HABIB BANK LTD

INTERNSHIP REPORT

HABIB BANK LIMITED

Specialization: Banking & Finance

Submitted To: Chairman, Dept. of

Business Administration

Submitted By: ABC DEF

Roll No. :Q
Registration No. :07PST
Address: ABC House,
DEF Street, GHI.
Contact No.: ****-*******
Date of Submission:

DEPARTMENT OF BUSINESS ADMINISTRATION

ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD

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ACKNOWLEDGEMENT

Everyone should admit that without ALLAH’s help, one can’t get anything. I bow my
head before almighty Allah with gratitude. I am very much thankful to the individuals
who have helped me in preparing this report. And also very much thankful to former
fellows and contemporary colleagues who took the time and trouble during the last
few days to speak to me about the way this text could be further improved.

ABC DEF

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GROUNDS OF STUDYING HABIB BANK LIMITED

The inspiration of studying financial organization like HBL is because of different

factors as under:

1. It is a big and famous organization having strong roots in the market and good

will in the mind of the customer even of children.

2. Its working environment is very impressive having the largest network in Pakistan

as well as in Overseas.

3. To understand the marketing activities, utilization of funds, product line

implementations and the ground realities that how a financial institution can play a

vital role in the economic growth of the country.

4. Strong and broad consumer banking vision.

5. Innovative internet banking.

6. Mobile banking.

7. Vast variety of product line.

8. Vast vision oriented banking.

9. Great learning opportunities.

10. Communicative & friendly environment.

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OVERVIEW OF THE ORGANIZATION

This is the map of domestic and overseas network of HABIB BANK LTD.

DOMESTIC NETWORK

OVERSEAS NETWORK

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HBL HISTORY

HBL established operations in Pakistan in 1947 and moved its head office to Karachi

from Bombay. The first international branch was established in Colombo, Sri Lanka

in 1951, and Habib Bank Plaza was built in 1972 to commemorate the bank’s 25th

Anniversary. It has come a long way from its modest beginnings in Bombay in 1941

when it commenced operations with a fixed capital of PKR.25000 only, 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 and loans to small

industries, traders and farmers. International operations were expanded to include the

USA, Singapore, Oman, Belgium, Seychelles, Maldives and the Netherlands.

On June 13, 2002 Pakistan's Privatization Commission announced that the

Government of Pakistan had formally granted the Aga Khan Fund for Economic

Development (AKFED) rights to 51% of the shareholding in HBL, against an

investment of PKR 22.409 billion (USD 389 million).

On February 26, 2004, management control was handed over 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.

Today, HBL plays a central role in Pakistan's financial and economic development.

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BUSINESS VOLUME

Business volume of HBL described in the balance sheet is as under:

(Rupees in Million)

Total Deposit 2,10,000

Total Asset 2,765,000

Advances (net of provision) 934,600

Investments (net of provision) 1,355,200

Profit & Loss

Total Net Income 51,000

Total Expenditure 36,800

Provision for Non-Performing Loan 100

Profit before Taxation 14,100

Profit after Taxation 8,100

Others

Home Remittances 128,970

Import 245,006

Export 177,101

Number of Branches 1,494

Number of Staff 13,211

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PROFILE OF EMPLOYEES

Designations No. of Employees

President 1

Group Executive 7

Deputy General Manger 65

Deputy Manager 220

Senior Manager 1,465

Manager 2,163

Assistant Manager (Band –II) 2,157

Assistant Manager (Band –I) 3,122

Officer 2,526

Cashier 1,485

PROFILE OF THE ORGANIZATION

Date of Establishment August 25, 1941

Branches 1494

Employees 13211

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BOARD OF DIRECTORS

Mr. Sultan Ali Allana Chairman

Zakir Mahmood President & Chief Executive Officer
Mr. Sajid Zahid Director
Mr. Iain Donald Cheyne Director
Mr. Ahmad Waqar Director
Arif Mansur Director
Shukat Hayat Durani Director
Muhammad Ismail Qureshi Director

MAJOR ASSIGNMENTS

President

1. To implement the policies chalked out and decisions made by the board of

directors.

2. To look after the affairs of the whole origination.

3. To maintain good relation with the big Clients of the bank in the interest of the

origination.

4. To promote the business activities of the bank.

5. To find new areas for investment.

6. To make liaison with the government and SBP.

Board Of Directors

1. To make the policies in order to promote the business of bank.

2. To declare the profit on deposits.

3. To announce the rate of interest on advances and loans.

4. To make the policies for the welfare of the bank’s employees.

Regional Chiefs

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1. To visit branches in order to promote the business activities and to make the

discussion at the spot under his discretionary powers.

2. To support the business activities.

3. To develop relations with Industrialists, Businessmen, Agriculturists etc for

the promotion of banking activities.

4. To solve problems of the employees.

5. To approve & assign banking facilities for high profile customers.

Branch Managers

1. To look after the affairs of the branch.

2. To meet the depositors and borrowers and solve their banking problems.

3. To make efforts to increase the profitability of the branch by capturing low

cost & cost free deposits and giving secured loans to the valued clients.

4. To reduce the expenses of the branch.

5. To maintain relation with the Businessmen, Agriculturists, Industrialists and

other customers of the branch.

PRODUCT LINE

There is a vast product line at HBL.

HBL Credit Card

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HBL has launched its most attractive product named “HBL Credit Card” with a lot of

features. For example, HBL offers a feature to promote its credit card that is “Save

and spend” up to a certain amount. It is very convenient and flexible for the

customers. The HBL Credit Card adds simplicity and excitement and is accepted at

over 24 million merchants worldwide. They claim that they have made shopping fun

with paying simple.

Classic

Card

Gold Card Green Card

Uses & Benefits

Convenience

 Security.

 Affordability.

 Cash Advance.

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 Balance Transfer Facility.

Instead of paying with cash, simply present your HBL Credit Card to the shopkeeper

and pay for anything you want.

Bill Payments

You can pay the bill of your HBL Credit card through two modes.

Modes of Payment

1. DDI(Direct Debit Instructions)

 MAXIMUM
 MINIMUMN

2. Through Cash.

You can give one-time standing instructions to pay your monthly bill. Check the

amount in your monthly card statement and make the payment with your regular card

payment system.

SMS alert for convenient

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 that is 20 Rupees per month.

Security

Your HBL Credit Card ensures your money stays completely secure. You cannot lose

cash if you don’t carry it. In the unlikely event that your card is stolen, you can call at

HBL Phone Banking (111-111-425) and your card will be blocked immediately.

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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 on every month with details of all your

purchases. You will have 21 credit free days to make the payment from the statement

date.

You have to pay at least 3 days in advance if you make your payments by Cheque 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 month’s statement. A nominal service charge will be

applied to the unpaid amount each month.

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 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

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5.4.2 HBL (NJI) Bank Assurance Summary of Benefits:

Death Benefit : The Sum Assured or Bid Value of

the Unit Account Which ever is higher.

Admissible Ages : 18-65 Years.

Minimum Premium : Rs. 12,000 Yearly or

Rs. 6,000 Half-Yearly or

Rs. 3,000 Quarterly.

Rs. 1,000 Monthly.

Premium Allocation:

First Year : 20%

Second Year : 80%

Third Year : 90%

Fourth & Fifth Year : 100%

Sixth Year Onward : 103%

Management Charges :

Initial Charges : 5% Bid/Offer Spread

Recurring Charges : 1.5% of the Fund Value per Year.

Administration Charges: Rs. 28 per month

Surrender Option Available after 2 years.

This can be varied at the discretion of the Company.

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MATURITY OF PLAN:

 Policy holder can keep paying As long as one can afford to save yearly

contribution and comfortable with appreciation being offered by NJI Life

Management Fund.

 The policy holder can surrender the plan any time after 2 years but may suffer

losses in early years because of front load.

PREMIUM PAYMENT RANGE:

 The payment term is flexible and minimum assumed payment term is 10 years.

 The policy holder may discontinue the premium payment even after 5 years and

can still enjoy death benefit and appreciation on his/her 5 years saving depending on

his/her present cash value.

MAXIMUM AGE AT MATURITY

 This is whole life plan and there is no limit on maximum age at maturity

however the entry age should not be greater than 65 years.

PARTIAL WITHDRAWAL & MATURITY BENEFITS:

 Partial withdrawals are allowed only after 2 years full year’s full premium is

paid.

 Accumulated cash value of the policy will be paid to the policy holder at Plan

Maturity.

5.4.3 ATM VALUE VISA CARD

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HBL Visa Debit Card allows you to pay for your purchases directly from your bank

account. You don’t 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. For more features we can call at 111-33-44-55.

5.4.4 HBL PHONE BANKING

T-PIN Generation

Your TPIN (Telephone Personal Identification Number) is generated the first time

you call and you can use it as your password for verification purposes, you can

change your TPIN anytime you like. You can get the following information.

 Get your account balance.

 Get information about the last 5-10 transactions carried out on your account.

 Request your bank statement, either through fax or email (as supplied in your

subscription form).

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 Get details of your transactions from the last 6 months on each of the accounts

listed on your subscription form.

 Change and/or modify your contact details.

 Transfer funds between your own accounts (as listed in the subscription form)

or from your account to a third party account (as listed in the Third Party

Authorization Form).

 Transfer funds from your own account to an account in another bank under the

 1-Link network (Inter Bank Funds Transfer).

 Generate your own choice of ATM PIN without filling a request at your

branch.

 Lodge a complaint in case of any inconvenience.

 Inquire about the daily accounts related profit rates and currency exchange

rates.

 Request a number of physical instruments and/or branch banking related

services that you might require, including:

o Bankers Cheque

o Statement

o Balance Certificate

o Cheque book

5.4.5 Internet banking

 Account information

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 Funds transfer

 View statement

 Mobile prepaid cards

 Utility bill payment

 Cheque book request

5.4.6 HBL FreedomAccount

A minimum balance of Rs.25000 gives you the following

FREE SERVICES

 Unlimited cash withdrawal & deposit transaction through any HBL

branch

 Unlimited online funds transfer transaction

 Unlimited Banker's cheque

 Unlimited HBL cheque deposit transaction at any HBL branch

 Unlimited cheque books

 Duplicate account statement

 Debit card issuance

 ATM transaction through HBL network

 SMS alert on transaction above PKR Rs.25000/-

5.4.7 HBL PersonalLoan

o For salaried person

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o Deposit Based

Eligible criteria for salaried person

 Mark up rate average 18%

 Eligible criteria for salaried person

 Minimum salary Rs.12000/-

 There must be 3 continuously credited salaries at any HBL branch

 Maximum loan amount 8 gross salaries

 Maximum tenure 5 years and minimum 6 month

Eligible criteria for deposit based

 There must be minimum 3 month average balance Rs.45000/-

 Maximum loan amount Rs.500000/-

 Mark up rate average 18%

 2 witnesses with there CNIC

 There must be 6 month bank relationship with the customer.

6. Organizational Structure of HBL

Chairman

President

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Board of Directors

SEVP International Operations SEVP Finance & Administration

SEVP Corporate Banking & SEVP Asset Remedial

Treasury Management

SEVP Retail Banking & SEVP

Information Credit Policy

SEVP Corporate Banking

Financial Institute
& Project Finance

ANALYSIS OF 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.

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a) 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.

b) Downward Communication

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 company
publications, information leaflets, tucked into pay envelops material on bulletin
boards, policy and procedure mandates.

The same pattern is followed at HBL. No doubt it’s 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.

c) 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.

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d) Authority and Responsibility

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 one’s authority and what is the
responsibility and the authority it allocated.

e) 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

6.1 STRUCTURE OF BRANCH

MANAGER

Cashier (Cash
Operation Manager Account Opening
Receipt/Payment & Utility Bills)

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PERSONAL EXPERIENCE DURING INTERNSHIP

I started my internship at HBL Mubarak Pura Branch Sialkot. Basically I am serving

in HBL since May, 2007. But my experience was limited to few Departments. That’s
why I spent 8 weeks in all departments of the Branch, to know clearly about all the
departments of HBL. I started on 01 Sep, 2010 and end on 30 Oct, 2010. I started
from Customer services department and observe about the customer of the bank. HBL
has a great number of customers. And the target market of HBL is middle class and
illiterate mostly. I do experience in customer services up to 08 Sep, 2010.
I also worked in different department of HBL. The detail is as under

1 Account Opening Department (09-09-2010 To 16-09-2010)

i) Filling of an Account Opening form

Account opening is an agreement in which customer offers his funds and bank accepts
these funds, therefore the nature of relation between a banker and customer is of a
contractual one and all the conditions applicable to this contract act are also
applicable.

ii) Issuance of Cheque Books

I was given the assignment of issuing Cheque books. It is issued to those customers
whose accounts are operated by the concern bank. Cheque books in two different
categories are issued which are as fallows.

A) Cheque book for Current account

B) Cheque book for Profit & Loss Sharing Accounts (PLS).

iii) Remittance Department (17-09-2010 To 25-09-2010)

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Remittances are sums of money sent in payment for or against something. The
remittance department is mainly concerned with these payments. Remittances are
divided into:

Inward remittances

Inward remittances refer to payment in favor of the banks account holders inward
remittance includes all Cheque received for collection.

Outward remittances

Outward remittances are all payments made to other people on behalf of the account
holders in the bank. Outward remittances can also be done for none account holders
who deposit cash in the bank and remittance tools are prepared for them. Among the
work done by the clearing department is receiving credit advises in favor of the banks
account holders and also debit advises against the account holder’s accounts. There
are various tools of remittances to the customers who want the facility of remittance.

iv) Clearing Department (26-09-2010 To 02-10-2010)

This is an extra ordinary banking facility which is provided to the public in this if they
are maintaining an account with the HBL they can lodge Cheque of any bank in
Pakistan, which will be collected and credited to their respective accounts through the
process of clearing. In this representatives of various banks are gathered at SBP and
exchanges the Cheque presented to them for debit of the respective accounts and in
second round of meeting provide each other the fate of those Cheques to be credited
to respective accounts.

When people present the Cheque of any other bank for clearing, first enter the Cheque
into the clearing register of the bank. Then this Cheque sent to the NIFT for clearing.
NIFT is the department which is created by the SBP for clearing the checks of
different banks.

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v) Cash Counter (03-10-2010 To 16-10-2010)

Cash counter is divided into three counters, as follows

a) Cash Payment

Payment of Cheques

It is counter where all payments are made. Whether the payment is made against
cheque, Banker’s cheque etc

Pensions Payment

Both types of pensions that is provincial and federal are paid to the thousands of
pensioners, this is also a unique feature of HBL

Payment of Salaries

This is one the distinct features of HBL, that it provides services to the Govt.
departments to distribute their salaries every month. The prominent examples include
ARMY, RANGERS, POLICE, EDUCATION, and PUBLIC WORKS ETC.

b) Cash Received

On this counter cash is received from the customer. An accountholder deposit cash
into his account on this counter or a person may deposit application with for banker;s
cheque and so on.

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Deposits Section

In the deposit section the amount of rupees deposited are carried out in two ways. One
is that the customer wants to deposits the money in his/her account directly in
monetary terms, while the second way of depositing the money is through Cheque. In
both the cases I observed the following procedures.

Deposit through Cash

In this method a voucher is filled for the customers with the descriptions of Account
number, amount deposited title of the account and the name of the customer having
that account. The depositor put a signature on the voucher and the amount is paid to
cashier who stamped it and the voucher consisted of two parts, one is given to the
customers and the other part remains with the bank. In this type of deposit, the
voucher is received by writing the amount as BY CASH.

Deposit through a Cheque

In this case the same procedure is fallowed but in the voucher the Cheque number
through which the amount is deposited is written against writing BY CASH.

Banker’s Cheque

This is made for the customer. This mode of remittance is normally used for payment
to out of city or within city beneficiaries.

c) Collection of Utility Bills

Third counter is for collection of utility bills. HBL is providing this facility since long
but recently it embark upon it with a new vigor and vitality and extended the range of
its utility collections. In this connection HBL nominated its all most all Branches all

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over the Pakistan to provide utility bill collection facility up to 9:pm instead of normal
working hours 5:pm. It also amended the previous collection timings which were
from 9: am- to 1: pm, now all branches collect the utility bills up to 5: pm instead of
1: pm. This amounts to the un-matched and unique services provided HBL. Its utility
collection ratio is more than 34% of market, which is a clear proof of its exclusive
services in this respect.

5 Running finance (17.10.2010 To 23.10.2010)

Running finance is extended to meet the working capital requirements against

hypothecation of stock under the buy back agreement on mark up basis It is allowed
to individual, firms, partnership concerns and Corporate bodies. Mark up is recovered
on quarterly basis on the strength of the letter of Authority obtained along with other
control documents.

6 Branch Operations (23-10-2010 To 30-10-2010)

There are many other Branch operations, which are controlled by the Branch manager
with the help of operation Managers, there are many kind of these operations like

Deal with Branch expenses and income

Resolve Audit objections
Branch maintenance
Printing and stationary

7 Fixed Deposit

There are many schemes in HBL for Fixed Deposit of their cash with different profit
rates.

6.2 FUNCTIONS OF DIFFERENT DEPARTMENTS OF HBL

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Followings are the main departments of HBL:

S.No. Name of the Department

A Recovery Operation Department
B Credit Department
C Finance Department
D Human Resource Department
E Internal Audit
F Administration Department
G Information Technology Department

6.2.1Recovery Operations Department

The main function of this department is to recover the debts of the bank. In the
previous political government huge amount of loans were granted on political grounds
which are mostly bad debts. This department is trying to recover those old and new
debts.

6.2.2Credit Department

The Credit Department is responsible for advancing loans to the customers. The loans
are mainly categorized in two types as given below:
i. Lending Products: To advance loans to labour intensive enterprises
ii. Banking Products: Advances to general account holders.

6.2.3Finance Department

The Finance Department is further divided into two departments:

i. Treasury: It is Karachi based and deals in money market

ii. Accounts: It deals in accounting functions and preparations of
different statements.

6.2.4 Human Resource Department

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HR Department has prepared HR Manual. It contains all HR related rules and

regulations like leave, pension, performance etc. Every person in the bank has
given targets and evaluation is based on these targets by HR Department.

6.2.5. Internal Audit

This Div. works under the Board of Directors. It has a President who is CIA
qualified. Its function is to observe the internal control. The audit is conducted
quarterly. The audit teams inspect every branch of the bank. Surprise visits are
also conducted by the auditors.

6.2.6. Administration Department

All the matters of administrative nature are being dealt in this department.
This includes: transfers, posting, promotion orders, leave orders, approvals etc.

6.2.7. Information Technology Department

All the information can be shared mutually by the virtue of software called
MYSIS. This information system connects all branches in Pakistan with each
other through intranet. The banking and treasury transactions are also made
through this system and could be accessed any where in all over the Pakistan.

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7. Structure of Finance Department

In any organization Financial Division is work as a back bone of that organization.
Similarly, in HBL its financial Division play a role of its Backbone. Structure of
Financial Department is as under.

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 FinanceDepartment
Finance Department

HABIB BANK LTD ChiefExecutive

Chief ExecutiveOfficer
Officer(CEO)
(CEO)
CHIEFFINANCIAL
CHIEF FINANCIALOFFICER
OFFICER

ChiefFinancial
Chief FinancialOfficer
Officer(CFO)
(CFO)
AyazAhmed
Ayaz Ahmed

Treasurer
Treasurer Financedirector
director
Faizan Mitha Finance
Faizan Mitha

InvestmentG.E
Investment G.E AccountantExecutive
Accountant Executive

AuditorExecutive
Auditor Executive
BudgetingG.E
Budgeting G.E
SalimAmlani
Salim Amlani

CapitalStructure
Capital StructureG.E
G.E

Above diagram is the structure of Financial department of HBL, in which Chief

Executive officer comes first of all and after that there is chief Financial Officer who
direct two Heads one is “Treasurer” and second is “Financial Director”.

Financial Director then direct account Executive that is responsible for collecting data
and preparing financial reports. And secondly Financial Director Direct the Auditor
Executive who is responsible for check and balance all the activities in the bank.

On the other hand, Treasurer Direct three bodies. One is Investment Executive and
second is Budgeting Executive who is responsible for preparing budget plans for the
bank. Third body is Capital Structure Executive.

FINANCE SYSTEM

We can define a Finance System by the following points

1. Financial reporting
Monthly performance report
Balance sheets and quarterly accounts
2. Financial Controlling
3. reporting to SBP
4. Budgeting

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FINANCE AND ACCOUNT OPERATIONS. DESCRIBE THE

WORKING OF FINANCE AND ACCOUNT DEPARTMENT.

Responsible for book keeping and account, department at head Office, prepare all
financial results and the MIS through its Management reporting wing. This division is
actively involved in market comparative analysis, consolidation of bank’s budgets, its
monitoring and constant review of various financial indicators.

Financial division works as the backbone of the Bank’s Operations. The division
which reports directly to the President and Chief Executive of the Bank has been
instrumental preparation of banks business plan and future strategies. The budgetary
performances are constantly reviewed and through a sophisticated “monthly
performance report” which is a computer based program, the division provide feed
back to the senior on strategic issues like reasons for budgetary variance and methods
to arrest negative performance factors.

Preparing the bank’s annual accounts and coordinating external audit is also a direct
function of a finance division.

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7.1 The Role of Financial Manager

Financial Management is an integral part of Business Management. Finance is one of
the key functions in an organization. The other key functions in an organization are:
Production
Human Resources
Marketing

Each of the above function has got sub-divisions – for example Production has
maintenance, Administration has purchases etc.
Finance deals with financial resources. Financial management as a corollary would
deal with management of financial resources and related areas.

7.2 Use of Electronic Data in Decision Making

No this is the age of information technology. So the banking system is also become
computerized. For this purpose Habib Bank Limited used software which name is:
 MISYS-Bank Software
 Its working is so simple and it is user interfering software.
 It is very important for decision making and it is helpful in the following
ways:
I. Used for entering the daily Deposits, Advances, Markup,
A/R and Revenue.
II. Used for preparing the daily Reports.
III. Used for calculate the Profitability of the Bank.
 So on the bases of these reports Manager decide the future planning for the
Habib Bank Limited.
7.3 SOURCES OF FUNDS

The bank finance policy is enquiring funds from the following sources:

1 Deposit of Account holders

2 Interest on advances and loans granted to the borrowers

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3 Income and commission provided by the services by the bank.

4 Bank open various types of accounts for its customers services are provide
for earning.
5 Interest income and commission bank providing the services to its
customers.

7.4 GENERATION OF FUNDS

HBL generate its funds via tow following ways

a) sale of shares
b) Fixed deposits from customers

GENERATION 2009 2008 2007 2006 2005

OF FUNDS
DEPOSITS 642895347 597090545 531298127 459140198 432545165
SALE OF - 7590000 6900000 6900000 6900000
SHARES
TOTAL 642895347 604680545 538198127 466040198 439445165

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HABIB BANK LTD

7.5 ALLOCATION OF FUNDS

After the acquisition of funds their allocation is necessary. The bank seeks the best
way for making investment to get more profit with maximum security. The bank has
an investment portfolio in which it allocate its funds for crediting to borrowers,
investment in stock market, investment in the real estate property etc. for allocation of
funds a bank has to follow some banking policies and a prudential regulation of SBP.

There are following to allocations of funds for a bank.

a) Lending to Financial Institutions
b) Lending to people on interest
c) Other loans, car finance, house finance etc

ALLOCATION 2009 2008 2007 2006 2005

OF FUNDS
LENDING TO 22184363 6193787 1628130 6550128 12272248
FINANCIAL
INSTITUTIONS
INVESTMENT 149589270 134974382 177942251 119587476 107384470
ADVANCES 459639034 459526817 382172734 349432685 316881635
TOTAL 631412667 600694986 561743115 475570289 436538353

8. Financial Analysis

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 HABIB BANK LTD

8.1 Balance Sheet

Habib Bank Limited

Balance Sheet
As at December 31 (Rupees
in ‘000)
2009 2008 2007 2006 2005
ASSETS
Cash and balances with treasury
banks 79839836 56533134 55487664 46310478 33051049
Balances with other banks 40366687 39307321 27020704 35965048 31813513
Lending to financial institutions 5352873 6193787 1628130 6550128 12272248
Investments 216467532 13814592 177942251 119587476 107384470
Advances 454662499 456355507 382172734 349432685 316881635
Other assets 41116582 35419252 27346111 17765291 14481818
Operating fixed assets 16766668 14751252 13780555 11954876 11166195
Deferred tax asset 9205944 11222444 6613372 2725486 1842977
TOTAL ASSETS 863778621 757928389 691991521 590291468 528893905
LIABILITIES
Bills payable 10041542 9944257 15418230 5737457 5776325
Borrowings from financial
institutions 52542978 46844890 58994609 56392270 34904352
Deposits and other accounts 82750079 597090545 531298127 459140198 432545165
Sub-ordinate loans 4212080 3954925 3100000 0
Liabilities against assets subject to
finance lease
Other liabilities 29862144 24913236 19943126 15578177 14490213
Deferred tax liability ------- ------- ----------- ---------
TOTAL LIABILITIES 779408823 682747953 628754092 536848102 487716055
NET ASSETS 84369798 75180436 63237429 53443366 41177850
REPRESENTED BY
Shareholders Equity
Share capital 9108000 7590000 6900000 6900000 6900000
Reserves 27527380 24243254 19821455 17802584 15912277
Inappropriate profit 38498335 39447648 28341670 20475080 9908920
Total equity attributable to the
equity holders of the Bank 75133715 71280902 55063125 45177664 32721197
Minority interest 1143241 890099 965642 913317 846801
Surplus on revaluation of assets -
net of tax 8092842 3009435 7208662 7352385 7609852
TOTAL EQUITY 84369798 75180436 63237429 53443366 41177850

8.2 Profit & Loss Account

Habib Bank Limited

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 HABIB BANK LTD

Profit & Loss Account

For the year ended December 31 (Rupees in
‘000)
2009 2008 2007 2006 2005
Mark-up / return / interest earned 76,076,347 63,305,033 50,481,021 43,685,740 32343206
Mark-up / return / interest expensed 33,405,813 26,525,556 19,153,957 13,204,037 7223603
Net mark-up / interest income 42,670,534 36,779,477 31,327,064 30,481,703 25015603
Provision against non-performing loans
and advances – net 8,794,560 6,904,919 8,238,227 2,863,207 2974665
Charge / (reversal) against off-balance
sheet obligations (51,396) 372,598 -54,626 -45,438 128851
Charge / (reversal) of provision against
diminution in the value of investments 346,495 1,909,887 -84,310 -13,697 -82568
Bad debts written off directly ---------- ---------- ---------- ------------- -------------
9,089,659 9,187,404 8,099,291 2,804,072 3020948
Net mark-up / interest income after
provisions 33,580,875 27,663,087 23,227,773 27,677,631 21994655
Fee, commission and brokerage income 5,316,479 4,518,408 3,420,051 3,931,710 2938000
Income / gain on investments 597,018 1,300,975 2,472,663 1,219,623 1726336
Income from dealing in foreign
currencies 1,913,115 2,374,318 1,487,374 1,102,358 1402521
------- 0
Other income 3,333,000 3,088,994 2,643,076 2,235,805 1787443
Total non-mark-up / interest income 11,159,612 11,282,695 10,023,164 8,489,496 7854300
44,740,487 38,945,782 33,250,937 36,167,127 29848955
Non mark-up / interest expense
Administrative expenses 22,745,955 21,425,361 18,297,279 15,425,461 14095063
Other provisions / write offs - net 210,190 200,163 276,111 122,510 249033
Other charges 3,540 64,751 85,152 54,898 68483
Workers welfare fund 399,166 323,575
Total non mark-up / interest expenses 23,358,851 22,013,850 18,106,32 15,602,869 14412579
Profit before taxation 21,381,636 16,931,932 15,144,617 18,840,487 13833975
Taxation
- Current 8,095,642 8,308,611 7,220,717 7,144,846 4076848
- Prior years (1,095,355) 233,100 1,668,562 (39,067) -39067
- Deferred 980,600 (2,473,891) (3,828,699) (965,607) 149975
7,980,887 6,067,820 10,084,037 12,700,315 9646549
Profit after taxation 13,400,749 10,864,112 10,084,037 12,700,315 9646549
Attributable to:
Equity holders of the Bank 13,389,452 15,535,011 10,000,231 12,630,259 9563303
Minority interest 90,230 79,009 83,806 70,056 83246
Minority investor of HBL Funds (78,933) (10,519)
Basic and diluted earnings per share 14.70 11.83 13.18 18.30 13.86

8.3 RATIO ANALYSIS

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HABIB BANK LTD

Ratio analysis is a useful tool for analyzing financial statements. Calculating ratios will
aid in understanding the bank’s strategy and in understanding its strengths and
weaknesses relative to other companies and over time. They can sometimes be useful in
identifying earnings management and in understanding the effect of accounting choices
on the firm’s reported profitability and growth. Finally, the ratios help in obtaining a
better understanding of a firm’s current profitability, growth, and risk which can improve
forecasts of future profitability and growth and estimates of the cost of capital.
A review of the ratios follows.

8.3.1 Current Ratio:

Current Ratio = Current Assets / Current Liabilities

This ratio indicates the extent to which current liabilities are covered by those assets
expected to be converted to cash in the near future. Current assets normally include
cash, marketable securities, accounts receivables, and inventories. Current liabilities
consist of accounts payable, short-term notes payable, current maturities of long-term
debt, accrued taxes, and other accrued expenses. Current assets are important to
businesses because they are the assets that are used to fund day-to-day operations and
pay ongoing expenses.

Year 2009 2008 2007 2006 2005

Current Assets 847011953 731954693 671597594 575611106 515884733
Current Liabilities 745334596 631948038 566659483 480455832 452811703
Current ratio 1.14 1.16 1.19 1.20 1.14

The current ratio for the year 2006, 2007, 2008 & 2009 is 1.20, 1.19 1.16 & 1.14
respectively, compared to standard ratio 2:1 this ratio is lower which shows low short
term liquidity efficiency at the same time holding less than sufficient current assets
mean inefficient use of resources

8.3.2Sales to Working Capital:

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HABIB BANK LTD

Sales to Working Capital = Sales / Working Capital

Sales to working capital give an indication of the turnover in working capital per year.
A low working capital indicates an unprofitable use of working capital.

Year 2009 2008 2006 2005

2007
Sales 75058474 32343206
63305033 50481021 43685740 32343206
Working 10065445 100006655 63073030 95155274 48282752
104938111
Salesto
Capital Working 0.75 0.6 times 0.5 times 0.5 times 0.4 times
0.5 times
Capital times
This liquidity ratio for the years 2006, 2007 , 2008 & 2009 is 0.5,0.5 0.6 & 0.75 times
respectively, compared to standard ratio 2:1 this ratio is lower which shows low short
term liquidity efficiency at the same time holding less than sufficient current assets
mean inefficient use of resources

8.3.3 Working Capital:

Working Capital = Current Assets – Current Liabilities

A measure of both a company's efficiency and its short-term financial health. Positive
working capital means that the company is able to pay off its short-term
liabilities. Negative working capital means that a company currently is unable
to meet its short-term liabilities with its current assets (cash, accounts receivable
and inventory).
Also known as "net working capital", or the "working capital ratio".

Year 2009 2008 2007 2006 2005

Current Assets 847011953 731954693 671597594 575611106 515884733
Current 745334596 452811703
631948038 566659483 480455832
Liabilities
Working Capital 10065445 100006655 104938111 95155274 63073030

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HABIB BANK LTD

It is very clear from the above calculations that the working capital of the bank is
gradually increasing over the years, which shows good short term liquidity efficiency.

8.3.4 Leverage Ratios:

By using a combination of assets, debt, equity, and interest payments, leverage ratio's
are used to understand a company's ability to meet it long term financial obligations.
Leverage ratios measure the degree of protection of suppliers of long term funds. The
level of leverage depends on a lot of factors such as availability of collateral, strength
of operating cash flow and tax treatments. Thus, investors should be careful about
comparing financial leverage between companies from different industries. For
example companies in the banking industry naturally operates with a high leverage as
collateral their assets are easily collateralized.
These include:

8.3.5 Time Interest Earned:

TIE Ratio = EBIT / Interest Charges

The interest coverage ratio tells us how easily a company is able to pay interest
expenses associated to the debt they currently have. The ratio is designed to
understand the amount of interest due as a function of company’s earnings before
interest and taxes (EBIT). This ratio measures the extent to which operating income
can decline before the firm is unable to meet its annual interest cost.

Year 2009 2008 2007 2006 2005

EBIT 56345630 48559935 34298574 32044524 21161578
Interest Charges 19958458 19153957 19153957 13204037 7327603
TIE ratio 2.82 1.83 1.79 2.43 2.89

We can see from this ratio analysis that, this company has covered their interest
expenses 2.43 times in 2006, 1.79 times in 2007 1.8 times in 2008 and 2.82 in 2009.
It means they have performed pretty much same in 2007 and 2008, but has taken a

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HABIB BANK LTD

different look in 2009. As in 2009 they issued a little high number of long-term loans
and does not have good liquidity position, their EBIT became high thus making TIE a
little high as well

8.3.6 Debt Ratio:

Debt Ratio = Total Debt / Total Assets

The ratio of total debt to total assets, generally called the debt ratio, measures the
percentage of funds provided by the creditors. The proportion of a firm's total assets
that are being financed with borrowed funds. The debt ratio is calculated by dividing
total long-term and short-term liabilities by total assets. The higher the ratio, the more
leverage the company is using and the more risk it is assuming. Assets and liabilities
are found on a company's balance sheet.

Year 2009 2008 2007 2006 2005

Total debt 779408823 682747953 628754092 536848102 487716055
Total Assets 863778621 757928,89 691991521 590291468 528893905
Debt Ratio 0.90 0.90 0.91 0.91 0.92

Calculating the debt ratio, we came to see that this company is highly leveraged one

8.3.7 Debt to Equity Ratio:

Debt to Equity Ratio = Total debt / Total Equity

The debt to equity ratio is the most popular leverage ratio and it provides detail
around the amount of leverage (liabilities assumed) that a company has in relation to
the monies provided by shareholders. As you can see through the formula below, the
lower the number, the less leverage that a company is using. The debt to equity ratio
gives the proportion of a company (or person's) assets that are financed by debt versus
equity. It is a common measure of the long-term viability of a company's business
and, along with current ratio, a measure of its liquidity, or its ability to cover its

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HABIB BANK LTD

expenses. As a result, debt to equity calculations often only includes long-term debt
rather than a company's total liabilities. A high debt to equity ratio implies that the
company has been aggressively financing its activities through debt and therefore
must pay interest on this financing.

Year 2009 2008 2007 2006 2005

Total debt 779408823 682747953 628754092 536848102 487716055

Total Equity 72906208 71280902 55063125 45177664 32721197

Debt To Equity 10.70 9.58 11.42 11.88 15.89
Ratio
We can see from the above calculations that this ratios continuously decreasing in the
last three years.
8.3.8 Current Worth / Net worth Ratio:

Current Worth to Net worth Ratio= Current Worth / Net worth Ratio

We can calculate current worth and net worth by using following formulas:
Current Worth = Total Current Assets – Total Current Liabilities
Net Worth = Total Assets - Total Liabilities

Year 2009 2008 2007 2006 2005

Current Worth 10065445 100006655 104938111 95155274 63073030
Net Worth 72056701 75180436 63237429 53443366 41177850
Current Worth 1.12 1.33 1.66 1.78 1.53
to Net worth

We can see from the above calculations that this ratios continuously decreasing in the
last three years. In 2006 it was 1.78, in 2007 it was 1.66 and in 2008 it was 1.33.

8.3.9 Total Capitalization Ratio:

Total Capitalization Ratio = Long-term debt / long-term debt + shareholders'
equity

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HABIB BANK LTD

The capitalization ratio measures the debt component of a company's capital structure, or
capitalization (i.e., the sum of long-term debt liabilities and shareholders' equity) to support a
company's operations and growth. Long-term debt is divided by the sum of long-term debt and
shareholders' equity. This ratio is considered to be one of the more meaningful of the "debt" ratios - it

delivers the key insight into a company's use of leverage.

Year 2009 2008 2007 2006 2005

Long Term 58067267 50799915 62094609 56392270 34904352
Long
debt term 147090963 122080817 117157734 101569934 67625549
Capitalization
debt + Equity 0.40 0.42 0.53 0.56 0.52
Ratio worth

It is obvious from the above calculations that there is a gradual fall in this ratio over
the years.

8.3.10 Long term Assets versus Long term Debt:

Long term Assets versus Long term Debt= Long Term Assets/ Long Term Debts

Year 2009 2008 2007 2006 2005

Long Term Assets28774532 25973696 20393927 14680362 13009172
Long term debt 58067267 50799915 62094609 56392270 34904352
L.T Assets /L.T 0.50 0.51 0.33 0.26 0.37
Debts Debt:worth

8.3.11 Debt Coverage Ratio:

Debt Coverage Ratio = Net Operating Income / Total Debt

Year 2009 2008 2007 2006 2005

Net Operating 5867256 5655568 5121453 12074762
Income
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HABIB BANK LTD

Total Debt 79408823 682747953 628754092 536848102 487716055

Debt Coverage .07 0.0083 0.008 0.02
Ratio
8.3.12 Profitability Ratios:

Profitability is the net result of a number of policies and decisions. This section of the
discusses the different measures of corporate profitability and financial performance.
These ratios, much like the operational performance ratios, give users a good
understanding of how well the company utilized its resources in generating profit and
shareholder value. The long-term profitability of a company is vital for both the
survivability of the company as well as the benefit received by shareholders. It is
these ratios that can give insight into the all important "profit". Profitability ratios
show the combined effects of liquidity, asset management and debt on operating
results. These ratios examine the profit made by the firm and compare these figures
with the size of the firm, the assets employed by the firm or its level of sales. There
are four important profitability ratios that I am going to analyze:
8.3.13 Net Profit Margin:

Net Profit margin = Net Profit / Sales x 100

Net Profit Margin gives us the net profit that the business is earning per dollar of
sales.
This margin indicates the profit after all the costs have been incurred it shows that
what % of turnover is represented by the net profit. An increase in the ratios indicates
that a firm is producing higher net profit of sales than before.

Year 2009 2008 2007 2006 2005

Net Profit 18813050 15614020 10084037 12700315 9646549
Sales 75058474 63305033 50481021 43685740 32343206
Net Profit 25.06% 24.66% 19.97% 29.07% 29.83%
Margin

Therefore, the Net Profit Margin was 8.31% in 2006, increase to 12.1% in 2007 to
4% in 2008 and then again increase 25.06%.

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HABIB BANK LTD

8.3.14 Operating Income Margin:

Operating Income Margin = Operating Income x 100

Net Sales

Net mark-up / interest income after provisions + Mark-up / return / interest expensed -
Total non mark-up / interest expenses

Year 2009 2008 2007 2006 2005

Operating 38938468 37738818 24275410 25278799
Net Sales
Income 75058474 63305033 50481021 43685740 32343206
Operating 60.1% 59.6% 48% 57.9%
Income Margin

8.3.15 Return on Assets:

Return on Assets (ROA) = Profit after Taxation / Average Total assets x 100

ROA, A measure of a company's profitability, equal to a fiscal year's earnings divided

by its total assets, expressed as a percentage. This is an important ratio for companies
deciding whether or not to initiate a new project. The basis of this ratio is that if a
company is going to start a project they expect to earn a return on it, ROA is the
return they would receive. Simply put, if ROA is above the rate that the company
borrows at then the project should be accepted, if not then it is rejected.

Year 2009 2008 2007 2006 2005

Net 75058474 15614020 10084037 12700315 9646549
Total
income 7356439256
724959955 641141494.5 559592686.5
Average
ROA 2.30% 2.15% 1.57% 2.27%

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HABIB BANK LTD

Return on assets decreased in 2008 and 2009 and it was maximum in year 2007. This
may have occurred because Square used more debt financing in 2007 compared to
2008 and 2009 which resulted in more interest cost and brought the Net income down.
.

8.3.16 Return on Equity (ROE):

Return on Total Equity = Profit after taxation x 100

Total Equity

Return on Equity measures the amount of Net Income earned by utilizing each dollar
of Total common equity. It is the most important of the “Bottom line” ratio. By this,
we can find out how much the shareholders are going to get for their shares. This ratio
indicates how profitable a company is by comparing its net income to its average
shareholders' equity. The return on equity ratio (ROE) measures how much the
shareholders earned for their investment in the company. The higher the ratio
percentage, the more efficient management is in utilizing its equity base and the better
return is to investors.

Year 2009 2008 2007 2006 2005

Net income 18813050 15614020 10084037 12700315 9646549
Total Equity 72906208 71280902 55063125 45177664 32721197
ROE 25.8% 21.9% 18.31% 28.11% 29.48%

The Return on Equity was maximum in 2007 but decreased in 2008 and went down
more in 2009. This again may have happened due to the issue of more long-term debt
in 2008 and 2009.

8.3.17 DuPont Return on Assets:

DuPont Return on Assets = Profit after taxation x 100
Total Assets

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HABIB BANK LTD

Year 2009 2008 2007 2006 2005

Net Profit 18813050 15614020 10084037 12700315 9646549
Total assets 863778621 757928389 691991521 590291468 528893905
DuPont ROA 2.18% 2.06% 1.46% 2.15% 1.82%

8.3.18 Operating Assets Turnover:

Operating Assets Turnover = Operating Assets x 100

Net Sales

Year 2009 2008 2007 2006 2005

Operating Assets 76500146 110591707 97259620 94230402 76030757
Net Sales 18198725 63305033 50481021 43685740 32343206
Operating Assets 182.5% 174.70% 192.7% 192.7% 235.1%
Turnover Margin

2009
Operating Assets:
Cash and balances with treasury banks 79839836
Balances with other banks 40366687
Operating fixed assets 16766668
136973191
2008
Operating Assets:
Cash and balances with treasury banks 56533134
Balances with other banks 39307321

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HABIB BANK LTD

Operating fixed assets 14751252

110591707

2007
Operating Assets:
Cash and balances with treasury banks 55487664
Balances with other banks 27020704
Operating fixed assets 13780555
97259620

2006
Operating Assets:
Cash and balances with treasury banks 46310478
Balances with other banks 35965048
Operating fixed assets 11954876
94,230,402

2005
Operating Assets:
Cash and balances with treasury banks 33051049
Balances with other banks 31813513
Operating fixed assets 11166195
76030757

8.3.19 Return on Operating Assets:

Return on Operating Assets = Profit after Taxation x 100

Operating assets

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HABIB BANK LTD

Year 2009 2008 2007 2006 2005

Net Profit 18813050 10084037 12700315 9646549
15614020
Operating Assets 136973191 110591707 97259620 94230402 76030757
Return on 13.73% 11.19% 10.37% 13.48% 12.69%
9perating Assets

8.3.20 Sales to Fixed Assets:

This ratio is indicates that how much sales are contributed by investment in fixed
Assets.

Sales to Fixed Assets = Net Sales / Fixed Assets

Year 2009 2008 2007 2006 2005

Net Sales 75058474 63305033 50481021 43685740 32343206
Fixed Assets 16766668 14751252 13780555 11954876 11166195
Sales to Fixed 4.48times 3.66times 3.6 times 3.6 times 2.90%
Assets

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HABIB BANK LTD

8.4 HORIZONTAL ANALYSIS OF BALANCE SHEET

HABIB BANK LIMITED

HORIZONTAL ANALYSIS
BALANCE SHEET AS AT DECEMBER 31
Common Size (%)
2009 2008 2007 2006 2005
ASSETS
Cash and balances with treasury banks 187.36 176.83 173.56 144.85 100
Balances with other banks 125.65 117.62 80.85 107.62 100
Lending to financial institutions 198.65 164.94 43.36 174.44 100
Investments 68.34 10.27 132.28 88.90 100
Advances 178.98 176.14 147.51 134.87 100
Other assets 302.30 297.15 229.42 149.04 100
Operating fixed assets 250.56 132.76 124.03 107.60 100
Deferred tax asset 602.62 567.32 334.32 137.78 100
TOTAL ASSETS 170.56 155.38 141.87 121.02 100
LIABILITIES
Bills payable 132.09 130.81 202.82 75.48 100
Borrowings from financial institutions 179.04 159.63 201.03 192.16 100
Deposits and other accounts 157.86 147.56 131.30 113.47 100
Sub-ordinate loans
Liabilities against assets subject to finance lease
Other liabilities 186.10 175.9 140.81 109.99 100
Deferred tax liability
TOTAL LIABILITIES 160.69 149.81 137.96 117.80 100
NET ASSETS 265.65 234.75 197.46 166.88 100
REPRESENTED BY
Shareholders Equity
Share capital 120 110 100.00 100.00 100.00
Reserves 988.87 916.31 749.19 672.88 601.43

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HABIB BANK LTD

Inappropriate profit 300.52 290.93 209.02 151.01 73.08

Total equity attributable to the equity holders of
the Bank 315.38 308.91 238.32 195.53 141.62
Minority interest 110.53 106.55 115.59 109.33 101.37
Surplus on revaluation of assets - net of tax 56.51 37.22 89.16 90.94 94.12
TOTAL EQUITY 265.54 234.75 197.46 166.88 128.58

Analysis:

i. There is a rapid increase in cash and balances with treasury bank. In the year
2006 it was144.5 % of the cash, and in the year 2009, it reached to 186.86%.
ii. On the other hand balance with other banks weaving every year. There is no
same trend among them.
iii. Advances have also increased as compare to the base year.
iv. There is overall increase in assets.
v. Though the assets have increased but the increase in liabilities is more than the
increase in assets.
vi. The main reason of increase in assets is deposits and other accounts, and
increase in loan from State Bank of Pakistan.
vii. That is why there is a prominent increase in net assets.
viii. There is a continuous increase in investments. It has increased to 132.28% in
the year 2007, as compared to 100% in the year 2005. But after that it was
declining from 132.28% to 68.34% in the year 2009.
ix. There is a not enough growth in deferred tax assets.
x. The bank has paid all the tax liabilities. Now there is no outstanding tax of
bank in the year 2009.

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HABIB BANK LTD

HORIZONTAL ANALYSIS OF INCOME STATEMENT

HABIB BANK LIMITED

HORIZONTAL ANALYSIS
PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31
Common Size (%)
2009 2008 2007 2006 2004
Mark-up / return / interest earned 358.58 347.85 277.39 240.05 100
Mark-up / return / interest expensed 650.65 593.13 428.30 295.25 100
Net mark-up / interest income 285.85 267.94 228.22 222.06 100
Provision against non-performing loans and
advances - net 350.65 365.81 436.45 151.69 100
Charge / (reversal) against off-balance sheet
obligations 85.62 65.21 -9.56 -7.95 100
Charge / (reversal) of provision against diminution
in the value of investments -63.32 -1263.00 55.75 9.06 100
Bad debts written off directly
400.32 398.12 350.97 121.51
Net mark-up / interest income after provisions 314.56 241.64 203.42 242.38 100
Fee commission and brokerage income 185.62 179.99 136.23 156.61 100
Income / gain on investments 50.86 55.94 58.38 28.79 100
Income from dealing in foreign currencies 265.65 216.68 135.74 100.60 100
Gain on investments in associate 0
Other income 168.98 154.24 130.81 110.66 100
Total non-mark-up / interest income 185.58 166.07 101.63 86.08 100
265.56 206.62 156.25 169.95 100
Non mark-up / interest expense
Administrative expenses 165.65 154.91 132.77 111.93 100
Other provisions / write offs - net 71.85 81.72 112.72 50.01 100
Other charges 765.05 860.71 1131.89 729.74 100
Workers welfare fund
Total non mark-up / interest expenses 175.65 156.31 12.90 111.18 100
Profit before taxation 315.64 304.20 209.08 260.10 100
Taxation
- Current 225.64 217.53 1813.56 1794.50 100
- Prior years 1320.65 1519.46 10876.49 -254.66 100
- Deferred -130.52 -231.09 -357.64 -90.20 100

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HABIB BANK LTD

96.41 111.40 174.97 220.36 100

Profit after taxation 280.95 270.92 174.97 220.36 100
Attributable to:
Equity holders of the Bank 283.56 273.79 176.25 222.60 100
Minority interest 98.65 88.36 93.72 78.35 100
286.52 270.92 174.97 220.36 100
Basic and diluted earnings per share 260.47 249.33 160.54 222.90 100

Analysis:

i. There is a positive increase in net markup income.

ii. Due to high increasing trend of provisions, the net markup income after
provision has lost its increasing trend to a little bit.
iii. There is decrease in the dividend income which shows that the bank was
unable to maintain its portfolio of investments effectively. Same is the case
with gain on sale of government securities.
iv. Total non-markup income has a decreased in 2008 while again its is increased
in the year 2009 whereas non-markup expense has an increasing trend in 2009
but decreasing in 2008.
v. That is why, the profit before taxation could not maintain its good standard in
2008 but again boost up to 315.64% in 2009.
vi. Markup interest expenses have increased form 100% to 156.3% in the year
2005 to 2009.
vii. The provision against non performing loans and advances has decreased from
100% to 81.72% in the year 2008.
viii. In the fee, commission and brokerage income, there remained variation i.e. in
the year 2006 & 2007 it increased, and then decreased in the next year 2008
but again increased in 2009.

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HABIB BANK LTD

8.5 VERTICAL ANALYSIS OF BALANCE SHEET

HABIB BANK LIMITED

COMMON SIZE / VERTICAL ANALYSIS
BALANCE SHEET AS AT DECEMBER 31
Common Size (%)
2009 2008 2007 2006 2005
ASSETS
Cash and balances with treasury banks 9.2450 7.4589 8.019 7.8454 6.2491
Balances with other banks 4.6760 5.1862 3.905 6.0928 6.0151
Lending to financial institutions 06275 0.8172 0.235 1.1096 2.3203
Investments 25.0652 1.8227 25.71 20.259 20.3035
Advances 52.6464 60.211 55.23 59.197 59.914
Other assets 4.7645 4.6732 3.952 3.0096 2.7381
Operating fixed assets 1.9411 1.9463 1.991 2.0252 2.1112
Deferred tax asset 1.0658 1.4807 0.956 0.4617 0.3485
TOTAL ASSETS 100 100 100 100 100
LIABILITIES
Bills payable 1.2884 1.312 2.228 0.972 1.0922
Borrowings from financial institutions 6.0045 6.1806 8.525 9.5533 6.5995
Deposits and other accounts 85.6587 78.779 76.78 77.782 81.783
Sub-ordinate loans 1.5246 0.5218 0.448
Liabilities against assets subject to finance
lease
Other liabilities 4.2586 3.287 2.882 2.6391 2.7397
Deferred tax liability
TOTAL LIABILITIES 98.0812 90.081 90.86 90.946 92.2144
NET ASSETS 10.2845 9.919 9.14 9.054 7.7857
REPRESENTED BY

Shareholders Equity

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HABIB BANK LTD

Share capital 1.2892 1.001 1 1.169 1.3046

Reserves 4.159 3.199 2.86 3.016 3.0086
Unappropriated profit 6.5265 5.205 4.1 3.287 1.8735
Total equity attributable to the equity holders
of the Bank 9.548 9.405 7.96 7.653 6.1867
Minority interest .2546 0.117 0.14 0.155 0.1601
Surplus on revaluation of assets - net of tax .8952 0.397 1.04 1.246 1.4388
TOTAL EQUITY 10.259 9.919 9.14 9.054 7.7857

Analysis:

i. In the year 2009, out of total assets (1008% of net assets), the liabilities and
equity are 908% and 100%, respectively, as detailed below:
o Assets = Liabilities + Equity
o 1008% = 908% + 100%
ii. In assets, the Advances form the largest part i.e. 604% out of 1008% of assets.
iii. The second largest portion is Cash and balances with treasury banks. In the
year 2005 the cash and balances with treasury banks was 66%, whereas in the
year 2008, it raised to 75% of net assets.
iv. The liabilities of bank are much more than its equity.
v. Lending to Financial Institutions is only 8% of net assets which is very meager
as compare to the Investments.
vi. The bank is not investing the money wisely. Means not going in the right
direction. Instead of lending to financial institution, it is spending its money in
investments. It means the bank is avoiding making efforts and finding easy
ways to utilize the assets.
vii. In the year 2005, the balances with other banks was 60% of net assets whereas
in the year 2008, it dropped down to 39% of net assets. But in 2009 it again
grow up to 52%.
viii. The portion of operating fixed assets in net income are decreasing from start to
end.

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HABIB BANK LTD

VERTICAL ANALYSIS OF INCOME STATEMENT

HABIB BANK LIMITED
COMMON SIZE VERTICAL ANALYSIS
PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31
Common Size (%)
2009 2008 2007 2006 2005
Mark-up / return / interest earned 100 100 100 100 100
Mark-up / return / interest expensed 62.527 41.901 37.94 30.225 22.334
Net mark-up / interest income 63.528 58.099 62.06 69.775 77.344
Provision against non-performing loans and
advances - net 12.589 10.907 16.32 6.5541 9.197
Charge / (reversal) against off-balance sheet
obligations 0.6558 0.5886 -0.108 -0.104 0.398
Charge / (reversal) of provision against diminution in
the value of investments 4.014 3.017 -0.167 -0.031 -0.255
Bad debts written off directly 0 0 0 0 0
15.545 14.513 16.04 6.4187 9.34
Net mark-up / interest income after provisions 46.456 43.586 46.01 63.356 68.004
Fee, commission and brokerage income 8.5823 7.1375 6.775 9 9.084
Income / gain on investments 4.2442 3.7426 4.898 2.7918 5.337
Income from dealing in foreign currencies 4.5687 3.7506 2.946 2.5234 4.336
Gain on investments in associate 7.1317 6.3191 0.3162 0 0
Other income 5.652 4.923 5.236 5.1179 5.526
Total non-mark-up / interest income 30.25 25.873 19.86 19.433 24.284
78.63 69.459 65.87 82.789 92.288
Non mark-up / interest expense
Administrative expenses 34.631 33.722 36.25 35.31 43.58
Other provisions / write offs - net 0.6231 0.3162 0.547 0.2804 0.769
Other charges 0.2035 0.1023 0.169 0.1257 0.212
Workers welfare fund 0.5653 0.5111 0 0 0
Total non mark-up / interest expenses 38.52 34.652 0 35.716 44.561
Profit before taxation 38.56 34.807 30 43.127 42.772
Taxation
- Current 13.5 0 14.3 16.355 12.605
- Prior years 0.8452 0.3682 3.305 -0.089 -0.121
- Deferred -1.258 -3.908 -7.584 -2.21 0.464

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HABIB BANK LTD

13.482 10.142 19.98 29.072 29.825

Profit after taxation 28.652 24.665 19.98 29.072 29.825
Attributable to:
Equity holders of the Bank 26.65 24.54 19.81 28.912 29.568
Minority interest 0.253 0.125 0.17 0.16 0.257
25.62 24.66 20 29.07 29.825
Basic and diluted earnings per share 4.320 3.23 2.61 4.189 4.285

Analysis:

i. In the year 2009, Markup earned is 186% more than net Markup income.
ii. Non-markup income is very low i.e. 76% of Net markup income.
iii. As compare to Non-markup income, Non-markup expenses are less i.e. 59%
of Net-markup income
iv. Profit before taxation increase to 60% of Net-markup income due to low
Administrative expenses.
v. The increase in profit available for appropriations is not due to high profits;
rather it is due to bringing forward the previous un-appropriated profits.
vi. In the year 2005, the markup expense was 42% of net markup income,
whereas in the year 2009 it has reduced to 72% of net markup income.
vii. Fee, commission and brokerage income remained declining throughout the
period under observation i.e. 23% in 2005 of net markup income and in 2008
it was 12%.
viii. The taxation expense has reduced from 53% of net income to 17% in the year
2005 & 2009, respectively.

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HABIB BANK LTD

Competitors/ Industry Analysis:

For the year ended December 31, 2008 (Rupees in thousand)

Muslim Askari % of HB
Habib Allied
Commercial Commercial Industry to
Particulars Bank Bank
Bank Bank Average Industry
Limited Limited Industry
Limited Limited Average
Analysis
Mark-
up/return/interest 40043824 18393313 30517000 31046583 30000180 211%
earned 63,305,033
Mark-
up/return/interest 11560740 10650719 16560000 20331194 14775663 160%
expensed 26,525,556
Net mark-up
28483084 7742594 14011000 10715389 24294436 151%
interest income 36,779,477
9,187,404
Provisions 4019121 5915615 3561000 3543357 4259773 216%

Net Mark-
up/interest 27,592,073
24463963 386225 6121000 7172032 9535805 289%
income after
provisions
Total non mark-
16,378,811
up/interest 5791440 2707000 4152000 12417459 6266974 261%
income
PROFIT
BEFORE 20,502,802 21887588 461382 6121000 1794720 8,293,478 247%
TAXATION
PROFIT AFTER
14,276,125 15374600 386225 4157000 1301301 5,838,596 245%
TAXATION

Analysis:
 The markup earning of HBL bank is very high the industry average i.e., 211%.

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HABIB BANK LTD

 Even then the net markup interest income after provision is better (289%) due
to comparatively less interest expenses and provisions.
 High non-markup income (261%) shows the high income before taxation.
 There is a little bit difference between both profits (profit before taxation and
profit after taxation) which shows the better position of Habib Bank as
compare to its competitors.

9. Critical analysis of the theoretical concepts

Banking is now become a big giant of Economy. It’s playing a vital role in the growth

of country economy, but there are some problems. But when we study the actual

practice we come to know that there is lot of gap between theoretical point of view as

well as actual benefits.

 Gap between consumer expectation and management perception.

 Gap between management perception and service quality specification.

 Gap between service quality specification and service delivery.

 Gap between service delivery and external communication.

 Gap between perceived service and expected service.

10. Success and Failure of Different Product

Recently HBL Launched credit card which could not attract the customer due to

different reasons of price, convenient and markup rates, same as due to highest

markup rate of Auto Finance which is 20% that product is also creating very tough

competition in market.

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HABIB BANK LTD

11. Future Prospective Of the Organization

 HBL is now planning to provide E-Banking facility to their account holders.

 Account Holder can find out the current balance by using unique ID and

Password.

 Account Holder can transfer money from his account to other HBL account by

using EFT (Electronic Fund Transfer) with no time delay.

 Can review his last six month bank statement.

 Pay utility bills through Debit or Credit Card.

 By using Phone banking customer can find out the account balance through

his personal Phone.

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HABIB BANK LTD

12. Critical Analysis

I have observed lot of weaknesses in HBL, it has very large network but Online

facility is not available in every branch, ATM machines are not available, their

FFT charges are high, If we compare the facilities of other banks offer to their

customer as compare to HBL then we find out different important factors which

are very strong in other banks are.

 Working speed is very slow.

 Employees are not skilled with new technology.

 On Line transfer money Charges are very high.

 ATM Card charges.

 Cheque Book charges.

 Lack of ATM machine availability to every branch.

 Difficult terms and conditions of Account Opening as well as Loan Facility.

 Lack of Help Desk Service for the guidance of the customer.

 Generation gap between youngsters and old bankers

 Lack of communication between staff.

 Extra charges.

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HABIB BANK LTD

13. Conclusion/Recommendation

According to my Observation HBL has to adopt different important strategies to

compete the market.

1. All of the branches of Habib Bank Limited should be computerized and

interlinked with networking. This is necessary to provide online service.

2. Refresher courses should be arranged for staff to groom their working

capabilities.

3. Special sachems should be introduced for individuals, salaried and pensioners

as well.

4. Capable of workings, efficient, effective, and well qualified people should be

appointed in the officer ranks for the rapid progress of the bank.

5. There should not be any political influence regarding loans etc.

6. Salaried should be competitive so that new appointees should able to stay in

the bank for long time.

7. Appraisal system and promotion criteria should be revised with positive

amendments.

8. The leave should be given to employees with flower on their weeding

Anniversary to motivate them.

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HABIB BANK LTD

9. Bonus is very important to encourage the employees to increase their

performance level.

14. Reference & Source Used/Under Guidance

My experience of internship in HBL is outstanding; All staff members help me and

guide me to explore the knowledge, I am also indebted to the whole management of

HBL and especially thanks to honorable sir Mr Syed Izaz Hussain Shah branch

manager of HBL Commissioner road branch Sialkot region and Miss Humaira Munir

operation manger HBL Commissioner Road Branch Sialkot region. who provided me

the chance of having sufficient material to complete my report.

o www.habibbank.com

o HBL Annual Report

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