Hbl Report

1. OBJECTIVE OF STUDYING THE HBL The purpose of the study is to experience real life banking practices in order to bridge the gap between the theoretical and the actual for better comprehension and knowledge of the different aspects of this vast field of profession. The main purpose of this report is to critically analyze and comprehend banking operations and suggest measures in the form of concrete and weighted recommendations. Besides, the report also aims to inculcate amongst the students the method of collecting relevant material and shaping it in the form of formal report writing.

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2. OVERVIEW OF THE HBL HBL established operations in Pakistan in 1947 and moved its head office to Karachi. HBL first international branch was established in Colombo, Sri Lanka in 1951 and Habib Bank Plaza was built in 1972 to commemorate the bank’s 25th Anniversary. With a domestic market share of over 40%, HBL was nationalized in 1974 and it continued to dominate the commercial banking sector with a major market share in inward foreign remittances (55%) and loans to small industries, traders and farmers. International operations were expanded to include the USA, Singapore, Oman, Belgium, Seychelles and Maldives and the Netherlands. On June 13, 2002 Pakistan's Privatization Commission announced that the Government of Pakistan had formally granted the Aga Khan Fund for Economic Development (AKFED) rights to 51% of the shareholding in HBL, against an investment of PKR 22.409 billion (USD 389 million). On February 26, 2004, management control was handed over to AKFED. The Board of Directors was reconstituted to have four AKFED nominees, including the Chairman and the President/CEO and three Government of Pakistan nominees. 2.1

Brief History of HBL

The decade of 40s was not very opportune for the establishment of a banking bank. History is witness to the failure of 150 banking companies established during the period and some carried the big names of Ram Krishan Dalmia and their likes. In such a period the successful establishment of a bank by Muslim sponsors was nothing less than a miracle. The inception of Habib Bank, in Bombay on August 25, 1941, heralded the dawn of a glorious era, for the Muslims of the sub-continent. The bank began with a paid-up capital of Rs.2.5 million. At the end of 1942, deposits stood at 24.0 million and doubled to Rs.57.3 million in 1945. In 1947, deposits increased to Rs.260 million. The bank’s steady growth not only signified the implicit confidence and trust placed in the integrity and dedication of the Habib family but was a victory and confirmation of their vision, foresight, acumen and expertise in the field of banking.

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The four Habib Brothers, Mr. Ahmad Habib, Dawood Habib, Mohammad Ali Habib and Ghulam Ali Habib formed Habib Bank in 1941. It was first headed by Mr. Dost Muhammad who was the first General Manager of the bank. On his untimely demise in 1948, he was succeeded by his younger brother Mr. Razzaq H. Mohammad, who remained President until the bank was nationalized in 1974 while Mr. Rashid D. Habib, son of Late Mr. Dawood Habib was its Managing Director. About sixty years back, it was indeed considered a daring venture on the part of a Muslim business family to think of setting up a bank. Muslims were then considered unsuited to the banking profession. Leaving aside the non-Muslims, even Muslims were reluctant to trust their own banks. 2.2 Tribute of Quaid-e-Azam Quaid reposed confidence in the bank by not only opening his personal account but also by entrusting the collection of relief fund for Muslims in 1947. “I have opened an account with Habib Bank Limited, Chandni Chowk in the name of Muslim League Bihar Relief Fund for the sufferers and distressed Muslims of communal riots of Bihar and Delhi. I appeal to Muslims all over the country to contribute generously and send contributions to Habib Bank”. It was with this implicit trust and support that Habib Bank achieved its privileged position of becoming the first Muslim bank of sub-continent. The consequent appointment of Mr. Muhammad Ali Habib, one of the bank’s pioneers, as his advisor on financial affairs of the new state, is also an important milestone in the history of Habib Bank. 2.3 Bank and Honesty An incident sticks out. A British bank on behalf of one of its clients once placed an order for a given quantity of gold tablets on Habib's. The order was fairly big. An official of Habib's went to deliver the goods in person. The chief cashier of the bank received and checked the quantity. Time after time, the indicated quantity (through counting the tablets which were supposed of known and standard denominations) differed with the one obtained through weighing on the scales. It was all very puzzling. The tablets bore the Habibs’ seal. They were in the right number and yet the total weight as measured by the best scales available did not agree with that declared. 3

And the discrepancy was on the unexpected side. Actual weight showed excess equal to one additional tola per thousand (tolas). The Briton, who was the General Manager of the bank, after making sure of the fact, rang up one of the Habib's and astonishingly inquired as to what were they doing. He was assured that is how they chose to do business. So many people who faced difficulties have had reason to remember the Habibs’ name with gratitude. This is the kind of success of which anyone can justly feel satisfied. That is also the kind of success, which compulsively calls for a word of praise from others. 2.4 Habib Bank and Pakistan Again, due to certain differences between the Governments of India and Pakistan, when the transfer of funds was withheld in 1948 by India, Habib Bank readily came forward and subscribed heavily to the Government of Pakistan, to tide over the crisis. In fact payment was made to the Government by the bank at a nominal rate of interest, even before the actual issue of securities. In the chaos and turmoil of partition, the Muslims of India were helped by Habib Bank to transfer their funds to Pakistan free of any charges. In this way, when other Indian Banks had adopted a non-cooperative attitude, it was Habib Bank, which was solely responsible for the transfer of hundreds of crores of rupees from India to Pakistan. 2.5 Silver Jubilee and Golden Jubilee Habib Bank celebrated its Silver Jubilee in 1966 on completion of 25 successful years of its operations. The Government of Pakistan officially acknowledged the unique role of the bank in the financial history of Pakistan. The President, the Central and Provincial Ministers, Governors of East and West Pakistan commended its services to the nation and the state. The Government of Pakistan issued Special Commemorative Postage Stamps as a tribute to the fact the Habib Bank and Pakistan’s freedom movement were born together and that one helped the other to its destiny. Newspapers and prominent Economic and Trade journals brought out comprehensive supplements on the occasion and while paying rich tributes in their editorial, stressed that no

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Muslim of the Sub-Continent could forget Habib Bank’s services to the cause of emancipation of the people. Silver Jubilee celebrations were memorable indeed. The slogan “Habib Bank key pachis saal behter khidmat ki behtreen misaal” was on everybody’s lips. In fact the impact was so great that the entire nation shared the jubilations and paid glowing tributes for the bank’s selfless service to the nation and the country. The president of Pakistan in his message termed the bank as “a shining example for all other to emulate”. Golden jubilee of ban on completion of 50 years was celebrated in 1991 with full enthusiasm and commitment to provide better service to its customers. 2.6 Contribution for Social Welfare Apart from playing a historical and pivotal role in banking, Habib Bank has reflected its interest in humanitarian goals by actively contributing to the social welfare of the people. The aims and objectives of the Trust are to eradicate illiteracy, poverty and disease. Religious and secular institutions have been established throughout the country and grants, stipends and scholarships are regularly bestowed on students with high academic merits. Another sphere of interest has been the setting up of industrial homes and vocational institutes where existing skills are promoted and channelised. Traditional arts and crafts are preserved while generating a steady means of income, thereby instilling a sense of pride and dignity of labour in the people. Special support has also been extended to health awareness programs for the illiterate, as how to safeguard health through preventive measures and control or cure common diseases. Greater emphasis is given to preventive measures; hygienic habits and child care to combat the high infant mortality rate. Dispensaries have been opened in “Kutchi Abadis”. In times of natural disasters such as floods, earthquakes and other such phenomena it is in keeping with the spirit and tradition of the banks pioneers to come to the forefront in helping to alleviate the resulting misery of the affected victims by providing money and kind.

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Commitment and dedication to a nation is at the core of its success and development. The bank takes pride in playing its role towards the betterment of society and further serving the nation. Habib Bank not only played an important role in establishing an economy in Pakistan, but has also played a major role in promoting national sports. It has thereby inspired a sporting spirit which is reflected by several of its players earning international fame in the filed of cricket and hockey. 2.7 Pioneers in Innovative Many of our schemes have gained national and international recognition as valuable contributors to field of banking. a)

Rupee Travellers Cheques

b)

Evening Banking Service

c)

School Banking

d)

Mobile Banking

e)

Computer Service

f)

Credit Card Scheme

g)

Computer Accounts

h)

Life Insurance Savings

i)

Prize Savings Account Scheme

j)

Deposit Growth Certificates

k)

Deposit Growth Insurance

l)

Scholarship Awards

m)

Autocash Teller Machines

n)

Owner-Driver-Taxi Finance

o)

Gold Card Scheme

p)

Monthly Investment Scheme

q)

Muhafiz Travellers Cheques

r)

Crore Pati Prize Saving Scheme

s)

Flexi Loan

t)

Express Inward Foreign Remittance 6

2.8

Habib Bank Was Nationalized

The nationalization of Pakistani system has crossed many milestones in terms of branch network, deposits and advances etc. No doubt, banks in a developing country have to fulfil their social obligations. Our banks have done a commendable job in this respect by offering banking facilities to the weaker sections of the society. 2.9

Human Resource Development

Human resource being the pulse of any organization is its most precious asset. And training plays a vital role in tapping and developing its potential to the utmost. With this key factor in mind Habib Bank pioneered its first training programme in 1946, in which Muslim youth were recruited after an extensive tour of leading academic institutions. The bank’s Training Division has gained renown for its excellence and efficiency and was called upon to assist in training personnel for other upcoming baking institutions. With the passage of time this assistance became a testimonial of the bank’s valuable contribution towards establishing and developing of other commercial banks within the country where several trained Habibians went to work with senior, middle and junior levels. Word of its skills spread far wide which led to many international banks sending their personnel to Habib Bank for training. Presently Habib Bank mans full-fledged teaching facilities and support staff at Karachi, Lahore and Islamabad. The training programmes are conducted with the latest aids and equipment and involve extensive training to new recruits, and existing staff with specialized courses that cater to the different cadre of personnel on topics of Management, Marketing, Selling, Accounting and Finance, Banking Law and Practice and Internal Procedure. Speakers from other prestigious institutes are also invited to deliver lectures. 2.10

Go Ahead

The journey of transformation of HBL towards a modern, service oriented and profitable financial institution is well underway. We have to face the challenges of optimising the use of technology, re-engineering and centralization of our process to achieve competitive advantage, managing large expenses base and above all enhancing the skills, moral and satisfaction level of our great resources as employees.

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3. NATURE OF HBL 3.1

Origin of Banking

Many of today’s banking services were first practiced in ancient Lydia, Phoenicia, China, and Greece, where trade and commerce flourished. The temples in Babylonia made loans from their treasuries as early as 2000 BC. The temples of ancient Greece served as safe-deposit vaults for the valuables of worshipers. The Greeks also coined money and developed a system of credit. The Roman Empire had a highly developed banking system, and its bankers accepted deposits of money, made loans, and purchased mortgages. The first bank to offer most of the basic banking functions known today was the Bank of Barcelona in Spain. Founded by merchants in 1401, this bank held deposits, exchanged currency, and carried out lending operations. It also is believed to have introduced the bank check. Three other early banks, each managed by a committee of city officials, were the Bank of Amsterdam (1609), the Bank of Venice (1587), and the Bank of Hamburg (1619). These institutions laid the foundation for modern banks of deposit and transaction. 3.2

Definition and purpose of Banks

Banking is the business of providing financial services to consumers and businesses. The basic services a bank provides are checking accounts, which can be used like money to make payments and purchase goods and services; savings accounts and time deposits that can be used to save money for future use; loans that consumers and businesses can use to purchase goods and services; and basic cash management services such as check cashing and foreign currency exchange. A broader definition of a bank is “Any financial institution that receives, collects, transfers, pays, exchanges, lends, invests, or safeguards money for its customers.” Banking services serve two primary purposes. First, by supplying customers with the basic mediums-of-exchange (cash, checking accounts, and credit cards), banks play a key role in the way goods and services are purchased. Without these familiar methods of payment, goods could only be exchanged by barter, which is extremely time-consuming and inefficient. Second, by 8

accepting money deposits from savers and then lending the money to borrowers, banks encourage the flow of money to productive use and investments. This in turn allows the economy to grow by letting people to purchase cars or houses, and businesses to expand and build the new factories that the economy needs in order to produce more goods and services. Enabling the flow of money from savers to investors is called financial intermediation and this is what banks are established for. 3.3

Business Volume in Term of Revenue, Deposit, and Advances: 3.3.1

Deposits

The total deposit of Habib Bank for the year of 2007 was Rs. 506,563,870 (in “000). 3.3.2

Advances The total advances of Habib Bank for the year of 2007 was Rs. 327,454,611 (in “000).

3.3.3

Revenue The total advances of Habib Bank for the year of 2007 was Rs. 335,772,341 (in “000).

3.4

Number of Employees by Designation

Total number of employees:

(18536)

During the year the bank offered Voluntary Staff Separation Scheme (VSSC) to some its employee. Under this scheme 2,202 employees opted for the separation. The HBL has incurred the additional cost of Rs. 1, 602 million in this respect. In addition, the consequential impact on retirement benefit scheme has been determined through actuarial valuation, the results of which are summarized in note 30 to those financial statements. Subsequent to the year end 2,343 employees in the non-clerical staff cadre have been retrenched with effect from March 10, 2007. The bank has committed to pay in addition to payments under the staff retirement funds, an amount of Rs. 1, 597 million under the retrench scheme. The impact, if any, on staff retirement benefit scheme will be finalized in due course through actuarial valuations.

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3.5

ORGANOGRAM OF HBL

Board Of Directors

President & CEO

Chief Operating Officer

Company Secretary & Chief Financial Officer

SEVPs Managers EVPs Ass.Manager SVPs OG-I/SG-I/CG-I OG-II/SGII/CG-II

VPs

OG-III/SGIII/CGIII

AVPs

BOARD OF DIRECTORS 10

SULTAN ALI ALLANA

R. ZAKIR MEHMOOD

Chairman

President & CEO

IAIN DONALD CHEYNE

SAJID ZAHID

Director

Director

M. ISMAIL QURESHI

AHMED JAVED

Director

Director

SHAUKAT HAYAT DURRANI Director

4. SERVICES

& PRODUCT LINE

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Our brand identity is the outward expression of what we stand for as an organization. This is summarized in our vision, mission and is supported by our values. Habib Bank Limited provides the following services & product line for their customers. 4.1

ACCOUNTS: i.

Term Accounts

ii.

Current Accounts

iii.

Saving Accounts

iv.

Foreign Currency Accounts

I

Term Accounts: HBL offers a wide range of accounts suited to meet individual customer needs. HBL’s Term Accounts are offered in a variety of tenure with deposits as low as Rs.10, 000. a) Special Notice Time Deposit

7 days or 30 days (and over) notice Minimum deposit of Rs. 10,000 Balance less than Rs. 1 million Balance equal to and greater than Rs. 1 million Returns range from 0.75% to 4% depending on notice period and amount b) F.I. – Term Deposit Receipts •

Three months term deposit

•

Minimum balance of Rs. 1 million

•

Return range from 0.75% to 2.25% c) Munafa Plus Deposit (Certificates)

•

Available in 3 months, 6 months, 1 year, 3 years, 5 year and 10 year terms •

Profit disbursement (except for 3 & 6 month terms) is monthly, quarterly,

bi-annually and on maturity •

Returns range from 6.15% to 14%

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d) IPDC •

Minimum investment of Rs 20 million except in the case of 1 month

where minimum investment is Rs. 100 million •

Available in 1 month, 3 month, 6 month, 12 month and 3 year terms

•

Profit paid on maturity

•

Rates on IPD are conveyed on a daily basis by the Treasury Division

e) Remittance Munafa Plus Deposit (Certificates) •

Available in 1 year, 3 years and 5 years certificates •

Profit disbursement is monthly, quarterly, bi-annually, annually and on

maturity •

Returns range from 7.8% to 11% II Current Accounts: Our Current Accounts offer features that meet your daily banking needs. There are two types of current accounts which are used by HBL. a) Current account •

No Profit Bearing

•

No Transaction Limit

•

Minimum balance of Rs. 10,000, if the average balance falls below this amount, then service charges will be deducted.

•

No restriction on anyone opening a Current Account (as long as regulatory guidelines are met).

b) Basic Banking Account

III

•

No Minimum Balance

•

No Service Charges Saving Accounts:

HBL’s Saving Accounts cater to individual saving habits.

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a) Remittance Munafa Plus Saving Account •

Profit paid bi-annually

•

Minimum average balance of Rs. 10,000

•

Less than Rs. 20,000 earns 0.10% profit

•

Greater than Rs. 20,000 earns 1% profit

b) HBL Value Account •

7% profit per annum*

•

Profit credited every 3 months

•

Deposit ranges from Rs. 10,000 to Rs. 100,000

•

Flexibility of withdrawals

c) HBL Supper Value Account •

7.25% profit per annum*

•

Profit credited every 3 months

•

Deposit ranges from Rs. 100,000 to Rs. 500,00

d) Remittance Munafa Plus Saving Account •

Remittance Based (no credit allowed except remittance)

•

Daily Basis Product

•

Tiered

•

Monthly profit

•

Minimum average balance of Rs. 10,000

•

Less than Rs. 20,000 earns 0.10% profit

•

Rs. 1 million and above earns 5% profit

e) Special Saving Deposit Scheme •

Daily Basis Product

•

Tiered

•

Monthly Profit

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•

Minimum balance of Rs. 20,000/-

•

Return up to 8% f) PLS – Daily Munafa Plus Deposit Account •

Daily Basis Product

•

Tiered

•

Monthly profit

•

Minimum balance of Rs. 50,000

•

Returns up to 8% IV

Foreign Currency Accounts: HBL offers Foreign Currency Accounts in multiple currencies as savings and term accounts a)

FC - SB •

Savings Account offered in 3 currencies, USD (US dollar), EUR (Euros) and

GBP (UK pound)Tiered •

Tiered product, with rates depending on choice of currency Minimum balance

of Rs. 50,000

b) •

•

To earn profit, minimum balance in USD, EUR and GBP is 1,000

•

Interest is payable on a quarterly basis

HYFFD (High Foreign Currency Fixed Deposit) Available in 1 month, 2 month, 3 month, 6 month and 12 Month in USD, EUR and GBP

•

Tiered product, with rates depending on choice of currency and term •

Profit paid on maturity only. No interim interest is payable.

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4.2

DEBIT CARD:

HBL Visa Debit Card allows

you to pay for your purchases directly from your bank account. You don’t have to carry cash and your monthly statement provides you with a complete record of all your transactions so you can manage your expenses with ease.

Features of Debit Card  No Interest  Ease & Security  No Liability  International Recognition& Acceptability  Spending Limits  Free Account Statement  24 hour Customer Service  Global Customer Assistance Service

No Interest HBL Visa Debit Card is the perfect way of paying for your purchases as it gives you access to the exact amount of money you need, as and when you need it. There is no interest or credit on payments because you spend from the money available in your personal HBL Account. Ease & Security HBL Visa Debit Card offers ease and convenience because you don’t have to visit an ATM to withdraw cash. Paying with the HBL Debit card is safe because it eliminates the need to carry cash. A single swipe automatically debits the exact purchase amount from your personal HBL account.

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No Liability In case of a lost or stolen card, you are protected against fraudulent transactions made on your card after you report the incident. Please report your card as lost or stolen immediately by calling our 24 hour HBL Phone Banking service at 111-111-425 within Pakistan or the Global Customer Assistance Service helpline for the relevant country if you are traveling abroad. International Recognition & Acceptability Your HBL Visa Debit Card is accepted at over 20 million Visa merchants worldwide, including over 10,000 merchants in Pakistan. As an ATM card it is accepted at more than 1,000 1-Link & M-Net ATMs in Pakistan and 864,000 Visa ATMs worldwide. No matter where you are, with the HBL Visa Debit Card, we are always with you. Spending Limits The daily spending limit at shops and outlets on your HBL Visa Debit Card is Rs. 50,000. On the HBL Visa Gold Card your daily spending limit is Rs. 100,000 with no restrictions on the number of transactions. (Please note that these figures are subject to the balance available in your account). Free Account Statement Our cardholders receive a free monthly account statement for their Debit Card and ATM transactions to help them keep track of their spending. 24 Hour Customer Service Local Contact our 24 hour HBL Phone Banking Service at 111-111-425 if you need assistance related to your HBL Visa Debit Card. International International callers can call +92-21-111-111-425 for 24 hour service.

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Global Customer Assistance Service (GCAS) When traveling overseas, HBL Visa Debit cardholders receive global assistance 24 hour a day, 7 days a week from the local Visa Global Customer Assistance Service. 4.3

CREDIT CARD:

Welcome to a world of convenience, flexibility and opportunity. The HBL Credit Card will add simplicity and excitement to your life. Accepted at over 24 million merchants worldwide, HBL Credit Card makes shopping fun and paying simple. Make the most out of your shopping experience with your very own HBL Credit Card.

GOLD CARD

GREEN CARD

Benefits of Credit Card  Convenience  Security  Affordability  Cash Advance  Balance Transfer Facility

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Convenience Instead of paying with cash, simply present your HBL Credit Card to the shopkeeper and pay for anything you want. •

Bill Payment We'll pay your bills on your behalf and charge the amount to your HBL Credit Card. You can give one-time standing instructions to pay your monthly bills. Check the amount in your monthly card statement and make the payment with your regular card payment.

•

SMS Alerts For all transactions, an SMS alert will be sent to you on your mobile phone to confirm that the transactions have been conducted by you. A nominal fee will be charged for this service.

•

E - Statements You can enroll for an e-statement with a simple call. An e-statement with details of all your transactions will be sent to your specified email address every month. You won’t have to wait for your paper statement any more or have to worry about storing it.

•

Statement by Fax HBL Credit Card also offers the facility of receiving your card statement by fax. Just give us a call and your last card statement will be faxed to you at the fax number specified by you. Security Your HBL Credit Card ensures your money stays completely secure. You cannot lose cash if you don’t carry it. In the unlikely event that your card is stolen, call us at HBL Phone Banking and your card will be blocked immediately. Affordability

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•

Buy Now, Pay Later HBL Credit Card gives you the flexibility to buy what you want, when you want and pay for it later. A credit card statement will be sent to you every month with details of all your purchases. You will have 21 credit free days to make the payment from the statement date. Please pay at least 3 days in advance if you make your payment by cheques to allow enough time for clearance. Pay As Much As You Want You have the freedom to pay the entire outstanding amount on your card statement or as little as 5% of the outstanding balance in your statement. The remaining amount will be transferred to next month’s statement. A nominal service charge will be applied to the unpaid amount each month.

•

Lower Rate Every Year Just make sure all your HBL Credit Card payments are made before the due date and you will benefit from a reduction in the rate of service charges at the end of each year. Cash Advance If you require cash urgently, you can go to any specified HBL branch and withdraw cash at the counter. You can also go to any 1 Link ATM in Pakistan and more than 780,000 ATMs and financial institutions worldwide displaying the Visa/Plus logo. You can withdraw cash up to the available cash advance limit on your HBL Credit Card. For Cash Advance, nominal service charges will be applied from the withdrawal date. Balance Transfer Facility With your HBL Credit Card Balance Transfer Facility, you have the opportunity to pay off balances you owe to other banks through your HBL Credit Card at lower service charges.

4.4

COMMERCIAL BANKING:

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HBL’s Commercial Banking Group targets medium sized companies with a turnover of at least PKR 50 million. Our business units are located in Karachi, Lahore, Faisalabad, Sialkot, Gujranwala and Peshawar. Each unit is dedicated to service business clusters located within these cities. We have the ability and the resources to meet the needs of your business with our pro-active, responsive and experienced Relationship Managers who are committed to understand your business. Services We offer financing for the following: • Working Capital

4.5

•

Procurement of Inventory

•

Receivables

•

Procurement of Machinery

•

Expansion of Production Facilities

•

Improve of Raw Material

•

Exports

•

Guarantees CORPORATE BANKING

HBL Corporate Banking Group comprises a seasoned team of Relationship Managers (RMs) to meet the demanding service standards of large corporations. A long history of financing and nurturing relationships in Pakistan has given HBL a unique insight, enabling us to provide timely and effective financial solutions for our customers to meet the growing challenges of a global economy. If you are a corporate customer, with a turnover of at least PKR 300 million, we have a range of solutions designed to help you with your banking needs. Our RMs has the expertise you need to create tailored financial solutions catering to the specific requirements of your business. Whether establishing a new venture or expanding an existing business, our team understands your banking needs and works closely with you to realize your goals.

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Services We provide the following services to meet your funding requirements: •

Working Capital Finance, including Overdraft, FE Loans, etc.

•

Pre and Post Shipment Export Financing (PKR and USD based)

•

Import Financing (PKR and USD based)

•

LMM Funding

•

Receivable Discounting

•

Islamic Banking facilities

•

Cash Management Services

•

Trade Services including Letter of Credit, Letter of Guarantee and Standby Letter of Credit, etc.

4.6

RURAL FINANCING

HBL‘s Agriculture loan are spread across the country and provide financing through over 800 branches. We have the largest private bank portfolio in the country with over PKR 18 billion in various agriculture sectors. HBL’s presence in all agriculture belts of the country ensures easy access to farmers in rural areas. We provide loans to small-scale land owning farmers as well as large institutionalized and alliance based financing to boost the country’s economy and yield better harvests. HBL enables farmers to buy good quality seeds, fertilizers, pesticides, agricultural implements and non-farm setups through its various products programs. The following products ensure that customer needs are fully met with respect to their farming requirements. •

Revolving Agri Scheme

•

Haryali Farm Transport Scheme

•

Agri Development Loan

•

Agri Development Loan (Fish Farming) 22

•

Agri Development Loan (Drip Irrigation)

•

Agri Production Loan

•

Haryali Livestock Loans

4.7

ISLAMIC BANKING

Islamic Banking is a growing market segment that offers attractive opportunities to potential and existing customers. At HBL, Islamic Banking offers Shariah compliant products and services to meet the short and long term requirements of business and trade.

Ijarah: Vehicles, plants and machinery leasing Murabaha: Local & import facilities Islamic Banking provides Ijarah (leasing) for vehicles, plants and machinery to meet long-term customer resource requirements. Murabaha (local & import) facilities are provided to meet the short-term financial needs of mid-market and corporate customers. HBL’s Islamic Banking products are fully Shariah compliant and duly certified by independent Shariah Advisors. Services Visit our Islamic Banking branch for the following services: •

Opening of Current Account and Basic Banking Account (BBA)

•

Collection of Foreign/Inland Bills

•

Acquisition of Assets on Ijarah

•

Purchase of Raw Materials, Semi-Finished/Finished goods or Store or Spares through Murabaha

•

Foreign/Inland Remittances

•

Utility Bills Collection

•

E-banking/Internet Banking services

Address

Call

Ground Floor

921-752529 & 31

Finlay House I.I Chundrigar Road

Fax

Karachi

921-7530

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4.8

TABEER – CHILD EDUCATION & MARRIAGE PLAN

Tabeer is a plan that provides parents with a means to accumulate a fund over a period of time which can then be used to pay for a child’s education or marriage. Plans are available for both under and over 45 years of age. Eligible age 18 – 60 years Minimum payment Rs. 3,000 per month Benefit on accidental In addition to other benefits, Rs. 500,000 will be paid for the death marriage of the nominated female child, given that female child is at least 18 years of age Partial withdrawals Allowed Maturity benefits Two options available: 1. Policy can be cashed in total 2. Funds are paid back as per policyholder's designated time period 4.9

AMAAN

Amaan is a pension plan that provides an opportunity for growth through investment in a balanced portfolio with post-retirement income benefits. The plan covers life insurance and gives attractive returns on investment to its customers. Eligible age 18 – 60 years Minimum payment Rs. 2,000 per month Minimum age to exercise pension option 55 years Benefit on accidental death

Rs. 800,000 will be paid along with other benefits

Benefit on death

Rs. 200,000 will be paid along with other benefits

Partial withdrawals Maturity benefits

Allowed Two options available: 1. Policy can be cashed in total 2. Pension can be recieved for life

5. ORGANIZATIONAL STRUCTURE 5.1 MAIN OFFICES OF HBL HBL has the largest domestic branch network with 1,400 branches and is present in 25 countries across five continents.

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5.2

HEAD OFFICE Habib Bank Plaza I.I.Chundrigar Road Karachi-75650, Pakistan.

REGISTERED OFFICE 4th Floor, Habib Bank Tower Jinnah Avenue Islamabad, Pakistan.

Phone: 021-2418000 (50 lines) Fax: 021-9217511

Phone: 051-2872203 & 051-2821183 Fax: 051-2872205

REVIEW OF VARIOUS DEPARTMENTS OF HBL:

Followings are the main departments of HBL: S.No. A B C D E F G

Name of the Department Recovery Operation Department Credit Department Finance Department Human Resource Department Internal Audit Administration Department Information Technology Department

5.2.1 Recovery Operations Department The main function of this department is to recover the debts of the bank. In the previous political government huge amount of loans were granted on political grounds which are mostly bad debts. This department is trying to recover those old and new debts.

5.2.2. Credit Department The Credit Department is responsible for advancing loans to the customers. The loans are mainly categorized in two types as given below: i.

Lending Products:

To advance loans to labour intensive enterprises

ii.

Banking Products: Advances to general account holders.

5.2.3. Finance Department The Finance Department is further divided into two departments: i.

Treasury:

It is Karachi based and deals in money market

ii.

Accounts:

It deals in accounting functions and preparations of different

statements.

25

5.2.4. Human Resource Department HR Department has prepared HR Manual. It contains all HR related rules and regulations like leave, pension, performance etc. Every person in the bank has given targets and evaluation is based on these targets by HR Department.

5.2.5. Internal Audit This Div. works under the Board of Directors. It has a President who is CIA qualified. Its function is to observe the internal control. The audit is conducted quarterly. The audit teams inspect every branch of the bank. Surprise visits are also conducted by the auditors.

5.2.6. Administration Department All the matters of administrative nature are being dealt in this department. This includes: transfers, posting, promotion orders, leave orders, approvals etc.

5.2.7. Information Technology Department All the information can be shared mutually by the virtue of software called MYSIS. This information system connects all branches in Pakistan with each other through intranet. The banking and treasury transactions are also made through this system and could be accessed any where in all over the Pakistan.

6. STRUCTURE AND FUNCTION OF THE ACCOUNTS / FINANCE / AUDIT DEPARTMENT: 6.1

BASIC OBJECTIVES OF FINANCIAL STATEMENTS

The objectives of financial reporting are to provide information that is:

26

1. Useful to those making investment and credit decisions who have a reasonable understanding of business and economic activities. 2. Helpful to present and potential investors, creditors and other users in assessing the amounts, timing and uncertainty of future cash flows. 3. Pertinent to economic resources, the claims to those resources and the changes in them. 6.2

ACCOUNTING CHARTS: Before the introduction of the new IT system, the manual codes were used. Now after the beginning of MYSIS software new computerized accounts were generated. The copy of this chart of accounts is given at Annexure A & B.

6.3

FINANCE & ACCOUNTING OPERATION: In SME bank, the accounts operations come under the Finance Department. Following operations are being performed by the subject department: i. Preparation of accounts ii. Daily basis statement of affairs iii. Payments and receipts statement iv. Weekly cash flow statement v. SME general vi. Accrued expenses statement vii. Weekly Profit and Loss account

6.4

THE ROLE OF FINANCE MANAGER: In SME bank the Finance Manager has to perform following two functions:

6.4.1. Accounts functions 6.4.2. Finance related issues These two issues are now discussed in detail as under:

6.4.1. Accounting roles: While performing the accounting functions the finance manager has to do the following jobs: a.

Compilation: 27

This is the duly of finance manager to ensure the compilation of accounts. All the accounts are compiled in his supervision. b.

Difference in accounts:

The finance manager makes sure that there is no difference in the accounts. It there is any difference, he reconciles the figures and is responsible to remove the same. c.

Window Dressing:

The finance manager confirms that the accounts are free of window dressing. The practice of window dressing is adopted to conceal the factual position. Thus he is responsible to show the true position of accounts. d.

Liaison with IT Department:

There is very close link between IT and Accounts departments because all the accounts are being maintained in the software maintained by the IT department. Now it is the Finance Manager’s duty to resolve the issues and the problems arise in this regard. e.

Timely preparation:

This is very important role of the FM. The delay in preparation of accounts makes the accounts useless. Because its disables the bank and other stakeholders to get the timely information. f.

BOD approval:

The accounts prepared but not approved are meaning less. The Finance Manager has to satisfy the Board of Directors that the accounts give true and fair view of the bank activities. g.

Publication:

The bank’s BOD or staff is not only concerned with the financial statements. All the stakeholders including borrowers, depositors, State Bank, government general public are also interested in the financial position of the bank. They can get this information only if the accounts are published. And this role is to be performed by the FM.

6.4.2. Financial roles: While performing the accounting functions the finance manager has to do the following jobs: 28

a.

Utilization of funds:

The finance manager confirms the true utilization of available funds. He also ensures the effective and efficient utilization of funds. b.

Advancing loans:

He has to see that to whom advance the loan. Who is the real needy person to use the loan. c.

Matching maturity responsibility:

This concept means that short term deposits should be utilized in short term loans and long term deposits in long term loans. This is very important role as a finance manager. d.

Fund Provision:

Finance manager has to manage the funds for all departments like Human Resource, Administration, Operation, etc. The funds are provided according to the budget requirements. e.

Budgeting:

Being a finance manager, he is responsible for the budgeting. This is an important role. The budgets are based on previous history keeping in view the future requirements. f.

Profitability:

For the best utilization of funds, he has to think the best use of the deposit to make them beneficial for the bank. The main source of income of the bank is the mark-up which comes from the utilization of funds. 6.5 6.5.1

USE OF ELECTRONIC DATA IN DECISION-MAKING: HBL Phone Banking:

29

Your

bank

is

just

a

phone

call

away.

You can now call HBL Phone Banking and save a trip to the branch. Your query will be resolved in a single telephone call from anywhere and at anytime.

6.5.2

Procedure, Features & Benefits of HBL Phone Banking

T – Pin Generation Your TPIN (Telephone Personal Identification Number) is generated the first time you call and you can use it as your password for verification purposes, self-service banking through IVR and additional services through our Phone Banking Officers. You can change your TPIN anytime you like. You can use the IVR system or to talk to our Phone Banking Officers to: •

Get your account balance

•

Get information about the last 5-10 transactions carried out on your account

•

Request your bank statement, either through fax or email (as supplied in your subscription form)

•

Get details of your transactions from the last 6 months on each of the accounts listed on your subscription form

•

Change and/or modify your contact details

•

Transfer funds between your own accounts (as listed in the subscription form) or from your account to a third party account (as listed in the Third Party Authorization Form)

•

Transfer funds from your own account to an account in another bank under the 1-Link network (Inter Bank Funds Transfer)

•

Generate your own choice of ATM Pin without filling a request at your branch

•

Inquire about our product offerings

•

Lodge a complaint in case of any inconvenience

•

Inquire about the daily accounts related profit rates and currency exchange rates

30

•

Request a number of physical instruments and/or branch banking related services that you might require, including:

6.6

o

Pay Order

o

Demand Draft

o

Statement

o

Balance Certificate

o

Cheque Book

SOURCES OF FUNDS: The deposits of the account holders in the bank are the major source of funds. The source of funds consists of deposits and liabilities which are detailed below:

a.

Deposits: The deposits of the Habib Bank for the years 2003, 2004, 2005, 2006 and 2007 were respectively,

Rs.16,817,472,

Rs.1,746,285,

Rs.15,400,087,

Rs.18,459,154

and

Rs.17,802,584. b.

Liabilities: The liabilities of Habib Bank for the years 2003, 2004, 2005, 2006 and 2007 were respectively, Rs.509,804,203, Rs.433,666,466, Rs.466,336,895, Rs.536,848,102 and Rs.534,771,236.

6.7

GENERATION OF FUNDS: The mark-up is the major source of generation of funds. The generation of funds consists of the income which is detailed below: Mark-up: The mark-up of the bank for the years 2003, 2004, 2005, 2006 and 2007 was respectively, Rs.4,187,426 Rs.1,814,345 Rs.4,246,767 Rs.6,226,677 and Rs.1, 768,802.

6.8

ALLOCATION OF FUNDS:

31

The Finance department analyzes the requirements of the organization and submits its proposal to the high-ups for approval and allocation of budget/ funds the purpose. The funds are usually allocated to acquire the assets and run the business. 6.8.1

Assets: The amount of assets of Habib Bank for the years, 2004, 2005, 2006 and 2007 were respectively, Rs. 560,150,004 Rs. 465,128,994 Rs. 506,067,762 Rs. 590,291,468 and Rs. 587,540,354.

6.8.2

Expenses: The amount of interest expenses of the bank for the years 2004, 2005 and 2006 are respectively,

Rs.14,412,579

Rs.13,288,058

Rs.13,686,669

Rs.14,766,222

and

Rs.3,950,578. The main source of utilization of funds is the loans which come under the head of assets.

7. RATIO ANALYSIS / CRITICAL ANALYSIS Ratio analysis is a useful tool for analyzing financial statements. Calculating ratios will aid in understanding the bank’s strategy and in understanding its strengths and weaknesses relative to other companies and over time. They can sometimes be useful in identifying earnings management and in understanding the effect of accounting choices on the firm’s reported profitability and

32

growth. Finally, the ratios help in obtaining a better understanding of a firm’s current profitability, growth, and risk which can improve forecasts of future profitability and growth and estimates of the cost of capital. A review of the ratios follows. 7.1

Debt/Asset Ratio is total liabilities divided by total assets. The debt/asset ratio shows the

proportion of a bank's assets which are financed through debt. If the ratio is less than one, most of the bank's assets are financed through equity. If the ratio is greater than one, most of the bank's assets are financed through debt. Companies with high debt/asset ratios are said to be "highly leveraged," and could be in danger if creditors start to demand repayment of debt. Debt/Asset Ratio

=

Total Liabilities Total Assets

For the year ended 2003

509,804,203

÷

560,150,004

=

0.91 or 91%

For the year ended 2004

433,666,466

÷

465,128,994

=

0.93 or 93%

For the year ended 2005

466,336,895

÷

506,067,762

=

0.92 or 92%

For the year ended 2006

536,848,102

÷

590,291,468

=

0.90 or 90%

For the year ended 2007

534,771,236

÷

587,540,354

=

0.91 or 91%

33

Debt / Asset Ratio

100.0

% 90.0 80.0 70.0 60.0 50.0

Ratio

40.0 30.0 20.0 10.0

P E R C E N T A G E

0.0

2003

2004

2005

2006

2007

Years

2003 2004 2005 2006 2007 Ratio 91 93 92 90 91

Analysis:

The debt/asset ratios show that the Habib Bank’s Assets are financed through

Equity. This also shows the strong position of the Habib Bank. On the other hand if assets are financed through debt. There is always danger of creditor’s repayment demand of debt. 7.2

Return on Assets (ROA) is a measure of a bank's profitability, equal to a fiscal year's

earnings divided by its total assets, expressed as a percentage. Its percentage shows how profitable a company's assets are in generating revenue. This number tells "what the company can do with what it's got", i.e. how many rupees of earnings they derive from each rupee of assets they control. It's a useful number for comparing competing companies in the same industry. Return on assets gives an indication of the capital intensity of the company, which will depend on the industry; companies that require large initial investments will generally have lower return on assets. Return on assets is an indicator of how profitable a company is before leverage, and is compared with companies in the same industry. Since the figure for total assets of the company depends on the carrying value of the assets, some caution is required for companies whose carrying value may not correspond to the actual market value. Return on assets is a common figure used for comparing performance of financial institutions (such as banks), because the majority of their assets will have a carrying value that is close to their actual market value. Return on assets is not useful for comparisons between industries because of factors of scale and peculiar capital requirements (such as reserve requirements in the insurance and banking industries). 34

Return on Assets

=

Net income after taxes Total Assets 9,646,549

÷

560,150,004

=

0.017

For the year ended 2004

5,870,176

÷

405,128,994

=

0.015

For the year ended 2005

8,916,171

÷

506,067,762

=

0.018

For the year ended 2006

14,276,125

÷

590,291,468

=

0.024

For the year ended 2007

3,293,468

÷

587,540,354

=

0.016

%

For the year ended 2003

Return on Asset (ROA)

3.0

2.0 Ratio

P E R C E N T A G E

1.0

0.0 2003

2004

2005

2006

2007

Years

2003 2004 2005 2006 2007 Ratio 1.7 1.5 1.8 2.4 1.6

Analysis:

This trend of Return of Assets is similar to Return on Equity. Its basic reason is

that the numerator i.e., net income is the same. The ROA has almost decreasing trend. In the year 2006 the ROA should increase due to decrease in denominator, contrary to this the ratio was decreased due to decrease in net income. At the end in 2007 this trend goes down due to minority interest payment. 7.3

Return on Equity (ROE) measures the rate of return on the ownership interest

(shareholders' equity) of the common stock owners. ROE is viewed as one of the most important financial ratios. It measures a firm's efficiency at generating profits from every rupee of net assets (assets minus liabilities), and shows how well an organization uses investment rupees to 35

generate earnings growth. ROE is equal to a fiscal year's net income (after preferred stock dividends but before common stock dividends) divided by total equity (excluding preferred shares), expressed as a percentage. Return on equity

=

Net income after taxes Total equity capital

For the year ended 2003

9,646,549

÷

50,345,801

=

0.192 or 19.2%

For the year ended 2004

5,870,176

÷

31,462,528

=

0.187 or 18.7%

For the year ended 2005

8,916,171

÷

39,730,867

=

0.224 or 22.4%

For the year ended 2006

14,276,125

÷

55,769,118

=

0.256 or 25.6%

For the year ended 2007

3,293,468

÷

53,443,366

=

0.162 or 16.2%

Return on Equity (ROE)

%

30.0

20.0 Ratio 10.0

P E R C E N T A G E

0.0

2003

2004

2005

2006

2007

Years

2003 2004 2005 2006 2007 Ratio 19.2 18.7 22.4 25.6 16.2

Analysis:

The ROE for the year 2003, 2004, 2005, and 2006 was 19.2, 18.7, 22.4, and 25.6

respectively. This shows the firm's efficiency at generating profits from every rupee of net assets is decreasing. In the year 2007 factor of decreasing trend is that the denominator (Equity capital) is increasing. The ratio between the increase in capital and income should be maintained which could not be done so. The liabilities of the bank are increasing faster than its assets, which is not a good symbol. 36

7.4

Net Interest Margin is a measure of the difference between interest income generated by

banks or other financial institutions by their lending and interest paid on borrowings (for example, deposits). It is considered analogous to the gross margin of non-financial companies. Net interest margin is expressed as net interest income (interest earned minus interest paid on borrowed funds) as a percentage of earning assets (any asset, such as a loan, that generates interest income). Net interest margin is similar to net interest spread; net interest spread expresses the nominal average difference between borrowing and lending rates, without compensating for the fact that the amount of earning assets and borrowed funds may be different. Net interest spread is generally higher than net interest margin, as banks may need to keep a certain amount of assets in non-interest bearing assets (such as cash balances held at branches for customers or liquid reserves as determined by banking regulators).

Net Interest Margin

=

Interest income from loans and security investments - Interest Expense on deposits and on other debt issued Total Assets

For the year ended 2003

32,343,206

÷

560,150,004

=

0.06 or 6 %

For the year ended 2004

17,292,455

÷

465,128,994

=

0.04 or 4 %

For the year ended 2005

31,041,863

÷

506,067,762

=

0.06 or 6 %

For the year ended 2006

42,152,520

÷

590,291,468

=

0.07 or 7 %

For the year ended 2007

11,903,763

÷

587,540,354

=

0.02 or 2 %

37

%

Net Interest Margin (NIM)

7.0 6.0 5.0 4.0

Ratio

3.0 2.0

P E R C E N T A G E

1.0 0.0

2003

2004

2005

2006

2007

Years Ratio

Analysis:

2003 2004 2005 2006 2007 6 4 6 7 5

Over all Habib Bank has average trend in this ratio except last year 2007. During

the year 2006 despite the decrease of assets, the interest has increased which shows the good performance for that year. But in the year 2007 there is a fall in the ratio due to increase in assets and decrease in interest which is not good for Habib Bank’s performance.

7.5

Net Non-interest Margin is measures the amount of noninterest revenues stemming

from deposit service charges and other service fees the bank has been able to collect (called fee income) relative to the amount of noninterest costs incurred (including salaries and wages, repair and maintenance costs on bank facilities, and loan loss expenses).

Net noninterest margin

For the year ended 2003

=

Non-interest Revenues – Non-interest Expenses Total Assets

7,858,300 – 14,412,479 -6554179

For the year ended 2004

÷ 560,150,004

10,149,954 – 13,288,058 -3138104

÷

÷ 490,128,994

560,150,004 =

÷

-0.001 or -0.01 %

465,128,994 =

-0.006 or -0.06 %

38

For the year ended 2005

÷ 506,067,762

7,173,942 – 13,686,669 -6512727

For the year ended 2006

÷ 506,067,762

-4619753 ÷ 501,291,468 2,161,130 – 3,950,578 -1789448

0.0

-0.001 or -0.01 %

÷ 590,291,468

10,146,469 – 14,766,222

For the year ended 2007

=

=

-0.007 or -0.07 %

÷ 587,540,354

÷ 587,540,354

=

-0.03 or -0.03 %

Net Non-interst Margin (NNM)

P E R C E N T A G E

Ratio

-1.0 2003

2004

2005

2006

2007

Years 2003 2004 2005 2006 2007 Ratio -0.1 -0.6 -0.1 -0.7 -0.3

Analysis:

Everyone knows better that “Interest Income” is the major source of Banking

Industry that’s why non-interest income is very nominal which result in negative trend. For most banks the non-interest margin is negative. Non-interest costs generally outstrip fee income, through bank fee income has been rising rapidly in recent years as a percentage of all bank revenues. 7.6

Net Bank Operating Margin is income from business after Operating Expenses have

been deducted, but before deducting income taxes and financing expenses (interest and Principal Payments). It is equal to the gap between the total operating revenues and total operating expenses, divided by the total assets.

39

Net bank operating margin

=

Total operating revenues – Total operating expenses Total Assets

For the year ended 2003

13,833,975

÷ 560,150,004

=

2%

For the year ended 2004

7,684,521

÷ 465,128,994

=

1%

For the year ended 2005

13,162,938

÷ 506,067,762

=

2%

For the year ended 2006

20,502,802

÷ 590,291,468

=

3%

For the year ended 2007

15,062,270

÷ 587,540,354

=

3%

Net Bank Operating Margin (NBOM)

3.0

2.0 Ratio

P E R C E N T A G E

1.0

0.0 2003

2004

2005

2006

2007

Years Ratio

Analysis:

2003 2004 2005 2006 2007 2 1 2 3 3

The Habib Bank’s NBOM increasing trend shows increase in profit before tax.

One of the factor of increase in profit before tax is the decrease in non-markup expenses. Increase in profit means that the bank is in a strong position and have a lot of resources for earning more through more investment by more profit. Which cause of more return and alternate the betterment of the bank in competitive market. 7.7

Earning Per Share of Stock (EPS) are the earnings returned on the initial investment

amount. The EPS formula does not include preferred dividends for categories outside of continuing operations and net income. Earnings per share for continuing operations and net income are more complicated in that any preferred dividends are removed from net income

40

before calculating EPS. Remember that preferred stock rights have precedence over common stock. If preferred dividends total Rs.100,000, then that is money not available to distribute to each share of common stock. Earning per share of stock (EPS)

=

Net income after taxes Common equity shares outstanding

For the year ended 2003

9,646,549

÷ 696,000

=

Rs. 13.86

For the year ended 2004

5,870,176

÷ 696,000

=

Rs. 8.43

For the year ended 2005

8,916,171

÷ 696,000

=

Rs. 12.81

For the year ended 2006

14,276,125

÷ 696,000

=

Rs. 20.51

For the year ended 2007

3,293,468

÷ 696,000

=

Rs. 14.73

Earning Per Share (EPS)

30.0

20.0

Rupees

Ratio

10.0

0.0 2003

2004

2005

2006

2007

Years 2003 2004 2005 2006 2007 Ratio 13.86 8.43 12.81 20.51 14.73

Analysis:

The Habib Bank has faced the decline trend in stockholders earning per share

during the year 2004. But in the years 2005 and 2006 Habib Bank faced increasing trend in stockholders earning per share. At the last in 2007 again decline trend faces by Habib Bank. Management needs to begin work immediately on expanding the bank’s revenues from assets and services sold. The decrease in EPS was due to two factors i.e. 41

o Decrease in net income (nominator) and on the other hand o Increase in number of shares (denominator). 7.8

Earning Spread is a traditional measure of the earnings efficiency with which a bank is

managed is called the earning spread, or simply the spread. The spread measures the effectiveness of the bank’s intermediation functions in borrowing and lending money and also the intensity of the competition in the the bank’s market area.

Earning spread

=

For the year ended 2003

Total interest income Total earning assets 32,343,206 560,150,004 0.058

For the year ended 2004

17,292,455 465,128,994 0.037

For the year ended 2005

31,041,863 506,067,762 0.061

For the year ended 2006

42,152,520 590,291,468 0.071

For the year ended 2007

28,903,763 587,540,354 0.049

-

-

Total interest expense Total interest-bearing bank liabilities 7,327,603 509,804,203 0.014

=

4.4 %

4,152,707 433,666,466 0.010

=

2.7 %

6,740,860 466,336,895 0.014

=

4.7 %

12,504,236 536,848,102 0.023

=

4.8 %

4,177,265 534,771,236 0.008

=

4.1 %

42

Earning Spread (ES)

5.0 4.0 3.0

Ratio 2.0

P E R C E N T A G E

1.0 0.0 2003

2004

2005

2006

2007

Years 2003 2004 2005 2006 2007 Ratio 4.4

Analysis:

2.7

4.7

4.8

4.1

Till the year 2006, this ratio shows the strong position of Habib Bank against its

competitors. But in the year 2007, this trend suddenly changes from increasing to decreasing in ratio from 4.8% to 4.1% which means HBL faces huge competitors in the market. In recent years, numbers of banks, both foreign and local, have established their branches all over in Pakistan. This has increased the competition in banks and ultimately decline in spread.

7.9

Net Profit Margin (NPM) a measure of profitability. It is calculated using a formula and

written as a percentage or a number. Margin is mostly used for internal comparison. It is difficult to compare accurately the net profit ratio for different entities. Individual business' operating and financing arrangements vary so much that entities are bound to have different levels of expenditure, that comparison of one with another can have little meaning. For example, suppose a company produces a loaf of bread and sells it for 10 units of currency. It costs the company 6 units of currency to produce the bread and it also had to pay an additional 2 units of currency in tax. That makes the company's net income 2 units of currency (10 - 6, before tax, then minus 2 for tax). Since its revenue is 10 units of currency, the profit margin would be (2 / 10) or 20%. Net Profit Margin (NPM)

=

Net income after taxes Total operating revenues

43

For the year ended 2003

9,646,549

÷ 40,201,506

=

0.24 or 24%

For the year ended 2004

5,870,176

÷ 27,442,409

=

0.21 or 21%

For the year ended 2005

8,916,171

÷ 38,215,805

=

0.23 or 23%

For the year ended 2006

14,276,125

÷ 52,298,989

=

0.27 or 27%

For the year ended 2007

3,293,468

÷ 15,064,893

=

0.22 or 22%

Net Profit Margin (NPM)

30.0

20.0 Ratio

P E R C E N T A G E

10.0

0.0 2003

2004

2005

2006

2007

Years 2003 2004 2005 2006 2007 Ratio 24

Analysis:

21

23

27

22

The increasing trend other than year 2004 & 2007, shows increase in bank

revenue and decrease in expenses and vice versa. At the last decreasing trend shows that the interest policy of the bank is weak which have no ability to control the costs.

7.10

Asset Utilization (AU) measures the value of the sales that a company generates for each

rupee invested in assets. If the assets are not worked hard, if inventory sits, if new books take too long to reach market, or if accounts receivable remain unpaid, cash flow suffers as a result asset utilization reduces. It is a bank’s total operating revenues divided by its total assets as detailed below: Asset utilization (AU)

=

Total operating revenues Total assets 44

For the year ended 2003

40,201,506

÷

560,150,004

=

0.071 or 7.1 %

For the year ended 2004

27,442,409

÷ 465,128,994

=

0.059 or 5.9 %

For the year ended 2005

38,215,805

÷ 506,067,762

=

0.075 or 7.5 %

For the year ended 2006

52,298,989

÷

590,291,468

=

0.088 or 8.8 %

For the year ended 2007

15,064,893

÷

587,540,354

=

0.025 or 2.5 %

Asset Utilization (AU)

9.0 8.0 7.0 6.0 5.0

Ratio

4.0 3.0 2.0

P E R C E N T A G E

1.0 0.0

2003

2004

2005

2006

2007

Years 2003 2004 2005 2006 2007 Ratio 7.1

Analysis:

5.9

7.5

8.8

7.6

The increasing trend in Asset Utilization ratio shows the banks ability to collect

accounts receivable quickly, turn over inventory quickly and turn investments into new sales. That is why the cash flow has improved. But in the last year 2007 this trend rapidly decrease which shows the non-satisfactpory result of collection department of Habib Bank. So there is a need to improve or act upon previous strategy for collection. 7.11

quity Multiplier (EM) Total assets divided by common stockholder's equity. This is a measure of leverage. The higher the ratio is, the more the company is relying on debt to finance its asset base. Like all debt management ratios, the equity multiplier is a way of examining how a company uses debt to finance its assets. Also known as the financial leverage ratio or leverage ratio. In other words, this ratio shows a company's total assets per rupee of stockholders' equity.

45

Equity multiplier (EM)

=

Total Assets Total equity capital account

For the year ended 2003

560,150,004

÷

50,345,801

=

11.1 or 111 %

For the year ended 2004

465,128,994

÷

31,462,528

=

14.7 or 147 %

For the year ended 2005

506,067,762

÷

39,730,867

=

12.7 or 127 %

For the year ended 2006

590,291,468

÷

55,769,118

=

10.6 or 106 %

For the year ended 2007

587,540,354

÷

53,443,366

=

10.9 or 109 %

Equity Multiplier (EM)

200.0

100.0

P E R C E N T A G E

Ratio

0.0 2003

2004

2005

2006

2007

Years 2003 2004 2005 2006 2007 Ratio 111 147 127 106 109

Analysis:

In average, the assets are 3 to 4 times more than the capital till the year 2004. But

after this year till 2007, there is decreasing trend which continously decreasing. This decreasing trend shows that the dependence of bank on deposits was decreasing during the period. 13.12 Operating Efficiency Ratio used to calculate a bank's efficiency. Not all banks calculate the efficiency ratio the same way. We've seen the ratio calculated as all of the following: 1. Non-interest expense divided by total revenue less interest expense 2. Non-interest expense divided by net interest income before provision for loan losses

46

3. Non-interest expense divided into revenue 4. Operating expenses divided by fee income plus tax equivalent net interest income. Its purpose is to evaluate the overhead structure of a financial institution. Banking is no different from any mature industry - the surviving companies are those that keep costs down. The efficiency ratio gives us a measure of how effectively a bank is operating. It is also referred to as the "overhead burden" or "overhead efficiency ratio". Operating efficiency ratio

=

Non-interest expenses Net interest income

For the year ended 2003

7,858,300

For the year ended 2004

6,149,954

For the year ended 2005

7,173,942

For the year ended 2006 For the year ended 2007

50.0

÷ 25,015,603

=

0.31 or 31 %

=

0.47 or 47 %

÷ 24,301,003

=

0.30 or 30 %

10,146,469

÷ 29,648,284

=

0.34 or 34 %

2,161,130

÷ 7,726,498

=

0.28 or 28 %

÷ 13,139,748

Operating Efficiency Ratio (OER)

40.0 30.0 Ratio 20.0

P E R C E N T A G E

10.0 0.0

2003

2004

2005

2006

2007

Years 2003 2004 2005 2006 2007 Ratio 31

Analysis:

47

30

34

28

If this ratio is getting lower, it is good for the bank and its shareholders. With the

increase in expenses, income is also increasing. But the increase in income is bit slower than the expenses. There is an increasing trend in Operating Efficiency ratio. This trend is not a good symbol and shows that the bank is losing a larger percentage of its income to expenses.

47

A – Balance Sheet I

Index / Horizontal Analysis: HABIB BANK LIMITED INDEX / HORIZONTAL ANALYSIS BALANCE SHEET AS AT DECEMBER 31

2003

Common Size (%) 2004 2005 2006

2007

Cash and balances with treasury banks

100%

103%

140%

97%

98%

Balance with other banks

100%

97%

154%

88%

135%

Lending to financial institutions

100%

327%

53%

36%

36%

Investments

100%

79%

116%

109%

113%

Advances

100%

123%

114%

98%

102%

Other assets

100%

122%

125%

107%

109%

Operating fixed assets

100%

101%

108%

103%

104%

Deferred tax assets

100%

86%

173%

102%

101%

100%

109%

117%

100%

105%

Bills payables

100%

77%

101%

61%

63%

Borrowing from financial institutions

100%

113%

187%

78%

88%

Deposits and other accounts

100%

108%

110%

102%

106%

Sub-ordinated loans

-

-

-

-

-

Liabilities against assets subject to finance lease

-

-

-

-

-

100%

104%

112%

104%

111%

-

-

-

-

-

100%

108%

115%

100%

105%

100%

126%

135%

104%

111%

Share capital

100%

100%

100%

100%

100%

Reserves

100%

882%

120%

96%

106%

Unappropriated Profit Total equity attributable to the equity holders of the bank

100%

67%

224%

93%

106%

100%

137%

148%

95%

105%

3%

3%

ASSETS

LIABILITIES

Other liabilities Deferred tax liabilities NET ASSETS SHAREHOLDER’S EQUITY

Minority interest Surplus on revaluation of assets – Net of tax

100%

94%

98%

99%

100%

100%

126%

140%

96%

106%

48

Analysis: i.

There is a rapid increase in cash and balances with treasury bank. In the year 2004 it was 103% of the cash of the year 2003, and in the year 2005, it reached to 140%. But after that it was declining from 140% to 97% & 98% in the years of 2006 & 2007.

ii.

On the other hand balance with other banks weaving every year. There is no same trend among them.

iii.

Advances have also decreased as compare to the base year.

iv.

There is overall increase in assets.

v.

Though the assets have increased but the increase in liabilities is more than the increase in assets.

vi.

The main reason of increase in assets is deposits and other accounts, and increase in loan from State Bank of Pakistan.

vii.

That is why there is a prominent increase in net assets.

viii.

There is a continuous increase in investments. It has increased to 113% in the year 2007, as compared to 100% in the year 2003.

ix.

There is a not enough growth in deferred tax assets.

x.

The bank has paid all the tax liabilities. Now there is no outstanding tax of bank in the year 2006.

49

II

Common Size / Vertical Analysis: HABIB BANK LIMITED COMMON SIZE / VERTICAL ANALYSIS BALANCE SHEET AS AT DECEMBER 31

2003

Common Size (%) 2004 2005 2006

2007

ASSETS Cash and balances with treasury banks

92%

101%

83%

87%

81%

Balance with other banks

47%

76%

59%

67%

57%

Lending to financial institutions

13%

12%

31%

12%

4%

Investments

230%

414%

259%

224%

234%

Advances

667%

797%

774%

654%

616%

Other assets

90%

80%

145%

81%

93%

Operating fixed assets

27%

47%

34%

25%

27%

5%

6%

4%

5%

5%

1113%

1478%

1274%

1105%

1054%

Bills payables

11%

23%

14%

11%

6%

Borrowing from financial institutions

99%

85%

76%

106%

79%

873%

1228%

1049%

859%

840%

Sub-ordinated loans

0%

0%

0%

0%

0%

Liabilities against assets subject to finance lease

0%

0%

0%

0%

0%

29%

42%

35%

29%

29%

0%

0%

0%

0%

0%

1013%

1378%

1174%

1005%

959%

100%

100%

100%

100%

100%

94%

85%

91%

93%

94%

Reserves

229%

22%

202%

248%

242%

Unappropriated Profit

262%

182%

202%

248%

278%

Total equity attributable to the equity holders of the bank

585%

289%

422%

637%

614%

3%

3%

100%

100%

Deferred tax assets LIABILITIES

Deposits and other accounts

Other liabilities Deferred tax liabilities NET ASSETS SHAREHOLDER’S EQUITY Share capital

Minority interest Surplus on revaluation of assets – Net of tax

100%

100%

100%

50

Analysis: i.

In the year 2007, out of total assets (1054% of net assets), the liabilities and equity are 954% and 100%, respectively, as detailed below: o Assets =

Liabilities

+

Equity

o 1054% =

954%

+

100%

ii.

In assets, the Investments form the largest part i.e. 234% out of 1054% of assets.

iii.

The second largest portion is Lending to Financial Institutions.

iv.

The liabilities of bank are more than its equity.

v.

Lending to Financial Institutions is only 4% of net assets which is very meager as compare to the Investments.

vi.

The bank is not investing the money wisely. Means not going in the right direction. Instead of lending to financial institution, it is spending its money in investments. It means the bank is avoiding making efforts and finding easy ways to utilize the assets.

vii.

In the year 2003 the cash and balances with treasury banks was 92%, whereas in the year 2007, it raised to 81% of net assets.

viii.

In the year 2003, the balances with other banks was maximum i.e. 47% of net assets whereas in the year 2007, it dropped down to 57% of net assets.

ix.

The portion of operating fixed assets in net income was equal from start to end.

51

B – Profit & Loss Account I

Profit & Loss Account Common Size / Vertical Analysis: HABIB BANK LIMITED COMMON SIZE VERTICAL ANALYSIS PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31

2003

Common Size (%) 2004 2005 2006

2007

129% 129% 100% 12% 4%

132% 32% 100% 14% 30%

128% 28% 100% 12% 4%

142% 42% 100% 10% -2%

154% 54% 100% 4% 3%

-64%

-26%

-64%

30%

0%

12% 728%

18% 467%

12% 704%

9% 958%

4% 234%

12% 59% 81%

18% 211% 21%

11% 51% 95%

12% 91% 34%

9% 51% 132%

Other incomes

127%

192%

132%

198%

154%

Total non-mark-up / interest income

40% 380%

26% 207%

12% 397%

67% 365%

11% 443%

56% 2% 27% 210% 107% 10% 163%

99% 2% 3% 176% 58% 9%

55% 2% 27% 199% 108% 11% 121%

49% 1% 45% 268% 151% 8% 118%

51% 1% 14% 743% 142% 10% 105%

16% -1% -381% 279% 230%

3% 4% 924% 128% 324%

17% -1% -519% 162% 210%

24% -1% 117% 158% 229%

24%

Mark-up/ return/ interest earned Mark-up/ return/ interest expensed Net mark-up / interest income Provision against non-performing loans & advances-Net (Reversal) Provision against off-balance sheet obligations Reversal Provision against diminution in value of investments Bad debts written off directly Net mark-up / interest income after provisions Non Mark-up / Interest Income Fee, commission and brokerage income Income / gain on investments Income from dealing in foreign currencies

Non-mark-up / Interest Expenses Administrative Expenses Other provisions / write offs – Net Other charges Total non-mark-up / interest Expenses Staff retrenchment cost Profit before taxation Taxation Current Prior years Deferred Profit after tax

-

-1% 167% 186%

52

Analysis: i.

In the year 2007, Markup earned is 154% more than net Markup income.

ii.

Non-markup income is very low i.e. 11% of Net markup income.

iii.

As compare to Non-markup income, Non-markup expenses are very high i.e. 743% of Net-markup income

iv.

Profit before taxation increase to 105% of Net-markup income due to low Administrative expenses.

v.

The increase in profit available for appropriations is not due to high profits; rather it is due to bringing forward the previous un-appropriated profits.

vi.

In the year 2003, the markup expense was 129% of net markup income, whereas in the year 2007 it has reduced to 54% of net markup income.

vii.

Fee, commission and brokerage income remained very nominal the throughout the period under observation i.e. 9% of net markup income.

viii.

The taxation expense has reduced from 279% of net income to 186% in the year 2003 & 2007, respectively.

53

Profit & Loss Account Index / Horizontal Analysis: HABIB BANK LIMITED INDEX / HORIZONTAL ANALYSIS PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31

2003

Common Size (%) 2004 2005 2006

2007

100% 100% 100% 100% 100%

53% 57% 53% 64% 443%

180% 162% 185% 157% 23%

136% 185% 122% 96% -35%

28% 33% 126% 97% 0%

100%

183%

55%

17%

30%

100% 100%

77% 49%

130% 197%

93% 126%

11% 128%

100% 100% 100%

79% 283% 72%

117% 28% 131%

133% 235% 83%

91% 11% 41%

Other incomes

100%

108%

90%

125%

32%

Total non-mark-up / interest income

100% 100%

129% 70%

71% 136%

141% 130%

21% 96%

100% 100% 100% 100% 100% 100% 100%

92% 98% 11% 92% 50% 56%

103% 102% 910% 103% 192% 100% 171%

109% 49% 80% 108% 151% 108% 156%

27% 30% 10% 127% 25% 32% 25%

100% 100% 100% 100% 100%

9% -39% 946% 43% 61%

1060% -329% 18% 234% 152%

174% 122% -277% 147% 160%

27%

Mark-up/ return/ interest earned Mark-up/ return/ interest expensed Net mark-up / interest income Provision against non-performing loans & advances-Net (Reversal) Provision against off-balance sheet obligations Reversal Provision against diminution in value of investments Bad debts written off directly Net mark-up / interest income after provisions Non Mark-up / Interest Income Fee, commission and brokerage income Income / gain on investments Income from dealing in foreign currencies

Non-mark-up / Interest Expenses Administrative Expenses Other provisions / write offs – Net Other charges Total non-mark-up / interest Expenses Staff retrenchment cost Profit before taxation Taxation Current Prior years Deferred Profit after tax

15% 28% 23%

Analysis: 54

i.

There is a positive increase in net markup income.

ii.

Due to high increasing trend of provisions, the net markup income after provision has lost its increasing trend to a little bit.

iii.

There is decrease in the dividend income which shows that the bank was unable to maintain its portfolio of investments effectively. Same is the case with gain on sale of government securities.

iv.

Total non-markup income has a decreasing trend whereas non-markup expense has an increasing trend.

v.

That is why, the profit before taxation could not maintain its good standard

vi.

Markup interest expenses have increased form 100% to 127% in the year 2003 to 2007.

vii.

The provision against non performing loans and advances has decreased from 100% to 97% in the year 2007.

viii.

In the fee, commission and brokerage income, there remained variation i.e. in the year 2005 & 2006 it increased, and then decreased in the next year 2007.

8.

Competitors/ Industry Analysis: 55

Industry Analysis For the year ended December 31, 2007 (Rupees in thousand) Habib Bank Limited

Muslim Commercial Bank Limited

Askari Commercial Bank Limited

Allied Bank Limited

Bank Alfalah Limited

Industry Average

% of HBL to Industry Average

50,481,02 1

31,786,595

12,596,921

21,201,422

21,191,470

21,694,102

233%

19,153,95 7

7,865,533

6,977,313

10,019,004

15,232,886

10,023,684

191%

Net mark-up interest income

31,327,06 4

23,921,062

5,619,608

11,182,418

5,958,584

11.670,418

268%

Provisions

8,099,291

3,065,051

1,128,513

2,714,842

1,699,227

8,607,633

95%

23,227,77 3

20,856,011

4,491,095

8,467,576

5,259,357

9,768,510

238%

10,023,16 4

6,011,291

2,139,254

3,920,099

3,224,639

3,823,821

262%

20,502,80 2

21,308,035

3,346,855

5,953,076

2,565,945

8,293,478

247%

14,276,12 5

15,265,562

2,249,974

4,076,158

1,762,691

5,838,596

245%

Particulars

Markup/return/interest earned Markup/return/interest expensed

Net Markup/interest income after provisions Total non markup/interest income PROFIT BEFORE TAXATION PROFIT AFTER TAXATION

Analysis: •

The markup earning of HBL bank is very high the industry average i.e., 233%.

•

Even then the net markup interest income after provision is better (238%) due to comparatively less interest expenses and provisions.

•

High non-markup income (262%) shows the high income before taxation.

•

There is a little bit difference between both profits (profit before taxation and profit after taxation) which shows the better position of Habib Bank as compare to its competitors.

8.1

FUTURE PROSPECT OF HBL

56

The future of Habib bank is very bright and prospers as shown in the statements and analysis of financial reports. During internship I found some factors which are needed more attention by the top management for the more profit of the Habib Bank. These factors are: •

Transfer of work:

Some times seniors transfer their own work to juniors. Juniors

can’t complete or not properly done this work which may base on errors and mistakes. So, there is a need to do their own work by themselves otherwise bank will face heavy loss. •

Political uncertainty:

The political uncertainty is a major cause of gaining Profit or

Loss. Profit and Loss depends upon the countries political stability or instability. When there are stable political situations then more investors invest/deposit their money in the bank for making profit and vice versa. •

New entrants:

Due to well repute HBL rapidly increased its employment level. This

shows the bank stability and future of the bank. People rely on HBL and join it with confidence.

Future Prospects: Keeping in view all the above factors, it is evident that the future of Habib Bank is very bright. Either it works individually or by emerging with other bank.

9.

SHORT FALLS / WEAKNESESS OF HBL 57

i.

To generate earning growth the bank is not utilizing investment rupees very well as its return is not accordingly.

ii.

Similar to equity, the assets are also not generating the revenue profitably.

iii.

There is a big difference between the rate of markup on deposits and advances. Though this difference increases revenue but gives bad impression on the customers.

iv.

According to the “matching Concept” of accounting the expenses should be compared with the similar nature of income to get the profit. On the basis of this concept when we compare non-interest revenues with non-interest expenses, it gives us result in negative. Means the expenses are more than revenues.

v.

The gap between total operating income and total operating expenses is decreasing year by year.

vi.

On the increase of competition and decrease in earning spread the bank, comparatively, has not found the new ways to generate income from other services.

vii.

From the equity multiplier ratio it is evident that the bank is mainly relying on the loans.

viii.

No appreciation from the seniors, which cause of low performance.

ix.

No promotion chances. Employees are still working on the same post for which they hire.

x.

Extra work burden from the seniors.

xi.

Biasness in all matters of banks. Personal liking and disliking leave the bad effects on other employees of the bank.

10

CONCLUSION

58

The operational efficiency of the bank is not stable. Some times it goes up and some times it goes down. There is fluctuation in the performance trend. But in the year 2007, profit has increasing trend. The main reason of rising trend is that Habib Bank starts various services for their customers and improving its packages and other internet related services for the convenience of its customers.

11

SPECIFIC RECOMMENDATIONS 59

i.

Bank should try increase profit after taxation to strengthen its return on equity ratio.

ii.

The management should make the innovative plans and schemes to utilize the investment wisely.

iii.

There is an increasing trend of assets, but just the increase does not benefit the bank until and unless these are utilized effectively.

iv.

The difference between markup rate of advances and deposits should be reduced to gain confidence of customers and income should be increased by increasing the number of customers, giving better facilities and offers to them.

v.

The bank management should try to, at least, equalize the non-interest revenues & expenses and reduce their gap.

vi.

In order to improve the net bank operating margin, the gap between the operating revenues and expenses should be increased.

vii.

Efforts should be made to increase the earning per share to regain the confidence of the customers.

viii.

The increased amount of equity capital should be utilized by launching the new profitable projects.

ix.

The management should try to find other ways of generating income from new services to reduce the earnings spread.

x.

There should be strick monitoring over the expenses and should be incurred according to the requirements. There should be a positive relationship between expenses and revenues

xi.

Too much dependence on the outsiders (loans/ liabilities) goes against the bank. The bank should strengthn its equity and decrease the portion of liability, and resultantly decrease the equity multiplier ratio.

xii.

The appriciation should be encouraged by management of Habib bank.

xiii.

Promotions should also made for better output.

xiv.

Work burden should be reduced because with fresh mind employees can perform their duties easily and effectively.

12

REFERENCES 60

For the completion of my internship report on Habib Bank Limited, I used the following sources: 1. Web site of HBL (www.habibbankltd.com.pk) 2. Last Five Year’s Annual Reports of HBL 3. Web sites of ABL, UBL, Alfalah Commercial Bank, MCB, and Askari Commercial Bank Limited for industry analysis. 4. Visit of Management Development Institute of HBL for data gathering. 5. Pandora Branch of HBL, where I completed my internship. 6. Observation during internship & 7. Discussion with seniors and Manager of each Branch.

13

ANNEXES

(Annexure – A)

61

13.1

Profit & Loss Account

Mark-up/ return/ interest earned

Habib Bank Limited Profit & Loss Account For the year ended December 31 2003 2004 32,343,20 17,292,45

Mark-up/ return/ interest expensed Net mark-up / interest income Provision against non-performing loans & advances-Net (Reversal) Provision against off-balance sheet obligations Reversal Provision against diminution in value of investments Bad debts written off directly

Net mark-up / interest income after provisions Non Mark-up / Interest Income Fee, commission and brokerage income Income / gain on investments Income from dealing in foreign currencies Other incomes Total non-mark-up / interest income

2005 31,041,86

(Rupees in ‘000) 2006 2007 42,152,52 11,903,763 0 12,504,23

6 7,327,60

5 4,152,70

3 6,740,86

3 25,015,60

7 13,139,74

0 24,301,00

6 29,648,28

3 2,974,665 128,851 (82,568) 3,020,94

8 1,896,989 571,352 (151,218) 2,317,12

3 2,976,654 128,851 (82,568) 3,022,93

4 2,861,093 (45,438) (13,697) 2,801,95

8 21,994,65

3 10,822,62

7 21,278,06

8 26,846,32

5

5

6

6

2,938,000 1,726,336 1,402,521 1,787,443 7,858,30

2,321,135 4,891,164 1,006,309 1,931,346 10,149,95

2,721,738 1,389,000 1,323,063 1,740,141 7,173,94

3,608,127 3,266,086 1,097,887 2,174,369 10,146,46

0 29,848,95

4 20,972,57

2 28,452,00

9 36,992,79

5

9

8

5

14,095,06

13,035,58

13,369,15

14,588,81

3 249,033 68,483 14,412,57

5 244,950 7,523 13,288,05

4 249,033 68,482 13,686,66

4 122,510 54,898 14,766,22

9 15,436,37

8

9 14,765,33

2 22,226,57

9 1,602,40

3 1,723,77

1 13,162,93

1 20,502,80

8

2

4,177,265 7,726,498 319,846 (4,166) 315,680 7,410,818 669,433 343,569 452,440 695,688 2,161,130 9,571,948

Non-mark-up / Interest Expenses Administrative Expenses Other provisions / write offs – Net Other charges Total non-mark-up / interest Expenses

Staff retrenchment cost Profit before taxation Taxation Current Prior years Deferred

Profit after tax

6 1,602,40 1 13,833,97 5

7,684,521 ____-____ 7,684,521

4,076,848 (39,397) 149,975 4,187,42

380,805 15,341 1,418,199 1,814,34

4,035,139 (50,540) 262,168 4,246,76

7,014,251 (61,738) (725,836) 6,226,67

6 9,646,54

5 5,870,17

7 8,916,17

7 14,276,12

3,908,129 37,136 5,313 3,950,578 5,621,370 559,100 5,062,270 1,874,135 (105,333) 1,768,802 3,293,468

62

9 Basic and diluted earnings per share

13.86

6 18.51

1 12.92

5 20.69

18.94

(Annexure - B) 13.2

Balance Sheet Habib Bank Limited Balance Sheet As at December 31 2003 2004

ASSETS Cash and balances with treasury banks Balance with other banks Lending to financial institutions Investments Advances Other assets Operating fixed assets Deferred tax assets

LIABILITIES Bills payables Borrowing from financial institutions Deposits and other accounts Sub-ordinated loans Liabilities against assets subject to finance lease Other liabilities Deferred tax liabilities

NET ASSETS SHAREHOLDER’S EQUITY Share capital Reserves Unappropriated Profit Total equity attributable to the equity holders of the bank Minority interest Surplus on revaluation of assets – Net of tax

(Rupees in ‘000)

2005

2006

2007 45,121,689 31,683,390 2,373,533

46,244,803 23,532,165 6,550,128 115,822,51

31,934,375 24,005,342 3,755,039 130,327,61

33,014,694 23,304,315 12,272,248 102,984,48

46,310,478 35,965,048 6,550,128 119,587,47

1 335,985,45

1 250,612,46

2 307,602,74

6 349,432,68

8 17,447,808 11,802,870 2,764,26

0 11,719,874 10,949,060 1,825,23

8 14,265,234 11,046,166 1,577,87

5 17,765,291 11,954,876 2,725,48

1 560,150,00

3 465,128,99

5 506,067,76

6 590,291,46

4

4

2

8

5,577,429 49,980,794 439,724,33

7,359,133 26,624,558 386,332,57

5,694,018 30,160,501 416,603,03

5,737,457 56,392,270 459,140,19

5

0

0

8

14,521,645 509,804,20

13,350,205 433,666,46

13,879,346 466,336,89

15,578,177 536,848,10

3 50,345,80

6 31,462,52

5 39,730,86

2 53,443,36

1

8

7

6

6,900,000 16,817,472 19,281,940

6,900,000 1,746,285 14,718,856

6,900,000 15,400,087 9,822,330

6,900,000 18,459,154 22,030,775

6,900,000 17,802,584 20,475,080

42,999,412

23,365,141

32,122,417

47,389,929

45,177,664

7,346,38

8,097,38

7,608,45

940,607 7,438,58

913,317

9 50,345,80

7 31,462,52

0 39,730,86

2 55,769,11

1

8

7

8

130,698,791 343,642,560 18,977,689 12,260,172 2,782,530 587,540,354 3,514,734 43,844,160 468,286,988 16,125,354 534,771,236 55,769,118

7,352,385 53,443,366

63