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Term Project
Strategic Management

Bank of Punjab
A Strategic Report on “Operation”

Submitted by:
Momna Akhlaq
Sharain Khan
Shehryar Asim
Fatima Ahmed Qureshi

B.S.c 1V
Section- B

LAHORE SCHOOL OF ECONOMICS 2022

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Table of Contents
Executive Summary ...................................................................................................................................... 3
Introduction ................................................................................................................................................... 4
Current Operations ........................................................................................................................................ 5
Management.............................................................................................................................................. 5
Finance ...................................................................................................................................................... 5
SWOT ........................................................................................................................................................... 6
Analysis of SWOT .................................................................................................................................... 7
EXTERNAL FACTOR EVALUATION ...................................................................................................... 9
Internal Factor Evaluation........................................................................................................................... 10
Grand Matrix............................................................................................................................................... 11
The space matrix ......................................................................................................................................... 12
Financial Ratios .......................................................................................................................................... 13
Profitability Ratios .................................................................................................................................. 13
Liquidity ratios ........................................................................................................................................ 15
Leverage Ratio ........................................................................................................................................ 15
Mission statement...................................................................................................................................... 16
Mission Analysis..................................................................................................................................... 16
Vision statement ........................................................................................................................................ 16
Analysis .................................................................................................................................................. 16
New business strategy ................................................................................................................................ 16
References ................................................................................................................................................... 18
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Executive Summary
PACRA has granted the Bank of Punjab a long-term entity rating of AA+ and a short-term rating
of A1+, the highest possible ranking. The Bank has 664 online branches, including 115 Taqwa
Islamic Banking Branches and 16 sub-branches. In addition, the Bank maintains a network of 651
ATMs that provide banking services 24 hours a day, seven days a week. In addition, the Bank
provides its customers with Branchless Banking, Mobile Banking, Internet Banking, and Cash
Management services. In this case, the Bank of Punjab may take the following actions: Invest time
and resources in tried-and-true methods that have proven to work. They can also employ market
penetration, market development, product development, and diversification tactics. The bank
should work to minimize non-performing assets, cut costs, enhance efficiency, introduce new
products, and grow revenues by entering profitable areas. BOP should focus on tapping on new
segments to increase their deposits and therefore increase share of deposits from private depositors.
This is because the company suffers from losses caused by non-performing loans, which are mostly
caused by government of Punjab, according to the information obtained through our primary
research.
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Introduction

Founded in 1989 and based in Lahore, Pakistan, BOP is a commercial bank with 648 branches and
has employed 6,092 people throughout the country. It provides a variety of retail and corporate
banking products and services, including as savings and time deposit accounts, household and
personal loans, credit cards, wealth management, insurance, and investment banking.

In the beginning, the main areas of procurement of deposits were government-based organizations.
The reason for this is that it was established to assist the Punjab government. The BOP network
has grown throughout the country as macroeconomic management is the major concern of an
economy.

The bank provides various forms of banking services, such as deposits in local currency, client
deposits in foreign currency, remittances, and advances to enterprises, trade, industry, and
agriculture. First Punjab Modaraba (FPM) was created in 1992 as a wholly-owned subsidiary of
BOP and is operated by Punjab Modaraba Services (Pvt) Ltd.

Over a long period of time, the difference between saving and investing and the balance of trade
deficit have made it hard fo.r Pakistan to reach the level of growth it wants. The Bank of Punjab
has the privilege to discharge its responsibilities towards national progress and prosperity within
the short period of its schedule.
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Current Operations

Management

Finance
The Board is pleased with the Bank's overall financial performance and notes that the Bank is
heading in the right direction in terms of achieving its strategic business objectives.

During the first quarter of 2022, the Bank's Net Interest Margin (NIM) increased by 18 percent to
Rs. 8.11 billion from Rs. 6.87 billion in the first quarter of 2021. Similarly, Interest Income grew
by 41 percent to Rs 1.80 billion from Rs 1.27 billion during the first quarter of 2021. During the
first quarter of the year, the Bank reported an after-tax profit of 2.16 billion rupees, an 18 percent
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increase from the 1.83 billion rupees earned in the first quarter of 2021. The earnings per share
(EPS) for the first quarter of 2022 increased to Rs. 0.82 per share from Rs. 0.69 per share in the
first quarter of 2021.

SWOT

Strengths Weaknesses

The Government of Punjab Due to a scam, the

holds a 51 percent stake in customer's trust is lost.
BOP.
Insufficient internal controls.
Capable of maintaining a
There is no advertising for
quick business atmosphere.
electronic media.
The bank responds to the
Weak State Bank of Pakistan
(IRAF) questionnaire.
management
Completely devoted to the
following road map.

BOP treats their customers

with respect.

Opportunities OS OW

BOP bolsters the agricultural

and industrial sectors.
(S1,O1) Since the bank of (O2,W1) The BOP desires to
The priority of BOP is client Punjab is owned by the create client relationships,
government of Punjab and it but they are unable to do so

happiness.
Should consider e-banking.
BOP supports Punjab's
programmes.
Adopting innovative
technology.
Threats
Slow economic growth.
Lack of confidence in BOP.
Facing a formidable
competition.
Analysis of SWOT
Strengths
BOP is majority-owned (51 percent) by the Punjabi government. It has assets worth PKR165
billion and deposits totaling PKR138 billion.
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is common knowledge that due to the negative impact of
Punjab is an agricultural the scams that have occurred
region, several financing on the Bank's reputation.
options for farmers should
be introduced.
(S5,O2) Since Bank of
Punjab desires to cultivate
client relationships, they
exert effort and provide
customer happiness.
TS TW
(T1,S2) BOP is constantly
(T2,W1) People do not trust
responsive to the business
the BOP, and the reason for
climate, but economic
this is that the BOP is rife
development is modest and
with fraud since SBOP
few new businesses are
control over the BOP is
being founded.
inadequate.
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The management of the bank recognizes the need for adequate internal controls to maintain
efficient operation in the current tech and fast-paced business environment.

The bank has been aggressive in establishing procedures to detect and mitigate industry-specific
risks. Bank has been scrupulously adhering to the Institutional Risk Assessment Framework
(IRAF) questionnaire's standards.

The bank is completely committed to adhering to the timescales outlined by the SBP in its
Roadmap for the implementation of Basel-II guidelines for risk measurement and management.

The financial statements generated by the bank's management accurately reflect the current state
of things, the outcomes of its operations, cash flows, and equity changes.

Weaknesses

Losing profit indicates "Bank's spread" and having negative profitability every year, mostly
because the directors and president of BOP cheated the bank out of billions of Rupees through
fraud.

Inadequate internal controls arose as an issue when the credit fraud was perpetrated. Some of the
recipients of the enormous loans are proprietors of firms that do not exist. In other instances,
fraudulent identification documents and overvalued houses were utilised.

Electronic media advertisements have not been observed.

The State Bank of Pakistan (SBP) has voiced grave worry regarding the Bank's "system and
controls," characterising them as "very inadequate."

Opportunities

2009 will be another difficult year for the bank, with sporadic opportunities and fierce competition.
Diversification, innovation, and an admissions-driven strategy are the keys to BOP's success, and
it should adopt them.

Progressive but careful company expansion, including the extension of a strategic branch network
and the introduction of innovative goods in all business sectors.

BOP should place a strong emphasis on e-banking.

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Beginning of new schemes can lead to an even higher increase in deposits.

Threats

Economic growth is projected to be sluggish, as agricultural growth may be slowed by weaker

cotton and rice crop harvests.

The "Credit Crisis" can have a negative effect on BOP.

Facing intense rivalry from its rivals.

Lack of client confidence in Bop may impede the expansion of deposits. Constraints Following
are the BOP restrictions.

EXTERNAL FACTOR EVALUATION

EFE Matrix is a strategic analysis tool used to examine a company's external environment and
disclose its strengths and shortcomings. lt is used by firms to analyze their present strategy.
A company's performance can be affected by a number of external factors, which are taken into
account when developing this model.

OPPURTUNITIES weight rating weight score

1. BOP support agriculture and industry sector. 0.2 4 0.8
2. BOP focus on customer satisfaction. 0.12 3 0.36
3. Focus on e-banking. 0.1 2 0.2
4. Punjab schemes supported by BOP. 0.16 4 0.64
5. Adoption of new technology. 0.12 3 0.36
Threats
6. Economic growth slow. 0.1 3 0.3
7. Lack of trust in BOP 0.07 1 0.07
8. Facing strong competition. 0.13 3 0.39
Total 1 3.12
It's possible to discover a company's greatest risks or potential benefits by using the EFE matrix.
PESTLE analysis, Porter's Five Forces, or Profile Matrix can be used to identify the most important
external influences. Determine as many critical external and internal aspects as feasible. A
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weighting scale of 0.0 (low significance) to 1.0 (high importance) should be used for each
important aspect (high importance). All components would be treated as equal if no weights were
applied, however this is an impossibility in the actual world. It is necessary to have all of the
weights add up to 1.0. EFE matrix show that company is doing good in terms of getting benefit
from opportunity and trying to overcome the threats.

Internal Factor Evaluation.

Internal Factor Evaluation (IFE) matrix method is a strategic-management tool often used for
assessment of current business conditions.
Strength weight rating total
 BOP 51% share by the government of Punjab. 0.2 4 0.8
 Able to swift business environment. 0.12 3 0.36
 Bank work under (IRAF) questionnaire. 0.1 3 0.3
 Fully committed to follower road map. 0.07 2 0.14
 BOP work fairly with their customer. 0.14 3 0.42

Weakness
 Losing the customer trust due to scam. 0.1 2 0.2
 Lack of internal controls. 0.09 3 0.27
 No Advertisement on digital media. 0.08 4 0.32
 The State Bank of Pakistan control is weak. 0.1 3 0.3
Total 1 3.11

Competitive profile matrix

BOP MCB UBL
Key success factors weight rating total rating total rating total
Advertising 0.2 1 0.2 2 0.40 4 0.8
Products 0.12 3 0.36 3 0.36 3 0.36
Management 0.13 3 0.39 4 0.52 4 0.52
Financial position 0.2 2 0.4 3 0.6 4 0.8
Customer loyalty 0.09 3 0.27 3 0.27 3 0.27
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Market share 0.11 2 0.22 3 0.33 3 0.33

Growth 0.15 3 0.45 2 0.3 3 0.45
Total 1 2.29 2.78 3.53
In the above matrix we can see that BOP has the lowest rating compared to MCB and UBL. The
main reason for this is the scam which happened in BOP. Twelve individuals, including six serving
Bank of Punjab executives, were accused of embezzling Rs9 billion by the National Accountability
Bureau in September 2007. It was revealed that billions of rupees had been embezzled with the
suspected complicity of former BoP president Hamesh Khan, Harris Steel Industries (Pvt) Ltd
CEO Sheikh Muhammad Afzal and others in the Bank of Punjab fraud

Grand Matrix
Rapid market growth

Quadrant II

BANK OF PUNJAB

Weak strong

Competition Competition

Position Position

Slow market growth

Firms positioned in Quadrant II need to assess their existing approach to the marketplace
thoroughly. Although their market is developing, they are still unable to compete successfully, and
they need to identify why the firm’s present strategy is useless and how the company may best
alter to increase its competitiveness. Quadrant II firms are in a rapid-market-growth industry, an
intense approach (as opposed to integrative or diversification) is typically the first choice that
should be examined.

To obtain the competitive edge to become a market leader, BoP might move into horizontal
integration according to resource availability. However, if these banks predict a severe competitive
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environment and quicker market growth than the expansion of the firm, the preferable alternative
is to go into divestment of some divisions or liquidation completely and change the business.

The space matrix

FP

Conservative 7 Aggressive

BANK OF PUNJAB 6

CP 1 IP

-7 -6 -5 -4 -3 -2 -1 1 2 3 4 5
6 7

-1

-2

Defensive -3 Competitive

-4

-5

-6

-7

SP
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In between the company's financial strength and its competitive edge, a conservative strategy is
applied. In most cases, this is a well-established company with little growth. Bank of Punjab in
this situation might take the following steps: Invest time and resources on established items that
have been shown to be effective. They can also use strategies like market penetration, market
development, product development and related diversification. The bank should strive to reduce
non-performing items, decrease expenses, improve efficiency, launch new products, and increase
revenues by expanding into profitable markets.

Financial Ratios
Profitability Ratios

BANK OF PUNJAB

PROFITABILITY

Ratios 2016 2017 2018 2019 2020

Return on equity capital 20.06% -8.81% 20.05% 17.67% 13.14%

Return on asset 0.89% -0.51% 1.06% 0.95% 0.63%

Earnings per share 3.12 -1.26 2.86 3.12 2.63

net profit margin 13.91% -8.51% 14.96% 9.73% 6.94%

Above is the summary of the some of the most important profitability ratios over the years
from 2016 to 2020. Starting with the measure of the profitability of a business in relation to
the equity so we can see significant net loss in 2017. There’s overall Varying trend
throughout. Then comes Return on asset which indicates how capable management has been
in converting assets into net earnings. ROA is Negative ROA in 2017 and after improving
from 2017 to 2018 it is dropping after 2018 till 2020. If we see the earning per share, so in
2017 the EPS was in negative which shows significant losses instead of earning. But from
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2017 till 2019 there has been betterment in EPS but again fall in 2020. Lastly, as per the net
profit margin, the bank’s performance has been disappointed. It has been dropped
significantly throughout the years.

Below are the comparison of ROA and ROE of BOP with various banks like Soneri, Silk,
Alfalah and Nation bank of Pakistan.
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Liquidity ratios
Ratio 2016 2017 2018 2019 2020
Cash to 0.0796 0.0804 0.0766 0.0816 0.0724
Current
Liabilities

Since banks don’t have inventory, quick ratio is not calculated. Moreover, considering the above
current ratio of the bank of Punjab over the years, it has some serious liquidity issues. Clearly, it
does not have enough current assets to pay back its short-term obligations.

Leverage Ratio
Ratios 2016 2017 2018 2019 2020
Debt-to-Total-Assets
Ratio 0.480888237 0.455458037 0.534883369 0.441517264 0.357613215
Debt-to-Equity Ratio 10.81301709 7.843031354 10.13008524 8.218239816 7.481272384

The table above shows two leverage ratios of bank of Punjab including Debt-to-Assets and Debt-
to-Equity Ratio. Debt-to-Assets Ratio is calculated through = Total Debt / Total Assets.
If the debt-to-assets ratio is greater than one, a business has more debt than assets. If the ratio is
less than one, the business has more assets than debt. A company with a high ratio of total debt
to total assets has a relatively high degree of leverage (DoL) and may lack the financial
flexibility of a business where assets outweigh debts.
The debt-to-equity (D/E) ratio compares a company's total liabilities to its shareholder
equity and can be used to evaluate how much leverage a company is using. Higher-leverage
ratios tend to indicate a company or stock with higher risk to shareholders. This ratio has fallen
from 2018 until 2020 indicating A low debt-to-equity ratio indicates a lower amount of financing
by debt via lenders, versus funding through equity via shareholders.
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Mission statement
“To exceed the expectation of our stakeholders by leveraging our relationship with government
of Punjab and delivering a complete range of professional solutions with a focus on programmed
driven products and services in the agriculture and middle tier markets through a motivated
team.”
Mission Analysis
BOP's mission statement is entirely focused on its stakeholders, including the government,
customers, professionals, the agriculture department, and those who want to establish their own
business. Last year, BOP launched various programmers such as yellow cabs and the Women
Entrepreneurs Finance Scheme. This demonstrates that the organization is assisting societies in
improving themselves. Because BOP is a semi-government bank, it is backed by the Punjab
government. If there is any work going on in Punjab, the BOP will be a part of it. This is
Pakistan's only bank that also helps the agriculture sector. As we all know, Pakistan is an
agricultural country, and BOP is the sole bank that serves this sector. Despite this, BOP claims to
give all types of professional solutions.

Vision statement
“To be a customer focused bank with service of excellence.”
Analysis
The focus of BOP's vision statement is on customers. BOP is just interested in growing its
customer base, and they employ a variety of techniques to do so. Similarly, new programmes
offer interest on savings accounts. BOP has realised that in order to be successful, they must
have more customers than their competition. So, as BOP considers the future, they envision
themselves as the market leader, and in order to achieve this, BOP is concentrating on the
services that they will deliver to their customers. BOP believes in giving its customers the best,
thus they are constantly looking for ways to improve their services.

New business strategy

BOP should focus on tapping on new segments to increase their deposits and therefore increase
share of deposits from private depositors. This is because the company suffers from losses
caused by non-performing loans, which are mostly caused by government of Punjab, according
to the information obtained through our primary research. The headline number for financial
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inclusion in Pakistan has been increasing, but disaggregated data shows that the gender gap is
getting worse. This is despite the fact that the situation has been improving overall. According to
the most recent statistics, it is now estimated that 36% (2017: 20%) of Pakistan's adult male
population is financially included. On the other hand, the ratio for Pakistan's adult female
population is still in the single digits, coming in at 7%. (2017: 7 percent). The gender gap has
reached an astounding 30 percent over the course of the past five years, which is a significant
increase. The World Economic Forum's (WEF) Global Gender Gap Report 2021 ranks Pakistan
at 153 out of 156 countries, which is 2 places lower than its ranking in 2020. This is a worrying
development. Pakistan has the worst gender parity (0.33 out of 100) for "Economic Participation
and Opportunity" compared to the other sub-indices.

Another very important segment is the BOP TAQWA portfolio to tap into people of Pakistan,
who are majority Muslims with strong sentiments based on religion. This can encourage people
to have accounts with the BOP.
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References

Siddiqui, A. R. (2003). The Bank of Punjab.

https://www.bop.com.pk/BoP

https://www.bop.com.pk/Profile%20of%20the%20Board%20of%20Directors

https://www.bop.com.pk/ViewManager.aspx