Bank Al Habib Limited 1

Executive Summary

This report has focused on the Management Style and working of the Bank Al Habib Limited.
Aspects like corporate philosophy, organizational structure, training and development and
role of technologies in company’s activities have been highlighted.

From management point Bank Al Habib is an organization following centralized planning and
controlling. Planning is the responsibilities of the senior management group more particularly
the board of directors, and to check any deviation from the prescribed plan, there is head
office under them.

Organizational structure has been established in such a way, which has enabled it to
decentralize its operations and day-to-day management activities. Delegation of authority
and establishment of zones, regions, and branches have helped to manage day-to-day
activities. To effectively maintain and develop its human resources Bank Al Habib invest
considerable time and finance to polish the skills of its employees.

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Bank Al Habib Limited 2

Company Overview

DAWOOD HABIB GROUP, which is the sponsor of Bank AL Habib Limited, has a very long
track record of banking which dates back to 1920s. They were among the founder members
of Habib Bank Limited , which played a major role in meeting the financial, and banking
needs of Pakistan, and which was nationalized along with other Banks in Pakistan on
December 31, 1973.

Under the privatization policy of Government of Pakistan, the DAWOOD HABIB GROUP was
granted permission to set up a commercial bank. Bank AL Habib was incorporated as a Public
Limited Company in October 1991 and started banking operations in 1992.

Board of Directors

The Board of Directors of the Bank comprises of the following:

Name Designation Occupation

Ali Raza D. Habib Chairman Businessman
Abbas D. Habib CEO & MD Banker
Anwar Haji Karim Director Industrialist
Faiz N. Abdul Ali Director Businessman
Hasnain A. Habib Director Industrialist
Imtiaz Aalam Hanfi Director
Murtaza H. Habib Director Industrialist
Qumail R. Habib Executive Director Banker
Syed Mazhar Abbas Director Banker
Tariq Iqbal Khan Director
Mahmood S. Allarakhia Company Secretary Banker

Credit Rating

The Bank has been rated as "AA" for long-term rating and "A1+" for short-term rating by the
Pakistan Credit Rating Agency (Private) Limited (PACRA).

Consumer Banking

Bank AL Habib Limited offer Consumer Loan facilities to its eligible customers. These facilities
are tailored to suit customer requirements with competitive rates and an easy means of
payment. We have the solution whether it may be for personal needs, a brand new car or a
house (building/renovating a house).

Following are the consumer banking products of Bank Al Habib.

• Personal Loan.
• Auto Loan.
• Home Loan.

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Bank Al Habib Limited 3

Services

Bank AL Habib Limited offers a wide range of services to the customers and recognizes the
importance for efficient business delivery and providing timely solutions to them.

Following are the services provided by Bank Al Habib to its customers:

• Online Banking.
• Safe Deposit Lockers.
• ATM Card.
• Debit Card.
• Tele Banking.
• Remittances.
• Cash Management.

The bank also maintains correspondent relations with leading international banks.

These include American Express Bank, USA; Banco Di Roma, Italy; Commerzbank and
Dresdner Bank, Germany; Midland Bank, PLC U.K.; The Royal Bank of Canada, Canada; Hong
Kong and Shanghai Banking Corporation Ltd., Hong Kong.

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Bank Al Habib Limited 4

Vision and Mission Statement

Vision Statement

“To be a quality financial service provider maintaining the highest standards in

banking practices.”

Mission Statement

“To be a strong and stable financial institution offering innovative products and
services while contributing towards the National economic and social development.”

Evaluation of Mission Statement

Customers. No.
Product/Services. Yes.
Markets. No.
Technology. No.
Concern for Survival, Growth, and Profitability Yes.
Philosophy. Yes.
Self Concept. Yes.
Concern for Public Image. No.
Concern for Employee. No.

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Bank Al Habib Limited 5

Strengths and Weaknesses

Strengths

1. Strong brand recognition in the domestic market and niche foreign markets.
2. Bank Al Habib provides a complete range of banking products and services including
retail banking, corporate banking, trade finance, consumer finance, debit cards, online
banking, tele banking, etc.
3. Focused business strategy supported by appropriate organization structure, operating
procedures, and qualified human resource.
4. Strong distribution capability through the 104 branches all over Pakistan.

Weaknesses

1. No massive advertising.
2. Up gradation of technology in all branches not yet complete.
3. The potential of overseas branches is not being fully exploited.
4. Shortage of trained and specialized staff at lower and officer levels for consumer and
retail banking.
5. Communication among the functional areas are some how lacking.

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Bank Al Habib Limited 6

Internal Factor Evaluation (EFU) Matrix

Weighted
S. No. Key External Factors Weight Rating
Score
Strengths
1 Strong brand recognition in the domestic market 0.15 4 0.60
and niche foreign markets.
2 Bank Al Habib provides a complete range of 0.15 4 0.60
banking products and services including retail
banking, corporate banking, trade finance,
consumer finance, debit cards, online banking,
tele banking, etc.
3 Focused business strategy supported by 0.10 4 0.40
appropriate organization structure, operating
procedures, and qualified human resource.
4 Strong distribution capability through the 104 0.10 3 0.30
branches all over Pakistan.

Weaknesses

1 No massive advertising. 0.15 4 0.60

2 Up gradation of technology in all branches not yet
0.10 3 0.30
complete.
3 The potential of overseas branches is not being
0.10 3 0.30
fully exploited.
4 Shortage of trained and specialized staff at lower
0.10 3 0.30
and officer levels for consumer and retail banking.
5 Communication among the functional areas are
0.05 3 0.15
some how lacking.
Total 1.00 3.55

The total weighted score of 3.55 shows that Bank Al Habib is above average in its efforts to
pursue strategies that enhance internal strengths and minimize weaknesses.

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Opportunities and Threats

Opportunities

1. Develop value added services combined with corporate banking relationships, cash
management services to large and medium sized corporate clients.
2. Large international network, which principally focuses on trade finance with Pakistan,
can be utilized to tap trade activities in other markets.
3. Reduction in intermediation costs from 5% to 10% is possible, with improving
technology.
4. Profit may increase by 10% to 15% through e-banking operations.
5. A wide product portfolio, along with increasing greater hedging of business risks also
significantly increases cross selling opportunities.

Threats

1. Intense competition among the various banks.

2. Economic instability such as changing level of disposable income, rates of inflation,
fiscal policy, unemployment etc.
3. Political changes affects banking sector seriously. Banks have the funds available for
lending, however, government may restrict up to certain amount for lending.
4. Qualified personnel are moving abroad for better living.
5. Although hardware prices continue to decline, the cost of service and support of
technology increases exponentially.
6. Technology is constantly changing - hard to keep up with limited staff.

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External Factor Evaluation (EFU) Matrix

Weighted
S. No. Key External Factors Weight Rating
Score
Opportunities
1 Develop value added services combined with 0.15 4 0.60
corporate banking relationships, cash
management services to large and medium sized
corporate clients.

2 Large international network, which principally 0.15 4 0.60

focuses on trade finance with Pakistan, can be
utilized to tap trade activities in other markets.

3 Reduction in intermediation costs from 5% to 0.05 3 0.15

10% is possible, with improving technology.

4 Profit may increase by 10% to 15% through e- 0.10 3 0.30

banking operations.
5 A wide product portfolio, along with increasing 0.10 3 0.30
greater hedging of business risks also
significantly increases cross selling opportunities.
Threats
1 Intense competition among the various banks. 0.10 4 0.40
2 Economic instability such as changing level of
disposable income, rates of inflation, fiscal policy, 0.10 3 0.30
unemployment etc.
3 Political changes affects banking sector seriously.
Banks have the funds available for lending,
0.10 3 0.30
however, government may restrict up to certain
amount for lending.
4 Qualified personnel are moving abroad for better
0.05 2 0.10
living.
5 Although hardware prices continue to decline, the
cost of service and support of technology 0.05 3 0.15
increases exponentially.
6 Technology is constantly changing - hard to keep
0.05 1 0.05
up with limited staff.
Total 1.00 3.25

The total weighted score of 3.25 shows that Bank Al Habib is above average in its efforts to
pursue strategies that capitalize on external opportunities and avoid threats.

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Competitive Profile Matrix (CPM)

Bank Al Habib Bank Al Falah Saudi Pak Bank

Critical Success
Weight Rating Score Rating Score Rating Score
Factors
Advertising 0.10 2 0.20 4 0.40 3 0.30

Service Quality 0.10 3 0.30 4 0.40 2 0.20

Price
0.10 3 0.30 3 0.30 3 0.30
Competitiveness
Management 0.10 4 0.40 3 0.30 3 0.30

Financial Position 0.15 3 0.45 4 0.60 2 0.30

Customer Loyalty 0.10 3 0.30 3 0.30 2 0.20

Technological
0.10 3 0.30 4 0.40 3 0.30
Advantage
Global Expansion 0.10 2 0.20 2 0.20 2 0.20

Market Share 0.15 2 0.30 3 0.45 2 0.30

Total 1.00 2.75 3.35 2.30

As indicated by the total weighted score of 2.75, Bank Al Habib is stronger than Saudi Pak
Bank having score of 2.30 but weaker than Bank Al Falah having score of 3.35.

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Bank Al Habib Limited
Threats Opportunities Weaknesses Strengths (TOWS) Matrix
Opportunities-O
1. Develop value added
services.
2. Large international
network.
3. Reduction in
intermediation costs.
4. E-banking operations.
5. A wide product portfolio,
along with increasing
greater hedging of
business risks also
significantly increases
cross selling
opportunities.
Threats-T
1. Intense industry
competition.
2. Economic instability.
3. Political changes.
4. Brain drain.
5. Cost of service and
support of technology
increases exponentially.
6. Technology is constantly
changing.
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Strengths-S
1. Strong brand recognition.
2. Complete range of
banking products and
services.
3. Focused business strategy
supported by appropriate
organization structure,
operating procedures, and
qualified human resource.
4. Strong distribution
capability.
SO Strategies
1. Offer new products and
services in retail and
consumer banking to
increase market share.
2. Increase local distribution
capability to exploit in
growth banking sector.
ST Strategies
1. Offer low markup facilities
for corporate and retail
customers.
2. Constantly monitor and
upgrade technologies to
get competitive
advantage.
10
Weaknesses-W
1. No massive advertising.
2. Up gradation of
technology in all
branches not yet
complete.
3. The potential of overseas
branches is not being
fully exploited.
4. Shortage of trained and
specialized staff.
5. Communication among
the functional areas are
some how lacking.
WO Strategies
1. Increase branch network
to increase market
share.
2. Development of Human
Resource for online and
E-Banking operations.
WT Strategies
1. Advertise new products
and services.
2. Branch network should
be upgraded with latest
technology.
Bank Al Habib Limited 11

Strategic Position and Action Evaluation (SPACE) Matrix

Financial Strength (FS)

Return on investments (ROIs) For Year 2005

1. Return on Assets (ROA)

Return on Total Assets (ROA) = Net Income / Total Assets

Rs. In ‘000
Net Income 1,483,165
Total Asset 91,501,541

ROA = 1,483,165 / 91,501,541

ROA = 0.016

2. Return on total Stockholder’s Equity

Return on Stockholder’s Equity (ROE) = Net Income / Total Stockholder’s Equity

Rs. in ‘000
Net Income 1,483,165
Total Stockholder’s Equity 4,745,795

ROE = 1,483,165 / 4,745,795

ROE = 0.313

Return on investments (ROIs) = 0.016 + 0.313

= 0.329

Operating profit Margin For Year 2005

Operating profit Margin = EBIT / Sales

Rs. in ‘000
Earning before interest and taxes 2,022,008
Sales 5,971,690

Operating profit Margin = 2,022,008 / 5,971,690

= 0.34

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Working Capital

Working Capital = Current Assets – Current Liabilities

= 8,671,552,000 – 7,740,516,000
= 938,776,516

ROIs 0.329 5
Operating profit Margin 0.34 4
Working Capital 938,776,516 4
Cash Flow (in ‘000) 8,671,552 5
Net Income (in ‘000) 1,483,165 5
Revenue (in ‘000) 5,971,690 5
Total 28

Competitive Advantage (CA)

Market Share -2
Product and service quality -2
Customer loyalty -2
Technological know how -3
Total -9

Environmental Stability (ES)

Technological Change -3
Rate of Inflation -4
Demand Variability -3
Price change of competing products -3
Competitive pressure -3
Total -16

Industry Strength (IS)

Growth potential 5
Profit Potential 5
Financial Stability 5
Resource utilization 4
Total 19

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Computation

ES Average = -16/5 = -3.20

IS Average = 19/4 = 4.75
CA Average = -9/4 = -2.25
FS Average = 28/6 = 4.67

Directioal Vector Coordinates

x-axis (CA + IS) = -2.25 + 4.75 = 2.50

y-axis (ES + FS) = -3.20 + 4.67 = 1.47

FS

(2.50, 1.47)

CA IS

-6 -1 1 6

-6

ES

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Boston Consulting Group (BCG) Matrix

(Rs In ‘000)
Percen
Percent Percent
Percent Profits/Los t
Divisions Revenues Profits/Los Growth
Revenue s Market
s Rate
Share
1 Mark-up/ 4,935,626 82.65 2,716,786 134.36 80 +15
Return/
Interest
Earned
2 Fee, 508,744 8.51 (341136) (18.03) 70 +08
Commission
and
Brokerage
Income.
3 Dividend 38,820 0.65 (1436.34) (0.08) 60 +05
Income
4 Income 300,795 5.04 (201485.62) (10.00) 65 -10
from
dealing in
foreign
currencies.
5 Other 187,705 3.15 (126449.6) (6.25) 40 +13
Income.
Total 5,971,690 100 2,022,008 100

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Relative Market Share Position

High Medium low

1.0 0.50 0.0

High
1) 134.36% 5) (6.25%)
+20

2) (18.03%)
Industry Sales Growth Rate (%)

3) (0.08%)

Medium
0

4) (10.00%)

Low
-20

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Internal External (IE) Matrix

(Rs In ‘000)
Percent
Percent Profits/Los IFE EFE
Divisions Revenues Profits/Los
Revenue s Score Score
s
1 Mark-up/ 4,935,626 82.65 2,716,786 134.36 3.70 3.60
Return/
Interest
Earned
2 Fee, 508,744 8.51 (341136) (18.03) 3.20 3.30
Commission
and
Brokerage
Income.
3 Dividend 38,820 0.65 (1436.34) (0.08) 2.65 3.10
Income
4 Income from 300,795 5.04 (201485.62) (10.00) 3.10 1.85
dealing in
foreign
currencies.
5 Other 187,705 3.15 (126449.6) (6.25) 2.50 2.25
Income.
Total 5,971,690 100 2,022,008 100

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The IFE Total weighted Scores

Strong Average Weak

3.0 to 4.0 2.0 to 2.99 1.0 to 1.99
4.0 3.0 2.0 1.0
4.0
1) 134.36%

High
2) (18.03%)
3.0 to
The EFE Total weighted Scores

4.0 3) (0.08%)

3.0

5) (6.25%)

Medium
2.0 to
2.99

2.0

4) (10.00%)

Low
1.0 to
1.99

1.0

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Grand Strategy Matrix

RAPID MARKET GROWTH

Alternative Strategies:

1. Market Penetration
2. Market Development
3. Product development
4. Concentric Diversification
5. Horizontal Diversification

STRONG
WEAK COMPETITIVE
COMPETITIVE POSITION
POSITION

SLOW MARKET GROWTH

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The Quantitative Strategic Planning Matrix (QSPM)

PRODUCT
S. No CRITICAL SUCCESS FACTORS MARKET DEVELOPMENT
DEVELOPMENT
WEIGHT AS TAS AS TAS
OPPORTUNITIES
1 Develop value added services. 0.15 4 0.60 4 0.60
2 Large international network. 0.10 3 0.30 3 0.30
3 Reduction in intermediation costs. 0.05 2 0.10 3 0.15
4 E-banking operations. 0.10 4 0.40 4 0.40
5 A wide product portfolio, along
with increasing greater hedging of
business risks also significantly 0.10 3 0.30 4 0.40
increases cross selling
opportunities.
THREATS
1 Intense industry competition. 0.15 4 0.60 4 0.60
2 Economic instability. 0.10 2 0.20 1 0.10
3 Political changes. 0.05 1 0.05 1 0.05
4 Brain drain. 0.10 2 0.20 2 0.20
Cost of service and support of
5 0.05 3 0.15 2 0.10
technology increases exponentially.
6 Technology is constantly changing. 0.05 2 0.10 3 0.15
STRENGTH
1 Strong brand recognition. 0.05 3 0.15 3 0.15
Complete range of banking
2 0.15 4 0.60 4 0.60
products and services.
Focused business strategy
supported by appropriate
3 organization structure, operating 0.15 3 0.45 4 0.60
procedures, and qualified human
resource.
4 Strong distribution capability. 0.10 3 0.30 3 0.30
WEAKNESSES
1 No massive advertising. 0.15 4 0.60 4 0.60
Up gradation of technology in all
2 0.10 3 0.30 3 0.30
branches not yet complete.
The potential of overseas branches
3 0.15 3 0.45 2 0.30
is not being fully exploited.
Shortage of trained and specialized
4 0.10 2 0.20 3 0.30
staff.
Communication among the
5 functional areas are some how 0.05 2 0.10 3 0.15
lacking.
Sum Total Attractiveness Score 6.15 6.35

Conclusion

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After conducting the comparative study of Bank Al Habib Limited, we concluded that keeping
the two strategies of expand the branch network and developing new and innovative products
is important for the company on one hand it increases its presence in the market and on the
other increase its customer base. For this purpose it is important to understand the
organization structure and try to modify according to the requirement.

Economic condition during the year 2005-2006 continued to be influenced by national socio-
political developments as well as the state of uncertainty in the peace process particularly in
last quarter of the year. Keeping the view customers needs, company launched a number of
new products.

After brief discussion with company representatives, analyzing the matrixes and considering
opinion of group members Bank Al Habib grew in most of its businesses. Bank Al Habib
growth philosophy should also concentrate on these key areas i.e. organic growth through
branch expansions, launching new products and services for existing as well as for new
customers. It is now functional in almost every major cities of the country and their vision is
similar as they are acting means they working.

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