Internship-report-on-habib-bank-ltd.-1471589133.doc

Chapter – 1

Introduction of Study

CHAPTER – 1

INTRODUCTION OF STUDY 1.1

BACKGROUND OF STUDY

The Students of Institute of Management studies University of Peshawar, studying Courses leading to Bachelors in Business Administration (BBA Hons), are required to undergo in Internship Program of Eight Weeks duration in any National or International Organization of repute. The Institute requires internship Report based on the theoretical and practical learning of the Student in the organization. The Internee is required to submit Research Report to the internship and Development Division (R&DD) of, IMS UOP, which is properly evaluated on the basis of his/her description and analytical capabilities by Internal and External Examiners. To fulfill this academic requirement and being a Student of BBA (Hons), I did my Internship in Habib Bank University campus branch Peshawar. The concern of this report is to study and analyze the overall view of the Bank & services offered by the bank to its customers. Habib Bank is considered to be one of the most prominent and outstanding bank as far its reputation and progress is concerned.

1.2

PURPOSE OF STUDY

The purpose of the report is to review and analyze the services offered by the bank to its valued customers, and to get training in real life situations and to see how successful organization’s management apply management skills to run their organization. In this context, its objectives are: 1. To examine and evaluate banking operations. 2. To give an insight to the readers about the Organization. 3. To suggest feasible recommendations. 4. To improve report writing skills.

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1.3

Introduction of Study

SCOPE OF WORK

The report is concerned with the performance of the HBL university campus Branch Peshawar. It explains various functions at the branch. The branch performs certain banking services for its customers such as Remittances, Deposits, Bills, and Clearing etc.

1.4

METHODOLOGY OF REPORT

Both Primary and Secondary Data were used in compilation of the report. Methodological tools used were: 1.4.1

Primary Data



Personal Observation.



Questionnaires.



Interviews with Bank Personnel.

1.4.2

Secondary Data



Brochures of the Bank.



Bank Manuals.



Annual Reports.



Internship Reports on HBL available in Institute of Management Studies and Institute of Management Sciences Libraries.



1.5

Websites.

SCHEME OF REPORT

This report is divided into following five sections, which are further divided into Seven Chapters. SECTION – I This Section has one Chapter. Chapter –1 This is an Introductory Chapter, which describes the Background, Purpose, Scope, Methodology and Scheme of the Report.

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Chapter – 1

Introduction of Study

SECTION – II This section includes the review of Habib Bank Limited. This section is comprised of four chapters. Chapter – 2 This chapter is an Introduction to HBL, which encompasses a brief history of banking and overall banking sector in Pakistan in general, and the history of HBL, and its objectives and policies in particular. Chapter – 3 This chapter is about Organizational Review of HBL, which identifies the Organizational Structure of the bank. Chapter – 4 This chapter includes Departmentation and its Human Resource Management. Chapter – 5 This chapter contains products & services offered by HBL SECTION – III This section has three chapters and it is about the Analysis of HBL. Chapter – 6 This chapter includes Critical Analysis of the HBL. Chapter – 7 This chapter includes SWOT Analysis and tows matrix. Chapter – 8 It contains a Financial Analysis. SECTION – IV This section contains the concluding chapter of the report.

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Chapter – 1

Introduction of Study

Chapter – 9

It contains findings, suggestions & conclusion. At the end conclusion, bibliography and some annexures are given.

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Chapter – 2

Introduction of HBL

CHAPTER– 2

INTRODUCTION OF HBL 2.1

EVOLUTION OF BANKING IN PAKISTAN

The pace of banking development in Pakistan has perhaps very few examples in the world. Starting virtually from scratch in 1947, the country today possesses all range of banking and financial institutions to cope with various needs of economy. The area now constituting Pakistan was, relatively speaking, fairly well provided with banking facilities in undivided India. In March 1947, there were 3496 Offices of India Scheduled Banks out of which, as many as 487 were situated in territories now constituted Pakistan. The Reserve Bank of India had decided that in the interest of smooth transition it should continue to function in newly emerging state of Pakistan up-till 30 th September 1948. The event is immediately after independence seriously strained political relations between the two states and a point was reached when it was strongly felt that without control on its currency and banking the newly established state if Pakistan remained exposed to grave dangers. Following the announcement of independence plan in June 1947, there was a rush in banks to transfer funds and accounts. This resulted in a negative effect on banking service in Pakistan. The banks, which had their Registered Offices in Pakistan, transferred them to India. In effort to bring about the collapse of the new state by pushing a deliberately policy of withdrawals, the Indian Bank’s Offices were closed quickly. The numbers of schedule banks were declined from 487 before independence to only 195 by 30th June 1948.

2.2

DEVELOPMENT OF BANKING IN PAKISTAN

At the time of partition, the Commercial Banks were only as 38, out of these, the Pakistani Banks were 2, Indian Banks were 29 and Exchange Banks were 7. The total

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Introduction of HBL

deposits of Pakistani Banks stood of Rupees 880 Millions, whereas the advances were Rupees 198 Million. In order to regulate the growth of banking on a sound footing, the following measures were taken to develop the banking system in Pakistan. 1. The State Bank of Pakistan, which is the Central Bank of the Country, was established on July 1, 1948. 2. The National Bank of Pakistan was established on November 21, 1949. This bank is to serve as an agent to SBP. 3. The Industrial Development Bank of Pakistan (IDBP) was set up on August 1,1961 with a paid up capital of Rs.50.000 Million. The Agricultural Development Bank of Pakistan (ADBP) was set up in 1961, which provides Short, Medium and Long Term Loans to the Farmers. 4. In January 1974, all the Commercial Banks were nationalized. The weaker commercial banks were merged with the stronger ones and five major banking companies were formed. MCB, ABL and UBL have again been privatized while Habib Bank was privatized on 29th December 2006. 5. The Pakistan Banking Council was set up for coordinating the activities of the Nationalized Commercial Banks. The Banking Council formulates policies and guidelines for the banks. 6. Interest has been eliminated from the banking transactions since July 1, 1985. The banks are now accepting saving deposits on profit and loss sharing basis. Modaraba and leasing companies are also operating in Pakistan. 7. The Government of Pakistan has also liberalized the exchange and payments procedure. The Pakistani Firms and Companies can now maintain foreign currency accounts in Pakistan on the same basis as non-Pakistani firms and companies can.

2.3

BRIEF HISTORY OF HBL

Habib Bank Limited (HBL), at its present position, has a long and rich history of deeds and sacrifices. All this has been possible on the account of sustained efforts. In

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1841, a family business company was established in the name of Khoja Mithabhai Nathoo in Bombay, which was dealing in steel business with in and outside the Indian Sub-continent. In 1891, a young Muslim Lad Habib Ismail got employment in this company. By the dent of his ability and sincerity to duty, radiated his career and at the age of just 18 years, he not only became shareholder of the company but also President of the steel market. His four children namely Ahmad Habib, Muhammad Ali Habib, Daud Habib, and Ghulam Ali Habib, after having educated and grown up, were inducted in the business of the company and there after the name of the company was changed as “Habib & Sons”. Habib Ismail died in 1928 at the age of 53. After the death of their father, the four sons ran the whole business. Mohammad Ali Habib was younger and rank third in the age but was the most intelligent among his brothers and a successful businessman. At that time there was no Muslim Bank in the Sub-Continent. Habib family established the first financial institution of the Muslims with the name of “Habib Bank Limited” on the 25th August 1941. The first branch of Habib Bank Limited started functioning on 30 th August 1941 at Muhammad Ali Road Bombay, where Quaid-e-Azam Muhammad Ali Jinnah first of all opened his personal account. At the time of its inception, the bank’s total paid up capital was Rs.2.5 Million. Habib family migrated to Pakistan and later on shifted the Bank’s Head Office from Bombay to Karachi on 7th August 1947 just one week prior to independence, to play its pivotal role in the development of this newly born country. The mission statement and its values of HBL are:

2.4

MISSION STATEMENT OF HBL

To be recognized as the leading financial institution of Pakistan and a dynamic international bank in the emerging markets, providing our customers with a premium set of innovative products and services, and granting superior value to our stakeholders – shareholders, customers and employees.

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2.5

Introduction of HBL

VALUE OF HBL

HBL is firmly grounded with a corporate philosophy that incorporates five solid values which each individual associated with the bank abides by. 

Humility

We encourage a culture of mutual respect and treat both our team members and customers with humility and care. 

Integrity

For us, integrity means a synergic approach towards abiding our core values. United with the force of shared values and integrity, we form a network of a well-integrated team. 

Meritocracy

At every level, from selection to advancement, we have designed a consistent system of human resource practices, based on objective criteria throughout all the layers of the organization. We are, therefore, able to achieve a specific level of performance at every layer of the organization. 

Team Work

Our team strives to become a cohesive and unified force, to offer you, the customer, a level of service beyond your expectations. This force is derived from participative and collective endeavors, a common set of goals and a spirit to share the glory and the strength to face failures together. 

Culture of Innovation

We aim to be proactively responsive to new ideas, and to respect and

reward the

agents, leaders and creators of change. HBL after partition opened its branches throughout Pakistan to provide finance and other facilities to the business community. The bank helped handsomely in the construction of WARSAK dam project, Wapda, & K.D.A. by provided finance and other facilities.

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Chapter – 2

Introduction of HBL

HBL started its journey on August 25th, 1941 and with the able guidance of its management, dedication and hard work of its entire staff, it has so far touched the high peaks of its excellence. It was HBL that introduced service products such as Credit Cards, ATMs, Travelers Cheques, etc., to the Pakistani Market. Today Habib Bank is truly the bank of the people, providing its customers convenience and satisfaction all over the world. Habib Bank Plaza, the tallest building in Pakistan, is the proud symbol of HBL’s leadership in Pakistan’s corporate arena. HBL has today 1456 branches inside the country, 65 branches outside the country and two subsidiaries. Other than this the bank has its overseas operations in 25 countries includes 65 branches, two subsidiaries, two Joint Ventures and two representative offices. HBL was privatized in an open auction on 29 th December 2006 and the management has been handed over to the winner group i.e. Agha Khan Foundation in February 2007. Still after the privatization the objectives and policies are the same and the new management has so far not introduced their line of action.

2.6

ROLE OF HBL IN BANKING SECTOR

Habib Bank was the pioneer, which opened branches all over Pakistan in order to provide finance and other facilities to the business community. HBL has introduced certain new products and services after starting its operations in Pakistan. It was first commercial bank to import the electronic machines that are in use in the leading banks of advance countries. These machines have made easier for the bank to cope with its expanding business and fast growing clientele. The HBL has introduced new facilities like Evening Banking, Gift Cheques, Rupee Traveler's Cheques, Credit Card System, Short Term and Long Term Schemes for businessmen, Crore Patti Scheme, and Monthly Income Scheme. It also issues a monthly publication with the name of Business News Service. Habib Bank is fully geared to monitor the national economy and play its due role in bringing prosperity to the country. Habib Bank is playing a vital role in the Public Sector. After partition, the first major association of HBL with the Government was the sponsoring of the Pakistan Finance

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Corporation Ltd., jointly with the Central and Provincial Government for financing of cotton. The bank always provided financial and technical support to public sector. Bank also associated itself with large-scale projects such as Warsak Dams Project, WAPDA, Pakistan Steel Mill, KDA etc. by providing finances and other facilities.

2.7

OBJECTIVES AND POLICIES OF HBL

2.7.1

Objectives of HBL

Objectives are the ends towards which organizational and individual activities are directed. The goal of every manager is to create a "Surplus", and clear and verifiable objective facilitates the measurement of the effectiveness and efficiency of managerial actions. Objectives state the end results desired, and major objectives are usually supported by sub-objectives. Thus, objectives form a hierarchy as well as a network. As a Commercial Bank, Habib Bank has the following main objective: 1. Earning profits for the bank itself and for its Share Holders. 2. To promote banking business in the country. 3. To provide employment opportunities to the people. 4. To develop Industries both on Large Scale and on Small Scale in the country. 5. To provide self-employment schemes to people. 2.7.2

Policies of HBL

Policies are identified as guide to thinking in decision-making. They assume that when decisions are made, these will fall within certain boundaries. Policies don't require action but are intended to guide Managers in their decision commitments when they do make mistakes. Policy is a limit within which a decision is to be made and assure that the decision will be consistent with and contribute to objectives. Policies tend to pre-decide issues, avoid repeated analysis, and give a unified structure to other types of plans, thus permitting managers to delegate authority while maintaining control. Policies ordinarily exist on all levels of the organization and range from department policies to minor or derivative policies applicable to the smallest section of the organization.

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Chapter – 2

1.

Introduction of HBL

Managerial Policy

Affairs of Habib Bank are controlled though President and Members Executive Committee who are normally Senior Executive Vice Presidents of the Bank based at Head Office. Each Region is headed by Regional Chief Executive and assisted by Regional General Managers. Each Regional Headquarter control branches in their area of jurisdiction. 2.

Marketing Policy

Marketing is the business function that identifies customer needs and wants determines, which target markets the organization can best serve, designs appropriate products, services and programs to serve these markets and calls upon everyone in the organization to "think and serve customers". From a social point of view, marketing links a society's material requirements and its economic patterns of response. Thus marketing is a key factor in business success. Habib Bank also adopts certain marketing techniques to enhance the image of the bank. Most of the marketing takes place through various Deposit Mobilization Schemes through advertising in Newspapers and other media and there is more emphasis on Counter Service to have more satisfied clients who can recommend to their associates and friends. 2.7.3

Operational Policy

Operational policies deal with the running or operation of the bank. It is about introducing new schemes in order to improve HBL Operations and to take measures for better services. The operations can be divided into two: 2.7.3.1 Domestic Operations The bank is quite successfully operating its domestic business. Habib Bank has the largest domestic branch network amongst Pakistani Banks, which is in consistence with the bank's policy to provide banking facilities at the doorstep across the length and breadth of the country in conformity with the government’s socio-economic objectives. The numbers of domestic branches as on 31.12.2006 were more than 1408.

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Chapter – 2

Introduction of HBL

HBL's domestic operations are carried out by Regional Headquarters comprising of branches under their jurisdiction. HBL also established Corporate Centers in various Regions to catch Industrial Clients and serve them better. The Corporate Major Centers are 12 and the Sub Centers are 64. The bank has presently one wholly owned subsidiary namely Habib Bank Financial Services Pvt. Ltd. It has shown improved operational results during the year. 2.7.3.2 International Operations The bank overseas branches are continuously rendering satisfactory services and are also contributing significantly towards channeling Home Remittances of Pakistani Expatriates. The foreign branches as on 31.12.2006 stood as 65. HBL has two wholly owned subsidiaries in Hong Kong and Australia. These subsidiaries have shown improved operational results. The bank has two joint ventures, in Nigeria and Nepal. The Habib Nigerian Bank Limited is consistently declaring good dividend since last several years. The joint venture at Nepal, Himalayan Bank Limited has shown good progress during its first year of operation.

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Chapter – 3

Organizational Review of HBL

CHAPTER – 3

ORGANIZATIONAL REVIEW OF HBL 3.1

ORGANIZATIONAL STRUCTURE

Habib bank is the oldest and largest bank of Pakistan and it operates the largest network of branches in Pakistan. Historically its organization was managed on geographical basis. But many problems raised with the passage of time and with the growth of branches network, such as, lack of coordination among branches as well as high offices, delay in communications, long times lapses in important decision – making, also problem of proper monitoring, evaluation, and compensation of the employees. The old structure was such that at the top was Head Office Karachi, after that 4 provincial Head Quarters, then Circle Office, then Zonal Offices and in the last were the Branches. However, in 1997 organizational changes were made to reposition the bank and overcome the above problems and also to give new smart and corporate shape to the activities of the bank. The organization changed the structure on functional lines. Thus various groups have been created to carry out different services and functions within the bank. Following are the various groups, whish are created: 1.

Corporate & Institutional Banking Group (CIBG)

2.

Retail Banking Group (RBG)

3.

Asset remedial Management Group (ARM)

4.

International Operations & Overseas Banking Group.

5.

Finance & Audit Group.

6.

Credit policy group.

Each group is headed by the group executive and they form policies and strategies. Each group executive is very experienced and knowledgeable person in his or her relevant areas of specialization.

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1.

Organizational Review of HBL

Corporate and Institutional Banking Group (CIBG)

In order to fetch business from corporate bodies/big customers all over the country, this group operates. The main function of this group is to provide better services to corporate clients, to keep them in their fold and to avoid plugging of their business to other banks. For this purpose, corporate centers have been established in big cities of Pakistan, to provide quick & better services to corporate clients. 2.

Retail Banking Group

It deals with the common branches of the bank spread all over the county. It fetches to bank spread all over the country. It fetches to bank greater but small deposits and this group’s function is to introduce innovative products& services for the retail banking. Some of which are Muhafiz Rupee Traveler Cheques & previous year’s Crore Pati Deposit Scheme. 3.

Asset Remedial Management Group

The primary goal of this group is the speedy recovery and resolution of the classified portfolio. The group aims at vigorous litigation, greater merges & consolidation of closed/stick units and debt equity swaps to fully address the classified portfolio. 4.

International Operations and Overseas Banking Group

The overseas operations have been consolidated under international operations group. It has chalked out country specific business revitalization strategies for important franchises. In addition, new consumer banking products are being developed at selected locations. 5.

Finance and Audit Group

It is independent of the business groups and look after the financial, regulatory and management reporting of the bank. It has also implemented new audit manual to create to increasing level and sophistication of risks involved. A new accounting and procedures manual is also nearing completion to improve the financial, regulatory and management reporting of the bank.

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Chapter – 3

6.

Organizational Review of HBL

Credit Policy (CPG)

CPG is staffed with industry specialists. They have implemented a new credit policy manual to ensure merit oriented risk management based on internationally proven and successfully banking methodology.

3.2

DIVISION OF HBL’S OFFICE

There are three types of offices in HBL. 1.

Head office.

2.

Regional Head quarters.

3.

Branch offices.

1.

Head Office

Head office of HBL is located in Karachi. It exercises overall control over the bank and other areas of administration and operations. The head office (HO) has various functions. Functions 1. It formulates policies and ensures its implementation by field offices. 2. It supervises and controls operations of RHQ. 3. It deals with foreign donors. 4. Sanctioning of loans. 5. Deals with ministry of finance. 6. Recruitment, training and management of human resources. 2.

Regional Head Quarters

The number of RHQs of HBL in the country is ten. Functions of RHQ The functions of RHQ of HBL are: 1. To implement the policies of Head office (HO). 2. To extend the credit facilities by keeping in view all the prescribed conditions. 3. To recover/collect the existing long-term financial assistance extended by the bank as per schedule. 4. To extend working capital facilities.

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Chapter – 3

3.

Organizational Review of HBL

Branch Offices

HBL has today 1456 branches inside the country, 65 branches outside the country and 17 subsidiaries. Other than this the bank has its overseas operations in 25 countries includes 65 branches, 17 subsidiaries, two Joint Ventures and two representative offices.

3.3

BOARD OF DIRECTORS

Name

Designation

Sultan Ali Allan

Chairman

R. Zakir Mahmood

President and CEO

Iain Donald Cheyne

Director

Sajid Zahid

Director

Ahmad Jawad

Director

Mushtaq Malik

Director

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Chapter – 3

3.4

Organizational Review of HBL

MANAGEMENT COMMITTEE

TABLE - A Name

Designation

Functional responsibilities

Sultan Ali Allana

Chairman

R.Zakir Mahmood

President and CEO

Sima Kamil

Group Executive

Ayaz Ahmed

Chief financial officer

Zafar Aziz Usmani

Group executive

Jamil Iqbal

Chief compliance officer

Salim Almani

Group Executive

Audit

Tulu Islam

Group Executive

IT and Systems

Kashif Shah

Group Executive

Investment Banking

Nausheen Ahmad

Comapany secretary and head of law

Sohail Malik

Group Executive

Risk Management

Nauman K.Dar

Group Executive

International Banking and CEO, Habib allied International Bank Plc., UK.

Abid Sattar

Group Executive

Retail and consumer banking

Corporatre Banking Human resource and organizational development

Muddarssir H.Khan Group Executive

Global Operation

Faizan Mitha

Group Executive

Global Treasury

Aslam Gadit

Group Executive

Asset remedial management

Mirza Saleem Baig

Group Executive

Commercial Banking

Jamil A.Khan

Group Executive

Administration and Services

Aly Mustansir

Head of Marketing and Brand Management

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Organizational Review of HBL

3.5

HBL’S ORGANIZATIONAL HIERARCHY Chairman

Board of Directors

Senior Executive Vice President

Executive Vice President

Error: Reference source not found Vice President

Assistant Vice President

Officer Group-1

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Officer Group-111

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Organizational Review of HBL

3.6 BANKING OPERATIONS OF HBL Error: Reference source not found Chairman and President

Corporate banking Group

Assets Remedial Management

Retail Banking Group

Audit and Finance

International Banking Group

3.7

Credit Policy

DOMESTIC OPERATIONS OF HBL

Error: Reference source not found RGB Group Executive

Regional Office

Zonal Offices

Branches

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Chapter – 3

3.8

Organizational Review of HBL

THE NEW SETUP

After the creation of the stated groups in HBL, now the organization hierarchy flows as following: Head office Karachi is at the apex then comes Regional offices after this Zonal office comes and under each Zonal office 40-50 Branches operates. There are total 9 Regions and total 48 Zones under these Regions. Similarly total Corporate centers are 12 and total Sub-Corporate centers are 64.Head office is run by President of the bank, in regional offices, Regional Chief Executive (RCE) sits, while Zonal Chiefs supervises zonal offices, branches are managed by Managers Sub-Manager assist them. The new organizational set up gave HBL several advantages, i.e.; now different groups concentrate on their respective functions and services, so they can work efficiently and derive better results. Similarly, there is more delegation of powers from the central office and the regional office can work more independently. As ‘time is money’, therefore because of this new system, it helped in reducing the time for important decision-making. The regional and offices can derive better strategies and achieving the targets assigned to them.

3.9

NWFP REGIONS CONSIST OF SIX ZONES

1. Peshawar Zone-having 43 branches. 2. Hazara Zone- having 39 branches 3. Malakand Zone having 52 branches 4. Mardan Zone-having 51 branches 5. Kohat Zone-having 43 branches 6. D I Khan Zone-having 24 branches Similarly there are regional offices of corporate group, Retail banking group, ARM group and Finance and Audit group.

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3.10 HBL, UNIVERSITY CAMPUS BRANCH PESHAWAR

HOK RGB

3.11 ORDER OF SENIORITY IN THE HBL Table – B: Grade Structure At Habib Bank Limited S. No.

Designation

Region

Equivalent Grade

N.W.F.P 1.

President/Chairman

Grade 22

2.

Senior Executive Vice President (SEVP) Peshawar

Grade 21

3.

Executive Vice President (EVP)

Grade 20

4.

Senior Vice President (SVP)

Grade 19

5.

Additional/Assistant Vice President (AVP)

Grade 18 – 19

6.

Officer Grade I

Grade 18

7.

Officer Grade II

8.

Officer Grade III

9.

Clerk, Cashier etc.

10.

Non Clerical Staff (Peon, Gunman etc.)

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Grade 17 Grade 16

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Chapter – 4 HBL

General Banking and Departmentation of

CHAPTER – 4

GENERAL BANKING AND DEPARTMENTATION OF HBL General banking refers to the day-to-day business of bank, under the supervision of manager of a branch. General or day-to-day banking of HBL consists of various departments, which are explained below:

4.1

DEPOSIT DEPARTMENT

Deposits are the lifeblood of banking industry. The basic function of bank is to accept the surplus of individuals, public sector, and public institutions and to honor cheque drawn upon them. 4.1.1

Account Opening Procedure

The applicant is provided an application form to open an account. The applicant in a manner prescribed and duly signed by the applicant fills this form. An existing account holder of the bank must introduce the applicant. A copy of Identity card is attached with the specimen signature card. The application is presented at the branch with the initial amount of deposit for credit of his account. The amount is centered in the passbook and is singed by the responsible officer of the bank; finally a checkbook is issued to the account holder, for withdrawal of money. Minimum Amount required for opening an account in HBL is Rs. 1000 presently. 4.1.2

Documents Required for Account Opening

Following are the various kinds of documents that are required to open account. These documents covers document requirement for individual, companies and partnership accounts. 1. Attested photocopy of N.I.C/passport of Account holder(s), Proprietors, Partners, Directors and Office Bearers as the case may be.

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2. Certified true copy of the certificate of incorporation or registration (in case of companies and registered bodies only). 3. Certified true copy of the certificate of commencement of business (in case of public limited companies only). 4. Certified true copy of the memorandum and articles of association (in case of limited companies). 5. Certified true copy of rules and regulations or By-laws (in case of association etc). 6. Certified true copy of the resolution of the board of Directors/Managing Committee/Governing Body regarding conduct of the account. 7. List containing names and signatures of the Directors/office bearers duly certified by CLA/Registration Authority. 8. Letter of partnership or certified copy of partnership deed (in case of partnership). 9. If the signatures are Shaggy (that is the person is unable to write proper and distinct signatures) three attested pictures of the individual/s opening account are taken. 10. Letter of employment in case of individual account opening who are employed somewhere. 11. Students opening accounts are need to show their student card showing that they are students of a particular institute.

4.1.3 Classification of Deposits The deposit can be classified under three main heads. 1. Current Account 2. Saving Account. 3. Term deposit. 1.

Current Account or Demand Deposit

Current accounts are usually opened by business organizations, businessmen, corporate, etc. There is no limit for the withdrawals in no. & amount. Current account

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General Banking and Departmentation of

or demand deposit can be withdrawn by Cheque or transferred to someone else by the depositor at any time without prior notice to the bank. a. Current Account is opened, on proper introduction and submission of required document along with initial deposit prescribed from time to time. Current Accounts are opened for individuals (single or joint), firms, joint stock companies, local bodies, autonomous bodies, associations, educational institutions etc. and all other cases where the accounts are to be opened under the order of a competent court of law. b. No profit is paid on the balances of current accounts. c. The bank is authorized to honor, whether the account is in credit or not cheques, bill of exchange, notes or other orders drawn, accepted, accept endorsement, act on any instructions, and accept any receipts or other documents relating to the account signed or made by authorized person(s) on behalf of the firm/company/association. 2.

PLS Saving Account

For the convenience of small savers HBL offers PL S saving account. In this account profit is paid on the average balance semiannually. These days no notice is required for withdrawals and there is restriction of the number of with drawls. The customer is bound to follow the rules and regulations of the bank. a. PLS saving accounts are opened on proper introduction and submission of required documents, along with an initial deposit prescribed from time to time for each category. b. PLS saving accounts are opened for individual (single or joint), charitable institutions, provident and other funds of benevolent nature of local bodies, autonomous corporations, companies, associations, and education. c. There is no restriction on maintaining the upper limit of deposit and withdrawal of amount and no. of cheques from PLS saving account. d. Profit is calculated on daily product basis.

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e. Payment of profit will be on monthly basis subject to adjustments on declaration of actual profit rates after six-month closings. f. Zakat wherever application shall be deducted on valuation dates from account having balance in excess of the exempted limit as declared for the particular Zakat year. 3.

Term Deposit Account

In case of term deposit account the time limit period of the account is in accordance of the different fixed deposit schemes offered by the bank and according to wishes of the customers. The customers cannot with draw money from his/her account in accordance and compliance of terms decided by the bank and the customer. HBL offers 7-30 day’s special notices time deposit so that a person can make best use of idle funds even if it is available for a week. Similarly schemes are available for five years where profit is payable at the end of fifth year or also available is a scheme in which profit is payable on monthly basis. 1.

PLS Khas Term Deposit

a. PLS Khas term deposits are accepted for a period ranging from one and half year to five years in multiple of six months. b. Profit declared from time to time is paid only once at the time of enactment/redemption of the receipt on maturity. c. Zakat shall be deducted only once on encashment before or after maturity. 2.

Special Notice Time Deposit

a. Profit/return is paid on daily product basis. b. Profit on PLS SNTD is payable at the rate declared on preceding half c. Yearly/yearly closing. d. No profit/return will be paid after expiry of notice period if the deposit is

not

withdrawn.

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e. No profit/return is paid for pre-mature encashment before seven days or thirty days notice, as the case may be, from the date of notice or date of issue.

4.1.4 BANK’S PROCEDURE AND INTERNAL WORKING AFTER OPENING AN ACCOUNT 1.

Entry in Account Opened and Closed Register

Every current & saving account is numbered in numerical serial order. The account no. allocated to the new account is written on the account opening form, specimen signature card and cheque book requisition slip. Similarly when an account is closed information is stored in the related registers. 2.

Supply of Deposit Slip and Authentication

The customer is supplied with pay in slip and requested to deposit the money with the cashier, who put his signature on counter foil of the slip, which must be countersigned by an authorized officer. This procedure also applies to all subsequent deposit/withdrawals. 3.

Issuance of Cheque Book

Cheque Book is issued only after the account opening form has been completed in all respects. The excise duty is recovered from the account to whom cheque book is issued. Cheque Book series is entered in the chequebook issuance register. 4.

Send the Documents to Officer in Charge

The account opening form, specimen signature card remain in the custody of officer in charge current/saving deposit. This officer sends “LETTER OF THANKS” to the new account holder. Specimen signature cards and other documents are kept under the joint custody of the manager and account/second officer. 5.

Maintaining Record of Accounts

After opening a current account, issuing deposit slip and chequebook the staff concerned is required to: 1.

Send letter of thanks to the introducer of new account holder.

2.

Send letter of thanks to new customer in order to verify his or her address.

3.

Recording information of customers in computer through “MISYS”.

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4.

Current account holder can get his or account statement on daily basis, weekly basis or monthly according to his or her requirement.

6.

Account Opening Forms File

This file contains all account opening form of the branch. Account opening forms of the closed accounts are also retained in the file except that the word “COSED” is written in hold letters across such forms. Memorandums & Articles of Association and any particular document is filed with its account opening form. Forms are filed according to serial number of accounts. 7.

Specimen Signatures Card File

Cards are maintained for all operational accounts according to the serial no. of the accounts. All operational cards are kept in special cabinets designed for the purpose. Specimen signature cards are scanned and the pictures are stored in computer through separate software of MISYS.

8.

Maintenance of Computerized Records

After opening a new account, all rest of the maintenance of the account’s transactions is done by the MISYS system itself. It is software that has multiple functions like opening account, debiting, crediting, LC opening, Demand depositing etc etc.

4.2

CASH DEPARTMENT

The basic function of cash department in the bank is to receive cash from clients and customers as well as to pay them through cheques. When the cash is received it is deposited with the bank. A Cheques book is issued to the customers with the help of which they are able to withdraw cash whenever they need it. Cheque is an order drawn on bank to pay specified amount of money to the person mentioned in the order/cheque. 4.2.1

Cheques are or the following three types

1.

Bearer Cheque

The bearer cheque can be cashed by holder of the instrument who presents it at the counter for payment .In such case no endorsement is required.

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2.

General Banking and Departmentation of

Order Cheque

If the word bearer is struck off from the cheque, it becomes order cheque. It is encashable on the counter, but the holder must satisfy the bank that he is the proper man, if the officer deems it necessary. 3.

Crossed Cheque

Crossed cheques are not payable in cash at the counter of the bank, but can be collected by only the banker who would credit the proceeds. When two parallel lines are struck on the cheque face and the word & co. are written in between these two lines, this makes the cheque cross. 4.2.2

Procedure and precautions for cash payment of the cheque

Person transacting amount from his account is asked to sign on the back of the cheque. The cheque particulars are entered in the system, than the officer verifies the signature of the drawer from specimen scanned in the MISYS system. Then he passes over the cheque to the cashier who calls the token no. and makes payment to the bearer of the cheque.

4.3

CD DEPARTMENT

CD Department performs very important functions in the retail banking of Habib Bank. CD Department supervises the activities of cash department and their actions at cash and receipt counters. The important function of CD department are maintaining the records of saving accounts holders, their signature instructions, their balances, from for opening of accounts, scrutiny of the computerized statements, sending of statements to the customers and issuance of other relevant letters to the customers etc.

4.4

CLEARING DEPARTMENT

Clearing department is also very important, because sometimes cheques are drawn on one bank and holder deposits the same in other bank for the collection of the amount. Then clearing department performs its functions:

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4.4.1

General Banking and Departmentation of

Clearing

Clearing means settlement of receipts and payments between bankers. It means money transaction in the form of cheques. Clearing is performed between different banks through clearing house. 4.4.2

Clearing House

A clearinghouse is an association of commercial banks set up in a given locality for the purpose of interchange and settlement of credit. In Pakistan state bank offices or NBP offices (incase, if SBP office not present) performs the functions of clearing house. In Peshawar, HBL City branch performs the representative role for clearing. All other branches of HBL send cheques for clearing to Peshawar City branch .The officials of clearing department make entry of cheques coming from each branch in a register (transfer delivery register). Then they arrange the entire cheque bank wise. The representatives of all commercial banks meet at a fixed time on all the business days of the week in the morning in SBP Peshawar, there they exchange and settle their claims. 4.4.3

Types of clearing

a. b.

Outward Clearing Inward Clearing

a.

Outward Clearing

It includes cheques lodged for payment on other banks on behalf of its own clients. Cheques are sent to clearing house through local main branch. b.

Inward Clearing

It includes the cheques drawn on the bank by other banks and the customers receive payments. 4.4.4

Procedure for Outward Clearing

1.

Account Number of Payee/Endorsee is written on backside of the Cheques.

2.

The instrument and paying –in-slips are separated.

3.

The instruments are sorted bank wise and branch wise.

4.

Schedules are prepared.

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5.

General Banking and Departmentation of

All schedule are noted in the clearing house statement Amount of Cheques is written in ‘delivered’ and ‘to pay’ columns.

6.

After balancing the outward clearing, the pay-in-slips are released to the C.D. Department.

7.

After balancing a transfer debit voucher is prepared.

8.

The instruments, schedules etc. are delivered to the messenger from the main branch.

4.4.5

Procedure of inward clearing at the drawer branch

1.

Number of instruments noted in the schedule is verified immediately on receipt.

2.

The amounts of all the instruments are noted down and totaled. It should be equal to the amount mentioned in the IBDA from the local main branch.

3.

The IDBA is responded crediting the account in the IBDA from the main local branch.

4.

The amounts are released to the concerned department.

4.5

REMITTANCE DEPARTMENT

Remittance is the transfer of funds from one bank to other and from one place to another place. HBL also provides this facility to its countrymen. It is the main responsibility of the remittances department. Transfer of funds within the country is also known as “Inland Remittances”. HBL transfers money by following a.

Telegraphic Transfer or T.T.

b.

Mail Transfer or M.T

c.

Demand Draft or D.D

d.

Pay Order

a.

Telegraphic Transfer or T.T

In T.T the order to pay is sent by Fax or Telegram. It is a faster mode of Transfer of money. A T.T is issued when the customer urgently desires the remittance. A T.T form is filled, providing details of the beneficiary and the place of payment. The bank deducts its own commission, withholding tax and cost of telegram or fax.

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b.

General Banking and Departmentation of

Mail transfer or M.T

M.T is also a mode of Transferring money.M.T advices are dispatched by mail. Customer is required to fill a M.T. Application form, and pay bank commission, cost of courier etc. along with the desired amount of money. c.

Demand draft or D.D

Money can be sent from one place to another place by means of demand draft. A demand draft is an order instrument by the issuing bank requiring the other branch of the branch of the bank to pay a specified amount of money to the person on presentation of the draft in the specified branch. A draft can be obtained by a person who wants to send money by paying the amount of the draft exercise duty, withholding tax and commission to the housing bank. d.

Pay Order

Pay order is used for the transfer of money within the limits of city or it is used for local transfer only. It is a semi-negotiable instrument, usually presented by banks.

4.6

ACCOUNTS DEPARTMENT

HBL accounts department is responsible for: 1.

Balance and Maintenance of books.

2.

Preparation of Statements.

During the course of daily business of a branch, a number of transactions take place. Accounts department maintains a record of these transactions in computers or books on a daily basis. For this purpose usually two books are maintained in this department. 1.

Cash book cum general ledger.

2.

Profit and Loss Account-Income and Expenditure ledger.

Balancing of cashbook means that all transactions have been properly recorded with their respective vouchers. Account department also prepare weekly and monthly statements to reflect the efficiency and financial position of a particular branch. 4.6.1

Weekly Statements

Following weekly statements are submitted at the Zonal Office by the branch.

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1.

General Banking and Departmentation of

Statement of Affairs

This statement includes the assets and liabilities of the branch, trends in deposits, finances, income and expenditure of the week etc. 2.

Statement of Expenditure over Budgeted Limits

The administration of bank allocates budgets for different expenditures expected to be incurred during the year. If any branch exceeds that limit, it has to justify the excess expenditure and has to send a statement disclosing the reasons, at the end of each week. 4.6.2

Monthly Statements

At the end of each month, these statements are submitted at the Zonal Office. 1.

PAK Account Reconciliation Statement

The inter branch transactions don’t involve physical transfer of funds from one branch to another. In fact all branches have their account at HBL Head office in Karachi; these accounts of branches are called PAK ACCOUNT of the branch. For this account, two bulks namely Pak Account Extract and Responding Extract are kept. Whenever a branch sends funds to another branch it is required to deliver advice to that branch, the advice is prepared in triplicate i.e. one copy is the responding branch advice cum voucher, second copy is Pak account department copy and third one is issuing branch’s copy. Daily statement of all the originating entries and responding entries is sent to PAK DEPTT; at the end of each month the PAK DEPTT. Send reconciliation statement to each branch in order to reconcile the account as normal account holder do with their banker. 2.

Statement of Fluctuation in Deposits

The branch is required to report at the end of the month that fluctuation of deposits increase and decreased along with the reason of fluctuation and the type of deposit in which fluctuation occurred. Computerized Statement of advances In this statement following facts are disclosed: a.

Number and amount of new loans sanctioned during the month.

b.

Amount of installation recovered during the period.

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c.

Any irregularity in payment of installments by any borrower.

d.

Number and amount of loans adjusted during the month

State Bank of Pakistan Returns (SBP Return) SBP return is a printed form, which must be completed and handed over by the branch at the end of the month to Zonal office, which sends to head office a compiled Performa of the zone for onward submission to State Bank of Pakistan. Following information is provided in the SBP return: 1.

Total amount of advances made by the branch at the end of the month.

2.

Progress in the specific sector financing such as agriculture.

3.

Position and amount of stuck advances in the branch.

4.

Provisioning against stuck up advances.

Statement of Term Deposits The branch is required to report the figure of term deposits issued and matured during the month for a consolidated record at the zonal and Head office level. Statement of Profit and Loss This statement shows the total income earned during the month and the source of income. In the same ways total expenditure is also reported and their nature. The statement reports not only the profit/loss of the current month but also profit/loss since beginning of the current year.

4.7

BILLS DEPARTMENT

Ordinary bills is a document giving the relevant details of similar goods sold but in banking by bill, we mean the bill of exchange and other similar instrument received for collection. The collection of cheques and bills on behalf of the customer is an important product of almost every modern bank, which can hardly be dispensed with because of the following reasons. 4.7.1

Function of Bills Department

a.

Out ward bills for collection



Bills/Cheques drawn on and sent to our branches.



Bills/Cheques drawn on the other banks collected through our branches.

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

Bills/Cheques drawn on other banked collected directly through them at present.

b.    

General Banking and Departmentation of

Inward bills for collection Bills/Cheques received from our branches located and drawn on us.. Bills/Cheques received from our branches drawn on other banks. Bills/Cheques received directly from other banks. Bills/Cheques received from parties such as post parcels.

4.8

ADVANCES DEPARTMENT

The function of this department is to finance the business and individuals. The customers can get loans in a specific manner. Credit extension is one of main activity for all financial institutions, because it is main source of earning .The difference between the rates at which the bank borrows and at which the bank lends is the source of revenue for the bank. However it is very risk, for the minimization of risk the banker usually applies the five criteria or Five C’s of credit. Which are given below: 4.8.1

Character

The reputation for honesty and integrity of the person/organization seeking credit is known as its character. It is the most important of the five. Lenders assess character by looking at a potential borrower’s history of loan repayments or if new borrower then the lender may also ask for references (firms or banks with whom the borrower has done business in the past). 4.8.2

Capacity

The measure of a borrowers ability to live up to the terms of a credit agreement and to pay off an obligation as promised is known as its capacity. Lender (banker) measures it by evaluating the statements of assets and liabilities on the credit application of the borrower. 4.8.3

Collateral

The security for the loan usually an asset with enough that it could be sold to satisfy the obligation-is called collateral. 4.8.4

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Capital means the financial resources that a borrower has available to assure the lender that the credit is secure. For this, the creditor looks at a business’s financial statements or an individual’s credit application. 4.8.5

Conditions

It refers to the current economics environment. It also affects the borrower’s ability to repay the loan.

4.9

ADVANCE OF HBL

1.

Over Draft

2.

Cash Credit

3.

Demand Loans

4.

Agriculture financing

5.

Staff Financing

1

Over draft

An overdraft is the right given by bank to its customer to draw in excess of his current account up to a fixed limit. This facility is usually given to proven loyal customers. The interest is charged only on the negative balance in the customer’s account. For this facility, bank has prescribed forms and after filling by the customer the bank scrutinizes the application and the financial statement, position credit worthiness of the client, after that, bank sanctions overdraft. Over draft is advantageous to both banker and customer such that bank earns profit or interest and the customer also gets the funds for his business development. 2.

Cash Credit

Cash Credit is advanced to commercial industrial concerns either against pledges or hypothecation of goods and products etc. The bank allows the business firm to borrow up to a certain limit either in lump sum or in installments. 3.

Demand Loans

IT is a long-term loan, usually advance made to the borrower in lump sum, for meeting the long-term capital requirements of the borrower. These are secured by pledging real estates property, plants, machinery, stocks, and bonds etc. These are mostly development loans for setting up and developing of industries etc.

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4.

General Banking and Departmentation of

Agricultural Finance

As Pakistan is an agro-based country and agriculture is the important sector of economy. HBL also makes advances to this sector of economy in two ways: Production Financing is made for the purchases of seeds, pesticides and chemicals etc. Loans are paid in lump sum, but its duration is short one. Development Financing is made for the purpose of purchasing farm machinery, and development of barren lands. This is long-term facility and is paid in installments. 5.

Staff Financing

HBL also provide financing facilities to its staff; help them to fulfill their needs. These loans are given for different purposes.

4.10 FOREIGN EXCHANGE DEPARTMENT Foreign exchange department is also very important department of a bank. In HBL foreign exchange department provides different kinds of services to its customers. It includes opening of foreign currency accounts, business of U.S Dollar bonds, remittance in foreign exchange etc, and other relevant services. 4.10.1 Foreign Currency Accounts (FCAS) Foreign currency accounts were started in 1991.The freezing of FCAs in 1998 due to sanctions on Pakistan, gave banking industry an irreparable loss. This created distrust among clients/people and their confidence evaporated on the banking industry. On July 14, 1998 Habib Bank along with other banks adopted new rules for FCA’s on the directives of SBP. Only designated branch can deal in FACs. 1.

To keep smooth operation. It is decided to accept FCAs in US dollar, Japanese yen, and pound sterling only.

2.

The deposit can be opened from, residents & non-residents including Pakistani, & foreign nationals.

3.

Foreign currency Deposit can be accepted in saving & in term i.e. 3, 6 or 12 month only.

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General Banking and Departmentation of

In FC saving account minimum limit is USD1, 000, D.M1500 and POUND Stg.500 & in term deposit the minimum limit is USD 500,DM 7500 and Pound Stg. 2500.

4.10.2 Converted Rupee Saving Deposit (CRSD) As stated earlier, that due to freezing of FCAs, the banks suffered a lot. The banks also introduced certain services or products to counter this problem. In this regard, HBL has introduced CRSD in June, 1998.The salient features of this scheme: a.

Profit calculated on daily basis.

b.

Profit is paid @ 12.5%p.a on quarterly basis.

c.

Minimum initial deposits for this scheme are Rs 50,000.

d.

There is no limit on withdrawals except that if minimum balance falls below Rs 50,000.

e.

So this scheme has provided a bit relief to the FCAs holders after that critical period.

4.10.3 Remittance in Foreign Exchange HBL also provide opportunities to its customers to transfer their funds from one country to other through forex department. HBL provides this facility through FDD, FTT, and FMT etc. Also HBL recently has adopted SWIFT system, which is the fast system for such transactions. 4.10.4 Special U.S Dollar Bonds HBL’s foreign exchange department also deals in the issuance of special U.S Dollar bond (3,5, and 7 years maturities). The salient features of these bonds are. 1.

The bonds are issued in U S Dollar in denomination of US$ 100,1000,10,000 and 100,000 for a period of 3 , 5, and seven years.

2.

The bonds may be Registered or bearer bonds.

3.

These bonds can be purchased on payment of the value in U.S Dollar or can also be issued to FCAs holders.F.C certificate of investment (COI) holders and bondholders etc.

4.

These bonds are exempted from levy of wealth tax for the period for which such bonds are hold until maturity of such bonds.

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5.

General Banking and Departmentation of

Also exempt from income tax and Zakat deductions as long as the holders hold these bonds.

6.

Profit is paid on as:

For bond of 3 years maturity: Six months LIBOR on the day proceeding the date of payment+2% For bond of 5 years maturity: LIBOR+3% For bond of 7-year maturity: LIBOR+4%

1.

The profit is paid in U.S dollar.

2.

The bonds are acceptable as collateral for raising loan in Pak. Rupees.

HBL though its foreign exchange department is providing very important services to its local customers as well as Pakistan living aboard. HBL’s services are beneficial for students, expatriates and businessmen equally and also serving the economy of the country at the same time. 4.11

MISYS AT HBL

Management Information System (MISYS) is a collection of tools that provides information to the manager to facilitate that person’s decision-making process. The basic need of MISYS is to get and utilize information for quick decision-making thus reducing time factor and competitor’s actions. In HBL all branches, which are computerized have computers with each department in charge, which are also linked with main server, where all data is stored; although, staff performs tradition file processing too. The main server is also linked with HOK can get direct information and the branch also sends them statements in CD or cartridge. MIS department prepares: a. b. c.

Report of daily basis cash on hand. Weekly statements of affairs for SBP return. Weekly Deposit/Advance/Agriculture finance report to RHQ.

d.

Consolidate position currency wise for Foreign Exchange department. Quarterly statements of size wise deposit statement.

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CHAPTER - 5

HBL PRODUCTS AND SERVICES In order to provide innovative financial products and services at competitive prices Habib Bank Ltd. offers wide range of banking services and products. These services /products include: 1.

Corporate Banking

2.

Investment Banking

3.

International Banking

4.

Commercial Banking

5.

Retail Banking.

The following are brief descriptions of various products and services offered by HBL to its customers:

5.1

CORPORATE BANKING

Corporate Banking provides financial institutions a way to deliver a complete set of online money movement services to corporations. 5.1.1

Cash Management

Cash management is the strategy by which a company administers and invests its cash or controls its cash collections. 5.1.2

Trade and other Finances

It is the strategy by which a company administers and invests its financal resources and trade.

5.2

INVESTMENT BANKING

Habib Bank Limited (HBL) has positioned itself to be a leader across all investmentbanking products from mergers and acquisitions and strategic advice to Equity Capital Markets, Debt Capital Markets, Private Placements and Leveraged Finance. HBL’s Investment Banking capabilities are designed to leverage its large capital base, product expertise and human capital to help its clients in meeting their strategic and

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operational objectives. HBL Investment Banking Division is well positioned to service even the most sophisticated Investment Banking client. HBL’s Investment Banking team is equipped to work on the following types of transactions on a domestic or cross-border basis: 1.

Mergers, Acquisitions, Divestitures, Spin-offs, Equity Carve-Outs, Leveraged Buyouts, Strategic Alliances, Joint Ventures and Privatization.

2.

Private Equity, Merchant Banking, Venture Capital and Financial Sponsors.

3.

Initial Public Offerings, Secondary Offerings and Equity Private Placements.

4.

Domestic Bonds, Euro Bonds, Loan Syndications (> one year), Medium Term Notes (TFCs), High Yield, term Loans and Debt Private Placements.

5.

Structured Products, Project Finance, Asset Backed Securities and Lease Finance.

6.

Asset Management Companies and Funds.

5.3

INTERNATIONAL BANKING

International Banking offers investment services to international clients living both in and outside of the Pakistan. 1. Trade Finance: Trade Finance involves the management of money, banking, credit, investments, and assets for international trade transactions. 2. Correspondent Banking: Correspondent banking allows foreign banks to conduct business in different countries (having affiliation with HBL) and provide services for their customers in areas where the bank does not maintain a physical presence. 3. Home Remittances: Transfer of money from abroad/worldwide to Pakistan. 4. Cash Management Services Maintenance of cash position: Analyzing daily banking activity to maximize interest earnings. Monitoring appropriated funds to insure accurate and timely posting.

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Implementation and maintenance of new legislation: Working with technical staff to comply with legislative requirements. Lending: (Loans) Disposing of money or property with the expectation that the same thing (or an equivalent) will be returned.

5.4

COMMERCIAL BANKING

The Commercial Banking at Habib Bank Limited focuses on small and medium sized businesses. This segment is the traditional stronghold of HBL with proven expertise and market knowledge. Units dedicated to service small and medium sized business are located at Karachi, Lahore, Faisalabad, Gujranwalla and Sialkot. Each unit has Relationship managers with in-depth knowledge of the market. These relationship managers assist existing and potential customers with their financial needs. 1.

Finance for Working Capital:

2.

Trade Finance Facilities:

3.

Finance for Capital Investment:

4.

General Products

5.

Other products & services

6.

Investment assistance (A.I)

5.4.1

Finance for Working Capital

i.

Running finance: for Working Capital requirements. (RF)

ii.

Cash finance: for Inventory financing. (CF)

5.4.2

Trade Finance Facilities Export finance

i.

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ii.

Finance against foreign bills: for post-shipment requirements (FAFB)

iii.

Foreign currency export finance: Dollar financing for pre & post shipment

requirements (FCEF) 4. Foreign bills purchase: for financing of export bills (FBP) Import Finance i.

Finance against trust receipt: for financing imported goods (FATR)

ii.

Finance against imported merchandise: for financing imported goods (FIM)

iii.

Foreign currency import finance: Dollar financing for import requirements (FCIF)

iv.

Letter of credit: for importing inventory & capital goods (LC)

5.4.3

Finance For Capital Investment

i.

Demand finance: medium term loans for capital expenditure (DF)

ii.

Leasing: for financing capital expenditure.

General Products 1.

Letter of Guarantee (LG)

2.

Bid & Performance Bonds

3.

Mobilization Advance Guarantees

Other Products and Services 1.

Commercial Day to Day Banking: There are a wide range of accounts and services to help you manage your money. We offer:

2.

Current Accounts: Non-interest bearing account for your daily banking needs.

3.

Cash Management Services: Giving you the convenience of cash handling.

4.

Habib Bank Easy Access: Real time “online banking” at commercial centers for customers online transfer/deposit of payments.

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5.

General Banking and Departmentation of

hblE-Banking: Habib Bank Limited has launched a product “HBL e-bank” which allows 24 hour access to accounts through internet banking, and PC banking.

6.

ATM: Now, adding more convenience, the customers can also use the ATMs of other partner banks.

Investment Assistant (IA) IA has been created specifically to assist expatriate Pakistanis who are interested in investing in Pakistan. Using Commercial Banking as a platform, we will be providing information of legislative, regulatory and financial nature to prospective investors to help them setup their businesses in Pakistan.

5.5

RETAIL BANKING

Retail banking is typical mass-market banking where individual customers use local branches of larger commercial banks. Overall services offered by HBL include: 1.

Habib Bank Auto Finance

2.

Habib Bank flexi loans

3.

hbl Phone banking.

4.

Current Account

5.

Profit & loss sharing

6.

Payment of utility Bills

7.

Value Visa Debit Card

8.

Lifestyle

9.

House Finance

10.

HBL Credit card

11.

Lockers

12.

Hajj/ Umra services.

I will discuss services offered by HBL in university campus Branch, university of Peshawar. 5.5.2

Habib Bank Flexi Loans

Habib Bank Flexi Loans is a personal loan product, which is available for salaried individuals for a variety of reasons. Whether it is for a child’s education, a much needed vacation, a daughter’s wedding or even just a shopping spree, HBL Flexi

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Loans is a flexible financing scheme which can actually provide the much needed cash to fulfill all such requirements. Salient Features of HBL Flexi Loans 1.

Low Mark-ups leading to affordable monthly installments. Mark-up slabs vary for various categories of salaried individuals

2.

Financing from Rs. 10,000 to Rs. 500,000/-

3.

Available throughout Pakistan from over 400 designated Habib Bank branches

4.

Tenures ranging from 12 to 60 months

5.

Low Processing Charges

6.

Full Credit Life Insurance.

5.5.3

hblE bank

Table – C: hblE Bank online Branches

1. All 2.

Helpdesk

Application Process

Security Features

PC Banking

Internet Banking

hblE bank Is Complete customer’s

banking

needs

are

covered

in

a single

user

interface.

hblE Bank is convenient

Access customer’s accounts from your desktop any time any where across the globe and avoid the hassles of branch banking.

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Chapter – 4 HBL

3.

General Banking and Departmentation of

hblE bank is economical

All it takes is a Dial up to the Bank or access hblE bank site. No extra charges, no new hardware / software and no more frequent visits to the Bank and the time wasted in arranging appointments, traveling, parking and queuing at the Bank for ordinary money management requirements. 4.

hblE Bank Improves Fund Management

Latest information of customer’s company / personal account(s) both in Rupees and other currencies on your desktop computer provides a great facility to manage customer’s funds flow in a more efficient manner. Customer can check whether you have sufficient funds in customer’s account for the present day’s needs or customer have to arrange funds from other account(s) / resources to meet customer’s needs. 5.

hblE Bank Improves Working

Effective management of excess cash float, accelerated accounts management, immediate reconciliation and electronic filing saves time, space and allows easy retrieval thus improving working quality and control. 6.

hblE bank is secure

Uncompromised security features supported by carefully controlled set of private passwords only permits authorized persons to access hblE bank from office / home. The hblE bank customers also have the option to decide the access rights of their users to access / manage their e-banking activities by using their private passwords. For more details, please click Security Features. 7.

hblE bank IS User Friendly

It is designed with you in mind. Simple step-by-step processes show you how to use it. An extensive on-screen help is also available in the system besides the formal documentary guidance and assistance/training provided by the Bank to the hblE bank users.

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Chapter – 4 HBL

8.

General Banking and Departmentation of

hblE Bank Ensures Confidentiality

The inherent high degree of data encryption and authentication features in the system ensures absolute data integrity of all value transactions / information routed to or received from the Bank, giving the user complete peace of mind. 5.5.4

Current Account

Deposit Slab Minimum Balance: 1000 Rs Eligibility: 1.

All

Pakistani’s

Resident/Non-Resident,

Individuals

(Single-Jointly)

Companies/Firms etc. can open and operate the Account. 2.

Any Foreign National Individuals (Single-Jointly) having valid Resident Pakistan VISA/Work Permit can open and operate the Account.

Features 1.

Account can be OPENED with Minimum Balance Rs. 1000/- with no maximum limit.

2.

Checking Account

3.

No profit is paid.

4.

Service Charges Rs. 52/- per month if average balance is less than Rs. 20,000/-

5.

Statement of Account dispatched on quarterly basis or as requested.

6.

There is no restriction for withdrawals of amount and number of cheques.

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Chapter – 4 HBL

5.5.5

General Banking and Departmentation of

Profit and Loss Sharing

Table – D

Profit and Loss Sharing

PLS saving account

PLS –7/30 days special notice time & PLS

PLS term deposit receipt (PLS TDR)

PLS KHAS term deposit receipt (PLS KHAS TDR)

PLS special saving deposits (SSD

F.I TDR (3 months financial institution TDR)

PLS monthly income scheme

*rate of return on PLS deposit July-Dec 2005.(3 years)

5.5.6

Payment of Utility Bills

Habib Bank also provides payment of utility bills services to its valued customers. 5.5.7

HBL Debit Card

Debit cardholders. Your Card entitles you to discounts and savings on your purchases at your favorite outlets. Thus, not only do you enjoy convenience, safety and international acceptability on your Card, but also you can save on your daily purchases. So, make each shopping spree exciting by availing Value offers at our partner shops and outlets. 5.5.10 HBL Credit Card Habib Bank MasterCard opens a world of convenience for customers. Be it shopping or traveling or medical expense, HBL MasterCard sets customer free from the hassles of carrying cash on hand.

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Chapter – 4 HBL

General Banking and Departmentation of

It gives customers Convenience, security, affordability, cash advance,

balance,

transfer facility and internet shopping Facilities 1.

Worldwide acceptability

2.

Up to 30% of your spending limit as cash advance

3.

Travel accident insurance coverage worth Rs. 2.5 million

4.

Photo feature to help avoid misuse.

5.5.11 Lockers

Habib Bank also provides locker facilities to its valued customers at very reasonable charges.

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Chapter – 4 HBL

General Banking and Departmentation of

5.5.12 Hajj/ Umra Services

Habib Bank also provides Hajj / Umra services to its customers. All branches of Habib Bank Limited are now equipped with special Hajj/ Umra customer, where one cannot only get Hajj/ Umra forms but helpful officers assist in filling in the relevant details.

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Chapter – 6 Analysis

Critical

CHAPTER – 6

CRITICAL ANALYSIS Critical analysis is based on the general observation and point out towards the short comings/weaknesses of HBL as observed during the internship. These observations generally reflect the different aspects of HBL and weaknesses in different areas, which needs to be overcome. Following are the critical analysis of HBL university campus branch Peshawar. HBL is the largest bank of our country with an excellent network of branches but it has certain flaws even in management functions. 1.

The leaders or managers at upper level are having expertise in their fields but branch leadership is not very well and often the managers don’t have even the basic knowledge of management and communication.

2.

In the function of organizing delegation of authority is a problem, especially in retail banking; a branch has fewer powers to deal with customers.

3.

The branches are staffed with usually old employees, who have the ability to carry out routine works excellently but there is lack of new ideas or these employees needs further training.

4.

HBL is not keeping pace with the changing market environment, the main reason for which is lack of new policies, and also the existing policies remain unchanged for a long period of time.

5.

Top management is having a lot of influence in all decision-making and usually don’t consult the lower level.

6.

In advances department, the processing of loan is very lengthy, which is problem for businessmen.

7.

The foreign exchange department is usually staffed by one officer, thus his absence causes problem for the customers.

8.

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Employees are lacking motivation, due to fear of downsizing.

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Chapter – 6 Analysis

9.

Critical

Employees also complaint that employments and promotions are made on favoritism and nepotism.

10.

There is dearth of innovation as compared with foreign banks, private banks or international banks. That is, with banks of this much caliber it should offer more products and services.

11.

Although in HBL, there are computers in different offices, but they are not utilizing this tool in full capacity and are using it for typing and calculation only.

12.

Counter services are not satisfactory and usually process at counter takes more time, than it should have.

13.

Branch’s internal seating arrangement and environment is also not satisfactory in most of the branches.

14.

Similarly for customers, usually less sitting places are available and that are also in deteriorate condition, furniture is also not neat and clean in most of the branches.

15.

The necessary stationary for the use of customers are also not adequate at the peak hours.

16.

Brochures are also found to be available in lesser quantities and usually not provided in time to customers.

17.

Informing customers (i.e. bank statements etc) are also done at long intervals (6 months), which is too long interval.

18.

The behavior of the staff is also not according to the marketing approach to words the customer. They usually behave in very bureaucratic way; they are not providing personalized banking, as the new private banks do.

19.

The employees of the bank are also experienced but most of them are not well educated i.e. most of them are graduates but they are not aware of the modern business administration knowledge and updates.

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Chapter – 6 Analysis

20.

Critical

Similarly the outlook of the staff is also orthodox and don’t present to the customers a smart image of the bank but rather presents a dull image, unlike private banks where presentation style is also of great importance.

21.

The bank lacks an information center, wherefrom the researches can get data. Even there is so much lack of information, that at branch level the employees are not aware of the basic decisions and information.

22.

This is in relation to the above problem; there is communication problem, between different groups within the bank. Like problem of communication exists between the lower staff, lower management, middle management and upper management, with each level is confined to itself and not aware of the lower level than its own level.

23.

One problem is also that in HBL, there are employees, who have no work at all that is, it has some surplus employees, but there is not clear policy about their fate and this creates confusion and uncertainty among all employees.

24.

There is also problem of politico-economic situation of the country; this problem is so for all financial institutions of the country.

25.

The freezing of FCAs has also affected the confidence of people on the banking sector in particular and HBL in general

26.

There are also culture hurdles, which are in the way of banks like, provision of services to ladies especially in backward areas, HBL has done nothing in this field, other wise it could have a new segment of customers.

27.

There is also absence of a proper database, and in this era of information technology, it is a tragedy that a huge organization like HBL doesn’t have a proper database system, which can help the bank and the bank could improve its services based on this.

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Chapter – 7 Analysis

SWOT

CHAPTER – 7

SWOT ANALYSIS SWOT is an acronym for an organization’ strengths, weaknesses, opportunities and threats. A SWOT analysis consists of sizing up a firm’s internal strengths and weaknesses and its external opportunities and threats. It is a tool, to get a quick overview of a firm’s strategic situation. In the following lines the SWOT analysis of HBL is given;

7.1

STRENGTH

1.

The largest bank in Pakistan with largest number of branches through out the country.

2.

Has market leadership in providing products and services to the customers over the year.

3.

Due to advancements in IT technology, HBL uses many s/w in different departments i.e. in Remittances department, in Account opening department, for posting of checks, for jotting purposes etc.Which is a positive factor in their competing sector.

4.

Have more deposits than other bank in the country.

5.

Largest customer base in the country.

6.

Has more branches and therefore accessible to more potential customers than any other bank.

7.

HBL is ahead on experience curve than any other bank in Pakistan Has experienced, world-class top management.

8.

Have product innovation skills and resources.

9.

HBL has the ability to cope with the pressure of competition and has several times out of competition successful.

10.

It has modern technology and resources to cater to its customers.

11.

Staff is rich in experience.

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Chapter – 7 Analysis

SWOT

12.

HBL has the goodwill of the people and it is also an asset to it.

13.

Has presence in all parts of the world. Thus also providing services to Pakistanis outside the country.

14.

Offer attractive schemes and more saving for customers from time to time.

15.

HBL’s credit card is more acceptable than any other Pakistani bank credit card.

16.

Bank’s management has the motivation to make it best bank of the country.

7.2

WEAKNESSES

1.

At present HBL has narrow product line and offers very little for the customers.

2.

This is due to the lack of proper and continuous R& D.

3.

Marketing skills of the bank are good but they have little presence at different medias.

4.

The lower level management lacks clear direction and is not having the managerial depth.

5.

Employees are lacking motivation.

6.

They also fear of downsizing.

7.

Have more employees, causing financial burden on the bank.

8.

Bank is not utilizing its IT tools to its full limit and thus reducing the efficiency.

9.

Problem of unionism from employees.

10.

Highest number of branches, affecting the maintenance of consistency and same working atmosphere at everywhere.

11.

Branch’s internal environment don’t presents smart image of the bank in most of the cases.

12.

Communication gap between different levels of management.

13.

Most of the bank staff is computer illiterate.

14.

More complicated and long procedure of account opening then any bank in the country.

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Chapter – 7 Analysis

SWOT

7.3

OPPORTUNITIES

1.

Add new products/services to its product line.

2.

Bank should take interest in the new market segments like IT business, software business etc.

3.

A big opportunity is to become innovator in introducing” Internet Merchant Accounts” in the country.

4.

Extending banking hours and providing more on branch facilities to customers.

5.

Increasing the ATMs to more locations.

6.

Increasing credit facilities to lower groups, thus reducing the risk of loss and also improving the image of the bank.

7.

If new schemes are introduced for the overseas Pakistanis, then bank can get the business of remittances more than any other bank or ”Hundi Business”.

8.

In December 2006 the bank is privatized and the opportunity is there to capture the market because in private sector the bank can do better than in government sector. As all over the World Bank is usually of private nature.

7.4

THREATS

1.

Increasing no. Of private/foreign banks in the country.

2.

Global technological advancement.

3.

Political –economical situation of the country.

4.

Reduction in the business activities in the country.

5.

Reducing rates of the savings in different segments of people.

6.

Deteriorating confidence of people in banks.

7.

Uncertainties of the investors.

8.

Provision of better services by the private banks.

9.

Lacks of consistency in Govt. Policy.

For SWOT analysis, we can conclude that the management of the bank should adopt systematic planning for the bank’s growth, taking with them all management levels of the bank, discover new segment of the customers, offering newer schemes for its

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Chapter – 7 Analysis

SWOT

customers. Similarly HBL has more customer and their needs, then it will become again the market leader.

7.5

TOWS MATRIX Strengths

Weaknesses

1-Has market leadership in providing products and services to the customers over the years. 2-Has experienced, world-class top management. 3-Has more branches and therefore accessible to more potential customers than any other bank. 4-Staff is rich in experience. 5-Have more deposits than any other bank in the country. 6-Largest customer base in the country. 7-It has modern technology and resources to cater to its customers.

1-At, present HBL has a narrow product line and offers very little for the customers. 2-This is due to the lack of proper and continuous R& D. 3-Employees are lacking motivation. 4-They also fears of downsizing. 5-Communication gap between different levels of management.

Opportunities-O

S O Strategies

W O strategies

1- Bank should take interest in the new market segments like IT business, software business etc. 2-Increasing the ATMs to more locations. 3 Add new products/services to its product line. 4-Extending banking hours & providing more on branch facilities to customers.

1-Improve and diversify the current products (S6, O3) 2-Improve its products/services to its product line in order to maintain its market leadership in providing products & services to the customers (S1, O3)

1-Introduce new products/services to its product line (W1, O3)

Threats – T 1- Increasing number of foreign/private banks in the country. 2- Deteriorating confidence of people in banks. 3-Politico-economical situation of the country 4-Lack of consistency in Govt. policy. 5-Global technological advancement.

ST Strategies 1-To motivate skilled management, so that they can compete in their corresponding competing sector (S3, T3)

WT Strategies 1-Start new employees’ benefit plan (W3, T2)

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Chapter – 8 ratios

Analysis of financial

CHAPTER - 8

ANALYSIS OF FINANCIAL RATIOS 8.1

RATIOS

Ratios are a valuable analytical tool when used as part of a through financial analysis. They can show the financial standing of a particular organization, with in a particular industry. But ratios alone can sometimes be misleading. Ratios are just one piece of the financial jigsaw puzzle that makes up a complete analysis. They cannot be used in isolation. Seasonally can distort ratios, as a demographic and economic factor like cyclicality. Many balance sheet ratios are not as helpful with service organizations that don’t carry much inventory in interpreting financial ratios to assess the firm’s performance and status. The basic inputs to ratio analysis are the firm’s income statement and balance sheets for periods to be examined. Ratio analysis of an organization’s financial statement is of interest to its shareholders, creditors and the firm’s own management. Both present and prospective shareholders are interested in the organization’s current and future level of risk and returns. These two dimensions directly affect share price. The firm’s creditors are primarily interested in the short-term liquidity of the organization and in its ability to make interest and principal payments. A secondary concern of creditors in the organization’s profitability, as they want assurance that the business is healthy, and will continue to be successful. Management, like stockholders must be concerned with all aspects of the organization’s financial position. Thus, it attempts to operate in the manner that will result in financial ratios that will be considered favorable by both owners and creditors.

8.2

CAUTIONS FOR DOING RATIO ANALYSIS

A single ratio does not generally provide sufficient information from which to judge the overall performance and status of the organization. Only when a group of ratios is used can reasonable judgments be made. If an analysis is concerned only with certain

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Chapter – 8 ratios

Analysis of financial

specific aspects of an organization’s financial position, one or two ratios may be sufficient. The financial statements being compared should be dated at the same point in time during the year. If they are not, the effect of seasonally may produce erroneous conclusions and decision. 1.

It is preferable to use audited financial statements for ratio analysis. If the statements have not been audited, there may be no reason to believe that the data contained in them reflect the organization’s true financial conditions.

2.

When the ratios of one organization are compared with those of another or with those of the organization it self over time, result can be distorted due to inflation. Inflation can cause the book values of inventory and depreciable assets to differ greatly from their through replacement values.

8.3

GROUPS OF FINANCIAL RATIOS

Financial ratios can be divided for convenience into the following groups: 1.

Liquidity ratios

2.

Debt ratios

3.

Profitability ratios

Liquidity, activity and debt ratios primary measure risk. Profitability ratios measure return. In the near term the important elements are liquidity, activity and profitability, because these provide the information that is critical to the short-run operation of the organization. 8.3.1

Analyzing Liquidity

Liquidity of the organization is measured by its ability to satisfy its short-term obligations as they come due. Liquidity refers to the solvency of the organization overall financial position-the case with which it can pay its bills. The two basic measure of liquidity are: 1.

Networking capital.

2.

The current ratios.

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Analysis of financial

TABLE – E 2006 (In 000 2007 (In 000 Rs) Rs) Current Assets

88825654

84136498

Current liabilities

525040105

608810966

8.3.1.2Current Ratios A measure of liquidity calculated by dividing the organization’s current assts by its current liabilities i.e. Current ratios=current assets/current liabilities. The current for the previous year that is 31st December 2006. Current ratio =88825654/525040105 Current ratio=0.170 The current ratio for the year that is 31st December 2007. Current ratio=84136498/608810966 Current ratio= 0.138

0.18 0.16 0.14 0.12 0.1 0.08 0.06

000’s Rs in

0.04

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2007 Years

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Chapter – 8 ratios

Analysis of financial

Conclusion The ratio is showing that in 2006 for every Rs 1 of liabilities the bank had Rs. 0.170 of assets as compared to 0.138 rupee for every 1 rupee in the year 2007 . The liquidity ratio of the bank has declined but it is not at all danger sign if we consider the economics ups and downs that affected the industry as a whole. 8.3.2 Analyzing Debt The debt position of an organization indicates the amount of other people’s money being used in attempting to generate profits. In general, the financial analyst is most concerned with long-term debts, because these commits the organization to pay interest over the long run as well as eventually repaying the principal borrowed. Because creditors claims must be satisfied before the distribution of earning to shareholders & prospective shareholders pay close attention to degree of indebtedness and ability to repay debts. Lenders are also concerned about the organization’s degree of indebtedness and ability to repay debts, because the more indebted the organization, the higher the probability that the organization will be unable to satisfy the claims of its creditors. Management obviously must be concerned with indebtedness in recognition of the attention paid to it by the stockholders and the increased interest in keeping the organization solvent. There are two general types of debt measures: 1.

Debt to total Assets ratio.

2.

Debt to share holder equity ratio.

8.3.2.1 Debt to Total Assets Ratio The debt ratio measures the properties of the total assets financed by the organization’s creditors. The higher this ratio, the greater the amount of other people’s money being used in an attempt to generate profits. Debit ratio=Total liabilities/Total assets

TABLE-F 2006

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2007

62

Chapter – 8 ratios

Analysis of financial

Total Debt

540618282

628754092

Total Assets

594061648

691991521

The debt total assets ratio for the previous year that is 31st December 2006. Debt to total assets Ratio=Total Debt/Total Assets Debt to total assets Ratio=540618282/594061648 Debt to total assets Ratio=0.91 The debt to total assets Ratio for the year that is 31st December 2007 Debt to total Ratio assets Ratio=628754092/691991521 Debt to total assets Ratio=0.9086

0.91 Conclusion 0.9095 In the year 2006, for Rs. 1 assets to debt is Rs. 0.91, where as in the year 2007, for Rs.

1 assets, 0.909 debt stands at Rs 0.9086 0’s

0.9085

00

So this ratio shows that the bank has effectively used the assets in the year 2006. in

0.908

Rs

0.9075 2006

2007 years

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2.

Analysis of financial

Debt to Share Holder’s Equity Ratio

TABLE-G 2006

2007

Total Debt

540618282

628754092

Total Equity

45177664

55063125

The debt to shareholder’s equity ratio for the previous year that is 31st December 2006. Debt to equity Ratio=Total Debt/Total Equity Debt to equity Ratio=540618282/45177664 Debt to equity Ratio=11.966 The debt to equity Ratio for the year that is 31st December 2007 Debt to equity Ratio=628754092/55063125 Debt to equity Ratio=11.42

12 Conclusion 11.9

This means 11.8 that for each Rs. l brought by shareholders, the Creditors have brought Rs. 11.966 and 11.7

Rs. 11.4211.6 during the years, 2006, and 2007 respectively, to finance Habib Bank limited. In 2007 the 11.5 11.4

Rs in 000’s

11.3

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2007 years

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Chapter – 8 ratios

Analysis of financial

debt of the bank has increased which is not a good sign. The bank thus, should bring some more equity in order to be more stable. 8.3.3

Analyzing Profitability

There are many measures of profitability. Each relates the return of the organization’s to its sales, assets equity or shares value. As a group, there measures allow the analyst to evaluate the organization’s earnings with respect to a given level of sales, a certain level of assets, the owner’s investment, of share value. With profits, an organization could not attract outside capital. Moreover, present owners and creditors would become concerned about the organization’s future and attempt to recover their funds. Owners, creditors and management pay close attention to boosting profits due to the great importance placed on The main two ratios are; 1.

Return on total investment (ROI)

2.

Net profit margin

3.

Return on shareholder’s equity ration (ROE)

8.3.3.1 Return on Total Investment (ROI) The return on investment (ROI), measures the overall effectiveness of management in generating profits with its available assets. The higher the organization’s return on total assets, the better. The return of total investment is calculated as; Return on total investment (ROI) =net profits after taxes/total assets. TABLE- H

Net Profit/loss taxes

after

Total Assets

2006

2007

12700315

10084037

594061648

691991521

The return on total investment for the previous year that is 31st December 2006 Return on Investment Ratio =

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Analysis of financial

Return on Investment Ratio =12700315/594061648 Return on Investment Ratio=0.0213 Return on total investment for the year that is 31st December 2007 Return on Investment Ratio =10084037/691991521 Return on Investment Ratio=0.0145

Conclusion 0.025 0.02

This ratio shows that the Bank has earned 0.0145 Rupees for every 1 Rupee 0.015in Assets in the year 2007 as compared to the 0.0213 rupees in the year investment 000’s

2006.

0.01

Rs in

0.005 8.3.3.2 Net Profit Margin

TABLE- I

0 2006

2007 Years

2006

2007

Net Profit after taxes

12700315

10084037

Revenue

30481703

31327064

The net profit margin for the previous year that is 31st December 2006

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Analysis of financial

Net Profit Margin =

Net profit after taxes Re venues

Net Profit Margin Ratio=12700315/30481703 Net Profit Margin Ratio=0.4166 Net Profit Margin Ratio for the year that is 31st December 2007 Net Profit Margin Ratio=10084037/31327064 Net Profit Margin Ratio=0.322

0.45 Conclusion 0.4 0.35

This ratio indicates the net income per rupee of revenue. In 2007 1 rupee of revenue 0.3

0.250.322 to net income while in 2006 it was 0.4166. contributes 000’s

0.2

Rs in

0.15

8.3.3.1 Return on Equity (ROE) 0.1 0.05 the earning power on shareholders’ book value investment. A high return It measures 0

2006the firm’s acceptance 2007 of strong investment opportunities and on equity often reflects Years

effective expense management. Higher the ratio more the risk for entity, and more returns for shareholders. The return of equity ratio is calculated as; Return on equity (ROE) =net profits after taxes/shareholder’s equity. TABLE- J

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Chapter – 8 ratios

Analysis of financial

2006

2007

Net Profit after taxes

12700315

10084037

Shareholder’s Equity

45177664

55063125

The return on equity for the previous year that is 31st December 2006 Return on equity Ratio = net profit after taxes/shareholder’s equity Return on equity Ratio =12700315/45177664 Return on equity Ratio=0.28 Return on equity for the year that is 31st December 2007 Return on equity Ratio =10084037/55063125 Return on equity Ratio=0.18

Conclusion 0.3 0.25

This ratio shows that there is 28% return on equity in the year 2006 as compared to 0.2

the 18% in the year 2007. 0.15

Rs in 000’s

0.1

0.05 0 2006

2007 Years

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From the analysis of the annual report the bank’s home remittances show up trend, it

is because of large-scale remittance is coming through Hundi and haw alas. However,

69

15

Number of staff

Number of Branches

23,096

1,773

67,300

Exports

13

14

70,700

18,002

1,521

(291)

181

10,133

11,544

70,677

Imports

Home remittances

Profit (loss) after taxation

Pro. For Taxation

Pro. For non-performance Loans & others

Total Expenditure

Total Income (Net of interest costs)

Investments (Net of Provision)

12

11

10

9

8

7

6

5

23,033

1760

73,118

76,133

15,464

(8,850)

3,587

4,705

11,731

11,175

64,278

Advances 137,124 160,301

22,779

1,755

78,751

92,508

22,545

493

476

1,411

12,233

14,613

68,069

174,894

266,052

Total Deposits 237,964 250,858

3

4 (Net of Provision)

328,605

Total Assets 289,862 305,217

2000

2

13,162

1999

12,534

Shareholders Equity & revaluation surplus

1998

4,519

1

S.NO

8.5 TABLE:H

19,352

1,516

93,900

82,600

22,267

1,112

1,112

2,710

11,736

16,788

57,792

167,225

283,445

333,751

12,814

2001

23,485

2003

31,190

2004

46,326

4,018

1,452

5,804

9,803

21,363

47,423

5,763

1,484

2,552

13,789

23,588

19,005

1,473

18,800

1,470

18,625

1,469

95,901 118,642 134,090

118,689 139,515 162,402

38,229

2,034

2,054

2,450

11,811

18,564

142,878 158,871 134,523

167,523 183,654 259,089

328,182 360,648 404,629

403,037 434,932 487,765

19,707

2002

16,314

1,470

118,882

153,392

54,759

9,647

4,187

3,270

15,766

32,870

107,384

316,882

432,545

528,894

40,331

2005

14,572

1,477

117,593

189,125

66,656

12,700

6,140

2,927

17,204

38,971

119,587

349,433

459,140

594,062

52,530

2006

14,552

1,489

129,742

178,684

79,322

10,084

5,061

7,823

18,382

41,350

177,942

382,173

531,298

691,992

62,272

2007

TEN YEAR PROGRESS OF HBL (Source ) HBL Annual Report

Chapter – 8 ratios Analysis of financial

8.5 PROGRESS OF HBL SINCE 1998 TO 2007:

Chapter – 8 ratios

Analysis of financial

in the year 2000, there is an abrupt increase in home remittance. In 2001, it was a little increased in home remittances i.e. Rs. 22,267 million and in 2002, it again increases to Rs. 38229 million. In 2006, the value of home remittance was Rs. 66,656 million, which is little bit, increased in 2007 i.e. Rs. 79,322 million. The number of branches of the bank is increasing slowly from 1989 to 1996. But from the year 1998, perhaps due to mergers and closures of branches, it is on the decreasing, Similar is the position of the number of staff which was on decreasing from 1998 to 2007 and this sudden decrease of near about 8000 is being shown by the annual report. This drastic decrease occurred due to the offer of Golden Hand Shake to the staff by the management of the bank. This was done for right sizing of the bank in order to cut the administrative cost, which was on very high side. The expenditure section of the annual report shows that it was running on the increasing side from the year 1998 to 2000. Investment of the bank is on increasing trend. Total deposits of the bank are also on upward trend. Reserve funds have also increased in the year 2007.A sum of Rs 0.551 billion has been injected in to the paidup capital of the bank in the year 2000. In 2004, 2005 the bank’s expenditure was increased i.e. Rs. 13789 million and Rs. 15766 million, which was increased in 2006 i.e. Rs. 17,204 million. In 2007 it again increased to Rs. 18,382 million. However HBL is still one of the biggest banks of the country and if proper utilization of SWOT method is made, the bank can regain its market share, which was previously near about 54% and now it is approximately 20%. This bank is the oldest bank of the country and it has played a very vital role in the economy of Pakistan it has provided lubricant to the wheel of economy of Pakistan, it has provided finances to the various sector of the economy e.g. 

Industrial sector.



Agricultural sector.



Commercial sector



Agro base industries to the customer and to the



Salaried class.

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Chapter – 8 ratios

Analysis of financial

The bank has already played a very vital role at the time of independence of Pakistan. It has facilitated the transfer of money from India to Pakistan for “Muhajereen”. I admit that the slog of Habib Bank limited really is based on facts.

8.6

GRAPHICAL REPRESENTATION OF GROWTH/LOSS

8.6.1

Shareholder’s Equity and Revolution Surplus

Since 1998 Habib Bank owner equity is showing inconsistency. The lowest level of Habib owner equity is in1998 i.e., Rs.13, 162 million and in 1999 it dropped to Rs.4, 519 million that increased to Rs.12, 534 million in 2000.In 2001 it dropped to Rs 12,814, in 2002 it again increased to Rs 19,707 which further increased to Rs 52,530 in 2006 & in 2007 there was very big increased i.e. Rs 62,272 million.

Rs. in 000’s 70,000 60,000

Source: HBL Annual Report 2007

8.6.2 Profit Loss after Taxation 50,000 40,000 30,000 20,000 10,000 0 2003

2004

2005

2006

2007

years

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Chapter – 8 ratios

Analysis of financial

14,000

Source: HBL Annual Report 2007

12,000

10,000 Until 1995 the bank was consistent in its profit taxation; in 1996 it made a loss of Rs. 8,000 3, 441 million, which was followed, by a loss of Rs. 6,802 million in 1997. The bank

made a profit6,000 of Rs. 1,521 million in 1998, but in 1999, it again made a loss of Rs. Rs. in 000’s 4,000

8,850 million. However, the bank was once again made a profit of Rs. 463 million in 2,000

2000. In 2001, the profit of the bank increased to 1112, which increased to 4018 in 0

2003.In 2006 the bank2003 made a profit of 12700, which by a profit of 2004 2005 2006was followed, 2007 years

10,084 in 2007. 8.6.3

Provisions for non performing loans and others

Rs. in 000’s 9,000 8,000 7,000

Source: HBL Annual Report 2007

6,000 5,000 4,000 3,000 2,000

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Internship Report On Habib Bank Ltd. 1,000 0 2003

2004

2005 years

2006

2007

Chapter – 8 ratios

Analysis of financial

The bank is consistently making provisions at high rate, this may be because of the loans paid under undue influence in past. In 2002, it made a total provision of Rs.2450 million. In 2003, the bank made a provision of Rs.5804 million, whereas in 2004 it made a provision of Rs.2552 million. In 2005, the bank made a provision of Rs.3270 million, which dropped to Rs. 2927 million in 2006. In 2007 the bank made a provision of Rs 7823 million Total Assets: The bank assets are on increase

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Chapter – 8 ratios

Analysis of financial

In 2003, it was about Rs. 434,932 million; in 2004, the assets were increased to Rs. 487,765 million; in 2005, it increased to Rs. 528,894 million.

800,000

Source: HBL Annual Report 2007

700,000

600,000 In 2006 the bank assets are Rs. 594,062 and in 2007 the bank’s assets are increased 000’s

500,000

in

400,000

from Rs. 594,062 to Rs. 691,992. Rs.

8.6.5

300,000

Total Expenditure 200,000 100,000 0 2003

2004

2005

2006

2007

years

20,000 18,000 16,000

Source: HBL Annual Report 2007

14,000 000’s

12,000

The bank total expenditure increased drastically in 2003 to reach to a level of Rs.9803 10,000 in

8,000811 million in 2002.The bank total expenditure for the year 2004 million from Rs.11, Rs.

6,000 4,000

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Internship Report On Habib Bank Ltd. 0 2003

2004

2005 years

2006

2007

Chapter – 8 ratios

Analysis of financial

were Rs.13, 789 million. In 2005, the bank’s total expenditure increased from the previous year i.e.Rs.15, 766.In 2006, it increased to Rs.17, 2004.In 2007 it again increased to Rs.18, 382. 8.6.6

Net Investments

200,000 180,000

Source: HBL Annual Report 2007

160,000 140,000

The bank net investment is mostly increasing. In 2003, the bank’s net investments 120,000 000’s

were Rs. 158,871100,000 million. In 2004, the bank’s net investment was Rs.134, 523 million Rs. in

80,000

which decreased quite a lot. In 2005, the value of net investment is declined to 60,000 40,000 Rs.107, 384 million. In 2006 the bank’s net investment increased from the previous 20,000

year i.e. Rs.119, 587 million. In 2007 the value of net investment of bank was Rs.177, 0 942 million.

2003

2004

2005

2006

2007

years

8.6.7

Advances Net:

The bank has been able to achieve a high advances level, which means that they are utilizing the resources. The advances made in 2003 were of Rs. 183,654 million, which grew to Rs. 259,089 million in 2004. In 2005, it increased to Rs. 316,882 million. In 2006 it increased, but little one i.e. Rs. 349,433 million. In 2007 it again increased to Rs. 382,173. Following is shown in the figure.

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Chapter – 8 ratios

Analysis of financial

450,000 400,000

8.5.8

350,000

Total Income 300,000

000’s

250,000

in

200,000

Rs.

150,000 100,000 50,000 0 2003

2004

2005

2006

2007

years

45,000

Source: HBL Annual Report 2007

40,000 35,000

30,000 The bank’s net income is increasing but to this the total expenses are also 000’s in

25,000

increasing at a20,000 higher rate. In addition, there is very inconsistency among the Rs.

income of the 15,000 different year as depicted by the graph. 10,000 5,000 0 2003

2004

2005

2006

2007

years

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Chapter – 9

Findings and Suggestions

CHAPTER – 9

FINDING AND SUGGESTION As we seen from the previous analysis of the financial statements we have realized that that Habib Bank is performing very well since its inception. It is quite difficult to give suggestion to improve the banking conditions Habib Bank Limited. As we know that nothing is perfect, there is always a room for improvement, so I have found during my internship can be made up taking into account the following findinds and suggestions.

9.1 INNOVATION: First and the foremost thing I have found out is that the process of innovation is slow. They can offer a lot new products and services in the country being one of the strongest institutions of the country. E.g. they can make use of mobile technology for facilitating their customers which have been started by some banks but they can offer even new services by its use.

9.2 MARKETING OF HBL: As we know by now that HBL is a very prestigious bank of Pakistan, in my view the attention they pay to Marketing should be much more than what they are doing right now. This does not mean that they are not doing well. My suggestion is that they also emphasize on the new product that make them different from other banks of the country. They should also educate through their adds that how much they are important internationally.

9.3 IMPROVEMENT OF WORKING CONDITIONS Working Condition in the branch should be improved, which will attract customers. The attitude of staff, especially of the peons towards the customers & then officials must be improved for the development & improvement of bank.

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Chapter – 9

Findings and Suggestions

9.4 FAVOURITISM AND NEPOTISM: Another finding is that of nepotism and favoritism in HBL. I met employees that have been hired only because they are “sons” of the employees who had worked once in the bank. This can be good to employ people from known background but this can be harmful as talented people might not be given chance, and in our culture these kinds of employees are sitting almost idle within the banks as they know no one can fire them from the job. The upper management should keep friendly relations with all the staff members. It would result in the feeling of equity amongst members.

9.3

USE OF COMPUTERS:

Computers have been provided to the employees of all the branches and departments of the bank this device helps the employees in efficiency of their work i.e. completing their work wit accuracy and in less time. Secondly it can maintain work and records without any extra cost. Some of the softwares have been installed for the purpose. 

MISYS:

It is software installed by IT department of HBL in every branch. It is a multiple functioning software performing various functions like account opening, maintaining ledger, record keeping etc. There are a Due to advancements in IT technology, the bank should introduce the following to make the banking system modern, efficient in order to compete the banking sector inside or outside the country. These are 1.

E-statement

2.

Email

3.

ATMs

4.

Clearing House

5.

Employee’s track record etc.

1.

E-Statement

If bank uses modern It technology to inform their customer instead of E-Statement, 

First it will save the time.



Second it will reduce the postal charges of the bank.

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Chapter – 9

2.

Findings and Suggestions

Email

Email has enabled the banks to send information to the customer in due course of time. 3.

ATMs

ATM has facilitated the customer to draw the required amount without facing any difficulty from the bank within the 24hrs. as and when he/she wishes to draw amount from that bank and its branches in the country. Askari Bank has recently introduced mobile ATMs. HBL should introduce mobile ATMs in order to compete their respected competitor. 4.

Clearing House

If bank uses modern IT technology in their clearing House department (to send the checks to different branches of same bank within the city). It will save the time. 5.

Employee’s Track Record

Every bank should introduce IT technology (software) to keep record of their respected employees i.e. Personal data, casual leaves, medical leaves etc, and so many other advancements in technology.

9.3 TRAINING AND DEVELOPMENT PROGRAM The HBL claims of training and educating its employees but practically speaking it should initiate a good employee training and development plan. This would help employees to know more about their specific job and its actual requirements. The employees can be given chance to serve in different departments, hence they can become aware of the mutual requirements and importance of the coordination between the different departments of the bank. Thus they can work in harmony and collaboration with each other. This would develop the proficiency, insight and administrative capabilities of the employees. This also helps in avoiding monotony of performing the same job again and again. This would also be a factor of motivation for the employees who works in over loaded departments. The rotation would provide them all with equal chances of serving in same kind of working conditions.

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Chapter – 9

9.2

Findings and Suggestions

STAFF REQUIRED:

A reasonable staff should be provided to branches, thus, which improve the performance condition of the branches. Especially a telephone operator and a customer service officer should be appointed.

9.4

QUICK PROCESS OF CUSTOMER SERVICE

Delays in any form should be avoided, so that customers are not discouraged from the bank services. And the full attention must be given to the customers because they are often right.

9.5

WEAK CHECK AND INSPECTION

General banking department, particularly account opening section is not performing well. In the absence of head of the section, they showed poor performance. I observed that they did not accept one rupee and coins from their clients. Audit &inspection division should be strengthened so that the branches should be frequently inspected & the inspecting parties should especially see the public dealings of the employees.

9.6

PROMOTION

Promotion is not made on seniority or merit basis. Junior people having family background or relatives of bank executives arrange their promotions through back door thus depriving people from their due right. The strict rules & procedures should be formulated to discourage this practice.

9.7

PERFORMANCE APPRAISALS

Evaluation of efficiencies & performance should not only be based on the total volume of deposits; but it should be based on complete budgeting, profit earned or loss incurred i.e. how much new customers are attracted to the bank.

9.8

APPOINTMENT OF RESEARCH OFFICERS

A research officer should be appointed at least one in every main branch. He should undertake research projects on problems faced by the manager, officers, customers

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Chapter – 9

Findings and Suggestions

and how a bank can serve more at a low cost, how can procedural difficulties can be removed and what customers expect from the banking institutions. SOME OTHER SUGGESTIONS 1.

A special advisory cell should be established at Regional Office level from which the private sector can acquire feasibility reports.

2.

The functions & procedures of the bank should be published in booklets & provided free of cost to the customers.

3.

Functioning of the branch, I suggested that staff be increased.

4.

Again I suggest that A NIGHT/EVENING COUNTER be opened for the clients to deposit the various types of bills i.e. (Electricity, telephone, gas, T.V etc) on the evening.

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Conclusion

CONCLUSION The HABIB bank which was established in Bombay in 1941 with a paid up capital of Rs 25,000 only, was shifted to Karachi, it was registered as a joint stock company for carrying on all types of banking activities. In early years, it has been largest subscriber to the Pakistan govt. & provincial government’s loan and treasury bills, but with the passage of time it becomes more enterprising in the credit field. The banking system of Pakistan was badly disrupted immediately after independence. Vigorous efforts were made to rehabilitate the system, with the Habib bank playing a pivotal role in the scheme of re-organization of commercial banking. The bank was nationalized in 1974 and from that year onward & to date is operating as a public sector institution. This has been providing credit facilities to a number of sectors at subsidized rates under various arrangements. Export finance, local manufactured machinery, government borrowing for commodity operations, mandatory production credit to small farmers & direct industrial investment. The bank has been providing one window financing facility to meet the local and foreign currency requirement of the industrial projects & thus proved to be a successful vehicle to transform the government policy of rapid industrialization into reality. As a responsibility of using the various foreign currency credit lines, provided by the World Bank & Asian Development Bank, the bank has been discharging its obligation in a manner satisfactory to the financing agencies & to the best interest of the country. In the conclusion one can say that the Habib bank has played a big role in the creation & development of the country. One thing significant about this institution is that it has always scarified monetary considerations over national interest. This fact raises Habib bank above all, in the service of Pakistan.

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Bibliography

BIBLIOGRAPHY 1.

Habib Bank Ltd., (2007). Annual Report. Karachi.. Habib Bank Ltd., (2006). Annual Report. Karachi.

2.

Habib Bank Ltd. General Manual. Volume –1.

3.

Habib Bank Ltd. General Manual. Volume – 2

4.

HBL, (1999). Advances and Credit Circular. Karachi

5.

HBL, (1993). Presentation Volume, Karachi

6.

Publishing Company, Ohio.

7.

S.A. Meenai. Money Banking in Pakistan. 3rd Edition, Oxford University Press,

8.

1984, PP-111-123-284.

9.

Sibghatullah Qureshi. (1999), An Internship Report on HBL City Branch. P-10.

10.

HBL WE Magazine (July, 2006). P-8.

11.

http://www.hbl.com (Visited on December 2008).

12.

http://www.google.com

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