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Bank Al Habib Limited

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Executive Summary
This report has focused on the Management Style and working of the Bank Al Habib Limited. Aspects like corporate philosophy, organizational structure, training and development and role of technologies in company’s activities have been highlighted. From management point Bank Al Habib is an organization following centralized planning and controlling. Planning is the responsibilities of the senior management group more particularly the board of directors, and to check any deviation from the prescribed plan, there is head office under them. Organizational structure has been established in such a way, which has enabled it to decentralize its operations and day-to-day management activities. Delegation of authority and establishment of zones, regions, and branches have helped to manage day-to-day activities. To effectively maintain and develop its human resources Bank Al Habib invest considerable time and finance to polish the skills of its employees.

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Bank Al Habib Limited

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Company Overview
DAWOOD HABIB GROUP, which is the sponsor of Bank AL Habib Limited, has a very long track record of banking which dates back to 1920s. They were among the founder members of Habib Bank Limited , which played a major role in meeting the financial, and banking needs of Pakistan, and which was nationalized along with other Banks in Pakistan on December 31, 1973. Under the privatization policy of Government of Pakistan, the DAWOOD HABIB GROUP was granted permission to set up a commercial bank. Bank AL Habib was incorporated as a Public Limited Company in October 1991 and started banking operations in 1992.

Board of Directors
The Board of Directors of the Bank comprises of the following: Name Ali Raza D. Habib Abbas D. Habib Anwar Haji Karim Faiz N. Abdul Ali Hasnain A. Habib Imtiaz Aalam Hanfi Murtaza H. Habib Qumail R. Habib Syed Mazhar Abbas Tariq Iqbal Khan Mahmood S. Allarakhia Designation Chairman CEO & MD Director Director Director Director Director Executive Director Director Director Company Secretary Occupation Businessman Banker Industrialist Businessman Industrialist Industrialist Banker Banker Banker

Credit Rating
The Bank has been rated as "AA" for long-term rating and "A1+" for short-term rating by the Pakistan Credit Rating Agency (Private) Limited (PACRA).

Consumer Banking
Bank AL Habib Limited offer Consumer Loan facilities to its eligible customers. These facilities are tailored to suit customer requirements with competitive rates and an easy means of payment. We have the solution whether it may be for personal needs, a brand new car or a house (building/renovating a house). Following are the consumer banking products of Bank Al Habib.

• • •

Personal Loan. Auto Loan. Home Loan.

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Bank Al Habib Limited

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Services
Bank AL Habib Limited offers a wide range of services to the customers and recognizes the importance for efficient business delivery and providing timely solutions to them. Following are the services provided by Bank Al Habib to its customers: • • • • • • • The Online Banking. Safe Deposit Lockers. ATM Card. Debit Card. Tele Banking. Remittances. Cash Management. bank also maintains correspondent relations with leading international banks.

These include American Express Bank, USA; Banco Di Roma, Italy; Commerzbank and Dresdner Bank, Germany; Midland Bank, PLC U.K.; The Royal Bank of Canada, Canada; Hong Kong and Shanghai Banking Corporation Ltd., Hong Kong.

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Bank Al Habib Limited

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Vision and Mission Statement
Vision Statement “To be a quality financial service provider maintaining the highest standards in banking practices.”

Mission Statement “To be a strong and stable financial institution offering innovative products and services while contributing towards the National economic and social development.”

Evaluation of Mission Statement
Customers. Product/Services. Markets. Technology. Concern for Survival, Growth, and Profitability Philosophy. Self Concept. Concern for Public Image. Concern for Employee. No. Yes. No. No. Yes. Yes. Yes. No. No.

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Bank Al Habib Limited

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Strengths and Weaknesses
Strengths
1. Strong brand recognition in the domestic market and niche foreign markets. 2. Bank Al Habib provides a complete range of banking products and services including retail banking, corporate banking, trade finance, consumer finance, debit cards, online banking, tele banking, etc. 3. Focused business strategy supported by appropriate organization structure, operating procedures, and qualified human resource. 4. Strong distribution capability through the 104 branches all over Pakistan.

Weaknesses
1. 2. 3. 4. No massive advertising. Up gradation of technology in all branches not yet complete. The potential of overseas branches is not being fully exploited. Shortage of trained and specialized staff at lower and officer levels for consumer and retail banking. 5. Communication among the functional areas are some how lacking.

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Bank Al Habib Limited

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Internal Factor Evaluation (EFU) Matrix
S. No. Strengths 1 2 Strong brand recognition in the domestic market and niche foreign markets. Bank Al Habib provides a complete range of banking products and services including retail banking, corporate banking, trade finance, consumer finance, debit cards, online banking, tele banking, etc. Focused business strategy supported by appropriate organization structure, operating procedures, and qualified human resource. Strong distribution capability through the 104 branches all over Pakistan. Weaknesses 1 2 3 4 5 No massive advertising. Up gradation of technology in all branches not yet complete. The potential of overseas branches is not being fully exploited. Shortage of trained and specialized staff at lower and officer levels for consumer and retail banking. Communication among the functional areas are some how lacking. Total 0.15 0.10 0.10 0.10 0.05 1.00 4 3 3 3 3 0.60 0.30 0.30 0.30 0.15 3.55 0.15 0.15 4 4 0.60 0.60 Key External Factors Weight Rating Weighted Score

3

0.10

4

0.40

4

0.10

3

0.30

The total weighted score of 3.55 shows that Bank Al Habib is above average in its efforts to pursue strategies that enhance internal strengths and minimize weaknesses.

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Bank Al Habib Limited

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Opportunities and Threats
Opportunities
1. Develop value added services combined with corporate banking relationships, cash management services to large and medium sized corporate clients. 2. Large international network, which principally focuses on trade finance with Pakistan, can be utilized to tap trade activities in other markets. 3. Reduction in intermediation costs from 5% to 10% is possible, with improving technology. 4. Profit may increase by 10% to 15% through e-banking operations. 5. A wide product portfolio, along with increasing greater hedging of business risks also significantly increases cross selling opportunities.

Threats
1. Intense competition among the various banks. 2. Economic instability such as changing level of disposable income, rates of inflation, fiscal policy, unemployment etc. 3. Political changes affects banking sector seriously. Banks have the funds available for lending, however, government may restrict up to certain amount for lending. 4. Qualified personnel are moving abroad for better living. 5. Although hardware prices continue to decline, the cost of service and support of technology increases exponentially. 6. Technology is constantly changing - hard to keep up with limited staff.

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Bank Al Habib Limited

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External Factor Evaluation (EFU) Matrix
S. No. Key External Factors Opportunities 1 Develop value added services combined with corporate banking relationships, cash management services to large and medium sized corporate clients. Large international network, which principally focuses on trade finance with Pakistan, can be utilized to tap trade activities in other markets. Reduction in intermediation costs from 5% to 10% is possible, with improving technology. Profit may increase by 10% to 15% through ebanking operations. A wide product portfolio, along with increasing greater hedging of business risks also significantly increases cross selling opportunities. Threats 1 2 3 Intense competition among the various banks. Economic instability such as changing level of disposable income, rates of inflation, fiscal policy, unemployment etc. Political changes affects banking sector seriously. Banks have the funds available for lending, however, government may restrict up to certain amount for lending. Qualified personnel are moving abroad for better living. Although hardware prices continue to decline, the cost of service and support of technology increases exponentially. Technology is constantly changing - hard to keep up with limited staff. Total 0.10 0.10 4 3 0.40 0.30 0.15 4 0.60 Weight Rating Weighted Score

2

0.15

4

0.60

3

0.05

3

0.15

4 5

0.10 0.10

3 3

0.30 0.30

0.10 0.05 0.05 0.05 1.00

3 2 3 1

0.30 0.10 0.15 0.05 3.25

4 5 6

The total weighted score of 3.25 shows that Bank Al Habib is above average in its efforts to pursue strategies that capitalize on external opportunities and avoid threats.

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Bank Al Habib Limited

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Competitive Profile Matrix (CPM)
Bank Al Habib Critical Success Factors Advertising Service Quality Price Competitiveness Management Financial Position Customer Loyalty Technological Advantage Global Expansion Market Share Total Weight 0.10 0.10 0.10 0.10 0.15 0.10 0.10 0.10 0.15 1.00 Rating 2 3 3 4 3 3 3 2 2 Score 0.20 0.30 0.30 0.40 0.45 0.30 0.30 0.20 0.30 2.75 Bank Al Falah Rating 4 4 3 3 4 3 4 2 3 Score 0.40 0.40 0.30 0.30 0.60 0.30 0.40 0.20 0.45 3.35 Saudi Pak Bank Rating 3 2 3 3 2 2 3 2 2 Score 0.30 0.20 0.30 0.30 0.30 0.20 0.30 0.20 0.30 2.30

As indicated by the total weighted score of 2.75, Bank Al Habib is stronger than Saudi Pak Bank having score of 2.30 but weaker than Bank Al Falah having score of 3.35.

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Bank Al Habib Limited

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Threats Opportunities Weaknesses Strengths (TOWS) Matrix

Strengths-S
1. Strong brand recognition. 2. Complete range of banking products and services. 3. Focused business strategy supported by appropriate organization structure, operating procedures, and qualified human resource. 4. Strong distribution capability.

Weaknesses-W
1. No massive advertising. 2. Up gradation of technology in all branches not yet complete. 3. The potential of overseas branches is not being fully exploited. 4. Shortage of trained and specialized staff. 5. Communication among the functional areas are some how lacking. WO Strategies 1. Increase branch network to increase market share. 2. Development of Human Resource for online and E-Banking operations.

Opportunities-O
1. Develop value added services. 2. Large international network. 3. Reduction in intermediation costs. 4. E-banking operations. 5. A wide product portfolio, along with increasing greater hedging of business risks also significantly increases cross selling opportunities.

SO Strategies 1. Offer new products and services in retail and consumer banking to increase market share. 2. Increase local distribution capability to exploit in growth banking sector.

Threats-T
1. Intense industry competition. 2. Economic instability. 3. Political changes. 4. Brain drain. 5. Cost of service and support of technology increases exponentially. 6. Technology is constantly changing.

ST Strategies 1. Offer low markup facilities for corporate and retail customers. 2. Constantly monitor and upgrade technologies to get competitive advantage.

WT Strategies 1. Advertise new products and services. 2. Branch network should be upgraded with latest technology.

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Bank Al Habib Limited

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Strategic Position and Action Evaluation (SPACE) Matrix
Financial Strength (FS)
Return on investments (ROIs) For Year 2005

1. Return on Assets (ROA) Return on Total Assets (ROA) = Net Income / Total Assets Rs. In ‘000 1,483,165 91,501,541

Net Income Total Asset ROA ROA

= 1,483,165 / 91,501,541 = 0.016

2. Return on total Stockholder’s Equity Return on Stockholder’s Equity (ROE) = Net Income / Total Stockholder’s Equity Rs. in ‘000 1,483,165 4,745,795

Net Income Total Stockholder’s Equity ROE ROE

= 1,483,165 / 4,745,795 = 0.313

Return on investments (ROIs) = 0.016 + 0.313 = 0.329 Operating profit Margin For Year 2005 Operating profit Margin = EBIT / Sales Rs. in ‘000 2,022,008 5,971,690

Earning before interest and taxes Sales Operating profit Margin

= 2,022,008 / 5,971,690 = 0.34

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Bank Al Habib Limited

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Working Capital Working Capital = Current Assets – Current Liabilities = 8,671,552,000 – 7,740,516,000 = 938,776,516

ROIs Operating profit Margin Working Capital Cash Flow (in ‘000) Net Income (in ‘000) Revenue (in ‘000) Total Competitive Advantage (CA)

0.329 0.34 938,776,516 8,671,552 1,483,165 5,971,690

5 4 4 5 5 5 28

Market Share Product and service quality Customer loyalty Technological know how Total

-2 -2 -2 -3 -9

Environmental Stability (ES) Technological Change -3 Rate of Inflation -4 Demand Variability -3 Price change of competing products -3 Competitive pressure -3 Total -16

Industry Strength (IS) Growth potential Profit Potential Financial Stability Resource utilization Total 5 5 5 4 19

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Bank Al Habib Limited

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Computation
ES Average IS Average CA Average FS Average = -16/5 = 19/4 = -9/4 = 28/6 = -3.20 = 4.75 = -2.25 = 4.67

Directioal Vector Coordinates
x-axis (CA + IS) y-axis (ES + FS) = -2.25 + 4.75 = 2.50 = -3.20 + 4.67 = 1.47

FS 6

(2.50, 1.47)

CA -6 -1 1 6

IS

-6 ES

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Bank Al Habib Limited

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Boston Consulting Group (BCG) Matrix
(Rs In ‘000) Divisions 1 Mark-up/ Return/ Interest Earned Fee, Commission and Brokerage Income. Dividend Income Income from dealing in foreign currencies. Other Income. Total Revenues 4,935,626 Percent Revenue 82.65 Profits/Los s 2,716,786 Percent Profits/Los s 134.36 Percen t Market Share 80 Percent Growth Rate +15

2

508,744

8.51

(341136)

(18.03)

70

+08

3 4

38,820 300,795

0.65 5.04

(1436.34) (201485.62)

(0.08) (10.00)

60 65

+05 -10

5

187,705 5,971,690

3.15 100

(126449.6) 2,022,008

(6.25) 100

40

+13

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Bank Al Habib Limited

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Relative Market Share Position
High 1.0 High +20 Medium 0.50 low 0.0

1) 134.36%

5) (6.25%)

Industry Sales Growth Rate (%)

2) (18.03%) 3) (0.08%)

Medium 0

4) (10.00%)

Low -20

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Bank Al Habib Limited

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Internal External (IE) Matrix
(Rs In ‘000) Divisions 1 Mark-up/ Return/ Interest Earned Fee, Commission and Brokerage Income. Dividend Income Income from dealing in foreign currencies. Other Income. Total Revenues 4,935,626 Percent Revenue 82.65 Profits/Los s 2,716,786 Percent Profits/Los s 134.36 IFE Score 3.70 EFE Score 3.60

2

508,744

8.51

(341136)

(18.03)

3.20

3.30

3 4

38,820 300,795

0.65 5.04

(1436.34) (201485.62)

(0.08) (10.00)

2.65 3.10

3.10 1.85

5

187,705 5,971,690

3.15 100

(126449.6) 2,022,008

(6.25) 100

2.50

2.25

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Bank Al Habib Limited

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The IFE Total weighted Scores
Strong 3.0 to 4.0
4.0 4.0 1) 134.36% 3.0

Average 2.0 to 2.99
2.0

Weak 1.0 to 1.99
1.0

The EFE Total weighted Scores

High 3.0 to 4.0

2) (18.03%) 3) (0.08%)

3.0

5) (6.25%)

Medium 2.0 to 2.99
2.0 4) (10.00%)

Low 1.0 to 1.99
1.0

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Bank Al Habib Limited

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Grand Strategy Matrix

RAPID MARKET GROWTH Alternative Strategies: 1. 2. 3. 4. 5. Market Penetration Market Development Product development Concentric Diversification Horizontal Diversification

WEAK COMPETITIVE POSITION

STRONG COMPETITIVE POSITION

SLOW MARKET GROWTH

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Bank Al Habib Limited

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The Quantitative Strategic Planning Matrix (QSPM)
S. No CRITICAL SUCCESS FACTORS OPPORTUNITIES Develop value added services. Large international network. Reduction in intermediation costs. E-banking operations. A wide product portfolio, along with increasing greater hedging of business risks also significantly increases cross selling opportunities. THREATS Intense industry competition. Economic instability. Political changes. Brain drain. Cost of service and support of technology increases exponentially. Technology is constantly changing. STRENGTH 1 2 Strong brand recognition. Complete range of banking products and services. Focused business strategy supported by appropriate organization structure, operating procedures, and qualified human resource. Strong distribution capability. WEAKNESSES 1 2 3 4 5 No massive advertising. Up gradation of technology in all branches not yet complete. The potential of overseas branches is not being fully exploited. Shortage of trained and specialized staff. Communication among the functional areas are some how lacking. Sum Total Attractiveness Score 0.15 0.10 0.15 0.10 0.05 4 3 3 2 2 0.60 0.30 0.45 0.20 0.10 6.15 4 3 2 3 3 0.60 0.30 0.30 0.30 0.15 6.35 0.05 0.15 3 4 0.15 0.60 3 4 0.15 0.60 MARKET DEVELOPMENT WEIGHT 1 2 3 4 5 0.15 0.10 0.05 0.10 AS 4 3 2 4 TAS 0.60 0.30 0.10 0.40 PRODUCT DEVELOPMENT AS TAS 4 3 3 4 0.60 0.30 0.15 0.40

0.10

3

0.30

4

0.40

1 2 3 4 5 6

0.15 0.10 0.05 0.10 0.05 0.05

4 2 1 2 3 2

0.60 0.20 0.05 0.20 0.15 0.10

4 1 1 2 2 3

0.60 0.10 0.05 0.20 0.10 0.15

3

0.15

3

0.45

4

0.60

4

0.10

3

0.30

3

0.30

Conclusion

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Bank Al Habib Limited

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After conducting the comparative study of Bank Al Habib Limited, we concluded that keeping the two strategies of expand the branch network and developing new and innovative products is important for the company on one hand it increases its presence in the market and on the other increase its customer base. For this purpose it is important to understand the organization structure and try to modify according to the requirement. Economic condition during the year 2005-2006 continued to be influenced by national sociopolitical developments as well as the state of uncertainty in the peace process particularly in last quarter of the year. Keeping the view customers needs, company launched a number of new products. After brief discussion with company representatives, analyzing the matrixes and considering opinion of group members Bank Al Habib grew in most of its businesses. Bank Al Habib growth philosophy should also concentrate on these key areas i.e. organic growth through branch expansions, launching new products and services for existing as well as for new customers. It is now functional in almost every major cities of the country and their vision is similar as they are acting means they working.

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