Submitted to:

Mam talat rehman

ACKNOWLEDGEMENT

First of all we thank to ALLAH ALMIGHTY gave us this beautiful life .

We are very grateful to our respected Mam

talat rehman who

gave us this
opportunity to make the project on HABIB METROPOLITAN BANK and helping
us to having all the information about the bank

I would also thanks to my group members for co-operate .

HABIB METROPOLITAN BANK

Habib Metropolitan Bank
History & Introduction

Habib Metropolitan Bank was incorporated in Pakistan as a Public Listed

Company in 1992 under the name, Metropolitan Bank Limited. The Bank
commenced, duly licensed, full scheduled commercial-banking operations in
October 1992.
Metropolitan Bank, from October 1992 to September 2006, remained a highly
rated bank and, vide its nationwide 51-branch on-line network, established as a
distinguished provider of trade finance services.

On October 26, 2006 Habib Bank A G Zurichs Pakistan Operations merged into
Metropolitan Bank Limited and the merged entity was named Habib Metropolitan
Bank Limited (HMB). Demonstrating a strong commitment to Pakistan economy,
HBZ is the principal shareholder of HMB.
HMB operates in all major cities of the country. The Bank ranks within Top 10 in
Pakistan with a strong vision to be the most respected Financial Institution. HMB
has its primary focus on retail banking and trade finance and also offers highly
innovative E-Banking solutions and Consumer Banking to its customers. The
Banks Islamic Banking Division is fully capable of catering to customers seeking
Shariah compliant products.
The HBZ Group is heir to a rich tradition of banking and commerce dating back to
more than 160 years. The groups flagship and HMBs principal, HBZ
(incorporated 1967) enjoys International ranking of 687 in terms of capital. With
Headquarters in Switzerland, the HBZ Group also operates in Hong Kong,
Singapore, United Arab Emirates, Kenya, South Africa, United Kingdom and
North America.
The Pakistan Credit Rating Agency (PACRA) has allotted both long-term and
short-term ratings of Habib Metropolitan Bank Limited at AA+ (Double A plus)
and A1+ (A one plus), respectively. These ratings, being the highest amongst the
local sector Private Banks, denote a very low expectation of credit risk emanating
from a very strong capacity for timely payment of financial commitments.

Vision Statement
Based on a foundation of trust,to be the most respected financial
institution,delighting customers with excellence,enjoying the loyalty of a dedicated
team,meeting the expectations of regulators and participating in social causes while
providing superior returns to shareholders.

Mission Statement

"The Mission of the Habib metropolitan Bank is to foster a sound economic and
financial environment which promotes the development of its stakeholders and
encourages a culture of excellence and leadership."

PACRA MAINTAINS RATINGS OF HABIB METROPOLITAN

BANK LTD. (HMB)
The Pakistan Credit Rating Agency (PACRA) has maintained the long-term and
short-term entity ratings of Habib Metropolitan Bank Ltd. at AA+ (Double A
plus) and A1+ (A one plus) respectively. These ratings denote a very low
expectation of credit risk emanating from a very strong capacity for timely
payment of financial commitments.The ratings reflect the strong position of the
bank in its respective niche self-liquidating trade finance to corporate and SMEs.
While consolidating its strength, the management continues to focus on
product innovation, enhanced reach through network expansion, and technology
up-gradation for ensuring quality services to its customers, thereby retaining
its relative positioning in the face of intensifying competition within the sector.
The bank continues to maintain outstanding asset quality an outcome of
conservative risk appetite as well as effective risk management. The ratings also
take into account the banks association with a geographically diversified
international sponsoring group Habib Bank AG Zurich (HBZ).
About the bank: HMB, commencing operations in 1992, is listed on all bourses of
Pakistan. Subsequent to recent merger, the bank is a 51% owned subsidiary of
HBZ, incorporated in Switzerland. HBZ, with consolidated assets of above
US$6bln, has operations in eight countries directly and through subsidiaries. This
provides inherent strength to the bank given high credibility and standing of HBZ.
The Chief Executive of the bank is a former Governor of the State Bank and also a
former president of Habib Bank Limited, one of the largest banks in the country. A
highly professional team of senior executives including the executive director,
who has emerged as the key professional in evolving the banks strategy as
well as its implementation, assists the chief executive.The primary function of
PACRA is to evaluate the capacity and willingness of an entity to honor its
obligations. Our ratings reflect an independent, professional and impartial
assessment of the risks associated with a particular instrument or an
entity.PACRAs comprehensive offerings include instrument and entity credit
ratings, insurer financial strength ratings, fund ratings, asset manager ratings and
real estate grading.

PACRAs opinion is not a recommendation to purchase, sell or hold a

security, in as much as it does not comment on the securitys market price or
suitability for a particular investor.

Achievements
These above credit ratings denote

HMB is one of the top ten banks in Pakistan

A very high credit quality,
A very low expectation of credit risk and
A very strong capacity for timely payment of financial commitments.

Corporate Information:
Board of Directors

Chairman & President

Kassim Parekh

Chief Executive

Anjum Iqbal

Directors

Muhammad H.Habib
Raza S. Habib
Bashir Ali Muhammad
Anwar H. J apanwala
Ronaid V. Emerson
Firasat Ali
Mohamedali R. Habib (Executive Director)

Audit Committee

Reza S. Habib
Kassim Parekh
Mohamedali R. Habib

Company Secretary
Muhammad Imran

COMPETITORS:
Arif Habib Bank
MCB
Bank al Habib
National Bank of Pakistan
Bank Alfalah
Standard Chartered Bank

Factors affecting Habib Metro

Not only Habib Metro but all the commercial banks of Pakistan are being governed
by regulatory authority State Bank which is basically a Government bank, all the
policies and circulars and changes in working routines are made due to direction by
State Bank. State Bank take decisions which become mandatory for all the
commercial banks to follow them. State Bank is a governing authority and HMB
have direct impact on its procedures if State Bank take any action.
Than the other factor that affects HMBs decisions are the government policies.
Like, recently government put withholding tax on with-drawls and onlines which
in result affected the banks deposit mobilization. People became less willing now
to move their deposits from one bank to another because of this tax. They are not
willing to move their funds in other banks without any strong reason or need.
Habib metro is also impacted by the economic conditions. People make
investments in companies and dont go for term deposits when the economic
conditions are good and companies are giving high profits and the reason is HMB
term deposits offer people riskless investments and when the risk is low the return
is obviously low. So when the economic conditions are good making the
investments becomes a better option for people to earn high profits instead of
going for risk-free investments because they have opportunity to earn high returns.
In past few days the conditions of Karachi were not good and there were strikes
happening in Karachi which in result impacted the bank because it was closing its
branches in that area and when the branches are closed the bank is unable to
facilitate customers and make transactions happened and that in result impacted the
banks profitability.

Internal forces of change

The internal organizational structure is basically the internal force of change, the
change in organizational structure directly impacts the authority delegation.

Changes in management strategies

changes made by regulatory authority (Stat Bank) In the practices

Why people resist change

Because banking is very sensitive and people try to follow the same patterns as it
sounds riskless, adopting changes might become harmful, they believe if the
change is implemented that would be dangerous for them. They give priority to
follow the same practices instead of adopting changes.

How it could be managed.

It could be managed through conducting the training programs and seminars
through which employees should make aware of importance of implementing
change and when they would be properly trained they would be more willing to
adopt change.

Change
In order to improve the customers services and facilitating customers in most of the
branches it made compulsory for staff to come on Saturday ; which is basically a
holiday, from 10am to 2pm.

Employees become resistant to change as it was wasting their holiday.

Bank offered its staff allowances and extra rewards for coming on Saturdays which
in result motivated the staff to come on Saturday.
It helped the organization a lot as customers were becoming more satisfied by the
services of banks. They became loyal to organization and it became competitive
edge for HMB as it was providing services to customers on Saturdays as well.

How this change was communicated

It was communicated to middle level staff through meetings by top management.
And to the other branches staff it was communicated through emails and circulars.

STRENGTHS:

Large capital base.

Rank in top 10 bank of Pakistan.
Continuous growth in ROE.
The banks management realizes the necessity of existence of effective
internal controls to ensure smooth operations in the current technical and
swift business environment.
Loyal management.
The bank has efficient and experienced management making significant.
Credit rating in long-term AA+ and in the short term A1+.
The financial statements, prepared by the management of the bank present
fairly the state of affairs.
Loans are given only to known, reputable clients to avoid chances of fraud.
Very low nonperforming loan.
Effectively handled the current economic recession.
Bank is continuously focusing on developing new and innovative products
to attract their target market.

 Strong customer relationship.

Asset utilization is very good.
WEAKNESSES:

Only valued client is important.

Bad portfolio diversification (54% advances to Textile industry)
Advertisement on electronic media has not been seen.
Declining standards of banking after merger. Inter- organizational conflicts
after merger.
Compromises upon polices to keep customers happy.
Old Management. (No creativity)
No further growth in branches.
Majority of shares are owned by the one family.
Low consumer finance.
Less job satisfaction of employees.
Customers facing problem of NADRA verification while opening their
accounts because its process is time consuming.
Promoting generally on seniority basis.
Attitude of senior manager at head office has to change towards junior staff.

OPPORTUNITIES:
Scope in Islamic Banking.
To go global fully
Low exposure to consumer banking providing opportunity to explore the
segment.
The year 2010 will prove to be another demanding year for the bank with
scattered. Diversification, innovation and mission driven approach are the
key to success which bank should adopt.
Progressive but cautious business expansion with strategic branch network
extension and introduction of innovative products in all areas of business.
Branch network need extension.
Should emphasize much on e-banking. Profit margin will be good.
The bank being Swiss incorporated, it bank follows dual banking regulation
i.e of Pakistan as well as Switzer-land which attracts foreign investors.

 SBP policy to allow Islamic Banking business separately.

Bank introduces Islamic banking in country that attracts large number of
people.
Greater profitability can be achieved through strong internal control.
New schemes for deposits and finances should be introduced regularly.
Opportunity to open branch in ruler area to increase its branch network and
gain more profit.
THREATS:
Adverse impact of Credit Crisis can badly effect on HMB.
Facing a strong competition by its competitors. High reliability on only one
market segment i.e. Textile. (54%)
Inconsistency in government policies.
Increasing competition in the banking sector. Entry of many foreign banks.
Strict policies of the State Bank of Pakistan.
Geopolitical condition of country.
Global liquidity crisis has constrained banks to stop lending.
Current economic crunch.
Political instability.
Rising deposit rates.
Foreign banks in market having more marketing budgets.
People losing trust in banks.
Decline in private and public sector credit due to tight monetary policy.

PEST ANALYSIS

 Political:
Political instability can lead to changes in laws and policies which can be
in favor or against the banking sector

Monopolies Legislation
Taxation Policy
Foreign Trade Regulations
Economic
Economy of Pakistan is facing issues about

Unemployment,
Inflation,
Illiteracy,
Corruption
Business Cycles
Interest Rate
all the above issues hinders business growth.
Socio Cultural issues
Cultural issues can be there but still as there are a number of
multinational companies there, therefore, culture issues are not
prominent.

Population Demographics
Income Distribution
Social Mobility
Lifestyle Changes
Levels of Educations

Technological

Speed of Technology Transfer

New Discoveries / Development

Investment on Research
Rate of Obsolescence

RISK MANAGEMENT
Credit risk:
The HMB strategy is to minimize credit risk through a strong pre-disbursement
credit analysis, approval and risk measurement process added with product,
geography and customer diversification. The Bank, as its strategic preference,
provides loans only to strong parties. Major portion of the Bank credit portfolio is
Textile industry (54%) which is highly profitable business in Pakistan but it may
riskier and not a good diversification of portfolio, if textile industry slump then it
will crash the whole bank. The bank has very low rate of Non-performing loans.
The ratios of risks are as under and we can see that they reduce the risk as per their
objective.
Market Risk:
Market risk is the possibility that fluctuation in interest rates, foreign exchange or
stock prices will change the market value of financial products leading to a loss.
The HMB has formalized liquidity and market risk management policies which
contain action plans to strengthen the market risk management system.
Foreign Exchange Risk:
Foreign Exchange Risk is the probability of loss resulting from adverse movement
is exchange rates. The HMB is not in the business of actively trading and market
making activities but a conservative risk approach and the Banks business strategy
to work with export oriented (Textile) clients gives the ability to meet its foreign
exchange needs.
Interest rate risk:
Interest rate risk is the risk that the value of the financial instrument will fluctuate
due to changes in the market interest rates. The HMBs interest rate exposure is
low due to the short-term nature of the majority of business transactions. Interest
rate risk is also controlled through flexible credit pricing mechanism and variable
deposit rates.

Liquidity risk:
HMB manages the liquidity position on a continuous basis. The Banks liquidity
position is based on self reliance with a wide branch network to expand the Bank
deposit base. The Banks liquidity profile generally consists of short-term, secured
assets, in line with the Banks credit strategy.

RECOMMENDATIONS

Diversify the portfolio

Introduction of new products/services in the market

Hire new management

Give importance to all customers

Increase the branches all over the country

Improve standard of banking

Start advertisement as soon as possible

Conclusion
Major factors like global financing disorder, economic slowdown and
strict monetary policy were on the top but Pakistan bank caters all these
problems. HMB is one of the top ten banks it is expected to play a major
role in pioneering these newer markets.
Currently, the banking sector is facing two major problems. The first one
is the decline in credit demand due to slowdown in the economic
activities due to poor law and order situation, power crisis, inflationary
pressure, and high interest rates. The other problem is the mounting
amount of NPLs (non-performing loans). With the exception of a few
banks all the banks are exhibiting considerable rise in NPLs. These two
issues are collectively dampening the banking sector s performance.
HMB offers branch banking,e-banking,consumer banking international
banking and also offers Islamic banking to facilitate their cutomers
At year-end, HMB s equity stands at Rs 18.9 billion at a comfortable
11.9% capital adequacy level against the required 10%.
The credit ratings denote a very high credit quality, a very low
expectation of credit risk and a very strong capacity for timely payment of
financial commitments.