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Habib Bank Limited

Strategic Management Experiential Learning Project

Spring 2017
Group Members:
Waqar Ahmed (19379)
Hassan Mehmood (19380)
Rehan Ali (19372)
Syed Maaz Zafar (19172)

Submitted to:
Dr. Fazal Khalidi
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Table of Contents

1 Company Description: ............................................................................................................................................................ 4


1.2 Vision: ........................................................................................................................................................................... 7
Proposed Vision: .......................................................................................................................................................................... 7
1.3 Mission: ......................................................................................................................................................................... 7
Proposed Mission:........................................................................................................................................................................ 7
2 PEST Analysis ........................................................................................................................................................................ 8
3 Porters 5 Forces Model .......................................................................................................................................................... 9
4 External Factor Evaluation (EFE) Matrix ............................................................................................................................. 11
5 Competitive Profile Matrix ................................................................................................................................................... 12
Culture ............................................................................................................................................................................................ 13
Internal Audit .................................................................................................................................................................................. 14
Value Chain Analysis ..................................................................................................................................................................... 18
Supporting activities in the banking value chain are as follows: ........................................................................................... 19
IFE Matrix ...................................................................................................................................................................................... 21
HBL STRATEGIES ....................................................................................................................................................................... 23
Generic Strategies ........................................................................................................................................................................... 24
CORPORATE STRATEGIES ........................................................................................................................................................ 24
Strategic Path ...................................................................................................................................................................... 24
GROWTH STRATEGIES ......................................................................................................................................................... 24
Incremental Growth............................................................................................................................................................ 24
International Growth .......................................................................................................................................................... 25
Merger.................................................................................................................................................................................. 25
CORPORATE LEVEL STRATEGIES ..................................................................................................................................... 25
Growth strategy: ................................................................................................................................................................. 25
Related Diversification: ...................................................................................................................................................... 25
Cost Leader Ship strategy: ................................................................................................................................................. 25
Differentiation Strategy: ..................................................................................................................................................... 25
DIVISIONAL LEVEL STRATEGY ......................................................................................................................................... 25
Strategy Analysis: ........................................................................................................................................................................... 27
BCG Matrix: .............................................................................................................................................................................. 27
SWOT Analysis: ........................................................................................................................................................................ 28
IE Matrix.................................................................................................................................................................................... 30
Grand Strategy Matrix ............................................................................................................................................................... 31
QSPM ........................................................................................................................................................................................ 32
Strategy Implementation ................................................................................................................................................................. 32

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Executive Summary

This report reflects the Strategic management efforts done at HBL and their outcomes on Global
level. It shows that how strategic management is helping HBL Bank in creating, maintaining and
retrieving the information when required. It starts with companys general overview, the brief
history, Values of HBL, the organogram, the challenges the product lines and detail information
regarding different automated systems used by them in taking timely decisions. The report consists
of my best efforts which I did in gathering information regarding Strategic management at HBL
Bank. This report elaborates that HBL is clearly the first choice of everyone who believes in
qualitative approach of banking. It pertains environment of highly responsible workforce. Bank is
enjoying a healthy market share and taste of good status in terms of its operative features and
customer support. HBL is experiencing a good reputation and reasonable mark up with respect to
prevailing market mark up with assurance of satisfaction and support. The management style is a
kind of participative management in which employees are encouraged to share their ideas in
decision making which enables bank to utilize knowledge, skills and abilities of its employees and
meets its objective efficiently and being more innovative. As the motivation and reward system of
HBL bank are also up to the expectation of employees so that employees are very much satisfied
and it helps them to retain their valuable workforce. Ultimately the report projects that HBL
inherits strong organizational culture having values for leaders as well as for employees and the
organizational behavior is up to the mark for any company in Pakistan.

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1 Company Description:
History:
Habib Bank Limited (HBL) was established on 25th August 1941; just one year after the historic
Pakistan resolution was adopted in Lahore for carving an independent homeland for the Muslims
of subcontinent. It was founded with the blessing of Quaid-e-Azam (Great Leader) Mohammad
Ali Jinnah, the architect and founder of Pakistan. HBL is proud of the fact that the Quaid-E-Azam
demonstrated his faith and confidence in HBL by opening his personal account in our Bombay
branch in the year 1946. The first prime minister of Pakistan Quaid-e-Millat Liaqat Ali Khan, on
the independence day of Pakistan (August 14, 1947) appreciated the service of the bank in these
words. I wish every success to HBL and hope that it will continue to play an important and useful
role in the industrial and commercial life of the Muslim nation The commitment of HBL towards
the cause of the economic uplift of Pakistani people was successfully tested when the subcontinent
was partitioned in 1947. The new born country faced serious financial difficulties. Habib Bank
joined hands with the government of Pakistan and placed all its services at their disposal for nation
building activities. Throughout the decades, HBL has held the mantle of a dynamic leader, by
adding value to the lives of its customers. It was HBL that introduced products such as Debit Cards,
ATMs, Travellers Cheques, etc., to the Pakistani market. Management at Habib Bank caters to the
needs of millions with our quality products & services. Today, Habib Bank is truly the bank of the
people, providing its customers convenience and satisfaction all over the world. Habib Bank Plaza,
the second tallest building in Pakistan, is the proud symbol of HBLs leadership in Pakistans
corporate.

Present Status:
The Habib Bank Group is leader in Pakistans services industry. Today, HBL has more than 1,400
branches all over Pakistan and presence in 25 countries across five continents. With a revamped
customer oriented philosophy, HBL are pursuing new avenues of leadership through innovation,
as HBL gear up to face the challenges of the new millennium. A huge network of 1425 domestic
branches, with largest bank in Pakistan and 55 international branches have enabled HBL to provide
comprehensive services that meet customer needs. This has ensured thriving client relationship
that forms the backbone of the Banks operations. Today, HBL plays a central role in Pakistans
financial and economic development. It has come a long way from its modest beginnings in
Bombay in 1941 when it commenced operations with a fixed capital of 25,000 rupees. Impressed
by its initial performance, Quaid-e-Azam Mohammad Ali Jinnah asked the bank to move its
operations to Karachi after the creation of Pakistan. HBL established itself in the Quaids city in
1943 and became symbol of pride and progress for people of Pakistan. Habib Bank has a pioneer
in providing the innovative banking services. These have included the installation of the first main
frame computer in Pakistan followed by first ATM and more recently internet banking facilities
in approximately 1600 domestic branches.

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Privatization:
The year 2003 was marked by the implementation of the Government of Pakistans program for
privatizing the Bank. Amongst the qualified bidders, the Agha khan Fund for Economic
Development (AKFED) offered the highest bid, which was accepted by the Government of
Pakistan in December. HBLs privatization is the largest in Pakistans history and management
takes great pride in fact that the bidding took place within four months of the commencement of
the due diligence process in September 2003. With this change the anticipates further progress as
AKFED brings considerable expertise in international finance and business and is familiar with
conditions in Pakistan, where it already has extensive operations in various fields.

Economic Landscape:
The country is now in the process of warming its relations with the neighbors. Consequently the
political stability has translated into direct economic benefit for Pakistan. G.D.P. growth has
exceeded. The capital market performance has been, once again, very impressive and KSE has
performed at par with all other stock markets of the world.

The banking sector has played an important role in sustaining this growth: consumer financing has
enhanced purchasing power and created new demand while the low interest rates has contributed
to making exports price competitive. The state bank of Pakistan (SBP) has played a supportive
monetary policy role to sustain and improved the current growth improved current growth
momentum.

Financial Highlights:
HBL now ranks amongst the top corporate entities in Pakistan in terms of profitability. This large
jump is also reported profit the net interest income and profit growth of the bank has been achieved
in an environment that can be termed unique for the sector in Pakistan. The improved economic
fundamentals have allowed the government to slash its borrowing requirements and this ,
combined with substantial inflows of remittance , has resulted in a large buildup of excess liquidity
in the banking sector.

Future Outlook:
For a bank to deliver quality services, it is imperative that technology be an integral part of all
aspects of its operations. At Habib Bank, strategy has been to utilize cutting edge technology to
serve customer efficiently and in a cost effective manner. HBL strive to accomplish this while
maintaining a strong personalized approach in our customer relationship. HBL embarked on an
ambitious plan in 2009 to revamp its technology platform. The technology initiative includes:

Online inter-branch funds transfer


Alternate delivery channels e.g. POS terminal
ATM network for cash withdrawal, fund transfer, payment of utility bills etc
E-commerce
Internet banking

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PC based banking for corporate customers
Automation of treasury and trade finance
HBL corporate website has recently been revamped and now provides a customer friendly,
information rich and technologically advanced environment to its clientele enhancement of the
Banks communications network to provide online connectivity.

Habib Banks corporate email users Implementation of a Virtual Private Network (VPN) yielding
the following benefits:

Centralized processing of batch branches offering daily consolidation of data for customer service
and risk management Implementation of technology in HBL international centers as with our other
areas of operations, HBL recognized that at international centers too, technology is a key
consideration for bank to ensure the competitive edge and maintain effective internal control. To
that end significant steps have been taken towards automation and offering technology related
faculties at our overseas centers.

Organizational Chart:

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1.2 Vision:
Enabling people to advance with confidence and success

Proposed Vision:
Excellence in all that we do by exceeding the highest expectation of our customer and all other
stakeholder.

1.3 Mission:
To make our customers prosper, our staff excel and create value for shareholders

Problem: The mission statement of HBL was too short and vague. It does not contain all 9
components of a mission, hence the proposed version of mission statement is below:

Proposed Mission:
To be recognized as the leading financial institution of Pakistan and a dynamic international
bank in the emerging markets, providing our customer with a premium set of high tech
innovative financial products, granting superior value to our stakeholders, customer and
employees

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2 PEST Analysis

POLITICAL AND LEGAL ENVIRONMENT

Banks are strongly affected by the political and legal considerations. This environment is
composed of regulatory agencies and government law that influence and limit various
organizations and individuals. Mostly these laws create new opportunities for business. State Bank
of Pakistan regulates all banks working in Pakistan and Prudential Regulations are designed to
monitor and issue commandments for all banks providing financial services in Pakistan. This
legislation has following main purposes

To protect banking companies from unfair competition


To protect consumers from unfair business practices adopted by banks
To protect the interest of the society from unbridled business behavior

Since all the banks act under the supervision of State Bank of Pakistan and has pure separate body
thus political interference is very low.

ECONOMIC TRENDS

A banking market requires better consumer market in volume along with higher borrowing power.
The available borrowing power depends on:

Consumer income
Saving rates
Consumption patrons
Rates of interest
Budget deficit
Exchange rates
Cost of living
Inflation

SOCIO-CULTURAL ENVIRONMENT

A society is shaped by beliefs, norms and values. People in a society consciously and
unconsciously interact with: Themselves Others Organizations and Society.

Following are the main factors which arise because of change in socio-cultural environment.

Consciousness about services


Concern for environment
Improved customer relation

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TECHNOLOGICAL FACTORS

Forces of technological advancement have played the most dramatic role in shaping the lives of
people. The rate of change of technology has greatly affected the rate of growth of economy. New
technology is creating deep rooted affects which could be observed in long run. The improvement
techniques involved in online banking and on the go banking with one touch ease of access to the
financial services at mobile phone or internet.

3 Porters 5 Forces Model

Rivalry among existing competitors (High):

There are 28 small medium and large banks providing financial services in Pakistan. There is a cut throat
competition in this industry as SBP regulates discount rate and other financial regulations, HBL has to
compete in the same market with identical products and services to the same target audience.
Only 11-15% of the total population of Pakistan is registered to any bank for financial services, so this is
a huge opportunity for HBL to grasp that market.
HBL advertise their products very often, Pakistan Super League was purchased by HBL to promote the
bank globally.

Threat of substitute product and services (High):

Banks are basic necessity of Pakistan since day 1 whether it be paying bills or tuition fees or doing any
financial transaction people of Pakistan rely on bank rather than any substitute channel. However due to
ease of reach and hassle of waiting in queues the demand for banks is decreasing day by day along with
virtual banking system using mobile and internet it is also causing a threat to over the counter banking
system of Pakistan.

Bargaining power of Supplier (Low):

Since SBP regulates the banking system and all monitory policies of Pakistan, the bargaining power of
supplier is very low. The banks have to cash their availability, good quality service and range of products
they offer to create an edge over the market competitors and has low control of bargaining power of being
a supplier. Along with the huge competition it is not a simple task.

Bargaining power of Buyer (High):

The bargaining power of buyers in this industry is very significant due to huge competition and easy to
switch option having more or less same products and services. This creates leverage to customer because
they can switch easily along with the banking industry cannot take any initiative without the approval of
SBP thus huge competition will outrun the competitive advantage.

Threat of New Entrant (Low):

Since Banking industry is closely monitored by government local and globally and ever since the terrorist
funding and money laundering the restrictions and regulations are very strict so government does not

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allow banking license to new party so entrance of new competitor is very low also because banking
industry require huge amount of capital for any new competitor to step into the market so that also creates
a barrier into the market.

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4 External Factor Evaluation (EFE) Matrix

Key External Factors Weight Rating Weighted


Score

OPPORTUNITIES

1. Government reforms to uplift economy 0.08 3 0.32


2. Fast cash transfer as compare other local markets 0.07 2 0.21
3. Diversification towards Islamic Banking Services 0.06 3 0.18
4. Providing premium and priority Banking services 0.07 2 0.14
5. Agriculture finance and Micro Finance Facility to farmers 0.07 2 0.14
and households
6. SME financing 0.05 2 0.10
7. Personal Loans and Consumer Banking 0.04 2 0.08
8. Expansion in Rural areas 0.06 3 0.18
9. International Expansion Plans 0.07 2 0.14

THREATS

10. Political interference in Banking Activities 0.07 1 0.07


11. Economic Downfall 0.08 2 0.16
12. High discount rates by SBP 0.05 1 0.05
13. Law and order situation affecting economic activities 0.07 2 0.14
14. High interest rates and strict monetary policy 0.06 2 0.12
15. High Inflation rate due to deficit financing by Government 0.04 1 0.04
16. Power shortage affecting industries overall performance 0.06 2 0.12
Total 1.00 2.19

Total weighted score is 1.0. The average total weighted score is 2.1 which means that organization
is responding well to the opportunities and threats in its industry. Keeping in consideration there
are elements which can boost the progress of organization and can ultimately flourish the
organization. This will be the resultant that firm`s strategies take advantage of existing
opportunities and minimize the adverse risk arise from the external forces.

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5 Competitive Profile Matrix

CRITICAL SUCCESS
FACTORS WEIGHTINGS NBP HBL MCB UBL
Rating Score Rating Score Rating Score Rating Score
Financial position 0.10 4 0.40 4 0.40 4 0.40 4 0.40
Management 0.05 4 0.20 4 0.20 4 0.20 3 0.15
Geographic Coverage 0.10 4 0.40 4 0.40 3 0.30 3 0.30
Service Quality 0.15 2 0.30 3 0.45 2 0.30 3 0.45
Foreign Branches 0.05 2 0.10 3 0.15 2 0.10 2 0.10
Brand Image 0.05 2 0.10 3 0.15 2 0.10 3 0.15
E-Com and Tech 0.10 2 0.20 3 0.30 3 0.30 4 0.40
Advertisement 0.15 2 0.30 3 0.45 2 0.30 4 0.60
Products 0.15 4 0.60 3 0.45 3 0.45 3 0.45
Market share 0.10 4 0.40 3 0.30 2 0.20 2 0.20
Total 1.00 3.00 3.25 2.65 3.20

Competitive Profile Matrix of company assess on its general strength rating. It identifies firm
major competitors and its particular strengths and weaknesses in relation to its competitors so that
the company can identify the improvement needed key factors that are valuable for their target
market but the company unable to capture.

We have taken top 3 banks of Pakistan to run the CPM Analysis over HBL. It includes 1 national
government bank and rest top tier private banks. Upon discovering the critical success factors we
identified 10 factors that influence the sector. After analysis we can conclude that HBL is rated
the highest rank earning total of 3.25 points overall and runner-up was UBL scoring 3.2. While
HBL is still at top but the competitors are very close and the company needs to take steps in terms
of technology and or do something unique to avoid this cut throat competition.

Recommendation: In baking industry product, Service Quality & advertisement are the three
key & crucial elements HBL score is 3.00 which is good as compare to other banks but they need
to focus in to these factors to make it better.

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Recommendations:

Overall bird eye view of HBL shows a vibrant picture of bank but since the competition is very close and
in this tough to act market the leading position is very hard to retain. As MCB acquired NIB and UBL is
running very close to HBL, the Bank should focus on the elements in which they can excel like customer
service quality. Following are the more recommendations:

HBL should focus on opportunities which aligns with their strengths


HBL should focus more on expanding in rural areas of Pakistan
Bank should also focus more on technology which drives youngsters of Pakistan to use HBL to
fulfill their banking needs
HBL should tap the huge chunk of those Pakistani who does not have a bank account.
The bank should also focus on customer experience

Culture
HBL have created a challenging environment that encourages creativity and commitment. In their
pursuit of excellence HBL has always focused on attracting, developing and retaining their best
talent in the marketplace.

HBLs dynamic culture offers diverse growth opportunities across Pakistan and in 25 countries
around the world. HBL fosters a work environment where employees can identify their potential
whether locally or in the international arena. Thus they enable their employees to achieve their
professional goals while keeping in synch with their banks overall objective.

HBL encourage its employees to explore this section to find out about current job opening and
how to submit your resume.

In this educational era, HBL stays ahead by bearing educational cost for its employees, whether
an employee wants to continue his education or get professional certification, HBL takes care of
that.

Innovative culture

HBL has innovative culture. HBL promotes the new ideas and appreciate its employees for giving
new and innovative ideas. That helps the employees in achieving their goals and they try to show
their best at job.

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Customer-responsive culture

HBL has customer responsive culture. The employees of the HBL are continues in their desire to
please the customers and provide good service to their customers and satisfy the needs of
customers.

Focus on individual development

HBL focus on individual development, HBL try to create the good culture, in which every
employee can adjust, work properly, learn the new thing and give best.

Trust and openness

In HBL, top management have full trust on their employees. Mostly employees are honest and
they

Employees Empowerment

In HBL, managers have trust on their employees and they want that their employees also try to
make decisions at their own job level

Internal Audit
Financial Analysis

Macroeconomic Review Pakistans economic progress continued to gain momentum in 2016, with
GDP growth for FY16 reaching 4.7% on the back of a 6.8% expansion in the industrial sector and
a 5.7% growth in services. Private sector credit for 1H FY17 has increased by 33% over the same
period last year, while Large Scale Manufacturing has increased by 3.2% during 5M FY17.
Consumer confidence has continued to improve and economic activity has picked up, driven by
the high visibility China Pakistan Economic Corridor (CPEC) project. Average inflation for 1H
FY17 increased to 3.9%, compared to 2.1% in 1H FY16. While headline inflation has remained
stable at under 4% in the last few months, inflationary expectations have risen on the back of
seasonal adjustments in house rent, as well as a potential rise in oil prices following OPECs
agreement to curtail excess supply. However, with food inflation projected to remain stable,
overall inflation for FY17 should remain well within the SBPs forecast of 4.5% 5.5%. The
government managed to restrict the fiscal deficit to 4.6% of GDP in FY16, a significant
improvement compared to the 5.3% deficit in FY15. This was achieved through fiscal
consolidation as well as improved tax collection, which met its budgeted level of Rs. 3.1 trillion.
Tax collection for 1H FY17 has reportedly fallen 8% short, making the full year tax revenue target
of Rs. 3.6 trillion challenging. The FY17 fiscal deficit target of 3.8% thus remains ambitious as it
will require reduction of government expenditure. The current account deficit has continued to

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increase and was US$ 3.6 billion for 1H FY17, almost double that in 1H FY16. This is mainly due
to a 16% increase in the trade deficit for the period. Exports, which have been on a declining trend,
reduced by 2% over last year, while imports rose by 6%, mainly due to CPEC related activity.
Workers remittances, which have consistently supported the external account, fell by 2% over 1H
FY16, as oil-price driven economic pressures in the GCC countries continued to impact flows.
However, after a period of decline, FDI improved by 10% during 1H FY17, due to acquisition
related inflows. Pakistan achieved a landmark in September with the successful conclusion of the
IMFs Extended Fund Facility (EFF), the countrys first ever completion of a medium term
program. Disbursements through the EFF, a US$ 1 billion Sukuk issue, and inflows from bilateral
and multilateral partners have helped foreign exchange reserves reach all-time highs, closing the
year at US$ 23.2 billion. The improved reserves position has provided an extended period of
stability to the Rupee. In November, S&P upgraded Pakistans country rating from B- to B with a
Stable Outlook, providing affirmation of the countrys positive economic trends. The MSCI
decision to reclassify Pakistan from its Frontier to its Emerging Markets index from May 2017
lifted investor sentiment, triggering a strong rally on the stock exchange. The divestment of the
Pakistan Stock Exchange (PSX) to a consortium led by Chinese investors has brought with it
anticipation of consequent improvements in governance and a broader retail investor base. The
bull-run has accelerated, with the PSX index increasing by 47% in 2016. While there has been a
net outflow of US$ 254 million in portfolio investment for 1H FY17, the MSCI upgrade is
expected to bring significant foreign inflows. The SBPs Target rate has remained unchanged at
5.75% since a 25 bps cut in May 2016. A cautious approach has been adopted, based on rising
inflationary trends and pressure on the external account. Loan/deposit spreads for the banking
sector saw further contraction this year, to 5.2%, and margin compression was exacerbated by the
large PIB maturity of Rs. 1.5 trillion in 3Q 16. After a period of slow growth, banking sector
advances increased by 14.7% during 2016 as market deposits continued their momentum, rising
by 15.8% to Rs. 11.2 trillion.

2016 2015
Rupees in Million

Profit after tax 34,206 35,102


Un-appropriated profit brought forward 96,495 88,715
Profit attributable to equity holders of the Bank 34,070 35,109
Other Comprehensive Income - net (624) (282)
Transferred from surplus on revaluation of assets - net of tax 38 54
33,484 34,881
Profit available for appropriation 129,979 123,596

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2016 2015
Rupees in Million
Appropriations:
Transferred to statutory reserves (3,289) (3,594)
Transferred to statutory funds of associates (12) (37)
Cash dividend Final (5,134) (8,068)
1st interim cash dividend (5,134) (5,134)
2nd interim cash dividend (5,134) (5,134)
3rd interim cash dividend (5,134) (5,134)
Total appropriations (23,837) (27,101)
Unappropriated Profit carried forward 106,142 96,495

Earnings per share (Rupees) 23.23 23.93

2015 2016
Rupees in Million
Balance Sheet
Total Equity 182,620 196,269
Total Assets 2,218,433 2,507,182
Total Deposits 1,634,944 1,885,959
Advances (net of provision) 637,384 748,466
Investments (net of provision) 1,270,824 1,344,405

Operating Results
Total Revenue 114,753 113,013
Total Expenditure 49,713 55,596
Operating Profit 65,040 57,417
Profit before taxation 60,286 56,525
Profit after taxation 35,102 34,206

Others
Home Remittances 474,068 545,651
Imports 385,846 390,224
Exports 450,522 359,214
Number of Branches 1,716 1,731

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HBL has delivered a pre-tax profit of Rest. 56.5 billion for the year 2016. Profit after tax is Rest.
34.2 billion, compared to a Post-tax profit of Rest. 35.1 billion Declared in 2015, which included
exceptional capital gains. Consequently, earnings per Share for 2016 are at Rest. 23.23 compared
to Rest. 23.93 For 2015. Excluding capital gains, pre-tax profit for 2016 is 4% higher than in 2015,
while profit after tax is 10% higher.

HBLs balance sheet has increased by 13% over December 2015 to Rest. 2.5 trillion. The Bank
added Rest. 251 billion in deposits while maintaining its CASA ratio at over 82%. Current accounts
grew by more than 16% to reach nearly Rest. 700 billion and the ratio of current accounts has now
risen from 36.7% in December 2015 to 37.0% in December 2016. After a period of sluggish
growth, Loans increased by more than 17% with strong contributions from higher yielding
consumer, SME and agriculture lending. The Bank was thus able to contain the decline in its
overall margins to just 30 bps despite the compression caused by lower interest Rates, competition
driven spread pressures and the impact of PIB maturities. Consequently, net interest income for
2016 Increased by 5% to Rest. 82.0 billion.

The interim cash dividend of Rs3.5/share. The top line and bottom-line largely remained flattish.
The first quarter was largely uneventful, but the balance sheet kept growing to mammoth levels.

Low spreads and low interest rates were always going to mean a depressed top line, despite a slight
surge in earning assets. The asset mix saw no drastic change, as investments continued to outpace
advances. The IDR now stands over 74 percent, whereas the ADR barely sits a shade over 40
percent. Banks, it seems, have not yet felt the necessity to go all out on a lending spree. And it
makes all business sense too, as the profits still seem sizeable, primarily coming from government
treasuries and non-funded income.

HBL balance sheet has both grown and improved


of late and now exceeds a mammoth Rs2.5 trillion.
The deposit base had extended in double digits last
year. Just one percent increase in the deposit base
over December 2016 seems understandable.
Recall that HBL boasts of a massive deposit base,
fast approaching Rs2 trillion. What is more
important is the fact that the deposit mix is
continuously improving, as current and saving
accounts now form the bulk of total deposit. The
improved CASA ratio has meant reduced cost of
deposits, which becomes more important in times
of thin spreads.

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HBL non-core income continues to ably support the bottom-line, as a sizeable growth was
witnessed in gain on sale of securities. HBL has traditionally kept a check on administrative
expenses, and has had a cost income ratio to be envious of. But the administrative expenses of late
have appeared on the higher side.

Recall that HBL infection ratio had slipped to single digits for the first time in eight years. The
trend continues, which speaks volume of the ever improving asset quality and prudence. HBL
faces no immediate need to alter its current strategy towards the asset mix. With economic
indicators slowly but surely improving, advances should certainly head north sooner than later.
That said, HBL can do just as well, without it too.

Value Chain Analysis

Marketing:

Just like other businesses marketing has a special significance for the banking industry too.
Competition has grown intense in this sector and there are more international players in the market.
As such marketing becomes important for banks to avoid the competitive pressures too. Attracting
and retaining customers requires more focus on marketing. Moreover, segmentation is important
for banking and insurance companies as all the consumer segments cannot be targeted in the same

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manner. The banks and insurance companies target different customer segments with suitable
plans and services. Brand image is also an important concern for the banking brands. Most often
the brand image is influenced by the service quality. Still, marketing plays an important role in
raising brand awareness and it is why banking companies spend so much on advertising and other
aspects of marketing. Visibility remains an important concern if brands are to expand their
customer base. It is also why banks focus heavily on marketing of their brand and its services.
Post-recession growth in the developing countries has remained slow and therefore attracting and
retaining customers was somewhat difficult for the brands. So, in this period they were mainly
forced to rely on marketing to retain their customer base. The marketing activities in the HBL is
mainly made up of sales support, branding and advertising activities. However, its overall aim is
to maximize profits by driving sales higher.

Sales:
Sales is also an important function in HBL value chain which is because of the importance of sales
for banks. The HBL is highly competitive and apart from entering new markets and finding new
customers, it is important that the banks retain their existing customers. The sales function serves
a very important role at this point where it does not just sell but also works at customer engagement
and retention. Another important thing about this function is that it is the main connecting point
between the bank and its customers. This functions performance also has an important effect on
the banks personality and image.

Product:

The products offered by the HBL is also an important part of their value chain. From loans to
deposits, banks provide several kinds of products and services. However, in a banking context,
rather than just having a great product portfolio, it becomes impertinent for the banks to provide
great service. HBL provide a series of products and services, some of which are tangible and
several intangible. From deposits and loans to credit cards and foreign exchange services, HBL
provide plethora of products and services.

Transactions:
Technology has made this task easier and millions of transactions are carried out every day
throughout the world online and offline. From ATMs to online payments, simply millions
exchange hands in the form of transactions. Variety of payment clearance systems and settlement
systems are used by banks globally. Some of them are ACH networks, ATMs, bankcard networks
and check clearing systems. Another method of transaction prevalent in HBL is the internet based
bill payment system. The debit and credit cards have remained at the forefront of this growth in
electronic payments.

Supporting activities in the banking value chain are as follows:

Technology:
The role of technology has grown increasingly important in HBL. Specifically, several of the most
important developments have taken place during the last two to three decades. Technology can
also be a source of competitive advantage for the banks since it helps deliver better services than
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the competitors. Technology has made banking easier and also improved the banks productivity.
Several of the services can be availed of online and customers do not always need to go to the
branch to receive their services.

Human Resources:
Despite the growing role of technology human resources continue to play an important role in the
value chain of HBL. Their importance in HBL is higher because trust plays an important role in
banking sector.

Infrastructure:
Infrastructure also plays a key role in the banking industry. From physical infrastructure to
technology and particularly IT, infrastructure plays an important role in the growth and functioning
HBL. Due to increased competition, the importance of IT in banking industry has also grown.

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IFE Matrix

Weight Rating Weighted Score


Strengths

Brand Name 0.1 4 0.4


Strategic Alliance 0.05 4 0.2
Largest private bank 0.05 4 0.2
Largest Network 0.15 3 0.45
Largest Foreign branches network 0.1 4 0.4

Weakness

Lacks in Customer service 0.15 2 0.3


Non Compliance with SBP 0.07 2 0.14
Untrained staff 0.1 1 0.1
Slow processes 0.1 1 0.1
No new innovation 0.13 1 0.13
1 2.42

Ratings Represents
1 Major Weakness
2 Minor Weakness
3 Minor Strength
4 Major Strength

IFE Matrix (internal factors Evaluation matrix) explains the influence of internal factors like
strengths and weaknesses for strategic decision making. By running IFE model a company can
determine the weaknesses to overcome and using strengths to prospect opportunities prevailing
into the market.

For HBL the brand name and its huge network is the most prime strength which if they utilize
properly they can generate huge profit by providing banking facilities to their customer in whole
Pakistan. The bank being the largest private bank with the largest number of branches overall
Pakistan, is unable to monitor and cater SBP compliance and provide same customer service across
Pakistan and abroad. Their slow processes and no new innovation for a long time is also causing
a root problem for the competitors to make move and HBL is facing neck to neck competition with
UBL and other banks.

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Overall score of IFE Matrix is 2.42 which is below the average score, this means that the bank
needs to strictly monitor the policies to cater weaknesses urgently.

Recommendation:

The two most important factors to be successful in banking industry are Brand name and bank
worldwide network. From the IFE matrix it can be seen that HBL is performing well in their both
the segments that is, HBL works on increasing branch networks and have the huge number of
branch network both locally and internationally. Secondly, HBL works on increasing their brand
name which achieved by providing maximum number of products at one place, they being a
customer friendly and customer oriented bank have managed to attain the positive and strong brand
image which plays vital part in the growth of their business.

Focus on lower class in most of the advertisements


Promote International Marketing at higher priority
Promote Islamic Banking on large scale
Services marketing is what people are asking on higher scale
Increase Promotional activities are required
People want to see innovation with information

Some weaknesses which HBL is facing at the moment is lack of training and new innovations. As,
in banking in industry it has been seen overall that innovation takes place gradually. HBL must
work on the innovation and they should implement new techniques which can give rapid results
with the advancements in technology. This can be achieved by updating systems and reducing the
turnaround time of tasks.

HBL should train their staff to the finest quality level which then can then render their services in
accurate and efficient manner. Trained staff are considered to be the assets of the business and
these assets can be an integral part in the growth and prosperity of the HBL business growth

HBL take great pride in staff and they are particularly appreciative of the work done by our high
performers. They have their highest admiration. On HBL part, they remain committed to building
human capacity and are fully aligned to invest as much as required in training the people to assist
them in becoming the best of the best. As HBL progress, they remind their self that quality begins
with meritocracy. Merit has been and will remain a core value for HBL. The bank is vigorously
pursuing processes that allow fair and transparent recruitment practices. There is growing
emphasis on achieving the highest level of best practices in undertaking staff assessments, in staff
promotions and in job placements. With the vision set to create higher and higher benchmarks,
HBL is committed in transforming HBL to take its place as a leading bank in industry best
practices, globally. Countrywide programs were organised to recognise high performers and
strengthen teamwork. Khwab75 was launched wherein the bank enabled the dreams of 75

22
employees. The bank also selected 5 staff members in a totally transparent manner, who received
what were termed as life altering rewards. The banks management has been tasked to develop and
implement more programs and better schemes for the staff which, over time, will not only make
HBL a lifetime employer but also genuinely improve the quality of life for those who show
commitment and dedication.

HBL STRATEGIES
HBL PSL
To take a further step for marketing, HBL purchased the legal license of Pakistans 1st cricket
league named PSL, HBL takes credit for the sponsorship of Pakistan Super League, which later
was renamed to HBL PSL which enabled the HBL to gain a lot of fame globally.

Discounts/Global Alliances
HBL has alliances with different brands of different areas of life, be it lifestyle, dine in, accessories,
traveling or anything HBLs debit card and credit card offers different discounts on those listed
brands those are revised semiannually.

Products and Services


HBL provides a large range of products and services to its business and individual customers some
of which are as follows.

PRODUCTS
HBL Muhafiz Rupee Travelers Cheques
HBL Auto Finance
HBL Flexi Loans for salaried personnel
HBL Lifestyles Financing Scheme
HBL i-Card
HBL House Financing Loans
HBL Easy Access
HBL Fast Transfer
Haryali Agricultural Loans
HBL E-Bank
SERVICES
Retail banking
Commercial banking
Corporate banking
Phone banking
Islamic banking
Cash management

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Asset management
Agriculture loans
Commercial banking
Corporate banking
Islamic banking
Investment banking
Working capital
Procurement of inventory
Procurement of machinery
Expansion of production facilities
Import of raw materials
Exports
Guarantees
Project finance
Debt capital markets & syndications
Equity capital markets & advisory.

Generic Strategies
The bank follows low price strategies, as there is a cut throat competition and not a lot to focus or
differentiate the solely market share depends upon the lowest cost and number of products that any
bank can offer along with the availability of branches.

CORPORATE STRATEGIES
Strategic Path
From the very beginning the main focus of the management of HBL is the implementation of
growth strategies. During the entire period of continuous straggle they adapted almost all types of
strategies according to situation and market demand of that time except restructuring of defensive
strategies. HBL never faced any type of liquidation, bankruptcy, sale or removal of any business
unit. Their main strength is to avoid insecure financing. It is big organization that ever during their
dark periods of straggle; they never lose their market share. If we talk about

GROWTH STRATEGIES
Incremental Growth
HBLs key areas of operations encompass product offering and services in retail and consumer
banking. They introduce their products to expand their clients base by bringing innovation and
improving the channels of distribution. They put their all efforts to reduce the business and make
their services accessible for all customers.

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International Growth
With a presence in 25 countries subsidiaries in Hong Kong and the UK, affiliates in Nepal, Nigeria,
Kenya and Kyrgyzstan and representation offices in Iran and China. HBL is also the largest
domestic multinational. The bank is expanding its presence in principal international markets
including the UK, UAE, SOUTH AND CENTRAL ASIA, AFRICA and the far EAST.

Merger
HBL merged Standard Bank in earlier times
HBL acquired Barclays bank

CORPORATE LEVEL STRATEGIES


HBL has following corporate level strategies.

Growth strategy:
HBL has adopted growth strategy by expanding its operations. HBL actually have different
products and services for both individuals and business customers. HBL product and services for
individual customers are credit cards, debit cards, and deposit accounts. HBL product and service
for business customer are commercial banking, cash management and asset management.

Related Diversification:
HBL has also adopted related diversification strategy, because at first function of HBL was only
accepting deposit and advancing loans but now HBL has many related functions like flexi loans,
ATM and credit cards.

BUSINESS LEVEL STRATEGY


Cost Leader Ship strategy:
At business level HBL has adopted cost leadership strategy in a way that cost of advancing loans
is less as compare to some other well reputed banks like Alfalfa,bank Al habib, MCB.

Differentiation Strategy:
At business level, HBL has also adopted differentiation strategy by introducing some new products
into the market earlier to other banks like debit cards.

DIVISIONAL LEVEL STRATEGY


Following are the main divisional level strategy fallowed by HBL

To establish sound relationships with top industrial groups and various multinationals.
To make the bank customer focused
To increase the no of online branches
To increase the ATM network to further improve the bank market shares.
To implement the performance appraisal process to provide motivation and merit oriented
culture in the bank
To improve extensive tanning to the employees in the process, products, marketing and
selling skills.

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Upgrading skills level of employees.

HBL CURRENT STRATEGIES

HBL being one of the largest bank in Pakistan works on following current strategies which leads
them towards becoming the most profitable bank in Pakistan.

Financial technology has emerged as the banking of tomorrow. This year HBL launched its in-
house developed mobile banking application, literally bringing banking to our customers
fingertips. HBL Mobile was the first of its kind in Pakistan to provide biometric authentication
based sign in to our customers, providing them with additional comfort from advanced security.
At HBL, they are conscious that as the nations bank of choice we cater to a wide spectrum of
customers. For those who prefer to bank with HBL at one of our branches, we are modernizing
our network to improve efficiencies and shorten transaction time, thereby enhancing our
customers banking experience

HBL`s current strategies are diversified in 3 division which are:

1. Corporate Level Strategies


2. Business Level Strategies
3. Divisional Level Strategies

HBL has worked on all three levels at their best and want to incorporate strategies at all the three
levels. HBL current strategies are towards innovations and advancement of technology. With the
increasing approach of new dynamics of Banking which is Islamic Banking, HBL is keener to shift
their majority operations towards Islamic Banking which can give them extra mileage and
advantage to be the proactive Islamic Bankers in the industry. The strategy is to train the staff and
develop them on the professional and personal level for the best possible outcomes for banking
industry as a whole.

Cricket unites Pakistan and HBL is synonymous with cricket in Pakistan. With HBL landmark
support of the Pakistan Super League we have once again demonstrated our commitment to
bringing the people of Pakistan together. The global success of Pakistans First Street Children
Football Team has kept our flag flying high and allowed them to display their energy, verve and
skill to an international audience. HBL is proud to have been a staunch supporter of this team and
showcase their success. HBL is committed to providing the youth of Pakistan every opportunity
to hone their skill and display their talent in the international arena.

HBL has always focused towards adoption of change in culture and environment as to be with the
modern era in banking industry. The way to implement any change in the bank/ organization takes
decades to adopt, due to which behavior have to be cultivated as a pyramid of unique feature is
hard to change and if changes that do not change the particular, it divert itself to the other factors
and it is a chain of changes towards the betterment of Bank.
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HBL celebrated its 75th anniversary in 2016 and recognized the contributions of our high
achievers. This year, once again, HBL exceeded the targets we had set for ourselves, and the
management team delivered outstanding results. HBLs revenues were over Rs.100 billion (over
$ 1 billion), including fee income of Rs.18.7 billion ($ 178 million); the bank registered pre-tax
profit of Rs.56.5 billion ($ 540 million) and post-tax profit of Rs.34.2 billion ($ 327 million).
During the year, over Rs.250 billion ($2.4 billion) were added to the banks deposit base, resulting
in a 15% increase. Loan growth was also an impressive Rs. 111 billion ($1.1 billion) with strong
performance from all business segments, especially from consumer and retail loans. The overall
balance sheet recorded a 13% increase and crossed Rs. 2.5 trillion ($24.0 billion), making HBL by
far the largest bank in the country. With the acquisition of PICIC Asset Management Company,
HBL Asset Management doubled in size and realigned itself to push forward with a wide range of
products in the market. This was a particularly good year for the Corporate, Investment and Islamic
Banking businesses who closed on some key transactions during the year, amounting to over Rs.
200 billion ($ 1.9 billion). Home Remittance initiatives resulted in inflows of over $ 5 billion,
thereby registering a record 27% market share for the bank; new products and services resulted in
a record throughput of over Rs.1.7 trillion ($16.3 billion) in our Cash Management business.

HBLs core strategy of pursuing financial inclusion has started taking root with the bank
processing over 560 million transactions for more than 9.5 million customers through its strong
domestic network of 1,677 branches, 2,000 ATMs and nearly 15,000 POS terminals. HBLs
standing in the marketplace and its all-round performance won us several accolades, notably,
Bank of the Year in Pakistan by The Banker and Safest Bank in Pakistan' by Global Finance as
well as the Best Retail Bank in Pakistan by the Asian Banker, amongst others. Our brand, of
which we are extremely proud, outstripped the competition in an independently administered
survey and was named Brand of the Year, Banking - Pakistan at the World Branding Awards.
The combination of solid profitability and a prudent dividend policy resulted in an equity base of
Rs.196 billion ($ 1.9 billion) with our capital adequacy ratios being well ahead of requirements.
Having achieved a coveted AAA rating.

Strategy Analysis:
BCG Matrix:
HBL has a lot of potential to grasp the market share, almost 80% of the population of Pakistan has no or
limited access to Banks. Upon which the market growth is huge for consumer banking auto loan and
house loans. HBLs Islamic Banking is still under question mark as the market growth is huge but HBL is
not able to achieve market share as the competitors have the major share of the market. Corporate banking
is at constant stage as the market growth is very low and HBL has good market share. HBLs young
savers account runs into dog as the market share is very low and the market growth is also very low.

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Consumer Banking
Auto Loan
Islamic banking
House Loan

Corporate Banking
Young Savers Account

Recommendations:

HBL should focus more on Islamic Banking as the market is growing very quickly and under the
regulations of SBP, all banks are strictly advised to focus on Islamic banking. Moreover Young savers
account is under dog there is no need of investing on it along with that consumer banking needs to be
more advertised and penetrate into market as these products are hot running products into the market.

SWOT Analysis:
Strengths:

The staff of the bank is skilled, well trained and competent.


HBL is having Centralized decision making.
Pioneer of ATM
Highest Bank reserves
HBL has the fastest mode of home remittance of 3 days.
Every 10th Pakistani is the account holder of HBL.
Brand Name
Strategic Alliance
Largest private bank
Largest Network
Largest Foreign branches network
Weaknesses:

Marketing department of HBL is not so effective.

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Poor system of recovery.
HBL has become victim of political, legal and socio cultural pressure.
Unsatisfied Staff
Lacks in Customer service
Non Compliance with SBP
Untrained staff
Slow processes
No new innovation
Non popularity of travelers cheques, deposits of having a large network of branches.
Opportunities:

Government reforms to uplift economy


Fast cash transfer as compare other local markets
Diversification towards Islamic Banking Services
Providing premium and priority banking services
Agriculture finance and Micro Finance Facility to farmers and households
SME financing
Personal Loans and Consumer Banking
Expansion in Rural areas
International Expansion Plans
THREATS

Political interference in Banking Activities


Economic Downfall
High discount rates by SBP
Law and order situation affecting economic activities
High Inflation rate due to deficit financing by Government
Power shortage affecting industries overall performance
High interest rates and strict monetary policy

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IE Matrix
THE INTERNAL - EXTERNAL (IE) MATRIX
IFE Total Weighted Score

Strong Average Weak


3.0 to 4.0 2.0 to 2.99 1.0 to 1.99

High
3.0 to 3.99
I II III

Medium
2.0 to 2.99
IV V VI

Low
1.0 to 1.99
VII VIII IX

Location: Strategies:

Quadrants I, II and IV = Grow and build


Quadrants III, V and VII = Hold and maintain
Quadrants VI, VIII and IX = Harvest or divest

Division Revenues in Net Income in Net Income


Billion PKR Billion PKR (% ) IFE Score EFE Score
Bank
113.000 34.200 30% 2.42 2.19
AlFalah

Strategy Recommended:

HBL position lies in Sector-V and it has strong IFE as well as High EFE score. Therefore bank should apply the Hold and
maintain strategies ( Market penetration an product development are two commonly employed strategies for these types of
division.

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Grand Strategy Matrix
GRAND STRATEGY MATRIX

RAPID MARKET
GROWTH

Quadrant II Quadrant I

WEAK STRONG
COMPETITIVE COMPETITIVE
POSITION POSITION

Quadrant III Quadrant IV


SLOW MARKET
GROWTH

Recommended Strategy:

The evaluation reveal following the factors to be followed, because it fall in 2nd Quadrant:
1 Market Development
2 Market Penetration
3 Product development
4 Forward Integration
5 Backward Integration
6 Horizontal Integration
7 Concentric diversification

Recommendation:

As the HBL falls under 2nd quadrant the bank should focus more on market development as there are
almost 80% of the market to capture. Along with the new product development needs to be made as there
is still a lot of room to improve.

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QSPM
Product Development Market Penetration
S. # Key Internal & External Factors Weight
(Conventional Banking) (Islamic Banking)

Strengths AS TAS AS TAS


1 Brand Name 0.1 4.00 0.40 3.00 0.30
2 Strategic Alliance 0.05 4.00 0.20 3.00 0.15
3 Largest private bank 0.05 3.00 0.15 3.00 0.15
4 Largest Network 0.15 4.00 0.60 4.00 0.60
5 Largest Foreign branches network 0.1 4.00 0.40 3.00 0.30

Weaknesses
6 Lacks in Customer service 0.15 2.00 0.30 2.00 0.30
7 Non Compliance with SBP 0.07 1.00 0.07 1.00 0.07
8 Untrained staff 0.1 1.00 0.10 2.00 0.20
9 Slow processes 0.1 3.00 0.30 1.00 0.10
10 No new innovation 0.13 1.00 0.13 2.00 0.26
11
SUB TOTAL 1.00 2.65 2.43

Opportunities
Government reforms to uplift economy 0.08 3 0.24 3.00 0.24
Fast cash transfer as compare other local markets 0.07 2 0.14 2.00 0.14
1 Diversification towards Islamic Banking Services 0.06 3 0.18 4.00 0.24
2 Providing premium and priority Banking services 0.07 2 0.14 4.00 0.28
Agriculture finance and Micro Finance Facility to farmers and
3 0.07 2 0.14 2.00 0.14
households
4 SME financing 0.05 2 0.10 2.00 0.10
5 Personal Loans and Consumer Banking 0.04 2 0.08 1.00 0.04
6 Expansion in Rural areas 0.06 3 0.18 3.00 0.18
7 International Expansion Plans 0.07 2 0.14 4.00 0.28
8 Threats
Political interference in Banking Activities 0.07 1 0.07 2.00 0.14
Economic Downfall 0.08 2 0.16 3.00 0.24
9 High discount rates by SBP 0.05 1 0.05 3.00 0.15
10 Law and order situation affecting economic activities 0.07 2 0.14 2.00 0.14
11 High interest rates and strict monetary policy 0.06 2 0.12 2.00 0.12
12 High Inflation rate due to deficit financing by Government 0.04 1 0.04 2.00 0.08
13 Power shortage affecting industries overall performance 0.06 2 0.12 2.00 0.12
14
15 SUB TOTAL 1.00 2.04 2.63
SUM TOTAL ATTRACTIVENESS SCORE 4.69 5.06

Recommendation:

As per QSPM, the bank should focus more on Islamic Banking via market penetration as the upcoming
market growth of banking industry especially Islamic banking is huge.

Strategy Implementation
The bank mainly focuses on conventional banking, the market penetration campaigns are designed for
conventional banking only focusing saving and current accounts. The bank is forgetting the rest of the

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products that they can easily capture i.e consumer banking and Islamic banking. The strategies needs to
be change and they should focus on Islamic banking along with consumer banking to increase their
revenues as the both products are the most profit generating products.

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