CHAPTER No: 01

INTRODUCTION TO BANKING
1.0.1: MEANING OF BANK
The word bank has been derived from the French word banque or bancus which means
bench, office or institution for the keeping, lending and exchanging of money. Some authorities
have the opinion that Bank is derived from the Germen word back which to the meaning of
joint stock fund. The bank is a financial institution that borrows money from one party and
lends to the other party (Government, individual, business) and the difference between
borrowing and lending rate of profit/Interest for the bank. Bank borrows and lends money on
interest basis. Banks are classified according to their sphere of activity; the main types of banks
are as under.

Commercial bank
Industrial banks.
Agricultural banks.
Saving banks.
Exchange banks.
Central banks.
Cooperative banks

1.0.2: COMMERCIAL BANK:

Commercial banks are engaged in performing the routine duties of banking business. Such bank
collects the money from the people (as borrowing) and extends the same money as a loan for
development purposes. Commercial bank plays a vital role in the economic development of a
country by performing the variety of function as given below:
1. Accepting of deposits (Current, saving and fixed account).
2. Making loans and advances (overdraft, cash credit, discounting bill).
3. Agency services to customers (Collection of cheques, dividends, electricity, water and
gas bills, and sale of securities, and acts as a trustee.
4. General utility services (Foreign business, Issue traveler cheques, providing trade
information).

1.0.3: HISTORICAL DEVELOPMENT OF BANK:

The history of bank can be traced from the early 2000 B.C. The first stage in the development of
banking sectors started with the acceptance of deposits from the general public as it is evident
that the priest in Greece used to keep money and valuable assets of the people in temples. Its
origin can also be traced to early goldsmiths. These goldsmiths used to keep strong safe, for
storing the money and other valuable collaterals of the people. People with surplus money used
to deposit in these storage safes.
The second stage towards the development of banking sector started from the issuance of
receipts by the safe keeper i.e goldsmiths .these receipts were issued because they can be used in
payment of debt and to clearly settle the transactions.
When goldsmiths realized that they had surplus money, therefore, they intended to lend some
portion of money to the nearly traders and merchants who constantly request for loans This
business was quiet profitable and instead of charging interest from depositors they began to give
interest on the deposited money . This was the third stage towards the development of banking.
They also planned to allow the customers to withdraw in excess of the amount deposited to meet
the customers needs. This facility is called overdraft and they used to keep some portion of
money for this purpose. After some time too much confusion were occurred in the banking
system and they were not able to meet the demands of customers. Failure to payback money to
the lender at the end led distress among the people.
To overcome this problem people felt that their must be a system which can control the banking
activities of different lending organization. For discussing this matter relevant to an efficient
banking system a conference was held at Nuremberg in 1548.in this discussion a unanimous
resolution was passed in favor of establishing a bank that regulates the banking activities.
As a result of this discussion the first bank was found in Geneva in 1587, which at the end results
in the inception of many other banks with the same objective.
Now days, various commercial banks have been increased enormously throughout the whole
world and is playing a catalyst role in economic development of every country.

1.1: INTRODUCTION TO HABIB BANK (HBL)

1.1.0: HISTORY OF HBL:
Mohammed Ali Jinnah, Pakistan's founding father, realized the importance of financial
intermediation while he was campaigning for the creation of a separate homeland for the
Muslims of India. He persuaded the Habib family to establish a commercial bank that could
serve the Indian Muslim community. His initiative resulted in the creation of Habib Bank in

1941, with head office in Bombay (now Mumbai), and fixed capital of 25,000 rupees. The bank
played an important role in mobilizing funds from the Muslim community to finance the AllIndia Muslim League's campaign for the establishment of Pakistan. Habib Bank also played an
important role in channeling relief funds to Muslims hurt in the communal riots and violence that
preceded the departure of the British from India.
After the formation of Pakistan in 1947, and its stature performance Quaid-e-Azam Mohammed
Ali Jinnah Impressed by its initial performance, and directed the Bank to move its operations to
Karachi after the creation of Pakistan. HBL established itself in the Quaids city on August 7,
1948 and became a symbol of pride and progress for the people of Pakistan. this gave Karachi its
first commercial bank of the newly formed Pakistan. The Habib family owned and managed the
bank until the Pakistan government nationalized it on 1 January 1974. With a domestic market
share of over 40%, HBL was nationalized in 1974 and it continued to dominate the commercial
banking sector with a major market share in inward foreign remittances (55%) and loans to small
industries, traders and farmers.
On December 29, 2003 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 Governments of Pakistan nominees.Having such an impeccable
reputation and experience in the field of banking HBL decided to globalize there business sector,
as it is evident that the HBL first international branch was established in Colombo, Sri Lanka in
1951 .after then the international operations were expanded to USA, Singapore, Oman, Belgium,
Seychelles and Maldives, Netherlands and subsidiaries in Hong Kong and UK, affiliates in
Nepal, Nigeria, Kenya and Kyrgyzstan and rep offices in Iran and China.
The Habib Bank Ltd is a leader in Pakistan's services industry. An extensive network of 1,400
domestic branches the largest in Pakistan and 25 international branches has enabled HBL to
provide comprehensive services that meet customer needs. This has ensured thriving client
relationships that form the backbone of the Bank's operation.
1.1.1: VALUES OF HBL:

Integrity:
We are the leading bank in Pakistan and our success depends upon trust. Our customers and society in general - expect us to possess and steadfastly adhere to high moral
principles and professional standards

Excellence
This is at the core of everything we do. The markets in which we operate are becoming
increasingly competitive, giving our customers an abundance of choice. Only through
being the very best - in terms of the service we offer, our products and premises - can we
hope to be successful and grow

Meritocracy:
We believe in giving opportunities and advantages to our employees on the basis of their
ability. We believe in rewarding achievement and in providing first-class career
opportunities for all.

Customer focus
We understand fully the needs of our customers and adapt our products and services to
meet these. We always strive to put the satisfaction of our customers first

Progressiveness
We believe in the advancement of society through the adoption of enlightened working
practices, innovative new products and processes, and a spirit of enterprise

Culture of Innovation:
We aim to be proactively responsive to new ideas, and to respect and reward the agents,
leaders and creators of change.

1.1.2: GOALS OF HBL:

To mobilize private savings and public funds for diverting the same into productive
channels and ensure their availability. To promote industrial agriculture and
socioeconomic process through the active participation of private and public sector in the
province.

Help under developed areas and create employment opportunities, especially in the rural
areas of the province. Further, to guide and assist the people of Pakistan serving overseas
to effectively and profitably invest their foreign savings in the province as well as in other
parts of Pakistan.

Create a diversified and sound portfolio for utilization of idle funds and their investment
in the existing and new ventures especially in the pioneering of high-techs agro-based
export oriented and engineering project to ensure maximum returns.

Participative and seek the share of the country in the capital market of Pakistan by way
of subscription through locally peopled resources in the leading stock exchange of the
country and eventually paving the way for establishing a stock market in the province.

1.1.3: BASIC FUNCTION OF HBL:

Accepting of deposits:
a. Current account

c. Fixed deposit account

Advancing of loans:
a. Loans and advances

b. Saving account

b. Cash credits

c. Provision of Qarze-e-Hasna

Agency functions:
Collection of cheques
Transfer of funds from one place to another.
Handling of Salaries and Pensions of federal, provincial employees and defense
personnel.
Assisting to Agriculture
Act as an agent or representative of his customers
Collection of Negotiable Instruments
Issuing Guarantees and Indemnities
Granting of letter of credit

General utility services:

Utility Bills collection

Sale and encashment of Prize Bonds
Issue of Travelers Cheques
Supplying of Trade information
Act as a referee
Financing of Foreign Exchange
Preparation of feasibility reports for small industrial units
Collection of fees and money for people proceeding on Hajj providing
pilgrimage services

1.1.4: NATURE OF ORGANIZATION OF HBL:

Habib bank is a limited banking organization. It is a public limited company, which is listed on
Karachi stock exchange (KSE).
1.1.5: BUSINESS VOLUME OF HBL:
Deposits
The total deposit of Habib Bank for the year of 2012 was Rs. 506,563,870 (in 000).
Advances
The total advances of Habib Bank for the year of 2012 was Rs. 327,454,611 (in 000).
Revenue
The total advances of Habib Bank for the year of 2012 was Rs. 335,772,341 (in 000).
1.1.6: COMPETITORS OF HBL:
HBL is the leading bank in the field of banking, so every bank is following the HBL. The main
competitors of the HBL are MCB, United bank limited (UBL), AL-Habib bank limited (AHBL),
National bank of Pakistan (NBP), Bank of Punjab (BOP), Allied bank limited (ABL) as well as
Bank Al-Falah limited

1.2: BUSINESS SECTORS OF HBL:

1.2.0: COMMERCIAL BANKING:
HBLs Commercial Banking Group targets medium sized companies with a turnover of at least
PKR 50 million. Our business units are located in Karachi, Lahore, Faisalabad, Sialkot,
Gujranwala and Peshawar. Each unit is dedicated to service business clusters located within these
cities.
We have the ability and the resources to meet the needs of your business with our pro-active,
responsive and experienced Relationship Managers who are committed to understand your
business.
Services
We offer financing for the following:
6

Working Capital

Procurement of Inventory

Receivables

Procurement of Machinery

Expansion of Production Facilities

Improve of Raw Material

Exports

Guarantees

1.2.1: CORPORATE BANKING:

HBL Corporate Banking Group comprises a seasoned team of Relationship Managers (RMs) to
meet the demanding service standards of large corporations. A long history of financing and
nurturing relationships in Pakistan has given HBL a unique insight, enabling us to provide timely
and effective financial solutions for our customers to meet the growing challenges of a global
economy.
If you are a corporate customer, with a turnover of at least PKR 300 million, we have a range of
solutions designed to help you with your banking needs. Our RMs has the expertise you need to
create tailored financial solutions catering to the specific requirements of your business.
Whether establishing a new venture or expanding an existing business, our team understands
your banking needs and works closely with you to realize your goals.
Services
We provide the following services to meet your funding requirements:
Working Capital Finance, including Overdraft, FE Loans, etc.

Pre and Post Shipment Export Financing (PKR and USD based)

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.

1.2.2: RURAL FINANCING:

HBLs Agriculture loan are spread across the country and provide financing through over 800
branches. We have the largest private bank portfolio in the country with over PKR 18 billion in
various agriculture sectors. HBLs presence in all agriculture belts of the country ensures easy
access to farmers in rural areas.
We provide loans to small-scale land owning farmers as well as large institutionalized and
alliance based financing to boost the countrys economy and yield better harvests. HBL enables
farmers to buy good quality seeds, fertilizers, pesticides, agricultural implements and non-farm
setups through its various products programs.
The following products ensure that customer needs are fully met with respect to their farming
requirements.
Revolving Agri Scheme

Haryali Farm Transport Scheme

Agri Development Loan

Agri Development Loan (Fish Farming)

Agri Development Loan (Drip Irrigation)

Agri Production Loan

Haryali Livestock Loans

1.2.3: ISLAMIC BANKING:

Islamic Banking is a growing market segment that offers attractive opportunities to potential and
existing customers. At HBL, Islamic Banking offers Shariah compliant products and services to
meet the short and long term requirements of business and trade.
Ijarah: Vehicles, plants and machinery leasing

Murabaha: Local & import facilities

Islamic Banking provides Ijarah (leasing) for vehicles, plants and machinery to meet long-term
customer resource requirements. Murabaha (local & import) facilities are provided to meet the
short-term financial needs of mid-market and corporate customers. HBLs Islamic Banking
products are fully Shariah compliant and duly certified by independent Shariah Advisors.
Services
Visit our Islamic Banking branch for the following services:
Opening of Current Account and Basic Banking Account (BBA)

Collection of Foreign/Inland Bills

Acquisition of Assets on Ijarah

Purchase of Raw Materials, Semi-Finished/Finished goods or Store or Spares through

Murabaha

Foreign/Inland Remittances

Utility Bills Collection

E-banking/Internet Banking services

CHAPTER No: 02
ORGANIZATIONAL STRUCTURE OF HBL
2.0.1: MAIN OFFICE OF HBL:
HBL has the largest domestic branch network with 1,400 branches and is present in 25 countries
across five continents.
HEAD OFFICE
Habib Bank Plaza
I.I.Chundrigar Road
Karachi-75650, Pakistan.

REGISTERED OFFICE
4th Floor, Habib Bank Tower
Jinnah Avenue
Islamabad, Pakistan.

Phone: 021-2418000 (50 lines)

Fax: 021-9217511

Phone: 051-2872203 & 051-2821183

Fax: 051-2872205

2.0.2: ORGANIZATIONAL HIERARCHY CHART OF SKARDU BRANCH:

Branch Manager
Kacho M.Ali Khan

Credit Manager
Sarwar Hussain

Operation manager
Mr Javeid Ali

Foreign Remittance
Mrs. Ebadat Ali

Clearing In charge
Mr. Habib Hussain

Cash Officer
Mr. Zaheer Hussain

Supervisor
Mr.G. Muhammad

10

Credit officer (R/F)

Mr. Ansar Ali

2.0.3: NUMBER OF STAFF:

Total number of employees:

(18536)

During the year the bank offered Voluntary Staff Separation Scheme (VSSC) to some of its
employee. Under this scheme 2,202 employees opted for the separation. The HBL has incurred
the additional cost of Rs. 1, 602 million in this respect. In addition, the consequential impact on
retirement benefit scheme has been determined through actuarial valuation, the results of which
are summarized in note 30 to those financial statements.
Subsequent to the year end 2008, 2,343 employees in the non-clerical staff cadre have been
retrenched with effect from March 10, 2009. The bank has committed to pay in addition to
payments under the staff retirement funds, an amount of Rs. 1, 597 million under the retrench
scheme. The impact, if any, on staff retirement benefit scheme will be finalized in due course
through actuarial valuations
2.1: INTRODUCTION OF ALL DEPARTMENTS:
HBL Skardu branch has the following departments:
2.1.1: OPERATION 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. Further more this department also
handles the remittance, cash and cheques, clearings, account opening section.
ACCOUNT OPENING SECTION:
HOW TO OPEN AN ACCOUNT:
There are certain formalities which are to be observed for opening of a current or saving account
with a Bank. These formalities in brief are as under.
FORMAL APPLICATION:
The customer is to fill "Account Opening Form. It is a formal request by a customer to the bank
to allow him to have and operate the current or saving account.

11

SPECIMEN SIGNATURE:
When the Banker is satisfied about the integrity of the customer, he agrees to open the account.
The Banker obtains the specimen signatures of the customer on the signature book or on card.
MINIMUM INITIAL DEPOSIT:
In Pakistan the current account can be opened with a minimum of Rs. 5000/- and PLS Saving
Account with a minimum of Rs 10,000/- These amounts are also the minimum balances to be
maintained by the account holders with the Bank.
TYPES OF BANK ACCOUNT:
Following are the types of bank account.
SAVING ACCOUNT:
Saving Account is that account in which customer puts his surplus money which he saves from
his daily expenditure.
The account can be operated by depositing a minimum cash of Rs. 1000/-. Small percentage of
interest is charged on the balance of this account.
BASIC BANKING ACCOUNT:
It is just like that of current account, which has been designed for business men and students who
frequently withdraw their amounts from the bank. There is no limit for this type of account as it
can also be operated at zero balance. At the time of opening the BBA account the customer is
required to deposit a minimum balance of 500 rupees, which later on can also be withdrawn.
CURRENT ACCOUNT:
The current account is that one which the customer draws his daily cheques and is normally
operated by the Business-men. It can be operated by minimum amount of Rs. 5000/- Any
number of cheques can be issued by the account holder for withdrawal or for payment. No
interest is allowed on this account.
JOINT ACCOUNT:
A joint account occurs when two or more than two customers have one account. The parties to a
joint account are considered in law as they are one person.

12

PROFIT AND LOSS SHARING ACCOUNT

This can be operated by a person, firm or organization by depositing Rs. 1000/- or above. The
holder of this account will get profit of his amount, or he will bear the loss as the case may be.
So an individual is equally participant in profit and loss.
The holder of account can withdraw up to Rs.15,000/- per month, in case of higher withdrawal,
seven day prior notice is necessary, but in practice have not seen it. This account is operated
under interest free system.
FIXED DEPOSIT ACCOUNT
In this account an amount is deposited into the Bank for a fixed period of time. The fixed period
may be three months, six months, one year, two years, five years and more. The Bank allows a
higher rate of interest for larger period.
At the time of operating on account the Bank issues deposit certificates for the period and
amount. The account holder can withdraw his amount before the specified period, but refunding
the excess profit paid at higher rate and the same Bank will allow loan against that certificate.
Bank is liable to give interest on this account on maturity date is monthly or quarterly or six
month.
2. DEPOSITS SECTION:
There are two types of deposits i.e. current and saving. There are different forms present in the
section of or deposits.
i. Current account form.
ii Saving account form.
iii Private or individual form
iv Private firm account form
In the above mentioned forms, the bank makes an agreement with his customers.
3. CLEARING SECTION:
Every Bank performs the paying and receiving functions. Cheques are collected which are drawn
up to Banks for customers. Similarly the cheques drawn on different Banks and deposited by
Banks own customers for collection within the city is know as clearing The functions of
receiving and paying is mostly done through the clearing house. A clearing house can be defined
as "A place where that representatives of all Bank get together to settle the receipts and payment
of cheques drawn on each other" Clearing House provides the facility which can hardly be
dispensed with especially, in case of crossed cheques.
13

There are two main types of clearing.

i Outward clearing
ii Inward clearing.
OUTWARD CLEARING:
It includes those cheques and other instruments which are sent by the Bank to the Banks for
payment on behalf of its own clients. Cheques are sent to clearing house thorough local main
branch.
A delivery message from the local main branch comes to every branch at a fixed time to pick its
outward clearing or outward returns as the case maybe.
Outward Clearing at Branch

Account number of payee/endorsee is written on the back side of the cheques

The instrument and the paying in slips are separated
. The instruments are sorted I Bank-wise and branch wise.
Schedules are prepared.
Jotting of all the schedules are taken in the clearing House statement. Amount of the
cheques is written in the "Delivered" and to pay column.
After balancing the outward clearing, the pay in slips are released to C.D department.

After balancing, a transfer debit voucher is prepared.

The instrument, schedules are delivered to the messenger from the main branch.

INWARD CLEARING
The cheques drawn are called inward clearing drawn on Habib Bank through its representatives.
On the Bank presented by other Banks for payment it includes those cheques and other
instruments of Pakistan branches which other Banks present at the clearing house.
Inward Clearing at the Drawn Branch

Numbers of instruments noted in the schedules are verified immediately on receipt.

The amount's of all the instruments are jotted down and totaled. If should be equal toss
the amount mentioned in schedule from the local main branch.
The amounts are debarred to the relevant accounts if otherwise in order.

TYPES OF CHEQUES COLLECTED BY CLEARING SECTION:

14

TRANSFER CHEQUES:

These are the cheques which are collected and paid by same branch of HBL For example Mr.
Ali is a customer of HBL of CITY branch and draws a cheque in favor of Mr. Hussain who is
also the customer of the same branch.

TRANSFER DELIVERY CHEQUES:

The cheques which are collected and paid by two different branches of a Bank situated in the
same city. For example a person draws a cheque on N.B.P. main branch, Skardu in favor of
another person who maintains an account with N.B.P. Gamba Skardu branch.

CLEARING CHEQUES:

When the payee/endorse and the drawer of cheque maintains account with different Banks,
the collection Bank in any one of the following methods:

It can collect cash by sending its representative with the cheques to each of the paying
Banks.
It is not so much appropriate.
The Bank maintains an account with the paying Bank.
The cheques can be exchanged by representative of the various Banks who meet at a
fixed time and at a fixed place. This is the most efficient method of collection and paying
cheques.

FUNCTIONS OF CLEARING SECTION IN A BRANCH:

To accept transfer, transfer delivery and clearing cheques from the customer of the branch
and to arrange for their collection.
To arrange payment of cheques drawn on the branch and gives for collection to any other
branch of H.B.L. or any other member or such member of local clearing house.
To collect amounts of cheques drawn on members of the local clearing house sent for
collection by N.B.P. branches not represented at the local clearing house.

15

PROCEDURE FOR CLEARANCE OF CHEQUE:

The customers are provided with the copes of pay In-slip, whenever the customer wants to
deposit any cheque, he fills in the pay in slip himself and hands it over the counter along with the
instrument.
4: REMITTANCE SECTION:
Remittance means transfer of money from one place to another place. It is of two kinds.
I: Inland remittance.
II: Home remittance.
INLAND REMITTANCE
An inland remittance means a transfer of money payable at a certain place within the country.
Inland remittances can be classified as under:I: Within locality.
II: Out side locality.
WITHIN LOCALITY:
When a branch situated in Rawalpindi is required to send drafts to any other branch situated in
the same city the process is know as within locality. For example HBL, Main Branch,
Rawalpindi sends any draft to HBL, Pandora branch, Rawalpindi.
OUTSIDE LOCALITY:
Outside locality is an important type of inland remittances, which means the transfer of money
payable outside the city. For example, HBL, Main Branch Rawalpindi sends any draft to a
Branch situated at LAHORE.
It is commonly done through
DEMAND DRAFT (D.D):
Demand draft is a written order by a branch of a specified Bank, drawn on another branch of the
same Bank to pay a certain sum of money only the following means:Demand Draft (D. D) to or to the order of the Payee. Demand drafts are purchased by the clients
and after receipt of money Bank issues and delivers the D.D. to the purchaser, who himself sends
it to the payee. In D.D. the Banks do not recover postal charges as it is payable by the purchaser.
The Bank, after deliver of D.D. to the purchaser also sends its own advice called IBCO (Inter

16

Branch Credit Order) to the drawee branch mentioning therein all details of issued draft Now
banker cheque payable any where in Pakistan.
5. ACCOUNT SECTION:
Every Business organization deals in money matters. Bank also deals in money and more over
since the money belong to the depositors therefore, it is of utmost importance to keep systematic
and correct record. Further-more, the Banks are commercial institutions and its main objective is
to earn profit, therefore, the record of all incomes and expenditures are kept correct and
systematically.
In H.B.L. the responsibility for maintaining necessary accounting data and to keep up to date
records in a systematic manner has been assigned to the Accounts Department.
The Branches of Bank perform their daily routine work and deal in money that belongs to
depositors. Here account department hold great importance in banking, because it keeps all the
accounting records properly. All the records of the account section are made in database software
called MYSIS.
2.1.2: CREDIT 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 labor intensive enterprises
ii.
Banking Products: Advances to general account holders.
2.1.3: ADMINISTRATION DEPARTMENT:
All the matters of administrative nature are dealt in this department. This includes: transfers,
posting, promotion orders, leave orders, approvals etc.
2.1.4: IT 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

17

CHAPTER No: 03
PRODUCT AND SERVICES OF HBL
Our brand identity is the outward expression of what we stand for as an organization. This is
summarized in our vision, mission and is supported by our values.
Habib Bank Limited provides the following products and services for their customers.
3.0.1: ACCOUNTS AND THEIR TYPES:
Term Accounts:
HBL offers a wide range of accounts suited to meet individual customer needs. HBLs Term
Accounts are offered in a variety of tenure with deposits as low as Rs.10, 000.
Special Notice Time Deposit

7 days or 30 days (and over) notice

Minimum deposit of Rs. 10,000
Balance less than Rs. 1 million
Balance equal to and greater than Rs. 1 million
Returns range from 0.75% to 4% depending on notice period and amount

F.I. Term Deposit Receipts

Three months term deposit

Minimum balance of Rs. 1 million
Return range from 0.75% to 2.25%

Munafa plus Deposit (Certificates)

Available in 3 months, 6 months, 1 year, 3 years, 5 year and 10 year terms

Profit disbursement (except for 3 & 6 month terms) is monthly, quarterly, bi-annually and
on maturity
Returns range from 6.15% to 14%

18

Current Accounts:
Our Current Accounts offer features that meet your daily banking needs. There are two types of
current accounts which are used by H
Current account

No Profit Bearing
No Transaction Limit
Minimum balance of Rs. 10,000, if the average balance falls below this amount, then
service charges will be deducted.
No restriction on anyone opening a Current Account (as long as regulatory guidelines are
met).

Basic Banking Account

No Minimum Balance
No Service Charges

Saving Accounts:
HBLs Saving Accounts cater to individual saving habits.
Remittance Munafa Plus Saving Account

Profit paid bi-annually

Minimum average balance of Rs. 10,000
Less than Rs. 20,000 earns 0.10% profit
Greater than Rs. 20,000 earns 1% profit

HBL Value Account

7% profit per annum*

Profit credited every 3 months
Deposit ranges from Rs. 10,000 to Rs. 100,000
Flexibility of withdrawals

19

HBL Supper Value Account

7.25% profit per annum*

Profit credited every 3 months
Deposit ranges from Rs. 100,000 to Rs. 500,00

Remittance Munafa Plus Saving Account

Remittance Based (no credit allowed except remittance)

Daily Basis Product
Tiered
Monthly profit
Minimum average balance of Rs. 10,000
Less than Rs. 20,000 earns 0.10% profit
Rs. 1 million and above earns 5% profit

Special Saving Deposit Scheme

Daily Basis Product

Tiered
Monthly Profit
Minimum balance of Rs. 20,000/Return up to 8%

PLS Daily Munafa plus Deposit Account

Daily Basis Product

Tiered
Monthly profit
Minimum balance of Rs. 50,000
Returns up to 8%

Foreign Currency Accounts:

HBL offers Foreign Currency Accounts in multiple currencies as savings and term accounts
FC S-B
Savings Account offered in 3 currencies, USD (US dollar), EUR (Euros) and GBP (UK
pound)Tiered

20

Tiered product, with rates depending on choice of currency Minimum balance of Rs.
50,000
To earn profit, minimum balance in USD, EUR and GBP is 1,000
Interest is payable on a quarterly basis

HYFFD (High Foreign Currency Fixed Deposit)

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

3.0.2: DEBIT CARD:

HBL Visa Debit Card allows you to pay for your purchases directly from your bank account. You
dont have to carry cash and your monthly statement provides you with a complete record of all
your transactions so you can manage your expenses with ease.
Features of Debit Card

No Interest
Ease & Security
No Liability
International Recognition& Acceptability
Spending Limits
Free Account Statement
24 hour Customer Service
Global Customer Assistance Service

3.0.3: CREDIT CARD:

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

21

Benefits of Credit Card

Convenience
Security
Affordability
Cash Advance
Balance Transfer Facility

3.0.4: OTHER PRODUCT AND SERVICES:

Commercial Day to day banking: There are a wide range of accounts and services to help
you manage your money.
Cash Management Services: Giving you the convenience of cash handling.
Habib Bank Easy Access: Real time online banking at commercial centers for
customers online transfer/deposit of payments.
HBL E-Banking: Habib Bank Limited has launched a product HBL e-bank which
allows 24 hour access to accounts through internet banking, and PC banking

22

CHAPTER No: 04
PLAN OF INTERNSHIP PROGRAM
4.0.1: BRIEF INTRO OF BRANCH:
I did my internship in the HBL main branch Skardu. The branch code of this branch is 0476. It is
main branch of HBL bank in Skardu city. The number of employees in this branch is 18. All the
staff members are highly qualified and cooperative. This branch consists of the operations
department, credit administration department, and IT department .The network of the bank is
very vast and valued. Mostly the business transactions of the bank are related to the local
contractors, property dealers, business man and general public. The Branch has all the required
staff, which is necessary to perform the banking operations. The present bank manager is a
highly qualified and cooperative person.
This branch received the award of Bank of Region in the regional level. A new branch of HBL
has opened in two district i.e. KHAPLU, SHIGAR and also opened a branch in the city of
Skardu called GAMBA SKARDU branch. All these branches are the sub-branch of the main
branch. Being the main branch, this branch has the power to control the sub-branch. Main
managers of the branch are branch operations manager and branch manager. The attitude of the
branch manager is very polite and favorable to employees and customers.
4.0.2: DURATION OF INTERNSHIP:
Starting date of the internship:
Ending date of the internship:

01-07-2013
22-08-2013

4.0.3: DEPARTMENTS WHERE I GOT TRAINING:

I completed my training tenure in the account operations department, credit department and IT
department. I spent my training program as follows:

I worked for 3 weeks in the operations department. (1 weeks in account opening section
and 1 weeks in clearing section and I week in the remittance section)
I worked for 1 week along with cashier of the operation department.
I worked for 1 week in the credit department

23

I worked for 2 days in the IT department and the another three days with complaints
section
The last week I spent with the manager office to get some know how regarding to the
work of the branch manager

4.1: INTERNSHIP EXPERIENCE:

Detailed description of the operations/activities performed by the departments I worked in:
4.1.0: ACCOUNT OPENING DEPARTMENT:
Account opening department is the main department of the operations department. It is the
introductory department of the bank. It is the primary evidence of relationship between bank and
the customer. This department has all the basic information regarding bank and customer
relationship. The head of this department is called CSO (customer services officer). The main
task of this department is to open the new accounts of the customers. CSO provides the major
information regarding to the accounts like account balance, account status and deposits of slips.
Main tasks performed by the account-opening department are as under:
4.1.1: FILL PAY IN SLIPS FOR DEPOSIT:
Many customers want to deposit the cash in their account or any other persons account. But for
the purpose of cash deposit customer has to meet CSO. CSO fills the customer deposit slip.
Filling of the cash deposit slip is very easy. Slip has two parts, the bank keeps one and one part is
given to the customer as a receipt. Main parts of the slip are date, name, amount in figures,
amount in words and deposit mode. First of all date is written on the right corner of the slip and
then name of the depositor is written on the left corner. After that amount in digits is written and
then amount in words is written. Both the written amounts must be same and equal to each other.
At the end there is need of signatures of the customer. After filling the pay in slip, customer is
sent to the cash counter, where cashier receives the deposit slip along with cash and then carbon
copy of the slip is given to customer as a receipt.
4.1.2: FILL PAY IN SLIPS FOR CHEQUES:
Account opening department also provide the facility of filling of pay in slip for cheques. Filling
of these slips is also very easy. These slips are also available on the counter of CSO. All the
filling procedure is as like as pay in slips for cash but a bit different. In these slips payment mode
is filled as Cheque. In these slips cheque number and the address of the particular branch, where
the cheque has to be deposited is written. At the end officer sings the slip and carbon copy is
given to customer as a receipt.

24

4.1.3: FILL ATM CARD APPLICATION:

Another function of the account-opening department is to fill the debit card/ATM card
applications. In this application, account number of the customer and complete address of the
customer is written. The charges of this card are Rs: 200 and this amount are deducted from the
account of the applicant. Card is provided to the customer within twenty to thirty days.
4.1.4: INFORMATION REGARDING HBL:
Last duty of the account-opening department is to provide all the information regarding to HBL
to its customers. For example if a customer wants to know about the head of the remittance
department, then CSO will refer him to the remittance department. After all, it is the main task of
the CSO to give information to the customer regarding any kind of bank.
Account opening department provide the facility to its customers with the following accounts:

Individual account
Joint account
Proprietorship account
Partnership account
Private limited companies account
Public limited companies account
Photo account
Minor account
Foreign currency account
Student account

Basic documents:
Documents, which are generally required to open an account, are as:

Account opening form

Know your customer (KYC) form
Specimen signature card
Copy of CNIC card or passport copy
Cheque book requisition

25

Letter of declaration for sole proprietorship

Partnership deed (in case of partnership)
Signing authority (for partnership)
Student card copy ( for student)

First of all account opening form is filled by the CSO, which contains the following items:

Title of account
Type of account
Initial deposit
Nominee
Reference

Residential and personal information

After filling the account opening form, specimen signature card is filled. In the specimen
signature card, two signatures of the customer are taken and then are saved in the computer.
These specimen signatures are proof for a particular customer. If the signature on a cheque
differs from the specimen signatures, then bank has the authority to refuse the payment of
cheque.
4.1.5: TASK ASSIGNED TO ME:
Working experience in the account opening department remains memorable for me. My in
charges, Mr Habib Hussain immensely cooperated with me and helped me in all respects to learn
about banking knowledge. In account opening department I perform all the task of account
opening department. Due to my knowledge about account opening department the branch
manger appreciated me. Tasks, which I performed in the account-opening department, are as
under:

Filling of all kinds of slips and forms

Filling of cheques of customers
Issuance of cheque books
Recording in register of issuing cheque books
Maintain record of customers
Checking all the form errorless
Customer dealing
Any task assigned by the incharge head

26

4.1.6: TASK PERFORMED BY ME:

CREDIT DEPARTMENT
My work experience in the credit department remained very good. All the staff of the credit
department helped me in learning about credit. Mr. Sarwar Hussain helped me in learning about
credit. Duties, which I performed in credit department, are as under:

Preparation of loan agreements

Checking the agreement deeds
Manual recording of credits
Calculation of outstanding credits
Distribute information to new customers
Filling of credit Performs

REMITTANCE DEPARTMENT
The remittance department usually handles the transfer or receipts of amounts within the city or
outside the city and also from outside the country. The in charge of the remittance section where
I did my internship was Mr Ibadat Ali .Mr Ibadat ali really cooperated and make me clearly
understand the working procedure of remittance section. All the work is done on online system
that is connected to every branch of HBL inside and outside the country. Things that I learned in
the remittance section are as under
1: DEMAND DRAFT.
2: ON LINE TRANSFOR.
On each transaction there is commission charged to the sender. The commission of (D.D) from 1
to 1lack is Rs; 150.The charges are on the (D.D) up to 1lack is calculated in percentage.
The commission of (O.T) is Rs 300
.
I also learned the following during my stay at remittance section

Filling of the remittance form

27

Making entries in the data base software

Rectification of error
Marinating of the deposited amount and receipts records

CLEARING SECTION:
Past Method:
I also worked in clearing section .during my stay in the clearing section I learned how to collect
the different cheques of different Banks. Then I learned how these cheques of different Banks
mutually transfer. For mutual transfer everyday a meeting is held in NBP main branch Skradu.
The representative of UBL, ABL, BANK AL FALAH, MCB, and HBL used to participate and
thus mutual transfer of cheques were held. Mr.Ibadat Ali was the in charge of this section .He
gave me a lot of attention.
New Method:
Now-a-Days this activity is done through NIFT i.e an institution in the state bank of Pakistan
which only handles the clearing of different bank cheques presented at different bank branch. In
this new system the remittance officer first collects the cheques of the customer and sees either
the cheque is of the HBL bank or any other bank. If the officer found that the cheque is of any
other bank, then the remittance officer transfer the cheque to the NIFT account through online.
After that the NIFT will check whether the particular bank mentioned on the cheque is the
member of the NIFT or not. If the bank is the member of the NIFT the cheque is cleared and
transferred the amount to the account of the bank department from where it was sent for clearing
purpose. Then after one day the remittance officer checks the account status of the customer and
transfers the amount in the account of the customer.
The number of days for the clearing of the cheques depends on the nature of the cheques and
location of the bank .if the cheque is from a bank within the same city then it comes under the
category of inward clearing and for inward clearing the clearing is done within one day. If the
cheques is from a branch of a bank which is located outside the city then such clearing is called
outward collection, and the number of says that takes for clearing such outward collection is two
or three days.

28

CHAPTER No: 05
RATIO ANALYSIS/CRITICAL ANALYSIS OF HBL
Ratio analysis is a useful tool for analyzing financial statements. Calculating ratios will aid in
understanding the banks 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 firms reported profitability and
growth. Finally, the ratios help in obtaining a better understanding of a firms 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.
5.1: LIQUIDITY RATIOS:

Current ratio

Years
Current Assets
Current Liabilities
Ratio

Current Assets
Current Liabilities

2011
43,551,474
49,885,889
0.873

2012
43,737,745
33,215,308
1.316

2013
44,852,225
52,863,178
0.848

**Note: All amounts are in Rupees

Current ratio is the ratio of current assets and current liabilities. This ratio shows the ability of a
company to pay its short-term debts. If current ratio will be high, it will be more useful for the
business. Higher the current ratio, company is capable to pay more its debts. But in the latest
year ratio is minimum as compared to previous years.

29

Acid Test Ratio/quick ratio

Liquid Assets =

= Liquid Assets
Current Liabilities

Current Assets Closing stock prepaid expenses

Closing stock and prepaid expenses are not given in the balance sheet so:
Years
Liquid Assets
Current Liabilities
Ratio

2011
43,551,474
49,885,889
0.873

2012
43,737,745
33,215,308
1.316

2013
44,852,225
52,863,178
0.848

Acid test ratio or liquid ratio is same. This ratio shows the ability of a company to pay its shortterm creditors out of total assets. It describes that cash covers short-term loans. If the liquid ratio
is greater that 1 then it shows credits are covered by loan. In the year 2012 acid test ratio is
decreasing as compared to 2011

Sales to working capital ratio

Net Sales
Working capital
30

Years
Net Sales
Working capital
Ratio

2011
23,932,935
(6,334,415)
(3.778)

2012
28,456,583
10,522,437
2.704

2013
35,782,189
(8,010,953)
(4.466)

Sales to working capital ratio belong to the net sales and the working capital of the business. This
ratio describes to maintain a certain level of sales. If the company wants to increase the sales to
less creditworthy customers, which show that they will pay more slowly than regular customers.

Working Capital

Years
Current Assets
Current Liabilities
Ratio

Current Assets Current Liabilities

2011
43,551,474
49,885,889
(6,334,415)

2012
43,737,745
33,215,308
10,522,437

2013
44,852,225
52,863,178
(8,010,953)

Working capital ratio is the difference between current assets minus current liabilities. This ratio
shows that how much assets a business has. A company which has more working capital is
known as a successive company. Some companies also have negative working capital, which
means that the liabilities of this business are more than the assets. In 2012 bank has negative
working capital, which means that bank liabilities are more than the assets.

31

5.2: LEVERAGE RATIOS:

Time interest earned /interest coverage ratio

Years
EBIT
Total Interest
expenses
Ratio

2011
22,526,311
6,079,342
3.705

EBIT
Total Interest expenses

2012
21,886,740
8,511,413

2013
23,349,146
11,065,771

2.571

2.110

Times interest ratio is known as interest coverage ratio. This ratio describes interest payments of
a company, and shows whether company is enabling to pay its interest expenses or not. If the
time interest earned is more then company has the more ability to pay its interest on debt.

Debt Ratio

Years

2011

Total Debt

355,353,519

Total Debt
Total Assets
2012
385,153,625
32

2013
439,428,598

Total Assets
Ratio

412,900,841
0.860

445,285,758
0.864

511,741,878
0.858

Debt ratio describes the liabilities of a company. It shows if the debt ratio is more than 1, it
indicates that company has more debt than assets. If the debt ratio remains low then business will
be in good position. In all the three years, debt ratio is less than 1 which indicates that bank
lower debts than assets.

Debt to equity ratio

Year
Total Debt
Total Equity
Ratio

Total Debt
Total Equity

2011
355,353,519
47,338,167
7.506

2012
385,153,625
54,120,812
7.116

2013
439,428,598
63,120,371
6.961

Debt to equity ratio indicates the proportion of debt and equity of a company. It is the most
important ratio in accounting. If this ratio is increasing then it is unfavorable for the bank. This
ratio is decreasing consistently, so bank is in favorable condition.

33

Long term assets / long term debt =

Ratio
Long term assets
Long term debt
Ratio

Long term assets

Long-term debt

2011
369,349,367
305,467,630
1.209

2012
401,548,013
351,938,317
1.140

34

2013
466,889,653
386,545,420
1.207

5.3: PROFITABILITY RATIOS:

Net profit margin

Years
Net Income
Net sales
Ratio

Net income
Net sales

2011
16,441,670
23,932,935
0.68

2012
15,323,227
28,456,583
0.53

2013
15,665,403
35,782,189
0.43

Net profit margin shows the profitability of a business. If this ratio is increasing then it shows
that business is in favorable condition. But in the latest year, profit margin of the bank is
decreasing as compared to previous year, which is unfavorable for the bank.

Return on assets

Years
Net Income
Total Assets
Ratio

Net income
Total assets

2011
16,441,670
412,900,841
0.039

2012
15,323,227
445,285,758
0.034

2013
15,665,403
511,741,878
0.030

Return on assets measure the net income to total assets. It shows the ability of a company to
utilize its assets for the purpose of earning profit. In latest year bank has the ability to use its
assets.

35

Operating profit margin

Years
Operating income
Net sales
Ratio

Operating profit
Net sales

2011
61,944,262
23,932,935
2.588

2012
2,115,561
28,456,583
0.074

2013
78,214,049
35,782,189
2.185

Operating income margin ratio describes operating income to net sales. In the latest year
operating income margin is more than the previous year, which shows that bank has earned more
income from its sales.

Return on investments

Net income
Net investment
36

Years
Net Income
Net investment
Ratio

2011
16,441,670
115,358,590
0.14

2012
15,323,227
97,790,391
0.15

2013
15,665,403
169,484,647
0.092

Return on investment is the combination of net income to net investment. This ratio describes
what we are getting from our investment. In the latest year return on investment is lower than the
previous year, which shows that investment is not favorable.

Return on total equity

Years
Net Income
Total Equity
Ratio

Net income
Total Equity

2011
16,441,670
47,338,167
0.34

2012
15,323,227
54,120,812
0.28

2013
15,665,403
63,120,371
0.24

This is the ratio of net income and total equity. This ratio describes how a company reinvested
earnings to generate additional earning. This ratio shows the efficiency of the company. Investors
like the company having more return on equity.

37

Gross profit margin

Ratio
Gross profit
Net sales
Ratio

Gross profit
Net sales

2011
20,867,884
23,932,935
0.871

2012
24,437,462
28,456,583
0.858

2013
28,459,868
35,782,189
0.795

Gross profit margin ratio shows the gross profit to net sales. In this ratio, we observe that how
efficient the company has its gross profit. As much the gross profit as much the financial strength
the bank has.

5.4: ACTIVITY RATIOS:

38

Total assets turnover

Ratio
Net sales
Total Assets
Ratio

Net sales
Total assets

2011
23932935
412900841
0.057

2012
28456583
445285758
0.063

2013
35782189
511741878
0.069

Total asset turnover is the ratio of assets efficiency to generate sales. This ratio is continuously
increasing which shows that total asset turnover is generating sufficient revenue from sales,
which is favorable for the company.

Fixed assets turnover

Years
Net sales
Fixed assets
Ratio

Net sales
Fixed assets

2011
23,932,935
16,082,781
1.488

2012
28,456,583
17,320,485
1.642

2013
35,782,189
18,099,010
1.977

Fixed assets turnover ratio consists of net sales and fixed assets. This ratio describes that how
well business is using its fixed assets to generate sales. This ratio is increasing continuously from
previous years, which indicate that bank is using its fixed assets efficiently.

39

5.5: MARKET RATIOS:

Earning per share

Ratio
Net Income
No. Of outstanding
shares
Ratio

Net Income after tax

No. Of outstanding shares

2011
16,441,670
6,282,768

2012
15,323,227
6,282,768

2.61

0.22

2013
15,665,403
6,911,045
2.26

This ratio describes the allocation of profit to the shareholders. In the latest year earning per
share is maximum which shows that shareholders are getting profit.

40

Dividend payout

Ratio
Dividend paid
Total Income
Ratio

Dividend paid
Net income

2008
-4,728,496
16,441,670
(0.28)

2009
-9,834,181
15,323,227
(0.64)

2010
-6,735,510
15,665,403
(0.42)

This ratio describes how much a company has paid its dividend to share holders. But in the
present situation, it is stated that bank has not given dividend to its shareholders.

5.6: INDEX/ HORIZONTAL ANALYSIS:

HABIB BANK LIMITED
INDEX / HORIZONTAL ANALYSIS
BALANCE SHEET AS AT JUNE 30, 2013
Common Size (%)
2009
2010
2011
2012
ASSETS
Cash and balances with treasury banks
Balance with other banks
Lending to financial institutions
Investments
Advances
Other assets
41

2013

100%

103%

140%

97%

98%

100%

97%

154%

88%

135%

100%

327%

53%

36%

36%

100%

79%

116%

109%

113%

100%

123%

114%

98%

102%

100%

122%

125%

107%

109%

Operating fixed assets

Deferred tax assets
LIABILITIES
Bills payables
Borrowing from financial institutions
Deposits and other accounts
Sub-ordinated loans
Liabilities against assets subject to finance
lease
Other liabilities
Deferred tax liabilities
NET ASSETS

100%

101%

108%

103%

104%

100%

86%

173%

102%

101%

100%

109%

117%

100%

105%

100%

77%

101%

61%

63%

100%

113%

187%

78%

88%

100%

108%

110%

102%

106%

100%

104%

112%

104%

111%

100%

108%

115%

100%

105%

100%

126%

135%

104%

111%

100%

100%

100%

100%

100%

100%

882%

120%

96%

106%

100%

67%

224%

93%

106%

100%

137%

148%

95%

105%

3%

3%

100%

94%
126
%

98%
140
%

99%

100%

SHAREHOLDERS EQUITY

Share capital
Reserves
Inappropriate Profit
Total equity attributable to the equity holders
of the bank
Minority interest
Surplus on revaluation of assets Net of tax

100%

96%

106%

Analysis:

There is a rapid increase in cash and balances with treasury bank. In the year 2010 it was
103% of the cash of the year 2009, and in the year 2011, it reached to 140%. But after
that it was declining from 140% to 97% & 98% in the years of 2012 & 2013.
On the other hand balance with other banks weaving every year. There is no same trend
among them.
Advances have also decreased as compare to the base year.
There is overall increase in assets.
Though the assets have increased but the increase in liabilities is more than the increase
in assets.

42

The main reason of increase in assets is deposits and other accounts, and increase in loan
from State Bank of Pakistan.
That is why there is a prominent increase in net assets.
There is a continuous increase in investments. It has increased to 113% in the year 2013,
as compared to 100% in the year 2009.
There is a not enough growth in deferred tax assets.
The bank has paid all the tax liabilities. Now there is no outstanding tax of bank in the
year 2012.

5.7: COMMON SIZE/ VERTICAL ANALYSIS

HABIB BANK LIMITED
COMMON SIZE / VERTICAL ANALYSIS
BALANCE SHEET AS AT JUNE 30,2013
Common Size (%)
2009
2010
2011
2012
ASSETS
Cash and balances with treasury banks
Balance with other banks
Lending to financial institutions
Investments
Advances
Other assets
Operating fixed assets
Deferred tax assets
LIABILITIES
Bills payables
Borrowing from financial institutions
Deposits and other accounts
Sub-ordinated loans
Liabilities against assets subject to finance lease

43

2013

92%

101%

83%

87%

81%

47%

76%

59%

67%

57%

13%

12%

31%

12%

4%

230%

414%

259%

224%

234%

667%

797%

774%

654%

616%

90%

80%

145%

81%

93%

27%

47%

34%

25%

27%

5%

6%

4%

5%

5%

1113%

1478%

1274%

1105%

1054%

11%

23%

14%

11%

6%

99%

85%

76%

106%

79%

873%

1228%

1049%

859%

840%

0%

0%

0%

0%

0%

0%

0%

0%

0%

0%

Other liabilities
Deferred tax liabilities
NET ASSETS
SHAREHOLDERS EQUITY
Share capital
Reserves
Inappropriate Profit
Total equity attributable to the equity holders of
the bank
Minority interest
Surplus on revaluation of assets Net of tax

29%

42%

35%

29%

29%

0%

0%

0%

0%

0%

1013%

1378%

1174%

1005%

959%

100%

100%

100%

100%

100%

94%

85%

91%

93%

94%

229%

22%

202%

248%

242%

262%

182%

202%

248%

278%

585%

289%

422%

637%

614%

3%

3%

100%

100%

100%

100%

100%

Analysis:

In the year 2013, out of total assets (1054% of net assets), the liabilities and equity are
954% and 100%, respectively, as detailed below:
o Assets =
Liabilities
+
Equity
o 1054% =
954%
+
100%
In assets, the Investments form the largest part i.e. 234% out of 1054% of assets.
The second largest portion is Lending to Financial Institutions.
The liabilities of bank are more than its equity.
Lending to Financial Institutions is only 4% of net assets which is very meager as
compare to the Investments.
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.
In the year 2009 the cash and balances with treasury banks was 92%, whereas in the year
2013, it raised to 81% of net assets.
In the year 2009, the balances with other banks was maximum i.e. 47% of net assets
whereas in the year 2013, it dropped down to 57% of net assets.
The portion of operating fixed assets in net income was equal from start to end.

44

PROFIT & LOSS ACCOUNT

COMMON SIZE/ VERTICAL ANALYSIS
HABIB BANK LIMITED
COMMON SIZE VERTICAL ANALYSIS
PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED JUNE 30,2013

2009
Mark-up/ return/ interest earned
Mark-up/ return/ interest expensed
Net mark-up / interest income
Provision against non-performing loans &
advances-Net
(Reversal) Provision against off-balance sheet
obligations
Reversal Provision against diminution in value of
investments
Bad debts written off directly
Net mark-up / interest income after provisions
Non Mark-up / Interest Income
Fee, commission and brokerage income

45

Common Size (%)

2010
2011
2012

2013

129%

132%

128%

142%

154%

129%
100%
12%

32%
100%
14%

28%
100%
12%

42%
100%
10%

54%
100%
4%

4%

30%

4%

-2%

3%

-64%

-26%

-64%

30%

0%

12%
728%

18%
467%

12%
704%

9%
958%

4%
234%

12%

18%

11%

12%

9%

Income / gain on investments

Income from dealing in foreign currencies
Other incomes
Total non-mark-up / interest income
Non-mark-up / Interest Expenses
Administrative Expenses
Other provisions / write offs Net
Other charges
Total non-mark-up / interest Expenses
Staff retrenchment cost
Profit before taxation

Taxation
Current
Prior years
Deferred
Profit after tax

59%
81%

211%
21%

51%
95%

91%
34%

51%
132%

127%
40%
380%

192%
26%
207%

132%
12%
397%

198%
67%
365%

154%
11%
443%

56%
2%

99%
2%

55%
2%

49%
1%

51%
1%

27%
210%
107%
10%
163%

3%
176%
58%
9%

27%
199%
108%
11%
121%

45%
268%
151%
8%
118%

14%
743%
142%
10%
105%

16%
-1%
-381%
279%
230%

3%
4%
924%
128%
324%

17%
-1%
-519%
162%
210%

24%
-1%
117%
158%
229%

24%
-1%
167%
186%

Analysis:

In the year 2013, Markup earned is 154% more than net Markup income.
Non-markup income is very low i.e. 11% of Net markup income
.As compare to Non-markup income, Non-markup expenses are very high i.e. 743% of
Net-markup income
Profit before taxation increase to 105% of Net-markup income due to low Administrative
expenses.
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.
In the year 2009, the markup expense was 129% of net markup income, whereas in the
year 2013 it has reduced to 54% of net markup income.
Fee, commission and brokerage income remained very nominal the throughout the period
under observation i.e. 9% of net markup income.
The taxation expense has reduced from 279% of net income to 186% in the year 2009 &
2013, respectively

46

INDEX/ HORIZONTAL ANALYSIS

HABIB BANK LIMITED
INDEX / HORIZONTAL ANALYSIS
PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED JUNE 30

Mark-up/ return/ interest earned

Mark-up/ return/ interest expensed
Net mark-up / interest income
Provision against non-performing loans &
advances-Net
(Reversal) Provision against off-balance sheet
obligations
Reversal Provision against diminution in value of
investments
Bad debts written off directly
Net mark-up / interest income after provisions
Non Mark-up / Interest Income
Fee, commission and brokerage income
Income / gain on investments
Income from dealing in foreign currencies
Other incomes
Total non-mark-up / interest income
47

2009

Common Size (%)

2010
2011
2012

2013

100%

53%

180%

136%

28%

100%
100%
100%

57%
53%
64%

162%
185%
157%

185%
122%
96%

33%
126%
97%

100%

443%

23%

-35%

0%

100%

183%

55%

17%

30%

100%
100%

77%
49%

130%
197%

93%
126%

11%
128%

100%
100%
100%

79%
283%
72%

117%
28%
131%

133%
235%
83%

91%
11%
41%

100%
100%

108%
129%

90%
71%

125%
141%

32%
21%

Non-mark-up / Interest Expenses

Administrative Expenses
Other provisions / write offs Net
Other charges
Total non-mark-up / interest Expenses
Staff retrenchment cost
Profit before taxation

Taxation
Current
Prior years
Deferred
Profit after tax

100%

70%

136%

130%

96%

100%
100%

92%
98%

103%
102%

109%
49%

27%
30%

100%
100%
100%
100%

11%
92%
50%

910%
103%
192%
100%

80%
108%
151%
108%

10%
127%
25%
32%

100%

56%

171%

156%

25%

100%
100%
100%
100%
100%

9%
-39%
946%
43%
61%

1060%
-329%
18%
234%
152%

174%
122%
-277%
147%
160%

27%
15%
28%
23%

Analysis:

There is a positive increase in net markup income.

Due to high increasing trend of provisions, the net markup income after provision has lost
its increasing trend to a little bit.
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.
Total non-markup income has a decreasing trend whereas non-markup expense has an
increasing trend.
That is why, the profit before taxation could not maintain its good standard
Markup interest expenses have increased form 100% to 127% in the year 2009 to 2013.
The provision against non performing loans and advances has decreased from 100% to
97% in the year 2013.
In the fee, commission and brokerage income, there remained variation i.e. in the year
2011 & 2012 it increased, and then decreased in the next year 2013.

48

5.8: COMPETITORS/ INDUSTRY ANALYSIS:

INDUSTRY ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2013 (RUPEES IN THOUSAND)

Particulars

Muslim
Commercial
Bank
Limited

Askari
Commercial
Bank
Limited

Allied Bank
Limited

Bank
Alfalah
Limited

Industry
Average

% of
HBL to
Industry
Average

31,786,595

12,596,921

21,201,422

21,191,470

21,694,102

233%

7,865,533

6,977,313

10,019,004

15,232,886

10,023,684

191%

23,921,062

5,619,608

11,182,418

5,958,584

11.670,418

268%

8,099,291

3,065,051

1,128,513

2,714,842

1,699,227

8,607,633

95%

23,227,773

20,856,011

4,491,095

8,467,576

5,259,357

9,768,510

238%

10,023,164

6,011,291

2,139,254

3,920,099

3,224,639

3,823,821

262%

20,502,802

21,308,035

3,346,855

5,953,076

2,565,945

8,293,478

247%

Habib
Bank
Limited

Markup/return/interest 50,481,021
earned
Markup/return/interest 19,153,957
expensed
Net mark-up
31,327,064
interest income
Provisions
Net Markup/interest
income after
provisions
Total non markup/interest
income
PROFIT
BEFORE
TAXATION

49

PROFIT AFTER
TAXATION

14,276,125

15,265,562

2,249,974

4,076,158

1,762,691

5,838,596

245%

Analysis:

The markup earning of HBL bank is very high the industry average i.e., 233%.
Even then the net markup interest income after provision is better (238%) due to
comparatively less interest expenses and provisions.
High non-markup income (262%) 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.

CHAPTER N0: 06
SWOT ANALYSIS OF HBL
The acronym SWOT stands for a firms internal Strengths, Weaknesses and its external
Opportunities and Threats. The purpose of such analysis is to build on companys strengths in
order to exploit opportunities and counter threats and to correct companys weaknesses. SWOT
analysis is based on the assumption that if managers carefully review such strengths,
weaknesses, opportunities, and threats, a useful strategy for ensuring organizational success will
become evident.
Strengths and weaknesses typically relate to the internal environment of an organization, whereas
opportunities and threats are brought about by the external environment of an organization. In the
following section, a both internal and external analysis of HABIB BANK IMITED has been
highlighted.
Internal analysis of a firm is the analysis of its strengths and weaknesses. Unless a firm has
internal strengths and controls its weaknesses, it cannot take advantage of opportunities and
escape threats which the external environment presents. Following are the main strength and
weaknesses of HBL.
6.1: STRENGTHS

50

Strength can be defined as an area where a company is best at doing something or a feature that
puts the company at an advantage in comparison to its competitors. HBL enjoys the following
strengths:

HABIB BANK is a well established bank enjoying long history of over 70 yrs of
experience and profitable operation.
HBL was the first privatized bank that gives it an edge over other nationalized banks as it
can develop any strategy consistent with the demand of market and free from any
political or bureaucratic influence.
HBL is the largest private bank in Pakistan now and people trust is very high.
It has the largest branch network among private banks of Pakistan.
HBL is the market leader in introducing -banking.
HBL was rated the best domestic bank for two consecutive years of 2000 and 2001 by
Euro money, a leading international publication.
HBL has forged strategic alliances with international banks for expanding its network
further, both locally and internationally
HBL has the ability to bring innovative products and services like personalized service,
electronic funds Transfer, sophisticated financial products such as electronic banking,
auto-teller machines and evening banking.
HBL has been very effective in controlling costs as it successfully restructured itself after
its privatization. During this process more than 1,600 employees were relieved under a
golden handshake scheme and 110 branches were closed.
Excellent branches appearance gives an edge to HBL over other banks. The branches are
well furnished even in less developed areas where other banks branches give a poor
view.

6.2: WEAKNESSES:
A weakness is defined as an area in an organization where the organization is not as good at
doing something as its competitors or a thing which an organization lacks thus putting the
organization at disadvantage in comparison to its competitors. Based on the above definition,
HBL has the following weaknesses.

Mission of HBL is not well defined.

Though HBL is second largest bank in Pakistan, yet the fact remains that it is not market
leader as NBP. Its total assets are always less than NBP total assets.
Now as it is a private bank that is why GOVERNAMENT support to HBL decreased as it
was in past.

51

Employees at branch level are not properly motivated to work by heart. They take the all
routine activities as a boring job.
Most of the employees lack managerial training as they are not properly educated. Due to
seniority, they have moved up on the hierarchy line to Grade- I, II or III positions having
hardly bachelor degrees. This type of senior staff cannot apply the modern and innovative
techniques of management in decision making almost computer knowledge.

6.3: EXTERNAL ANALYSIS:

An organization has to monitor its environment constantly to keep up with new developments
and changes in the environment. A change in the external environment may be either an
opportunity or threat. In either case, the organization has to properly use it strengths to avail the
opportunities and avoid or minimize the negative effects of threats.
Following are the main opportunities and threats of HBL.

6.4: OPPORTUNITIES:
An opportunity can be defined as a change in external environment which if
properly exploited with the organizational strengths will result in enhanced
sales, market share, or income. Using its strengths, HBL can avail the following opportunities:

It can introduce debit card system or may convert the existing ATM cards into a complete
debit card.
New products like personal loans, mortgage and auto leasing and cash management
which diversify credit risk and add to revenue generating products, are currently provided
in big cities like Lahore, Islamabad, Karachi, and Rawalpindi, these products may be
tested for success in other small areas of PAKISTAN in different provinces.
As all around the world remittances of money are strictly monitored so as the money
remitted may not fall in hands of so-called terrorists. For that all conventional money
laundering through Hundies have been stopped, there is an opportunity for HBL to extend
its branch network to various countries emphasizing mainly on introducing electronic
fund transfer facilities.

6.5: THREATS:
Threat can be defined as a change in external environment which if not met with proper
strategies will result in loss of revenues, market share, or income. In the context of HBLs
external environment,
52

The following potential threats exist:

The frequent reduction on 6-month and 12-month Treasury Bills discount rates by SBP
may create pressure on the banks profitability.
The low discount rates are also negatively influencing the advances rates which may
affect the banks profits from the other side.
Foreign banks operating in Pakistan are playing a significant role by incorporating new
technologies and providing better quality services thus creating a threat to the local banks
especially to HBL which tries to develop core competence in electronic based products.
Policies of privatization, foreign exchange reforms, and structural adjustments have
increased the inflow of foreign resources through direct and portfolio investment. In trade
financing, the role of foreign banks is even more significant, as approximately 30 percent
of the total trade of the country is transacted through them. Major portion of the trade
financing is for importers to establish letters of credit.

6.6: PROBLEMS:
During my Six weeks I found various problems, which I think, should be resolved for the better
functioning of the Bank. Some of these problems are of such nature that their solution will help
the Bank and its workers in cooping in this complex world of globalization.
These problems are:

There is a lack of on-line information in the Bank about the changes taking place in the
world of Banking.
A customer cannot find any kind of journal or newspaper there.
In early days of month there is a great rush of customers, which cause inconvenience for
the officer concerned and cashier as well.
Separate cabins are not available for the staff.
A separate counter for ladies is not maintained there.

6.6: RECOMMENDATIONS:
I will give following suggestions for the better function of the Bank:

The management should provide better arrangement for the employees.

The daily newspapers and journals should be provided to the employees and customers
visiting there.

53

A separate ladies counter should be there.

The Bank management should be very careful while granting the loans.
Personal interests should not be given importance and customers Personal credit
worthiness must be carefully scrutinized public relation desk should be established in
each and every branch for guidance as well as redresses of grievance of customers at the
spot.
Online Banking should be introduced in all the branches.
Aggressive publicity campaign must be introduced through press and Electronic media
for new products and scheme by initiating vigorous marketing policy.
New talent / professionals should be hired to coupe with the competitive demand in the
industry.
Employees induction promotion and transfer should always be made on merit.
To motivate the employees their remuneration / salaries should be made at par with top
tier Banks.

6.7: REFRENCES:

Retrieved January 20, 2014 from http://en.wikipedia.org/wiki/Habib_Bank_Limited.

Retrieved January 20, 2014 from http://www.sbp.org.pk
Retrieved January 20, 2014 from http://www.sbp.org.pk
Retrieved January 23, 2014 pm from http://www.hbl.com.pk
Retrieved January 25, 2013 11:00 am from http://www.brecorder.com/search?q=HBL
Retrieved January 25 Annual Report of the year 2011, Habib Bank from
http://www.hbl.com.pk/publications/AnReport2011.aspx

Annual Report of the year 2012, Habib Bank from

http://www.hbl.com.pk/publications/AnReport2012.aspx

James, C. Van Horne (2009) Financial Management and Policy. Stanford University

Robert, F. Meigz & Mary, A. Meigz (1994) Financial Accounting. New York: McGraw
Hill.
Meenai. S. A. (2000). Money and Banking in Pakistan (6th Ed). Karachi: The Allies Book
Corporation.
Brigham, E. F and Houston, J. F (2006). Fundamentals of Financial Management, (8th ed).

54