Submitted to:

Mam talat rehman

ACKNOWLEDGEMENT

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

We are very grateful to our respected Mam talat rehman who gave us this opportunity to make the project on HABIB METROPOLITAN BANK and helping

us to having all the information about the bank

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

HABIB METROPOLITAN BANK

Habib Metropolitan BankHistory & Introduction

Habib Metropolitan Bank was incorporated in Pakistan as a Public Listed Company in 1992 under the name, Metropolitan Bank Limited. The Bank commenced, duly licensed, full scheduled commercial-banking operations in October 1992.

Metropolitan Bank, from October 1992 to September 2006, remained a highly rated bank and, vide its nationwide 51-branch on-line network, established as a distinguished provider of trade finance services.

On October 26, 2006 Habib Bank A G Zurich’s Pakistan Operations merged into Metropolitan Bank Limited and the merged entity was named Habib Metropolitan

Bank Limited (HMB). Demonstrating a strong commitment to Pakistan economy, HBZ is the principal shareholder of HMB.

HMB operates in all major cities of the country. The Bank ranks within Top 10 in Pakistan with a strong vision to be the most respected Financial Institution. HMB has its primary focus on retail banking and trade finance and also offers highly innovative E-Banking solutions and Consumer Banking to its customers. The Bank’s Islamic Banking Division is fully capable of catering to customers seeking Shariah compliant products.

The HBZ Group is heir to a rich tradition of banking and commerce dating back to more than 160 years. The group’s flagship and HMB’s principal, HBZ (incorporated 1967) enjoys International ranking of 687 in terms of capital. With Headquarters in Switzerland, the HBZ Group also operates in Hong Kong, Singapore, United Arab Emirates, Kenya, South Africa, United Kingdom and North America.

The Pakistan Credit Rating Agency (PACRA) has allotted both long-term and short-term ratings of Habib Metropolitan Bank Limited at “AA+” (Double A plus) and “A1+” (A one plus), respectively. These ratings, being the highest amongst the local sector Private Banks, denote a very low expectation of credit risk emanating from a very strong capacity for timely payment of financial commitments.

Vision Statement

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

Mission Statement

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

encourages a culture of excellence and leadership."

PACRA MAINTAINS RATINGS OF HABIB METROPOLITAN

BANK LTD. (HMB)

The Pakistan Credit Rating Agency (PACRA) has maintained the long-term and short-term entity ratings of Habib Metropolitan Bank Ltd. at “AA+” (Double A

plus) and “A1+” (A one plus) respectively. These ratings denote a very low expectation of credit risk emanating from a very strong capacity for timely payment of financial commitments.The ratings reflect the strong position of the bank in its respective niche – self-liquidating trade finance to corporate and SMEs. While consolidating its strength, the management continues to focus on product innovation, enhanced reach through network expansion, and technology up-gradation for ensuring quality services to its customers, thereby retaining its relative positioning in the face of intensifying competition within the sector. The bank continues to maintain outstanding asset quality – an outcome of conservative risk appetite as well as effective risk management. The ratings also take into account the bank’s association with a geographically diversified international sponsoring group – Habib Bank AG Zurich (HBZ).

About the bank: HMB, commencing operations in 1992, is listed on all bourses of Pakistan. Subsequent to recent merger, the bank is a 51% owned subsidiary of HBZ, incorporated in Switzerland. HBZ, with consolidated assets of above US$6bln, has operations in eight countries directly and through subsidiaries. This provides inherent strength to the bank given high credibility and standing of HBZ. The Chief Executive of the bank is a former Governor of the State Bank and also a former president of Habib Bank Limited, one of the largest banks in the country. A highly professional team of senior executives including the executive director, who has emerged as the key professional in evolving the bank’s strategy as well as its implementation, assists the chief executive.The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity.PACRA’s comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate grading.

PACRA’s opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security’s market price or suitability for a particular investor.

AchievementsThese above credit ratings denote

HMB is one of the top ten banks in Pakistan A very high credit quality, A very low expectation of credit risk and A very strong capacity for timely payment of financial commitments.

Corporate Information:Board of Directors

Chairman & PresidentKassim Parekh

Chief ExecutiveAnjum Iqbal

DirectorsMuhammad H.Habib

Raza S. Habib

Bashir Ali Muhammad

Anwar H. J apanwala

Ronaid V. Emerson

Firasat Ali

Mohamedali R. Habib (Executive Director)

Audit CommitteeReza S. Habib

Kassim Parekh

Mohamedali R. Habib

Company Secretary

Muhammad Imran

COMPETITORS:

Arif Habib Bank

MCB

Bank al Habib

National Bank of Pakistan

Bank Alfalah

Standard Chartered Bank

Factors affecting Habib Metro

Not only Habib Metro but all the commercial banks of Pakistan are being governed by regulatory authority State Bank which is basically a Government bank, all the policies and circulars and changes in working routines are made due to direction by State Bank. State Bank take decisions which become mandatory for all the commercial banks to follow them. State Bank is a governing authority and HMB have direct impact on its procedures if State Bank take any action.

Than the other factor that affects HMB’s decisions are the government policies. Like, recently government put withholding tax on with-drawls and onlines which in result affected the bank’s deposit mobilization. People became less willing now to move their deposits from one bank to another because of this tax. They are not willing to move their funds in other banks without any strong reason or need.

Habib metro is also impacted by the economic conditions. People make investments in companies and don’t go for term deposits when the economic conditions are good and companies are giving high profits and the reason is HMB term deposits offer people riskless investments and when the risk is low the return is obviously low. So when the economic conditions are good making the investments becomes a better option for people to earn high profits instead of going for risk-free investments because they have opportunity to earn high returns.

In past few days the conditions of Karachi were not good and there were strikes happening in Karachi which in result impacted the bank because it was closing its branches in that area and when the branches are closed the bank is unable to facilitate customers and make transactions happened and that in result impacted the bank’s profitability.

Internal forces of change

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

Changes in management strategies

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

Why people resist change

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

How it could be managed.

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

Change

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

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

Bank offered its staff allowances and extra rewards for coming on Saturdays which in result motivated the staff to come on Saturday.

It helped the organization a lot as customers were becoming more satisfied by the services of banks. They became loyal to organization and it became competitive edge for HMB as it was providing services to customers on Saturdays as well.

How this change was communicated

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

STRENGTHS:

Large capital base. Rank in top 10 bank of Pakistan. Continuous growth in ROE. The bank’s management realizes the necessity of existence of effective

internal controls to ensure smooth operations in the current technical and swift business environment.

Loyal management. The bank has efficient and experienced management making significant. Credit rating in long-term “AA+” and in the short term “A1+”. The financial statements, prepared by the management of the bank present

fairly the state of affairs. Loans are given only to known, reputable clients to avoid chances of fraud.

Very low nonperforming loan. Effectively handled the current economic recession. Bank is continuously focusing on developing new and innovative products

to attract their target market. Strong customer relationship. Asset utilization is very good.

WEAKNESSES:

Only valued client is important. Bad portfolio diversification (54% advances to Textile industry) Advertisement on electronic media has not been seen. Declining standards of banking after merger. Inter- organizational conflicts

after merger. Compromises upon polices to keep customers happy. Old Management. (No creativity) No further growth in branches. Majority of shares are owned by the one family. Low consumer finance. Less job satisfaction of employees. Customers facing problem of NADRA verification while opening their

accounts because its process is time consuming. Promoting generally on seniority basis. Attitude of senior manager at head office has to change towards junior staff.

OPPORTUNITIES:

Scope in Islamic Banking. To go global fully Low exposure to consumer banking providing opportunity to explore the

segment. The year 2010 will prove to be another demanding year for the bank with

scattered. Diversification, innovation and mission driven approach are the key to success which bank should adopt.

Progressive but cautious business expansion with strategic branch network extension and introduction of innovative products in all areas of business. Branch network need extension.

Should emphasize much on e-banking. Profit margin will be good. The bank being Swiss incorporated, it bank follows dual banking regulation

i.e of Pakistan as well as Switzer-land which attracts foreign investors. SBP policy to allow Islamic Banking business separately. Bank introduces Islamic banking in country that attracts large number of

people. Greater profitability can be achieved through strong internal control. New schemes for deposits and finances should be introduced regularly. Opportunity to open branch in ruler area to increase its branch network and

gain more profit.

THREATS:

Adverse impact of “Credit Crisis” can badly effect on HMB. Facing a strong competition by its competitors. High reliability on only one

market segment i.e. Textile. (54%) Inconsistency in government policies. Increasing competition in the banking sector. Entry of many foreign banks. Strict policies of the State Bank of Pakistan. Geopolitical condition of country. Global liquidity crisis has constrained banks to stop lending. Current economic crunch. Political instability. Rising deposit rates. Foreign banks in market having more marketing budgets. People losing trust in banks. Decline in private and public sector credit due to tight monetary policy.

PEST ANALYSIS

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

Monopolies Legislation Taxation Policy Foreign Trade Regulations

Economic Economy of Pakistan is facing issues about

Unemployment, Inflation, Illiteracy, Corruption Business Cycles Interest Rate

all the above issues hinders business growth.

Socio Cultural issues Cultural issues can be there but still as there are a number of multinational companies there, therefore, culture issues are not prominent.

Population Demographics Income Distribution Social Mobility Lifestyle Changes Levels of Educations

Technological

Speed of Technology Transfer New Discoveries / Development Investment on Research Rate of Obsolescence

RISK MANAGEMENTCredit risk:

The HMB strategy is to minimize credit risk through a strong pre-disbursement credit analysis, approval and risk measurement process added with product, geography and customer diversification. The Bank, as its strategic preference, provides loans only to strong parties. Major portion of the Bank credit portfolio is Textile industry (54%) which is highly profitable business in Pakistan but it may riskier and not a good diversification of portfolio, if textile industry slump then it will crash the whole bank. The bank has very low rate of Non-performing loans. The ratios of risks are as under and we can see that they reduce the risk as per their objective.

Market Risk:

Market risk is the possibility that fluctuation in interest rates, foreign exchange or stock prices will change the market value of financial products leading to a loss. The HMB has formalized liquidity and market risk management policies which contain action plans to strengthen the market risk management system.

Foreign Exchange Risk:

Foreign Exchange Risk is the probability of loss resulting from adverse movement is exchange rates. The HMB is not in the business of actively trading and market making activities but a conservative risk approach and the Bank’s business strategy to work with export oriented (Textile) client’s gives the ability to meet its foreign exchange needs.

Interest rate risk:

Interest rate risk is the risk that the value of the financial instrument will fluctuate due to changes in the market interest rates. The HMB’s interest rate exposure is low due to the short-term nature of the majority of business transactions. Interest rate risk is also controlled through flexible credit pricing mechanism and variable deposit rates.

Liquidity risk:

HMB manages the liquidity position on a continuous basis. The Bank’s liquidity position is based on “self reliance” with a wide branch network to expand the Bank

deposit base. The Bank’s liquidity profile generally consists of short-term, secured assets, in line with the Bank’s credit strategy.

RECOMMENDATIONS

Diversify the portfolio

Introduction of new products/services in the market

Hire new management

Give importance to all customers

Increase the branches all over the country

Improve standard of banking

Start advertisement as soon as possible

Conclusion

Major factors like global financing disorder, economic slowdown and strict monetary policy were on the top but Pakistan bank caters all these problems. HMB is one of the top ten banks it is expected to play a major role in pioneering these newer markets.

Currently, the banking sector is facing two major problems. The first one is the decline in credit demand due to slowdown in the economic activities due to poor law and order situation, power crisis, inflationary pressure, and high interest rates. The other problem is the mounting amount of NPLs (non-performing loans). With the exception of a few banks all the banks are exhibiting considerable rise in NPLs. These two issues are collectively dampening the banking sector s performance.

HMB offers branch banking,e-banking,consumer banking international banking and also offers Islamic banking to facilitate their cutomers

At year-end, HMB s equity stands at Rs 18.9 billion at a comfortable 11.9% capital adequacy level against the required 10%.

The credit ratings denote a very high credit quality, a very low expectation of credit risk and a very strong capacity for timely payment of financial commitments.