PROPOSAL –REPORT

Habib Bank Limited (HBL)

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Table of Contents

Organization Background ............................................................................................................................. 2

Organizational Structure (Sana) .................................................................................................................... 3

Environmental Analysis (Sahrish& Urooj) ................................................................................................... 4

Major Problems ............................................................................................................................................. 4

Minor Problems ............................................................................................................................................ 6

Tentative Table of Contents for Final Report ............................................................................................... 8

Appendix ....................................................................................................................................................... 8

Tentative Interview Schedule........................................................................................................................ 8

Organization Background
Habib Bank Limited was the first commercial bank to be established in Pakistan in 1947 and is

the nation’s largest bank today. Over the years, HBL has grown its branch network to over 1,700

branches and +2,100 ATMs globally, serving 14 million customers and clients.

HBL is a leading full-service commercial bank. The key areas of its operations are Branch

Banking, Corporate & Investment Banking, Treasury, SME & Rural Banking, Financial

Institutions & Global Trade Services, Transaction Banking and Islamic Banking.

The Branch Banking business is the spine of the Bank, positioning HBL as the largest retail bank

in Pakistan catering to all market segments. HBL Corporate & Investment Banking Group is a

leading provider of financial services to multinational and local corporate clients while the bank

also has the largest Treasury operations in Pakistan.

HBL is shaping the future through a paradigm shift as a ‘Technology company with a banking

license’ and used multiple digital channels to deliver service to its customers in a faster, cheaper

and more efficient way.

As the leading financial intuition of Pakistan, HBL is at the forefront of all development

initiatives which includes growth of priority sectors and targeting the unbanked population in the

country. The Bank remains committed to its objective of financial inclusion for all sectors of

society, across Pakistan. The Bank is already playing a leading role in enhancing gender

diversity through ensuring the access of women to the financial sector.

Organizational Structure
Industry Overview

The Pakistan banking industry constitutes a total of around 31 banks, of which five are public-

sector and four are foreign, while there are 22 local private banks. Most of the banking business

is concentrated in a select few banks in the industry.

HBL is the largest bank of Pakistan with a total deposit base of Rs 2.02tn as of Dec-18 followed

by National Bank of Pakistan with a total deposit size of Rs 2.01tn.

The banking industry is regulated by the State Bank of Pakistan (SBP), which governs local

banks under the ambit of its prudential regulations. Moreover, the banks also must comply with

the international Basel III standards. Overall, the potential in this sector is huge.

HBL - Major Problems

Enlisted below are few tentative statements of major problems faced by HBL:

1. Loose controls & due diligence processes: HBL is a legacy bank, having its footprint even

before the independence of the country. The accounts opened then have not been subject

to proper risk assessment and due diligence processes which now pose a threat to the bank’s

business as these accounts are prone to breach of Anti-Money Laundering Act & FATF

regulations. Increasing regulations by State Bank of Pakistan has made it much difficult to

bring new accounts on board since scrutiny of customers is costing multifold to the bank.

HBL lacks the necessary technology, skills and perhaps the mindset of due diligence. This

has costed the bank a penalty of $225 million when the Department of Financial Services

(DFS) of New York State imposed a fine on HBL New York branch for loose controls &
 due diligence processes. This challenge is currently a top of the mind issue for the Top

management and all strategies, budgets and long term and short-term plans are made in

lieu of this challenge.

2. Decision making concentrated at the Top: With a staff of 20,092 (As of Dec 31 2019), HBL

struggles to keep all employees engaged in decision making of the organization. The

culture is such that all key strategic business decisions are taken at the highest level which

usually includes the BOD and the Executive committees. The final verdict is then cascaded

down to the lower tiers of management leaving the employees with almost no sense of

ownership. In 2018, a Mercer’s employee engagement survey was conducted to gauge the

overall engagement levels of the employees at HBL. Although the overall engagement

level came out to 78% which was ahead of Mercer’s 74% global average, there still seems

to be an apparent gap in employees’ commitment to the organization, lower morale and

consequently a very high employee turnover.

3. Lack of mutual trust between departments & hoarding of information: Because of the

breadth of organization, there is more conflict rather than cooperation between

departments. Whilst the revenue generating departments like Treasury, Retail Banking,

Corporate & Investment Banking push towards maximizing revenues to achieve their

Business KPIs, we see a rift coming from the support functions like Risk, Global

Compliance, Audit & Global Operations who play the role of devil’s advocate. The

business functions therefore hoard information or disclose selective information to the

support functions to avoid delays and achieve their optimum revenue targets. Hence,

departments concentrate on their personal KPIs and departmental goals instead of

collectively working to achieve the organization’s collective vision.

 4. Redundant Processes/Resistance to Change: Most of the front-end staff in HBL branches

are relatively older, aged between 45-60 years who have been with the bank for a couple

of decades. Such employees bring their experience to the organization however they are

change-resistant and do not adapt to changes (technological, managerial, strategic change)

very easily. Redundant processes coupled with fixated mindsets & looser controls to

monitor, exacerbate the situation to upgrade the work standards in line with the changing

landscape.

HBL - Minor Problems

1. Increasing Costs: HBL has taken countermeasures to deal with loose controls & due

diligence (Major Problem #1) by hiring PricewaterhouseCoopers to transform bankwide

processes, enabling the bank to be more compliant and prevent further penalties coz of

weak processes. This has costed the bank PKR 2 billion which is an unbudgeted cost

hurting the financials of the company. Moreover, inclining interest rates, inflation and

adverse monetary conditions are some other reasons leading to increasing costs.

2. Low profitability: With depreciation of Pak rupee, the financial penalty imposed by DFS

New York is now costing much more. This coupled with the increasing costs of bringing

in transformation with PwC & lesser revenue due to stringent processes of customer

onboarding, leads to significant drop in HBL’s profitability.

3. Service Quality is poor: The trickledown effect of fixated mindsets and resistance to change

is poor quality of customer service.

4. Capacity constraints: The spillover effect of redundant/slow processes is failing to operate

at the optimum capacity. As employee morale remains low, there is high turnover in
 branches which leads to numerous empty positions. Because of dead slow HR processes,

the vacant positions take a while to be occupied often (3-4 months) and the burden is often

shared by the existing employees, adversely impacting the quality of customer service and

employee motivation.

5. Retention of employees: Because of the problem mentioned above, it becomes very

difficult for HBL to retain employees. There is an increased cost to hire someone externally

and train them accordingly.

 Appendix

Tentative Interview Schedule

Tentative Table of Contents for Final Report

Introduction  HBL Background

 Operations, Vision, Mission and Strategy.

HBL Internal  Cross functional analysis; Internal strengths and weaknesses

Environment analysis

HBL External  Competitive analysis

Environmental Analysis  SWOT Analysis (social, economic, culture, government, technical,

demographic)

Minor and Major  Identification of all minor problems

Problems  Identification of one major problem through root cause analysis

Financial and Strategic  Analysis of Financial Performance

Analysis  Strategy planning, implementation and evaluation, proposed strategic

alternatives