Strategic Management Report on

“MEEZAN BANK LIMITED”

Introduction• The Bank commenced operations in 2002, on being issued the first-ever Islamic commercial banking license

by the State Bank of Pakistan; in 2012 Meezan Bank completed a milestone of 10 years of Islamic Banking in Pakistan

• Meezan Bank offers a range of personal and corporate Islamic banking products and services through a retail banking network of over 385 branches in 109 cities.

• Backed by a state-of-the art T-24 core banking system, the branch network is supported by 24/7 banking services.

• 281 ATMs, Meezan VISA Debit Cards, Internet Banking, SMS alerts and a 24-hour Call Center.

Product Selected:

Current Account:

• Meezan Current Account is a Rupee-based current account that provides you the convenience of putting your money in a Riba-free account

Vision

Establish I slamic banking as banking of first choice to facilitate the implementation of an equitable economic system, providing a strong

foundation for establishing a fair and just society for mankind.

To be a premier I slamic bank, offering a one-stop shop for innovative value-added products and services to our customers within the bounds of Shariah, while optimizing the stakeholders value through an organizational culture based on learning, fairness, respect for individual enterprise and performance.

To develop a committed service culture which ensures the consistent delivery of our products and services within the highest quality service parameters, promoting I slamic values and ensuring recognition and a quality banking experience to our customers.

Mission

Service Mission

Business ScopeMarket• Since large population are practicing Muslims belonging increasingly aware of

prohibition of interest in Islam. • Non-Muslims as well.• Customers who believe in Interest free bankingCustomers:• Conventional current account holders.• Uncatered customersBoundaries• Within Shariah principles.

S. No. Region Customer Need Specifications Product / Technology

1 Industrial Area Manufacturers / Exporters

Local & Foreign Trade facilities, Cash Management, Salary Disbursements, Business Transactions including online transfers, clearing & remittances , Loan

Online transaction facility, Loan Facility, Loan Slabs*

2 Commercial Markets Whole Sellers / Retailers Inter branch and interbank transactions through clearing and remittance counters

Online transaction facility

3 Residential AreasSalaried Individuals/ Self Employed Persons/ Small cash based business owners.

Current deposit account for safe keeping of money, remittance, clearing (occasional)

Online transaction facility

4 Rural Areas Agriculture and Dairy farmsCurrent deposit account for Fund management and its Safety.

Online transaction facility

Loan facility

Changes Effects• Mechanized Trade Facility for exporters and importers• running finance and term finance • Cash management facilities to customers with high transaction

• Islamic mode of banking in foreign transaction.• Provide Riba free facility to customers • Customer with large cash transactions will be captured by

mitigating there risk

Business Scope (cont.)

Objectives (cont.)1. Improve community awareness of the bank's services in different cities by increasing branch marketing program + Awareness session by 20% the end of the year.

Cities Seminars Cost2012 14 24 12000000

2013 17 29 14500000

2014 20 35 17500000

Objectives (cont.)2. Increase EPS to Rs 4.5 per share.

EPS 2012 EPS 2013MBL 3.50 3.95

HBL 17.02 17.15BI 0.35 0.58

3. Increase number of consumer deposit accounts by [35]% by the end of the year

2012 2013 Current Growth %

MBL 60,123,651.00 82,382,328.00 30

HBL 310,567,157.00 402,564,215.00 29

BI 11,294,000.00 12,276,000.00 11

Market StructureEnd Users

• Manufacturers /

Exporters• Whole Sellers /

Retailers• Salaried Individuals/

Self Employed Persons/ Small cash based business owners.• Farmers

Representative Product

• Current Account

Channels

• Branches• Designated

Marketing Teams

50%

20%

25%

5%

Market Structure (cont.)Changes Effects

• Increase numbers of branches in remote areas of Baluchistan, KPK and other areas with strong business activities.

• Increase branch network in urban areas.

• Normally remote areas are covered by few banks including NBP, MCB and HBL with low standard of services usually and only enjoying that deposit base of customers and also that of their counter parties due to coverage in those remote areas which can also be captured.

• In urban areas customers prefer nearby branches due to law and order situation, which is also helpful in capturing those customers.

Market Segment(Historical growth of Industry)PAST FOUR (4) YEARS

Market Size Years Growth Per Year

2010 2011 2012 2013 Year Increase

Current Deposit

1,639,778,560

 

 

1,879,900,480

 

 

2,138,447,360

 

 

2,409,398,400

 

 

2010 N/A

2011 15%

2012 15%

2013 13%

Industry Future growthMarket Segment Years

Current Deposit Average Growth 2014 2015 2016 2017

Industry13.69% 2,739,222,840.50 3,114,197,207.86 3,540,502,111.07 4,025,164,227.50

COMPETITION AND MARKET MATRIXHistorical GrowthMarket Segment Years

Current Deposit 2010 2011 2012 2013

Meezan Bank 36,970,326.00 47,587,663.00 60,123,651.00 82,382,328.00

Habib Bank Limited 186,234,235.00 240,687,417.00 310,567,157.00 402,564,215.00

Bank Islami 8,975,862.00 10,101,628.00 11,294,000.00 12,276,000.00

Bank Alfalah 119,435,697.00 141,881,781.00 160,786,090.00 187,026,587.00

2010 2011 2012 2013 -

50,000,000 100,000,000 150,000,000 200,000,000 250,000,000 300,000,000 350,000,000 400,000,000 450,000,000

Meezan BankHBLBank IslamicBank Alfalah

Future GrowthMarket Segment YearsCurrent Deposit Avg. Growth 2014 2015 2016 2017Industry 13.69% 2,739,222,840.50 3,114,197,207.86 3,540,502,111.07 4,025,164,227.50 Meezan Bank 30.69% 107,669,027.15 140,717,307.82 183,909,535.02 240,359,324.63 HBL 29.30% 520,508,495.47 673,008,389.12 870,188,086.79 1,125,137,990.29 Bank Islamic 11.01% 13,628,029.21 15,128,965.48 16,795,208.83 18,644,965.51 Bank Alfalah 16.15% 217,223,626.50 252,296,235.89 293,031,617.55 340,344,074.42

14%

30%

29%

11%

16%

NEXT FOUR YEARS

IndustryMeezan BankHBLBank IslamicBank Alfalah

COMPETITION AND MARKET MATRIX (cont.)

Profitability AnalysisPROFIT 2010 2011 2012 2013

Meezan Bank 2,126,960 4,356,300 5,230,226 5,646,664

HBL 27,040,030 34,321,398 35,561,757 36,133,328

Bank Islamic 608,587 626,442 462,996 308,152

Bank Alfalah 1,368,745 5,433,718 6,783,202 6,807,211

2010 2011 2012 2013 -

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

PROFITABILITY ANALYSIS

Meezan Bank HBL Bank Islami Bank Alfalah

DISTRIBUTION CHANNELS

Individual CommercialBranches 385 385Direct Selling 385 385

DISTRIBUTION ANALYSIS WITH COMPETITION

Commercial Individual Industrial

Meezan Bank 385 385 385

Habib Bank Limited 1500 1500 1500

Bank Islamic 141 141 141

Bank Alfalah 574 574 574

Meezan Bank Habib Bank Limited Bank Islamic Bank Alfalah -

200

400

600

800

1,000

1,200

1,400

1,600

CommercialIndividualIndustrial

As HBL is capturing maximum market share in all three segments, so in comparison Meezan Bank Limited is almost 25% of it due to less number of branches as HBL have.To increase its market share, Meezan has to increase number of its branches to cover more areas either in domestic region / International.

Driving ForcesBetter and

timely service.Increase of

awareness regarding Islamic banking.

Larger branch network.

Low charges.

Timely and satisfactory response to complaints

and issues.

Econmic, political and law & order

condition.

Foreign branches

Operational CostS. No. Cost Heads Meezan Bank HBL Bank Al Falah Bank Islami1 Average Cost of Deposit 4.52 5.38 5.1 5.78

2 Salaries & Perks 27.59 24.53 33.12 36.23

3 Rent 8.97 5.89 13.25 18.42

4 Repair & Maintenance 2.82 2.61 3.88 2.61

5 Communication & Transportation

3.45 1.48 2.80 3.91

6 Advertisement publicity Expenses

0.78 1.65 1.62 1.90

7 Subscription Charges 1.21 0.39 0.95 2.83

8 Security Charges 1.98 1.55 1.03 3.94

Measuring GAP & Action PlanS. No. Cost Heads1 Average Cost of Deposit Average cost of capital is low as compare to industry and competitors but

same position can not be maintained only by capturing urban current deposit market and expansion in rural areas is required

2 Salaries & Perks Appraisal and bonuses should be evaluated on performance basis3 Rent Comparatively low4 Repair & Maintenance Centralized Administration should manage all related issues to low down

cost.

5 Communication & Transportation

Cost increased due to staff transportation service.

6 Advertisement publicity Expenses

Comparatively low

7 Subscription Charges Include portfolio management fees of Al Meezan Investment Management Limited.

8 Security Charges Manage cash shipment and security guards matters

Strategic Cost• Research and development cost on human resource department

• Disaster Recovery Data Center or DRDC cost

• Implementation cost of Temenos T24

• Rural expansion of branch network

• Expansion cost required to approach international market

Operational Growth Indicators• Total deposits increased to Rs. 330 billion

• The Bank recorded 24% growth in its Profit-after-tax

• Substantial recovery efforts during the year on its non-performing financing portfolio

• The Bank's total revenues increased to Rs. 26.7 billion

• The income from core banking business grew to Rs. 14.1 billion

Strategic Performance Indicators• The Bank has already met its minimum capital requirement of Rs. 10 billion

• Commercial Banking business targets the 'middle-market' segment of customers

• Commercial Banking business segment by 85% in 2013

• The Bank also entered the Agriculture sector and set up a dedicated Agriculture Unit

Customer Buying Criteria

Factors considered by customers while selecting a particular bank

Meezan Bank

HBL

Bank Islamic

Bank Alfalah

WEIGHTAGE given by

customers*

Reputation 37% 30 40 20 20Social influence 8% 30 20 20 30Service quality 19% 15 10 35 20Religious Belief 19% 20 0 20 10Media advertisement 17% 5 30 5 20

The below table shows the weightage given by customers to each of the factors and the position

of MBL, and its competitors.

*taken from a research paper on Islamic Banking

Social Influence Reputation and Brand Name

Service QualityAccessibility

Responsiveness

Media Advertisement

Improve Fast

Question Its Cost

Do not Sweat

Keep It Up

Best

Same

Worst

Strengths

• Interest free banking.• Pioneer in the industry of Islamic Banking, Market

leader.• Authentic and Credible Shariah board with

members consist of famous religious scholars.• High market coverage as compared to its

competitors.• An acquisition of conventional Bank (HSBC) has

increased its reputation and goodwill.

Opportunities

• Convert conventional current account holders to MBL customers.• Awareness to uncatered customers, as people are still fully not aware

regarding Islamic banking principles.• Awareness to Islamic Institutions regarding their practices.• Currently, State bank is targeting banks with lower equity (KASB), so

MBLS’s high equity can be used as an added advantage to attract new customers.

• Mergers with Telecom industry for mobile banking (easy paisa etc) can be done.

• Increase in the no. of branches in rural areas.• Improved customer service.• Global acceptance of Islamic banking system, Target the global market as

well.

Threats

• Banks converting to Islamic banking from conventional banking, growing competition.

• Mobile banking technology is increasing in the world and can act as a threat to MBL.

• Misconceptions and misunderstandings among the general public about Islamic banking.

• Government restrictions on Islamic banking.• Non availability of conventional banking products

(credit cards etc).• Aggressive marketing by conventional banks.

Weaknesses

• Numbers of branches are less in rural areas.• Customer service needs improvement.• No global coverage discourages big customers.• Clearing time of foreign transactions is lengthy.• No benchmarking available in the market using

conventional banking benchmarks.• Limited availability of human resources with Islamic

banking knowledge.

S W

TO

SWOT ANALYSIS

Recommendations:

• Aggressive marketing and advertising strategy.• Establishment of new branches.• Service improvement.• Islamic banking introduction trainings

in Universities/colleges.