CHAPTER- – 1 - Internship reportsinternshipreports.yolasite.com/resources/Internship... · Web viewThis chapter is about Organizational Review of HBL, which identifies the Organizational

Chapter – 1 Chapter – 1 Introduction of Study 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.

82 Internship Report On Habib Bank Ltd. Internship Report On Habib Bank Ltd. 1


1.3 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.

Websites.

1.5 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.



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.



Chapter – 9

It contains findings, suggestions & conclusion. At the end conclusion,

bibliography and some annexures are given.


Chapter – 2 Chapter – 2 Introduction of HBLIntroduction 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



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



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 30th 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.



2.5 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.



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 29th 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



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.



1. 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.



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.


Chapter – 3 Chapter – 3 Organizational Review of HBL 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.



1. 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.



6. 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.



3. 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



3.4 MANAGEMENT COMMITTEE

TABLE - A

Name Designation Functional responsibilities

Sultan Ali Allana Chairman

R.Zakir Mahmood President and CEO

Sima Kamil Group Executive Corporatre Banking

Ayaz Ahmed Chief financial officer

Zafar Aziz Usmani Group executive Human resource and organizational development

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

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



3.5 HBL’S ORGANIZATIONAL HIERARCHY

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82 Internship Report On Habib Bank Ltd. Internship Report On Habib Bank Ltd.

Chairman

Board of Directors

Vice President

Senior Executive Vice President

Officer Group-11Officer Group-1 Officer Group-111

Assistant Vice President

Executive Vice President

18


3.6 BANKING OPERATIONS OF HBL


3.7 DOMESTIC OPERATIONS OF HBL



RGB Group Executive

Regional Office

Zonal Offices

Branches

Chairman and President

International Banking Group

Assets RemedialManagement Audit and

FinanceRetail Banking

Group

Corporatebanking Group

CreditPolicy

19


3.8 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.



3.10 HBL, UNIVERSITY CAMPUS BRANCH PESHAWAR

3.11 ORDER OF SENIORITY IN THE HBL

Table – B: Grade Structure At Habib Bank Limited

S. No. Designation Equivalent Grade

1. President/Chairman Grade 22

2. Senior Executive Vice President (SEVP) 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 Grade 17

8. Officer Grade III Grade 16

9. Clerk, Cashier etc.

10. Non Clerical Staff (Peon, Gunman etc.)


HOK RGB

Region

N.W.F.P

Peshawar

Region

HBL,

University

Campus,

Peshawar

21

Chapter – 4 Chapter – 4 General Banking and Departmentation of HBL General Banking and Departmentation of HBL

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.



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 DepositsThe 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



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.



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.



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”.



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 RecordsAfter 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 ChequeThe 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.



2. Order ChequeIf 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 DEPARTMENTClearing 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:



4.4.1 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. Outward Clearingb. 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.



5. 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.



b. 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.



1. 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.



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.



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

b. 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 Capital



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.



4. 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.



4. 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.



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

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



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 BANKINGCorporate 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 BANKINGHabib Bank Limited (HBL) has positioned itself to be a leader across all investment-

banking 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


http://www.investorwords.com/4775/strategy.html


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 BANKINGInternational 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.



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 BANKINGThe 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. Finance against packing credit: for pre-shipment requirements (FAPC)



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.



5. 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 BANKINGRetail 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



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 Helpdesk

Application Process Security Features

PC Banking Internet Banking

1. hblE bank Is Complete

All customer’s banking needs are covered in a single user interface.

2. 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.



3. 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.



8. 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.



5.5.5 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.



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.


http://www.hbl.com/individual-customers-creditcards.php#6%236








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.


Chapter – 6 Chapter – 6 Critical AnalysisCritical Analysis

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. Employees are lacking motivation, due to fear of downsizing.



9. 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.



20. 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.


Chapter – 7 Chapter – 7 SWOT Analysis SWOT Analysis

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.



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.



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



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 ST Strategies WT Strategies 1- Increasing number of foreign/private banks in the country.2- Deteriorating confidence of people in banks.3-Politico-economical situation of the country4-Lack of consistency in Govt. policy.5-Global technological advancement.

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

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


Chapter – 8Chapter – 8 Analysis of financial ratios Analysis of financial ratios

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



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.



TABLE – E

2006 (In 000 Rs)

2007 (In 000 Rs)

Current Assets 88825654 84136498

Current liabilities 525040105 608810966

8.3.1.2Current RatiosA 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


00.02

0.040.06

0.080.10.12

0.140.16

0.18

2006 2007

Years

Rs in 000’s


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-F2006 2007



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

Conclusion

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

1 assets, debt stands at Rs 0.9086

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


0.9075

0.908

0.9085

0.909

0.9095

0.91

Rs in 000’s

2006 2007

years


2. Debt to Share Holder’s Equity Ratio

TABLE-G2006 2007

Total Debt 540618282 628754092

Total Equity 45177664 55063125

The debt to shareholder’s equity ratio for the previous year that is 31 st 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

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

Rs. 11.42 during the years, 2006, and 2007 respectively, to finance Habib Bank limited. In 2007


11.1

11.2

11.3

11.4

11.5

11.611.7

11.811.9

12

Rs in 000’s

2006 2007

years


the 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

2006 2007

Net Profit/loss after taxes

12700315 10084037

Total Assets 594061648 691991521

The return on total investment for the previous year that is 31st December 2006

Return on Investment Ratio =



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

This ratio shows that the Bank has earned 0.0145 Rupees for every 1 Rupee

investment in Assets in the year 2007 as compared to the 0.0213 rupees in the year

2006.

8.3.3.2 Net Profit Margin

TABLE- I

2006 2007

Net Profit after taxes 12700315 10084037

Revenue 30481703 31327064

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


0

0.005

0.01

0.015

0.02

0.025

Rs in 000’s

2006 2007

Years


Net Profit Margin =

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

Conclusion

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

contributes 0.322 to net income while in 2006 it was 0.4166.

8.3.3.1 Return on Equity (ROE)

It measures the earning power on shareholders’ book value investment. A high return

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

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


00.050.10.150.20.250.30.350.40.45

Rs in 000’s

2006 2007

Years


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

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

the 18% in the year 2007.


0

0.05

0.1

0.15

0.2

0.25

0.3

Rs in 000’s

2006 2007

Years


8.5 PROGRESS OF HBL SINCE 1998 TO 2007:

8.5

TA

BL

E:H

T

EN

YE

AR

PR

OG

RE

SS O

F H

BL

(Sou

rce

) HB

L A

nnua

l Rep

ort

2007

62,2

72

691,

992

531,

298

382,

173

177,

942

41,3

50

18,3

82

7,82

3

5,06

1

10,0

84

79,3

22

178,

684

129,

742

1,48

9

2006

52,5

30

594,

062

459,

140

349,

433

119,

587

38,9

71

17,2

04

2,92

7

6,14

0

12,7

00

66,6

56

189,

125

117,

593

1,47

7

2005

40,3

31

528,

894

432,

545

316,

882

107,

384

32,8

70

15,7

66

3,27

0

4,18

7

9,64

7

54,7

59

153,

392

118,

882

1,47

0

2004

31,1

90

487,

765

404,

629

259,

089

134,

523

23,5

88

13,7

89

2,55

2

1,48

4

5,76

3

47,4

23

162,

402

134,

090

1,46

9

2003

23,4

85

434,

932

360,

648

183,

654

158,

871

21,3

63

9,80

3

5,80

4

1,45

2

4,01

8

46,3

26

139,

515

118,

642

1,47

0

2002

19,7

07

403,

037

328,

182

167,

523

142,

878

18,5

64

11,8

11

2,45

0

2,05

4

2,03

4

38,2

29

118,

689

95,9

01

1,47

3

2001

12,8

14

333,

751

283,

445

167,

225

57,7

92

16,7

88

11,7

36

2,71

0

1,11

2

1,11

2

22,2

67

82,6

00

93,9

00

1,51

6

2000

12,5

34

328,

605

266,

052

174,

894

68,0

69

14,6

13

12,2

33

1,41

1

476

493

22,5

45

92,5

08

78,7

51

1,75

5

1999

4,51

9

305,

217

250,

858

160,

301

64,2

78

11,1

75

11,7

31

4,70

5

3,58

7

(8,8

50)

15,4

64

76,1

33

73,1

18

1760

1998

13,1

62

289,

86

237,

96 413

7,12

70,6

77

11,5

44

10,1

33

181

(291

)

1,52

1

18,0

02

70,7

00

67,3

00

1,77

3

Shar

ehol

ders

Equ

ity

&

reva

luat

ion

surp

lus

Tot

al A

sset

s

Tot

al D

epos

its

Adv

ance

s

Inve

stm

ents

(Net

of

Prov

isio

n)

Tot

al In

com

e (N

et o

f

inte

rest

cos

ts)

Tot

al E

xpen

ditu

re

Pro.

For

non

-per

form

ance

Loa

ns &

oth

ers

Pro.

For

Tax

atio

n

Prof

it (lo

ss) a

fter

taxa

tion

Hom

e re

mitt

ance

s

Impo

rts

Exp

orts

Num

ber

of B

ranc

hes

S.N

O 1 2 3 4 5 6 7 8 9 10 11 12 13 14

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,

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 paid-

up 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.

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.

Source: HBL Annual Report 2007

8.6.2 Profit Loss after Taxation



0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2003 2004 2005 2006 2007

years

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2003 2004 2005 2006 2007

years

Rs. in 000’s

Rs. in 000’s


Until 1995 the bank was consistent in its profit taxation; in 1996 it made a loss of Rs.

3, 441 million, which was followed, by a loss of Rs. 6,802 million in 1997. The bank

made a profit of Rs. 1,521 million in 1998, but in 1999, it again made a loss of Rs.

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

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

2003.In 2006 the bank made a profit of 12700, which was followed, by a profit of

10,084 in 2007.

8.6.3 Provisions for non performing loans and others


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


0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2003 2004 2005 2006 2007

yearsRs. in 000’s


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.


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

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

8.6.5 Total Expenditure


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

million from Rs.11, 811 million in 2002.The bank total expenditure for the year 2004


0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

2003 2004 2005 2006 2007

years

Rs. in 000’s

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

2003 2004 2005 2006 2007

years

Rs. in 000’s


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


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

were Rs. 158,871 million. In 2004, the bank’s net investment was Rs.134, 523 million

which decreased quite a lot. In 2005, the value of net investment is declined to

Rs.107, 384 million. In 2006 the bank’s net investment increased from the previous

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

942 million.

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.


0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

2003 2004 2005 2006 2007

years

Rs. in 000’s


8.5.8 Total Income


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

increasing at a higher rate. In addition, there is very inconsistency among the

income of the different year as depicted by the graph.


0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

2003 2004 2005 2006 2007

years

Rs. in 000’s

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

2003 2004 2005 2006 2007

years

Rs. in 000’s

Chapter – 9Chapter – 9 Findings and Suggestions 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.



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-StatementIf 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.



2. 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.



9.2 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



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.


Conclusion 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.


Bibliography Bibliography

BIBLIOGRAPHY1. 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


http://www.google.com/