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Business and Financial Performance of Habib Bank Limited

The Business & Financial Performance of Habib Bank over a Three Year Period

Word count: Research Analysis Project 6485 words

This project is prepared in accordance with guidelines of `Oxford Brookes University for BSC (Hons)

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Contents Topic Selection About HBL Product and services Overview of the Banking Industry Research objectives Framework of RAP Information Gathering Limitation for Collecting Information Ethical issues While Techniques Ratio Analysis Revenue and expense trend Analysis Profitability Ratio Liquidity Ratio Debt management Ratios Investors Ratio Business Analysis Pest Analysis SWOT Analysis Conclusion

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Topic Selection
I have selected Topic 8, The Financial & Business Analysis Of Habib Bank limited (HBL) as a subject for my Research & Analysis Project (RAP). This topic will give me a chance to apply my knowledge in a real organization because Analyzing Business and Financial Position of any organization is key competence which an accountant should posses. However, there is a massive difference in analyzing the real organizations business and financial environment as compared to the exam question because there are thousands of factors affecting the business in different manner.

This topic will definitely improve my interpretation skills. Moreover, provide me an opportunity to understand and evaluate the economic environment and corporate culture and strategies.

About Habib Bank Limited HBL

Habib Bank limited (HBL) was the first commercial bank to be established in Pakistan in 1947. Over the years, HBL has grown its branch network and become the largest private sector bank with over 1,450 branches across the country and a customer base exceeding five million relationships. HBL is the largest private bank in the country with a domestic market share of over 40%. Habib Bank Limited is incorporated in Pakistan and is engaged in commercial banking, modaraba management and asset management related services in Pakistan and overseas. The Bank is expanding its presence in principal international markets including the UK, UAE, Southland Central Asia, Africa and the Far East.

Key areas of operations encompass product offerings and services in Retail and Consumer Banking.HBL has the largest Corporate Banking portfolio in the country with an active Investment Banking arm. SME and Agriculture lending programs and banking services are offered in urban and rural centers.

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.

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(, 2012)

Shareholding In HBL
7% 51% Agha Khan Fund for Economic Development(Governenment of Pakistan privatized HBL in 2004) Government of Pakistan


General Public

JCR-VIS, a credit rating company re-affirmed the bank's long-term entity rating at AA+. The short term rating remains at A-1+, which is the highest rating denoting the greatest certainty of timely payments by a financial institution. All ratings for HBL have been assigned a Stable outlook.

(HBL (2011).Annual Report .s.l: s.n. p11)

Products and services:

HBL caters to all market segments, offering products that are as diverse as the people they service. This gives HBL the insights needed to provide a variety of products that directly reflect customer needs.

Services to individual clients like car loan, credit cards, home loan, deposite accounts, ATM facility, banc assurance, debit card, phone and internet banking, fast transfer and mutual fund.

( individual-customers.php,2012) HBL provides the following services to meet your funding requirements to meet the demanding service standards of large corporations. o o

Working Capital Finance, including Overdraft, FE Loans, etc. Pre and Post Shipment Export Financing (PKR and USD based)

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o o o o o o

Import Financing (PKR and USD based) LMM Funding Receivable Discounting Islamic Banking facilities Cash Management Services Trade Services including Letter of Credit, Letter of Guarantee and Standby Letter of Credit, etc. ( individual-customers.php,2012)

Overview of the Banking Industry:

Pakistan Banking Industry is one of the most regulated industries in the country. State Bank of Pakistan is the governing body of all banks operating in the country and also plays a key role in monitoring and regulating the services provided by the banks, its main objective is to coordinate the efforts of the banking industry, and to share a common vision of progress and development with its members. And other Key Governmental Authorities continuously influence and imply strict regulations on industry players.

Banking Industry at Glance:

The big 5 banks of Pakistan namely National Bank of Pakistan (NBP), Habib Bank Limited (HBL), Muslim Commercial Bank (MCB), United Bank Limited (UBL) and Allied Bank Limited (ABL). The top five banks are roughly holding nearly 51 percent of the industry's total asset base. The HBL Total Asset share is 14.5 percent from the total Assets of all Banks.


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(Quarterly compendium financial soundness report, 2011, p.8) Appendix 2 (,2011) (,2011) ( ,2011) (,2011)

In terms of Assets, Deposits and Investments NBP and HBL has a dominant domestic presence across the Country. The Aggregated assets of these 5 Banks 2011 are Rs. 4,339 Billion 17% higher than 2010 which was Rs. 3,706 Billion and Profit after tax have surged to Rs. 84.3 Billion in 2011, 19% higher as compared to 2010 Rs. 70 Billion. However, there is a little increase in the Advances which is 1.08% (Rs. 1,936 Billion in 2011 to 1,915 Billion in 2009). Due to the economic conditions and recent flood disaster the increase in the non performing loans was observed from past few years. However, surprisingly there is a decrease in 2011 by 5.4% (168 Billion from 178 Billion) from 2010. Furthermore, the bank deposits, which have a key contribution in maintaining financial stability of overall banking, has increased by 15% Rs. 3,385 Billion in 2010 to Rs. 2,932.3 Billion in 2010.siness & Financial Performance of Habib B

Advances of Top five Bank's (In Million PKR)

800 600 400


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Due to the high risk, banks are keen interested in investing in Government securities, induced by a lucrative return on government papers, the top five banks increased their investment

Deposits of Top five Bank's (In Million PKR)

1,000 800 600 400 200 0 NBP HBL MCB UBL ABL 500 400 300 200 100 0

Investments of Top five Bank's (In Million PKR)






portfolio by 38 percent (Rs. 1,554 Billion in 2011 to Rs. 1,120 Billion in 2010).

According to the latest Banking industry review conducted by Banking Surveillance department of State Bank of Pakistan Financial Soundness Indicators of the Banking System at the end of December 2011 is as follows: It includes All Banks in Pakistan (Public Sector Commercial Banks, Local Private Banks, Foreign Banks, Commercial Banks Specialized Banks).

Key Financial Soundness Indicators(FSIs) of the Overall Banking System

2009 Return On Earning ROE (%) (before tax) Return on Assets (times) Advance/ Deposits Ratio NPLs to loans (Gross) Ratio Net NPLs to net loans Ratio Liquid Assets/Total Deposits Ratio 13.2 1.3 67.7 12.6 4.1 44.5 2010 16.7 1.7 61.4 14.7 5.4 45.9 2011 23.4 2.2 53.6 16.2 6 58.4

(, 2011)

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Research Objectives:
Among many options for selecting the appropriate organization, I chose HBL to explore the reason what makes HBL a largest bank in Pakistan in terms of deposits as well as won several awards from Global Finance, the purpose of this project is to learn about success and status in market.

The objective of this research includes: a. Analysis of financial statements for year ended December 2009, 2010 and 2011. b. What competitive edge does HBL enjoys with its huge network? c. Does HBL commit itself towards these social and corporate responsibilities?

Framework of RAP
Information gathering is the main component for research analysis. Most of the information gathered for analysis is done prior commencing the RAP. Keeping in mind that the information collected is the quality of information containing the characteristics like reliability and relevancy and authoritative.

Moreover, ethical matters are also discussed as a part of information collection. Banks provide services therefore, Banking Financial and business analysis is slightly different from the traditional analysis because bank do not possess inventory like manufacturing company.

First in Research analysis project, I consider the financial analysis comprises of revenue and expense trend analysis, Profitability, debt management ratio, liquidity ratio and Investors Ratio. Non Financial information has been evaluated with PEST analysis, SWOT framework and Porters five Forces.

After, the analyzing the financial and non financial issues of HBL. Final evaluation of research answers and achievements of objectives are discussed in Conclusion as well as the HBL attitude towards corporate social responsibility.

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