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INTERNSHIP REPORT ON HABIB BANK LIMITED PAKISTAN

SUBMITTED BY: MUHAMMAD IRFAN ALI LOGID: mc070402338 Phone# 0313-6747208 Mail address: syedirfanmw@yahoo.com & mc070402338@vu.edu.pk Address: Ward # 2 Mohala Chah Kurai MBA (FINANCE) 2007-09 SUPERVISED BY: MAHER AMEER MUHAMMAD

DATE OF FINAL REPORT 10-04-2009 to 10-06-2009 NAME OF THE UNIVERSITY VIRTUAL UNIVERSITY OF PAKISTAN

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DEDICATION

Allah Almighty ( whose claim (to obedience) cannot be satisfied by those who
attempt to do so) & His Beloved People.

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ACKNOWLEDGEMENT

Thanks to ALLAH Almighty for giving me such a beautiful opportunity and enabling me to complete my project. Thanks to my loving parents and guardian who help me a lot at every phase of my life, encouraged me in the days of depression and sacrificed for my better future. I am very thankful to Mr. Maher Ameer Muhammad my supervisor, who has helped me a lot in finding an appropriate project and for his reviews, encouragement, and support. I am thankful to all of my teachers and my class fellows and friends whom Cheerfulness and guidance is an asset for me .I am especially thankful to the bank staff and particularly.

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Executive Summary
HBL established operations in Pakistan in 1947 and moved its head office to Karachi Our first international branch was established in Colombo, Sri Lanka in 1951 and Habib Bank Plaza was built in 1972 to commemorate the banks 25th Anniversary. HBL has the largest Corporate Banking portfolio in the country with an active Investment Banking arm. It encompasses product offerings and services in Retail Banking and, in recent years, Consumer Banking as well. Satisfying customers are the only way to stay competitive in today's Market Place. The balancing act between what customers want and what the HBL can provide must be optimized in order to maximize HBLs long-term profits. HBL is expanding its presence in principal international markets including the UK, UAE, South and Central Asia, Africa and the Far East. With a domestic market share of over 40%, HBL was nationalized in 1974 and it continued to dominate the commercial banking sector with a major market share in inward foreign remittances (55%) and loans to small industries, traders and farmers. International operations were expanded to include the USA, Singapore, Oman, Belgium, Seychelles and Maldives and the Netherlands. HBL is currently rated AA (Long Term) and A-1+ (Short term). HBL is the first Pakistani bank to raise Tier II Capital from external sources.

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Internship certificate

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Table of content
Introduction Brief history& Overview of the organization Nature of the organization Business volume Product lines Competitors Organizational structure Organizational Hierarchy chart Number of employees Main offices 44 Comments on the organizational structure Plan of your internship program A brief introduction of the branch where I did your internship Starting and ending dates of your internship Training program Introduction of all the departments Detailed description of the department you worked in Structure of the Finance Department Department hierarchy Accounting system of the organization Finance system of the organization Mobilization of funds Generation of funds 45 47 47 48 49 49 49 70 70 71 73 73 79 7 8 12 18 21 22 37 41 43 44

The departments in which I got training and the duration of your training 48

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Sources of funds Critical analysis Ratio analysis Organization analysis in comparison with itscompetitors Future prospects of the organization. SWOT analysis of organization in the business sector Conclusion & recommendations for improvement Reference & Sources used ANNEXES

81 88 95 101 103 104 108 110 111

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Introduction
Habib Bank Ltd is a Banking HBL which is engaged in Commercial & Retail Banking and related services domestically and overseas. HBL Enjoy 20% of the market Share in Pakistan. Today HBL is truly the bank of the people Providing its customers convenience and Satisfaction all Over the world. Habib Bank Plaza, the tallest building in Pakistan, is the proud symbol of HBL leadership In Pakistans corporate ground. HBL is currently uses rate AA and A1+.

ESTABLISHMENT:
Habib Bank Limited was established by Mr.Ismail Habib (Late) on August 25, 1942 at Bombay. It was the first Muslim Bank of the sub-continent. It was Established with a Paid up capital of Rs. 2.5millon

BRANCHES:
Numbers of branch of HB L 1437.in the form of 1408 retail Banking branch 18 commercial banking division 10 Corporate center 1 Islamic banking.

Registered office:
Habib Bank Limited 4th Floor, Habib Bank Tower Jinnah Avenue Islamabad, Pakistan. Phone: 051-2872203 &051-2821183 Fax: 051-2872205

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Head office:
Habib Bank Plaza I.I. Chundrigar Road Karachi 75650 Pakistan. Phone: 2418000 [50 Lines] Fax: 021-921751

Auditors:
Taseer Hadi Khalid & co. (A member firm of KPMG International) Sh. Sultan Trust Bidg. No. 2 Beaumont Road Karachi-75530 Pakistan A.F. Ferguson & Co. (A member firm of price water house coopers) State Life Building 1-C I. I. Chundrigar Road Karachi Pakistan.

Audit Committee:
Mr. Sikandar Mustafa Khan Mr. Ebrahim Sidat Mr. Ansar Hussain Shamsi Chairman Member Member 10

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Board of Directors:

Sultan Ali Allana

Chairman

Moez Jamal

Director

Ahmad Jawad

Director

R.Zakir Mehmood

President & CEO

Yasin Malik

Director

Sajid Zahid

Director

Mushtaq Malik

Director

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Management
Sohail Malik Group Executive, Risk Management Nauman K. Dar Group Executive, International Banking & CEO, Habib Allied International Bank Plc.,UK Abid Sattar Group Executive, Retail & Consumer Banking Zafar Aziz Osmani Group Executive, Human Resources & Organizational Development Mudassir H. Khan Group Executive, Chief Compliance Officer Salim Amlani Group Executive, Audit, BRR & Investigation Aslam Gadit Group Executive, Asset Remedial Management Yousuf Nasir Group Executive, Information Technology Nausheen Ahmad HBL Secretary & Head of Law Division R. Zakir Mahmood President & CEO Group Executive, Corporate Banking Ayaz Ahmed Group Executive, Chief Financial Officer Jamil Iqbal Group Executive, Jamil A. Khan Group Executive, Global Operations Faizan Mitha Group Executive, Global Treasurer Mirza Saleem Baig Group Executive, Commercial Banking Kashif Shah Group Executive, Investment Banking Aly Mustansir Head of Marketing & Brand Management

MISYS

Business Process Re-engineering

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Overview of the Organization History

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The branches of Habib Bank in Pakistan HBL Plaza in Karachi Mohammed Ali Jinnah, Pakistan's founding father, realized the importance of financial intermediation while he was campaigning for the creation of a separate homeland for the Muslims of India. He persuaded the Habib family to establish a commercial bank that could serve the Indian Muslim community. His initiative resulted in the creation of Habib Bank in 1941, with HO in Bombay (now Mumbai), and fixed capital of 25,000 rupees. The bank played an important role in mobilizing funds from the Muslim community to finance the All-India Muslim League's campaign for the establishment of Pakistan. Habib Bank also played an important role in channeling relief funds to the people hurt in the communal riots and violence that preceded the departure of the British from India.

After Pakistan was born in 1947, Habib Bank, at the urging of Governor-General Jinnah, moved its headquarters to Karachi, Pakistan's first capital. This gave Karachi its first commercial bank of the newly formed Islamic Republic of Pakistan. The Habib family

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owned and managed the bank until the Pakistan government nationalized it on 01 January 1974.

1951 HBL opened the first of 3 branches in Sri Lanka. 1952 HBL established Habib Bank (Overseas). 1956 HBL opened first of 5 branches in Kenya. 1957 or 1958 HBL opened a branch in Aden. 1961 HBL opened the first of what would become 6 branches in the UK. 1964 HBL opened the first of 4 branches in Mauritius and a branch in Beirut.

1966 HBL opened the first of 8 branches in the UAE. 1969 HBL opened first of 3 branches and an OBU in Bahrain. However, HBs branch in Aden is nationalized. 1971 HBL opened an OBU in Singapore and a branch in New York. 1972 HBL opened the first of 11 branches in Oman. HBL constructed Habib Bank Plaza in Karachi to commemorate the banks 25th Anniversary. 1974 The government of Pakistan nationalized HBL and HBL merged with Habib Bank (Overseas). 1975 HBL opened a branch in Belgium. HBL also merged with Standard Bank, a Pakistani bank. 1976 HBL opened a branch in the Seychelles, the first of two branches in Bangladesh, and a branch in the Maldives. 1979 HBL opened a branch in the Netherlands. 1980 HBL opened a branch in Paris and another in Hong Kong. 1981 HBL established Nigeria Habib Bank with 40% ownership. HBL also opened a representative office in Teheran. 1982 HBL opened a branch in Khartoum.

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1983 HBL opened branch in the Karachi EPZ and a branch in Istanbul. 1984 HBL established Habib American Bank in New York with a branch each in Manhattan and Queens, and a US International Banking Facility. HBL also opened a branch in California. 1987 HBL opened in Australia. 1991 The Habib Group established a separate private bank, the Bank AL Habib, after private banking was re-established in Pakistan. HBL opened a branch in the Fiji Islands, and took over the Paksistani branches of failed bank, BCCI. 1992 In Nepal HBL acquired 20% of Himalayan Bank. 1995 HBL established a representative office in Cairo. 1990s HBL established Habib Finance (Australia), and Habib Finance International Limited, Hong Kong. 2000 HBL established Habib Canadian Bank. 2002 On June 13, 2002 Pakistan's Privatization Commission announced that the Government of Pakistan had granted the Aga Khan Fund for Economic Development (AKFED), a subsidiary of the Aga Khan Development Network, rights to 51% of the shareholding in HBL, against an investment of PKR 22.409 billion (USD 389 million). HBL's UK operation came close to being shut down due to regulatory issues with the Financial Services Authority. The issue was resolved by converting the operations to a subsidiary. Then Habib Bank Limited and Allied Bank of Pakistan merged their operations (Habib contributed its 6 branches and Allied its 4), into a new bank, called Habib-Allied International Bank, in which Habib Bank has a 90.5 percent shareholding, while Allied Bank has 9.5 percent. Simultaneously with the transfer of business to the new bank, both allied and Habib Bank close down all independent operations in the UK.

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2003 HBL received permission to open a branch in Afghanistan. 2004 On February 26, the Government of Pakistan handed over management control of Habib Bank to AKFED. The Board of Directors was reconstituted to have four AKFED nominees, including the Chairman and the President/CEO and three Government of Pakistan nominees 2006 HBL sold the operations that it had established in Fiji in 1991 to Bank of South Pacific.

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Vision
Simply the vision of Habib Bank is mass banking. At the time of formation it changed its motto from class banking to mass banking. Expedite the economic growth of the country through spreading the banking services to the doorsteps of mass people so that they get institutional financial help and participate in the economic activities of the country.

Mission
To be the trendsetter for innovative banking with excellence and perfection. To be the best performing bank in the country and the region. To exceed customer expectations through innovative financial products & services and establish a strong presence to recognize shareholders' expectations and optimize there rewards through dedicated workforce. Keeping ahead of other competitors in productivity and profitability. To attain budgetary targets fixed in each area of business.

Objectives
Like other business organization the core desire of Habib Bank is to maximize the profit through saving & loaning money to the life of the common people. The Objectives of the Habib Bank is given below: I. Broad Goal:

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As a nationalized commercial organization, Habib Bank belongs to the people. It implies that it stands for meeting the banking needs of the mass people of the society.

II.

Operating Goal: In compliance with the very nature of the organization, the objective in mind the bank aims at excelling quality and diversified services. To fulfill its mission Habib Bank has its main objectives as followings: To provide banking services to people. To earn profit. Act as a media of exchange. To contribute to gross domestic product (GDP). Maintain a satisfactory deposit mix. To promote and boost up business sector inside the country. To help to grow entrepreneurship. Increase loan portfolio diversification and geographical coverage. To mitigate unemployment problem. Provide finance specialized services to the export. To help to boost economic development.

To help in development and industrialization of the country

Service Attitudes:

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Habib Bank is a service organization. It will live and prosper on the quality of service it provides. Hence quality of service must be maintained at all levels.

Banks image with people should be identified on the quality and diversity of services that the people aspire to receive. As a dynamic bank it will remain in search of new field of activity in line with people economic need. Suggestions by customers and other people shall receive proper attention so as to help identify new activity or improve upon present activities.

The bank shall maintain healthy competition with other banks aiming at excelling services in meeting economic needs of the people.

Nature of the organization Accepting Deposits


The primary function of HBL is to accept and receive surplus money from the people, which they willingly deposit with the Bank. Like all other Banks, HBL also take incitation to attract as much depositors as it can. They offer different deposit schemes to its customers, which includes the following types. These schemes as follow. Current Deposits This type of account is often maintained by the business

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Current deposits are those deposits on which Bank offers no interest but it allows the account holders to withdraw their money at any time they want without giving any prior notice to the community, which requires large sums of money very often for their business transaction. Profit and loss sharing account (Saving) Saving deposits or PLS is those accounts on which Bank offers a lower rate of interest. After the Islamization of the Banking system in the country it has been given the name of PLS saving account. The Bank undertakes to repay deposits on demand up to a certain amount. Fixed deposits Fixed deposits are those which can be withdrawn only after the maturity period. In this type of deposits the Bank allows high rates of interest depending on the time period of deposits. The shorter the period of deposits, the less will be the interest and vice versa.

Making Loans and advances


The second most important function of HBL is to provide financing facility to its customers. These loans and advances are usually made against document of title to goods, marketable securities, and personal securities. HBL charges different interest rates on these loans and advances depending on the terms and conditions settled with the customers. Following types of loans and advances are made available to the customers. Demand Finances

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Demand finances are those finances which are given to the borrowers for specified period and can be called back without any prior notice. It is a single transaction finance. It can be long term, medium term and short term. Mark up is also charge. Here the amount can be withdrawn once at the time of disbursement. Running Finance HBL provides these finances against the security of current assets like shares, bond, cash crops like cotton and other cashable commodities. The borrowers account is opened with the Bank with the amount of the total loan provided or allowed to the borrower. The borrower is allowed to withdraw any amount from his account within the specified limit and interest is charged only on the amount actually withdrawn. Over Draft This type of facility is usually given to very loyal clients. This allows them to withdraw over and above the amount held by them in their account, and interest is charged only on the amount, which is withdrawn in excess of the amount actually held in their account. Discounting bills of exchange Discounting bills of exchange can also be considered as a form of loan because it allows the holder to get the bill encased before the maturity period. A bill of exchange is usually issued by the importer of goods to the exporters, which allows them to be paid in their own currency after three months time. If the exporter needs the money before the maturity of the bill of exchange, he can get his money from the Bank by discounting the bill of exchange. The Bank utilizes their surplus funds by discounting the bills of exchange at their market worth i.e. Bank pay to the holders of the bill on amount equal

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to their face value after deducting interest at the current rate for the maturity period of the bill. Our stated objective of being a premier emerging market bank.

Business volume
Habib Bank Limited (HBL), Pakistans biggest IPO of Rs 12 bn in terms of value, will be formally listed today at the Karachi Stock Exchange (KSE). This listing would further add Rs 162 bn to the banking sector market capitalization of nearly Rs 3,700 bn if we simply take the offer price of Rs 235/share as a proxy. Pakistans banking sector has already got the biggest share of 29% in the market capitalization of KSE and with this listing it will increase up to 33%. We have signaled our positive outlook for the bank in our detailed Pakistans banking jewel IPO report on HBL mainly due to 1) our forecasted CY07 ROE of 27% which is also in line with high performing peer banks viz. MCB Bank & United Bank (UBL) 2) satiating 10% yield on earning assets 3) presence of more than 80% low cost deposits and mere 4.2% weighted average cost on remunerative deposits 4) greater market share of fee-based income of 16% vis--vis peer banks 5) management thrust on retail banking 6) strong brand equity. On the flipside, recent draft circular by State Bank of Pakistan (SBP) regarding withdrawal of forced sale 24

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value (FSV) facility on illiquid securities in taking provision coverage against nonperforming loans (NPLs) is a blow to HBL. HBL has relatively low provision coverage against historical NPLs and we expect the bank to make more provisioning to the tune of Rs 5.2 bn that could impair our CY07 EPS forecast of Rs 26.85/share.

Product Lines

Services / Products Offered by the bank


Car to car Car Loan Credit Cards Deposit Accounts Bancassurance Debit Card Phone Banking

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Mutual Funds

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1.

Credit Cards

Welcome to a world of convenience, flexibility and opportunity. The HBL Credit Card will add simplicity and excitement to your life. Accepted at over 24 million merchants worldwide, HBL Credit Card makes shopping fun and paying simple. Make the most out of your shopping experience with your very own HBL Credit Card.

Gold Card

Green Card

i. ii. iii. iv. v.

Convenience Security Affordability Cash Advance Balance Transfer Facility

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vi.

Internet shopping

i.

Convenience

Instead of paying with cash, simply present your HBL Credit Card to the shopkeeper and pay for anything you want. Bill Payments We'll pay your bills on your behalf and charge the amount to your HBL Credit Card. You can give one-time standing instructions to pay your monthly bills. Check the amount in your monthly card statement and make the payment with your regular card payment. SMS Alerts For all transactions, an SMS alert will be sent to you on your mobile phone to confirm that the transactions have been conducted by you. A nominal fee will be charged for this service. E-Statements You can enroll for an e-statement with a simple call. An e-statement with details of all your transactions will be sent to your specified email address every month. You wont have to wait for your paper statement any more or have to worry about storing it. Statement by Fax HBL Credit Card also offers the facility of receiving your card statement by fax. Just give us a call and your last card statement will be faxed to you at the fax number specified by you

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ii.

Security.

Your HBL Credit Card ensures your money stays completely secure. You cannot lose cash if you dont carry it. In the unlikely event that your card is stolen, call us at HBL Phone Banking and your card will be blocked immediately.

iii.

Affordability

Buy Now, Pay Later HBL Credit Card gives you the flexibility to buy what you want, when you want and pay for it later. A credit card statement will be sent to you every month with details of all your purchases. You will have 21 credit free days to make the payment from the statement date. Please pay at least 3 days in advance if you make your payment by cheques to allow enough time for clearance. Pay As Much As You Want You have the freedom to pay the entire outstanding amount on your card statement or as little as 5% of the outstanding balance in your statement. The remaining amount will be transferred to next months statement. A nominal service charge will be applied to the unpaid amount each month. Lower Rate Every Year Just make sure all your HBL Credit Card payments are made before the due date and you will benefit from a reduction in the rate of service charges at the end of each year.

iv.

Cash Advance

If you require cash urgently, you can go to any specified HBL branch and withdraw cash at the counter. You can also go to any 1 Link ATM in Pakistan and

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more than 780,000 ATMs and financial institutions worldwide displaying the Visa/Plus logo. You can withdraw cash up to the available cash advance limit on your HBL Credit Card. For Cash Advance, nominal service charges will be applied from the withdrawal date.

v.

Balance Transfer Facility

With your HBL Credit Card Balance Transfer Facility, you have the opportunity to pay off balances you owe to other banks through your HBL Credit Card at lower service charges.

vi.

Internet shopping

Enjoy a hassle free shopping experience and shop from a choice of online merchants, all from the comfort of your home. To activate /de-activate the service please call 111-111-425

2. HBL Car Loan


HBL Car Loan helps you get your preferred car through a simple and hassle-free process, backed by superior service and support. Now you can drive a car you always wanted.

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Car Showroom

Car Navigator

Choice of either a new local/imported car or a reconditioned imported car. Repayment options ranging unto 7 years. Upton 85% of financing for the car of your choice. Insurance at all times for complete peace of mind and security. Round the clock support available through

3.

HBL Phone Banking;

PHONE BANKING

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Your bank is just a phone call away. You can now call HBL Phone Banking and save a trip to the branch. Your query will be resolved in a single telephone call from anywhere and at anytime.

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You can place your requests and queries, track the status of your repayment/loan account and avail other value-added services through HBL Phone Banking.

Eligibility Criteria
Self-Employed Business persons/Professionals

Salaried Individuals

Citizenship

Pakistani

Pakistani

Age

22-60 years

22-65 years

Minimum monthly income

Rs. 20,000

Rs. 25,000

Documentation Salaried Individuals


Copy of CNIC 2 recent passport size photographs Latest original salary slip and personal bank statement for last 3 months

Self-Employed Business persons/Professionals


Copy of CNIC

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2 recent passport size photographs Bank statement for last 6 months and bank letter confirming details of account Proof of business

Home Loan
HBL yet not offered home loan in the future the management of the HBL will offered Home loan also.

Types of accounts offered by the bank

Term Accounts

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HBLs Term Accounts are offered in a variety of tenure with deposits as low as Rs.10, 000. HBL Advantage Account Term 10 year 5 year 3 year 1 Year Profit 18% 15% 14% 12%

Multiple options for tenure and profit payout Loan facility up to 90% of deposit Minimum required investment as low as Rs. 25,000

Special Notice Time Deposit 7 days or 30 days (and over) notice Minimum deposit of Rs. 10,000 Balances less than Rs. 1 million Balances equal to and greater than Rs. 1 million Returns range from 0.75% to 4% depending on notice period and amount

Term Deposit Receipts IPDC 3 month term deposit Minimum balance of Rs. 10 million Returns range from 0.75% to 2.25%

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Minimum investment of Rs. 20 million except in the case of 1 month where minimum investment is Rs. 100 million Available in 1 month, 3 month, 6 month, 12 month and 3 year terms Profit paid on maturity Rates on IPD are conveyed on a daily basis by the Treasury Division

Remittance Munafa plus Deposit (Certificates) Available in 1 year, 3 year and 5 year certificates Profit disbursement is monthly, quarterly, bi-annually, annually and on maturity Profit paid on maturity Returns range from 7.8% to 11% Current Account Non-profit bearing No transaction limits Minimum balance of Rs. 10,000. If the average balance falls below this amount, then service charges will be deducted No restriction on anyone opening a Current Account (as long as regulatory guidelines are met) Basic Banking Account (BBA) No minimum balance No service charges

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Savings Account

Profit paid bi-annually Minimum average balance of Rs. 10,000 5% profit per annum

HBL Value Account 7% profit per annum* Profit credited every 3 months Deposit ranges from Rs. 10,000 to Rs. 100,000 Flexibility of withdrawals

HBL Supervalu Account 7.25% profit per annum* Profit credited every 3 months Deposit ranges from Rs. 100,000 to Rs. 500, 00 Flexibility of withdrawals

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Remittance Munafa Plus Saving Account Remittance Based (no credit allowed except remittance) Daily Basis Product Tiered Monthly profit Minimum average balance of Rs. 10,000 Less than Rs. 20,000 earns 0.10% profit Rs. 1 million and above earns 5% profit

Special Saving Bank Deposit Scheme Daily Basis Product Tiered Monthly profit Minimum balance of Rs. 20,000 Returns unto 8% Daily Munafa plus Deposit Account Daily Basis Product Tiered Monthly profit Minimum balance of Rs. 50,000 Returns unto 8%

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FC-SB Savings Account offered in 3 currencies, USD (US dollar), EUR (Euros) and GBP (UK pound) Tiered product, with rates depending on choice of currency To earn profit, minimum balance in USD, EUR and GBP is 1,000

Interest is payable on a quarterly basis

HYFFD (High Yield Foreign Currency Fixed Deposit)

Available in 1 month, 2 month, 3 month, 6 month and 12 Month in USD, EUR and GBP Tiered product, with rates depending on choice of currency and term Profit paid on maturity only. No interim interest is payable.

Tabeer Children Education:

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An insurance plan that enables parents to cover education and marriage costs.

DEBIT CARD

HBL Visa Debit Card allows you to pay for your purchases directly from your bank account. You dont have to carry cash and your monthly statement provides you with a complete record of all your transactions so you can manage your expenses with ease. No Interest Ease & Security No Liability

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International Recognition& Acceptability Spending Limits Free Account Statement 24 hour Customer Service Global Customer Assistance Service

HBL has a long history of being a partner of growth for business and industry. We provide tailored banking solutions to business customers of all sizes in a wide range of industries. We cater to the needs of a broad spectrum of clients. To do this, the business banking group is segregated by the size of the customer. For customers with an annual turnover between PKR 50 million to PKR 300 million, our Commercial Banking group provides a wide range of products that meet specific customer needs.

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The Corporate Banking Group focuses on personalized services to large corporate borrowers who need tailored facilities. The Corporate Bank manages a diverse portfolio, being an active player in a multitude of sectors including textiles, sugar, leather, pharmaceuticals, fertilizer, petrochemicals, power, aviation, automotive, telecom, oil and gas and FMCGs. The Investment Banking Group is a market leader. It provides innovative capital strategy solutions to major local and multinational entities. HBL offers a wide range of products and services for its business customers. They are as follows:

Competitors

Local Private Banks in Pakistan


Allied Bank of Pakistan Limited Arif Habib Rupali Bank Limited Askari Commercial Bank Limited Bank Al Habib Bank Al Falah Limited Faysal Bank Limited MCB Bank United Bank Limited

Foreign Banks in Pakistan


Citibank NA

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ABN AMRO Bank NV HSBC American Express Bank Limited Emirates Bank Doha Bank Bank of Tokyo Mitsubishi Limited

However Habib Bank feels that its major competitors are as follows: United Bank Limited (UBL) MCB Bank Citibank Askari Bank

As far as UBL is concerned, Habib Bank feels that it is a competitor because UBL itself is a sister HBL of Habib Bank as the Abu Dhabi Group has stake in UBL and so there is always a comparison between them. Furthermore, Askari Bank is a competitor because of the fact that the product and services that it offers is fairly similar to that of Habib Bank and its markup rates are similar as well. MCB, after being privatized has also introduced a wide variety of services and with its large number of account holders, it is also a big competitor. Citibank is a foreign bank that has been established in Pakistan for a long period of time and has introduced a number of first class services and as Habib Bank is also competing in the services industry, it needs to benchmark its product and services to a bank with a stature to that of Citibank

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Their Goals and Strategies

United Bank Limited


UBL was established in 1959, to provide banking facilities to the nation, after its nationalization in 1971, the bank became an inefficient enterprise, however after its privatization in 2000; the whole face of UBL has been changed. Today UBL stands on a solid network of more than 1000 branches nationwide and 15 overseas branches and with an experience of 46 years its main goal is to become the leading bank of Pakistan. To achieve its goal, UBL has introduced innovative products in the banking sector to facilitate the general public. It was one of the very first banks to introduce internet and SMS banking to its customers. It has divided its banking into three divisions, each having customized products to satisfy the needs of that particular division: Consumer: for individual customers Commercial: for small and medium enterprises Corporate: for large national and multinational companies

These strategies have helped UBL to raise its image in the banking sector. Its long term credit rating is AA+1.

MCB Bank
In 1974, MCB was nationalized along with all other private sector banks. This led to deterioration in the quality of the Banks loan portfolio and service quality. Eventually, MCB was privatized in 1991. The vision of MCB is Challenging and Changing the Way you Bank.

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The main strategies of the bank have concentrated on growth through improving service quality, investment in technology and people, utilizing its extensive branch network, developing a large and stable deposit base and managing its non-performing loans via improved risk management processes. In 2006, MCB Bank was awarded the Euro money Award for the best bank in Pakistan, which shows its commitment of changing the way you bank.

Askari Bank
Askari Commercial Bank was established in 1992, with the vision of maintaining excellent standards of banking quality and service, so as to serve its customers better. With time Askari Bank has also changed its identity, changing its name to a shorter Askari Bank, a new logo and a new slogan Ask Us. Askari Bank has a wide variety of product and services that cater to need of all type of customers. It also developed a wide variety of products for the Ksaans or farmers of Pakistan, a segment of Pakistanis neglected by the baking sector of Pakistan. Askari

bank was also the first bank in Pakistan to introduce ATM machines on a third party basis. Askari Banks long term rating of AA+ by Pakistan Credit Rating Agency Limited (PACRA) also shows its commitment of developing excellent standard of products and services for its customers.

Citi Bank
Citi Bank was established in Pakistan in 1990 and since then has been using its international roots and knowledge to make a name in the Pakistani banking sector. Its main vision is to provide right financial solutions - every time, all the time and to fulfill their vision Citi Bank has used its ability to identify market needs and develop products

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which are unique in concept and fulfill customer requirements. Every customer is served by a versatile team of relationship managers who ensure in-depth knowledge of trends and opportunities while synchronizing their financial activities. Some of the innovative products introduced by Citi Bank or the very first time in the Pakistani Banking sector are as follows: CitiGold Priority Banking Photo Credit Card First to launch Personal Loans in Pakistan First foreign bank to launch MasterCard in Pakistan Complaint Tracking System (CTS) launched

Organizational structure
A well-developed and properly coordinate structure is an important requirement for the success of any organization. It provides the basic framework within which functions and procedures are performed. Any organization needs a structure, which provides a framework for successful operations. The operation of an organization involves a number of activities, which are related to decision making, and communication of these decisions. These activities must be well coordinated so that the goals of the organization are achieved successfully.

STRUCTURE OF HBL
At present the Bank operates through one central and 23 Regional Offices and 1439 branches, all over Pakistan. The president and Executives Committee look after the affairs of the Bank. Each Regional Head Quarter is headed by a Chief Executive and 46

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assisted by General Manager Operations and General Manager Support Services. The Regional Head Quarter controls the branches in their area. Overseas operations consist of 65 main branches, two affiliates, two representative offices and two subsidiaries. President, from Head Office at Karachi controls the officers of the Bank with the help of the senior management. Functional responsibilities of the Banks are broken into seven groups known as 1) International Operations Group2) Corporate Banking and Treasury Investment Group3) Retail Banking and Operation Group

Finance, Audit and Administration Group5) Assets Remedial Management Group6) Credit Policy Group7)Corporate Bank, Financial Institutions and Project Finance Group. In addition to the overall controlling authority, president also manages the International Operations Group individually. While the Senior Executive Vice Presidents supervise rest of the functional groups. Each Senior Executive Vice President is individually responsible for the group which is assigned to him. At the level of provinces there are Regional Head Quarters headed by Regional Chief Executives (RCE). Each RCE is assisted by GM operations and GM Support Services. Branches are also controlled by the RCEs. Circle Offices of the past times have been removed to reduce Managerial Layers, which were working under the control of Zonal Offices. This happened as a result of policy of beginning new changes in the organizational structure.

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Organizational Hierarchy chart

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Chairman

President

Board of Directors

SEVP International Operation

SEVP Finance, Audit & Administration

SEVP Corporate Banking & Treasury

SEVP Asset Remedial Management

SEVP Retail Banking & Information Technology

SEVP Credit Policy

SEVP Corporate Banking, financial institute & Project finance

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Number of employees
HBL Profile: Ticker: Exchanges: 2008 Sales: Major Industry: Sub Industry: Country: Employees: Habib Bank Limited HBL KAR 73,498,000,000 Financial Commercial Banks PAKISTAN 14123

Main offices
Habib Bank Plaza I.I. Chundrigar Road Karachi 75650 Pakistan. Phone: 2418000 [50 Lines] Fax: 021-921751

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Comments on the organizational structure

The purpose of an organizational structure is to help in creating an environment for human performance. It is then, a management tool and not an end in its own. Although the structure must define the task to be done, the rules so established must also be designed in the light of abilities and motivation of the human recourse available. By analyzing the organizational structure of HBL presence of the following elements can be found in its structure.

Centralized Decision Making By looking at the organizational structure of HBL would be found that the structure at HBL is a critical one. All the decisions are made at the top management level and the subordinates have to obey these decisions. This trend in the decision making shows a pattern of rigidity in structure of HBL.

Downward Communication

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Communication is the process by which information is exchanged and understood by two or more people, usually with the interest to motivate or influence the behavior of others in the organization. Downward communication is the message and information sent from top management to subordinates in a downward direction. Managers can communicate downward to the employees through speeches, massages in HBL publications, information leaflets, tucked into pay envelops material on bulletin boards, policy and procedure mandates. The same pattern is followed at HBL. No doubt its a very

traditional approach but it can create problems because it ignores the receiver of the communication because the issuer Of policies and procedures does not ensure communication. In reality may the messages communicated downward are not understood perfectly.

Chain of Command The chain of command is an unbroken line of authority that links all persons in an organization and shows who reports to whom. By analyzing the organizational structure it can be found that there is a scalar principle followed with in the Bank because each and every person knows to whom can one report. The authority and responsibility for different tasks and duties are different, as well as every one knows the successive levels of management all the way to the top.

Authority and Responsibility

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The chain of command illustrates the authority structure of HBL. Authority is the formal and legitimate right of the manger to make decisions, issues orders and allocates resources to achieve organizational desired outcomes. By analyzing the chain of command of HBL, one can come to the conclusion that, as there is scalar pattern followed at the organizational setup of HBL therefore it is implied that everyone in his position knows that what is ones authority and what is the responsibility and the authority it allocated.

Delegation

Delegation is the process, which managers use to transfer the authority and responsibility to position below in the hierarchy. Most organizations today encourage managers to delegate authority to the lowest possible level to provide maximum flexibility to meet customer needs and adapts to the environment. But at HBL no such system prevails the managers try to keep as much of the authority as they can and if some authority is delegated it is sure that it will be misused

Plan of your internship program


A brief introduction of the branch

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Habib Bank Limited main branch chubara road Layyah is the center of the employee of different organizations, cotton and grain business. According to its location majority of its accounts holders are businessmen and employees of different organizations and as well as it has huge accounts of the farmers those are the brokers of wheat and cotton. This Branch work under the very experienced Manager Chudary Sarwer.He is very talented and hardworking person he tries to make hard to improve the progress of the branch by leaps and bunds. He manage his employees very efficiently also motivated them according to his work and encourage them. The employees of this branch are also well experienced. Every employee of the branch guide the customers properly.As the working of the branch is organized so different are made in order to make the working easier and error free. Every person of the branch done his duty beautifully.

Starting and ending dates of internship


I start my internship at HBL from 10-04-2009 to 10-06-2009. I completed two month in the HBL and in this two month I get great experience from different departments of the HBL.

The departments in which I got training and the duration of training


These are departments where I get training 1. 2. Finance Department 3. Account services Department Remittance Department

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4. AgriFinance Department Sr.# 1 2 3 4 Name of the Department Remittance Department Finance Department Account services Department AgriFinance Department From 10-04-2009 26-04-2009 11-05-2009 26-05-2009 Duration To 25-04-2009 10-05-2009 25-05-2009 10-06-2009

Training program

Introduction of all the departments


There are some Names of the departments

1. Account Department 2. Remittance Department 3. Utility bills 4. CD In charge Department 5. Finance department 6. Cash Department 7. Agri -Finance Department

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Detailed description of the department I worked


These are those departments where I worked 1. Remittance Department 2. Finance/Advance Department 3. Account services Department 4. AgriFinance Department

These are detail of there department.

1. Remittance Department
As it is the function of the Bank to the money to any place where there is a Bank. It is the most easiest and safe way to send money to any place. Bank charges menial amount as a commission for the remittance. Here in the Habib Bank Limited Chubara Road Layyah Branch there is also remittance Department. There are mostly four methods to remit the money. They Are i. ii. iii. i. Demand Draft (DD) Mail Transfer (MT) Pay Order (PO) Demand Draft

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It is the most commonly method used for remittance of money. It is very simple, firstly a form is to be filled in which all details are specified that where and it which branch the draft is to be sent then the money is depositor which is called draft and money can by drawn after showing to the bank of the specified branch of the Bank. Only specified person can draw the money on that draft. Another method to secure the payment of the draft could be the crossing of the draft, which means that it will only be deposited in the payee's account. To make it more secured and safe the Bank has coded the amount exceeding Rs. 15000. Only the banker or the person known the actual amount of the draft in return bank gets a commission which is its mode of earning.

ii.

Mail Transfer (MT)

The money is transferred through mail. One Branch of the bank sends advice to the branch of the same bank to credit the account of payee. In this type of transfer the payee must has the Bank account. For example, now days PTV's licenses are made all over the Pakistan. commission on the mail transfers. Bank also gets

iii.

Pay Order (PO)

Pay order is less expensive method of transfer money. Normally this method is used to transfer money inside the city. If it is used city wide, it

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takes a long time. The bank charge Rs. 10 which is flat fee the pay order and an excise duty of Rs, 1 per leaf with holding tax of 20% on the sum is also taken from the party. Now if the pay order is to be cancelled or duplicate of the pay order is to be needed is case of misplacement Rs.20 is to be paid.

2. Finance/Advance Department
This department has been working under the supervision of knowledge experienced & well qualified banker. Mr. Nadeem who has been serving this bank for last 22 years. This department has been playing one of the primary function of the bank because a bank is the organization that accept deposits & give advances. Advances department is one of the most sensitive and important departments of the bank. The major portion of the profit is earned through this department. The job of this department is to make proposals about the loans.

The Credit Management Division of Head Office directly controls all the advances. As we known bank is a profit seeking institution. It attracts surplus balances from the customers at low rate of interest and makes advances at a higher rate of interest to the individuals and business firms. Credit extensions are the most important activity of all financial institutions, because it is the main source of earning. However, at the same time, it is a very risky task and the risk cannot be completely eliminated but could be minimized largely with certain techniques.

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Any individual or company, who wants loan from HBL, first of all has to undergo the filling of a prescribed form, which provides the following information to the banker.

There are basically two types of loans. Fund base Non-fund base In fund base the cash is involved while in non-fund base cash is not involved. These are following types of advances those are given by the bank. Cash Finance Running Finance

Any individual or HBL, who wants loan from HBL, first of all has to undergo the filling of a prescribed form, which provides the following information to the banker. Name and address of the borrower. a) b) c) d) Existing financial position of a borrower at a particular branch. Accounts details of other banks (if any). Security against loan. Exiting financial position of the HBL. (Balance Sheet & Income

Statement).

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e)

Signing a promissory note is also a requirement of lending, through this

note borrower promise that he will be responsible to pay the certain amount of money with interest. Principles of Advances There are five principles, which must be duly observed while advancing money to the borrowers. Safety Liquidity Dispersal Remuneration Suitability

a.

Safety

Bankers funds comprise mainly of money borrowed from numerous customers on various accounts such as Current Account, Savings Bank Account, Call Deposit Account, Special Notice Account and Fixed Deposit Account. It indicates that whatever money the banker holds is that of his customers who have entrusted the banker with it only because they have full confidence in the expert handling of money by their banker. Therefore, the banker must be very careful and ensure that his depositors money is advanced to safe hands where the risk of loss does not exist. The elements of character, capacity and capital can help a

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banker in arriving at a conclusion regarding the safety of advances allowed by him.

b.

Character

It is the most important factor in determining the safety of advance, for there is no substitute for character. A borrowers character can indicate his intention to repay the advance since his honesty and integrity is of primary importance. If the past record of the borrower shows that his integrity has been questionable, the banker should avoid him, especially when the securities offered by him are inadequate in covering the full amount of advance. It is obligation on the banker to ensure that his borrower is a person of character and has capacity enough to repay the money borrowed including the interest thereon.

c.

Capacity

This is the management ability factor, which tells how successful a business has been in the past and what the future possibilities are. A businessman may not have vast financial resources, but with sound management abilities, including the insight into a specific business, he may make his business very profitable. On the other hand if a person has no insight into the particular business for which he

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wants to borrow funds from the banker, there are more chances of loss to the banker. d. Capital

This is the monetary base because the money invested by the proprietors represents their faith in the business and its future. The role of commercial banks is to provide short-term capital for commerce and industry, yet some borrowers would insist that their bankers provide most of the capital required. This makes the banker a partner. As such the banker must consider whether the amount requested for is reasonable to the borrowers own resources or investment. e. Liquidity

Liquidity means the possibilities of recovering the advances in emergency, because all the money borrowed by the customer is repayable in lump sum on demand. Generally the borrowers repay their loans steadily, and the funds thus released can be used to allow fresh loans to other borrowers. Nevertheless, the banker must ensure that the money he is lending is not blocked for an undue long time, and that the borrowers are in such a financial position as to pay back the entire amount outstanding against them on a short notice. In such a situation, it is very important for a banker to study his borrowers assets to liquidity, because he would prefer to lend only for a short period in order to meet the shortfalls in the wording capital. If the borrower asks for an advance for the purchase of fixed assets the banker should refuse because it shall not be possible for him to repay when the banker wants his customer to repay the amount. Hence, the baker must adhere to the consideration of the principles of liquidity very careful. f. Dispersal

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The dispersal of the amount of advance should be broadly based so that large number of borrowing customer may benefit from the bankers funds. The banker must ensure that his funds are not invested in specific sectors like textile industry, heavy engineering or agriculture. He must see that from his available funds he advances them to a wide range of sector like commerce, industry, farming, agriculture, small business, housing projects and various other financial concerns in order of priorities. Dispersal of advances is very necessary from the point of security as well, because it reduces the risk of recovery when something goes wrong in one particular sector or in one field. g. Remuneration

A major portion of the bankers earnings comes form the interest charged on the money borrowed by the customers. The banker needs sufficient earnings to meet the following: a) b) c) Interest payable to the money deposited with him. Salaries and fringe benefits payable to the staff members. Overhead expense and depreciation and maintenance of the fixed assets

of the bank. d) An adequate sum to meet possible losses.

e) f)

Provisions for a reserve fund to meet unforeseen contingencies. Payment of dividends to the shareholders.

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h.

Suitability

The word suitability is not to be taken in its usual literary sense but in the broader sense of purport. It means that advance should be allowed not only to the carefully selected and suitable borrowers but also in keeping with the overall national development plans chalked out by the authorities concerned. Before accommodating a borrower the banker should ensure that the lending is for a purpose in conformity with the current national credit policy laid down by the central bank of the country.

Cash Finance Cash finance is the biggest loan given to the businessmen, industrialists. After the proper investigation and documentation these finances are given and genuine property is pledged as a matter of security. These loans are taken for the purchase of stocks etc. the bank appoints its staff of two or three persons at the place where that stock is lying. This is a very common form of borrowing by commercial and industrial concerns and is made available either against pledge or hypothecation of goods, produce or merchandise. In cash finance a borrower is allowed to borrow money from the banker up to a certain limit, either at once or as and when required. The borrower prefers this form of lending due to the facility of paying markup/services charges only on the amount he actually utilizes. If the borrower does not utilize the full limit, the banker has to lose return on the un-utilized amount. In order to offset this loss, the banker may provide for a suitable clause in the cash finance agreement, according to which the borrower has to pay markup/service charges on at least on self or one quarter of the amount of cash finance limit allowed to him even when he does not utilize that amount.

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Bank also keeps three records of the stock and current position. a notice is also written at the place that the stock are pledged with the bank To get these types of loan prior permission from the zonal office of the HBL is also required the bank gets back its principal amount and also markup for the loan. The rate of markup is Rs. 0.521/1000 per day. Document Required For the Loan 1. Demand Promissory Note DP Note This document is filled in by the party that promises to pay the amount whenever it is demanded. 2. Facility Letter This is the requisition of the finance facilities to the bank by the party. 3. Balance Confirmation After the approval of loan this letter is written by the party that such amount is in the account of the party. 4. Letter of Pledge (IB26) For the getting of the cash finance a letter of pledge is to be given to the bank that such property is to be pledged with the bank as a security. 5. Letter of Guarantees (IB 29) A letter for the personal guarantees is also required, in which the guarantee from a sound person to the party is attached with the application.

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6. Agreement for Financing (IB 6) This agreement for the short term medium term/long term on the markup basis. At most these are the documents required in attaining of the loan. Running Finance When a customer borrows from a banker a fixed amount repayable either in periodic installments or in lump sum at a fixed future time, it is called a loan. When bankers allow loans to their customers against collateral securities they are called secured loans and when no collateral security is taken they are called clean loans. The amount of loan is placed at the borrowers disposal in lump sum for the period agreed upon, and the borrowing customer has to pay interest on the entire amount. Thus the borrower gets a fixed amount of money for his use, while the banker feels satisfied in lending money in fixed amounts for definite short periods against a satisfactory security. This is the most common form of bank lending. When a borrower requires temporary accommodation his banker allows withdrawals on his account in excess of the balance which the borrowing customer has in credit, and an overdraft thus occurs. This accommodation is generally allowed against collateral securities. When it is against collateral securities it is called Secured Overdraft and when the borrowing customer cannot offer any collateral security except his personal security, the accommodation is called a Clean Overdraft. The borrowing customer is in an advantageous position in an overdraft, because he has to pay service charges only on the balance outstanding against him. The main difference between a cash finance and overdraft lies in the fact that cash finance is a bank finance used for long term

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by commercial and industrial concern on regular basis, while an overdraft is a temporary accommodation occasionally resorted to.

Demand Financing/Loans When a customer borrows from a banker a fixed amount repayable either in periodic installments or in lump sum at a fixed future time, it is called a loan. When bankers allow loans to their customers against collateral securities they are called secured loans and when no collateral security is taken they are called clean loans. The amount of loan is placed at the borrowers disposal in lump sum for the period agreed upon, and the borrowing customer has to pay interest on the entire amount. Thus the borrower gets a fixed amount of money for his use, while the banker feels satisfied in lending money in fixed amounts for definite short periods against a satisfactory security

3. ACCOUNT DEPOSIT DEPARTMENT: It controls the following activities: a) b) a) b) A/C opening. Issuance of cheque book. Current a/c Saving a/c

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c) d)

Cheque cancellation Cash

Account opening The opening of an account is the establishment of banker customer relationship. Before a banker opens a new account, the banker should determine the prospective customers integrity, respectability, occupation and the nature of business by the introductory references given at the time of account opening. Preliminary investigation is necessary because of the following reasons. i. ii. iii. iv. Avoiding frauds Safe guard against unintended over draft. Negligence. Inquiries about clients. There are certain formalities, which are to be observed for opening an account with a bank. Formal Application Introduction Specimen Signature

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1. 2. 3.

Minimum Initial Deposit Operating the Account Pay-In-Slip Book Pass Book Issuing Cheque Book

a) Qualification of Customer The relation of the banker and the customer is purely a contractual one, however, he must have the following basic qualifications. He must be of the age of majority. He must be of sound mind. Law must not disqualify him. The agreement should be made for lawful object, which create legal

relationship Not expressly declared void.

b) Types of Accounts Following are the main types of accounts 1) Individual Account

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2) 3)

Joint Account Accounts of Special Types Partnership account Joint stock HBL account Accounts of clubs, societies and associations Agents account Trust account

Executors and administrators accounts Pak rupee non-resident accounts Foreign currency accounts1

Issuing of cheque book: This department issue cheque books to account holders. Requirements for issuing cheque book a) The account holder must sign the requisition slip b) Entry should be made in the cheque book issuing book

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c) three rupees per cheque should be recovered from a/c holder if not then debit his/her account.

Current account These are payable to the customer whenever they are demanded. When a banker accepts a demand deposit, he incurs the obligation of paying all cheques etc. drawn against him to the extent of the balance in the account. Because of their nature, these deposits are treated as current liabilities by the banks. Bankers in Pakistan do not allow any profit on these deposits, and customers are required to maintain a minimum balance, failing which incidental charges are deducted from such accounts. This is because the depositors may withdraw Current Account at any time, and as such the bank is not entirely free to employ such deposits.

Until a few decades back, the proportion of Current Deposits in relation to Fixed Deposits was very small. In recent years, however, the position has changed remarkably. Now, the Current Deposits have become more important; but still the proportion of Current Deposits and Fixed Deposits varies from bank to bank, branch to branch, and from time to time. Saving account Savings Deposits account can be opened with very small amount of money, and the depositor is issued a cheque book for withdrawals. Profit is paid at a flexible

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rate calculated on six-month basis under the Interest-Free Banking System. There is no restriction on the withdrawals from the deposit accounts but the amount of money withdrawn is deleted from the amount to be taken for calculation of products for assessment of profit to be paid to the account holder. It discourages unnecessary withdrawals from the deposits. In order to popularize this scheme the State Bank of Pakistan has allowed the Savings Scheme for school and college students and industrial labor also. The purpose of these accounts is to inculcate the habit of savings in the constituents. As such, the initial deposit required for opening these accounts is very nominal. Cheque cancellation: This department can cancel a cheque on the basis of; a) b) c) d) Post dated cheque Stale cheque Warn out cheque Wrong sign etc

Cash This department also deals with cash. Payment of cheques, deposits of cheques etc.

4.

AgriFinance Department

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At HBL Agri Finance we understand the peaks and troughs of farming. Thats why we have designed our lease, loan and hire-purchase agreements to match your income situation. On an arable or dairy farm, for example, cash flow is tight early in the year when you are buying stock and feed. You may have a surplus at harvest time or when you receive the single farm payment. We simply arrange to take high repayments when cash flow is good and lower ones at quieter periods. If necessary, you can even hold off payments during periods when your income is under pressure. Flexible loan Our lease, loan and hire-purchase agreements do not just apply to farms. We also help finance equipment used by local authorities, landscape gardeners and sports clubs in caring for grounds. Unlike buying equipment outright, this allows you to spread your payments over several yearly budgets. If club membership is an issue, it means you can spread costs fairly between present and future members. For more information, contact your local HBL Agri Finance Area sales executive

Multiple equipment purchase


Page 3 If you need a range of different pieces of equipment or vehicles over period of time, we may be able to arrange a credit line for you. We can make an agreed amount of finance available to you to draw down (take) as you need. Ask your Agri Finance area sales executive about credit lines and agency purchasing.

Outright purchase

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If you want to buy equipment outright, our hire-purchase agreement is the flexible and cost-effective alternative to overdrafts or term loans. Full ownership passes to you at the end of the agreed term. On the other hand, with a loan agreement, you will own the equipment from the beginning. This can be useful in grant-aided projects, for example, where you need an invoice in your own name. Hire purchase and loan agreements offer: fixed repayments, making budgeting easy; repayments which you can time to suit the income pattern Of your farm; the option to claim capital tax allowances on the equipment; interest on your repayments which is tax-deductible ; A flexible deposit; VAT which you can claim back immediately on the whole purchase Price (except for motor vehicles); and with a hire-purchase agreement, no need for extra security or to repay On demand (unlike bank loans). Ask your HBL Agri Finance area sales executive to explain The benefits to you in detail.

Lease agreements
Leasing is an efficient way of paying for the use of equipment over a set Period of time. You negotiate the purchase of the equipment you want and we will pay The supplier and keep legal ownership of the equipment. You then rent the equipment from us over an agreed term - from five up to seven years for tractors. You can then choose from the following options. Carry on using the equipment for a small yearly rental fee.

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Sell the equipment as our agent and keep all the sales proceeds. Trade it in as a repayment against new equipment. Other benefits of leasing include: Fixed rentals making budgeting easy; Rentals you can time to suit your income; Using the equipment just as if you owned it; Rentals which are fully tax-deductible (except for motor vehicles); Using an overdraft facility for other purposes; You do not usually need extra security which you would for a bank loan; And a flexible first rental payment. Your HBL Agri Finance sales executive will tell you more about The benefits of leasing. Talk to your accountant about which leasing

Product is most suitable for you. The key to our success is our focus and dedication to agriculture. We know that our business depends on farming - a unique industry with unique problems and challenges. As a result, we make it our business to understand the needs of Irish farmers. Our field service is one of a kind - a team of dedicated area sales executives, covering the whole country and backed by teams at regional offices. Our nationwide network of branches means we understand the rural economy. We always try to make sure our service and products meet your needs. We work with agricultural dealers and manufacturers to provide a quality service to the farming community.

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Agriculture finance is defined as a subset of rural finance dedicated to financing for agricultural related activities viz. input supply, production, processing, and marketing. understood as the outstanding practice in the particular process or function, i.e. producing the best results, among those in the same industry. Rural finance, as defined by the World Bank(WB Report-2004), includes a range of financial services such as savings, credit, payments and insurance to rural individuals, households, and enterprises, both farm and non-farm, on a sustainable basis. It includes financing for agriculture and agro processing/agribusiness. Microfinance is the provision of financial services for poor and low income people and also covers the lower ends of both rural and agriculture finance. It includes financing
both in rural and urban areas. Consistent with these operational distinctions, agricultural microfinance can be defined as referring to the overlap of agriculture finance andmicrofinance dedicated to providing financial services to poor agricultural households.

Importance of AgriFinance
Availability of agrifinance is a prerequisite for enhancing productivity and improving standard of living by breaking the vicious circle of poverty of small farmers. It has been observed that farmers usually utilize the credit facility to meet short term credit needs mostly for purchase of inputs. The banks are also interested in extending short term credit. The experience of developed economies shows that agri/rural credit for investment in the form of machinery, equipment and

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infrastructure has played major role in increasing productivity and future cash flows. Therefore, banks need to increase the supply of credit in the form of medium to long term investment in the farm and nonfarm sector. Farmers can also avail the opportunity to transform their lands into mechanized farming units to reduce cost and increase profitability.

Finance Department

Structure of the Finance Department Officer (CEO)


Departmental hierarchy Ayaz Ahmed
Treasurer Chief Financial Officer (CFO) Finance director Investment G.E Accountant Executive

Chief Executive

Budgeting G.E

Auditor Executive 77

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Functions of the Finance Department

Accounting system of the HBL


HBL has some accounting system's functions Balance inquire Product inquire Transaction history Statement requests

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Cheque book request Stop payment Pay order / DD request Balance certificate Fund transfers A/ C maintains Verification / generation / change of TPIN numbers Utility bill payments These are some detailed of these During the course of daily business of the branch, a number of cheques are presented by customer for cash payment, though transfer, delivery and clearing cheques at the counter. Also a number of new accounts are opened and cash is deposited by the customers. A number of new vouchers are passed by the branch by debiting, one account and crediting another account.

So in order to ensure that during the day all the transactions have properly been recorded and they are complete in all respects and are recorded in proper books by the branch this recording is done on daily basis and maintained by account section. Balancing the cash book means that all the transactions have properly been recorded and there is no mistake in any of these vouchers. Arrangement of voucher.

Preparation of suplimentaries.

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Preparation of summary.

Agreement of total of the summary, with the total of transfer book.

To Judge the performance of branches, the Head Office requires periodic statements from them. Through these statements the top management watches the progress of the branches and they provide them necessary guidance, The top management decisions depend upon these statements also. The following are the important statements prepared by the account section: Balance sheet on daily basis.

Pak account on daily basis.

Provisional income and expenditure statement on monthly basis.

Finance system of the HBL


Demand finance Fixed assets financing (FAF) House Finance Running finance Cash Finance

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Musharika Financing LMM Finance (Local Manufactured Machinery) Hire Purchase Financing Bridge finance

Mobilization of funds
The business of accepting deposits of money and lending and/or investing of such monies is an activity governed by specific laws. The Central Bank has, in terms of the provisions of the Banking Act No. 30 of 1988 or the Finance Companies Act No. 78 of 1988, authorized the following three categories of institutions to carryon such business: Licensed commercial banks Licensed specialized banks Registered finance companies

Only the following categories of institutions/organizations are exempted from the requirement to obtain a license from the Central Bank for the purpose of carrying on the business of.

By these activitires we can mobilized our bank' funds Improving member services and patronage Consider use of outside funding Improving operating efficiency

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Promoting patronage Giving priority to mobilizing member funds Too much institutional capital

Cooperatives need to find ways to increase member funding, since this provides the lowest cost, lowest risk form of capital for operations and investment. As government and donor support continues to decline, increasingly this also becomes the only practical source of funding for cooperatives. Even where outside support is still available, the advantage of increased reliance on member funding is that it gives greater autonomy to the cooperative and lowers the risk of eventual withdrawal of outside funding. The strategy for increasing member funding depends on the particular circumstances of the cooperative, the type of activity it is engaged in and its scale of operation. Among the strategies to consider are:

Improving member services and patronage


Most strategies for cooperative development require increased funds. The strategy for developing the cooperative so that it maintains or expands its market position should focus on operational efficiency and on patronage, on how the cooperative can maintain existing business and attract more business and new members. Increased patronage provides an important source of member capital. However, it also usually requires more working capital for the operation of the business of the cooperative and may require more investment in fixed assets such as buildings and equipment.

Consider use of outside funding

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In simple terms, the higher the institutional and member capital, the more outside lenders such as HBL and suppliers will be willing to loan funds to the cooperative. Care should be taken in borrowing, however since the higher the outside funding as a proportion of funds used, the higher the risk if something goes wrong. (This risk is measured by the gearing ratio - an increased gearing ratio meaning a higher risk). If more funds are required, a low gearing ratio can be maintained if member contributions are also increased. For example, if the cooperative owns $1000 and needs an additional $1000, it will be highly geared (50% gearing ratio 4) if all funds come from a loan. Alternatively, if the cooperative raises an additional $500 from member funding, the sum to be borrowed would be lower The gearing ratio would then be 25% 5 representing a considerably lower risk. It is also easier to find a bank or other lender willing to provide the less risky loan. The interest rate will also often be lower
4

i.e. gearing ratio = 1000 (1000 + 1000) 100 = 50% i.e. gearing ratio = 500 (1500+ 500) 100 = 25%

Improving operating efficiency


Improving efficiency can be important for the mobilization of funds. It enables a cooperative to offer more competitive prices, securing and keeping member loyalty. Funding and efficiency are related. Cooperatives with sufficient funds are able to invest in training and technology to reduce costs, and to increase or improve production. Well managed, technologically efficient cooperatives are generally more likely to accumulate capital.

Promoting patronage

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The more members use the cooperatives services - that is by selling through or buying from the cooperative - the more funds the cooperative will receive. It is therefore important for the cooperative to promote patronage. This is most easily achieved when

cooperatives provide services valued by members, offer competitive prices and prompt payment.

Giving priority to mobilizing member funds Most cooperatives will have to rely on member generated funds to finance their operations. Members financial stakes in the cooperative enforce greater accountability of the cooperative to members, build member participation in decision making and strengthen cooperative financial self-reliance and operational autonomy. There are a number of ways in which member funds are obtained. In many cases, increased levels of funding can be achieved through adjusting these methods: Non-refundable membership fees upon joining

These fees are often small, but they need not necessarily be so if new members are buying into a successful business that provides valuable services. Member shares

All members are required to purchase shares, which are usually the primary source of member capital. Shares purchased should earn interest and are refundable to the member upon withdrawal from membership or to his/her heirs in the event of the members death.

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Shares in some cooperatives can be paid for over time through check-offs from a members transactions with the cooperative. The members share account is credited with the amount of the deduction. Many changes in cooperative financing are underway in Europe. These have included the issue of new classes of shares in addition to member shares, that are weighted on the .asis of one share, one vote, providing control and governance incentives that result from cooperative solidarity but not necessarily by the traditional ownership structure. This technique can attract additional members and capital from those who would otherwise not be willing to contribute their capital due to their relative lack of control when capita entitles each member to only one vote regardless of the members investment in the cooperative. Other changes involve the use of limited company forms of organization for certain activities undertaken for the benefit of cooperatives and their members. These activities may include wholesale or other large scale marketing activities.

Retention of surplus.

A surplus arises when the cooperative is able to retain some of the proceeds from sales of members produce or from members purchases from the cooperative. This surplus can either be retained by the cooperative as institutional capita, or paid out in patronage refunds to members following the close of each year In practice, cooperatives often offer prices more favourable than those prevailing in the market, creating little surplus and making it impossible to offer patronage refunds. In other cases, cooperatives are protected by governments and do not operate in competitive markets, making any surplus unrelated to competitive performance.

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Whenever possible, these practices should be altered either to build up surpluses or increase patronage refunds and attract new members. Deferred payments

A surplus creates two opportunities for increasing capital available to a cooperative. One is the surplus retained, and the other is the patronage refund that is allocated but not immediately paid out in cash. During the period between the realisation of the surplus and the cash pay-out of patronage refunds, the cooperative has the use of the cash. Payout may take the form of a share or of an obligation to pay the member in the future. Cooperatives in North America have been particularly creative in finding ways of retaining cash while allocating surpluses. The usual procedure is to issue notes payable over several years, such as five or seven. The member receives a portion of the allocation each year, while the cooperative is able to rotate its capital over the same period. Making member delivery rights transferable

In certain new processing and marketing cooperatives in North America the foundermembers can purchase delivery rights which guarantee that the cooperative will purchase a given amount of produce each year. They also oblige the member to provide a certain amount of produce. These rights are freely transferable, which gives them a market value. This feature gives members an incentive to behave in a manner that maintains and increases the market value of their rights. Too much institutional capital For the majority of cooperatives in developing countries, the possibility of accumulating too much institutional capital any time soon is small. However, members should be 86

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aware that it is actually possible for the original purpose of the cooperative to be lost if the amount of institutional capital becomes too large. This may result in the exclusion of new members, because present members do not want others to benefit from the services provided and surpluses produced by the capital accumulated. It may lead to strategies for intentional losses so that the capital accumulated returns to the members in the form of unrealistic prices for services. It may also lead to the conversion of the cooperative to another legal form, such as a limited company While this may benefit existing members by providing them with higher incomes, the members should be aware that many of the ideals of a cooperative may be lost in the process.

Generation of funds
The HBL can generated the funds by these sources Making Finances Investing in various financial markets

By giving these facilities to their customers we can generates the funds


Positive Return on Loan


Provision of Working Capital Shifting of funds into Productive Hands Strengthening Industrializations Backbone of National Economy

Lending Products: Running Finance Cash Finance

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Demand Finance Consumer Finance PAD

Investment in Financial Markets: The investment functions are usually performed by Treasury Office of the bank. Treasury invests deposit for: Ensuring optimum utilization of Available resources. Rising additional resources required for Meeting credit demands. Managing market and liquidity risks.

Investment Markets
By investing the HBL in the investment market generat the funds easly and efficiently that a good place for generating the funds by invests the money. These are three Markets

Money Market
1. T-Bill and Govt. Securities 2. Bonds of Provincial Govt. 3. Defense Saving Certificates 4. Mutual Funds etc.

Capital Market
1. Equities e.g. shares and 2. Mutual Funds 88

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3. Bonds 4. Debt Market

Foreign Exchange Market


1. Spot Transactions 2. TOM Transactions 3. Outright Transactions 4. Swap Transactions

Sources of funds
Banks require funds to support lending. Banks lend to home buyers, credit card customers, small and medium businesses and institutional clients. Banks source their funds from customer deposits and wholesale markets (domestic and international). Since the onset of the global financial crisis in late 2007, bank funding costs have become a topic of considerable discussion given their link to retail interest rates. The deposits are the major sources for a commercial bank. There are two kinds of deposits in a bank including checkable deposits and non-transaction deposits. Checkable deposits form 9% of the all sources of funds and non- transaction deposits form 61% of all sources of funds. The other sources of funds for a bank are borrowings from other banks and bank capital which almost makes 24% and 6% of the total sources of funds respectively. When examining banks funding, it is important to recognize that it is not free and the price of funding varies according to a range of factors.

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For most of the last decade, banks funding sources and the cost of funding has been relatively predictable. Movements in the Reserve Banks cash rate have generally closely approximated changes in total bank funding costs. Since the global capital markets crisis in late 2007, the Reserve Banks cash rate has not provided an accurate indicator of changes in bank funding costs. By providing an overview of bank funding, the paper aims to help explain why this is the case. Over the past year, financial markets have experienced a serious global financial event, triggered by the US sub-prime lending market

For banks, the global credit crisis has made it more difficult to access funds and those funds are more expensive No-one is predicting a quick end. There is a possibility that it may take two years to see conditions in financial markets stabilize.

Debt markets
In terms of funding access, for well-rated institutions (i.e. those with strong credit ratings) borrowing money in their own name, there is generally sufficient liquidity in the global debt markets. However, prices remain elevated.

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Funding bank lending through securitization markets, however, is very strained. There is very little issuance occurring

Funding
About 50% of banks funding comes from deposits; a further 25% from short-term wholesale funding, and 25% from long-term wholesale funding. Wholesale funding comes both from domestic and global financial markets (splits will vary from bank to bank). Short-term funding (excluding bills of exchange) constitutes 64% domestic issuance and 36% offshore issuance. For long-term funding the spit is 25% domestic issuance and 75% offshore issuance. (These proportions vary between banks.) Short-term funding costs have been volatile since August 2007. On several occasions the 90-day Bank Bill Swap Rate (BBSW)1 spiked sharply (August 2007, September 2007, December 2007, February 2008, March 2008, June 2008, September 2008 and October 2008). Long-term funding costs remain elevated with no evidence of easing.

Since the onset of the financial crisis, net flows into deposit accounts have been strong, particularly higher yielding personal investment accounts. Balances in these accounts have increased 19% (annualized) compared to 1% for lower yielding personal transaction accounts.

Market interest rates and the cash rate

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A number of factors influence interest rates including changes in the official cash rate, inflation expectations, credit ratings and the broader global financial environment. Under normal circumstances, cash rate changes are expressly linked to market interest rate changes. Over the past year, however, global events have had a greater influence on market rates.

Interest Rate Margins

Banks interest rate margins continue to contract. Interest rate margins for

Australian banks have contracted at a slightly faster pace since the beginning of the global financial crisis.

1. Global environment
Over the past year, financial markets have been in the midst of a serious global financial event caused by the sub-prime crisis in the USA. The Reserve Bank has commented on the large increase in the delinquency rate on US sub-prime mortgages which had grown to about 18 per cent of housing loans in the US. Also, of the $US2 trillion of US residential mortgage backed securities (RMBS) issued to investors in 2006; around a quarter were backed by sub-prime mortgages. As a result of the global credit crisis, there was a sharp decline in investor appetite for RMBS, even those of the highest credit quality. The Reserve Bank said that the increase in risk aversion, and the existence of considerable uncertainty about where the spreads on these securities will settle, has meant that traditional investors in RMBS have preferred to wait until more settled conditions return. This increased risk aversion has significantly increased the cost of short-term and long-term funds sourced by financial institutions internationally and in Australia.

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Additionally, there has been considerable volatility in the cost of funds. Financial experts are not predicting a quick end to the current financial scenario, with some suggesting it will take up to two years to see financial market conditions stabilize, though there is still uncertainty over whether funding costs will return to the lower levels they have been in the past. 2. Overview of bank funding Generally speaking, banks source their funds from deposits (50%) and through wholesale funding, that is, short-term wholesale funding (25%) and long-term wholesale funding (25%), in both the domestic and global markets (this split will vary from bank to bank). Short-term funding relates to borrowings for up to 12 months while long-term funding includes borrowings of greater than 12 months. Banks borrow money from global financial markets to facilitate lending to Australian businesses and households. Borrowing costs for banks short-term and long-term funding requirements have increased significantly as a result of the current global financial crisis. The price or cost that banks pay for funds depends on many factors. These include: changes in the official cash rate; competition; international events; the credit rating of the bank; and the supply of wholesale funds. Banks must pay for all funding either though paying deposit interest rates or paying interest on domestic and global debt. Therefore, to determine a banks cost of funds it is important to conduct a detailed analysis of all funding components and how these are changing. This is discussed further below.

3. State of the debt markets

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For banks with a strong credit rating (i.e. AA or A) wanting short-term funding, there is generally good liquidity in debt markets but prices remain elevated when compared with levels prior to the financial crisis.

For term funding, markets have been very difficult to access and issuance by banks has been very low, particularly in the most recent months. Spreads are now at very high levels.

Banks rated BBB+ are finding it more difficult to access longer-term funding and are concentrating more on short-term funds, private placements and deposit growth. Securitization markets continue to see very low issuance levels. Much of the Australian issuance was to the US. Investor interest in securitized assets has virtually dried up. Recent initiatives designed to stimulate debt markets include:

guarantee of banks term funding; deposit guarantees; and Widening the range of securities eligible for its repurchase operations (repos) by

the RBA. These initiatives align Australias response within the context of the broader global initiatives which are aimed at resolving the financial crisis.

4. Funding
Banks source funds from deposits and through wholesale funding - short-term and long-term funds in both the domestic and global financial markets. When the term of any funding arrangement expires, either in domestic and global

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markets, banks have to re-finance. Since the onset of the global financial crisis, wholesale funding costs have increased significantly. Furthermore, interest rate volatility has increased on these markets and it is widely reported considerable uncertainty will remain over the next year at least. Due to the protracted nature of the sub-prime crisis, pressures in financing from the wholesale market continue. ABS Financial Accounts shows retail deposits constitute 49% ($665 billion) of bank funding as at June 2008. Wholesale funding accounts for 51% or $703 billion. Of the short-term funding, excluding bills of exchange (which are not classified by domestic/offshore), short-term funding is 64% domestic and 36% offshore. For long-term funding, 25% is domestic and 75% offshore. The 90-day bank bill swap rate is commonly viewed as the short-term funding cost benchmark in the market. The divergence (i.e. spread) of the 90-day from a market indicator of the cash rate can indicate changes to the banks short-term funding costs. This cash rate market indicator is called the 90-day Overnight Index Swap rate (90-day OIS). The 90-day OIS is a traded instrument by large treasuries. Its value reflects the expectation of where the cash rate will be in 90 days (its like a futures contract). Analyzing the spread between the 90-day and the 90-day OIS provides a broad measure of changes to banks short-term funding costs. This spread reflects market conditions as interest rates incorporate both credit premiums and liquidity in financial markets. Changes in these measures also reflect banks product pricing and risk management. The chart below shows that the cost of short-term funds has been volatile since August 2007. On numerous occasions the 90-day has increased significantly (August 2007, September 2007, December 2007, February 2008, March 2008, June 2008, September 2008 and October 2008). Banks short-term funding costs (i.e. over and above the 90-day OIS) have 95

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significantly increased since the global financial crisis. The chart shows that prior to August 2007, the cost above the 90-day OIS was about 8-10 basis points. After August 2007, this spread reached a high of 144 basis points in early October 2008. Longer term funding costs continue to stay high with little evidence of easing. The chart below shows the spread to swap2 for banks three-year term funding. Recent pricing for bank issuance remains about 175 bps above swap for three- year terms. The widening spreads for long term funding are detailed in The Sheet (18 August 2008): As for the cost of longer term funding, the credit spreads the banks have to pay on their borrowings have been moving steadily wider since the credit crunch began. In the domestic market, this is best exemplified in the two and four year parts of the curve. Bond issuance in May attracted a spread of 47 bps and 95 bps for two and four years respectively.

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Critical analysis
Financial analysis is the process of identifying the financial strengths and weakness of the firm by properly establishing relation ship between the items of balance sheet and profit and loss account, in order to make rational decision in keeping with the objective of the organization, for that purpose the management use analytical tools. To evaluate the financial condition and performance of the business entity, the financial analyst needs to perform "checkups" on various aspects of the business financial health. A tools frequently used during these checkups is a financial ratio analysis, which relates two piece of financial data by dividing one quantity by the other we calculate ratios because in this way we get a comparison that may prove more useful than the raw number by themselves. The business itself and outside providers of capital (creditors and investors) all undertake financial statement analysis. The type of analysis varies according to the specific interest party involved. The nature of analysis is depending at the purpose of analyst.

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Balance Sheet As at December 31, 2008 2006 2007 2008 Rupee's in 000 cash and balances with treasury banks balances with other banks lendings to financial institutions investment-net advances-net operating fixed assets deferred tax assets-net other assets-net 32465976 6577017 21081800 63486316 198239155 9054156 172373 11031450 342108243 39683883 3807519 1051372 113089261 218960598 16024123 0 17868761 410485517 39631172 4043100 4100079 96256874 262510470 17263733 0 19810476 443615904

Liabilities Bills payable borrowings deposits and other accounts sub-ordinate loan liabilities against assets subject to finance lease deferred tax liabilities-net other liabilities 7089679 23943476 257461838 1597440 0 0 11171496 301263929 Net assets Represented by: Share capital Reserves Unappropraited profit Surplus on revaluation pf assets-net of tax 5463276 24662426 5530973 35656675 5187639 6282768 34000638 5130750 45414156 9705519 6282768 36768765 9193332 52244865 6191189 40844314 10479058 39406831 292098066 479232 0 1180162 11722493 355365842 55119675 10551468 22663840 330274155 0 0 437137 21253250 385179850 58436054

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40844314

55119675

58436054

Profit and Loss Account For the year ended December31, 2008. Mark-up/ return / interest earned Mark-up/ return / interest expensed Net mark-up/ interest income Provision for diminution in the value of investments-net Provision against loans and advances-net Bad debts written off directly Net mark-up/ interest income after provision Non mark-up/ interest income Fee, commission and brokerage income Dividend income Income from dealing in foreign currencies Gain on sale of securities-net Unrealized loss on revaluation of investments classified as held for trading Other income-net Total non-mark-up/ interest income Non-mark-up/ interest expense Administrative expenses Other provisions/ (reversal)-net Other charges Total non-mark-up/ interest expense Extra ordinary/ unusual item Profit before Taxation Taxation - Current year - Prior years - Deferred 6482592 11411 66708 6560711 0 18500670 5701443 593497 63332 6358272 Profit after Taxation 12142398 5426116 -3743 573830 5996203 0 21308035 6442356 -1294473 894590 6042473 15265562 7546878 10120 830839 8387837 0 21867566 7341257 -864824 16533 6492966 15374600 570505 4991416 25061381 -13105 1000149 6448227 27304238 -103198 942362 5791440 30255403 2311235 811801 692010 605865 2634610 632300 693408 1500865 2866729 617554 727564 740429 2006 25778061 4525359 21252702 121197 1014540 47000 1182737 20069965 2007 31786595 7865533 23921062 105269 2959583 199 3065051 20856011 2008 40043824 11560740 28483084 2683994 1335127 0 4019121 24463963

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Unappropriated profit brought forward Transfer from surplus on revaluation of fixed assets-net of tax

4990260 32166 5022426

5530973 11855 5542828 20808390 24.3

5130750 21319 5152069 20526669 24.47

Profit available for appropriation Basic and diluted earnings per share - after tax Balance Sheet Vertical Analysis

17164824 23.4

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Balance Sheet As at December 31, 2008 2007 2008 2007 % cash and balances with treasury banks balances with other banks landings to financial institutions investment-net advances-net operating fixed assets deferred tax assets-net other assets-net 39683883 3807519 1051372 113089261 218960598 16024123 0 17868761 410485517 39631172 4043100 4100079 96256874 262510470 17263733 0 19810476 443615904 9.67 0.93 0.26 27.55 53.34 3.90 0.00 4.35 100.00 2008 % 8.93 0.91 0.92 21.70 59.18 3.89 0.00 4.47 100.00

Liabilities Bills payable borrowings deposits and other accounts sub-ordinted loan liabilities against assets subject to finance lease deferred tax liabilities-net other liabilities 10479058 39406831 292098066 479232 0 1180162 11722493 355365842 Net assets Represented by: Share capital Reserves Unappropraited profit Surplus on revaluation pf assets-net of tax 6282768 34000638 5130750 45414156 9705519 55119675 6282768 36768765 9193332 52244865 6191189 58436054 55119675 10551468 22663840 330274155 0 0 437137 21253250 385179850 58436054 2.95 11.09 82.20 0.13 0.00 0.33 3.30 100.00 2.74 5.88 85.75 0.00 0.00 0.11 5.52 100.00

Balance Sheet Horizontal Analysis

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Balance Sheet As at December 31, 2008 2006 2007 2008 2006 Rupee's in 000 % cash and balances with treasury banks balances with other banks lendings to financial institutions investment-net advances-net operating fixed assets deferred tax assets-net other assets-net 32465976 6577017 21081800 63486316 198239155 9054156 172373 11031450 342108243 39683883 3807519 1051372 113089261 218960598 16024123 0 17868761 410485517 39631172 4043100 4100079 96256874 262510470 17263733 0 19810476 443615904 100 100 100 100 100 100 100 100 100 % 22.23 -42.11 -95.01 78.13 10.45 76.98 -100.00 61.98 19.99 % 22.07 -38.53 -80.55 51.62 32.42 90.67 -100.00 79.58 29.67 2007 2008

Liabilities Bills payable borrowings deposits and other accounts sub-ordinted loan liabilities against assets subject to finance lease deferred tax liabilities-net other liabilities 7089679 23943476 257461838 1597440 0 0 11171496 301263929 Net assets Represented by: Share capital Reserves Unappropraited profit Surplus on revaluation pf assets-net of tax 5463276 24662426 5530973 35656675 5187639 40844314 6282768 34000638 5130750 45414156 9705519 55119675 6282768 36768765 9193332 52244865 6191189 58436054 40844314 10479058 39406831 292098066 479232 0 1180162 11722493 355365842 55119675 10551468 22663840 330274155 0 0 437137 21253250 385179850 58436054 100 100 100 100 100 100 100 100 47.81 64.58 13.45 -70.00 0.00 0.00 4.93 17.96 48.83 -5.34 28.28 -100.00 0.00 0.00 90.25 27.85

Vertical Analysis

Profit and Loss Account

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For the year ended December31, 2008. Mark-up/ return / interest earned Mark-up/ return / interest expensed Net mark-up/ interest income Provision for diminution in the value of investments-net Provision against loans and advances-net Bad debts written off directly Net mark-up/ interest income after provision Non mark-up/ interest income Fee, commission and brokerage income Dividend income Income from dealing in foreign currencies Gain on sale of securities-net Unrealized loss on revaluation of investments classified as held for trading Other income-net Total non-mark-up/ interest income Non-mark-up/ interest expense Administrative expenses Other provisions/ (reversal)-net Other charges Total non-mark-up/ interest expense Extra ordinary/ unusual item Profit before Taxation Taxation - Current year - Prior years - Deferred Profit after Taxation Unappropriated profit brought forward Transfer from surplus on revaluation of fixed assets-net of tax Profit available for appropriation Basic and diluted earnings per share - after tax

2007 31786595 7865533 23921062 105269 2959583 199 3065051 20856011

2008 40043824 11560740 28483084 2683994 1335127 0 4019121 24463963

2007 100 24.745

2008 100 28.87

0.3312 9.3108 0.0006 65.613

6.7026 3.3342 0 61.093

2634610 632300 693408 1500865 -13105 1000149 6448227 27304238 5426116 -3743 573830 5996203 0 21308035 6442356 -1294473 894590 6042473 15265562 5530973 11855 5542828 20808390 24.3 Horizontal Analysis

2866729 617554 727564 740429 -103198 942362 5791440 30255403 7546878 10120 830839 8387837 0 21867566 7341257 -864824 16533 6492966 15374600 5130750 21319 5152069 20526669 24.47

40.858 9.8058 10.753 23.276 -0.2032 15.51 100

49.499 10.663 12.563 12.785 -1.7819 16.272 100

35.545 -0.0245 3.759 39.279 0 139.58 42.202 -8.4797 5.8602 39.582 100

49.087 0.0658 5.404 54.556 0 142.23 47.749 -5.625 0.1075 42.232 100

Profit and Loss Account

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For the year ended December31, 2008.

2006 2577806 1 4525359 2125270 2

2007 3178659 5 7865533 2392106 2

2008 4004382 4 1156074 0 2848308 4

200 6

2007

2008

Mark-up/ return / interest earned Mark-up/ return / interest expensed Net mark-up/ interest income

100 100 100 100

23.31 73.81 12.56

55.34 155.47 34.02 2114.5 7 31.60 -100.00 239.82 21.89 24.03 -23.93 5.14 22.21

Provision for diminution in the value of investments-net Provision against loans and advances-net Bad debts written off directly

121197 1014540 47000 1182737 2006996 5 2311235 811801 692010 605865

105269 2959583 199 3065051 2085601 1 2634610 632300 693408 1500865 -13105

2683994 1335127 0 4019121 2446396 3 2866729 617554 727564 740429 -103198 942362 5791440 3025540 3 7546878 10120 830839 8387837 0 2186756 6 7341257 -864824 16533 6492966 1537460 0 5130750 21319 5152069 2052666 9 24.47

100 100 100 100 100 100 100 100 100

-13.14 191.72 -99.58 159.15 3.92 13.99 -22.11 0.20 147.72

Net mark-up/ interest income after provision Non mark-up/ interest income Fee, commission and brokerage income Dividend income Income from dealing in foreign currencies Gain on sale of securities-net Unrealized loss on revaluation of investments classified as held for trading Other income-net Total non-mark-up/ interest income

570505 4991416 2506138 1 6482592 11411 66708 6560711 0 1850067 0 5701443 593497 63332 6358272 1214239 8 4990260 32166 5022426 1716482 4 23.4

1000149 6448227 2730423 8 5426116 -3743 573830 5996203 0 2130803 5 6442356 -1294473 894590 6042473 1526556 2 5530973 11855 5542828 2080839 0 24.3

100 100 100 100 100 100 100

75.31 29.19 8.95 -16.30 -132.80 760.21 -8.60

65.18 16.03 20.73 16.42 -11.31 1145.4 9 27.85

Non-mark-up/ interest expense Administrative expenses Other provisions/ (reversal)-net Other charges Total non-mark-up/ interest expense Extra ordinary/ unusual item Profit before Taxation Taxation - Current year - Prior years - Deferred

100 100 100 100 100 100

15.17 13.00 -318.11 1312.5 4 -4.97 25.72

18.20 28.76 -245.72 -73.89 2.12 26.62

Profit after Taxation Unappropriated profit brought forward Transfer from surplus on revaluation of fixed assets-net of tax

Profit available for appropriation Basic and diluted earnings per share - after tax

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RATIO ANALYSIS
Ratio Analysis is an important and age-old technique of financial analysis. Ratios are important and helpful in the reference that:

These simplify the comprehension of financial statement and tell the whole story of changes in the financial conditions of the business. These provide data for inter-firm comparison. The ratios highlight the factors associated with successful and unsuccessful firms, also reveal strong and weak firms.

These help in planning and forecasting, these can assist management in its basic functions of forecasting, planning, coordination and control. These help in investment decision in case of investor and lending decision in case of Bankers etc.

However, the ratios are only indicators, they cannot be taken as final regarding good and bad financial position of the business other things have also to be seen.

1. RETURN ON EQUITY Dividing profit after taxation by share holders equity. ROE compares net profit after taxes to the Share holders Equity.

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This ratio is calculated as:

ROE=Profit after taxes/Share holders Equity

2008 2007

= =

29.42% 33.61%

2. RETURN ON ASSETS: This ratio shows the efficiency of organization that how efficiently utilizes their assets. This ratio relates profits to assets. It is calculated as: Profit after Tax/Total Assets

2008 2007

= =

3.60% 4.60%

3. EARNING PER SHARE:

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N.P.A.T

No. Of outstanding shares

2008 2007

= =

24.47% 24.30 %

4. RETURN ON DEPOSIT:

N.P.A.T * 100

= =

Total Deposit

2008 2007

4.65 % 5.22 %

5.

CASH/DEPOSIT RATIO:

This ration is obtained by dividing cash by current liabilities / liabilities. This ratio shows that the cash is enough for payment of current liabilities or not. It is calculated as cash Ratio=Cash/current liabilities Or =Cash/Total Deposit

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2008 2007

= 11.99 % = 13.58 %

6. INTEREST INCOME/TOTAL INCOME RATIO:

Interest Income

= =

Total Income

2008 2007

87.36 % 83.13 %

7. NET PROFIT MARGIN: This ratio measure the firms profitability of sales/ interest earned after taking account of all expenses and income taxes. This ratio can be calculated as: Net profit margin ration= Net Profit after taxes / interest earned *100

2008 2007

= =

33.54% 39.92 %

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8. AVERAGE PROFIT PER BRANCH:

Profit Net

= =

No. Of Branches

2008 2007

Rs. 14,984,990.25 Rs. 14,878,715.4

9. OPERATING EXPENSE RATIO: Non markup expense

= =

Gross income

2008 2007

27.72 % 21.96 %

10. TOTAL ASSET TURNOVER:

Interest/markup earned*100

= 9.02 %

Total asset

2008

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2007

7.74 %

11. RISK ASSETS TURNOVER:

Net interest income after provision

Risk assets

2008 2007

= =

65.98 % 68.11%

12. ADVANCES TO TOTAL DEPOSITS: This ratio show that how much efficiently the bank advances the deposits of their customer to borrower. It is calculated as. Advances deposit ratio = Advances/ deposit

2008 2007

= =

79.48 % 74.96 %

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13. DUE FROM BANK TO DUE FROM BANK:

Landing to financial institution* 100 institution

18.09 % 2.66 %

Borrowing

from

financial

2008 2007

= =

Organization analysis in comparison with its industry (or with its competitors) Competitive advantage spells out the uniqueness' of the organization vis--vis its competitors. so the HBL also have uniqueness in its dealing with customers and also have uniqueness in his strategy with other their competitors. Business analysis is imperative for the organization to ascertain the mood and the conditions for starting or consolidating a business venture. Business strategy analysis involves analysis of the organizational strategy to create a sustainable competitive advantage

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primary objective of competitor analysis is to understand and predict the rivalry, or interactive market behavior, between firms in their quest for a competitive position in an industry. Therefore the HBL also always analyze their competitors Banks Toward this end, researchers have examined factors that influence competitive and patterns of entry into and exit from rivals' markets However, researchers have made limited effort to investigate the prebattle competitive relationship between rivals and the extent to which it may predict rivalrous behavior in the market. This omission is due partly to the restricted conceptual treatment of competitor analysis, which has not fully incorporated the essential antecedents that affect a firm's competitive activity, let alone considered them in an integrated way. Intensity of rivalry, one of Porter's (1980) well-known five forces driving competition, has remained mainly a theoretical construct confined to the industry level. In terms of analyzing firms competing in an industry, the strategic-group far the most popular and relevant. However, researchers who use this approach have largely ignored the market context in which competitors carry on their battles and the extent to which two firms actually compete directly against each other. Although the marketing literature recognizes the importance of the market context, its contribution has been primarily in analyzing competitors and competition at the brand or individual-market level rather than at the firm level. Other approaches usually represent a high degree of abstraction and rely primarily on managers' or researchers' subjective perceptions, which often are too remote to be linked to competitive behaviors in the market Thus far, some of the most fundamental questions in competitor analysis have remained unexplored 1985). For example, how can researchers studying competition differentiate among players in an industry to explain each player's market behaviors? How can a firm, before launching an attack, assess its prebattle relationship with a given rival and the resultant likelihood that this rival would retaliate? How can a firm gauge which

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opponent is most likely to attack its markets? How can strategists differentiate among a set of competitors to allow the firm to allocate appropriate resources and attention to each? Finally, although the importance of competitor analysis and interfirm rivalry is well recognized, there has been no systematic attempt to integrate the two topics.

This article seeks to provide a conceptual link by proposing two firm-specific, theory-based constructs: the market commonality and the resource similarity between a given pair of competitors. Taking the firm as the basis for analysis, I argue that each firm has a unique market profile and resource endowment and that a comparison with a given competitor along these two dimensions will help to illuminate the competitive relationship between them and to predict how they may attack (or respond to) each other in the market. This firm-specific conceptualization also leads to the idea of competitive asymmetry, the notion that a given pair of firms may not pose an equal threat to each other. I first offer a number of propositions that use market commonality and resource similarity to predict competitive attack and response. I also propose measures to assess market commonality and resource similarity along with a demonstration of how such measures could be implemented. The article ends with a number of implications for research and practice.

Future prospects of the organization. The structure of the Banking markets has changed radically over the last decade while in contrast the futures markets more or less maintained the status quo. But now the futures markets are in catch-up mode as evidenced by the emergence of some dark pools and, Banking firms are beefing up their technology to take advantage of what is coming down the pike. For the future aspects the HBL should be make itself active and also efficient 113

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and effective in the banking field and get the competitive advantage. That when occur truly when the HBL produce new products and services to their customers. The HBL should also introduce the new technologies in the Banking field before their competitors and provide the facilities to their customers and get the customer's loyalty . The HBL should also provide the better service than their competitors and also should give the full response in the any branch. The HBL also should improve their computerized system in the bank and the bank in the future also want to trained their employees in any technology and also will provide the new technology that facilitate the customers of the HBL

SWOT analysis of organization in the business sector


HBL is considered to be a very sound bank in the financial circles. The bank where the customers can safely keep their money as long as they want. In SWOT analysis the best strategies accomplish in organizations mission by: 1.Exploiting opportunities Strengths A skill or capability that enables HBL to conceive and implement its The officers of HBL are considered as one of the most able professionals in and strengths.2.Neutralizing its threats and3.Avoiding its weaknesses. Following is a list of SWOT of HBL

strategies. the banking world.

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I observed that HBL employees interact with their clients as if they are their

personal friends and discuss about their problems as their own. HBL has got a reliable and easy to use internal computer system. Every

information regarding the transactions in customers deposits has been computerized. HBL maintained its data properly. HBL has very good security system. HBL is the larger commercial bank in Pakistan with the network of over 1439

domestic and international branches. Being the pioneer of banking in Pakistan, HBL is the oldest and is the richest HBL focuses on consumer banking by lucrative schemes, products and

in experience. services suiting best to the wants and demands of the customers.

HBL has opened all its branches at commercial areas so that the customers or The band is always on the look to improve its services both to the domestic as

clients face no problems in reaching to the bank. well as overseas customers. Human resources development and introduction of new technology towards 24 hours cash access and safe payment products for high value transaction. Having potential to encounter the competitive environment in the market. Veteran and experience private management group also involved in other

modern banking.

interests like, textile and cement industry. Customer enjoys the services at the residential localities.

Weaknesses

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Highest number of branches effecting the proper maintenance and difficulty

in providing same working environment at the each branch Poorer system of recovery of the system is a threat to bankruptcy. Lack of customer feed back. Low job satisfaction. Poor ATMs Service Inconsistency in efficiency and working atmosphere due to the largest of Sense of insecurity in the employees serving at low profitable branches due

branches. to the down sizing. Females feel uneasy in an environment among the male workers. Victim of political, legal and socio-cultural pressures .Lack of professionalism in the branch employees mostly.

Opportunities Huge untapped market potential in consumer banking In opportunity exist, in form of opening of ladies banking section within the Opportunity for developing value added services combined with corporate

branch which is entirely a new idea and it will attract customer. banking relationships, cash management services to large and medium sized corporate clients. Growing policies of government on business and commerce sector provide

HBL opportunities to take advantages of these policies to meet efficiently with the 116

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business people to solve their problems with the instant cash and financing facilities. Govt. is taking very bold steps to promote IT in Pakistan. HBL has an opportunity to improve in technology. Large international network which principally focuses on trade finance with

Pakistan can be utilized to tap trade activities in other markets. In addition, services such as cross border / offshore financing for corporate customers can be enhanced. Customer feedback on different products and accounts has really improved the bank performance and encourage the atmosphere for other future policies. HBL also has an opportunity to expand its new technological advancement

like; tele banking and internet banking facilities in order to serve the customer more efficiently, specially E-banking facility is also a new opportunity which is a flourishing business in foreign countries and can also be here, if HBL takes the initiatives. Further reduction in intermediation costs possible, with improving Due to efficient and veteran management group, HBL can also improve Ill

technology. and expand its foreign operation successfully.

Habib Bank Limited provides opportunity to utilize its skills and efficiencies

in leasing business.

Threats
An area in the environment that increases the difficulties the organizations Consolidation in the banking sector resulting in increased competition. achieving high performance.

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Shortage of trained and specialized staff at lower executive and officer levels The threat of inconsistency and government policy regarding to business and

economics sectors, specially political and regional situation which makes the environment uncertain. Growing global technological advancement. Strict regulation by government over credit facilities to the customers as Ill as Loss of confidence of overseas customers due to freezing of accounts. Facing more competition by foreign banks in the market. Foreign banks are flourishing in field of consumer financing. Also the increasing operation of private banks. Highly attractive and advance services by foreign banks to their customers.

to meet the prudential.

Conclusion & recommendations for improvement


Recommendation I Propose
1) I will give following suggestions for the better function of the Bank:

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2) 3)

The management should provide better arrangement for the employees. The daily newspapers and journals should be provided to the employees

and customers visiting there. 4) A separate hajj applications acceptance counter should be provided to

overcome inconveniences faced by the customers. 5) 6) 7) 8) A separate ladies counter should be there The Bank management should be very careful while granting the loans. Personal interests should not be given importance and customers Personal credit worthiness must be carefully scrutinized public relation

desk should be established in each and every branch for guidance as well as redresses of grievance of customers at the spot. 9) 10) policy. 11) New talent / professionals should be hired to coupe with the competitive Online Banking should be introduced in all the branches. Aggressive publicity campaign must be introduced through press and

Electronic media for new products and scheme by initiating vigorous marketing

demand in the industry. 12) Information technology should be introduce in all the branches to

enhance the efficiently. 13) The commission on government rashed enhanced / made rational to

increase the Banks profitability. 14) 15) 16) on merit. The financial statement should be made more transparent and reliable. Consumer financing should be initiated to capture the market share. Employees induction, promotion and transfer should always be made

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17)

To motivate the employees their remuneration / salaries should be made

at par with top tier Banks.

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Reference & Sources used (Should be provided in APA format)


I collect this information from, 1. Habib Bank Limited of Pakistan, Annual Reports 2. State Bank of Pakistan Prudential Regulation for Corporate and Commercial Banking. 3. State Bank of Pakistan BPRD Circulars 4. Dawn Newspapers for updated information 5. Instruction Circulars of National Bank Limited 6. Economic Reviews for Banks and their activities 7. State Bank of Pakistan, Website, http://www.sbp.gov.pk 8. Habib Bank's website, http://www.hbl.com I also visit & complete 8 weeks internship in Habib bank of Pakistan Main Chubara Road Layyah for collecting data.

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Annexes
List of Annexes

Annex 1
Overview of the organization Brief history Nature of the organization Business volume Product lines Competitors

Annex 2 Organizational structure Organizational Hierarchy chart1 Number of employees1. Main offices Comments on the organizational structure

Annex 3
Plan of your internship program A brief introduction of the branch where you did your internship Starting and ending dates of your internship The departments in which you got training and the duration of your training

Annex 4
Training program

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Introduction of all the departments Detailed description of the department you worked in OR Detailed description of the project assigned.

Annex 5
Structure of the Finance Department Department hierarchy

Annex 6 Accounting system of the organization Finance system of the organization Use of electronic data in decision making Mobilization of funds Generation of funds Sources of funds

Annex 7 Critical analysis Ratio analysis Horizontal & vertical Analysis Organization analysis in comparison with itscompetitors) Future prospects of the organization. Annex 8 SWOT analysis of organization in the business sector Annex 9 Conclusion & recommendations for improvement Reference & Sources used

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