Term Report

HBL (Habib Bank Limited)

Submitted By:
Muhammad Adnan Nazik
BSF1703669
Session: 2017-2021
Supervisor: Prof.Dr.Rana Tahir Shab (HoD Business Depart)

University of Education
Multan Campus, Lahore
Department of Economics and Business Administration
 Dedication

The Term report on HBL (Habib Bank Limited) dedicated to our parents and respectable
teachers.
 Acknowledgement
All praises to almighty Allah and our holy prophet Muhammad PBUH who gave me the
courage and patience for completion of this final report.

Our supervisor Sir Shehzad is the humblest person. Due to his support and untiring efforts this
marathon task is completed. He supported us in every situation during the research project. We
are grateful to our department as well because they give us opportunity to show our knowledge
and skills.

We are also very thankful to our family and friends for their support, love and care. Without their
support it would be a dream to complete a lengthy task.
 Executive Summary
HBL established operations in Pakistan in 1947 and moved its head office to Karachi Our first
international branch was established in Colombo, Sri Lanka in 1951 and Habib Bank Plaza was
built in 1972 to commemorate the bank’s 25th Anniversary. HBL has the largest Corporate
Banking portfolio in the country with an active Investment Banking arm. It encompasses product
offerings and services in Retail Banking and, in recent years, Consumer Banking as well.

Satisfying customers are the only way to stay competitive in today's Market
Place. The balancing act between what customers want and what the HBL can provide must be
optimized in order to maximize HBL’s long-term profits.

HBL is expanding its presence in principle international markets including the UK, UAE, South
and Central Asia, Africa and the Far East.

With a domestic market share of over 40%, HBL was nationalized in 1974 and it continued to
dominate the commercial banking sector with a major market share in inward foreign
remittances (55%) and loans to small industries, traders and farmers. International operations
were expanded to include the USA, Singapore, Oman, Belgium, Seychelles and Maldives and
the Netherlands.

HBL is currently rated AA (Long Term) and A-1+ (Short term). HBL is the first Pakistani bank
to raise Tier II Capital from external sources.
Contents
Acknowledgement...........................................................................................................................3
Executive Summary.........................................................................................................................4
1. Introduction of Sector..............................................................................................................7
The Muslim Commercial Bank Limited........................................Error! Bookmark not defined.
1.1. History...............................................................................................................................9
1.2. Mission Statement...........................................................................................................11
1.3. Vision Statement.............................................................................................................12
1.4. Core Values.....................................................................................................................12
1.5. Development...................................................................................................................13
1.6. Head Office.....................................................................................................................13
1.7. Circle Office....................................................................Error! Bookmark not defined.
2. Marketing Functions..............................................................................................................14
 Savings deposit accounts................................................................................................16
 Jumbo savings accounts..................................................................................................16
 High interest savings accounts........................................................................................16
 Rewards savings accounts...............................................................................................16
 Joint savings accounts.....................................................................................................16
 Student savings accounts................................................................................................16
2.2. Price:...............................................................................................................................17
2.3. Promotion:.......................................................................................................................17
2.4. Place:...............................................................................................................................17
3. Organizational Structure........................................................Error! Bookmark not defined.
3.1. Organizational Hierarchy:...............................................Error! Bookmark not defined.
3.2. Numbers of Employees:..................................................Error! Bookmark not defined.
3.3. Main Offices:...................................................................Error! Bookmark not defined.
3.4. Introduction of Departments...........................................Error! Bookmark not defined.
3.4.1. Operational Department..............................................Error! Bookmark not defined.
3.5. Comment on the Organizational Structure:.....................Error! Bookmark not defined.
4. Problem Statement:................................................................Error! Bookmark not defined.
4.1. Solution to that Problem:.................................................Error! Bookmark not defined.
5. Critical Analysis:...................................................................Error! Bookmark not defined.
5.1. Human Capital:...............................................................Error! Bookmark not defined.
5.2. Manufactured Capital:.....................................................Error! Bookmark not defined.
 5.3. Intellectual capital:..........................................................Error! Bookmark not defined.
6. Financial Analysis.................................................................................................................23
6.1. Ratio Analysis.................................................................................................................23
6.1.1. Liquidity Ratio............................................................................................................23
6.2. Vertical Analysis:............................................................Error! Bookmark not defined.
6.3. Horizontal Analysis:........................................................Error! Bookmark not defined.
7. Competitive:...........................................................................Error! Bookmark not defined.
8. HBL SWOT Analysis............................................................Error! Bookmark not defined.
8.1. Strength:..........................................................................Error! Bookmark not defined.
8.2. Weaknesses:....................................................................Error! Bookmark not defined.
8.3. Opportunities:..................................................................Error! Bookmark not defined.
8.4. Threats:............................................................................Error! Bookmark not defined.
9. Conclusion.............................................................................Error! Bookmark not defined.
Recommendation 40
 1. Introduction of Sector
The word “Bank” is said to have derived from the words “Bancus or Banque or Bank.” This
history of banking is traced to as early as 2000 B.C. Banking in fact is primitive as a human
society, for ever since man came to realize the importance of money as a medium of exchange,
the necessity of a controlling or regulating agency or institution was naturally felt. The priests in
Greece used to keep money and valuables of the people in temples. These priests thus acted as
financial agents. The origin of banking is also traced to early goldsmiths. They used to keep
strong safes for storing the money and valuables of the people. The first stage in the development
of modern banking, thus, was the accepting of deposits of cash from those persons who had
surplus money with them. goldsmiths used to issue receipts for the money deposited with them.
These receipts began to pass from hand to hand in settlement of transactions because people had
confidence in the integrity and solvency of goldsmiths. When it was found that these receipts
were fully accepted in payment of debts, then the receipts were drawn in such a way that it
entitled any holder to claim the specified amount of money in cash from goldsmiths. A depositor
who is to make the payment may now get the money in cash from goldsmiths or pay over the
receipt to the creditor. These receipts were the earlier bank notes. The second stage in the
development of banking thus was the issue of bank notes.
The goldsmiths soon discovered that all the people who had deposited money with them do not
come to withdraw their funds in cash. They found that only a few persons presented the receipts
for encashment during a given period of time. They also found that most of the money deposited
with them was lying idle. At the same time, they found that they were being constantly requested
for loan on good security. They thought it profitable to lend at least some of the money deposited
with them to the needy persons. This proved a profitable business for the goldsmiths. They
instead of charging safe keeping charges from the depositors began to give them interest on the
money deposited with them. This was the third stage in development of banking.
At the time of independence, there were 631 offices of scheduled banks in Pakistan, of which
487 were located in West Pakistan alone. As a new country without resources, it was very
difficult for Pakistan to run its own banking system immediately. Therefore, the expert
committee recommended that the Reserve Bank of India should continue to function in Pakistan
until 30th September 1948, so that problems of time and demand liability, coinage currencies,
exchange etc. be settled between India and Pakistan.
The non-Muslim started transferring their funds and accounts to India. By the end of June 1948,
the number of offices of scheduled banks in Pakistan declined from 631 to 225. There were 19
foreign banks with the status of small branch offices that were engaged solely in export of crop
from Pakistan, while there were only two Pakistani institutions, Habib Bank of Pakistan and the
Australian Bank. The customers of the bank are not satisfied with the uncertain condition of
banking. Similarly, the Reserve Bank of India was not in the favour of Government of Pakistan.
The Government of Pakistan decided to establish a full fledge Central Bank. Consequently, the
Governor General of Pakistan Quaid-e-Azam inaugurated the State Bank of Pakistan on July 1,
1948. Thus a landmark was made in history of banking when the State Bank of Pakistan assumed
full control of banking and currency in Pakistan. The banking structure in Pakistan compromises
of the following types:
 State Bank of Pakistan
 Commercial Bank of Pakistan
 Cooperative Banks
 Saving Banks
 Specialized credit institutions

Commercial banks have been the most effective mobilizers of savings and have been providing
short term requirements of working capital to trade, commerce and industry.

Up to December 31, 1973, there were 14 Pakistan commercial banks that financial all over the
country and in same foreign countries through a network of branches. All these commercial
banks were in January 1, 1974, and merged into the following five banks:
 National Bank of Pakistan
 Muslim Commercial Bank limited
 Habib Bank Limited
 United Bank Limited
 Allied Bank of Pakistan

The State Bank of Pakistan is the Central Bank of the country and was established on July 1,
1948. The separation of East Pakistan and its repercussion in the form of economic depression
has caused a lot of difficulties to the banking system in Pakistan. The network of bank branches
now covers a very large segment of national economy. The numbers of branches have increased
appreciably and there is now on branch of bank for every 3000 heads of population
approximately. There is done reasonable growth in deposits from the establishment of Pakistan.
Besides this growth, specialized credit and financial institutions have developed over the years.
The Government of Pakistan in the late 90’s introducing the need for the privatization of state
owned banks and companies. The private sector has accepted the challenge and the most of the
banks are privatized today. The State Bank of Pakistan issues the shares of these periodically.
Bank employees and other common peoples can also purchase these.
 Habib Bank Limited
1.1. History
Habib Bank Limited (Urdu: ‫ )حبیب بینک‬abbreviated as HBL, is a
Pakistani multinational bank based in Habib Bank Plaza, Karachi, Pakistan.
Founded in 1940 by the Habib Family, HBL became Pakistan's first commercial bank. In 1951 it
opened its first international branch in Colombo, Sri Lanka. In 1972 the bank moved its
headquarters to the Habib Bank Plaza, which became the tallest building in South Asia at the
time. The Government nationalized the bank in 1974 and privatized it in 2003; at that time
the Aga Khan Fund for Economic Development acquired a controlling share.
HBL major shareholding lies with the Aga Khan Fund for Economic Development (AKFED)
which is based in Geneva, Switzerland.
As of 2018, HBL has 1700+ branches with presence in over 25 countries spanning across four
continents. It is the largest company in Pakistan in terms of assets, and has repeatedly ranked top
Pakistani company in the Forbes Global 2000.[5][6] It is also Pakistan’s largest commercial bank,
with over 1,700 branches.
As of 2020, HBL has 20,795 permanent employees.

Mohammed Ali Jinnah, Pakistan's first Governor General, realized the importance of financial
intermediation while he was campaigning for the creation of a separate homeland for the
Muslims. He persuaded the Habib family to establish a commercial bank that could serve
the 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 British India and the subsequent partition.
After the formation of Pakistan in 1947, Habib Bank moved its headquarters to Karachi,
Pakistan's first capital, at the urging of Governor-General Jinnah. This gave Karachi its first
commercial bank of the newly formed Pakistan.
The Habib family would own and manage the bank until the Pakistan government nationalized it
on 1 January 1974.
On 13 June 2002, Pakistan's Privatization Commission announced that the Government of
Pakistan would grant the Aga Khan Fund for Economic Development (AKFED), a subsidiary of
the Aga Khan Development Network, majority ownership of HBL against an AKFED's
investment in the bank.[9]
In 2002, HBL's UK operation came close to being shut down due to regulatory issues with the
Financial Services Authority. The issue was resolved by converting the operations to a
subsidiary. Then Habib Bank Limited and Allied Bank of Pakistan merged their operations
(Habib contributed its 6 branches and Allied its 4 branches), into a new bank, called Habib-
Allied International Bank, in which Habib Bank has a 90.5% shareholding, while Allied Bank
has 9.5%.
In December 2003, the Government of Pakistan granted AKFED rights to 51% of the
shareholding in the bank against an investment of PKR 22.409 billion (US$389 million).[10] In
February 2004, Government of Pakistan handed over management control of Habib Bank to
AKFED. The Board of Directors was reconstituted to have four AKFED nominees, including the
Chairman and the President/CEO and three Government of Pakistan nominees.[11]
In 2013, the bank acquired Citibank Pakistan consumer business for ₨2 billion.[12]
In April 2015, the Government of Pakistan sold its 41.5% stake or 609 million shares in the bank
for $1.02 billion.[13] According to the finance ministry, the strike price of Rs. 168 per share
(compared to the floor price of Rs. 166 per share) was recommended by the Privatization
Commission Board. The bank's owners now comprise the Aga Khan Fund for Economic
Development (51%) and the remaining 49% of shares are in free float. CDC Group holds 5% and
the International Finance Corporation holds 3% while the rest of the shares are held by
individuals, institutions and funds.[14]
In June 2015, the bank acquired Barclays's Pakistan operations and absorbed the staff into the
HBL.[15]
On 18 April 2016, HBL received license to operate a subsidiary in Urumqi, Xinjiang, becoming
the first Pakistani bank to operate in China.[16] It has become the first Pakistani bank and one of
three banks from South Asia & MENA Region to open branches in China, with permission to
trade in local currency, RMB. [17]
In February 2018, HBL appointed senior banker, Muhammad Aurangzeb (formerly CEO Global
Corporate Bank – Asia Pacific at JP Morgan) as its President & CEO following early retirement
of Nauman K. Dar on 31 December 2017, after the bank was marred by a penalty of $225
Million (USD) for its non-compliance with risk management and anti-money laundering rules.
In 2020, HBL was designated one of the domestic systemically important banks (D-SIB) of the
year by the State Bank of Pakistan.
1.2. Mission Statement
1.3. Vision Statement
Enabling people to advance with confidence and success.

1.4. Core Values

 Integrity
 Customer Centricity
 Values People
 Progressive
 Excellence
 1.5. Development
After privatization, the growth in every department of the bank has been observed. Following are
some key developments:
 Launching of different deposit schemes to increase saving level.
 Increased participation on foreign trade.
 Betterment of branches and staff services level.
 Introduction of Rupee traveler Cheques and photo credit card for the first
time in Pakistan.

Extended use of information technology which is evident from the fact that there are
1650+ fully automated branches, more than 700 online branches, 2100+ ATMS in 27 cities
nationwide and a HBL continuously innovate new product.

1.6. Head Office

2. Habib Bank Plaza I.I. Chandigarh Road
3. Karachi – 75650 Pakistan.
4. Phone: 2418000 [50 Lines]
5. Fax: 021-921751
6. Administration
7. Credit Management
8. Investment Banking
9. Human Resource
10. Information Technology
11. Corporate Planning and Budgeting
12. Finance and Treasury
13. International Division
14. Inspection Division
15. Law Division
16. Marketing and Development
17. Trustee Division
1.7. Major Competitor
 JSBL
 MCB
 BOP
 Bank Alfalah
 Faysal Bank
 Allied Bank
 Meezan Bank

1.8. Marketing Functions

HBL Branch Banking consists of diverse business areas which leverage HBL's distribution

network. These businesses include Retail Products, Rural Banking, Retail Lending,

Commercial Banking and the overall branch network of the bank. This group constitutes the

core business and sales arm of the bank.

2. Commercial Banking

3. Rural Banking
4. Corporate Secretariat & Legal
5. Finance
6. Financial Institutions & Global Trade Services
7. Global Compliance
8. Global Operations
9. Global Treasury
10. Human Resources
11. Informational Technology & Security
12. Innovation and Financial Inclusion
13. Internal Audit
14. Islamic Banking
15. Marketing & Brand Management
16. Remedial & Structured Credits
17. Retail Banking
18. Risk Management
19. Service Quality

20. Organizational structure

 A well-developed and properly coordinate structure is an important requirement for the
success of any organization. It provides the basic framework within which functions and
procedures are performed. Any organization needs a structure, which provides a
framework for successful operations. The operation of an organization involves a number
of activities, which are related to decision making, and communication of these decisions.
These activities must be well coordinated so that the goals of the organization are
achieved successfully.

Product
Deposit Accounts:
A deposit account is a financial account maintained by a bank for a customer. Deposit accounts
are its main source of fund.
The HBL Bank mainly offers the following types of accounts.
1. Current Account
2. Saving Account
3. Term Deposit Account

a) Current Account:
A current account is a running account which is continuously in operation by the customers on
all working days of bank. The customers can withdraw the current deposits without previous
notice to the bank.
Followings are the accounts that are offered as current accounts:

HBL Freedom Account

Use your money as you please with HBL Freedom
Account. Rest free from worries and expand your
business with unmatched accessibility across
Pakistan.
HBL Business Value Account
 Unique transactional account for
Businessmen
 Up to 5.35% profit per annum*
 Profit calculated daily, paid every quarter
 No minimum balance requirement
 Nominal monthly maintenance charge of
Rs. 50
 HBL Debit Card and Inter Branch
Transaction System (IBTS) facilities
 Up to 10 Bankers Cheques free (at
minimum balance of Rs. 500,000)
  Funds transfer to any bank through HBL
Phone Banking

Basic Banking Account (BBA)

Can be opened with only Rs. 1,000
b) No
Saving Accounts:
minimum balance requirement
AnUpideal
to 2account for anyone
withdrawal who wants
and 2 deposit to keep aside some extra funds for emergencies. Rather
transactions
than keeping
free large amounts of money at home, MCB Savings Account allows you to secure your
every month
savings with us, providing principal security as well as a modest profit rate.
Unlimited withdrawals through HBL Debit
Card
Followings are the accounts that are offered as saving accounts:

Non-profit bearing
 Savings deposit accounts
 Jumbo savings accounts
 High interest savings accounts
 Rewards savings accounts
 Joint savings accounts
 Student savings accounts

c) Term Deposit Account:

Our Term Deposit products, in PKR & foreign currencies, offer attractive short to mid-term
investment options with flexibility, convenience and security. Various tenor options available so
that you can choose the one that suits your needs. With different profit pay-out options and
added credit facility our Term Deposits are an answer to your investment needs.

Price:

Different products and services have different prizes. But online banking is an additional service
available to bank customers which is free.  Any visitor to the site can apply to become a
customer, and any existing customer can sign up for online access to his/her bank account(s) at
no additional cost.

Promotion:
HBL provide different promotional offers with the following discount partner:

 FedEx Express
  Universal Cinema

 Burger Kings

 Pizza Hut

 Chagatai Lab

 Oregano Pizza

 Daraz.pk

Place:

HBL Bank Limited is one of the largest Banks in Pakistan with a total customer base exceeding
7 million. Renowned for its consumer-centric approach, the Bank has a vast branch network of
over 1650+ branches in Pakistan and abroad, in countries such as Sri Lanka, Bahrain and Dubai.
STRUCTURE OF HBL:
At present the Bank operates through one central and 23 Regional Offices and 1650+ branches,
all over Pakistan. The president and Executives Committee look after the affairs of the Bank.
Each Regional Head Quarter is headed by a Chief Executive and assisted by General Manager
Operations and General Manager Support Services. The Regional Head Quarter controls the
branches in their area. Overseas operations consist of 65 main branches, two affiliates, two
representative offices and two subsidiaries. President, from Head Office at Karachi controls the
officers of the Bank with the help of the senior management. Functional responsibilities of the
Banks are broken into seven groups known as 1) International Operations Group2) Corporate
Banking and Treasury Investment Group3) Retail Banking and Operation Group

Finance, Audit and Administration Group5) Assets Remedial Management Group6) Credit
Policy Group7) Corporate Bank, Financial Institutions and Project Finance Group. In
addition to the overall controlling authority, president also manages the International
Operations Group individually. While the Senior Executive Vice Presidents supervise rest of
the functional groups. Each Senior Executive Vice President is individually responsible for
the group which is assigned to him. At the level of provinces there are Regional Head
Quarters headed by Regional Chief Executives (RCE). Each RCE is assisted by GM
 operations and GM Support Services. Branches are also controlled by the RCEs. Circle
Offices of the past times have been removed to reduce Managerial Layers, which were
working under the control of Zonal Offices. This happened as a result of policy of beginning
new changes in the organizational structure.

Organizational Hierarchy chart:

 Chairman

President

Board of Directors

SEVP International SEVP Finance, Audit &

Operation Administration

SEVP Corporate Banking & SEVP Asset Remedial

Treasury Management

SEVP Retail Banking & SEVP Credit Policy

Information Technology

SEVP Corporate Banking, financial

institute & Project finance

Centralized Decision Making:

By looking at the organizational structure of HBL would be found that the structure at HBL is a
critical one. All the decisions are made at the top management level and the subordinates have to
obey these decisions. This trend in the decision making shows a pattern of rigidity in structure of
HBL.

Downward Communication:
Communication is the process by which information is exchanged and understood by two or
more people, usually with the interest to motivate or influence the behaviour of others in the
organization. Downward communication is the message and information sent from top
management to subordinates in a downward direction. Managers can communicate downward to
the employees through speeches, massages in HBL publications, information leaflets, tucked into
pay envelops material on bulletin boards, policy and procedure mandates. The same pattern is
followed at HBL. No doubt it’s a very traditional approach but it can create problems because it
ignores the receiver of the communication because the issuer of policies and procedures does not
ensure communication. In reality may the messages communicated downward are not understood
perfectly.
Chain of Command:
The chain of command is an unbroken line of authority that links all persons in an organization
and shows who reports to whom. By analysing the organizational structure, it can be found that
there is a scalar principle followed with in the Bank because each and every person knows to
whom can one report. The authority and responsibility for different tasks and duties are different,
as well as everyone knows the successive levels of management all the way to the top.

Authority and Responsibility:

The chain of command illustrates the authority structure of HBL. Authority is the formal and
legitimate right of the manger to make decisions, issues orders and allocates resources to achieve
organizational desired outcomes. By analysing the chain of command of HBL, one can come to
the conclusion that, as there is scalar pattern followed at the organizational setup of HBL
therefore it is implied that everyone in his position knows that what is one’s authority and what
is the responsibility and the authority it allocated.

Delegation:
Delegation is the process, which managers use to transfer the authority and responsibility to
position below in the hierarchy. Most organizations today encourage managers to delegate
authority to the lowest possible level to provide maximum flexibility to meet customer needs and
adapts to the environment. But at HBL no such system prevails the managers try to keep as much
of the authority as they can and if some authority is delegated it is sure that it will be misused.
Number of employees

HBL Profile: Habib Bank Limited

Ticker: HBL
Exchanges: KAR
2020 Sales: 30,900,000,000
Major Industry: Financial
Sub Industry: Commercial Banks
Country: PAKISTAN
Employees: 20795

Main offices:
Habib Bank Plaza I.I. Chandigarh Road
Karachi – 75650 Pakistan.
Phone: 2418000 [50 Lines]
Fax: 021-921751

Comments on the organizational structure:

The purpose of an organizational structure is to help in creating an environment for human
performance. It is then, a management tool and not an end in its own. Although the structure
must define the task to be done, the rules so established must also be designed in the light of
abilities and motivation of the human recourse available. By analysing the organizational
structure of HBL presence of the following elements can be found in its structure.
PROBLEMS Solving:
My study found various problems, which I think, so 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.
PROBLEMS:
These problems are: -
1. There is a lack of on-line information in the Bank about the changes taking place in the
world of Banking.
2. A customer cannot find any kind of journal or newspaper there.
3. In early days of month there is a great rush of customers, which cause inconvenience for
the officer concerned and cashier as well.
4. Separate cabins are not available for the staff.
5. A separate counter for ladies is not maintained there.

Critical analysis:
Financial analysis is the process of identifying the financial strengths and weakness of the firm
by properly establishing relationship between the items of balance sheet and profit and loss
account, in order to make rational decision in keeping with the objective of the organization, for
that purpose the management use analytical tools. To evaluate the financial condition and
performance of the business entity, the financial analyst needs to perform "check-up" on various
aspects of the business financial health tools frequently used during these checkups is a financial
ratio analysis, which relates two pieces of financial data by dividing one quantity by the other we
calculate ratios because in this way we get a comparison that may prove more useful than the
raw number by themselves. The business itself and outside providers of capital (creditors and
investors) all undertake financial statement analysis. The type of analysis varies according to the
specific interest party involved. The nature of analysis is depending at the purpose of analyst.
Financial Analysis:

Financial analysis (also referred to as financial statement analysis or accounting analysis) refers
to an assessment of the viability, stability and profitability of a business.

Ratio Analysis
Ratio analysis is important and old technique of financial analysis.
Liquidity Ratio
Liquidity ratios measure the short-term solvency of a firm. Liquidity ratio presents the picture of
the ability of the ability of the firm to pay its short-term obligations. The ratio holds different
meaning for creditors and owners of the firm.
Following are most common type of liquidity ratios used by analysts to determine the liquidity of
the firm:

a) Current Ratio:
The current ratio measures the bank’s the ability to meet its short-term obligation. It is calculated
by dividing the current assets over current liabilities.

Current Ratio = Current Assets / Current Liabilities

Years 2020 2019 2018

Current Assets 3,849,062,818 3,227,132,397 3,025,853,150

Current Liabilities 3,583,567,571 3,002,380,885 2,826,600,939

Current Ratio 1.07 1.07 1.07

Interpretation:
Here Current Assets = Current Liabilities, then Ratio is equal to 1.0 -> Current Assets are just
enough to pay down the short-term obligations.
b) Working Capital Ratio:
Working capital ratio = Current Assets-Current liabilities

Years 2020 2019 2018

Current Assets 3,849,062,818 3,227,132,397 3,025,853,150

Current Liabilities 3,583,567,571 3,002,380,885 2,826,600,939

Working capital 265,495,247 224,751,512 199,252,211

ratio

Interpretation:
The working capital is rapidly increasing from 2018 to 2019. Because the current assets of HBL
are rapidly increase. In 2020 it also increases but not in a rapid as it grows 2019 to 2018.

Leverage Ratio:
These ratios show the capital structures of the firm. Through these ratios we find that how the
firm finance their activities. It is more important for the lender to assess that the firm can repay
the loan amount or not. Increasing debt increases the likelihood of bankruptcy of the firm.

(A)Time Interest Earned Ratio:

Times Interest Earned = EBIT/Interest Expense

Years 2020 2019 2018

EBIT 65,250,250 32,195,003 26,593,407

Interest Expense 95,448,928 93,289,876 74,977,880
Times Interest Earne 0.63 times 0.34 times 0.35 times
d Ratio

Interpretation:
The Time Interest earned ratio of HBL is better. The ratio is consistently is increasing. This
graph is showing that EBIT is enough to cover the interest expenses.

b) Debt ratios:
Debt ratio = Total liabilities/Total assets * 100
 Years 2020 2019 2018

Total liability 3,583,567,571 3,002,380,885 2,826,600,939

Total asset 3,849,062,818 3,227,132,397 3,025,853,150
Debt ratio 93.10% 93.03% 93.41%

Interpretation
Debt ratio is measure of debt with the total assets. The graph shows that the debt ratio is
consistently decreasing that indicates the dependence on debt is decreasing and in 2019, it is at
the lower level. From 2018 to 2019 its little decreasing. In 2020 the total debt was the almost
93% of total assets.

c) Debt/Equity ratios:
Debt/Equity ratio = Total debt/Total equity

Years 2020 2019 2018

Total debt 3,583,567,571 3,002,380,885 2,826,600,939

Total Equity 260,943,687 220,354,516 195,241,731
Debt/Equity ratio 13.73 13.62 14.47

Interpretation
As we already observed that the debt is decreasing from 2018 to 2019, in this graph we compare
it with the equity. We find the consistent increase in the debt-to-equity ratio. In 2018, it was at
the higher level. The debt exceeded the equity.

Profitability Ratio:
That are used to assess a business ability to generate earning relative to its revenue, operating
costs, balance sheet, assets, and shareholder equity over time, using data from a point in time.

a) Net Profit Margin:

Net Profit Margin = Net Profit/Total Revenue *100

Years 2020 2019 2018

Net Profit 30,913,349 15,499,795 12,440,943

 Total Revenue 130,104,318 101,323,300 81,675,804
Net Profit Margin 23.76% 15.29% 15.23%

Interpretation
The net profit margin is declining from 2018 to 2020, as shown in graph. In 2020, the net profit
margin is 23.76 % which is higher in selected three years.

b) Return on Assets:
ROA = Net Income/Total Assets *100

Years 2020 2019 2018

Net Income 160,699,178 125,484,879 101,571,287

Total assets 3,849,062,818 3,227,132,397 3,025,853,150
ROA 4.17% 3.88% 3.35%

Interpretation
It is simple ROA, which calculate through net income and total assets. It showing the consist
increasing in the return of assets.

c) Operating Income Margin:

Operating Income Margin = Operating profit/ Total Revenue *100

Years 2020 2019 2018

Operating Profit 53,030,636 28,880,922 21,584,829

Total Revenue 130,104,318 101,323,300 81,675,804
Operating Income 40.76% 28.50% 26.42%
Margin

Interpretation
Graph show a increasing in the Revenues. In 2020 HBL generate enough revenue but in 2018 the
provision of non-performing loans declines the profit.

d) Return in Total Equity:

Return in Total Equity = Net income/Average Stockholder Equity *100
 Years 2020 2019 2018

Net income 160,699,178 125,484,879 101,571,287

Average Stockholder 260,943,687 220,354,516 195,241,731
Equity
Return in Total 61.58% 56.94% 52.02%
Equity

Interpretation
Return on Equity in the year 2018 is 52.02 % in the year 2019 it is 56.94 % and in last year it is
61.58% which shows an increasing trend to the greater extent from the year-on-year basis as well
as it is meet the standard of banking industry.

e) Gross Profit Margin:

Gross Profit Margin = Gross Profit/Total Revenue *100

Years 2020 2019 2018

Gross Profit 30,913,349 15,499,795 12,440,943

Total Revenue 130,104,318 101,323,300 81,675,804
Gross Profit Margin 23.76% 15.29% 15.23%

Interpretation
This ratio also shows that the increases in revenue of the HBL Bank. In 2018, it nearly 15% but
after 2018 it starts to increases and in 2020 it merely 23%. Because the revenue of the HBL
increase so the gross profit also increases.

Activity Ratios:
Activity ratio is the metric which determine the ability of a company to its balance sheet account
into revenue.

a) Total Asset Turnover:

Total Asset Turnover = Interest/Total Assets

Years 2020 2019 2018

Interest 95,448,928 93,289,876 74,977,880

Total Assets 3,849,062,818 3,227,132,397 3,025,853,150
 Total Asset Turnover 0.024times 0.028 times 0.024times

Interpretation:
Total asset turnover ratio measures the effectiveness in generating the revenue from its
investment in total assets. The graph shows the increase in the total asset turnover ratio.

b) Fixed Asset Turnover:

Fixed Asset Turnover = Interest/ Fixed Assets

Years 2020 2019 2018

Interest 95,448,928 93,289,876 74,977,880

Fixed Assets 89,190,210 80,462,410 64,083,277
Fixed Asset Turnover 1.07 times 1.15 times 1.17 times

Interpretation:
The fixed asset turnover ratio measures the company effectiveness in generating sales from its
investment in fixed assets. The graph shows the decline in fixed assets turnover. It means that the
generation of revenue on the fixed assets is declining. The HBL is not using its fixed assets
effectively.

Market Ratios:

a) Earning Per Share:

Earnings Per Share = Net Income/Avg. no. of shares outstanding

Years 2020 2019 2018

Net income 160,699,178 125,484,879 101,571,287

Avg. no. of shares 12390488 21086556 23752035
outstanding
EPS 21.47 10.27 8.04

Interpretation
The earning per share was 4.27 in 2018, which increases in 2019, and was 5.95. But in 2020 its
jump up-to 12.96 and give profit to shareholder.

b) Price/Earnings Ratio:
Price/Earnings Ratio = Market Price Per Share/EPS
 Years 2020 2019 2018

Market Price Per 310.6 153 127.3

Share
EPS 21.47 10.27 8.04
Price/Earnings ratio 14.43 14.89 15.83

Interpretation
The P/E ratio was 15.83 in 2018. In 2019, it decreases due to the decline in market price so the
shares of the HBL look more attractive in 2018 because the P/e ratio is higher but in 2020 as we
already have seen in DPS and EPS calculation the P/E ratio went in less. In 2020, HBL has to
bear the loss so the DPS and EPS declined so the P/E ratio also declined.

Vertical Analysis:

Vertical Analysis of Balance sheet:

Balance Sheet 2020 2019 2018

Assets
Cash and balances 9% 11% 9%
with treasury banks
Balances with other 1% 1% 1%
banks
Lending’s to financial 0% 1% 1.%
institutions
Investments 50% 42% 45%
Advances 31% 36% 35%
Fixed assets 2% 2% 2%
Intangible assets 0% 0% 0.25%
Deferred tax assets 0% 0% 1%
Other assets 2% 4% 3%
100% 100% 100%
Liabilities
Bills payable 1% 0% 1%
Borrowings 15% 12% 18%
Deposits 78% 81% 75%
Liability against asset 0% 0% 0%
Sub-ordinated loan 0% 0% 0%
Deferred tax 0% 0% 0%
liabilities
Other liabilities 3% 4% 4%
97% 97% 98%
Net Assets 3% 3% 2%
Share capital 5% 6% 7%
Reserves 27% 30% 33%
Surplus on 13% 11% 7%
revaluation of assets -
net of tax
Unappropriated profit 52% 56% 52%
3% -3% 1%

Vertical Analysis of Income Statement:

Income Statement 2020 2019 2018
Mark-up earned 100% 100% 100%
Mark-up expensed 52% 60% 50%
Net mark-up income 47% 39% 49%
Non-mark-up income 11% 9% 12%
Total income 59% 48% 61%
Non-mark-up -35% -36% -45%
expenses
Profit before 24% 12% 16%
provisions
Provisions & write 4% 1% 3%
off
Profit before taxation 19% 11% 13%
Taxation -8% -0.5% -5%
Profit after taxation 11% 6% 7%
Horizontal Analysis of Balance sheet:

Balance Sheet 2020 2019 2018

Assets
Cash and balances 134% 131% 100%
with treasury banks
Balances with other 132% 96% 100%
banks
Lending’s to financial 58% 88% 100%
institutions
Investments 140% 99% 100%
Advances 113% 108% 100%
Fixed assets 139% 125% 100%
Intangible assets 132% 115% 100%
Other assets 105% 125% 100%

Liabilities
Bills payable 109% 69% 100%
Borrowings 103% 73% 100%
Deposits 132% 114% 100%
Sub-ordinated loan 223% 223% 100%
Deferred tax 0% 0% 0%
liabilities
Other liabilities 114% 109% 100%

Net Assets 133% 112% 100%

Share capital 0% 0% 0%
Reserves 118% 102% 100%
Surplus on 79% 78% 100%
revaluation of assets -
net of tax
Unappropriated profit 136% 11% 100%

Horizontal Analysis of Income Statement:

Income Statement 2020 2019 2018

Mark-up earned 168% 187% 100%
Mark-up expensed 154% 132% 100%
Net mark-up income 167% 118% 100%
Non-mark-up income 123% 114% 100%
Total income 158% 122% 100%
Non-mark-up 127% 124% 100%
expenses
Profit before 245% 121% 100%
provisions
Provisions & write -243% -66% 100%
off
Profit before taxation 245% 133% 100%
Taxation 241% 146% 100%
Profit after taxation 248% 124% 100%
Competitive:
The competitive advantage of HBL is that he conceptualization of organization competitive
advantage is often determined by the nature of the organization being investigated. In financial
institutions or studies that measured competitive advantage using financial measures.
Several previous studies have attempted to conceptually discuss banking institution’s
competitive advantages with respect to its causative factors generally. Some of these studies
showed encouraging levels of effectiveness in many dimensions of composite marketing
strategies with adequate managerial recommendations.
The financial measures are mostly characterized with Return on Assets (ROA) and Return on
Equity (ROE) to measure yearly turn-out profit of the company. They are used as metrics when
competitive advantage is investigated as dependent variable. Creative product development
process best explained the non-financial measure. Responsiveness to customers, organization
core competence and cost effectiveness are also example of the non-financial measures of
competitive advantage and when it is mostly investigated as independent variable. The
relationship between the measures of the competitive advantage and the position of the construct
in the conceptual model is also an interesting niche for research exploration.

SWOT ANALYSIS HBL:

The acronym SWOT stands for a firm’s internal Strengths and Weaknesses and its external
Opportunities and Threats. The purpose of such analysis is to build on company’s strengths in
order to exploit opportunities and counter threats and to correct company’s 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, both internal and external analyses of HABIB BANK
LIMITED are outlined:
INTERNAL ANALYSIS:
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.
STRENGTH:
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:
1. HABIB BANK is a well-established bank enjoying long history of over 65 years of
experience and profitable operation.
2. 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.
3. HBL is the largest private bank in Pakistan now and people trust is very high.
4. It has the largest branch network among private banks of Pakistan.
5. HBL is the market leader in introduction of e-banking and it has the largest.
6. HBL was rated the best domestic bank for two consecutive years of 2000 and 2001 by
Euro money, a leading international publication.
7. HBL has forged strategic alliances with international banks for expanding its network
further, both locally and internationally.
8. 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.
9. 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.
10. Excellent branches appearance gives an edge to HBL over other banks. Branches are
well furnished even in less developed areas where other banks’ branches give a poor
view.
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.
1. Mission of HBL is not well defined.
2. 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.
3. Now as it is a privatize bank that is why GOVERNAMENT support to HBL decreased as
it was in past.
4. Employees at branch level are not properly motivated to work by heart. They take the all-
routine activities as a boring job.
5. 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.
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.
OPPORTUNITIES:
An opportunity can be defined as a change in external environment which if
properly exploited with the organizational strengths will result in enhanced
sales, market share, or income. Using its strengths, HBL can avail the
following opportunities:
1. It can introduce debit card system or may convert the existing ATM cards into a complete
debit card.
2. 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.
 3. 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 Hundis 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.
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 HBL’s
external environment,
the following potential threats exist:
1. The frequent reduction on 6-month and 12-month Treasury Bills discount rates by SBP
may create pressure on the banks profitability.
2. The low discount rates are also negatively influencing the advances rates which may
affect the bank profits from the other side.
3. 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.
Conclusion:
I concluded that no doubt bank is trying to give its best efforts to develop the organization as a
whole but consumer banking should expand its opportunities, customers want to be comfortable
by the products and services provided by bank that will give huge profit to bank. Customers are
facing main problems to pay the high mark-up rate on credit card, running finance, demand
finances other loans. HBL should introduce a new policy in which they offer suitable rate to
customer as well as adopt discount policy. Bank should provide relieve to customers in buying
any product or service like CDR, TRD, online transfer etc. As per bank policy HBL staff should
free the customer in 4-6 minutes. So, they should work more efficiently. HBL make a new
strategy to overcome its weakness.

Suggestion and Recommendation:

Recommendation I Propose

1) I will give following suggestions for the better function of the Bank:

2) The management should provide better arrangement for the employees.

3) The daily newspapers and journals should be provided to the employees and
customers visiting there.

4) A separate hajj applications acceptance counter should be provided to overcome

inconveniences faced by the customers.

5) A separate ladies counter should be there

6) The Bank management should be very careful while granting the loans.
 7) Personal interests should not be given importance and customers

8) 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.

9) Online Banking should be introduced in all the branches.

10) Aggressive publicity campaign must be introduced through press and Electronic
media for new products and scheme by initiating vigorous marketing policy.

11) New talent / professionals should be hired to cope with the competitive demand
in the industry.

12) Information technology should be introducing in all the branches to enhance the
efficiently.

13) The commission on government Rashed enhanced / made rational to increase

the Banks profitability.

14) The financial statement should be made more transparent and reliable.

15) Consumer financing should be initiated to capture the market share.

16) Employee’s induction, promotion and transfer should always be made on merit.

17) To motivate the employees their remuneration / salaries should be made at par
with top tier Banks.

Annexes:
 www.hbl.com.pk
 HBL Bank Annual Report 2019
 HBL Bank Annual Report 2020
 www.google.com.pk
 www.wikipedia.com
 https://www.investopedia.com/
Financial Statements:
As at December 31, 2020
Assets 2020 2019 2018

Cash & balances with treasury bank 375,280,120 367,593,717 279,460,688

Balances with other banks 56,533,829 41,248,554 42,642,022
Lending to financial institution 30,154,193 45,303,199 51,277,336
Investments-net 1,948,576,822 1,379,607,379 1,390,052,464
Advances –net 1,223,510,222 1,166,956,994 1,080,440,220
Operating fixed assets 89,190,210 80,462,410 64,083,277
Deferred tax assets 0 0 7,865,361
Other assets-net 115,404,542 136,870,799 109,461,065
Total Assets 3,849,062,818 3,227,132,397 3,025,853,150
Liabilities
Bills payable 46,434,199 29,681,108 42,460,568
Borrowings 544,107,826 382,206,306 523,319,055
Deposits and other account 2,830,371,390 2,437,597,169 2,137,293,065
Sub ordinate loan 22,356,000 22,360,000 9,990,000
Liabilities against assets subjected to 0 0 0
financial leases
Deferred tax liabilities 10,387,859 6,189,687 0
Other liabilities 129,910,297 124,346,615 113,538,251
Total Liabilities 3,583,567,571 3,002,380,885 2,826,600,939

Shareholder equity
Share capital 14,668,525 14,668,525 14,668,525
Reserve 72,062,025 66,260,511 64,435,243
unappropriated profit 138,208,223 114,550,097 101,606,320
Total equity attributable to the equity 260,943,687 220,354,516 195,241,731
holders of the Bank
Non-controlling interest 4,551,560 4,396,996 4,010,480
Surplus on revaluation of assets-net 36,004,914 24,875,383 14,531,643
assets
Total Liabilities and share-Capital 265,495,247 224,751,512 199,252,211
Unconsolidated Profit and loss account
For the year ended December 31, 2020
2020 2019 2018

Markup/return/interest earned 271,237,258 258,113,896 165,286,803

Markup/return/interest expensed 141,132,940 156,790,596 83,610,999
Net markup 130,104,318 101,323,300 81,675,804
Non markup/interest income 130,104,318 101,323,300 19,895,483
Fees, commission 18,795,739 20,447,851 18,058,336
Dividend income 489,303 586,353 985,867
Income from dealing in foreign (161,688) 1,657,595 (2,392,862)
currencies
Gain on sale of securities 7,054,874 (2,657,256) 1,029,880
Other income 375,597 829,310 398,483
Total non-markup/ interest income 30,594,860 24,161,579 19,895,483
Total income 160,699,178 125,484,879 101,571,287

Non markup / interest expenses

Administrative expenses 94,018,405 92,236,328 77,380,591
Other provision –net 1,109,730 573,492 (2,898,437)
Other charges 320,793 480,056 495,726
Total non-markup / interest expenses 95,448,928 93,289,876 74,977,880
Profit before taxation 53,030,636 28,880,922 26,593,407
Taxation 22,117,287 13,381,127 9,143,886

Profit after taxation 30,913,349 15,499,795 12,440,943

Basic and diluted earnings per share- 21.06 10.45 8.22
after tax