Meezan Current can be opened by Individuals, Sole-Proprietorships, Partnerships and Limited Companies. Key Features: •

Minimum investment required to open an is Rs. 1000/-

•

No restriction on withdrawals or number of transactions

•

No deduction on low balance maintained

2) Rupee Saving The Riba-free Rupee Saving is a basic banking for every customer's need. The provides monthly returns along with a variety of free packaged benefits. Key Features:

•

Profit will be calculated on daily product basis

•

Profit will be paid on monthly basis

•

No restriction on withdrawals or number of transactions

•

Free Cheque books

•

Globally accepted Meezan VISA Debit Card

•

Free Online Banking services at our branch network nationwide

•

Free Internet Banking facility

•

Free bank balance certificates

•

3) Meezan Bachat Meezan Bachat offers a higher expected rate of return with nearly the same convenience and service of a regular savings .Meezan Bachat can be opened by Salaried or Self-employed, Housewives and Retired individuals.

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Key features: 

Minimum investment required to open an is Rs. 50,000/-



Profit will be calculated on the minimum monthly balance maintained

 

during a month Profit payment is made to your Meezan Bank on a monthly basis. Waiver of application fee for Car Ijarah & Easy Home for s with minimum balance of Rs. 500,000

4) Labbaik Saving Aasaan (A Holy Journey with Comfort & Convenience) Meezan Labbaik Saving Aasaan is an ideal deposit product for you if you are an individual saver and wish to save for your spouse, children, parents, etc. Key Features: •

Available for individuals, where customers can open a single / t with family

•

Labbaik Saving Plan is available for six (06) months to twenty (20) years

•

Labbaik Saving is a Pak Rupee

•

It will be a Recurring Deposit , where customers will deposit monthly contribution as per the deposit schedule plan

•

Labbaik Saving is a non-chequing , where no cheque book or VISA Debit Card will be issued

5) Meezan Business Plus (Serving you the perfect blend of convenience and flexibility) Meezan Business Plus can be opened by Individuals and businesses including Sole Proprietorships, Partnerships and Limited Companies. Key Features: •

Minimum investment required to open an is Rs. 100,000/-

•

There is no restriction on withdrawals or numbers of transactions

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•

There is no deduction of service charges if the balance maintained is low

•

You will have instant access to your both through Internet Banking and through Online Banking at all branches of Meezan Bank across Pakistan

•

Free Cheque books

•

Free Pay Orders

•

Free VISA Debit Card

•

Free Statements

•

Free Online Banking

•

Free Internet Banking

•

Free Hold Mail Facility

•

Free SMS Alert services

•

Free intercity clearing

6) Dollar Saving (A Truly Halal Dollar Saving ) The Meezan Dollar Saving can be opened by individuals and businesses including Sole Proprietorships, Partnerships and Limited Companies. Key Features: •

Minimum investment required to open an is $100

•

There is no deduction of service charges if the balance maintained is low

•

You will have instant access to your through free Internet Banking

•

Profit will be paid a on monthly basis

•

Profit will be calculated on daily product basis, which ensures that you are getting a return on your investment all the time

•

Foreign Remittances

7) Karobari Munafa Karobari Munafa is a high profit savings specifically tailored for large Corporate or GoP-controlled entities. It allows customers to earn higher returns on

33

surplus cash balances, has no preset transaction limits and comes with a variety of free packaged benefits Key Features: •

Minimum investment required to open an is Rs. 10,00,000/-

•

Profit will be calculated on daily product basis

•

Profit will be paid on monthly basis

•

No restriction on withdrawals or number of transactions

•

Free Cheque books & Pay-orders

•

Dedicated Relationship Manager

SERVICES PROVIDING BY MEEZAN BANK 1) Online Banking Our free On-line Banking facility allows all customers to access their and conduct banking transactions from any of Meezan bank's branches nationwide Our free On-line Banking offers the following services: •

Real-time cash withdrawal up to Rs. 5 million, giving you access to your money from anywhere in the Country!

•

Transfer of funds between your Meezan Bank s

•

Deposit and collection of clearing Cheques drawn within the same city

•

Issuance of Pay-order from any Meezan Bank branch

2) Financial Services 

Western Union



Ria Financial Services

1. Western Union & Meezan Bank: 34

This is a financial service by which money is transfer via online system.Translink is a centralized payment processing system enabling to provide immediate to the branch in case if the customer have not personal in MBL. Maximum transfer amount limit: Maximum transfer amount limit is 5 lakh. Code: It has 10 digits code Detail: •

Beneficiary / Receiver name

•

Remittance amount in PKR (Approx)

•

Beneficiary CNIC/port no.

•

Beneficiary date of birth (DOB)

•

Beneficiary CNIC/port issuance date

•

Expiry date

•

Address

•

number

•

Sender/remittance name

•

Sender city/country

Documents: •

Remittance Payment Slip

•

RPS would be used for meeting the KYC requirement of Beneficiary & receipt of remittance by beneficiary.

35

•

Fax-online payment receipt:

•

This will be treated as profit that transaction has been completed at wo pos

•

& now cash can be paid to the beneficiary. Branch will take beneficiary signature & authorize branches officer will sign on payment receipt..

•

.Photocopy of beneficiary’s identityfication verification must be enclosed with RPS.

Document Retention Period: The time period applied on bank’s vouchers as per bank’s policy. Adjusting Entries:

Western union payment settlement Cash on hand

dr cr

2. Ria Financial Service Meezan Bank, Pakistan’s first and largest Islamic Bank, has entered into a Money Remittance Agreement with Ria Financial services, a wholly owned subsidiary of Euronet Worldwide, Inc. Ria Financial Services was founded in 1987 and today is recognized as the third largest money transfer company in the world, with a global agent network of 100,000 locations in over 130 countries on five continents. This new partnership will facilitate Pakistanis around the world in sending money to their families and friends in Pakistan by simply visiting any Ria Financial Services location worldwide. The amount remitted from abroad can be collected from any of Meezan Bank’s 230 branches located in 63 cities across Pakistan, instantly and in cash, even without having a bank . This is also a financial service which is used transfer money via online system.it has 13 digits code. all documents and apply and transfer procedure requirements are same.

36

3. Home Remittance Meezan Bank's Remittance services are simple and reliable. They are available at your doorstep through a wide and efficient network of corresponding banks worldwide. Only the leading global financial institutions form this network of correspondent banks.

Advantages of Meezan Home Remittance: Quick Remittance in major currencies i.e. USD, GBP, EUR, JPY, CHF, SGD, AUD •

Instant online transfer within our branch network without any charges

•

Extensive branch network in all major cities of Pakistan

•

Meezan Visa Debit Card allows you to use your own money at more than 30 million outlets and 160 countries worldwide

•

Free Internet banking facility

4. Electronic Banking If you wish to remit money to Pakistan, simply give instructions to your existing bank for money transfer by providing the name of your preferred Meezan Bank branch and beneficiary number.

5. Meezan Visa Debit Card Using your card is quicker than making a trip to the bank! Meezan Bank offers a wide network of ATMs located at its branches as well as prominent offsite locations. You do not need to carry cash anymore; simply go to the ATM and withdraw cash anywhere, anytime. We also offer access to more than 2,000 ATM locations country-wide via 1Link and MNET Network. Using your card is quicker and far more convenient than queuing at a cash dispenser and safer than carrying cash.

37

•

Use your own money at more than 30 million outlets and 160 countries worldwide.

•

Use it to buy both big and small items, wherever you see the Visa symbol.

•

Each withdrawal taken directly from your Meezan Bank Linked .

•

A safe and convenient alternative to carrying cash.

•

You can call 24 hours a day, 7 days a week with any queries. Simply call 111-331-331 and 111-331-332

•

All shopping transactions on your card are signature based. Simply swipe and sign!

Cards

Withdrawals

Shopping

Silver

30,000

50,000

Gold

50,000

100,000

Titanium

75,000

150,000

Platinum

100,000

300,000

Teens

15,000

25,000

Kids

10,000

20,000

6. Meezan Internet Banking Meezan Internet Banking is the smarter way to bank, providing you global access to your 24 hours a day, 7 days a week. Facilities With Meezan Internet Banking, you can get secure and convenient access to the following facilities: •

Balance inquiry of multiple s

•

View statement

•

Real time cheque status and stop payment request

•

Cheque book and pay-order request

•

Lodging and tracking status of complaints

•

activity alerts

38

7. ATM Network Meezan Bank offers a wide network of ATMs located at its branches as well as prominent offsite locations. You do not need to carry cash anymore; simply go to the ATM and withdraw cash anywhere, anytime. We also offer access to more than 2,000 ATM locations country-wide via 1Link and MNET Network. Key Features: •

Transfer funds between your own s in the same branch via ATM.

•

The cash withdrawal limit for Meezan Visa Debit Card per day is subject to the funds present in your selected .

8. Meezan SMS Alerts Alerts: •

Debit Alert: An instant SMS alert to inform you when any amount is deducted from your Current or Savings (s).

•

Credit Alert: An instant SMS alert to inform you when any amount is added into your Current or Savings (s).

•

Cheque Bounce: An instant SMS alert to inform you that your cheque has been dishonoured.

Important: 

SMS Alert service is applicable to all Current and Saving s (either or survivor in case of t s).



The service is currently for customers residing in Pakistan.



SMS Alert Service is not available on Mobile Network Portable (MNP) numbers.

39

9. 24/7 Call Center With our Call Centre facility, you no longer have to take time out to visit your branch for your everyday banking needs. By simply dialing 111-331-331/332 (dial 00-92-21111-331-331/332 from outside Pakistan)

Consumer Finance (Islamic Financing Solutions) Car Ijarah is Pakistan’s first Interest Free car financing based on the Islamic financing mode of Ijarah (Islamic leasing). This product is ideal for individuals looking for car financing while avoiding an interest-based transaction. Meezan Bank’ Car Ijarah is a car rental agreement, under which the Bank purchases the car and rents it out to the customer for a period of 3 to 5 years, agreed at the time of the contract. Upon completion of the lease period the customer gets ownership of the car against his initial security deposit.

Islamic Home Financing Easy Home is a Shariah-compliant Home Finance facility! One that is comprehensive, affordable, and totally hassle-free. Meezan Bank is committed to meet our customers’ needs in a truly Shariah-compliant manner coupled with dedicated service excellence. Why not have the best of both worlds? Isn't that what you are working so hard for anyway?

Certificate of Islamic Investment Key Features: 

Investment can be made for 3 months, 6 months, 1 year, 2 years, 3 years and 5 years



Profit payment options are monthly, quarterly or at maturity



Minimum investment required for quarterly and on-maturity payment is Rs. 50,000/



Minimum investment required for monthly profit payment is Rs. 200,000/

40



Pre-mature withdrawal can be made as per approved schedule

Meezan Amdnan Certificate Enjoy a range of valuable features including: 

Minimum investment required is Rs. 100,000/



Minimum investment for widows and senior citizens is Rs. 50,000/-



Investment can be made for 5 1/2 years and 7 years



Profit payment is made to your Meezan Bank on a monthly basis



Pre-mature withdrawal can be made as per approved schedule



Free first cheque book for customers who open an for MAC issuance

Monthly Mudarabah Certificate Key Feature: 

Minimum Investment required is Rs. 100,000/-



Investment period is one month with re-investment option available on a continuous basis



Monthly profit payment will be made to your Meezan Bank



Pre-mature withdrawal can be made as per approved schedule

Dollar Mudarabah Certificate The Dollar Mudarabah Certificate (DMC) is a deposit product through which you can invest your US Dollars with Meezan Bank for periods ranging from 3 months to 3 years and earn six-monthly or at maturity profit payments on your investment. Enjoy a range of valuable features including: 

Minimum Investment required is USD 10,000/-



Investment tenures are 3 months, 6 months, 1 year and 3 years



Profit payment will be made either at maturity or on a six-monthly basis to your Meezan Bank Dollar Saving

41



Pre-mature withdrawal options available as per approved Early Redemption Schedule

Strengths

Weaknesses

SWOT Analysis Opportunities

Threats

42

Strengths Following are some of the strengths of Meezan bank which distinguish it from other banks in market. 

First exclusive Islamic bank.



The largest Islamic Bank in Pakistan with a network of over 400 branches in 100+ cities. And ending 2015 year they have increase his branches in Pakistan to 500 branches.



Strong growth of its Islamic banking SBU.



The of the Shariah Supervisory Board of Meezan Bank are Internationally-renowned scholars, serving on the boards of many Islamic banks operating in different countries.



Karachi, August 20, 2008: Meezan Bank, the largest Islamic Bank in Pakistan has been conferred the Best Islamic Bank Award by Rawalpindi Chamber of Commerce and Industry.



The Chief Minister of Punjab Mr. Shahbaz Sharif bestowed this award to Mr. SaleemKhan Regional Manger - North, Meezan Bank at 21st RCCI achievement awards ceremony held at the Convention Center in Islamabad.



Dedicated and professional staff

Weaknesses 

Lack of promotions and advertising of their products and services.



Lengthy & extensive documentation



Weak marketing strategy

43



Offering fewer services than the competitors



.Meezan Bank Limited has no Credit card facility



Restricted Shariah based policies

Opportunities 

House financing sector can be targeted to maximize the profit.



Growing demand of Islamic financial product and services.



Venturing into Islamic groups out side the countries as opportunity to expand business inUAE and Golf states. I-e financial institutions.



Coming up with. Products for the SME to targeting the medium level customers.



Doing business with companies having Islamic mindset. I-e Islamic financial Institutions.



Increase branch network within the country

Threats 

New competitors setting up their Islamic banking sections and they have the infrastructure, skill, ability, resources & attitude to capture the market more than theMeezan bank.



High Interest Rate from SBP



SBP has not special policy regarding Islamic Banking.

44



Govt. policies are mostly for conventional banking system not for specially designed for Islamic banking.



Change in Government's attitude towards Islamic banking.



Fears on the credibility of Islamic banking ethical compliance and monitoring systems

Financial Analysis Ratio Analysis: Ratio analysis is helpful to the management of the organization as well as for the investors and creditors. Investor keeps an eye on the company’s financial statement and make decisions whether to invest funds in that company or not. Similarly a creditor also analysis the financial statements and makes decisions whether to grant loan or not. Financial statements for the last three years from 2008 to 2010 are given below:

Meezan bank Limited Profit and Loss As on 31st December

Profit / return on financings, investments and placement

2008 Rs. (000)

2009 Rs. (000)

2010 Rs. (000)

6,803,213

10,102,060

12,290,549

45

Return on deposit and other dues expensed Net spread earned Provision against non-performing financing (net) Provision for diminution in value of investment and impairment Provision against off balance sheet obligations Provision against amount due from financial institutions Bad debts written off directly Net spread after provisions OTHER INCOME Fee, commission and brokerage income Dividend income Income from dealing in foreign currencies Capital gain / (loss) on sale of investment – net Unrealized loss on held for trading investment Impairment on reclassification of securities from held for trading to available for sale securities Other income Total other income

OTHER EXPENSES istrative expenses Other provision / write offs / (reversals) Other charges Total other expenses Extraordinary / Unusual Items PROFIT BEFORE TAXATION Taxation - current - Prior years - Deferred PROFIT AFTER TAXATION Un-appropriated profit brought forward Profit before appropriations

3.088,344 3,714,879 428,436

4,969,916 5,132,144 1,430,536

6,606,474 5,684,075 1,330,057

288,884 -

88,640 -

46,862 37,682

717,320 2,997,559

12,625 1,531,801 3,600,343

81,875 1,496,476 4,187,599

431,725 243,585 304,692 47,001 (23,014)

529,260 189,973 752,904 76,160 -

615,752 321,898 1,381,044 97,155 -

(362,751) 66,670 707,908

49,507 1,597,804

59,181 2,475,030 6,662,629

3,705,467

5,198,147

2,626,606 86,263 287 2,713,156 992,311 992,311 314,790

3,530,161 (73,484) 1,747 3,458,424 1,739,723 1,739,723 1,440,374

4,460,804 18.306 56,559 4,535,669 2,126,960 2,126,960 1,025,135

-

-

(332,808)

56,334 371,124 621,187 1,219,228 1,840,415

(726,002) 714,372 1,025,351

(214,955) 477,372 1,649,588 -

2008 Rs.(000)

2009 Rs.(000)

2010 Rs.(000)

5,763,710 1,344,974 18,108,000 14,526,699 39,528,731 1,880,515 -

8,387,432 5,260,467 34,486,875 23,290,309 41,709,656 2,416,375 204,172

12,780,806 9,939,660 10,511,855 54,966,907 54,195,163 3,066,100 342,175

Meezan Bank Limited Balance Sheet As on 31st December

Assets: Cash and balances with treasury banks Balances with other banks Due from financial institutions Investments Financings Operating fixed assets Deferred tax assets

46

Other assets including inventories Total Assets

4,123,441 8,413,810 8,949,759 85,276,070 124,169,096154,752,425

LIABILITIES: Bills payable Due to financial institutions Deposits and other s Sub-ordinated loan Liabilities against assets subject to finance leases Deferred tax liabilities Other liabilities Total liabilities

1,057,017 1,249,210 1,767,370 4,008,496 8,468,425 5,829,296 70,233,875 100,333,051 131,070,328 453,038 3,548,666 4,933,951 5,005,440 79,301,092 114,984,637143,672,434

Net Assets Represented By Share capital Reserves Un-appropriated profit Total equity Surplus/ (Deficit) on revaluation of investment

5,974,978

9,184,459

11,079,991

4,925,961 845,022 570,114 6,341,097 (366,119) 5,974,978

6,650,048 1,050,092 1,390,395 9,090,535 93,924 9,184,459

6,982,550 1,380,010 2,377,563 10,740,123 339,868 11,079,991

Liquidity Ratios Liquidity ratios means to measure short term solvency of the company. Ability of the company to payoff 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 Assets: Cash and balances with other treasury banks + Balance with other banks + due from financial Institution + short term investment + short term financing + other assets Current Liabilities: Bills payable + Due to financial institution + short term deposit + other liabilities

Current Ratio = Current Assets / Current liabilities Year 2008 Year 2009 Year 2010 112,151,079 / 52,367,722 / 58,123,087 93,974,134 / 86,338,599 105,272,728 =0.90 : 1 = 1.08 :1 = 1.06 : 1

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Working Year 2008 Current Assets = 5,763,710 + 1,344,974 + 18,108,000 + 1,542,473 + 21,499,732 + 4,108,833 Current Assets = 52,367,722 Current Liabilities = 1,057,017 + 4,008,496 + 50,922,554 + 2,135,020 Current Liabilities = 58,123,087

Year 2009 Current Assets = 8,387,432 +5,260,467 +34,486,875 + 1 2,195,470 + 25,203,080 + 8,413,810 Current Assets = 93,947,134 Current Liabilities = 1,249,210 + 8,468,425 + 73,548,063 + 3,072,901 Current Liabilities = 86,338,599 Year 2010 Current Assets = 12,780,806 + 9,939,660 + 10,511,855 + 37,873,600 + 32,095,399 + 8,949,759 Current Assets = 112,151,079 Current Liabilities = 1,767,370 + 5,829,296 + 94,789,739 + 2,886,323 Current Liabilities = 105,272,728

Interpretation As the current ratio in the year 2008 is 0.90, in the year 2009 is 1.08 and in the year 2010 it is 1.06 Which depicts that there is a slight increase in the year 2009 as compare to year 2008 where as there is a negligible decrease of 0.02 as compared to year 2009. Current ratio must be 2:1 in accordance with the prudential regulations of State Bank of Pakistan as well as international ing standards but in case of Meezan Bank current ratio seems to be unsatisfactory in all the three years which is not a healthy sign so for as bank’s short term solvency to pay its short Debts are concerned Acid Test Ratio Quick Assets = Current Assets – (Inventories + prepayments) Current liabilities: Bills payable + Due to Financial institution + short term Deposit + other liabilities

48

Acid Test Ratio = Current Assets - (inventories + prepayments) / current liabilities Year 2008 Year 2009 Year 2010 109,273,310 / 50,289,704 / 58,123,087 91,043,434 / 86,338,599 105,272,728 = 0.86 : 1 = 1.05 : 1 = 1.04 : 1 Working Year 2008 Quick Assets = 52,367,722 – (1,535,744 + 542,274) Quick Assets = 50,289,704 Current Liabilities = 1,057,017 + 4,008,469 + 50,922,554 + 2,135,020 Current Liabilities = 58,123,087 Year 2009 Quick Assets = 93,947,134 – (2,523,969 + 379,731) Quick Assets = 91,043,434 Current Liabilities = 1,249,210 + 8,468,425 + 73,548,063 + 3,072,901 Current Liabilities = 86,338,599 Year 2010 Quick Assets = 112,151,079 - (2,461,097 + 416,672) Quick Assets = 109,273,310 Current Liabilities = 1,767,370 + 5,829,296 + 94,789,739 + 2,886,323 Current Liabilities = 105,272,728 Interpretation: The Quick Ratio for the year 2008 is 0.86 which is less than 0.14 as compare to industry’s ratios but in the year 2009 is 1.05 which is slight more than the standard ratio. Similarly in the year 2010 the Quick ratio 1.04 which is also more than the industry’s standard ratio. Quick Ratio in the year 2008 is unsatisfactory where as in the years 2009 and 2010 Quick Ratio is quite satisfactory.

Leverage Ratios Any ratio used to calculate the financial leverage of a company to get an idea of the company’s methods of financing or to measure its ability to meet financial obligations. Following ratios are calculated in order to measure the long term solvency of the firm:



Time Interest Earned

 

Debt Ratio Debt / Equity Ratio



Debt to Tangible Net worth Ratio

49



Total Capitalization Ratio

Time Interest Earned

Time Interest Earned = Earning Before Tax + interest expenses / interest expenses Note: It is an Islamic bank so this ratio cannot be calculated. Debt Ratio Total Debt = Bills payable + Due to financial institution + Deposits and other s + sub-ordinates loan + liabilities against assets subject to Finance leases + deferred tax liabilities + other liabilities Total Assets = Cash and balances with treasury banks + balances with other banks + due from financial institutions + investments + financings + operating fixed assets + other assets

Debt Ratio= ( Total Debt / Total Assets ) Year 2008 Year 2009 Year 2010 (79,301,092 / 85,276,070) (114,984,637 / 124,169,096) (143,672,434 / 154,752,425) = 0.9299 Times

= 0.9260 Times

= 0.9284 Times

Working Year 2008 Total Debt = 1,057,017 + 4,008,469 + 70,233,875 + 0 + 0 + 453,038 +3,548,666 Total Debt =79,301,092 Total Assets = 5,763,710 + 1,344,974 + 18,108,000 +14,526,699 + 39,528,731 + 1,880,515 +4,123,441 Total Assets = 85,276,070 Year 2009 Total Debt = 1,249,210 +8,468,425 +100,333,051 + 0 + 0 + 0 + 4,933,951 Total Debt = 114,984,637 Total Assets = 8,387,432 + 5,260,467 + 34,486,875 + 23,290,309 + 41,709,656 + 2,416,375 + 204,172 + 8,413,810 Total Assets = 124,169,096 Year 2010 Total Debt = 1,767,370 + 5,829,296 + 131,070,328 + 0 + 0 + 0 + 5,005,440 Total Debt = 143,672,434

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Total Assets = 12,780,806 + 9,939,660 + 10,511,855 + 54,966,907 + 54,195,163 + 3,066,100 + 342,175 + 8,949,759 Total Assets = 154,752,425 Graphical Representation: Interpretation: Bank’s Debt ratio in the years 2008, 2009 and 2010 is 0.9299, 0.9260 and 0.9284. Debt Ratio indicates that bank’s Debt is on higher side in all the three years as compare to its assets which indicates that the bank is highly levered and its fixed financial cost is much higher which may decrease the operating profit of the company with the result of decrease in earning per share. Debt / equity Ratio

Debt to Equity Ratio = Total Debt / Total Equity Year 2008 Year 2009 Year 2010 79,301,092 / 6,341,097 114,984,637 / 9,090,535 143,672,434 / 10,740,123 = 0.125 Times

= 0.1265 Times

= 0.1337 Times

Total Equity = Share Capital + Reserves + Un-appropriated Profit Working Year 2008 Total Debt = 1,057,017 + 4,008,496 + 70,233,875 + 0 + 0 + 453,038 + 3,548,666 Total Debt = 79,301,092 Total Equity = 4,925,961 + 845,022 + 570,114 Total Equity = 6,341,097 Year 2009 Total Debt = 1,249,210 + 8,468,425 + 100,333,051 + 0 + 0 + 0 + 4,933,951 Total Debt = 114,984,637 Total Equity = 6,650,048 + 1,050,092 + 1,390,395 Total Equity = 9,090,535 Year 2010 Total Debt = 1,767,370 + 5,829,296 + 131,070,328 + 0 + 0 + 0 + 5,005,440 Total Debt = 143,672,434 Total Equity = 6,982,550 + 1,380,010 + 2,377,563 Total Equity = 10,740,123 Graphical Representation:

51

Interpretation: According to prudential regulation of State Bank of Pakistan Debt ratio must be 70:30 but here in the case of Meezan Bank Limited in all the three years debt ratio is 0.125, 0.1265 and 0.1337 respectively which indicates that Debt portion in the total financing is much lower but Equity portion is to a reasonable extent in the total financing which shows that bank has been financed with greater portion of equity instead of debt.

Debt to Tangible Net Worth

Debt to Tangible Net Worth = Total Debt / Tangible Net Worth Year 2008 Year 2009 Year 2010 79,301,092 / 5,880,094 114,984,637 / 9,089,242 143,672,434 / 10,975,858 = 0.1348 Times

= 0.1265 Times

= 0.1309 Times

Tangible Net Worth = Total Assets – Total Liabilities – Intangible Assets Working Year 2008 Tangible Net Worth = 85,276,070 – 79,301,092 – 94,884 Tangible Net Worth = 5,880,094 Year 2009 Tangible Net Worth = 124,169,096 – 114,984,637 – 95,217 Tangible Net Worth = 9,089,242 Year 2010 Tangible Net Worth = 154,752,425 - 143,672,434 – 104,133 Tangible Net Worth = 10,975,858 Interpretation: In all the three years Debt as compare to total tangible assets is 0.1348, 0.1265 and 0.1309 respectively which indicates that Debt portion in the total tangible assets is not on higher side which shows a healthy sign on the financial position of the bank and bank will be a going concern for indefinite period. Total capitalization Ratio

Total Capitalization Ratio= Long Term Debt / Long Term Debt +Shareholder’s Equity Year 2008 Year 2009 Year 2010 21,178,005 /(21,178,005 + 28,646,038 / (28,646,038 + 38,399,706 / (38,399,706 + 6,341,097) 9,090,535) 10,740,123) = 0.7695 Times

= 0.7591 Times

= 0.7814 Times

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Long Term Debt = Deposit and other + Sub- ordinates loans + Liabilities against assets subject to finance lease + Deferred tax liabilities + other liabilities Shareholder’s Equity = Share Capital + Reserves + Un-appropriated profit Working Year 2008 Long Term Debt = 21,178,005 Shareholder’s Equity = 4,925,961 + 845,022 + 570,114 = 6,341,097 Year 2009 Long Term Debt = 28,646,038 Shareholder’s Equity = 6,650,048 + 1,050,092 + 1,390,395 = 9,090,535 Year 2010 Long Term Debt = 38,399,706 Shareholder’s Equity = 6,982,550 +1,380,010 + 2,377,563 = 10,740,123

Interpretation: Long term debt of the company is in all the three years 0.7695, 0.7591 and 0.7814 respectively of Total Capitalization i.e. (Debt + equity) which depicts that the bank’s long term solvency to pay out its long term debts is not too much stable because of high degree of debt in the total capital employed. Profitability Ratios Profitability ratios measure the earning ability of the firm. Following ratios are calculated:

 

Net Profit Margin Return on Assets

 

Dupont Return on Assets Operating Income Margin

 

Return on operating Assets Return on Total Equity



Gross Profit Margin Net Profit Margin

53

Net Profit Margin = Net Profit / Total Revenue *100 Year 2008 Year 2009 Year 2010 621,187 / 6,803,213 * 100 1,025,351 / 10,102,060 * 100 1,649,588 / 12,290,549 * 100 = 9.13 %

=10.14 %

=13.42 %

Net Profit = profit after taxation Total Revenue = Profit/return earned on financings, investments and placements Working Year 2008 Net Profit = 621,187 Total Revenue = 6,803,213 Year 2009 Net Profit = 1,025,351 Total Revenue = 10,102,060 Year 2010 Net Profit = 1,649,588 Total Revenue = 12,290,549 Interpretation: Net Profit margin in the Year 2008,2009 and 2010 is 9.13%, 10.14% and 13.42% respectively which shows an increasing trend as for as index analysis is concerned. Net Profit Margin is to a reasonable extent i.e. return on sales after payment of tax. Return on Assets

Return on Assets =Earning Before Tax(EBT) / Total Assets * 100 Year 2008 Year 2009 Year 2010 992,311 / 85,276,070 * 100 1,739,723 / 124,169,096 * 100 = 2,126,960 / 154,752,425 * 100 = 1.16%

1.40%

= 1.37%

Working Year 2008 Profit before tax = 992,311 Total Assets = 85,276,070 Year 2009 Profit before Tax = 1,739,723 Total Assets = 124,169,096 Year 2010 Profit before tax = 2,126,960 Total Assets = 154,752,425

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Interpretation: As for as Return on total Assets is concerned, in the year 2008 it is 1.16%, in the year 2009 is 1.40% and in the year 2010 is 1.37% which depicts that return on total assets is much lesser as compare to banking industry’s standard. Although it has an increasing trend in the year 2009 and 2010 but as for as international ing standards are concerned, return on total assets is not worth while which shows that assets of the bank are not being utilized properly. Du Pont Return on Assets

Du-Pont ROA= (Net Income / Total Revenue) x (Total Revenue / Total Assets ) Year 2008 Year 2009 Year 2010 (1,025,351 / 10,102,060) (1,649,588 / 12,290,549) (621,187 / 6,803,213) x x (10,102,060 / x (12,290,549 / (6,803,213 / 85,276,070) 124,169,096) 154,752,425) = 0.7276%

= 0.8244%

= 1.06%

Working Year 2008 = (621,187 / 6,803,213) x (6,803,213 / 85,276,070) = (0.0913) x (0.0797) = 0.7276% Year 2009 = (1,025,351 / 10,102,060) x (10,102,060 / 124,169,096) = (0.1014) x (0.0813) = 0.8244% Year 2010 = (1,649,588 / 12,290,549) x (12,290,549 / 154,752,425) = (0.1342) x (0.0794) =1.06% Interpretation: As for as Return on total Assets is concerned, in the year 2008 it is 0.7276, in the year 2009 is 0.8243 and in the year 2010 is 1.06 which depicts that return on total assets is much lesser as compare to banking industry’s standard. Although it has an increasing trend in the year 2009 and 2010 it is pertinent to mention here that assets of the bank are not used properly. Operating Income Margin

Operating Income Margin

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= Earning Before interest and tax (EBIT)(EBT) / Total Revenue Year 2008 Year 2009 Year 2010 992,311 / 6,803,213 1,739,723 / 10,102,060 2,126,960 / 12,290,549 = 14.58%

= 17.22%

= 17.30%

Note: Islamic banking is Riba-Free so I use EBT for operating income margin Working Year 2008 EBT = Earning Before tax = 992,311 Total Revenue = 6,803,213 Year 2009 EBT = Earning before tax = 1,739,723 Total Revenue = 10,102,060 Year 2010 EBT = Earning before tax = 2,126,960 Total Revenue = 12,290,549

Interpretation: Operating income means income from operation i.e. earning before Tax (EBT). Income from operation in the year 2008 is 14.58%, in the year 2009 is 17.22% and in the year 2010 is 17.30% which is to a reasonable extent in all the three years. Return on Operating Assets

Return on Operating Assets = Earning before interest and tax (EBIT) (EBT) / Operating Assets Year 2008 Year 2009 Year 2010 992,331 / 66,625,930 1,739,723 / 92,260,805 2,126,960 / 90,493,584 =1.49%

=1.88%

=2.35%

Note: Meezan Bank is Riba Free so I use Earning before Tax Operating Assets = cash and balances with treasury banks + Balance with other banks + due from financial institutions + financing + operating fixed assets Working Year 2008 EBT = Earning before tax = 992,311 Operating Assets = 5,763,710 + 1,344,974 + 18,108,000 + 39,528,731 + 1,880,515 Operation Assets = 66,625,930 Year 2009 EBT = Earning before tax = 1,739,723

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Operating Assets = 8,387,432 + 5,260,467 + 34,486,875 + 41,709,656 + 2,416,375 Operating Assets = 92,260,805 Year 2010 EBT= Earning before tax = 2,126,960 Operating Assets = 12,780,806 + 9,939,660 + 10,511,855 + 54,195,163 + 3,066,100 Operating Assets = 90,493,584

Interpretation: Return on operating assets in the years 2008, 2009 and 2010 is 1.49%, 1.88%, and 2.35% respectively. As for as index analysis is concerned, return on operating assets has been an increasing trend from 2008 to 2010 but it is much below the standard of banking industry. Return on Total Equity

Return on total Equity = (Net Income / Total Equity )*100 Year 2008 Year 2009 Year 2010 (621,187 / 6,341,097)*100 (1,025,351 / 9,090,535)*100 (1,649,588 / 10,740,123)*100 = 9.79%

= 11.27%

= 15.35%

Total Equity = Share Capital + Reserves + un-appropriated profit Working Year 2008 Net income = Profit after Tax = 621,187 Total Equity = 4,925,961 + 845,022 + 570,144 Total Equity= 6,341,097 Year 2009 Net income = Profit after tax = 1,025,351 Total Equity = 6,650,048 +1,050,092 + 1,390,395 Total Equity = 9,090,535 Year 2010 Net income = Earning after tax = 1,649,588 Total Equity = 6,982,550 + 1,380,010 + 2,377,563 Total Equity = 10,740,123 Graphical Representation: Interpretation: Return on Owner’s Equity in the year 2008 is 9.79%, in the year 2009 is 11.27% and in the year 2010 is 15.35% which shows an increasing trend

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to a greater extent from year on year basis as well as it is also meeting the standard of banking industry.  Gross Profit Margin

Gross Profit Margin = (Gross profit / Total Revenue )*100 Year 2008 Year 2009 Year 2010 (3,714,879 / 6,803,213)*100 (5,132,144 / 10,102,060)*100 (5,684,075 / 12,290,549)* 100 = 54.60%

= 50.80%

= 46.24%

Working Year 2008 Gross profit = Net spread earned = 3,714,879 Total revenue = Return earned on financings, investments, placements = 6,803,213 Year 2009 Gross profit = Net spread earned = 5,132,144 Total Revenue = Return earned financings, investments and placements =10,102,060 Year 2010 Gross profit = Net Spread earned = 5,684,075 Total Revenue = Return on financings, investments and placements = 12,290,549

Interpretation Gross profit margin on year to year basis is 54.60%, 50.80% and 46.24% which is showing a much healthy sign because of high gross profit margin on sales. It is much above the industry yard stick. Activity Ratios Activity ratios measure a firm’s ability to convert different s within their balance sheets into cash or sales.



Total Assets Turnover



Fixed Assets Turnover

Total Assets Turnover

Total Assets Turnover = Total Revenue / Total Assets Year 2008 Year 2009 Year 2010 6,803,213 / 85,276,070 10,102,060 / 124,169,096 12,290,549 / 154,752,425 = 0.079 Times

= 0.081 Times

= 0.079 Times

Working

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Year 2008 Total Revenue = profit / return earned on financings, investments and placements = 6,803,213 Total Assets = 85,276,070 Year 2009 Total Revenue = profit/return earned on financings, investments and placements = 10,102,060 Total Assets = 124,169,096 Year 2010 Total Revenue = profit/return on financings, investments and placements = 12,290,549 Total Assets = 154,752,425

Interpretation: Turnover means how many times we make the sales during the year as compare to our total assets. It is in the year 2008 is 0.079, in 2009 is 0.081 and in 2010 is 0.079. Sale turnover is much lower keeping in view the standard of banking industry. Fixed Assets Turnover

Fixed Assets Turnover = Total Revenue / Fixed Assets Year 2008 Year 2009 Year 2010 6,803,213 / 1,880,515 10,102,060 / 2,416,375 12,290,549 / 3,066,100 = 3.61 Times

= 4.18 Times

= 4.00 Times

Working Year 2008 Total Revenue = return on financings, investments and placements = 6,803,213 Operating Fixed Assets = 1,880,515 Year 2009 Total Revenue = return on financings, investments and placements = 10,102,060 Fixed Assets = 2,416,375 Year 2010 Total Revenue = return on financings investments and placements = 12,290,549 Fixed Assets = 3,066,100 Interpretation: From year on year basis fixed assets turnover has been an increasing trend in the year 2009 but in the year 2010 it has again been decreased which has not a uniform trend. Keeping in view the standard of the

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banking industry, it is much below the standard which dose not shows a healthy sign. Market Ratios Market ratios are commonly used by the investors to access the performance of a business as an investment and also the cost of issuing stock.



Dividend per share

 

Earning per Share Price / Earning Ratio

Dividend per share

Dividend per share = Dividend paid / number of shares Year 2008 Year 2009 Year 2010 Note: Meezan bank has not paid dividend so this ratio is not calculated Earning Per Share

Earning Per Share = Net income after tax / No. of Shares Outstanding Year 2008 Rs.(000) Year 2009 Rs.(000) Year 2010 Rs. (000) 621,187 / 4,925,96.1 1,025,351 / 6,650,04.8 1,649,588 / 698,255 = 1.26

= 1.54

= 2.36

Working Year 2008 Net Income = profit after tax = 621,187 No. of share outstanding = Share capital / par value = 4,925,961 / 10 No. of share outstanding =4, 925, 96.1 Year 2009 Net Income = profit after tax = 1,025,351 No. of share outstanding = Share Capital / Par Value = 6,650,048 / 10 No. of share outstanding = 6, 650, 04.8 Year 2010 Net income = profit after tax = 1,649,588 No. of share outstanding = Share Capital / Par Value = 6,982,550 / 10 No. of share outstanding = 698,255

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Interpretation: Earning per Share in the year 2008 is 1.26, in the year 2009 is 1.54 and in the year 2010 is 2.36. On year to year basis earning per share is increasing but it is not up to the mark as for as industry standard is

Price / Earning Ratio

Price Earning Ratio = Market price per share / Earning per share Year 2008 Year 2009 Year 2010 21.48 / 1.26 15.74 / 1.54 16.90 / 2.36 = 17.04

= 10.22

= 7.16

Note : book value per share is given in annual report 2010. Working Year 2008 Market price per share = 21.48 Earning per share = 1.26 Year 2009 Market price per share = 15.74 Earning Per share = 1.54 Year 2010 Market price per share = 16.90 Earning per share = 2.36 Interpretation: Price Earning ratios means how much the price of the share in the market as compare to earning per share. P/E ratio in the year 2008 is 17.04, in 2009 is 10.22 and in 2010 is 7.16 which is decreasing on year to year basis. Although P/E ratio is meeting the criterion of industry standard but has a decreasing trend on year to year basis.

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