ACKNOWLEDGEMENT:First of all, we would like to say ALHAMDULLILAH for giving us the strength and health to complete this report until it done. We are very grateful to Almighty ALLAH who has given us the power and capability to think and judge the matters and then to make use of the sacred abilities.Then I am heartily thankful to our teacher KHALID JAMIL ANSARI whose encouragement, guidance and support from an initial to the final level enabled us to build up an understanding of the subject not capable to prepare it.Last but not a least, we offer our regards and blessings to all our friends and not forgotten to our family for providing everything, such as money, to buy everything that are related to this project work and their guidance, which is the most needed for this project. They also encouraged us and supported us to complete this task

TABLE OF CONTENTS

Executive Summary:

This report provides an analysis and evaluation of the current and prospective position ofBank Al Habib in the banking industry. This report focuses on the growth and marketexpansion of the Bank Al Habib Limited. Aspects like strengths, weaknesses, opportunitiesand threats of Bank Al Habib are highlighted.Methods of Analysis include IFE, EFE, CPM, BCG, IE, Grand Strategy, and QSPM matrices.After analyzing of matrixes, it is indicated that Bank AL Habib has a strong and stableposition and needs to plan a strategy for further growth.The report finds through QSPM matrix that Horizontal integration is most favorable strategyfor growth and expansion of Bank Al Habib. Bank AlHabib is needed to carefully plananAcquisition and Merger strategy and implement accordingly.

INTRODUCTION :BANK AL HABIB LIMITED:

DAWOOD HABIB GROUP, the sponsor of Bank AL Habib Limited, has a long track record in banking which dates back to the 1920's. It was among the founder members of Habib Bank Limited which played a major role in meeting the financial and banking needs of Pakistan, and which was nationalized along with other Banks in Pakistan on January 1, 1974. Under the subsequent privatization policy of Government of Pakistan, DAWOOD HABIB GROUP was granted permission to set up a commercial bank. Bank AL Habib was incorporated as a Public Limited Company in October 1991 and started banking operations in 1992.

(Late) Hamid D. Habib, grandson of the founder of Habib Group, was the first Chairman of Bank AL Habib Limited. He was a Director in Habib Bank Limited from 1954 and its Chairman from 1971 until its nationalization. After the death of Mr. Hamid D. Habib in May 2000, Mr. Ali Raza D. Habib, who was Director on the Board, was appointed the Chairman of the Bank, a position he continues to hold.

(Late) Rashid D. Habib, who was the Managing Director of Habib Bank Limited from 1953 till its nationalization, was appointed as the Managing Director & Chief Executive of Bank AL Habib Limited until he passed away in 1994. After his death, Mr. Abbas D. Habib who was the Joint Managing Director and closely associated with the Bank since its inception in 1991, was appointed as

the Managing Director & Chief Executive of the Bank, a position which he continues to hold.HISTORY OF BANK:Habib Esmail, founder of Habib Group, started his career in Bombay in 1891 at the age of 13 on a salary of Rs. 5 per month in a firm that dealt in copper and brass utensils. He worked day and night, arriving before the shop opened, staying till late in the night, and then walking home to save money on conveyance. No wonder that in the short span of five years, at the age of 18, he was made a partner in the firm. Even at that young age, he had established an excellent reputation for honesty, hard work, fair play, trustworthiness, humility. These values continue to guide the activities of Habib Group to this day.

During the next 17 years, he captured over 60 percent of the local utensils business and diversified into export of copper, cotton scrap iron and manganese ore, selling to East Africa, Italy, France and Great Britain. Being a person of great insight, he sent his representatives to Europe in 1912 and established branch offices in Genoa and Vienna. Simultaneously, he initiated business relationships with Japan and China.

His reputation for honesty and fair play was so well known that his customers and local merchants would leave their surplus funds with him for safe-keeping and investment, thus establishing the foundation of the family's banking business. In 1921, he started Habib & Sons. The firm traded in cotton, oil seeds, and bullion and acted as a merchant bank. It eventually became the flagship of the family and the parent family and the parent company of Habib Bank Limited.

Habib Bank Limited was established in Bombay in 1941 by the sons of Habib

Esmail. The bank had over 30 branches operating in India at the time of partition. Quaid-e-Azam Mohammad Ali Jinnah reposed confidence in the bank by opening his personal account. On the creation of Pakistan in 1947, and following the advice of the Quaid-e-Azam, Habib Family shifted all of its businesses including Habib Bank to Pakistan. The bank played a vital role in meeting the financial and banking needs of Pakistan. It continued to record tremendous growth and progress and emerged as the leading private-sector commercial bank in Pakistan when it was taken over by the Government of Pakistan along with all other Pakistani banks on January 1, 1974.

In 1991, the government again decided to allow the private sector to establish commercial banks in the country. Dawood Habib Group was amongst the first to be granted permission to set up a new bank under this policy. Bank AL Habib Limited was incorporated in October 1991 by the grandsons of Habib Esmail and started operations in January 1992. Although Bank AL Habib commenced operations in 1992, it embodies the same high standards of integrity, prudence, and trust which have characterized Habib Family's banking operations in Pakistan and abroad for about 70 years. The bank is particularly conscious of the trust reposed in it by the depositors, and its prime duty is to protect and honour this trust all times. Guided by the values taught and practiced by Habib Esmail more than a century ago, the bank has continued to grow and progress in all areas of its operations. In a short span of 20 years, the Bank's assets have grown to more than Rs. 380 billion, with a network of 442 branches and sub-branches, a Wholesale Branch in the Kingdom of Bahrain, and Representative Offices in Dubai, Istanbul and Beijing, China.

Board Of Directors:

NameDesignationOccupation

Mr. Ali Raza D. HabibChairmanBusinessman

Mr. Abbas D. HabibManaging Director & Chief ExecutiveBanker

Mr. Anwar Haji KarimDirectorIndustrialist

Mr. Shameem AhmedDirectorFormer President, Askari Commercial Bank Ltd.

Mr. Murtaza H. HabibDirectorIndustrialist

Mr. Qumail R. HabibExecutive DirectorBanker

Syed Mazhar AbbasDirectorFormer Banker

Mr. Manzoor AhmedDirectorChief Operating Officer NIT

Mr. Safar Ali LakhaniDirectorFormer President, Soneri Bank Limited

Syed Hasan Ali BukhariDirectorFormer MD & CEO - Mackinnon Mackenzie & Co. of Pakistan/Corporate Advisor

Company Secretary:Banks company secretary is as follows:

NameDesignationOccupation

A. Saeed SiddiquiCompany SecretaryBanker

Management Team:

MrAbbasD.HabibChief Executive & Managing DirectorMr.QumailR.HabibExecutive DirectorMr.AhmadSaeedSiddiquiGroup Head & Company Secretary

Mr.MansoorAliKhanGroup HeadInformation Technology DivisionSyedAzizWastiGeneral ManagerInternational DivisionMr.MohammadZafarAminGeneral ManagerProjects DivisionMr.EhteshamH.AliGeneral ManagerCredit DivisionMr.Mahfuz-ur-RahmanGeneral ManagerCompliance DivisionMr.RafiqA.SuhrwardyGeneral ManagerTreasuryMr.RazaAliGeneral ManagerAudit DivisionMr.MohammadSaleemChashmawalaGeneral Manager

Centralized Processing Unit

Mr.MushtaqPanjwaniGeneral ManagerCustomer Services DivisionMr.AkbarRazaKhanGeneral ManagerFinance DivisionMr.NadirAkbaraliJamalGeneral Manager & CFOKarachi / Sindh & Balochistan ZonesMr.MohammadHaiderRazaGeneralManager

Mr.AliAsadHabibDeputyGeneralManager

Mr.AkramRizwiDeputy General ManagerNorthern ZoneMr.ZahidSaeedMirzaGeneral ManagerCentral ZoneMr.AunAliGeneral Manage

Vision and Mission:Vision:"To be a quality financial service provider maintaining the highest standards in banking practices".Mission:"To be a strong and stable financial institution offering innovative products and services while contributing towards the National economic and social development".

Proposed Vision:To be aworld-class financial services company that helps consumers andbusinesses achieve their goalsORTo become theleading, technology-driven and globalfinancial institution,providingdistinctively unique range of financial services.

Proposed Mission Statement:

To be the preferred provider of targeted financialservice in ourcommunities based on strong customer relationships. We willstrengthen these relationships by providing the right solutions thatcombine our technology,

expertise and financial strength. Ourgoal isto create customer loyalty, shareholder value and employeesatisfaction.

SWOT ANALYSIS:INTERNAL STRENGTHS:

Huge Deposits:The bank has stable growth in deposits since its emergence. BAHL is the Eight largest bank in Pakistan and because of its 23 years long existence it is the trustworthy bank in Pakistan and outside Pakistan.Advances on Sound Basis:The loan facility provided by the bank is on sound basis. They have many checks and documentation that secure their money after advancing. With their strategy there are very less chances of non-recovery from the debtorInfrastructure:Because of its 465 Domestic and 4 Overseas Branches they have very good infrastructure and are prevailing now outside Pakistan also. BAHL continually looks for ways to become more efficient and to increase their profit marginsBrands:BAHL has launched their products and varied services with particular brand names that is now-a-days a competitive strategy in its own. They are launching same schemes that are already existant in the banking sector but because of giving them brand names they are creating unique identity. Their popular brands are BAHL Wallet (ATM card), BAHL Address (House loans), BAHL Drive (Car financing), (Online Banking Service), HAMRAH (Traveler Cheque), Click N Remit , TezRaftar (Remittance Service) etc.

Fast Service:Another very important aspect of BAHL is its fast service. Every thing goes very quickly. If you are looking for a loan, or you want to deposit money or you want to pay your bills their service is so fast that they respond the customer very quickly. Like other banks customer do not have to wait for the long time.Financial:BAHL has financial strength as they are gaining profit from the advances that they provide to the organizations.Services:BAHL is providing lot of services to its customers like in case of remittances they have services like Click N Remit online service, Tezraftar is another remittances service, BAHL -Online their online service, Money gram is their service for foreign currency remittance from outside Pakistan and Hamrah is their service regarding rupee traveler cheque.Promotion Criteria:The promotion criterion of employees is made up of passing the diploma examination of Pakistan institute of bankers and other business qualifications.Good Reputation:Because of its quality management, marketing, innovation in products and services they have established a good reputation in the banking sector.

INTERNAL WEAKNESSES:Centralization:BAHL is centralized. It means authority is not delegated to branch level. Manager cant take initiative regarding different decisions such that for giving finance.Low Promotional Activity:The majority of people are not well aware about the products of BAHL. Promotion activity of their services is very low.Lack Innovation:BAHL Management lacks innovation they introduce the same products that are already existent in the market.Low Salaries:BAHL officers salaries are low as compared to other private banks.Low Motivation Level:There is low level of motivation in the employee of the bank.Less Specialized Skill:In BAHL there is lack of specialized skill because of job rotation policy of human resource department. The bank should concentrate upon increasing its abilities on individual service basis.

EXTERNAL OPPORTUNITIES:Mobile Banking:Mobile banking is a concept that has started to find its roots in the banking sector. So it is a big opportunity for BAHL to avail this chance at big level.International Expansion:Opportunities exist for expansion of BAHL chains in the international arena, in particular in Bahrain and Dubai. Particular attention must be given to the individual country's customs and cultural practices to be successfulTrade Shows: BAHL should organize trade shows for the promotion of export for that they should finance the companies those who wanted to internationalize and wanted to introduce their product and services outside Pakistan.Sociocultural:An external opportunity exists in efforts to improve the social environment of local communities and society in general by offering innovative, community-involvement programs

EXTERNAL THREATS:Rapid Changes:The rapidly changing environment in the banking sector and the quick response of the other banks to these changes can be a threat for BAHL.

Customer Behavior:What customer really wants is a difficult thing to identify as to identify the customer perception and its behavior is complex procedure. So the changing needs of the customer can be a threat for the banks.Governmental Policies:Changing governmental policies and instability in politics can be seen as a threat for the banking sector.Competition:Competition can be the greatest threat for the BAHL. As old banks have started changes and many new banks are emerging as a strong entity so BAHL will face a strong threat from this competition unless they adopt pro- active approach to handle these threats.

Internal Audit:

Management Audit:

Bank Al Habib is an organization following centralized planning and controlling. Planning isthe responsibility of the senior management group more particularly the board of directors,and to check any deviation from the prescribed plan, there is head office under them.

Marketing Audit:Bank Al-Habib marketing strategies are not aggressive. They should improve interpersonalcommunication skills, marketing department & provide excellent customer services to getmore business by satisfying their customers. Bank has an opportunity to target tradefinance & to attract low cost deposits from individuals & retail customers. Bank Al- Habibcan easily get business from SME sector, Consumer Banking & Micro Finance Banking byimproving their marketing strategy.

Financial Audit:

PACRA has maintained the long-term and short-term entity ratings of Bank AL HabibLimited at AA+ (Double A plus) and A1+ (A One plus) respectively.These ratings denote a very low expectation of credit risk emanating from a very strongcapacity for timely payment of financial commitments.The ratings reflect the banks sustained performance, exceptional asset quality, andsatisfactory financial profile. The ratings draw comfort from prudent risk managementpolicies and themanagements conservative risk appetite.

HR Audit:There is absence of corporate culture & good HR practices in Bank as compare to otherbanks. They provide training & promotion to their employees but salary packages &compensation is not good which should be at least market competitive to attract good resource from market

Strategies:

Market Penetration:

Through advertisement campaigns, bank is striving topenetrate in the market.Market Development:

The Bank is operating 11 Islamic banking branches in Pakistan.

Product Development:

Bank is continuously involved in new product development.Some are as follows

MoneyGram

Young saver AccountSenior Citizen AccountForeign Currency Saver

Backward Integration:

Bank is not involved in horizontal integration.

Forward Integration:

Bank is not involved in horizontal integration.

Horizontal Integration:

Bank is not involved in horizontal integration.

Diversified Strategy

Related Diversification

The Bank has 66.67% shares holding of AL HabibCapital Markets (Pvt.) Ltd.

The bank has 30% shares holding of Habib Asset Management Limited.

Un-related Diversification.The Bank has 6.24% shares holding of HabibSugar Mills.

Strategy Implementation:

Annual Objective:

Determine Business Plan DriversDetermine Acquisition Financing ConstraintsDevelop Acquisition Candidate List

Build Preliminary Valuation Models

Rate/Rank Acquisition Candidates

Review & Approve Acquisition Strategy

Policies:The first and foremost thing is to determine business plan drivers. It is veryimportant to convert business strategies to set of drivers or a source of motivation tohelp the merger succeed in allpossible ways.There should be a strong understanding of the intended business market, marketshare, and the technological requirements and geographic location of the business.The company should also understand and evaluate all the risks involved and therelative impact on the business.Then there is an important need to assess the market by deciding the growth factorsthrough future market opportunities, recent trends, andcustomer's feedback.

The integration process should be taken in line with consent of the managementfrom both the companies venturing into the merger.Restructuring plans and future parameters should be decided with exchange ofinformation and knowledge from both ends. This involves considering the workculture, employee selection, and the working environment as well.

At the end, ensure that all those involved in the merger including management ofthe merger companies, stakeholders, board members, and investors agree on thedefined strategies. Once approved, the merger can be taken forward to finalizing adeal.

Strategy Evaluation:

Set Standards:

Reviewing internal and external factors that arethe bases for currentstrategy.

Measuring performance.

Taking corrective actions.

FUTURE STRATEGY:

BAHL expects its strong customer focus to drive the banks future business strategy. On the domestic side bank has already launched its consumer

banking business. Increased investment is targeted in developingHuman Resources; Infrastructure and internal system support the

aggressive consumer initiative and explorations of new avenue generation. The first step under this initiative is the launch of the banks ATM / Debit Card, branded as BAHL Wallet. Furthermore BAHL has plans to introduce a full suite of innovative consumer finance products designed to capture a significant share of the local consumer financing market and tap into the current growth in demand of such financing.

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