Allied Bank Limited

Strategic Management Case Study

Presented by:
Rizwan Qamar
M. Phil Fellow at Faculty of Contemporary Studies,
National Defence University,
Islamabad

Outline
INTRODUCTION

Pakistani Banking Industry

Industry Overview
ABLs Introduction
ABL Today
Mission, Vision Statements
Existing
Why change?
Proposed
INPUT STAGE
Internal Assessment
Map Locating ABLs
Operations
Size of Financial Position
Investments
Profit and Loss
Composition
ROE & ROI
Shareholders equity
Cash Flows Analysis
Profitability Analysis
Strengths and Weakness
IFE Matrix

External Assessment
Interest Rates

Comparison
List of Competitors
External Industry

Comparison

EFE Matrix
Competitive Profile Matrix
Porter's Five Forces

Model
MATCHING STAGE
SWOT Matrix
BCG Matrix
SPACE Matrix
The IE matrix
Grand Strategy Matrix
Strategy Analysis
DECISION STAGE
QSPM
Possible Alternative

Strategies
Recommendations
References

Pakistani Banking Industry

At present there are 41 scheduled banks,

The Commercial Banks comprise of 3

nationalized banks,3 privatized banks, 15 private

sector banks, 14 foreign banks, 2 provincial
scheduled banks, and 4 specialized banks.
There are 17 Listed and 4 unlisted Banks
Banking Industry still remains the most favorite in
Pakistan
Domestic Banks are in surplus liquidity
The Largest 5 local Banks (Also knows as Big-5)
includes, HBL,UBL, MCB, ABL and NBP
Out of them NBP is a State Owned Bank

Pakistan Banking Industry in

Brief

Pakistan Banking Industry in

Brief

Pakistan Banking Industry in

Brief

ABL Introduction
Allied Bank with its Registered Offices in Karachi and

Lahore is one of the largest banks within the country

It has 830 branches connected to an online network.
It was the first Muslim Bank Established in Pakistan
before Partition (1942) with the name of Australasia
Bank at Lahore.
Australasia Bank was the only fully functional Muslim
Bank on Pakistan territory on 14th August
At the time of independence all the branches in India,
(Amritsar, Batala, Jalandhar, Ludhaina, Delhi and
Angra (Agra)) were closed down.
New Branches were opened in Karachi, Rawalpindi,
Peshawar, Sialkot, Sargodha, Jhang, Gujranwala and
Kasur
By the end of 1970 it had 101 branches but
unfortunately it lost 51 branches in the separation of
East Pakistan which became Bangladesh.

ABL Introduction.
Contd
The bank did well in despite losing lot of its assets

and by the end of 1973 the bank had 186 branches in

West Pakistan
In 1974, the Board of Directors of Australasia Bank
was dissolved and the bank was renamed as Allied
Bank of Pakistan.
Same year Sarhad Bank Ltd, Lahore Commercial
Bank Ltd and Pak Bank Ltd were also merged in it
From 1974-91 (Nationalization), bank made a rapid
progress and branches network increased to 748 with
three branches in UK
As a result of privatization in September 1991, Allied
Bank entered in a new phase of its history, as the
worlds first bank to be owned and managed by its
employees

ABL Today
Now a days ABL has the largest network of online

branches in Pakistan which counts over 800 and located

in almost 150 cities and towns.
The bank offers a full range of retail, commercial and
corporate banking services with a focus on service delivery
through technology.
Additionally, it also provides general banking services to
agricultural, industrial and individual customers throughout
Pakistan.
Almost 89% of bank's deposit base is composed of
deposits from the urban areas.
The bank's fundamental strength lies in its strong lending
capability, as well as providing a variety of financial
services
The bank also conducts international operations in UK
whereby it caters to the needs of the bank's domestic
corporate and other customers in financing import and
export transactions.

ABL Today
Contd
ABL has highest number of ATMs, which increased to

601 at December 31, 2011 covering 145+ cities

whereby, making it the widest geographical coverage
for ATM-based service amongst all the banks in
Pakistan.
It has a completely online network of 830 branches.
This accounts for 12% of the market share amongst
the online branches in the country.
Allied Bank has also been adjudged as "best bank" of
2009 by CFA Association of Pakistan in its 7th Annual
Excellence Awards.
It has also been ranked 1st in Pakistan and 9th
globally by the Banker Magazine, UK for yielding best
profits on capital.

Financial Highlights in 2011

ABL VISION
Actual

Proposed

To become a dynamic
and efficient bank
providing integrated
solutions in order to be
the first choice bank for
the customers

To become a leading
and efficient Financial
Institution providing
integrated solutions in
order to be the first
choice of customers

ABLs Mission Statement (Actual)

To provide value added services to our customers
To provide high tech innovative solutions to meet

customers requirements
To create sustainable value through growth,
efficiency and diversity for all stakeholders
To provide a challenging work environment and
reward dedicated team members according to
their abilities and performance
To play a proactive role in contributing towards
the society

Characteristics of ABLs Mission

Characteristics of Mission Statement

ABL Mission
Statement

Broad in scope

Yes

Less than 250 words

Yes

Inspiring

Yes

Identify the utility of a firms product

No

Reveal that a firm is socially responsible

Yes

Reveal that the firm is environmentally friendly

No

Include nine components of mission statements

No

Enduring

No

Components of ABLs Mission

Components of Mission Statement

ABL Mission

1) Customer

Yes

2) Product

No

3) Market

No

4) Technology

Yes

5) Concern for survival , growth and profitability

Yes

6) Philosophy

Yes

7) Self Concept

No

8) Concern for public Image

Yes

9) Concern for employee

Yes

ABLs Mission Statement (Proposed)

We are committed to provide with

efficient high tech innovative Financial
Solutions to our customers in Pakistan
and create sustainable value through
growth, efficiency and diversity for all
stakeholders. We provide a challenging
work environment and reward according
to their abilities and performance and to
play a proactive role in contributing

Input Stage
Internal Assessment
Internal Factor Evaluation (IFE) Matrix

External Assessment
External Factor Evaluation (EFE) Matrix
Competitive Profile Matrix (CPM)

INTERNAL ASSESSMENT

Map Showing Operations of ABL in

Pakistan

Internal Assessment

Internal Assessment

Internal Assessment

Internal Assessment

Internal Assessment

Internal Assessment

Internal Assessment

Internal Assessment

Internal Assessment

Internal Assessment

Internal Assessment

Internal Assessment

Internal Assessment

Internal Assessment

Internal Assessment
Revenue Divisions
PKR 000

Income Category
Interest Income

2011

2010

25,171,039

22,565,044

Fee, Commission and Brokerage Income

2,730,686

2,491,200

Dividend Income

2,681,218

1,118,270

643,058

418,524

31,226,001

26,593,038

Income from dealing in Foreign Currencies

Total.

Revenue Divisions
30,000,000

25,000,000

20,000,000

15,000,000
2011
2010

10,000,000

5,000,000

0
Interest Income
Fee, Commision and
Brokrage Income

Dividend Income

Income from dealing in

Foreign Currencies

Internal Assessment
Growth in Revenue Divisions 2011
(%)
Growth (%)
Income Category

Growth

Interest Income

11.54881

Fee, Commission and

Brokerage Income

9.613279

Dividend Income

139.7648

Income from dealing in

Foreign Currencies

53.64901

140
120
100
80
60
40
20
0

Internal Assessment
STRENGTHS
ABL is the first Muslim Bank of the world, which is owned and

managed by its own employs.

Strength is the high motivation of employees to their work
because they know that what so ever they do, it will be in their
own benefit.
Salaries are very reasonable, so the employees are not
financially disturbed and they devote their selves fully to their
work.
They have wide area network in all over the Pakistan, so that
they cover a lot of portion of cash transactions and make
customer satisfied.
The bank's fundamental strength lies in its strong lending
capability, as well as providing a variety of financial services
ABL has highest number of ATMs, which increased to 601 at
December 31, 2011 (14% of the industry
ABL covers 145+ cities whereby, making it the widest
geographical coverage for ATM-based service amongst all the
banks in Pakistan.

Internal Assessment
STRENGTHS.. Contd
It has also been ranked 1st in Pakistan and 9th globally by the

Banker Magazine, UK for yielding best profits on capital.

Deposits of the bank grew by 17.2% and stood at Rs 372,254
million as at March 31, 2011 compared to deposits of Rs 317,742
million at March 31, 2010
Gross Advances, keeping in line with prudent lending strategy
were Rs 257,249 million as at March 31, 2011, a growth of 7%
over the gross advances of Rs 240,359 million as at March 31,
2010.
The balance sheet size stands at Rs 450,308 million as at March
31, 2011, while the equity of the Bank as at March 31, 2011
registered a growth of 30.7% over March 31, 2010 level to reach
Rs 39,547 million.
Profit before tax of ABL increased by 43.5% to reach Rs 3,851
million during three months period ended March 31, 2011 as
compared to Rs 2,683 million in the corresponding period of
previous year.
Profit after tax also rose by 41.3% to Rs 2,511 million compared

Internal Assessment
WEAKNESS
No entertainment facilities are available in the Bank when

customer goes to the Bank and wait for a longer time.

These facilities can be the newspaper, magazines, TV etc.
Advertisement of ABL is not such goods as of other banks.
Outlook of the ABL branches is not attractive to the people.
The non-interest expenses of the bank increased by 22.7%
due to the increase in all the expenses including the
administrative expenses, provisions and other charges.
The cost of funding also increased by 6%.
The earning assets to deposits ratio has declined.
Less staff in branches which leads to a long wait for their
turn of customers.
Nonperforming loans to the Govt. sector due to Govt.
influence on the bank.
There is no consumer banking services offered by the
bank.

Internal Factor Evaluation (IFE)

Matrix
Key Success Factors

Weigh
t

Rate

Weighted
Score

STRENGTHS
Largest Online braches network

0.09

0.36

Largest Nation-wide ATM network

0.06

0.24

Strong lending ability

0.08

0.24

Ranked 1st in Pakistan and 9th globally by the

Banker Magazine, UK

0.04

0.12

Higher employee motivation in comparison with

Competitors

0.05

0.2

Over 17% growth in Deposits where as industry

stands at 13%

0.06

0.18

0.24

Profit after tax has increased by 41.3% in last

year

0.06

Employee training and development

0.05

0.15

ABL covers 86% of the Country's urban area

0.08

0.32

Owned and managed by its employees

0.04

0.12

Internal Factor Evaluation (IFE)

Matrix
Key Success Factors

Weigh
t

Rate

Weighted
Score

WEAKNESS
No entertainment facility for the customers

0.05

0.05

Very Less Advertisement

0.05

0.1

No consumer banking services offered by the

bank

0.07
2

0.14

Limited coverage of rural areas (Only 14%)

0.04

0.04

Outlook of the branches

0.03

0.06

High non-performing loans

0.08

0.16

The cost of funding also increased by 6%.

0.03

0.03

Less customer service care

0.04

0.08

Total.
1.00
2.83
IFE Matrix Score of ABL is 2.83 which is higher than the bench mark of
2.50

EXTERNAL ASSESSMENT

External Assessment

External Assessment
List of Major Competitors
ABLs Major Competitors includes:

Habib Bank Limited (HBL)

United Bank Limited (UBL)
MCB Bank Limited (MCB)
National Bank of Pakistan (NBP)

External Assessment
External Industry Comparison
ABL has 13% share of the ATM Market
12% market share among the online branches
The increase in the net interest income of the company is

higher than the average for industry, which was 8%.

Deposits grew by almost 13%, which equals the industry
average of the banking sector
The advances grew by 7.5 % as compared to FY09, which
was way higher than the industry average of just 1%.
Allied Bank's deposits account for 7.3% of the total
deposits of all the banks whereas its advances account for
7.6%.
ABL's total assets constitute 6.6% of the total assets of the
banking industry.
Despite of economic issues in the country ABL has been
able to maintain its profitability.

External Assessment
OPPORTUNITIES
The policies of the new government to uplift the economy

and pursue financial sector reforms are expected to yield

positive results in the banking industry of the country.
As a result of the different steps taken by the Government
regarding the betterment of the economy, small borrowers
are attracted to get the financing and start small
businesses.
So, the ABL has an opportunity to attract the customers by
giving them attractive schemes.
They have wide area network in all over the Pakistan, if
ABL can make it possible the fast delivery of fund from
abroad through online banking, it can cover the major
market of Pakistan which still is capturing by Hundi.
Diversification towards Islamic Banking Services
Provide Privileged or Preference banking like MCB and
UBL

External Assessment
THREATS
First threat is that of political influence. Three boards of directors

are of government. So that they can influence on the decisions of

the ABL.
The biggest threat in the banking sector is the continuous
downfall of the countrys economy since the last few years.
New Privates Bank coped with emerging new Technology of IT
and with huge investments.
Increase in the withholding tax by the Govt. on transactions.
The higher discount rates offered by the SBP
The Law and order situation disturb the economic situation and
hence the Banking Industry
Power shortage brutally hinders the performance of Industrial
sector which get loans from Banks.
Tight monetary policy and high interest of 15% by the SBP
reduce the interest of people to get expensive loans from Banks.
The high inflation rate due to deficit financing by the Govt. is also
a big threat to ABL.

External Factor Evaluation (EFE)

Matrix
Weigh
t

Rate

Weighted
Score

Govt. reforms to up lift economy

0.10

0.40

Can Capture Hundi market by providing fast

cash transfer

0.07

0.21

Diversification towards Islamic Banking Services

0.06

0.24

Provide Privileged or Preference banking like

MCB and UBL

0.07

0.20

Micro Finance to the farmers and house hold

Industry

0.07

0.21

SME Financing

0.05

0.20

Personal loans and consumer banking

0.04

0.12

Expansion in the rural area of the country

0.06

0.24

Key Success Factors

OPPORTUNITIES

International expansion through joint ventures or

External Factor Evaluation (EFE)

Matrix
Weigh
t

Rate

Weighted
Score

Political influence on the Banks activities

0.07

0.07

Continuous downfall of the economy

0.08

0.16

The higher discount rates offered by the SBP

0.05

0.05

Law & order situation damaging economic

activities

0.08

0.16

Tight monetary policy and high interest of 15%

by the SBP

0.06

0.12

The high inflation rate due to deficit financing by

the Govt.

0.04

0.04

Power shortage brutally hinders the

performance of Industrial sector

0.06

0.12

Key Success Factors

THREATS

EFE Matrix Score of ABL is 2.66 which is higher than the bench mark of
Total.
1.00
2.66
2.50

Competitive Profile Matrix (CPM)

Competitors
Critical Success Factors

HBL

ABL

MCB

Rate

WS

Rate

WS

Rate

WS

Financial Position

0.16

0.64

0.64

0.64

Service Quality

0.14

0.42

0.42

0.42

Market Share

0.09

0.36

0.18

0.27

Customer Loyalty

0.10

0.2

0.4

0.4

Bank Charges/ Fees

0.12

0.24

0.48

0.36

Advertising and Promotion

0.08

0.24

0.16

0.16

Work force motivation

0.07

0.14

0.21

0.21

Online/ATM Services

0.11

0.33

0.44

0.44

Geographic Coverage

0.13

0.52

0.39

0.52

Total..

1.0
0
3.09
3.32
3.42
The CPM value of ABL is 3.32 which shows good competitive position

Porters Five Forces Model

Porters Five
Forces
Model

Forces

Intensity

Rivalry among competing

firms

High

Entry of New Competitor

Low

Development of Substitute
Products

Low

Bargaining Powers of
Suppliers

Low

Bargaining Power of
Consumers

High

External Assessment

Matching Stage
SWOT Matrix
BCG Matrix
SPACE
IE Matrix
G S Matrix

SWOT
Matrix

1.
2.
3.
4.
5.
6.
7.

STRENGTHS
Strong lending position
Largest online branches
Largest ATM network
Solid Financial position
Fastest growth rate
Motivated workforce
High profit Margin

1.
2.
3.
4.
5.

6.
7.

WEAKNESS
No entertainment
Non performing loans
Increasing lending cost
Urban area focus only
No branch
attractiveness
No consumer Banking
No Customer Care
System

OPPORTUNITIES
1. Micro Financing
2. Islamic Banking
3. Govt. reliefs for
Economy
4. SME Sector
5. Preference Banking
6. Rural economy

SO STRATEGIES
1. Use Strong financial
and lending position to
capture SME and Micro
Financing (S1, S, S6,
O1, O4)
2. Use its network for
Islamic, preference
banking (S2, S3. S5,
O2, O5, O6)

WO STRATEGIES
1. Take offer any Islamic
Bank and reduce and
lending NPL (W2, W3, O2,
O1)
2. Benefit from Govt. relief
and start focus on SME,
Micro and preference
banking with attractive
setup (W1, W5, W6, O3,
O4, )5)

THREATS
1. Foreign Banks
2. Power shortage

ST STRATEGIES
1. Invest in Power sector
to boost economy (S1,

WT STRATEGIES
1. Prudent lending to avoid
NPL (W2, W3, W6, T5,

BCG Matrix (Table)

PKR 000

Revenue Division

Interest Income

Revenues

25,171,039

%
Revenu
es

80.60923

Fee, Commission and

Brokerage Income

2,730,686

9.744911

Dividend Income

2,681,218

9.586492

Total

31,226,001 100%

%
Market
Share
13.7%

%
Growth
Rate

11.54881

15.6%

9.613279
17.3%

139.7648

BCG Matrix

Medium 0

Industry growth rate

High +20
Low -3

High 1.0

Relative market share position in the

industry
Medium .50

Low 0.0

Dividen
d
Income
Fee,
Commissi
on

Boston Consulting Group (BCG) Matrix

Relative Market Share

Market Growth

Dividend
Income

Interest
Income

Fee,
Bank
Charges

Space Matrix (Score Table)

Financial Strength

Rating

Return on Asset

Rating

Environmental
Stability

Leverage/Debt

Inflation Rate

-4

Net Income

Technological Changes

-3

Earnings Per Share

Competitive Pressure

-4

Net Profit Margin

Barriers of Entry

-2

Total

14

SBP Policy

-3

Industry Strength

Rating

Total
-16
Competitive Advantage Rating

Growth Potential

Market Share

-1

Financial Stability

Service Quality

-2

Ease of Entry in the

industry

Customer Loyalty

-4
-2

Resource Utilization

Technological
Knowledge

Profit Potential

Online Network/ATMS

-4

Total

16

Total

-13

x-axis = IS + CA = 3.10 - 2.60 = 0.50

y-axis = FS + ES = 2.80 - 3.20 = -0.40

SPACE Matrix
FS

Conservative

Aggressive

+6
+5
+4
+3
+2

+1

CA

IS
-6

-5

-4

-3

-2

-1

-1

+1

+2 +3

+4

+5

+6

-2
-3
-4

Defensive

-5

-6

Competitive

ES

The Internal-External Matrix

IFE Score is 2.83 and EFE Score is 2.66 hence ABL lies in Quadrant V
Note: IE Matrix is constructed on the basis of IFE and EFE Score only due to less available date

Grand Strategy Matrix

Rapid Market Growth
Quadrant 2

Quadrant 1

Weak
Competitive
Position

ABL
Quadrant 3

Quadrant 4

Slow Market Growth

Strong
Competitive
Position

Matrix Analysis

Alternative Strategies

SPAC BCG
E

IE Matrix
INT

B/Co
m

Forward Integration

Backward Integration

Horizontal Integration

Market Penetration

Market Development

Product Development

Diversification

Joint Venture

Div

GS

Count
s

2
1

4
1

Retrenchment

Divestiture

Liquidation
Mergers & Acquisition

0
X

STRATEGY ANALYSIS

Decision Stage
Quantitative Strategic Planning Matrix
Alternative Strategies
Recommendations

Quantitative Strategic Planning

Matrix
Key Factors

Weight

INTERNAL FACTORS

Strategy-I
AS

TAS

Strategy-II
AS

TAS

Govt. Intervention in banks matters

0.12

4.00

0.48

3.00

0.36

High Growth rate

0.14

4.00

0.56

3.00

0.42

Trained and motivated work force

0.09

3.00

0.27

4.00

0.36

Strong financial and lending capability

0.11

2.00

0.22

3.00

0.33

Largest online and ATM networks

0.10

4.00

0.40

2.00

0.20

SBP Monetary Policy and Regulations

0.08

3.00

0.24

2.00

0.16

High Inflation Rate

0.06

3.00

0.18

4.00

0.24

Power Crisis in the country

0.10

4.00

0.40

3.00

0.30

Law and Order Situation

0.07

3.00

0.21

2.00

0.14

High discount rates and lending

restrictions

0.08

4.00

0.32

2.00

0.16

Less savings of the people

0.05

3.00

0.15

4.00

0.20

Total..

1.00

EXTERNAL FACTORS

3.43

2.87

Possible Alternative Strategies

Strategy-I (Product Development)
Introduce new services within existing set up of the

bank
Provide consumer Banking services
Take initiative of Islamic Banking
Fast and innovative & secure methods of Cash
transfer
Diversify and enhance Bank A/C types and other
services
Strategy-II (Market Development)
Expand banks operations geographically
Banking services may be provided in rural areas
Those customers must be identified and attracted

who have capacity but never used bank services

Possible Alternative Strategies.

Contd
Strategy-I has 3.43 Total Attractiveness Score

(TAS)
And Strategy-II has 2.87 TAS
So Strategy-I is recommended for the Bank
according to QSPM
Strategy-I is the product development. Hence
Bank should diversify its services and introduce
new innovative, secure and high tech methods of
Financial Transitions with the convenience of the
customers
SME sector may be focused more for lending

Recommendation
Internal & External Audits (concept of financial

discipline, accountability, good corporate governance,

professionalism and impartiality)
Communications Skills. No ambiguity should be left.
Clear and comprehensive instructions at all levels of
hierarchy
Transparency in all matters especially in financing,
lending, recovery etc.
Lending focus must be on private sector instead of
public sector
SME sector must be given priority in all financial
matters
Aggressive marketing strategies in retail and
commercial banking
Institutionalization of Human Resource Management
(best man should be posted to best assignment,
refreshing courses, seminar on emerging banking and

Recommendation..
Contd
Research and Development facilities (Domestic

market research, economic analysis, strategic insight

of major economic and financial accords, international
markets knowledge, rigorous planning and
development, loss & prevention mechanism)
There should be central compliant cell in ABL in order
to reduce peoples complaints and foster the ratios of
productivity.
Commonness of E-commerce with the help of Internet
banking should allow flourishing in all branches.
Scope of Investment Banking is very much there and
bright as said by finance minister. Concrete efforts
should be made to initiate investment-banking
operations.

References
David, Fred, R Strategic Management Concepts

and Cases 10th and 13th Edition. Prentice Hall

International 2009.
www.abl.com.pk (Accessed on May 14, 2012)
http://www.mediamonitors.net/biopakbymuhkhan.
html (Accessed on May 14, 2012)
www.sbp.gov.pk (Accessed on May 14, 2012)
Retrieved May 15, 2012 www.yahoo.com/images
Retrieved May 15, 2012
http://www.google.com.pk/imghp?hl=en&tab=wi
www.finance.gov.pk (Retrieved May 15, 2012)
ABL Retrieved May 15, 2012
http://en.wikipedia.org/wiki/Allied_Bank_Limited

Questions and Further

Discussion ?

Have a nice weekend