18061782 ubl internship report

7/29/2019 18061782 UBL Internship Report

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PREFACE:

The field of banking has always been a source of inspiration for me during my

entire academic career. To work in a bank, to acquaint with its working

mechanism was always a point of interest for me and God gave me a golden

opportunity to complete my internship at UBL, one of the leading bank in

Pakistan and well known in world due to its appearance in the international

markets. I had a general idea about the banking, but once I practically started

the internship in banking field I observed much about banking, I realized the

importance and significance of commercial banking for the development of

economy. To adjust myself in such a large commercial organization was not

an easy task, but by the grace of Almighty Allah aid my internship in a

befitting manner and I learned a lo about the overall banking arena. This

expanded my vision about the banking sector, which in turn enabled me to

make an appraisal of the economic situation of our country.

This report is a thorough essence of my rigorous studies which I undergone

through in a period of two months in a commercial bank. I have exclusively

studied and observed the operations/ functioning of the bank and tried my best

to abreast myself with all the dimensions of the banks. The purpose of this

report is to evaluate the performance of UBL in diversified avenues and give

concrete recommendation for further improvement. Although the bank is

functioning satisfactory, but the path to ultimate success is still full of threats

and hurdles.

It was a great experience to work there and contribute handsomely in the

process of appraising its pros and cons and feeling to be a significant part of

the bank.

I am thankful to all those who helped me in one-way or the other and guidedme in the preparation and compilation of this report in a presentable fashion.

LIST OF CONTENTS

S. No. Title PageNo.

1



PREFACEPREFACE I

TABLE OF CONTENTSTABLE OF CONTENTS II

LIST OF TABLESLIST OF TABLES V

LIST OF GRAPHSLIST OF GRAPHS VI

LIST OF CHARTSLIST OF CHARTS VII

LIST OF ACRONYMSLIST OF ACRONYMS VIII

EXECUTIVE SUMMARYEXECUTIVE SUMMARY IX

Section # 1

CHAPTER – 1CHAPTER – 1INTRODUCTION OF THE REPORTINTRODUCTION OF THE REPORT

1.1 Introduction 1

1.2 Purpose of Study 1

1.3 Scope of Study 1

1.4 Limitations of Study 2

1.5 Methodology of Report 2

1.6 Scheme of Report 3

Section # 2

Chapter – 2

Introduction to UBLIntroduction to UBL

2.1 Banking History 4

2.2 Banking in Pakistan 4

2.3 Towards Islamization of Economy 4

2.4 Birth of UBL 6

2.5 Number of Branches 6

2.6 Subsidiaries 7

2.7 Functions of UBL 7

2.8 Role of UBL in Banking Sector 7

2.8 Computerization of UBL 9

Chapter – 3

Deposits, Remittances, Credit & Clearing DepartmentsDeposits, Remittances, Credit & Clearing Departments

3.1 Deposit Department 12

3.1.1 Functions performed by Deposit Department 12

3.1.2 Types of Accounts 13

3.1.3 Nature of Accounts 133.2 Remittances Department 14

2



3.2.1 Demand Draft 14

3.2.2 Telegraphic Transfer 15

3.2.3 Mail Transfer 15

3.2.4 Pay Order 163.2.5 Rupee Travelers Cheque 16

3.2.6 Uniremote 16

3.3 Credit Department of UBL 17

3.3.1 Credit department of UBL Nowshera 17

3.3.2 Procedure for Financing 17

3.4 Clearing Department 19

3.4.1 Procedure for clearing of Cross cheques 20

3.4.2 IBC 21

3.4.3 LBC 21

3.4.4 OBC 21

Section # 3

Chapter – 4

Financial AnalysisFinancial Analysis

4.1 Group and its Operations 22

4.2 Basis of Presentation 22

4.3 Significant Account Policies 23

4.4 Risk Management 25

4.5 Concentration of Credits and Deposits 26

4.6 Investment Portfolio 27

4.7 Profitability 27

4.8 FINANCIAL ANALYSIS 28

4.8.1 Common size analysis of Balance Sheet 28

4.8.2 Common size analysis of Income Statement 32

4.8.3 Financial Ratios 34

Chapter – 5

Qualitative AnalysisQualitative Analysis

5.1 Qualitative Analysis of UBL 41

5.2 SWOT Analysis 44

5.2.1 Strengths 45

5.2.2 Weaknesses 46

5.2.3 Opportunities 46

5.2.4 Threats 47

3



Section # 4

Chapter – 6

RecommendationsRecommendations6.1 RecommendationsRecommendations 49

6.1 Human Resource Department 49

6.2 Credits and Advances 53

Section # 5

Chapter – 7

Implementation PlanImplementation Plan

7.1 Action Plan 1 577.1.1 Franchise Agriculture Supplies Stores 57

7.2 Action Plan 2 59

7.2.1 Techniques for effective Management and Recovery of

Advances

59

7.3 Action Plan 3 62

Bibliography 68

Annexure 69

LIST OF TABLES

S. No. Title Page No.

1 Common size Analysis of Balance Sheet 30

2 Common Size analysis of Income Statement 33

4



3 Financial Ratios 34

4 Cost Schedule of Action Plan 59

5 Cost/revenue schedule – Marketing Plan 67

5



LIST OF GRAPHS


1 Total Current Assets 30

2 Fixed Assets Distribution 31

3 Short Term Liabilities 31

4 Long term Liabilities 31

5 Income composition 33

6 Current Ratio 35

7 Asset Turnover 35

8 Debt to Assets 36

9 Debt to Equity 36

10 Coverage Ratio 37

11 Gross Profit Margin 37

12 Net Profit Margin 38

13 Return on Investment 38

14 Return on Equity 39

15 Advances to Deposits 39

16 Investment to Deposits 40

17 Cash Ratio 40

6



LIST OF CHARTS


1 Senior Management of UBL 10

2 Organizational Hierarchy of UBL 11

7



List of Acronyms

AD Authorized Dealer.ATM Automated Teller Machine

ATR Asset Turn Over

AVP Assistant Vice President

AOF Account Opening Form

BOG Board Of Governor

BOD Board Of Director

CA Credit approval

CP Credit Proposal

DAC Disbursement Authorization Certificate

DD Demand Draft

DP Note Demand Promissory Note

EBIT Earnings Before Interest & Tax

ESVP Executive Senior Vice President

EVP Executive Vice President

FDD Foreign Demand Draft

FMT Foreign Mail Transfer

FTDR Foreign term Deposited Receipt

FTT Foreign Telegraph Transfer

GM General Manager

GOP Government Of Pakistan

GPM Gross Profit MarginHBL Habib Bank LTD

IMS Institute Of Management Sciences

LC letter Of Credit

MCB Muslim Commercial Bank

MT Mail Transfer

NPM Net profit Margin

OG1 Officer Grade 1

PLS Profit & Loss Saving Account

PO Pay Order

RCAD Regional Credit Administration Department

RF Running FinanceRM Relationship Manager

ROI Return On Investment

RTC Rupee Traveler Cheque

STDR Special term Deposited Receipt

SVP Senior Vice President

SWOT Strength Weakness Opportunities Threats

TIE Time Interest Earned

TT Telegraphic Transfer

UBL United Bank LTD

8



EXECUTIVE SUMMARY

1. Banking operations and services are one of the basic needs of an

economy. These include acceptance of deposits and disbursement

of advances to individuals and others at higher rates. Banks

perform various fundamental factions, which are directly or

indirectly contributory towards economic and social development

of countries. UBL, a commercial bank was established in 1959 as

result of reckless efforts made by Agha Hassan Abidi. The UBL

has shown the fastest growth pattern and in a period of just 27

years became the second largest bank of Pakistan. The bank image

however adversely destroyed when it suffered heavy losses during

its nationalization period due to political and other factors. The

bank is showing re-emerging indications as is evident from its

financial statements. UBL on October 19, 2002 was privatized and

bought by two financially sound parties of international repute i.e.

best way group and Abu Dhabi group holding 51% of the banks

share and thus has emerged as the largest private bank surpassingMCB.

2. The purpose of this report is to study operations and analyze

performance of UBL to see whether the bank is successful in its

operational performance or not, and recommending possible

solutions for problems. For meeting the purpose both secondary

and primary data have been used.

3. The whole report has been divided into five main sections as

describe below:

Section I is introduction to the report and briefly describes the scope,

purpose, methodology and limitations faced during the preparation of

the report.

Section II is the review portion and contains five chapters. First chapter

is introducing the organization, UBL which came in to being in 1959.

Remaining four chapter are explaining operations and relevant broader

9



but comprehensive set of information of the functional departments of

the bank. An attempt has been made so that readers of this report

should be able to gain sufficient knowledge of the processing and

procedures of the operations carried out by these departments.

However in the chapter pertaining to foreign exchange department

main focus is places on the payments regulations and procedures of

letter of credits in the light of foreign exchange regulation Act, 1947.

Section III; the analysis part of the report and is comprising of two

chapters. Chapter 5 is the critical analysis of the departments and its

functions. SWOT analysis is an integral part of this chapter. As an

internee I was deeply concerned about the performance level of the

UBL and therefore tried to analyze the bank financial performance that

is included in chapter 4, this chapter reveals that the bank is trying to

regain its position in the present more dynamic and competitive

environment. Major findings are included in this summary which is the

outcome of these analysis.

Sector IV is the recommendation part and is derived from the previoussection. Major findings are stated in the later part of this summary.

Three action plans are included in section V with the hope that if

implemented properly will enhance the bank’s overall productivity and

will also enable it to compete more efficiently and effectively. These

plans are related to exploration of new opportunity present in the

agriculture sector, effective management and recovery of advances and

marketing activities respectively.

4. During the study, findings extracted are listed below:

i. Mark up expense of the bank has reduced and

administrative expenses have shown increase.

ii. Non-performing advances have reduced; deposits show

consistency.

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iii. Due to lack of job rotation opportunity and lack of informal

group existence, employees do not share each other

workload.

iv. The recent downsizing hustle and bustle trends have

affected bank’s efficiency due to lay-off survival syndrome.

v. Presently about 1100 employees have been placed in

surplus pools that are unaware of their future.

vi. Motivation level of employees is not satisfactory which

effects their own and as well as performance of the

organization.

vii. In proportion to number of accounts and functions

performed sizes of branch’s buildings are small.

viii. Newly developed account opening form carries restricted

space where only two applicant’s names can be

incorporated.

5. Recommendations of the report are as under:

i. Training for developing managerial leadership should be

provided.

ii. Political interference in placements etc. should be

discouraged.

iii. Exercise should be evolved to bring needed cultural and

other management changes.

iv. Recruitment policies should be changed, MBA’s and other

business related qualified individuals should be hired.

v. HRD should frequently conduct refresher courses.

vi. Computer training courses should be imparted.

vii. Staffs who deal with credit, should be properly trained for

their jobs.

11



viii. HRD should focus on designing new courses to build

organizational image and goodwill.

ix. Use of cheap means for posting etc. should be curbed.

x. Customer orientation culture should be developed among

employees.

xi. For enhancing motivation level fair and clear career

development policies should be implemented.

xii. Relationship managers should be trained to correctly access

credit related risks.

xiii. Skills should be development of employees to assess

management abilities of the borrower’s of their business.

xiv. Credit officers should be enabled to carry out proper and

correct documentation.

xv. Credit officers should be equipped with knowledge and

skill to analyze, verify and maintain securities in handsome

manner.

xvi. Various administrative reforms should be made to resolve

quickly default cases.

xvii. Marketing department at Hub branches should be created.

xviii. All employees should participate in marketing operations of

the bank.

xix. Marketing at Desk concepts should be practiced.

xx. Proper promotional campaign on media should be carried

out.

xxi. Marketing research and development department of the

bank should carry out situational analysis and develop short

medium and long-term plans.

12



CHAPTER # 1

INTRODUCTION TO THE REPORT

1.1 INTRODUCTION:

Students of M.Com studying courses leading to Master degree in

Commerce are required to undergo an internship programme of two

months duration. This is an essential academic requirement. The

internship is followed by comprehensive report writing, required to

submit to the research and development division (R&DD) of Quaid-e-

Azam College Of Commerce, Peshawar. This report is properly

evaluated on the basis of its description and analytical capabilities byinternal and external examiners. I did my internship in United Bank

Limited Nowshera Cantt Branch.

1.2 PURPOSE OF STUDY:

The purpose of the study is to work in real life situation and learn

banking practice by doing. In this context its objectives are:

i. To analyze banking operations i.e. operational analysis,

financial analysis.

ii. To develop concrete and feasible recommendations.

iii. To improve report writing skills.

1.3 SCOPE OF STUDY:

13



The study is confined to banking operations. An attempt, along with all

its limitations, to collect financial data and general statistics of the

bank has been made. Keeping in view the purpose of the study, which

is to make an acquaintance with practical doings in the bank, this

seems a comprehensive effort.

1.4 LIMITATION OF STUDY:

It is to admit that the study attempts only those aspects, which are

closely relevant to the purpose of the study. facts and figures, which

otherwise might be equally important, but not having a direct bearing

on the conclusions arrived at this study, have been ignored.

The most important limitation from which the study suffers is the non-

availability of information in a manner required for analysis and the

secrecy of the bank. Another important limitation of the study is time

and space constraint.

1.5 METHODOLOGY OF STUDY:Both primary and secondary data were used in compilation of the

report. Methodological tools used were:

i. Primary Data:

Personal Observations.

Discussion with Bank Personnel.

ii. Secondary Data:

Brochures/ Manuals of the bank.

Annual Report

State Bank Foreign Exchange Manual

Bank internship reports on UBL available in library.

Journals, newspapers and books.

Internet.

14



1.6 SCHEME OF REPORT:

The report is divided into five sections as under:Section-I consists of chapter 1, which includes background, purpose,

scope, limitations, methodology and scheme of the report.

Section-II consists of five chapters (Chapter 2-3) and includes

organizational review. In this section background history of UBL, its

organizational structure; and department operations are discussed.

Section-III consists of chapter 4 and Chapter 5, which include

operational and financial analysis of UBL respectively.

Section-IV summarizes the findings and recommendations of the

study.

Section-V deals with action plan to implement the recommendations,

identified in the previous section.

15



CHAPTER # 2

INTRODUCTION TO UBL

2.1 BANKING HISTORY:

Consensus on the origination of word “Bank” is not yet reached at.

Some authors opinion is that this word is derived from the words “Bancus” or

“Banque”, which mean a bench and they further relate banking business

inception to Jews in Lombardy. Other authorities state that the word “Bank” is

derived form the German word “Back” which means “Joint Stock fund” and

later on due to German occupation of Italy, this word was Italianated into

“Bank. Authors quote Babylonians (few quotes Chinese) who developed

banking system as early as 2000. B.C1

2.2 BANKING IN PAKISTAN:

Banking started in Pakistan after the bold and emergent decision of

formulation of SBP on July 30, 1948. Thereafter this sector has witnessed

enormous growth. In 1974 banks were nationalized, in the hope that new era

of growth could be achieved through it. However the process is reverse since

1991, up till now MCB, ABL, and UBL have been privatized and HBL is in

the process of its privatization.

2.3 TOWARDS ISLAMIZATION OF ECONOMY2:

Interest based transactions/businesses are “Haram” in Islam. The GOP

has shown. Interest to eliminate “interest” from its economy by developing

various alternatives. To achieve this objective various efforts are made with

the following outcomes:

2.3.1 Deposits:

PLS (Modarba) Accounts

Current Accounts: (with no return paid)

1 S A Haq. (1998) Practice & Law of Banking in Pakistan (6th Ed.)

2 Council Of Islamic Ideology (1980). Elimination of Riba from Economy. Islamabad

16



2.3.2 Loans:

Qarz-e-Hasana

Lending on the basis of Service charges

2.3.3 Trade Related Modes of Finances:

Bai Muajjuai; purchases of goods by banks and their sale to clients at

appropriate mark-up in prices.

Bai-Salam; purchase of goods from clients by banks and their resale to

the client at increased prices, to be paid in future.

Financing for development of property on the basis of developmental

charges.

Purchase of trade bills.

Ijara: leasing.

Hire purchase.

2.3.4 Investment Type of Modes of Finances:

Musharaka: financing on the basis of profit and loss sharing.

Modaraba: equity sharing of borrower profit and loss on basis of

purchase of modaraba certificates.

Rent sharing.

Equity participation through purchase of shares.

2.4 BIRTH OF UBL:

On November 9, 1959, UBL was notified and included as a private

schedule bank with authorized capital of Rs. 20 million; issued and paid up

capital of Rs. 10 million divided into 1 million shares of Rs. 10/ each.

Currently BOD and president/ CEO Mr. Amar Zafar Khan being a member of

17



this newly formed set up manage UBL. Chairman His Highness Shaikh

Nahayan Mabarak Al Nahayan and Deputy Chairman Sir Mohammed Anwar

Pervez are the two supreme controllers of the bank’s affairs. Another

development is the appointment of director operation, Nauman Hussain by the

newly privatized bank. Senior management of the bank is shown in the chart

given at the end of chapter.

2.5 NUMBER OF BRANCHS:

UBL has a large network of branches, which extends to the remotest

areas of the country. In December 1983, there were 1623 branches whereas in

1974 it had only 1238 branches and in October 2003 these figures show total

number of 1007 branches3.

UBL has been very active in increasing its overseas branches network.

The first foreign branches were established in London in 1963. Now UBL has

branches in Bahrain, Qatar, Saudi Arabia, United Arab Emirates, Yemen Arab

Republic, UK Switzerland, Egypt, Oman and The United States. These

branches are playing a significant role in channeling home remittances and

foreign trade of Pakistan.

2.6 SUBSIDIARIES:

UBL has four subsidiaries, namely:

United National Bank Limited (UNB), UK

United Bank AG (Zurich), Switzerland

United Executers and trustees Company Limited

United Bank Financial Services (Private) Limited

2.7 FUNCTIONS OF UBL:

UBL is a commercial bank, which transacts the business of banking in

accordance with the provisions of BCO, 1962. Section 7 of the Act authorizes3 UBL (2003) Annual Report

18



banks to engage in the prescribed form of business. In the light of this section

UBL’s functions can be categorized as under:

Agency services

General Utility Services

Underwriting of loans raised by the Government or public bodies and

trading by corporations etc.

Providing specialized services to customers, and

Hajj-related services.

2.8 ROLE OF UBL BANKING SECTOR:

The impressive growth and development, which UBL achieve, present

it undoubtedly the most dynamic and progressive. In a very shorter period of

time it became one of the leading banks overtaking several other older and its

competitor banks4. The major contributions5 the bank ahs made are enlisted

below:

Record setting performance and commitment to serve the customers

Personalized service and dynamic approach

Catalyst of changes

Professional management

Modern banking policy

Human resource development

Small loans (or) micro credits

Pacesetter in economic research established in 1967, department for

economic research.

Utility bills collection

4 Cap. (Rtd) Syed Hamid Ali Shah, (2002) Internship Report On UBL Main Branch Peshawar.

IMS.

5 M. Iqbal Khan,, (2002) Internship Report On UBL Nowshera Cantt Branch. IMS

19



Credit cards (unicard-1970)

Travelers Cheques (Humarah-1971)

Diaries and calendars – received prizes too

Promotion of sports

2.9 COMPUTERIZATION OF UBL:

UBL has taken leading start in the introduction of computers in (1966-

1968)6 in important cities. Its three computers centers Rawalpindi, Lahore and

Karachi are equipped with the modern mainframe computers of various

capacities. Every branch has been decorated with microcomputers.

The use of computers has enabled the bank to save time and efforts,

raise efficiency and deliver the goods speedily to its customers. This has also

allowed the bank to maintain its leadership within the industry.

UBL - On line System7 :

Themes of this service is “Access any time, anywhere, any device”

which symbolizes comfort, convince and connectivity. UB-Online a web

based service that can be accessed through multiple media link like, (i) PC via

internet (00) Mobile phone with WAP or free SMS) (iii) Personal Digital (iv)

assistants and (v) Plain telephone; following are some of the exciting features:

o Accounts statement & electronic data interchange

o Graphical analysis

o Alerts service /facility, search facility and activity long

o The banks as another computer-based system known as

“UIBANK”8, which is a well-develop on-line branch-banking

package. The system automatically prepares various report, central

bank returns, and statement of accounts for customers.

6 Cap. (Rtd) Syed Hamid Ali Shah, (2002) Internship Report On UBL Main Branch Peshawar.

IMS.

7 UBL, (October 8, 2002). PPI Circular. Karachi

8 www.ubl.com

20



Money Gram facility:

The bank has recently employed money gram service system, which

can affect money transfers within minutes. Similarly the system used for local

transfer of money transactions is called uni-remote.

Hajj service:

Keeping to its tradition is august 1982 provided electronic facility at its

Hajj booth and has installed now modern computers at designated branches

(Hajis) and increasing efficiency. This facility has reduced the service time to

less than six minutes per Haji compare to about half-an-hour to 45 minutes per

Haji earlier.

21



2.10 MANAGEMENT OF UBL:

Chart 2.1 Senior Management of UBL

Source: UBL, (2003). Annual Report. Karachi.

22

Sheikh Nahyan Mabarak

Nahayan chairman

Sir Mohammad Anwar

Pervez Deputy Chairman

Amar Zafar KhanPresident

M.A Manna

Deputy CEO

Nauman Hussain

Director Operations &

UtilitiesMansoor M. Khan

Head Corporate Banking

Group

Shaharyar Ahmed

Head Investment Banking

group

Shahid Waqar Mehmood

Head Commercial bank

Risha Moheyuddin

Global Treasurer

Khalid Munawar-ud-din

Head Credit Policy

Supervision

Muhammad Ejazuddin

Audit Chief

Mehboob A.KhanAman Aziz Siddique

Head International

Operations (Dubai)

Rukhasana Asghar

Global Head Human

Resources

Ali sameer Chief SAM (domestic)

Ameer KarachiwalaChief financial Office/HCA



2.11 FUNCTION HIERARCHY:

Chart 2.2 Organizational Hierarchy of UBL

Source: UBL, (2003). Annual Report Karachi.

CH # 3

CASH, REMITTENCES, CREDIT & CLEARING

DEPARTMENTS:

23

Chairman

Deputy Chairman

Board of Directors

Executive Committee

Managing Director

SEVP

EVP

VP

Officer Grade-I

Non Clerical

Staff

Clerical Staff Officer

Grade-II

Officer

Grade-III



DEPOSITE DEPARTEMNT

As per the definition of “Banking” under see 5(b) of BCO 1992 one of the

main functions of a bank is to accept deposit. Deposits are the backbone of

any bank; other functions of the bank primarily depend upon the type and size

of deposits.

3.1.1: Function perfumed by cash and deposit department in UBL

Nowshera Cantt Branch.

Nowshera Cantt Branch accepts deposits under the following three accounts.

i. Current account

ii. PLS Saving account

iii. Terms Deposits

3.1.2: Opening of Account:

To open an account in UBL the customer will have to fill an account opening

form in front of bank officer. He has to sign in all required places in front of

the officer.

3.1.2.1: Documents Required in Account Opening:

i. N.I.C Copy.

ii. Account opening form (provided by bank)

iii. Two photograph (in case of illiterate person)

iv. Specimen Signature card (Provided By Bank)

v. Cheque Requisition Form

vi. Introduction of Account.

24



Types of Account:

a. Individual Account

In this account a single customer operates the account. The banker willrun the account according to the rules, but if the customer gives special

instructions the Bank will have to follow it.

b. Joint account:

In this type of account two or more than two persons will open the

account. The account will be operated by one account holder in case of (either

of the survival). If the instructions are not given, all the account holders will

have to sign the check.

NATURE OF ACCOUNTS IN UBL NOWSHEREA

A) Current Account:

These are non-profitable demand accounts. The account can be opened with

minimum amount of rupees 1000/-. These account are usually maintained for

business purpose. Due to enormous competition UBL has introduced daily

profit current account for corporate clients called (UNISEVER) minimum

balance required is Rs. 100,000/-. If minimum balance requirement is not met,

bank is authorized to recover predetermined charges.

B) PLS Saving Account

These accounts were intended with the aim of encouraging thrift among

people. These accounts can be opened either in Pakistani rupees or in fewmajor currencies of the world. Bank offers (4%- 6%) return on these accounts.

The basic feature is the profit and loss sharing as according to non-interest

based banking system. These accounts can be opened in the name of;

individuals, joint names, trust accounts, charitable organizations.

Unlike current accounts, Zakat is applicable on local currency saving

accounts. Minor’s accounts can be opened on the condition that their

guardians shall operate these accounts.

25



C) Term Deposits:

Term deposits are also called fixed deposits. These can be with drawn after a

specified period of time. Interest is paid to the depositor on all fixed or term

deposits. The rate of return varies with the duration for which the amount is

kept with bank

There are two types of term deposits.

STDR’S – Special Term Deposit Receipt (local currency):

Special Term Deposit Receipts are issued for different periods of maturity

ranging from one month to 5 years, having attractive returns. There is no

limit on denominations.

3.2.3.2 NTDR’s – Notice Term Deposit Receipt (local currency):

These are term deposit with special features that these can be withdrawn

any time but after giving a predetermined and pre agreed early notice.

REMITANCES DEPARTEMNT:Current business trends demand fast movement from one geo-graphic end to

another. Latest technology and telecom data transmission has made it possible

to make such transactions with in minutes. UBL Nowshera Remittances

Department performs following functions.

Demand draft (D.D)

D.D is a negotiable instrument issued by branch of the bank drawn on other branch of the same bank.

A) Procedure For D.D.:

Purchaser is asked to fill in an application form duly singed by applicant.

Three things should be maintained in the form.

Name of Payee

Place of payment

Amount of D.D

26



Commission is charged on D.D as bank income. The applicant is asked to

deposit the cash specified on the application form to the teller. After

depositing cash the remittances incharge prepare a D.D. That is singed by two

officers must having power of attorney.

Bank also provides this facility to general public who don’t have account in

UBL. They will have to submit a N.I.C copy along with D.D application form.

Telegraphic transfer (T.T):

Transfer of funds to another branch of the same bank with the help of test

numbers. If the test number agrees the bank make payment to the party.

A) Procedure for T.T:

The procedure for T.T is same as D.D. But in D.D it is given on a printed-

paper and singed by two officers but, in T.T, only test number is given to the

customer.

3.2.3. Mail Transfer (MT)

When the money is not required immediately, the remittances can also be

made by MT. Here the selling officer of the bank sends instructions in writing

by mail to the paying bank for the payment of a specified amount of money.

The payment under transfer is made by debiting the buyer’s account at the

sending office and crediting it the recipient’s account at the paying bank. UBL

takes mail charges from the applicant where no excise duty is charged.

Pay Orders:

Pay order is banker cheque issued favoring a named beneficiary. The issuance

bank is discharged by payment in due course. Application for the

PO stamped and the customer’s account balance is checked or cash received

for the amount PO and other charges. Pay Order leaf is typed and crossed if

required and signed by two authorized persons. Thereafter it is delivered to the

customer. PO can be cancelled at original purchaser’s request in writing and

surrender the instrument, which then marked canceled along with other

documents and prior entries.

27



3.2.5 Rupee Traveler Cheques:

UBL has launched R.T.C Brand named “Hamrah” in November 1996. These

are issued to applicants with varied denominations without excise duty and

commission. When issued HO account is credited and on encashment the same

account is debited. RTC’s lost cases are communicated to HO and client is

either repaid or new RTC’s are issued to him/her.

3.2.6 Uni Remote:

This is a new tool for the transfer of money. This is a step towards the online

banking taken by UBL. This tool transfers money from one branch of UBL to

other through electronic transfer. The customer will have to fill the deposit

slip. On the slip he will write the name and account number of the person to

whom the money will transfer, the name of the branch is also written. The

amount is deposited with teller and the receipt is shown to remittance

inchraged. One I.D copy is also attached with slip. The remittances incharge

will transfer if by using device (computer) through online service. The fund

transfer is must be supervised by another authorized officer. Every time for

this is five minutes.

3.3 CREDIT DEPARTMENT OF UBL

General

Credit extension is the principal function of a bank, through which pace of

activity is accelerated in the various sectors of economy. Also the indicators,

which mainly reflect the high quality of bank’s management, are its prudent

financing decisions, proper control of finance and prompt recovery. In this

regard the credit policy of a bank play a very important role as it provides the

overall framework, responsibilities, authorities and facilitate decision-making.

Credit department performance is subject to a defined policy on credit control

exercised by the SBP. SBP affect credit decisions through the weapons of

bank rate, open market operations, variable reserve requirements, selective

credit restrictions and prudential regulations.

28



UBL Credit Policy:

Credits operations are undertaken in accordance to bank’s credit policy. The

policy strictly prohibits violation of SBP/Local central bank’s rules and

suggest financing of self liquidating, cash flow supported and well

collateralized transactions, which equate the principle of lending (safety,

liquidity, dispersal, remunerations and suitability).

3.3.1 CREDIT DEPARTMENT OF UBL NOWSHERRA BRANCH

Facilities offered by UBL Nowshera. Running Finance (for one year)

Demand Finance (3to 5 years)

3.3.2 Procedure for Financing from UBL

When a party comes for financing, banker will ask the following questions.

3.3.2.1 Purpose:

In this the party mentions the purpose, they want to apply for the finances. No

lending is done with out purpose.

3.3.2.2 Business

The party must have some specific running business i.e. general merchandise,

construction business etc.

The second question arises of the cash flow that how much flow is generated by the party from the current business.

3.3.2.3 Security:

The bank will secure itself against the lending. There can be two type of

security.

Commercial

Residential

29



The bank prefers commercial security. Relationship Manager (RM) is mainly

responsible for the relationship between the bank and party. He acts like a

bridge between the two.

In the first instance the party would prepare the following property documents.

AKS Shajarah

Naqsha Tasveeri

Approved Building Plan

Tresh fard

Intaqal Naqal

The party is asked to contact any valuator on the panel of UBL. ICM&L and

Tajak Builder are on the panel of UBL Nowshera. The valuator will visit the

site and set market value and FSV of the said property. He prepare report of at

least three pages. These document sent for one page legal opinion to any layer

on the panel of UBL. Having clear legal opinion RM start preparing credit

Approval (CA). The documents are singed by the RM & AM and then

forwarded to UBL RHQ in Peshawar. Here SRM examines the CA if he found

some exception he will send it back to the respective Rm.

RM rectifies the acceptation and send it back to SRM. SRM studied and pass

it to credit officer. He has three hours of time to study the CA and if found

correct then he pass it to another credit officer. After his examination the CA

is passed on to the credit risk manager. He checks the CA and after signing it

sent to CAD. He forwards the CA to SCO. Whose office is at UBL RUCO at

Lahore, after his signature the C.A is sent back to RCAD.

RCAD make a check less list and asked the RM to contact the party to

complete the said documents they are.

Letter of continuity

Personal Guarantee

Letter of hypothecation of stock

D.P Note

Mortgage Deed

NIC of executants and witness

30



Stock report

Insurance policy

Party profile

After completion of charge document RM send it to RCAD when they found it

correct, they issues DAC. A copy of DAC is sent to RM and NICF account is

opened and debit transaction starts.

3.4. CLEARING OF BILLS:

General:Bank can make payments of only open Cheques on the counter payment.

Payment of cross Cheques cannot be made on counter its payment is possible

through collecting bankers. The functions of clearing department is divided

into two main classes.

Inter Branch Transaction

Inter Bank Transaction

3.4.1 Procedure of Clearance of Cross (Cheques):

Whenever bank receives a cheque of other bank from the client he cannot

make payment on the counter. The first job banker has to perform is to put a

special crossing across the face of cheque. By special crossing cheque is

secured. If it is stolen the paying banker would not suffer because of non-

endorsement. On the back of the cheque the stamp is made of payee account

will by credited on realization. It is signed by authorized person. Along with

the cross cheque the customer has to fill the deposit slip. The half part of slip

is given back to the customer. after the special crossing and is necessary

endorsement the banker write the amount along with cheque number on paper

and attach with each slip. Then again on he smile paper the amount of all the

Cheques along with the bank names are added and attached to cheque

presented for clearing, and advice is also attached with the cheque presented

for clearing. The following entry is passed on sending the cheque for clearing.

Bill lodged for clearing ……. Dr

31



Bill for collection ………. Cr

The Cheques are sent on the same day for clearing. The bank receives it on

other day. The paying bank receives the receipt and the amount is credited inthe respective account. The paying banker passed the following.

Bill for realization. ……. Dr

Bill lodged. ………. Cr

The other entry passed its Dr. HQ account and Cr Party account.

3.4.2 I B C:

It means “Inter Branch Transaction” when UBL received a cheque a drawn onthe customers of his branch; first they will cheque the amount in the account

on which cheque is drawn. Of the required amount is available in the account

they will match the signature on the cheque along with their SS card. If all the

requirement are completed the bank will send an IBCA to the bank from

which cheque is sent

3.4.3 L B C:

LBC means local branch cheques received for collection. UBL Nowshera,

received cheques from their spoke braches as well as from other UBL

branches of the country, drawn of any other bank in Nowshera. They send the

cheque to responding bank and after clearing the cheque through clearing

houses (which is NBP) in Nowshera. They send LBC advised to the bank from

which the cheque was received. The following entry is passed after sending

LBCA.

NBP a/c ………. Dr

Ho a/c………. Cr

3.4.4 OBC

When the bank receives the cheque from its customer or from any other spoke

branch drawn on any other bank of any other city. They sent the cheque to the

UBL main branch of that city, after receiving OBCA the bank will passed the

following entry. In case of his own customers.

32



Ho a/c………. Dr

Customer a/c………. Cr

In case of spoke branch

Ho a/c………. Dr

Spoke Branch a/c………. Cr

CH # 4

FINANCIAL ANALYSIS:

INTRODUCTION

These section efforts have been made to cover all relevant aspects of the

financial performance of UBL. Overtime comparison and Common Size

analysis are carried out with the view to extract concrete conclusion to

describe financial standing and performance of the bank.

4.1 THE GROUP AND ITS OPERATIONS

The group consists of

a) Holding Company

United Bank Limited, Pakistan

b) Subsidiary Companies

United National Bank Limited, UK

United Bank AG (Zurich), Switzerland

United Executers and Trustees Company Limited

United Bank Financial Services (Pvt) Limited

4.2 BASIS OF PRESENTATION

33



The purchase and sales of UBL are restricted to the amount of facility actually

utilized and the appropriate portion of mark up there on. They strictly observe

the rules and regulations as applicable and promulgated by the GOP and or

SBP.

4.3 SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition

Returns on advances and investments are recorded on accrual basis. Debts

securities purchased at premium or discount are amortized over their maturity

periods.

Dividend income is recognized on accrual basis of declaration of dividend up

to the year-end. Returns on classified assets are recorded on receipt basis,

rescheduled and restructured loans are treated in accordance to SBP

regulations. Fees/commissions etc. on Letter of Credit and others are recorded

on accrual basis.

Advances

These items are stated net of provisions against non-performing loans as per

SBP PR – IIIV.

• Investments:

UBL classify its investments as stated below;

a) Held for trading

b) Held to maturity

c) Available for sale-other than the above two types

In the light SBP regulations quoted securities are shown at market values and

any changes arising are taken to profit and loss account only upon actual

realization.

34



Unquoted securities are valued at the lower of cost and break up value and

difference is charged to income. Provisions for diminution in the values are

made after permanent impairment, if any.

• Lending/Borrowing from Financial Institutions

a) Sales under Purchase Obligation: These are reflected as liabilities and

the charges against these are recorded as an expense on pro rata basis.

b) Purchase under Resale Obligation: The differential of the contracted

price and resale price is amortized over the period of their contract and

recorded as income.

• Fixed Assets and Depreciation

a. Owned

Such assets are showed at their cost or revalued amount less

accumulated depreciation and impairment loss, if any. No depreciation

is charged on freehold land. During the year, amendment related to

section 235 of the Companies Ordinance 1984, surplus on revaluation

can now be reversed to the extent of incremental depreciation charged.

As a result such differentials are now transferred to retained

earnings/accumulated losses as per the Securities and Exchange

Commission of Pakistan’s (SECP) clarifications.

Gains and losses on sale of fixed assets are included in income

currently, except that the related surplus on revaluation of fixed assets

is transferred directly to retained earnings/accumulated losses.

b. Leased

Assets under financial leases are stated at cost. The outstanding obligations

are shown as a liability. The finance charges are allocated to accounting

periods in a manner so as to provide a constant periodic rate of charge on

the outstanding liability.

35



• Taxation

Current

Provision is based on the taxable income for the year or minimum tax

computed on the basis of turnover, whichever is higher.

Deferred

The bank accounts for deferred taxation on major timing differences, using the

liability method in respect of those timing differences, which may reverse inthe foreseeable future. Deferred tax debits are, however, recognized only if

there is reasonable expectation of realization of the amount.

c. Foreign Currencies:

Balances are translated into rupees at the applicable rate of exchange

prevailing at the balance sheet date or where applicable at contractual rates.

During year transactions are converted into Pak rupees applying the exchange

rate at the date of respective transactions. Gains and losses are included in

income currently.

d. Deferred Cost and Lease Payments

These are amortized over a period of five years. Rental obligations under

operating leases are charged to profit and loss account as incurred.

4.4 RISK MANAGEMENT

The bank is primarily subject to interest rate, credit and currency risks. The

bank has designated and implemented a frame work of controls to identify,

monitor and manage these risks are as follow;

Currency Risk Management

For the purpose of efficient management of this risk, the group enters into

ready, spot, forward and swap transactions in the inter bank market and with

36



the State Bank of Pakistan in order to kedge its assets and liabilities and cover

its foreign exchange position.

Credit Risk Management

Out of the total assets of Rs.183, 139.879M assets subject to credit risk

amounted to Rs.178; 958.323M. The bank’s major credit risk is concentrated

in textile sector. To manage it the bank applies credit limits to its customers

and obtains collaterals. Credit risk in the portfolio is monitored by the CRM

who formulate appropriated policies and procedures to ensure building and

maintaining quality credits and efficient credit process.The bank’s financial institution risk management unit assesses, recommends

financial institutions and also controls cross border/country risk.

Interest rate Risk Management

The group is mainly exposed to mark up interest rate risk on its deposit

liabilities and its loans and advances and investment portfolios. The asset

liability committee of the bank reviews the portfolio of the bank to ensure that

risk is managed within acceptable limits. Most of the loans and advances

portfolio comprises of working capital, which are reprised on a periodical

basis. The group’s interest is limited since the majority of customer’s deposits

are retrospectively reprised on a six monthly basis due to the profit and loss

sharing principles.

4.5 CONCENRATION OF CREDIT AND DEPOSITS1

The major class of business for UBL related to advances is the textile and

private sectors. UBL is advancing 27.2% to textile and 74.5% to private

sector. Majority of the depositors fails in the category of individuals,

contributing 65% of the total deposits.

1 UBL (2003) Annual Report

37



4.6 INVESTMENT PORTFOLIO2

UBL employs diversified investment portfolio. The bank invests its funds both

in risk free assets as well as in risky assets. This enables it to minimize itsunsystematic risk to a great extent.

UBL values its security holding on market value, in accordance with the

guidelines given in SBP circular. Any unrealized surplus/deficit arising on

such revaluation is taken directly to “Surplus/Deficit on revaluation of

securities” in the balance sheet. Where an active market is not available,

securities continue to be stated at cost. Provision for diminution in the value of

these securities is made after considering permanent impairment, if any, in

their value.

Where securities are sold subject to commitment to repurchase them at a

predetermined price, they remain on the balance sheet and a liability is

recorded in respect of the consideration received in “Borrowing from Bank” or

“Deposits” as appropriate. Conversely, securities purchased under analogous

commitments to resell are not recognized on the balance sheet and

consideration paid is record in “lending to financial institutions” or “loans and

advances” as appropriate.

4.7 PROFITABILITY3

The operating profit before provisions and write offs increased by 80%, where

as the profit before tax and extraordinary items increased by 62% as compared

to last year. The increase is mainly attributed to 14% increase in the net

revenue from funds (NRFF), 10% increase in fee and brokerage income and

75% reduction inn write offs/provisions for non-performing assets as

compared to year 2002.

Performing advances increased by Rs. 2 billion as compared to 2002 while

NPAs decreased by 53%. Presently NPA constitutes 7.4% as compared to

14.6% in 2002 of the total loan portfolio. The branches reduced to 1077 from



38



1112. The bank handled over Rs. 96 billion of import and export business

during the year, an increase of 24.7% as compared to last year.

4.8 FINANCIAL ANALYSIS

Financial statements are the principal means of reporting the financial

condition and results of operations of a business entity. These statements are

meant to assist various parties in decision making who are interested in the

activities of the business. These statements are means to an end of helping

stakeholders in decision-making. To improve the quality of decision making

proper analysis of these statements helps a lot. Financial statements analysis

helps in determining the financial conditions at any particular points in time

and effectiveness of operations of a firm during a specific period.

The various stakeholders of business are interested in the analysis of financials

statements. But the focus of interest of all is not the same. For example,

creditors and credit reporting agencies are interested in finding out the credit

worthiness of the firm to which they have extended credit or intend to extend

credit. Short term creditors are interested in short term liquidity of the business

and long term creditors are interested in the long term cash flow which the

firm can generate over the long period of time. Investors are interested in the

firm’s ability to sustain profitability over a period of time. Government

agencies analyze financial data for tax purposes. The internal users of financial

statements like management also analyze financial data for planning and

control.

4.8.1 COMMON SIZE ANALYSIS OF BALANCE SHEET

Common size analysis is an analysis of financial statements where the total

assets divide all balance sheet items of asset side and all credit side balances

divided by all liability items, and all income statement items are divided by net

sales/revenues. Common size analyses are extremely helpful to highlight

changes over the time in financial performance and financial conditions of the

39



company. The table shows common size analysis of the balance sheets for the

years 2001, 2002 & 2003.

The common size analysis given in the table shows that there have been

improvements in the current assets in 2003 as compared to 2002, about 17%.

But there has been decrease in fixed assets of about 16%. The main reason for

this change is increase in short term investment showing a constant increase as

a percentage to total assets. This implies that the bank is concentrating now

more on non-interest income and the interest rates are constantly falling.

Short-term advances have shown a significant change of 15% whereas total

advances show a total change of only 6.3%. This is very significant to note

that major decrease has occurred in long-term performing and non-performing

advances.

There is decrease in long term assets of about 17% which mainly cause the

decrease in long term advances which are about 13% and 6% decrease in long

term investment.

On the liability side the total current liability has shown change of about 4%.

The main reason for which is increase in current deposits, which are about 6%.

The long-term liability of the organization is also decreased by 4%. The main

reason for this is that fixed deposits of organization are decreased by 6%,

which shows that there is a slight change in the organization’s position by

decrease in fixed deposits.

Table:4-1 Common size analysis of consolidated Balance Sheet

Rs in '000 Common size (%)assets 2001 2002 2003 2001 2002 2003

40



Cash/Bal. With Banks 3609108 70463707 35591280 21.5 17.93 15.79

lending to F.Is 4370006 3627557 19050791 2.6 1.89 8.45

Investment (ST) 9190430 33883311 29580252 5.5 17.66 13.12

Advances-Performing (ST) 39489369 43632117 89292490 23.4 22.75 39.61

Other Assets 8641263 2641471 3509351 5.1 1.38 1.55Total Current Assets 97782157 118177074 177024164 58 61.61 78.54

Investment (LT) 19388131 33623058 25007413 11.5 17.53 11.09

Advances-Performing (LT) 28477494 26423058 10312297 16.89 13.77 4.57

Advances-Non performing (LT)11813855 5739798 3671991 7.01 2.99 1.62

Operating fixed Assets 2864018 2831534 3884990 1.7 1.48 1.72

Deferred Tax Assets 8297500 5026459 5486357 4.92 2.62 2.43

Total L.T Assets 70840998 73643958 48363048 42 38.39 21.45

Total Assets 168623155 191821032 225387212 100 100 100

Liabilities

B/Payables 1540592 1847025 2991269 0.91 0.96 1.32

Borrowings ST 4004130 174533 174533 2.37 0.09 0.07

Deposits - Current 102568752 118167469 152580240 60.83 61.6 67.69

Lease and Others 8838842 9986608 5933743 5.24 5.2 2.63

Total Current Liabilities 116952316 130175635 161679785 69.36 67.86 71.73

Fixed Deposits 38747422 43998916 37252204 22.98 22.94 16.52

Other Long term Liabilities 21264831 5212755 10883720 6.21 2.72 4.82

Total LT Liabilities 49219400 49211671 48135924 29.19 25.65 21.35

Total Liability 166171716 179387306 209815709 98.55 93.52 93.09

Shareholder's Equity

Share Capital 22481680 5180000 5180000 13.33 2.7 2.3

Reserves 3960453 4258947 4712569 2.35 2.22 2.09

Accumulated Losses/Profits -27282709 -722387 454403 -16.18 -0.38 0.2

Minority Interest 1168264 1271700 1412932 0.69 0.66 0.62Surplus on revaluation 2123751 2445466 3811599 1.26 1.27 1.69

Total 24541439 12433726 15571503 1.45 6.48 6.9

Source: UBL (2003) Annual Report

TOTAL CURRENT ASSETS

20%

11%

17%

50%

2%

Cash/Bal. With Banks

lending to F.Is

Investment (ST)

Advances-Performing(ST)

Other Assets

41



FIXED ASSETS DISTRIBUTION

52%

21%

8%8%

11%

Investment (LT)

Advances-Perform ing (LT)

Advances-Non performing

(LT)

Operating fixed Assets

Deferred Tax Ass ets

SHORT TERM LIABILITIES

2%0%

94%

4% B/Payables

Borrowings ST

Deposits - Current

Lease and Others

LONG TERM LIABILITES

39%

11%

50%

Fixed Deposits

Other Long term

Liabilities

Total LT Liabilities

The trend of switching over the investing in share market or other businesses

instead of committing money in advances it is because of fall in interest rates.

The share capital of the company is static while in 2002 the share capital was

decreased because of losses faced by the company.

4.8.2 COMMON SIZE ANALYSIS OF INCOME

STATEMENT

42



The common size analysis of income statement is given in the table. Which

shows that the UBL has been able to control its interest or mark up expense.

As a result of decrease in mark up expense as a percentage of total revenues

the gross profit margin has shown a trend of continuous increase. The

increasing G/P Margin shows efficiency of the bank in controlling cost of

sales (Markup expense) and better strategy of pricing, products and services.

The provision for non-performing loans has a decreasing trend making no

provision for non-performing loans and diminution in value of investment,

which increases the profit of current year. The reduction in provision is a good

sign, which shows that the bank is recovering its disbursed advances. It shows

the good credit management of the bank.

There is a great increase in non-markup income, which is about 23%. Among

its individual components investment income has shown a large increase as a

percentage of sales.

Non markup expenses also show a rising trend in absolute amount though the

common size in percentages have shown a mixed trend due to the changes in

revenue figures. The non-performing expanses also increased to about 25%,which is a very high percentage, but the other aspect of this is that it increased

the efficiency and credit management of the staff.

Like gross profit the net profit margin before tax has also increased with 24%

rate. The extraordinary item expanse has not occurred in 2003 that caused a

slight increase in the net income. The tax expanse is increased about 7%

because of the increase in profit. Loss brought forward from previous year is

reduced by 14%.

The common size analysis of the UBL is clearly showing that the bank has

shown a lot of improvement in its performance. The organization shows profit

for the first time in the last 5 years which is a positive sign and it will build up

the moral of the employees by which they can work more effectively and

efficiently increasing the performance of the bank.

Table: 4-2 Common size analysis of consolidated Income Statement

Rs in Millions Common size (%)

43



ITEMS 2001 2002 2003 2001 2002 2003

Mark up revenue 11468 11385 9269 100 100 100

mark up expense 6347 5476 1931 55.35 48.09 20.83

gross profit 5121 5909 7338 44.65 51.9 79.89provisions and B/Debts 1263 746 564 11.02 6.55 6.08

Net Mark up Income 3858 5163 6773 33.64 45.34 73.07

Non Mark up Return

Commission & Brokrage 1097 2008 2142 9.57 17.63 23.1

Dividends/Exchange and Others 1818 1514 2803 15.85 13.3 30.24

Total Non Mark up Income 2915 3522 4945 25.42 30.94 53.34

Total Income 6773 8686 11718 59 76.2 126.42

Non Mark Up Expense

Administrative 4669 5879 6639 40.71 51.64 71.62

Other Provision and Charges 632 51 556 5.15 0.44 6

Total non mark up Expenses 5301 5930 7197 46.22 52.08 77.64

Profit Before Extraordinary Items1472 2756 4521 12.84 24.2 48.77

Extraordinary Items -7200 25 0 62.78 0.21

Profits before tax -5728 2781 4521 49.95 24.44 48.77

Taxation 1739 1319 1704 15.16 11.59 18.38

Profit/Loss after tax -7467 1462 2818 65.11 12.84 30.39

Share of Minority Interest 6 10 21 0.06 0.09 0.22

Accumulated Loss Brought Frd. 19821 27283 722 172.2 210.64 7.78

Adjustment against sh. Capital 0 25202 0 221.36 0

Appropriation and Transfers

Surplus on revaluation of Assets 0 238 0 2.1 0

Transfer to Statutory Reserve 2 332 527 0.02 2.91 5.68

Accumulated Loss Brought Frd. 27283 722 454 237.9 16.34 4.9


INCOME COMPOSITION

20.83%6.08%

71.62%6.90%

18.30%

30.39%

Total Revenue

Mark up Expense

Bad Debts

Administrative ExpOthere Exp

Taxes

Profit after Taxes

4.8.3 FINANCIAL RATIO ANALYSIS

The user of financial statements finds it helpful to calculate ratios when they

interpret company’s financial statements. A financial ratio is simply one

quantity divided by another. Ratios focus on special relationship between two

items of balance sheet, income statement or one from each. Ratios make it

44



easier to understand a specific relationship between various items of financial

statements then looking simply at the raw numbers themselves. The number of

financial ratios that might be created is virtually limitless, but there are certain

basic ratios that are frequently used, these ratios can be placed into six

different classes.

Liquidity Ratio

Asset Turnover Ratio

Leverage Ratios

Coverage Ratios

Profitability Ratios

Market Value Ratios

The calculation and interpretation of these ratios of financial statements of

UBL are as follows.

Table:4-3 Financial Ratio analysis

YEARS 2001 2002 2003 FORMULA

Current Ratio 0.84 0.91 1.15 Current Assets / Current Liabilities

Asset Turnover 0.07 0.06 0.04 Markup Revenure / Total Assets

Debt to Asset 0.99 0.94 0.93 Total Debt / Total AssetsDebt to Equity 14.54 14.4 13.47 Total Equity / Total Assets

Coverage Ratio 0.1 1.15 3.34 EBIT / Interest Expense

Gross Profit Margin 44.65% 52.50% 79% Gross Profit / Revenue * 100

Net Profit Margin -65.12% 12.69% 30% Net Profit / Revenue * 100

Return On Investment -4.43% 0.76% 1.24% Net Profit / Total Assets * 100

Return On Equity -887.99% 16.78% 18% Net Profit / Total Equity * 100

Advances to Deposit 56.46% 46.74% 45% Advances / Deposits * 100

Investment to Deposit 20.22% 41.63% 28% Investment / Deposits * 100

Cash Ratio 9.59% 9.23% 28% Cash / Current Liabilities * 100


4.8.3.1 CURRENT RATIO:

UBL’s current ratio is increasing over the time. Higher the current ratio higher

the ability to meet the short-term obligations as they come due. The UBL’s

current ratio is increased by 0.18% as compared to 2002. this in turn decreases

the risk of insolvency. The change is occurring due to increase in short terminvestment and decrease in short term borrowings.

45



Current Ratio

0.84 0.91 1.15

0

0.5

1

1.5

Current Ratio

Current Ratio 0.84 0.91 1.15

1 2 3

4.8.3.2 ASSETS TURNOVER :

This shows revenue generated per rupee investment in total assets. UBL’s

assets turnover ratio has shown a little decrease. This is because of increase in

total assets with proportionate increase in revenue. Banks have relatively low

ATR capital, as they are selective in advancing loans and generating smaller

sales.

Asset Turnover

0.070.06

0.04

0

0.05

0.1

Asset Turnover

Asset Turnover 0.07 0.06 0.04

1 2 3

4.8.3.3 DEBT TO ASSET RATIO:

The analysis of total debt to assets ratio, there has been decrease of one

percent as compared to 2002 and 6% to 2001. in 2001 every rupee one of

assets was being financed by rupees 0.098 or debt and in 2002 it is 0.94 while

in 2003 it is reduced to 0.93 worth of debt per rupee of asset. Although the

decrease is not large enough but it is a good sign for bank’s creditors. The

decrease may be attributed to the substantial decrease in borrowings from

46



financial institutions but the affect was weakened by an increase in bills

payable and other liabilities.

Debt to Ass et

0.99

0.940.93

0.9

0.95

1

Debt to Ass et

Debt to Ass et 0.99 0.94 0.93

1 2 3

4.8.3.4 DEBT TO EQUITY:

This ratio measures how the company is leveraging its debt against the capital

employed by its shareholders. Analysis of debt to equity ratio indicates that

the current position for the debt to equity is that for every one rupee in equity

provided by the shareholders the bank has Rs. 13.5 as a debt. This shows that

the bank is heavily relying on debt financing. The reason for huge difference

stated in the table is because of losses occurred in 2001 and 2002.

Debt to Equity

14.54 14.4

13.47

12

13

14

15

Debt to Equity

Debt to Equity 14.54 14.4 13.47

1 2 3

4.8.3.5 COVERAGE RATIO:

This ratio shows the number of times a company can cover or meet its

financial charges or obligations. One of the most commonly used ratio is the

interest coverage ratio that measures the number of times the income is

available to pay interest charges. The UBL interest coverage ratio has shown

significant improvement in these three years. The ratio is increased from 0.10

to 3.34.

47



Coverage Ratio

0.11.15

3.34

0

2

4

Coverage Ratio

Coverage Ratio 0.1 1.15 3.34

1 2 3

4.8.3.6 GROSS PROFIT MARGIN:

Gross profit margin is the difference between the revenue and cost of goods

sold. Gross profit is critical because it represents the amount of money

remaining to pay operating expanses financing cost and taxes. UBL’s gross

profit margin per rupee has shown rising trend in last three years. There is an

increase of 27% in 2003 as compared to 2002. this shows efficiency of the

bank to control the cost of sales.

Gross Profit Margin

44.65% 52.50%79%

0.00%

50.00%

100.00%

Gross Profit Margin

Gross Profit

Margin

44.65% 52.50% 79%

1 2 3

4.8.3.7 NET PROFIT MARGIN:

This ratio shows the profit that is available from each rupee of the sale. After

all expanses have been paid. Net profit margin is also showing an increasing

trend. UBL has improved net profit margin in the current years. The net profit

margin has reached to 30% as compared to 2002 in which it was only 12.69%.

While in 2001 it was in negative figure. It shows a good impact on the UBL’s

Balance Sheet.

48



Net Profit Margin

-65.12%

12.69%30%

-100.00%

-50.00%

0.00%

50.00%

Net Profit Margin

Net Profit Margin -65.12% 12.69% 30%

1 2 3

4.8.3.8 RETURN ON INVESTMENT:

This ratio measures the profitability per rupee of investment in assets. UBL’s

return on investment has shown an improvement more than 100%. In 2003 the

ratio is 1.24% while in 2002 it was 0.76% and in 2001 it was in –ive figures.

Although the assets have increased but the operational recovery of the bank is

main cause of increasing this ratio.

Return On Investment

-4.43%

0.76% 1.24%

-5.00%

0.00%

5.00%

Return On Investment

Return On

Investment

-4.43% 0.76% 1.24%

1 2 3

4.8.3.9 RETURN ON EQUITY:

This ratio shows the profit as a proportion of the book value of the common

shareholders. The return on equity is also shown a great deal of positive

change. In 2003 the ratio is 45% while in 2002 it was only 16% and in 2001it

was in negative figures.

49



Return On Equity

-887.99%

16.78% 18%

-1000.00%

-800.00%

-600.00%

-400.00%

-200.00%0.00%

200.00%

1 2 3

Return On Equity

4.8.3.10 ADVANCES TO DEPOSIT RATIO:This ratio shows the companies advances employed per unit of deposit. This

ratio of UBL over the recent three years shows a decreasing trend. In 2001 it

was 56% while in 2002 it was 46% and in 2003 it is 45%.

Advances to Depos it

56.46%46.74% 45%

0.00%

50.00%

100.00%

Advances to Depos it

Advances to

Deposit

56.46% 46.74% 45%

1 2 3

4.8.3.11 INVEST TO DEPOSIT:

This ratio shows the company’s investment employed per unit of deposit. This

ratio increased in 2002 as compared to 2001 but in 2003 it again decreased. Itis because of industrial development factors in the country by which lending

have been increased and investment is slightly decreased.

50



Investment to Deposit

20.22%

41.63%

28%

0.00%

50.00%

Investment to Deposit

Investment to

Deposit

20.22% 41.63% 28%

1 2 3

4.8.3.12 CASH RATIO:It is the ratio of cash and cash equivalent of current liabilities. It shows that

how much cash is available to meet the current liabilities. In 2003 this ratio

has increased by 2%. The balance of bank is increased with 20%. Although

the current liabilities also increased but the increase in cash is very high.

Cash Ratio

9.59% 9.23%

28%

0.00%

10.00%

20.00%

30.00%

Cash Ratio

Cash Ratio 9.59% 9.23% 28%

1 2 3

CH # 5

QUALITATIVE ANALYSIS

5.1 QUALITATIVE ANALYSIS OF UBL

51



During my two months of internship period I have tried to fully commit

myself in the learning process. I kept critically observing the things that I

could analyze and the result of the exercise is presented as below.

A) Organizational:

Existing organizational hierarchy hinders vertical communication and

blocks flow of information among the levels of management.

The workload is not equally distributed.

Coordination level among divisions/departments and employees are

poor, particularly speaking of between the top and lower levels of

management.

There is centralization of authority and branch managers are bound and

restricted to take initiative.

Due to overlapping nature of duties and jobs there exists chaos and

confusion in branches.

B) Departmental:

During my internship period in UBL, in various departments, I noticed

following departmental problems.

• Cash Department:

i. Not very frequently but there are instances of fake currency notes,

being identified. At times notes received from other branches were

found to have certain fake currency notes.

ii. Counting mistakes occur due to overcrowding particularly during

the collection of utility bills. Manual counting system also affects

efficiency of the bank.

iii. Code of conduct of cashiers is found unsatisfactory.

iv. There is generally the lacking in observing and practicing bank’s

relevant procedures and SOP’s.

52



• Remittances Department:

i. Application of tests for authentication of TTs is not known to al

concerned individuals that reduces the efficiency and further the wrong

application of tests prevent payments and the delay could dissatisfy

customers.

ii. Telegraphic messages require specific skills and training. The

employees are partially equipped of such knowledge.

iii. Preparation, execution and management of TTs and MTs and

particularly DDs ask for mastering applicable rules and regulations and

most of the staff was found ignorant of those.

• Deposit Department:

i. Newly designed AOF has an inbuilt deficiency of restricted space and

cannot accommodate more than two names.

ii. Identification of customer’s signature is very important particularly

when cash is to be withdrawn by him. Manual practices pose problems

in those branches where automation has not been done yet.

iii. In cases where the presence of customer himself is must, is sometime

compromised due to influences of\r fear of loss of customer.

• Clearing Department:

i. Wrong endorsement and stamping causes loss to the customers and

extra efforts for the bank to repeat the procedures.

ii. Reasons for the return of the cheques at times are not mentioned on the

return memos.

iii. At times due to lack of training wrong stamps are applied on

instruments.

53



• Credit Department:

i. Timelines in cash disbursement is very important which is

compromised due to lengthy processing and documentation

requirements.

ii. Relationship Managers need to be fully equipped with the requisite

knowledge and skills as presently plain BA/B.Sc qualified individuals

are performing jobs of MBAs.

iii. Lack of infrastructure for carrying out computerized financial analysis

of borrower’s business.

iv. Large pool of potential borrowers cannot apply for loans due to lack of

collaterals. Heavy collateral requirements restrict credit business of the

bank.

v. The credit proposal and other documents at times are not properly and

sufficiently prepared before taking approval.

vi. Filing and record maintenance of credit related documents are not done

efficiently.

• Bills Department:

i. Bills are sent to other cities; therefore, extra care should be exercised

in making entries and stamp affixing.

ii. Proper scrutiny at times is not carried out and it causes loss to the bank

or increase procedural timings.

iii. Employees at times mismanage their time and fail to forward bills

promptly.

• Foreign Exchange Department:

i. Problems of bills and remittances departments equally apply to foreign

exchange department. There is overlapping of functions and complete

separation of function has not been achieved thus leading to a state of

confusion and conflict among employees.

54



ii. Employees of this department are lacking computer-operating skills.

iii. Knowledge and educational background of employees working in this

department do not match with the job they are doing.

iv. Most of the employees of this department lack the ability to handle the

Letters of Credit.

• Marketing Department

i. Lack of marketing at desk due to lack of training and awareness among

employees.

ii. Lack of promotional activities.

iii. Little attention to the apparent conditions of the bank exterior, interior

layouts and design of furniture in most of the branches.

5.2 SWOT ANALYSIS:

SWOT is useful tool for providing a framework for analysis of an

organization. SWOT stands for Strengths, Weaknesses, Opportunities and

Threats. It is a common approach to make assessments in terms of internal and

external environment of the organization, and to formulate strategies analyzing

its internal strengths and weaknesses, external opportunities and threats,

coming up is the SWOT analysis for the UBL.

5.2.1 STRENGTHS:

• It is one of the largest private banks with a deposit base of Rs. 94883/-

millions showing constant growth over the period from 1999 till the

day.

• It has a well-knitted and adequately equipped branch networking

system that efficiently covers both the domestic and international

markets.

•It is involved in both corporate and retail banking.

55



• The bank is actively emerging and is engaged in international trade and

foreign exchange transactions. Foreign trade volume showed an

increase of 17% over the previous year.

• Advances investment of the bank shows a constant growth pattern. The

current year’s growth rate is 32%.

• The overall efficiency of the bank operations and management ability

can be noticed by looking at to its income pattern and provisions/write

off practices.

o Net revenue from funds increased by 18% for the current

period.

o Provisions decreased by 14%.

o Total income increased by 16%.

• UBL is actively participating in international markets and has recently

introduced credit cards in UAE, Behrain, and Qatar, being backed up

by 24 hours call center out of UAE.

•

The bank is owned by parties of financial repute and credit worthinesslike, SBP with 48.69% interest, Best Way group and Abu Dubai group

with 25.50% of interest each. Others are GOP, NBP Trustee

Department, State Life Insurance Corporation etc.

• The bank is run by highly professional recruited from and trained by

foreign banks like Citi Bank.

5.2.2 WEAKNESSES:

• Due to risks such as political, economic and legal etc the bank has

suffered losses the main reason was that of piling up of large amount

of unrecoverable loans and debts which has adversely affected the

image of the UBL.

• Accumulated losses pushed the bank to cut down its promotional

activities in order to reduce expenses for last few years.

56



• During the nationalization life span of the bank political lords used

influence in bank business and selection of employee at each level and

thus adversely affected the bank’s efficiency and effectiveness.

• Administrative expenses are 51% of the mark up revenue.

• Promotions are carried out on annual basis ignoring the importance of

capabilities and performance outputs.

• The bank has large number of employees who are simple graduates

with no banking knowledge.

•

Ineffective system of recruiting and selection.

• Lengthy credit processing and documentation procedures.

• Unsatisfactory working conditions.

5.2.3 OPPERTUNITIES:

• Growing policies of the GOP on business and economic sectors

provide UBL an opportunity to efficiently meet with the business

people requirements of instant cash facilities e.g. the government

intentions of developing housing and agriculture sectors.

• The efficiency of stock market and sound exchange reserve level is

providing a good opportunity for effective investment decisions.

• Foreign remittances are another area as present world wide control

systems over transfer of currencies through illegal channels has

facilitated the area for the banks.

• Reconstruction of Afghanistan is a golden opportunity where the bank

can effectively participate.

• Expansion of IT platform and internet based banking system.

• Interest of businesses in leasing facilities provides a healthy

opportunity for banks.

57



• There is a large pool of unemployed MBAs who can be hired to

achieve professionalism on its organizational culture.

• Outsourcing of promotional companies or use of available excellent

promotional facilities.

• Entering new market segments.

• Increase the product range to meet the broader range of customers’

needs.

5.2.4 THREATS:

• Increase in competition due to increasing number of foreign and

domestic private banks offering highly specialized and attractive

services.

• Growing global technological advancements and adaptation of modern

style of management in banking sectors.

• Extensive promotion campaigns run by competitors.

• Unemployment, lower level of income and prices like problems in the

motherland coupled with low rate of industrialization, geo political

adverse conditions, religious factor, lack of consistency in policies due

to political instability are some of the other major threats.

This SWOT analysis is a mirror image of the bank’s present conditions. Some

efforts are made and others are still required to be made in order to improve

the situation. The management can develop elaborate strategic plans for capitalizing the available opportunities. The bank should maintain principal of

professional management and adhere to sound and sophisticated banking rules

and regulations so that confidence and trust of the public in the institutions

could be re earned.

58



CH # 6

RECOMMENDATIONS

Recommendations are considered to be the most important part of an

internship report, without which no report is considered complete and

meaningful. This part of the report is based on the previous sections i.e. review

and analysis. Moreover, for bringing suggestions, discussions have beenconducted with the staff of UBL officers, who not only provided the basis for

recommendations but also pointed out some areas, where the change for the

development is utmost important. Realizing the importance of this section,

efforts have been made to give feasible recommendations, which are

categorized under the following headings.

6.1 HUMAN RESOURCE DEPARTMENT

59



The importance of manpower cannot be denied in any organization. In case of

banks it is the most valuable asset, because the bank is very sensitive

organization and to be in harmony with this sensitivity, need for proper human

resource is felt badly. Critical analysis of UBL necessities recommending

suggestions that would increase bank’s efficiency and effectiveness.

• Development of Managerial Leadership

In services industries like banks the need of managerial skill is much

more important. It makes positive contribution towards higher effective

results. Without development of managerial leadership, the effective

utilization of the human resource will be impossible. UBL should also focus

on this area and should avoid deficiencies in managerial leadership, by

applying the modern styles of management.

• Political interference:

The political intervention in the bank needs to be stopped so that the top

hierarchy as well as the personnel placed at other important levels of the

institution is not changed Just on political grounds and the on going

developmental work is not obstructed. It will enable the management to

formulate long term strategies and their proper implementation because the

long term policies, accurately based on calculated risk, have proved the pivotal

role players for organizational sustainable development.

• Basis for Promotion:

A sizeable portion of the officers of UBL, are promoted in without test and

interviews to officers cadre. The promotion policy must be too tight and

transparent that no one may have the chance to be promoted on criteria other

than the required qualification, experience and performance. As for the present

excess staff, those not found up to the required criteria, may be given GHS etc.

•

Management Changes on Merit:

60



In UBL, though vary rare fresh recruitments are made, and the bank faces

saturation in personnel, now clipping will be more helpful. This downsizing

will leave the bank with the staff, to be retained on the basis of ultimate

meritocracy with zero tolerance of incompetence. Now in this remaining

workforce, a cultural change right from the top management down to the front

line, that better suits to the present day needs of banking environment could be

included through proper discipline and training.

• Needs of change in Recruitment Policy:

It is important to say that the external level market is full of the required talent

like MBA, M. Com etc,. But on the country only graduation with simple

subjects is still the requisite qualification for officer’s cadre, which has already

worked amply in the devastation of UBL. Therefore the recruitment

qualification to the officer’s framework should be enhanced for simple

graduation, to professionally qualified preferably Masters in their respective

fields.

• Refresher Courses:

The Human of the bank should frequently conduct meaningful refresher

courses, seminars and workshops with a view to improve the knowledge of the

staff. Due to severe competition and technological developments, the banking

business is experiencing rapid changes therefore the HRD should have

arrangements for staff trainings to cope with the new changes that may

become threats for the interest of the bank.

• Computer Trainings:

The present conventional and orthodox training programmes need to be made

more comprehensive and reinforced with inclusion of computer training

courses.

• Training for Credit Management:

61



Special trainings on credit management should be imparted to the finance

dealing staff. Financing is main fountain bank’s income. Sound finance are

extremely necessary for opening of springs of the smooth inflow of the

income.

• Training with Clear Objectives:

Training needs assessment is necessary so that only the relevant staff is sent

for the training courses.

• Change in Appraisal System:

The present performance appraisal system is good. However, it needs to be

implemented in true sense. The drawbacks that are obvious like nepotism and

favoritism etc. need to rooted out and the culture of ultimate meritocracy in

appraising needs be inculcated.

• Introduction of New Courses:

The human recourses division of the bank should focus on the restoration of

the corporate image of the bank by floating programmes such as, marketing

excellence, courses on corporate culture and others. Usually in businesses the

wholesalers, retailers and other intermediaries are finished by opening a

network of the business own outlets. It works as profit maximization devise. In

my opinion the above two programmes marketing excellence and corporate

culture, added with the best counter service and outdoor informal relationship

with the potential customers by the line managers will save the sum of money

spent on various media of advertisement.

• Cheaper means for Postings etc.

The culture of attachment of hopes with the elements outside UBL, for

promotion, transfers, postings, and other benefits requires eradication from the

roots.

62



• Customers Orientation:

Every entrepreneur if concerned about the success of his business, has to

understand, recognize, carefully and appropriately that his customer is “The

King” of the business system and the original spring of the business revenue.

UBL should recognize its customers as the mainstream of the bank’s revenue.

They need to be provided the deserved respect, quality and in time service and

to be politely dealt with.

•

Career Development:As a matter of personnel policy HRD of UBL should prepare a plan showing

the future growth potential of employees on the job performance and

evaluation and it should be made known to the employees. In this regard,

employees should be given opportunities to show their performances, which

would help in their career development.

6.2 CREDITS AND ADVANCES DEPARTMENT:

The defaulted loans have showered the process of development of banking

sectors in Pakistan and have reduced the lending capacities of banks. In result

of which economic growth has reduced and rate of industrialization has

become lowered. Defaulted loans being the major cause for this depression,

various suggestions and recommendations have been given with focus on UBL

to overcome the drawbacks of this department.

• Training for RM’s:

Exclusive mandatory training concerning all possible aspects like, financial

management and organizational management etc is required to be developed

and designed to achieve

i. Risk assessment ability

ii. Understanding of all legal matters

iii. Early detection ability Skill of any loans becoming bad

63



iv. Ability to develop and suggest sound strategies when needed.

•Fake financial presentation:

The bank should confirm that the provided figures by the borrowing

organization are fairly audited and that the auditors are on the approved list of

the bank and they have clear opinion about the affairs of company and nothing

has been made secret. The bank should have expert to examine various

changes and developments for years in areas of the borrowing corporation

like;

i. Financial conditionii. Cash generation

iii. Ability to pay back

iv. Operational performance

The focus should be on identifying and explaining significant changes and

developments in payback of loans, profit maximization, capital flow and

operating expenses etc. the bank should take critical view of the financial and

should assess changes occurred during the favorable and slack reason for the

company.

• Poor Management:

A large number of industrial units and projects become sick because of poor

management. When a business becomes sick or fails it is unable to return the

loans, it has taken, and as a result such loans become bad debts, to avoid this,

it is the responsibility of UBL, to ensure that the company to which loan is

sanctioned enjoys good management skills and reputation. This can only be

confirmed, if the bank assesses the management of the borrower party by

taking care of

i. Length and type of experience

ii. Qualification and integrity

iii. Reputation of managerial skills and style of management being used

iv. SWOT analysisv. Financial procedures and documentation followed by employees

64



vi. Span of authority and responsibility

vii. Decision making skills of employees

viii. Risk management of employees

• Proper Documentation:

Loans become irrecoverable through court of law in case of default when the

bank fails to prove their claims against the delinquent borrower. If documents

are obtained properly as per terms of the loan it is not difficult for the counsel

of the bank to get decree against the defaulter. For proper and valid

documentation the following aspects must be kept in mind.

i. The bank should confirm that standard loan documentation is in place

for each credit facility prior to disbursement. If the documents required

are different from the bank’s standard approved format, arrangement

for vetting of the legal counsel.

ii. Bank should ensure that the documentation are correct, complete and

correspond with the approved facilities. Also to ensure that blank

spaces are filled, documents are dated, signed and stamped, the signer

is authorized to execute such documents and signatures are verified.

iii. Act as custodian for legal borrowing documentation, lodging the

documents in vault, maintaining records as per bank operating

procedure.

iv. Keep track of expiry of borrowing documents, insurance policies etc

and follow up for regulation of any approved documentation deferrals.

v. Maintain documentation checklist, updating it properly each time new

documentation received.

vi. Maintaining computerized record of documentation.

vii. Division of documentation on the basis of sector, to which loan is

given.

• Securities:

65



i. Physical verification of the property offered as a security is must rather

to rely on the documents. Investigation should also be conducted if the

property is of ancestral nature or joint property.

ii. The competent consultants should do valuation of the property and

mere completion of formatives should not be taken into account.

iii. Maintain in safe custody all collateral i.e. shares, govt. securities,

property title deeds, mortgage documents etc.

iv. Bank must ensure receipt of periodical statements of stock and

receivables from customers, as per frequency specified in the credit

approval.

v. Bank should also do the periodic physical checking and evaluation of

pledged inventories as per terms of the approvals, i.e. using applicable

margins, such that the drawing power adequately covers out standings

amount at all times.

vi. Bank officials must ensure that the goods hypothecated or pledged are

covered through a valid insurance policy with appropriate risk

coverage, adequately covering the bank’s amount.

vii. Concerned bank staff should ensure compliance with the institutional

credit policies and procedures as laid down in the policy book or credit

manual and advised from time to time by the credit committee or top

management.

viii. Ensure compliance with local regulatory requirements.

ix. Confirm timely submission of correct information in the prescribed

format as may be required by the central bank.

• Administrative Reforms:

i. Fast resolving of loan defaults cases is must.

ii. Immediate steps to appoint more banking court’s judges.

iii. Exclusive judges are required for Lahore, Peshawar, Baluchistan,

Sindh High Courts.

66



iv. Informal body to be set up by the banks jointly with the bar councils

and chamber to monitor and publish performance of the banking

courts. This body will need statutory authority for protection from

contempt.

v. Use of debt recovery agencies regulated by law is to allow.

CH # 7

IMPLEMENTATION PLAN:

Every organization has its own strengths, weaknesses and opportunities for

improvements. Nothing is impossible in this world. Possible can become

impossible if untried.

To ensure feasibility of a project, any suggestion or recommendation given for

it should be supported by its implementation plan. An implementation plan

consists of action oriented tools and procedures, which are specific and clear.

An implementation plan means that every thing except resources and taking of

step to start work is ready which shows that implementation plan is the soul of

a project. A good implementation plan consists of all the steps needed for the

accomplishment of a task or tasks, it is clear and helps in identifying the

problems to be faced in carrying practical work and provides a full picture of

activities and events.

7.1 ACTION PLAN 1:

7.1.1 Franchised Agriculture Supplies Shops:

67



In order to exploit opportunities available in the existing agriculture market

the following steps should be taken.

• Establishing franchised supplier shops

UBL should concentrate efforts towards major agriculture union councils and

develop franchised shops; those should provide essential farmer services

including leasing of sophisticated farm machinery and advising farmers how

to improve productivity.

• Location of franchised supplier shops

Preferably such shops should be in close proximity of UBL branches in the

area. These branches should extend credit to the shops for their supplies and

equipments and to farmer customers, at market rates, which are well below the

50%to 90% charged by the arties (informal sector).

• Agri-Officers in Branches:

Such agri credit officers should be employed who possesses requisite

knowledge and know how both of the agricultural field and bank credit fields.

The bank already has such assets, available in its existing HR factory and

others can be trained for, if so required. These officers should be provided

with motorbikes with per month fixed mileage limit.

• Cost Schedule

The above-mentioned plan has two major cost categories as given below:

a) Credit amount extension

This amount will be disbursed as per requirement and is to be recovered

with added return.

b) Operation cost

Details of the cost are tabulated below and following points are of

significance;

68



i. Fixed cost, cost of motorbike less tax saving due to

depreciation expense should be amortized for a

period of five years and distributed equally on

average number of customers a mobile agri credit

officer will deal with.

ii. Variable cost which includes petrol and

maintenance charges should be incorporated in

pricing of the facility extended on average basis.

Table: 7-1 Cost Schedules of Action Plan

Fixed Cost Total Variable Cost Total Cost

Dep. M/Cycle

Mileage/year

@50km/day

Petrol/Year

@40km/day

Petrol Cost

Rs.30/litre

Repair Maintenance

Per year TVC + TFC

15000 18000 450 13500 500 29000

The above plan could be reinforced and made more effective if following

supporting activities are undertaken.

c) Pakistan loses a significant portion of its agriculture

land each year through high soil salinity and poor water

treatment. The bank can finance projects equipped with

measures to treat saline/soda water and soils so as to

render if efficacious for agricultural purposes.

d) The bank may help farmers to acquire needed

equipment of saline soil treatment thus enhancing their

ability to bring more land under cultivation and improve

per area yield.

e) The bank may finance projects such as better storage

and marketing services.

69



7.2 ACTION PLAN 2

7.2.1 Technique For Effective Management and Recovery of Advances:

Banks are highly leveraged bodies where advances constitute a major portion

of their assets. Effective management and recovery of advances has to be an

ongoing process, if the bank is to maintain good quality of its assets. In this

regard following plan is advised for effective management and recovery.

• Through Assessment of Advances:

Bench marketing technique should be used to develop comprehensive proposal perform, though the existing Performa is not a bad one. Following

factors should be carefully examined.

a. Principle of good lending

This includes safety, desirability, liquidity and profitability.

b. Compilation of credit information report

Through investigation of the borrower’s personal and business related

aspects should be conducted.

• Proper and effective Documentation:

Safety of advances depends upon correct documentation. In addition to

compliance with all relevant legal rules and regulations following aspects

should be deeply digged into.

a) Executants

Borrowers/executants should be legally authorized to enter into the

contract.

b) The Bank’s printed charge Form

The appropriate charge forms such as letters of pledge and hypothecation

etc. should be properly completed and executed.

70



c) Stamps

Charge form should be properly stamped in accordance with the stamp

duty as applicable in the province, where the documents are executed.

d) Execution and Documents:

These charge documents should be executed in the bank premises and

should be signed in full as per borrower’s specimen signatures.

e) Registration of Charged Documents:

Certain charged documents for example, mortgage deed are required to be

registered at the office of registrar. Such registrations must be affected

within 21 days of the creation of the charge.

Careful Monitoring

As a preventive measure, systematic and continuous evaluation helps to

identify potential problem cases before they reach a critical stage. It is,

therefore, essential to monitor advances. Following could prove good sources

for effective monitoring.

i. Financial statements, accounting and management policies.

ii. Bank accounts operations.

iii. Personal contacts and site inspections.

iv. Analysis of overall economic environment.

v. Analysis of industry specific environment.

• Review Function:

This is periodic monitoring function that should be conducted under following

broader guidelines.

i. Analysis of operations on financing account

ii. Credit report - bearing upto date information

iii. Financial statements analysis

iv. Inspection and analysis stocks reports

v. Review and updating charge documents

71



vi. Analysis, revaluation of securities

vii. Other correspondence with borrowers

viii. Study of previous review files

ix. Analyzing validity of insurance documents

Handling of Delinquent Advances

Through careful monitoring and periodic reviews delinquent advances could

be recognized and should be tactfully and effectively handled. Good relations

with such customers should be maintained endeavors should be focused on

ways and means of obtaining repayment without resort to litigation.

Borrower’s situation should be analyzed and suggestions for improvement

should be given. It is a well-established fact that legal suits cost both money

and time, which could be used for more productive endeavors.

Recovery of Advances through realization of securities

At times due to unforeseen circumstances beyond the control of the borrower,

the normal plan for repayment may not work out. Then the bank has to relyupon the realization of security to liquidate the advances. Following steps

should be followed.

i. A notice for sale of security, bearing full particulars of the loans and

security should be served to borrower.

ii. Sufficient time should be given to borrower.

iii. Notice should be issued by registered post, acknowledgement due and

should be retained as evidence.

iv. Reputed surveyors should do through, valuation of security.

v. Written offers from several dealers should be invited.

vi. In case of auction, it should be well advertised.

vii. The offer closest to market value should be accepted

7.3 ACTION PLAN FOR MARKETING DEPARTMENT:

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This will help the bank to take long-term perspective for its marketing

activities, with consideration on strategic approach of the bank. There are

various steps involved in the given implementation plan, which will come in

order, according to their importance and subjection on one another. Moreover,

to bring order and efficiency to the difficult task of implementation plan. It

has been broken down into the steps, which believed to be needed, when

developing a disciplined action/implementation plan for launching financial

products.

Step 1: Business Review

As we early discussed that this implementation plan will focus on marketing

activities of UBL and as a part of the marketing background component, the

business review is must. It includes the marketing database not only of UBL

but also of other banks. To develop marketing database, we first need to

understand the scope of banking followed by a comprehensive situational

analysis of the financial product, and market place, which is relevant to the

target market and competition situation. This will be accomplished through

secondary research in Pakistan. UBL’s own record of financial products and

very often-primary research surveys of potential customers and focus group

information. The business review provides a qualitative and quantitative

decision activities and a rational for all the strategic marketing decisions with

in the plan.

Step 2: Problems and Opportunities

The problems and opportunities step of UBL is a summary of the challenges

that will emerge from the marketing database. In this step the data collected

from the business review is shaped into meaningful summary points that form

the basis of the implementation plan.

Step 3: Quantifiable deposits’ Collection Target

Collection of deposits as an objective represents projected levels of services to be sold. Setting this objective is critical because it is the first task of this

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implementation plan and it sets the tone of the entire implementation plan for

the bank. Everything that follows in the plan is designed to meet the objective

of collecting deposits through financial product from defining the size of the

specific target market establishing marketing objectives

This will also determine the amount of advertising and money spent on it in a

quantifiable manner, e.g. 400 million advertisement expenses in a year, for the

first 5 years of its start.

Step 4: Target Markets and Marketing

The target market and marketing objective both are inducted in one step due to

their critical link to one another.

Target Market: Once the deposits collection being developed as

quantifiable objective, the staff of marketing department at the Hub branches

and Head Office of bank must determine to whom they will be selling their

new financial packages. In response to which bank will raise deposits, making

this determination is really defining a target market. Which is a group of

people with common characteristics. This part of implementation plan is

concerning on marketing efforts towards the portion of population wit similar

banking needs and saving habits.

Marketing Objectives: Marketing objectives for UBL clearly defines

what the bank want from its target market and potential customers. This part

of implementation plan focuses on the behavior of customers that will help in

setting the marketing objectives.

Step 5: Plan Structure

To compete with other banks, UBL needs to set strategies for its new product

by including the postings strategy, it will help in image building of the

financial package to be launched.

Posting: Once the bank has defined its potential market and has

established marketing objectives, it must need to develop posting of its

financial product. Position is the desired perception of the product within the

market target of the bank for example, if the product is launched. Its position

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should be done in such a way, that customer is fully aware of its major

characteristics the bank has stained to build the image of its products as highly

profitable package. This positioning strategy is supported by the strategic

consideration on various marketing mix tools e.g. advertisement, publicity etc,

Marketing Strategies: though marketing strategies are descriptive

and non- qualitative yet has a major impact over getting competitive

advantage. These marketing strategies guide to the development and selection

of various tactical marketing mix tools and provide direction in broadening the

target market, set by the bank.

Step 6: Informational Goals:

All steps of this implementation plan are highly dependent, but step 5, 6 & 7

are much more. Informational goals means to set the target the market

awareness and attitudes package and fulfill the marketing objective of the

bank. Another purpose is to provide direction for what is to be accomplished

by each strategic tool in term of informational context.

Step 7: Strategic Marketing Mix:

This step is highly concerned with getting attention of the customers towards

the service of the UBL offering. Here we are concerned with a new package

launched by the bank. Focus will be on that financial product. This step of

disciplined implementation plan provides some strategic plans for marketing

of the product. These strategic and tactical plans incorporate marketing

executed. When implemented, will allow the bank to meet it’s marketing

objectives and fulfill the overall marketing strategies and information and

communication guidelines, established in the start of the plan. Selection of

each marketing tool has its own objective and strategies. Following are the

marketing mix tools included in strategic planning process.

Financial package/Product

This is the service which is provide by the bank as a result of which bank gets

deposits and customer takes profit and keeps his money safe.

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Branding

Branding is the naming of new-marketed financial products e.g. present

products of UBL i.e., UBL Sahara, UBL Hamrah Travelers Cheque. This

brand or name of service associates with it should be such, which could

communicate some message and attract the customers.

Profit Percentage

This is the percentage of profit, which the customer expects receives from the

bank against his deposits in a scheme of financial package.

Advertising Media

Promotional campaigns provide added incentive, encouraging the target

market to perform some incremental behavior, which is highly necessary.

Communication with the target market should be always there and Electronic

and Print Media should be used for promotion of financial product. Following

is some financial tabulation for UBL based on some data taken from an

advertising agency. This will show the importance of advertising and its benefits in terms of figures. This table gives the plan for one year and is for

one financial product, for example, a product of UBL like SAHARA. A

conservative approach has been followed to get a framework for reality, and to

help in avoiding the slack season of economy.

Table: 7-2 Cost/revenue schedule – Marketing Plan

Cost of

Advertising

No. Of

Customers

Attached

Average

deposits

by

Customers

Lending by

Bank

Total

Deposits

in Year

Difference

(Revenue)

48 Million 1 Million 5000 2% of D=100 5 billion (b x (E - A)= 52

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(7% of

population) million c) million

i. The bank’s revenue in the F column does not include advertisement

expense, which is a major cost here in this comparison.

ii. 2% given in column E is the difference of percentage between lending

and borrowing which is again a conservative approach.

iii. Many things in the comparison have been kept constant to understand

the importance of advertisement.

BIBLIOGRAPHY

• Aswathpa, K, (2003) Human Resource and Personnel Management:

New Delhi: Tata McGraw Hill Gibson, Charles H, (2002), 7th. Ed.,

Financial Statement Analysis, Prentice Hall International Corporation.

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• Meenai, S A, (1999) Money & Banking in Pakistan, Karachi: the

Elahi’s Book Corporation.

• Siddiqui, A H, (1998), 6th

Edition. Practice and law of banking in

Pakistan, Royal Book Company, Karachi.

• UBL (1999). Credit Manual. Karachi.

• UBL (2000). Deposit Manual. Karachi.

• UBL. (2002 – 2003). Annual Report . Karachi.

• Van Horne, J. C & J.M Wachowicz, (1998), 10th Edition.

Fundamentals of Financial Management. New York, Prentice Hall

International Corporation.

• http/. www.ubl.com.pk