internship report on habib bank limited

Habib Bank Ltd. Internship Report, 2010

Executive Summary

Department of Management Sciences demands every student of BBA/MBA program to

go a procedure of 4 to 6 weeks internship course and to present the report based on the

observations and work done during the training practice. It is actually the appraisal of any

organization currently running its business, having its competitors. It is also meant for

discovering the weaknesses and shortcomings and then giving the suggestions for

perfection.

I have fulfilled my eight weeks internship at Habib Bank Limited, The Islamia University

Branch Bahawalpur and tried my level best to achieve something sensibly from this

opportunity.

In my internship I opened many accounts of the customers; most of them were the

employees of The Islamia University. I also did a lot of work on the pension and salary

days. As there is a bunch of crowd on these days so I helped the staff of the bank by

filling out the pension forms and then recording the entries in the register of the Pension

Records. In this way we winded up the work quickly and in less time.

Department of Management Sciences demands every student of BBA/MBA program to

go a procedure of 4 to 6 weeks internship course and to present the report based on the

observations and work done during the training practice. It is actually the appraisal of any

organization currently running its business, having its competitors. It is also meant for

discovering the weaknesses and shortcomings and then giving the suggestions for

perfection.

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I have fulfilled my eight weeks internship at Habib Bank Limited, The Islamia University

Branch Bahawalpur and tried my level best to achieve something sensibly from this

opportunity.

This internship report starts from the introduction on word ‘BANKING’ and then history of

Habib Bank Limited of Pakistan i.e. how it helped the nation and country in any way.

Bank mission and vision statement shows that it focuses on overall performance of bank

and quality of service and products.

The main objective of the bank is to realize the real importance of its customers and is

profit-oriented.

A bank performs basic functions that are:

Accept money as deposit

Investing deposits to earn profit

Miscellaneous functions

Each branch of the bank is divided into different

sections on the basis of these basic functions.

Deposit Section opens different accounts of

clients and maintains record of money deposits from

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the customer and credited it into his account. It also maintains record of payment to the

customer when he presents cheque.

Remittance and Collection Section deals with customers who want to transfer or

collect their money from other city.

Clearance Department deals with the clearance of cheques of other banks and also

the cheques can be cleared at any branch of bank.

I have also given the SWOT Analysis of HBL which shows that the bank as many

Strengths and Weaknesses and also with many Opportunities there are numerous

Threats as well.

After this I have suggested and recommended how bank can improve its working and

flourish.

I also faced some challenges and problems before, during and after my internship in the

bank which I have added in the report

In the end I have given conclusion of the entire report.

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IINTRODUCTIONNTRODUCTION OFOF O ORGANIZATIONRGANIZATION

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What is Bank?

“Bank is an institution which revives money from one party and lends to

another party.”

There are different views about origin of the word “Bank”. According to some people the

word “Bank” is derived from the world “Bancus” which means a “Bench”. They argue their

point by this transacted their business of money exchange on the benches. If the

business of any businessman failed, his bench was destroyed by the people. Due to this

practice the word “Bankrupt” was also used.

On the other hand some people say that the world “Bank” is derived from German time

the word “Bank” was replaced by the word “Bank” which is called “Banco” in Italian

language.

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The bank can be defined as 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 make profit for the bank.”

In Simple words we can also say that bank is a pipeline through which money moves into

and out of circulation. Bank accepts deposits and repays cash to its customers on

demand. The bank borrows money at a lesser rate of interest and lends it to the borrower

at a higher rate.

The history of banking evolution is very interesting. In the early ages human like and

wealth was not secure. Due to fear of loot-mar and theft people buried their wealth under

land but this method was not satisfied. People started to search the custodians of wealth.

The evolution of banking started and it has crossed the many stages.

Why Bank is important?

Bank plays a significant part in the economic existence of nation. The growth of economy

is strongly related to the reliability of its banking system. Although banks create no new

money but they borrow, exchange and use wealth. In this way they become very valuable

partners in the process of economic development.

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The fundamental role of bank is to persuade the habit of savings among the people and

to activate these savings for investment purposes. Banks serve in capital formation.

If there are no banks then there would be concentration of capital in few hands and the

great fraction of capital of the country would remain inactive.

Loan facility provided by the bank works as an encouragement to the produce to increase

production. Banks offer transfer of payment facility, which is cheaper, quicker and safe.

These facilities are very much accommodating for the development of commerce and

trade.

Types of Banks

Banks are classified according to their field of activity; the main types of banks are as

under.

Commercial banks

Industrial banks.

Agricultural banks

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Saving banks.

Exchange banks.

Central banks

Cooperative bank

Commercial Bank

Commercial bank is occupied 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.

C o m m e r c i a l b a n k s a r e h a v i n g p r o f i t e a r n i n g c o n c e r n s . T h e y r e c e i v e d e p o s i t s a n d a d v a n c e l o a n s t o t h e b o r r o w e r s . T h e y g r e a t l y h e l p i n f i n a n c i n g f o r i n t e r n a l a n d e x t e r n a l t r a d e o f t h e c o u n t r y

So we can say that commercial banks are companies “which transact business of

banking in Pakistan”. Commercial banks have constituted the most important source of

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institutional credit in the economy of Pakistan. E x a m p l e o f c o m m e r c i a l b a n k s

i n P a k i s t a n i s H B L , U B L e t c .

F u n c t i o n s o f C o m m e r c i a l B a n k s :

T o d a y t h e r e a r e m o r e t h a n 7 0 0 0 b r a n c h e s o f c o m m e r c i a l b a n k s a l o n g w i t h a n e s t a b l i s h e d n e t w o r k o f s u p p l e m e n t a r y f i n a n c i a l i n s t i t u t i o n s .

T h e f u n c t i o n o f a m o d e r n c o m m e r c i a l b a n k c a n b e d i v i d e d u n d e r f o u r h e a d i n g s a s :

A c c e p t a n c e o f d e p o s i t s

A d v a n c e m e n t o f l o a n s

A g e n c y s e r v i c e

G e n e r a l u t i l i t y S e r v i c e

History of banking in Pakistan

At the time of independence, there were 487 offices of scheduled banks in the territories

now constituting Pakistan. Following the announcement of independence plan in June

1947, the Hindus residing in the territories now comprising Pakistan started transferring

their registered offices in Pakistan, transferred them to India in order to bring a collapse of

the new state. By 30th June 1948, the number of offices of scheduled banks in Pakistan

declined from 487 to only 195.

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BANKING IN PAKISTAN

Pakistan has indeed unique banking

history commencing as were from

scratch at the time of Pakistan of this

subcontinent. However it soon comes

over its extra ordinary banking

problems and by grace of Allah we

have a stable banking sector.

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H ISTORY OF HABIB BANK L IMITED

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Habib Bank Limited

Habib Bank Limited commonly referred to as "HBL" and head-quartered in Habib Bank

Plaza, Karachi, Pakistan, is the largest bank in Pakistan. The bank has a network of over

1450 branches in Pakistan and 55 branches worldwide. It has a domestic market share of

over 40%. It continues to dominate the commercial banking sector with a major market

share in inward foreign remittances (55%) and loans to small industries, traders and

farmers.

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 HO 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 All-India 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 Pakistan was born in 1947, Habib Bank, at the urging of Governor-General Jinnah,

moved its headquarters to Karachi, Pakistan's first capital. 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.

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HBL’s first international branch was established in Colombo, Sri Lanka in 1951 and Habib

Bank Plaza was built in 1972 to commemorate the bank’s 25th Anniversary.

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

of Pakistan had formally granted the Agha 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, 204, management control was handed over to

AKFED. The Board of Directors was reconstituted to have four AKFED nominees,

including the Chairman and the President/CEO and three Government of Pakistan

nominees.

It was HBL that introduced products such as Credit Cards, ATMs, Travelers Cheques,

etc., to the Pakistani market. Today, Habib Bank is truly the bank of the people, providing

its customers convenience and satisfaction all over the world. HBL plays a central role in

Pakistan's financial and economic development.

Habib Bank Plaza, the tallest building in Pakistan, is the proud symbol of HBL’s

leadership in Pakistan’s corporate arena.

Habib Bank offers the basic range of banking services to its customers, to include

Commercial, Corporate, Investment, and Retail Banking, Treasury, and Islamic Banking.

It has more than 1489 branches all over Pakistan and presence in 26 countries across

five continents. With a revamped customer oriented philosophy, we are pursuing new

avenues of leadership through innovation, as it gear up to face the challenges of the new

millennium.

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VISION, MISSION & VALUES

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Vision of HBLVision of HBL

“Enabling people to progress with a confidence and success.”“Enabling people to progress with a confidence and success.”

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Mission of HBLMission of HBL

“To be recognized as the leading financial institution of Pakistan and a

vibrant international bank in the promising markets, providing our customers

with a best set of original products and services, and granting superior

values to our stakeholders – shareholders, customers and employees.”

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Core Values

HBL is absolutely trapped with a business philosophy that incorporate five concrete

values which each individual associated with the bank abides by. Our values are the

fundamental principles that define our culture and are brought to in our life in our attitudes

and behavior. It is our values that make us unique and unmistakable. Our values are

defined below:

1) 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.

2) Integrity

For us, integrity means a synergic approach towards abiding our core values. United with

the force of shared values and integrity, we form a network of a well-integrated team.

3) Meritocracy

At every level, from selection to advancement, we have designed a consistent system of

human resource practices, based on objective criteria throughout all the layers of the

organization. HBL is therefore, able to achieve a specific level of performance at every

layer of the organization.

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4) Customer Focus

We understand fully the needs of our customers and adapt our products and services to

meet those. We always strive to put the satisfaction of our customers first.

5) 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.

Objectives

The bank’s main aim is to provide better and efficient services to its domestic and

efficient customers and overseas customer regarding the need for improving the financial

performance of the company.

Next are some of the main objectives of HBL.

• To get profit for the Bank itself and maximize its shareholder’s value.

• To offer solutions for multiple requirements of clients of assorted financial nature.

• To cope with the changing trends of the modern day financial market.

• To be a diversified bank by offering all basic consumer services along with specialized

services

• Honest and ethical conduct, including ethical handling of actual or apparent conflicts of

interest between personal and professional relationship.

• To provide employment opportunities to people.

• To help in development and industrialization of the country

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ORGANIZATION STRUCTURE

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Domestic Structure

With a domestic system of 1408 trade branches and 17 business branches which are well

located in all cities and towns of the country, the bank provides the entire banking

services counting consumer and corporate finances, leasing, investment and money

market transactions etc.

International Structure

Through its 15 overseas offices including branches, locally included subsidiaries and joint

ventures, the bank has international presence in 26 countries encompassing the United

Kingdom, Continental Europe, the Middle East, Southeast and Far East Asia, Africa,

Australia, and the United States. Besides providing banking services to the emigrants

Pakistanis, these offices also help out in developing linkages between Pakistan and the

international financial set-up.

Operational Structure

HBL is among the principal commercial bank of Pakistan. It accounts for a considerable

share (40%) of the entire commercial banking market in Pakistan with a set-up of 1,705

domestic branches; 55 overseas branches in 26 countries extend over Europe, the

Middle East, Far East, Asia, Africa and the United States; 3 HBL wholly owned

subsidiaries explicitly Habib Bank Financial Services (pvt) Ltd. (Karachi), Habib Finance

International Ltd. (Hong Kong) and Habib Finance Australia Ltd. (Sydney); 2 joint

ventures namely Habib Nigeria Bank Ltd. (40%) and Himalayan Bank Ltd. (20%); and 2

delegate offices in Iran and Egypt.

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Retail Banking

Retail banking of HBL consists of trade lending, deposits, and banking services to private

individual and small businesses.

Corporate & Commercial Banking

Consists of business customers and savings banking, includes advices and placements

to commercial mergers and acquisitions, underwriting, privatizations, and securitizations.

Ownership Structure

HBL operated under Government possession from 1974-2004. After privatization in 2004,

51% of the bank’s shares were purchased by the Agha Khan Fund for Economic

Development, an organization of the Agha Khan Development Network. The

administration of Pakistan is expected to slowly strip its remaining 49% shares in the

bank.

Business Segments

A segment is a noticeable constituent of the bank that is occupied in providing product or

service (business segment), or in providing products or services within a particular

economic environment (geographical segment), which is subject to risk and rewards that

are different from those of other segments. The bank’s primary layout of reporting is

based on business segments.

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Geographical Segments

The bank operates in five geographic regions, being:

Pakistan

Asia Pacific (including South Asia)

Europe

North America

Middle East

Others

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Board of Directors

What does Board of Directors do?

To construct the policies in order to support the business of bank.

To announce the profits on deposits.

To declare the rate of interest on advances and loans.

To make the policies for the benefit of bank recruits.

List of Board of Directors

Sultan Ali Allan CHAIRMAN

R. Zakir Mahmood PRESIDENT & CEO

Mushtaq Malik DIRECTOR

Ahmad Jawad DIRECTOR

Yasin Malik DIRECTOR

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Moez Jamal DIRECTOR

Management

List of Management

R. Zakir Mahmood PRESIDENT & CEO

Sohail Malik RISK MANAGEMENT

Saima Kamil CORPORATE BANKING

Nauman K Dar INTL BANKING & CEO HABIB ALLIED

INT BANK

Ayaz Ahmad CHIEF FINANCIAL OFFICER

Abid Sattar RETAIL & CONSUMER BANKING

Zafar Aziz Usmani HR & ORG DEVELOPMENT

Mudasir K Khan GLOBAL OPERATION

Jamil Iqbal CHIEF COMPLIANCE OFFICER

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Faizan Mitha GLOBAL TREASURY

Saleem Amlani AUDIT & INVESTIGATION

Aslam Gatit ASSET REMEDIAL MANAGEMENT

Tulu Islam IT & SYSTEMS

Mirza Saleem Baig COMMERCIAL BANKING

Kashif Shah INVESTMENT BANKING

Aly Mustansir BRAND MANAGER

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Management Hierarchy

President

Board of Directors

Member Executive Board

Zonal Chief

Branch Managers

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FUNCTIONS AND DEPARTMENTS

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FUNCTIONS OF HBL

Basic Functions

Receiving of money and deposits

Lending and investing the deposit money

Miscellaneous functions

Miscellaneous Functions

Collecting negotiable instruments on behalf of customer.

Issuing Letter of Credit for the customer.

Receiving values for safe custody.

Issuing guarantees and LC’s.

Utility services.

Transfer money from one place to another.

Giving there customer life insurances for better future.

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Departments of HBL

A variety of departments are working in all the branches of Habib Bank Limited to smooth

the progress of banking for the customers. Few of them are:

1) Account Opening Department :

Account opening is a contract in which customer offers his finances and bank accepts

those funds, hence the nature of relation between a banker and customer is of a

contractual one and all the conditions pertinent to this agreement act are also applicable.

The essential function of accounts department is to open fresh customers account and

assist the customers for the account opening purpose.

A) Types of accounts:

Depositors can open following types of accounts.

Current account

Profit and Loss account

Basic Baking Account

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Current Account/Demand Deposit:

In this category of account the customer is permitted to withdraw or deposit money as

and when he likes. Unlike term deposit there is no restriction of withdrawals. The

depositor can draw or demand amount money at any time by presenting the cheque in

the bank. No revenue or interest is specified on these accounts. These types of accounts

are generally maintained by the businessmen who may draw money at any time. Zakat is

also not deducted on these accounts and no any notice is necessary for the withdrawal of

money. In urbanized and developing countries a very noteworthy amount of money is

kept under current account.

Profit and Loss (PLS) Account:

These sorts of accounts are one footstep towards the Islamisation of banking system in

Pakistan. Under such accounts bank allows no interest to the customers. Following each

six months the executive board of the bank specifies the profit/interest on this account

and the rate of profit is declared by the Head Office Habib Bank Limited.

On the first of Ramadan Zakat is deducted at the rat of 2.5%. If any customer does want

to pay the Zakat form his account then he must give an affidavit that he will give Zakat by

himself or he belongs to Fiqah-e-Jafria.

Limitation on withdrawal of heavy balances is now abolished. Customer can withdraw

heavy amount within the banking hours without giving any notice.

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B) Requirements for Opening an Account:

A copy of ID card of both introducer and customer

Original ID for verification copies of student card for students and appointment

letter from the employees of IUB.

If customer use thumbs impression then must give his 3 recent photographs.

Next of kin: the customer must clear that who is responsible for the account in

his absence.

Customer must be present at the time of opening the account.

C) How to open an account:

There is a definite official procedure which is to be observed for opening a current or

saving account with a Bank. These formalities in brief are as under:

I. Formal Application:

The customer is to fill an "Account Opening Form”. It is a official request by a customer to

the bank to permit him to have and manage the current or saving account.

II. Obtaining Introduction:

The bank previous to opening an account obtains introduction of the customer from an

old customer, responsible person etc

III. Specimen Signature:

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When the Banker is contented about the truthfulness of the customer, he agrees to open

the account. The Banker then obtains the specimen signatures of the customer on the

signature book or on card.

IV. Minimum Initial Deposit:

In Pakistan the current account can be opened with a minimum balance of Rs. 500/- and

PLS Saving Account with a minimum of Rs 100/- These amounts are also the minimum

balances to be maintained by the account holders with the bank.

V. Operating The Account:

When an account is opened in a Bank, the Banker gives to the customer.

i. Pay in slip book.

ii. Cheque Book and pass book with a view to operate it.

Cheque book:

It is a printed book of blank cheques provided by the bank to its customer for drawing

money from their account. Different cheque books are available for the current and PLS

account.

Issuance of chequebook:

For issuance of cheque book of a new account, the customer first fills out the requisition

slip and submit it to the relevant officer, who in turn will issue chequebook to the

customer within 4-5 days or a week. The officer will enter the date, account title, number

of leaves, cheque number from start to end, account numer and the signature of the

applicant on the chequebook issuance register. The officer will also enter the account

number on each cheque of the book and in case of photo account ( either having thumb

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impression or shaky signs) stamp is impressed written ” All the cheques to be signed in

the presence of the bank officer(this stamp is impressed on the cheque books of those

people who have shaky signs) “Right or left thumb will be affixed in the presence of bank

officer” (This stamp in impressed on the cheque books of those people who use thumb

impressions). And in case of Minor’s account, every cheque has a stamp impressed

written “The account will be operated by minor if even minor attains the age of majority.”

D) Withdrawal from an Account:

Withdrawal is done through cheques supplied by the Bank. A new cheque book is issued

only on receipts of the requisition slip attached to the cheque book issued earlier and this

offered along with the depositor pass book for entire against cheque book challan.

Cheque book is issued on prudence of the branch manager.

E) Transfer of an Account:

Account can be transferred to any other branches of Habib Bank Ltd., free of charge. If a

shareholder wants to transfer his account, he presents his pass book individually or

sends it to Bank and writes a request for the transfer of an account.

F) Closing of an Account: A shareholder ready to close his account must present his pass book in order that

withdrawals and the amount of interest due on the account is entered within and final

balance stuck. This balance is then paid to the depositor and his proof of payment is

taken, the pass book is canceled, unused cheque forms on hand are also surrendered at

the same time.

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G) Secrecy:

The confidentiality of depositor’s account is the responsibility of every official engaged in

the Bank service.

H) Money Deposited or Drawn by Post: When currency is sent by post for deposit, the pass book and a letter starting the amount

of the deposit and the number of the account escort it.

When a depositor desires to withdraw money by post he must forwards his pass book

with a letter stating the number of his account, the amount to be drawn and either the

money is to be remitted by money- order or in currency notes registered.

2) Remittance Department: Remittances are arithmetic of money sent in payment for or against something. The

remittance department is chiefly concerned with these payments. As it is the

responsibility of the bank to pass on the money to any place where there is a bank.

Remittance is the chief department of the bank. It is the easiest and safest way to send

money to any situate. Remittances are divided into:

A) Inward Remittance: Inward remittances refer to payment in goodwill of the banks account holders. Inward

remittance includes all cheques received for collection i.e. cheques and drafts received

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for the payment and clearance or drawn on us from customers or other bank on behalf of

their customers are called remittance inward.

B) Outward Remittance: Outward remittances are the entire payments prepared to other people on behalf of the

account holders in the bank. Outward remittances can also be done for non-account

holders who deposit cash in the bank and remittance tools are prepared for them. In

short, all instruments issued by us which are drawn on other branch of the same bank or

instrument deposited for collection from other bank locally or out of the city is called

remittance outward.

Types of Remittance:

Habib Bank Ltd. Of Pakistan deals with the following types of remittance:

I. Demand Draft:

Demand draft is the on paper order given by one branch of the bank on the behalf of

client to another branch outside the city of the same bank for a certain amount to the

certain person.

It is the most commonly used method for the remittance of money. It is very simple, firstly

a form is to be filled, in which all details are specified that where and in which branch the

draft is to be sent then the money is deposited which is called draft and money can by

drawn after showing to the bank of the specified branch of the bank. Only specified

person can draw the money on that draft. Another method to secure the payment of the

draft could be the crossing of the draft which means that it will only be deposited in the

payee’s account.35


It is unconditional order. The payee is not bound to have an account in the bank. It is

issued to rest of the customer and the bank receives the charges and exchange.

II. Pay Order:

A pay order is on paper order issued by the bank on its own branch, drawn upon and

payable by itself to pay a particular sum of the money to the person. The purpose of the

pay order is to transfer the funds from one place to another. It is usually not issued in

favor of the parties of other cities. Usually the pay order is issued for the local transfer of

money between the parties.

Pay order is less costly method of relocate money. Normally this method is used to

transfer money inside the city. If it is used city wide, it takes a long time.

Procedure of DD and Pay order:

First remittance application form is filled that is etched in annexure of the report.

Here the customer is requested to fill update, branch, amount, cheque #,

beneficiary details; his complete name, address, CNIC no., account no. and the

details of the applicant.

Customer is asked to submit money on the counter by first filling the pay in slip

and required amount is received by customer from the customer.

Cash is received by the cashier on counter and he place stamps on the pay in slip

and give the receipt to the customer.

Then the remittance department will make the DD or pay order and then handed

overt to customer.

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3) Clearing Department:

“Clearing house is a place where ambassador, of all bank get together for the intention of

setting the inter bank indebtedness arising from the transmit of deposit by a customer of a

particular bank to another bank.”

This is a superfluous banking facility which is provided to the community in this if they are

maintaining an account with the HBL they can lodge Cheque of any bank in Pakistan,

which will be collected and credited to their respective accounts through the course of

clearing. In this representatives of various banks are gathered at State Bank of Pakistan

and exchanges the Cheque presented to them for debit of the respective accounts and in

second round of meeting provide each other the fate of those cheques to be credited to

respective accounts.

When people present the Cheque of any other bank for clearing, first enter the Cheque

into the clearing register of the bank. Then this Cheque sent to the NIFT for clearing.

NIFT is the department which is created by the SBP for clearing the checks of different

banks.

NIFT

National Institutional Facilitations Technologies (Pvt) limited was established in

1997 by the banking giants of Pakistan, i.e. HBL, NBP, ABL, MCB.

NIFT has the blessing and the support of the SBP.

It has offices in all the major cities of Pakistan.

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NIFT facilitates the clearing of cheques between institutions locally (within the city).

It is also referred to as the “Automated Clearing House”.

NIFT collects cheques, demand drafts, Pay orders, Travelers Cheques, etc. from all

the branches of different banks within city through its carriers and send them to the

branches on which these are drawn for clearing. After the branches approve the

instruments drawn on them, NIFT prepares a sheet for each branch showing the

number for instruments and amount in its favor and drawn on it and sends it to each

branch.

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SWOT ANALYSIS

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The short form SWOT stands for an organization’s internal Strengths and Weaknesses

and its external Opportunities and Threats. The principle of such examination is to

assemble on company’s strengths in order to take advantage of opportunities and argue

against threats and to accurate company’s weaknesses. SWOT analysis is based on the

supposition that if executives cautiously evaluate such strengths, weaknesses,

opportunities, and threats, a valuable approach for making sure managerial

accomplishment will become apparent.

SWOT Analysis of HBL

HBL has very effectual net of branches all over the country. Each 10 th Pakistani is

account holder of this bank. HBL has made enormous savings in almost all the essential

economic sectors of Pakistan. HBL not only has made investment in commerce but also

in small scale industry as well. HBL has well-organized & a smaller amount of technical

set up. Habib Bank Ltd. has introduced monthly revenue plan that provides almost

maximum interest rate. ATM was introduced in Pakistan by Habib Bank Ltd. Master Card

facilities are also accessible to the customers. HBL is measured to be a very sound

bank in the financial circles. It is the bank where the clientele can securely keep

their money as long as they want.

In SWOT analysis the most excellent strategies accomplish in organization’s mission by:

1. Taking advantage of opportunities and strengths.

2. Reducing the effect of its threats and

3. Evading its weaknesses.

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Strengths:

A proficiency or potential that facilitates HBL to visualize and put into practice its

strategies.

The representatives of HBL are considered as one of the most competent

professionals in the banking world.

I noticed that HBL employees cooperate with their clients as if they are their

personal friends and talk about about their problems as their own.

Habib Bank Limited has acquired a consistent and easy to use internal computer

system. All information regarding the transactions in customers’ deposits has been

automated.

HBL uphold its data appropriately.

HBL has very good quality security arrangement.

HBL is the bigger commercial bank in Pakistan with the system of more than 1439

domestic and international branches.

Being the leading the way of banking in Pakistan, HBL is the oldest and the richest

in familiarity.

Habib Bank Ltd. spotlights on consumer banking by rewarding schemes, products

and services suiting best to the requirements and demands of the customers.

HBL has opened all its branches at marketable regions so that the customers face

no problems in reaching to the bank.

The bank is all the time on the look to get better its services mutually to the

domestic as well as overseas customers.

41


Human resources development and introduction of new technology towards

contemporary banking.

24 hours cash access and secure payment products for high value transaction.

Having prospective to meet the competitive environment in the market.

Customer takes benefit from the services at the housing localities.

Weaknesses:

Maximum number of branches carrying out the proper maintenance and

complexity in providing identical working atmosphere at the every branch

Inferior organization of revival of the system is a danger to bankruptcy.

Be deficient in customer feedback.

Little job contentment.

Pitiable ATM’s Service

Irregularity in efficiency and working environment due to the largest of branches.

Sense of uncertainty in the employees allocated at little money-making branches

due to the down sizing.

Females feel nervous in an environment in the middle of the male workers.

Prey of political, legal and socio-cultural stress

Short of professionalism in the branch employees frequently.

42


Opportunities:

Huge available market prospective in consumer banking.

An opportunity exists, in shape of opening of ladies banking segment inside the

branch which is completely a new idea and it will pull customers towards bank.

Chance for mounting value added services combined with corporate banking

relationships, cash management services to large and medium sized corporate

clients.

Emergent strategy of government on business and commerce sector provide HBL

opportunities to take return of these policies to meet professionally with the

business people to solve their problems with the instant cash and investment

facilities.

Government is taking very courageous steps to endorse Information Technology in

Pakistan. HBL has an opportunity to recover its technology.

Huge international net which mainly emphasizes on trade finance with Pakistan

can be operated to valve trade activities in other markets. In addition, services

such as cross border / offshore financing for corporate customers can be

improved.

Customer advice on diverse products and accounts has really improved the bank

performance and encouraged the ambiance for other potential policies.

Habib Bank Ltd. also has an opportunity to enlarge its new technological

expansion like; tele-banking and internet banking facilities in a way to serve the

customer more competently.

E-banking facility too is an innovative opportunity which is a prosperous business

in foreign countries and can also be here, if HBL takes the step ahead.

Due to well-organized and expert management group, HBL can also develop and

enlarge its foreign business productively.

43


Habib Bank Limited provides opportunity to make use of its abilities and

efficiencies in leasing business

Threats:

Consolidation in the banking segment ensuing in increased rivalry.

Scarcity of qualified and focused personnel at minor managerial and officer stage.

The danger of irregularity and government policy concerning about business and

economics sectors, specially political and regional situation which makes the

environment doubtful.

Increasing global technological progression.

Firm regulation by government over credit conveniences to the customers as

poorly as to meet the prudential.

Loss of assurance of out of the country customers due to freezing of accounts.

Facing more opposition by overseas banks in the marketplace.

Overseas banks are flourishing in field of consumer financing.

Also the rising operation of private banks.

Highly striking and advance services by overseas banks to their customers.

44


Financial Analysis

1. Return on Assets

FORMULA: Net profit after Tax / Total Assets*100

45


Year 2005 2006 2007 2008 2009

ROA 1.808% 2.138% 1.457% 1.45% 1.55%

INTERPRETATION:

ROA measures the overall effectiveness of management in generating profit with its

available assets. The higher return on total assets is considered best.

Return on assets decreased in 2007 onwards and it was on peak in year 2006. This may

occurred because of more debt financing in 2006 as compare to years 2007 to 2009

which resulted in declining of net profit and rising of interest cost.

2. Return on Equity:

FORMULA: Net Profit / Equity*100

46


Year 2005 2006 2007 2008 2009

ROE 24.12% 24.18% 16.19% 16.61% 16.1%

INTERPRETATION:

ROE measures the return earned on the common stock holder’s investment on the firm.

Generally the higher the returns the better off are the owners.

In 2005 and 2006 ROE is very high which indicates that the more efficient management is

utilizing the equity base and is giving a better return to its investors. While in the years

2007 and onwards ROE is decreasing this happened may be due to increased issuance

of long-term debts.

3. Advances to Deposits:

FORMULA: Advances / Deposits

Year 2005 2006 2007 2008 200947


Advances

to deposit

73.3% 76.11% 71.93% 76.43% 66.60%

Interpretation:

This ratio shows advances of the bank as compared to the deposits.

Loans to deposit show a decreasing trend in alternative year from 2005 to 2009. This

shows that the advances of the bank decreased but on the other side bank deposits

increased. While in year 2006 and 2008 the advances of bank increased and deposits of

bank decreased.

4. Equity to Assets:

FORMULA: Equity / Total assets

Year 2005 2006 2007 2008 2009

48


Equity to

assets

7.50% 8.84% 9.00% 8.72% 9.64%

Interpretation:

The equity to assets ratio shows the profitability and finance of the bank. In 2005 ratio is

lowest this means that much of the bank is financed by loans. From 2006 to onwards this

ratio increased to 9.64% in 2009 showing better financial and profitability position of the

bank as approximately all of the long term capital is equity.

5. Deposits to total Liability:

FORMULA: Total deposits / Liabilities

49


Year 2005 2006 2007 2008 2009

Deposits to

liability

88.56% 85.2% 85.0% 87.36% 87.60%

Interpretation:

This ratio shows the relation between the total deposits and total liability. Its value should

be high because deposits of the bank should be high than liabilities.

The value is decreasing in year 2006 and 2007 but increasing in 2008 and onwards

which is a good sign for the company.

6. Equity to deposit ratio:

FORMULA: Equity / Deposits

50


Year 2005 2006 2007 2008 2009

Equity to

deposit

ratio

9.16% 11.44% 11.72% 10.96% 12.19%

Interpretation:

This ratio shows the relation between total equity to the total deposit.

In 2005 ratio is lowest this means that much of the bank was financed by deposits made

to bank rather than equity. From 2006 to onwards this ratio is increasing to 12.19% in

2009 showing better financial and profitable position of the bank as approximately all of

the long term capital is equity with less or no deposits involved in the financing of bank.

7. Investment to total assets:

FORMULA: Investment / Total Assets

51


Year 2005 2006 2007 2008 2009

Inv. to total

assets

20% 20.13% 25.71% 17.32% 25.06%

Interpretation:

The above ratio shows the relation between the investment and total assets.

As the calculation show that for the couple of years the ratio was low but the value has

increased in year 2007 and 2009. This means that the investment has increased a lot as

compared to the assets.

8. Advances to Assets:

FORMULA: Loans / Total Assets52


Year 2005 2006 2007 2008 2009

Advances

to assets

59.91% 58.8% 55.23% 60.86% 52.64%

Interpretation:

This ratio measures the percentage of funds provided by the creditors. Loan to asset is

continuously decreasing except in year 2008. This continuous decrease shows a

decrease to the advances of the bank but on the other side the bank assets increase

rapidly.

9. Cash to deposit ratio:

53


FORMULA: Cash / Total Deposit

Year 2005 2006 2007 2008 2009

Cash to

deposit

ratio

14.99% 17.92% 15.53% 16.06% 17.61%

Interpretation:

Cash to deposit ratio is lowest in 2005 indicating a decrease in cash while in 2006 it is

highest showing an increase in cash and decrease in deposits. From 2007 onwards cash

is increasing continuously but on other hand deposits of bank is decreasing.

10. Earning per share:

FORMULA: Profit available to Common Shareholders / No. of Equity Holders

54


Year 2005 2006 2007 2008 2009

EPS 13.86% 18.30% 14.49% 11.83% 14.70%

Interpretation:

EPS shows the company’s profitability. In 2006 company has a maximum EPS it

indicates that company is enjoying profits more as compare to year 2007 onwards till

2009 which shows a tremendous decrease in EPS showing adverse effect to the

company’s profitability.

11.Net Interest Margin:

FORMULA: Interest Income / Earning Assets

55


Year 2005 2006 2007 2008 2009

Net

Interest

Ratio

4.91% 1.74% 1.74% 1.86% 1.84%

Interpretation:

Net Interest Margin measures difference between interest income generated by banks or

other financial institutions by their lending and interest paid on borrowing.

NIM is highest in the year 2005 and then it decreased rapidly in 2006 and onwards. This

happened because interest expenses were greater than the amount of returns generated

by investments.

12. Net Profit Margin:

FORMULA: Profit after tax / Total income56


Year 2005 2006 2007 2008 2009

Net profit

margin

32.31% 35.11% 30.33% 27.90% 29.95%

Interpretation:

Net profit margin shows how much a firm is earning per dollar of sales.

In 2006 company is producing highest net profit of sales i.e. 35.11% than in any other

given year. After 2006 the net profit margin is decreasing that is not a good sign for the

company’s profitability.

57


RECOMMENDATIONS & SUGGESTIONS

I spend six weeks of my internship in Habib Bank Ltd, The Islamia University Branch

Bahawalpur. During this period I felt as the part of the bank. It was my first experience to

work in a banking environment. I had less knowledge about the operations of the bank

and its ambiance. This internship gave me an opportunity to learn more about the

Banking systems. Based on my experience in HBL I can recommend or suggest them

which can help them in short or long-term issues.58


So, I will give following suggestions for the better function of the bank:

It is strongly recommended that HBL must introduce employees training programs

on regular basis. So that employees have awareness about the new developments

with the clients.

Habib Bank Ltd. should update all the branches throughout the country as the

banking competition is very tight and they have to make their banking systems

quicker and reliable.

Habib Bank Limited even though providing the customer service in better way but

there is a lot of work to be done in a custom banking due to which employees work

for stretched duration. Management should reduce the burden of the employees

by hiring new qualified staff and trim down the working hours.

If any bad debt comes up, then the bank should recover those debts as soon as

possible so that its financial position should improve.

Branch manager’s attitude and behavior should be supportive & friendly in order to

entertain the difficulties faced by the workers.

All the additional banks are taking hold of the customers on very high interest rate

presented to the depositors, HBL should also implement some approach to grab

the customer and enhance total deposits.

The amount of women employed by Habib Bank Limited is not as much as

compared to male staff, so it should provide work to more women.

Working conditions must be improved for the employees.

Immediate feedback to customer’s inquiries is essential to sustain a healthy

relationship with the customer.

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Top executive should take all the decisions for the promotion of employees on the

basis of their work done in the bank

Supplementary conveniences of loans should be provided to individuals for

enhancing the business, studies etc on simple state of affairs.

For financing actions the procedure should be simple to the customer.

The recruitment procedure must be reasonable and clear.

Studies must be carried out regarding degree of customer satisfaction and all

employees of this department should look forward to get criticism whenever

possible.

CONCLUSION 60


Habib Bank Ltd.:

Habib Bank Ltd. is obviously the first and foremost selection of each and everyone who

believes in qualitative approach of banking, an atmosphere of extremely accountable

employees. Habib Bank is taking pleasure in a strong market share and enjoying the

61


taste of high-quality standing in terms of its operational features and customer support.

Habib Bank Ltd. is undoubtedly the unsurpassed bank operating in Pakistan.

Personal loan is a distinguished feature of HBL experiencing a good reputation and

reasonable mark up with respect to prevailing market mark up with assurance of

satisfaction and support. HBL has additional customers as contrast to other banks, if they

give appropriate concentration to every customer then in coming few years it will be the

principal bank of the country.

I noticed that Habib Bank Ltd. is an economically sound bank. Its proceeds are increasing

gradually more years by year. Its personnel are exceptionally good and genuine with the

bank. But due to the current economic crash, business of the bank has been reduced.

Habib Bank Limited views specialization and service brilliancy as the foundation of its

policy. The people at Bank understand that innovation, creativity, reliability, customized

services and their implementation is the important constituent for their future

enlargement.

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HBL is aware that they have paced into 21st century and they must get together its

challenge by obtaining the maximum level of technology. Thus they will be speeding up

their technological advance to facilitate them to deal out their products and services

through most professional and high technology way.

Habib bank was among the top banks of the world but in few years it has lost its position.

HBL is not giving any progress due to political pressure and instability. Other factors

holding back the performance of HBL are unproductive and inefficient management. Last

but not the least corruption is the root cause of declining worth of HBL.

Removing these factors will not only retain the worth and place of HBL but also lead it to

top ten banks of the world.

HBL is lacking in conflict management. There are many problems aroused regarding any

issue that leads to a conflict; HBL must be having a conflict resolving system in which

higher officials must be involved to have a keen and close look on the critical issues. The

decision making will become easier and beneficial as the issues are observed by the

higher officials. This will result in the decreasing of conflict within the organization

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resulting in the motivation of workers as they are now working in ethical environment,

ultimately this will lead to increased productivity of the bank.

HBL took a great step of introducing mobile banking. But a huge problem HBL is facing is

the lack of knowledge of client. Client is unaware of this sort of banking.

HBL can launch an organized marketing program to make its customers aware of their

product.

HBL has upgraded its system by installing “MISYS” to ensure real time banking at its

about 300 local and overseas locations.

Habib Bank, The Islamia University Old Campus Branch:

I want to sum up the pleasant experience I had during my internship program in Habib

Bank Limited, The Islamia University Old Campus Branch. I worked in various

departments of the bank and got the chance to know about the banking operations.

64


Pension Forms:

On the first day of internship there was Salary and Pension week was in process. So the

bank was crowded with people to get their salaries and pensions.

We were told to help the bank staff by filling the pension forms. It was fun but I had to do

it with responsibility. So I and other internees did this work with full enthusiasm. After

filling out the forms we were asked to

record the entries in the register of Pension

Records.

We were told that there are two types of

pension:

1. Personal Pension:

The pension which is taken by the worker or employee by himself/herself after he/she is

retired from the work it is called PERSONAL PENSION.

2. Family Pension:65


The pension which is collected by the family i.e. wife, children etc of the employee/worker

after his/her death is called FAMILY PENSION.

Every individual is assigned a P.P. no. through which he is given the pension and then

the entry is made in the register of the bank to which the pension is paid.

I worked in the various departments of the bank. My workings in those areas are as

follows:

Account Opening Department:

This department deals with opening account and saving account for its customer and all

matters regarding there off. I opened the current and saving accounts of individual

customers only.

We were told that there are five basic steps to open an account of any customer.

1. Add New Customer (ANC)

2. Open Customer Account (OCA)

3. Add Customer Address (CAA)

66


4. Customer’s Information (CIM)

5. Know Your Customer (ZYC)

Keeping in mind these steps I opened accounts of many customers. Most of them were

the employees of The Islamia University so they wanted to maintain a salaried account

with the bank. To open the account the customers were given the account opening form

and a specimen signature card to fill. And with these clients were required to give the

copy of identity card and employment certificate in case they are employed in any

organization.

After the paper work the information of the customer was entered in the automated

system, MYSIS, which then gives the account number for that customer. 14 digit account

number is allotted to HBL ac holders. The first four digits are the branch code where ac is

going to be opened. Afterwards the next eight digits are customer account serial number

and last two digits indicate the type of account.

This account number will be used to carry out different transactions by the customer as

the same number will be imprinted on his cheque book.

67


Account can be OPENED with Minimum Balance Rs.1000/- with no maximum limit.

Deposits Department:

This is the fundamental department of the bank. The entire banking system is based

upon borrowing. Like all banks, deposit department has acknowledged its worth as the

most important. Almost all the operations generated from the deposit department and

with due course of time reflect back to the deposit department. In order to attract funds

bank has introduced various types of deposit schemes that may suit the need and tastes

of a large number of depositors

There are three basic types of deposits:

1. Demand Deposits

2. Time Deposits

3. Saving Deposits

Clearing Department:

68


Clearing is a system by which banks exchange cheques and other negotiable instruments

drawn on each other within a specified area and thereby secure payment for their client

through the clearing house at specified time” in an efficient way.

There are two types of clearing:

Inward Clearing:

A type of clearing in which a bank does payment on the behalf of customer is called

Inward Clearing.

Outward Clearing:

A type of clearing in which a bank collects on the behalf of customer is called Outward

Clearing.

Outward Bills for Collection (OBC’S)

The cheques, which are sent to their city banks for the local clearing in that city, are

called outward bills for collection.

I also prepared these OBCs during my internship.

The kinds of clearing are as follows:

1. Normal clearing

69


2. Same Day clearing

3. Inter-City clearing

Cheque Book:

As told above cheque book is a printed book of blank cheques issued by the bank which

is used by customer for further transactions.

During my internship I observed the issuance of cheque book.

In short, Habib Bank Limited is the first choice of the students who want to gain the

practical experience of internship. As being the first multinational bank in Pakistan, HBL

has always strived to achieve more market share by focusing on the needs of its current

and potential customers. In this regard, HBL won “THE BANK OF THE YEAR

2009”award which is a big achievement for HBL’s management and its hard working

employees.

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internship report on habib bank limited

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