TABLE OF CONTENTS

CHAPTER No: 01INTRODUCTION TO BANKING1.0.1: MEANING OF BANK The word bank has been derived from the French word banque or bancus which means bench, office or institution for the keeping, lending and exchanging of money. Some authorities have the opinion that Bank is derived from the Germen word back which to the meaning of joint stock fund. The bank is a financial institution that borrows money from one party and lends to the other party (Government, individual, business) and the difference between borrowing and lending rate of profit/Interest for the bank. Bank borrows and lends money on interest basis. Banks are classified according to their sphere of activity; the main types of banks are as under. Commercial bank

Industrial banks.

Agricultural banks.

Saving banks.

Exchange banks.

Central banks.

Cooperative banks1.0.2: COMMERCIAL BANK:Commercial banks are engaged in performing the routine duties of banking business. Such bank collects the money from the people (as borrowing) and extends the same money as a loan for development purposes. Commercial bank plays a vital role in the economic development of a country by performing the variety of function as given below:1. Accepting of deposits (Current, saving and fixed account).

2. Making loans and advances (overdraft, cash credit, discounting bill).3. Agency services to customers (Collection of cheques, dividends, electricity, water and gas bills, and sale of securities, and acts as a trustee.

4. General utility services (Foreign business, Issue traveler cheques, providing trade information).

1.0.3: HISTORICAL DEVELOPMENT OF BANK: The history of bank can be traced from the early 2000 B.C. The first stage in the development of banking sectors started with the acceptance of deposits from the general public as it is evident that the priest in Greece used to keep money and valuable assets of the people in temples. Its origin can also be traced to early goldsmiths. These goldsmiths used to keep strong safe, for storing the money and other valuable collaterals of the people. People with surplus money used to deposit in these storage safes. The second stage towards the development of banking sector started from the issuance of receipts by the safe keeper i.e goldsmiths .these receipts were issued because they can be used in payment of debt and to clearly settle the transactions.When goldsmiths realized that they had surplus money, therefore, they intended to lend some portion of money to the nearly traders and merchants who constantly request for loans This business was quiet profitable and instead of charging interest from depositors they began to give interest on the deposited money . This was the third stage towards the development of banking.

They also planned to allow the customers to withdraw in excess of the amount deposited to meet the customers needs. This facility is called overdraft and they used to keep some portion of money for this purpose. After some time too much confusion were occurred in the banking system and they were not able to meet the demands of customers. Failure to payback money to the lender at the end led distress among the people. To overcome this problem people felt that their must be a system which can control the banking activities of different lending organization. For discussing this matter relevant to an efficient banking system a conference was held at Nuremberg in 1548.in this discussion a unanimous resolution was passed in favor of establishing a bank that regulates the banking activities.

As a result of this discussion the first bank was found in Geneva in 1587, which at the end results in the inception of many other banks with the same objective.

Now days, various commercial banks have been increased enormously throughout the whole world and is playing a catalyst role in economic development of every country. 1.1: INTRODUCTION TO HABIB BANK (HBL)1.1.0: HISTORY OF HBL: Mohammed Ali Jinnah, Pakistan's founding father, realized the importance of financial intermediation while he was campaigning for the creation of a separate homeland for the Muslims of India. He persuaded the Habib family to establish a commercial bank that could serve the Indian Muslim community. His initiative resulted in the creation of Habib Bank in 1941, with head office in Bombay (now Mumbai), and fixed capital of 25,000 rupees. The bank played an important role in mobilizing funds from the Muslim community to finance the 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 the formation of Pakistan in 1947, and its stature performance Quaid-e-Azam Mohammed Ali Jinnah Impressed by its initial performance, and directed the Bank to move its operations to Karachi after the creation of Pakistan. HBL established itself in the Quaids city on August 7, 1948 and became a symbol of pride and progress for the people of Pakistan. this gave Karachi its first commercial bank of the newly formed Pakistan. The Habib family owned and managed the bank until the Pakistan government nationalized it on 1 January 1974. With a domestic market share of over 40%, HBL was nationalized in 1974 and it continued to dominate the commercial banking sector with a major market share in inward foreign remittances (55%) and loans to small industries, traders and farmers. On December 29, 2003 Pakistan's Privatization Commission announced that the Government of Pakistan had formally granted the Aga Khan Fund for Economic Development (AKFED) rights to 51% of the shareholding in HBL, against an investment of PKR 22.409 billion (USD 389 million). On February 26, 2004, management control was handed over to AKFED. The Board of Directors was reconstituted to have four AKFED nominees, including the Chairman and the President/CEO and three Governments of Pakistan nominees.Having such an impeccable reputation and experience in the field of banking HBL decided to globalize there business sector, as it is evident that the HBL first international branch was established in Colombo, Sri Lanka in 1951 .after then the international operations were expanded to USA, Singapore, Oman, Belgium, Seychelles and Maldives, Netherlands and subsidiaries in Hong Kong and UK, affiliates in Nepal, Nigeria, Kenya and Kyrgyzstan and rep offices in Iran and China.The Habib Bank Ltd is a leader in Pakistan's services industry. An extensive network of 1,400 domestic branches the largest in Pakistan and 25 international branches has enabled HBL to provide comprehensive services that meet customer needs. This has ensured thriving client relationships that form the backbone of the Bank's operation.

1.1.1: VALUES OF HBL:

Integrity: We are the leading bank in Pakistan and our success depends upon trust. Our customers - and society in general - expect us to possess and steadfastly adhere to high moral principles and professional standards ExcellenceThis is at the core of everything we do. The markets in which we operate are becoming increasingly competitive, giving our customers an abundance of choice. Only through being the very best - in terms of the service we offer, our products and premises - can we hope to be successful and grow Meritocracy: We believe in giving opportunities and advantages to our employees on the basis of their ability. We believe in rewarding achievement and in providing first-class career opportunities for all. Customer focus We understand fully the needs of our customers and adapt our products and services to meet these. We always strive to put the satisfaction of our customers first Progressiveness We believe in the advancement of society through the adoption of enlightened working practices, innovative new products and processes, and a spirit of enterprise Culture of Innovation: We aim to be proactively responsive to new ideas, and to respect and reward the agents, leaders and creators of change.1.1.2: GOALS OF HBL: To mobilize private savings and public funds for diverting the same into productive channels and ensure their availability. To promote industrial agriculture and socioeconomic process through the active participation of private and public sector in the province. Help under developed areas and create employment opportunities, especially in the rural areas of the province. Further, to guide and assist the people of Pakistan serving overseas to effectively and profitably invest their foreign savings in the province as well as in other parts of Pakistan. Create a diversified and sound portfolio for utilization of idle funds and their investment in the existing and new ventures especially in the pioneering of high-techs agro-based export oriented and engineering project to ensure maximum returns. Participative and seek the share of the country in the capital market of Pakistan by way of subscription through locally peopled resources in the leading stock exchange of the country and eventually paving the way for establishing a stock market in the province. 1.1.3: BASIC FUNCTION OF HBL:

Accepting of deposits: a. Current account b. Saving account c. Fixed deposit account Advancing of loans: a. Loans and advances b. Cash credits c. Provision of Qarze-e-Hasna Agency functions: Collection of cheques Transfer of funds from one place to another. Handling of Salaries and Pensions of federal, provincial employees and defense personnel. Assisting to Agriculture Act as an agent or representative of his customers Collection of Negotiable Instruments Issuing Guarantees and Indemnities Granting of letter of credit General utility services: Utility Bills collection Sale and encashment of Prize Bonds Issue of Travelers Cheques Supplying of Trade information Act as a referee Financing of Foreign Exchange Preparation of feasibility reports for small industrial units Collection of fees and money for people proceeding on Hajj providing pilgrimage services1.1.4: NATURE OF ORGANIZATION OF HBL: Habib bank is a limited banking organization. It is a public limited company, which is listed on Karachi stock exchange (KSE).

1.1.5: BUSINESS VOLUME OF HBL:DepositsThe total deposit of Habib Bank for the year of 2012 was Rs. 506,563,870 (in 000).Advances

The total advances of Habib Bank for the year of 2012 was Rs. 327,454,611 (in 000). Revenue

The total advances of Habib Bank for the year of 2012 was Rs. 335,772,341 (in 000).

1.1.6: COMPETITORS OF HBL:HBL is the leading bank in the field of banking, so every bank is following the HBL. The main competitors of the HBL are MCB, United bank limited (UBL), AL-Habib bank limited (AHBL), National bank of Pakistan (NBP), Bank of Punjab (BOP), Allied bank limited (ABL) as well as Bank Al-Falah limited1.2: BUSINESS SECTORS OF HBL: 1.2.0: COMMERCIAL BANKING:HBLs Commercial Banking Group targets medium sized companies with a turnover of at least PKR 50 million. Our business units are located in Karachi, Lahore, Faisalabad, Sialkot, Gujranwala and Peshawar. Each unit is dedicated to service business clusters located within these cities.

We have the ability and the resources to meet the needs of your business with our pro-active, responsive and experienced Relationship Managers who are committed to understand your business.

Services

We offer financing for the following:

Working Capital

Procurement of Inventory

Receivables

Procurement of Machinery

Expansion of Production Facilities

Improve of Raw Material

Exports

Guarantees

1.2.1: CORPORATE BANKING: HBL Corporate Banking Group comprises a seasoned team of Relationship Managers (RMs) to meet the demanding service standards of large corporations. A long history of financing and nurturing relationships in Pakistan has given HBL a unique insight, enabling us to provide timely and effective financial solutions for our customers to meet the growing challenges of a global economy. If you are a corporate customer, with a turnover of at least PKR 300 million, we have a range of solutions designed to help you with your banking needs. Our RMs has the expertise you need to create tailored financial solutions catering to the specific requirements of your business.

Whether establishing a new venture or expanding an existing business, our team understands your banking needs and works closely with you to realize your goals. Services

We provide the following services to meet your funding requirements:

Working Capital Finance, including Overdraft, FE Loans, etc.

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

Import Financing (PKR and USD based)

LMM Funding

Receivable Discounting

Islamic Banking facilities

Cash Management Services

Trade Services including Letter of Credit, Letter of Guarantee and Standby Letter of Credit, etc. 1.2.2: RURAL FINANCING: HBLs Agriculture loan are spread across the country and provide financing through over 800 branches. We have the largest private bank portfolio in the country with over PKR 18 billion in various agriculture sectors. HBLs presence in all agriculture belts of the country ensures easy access to farmers in rural areas.

We provide loans to small-scale land owning farmers as well as large institutionalized and alliance based financing to boost the countrys economy and yield better harvests. HBL enables farmers to buy good quality seeds, fertilizers, pesticides, agricultural implements and non-farm setups through its various products programs.

The following products ensure that customer needs are fully met with respect to their farming requirements.

Revolving Agri Scheme

Haryali Farm Transport Scheme Agri Development Loan Agri Development Loan (Fish Farming)

Agri Development Loan (Drip Irrigation)

Agri Production Loan

Haryali Livestock Loans1.2.3: ISLAMIC BANKING: Islamic Banking is a growing market segment that offers attractive opportunities to potential and existing customers. At HBL, Islamic Banking offers Shariah compliant products and services to meet the short and long term requirements of business and trade.

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

Opening of Current Account and Basic Banking Account (BBA)

Collection of Foreign/Inland Bills

Acquisition of Assets on Ijarah

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

Foreign/Inland Remittances

Utility Bills Collection

E-banking/Internet Banking servicesCHAPTER No: 02ORGANIZATIONAL STRUCTURE OF HBL2.0.1: MAIN OFFICE OF HBL: HBL has the largest domestic branch network with 1,400 branches and is present in 25 countries across five continents.

HEAD OFFICEHabib Bank PlazaI.I.Chundrigar RoadKarachi-75650, Pakistan.

Phone: 021-2418000 (50 lines)Fax: 021-9217511REGISTERED OFFICE4th Floor, Habib Bank TowerJinnah AvenueIslamabad, Pakistan.

Phone: 051-2872203 & 051-2821183Fax: 051-2872205

2.0.2: ORGANIZATIONAL HIERARCHY CHART OF SKARDU BRANCH:

2.0.3: NUMBER OF STAFF:Total number of employees:

(18536)

During the year the bank offered Voluntary Staff Separation Scheme (VSSC) to some of its employee. Under this scheme 2,202 employees opted for the separation. The HBL has incurred the additional cost of Rs. 1, 602 million in this respect. In addition, the consequential impact on retirement benefit scheme has been determined through actuarial valuation, the results of which are summarized in note 30 to those financial statements.

Subsequent to the year end 2008, 2,343 employees in the non-clerical staff cadre have been retrenched with effect from March 10, 2009. The bank has committed to pay in addition to payments under the staff retirement funds, an amount of Rs. 1, 597 million under the retrench scheme. The impact, if any, on staff retirement benefit scheme will be finalized in due course through actuarial valuations2.1: INTRODUCTION OF ALL DEPARTMENTS: HBL Skardu branch has the following departments:2.1.1: OPERATION DEPARTMENT:The main function of this department is to recover the debts of the bank. In the previous political government huge amount of loans were granted on political grounds which are mostly bad debts. This department is trying to recover those old and new debts. Further more this department also handles the remittance, cash and cheques, clearings, account opening section.ACCOUNT OPENING SECTION: HOW TO OPEN AN ACCOUNT: There are certain formalities which are to be observed for opening of a current or saving account with a Bank. These formalities in brief are as under. FORMAL APPLICATION:

The customer is to fill "Account Opening Form. It is a formal request by a customer to the bank to allow him to have and operate the current or saving account.SPECIMEN SIGNATURE: When the Banker is satisfied about the integrity of the customer, he agrees to open the account. The Banker obtains the specimen signatures of the customer on the signature book or on card. MINIMUM INITIAL DEPOSIT: In Pakistan the current account can be opened with a minimum of Rs. 5000/- and PLS Saving Account with a minimum of Rs 10,000/- These amounts are also the minimum balances to be maintained by the account holders with the Bank. TYPES OF BANK ACCOUNT:Following are the types of bank account.

SAVING ACCOUNT:Saving Account is that account in which customer puts his surplus money which he saves from his daily expenditure.

The account can be operated by depositing a minimum cash of Rs. 1000/-. Small percentage of interest is charged on the balance of this account. BASIC BANKING ACCOUNT: It is just like that of current account, which has been designed for business men and students who frequently withdraw their amounts from the bank. There is no limit for this type of account as it can also be operated at zero balance. At the time of opening the BBA account the customer is required to deposit a minimum balance of 500 rupees, which later on can also be withdrawn.CURRENT ACCOUNT: The current account is that one which the customer draws his daily cheques and is normally operated by the Business-men. It can be operated by minimum amount of Rs. 5000/- Any number of cheques can be issued by the account holder for withdrawal or for payment. No interest is allowed on this account.JOINT ACCOUNT: A joint account occurs when two or more than two customers have one account. The parties to a joint account are considered in law as they are one person.PROFIT AND LOSS SHARING ACCOUNTThis can be operated by a person, firm or organization by depositing Rs. 1000/- or above. The holder of this account will get profit of his amount, or he will bear the loss as the case may be. So an individual is equally participant in profit and loss.

The holder of account can withdraw up to Rs.15,000/- per month, in case of higher withdrawal, seven day prior notice is necessary, but in practice have not seen it. This account is operated under interest free system.FIXED DEPOSIT ACCOUNT In this account an amount is deposited into the Bank for a fixed period of time. The fixed period may be three months, six months, one year, two years, five years and more. The Bank allows a higher rate of interest for larger period. At the time of operating on account the Bank issues deposit certificates for the period and amount. The account holder can withdraw his amount before the specified period, but refunding the excess profit paid at higher rate and the same Bank will allow loan against that certificate. Bank is liable to give interest on this account on maturity date is monthly or quarterly or six month.2. DEPOSITS SECTION:There are two types of deposits i.e. current and saving. There are different forms present in the section of or deposits. i. Current account form.

ii Saving account form.

iii Private or individual form

iv Private firm account form

In the above mentioned forms, the bank makes an agreement with his customers.3. CLEARING SECTION:Every Bank performs the paying and receiving functions. Cheques are collected which are drawn up to Banks for customers. Similarly the cheques drawn on different Banks and deposited by Banks own customers for collection within the city is know as clearing The functions of receiving and paying is mostly done through the clearing house. A clearing house can be defined as "A place where that representatives of all Bank get together to settle the receipts and payment of cheques drawn on each other" Clearing House provides the facility which can hardly be dispensed with especially, in case of crossed cheques.

There are two main types of clearing.

i Outward clearing

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

Outward Clearing at Branch Account number of payee/endorsee is written on the back side of the cheques

The instrument and the paying in slips are separated . The instruments are sorted I Bank-wise and branch wise. Schedules are prepared. Jotting of all the schedules are taken in the clearing House statement. Amount of the cheques is written in the "Delivered" and to pay column. After balancing the outward clearing, the pay in slips are released to C.D department. After balancing, a transfer debit voucher is prepared. The instrument, schedules are delivered to the messenger from the main branch. INWARD CLEARING The cheques drawn are called inward clearing drawn on Habib Bank through its representatives. On the Bank presented by other Banks for payment it includes those cheques and other instruments of Pakistan branches which other Banks present at the clearing house.

Inward Clearing at the Drawn Branch Numbers of instruments noted in the schedules are verified immediately on receipt. The amount's of all the instruments are jotted down and totaled. If should be equal toss the amount mentioned in schedule from the local main branch. The amounts are debarred to the relevant accounts if otherwise in order. TYPES OF CHEQUES COLLECTED BY CLEARING SECTION: TRANSFER CHEQUES:These are the cheques which are collected and paid by same branch of HBL For example Mr. Ali is a customer of HBL of CITY branch and draws a cheque in favor of Mr. Hussain who is also the customer of the same branch. TRANSFER DELIVERY CHEQUES:The cheques which are collected and paid by two different branches of a Bank situated in the same city. For example a person draws a cheque on N.B.P. main branch, Skardu in favor of another person who maintains an account with N.B.P. Gamba Skardu branch. CLEARING CHEQUES:When the payee/endorse and the drawer of cheque maintains account with different Banks, the collection Bank in any one of the following methods:- It can collect cash by sending its representative with the cheques to each of the paying Banks. It is not so much appropriate. The Bank maintains an account with the paying Bank. The cheques can be exchanged by representative of the various Banks who meet at a fixed time and at a fixed place. This is the most efficient method of collection and paying cheques. FUNCTIONS OF CLEARING SECTION IN A BRANCH: To accept transfer, transfer delivery and clearing cheques from the customer of the branch and to arrange for their collection. To arrange payment of cheques drawn on the branch and gives for collection to any other branch of H.B.L. or any other member or such member of local clearing house. To collect amounts of cheques drawn on members of the local clearing house sent for collection by N.B.P. branches not represented at the local clearing house. PROCEDURE FOR CLEARANCE OF CHEQUE:The customers are provided with the copes of pay In-slip, whenever the customer wants to deposit any cheque, he fills in the pay in slip himself and hands it over the counter along with the instrument.4: REMITTANCE SECTION:Remittance means transfer of money from one place to another place. It is of two kinds.

I: Inland remittance.

II: Home remittance. INLAND REMITTANCEAn inland remittance means a transfer of money payable at a certain place within the country. Inland remittances can be classified as under:-

I: Within locality.

II: Out side locality. WITHIN LOCALITY:When a branch situated in Rawalpindi is required to send drafts to any other branch situated in the same city the process is know as within locality. For example HBL, Main Branch, Rawalpindi sends any draft to HBL, Pandora branch, Rawalpindi.OUTSIDE LOCALITY: Outside locality is an important type of inland remittances, which means the transfer of money payable outside the city. For example, HBL, Main Branch Rawalpindi sends any draft to a Branch situated at LAHORE.

It is commonly done throughDEMAND DRAFT (D.D): Demand draft is a written order by a branch of a specified Bank, drawn on another branch of the same Bank to pay a certain sum of money only the following means:-

Demand Draft (D. D) to or to the order of the Payee. Demand drafts are purchased by the clients and after receipt of money Bank issues and delivers the D.D. to the purchaser, who himself sends it to the payee. In D.D. the Banks do not recover postal charges as it is payable by the purchaser. The Bank, after deliver of D.D. to the purchaser also sends its own advice called IBCO (Inter Branch Credit Order) to the drawee branch mentioning therein all details of issued draft Now banker cheque payable any where in Pakistan.

5. ACCOUNT SECTION:Every Business organization deals in money matters. Bank also deals in money and more over since the money belong to the depositors therefore, it is of utmost importance to keep systematic and correct record. Further-more, the Banks are commercial institutions and its main objective is to earn profit, therefore, the record of all incomes and expenditures are kept correct and systematically.In H.B.L. the responsibility for maintaining necessary accounting data and to keep up to date records in a systematic manner has been assigned to the Accounts Department.

The Branches of Bank perform their daily routine work and deal in money that belongs to depositors. Here account department hold great importance in banking, because it keeps all the accounting records properly. All the records of the account section are made in database software called MYSIS. 2.1.2: CREDIT DEPARTMENT:The Credit Department is responsible for advancing loans to the customers. The loans are mainly categorized in two types as given below:

i.Lending Products:To advance loans to labor intensive enterprises

ii.Banking Products:Advances to general account holders.2.1.3: ADMINISTRATION DEPARTMENT:

All the matters of administrative nature are dealt in this department. This includes: transfers, posting, promotion orders, leave orders, approvals etc.

2.1.4: IT DEPARTMENT:

All the information can be shared mutually by the virtue of software called MYSIS. This information system connects all branches in Pakistan with each other through intranet. The banking and treasury transactions are also made through this system and could be accessed any where in all over the PakistanCHAPTER No: 03PRODUCT AND SERVICES OF HBLOur brand identity is the outward expression of what we stand for as an organization. This is summarized in our vision, mission and is supported by our values.Habib Bank Limited provides the following products and services for their customers.

3.0.1: ACCOUNTS AND THEIR TYPES:Term Accounts:HBL offers a wide range of accounts suited to meet individual customer needs. HBLs Term Accounts are offered in a variety of tenure with deposits as low as Rs.10, 000. Special Notice Time Deposit 7 days or 30 days (and over) notice Minimum deposit of Rs. 10,000

Balance less than Rs. 1 million

Balance equal to and greater than Rs. 1 million

Returns range from 0.75% to 4% depending on notice period and amount

F.I. Term Deposit Receipts

Three months term deposit Minimum balance of Rs. 1 million Return range from 0.75% to 2.25%Munafa plus Deposit (Certificates)

Available in 3 months, 6 months, 1 year, 3 years, 5 year and 10 year terms Profit disbursement (except for 3 & 6 month terms) is monthly, quarterly, bi-annually and on maturity Returns range from 6.15% to 14%Current Accounts:Our Current Accounts offer features that meet your daily banking needs. There are two types of current accounts which are used by HCurrent account

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

No Minimum Balance No Service ChargesSaving Accounts:HBLs Saving Accounts cater to individual saving habits.

Remittance Munafa Plus Saving Account

Profit paid bi-annually Minimum average balance of Rs. 10,000 Less than Rs. 20,000 earns 0.10% profit Greater than Rs. 20,000 earns 1% profitHBL Value Account

7% profit per annum* Profit credited every 3 months Deposit ranges from Rs. 10,000 to Rs. 100,000 Flexibility of withdrawalsHBL Supper Value Account

7.25% profit per annum* Profit credited every 3 months Deposit ranges from Rs. 100,000 to Rs. 500,00Remittance Munafa Plus Saving Account

Remittance Based (no credit allowed except remittance) Daily Basis Product Tiered Monthly profit Minimum average balance of Rs. 10,000 Less than Rs. 20,000 earns 0.10% profit Rs. 1 million and above earns 5% profitSpecial Saving Deposit Scheme

Daily Basis Product

Tiered Monthly Profit

Minimum balance of Rs. 20,000/-

Return up to 8%

PLS Daily Munafa plus Deposit Account Daily Basis Product Tiered Monthly profit Minimum balance of Rs. 50,000 Returns up to 8%Foreign Currency Accounts:HBL offers Foreign Currency Accounts in multiple currencies as savings and term accountsFC S-B Savings Account offered in 3 currencies, USD (US dollar), EUR (Euros) and GBP (UK pound)Tiered Tiered product, with rates depending on choice of currency Minimum balance of Rs. 50,000 To earn profit, minimum balance in USD, EUR and GBP is 1,000 Interest is payable on a quarterly basisHYFFD (High Foreign Currency Fixed Deposit)

Available in 1 month, 2 month, 3 month, 6 month and 12 Month in USD, EUR and GBP Tiered product, with rates depending on choice of currency and term

i) Profit paid on maturity only. No interim interest is payable.3.0.2: DEBIT CARD: HBL Visa Debit Card allows you to pay for your purchases directly from your bank account. You dont have to carry cash and your monthly statement provides you with a complete record of all your transactions so you can manage your expenses with ease.Features of Debit Card

No Interest Ease & Security No Liability International Recognition& Acceptability Spending Limits Free Account Statement 24 hour Customer Service Global Customer Assistance Service 3.0.3: CREDIT CARD: Welcome to a world of convenience, flexibility and opportunity. The HBL Credit Card will add simplicity and excitement to your life. Accepted at over 24 million merchants worldwide, HBL Credit Card makes shopping fun and paying simple. Make the most out of your shopping experience with your very own HBL Credit Card.Benefits of Credit Card Convenience Security Affordability Cash Advance Balance Transfer Facility 3.0.4: OTHER PRODUCT AND SERVICES: Commercial Day to day banking: There are a wide range of accounts and services to help you manage your money. Cash Management Services: Giving you the convenience of cash handling.

Habib Bank Easy Access: Real time online banking at commercial centers for customers online transfer/deposit of payments. HBL E-Banking: Habib Bank Limited has launched a product HBL e-bank which allows 24 hour access to accounts through internet banking, and PC bankingCHAPTER No: 04PLAN OF INTERNSHIP PROGRAM4.0.1: BRIEF INTRO OF BRANCH:I did my internship in the HBL main branch Skardu. The branch code of this branch is 0476. It is main branch of HBL bank in Skardu city. The number of employees in this branch is 18. All the staff members are highly qualified and cooperative. This branch consists of the operations department, credit administration department, and IT department .The network of the bank is very vast and valued. Mostly the business transactions of the bank are related to the local contractors, property dealers, business man and general public. The Branch has all the required staff, which is necessary to perform the banking operations. The present bank manager is a highly qualified and cooperative person.This branch received the award of Bank of Region in the regional level. A new branch of HBL has opened in two district i.e. KHAPLU, SHIGAR and also opened a branch in the city of Skardu called GAMBA SKARDU branch. All these branches are the sub-branch of the main branch. Being the main branch, this branch has the power to control the sub-branch. Main managers of the branch are branch operations manager and branch manager. The attitude of the branch manager is very polite and favorable to employees and customers.

4.0.2: DURATION OF INTERNSHIP:Starting date of the internship:01-07-2013Ending date of the internship:22-08-20134.0.3: DEPARTMENTS WHERE I GOT TRAINING:I completed my training tenure in the account operations department, credit department and IT department. I spent my training program as follows:

I worked for 3 weeks in the operations department. (1 weeks in account opening section and 1 weeks in clearing section and I week in the remittance section)

I worked for 1 week along with cashier of the operation department.

I worked for 1 week in the credit department

I worked for 2 days in the IT department and the another three days with complaints section

The last week I spent with the manager office to get some know how regarding to the work of the branch manager4.1: INTERNSHIP EXPERIENCE: Detailed description of the operations/activities performed by the departments I worked in:4.1.0: ACCOUNT OPENING DEPARTMENT:Account opening department is the main department of the operations department. It is the introductory department of the bank. It is the primary evidence of relationship between bank and the customer. This department has all the basic information regarding bank and customer relationship. The head of this department is called CSO (customer services officer). The main task of this department is to open the new accounts of the customers. CSO provides the major information regarding to the accounts like account balance, account status and deposits of slips. Main tasks performed by the account-opening department are as under:

4.1.1: FILL PAY IN SLIPS FOR DEPOSIT:Many customers want to deposit the cash in their account or any other persons account. But for the purpose of cash deposit customer has to meet CSO. CSO fills the customer deposit slip. Filling of the cash deposit slip is very easy. Slip has two parts, the bank keeps one and one part is given to the customer as a receipt. Main parts of the slip are date, name, amount in figures, amount in words and deposit mode. First of all date is written on the right corner of the slip and then name of the depositor is written on the left corner. After that amount in digits is written and then amount in words is written. Both the written amounts must be same and equal to each other. At the end there is need of signatures of the customer. After filling the pay in slip, customer is sent to the cash counter, where cashier receives the deposit slip along with cash and then carbon copy of the slip is given to customer as a receipt.4.1.2: FILL PAY IN SLIPS FOR CHEQUES:Account opening department also provide the facility of filling of pay in slip for cheques. Filling of these slips is also very easy. These slips are also available on the counter of CSO. All the filling procedure is as like as pay in slips for cash but a bit different. In these slips payment mode is filled as Cheque. In these slips cheque number and the address of the particular branch, where the cheque has to be deposited is written. At the end officer sings the slip and carbon copy is given to customer as a receipt.4.1.3: FILL ATM CARD APPLICATION:Another function of the account-opening department is to fill the debit card/ATM card applications. In this application, account number of the customer and complete address of the customer is written. The charges of this card are Rs: 200 and this amount are deducted from the account of the applicant. Card is provided to the customer within twenty to thirty days.4.1.4: INFORMATION REGARDING HBL:Last duty of the account-opening department is to provide all the information regarding to HBL to its customers. For example if a customer wants to know about the head of the remittance department, then CSO will refer him to the remittance department. After all, it is the main task of the CSO to give information to the customer regarding any kind of bank.Account opening department provide the facility to its customers with the following accounts:

Individual account

Joint account

Proprietorship account

Partnership account

Private limited companies account

Public limited companies account

Photo account

Minor account

Foreign currency account

Student account

Basic documents:

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

Account opening form

Know your customer (KYC) form

Specimen signature card

Copy of CNIC card or passport copy

Cheque book requisition

Letter of declaration for sole proprietorship

Partnership deed (in case of partnership)

Signing authority (for partnership)

Student card copy ( for student)First of all account opening form is filled by the CSO, which contains the following items:

Title of account

Type of account

Initial deposit

Nominee

Reference

Residential and personal informationAfter filling the account opening form, specimen signature card is filled. In the specimen signature card, two signatures of the customer are taken and then are saved in the computer. These specimen signatures are proof for a particular customer. If the signature on a cheque differs from the specimen signatures, then bank has the authority to refuse the payment of cheque.

4.1.5: TASK ASSIGNED TO ME:Working experience in the account opening department remains memorable for me. My in charges, Mr Habib Hussain immensely cooperated with me and helped me in all respects to learn about banking knowledge. In account opening department I perform all the task of account opening department. Due to my knowledge about account opening department the branch manger appreciated me. Tasks, which I performed in the account-opening department, are as under:

Filling of all kinds of slips and forms

Filling of cheques of customers

Issuance of cheque books

Recording in register of issuing cheque books

Maintain record of customers

Checking all the form errorless

Customer dealing

Any task assigned by the incharge head

4.1.6: TASK PERFORMED BY ME:CREDIT DEPARTMENTMy work experience in the credit department remained very good. All the staff of the credit department helped me in learning about credit. Mr. Sarwar Hussain helped me in learning about credit. Duties, which I performed in credit department, are as under:

Preparation of loan agreements

Checking the agreement deeds

Manual recording of credits

Calculation of outstanding credits

Distribute information to new customers

Filling of credit Performs

REMITTANCE DEPARTMENTThe remittance department usually handles the transfer or receipts of amounts within the city or outside the city and also from outside the country. The in charge of the remittance section where I did my internship was Mr Ibadat Ali .Mr Ibadat ali really cooperated and make me clearly understand the working procedure of remittance section. All the work is done on online system that is connected to every branch of HBL inside and outside the country. Things that I learned in the remittance section are as under1: DEMAND DRAFT.

2: ON LINE TRANSFOR. On each transaction there is commission charged to the sender. The commission of (D.D) from 1 to 1lack is Rs; 150.The charges are on the (D.D) up to 1lack is calculated in percentage.

The commission of (O.T) is Rs 300.I also learned the following during my stay at remittance section

Filling of the remittance form

Making entries in the data base software

Rectification of error

Marinating of the deposited amount and receipts recordsCLEARING SECTION:Past Method:I also worked in clearing section .during my stay in the clearing section I learned how to collect the different cheques of different Banks. Then I learned how these cheques of different Banks mutually transfer. For mutual transfer everyday a meeting is held in NBP main branch Skradu. The representative of UBL, ABL, BANK AL FALAH, MCB, and HBL used to participate and thus mutual transfer of cheques were held. Mr.Ibadat Ali was the in charge of this section .He gave me a lot of attention.New Method:Now-a-Days this activity is done through NIFT i.e an institution in the state bank of Pakistan which only handles the clearing of different bank cheques presented at different bank branch. In this new system the remittance officer first collects the cheques of the customer and sees either the cheque is of the HBL bank or any other bank. If the officer found that the cheque is of any other bank, then the remittance officer transfer the cheque to the NIFT account through online. After that the NIFT will check whether the particular bank mentioned on the cheque is the member of the NIFT or not. If the bank is the member of the NIFT the cheque is cleared and transferred the amount to the account of the bank department from where it was sent for clearing purpose. Then after one day the remittance officer checks the account status of the customer and transfers the amount in the account of the customer.The number of days for the clearing of the cheques depends on the nature of the cheques and location of the bank .if the cheque is from a bank within the same city then it comes under the category of inward clearing and for inward clearing the clearing is done within one day. If the cheques is from a branch of a bank which is located outside the city then such clearing is called outward collection, and the number of says that takes for clearing such outward collection is two or three days.CHAPTER No: 05RATIO ANALYSIS/CRITICAL ANALYSIS OF HBLRatio analysis is a useful tool for analyzing financial statements. Calculating ratios will aid in understanding the banks strategy and in understanding its strengths and weaknesses relative to other companies and over time. They can sometimes be useful in identifying earnings management and in understanding the effect of accounting choices on the firms reported profitability and growth. Finally, the ratios help in obtaining a better understanding of a firms current profitability, growth, and risk which can improve forecasts of future profitability and growth and estimates of the cost of capital.A review of the ratios follows.5.1: LIQUIDITY RATIOS: Current ratio

=Current Assets Current Liabilities

Years201120122013

Current Assets43,551,47443,737,74544,852,225

Current Liabilities49,885,88933,215,30852,863,178

Ratio0.8731.3160.848

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

Acid Test Ratio/quick ratio

= Liquid Assets

Current Liabilities

Liquid Assets =Current Assets Closing stock prepaid expenses

Closing stock and prepaid expenses are not given in the balance sheet so:

Years201120122013

Liquid Assets43,551,47443,737,74544,852,225

Current Liabilities49,885,88933,215,30852,863,178

Ratio0.8731.3160.848

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

Sales to working capital ratio=Net Sales Working capital

Years201120122013

Net Sales23,932,93528,456,58335,782,189

Working capital(6,334,415)10,522,437(8,010,953)

Ratio(3.778)2.704(4.466)

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

Working Capital=Current Assets Current Liabilities

Years201120122013

Current Assets43,551,47443,737,74544,852,225

Current Liabilities49,885,88933,215,30852,863,178

Ratio(6,334,415)10,522,437(8,010,953)

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

5.2: LEVERAGE RATIOS: Time interest earned/interest coverage ratio= EBIT Total Interest expenses

Years201120122013

EBIT22,526,31121,886,74023,349,146

Total Interest expenses6,079,3428,511,41311,065,771

Ratio3.7052.5712.110

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

Debt Ratio

=

Total DebtTotal Assets

Years201120122013

Total Debt355,353,519385,153,625439,428,598

Total Assets412,900,841445,285,758511,741,878

Ratio0.8600.8640.858

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

Debt to equity ratio

=

Total DebtTotal Equity

Year201120122013

Total Debt355,353,519385,153,625439,428,598

Total Equity47,338,16754,120,81263,120,371

Ratio7.5067.1166.961

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

Long term assets / long term debt=Long term assets Long-term debt

Ratio201120122013

Long term assets369,349,367401,548,013466,889,653

Long term debt305,467,630351,938,317386,545,420

Ratio1.2091.1401.207

5.3: PROFITABILITY RATIOS: Net profit margin

=

Net income Net sales

Years201120122013

Net Income16,441,67015,323,22715,665,403

Net sales23,932,93528,456,58335,782,189

Ratio0.680.530.43

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

Return on assets

=

Net incomeTotal assets

Years201120122013

Net Income16,441,67015,323,22715,665,403

Total Assets412,900,841445,285,758511,741,878

Ratio0.0390.0340.030

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

Operating profit margin

=Operating profit Net sales

Years201120122013

Operating income61,944,2622,115,56178,214,049

Net sales23,932,93528,456,58335,782,189

Ratio2.5880.0742.185

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

Return on investments

=

Net incomeNet investment

Years201120122013

Net Income16,441,67015,323,22715,665,403

Net investment115,358,59097,790,391169,484,647

Ratio0.140.150.092

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

Return on total equity

=

Net incomeTotal Equity

Years201120122013

Net Income16,441,67015,323,22715,665,403

Total Equity47,338,16754,120,81263,120,371

Ratio0.340.280.24

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

Gross profit margin

=

Gross profit Net sales

Ratio201120122013

Gross profit20,867,88424,437,46228,459,868

Net sales23,932,93528,456,58335,782,189

Ratio0.8710.8580.795

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

5.4: ACTIVITY RATIOS: Total assets turnover

=

Net salesTotal assets

Ratio201120122013

Net sales239329352845658335782189

Total Assets412900841445285758511741878

Ratio0.0570.0630.069

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

Fixed assets turnover

=Net salesFixed assets

Years201120122013

Net sales23,932,93528,456,58335,782,189

Fixed assets16,082,78117,320,48518,099,010

Ratio1.4881.6421.977

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

5.5: MARKET RATIOS: Earning per share

= Net Income after tax No. Of outstanding shares

Ratio201120122013

Net Income16,441,67015,323,22715,665,403

No. Of outstanding shares6,282,7686,282,7686,911,045

Ratio2.610.222.26

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

Dividend payout

=Dividend paid Net income

Ratio200820092010

Dividend paid-4,728,496-9,834,181-6,735,510

Total Income16,441,67015,323,22715,665,403

Ratio(0.28)(0.64)(0.42)

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

5.6: INDEX/ HORIZONTAL ANALYSIS:HABIB BANK LIMITED

INDEX / HORIZONTAL ANALYSIS

BALANCE SHEET AS AT JUNE 30, 2013Common Size (%)

20092010201120122013

ASSETS

Cash and balances with treasury banks100%103%140%97%98%

Balance with other banks100%97%154%88%135%

Lending to financial institutions100%327%53%36%36%

Investments100%79%116%109%113%

Advances100%123%114%98%102%

Other assets 100%122%125%107%109%

Operating fixed assets100%101%108%103%104%

Deferred tax assets100%86%173%102%101%

100%109%117%100%105%

LIABILITIES

Bills payables100%77%101%61%63%

Borrowing from financial institutions100%113%187%78%88%

Deposits and other accounts100%108%110%102%106%

Sub-ordinated loans-----

Liabilities against assets subject to finance lease-----

Other liabilities100%104%112%104%111%

Deferred tax liabilities-----

100%108%115%100%105%

NET ASSETS100%126%135%104%111%

SHAREHOLDERS EQUITY

Share capital100%100%100%100%100%

Reserves100%882%120%96%106%

Inappropriate Profit100%67%224%93%106%

Total equity attributable to the equity holders of the bank 100%137%148%95%105%

Minority interest---3%3%

Surplus on revaluation of assets Net of tax100%94%98%99%100%

100%126%140%96%106%

Analysis:

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

There is overall increase in assets.

Though the assets have increased but the increase in liabilities is more than the increase in assets. The main reason of increase in assets is deposits and other accounts, and increase in loan from State Bank of Pakistan. That is why there is a prominent increase in net assets.

There is a continuous increase in investments. It has increased to 113% in the year 2013, as compared to 100% in the year 2009.

There is a not enough growth in deferred tax assets. The bank has paid all the tax liabilities. Now there is no outstanding tax of bank in the year 2012.

5.7: COMMON SIZE/ VERTICAL ANALYSIS HABIB BANK LIMITED

COMMON SIZE / VERTICAL ANALYSIS

BALANCE SHEET AS AT JUNE 30,2013Common Size (%)

20092010201120122013

ASSETS

Cash and balances with treasury banks92%101%83%87%81%

Balance with other banks47%76%59%67%57%

Lending to financial institutions13%12%31%12%4%

Investments230%414%259%224%234%

Advances667%797%774%654%616%

Other assets 90%80%145%81%93%

Operating fixed assets27%47%34%25%27%

Deferred tax assets5%6%4%5%5%

1113%1478%1274%1105%1054%

LIABILITIES

Bills payables11%23%14%11%6%

Borrowing from financial institutions99%85%76%106%79%

Deposits and other accounts873%1228%1049%859%840%

Sub-ordinated loans0%0%0%0%0%

Liabilities against assets subject to finance lease0%0%0%0%0%

Other liabilities29%42%35%29%29%

Deferred tax liabilities0%0%0%0%0%

1013%1378%1174%1005%959%

NET ASSETS100%100%100%100%100%

SHAREHOLDERS EQUITY

Share capital94%85%91%93%94%

Reserves229%22%202%248%242%

Inappropriate Profit262%182%202%248%278%

Total equity attributable to the equity holders of the bank585%289%422%637%614%

Minority interest- --3%3%

Surplus on revaluation of assets Net of tax100%100%100%100%100%

Analysis:

In the year 2013, out of total assets (1054% of net assets), the liabilities and equity are 954% and 100%, respectively, as detailed below:

Assets=Liabilities+Equity

1054%=954%

+100% In assets, the Investments form the largest part i.e. 234% out of 1054% of assets.

The second largest portion is Lending to Financial Institutions.

The liabilities of bank are more than its equity. Lending to Financial Institutions is only 4% of net assets which is very meager as compare to the Investments.

The bank is not investing the money wisely. Means not going in the right direction. Instead of lending to financial institution, it is spending its money in investments. It means the bank is avoiding making efforts and finding easy ways to utilize the assets.

In the year 2009 the cash and balances with treasury banks was 92%, whereas in the year 2013, it raised to 81% of net assets.

In the year 2009, the balances with other banks was maximum i.e. 47% of net assets whereas in the year 2013, it dropped down to 57% of net assets.

The portion of operating fixed assets in net income was equal from start to end. PROFIT & LOSS ACCOUNTCOMMON SIZE/ VERTICAL ANALYSISHABIB BANK LIMITED

COMMON SIZE VERTICAL ANALYSIS

PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED JUNE 30,2013Common Size (%)

20092010201120122013

Mark-up/ return/ interest earned129%132%128%142%154%

Mark-up/ return/ interest expensed129%

100%

12%32%

100%

14%28%

100%

12%42%

100%

10%54%

100%

4%

Net mark-up / interest income

Provision against non-performing loans & advances-Net

(Reversal) Provision against off-balance sheet obligations4%30%4%-2%3%

Reversal Provision against diminution in value of investments-64%-26%-64%30%0%

Bad debts written off directly -----

12%18%12%9%4%

Net mark-up / interest income after provisions728%467%704%958%234%

Non Mark-up / Interest Income

Fee, commission and brokerage income 12%18%11%12%9%

Income / gain on investments59%211%51%91%51%

Income from dealing in foreign currencies81%21%95%34%132%

Other incomes127%

40%

380%192%

26%

207%132%

12%

397%198%

67%

365%154%

11%

443%

Total non-mark-up / interest income

Non-mark-up / Interest Expenses

Administrative Expenses56%99%55%49%51%

Other provisions / write offs Net2%2%2%1%1%

Other charges27%

210%

107%

10%

163%3%

176%

58%

9%27%

199%

108%

11%

121%45%

268%

151%

8%

118%14%

743%

142%

10%

105%

Total non-mark-up / interest Expenses

Staff retrenchment cost

Profit before taxation

Taxation

Current16%3%17%24%24%

Prior years-1%4%-1%-1%

Deferred-381%

279%924%

128%-519%

162%117%

158%-1%

167%

Profit after tax230%324%210%229%186%

Analysis:

In the year 2013, Markup earned is 154% more than net Markup income.

Non-markup income is very low i.e. 11% of Net markup income .As compare to Non-markup income, Non-markup expenses are very high i.e. 743% of Net-markup income

Profit before taxation increase to 105% of Net-markup income due to low Administrative expenses. The increase in profit available for appropriations is not due to high profits; rather it is due to bringing forward the previous un-appropriated profits.

In the year 2009, the markup expense was 129% of net markup income, whereas in the year 2013 it has reduced to 54% of net markup income.

Fee, commission and brokerage income remained very nominal the throughout the period under observation i.e. 9% of net markup income.

The taxation expense has reduced from 279% of net income to 186% in the year 2009 & 2013, respectivelyINDEX/ HORIZONTAL ANALYSIS

HABIB BANK LIMITED

INDEX / HORIZONTAL ANALYSIS

PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED JUNE 30Common Size (%)

20092010201120122013

Mark-up/ return/ interest earned100%53%180%136%28%

Mark-up/ return/ interest expensed100%

100%

100%57%

53%

64%162%

185%

157%185%

122%

96%33%

126%

97%

Net mark-up / interest income

Provision against non-performing loans & advances-Net

(Reversal) Provision against off-balance sheet obligations100%443%23%-35%0%

Reversal Provision against diminution in value of investments100%183%55%17%30%

Bad debts written off directly -----

100%77%130%93%11%

Net mark-up / interest income after provisions100%49%197%126%128%

Non Mark-up / Interest Income

Fee, commission and brokerage income 100%79%117%133%91%

Income / gain on investments100%283%28%235%11%

Income from dealing in foreign currencies100%72%131%83%41%

Other incomes100%

100%108%

129%90%

71%125%

141%32%

21%

Total non-mark-up / interest income

100%70%136%130%96%

Non-mark-up / Interest Expenses

Administrative Expenses100%92%103%109%27%

Other provisions / write offs Net100%98%102%49%30%

Other charges100%

100%

100%

100% 11%

-

92%

50%910%

103%

192%

100%80%

108%

151%

108%10%

127%

25%

32%

Total non-mark-up / interest Expenses

Staff retrenchment cost

Profit before taxation

100%56%171%156%25%

Taxation

Current100%9%1060%174%27%

Prior years100%-39%-329%122%-

Deferred100%

100%946%

43%18%

234%-277%

147%15%

28%

Profit after tax100%61%152%160%23%

Analysis:

There is a positive increase in net markup income.

Due to high increasing trend of provisions, the net markup income after provision has lost its increasing trend to a little bit.

There is decrease in the dividend income which shows that the bank was unable to maintain its portfolio of investments effectively. Same is the case with gain on sale of government securities. Total non-markup income has a decreasing trend whereas non-markup expense has an increasing trend.

That is why, the profit before taxation could not maintain its good standard

Markup interest expenses have increased form 100% to 127% in the year 2009 to 2013.

The provision against non performing loans and advances has decreased from 100% to 97% in the year 2013.

In the fee, commission and brokerage income, there remained variation i.e. in the year 2011 & 2012 it increased, and then decreased in the next year 2013.

5.8: COMPETITORS/ INDUSTRY ANALYSIS:INDUSTRY ANALYSISFOR THE YEAR ENDED JUNE 30, 2013 (RUPEES IN THOUSAND)ParticularsHabib Bank LimitedMuslim Commercial Bank LimitedAskari Commercial Bank Limited Allied Bank LimitedBank Alfalah Limited Industry Average% of HBL to Industry Average

Mark-up/return/interest earned50,481,02131,786,59512,596,92121,201,42221,191,47021,694,102233%

Mark-up/return/interest expensed19,153,9577,865,5336,977,31310,019,00415,232,88610,023,684191%

Net mark-up interest income31,327,06423,921,0625,619,60811,182,4185,958,58411.670,418268%

Provisions8,099,2913,065,0511,128,5132,714,8421,699,2278,607,63395%

Net Mark-up/interest income after provisions 23,227,77320,856,0114,491,0958,467,5765,259,3579,768,510238%

Total non mark-up/interest income10,023,1646,011,2912,139,2543,920,0993,224,6393,823,821262%

PROFIT BEFORE TAXATION20,502,80221,308,0353,346,8555,953,0762,565,9458,293,478247%

PROFIT AFTER TAXATION14,276,12515,265,5622,249,9744,076,1581,762,6915,838,596245%

Analysis:

The markup earning of HBL bank is very high the industry average i.e., 233%.

Even then the net markup interest income after provision is better (238%) due to comparatively less interest expenses and provisions.

High non-markup income (262%) shows the high income before taxation.

There is a little bit difference between both profits (profit before taxation and profit after taxation) which shows the better position of Habib Bank as compare to its competitors.CHAPTER N0: 06

SWOT ANALYSIS OF HBL

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

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

HABIB BANK is a well established bank enjoying long history of over 70 yrs of experience and profitable operation. HBL was the first privatized bank that gives it an edge over other nationalized banks as it can develop any strategy consistent with the demand of market and free from any political or bureaucratic influence. HBL is the largest private bank in Pakistan now and people trust is very high. It has the largest branch network among private banks of Pakistan. HBL is the market leader in introducing -banking.

HBL was rated the best domestic bank for two consecutive years of 2000 and 2001 by Euro money, a leading international publication. HBL has forged strategic alliances with international banks for expanding its network further, both locally and internationally HBL has the ability to bring innovative products and services like personalized service, electronic funds Transfer, sophisticated financial products such as electronic banking, auto-teller machines and evening banking. HBL has been very effective in controlling costs as it successfully restructured itself after its privatization. During this process more than 1,600 employees were relieved under a golden handshake scheme and 110 branches were closed. Excellent branches appearance gives an edge to HBL over other banks. The branches are well furnished even in less developed areas where other banks branches give a poor view. 6.2: WEAKNESSES:

A weakness is defined as an area in an organization where the organization is not as good at doing something as its competitors or a thing which an organization lacks thus putting the organization at disadvantage in comparison to its competitors. Based on the above definition, HBL has the following weaknesses. Mission of HBL is not well defined. Though HBL is second largest bank in Pakistan, yet the fact remains that it is not market leader as NBP. Its total assets are always less than NBP total assets. Now as it is a private bank that is why GOVERNAMENT support to HBL decreased as it was in past. Employees at branch level are not properly motivated to work by heart. They take the all routine activities as a boring job. Most of the employees lack managerial training as they are not properly educated. Due to seniority, they have moved up on the hierarchy line to Grade- I, II or III positions having hardly bachelor degrees. This type of senior staff cannot apply the modern and innovative techniques of management in decision making almost computer knowledge.6.3: EXTERNAL ANALYSIS:

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

Following are the main opportunities and threats of HBL.6.4: OPPORTUNITIES:

An opportunity can be defined as a change in external environment which ifproperly exploited with the organizational strengths will result in enhancedsales, market share, or income. Using its strengths, HBL can avail the following opportunities: It can introduce debit card system or may convert the existing ATM cards into a complete debit card. New products like personal loans, mortgage and auto leasing and cash management which diversify credit risk and add to revenue generating products, are currently provided in big cities like Lahore, Islamabad, Karachi, and Rawalpindi, these products may be tested for success in other small areas of PAKISTAN in different provinces. As all around the world remittances of money are strictly monitored so as the money remitted may not fall in hands of so-called terrorists. For that all conventional money laundering through Hundies have been stopped, there is an opportunity for HBL to extend its branch network to various countries emphasizing mainly on introducing electronic fund transfer facilities.6.5: THREATS:

Threat can be defined as a change in external environment which if not met with proper strategies will result in loss of revenues, market share, or income. In the context of HBLs external environment, The following potential threats exist: The frequent reduction on 6-month and 12-month Treasury Bills discount rates by SBP may create pressure on the banks profitability. The low discount rates are also negatively influencing the advances rates which may affect the banks profits from the other side. Foreign banks operating in Pakistan are playing a significant role by incorporating new technologies and providing better quality services thus creating a threat to the local banks especially to HBL which tries to develop core competence in electronic based products. Policies of privatization, foreign exchange reforms, and structural adjustments have increased the inflow of foreign resources through direct and portfolio investment. In trade financing, the role of foreign banks is even more significant, as approximately 30 percent of the total trade of the country is transacted through them. Major portion of the trade financing is for importers to establish letters of credit.6.6: PROBLEMS:During my Six weeks I found various problems, which I think, should be resolved for the better functioning of the Bank. Some of these problems are of such nature that their solution will help the Bank and its workers in cooping in this complex world of globalization.These problems are: - There is a lack of on-line information in the Bank about the changes taking place in the world of Banking.

A customer cannot find any kind of journal or newspaper there.

In early days of month there is a great rush of customers, which cause inconvenience for the officer concerned and cashier as well.

Separate cabins are not available for the staff.

A separate counter for ladies is not maintained there.6.6: RECOMMENDATIONS:

I will give following suggestions for the better function of the Bank: The management should provide better arrangement for the employees. The daily newspapers and journals should be provided to the employees and customers visiting there. A separate ladies counter should be there.

The Bank management should be very careful while granting the loans.

Personal interests should not be given importance and customers Personal credit worthiness must be carefully scrutinized public relation desk should be established in each and every branch for guidance as well as redresses of grievance of customers at the spot. Online Banking should be introduced in all the branches. Aggressive publicity campaign must be introduced through press and Electronic media for new products and scheme by initiating vigorous marketing policy. New talent / professionals should be hired to coupe with the competitive demand in the industry. Employees induction promotion and transfer should always be made on merit. To motivate the employees their remuneration / salaries should be made at par with top tier Banks. 6.7: REFRENCES: Retrieved January 20, 2014 from http://en.wikipedia.org/wiki/Habib_Bank_Limited.

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

Annual Report of the year 2012, Habib Bank from http://www.hbl.com.pk/publications/AnReport2012.aspx James, C. Van Horne (2009) Financial Management and Policy. Stanford University Robert, F. Meigz & Mary, A. Meigz (1994) Financial Accounting. New York: McGraw Hill.

Meenai. S. A. (2000). Money and Banking in Pakistan (6th Ed). Karachi: The Allies Book Corporation.

Brigham, E. F and Houston, J. F (2006). Fundamentals of Financial Management, (8th ed).

Branch Manager

Kacho M.Ali Khan

Credit Manager

Sarwar Hussain

Operation manager

Mr Javeid Ali

Credit officer (R/F)

Mr. Ansar Ali

Clearing In charge

Mr. Habib Hussain

Foreign Remittance

Mrs. Ebadat Ali

Supervisor

Mr.G. Muhammad

Cash Officer

Mr. Zaheer Hussain

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