Download - Internship Report Ubl

ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD

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INTERNSHIP REPORT

ON

UNITED BANK LIMITED

SPECIALIZATION:

BANKING & FINANCE

SUBMITTED TO:

CHAIRMAN,

DEPT. OF BUSINESS ADMINISTRATION

SUBMITTED BY:

ADNAN FAROOQ

ROLL # T-521199

REG # 06PMN0039

382 - RAVI BLOCK, ALLAMA IQBAL TOWN,

LAHORE.

TEL # 042-5417364 MOB # 0300-6720085

DEPARTMENT OF BUSINESS ADMINISTRATION

ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD.


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IN THE NAME OF

ALLAH

THE MOST BENIFICIENT AND MOST

MERCIFUL


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DEDICATED

To My Beloved Parents

For Having Firm Belief in My

Abilities & Whom Prayers Enabled Me

To

Accomplish This Milestone


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MESSAGE OF THE QUAID

MUHAMMAD ALI JINNAH

“We must work our destiny in our own way and present to the world an economic system

based on true Islamic concept of equality of manhood and social justice. We will thereby

be fulfilling our mission as Muslims and giving to humanity the message of peace which

alone can save it and secure the welfare, happiness and prosperity of mankind”.

(SPEECH AT THE OPENING CEREMONY OF STATE BANK OF PAKISTAN, KARACHI JULY 1,

1948).


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FINAL APPROVAL

This is to certify that we have read the report submitted by MR. ADNAN FAROOQ

Roll No. T-521199 and It is our judgment that this is of sufficient standard to warrant

its acceptance by ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD, for MBA (B&F)

degree.

REPORT EXAMINING COMMITTEE

SIGNATURES STAMP


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ACKNOWLEDGEMENT

All praise to ALMIGHTY ALLAH alone, the Omnipresent and the most Merciful and

compassionate. The words are bound, knowledge is limited and time is short to express

His dignity. It is one of infinite blessings of ALLAH that he bestowed me with the

potential and ability to contribution towards the deep oceans of knowledge already

existing. I pay hum-age to greatest personality of the universe; HOLY PROPHET

HAZARAT MUHAMMAD (PBUH) Who is forever torch bearer and spring of

guidance in every sphere of life. I am deeply indebted and also express my gratitude to

my respected teachers at ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD for

their support.

At the very outset, I am very thankful to Mr. ZULIFQAR AHMAD RANA (AVP UBL)

for providing me the opportunity to have an excellent learning experience during my

internship at REGIONAL CREDIT ADMINISTTRATION DEPARTMENT-

COMMERCIAL BANKING (RCAD-CB) UNITED BANK LIMITED, LAHORE. It is

my privilege and honors to express my deep gratitude and in calculating thanks to Mr.

Sohail Amjad Vice President & Head RCAD-CB UBL, Lahore . The person to whom I

would like to give my regards is the MIS OFFICER Mr. WASIM AHMAD of RCAD-

CB UBL, LAHORE who gave me very useful tips and information. I might not be able to

complete my internship without his cooperation and his kind behavior. I am thankful to

all of my teachers especially Mr. Muhammad Azeem and Mr. F. R. Tariq (N. K. Fact

College, Lahore).

I am thankful to all of my class fellows and friends whom cheerfulness and guidance is

an asset for me .I am especially thankful to the bank staff and particularly.

� Mr. Nabeel Anwar Senior Vice President & Head North

� Mr. Badar Munir Processing Officer

� Mr. Naeem Azam Documentation Officer

� Mr. Mohsin Hassan Documentation Officer

� Mr. Sohail Saeed Processing Officer

� Mr. Nadeem Saif Processing Officer


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EXECUTIVE SUMMARY

United Bank Limited (UBL) is the second largest bank of Pakistan with assets of over Rs.

550 billion and a solid track record of forty six years - in addition to the convenience of

over 1400 branches serving its customers throughout the country and also at several

overseas locations.

In this 12 weeks (3 Months) internship program I have worked in Regional Credit

Administration Departments (MIS section, Processing section, Documentation section) of

this high class bank of Pakistan where I have learned about banking from experienced

managers running these sections.

This report contains the information and learning about UBL that I learnt during the 12

weeks internship period in United Bank limited. This report deals with History & Nature

(Business) of the UBL, its Products and Services, information about main offices and

also the review of various departments of the Bank. This report also contains Finance &

Accounting operations of the UBL, role of Financial Manager (Branch Manager), Use of

Electronic Data in core decision making and the Sources, Generation and Allocation of

funds used in the banking operations of the UBL.

Recognizing the need of Islamic banking, UBL also provided number of Islamic banking

services like Islamic Deposit Schemes and Islamic Fund Based Facilities.

At the end of this report, on basis of my observation during internship, financial analysis

and SWOT analysis of UBL is provided. Suggestions are also recommended as per

learning from analysis. This report will provide a better and brief learning about United

Bank Limited.


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OBJECTIVES

This internship offers me an incredible opportunity to gain real-world experience in the

high-stakes finance industry. Most importantly this internship allows me to distinguish

myself from my classmates, as I gain a competitive advantage by connecting my

coursework with industry experience.

Following are important objectives of studying the organization:

� Categorize the different products and services offered by the financial institution

and note how to most efficiently match those products and services with the needs

of customers.

� Analyze the company’s financial condition through the financial statements

(compute financial ratios and compare to the industry averages).

� To describe the impact of financial decisions on the health and functioning of the

overall organization.

� To learn the various steps and procedures of credit risk management &

administration.

� Finding out the weaknesses, short comings, strengths and beauties of the credit

administration department.


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TABLE OF CONTENTS

1. OVERVIEW OF THE ORGANIZATION 01

1.1 BRIEF HISTORY OF THE ORGANIZATION 01

1.1.1 ABOUT UBL 01

1.1.2 FORMULATION 01

1.1.3 NATIONALIZATION 01

1.1.4 PRIVATIZATION OF UBL 02

1.1.5 UBL TODAY 02

1.2 NATURE OF THE ORGANIZATION 04

1.2.1 VISION STATEMENT 05

1.2.2 MISSION STATEMENT 05

1.3 BUSINESS VOLUME 06

1.3.1 REVENUE 06

1.3.2 DEPOSITS 06

1.3.3 ADVANCES 07

1.3.4 COMPUTATION OF ADVANCES 07

1.4 NUMBER OF EMPLOYEES 08

1.4.1 BOARD OF DIRECTORS 08

1.4.2 STAFF STRENGTH 08

1.4.3 KEY MANAGEMENT 09

1.4.4 MANAGEMENT HIERARCHY 09

1.5 PRODUCT LINES 10

1.5.1 DEPOSIT PRODUCTS 10

1.5.2 LOANS & CARDS 12

1.5.3 AGRICULTURAL PRODUCTS 15

1.5.3.1.1 FARM LOANS 15

1.5.3.1.2 NON FARM LOANS 16

1.5.4 SMALL BUSINESS 17

1.5.5 NRP SERVICES 18

1.5.6 OTHER SERVICES 19


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2. ORGANIZATIONAL STRUCTURE 22

2.1 MAIN OFFICES 22

2.1.1 HEAD OFFICE 22

2.1.2 BRANCHES 23

2.1.3 DOMESTIC NETWORK 23

2.1.4 PROVISIONAL HEADQUARTERS 23

2.1.5 BRANCH HIERARCHY 24

2.1.6 OVERSEAS NETWORK 25

2.2 DEPARTMENTS OF THE UBL 26

3. STRUCTURE AND FUNCTIONS OF THE ACCOUNTS/ FINANCE AND AUDIT

DEPARTMENT 34

3.1 ORGANIZATIONAL CHART (FINANCE DEPARTMENT) 34

3.2 MY LEARNING AS AN INTERNEE 35

3.3 FINANCE AND ACCOUNTING OPERATIONS 35

3.4 THE ROLE OF FINANCIAL MANAGER 35

3.4.1 ACCOUNTS MANAGEMENT 37

3.4.2 CASH MANAGEMENT 38

3.4.3 CREDIT MANAGEMENT 38

3.5 USE OF ELECTRONIC DATA IN DECISION MAKING 41

3.6 SOURCES OF FUNDS 47

3.7 GENERATION OF FUNDS 47

3.8 ALLOCATION OF FUNDS 49

4. CRITICAL ANALYSIS OF THE THEORETICAL CONCEPTS 57

4.1 FINANCIAL ANALYSIS 57

4.1.1 RATIO ANALYSIS (ABBREVIATIONS USED IN CALCULATIONS 59

4.1.2 CALCULATION OF RATIOS 60

4.1.3 GRAPHICAL REPRESENTATION OF RATIOS 62

4.1.4 EXPLANATION OF FINANCIAL RATIOS 65

4.1.5 HORIZONTAL ANALYSIS 68


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4.1.5.1.1 BALANCE SHEET 68

4.1.5.1.2 PROFIT & LOSS ACCOUNT 73

4.1.6 VERTICAL ANALYSIS 77

4.1.6.1.1 BALANCE SHEET 77

4.1.6.1.2 PROFIT & LOSS ACCOUNT 80

4.2 ORGANIZATIONAL ANALYSIS 82

4.3 FUTURE PROSPECTS OF THE ORGANIZATION 83

5. SHORT – FALLS/WEAKNESSES OF THE ORGANIZATION 84

6. CONCLUSION 85

7. RECOMMENDATIONS 86

8. REFERENCES 88

9. ANNEXES 89


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1. OVERVIEW OF THE ORGANIZATION

1.1. BRIEF HISTORY OF THE ORGANIZATION:

1.1.1. ABOUT UBL:

The history of UBL can be divided into four main Phases:

� Formulation

� Nationalization

� Privatization

� UBL Today

1.1.2. FORMULATION:

In June 1957, Mr. Agha Hassan Abidi decided to open a Bank different from others, to

provide modern facilities to trade and industry and to promote thrift and habit of saving

amount common thereby stimulating the economy as a whole. Necessary formalities

completed for obtaining registration certificate from State Bank of Pakistan to perform

business activities. After passing through all these formalities on 7th November, 1959

United Bank Ltd came into existence as a Schedule bank.

The Head office of the Bank was established in the New Jubilee Insurance House, 1.1

Chundrigar Road Karachi. It was registered as a joint stock company. The bank was

incorporated with an Authorized Capital of Rs 20,000,000 and issued and subscribed

and paid up capital of RS 10, 00,000. Saigol family owned it and Agha Hassan Abedi

was its first managing Director. It had posted a profit of 0.7 million in its first year of

operation with just eight branches at Karachi.

1.1.3. NATIONALIZATION:

As a policy of nationalization fourteen commercial banks was merged into five big

banks. So consequently on 21st December 1974 Commerce Bank and Union bank was


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merged with the UBL. Mr.Mushtaq Ahmed khan Yousafi took over the charge of UBL.

Now, there are six directors, a secretary and a president.

1.1.4. PRIVATIZATION OF UBL:

UBL was the largest privatization attempted by the government of Pakistan, launched in

June 2001, with 21 interested parties. It was impacted by the adverse developments of

the September 11, 2001 and was finally concluded in October 2002, which left stage

only three bidders. The consortium comprising Bestway Group (BG), out of the U.K.

and Abu Dhabi Group (ADG) from the U.A.E. were finally the winners at a record

price.

Sale proceed was Rs 12350 million. This signaled the strong confidence reposed by

these investor groups, in the improved governance of the country, the economic

potential, the banking opportunity and the existing management of the bank.

1.1.5. UBL TODAY:

Today the bank has taken progressive steps. The United Bank Limited (UBL)

management has launched its new corporate identity and changed its 44 year-old-logo

following its privatization. UBL has started the Online Banking & Click n Remit

services.

CHAIRMAN:

� His Highness Shaikh Nahayan Mabarak Al Nahayan.

DEPUTY CHAIRMAN:

� Sir Mohammed Anwar Pervez OBE.

PRESIDENT & CEO:

� Mr. Atif R. Bokhari.


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BRANCHES:

� 1079 Domestic, 17 Overseas Branches.

REPRESENTATIVE OFFICES:

� Tehran

� Kazakhstan

� China

SUBSIDIARY:

� United Bank AG Zurich, Switzerland.

� United National Bank Limited, UK (Joint venture with NBP).

� UBL Fund Managers Limited.

ASSOCIATED COMPANIES:

� Oman United Exchange Company, Muscat.

� UBL Insurers Limited.

OFFSHORE BANKING UNIT:

� Export Processing Zone, EPZ Branch, Karachi, Pakistan.

HEAD OFFICE:

� State Life Insurance Corp. Building #1,

I.I. Chundrigar Road, Karachi, Pakistan

P.O. Box No.: 4306

Phone: (92-21) 111-825-111

Gram: "UNITED"

Fax: (92-21) 2413492.


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1.2. NATURE OF THE ORGANIZATION

UBL is a Banking Company, which is engaged in Commercial & Retail Banking and

related services domestically and overseas. UBL was set up in 1959 by. Agha Hasan

Abedi and is today one of Pakistan's major banks in terms of deposits and advances.

The Group's principal activities are to provide commercial banking and other financial

services. The Group offers personal banking, cash management, retail loans and other

financial services. These services include deposits, savings/current bank account, vehicle

loans, personal loans, retail trade finance, global banking, lending to priority sector and

small scale sector, foreign exchange and export finance, corporate loans and equipment

loans.

In 1971 the Government of Pakistan nationalized it. In 2002, the Government of Pakistan

sold it in an open auction to a consortium of Abu Dhabi Group and Bestway Group.

Since its privatization the bank has been successfully turned around and remains a robust

and strong performer in all major segments of its operations.

In 2002 it merged its operations in the UK with those belonging to National Bank of

Pakistan to form United National Bank Limited, of which it owns 55%, with National

Bank of Pakistan owning the remainder.

The Bank is making every effort to meet the up-coming challenges through strategic

planning and making the best use of the resources at its command. A professional team

was appointed in mid 1997 to restructure the bank and to commence rightsizing. The

management is also in the process of rationalizing the branch network and identifying

and recovering its doubtful and classified portfolio. It has planned to institute major

improvements in customer services and internal systems to improve efficiency. It also

intends to launch innovative products. The bank is increasing resource mobilization

through regular deposit campaigns and accelerating the process of recovery of

outstanding advances and non-performing assets.


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1.2.1. VISION STATEMENT

“To be a world class bank dedicated to excellence, and to surpass the highest

expectations of our customers and all other stakeholders”.

1.2.2. MISSION STATEMENT

� Set the highest industry standard for quality across all areas of operation, on a

sustained basis;

� Optimize people, processes and technology to deliver the best possible financial

solutions to our customers;

� Become the most sought after investment;

� Be recognized as the employer of choice.


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1.3. BUSINESS VOLUME

1.3.1. REVENUE:

Particulars 2007 2006 2005 2004 2003

-----------------------------(Rupees in ‘000)------------------------------

Mark-up / return / interest earned 41,045,543 32,991,603 20,158,860 9,233,881 8,944,260

Fee, commission and brokerage

income 5,165,066 4,435,465 2,543,739 1,654,475 1,442,642

Dividend income / gain on sale of

investments 548,782 837,338 583,982 1,102,510 2,057,314

Income from dealing in foreign

currencies 827,328 659,726 675,109 668,085 436,656

Gain on sale of securities 849,367 280,864 382,419 947,945 1,976,999

Other income 1,617,563 738,330 1,210,202 1,072,756 607,500

Total Revenue 50,053,649 39,943,326 25,554,311 14,679,652 15,465,371

1.3.2. DEPOSITS:

2007 2006 2005 2004 2003

-----------------------------(Rupees in ‘000)------------------------------

Customers

Fixed deposits 127,317,589 114,927,897 79,841,687 42,971,478 35,945,097

Saving deposits 153,001,867 121,878,162 122,662,484 118,243,902 102,372,765

Sundry deposits 4,645,873 4,942,064 4,148,275 3,161,327 2,728,107

Margin deposits 2,746,824 2,698,999 2,214,877 1,218,963 1,212,276

Current accounts –

remunerative 5,641,419 1,908,055 1,886,548 393,760 565,433

Current accounts – non-

remunerative 108,116,175 88,662,089 78,324,614 64,150,773 41,253,005

Total Customers Deposits 401,469,747 335,017,266 289,078,485 230,140,203 184,076,683

Financial Institutions

Remunerative deposits 143,603 35,539 - - 8,881

Non-remunerative deposits 24,466 25,068 147,814 116,424 985,938

Total Financial Institutions

Deposits 168,069 60,607 147,814 116,424 994,819

Total Deposits 401,637,816 335,077,873 289,226,299 230,256,627 185,071,502


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1.3.3. ADVANCES:

2007 2006 2005 2004 2003

-----------------------------(Rupees in ‘000)------------------------------

Performing 293,373,007 243,237,819 201,152,095 139,669,440 92,513,736

Non-performing 5,981,729 4,072,074 3,658,375 4,481,615 3,611,442

Total Advances 299,354,736 247,309,893 204,810,470 144,151,055 96,125,178

1.3.4. COMPUTATIONS OF ADVANCES:

Performing Non-performing

2007 2006 2007 2006

-----------------------------(Rupees in ‘000)------------------------------

Loans, cash credits, running

finance etc.

In Pakistan 222,660,938 200,080,279 17,759,670 9,273,198

Outside Pakistan 60,310,465 33,369,281 3,011,935 4,771,131

282,971,403 233,449,560 20,771,605 14,044,329

Bills discounted and

purchased (excluding

government treasury bills)

Payable in Pakistan 5,301,652 5,661,421 745,115 876,300

Payable outside Pakistan 3,820,841 4,080,845 495,691 1,334,780

9,122,493 9,742,266 1,240,806 2,211,080

292,093,896 243,191,826 22,012,411 16,255,409

Financing in respect of

continuous funding system

(CFS)

2,631,139 1,462,242 - -

Advances - gross 294,725,035 244,654,068 22,012,411 16,255,409

Provision against advances

- Specific - - (16,030,682) (12,183,335)

- General (1,352,028) (1,416,249) - -

(1,352,028) (1,416,249) (16,030,682) (12,183,335)

Advances – Net Provision 293,373,007 243,237,819 5,981,729 4,072,074


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1.4. NUMBER OF EMPLOYEES

1.4.1. BOARD OF DIRECTORS:

Name Designation

His Highness Shaikh Nahayan Mabarak Al Nahayan Chairman

Sir Mohammed Anwar Pervez, OBE, HPK Deputy Chairman

Mr. Atif R. Bokhari President & CEO

Mr. Omar Ziad Jaafar Al Askari Director

Mr. Zameer Mohammed Choudrey Director

Dr. Ashfaque Hasan Khan Director

Mr. Muhammad Sami Saeed Director

Mr. Aqeel Ahmed Nasir Company Secretary & Chief Legal

Mr. Aameer Karachiwalla SEVP/Group Chief Financial Officer

As at December 31, 2006, the organization had a total staff strength of 15,369 (FY05:

13,479) employees, of which 9,738 were the bank’s own staff, while the remaining were

out sourced resources. Turnover for the year was about 10%, while approximately 1,300

new employees had been hired during the year.

1.4.2. STAFF STRENGTH:

STAFF STRENGTH 2007 2006

Permanent 9,373 9,734

Contractual basis 9 4

Bank's own staff strength at the end of the year 9,382 9,738

Outsourced 5,522 5,631

Total number of employees at the end of the

year 14,904 15,369


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1.4.3. KEY MANAGEMENT:

Name Designation

M. A. Mannan Group Executive Consumer & Commercial Bank

Risha Mohyeddin Group Executive Treasury & Capital Markets

Baqar Muzaffar Group Head Information Technology

Nauman Hussain Group Head Operations

Ayaz H. Shamsi Group Executive Human Resources

Aameer Karachiwalla Group CFO

Muhammad Ejazuddin Group Audit & Inspection Head

Ali Sameer Group Executive Risk & Credit Policy

Mohammad Asghar Group Commercial Bank Head

Saeed Iqbal Group Head Investment Bank

Ahmed Hafeez Group Head Business Development & Strategic Initiatives

Hasan Raza Group Head Corporate Banking and Cash Management

Najeeb Agrawalla Group Head Marketing Retail Bank

Wajahat Husain Head of Middle East

1.4.4. MANAGEMENT HIERARCHY:

� President

� Board of directors

� Members executive board

� Regional chiefs

� Zonal chiefs

� Branch managers


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1.5. PRODUCT LINES

1.5.1. DEPOSIT PRODUCTS:

UBL has taken progressive steps and has introduced innovative products and services to

provide you a variety of banking and financing services including Current and BBA

Accounts.

UBL UNIFLEX ACCOUNT:

UBL has introduced a new checking account ideal for small investors, traders,

businessmen and customers from middle income group. They can now afford an amazing

rate of return plus value added benefits only available from the UBL UniFlex PLS

Savings Account.

UBL UNISAVER ACCOUNT:

UBL UniSaver Account is an innovative way of serving your banking needs. Be it trade,

business or personal finance, the UBL UniSaver allows you maximum flexibility, yet

gives you optimum returns.

� Innovative and flexible checking account.

� Attractive rates of return.

� Profit is calculated on monthly average balance.

� Profit payment is on six monthly basis.

� Higher returns on higher balances.

UBL PROFIT COD:

Customer can earn a higher income on their surplus cash by investing it in UBL Profit

Certificate of Deposit. UBL Profit helps them earn extra income with their hard earned

money, while providing absolute trust and security. Two Types of Profit Payment

Options:


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� Profit Payment at Maturity.

� Monthly Profit Payment.

PLS REGULAR TERM DEPOSITS RECEIPTS:

If customer wish to make a secured long term investment, UBL’s Term Deposit Receipt

is the smart choice. UBL Term Deposit Receipts provides an attractive rate of return. The

profit is credited to the customer account every six months. Customer has the flexibility

to choose from a wide range of tenors. Customer can avail the Rollover or Renewed

option at any time before encashment. Customer can get TDR en-cashed at any time

before maturity period.

FOREIGN CURRENCY SAVINGS & FOREIGN CURRENCY TERM DEPOSITS RECEIPTS:

United Bank offers the best rates of return on Foreign Currency Deposits in the market.

Accounts can be opened in US Dollar, Pound Sterling, Euro, and Japanese Yen at

designated branches. All Pakistani nationals residing in Pakistan and outside Pakistan can

also open Foreign Currency Accounts. Resident Firms and companies including

Investment Banks can open Accounts.

Term deposits in foreign currency are offered for the following periods of maturity with

variable rates of return:

� Three Months.

� Six Months.

� Twelve Months.

There are no cash handling (Cash Deposit & Cash Withdrawals) charges from the

customers. Zakat is exempted on these TDR’s. Flexible options of rollover or renew the

TDR at the time of encashment. Special Rates available from for USD 500,000 and above

or equivalent.


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UBL E-TRANSACTION ACCOUNT:

When it comes to electronic financial services www.ubl.com.pk is Pakistan’s favorite

Internet destination and why not! With years of experience in innovation United Bank

offers a wide spectrum of world-class of electronic services and banking products for

trailblazers like you.

Save up to Rs. 2400/- with your eTransaction Package which includes:

� A branch Account with all features of a current account (including checkbook,

Visa ATM/Debit Card, etc.).

� Free Premium Internet Banking Access -- Save up to Rs. 1200/year in

subscription fees.

1.5.2. LOANS & CARDS

UBL MONEY:

UBL Money, the Personal Installment Loan from UBL provides you with power, control,

convenience and the flexibility to manage your financial requirements and realize your

dreams.

UBL Money is a fixed installment loan. It gives you access to funds starting from Rs.

50,000/- up to a maximum of Rs. 500,000/- without any collateral. UBL Money provides

you the flexibility to manage your monthly installments according to your income stream.

You can select any tenor from 1 to 5 years in a multiple of 12 months.

UBL BUSINESSLINE:

UBL Businessline is a running Finance facility that not only provides funds for growth

but also enables you to capitalize on profitable opportunities.

“It is a ‘Credit Line/ OD Facility’ against Residential Property. It is an evergreen credit

line that the customer can use for his/her business expansion”.


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UBL CASHLINE:

UBL Cashline is a flexible loan that provides you cash up to Rs.500, 000 without any

security requirements. It empowers you to take control of your finances. UBL Cashline is

aimed to make your life easier. Whether you are a salaried individual or a businessman.

Cashline offers you:

You can avail this facility if you are:

� A salaried person of 21 to 60 years, and your monthly net salary is Rs. 15,000 or

more; OR

� A self employed business person/professional between the ages of 21 to 65 years,

and your monthly net take home income is Rs. 35,000.

UBL DRIVE:

UBL Drive allows you to drive away in your own car by making a down payment of just

15% and to top that with low monthly installments. With UBL Drive you can buy your

favorite used car (up to 5 years old) at the most affordable rates. UBL Drive is not just a

car loan; it’s a financing facility that gives you Cash on your car, you can get up to 75%

of your car value.

UBL ADDRESS:

UBL Address empowers you to become the proud owner of a home by offering a variety

of product and pricing options that are flexible yet affordable. So choose the best product

option and pricing to suit your needs. All product options are amortized and range over a

tenor of 3 - 20 years.

Eligibility Criteria:

� Minimum monthly income: Rs.15, 000.

� Age: 23 to 65 years.

� Resident Pakistani.


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� Self-employed businessman (SEB)/professional (SEP) or salaried individual.

� Minimum loan size: Rs. 500,000.

Markup Rates:

Segments Pricing

Salaried KIBOR + 3.5% = Applicable Markup Rate

SEB/SEP KIBOR + 4.5% = Applicable Markup Rate

UBL PAYPLUS:

If you are a permanent employee of a company (Government, Semi-Government, MNC

or Local Corporate Entity/Private/Public Limited), which disburses salary through UBL,

then UBL PayPlus (loan against salary) is the right product for you. Through UBL

PayPlus, you can now easily avail a loan based on your salary level.

Eligibility Criteria:

� Must be Permanent Employee of company.

� Maximum Loan Amount of up to 15 gross salaries or PKR 500,000.00 (which

ever is less).

� Installment amount must not exceed 33% of Net Take Home Salary (NTHS).

� Loan amount not to exceed 90% of already accrued End Service Benefits (ESB).

� Repayment through 12, 24, 36, 48 or 60 monthly installments.

� Maximum age should be 55 years on the date of disbursement.

UBL CRDIT CARD:

UBL Credit Card provides the following facilities:

� To share the value, excitement and benefits of UBL Credit Card with loved ones,

UBL Credit Card offers up to 4 free supplementary cards.

� Customers can now withdraw cash through their UBL Credit Card’s instant cash

advance facility from any designated UBL Card Payment Branches nationwide


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and more than 780,000 ATMs and financial institutions worldwide displaying

VISA/PLUS logo.

� Each time UBL Card members use their UBL Credit Card to purchase airline,

train or bus tickets, they are automatically covered against any sort of accident

that might befall them while traveling. The coverage amounts are:

1. Classic Card: Up to Rs. 3.5 Million

2. Gold Card: Up to Rs. 7 Million

1.5.3. AGRICULTURAL PRODUCTS

1.5.3.1.1. FARM LOANS

PRODUCTION LOAN:

Financing is available for Major and Minor crops across Pakistan. Main purpose of

financing is to facilitate farmers to purchase Agri Inputs such as Seeds, Fertilizers,

Pesticides, Sprayers, hired labor etc.

NIACF (REVOLVING CREDIT SCHEME):

� Loan Tenure 3 years.

� Documentation once for 3 years.

� Cleanup once a year.

� Option for the farmer to use limit as per requirement.

� Markup is charged on amount used or withdrawn.

� Minimum Amount PKR 30,000.

� Maximum Amount as per requirement of the farmer.


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NIADF (DEMAND FINANCE PRODUCTION):

� Loan Tenure 3 months to 1 year.

� 18 months for Sugar cane only.

� Lump sum disbursement of the limit for a specified period.

� Repayment of loan in bullet payment on maturity (Principal and markup).


DEVELOPMENT LOAN:

LAND DEVELOPMENT, EQUIPMENTS AND MACHINERY:

Financing for Land Improvement, Water course improvement, Tube wells, Lift pumps,

Deep turbine pumps, Cotton pickers, Godown, Cold Storage, Harvester, Thresher, etc

TRACTOR & VEHICLE FINANCE:

To purchase Tractors, Delivery Vans, Mini Trucks, Motor Cycle and other vehicles used

for marketing Agri Products. Loan Tenure: 1 to 3 years for Motor Cycle, 1 to 7 years for

Tractor, and 1 to 5 years for other 4 wheel vehicles. Other features are:

1.5.3.1.2. NON FARM LOANS

LIVESTOCK FINANCING:

Dairy Farming, Meat Farming, Fattening of Animals, Rearing of Animals, Construction

of Sheds, Milk storage tanks, acquire and establish modern and efficient livestock

facilities.

POULTRY FINANCING:

Poultry Farm structure and equipments, Hatchery farm structure and equipments, Feed

Mills, Purchase of Chicks, Feed, Medicines, Storage tanks, Cold storage, Construction of

shed, etc.


28

� Loan Tenure 1 to 5 years.

� Monthly / Quarterly repayment mode for all loans.


� Maximum Amount as per requirement.

FISHERIES FINANCING:

Financing available on Fish seed, Fish feed, Manuring, Construction of pond, Curing and

Dying by fishermen, etc.

1.5.4. SMALL BUSINESS

SMALL BUSINESS SCHEME:

Under the Small Business Scheme, UBL is providing loans on easy terms to those who

wish to set up their own small-scale business. This scheme is aimed at spreading

prosperity in the country by reducing unemployment.

As more and more people start their own industrial units, the country will move steadily

towards economic self-reliance.

1.5.5. NRP SERVICES

UBL has taken progressive steps and has introduced innovative products and services to

provide customers a variety of banking and financing services.

UBL CLICK N REMIT:

United Bank Ltd. is pleased to offer you access to a Reliable, Fast, Secure, Convenient

and in-expensive way of remitting money to anyone in Pakistan. The entire transaction is

completed online and with just a few clicks of a mouse, your money is on its way to the

recipient of your choice. There is no need to visit a bank to use this service. Remitting

money is just a click away through UBL Click N Remit.


29

TEZRAFTAAR:

Free Doorstep Remittances With-in the country or from abroad, UBL offers the most

efficient and price competitive service. With their large network of branches, they are

poised to offer customer service almost at customer door step.

UBL's new remittance service, TezRaftaar offers all overseas Pakistanis the fastest and

the most convenient delivery of their money to their beneficiaries in Pakistan. Best of all,

TezRaftaar is completely cost free and is available at all UBL branches along the Bank's

Network in the Middle East, UK and US.

UBL CLICK N BANK:

Click N Bank eNRP Account - A simple & convenient way to open, fund and operate

account in Pakistan. It’s completely online. Some features of this service are:

� Complete online registration.

� PKR Accounts operable nationwide.

� Primary and supplementary ATM cards.

� Check book (Order online).

� UBL net banking.

UBL ORION:

Orion is the “First Complete Mobile Payments Solution” ever to be launched in the

country. The UBL Orion provides the following services:

� Buy prepaid cards.

� Share & send money.

� Send flower & cakes.

� View current bills.

� Pay bills etc.


30

NRP DIRECT:

United Bank brings to you a simple & convenient way to open, fund & operate a bank

account in Pakistan. NRP Direct is the first & only deposit account ever to be launched

for Non-resident Pakistanis. Now feel at home with your NRP Direct account!

1.5.6. OTHER SERVICES

UBL E-STATEMENT:

UBL has launched the UBL e-statement facility which makes it easier for customers to

get their statement of accounts and automated transactional debit/ credit alerts right into

their inbox. It is available for all Rupee and Foreign Currency Account holders. UBL e-

statement facility is:

� Absolutely free of cost.

� Accessible when you need it.

� Security.

� Automated transactional debit/ credit alerts.

� Easy to read format.

UBL WALLET:

UBL offers ATM and Debit Card facility to all account holders at all UBL branches

anywhere in Pakistan, regardless of whether their branch is online or offline.

UBL Wallet VISA ATM & Debit Card has the entire convenience and security account

holder’s desire and the quality they deserve. This Wallet holds all the cash in customer’s

bank account. UBL Wallet VISA also gives the facility of having up to 9 supplementary

cards issued against one primary card. All supplementary cardholders will be able to

conduct ATM/Debit transactions within the limits of the primary card account.

UBL already has its own network of 336 ATMs in 83 cities, which continues to expand

by the day. Moreover, UBL Wallet is now part of the 1 Link and VISA networks. These


31

allow account holders to use their UBL Wallet VISA across Pakistan at more than 925

ATMs displaying the 1 Link logos and at more than 1 Million ATMs in 150 countries. It

is also acceptable on the MNET network of ATMs in Pakistan. UBL Wallet VISA Card

will also be acceptable on all local VISA certified machines displaying the VISA Plus

sign.

Annual Fee (Rs.) Daily Limits (Rs.)

Card

Type Primary Supplementary

ATM

Withdrawal

Debit

Card

Funds

Transfer

(From

UBL

to UBL)

Funds

Transfer

(From

UBL to

other

banks)

Gold 500 250 40,000 100,000 250 40,000

Silver 300 150 20,000 50,000 230,000 250,000

UBL “HAMRAH”:

UBL has always been at the forefront in identifying and meeting the financial needs of its

valued customers. UBL was the pioneer in introducing Rupee Travellers Cheque facility

in Pakistan, as early as 1971. In continuation of the same tradition, UBL in the shape of

"Hamrah" Rupee Travellers Cheque enhances this facility for the convenience of its

valued customers by offering denominations up to Rs. 10,000.

UBL WIZ:

UBL Wiz is Pakistan’s first ever Prepaid VISA Debit Card that provides the convenience,

security and benefits of an ATM and Debit Card, locally and internationally. More than

just an ATM card, you can use your UBL Wiz everywhere VISA cards are accepted.

Whether you are using it online, paying for petrol, shopping or dining, you are accessing

money directly from your prepaid card, without having to visit the bank.


32

UBL NETBANKING:

UBL net banking is an Internet Banking portal offering a simple, convenient and secure

method of accessing bank accounts on the Internet.

Using UBL net banking, the customers have access to their bank accounts 24 hours a day,

7 days a week and can keep a close eye on their account balances, print account

statements, pay bills, transfer funds, track purchases and schedule their recurring

payments at the touch of a button and much more. Important features & benefits of this

service are:

� Real-time account balance & summary.

� Manage multiple accounts.

� Receive customized alerts.

� Transfer funds between customer’s accounts.

� Pay bills online (Only PTCL & Cellular Services Bills).

� Send money to anyone using the new PC-to-Person facility.

� Net banking Phone Banking: 0800-11-825 (toll-free).

� For people in Azad Jammu Kashmir: (021) 2446949.

UBL ONLINE:

This service is available only for corporate customers of UBL. This service contains the

following features:

� 24 hours banking.

� Account statement.

� Activity log.

� Electronic data interchange.

� Search facility.

� Graphical analysis.

� Access visa wireless devices.

� Alerts service.


33

2. ORGANIZATIONAL STRUCTURE

Head Office

Provisional Head Quarters

Zonal Office

Hub Branches

Branches

2.1. MAIN OFFICES:

2.1.1. HEAD OFFICE:

The Bank's registered office and principal office is situated at State Life Building No. 1,

I. I. Chundrigar Road, Karachi.


34

2.1.2. BRANCHES:

Domestic Branches 1079

Overseas Branches 17

2.1.3. DOMESTIC NETWORK: (IN 2007)

Domestic Network Branches

Azad Kashmir 71

Baluchistan 41

N.W.F.P 163

Punjab 584

Sindh 220

Total 1079

2.1.4. PROVISIONAL HEADQUARTERS:

Province Region(City)

Balucihstan Quetta

N.W.F.P Peshawar

Punjab Lahore

Sindh Karachi


35

2.1.5. BRANCH HIERARCHY

Sindh

Branches

Baluchistan

Branches

Punjab

Branches

Azad Kashmir

Branches

Islamabad

Branches

N.W.F.P

Branches

Northern Area

Branches

Regional Office

(North)

Regional Office

(South)

Central Office Karachi Controlled by President


36

2.1.6. OVERSEAS NETWORK:

HUB Name

Branches

United Arab Emirates 9

Bahrain 3

Yemen 2

Qatar 1

United States of America 1

Export Processing Zone, Karachi 1

Total Branches 17


37

2.2. DEPARTMENTS OF THE UBL

CORPORATE BANKING & CASH MANAGEMENT GROUP: (CBG)

The Corporate Banking Group has endeavored to be the market leader in their area and

builds market share through offering superior service, competitive pricing, and a wide

product range to valued corporate clients. The group caters to the needs of multinational

companies and medium to large corporate clients, which include private and public sector

entities.

This group will continue to remain a major contributor to UBL’s earnings by taking

advantage of tremendous growth potential of corporate accounts. The group requires

talented, qualified, and proactive human resources. Front line relationship managers

require a complete grasp of UBL’s credit policies and procedures as they directly affect

existing and future credit portfolio handling.

The Corporate Banking Group focuses on attracting and servicing large portfolio

customers. Our forte is providing exemplary customer service using the "Single Window"

concept and product superiority. The Relationship Management team manned by highly

qualified individuals from the industry has steadily expanded UBL customer base and

continues to enhance their 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.

The success of CBG has been established from the fact that UBL received the 'No.1


38

Euromoney 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. Presently, its portfolio includes

the quality names in the country, which were initially confined to foreign banks only.

CBG – Offers full spectrum of services:

COMMERCIAL BANKING/SME (CB):

The Commercial Banking Group caters to the needs of commercial entities and small and

medium enterprises, as defined in the State Bank of Pakistan’s Prudential Guidelines.

This group deals with commercial clients of small to medium size in both private and

public sectors. It operates in almost every city of the country with qualified and

dedicated staff.

This group aims to fulfill necessary business needs of its customers, which are more

numerous than corporate clients. However, their individual requirements are relatively

much smaller than those demanded by corporate clients. In view of the peculiar nature of

this business segment, which involves a higher turnover, a much wider network is

needed.


39

CREDIT ADMINISTRATION DEPARTMENT: (CAD)

Composition of Credit Functions:

� Credit & Marketing.

� Credit Administration.

CREDIT & MARKETING:

� Market new relationships to increase bank’s asset based portfolio.

� Financial Analysis, Evaluation and Processing of credit Line Proposals.

� Monitoring of Credit portfolio through Client visits, Factory visits, Inspections,

and prepare Call Reports, Visit Reports in this regard.

� Responsible for the compliance of all Pre-approval instructions/regulations issued

from time to time by Head Office Credit Policy, SBP and other regulatory bodies

including obtaining CIB, Borrower Basic Fact Sheet, Compliance of ratios as

required under Prudential Regulations, Per party limit etc.

CREDIT ADMINISTRATION:

� Disbursement of Credit Facilities including Preparation of Security/Charge

documents, perfection of collateral, Ensure compliance of SBP regulations/Credit

Policy, HO Circulars & Issuance of Disbursement Authorization Certificate

(DAC).

� Regular monitoring of Collateral & Asset based portfolio through Weekly

Roosters/Diaries, CARS Reports, Credit Maintenance, Identify exceptions and

follow for the rectification of the same.

� MIS related to Credit & Credit Admin. Department.

� Monitoring of Mark up accruals, recoveries thereof.

� Liaison with various outside agencies (RCAD Head).

� Miscellaneous Jobs.


40

CONSUMER BANKING GROUP:

The Consumer Banking Group provides financial facilities to individuals through a

diverse product line. Its success depends on the design of versatile and effective products

and comprehensive communication and marketing strategies. Agility in monitoring the

portfolio and following up with its customer base, which is wholly comprised of

individuals, is also an essential requirement.

This group operates in nearly all major cities of Pakistan, and also in some international

locations through UBL’s network of branches and trained sales force. This group offers

products such as home loans, personal loans, auto loans, business loans, and credit card

facilities, etc.

Consumer banking requires regular training of its workforce and the need for imparting

basic product knowledge to sales staff is highly pronounced in this group as they are in

direct contact with the customer base. This group conducts business based on structured

products that fit into the needs of its target market. Product Process Manuals are

developed for these products and are provided with the Credit Policy and Procedure

guidelines.

Risk management for the consumer has to play a dominant role in formulation and

revision of credit policies, monitoring of portfolio quality and devising effective

strategies aimed at minimizing the inherent risks.

INVESTMENT BANKING GROUP (IBG):

The Investment Banking Group specializes in providing innovative and unique advice to

its clients, assisting them in meeting challenges in an ever-changing market. The group is

equipped with adequately experienced professionals.

This group will either lead or participate in major Term Finance Certificates in the

market. It offers a full spectrum of services, including Term Finance Certificates,

Syndicated Loans, Structured Finance, Leveraged Buyouts, Project Finance, Quasi-


41

Equity Products, Independent Advice, Equity Placements, IPO’s, Equity Underwriting,

Mergers, Corporate Restructuring, Acquisitions and other products.

Although the Corporate Banking Group supports the product line of the Investment

Banking Group, the special nature of these products demands a more active involvement

of risk management. Transactions such as Project Finance offer limited recourse and such

transactions need to be structured in a way as to mitigate inherent risks. Risk

management is to be proactively involved in Investment Banking Group transactions,

right from the time of initiation until the time of execution.

TREASURY & CAPITAL MARKETS GROUP:

The major roles of the Treasury and Capital Markets Group include:

� Managing the bank’s liquidity and balance sheet requirements as per UBL and

State Bank of Pakistan guidelines,

� Dealing in foreign currencies on behalf of its customers, and

� Providing treasury and foreign exchange related financial services to its clients.

This Group consists of highly qualified and experienced human resources who are

actively involved in dealing with other banks and financial institutions to execute

transactions in various currencies.

In performing these tasks, it undertakes credit risk, which is identified, monitored, and

managed by the middle office.

INTERNATIONAL DIVISION:

The International Division manages overseas operations including credits handled by the

network of overseas branches. With careful planning and detailed surveys of the market,

the International Division will explore better quality businesses and products and manage

them efficiently to enhance UBL’s profitability and turn the overseas branch network into

a highly profitable unit of the Bank.


42

The Global Credit Risk Management Division monitors and manages the risk, credit

process and procedures at overseas branches.

FINANCIAL INSTITUTIONS DIVISION (FI):

This is an independent division operating as a profit center and is responsible for catering

to all financial business requirements of banking and non-banking financial institutions.

This division caters to the financing needs of all local banks, foreign banks, and other

financial institutions including leasing companies, investment banks, DFIs, insurance

companies, mutual funds, etc.

Like the Corporate Banking Group, the Financial Institutions Division also operates with

a structure of relationship managers, providing comprehensive solutions to its clients.

In order to strengthen the division’s credit analytic capabilities, the Financial Institutions

Risk Management Unit oversees the risk related to financial institution related

transactions. The Financial Institutions Risk Management Unit is part of the Risk Group.

ISLAMIC BANKING GROUP (IB):

The roles and functions of the Islamic Banking Group shall be:

� To manage and be responsible for the operations of Islamic Banking Business

(IBB), including policy and procedural matters;

� To liaise with other departments in the bank and the Shariah Advisor to ensure

smooth operations of IBB(s);

� To ensure that all funds pooled into the Islamic Banking Fund (IBF) are

channeled into Shariah-compliant financing and investment activities;

� To arrange training of staff of Islamic banking;

� To arrange for compilation and submission of such returns, as may be required to

be submitted to the State Bank of Pakistan from time to time;

� To ensure that all directives and guidelines, particularly those applicable to

Islamic banking, issued by the State Bank of Pakistan are strictly complied with;


43

� To maintain the Statutory Cash Reserve and Liquidity Requirements with the

State Bank as prescribed from time to time by the State Bank of Pakistan; and

� To assume other roles and responsibilities as determined by the bank or the State

Bank of Pakistan from time to time.

HUMAN RESOURCE DEPARTMENT: (HR)

UBL is the place for you if you are willing to materialize all your deliverables in

alignment with the organization’s holistic vision to grow and excel. Committed and

competent work force is the primary asset in providing value addition to stakeholders of a

business organization.

HR Division is responsible for attracting, selecting and recruiting the right people from

the market. UBL is proud of its highly professional, transparent and objective approach in

its recruitment and selection processes. After applying the eligibility criteria, which

depends on the Job grade, a series of selection procedures are applied before hiring

employees. Normally the candidates go through the process of test, group discussion and

interview. The Interview is conducted by a team of internal as well as external

professionals of the related area. Sophisticated recruitment and selection tools like oracle

based data management system; online application and behavioral based interviewing

techniques have been introduced.

FINANCE DIVISION:

Responsible for book-keeping and accounts, this Division at the head office, prepares all

financial returns. The Division is actively involved in preparing market comparative

analysis, consolidation of Bank's budgets, its monitoring and constant review of various

financial indicators. Finance Division works as the back bone for all Bank's operations.

The Division, which reports directly to the President and Chief Executive of the Bank,

has been instrumental in preparation of Bank's business plans and future strategies.


44

INFORMATION TECHNOLOGY DEPARTMENT:

Operations of UBL have been significantly streamlined post-privatization, however

further plans for improving operational efficiency are under-way. Currently the bank is

using internally developed distributed database software called UNIBANK. This software

is utilizing Oracle Financials at the back end. As all daily banking transactions are stored

at the respective branches, consolidation at the head office takes place at day end.

The bank has specialized software to support its various functions and the focus for some

time has now been on enterprise application integration (middleware). The management

launched a transformation program in 2006 which aims to accomplish bank-wide

business and technology reengineering.

The business aspect of this program is expected to improve performance through

implementation of uniform business processes and training is ongoing in this respect.

AUDIT DEPARTMENT:

The Board Audit Committee (BAC) comprising three members meets every quarter and

is responsible, among other things, for ensuring the effectiveness of the internal audit

function and systems for monitoring compliance.

Internal audit procedures include routine branch and business function audit as well as

special surprise audits. There is also a dedicated compliance division mainly to follow up

on the recommendations advised by the audit team. The deliberations of BAC however

reflect concern regarding the overall control environment. The audit and inspection

department has been highlighting issues with regard to operational control weaknesses at

the branch level.

While most of these are routine in nature, further emphasis on HR training may help in

improving the control environment. Some of the issues raised by the external auditors

pertain to the capacity of the existing software applications, which the management

expects to address over the near term.


45

3. STRUCTURE AND FUNCTIONS OF THE

ACCOUNTS/FINANCE/AUDIT DEPARTMENT

3.1. ORGANIZATIONAL CHART: (FINANCE DEPARTMENT)

CFO/Head Global

Shared Services

TBA 1

Deputy CFO

Head-Investor

Relations

Head of Finance-

Middle East

Division Head /

Financial

Controller

Financial

Controller

Statutory

TBA 2

Financial

Controller

Financial

Controller-Genesis

& Automation

Financial

Controller-Advances

& Overseas

TBA-4 Assistant

Manager-Genesis

Project

Manager-

Taxation

Manager-Overseas

Accounts

Manager-Write

off Cell

Asst. Manager

Overseas Accounts

Senior Manger

Finance –

Consumer

Manager

Consumer

Accounts

TBA 3

Manager

Consolidated

Manager Finance

Employee Funds

Asst. Manager

Statutory

Accounts

Asst. Manager

OFAMS

Asst. Manager

Islamic Banking

Accounts

Manager Finance –

Central Accounts

& Payments

Senior Manager

Finance SBP

Reporting

Manager Central

Payments

Manager MIS &

Budgeting

Manager-HO

Budgeting, BOD

Reports & Bench

Manager CAPEX

Manager – MIS-

Agri & Micro

Credit

Manager-SBP

Returns/Unclaimed

Deposits

Manager ALCO


46

3.2. MY LEARNING AS AN INTERNEE:

I worked as an internee in the United Bank Limited Regional Credit Administration

Department-Commercial Banking (RCAD-CB), Corporate Centre Branch, M.M.Alam

Road, Gulberg II, Lahore.

3.3. FINANCE & ACCOUNTING OPERATIONS:

Every branch has its own Accounts Department which is responsible to record and

process each & every business transaction taking place during the working day. This

Department consolidates the position of the branch at the day end in the shape of Assets,

Liabilities, Revenues and Expenses.

This position is daily sent to the Finance Department of Head Office which consolidates

all these Statement of Affairs bank wise. This position is sent to the State Bank of

Pakistan (SBP) and SBP publishes on weekly basis overall consolidated Statement of

banks in business news papers like Business Recorder (BR).

The main function of Finance Department of Head Office is to maintain smooth liquidity

of bank by arranging funds from SBP and other banks if required. This Department is

also responsible for making physical investment on behalf of bank into government

securities and other corporate securities.

3.4. THE ROLE OF FINANCIAL MANAGER:

FINANCIAL MANAGER:

“The person which manages the financial resources of a business is called financial

manager.”

EXPLANATION:

The emergence of financial management as a distinct management discipline is relatively

recent and linked to changes in business and socio-economic scenario, brought about by


47

the advancements in computer and information technology, emergence of multi-product

and multi-division corporations with complex and dynamic organizational set-ups,

increasing global competition etc.

Finance, no doubt, is the sine qua non of business operations, and traditionally the role of

financial manager (known as an accountant or accounts manager) was limited to

managing business finance or ‘counting the beans.’ However, the emerging discipline of

financial management varies considerably from its traditional functions and extends to

more inclusive functions of ‘growing the beans.’

Almost every firm, government agency, and other type of organization has one or more

financial managers who oversee the preparation of financial reports, direct investment

activities, and implement cash management strategies. Because computers are

increasingly used to record and organize data, many financial managers are spending

more time developing strategies and implementing the long-term goals of their

organization.

ROLE & DUTIES OF FINANCIAL MANAGER:

The duties of financial managers vary with their specific titles, which include controller,

treasurer or finance officer, credit manager, cash manager, and risk and insurance

manager. Controllers direct the preparation of financial reports that summarize and

forecast the organization’s financial position, such as income statements, balance sheets,

and analyses of future earnings or expenses. Controllers also are in charge of preparing

special reports required by regulatory authorities. Often, controllers oversee the

accounting, audit, and budget departments. Treasurers and finance officers direct the

organization’s financial goals, objectives, and budgets. They oversee the investment of

funds, manage associated risks, supervise cash management activities, execute capital-

raising strategies to support a firm’s expansion, and deal with mergers and acquisitions.

Credit managers oversee the firm’s issuance of credit, establishing credit-rating criteria,

determining credit ceilings, and monitoring the collections of past-due accounts.

Managers specializing in international finance develop financial and accounting systems


48

for the banking transactions of multinational organizations.

Cash Managers: monitor and control the flow of cash receipts and disbursements to

meet the business and investment needs of the firm. For example, cash flow projections

are needed to determine whether loans must be obtained to meet cash requirements or

whether surplus cash should be invested in interest-bearing instruments. Risk and

insurance managers oversee programs to minimize risks and losses that might arise from

financial transactions and business operations undertaken by the institution. They also

manage the organization’s insurance budget.

Financial Institutions: such as commercial banks, savings and loan associations, credit

unions, and mortgage and finance companies, employ additional financial managers who

oversee various functions, such as lending, trusts, mortgages, and investments, or

programs, including sales, operations, or electronic financial services. These managers

may be required to solicit business, authorize loans, and direct the investment of funds,

always adhering to Federal and State laws and regulations.

Branch Managers: of financial institutions administer and manage all of the functions of

a branch office, which may include hiring personnel, approving loans and lines of credit,

establishing a rapport with the community to attract business, and assisting customers

with account problems. The trend is for branch mangers to become more oriented toward

sales and marketing. It is important that they have substantial knowledge about all types

of products that the bank sells. Financial managers who work for financial institutions

must keep abreast of the rapidly growing array of financial services and products.

3.4.1. ACCOUNTS MANAGEMENT:

Being the Manager of the branch it is the duty of the Branch Manager to properly manage

the accounts that are deposited in the respective branch. Main duties of Branch Manager

regarding accounts management are:

� To ensure that the Accounts Officer is maintaining proper books of accounts

including basic accounting controls like daily verification of cash in hand, daily


49

entry of cash & bank vouchers, Bank Reconciliation statements, accounting of

Receipts / Payments correctly.

� To supervise and maintain the Assets Records of branch including obsolescence /

Sale through auction or otherwise, conducting physical verification of assets

annually and reporting variations, if any, to HQs & BEC.

� To prepare the Annual Programme and Budget (APB) and Annual Report of the

Branch with the help of the Accountant/Statistical Assistant and concerned unit

heads, supported by the volunteers.

There is system used in the UBL called UNI Bank for the accounts management. The

reports generated on this system should review on daily basis by Branch Manager under

his signatures and also by the Area Manager and a complete record of these reports in

date order should be filed.

3.4.2. CASH MANAGEMENT:

The key person in banking is the Branch Manager who is not only responsible for

mobilization of deposits for the bank but also to generate foreign exchange and other

business for the bank. He is also taking care that customers of bank are properly served &

their problems are immediately solved. He is also responsible for cash management &

credit management.

In every city there is a Main Branch (Feeding Branch) of a bank (UBL) which is

custodian of cash. All excess cash in the branch is deposited with this branch & whenever

any branch needs cash to pay off to the depositors, the Branch Manager is required to

make requisition to this Main Branch & the Main Branch provides the required cash

accordingly.

3.4.3. CREDIT MANAGEMENT:

As regarding credit management there is a department in the bank called Credit

Administration Department (CAD). Deposits are the liabilities of bank while advances

are the assets of the bank. To balance these two sides, bank attracts the current as well as


50

prospective customers to deposit their savings by offering high rate of interest/ profit,

while in order to increase its assets, bank attracts its customers by Corporate Banking

Group (CBG) & Commercial Banking Group (CB).

When the credit facilities are approved then work of credit administration department

starts. It performs two functions:

� Pre-dispersal function (before advancing facility)

� Post-dispersal Function (after credit facility is dispersed)

It keeps three sections named as:

� Processing Section

� Documentation Section

� MIS (Management Information System) Section

Relationship managers (RM’s) bring cases from customers and present to RCAD. RM’s

have direct contact with customers. Case first comes to Processing Officer who checks

the necessary prudential requirements if so then case is forwarded to Risk Management

Department (RMD) otherwise send back to ( RM) to fulfill necessary requirements. Risk

Management Department (RMD) verifies attached documents and send back documents

after risk analysis and mention how much loan is to issue (under SBP limitations).

Documentation Officer verifies the originality of documents attached and finally DAC

(disbursement authorization certificate) is issued to customer. MIS keeps record of the

customer in computer. And customer account is opened in the UNI bank (it is also

software which keeps record that how much loan the customer has availed). Under

mentioned process flow diagram present the right picture.


51

PROCESS FLOW DIAGRAM OF LOAN DISBURSEMENT:

If Verified

Rejected

If approved

Rejected

Rejected

If approved

Customer

Relationship

Manager

Processing

Section

CA Package

Preparation

CRM

Documentation

Section

DAC Issued

Customer

Receives Loan


52

3.5. USE OF ELECTRONIC DATA IN DECISION MAKING:

In today’s banking new devices have been introduced for efficient & courteous service to

the client. Like Online Banking, Net Banking, Mobile Banking, Auto Teller Machines

(ATM’s) & Electronic Cashiers.

In UBL most of the decisions are made after getting approval from authority using

electronic data. Now a days Statements of Accounts are not dispatched to the account

holders. Instead they have been given option to get their Statements printed while using

Net Banking. UBL has its own network of 336 ATMs in 83 cities.

Moreover customers can gave all types of instructions in respect of their transactions

through E-mails, Net & Mobile Banking. So we can say that electronic data is very

widely used in today’s banking.

In branches UBL is using their personal software called UNI Bank 2000. To maintain and

exercise and better controls on operations, UNI Bank 2000 provides controls in the shape

of daily override/exceptions reports to the branch manager & respective staff. The

exceptions include the following:

� Transaction by un-issued/loose cheques.

� Transactions over debit limit of user.

� Transactions on limit expired accounts.

� Transactions of excess over limit in Party accounts.

� Back dated transaction in the accounts.

� Transaction in restricted accounts.

� Reversal entries.

� Change in customer name, address or other details. etc.

These reports are reviewed by the Manger of the branch and also by the Area Manager

which helps them in decision making. This system also provides the following

Statements/Reports:


53

(A)NON-AUTOMATED & AUTOMATED SPOKES FROM HUBS:

DAILY:

� UNIDD032 Contra.

� UNIPD052 Hub generated customer transactions.

� UNIDD110 Sub ledger.

� Statement of condition.

� List of new accounts.

� Customer accounts/status maintenance.

� Unidd040 (ATM transactions).

MONTHLY:

� Consolidated income/expenditure.

� Incidental charges.

� Customer ledger dormant/active.

QUARTERLY:

� Unclaimed deposits.

� Size wise deposits.

� Debit to deposit accounts.

� Classification of deposit accounts.

HALF YEARLY:

� Customer transactions ledger.

� Account amendment report

� Profit posting report.

YEARLY:

� Zakat exemption report.


54

� Zakat deduction report.

(B) AUTOMATED SPOKES ON A DAILY BASIS:

� UniRemote transaction (Inward/outward).

� Daily override.

� Teller cash report.

� Utility scroll/vouchers.

� Clearing schedules.

� Remittances vouchers.

MOBILE COMPUTING DEVICE:

Mobile computing device is provided only to authorize UBL employees in order to

perform business activities with special business requirements.

LAPTOPS:

According to ITG (Information Technology Group-UBL) Policy this type of equipment

must be used for official purposes only. Laptops are provided to the persons with the

designation having SVP (Senior Vice President) or higher.

PDA :( PERSONAL DIGITAL ASSISTANT)

The intended use for the PDA is to facilitate UBL employees for the following business

objectives:

� 24x7 Access to UBL corporate Emails.

� Updated contact list.

� List of tasks.

� Access to GAL (Global Address List).

� Any other services that may be offered by UBL ITG to corporate users.


55

CARS (CREDIT ANALYST REPORTING SYSTEM):

PURPOSE OF CARS:

CARS is a system which is design to cater the following purposes:

� CCAMS (CAD- Credit Administration Management System) replacement

� Tagging process

� SBP reporting (Corporate / commercial – CIB & Consumer – CIB)

� Inter-departmental reports

Account tagging is also a part of CARS. Parties which have availed loan facility from

UBL are tagged in CARS with their specific accounts. Consumer blue forms are

generated for individual and sole proprietorship accounts. Following details should be

entered in the software. If single of them is missing, blue form is considered incomplete

keeping insufficient data;

� New and old NIC

� Gender

� Customer and his/her father/husband name

� Date of birth

� Home address

� Business name and address

� Security which is to be pledged

REPORT VIEWING:

CARS have also option to view many reports like account tagging summary, blue form,

central liability report etc. Most common report is blue form. After construction of blue

form its report is viewed and prints out is taken for record.


56

CREDIT RISK ENVIRONMENT’S ADMINISTRATION & MANAGEMENT SYSTEM

(CREAMS):

UBL is from few Pakistani Banks which keeps centralized information system. CREAMS

is one of them. CREAM is highly customizable and parameterizes able software.

CREAM is developed with the ideology that it can operate in all parts of the world.

Certainly there are different operational, monitoring and regulatory requirements

depending upon the region where the bank is operating. Further more; a single bank may

operate in more than one region of the world. Parameterization lets CREAM behave

according to the requirement of the region.

This customization is a one time initiative and once CREAM has the requisite

information, it will behave according to the bank’s requirement. This section will explain

the all CREAM setup screens one by one. It must be noted the once the Parameterization

phase is completed by bank then bank must lock this section. That is only authorized

person (Mostly Credit Head & MIS Officer) can enter to this section, not every one who

is using CREAM application.

CREAM provides end to end automation of “Credit Risk Environment” i.e. credit risk

origination, analysis and assessment, measurement, pricing and management together

with credit risk review, administration and monitoring, all this in accordance with bank’s

credit risk policy.

Thus CREAM becomes a unique product that provides complete and most flexible credit

risk management solution. It fully supports the pillars of BIS/BASEL II and the “Risk

Environment” and assesses the credit risks in trading and banking books. It is the most

comprehensive risk management tool available.


57

SCREENSHOT OF CREAMS:


58

3.6. & 3.7. SOURCES & GENERATION OF FUNDS:

Main sources and generation of funds for the bank are as under:

1. Deposits from Customers.

2. Borrowings from Financial Institutions.

1. DEPOSITS FROM CUSTOMERS:

2007 2006 2005 2004 2003

-----------------------------(Rupees in ‘000)------------------------------

Customers

Fixed deposits 127,317,589 114,927,897 79,841,687 42,971,478 35,945,097

Saving deposits 153,001,867 121,878,162 122,662,484 118,243,902 102,372,765

Sundry deposits 4,645,873 4,942,064 4,148,275 3,161,327 2,728,107

Margin deposits 2,746,824 2,698,999 2,214,877 1,218,963 1,212,276

Current accounts –

remunerative 5,641,419 1,908,055 1,886,548 393,760 565,433

Current accounts – non-

remunerative 108,116,175 88,662,089 78,324,614 64,150,773 41,253,005

Total Deposits from

Customers 401,469,747 335,017,266 289,078,485 230,140,203 184,076,683

COMMENTS:

Total deposits from customers have been increased 118% in 2007 as compared to 2003.

This increase is due to major increase in Fixed & Saving deposits of the bank.

Current accounts – remunerative includes pre IPO (Initial Public Offering) / private

placement receipts of Rs 4,185 million deposited with the bank on account of

subscription money towards UBL's fourth issue of 10 year term finance certificates. The

total issue consists of Rs 6,000 million under pre-IPO / private placement and the

remaining Rs 1,500 million represents the proposed Initial Public Officer to the general

public. The issue of these term finance certificates has been approved by the State Bank

of Pakistan. These term finance certificates will be sub-ordinate as to the payment of

principal and profit to all other indebtedness of the bank (including deposits) and are not


59

redeemable before maturity with approval of SBP. The rate of mark-up on these term

finance certificates would be KIBOR plus 0.85% per annum for the first five years and

KIBOR plus 1.35% per annum during the last five years to maturity.

2. BORROWINGS FROM FINANCIAL INSTITUTIONS:

Details of borrowings from

financial institutions 2007 2006 2005 2004 2003

-----------------------------(Rupees in ‘000)------------------------------

Secured

Borrowings from the SBP

under:

� Export refinance

scheme 6,708,853 9,414,812 7,453,261 5,988,377 4,325,125

� Long-term financing

under export oriented

projects

4,945,514 5,333,691 303,410 - -

� Locally manufactured

machinery refinance

scheme

1,620 3,382 5,195 9,872 18,299

11,655,987 14,751,885 7,761,866 5,998,249 4,343,424

Borrowings from other

financial institutions - - - 17,830 557,441

Repurchase agreement

borrowings 32,269,543 17,527,738 8,434,771 4,629,607 2,680,977

43,925,530 32,279,623 16,196,637 10,645,686 7,581,842

Unsecured

Call borrowings 13,607,326 4,600,000 4,000,000 500,000 -

Overdrawn nostro accounts 912,190 542,162 113,991 79,998 128,533

Trading Liabilities 658,304 1,068,801 1,479,852 750,000 -

15,177,820 6,210,963 5,593,843 1,329,998 128,533

Total Borrowings 59,103,350 38,490,586 21,790,480 11,975,684 7,710,375

COMMENTS:

Borrowings under Export refinance scheme the bank has entered into agreements with the

State Bank of Pakistan (SBP) for extending export finance to customers. As per the terms

of the agreement, the bank has granted SBP the right to recover the outstanding amount

from the bank at the date of maturity of finances by directly debiting the current account

maintained by the bank with SBP. These borrowings are repayable within six months up


60

to June 2008.

Borrowings under long-term financing under export oriented projects have been made

from SBP for providing financing facilities to customers for import of machinery, plant,

equipment and accessories thereof (not manufactured locally) by export oriented units.

According to agreements with SBP, locally manufactured machinery refinance scheme

were obtained for providing finance to customers against locally manufactured

machinery.

The repurchase agreement borrowings are secured against market treasury bills and carry

mark-up at rates ranging from 8.9% to 10.00% per annum (2006: 8.19% to 8.82% per

annum). These borrowings are repayable latest by August 2008.

The call borrowings carry mark-up at rates ranging from 9.3% to 12.00% per annum

(2006: 8.1% to 10.1% per annum) and are repayable latest by January 2008.

3.8. ALLOCATION OF FUNDS:

Banking deposits are used and allocated in the following channels:

1. Lending to Financial Institutions.

2. Investments (In Securities).

3. Advances

1. LENDING TO FINANCIAL INSTITUTIONS:

2007 2006 2005 2004 2003

-----------------------------(Rupees in ‘000)------------------------------

Call money lending 2,777,757 447,360 1,199,534 1,876,465 840,000

Repurchase agreement

lending’s 13,809,706 21,950,095 11,769,693 8,011,490 18,210,791

Lending’s to banks / financial

institutions 8,194,260 7,174,615 4,898,325 8,472,678 4,045,237

Total lending’s to financial

institutions 24,781,723 29,572,070 17,867,552 18,360,633 23,096,028


61

Comments:

Call money lending’s carry mark-up at rates ranging from 9.50% to 11.00% per annum

(2006: 6.70% to 10.35% per annum) and are due to mature latest by March 2008.

Securities held as collateral against repurchase agreement lendings includes the Market

Treasury Bills and Pakistan Investment Bonds. These carry mark-up at rates ranging from

9.20% to 9.90% per annum (2006: 7.99% to 9.40% per annum) and are due to mature

latest by March 2008.Lending’s to banks / financial institutions carry mark-up at rates

ranging from 5.45% to 12.63% per annum (2006: 5.45% to 12.63 %per annum) and are

due to mature latest by March 2011.

2. INVESTMENTS (IN SECURITIES):

2007 2006 2005 2004 2003

Investments by segments -----------------------------(Rupees in ‘000)------------------------------

Federal Government

Securities

Market Treasury Bills 58,345,964 32,594,095 29,193,297 17,377,405 20,342,718

Pakistan Investment Bonds 21,395,430 7,848,875 7,190,650 10,002,541 9,829,874

Foreign currency bonds 1,055,801 1,382,986 1,694,788 2,024,073 2,280,646

Government of Pakistan

Islamic Bonds 1,123,894 694,271 833,386 - -

Government of Pakistan – US

Dollar / Euro Bonds 2,170,415 1,247,217 279,575 1,403,469 1,235,859

Federal Investment Bonds - 13,906 32,725 45,026 318,608

Total Federal Government

Securities 84,091,504 43,781,350 39,224,421 30,852,514 34,007,705

Provisional Government

Securities - - 1,207 1,207 31,207

Overseas Governments’

Securities

Foreign securities 5,827,021 2,344,109 924,001 1,284,123 971,718

Market Treasury Bills 1,937,613 705,937 197,204 96,317 91,111

Total Overseas Governments’

Securities 7,764,634 3,050,046 1,121,205 1,380,440 1,062,829

Other Overseas Securities

Foreign securities - - 162,576 161,809 156,268

CDC SAARC Fund 310 505 65,501 124,144 279,245

310 505 228,077 285,953 435,513


62

2007 2006 2005 2004 2003

Investments by segments -----------------------------(Rupees in ‘000)------------------------------

Fully Paid-up Ordinary

Shares

Listed companies 3,449,960 2,494,,698 2,128,551 752,602 303,349

Unlisted companies 441,106 497,288 432,680 303,392 1,280,028

Total Fully Paid-up Ordinary

Shares 3,891,066 2,991,986 2,561,231 1,055,994 1,583,377

Units of Mutual Fund 262,201 1,222,338 550,000 350,000 350,000

Term Finance Certificates,

Debentures, Bonds and

Participation Term

Certificates

Term Finance Certificates

Unlisted 6,000,195 7,629,656 8,332,720 8,116,726 1,353,456

Listed 985,184 1,197,666 1,077,637 645,732 5,076,908

Total TFC’s 6,985,379 8,827,322 9,410,357 8,762,458 6,430,364

Bonds 5,018,444 5,310,415 8,094,854 9,754,423 9,304,056

Debentures 8,300 11,289 169,351 176,277 196,667

Participation Term Certificates 46,920 55,169 70,087 77,267 94,687

Commercial Paper - - - - 78,490

Total TFC’s, Debentures,

Bonds, PTC’s 12,059,043 14,204,195 17,744,649 18,770,425 16,104,264

Investments in subsidiaries

and associates 8,249,575 2,257,829 1,917,829 2,462,558* 2,200,476

Total investments at cost 116,318,333 67,508,249 63,348,619 55,159,091 55,775,371

Provision for diminution in

value of investments (351,191) (400,639) (634,003) (540,402) (640,229)

Investments (net of

provisions) 115,967,142 67,107,610 62,714,616 - -

(Deficit) / surplus on

revaluation of available for sale

securities

(365,741) 156,063 313,108 333,995 1,381618

Deficit on revaluation of held

for trading securities (15,755) (3,335) (780) (1,044) -

Total Investments 115,585,646 67,260,338 63,026,944 54,953,728 56,516,760

COMMENTS:

Investments include certain approved / government securities which are held by the Bank

to comply with the Statutory Liquidity Requirement determined on the basis of the

Bank's demand and time liabilities as set out under section 29 of the Banking Companies

Ordinance, 1962.


63

Investments include Rs. 282 million (2006: Rs. 282 million) held by the State Bank of

Pakistan and National Bank of Pakistan as pledge against demand loan, TT / DD

discounting facilities and foreign exchange exposure limit sanctioned to the Bank and Rs.

5 million (2006: Rs. 5 million) held by the Controller of Military Accounts (CMA) under

Regimental Fund Arrangements. During the year 2007 the bank has made a fresh capital

injection of CHF 10 million in United Bank AG Zurich, Switzerland and Rs 40 million in

UBL Fund Managers Limited to support the business needs of the respective subsidiaries.

United Bank Financial Services (Private) Limited (UBFSL) was registered as a Modaraba

Company under the Modaraba Companies and Modaraba (Floatation and Control)

Ordinance, 1980. During the year, keeping in view UBFSL's dormant status, the

management has surrendered UBFSL's license to act as a Modaraba Management

Company. As a result, the Registrar of Modaraba Companies and Modarabas cancelled

the registration of UBFSL as a Modaraba Management Company. Pursuant to the

cancellation of this registration UBFSL has decided to wind up its dormant operations

under the Companies Easy Exit Scheme 2007 issued by the Securities and Exchange

Commission of Pakistan.

Unlisted companies’ amount includes the Bank's subscription towards the paid-up capital

of Khushhali Bank Limited amounting to Rs. 200 million (2006: Rs. 200 million).

Pursuant to Section 10 of the Khushhali Bank Ordinance, 2000 strategic investors

including the Bank cannot sell or transfer their investment before a period of five years

that has expired on October 10, 2005. Thereafter, such sale/ transfer would be subject to

the prior approval of SBP. In addition, profit of Khushhali Bank Limited cannot be

distributed as dividend under clause 35(i) of the Khushhali Bank Ordinance, 2000.

However, Khushhali Bank Ordinance is in process of amendment under which the

restriction on the dividend payments is expected to be deleted. Moreover, the

shareholders of Khushhali Bank Limited at the Extra Ordinary General Meeting held in

December 2007 have passed a resolution stating that Khushhali Bank be licensed and

operated under the Micro Finance Institution Ordinance, 2001 under the conversion

structure stipulated by the State Bank of Pakistan which does not restrict the distribution


64

of dividend to members.

* During the year, the bank has reversed exchange translation reserve recognized on

revaluation of bank's investment in overseas subsidiaries and associate in prior years

amounting to Rs. 854.729 million. This reversal is in accordance with the requirements of

International Accounting Standard -21, 'The effect of changes in foreign exchange rates'.

There was no impact on profit or loss for the current or prior period as the revaluation

was taken directly to equity in the year in which it arose.

3. ADVANCES:

Performing 2007 2006 2005 2004 2003

-----------------------------(Rupees in ‘000)------------------------------

Loans, cash credits, running

finance etc.

In Pakistan 222,660,938 200,080,279 169,599,106 113,521,983 74,934,525

Outside Pakistan 60,310,465 33,369,281 21,867,208 13,441,801 10,762,277

282,971,403 233,449,560 191,466,314 126,963,784 85,696,802




Payable in Pakistan 5,301,652 5,661,421 2,686,883 3,871,559 2,247,692

Payable outside Pakistan 3,820,841 4,080,845 7,067,883 7,767,493 4,080,137

9,122,493 9,742,266 9,754,766 11,639,052 6,327,829

292,093,896 243,191,826 201,221,080 138,602,836 92,024,631



(CFS)

2,631,139 1,462,242 1,094,002 1,327,541 608,082

Advances - gross 294,725,035 244,654,068 202,315,082 139,930,377 92,632,713


- Specific - - - - -

- General (1,352,028) (1,416,249) (1,162,987) (260,937) (118,977)

Total Provision against

advances (1,352,028) (1,416,249) (1,162,987) (260,937) (118,977)

Advances – Net Provision 293,373,007 243,237,819 201,152,095 139,669,440 92,513,736


65

Non - Performing 2007 2006 2005 2004 2003

-----------------------------(Rupees in ‘000)------------------------------

Loans, cash credits,

running finance etc.

In Pakistan 17,759,670 9,273,198 9,831,330 11,827,862 10,354,782

Outside Pakistan 3,011,935 4,771,131 5,540,208 6,152,872 6,250,428

20,771,605 14,044,329 15,371,538 17,980,734 16,605,210




Non - Performing 2007 2006 2005 2004 2003

-----------------------------(Rupees in ‘000)------------------------------

Payable in Pakistan 745,115 876,300 417,400 286,514 252,687

Payable outside Pakistan 495,691 1,334,780 1,171,427 1,836,085 2,058,603

1,240,806 2,211,080 1,588,827 2,122,599 2,311,290

22,012,411 16,255,409 16,960,365 20,103,333 18,916,500



(CFS)

- - - - -

Advances - gross 22,012,411 16,255,409 16,960,365 20,103,333 18,916,500


- Specific (16,030,682) (12,183,335) (13,301,990) (15,621,718) (15,305,058)

- General - - - - -

Total Provision against

advances (16,030,682) (12,183,335) (13,301,990) (15,621,718) (15,305,058)

Advances – Net Provision 5,981,729 4,072,074 3,658,375 4,481,615 3,611,442

COMMENTS:

Performing advances given under various Islamic financing modes amounting to Rs

339.477 million at December 31, 2007 entered into during the year by the Islamic

Banking branches of the bank.Non-performing advances include Advances having Gross

Book Value of Rs.1, 043.568 million (2006: Rs. 199.770 million) and Net Book Value of

Rs. 166.605 million (2006: Rs. 174.465 million) though restructured and performing have

been placed under nonperforming status as required by the revised Prudential Regulations

issued by the State Bank of Pakistan, which requires monitoring for at least one year

before any up gradation is considered.


66

During the year the State Bank of Pakistan has introduced certain amendments in the

Prudential Regulations in respect of maintenance of provisioning requirements against

non-performing loans and advances vide BSD Circular No. 7 dated October 12, 2007.

The amendments made in the provisioning requirements and the resulting additional

provision of Rs 3.803 million is explained below:

Under the revised guidelines issued by SBP, banks cannot avail the benefit of discounted

forced sales value of mortgaged assets held as collateral by the banks against their non-

performing (excluding housing finance portfolio) loans for the purpose of determining

the provisioning requirement to be maintained for non-performing customers with effect

from December 31, 2007. Previously, the Prudential Regulations issued by SBP allowed

banks to avail the benefit of discounted forced sales value of mortgaged assets held as

collateral against non-performing loans of over Rs 10 million while determining the

provisioning requirement there against. Had the provision against non-performing loans

and advances been determined in accordance with the requirement previously laid down

by SBP, the specific provision against non-performing loans and advances would have

been lower and consequently profit before taxation and advances (net of provisions) as at

December 31, 2007 would have been higher by approximately Rs 3,314 million.

As noted above in accordance with the revised guidelines issued by SBP, banks are

allowed to avail the benefit of forced sales value of mortgaged assets held as collateral

against their non-performing housing finance portfolio while determining provisioning

requirement against such portfolio. However, the forced sales value of the mortgaged

assets would only be allowed to the extent of 50% of its value during the first two years

from the date of classification of the respective non-performing customers and no benefit

would be admissible in subsequent years.

Previously, the Prudential Regulations allowed banks to avail the benefit of forced sales

value of mortgaged assets held as collateral against their non-performing housing finance

portfolio without any specified time limit. Had the provision against non-performing

housing finance portfolio been determined in accordance with requirement previously

laid down by SBP, the specific provision against non-performing housing finance


67

portfolio would have been lower and consequently profit before taxation and advances

(net of provisions) as at December 31, 2007 would have been higher by approximately Rs

240.288 million.

In addition, as per the revised regulations the overdue time period for classifying personal

loans as 'loss' has been reduced from one year to 180 days and as a result the category of

'doubtful' has been dispensed with. Had the provision against non-performing personal

loans been determined in accordance with the requirement previously laid down by SBP,

the specific provision against non-performing personal loans would have been lower and

consequently profit before taxation and advances (net of provision) as at December 31,

2007 would have been higher by approximately Rs 249.319 million.

Although the bank had made full provision against its non-performing portfolio as per the

category of the loan, however, the bank still holds enforceable collateral in the event of

recovery through litigation. These securities comprise of charge against various tangible

assets of the borrower including land, building, plant and machinery, stock in trade etc.


68

4. CRITICAL ANALYSIS OF THE THEORETICAL CONCEPTS

RELATING TO PRACTICAL EXPERIENCES:

4.1. FINANCIAL ANALYSIS:

BALANCE SHEET OF FIVE

YEARS 2007 2006 2005 2004 2003

-----------------------------(Rupees in ‘000)------------------------------

Assets

Cash and balances with

treasury banks 57,526,451 48,939,840 34,074,786 23,844,435 17,274,461

Balances with other banks 4,191,128 14,034,476 12,717,100 17,699,334 11,386,434

Lending to financial

institutions 24,781,723 29,572,070 17,867,552 18,360,633 23,096,028

Investments 115,585,646 67,260,338 63,026,944 54,953,728 56,516,760

Advances 299,354,736 247,309,893 204,810,470 144,151,055 96,125,178

Fixed assets 16,918,844 5,234,463 4,449,324 3,969,006 3,754,236

Deferred tax asset – net - 906,661 2,273,005 5,194,892 5,486,357

Taxation Recoverable - - - - 283,171

Other assets 11,925,428 10,008,132 7,829,770 4,439,580 3,001,793

Total Assets 530,283,956 423,265,873 347,048,951 272,612,663 216,924,418

Liabilities

Bills payable 6,079,341 4,560,649 4,159,964 3,811,284 2,975,910

Borrowings 59,103,350 38,490,586 21,790,480 11,975,684 7,710,375

Deposits and other accounts 401,637,816 335,077,873 289,226,299 230,256,627 185,071,502

Sub-ordinated loans 5,996,696 5,998,344 3,999,192 3,500,000 -

Liabilities against assets

subject to finance lease - - - 288 39,995

Deferred tax liabilities - net 2,232,344 - - - -

Deferred liabilities - - - - 1,535,059

Other liabilities 12,813,005 9,275,034 6,204,746 5,704,749 4,541,704

Total Liabilities 487,862,552 393,402,486 325,380,681 255,248,632 201,874,545

Represented By:

Share capital 8,093,750 6,475,000 5,180,000 5,180,000 5,180,000

Reserves 10,261,958 8,298,873 6,225,461 5,915,928 4,678,317

Unappropriated profit 15,653,703 12,429,853 7,350,813 3,274,439 1,384,490

34,009,411 27,203,726 18,756,274 14,370,367 11,242,807

Surplus on revaluation of assets

- net 8,411,993 2,659,661 2,911,996 2,993,664 3,807,066

42,421,404 29,863,387 21,668,270 17,364,031 15,049,873

Total Liabilities & share

Capital 530,283,956 423,265,873 347,048,951 272,612,663 216,924,418


69

PROFIT & LOSS ACCOUNTS OF FIVE YEARS:

2007 2006 2005 2004 2003

-----------------------------(Rupees in ‘000)------------------------------

Mark-up / return / interest

earned 41,045,543 32,991,603 20,158,860 9,233,881 8,944,260


expensed 16,936,187 12,126,809 6,045,948 1,732,760 1,888,349

Net mark-up / interest income 24,109,356 20,864,794 14,112,912 7,501,121 7,055,911

Provision against loans and

advances – net 5,493,226 1,972,936 1,277,002 435,414 444,871


value of investments – net (6,303) 74,573 112,666 (100,381) 104,285

Bad debts written off directly 935,123 269,349 38,140 3,841 12,897

Net mark –up / return /

interest income after

Provisions

17,687,310 18,547,936 12,685,104 7,162,247 6,493,858

Non Mark – up / Interest

Income

Fee, Commission and

brokerage income 5,165,066 4,435,465 2,543,739 1,654,475 1,442,642

Dividend income 548,782 837,338 202,343 154,565 80,315


currencies 827,328 659,726 675,109 668,085 436,656

Gain on sale of securities 849,367 280,864 382,419 947,945 1,976,999

Unrealized loss on revaluation

of investments (15,755) (3,335) (780) - -

Other income 1,617,563 738,330 1,210,202 1,072,756 607,500

Total non mark-up / return /

interest income 8,992,351 6,948,388 5,013,032 4,497,826 4,544,112

26,679,661 25,496,324 17,698,136 11,660,073 11,037,970

Non Mark-up / Interest

Expenses

Administrative expenses 13,420,977 10,952,275 7,874,013 6,794,311 6,153,913

Other provisions / write offs –

net 236,281 226,313 335,409 (34,422) 551,840

Other charges 17,430 25,980 7,066 10,456 5,501

Total nom mark-up / interest

expenses 13,674,688 11,204,568 8,216,488 6,770,345 6,711,254

Profit Before Taxation 13,004,973 14,291,756 9,481,648 4,889,728 4,326,716

Taxation 4,602,383 4,823,524 3,532,616 1,188,184 1,691,098

Profit After Taxation 8,402,590 9,468,232 5,949,032 3,701,544 2,635,618

Unappropriated profit brought

forward 12,429,853 7,350,813 3,274,439 1,384,490 (797,100)

20,832,443 16,819,045 9,223,471 5,086,034 1,838,518

Transfer from surplus on

revaluation of fixed assets – net

of tax

63,028 94,454 94,148 94,214 73,096

Profit Available For

Appropriation 20,895,471 16,913,499 9,317,619 5,180,248 1,911,614


70

4.1.1. RATIO ANALYSIS:

ABBREVIATION USED IN CALCULATIONS:

Words Abbreviation

Earning after tax EAT

Net Markup income NMI

Gross markup income GMI

Total income T.I

Operating income OP

Operating expenses OE

Total Share holder Equity TSE

Net Sales N.S

Market price per share MPS

Earning per share EPS

Earning before tax EBT

Total outstanding shares TOS

Book Value BV

Dividend per share DPS

Total debt T.D

Total liabilities T.L

Interest Earned I.E

Total Assets T.A


71

4.1.2. CALCULATION OF RATIOS:

Ratio Type Formula 2007 2006 2005 2004 2003

-----------------------------(Rupees in ‘000)------------------------------

Profitability Ratios

Net profit after tax EAT/IE 8,402,590/41,045,

543=20.47% 9,468,232/32,991,

603=28.70% 5,949,032/20,158,

860=29.51% 3,701,544/9,233,8

81=40.09% 2,635,618/8,944,2

60=29.47%

Gross spread ratio NMI/GMI 24,109,356/41,045

,543=58.74% 20,864,794/32,991

,603=63.24% 14,112,912/20,158

,860=70.00% 7,501,121/9,233,8

81=81.23% 7,055,911/8,944,2

60=78.89%

Income Expense

ratio T.I/O.P

33,101,707/17,687

,310=1.87

27,813,182/18,547

,936=1.50

19,125,944/12,685

,104=1.50

11,998,947/7,162,

247=1.68

11,600,023/6,493,

858=1.79

Return on Equity

ratio (ROE) EAT/TSE

8,402,590/34,009,

411=24.71%

9,468,232/27,203,

726=34.80%

5,949,032/18,756,

274=31.72%

3,701,544/14,370,

367=25.76%

2,635,618/11,242,

807=23.44%

Return on Asset

ratio (ROA) EAT/T.A

8,402,590/530,283

,956=1.58%

9,468,232/423,265

,873=1.79%

5,949,032/347,048

,951=1.71%

3,701,544/272,612

,663=1.36%

2,635,618/216,924

,418=1.21%

Loan/deposit ratio Loan/Deposits 299,354,736/401,6

37,816=74.53%

247,309,893/335,0

77,873=73.81%

204,810,470/289,2

26,299=70.81%

144,151,055/230,2

56,627=62.60%

96,125,178/185,07

1,502=51.94%

Activity Ratios*

Total asset turnover

N.S/T.A 41,045,543/530,28

3,956=7.74 32,991,603/423,26

5,873=7.79 20,158,860/347,04

8,951=5.80 9,233,881/272,612

,663=3.39 8,944,260/216,924

,418=4.12

Fixed Asset

Turnover N.S/F.A

41,045,543/16,918

,844=2.43

32,991,603/5,234,

463=6.30

20,158,860/4,449,

324=4.53

9,233,881/3,969,0

06=2.33

8,944,260/3,754,2

36=2.38

Market Ratios

Earning per share

(EPS) EAT/TOS

8,402,590/809,375

=10.38

9,468,232/647,500

=14.62

5,949,032/518,000

=11.48

3,701,544/518,000

=7.15

2,635,618/518,000

=5.09

Book Value per

share TSE/TOS

34,009,411/809,37

5=42.02

27,203,726/647,50

0=42.01

18,756,274/518,00

0=36.21

14,370,367/518,00

0=27.74

11,242,807/518,00

0=21.70

Revaluation per

share SOR/TOS

8,411,993/809,375

= Rs. 10.39

2,659,661/647,500

= Rs. 4.11

2,911,996/518,000

= Rs. 5.62

2,993,664/518,000

= Rs. 5.78

3,807,066/518,000

= Rs. 7.35

Leverage Ratios

Debt-to-Equity

ratio T.D/TSE

59,103,350/34,009

,411=1.74%

38,490,586/27,203

,726=1.41%

21,790,480/18,756

,274=1.16%

11,975,684/14,370

,637=0.83%

7,710,375/11,242,

807=0.69%

Debt Ratio/Debt-

to-Total Assets T.D/T.A

59,103,350/530,28

3,956=11.15%

38,490,586/423,26

5,873=9.09%

21,790,480/347,04

8,951=6.28%

11,975,684/272,61

2,663=4.39

7,710,375/216,924

,418=3.55%

*Figures in Times.


72

FINANCIAL RATIOS

Five Years Progress 2007 2006 2005 2004 2003

Profitability Ratios

Net profit after tax 20.47% 28.70% 29.51% 40.09% 29.47%

Gross spread ratio 58.74% 63.24% 70.00% 81.23% 78.89%

Income Expense ratio 1.87% 1.50% 1.50% 1.68% 1.79%

Return on Equity ratio (ROE) 24.71% 34.80% 31.72% 25.76% 23.44%

Return on Asset ratio (ROA) 1.58% 1.79% 1.71% 1.36% 1.21%

Loan/deposit ratio 74.53% 73.81% 70.81% 62.60% 51.94%

Activity Ratios*

Total asset turnover 7.74 7.79 5.80 3.39 4.12

Fixed Asset Turnover 2.43 6.30 4.53 2.33 2.38

Market Ratios

Earning per share (EPS) Rs. 10.38 Rs. 14.62 Rs. 11.48 Rs. 7.15 Rs. 5.09

Book Value per share Rs. 42.02 Rs. 42.01 Rs. 36.21 Rs. 27.74 Rs. 21.70

Revaluation per share Rs. 10.39 Rs. 4.11 Rs. 5.62 Rs. 5.78 Rs. 7.35

Leverage Ratios

Debt-to-Equity ratio 1.74% 1.41% 1.16% 0.83% 0.69%

Debt Ratio/Debt-to-Total Assets 11.15% 9.09% 6.28% 4.39% 3.55%

*Figures in Times.


73

4.1.3. GRAPHICAL REPRESENTATION OF RATIOS:

PROFITABILITY RATIOS:

0

10

20

30

40

50

60

70

80

90

%

2007 2006 2005 2004 2003

Years

Net Profit After Tax

Gross Spread Ratio

0

0.5

1

1.5

2

%

2007 2006 2005 2004 2003

Years

Income Expense Ratio

Return on Assets

0

10

20

30

40

50

60

70

80

%

2007 2006 2005 2004 2003

Years

Return on Equity

Loan/Deposit


74

ACTIVITY RATIOS:

0

1

2

3

4

5

6

7

x*

2007 2006 2005 2004 2003

Years

Fixed Assets Turnover

0

1

2

3

4

5

6

7

8

X*

2007 2006 2005 2004 2003

Years

Total Assets Turnover


75

MARKET RATIOS:

LEVERAGE RATIOS:

0

2

4

6

8

10

12

14

16

Rs.

2007 2006 2005 2004 2003

Years

Earning Per Share

Revaluation Per Share

0

5

10

15

20

25

30

35

40

45

Rs.

2007 2006 2005 2004 2003

Years

Book Value Per Share

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

%

2007 2006 2005 2004 2003

Years

Debt-to-Equity


76

4.1.4. EXPLANATION OF FINANCIAL RATIOS:

PROFITABILITY RATIOS:

These ratios indicate the organization’s overall effectiveness of operation. These ratios

use margin analysis and show the return on sales and capital employed.

� Net profit after tax measure profit remaining after deducting all expenses

including tax. It should be maximum. Markup/return/interest earned and non

markup interest income increased throughout the period i.e. year 2003 up to year

2007. While markup/return/interest expensed was decreased in 2004 as a result of

net profit after tax ratio increased in said year while from 2005 to 2007 it shows

an increasing trend also that cause a decrease in net profit after tax ratio. Non

markup interest expenses have also increasing trend.

� Gross Spread ratio measure profit after deducting cost of goods sold. Gross spread

ratio carry the same trend as explained in above paragraph of net profit after tax

ratio. Here Markup/return/interest expenses decreased proportionately in 2003

while from 2004 to 2007 it increased proportionately.

� Income expense ratio as shows the percentage of expenses so it should be lower.

Income expense ratio is increased in 2007 as compared to 2003 due to increase in

net markup interest income and non markup/return/interest income while it is

0

2

4

6

8

10

12

%

2007 2006 2005 2004 2003

Years

Debt-to-Total Asset


77

decreased in 2004, 2005, and 2006 respectively due to decrease in the markup and

non markup interest income.

� ROE measure the return on owner’s total investment into the business. It should

be maximum. ROE has increased from 2003 to 2006 due to increase in EAT

while ROE has decreased in 2007 due to decrease in EAT.

� ROA measure the return of total investment of business. It should be maximum.

ROA has similar increasing trend as the ROE because EAT of the bank has

increased from 2003 to 2006.

� Loan deposit ratio has the increasing trend due to increase in the bank’s deposits

and advances portfolio.

ACTIVITY RATIOS:

These ratios also known as efficiency or turnover ratios, measure how effectively the

organization is using its assets.

� Total asset turnover shows that by investment of Rupee One in average total

assets, of the entity how much sale is generated. This ratio shows the utilization of

total assets and it should be maximum. Total asset turnover has increased in 2007,

2006, and 2005 as compare to 2003 & 2004 due to increase in

markup/return/interest earned (Net Sales).

� Fixed assets turnover shows that by investment of Rupee One in fixed assets, of

the entity how much sale is generated. This ratio shows the utilization of fixed

assets and it should be maximum. Fixed asset turnover has increased in 2005 and

2006 due to greater increase in net sales and relatively slow increase in fixed

assets in these years.

MARKET RATIOS:

These ratios are calculated to analyze the market position of a business.

� EPS means Rupees earned per share by the company. It should be maximum. EPS

has an increasing trend from 2003 to 2006 because of increasing trend in EAT.


78

Slight drop is observed in EPS in 2007.

� Book value per share shows value of share as per books. It should be maximum.

Book value per share of the bank has increased due to increase in shareholders

equity.

� Revaluation per share of UBL has the increasing trend due to increase in surplus

on revaluation of assets per year.

LEVERAGE RATIOS:

Leverage ratios used to calculate the financial leverage of a company to get an idea of the

company's methods of financing or to measure its ability to meet financial obligations.

There are several different ratios, but the main factors looked at include debt, equity,

assets and interest expenses.

� Debt to equity ratio shows how much portion of long term funds was financed

through long term debt, maximum ratio is 60:40. Debt to equity ratio has

increased gradually from 2003 to 2007 because of increase in the bank’s

borrowings and shareholders equity.

� Debt to total assets or debt ratio serves a similar purpose to the debt to equity

ratio. It highlights the relative importance of debt financing to the firm by

showing the percentage of the organization’s assets that is supported by debt

financing. Debt to total asset ratio has also increased gradually from 2003 to 2007

because of increase in borrowings and total assets.


79

4.1.5. HORIZONTAL ANALYSIS:

4.1.5.1.1. HORIZONTAL ANALYSIS OF FIVE YEARS BALANCE SHEET:

2007 2006 2005 2004 2003

Assets


treasury banks 233% 183% 97% 38% 100%

Balances with other banks (63%) 23% 12% 55% 100%


institutions 7.3% 28% (23%) (21%) 100%

Investments 105% 19% 12% (2.8%) 100%

Advances 211% 157% 113% 50% 100%

Fixed assets 351% 39% 19% 5.7% 100%

Deferred tax asset – net (100%) (83%) (59%) (5.3%) 100%

Taxation Recoverable (100%) (100%) (100%) (100%) 100%

Other assets 297% 233% 161% 48% 100%

Total Assets 144% 95% 60% 26% 100%

Liabilities

Bills payable 104% 53% 40% 28% 100%

Borrowings 667% 399% 183% 55% 100%

Deposits and other accounts 117% 81% 56% 24% 100%

Sub-ordinated loans 100% 100% 100% 100% -


subject to finance lease (100%) (100%) (100%) (99%) 100%

Deferred tax liabilities - net 100% - - - -

Deferred liabilities (100%) (100%) (100%) (100%) 100%

Other liabilities 182% 104% 37% 26% 100%

Total Liabilities 142% 95% 61% 26% 100%

Represented By:

Share capital 56% 25% - - 100%

Reserves 119% 77% 33% 26% 100%

Unappropriated profit 1031% 798% 431% 137% 100%

202% 142% 67% 28% 100%


- net 121% (30%) (24%) (21%) 100%

182% 98% 44% 15% 100%


Capital 144% 95% 60% 26% 100%


80

COMMENTS ON HORIZONTAL ANALYSIS OF FIVE YEARS BALANCE SHEET:

TOTAL ASSETS:

Total assets of United Bank Limited have increased from Year 2003 to year 2007.

As compared to 2003:

In Year 2004 there is an increase of 26% in total assets of the bank. This increase is due

to increase in both local and foreign currency cash and balances with the treasury banks

in hand. This increase is 38%. The other reason of this increase in total assets is due to

increase in balances with other banks in the form of current accounts and deposit

accounts which increased by 55%. Advances also increased by 50% in the form of loans,

cash credits and running finances. Other assets are also increase by 48%.

In Year 2005 total assets increased by 60% as compare to 2003 and 27% increase as

compare to 2004. This increase is because of:

97% increase in cash and balances with other banks in the form of cash and balances with

SBP. Advances increased by 113% as compare to 2003 in 2005. Here advances portfolio

is 50% higher than 2004. Increase in advances is due to increase in loans, cash credits and

running finances given in Pakistan and outside Pakistan. Investment increased by 12% in

2005 as compare to 2003 due to increase in market treasury bills and bank’s first time

investment in Government of Pakistan Islamic Bonds. Fixed assets of the bank also

increased by 19% in 2005 as compare to 2003. This is because of major increase in

intangible assets, property and equipment. Other assets also increased by 161% in 2005.

This percentage is 76% higher than 2004.

In Year 2006 total assets have increased by 95% as compare to year 2003. This shows

more increase of 69% and 35% in total assets in 2004 and 2005 respectively. This

increase in total assets is because of:

Cash and balances with other banks increased by 183% which show an increase of 44%

as compare to 2005, where the increase is 105% as compare to 2004. Advances


81

increased by 157%. Lending to financial institutions increased by 28%. Fixed assets

increased by 39% and other assets increased by 233%. This percentage of other assets is

28% higher than 2005.

In Year 2007 total assets have increased by 144% as compare to 2003. In 2007 this

increase in total assets are 95%, 53% and 25% more than 2004, 2005, and 2006

respectively. This increase is due to following reasons:

Cash and balances with other banks have increased by 233%. This increase is due to

increase in local and foreign currency (in hand) cash and balances with other banks, local

currency foreign accounts and increase in foreign currency accounts held with National

Bank of Pakistan (NBP). Investment increased by 105% which is 72% higher than 2006.

This is due to investment in Pakistan Investment Bonds, Government of Pakistan Islamic

bonds, Market Treasury Bills, and Government of Pakistan-US Dollar / Euro bonds.

Advances increased 211% which is 21% higher than 2006. Fixed assets also increased

351%. Major increase is due to in property and equipment material. This increase is

223% higher than 2006. Other assets increased 297%.

TOTAL LIABILITIES:

As compare to 2003:

In Year 2004 total liabilities have increased in 2004 by 26% as compared to 2003. This

increase is due to:

28% increase in bills payable. These bills are payable in Pakistan and outside Pakistan.

55% increase in borrowings. These borrowings include borrowings from SBP. 100%

increase in subordinated loans due to Term Finance Certificates (TFC’s). 26% increase in

other liabilities. 24% increase in deposits and other accounts. This increase is due to

increase in saving, fixed deposits, and major increase in current accounts-non

remunerative.

In Year 2005 total liabilities have increased 61% in this year comparing it with 2003. In


82

2005 this increase is 27% more than 2004. This increase is due to:

40% increase in bills payable. This is due to increase in bills payable in Pakistan. 183%

increase in borrowings. These borrowings are greater than 2004 and carry a difference of

82% (increase). This is because of secured borrowings from the SBP under export

refinance scheme and long term financing under export oriented projects have increased.

While call borrowings and trading liabilities (unsecured) also increased significantly.

56% increase in deposits and other accounts. Major increase is seen in fixed; current

accounts-remunerative and non-remunerative also increase in current accounts

remunerative of financial institutions. 37% increase in other liabilities.

In Year 2006 total liabilities have increased by 95% as compared to 2003. This increase

is 54% and 21% more than in 2004 and 2005 respectively. This increase is due to:

399% increase in borrowings due to increase in repurchase agreement, export refinance

scheme, and long term finance under export oriented projects. These borrowings are 77%

more than in 2005. 81% increase in deposits and other accounts due to major increase in

fixed, saving, current accounts remunerative and non-remunerative. 104% increase in

other liabilities.

In Year 2007 total liabilities have increased by 142% as compared to 2003. This increase

is 24%, 50% and 91% greater than in 2004, 2005 and 2006 respectively. This increase is

due to:

Major increase in bills payable which is 104% in 2007. Increase in difference is 33% with

2006. This increase is due to increase in repurchase agreement borrowings and call

borrowings. Borrowings increased by 667% which is 54% more than in 2006. 117%

increase in deposits and other accounts. This increase is due to significant increase in

fixed, saving, and current accounts remunerative. In 2007 there is an increase of 100% in

deferred tax liabilities-net. Other liabilities also increased by 142% due to major increase

in branch adjustment account.


83

TOTAL SHARE CAPITAL: (OWNER’S EQUITY)

As compare to 2003:

In Year 2004 share capital is increased by 15% as compared to 2003 due to increase in:

26% in reserves and 137 increases in unappropriated profit. In Year 2005 share capital is

increased by 44% as compared to 2003. This increase is 25% more than in 2004. This

increase is due to increase in: 33% in reserves and 431% increase in unappropriated

profit. This Unappropriated profit is 124% more than in 2004.

In Year 2006 share capital is increased by 98% as compared to 2003. This increase is

38% more than in 2005. This increase is due to increase in: 25% increase in share capital

issued for cash and as bonus shares. 77% increase in reserves. Major change occurred in

unappropriated profit which is increased by 798% which is 69% more than in 2005. In

Year 2007 share capital is increased by 182% as compared to 2003. This increase is 42%

more than in 2006. This increase is due to increase in: 56% increase in share capital.

119% increase in reserves. Major increased occurred of 1031% in unappropriated profit.

Also an increase of 121% of surplus on revaluation of assets-net, increase in fixed assets

and securities.


84

4.1.5.1.2. HORIZONTAL ANALYSIS OF FIVE YEARS PROFIT & LOSS ACCOUNT:

2007 2006 2005 2004 2003


earned 359% 269% 125% 3% 100%


expensed 797% 542% 220% (8%) 100%

Net mark-up / interest income 242% 196% 100% 6% 100%


advances - net 1135% 343% 187% (2%) 100%


value of investments – net 106% (28%) 8% (196%) 100%

Bad debts written off directly 7151% 1988% 196% (70%) 100%



Provisions

172% 186% 95% 10% 100%


Income

Fee, Commission and

brokerage income 258% 207% 76% 15% 100%

Dividend income 583% 943% 152% 92% 100%


currencies 89% 51% 55% 53% 100%

Gain on sale of securities (57%) (86%) (81%) (52%) 100%


of investments 100% 100% 100% - -

Other income 166% 22% 99% 77% 100%


interest income 98% 51% 10% (1%) 100%

142% 131% 60% 6% 100%


Expenses

Administrative expenses 118% 78% 28% 10% 100%


net (57%) (59%) (39%) 106% 100%

Other charges 217% 372% 28% 90% 100%


expenses 104% 67% 22% 0.88% 100%

Profit Before Taxation 201% 230% 119% 13% 100%

Taxation 172% 185% 109% (30%) 100%

Profit After Taxation 219% 259% 126% 40% 100%


forward 1659% 1022% 511% 274% 100%

1033% 815% 402% 177% 100%



of tax

14% 29% 28% 29% 100%


Appropriation 993% 785% 387% 171% 100%


85

COMMENTS ON HORIZONTAL ANALYSIS OF FIVE YEARS PROFIT & LOSS ACCOUNT:

As compared to 2003:

YEAR 2004:

In Year 2004 profit increased by 171% as compared to 2003. This increase is due to:

Markup / interest earned are increased by 3% as compare to 2003. This increase is due to

increase in: on loans and advances interest earned, on deposits with financial institutions

and on securities purchase under resale agreements. Net markup / interest income is

increased by 6% while markup interest expense is decreased by (8%) due to decrease in

on deposits interest expense. Net markup / interest income after provisions is increased

by 10% as compared to 2003. Total income has increased in 2004 by 6%. This increase is

due to increase in fee, commission and brokerage income by 15%, dividend income by

92%, and income in dealing in foreign currencies by 53%, other income by 77%. Other

income is increased due to increase in charges recovered from customers. While gain on

sale of securities has decreased by (52%).

Profit before taxation is increased by 13%. Taxes reduce by (30%). Profit after tax has

increased by 40%. Unappropriated profit brought forward from last year is increased by

274%. This results 177% increase. Transfer of fixed assets from surplus also increases by

29%. That’s why profit available for appropriation is increased by 171%.

YEAR 2005:

In Year 2005 profit increased by 387%% as comparing it with 2003. This increase in

profit is 80% greater than in 2004. This increase is due to:

Markup / return / interest earned are increased by 125%. This increase is 118% greater

than in 2004. This significant increase in 2005 is due to increase in: on loans and

advances from customers and financial institutions and on investment in available for sale

securities and associates, on deposits with financial institutions, on discount income and

on securities purchased under resale agreements. Net markup / interest income is


86

increased by 100% which is 88% more than in 2004. While interest expense has

increased by 220% due to increase in: on deposits interest expense, on securities sold on

repurchase agreement, on long term and other short tem borrowings , on securities sold

under repurchase agreements.. Net markup interest income is after provisions are

increased by 95% as compared to 2003. Total income has increased in 2005 by 60%

which is 52% more than in 2004. This increase is due to: 76% increase in fee,

commission and brokerage income, 152% increase in dividend income, 55% increase in

income from dealing in foreign currencies. 100% increase in unrealized loss on

revaluation of investment and other income is increased by 99% while gain on sale of

securities decrease by (81%).

Profit before taxation increased by 119%. This increase is 94% more than in 2004. Taxes

increased by 109%. Profit after taxation is increased by 126%. Unappropriated profit

brought forward increased by 511% which 137% more than in 2004. This all causes an

increase of 387% in profit available for appropriation.

YEAR 2006:

In Year 2006 profit increased by 785% as comparing it with 2003. This increase in profit

is 226% and 82% more than in 2004 and 2005 respectively. This increase is due to:

Markup / interest earned are increased 269% as compare to 2003. This increase is due to:

increase in interest earned on loans and advances from customers and financial

institutions, and interest earned on investment. Net markup / interest income is increased

by 196% as compared to 2003 which is 48% higher than in 2005. While interest expense

is increased by 542% due to major increase in interest expense on deposits, on securities

sold under repurchase agreements and on long term borrowings. Net markup interest

income increased by 186% in 2006 as comparing it with 2003. Total income has

increased by 131% as compared to 2003 which is 44% and 119% more than in 2005%

and 2004 respectively. This increase is due to: 207% increase in fee, commission and

brokerage income. This is an increase of 74% as compared to 2005. 943% increase in

dividend income. 51% increase in income from dealing in foreign currencies. 22%


87

increase in other income. 100% increase in unrealized loss on revaluation of investments.

While (86%) decrease on gain on sale of securities.

Profit before tax increased by 230% which is 51% more than in 2005. Taxes ratio is

increased by 185% in 2006. Profit after tax is increased by 259 which is 59% higher than

in 2005. Unappropriated profit doubled in this year. These changes or increase causes an

increase of 785% in the profit available for appropriation.

YEAR 2007:

In Year 2007 profit increased by 933% comparing it with 2003. This increase in profit is

24%, 124% and 303% more than in 2006, 2005 and 2004 respectively. This increase is

due to:

Markup / return / interest earned are increased by 359% as compare to 2003. This

increase is due to: increase in interest earned on loans and advances from customers and

financial institutions, discount income, deposit with financial institutions. Net markup /

interest income is increased by 242% while interest expense increased by 797% due to

increase in expense on deposit, on long term borrowings. Net markup interest income

increased by 16% as compare to 2006. Total income has increased by 142% which shows

an increase of 5% than in 2006. This increase is due to major increase in: fee,

commission and brokerage income by 258%. Dividend income by 583%, 166% increase

in other income. 89% increase in foreign currency income and 100% increase in

revaluation of investment.

Increase in profit before tax is slow than in 2006.Actually profit before tax is decreased

here in 2007 by (9%) as compare to 2006. It is only 201% which (9%) less than in 2006.

Profit after tax increase by 219% which shows a slow increase as compared to 2006.

Major increase is seen in unappropriated profit brought forward 1659% which is 69%

higher than in 2006. Overall this causes an increase of 993% in profit available for

appropriation.


88

4.1.6. VERTICAL ANALYSIS:

4.1.6.1.1. VERTICAL ANALYSIS OF FIVE YEARS BALANCE SHEET:

2007 2006 2005 2004 2003

Assets


treasury banks 10.85% 11.56% 9.82% 8.75% 7.96%

Balances with other banks 0.79% 3.32% 3.66% 6.49% 5.25%


institutions 4.67% 6.99% 5.15% 6.73% 10.65%

Investments 21.80% 15.89% 18.16% 20.16% 26.06%

Advances 56.45% 58.43% 59.02% 52.88% 44.31%

Fixed assets 3.19% 1.24% 1.28% 1.45% 1.73%

Deferred tax asset – net - 0.21% 0.65% 1.91% 2.53%

Taxation Recoverable - - - - 0.13%

Other assets 2.25% 2.36% 2.26% 1.63% 1.38%

Total Assets 100% 100% 100% 100% 100%

Liabilities

Bills payable 1.15% 1.08% 1.20% 1.40% 1.37%

Borrowings 11.14% 9.09% 6.28% 4.39% 3.55%

Deposits and other accounts 75.74% 79.16% 83.34% 84.46% 85.32%

Sub-ordinated loans 1.13% 1.42% 1.15% 1.28% -


subject to finance lease - - - 0.00% 0.02%

Deferred tax liabilities - net 0.42% - - - -

Deferred liabilities - - - - 0.71%

Other liabilities 2.42% 2.19% 1.79% 2.09% 2.09%

Total Liabilities 92% 92.94% 93.76% 93.63% 93.06%

Represented By:

Share capital 1.53% 1.53% 1.49% 1.90% 2.39%

Reserves 1.93% 1.96% 1.79% 2.17% 2.16%

Unappropriated profit 2.95% 2.94% 2.12% 1.20% 0.64%

6.41% 6.43% 5.40% 5.27% 5.19%


- net 1.59% 0.63% 0.84% 1.10% 1.75%

8% 7.06% 6.24% 6.37% 6.94%


Capital 100% 100% 100% 100% 100%


89

COMMENTS ON VERTICAL ANALYSIS OF FIVE YEARS BALANCE SHEET:

Comparing figure from 2003 to 2007.

TOTAL ASSETS:

Here Total Assets includes: Current Assets + Fixed Assets + Other Assets. Where

Current Assets include: All assets excluding Fixed Assets and Other Assets.

Current assets of the bank have increasing trend from 2003 to 2004 (96.89% and 96.92%

respectively). This increase is due to increase in: cash and balances with treasury banks,

balances with other banks, advances. In 2003 and 2004 bank need the current assets more

to fund their day-to-day operations. This increase in current assets is due to increase in:

local and foreign currency cash and balances with the treasury banks, balances with other

banks in current and deposit accounts form, loans, cash credits and running finances.

Deposits with State Bank of Pakistan are maintained to comply with the statutory

requirements issued from time to time. Deposits with other central banks are maintained

to meet the minimum cash reserves and capital requirements pertaining to the foreign

branches of the Bank. Although these current assets are in good position in 2005, 2006,

and in 2007 but there is slight or minor decrease. This slight decrease is due to decrease

in: Balances with other banks, lending to financial institutions, investments. If current

assets fall short more than this in future, then the bank will have to scramble for other

sources of short-term funding, either by taking debt. But overall current assets of the bank

are in healthy and satisfactory position.

Fixed assets increased in 2007 as compare to 2003 but like current assets there is a slight

decrease in fixed assets. Increase is due to increase in capital work-in-progress, property

and equipment. Fixed assets are the long-term base of the bank’s operation strategy,

represented by all the equipment, facilities, IT infrastructure and long-term contracts the

bank has invested in to conduct business. These assets are the revenue generators, which

together form the base from which the company functions from week to week. So these

are also well handled by the bank.


90

Other assets have the increasing trend since 2003. This increase in other assets is due to

increase in: Income / mark-up accrued in local currency and income / mark-up accrued in

foreign currency.

TOTAL LIABILITIES:

Total liabilities of UBL have the increasing trend over all. Total liabilities have increased

from 2003 to 2005. While there is a slight decrease in 2006 and 2007. But this decrease is

not too big. Increase in liabilities is due to: Borrowings, subordinated loans, other

liabilities and deposits and other accounts. This increase is due to increase in: Borrowings

from SBP, term finance certificates. While these borrowings have been made from SBP

for providing financing facilities to customers for import of machinery, plant, equipment

and accessories thereof (not manufactured locally) by export oriented units. Money

deposited with a bank becomes a liability of the bank, because the bank has an obligation

to pay the depositor the money deposited; usually on demand. (The money deposited is

an asset for the depositor; but this asset will not be recorded by the bank because it is not

the bank's asset. This shows that bank’s need more debt from other financial institutions

from 2003 to 2005 especially. However there is no major increase found in the bank’s

liabilities portion. Liabilities increase also shows that bank’s need more funds in these

years to complete its higher operational activities.

OWNER’S EQUITY OR SHARE CAPITAL:

Share capital or issued capital or capital stock refers to the portion of a company's equity

that has been obtained (or will be obtained) by trading stock to a shareholder for cash or

an equivalent item of capital value. Share capital or owner’s equity has increased from

2003 to 2007. This increase is due to increase in reserves and unappropriated profit. In

2007 Owner’s equity has increased by 8% as compare to 2003 which is 6.94%.


91

4.1.6.1.2. VERTICAL ANALYSIS OF FIVE YEARS PROFIT & LOSS ACCOUNTS:

2007 2006 2005 2004 2003


earned 100% 100% 100% 100% 100%


expensed 41.26% 36.76% 30.00% 18.77% 21.11%

Net mark-up / interest income 58.74% 63.24% 70.00% 81.23% 78.89%


advances - net 13.38% 5.98% 6.33% 4.72% 4.97%


value of investments – net (0.02%) 0.23% 0.56% (1.09%) 1.17%

Bad debts written off directly 2.28% 0.82% 0.19% 0.04% 0.14%



Provisions

43.09% 56.22% 62.92% 77.56% 72.60%


Income

Fee, Commission and

brokerage income 12.58% 13.44% 12.62% 17.92% 16.13%

Dividend income 1.34% 2.54% 1.00% 1.67% 0.90%


currencies 2.02% 2.00% 3.35% 7.24% 4.88%

Gain on sale of securities 2.07% 0.85% 1.90% 10.27% 22.10%


of investments (0.04%) (0.01%) (0.004%) - -

Other income 3.94% 2.24% 6.00% 11.62% 6.79%


interest income 21.91% 21.06% 24.87% 48.71% 50.80%

65% 77.28% 87.79% 126.27% 123.41%


Expenses

Administrative expenses 32.70% 33.20% 39.06% 73.58% 68.80%


net 0.56% 0.69% 1.66% (0.37%) 6.17%

Other charges 0.04% 0.08% 0.04% 0.11% 0.06%


expenses 33.32% 33.96% 40.76% 73.32% 75.03%

Profit Before Taxation 31.68% 43.32% 47.03% 52.95% 48.37%

Taxation 11.21% 14.62% 17.52% 12.87% 18.91%

Profit After Taxation 20.47% 28.70% 29.51% 40.09% 29.47%


forward 30.28% 22.28% 16.24% 14.99% (8.91%)

50.75% 50.98% 45.75% 55.08% 20.56%



of tax

0.15% 0.29% 0.47% 1.02% 0.82%


Appropriation 50.91% 51.27% 46.22% 56.10% 21.37%


92

COMMENTS ON VERTICAL ANALYSIS OF FIVE YEARS PROFIT & LOSS ACCOUNTS:

Comparing figures from 2003 to 2007.

PROFIT AVAILABLE FOR APPROPRIATION:

Profit available for appropriation have the increasing trend overall from 2003 to 2007. In

2003 profit is 21.37% only which gradually increase by 56.10%, 46.22%, 51.27% and

50.91% in 2004, 2005, 2006, and 2007 respectively. This increase in profit is due to

following reasons:

Markup / return / interest expensed have increased from 2003 to 2007. Net markup /

interest income have increased but this increase is less than that’s in 2003 and 2004. In

2007 interest income is 58.74% while this percentage is 81.23% in 2004 and 78.89% in

2003.

Net markup / return / interest income after provisions have also increased but this

increased is slow as compare to 2003 and 2004. Total income has also increased from

2003 to 2004 but this ratio of increasing trend is slow in 2007, 2006 and 2005. This

increase is due to major increase in fee, commission and brokerage income, dividend

income and other income. Administrative expenses have increased from 2003 to 2007.

This increase in administrative expenses due to increase in personnel cost, premises cost

and other operating cost. Profit before taxation is 31.68% while this percentage is 48.37%

in 2003. While profit after tax has a mix up trend of increase and decrease. In 2005 profit

after tax has increased 40.09% while this percentage is 20.47% in 2007. Unappropriated

profit brought forward has the increasing trend. Unappropriated profit that is brought

forward is 30.28% in 2007. After adding the unappropriated profit this profit is increased

by 50.98% and 50.75% in 2006 and 2007 respectively. This all causes an increasing trend

in the profit available for appropriation. These figures of profit available for

appropriation tell that bank has gaining a significant growth in recent years after its

privatization and better management skills.


93

4.2. ORGANIZATIONAL ANALYSIS: (COMPARISON WITH OTHER BANKS)

UBL COMPARISON WITH MUSLIM COMMERCIAL BANK & HABIB BANK LIMITED:

Particulars UBL MCB HBL

-----------------------------(Rupees in ‘000)------------------------------

Deposits 401,637,816 292,098,066 531,298,127

Advances 299,354,736 218,960,598 382,172,734

Profit 8,402,590 15,265,562 10,084,037

Branches* 1,079 1,026 1,489

Employees* 14,904 17,120 14,552

*Figures in Numbers.

If we compare UBL with MCB and HBL, we observe that HBL is a big banking group as

compare to UBL and MCB. Deposit wise HBL is in front of both UBL and MCB.

Although UBL is in good position as compare to MCB in deposit situation. It shows

customer’s trust on both banks. HBL again ahead in case of advances portfolio as

compare to UBL and MCB. Here health portfolio of advances places the UBL in second

position which is a good indicator. But profit wise MCB is in front of both HBL and UBL

in year 2007. Branches of HBL are greater than UBL and MCB. There is a less difference

between UBL and MCB in number of branches. MCB has greater number of employees

as compared to UBL and HBL.

These figures show that HBL and MCB are in much better position than UBL. After the

privatization business of UBL taking high growth. The Bank's long term rating is AA +,

which denotes good credit quality. Protection factors are strong. Risk is modest but may

vary slightly from time to time because of economic conditions. The short-term rating is

A-1+, which denotes the highest certainty of timely payment. Short-term liquidity,

including internal operating factors and / or access to alternative sources of funds, is

outstanding and safety is just below risk free Government of Pakistan's short-term

obligations.

The bank is increasing resource mobilization through regular deposit campaigns and

accelerating the process of recovery of outstanding advances and non-performing assets.

The Bank is making every effort to meet the up-coming challenges through strategic


94

planning and making the best use of the resources at its command. These financial figures

and improving condition of the bank shows that UBL is among the leading commercial

banks of Pakistan.

4.3. FUTURE PROSPECTS OF THE ORGANIZATION: (UBL)

UBL is focusing on bringing the next level of consumer banking in Pakistan,

emphasizing on its “You First” vision. UBL aims to offer products that will change the

industry norms by providing innovations, options and flexibility unmatched so far by any

other bank due to the investment made in the state-of-the-art systems at UBL. UBL plans

to expand the market by its vast distribution network. UBL’s products & services are

being developed keeping in view the increased level of consumer awareness due to

increased accessibility of information, and hence the demand for better products and

services with options.

Management believes that their business process reengineering initiative supported by

their customized core banking technology platform will also help them to compete more

effectively in the changing landscape of the Pakistani banking sector. Bank’s Credit Risk

Environmental and Monitoring system which is in its final stages of implementation is

expected to assist them in more effective post disbursement monitoring. They expect

their efforts in this area to show positive results in the coming months.

Macro economic and political instability, going forward, will continue to impact growth

and profitability of the banking sector. Management believes that political reconciliation

will result in renewed attention to economic management and hence improvement in the

operating environment.

Management is focusing on converting the manual branches into online branching system

and also to expend their branch network domestically and internationally. Management is

also keen to increase the ATM network in future and plans have prepared for it.

Management believes the bank is well positioned to take advantage of the next economic

upturn.


95

5. SHORT – FALLS / WEAKNESSES OF THE ORGANIZATION:

Following are the weaknesses of the United Bank Limited;

� The bank achieved a profit before tax of Rs. 13 billion in 2007 which is 9% lower

than in that of last year.

� Asset quality was impacted by an increase in non performing loans in the

consumer and commercial business.

� Fixed asset turnover ratio was decreased in 2007. This shows the decrease in sales

in 2007.

� Net profit after tax ratio decreased in 2007.

� UBL provisioning coverage of NPL Loans also fell from 84% to 79%.

� Given the monetary tightening, the consumer portfolios throughout the industry

witnessed deterioration in 2007.

� During the Year 2007 weaknesses identified in the Internal Control System by the

auditors.

� EPS has decreased from 14.62% (2006) to 10.38% (2007).


96

6. CONCLUSION:

United Bank Limited is one of the largest Commercial Bank in Pakistan. UBL has a

growing presence in the international market through 17 branches in various foreign

countries, with significant activity in Middle Eastern markets, particularly in United Arab

Emirates and the Kingdom of Bahrain. Additional branches in the Arabian region will be

established during the ongoing year.

Paid-up capital of UBL was increased by way of bonus issue during FY06. Along with

healthy reserves and retained earnings, UBL’s total net worth, adjusted for final cash

dividend, increased to Rs. 27.9b (FY05: Rs. 20.4b). Deposit base of the bank increased

by approximately 16% to Rs. 335.1b (FY05: Rs. 289.3b) as at December 31, 2006, with

significant increase coming through the fixed deposit schemes. Deposits further increase

in 2007. As UBL has a growing international presence, almost 19% of the total deposit

base is mobilized from the overseas branches and contributed almost 52% to the growth

during FY06. Increasing markup rates on the banking book, resulted in a substantial

widening of spreads (FY06: 5.4%; FY05: 4.5%) and drove interest based earnings to new

highs. Profitability was also supported by increased fee and commission based income.

Profitability is increased in 2007 (20.9b) by 23% as compared to 2006 (16.9).

Net advances increased to Rs. 299.3b (FY06: Rs. 247.3b) during 2007. Both corporate

and consumer lending have contributed to the growth achieved during FY06. The bank’s

consumer portfolio is one of the largest in the sector at Rs. 44.5b (FY05: Rs. 28.3b),

where the auto product has acquired a significant market share. Overseas operations have

also contributed to this growth. While increase in overseas operations has a risk benefit in

terms of increased geographical diversification, the bank has taken some fairly large

exposures. Total asset size of UBL increased by approximately 25% to Rs. 530.3b as at

December 31, 2007 from Rs. 423.3b at the end of the previous year. In future years, the

bank is likely to sustain strong profitability indicators with the persistent growth in

lending and continued investment in high margin consumer lending. This all shows a well

and rapid growth of this world class bank.


97

7. RECOMMENDATIONS:

On the basis of financial analysis we see that the Bank’s strengths are more than its

weaknesses but still there is room for a lot of improvement and innovation. Following are

some of the suggestions and recommendations that I want to give on the basis of short-

falls / weaknesses found in the bank.

� The profitability in 2007 was impacted by a change in the prudential Regulations

according to which the benefit of collateral was withdrawn while calculating the

provisioning requirements against non – performing loans. This resulted in an

incremental provisioning charge of Rs. 3.8 billion on UBL books in year 2007.

Had this charge not been taken, the increase in profit before tax would have been

18% higher from the same period last year. So it must be improved.

� Asset quality was impacted by an increase in non performing loans (consumer and

commercial business) which coupled with subjective classifications by the SBP

resulted gross NPL to gross loans amount increased. In this regard SAM (Special

Assets department) of UBL must take progressive steps with the collaboration of

CAD department to low down the NPL’s ratio by carrying effective management

of credit risk.

� In 2007 decrease in fixed asset turnover ratio shows the decrease in sales of the

bank. Bank must utilize its resources and fixed assets especially in proper manner

to generate higher sales in future. Healthy portfolio of fixed assets must be

maintained by the bank.

� Net profit after tax ratio decreased in 2007. In this regard bank must control its

interest expenses and administrative expenses because administrative expenses

grew by 23% to Rs. 13.4 billion in year 2007, mainly due to continued

investments in upgrading and expending UBL branch network domestically and

overseas, higher personnel cost on account of the bank’s Early Retirement

Scheme and ongoing costs in the consumer business. Although these steps are

taken by the bank to upgrade its branches and operations but it cause decrease in

the net profit after tax ratio in 2007 as comparing it with 2006 and respective

years. So a better control is required on the bank’s expenses.


98

� Provisioning coverage of NPL Loans must be improved by both SAM and CAD

departments. The management of risks and uncertainties associated with problem

credits requires a different and more intense approach than normal management.

The unit must staff with experienced officers who possess the specialized

expertise required for managing problem credits.

� Consumer portfolios throughout the industry witnessed deterioration in 2007

because of monetary tightening conditions. So there must be close monitoring of

portfolios and enforcing appropriate controls to manage delinquencies and

mitigate the impact of structured fraud, which has been making subtle advances in

the industry.

� Management ensures the efficient and effective Internal Control System by risk

assessment, identifying control objectives, reviewing pertinent policies /

procedures, establishing relevant control procedures and monitoring. All policies

and procedures are monitored, reviewed and compared with existing requirements

and necessary amendments are made accordingly. Steps must taken to avoid non -

repetition of those in all possible manner. Management took steps to effectively

monitor control environment of the bank, resulted in improvement in the overall

working of the branches and departments.

� Earnings per share is generally considered to be the single most important

variable in determining a share's price. An important aspect of EPS that's often

ignored is the capital that is required to generate the earnings (net income) in the

calculation. Two companies could generate the same EPS number, but one could

do so with less equity (investment) - that company would be more efficient at

using its capital to generate income and, all other things being equal would be a

"better" company. Investors also need to be aware of earnings manipulation that

will affect the quality of the earnings number. It is important not to rely on any

one financial measure, but to use it in conjunction with statement analysis and

other measures. EPS can be increased by increasing the revenue and decreasing

the expenses of the bank. Cost also plays a major role in generating EPS. If

management focus to have good cost control on EPS.


99

8. REFERENCES:

All of the references and sources from where the data gathered for this report are

mentioned herewith for your kind concern.

ORGANIZATION:

� Annual Reports of United Bank Limited.

� UBL Credit Policy.

� CARS and CREAMS Manual of UBL.

� http://www.ubl.com.pk.

� https://ublfunds.com/ubl/financial_reports.htm.

WEB PORTALS:

� http://www.sbp.com.pk.

� http://www.ibp.org.

� http://www.thebankers.com.

� http://www.pacra.com.pk.

� http://www.gulfeconomist.com.pk.

� http://www.privatisation.gov.pk.

� http://www.finance.gov.pk.

BOOKS:

� Practice and Law of Banking in Pakistan by Dr. Asrar H. Siddiqui.

� Fundamentals of Financial Management by James C. Van Horne & John M.

Wachowicz, JR.


100

9. ANNEXES:

ORGANGRAMS:

MANAGEMENT AT HEAD OFFICE

Board of Directors

Chairman of the Board

Managing Director

Director

Credit

Division

Admin.

Division

Finance &

Int’l

Treasury

Division

Recovery

Division

I.T. &

Operations

Division

Audit &

Inspection

Division

Business

and

Marketing

Division

Regional Offices

Multan

Gujrawala

Faisalabad

Karachi

Lahore

Rawalpindi

Peshawar

Quetta


101

MANAGEMENT OF A TYPICAL BRANCH

Manager/ Chief Manager

Manager Credits Manager Operations Manager Foreign Exchange

Second Officer Second Officer

Second Officer

Procession officer Administration Officer Import Incharge/Officer

Distribution Officer Internal Working Officer Export Incharge/Officer

Correspondence Officer Internal Working Officer


102

LIST OF ILLUSTRATIONS

Words Abbreviation

Abu Dhabi Group ADG

Annual Program Budget APB

Auto Teller Machines ATM

Bestway Group BG

Branch Manager BM

CAD-Credit Administration Management System CCAMS

Capital Expenditures CAPEX

Certificate of Deposit COD

Chief Executive Officer CEO

Chief Financial Officer CFO

Commercial Banking CB

Continuous Funding System CFS

Corporate Banking Group CBG

Credit Administration Department CAD

Credit Analyst Reporting System CARS

Credit Application CA

Credit Information Bureau CIB

Credit Risk Environment’s Administration & Management

System

CREAMS

Customer Relationship Manager CRM

Development Financial Institution DFI

Disbursement Authorization Certificate DAC

End Service Benefits ESB

Financial Institution FI

Financial Manager FM

Global Address List GAL

Habib Bank Limited HBL

Head Office HO

Information Technology Group ITG

Investment Banking Group IBG

Islamic Banking IB

Karachi Interbank Offered Rate KIBOR

Management Information System MIS

Market Treasury Bills MTB

Muslim Commercial Bank MCB


103

Words Abbreviation

Net Take Home Salary NTHS

Officer For Financial and Assets Management Services OFAMS

Personal Digital Assistant PDA

Relationship Manager RM

Risk Management Department RMD

Rupee Travelers Cheque RTC

Self Employed Businessman SEB

Self Employed Professional SEP

State Bank of Pakistan SBP

Term Deposit Receipt TDR

Term Finance Certificates TFC’s

Total Branch Automation TBA

United Bank Limited UBL

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