ubl bank financial analysis

5/27/2018 UBL Bank Financial Analysis

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Final ProjectOn

UNITED BANK LIMITED

-------------------------------------------------

Submitted By:Aftab Mughal 1632-211004

MBA (Hon)(Banking & FINANCE)

Submitted To:

___________________________

PIMSATInstitute of Higher Education


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FORThe partial fulfilment of therequirements for awarding the degree of

MBA (Banking & Finance)Assigned by: ____________________________

Faculty Members Signature: _______________

Internal Examiner Sign: ____________________

Name: __________________________________

External Examiner Sign: ____________________

Name: __________________________________


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We are thankful to Allah and many different people for helping

us creating this project.

Thanks to our families for their trust and understanding.

Our friends (who have always been a source of inspiration)

have helped to create a wonderful academic climate.


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Our Dearest and most respected ParentsWhose efforts and prayers are great source of strength tous in every noble venture? Their love inspired us to thehigher idea of life.


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There are many definitions of the word Bankeven the standard encyclopedia

and law books find it difficult to state exactly what a Bank is!

There have been many attempts by different writers to explain the exact significance

of the term Bank. Here some of the definitions are quoted as follows:

Banking Companies Ordinance 1962 Section 5 (b) defines

banking as:Banker means a person transacting the business of accepting, for the

purpose of lending or investment, of deposits from the public, and withdrawal

by cheques, drafts, order of otherwise, and include any post office saving

banks.

According to Crowther:Bank is a dealer of debt, his own and of other people.

According to Gilbert:A bank is a dealer in capital or dealer in money. He is an intermediary party

between the borrowers and lenders.

According to Samuelsson:Commercial banks provide certain services for customers and in return

receive payments from them.

Thus the comprehensive definition of the bank is:

A bank is a financial institution, which deals with money and credit. Itaccepts deposits from individuals, firms and companies at a lower rate of

interest and gives at a higher rate of interest to those who need them. The

difference between the terms at which it borrows and at which it lends forms

the source of it profit.

No doubt, a bank, thus, is a profit earning institution.


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VALUE of BANKING

Banks play very important role in the economic life of a nation. The growth

of the economy is dependent upon the soundness of its banking system. Althoughbanks do not create new wealth but borrow, exchange and consume. These make

generation of wealth. In this way they become most effective partners in the

development of that country.

To encourage the habit of saving and to mobilize these savings is its basic

purpose. Banks deposit surplus from the public and then advances these surpluses

in the form of loans to the industrialists, agriculturists, businessmen and

unemployed people under different schemes so that they set up their own business.

Thus banks help in capital formation.

If there are no banks, then there would be concentration of wealth in fewhands and great portion of wealth of a country would be idle. In the fewer

developing countries rate of saving is very low and due to this, rate of investment

and rate of growth is also very low. We can take bank just like a heart in the

economic structure and capital provided by it is like blood in it. As long as the blood

is in circulation, the organs will remain sound and healthy. If the blood is not

provided to any organ then the organ would become useless. So if the finance is not

provided to agriculture sector or to industrial sector, it will be destroyed.

Loan facility provided by bank works as an incentive to the producer to increase

production. Banks provide transfer of payment facility, which is cheaper, quicker

and safe. Many difficulties in the international payment have been overcome and

volume of transactions has been increased. These facilities are very much helpful

for the development of trade and commerce.


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BANKING SYSTEM

Banking services are extremely important for both developed and developing

economy such as Pakistan. Banking services serve two primary purposes:

o First, by supplying customers with the basic mediums-of-exchange (cash,

current accounts, and credit cards), banks play a key role in the way goods and

services are purchased. Without these familiar methods of payment, goods

could only be exchanged by barter (trading one good for another), which is

extremely time consuming and inefficient.

o Second, by accepting money deposits from savers and then lending the money

to borrowers, banks encourage the flow of money to productive use and

investments. This in turn allows the economy to grow. Without this flow,

savings would sit idle in someones safe or pocket, money would not be

available to borrow, people would not be able to purchase cars or houses, andbusinesses would not be able to build the new factories the economy needs to

produce more goods and grow. Enabling the flow of money from savers to

investors is called financial intermediation, and it is extremely important for the

growth of economy.


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HISTORY of BANKING

Earliest Banks:The first banks were probably the religious temples of the ancient world,

and were probably established sometime during the 3rd millennium B.C. Banks

probably predated the invention of money. Deposits initially consisted of grain

and later other goods including cattle, agricultural implements, and eventuallyprecious metals such as gold, in the form of easy-to-carry compressed plates.

Temples and palaces were the safest places to store gold as they were constantly

attended and well built. As sacred places, temples presented an extra deterrent

to would-be thieves. There are extant records of loans from the 18th century BC

inBabylon that were made by temple priests / monks to merchants. By the time

of Hammurabi's Code, banking was well enough developed to justify the

promulgation of laws governing banking operations.

Ancient Greece holds further evidence of banking. Greek temples, as

well as private and civic entities, conducted financial transactions such as loans,deposits, currency exchange, and validation of coinage. There is evidence too

of credit, whereby in return for a payment from a client, a moneylender in one

Greek port would write a credit note for the client who could "cash" the note in

another city, saving the client the danger of carting coinage with him on his

journey.

Pythius, who operated as a merchant banker throughout Asia Minor at

the beginning of the 5th century B.C., is the first individual banker of whom we

have records. Many of the early bankers in Greek city-states were metics or

foreign residents. Around 371 B.C., Pasion, a slave, became the wealthiest and

most famous Greek banker, gaining his freedom and Athenian citizenship in the

process.

The fourth century B.C. saw increased use of credit-based banking in

the Mediterranean world. In Egypt, from early times, grain had been used as a

form of money in addition to precious metals, and state granaries functioned as

banks. When Egypt fell under the rule of a Greek dynasty, the Ptolemies (330-

323 B.C.), the numerous scattered government granaries were transformed into

a network of grain banks, centralized in Alexandria where the main accounts

from all the state granary banks were recorded. This banking network

functioned as a trade credit system in which payments were affected by transferfrom one account to another without money passing.
http://en.wikipedia.org/wiki/Babylonhttp://en.wikipedia.org/wiki/Babylon


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EVOLUTION of BANKING IN

INDO-PAK SUB CONTINENT

The Indian society was quite familiar with the banking, right for the beginning.

There is also sufficient evidence to show that during 5 th century people were

accustomed to use hounds as a credit investment. Loans were given to the people

against personal and other securities such as ornaments, goods and other immovable

properties.


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COMMERCIAL BANKING IN

PAKISTAN

First Phase (1947 1974):

o Establishment of Commercial Banking System:There were 19 non-Indian foreign banks in Pakistan at the time of

independence with the status of small branch network, whose policies and

operations were controlled by their head office abroad. These banks were

solely engaged in export of crops from Pakistan. There were only two banks

in Pakistan at the time of Partition, Habib Bank, which had transferred its

head office from Bombay to Karachi after the announcement of thepartition, and Australian Bank, which has been working in Pakistani

territories prior to June 1947.The government of Pakistan, tried hard to

eliminate the banking crises.

The imperial bank of India closed down most of its offices in Pakistan,

which had been working as the agent of Reserve Bank of India was not

willing to purchase even token amounts of the government of Pakistan. The

Reserve Bank of India was hardly of any help. It refused to help the govt. of

Pakistan with advance argument ad-hoc securities to enable them to make

essential disbursements such as salaries and other obligations to add to the

difficulties.

The Indian govt. withheld Pakistans share of 750 million in cash

balances held by her at the time of independence. The forgoing

developments clearly brought home the urgency of assuming the control and

currency in Pakistan and brought to the force the need to setup a central

banking institution to take the place of reserve bank of India. Therefore it

was agreed between the Govt. of India and Pakistan to authority of Pakistan

from 30thSeptember 1947 to 30thJune 1948.

When it assumed full control of banking and currency in Pakistan the

first important task before the SBP was to issue of currency notes and

withdrawal of reserve bank of India, which had been in circulating in

Pakistan so far.

Second Phase (1974-1979):

o Nationalization of Banks:The banking reforms turned out to be a transitional and temporary step

and hardly after 18 months, the government nationalized the banking

system. Thus through the Nationalization Bank Act 1974, SBP and allcommercial banks incorporated in Pakistan and carrying on business in or


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outside the country were brought under the government ownership with

effect from January 1974. The ownership and management of all Pakistan

banks stood transferred and rested in the federal government.

The shareholders were provided compensation in the form of federal

government bonds redeemable at par any time with in a period of fifteenyears. The amount of compensation was equal to the breakup value of the

shares in case of commercial banks. For the SBP shares the amount of

compensation was estimated on the basis of average of the clearing

quotations during the 6 working days preceding nationalization.

The chairman, director and chief executive of various banks were

removed from their offices other than those appointed by the federal

government and the state bank. The central board of banks, managing

committees and similar other bodies were dissolved.

o Causes of Nationalization:The nationalization of banks may be justified on the following grounds:

- Large business and industrial houses dominate the lending policiesof the commercial banks; this brought forward the problem of

concentration of wealth.

- Commercial banking operations were guided by profit motives andas a result the backward regions and the small entrepreneurs were

never been their favorite customers.

- The operation of banks, unlike after business, have directimplication on the entire national economy. For instance if the banksraise the cost of their credit, the cost of everything may go up.

Third Phase (1979-1991):

o Introduction of Islamic Banking:In 1977 the Bhutto government was toppled. The martial law

government planned to reform the banking sector in a novel way. The

overall policy was to Islamize the economy and the banking system, being

based on interest was an important target of the new policy. The most

preferred form of Islamic bank financing profit and loss sharing would

receive banks to receive deposit without guaranteeing any return.

The Islamic bank has to acquire a high degree of confidence of the saver

to make him deposit his money with them. Not even the return of the

principal amount if guaranteed. The Islamic bank cannot finance the project

of an investor merely on the furnishing of collateral. The bank will have to

be a partner in the project. This will require to careful security of the project

and the assessment of risk involved because profits are the function of the

amount of risk in the project. Honesty and trust from both sides of the marketare more important to the system of Islamic Banking.


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Fourth Phase (1991-2000):

o Privatization And De-Regulation:The government headed by Prime Minister Nawaz Sharif was not fully

satisfied with the performance of nationalized banks. The areas, which were

severely criticized, were the falling standard of banking services and

common red-tapism. There were complaints about the services as delay in

home remittances, dispatch of cheques, drafts, inefficient counter services,

bad debts of the banks etc. were on sector application for privatization of

other banks namely UBL and HBL were also invited but the bidding

response was quite poor.

The privatization of these banks is under consideration. Legislation was

enacted to permit the establishment of new banks and the government

approved 10 application from the private sector for the grant of commercialbank licenses by SBP, out of these 9 new banks have since been

incorporated. Till March 1994 there were 20 domestic scheduled banks with

9825 branches and 21 foreign banks with 66 branches in operation in the

country. Overall investment of the scheduled banks rose to 76.7%. At

present there are 24 domestic scheduled with 8137 branches and 19 foreign

banks with 71 branches are in operation in the country. Total assets of

domestic scheduled banks amounting to Rs.1563.73 billion on 30 thMarch

1996.


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BENEFITS of BANKING for

ECONOMY

The deposits and loan services provided by bank beneficial for an economy in

many ways:

First, Current account, because they act like cash, make it much easier to buygoods and services and therefore help both consumers and businesses, who

would find it inconvenient to carry or send through the mail huge amounts of

cash.

Second, loans enable consumers to improve their standard of living by

borrowing money to purchase cars, houses, and other expensive consumergoods that they otherwise could not afford.

Third, loans help businesses finance plant expansion and production of newgoods, and therefore increase employment and economic growth.

Finally, since banks want loans repaid, banks choose borrowers carefully andmonitor performance of a companys managers very closely. This helps ensure

that only the best projects get financed and that companies are run efficiently.

This creates a healthy, efficient economy. In addition, since the owners(stockholders) of a company receiving a loan want their company to be

profitable and managed efficiently, bankers act as surrogate monitors for

stockholders who cannot be present on a regular basis to watch the companys

managers.


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UNITED BANK LIMITED

UBL was established in November 7, 1959 and is one of the major commercial

banks of Pakistan. 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. UBL is a Banking Company, which is engaged in Commercial &

Retail Banking and related services domestically and overseas.

On 1stJanuary 1974 banking nationalization act was promulgated which states

that all the banks working in the territory of the state are owned by Federal

Government. There were 14 banks with 3323 branches within the country and 74

in foreign country offices. On 1st July 1974 under nationalization act Commerce

Bank was merged in United Bank.

There were complaints about the services as delay in home remittances, dispatch

of cheques, drafts, inefficient counter services, bad debts of the banks etc. were on

sector application for privatization of other banks namely UBL and HBL were also

invited but the bidding response was quite poor. Due to above Problems State bank

of Pakistan has took over the United Bank Ltd in 1996.

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.

In October, 2002 UBL was sold to Abu Dhabi Group of Industry and Best Way

Group of Industry with 51% shares were given to them.


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UNITED BANK LIMITEDs

VISIONThe statement said with a vision of becoming a World Class Bank together with

its 'you come first' philosophy, the UBL has come a long way in the journey to

accomplish its vision.

UNITED BANK LIMITEDsMISSION

Set the highest industry standard for quality, across

all areas of our 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 and

Be recognized as the employer of choice


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UNITED BANK LIMITEDs

PRESENT POSITION

United Bank ltd is the third largest bank in Pakistan. UBLhas assets of over Rs.

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

convenience of over 1000 branches serving you throughout the country and also at

several overseas locations.- in addition to the convenience of over 1000 branches

serving you throughout the country and also at several overseas locations. Its paid

up capital Rs.8.09 Billion and Reserves Rs.10.261 Billion Inappropriate profit

Rs.15.56 Billion (as at December 31st2007)

Long Term Rating AA +:United Bank Limited is one of the largest Commercial Bank in Pakistan.

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.

Short Term Rating A-1+: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 belowrisk free Government of Pakistan's short-term obligations.

Term Finance Certificate Rating:- TFC - I: 'AA'

- TFC - II: 'AA'

- TFC - III: 'AA'

- TFC - IV: 'AA'


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FUTURE STRATEGIES

UBL expects its strong customer focus to drive the Banks future business

strategy. On the domestic front the bank is already an established player inconsumer banking business. It has taken an aggressive entry into the consumer

assets market with full range of product offerings, e.g. car financing, home loans,

etc.

UBL plans to increase investment in developing human resources, infrastructure

and internal systems to support the aggressive consumer initiative and exploration

of new avenues of revenue recognition

UBL is introducing a range of credit cards backed by visa and master card and

establish a strong market position through innovation and provision of superior

value to the customers

On the international front ,UBL plans to continue to build the core gulf business

with special focus on trade, With a network presence in Gulf, New York, Zurich

and London UBL has an ideal opportunity to offer correspondent banking services

in these key financial centers to a host of small and middle-tier banks in the sub-

continent, middle east and Africa.


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HISTORY of UNITED BANK

LIMITED

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

1. Formulation

2. Nationalization

3. Privatization

4. Today

1. 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 promotethrift 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, l.l Chandrigar 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. 1,000,000.Saigol family owned it and Agha Hassan Abedi was its first managing Director.

It had posted a profit of Rs. 0.7 million in its first year of operation with just

Eight branches at Karachi.

2. 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 merged with the UBL. Mr.Mushtaq Ahmed khan Yousafi

took over the charge of UBL. Now, there are six directors, a secretary and apresident.

3. Privatization of UBL:

United Bank Limited 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 UK and Abu Dhabi

Group (ADG) from the UAE were finally the winners at a record price.


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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.

4. UBL Today:Today they bank has taken progressive steps:

Logo:The United Bank Limited (UBL) management has launched its

new corporate identity and changed its 44 year-old-logo following its

privatization.

UBL Online:Evolution of internet and mobile online banking.

Money Direct:This remittance facility has been started to facilitate transfer of

money from UK to Pakistan.

Click n Remit:This is one of the easiest ways to remit money from U.S.A. to

Pakistan.


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MANAGEMENT of UNITED

BANK LIMITED

Over view of UBL:

UBLhas assets of over Rs. 550 billion and a solid track record of forty

eight years - in addition to the convenience of over 1000 branches serving you

throughout the country and also at several overseas locations.

o Date Established: November 7, 1959

o Chairman: His Highness Shaikh Nahayan Mabarak

Al Nahayano Deputy Chairman: Sir Mohammed Anwar Pervez OBE

o President & CEO: Mr. Atif R. Bokhari

o Branches: 1138: 1121 Domestic, 17 Overseas

Branches

o JointVenture with NBP: United National Bank Limited, U.K

o Representative Offices: Tehran, Kazakhstan, America & China.

o Subsidiary: United Bank AG Zurich, Switzerland.

United National Bank Limited,

UK (Joint venture

with NBP).

UBL Fund Managers Limited.

o Associated Company: Oman United Exchange Company,

Muscat.

UBL Insurers

Limited.

o Offshore Banking Unit: Export Processing Zone, EPZ Branch,

Karachi, Pakistan

o Employees: More Than 10,000.

o 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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Branches by Region

Region BranchesKarachi 110

Hyderabad 120

Multan 165

Lahore 86

Faisalabad 162

Quetta 42

Peshawar 160

Islamabad 157

Azad Kashmir 77

Total 1079

Provisional Headquarters

Province

Punjab Lahore

Sindh Karachi

N.W.F.P Peshawar

Baluchistan Quetta


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United Bank Limited

OVERSEAS NETWORK

OVERSEAS NETWORK

COUNTRIES

Branches Name of Country

"" U.S.A

"" Qatar

"" U.A.E

"" Bahrain

"" Republic of Yemen

"' ZurichRepresentative offices Iran

"" Egypt

Associated companies Oman

HUB Name Branches

United Arab Emirate 9

Bahrain 3

Yemen 2

Qatar 1

United States of America 1Export Processing Zone, Karachi 1

Total Branches 17


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Branches in U.S.A. U.K. and

Other Representative &Associated Offices

New York:

Address:

30 Wall Street, 10th Floor,

New York, NY 10005.

United States of America

United Kingdom UK:

United National Bank

Branches:

London

Birmingham

Bradford

Glasgow

Manchester

Representative offices:

o Tehran

o Kazakhstan

o China

Associated Companies:

o Oman United Exchange Co. Muscat

o UBL Insurers Limited


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MANAGEMENT STRUCTURE

President and Chairman of Board of Director

Executive vice President

General Manager of

Dept. 1 Dept. 2 Dept. 3 Dept. 4

Dept.5

Zonal Incharge

Area Manager

Branch Manager


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BASIC STRUCTURE

Board of Directors

H.O. Committees

Support functionsCore Functions

Divisional Heads Department Heads

Groups

Heads/Segment Heads

Field Operations

RCE, s / GM, s

Branches

President & CEO

Groups & SegmentsH.O. Committees

Chairman


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RCEs ORGANOGRAM

Regional ChiefExecutive

Head of Branchesoperations

MISCoordinator

Coordinator

Relationship

Manager (RA)

Relationship

Manager (RM)

Senior RelationshipManager (SRM)

Coordinato

Regional Agric.

Manager (RAM)

Regional Operations

Head (ROH)

Unit Head

Agriculture Credit

Officer (ACO)

Manager

OfficerCoordination

OfficerCoordination

Driver

Unit Head

Area Manager

(AM)


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AREA MANAGERS

ORGANOGRAM

AREAMANAGER AM

Area OperationManager (AOM)

Supervisor

Funds Transfer

Cash

Officer

CashOfficers

Cashiers

Supervisors

Branch Operations

Manager

Hub BranchManager

Branch Manager

Coordinator

RegionalOperations Head

Business Dev.

Officer (BDO)

Officer

SupervisorCash Outsourced

Cash Officer

Officer

Data

Input

Hub E-

Coordinator

SupervisorCustomer

Services

Commercial

officer

Hub BranchOperations

Data

Supervisor

CashierOutsource

Cash Officer

CommercialOfficer


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BUSINESS SEGMENTATION

UBLs credit process is built around the following basis customer

constituencies:Corporate Banking Group

Commercial Banking Group

Consumer Banking Group

Investment Banking

Treasury and Capital Market Group

International Division

Financial Institution Division

Islamic Banking Group

Business group heads will prepare their annual plans with projected financial

results and strategies and manage actual transactions and portfolios consistent with

their asset writing strategies. These groups are also responsible for monitoring their

performance for annual improvement.

o Corporate Banking:

The corporate banking group has endeavored to be the market leader in

their area and build market share through offering superior services, competitive

pricing, and a whole product range to valued corporate clients which include

private and public sector entities

This group will continue to remain the major contributor to UBLs

earning by taking advantage of tremendous growth potential of corporate

clients. The group requires talented, qualified and proactive human

resources. Frontline relationship managers require a complete grasp of UBLs

credit policies and procedures as they directly affect existing and future credit

portfolio handling.

o Commercial Banking:

This group caters to the needs of commercial entities and SMEs as

defined in prudential guidelines of SBP (State Bank of Pakistan). This group

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

sector. It operates almost in every city of Pakistan.

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

which are more numerous than corporate clients, however, their individual

requirements are much smaller than those demanded by corporate clients.


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o Consumer Banking Group:

This group provides financial facilities to individuals through a diverse

product line. Its success depends on the design of effective products,

comprehensive communication and marketing strategies.

This group operates almost in all Pakistan cities and also in someinternational location through UBLs 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.

Consumer banking group 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 credit policy and procedure guidelines.

o Investment Banking:

This group specializes in providing innovative and unique advice to its

clients, assisting them in meeting challenges in an ever changing market. This

group is equipped with adequate 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, TFCs, syndicated

loans, structured finance, leverage buyouts, project finance, quasi equity

products, independent advice, equity placements, mergers, corporate

restructuring, acquisition and other products.

Although the corporate banking group supports the product line of

investment banking group, the special nature of these products demands a more

active involvement of risk management. Risk management is to be proactively

involved in investment banking group transactions, right from the time of

initiation until the time of execution.

o Treasury and Capital Markets Group:

The major roles of this group include:

Managing banks liquidity and balance sheet requirement as per UBLand SBP guidelines.

Dealing in foreign currencies on behalf of its customers.

Providing treasury and foreign exchange related financial services to

its clients.

This group consists of highly qualified and experienced HR who is

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

transaction in various currencies. In performing these tasks, it undertakes credit

risk which is identified, monitored and managed by middle staff.

o International Division:


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The international division manages overseas operations including

credits handled by network of overseas branches. With careful planning and

detailed surveys of market, the international division will explore better quality

businesses and products and manage them efficiently to enhance UBLs

profitability and turn the overseas branches network into highly profitable unitof bank.

o Financial Institution Division:

This is an independent division operating as a profit center and is

responsible for catering non-banking financial institutions.

The division caters to 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.

o Islamic Banking Group:

Roles of Islamic banking are:

To manage and be responsible for the operations of Islamic

Banking Business (IBB)

To liaise with other dept. in the bank and the Shariah advisor to

ensure smooth operations of IBB

To ensure that all funds pooled into the Islamic Banking Fund

(IBF) and channeled into Shariah-Compliant financing and

investment activities

To arrange training of staff is Islamic Banking

To arrange for compilation and submission of such returns as

may be required to be submitted to SBP from time to time;

To ensure that all directives and guidelines, particularly those

applicable to Islamic Banking, issued by the SBP are strictly

compiled with;

To maintain the statutory cash reserves & liquidity requirements

with the SBP as prescribed the SBP; and

To assume other roles and responsibilities as determined by SBP

from time to time.


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UNITED BANKs

COMMERCIAL BANKING

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

mix of banking services that will help you manage and grow your business. The

experts of UBL facilitate its customers in the varied financial situations that they

come across.

Commercial Banking Products:UBL has taken progressive steps and has introduced innovative products

and services to provide you a variety of banking and financing services.

o Agricultural

o Foreign Currency Savings

o Foreign Currency Term Deposits Receipts

o Rupee Transactional Account (RTA)

o Regular Term Deposits Receipts

o Small Business

o Special Notice Deposits Receipts

o UBL Business Partner

o UBL Wallet

o UBL Profito Unisaver

Commercial Banking Services:UBL has taken progressive steps and has introduced innovative products

and services to provide you a variety of banking and financing services.

o UBL Wallet

o Online Banking

o Bank Charges

o Formso UBL e-statement

1.Agricultural Loan:UBL's agricultural loans on easy terms and conditions to

small-scale land owning farmers boost the country's economy

and yield greener harvests. UBL enables farmers to buy good

quality seeds, fertilizers, pesticides and agricultural implements.

Through the Government's Loan Schemes for Hairs, UBL helps the formers in

crops prosperity to make Pakistan's economy stronger.


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2.Small Business: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.

BusinessLine:- What is BusinessLine?

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

UBL Business line a complete solution to all your Business Financing

needs. With UBL Business Financing facility, one can now take his business to

greater and newer heights, and achieve the level of success that he truly

deserves. UBL Business line is a running Finance facility that not only provides

funds for growth but also enables the customers to capitalize on profitable

opportunities.

UBL Drive:UBL Drive is a unique auto financing product which offers features,

options and flexibility unmatched by any other bank, because at UBL,

You come first.

New Car Financing:UBL Drive allows to drive away own car by making a down payment of just

10% and to top that with low monthly installments

Used Car Financing:With UBL Drive one can buy his favorite used car (up to 5 years

old) at the most affordable rates.

UBL CashLine:

Introduction:UBL CASHLINE is a personal loan offered to customers. In today's

dynamic and hard economic environment where one can be in difficulty

due to any shortage of money for some urgent or routine work, UBL

CASHLINE guarantees the solution to the customers. This is a loan

offered to the customers with a view to investing the bank's funds in amanner as to get good return financially and socially.


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This product of the UBL consumer finance offers very unique features

and provides complete convenience, affordability and flexibility to the

customer. People now days are not in a condition to save voluntarily. The

inflation in our economy is one of the major reasons why people feel

difficult to save. Saved money losts its purchasing power as the timepasses, so people tend to spend them in some business or buy some

durables or in any other activity.

Due to these tough economic conditions people have little money to

spend for special events. UBL CASHLINE comes to rescue here. It offers

a cash loan to customer on easy terms and low mark up and encourages

them to spend for themselves. This product like any other consumer

finance product has a multiple effect on the economy and positive impact

on GDP.

This product was launched in LAHORE in OCTOBER, 2006 and is a

success since then. It is offered from Rs. 25000-Rs.500000.

Like all other consumer finance products of UBL, this particular

product also enjoys a 50% plus market share. Such an achievement in just

6 months is remarkable. This indicates the overall strategy and vision of

UBL regarding consumer finance.

UBL Travelers Cheaques HAMRAH:

- Introduction:

UBL was the pioneer in introducing Rupee Travelers Cheques facility

in Pakistan, as early as 1971.UBL "Hamrah"has been designed keeping

in mind, both convenience and security - be it business, property, trade or

personal needs. "Hamrah"Rupee Travelers Cheques are the ideal and

safest way of carrying cash when traveling anywhere in Pakistan.

Hamrah RTC's are now accepted at more than 2000 places such as

hotels, shops, real estate agents, jewelers, car dealers, etc and of course at

all our UBL branches. UBLhas a 24-Hours customer help-line, providingits customers with round the clock tele-verification of "HAMRAH"

travelers Cheques.


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o Salient Features:

- Absolutely FREE - No Bank Commission, No Excise Duty:

Bank doesnt charge any commission or excise duty on sale of

travelers Cheques, Whatever the denomination is.

- Denominations:

UBL RTCs are available in Rs. 10,000 and Rs. 5000

denominations.

- Easily Transferable and Encashable:

Hamrah Rupee travelers Cheques are easily encashable at

designated branches of UBL throughout the country through a single

signature.

- Available to All:

The person does not need to have an account with UBL to buy

rupee travelers Cheques.

- Ease of Immediate Assistance in case of Loss or Theft:

In case of theft or loss of the travelers Cheques the customer just

has to call the U FIRST SERVIC CENTRE which are providing help to

customers 24 hours a day and will guide him in the process.

- Special Facility of Refund:

Customer can have an immediate refund from the already

designated branches while traveling inside Pakistan.

- Valid Until Encashed:

They can be encashed whenever the customer wants, as there

validity does not have limit.


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CORPORATE BANKING

GROUP

The mission of UBL is to serve all the corporate needs and ensure full

satisfaction through product innovation, personalized banking, and top notch

service.

The CBG (CORPORATE BUSINESS GROUP) department of UBL defines

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

in providing innovative solutions to its diversified and satisfied customer base. UBL

CBG is considered to be a major player in the financial market of Pakistan.

The Corporate Banking Group focuses on attracting and servicing large

portfolio customers. The forte of UBL is providing exemplary customer serviceusing the "Single Window" concept and product superiority. The Relationship

Management team manned by highly qualified individuals from the industry has

steadily expanded the customer base and continues to enhance the cordial relations

with the 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 customers 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 today's competitive and

a demanding environment.

The success of CBG has been established from the fact that UBL received the

'No.1 Euromoney 2000' Best Local Bank award and recognized it to have

outperformed 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 wereinitially confined to foreign banks only.


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TARGET MARKET and

PRODUCTS

Objective:

Optimum utilization of available skills and resources will allow United Bank

Limited to:

Build strong customer relationship through a diversified product

portfolio in targeted markets.

Provide financial services to customers in an effective manner.

Achieve strong market position and adequate returns on capital.

Understanding a target market involves business discipline and selectivity. The

critical aspects of this process include identifying business potential, definingdesirable opportunities, and adhering to resultant marketing objectives and

strategies. An unfocused approach to the market may lead to unplanned asset

concentration of uneven quality.

Products:

Development of products at United Bank Limited is need based and is market

dependant. Innovative products will continue to be formulated as and when

required.

At present, United Bank Limited is offering the following major productswhich may be fund based or non fund based:

1. Short-term Credit Facilities.

2. Term Credit Facilities.

1. Short-term Credit Facilities:The financing for the period less than one year or one year is known as short

term financing. UBL provides different short term facilities to its credit worthy

clients to meet their short term needs like working capital requirement etc.

i. Non Interest Cash Finance (NICF):This facility allows a client to withdraw more money than the actual

balance lying in his account up to a specified approved limit. It is also known

as bank overdraft, credit line etc. this facility can be secured or clear (if up

to Rs. 500,000). The facility is generally provided against pledge or

hypothecation of goods or any other tangible security acceptable to the bank.

The customer would be required to adjust the advance periodically or within

a specified period.


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ii. Export Finance (FAPE I, II,G / LAPC):United Bank Limited provides facility against pre-shipment export

at an agreed rate of return, as per guidelines established by the SBP or

respective central banks in the case of international division.

iii. Foreign Bills Purchased- On Account (FBP-A):This is a post shipment facility known as finance against foreign

bills. It is allowed to exporter against export bills drawn under different sort

of letters of credit. This facility remains on customer risk until realization of

proceeds from the bill of exchange.

iv. Foreign Bills Purchased-against L/C (FBP) & FBP:United Bank Limited may extend financial accommodation through

negotiation and/or discounting at prevailing exchange rate, of a foreigndocumentary bill accompanied by relevant document of title to goods.

v. Payment Against Documents- under sight L/C:Import documents received under sight letters of credit are lodged in

PAD (payment against documents), and are released upon payment from the

party.

vi. Financing against Trust Receipt (FTR/LTR):

United Bank Limited provides this facility to its customers onrequest, at the time of opening of letter of credit or at later stage, release

import documents of related goods received under the letter of credit, to

enable the party to obtain delivery of goods and arrange to retire the

documents out of the sale proceeds of goods or from other sources. This

facility is issued against the hypothecation charge on the goods and

customer fills a prescribed Trust Receipt Form and provides his signatures.

vii. Financing Against Imported Merchandise (FIM):

Facility for financing imported goods against import letter of creditestablished through UBL is also made available at partys request on the

basis of mark-up for a short period not exceeding 90 days. This facility may

be repaid within the validity period either in part or in lump sum.

viii. FE-25 Financing:Fe 25 financing uses the banks foreign currency deposits held under

FE25 accounts scheme. This facility is classified as a working capital

facility and is allowed to exporter and importers, with a maximum tenure of

180 days from the date of shipment, or as otherwise stipulated by the StateBank of Pakistan guidelines.


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ix. Inland Bills Purchased:Inland bills purchased facility will be allowed to customers against

inland documentary bills. This facility will also be allowed for the purchase

of cheques and purchase of drafts up to the amount stipulated by the Statebank of Pakistan for the clean facility In case of the dishonor of this

instrument, the related partys account shall be debited. Simultaneously the

drawer shall immediately be asked to arrange for sufficient funds in his

account for adjustment.

x. Commercial Paper (CP):This is a short-term facility directly issued to the obligor. It is an

unsecured facility with tenor of less than 1 year. State Bank of Pakistan

guidelines for commercial paper is required to be followed for issuance bythe company and participation by banks. Large rated companies allow the

investor to invest directly without the need for an intermediary.

xi. Money Market Line (MML):This is a short term facility. It is used when the client desires to fix

markup for the tenure of the transaction. Money Market Line (MML) is used

by corporation with back to back lines booked by treasury. Money Market

Line (MML) is usually availed as a sub limit of working capital facilities.

2. Term credit Facilities:All credit facilities approved for tenor greater than 1 year with a fixed

repayment schedule are defined as term credit facilities.

As a rule, term credit facilities are deemed to carry a greater degree of risk

than short term facilities. Accordingly, they need to be analyzed in depth and

with an outlook of 5 to 7 years.

There are two types of term credit facilities, which are usually approved by

the bank. They are:

Fund Based.

Non Fund Based.


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Fund Based:These are the facilities, in which bank actually disbursed the cash to the

client or its customers.

i. Commercial and Industrial Loans.

ii. Term Finance Certificates (TFC).iii. Syndication.

iv. Project Finance.

i. Commercial and Industrial Loans:

Tenor must not exceed 7 years.

Principal must be amortized through regular installments, preferably

quarterly.

Markup should preferably be paid quarterly.

ii. Term Finance Certificates:Bank will also invest and purchase term finance certificates and privately

placed term finance certificates as deemed to be viable and feasible that is issued

by existing or new clients. Credit guiding principles are the same as that of for

industrial and commercial term loans except that the nature of the instrument is

tradable under prevailing laws and rules.

iii. Syndication:

Syndication is defined as any transaction involving commondocumentation (including, but not limited to, security sharing arrangements)

between United Bank Limited and other lenders for the purposes of extending

financing facilities to a client.

iv. Project Finance:Project finance is defined as methodology applied to the large scale

financing of specific assets, often utilizing a special purpose project company

where repayment is primarily based on future cash flows generated by project

assets finance, and where risks are entirely encapsulated within the context ofthe project and its contractual framework, with lenders having only limited or

no recourse to project sponsors.

Non-Funded:These are the facilities, in which bank actually disbursed to the client or

its customers:

i. Guarantee (Bonds).ii. Documentary Letter of Credit.

iii. Credit Facilities to Individuals.iv. Lending Against Shares.


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i. Guarantee (Bonds):United Bank Limited may issue guarantees (Bonds) on behalf of its

customers in favor of government entities or private beneficiaries. The

guarantees issued in favor of government beneficiaries are considered lower risk

compared to guarantees issued to in favor of private beneficiaries.Primarily, guarantees would be issued in accordance with state bank

guidelines.

ii. Documentary letter of credit:A letter of credit is one of the most widely used modes of settling

international trade debts. It is also a convenient and common method of

obtaining short term facilities from banks.

- Letter of Credit:A letter of credit (L/C) is one of the most widely used modes of

settling international trade debts. It is also a convenient and common

method of obtaining short-term finances from banks.

L/Csare broadly classified as follows:

1. Sight letters of credit (DP)

2. Usance letters of credit (DA)

1. Sight Letters of credit (DP):

In case of sight L/C (DP), the draft is drawn at sight and

relevant documents are held by importing bank until retired

(released) by the customer.

3. Usance letter of credit (DA):

In case of Usance letters of credit (DA), the draft is drawn

for a certain period (number of days) clearly mentioned in L/C,

payable by the customer on due date

v. Credit Facilities to Individuals:Extension of credit facility to individuals other than through consumer

banking products will not normally within the scope of the business of UBL and

will be treated as a special type of loan requiring approval for the group

executive.


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vi. Lending against Shares:Lending against shares falls into two categories:1. Margin Financing (MF)

2. Extension of credit facilities against shares held as collateral.

The purpose of both types of lending differs.

1. Margin Financing (MF):

Margin financing is defined as lending against collateral of listed

equity securities where the objective of the borrower is to invest in the

equity market.

2. Extension of credit facilities against shares held as collateral:

Extension of credit facilities against shares held as collateral

enables the borrower to pledge his portfolio of shares and avail financingto cater to his business or any personal need including any need other

than further investment in the equity market. The need may be to finance

working capital requirement or any other financing requirement. The

following credit principles are adopted for extension of credit facilities.


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CREDIT POLICY

In UBL, group executive risk heads the risk and credit policy which is a group

an independent function responsible for setting up frameworks for addressingdifferent types of risks faced by bank including credit risk. Since formally approvedcredit manual 1998, credit policies and procedures have been further developed andmodified through credit policies bulletins. This credit policy aims to consolidatechanges made since last approved policy, and incorporate the latest concepts ofdocumenting and presenting credit, an improved credit approval system and astreamlined credit process that has been inducted by UBL.

These policies and procedures cover all business areas of the bank and areexpected to ensure that lending activities and creation of risk assets are executed

prudentially and systematically. The goal of this policy is to achieve portfolios ofrisk assets that are acceptable quality in order to safely enhance long term corporate

earnings.This policy is designed to meet the organizational requirements as they exist

today in addition to provide sufficient flexibility to account for future needs of UBL.This comprehensive document explains UBLs credit policies and procedures.

Policies and procedures described are minimum requirements under normalcircumstances. However, the risk and credit policy group may establish additionalcontrols whenever appropriate. Going forward, any additions or amendments to this

policy will be approved by group executive risk and will be ratified by board creditcommittee which will become integral additions to the manual.

Certain policies and procedures of international division may be amended tocomply with locally prevailing regulatory requirements. After necessary approvals

by group executive risk and board credit committee, these policies will beconsidered addendum to credit policy manual.

Objectives:The objective of credit policy is to make risk handling and management

a core competency of organization and ensure that risks are accurately identified &assessed properly documented and approved, and adequately monitored andmanaged.

In order to ensure that desired directives are clear and wellcommunicated to relevant functions and departments. This credit policy and

procedure manuals aim to achieve following objectives:o To provide tools and techniques for implementing an effective credit

administration and monitoring system.o To establish and explain the credit assessment process by setting out

outlines for documentary credit, risk assessment and rating system forsound lending practice.

o To streamline, standardize and impalement credit approval process andto establish functions and responsibilities for staff engaged in creditactivities.

o To improve quality of UBLs portfolioo To ensure adequate returns on risk assets taken on by UBL.


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CREDIT PRINCIPLES

This section outlines the basic principles that United Bank Limited (UBL) will

pursue for extending credit facilities. These principles will serve as usefulguidelines and precautionary measured for prudent lending.

(UBL) will not extend any such credit facilities, which violate the rules

and regulations prescribed by the SBP and/or local central bank from time

to time.

(UBL) will consider financing of self-liquidating, cash flow supported

and well collateralized transactions within a business groups target

market and risk acceptance criteria.

(UBL) will participate in syndicated facilities if the transaction fulfills the

parameters established by the banks.

(UBL) will, prior to allowing the facilities, satisfy itself that there are

adequately secured with relevant and legally skilled enforceable

documents.

(UBL) will ensure that facilities allowed are well-aligned to customers

business structure and specific needs.

(UBL) will assess the customers character for integrity and willingness

to repay by studying background and credit history of the customer to

establish commitment to repay.

Facilities provided by (UBL) will be well diversified into such industrial

/ trading sectors where United Bank Limited (UBL) has the necessary

skills and resources to achieve a strong market position and adequate

return on capital.

(UBL) shall only land up the amount that the customer has capacity and

ability to repay. Customers liquidity and repayment capacity will be

determined by careful analysis of Financial Statement and Future

Projections to ensure that customers financial condition remains

satisfactory liquid to repay the bank.

It is against (UBLs) policy to provide financing for speculative purposes

and / or undesirable activities. For Islamic Banking Business, ShariahCompliant Business activities shall be financed based on evaluation on

Islamic Financial Accounting Standards (FAS).

(UBL) shall not allow and credit facility to clients, who have allowed

waivers / write offs in United Bank Limited (UBL). Any expectation to

this will need approval of the highest level of credit committee including

the Group Executive Risk and Credit Policy.

(UBL) shall maintain adequate margin against credit facilities, in

accordance with State Bank of Pakistans (SBPs) prudential Regulation

and / or local central banks instructions. If deemed necessary, the

appropriate business unit / credit authority may specify a higher margin.


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(UBL) shall continue to invest in development of officers dealing with

credit risk management and credit risk process.

Documents include as annexes of this manual will require regular updates

and modifications as per the requirements and needs of the businesses and

changing markets dynamics. The Group Executive Risk and Credit Policywill approve any all updates and modifications in such documents. Any

major structural changes and / or modifications will require ratification by

the Board Credit Committee / Board of Directors as well as clearance by

the State Bank of Pakistan (SBP).

Any addition/amendments/deletion/deviation in this manual to meet

changing conditions and / or regulatory/legal requirements of any

domestic or overseas location will be approved by the Group Executive

Risk and Credit Policy. However, if any such changes weaken provision

in this manual, the same shall require ratification by the Board Credit

Committee / Board of Directors as well as clearance by State Bank of

Pakistan (SBP).

This manual represents policies and procedures introduced to streamline and

consolidate all rules applicable to Credit Policies globally. However, management

reserves the right to formulate auxiliary credit policies for any domestic or overseas

location within parameters laid down in the manual.


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FIELD of ACTIVITIES

Regional Credit Administration

FunctionsComposition of Credit Functions:

Credit and Marketing

Credit Administration

Brief Job Description of the Documents:

oCredit and Marketing: Market new relationship to increase banks assets-based portfolio.

Financial analysis, evaluation and processing of credit line proposals.

Monitoring of credit portfolio through Client visits, Factory visits,

inspection and prepare call reports, visit reports in this regard.

Responsibilities for the compliance of all pre-approval instructions /

regulations issued from time to time by Head Office Credit Policy, State

Bank of Pakistan (SBP) and other regulatory bodies including obtaining

CIB, Borrowers Basic Fact Sheet, Compliance of ratios, as required

under Prudential Regulations, per party limit etc.

oCredit Administration: Disbursement of Credit Facilities including preparation of security /

charge documents, perfection of collateral, ensure compliance of State

Bank of Pakistan (SBP)s regulations / credit policy, Head Office (HO)

circulars and issuance of Disbursement Authorization Certificate

(DAC).

Regular monitoring of collateral and asset based portfolio through

weekly roosters / diaries, CARS Reports, credit maintenance, identifyexceptions and follow for the rectification of the same.

MIS related to Credit and Credit Administration Department.

Monitoring of markup accruals, recoveries thereof.

Liaison with various outside agencies (RCAD Head).

Miscellaneous jobs.

Disbursement of Credit Facilities: Preparation / Filling of charge / security documentation as per credit

approval. Perfection of securities and identification of expectations, if any.


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Scrutiny of charge / security documents after execution and

identification of expectations / observations, if any.

Limit feeding.

Preparation / Filling of Charge / SecurityDocumentation as per Credit Approval / Credit Policy

Compulsory Documents:

Limited Company:

o Attested copy of Memorandum and Articles of Association to

ensure that the company can borrow from banks, can

hypothecate / mortgage its assets to banks, to check seal

requirement etc.

o

List of directors along with specimen signature duly verified byCompany Secretary / Chief Executive.

o Form-29 (Part of Account opening document).

o Board resolution to borrow (in case of limited companies).

Partnership:

o Attested copy of partnership deed.

o Attested copy of registration certificate if partnership is

registered.

o Mandate to sign all borrowing documents on behalf of

partnership.

Sole proprietorship:

o A declaration if the firms letterhead evidencing proprietor

name, business etc. (A part of account opening document)

Club, Association, Trusts, Charitable Institutes, Schools:

o If the institution is a legal entity (legally registered with the

concerned authority), all formalities of limited companies are to

be complied with.

o Attested copy of bye-laws, rules, trust-deeds etc.

o It is advisable that opinion from lawyer should be obtained that

all formalities have been completed and disbursement can be

allowed to such customers.


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List of Security Documents Currently Used at UBL

o Facility wise charge documents: (As per Documentation Check List)

Charge documents for NICF. Charge documents for NIDF.

Charge documents for FAPC-l & ll.

Charge documents for FAFB.

Charge documents for FIM.

Charge documents for FTR.

Charge documents for LBP.

Charge documents for FBP (Discrepant).

Charge documents for LG.

o Security wise charge Documents:

Letter of Pledge in respect of roots ( Where any commodity id pledge

with the bank)

Letter of Lien & se of (in case shares, NIT units, US Dollar Bonds,

Wapda Bonds, FEBC. SSC, DSC, RIC, Accounts and TDR issued by

other banks are pledges with the bank.

Letter of Hypothecation if movables (in case of movable asset as

security including raw material, work-in-process, finished talks, plant

and machinery, spares, tools, equipments etc. Letter of Hypothecation for stocks, machinery, receivables (in case of

current assets as security including raw material, work in process,

finished stocks, receivables, machinery (movable / immovable), book

debts).

Memorandum acknowledging relation of mortgage by deposit of title

deeds.

Mortgage deed duly registered with the concerned sub-registrar,

whenever a registered mortgage required.

Personal / Corporate guarantee.

Undertaking of clean finance.


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Types of Collateral Currently Used

o Readily Encashable Registered Securities:

Defense Saving Certificate (DSC) Special Saving Certificate (SSC)

Regular Income Certificate (RIC)

Special U.S. Dollar Registered Bonds

o Readily Encashable Bearer Securities:

WAPDA Bearer Bonds

Special U.S. Dollar Bearer Bonds

Foreign Exchange Bearer Certificates

o Deposits Held With United bank Limited:

Saving Deposit

Current Deposit

Term Deposit

o Deposits Held With Any Other Bank:

Saving Deposit

Current Deposit & Term Deposit

o Pledge of any Commodity

o Financial Guarantee

o Hypothecation of Assets:

Movables

Current Assets

Receivables

Plant & Machinery

o Mortgage of Properties: Equitable Mortgage

Equitable Mortgage with Token Register Mortgage

Registered mortgage

o Clean (SBP has allowed clean financing up to Rs.500,000/-)

o Personal / Corporate Guarantee

o Counter Guarantee


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CREDIT INITIATION

After describing the main functions of RCAD the process of credit

initiation is given below in steps:

1. At first the borrower meets the Relation Ship Manager known as RM in

the Marketing Unit for the purpose of new facility, extension of existing

facility, renewal / enhancement of existing facility or rescheduling or

restructuring of the loan.

2. RM prepares the credit application of the client. He fulfills all the

documentary requirements which are necessary to initiate the credit. The

first requirement is known as Credit Application. This is not a one page

application rather it is a full document whichcontains a lot of things. Allthe contents of credit files will be discussed after this section

3. Complete Credit Application is send to RCAD for the purpose of

scrutiny. If any objection is found the file is returned back to marketing

unit. If RCAD is satisfied then this file is sent to the credit committee

for approval

4. The next step is the approval of the application. The file is transferred

from RCAD to the credit committee which consists of the following

authorities depending upon the amount of facility:

4.1. Senior Risk Manager

4.2. Global head CRM

4.3. group Executive Credit Policy4.4. President

4.5. Board of Directors

5. The next step is the Issuance of DAC. If the file is approved by the credit

committee then it is returned back to RCAD which issues DAC to client

after being satisfied.

6. When Disbursement Authorization Certificate is issued to the client then

he can enjoy the facility.

The note able thing is that for every different proposal there will be different

RMs and different Credit Committee.

The person or group of persons who approves the credit file is collectively

known as credit committee and it is designed separately for each client at different

Tiers of Capital. For example Senior Risk Manger can approve credit only up to 5

billion PKR and for above amount approval from Global Head CRM is also

necessary.

The process of DAC Issue is showed in the form of diagram in the next page:


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Borrower

Initiates the

Application

RecommendingAuthorities

Credit Administration Department Scrutiny

Approving

Authorities

CAD ISSUENCE OF DAC

Business UnitMarketing

Credit Committee

RM

Unit Leader

Corporate Head

Group Executive

Senior Risk Manager

Global Head CRM

Group Executive

President

Board of Directors


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CREDIT APPLICATIONThe main document of the process of credit is the credit application also known

as CA or Credit approval. As it already have been mentioned that RM in the

marketing unit prepares this application or proposal to decide whether the bank will

allow the facility to the client or not. There are many different sort of documents

which are annexed to this application according to the policies of the bank and

instructions of the state bank.

Contents of Credit Application

1.Executive Summary:In the executive summary the basic information about the company or

business is mentioned and the bank needs following type of documents:1.1. Company Profile ORR, RM, Legal Structure, Line of Business

1.2. Purpose of submission

1.3. Transaction Details

1.4. Time Banded Description of facilities

1.5. Financial Review

1.5.1. Sales

1.5.2. Cost of Sales

1.5.3. Profitability

1.5.4. Receivables1.5.5. Inventory

1.5.6. Payables

1.5.7. Liquidity

1.5.8. Capital Structure

1.5.9. Leverage

1.5.10.Debt to Equity

1.5.11.Interest Coverage

1.5.12.Comments over financial position

1.6. Summary Of Bank Line

1.7. Comments

2.Facility Appendix:Facility appendix mentions which type of facilities are being requested by

the client and it includes all the terms and conditions at which loan will be

disbursed.


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3.Borrower Basic Fact Sheet:This document describes the basic information about the company. It is on

the prescribed form according to the instructions of the SBP.

4.Directors Guarantee:The directors of the company give the personal guarantee that the principle

together with the interest will be repaid on the predefined dates.

5.Directors Net worth Statement:The assets and liabilities of each director of the company are also attached

with the application.

6.C. I. B. Report (Corporate Credit InformationReport):It is mandatory and statutory requirement that the bank will attach a report

about the credit worthiness of the company from Credit Information Bureau of

the SBP.

7.Request letter:The original request letter on the letter head of the company also attached

with the CA. This document works as an order letter.

8.Check List of Prudential Regulations:RM also ensures that all the regulation laid down by the State Bank of

Pakistan from R-1 to R-13 and from M-1 to M-2 has been duly fulfilled.

9.ICIL Report International Credit Information Ltd.It is a private company which collects the secret information about the

companies about their credit worthiness of the companies. A report from that

company is also attached with the credit application.

The following different types of documents are required before issuance of DAC

in respect of any renewal, extension, restructuring / rescheduling or deferrals.


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Basic Documents:o Memorandum of association

o Certificate of incorporation

o Certificate of commencement of Business

o Subordinated agreements signed by the provider of the loan (in casesubordinated agreement is present in the balance sheet)

o Form 29/ A (List of directors from SECP)

o National Identity Card

o Partnership Deed

o Board Resolution (for limited companies)

o Facility Acceptance Letter

o Site visit Reports

o Market Checking Report of ICIL

o

CIB report of SBPo Audited Financial Statements

o Prudential Check List duly signed by RM

o Borrowers Basic Fact Sheet duly signed by RM

o Search report showing the status of charges over the assets of the

borrower company from the office of SECP

Facility Document:

NICF / FIM / FTR / Export Financing:

In the case of above facilities following documents are required.o Buy back Agreement.

o Demand Promissory Note.

o Letter of Continuity.

o Other related Documents.

FE 25 Export Financing:o USD financing documents (drafted by chief legal counsel).

o Dollar demand promissory note.

o Undertaking.

Sight Letter of Credit:

o Application of opening the irrevocable letter of credit.

Non Interest Demand Finance:

o Term Finance Certificate.

o Demand Promissory Note.

Syndication term Loan:o Syndication term facility agreement along with terms and conditions.


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o Vetting Certificate from transaction lawyer.

o Demand promissory note.

Security Support Documents:

Against different types of securities different types of documents arerequired.

Hypothecation / Floating Charge over Stocks / Book Debts /

\Hypothecation of Plant and Machinery:

o 1stpari passu charge / 1sthypothecation charge certificate over the stocks

and book debts for Rs. Along with supplementary letter of

hypothecation.

o 1stpari passu charge / 1stfloating charge certificate over stocks and book

debts along with deed of floating charge / supplementary deed offloating charge.

o 1stpari passu hypothecation charge certificate over plant and machinery

along with letter of hypothecation.

o Stock reports in case of hypothecated stock.

o Insurance Policy from UBL approved company covering full value of

stocks / plant and machinery.

o Valuation report with FSV.

Pledge of stock:o Letter of Pledge.

o Insurance Policy from UBL approved company covering full value of

stocks.

o Stock report.

Pledge / Lien on Deposit Account / Government Securities /

Shares:

o Letter of lien and set off.

o Agreement for sale and buy back of securities.o Transaction slips of CDC for pledge of shares in UBLs pledge account.

o Transfer deeds with pledgors signature duly verified from issuing

office.

o Discharge signatures on government securities duly verified by the

issuing office.

Financial/ Bank Guarantee:

o Financial / bank guarantee from FIRMU approved bank.


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Personal / Corporate Guarantee of Directors:

o Personal guarantee supported with net worth statement.

o Corporate guarantee supported by board resolution, memorandum and

articles of association.

Equitable / Registered Mortgage of Property:o Memorandum of deposit of title deed / mortgage deed.

o Title deeds.

o Certificate from the relative authority / department showing ownership

of mortgagor.

o Approved site / building plan.

o Valuation report with FSV.

o 1st pari passu / 1st charge certificate over fixed charge (land and

building).o Insurance policy from UBL approved company covering full value of

building mortgaged.

Term finance Certificate Documents:o Approval of SECP to issue prospectus.

o Clearance of prospectusTFC by stock exchange.

o Pledge of TFC within 30 days of issue in CDC favoring UBL or Trustee.


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RISK GRADEIn the executive summary of the company its risk grade is written. What is risk

grade? Risk grade is measure of the financial strength of the company and it is

calculated through a complex method. However basic details about risk grade are

given below

Given the importance of an accurate consistent measurement of the quality of

the banks credit portfolio, a central element is the need for a single and consistent

risk grading frame work.

Objective:

The risk-rating system is a tool to evaluate asset quality, and to identify and

monitor portfolio risk. UBLrisk-rating mechanism is used to assess the two

major sources of risk that derived the occurrence of lending loss:

o The risk that the customer will default.

o The ability to limit loss in event of default by holding tangibles

security.

Purpose of Risk Grading:

The risk-grading system provides a framework for:o Loan evaluation and ongoing review,

o Measuring credit quality of borrowers/ borrower groups,

o Providing early warnings of credit exposures showing signs of

deterioration.

o Effective Problem Loan management.

Obligor Risk Rating:This represents a review of the possibility of the customer defaulting on its

financial arrangements, i.e. the Profitability of default. This entails:

o Failure to meet interest payment and / or principal reductions when due.

o Breach of financial covenant or other loan conditions.

o Failure to meet financial obligations to other creditors and lenders.


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Levels of Risk:

1. ORR1:The highest rating is reserved for Government institutions and a

handful of multi-national and large institutional client. Customers with

this rating have shown usually solid and stable profitability, liquidity,

and debt coverage in the past and are projected to continue this

performance over the long term.

2. ORR2:Strong corporate/ Institutional clients, Government institutions,

or multi-nationals with somewhat greater long-term risk than rating 1

customer, but still supported by very stable operating and financial

performance.

3. ORR3:Customers demonstrate medium to long-term operational and

financial stability but they may be somewhat more susceptible to

cyclical trends or variability in earnings. Their operating cash-flow

projections over the medium to long-term adequately cover both

projected principal repayments and interest.

4. ORR4:

Customers portray operational and financial stability over a 3 to5 years time horizon, but are more likely to be weakened by adverse

business, financial and economic condition than clients with stronger

ratings.

5. ORR5:Customers are reasonably sound and have some margin of

protection in their current performance, but may portray more erratic

patterns as a result of competitive or general economic pressures. Recent

profits and operating cash-flows provide moderate comfort; therefore

interest and principal repayments are less well assured over a mediumto long-term time horizon.

6. ORR6:These customers face more uncertainty over future operating

cash flows, and are often under stronger competitive pressure, their

future over three-five years and both in good or bad time, is less well

safe guarded by operational and financial performance, with smaller

margins of protection on principal repayments and interest.


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7. ORR7:Customers have greater vulnerability to default. While current

projections show that they are able to support principal repayments and

interest, capacity or willingness repay is likely to be impaired by adverse

business, financials are economy conditions. These customers oftenshow greater erratic performance and may have experience recent loss

years. They may be perceived as fighting to maintain current levels of

profitability. This risk rating would also typically carry customers

categorized as watch list under UBLs credit policy.

8. ORR8:These customers clearly exhibit weaknesses and depend upon

favorable economic conditions to meet financial commitments. They

have been experiencing difficulties, which may threaten the safety oflending. Retaining the business to sustainable health without important

changes in strategies or practices is difficult. If it is highly likely that a

breach of repayment arrangements will occur within a period of three

months, the requirement of obligor risk rating 9 and 10 are to be strictly

observed. Customers under the sub-standard category as defined under

the State bank of Pakistan prudential regulations (i.e. mark-up/ interest

or principle is overdue by 90 days or more from the due date) would

also fall under this risk rating.

9. ORR9:Customers with credit rating 10 are of very poor standing with

little prospect for improvement. Principal recovery will require rigorous

remedial management. Customers under the doubtful category as

defined under the state bank of Pakistan regulations (i.e. mark-

up/interest or principal is over due by 180 days or more from the due

date) would also fall under this risk rating.

10.ORR 10:This risk rating clearly recognizes and measures assets impaired

due to loss of principle (which may be partial) as well as mark-up, thus

justifying the provisioning from the same. Customers under the Loss

category as defined under the SBP regulations (i.e. where mark-

up/interest or principal is over due by 1 year or more from the due date)

would also fall under this risk rating.


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Security Indicator:The obligor risk rating assesses the risk of customer defaulting. For pricing

and credit management purposes, UBL need to know the amount UBL can expect

to lose in case of default, i.e. loss in the event of default. One of the key drivers

of the loss in the event of default is level of securities/ collateral coverage.Therefore once the obligor risk rating has been determined, the next step

would be to calculate the security indicator for each facility provided t

ubl bank financial analysis

Documents

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