Chapter – 1
Introduction of Study
CHAPTER – 1
INTRODUCTION OF STUDY
1.1
BACKGROUND OF STUDY
The Students of Institute of Management studies University of Peshawar, studying
Courses leading to Bachelors in Business Administration (BBA Hons), are required to
undergo in Internship Program of Eight Weeks duration in any National or
International Organization of repute. The Institute requires internship Report based on
the theoretical and practical learning of the Student in the organization. The Internee
is required to submit Research Report to the internship and Development Division
(R&DD) of, IMS UOP, which is properly evaluated on the basis of his/her description
and analytical capabilities by Internal and External Examiners.
To fulfill this academic requirement and being a Student of BBA (Hons), I did my
Internship in Habib Bank University campus branch Peshawar.
The concern of this report is to study and analyze the overall view of the Bank &
services offered by the bank to its customers.
Habib Bank is considered to be one of the most prominent and outstanding bank as far
its reputation and progress is concerned.
1.2
PURPOSE OF STUDY
The purpose of the report is to review and analyze the services offered by the bank to
its valued customers, and to get training in real life situations and to see how
successful organization’s management apply management skills to run their
organization. In this context, its objectives are:
1. To examine and evaluate banking operations.
2. To give an insight to the readers about the Organization.
3. To suggest feasible recommendations.
4. To improve report writing skills.
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Chapter – 1
1.3
Introduction of Study
SCOPE OF WORK
The report is concerned with the performance of the HBL university campus Branch
Peshawar. It explains various functions at the branch.
The branch performs certain banking services for its customers such as Remittances,
Deposits, Bills, and Clearing etc.
1.4
METHODOLOGY OF REPORT
Both Primary and Secondary Data were used in compilation of the report.
Methodological tools used were:
1.4.1
Primary Data

Personal Observation.

Questionnaires.

Interviews with Bank Personnel.
1.4.2
Secondary Data

Brochures of the Bank.

Bank Manuals.

Annual Reports.

Internship Reports on HBL available in Institute of Management Studies and
Institute of Management Sciences Libraries.

1.5
Websites.
SCHEME OF REPORT
This report is divided into following five sections, which are further divided into
Seven Chapters.
SECTION – I
This Section has one Chapter.
Chapter –1
This is an Introductory Chapter, which describes the Background, Purpose, Scope,
Methodology and Scheme of the Report.
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Chapter – 1
Introduction of Study
SECTION – II
This section includes the review of Habib Bank Limited. This section is comprised of
four chapters.
Chapter – 2
This chapter is an Introduction to HBL, which encompasses a brief history of banking
and overall banking sector in Pakistan in general, and the history of HBL, and its
objectives and policies in particular.
Chapter – 3
This chapter is about Organizational Review of HBL, which identifies the
Organizational Structure of the bank.
Chapter – 4
This chapter includes Departmentation and its Human Resource Management.
Chapter – 5
This chapter contains products & services offered by HBL
SECTION – III
This section has three chapters and it is about the Analysis of HBL.
Chapter – 6
This chapter includes Critical Analysis of the HBL.
Chapter – 7
This chapter includes SWOT Analysis and tows matrix.
Chapter – 8
It contains a Financial Analysis.
SECTION – IV
This section contains the concluding chapter of the report.
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Chapter – 1
Introduction of Study
Chapter – 9
It contains findings, suggestions & conclusion. At the end conclusion,
bibliography and some annexures are given.
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Chapter – 2
Introduction of HBL
CHAPTER– 2
INTRODUCTION OF HBL
2.1
EVOLUTION OF BANKING IN PAKISTAN
The pace of banking development in Pakistan has perhaps very few examples in the
world. Starting virtually from scratch in 1947, the country today possesses all range of
banking and financial institutions to cope with various needs of economy.
The area now constituting Pakistan was, relatively speaking, fairly well provided with
banking facilities in undivided India. In March 1947, there were 3496 Offices of
India Scheduled Banks out of which, as many as 487 were situated in territories now
constituted Pakistan.
The Reserve Bank of India had decided that in the interest of smooth transition it
should continue to function in newly emerging state of Pakistan up-till 30th September
1948.
The event is immediately after independence seriously strained political relations
between the two states and a point was reached when it was strongly felt that without
control on its currency and banking the newly established state if Pakistan remained
exposed to grave dangers.
Following the announcement of independence plan in June 1947, there was a rush in
banks to transfer funds and accounts. This resulted in a negative effect on banking
service in Pakistan. The banks, which had their Registered Offices in Pakistan,
transferred them to India. In effort to bring about the collapse of the new state by
pushing a deliberately policy of withdrawals, the Indian Bank’s Offices were closed
quickly. The numbers of schedule banks were declined from 487 before independence
to only 195 by 30th June 1948.
2.2
DEVELOPMENT OF BANKING IN PAKISTAN
At the time of partition, the Commercial Banks were only as 38, out of these, the
Pakistani Banks were 2, Indian Banks were 29 and Exchange Banks were 7. The total
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Chapter – 2
Introduction of HBL
deposits of Pakistani Banks stood of Rupees 880 Millions, whereas the advances were
Rupees 198 Million.
In order to regulate the growth of banking on a sound footing, the following measures
were taken to develop the banking system in Pakistan.
1. The State Bank of Pakistan, which is the Central Bank of the Country, was
established on July 1, 1948.
2. The National Bank of Pakistan was established on November 21, 1949. This bank
is to serve as an agent to SBP.
3. The Industrial Development Bank of Pakistan (IDBP) was set up on August
1,1961 with a paid up capital of Rs.50.000 Million. The Agricultural Development
Bank of Pakistan (ADBP) was set up in 1961, which provides Short, Medium and
Long Term Loans to the Farmers.
4. In January 1974, all the Commercial Banks were nationalized. The weaker
commercial banks were merged with the stronger ones and five major banking
companies were formed. MCB, ABL and UBL have again been privatized while
Habib Bank was privatized on 29th December 2006.
5. The Pakistan Banking Council was set up for coordinating the activities of the
Nationalized Commercial Banks. The Banking Council formulates policies and
guidelines for the banks.
6. Interest has been eliminated from the banking transactions since July 1, 1985. The
banks are now accepting saving deposits on profit and loss sharing basis.
Modaraba and leasing companies are also operating in Pakistan.
7. The Government of Pakistan has also liberalized the exchange and payments
procedure. The Pakistani Firms and Companies can now maintain foreign
currency accounts in Pakistan on the same basis as non-Pakistani firms and
companies can.
2.3
BRIEF HISTORY OF HBL
Habib Bank Limited (HBL), at its present position, has a long and rich history of
deeds and sacrifices. All this has been possible on the account of sustained efforts. In
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Introduction of HBL
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.
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Chapter – 2
2.5
Introduction of HBL
VALUE OF HBL
HBL is firmly grounded with a corporate philosophy that incorporates five solid
values which each individual associated with the bank abides by.
 Humility
We encourage a culture of mutual respect and treat both our team members and
customers with humility and care.

Integrity
For us, integrity means a synergic approach towards abiding our core values. United
with the force of shared values and integrity, we form a network of a well-integrated
team.

Meritocracy
At every level, from selection to advancement, we have designed a consistent system
of human resource practices, based on objective criteria throughout all the layers of
the organization. We are, therefore, able to achieve a specific level of performance at
every layer of the organization.

Team Work
Our team strives to become a cohesive and unified force, to offer you, the customer, a
level of service beyond your expectations. This force is derived from participative and
collective endeavors, a common set of goals and a spirit to share the glory and the
strength to face failures together.

Culture of Innovation
We aim to be proactively responsive to new ideas, and to respect and
reward the
agents, leaders and creators of change.
HBL after partition opened its branches throughout Pakistan to provide finance and
other facilities to the business community. The bank helped handsomely in the
construction of WARSAK dam project, Wapda, & K.D.A. by provided finance and
other facilities.
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Introduction of HBL
HBL started its journey on August 25th, 1941 and with the able guidance of its
management, dedication and hard work of its entire staff, it has so far touched the
high peaks of its excellence. It was HBL that introduced service products such as
Credit Cards, ATMs, Travelers Cheques, etc., to the Pakistani Market. Today Habib
Bank is truly the bank of the people, providing its customers convenience and
satisfaction all over the world. Habib Bank Plaza, the tallest building in Pakistan, is
the proud symbol of HBL’s leadership in Pakistan’s corporate arena.
HBL has today 1456 branches inside the country, 65 branches outside the country and
two subsidiaries. Other than this the bank has its overseas operations in 25 countries
includes 65 branches, two subsidiaries, two Joint Ventures and two representative
offices.
HBL was privatized in an open auction on 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
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Chapter – 2
Introduction of HBL
Corporation Ltd., jointly with the Central and Provincial Government for financing of
cotton. The bank always provided financial and technical support to public sector.
Bank also associated itself with large-scale projects such as Warsak Dams Project,
WAPDA, Pakistan Steel Mill, KDA etc. by providing finances and other facilities.
2.7
OBJECTIVES AND POLICIES OF HBL
2.7.1
Objectives of HBL
Objectives are the ends towards which organizational and individual activities are
directed. The goal of every manager is to create a "Surplus", and clear and verifiable
objective facilitates the measurement of the effectiveness and efficiency of managerial
actions. Objectives state the end results desired, and major objectives are usually
supported by sub-objectives. Thus, objectives form a hierarchy as well as a network.
As a Commercial Bank, Habib Bank has the following main objective:
1. Earning profits for the bank itself and for its Share Holders.
2. To promote banking business in the country.
3. To provide employment opportunities to the people.
4. To develop Industries both on Large Scale and on Small Scale in the country.
5. To provide self-employment schemes to people.
2.7.2
Policies of HBL
Policies are identified as guide to thinking in decision-making. They assume that
when decisions are made, these will fall within certain boundaries. Policies don't
require action but are intended to guide Managers in their decision commitments
when they do make mistakes.
Policy is a limit within which a decision is to be made and assure that the decision
will be consistent with and contribute to objectives. Policies tend to pre-decide issues,
avoid repeated analysis, and give a unified structure to other types of plans, thus
permitting managers to delegate authority while maintaining control. Policies
ordinarily exist on all levels of the organization and range from department policies to
minor or derivative policies applicable to the smallest section of the organization.
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Chapter – 2
1.
Introduction of HBL
Managerial Policy
Affairs of Habib Bank are controlled though President and Members Executive
Committee who are normally Senior Executive Vice Presidents of the Bank based at
Head Office. Each Region is headed by Regional Chief Executive and assisted by
Regional General Managers. Each Regional Headquarter control branches in their
area of jurisdiction.
2.
Marketing Policy
Marketing is the business function that identifies customer needs and wants
determines, which target markets the organization can best serve, designs appropriate
products, services and programs to serve these markets and calls upon everyone in the
organization to "think and serve customers". From a social point of view, marketing
links a society's material requirements and its economic patterns of response. Thus
marketing is a key factor in business success.
Habib Bank also adopts certain marketing techniques to enhance the image of the
bank. Most of the marketing takes place through various Deposit Mobilization
Schemes through advertising in Newspapers and other media and there is more
emphasis on Counter Service to have more satisfied clients who can recommend to
their associates and friends.
2.7.3
Operational Policy
Operational policies deal with the running or operation of the bank. It is about
introducing new schemes in order to improve HBL Operations and to take measures
for better services.
The operations can be divided into two:
2.7.3.1 Domestic Operations
The bank is quite successfully operating its domestic business. Habib Bank has the
largest domestic branch network amongst Pakistani Banks, which is in consistence
with the bank's policy to provide banking facilities at the doorstep across the length
and breadth of the country in conformity with the government’s socio-economic
objectives. The numbers of domestic branches as on 31.12.2006 were more than 1408.
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HBL's domestic operations are carried out by Regional Headquarters comprising of
branches under their jurisdiction. HBL also established Corporate Centers in various
Regions to catch Industrial Clients and serve them better. The Corporate Major
Centers are 12 and the Sub Centers are 64.
The bank has presently one wholly owned subsidiary namely Habib Bank Financial
Services Pvt. Ltd. It has shown improved operational results during the year.
2.7.3.2 International Operations
The bank overseas branches are continuously rendering satisfactory services and are
also contributing significantly towards channeling Home Remittances of Pakistani
Expatriates. The foreign branches as on 31.12.2006 stood as 65.
HBL has two wholly owned subsidiaries in Hong Kong and Australia. These
subsidiaries have shown improved operational results. The bank has two joint
ventures, in Nigeria and Nepal. The Habib Nigerian Bank Limited is consistently
declaring good dividend since last several years. The joint venture at Nepal,
Himalayan Bank Limited has shown good progress during its first year of operation.
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Chapter – 3
Organizational Review of HBL
CHAPTER – 3
ORGANIZATIONAL REVIEW OF HBL
3.1
ORGANIZATIONAL STRUCTURE
Habib bank is the oldest and largest bank of Pakistan and it operates the largest
network of branches in Pakistan. Historically its organization was managed on
geographical basis. But many problems raised with the passage of time and with the
growth of branches network, such as, lack of coordination among branches as well as
high offices, delay in communications, long times lapses in important decision –
making, also problem of proper monitoring, evaluation, and compensation of the
employees. The old structure was such that at the top was Head Office Karachi, after
that 4 provincial Head Quarters, then Circle Office, then Zonal Offices and in the last
were the Branches.
However, in 1997 organizational changes were made to reposition the bank and
overcome the above problems and also to give new smart and corporate shape to the
activities of the bank. The organization changed the structure on functional lines.
Thus various groups have been created to carry out different services and functions
within the bank. Following are the various groups, whish are created:
1.
Corporate & Institutional Banking Group (CIBG)
2.
Retail Banking Group (RBG)
3.
Asset remedial Management Group (ARM)
4.
International Operations & Overseas Banking Group.
5.
Finance & Audit Group.
6.
Credit policy group.
Each group is headed by the group executive and they form policies and strategies.
Each group executive is very experienced and knowledgeable person in his or her
relevant areas of specialization.
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Chapter – 3
1.
Organizational Review of HBL
Corporate and Institutional Banking Group (CIBG)
In order to fetch business from corporate bodies/big customers all over the country,
this group operates. The main function of this group is to provide better services to
corporate clients, to keep them in their fold and to avoid plugging of their business to
other banks. For this purpose, corporate centers have been established in big cities of
Pakistan, to provide quick & better services to corporate clients.
2.
Retail Banking Group
It deals with the common branches of the bank spread all over the county. It fetches to
bank spread all over the country. It fetches to bank greater but small deposits and this
group’s function is to introduce innovative products& services for the retail banking.
Some of which are Muhafiz Rupee Traveler Cheques & previous year’s Crore Pati
Deposit Scheme.
3.
Asset Remedial Management Group
The primary goal of this group is the speedy recovery and resolution of the classified
portfolio. The group aims at vigorous litigation, greater merges & consolidation of
closed/stick units and debt equity swaps to fully address the classified portfolio.
4.
International Operations and Overseas Banking Group
The overseas operations have been consolidated under international operations group.
It has chalked out country specific business revitalization strategies for important
franchises. In addition, new consumer banking products are being developed at
selected locations.
5.
Finance and Audit Group
It is independent of the business groups and look after the financial, regulatory and
management reporting of the bank. It has also implemented new audit manual to
create to increasing level and sophistication of risks involved. A new accounting and
procedures manual is also nearing completion to improve the financial, regulatory and
management reporting of the bank.
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Chapter – 3
6.
Organizational Review of HBL
Credit Policy (CPG)
CPG is staffed with industry specialists. They have implemented a new credit policy
manual to ensure merit oriented risk management based on internationally proven and
successfully banking methodology.
3.2
DIVISION OF HBL’S OFFICE
There are three types of offices in HBL.
1.
Head office.
2.
Regional Head quarters.
3.
Branch offices.
1.
Head Office
Head office of HBL is located in Karachi. It exercises overall control over the bank
and other areas of administration and operations. The head office (HO) has various
functions.
Functions
1. It formulates policies and ensures its implementation by field offices.
2. It supervises and controls operations of RHQ.
3. It deals with foreign donors.
4. Sanctioning of loans.
5. Deals with ministry of finance.
6. Recruitment, training and management of human resources.
2.
Regional Head Quarters
The number of RHQs of HBL in the country is ten.
Functions of RHQ
The functions of RHQ of HBL are:
1. To implement the policies of Head office (HO).
2. To extend the credit facilities by keeping in view all the prescribed conditions.
3. To recover/collect the existing long-term financial assistance extended by the
bank as per schedule.
4. To extend working capital facilities.
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Chapter – 3
3.
Organizational Review of HBL
Branch Offices
HBL has today 1456 branches inside the country, 65 branches outside the country and
17 subsidiaries. Other than this the bank has its overseas operations in 25 countries
includes 65 branches, 17 subsidiaries, two Joint Ventures and two representative
offices.
3.3
BOARD OF DIRECTORS
Name
Designation
Sultan Ali Allan
Chairman
R. Zakir Mahmood
President and CEO
Iain Donald Cheyne
Director
Sajid Zahid
Director
Ahmad Jawad
Director
Mushtaq Malik
Director
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Chapter – 3
3.4
Organizational Review of HBL
MANAGEMENT COMMITTEE
Table - A
Name
Designation
Functional responsibilities
Sultan Ali Allana
Chairman
R.Zakir Mahmood
President and CEO
Sima Kamil
Group Executive
Ayaz Ahmed
Chief financial officer
Zafar Aziz Usmani
Group executive
Jamil Iqbal
Chief compliance officer
Salim Almani
Group Executive
Audit
Tulu Islam
Group Executive
IT and Systems
Kashif Shah
Group Executive
Investment Banking
Nausheen Ahmad
Comapany secretary and
head of law
Sohail Malik
Group Executive
Risk Management
Nauman K.Dar
Group Executive
International Banking and
CEO, Habib allied
International Bank Plc., UK.
Abid Sattar
Group Executive
Retail and consumer
banking
Corporatre Banking
Human resource and
organizational development
Muddarssir H.Khan Group Executive
Global Operation
Faizan Mitha
Group Executive
Global Treasury
Aslam Gadit
Group Executive
Asset remedial management
Mirza Saleem Baig
Group Executive
Commercial Banking
Jamil A.Khan
Group Executive
Administration and Services
Aly Mustansir
Head of Marketing and
Brand Management
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Chapter – 3
Organizational Review of HBL
3.5
HBL’S ORGANIZATIONAL HIERARCHY
Chairman
Board of Directors
Senior Executive Vice
President
Executive Vice President
Vice President
Assistant Vice President
Officer Group-1
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18
Chapter – 3
Organizational Review of HBL
3.6 BANKING OPERATIONS OF HBL
Chairman and President
Corporate
banking Group
Assets Remedial
Management
Retail Banking
Group
Audit and
Finance
International Banking Group
3.7
Credit
Policy
DOMESTIC OPERATIONS OF HBL
RGB Group Executive
Regional Office
Zonal Offices
Branches
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Chapter – 3
3.8
Organizational Review of HBL
THE NEW SETUP
After the creation of the stated groups in HBL, now the organization hierarchy flows
as following:
Head office Karachi is at the apex then comes Regional offices after this Zonal office
comes and under each Zonal office 40-50 Branches operates. There are total 9
Regions and total 48 Zones under these Regions. Similarly total Corporate centers are
12 and total Sub-Corporate centers are 64.Head office is run by President of the bank,
in regional offices, Regional Chief Executive (RCE) sits, while Zonal Chiefs
supervises zonal offices, branches are managed by Managers Sub-Manager assist
them.
The new organizational set up gave HBL several advantages, i.e.; now different
groups concentrate on their respective functions and services, so they can work
efficiently and derive better results. Similarly, there is more delegation of powers
from the central office and the regional office can work more independently. As ‘time
is money’, therefore because of this new system, it helped in reducing the time for
important decision-making. The regional and offices can derive better strategies and
achieving the targets assigned to them.
3.9
NWFP REGIONS CONSIST OF SIX ZONES
1.
Peshawar Zone-having 43 branches.
2.
Hazara Zone- having 39 branches
3.
Malakand Zone having 52 branches
4.
Mardan Zone-having 51 branches
5.
Kohat Zone-having 43 branches
6.
D I Khan Zone-having 24 branches
Similarly there are regional offices of corporate group, Retail banking group, ARM
group and Finance and Audit group.
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Chapter – 3
Organizational Review of HBL
3.10 HBL, UNIVERSITY CAMPUS BRANCH PESHAWAR
HOK RGB
Region
N.W.F.P
Peshawar
Region
HBL,
University
Campus,
Peshawar
3.11 ORDER OF SENIORITY
IN THE HBL
Table – B: Grade Structure At Habib Bank Limited
S. No.
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.)
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Chapter – 4
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.
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General Banking and Departmentation of HBL
2. Certified true copy of the certificate of incorporation or registration (in case of
companies and registered bodies only).
3. Certified true copy of the certificate of commencement of business (in case of
public limited companies only).
4. Certified true copy of the memorandum and articles of association (in case of
limited companies).
5. Certified true copy of rules and regulations or By-laws (in case of association etc).
6. Certified true copy of the resolution of the board of Directors/Managing
Committee/Governing Body regarding conduct of the account.
7. List containing names and signatures of the Directors/office bearers duly certified
by CLA/Registration Authority.
8. Letter of partnership or certified copy of partnership deed (in case of partnership).
9. If the signatures are Shaggy (that is the person is unable to write proper and
distinct signatures) three attested pictures of the individual/s opening account are
taken.
10. Letter of employment in case of individual account opening who are employed
somewhere.
11. Students opening accounts are need to show their student card showing that they
are students of a particular institute.
4.1.3 Classification of Deposits
The deposit can be classified under three main heads.
1. Current Account
2. Saving Account.
3. Term deposit.
1.
Current Account or Demand Deposit
Current accounts are usually opened by business organizations, businessmen,
corporate, etc. There is no limit for the withdrawals in no. & amount. Current account
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or demand deposit can be withdrawn by Cheque or transferred to someone else by the
depositor at any time without prior notice to the bank.
a. Current Account is opened, on proper introduction and submission of required
document along with initial deposit prescribed from time to time. Current
Accounts are opened for individuals (single or joint), firms, joint stock companies,
local bodies, autonomous bodies, associations, educational institutions etc. and all
other cases where the accounts are to be opened under the order of a competent
court of law.
b. No profit is paid on the balances of current accounts.
c. The bank is authorized to honor, whether the account is in credit or not cheques,
bill of exchange, notes or other orders drawn, accepted, accept endorsement, act
on any instructions, and accept any receipts or other documents relating to the
account signed or made by authorized person(s) on behalf of the
firm/company/association.
2.
PLS Saving Account
For the convenience of small savers HBL offers PL S saving account. In this account
profit is paid on the average balance semiannually. These days no notice is required
for withdrawals and there is restriction of the number of with drawls.
The customer is bound to follow the rules and regulations of the bank.
a. PLS saving accounts are opened on proper introduction and submission of
required documents, along with an initial deposit prescribed from time to time for
each category.
b. PLS saving accounts are opened for individual (single or joint), charitable
institutions, provident and other funds of benevolent nature of local bodies,
autonomous corporations, companies, associations, and education.
c. There is no restriction on maintaining the upper limit of deposit and withdrawal of
amount and no. of cheques from PLS saving account.
d. Profit is calculated on daily product basis.
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e. Payment of profit will be on monthly basis subject to adjustments on declaration
of actual profit rates after six-month closings.
f. Zakat wherever application shall be deducted on valuation dates from account
having balance in excess of the exempted limit as declared for the particular Zakat
year.
3.
Term Deposit Account
In case of term deposit account the time limit period of the account is in accordance of
the different fixed deposit schemes offered by the bank and according to wishes of the
customers. The customers cannot with draw money from his/her account in
accordance and compliance of terms decided by the bank and the customer.
HBL offers 7-30 day’s special notices time deposit so that a person can make best use
of idle funds even if it is available for a week.
Similarly schemes are available for five years where profit is payable at the end of
fifth year or also available is a scheme in which profit is payable on monthly basis.
1.
PLS Khas Term Deposit
a. PLS Khas term deposits are accepted for a period ranging from one and half year
to five years in multiple of six months.
b. Profit declared from time to time is paid only once at the time of
enactment/redemption of the receipt on maturity.
c. Zakat shall be deducted only once on encashment before or after maturity.
2.
Special Notice Time Deposit
a. Profit/return is paid on daily product basis.
b. Profit on PLS SNTD is payable at the rate declared on preceding half
c. Yearly/yearly closing.
d. No profit/return will be paid after expiry of notice period if the deposit is
not
withdrawn.
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e. No profit/return is paid for pre-mature encashment before seven days or thirty
days notice, as the case may be, from the date of notice or date of issue.
4.1.4 BANK’S PROCEDURE AND INTERNAL WORKING
AFTER OPENING AN ACCOUNT
1.
Entry in Account Opened and Closed Register
Every current & saving account is numbered in numerical serial order. The account
no. allocated to the new account is written on the account opening form, specimen
signature card and cheque book requisition slip. Similarly when an account is closed
information is stored in the related registers.
2.
Supply of Deposit Slip and Authentication
The customer is supplied with pay in slip and requested to deposit the money with the
cashier, who put his signature on counter foil of the slip, which must be countersigned
by an authorized officer. This procedure also applies to all subsequent
deposit/withdrawals.
3.
Issuance of Cheque Book
Cheque Book is issued only after the account opening form has been completed in all
respects. The excise duty is recovered from the account to whom cheque book is
issued. Cheque Book series is entered in the chequebook issuance register.
4.
Send the Documents to Officer in Charge
The account opening form, specimen signature card remain in the custody of officer
in charge current/saving deposit. This officer sends “LETTER OF THANKS” to the
new account holder. Specimen signature cards and other documents are kept under the
joint custody of the manager and account/second officer.
5.
Maintaining Record of Accounts
After opening a current account, issuing deposit slip and chequebook the staff
concerned is required to:
1.
Send letter of thanks to the introducer of new account holder.
2.
Send letter of thanks to new customer in order to verify his or her address.
3.
Recording information of customers in computer through “MISYS”.
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4.
Current account holder can get his or account statement on daily basis, weekly
basis or monthly according to his or her requirement.
6.
Account Opening Forms File
This file contains all account opening form of the branch. Account opening forms of
the closed accounts are also retained in the file except that the word “COSED” is
written in hold letters across such forms. Memorandums & Articles of Association
and any particular document is filed with its account opening form. Forms are filed
according to serial number of accounts.
7.
Specimen Signatures Card File
Cards are maintained for all operational accounts according to the serial no. of the
accounts. All operational cards are kept in special cabinets designed for the purpose.
Specimen signature cards are scanned and the pictures are stored in computer through
separate software of MISYS.
8.
Maintenance of Computerized Records
After opening a new account, all rest of the maintenance of the account’s transactions
is done by the MISYS system itself. It is software that has multiple functions like
opening account, debiting, crediting, LC opening, Demand depositing etc etc.
4.2
CASH DEPARTMENT
The basic function of cash department in the bank is to receive cash from clients and
customers as well as to pay them through cheques. When the cash is received it is
deposited with the bank.
A Cheques book is issued to the customers with the help of which they are able to
withdraw cash whenever they need it. Cheque is an order drawn on bank to pay
specified amount of money to the person mentioned in the order/cheque.
4.2.1
Cheques are or the following three types
1.
Bearer Cheque
The bearer cheque can be cashed by holder of the instrument who presents it at the
counter for payment .In such case no endorsement is required.
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2.
General Banking and Departmentation of HBL
Order Cheque
If the word bearer is struck off from the cheque, it becomes order cheque. It is
encashable on the counter, but the holder must satisfy the bank that he is the proper
man, if the officer deems it necessary.
3.
Crossed Cheque
Crossed cheques are not payable in cash at the counter of the bank, but can be
collected by only the banker who would credit the proceeds. When two parallel lines
are struck on the cheque face and the word & co. are written in between these two
lines, this makes the cheque cross.
4.2.2
Procedure and precautions for cash payment of the cheque
Person transacting amount from his account is asked to sign on the back of the
cheque.
The cheque particulars are entered in the system, than the officer verifies the signature
of the drawer from specimen scanned in the MISYS system. Then he passes over the
cheque to the cashier who calls the token no. and makes payment to the bearer of the
cheque.
4.3
CD DEPARTMENT
CD Department performs very important functions in the retail banking of Habib
Bank. CD Department supervises the activities of cash department and their actions at
cash and receipt counters. The important function of CD department are maintaining
the records of saving accounts holders, their signature instructions, their balances,
from for opening of accounts, scrutiny of the computerized statements, sending of
statements to the customers and issuance of other relevant letters to the customers etc.
4.4
CLEARING DEPARTMENT
Clearing department is also very important, because sometimes cheques are drawn on
one bank and holder deposits the same in other bank for the collection of the amount.
Then clearing department performs its functions:
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4.4.1
General Banking and Departmentation of HBL
Clearing
Clearing means settlement of receipts and payments between bankers. It means
money transaction in the form of cheques. Clearing is performed between different
banks through clearing house.
4.4.2
Clearing House
A clearinghouse is an association of commercial banks set up in a given locality for
the purpose of interchange and settlement of credit. In Pakistan state bank offices or
NBP offices (incase, if SBP office not present) performs the functions of clearing
house. In Peshawar, HBL City branch performs the representative role for clearing.
All other branches of HBL send cheques for clearing to Peshawar City branch .The
officials of clearing department make entry of cheques coming from each branch in a
register (transfer delivery register). Then they arrange the entire cheque bank wise.
The representatives of all commercial banks meet at a fixed time on all the business
days of the week in the morning in SBP Peshawar, there they exchange and settle
their claims.
4.4.3
Types of clearing
a.
b.
Outward Clearing
Inward Clearing
a.
Outward Clearing
It includes cheques lodged for payment on other banks on behalf of its own clients.
Cheques are sent to clearing house through local main branch.
b.
Inward Clearing
It includes the cheques drawn on the bank by other banks and the customers receive
payments.
4.4.4
Procedure for Outward Clearing
1.
Account Number of Payee/Endorsee is written on backside of the Cheques.
2.
The instrument and paying –in-slips are separated.
3.
The instruments are sorted bank wise and branch wise.
4.
Schedules are prepared.
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5.
General Banking and Departmentation of HBL
All schedule are noted in the clearing house statement Amount of Cheques is
written in ‘delivered’ and ‘to pay’ columns.
6.
After balancing the outward clearing, the pay-in-slips are released to the C.D.
Department.
7.
After balancing a transfer debit voucher is prepared.
8.
The instruments, schedules etc. are delivered to the messenger from the main
branch.
4.4.5
Procedure of inward clearing at the drawer branch
1.
Number of instruments noted in the schedule is verified immediately on
receipt.
2.
The amounts of all the instruments are noted down and totaled. It should be
equal to the amount mentioned in the IBDA from the local main branch.
3.
The IDBA is responded crediting the account in the IBDA from the main local
branch.
4.
The amounts are released to the concerned department.
4.5
REMITTANCE DEPARTMENT
Remittance is the transfer of funds from one bank to other and from one place to
another place. HBL also provides this facility to its countrymen. It is the main
responsibility of the remittances department. Transfer of funds within the country is
also known as “Inland Remittances”.
HBL transfers money by following
a.
Telegraphic Transfer or T.T.
b.
Mail Transfer or M.T
c.
Demand Draft or D.D
d.
Pay Order
a.
Telegraphic Transfer or T.T
In T.T the order to pay is sent by Fax or Telegram. It is a faster mode of Transfer of
money. A T.T is issued when the customer urgently desires the remittance. A T.T
form is filled, providing details of the beneficiary and the place of payment. The bank
deducts its own commission, withholding tax and cost of telegram or fax.
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b.
General Banking and Departmentation of HBL
Mail transfer or M.T
M.T is also a mode of Transferring money.M.T advices are dispatched by mail.
Customer is required to fill a M.T. Application form, and pay bank commission, cost
of courier etc. along with the desired amount of money.
c.
Demand draft or D.D
Money can be sent from one place to another place by means of demand draft. A
demand draft is an order instrument by the issuing bank requiring the other branch of
the branch of the bank to pay a specified amount of money to the person on
presentation of the draft in the specified branch. A draft can be obtained by a person
who wants to send money by paying the amount of the draft exercise duty,
withholding tax and commission to the housing bank.
d.
Pay Order
Pay order is used for the transfer of money within the limits of city or it is used for
local transfer only. It is a semi-negotiable instrument, usually presented by banks.
4.6
ACCOUNTS DEPARTMENT
HBL accounts department is responsible for:
1.
Balance and Maintenance of books.
2.
Preparation of Statements.
During the course of daily business of a branch, a number of transactions take place.
Accounts department maintains a record of these transactions in computers or books
on a daily basis. For this purpose usually two books are maintained in this department.
1.
Cash book cum general ledger.
2.
Profit and Loss Account-Income and Expenditure ledger.
Balancing of cashbook means that all transactions have been properly recorded with
their respective vouchers.
Account department also prepare weekly and monthly statements to reflect the
efficiency and financial position of a particular branch.
4.6.1
Weekly Statements
Following weekly statements are submitted at the Zonal Office by the branch.
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1.
General Banking and Departmentation of HBL
Statement of Affairs
This statement includes the assets and liabilities of the branch, trends in deposits,
finances, income and expenditure of the week etc.
2.
Statement of Expenditure over Budgeted Limits
The administration of bank allocates budgets for different expenditures expected to be
incurred during the year. If any branch exceeds that limit, it has to justify the excess
expenditure and has to send a statement disclosing the reasons, at the end of each
week.
4.6.2
Monthly Statements
At the end of each month, these statements are submitted at the Zonal Office.
1.
PAK Account Reconciliation Statement
The inter branch transactions don’t involve physical transfer of funds from one branch
to another. In fact all branches have their account at HBL Head office in Karachi;
these accounts of branches are called PAK ACCOUNT of the branch. For this
account, two bulks namely Pak Account Extract and Responding Extract are kept.
Whenever a branch sends funds to another branch it is required to deliver advice to
that branch, the advice is prepared in triplicate i.e. one copy is the responding branch
advice cum voucher, second copy is Pak account department copy and third one is
issuing branch’s copy. Daily statement of all the originating entries and responding
entries is sent to PAK DEPTT; at the end of each month the PAK DEPTT. Send
reconciliation statement to each branch in order to reconcile the account as normal
account holder do with their banker.
2.
Statement of Fluctuation in Deposits
The branch is required to report at the end of the month that fluctuation of deposits
increase and decreased along with the reason of fluctuation and the type of deposit in
which fluctuation occurred.
Computerized Statement of advances
In this statement following facts are disclosed:
a.
Number and amount of new loans sanctioned during the month.
b.
Amount of installation recovered during the period.
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c.
Any irregularity in payment of installments by any borrower.
d.
Number and amount of loans adjusted during the month
State Bank of Pakistan Returns (SBP Return)
SBP return is a printed form, which must be completed and handed over by the branch
at the end of the month to Zonal office, which sends to head office a compiled
Performa of the zone for onward submission to State Bank of Pakistan. Following
information is provided in the SBP return:
1.
Total amount of advances made by the branch at the end of the month.
2.
Progress in the specific sector financing such as agriculture.
3.
Position and amount of stuck advances in the branch.
4.
Provisioning against stuck up advances.
Statement of Term Deposits
The branch is required to report the figure of term deposits issued and matured during
the month for a consolidated record at the zonal and Head office level.
Statement of Profit and Loss
This statement shows the total income earned during the month and the source of
income. In the same ways total expenditure is also reported and their nature. The
statement reports not only the profit/loss of the current month but also profit/loss
since beginning of the current year.
4.7
BILLS DEPARTMENT
Ordinary bills is a document giving the relevant details of similar goods sold but in
banking by bill, we mean the bill of exchange and other similar instrument received
for collection. The collection of cheques and bills on behalf of the customer is an
important product of almost every modern bank, which can hardly be dispensed with
because of the following reasons.
4.7.1
Function of Bills Department
a.
Out ward bills for collection

Bills/Cheques drawn on and sent to our branches.

Bills/Cheques drawn on the other banks collected through our branches.
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
Bills/Cheques drawn on other banked collected directly through them at present.
b.




General Banking and Departmentation of HBL
Inward bills for collection
Bills/Cheques received from our branches located and drawn on us..
Bills/Cheques received from our branches drawn on other banks.
Bills/Cheques received directly from other banks.
Bills/Cheques received from parties such as post parcels.
4.8
ADVANCES DEPARTMENT
The function of this department is to finance the business and individuals. The
customers can get loans in a specific manner. Credit extension is one of main activity
for all financial institutions, because it is main source of earning .The difference
between the rates at which the bank borrows and at which the bank lends is the source
of revenue for the bank.
However it is very risk, for the minimization of risk the banker usually applies the
five criteria or Five C’s of credit. Which are given below:
4.8.1
Character
The reputation for honesty and integrity of the person/organization seeking credit is
known as its character. It is the most important of the five. Lenders assess character
by looking at a potential borrower’s history of loan repayments or if new borrower
then the lender may also ask for references (firms or banks with whom the borrower
has done business in the past).
4.8.2
Capacity
The measure of a borrowers ability to live up to the terms of a credit agreement and to
pay off an obligation as promised is known as its capacity. Lender (banker) measures
it by evaluating the statements of assets and liabilities on the credit application of the
borrower.
4.8.3
Collateral
The security for the loan usually an asset with enough that it could be sold to satisfy
the obligation-is called collateral.
4.8.4
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Capital means the financial resources that a borrower has available to assure the
lender that the credit is secure. For this, the creditor looks at a business’s financial
statements or an individual’s credit application.
4.8.5
Conditions
It refers to the current economics environment. It also affects the borrower’s ability to
repay the loan.
4.9
ADVANCE OF HBL
1.
Over Draft
2.
Cash Credit
3.
Demand Loans
4.
Agriculture financing
5.
Staff Financing
1
Over draft
An overdraft is the right given by bank to its customer to draw in excess of his current
account up to a fixed limit. This facility is usually given to proven loyal customers.
The interest is charged only on the negative balance in the customer’s account. For
this facility, bank has prescribed forms and after filling by the customer the bank
scrutinizes the application and the financial statement, position credit worthiness of
the client, after that, bank sanctions overdraft. Over draft is advantageous to both
banker and customer such that bank earns profit or interest and the customer also gets
the funds for his business development.
2.
Cash Credit
Cash Credit is advanced to commercial industrial concerns either against pledges or
hypothecation of goods and products etc. The bank allows the business firm to borrow
up to a certain limit either in lump sum or in installments.
3.
Demand Loans
IT is a long-term loan, usually advance made to the borrower in lump sum, for
meeting the long-term capital requirements of the borrower. These are secured by
pledging real estates property, plants, machinery, stocks, and bonds etc. These are
mostly development loans for setting up and developing of industries etc.
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4.
General Banking and Departmentation of HBL
Agricultural Finance
As Pakistan is an agro-based country and agriculture is the important sector of
economy. HBL also makes advances to this sector of economy in two ways:
Production Financing is made for the purchases of seeds, pesticides and chemicals etc.
Loans are paid in lump sum, but its duration is short one.
Development Financing is made for the purpose of purchasing farm machinery, and
development of barren lands. This is long-term facility and is paid in installments.
5.
Staff Financing
HBL also provide financing facilities to its staff; help them to fulfill their needs.
These loans are given for different purposes.
4.10 FOREIGN EXCHANGE DEPARTMENT
Foreign exchange department is also very important department of a bank. In HBL
foreign exchange department provides different kinds of services to its customers. It
includes opening of foreign currency accounts, business of U.S Dollar bonds,
remittance in foreign exchange etc, and other relevant services.
4.10.1 Foreign Currency Accounts (FCAS)
Foreign currency accounts were started in 1991.The freezing of FCAs in 1998 due to
sanctions on Pakistan, gave banking industry an irreparable loss. This created distrust
among clients/people and their confidence evaporated on the banking industry. On
July 14, 1998 Habib Bank along with other banks adopted new rules for FCA’s on the
directives of SBP. Only designated branch can deal in FACs.
1.
To keep smooth operation. It is decided to accept FCAs in US dollar, Japanese
yen, and pound sterling only.
2.
The deposit can be opened from, residents & non-residents including Pakistani,
& foreign nationals.
3.
Foreign currency Deposit can be accepted in saving & in term i.e. 3, 6 or 12
month only.
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4.
General Banking and Departmentation of HBL
In FC saving account minimum limit is USD1, 000, D.M1500 and POUND
Stg.500 & in term deposit the minimum limit is USD 500,DM 7500 and Pound
Stg. 2500.
4.10.2 Converted Rupee Saving Deposit (CRSD)
As stated earlier, that due to freezing of FCAs, the banks suffered a lot. The banks
also introduced certain services or products to counter this problem. In this regard,
HBL has introduced CRSD in June, 1998.The salient features of this scheme:
a.
Profit calculated on daily basis.
b.
Profit is paid @ 12.5%p.a on quarterly basis.
c.
Minimum initial deposits for this scheme are Rs 50,000.
d.
There is no limit on withdrawals except that if minimum balance falls below Rs
50,000.
e.
So this scheme has provided a bit relief to the FCAs holders after that critical
period.
4.10.3 Remittance in Foreign Exchange
HBL also provide opportunities to its customers to transfer their funds from one
country to other through forex department. HBL provides this facility through FDD,
FTT, and FMT etc. Also HBL recently has adopted SWIFT system, which is the fast
system for such transactions.
4.10.4 Special U.S Dollar Bonds
HBL’s foreign exchange department also deals in the issuance of special U.S Dollar
bond (3,5, and 7 years maturities). The salient features of these bonds are.
1.
The bonds are issued in U S Dollar in denomination of US$ 100,1000,10,000
and 100,000 for a period of 3 , 5, and seven years.
2.
The bonds may be Registered or bearer bonds.
3.
These bonds can be purchased on payment of the value in U.S Dollar or can
also be issued to FCAs holders.F.C certificate of investment (COI) holders and
bondholders etc.
4.
These bonds are exempted from levy of wealth tax for the period for which
such bonds are hold until maturity of such bonds.
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5.
General Banking and Departmentation of HBL
Also exempt from income tax and Zakat deductions as long as the holders hold
these bonds.
6.
Profit is paid on as:
For bond of 3 years maturity: Six months LIBOR on the day proceeding the date of
payment+2%
For bond of 5 years maturity: LIBOR+3%
For bond of 7-year maturity: LIBOR+4%
1.
The profit is paid in U.S dollar.
2.
The bonds are acceptable as collateral for raising loan in Pak. Rupees.
HBL though its foreign exchange department is providing very important services to
its local customers as well as Pakistan living aboard. HBL’s services are beneficial for
students, expatriates and businessmen equally and also serving the economy of the
country at the same time.
4.11
MISYS AT HBL
Management Information System (MISYS) is a collection of tools that provides
information to the manager to facilitate that person’s decision-making process.
The basic need of MISYS is to get and utilize information for quick decision-making
thus reducing time factor and competitor’s actions.
In HBL all branches, which are computerized have computers with each department
in charge, which are also linked with main server, where all data is stored; although,
staff performs tradition file processing too. The main server is also linked with HOK
can get direct information and the branch also sends them statements in CD or
cartridge. MIS department prepares:
a.
b.
c.
Report of daily basis cash on hand.
Weekly statements of affairs for SBP return.
Weekly Deposit/Advance/Agriculture finance report to RHQ.
d.
Consolidate position currency wise for Foreign Exchange department.
Quarterly statements of size wise deposit statement.
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General Banking and Departmentation of HBL
CHAPTER - 5
HBL PRODUCTS AND SERVICES
In order to provide innovative financial products and services at competitive prices
Habib Bank Ltd. offers wide range of banking services and products. These services
/products include:
1.
Corporate Banking
2.
Investment Banking
3.
International Banking
4.
Commercial Banking
5.
Retail Banking.
The following are brief descriptions of various products and services offered by HBL
to its customers:
5.1
CORPORATE BANKING
Corporate Banking provides financial institutions a way to deliver a complete set of
online money movement services to corporations.
5.1.1
Cash Management
Cash management is the strategy by which a company administers and invests its cash
or controls its cash collections.
5.1.2
Trade and other Finances
It is the strategy by which a company administers and invests its financal resources
and trade.
5.2
INVESTMENT BANKING
Habib Bank Limited (HBL) has positioned itself to be a leader across all investmentbanking products from mergers and acquisitions and strategic advice to Equity Capital
Markets, Debt Capital Markets, Private Placements and Leveraged Finance.
HBL’s Investment Banking capabilities are designed to leverage its large capital base,
product expertise and human capital to help its clients in meeting their strategic and
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General Banking and Departmentation of HBL
operational objectives. HBL Investment Banking Division is well positioned to
service even the most sophisticated Investment Banking client.
HBL’s Investment Banking team is equipped to work on the following types of
transactions on a domestic or cross-border basis:
1.
Mergers, Acquisitions, Divestitures, Spin-offs, Equity Carve-Outs, Leveraged
Buyouts, Strategic Alliances, Joint Ventures and Privatization.
2.
Private Equity, Merchant Banking, Venture Capital and Financial Sponsors.
3.
Initial Public Offerings, Secondary Offerings and Equity Private Placements.
4.
Domestic Bonds, Euro Bonds, Loan Syndications (> one year), Medium Term
Notes (TFCs), High Yield, term Loans and Debt Private Placements.
5.
Structured Products, Project Finance, Asset Backed Securities and Lease
Finance.
6.
Asset Management Companies and Funds.
5.3
INTERNATIONAL BANKING
International Banking offers investment services to international clients living both in
and outside of the Pakistan.
1. Trade Finance: Trade Finance involves the management of money, banking,
credit, investments, and assets for international trade transactions.
2. Correspondent Banking: Correspondent banking allows foreign banks to conduct
business in different countries (having affiliation with HBL) and provide services for
their customers in areas where the bank does not maintain a physical presence.
3. Home Remittances: Transfer of money from abroad/worldwide to Pakistan.
4. Cash Management Services
Maintenance of cash position: Analyzing daily banking activity to maximize interest
earnings. Monitoring appropriated funds to insure accurate and timely posting.
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Chapter – 4
General Banking and Departmentation of HBL
Implementation and maintenance of new legislation: Working with technical staff
to comply with legislative requirements.
Lending: (Loans) Disposing of money or property with the expectation that the same
thing (or an equivalent) will be returned.
5.4
COMMERCIAL BANKING
The Commercial Banking at Habib Bank Limited focuses on small and medium sized
businesses. This segment is the traditional stronghold of HBL with proven expertise
and market knowledge.
Units dedicated to service small and medium sized business are located at Karachi,
Lahore, Faisalabad, Gujranwalla and Sialkot. Each unit has Relationship managers
with in-depth knowledge of the market. These relationship managers assist existing
and potential customers with their financial needs.
1.
Finance for Working Capital:
2.
Trade Finance Facilities:
3.
Finance for Capital Investment:
4.
General Products
5.
Other products & services
6.
Investment assistance (A.I)
5.4.1
Finance for Working Capital
i.
Running finance: for Working Capital requirements. (RF)
ii.
Cash finance: for Inventory financing. (CF)
5.4.2
Trade Finance Facilities
Export finance
i.
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Finance against packing credit: for pre-shipment requirements (FAPC)
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Chapter – 4
General Banking and Departmentation of HBL
ii.
Finance against foreign bills: for post-shipment requirements (FAFB)
iii.
Foreign currency export finance: Dollar financing for pre & post shipment
requirements (FCEF)
4. Foreign bills purchase: for financing of export bills (FBP)
Import Finance
i.
Finance against trust receipt: for financing imported goods (FATR)
ii.
Finance against imported merchandise: for financing imported goods
(FIM)
iii.
Foreign currency import finance: Dollar financing for import requirements
(FCIF)
iv.
Letter of credit: for importing inventory & capital goods (LC)
5.4.3
Finance For Capital Investment
i.
Demand finance: medium term loans for capital expenditure (DF)
ii.
Leasing: for financing capital expenditure.
General Products
1.
Letter of Guarantee (LG)
2.
Bid & Performance Bonds
3.
Mobilization Advance Guarantees
Other Products and Services
1.
Commercial Day to Day Banking: There are a wide range of accounts and
services to help you manage your money. We offer:
2.
Current Accounts: Non-interest bearing account for your daily banking needs.
3.
Cash Management Services: Giving you the convenience of cash handling.
4.
Habib Bank Easy Access: Real time “online banking” at commercial centers
for customers online transfer/deposit of payments.
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Chapter – 4
5.
General Banking and Departmentation of HBL
hblE-Banking: Habib Bank Limited has launched a product “HBL e-bank”
which allows 24 hour access to accounts through internet banking, and PC
banking.
6.
ATM: Now, adding more convenience, the customers can also use the ATMs
of other partner banks.
Investment Assistant (IA)
IA has been created specifically to assist expatriate Pakistanis who are interested in
investing in Pakistan. Using Commercial Banking as a platform, we will be providing
information of legislative, regulatory and financial nature to prospective investors to
help them setup their businesses in Pakistan.
5.5
RETAIL BANKING
Retail banking is typical mass-market banking where individual customers use local
branches of larger commercial banks. Overall services offered by HBL include:
1.
Habib Bank Auto Finance
2.
Habib Bank flexi loans
3.
hbl Phone banking.
4.
Current Account
5.
Profit & loss sharing
6.
Payment of utility Bills
7.
Value Visa Debit Card
8.
Lifestyle
9.
House Finance
10.
HBL Credit card
11.
Lockers
12.
Hajj/ Umra services.
I will discuss services offered by HBL in university campus Branch, university of
Peshawar.
5.5.2
Habib Bank Flexi Loans
Habib Bank Flexi Loans is a personal loan product, which is available for salaried
individuals for a variety of reasons. Whether it is for a child’s education, a much
needed vacation, a daughter’s wedding or even just a shopping spree, HBL Flexi
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Chapter – 4
General Banking and Departmentation of HBL
Loans is a flexible financing scheme which can actually provide the much needed
cash to fulfill all such requirements.
Salient Features of HBL Flexi Loans
1.
Low Mark-ups leading to affordable monthly installments. Mark-up slabs vary
for various categories of salaried individuals
2.
Financing from Rs. 10,000 to Rs. 500,000/-
3.
Available throughout Pakistan from over 400 designated Habib Bank branches
4.
Tenures ranging from 12 to 60 months
5.
Low Processing Charges
6.
Full Credit Life Insurance.
5.5.3
hblE bank
Table – C:
hblE Bank online Branches
1.
All
2.
Helpdesk
Application Process
Security Features
PC Banking
Internet Banking
hblE bank Is Complete
customer’s
banking needs
are
covered in
a
single user
interface.
hblE Bank is convenient
Access customer’s accounts from your desktop any time any where across the globe
and avoid the hassles of branch banking.
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Chapter – 4
3.
General Banking and Departmentation of HBL
hblE bank is economical
All it takes is a Dial up to the Bank or access hblE bank site. No extra charges, no
new hardware / software and no more frequent visits to the Bank and the time wasted
in arranging appointments, traveling, parking and queuing at the Bank for ordinary
money management requirements.
4.
hblE Bank Improves Fund Management
Latest information of customer’s company / personal account(s) both in Rupees and
other currencies on your desktop computer provides a great facility to manage
customer’s funds flow in a more efficient manner. Customer can check whether you
have sufficient funds in customer’s account for the present day’s needs or customer
have to arrange funds from other account(s) / resources to meet customer’s needs.
5.
hblE Bank Improves Working
Effective management of excess cash float, accelerated accounts management,
immediate reconciliation and electronic filing saves time, space and allows easy
retrieval thus improving working quality and control.
6.
hblE bank is secure
Uncompromised security features supported by carefully controlled set of private
passwords only permits authorized persons to access hblE bank from office / home.
The hblE bank customers also have the option to decide the access rights of their
users to access / manage their e-banking activities by using their private passwords.
For more details, please click Security Features.
7.
hblE bank IS User Friendly
It is designed with you in mind. Simple step-by-step processes show you how to use
it. An extensive on-screen help is also available in the system besides the formal
documentary guidance and assistance/training provided by the Bank to the hblE bank
users.
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Chapter – 4
8.
General Banking and Departmentation of HBL
hblE Bank Ensures Confidentiality
The inherent high degree of data encryption and authentication features in the system
ensures absolute data integrity of all value transactions / information routed to or
received from the Bank, giving the user complete peace of mind.
5.5.4
Current Account
Deposit Slab
Minimum Balance: 1000 Rs
Eligibility:
1.
All
Pakistani’s
Resident/Non-Resident,
Individuals
(Single-Jointly)
Companies/Firms etc. can open and operate the Account.
2.
Any Foreign National Individuals (Single-Jointly) having valid Resident
Pakistan VISA/Work Permit can open and operate the Account.
Features
1.
Account can be OPENED with Minimum Balance Rs. 1000/- with no
maximum limit.
2.
Checking Account
3.
No profit is paid.
4.
Service Charges Rs. 52/- per month if average balance is less than Rs. 20,000/-
5.
Statement of Account dispatched on quarterly basis or as requested.
6.
There is no restriction for withdrawals of amount and number of cheques.
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Chapter – 4
5.5.5
General Banking and Departmentation of HBL
Profit and Loss Sharing
Table – D
Profit and Loss Sharing
PLS saving account
PLS –7/30 days special notice time & PLS
PLS term deposit receipt (PLS TDR)
PLS KHAS term deposit receipt (PLS KHAS TDR)
PLS special saving deposits (SSD
F.I TDR (3 months financial institution TDR)
PLS monthly income scheme
*rate of return on PLS deposit July-Dec 2005.(3 years)
5.5.6
Payment of Utility Bills
Habib Bank also provides payment of utility bills services to its valued customers.
5.5.7
HBL Debit Card
Debit cardholders. Your Card entitles you to discounts and savings on your purchases
at your favorite outlets. Thus, not only do you enjoy convenience, safety and
international acceptability on your Card, but also you can save on your daily
purchases. So, make each shopping spree exciting by availing Value offers at our
partner shops and outlets.
5.5.10 HBL Credit Card
Habib Bank MasterCard opens a world of convenience for customers. Be it shopping
or traveling or medical expense, HBL MasterCard sets customer free from the hassles
of carrying cash on hand.
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Chapter – 4
General Banking and Departmentation of HBL
It gives customers Convenience, security, affordability, cash advance,
balance,
transfer facility and internet shopping
Facilities
1.
Worldwide acceptability
2.
Up to 30% of your spending limit as cash advance
3.
Travel accident insurance coverage worth Rs. 2.5 million
4.
Photo feature to help avoid misuse.
5.5.11 Lockers
Habib Bank also provides locker facilities to its valued customers at very reasonable
charges.
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Chapter – 4
General Banking and Departmentation of HBL
5.5.12 Hajj/ Umra Services
Habib Bank also provides Hajj / Umra services to its customers. All branches of
Habib Bank Limited are now equipped with special Hajj/ Umra customer, where one
cannot only get Hajj/ Umra forms but helpful officers assist in filling in the relevant
details.
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Chapter – 6
Critical 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.
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Chapter – 6
9.
Critical Analysis
Employees also complaint that employments and promotions are made on
favoritism and nepotism.
10.
There is dearth of innovation as compared with foreign banks, private banks or
international banks. That is, with banks of this much caliber it should offer
more products and services.
11.
Although in HBL, there are computers in different offices, but they are not
utilizing this tool in full capacity and are using it for typing and calculation
only.
12.
Counter services are not satisfactory and usually process at counter takes more
time, than it should have.
13.
Branch’s internal seating arrangement and environment is also not satisfactory
in most of the branches.
14.
Similarly for customers, usually less sitting places are available and that are
also in deteriorate condition, furniture is also not neat and clean in most of the
branches.
15.
The necessary stationary for the use of customers are also not adequate at the
peak hours.
16.
Brochures are also found to be available in lesser quantities and usually not
provided in time to customers.
17.
Informing customers (i.e. bank statements etc) are also done at long intervals (6
months), which is too long interval.
18.
The behavior of the staff is also not according to the marketing approach to
words the customer. They usually behave in very bureaucratic way; they are
not providing personalized banking, as the new private banks do.
19.
The employees of the bank are also experienced but most of them are not well
educated i.e. most of them are graduates but they are not aware of the modern
business administration knowledge and updates.
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Chapter – 6
20.
Critical Analysis
Similarly the outlook of the staff is also orthodox and don’t present to the
customers a smart image of the bank but rather presents a dull image, unlike
private banks where presentation style is also of great importance.
21.
The bank lacks an information center, wherefrom the researches can get data.
Even there is so much lack of information, that at branch level the employees
are not aware of the basic decisions and information.
22.
This is in relation to the above problem; there is communication problem,
between different groups within the bank. Like problem of communication
exists between the lower staff, lower management, middle management and
upper management, with each level is confined to itself and not aware of the
lower level than its own level.
23.
One problem is also that in HBL, there are employees, who have no work at all
that is, it has some surplus employees, but there is not clear policy about their
fate and this creates confusion and uncertainty among all employees.
24.
There is also problem of politico-economic situation of the country; this
problem is so for all financial institutions of the country.
25.
The freezing of FCAs has also affected the confidence of people on the
banking sector in particular and HBL in general
26.
There are also culture hurdles, which are in the way of banks like, provision of
services to ladies especially in backward areas, HBL has done nothing in this
field, other wise it could have a new segment of customers.
27.
There is also absence of a proper database, and in this era of information
technology, it is a tragedy that a huge organization like HBL doesn’t have a
proper database system, which can help the bank and the bank could improve
its services based on this.
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Chapter – 7
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.
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Chapter – 7
SWOT Analysis
12.
HBL has the goodwill of the people and it is also an asset to it.
13.
Has presence in all parts of the world. Thus also providing services to
Pakistanis outside the country.
14.
Offer attractive schemes and more saving for customers from time to time.
15.
HBL’s credit card is more acceptable than any other Pakistani bank credit card.
16.
Bank’s management has the motivation to make it best bank of the country.
7.2
WEAKNESSES
1.
At present HBL has narrow product line and offers very little for the
customers.
2.
This is due to the lack of proper and continuous R& D.
3.
Marketing skills of the bank are good but they have little presence at different
medias.
4.
The lower level management lacks clear direction and is not having the
managerial depth.
5.
Employees are lacking motivation.
6.
They also fear of downsizing.
7.
Have more employees, causing financial burden on the bank.
8.
Bank is not utilizing its IT tools to its full limit and thus reducing the
efficiency.
9.
Problem of unionism from employees.
10.
Highest number of branches, affecting the maintenance of consistency and
same working atmosphere at everywhere.
11.
Branch’s internal environment don’t presents smart image of the bank in most
of the cases.
12.
Communication gap between different levels of management.
13.
Most of the bank staff is computer illiterate.
14.
More complicated and long procedure of account opening then any bank in the
country.
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Chapter – 7
SWOT Analysis
7.3
OPPORTUNITIES
1.
Add new products/services to its product line.
2.
Bank should take interest in the new market segments like IT business,
software business etc.
3.
A big opportunity is to become innovator in introducing” Internet Merchant
Accounts” in the country.
4.
Extending banking hours and providing more on branch facilities to customers.
5.
Increasing the ATMs to more locations.
6.
Increasing credit facilities to lower groups, thus reducing the risk of loss and
also improving the image of the bank.
7.
If new schemes are introduced for the overseas Pakistanis, then bank can get
the business of remittances more than any other bank or ”Hundi Business”.
8.
In December 2006 the bank is privatized and the opportunity is there to capture
the market because in private sector the bank can do better than in government
sector. As all over the World Bank is usually of private nature.
7.4
THREATS
1.
Increasing no. Of private/foreign banks in the country.
2.
Global technological advancement.
3.
Political –economical situation of the country.
4.
Reduction in the business activities in the country.
5.
Reducing rates of the savings in different segments of people.
6.
Deteriorating confidence of people in banks.
7.
Uncertainties of the investors.
8.
Provision of better services by the private banks.
9.
Lacks of consistency in Govt. Policy.
For SWOT analysis, we can conclude that the management of the bank should adopt
systematic planning for the bank’s growth, taking with them all management levels of
the bank, discover new segment of the customers, offering newer schemes for its
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Chapter – 7
SWOT Analysis
customers. Similarly HBL has more customer and their needs, then it will become
again the market leader.
7.5
TOWS MATRIX
Strengths
Weaknesses
1-Has market leadership in providing
products and services to the
customers over the years.
2-Has experienced, world-class top
management.
3-Has more branches and therefore
accessible to more potential
customers than any other bank.
4-Staff is rich in experience.
5-Have more deposits than any other
bank in the country.
6-Largest customer base in the
country.
7-It has modern technology and
resources to cater to its customers.
1-At, present HBL has a narrow
product line and offers very little for
the customers.
2-This is due to the lack of proper and
continuous R& D.
3-Employees are lacking motivation.
4-They also fears of downsizing.
5-Communication
gap
between
different levels of management.
Opportunities-O
S O Strategies
W O strategies
1- Bank should take interest in
the new market segments like
IT business, software business
etc.
2-Increasing the ATMs to
more locations.
3 Add new products/services
to its product line.
4-Extending banking hours &
providing more on branch
facilities to customers.
1-Improve and diversify the current
products (S6, O3)
2-Improve its products/services to its
product line in order to maintain its
market leadership in providing
products & services to the customers
(S1, O3)
1-Introduce new products/services to its
product line (W1, O3)
Threats – T
1- Increasing number of
foreign/private banks in the
country.
2- Deteriorating confidence of
people in banks.
3-Politico-economical
situation of the country
4-Lack of consistency in Govt.
policy.
5-Global technological
advancement.
ST Strategies
1-To motivate skilled management,
so that they can compete in their
corresponding competing sector (S3,
T3)
WT Strategies
1-Start new employees’ benefit plan
(W3, T2)
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Chapter – 8
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
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Chapter – 8
Analysis of financial ratios
specific aspects of an organization’s financial position, one or two ratios may be
sufficient.
The financial statements being compared should be dated at the same point in time
during the year. If they are not, the effect of seasonally may produce erroneous
conclusions and decision.
1.
It is preferable to use audited financial statements for ratio analysis. If the
statements have not been audited, there may be no reason to believe that the
data contained in them reflect the organization’s true financial conditions.
2.
When the ratios of one organization are compared with those of another or with
those of the organization it self over time, result can be distorted due to
inflation. Inflation can cause the book values of inventory and depreciable
assets to differ greatly from their through replacement values.
8.3
GROUPS OF FINANCIAL RATIOS
Financial ratios can be divided for convenience into the following groups:
1.
Liquidity ratios
2.
Debt ratios
3.
Profitability ratios
Liquidity, activity and debt ratios primary measure risk. Profitability ratios measure
return. In the near term the important elements are liquidity, activity and profitability,
because these provide the information that is critical to the short-run operation of the
organization.
8.3.1
Analyzing Liquidity
Liquidity of the organization is measured by its ability to satisfy its short-term
obligations as they come due. Liquidity refers to the solvency of the organization
overall financial position-the case with which it can pay its bills.
The two basic measure of liquidity are:
1.
Networking capital.
2.
The current ratios.
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Chapter – 8
Analysis of financial ratios
TABLE – E
2006 (In 000 2007 (In 000 Rs)
Rs)
Current Assets
88825654
84136498
Current liabilities
525040105
608810966
8.3.1.2Current Ratios
A measure of liquidity calculated by dividing the organization’s current assts by its
current liabilities i.e.
Current ratios=current assets/current liabilities.
The current for the previous year that is 31st December 2006.
Current ratio =88825654/525040105
Current ratio=0.170
The current ratio for the year that is 31st December 2007.
Current ratio=84136498/608810966
Current ratio= 0.138
0.18
Rs in 000’s
0.16
0.14
0.12
0.1
0.08
0.06
0.04
0.02
0
2006
2007
Years
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Chapter – 8
Analysis of financial ratios
Conclusion
The ratio is showing that in 2006 for every Rs 1 of liabilities the bank had Rs. 0.170
of assets as compared to 0.138 rupee for every 1 rupee in the year 2007. The
liquidity ratio of the bank has declined but it is not at all danger sign if we consider
the economics ups and downs that affected the industry as a whole.
8.3.2 Analyzing Debt
The debt position of an organization indicates the amount of other people’s money
being used in attempting to generate profits. In general, the financial analyst is most
concerned with long-term debts, because these commits the organization to pay
interest over the long run as well as eventually repaying the principal borrowed.
Because creditors claims must be satisfied before the distribution of earning to
shareholders & prospective shareholders pay close attention to degree of indebtedness
and ability to repay debts. Lenders are also concerned about the organization’s degree
of indebtedness and ability to repay debts, because the more indebted the
organization, the higher the probability that the organization will be unable to satisfy
the claims of its creditors.
Management obviously must be concerned with indebtedness in recognition of the
attention paid to it by the stockholders and the increased interest in keeping the
organization solvent.
There are two general types of debt measures:
1.
Debt to total Assets ratio.
2.
Debt to share holder equity ratio.
8.3.2.1 Debt to Total Assets Ratio
The debt ratio measures the properties of the total assets financed by the
organization’s creditors. The higher this ratio, the greater the amount of other people’s
money being used in an attempt to generate profits.
Debit ratio=Total liabilities/Total assets
TABLE-F
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Chapter – 8
Analysis of financial ratios
2006
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
0.91
0.9095
Rs in 000’s
0.909
0.9085
0.908
0.9075
2006
2007
years
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.
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Chapter – 8
Analysis of financial ratios
Debt to Share Holder’s Equity Ratio
2.
TABLE-G
2006
2007
Total Debt
540618282
628754092
Total Equity
45177664
55063125
The debt to shareholder’s equity ratio for the previous year that is 31st December
2006.
Debt to equity Ratio=Total Debt/Total Equity
Debt to equity Ratio=540618282/45177664
Debt to equity Ratio=11.966
The debt to equity Ratio for the year that is 31st December 2007
Debt to equity Ratio=628754092/55063125
Debt to equity Ratio=11.42
12
11.9
Rs in 000’s
11.8
11.7
11.6
11.5
11.4
11.3
11.2
11.1
2006
2007
years
Conclusion
This 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
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Chapter – 8
Analysis of financial ratios
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
Net Profit/loss
taxes
Total Assets
after
2006
2007
12700315
10084037
594061648
691991521
The return on total investment for the previous year that is 31st December 2006
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Chapter – 8
Analysis of financial ratios
Return on Investment Ratio =
Pr ofit / Loss after Taxation
Total Assets
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
0.025
Rs in 000’s
0.02
0.015
0.01
0.005
0
2006
2007
Years
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
8080
2006
2007
Net Profit after taxes
12700315
10084037
Revenue
30481703
31327064
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Chapter – 8
Analysis of financial ratios
The net profit margin for the previous year that is 31st December 2006
Net Profit Margin =
Net profit after taxes
Re venues
Net Profit Margin Ratio=12700315/30481703
Net Profit Margin Ratio=0.4166
Net Profit Margin Ratio for the year that is 31st December 2007
Net Profit Margin Ratio=10084037/31327064
Net Profit Margin Ratio=0.322
0.45
0.4
Rs in 000’s
0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
2006
2007
Years
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.
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Chapter – 8
Analysis of financial ratios
TABLE- J
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
0.3
Rs in 000’s
0.25
0.2
0.15
0.1
0.05
0
2006
2007
Years
Conclusion
This ratio shows that there is 28% return on equity in the year 2006 as compared to
the 18% in the year 2007.
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8080
12,534
2000
Internship Report On Habib Bank Ltd.
Pro. For non-performance
8
1,521
Profit (loss) after taxation
Home remittances
Imports
Exports
Number of Branches
Number of staff
10
11
12
13
14
15
(8,850)
3,587
4,705
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,
69
1760
23,096 23,033
1,773
67,300 73,118
70,700 76,133
18,002 15,464
(291)
Pro. For Taxation
181
10,133 11,731
11,544 11,175
9
Loans & others
Total Expenditure
interest costs)
Total Income (Net of
7
6
70,677 64,278
(Net
of Provision)
Investments
(Net of
5
Provision)
137,124 160,301 174,894
Advances
22,779
1,755
78,751
92,508
22,545
493
476
1,411
12,233
14,613
68,069
266,052
4
237,964 250,858
Total Deposits
3
289,862 305,217 328,605
4,519
1999
Total Assets
& revaluation surplus
Shareholders Equity 13,162
1998
19,352
1,516
93,900
82,600
22,267
1,112
1,112
2,710
11,736
16,788
57,792
167,225
283,445
333,751
12,814
2001
23,485
2003
31,190
2004
40,331
2005
46,326
4,018
1,452
5,804
9,803
21,363
47,423
5,763
1,484
2,552
13,789
23,588
54,759
9,647
4,187
3,270
15,766
32,870
19,005
1,473
95,901
18,800
1,470
18,625
1,469
16,314
1,470
118,642 134,090 118,882
118,689 139,515 162,402 153,392
38,229
2,034
2,054
2,450
11,811
18,564
142,878 158,871 134,523 107,384
167,523 183,654 259,089 316,882
328,182 360,648 404,629 432,545
403,037 434,932 487,765 528,894
19,707
2002
TEN YEAR PROGRESS OF HBL (Source ) HBL Annual Report
2
1
S.NO
8.5 TABLE:H
14,572
1,477
117,593
189,125
66,656
12,700
6,140
2,927
17,204
38,971
119,587
349,433
459,140
594,062
52,530
2006
14,552
1,489
129,742
178,684
79,322
10,084
5,061
7,823
18,382
41,350
177,942
382,173
531,298
691,992
62,272
2007
Chapter – 8
Analysis of financial ratios
8.5 PROGRESS OF HBL SINCE 1998 TO 2007:
Chapter – 8
Analysis of financial ratios
which is little bit, increased in 2007 i.e. Rs. 79,322 million. The number of branches
of the bank is increasing slowly from 1989 to 1996. But from the year 1998, perhaps
due to mergers and closures of branches, it is on the decreasing, Similar is the position
of the number of staff which was on decreasing from 1998 to 2007 and this sudden
decrease of near about 8000 is being shown by the annual report. This drastic
decrease occurred due to the offer of Golden Hand Shake to the staff by the
management of the bank. This was done for right sizing of the bank in order to cut the
administrative cost, which was on very high side.
The expenditure section of the annual report shows that it was running on the
increasing side from the year 1998 to 2000. Investment of the bank is on increasing
trend. Total deposits of the bank are also on upward trend. Reserve funds have also
increased in the year 2007.A sum of Rs 0.551 billion has been injected in to the paidup capital of the bank in the year 2000. In 2004, 2005 the bank’s expenditure was
increased i.e. Rs. 13789 million and Rs. 15766 million, which was increased in 2006
i.e. Rs. 17,204 million. In 2007 it again increased to Rs. 18,382 million.
However HBL is still one of the biggest banks of the country and if proper utilization
of SWOT method is made, the bank can regain its market share, which was previously
near about 54% and now it is approximately 20%.
This bank is the oldest bank of the country and it has played a very vital role in the
economy of Pakistan it has provided lubricant to the wheel of economy of Pakistan, it
has provided finances to the various sector of the economy e.g.

Industrial sector.

Agricultural sector.

Commercial sector

Agro base industries to the customer and to the

Salaried class.
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.
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Chapter – 8
Analysis of financial ratios
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.
70,000
60,000
50,000
Rs. in 000’s
40,000
30,000
20,000
10,000
0
2003
2004
2005
2006
2007
years
Source: HBL Annual Report 2007
8.6.2
Profit Loss after Taxation
14,000
Rs. in 000’s
12,000
10,000
8,000
6,000
4,000
2,000
0
2003
2004
2005
2006
2007
years
Source: HBL Annual Report 2007
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Chapter – 8
Analysis of financial ratios
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
9,000
8,000
Rs. in 000’s
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2003
2004
2005
2006
2007
years
Source: HBL Annual Report 2007
The bank is consistently making provisions at high rate, this may be because of the
loans paid under undue influence in past. In 2002, it made a total provision of Rs.2450
million. In 2003, the bank made a provision of Rs.5804 million, whereas in 2004 it
made a provision of Rs.2552 million. In 2005, the bank made a provision of Rs.3270
million, which dropped to Rs. 2927 million in 2006. In 2007 the bank made a
provision of Rs 7823 million
Total Assets:
The bank assets are on increase
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Chapter – 8
Analysis of financial ratios
In 2003, it was about Rs. 434,932 million; in 2004, the assets were increased to Rs.
487,765 million; in 2005, it increased to Rs. 528,894 million.
800,000
Rs. in 000’s
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
2003
2004
2005
2006
2007
years
Source: HBL Annual Report 2007
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
20,000
18,000
Rs. in 000’s
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
2003
2004
2005
2006
2007
years
Source: HBL Annual Report 2007
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
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Chapter – 8
Analysis of financial ratios
were Rs.13, 789 million. In 2005, the bank’s total expenditure increased from the
previous year i.e.Rs.15, 766.In 2006, it increased to Rs.17, 2004.In 2007 it again
increased to Rs.18, 382.
8.6.6
Net Investments
200,000
Rs. in 000’s
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
2003
2004
2005
2006
2007
years
Source: HBL Annual Report 2007
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.
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Chapter – 8
Analysis of financial ratios
450,000
400,000
Rs. in 000’s
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
2003
2004
2005
2006
2007
2006
2007
years
8.5.8
Total Income
45,000
Rs. in 000’s
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
2003
2004
2005
years
Source: HBL Annual Report 2007
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.
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Chapter – 9
Findings and Suggestions
CHAPTER – 9
FINDING AND SUGGESTION
As we seen from the previous analysis of the financial statements we have
realized that that Habib Bank is performing very well since its inception. It is quite
difficult to give suggestion to improve the banking conditions Habib Bank Limited.
As we know that nothing is perfect, there is always a room for improvement, so I have
found during my internship can be made up taking into account the following findinds
and suggestions.
9.1 INNOVATION:
First and the foremost thing I have found out is that the process of innovation is slow.
They can offer a lot new products and services in the country being one of the
strongest institutions of the country. E.g. they can make use of mobile technology for
facilitating their customers which have been started by some banks but they can offer
even new services by its use.
9.2 MARKETING OF HBL:
As we know by now that HBL is a very prestigious bank of Pakistan, in my view the
attention they pay to Marketing should be much more than what they are doing right
now. This does not mean that they are not doing well. My suggestion is that they also
emphasize on the new product that make them different from other banks of the
country. They should also educate through their adds that how much they are
important internationally.
9.3 IMPROVEMENT OF WORKING CONDITIONS
Working Condition in the branch should be improved, which will attract customers.
The attitude of staff, especially of the peons towards the customers & then officials
must be improved for the development & improvement of bank.
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Chapter – 9
Findings and Suggestions
9.4 FAVOURITISM AND NEPOTISM:
Another finding is that of nepotism and favoritism in HBL. I met employees that have been
hired only because they are “sons” of the employees who had worked once in the bank.
This can be good to employ people from known background but this can be harmful as
talented people might not be given chance, and in our culture these kinds of employees are
sitting almost idle within the banks as they know no one can fire them from the job. The
upper management should keep friendly relations with all the staff members. It would result
in the feeling of equity amongst members.
9.3
USE OF COMPUTERS:
Computers have been provided to the employees of all the branches and departments
of the bank this device helps the employees in efficiency of their work i.e. completing
their work wit accuracy and in less time. Secondly it can maintain work and records
without any extra cost. Some of the softwares have been installed for the purpose.

MISYS:
It is software installed by IT department of HBL in every branch. It is a multiple
functioning software performing various functions like account opening, maintaining
ledger, record keeping etc. There are a
Due to advancements in IT technology, the bank should introduce the following to
make the banking system modern, efficient in order to compete the banking sector
inside or outside the country. These are
1.
E-statement
2.
Email
3.
ATMs
4.
Clearing House
5.
Employee’s track record etc.
1.
E-Statement
If bank uses modern It technology to inform their customer instead of E-Statement,

First it will save the time.

Second it will reduce the postal charges of the bank.
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Chapter – 9
2.
Findings and Suggestions
Email
Email has enabled the banks to send information to the customer in due course of
time.
3.
ATMs
ATM has facilitated the customer to draw the required amount without facing any
difficulty from the bank within the 24hrs. as and when he/she wishes to draw amount
from that bank and its branches in the country. Askari Bank has recently introduced
mobile ATMs. HBL should introduce mobile ATMs in order to compete their
respected competitor.
4.
Clearing House
If bank uses modern IT technology in their clearing House department (to send the
checks to different branches of same bank within the city). It will save the time.
5.
Employee’s Track Record
Every bank should introduce IT technology (software) to keep record of their
respected employees i.e. Personal data, casual leaves, medical leaves etc, and so many
other advancements in technology.
9.3 TRAINING AND DEVELOPMENT PROGRAM
The HBL claims of training and educating its employees but practically speaking it should
initiate a good employee training and development plan. This would help employees to
know more about their specific job and its actual requirements. The employees can be given
chance to serve in different departments, hence they can become aware of the mutual
requirements and importance of the coordination between the different departments of the
bank. Thus they can work in harmony and collaboration with each other. This would
develop the proficiency, insight and administrative capabilities of the employees. This also
helps in avoiding monotony of performing the same job again and again. This would also
be a factor of motivation for the employees who works in over loaded departments. The
rotation would provide them all with equal chances of serving in same kind of working
conditions.
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Chapter – 9
9.2
Findings and Suggestions
STAFF REQUIRED:
A reasonable staff should be provided to branches, thus, which improve the
performance condition of the branches. Especially a telephone operator and a
customer service officer should be appointed.
9.4
QUICK PROCESS OF CUSTOMER SERVICE
Delays in any form should be avoided, so that customers are not discouraged from the
bank services. And the full attention must be given to the customers because they are
often right.
9.5
WEAK CHECK AND INSPECTION
General banking department, particularly account opening section is not performing
well. In the absence of head of the section, they showed poor performance. I observed
that they did not accept one rupee and coins from their clients. Audit &inspection
division should be strengthened so that the branches should be frequently inspected &
the inspecting parties should especially see the public dealings of the employees.
9.6
PROMOTION
Promotion is not made on seniority or merit basis. Junior people having family
background or relatives of bank executives arrange their promotions through back
door thus depriving people from their due right. The strict rules & procedures should
be formulated to discourage this practice.
9.7
PERFORMANCE APPRAISALS
Evaluation of efficiencies & performance should not only be based on the total
volume of deposits; but it should be based on complete budgeting, profit earned or
loss incurred i.e. how much new customers are attracted to the bank.
9.8
APPOINTMENT OF RESEARCH OFFICERS
A research officer should be appointed at least one in every main branch. He should
undertake research projects on problems faced by the manager, officers, customers
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Chapter – 9
Findings and Suggestions
and how a bank can serve more at a low cost, how can procedural difficulties can be
removed and what customers expect from the banking institutions.
SOME OTHER SUGGESTIONS
1.
A special advisory cell should be established at Regional Office level from
which the private sector can acquire feasibility reports.
2.
The functions & procedures of the bank should be published in booklets &
provided free of cost to the customers.
3.
Functioning of the branch, I suggested that staff be increased.
4.
Again I suggest that A NIGHT/EVENING COUNTER be opened for the
clients to deposit the various types of bills i.e. (Electricity, telephone, gas, T.V
etc) on the evening.
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Conclusion
CONCLUSION
The HABIB bank which was established in Bombay in 1941 with a paid up capital of
Rs 25,000 only, was shifted to Karachi, it was registered as a joint stock company for
carrying on all types of banking activities.
In early years, it has been largest subscriber to the Pakistan govt. & provincial
government’s loan and treasury bills, but with the passage of time it becomes more
enterprising in the credit field.
The banking system of Pakistan was badly disrupted immediately after independence.
Vigorous efforts were made to rehabilitate the system, with the Habib bank playing a
pivotal role in the scheme of re-organization of commercial banking.
The bank was nationalized in 1974 and from that year onward & to date is operating
as a public sector institution.
This has been providing credit facilities to a number of sectors at subsidized rates
under various arrangements. Export finance, local manufactured machinery,
government borrowing for commodity operations, mandatory production credit to
small farmers & direct industrial investment. The bank has been providing one
window financing facility to meet the local and foreign currency requirement of the
industrial projects & thus proved to be a successful vehicle to transform the
government policy of rapid industrialization into reality.
As a responsibility of using the various foreign currency credit lines, provided by the
World Bank & Asian Development Bank, the bank has been discharging its obligation
in a manner satisfactory to the financing agencies & to the best interest of the country.
In the conclusion one can say that the Habib bank has played a big role in the creation
& development of the country.
One thing significant about this institution is that it has always scarified monetary
considerations over national interest. This fact raises Habib bank above all, in the
service of Pakistan.
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Bibliography
BIBLIOGRAPHY
1.
Habib Bank Ltd., (2007). Annual Report. Karachi.. Habib Bank Ltd., (2006).
Annual Report. Karachi.
2.
Habib Bank Ltd. General Manual. Volume –1.
3.
Habib Bank Ltd. General Manual. Volume – 2
4.
HBL, (1999). Advances and Credit Circular. Karachi
5.
HBL, (1993). Presentation Volume, Karachi
6.
Publishing Company, Ohio.
7.
S.A. Meenai. Money Banking in Pakistan. 3rd Edition, Oxford University Press,
8.
1984, PP-111-123-284.
9.
Sibghatullah Qureshi. (1999), An Internship Report on HBL City Branch. P-10.
10.
HBL WE Magazine (July, 2006). P-8.
11.
http://www.hbl.com (Visited on December 2008).
12.
http://www.google.com
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