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INTERNSHIP REPORTHABIB BANK

CREATED BY (IREM JABEEN) ROLL NO: 112

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HABIB BANK LIMMETED

SUBMITTED TO:

Sir Mumtaz Kanju (In charge internship & placement)

SUBMITTED BY: IREM JABEEN

Roll # 112 M.COM Section (B) (Evening) 2006-2008


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Being aware of the importance of practical training, the Department of

Commerce (IUB) requires every M.Com student to go through training for

practical purpose as trainee.

The internship program is to broaden the vision of practical experiences with

theoretical knowledge as it increases one’s capabilities to handle problems at

various stages and the ability of decision.

I tried my best to collect the valuable information and its relevant facts.

This report is the result of my internship with Habib Bank (HBL).

IREM JABEEN M.com

Session: 2006-08


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Who always prayed for my success and their love and affection have always been a source of inspiration for me to difficulties, this taught me a lot about life.

Who always provide us knowledge and guidance that becomes a successful way in our life,


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Up and above everything, I am thankful to ALMIGHTY ALLAH, the most

Beneficent and merciful, and his Holy Prophet (Peace be upon him) who is

forever a true torch of guidance for whole humanity. I am greatly obliged to

“ALLAH” by whom grace I have been able to complete this report

successfully.

I also offer my thanks to honorable Chairman Prof. Javaid Iqbal for

providing me a chance to work in such a prestigious organization.

I also offer my thanks to respected teacher Mr. Mumtaz Kanjo for his

valuable guidance and contribution in making my report meaningful and

useful.

I also thank to the Branch Manager Mr. Zubair Khan, officers and employees

for their kind behavior and full cooperation during the internship Period.

IREM JABEEN M.com Session: 2006-08


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I have completed my 8 weeks internship in HABIB BANK LIMITED. I tried

my best to gain something practically from this opportunity. This report starts

from the introduction of word ‘Banking’ and then History of HABIB BANK

LIMITED. History of HBL shows that how it helps its Nation and Country in

both war & peace. The first Pakistani bank .Bank Mission statement & Vision

shows its focus on overall performance of the bank and quality of services

and products.

After restructuring of the bank the objectives of the bank are changed. Now it

has objectives to overcome past mistakes, realize the real importance of

customer so now it has main objective to achieve customization.

A commercial bank has basic functions that are must be performed by them as

a bank i.e.

1. Accept money as deposits.

2. Investing deposits to earn profit.

3. Miscellaneous functions.


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Each branch of the bank is divided on the basis of these functions into

different sections.

Deposit section opens different accounts of clients and maintains record

of deposited money from the customer & credited it into his account. It also

maintains record of payment to the customer when he presents cheque.

Advances section deals the customers who demand loans against required

security.

Remittance & collection section deals customers who want to transfer or

collect their money from/to other city.

Foreign Exchange section deals customers who have foreign account in the

bank & deals exchange of foreign currencies.

Bank also provides facility of L.C to support export and import in the region.

Flexi is the new product of Habib bank for the employees.

All branches are now interconnected with head office through internet.

Total numbers on branches are 1489 and number of employees are 14552.

Bank shows improvement after the privatization.

Simex system is very good but misused by staff due not proper training.


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SWOT analysis of Habib Bank shows that it has small number of strengths

and lot of weaknesses and threats. The bank should give attention to this draw

back. But bank has lot of opportunities to improve its quality of services, and

do efficient banking. Bank should give proper attention to overcome its

threats.

Banks profit has been increased as compared to previous years.


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TABEL OF CONTENTS

serial No. Content Page #1 COMPANY INTRODUCTION

11

2COMPANY INFORMATION

17

3FINANCIAL HIGH LIGHTS

20

4 MISSION STATMANTANDOBJACTIVES

22

5 OPERATIONS OF THE BANK 25

6 WORK DONE BY ME DURING INTERNSHIP

27

7 FEILD OF ACTIVITIES /DEPARTMENTS OF A BANK

31

8 Deposit department 32

9 Accounts department 35

10 Advances department 39

11 Agriculture loan 41

12 Flexi loan 44


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14 Foreign exchange department 50

15 MISCELANIESUS FUNCTIONS OF ALL DEPARTMENTES

53

16 Lockers 56

17 A.T.M. 58

18 CREDIT CARD 62

19 SIMEX 64

20 BALANCE SHEET 65

21 INCOME STATMANT 66

22 Ratio Analysis 76

23 SWOT ANALYSIS 86

24 SUGGESTION 88


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Company Description:

Habib Bank Limited is a Banking Company, which is engaged in Commercial & Retail banking and related services domestically and overseas.

WHAT IS BANKING COMPANY?

Section 5 of banking ordinance 1962 says that Banker means a person transacting business of transacting the business of accepting, for the purpose of lending or investment of deposits and withdrawals by Cheques, drafts, orders of other wise and include any post office saving bank.

COMMERCIAL BANKING :

Commercial banks are profit seeking organization. They have been the most effectively mobilize the savings and have been providing short-term requirements of businesses. They help in internal and external trade of the country.

FUNCTIONS OF COMMERCIAL BANKS:

Today there are more than 7000 branches of commercial banks along with an established network of supplementary financial institutions.

The function of a modern commercial bank can be divided under the four headings as:

1. Accepting of deposits.2. Advancing of loans.3. Agency service.4. General utility service.


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ACCEPTING DEPOSITS:

The primary function of a bank is to receive surplus balances from individuals, firms, public institutions and government etc and honor Cheques drawn upon it. Three types of deposits are

Current or demand deposits Saving deposits Fixed or term deposits

ADVANCING OF LOANS:

The most important function is to provide loans to individuals, firms, business concerns and government bodies against securities to meet their financial needs at a fixed percentage of interest. These are some kinds of loans:

Loan to business Loan to real estate mortgage Consumer loan Loan for purchasing security Loan to agriculture Bank investment for security

AGENCY SERVICES:

The commercial bank provides following agency services to its customer

Collection and payment of Cheques Collection of dividend Purchase of securities Execution of standing orders Acting as trustee or executer Make transfer of funds Act as an agent


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GENERAL UTILITY SERVICES:

Commercial bank performs general utility services as follows

Foreign exchange business Act as referee Accepting of bills for collection Issuer of traveler’s Cheques Supplier of trade information


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HBL established operations in Pakistan in 1947 and moved its head office to Karachi. Our 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.

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. International operations were expanded to include the USA, Singapore, Oman, Belgium, Seychelles and Maldives and the Netherlands.

On June 13, 2002 Pakistan's Privatization Commission announced that the Government of Pakistan had formally granted the Aga Khan Fund for Economic Development (AKFED) rights to 51% of the shareholding in HBL, against an investment of PKR 22.409 billion (USD 389 million). On February 26, 2004, management control was handed over to AKFED. The Board of Directors was reconstituted to have four AKFED nominees, including the Chairman and the President/CEO and three Government of Pakistan nominees.

TODAY’S HABIB BANK:

Today, Habib Bank is truly the bank of the people, providing its customers convenience and satisfaction all over the world. Habib Bank Plaza, the tallest building in Pakistan, is the proud symbol of HBL’s leadership in Pakistan’s corporate arena.

Today, HBL 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.

Operational Structure:

Habib Bank Limited is one of the largest commercial bank of Pakistan. It accounts for a substantial share (20%) of the total commercial banking market in Pakistan with a network of 1469 domestic branches; 55 overseas branches in 26 countries spread over Europe, the Middle East, Far East, Asia, Africa and the United States; 3


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HBL wholly owned Subsidiaries namely 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 representative offices in Iran and Egypt.


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AUDITORS:

TASEER HADI KHALID & Co.Chartered AccountantsSh. Sultan Trust Building No. 2

Beaumont RoadKarachi – 75530

Pakistan

A.F. Ferguson & Co.Chartered AccountantsState Life building 1-C1-1 Chundrigar RoadKarachiPakistan

REGISTERED OFFICE:

Habib Bank LimitedHabib Bank Plaza1-1 Chundrigar RoadKarachi - 75650Pakistan

HEAD OFFICE

Habib Bank Plaza1-1 Chundrigar RoadKarachi - 75650PakistanPhones: 2418000(50 lines)Fax: 2411647Telex: 20086-20751 HBANK-PK


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BOARD OF DIRECTORS

ZAKIR MEHMOOD PRESIDENT &CHIEF EXECUTIVE

SULTAN ALI ALLANA CHAIRMAIN

LAIN DONALD CHEYNE DIRECTOR

SAJID ZAHID DIRECTOR

AHMAD WAQAR DIRECTOR

MUSHTAQ MALIK DIRECTOR


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DESIGNATION

Zakir Mehmood President & Chief Executive

Sohail Malik SEVP & Group executive Credit policy

Jamail Iqbal SEVP & Group executive Global operation

Shahid M.Loan SEVP & Group ExecutiveAudit, BRR & Investigation

Sima kamal SEVP & Group ExecutiveCorporate and investment

Banking

Ayaz Ahmad SEVP & Group ExecutiveInformation Technology, financial control

Hanif Akhai SEVP & Group Executive Global treasury

Jamil A. Khan SEVP & Group ExecutiveHuman Resource s Retail banking

Aziz Rajkotwala SEVP & Group Executive International


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Description 2007 2006

20052004 2003

1 Total Deposits 531298 459140 3281832

283445 266052

2Total Assets 691992 594062

403013 333751 328605

3 Advances38173 349433

167523 167225 174894

4 Liquid Assets*170901 126207

147288 85228 96499

5 Shareholders' Equity & Revaluation Surplus 62272 52530

19498 12611 12534

6 Liquid Assets % of Deposits from Customers & Bills Payable 32.06% 27.72%

47.36% 30.61% 26.82%

Profit & Loss

8 Total Net Income 41350 38971 18,564 16788 146139 Total Expenditure 18382 17204 11,748 11810 1217611 Pre Tax Profit 15145 18840 4,088 2224 47612 Profit after Taxation 10084 12700 2,034 1112 49313 Earnings Per Share (Rs. / Share) 14.49 18.30 1.68 0.92 0.40


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The main logo of the bank shows a picture of a lion with a sword on the top on the up most

Portion BISMILLAH is written to show the supremely of God and the symbol of lion shows the

Quality of leadership that lies with the bank. The reason for the statement the power to Lead.

As the bank has entered the new millennium, it wishes to appear as a bank that is

“LEADING LOCALLY AND GROWING GLOBALLY”

MISSION STATMANTOF HABIB BANK IS TO MAKE

Habib bank the dominate financial institution in Pakistan and a leading bank of the Middle East and South Asia regions.

The bank main aims to provide better and efficient services to its Domestic and overseas customer .regarding the need for improving the financial

Performance of the company, following objective have been chalked out.

To take necessary steps to plug the leakages of revenue and expenses.

To insure internationally accepted accounting standard are followed by the bank

To correct the structural flaws in the balance sheet


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To put greater focus on neglected sectors to correct sectored imbalances in the loan portfolio.

To achieve those objectives necessary steps have been taken by the management loss making branches have been closed or merged.

To devolved country specific business revitalization strategies for important franchise to improve overseas operations.

To develop more branded proudest in saving deposits and consumer assets.

To increased the ATM network to further improve the banks market shears.

To establish sound relationship with top industrial groups and various multinationals.

To make the bank customer focused.

To launch innovative product as which cater to the needs of different segments of the markets.

To increased the number of “ON LINE” branches


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To provide extensive training to employees in process, products, marketing and selling skills introduced.

Upgrading skills levels of staff.

To implement a performance appraisal process to provide motivation and a merit oriented culture in the bank.


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For facilitation of domestic operations the retail banking group and the corporate institution banking group is divided in to several distinct regions, centers and sub centers comprising of

1469 branches

For the facilitation of the overseas operations the bank has

55Branches

02 affiliates

01 Representative office

02 subsidiaries


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I have worked as an internee in the Habib Bank limited Farid gate Branch Bahawalpur for

eight weeks. During my internship I learned a lot about the banking work.On first day I

reported to the branch manager and he guided me and gave me information about the

branch. In first week he had given me information about the overall banking in this branch.

He told me about the departments of the bank and some other basic information about the

bank, cheques, records, etc.

In the next week he told me that now I have to start work in the different departments. I

started my internship from account department.

The most of the working was conducted in this department. There was a lot of burden of

work in this department. In this department the following major activities were

a) Account opening.

b) IBDA’s records and preparation.

In this department daily many people came for open the accounts according to their own

choice of account. In PLS Saving account and current account procedure of opening of

account is the same except the initial deposite.

The type of account which any person want to be open, he has to select that.

Nature of account whether individual or proprietorship or other.

Currency (in which want to operate).

Particular of deposits. (Period for operation).

Complete address.

Telephone number.

Nature of business etc.


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Detail of other accounts.

Zakat deduction.

Personal information.

Name.

Date of birth.

Nationality etc.

Then signatures of the account holders and the bankers and manager.

Signature of the introducer, his account number and address.

When this form is filled then signature of the person who want to open the account are to

be taken on the specimen signature card. Then it is recorded in the PC. Then after a week

letter of thanks when received by the person then a cheques book is issued to him. Now he

can withdraw the amount by fulfilling cheques up to the extent of his balance, in the

account.

In that account opening I also write the letter to the customer.

There are two letter are written while opening the account

1. New customer

2. Introducer of new customer

These are printed letter on which just write the name of person and his addresser written in

the form.

I issued cheques books in the account opening department. The cheques book is issued

after opening of the account. The Account No. is stamped by the rubber stamp on each

cheque. Then it is given to the person.


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When all cheques books are issued to the customers then these are recorded in the

CD Book or PLS saving book. All cheque books are recorded with their a/c number and

name of the person.

I prepared in this department IBDA Inter Branch Debit Advice. If for one branch it is

IBDA transition then it is for branch is IBCA. (Inter branch credit advice).

For example transaction between satellite town Branch and Model Town Branch is

as follow.

If the customer of satellite town branch withdraw money from Model Town branch.

(Use) this branch will debit the account of satellite town branch with IBDA. Davis road

branch will receive the slips that the person has used the ATM machine there. When

money is withdrawn then Habib Bank satellite town branch will credit the Model Town

branch. After transfer of cash from branch the account will be settled.

I spent one week in the cash department here I issued token to the customers and then

recorded it into the token book. The procedure of issuing the token is that when cheque is

presented at the counter. Then following things are checked.

The signatures on front and at the back.

Similarities in the signatures of the issuer of the cheque.

Date.

Amounts whether tally with the amount written in words.


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Then token is issued to him and cheques are stamped at the back at which date and token

No. is filled. Then all cheques are forwarded to the next counter where signatures are

compared with the signatures in the book and the balance of the account is checked.

If the cheque has not any fault on it then it is given to cash payment counter and cash is

paid to the customer up to the amount mentioned on the cheques. I spent one week in this

department.

I also completed their pending token books also.

I also spend some time in the Advance t department .the loans available in our branch are

1-FLAXI LOAN2-AGRI LOAN3-CONSUMER FINANCE 4-BUSNIERES LOAN

These are the main types of loan which is future categriosed in different ways.

I check there the procedure of different loans

Documents required

Capacity of the party

Purpose of loan

I also observed the 5c’s of loan while gave the to the party


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The main departments of a bank are as follow

1. Deposit department

2. Accounts department

3. Advances department

4. Clearing department

5. Bills and remittances department

6. Foreign exchange department

1) Deposit Department

The function of deposit department is to collect cash from the customers and to deposit it

into the accounts, maintained by them. Their classification is based on duration and


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purpose for which the account is maintained. The following types of accounts are

maintained for this purpose.

a) Current account

b) Saving account

c) Fixed account

a. Current account

A current account is a running account is a running account which is

continuously in operation, by the customers on all working days of the bank. The

customers can withdraw the amount from the bank without prior notice. The banks

usually do not pay any interest on these deposits as they can withdraw without

notice.

These accounts are operated normally by the traders, business companies,

institutions, public service bodies, industrialists etc.

Summing up, the current account does not earn but serves the cause of industry,

trade and commerce.

b. Saving deposits account

This type of account is for those persons who want to make small savings. The

depositors are allowed to withdraw a limited amount of money for twice a week.

The banks will keep a minimum account and the balance be safely utilized for

investment by the bank.

The bank pays interest on saving bank accounts according to the prescribed

rates by the central bank of the country.

c. PLS saving account CREATED BY (IREM JABEEN) ROLL NO: 112

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In Pakistan (PLS) saving account was introduced in January, 1982.

The bank has full right to investment of credit balances /deposits in the PLS

saving accounts.

Statements of accounts will be supplied on periodical intervals.

The following information are required to be furnished

1. Name2. occupation and full address3. Specimen signature4. Introductory references5. Declaration that he will follow them

D.Fixed or time deposit

Fixed or time deposit are the major source of funds of a commercial bank. The rate

of interest on fixed deposits is higher them that of saving deposits and it varies with

time to time. The longer the period for which the amount is kept higher is rate of

interest. The fixed deposit receipt (FDR) is marked as not negotiated. The holder of

time deposit account cannot issue cheque for the withdrawal of the amount.

E.Joint account

A joint account is a special bank account which is opened in the name of two

Or more persons. For drawing amount all persons whose name the account stands

should sign the cheque.


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In case of firms or companies a/c following are the requirementTo open the account of firms or companies the following are the essentials.

-List of the office bearers.

-List of authorized signatures.

-Copy of memorandum or by laws.

-Copy of registration.

-In case of joint stock companies

-Certificate of incorporation.

-Certificate of commencement of business.

-Beside NIC copies

Cash department

The cash department is the most important department of the bank. It receives cash

from customers and then deposit it into the accounts of the customers and

maintained their balances

In cash department following books are maintained..

I. Scroll book

II. Paying cash book

III. Token book

IV. Cash balance book

I.Scroll book:When cash is received at the counter it is recorded in the scroll book.

II.Paying cash book:

The cashier makes entry in the paying cash book when cash is paid.


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III.Token book:

When any cheque or any negotiable instrument is presented it is recorded in the token

book then token is issued.

IV.Cash balance book:

The consolidated figure of receipt and payment of cash is entered in cash balance book.

There are two ways of maintaining an accounts Journal system Voucher system

Journal system

Under this system entries are journalized in journal book and then posted in ledger

account. Their entries are maintained in journals.

Voucher system

In voucher system for each transaction voucher is prepared, either in cash or in transfer or

in clearing all vouchers are summarized to the one consolidated figure and are recorded in

cash –cum- daybook sheet upon which vouchers are summarized according to the

transition wise suit is called supplementary.

These are of 2 types.

Debit supplementaryCredit supplementaryDebit suplementary is for debit vouchers and it is of red colour

Credit supplementary is for credit vouchers and it is of green colour


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The following books are maintained in accounts department.

1) Cash cum day book.

2) General ledger.

3) Subsidiary ledger.

4) Voucher register.

5) Transfer book.

6) CD/SB summery book.

7) Balance books.(Weekly and monthly)

8) Old record register.

9) Bank ledger.

10) Fraud and forgeries register.

11) Comparative statistics cards of deposits.

12) Advances and profit and loss.

The individual figure of subsidiaries will be posted straight to subsidiary ledger from

individual vouchers.

It is not safe for private individual to keep their surplus money at home. They can keep

their money in safe custody by opening accounts in a bank. They can open deposit

accounts for fixed period. The deposit account also earns interest for the depositors. Again

the businessman conducts transaction is for thousands of rupees daily. It is unsafe to keep

so much cash in hand for carrying on business transactions. They may put their money

with some banks by opening deposit accounts. Now they can draw cheques for settlement

of transactions without involving cash.


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:

There are certain formalities which are to be observed for opening of a current account or

saving a/c. With a bank, these formalities are as

1) Request of opening of an account.

2) Obtaining introduction

3) Specimen signatures

4) Minimum initial deposit

5) Operating the account / cheque book

1).Request of opening of an account.The customer has to fill an 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

.

2). Obtaining introduction.

The bank before opening an account obtains introduction of the customers from an

old customer, responsible person etc.

3) Specimen signatures.

When the banker satisfied about the information’s provided in the form hen the

banker obtains the specimen signatures of the customer on the signature book or on

card. The duty of a banker is to verify customer’s signature on the cheques with his


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specimen signature in order to ascertain whether there has been any forgery or

fraud.

4). Minimum initial deposit.

In Pakistan to open up an account in the PLS account is up to Rs.1000/- it is the

minimum requirement. However the account of zakat dependent can be opened by

Rs. 200

5). Operating the account. / cheque book.

When the account is operated the banker gives a pay-in-slip book, chequeBook, pass book with the view to operate it.

Books relating to customers.

Pay-in-slip

Cheque book

Pass book

Pay-in-slip

When money is to be deposited in the bank the pay-in-slip is to be filled, the object

of this book is to provide the customers with the bank’s acknowledgment for

receipt of money to be credited his account.

Cheques book.


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A cheque book contains a number of cheques which is given to a customer upon

written request and after making payment for the cheque book. It enables to a

customer to make withdrawals from his account.

Pass book.

Is a copy of customers account as it appears in the books of the bank. Pass book is a

book in which the banker maintain the record of its customers account for later use.

The because it passes hand periodically between the banker and the customers. On

delivery of pass book the customer examine the debit and credit eateries with its

cheque book and bank receipt challans. But now days this concept of pass book is

ended and computerized account statement send to the customer semi annually or

on the demand of customer bank is bounded to give him the account statement.

The function of advances department is to lend money in the form of clean

advances. Against promissory notes, as will as secured advances against tangible and

marketable securities. The bankers prefer the securities which are free of risk of

depreciation.

Deposits lead to advances and advances create deposits. Advances to a variety of

customers is the sure method of enhancing income and promoting expansion of a bank.

Types of advances : The main types of advances are as follow.

1). Overdraft.

2). Cash credit.


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3). Loans.

1). Overdraft.“An overdraft is the right given by a bank to his customer to draw in excess

of his current account up to a fixed limit.”

The facility to overdraw by cheques is allowed only in current account. The overdraft

facility enables a customer to draw over and above his own balances up to the extent of

limit as agreed. The bank does not provide the facility of overdraw on checking accounts to

all of its customers.

a. Clean overdraft.Advances for which the bank no security except the personal security.

B. Secured overdraft.Advances for which bank has security other then his personal security.

1. Against lien on third party account.

2. Against immovable property, equitable mortgage

collateral.

C. Cash finance.Cash finance may be allowed within discretionary powers of the branch managers

to first class parties keeping in view their credit worthiness, overall business and

average balance maintained in their account.


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2).Cash credit.

A cash credit is an arrangement by which a banker allows a customer to borrow money up

to certain extent cash credits are usually made against securities of commodities

hypothecated or pledged with the bank.

Pledge Pledge is a contract whereby a good is deposited with the lender as security for

repayment of the loan. The delivery of documents of title relating to goods also

create a valid pledge. The person delivering the goods as security is called

pledger. The person to whom the goods is delivered is called the pledgee.

Hypothecation: It is a legal transaction where by goods may be made available as security for a

debt without transferring property or the possession to the lender.

Advances granted under hypothecation are not secure from safety point of view.

The bank should make sure that the party has a good reputation, which property

regularly.

3). Loans Banks may make advances to its customers which may be payable in lump sum or in

installments. Loans may be.

A). clean loans

This is granted to borrowers without obtaining any security. Example

flexi loan

b).Secured loans.

Loans for which bank has security other then its personal security.


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These are issued against the pledge, hypothecation, property and cash

etc.

c).Small loans.

These are the loans which are sanctioned for small size projects.

The loans may be call loans or loans repayable at short notice. These are the loans

repayable which bear no maturity date. They can be paid at anytime. These are normally

secured by other assets.

The other kind of loan is loans repayable at short notice; these are short term loans and are

repayable at short notice. These are widely used in the financing of seasonal increase in the

working capital and the temporary financing of capital expenditure these loans are obtained

by manufacturing concerns to meet the financing of working capital expenditure.

1. Haryali agricultural finance scheme

2. Tractor finance scheme

3. Live stock finance scheme

1-Haryali agricultural finance scheme : Habib is providing creditability to the farmers according to instructions of state bank of Pakistan under the agricultural Haryali finance scheme. The Haryali credit scheme is a best section of every agricultural need. According to this scheme the credit is provided on easy installment for productive and installment for productive and improvement purpose.


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The basic purpose of Haryali finance scheme is to provide credit in time to overcome agricultural needs, so that they earn profit from forms by using modern technology.

Basic conditions to get Habib Bank Haryali scheme:

Tenant has a NIC covered. A computerized NIC cord is to provide to Bank from getting loan.

An attested copy of receipt can also given with old NIC in case of computerized is not available.

The rate of mark up on this scheme is 11% lowest mark up rate as

compared to the other scheme like flexi or life style loan

2-Tractor finance scheme.

Under this scheme finance is allowed to cultivator/land owners cultivating minimum 5 acres of agricultural land, Finance is allowed from a period of 5-7 years repayable in half yearly installments, a minimum debt/equity ratio of 90:10 is maintained, mark up of 11% p.a. is charges however in case of timely adjustment of all installments at time of last installment mark up is recalculated at 9%p.a and 2% amount is adjusted towards last installment.

In case of cash collateral no equity is needed and mark up is charged at a rate of 2% over the Bank profit.

In case of NSCs, DSCs etc., a mark up of 8% p.a. charged.

Special effort have been made to promote tractor finance and during the year 2003-2004 HBL has disbursed 3850 tractor up to MAY ,2004 against 1598 tractor distributed last year

3-LIVE STOCK FINANCE SCHAME

The scheme has been introduced to promote the following sub-sector.


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1- Live stock /diary farming.

2- sheep /goat farming

3- Fattening of animals for beef purposes.

4- Poultry

Finance is allowed at a mark up rate of 11%p.a. for fixed investment purposes as well as to meet the needs of working capital requirement to all categories of farmers all over Pakistan including Azad Kashmir area. Finance is repayable in a maximum period of 5 year time period in easy installment.

In case of timely adjustment of all installments, at the time of final adjustment the bank offers the 2% incentives on all installments. In order to facilitate the bonafide formers these finances are available against security of agricultural land under agricultural pass book system, rural /urban property and cash collaterals in the shape of NSCs, TDCs and bank deposited etc. there agricultural finances products offered by HABIB BANK provide consumer opportunity for our hard working farming community promote agriculture sector an modern line by fulfilling their credit requirements


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A special scheme of Habib bank limited for the employee of govt. and semi govt .institute. This is a clean loan no any security has been taken from the employees of the organization. Just salary of the employee is transferred in the account of the client.

Basic requirements for the flexi loan

He must be employee of listed organization

He must be account holder of the bank

His salary is transferred in his account


46


His job at least one year

His retirement period is grater then the period of loan

Document required for flexi loan Letter from employer

His last month salary slip

His account statement

60 post dated cheques

Promissory notes

The rate of mark up on flexi loan is different for various departments

For the armed forces

The rate of mark up is 13.5%

The DSR factor is 35%


47


For the civil person

The rate of mark up is 14.5%

The DSR factor is 35%

“Clearing house is the place where representative, of all banks get together

for the purpose of off setting the interbank indebtedness arising from the

transfer of deposit by a customer of a particular bank to another bank”

Clearing settlement is made by debiting or crediting the bankers accounts, the daily

difference in the clearing between banks may considerable and much differences are

adjusted by mean of debit and credit entries in the respective accounts with is SBP, by

book entries.

Functions of clearing department.

The following are the main function of clearing department

1). To accept transfer delivery and clearing cheques from customer of the bank and

to arrange for their collection.

2). To arrange the payment of cheque drawn on branch and given for collection to

any other branch of HBL or any other member or sub member of the local clearing

house.


48


3). To collect amount of cheque drawn on members, sub members of the local

clearing house, sent for collection by thouse HBL branches which are not

represented at the local clearing house.

Procedure of clearing at clearing house:

The mechanism of off setting inters bank indebtedness operators as follows; Clerk

representing various banks met at a common plane, the clearing everyday. Every clerk then

delivers to the others the cheques and other claims which his bank holds against them. So

he also receive from the others the claims which their respective banks hold against his

bank. Cheques and other documents dishonored will be returned to the representative of

the respective bank. The various amounts of receipts and deliveries are now added up an

balance is struck therein and the final settlement is effected by the supervisor of the

clearing house by transferring balances kept at the central bank the these various clearing

banks

The main function of bills and remittances department is to deal mainly in following.

A. Outward bills for collection (OBC)

B. Inward bill for collection(IBC)


49


A. Outward bill for collection1. Clean billsThese are negotiable instruments drawn on out station branches of the bank, sent for

collection on behalf of the customer’s i.e. cheques drafts etc.

2.Documentary bills

These are bills accompanied by documents such as R.R, T.R bill of lading etc having title,

collected on behalf of their customers. if payment is made other than cheques then this

mode is used. it is an arrangement between 2 parties. Banks plays role as an agent.

Documentation is properly drawn between 2 parties. But in 99 cases clean bills are used.

B. Inward bill for collectionThese are bills received locally. They are received from out station branches of the bank

and parties drawn on recipient banker or other banks or parties.

The main documents invited in bills and remittances department are as follow.

1. demand draft

2. Pay slip

3. Mail transfer MT

4. Telegraphic transfer

5. Pay order

1. Demand draft

Demand draft is an instrument which is drawn by one branch to another branch of

the same bank. If any person wants to make payment from one city to another city then he

can make payment through demand draft. Bank charges a commission for performing this

kind of service according to bank rate schedule which is revised after 6 months. Demand

draft may be issued or paid.


50


2. Pay slip For payment of internal expenses of the bank the pay slip is used. For e.g tax payment, by

bank, repair and maintenance expenses, repair and maintenance expenses etc.

3. Mail transfer (MT)

Bank to bank remittances are transferred through mail. Its charges are same as of DD plus

additional 60 rupees. Mail transfer advise is use against cash receipt , cheque, and letter of

instrument.MT advise is prepared and test number is written on this MT advise. The advise

is given to dispatch department for onward transmission.

4. Telegraphic transfer. It is a bank to bank transaction the issuing bank makes payment on payment order. The

beneficiary (3rd party) not directly involved in it. Two other mode of this transactions are

1. telephonic transfer

2. Fax

It is a coded massage by one bank to another bank. Each bank has its own code number

first they write the massage in the code form and after this they apply its test number on it.

Two types of instructions can be issued by the bank for T.T.

a) Advice in pay

b) Advice in credit.

a). Advice in payIn this case the party on which the T.T is drawn, if not having its account in this

bank it means they are not the account holder of this bank, bank informs the party

that its T.T has came and to come and to open the account and to receive the


51


amount. Bank charges according to the bank schedule. Bank make payment to the

party after opening the account in the branch.

b). Advise in credit.In this case the party having its own account in the same bank where the T.T has

came in their names the bank simply credit the account of its customer.

5. Pay order pay order is just like a cash. If someone want to make payment to some other person he

can make payment through pay order slip. The main advantage of pay order is that it can

not be dishonour by the bank when payment is required to made within the city then we

can take this bank service and when we want to make payment outside the city then we use

demand draft in case of cheque there is a possibility that it can be dishonour by the bank

but it case of pay order we have surity that it can never be dishonour.

The main function of foreign exchange department is to facilitate the import and exports by

opening up of letter of credit the banks provide. This facility to its customers. There are 2

types of facilities.

1. fund based

2. Non fund based.

Fund based facilities are those facilities which involve cash but non fund

based facilities are those which do not involve cash. Letter of credit is a fund based

facility. Foreign exchange department also deals in the foreign currency.


52


Letter of credit.“A letter of credit is a commitment on the part of buyer’s bank to pay or accept

draft drawn upon it provided drafts do not exceed a specified amount.”

Why banks deal in letter of credit.The bank charge nominal commission on financing the import and export shipment

The main benefits for opening it are

-Increased balances.

-Commission.

-New business opportunities.

Procedure of opening a letter of credit . The letter of credit is opened by filling an application with the bank and following

informations should be provided to the bank.

1. name of beneficiary (seller)

2. Complete address of beneficiary

3. Type of letter of credit whether

Revocable or irrevocable

4. mode and time of payment

5. description of goods

6. Payment of freight

7. Detail of documents

8. Place &date of shipment

9. The date of expiry of credit

10. How the credit is to be advised by mail, cable, telex etc.

Foreign exchange department also provide facility to financing the exports by

-advising export credit

-collection of negotiation of foreign bills

-receiving payment from aboard by means of remittances.CREATED BY (IREM JABEEN) ROLL NO: 112

53


-allowing packing credit facility to exports

Other services

-Sale and purchase of foreign exchange

-providing credit information to foreign correspondent

-implementation of foreign exchange regulations

-Maintenance of non- resident accounts of foreign nationals.

MISCELANIESUS FUNCTIONS

OF ALL

DEPARTMENTES CREATED BY (IREM JABEEN) ROLL NO: 112

54


Many branches and checking accounts Habib Bank Limited are linked through satellite. It provides the facility of transaction with each branch while sitting on any branch of Habib Bank.

On Line Transaction are of three types:

Cash Transaction

Clearing Transaction

Transfer Transaction

The clients can shift their amounts from one branch to another branch. their cheques can be cashed. On line banking is miscellaneous activity that is performed in almost all the department of Habib Bank.


55


There are no charges recovered with in the same city. No charges from the customer maintaining Rs. 200,000 in their current

accounts other wise charges will be recovered according to the schedule.

Up to Rs. 25,000/- Rs. 50/- Up to Rs. 200,000/- Rs. 100/- Rs. 200,001 to 500,000 Rs. 250/- Rs. 500,001 to 200,000 Rs. 500/- Collection account(companies only)

Opened with the approval of head offices. Rs 750/-


56


One of much appreciated facility offered by a bankers to his customer is that of keeping in safe custody, valuables if various kinds, including securities, and documents of title of property. Frequently such items deposits in a locker box or sealed envelope, in which case the banker takes no cognizance of the contents. A part from providing the facility for accepting the valuable for safe custody, safe deposit lockers are also made available to customers on nominal rent.

Documents required for a locker facility :

Locker opening form. Specimen signature card. Copy of NIC of the client.


57


Fee for safe deposit lockers to be recovered in advance or at the commencement of the period yearly/half yearly/ quarterly as the case may be.

Small size Rs. 1000 per annum or nil on refundable key deposit of Rs. 15,000/-

Medium size Rs. 1,500 per annum or nil on refundable key deposit of Rs.20,000/-

Large size Rs. 2,500per annum or nil refundable keys deposited of Rs. 35000/-

Extra large Rs. 3,000per annum or nil refundable keys deposited of Rs. 45000/-

Extra Extra large Rs. 5,000per annum or nil refundable keys deposited of Rs.75000/-

Key deposited Rs. 1,000 per locker

Breaking charges Rs. 2,000 per locker plus actual charges of supplier

Late payment charges Rs.50 per month of part thereof, maximum one year annual rent.


58


Habib bank Limited has offered on line banking which is an innovative and truly global product to its customer. Thus enables them to check their balance, view their account ststmant, can transfer their fund.

Habib bank has introduced ATM (automated teller machine) in Pakistan for its customer. Electronic cash dispensing facilities are available in various cities. in due course of time,it plans to install more ATMS and extended this on line facility to other operating centers of the bank. All these ATMS are linked through a state –of- the- art satellite based communication system offering real time 42- hour service. ATM card is a debit card and cash withdrawal transition are performed with its used as well as customer can check balance and have its account statmant.By using this card a client can with drawl the amount from 500 to 20,000 rupee in 42 hours.


59


Customer should be an account holder

Application from is filled

Speacmain signature card is filled

Application is forward to head office .Within to 10-15 days bank receive the ATM card and pin codes and hand it over ton the respective customer after taking his signature. Bank charges are Rs. 200 per annum

When client enters his card in machine, it asks for the pin code. If he enters a wrong pin code constantly three times, then machine captured the card. This secured the transition .this increased the safety of the customer card. After the client has given a correct pin code, he can safely perform his transition. After getting the amount from ATM machine customer get a small statement of his account which contains the following,

Pervious balance

Transaction amount

Current balance

Date

Time of transaction

Account number

Name of customer


60


Habib bank Limited has arrangement with other bank to use their ATMS where Habib bank ATM is not available. When a client uses an ATM of these other banks, Rs. 15 per transition are deducted from his account as ATM charges.

KARACHI

HABIB BANKM LIMITED

SONERI BANK

ASKARI COMMERICAL BANK

LAHORE

SONERI BANK



61


ABN –AMRO BANK

ISLAMABAD/RAWALPINDI

SONERI BANK


ABN –AMRO BANK

MULTAN

HABIB BANKM LIMITED


SIALKOT

HABIB BANKM LIMITED


FAISALBAD

HABIB BANKM LIMITED

PESHAWARCREATED BY (IREM JABEEN) ROLL NO: 112

62


HABIB BANKM LIMITED

GUJRANWALA

HABIB BANK LIMITED

HAYDERABAD

HABIB BANKM LIMITED


AZAD KASHMIR

HABIB BANKM LIMITED

BAHAWALPUR

HABIB BANKM LIMITED

CREDIT CARD


63


Habib Bank offers a range of credit cards, accepted at thousands of locations in Pakistan.These cards facilitate the small financial, needs of customers like shopping of goods or any short term financing. Limit of credit card depends on the average balance in the account and monthly income. One of the requirements to issues credit card is that the applicant should be the account holder of the bank.

Application form of credit card

Photocopy of national identey card

Passport size photograph

Salary certificate

Last six month income certificate


64


SIMEX/ KHAERADER

Function of simex

For the close interaction and monitoring Habib bank devolved a intra net networking system known as simex.

For the time being internal net working the data is stored in computer and then send to head office on the daily basis.

All the function of branch is entered in the computer then these are as follows,


65


Cheques presented at counter of bank

Deposit slip

Account of new customer

Cheque book issued to customer

Cashier payment book

Cash received book etc.

This type of data is send to the head office and when data received a conformation letter is received to the branch and this letter is attached with daily vouchers.

Also formats of different kind are sending to the branch.

CONSOLIDATED BALANCE SHEET

AS AT DECEMBER 31, 2007

ASSETS 2007 2006 (Rupees in ‘000)Cash and balance with treasury banks 55487664 46310478Balance with other banks 27020704 35965048Lending to financial institutions 1628130 6550128Investments 177942251 119587476CREATED BY (IREM JABEEN) ROLL NO: 112

66


Advances 382172734 349432685Others Assets 27346111 21535471Operating fixed assets 13780555 11954876Deferred Tax assets 6613372 2725486Total 691991521 594061648

Liabilities

Bill Payable 15418230 9507637Borrowing from Financial institutions 58994609 56392270Deposits and other Account 531298127 459140198Sub-ordinated loan 3100000 -Liabilities against assets subject to finance lease - - Other liabilities 19943126 15578177Deferred tax liability - -Total 628754092 540618282NET ASSETS 63237429 53443366REPRESENTED BY:Shareholder EquityShare capital 6900000 6900000Reserves 19821455 17802584Unappropriated Profit 28341670 20475080

Total equity attributable to the equity holder of the bank 55063125 45177664

Minority interest 965642 913317

Surplus on revolution of assets-net tax 7208662 7352385

Total 63237429 53443366

CONSOLIDATED PROFIT AND LOSS ACCOUNTFOR THE YEAR ENDED DECEMBER 31, 2007

2007 2006 (Rupees in ‘000)Mark-up / return / interest earned 50481021 43685740Mark-up / return / interest expensed 19153957 13204037

Net mark-up / interest income 31327064 30481703

Provision against non-performing 8238227 2863207Loans and advances-net CREATED BY (IREM JABEEN) ROLL NO: 112

67


(Reversal)/provision against off-balance sheet Obligations (54626) (45438)Reversal of provision against diminution in value of investments (84310) (13697)Bad debts written of directly - - 8099291 2804072

Net Mark-up / interest income after provisions 23227773 27677631

Non mark-up / interest income

Fee, commission and brokerage income 3420051 3931710Income / gain on investments 2472663 1219623Income from dealing in foreign currencies 1487374 1102358Other income 2643076 2235805 Total non mark-up / interest income 10023164 8489496 33250937 36167127Non mark-up / interest expensesAdministrative expenses 18297279 17149232 Other provision /write offs-net (267111) 122510Other charges 85152 54898 Total non mark-up / interest expenses 18106320 17326640Profit before taxation 15144617 18840487

Taxation Current 7220717 7144846Prior years 1668562 (39067) Deferred (3828699) (965607)Total 5060580 6140172

Profit after taxation 10084037 12700315 Attributable to:

Equity holder of the bank 10000231 12630259Minority interest 83806 70056

Basic and diluted earnings per share 14.49 18.30


68


HABIB BANK LIMITEDHORIZONTAL ANALYSIS

BALANCE SHEETYEAR 2003-2007

CAPITAL AND LIBILITIES

PARTICULARS 2003 2004 2005 2006 2007(Rs.000) (Rs.000) (Rs.000) (Rs.000) (Rs.000)

Deposits 328182054 404629059 432545165 459140198 531298127

Borrowing 38045541 29346284 34904352 56392270 58994609

B/P 5834673 5776325 7601766 9507637 15418230

Other liabilities 11243342 15180213 14162888 15578177 19943126

Capital 6900000 6900000 6900000 6900000 6900000

Reserve fund 1901371 2051371 2645730 17802584 19821455

Surplus on revaluation of assets

7224050 7609852 8085127 7352385 7208662


69


Increase/Decrease2003-04

Change in %


Change in %


Change in %


Change in %

Particulars (Rs.000) (Rs.000) (Rs.000) (Rs.000)Deposits 76447005 23% 27916107 8% 26595033 2% 72157929 22%Borrowing (8699257) (23)% 5558068 14% 21487918 40% 2602339 6%B/P (58348) (1)% (1825441) 32% 1905871 32% 5910593 102%Other liabilities

3936871 35% 1017325 10% 1415289 4% 4364949 32%

Capital - - - - - - - -Reserve fund

15000 7% (594359) (32)% 15156854 745% 2018871 95%


385802 5% (475275) 6% (732742) (10)% (143723) (2)%



PROPERTY AND ASSETS

Particulars 2003 2004 2005 2006 2007

(Rs.000) (Rs.000) (Rs.000) (Rs.000) (Rs.000)

Cash 27449292 31970302 33051049 46310478 55487664

Balances with other banks 26870767 33419120 31813513 35965048 27020704

Lending to financial institutions

10001123 3755039 122723248 6550128 1628130

Investment 142877930 134522944 107384470 119587476 177942251

Advances 167523299 259089466 316881635 349432685 382172734

Other assets 18137931 11919594 14481818 21535471 27346111

Operating fixed assets 7184623 11110724 11166195 11954876 13780555

Deferred tax assets 1967570 1978144 1842977 2725486 6613372


Change in %


Change in %


Change in %


Change in %


70


Particulars (Rs.000) (Rs.000) (Rs.000) (Rs.000)

Cash 4521010 16% 1080747 4% 13259429 48% 9177186 33%Balances with other banks

6548353 24% (1605607) 6% 4151535 31% (8944344) (15)%


(6248353)

(37)% 8517209 85% (116173120)

(57)% (4921998) (48)%

Investment (8354986)

(6)% 27138474 20% 12203006 6% 58354776 39%

Advances 91566167

54% 57792169 35% 32551050 11% 32740049 16%

Other assets (6218337)

(34)% 2562224 14% 7053653 37% 5810640 24%

Operating fixed assets

3926101 54% 55471 0.5% 788681 9% 1825679 25%

Deferred tax assets

10574 0.53% (135167) (7)% 882509 47% 3887886 170%


PROFIT AND LOSS ACCOUNTYEAR 2003-2007

EXPENDITURES


Mark-up/return/interest expense

11580431 4472138 7327603 43685740 50481021

Provision against non performing loan

2656361 1887552 2974665 13204037 19153957

Provision against diminution in value of investment

(144154) (151218) (82558) (13697) (84310)

Administrative expenses

11807129 13781291 14095063 17149232 18297279

Other provision 62542 24459 249033 122510 267111

Other charges 4061 7523 68483 54898 85152

Increase/Decrease

Change in %

Increase/Decrease

Change in %

Increase/Decrease

Change in %

Increase/Decrease

Change in %


71


2003-04 2004-05 2005-06 2006-07Mark up /Return / Interest expense

7108293 61% 2855465 25% 36358137

303% 6795281 54%


7668809 29% 1087113 40% 10229372

386% 5949920 224%


(7064) (5)% (68660) (45)% (8861) (38%) (70613) (36)%


1974162 17% 313772 2% 3054169

26% 1148047 9%

Other provision 182408 61% 4083 1% (126523)

(157)%

144601 232%

Other charges 3262 85% 60960 810% (13585) (335)%

30254 745%

INCOME:


Mark up/ return / interest earned

23956114 18198725 32343206 43685740 50481021

Fee,Commission and brokerage income

209687 2510933 2938000 3931710 3420051

Gain on investment

1795385 4235574 1726336 1219623 2472663

Income from F/C

1144350 1095789 1402521 1102358 1487374

Other income 1151751 2020506 1787443 2235805 2643076

PARTICULARS Increase/Decrease2003-04

Change in %


Change in %


Change in %


Change in %

(Rs.000) (Rs.000) (Rs.000) (Rs.000)Mark up/ return / interest earned

1119305 25% 14144481

62% (279757466)

(169)%

6795281

28%


63771 1097% 427067 204% 993710 834% (3591659)

244%


72


Gain on investment

(5260330)

(135)% (2509238)

139% (506713) (28)% 1253040

69%

Income from F/C 183449 4% 306732 26% (300163) (26)% 385016 33%Other income (404682

)(75)% (233063

)(20)% 448362 39% 407271 35%

2003- HABIB BANK LIMITEDVERTICAL ANALYSIS

BALANCE SHEETYEAR 2007

CAPITAL AND LIABILITIES


Deposits 328182054 404629059 432545165 459140198 531298127

Borrowing 38045541 29346284 34904352 56392270 58994609B/P 5834673 5776325 7601766 9507637 15418230

Other liabilities 11243342 15180213 14162888 15578177 19943126

Capital 6900000 6900000 6900000 6900000 6900000Reserve fund 1901371 2051371 2645730 17802584 19821455


7224050 7609852 8085127 7352385 7208662

Total 399331031 471493104 506845028 572673251 659584209

2003 % 2004 % 2005 % 2006 % 2007 %CREATED BY (IREM JABEEN) ROLL NO: 112

73


ParticularsDeposits 82 86 85.3 80.1 80.5Borrowing 9 6 7 9.84 8.9B/P 1 1.43 1.5 1.7 2.3Other liabilities

3 3 2.7 2.7 31

Capital 2 1.5 1.36 1.2 1.04Reserve fund 1 0.43 0.52 3.1 3Surplus on revaluation of assets

2 1.6 1.6 1.3 1.09

Total 100 100 100 100 100

HABIB BANK LIMITEDVERTICAL ANALYSIS


ASSETS

Particulars 2003 2004 2005 2006 2007

(Rs.000) (Rs.000) (Rs.000) (Rs.000) (Rs.000)

Cash 27449292 31970302 33051049 46310478 55487664

Balances with other banks 26870767 33419120 31813513 35965048 27020704


10001123 3755039 122723248 6550128 1628130

Investment 142877930 134522944 107384470 119587476 177942251

Advances 167523299 259089466 316881635 349432685 382172734

Other assets 18137931 11919594 14481818 21535471 27346111

Operating fixed assets 7184623 11110724 11166195 11954876 13780555

Deferred tax assets 1967570 1978144 1842977 2725486 6613372

Total 403012535 475845739 528893905 594061648 691991521


74


2003 % 2004 % 2005 % 2006 % 2007 %ParticularsCash 6.8 6.7 6.2 7.8 8.01

Balances with other banks 6.6 7 6 6.1 3.9Lending to financial institutions

2.4 0.7 2.3 1.1 0.23

Investment 35.4 28 20 20.1 25.7Advances 41.5 54 60 58.5 55.2Other assets 4.50 2.5 2.7 3.6 3.95Operating fixed assets 1.7 2.3 2.3 2.01 1.99Deferred tax assets 0.7 0.4 0.5 0.45 0.95Total 100 100 100 100 100

HABIB BANK LIMITEDVERTICAL ANALYSIS

PROFIT AND LOSS ACCOUNTYEAR 2003-2007

EXPENDITURE:


Mark-up/return/interest expense

11580431 4472138 7327603 43685740 50481021


2656361 1887552 2974665 13204037 19153957


(144154) (151218) (82558) (13697) (84310)


11807129 13781291 14095063 17149232 18297279

Other provision 62542 24459 249033 122510 (267111)

Other charges 4061 7523 68483 54898 85152

TOTAL 25841286 20242236 24632289 74202720 87665988

2003 % 2004 % 2005 % 2006 % 2007 %PARTICULARSMark-up/return/ 44.81 22 30 58.8 57.6


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interest expenseProvision against non performing loan

10.27 9.32 12 17.79 21.8


0.55 (0.74) (0.33) (0.01) (0.1)


45.69 68 57 23.11 20.9

Other provision 0.42 1.2 1 0.165 (0.3)Other charges 0.015 0.03 0.23 0.07 0.1TOTAL 100 100 100 100 100

INCOME:


Mark up/ return / interest earned

23956114 18198725 32343206 43685740 50481021


209687 2510933 2938000 3931710 3420051

Gain on investment

1795385 4235574 1726336 1219623 2472663

Income from F/C

1144350 1095789 1402521 1102358 1487374

Other income 1151751 2020506 1787443 2235805 2643076 TOTAL 30144471 28061527 40197506 52175236 60504185

2003 % 2004 % 2005 % 2006 % 2007 %PARTICULARSMark up/ return / interest earned

79.47 64.8 80 83.7 83.4


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6.91 8.94 7.3 7.5 5.7

Gain on investment

5.95 15.09 4.29 2.3 4.1

Income from F/C

3.79 3.90 3.48 2.1 2.5

Other income 3.82 7.20 4.4 4.2 4.4TOTAL 100 100 100 100 100

RATIO ANALYSIS: Ratio analysis involves the method of calculating and interpreting financial ratio to access the firm’s performance and status. The basic input to ratio analysis is the firm’s income statement and balance sheet for the period to be examined. Ratio analysis of firm’s financial statement is of interest to shareholders. Creditors and the firm’s own management, both present and perspective shareholders are interested in the firm’s current and future level of risk and return. These two dimensions directly affect share price. The firm’s creditors are the primarily interested in the short-term liquidity of company and its ability to make interest and principal payment. A secondary interest of the creditor firm’s profitability. In addition, management uses ratio to monitor the firm performance from period to period.

From bank point of view we can calculate following ratios: Short-term Ratios Overall profitability Ratios


77


Balance sheet Ratios

CURRENT RATIO:

FORMULA: CURRENT ASSETS / CURRENT LIABILITIES

YEARS 2004 2005 2006 2007RATIO 1.77:1 1.59:1 0.96:1 1.1:1


78


COMMENTS:

Current ratio is used to judge a firms ability to meet its short term obligations. A current ratio of 2:1 is usually cited as acceptable, but values acceptability depends on the purpose and person who is calculating this ratio.The current ratio of HBL is good and shows that it is able to remain solvent in the event of adversities. But as compared to previous year the ratio decreased this shows that banks liabilities are increased at greater quantum than assets. And banks liabilities basically include a deposit which doesn’t mean that it is a good sign but as bank has to pay interest over it so it is just satisfactory for bank.

FORMULA: ADVANCES / TOTAL DEPOSITES

YEARS 2004 2005 2006 2007RATIO 3.7:1 8.5:1 4.1:1 3.1:1


79


COMMENTS:

Current ratio is used to judge a firm’s ability to meet its short term obligation. The current ratio of HBL is good and show that it is able to remained solvent in the event of adversities but as the compare to the year 2005 the ratio decreased this shows that banks liabilities are increased at greater quantum than assets.

FORMULA: CURRENT ASSETS - CURRENT LIABILITES.

YEARS 2004 2005 2006 2007RATIO 58389842 68290962 78725183 74493123


80


COMMENTS:

Net working capital although not actually a ratio, it is commonly used to measure to firm/banks over all liquidity. Here working capital is increased in the year 2006 as compare to the previous year, but in the year 2007 is decreases this shows that its ability to repay short term obligation out of its current assets has remained almost same.

FORMULA: LIQUID ASSET / CURRNT LIABILITES

YEARS 2004 2005 2006 2007RATIO 1.5 3.6 1.8 1.5


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COMMENTS:

This ratio also shows the liquidity of a company. This means it tells us that for the payment of its liabilities the bank has how many liquid resources at the time of calculating this ratio.With regards to this bank its liquidity position in the year2005 was better than the current year.

RETURN ON ASSETS:

FORMULA: NET PROFIT AFTER TEXT/ TOTAL ASSETS*100

YEARS 2004 2005 2006 2007RATIO 1.8 1.18 2.13 1.45


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COMMENTS:

Return on assets which is usually called return on investment (ROI).It 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 shows the profit earns by the bank on its present assets.The HBL return on assets is decreased in 2007 that is not a better sign.

FORMULA: TOTAL INCOME / TOTAL ASSETS

YEARS 2004 2005 2006 2007RATIO 0.01 times 0.02 times 0.02 times 0.001 times


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COMMENTS:

This ratio indicates the efficiency with which the firm uses its assets to generate sale. Generally, the higher a firm total assets, the more its efficiency to use assets. This measure is of greater interest for management then its share holders. As it tells the relative efficiency of the bank with which it utilizes the resources to generate output. The current year efficiency of the firm increase but in the year 2007 it decreased.

DEBT RATIO:

FORMULA: TOTAL LIABILITIES OTHER THAN EQUITY / TOTAL ASSETS

YEARS 2004 2005 2006 2007RATIO 93.4 % 92 % 91 % 90 %


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COMMENTS:

Debt ratio measure the proportion of total assets financed by creditors. The higher the ratio the greater the amount of others money used in an attempt to generate profit. This ratio indicates that bank has financed 90% of its assets with debt in the year 2007. It increased and then decreased this shows that its borrowing decreased which is a good sign.

FORMULA: ADVANCES / TOTAL DEPOSITS

YEARS 2004 2005 2006 2007RATIO 64 % 73 % 72 % 71 %


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COMMENTS:

It shows advances of the bank as compare to the deposits. This ratio is decreased by 1% in 2006 and 1% increased in 2007.This shows that advances are increasing than deposits which is good for bank.

FORMULA: NET PROFIT BEFORE TAX / DEPOSITS * 100

YEARS 2004 2005 2006 2007RATIO 1.42% 2.2% 4.1% 2.85%


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COMMENTS:

Return on deposit is basically calculated for the purpose of checking the increase in profit that is 4.1% in 2006 but decrease in 2007 by 2.85% that is not a good sign for management.


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The staff of the bank is trained and competent. The branches of are more in Pakistan and becoming online. Increasing account holders due to blood relationship. The reserves of bank are higher.


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The administrative cost is high due to over staffing. The owners not taking invest in management in bank. As

ownership by (Agha khan). The Markup is high. Paying low interest rate to account holder. The branches are using manual system.

The new branches can open as a staff is trained an competent. Investment can be made in new project as account holder

increasing.They can establish their branches online.

The profit becoming low due to higher cost. The staff is old and no energetic leading to not attractiveness

to the customers. The customers leaving the bank due to low interest rate. The branches are no sufficient due to manual system


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Staff should be provided professional training in marketing, selling, finance and computer.

. It will be helpful in sharpening their abilities and developing their skills.

Bank should emphasize on hiring of business graduates and computer experts for the simex system.

ATMs should be installed in small cities as well.

The political influence should be minimized on all type of the operations of the bank.

Advance for non-productive investment should be stopped.

The influence of employees union should be minimized.

Implantation on the rules, regulations and policies should be done at all cost.

The customer satisfaction should be guaranteed through rapid delivery of financial products and services

Habib bank should focus in the services of their educational institutes

The training should be proper time period

Right person on right job should be placed

Proper staff should be in the branches.


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