CHAPTER # 1

INTRODUCTION TO UBL

BANKING HISTORY
Consensus on the origination of word “Bank” is not yet reached at. Some author’s
opinion is that this word is derived from the words “Bancus” or “Banque”, which mean a
bench and they further relate banking business inception to Jews in Lombardy. Other
authorities state that the word “Bank” is derived form the German word “Back” which
means “Joint Stock fund” and later on due to German occupation of Italy, this word was
italianated into “Bank. Authors quote Babylonians (few quotes Chinese) who developed
banking system as early as 2000. B.C

BANKING IN PAKISTAN
Banking started in Pakistan after the bold and emergent decision of formulation of SBP
on July 30, 1948. Thereafter this sector has witnessed enormous growth. In 1974 banks
were nationalized, in the hope that new era of growth could be achieved through it.
However the process is reverse since 1991, up till now MCB, ABL, and UBL have been
privatized and HBL is in the process of its privatization.

INTRODUCTION TO UBL
Agha Hasan Abedi founded the bank in 1959. In 1971 the Government of Pakistan
nationalized it. In 2002, the Government of Pakistan sold it in an open auction to a
consortium of Abu Dhabi Group and Bestway Group. Since its privatization the bank has
been successfully turned around and remains a robust and strong performer in all major
segments of its operations.

In 2002 it merged its operations in the UK with those belonging to National Bank of
Pakistan to form United National Bank Limited, of which it owns 55%, with National
Bank of Pakistan owning the remainder.

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Atif Riaz Bokhari, President & CEO of UBL was brought by President General
Musharraf from Bank of America. Atif is younger brother of General Asif Riaz Bukhari a
commando, who is a close friend of General Musharraf.

SERVICES
Consumer Banking
Commercial banking
Corporate Banking
Investment
Treasury
UBL Ameen Islamic Banking

NUMBER OF BRANCHS
UBL has a large network of branches, which extends to the remotest areas of the country.
In December 1983, there were 1623 branches whereas in 1974 it had only 1238 branches
and in October 2003 these figures show total number of 1007 branches3.
UBL has been very active in increasing its overseas branches network. The first foreign
branches were established in London in 1963. Now UBL has branches in Bahrain, Qatar,
Saudi Arabia, United Arab Emirates, Yemen Arab Republic, UK Switzerland, Egypt,
Oman and The United States. These branches are playing a significant role in channeling
home remittances and foreign trade of Pakistan.

SUBSIDIARIES
UBL has four subsidiaries, namely:
 United National Bank Limited (UNB), UK

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  United Bank AG (Zurich), Switzerland

 United Executers and trustees Company Limited

 United Bank Financial Services (Private) Limited

FUNCTIONS OF UBL
UBL is a commercial bank, which transacts the business of banking in accordance with
the provisions of BCO, 1962. Section 7 of the Act authorizes banks to engage in the
prescribed form of business. In the light of this section UBL’s functions can be
categorized as under:
 Agency services

 General Utility Services

 Underwriting of loans raised by the Government or public bodies and trading by

corporations etc.

 Providing specialized services to customers, and

 Hajj-related services.

ROLE OF UBL BANKING SECTOR

The impressive growth and development, which UBL achieve, present it undoubtedly the
most dynamic and progressive. In a very shorter period of time it became one of the

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leading banks overtaking several other older and its competitor banks4. The major
contributions5 the bank ahs made are enlisted below:

 Record setting performance and commitment to serve the customers

 Personalized service and dynamic approach

 Catalyst of changes

 Professional management

 Modern banking policy

 Human resource development

 Small loans (or) micro credits

 Pacesetter in economic research established in 1967, department for economic

research.

 Utility bills collection

 Credit cards (unicard-1970)

 Travelers Cheques (Humarah-1971)

 Diaries and calendars – received prizes too

 Promotion of sports

COMPUTERIZATION OF UBL

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UBL has taken leading start in the introduction of computers in (1966-1968)6 in
important cities. Its three computers centers Rawalpindi, Lahore and Karachi are
equipped with the modern mainframe computers of various capacities. Every branch has
been decorated with microcomputers.
The use of computers has enabled the bank to save time and efforts raise
efficiency and deliver the goods speedily to its customers. This has also allowed the bank
to maintain its leadership within the industry.

 UBL - On line System7:

Themes of this service is “Access any time, anywhere, any device” which
symbolizes comfort, convince and connectivity. UB-Online a web based service that can
be accessed through multiple media link like, (i) PC via internet (00) Mobile phone with
WAP or free SMS) (iii) Personal Digital (iv) assistants and (v) Plain telephone; following
are some of the exciting features:
o Accounts statement & electronic data interchange

o Graphical analysis

o Alerts service /facility, search facility and activity long

o The banks as another computer-based system known as “UIBANK”8, which is

a well-develop on-line branch-banking package. The system automatically
prepares various report, central bank returns, and statement of accounts for
customers.

 Money Gram facility:

The bank has recently employed money gram service system, which can affect
money transfers within minutes. Similarly the system used for local transfer of money
transactions is called uni-remote.

 Hajj service:

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 Keeping to its tradition is august 1982 provided electronic facility at its Hajj booth
and has installed now modern computers at designated branches (Hajis) and increasing
efficiency. This facility has reduced the service time to less than six minutes per Haji
compare to about half-an-hour to 45 minutes per Haji earlier.

CHAPTER # 2

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 MANAGEMENT OF UBL

SENIOR MANAGEMENT OF UBL

Sheikh Nahyan Mabarak
Nahayan chairman

Sir Mohammad Anwar Pervez

Deputy Chairman

Amar Zafar Khan

President

M.A Manna
Deputy CEO

Risha Moheyuddin
Nauman Hussain Global Treasurer
Director Operations & Utilities

Khalid Munawar-ud-din
Head Credit Policy Supervision
Mansoor M. Khan
Head Corporate Banking Group

Muhammad Ejazuddin
Shaharyar Ahmed Audit Chief
Head Investment Banking
group

Mehboob A.Khan
Shahid Waqar Mehmood
Head Aman Aziz Siddique
Commercial bank

Rukhasana Asghar
Global Head Human Resources
Head International Operations
(Dubai)
ORGANIZATIONAL HIERARCHY
Ali sameer OF UBL Ameer Karachiwala
Chief SAM (domestic) Chief financial Office/HCA

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 Chairman

Deputy Chairman

Board of Directors

Executive Committee

Managing Director

SEVP

EVP

VP

Officer Grade-I

Non Clerical Clerical Staff Officer Officer

Staff Grade-II Grade-III

CHAPTER # 3

CASH, REMITTENCES, CREDIT & CLEARING DEPARTMENTS

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DEPOSIT DEPARTMENTS
As per the definition of “Banking” under see 5(b) of BCO 1992 one of the main functions
of a bank is to accept deposit. Deposits are the backbone of any bank; other functions of
the bank primarily depend upon the type and size of deposits.

Function perfumed by cash and deposit department in UBL

UBL accepts deposits under the following three accounts.
i. Current account

ii. PLS Saving account

iii. Terms Deposits

Opening of Account
To open an account in UBL the customer will have to fill an account opening form in
front of bank officer. He has to sign in all required places in front of the officer.

Documents Required in Account Opening

i. N.I.C Copy.
ii. Account opening form (provided by bank)

iii. Two photograph (in case of illiterate person)

iv. Specimen Signature card (Provided By Bank)

v. Cheque Requisition Form

vi. Introduction of Account.

Types of Account

a. Individual Account
In this account a single customer operates the account. The banker will run the
account according to the rules, but if the customer gives special instructions the Bank will
have to follow it.

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b. Joint account

In this type of account two or more than two persons will open the account. The
account will be operated by one account holder in case of (either of the survival). If the
instructions are not given, all the account holders will have to sign the check.

NATURE OF ACCOUNTS IN UBL

Current Account

These are non-profitable demand accounts. The account can be opened with minimum
amount of rupees 1000/-. These accounts are usually maintained for business purpose.
Due to enormous competition UBL has introduced daily profit current account for
corporate clients called (UNISEVER) minimum balance required is Rs. 100,000/-. If
minimum balance requirement is not met, bank is authorized to recover predetermined
charges.

B) PLS Saving Account

These accounts were intended with the aim of encouraging thrift among people. These
accounts can be opened either in Pakistani rupees or in few major currencies of the world.
Bank offers (4%- 6%) return on these accounts. The basic feature is the profit and loss
sharing as according to non-interest based banking system. These accounts can be opened
in the name of; individuals, joint names, trust accounts, charitable organizations.
Unlike current accounts, Zakat is applicable on local currency saving accounts. Minor’s
accounts can be opened on the condition that their guardians shall operate these accounts.

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C) Term Deposits
Term deposits are also called fixed deposits. These can be with drawn after a specified
period of time. Interest is paid to the depositor on all fixed or term deposits. The rate of
return varies with the duration for which the amount is kept with bank
There are two types of term deposits.

STDR’S – Special Term Deposit Receipt (local currency)

Special Term Deposit Receipts are issued for different periods of maturity ranging
from one month to 5 years, having attractive returns. There is no limit on
denominations.

NTDR’s – Notice Term Deposit Receipt (local currency)

These are term deposit with special features that these can be withdrawn any time but
after giving a predetermined and pre agreed early notice.

REMITANCES DEPARTMENT
Current business trends demand fast movement from one geo-graphic end to another.
Latest technology and telecom data transmission has made it possible to make such
transactions with in minutes. UBL D.I.Khan Remittances Department performs following
functions.

Demand draft (D.D)

D.D is a negotiable instrument issued by branch of the bank drawn on other branch of the
same bank.

A) Procedure for D.D.

Purchaser is asked to fill in an application form duly singed by applicant. Three things
should be maintained in the form.

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  Name of Payee

 Place of payment

 Amount of D.D

Commission is charged on D.D as bank income. The applicant is asked to deposit the
cash specified on the application form to the teller. After depositing cash the remittances
incharge prepare a D.D. That is singed by two officers must having power of attorney.

Bank also provides this facility to general public who don’t have account in UBL. They
will have to submit a N.I.C copy along with D.D application form.

Telegraphic transfer (T.T)

Transfer of funds to another branch of the same bank with the help of test numbers. If the
test number agrees the bank make payment to the party.

Procedure for T.T

The procedure for T.T is same as D.D. But in D.D it is given on a printed-paper and
singed by two officers but, in T.T, only test number is given to the customer.

Mail Transfer (MT)

When the money is not required immediately, the remittances can also be made by MT.
Here the selling officer of the bank sends instructions in writing by mail to the paying
bank for the payment of a specified amount of money. The payment under transfer is
made by debiting the buyer’s account at the sending office and crediting it the recipient’s
account at the paying bank. UBL takes mail charges from the applicant where no excise
duty is charged.

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Pay Orders
Pay order is banker cheque issued favoring a named beneficiary. The issuance bank is
discharged by payment in due course. Application for the
PO stamped and the customer’s account balance is checked or cash received for the
amount PO and other charges. Pay Order leaf is typed and crossed if required and signed
by two authorized persons. Thereafter it is delivered to the customer. PO can be cancelled
at original purchaser’s request in writing and surrender the instrument, which then
marked canceled along with other documents and prior entries.

Rupee Traveler Cheques

UBL has launched R.T.C Brand named “Hamrah” in November 1996. These are issued
to applicants with varied denominations without excise duty and commission. When
issued HO account is credited and on encashment the same account is debited. RTC’s lost
cases are communicated to HO and client is either repaid or new RTC’s are issued to
him/her.

Uni Remote

This is a new tool for the transfer of money. This is a step towards the online banking
taken by UBL. This tool transfers money from one branch of UBL to other through
electronic transfer. The customer will have to fill the deposit slip. On the slip he will
write the name and account number of the person to whom the money will transfer, the
name of the branch is also written. The amount is deposited with teller and the receipt is
shown to remittance inchraged. One I.D copy is also attached with slip. The remittances
incharge will transfer if by using device (computer) through online service. The fund
transfer is must be supervised by another authorized officer. Every time for this is five
minutes.

CREDIT DEPARTMENT OF UBL

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 General
Credit extension is the principal function of a bank, through which pace of activity is
accelerated in the various sectors of economy. Also the indicators, which mainly reflect
the high quality of bank’s management, are its prudent financing decisions, proper
control of finance and prompt recovery. In this regard the credit policy of a bank play a
very important role as it provides the overall framework, responsibilities, authorities and
facilitate decision-making. Credit department performance is subject to a defined policy
on credit control exercised by the SBP. SBP affect credit decisions through the weapons
of bank rate, open market operations, variable reserve requirements, selective credit
restrictions and prudential regulations.

UBL Credit Policy

Credits operations are undertaken in accordance to bank’s credit policy. The policy
strictly prohibits violation of SBP/Local central bank’s rules and suggest financing of self
liquidating, cash flow supported and well collateralized transactions, which equate the
principle of lending (safety, liquidity, dispersal, remunerations and suitability).

Procedure for Financing from UBL

When a party comes for financing, banker will ask the following questions.
Purpose

In this the party mentions the purpose, they want to apply for the finances. No lending is
done with out purpose.

Business

The party must have some specific running business i.e. general merchandise,
construction business etc.

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The second question arises of the cash flow that how much flow is generated by the party
from the current business.

Security

The bank will secure itself against the lending. There can be two type of security.
 Commercial
 Residential
The bank prefers commercial security. Relationship Manager (RM) is mainly responsible
for the relationship between the bank and party. He acts like a bridge between the two.

In the first instance the party would prepare the following property documents.
 AKS Shajarah
 Naqsha Tasveeri
 Approved Building Plan
 Tresh fard
 Intaqal Naqal
The party is asked to contact any valuator on the panel of UBL. ICM&L and Tajak
Builder are on the panel of UBL D.I.Khan. The valuator will visit the site and set market
value and FSV of the said property. He prepare report of at least three pages. These
document sent for one page legal opinion to any layer on the panel of UBL. Having clear
legal opinion RM start preparing credit Approval (CA). The documents are singed by the
RM & AM and then forwarded to UBL RHQ in Peshawar. Here SRM examines the CA
if he found some exception he will send it back to the respective Rm.

RM rectifies the acceptation and send it back to SRM. SRM studied and pass it to credit
officer. He has three hours of time to study the CA and if found correct then he pass it to
another credit officer. After his examination the CA is passed on to the credit risk
manager. He checks the CA and after signing it sent to CAD. He forwards the CA to
SCO. Whose office is at UBL RUCO at Lahore, after his signature the C.A is sent back to
RCAD.

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RCAD make a check less list and asked the RM to contact the party to complete the said
documents they are.

 Letter of continuity
 Personal Guarantee
 Letter of hypothecation of stock
 D.P Note
 Mortgage Deed
 NIC of executants and witness
 Stock report
 Insurance policy
 Party profile
After completion of charge document RM send it to RCAD when they found it correct,
they issues DAC. A copy of DAC is sent to RM and NICF account is opened and debit
transaction starts.

CLEARING OF BILLS

General

Bank can make payments of only open Cheques on the counter payment. Payment of
cross Cheques cannot be made on counter its payment is possible through collecting
bankers. The functions of clearing department is divided into two main classes.
 Inter Branch Transaction
 Inter Bank Transaction

Procedure of Clearance of Cross (Cheques)

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Whenever bank receives a cheque of other bank from the client he cannot make payment
on the counter. The first job banker has to perform is to put a special crossing across the
face of cheque. By special crossing cheque is secured. If it is stolen the paying banker
would not suffer because of non-endorsement. On the back of the cheque the stamp is
made of payee account will by credited on realization. It is signed by authorized person.
Along with the cross cheque the customer has to fill the deposit slip. The half part of slip
is given back to the customer. after the special crossing and is necessary endorsement the
banker write the amount along with cheque number on paper and attach with each slip.
Then again on he smile paper the amount of all the Cheques along with the bank names
are added and attached to cheque presented for clearing, and advice is also attached with
the cheque presented for clearing. The following entry is passed on sending the cheque
for clearing.
Bill lodged for clearing ……. Dr

Bill for collection ………. Cr

The Cheques are sent on the same day for clearing. The bank receives it on other day.
The paying bank receives the receipt and the amount is credited in the respective account.
The paying banker passed the following.

Bill for realization. ……. Dr

Bill lodged. ………. Cr

The other entry passed its Dr. HQ account and Cr Party account.

IBC
It means “Inter Branch Transaction” when UBL received a cheque a drawn on the
customers of his branch; first they will cheque the amount in the account on which
cheque is drawn. Of the required amount is available in the account they will match the
signature on the cheque along with their SS card. If all the requirement are completed the
bank will send an IBCA to the bank from which cheque is sent

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LBC
LBC means local branch cheques received for collection. UBL D.I.Khan, received
cheques from their spoke braches as well as from other UBL branches of the country,
drawn of any other bank in D.I.Khan. They send the cheque to responding bank and after
clearing the cheque through clearing houses (which is NBP) in D.I.Khan. They send LBC
advised to the bank from which the cheque was received. The following entry is passed
after sending LBCA.
NBP a/c ………. Dr

Ho a/c………. Cr

OBC

When the bank receives the cheque from its customer or from any other spoke branch
drawn on any other bank of any other city. They sent the cheque to the UBL main branch
of that city, after receiving OBCA the bank will passed the following entry. In case of his
own customers.

Ho a/c………. Dr

Customer a/c………. Cr

In case of spoke branch

Ho a/c………. Dr

Spoke Branch a/c………. Cr

CHAPTER # 4

FINANCIAL ANALYSIS
INTRODUCTION

These section efforts have been made to cover all relevant aspects of the financial
performance of UBL. Overtime comparison and Common Size analysis are carried out
with the view to extract concrete conclusion to describe financial standing and
performance of the bank.

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THE GROUP AND ITS OPERATIONS
The group consists of
a) Holding Company
United Bank Limited, Pakistan
b) Subsidiary Companies
 United National Bank Limited, UK
 United Bank AG (Zurich), Switzerland

 United Executers and Trustees Company Limited

 United Bank Financial Services (Pvt) Limited

BASIS OF PRESENTATION
The purchase and sales of UBL are restricted to the amount of facility actually utilized
and the appropriate portion of mark up there on. They strictly observe the rules and
regulations as applicable and promulgated by the GOP and or SBP.

SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition
Returns on advances and investments are recorded on accrual basis. Debts securities
purchased at premium or discount are amortized over their maturity periods.
Dividend income is recognized on accrual basis of declaration of dividend up to the year-
end. Returns on classified assets are recorded on receipt basis, rescheduled and
restructured loans are treated in accordance to SBP regulations. Fees/commissions etc. on
Letter of Credit and others are recorded on accrual basis.

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 ADVANCES
These items are stated net of provisions against non-performing loans as per SBP PR –
IIIV.

• Investments

UBL classify its investments as stated below;

a) Held for trading

b) Held to maturity
c) Available for sale-other than the above two types
In the light SBP regulations quoted securities are shown at market values and any
changes arising are taken to profit and loss account only upon actual realization.

Unquoted securities are valued at the lower of cost and break up value and difference is
charged to income. Provisions for diminution in the values are made after permanent
impairment, if any.

• Lending/Borrowing from Financial Institutions

a) Sales under Purchase Obligation: These are reflected as liabilities and the charges
against these are recorded as an expense on pro rata basis.
b) Purchase under Resale Obligation: The differential of the contracted price and
resale price is amortized over the period of their contract and recorded as income.

• Fixed Assets and Depreciation

a. Owned
Such assets are showed at their cost or revalued amount less accumulated
depreciation and impairment loss, if any. No depreciation is charged on freehold
land. During the year, amendment related to section 235 of the Companies
Ordinance 1984, surplus on revaluation can now be reversed to the extent of
incremental depreciation charged. As a result such differentials are now
transferred to retained earnings/accumulated losses as per the Securities and
Exchange Commission of Pakistan’s (SECP) clarifications.

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 Gains and losses on sale of fixed assets are included in income currently, except
that the related surplus on revaluation of fixed assets is transferred directly to
retained earnings/accumulated losses.

b. Leased
Assets under financial leases are stated at cost. The outstanding obligations are shown
as a liability. The finance charges are allocated to accounting periods in a manner so
as to provide a constant periodic rate of charge on the outstanding liability.

• Taxation

CURRENT

Provision is based on the taxable income for the year or minimum tax computed on the
basis of turnover, whichever is higher.
DEFERRED
The bank accounts for deferred taxation on major timing differences, using the liability
method in respect of those timing differences, which may reverse in the foreseeable
future. Deferred tax debits are, however, recognized only if there is reasonable
expectation of realization of the amount.
c. Foreign Currencies
Balances are translated into rupees at the applicable rate of exchange prevailing at the
balance sheet date or where applicable at contractual rates. During year transactions are
converted into Pak rupees applying the exchange rate at the date of respective
transactions. Gains and losses are included in income currently.
d. Deferred Cost and Lease Payments

These are amortized over a period of five years. Rental obligations under operating leases
are charged to profit and loss account as incurred.

RISK MANAGEMENT

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The bank is primarily subject to interest rate, credit and currency risks. The bank has
designated and implemented a frame work of controls to identify, monitor and manage
these risks are as follow;

CURRENCY RISK MANAGEMENT

For the purpose of efficient management of this risk, the group enters into ready, spot,
forward and swap transactions in the inter bank market and with the State Bank of
Pakistan in order to kedge its assets and liabilities and cover its foreign exchange
position.

CREDIT RISK MANAGEMENT

Out of the total assets of Rs.183, 139.879M assets subject to credit risk amounted to
Rs.178; 958.323M. The bank’s major credit risk is concentrated in textile sector. To
manage it the bank applies credit limits to its customers and obtains collaterals. Credit
risk in the portfolio is monitored by the CRM who formulate appropriated policies and
procedures to ensure building and maintaining quality credits and efficient credit process.
The bank’s financial institution risk management unit assesses, recommends financial
institutions and also controls cross border/country risk.

INTEREST RATE RISK MANAGEMENT

The group is mainly exposed to mark up interest rate risk on its deposit liabilities and its
loans and advances and investment portfolios. The asset liability committee of the bank
reviews the portfolio of the bank to ensure that risk is managed within acceptable limits.
Most of the loans and advances portfolio comprises of working capital, which are
reprised on a periodical basis. The group’s interest is limited since the majority of
customer’s deposits are retrospectively reprised on a six monthly basis due to the profit
and loss sharing principles.

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CONCENRATION OF CREDIT AND DEPOSITS1
The major class of business for UBL related to advances is the textile and private sectors.
UBL is advancing 27.2% to textile and 74.5% to private sector. Majority of the
depositors fails in the category of individuals, contributing 65% of the total deposits.

INVESTMENT PORTFOLIO
UBL employs diversified investment portfolio. The bank invests its funds both in risk
free assets as well as in risky assets. This enables it to minimize its unsystematic risk to a
great extent.
UBL values its security holding on market value, in accordance with the guidelines given
in SBP circular. Any unrealized surplus/deficit arising on such revaluation is taken
directly to “Surplus/Deficit on revaluation of securities” in the balance sheet. Where an
active market is not available, securities continue to be stated at cost. Provision for
diminution in the value of these securities is made after considering permanent
impairment, if any, in their value.

Where securities are sold subject to commitment to repurchase them at a predetermined

price, they remain on the balance sheet and a liability is recorded in respect of the
consideration received in “Borrowing from Bank” or “Deposits” as appropriate.
Conversely, securities purchased under analogous commitments to resell are not
recognized on the balance sheet and consideration paid is record in “lending to financial
institutions” or “loans and advances” as appropriate.

PROFITABILITY
The operating profit before provisions and write offs increased by 80%, where as the
profit before tax and extraordinary items increased by 62% as compared to last year. The
increase is mainly attributed to 14% increase in the net revenue from funds (NRFF), 10%
increase in fee and brokerage income and 75% reduction inn write offs/provisions for
non-performing assets as compared to year 2002.

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 Performing advances increased by Rs. 2 billion as compared to 2002 while NPAs
decreased by 53%. Presently NPA constitutes 7.4% as compared to 14.6% in 2002 of the
total loan portfolio. The branches reduced to 1077 from 1112. The

bank handled over Rs. 96 billion of import and export business during the year, an
increase of 24.7% as compared to last year.

FINANCIAL ANALYSIS
Financial statements are the principal means of reporting the financial condition and
results of operations of a business entity. These statements are meant 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
statements analysis helps in determining the financial conditions at any particular points
in time and effectiveness of operations of a firm during a specific period.
The various stakeholders of business are interested in the analysis of financials
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 short term liquidity of the business and long term creditors are interested in
the long term cash flow which the firm can generate over the long period of time.
Investors are interested in the firm’s ability to sustain profitability over a period of time.
Government agencies analyze financial data for tax purposes. The internal users of
financial statements like management also analyze financial data for planning and
control.

COMMON SIZE ANALYSIS OF BALANCE SHEET

Common size analysis is an analysis of financial statements where the total assets
divide all balance sheet items of asset side and all credit side balances divided by all

24
liability items, and all income statement items are divided by net sales/revenues.
Common size analyses are extremely helpful to highlight changes over the time in
financial performance and financial conditions of the company.

The table shows common size analysis of the balance sheets for the years 2001, 2002 &
2003.
The common size analysis given in the table shows that there have been improvements in
the current assets in 2003 as compared to 2002, about 17%. But there has been decrease
in fixed assets of about 16%. The main reason for this change is increase in short term
investment showing a constant increase as a percentage to total assets. This implies that
the bank is concentrating now more on non-interest income and the interest rates are
constantly falling.

Short-term advances have shown a significant change of 15% whereas total advances
show a total change of only 6.3%. This is very significant to note that major decrease has
occurred in long-term performing and non-performing advances.

There is decrease in long term assets of about 17% which mainly cause the decrease in
long term advances which are about 13% and 6% decrease in long term investment.

On the liability side the total current liability has shown change of about 4%. The main
reason for which is increase in current deposits, which are about 6%. The long-term
liability of the organization is also decreased by 4%. The main reason for this is that fixed
deposits of organization are decreased by 6%, which shows that there is a slight change in
the organization’s position by decrease in fixed deposits.

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Table:Common size analysis of consolidated Balance Sheet

Rs in '000 Common size (%)

assets 2006 2007 2008 2006 2007 2008
Cash/Bal. With Banks 3609108 70463707 35591280 21.5 17.93 15.79
lending to F.Is 4370006 3627557 19050791 2.6 1.89 8.45
Investment (ST) 9190430 33883311 29580252 5.5 17.66 13.12
Advances-Performing (ST) 39489369 43632117 89292490 23.4 22.75 39.61
Other Assets 8641263 2641471 3509351 5.1 1.38 1.55
Total Current Assets 97782157 118177074 177024164 58 61.61 78.54
Investment (LT) 19388131 33623058 25007413 11.5 17.53 11.09
Advances-Performing (LT) 28477494 26423058 10312297 16.89 13.77 4.57
Advances-Non performing (LT) 11813855 5739798 3671991 7.01 2.99 1.62
Operating fixed Assets 2864018 2831534 3884990 1.7 1.48 1.72
Deferred Tax Assets 8297500 5026459 5486357 4.92 2.62 2.43
Total L.T Assets 70840998 73643958 48363048 42 38.39 21.45
Total Assets 168623155 191821032 225387212 100 100 100
Liabilities
B/Payables 1540592 1847025 2991269 0.91 0.96 1.32
Borrowings ST 4004130 174533 174533 2.37 0.09 0.07
Deposits - Current 102568752 118167469 152580240 60.83 61.6 67.69
Lease and Others 8838842 9986608 5933743 5.24 5.2 2.63
Total Current Liabilities 116952316 130175635 161679785 69.36 67.86 71.73

26
Fixed Deposits 38747422 43998916 37252204 22.98 22.94 16.52
Other Long term Liabilities 21264831 5212755 10883720 6.21 2.72 4.82
Total LT Liabilities 49219400 49211671 48135924 29.19 25.65 21.35
Total Liability 166171716 179387306 209815709 98.55 93.52 93.09
Shareholder's Equity
Share Capital 22481680 5180000 5180000 13.33 2.7 2.3
Reserves 3960453 4258947 4712569 2.35 2.22 2.09
Accumulated Losses/Profits -27282709 -722387 454403 -16.18 -0.38 0.2
Minority Interest 1168264 1271700 1412932 0.69 0.66 0.62
Surplus on revaluation 2123751 2445466 3811599 1.26 1.27 1.69
Total 24541439 12433726 15571503 1.45 6.48 6.9
Source: UBL (2008) Annual Report

TOTAL CURRENT ASSETS Cash/Bal. With Banks

lending to F.Is
2% 20%
Investment (ST)

11% Advances-Performing
50%
(ST)
17% Other Assets

FIXED ASSETS DISTRIBUTIONInvestment (LT)

Advances-Performing (LT)
11%
8% Advances-Non performing
8% (LT)

52% Operating fixed Assets

21% Deferred Tax Assets

27
 SHORT TERM LIABILITIES

4% 2%
0% B/Payables
Borrowings ST
Deposits - Current
Lease and Others

94%

LONG TERM LIABILITES

Fixed Deposits

39%
Other Long term
50% Liabilities
Total LT Liabilities
11%

The trend of switching over the investing in share market or other businesses instead of
committing money in advances it is because of fall in interest rates.

The share capital of the company is static while in 2007 the share capital was decreased
because of losses faced by the company.

COMMON SIZE ANALYSIS OF INCOME STATEMENT

The common size analysis of income statement is given in the table. Which shows that
the UBL has been able to control its interest or mark up expense. As a result of decrease
in mark up expense as a percentage of total revenues the gross profit margin has shown a
trend of continuous increase. The increasing G/P Margin shows efficiency of the bank in
controlling cost of sales (Markup expense) and better strategy of pricing, products and
services.
The provision for non-performing loans has a decreasing trend making no provision for
non-performing loans and diminution in value of investment, which increases the profit
of current year. The reduction in provision is a good sign, which shows that the bank is
recovering its disbursed advances. It shows the good credit management of the bank.

28
 There is a great increase in non-markup income, which is about 23%. Among its
individual components investment income has shown a large increase as a percentage of
sales.

Non markup expenses also show a rising trend in absolute amount though the common
size in percentages have shown a mixed trend due to the changes in revenue figures. The
non-performing expanses also increased to about 25%, which is a very high percentage,
but the other aspect of this is that it increased the efficiency and credit management of the
staff.

Like gross profit the net profit margin before tax has also increased with 24% rate. The
extraordinary item expanse has not occurred in 2003 that caused a slight increase in the
net income. The tax expanse is increased about 7% because of the increase in profit. Loss
brought forward from previous year is reduced by 14%.

The common size analysis of the UBL is clearly showing that the bank has shown a lot of
improvement in its performance. The organization shows profit for the first time in the
last 5 years which is a positive sign and it will build up the moral of the employees by
which they can work more effectively and efficiently increasing the performance of the
bank.

Table: Common size analysis of consolidated Income Statement

Rs in Millions Common size (%)

ITEMS 2006 2007 2008 2006 2007 2008
Mark up revenue 11468 11385 9269 100 100 100
mark up expense 6347 5476 1931 55.35 48.09 20.83
gross profit 5121 5909 7338 44.65 51.9 79.89
provisions and B/Debts 1263 746 564 11.02 6.55 6.08
Net Mark up Income 3858 5163 6773 33.64 45.34 73.07
Non Mark up Return
Commission & Brokrage 1097 2008 2142 9.57 17.63 23.1
Dividends/Exchange and Others 1818 1514 2803 15.85 13.3 30.24
Total Non Mark up Income 2915 3522 4945 25.42 30.94 53.34
Total Income 6773 8686 11718 59 76.2 126.42
Non Mark Up Expense
Administrative 4669 5879 6639 40.71 51.64 71.62

29
Other Provision and Charges 632 51 556 5.15 0.44 6
Total non mark up Expenses 5301 5930 7197 46.22 52.08 77.64
Profit Before Extraordinary Items 1472 2756 4521 12.84 24.2 48.77
Extraordinary Items -7200 25 0 62.78 0.21
Profits before tax -5728 2781 4521 49.95 24.44 48.77
Taxation 1739 1319 1704 15.16 11.59 18.38
Profit/Loss after tax -7467 1462 2818 65.11 12.84 30.39
Share of Minority Interest 6 10 21 0.06 0.09 0.22
Accumulated Loss Brought Frd. 19821 27283 722 172.2 210.64 7.78
Adjustment against sh. Capital 0 25202 0 221.36 0
Appropriation and Transfers
Surplus on revaluation of Assets 0 238 0 2.1 0
Transfer to Statutory Reserve 2 332 527 0.02 2.91 5.68
Accumulated Loss Brought Frd. 27283 722 454 237.9 16.34 4.9
Source: UBL (2008) Annual Report

INCOME COMPOSITION
Total Revenue
Mark up Expense
30.39% 20.83%
6.08% Bad Debts
Administrative Exp
18.30%
Othere Exp
6.90%
71.62%
Taxes
Profit after Taxes

FINANCIAL RATIO ANALYSIS

The user of financial statements finds it helpful to calculate ratios when they interpret
company’s financial statements. A financial ratio is simply one quantity divided by
another. Ratios focus on special relationship between two items of balance sheet, income
statement or one from each. Ratios make it easier to understand a specific relationship
between various items of financial statements then looking simply at the raw numbers
themselves. The number of financial ratios that might be created is virtually limitless, but
there are certain basic ratios that are frequently used, these ratios can be placed into six
different classes.
 Liquidity Ratio
 Asset Turnover Ratio
 Leverage Ratios

30
  Coverage Ratios
 Profitability Ratios
 Market Value Ratios
The calculation and interpretation of these ratios of financial statements of UBL are as
follows.

Table:4-3 Financial Ratio analysis

YEARS 2006 2007 2008FORMULA
Current Ratio 0.84 0.91 1.15Current Assets / Current Liabilities
Asset Turnover 0.07 0.06 0.04Markup Revenure / Total Assets
Debt to Asset 0.99 0.94 0.93Total Debt / Total Assets
Debt to Equity 14.54 14.4 13.47Total Equity / Total Assets
Coverage Ratio 0.1 1.15 3.34EBIT / Interest Expense
Gross Profit Margin 44.65% 52.50% 79%Gross Profit / Revenue * 100
Net Profit Margin -65.12% 12.69% 30%Net Profit / Revenue * 100
Return On Investment -4.43% 0.76% 1.24%Net Profit / Total Assets * 100
Return On Equity -887.99% 16.78% 18%Net Profit / Total Equity * 100
Advances to Deposit 56.46% 46.74% 45%Advances / Deposits * 100
Investment to Deposit 20.22% 41.63% 28%Investment / Deposits * 100
Cash Ratio 9.59% 9.23% 28%Cash / Current Liabilities * 100

Source: UBL (2008) Annual Report

CURRENT RATIO
UBL’s current ratio is increasing over the time. Higher the current ratio higher the ability
to meet the short-term obligations as they come due. The UBL’s current ratio is increased
by 0.18% as compared to 2002. this in turn decreases the risk of insolvency. The change
is occurring due to increase in short term investment and decrease in short term
borrowings.

31
 Current Ratio

1.5
1
Current Ratio
0.5 0.91 1.15
0.84
0
1 2 3
Current Ratio 0.84 0.91 1.15

ASSETS TURNOVER
This shows revenue generated per rupee investment in total assets. UBL’s assets turnover
ratio has shown a little decrease. This is because of increase in total assets with
proportionate increase in revenue. Banks have relatively low ATR capital, as they are
selective in advancing loans and generating smaller sales.

Asset Turnover

0.1
0.07
0.06
0.05 0.04 Asset Turnover

0
1 2 3
Asset Turnover 0.07 0.06 0.04

DEBT TO ASSET RATIO

The analysis of total debt to assets ratio, there has been decrease of one percent as
compared to 2007 and 6% to 2001. in 2006 every rupee one of assets was being financed
by rupees 0.098 or debt and in 2007 it is 0.94 while in 2008 it is reduced to 0.93 worth of
debt per rupee of asset. Although the decrease is not large enough but it is a good sign for
bank’s creditors. The decrease may be attributed to the substantial decrease in borrowings

32
from financial institutions but the affect was weakened by an increase in bills payable and
other liabilities.

Debt to Asset

0.99
1

0.94
0.95 0.93 Debt to Asset

0.9
1 2 3

Debt to Asset 0.99 0.94 0.93

DEBT TO EQUITY:
This ratio measures how the company is leveraging its debt against the capital employed
by its shareholders. Analysis of debt to equity ratio indicates that the current position for
the debt to equity is that for every one rupee in equity provided by the shareholders the
bank has Rs. 13.5 as a debt. This shows that the bank is heavily relying on debt financing.
The reason for huge difference stated in the table is because of losses occurred in 2006
and 2007.

Debt to Equity

15 14.54 14.4
14 13.47
Debt to Equity
13

12
1 2 3
Debt to Equity 14.54 14.4 13.47

COVERAGE RATIO
This ratio shows the number of times a company can cover or meet its financial charges
or obligations. One of the most commonly used ratios is the interest coverage ratio that
measures the number of times the income is available to pay interest charges. The UBL

33
interest coverage ratio has shown significant improvement in these three years. The ratio
is increased from 0.10 to 3.34.

Coverage Ratio

4 3.34

2 1.15 Coverage Ratio

0.1
0
1 2 3
Coverage Ratio 0.1 1.15 3.34

GROSS PROFIT MARGIN

Gross profit margin is the difference between the revenue and cost of goods sold. Gross
profit is critical because it represents the amount of money remaining to pay operating
expanses financing cost and taxes. UBL’s gross profit margin per rupee has shown rising
trend in last three years. There is an increase of 27% in 2008 as compared to 2007. This
shows efficiency of the bank to control the cost of sales.

Gross Profit Margin

100.00% 79%
44.65% 52.50%
50.00% Gross Profit Margin

0.00%
1 2 3
Gross Profit 44.65% 52.50% 79%
Margin

NET PROFIT MARGIN

This ratio shows the profit that is available from each rupee of the sale. After all expanses
have been paid. Net profit margin is also showing an increasing trend. UBL has improved
net profit margin in the current years. The net profit margin has reached to 30% as

34
compared to 2007 in which it was only 12.69%. While in 2006 it was in negative figure.
It shows a good impact on the UBL’s Balance Sheet.

Net Profit Margin

50.00% 30%
12.69%
0.00%
Net Profit Margin
-50.00%
-65.12%
-100.00%
1 2 3
Net Profit Margin -65.12% 12.69% 30%

RETURN ON INVESTMENT
This ratio measures the profitability per rupee of investment in assets. UBL’s return on
investment has shown an improvement more than 100%. In 2008 the ratio is 1.24% while
in 2007 it was 0.76% and in 2006 it was in –ive figures. Although the assets have
increased but the operational recovery of the bank is main cause of increasing this ratio.

Return On Investment

5.00%
0.76% 1.24%
0.00% Return On Investment

-5.00%
-4.43%
1 2 3
Return On -4.43% 0.76% 1.24%
Investment

RETURN ON EQUITY
This ratio shows the profit as a proportion of the book value of the common shareholders.
The return on equity is also shown a great deal of positive change. In 2008 the ratio is
45% while in 2007 it was only 16% and in 2006it was in negative figures.

35
 Return On Equity

200.00% 16.78% 18%

0.00%
-200.00% 1 2 3
-400.00% Return On Equity
-600.00%
-800.00%
-1000.00% -887.99%

ADVANCES TO DEPOSIT RATIO

This ratio shows the companies advances employed per unit of deposit. This ratio of UBL
over the recent three years shows a decreasing trend. In 2006 it was 56% while in 2007 it
was 46% and in 2008 it is 45%.

Advances to Deposit

100.00%
56.46% 46.74% 45%
50.00% Advances to Deposit

0.00%
1 2 3

Advances to 56.46% 46.74% 45%

Deposit

INVEST TO DEPOSIT
This ratio shows the company’s investment employed per unit of deposit. This ratio
increased in 2007 as compared to 2006 but in 2008 it again decreased. It is because of

36
industrial development factors in the country by which lending has been increased and
investment is slightly decreased.

Investment to Deposit

50.00% 41.63%
28%
20.22%
Investment to Deposit

0.00%
1 2 3
Investment to 20.22% 41.63% 28%
Deposit

CASH RATIO
It is the ratio of cash and cash equivalent of current liabilities. It shows that how much
cash is available to meet the current liabilities. In 2008 this ratio has increased by 2%.
The balance of bank is increased with 20%. Although the current liabilities also increased
but the increase in cash is very high.

Cash Ratio

28%
30.00%

20.00%
9.59% 9.23% Cash Ratio
10.00%

0.00%
1 2 3
Cash Ratio 9.59% 9.23% 28%

CHAPTER # 5

37
SWOT ANALYSIS

QUALITATIVE ANALYSIS OF UBL

During my two months of internship period I have tried to fully commit myself in the
learning process. I kept critically observing the things that I could analyze and the result
of the exercise is presented as below.

A) Organizational
 Existing organizational hierarchy hinders vertical communication and blocks flow
of information among the levels of management.
 The workload is not equally distributed.

 Coordination level among divisions/departments and employees are poor,

particularly speaking of between the top and lower levels of management.

 There is centralization of authority and branch managers are bound and restricted
to take initiative.

 Due to overlapping nature of duties and jobs there exists chaos and confusion in
branches.

B) Departmental
During my internship period in UBL, in various departments, I noticed following
departmental problems.

• Cash Department

38
 i. Not very frequently but there are instances of fake currency notes, being
identified. At times notes received from other branches were found to have
certain fake currency notes.
ii. Counting mistakes occur due to overcrowding particularly during the
collection of utility bills. Manual counting system also affects efficiency of
the bank.

iii. Code of conduct of cashiers is found unsatisfactory.

iv. There is generally the lacking in observing and practicing bank’s relevant
procedures and SOP’s.

• Remittances Department
i. Application of tests for authentication of TTs is not known to al concerned
individuals that reduces the efficiency and further the wrong application of tests
prevent payments and the delay could dissatisfy customers.
ii. Telegraphic messages require specific skills and training. The employees are
partially equipped of such knowledge.

iii. Preparation, execution and management of TTs and MTs and particularly DDs
ask for mastering applicable rules and regulations and most of the staff was found
ignorant of those.

• Deposit Department
i. Newly designed AOF has an inbuilt deficiency of restricted space and cannot
accommodate more than two names.
ii. Identification of customer’s signature is very important particularly when cash is
to be withdrawn by him. Manual practices pose problems in those branches where
automation has not been done yet.

iii. In cases where the presence of customer himself is must, is sometime

compromised due to influences of\r fear of loss of customer.

39
 • Clearing Department
i. Wrong endorsement and stamping causes loss to the customers and extra efforts
for the bank to repeat the procedures.
ii. Reasons for the return of the cheques at times are not mentioned on the return
memos.

iii. At times due to lack of training wrong stamps are applied on instruments.

• Credit Department
i. Timelines in cash disbursement is very important which is compromised due to
lengthy processing and documentation requirements.
ii. Relationship Managers need to be fully equipped with the requisite knowledge
and skills as presently plain BA/B.Sc qualified individuals are performing jobs of
MBAs.

iii. Lack of infrastructure for carrying out computerized financial analysis of

borrower’s business.

iv. Large pool of potential borrowers cannot apply for loans due to lack of collaterals.
Heavy collateral requirements restrict credit business of the bank.

v. The credit proposal and other documents at times are not properly and sufficiently
prepared before taking approval.

vi. Filing and record maintenance of credit related documents are not done
efficiently.

• Bills Department

40
 i. Bills are sent to other cities; therefore, extra care should be exercised in making
entries and stamp affixing.
ii. Proper scrutiny at times is not carried out and it causes loss to the bank or increase
procedural timings.

iii. Employees at times mismanage their time and fail to forward bills promptly.

• Foreign Exchange Department

i. Problems of bills and remittances departments equally apply to foreign exchange

department. There is overlapping of functions and complete separation of function
has not been achieved thus leading to a state of confusion and conflict among
employees.

ii. Employees of this department are lacking computer-operating skills.

iii. Knowledge and educational background of employees working in this department

do not match with the job they are doing.

iv. Most of the employees of this department lack the ability to handle the Letters of
Credit.

• Marketing Department
i. Lack of marketing at desk due to lack of training and awareness among
employees.
ii. Lack of promotional activities.

iii. Little attention to the apparent conditions of the bank exterior, interior layouts and
design of furniture in most of the branches.

41
SWOT ANALYSIS
SWOT is useful tool for providing a framework for analysis of an organization. SWOT
stands for Strengths, Weaknesses, Opportunities and Threats. It is a common approach to
make assessments in terms of internal and external environment of the organization, and
to formulate strategies analyzing its internal strengths and weaknesses, external
opportunities and threats, coming up is the SWOT analysis for the UBL.

STRENGTHS
• It is one of the largest private banks with a deposit base of Rs. 94883/- millions
showing constant growth over the period from 1999 till the day.
• It has a well-knitted and adequately equipped branch networking system that
efficiently covers both the domestic and international markets.

• It is involved in both corporate and retail banking.

• The bank is actively emerging and is engaged in international trade and foreign
exchange transactions. Foreign trade volume showed an increase of 17% over the
previous year.

• Advances investment of the bank shows a constant growth pattern. The current
year’s growth rate is 32%.

• The overall efficiency of the bank operations and management ability can be
noticed by looking at to its income pattern and provisions/write off practices.

o Net revenue from funds increased by 18% for the current period.
o Provisions decreased by 14%.
o Total income increased by 16%.
• UBL is actively participating in international markets and has recently introduced
credit cards in UAE, Behrain, and Qatar, being backed up by 24 hours call center
out of UAE.

• The bank is owned by parties of financial repute and credit worthiness like, SBP
with 48.69% interest, Best Way group and Abu Dubai group with 25.50% of

42
 interest each. Others are GOP, NBP Trustee Department, State Life Insurance
Corporation etc.

• The bank is run by highly professional recruited from and trained by foreign
banks like Citi Bank.

WEAKNESSES
• Due to risks such as political, economic and legal etc the bank has suffered losses
the main reason was that of piling up of large amount of unrecoverable loans and
debts which has adversely affected the image of the UBL.
• Accumulated losses pushed the bank to cut down its promotional activities in
order to reduce expenses for last few years.

• During the nationalization life span of the bank political lords used influence in
bank business and selection of employee at each level and thus adversely affected
the bank’s efficiency and effectiveness.

• Administrative expenses are 51% of the mark up revenue.

• Promotions are carried out on annual basis ignoring the importance of capabilities
and performance outputs.

• The bank has large number of employees who are simple graduates with no
banking knowledge.

• Ineffective system of recruiting and selection.

• Lengthy credit processing and documentation procedures.

• Unsatisfactory working conditions.

OPPERTUNITIES
• Growing policies of the GOP on business and economic sectors provide UBL an
opportunity to efficiently meet with the business people requirements of instant

43
 cash facilities e.g. the government intentions of developing housing and
agriculture sectors.
• The efficiency of stock market and sound exchange reserve level is providing a
good opportunity for effective investment decisions.

• Foreign remittances are another area as present world wide control systems over
transfer of currencies through illegal channels has facilitated the area for the
banks.

• Reconstruction of Afghanistan is a golden opportunity where the bank can

effectively participate.

• Expansion of IT platform and internet based banking system.

• Interest of businesses in leasing facilities provides a healthy opportunity for

banks.

• There is a large pool of unemployed MBAs who can be hired to achieve

professionalism on its organizational culture.

• Outsourcing of promotional companies or use of available excellent promotional

facilities.

• Entering new market segments.

• Increase the product range to meet the broader range of customers’ needs.

THREATS
• Increase in competition due to increasing number of foreign and domestic private
banks offering highly specialized and attractive services.
• Growing global technological advancements and adaptation of modern style of
management in banking sectors.

• Extensive promotion campaigns run by competitors.

• Unemployment, lower level of income and prices like problems in the motherland
coupled with low rate of industrialization, geo political adverse conditions,

44
 religious factor, lack of consistency in policies due to political instability are some
of the other major threats.

This SWOT analysis is a mirror image of the bank’s present conditions. Some efforts are
made and others are still required to be made in order to improve the situation. The
management can develop elaborate strategic plans for capitalizing the available
opportunities. The bank should maintain principal of professional management and
adhere to sound and sophisticated banking rules and regulations so that confidence and
trust of the public in the institutions could be re earned.

45
CHAPTER # 6
RECOMMENDATIONS
Recommendations are considered to be the most important part of an internship report,
without which no report is considered complete and meaningful. This part of the report is
based on the previous sections i.e. review and analysis. Moreover, for bringing
suggestions, discussions have been conducted with the staff of UBL officers, who not
only provided the basis for recommendations but also pointed out some areas, where the
change for the development is utmost important. Realizing the importance of this
section, efforts have been made to give feasible recommendations, which are categorized
under the following headings.

HUMAN RESOURCE DEPARTMENT

The importance of manpower cannot be denied in any organization. In case of banks it is
the most valuable asset, because the bank is very sensitive organization and to be in
harmony with this sensitivity, need for proper human resource is felt badly. Critical
analysis of UBL necessities recommending suggestions that would increase bank’s
efficiency and effectiveness.

• Development of Managerial Leadership

In services industries like banks the need of managerial skill is much more
important. It makes positive contribution towards higher effective results. Without
development of managerial leadership, the effective utilization of the human resource
will be impossible. UBL should also focus on this area and should avoid deficiencies in
managerial leadership, by applying the modern styles of management.

• Political interference
The political intervention in the bank needs to be stopped so that the top hierarchy as well
as the personnel placed at other important levels of the institution is not changed Just on
political grounds and the on going developmental work is not obstructed. It will enable

46
the management to formulate long term strategies and their proper implementation
because the long term policies, accurately based on calculated risk, have proved the
pivotal role players for organizational sustainable development.

• Basis for Promotion

A sizeable portion of the officers of UBL, are promoted in without test and interviews to
officers cadre. The promotion policy must be too tight and transparent that no one may
have the chance to be promoted on criteria other than the required qualification,
experience and performance. As for the present excess staff, those not found up to the
required criteria, may be given GHS etc.

• Management Changes on Merit

In UBL, though vary rare fresh recruitments are made, and the bank faces saturation in
personnel, now clipping will be more helpful. This downsizing will leave the bank with
the staff, to be retained on the basis of ultimate meritocracy with zero tolerance of
incompetence. Now in this remaining workforce, a cultural change right from the top
management down to the front line, that better suits to the present day needs of banking
environment could be included through proper discipline and training.

• Needs of change in Recruitment Policy

It is important to say that the external level market is full of the required talent like MBA,
M. Com etc,. But on the country only graduation with simple subjects is still the requisite
qualification for officer’s cadre, which has already worked amply in the devastation of
UBL. Therefore the recruitment qualification to the officer’s framework should be
enhanced for simple graduation, to professionally qualified preferably Masters in their
respective fields.

• Refresher Courses

47
The Human of the bank should frequently conduct meaningful refresher courses,
seminars and workshops with a view to improve the knowledge of the staff. Due to
severe competition and technological developments, the banking business is experiencing
rapid changes therefore the HRD should have arrangements for staff trainings to cope
with the new changes that may become threats for the interest of the bank.

• Computer Trainings
The present conventional and orthodox training programmes need to be made more
comprehensive and reinforced with inclusion of computer training courses.

• Training for Credit Management

Special trainings on credit management should be imparted to the finance dealing staff.
Financing is main fountain bank’s income. Sound finance are extremely necessary for
opening of springs of the smooth inflow of the income.

• Training with Clear Objectives

Training needs assessment is necessary so that only the relevant staff is sent for the
training courses.

• Change in Appraisal System

The present performance appraisal system is good. However, it needs to be implemented
in true sense. The drawbacks that are obvious like nepotism and favoritism etc. need to
rooted out and the culture of ultimate meritocracy in appraising needs be inculcated.

• Introduction of New Courses

The human recourses division of the bank should focus on the restoration of the corporate
image of the bank by floating programmes such as, marketing excellence, courses on

48
corporate culture and others. Usually in businesses the wholesalers, retailers and other
intermediaries are finished by opening a network of the business own outlets. It works as
profit maximization devise. In my opinion the above two programmes marketing
excellence and corporate culture, added with the best counter service and outdoor
informal relationship with the potential customers by the line managers will save the sum
of money spent on various media of advertisement.

• Cheaper means for Postings etc.

The culture of attachment of hopes with the elements outside UBL, for promotion,
transfers, postings, and other benefits requires eradication from the roots.

• Customers Orientation
Every entrepreneur if concerned about the success of his business, has to understand,
recognize, carefully and appropriately that his customer is “The King” of the business
system and the original spring of the business revenue. UBL should recognize its
customers as the mainstream of the bank’s revenue. They need to be provided the
deserved respect, quality and in time service and to be politely dealt with.

• Career Development
As a matter of personnel policy HRD of UBL should prepare a plan showing the future
growth potential of employees on the job performance and evaluation and it should be
made known to the employees. In this regard, employees should be given opportunities to
show their performances, which would help in their career development.

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CREDITS AND ADVANCES DEPARTMENT
The defaulted loans have showered the process of development of banking sectors in
Pakistan and have reduced the lending capacities of banks. In result of which economic
growth has reduced and rate of industrialization has become lowered. Defaulted loans
being the major cause for this depression, various suggestions and recommendations have
been given with focus on UBL to overcome the drawbacks of this department.

• Training for RM’s

Exclusive mandatory training concerning all possible aspects like, financial management
and organizational management etc is required to be developed and designed to achieve
i. Risk assessment ability
ii. Understanding of all legal matters
iii. Early detection ability Skill of any loans becoming bad
iv. Ability to develop and suggest sound strategies when needed.

• Fake financial presentation

The bank should confirm that the provided figures by the borrowing organization are
fairly audited and that the auditors are on the approved list of the bank and they have
clear opinion about the affairs of company and nothing has been made secret. The bank
should have expert to examine various changes and developments for years in areas of
the borrowing corporation like;
i. Financial condition
ii. Cash generation
iii. Ability to pay back
iv. Operational performance
The focus should be on identifying and explaining significant changes and developments
in payback of loans, profit maximization, capital flow and operating expenses etc. the

50
 bank should take critical view of the financial and should assess changes occurred during
the favorable and slack reason for the company.

• Poor Management
A large number of industrial units and projects become sick because of poor
management. When a business becomes sick or fails it is unable to return the loans, it has
taken, and as a result such loans become bad debts, to avoid this, it is the responsibility of
UBL, to ensure that the company to which loan is sanctioned enjoys good management
skills and reputation. This can only be confirmed, if the bank assesses the management of
the borrower party by taking care of
i. Length and type of experience
ii. Qualification and integrity
iii. Reputation of managerial skills and style of management being used
iv. SWOT analysis
v. Financial procedures and documentation followed by employees
vi. Span of authority and responsibility
vii. Decision making skills of employees
viii. Risk management of employees

• Proper Documentation
Loans become irrecoverable through court of law in case of default when the bank fails to
prove their claims against the delinquent borrower. If documents are obtained properly as
per terms of the loan it is not difficult for the counsel of the bank to get decree against the
defaulter. For proper and valid documentation the following aspects must be kept in
mind.
i. The bank should confirm that standard loan documentation is in place for each
credit facility prior to disbursement. If the documents required are different from
the bank’s standard approved format, arrangement for vetting of the legal counsel.

ii. Bank should ensure that the documentation are correct, complete and correspond
with the approved facilities. Also to ensure that blank spaces are filled, documents

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 are dated, signed and stamped, the signer is authorized to execute such documents
and signatures are verified.

iii. Act as custodian for legal borrowing documentation, lodging the documents in
vault, maintaining records as per bank operating procedure.

iv. Keep track of expiry of borrowing documents, insurance policies etc and follow
up for regulation of any approved documentation deferrals.

v. Maintain documentation checklist, updating it properly each time new

documentation received.

vi. Maintaining computerized record of documentation.

vii. Division of documentation on the basis of sector, to which loan is given.

• Securities
i. Physical verification of the property offered as a security is must rather to rely on
the documents. Investigation should also be conducted if the property is of
ancestral nature or joint property.
ii. The competent consultants should do valuation of the property and mere
completion of formatives should not be taken into account.
iii. Maintain in safe custody all collateral i.e. shares, govt. securities, property title
deeds, mortgage documents etc.
iv. Bank must ensure receipt of periodical statements of stock and receivables from
customers, as per frequency specified in the credit approval.
v. Bank should also do the periodic physical checking and evaluation of pledged
inventories as per terms of the approvals, i.e. using applicable margins, such that
the drawing power adequately covers out standings amount at all times.
vi. Bank officials must ensure that the goods hypothecated or pledged are covered
through a valid insurance policy with appropriate risk coverage, adequately
covering the bank’s amount.

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 vii. Concerned bank staff should ensure compliance with the institutional credit
policies and procedures as laid down in the policy book or credit manual and
advised from time to time by the credit committee or top management.
viii. Ensure compliance with local regulatory requirements.
ix. Confirm timely submission of correct information in the prescribed format as may
be required by the central bank.

• Administrative Reforms

i. Fast resolving of loan defaults cases is must.

ii. Immediate steps to appoint more banking court’s judges.

iii. Exclusive judges are required for Lahore, Peshawar, Baluchistan, Sindh High
Courts.

iv. Informal body to be set up by the banks jointly with the bar councils and chamber
to monitor and publish performance of the banking courts. This body will need
statutory authority for protection from contempt.

v. Use of debt recovery agencies regulated by law is to allow.

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 CHAPTER # 7
IMPLEMENTATION PLAN
Every organization has its own strengths, weaknesses and opportunities for
improvements. Nothing is impossible in this world. Possible can become impossible if
untried.
To ensure feasibility of a project, any suggestion or recommendation given for it should
be supported by its implementation plan. An implementation plan consists of action
oriented tools and procedures, which are specific and clear. An implementation plan
means that every thing except resources and taking of step to start work is ready which
shows that implementation plan is the soul of a project. A good implementation plan
consists of all the steps needed for the accomplishment of a task or tasks, it is clear and
helps in identifying the problems to be faced in carrying practical work and provides a
full picture of activities and events.

ACTION PLAN 1

Franchised Agriculture Supplies Shops

In order to exploit opportunities available in the existing agriculture market the following
steps should be taken.

• Establishing franchised supplier shops

UBL should concentrate efforts towards major agriculture union councils and develop
franchised shops; those should provide essential farmer services including leasing of
sophisticated farm machinery and advising farmers how to improve productivity.

54
 • Location of franchised supplier shops
Preferably such shops should be in close proximity of UBL branches in the area. These
branches should extend credit to the shops for their supplies and equipments and to
farmer customers, at market rates, which are well below the 50%to 90% charged by the
arties (informal sector).

• Agri-Officers in Branches
Such agri credit officers should be employed who possesses requisite knowledge and
know how both of the agricultural field and bank credit fields. The bank already has such
assets, available in its existing HR factory and others can be trained for, if so required.
These officers should be provided with motorbikes with per month fixed mileage limit.

• Cost Schedule
The above-mentioned plan has two major cost categories as given below:
a) Credit amount extension
This amount will be disbursed as per requirement and is to be recovered with
added return.
b) Operation cost
Details of the cost are tabulated below and following points are of significance;
i. Fixed cost cost of motorbike less tax saving due to depreciation
expense should be amortized for a period of five years and
distributed equally on average number of customers a mobile
agri credit officer will deal with.

ii. Variable cost which includes petrol and maintenance charges

should be incorporated in pricing of the facility extended on
average basis.

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Table:Cost Schedules of Action Plan
Fixed Cost Total Variable Cost Total Cost
Mileage/year Petrol/Year Petrol Cost Repair Maintenance

Dep. M/Cycle @50km/day @40km/day Rs.30/litre Per year TVC + TFC

15000 18000 450 13500 500 29000

The above plan could be reinforced and made more effective if following supporting
activities are undertaken.

c) Pakistan loses a significant portion of its agriculture land each year

through high soil salinity and poor water treatment. The bank can
finance projects equipped with measures to treat saline/soda water
and soils so as to render if efficacious for agricultural purposes.

d) The bank may help farmers to acquire needed equipment of saline

soil treatment thus enhancing their ability to bring more land under
cultivation and improve per area yield.

e) The bank may finance projects such as better storage and

marketing services.

ACTION PLAN 2
Technique For Effective Management and Recovery of Advances
Banks are highly leveraged bodies where advances constitute a major portion of their
assets. Effective management and recovery of advances has to be an ongoing process, if

56
 the bank is to maintain good quality of its assets. In this regard following plan is advised
for effective management and recovery.

• Through Assessment of Advances

Bench marketing technique should be used to develop comprehensive proposal perform,
though the existing Performa is not a bad one. Following factors should be carefully
examined.
a. Principle of good lending
This includes safety, desirability, liquidity and profitability.

b. Compilation of credit information report

Through investigation of the borrower’s personal and business related aspects
should be conducted.

• Proper and effective Documentation

Safety of advances depends upon correct documentation. In addition to compliance with
all relevant legal rules and regulations following aspects should be deeply digged into.

a) Executants
Borrowers/executants should be legally authorized to enter into the contract.

b) The Bank’s printed charge Form

The appropriate charge forms such as letters of pledge and hypothecation etc. should
be properly completed and executed.

c) Stamps

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 Charge form should be properly stamped in accordance with the stamp duty as
applicable in the province, where the documents are executed.

d) Execution and Documents

These charge documents should be executed in the bank premises and should be
signed in full as per borrower’s specimen signatures.

e) Registration of Charged Documents

Certain charged documents for example, mortgage deed are required to be registered
at the office of registrar. Such registrations must be affected within 21 days of the
creation of the charge.

CAREFUL MONITORING
As a preventive measure, systematic and continuous evaluation helps to identify potential
problem cases before they reach a critical stage. It is, therefore, essential to monitor
advances. Following could prove good sources for effective monitoring.
i. Financial statements, accounting and management policies.
ii. Bank accounts operations.
iii. Personal contacts and site inspections.
iv. Analysis of overall economic environment.
v. Analysis of industry specific environment.

• Review Function
This is periodic monitoring function that should be conducted under following broader
guidelines.
i. Analysis of operations on financing account
ii. Credit report - bearing upto date information
iii. Financial statements analysis
iv. Inspection and analysis stocks reports
v. Review and updating charge documents

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 vi. Analysis, revaluation of securities
vii. Other correspondence with borrowers
viii. Study of previous review files
ix. Analyzing validity of insurance documents

Handling of Delinquent Advances

Through careful monitoring and periodic reviews delinquent advances could be
recognized and should be tactfully and effectively handled. Good relations with such
customers should be maintained endeavors should be focused on ways and means of
obtaining repayment without resort to litigation. Borrower’s situation should be analyzed
and suggestions for improvement should be given. It is a well-established fact that legal
suits cost both money and time, which could be used for more productive endeavors.

RECOVERY OF ADVANCES THROUGH REALIZATION OF

SECURITIES
At times due to unforeseen circumstances beyond the control of the borrower, the normal
plan for repayment may not work out. Then the bank has to rely upon the realization of
security to liquidate the advances. Following steps should be followed.
i. A notice for sale of security, bearing full particulars of the loans and security
should be served to borrower.

ii. Sufficient time should be given to borrower.

iii. Notice should be issued by registered post, acknowledgement due and should be
retained as evidence.

iv. Reputed surveyors should do through, valuation of security.

v. Written offers from several dealers should be invited.

vi. In case of auction, it should be well advertised.

vii. The offer closest to market value should be accepted

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ACTION PLAN FOR MARKETING DEPARTMENT
This will help the bank to take long-term perspective for its marketing activities, with
consideration on strategic approach of the bank. There are various steps involved in the
given implementation plan, which will come in order, according to their importance and
subjection on one another. Moreover, to bring order and efficiency to the difficult task of
implementation plan. It has been broken down into the steps, which believed to be
needed, when developing a disciplined action/implementation plan for launching
financial products.

Step 1: Business Review

As we early discussed that this implementation plan will focus on marketing activities of
UBL and as a part of the marketing background component, the business review is must.
It includes the marketing database not only of UBL but also of other banks. To develop
marketing database, we first need to understand the scope of banking followed by a
comprehensive situational analysis of the financial product, and market place, which is
relevant to the target market and competition situation. This will be accomplished
through secondary research in Pakistan. UBL’s own record of financial products and very
often-primary research surveys of potential customers and focus group information. The
business review provides a qualitative and quantitative decision activities and a rational
for all the strategic marketing decisions with in the plan.

Step 2: Problems and Opportunities

The problems and opportunities step of UBL is a summary of the challenges that will
emerge from the marketing database. In this step the data collected from the business
review is shaped into meaningful summary points that form the basis of the
implementation plan.

Step 3: Quantifiable deposits’ Collection Target

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Collection of deposits as an objective represents projected levels of services to be sold.
Setting this objective is critical because it is the first task of this implementation plan and
it sets the tone of the entire implementation plan for the bank. Everything that follows in
the plan is designed to meet the objective of collecting deposits through financial product
from defining the size of the specific target market establishing marketing objectives
This will also determine the amount of advertising and money spent on it in a
quantifiable manner, e.g. 400 million advertisement expenses in a year, for the first 5
years of its start.

Step 4: Target Markets and Marketing

The target market and marketing objective both are inducted in one step due to their
critical link to one another.
Target Market: Once the deposits collection being developed as quantifiable
objective, the staff of marketing department at the Hub branches and Head Office of bank
must determine to whom they will be selling their new financial packages. In response to
which bank will raise deposits, making this determination is really defining a target
market. This is a group of people with common characteristics. This part of
implementation plan is concerning on marketing efforts towards the portion of population
wit similar banking needs and saving habits.

Marketing Objectives: Marketing objectives for UBL clearly defines what

the bank want from its target market and potential customers. This part of implementation
plan focuses on the behavior of customers that will help in setting the marketing
objectives.

Step 5: Plan Structure

To compete with other banks, UBL needs to set strategies for its new product by
including the postings strategy, it will help in image building of the financial package to
be launched.
Posting: Once the bank has defined its potential market and has established
marketing objectives, it must need to develop posting of its financial product. Position is

61
the desired perception of the product within the market target of the bank for example, if
the product is launched. Its position should be done in such a way, that customer is fully
aware of its major characteristics the bank has stained to build the image of its products
as highly profitable package. This positioning strategy is supported by the strategic
consideration on various marketing mix tools e.g. advertisement, publicity etc,

Marketing Strategies: though marketing strategies are descriptive and non-

qualitative yet has a major impact over getting competitive advantage. These marketing
strategies guide to the development and selection of various tactical marketing mix tools
and provide direction in broadening the target market, set by the bank.

Step 6: Informational Goals

All steps of this implementation plan are highly dependent, but step 5, 6 & 7 are much
more. Informational goals means to set the target the market awareness and attitudes
package and fulfill the marketing objective of the bank. Another purpose is to provide
direction for what is to be accomplished by each strategic tool in term of informational
context.

Step 7: Strategic Marketing Mix

This step is highly concerned with getting attention of the customers towards the service
of the UBL offering. Here we are concerned with a new package launched by the bank.
Focus will be on that financial product. This step of disciplined implementation plan
provides some strategic plans for marketing of the product. These strategic and tactical
plans incorporate marketing executed. When implemented, will allow the bank to meet
it’s marketing objectives and fulfill the overall marketing strategies and information and
communication guidelines, established in the start of the plan. Selection of each
marketing tool has its own objective and strategies. Following are the marketing mix
tools included in strategic planning process.

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Financial package/Product
This is the service which is provide by the bank as a result of which bank gets deposits
and customer takes profit and keeps his money safe.
Branding
Branding is the naming of new-marketed financial products e.g. present products of UBL
i.e., UBL Sahara, UBL Hamrah Travelers Cheque. This brand or name of service
associates with it should be such, which could communicate some message and attract the
customers.

Profit Percentage
This is the percentage of profit, which the customer expects receives from the bank
against his deposits in a scheme of financial package.

Advertising Media
Promotional campaigns provide added incentive, encouraging the target market to
perform some incremental behavior, which is highly necessary. Communication with the
target market should be always there and Electronic and Print Media should be used for
promotion of financial product. Following is some financial tabulation for UBL based on
some data taken from an advertising agency. This will show the importance of
advertising and its benefits in terms of figures. This table gives the plan for one year and
is for one financial product, for example, a product of UBL like SAHARA. A
conservative approach has been followed to get a framework for reality, and to help in
avoiding the slack season of economy.

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Table: 7-2 Cost/revenue schedule – Marketing Plan

Average
No. Of deposits Total
Cost of
Customers Deposits
Advertising by Lending by Difference
Attached Customers Bank in Year (Revenue)
48 Million 1 Million

(7% of 2% of D=100 5 billion (b x (E - A)= 52

population) 5000 million c) million

i. The bank’s revenue in the F column does not include advertisement expense,
which is a major cost here in this comparison.

ii. 2% given in column E is the difference of percentage between lending and

borrowing which is again a conservative approach.

iii. Many things in the comparison have been kept constant to understand the
importance of advertisement.

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BIBLIOGRAPHY

• Aswathpa, K, (2003) Human Resource and Personnel Management: New Delhi:

Tata McGraw Hill Gibson, Charles H, (2002), 7th. Ed., Financial Statement
Analysis, Prentice Hall International Corporation.

• Meenai, S A, (1999) Money & Banking in Pakistan, Karachi: the Elahi’s Book
Corporation.

• Siddiqui, A H, (1998), 6th Edition. Practice and law of banking in Pakistan, Royal
Book Company, Karachi.

• UBL (1999). Credit Manual. Karachi.

• UBL (2000). Deposit Manual. Karachi.

• UBL. (2002 – 2003). Annual Report. Karachi.

• Van Horne, J. C & J.M Wachowicz, (1998), 10th Edition. Fundamentals of

Financial Management. New York, Prentice Hall International Corporation.

• http/. www.ubl.com.pk

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