research work1

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PREFACE:

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

academic career. To work in a bank, to acquaint with its working mechanism was alwaysa point of interest for me and God gave me a golden opportunity to complete my

internship at UBL, one of the leading bank in Pakistan and well known in world due to its

appearance in the international markets. I had a general idea about the banking, but once Ipractically started the internship in banking field I observed much about banking, I

realized the importance and significance of commercial banking for the development of

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

but by the grace of Almighty Allah aid my internship in a befitting manner and I learneda lot about the overall banking arena. This expanded my vision about the banking sector,

which in turn enabled me to make an appraisal of the economic situation of our country.

This report is a thorough essence of my rigorous studies which I undergonethrough in a period of two months in a commercial bank. I have exclusively

studied and observed the operations/ functioning of the bank and tried my best toabreast myself with all the dimensions of the banks. The purpose of this report is

to evaluate the performance of UBL in diversified avenues and give concrete

recommendation for further improvement. Although the bank is functioning

satisfactory, but the path to ultimate success is still full of threats and hurdles.

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

appraising its pros and cons and feeling to be a significant part of the bank.

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

LIST OF CONTENTS

PREFACE I

TABLE OF CONTENTS IILIST OF TABLES V

LIST OF GRAPH VI

LIST OF CHARTS VIIEXECUTIVE SUMMARY IX

Section # 1

INTRODUCTION OF THE REPORT

1.1 Introduction 1


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1.2 Purpose of Study 1

1.3 Scope of Study 1

1.4 Limitations of Study 21.5 Methodology of Report 2

1.6 Scheme of Report 3

Section # 2

Chapter 2

Introduction to UBL

2.1 Banking History 42.2 Banking in Pakistan 4

2.3 Towards Islamization of Economy 4

2.4 Birth of UBL 6

2.5 Number of Branches 62.6 Subsidiaries 7

2.7 Functions of UBL 72.8 Role of UBL in Banking Sector 7

2.8 Computerization of UBL 9

Chapter 3

Deposits, Remittances, Credit & Clearing Departments

3.1 Deposit Department 12

3.1.1 Functions performed by Deposit Department 12

3.1.2 Types of Accounts 133.1.3 Nature of Accounts 13

3.2 Remittances Department 14

3.2.1 Demand Draft 143.2.2 Telegraphic Transfer 15

3.2.3 Mail Transfer 15

3.2.4 Pay Order 16

3.2.5 Rupee Travelers Cheque 163.2.6 Uniremote 16

3.3 Credit Department of UBL 17

3.3.1 Credit department of UBL Shamsabad 173.3.2 Procedure for Financing 17

3.4 Clearing Department 19

3.4.1 Procedure for clearing of Cross cheques 203.4.2 IBC 21

3.4.3 LBC 21

3.4.4 OBC 21


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Section # 3

Chapter 4

Financial Analysis

4.1 Group and its Operations 22

4.2 Basis of Presentation 22

4.3 Significant Account Policies 234.4 Risk Management 25

4.5 Concentration of Credits and Deposits 26

4.6 Investment Portfolio 27

4.7 Profitability 274.8 FINANCIAL ANALYSIS 28

4.8.1 Common size analysis of Balance Sheet 28

4.8.2 Common size analysis of Income Statement 32

4.8.3 Financial Ratios 34

Chapter 5

Qualitative Analysis

5.1 Qualitative Analysis of UBL 415.2 SWOT Analysis 44

5.2.1 Strengths 45

5.2.2 Weaknesses 465.2.3 Opportunities 46

5.2.4 Threats

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Section # 4

Chapter 6

Recommendations

6.1 Recommendations 49

6.1 Human Resource Department 49

6.2 Credits and Advances 53

Section # 5

Chapter 7

Implementation Plan


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7.1 Action Plan 1 57

7.1.1 Franchise Agriculture Supplies Stores 57

7.2 Action Plan 2 597.2.1 Techniques for effective Management and Recovery of Advances 59

7.3 Action Plan 3 62

Bibliography 68

Annexure 69

LIST OF TABLES

1 Common size Analysis of Balance Sheet 30

2 Common Size analysis of Income Statement 33

3 Financial Ratios 34

4 Cost Schedule of Action Plan 595 Cost/revenue schedule Marketing Plan 67

LIST OF GRAPHS

1 Total Current Assets 30

2 Fixed Assets Distribution 31

3 Short Term Liabilities 314 Long term Liabilities 31

5 Income composition 33

6 Current Ratio 357 Asset Turnover 35

8 Debt to Assets 36

9 Debt to Equity 3610 Coverage Ratio 37

11 Gross Profit Margin 37

12 Net Profit Margin 38

13 Return on Investment 3814 Return on Equity 39

15 Advances to Deposits 39

16 Investment to Deposits 4017 Cash Ratio 40

LIST OF CHARTS

1 Senior Management of UBL 10

2 Organizational Hierarchy of UBL 11


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List of Acronyms

AD Authorized Dealer

AT M Automated Teller Machine

AT R Asset Turn Over AV P Assistant Vice President

AOF Account Opening Form

BOG Board Of Governor BOD Board Of Director

CA Credit approval

CP Credit Proposal

DAC Disbursement Authorization CertificateDD Demand Draft

DP Note Demand Promissory Note

EBIT Earnings Before Interest & Tax

ESVP Executive Senior Vice PresidentEVP Executive Vice President

FDD Foreign Demand DraftFMT Foreign Mail Transfer

FTDR Foreign term Deposited Receipt

FTT Foreign Telegraph Transfer

GM General Manager GOP Government Of Pakistan

GPM Gross Profit Margin

HBL Habib Bank LTDIMS Institute Of Management Sciences

LC Letter Of Credit

MCB Muslim Commercial Bank MT Mail Transfer

NPM Net profit Margin

OG1 Officer Grade 1PLS Profit & Loss Saving Account

PO Pay Order

RCAD Regional Credit Administration Department

RF Running FinanceRM Relationship Manager

ROI Return On Investment

RTC Rupee Traveler ChequeSTDR Special term Deposited Receipt

SVP Senior Vice President

SWOT Strength Weakness Opportunities ThreatsTIE Time Interest Earned


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TT Telegraphic Transfer

UBL United Bank LTD

EXECUTIVE SUMMARY

1. Banking operations and services are one of the basic needs of an economy. Theseinclude acceptance of deposits and disbursement of advances to individuals and others at

higher rates. Banks perform various fundamental factions, which are directly or indirectly

contributory towards economic and social development of countries. UBL, a commercialbank was established in 1959 as result of reckless efforts made by Agha Hassan Abidi.

The UBL has shown the fastest growth pattern and in a period of just 27 years became

the second largest bank of Pakistan. The bank image however adversely destroyed when

it suffered heavy losses during its nationalization period due to political and other factors.The bank is showing re-emerging indications as is evident from its financial statements.

UBL on October19, 2002 was privatized and bought by two financially sound parties of

international repute i.e. best way group and Abu Dhabi group holding51% of the banks

share and thus has emerged as the largest private bank surpassing MCB.

2. The purpose of this report is to study operations and analyze performance of UBLto see whether the bank is successful in its operational performance or not, and

recommending possible solutions for problems. For meeting the purpose both secondary

and primary data have been used.

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

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

methodology and limitations faced during the preparation of the report.

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

organization, UBL which came in to being in 1959.Remaining four chapter are

explaining operations and relevant broader but comprehensive set of information of thefunctional departments of the bank. An attempt has been made so that readers of this

report should be able to gain sufficient knowledge of the processing and procedures of

the operations carried out by these departments. However in the chapter pertaining to

foreign exchange department main focus is places on the payments regulations andprocedures of letter of credits in the light of foreign exchange regulation Act, 1947.

Section III; the analysis part of the report and is comprising of two chapters. Chapter 5 isthe critical analysis of the departments and its functions. SWOT analysis is an integral

part of this chapter. As an internee, I was deeply concerned about the performance level

of the UBL and therefore tried to analyze the bank financial performance that is includedin chapter 4, this chapter reveals that the bank is trying to regain its position in the present

more dynamic and competitive environment. Major findings are included in this

summary which is the outcome of these analyses.

Sector IV is the recommendation part and is derived from the previous


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section. Major findings are stated in the later part of this summary.

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

will enhance the banks overall productivity and will also enable it to compete moreefficiently and effectively. These plans are related to exploration of new opportunity

present in the agriculture sector, effective management and recovery of advances and

marketing activities respectively.

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

i. Mark up expense of the bank has reduced and administrative expenses have

shown increase.

ii. Non-performing advances have reduced; deposits show consistency.

iii. Due to lack of job rotation opportunity and lack of informal group existence,employees do not share each other workload.

iv. The recent downsizing hustle and bustle trends have affected banks

efficiency due to lay-off survival syndrome.

v. Presently about 1100 employees have been placed in surplus pools that areunaware of their future.

vi. Motivation level of employees is not satisfactory which effects their own andas well as performance of the organization.

vii. In proportion to number of accounts and functions performed sizes of

branchs buildings are small.

viii. Newly developed account opening form carries restricted space where onlytwo applicants names can be incorporated.

5. Recommendations of the report are as under:

i. Training for developing managerial leadership should be provided.ii. Political interference in placements etc. should be discouraged.

iii. Exercise should be evolved to bring needed cultural and other management

changes.iv. Recruitment policies should be changed, MBAs and other business related

qualified individuals should be hired.

v. HRD should frequently conduct refresher courses.

vi. Computer training courses should be imparted.vii. Staffs who deal with credit, should be properly trained for their jobs.

viii. HRD should focus on designing new courses to build organizational image

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

x. Customer orientation culture should be developed among employees.

xi. For enhancing motivation level fair and clear career development policiesshould be implemented.

xii. Relationship managers should be trained to correctly access credit related

risks.


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xiii. Skills should be development of employees to assess management abilities of

the borrowers of their business.

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

xv. Credit officers should be equipped with knowledge and skill to analyze, verify

and maintain securities in handsome manner.xvi. Various administrative reforms should be made to resolve quickly default

cases.

xvii. Marketing department at Hub branches should be created.xviii. All employees should participate in marketing operations of the bank.

xix. Marketing at Desk concepts should be practiced.

xx. Proper promotional campaign on media should be carried out.

xxi. Marketing research and development department of the bank should carry outsituational analysis and develop short, medium and long-term plans.

CHAPTER # 1

INTRODUCTION TO THE REPORT

1.1 INTRODUCTION:

Students of MBA studying courses leading to Master degree in Banking & Finance are

required to undergo an internship program of eight weeks duration. This is an essentialacademic requirement. The internship is followed by comprehensive report writing,

required to submit to the research and development division (R&DD) of Allama Iqbal

Open University. This report is properly evaluated on the basis of its description andanalytical capabilities by internal and external examiners. I did my internship in United

Bank Limited Shamsabad Branch Multan.

1.2 PURPOSE OF STUDY:

The purpose of the study is to work in real life situation and learn banking practice bydoing. In this context its objectives are:

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

ii. To develop concrete and feasible recommendations.iii. To improve report writing skills.

1.3 SCOPE OF STUDY:

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

collect financial data and general statistics of the bank has been made. Keeping in viewthe purpose of the study, which is to make an acquaintance with practical doings in the

bank, this seems a comprehensive effort.

1.4 LIMITATION OF STUDY:


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

purpose of the study. Facts and figures, which otherwise might be equally important, butnot having a direct bearing on the conclusions arrived at this study, have been ignored.

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

information in a manner required for analysis and the secrecy of the bank. Anotherimportant limitation of the study is time and space constraint.

1.5 METHODOLOGY OF STUDY:

Both primary and secondary data were used in compilation of the report. Methodological

tools used were:

i. Primary Data:

Personal Observations.

Discussion with Bank Personnel.

ii. Secondary Data: Brochures/ Manuals of the bank.

Annual Report

State Bank Foreign Exchange Manual

Bank internship reports on UBL available in library.

Journals, newspapers and books.

Internet.

1.6 SCHEME OF REPORT:

The report is divided into five sections as under:

Section-I consists of chapter 1, which includes background, purpose, scope, limitations,methodology and scheme of the report.

Section-II consists of five chapters (Chapter 2-3) and includes organizational review. Inthis section background history of UBL, its organizational structure; and department

operations are discussed.

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

analysis of UBL respectively.

Section-IV summarizes the findings and recommendations of the study.

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

previous section

CHAPTER # 2

INTRODUCTION TO UBL


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2.1 BANKING HISTORY:

Consensus on the origination of word Bank is not yet reached at. Some authors opinion

is that this word is derived from the words Bancus or Banque, which mean a bench

and they further relate banking business inception to Jews in Lombardy. Other authoritiesstate that the word Bank is derived form the German word Back which means Joint

Stock fund and later on due to German occupation of Italy, this word was Italianated

into Bank. Authors quote Babylonians (few quotes Chinese) who developed bankingsystem as early as2000. B.C1

2.2 BANKING IN PAKISTAN:

Banking started in Pakistan after the bold and emergent decision of formulation of SBP

on July 30, 1948. Thereafter this sector has witnessed enormous growth. In 1974 banks

were nationalized, in the hope that new era of growth could be achieved through it.

However the process is reverse since 1991,up till now MCB, ABL, and UBL have beenprivatized and HBL is in the process of its privatization.

2.3 TOWARDS ISLAMIZATION OF ECONOMY2:

Interest based transactions/businesses are Haram in Islam. The GOP has shown.

Interest to eliminate interest from its economy by developing various alternatives. To

achieve this objective various efforts are made with the following outcomes:

2.3.1 Deposits:

1 S A Haq. (1998) Practice & Law of Banking in Pakistan (6th Ed.)2 Council Of Islamic Ideology (1980). Elimination of Riba from Economy.

Islamabad

PLS (Modarba) Accounts

Current Accounts: (with no return paid)

2.3.2 Loans:

Qarz-e-Hasana

Lending on the basis of Service charges

2.3.3 Trade Related Modes of Finances:

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

mark-up in prices.

Bai-Salam; purchase of goods from clients by banks and their resale to the clientat increased prices, to be paid in future.

Financing for development of property on the basis of developmental charges.

Purchase of trade bills.

Ijara: leasing.

Hire purchase.

2.3.4 Investment Type of Modes of Finances:


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

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

modaraba certificates.

Rent sharing.

Equity participation through purchase of shares

2.4 BIRTH OF UBL:

On November 9, 1959, UBL was notified and included as a private schedule bank withauthorized capital of Rs. 20 million; issued and paid up capital of Rs. 10 million divided

into 1 million shares of Rs. 10/ each. Currently BOD and president/ CEO Mr. Amar Zafar

Khan being a member of this newly formed set up manage UBL. Chairman His HighnessShaikh Nahayan Mabarak Al-Nahayan and Deputy Chairman Sir Mohammed Anwar

Pervez are the two supreme controllers of the banks affairs. Another development is the

appointment of director operation, Nauman Hussain by the newly privatized bank.

Senior management of the bank is shown in the chart given at the end of chapter.

2.5 NUMBER OF BRANCHS:

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

In December 1983, there were 1623 branches whereas in 1974 it had only 1238 branchesand in October 2003 these figures show total number of1007 branches3.

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

branches were established in London in 1963. Now UBL has branches in Bahrain, Qatar,Saudi Arabia, United Arab Emirates, Yemen Arab Republic, UK Switzerland, Egypt,

Oman and The United States. These branches are playing a significant role in channelinghome remittances and foreign trade of Pakistan.

2.6 SUBSIDIARIES:

UBL has four subsidiaries, namely:

United National Bank Limited (UNB), UK

United Bank AG (Zurich), Switzerland

United Executers and trustees Company Limited

United Bank Financial Services (Private) Limited

2.7 FUNCTIONS OF UBL:

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

the provisions of BCO, 1962. Section 7 of the Act authorizes banks to engage in theprescribed form of business. In the light of this section UBLs functions can be

categorized as under:

Agency services

General Utility Services


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Underwriting of loans raised by the Government or public bodies and trading by

corporations etc.

Providing specialized services to customers, and

Hajj-related services.

2.8 ROLE OF UBL BANKING SECTOR:The impressive growth and development, which UBL achieve, present it undoubtedly the

most dynamic and progressive. In a very shorter period of time it became one of the

leading banks overtaking several other older and its competitorbanks4. The majorcontributions5 the bank has made are enlisted below:

Record setting performance and commitment to serve the customers

Personalized service and dynamic approach

Catalyst of changes

Professional management

Modern banking policy

Human resource development

Small loans (or) micro credits

Pacesetter in economic research established in 1967, department for economicresearch.

Utility bills collection

Credit cards (unicard-1970)

Travelers Cheques (Humarah-1971)

Diaries and calendars received prizes too

Promotion of sports

2.9 COMPUTERIZATION OF UBL:

UBL has taken leading start in the introduction of computers in (1966-1968)6 inimportant cities. Its three computers centers Rawalpindi, Lahore and Karachi areequipped with the modern mainframe computers of various capacities. Every branch has

been decorated with microcomputers.

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

deliver the goods speedily to its customers. This has also allowed the bank to maintain its

leadership within the industry.

UBL - On line System7:

Themes of this service is Access any time, anywhere, any device which symbolizes

comfort, convince and connectivity. UB-Online a web based service that can be accessedthrough multiple media link like, (i) PC via internet (00)Mobile phone with WAP or free

SMS) (iii) Personal Digital (iv) assistants and (v)Plain telephone; following are some of

the exciting features:

o Accounts statement & electronic data interchange

o Graphical analysis

o Alerts service /facility, search facility and activity long


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a. Individual Account:

In this account a single customer operates the account. The banker will run the account

according to the rules, but if the customer gives special instructions the Bank will have to

follow it.

b. Joint Account:

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

will be operated by one account holder in case of (either of the survival). If the

instructions are not given, all the account holders will have to sign the check.

3.1.3 NATURE OF ACCOUNTS IN UBL SHAMSABAD

A) Current Account:

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

amount of rupees 1000/-. These accounts are usually maintained for business purpose.Due to enormous competition UBL has introduced daily profit current account for

corporate clients called (UNISEVER) minimum balance required is Rs. 100,000/-. If

minimum balance requirement is not met, bank is authorized to recover predetermined

charges.

B) PLS Saving Account:

These accounts were intended with the aim of encouraging thrift among people. Theseaccounts can be opened either in Pakistani rupees or in few major currencies of the world.

Bank offers (4%- 6%) return on these accounts. The basic feature is the profit and loss

sharing as according to non-interest based banking system. These accounts can be openedin the name of; individuals, joint names, trust accounts, charitable organizations.

Unlike current accounts, Zakat is applicable on local currency saving accounts. Minorsaccounts can be opened on the condition that their guardians shall operate these accounts.

C) Term Deposits:

Term deposits are also called fixed deposits. These can be with drawn after specifiedperiod of time. Interest is paid to the depositor on all fixed or term deposits. The rate of

return varies with the duration for which the amount is kept with bank

There are two types of term deposits.i. STDRS Special Term Deposit Receipt (local currency):

Special Term Deposit Receipts are issued for different periods of maturity ranging fromone month to 5 years, having attractive returns. There is no limit on denominations.

ii. 3.2.3.2 NTDRs Notice Term Deposit Receipt (local currency):


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

after giving a predetermined and pre agreed early notice.

3.2 REMITTANCES DEPARTMENT:

Current business trends demand fast movement from one geographic end to another.

Latest technology and telecom data transmission has made it possible to make suchtransactions with in minutes. UBL Shamsabad Remittances Department performs

following functions.

3.2.1 Demand draft (D.D)

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

same bank.

A) Procedure For D.D.:

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

should be maintained in the form.

Name of Payee

Place of payment

Amount of D.D

Commission is charged on D.D as bank income. The applicant is asked to deposit thecash specified on the application form to the teller. After depositing cash the remittances

incharge prepare a D.D. That is singed by two officers must having power of attorney.

Bank also provides this facility to general public who dont have account in UBL.

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

3.2.2 Telegraphic transfer (T.T):Transfer of funds to another branch of the same bank with the help of test numbers. If the

test number agrees the bank make payment to the party.

A) Procedure for T.T:

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

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

3.2.3. Mail Transfer (MT)

When the money is not required immediately, the remittances can also be made by MT.Here the selling officer of the bank sends instructions in writing by mail to the paying

bank for the payment of a specified amount of money. The payment under transfer is

made by debiting the buyers account at the sending office and crediting it the recipientsaccount at the paying bank. UBL takes mail charges from the applicant where no excise

duty is charged.

3.2.4 Pay Orders:


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3.3.1 CREDIT DEPARTMENT OF UBL SHAMSABAD BRANCH

Facilities offered by UBL Shamsabad.

Running Finance (for one year)

Demand Finance (3to 5 years)

3.3.2 Procedure for Financing from UBL

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

3.3.2.1 Purpose:

In this the party mentions the purpose, they want to apply for the finances. No lending isdone with out purpose.

3.3.2.2 Business

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

The second question arises of the cash flow that how much flow is generated by the party

from the current business.

3.3.2.3 Security:

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

Commercial

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

for the relationship between the bank and party. He acts like a bridge between the two.In the first instance the party would prepare the following property documents.

AKS Shajarah

Naqsha Tasveeri

Approved Building Plan

Tresh fard

Intaqal Naqal

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

Builder are on the panel of UBL Shamsabad. The valuator will visit the site and set

market value and FSV of the said property. He prepares report of at least three pages.

These documents sent for one page legal opinion to any layer on the panel of UBL.Having clear legal opinion, RM starts preparing credit Approval (CA). The documents

are singed by the RM & AM and then forwarded to UBL RHQ in Peshawar. Here SRMexamines the CA if he found some exception he will send it back to the respective Rm.

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

officer. He has three hours of time to study the CA and if found correct then he pass it toanother credit officer. After his examination the CA is passed on to the credit risk

manager. He checks the CA and after signing it sent to CAD. He forwards the CA to


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SCO. Whose office is at UBL RUCO at Lahore, after his signature the C.A is sent back to

RCAD.

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

documents they are.

Letter of continuity Personal Guarantee

Letter of hypothecation of stock

D.P Note

Mortgage Deed

NIC of executants and witness

Stock report

Insurance policy

Party profile

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

they issues DAC. A copy of DAC is sent to RM and NICF account isopened and debit

transaction starts.

3.4.CLEARING OF BILLS:

General:

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

cross Cheques cannot be made on counter its payment is possible through collectingbankers. The functions of clearing department is divided into two main classes.

Inter Branch Transaction

Inter Bank Transaction

3.4.1 Procedure of Clearance of Cross (Cheques):

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

on the counter. The first job banker has to perform is to put a special crossing across the

face of cheque. By special crossing cheque is secured. If it is stolen the paying bankerwould not suffer because of non-endorsement. On the back of the cheque the stamp is

made of payee account will by credited on realization. It is signed by authorized person.

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

is given back to the customer. after the special crossing and is necessary endorsement thebanker write the amount along with cheque number on paper and attach with each slip.

Then again on he smile paper the amount of all the Cheques along with the bank names

are added and attached to cheque presented for clearing, and advice is also attached withthe cheque presented for clearing. The following entry is passed on sending the cheque

for clearing.

Bill lodged for clearing . Dr

Bill for collection . Cr


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

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

Bill for realization. . DrBill lodged. . Cr

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

3.4.2 I B C:

It means Inter Branch Transaction when UBL received a cheque a drawn on the

customers of his branch; first they will cheque the amount in the account on which

cheque is drawn. Of the required amount is available in the account they will match the

signature on the cheque along with their SS card. If all the requirement are completed thebank will send an IBCA to the bank from which cheque is sent.

3.4.3 L B C:

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

cheques from their spoke branches as well as from other UBL branches of the country,drawn of any other bank in Multan. They send the cheque to responding bank and after

clearing the cheque through clearing houses (which is NBP) in Multan. They send LBC

advised to the bank from which the cheque was received. The following entry is passedafter sending LBCA.

NBP a/c . Dr

Ho a/c. Cr

3.4.4 OBC

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

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

of that city, after receiving OBCA the bank will pass the following entry.

In case of his own customers.

Ho a/c. Dr

Customer a/c. Cr

In case of spoke branch

Ho a/c. Dr


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Spoke Branch a/c. Cr

CH # 4

FINANCIAL ANALYSIS:

INTRODUCTION

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

performance of UBL. Overtime comparison and Common Size analysis are carried out

with the view to extract concrete conclusion to describe financial standing and

performance of the bank.

4.1 THE GROUP AND ITS OPERATIONS

The group consists of:

a) Holding Company

United Bank Limited, Pakistan

b) Subsidiary Companies

United National Bank Limited, UK

United Bank AG (Zurich), Switzerland

United Executers and Trustees Company Limited

United Bank Financial Services (Pvt) Limited

4.2 BASIS OF PRESENTATION

The purchase and sales of UBL are restricted to the amount of facility actually utilizedand the appropriate portion of mark up there on. They strictly observe the rules and

regulations as applicable and promulgated by the GOP and or SBP.

4.3 SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition

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

purchased at premium or discount are amortized over their maturity periods.


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Dividend income is recognized on accrual basis of declaration of dividend up to the year-

end. Returns on classified assets are recorded on receipt basis, rescheduled and

restructured loans are treated in accordance to SBP regulations. Fees/commissions etc. onLetter of Credit and others are recorded on accrual basis.

Advances

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

PR IIIV.

Investments:

UBL classify its investments as stated below;

a) Held for trading

b) Held to maturity

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

In the light SBP regulations quoted securities are shown at market values and anychanges arising are taken to profit and loss account only upon actual realization.

Unquoted securities are valued at the lower of cost and break up value and difference ischarged to income. Provisions for diminution in the values are made after permanent

impairment, if any.

Lending/Borrowing from Financial Institutions

a) Sales under Purchase Obligation: These are reflected as liabilities and thecharges against these are recorded as an expense on pro rata basis.b) Purchase under Resale Obligation: The differential of the contracted price

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

income.

Fixed Assets and Depreciation

a. Owned

Such assets are showed at their cost or revalued amount less accumulated depreciation

and impairment loss, if any. No depreciation is charged on freehold land. During the year,amendment related to section 235 of the Companies Ordinance 1984, surplus on

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

result such differentials are now transferred to retained earnings/accumulated losses asper the Securities and Exchange Commission of Pakistans (SECP) clarifications.


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Gains and losses on sale of fixed assets are included in income currently, except that the

related surplus on revaluation of fixed assets is transferred directly to retained

earnings/accumulated losses.

b. Leased

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

a liability. The finance charges are allocated to accounting periods in a manner so as to

provide a constant periodic rate of charge on the outstanding liability.

Taxation

a) Current

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

basis of turnover, whichever is higher.

b) Deferred

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

method in respect of those timing differences, which may reverse in the foreseeable

future. Deferred tax debits are, however, recognized only if there is reasonableexpectation of realization of the amount.

c) Foreign Currencies

Balances are translated into rupees at the applicable rate of exchange prevailing at the

balance sheet date or where applicable at contractual rates. During year transactions areconverted into Pak rupees applying the exchange rate at the date of respectivetransactions. Gains and losses are included in income currently.

d) Deferred Cost and Lease Payments

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

are charged to profit and loss account as incurred.

4.4 RISK MANAGEMENT

The bank is primarily subject to interest rate, credit and currency risks. The bank hasdesignated and implemented a frame work of controls to identify, monitor and manage

these risks are as follow;

Currency Risk Management


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

forward and swap transactions in the inter bank market and with the State Bank of

Pakistan in order to pledge its assets and liabilities and cover its foreign exchangeposition.

Credit Risk Management

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

Rs.178; 958.323M. The banks major credit risk is concentrated in textile sector. Tomanage it the bank applies credit limits to its customers and obtains collaterals. Credit

risk in the portfolio is monitored by the CRM who formulate appropriated policies and

procedures to ensure building and maintaining quality credits and efficient credit process.The banks financial institution risk management unit assesses, recommends financial

institutions and also controls cross border/country risk.

Interest rate Risk Management

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

loans and advances and investment portfolios. The asset liability committee of the bankreviews the portfolio of the bank to ensure that risk is managed within acceptable limits.

Most of the loans and advances portfolio comprises of working capital, which are

reprised on a periodical basis. The groups interest is limited since the majority ofcustomers deposits are retrospectively reprised on a six monthly basis due to the profit

and loss sharing principles.

4.5 CONCENTRATION OF CREDIT AND DEPOSITS1

The major class of business for UBL related to advances is the textile and private sectors.UBL is advancing 27.2% to textile and 74.5% to private sector. Majority of thedepositors fails in the category of individuals, contributing 65% of the total deposits.

4.6 INVESTMENT PORTFOLIO2

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

free assets as well as in risky assets. This enables it to minimize its unsystematic risk to a

great extent.

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

in SBP circular. Any unrealized surplus/deficit arising on such revaluation is takendirectly to Surplus/Deficit on revaluation of securities in the balance sheet. Where an

active market is not available, securities continue to be stated at cost. Provision for

diminution in the value of these securities is made after considering permanentimpairment, if any, in their value.

Where securities are sold subject to commitment to repurchase them at a predeterminedprice, they remain on the balance sheet and a liability is recorded in respect of the


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consideration received in Borrowing from Bank or Deposits as appropriate.

Conversely, securities purchased under analogous commitments to resell are not

recognized on the balance sheet and consideration paid is record in lending to financialinstitutions or loans and advances as appropriate.

4.7 PROFITABILITY3

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

profit before tax and extraordinary items increased by 62% as compared to last year. Theincrease is mainly attributed to 14% increase in the net revenue from funds (NRFF), 10%

increase in fee and brokerage income and 75%reduction inn write offs/provisions for

non-performing assets as compared to year2002.

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

decreased by 53%. Presently NPA constitutes 7.4% as compared to 14.6% in 2002of the

total loan portfolio. The branches reduced to 1077 from 1112. The bank handled over Rs.

96 billion of import and export business during the year, an increase of 24.7% ascompared to last year.

4.8 FINANCIAL ANALYSIS

Financial statements are the principal means of reporting the financial condition and

results of operations of a business entity. These statements are meant to assist variousparties in decision making who are interested in the activities of the business. These

statements are means to an end of helping stakeholders indecision-making. To improve

the quality of decision making proper analysis of these statements helps a lot. Financialstatements analysis helps in determining the financial conditions at any particular points

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

The various stakeholders of business are interested in the analysis of financial statements.

But the focus of interest of all is not the same. For example, creditors and credit reporting

agencies are interested in finding out the credit worthiness of the firm to which they haveextended credit or intend to extend credit. Short term creditors are interested in short term

liquidity of the business and long term creditors are interested in the long term cash flow

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

firms ability to sustain profitability over a period of time. Government agencies analyzefinancial data for tax purposes. The internal users of financial statements like

management also analyze financial data for planning and control.

4.8.1 COMMON SIZE ANALYSIS OF BALANCE SHEET

Common size analysis is an analysis of financial statements where the total assets divideall balance sheet items of asset side and all credit side balances divided by all liability

items, and all income statement items are divided by net sales/revenues. Common size

analyses are extremely helpful to highlight changes over the time in financial

performance and financial conditions of the company.


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

individual components investment income has shown a large increase as a percentage of

sales.

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

size in percentages has shown a mixed trend due to the changes in revenue figures. Thenon-performing expanses also increased to about 25%,which is a very high percentage,

but the other aspect of this is that it increased the efficiency and credit management of the

staff.

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

extraordinary item expanse has not occurred in 2003 that caused a slight increase in the

net income. The tax expanse is increased about 7% because of the increase in profit. Lossbrought forward from previous year is reduced by 14%.

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

improvement in its performance. The organization shows profit for the first time in thelast 5 years which is a positive sign and it will build up the moral of the employees by

which they can work more effectively and efficiently increasing the performance of thebank.

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

MISSING 44

4.8.3 FINANCIAL RATIO ANALYSIS

The user of financial statements finds it helpful to calculate ratios when they interpretcompanys financial statements. A financial ratio is simply one quantity divided by

another. Ratios focus on special relationship between two items of balance sheet, income

statement or one from each. Ratios make it easier to understand a specific relationshipbetween various items of financial statements then looking simply at the raw numbers

themselves. The number of financial ratios that might be created is virtually limitless, but

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

different classes.

Liquidity Ratio

Asset Turnover Ratio

Leverage Ratios

Coverage Ratios

Profitability Ratios

Market Value Ratios

The calculation and interpretation of these ratios of financial statements of UBL are asfollows.


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4.8.3.6 GROSS PROFIT MARGIN:

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

profit is critical because it represents the amount of money remaining to pay operating

expanses financing cost and taxes. UBLs gross profit margin per rupee has shown risingtrend in last three years. There is an increase of 27% in 2003 as compared to 2002. This

shows efficiency of the bank to control the cost of sales.

4.8.3.7 NET PROFIT MARGIN:

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

expanses have been paid. Net profit margin is also showing an increasing trend. UBL hasimproved net profit margin in the current years. The net profit margin has reached to 30%

as compared to 2002 in which it was only 12.69%. While in2001 it was in negative

figure. It shows a good impact on the UBLs Balance Sheet.

4.8.3.8 RETURN ON INVESTMENT:

This ratio measures the profitability per rupee of investment in assets. UBLs return on

investment has shown an improvement more than 100%. In 2003 the ratio is 1.24% while

in 2002 it was 0.76% and in 2001 it was in ive figures. Although the assets have

increased but the operational recovery of the bank is main cause of increasing this ratio.

4.8.3.9 RETURN ON EQUITY:

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

The return on equity is also shown a great deal of positive change. In 2003 the ratio is

45% while in 2002 it was only 16% and in 2001it was in negative figures.

4.8.3.10 ADVANCES TO DEPOSIT RATIO:

This ratio shows the companies advances employed per unit of deposit. This ratio of UBL

over the recent three years shows a decreasing trend. In 2001 it was 56%while in 2002 it

was 46% and in 2003 it is 45%.

4.8.3.11 INVEST TO DEPOSIT:

This ratio shows the companys investment employed per unit of deposit. This ratioincreased in 2002 as compared to 2001 but in 2003 it again decreased. It is because of

industrial development factors in the country by which lending have been increased and

investment is slightly decreased.

4.8.3.12 CASH RATIO:


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It is the ratio of cash and cash equivalent of current liabilities. It shows that how much

cash is available to meet the current liabilities. In 2003 this ratio has increased by 2%.

The balance of bank is increased with 20%. Although the current liabilities also increasedbut the increase in cash is very high.

CH # 5

QUALITATIVE ANALYSIS

5.1 QUALITATIVE ANALYSIS OF UBL

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

learning process. I kept critically observing the things that I could analyze and the resultof the exercise is presented as below.

A. Organizational:

Existing organizational hierarchy hinders vertical communication and

blocks flow of information among the levels of management.

The workload is not equally distributed.

Coordination level among divisions/departments and employees are poor,

particularly speaking of between the top and lower levels of management.

There is centralization of authority and branch managers are bound and

restricted to take initiative.

Due to overlapping nature of duties and jobs there exists chaos andconfusion in branches.

B. Departmental:

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

departmental problems.

Cash Department:

i. Not very frequently but there are instances of fake currency notes, beingidentified. At times notes received from other branches were found to have

certain fake currency notes.

ii. Counting mistakes occur due to overcrowding particularly during the

collection of utility bills. Manual counting system also affects efficiency ofthe bank.

iii. Code of conduct of cashiers is found unsatisfactory.

iv. There is generally the lacking in observing and practicing banks relevantprocedures and SOPs.

Remittances Department:


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

individuals that reduces the efficiency and further the wrong application of

tests prevent payments and the delay could dissatisfy customers.ii. Telegraphic messages require specific skills and training. The employees are

partially equipped of such knowledge.

iii. Preparation, execution and management of TTs and MTs and particularlyDDS ask for mastering applicable rules and regulations and most of the staff

was found ignorant of those.

Deposit Department:

i. Newly designed AOF has an inbuilt deficiency of restricted space and cannotaccommodate more than two names.

ii. Identification of customers signature is very important particularly whencash

is to be withdrawn by him. Manual practices pose problems in thosebranches

where automation has not been done yet.

iii. In cases where the presence of customer himself is must, is sometimecompromised due to influences of\r fear of loss of customer.

Clearing Department:

i. Wrong endorsement and stamping causes loss to the customers and extraefforts for the bank to repeat the procedures.

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

memos.

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

Credit Department:

i. Timelines in cash disbursement is very important which is compromised due

to lengthy processing and documentation requirements.

ii. Relationship Managers need to be fully equipped with the requisite knowledgeand skills as presently plain BA/B.Sc qualified individuals are performing

jobs of MBAs.

iii. Lack of infrastructure for carrying out computerized financial analysis ofborrowers business.

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

collaterals. Heavy collateral requirements restrict credit business of the bank.

v. The credit proposal and other documents at times are not properly andsufficiently prepared before taking approval.

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

efficiently.

Bills Department:


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

making entries and stamp affixing.

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

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

Foreign Exchange Department:

i. Problems of bills and remittances departments equally apply to foreignexchange department. There is overlapping of functions and complete

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

confusion and conflict among employees.ii. Employees of this department are lacking computer-operating skills.

iii. Knowledge and educational background of employees working in this

department do not match with the job they are doing.

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

of Credit.

Marketing Department:

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

ii. Lack of promotional activities.

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

and design of furniture in most of the branches.

5.2 SWOT ANALYSIS:

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

stands for Strengths, Weaknesses, Opportunities and Threats. It is a common approach to

make assessments in terms of internal and external environment of the organization, andto formulate strategies analyzing its internal strengths and weaknesses, external

opportunities and threats, coming up is the SWOT analysis for the UBL.

5.2.1 STRENGTHS:

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

showing constant growth over the period from 1999 till the day. It has a well-knitted and adequately equipped branch networking system that

efficiently covers both the domestic and international markets.

It is involved in both corporate and retail banking.

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

exchange transactions. Foreign trade volume showed an increase of 17% over the

previous year.


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

years growth rate is 32%.

The overall efficiency of the bank operations and management ability can benoticed by looking at to its income pattern and provisions/write off practices.

o Net revenue from funds increased by 18% for the current period.o Provisions decreased by 14%.

o Total income increased by 16%.

UBL is actively participating in international markets and has recently

introduced credit cards in UAE, Behrain, and Qatar, being backed up by24 hours

call center out of UAE.

The bank is owned by parties of financial repute and credit worthiness

like, SBP with 48.69% interest, Best Way group and Abu Dubai group with

25.50% of interest each. Others are GOP, NBP Trustee Department, State Life

Insurance Corporation etc.

The bank is run by highly professional recruited from and trained byforeign banks like Citi Bank.

5.2.2 WEAKNESSES:

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

the main reason was that of piling up of large amount of unrecoverable loans and

debts which has adversely affected the image of the UBL.

Accumulated losses pushed the bank to cut down its promotional activities in

order to reduce expenses for last few years.

During the nationalization life span of the bank political lords used influence inbank business and selection of employee at each level and thus adversely affected

the banks efficiency and effectiveness.

Administrative expenses are 51% of the mark up revenue

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

and performance outputs.

The bank has large number of employees who are simple graduates with nobanking knowledge.

Ineffective system of recruiting and selection.

Lengthy credit processing and documentation procedures.

Unsatisfactory working conditions.

5.2.3 OPPORTUNITIES:

Growing policies of the GOP on business and economic sectors provide UBL an

opportunity to efficiently meet with the business people requirements of instant


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cash facilities e.g. the government intentions of developing housing and

agriculture sectors.

The efficiency of stock market and sound exchange reserve level is providing a

good opportunity for effective investment decisions.

Foreign remittances are another area as present world wide control systems over

transfer of currencies through illegal channels has facilitated the area for thebanks.

Reconstruction of Afghanistan is a golden opportunity where the bank can

effectively participate.

Expansion of IT platform and internet based banking system.

Interest of businesses in leasing facilities provides a healthy opportunity for

banks.

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

professionalism on its organizational culture.

Outsourcing of promotional companies or use of available excellent promotionalfacilities.

Entering new market segments.

Increase the product range to meet the broader range of customers needs.

5.2.4 THREATS:

Increase in competition due to increasing number of foreign and domestic privatebanks offering highly specialized and attractive services.

Growing global technological advancements and adaptation of modern style of

management in banking sectors.

Extensive promotion campaigns run by competitors.

Unemployment, lower level of income and prices like problems in the motherlandcoupled with low rate of industrialization, Geo political adverse conditions,religious factor, lack of consistency in policies due to political instability are some

of the other major threats.

This SWOT analysis is a mirror image of the banks present conditions. Some efforts are

made and others are still required to be made in order to improve the situation. The

management can develop elaborate strategic plans for capitalizing the availableopportunities. The bank should maintain principal of professional management and

adhere to sound and sophisticated banking rules and regulations so that confidence and

trust of the public in the institutions could be re earned.

CH # 6

RECOMMENDATIONS

Recommendations are considered to be the most important part of an internship report,

without which no report is considered complete and meaningful. This part of the report isbased on the previous sections i.e. review and analysis. Moreover, for bringing


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management down to the front line, that better suits to the present day needs of banking

environment could be included through proper discipline and training.

Needs of change in Recruitment Policy:

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

M. Com etc,. But on the country only graduation with simple subjects is still the requisitequalification for officers cadre, which has already worked amply in the devastation of

UBL. Therefore the recruitment qualification to the officers framework should be

enhanced for simple graduation, to professionally qualified preferably Masters in theirrespective fields.

Refresh Courses:

The Human of the bank should frequently conduct meaningful refresher courses,

seminars and workshops with a view to improve the knowledge of the staff. Due to

severe competition and technological developments, the banking business is experiencing

rapid changes therefore the HRD should have arrangements for staff trainings to copewith the new changes that may become threats for the interest of the bank.

Computer Trainings:

The present conventional and orthodox training programmes need to be made morecomprehensive and reinforced with inclusion of computer training courses.

Training for Credit Management:

Special trainings on credit management should be imparted to the finance dealing staff.

Financing is main fountain banks income. Sound finance are extremely necessary foropening of springs of the smooth inflow of the income.

Training with Clear Objectives:

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

training courses.

Change in Appraisal System:

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

in true sense. The drawbacks that are obvious like nepotism and favoritism etc. need torooted out and the culture of ultimate meritocracy in appraising needs be inculcated.

Introduction of New Courses:

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

image of the bank by floating programmes such as, marketing excellence, courses oncorporate culture and others. Usually in businesses the wholesalers, retailers and other


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intermediaries are finished by opening a network of the business own outlets. It works as

profit maximization devise. In my opinion the above two programmes marketing

excellence and corporate culture, added with the best counter service and outdoorinformal relationship with the potential customers by the line managers will save the sum

of money spent on various media of advertisement.

Cheaper means for Postings etc:

The culture of attachment of hopes with the elements outside UBL, for promotion,transfers, postings, and other benefits requires eradication from the roots.

Customers Orientation:

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

recognize, carefully and appropriately that his customer is The King of the business

system and the original spring of the business revenue. UBL should recognize its

customers as the mainstream of the banks revenue. They need to be provided thedeserved respect, quality and in time service and to be politely dealt with.

Career Development:

As a matter of personnel policy HRD of UBL should prepare a plan showing the futuregrowth potential of employees on the job performance and evaluation and it should be

made known to the employees. In this regard, employees should be given opportunities to

show their performances, which would help in their career development.

6.2 CREDITS AND ADVANCES DEPARTMENT:

The defaulted loans have showered the process of development of banking sectors inPakistan and have reduced the lending capacities of banks. In result of which economic

growth has reduced and rate of industrialization has become lowered. Defaulted loans

being the major cause for this depression, various suggestions and recommendations havebeen given with focus on UBL to overcome the drawbacks of this department.

Training for RMs:

Exclusive mandatory training concerning all possible aspects like, financial management

and organizational management etc is required to be developed and designed to achieve

i. Risk assessment ability

ii. Understanding of all legal matters

iii. Early detection ability Skill of any loans becoming badiv. Ability to develop and suggest sound strategies when needed.

Fake Financial presentation:


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

correspond with the approved facilities. Also to ensure that blank spaces are

filled, documents are dated, signed and stamped, the signer is authorized toexecute such documents and signatures are verified.

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

vault, maintaining records as per bank operating procedure.iv. Keep track of expiry of borrowing documents, insurance policies etc and

follow up for regulation of any approved documentation deferrals.

v. Maintain documentation checklist, updating it properly each time newdocumentation received.

vi. Maintaining computerized record of documentation.

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

Securities:

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

on the documents. Investigation should also be conducted if the property is ofancestral nature or joint property.

ii. The competent consultants should do valuation of the property and merecompletion of formatives should not be taken into account.

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

title deeds, mortgage documents etc.iv. Bank must ensure receipt of periodical statements of stock and receivables

from customers, as per frequency specified in the credit approval.

v. Bank should also do the periodic physical checking and evaluation of pledgedinventories as per terms of the approvals, i.e. using applicable margins, such

that the drawing power adequately covers outstanding amount at all times.

vi. Bank officials must ensure that the goods hypothecated or pledged arecovered through a valid insurance policy with appropriate risk coverage,adequately covering the banks amount.

vii. Concerned bank staff should ensure compliance with the institutional credit

policies and procedures as laid down in the policy book or credit manual andadvised from time to time by the credit committee or top management.

viii. Ensure compliance with local regulatory requirements.

ix. Confirm timely submission of correct information in the prescribed format asmay be required by the central bank.

Administrative Reforms:

i. Fast resolving of loan defaults cases is must.

ii. Immediate steps to appoint more banking courts judges.iii. Exclusive judges are required for Lahore, Peshawar, Baluchistan, Sindh High

Courts.


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

chamber to monitor and publish performance of the banking courts. This body

will need statutory authority for protection from contempt.v. Use of debt recovery agencies regulated by law is to allow.

CH # 7

IMPLEMENTATION PLAN:

Every organization has its own strengths, weaknesses and opportunities for

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

untried.

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

be supported by its implementation plan. An implementation plan consists of action

oriented tools and procedures, which are specific and clear. An implementation plan

means that every thing except resources and taking of step to start work is ready whichshows that implementation plan is the soul of a project. A good implementation plan

consists of all the steps needed for the accomplishment of a task or tasks, it is clear andhelps in identifying the problems to be faced in carrying practical work and provides a

full picture of activities and events.

7.1 ACTION PLAN 1:

7.1.1 Franchised Agriculture Supplies Shops:

In order to exploit opportunities available in the existing agriculture market the following

steps should be taken.

Establishing franchised supplier shops

UBL should concentrate efforts towards major agriculture union councils and developfranchised shops; those should provide essential farmer services including leasing of

sophisticated farm machinery and advising farmers how to improve productivity.

Location of franchised supplier shops

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

branches should extend credit to the shops for their supplies and equipments and tofarmer customers, at market rates, which are well below the50%to 90% charged by the

arties (informal sector).

Agri-Officers in Branches

Such agri credit officers should be employed who possesses requisite knowledge andknow how both of the agricultural field and bank credit fields. The bank already has such


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assets, available in its existing HR factory and others can be trained for, if so required.

These officers should be provided with motorbikes with per month fixed mileage limit.

Cost Schedule

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

a) Credit amount extension

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

return.

b) Operation cost

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

i. Fixed cost, cost of motorbike less tax saving due todepreciation expense should be amortized for a period of five years and

distributed equally on average number of customers a mobile agri creditofficer will deal with.

ii. Variable cost which includes petrol and maintenance charges

should be incorporated in pricing of the facility extended on average basis.

Table: 7-1 Cost Schedules of Action Plan

MISSING 67

The above plan could be reinforced and made more effective if following supportingactivities are undertaken.

c) Pakistan loses a significant portion of its agriculture land each year

through high soil salinity and poor water treatment. The bank can finance projectsequipped with measures to treat saline/soda water and soils so as to render if

efficacious for agricultural purposes

d) The bank may help farmers to acquire needed equipment of saline soiltreatment thus enhancing their ability to bring more land under cultivation and

improve per area yield.

e) The bank may finance projects such as better storage and marketing

services.

7.2 ACTION PLAN 2

7.2.1 Technique For Effective Management and Recovery of Advances:

Banks are highly leveraged bodies where advances constitute a major portion of theirassets. Effective management and recovery of advances has to be an ongoing process, if


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the bank is to maintain good quality of its assets. In this regard following plan is advised

for effective management and recovery.

Through Assessment of Advances:

Bench marketing technique should be used to develop comprehensive proposal perform,

though the existing Performa is not a bad one. Following factors should be carefullyexamined.

a. Principle of good lendingThis includes safety, desirability, liquidity and profitability.

b. Compilation of credit information reportThrough investigation of the borrowers personal and business related aspects should be

conducted.

Proper and effective Documentation:

Safety of advances depends upon correct documentation. In addition to compliance with

all relevant legal rules and regulations following aspects should be deeply dug into.

a) Executant

Borrowers/executants should be legally authorized to enter into the contract.

b) The Banks printed charge Form

The appropriate charge forms such as letters of pledge and hypothecation etc. should be

properly completed and executed.

c) StampsCharge form should be properly stamped in accordance with the stamp duty asapplicable in the province, where the documents are executed.

d) Execution and Documents:These charge documents should be executed in the bank premises and should be signed in

full as per borrowers specimen signatures.

e) Registration of Charged Documents:Certain charged documents for example, mortgage deed are required to be registered at

the office of registrar. Such registrations must be affected within21 days of the creation

of the charge.

Careful Monitoring

As a preventive measure, systematic and continuous evaluation helps to identify potential

problem cases before they reach a critical stage. It is, therefore, essential to monitor

advances. Following could prove good sources for effectivemonitoring.


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i. Financial statements, accounting and management policies.

ii. Bank accounts operations.iii. Personal contacts and site inspections.

iv. Analysis of overall economic environment.

v. Analysis of industry specific environment.

Review Function

This is periodic monitoring function that should be conducted under following broader

guidelines.

i. Analysis of operations on financing accountii. Credit report - bearing up to date information

iii. Financial statements analysis

iv. Inspection and analysis stocks reports

v. Review and updating charge documents

vi. Analysis, revaluation of securitiesvii. Other correspondence with borrowers

viii. Study of previous review filesix. Analyzing validity of insurance documents

Handling of Delinquent Advances

Through careful monitoring and periodic reviews delinquent advances could be

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

customers should be maintained endeavors should be focused on ways and means ofobtaining repayment without resort to litigation. Borrowers situation should be analyzed

and suggestions for improvement should be given. It is a well-established fact that legalsuits cost both money and time, which could be used for more productive endeavors.

Recovery of Advances through realization of securities

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

plan for repayment may not work out. Then the bank has to rely upon the realization of

security to liquidate the advances. Following steps should be followed.

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

should be served to borrower.

ii. Sufficient time should be given to borrower.iii. Notice should be issued by registered post, acknowledgment due and should

be retained as evidence.

iv. Reputed surveyors should do through, valuation of security.v. Written offers from several dealers should be invited.

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

vii. The offer closest to market value should be accepted


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7.3 ACTION PLAN FOR MARKETING DEPARTMENT:

This will help the bank to take long-term perspective for its marketing activities, withconsideration on strategic approach of the bank. There are various steps involved in the

given implementation plan, which will come in order, according to their importance and

subjection on one another. Moreover, to bring order and efficiency to the difficult task ofimplementation plan, it has been broken down into the steps, which believed to be

needed, when developing a disciplined action/implementation plan for launching

financial products.

Step 1: Business Review

As we early discussed that this implementation plan will focus on marketing activities ofUBL and as a part of the marketing background component, the business review is must.

It includes the marketing database not only of UBL but also of other banks. To develop

marketing database, we first need to understand the scope of banking followed by a

comprehensive situational analysis of the financial product, and market place, which isrelevant to the target market and competition situation. This will be accomplished

through secondary research in Pakistan. UBLs own record of financial products and veryoften-primary research surveys of potential customers and focus group information. The

business review provides a qualitative and quantitative decision activities and a rational

for all the strategic marketing decisions with in the plan.

Step 2: Problems and Opportunities

The problems and opportunities step of UBL is a summary of the challenges that willemerge from the marketing database. In this step the data collected from the business

review is shaped into meaningful summary points that form the basis of the

implementation plan.

Step 3: Quantifiable deposits Collection Target

Collection of deposits as an objective represents projected levels of services to be sold.

Setting this objective is critical because it is the first task of this implementation plan and

it sets the tone of the entire implementation plan for the bank. Everything that follows in

the plan is designed to meet the objective of collecting deposits through financial productfrom defining the size of the specific target market establishing marketing objectives

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

quantifiable manner, e.g. 400 million advertisement expenses in a year, for the first 5years of its start.

Step 4: Target Markets and Marketing

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

critical link to one another.


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Target Market: Once the deposits collection being developed as quantifiable objective,

the staff of marketing department at the Hub branches and Head Office of bank must

determine to whom they will be selling their new financial packages. In response towhich bank will raise deposits, making this determination is really defining a target

market which is a group of people with common characteristics. This part of

implementation plan is concerning on marketing efforts towards the portion of populationwit similar banking needs and saving habits.

Marketing Objectives: Marketing objectives for UBL clearly defines what the bank wantsfrom its target market and potential customers. This part of implementation plan focuses

on the behavior of customers that will help in setting the marketing objectives.

Step 5: Plan Structure

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

including the postings strategy, it will help in image building of the financial package to

be launched.

Posting: Once the bank has defined its potential market and has established marketingobjectives, it must need to develop posting of its financial product. Position is the desired

perception of the product within the market target of the bank for example, if the product

is launched. Its position should be done in such a way, that customer is fully aware of its

major characteristics the bank has stained to build the image of its products as highlyprofitable package. This positioning strategy is supported by the strategic consideration

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

Marketing Strategies: though marketing strategies are descriptive and non- qualitative yet

has a major impact over getting competitive advantage. These marketing strategies guide

to the development and selection of various tactical marketing mix tools and providedirection in broadening the target market, set by the bank.

Step 6: Informational Goals:

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

more. Informational goals means to set the target the market awareness and attitudes

package and fulfill the marketing objective of the bank. Another purpose is to providedirection for what is to be accomplished by each strategic tool interm of informational

context.

Step 7: Strategic Marketing Mix:

This step is highly concerned with getting attention of the customers towards the serviceof the UBL offering. Here we are concerned with a new package launched by the bank.

Focus will be on that financial product. This step of disciplined implementation plan

provides some strategic plans for marketing of the product. These strategic and tactical

plans incorporate marketing executed. When implemented, will allow the bank to meet its


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Aswathpa, K, (2003) Human Resource and Personnel Management: NewDelhi:Tata McGraw Hill Gibson, Charles H, (2002), 7th. Ed., Financial Statement Analysis,

Prentice Hall International Corporation.

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

Book Corporation.

Siddiqui, A H, (1998), 6th Edition. Practice and law of banking in Pakistan,

Royal Book Company, Karachi.

UBL(1999). Credit Manual. Karachi.

UBL(2000). Deposit Manual. Karachi.

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

Van Horne, J. C & J.M Wachowicz, (1998), 10th Edition. Fundamentals ofFinancial Management. New York, Prentice Hall International Corporation.

http/. www.ubl.com.pk