CHAPTER – 1

EVOLUTION OF BANKING

1.1 INTRODUCTION

The word bank is derived from Latin word “Bancs” or

“Banque”, which means a bench. The explanation of this origin is

attributed to the fact that the Jews in Lombardy transected the

business of money exchange on benches in the market place. When

the business failed, the people destroy the bench.

Incidentally the word bankrupt is said to have been evolved from this

practice.

The opponents of this opinion argue that if it was so, then how

is it that the Italian money changers were never called Banchierei in

the middle ages

Other authorities hold the opinion that Bank is derived from

German word back which mean joint stock fund. Later on, when the

German occupied major part of Italy, the Back was italicized into

Bank.

1.2 DEVELOPMENT OF MODERN BANKING

Despite the classical origin, banking in its modern form and

structure started in Britain when many of the Lambordary merchants

came to England in the fourteen century and settled in the part of the

London now called Lombard street.

They were so resourceful that even the kings had to depend on

them for loans despite the fact that the church was firmly against

usury. They dealt with not only keeping the money in safe custody

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but also changed money for the travelers or merchants engaged in

foreign trade.

The business of changing money was so lucrative that King

Edward III established the office of Royal Exchanger for changing

foreign money at a profit for the benefit of the crown.

The discovery of America brought riches to England and gave

a tremendous boost to foreign trade. The merchants now began to

hold part of their riches in cash. These transactions, however,

received a big setback in 1640, when King Charles I seized 130,000

Pounds and bullion left for safe custody with the city merchants at

the Royal Mint.

This shook the confidence of the merchants in the Royal

Exchanger and Royal Mint. Consequently this business was taken

over by the gold smiths, who, up to that time, were dealing only in

gold and silver. Since these gold smiths required strong safes for the

purpose of their own business, they introduce necessary facilities of

safe keeping of the valuables and the cash of their customers. These

goldsmiths issued receipts or note to their depositors in respect of the

cash or articles left with them. These were called gold smith notes,

and carried an undertaking to return the money and articles to

depositors or bearers on demand. There were a considerable number

of such notes on circulation among various classes of merchants and

thus they can be aptly called Bank Notes in their earliest form.

Over a period of time, these goldsmiths discovered that large

sums of money were left in their custody for long periods. Therefore,

they started the use of this cash to advance loans to other persons for

a fixed period of time and at considerably at a higher rate of interest.

2

Moreover they further encourage cash deposits by their customers by

offering them a part of their profit earned on the money. Thus began

the issue and deposit banking of modern times. Some of the

enterprise goldsmiths issued checkbooks for the attraction of their

customers; and thus another important step in the evolution of

banking was taken.

In 1672, however, English banking faced a great crisis when

Charles II borrowed huge sum of money from the goldsmith bankers

formed themselves into a Corporation in 1695, known as the Bank of

England. This bank lent 1,200,000 pounds at 8% interest to William

III, who in return, allowed a number of privileges to the bank,

specially the right to issue Notes payable to bearer on demand unto

the amount of this loan. This was known as fiduciary issue, not

covered by gold. This new bank became a very serious competitor to

the comparatively smaller private banks run by the London

goldsmiths.

By the year 1700, the Bank of England was not only issuing

Notes but also conducting accounts for customers. Being a joint

stock bank by charter, its directors were conducting the business like

that of limited companies. The Bank of England was the only joint

stock company which was given the monopoly of issuing the Bank

Notes.

In 1708 the privilege to issue Notes in England was

withdrawn from joint stock banks and confined to the private banks

with not more then 6 partners.

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Up to 1813 or there about in England, the main profit of banks

was derived from the circulation of notes and for many years after

that, deposits were treated as very minor matters

1.3 GROWTHS AND HISTORY OF UBL

Commercial banks play a role of vital importance in the

economic growth of a country. Banks mobilize idle savings of public

and provide finance to various sectors of economy. In spite of vital

importance, there was shortage of branches of commercial banks in

the areas of sub-continents, which now constitute Pakistan. When

Pakistan got independence, there were only 487 branches of

commercial banks, which were further reduced to 195 as at 30/09/47

due to shifting of a number of branches to India or U.K. The Reserve

Bank of India, which was made responsible to exercise control over

banking sector in both the dominions, did not perform its duties

properly in Pakistan. The State Bank of Pakistan was established on

01/07/1948. After the establishment of State Bank of Pakistan,

banking expansion got momentum but real progress was not

achieved until 1959, when a dynamic banker Mr. Agha Hassan

Abedi conceived the idea of opening a bank different from others.

His dream was translated into reality on November 07/1959 when

first branch of UBL was opened at McLeod Road Karachi (now

known as I.I. Chundrigar Road).

This achievement was secured after passing through many

problems and after completion of a lot of legal formalities. UBL was

established on 24-07-59 as a public limited company with registered

office at I.I. Chandrigar road Karachi. The authorized capital was

RS. 20,000,000 issued, subscribed and paid up capital was. RS.

10,000,000 divided into 1,000,000 shares of RS. 10each.

4

I. LOCATION

WITH an integrated network of over 1000 branches in

Pakistan as well as 15 overseas branches, UBL gives you direct

access to a comprehensive range of better banking facilities to help

you monitor your business locally as well as internationally.

II. TREASURY

The UBL Treasury & Capital Markets (TCM) has developed a

reputation as a proven market leader in converting innovative ideas

into profitable ventures for the bank and for its customers. Today the

UBL TCM is a frontrunner in providing:

The narrowest bid/ask spreads and the fastest quotes

Dynamic risk-reducing hedging strategies for its customers

The best relationships with institutional, corporate and retail

clients Year 2007 was a highly lucrative year for the bank with net

profits in excess of PKR 4 billion. Treasury and Capital Markets

contributed to over 65% of UBL’s total returns. This was due to

Government Bond Trading, Equity Trading, Structured

Products/Financial Engineering, Corporate Debt trading, and double-

Count of revenues.

Under the new management, the TCM expedited the launch of

Pakistan’s first derivative money market product-the FRA (forward

rate agreement) with Quetta Textile Mills Ltd. in August 2007, and

has further closed several similar transactions thereafter.

UBL TCM is a market maker in both the domestic money

market as well as the foreign exchange market. Being one of 11

primary dealers (PD), UBL has one of the largest balance sheets

amongst banks in Pakistan, and hence our Foreign Exchange

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Exposure Limit (FEEL), as imposed by the State Bank of Pakistan, is

the highest in the industry.

UBL was the first local bank to establish a Corporate

Treasury team in the Treasury dealing room. The Global Corporate

Treasury Business is globally responsible for sales of all structured

and derivative products for UBL. The bank’s trade volumes and

revenues have grown significantly since the introduction of the

corporate treasury business.

Equities are responsible for managing the bank’s trading and

badla portfolio, and to eventually develop a global equity trading

activity for UBL. Structured Products is responsible for developing

and packaging plain vanilla derivatives as well as more exotic

customer specific products, and pipeline products.

The Strategic Planning and Balance Sheet Management

responsibilities include:

Liquidity Management for the domestic balance sheet - This

unit is the focal point for all branch-related liquidity issues and will

also be responsible for day-to-day management of liquidity for UBL.

Overseas Branches Treasury and Capital Markets - we plan to

integrate the treasury activities for all overseas branches, to

develop synergies amongst our various treasuries. As our core

business in these markets continues to develop, we expect

significant opportunities to arise in the trading, funding and

gapping areas.

Research - providing market research for internal and external

clients in order to support the sales and trading effort.

6

1.4 THE FIRST BOARD OF GOVERNORS OF UBL CONSISTED OF THE FOLLOWING MEMBERS

Table – 1.1

1 Mr. Ismail Ibrahim Chandrighar Chairman

2 Mr. Muhammad Shafiq Saigol Managing Director

3 Mr. Muhammad Rafiq Saigol Director

4 Mr. M.Bashir saigol Director

5 Mr. A. Razaq Dada Director

6 Mr. Mian M.Yahya Director

7 Mr. M. Saeed Saigol Director

8 Mr. Agha Hassan Abidi Director and General ManagerSource: Rahman ullah, Internship Report on UBL, (2007-2009).

Presently UBL is managed by a board of directors including

one president, 4 directors from UBL, 1 from Pakistan Banking

Council and one from ministry of finance.

The names and designations of present top management include;

Table – 1.2 1 Mr. Shaikh Nahayan Mubarak Al Nahayan Chairman

2 Mr. Mohammed Anwar Pervez OBE Deputy Chairman3 Mr. Atif R. Bokhari President & CEO4 Mr. Omar Ziad Jaafar Al Askari Director

5 Mr. Zameer Mohammed Choudrey Director

6 Mr. Ahmad Waqar Director

7 Mr. Abdul Rauf Malik Director

8 Dr. Ashfaque Hasan Khan Director

Source: www.ubl.com.pk

Since inception, UBL provides personalized, efficient and

courteous services to its customers and has achieved dynamic

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progress in a short span of time. UBL has achieved the distinction of

earning profit in very first year of its operation. UBL also introduced

many remunerative schemes for its depositors and introduced

computer services for the first time in the banking history of

Pakistan. UBL gives advance finances to small, medium and large

industries, commercial establishments, agriculturists, construction

companies and other needy persons. UBL offers computerized

services to intending Hajis free of cost. UBL collects Electricity, Gas

and Telephone bills from public and issues TV licenses on behalf of

Pakistan Television Corporation. It also offers evening banking and

lockers facilities at its selected branches. Over 100 branches deal in

foreign exchange where facilities to importers, exporters, travelers

and other persons are being given.

UBL arranges prompt payment of inward remittances.

Similarly for issues of outward remittances minimum time is taken.

Other auxiliary services such as unicorn, inland traveler’s checks,

school banking and collection of checks and other documentary bills

drawn on its station drawees are offered.

“The names and tenure of various presidents of UBL after

nationalization are given here under.”1

Table – 1.3 S.No. Name of President From To

1 Mr. Mushtaq Ahmad Khan Yousafi 01/01/74 31/12/76

2 Mr. Kh. Zai Ud Din 01/01/77 31/12/79

3 Mr. Sami 01/01/80 01/02/82

4 Mr. M. Sadiq Dar (Acting president) 04/02/82 31/12/82

5 Mr. Tajammal Husain 01/01/83 15/07/88

6 Mr. Amjad Ali 16/07/88 04/02/89

8

7 Mr. Maqbool A Soomro 7/02/89 18/07/89

8 Mr. Salim Malik 19/07/89 01/08/90

9 Mr. Maqbool A Soomro 01/08/90 15/05/93

10 Mr. Aziz ullah Mamon 15/05/93 4/08/96

11 Mr. Shafi Arshad 4/08/96 14/07/97

12 Mr. Zubayr A Soomro 14/07/97 15/01/00

13 Mr. Amar Zafar Khan 15/01/00

1.5 NUMBER OF BRANCHES

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

remotest areas of the country. In December 1983, there were 1417

branches whereas in 1974 it had only 1238 branches and in

December 1999 there were 1623 branches and in December 2007

there were 1821 branches. Presently there are 1056 domestic

branches and 15 overseas branches.

I. OVERSEAS BRANCHES

UBL, with an integrated network of over 1000 branches

globally, with 15 overseas locations, gives their customers

direct access to a comprehensive range of better banking

facilities to help them monitor their business internationally.

They have branches in:

United States of America

Qatar

UAE

United Kingdom

Bahrain Republic of Yemen

Zurich

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Off Shore banking Unit

II. SUBSIDIARIES

UBL has two subsidiaries, namely,

United Bank of Lebanon & Pakistan

United bank A. G. Zurich.

United bank of Lebanon and Pakistan was established in

1968, 1st had a paid up capital of dollars 379,000, deposits of

dollars 125,978, advances of dollars 1983,313 and six

branches as on December 31, 1983.

United Bank A.G. Zurich also was established in 1968 and

had a paid –up capital of dollars 2722 thousand, deposits of

dollars 5827 thousand and advances of dollars 5538 thousand

as on December 31, 1962.

1.6 JOINT VENTURE

UBL has two ventures, Commercial Bank of Oman limited,

established in 1975. It had a paid up capital of dollars 8,700 million,

deposits of dollars 7,333 million, advances of dollars 73.993 million

and 11 branches as on December 31, 1962. And United Saudi

Commercial Bank Limited (Saudi Arabia), established in 1982.

1.7 ROLE OF UBL IN N.W.F.P.

The role of UBL has developed largely; through out the

country in very short period of forty seven years. The bank is

operating in the entire country and has branches all over the country

and overseas. In N.W.F.P, UBL is operating successfully. The

number of branches of UBL in Peshawar region is 156 up to

dec.2001 i.e. there are total 14 Hub Branches in Peshawar region and

10

under these Hub branches, there are 142 spokes branches. These 156

branches come under the Peshawar Region, for which there is a

Regional head Quarter (RHQ) in Peshawar.

The list of hub branches come under the Peshawar Region is as under.

1. Peshawar 6. Haripur 11. Mardan2. Bannu 7. D.I. Khan 12. Swabi3. Mansehra 8. Mingora 13. Kohat4. Timergara 9. Nowshera 14. Abbotabad5. Hangu 10. Bathela

1.8 MISSION STATEMENT OF UBL

“We shall dominate Pakistan’s financial markets and be the

leading bank of Pakistan in term of quality of customer services,

assets, profits and reserves. We shall consistently try to be among

banks in the Pakistan. Comparing over selves to international

standards. We shall be a modern universal bank. Our employees will

be efficient, motivated and have corporate pride”

1.9 OBJECTIVES OF UBL

Objectives mean the end towards which an activity is aimed.

An organization without objective is like a person who is wandering

with no purpose. All the activities of an organization are due to its

objectives and goals. And for the attainment of those objectives,

various types of financial products and plans are developed. UBL has

also some objectives, which are as under.

To ensure growth and development of the bank.

To use resources of the bank efficiently.

To get more deposits.

To participate in development of the country.

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Paying special attention to the areas, which are under

developed.

To develop SME’S.

To increase industrialization in the country.

To provide financial help to the farmers.

To provide employment opportunities.

To make people more of mind to have saving habits.

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CHAPTER – 2

SERVICES OFFERED BY UNITED BANK

LIMITED

2.1 CONSUMER BANKING

United Bank limited aspires to be the leading provider of

consumer baking services in the country besides the fact that UBL

was the Last entrant in the consumer products of the new age but Not

The Least. The bank’s operating strategy in this regard has been

aligned with the core customer needs of highest value and expert

services. The bankers in general are facing challenging time today as

bankers; as they should be more than just custodians of client’s

funds. Rather they should devise safe and prudent methods of

maximizing the returns on hard earned savings and investments of

their customers. These corporate values are evident in United Bank’s

diversified product portfolio which includes Current a/c, Pls saving,

Business Partner a/c, Term Finance Certificate, UBL Profit

certificate of deposit, Monthly income, Foreign currency a/c, Rupee

travelers’ check, Money gram, Safe deposits, Car finance, Credit

card, Personal loans, Housing finance, Business Loans and Running

Finance.

In the arena of consumer banking the bank has carved a niche

in the market place, with products like car finance, rupee travelers’

checks homes and car loans for U.A.E based non-resident Pakistanis.

It has set up strong internal control mechanisms to monitor and

measure risks arising out of consumer banking products. The bank is

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developing electronic, automated and computerized environment to

give impetus to their efforts in consumer banking area.

2.2 CORPORATE BANKING

Systems and operations have to be aligned so that they

support the performance of the Organization’s product offering.

Consequently, business process re-engineering and quality control

are on the main maxims of corporate philosophy. United Bank

Limited has the Corporate Banking Group (CBG) which enhanced

the image of UBL in the corporate world and also increased the

advances, revenues and profit of the bank to the new heights.

United Bank’s product line-up fulfills and satisfies the

banking requirements of not just the conventional consumer, but the

demanding financial needs of the corporate sector as well. Corporate

product includes current deposits, foreign deposits, over draft, term

loans, project financing etc. The bank is continuously setting new

standards of services in the industry and is becoming reliable

financial ally of all the customers.

2.3 INVESTMENT BANKING

Investment Banking Group of UBL (IBG) continues its

leadership position in providing innovative and unique financial

solution to its clients by anticipating their changing requirements and

developing new products & services.

IBG concludes more transactions, both number and volume

than any other local and foreign financial institution, including

banks, investment banks, and brokerage houses.

More specifically, while IBG maintained its leading status in

the traditional business of loan syndication and debt capital markets,

14

major strides were achieved in the newer value-added business areas

of projects and structured finance, equity & advisory services and

private equity solutions.

Nowadays IBG is focusing on the fast emerging Technology,

Media and Telecom sector where it concluded several unique high-

profile transactions. Most significantly UBL is the only major

financial institution based in Pakistan to be engaged by a reputable

local group to act as financial advisor for the cellular license auction

bidding in April 2008.

2.4 AUTOMATED BANKING

Technology and automation play a pivotal role in the

progressive development of any organization. It has become

impossible to control the operations of a bank effectively in real time

situation without the latest technology. The bank continues to invest

heavily into the progressive automation and computerization of all

banking activities. Its aim is to achieve total connectivity between

branches. The objectives are to achieve efficiency in services and to

control costs. UBL has recently installed the New-state-of-the-art

ATM machines in UAE.

United Bank Ltd provides:

ATM/ UBL Wallet Debit Card

Online Banking/ Uni Remote

Telephone banking

UBL Business Partner ( In 500 branches and 250 cities)

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2.5 ISLAMIC BANKING

UBL has played an important role in Islamic banking and

successful operation of Non- interest based system of banking.

The interest free banking system was introduced on January I,

1981. Since then, UBL has played an important role in the successful

operation of this system. For this purpose, it has established a special

division, “The Islamic Banking Cell”.

The sincere efforts of UBL as making Islamic Banking

successful is proved by the fact that it declared the highest rates of

profit for PLS deposits for the first half year of 1983. This has been

due to a sound planning of all its Islamic Banking efforts.

The bank has provided capital to businessmen and

industrialists on the basis of “Mudaraba and Musharika”.

Additionally the bank has started interest- free hire purchase and

lease schemes for financing purchase of buses, trucks and industrial

machinery on installments. The bank also provides “Qarz-e-Hasna”

to needy and deserving students.

2.6 AGRICULTURE

UBL has contributed in full measures to the development of

agriculture. It has always exceeded, by a considerable margin, the

targets given by the State Bank of Pakistan. UBL has also provided

loans for a variety of agricultural activities including tractors, tube-

wells, fertilizers, insecticides, poultry farming, bio-gas plants etc.

The bank officers who are qualified agricultural graduates not only

provide loans at the doorsteps of the farmers, but also render

technical assistance to them. To maintain constant liaison with the

farmers, the bank officers have been provided with motorcycles.

16

Financing of Small Business to meet the goals of social

justice, the bank has zealously participated in the small loans

scheme. It has always tried to exceed the targets fixed by the state

Bank. A full- fledged department catering to the needs of small

businessmen is functioning. To improve its operations, the bank has

made arrangements for overseas training of its staff.

The bank is also participating in the dollars 30 million IDA

credit, which will be provided to small industrialists.

For training its staff, a staff collage was established at Karachi

in 1994. Now there are three such colleges at Karachi, Lahore and

Rawalpindi, where the officers and staff are provided extensive

training. Furthermore for training senior officers, a UBL school of

Banking has been set up at Karachi. Senior bankers and management

experts provide training to the executives and senior officers of the

bank.

2.7 RESEARCH DEPARTMENT

UBL was the first commercial bank in the private sector to

establish a full- fledged Research Department. Prominent economists

of the country have been acclaimed both at home and abroad. Not

only does this research provides useful and cogent studies of

economic development in Pakistan and abroad, it also assists in the

managerial decision making process.

The Research Department is publishing “Economic Matters”

every month since 1967. It was recently upgraded to “UBL

Economic Journal”. In addition, the department also brings out the

“UBL Home Journal”.

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2.8 COMPUTER SERVICES

UBL was the first bank to introduce computers. The

Computer Division was established in 1968. Presently, UBL has

Computer Department at Karachi, Lahore and Rawalpindi. Many

branches have been fully equipped with computers. The Computer

Division prepares weekly, monthly, quarterly, bi- annual and annual

reports for top services to many Government, Semi Government and

private institutions.

2.9 SERVICE TO HAJJIS

For providing prompt and efficient services to the intending

Hajjis who come to UBL every year, the bank has introduced the

most modern system of electronic banking which permits all

formalities to be completed within a short time. This year 2009, UBL

received the greatest number of applications from customers for

Hajj, which shows the customers faith in UBL.

2.10 AUXILIARY BANKING SERVICE

Bank provides a number of auxiliary services such as credit

cards, traveler’s checks and school banking.

2.11 COLLECTION OF UTILITY BILLS

UBL also collects electricity, gas, and telephone bills from the

public on behalf of the respective organizations. The bank also

introduced the bills collection facilities in selected branches in the

evening hours for the convenience of general public. And now

selected UBL branches are collecting the utility bills through online

banking.

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2.12 ISSUANCE OF TV LICENSE

UBL also collects TV License fee on behalf of Pakistan

Television Corporation and issues TV Licenses to the general public.

Sports

UBL was one of the first banks to patronize sports. Senior

executives at the highest level supervise the sports activities.

The bank has established a special department to organize its

various sports activities. It has provided patronage to leading

sportsmen. Many outstanding players and national players

have been included in its teams. The bank has won United

States of America trophies in hockey, cricket, badminton,

table tennis, rifle shooting, etc.

Development of Data Base Management System (DBMS)

United bank is the only bank in Pakistan, which is making use

of its own data base management system (DBMS) since 1971.

The VIS was used in the three main branches of Karachi.

After years of deducted efforts on its work, it succeeded in

loping UNI Bank Plus.

19

CHAPTER – 3

ORGANIZATIONAL STRUCTURE

Organizational structure of a firm provides boundaries for

authority of persons and clarifies individual responsibility and

authority. It shows who is responsible to whom, and who has the

authority to give orders to someone. An organization having dual

authority or vague structure would not have clear direction and will

face hurdles in getting its goals and objectives. Therefore, it is very

important for any organization to have a well-established structure of

responsibility and authority. An organization structure should be so

designated to clarify the environment so that everyone knows his

duty and who is responsible for what. It results to remove obstacle to

performance caused by confusion and uncertainty of tasks and to

furnish a decision making communication network reflecting and

supporting enterprise objectives.

3.1 UBL ORGANIZATIONAL STRUCTURE:

UBL also has a well defined formal organizational structure.

UBL is a very vast organization. In the organization set up of

UBL, the highest authority rests with Board of Directors which

consists of Chairman, Deputy Chairman, President & CEO and the

directors. In which four directors are from UBL, one from Pakistan

Banking Council, one from Ministry of Finance and one who is also

the secretary of the board. So the Board of Directors is an eight

member team, and is responsible for policy formulation and making

important strategic decisions.

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THE NAMES OF THE BOARD OF DIRECTORS ARE AS

FOLLOWS:

Chairman H.H Sheikh Nahayan Mabarak Al Nahayan

Deputy ChairmanMr. Muhammad Anwar Pervez, OBE, HPK

President & CEOAtif R. Bokhari

Director Zameer M. Choudrey

DirectorOmar Z. Al Askari

DirectorMuhammad Tehsin Khan Iqbal

Director Ahmad Waqar

Director Javed Sadiq Malik

The authority, which is second highest, lies with executive

committee. It consists of seven members, including the president and

secretaries are in charge of divisions. The members are Senior

Executive Vice President (SEVP) of UBL. There are twenty

divisions, which have their own Senior Executive Vice President

(SEVT). Executive Vice President (EVP), or Senior Vice President

(SVP), the

21

SEVP to international divisions manages the operations of

foreign countries branches. The rest of the divisions work along their

functional lines as shown in the organizational chart.

At the National level, UBL has a network of branches spread

allover the country and its field operations are one of the most

extensive among the leading banks in Pakistan. At provincial level

the bank is managed by SEVP, who is assisted by General Manager

(OM), who is EVP or SEVP. The OM is responsible for either a

number of regional areas or in charge of various provincial

departments such as Administration, General Recovery, Loans,

Inspection, etc. The complexity and extensiveness of the operations

in a given province determine the number of OMs. OMs are assisted

by circles executives who are of the rank of SEVP or VP.

The entire country is divided into Circles which are further

divided into Zones.

The circles are administered by circle executive. Each zone is

comprised of a number of branches, which are managed by branch

managers who are mostly Grade I or Grade II officers. Some large

sized branches are also managed by AVPs.

3.2 CONCEPT OF HUB AND SPOKES BRANCHES:

The concept of HUB and Spoke branches was introduced by

ANZ Grind lays Bank (now renamed Standard Chattered Bank). The

bank couldn’t get the deMr.ed benefits and withdrew form it.

Another bank which adopted the concept was National Bank of

Pakistan (NBP), which also couldn’t get the deMr.ed results so both

the banks disbanded it. Recently UBL has implemented this scheme

with high hopes. Under the concept big branches of a zone are given

22

the status of Hub branches. The Hub branches monitor the activities

of spokes branches. The number of branches under a Hub branch

depends upon the resources of Hub branch and the location of the

spokes branches e.g. in Peshawar there are two hub branches one is

Peshawar Cantt branch and the other one is Khyber Bazaar branch.

All the spoke and Hub branches work under the concerned area

manager. He is responsible for the performance of these branches.

He sits in the Hub branch and is assisted by a Vice President. In

UBL this new concept of banking has shown tremendous results and

is quite successful here. Unlike ANZ and NBP, UBL is getting

benefits from it, and has improved its performance quite well.

3.3 DIVISION OF UBL’S OFFICE

Basically there are two types of offices in UBL

1. Head Office

2. Regional Head quarters

1. Head Office

Head office of UBL is in Karachi. It exercises overall control

over the bank. The head office (HQ) has various functions.

It formulates polices and ensures its implementation.

To supervise and control the operations of the regional

offices.

To formulate policies and ensure its implementation by the

field offices.

To deal/liaison with foreign donors like IBRD (World Bank),

Asian

23

Development Bank, Islamic Development Bank, KFW

(German Bank),

FMO Netherlands etc.

To deal with Ministry of Finance.

To supervise RHQs.

To sanction loan applications received from the branches.

To deal with ministry of finance.

2. Regional Head Quarters There are Eleven Regional Offices of UBL which fully

cooperate with the Head Office. UBL Regional Offices

performance with reference to sanctions, disbursement,

recoveries, and deposit mobilization is of vital importance to

the bank operations. The functions are as follows:

To implement the policies formulated by the Head Office.

To extend the credit facilities by keeping in view all the

prescribed conditions.

To recover/collect the existing long-term credits extended by

the bank as per schedule.

To assist customers in the process of development by

advancing loans for viable financial projects.

All the 1056 UBL branches are the representatives of the

bank. These branches provide commercial as well as non-

commercial banking facilities. Various structures involved in the

organization of UBL are given below.

24

3.4 CONCEPT OF CONSUMER ASSETS CENTERS:

As the UBL was privatized the management started thinking

about the consumer products as well the commercial products. For

this purpose the management started hiring from all over the world in

order to collect the cream, and make a world class team without any

doubt.

The management took the consumer head from the bank

which is consider as the pioneer in the consumer sector “City Bank”,

and then he joined hands management and made all the possible

ways to make UBL a World Class Bank on the Consumer Side as

well in the Commercial Sector. They made collectively the plans to

make Consumer Assets Centers in all over the country which was

introduced first time in Pakistan.

The UBL’s Consumer Assets Centers are the state-of-the-art

in the main cities like Karachi, Lahore, Islamabad and Peshawar. The

Consumer Assets Centers are divided in main Head Office, Regional

Centers and New Cities. At the time of launch the regions were 10 in

the country but now it has been increased to 14.

In Consumer Assets centers the products are divided in to two

types: The Secured, and Un-secured Products. The Secured include

UBL Autos, UBL Address, and Credit Card while the UBL Money

and UBL Cashline comes under the canopy of Un-secured Products.

There is a Group Executive, a Global Sales Head, Head

Secured Financing, Head Un-secured Financing, National Sales

Managers, Regional Sales Managers, Relationship Managers and the

Relationship Officers.

25

3.5 TOP MANAGEMENT AT THE HEAD OFFICE:

I. Board of Directors The executive authority for the general direction and

supervision of the Bank operations or the conduct of business

of UBL vests in Board of Directors. The board consists of a

Chairman and seven other Directors.

The chairman of the Board of Directors is the “Managing

Director”. All the members of the Board of Directors, as well

as the Managing Directors are appointed by the government

of Pakistan.

II. Executive CommitteeExecutive committee of UBL consists of seven members.

With the expectation of the president, and secretary all other

members serves as In charge of many divisions. These

members are Senior Executive Vice President (SEVP), or

consultants hired on contract basis. The Division Heads that

work under SEVP or consultants are either Senior Vice

President (SVP), Executive Vice President (EVP) or Vice

President (VP). The members of the executive committee

other than the M.D. shall hold office for such period as may

be determined by the Board. The decisions of the executive

committee, other than those, which relate to matters specified

by the board in this behalf, shall be laid before the board

Functions of Executive Committee

The members of the executive committee other than the M.D.

shall hold office for such period as may be determined by the

Board of Directors.

26

The decisions of the executive committee, other than those,

which relate to matters specified by the board in this behalf,

shall be laid before the board for approval.

Subject to the general or special direction of the board, The

Executive Committee may deal with any matter within the

competence of the board.

Managing Director The Managing Director is responsible for the efficient

working of the organization. He performs his duty according

to the policies formulated by the Board of Directors and is

directly answerable to it.

The Federal Government on such salary and on terms and

conditions shall appoint the MD as it might deem fit.

The MD shall hold office for term of three years, which the

government may extend from time to time.

The MD shall be the Chief Executive of the organization and

shall perform such functions as required by the Ordinance and

the rules and regulations made for the past.

27

ORGANIZATIONAL HIERARCHY CHART

28

Board of Directors

Executive Committee

President/CEO

SEVP

EVP

SVP

VP

AVP

Office Grade 1

Non Clerical Staff Clerical Staff Officer Grade

III

Officer Grade

II

ORGANIZATIONAL HIERARCHY CHART OF CONSUMER SECTOR IN UBL

29

Board of Directors

Executive Committee

President/CEO

Group Executive

Global Sales Head

Head Secured Financing

National Sales Manager

Senior Sales Manager

Regional Sales Manager

Non-Clerical Staff Processors Relationship

officers

Relationship

Manager

Head Un-secured Financing

LOCATION MAP

WITH an integrated network of over 1000 branches in

Pakistan as well as Overseas, UBL gives you direct access to a

comprehensive range of better banking facilities to help you monitor

your business locally as well as internationally.

www.ubl.com.pk

30

CHAPTER – 4

DEPARTMENTATION

4.1 ACCOUNTS DEPARTMENT

This department deals with the internal accounts of the bank.

The only Book maintained here is the cashbook. The summary book

and main ledger are maintained.

The function of cashbook is to balance the daily transactions.

At the end of the day this department receives cash position from the

cashier. This position shows opening and closing balance.

TYPES OF ACCOUNTS

There are three types of accounts:

Current Accounts

Saving Accounts

Fixed Accounts

4.2 REMITTANCES DEPARTMENT

This dept is concerned with transfer of money from one place

to another place. Remittance can take place in three different ways.

I. Mail Transfer When a customer requests the bank to transfer his money

from this bank to any other bank or the branch of the same

bank in the city/ outside the city or outside the country, the

first thing he has to do is to fill an application form in which

he states that I want to transfer the money from this bank to

another bank. If the customer is the account bolder of bank,

31

then the bank will debit his account. The concerned office will

fill the different forms to make the mail transfer complete.

Three forms used for this purpose are listed below;

Debit voucher

Credit voucher

Mail transfer register

If the customer is not the account holder of bank, then firstly

he has to deposit the money and then the above said procedure

will be adopted to transfer his money.

II. Telegraphic Transfer

This type of transfer is simple. After filling the application

form, the concerned officer fills the telegraphic form. This

telegram is sent to the required bank. Which on receiving it

immediately makes the payment to the customer and

afterwards the vouchers are sent to the bank by ordinary mail.

III. Demand Draft

DD is just a check and is issued when the customer wants to

take the draft personally. The idea behind it is that as the cash

is not safe to be kept along and a check in the shape of a draft

is safer and one can easily get cash by presenting it in the

bank, on whose favor it has been made.

Draft is only issued when the customer is known to the bank

and the bank has the confidence that the customer will not do

anything wrong with the draft. For the preparation of a draft,

first of all customer has to fill an application form, then the

concerned officer fills the following before delivering the

32

draft to the customer. The forms filled for this purpose are as

follows;

Demand draft register

Credit vouchers

4.3 DEPOSITS DEPARTMENT

The main economic function of the commercial bank is to

receive surplus balances of individuals, firms, public institutions and

to honor check drawn up to it. The funds deposited with the

commercial banks are classified under four main heads.

I. Current or Demand Deposits In this type of deposits, the depositor at any time by presenting a

check can draw his money from the bank. People keep some of their

deposits in current account in order to have ready command over

money. No interest is given on current deposits, because it is subject

to transfer or cashing by check at sight. The bank charges

commission on the account, which is called bank charges.

II. Saving Deposits This deposit refers to the deposits, which are kept to meet the

customer and unexpected outlay or to safeguard financial

respectability. The bank undertakes to repay the money on demand

up to a certain limit fixed by the rules of the bank. The bank pays

interest to the customers on saving deposits. The customer has to

give a notice to the bank about two weeks in advance for withdrawal

of large amounts.

33

III. Fixed Deposits Fixed deposits are those, which are repayable only after the expiry of

the stipulated period i.e. from three months up to sixty months. The

rate of interest depends upon the length of the period. The rate of

interest on fixed deposits is higher than saving account, because the

bank can safely utilize these deposits for a certain period. Customer

is allowed to borrow the required amount, which should not exceed

his fixed deposit. The bank charges one or two percent higher rate of

interest than the profit allowed to him at his fixed deposit. The bank

issues a receipt against the fixed disposition stating the amount and

the time of expiry to the customer. There is no paying book or

passbook or checkbook issued to the depositor.

Call DepositsIt is a type of bank guarantee on behalf of the depositor given at call.

In this case, Security Deposit Receipt (SDR) is issued by the bank at

the instructions of the depositor, confirming that amount of the SDR

is held by the bank, to be paid whenever called upon to do so by the

beneficiary named in the SDR.

4.4 ADVANCES DEPARTMENT

It is the loan function, which produces the major portion of

banks’ income, and as such it is one of the major areas of

professional bankers’ concerns and attention.

A bank generally deals in following areas;

Agricultural finance

Commercial finance

Industrial finance

Export finance

34

Import finance

In addition to the above-mentioned broad areas, there are

loans available to small size businessmen, construction

companies etc.

In UBL, advances department is responsible to deal with

following cases;

1. Handle all the cases of short and long term loans.

2. To process all the cases concerned.

3. To forward the cases for approval and consideration to the higher authorities.

4. To deal with the borrower directly.

5. To implement the disbursement of the loan.

6. To give feed back to higher authorities in advance.

UBL advances loans in the following manners:

I. By Cash CreditIn this form of lending, the bank lends money to the borrower against

a tangible security. The total amount of the loan, which is given, is

not paid in one installment. The borrower has to pay interest on the

amount borrowed. Cash credit is the favorite loan for large

commercial and industrial concerns, on account that the customers

need not to borrow at once the whole amount he is likely to require,

but can draw such amount as and when required.

II. By Discounting Bills of Exchange It is another method of advancing loans to borrowers. The holder of

bills is paid an amount equal to the face value of the bill after

deducting interest at the market rate for the period the bill has to

mature. Interest in this type of loan can be charged as running

finance and demand finance.

35

III. By Over Drafting

This facility is given to regular, reliable and well- established

customers. The bank charges interest on the extra money, which the

borrower takes.

When a customer requires temporary accommodation, he may

be allowed to overdraw his current account usually against collateral

security. From the customers point of view this agreement like cash

credit is advantageous, as he is required to pay interest on the amount

actually used by him.

4.5 FOREIGN EXCHANGE DEPARTMENT

In modern banking system, foreign exchange department

plays very crucial and important role from every aspect. It is parallel

banking with general banking with an additional function of import

and export business controlled by State Bank of Pakistan. Rules and

regulations are framed by state Bank of Pakistan in the form of

manuals. Foreign exchange department under SBP regulations also

carries out international banking of UBL. Foreign exchange is being

controlled by SBP. No transaction can be affected without

permission of SBP, under foreign exchange regulations Act 1947 and

notification issued there under. Exchange control department of State

Bank of Pakistan is responsible for day-to-day administration of

exchange control.

All the transactions shall be done at rate authorized by SBP.

For this purpose, US dollar has been fixed by SBP and the rates of

other currencies are calculated in accordance with the formula

approved by SBP and as published daily by the Foreign Exchange

Rate Committee in Karachi. Head office ensures that the branches

36

receive the rates published by Foreign Exchange Rate Committee on

the same day.

The foreign exchange department provides the following

services;

1. Foreign Currency Accounts

Foreign currency in UBL can be opened in 4 major currencies of the

world i.e. US dollar $, Japanese Yen, German Mark, DM and Pound

Sterling. Only authorized branches of UBL can deal in foreign

currency account.

Pakistani citizens and foreigners both can open foreign currency

account by introduction and following the procedure required for

general accounts with one exception for foreigners that they will

have to submit a copy of their passport. The account may be personal

or joint.

Amount deposited in foreign currency account must be in four

currencies, which were mentioned earlier. When the customer will

withdraw the money he will receive the amount in the same foreign

currency. Profit will also be in the same currency. There are two

types of foreign currency account;

a. Current account

b. Saving account

I. Current Account On current account, no profit is given to the account holder. This

account is exempted from zakat, income tax and wealth tax.

Worldwide remittances (inside and outside) facility is given to

customer. Cash travel checks, foreign exchange bearer certificate,

and coming for customer can be deposited in his account.

37

Similarly account holder can shift the amount or any part thereof to

foreign countries through exchange remittances service.

II. Saving Account On saving account, a handsome profit is paid to the account holder.

On saving account, profit is paid to the customer in the same

currency in which he had opened the account. This account is also

exempted from zakat, income tax and wealth tax etc.

Saving account can be opened with an amount of $ 100 equivalent in

other three currencies. The facility of inward and outward remittance

is also granted to the customer. Profit is paid on monthly product

basis.

2. Sale and Purchase of Foreign Currency UBL is an authorized dealer of State Bank of Pakistan. It can sell and

purchase foreign currency. UBL usually involves sale and purchase

of US dollars, Japanese yen, Pound Sterling, German Mark, Saudi

Riyal, and UAE Durham.

Daily exchange rate by SBP from ANZ Grind lays Bank Karachi is

sent to all the branches authorized in foreign exchange. Daily sale

and purchase of foreign currencies is done according to that rate

sheet issued by SBP on daily basis. Sale and purchase rates of

foreign currency are different.

The purchase of coins is avoided, only notes are purchased. Only

those foreign currencies are purchased for which resale to

customer is possible. And only those persons, who have

passport, can sell and purchase foreign currency to or from UBL.

Foreigners can also sell foreign currencies by showing their

passport.

38

There are 5 rates of foreign currencies:

1. For import

2. Cash purchase

3. Cash sale

4. Travel check purchases

5. Foreign currency

It is the policy of UBL to involve only in the sale of hard

currencies i.e. those, which are easily accepted. Head office of UBL

has given certain limits to each authorized branch about the custody

of foreign currency. If the amount exceeds this limit, the branch must

transfer the cash to feeding branch or SBP.

All the authorized branches of UBL must submit following

reports about foreign exchange business;

1. Report to general manager office

2. Monthly business report to SBP

3. Monthly report to head office

3. Remittances in Foreign ExchangeAs we know that the money of one country is not legal tender

in other countries. The monetary device, which has been evolved, for

all international payments is the foreign exchange from the exporter

and others who have it for sale and sell foreign currency to importers

and others who need it in their own countries. A transfer from a bank

account in the debtor’s country to the creditor’s country affects the

international payments.

Two branches of the same bank or of different banks involve

in foreign remittance. One is called remitting branch or bank and the

other is called receiving branch or bank. In foreign currency, SBP

39

has given general permission to authorized dealers in foreign

exchange including UBL to affect remittances for specific purposes

without referring it to (SBP) for approval i.e. remittance on account

of education subscription, books and periodical of technical nature.

Remittance can be done in following ways;

1. Telegraphic Transfer (TT)

2. Mail Transfer (MT)

3. Foreign Demand Draft (FD

40

CHAPTER – 5

BANKING EFFORTS

5.1 COMMERCIAL BANKING

If you have a small or medium-sized business, UBL can assist

you with the right mix of banking services that will help you manage

and grow your business. Our experts will facilitate you in the varied

financial situations that you come across. We will respond to your

needs promptly because we understand how many your customers,

your employees and you depend on us.

5.2 CONSUMER BANKING

You as an individual can gain and benefit the most through

UBL Consumer Banking. In UBL you get friendly, efficient and

attentive personalized banking services - a unique banking

relationship experienced by each UBL client. You can utilize the

following services

UBL Cash line

UBL Address

UBL Drive

PLS Term Deposits

PLS Savings Accounts

Uni-Saver Remittances

41

5.3 CORPORATE BANKING

Our mission is to serve all your corporate needs and ensure

your full satisfaction through product innovation, personalized

banking, and top notch service.

The CBG department of UBL defines corporate banking in

Pakistan. Amongst the local banks UBL CBG is the pioneer in

providing innovative solutions to its diversified and satisfied

customer base. UBL CBG is considered to be a major player in the

financial market of Pakistan.

The Corporate Banking Group focuses on attracting and

servicing large portfolio customers. Our effort is providing

exemplary customer service using the "Single Window" concept and

product superiority. The Relationship Management team managed by

highly qualified individuals from the industry has steadily expanded

our customer base and continues to enhance our cordial relations

with our esteemed clients.

Despite the sluggish economic growth in recent years, UBL

outperformed all the other local banks in the corporate banking

sector primarily due to CBG's emphasis on establishing and

enhancing relationships with foreign/local blue chip and middle

market customer’s thereby capturing significant market share.

UBL's appetite for large exposures coupled with dedicated

Structured Finance Unit, and an innovative team of professionals

having extensive experience of Corporate Banking gives it the right

platform to succeed in todays competitive and a demanding

environment.

42

The success of CBG has been established from the fact that

UBL received the 'No.1Euromoney 2000' Best Local Bank award

and recognized it to have out performed all other banks. In year

2000, UBL was also voted as the best Corporate Bank by the

customers of a major foreign bank in a survey. Aggressive marketing

combined with professionalism has led to an increase in UBL's

market share with top corporate customers and in some cases

replacing Foreign Banks.

FINANCIAL PRODUCTS

5.4 UNI CASH

Nowadays carrying cash while going out of your home is very

risky. Every body wants maximum security while keeping his money

in his pocket. People make use of TC and various credit cards for

this purpose. UBL provides such facility through UNI CASH. The

management of UNI CASH is carried out in the following way.

I. Personal Identification Number When a Uni-Cash card is issued to a customer, a unique number

known as Personal Identification Number (PIN) is also allotted to

him/her. This is 4 digits confidential number which when used in

conjunction with the Uni-Cash card enables the customer to avail the

cash point service. To keep it secret even from the bank staff, the

PIN is generated and printed in a special manner by the computer on

pre-sealed, tamper proof PIN millers. These PIN millers are designed

in such a way that the PIN is only visible after the envelope is

opened by the customer.

43

II. Card serial number The customer will notice that some numbers and alphabets are

embossed on his Uni-Cash card. The first line obtains UNICASH

CARD SERIAL NUMBER while the other line has customer’s

name, account number and card expiry Month/ Year.

III. Weekly withdrawal limits

The Uni-Cash card issued to customer carries a weekly withdrawal

limit, which applies to cash withdrawal, made from any of the cash

point. This limit is equal to initial amount deposited by him at the

time of applying for his card.

IV. Cash points For customer’s convenience, a number of cash points are available in

the country. These machines are at customer’s service round the

clock on all days of the year. Uni-Cash card can be used in these

machines. Besides cash withdrawal, cash points would provide the

following facilities;

Balance Inquiry Mini Statement

Pin Change

V. Card Captures Cash points will automatically capture card that have been duly

reported as lost or have been cancelled or have expired. Similarly if

one fails to key-in his correct PIN, in three repeated attempts, the

card will be captured.

VI. Loss of CardIn case, customer loses his UNI CASH card or the card is stolen, the

matter should invariably be brought to the notice of the bank

personnel.

44

5.5 UNI SONA

This product has been designed to attract more and more

savings. As inflation in Pakistan is at a very high rate, due to which

money has very limited value.

The features of Uni-Sona are the following;

The amount deposited in the bank becomes triple after seven

years.

If person withdraws his money after five years he will get

double amount as compared to its initial deposits.

There is also a facility for partial withdrawal from principle

amount. For example, if a person has deposited Rs.50, 000,000 in

January 1993 and he withdraws Rs.20, 000,000 in January 1995. In

1996 the person has Rs. 30,000,000. This amount will receive the

same interest rate and would be doubled (Rs. 60,000,000) in January

98 and triple (RS. 90,000,000) in January 2000.

5.6 UNIZAR

It is a special type of foreign currency account and can be

opened in two currencies i.e. US $ and Pound Sterling. Minimum

amount required for opening of this account is 750 pounds or $ 1000.

Profit is paid in the currency in which the account is opened. Rate of

return of 2.25% is paid to the depositor.

A special feature of this account is that withdrawal from the

deposits can be made anywhere in the world in the UBL branch.

45

5.7 UNISAVER

It is a special type of account designed for corporate savers.

This account can be opened with Rs.1 m up to Rs. 10 m. The

minimum profit rate is 4% while maximum limit is 8%. Profit is

paid on daily product basis. Any one can open this account.

46

CHAPTER – 6

FINANCIAL ANALYSIS

Financial analysis is performed in order to determine whether

the business organization is performing satisfactorily or not in

respect to other competitive organizations.

Financial analysis is the process of identifying the financial

strengths and weaknesses of the firm by properly establishing

relationships between the items of balance sheet and profit and loss

account. Financial analysis can be undertaken by management of the

firm or by parties’ outsides the firm viz. owners, creditors, investors

and others. The nature of the analysis depends on the purpose of the

analyst.

Trade creditors are interest in firm’s ability to meet their

claims over a very short period of time. Their analysis will,

therefore, confine to the evaluation of the firm’s liquidity position.

Suppliers of long term debt on the other hand are concerned

with the firm’s long term solvency and survival. They analyze the

firm’s profitability over time, its ability to generate cash to be able to

pay interest and repay principal and the relationship between various

sources of funds (capital structure relationship). Long term creditors

do analyze the historical financial statements but they place more

emphasis on the firm’s projected financial statements to make

analysis about its future solvency and profitability.

Investors, who have invested their money in the firm’s share,

are most concerned about the firm’s steady growth in earnings. As

such, they concentrate on the analysis of the firm’s present and

future profitability. They are also interested in the firm’s financial

47

structure to the extent it influences the firm’s earnings ability and

risk.

Management of the firm is interested in every aspect of the

financial analysis. It is their overall responsibility to see that the

resources of the firm are used most effectively and efficiently and

that the firm’s financial condition is sound.

UNITED BANK LIMITEDRECASTED BALANCE SHEET

AS AT DEC, 31, 2009

(Rupees in 000)Assets 2009 2008 2007Cash and balances with treasury banks 34,062,679 23,844,435 17,274,461Balances with other banks 12,729,207 17,699,334 11,366,434Lending to financial institutions 17,867,552 18,360,633 23,096,028Investments 63,026,944 54,953,728 56,516,760Advances Performing 201,152,095 139,699,440 92,513,736Non-performing 3,658,375 4,481,615 3,611,442Other assets 7,829,770 4,439,580 3,001,793Total current Assets 340,326,622 263,448,765 96,125,178Fixed assets 4,449,324 3,969,006 3,754,236Deferred tax asset-net 2,273,005 5,194,892 5,486,357Total Assets 347,048,951 272,612,663 216,621,247Liabilities Bills payables 4,159,964 3,811,284 2,975,910Borrowing from financial institutions 21,790,480 11,975,684 7,710,375Deposits and other accounts 289,226,299 230,256,627 185,071,502Subordinated loans 3,999,192 3,500,000 ---Liabilities against assets subject to finance lease

--- 288 39,995

Other liabilities 6,204,746 5,704,749 4,541,704Total liabilities 325,380,681 225,248,632 200,339,486Net Assets 21,668,270 17,364,031 16,281,761Owner’s EquityShare capital 5,180,000 5,180,000 5,180,000Reserves 6,225,461 5,915,928 4,678,317Inappropriate profit 7,250,813 3,274,439 1,384,490

18,756,274 14,370,367 11,242,807Surplus on revaluation of assets 2,911,996 2,993,664 5 ,038,954Total owner’s equity 21,668,270 17,364,031 16,281,761Total liabilities and owner’s equity 347,048951 272,612,663 216,621,247

Source: UBL Annual Report 2007, 2008, 2009

48

UNITED BANK LIMITEDRECASTED INCOME STATEMENT

FOR THE YEAR ENDED DEC, 31,2009(Rupees in 000)

2009 2008 2007Markup/return/interest earned 20,158,860 9,233,881 8,944,260Markup/return/interest expensed 6,045,848 1,732,760 1,888,349Net markup/interest income 14,112,912 7,501,121 7,055,911Provision against loans and advances-net 1,277,002 435,414 444,871Provision (reversal) for diminution in value of investment-net

112,666 (100,381) 104,285

Bed debts written off-directly 38,140 3,841 12,897 1,427,808 338,874 562,053

Net markup/return/interest income after provision

12,685,104 7,162,247 6,493,858

Net markup/interest incomeFee, commission and brokerage income 2,543,739 1,654,475 1,442,642Dividend income/ gain on sale of investments 583,982 1,102,510 2,057,314Income from dealing in foreign currencies 675,109 668,085 436,656Other income 1,210,202 1,072,750 607,500Total non-markup/return/interest income 5,013,032 4,497,826 4,544,112EBIT 17,698,138 11,660,073 11,037,970Non markup /interest Expense Administrative expenses 7,874,013 6,794,311 6,153,913Other provision /write offs/(reversals) 335,409 (34,422) 551,840Other charges 7,066 10,456 5,501Total non markup/interest expenses 8,216,488 6,770,345 6,711,254Extraordinary items ---- --- ---Profit before Taxation 4,889,728 4,326,716 4,889,728Taxes 498,748 283,083 193,050Net Profit 4,606,645 4,043,633 3,614,750

Source: UBL Annual Report 2007, 2008, 2009

49

6.1 RATIO ANALYSISRatio analysis is a powerful tool of financial analysis. A ratio

is defined as “the quotient of two mathematical expression” and as

“the relationship between two or more things”. In financial ratio

analysis a ratio is used as benchmark for evaluation the financial

position and performance of a firm.

STANDARD OF COMPARISONThe ratio analysis involves comparison for a useful

interpretation of financial statements. A single ratio is itself does not

indicate favorable or unfavorable condition. It should be compared

with some standard. Standard of comparison may consist of:

Past RatiosRatio calculated from the past financial statements of the

same firm.

Competitors RatiosRatios of some selected firms, especially the most progressive

and successful competitors at the same point in time.

Industry RatiosRatios of the industry to which the firm belongs.

Projected RatiosRatios developed using he projected, or Performa, financial

statements of the same firm.

Table No. 6.1 Financial Ratio’s at a glance 2007, 2008, and 2009

Years 2007 2008 2009

Gross profit margin 78.8% 81.23% 70%

Net Profit Margin 40.41% 43.79% 22.85%

Return on Assets 1.67% 1.47% 1.33%

Return on Equity 22.20% 23.29% 21.26%

Current ratio 0.48 1.17 1.05

50

Cash ratio 0.14 0.18 0.14

Debt to Equity Ratio 12.30 12.97 15.02

Total Debt to total Assets 0.92 0.83 0.94

Current Asset Turn Over Ratio 3.76 1.53 1.35

Taxation to Total Income 5.34 7.00 10.83

Assets Turnover Ratio 0.023 0.023 0.013

Fixed Asset Turnover Ratio 0.96 1.02 1.03

Interest Coverage Ratio 1.64 1.72 2.15

Interest Expense to Deposit 3.63 2.94 2.84

6.2 RATIO ANALYSIS DETAILED

I. Profitability RatiosThe objective of any firm is to increase the wealth of

shareholders. So profitability ratio is calculated in order to determine

how much increase or decrease has occurred in the wealth of

shareholders of a business.

II. Gross Profit MarginThis ratio tells us the profit of the firm related to sales after

deducting the cost of producing the goods or ini other words an

indication of the total margin available to cover operating expense

and yield a profit.

Formula: {Gross Profit / Net Sales} x 100

Gross Profit Margin (2007) = {7,055,911 / 8,944,260} x 100

Gross Profit Margin (2008) = {7,501,121 / 9,233,881} x 100

Gross Profit Margin (2009) = {14,112,912 / 20,158,860} x 100

51

Year 2007 2008 2009

Gross Profit Margin 78.8% 81.23% 70%

Graph 6.1 Gross Profit Margin

Years

The Gross Profit of the bank in 2007 was 78.8%, which

increased to 81.23% and then decreased to 70%. The gross

profit decreased in 2009 because of increase in cost of goods

sold.

52

III. Net Profit MarginThe net profit margin is a measure through which the fir’s

profitability is measured. It tells about the firm’s net income per

dollar of sales.

Formula: {Net Income / Net Sales} x 100

Net Profit margin (2007) = {3,614,750 / 8,944,260} x 100

Net Profit margin (2008} = {4,043,633 / 9,233,881} x 100

Net Profit margin (2009} = {4,606,645 / 20,158,860} x 100

Year 2007 2008 2009

Net Profit Margin 40.41% 43.79% 22.85%

Graph 6.2 Net Profit Margin

Years

The net profit ratio shows that net profit increased from 2007

to 2008.But decreased in 2009, which is partially because of

increase in expenses and cost of goods sold.

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IV. Return on AssetsIt is the ratio that explains that how efficiently the assets are

being utilized. The high return on assets means efficient utilization of

the assets.

Formula: {Net Income / Total Assets} x 100

Return on Assets (2007) = {3,614,750 / 216,621,247} x 100

Return on Assets (2008) = {4,043,633 / 272,612,663} x 100

Return on Assets (2009) = {4,606,645 / 347,048,951} x 100

P11 2007 2008 2009

Return on Assets 1.67% 1.47% 1.33%

Graph 6.3 Returns on Assets

YearsThe return on assets decreases gradually as can be seen from

the above table. It shows that the assets are not utilized efficiently.

This should be controlled in order to improve the bank financial

position and attract more deposits.

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V. Return on EquityThis ratio tells us the earning power on shareholders’ book

value investment and is frequently used in comparing two or more

firms in an industry. A high return on equity often reflects the firms’

acceptance of strong investment opportunities and effective expense

management.

Formula: {Net Income / Equity} x 100

Return on Equity (2007) = {3,614,750 / 16,281,761} x 100

Return on Equity (2008) = {4,043,633 / 17,364,031} x 100

Return on Equity (2009) = {4,606,645 / 21,668,270} x 100

Year 2007 2008 2009

Return on Equity 22.20% 23.29% 21.26%

Graph 6.4: Return on Equity

YearsThe return on equity has increased from 2007 to 2008 by

1.09%. But has decreased from 2008 to 2009 by -2.03% which

shows rise in liabilities, inefficient management. This situation

should be improved so as to bring something to equity holders.

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VI. Liquidity RatiosLiquidity ratios show that how efficient management is to

meet its current liabilities from it current assets.

i. Current RatioCurrent ratio indicates the extent to which the claims of the

short term creditors are covered by assets that are expected to be

converted into cash a period roughly corresponding to the maturity

of the liabilities.

Formula: Current Assets / Current Liabilities

Current Ratio (2007) = {96,125,178 / 200,339,486}

Current Ratio (2008) = {263,448,765 / 225,248,632}

Current Ratio (2009) = {340,326,622 / 325,380,681}

Years 2007 2008 2009

Current Ratio 0.48 1.17 1.05

Graph 6.5: Current Ratio

YearsThe current ratio shows increase from 2007 to 2008, which is

encouraging. But decreased in 2009. This is because of increase in

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liabilities. But still it shows that current assets are more than current

liabilities, which is sufficient to meet current liabilities.

ii. Cash RatioThis is a relationship between cash in hand and current

liabilities. It indicates the extent to which cash covers the claims of

short-term creditors in hand.

Formula: {Cash / Current Liabilities}

Cash Ratio (2007) = {28640895 / 200,339,486}

Cash Ratio (2008) = {41543769 / 225,248,632}

Cash Ratio (2009) = {46791886 / 325,380,681}

Year 2007 2008 2009

Cash Ratio 0.14 0.18 0.14

Graph 6.6: Cash Ratio

Years

From the cash ratio we see that this ratio has increased from

2007 to 2008. But decreased in 2009 by –0.04, which came to the

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2007 position which is not too big decrease. Overall cash position is

satisfactory.

VII. Leverage RatiosLeverage means using borrowed money to earn a return

greater than the cost of borrowing, increasing net income and the

return on common stockholders’ equity.

i. Debt to Equity Ratio

This is a ratio that shows the share of owners and outsiders in

the business. It explains the extent to which the bank is financed by

the owners and debtors.

Formula: {Total Debt / Owner’s Equity}Debt to Equity Ratio (2007) = {200,339,486 / 16,281,761}Debt to Equity Ratio (2008) = {225,248,632 / 17,364,031}Debt to Equity Ratio (2009 = {325,380,681 / 21,668,270}

Year 2007 2008 2009

Debt to Equity Ratio 12.30 12.97 15.02

Graph 6.7: Debt to Equity Ratio

Years

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The debt to equity ratio has increased continuously from 2007

and onward. But increase in 2009 is more than increase in 2008. This

shows that business has financed by debtors more than the owners.

And this ratio has risen in 2009. But anyhow the trend is improving.

ii. Total Debt to Total Assets RatioThis ratio highlights the relative importance of debt financing

to the firm by showing the percentage of the firm’s assets that is

supported by debt financing. The greater this ratio the greater will be

the protection for creditor.

Formula: {Total Debt / Total Assets}

Total Debt to Total Assets Ratio (2007 = {200,339,486 / 216,621,247}

Total Debt to Total Assets Ratio (2008 = {225,248,632 / 272,612,663}

Total Debt to Total Assets Ratio (2009) = {325,380,681 / 347,048,951}

Year 2007 2008 2009

Debt to Total Assets 0.92 0.83 0.94

Graph 6.8: Debt to Total Assets Ratio

Years

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The above ratio shows a satisfactory picture of the bank.

Although the ratio decreased in 2008 but it then increased in 2009.

This means that the bank is becoming safer for the investors. Which

will further lead to the increase in the per value share of the bank.

6.3 ACTIVITY RATIOS

Activity ratios also known as Efficiency or turnover ratios,

measure how effectively the firm is using its assets.

I. Current Asset Turnover Ratio

It shows the relationship between revenue and current assets,

a measure of the revenue productivity and utilization of current

assets.

Formula: {Net Revenue / Current Asset} x 100

Current Asset Turnover Ratio (2007) = {3,614,750 /

96,125,178} x 100

Current Asset Turnover Ratio (2008) = {4,043,633 /

263,448,765} x 100

Current Asset Turnover Ratio (2009) = {4,606,645 /

340,326,622} x 100

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Year 2007 2008 2009

Current Asset Turnover Ratio 3.76 1.53 1.35

Graph 6.9: Current Asset Turnover Ratio

YearsThe current asset turnover ratio is decreasing from 2007 to

2009. This tells us that the current assets are not utilized efficiently

because of management ineffectiveness.

II. Taxation to Total Income

This ratio shows the percentage of tax that is applied to total

net income.

Formula: {Tax / Total Income} x 100

Taxation to Total Income ratio (2007) = {193,050 / 3,614,750} x 100

Taxation to Total Income ratio (2008) = {283,083 / 4,043,633} x 100

Taxation to Total Income ratio (2009) = {498,748 / 4,606,645} x 100

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Year 2007 2008 2009

Taxation to Total Income Ratio 5.34 7.00 10.83

Graph 6.10: Taxation to Total Income Ratio

Years

This ratio shows continuous increase. Because the profit of

the bank is also increasing.

III. Assets Turnover RatioThe asset turnover ratio is the ratio that explains the

relationship between the Net sales and the total Assets. That how

much efficiently the assets are being turnover into sales.

Formula: {Net Revenue / total Assets}

Assets Turnover Ratio (2007) = {3,614,750 / 216,621,247}

Assets Turnover Ratio (2008) = {3,614,750 / 216,621,247}

Assets Turnover Ratio (2009) = {4,606,645 / 347,048,951}

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Year 2007 2008 2009

Assets Turnover Ratio 0.023 0.023 0.013

Graph 6.11: Assets Turnover Ratio

Years

The ratio indicates that the asset turnover remained the same

in both 2007 and 2008. But decreased in the year 2009. This means

that the bank does not efficiently utilize the assets in the year 2009.

IV. Fixed Assets Turnover RatioThis ratio explains the relationship between the fixed assets

and Net Revenues. That how efficiently the fixed Assets contribute

to the Net Revenues.

Formula: {Net Revenue / Total Fixed Assets}

Fixed Assets Turnover Ratio (2007) = {3,614,750 / 3754236}

Fixed Assets Turnover Ratio (2008) = {4043633 / 3969006}

Fixed Assets Turnover Ratio (2009) = {4,606,645 / 4449324}

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Year 2007 2008 2009

Fixed Assets Turnover Ratio 0.96 1.02 1.03

Graph 6.12: Fixed Assets Turnover Ratio

Years

The contribution of fixed asset to generating Revenue is

shown in the above graph. In the year 2007 the ratio is low. But

increased in the years 2008 and 2009, which is encouraging. Also

this ratio tells us that these fixed assets are utilized efficiently.

6.4 COVERAGE RATIOS

Coverage ratios are designed to relate the financial charges of

a firm to its ability to service, or cover, them. In other words this

ratio help us to determine that how much of the interest expenses are

covered out of the revenue generated.

I. Interest Coverage Ratio

This ratio serves as one measure o the firm’s ability to meet

its interest payments and thus avoids bankruptcy. In general the

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higher the ratio, the greater the likelihood that the company could

cover its interest payments without difficulty.

Formula: {Earning Before Interest and Taxes/Interest Expenses}

Interest Coverage Ratio (2007) = {11,037,970 / 6711254}

Interest Coverage Ratio (2008) = {11660073 / 6770345}

Interest Coverage Ratio (2009) = {17698138 / 8216488}

Years 2007 2008 2009

Interest Coverage Ratio 1.64 1.72 2.15

Graph 6.13: Interest Coverage Ratio

Years

The increase in the Ratio indicates that the bank has enough

profit to pay its interest expenses.

II. Interest Expense to Deposit

The ratio reflects the rate at which the bank has honored the

depositors.

Formula: {Interest Expense / Deposit} x 100

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Interest Expense to Deposit (2007) = {6711254 / 185071502} x 100

Interest Expense to Deposit (2008) = {6770345 / 230256627} x 100

Interest Expense to Deposit (2009) = {8216488 / 289226299} x 100

Year 2007 2008 2009

Interest Expense to Deposit 3.63 2.94 2.84

Graph 6.14: Interest Expense to Deposit Ratio

Years

The interest rats offered to the public are getting decreased.

This is not beneficial for the bank. But as the policy of the

government, the bank has to keep the interest rates as lower as

possible in order to encourage the investment.

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CHAPTER – 7

FINDINGS AND RECOMMENDATIONS

Recommendations are based on the previous sections of a

report and are suggestions that the analyst feels are required to be

implemented in order to improve further the standing and position of

the firm in the financial world. These are thus based on the findings

and shortcomings noted in an organization while working with it and

then writing on it. Opinions of various capable individuals are sought

who through their real life experiences and deep insight are better

able to judge whether the course of action adopted by the

organization is going to prove fruitful or does it require further

improvement in the form of changes in its strategies.

Following are the findings and recommendations for various

Departments that were felt are required while consulting the staff

members of UBL.

7.1 DEPOSITS DEPARTMENT

The comparative analyses reveal that UBL has the lowest

share of Deposits out of the total in the market. Since deposits are the

lifeblood of a bank, it should attract more customers and expand its

deposit base in the following manner

I. Simplification of ProceduresThe procedure of opening an account should be simplified.

The account opening form should be self-explanatory and include

translations in Urdu for those customers who are not well read, since

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the fact cannot be ignored that many people do not have a good

understanding of English.

II. No Duplication of ActivitiesOnce the account opening form is filled there should be no

reason to submit a written application for opening an account, since

it not only is a wasteful and time consuming exercise on the part of

the customer but also makes filing lengthy.

III. Incentives for DepositorsThose who deposit large amounts of money or are old

customers of the bank should be given free credit lines up to a certain

limit. Besides, financial advice should be provided to customers in

case there is a change in the market trend before they seek for it.

IV. Integrated Marketing ApproachAll the officers in Deposits Department should be involved in

marketing and not just opening accounts and maintaining their

records. This can be done through improving their personnel

relations’ skills and applying the Uni-Service concept of visiting the

potential customers at their offices and homes.

V. Performance AppraisalUBL should follow the performance evaluation policy strictly

and award those who bring in deposits and help it increase its market

share. Unfortunately, this has been stated in the bank’s policy but is

not being implemented.

7.2 REMITTANCES DEPARTMENT

The Remittances Department at the Branch is divided into

Inland Remittances and Foreign Remittances.

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Both these are dealt by separate officers and involve using

specific stationary and procedures. The following recommendations

are made for this very important Department of the bank

I. Organizing the DepartmentThe Department is spread over the entire bank with no

specific person or desk for the purpose. Usually drafts and

telegraphic transfers are made in the cash counter that results in

hassle for the other customers. A senior officer detached from the

other officers performing inland remittance transactions handles the

foreign remittances. It would be better for them to sit together so that

they can benefit from his experience and know how.

II. Centralized Money gram ServicesThe customers receiving funds from abroad have to wait quite

long in order to get their money as the branch sends the application

form through fax to the City Branch from where it is confirmed

whether the amount has been credited to the Branch or not. This

confirmation takes long at times and there is always a fear of the

bank losing its goodwill in case of lengthy delays. The service

should thus be decentralized and the Hub Branch having the

authority of directly confirming the amount.

7.3 CASH DEPARTMENT

The following recommendations are made for the Cash

Department.

I. Expansion of the Cash CounterThe Cash Department at the Branch needs special attention in

the sense that the cash counter is small and becomes crowded when

there are more than five to six customers to attend. Customers

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purchase drafts and other instruments from the very same counter

where utility bills are collected and cash is deposited and withdrawn.

Hence, if a new counter cannot be built due to certain limitations the

utility bills should be collected through a window so that the regular

customers do not face any problems.

II. Extended timings for Cash In order for the bank to progress and compete with the others

in the market, it should extend the time for accepting and

withdrawing cash. The customers face great hardship especially

when they come from far off places and find that the cash counter is

closed for the daily transactions.

7.4 BILLS AND CLEARING DEPARTMENT

The following suggestions are made for this Department

keeping in view the problems noted in it.

I. Career DevelopmentIt has been noted that the officers taking bills for clearing do

not involve themselves much with the other operations of the bank

and thus remain on the very same post and seat throughout their

banking career. This is against the modern day policies of

organizations giving their employees conducive, rewarding and

equal opportunities of prospering and growing with it. Thus, the

Human Resource Department at the Head Office should prepare a

plan that shows the future growth potential of the employees based

on their job performance and evaluation and make it known to all.

II. Job RotationThere should be job rotation of employees especially in this

department as it was felt that the employees here know quite less as

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compared to the others. This will enhance their capabilities and help

them break the monotony making them find their work more

interesting.

7.5 ADVANCES DEPARTMENT

There were certain drawbacks in the application and

processing for the loan requests that were observed at the branch.

The findings and the recommendations are as under

I. Proper DocumentationIf valid documents are not obtained before sanctioning the

loan limit, it becomes irrecoverable in case of default by the

borrower. It has been noted that at times the related officers oblige

the customer by letting him submit the documents later and

approving the limit by getting the Disbursement Authorization

Certificate from the Credit Committee. It proves to be very time and

resource consuming afterwards tracing the borrower to bring in the

documents. Therefore, correct and complete documents should be

attained before the amount is sanctioned and no leniency shown in

any case.

II. Computerized RecordAll the sanctioned cases should have record on the computer

as it is easy to access and does not involve the hassles of maintaining

and retrieving large and old files. For this purpose, training programs

should be organized for the Relationship Managers to enable them to

have a basic computer know how. Through this, they would also be

able to assess the financial position of the prospective borrower in

minutes by using related financial software.

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III. Verification of SecurityPhysical verification of the security tendered is a must rather

than to merely rely on the documents. It had been noted that where

the property to be hypothecated/ mortgaged lay in remote areas such

as the regular physical visits are avoided by the officers. This and the

above factors result in an increase in the non-performing loans of the

bank and as result UBL had more debts turned bad as compared to

the other banks. For this purpose, regular physical verification must

be conducted of securities pledged and hypothecated.

7.6 OTHER FINDINGS AND RECOMMENDATIONS

The following recommendations are for the bank as a whole

I. Development of Managerial LeadershipGood managerial skills make positive contribution towards

higher effective results. UBL should focus on the effective utilization

of its human resource by applying the modern style of management.

This can only be possible if political interferences are discouraged

especially when hiring and placing personnel and the recruitment

policies are changed to give preference to BBA students.

II. Tests for PromotionsA sizeable portion of the officers at UBL is promoted without

conducting any tests and interviews. This results in undeserving

people sitting on the managerial posts and steering the organization

away from its goals and objectives in the long run.

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III. Training for Credit ManagementSpecial trainings on credit management should be imparted to

the staff dealing in financing activities of the bank. This is very

important in light of current loan default scenario in the economy.

IV. Delegation of PowersDelegating powers to the Department in-charges up to the

greater possible extent will most certainly reduce the workload on

the managers and they would be able to perform well by taking quick

remedial actions where necessary. Besides, the spare time will be

spent dealing with matters of more important nature.

V. Research and Development DepartmentA Research and Development Department in UBL will help it

to adopt new procedures and modern techniques that will help the

bank to compete with the others. An R&DD should be maintained at

all the Hub Branches that would define the target market for the bank

in that particular area and through its findings suggest measures to

improve the performance of branches there.

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