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Evaluation Criteria Result
Report writing Pass
Presentation & Viva voce
Final Resultt
www .VUsol utio ns.bl og spot. co m
V irtu al Un iversity of P ak istan
Evalu ation Sh eet for In ternsh ip Report
S prin g 2 011
F IN I619: In t e r n s h i p Re po r t (F in a n c e ) C r e d i t H o u r s : 3
Name of Student: VUsolutions
Students ID:
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AN INTERNSHIP REPORT ON HABIB BANK
4th semester
August 5, 2011
VIRTUAL UNIVERSITY
DEPARTMENT OF BUSINESS MANAGEMENT SCIENCES
VVIIRRTTUALUAL UNUNIIVVEERRSSIITTYY OFOF PPAAKKIISSTTANAN
A REPORT SUBMITED IN PARTIAL FULFILLMENT OF THE
REQUIREMENT FOR THE DEGREE OF
MASTER IN BUSINESS ADMINISTRATION (MBA)
LETTER OF UNDERTAKING:
LETTER OF INTERNSHIP:
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4.ACKNOWLDGEMENT
I am very grateful to Almighty Allah, the most merciful and beneficial who gave
me encourages completing this task and made me able to complete the work accessible in
the report. I am also thankful to my parents whose prayers make possible to reach this
stage.
I am highly thankful to my instructor & VUsolutions team who guides me for thecompletion of this report along with I am thankful to my fellows who helped me and gave
me own precious time to complete this report.
I am also very thankful to the staff of Habib Bank Water Works Road Branch,
Jarawala particularly to RIA Shahzad (branch manager) who helped and guided me
throughout this whole work.
It was an honor for me to learn and work with:-
Mr. Ria Shahzad (Branch Manager)
Mr. XYZ (Cashier)
Mr. DEF (Admininstrator)
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5.EXECUTIVE SUMMARY
Every student of master has to practically work for six to eight weeks for more
learning of theoretical concept which he read during the session. It is very helpful duringpractical life and awareness about the economy of the country. This purpose is to explain
the student with practical work that how to apply what they have learnt in practical work.
It is nice opportunity for the student to have shut relationship in theoretical concept and
practical work.
I got the chance to get my internship from one of the renowned bank of Pakistan
The Habib Bank Limited, Pakistan, it was a nice opportunity for me to apply my
theoretical work and learn from seniors having years of experience. All the efforts on theway are summarized in shape of this Internship Report. Internship Report contains the
Short History of Banking, Banking in Pakistan, Introduction of Habib Bank Limited,
Organization Breakdown structure, Organization Hierarchy Chart, Introduct ion of
different departments.
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w w w . V U s o l u ti o n s.b l o g sp o t . c o m
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T A B L E OF CON TE N ET S
ACKNOWLDGEMENT -------------------------------------------------------------------------- 3EXECUTIVE SUMMARY ----------------------------------------------------------------------- 4
TABLE OF CONTENETS------------------------------------------------------------------------ 6EVOLUTION OF BANKING: ------------------------------------------------------------------- 7
BANKING IN PAKISTAN: ---------------------------------------------------------------------- 7ABOUT HABIB BANK LIMITED: ------------------------------------------------------------- 8
BRIEF HISTORY: ------------------------------------------------------------------------------ 8ORGANIZATIONAL CHART: --------------------------------------------------------------- 9
BOARD OF DIRECTORS: ------------------------------------------------------------------ 10ORGANIZATIONAL STRUCTURE:------------------------------------------------------ 10
VISION, MISSION AND VALUES: ------------------------------------------------------- 10Vision: --------------------------------------------------------------------------------------- 10
Enabling people to advance with confidence and success. ---------------------------- 10Values:--------------------------------------------------------------------------------------- 10
Our values are the fundamental principles that define our culture and are brought to
life in our attitude and behaviors. It is these values that make us unique andunmistakable. Our values are defined below: ------------------------------------------- 10
DEPARTMENTS & RESPONSIBILITIES: ----------------------------------------------- 11
AWARDS: ------------------------------------------------------------------------------------- 59
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6.EVOLUTION OF BANKING
This history of banking is traced to as early as 2000 B.C. The priests in Greece
used to keep money and valuables of the people in temples. 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 goldsmiths used to issue receipts for the money and other
valuable assets deposited with them. These receipts could be used for 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 from goldsmiths. A depositor who is to make the payments 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.
BANKING IN PAKISTAN:
I observed during my internship was that I came to known the historical
background of Banking & Financial sector and its improvement and growth since the
formation of Pakistan.
At the time of partition there were only 631 bank branches in area which came
under Pakistani control. But due to blood shed and violence at large scale, most of the
branches were closed. At that time Bank of India was acting as central bank for both
countries and same currency notes were used in both territories. But Reserve Bank of
India was biased and Set down Pakistan on many occasions such as the issue of funds
transfer etc.
Thus some drastic steps were taken in government sector for the improvement of
overall position. The private sector also responded positively. Some of the steps taken by
the government in this regard were as under:
Inauguration of State Bank of Pakistan (SBP) on 1st July, 1948.
Setting up of National Bank of Pakistan in November.
Banking Companies Ordinance 1962 for protection and guidance to banks.
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Establishment of specialized banks, such as ADBP (1952);
o HBFC (Nov, 1952)
o P1CIC (Oct, 1957)
o IDBP (Aug. 1961)
o NDFC (Jan, 1973)
In 1990 the government decided to denationalize all the nationalized institutes.
For this purpose, amendments were made to Nationalization Act 1974 and two
nationalized banks were privatized. Along with this a permission to open banks in private
sector was also granted.
The- privatized banks are;
o MCB taken up by a private group in April, 1991
o ABL taken up by its own employees in September, 1991.
o UBL taken up by UAE party in 2002.
o December 29, 2003 HBL was taken by AKFED
ABOUT HABIB BANK LIMITED:
BRIEF HISTORY:
HBL was the first commercial bank established in 1947. HBL is one of the largest
commercial bank of Pakistan. It accounts for a substantial share (20%) of the total
commercial banking market in Pakistan with a network of 1,705 domestic branches; 55
overseas branches in 26 countries spread over Europe, the Middle East, Far East, Asia,
Africa and the United States; 3 HBL wholly owned Subsidiaries namely Habib Bank
Financial Services (PVT) LTD. Karachi, Habib Finance International LTD (Hong Kong)
and Habib Finance Australia Ltd. Sydney; 2 Joint Ventures namely Habib Nigeria Bank
Ltd. (40%) and Himalayan Bank Ltd. (20%) and 2 representative offices in Iran and
Egypt. HBL is currently rated AA+ (Long term) and A1+ (Short term)*. It is the first
Pakistani bank to raise Tier II Capital from external sources.
Business Operations
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1. Banking Sector Overview
2. HBls Performance Overview
3. Products and Services
Personal Banking
Corporate Banking
Online Services
. Virtual Banking
Islamic Banking
4. HBLs Competitive Strategies
ORGANIZATIONAL CHART
PRESIDENT
BOARD OF DIRECTOR
MEMBER EXECUTIVE BOARD
REGIONAL CHIEF
ZONAL CHIEF
BRANCH MANAGERS
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BOARD OF DIRECTORS
Sultan Ali AllanaChairman
Sajid Zahid
Director
Ahmed Jawad
Director
Sikandar Mustafa Khan
Director
Moez Jamal
Director
ORGANIZATIONAL STRUCTURE
HBL is organized along functional lines with eight core divisions namely Corporate &
International Banking, Retail Banking, International Banking, Audit & B.R.R., Credit
Policy, Asset Remedial Management (ARM), Information Technology Group and
Human Resources Group.
VISION, MISSION AND VALUES
Vision:
Enabling people to advance with confidence and success.
Mission:
To make our customers prosper, our staff excel and create value for shareholders.
Values:
Our values are the fundamental principles that define our culture and arebrought to life in our attitude and behaviors. It is these values that make us uniqueand unmistakable. Our values are defined below:
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Excellence
Integrity
Customer Focus
Meritocracy
Progressiveness
PRODUCTS AND SERVICES OFFERED BY HBL
PRODUCTS:
o
HBL Muhafiz Rupee Travellers Chequeso HBL Auto Finance
o HBL Flexi Loans for salaried personnel
o HBL LifeStyles Financing Scheme
o HBL i-Card
o HBL House Financing Loans
o HBL Easy Access
o HBL Fast Transfer
o Haryali Agricultural Loans
o HBL E-Bank
DEPARTMENTS & RESPONSIBILITIES:
During my internship, I came to known about the following departments functioning inmy branch
1. Account opening department.
2. Cash department.
3. Credit department.
4. Lockers department.
5. Bill clearing department.
6. Foreign exchange department.
7. I.T department
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Account opening department:
In this department customer open the account in the bank. This give facility to the
customer for opening new account with the bank that they allow him and operate this
account.
These require many document to open this account:
Copy of CNIC
Utility bill
Student card
Provisional receipt
Address of customer
Specimen Signature of the customer
Posting the account on the system
Cheque book issue to the customer
Secrecy of the customer
Types of the Account
1. Individual account
2. joint account
3. Business account
4. Current account
5. Saving account
Individual account:
Bank opens this account by individually. It involves single person only.
Bank opens this account for one person.
Joint account:
Bank opens this account by one or two person. The two people use oneaccount in the bank. Bank considers one account by two people. The two people of
joint account show one account according to the law.
Business account:
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In this account, bank only business transaction. It is opened by companies,
institution, organization and partnership business. It is purpose of deal with the
businessmen.
Current account:
Bank opens current account to every person. Usually, some current account
have to pay interest by the customer but its rate is low other accounts. Current
account offers any facilities to the customer which is mentioned below:
Debit card
Cheque book to the customer
Automatic bill payments from account
Overdraft facility
Clearing services etc.
Reason for closing customer account:
Bank ay close this account due to some reason:
1. Death of a customer
2. Notice by a customer
3. Customer insanity
Death of a customer:
In the case death of the customer, bank may close the account and stop all
transaction related to the person. Bank stop further transaction such as cheque issue,
money transfer etc.
Notice by the customer:
Bank may close this account on the demand of the customer. Customer gives
application to the bank for closing this account.
Customers insanity:
Bank terminates this account due to mental of the customer. Bank stop this
transaction with this customer. It is all too easy for the customers needs by the desires of
others within a bank who interpret the customer needs through their own prism. His
insanity of the customer, to the knowledge of the bank, has the effect of revoking this
authority, and the bank would not be necessary in paying the acceptances. That the bank
has not been officially notified of the customer's insanity does not indicate
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Cash department
Cash department has vital role in the banking sector. All cash transaction represent in this
account such as cash received fro customer, import and export transaction, bill payment
etc. It involves cash payment and receipt transaction in it.
These are following perform various function in this department:
Acceptance of deposit
Cheque payment
Collection of funds
Remittances
Transfer of funds from one account to another
Verification of signature
Posting
Heading of prize bond
There are some functions of cash department in the bank:
Receipts and payments:
Cash will be received by the Receipts from the customers in the bank. In the receipts, the
name of the account holder, account number, name of the branch, dates etc are involved.
Customer must also make certain that the receipts are signed by the person which deposit
cash. In some cases, cash is received from receipt department.
Deposit cash in customer account:
When the customer wants to deposit amount in his account .T he a c co u nt in w h ic h t
he c a s h w ill be deposited. Then customer will receive amount and credit the
customers account that shows increase in customers bank accounts.
Cheque encashment procedure:
The cash is paid to the customer in the cash department such as:
Cheque is drawn on some branches
Cheque is not posted on date
It should be bearer cheque
Payment of cash:
A ft er po st ing t he c he q u e t he o p er at io n ma na g er c a nc e lle d t he c he
q ue a nd r et ur ne d ba c k to ca s hie r . T he c a s hie r e nt er s t he c he qu
e in c a s h p a id
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r eg is t er e d a nd p a ys a g a ins t t he second signature of receiver on the back of
the
cheque.
Credit department
A simple but practical definition of credit is "the ability to buy with a promise to pay," in
other words, to obtain present value for a promise to pay in the future. The word "credit"
is derived from the Latin "credo. The banker knows that he may be asked to expand
credit. He first satisfies himself that the ability is such as to defend assurance. This
information is obtained from personal knowledge of the borrower. Trade inquiries are
directed to people selling goods to and competitors of the borrower. If all this information
is satisfactory, the capital factor is studied in the borrower's financial statement which
balance sheet should be taken off at normal intervals. This ratio is often called the 2 to 1ratio, but differs in business. In short, the distinguish between a safe risk and an unsafe
one that is the quality that marks the good banker.
This is including different latter issue in the credit department:
Establishment of letter of credit:
In case party enjoying regular limit, the L.C is established without adopting the procedure
mentioned above. However the amount of L.C should not exceed the regular limit. The
major non-fund based facilities that are considered as a part of regular credit facilities are
letter of Credit a n d B a n k G u a r a n t e e .Ba nk s c ha r g e co mmis s io n fo r
t he s e r vic e s r e nd er ed by t he m a nd c o mmit me nt s on t he p a ct of t he
ba nk t he s e a r e a l lo w e d a f t e r ma k ing o u t a ve r y c a r e fu l and detailed
assessment of borrowers
requirement.
Types of credit
These are many types of credit of habib bank which are given below:
Demand finance:
Packing credit
Demand finance to student
Loan to staff
Loans are offered to the staff in various categories
1. loan for purchasing vehicles
2. loan correspondent to months salary
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3. mortgage loan
Running finance:
It include old name overdraft which are meet requirements to the customer.
For example:
secured
Which are diifernt forms given below
1. share certificate
2. deposits
3. mortgage of property etc
unsecured
DEPOSIT DEPARTMENT
Bank deals in money and they are merely mobilizing funds within the economy. They
borrow from one person and lend to another, the difference between the rate of borrowing
lending forms theirspreador gross profit. Therefore we can rightly state that deposits are
the blood of the bank which causes the body of an institution to get to work. These
deposits are liability of the bank so from point of view of bank we can refer to them as
liabilities.
REMITTANCES
DEMAND DRAFT:
Demand draft is a written order drawn by a branch of a bank upon the branch of
same or any other bank to pay certain sum of money to or to the order of specified
person. It can be issued to the customers as well as non customer against cash chaque and
letter of instruction. Demand draft is negotiable instruments that can be negotiating at any
time before its cancellation. Its Legal provisions are same as that of cheque.
Following parties are involved in demand draft:
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Applicant
issuing branch
Drawee branch
Beneficiary
A demand draft may be issued against the written request of the customer before issuing
it must be seen that the demand draft is in order.
The DD application must be scrutinized by the counter clerk in respect of following
points.
There should be branch where payment is to be made.
Full name of payer should be mentioned.
Amount in words and figures must be same
The applicant on two places should sign application.
TELEGRAPHIC TRANSFER:
Telegraphic transfer means the transfer of funds from one branch to another
branch of the same bank or upon other bank under special arrangements just like a
telegram. Telegraphic transfer is not negotiable and the funds are not payable to
bearer. Minor cannot avail this facility. In telegraphic transfer the bankers use secret
codes. One code is with issuing person and the second is with an other person. When
they combine the codes its become an amount that is called check. The payment is
made after the confirmation of the check.
Following parties are involved in TT
Applicant
Drawing branch
Drawee branch
Beneficiary
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Following important things should be included in TT:
Full name of the beneficiary or account number should be mentioned in the
application form.
Instruction regarding mode of payment should be obtained.
A record in the remittance outward register should be maintained.
All the remittance must be controlled through number or codes.
PAY ORDER:
Pay order is an instrument through which payment can be made from one bank to
another bank. Pay order is meant for bank own payment but in practice they are also
issued to customers.
Following parties are involved in pay order:
Applicant
issuing branch
Payee
MAIL TRANSFER:
Mail transfer is not negotiable and the procedure of it is same with the
procedure of DD.When a customer request the bank to transfer his money from this bank
to any other bank of the branch of same bank in the city, outside the city of outside the
country the first thing he has to do is to fill an application form. In which he states that I
want to transfer the money from this bank to that specific bank by mail. If the customer is
the account holder of this bank, the bank will debit his account and the concerned officer
will fill forms to make the mail transfer complete.
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If the customer is not the account holder of the bank, then firstly he has to deposit
the money and then rest of the procedure will be adopted to transfer his money.
SBP ERF Scheme
SBP had introduced this scheme to promote country s export and to earn
foreign exchange. This scheme is operated through authorized dealers under SBP control.This scheme had been amended by time to time.
Features:
Concessions rate of markup as compare to commercial banks rate of markups.
Export refinance allow to exporters via authorized dealers.
In case of default, the SBP recover its principal loan amount, markup & penaltythrough the bank to which exporter has submitted his refinance claim.
Refinance allows against value added products i.e. garments, print, dyed cloths,bed sets.
Proceeds repatriated through banking channels.
Allow credit loan amount within 248 hrs.
Misutilization of SBP funds has been prohibited, if any violation occurs SBPimposed penalty.
Risk:
If the exporter has been / will be defaulted the laps of funds of authorized dealers.
Cheating or misuse of funds, SBP may cause to impose not any penalty but alsotermination of bank employee or change of management or authorized dealers
reputation may destroy.
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How to operate this scheme?
SBP ERF scheme
Part I Part II
Preshipment
Post shipmentParty request
EEstatement
EFstatement
Party request letterL/C sales contract
L/C sales contractUnder taking
total realization& negotiation
it includetotal
UndertakingDP note
DP noteForm D
SBP financedForm E & not
realizationbut on which
Form DProof of purchase
Commercial invoiceBill of Lading
availed SBP finance Form E SBPfinance
of raw material Form E availed notinclude.
Part A
This means after making a shipment the exporter prepare all relevant shippingdocuments and evidence of shipment. The exporter contact his bank w.r.t to lodge the
documents and send a one set of shipping documents to export finances department to
allow him post shipment part I under SBP scheme.Required documents at the time of finance allow to party
D/Pnote Under taking on non judicial stamp paper
L/C Party request letter
Form D Commercial invoice
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Penalties:
Non shipment 37 paisa/1000 per day
Short shipment Delayed shipment
Late submission of documents to SBP
How to avoid from penalty of non shipment?
Provide proof of shipment against relevant sales contract or L/C on which finance
obtain Substituted the old L/C or contract with new one after assurance that against new
L/C.
Restrictions/prohibitions
Evidence of shipment submit to SBP within 180 days or within time period fixedby SBP
In case of substitution against new L/C or sales contract make sure that theexporter has not availed pre or post shipment finance through any other bank.
How to calculate penalty?
Non shipment
Short shipment
180 days *1000000* 0.37/1000=66600
Finance amount 1000000Shipment 800000
Short shipment amount =200000
180 days *200000*0.37/1000=13320 In case of post shipment only late repayment of finance penalty is involved.
Part B
The authorized dealers provide this finance facility to exporters against their EE
statement. From the export earning during of one fiscal year the SBP sanction a limit of50% for the a ailment of the ERF part II. In the EE statement all foreign bills realized and
negotiated during a period of 01-07-04 to 30-06-05 are included in this statement.Documents required at the time of sanction of finance
D/P note Under taking on non judicial paper
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Party request letter
Short fall in EE statement penalty:
Days*amount of finance*rate(0.37)/day/1000
Short fall in EF:
SBP calculate case to case basis daily product and match this with his EF performance,if he avail excess Refinance from SBP and Business performance is short the SBP
imposed a short fall penalty.Total short product*number of days*0.37/180
Demand Finance & Running Finance:
Demand finance:
This is common form of financing to commercial industrial concerns and is madeavailable either on pledge or hypothecation of goods, produce or merchandise. In demand
finance the party is finance up to certain limit either at once or as and when required.The party due to facility of a paying mark prefers the financing up only on the amount it
actually utilizes.
Running Finance:
This form of financing was known as Overdraft when a bank customer requires
temporary accommodation, his banker allows withdrawals from his account and runningfinance thus occurs. The accommodations generally allowed against collateral security.The customer is in advantageous position in a running finance because he has to pay
mark up only on balance outstanding against him on daily products basis.
Pledge:
It is entitled to the exclusive possession of the property until the debt is charged.
Hypothecation:
When the property in the goods is charged as security of loan from the bank but theownership & possess
FAPC & FAFB
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FAPC (finance against packing credit):
It is a type of banks own source finance provided to clients engaged in exporttrade. As the term packing indicates that the credit line is granted to an exporter for thepurpose of packing merchandise for shipment to an importer abroad. An exporter should
give documentary proof to the bank consist of L/C in favor of exporter indicating thedescription of the merchandise, the purchase price, date of delivery along with otherterms.
FAFB(finance against foreign bills):
It is a post shipment finance facility which is provided by the banks to its clientsafter providing the evidence of shipment, he contacts his bank to request him to lodge the
documents. He then provide the request letter with sale contract to grant him finance &
this department grant him finance (90% value of commercial invoice).
Imports and exports department
Exports:
Introduction and registration:
Imports and exports act 1950 have empowered the federal Govt to control the
import and export in Pakistan. Pakistan is developing country and like other developing
countries its imports exceeds than exports. To control this situation the registration of
import and export has been made obligatory under the registration order 1993. The
authority of registration has been given to export promotion bureau. No importer and
exporter who has no granted registration shall indent, import and export of any good into
or out of Pakistan. The requirements for getting registration are as under:
Application form.
Photocopy of I.D card.
Copy of memorandum and article of association (in case of limited company).
Ownership deed of office.
Fee payment.
Certificate of incorporation.
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Applicant should regular taxpayer.
The major exports from Pakistan are surgical goods, sports goods hand noted goods,
leather goods, textile goods, etc.
Export procedure:
All the exports work under the imports and exports act that is changed by the state
in every year. When the importer send the L.C to bank in respect to import or when the
L.C comes to the advising bank from the issuing bank then the concerned officer allot
the number to the L.C and get registered. The concerned officer write down the name of
issuing bank and the party name in a register and intimate the party about L.C. the
exporter after receiving the L.C from bank will prepare the documents as per the L.C
usually the following documents have to be prepared by the exporter:
Bill of lading
Covering letter
E- Form
Bill of exchange
Packing list
Commercial invoice
Quota documents in case of quota country
Certificate of origin
Special custom invoice
The export form (E-FORM):
E-FORM means export form which is the first and foremost requirement for
the exports from Pakistan. It is control instrument by Govt of Pakistan by which it
monitors the receipts from exports and checks the goods that are transferred without
foreign exchange. all banks which are engaged with the foreign exchange are required to
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print and maintained the E form that is checked by the state bank of Pakistan. For export
an e form is issued by the bank on the request letter of a company. Two separate registers
are maintained by the bank one for his use and the other one are for the requirement of
the SBP. On issuance of E forms the banker lists it in the register and makes sign from
the exporters. Banks record the name of party, amount, the goods description, port of
destination, importer name port of loading etc.
The functional utility of E-FORM:
The export form has four copies. The exporters and banks use it. Without it the
exporter can not make export. These copies are used as:
Original copy is for SBP that is checked by the higher authority.
Duplicate copy is for the bank use that is upraised by the custom authorities.
Triplicate for the use to report of SBP at the time of payment received.
Quartiplacte is for the company used.
Usage of E- FORM:
E- FORM is an important document for export. It has its own importance such as
this form is used as a checker means it monitor that what things are going abroad and in
return what things we are getting. So it creates a check and balance on the foreign
exchange. It shows the total quantity and quality of the goods that is sending to another
country. An E Form shoe the party worth that is very helpful for the party and the bank.
Bank can create a party limit for the credit on the behalf of it and a party can arrange a
loan for its future requirements from the bank. It shows the terms of payment by the
importer and the delivery terms by the both parties that is helpful in case of any
discrepancy during the contact.
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Short shipment notice:
A shipment may be cancelled by the importer or exporter due to many reasons.
The cancellation of the export letter is called short shipment notice. In this situation the
company has to inform the bank. Company has to give a written letter to the bank that he
is not the export so please cancelled their e form. On the other hand bank at the time of
receiving the letter will stop the e form and cancelled the all documents.
IMPORTS
Imports regulation:
Import is being regulated by the ministry of commerce and the government of
Pakistan under the import and export act:
Categories of imports:
Imports are classified into the following categories:
Commercial sector imports
Industrial sector imports
Public sector imports
Registration of importers:
A person who wants to approach the bank for importing goods from abroad, he
should have to get himself registered with the export promotion bureau under
registration of imports and exports act. He must fulfill the following conditions before
getting himself registered:
NIC NUMBER
NATIONAL TAX NUMBER
MEMBER OF REGISTERED ASSOSITATION
Documentary letter of credit:
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A documentary letter of credit is an instrument or document issued by the bank
on the behalf of a customer, authorizing a beneficiary to draw a draft and drafts or
sometimes the requirement of a draft, which will be honored, on presentation by the
bank if drawn accordance with the te3rm and condition specified in the letter of
credit.
It is the written undertaking by the bank (issuing bank) pay to the seller
(beneficiary) at the request or as per the instruction given by the opener (applicant)
pay at sight or at the future date, a stated sum of money against the required
documents. The documents include the commercial invoice, certificate of origin,
insurance policy or certificate and the documents of transport relating to the mode
sending goods. L/C is therefore is an arrangement of security for the parties. The
conditional guarantee is related to the documents only and not on the underlying
goods or services.
Procedure:
Establishment of letter of credit
The person applying for the letter of credit must be registered with the EPB. The
opening bank verifies this registration or otherwise exemption. This is mentioned in the
I form. The importer also shows the valid certificate of an organization membership. A
category pass book is issued by the EPB for registered importer specifying his category.
This book is centralized by the centralized banks in the city. It is not necessary for the
bank to hold the original copy of the pass book of all the importers. But some times the
importer gets L.C from more than one bank so the bank have to hold the photo copy of
this pass book. The applicant can get the application from any branch of the Habib Bank
Limited. However only some branches are authorized to open L.C. That branches how
are not authorized have to contact with the authorized branches to open an L.C. The
authorized branches in such case require the certificate from the applicant branch that the
required formalities are fulfilled and the approval was obtained with required margin.
For establishment of letter of credit, the importer requests the opening bank with the
following documents:
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1) Application and agreement form IB-8:
Credit application form is an agreement between the bank and the customer on the
basis of which the letter of credit is opened. This form contains the undertaking of the
importer that get the documents from the bank at the mark up price. It contains the
following information:
Name and address of importer.
Name and address of exporter.
Amount in foreign currency.
Terms of credit.
Description of goods.
Origin of goods.
Port of loading and discharge.
Last date of shipment.
Foreign bank charges.
Terms of shipment. (Partial shipment or transshipment)
Insurance cover note, policy no, and name of insurance company.
Forward booking.
Mode of transmission.
Import registration no.
Any other documents required.
Detailed documents.
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2) P er f o r m a in voic e / pu r c h a s e o r d e r :
A Performa invoice is quotation of seller containing the description and the
specification of the goods, price, and terms of the sale. Some times the exporter has
their agent in the country. The agent must be registered from the EPB.
3) I n s u r a n c e c ov e r n o t e :
All the goods imported under the documentary credit must always be insured.
In accordance with our country import policy, insured must be issued by a Pakistani
insurance company or the foreign company operating in Pakistan and such company
must be approved by the bank. Insurance covered based on the following:
It is issued in the name of issuing bank A/C importer.
The rider should cover against war.
The port of shipment and the port of destination.
Amount of premium prepaid.
Shipment period.
The description of goods should be the same as per the form.
4) Appendix B:
This Performa replaces the import license and is submitted along with L.C
application form duly filled in triplicate. It is conditional undertaking that the imports
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goods are not banned, not smuggled. It is also an undertaking that if the bank is unable to
arrange the said currency the importer have to purchase it from other banks or from any
other place. It includes the details and description of goods, codes, class, type, source of
import, country of import, Performa invoice no etc.
5) I FORM:
This form is used at the time of retirement of documents against L.C established
earlier for reporting to the transaction to SBP through the bill of entry deptt. It has four
copies that is used as follows:
Original is for the use of SBP.
Duplicate for the authorized dealer to be used for processing exchange
control.
Triplicate for the authorized dealer record.
Quartiplacte is for the submission in SBP in the case of import where the
documents are not retired.
Approval for establishment of letter of credit
After scrutiny of the documents, IB-8 along with attached documents is put before the
corporate head for approval. If the amount of application exceeds the power of the
corporate head the branch concerned prepared the memorandum for the corporat e
banking head for obtaining his approval.
In case party enjoying regular limit, the L.C is established without adopting the
procedure mentioned above. However the amount of L.C should not exceed theregular limit.
Types of letter of credit:
1) Revocable credit:
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The letter of credit that can be cancel with the consent of importer, without
giving any prior information to the exporter.
2) I r r e vo c a b le le tt e r o f cre d it :
The letter of credit that can be cancelled by the mutual consent of the both
parties. Only one party cannot cancel it.
3) Irrevocable confirmed letter of credit:
When an issuing bank authorizes and or request to an other bank to
confirm his irrevocable credit and adds its confirmation. Such confirmation
constitutes a definite undertaking of such bank in addition to that of the issuing bank.
There are following other letter of credits:
1. Revolving Credit
2. Transferable Credit
3. Back to Back Credit
4. Green Clause Credit
5. Red Clause Credit
6. Clean Documentary Credit
7. Transit Credit
8. Stand by Credit
9. Sight Credit
Parties to a credit:
The applicant:
The applicant of the letter of credit is called the importer or buyer. The buyer
requests to the bank to open a documentary letter of credit in favor of the seller.
Opening bank (issuing bank or importer bank):
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At the request of the importer an issuing bank issues a credit under the
instructions in the favor of the seller.
Advising bank:
An advising bank is a bank in the sellers country. The issuing bank forwards the
advice of the credit by mail or by any mode to the correspondent bank in the exporter
country as instructions of the opener.
Beneficiary (exporter):
The person or body receiving the letter of credit from the importer that is opened
in favor of him.
Confirming bank:
The bank that on the requests of the issuing bank adds confirmation to a credit. It
is definite undertaking of the confirming bank, in addition to the issuing bank.
Negotiating bank:
It May or may not be the advising bank. An authorized bank that gives the value
to the draft for processing and payments.
Reimbursing bank:
Reimbursing bank is the bank, which on the behalf of the opening bank, honors
the Reimbursing claim lodged by the negotiating bank.
Modes of payment:
Sight letter of credit:
The seller submit all the documents with draft in the importer country
Complying with the all terms and conditions. The payments are made on the presence
of the documents.
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Usance letter of credit:
Under these circumstances it is agreed that the payment will be made after a
specified period. So the payment is made after or on the expiry of that date.
Risks for importer and exporter:
Importers risks:
He does not know the seller.
He does not know that goods will be delivered in time.
He does not know how to check the goods.
Exporters risks:
He does not know the buyer.
He does not know the credit worthiness of the buyer.
He does not wait for payment.
He does not wait for exchange control.
Buyers and sellers obligations:
The sellers obligations:
Provision of goods as per contract.
License authorization and formalities.
Contract of carriage and insurance.
Delivery at time.
Transfer of risk.
Division of cost.
Notice to buyer.
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Proof of delivery.
Good checking marking and packing.
Other obligations.
Buyers obligations:
Payment of price.
License authorization and formalities.
Contract of carriage and insurance.
Taking Delivery at time.
Transfer of risk.
Division of cost.
Notice to seller.
Proof of delivery.
Inspection of goods.
Possible problems in international trade:
Non-payment.
Delay in delivery.
Financing, how and against what.
Currency restrictions.
Regulatory restrictions.
Documentation and mode of settlement.
ICC rules and INCO terms.
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H U M A N R E S O U R C E D E P A R T M E N T
FUNCTIONAL RESPONSIBILITIES:
Right Now the responsibilities assigned to HR department at Corporate Center
can be categorized under three heads: Staff matters / Basic HR Functions
Expenses control Security matters
Now Ill discuss these one by one::
Background:
The banking council of Pakistan was responsible for the recruitment, selectionand allocation of human resources. After the dissolution of the Pakistan Banking Co uncil,the Banking & Financial Services Commission of Pakistan is responsible for theseactivities.
Procedure:
Staff requirements are met according to the changing needs of macro environmentscenario and particularly the arising needs of the bank itself. A need analysis is
conducted. After assessing the human resources requirements and screening of theapplications, most probably, the suspects are invited for a written test.Short listed candidates are called for an interview for personality and social appraisal.
Interviews are a mix of direct and indirect interviewing techniques and informationrequired.
The selected candidates are sent for training of six months training from MDIs.The training is through the lectures regarding banking procedural guidelines and other
behavioral aspects. After the completion of training employees are allocated to different
offices. The effective management of people in an organization requires an understandingof motivation, job design, reward systems, and group influence.
Recruiting Retention Succession planning
Risk Management Diversity in our workforce
Management information Progressive compensation and benefits design and implementation
Employee communications and relations
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TrTraaiinniingng nneeeedsds aannaallyyssiiss,,pprrooggrraamm ddeessiiggnn aanndd imimpplleemmeennttaattiioonn
PPeerrffoorrmmaannccee eevvaalluuaattiioonn
Work-life initiatives
CREDIT & ADMINISTRATION DEPARTMENT
The responsibility of providing administrative support for the lending activities ofthe Bank, and day-to-day monitoring of credit-exposure, is vested in the Credit
Administration Department (CAD).
FUNCTIONAL RESPONSIBILITIES:
The main responsibilities under this department are: Implementation of credit facility and their maintenance according to terms of
credit approved. Ensure that standard loan documentation for each credit facility is maintained and
the correctness & completeness of such documentation and also responsible forcustody of all credit files.
Maintain the safe custody of all collateral as per banks standard operatingprocedures; undertake periodic evaluation and inspection of hypothecated/pledged inventories in accordance with the terms of credit.
Ensure compliance with
Institutional credit policies & procedures Local regulatory requirements.
Prepare various portfolio composition reports and other documentation forsubmission to GRMs & RMs.
CREDIT FACILITY IMPLEMENTATION PROCEDURE:
Upon approval of credit proposal, the credit proposal and approval are handedover to CAD. Now CAD determines the nature of documentation required and on receiptof same ensures that all legal documents are obtained and are legally enforceable. Afterall these activities it can release the facility for utilization.
MARKETING DEPARTMENT
The marketing department in HABIB BANK LIMITED is very strong. It is the
main source of gaining and maintains the customers that can give a large profit to thebank. There are five relationship managers in Habib bank and every person is responsible
for the credit of his party.
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CUSTOMER DEALING:
HBL corporate center only deal with the following categories of business:
The organization that have minimum 250 million sales in a year. The organization that have availed 80 million finance
Agri based industry. HBL do not deal with the agriculture sector.
PROCEDURE FOR CREDIT APPROVAL:
It is the responsibility of the relationship manager to provide or fulfill therequirement of the customer by checking his financial and position. The procedure of
credit approval starts with the credit proposal. First of all the customer request to the
bank for credit and on the behalf of him the RM check the memorandum. TheMemorandum includes:
The company information.
Purpose of credit. Assessment of management.
Risks. Financial analysis.
Third party or other bank information. Conclusion and recommendations.
Then the RM sends it to the authorities who accept or reject the proposal. If they acceptthe proposal they announced a credit range for the party. At the end RM sends the
proposal to CAD deptt custody and check.
EXCESS FACILITY CREDIT BY RM:
Relationship manager is authorized to provide the excess facility to the
customer than the credit line. It may be up to
10 percent of excess amount
OR
12.5 million Whichever is less?
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It is not more than 15 days if the customer wants to increase this facility he has to contactwith the head office.
TYPES OF CREDIT FACILITY:
1) fund based:It is first type of credit facility. In this facility the bank actually provides fund to
customers.2) non fund base:
Second type of credit facility that does not provides fun but only give the
guarantee. If the customer is unable to make the payment at maturity date then
bank will be responsible to make the payment.
10. PLAN OF INTERNSHIP PROGRAMME
Every body knows that knowledge does not increase without practice .practice is animportant mean to improve the knowledge. Therefore university provides internshipprogrammed of six to eight week in different organization during MBA so that we couldable to apply in theoretical concepts to practical.I started internship on 5
thmay to 25
thJune in water works road branch of habib bank.
Work done by me in HBL in different departments:
1. Account opening department.
2. Data punching department.
3. Public dealing department.
ACCONTS OPENING DEPARTMENT
In this account department I gain the particle knowledge about opening. This department
deals with opening account and saving account for its customer and all matters regarding
there off. The customer opening account/saving accounts can be categorized as
following:
1) individual
2) firm
3) company
4) trust
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5) staff
6) others
OPENING AN ACOOUNT:
In order to open an account first of all the customer has to fill a form prescribed
by the bank. The person is required to bring some reference or introduction for opening
the account. Introducer may be a person who has an account with HBL.
Some important information regarding introducer e.g. the name and account
number of the introducer is written on the space provided on the specimen signature
cards. Then in order to find out whether he is a true introducer or not a letter is sent to
him thanking him for this introduction, so that any thing wrong may come into notice.
There are different requirement for different types of accounts and account holders. An
important thing is that the customer should have a corporate customer. The corporate
customer limit is 40 million and this branch always deals the corporate customer.
General rules for opening an account:
One person can open only one account in the same branch with the same
category.
In the event of death of an account holder the credit balance will be transfer to
the heirs of the diseased individual account.
Services charges will be deducted periodically as prescribed from time to time
on the accounts that are under the limit of specific account.
Services charges are not applicable on that accounts that are prescribed as
exempted.
A distinctive number will be allotted to the each account.
The bank can close those accounts that are under the minimum limit of the
bank.
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Any sum to be deposited in the account should be accompanied by paying in
slip showing the party account number and the name.
Account holder can only withdraw the sum of money by his own account by
cheque.
Cheque should be signed by the account holder by the specimen given by the
bank.
Post dated and defective cheque is not accepted.
If statement of account spoiled a new will be issued on cost.
Any change in the address should immediately communicate to the bank.
The account holder wishing to close the account must surrender the cheque
book.
Account may be transfer from one branch to another same branch without any
charges etc.
Data punching
Data punching means feeding of data collected into the computer daily or weekly. We
punch data daily which include in the account. First, we enter transaction of customer on
the basis of buying and selling daily in the customer account then we punch customer
data one by one according to dates and sequence. Through data punching, we can easily
transfer the data and money to another account and determine the account information.
After debt and credit amount, we punch data according to their account in the computer
so that we could check data easily. We make cash debit vouchers.cash credit
vouchers,sundry debtor and sudry credit vouchers,transfer vouchers,internal account
vouchers ,cross branch vouchers. We give detail in the system .these all
Public dealing
Public dealing means have good behavior with the public for increasing efficiency and
growth. Bank deals with the customer and provides information of accounts and others
which relates to the accounts. Bank guides that how to open account and forms fill to
open new account. Bank issues cheque to the customer for opening new accounts. Bank
asks to the customer about their needs and requirements and fulfill on time.
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Following are includes in public dealing: Accounts Opening, Check book issuance,
Standing instructions, Marking stock payments, Debit Credit card issuance, Activation of
dormant accounts, Making inoperative account into operation, Recovering of multiple
charges availing bank facilities, issuance of bank account statements
Open new accounts to the customer.
Issuance cheque to the customer.
Provides information for opening new account to the customer.
Establish good behavior with the customer to increase our product and services.
To solve their problems which create open accounts etc.
13 .FinancialAnalyses
2010 2009 2008Balance Sheet
(Ru ees in '000)As at December 31, 2007
Assets
Cash & Balances with Treasury Banks 81,516,883 79,527,191 5 6,533,134Balances with other Banks 35,990,301 29,560,309 39,364,297
Landings to Financial Institutions 30,339,344 5,352,873 6,193,787
Investments 245,016,986 209,421,147 129,833,446
Advances 434,998,560 432,283,588 456,355,507
Other Assets 15,876,545 16,475,939 34,588,444
Operating Fixed Assets 8,835,326 8,172,590 14,751,252
Deferred Tax Asset 34,478,466 40,333,882 12,186,848
887,052,411 821,127,519 749,806,715
LiabilitiesBills Payable 9,774,749 10,041,203 9,828,082
Borrowings From Financial Institutions 37,430,333 48,121,649 46,961,165
Deposits and other Accounts 721,069,137 653,452,460 597,090,545
Subordinated Loans 4,281,835 4,212,080 3,954,925
Liabilities against assets subject to finance lease
Other Liabilities 24,971,618 26,204,580 2 5,663,411
Deferred Tax Liability
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w w w . V U s o l u ti o n s.b l o g sp o t . c o m
797,527,672 742,031,972 683,498,128
Net Assets 8 9,524,739 79,095,547 6 6,308,587
Represented By:
Shareholder's EquityShare Capital 10,018,800 9,108,000 7 ,590,000
Reserves 27,671,813 25,801,889 23,656,044
Un appropriate Profit 4 4,121,103 36,325,458 3 1,933,178
Total equity attributable to the equity holders of the
Bank 8 1,811,716 71,235,347 6 3,179,222
Minority Interest 7,713,023 7,860,200 8 90,099
Surplus on revaluation of assets - net of tax
8 9,524,739 79,095,547 6 6,308,587
2010 2009 20Profit and Loss Account
For the year ended December 31, 2007 (Rupees in '000)
Mark-up/return/interest earned 7 9,999,852 74,751,375 63,376,04
Mark-up/return/interest expensed 3 4,090,368 33,088,536 26,525,55
Net Mark-up/interest income 4 5,909,484 41,662,839 36,850,49
Provision against Non-performing loans and advance-net 7 ,559,458 8,276,180 6,904,91
Reversal/provision against off-balance sheet obligations 3 0,895 (51,396) 3 72,59
Reversal of provision against diminution in value of
investments 3 89,273 1 ,387,354 1,909,88
Bad debts written off directly
7 ,979,626 9,612,138 9,187,40
Net mark-up/interest income after provisions 3 7,929,858 32,050,701 27,663,08
Non-market/interest income
Fee,commision and brokerage income 4 ,928,705 4,620,148 4,518,40Income/gain on investments 6 07,440 452,823 1 ,300,97
Income from dealing in foreign currencies 2 ,893,454 1,692,776 2 ,374,31
other income 2 ,619,905 3,176,865 3 ,088,99
Total non-mark-up/interest income 1 1,049,504 9,942,612 1 1,282,69
4 8,979,362 41,993,313 3 8,945,78
Non-market/interest expense
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w w w . V U s o l u ti o n s.b l o g sp o t . c o m
administrative expenses 2 3,053,860 21,733,407 21,425,36
other provision offs-net 1 78,148 372,957 2 00,16
other charges 1 78,700 3 ,540 64,75
Total non-mark-up/interest expenses 5 11,373 397,668 3 23,57
Profit Before Taxation 2 3,922,081 22,507,572 22,013,85
25,057,281 19,485,741 16,931,932
Taxation
current 9 ,331,828 7 ,827,137 8 ,308,61
prior years 6 94,898 (1,079,473) 2 33,10
deferred (582,499) 4 39,434 (2,473,89
9 ,444,227 7 ,187,098 6,067,82
Profit after taxation 1 5,613,054 12,298,643 10,864,11
Attributable to:
Equity holders of the Bank
Minority Interest
Basic and diluted earnings per share 1 5.58 1 2.28 1 1.
2010 2009 200Cash Flow Statement
For the year ended December 31, 2007 (Ru ees in '000)
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before taxation 25,057,281 19,485,741 16,931,932
Less: Dividend income and share of profit of associated
and
joint venture companies (318,539) (281,152) ( 1,111,810)
Gain on sale of investments - net (288,836) (171,403) (197,242)
(607,375) (452,555) (1,309,052)
24,449,906 19,033,186 15,622,880
Adjustment for:
Depreciation/amortization/adjustments 1,666,058 1,670,958 1 ,625,943
Reversal against diminution in the value of investments 389,273 1,387,354 1 ,909,887
Provision against Non-performing loans and advances-net
of reversals 7,559,458 8,276,180 6 ,904,919
Amortization of premium on investments (65) (268) 8 ,077
Gain on sale of property and equipment-net 69,755 257,155 8 54,925
Miscellaneous provisions (16,993) (29,386) ( 41,840)
209,043 321,561 5 72,761
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w w w . V U s o l u ti o n s.b l o g sp o t . c o m
9,876,529 11,883,554 11,834,672
34,326,435 30,916,740 27,457,552
Increase/decrease in operating assets
Government securities
Landings to financial institutions (24,986,471) 840,914 (4,565,657)
Loans and advances (10,274,430) (4,851,108) ( 81,087,692Other assets-net 5,859,907 (1,951,264) (6,355,923)
(29,400,994) (5,961,458) ( 92,009,272
Increase/decrease in operating liabilities
Deposits and other accounts 67,616,677 81,053,273 6 5,792,418
Borrowings from financial institutions (10,691,316) 4,098,973 ( 12,033,4440
Bills payable (266,454) 260,126 (5,590,148)
Other liabilities-net (1,350,947) 4,083,696 5 ,657,085
55,307,960 89,496,068 53,825,911
60,233,401 114,451,350 (10,725,809)
Income tax paid-net (10,137,565) (12,265,104) (11,600,790)
Net cash flows from operating activities 50,095,836 102,186,246 ( 22,326,599)
CASH FLOWS FROM INVESTING ACTIVITIES
Net investments in securities, associated and joint venture
companies (35,957,034) (78,588,907) 37,444,490
Dividend income received 319,465 624,628 2 37,291
Fixed capital expenditure (948,433) (1,835,161) ( 2,662,833
Proceeds from sale of fixed assets 51,667 104,288 1 08,033
Effect of translation of net investment in foreign branches 308,619 1,689,707
3
,037,018
subsidiaries and joint venturesNet cash flows from investing activities (36,225,716) (78,005,445) 38,163,999
CASH FLOWS FROM FINANCING ACTIVITIES
Sub-ordinate Loans (58,868)
Dividend Paid (5,450,436) (4,173,059) ( 2,730,251
Net cash flows from (used in )financing activities (5,450,436) (4,173,059) (2,789,119)
Increase in cash and cash equivalents during the year 8,419,684 20,007,742 1 3,048,281
Cash and cash equivalents at beginning of the year 108,541,351 84,639,657 7 5,518,830Effects of exchange rate changes on cash and cash
equivalents 546,149 4,440,101 7,330,320
109,087,500 89,079,758 82,849,150
Cash and cash equivalents at end of the year 117,507,184 109,087,500 9 5,897,431
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Liquidity RatiosThe liquidity of a firm is measured by its ability to satisfy its short term obligations as
they come due.These are includes:
Current Ratio:
Current ratio = current asset/current liabilities
2010
Rs. In 000
2009
Rs. In 000
2008
Rs. In 000
843738619/770745837 772621047/737819892 666335481/679543203
1.0947041 1.0471675 0.9805638
1.1
1.08
1.06
1.04
1.02
1
0.98
0.96
0.94
0.92
2010 20092008
habibbanklimited
Comments:
The current ratio of 2010 and 2009 is quite acceptable as compare to 2008.
It means that its current ratio is less liquid. There is small increase in industrys ratio
which can meet the short term obligations of 2010 and 2009 as compare to 2008.
Acid Test Ratio:
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1
0.8
0.6
0.4
HABIBBANK
LIMITED
0.2
Acid test ratio =
0
2010 20092008
current
asset inventories prepaid expanses/current liabilities.
2010
Rs. In 000
2009
Rs. In 000
2008
Rs. In 000
843738619-434998560/770745837
772621047-432283588/737819892
666335481-45635507/679543203
0.5303176 0.4612744 0.9134077
1
0.8
0.6
0.4
HABIB
BANKLIMITED
0.2
02010 2009 2008
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Comments:
The acid test ratio indicates good sign in the overall liquidity of industry. It
is a small increase in the acid test ratio.
Working capital:
Working capital = current asset/current liabilities
2010
Rs. In 000
2009
Rs. In 000
2008
Rs. In 000
843738619/770745837 772621047/737819892 666335481/679543203
1.0947041 1.0471675 0.9805638
1.1
1.08
1.0
61.04
1.02
1
0.98
0.96
0.94
0.92
2010 20092008
HABIBBANKLIMITED
Comments:
Working capital ratio is increasing than previous ratio. In the year of 2010,the current assets is high than current liabilities. Therefore, working capital ratio is also
high as compare to others year because its assets and liabilities are lower.
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Leverage RatiosThe leverage ratio may be defined as financial ratio which is magnification of risk and
return introduced through the use of fixed cost financing such as debt and preferred stock
Leverage ratios measure the degree of protection of suppliers of long termfunds.
These include: Times Interest Earned= E a r n ing B e f o r e I n t e r e s t a n d T a x e s ( E B I T )
Interest Expenses
2010
Rs. In 000
2009
Rs. In 000
2008
Rs. In 000
2 3,922,081/34090368 22,507,572/33088536 22,013,850/26525556
0.7017255 0.6802227 0.829911
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.20.1
0
2010 20092008
HABIBBANKLIMITED
Comments:
The time interest ratio shows the lower value. Firm is not able to fulfill its
interest obligations. It is also called interest coverage ratio.
Debt Ratio:Debt Ratio= Total liabilities/ total assets.
2010
Rs. In 000
2009
Rs. In 000
2008
Rs. In 000
797,527,672/887,052,411 742,031,972/821,127,519 683,498,128/749,806,715
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0.8990762 0.9036745 0.9115658
0.915
0.91
0.905
0.9HABIBBANKLIMITED
0.895
0.8
9 2010 2009 2008
Comments:
These values indicate that the firm has financed close to total of its assets
with debt. The higher this ratio, the greater the firms degree of indebtedness and the
more financial leverage it has.
Debt-Equity Ratio:
Debt-equity ratio = total liabilities / total share holder equity.
2010
Rs. In 000
2009
Rs. In 000
2008
Rs. In 000
797,527,672/81811716 742,031,972/71235347 683,498,128/63179222
9.7483308 10.416626 10.818401
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0.915
0.91
0.905
0.9HABIBBANKLIMITED
0.895
0.89 2010 2009 2008
Comments:It is a ratio of amount invested by outsiders to the amount invested by the
owners of the business. This ratio indicates the low margin of safety to the creditors.2009and 2008 has high ratio as compare to 2010. The firm would not be able to meet the
creditors claim because of low assets or shareholder equity.
Debt to Tangible Net worth Ratio:
Tangible Net worth Ratio:
Tangible net worth ratio =total assets- intangible asset-total liabilities.
Debt to tangible net worth ratio= Total Debt / Tangible Net worth Ratio.
2010
Rs. In 000
2009
Rs. In 000
2008
Rs. In 000
9.7483308 /80689413 10.416626/70922957 10.818401 /51557334
1.2081 1.4687 2.0983
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2.5
2
1.5
1HABIBBANKLIMITED
0.5
02010 2009 2008
Total Capitalization Ratio:
Debt to total capital ratio =long term debt/ (long term debt-shareholder equity).
2010
Rs. In 000
2009
Rs. In 000
2008
Rs. In 000
750322590/(750322590-81,811,716)
683869120/(683869120-71,235,347)
856678881/(856678881-63,179,222)
750322590/668510874 683869120/612633773 856678881/7934996591.122379 1.1162772 1.079621
1.2
1
0.8
0.6
0.4
0.2
0
2010 20092008
habibbanklimited
Comments:
This ratio is relating the long-term debt to the permanent capital of the bank.
It shows that the fixed assets decrease than previous years which show a good sign. This
ratio is considered to be satisfactory.
Profitability Ratios
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Profitability measures enable the analyst to evaluate the bank or firms profits with
respect to a given level of sales, a certain level of assets or the owners investment .Without profits, a bank or firm could not attract outside capital
Net Profit Margin:
Net profit margin = (Net income/ Net sale) * 100
2010
Rs. In 000
2009
Rs. In 000
2008
Rs. In 000
(15,613,054/79,999,852)*100 (12,298,643/74,751,375)*100 (10,864,112/63,376,047)*100
19.52% 16.45 % 17.14%
20
19
18
17 HABIBBANKLIMITED
16
15
142010 2009 2008
Return on Assets:Return on Asset = Profit before Tax / Total Assets *100
2010
Rs. In 000
2009
Rs. In 000
2008
Rs. In 000
(23,922,081/887,052,411)*100 (22,507,572/821,127,519)*100 (22,013,850/749,806,715)*100
2.69681 2.74106 2.93594
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2.95
2.9
2.85
2.8
2.75
2.7
2.65
2.6
2.55
2010 2009 2008
Comments:
This ratio shows that the returns on assets are decreasing as compare to
previous years but overall profit with its available assets is increasing.
DuPont Return on Assets:
DuPont return on assets = (Net income/sale)*(sale/total asset) *100
2010
Rs. In 000
2009
Rs. In 000
2008
Rs. In 000
(15,613,054/79,999,852)*(79,999,852/887,052,411)*100
(12,298,643/74,751,375)*(74,751,375/821,127,519)*100
(10,864,112/63,376,047)*(63,376,047/749,806,715)*100
1.7604 1.4975 1.4487
1.81.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2010 20092008
HABIBBANK
LIMITED
Operating Income Margin:Operating income margin = (EBIT/ Net sale) *100
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1.8
1.61.4
1.2
1
0.8
0.6
0.4
0.2
0
2010 20092008
HABIBBANK
LIMITED
Return on Operating Assets:
Return on operating assets = (EBIT/operating asset)*100
2010
Rs. In 000
2009
Rs. In 000
2008
Rs. In 000
( 2 3,922,081/887,052,411)*100
(22,507,572/821,127,519)*100 (22,013,850/749,806,715)*100
2.69681 2.74106 2.93594
2.95
2.9
2.85
2.8
2.75
2.7
2.65
2.6
2.55
2010 20092008
HABIBBANK
LIMITED
Comments:
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This ratio indicates that banks growth is not good. It can not cover all assets
or expenses through net profit before tax easily. Its not able because its ratio is decreasing
than previous years.
Return on Total Equity:
Return on total equity = (Net income/ total equity)*100
2010
Rs. In 000
2009
Rs. In 000
2008
Rs. In 000
(15,613,054/81,811,716)*100 (12,298,643/71,235,347)*100 (10,864,112/63,179,222)*100
19.08% 17.26% 17.19%
19.5
19
18.5
18
17.5
17
16.5
16
2010 20092008
LIMITED
Comments:
Return on equity indicates the net income by the total equity of the owners. In
the year of 2010, the total equity is increasing than previous years and net income is also
increasing. In the year of 2010, the total equity is grater than net income. It means that
generally, the bank has high return, the better off are the owners.
Gross Profit Margin:Gross profit margin = (Gross Profit/ Net sales)*100
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2010
Rs. In 000
2009
Rs. In 000
2008
Rs. In 000
(45,909,484/79,999,852)*100 (41,662,839/74,751,375)*100 (36,850,491/63,376,047)*1057.39% 55.73% 58.14%
58.5
58
57.5
57
56.5
56
55.5
55
54.5
2010 20092008
HABIBBANK
LIMITED
Activity RatiosActivity ratios measure the speed with which various accounts are converted into sales orcash such as inflows or outflows.
These include: Total Assets TurnoverTotal assets turnover = Net sales/ total asset
2010
Rs. In 000
2009
Rs. In 000
2008
Rs. In 000
7 9,999,852 /887,052,411 74,751,375/821,127,519 63,376,047/749,806,715
0.0902 0.0910 0.0845
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58.5
58
57.5
57
56.5
56
55.5
55
54.5
2010 20092008
HABIBBANK
LIMITED
Fixed Assets Turnover:
Fixed assets2t0u1r0nover =Net s
ales/ fixed ass2e0t 09
Rs. In 000
2008
Rs. In 000
7 9,999,852 /739,205,903 74,751,375/706,687,146 63,376,047/647,715,497
0.1082 0.1057 0.0978
0.11
0.108
0.106
0.104
0.102
0.1
0.098
0.096
0.094
0.092
2010 2009 2008
Market RatiosMarket ratio relates a firms market value, as measured by its current shares price to
certain accounting values.
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These include:
Dividend per shareDividend per share =Total dividend/ no of share outstanding
2010Rs. In 000
2009Rs. In 000
2008Rs. In 000
5,450,436/10,018,80 4,173,059/9,108,000 2,730,251/7 ,590,000
0.5440 0.4582 0.3597
0.6
0.5
0.4
0.3
0.2
HABIBBANK
LIMITED
0.1
0
2010 2009 2008
Earning per Share:Earning per share = Net income/ no of share outstanding.
2010
Rs. In 000
2009
Rs. In 000
2008
Rs. In 000
15,613,054/10,018,80 12,298,643/9,108,000 10,864,112/7 ,590,000
1.56 1.35 1.43
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1.
6
1.5
5
1.5
1.4
5
1.
4
1.3
5
1.
3
1.2
5
1.
2
2010 20092008
HABIBBANK
LIMITED
Comments:
This ratio is decreasing as compare to previous years. In these ratios, net
income is greater than no of shares outstanding. Thats why, the earning per share is
decreasing and growth rate as well as. It shows low profitability between the
shareholders.
AWARDS:
2010
2009
2008
'HBL wins Best Emerging Market Banks award in Pakistan 2010'
'The Best Emerging Market Bank in Pakistan'
HBL among Top 500 Global Financial Brands
'Best Bank In Pakistan'
'Most Innovative Global Trade Finance''Buzziest Brands'
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15. Conclusion/Recommendation:
RAFIQ has become a creditable name in the textile industry of Faisalabad. In a bid to
prepare itself for the challenges / opportunities of the barrier free trade Textile Vision2005, their planned spinning unit will help them reap the benefits with competitive edgeof cost effective, quality products. The company has already started exporting quality
yarn to various buyers in the region. We may improve net return on funded facilities fromthe relationship by rationalizing the credit portfolio in accordance with their financial
requirements as proposed. In view of the above, we recommend the proposal forapproval.
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Recommendations:During my internship, I have realized that habib bank is vast system and spread its
networking all over the world and performing very well. It is difficult to give suggestionabout improving condition of habib bank.So, I will few suggestions to habib bank which are given below:
Bank must introduce online system all over the world.
Bank has different schemes which should express to the required customer so that
They are introduced reasonable shares in the market.
Bank should provide interest free loan to the scholar students for theirencouragement.
Habib bank should introduced computerize system in all branches. Through it,bank can increase more efficiency in the work than without it.
Habib bank should create plan for opening a customer account with bank where
he could easily know about the procedure of filling forms or cheque of newaccounts. It saves a lot of times of banks and staff who perform it.
Habib bank should increase communication with customer so that they couldmore establish public relation and expand its growth.
Habib bank must introduce marketing programs for the clients so that they couldeasily know about the market development of bank because it is problem for
clients that he has no idea for usage of new marketing term.
Bank should have same behavior with the customer. Bank should not adopt such a
behavior which creates problems between the customer and banker. For example,bank show good behavior with very close person and bad behavior show withother person. It is not good position for the banking growth.
Prepared & Consolidated by
VU s o l u t io n s
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