S Qaim HBL Final Report

PREFACE
After studying so much about management, accounting and banking theoretically, one always develops a desire to work in a bank. After completion of my course-work , I had a chance to work as an internee at Habib Bank, Main Branch Punjabi Bazaar Kurram Agency Parachinar. Banking is both a sacred and sophisticated profession. In Pakistan Habib Bank has always been in the forefront of this profession. During my stay at Habib Bank I tried my best to acquaint myself with the operations of the bank and as a result learned a lot. What I have learned during my stay at the bank is being presented here for the reader. Banking industry has always played a vital role in the success of economies. The practice is carried out since primitive ages. Multinational banks are now dealing in money and are laying the foundations for countries to stand on their own feet. The internship proved to be extremely helpful in learning about the functions and operations of a bank and how different kinds of procedures at bank are carried out. Although eight weeks internship is not enough time to know delicately about every aspect, but somehow it had the initial touch of being in a practical world. I owe very much too so many people whose help and support at different stages of my work enabled me to write this report. First of all I would like to thank Mr. Muhammad Habib whose help made it possible for me to have an internship in HBL Main Branch Punjabi Bazaar Kurram Agency, Parachinar. I am also grateful to my supervisor Mr. Mussarat Hussain who always taught and corrected me in very loving manner whenever I needed him.
SAYED QAIM
ACKNOWLEDGEMENTS
Most humbly I express my thanks to the supreme Ruler, the ALLAH Almighty, the most Benevolent, ever Merciful, Whose divine helped me to complete my Internship and this report Successfully. I am also thankful to the staff of HBL Main Branch Punjabi Bazaar Parachinar Kurram Agency, for their cooperation during the collection of required data. In the end I am more than grateful to my parents whose prayers, moral and financial support is always with me as guiding lights in the struggling ways of my life.
SAYED QAIM
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LIST OF CONTENTS
PREFACE...................................................................................i Acknowledgements....................................................................ii list of contents...........................................................................iii LIST OF ACRONYMS...........................................................vi EXECUTIVE SUMMARY......................................................vii
CHAPTER 1..............................................................................................................1
Introduction................................................................................1
1.1 BACKGROUND OF STUDY..........................................................................1 1.2 PURPOSE OF THE STUDY............................................................................1 1.3 SCOPE OF STUDY..........................................................................................2 1.4 RESEARCH METHODOLOGY......................................................................2 1.5 LIMITATIONS.................................................................................................3 1.6 SCHEME OF THE STUDY...........................................................................................3 CHAPTER-2 ................................................................................................................5
Evaluation of Banking...............................................................5
2.1 FORMATION OF BANKING.........................................................................5 2.2 BANKING IN PAKISTAN..............................................................................7 2.3 HISTORY OF HABIB BANK LIMITED..........................................................................8
TENTH PHASE/PRESENT.....................................................10
2.4 ROLE OF HABIB BANK IN PUBLIC SECTOR DEVELOPMENT...........10 2.5 ROLE OF HABIB BANK LIMITED IN PRIVATE SECTOR DEVELOPMENT.................................................................................................11 2.6 FUNCTIONS OF HABIB BANK LIMITED.................................................12 2.7 DISCOUNTING BILL OF EXCHANGE......................................................14 2.8 AGENCY SERVICES TO CUSTOMER.......................................................14 CHAPTER-3...............................................................................................................17
OBJECTIVES AND POLICIES..............................................17

A. MISSION..............................................................................................................17 B. OBJECTIVES...........................................................................................................17 3.1 OBJECTIVES OF HABIB BANK LIMITED................................................17 3.2 POLICIES OF HABIB BANK LIMITED......................................................18 3.3 VARIOUS SCHEMES AND PRODUCTS OF HABIB BANK LIMITED ..................................21 CHAPTER 4............................................................................................................26
ORGANIZATIONAL STRUCTURE......................................26
4.1 FORMAL ORGANIZATIONS......................................................................26
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Sohail Malik.............................................................................29 Zafar Aziz Osmani...................................................................29 Jamil Iqbal................................................................................29 Sima Kamil..............................................................................29 Nauman K. Dar........................................................................29 Abid Sattar...............................................................................29 Mudassir H. Khan....................................................................29 Faizan Mitha............................................................................29 Salim Amlani...........................................................................29 Aslam.......................................................................................29 Tulu Islam................................................................................29 Mirza Salim Baig.....................................................................29 Kashif Shah..............................................................................29
4.2 ORGANIZATIONAL CHANGES IN HABIB BANK..................................30 CHAPTER 5............................................................................................................34
FUNCTIONS OF HABIB BANK LIMITED..........................34

5.1 FUNCTIONS OF CENTRAL OFFICE..........................................................34 5.2 DOMESTIC OPERATIONS..........................................................................36 CHAPTER -6 .............................................................................................................39
GENERAL BANKING AND departmentation........................39

6.1 DEPOSIT DEPARTMENT.........................................................................................39 6.2 CLEARING DEPARTMENT.........................................................................43 6.3 INLAND REMITTANCE DEPARTMENT...................................................45 6.4 BILLS DEPARTMENT..................................................................................47 6.5 ADVANCES DEPARTMENT.......................................................................48 6.6 CASH DEPARTMENT..................................................................................50 6.7 CD DEPARTMENT.......................................................................................51 CHAPTER-7...............................................................................................................52
ANALYSIS OF HABIB BANK LIMITED.............................52

7.1 SWOT ANALYSIS OF HABIB BANK LIMITED ..............................................................52 7.2 ANALYSIS OF KEY AREAS OF HABIB BANK LIMITED ...............................................56 7.3 ANALYSIS OF ORGANIZATIONAL STRUCTURE..................................57
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7.4 BRANCH LEVEL ENVIRONMENT OF HABIB BANK LTD...............................................59 7.5 PROCEDURAL ANALYSIS.........................................................................60 CHAPTER-8...............................................................................................................62
FINANCIAL ANALYSIS ......................................................62

8.1 INDEX ANALYSIS OF HBL............................................................................63 8.2 COMMON SIZE ANALYSIS.......................................................................................63 8.3 RATIO ANALYSIS........................................................................................64 8.4 HABIB BANK LTD. BALANCE SHEET FOR THE YEAR ENDED DEC, 2009, 2010...........65 8.5 HABIB BANK LTD. INCOME STATEMENT FOR THE YEAR ENDED DEC, 2009, 2010.....65 8.6 HABIB BANK LTD. BALANCE SHEET, INDEX ANALYSIS, FOR THE YEAR ENDED DEC, 2009- 2010............................................................................................................66 8.7 HABIB BANK LTD. INCOME STATEMENT, INDEX ANALYSIS, FOR THE YEAR ENDED DEC, 2009, 2010.............................................................................................................67 8.8 HABIB BANK LTD. BALANCE SHEET, COMMON SIZE ANALYSIS, FOR THE YEAR ENDED DEC, 2009-2010.....................................................................................................67 8.9HABIB BANK LTD. INCOME STATEMENT, COMMON SIZE, FOR THE YEAR ENDED DEC, 2009-2010.....................................................................................................68 8.10 FINANCIAL RATIO..............................................................................................70 8.11 LIQUIDITY RATIOS.............................................................................................70 8.11.1 CURRENT RATIO...............................................................................70 8.12 LEVERAGE RATIOS.............................................................................................70 8.12.1 DEBT-TO-EQUITY..............................................................................71 8.12.2 DEBT-TO-TOTAL-ASSETS..................................................................71 8.13 PROFITABILITY RATIOS.......................................................................................72 8.13.1 NET PROFIT MARGIN........................................................................72 8.13.2 RETURN ON EQUITY...........................................................................73 CHAPTER 9............................................................................................................74
conclusion and RECOMMENDATIONS ...............................74

9.1 CONCLUSION...............................................................................................74 9.2 RECOMMENDATIONS ............................................................................................74
References ...............................................................................78 Bibliography ...........................................................................79
LIST OF ACRONYMS
A/C ATM DD DFIs FCY FTS HBL IBTS LCY MDI MT RF SSC SBP SVP SME TT US $
Account Automated Teller Machine Demand Draft Developmental Financial Institutes Foreign Currency Funds Transfer System Habib Bank Limited Inter Branch Transaction services Local Currency Management Development Institutes Mail Transfer Running Finance Special Savings Certificate State Bank of Pakistan Senior Vice President Small & Medium Enterprise Telephonic Transfer United States Dollar
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EXECUTIVE SUMMARY
Habib Bank is the largest and oldest bank among Pakistani Banks. Founded in 1941 it emerged as a Muslim Bank in undivided India. In 1947, when Pakistan came into being Habib Bank shifted its operations from India to Pakistan. Since then it is carrying on its operations with more than 1459 local and 52 foreign branches. The purpose of this report is to evaluate the performance of Habib Bank Limited (HBL), Main Branch Punjabi Bazaar Kurram Agency Parachinar. The internship experience in the form of an internship report also carries an attempt to explain domestic as well as international banking operations of Habib Bank. The report aims at appraising the working of Habib Bank Limited, its functions and operation and also attempts to assess its performance. Certain recommendations are presented for the potential areas of improvement. An implementation plan of the recommended steps is given at the end of the report. Habib Bank Limited is the oldest & the first bank in Pakistan. Its name is generally considered for quality and reputation. It offers a broad range of products to target different market segments. Main problems identified during the course of internship are as following a) b) c) d) Absence of proper information technology tools Lack of efficiency of employees. Presentation styles of bank especially at retail level are not good. Management style is centralized.
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The recommendations are as follow: a) Establishment of Data bank at Zonal office, so that information can be obtained in time. b) Proper designing of the jobs should be performed similarly clearcut division of work to increase efficiency. c) Special attention should be given to exterior/interior layouts, cleanliness and office furniture. d) Decentralization of authority at different level to fasten the decision making process.
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Chapter 1
Introduction of the Report
CHAPTER 1
INTRODUCTION
1.1 BACKGROUND OF STUDY
esides the bookish knowledge, every student especially a student of management must have an understanding that how theory is practically implemented. Hailey institute of
management studies university of Peshawar requires every student of master of public administration to undergo an internship Program of Eight Weeks in a recognized organization. The internship is to serve the purpose of acquainting students with the practice of knowledge of the discipline of business administration. For this reason I carried out my internship at Habib Bank Limited, Main Branch Punjabi Bazaar Kurram Agency Parachinar. I prepared this report on the basis of knowledge, which I previously had, and especially from working in HBL during my internship. Habib Bank Limited is the premier bank of the country, established in 1941. Its registered head office is in Karachi. Habib Bank played a memorable role in credit handling at the time of independence. Habib Bank was nationalized in 1974, but now the Government has privatized the bank again.
1.2 PURPOSE OF THE STUDY

The main purpose of the study is to increase my knowledge and skill in preparation of report and collection of relevant data and information about Habib Bank Limited to compile internship report more completely, precisely and more effectively.
Internship Report on HBL
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Other purposes are listed below: To observe, analyze and interpret the relevant data completely and in a meaningful manner. To judge my abilities and skill. To gain experience. To apply my theoretical knowledge. To work practically in an organization. To improve my communication skills.
1.3 SCOPE OF STUDY

Habib Bank Limited being an established busy and big organization it was difficult to cover all the departments in such a short period of time. Being a HR student, I chose to work in HR related departments, including record keeping,asistant record, accounts/deposits, account opening, Remittances, and to some extent CD Department. Various other functional areas of Habib Bank Limited are also covered in this report.
1.4 RESEARCH METHODOLOGY

For the completion of this report, I used both primary and secondary sources. Formally developed Questionnaire, interviews and discussion with bank personnel and my co-internees helped me greatly while preparing the report. i. Primary Data ii. Personal observation Interviews Questionnaire Discussion with my co-internees.
Secondary Data Annual reports
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Magazines Manuals Journals Various HBL publications
1.5 LIMITATIONS
During the internship, I had faced certain limitations and problems, first being the time duration; only two months are not sufficient to understand the functions of all the departments of the bank. Another problem was scarcity of written material and the element of secrecy, due to which; I could not get access to all areas. Lastly the busyness of bank personnel they used to be so busy in their official work that they could not had time for us to make us understand on certain phenomenon. Although they were very helpful but still I faced great hardship in gathering information and understanding of procedures. For this purpose I studied few previous reports on HBL to complete my report.
1.6 SCHEME OF THE STUDY

The scheme of the report is as follows: Section I In this section background of the study, purpose of the study, scope of the study, methodology performed, limitations and scheme of the report are given. Section II In this section there are five chapters that contain detailed material regarding the Evaluation of Banking, Introduction and History of Habib Bank Limited, Role of HBL in Public and Private Sectors, Functions of HBL, Objectives and Policies, Organizational Structure some features of the branch in which I made my internship and Departmentation are discussed.
Chapter 1
Section III This section of the chapter consists of two chapters, first one is about the Critical Analysis of Key Areas of HBL and SWOT analysis, second chapter of the section is all about financial analysis of HBL. Section IV It contains few recommendations and conclusion for the betterment and improvement of HBL.
Chapter-2
Evaluation of Banking
CHAPTER-2
EVALUATION OF BANKING
2.1 FORMATION OF BANKING
The history of banking can be traced back to the early days of recorded history when goldsmiths used to store the valuables of people in their safe custody. People use to store their valuables because of the danger of theft of money being transported or stored. In the 17th century, English goldsmiths provided the model for contemporary banking. Gold was stored with these artisans for safekeeping, and was expected to be returned to the owners on demand. The owners of these valuables became the first depositors of the banking history.1 i. Issuance of Notes The goldsmiths soon discovered that the amount of gold actually removed by owners was only a fraction of the total stored. Thus, they could temporarily lend out some of this gold to others, obtaining a promissory note for principal and interest. In time, paper certificates redeemable in gold coin were circulated instead of gold. Consequently, the total value of these bank notes in circulation exceeded the value of the gold that was exchangeable for the notes. ii. Fractional Reserve Banking The second stage in banking history was the birth of the concept of fractional reserve banking through which goldsmiths were transformed from mere custodians of valuables into bankers.
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According to this system the bankers were allowed to keep only a fraction of the valuables actually deposited with them and the rest could be lend out This system continued to exist because it was to the advantage of both the goldsmiths and public. The public was convinced that the fractional reserve system is to the mutual benefit of both. The banker provided safety, convenience, ease of transfer, and bookkeeping services at a little or no charge to the public. iii. Money Lenders Third stage in the development of modern banking was that the banker was allowed to use the public deposits as reserves against lending activity. As is the case in most communities of interest, a way to achieve their mutual advantage was found. Any moral or ethical implications of holding less than 100% reserve in order to increase profits have been rationalized. Two characteristics of this fractional-reserve banking remain the basis for present-day operations. First, the banking systems monetary liabilities exceed its reserves. This feature was responsible in part for Western industrialization, and it still remains important for economic expansion, though a risk of creating too much money is a rise in inflation. Second, liabilities of the banks (deposits and borrowed money) are more liquid that is, more readily convertible to cashthan are the assets (loans and investments) included on the banks balance sheets. This characteristic enables consumers, businesses, and governments to finance activities that otherwise would be deferred or cancelled; at the same time, it opens banks to the risk of a liquidity crisis. When depositors rush to request for payment, the inability of a bank to respond because it lacks sufficient liquidity means that it must either renew on its promises to pay or pay until it fails.
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2.2 BANKING IN PAKISTAN

At the time of independence, the areas, which now constitute Pakistan, were producing only food grains and agricultural raw material for Indo-Pakistan subcontinent. There were practically no industries, and whatever raw material was produced was being exported from Pakistan. However, commercial banking facilities were provided fairly well here. There were 487 offices of scheduled banks in the territories now constituting Pakistan. As a new country without resources it was very difficult for Pakistan to run its own banking system immediately. Expert Committee was appointed to study the issue. Therefore, in The committee accordance with the provision of Indian Independence Act of 1947, an recommended that the Reserve Bank of India should continue to function in Pakistan until 30th September 1948, so that the problems of time and demand liability, coinage, currencies, exchange etc are settled between India and Pakistan. It was also stipulated that Pakistan would take over the management of public debt and exchange control from Reserve Bank of India on 1st April 1948, and that Indian Notes would continue to be legal tender in Pakistan till 30th September, 1948 following the announcement of Independence Plan in June 1947, the Hindus residing in the territories now comprising Pakistan started transferring their assets to India. Moreover, the banks including those having their registered offices in Pakistan transferred them to India in order to bring a collapse of the new State. By 30th June 1948, the number of offices of scheduled banks in Pakistan declined from 487 to only 195. Consequently the governor-general of Pakistan and the Father of the Nation, Quaid-i-Azam Mohammad Ali Jinnah, inaugurated the State Bank of Pakistan on July 1, 1948, after the State Bank of Pakistan Order was promulgated on May 12, 1948. Thus a landmark was made in the history of banking when the State Bank of Pakistan assumed full control of banking and currency in Pakistan.
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As the Central Bank of the country, the State Bank addressed itself with the equally urgent task of creating a national banking system. In order to attain this goal it provided every help and encouragement to Habib Bank to expand its network of branches, and also recommended to Government the establishment of a new bank which could serve as an agent of the State Bank. As a result, The National Bank of Pakistan came into being in 1949 and by 1952 it became strong enough to take over the agency function from the Imperial Bank of India. In order to develop sound banking and weeding out weak institutions, the Banking Companies (Control) Act was promulgated in 1949, empowering the State Bank to control the operations of Banking Companies in Pakistan, including preparation of the required trained manpower. Further, the State Bank restricted the opening of new branches by foreign banks in port towns or in big cities from where trade was being carried out with foreign countries, where Pakistani banks were allowed to open as many branches as possible within the country.
2.3 HISTORY OF HABIB BANK LIMITED

Habib Bank is a commercial bank according to the definition given by Professor Dr. Harts a bank can be defined as A banker is one who, in the ordinary course of his business, receives money which he repays by honoring Cheques of persons from whom or on whose account he received it. Four Habib brothers, Mr. Ahmad Habib, Dawood Habib, Muhammad Ali Habib and Ghulam Ali Habib formed Habib Bank. In 1941 the bank had only Rs.1.03 core by way of advance and invested Rs.12 lacs in government securities. But with the passage of time and by the efforts of Habib brothers Habib Bank Limited grew in size and its deposits increased to 2.40 crore by the end of 1942. Due to certain difference between the Governments of India and Pakistan, when India withheld the transfer of funds in 1945, Habib Bank
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readily came forward and subscribed heavily to the Government of Pakistan, to overcome the crisis. The loan to the Government was made at a very nominal rate of interest. The history of Habib Bank can be divided into different phases. FIRST PHASE The first phase in the history of Habib Bank Limited comprises seven years from 1941 to 1947 it was the most crucial time with a humble beginning, the bank mastered a formidable challenge and overcame depredate prejudices against business talents of the Muslims of South Asia. SECOND PHASE This phase in the history of Habib Bank was a new beginning when the bank shifted its head quarters in Bombay to Karachi according to the wishes of founder of the nation in order to meet new responsibilities and to face great challenges. THIRD PHASE This phase in the history of the Bank is characterized by setting certain standards of services such as increasing of facilities, extending banking hours and improving the physical appearance of the branches. These steps popularized banking among people from all walks of life. FOURTH PHASE This phase marked by the tremendous achievement of the construction of banks first head office building at Habib square, Karachi along with continued solid business and profitability. FIFTH PHASE This phase witnessed the consolidation and the beginning of mechanization and modernization of branches.
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SIXTH PHASE This was the year of silver jubilee celebrations. It has a tremendous impact on the common man that the bank emerged throughout Pakistan and wherever its branches operated abroad, with a new image of a Best example of better service. SEVENTH PHASE On the occasion of its 30th anniversary marked the shifting of head office from Habib Square to Habib Bank Plaza. EIGHTH PHASE This phase was generally characterized by heralded nationalization of Pakistani banks on 1st January 1974. The whole concept of commercial banking in Pakistan was changed to offer all the necessary help to small industrialists, traders and farmers. NINTH PHASE This phase begins with the 50th year of its existence totaled Golden Jubilee year, it is the largest Pakistani bank operating round the globe with a great futuristic outlook and planning recognized and acclaimed both nationally and internationally at highest levels. TENTH PHASE/PRESENT Currently the bank has been privatized by the government and Agha Khan has taken most of the share. Now Habib Bank has more than 1400 branches and operating in more than 36 countries internationally.
2.4 ROLE OF HABIB BANK IN PUBLIC SECTOR DEVELOPMENT

Habib Bank is playing very important role in the public sector. Immediately after partition, the first major association of Habib Bank with the government was the sponsoring of the Pakistan Finance Corporations
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Ltd., jointly with the central and provincial governments for financing of cotton industry. Furthermore, the bank not only provided capital but also provided technical advice for different projects. Some of which are largescale projects such as Warsak Dam Project, WAPDA, Thal Development Authority, by providing finance and other facilities.
2.5 ROLE
OF
HABIB
BANK
LIMITED
IN
PRIVATE SECTOR DEVELOPMENT

Habib Bank can also be considered as the first to open branches all over Pakistan in order to provide finance and other facilities to the business community. During the half century of its existence, Habib Bank has proved to be leader all the way in many respects, which have been introduced for the first time in the history of commercial banking sector in Pakistan. It was the first commercial bank to import the electronic machines to have made it easier for the bank to cope with its expanding business and fast growing clientele. Another innovation introduced by Habib Bank is the evening banking cash long after the crossing of normal banking hours. The Habib Bank have also the first in making available such new facilities as Gift Cheques, Rupee Travelers Cheques, Credit Card System, Short term and Long term Schemes for small businessmen. For the benefit of investors it publishes weekly stock exchange price averages. It also issues monthly publication with a title of Business News Service. It also brings out a House journey. We of Habib Bank with superb research data and facilities at its command, Habib Bank is fully geared to monitor the nations economy and play its due role in its brining prosperity to the country.
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2.6 FUNCTIONS OF HABIB BANK LIMITED

There are two most important and basic functions of any commercial bank. Being a commercial bank, Habib Bank also performs these two functions which are listed below: a. b. a. Accepting deposits Making Loans and Advances.
Accepting Deposits The primary function of Habib bank is to accept and receive surplus money from the people, which they willingly deposit with the bank. Like all other banks Habib bank also tries hard to attract as much deposits of the people as it can. It is therefore it offers different types of deposit schemes to its clients, which includes the following types.
i.
Current Deposits Current deposits are those deposits on which bank offers no interest but it allows the account holders to withdraw their money at any time they want without giving any prior notice to the bank. This type of account is often maintained by the business community, which requires large sums of money very often for their business transactions.
ii.
Profit and Loss Sharing Account (Saving) Saving deposits or PLS is those accounts on which bank offer a lower rate of interest and on such deposits, the bank pays very low interest to its customers. After the Islamization of the banking system in the country it has been given the name of PLS saving account. The bank undertakes to repay deposits on demand up to a certain limit.
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iii.
Fixed Deposits Fixed deposits are those which can be withdrawn only after the maturity of the account. In this type of deposits the bank allow high rate of interests depending on the time period of deposits. The shorter the period of deposits, the less will be the interest and vice versa. Currently HBL has offered a new type of fix deposit called Habib bank munafa scheme. Its summary is Deposit from 10,000 to 1, 00,000 interests at the rate Deposit from 100,000 to 10, 00,000 interests at the rate 7% 7.5%
b.
Making Loans and Advances The second most important function of HBL is to provide financing facility to its clients. These loans and advances are usually made against document of title to goods, marketable securities, and personal securities of borrowers. Habib Bank charges different interest rates on these loans and advances depending on the terms and conditions settled with the customers. Following types of loans and advances are made available to the clients.
i.
Demand Finances Demand finance are those finances, which are given to the borrowers for specified period and can be called back without any prior notice demand. It is a single transaction. It can be long term, medium term and short term. Mark up is also charged. Here the amount can be withdrawn once at the time of disbursement.
ii.
Running Finances Habib bank provides such loans against the security of current assets like shares, bond, cash crops like cotton and other cashable commodities. The borrowers account is opened with the bank with the amount of the total loan provided or allowed to the borrower. The borrower is allowed to withdraw any amount from his account
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Chapter-2
within the specified limit and interest is charged only on the amount actually withdrawn. iii. Over Draft Over draft is a kind of facility given to the account holders of the bank. This type of facility is given usually to very loyal type of the customer. This allows them to withdraw over and above the amount held by them in their accounts. And interest is charged only on the amount, which is withdrawn in excess of the amount actually held in their account.
2.7 DISCOUNTING BILL OF EXCHANGE

Discounting bills of exchange can also be considered as a type of form of loan because it allows the holder of the bill to get the bill encashed before the maturity of the bill. A bill of exchange is usually issued by the importer of goods to the exporters, which allows them to be paid in their own currency after three months time. If the exporter needs the money before the maturity of the Bill of Exchange he can get his money from the bank by discounting the bill of exchange. The bank utilize their surplus funds by discounting the bills of exchange at their market worth i.e. they pay to the holders of the bill on amount equal to their face value after deducting interest at the current rate for the period of the bill to mature.
2.8 AGENCY SERVICES TO CUSTOMER

Habib Bank also provides agency services to its customer. Some of which are as follow: i. Collection of Cheques Habib bank pays and collects Cheques on behalf of their customers, and for this it receives commission from their account holders.
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ii.
Collection of Dividends The bank provides a very useful service by acting as an agent for its account holders. It arranges for the collection of dividends on shares and securities held by its account holders. The customer is simply to inform the issuer of the securities that the interest on the securities is to be credited to his account in the bank. Bank charges commission for the collection of the dividends on behalf of account holders.
iii.
Purchase and Sale of Securities Habib bank if authorized by the customers also makes purchases and sale of securities on the behalf of its account holders. Bank charges commission for the purchase or sale made by it on behalf of its customers.
iv.
Transfer of Funds HBL also transfer funds of the customers from one bank to another bank. If the transfer is within one station. They dont charge any commission and even if they charge, they charge on reduced rates.
v.
Acts as an Agent HBL also acts as an agent, correspondent or representative of his customers at home and abroad. General Utility Services HBL also performs a number of generally utility services to his client which are as follows: 1. Foreign Exchange Business HBL transacts foreign exchange business by discounting foreign bills of exchange and thus provides facilities for financing the foreign trade.
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2.
Acts as a Referee Habib bank provides a useful service to its customer by acting as a referee for his credit worthiness. financial standing of the client. The information is supplied in utmost secrecy and is based
3.
Acceptance of Bills of Exchange HBL also undertake acceptance business connection with bills of exchange and thus enable its customers to obtain the desired credit.
4.
Issue of Travelers Cheques Habib Bank also issues travelers Cheques. These Cheques can be issued to anyone whether an account holder or not and charges no commission on issuance of such Cheques. Habib bank also recently introduced Muhafiz Rupee traveler Cheques with enhanced features.
5.
Collection of Utility Bills Electricity, telephone and other such bills can also be deposited with HBL.
6.
Locker HBL also provides locker facility to its clients where valuables of peoples can be kept.
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Chapter 3
Objectives and Policies
CHAPTER-3
OBJECTIVES AND POLICIES

A. MISSION
Mission is the organizations reason for existence. The mission describes the organization values, aspirations, and reason for being. The formal mission statement is a broadly stated definition of basic business scope and operations that distinguishes the organization from others of similar type. The contact of mission statement often focuses on the market and customers and identifies desired fields of endeavor. The mission of Habib Bank Limited can be obvious from its engagement in the business in which it is engaged.
B.
OBJECTIVES
Objectives are the ends towards which organizational and
individual activities are directed or it can be defined as the specific shortterm target for which measurable results can be obtained. The goal of every manager is to create a surplus and a clear and verifiable objective facilitates the measurement of the effectiveness and efficiency of managerial actions. Objective state the end desired, and major objectives are supported by sub objectives. Thus, objectives form Hierarchy as well as network.
3.1 OBJECTIVES OF HABIB BANK LIMITED

Following are some of the main objectives of Habib Bank Limited. i. ii. iii. To earn profit for the bank itself and for its shareholders. To promote and boost business sector inside the country. To provide employment opportunities to people.
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Chapter 3
iv. v.
To help in development and industrialization of the country. To provide loan and advances to help in self-employment schemes.
3.2 POLICIES OF HABIB BANK LIMITED

Policies are general guidelines for decision making throughout the organization. Policies serve as a link between the formulation of strategy and its implementation. Now all policies are explicit statements they are often implied from the actions of managers. Policies define the area, which in a decision is to be made, and ensures that the decision will be consistent with, and contribute to an objective. Policies help decide issues before they become problems; it makes it unnecessary to analyze the same situation every time it comes up and unify other plans. Thus policies provide opportunity to managers to delegate authority and still maintain control over what their subordinates do. Policies limit an area within which a decision is to be made and assure that the decision will be consistent with and contribute to objectives Some of the policies of Habib Bank are described below. i. Managerial Policies Affairs of Habib Bank Limited are controlled through president and members of Executive Committee who are normally Senior Executive Vice President of the bank based at head office. Each province has a provincial headquarter headed by Provincial Chief and assisted by regional General Managers. Each provincial headquarter controls branches in their area of their jurisdiction through circle offices. Each circle office supervises various zones headed by Zonal Chief comprising 25-40 branches in each zone. ii. Requirement and Selection Policy The bank advertises the vacancies available to be filled through press under the Pakistan banking and finance services commission.
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The requirement for the selection depends upon the post to be filled. iii. Promotion Policy Persons career is a highly personal and extremely important element of life. Both productivity and morale are facilitated if these personal decisions are based on objective assessments of present and potential capability. Promotion is a term which covers a change calls for greater responsibilities and usually involves higher pay and better terms and conditions of service and therefore, a higher status or rank. The purposes of promotion are: hard To improve training, skill and experience ability To provide organization with a competent worker To find out the most competent and suitable candidate To provide satisfaction to the employee who are working
Promotion is based on personal performance of an individual, the evaluation of overall performance comprises of the following elements. iv. Educational qualification Professional qualification Service in grade Operating performance Experience in different disciplines Posting faraway placed
Training The staff college curses receives junior most officers for further training in banking, the courses lasting from six to nine weeks with about twenty five candidates in each course. The college is
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residential one and provides a measure of the collegiate atmosphere, which helps to impart a sense of camaraderie, which is of great value. It is also of great interest to record that the staff colleges receives trainees from abroad as well as helps to create worthwhile reference to banking business. The staff college courses are designed not to impart technical instructions, but to develop qualities of judgment, decision, leadership and management. The college is one of the most important institution setup by the bank, students are likely to be drawn those men who may expect to rise to the senior most executive position the bank has to offer. It is the business of the staff college to keep in touch with all that is going on in the world of banking and finance and to raise its instructions as to keep pace with the developments in Pakistan and with changes in the world outside. The methods, procedures, routines and even outlook change so much in banking and the staff college must be able to turn out men trained with up-to-date knowledge and thoroughly modern approach. v. Marketing Policy Marketing is a business function that identifies customer needs and wants, determines which target market the organization can best serve, designs appropriate product, services and programs to serve these markets and call upon everyone in the organization to think and serve customers. From a social viewpoint market links a societys material requirements and its economic pattern 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 mobilization of deposit schemes and there is more emphasis on offering efficient service to the clients in order to better satisfy them, so that they recommend the bank to their friends and relatives.
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vi.
Operational Policy The Operational policies of Habib Bank Limited deal with the method of provision of better services to its customers. Through the introduction of new schemes as means of satisfaction for their customers. The operational policy of Habib Bank can be divided into two sectors. a. b. a. Domestic operations International operations Domestic Operations
Habib bank is quite successfully operating its domestic business. Facilities at the door step across the length and breadth of the country also in conformity with the governments socio-economic objectives. The number of domestic branches totaled 1459. b. International Operations
Habib banks overseas branches are continuously rendering satisfactory services and are also contributing to the channeling home remittances of Pakistanis working abroad. HBLs international network comprises of 60 offices in 26 countries, operating in USA, Europe, UK, Middle East, Asian Pacific Region and Africa. It is also the largest banking in financial services Provider in Pakistan. In order to improve the operations, the bank has introduced various schemes and services. Which are listed in the following.
3.3 VARIOUS SCHEMES AND PRODUCTS OF HABIB BANK LIMITED

i. Tele-printer Service Introduced in 1952, this system helped the bank to improve its services
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ii.
Rupee Travelers Cheque It was introduced in 1957. Here the customers were provided the facility of encashment of their travelers cheque through any branch of the bank.
iii.
Evening Banking Services After launching evening banking service system in 1959 customers were enabled to deposit their money at evening in specified branches of the bank.
iv.
Small Factory Owner Scheme In 1959 the bank offered loans to small scale producers under the small factory owner scheme in order to boost the economy of Pakistan.
v.
Foreign Teleprinter Service It was introduced in 1961. The idea behind this scheme was to provide quick and prompt banking services to customers in foreign countries.
vi.
Gift Cheque Schemes It was launched in 1962. Under this scheme, the bank provided customers with pre-printed cheque of various denominations which could be used to sent gifts to their loved one on various occasions.
vii.
School Banking This scheme was introduced in 1962 to provide banking services to children in a number of schools throughout the country.
viii.
Drive in Banking Habib Bank Limited established Drive in branches in 1962 at various major cities of the country where the customer could avail banking services without getting down from their vehicles.
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ix.
Mobile Banking It was introduced in 1962. The feature of this scheme is to provide banking services to the customers residing in the rural areas.
x.
Night Safe Scheme In 1962 the bank offered facility to their customers to deposit their valuables at night in specified branches of the bank.
xi.
Computer Accounts In 1962 the bank introduced computer accounts through which most of the accounts in head office were computerized.
xii.
Computer Prize Bond It was introduced in 1966. It is a scheme through which prize could be declared for prize bond scheme.
xiii.
Credit Card Scheme It was introduced in 1966 through which customers could get certain sum of money from specified branches. Many business organizations accepted payments through valid credit cards.
xiv.
Infant Saving Scheme In 1968 the bank offered infants to open saving accounts operated by their parents/ guardians.
xv.
Courtesy Card It was launched in 1968 through which the customer could be introduced to other branches in the country.
xvi.
Foreign Currency Accounts It was introduced in 1973.
xvii.
Deposit Growth Certificate This scheme was introduced in 1975 with increase rate of interest
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xviii. Special Five Years Deposit Certificate This scheme was introduced in 1975 where the major emphasis is on increased rate of interest. xix. Dollar Traveler Cheque Introduced in 1976, the scheme was more helpful and safe for the travelers than carrying foreign currency notes. xx. Haj Accidental Death Scheme Introduced in 1983, according to this insurance scheme, if a Haji who has submitted his Haj application through Habib Bank Limited died while he was away for performing Hajj, his family was to be provided a certain sum of money. xxi. Auto Cash Teller Machine Auto cash machine were installed in 1988 at various branches which allows customers to withdraw cash round the clock and on all days of the week. xxii. Transport Finance Scheme In 1989 the bank in order to decrease unemployment in the country introduced owner, driver taxi finance and scooter loans. According to this scheme they were provided loans on soft terms. xxiii. Gold Card System In 1991 HBL introduced the scheme with the features of offering card holders to get up to Rs.10,000 at a time. xxiv. Muhafiz Rupee Traveler Cheque It was introduced in 1998. A cheque available in denomination of Rs.10,000, 25,000, 50,000 and 100,000, with the advantage of 100% free purchase and encashment. Distinct Properties of Muhafiz a. It can be issued from more than 700 branches all over Pakistan.
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Chapter 3
b.
Muhafiz provide the facility of payment in all branches of HBL
c.
There is no commission and fee charge for purchase of Muhafiz. Habib Bank keeps alive the tradition of Serve you better charges nothing for the purchase and sale of Muhafiz.
xxv.
Habib Bank Flexi Loan HBL had introduced a unique loan system for the middle incomeserving people in various public sectors. It is basically meant for those in service people who earn more than Rs. 5,000 per month. This loan meets the petty requirements of the salaried class. Since the introduction of this scheme Rs. 6 billion is advanced throughout the country. The maximum limit of this loan is Rs.3,00,000.
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Chapter-4
Organizational Structure
CHAPTER 4
ORGANIZATIONAL STRUCTURE
4.1 FORMAL ORGANIZATIONS
For the smooth and successful operations of any organization, a well-developed and properly coordinated structure is an extremely important requirement. It provides the basic framework within which functions and procedures are performed. This is not the end in itself, rather a mean with which to achieve certain objectives. The organizational structure of HBL is descried bellow: At present, the bank operates through four provincial head quarters, 26 circle offices, 77 Zonal offices, and more than 1450 branches all over Pakistan. The affairs of the bank are controlled through president and members of executive committee who are normally senior vice president of the bank based at Karachi Head Office (HOK). Each province has a provincial head quarter headed by provincial chief and assisted by regional general manager. Each provincial head quarter controls branches and their area of jurisdictions through circle offices. Each circle office supervises various zones headed by zonal chief comprising 25 40 branches in each zone.
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Chapter-4
Chart 1:
ORGANIZATIONAL CHART
Chief Executive Officer
SEVP
SEVP
SEVP
SEVP
Corporate Banking Group
Retail Banking Group
International Banking Group
Asset Remedial Manager
SEVP
SEVP
Credit Policy
Audit and Finance
Table 1:
Name
Board of Directors
Designation Chairrman President and CEO Director Director Director Director
Sultan Ali Allana Zakir Mahmood Iain DonaldCheyne Ahmad Jawad Mushtaq Malik Sajid Zahid Source:
Habib Bank Annual Report 2010
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Chart-2:
Organizational Hierarchy in Habib Bank Limited
President
Senior Executive Vice President
Executive Vice President
Senior Vice President
Vice President
Assistant Vice President
Officer Grade-I
Officer Grade-II
Officer Grade-III
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Table 2:
Name Zakir Mahmood Khaleeq Kayani
Management Committee
Designation President and CEO S.E.V.P & group executive S.E.V.P & group executive S.E.V.P & group executive S.E.V.P & group executive General Executive General Executive Company Secretary& head Group Executive Group Executive Group Executive Group Executive General Executive General Executive General Executive General Executive General Executive General Executive International and overseas banking Information Technology Risk Management Human Resource and organizational Development Chief compliance Officer Administration and services group Law division Corporate Banking International Banking Retail And Consumer Banking Global Operations Global Treasurer Audit, BRR&Investigation Asset Remidial Managment I.T. and System Communication Banking Investment banking Functional responsibilities
Khayyam Mahmood Sohail Malik Zafar Aziz Osmani Jamil Iqbal Jamil A. Khan Afsheen Ahmad Sima Kamil Nauman K. Dar Abid Sattar Mudassir H. Khan Faizan Mitha Salim Amlani Aslam Tulu Islam Mirza Salim Baig Kashif Shah Source:
Habib Bank Annual Report 2010
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4.2 ORGANIZATIONAL BANK
CHANGES
IN
HABIB
In 1997, the Banks Nationalization Act amended with a view to inculcates a commercially oriented culture. In the nationalized commercial bank, two major changes brought about by amendment were the introduction of an independent board of directors by federal Government, with total representative from the private sector and of professional senior management. This change was a break from the past and was carried out recognize that the Government owned bank need to be run based on commercial and market driven parameters, to improve the operations and to prepare the bank for privatization in the shortest possible period of time. In September 1997, the bank recognized its domestic and overseas operation on functional line creating desecrate business groups, to focus against the customer profile available to the bank. Through this process the following business groups have been created; i. ii. iii. iv. v. i. Retail banking group Corporate banking group Asset remedial banking group International operation management group. Finance and audit group. Retail Banking Group The creation of business group has allowed the bank to focus and develop products within these business groups for its customers. In the retail, banking group the bank successfully launched five different products which are: a. b. c. d. e. Muhafiz Rupee Traveler Cheque Crore Rupee Saving Account Crore Pati Deposit Certificate P. M Small Business Loan Scheme New Foreign Currency Accounts
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ii.
Corporate Banking Group The corporate and institutional banking group have been successful in establishing significant relationship with some of the top ten industrial groups and various multinationals, which includes Engro, Alkaram, Siddique Sons, Gul Ahmad, Nestle, Level Brothers and ICI.
iii.
Asset Remedial Banking Group As the bank was facing problems in addressing the recovery of classified portfolio, an asset remedial management group was created (ARM). The total classified portfolio has been consolidated under this group including these loans that were incorrectly rescheduled or restructured in the past. This unit has been staffed with some best executive within the bank and its primary goal is speedy recovery and resolution of classified portfolio.
iv.
International Operations Management Group The overseas operations have been consolidated under international operation group. During the year, local market in the larger operations, e.g. UK, Oman, and U.A.E were reviewed and the country specific strategies have been put in place, in order to build these important franchises. In addition, emphasis has been placed in improving the bank operation in important money centers, e.g. New York, London, Hong Kong, Singapore, and Bahrain. The finance and audit group is independents of business groups and looks after the financial, regulatory and management reporting of the bank. The audit process is being improved taking into consideration the nature, sophistication, and level of risk within the business groups. Historically the risk management, which includes approval of credits, was being carried out through an executive committee. This approval process lacked the very basics of accountability and this committee was therefore immediately disbanded and replaced
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Chapter-4
by credit until process, which is widely used by international banks. Credit initials are given to those experienced bankers, who have adequate credit training and credit experience. Furthermore it was essential that the centralized approval process was delegated to ensure greater efficiency, responsibility and accountability at various level of management. Within this aspect of mind, approvals of credit were delegated down to heads of corporate centers, regional chief executive and zonal chiefs. In order to further straighten risk management procedures, and separate credit policy group and industry specialist have been introduced which now oversea and provide independent input and expert knowledge to the credit process. Furthermore at the corporate center level credit administration is being introduced. v. Finance and Audit Group The main functions of finance and audit groups are: a. Develop and introduce financial controls and procedures on a bank wide basis based on internally accepted accounting and banking standards and practice. b. Establish financial groups for all business groups in order to ensure an acceptable return to shareholders. c. In consultation with the business groups, develop and monitor the banks annual and long-term business plan for each business. d. Provide the management and the board of directors on a periodical basis, the banks business plan together with various Analysis. e. Develop and implement an independent audit structure with focus on activities, which provide senior management timely and proactive information, in order to protect the
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bank incurring losses of frauds, forgery, defalcations, penalties, etc f. To carry out planning of the bank and manage it to minimize incidence of taxation for the bank. g. To assist the persistent in managing the regulatory affairs of the bank in Pakistan overseas. h. As corporate secretary, meet all legal requirements of the bank under the company law ordinance 1984 and banking companies ordinance 1962 and to assist the chairman and the board of directors in preparation for the conferring of meeting so the board and other statuary meetings in an orderly.
Chart-3:
Financial and Audit Group
Financial Control Division
Audit Division
Pak. Reconciliation Division
Investigatio n Division
Corporate Division
Regulatory Units Planning Units Business Finance Control
Business Risk Review
International Audit
Corporate Audit
33
Chapter 5
Functions of Habib Bank Limited
CHAPTER 5
FUNCTIONS OF HABIB BANK LIMITED

Offices can be divided into five levels according to the functions performed by them.
5.1 FUNCTIONS OF CENTRAL OFFICE

Central offices perform the following functions: a. Central office provides leadership and guidance to the field force. b. Implements the polices of State Bank and Pakistan Baking Council. c. It ensures co-ordination between central officer, Circle Office Zones and branches. d. e. It performs the function of planning side in management. Makes sure the efficient and continued service to customers. f. g. Motivates the field force and other staff. Try to build the image of the bank inside and out of country at international level. i. Functions of Provincial Head Quarter Provincial head quarter performs the following functions. a. Processing and monitoring of project financing by project appraisal department. b. c. Post sanctioning of finances approved by circle office. Critical analysis of information received from the field and comparative analysis of facts and figures.
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d. e.
Approves finances according to the powers delegated to it. Controlling and supervising of branches and working sure its smooth functioning.
f. g.
Supervision and implementation of the policies. Keeping contacts with Government and notables of the areas.
ii.
Functions of Circle Office The functions of the circle offices include: a. b. c. Control and supervision of branches and field offices. Sanctioning advances within its powers. Scrutiny and comment on various periodical statements received from the Zonal Chief. d. Reporting and compiling of reports to Zonal head quarters are well as to head offices.
iii.
Functions of Zonal Offices The functions performed by zonal offices are as follows. a. Controls jurisdiction. b. c. Advances to the extent of delegated powers. Consolidates the periodical reports regarding the branches and other field offices and reports to Zonal Chiefs. the operation of branches within their
vi.
Functions of the Branches All the actual banking functions are performed by the branches of the Bank, which includes the following. a. b. To accept deposits. Channelizes the deposits into productive channels through the sanction of proper authority.
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c.
It deals with public matters regarding the provision of financial services to them.
d.
And finally deals all General banking functions.
5.2 DOMESTIC OPERATIONS

Habib Banks Limited Comprises the following division through which it conducts the domestic operations. i. International Division It controls and supervises the operations of various overseas branches all over the world and also monitors the performance of the subsidiaries of Habib Bank. ii. Project Appraisal Division This division is to look into the feasibility of various projects on behalf of their clients. iii. Financial Division This division monitors the fiscal and financial polices of the Bank. iv. Advances Division It looks after various advance portfolios of the bank. v. Personnel Division This division takes care of matters related to Human Resource Development. vi. MIS Division The main aim of MIS Division is the computerization of the daily banking in various branches. vii. Recovery Division This division takes care of bad debts and takes essential steps to recover it.
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viii.
Agriculture Finance Division The basic function of this division is related to the matters regarding the provision of financial support to Agriculture sector..
ix.
Cash Investment Division This division explores the ways and means for investment
opportunities. x. Sports Division Sports divisions encourage sports inside the country and contribute the talent of its own players to National teams. xi. Law Division This division is mainly concerned with the legal aspects of Banks operations its documents and other papers related to the bank. xii. Customer Service Division This division is responsible to introduce new schemes. xiii. Maintenance Division: Its responsible for the maintenance of the building owned by Habib Bank Limited. engineers. xiv. Auditing and Inspection Division This division is charged with the responsibility of the auditing inspection of domestic and international branches. xv. Haj and Zakat Cell This division deals and supervises the policies of the government relating to Haj and Zakat. This division comprises of technical staff and
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xvi.
Investigation Division Investigation division supervises the mall practices within the bank and also investigates any frauds and forgeries within the bank.
xvii.
Publicity and Public Relation Division The main aim of this division is the publicity of the bank and replying contacts with the masses through print and electronic media.
xviii. Printing and Stationary Division Provides the branches with necessary paper and stationary for their routine business. xix. Training Division Training division arranges and imparts the basic and specialized training to the staff of Habib Bank Limited. xx. Market and Business Division The main aim of this division is to develop business and attract depositors. xxi. Micro Enterprises Division This division deals with small enterprises and is responsible for provision of advances to small and medium size enterprises for their development and encouragement. xxii. Organization and Method Division It develops new methods and techniques for the improvement of bank. xxiii. Syndicated Loan Division It deals with provision of advances and banking services to specialized types of clients.
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Chapter-6
General Banking and Departmentation
CHAPTER -6
GENERAL BANKING AND DEPARTMENTATION

General banking means the day-to-day business of bank, under the supervision of Vice President, Zonal Head Office of the main branch. General or day-to-day banking of HBL consists of various departments, which are explained below. 1. 2. 3. 4. 5. 6. 7. Deposit Department Clearing Department Inland Remittances Department Bills Department Advances Department Cash Department CD Department.
6.1 DEPOSIT DEPARTMENT

The basic function of a bank is to accept the surplus of individuals, public sector, and public institution and to honor Cheque drawn upon them. How to Open an Account The applicant is provided with a copy of rules and an application form along with the KYC to open an account. The applicant in a manner prescribed and duly singed by the applicant fills this form. An existing account holder of the bank must introduce the application. A copy of ID 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. Minimum amount to open an account is Rs. 1000. The amount is
39
Chapter-6
entered in the passbook and is singed by the responsible officer of the bank. The documents are sent for scrutiny to main office and ID card to NADRA. After approval of the documents account opener fills another form for chequebook. Printed chequebook is allotted to him within one week. He can withdraw money using this chequebook. Online branches also fill a separate form for credit card if the customer demands. Classification of Deposits The deposits can be classified under three main heads. i. Current Account ii. Saving Account iii. Fixed Deposit i. Current Account or Demand Deposits Current account or demand deposit can be withdrawn by Cheque or transferred to someone else by the depositor at any time without prior notice to the bank. This account can be opened with a minimum of Rs.1000/. In such case the bank does not allow any interest on it, because such deposits are meant for short period and can be withdrawn without any prior notice. Current account best suits with businessmen. Current account can be opened by or through. a. b. c. d. a. Partnership Limited Companies Account Welfare Account Individual Account
Partnership Account The assets of partnership are held partners of the firm, or by one of
its member acting on behalf of all members as trustees for all of them. A partner has an implied power by law to open an account on behalf of his partnership firm, but not on his individual name. The bank only honors that Cheque which confirms to the mandate given to it by all the partners.
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Procedure and Requirements for Opening Partnership Account a. Names of all partners are taken with their specimen
signature. b. c. d. e. Instructions for operation are obtained from each partner. Signature of authorized partner is obtained. A letter of partnership, signed by all partners is obtained. In case all partners now authorize a partner who was not Thus the authority letter is
authorized to operate the account. obtained. b. Limited Companies Account
Before opening an account for a limited company the following documents are obtained. i. ii. The true copy of the certificate of incorporation. True copy of the certificate of commencement of business (only in case of public limited company). iii. iv. Three copies of the memorandum and article of Association. True copy of the resolution of the Board of Director regarding conduct of the account. Procedures and requirements for opening a Limited Company Account i. The certificate of incorporation and commencement certificate of business should be called in original which are returned after inspection. ii. The specimen signature of the director named in the resolution authorized should be obtained on specimen card. iii. In case the company is taken-over by the Government fresh instruction are obtained from the managing director appointed by the government.
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c.
Welfare Account The Associations and welfare unions open such accounts.
Requirements for Opening Welfare Account No registration certificate is needed but only a paper containing registration of the Association is sufficient. d. Individual Account Any individual can open individual account. Following are some requirements to be fulfilled by the individual in order to be able to open an account with a bank. Requirements for Opening an Individual account: i. ii. iii. National ID Card Introducers reference Rs.1000/- as initial amount to be credited to his account. Procedure is the same as explained earlier in this chapter. ii. Saving Account In saving account the basic purpose is to mobilize the saving trend in the lives of people and to enable people to draw money within certain limits. In saving account all HBL the customers are not allowed to draw a big amount at once without any notice. The customer is bound to follow the rules and regulations of the bank. Saving account can be opened with a minimum amount of 1000. Saving accounts can be opened in following shapes. Individual account Joint account
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Chapter-6
iii.
Fixed Deposit Account In case of fixed deposit account the time 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 withdraw money from his/her account in accordance and compliance of terms decided by the bank and the customer. Currently HBL is offering two types of fix deposit accounts. These are called Habib bank munafa certificates. These are divided into two types on the basis of income groups 1) 2) Deposit of Rs.10, 000 to1, 00,000 @ 7% per anum 7.5% per anum
Deposit of Rs.1, 00,000 to10, 00,000 @
6.2 CLEARING DEPARTMENT

Clearing Every bank performs the function of paying and collecting. The cheque drawn on other bank by the customers of the bank is collected by the bank for or without charging fee is called clearing. The bank through the clearinghouse (State Bank of Pakistan) performs the function of clearing. Clearinghouse A clearinghouse is a place where the representative of all banks get together to settle the payment and receipts of Cheques drawn on each other. Functions of Clearing Department in Branch i. To accept transfer, transfer delivery and clearing Cheques from the customers of the branch and to arrange for their collection ii. To arrange the payment of Cheque drawn on the branch and give Cheque for collection to any other branch of Habib Bank Ltd. or any other member or sub-member of local clearing house.
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iii.
To collect amounts of Cheques drawn on members of local clearing house sent for collection by Habib Bank Ltd. branches, not represented at the local clearing house.
Types of Clearing a. b. Outward clearing Inward clearing
OUTWARD CLEARING It includes those Cheques and other instruments which are sent by the bank to other banks for payment on behalf of its own clients. Cheques are sent to clearing house through local main branch. Procedure for Outward Clearing (i) Account number of payee/endorsee is written on
backside of the Cheques. (ii) (iii) wise. (iv) (v) Schedules are prepared. Jottings of all the schedules are taken in the The investment and paying-in-slips are separated. The instruments are sorted bank wise and branch
clearinghouse statement. Amount of Cheques is written in delivered and to pay columns. (vi) After balancing the outward clearing, the pay-in-
slips are released to the C.D. Department. (vii) (viii) After balancing a transfer debit voucher is prepared. The instruments, schedules etc. are delivered to the
message from the main branch. INWARD CLEARING This includes the cheques drawn on the bank presented by other banks for payments. Procedure of inward clearing at the Drawer Branch
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(i) (ii)
Numbers of instruments noted in the schedule are verified immediately on receipt. The amounts of all the instruments are jotted down and totaled. It should be equal to the amount mentioned in the IBDA from the local main branch.
(iii) (iv) (v)
The IBDA is responded crediting the account in the IBDA from the main local branch. The IBDA is responded crediting the account of the main branch. The amounts are released to the concerned department.
Types of Cheques Collected by Clearing Department Transfer Cheques These are the cheques, which are collected and paid by the same branch of Habib Bank. For example Mr. A is a customer of Habib Bank, Turi Bazar Branch and draws a Cheque in favor of Mr. B who is also the customer of the same branch. Transfer Delivery Cheques The Cheques that are collected and paid by two different branches of a bank situated in the same city. e.g. a person draws a Cheque on Habib Bank Ltd. Punjabi Bazar Branch, Parachinar in favor of another person who maintains an account in Turi Bazar Branch, Parachinar. Clearing Cheque When the payee/endorsee and the drawer of the Cheque maintain account with different banks, the collecting bank can receive the amount of cheque from the paying bank in any of the following manner. a. b. The bank can maintain an account with paying banks. The Cheques can be exchanged in clearing house through
their representatives.
6.3 INLAND REMITTANCE DEPARTMENT
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Inland remittance can be defined as the transfer of money payable at certain place within the country. Inland remittances can be classified into following. (i) (ii) i. Within locality Outside locality WITHIN LOCALITY When a branch situated in Parachinar is required to send draft to other branches within the same city, the process is known as within the locality. ii. OUTSIDE LOCALITY Out side locality means the transfer of money payable outside the city. For example some Parachinar branch sends a draft to Kohat branch. This can be done through following means. (i) (ii) (iii) i. Telegraph transfers Mail transfer Demand Draft Telegraphic Transfer (T.T.) In T.T. the order to pay is sent by cable. a. b. a. Government draft Bank draft T.T. MT. DD.
Government Draft It is concerned with the government business and only authorities
can issue such type of draft.
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b.
Bank Draft All branches of H.B.L issue bank draft.
Difference Between Government and Bank Draft

a) The bank drafts are issued to any customer on request. While
government drafts are issued to any department of government. b) Any branch of the bank issues bank drafts, whereas only authorized branches, which deal in treasurery business of the country government, issue the government drafts. c) Through bank draft one can get the amount from any bank but in case of government draft only the authorized section can deal and is able to issue cash. ii. Mail Transfer It is an order to pay a specified sum of money to the person named in the instrument. It sent by surface mail or airmail. The issuing bank charges a commission of issuance, which is, called MT rate. iii. Demand Draft Money could 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 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 and commission to the housing bank, and can be sent by post to the person needed to be paid.
6.4 BILLS DEPARTMENT

Definition of bill of exchange: The bill of exchange is an unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the
47
Chapter-6
person to whom it is addressed to pay on demand or at a fixed or future determinable future time, a sum certain in money to the order of a certain person or to bearer. Bills of Exchange are of two types: i. ii. i. Inland Bill: These are generally used inside Pakistan. Inland can be further divided into two: (a) Out ward bills collection (OBC) (b) Inward bills collection (IBC) a. Outward Bill: Outward bills are sent to the banks outside the city. b. Inward Bill: Inward bills are those that other bank sent to any Habib Bank Ltd. ii. Foreign Bills for Collection (FBC): This type of bills are related to foreign drafts these are first sent to foreign exchange branch which collects these instruments from the concerned branches and banks are then valued in foreign currency. Inland Bills Foreign Bills
6.5 ADVANCES DEPARTMENT

This department is mainly concerned in dealing with loans given to people/customers on their request. These customers can get loans in a specified manner. The loan can be of any domination and nature in accordance to the request made by the customer. TYPES OF ADVANCES (LOANS) Advances can be classified into three types.
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Chapter-6
(i) (ii) (iii) (i)
Overdraft Cash credit Demand loan
OVERDRAFT The over draft facility is given to the already existing worthwhile proven loyal customers. This is actually a facility that allows the account holder to draw over and above the amount, which he maintains in his account. The duration of this facility provision is up to one year, which can be extended. This facility requires no security to be placed with the bank.
(ii)
CASH CREDIT Cash credit is provided to the customers on two types of securities. a. b. Pledge Hypothecation
a.
Pledge The bailment of goods as security for payment of a debt or performance of promise is called pledge. Pledge is that form which allows the bank to be in control of properties and or stocks. Bank is responsible for look after of the properties.
b.
Hypothecation When property in the goods is charged as security for a loan from the bank but the ownership and possession is left with the borrower, the goods are said to be hypothecated. In hypothecation the bank is not responsible for look after of the properties. The property remains under the supervision of the customer, and the customers are requested to send short period annually published reports.
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(iii)
DEMAND LOANS The loans, which are provided to parties on the prudence of the manager. The people who are not the customer of the bank generally take such loan.
Functions of Advances Department The advances department performs the following functions. (i) (ii) (iii) (iv) To finance trade industry and agriculture To give loans to business community. Give loans to students for higher education. Give loans to farmers for crops, cultivation, seeds, fertilizers, tractors etc. (v) (vi) House building loans are given to needy for construction of houses. Loans are given to households for some big or special events like marriage etc.
6.6 CASH DEPARTMENT

The basic function of cash department in the bank is to pay and receive cash to and from its customers. 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. There are three types of Cheques. i. Bearer Cheques The bearer Cheque can be cashed by holder of the instrument who presents it at the counter for payment. endorsement is required. In such case no
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Chapter-6
ii.
Order Cheque When on the word bearer a line is struck the Cheque becomes an order Cheque. Which can be only paid to the person mentioned in it?
iii.
Crossed Cheque It is a sort of Cheque rather a simple Cheque but two parallel lines are struck on its face and the word & Co are written in between these two lines. This Cheque can only be deposited in payees account or the payee can indorse it to somebody else.
6.7 CD DEPARTMENT
CD Department performs small few but very important functions in the retail banking. The main functions of CD DEPARTMENT are maintaining records of saving account holders, their signatures, their balances, standing instructions, issuance of Cheques, and book scrutiny of Cheque etc.
51
Chapter-7
Analysis of Habib Bank Limited
CHAPTER-7
ANALYSIS OF HABIB BANK LIMITED

7.1 SWOT LIMITED
SWOT analysis is a basic tool for identification of internal and external positive or negative impacts on a specific industry or organization. SWOT stands for strengths, weaknesses, opportunities and threats. SWOT analysis is a careful evaluation of an organizations internal strengths, weaknesses as well as its environmental opportunities and threats. In SWOT analysis the best strategies accomplish in organizations mission by: 1. 2. 3. Exploiting opportunities and strengths. Neutralizing its threats and Overcoming its weaknesses. By designing strategies in accordance. Following is a list of SWOT of Habib Bank Limited. i. Organizational Strengths A skill or capability that enables an organization to conceive and implement its strategies. HBL being the oldest and biggest of all private banks enjoys the following strengths. a. HBL is the larger commercial bank in Pakistan with the
ANALYSIS
OF
HABIB
BANK
network of over 1450 domestic branches and 55 international branches.
52
Chapter-7
b.
Being the pioneer of banking in Pakistan, HBL is the oldest
and is the richest in experience. c. HBL focuses on consumer banking by lucrative schemes,
products and services suiting best to the wants and demands of the customers. d. The band is always on the look to improve its services both
to the domestic as well as overseas customers. e. Attractive and competitive compensation package for
employees. f. Human resources development and introduction of new
technology towards modern banking. g. h. i. j. Extension to remote areas of country. High morale and interrelationship of employees. Goodwill throughout its life, and even higher today. 24 hours cash access and safe payment products for high
value transaction. k. HBL instant financing products for customers wanting
instant loan facilities at HBL branches. l. Having potential to encounter the competitive environment
in the market. m. Veteran and experience private management group also
involved in other interests like, textile and cement industry. n. Weaknesses A skill in capability that does not enable an organization to choose and implement strategies that supports its mission. a. Slow down in advances growth in the short term as HBL Customer enjoys the services at the residential localities.
focuses on quality customers in the markets.
53
Chapter-7
b. c. d.
Work burden on employees. Unsatisfaction in employees due to risky nature of business. Discrimination in services to customers with large and
small accounts. e. Inconsistency in efficiency and working atmosphere due to
the largest of branches. f. Sense of insecurity in the employees serving at low
profitable branches due to the right sizing. . g. h. Victim of political, legal and socio-cultural pressures. Slow towards adopting new technologies specially in online
banking and computerization of branches in comparison with foreign banks. Opportunities An area that, if exploited, may generate high performance. a. In big cities the bank may offer 24 hours of service, this 24
hour market is wide open, it will not only facilitate old customer but will also attract a bulk of new customers. b. In opportunity exist, in form of opening of ladies banking
section within the branch, which is entirely a new idea and it, will attract customer. c. Growing policies of government on business and commerce
sector provide HBL opportunities to take advantages of these policies to meet efficiently with the business people to solve their problems with the instant cash and financing facilities. d. Customer feedback on different products and accounts has
really improved the bank performance and encourage the atmosphere for other future policies. e. HBL also has an opportunity to expand its new
technological advancement like; Tele bank and internet banking

54
Chapter-7
facilities in order to serve the customers more efficiently, specially E-banking facility is also a new opportunity which is a flourishing business in foreign countries and can also be here, if HBL takes the initiatives. f. Due to efficient and veteran management group, HBL can
also improve well and expand its foreign operation successfully. g. Threats An area in the environment that increases the difficulties the organizations achieving high performance. a. b. Current economic and social condition of the country. Foreign banks are also advance in regard of technology Habib Bank Limited provides opportunity to utilize its
skills and efficiencies in leasing business.
which is a very big threat for domestic banks. c. d. e. Openness of market for foreign banks. Also the increasing operation of private banks. Highly attractive and advance services by foreign banks to
their customers. f. The threat of inconsistency and government policy
regarding to business and economics sectors, specially political and regional situation which makes the environment uncertain. g. h. Growing global technological advancement. Strict regulation by government over credit facilities to the
customers as well as to meet the prudential. i. Loss of confidence of overseas customers due to freezing of
accounts. j. From SWOT analysis we can conclude that the
management of the bank should adopt systematic planning for the
55
Chapter-7
bank growth, introduced new schemes HBL has more customers as compare to other banks, if they given proper attention to every customer then if in few years it will be the leading bank of the country.
7.2 ANALYSIS BANK LIMITED

i. Planning
OF
KEY
AREAS
OF
HABIB
In this tense kind of business situation, where competition is high and environment is rapidly changing the only thing which can save a business is effective planning and its implementation. Many economic technological, social and political changes globally; therefore it will be almost impossible for an organization to survive without planning its feature. Keeping in view these facts Habib Bank is fully committed to plan all its activities for the progress in such a dynamic and threatened changing environment. In designing an environment, for effective performance of individual working together in-groups, the most important task is to see the purpose; objectives and methods of attaining them are clearly understood. Planning can be classified into purpose, objective policy procedures and budgets. ii. Policies Policies are general guidelines for decision making process throughout the organization. Policies define an area within which a decision is to be made and ensures the decision will be consistent with and contribute to an objective. Policies help decide issues before they become problems; makes it unnecessary to analyze the same situation every time it comes up and unify other plans. Keeping in view the importance of policies the upper management of Habib Bank engineered their own Set of policies ranging from
56
Chapter-7
managerial, marketing and operational policies. These policies are known to each and every employee of Habib Bank but these are often implied. Polices and many of them do not exist in written form. Which some times create ambiguity for the employees. iii. Procedures Procedures are the plans, which establish a required set of method of handling future activities. They are guides to actions rather than to thinking. Procedures define the manner in which certain activities must be handled and accomplished. Habib Bank has its own procedures for handling and
accomplishing certain tasks like the operational procedures regarding day to day banking. iv. Budgets Budget is a statement of expected results expressed in numerical terms. Budget brings precision in planning. It also serves a control device for evaluating enterprise operations. In a broad sense a budget is a tool which managers use to translate future plans into quantitative terms. Budget being the essential part of planting process is also prepared at Habib Bank. And different amount of resources is allocated for different uses.
7.3 ANALYSIS STRUCTURE
OF
ORGANIZATIONAL
Organization means the organized activities of a group of people working towards a group goal to be achieved by the people for betterment and development of the organization and eventually for the achievement of individual objectives. Organizing is that part of managing that involves establishing an intentional structure of roles for people to be filled in an organization. It is intentional in a sense of making sure that all the tasks
57
Chapter-7
necessary to accomplish goals are assigned and, it is hoped, assigned to people who can do them best. The purpose of an organizational structure is to help in creating an environment for human performance. It is then, a management tool and not an end in and of itself. Although the structure must define the task to be done, the rules so established must also be designed in the light of abilities and motivations of the people available. If we analyze the organizational structure of Habib Bank we will find the presence of following elements in its structure. i. Centralized Decision Making By looking at the organizational structure of Habib Bank Limited we will find that the structure at Habib Bank Limited is a critical one. All the decisions are made at the top management level and the subordinates have to obey these decisions. This trend in the centralized decision making show a pattern of rigidity in the structure of Habib Bank Limited. ii. Downward Communication Communication is the process by which information is exchanged and understood by two or more people, usually with the interest to motivate or influence the behavior of others in the organization. Downward communication is the message and information sent from top management to subordinates in a downward direction. Managers can communicate downward to employees through speeches, messages in company publications, information leaflets tucked into pay envelops material on bulletin boards, and policy and procedure mandates. The same pattern is followed at Habib Bank. No doubt its a very traditional approach but it can create problems because it ignores the receiver of the communication because the issuance of polices and procedures, does not ensure communication. In reality many of the messages communicated downward are not understood perfectly.
58
Chapter-7
iii.
Chain of Command The chain of command is an unbroken line of authority that links
all persons in an organization and shows who reports to whom. If we analyze the organizational structure we will find that there is a scalar principle followed within the Bank because each and every person knows to whom he report. The authority and responsibility for different tasks and duties are different, as well as every one knows the successive levels of management all the way to the top. iv. Authority and Responsibility The chain of command illustrates the authority structure of Habib Bank. Authority is the formal and legitimate right of the manager to make decisions, issues, and orders and allocates resources to achieve organizational desired outcomes. As we have analyzed the chain of command of Habib Bank, we come to the conclusion that, as there is a scalar pattern followed at the organizational setup of Habib Bank therefore it is implied that everyone in his position knows that what is his authority and what is his responsibility for the allocated authority. v. Delegation Delegation is the process manager use to transfer of authority and responsibility to positions below them in the hierarchy. Most organizations today encourage managers to delegate authority to the lowest possible level to provide maximum flexibility to meet customer needs and adapts to environment. But at Habib Bank no such system prevails the managers try to keep, as much of the authority as they can and if some authority is delegated it is sure that it will be misused.
7.4 BRANCH LEVEL ENVIRONMENT OF HABIB BANK LTD

This part of discussion is all about the branch in which I did my internship that is Turi Bazar Branch, Parachinar.
59
Chapter-7
i.
Lack of Coordination Lack of coordination is one of the charges most frequently leveled
against large organizations, the result of all this is delay, frustration and waste on part of the employees of the bank and for the customers. The main reason of it is burden of work on employees. All of them are so busy in their duties that they dont know what my fellow is doing. ii. No Proper Timing for Lunch There is break of lunch in this branch .The employees do their lunch during the banking hours, which not only creates bad impression on customers but it is also a great problem for bank employees and internees. iii. Work Burden Due to the location of the branch the employees are under heavy stress due to the burden of work. The bank office is completely occupied during the first week of the month, customer come to get their salaries on this day. iv. Computerization of the bank Turi Bazar branch is located in a very busy locality. It is also a very old branch but still where most of the branches were already computerized this branch is still in queue to be computerized. They were preparing to computerize the time I was doing internship. Although it is computerized now.
7.5 PROCEDURAL ANALYSIS

Most of the procedures are very lengthy at Habib Bank. Fore example if a customer wants to open account in bank, he has to fill three different forms. After filling these forms he has to wait for four days for approval of his I.D. card from NADRA after approval from NADRA he has to apply for chequebook. After a week or so he receives his printed chequebook. Opening of account is the first impression of bank on customer and this very first impression is bad.
60
Chapter-7
The is also true in case if somebody wants a loan from the bank the procedures are too lengthy which in most cases leads to a loss to the bank in terms of interest income to the bank. They may apply somewhere else where the procedures are simple and short. Other there is a red tape exists in every department of the bank, which contributes, eventually to a loss of image to the bank in the market where every bank tries to compete on what so ever basis. This lengthy procedure is only for safeguarding the customer and loan but stretching it too much leads to bad impression.
61
Chapter-8
Financial Analysis
CHAPTER-8
FINANCIAL ANALYSIS
Financial statements are the principal means of reporting the financial condition and results of operations of a business entity. These statements are the means to assist various parties in decision making who are interested in the activities of the business. These statements are means to an end of helping stakeholders in decision making to improve the quality of decision making proper analysis of these statements helps a lot. Financial statement analysis helps in determining the financial conditions at any particular point in time and effectiveness of operations of a firm during a specific period. The various stakeholders of business are all interested in the analysis of financial statements. But the focus of interest of all is not the same. For example creditors and credit reporting agencies are interested in finding out the credit worthiness of the firm to which they have extended credit or intend to extend credit. Short term creditors are interested in the short term liquidity of the business and long term creditors are interested in the long run cash flow which the firm can generate over the long period of time. Investors are interested in the firms ability to sustain profitability over a period of time. Government agencies analyze financial data for tax purposes. The internal users of financial statement like management also analyze financial data for planning and control. The financial data of HBL is analyzed in the two following ways: 1. Index Analysis 2. Common Size Analysis 3. Ratio Analysis
62
Chapter-8
Financial Analysis
Index and common size Analysis are used to measure a firms performance over time in relation to itself. Such analysis is called time series analysis.
8.1 INDEX ANALYSIS OF HBL

Growth or Index analysis is done when financial analyst measures a firms performance over time. Comparison of the firms current performance to past performance through financial analysis allows the analyst to determine whether the firm is progressing as planned.
Knowledge of trends assists the management in planning future operations. The theory behind time-series analysis is that the firm must be evaluated in relation to its past performance and appropriate action must be taken where necessary, in order to direct the firms towards its immediate and long term desired goals.
8.2 COMMON SIZE ANALYSIS

Common size analysis is an analysis of financial statements where total assets divide all balance sheet items and all income statement items are divided by net sales or revenues. Common size statements can be extremely helpful to highlight changes over time in the financial performance and financial condition of a company. However, growth or decline in various items of balance sheet and income statement cannot be detected from the common size percentage only changes in the data relative to a total for a particular date or period can be determined. A statement item that has increased in rupee amount will show a decrease percentage if the total has increased at a greater rate than the individual item or vice versa
63
Chapter-8
Financial Analysis
8.3 RATIO ANALYSIS

A ratio is a quantitative relation between two magnitudes of the same kind. In ratio analysis, the financial ratios of the firm are compared to that of its competitors. This comparison allows the firm to detect major operating differences, which if corrected, will increase its efficiency. Another very popular method of ratio analysis is to compare the firms financial ratios to industry average or similar form in industry or to our own past performance. Before discussion financial ratios, three cautions are in order: a. A single ratio does not generally provide sufficient information to judge the overall performance of the firm. Only when a group of ratios is used, a reasonable judgment concerning the firms overall financial state can be made. b. An analyst, when comparing financial statement, should ensure that predetermined uniform standards are used for this purpose. c. It must be ensured that the data used in calculating financial ratios have been developed in the same manner and are sound and reliable. There is no doubt that financial ratios are a useful guide for managerial decision-making but these are not exact and definite. Ratios only suggest the questions that need to be answered and provide no answers.
64
Chapter-8
Financial Analysis
8.4 HABIB BANK LTD. BALANCE SHEET FOR THE YEAR ENDED DEC, 2009, 2010
65
Chapter-8
Financial Analysis
8.6 HABIB BANK LTD. BALANCE SHEET, INDEX ANALYSIS, FOR THE YEAR ENDED DEC, 2009- 2010.
2009 Rupees in 000 Assets Cash and balances with treasury banks Balances with other banks Lending to financial institutions Investments Advances Operating fixed assets Other assets Deferred tax assets Total Assets Liabilities Bills Payable Borrowings from financial institutions Deposits and other accounts Sub-ordinated loans Other liabilities Total Liabilities Represented By Share capital Reserves Unappropriated profit Minority Interest Surplus on revaluation of assets Total Equity Total Liability & Equity 100% 100% 100% 100% 100% 100% 100% 100 111.3403 138.4203 105.7291 98.0452 118.3260 116.4847 100% 100% 100% 100% 100% 100% 162.1667 104.6147 115.7158 128.0196 116.3027 100% 100% 100% 100% 100% 100% 100% 100% 100% 119.8166 75.1304 24.8564 148.7967 109.3694 126.9817 115.2714 242.6492 116.4847 2010 Rupees in 000 (%)
66
Chapter-8
Financial Analysis
8.7 HABIB BANK LTD. INCOME STATEMENT, INDEX ANALYSIS, FOR THE YEAR ENDED DEC, 2009, 2010
2009 Rupees in 000 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 2010 Rupees in 000 (%) 115.5549 145.0613 102.7733 287.7272 120.2209 615.5362 83.9225 86.9863 202.7399 134.9265 118.2158 118.0654 91.9369 106.6944 225.3783 155.1094 80.3833 101.0618 4271.0266 396.5069 79.3998
Mark-up/Return/interest earned Less: Mark-up/Return/interest expensed Net Mark-up/Interest income Provision against non-performing loans and advances Reversal Provisions against off balance sheet obligations Bad debts written off directly Net Mark-up/Interest Income after provisions Add :Non Mark-up/Interest Income Fee, commission and brokerage income Income Gain on Investment Income from dealing in foreign currencies Other income Total non-mark-up/interest income Less : Non Mark-up/Interest Expenses Administrative expenses Other provisions/write offs Other charges Profit before taxation (EBT) Taxation: - Current - Prior years - Deferred Profit After Taxation (EBIT)
8.8 HABIB BANK LTD. BALANCE SHEET, COMMON SIZE ANALYSIS, FOR THE YEAR ENDED DEC, 2009-2010.
2010 Rupees in 000 Assets 2009 Rupees in 000
67
Chapter-8
Financial Analysis
Cash and balances with treasury banks Balances with other banks Lending to financial institutions Investments Advances Operating fixed assets Other assets Deferred tax assets Total Assets Liabilities Bills Payable Borrowings from financial institutions Deposits and other accounts Sub-ordinated loans Other liabilities Total Liabilities Represented By Share capital Reserves Unappropriated profit Minority Interest Surplus on revaluation of assets Total Equity
8.0185 3.9047 0.2352 25.7145 55.2279 3.9517 1.9914 0.9557 100% 2.4521 9.3827 84.5001 0.4930 3.1718 100% 10.9112 31.344 44.8178 1.5270 11.3993 100%
7.7955 6.0540 1.1026 20.1304 58.8209 3.6251 2.0123 0.4587 100% 1.7586 10.43.10 84.9287 2.8815 100% 12.9108 33.311 38.3117 1.7089 13.7573 100%
8.9 HABIB BANK LTD. INCOME STATEMENT, COMMON SIZE, FOR THE YEAR ENDED DEC, 2009-2010.
68
Chapter-8
Financial Analysis
Mark-up/Return/interest earned Less: Mark-up/Return/interest expensed Net Mark-up/Interest income Provision against non-performing loans and advances Reversal Provisions against off balance sheet obligations Bad debts written off directly Net Mark-up/Interest Income after provisions Add :Non Mark-up/Interest Income Fee, commission and brokerage income Income Gain on Investment Income from dealing in foreign currencies Other income Total non-mark-up/interest income Less : Non Mark-up/Interest Expenses Administrative expenses Other provisions/write offs Other charges Profit before taxation (EBT) Taxation: - Current - Prior years - Deferred Profit After Taxation (EBIT)
2010 Rupees in 000 100% 37.9428 62.0571 16.3194 0.1082 0.1670 46.0128 6.7749 4.8982 2.9464 5.2357 19.8553 65.8681 36.2458 0.5469 0.1686 30.0006 14.3038 3.3053 7.5844 19.9758
2009 Rupees in 000 113% 30.2250 69.7749 6.5540 0.1040 0.0313 63.3562 8.9999 2.7918 2.5233 5.1179 19.4331 82.7893 39.2559 0.2804 0.1256 43.1273 16.3551 0.0894 2.2103 29.0719
69
Chapter-8
Financial Analysis
8.10 FINANCIAL RATIO

To evaluate a firms financial condition and performance, the financial analyst needs to perform checkups on various aspects of a firms financial health. A tool frequently used during these checkups is financial ratio or index.
8.11 LIQUIDITY RATIOS

Liquidity Ratios help us understand if we can meet our obligations over the short-run. Higher liquidity levels indicate that we can easily meet our current obligations. We can use several types of ratios to monitor liquidity.
8.11.1
Current Ratio
It measures the ability of the firm to meet the current debts with currents Assets. OR It shows the short-term debt-paying ability of an organization.
Current Ratio = Current Assets / Current Liabilities 2009 2010 = 79,839,836 / 10,041,542 = 81,640,246/ 9,775,093 = 7.950 = 8.351
Interpretation
This means that Habib bank has Rs.7.950 and Rs.8.351 in its Current Assets to meet its every Rs.1 Current Liabilities in the years. 2009 and 2010 respectively.
8.12 LEVERAGE RATIOS

Another important group of detail ratios are Leverage Ratios. Leverage Ratios measure the use of debt and equity for financing of assets
70
Chapter-8
Financial Analysis
8.12.1
Debt-to-Equity
It indicates the extent to which the debt financing is used relative to Equity financing. This ratio is used to determine an entitys long-term debt-paying ability. It helps to determine how well the creditors are protected in case of insolvency of a company. It compares the funds provided by creditors to the funds provided by shareholders.
Debt to Equity Ratio = Total Debt / Share holders Equity 2009 2010 = 779,554,995/ 9,108,000 =789,164,897/ 10,018,800 = 85.59 = 78.76
Interpretation
This means that for each Rs. 1 brought by shareholders, the Creditors brought Rs. 85.59 and Rs. 78.76 during the years 2009 and 2010 respectively to finance the HBL.
8.12.2
Debt-To-Total-Assets
The Debt to total assets Ratio measures the level of debt in relation to our investment in assets. The Debt Ratio tells us the percent of funds provided by creditors and to what extent our assets protect us from creditors. A low Debt Ratio would indicate that we have sufficient assets to cover our debt load. Creditors and management favor a low Debt Ratio
Debt to Total Assets = Total Debt / Total Assets 2009 2010 = 779,554,995/ 863,924,793= 0.9020 = 789,164,897/ 875,451,415= 0.9010
71
Chapter-8
Financial Analysis
Interpretation
This means that for each Rs 1 invested in the Total Assets of the HBL, Rs 0.9020 and Rs 0.9010 have been brought by the creditors during the years 2009 and 2010 respectively.
8.13 PROFITABILITY RATIOS

Profitability Ratios measure the level of earnings in comparison to a base, such as assets, sales, or capital. Analysis of profit is of vital concern to stockholders as they derive revenue, in the form of dividends, when paid from profit. Profits are also important to creditors as they are source of funds for debt coverage.
8.13.1
Net Profit Margin
Profit Margin measures the percent of profits you generate for each dollar of sales. Profit Margin reflects your ability to control costs and make a return on your sales. Management is interested in having high profit margins.
Net Profit Margin = (Net Profit / Net Sales or total income) * 100 2009 2010 = (6,099,858/ 21,277,842) *100 = (7,865,165/ 25,704,769) * 100 = 28.66%
= 30.59%
Interpretation
This means that the HBL earned Rs. 28.66 and Rs. 30.59 as net profit for each Rs 100 for 2009 and 2010 respectively.
72
Chapter-8
Financial Analysis
Return on Assets = Net Profit / Total Assets 2009 2010 = (6,099,858/ 8 4,369,798) *100 = (7,865,165/ 8 6,286,518) * 100 = 7.22 = 9.11
Interpretation
This means that HBL is able to earn Rs. 7.22 and Re. 9.11 return on its each Rs. 1 invested capital in 2009 and 2010 respectively.
8.13.2
Return on Equity
It measures the earning power on shareholders book value investment. A high return on equity often reflects the firms acceptance of strong investment opportunities and effective expense management. Higher the ratio more the risk for entity, and more returns for shareholders.
Return on Equity = Net Profit / Shareholders Equity 2009 2010 = (6,099,858 / 9,108,000) = (7,865,165 / 10,018,800) *100 * 100 = 66.97 % = 78.50 %
Interpretation
This means that HBL has been able to grant a return of 66.97 % & 78.50 % to all shareholders on their equity during, 2009 & 2010 respectively. It is a high return for shareholders & thus too much attractive for investors.
73
Chapter-9
Conclusion & Recommendations
CHAPTER 9
CONCLUSION AND RECOMMENDATIONS

9.1 CONCLUSION
During my two months internship in HBL Turi Bazar Branch Parachinar , I observed many things at the Bank such as its working procedures, policies, and many other aspects of practical nature of a big organization like Habib Bank. On the basis of all these observations, I have come to the conclusion. As we see that this world is very dynamic and changing, so any organization, financial or non-financial has to be innovative in order to be in a run for competition for the products it develops or the services it provides to its consumers. Habib Bank is one of the oldest and more settled banks of Pakistan in fact it remained the business of financial services for more than the life of our country. Probably it was one of the most established Banks at the time of independence of Pakistan. During its course of history Habib Bank contributed a lot in the development and fostering the growth of economy in the country. Despite all these facts there are some areas, which needs to be improved, like it should computerize all its Network of branches in order to meet the requirements of a new era and to fulfill the needs of 21st century.
9.2 RECOMMENDATIONS
74
Chapter-9
i.
Separation of Activities
Many of the activities at the bank are haphazardly arranged and one person has to do many jobs, which makes problems in handling of activities. In order to be more effective the activities should be properly distributed among the concerned employees of the bank.
ii.
Informal Get Together

In todays organizational structures the importance of informal groups are recognized through which the employees can discussed their work related experiences and problems with their high rankings. There is a need of setting up informal organization within Habib Bank in order to foster the employees confidence and to ensure high efficiently working environment.
iii.
Uniformity in Dress
Although Habib Bank has Proper dress But it is not strongly implemented through out the bank.. It is strongly recommended that a proper dress code should be observed in the Bank which would enhance and develop the proper outlook of the bank in the eyes of its customers and would build the image of the bank more like is disciplined financial institution.
iv.
Proper Work Distribution

The work should be properly distributed among the employees in a manner compatible to the abilities of the workers.
v.
Decentralization
A decentralized pattern of authority distribution should be followed at the bank. And employees should be given a due consideration while making decision which can affect the employees at lower levels.
vi.
Delegation of Authority
75
Chapter-9
As mentioned before that upper management does not have full confidence in the employees working at lower level. Sufficient authority should be delegated to the officers working at lower levels.
vii.
Enhanced Customers Services

Improved customer service should be adopted at Habib Bank. Personalized banking system should be introduced to attract more customers, and all the customers should be given due respect.
viii.
Computerization of branches
All of the banks are very quick towards computerization of banking network. Habib bank is very slow in doing so. It should become faster in doing so.
ix.
Reduction in work burden

The work Burdon is very high on bank employees, due to which they feel un satisfied in their jobs I think they should be given some relaxation in respect of their duty timings or work Burdon.
x.
Market Visit
A very useful mode of contacts is through personal marketing visits. Such visits have other important by products, such as information about customers financial and business positions about the market reputation creation a feeling of importance in the minds of customers. Such visits should be properly arranged with regularity and consistency.
xi.
Better and Modern Training Programs

Better and modern training programs should be arranged for the new recruits and as well as refresher-training programs should be arranged at all levels for the employees of the bank.
xii.
Job Rotation
76
Chapter-9
A job rotation program should be followed for the individuals at the bank in order to keep them motivated and energetic so that doing the same job for years may not bore them.
xiii.
Introduction of Modern Forecasting Techniques

Modern forecasting techniques should be adopted in order to meet the dynamic and competing business environment.
xvi.
More Friendly Environment

Customer friendly environment should be maintained at the bank, in order to attract more clients.
xv.
Better Communication
A proper upward communication pattern should also be encouraged at the bank, which would help the banks top management to the actual happenings in the bank at lower levels in the bank.
77
References
REFERENCES
1.
Yasin Dost Muhammad. Golden Jubilee Magazine of HBL. 1991. pp. 54-56.
2.
Koontz W. (1993). Management 10th edition. New Jersey. McGraw Hill Inc. (USA). page 143.
3. 4. 5. 6. 7.
www.habibbankltd.com
Branch Manager Muhammad Habib MTO Cash Officer Assistant Manager tahir Mushtaq Hussain Mussarat Hussain Qamar abbas S.Kamal Hussain Khar Ali
8.
Koontz W. (1993), Management 10th edition. New Jersey. McGraw Hill Inc. (USA). page 168.
9.
Habib Bank Annual Report 2010.
78
Bibliography
BIBLIOGRAPHY
1. Alhaddet, David (1954). Monopoly and Competition in Banking. Berley, California, University of California Press 2. Benston, George, (1973), Bank Examination. The Bulletin, New York, University Graduate School of Business Administration.
3.
De Cenzo, David A. Robins, Stephen P. (1994). Human Resource Management Concepts and Practices, 4th Edition. New York, John Whiley and Sons Ince.
4.
HBL, Annual Report, We. Hicks, Herbert G. (1984) Management. 4th Edition, New York: McGraw Hill Publishers.
5.
6.
Khan, Mubashar (2001). Banking Laws in Pakistan, Lahore Uzair Publishers.
7.
Kothari, C.R. (1993), Research Methodology, Methods and Techniques. 2nd Edition. New Delhi: Wiley Eastern Limited.
8.
Sameulson, Paul A. Nordhaus, Willian D. (1995). Economics, 15th Edition, New York: McGraw Hill Inc.
9.
Siddiqi, Asrar H. (1998). Practices and Law of Banking Pakistan. 6th Edition, Karachi, Laureate Packages.
10.
Weihrich, Heinz, Koontz, Harold (1993). Management: A Global Perspective. Tenth Edition, North America: McGraw Hill Inc.
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S Qaim HBL Final Report

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PREFACE

OBJECTIVES AND POLICIES..............................................17

FUNCTIONS OF HABIB BANK LIMITED..........................34

GENERAL BANKING AND departmentation........................39

ANALYSIS OF HABIB BANK LIMITED.............................52

FINANCIAL ANALYSIS ......................................................62

conclusion and RECOMMENDATIONS ...............................74

References ...............................................................................78 Bibliography ...........................................................................79

Introduction of the Report

1.2 PURPOSE OF THE STUDY

Internship Report on HBL

Introduction of the Report

1.3 SCOPE OF STUDY

1.4 RESEARCH METHODOLOGY

Secondary Data Annual reports

Internship Report on HBL

Introduction of the Report

Magazines Manuals Journals Various HBL publications

1.6 SCHEME OF THE STUDY

Internship Report on HBL

Introduction of the Report

Internship Report on HBL

Internship Report on HBL

Internship Report on HBL

2.2 BANKING IN PAKISTAN

2.3 HISTORY OF HABIB BANK LIMITED

Internship Report on HBL

Internship Report on HBL

2.4 ROLE OF HABIB BANK IN PUBLIC SECTOR DEVELOPMENT

Internship Report on HBL

PRIVATE SECTOR DEVELOPMENT

Internship Report on HBL

2.6 FUNCTIONS OF HABIB BANK LIMITED

Internship Report on HBL

Internship Report on HBL

2.7 DISCOUNTING BILL OF EXCHANGE

2.8 AGENCY SERVICES TO CUSTOMER

Internship Report on HBL

Internship Report on HBL

Internship Report on HBL

Objectives and Policies

OBJECTIVES AND POLICIES

3.1 OBJECTIVES OF HABIB BANK LIMITED

Internship Report on HBL

Objectives and Policies

3.2 POLICIES OF HABIB BANK LIMITED

Internship Report on HBL

Objectives and Policies

Internship Report on HBL

Objectives and Policies

Objectives and Policies

3.3 VARIOUS SCHEMES AND PRODUCTS OF HABIB BANK LIMITED

Internship Report on HBL

Objectives and Policies

Internship Report on HBL

Objectives and Policies

Foreign Currency Accounts It was introduced in 1973.

Internship Report on HBL

Objectives and Policies

Internship Report on HBL

Objectives and Policies

Muhafiz provide the facility of payment in all branches of HBL

Internship Report on HBL