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PROJECT REPORT ON PICIC COMMERCIAL BANK BY UMAR HASSAN & HASSAAN KHAN

Department Of Business Management Faculty Of Sciences Faisalabad Institute Of Textile &Fashion Design Faisalabad

PICIC Commercial Bank Ltd.

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PICIC Commercial Bank Ltd.

DECLARATION THIS IS A PROJECT REPORT SUBMITTED TO SIR TAHIR SULEMAN IN 2ND SMT AS THE REQUIREMENT IN COMPLETION OF BBA.

DEDICATION TO MY PARENTS FOR THEIR LOVE AND SUPPORT TO DEAR SIR MR TAHIR FOR THEIR COOPERATION AND ASSISTANCE

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PICIC Commercial Bank Ltd.

TABLE OF CONTENTS

Sr #

TOPIC

PAGE

1

VISION

6

2

MISSION

3

INTRODUCTION

4

HISTORY

5

BOARD OF DIRECTORS

6

MANAGEMENT

10

7

SERVICES

14

8

DATA COLLECTION

15

9

PROGRESS OF PAST FIVE YEARS

17

10

ANALYSIS OF PAST AND CURRENT YEAR

11

PROFITIBALITY AND PERFORMANCE MEASURES INVESTMENT ANALYSIS

12

FINENCIAL ANALYSIS

7 8 9

19 20 22 23

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PICIC Commercial Bank Ltd.

Vision To be Recognized And Accepted As Pakistan's Leading Commercial Bank

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PICIC Commercial Bank Ltd.

Mission PICIC Commercial Bank’s mission is: ■ To have a diversified and satisfied customer base. ■

To serve the market through innovative banking solutions.

■

To offer high rate of return to shareholders.

■

To foster Pakistan's economic prosperity.

■

To create a good work environment for employees and foster team work and career development.

■

To operate ethically and maintain transparency in operations.

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PICIC Commercial Bank Ltd.

INTRODUCTION PICIC Commercial Bank Limited was incorporated in 1993 as Schön Bank Limited and commenced its business on 4th April 1994, with a paid-up capital of Rs. 500 Million. In 1997, Al-Ahlia Portfolio Securities Company, Sultanate of Oman acquired the major shareholding and changed Bank’s name to Gulf Commercial Bank. Thereafter, in February 2001, the Bank’s management again changed when Pakistan Industrial Credit and Investment Corporation acquired 60% controlling shares from Al-Ahlia and changed its name to PICIC Commercial Bank in May 2001. Since acquisition, the Bank performance has turned around and it's now the fastest growing private commercial bank in Pakistan. At the time of takeover by PICIC in February 2001, the Bank had only 15 branches. Now it is the 6th largest bank in Pakistan after 5 nationalized and privatized banks.

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PICIC Commercial Bank Ltd.

HISTORY PICIC Commercial Bank Limited was incorporated in 1993 as Schön Bank Limited and commenced its business on 4th April 1994, with a paid-up capital of PKR 500 Million. In 1997, Al Ahlia Portfolio Securities Company, Sultanate of Oman acquired the major shareholding and changed Bank’s name to Gulf Commercial Bank. Thereafter, in February 2001, the Bank’s management again changed when Pakistan Industrial Credit and Investment Corporation acquired 60% controlling shares from Al-Ahlia and changed its name to PICIC Commercial Bank in May 2001. Since acquisition, the Bank performance has turned around and it's now the fastest growing private commercial bank in Pakistan. At the time of takeover by PICIC in February 2001, the Bank had only 15 branches. Now it is the 6th largest bank in Pakistan.

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PICIC Commercial Bank Ltd.

Board of Directors Chairman Mr. Muhammad Ali Khoja Directors Mr. Waseem Haqqie Mr. Hasnain Nazim Mr. Manzoor Ahmed Mr. Ghulam Haider Choudhry Mr. Ahmed Salahuddin Mr. Rahat Saeed Khan President & Chief Executive Officer Mr. Zafar H. Naqvi Company Secretary Mr. Rahat Saeed Khan Chief Financial Officer Mr. Akbar A. Ladak Board Audit Committee Mr. Hasnain Nazim Chairman Mr. Muhammad Ali Khoja Member Mr. Manzoor Ahmed Member Registered Office 2nd & 3rd Floors, Spencer Building I.I. Chundrigar Road, Karachi. Tel: (021) 111-566-566 Share Registrar THK Associates (Pvt.) Limited Ground Floor, State Life Building No. 3 Dr. Ziauddin Ahmed Road, Karachi. Tel: (021) 111-000-322 Auditors M/s. KPMG Taseer Hadi & Co. Chartered Accountants Legal Advisor M/s. Mandviwalla & Zafar Advocates

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PICIC Commercial Bank Ltd.

Management Head Office Mr. Zafar H. Naqvi President & Chief Executive Officer Mr. Rahat Saeed Khan SEVP - Head of HR & Administration / Company Secretary Mr. Tauseef Ahmed SEVP - Head of Information Technology Mr. Mamoon H. Farooqi SEVP - Credit Administration & Control Mr. Akbar A. Ladak EVP - Head of Finance & Planning Mr. Hadi Ali Khan EVP - Head of Financial Institutions Mr. Tariq Ahsan EVP - Head of Treasury Mr. Manzoor Elahi EVP - Head of Compliance Mr. Aziz A. Lakhani EVP - Head of Risk Management Mr. Sadaqat Khan SVP - Head of Special Assets Management / Consumer Banking Mr. Naveed Elahi Malik SVP - Head of Audit & Inspection Mr. Ghazanfar Ali Khan SVP - Systems & Operations Mr. Ather Ali Khan SVP - Corporate Affairs / Shares Regions Mr. Akhtar Ali Khan EVP / Officiating RGM, Southern Region, Karachi. Mr. Khalid Rashid EVP / Officiating RGM, Central Region, Lahore. Mr. Rahmat Ali EVP / Zonal Head, Lahore South. Mr. Syed Imtiaz Bokhari EVP / Zonal Head, Lahore North. Mr. Zahid Hussain Qureshi EVP / Zonal Head, Gujranwala. Mr. Faqir Ejaz Asghar SEVP / RGM, Northern Region, Islamabad. Mr. Shah-e-Room Khan EVP / Zonal Head, NWFP, Peshawar. Mr. S. Tauqir Haider Rizvi EVP / Zonal Head, Rawalpindi.

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PICIC Commercial Bank Ltd.

MESSAGE FROM THE CHAIRMAN Dear Shareholders, I am extremely pleased to present the 2006 annual report of PICIC Commercial Bank Limited that continued its successful streak with more achievements. By the grace of Allah the Almighty, your Bank achieved new milestones during the year. A number of critical financial indicators depicted impressive performance. Deposits grew by more than 11% while Investments rose by 14.6% over 2005. Overall asset mix was sustained at the same level with similar level of earning assets ratio. The equity of the Bank also showed improvement despite increasing interest rate scenario that led to thinning of spread. Your Bank was successfully able to cope with the increasing interest rate scenario. The challenge was met by passing on reasonable increase to the borrowers while at the same time give adequate returns to the depositors. Although this led to a decrease in percentage Net Interest Margin (spread), still the Bank maintained its reputation as economical service provider. The other satisfying aspect of our operations was the continuous increase in total income. This showed an improvement of about 21%; up from Rs. 5,120 million to Rs. 6,176 million. This is not only reflective of the expanded branch network throughout the country but also shows our increased focus on the Bank’s core business. It is expected that added focus on core operations and the wide branch network will further boost growth in the years to come. The branch network was expanded to 136 including 7 collection booths by the end of the year and the Bank has applied to SBP for opening of 20 more branches during 2007. Of these, 60 branches have the facility of ATMs available to our customers while another 20 ATMs will be installed during 2007. On-line banking has also been introduced in almost all the branches throughout the country for the benefit of our customers. This extended reach is of great importance in view of our plans for expanding the consumer finance side of our business. The shareholders’ equity stood at over Rs. 4.5 billion at the end of 2006 as compared to Rs 4.2 billion at the end of the previous year. With the regular ploughing back of profits, your Bank is now in a better position to initiate and

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PICIC Commercial Bank Ltd.

sustain complex and large transactions. The Bank was also successful in increasing its Capital Adequacy Ratio (CAR) from 9.42% in 2005 to 9.89% in 2006 thereby improving the cushion to safeguard against various risk exposures. Your Bank has shown progress over the last few years, and has consistently been amongst good performers in its peer group. On the Human Resource side, the number of employees went up from 273 in the year 2000 to 1,270 at the end of 2006. I hope that the process of acquisition of PICIC by NIB Bank, which was initiated at the end of last year, will soon be concluded. Your Board is convinced of the synergies this will bring and the vibrant and powerful organization that will emerge. During the year a number of directors left the Board to be replaced by new directors. I would like to thank the outgoing directors for their valuable contributions to the working of the Bank during their tenure and wish them success in their future endeavors. I also welcome aboard new directors and expect that their presence will further strengthen the Board. All the members of the Board have made excellent contributions and given generously their time throughout their tenure. I would like to thank them for their involvement. I would also like to appreciate the services rendered by our Ex President/CEO Mr. Muhammad Bilal Sheikh. The Bank reflected tremendous growth during his tenure and achieved new milestones. I, on behalf of the Board, acknowledge his excellent services that led to the current status of the Bank. My heartiest welcome to the new President/CEO, Mr. Zafar H. Naqvi who is ably performing his duties since appointment. Mr. Naqvi is a seasoned banker with decades of experience in banking. My Board joins me in wishing him all the best for his future endeavors and assure him of our continued support. I would like to express my appreciation on behalf of the Board for the hard work, dedication and team work demonstrated by all employees of the Bank and especially the Management team so ably led by Mr. Zafar H. Naqvi. I would also like to thank the regulatory authorities for providing useful guidance. I am also thankful to our valued customers for banking relationship with us. It is only because of their trust reposed in us that we continue to achieve milestones. We will try to consistently anticipate and surpass their expectations of our services and offer them need based products.

Muhammad Ali Khoja Chairman

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PICIC Commercial Bank Ltd.

SERVICES • • • • • • • • •

Commercial Financing Home Financing Car Financing Home Financing Telebanking Mobile Banking Motorcycle Financing Islamic Banking Deposit & Saving Products

INTERNET BANKING As technology advances, PICIC Commercial Bank is set to use it and make the best of it. Now introducing for its customers, Online Banking solutions. With that customers can access their accounts for deposits, withdrawals or inquiries from any branch nationwide.

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PICIC Commercial Bank Ltd.

SOURCE OF DATA COLLECTION THIS DATA IS COLLECTED FROM WWW.PICICBANK.COM.PK AND PICIC ANNUAL REPORT OF 2006

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PICIC Commercial Bank Ltd.

PROGRESS SUMMARY OF PAST FIVE YEARS PROFIT BEFORE TAXATION AMMOUNT IN THOUSANDS OF Rs

2001======= 295,837

2500 1905

2000

2002======= 509,067 2003======= 825,071

1500 825

1000 500 295

2004======= 1,126,385

1279

1126 509

0 2001

2002

2003

2004

2005

2005======= 1,905,620 2006 ======= 1,279,215

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2006

PICIC Commercial Bank Ltd.

PROFIT AFTER TAXATION

2001 ====== 111,560

1504

1600 1400 1200

2002 ====== 319,248

968

896

1000 800

621

600

2003 ====== 621,412 2004 ====== 896,322

319

400 200 111 0 2001

2002

2003

2004

2005

2005 ====== 1,504,039 2006 ====== 968,841

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2006

PICIC Commercial Bank Ltd.

ANALYSIS OF PAST AND CURRENT YEAR SALES ANALYSIS 2005 ====== 4,171,890 2006 ====== 5,795,979

7000

5797

6000 5000

4171

4000 3000 2000 1000 0 2005

2006

SALES HAS INCREASED THAN PAST YEAR. THE INTEREST EARNED HAS INCREASED THAN PAST YEAR.WHICH IS THE THE SALES OF THE BANK.

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PICIC Commercial Bank Ltd.

PROFIT ANALYSIS 2300

2005 ====== 2,110,001 2006 ====== 2,265,650

2265

2250 2200 2150

2110

2100 2050 2000 2005

2006

AS SALES HAS INCREASED SO IT IS DEFINITE THAT PROFIT HAS ALSO INCREASED .

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PICIC Commercial Bank Ltd.

PROFITIBALITY AND PERFORMANCE MEASURES

GROSS PROFIT MARGIN: GROSS PROFIT/SALES 2005 ====== 50.57% 2006 ====== 39.09%

60

50.57

50

39.09

40 30 20 10 0 2005

2006

AS THE SALES HAS INCREASED SO GP MARGIN HAS DECREASED.

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PICIC Commercial Bank Ltd.

NET PROFIT MARGIN : NET PROFIT / SALES 2005 ====== 36.05% 40

2006 ====== 16.70%

35 30 25 20 15 10 5 0 2005

2006

NET PROFIT HAS DECREASED THAN PAST YEAR SO NET PROFIT MARGIN HAS DECREASED

EARNING PER SHARE: 6

2005 ====== 5.50 2006 ====== 3.54

5 4 3 2 1 0 2005

2006

EARNING PER SHARE HAS DECREASED IN 2006 DUE TO LESS PROFIT .

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PICIC Commercial Bank Ltd.

INVESTMENT ANALYSIS RETURN ON ASSETS: OPERATING INCOME / TOTAL ASSETS 2005 ====== 1.47%

1.6

2006 ====== 1.21%

1.2

1.4 1 0.8 0.6 0.4 0.2 0 2005

2006

OPERATING INCOME HAS DECREASED IN 2006.

RETURN ON EQUITY: NET INCOME – P.D / COMMON STOCK OUTSTANDING 2005 ======14.6%

16

2006 ======11.33%

12

14 10 8 6 4 2 0 2005

2006

DUE TO THE COMMON STOCK DECREASE IN 2006 THE RETURN ON EQUITY HAS DECREASED.

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PICIC Commercial Bank Ltd.

FINENCIAL ANALYSIS CURRENT RATIO: CURRENT ASSETS / CURRENT LIABILITIES 2005 ====== 25.81

28.5 28 27.5

2006 ====== 28.05

27 26.5 26 25.5 25 24.5 2005

2006

CURRENT LIABILITIES HAS DECREASED THAN PAST YEAR

ASSET TEST RATIO: QUICK ASSETS / CURRENT LIABILITIES QUICK ASSETS=(CURRENT ASSETS - INVENTORY) 2005 ====== 0.11

0.2

2006 ====== 0.18

0.15 0.1 0.05 0 2005

2006

DUE TO DECREASE IN CURRENT LIABILITIES THAN PAST YEAR THE ASSET TEAT RATIO HAS INCREASED THAN PAST YEAR.

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PICIC Commercial Bank Ltd.

DEBT RATIO: TOTAL LIABILITIES / TOTAL ASSETS 2005 ====== 0.93 2006 ====== 0.94

0.942 0.94 0.938 0.936 0.934 0.932 0.93 0.928 0.926 0.924 2005

2006

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