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United Bank Limited
Jinnah Town Branch Harappa, Sahiwal
A REPORT SUBMITTED TO DEPARTMENT OF BUSINESS ADMINSTRATION, BZU
SUB CAMPUS SAHIWAL, IN PARTIAL FULLFILLMENT AND REQUIREMENTS
FOR THE DEGREE OF MASTER IN BUSINESS ADMINSRATION
Submitted By
Islam Fazal
MBA-12-33
Department of Business Administration1
BZU SUB CAMPUS SAHIWAL
2
3
PREFACE
In Masters of Business Administration, Internship Program is an important part to give
students an opportunity to have experience of practical field. Unless and until the students
experience the novelty of practical work, their knowledge of what they study in theoretical
courses remains incomplete. The most important point in an Internship Program is that the
student should spend their time in a true manner and with the spirit to learn practical orientation
of theoretical study framework.
This internship report is on my six weeks practical training at United Bank Limited
Jinnah Town Branch, Harappa. In this internship report I have tried to give details about the
United Band Limited, working and the functions of different departments of the bank.
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DEDICATION
By The Grace Of Allah Al-Mighty And Due To The Prayers Of My Beloved Parents, I
Completed This Report In A Successful And Timely Manner. I Dedicate This Report To My
Loving Parents And Teachers Who Contributed A Lot For My Success.
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ACKNOWLEDGEMENT
All praise to ALMIGHTY ALLAH alone, the Omnipresent and the most Merciful and
compassionate. The words are bound, knowledge is limited and time is short to express His
dignity. It is one of infinite blessings of ALLAH that he best owed me with the potential and
ability to contribution towards the deep oceans of knowledge already existing. I pay hum-age to
greatest personality of the universe; HOLY PROPHET HAZARAT MUHAMMAD (PBUH)
Who is forever torch bearer and spring of guidance in every sphere of life. I am deeply indebted
and also express my gratitude to my respected teachers at BZU SUB COMPUS SAHIWAL for
their support.
At the very outset, I am very thankful to Mr. Javed (Branch Manager) for providing me
the opportunity to have an excellent learning experience during my internship at United Bank ltd
Jinnah Town Harappa Station Dist Sahiwal. The person to whom I would like to give my regards
is the Mr. Tariq Niaz (Operational Manager) at UBL, Jinnah Town Harappa who gave me very
useful tips and information. I might not be able to complete my internship without his
cooperation and his kind behavior. I am thankful to all my teachers of BZU Campus Sahiwal.
I also take this opportunity to express a deep sense of gratitude to all the staff members of
UBL for their cordial support, valuable information and guidance, which helped me in
completing this task through various stages specially
Mr. Javed Ahmad Branch Manger
Mr. Tariq Niaz Operational Manger
Mr. Mudasar Chief Cashier
Mr. Tariq Mehmood Cashier
Lastly, I thank almighty, my parents and friends for their constant encouragement without
which this internship would not be possible.
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EXECUTIVE SUMMARY
Banking operations and services are one of the basic needs of an economy. These include
acceptance of deposits and disbursement of advances to individuals and others at higher rates.
Banks perform various fundamental factions, which are directly or indirectly contributory
towards economic and social development of countries.
The purpose of this report is to study operations and analyze performance of UBL to see
whether the bank is successful in its operational performance or not, and recommending possible
solutions for problems. For meeting the purpose both secondary and primary data have been
used.
United Bank Limited (UBL) is the second largest bank of Pakistan with assets of over Rs.
1009739 million and a solid track record of fifty six years - in addition to the convenience of
over 1400 branches serving its customers throughout the country and also at several overseas
locations. In this six weeks internship program I have learned about banking from experienced
managers running these sections.
This report contains the information and learning about UBL that I learnt during the 06
weeks internship period in United Bank limited. This report deals with History & Nature
(Business) of the UBL, its Products and Services, information about main offices and also the
review of various departments of the Bank. This report also contains Finance & Accounting
operations of the UBL, role of Financial Manager (Branch Manager), Use of Electronic Data in
core decision making and the Sources, Generation and Allocation of funds used in the banking
operations of the UBL.
Recognizing the need of Islamic banking, UBL also provided number of Islamic banking
services like Islamic Deposit Schemes and Islamic Fund Based Facilities.
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At the end of this report, on basis of my observation during internship, financial analysis
and SWOT analysis of UBL is provided. Suggestions are also recommended as per learning from
analysis. This report will provide a better and brief learning about United Bank Limited.
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Sr. No. Content Page No.
1 PREFACE
2 DEDICATION
3 ACKNOWLEDGEMENT
4 EXECUTIVE SUMMARY
5 1. INTRODUCTION 2
6 2. ORGANIZATIONAL STRUCTURE 15
7 3. MY LEARNING’S 23
8 4. FINANCIAL STATEMENTS, VERTICAL and TREND ANALYSIS
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9 5. RATIO ANALYSIS 39
10 6. SWOT ANALYSIS 52
11 7. PEST ANALYSIS 55
12 8. RECOMMENDATIONS 56
13 9. ANNAXURE 62
14 10. REFERENCES 63
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1
1. INTRODUCTION
1.1 Brief history of the organization:
About UBL:
The history of UBL can be divided into four main
Phases:
Formulation
Nationalization
Privatization
UBL Today
1.1.1. 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 promote thrift and habit of saving amount
common thereby stimulating the economy as a whole. Necessary formalities completed for
obtaining registration certificate from State Bank of Pakistan to perform business activities. After
passing through all these formalities on 7th November, 1959 United Bank Ltd came into
existence as a Schedule bank.
The Head office of the Bank was established in the New Jubilee Insurance House, 1.1
Chundrigar Road Karachi. It was registered as a joint stock company. The bank was incorporated
with an Authorized Capital of Rs 20,000,000 and issued and subscribed and paid up capital of
RS 10, 00,000. Saigol family owned it and Agha Hassan Abedi was its first managing Director.
2
1.1.2. 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 a president.
1.1.3. PRIVATIZATION OF UBL:
UBL was the largest privatization attempted by the government of Pakistan, launched in
June 2001, with 21 interested parties. It was impacted by the adverse developments of the
September 11, 2001 and was finally concluded in October 2002, which left stage only three
bidders. The consortium comprising Best way Group (BG), out of the U.K. and Abu Dhabi
Group (ADG) from the U.A.E. were finally the winners at a record price. Sale proceed was Rs
12350 million. This signaled the strong confidence reposed by these investor groups, in the
improved governance of the country, the economic potential, the banking opportunity and the
existing management of the bank.
1.1.4. UBL TODAY:
Today the bank has taken progressive steps. The United Bank Limited (UBL)
management has launched its new corporate identity and changed its 44 year-old-logo following
its privatization. UBL has started the Online Banking & Click n Remit services.
CHAIRMAN:
His Highness Shaikh Nahayan Mabarak Al Nahayan.
DEPUTY CHAIRMAN:
Sir Mohammed Anwar Pervez OBE.
PRESIDENT & CEO:
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BRANCHES:
1079 Domestic, 17 Overseas Branches.
REPRESENTATIVE OFFICES:
Tehran
Kazakhstan
China
SUBSIDIARY:
United Bank AG Zurich, Switzerland.
United National Bank Limited, UK (Joint venture with NBP).
UBL Fund Managers Limited.
ASSOCIATED COMPANIES:
Oman United Exchange Company, Muscat.
UBL Insurers Limited.
OFFSHORE BANKING UNIT:
Export Processing Zone, EPZ Branch, and Karachi, Pakistan.
HEAD OFFICE:
State Life Insurance Corp. Building #1,
I.I. Chundrigar Road, Karachi, Pakistan
P.O. Box No.: 4306
Phone: (92-21) 111-825-111
Gram: "UNITED"
Fax: (92-21) 2413492.
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1.2 NATURE OF THE ORGANIZATION
UBL is a Banking Company, which is engaged in Commercial & Retail Banking
and related services domestically and overseas. UBL was set up in 1959 by Agha Hasan
Abedi and is today one of Pakistan's major banks in terms of deposits and advances. The
Group's principal activities are to provide commercial banking and other financial
services. The Group offers personal banking, cash management, retail loans and other
financial services. These services include deposits, savings/current bank account, vehicle
loans, personal loans, retail trade finance, global banking, lending to priority sector and
small scale sector, foreign exchange and export finance, corporate loans and equipment
loans.
In 1971 the Government of Pakistan nationalized it. In 2002, the Government of
Pakistan sold it in an open auction to a consortium of Abu Dhabi Group and Best way
Group. Since its privatization the bank has been successfully turned around and remains a
robust and strong performer in all major segments of its operations. In 2002 it merged its
operations in the UK with those belonging to National Bank of Pakistan to form United
National Bank Limited, of which it owns 55%, with National Bank of Pakistan owning
the remainder.
The Bank is making every effort to meet the up-coming challenges through
strategic planning and making the best use of the resources at its command. A
professional team was appointed in mid 1997 to restructure the bank and to commence
rightsizing. The management is also in the process of rationalizing the branch network
and identifying and recovering its doubtful and classified portfolio. It has planned to
institute major improvements in customer services and internal systems to improve
efficiency. It also intends to launch innovative products. The bank is increasing resource
mobilization through regular deposit campaigns and accelerating the process of recovery
of outstanding advances and non-performing assets.
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1.2.1. VISION STATEMENT:
“To be a world class bank dedicated to excellence, and to surpass the highest
expectations of our customers and all other stakeholders”.
1.2.2. MISSION STATEMENT:
Set the highest industry standard for quality across all areas of operation,
on a sustained basis;
Optimize people, processes and technology to deliver the best possible
financial solutions to our customers;
Become the most sought after investment;
Be recognized as the employer of choice.
1.2.3 Core Values:
Honesty and Integrity
Commitment and Dedication
Fairness and meritocracy
Team work and collaborative spirit
Humility and Mutual respect
Caring and socially responsible
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1.3. NUMBER OF EMPLOYEES
1.3.1. BOARD OF DIRECTORS:
Name Designation
His Highness Shaikh Nahayan Mabarak Al Nahayan Chairman
Sir Mohammed Anwar Pervez, OBE, HPK Deputy Chairman
Mr. Atif R. Bokhari President & CEO
Mr. Omar Ziad Jaafar Al Askari Director
Mr. Zameer Mohammed Choudrey Director
Dr. Ashfaque Hasan Khan Director
Mr. Muhammad Sami Saeed
Director
Mr. Aqeel Ahmed Nasir
Company Secretary
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1.3.2. MANAGEMENT HIERARCHY:
President
Board of directors
Members executive board
Regional chiefs
Zonal chiefs
Branch managers
1.4.
PRODUCT LINES
1.4.1. DEPOSIT PRODUCTS:
UBL has taken progressive steps and has introduced innovative products and
services to provide you a variety of banking and financing services including Current and
BB Accounts.
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UBL UNIFLEX ACCOUNT:
UBL has introduced a new checking account ideal for small investors, traders,
businessmen and customers from middle income group. They can now afford an amazing
rate of return plus value added benefits only available from the UBL UniFlex PLS
Savings Account.
UBL PROFIT COD:
Customer can earn a higher income on their surplus cash by investing it in UBL
Profit Certificate of Deposit. UBL Profit helps them earn extra income with their hard
earned money, while providing absolute trust and security.
PLS REGULAR TERM DEPOSITS RECEIPTS:
If customer wish to make a secured long term investment, UBL’s Term Deposit
Receipts the smart choice. UBL Term Deposit Receipts provides an attractive rate of
return. The profit is credited to the customer account every six months. Customer has the
flexibility to choose from a wide range of tenors. Customer can avail the Rollover or
Renewed option at any time before encashment. Customer can get TDR en-cashed at any
time before maturity period.
FOREIGN CURRENCY SAVINGS & FOREIGN CURRENCY TERM DEPOSITS RECEIPTS:
United Bank offers the best rates of return on Foreign Currency Deposits in the
market. Accounts can be opened in US Dollar, Pound Sterling, Euro, and Japanese Yen at
designated branches. All Pakistani nationals residing in Pakistan and outside Pakistan can
also open Foreign Currency Accounts. Resident Firms and companies including
Investment Banks can open Accounts.
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UBL E-TRANSACTION ACCOUNT:
When it comes to electronic financial
services www.ubl.com.pk is Pakistan’s favorite Internet destination and why not! With years of
experience in innovation United Bank offers a wide spectrum of world-class of electronic
services and banking products for trailblazers like you.
1.4.2. LOANS & CARDS
UBL MONEY:
UBL Money, the Personal Installment Loan from UBL provides you with power, control,
convenience and the flexibility to manage your financial requirements and realize your dreams.
UBL Money is a fixed installment loan. It gives you access to funds starting from Rs.
50,000/- up to a maximum of Rs. 500,000/- without any collateral. UBL Money provides you the
flexibility to manage your monthly installments according to your income stream. You can select
any tenor from 1 to 5 years in a multiple of 12 months.
UBL BUSINESSLINE:
UBL Businessline is a running Finance facility that not only provides funds for growth
but also enables you to capitalize on profitable opportunities.
UBL CASHLINE:
UBL Cashline is a flexible loan that provides you cash up to Rs.500, 000 without any
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security requirements. It empowers you to take control of your finances.
UBL Cashline is aimed to make your life easier .Whether you are a salaried individual or a
businessman.
UBL DRIVE:
UBL Drive allows you to drive away in
your own car by making a down payment of just 15% and to top that with low monthly
installments. With UBL Drive you can buy your favorite used car (up to 5 years old) at the most
affordable rates. UBL Drive is not just a car loan; it’s a financing facility that gives you Cash on
your car.
UBL ADDRESS:
UBL Address empowers you to become the proud owner of a home by offering a variety
of product and pricing options that are flexible yet affordable. So choose the best product option
and pricing to suit your needs
UBL PAYPLUS:
If you are a permanent employee of a company (Government, Semi-Government, MNC
or Local Corporate Entity/Private/Public Limited), which disburses salary through UBL, then
UBL PayPlus (loan against salary) is the right product for you. Through UBL PayPlus, you can
now easily avail a loan based on your salary level.
UBL CRDIT CARD:
UBL Credit Card provides the following facilities:
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To share the value, excitement and benefits
Each time UBL Card members use their UBL Credit Card to purchase
airline, train or bus tickets, they are automatically covered against any sort of accident
that might befall them while traveling. The coverage amounts are:
1.4.3. AGRICULTURAL PRODUCTS
PRODUCTION LOAN:
Financing is available for Major and Minor crops across Pakistan. Main purpose of
financing is to facilitate farmers to purchase Agriculture Inputs such as Seeds, Fertilizers,
Pesticides, Sprayers, hired labor etc.
NIACF (REVOLVING CREDIT SCHEME):
Loan Tenure 3 years.
Documentation once for 3 years.
Cleanup once a year.
Option for the farmer to use limit as per requirement.
Markup is charged on amount used or withdrawn.
Minimum Amount PKR 30,000.
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NIADF (DEMAND FINANCE PRODUCTION):
Loan Tenure 3 months to 1 year.
18 months for Sugar cane only.
Lump sum disbursement of the limit for a specified period.
Repayment of loan in bullet payment on maturity (Principal and markup).
Minimum Amount PKR 30,000.
DEVELOPMENT LOAN:
LAND DEVELOPMENT, EQUIPMENTS AND MACHINERY:
Financing for Land Improvement, Water course improvement, Tube wells, Lift
pumps, Deep turbine pumps, Cotton pickers, Godown, Cold Storage, Harvester,
Thresher, etc
TRACTOR & VEHICLE FINANCE:
To purchase Tractors, Delivery Vans, Mini Trucks, Motor Cycle and other
vehicles used for marketing Agri Products. Loan Tenure: 1 to 3 years for Motor Cycle, 1
to 7 years for Tractor, and 1 to 5 years for other 4 wheel vehicles. Other features are:
1.4.4. OTHER SERVICES
UBL E-STATEMENT:
UBL has launched the UBL e-statement facility which makes it easier for
customers to get their statement of accounts and automated transactional debit/ credit
alerts right into their inbox. It is available for all Rupee and Foreign Currency Account
holders. UBL statement facility is:
Absolutely free of cost.
Accessible when you need it.
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Security.
Automated transactional debit/ credit alerts.
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UBL WALLET:
UBL offers ATM and Debit Card facility to all account holders at all UBL
branches anywhere in Pakistan, regardless of whether their branch is online or offline.
UBL Wallet VISA ATM & Debit Card has the entire convenience and security
account holder’s desire and the quality they deserve. This Wallet holds all the cash in
customer’s bank account. UBL Wallet VISA also gives the facility of having up to 9
supplementary cards issued against one primary card. All supplementary cardholders will
be able to conduct ATM/Debit transactions within the limits of the primary card account.
UBL WIZ:
UBL Wiz is
Pakistan’s first ever Prepaid VISA Debit Card that provides the convenience, security
and benefits of an ATM and Debit Card, locally and internationally. More than just an
ATM card, you can use your UBL Wiz everywhere VISA cards are accepted. Whether
you are using it online, paying for petrol, shopping or dining, you are accessing money
directly from your prepaid card, without having to visit the bank.
UBL NETBANKING:
UBL net banking is an
Internet Banking portal offering a simple, convenient and secure method of accessing
Using UBL net banking, the customers have access to their bank accounts 24
hours a day, 7 days a week and can keep a close eye on their account balances, print
account statements, pay bills, transfer funds, track purchases and schedule their recurring
payments at the touch of a button and much more Receive customized alerts.
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2. ORGANIZATIONAL STRUCTURE
Head Office
Provisional Head Quarters
Zonal Office
Hub Branches
Branches
2.1. Main Offices:
2.1.1. HEAD OFFICE:
The Bank's registered office and principal office is situated at State Life Building No. 1,
I. I. Chundrigar Road, Karachi.
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2.1.2. BRANCHES:
Domestic Branches 1079
Overseas Branches 17
2.1.3. DOMESTIC NETWORK:
Domestic Network Branches
Azad Kashmir 71
Baluchistan 41
N.W.F.P 163
Punjab 584
Sindh 220
Total 1079
2.1.4. PROVISIONAL HEADQUARTERS:
Province Region (City)
Balucihstan Quetta
N.W.F.P Peshawar
Punjab Lahore
Sindh Karachi
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2.1.5. OVERSEAS NETWORK:
HUB Name Branches
United Arab Emirates 9
Bahrain 3
Yemen 2
``````````Qatar 1
United States of America 1
Export Processing Zone, Karachi 1
Total Branches 17
2.2. Departments of the UBL
CORPORATE BANKING & CASH MANAGEMENT GROUP: (CBG):
The Corporate Banking Group has endeavored to be the market leader in their area and
builds market share through offering superior service, competitive pricing, and a wide product
range to valued corporate clients. The group caters to the needs of multinational companies and
medium to large corporate clients, which include private and public sector entities. This group
will continue to remain a major contributor to UBL’s earnings by taking advantage of
tremendous growth potential of corporate accounts. The group requires talented, qualified, and
proactive human resources. Front line relationship managers require a complete grasp of UBL’s
credit policies and procedures as they directly affect existing and future credit portfolio handling.
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The Corporate Banking Group focuses on attracting and servicing large portfolio
customers. Our forte is providing exemplary customer service using the "Single Window"
concept and product superiority. The Relationship Management team manned by highly qualified
individuals from the industry has steadily expanded UBL customer base and continues to
enhance their cordial relations with our esteemed clients. Despite the sluggish economic growth
in recent years, UBL outperformed all the other local banks in the corporate banking sector
primarily due to CBG's emphasis on establishing and enhancing relationships with foreign/local
blue chip and middle market customer’s thereby capturing significant market share.
COMMERCIAL BANKING/SME (CB):
The Commercial Banking Group caters to the needs of commercial entities and small and
medium enterprises, as defined in the State Bank of Pakistan’s Prudential Guidelines. This group
deals with commercial clients of small to medium size in both private and public sectors. It
operates in almost every city of the country with qualified and dedicated staff.
This group aims to fulfill necessary business needs of its customers, which are more
numerous than corporate clients. However, their individual requirements are relatively much
smaller than those demanded by corporate clients. In view of the peculiar nature of this business
segment, which involves a higher turnover, a much wider network is needed.
CONSUMER BANKING GROUP:
The Consumer Banking Group provides financial facilities to individuals through a
diverse product line. Its success depends on the design of versatile and effective products and
comprehensive communication and marketing strategies. Agility in monitoring the portfolio and
following up with its customer base, which is wholly comprised of individuals, is also an
essential requirement.
This group operates in nearly all major cities of Pakistan, and also in some international
locations through UBL’s network of branches and trained sales force. This group offers products
such as home loans, personal loans, auto loans, business loans, and credit card facilities, etc.
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INVESTMENT BANKING GROUP (IBG):
The Investment Banking Group specializes in providing innovative and unique advice to
its clients, assisting them in meeting challenges in an ever-changing market. The group is
equipped with adequately experienced professionals.
This group will either lead or participate in major Term Finance Certificates in the
market. It offers a full spectrum of services, including Term Finance Certificates, Syndicated
Loans, Structured Finance, Leveraged Buyouts, Project Finance, Quasi Equity Products,
Independent Advice, Equity Placements, IPO’s, Equity Underwriting, Mergers, Corporate
Restructuring, Acquisitions and other products.
Although the Corporate Banking Group supports the product line of the Investment
Banking Group, the special nature of these products demands a more active involvement of risk
management. Transactions such as Project Finance offer limited recourse and such transactions
need to be structured in a way as to mitigate inherent risks. Risk management is to be proactively
involved in Investment Banking Group transactions, right from the time of initiation until the
time of execution.
TREASURY & CAPITAL MARKETS GROUP:
The major roles of the Treasury and Capital Markets Group include:
Managing the bank’s liquidity and balance sheet requirements as per UBL
and State Bank of Pakistan guidelines,
Dealing in foreign currencies on behalf of its customers, and
Providing treasury and foreign exchange related financial services to its
clients.
This Group consists of highly qualified and experienced human resources who are
actively involved in dealing with other banks and financial institutions to execute transactions in
various currencies.
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INTERNATIONAL DIVISION:
The International Division manages overseas operations including credits handled by the
network of overseas branches. With careful planning and detailed surveys of the market, the
International Division will explore better quality businesses and products and manage them
efficiently to enhance UBL’s profitability and turn the overseas branch network into a highly
profitable unit of the Bank.
The Global Credit Risk Management Division monitors and manages the risk, credit
process and procedures at overseas branches.
FINANCIAL INSTITUTIONS DIVISION (FI):
This is an independent division operating as a profit center and is responsible for catering
to all financial business requirements of banking and non-banking financial institutions. This
division caters to the financing needs of all local banks, foreign banks, and other financial
institutions including leasing companies, investment banks, DFIs, insurance companies, mutual
funds, etc.
Like the Corporate Banking Group, the Financial Institutions Division also operates with
a structure of relationship managers, providing comprehensive solutions to its clients. In order to
strengthen the division’s credit analytic capabilities, the Financial Institutions Risk Management
Unit oversees the risk related to financial institution related transactions. The Financial
Institutions Risk Management Unit is part of the Risk Group.
ISLAMIC BANKING GROUP (IB):
The roles and functions of the Islamic Banking Group shall be:
To manage and be responsible for the operations of Islamic Banking
Business (IBB), including policy and procedural matters;
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To ensure that all funds pooled into the Islamic Banking
Fund (IBF) are channeled into Shariah-compliant financing and investment activities;
To arrange training of staff of Islamic banking;
To arrange for compilation and submission of such returns, as may be
required to be submitted to the State Bank of Pakistan from time to time;
To ensure that all directives and guidelines, particularly those applicable
to Islamic banking, issued by the State Bank of Pakistan are strictly complied with;
To maintain the Statutory Cash Reserve and Liquidity Requirements with
the State Bank as prescribed from time to time by the State Bank of Pakistan; and
To assume other roles and responsibilities as determined by the bank or
the State Bank of Pakistan from time to time.
HUMAN RESOURCE DEPARTMENT: (HR)
UBL is the place for you if you are willing to materialize all your deliverables in
alignment with the organization’s holistic vision to grow and excel. Committed and competent
work force is the primary asset in providing value addition to stakeholders of a business
organization.
HR Division is responsible for attracting, selecting and recruiting the right people from
the market. UBL is proud of its highly professional, transparent and objective approach in its
recruitment and selection processes. After applying the eligibility criteria, which depends on the
Job grade, a series of selection procedures are applied before hiring employees. Normally the
candidates go through the process of test, group discussion and interview. The Interview is
conducted by a team of internal as well as external professionals of the related area.
Sophisticated recruitment and selection tools like oracle based data management system; online
application and behavioral based interviewing techniques have been introduced.
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Consolidation of Bank's budgets, its monitoring and constant review of
various financial indicators. Finance Division works as the back bone for all Banks’ operations.
The Division, which reports directly to the President and Chief Executive of the Bank,
has been instrumental in preparation of Bank's business plans and future strategies.
INFORMATION TECHNOLOGY DEPARTMENT:
Operations of UBL have been significantly streamlined post-privatization, however
further plans for improving operational efficiency are under-way. Currently the bank is using
internally developed distributed database software called UNIBANK. This software is utilizing
Oracle Financials at the back end. As all daily banking transactions are stored at the respective
branches, consolidation at the head office takes place at day end.
The bank has specialized software to support its various functions and the focus for some
time has now been on enterprise application integration (middleware). The management
launched a transformation program in 2006 which aims to accomplish bank-wide business and
technology reengineering.
AUDIT DEPARTMENT:
The Board Audit Committee (BAC) comprising three members meets every quarter and
is responsible, among other things, for ensuring the effectiveness of the internal audit function
and systems for monitoring compliance.
Internal audit procedures include routine branch and business function audit as well as
special surprise audits. There is also a dedicated compliance division mainly to follow up on the
recommendations advised by the audit team. The deliberations of BAC however reflect concern
regarding the overall control environment. The audit and inspection department has been
highlighting issues with regard to operational control weaknesses at the branch level.
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3. MY LEARNING’S
Standing on the second floor in my home, I heard the good news of me having a six week
opportunity to interact with a world class bank. All these six weeks were full of events, full of
learning and most importantly full of professional working. Here 'professional' regards in all
from clerical to managerial work. In these six weeks period, the best thing to me was the
authority and dependency of customers upon me, when they come with a hope that I'm there to
guide them. Knowing all is not learning, the real learning is to convey right. I tried to learn real,
see real UBL, and tried to comprehend the difference between what we look from outside and
what is going on inside.
UBL is full of experienced and professional traditional bankers. As it perfectly suit the
environment we are operating in, you attitude has helped UBL in capturing masses. In the private
sector, no doubt its a fast growing bank, but here's something that's still unrealistic to the policy
makers. The line of unsatisfied customers is increasing, not because we are not serving well, it's
because customers are not understanding the YOU attitude right. Every customer wants to make
sure his work is done at the first convenience, but they are not concerned about the responsibility
with which every employee is workingBack to my real learning’s in my six week internship, I
worked in customer service department, as well as in clearing department. Because of some work
load, I was unable to learn much about other cash and accounting department. Here is my
countdown learning of six weeks.
3.1 Account Opening:
Penning down information and keying it into the system does seem a simple and tedious
job but it is not. My initial five days at customer service department was the liveliest experience
of my internship. Though physically I was there just to assist the account opening officer, but it
turned
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Out to be much more for me. That is when I first actually imitated as a presenter of UBL
to customers, when to many people, I'm their hope.
UBL offers a variety of options for anyone; to everyone. You are an investor, regular
businessman, middle man, salaried person or a house wife; UBL serve you in every way it can
through its commendable and reliable services, because at UBL, YOU come first.
Working at Customer Service Department, I did counter with different types of Customer
and opened their accounts under the supervision of the officer. When you have the sole
responsibility to open the accounts, it's always very important to understand the needs of your
customer. Understanding the psyche of customer is very important. Until and unless you're
completely satisfied that the customer has genuine reason and need to open the account, don't do
so.
Account Opening Form:
In all the documentation within the bank, clearness and tidiness are the major features.
Over writing and cutting should always be avoided as it may lead to any misinterpretation.
Account Opening Form is the most important documentation when a customer walks in for
commercial banking and wants to develop a relationship with us.
In AOF, all the necessary information should be completely scrutinized before the
customer walks back. Now let’s look at some of the salient requirements of AOF and their
importance.
Currency and Type of Account
It offers you all the eight different types of accounts mentioned before. First understand
why the customer is here and what type of account suits him a lot. Scale down all the options
suiting his investment or requirement and help him choose what is best for him. Outline all the
salient features of that particular account to him and make him tick the best box. Mark the
currency box if the customer wishes to deposit in currency, in case, other than PKR.
25
Nature of Account:
Understand and choose the desired nature of account.
3.1.1 Individual Account (Single/Joint):
Individual Account determines if the account is personal or joint. Once again understand
your customer here. Illiterate and gullible customers should better opt for joint account for their
own security.
3.1.1.1 Particulars of Account:
First of all the title of account is entered by which it will be called off. Following is the
Key/Secret Word of six characters which is mostly preferred to be mother’s name because it’s
simple unforgettable. Key word is used to verify the customer on phone or while other
subsequent inquiries. Next comes the mailing address; where the bank should mail anything it
has to. Next is the permanent address of the customer which should be copied from the CNIC of
the customer. E-mail address is mandatory for Net banking and e-statement facility whereas
Mobile number for mobile banking. Lastly it’s your choice to hold your statements for collection
or mail it to you.
3.1.1.2 Personal Information:
Following portion summarizes social with standing of a person.
Applicant’s name, Father’s or husband’s name, gender, marital status, Date of birth,
nationality, country of residence and identification source and its number should be enter. Make
sure the source of identification is not expired. Enter NTN if available. Know the occupation of
the applicant and check the respected box. In case there is more than one account applicant, fill
in all the above mentioned information for other applicant as well.
*It’s a good practice to ask for the original identification source of the customer and pen
down the number and expiry date directly from it.
26
3.1.1.3 Next of Kin:
In case if the account holder is somehow not contacted, this portion provides information
of the person who should be contacted instead. Person’s name, relationship, address and
Telephone number should be provided.
3.1.2 Business Account:
Business Account determines that the party has its own entity under which the
accountwill be supervised. Match the respected category and check the box.
3.1.2.1 Particulars of Account:
Here the information about the business is filled in. Title of account, company/business
name, and nature of business, office/mailing address, head office /registered address, office email
and NTN are mandatory information required for business account. CNIC is required in case of
sole proprietor ship and information of few persons are required who can be contacted in case of
companies. Here we need to know that who will be operating the company accounts.
3.1.2.2 Additional Information:
Existing relationship with UBL:
In case if the customer already has some relationship with UBL, it should be mentioned
here. This is just in case to formally know and cross check the customer’s provided information.
Existing relationship with other banks:
This is to know what relationship the customer has with other banks, if any.
UBL Wallet ATM/Debit Card:
27
Here first define your customer what ATM card is, what are its features and what is the
difference between its different options. Enter the name of the customer in ‘Name on card’ field.
Then is the option of supplementary ATM card.
28
A customer can issue up to 9 supplementary cards. If supplementary card is required, a
UBL Wallet VISA card requisition form is filled in which details about supplementary card
holders is penned.
Zakat Deduction (only on PLS A/C):
PLS account holders can directly pay Zakat from their accounts, if they are willing to.
Other UBL Products:
Account holders can opt for UBL Net banking, UBL Orion, Credit card, Personal loan,
Car Financing, Mortgage and Business Finance.
Operating Instructions:
This identifies the signing authority of the account. It can be operated singly, either or
survivor, jointly, mandate or by any other in special cases.
Statement of Accounts:
This specifies how early the account statement is required. It can be daily, weekly,
monthly, quarterly or semi annually. Customers can choose Mail or e Statement or both.
Special Instructions:
Special instructions, if any, are registered here. It usually certifies further the operating
instructions of the account.
Account referred by:
Detail of person referring the customer is entered here.
29
3.1.3 For Bank Use Only
Special Category of Account:
If the account is of minor, UBL staff, Illiterate, Blind or Registered Alien, it should be
checked respectively. Passport size Photographs are required in this case and customer can only
make the transaction personally. Make sure signatures are not too simple or shaky. If so, again
passport size photographs may be required and transactions can only be made personally for
customer's own security.
Service Charges:
This is the minimum balance penalty which is applicable to all except students and
government employees' salary or pension purpose accounts.
Know You Customer:
Here's an assessment that the account opening officer do in order to understand some
aspects of the new customer relationship.
Individual Account:
The customer is marked as walk in, marketed or a referral; he/she is a public figure or
not. Moreover what will be the customer's sources of funds? What would be the usual mode of
transaction and what would be the intentions of account with UBL. Who will be the ultimate
beneficiary and what the approximate value of transaction per month is.
30
3.2 Clearing of Cheques:
3.2.1 Outward Clearing:
My experience at C.C S. Town branch started from the clearing department. Right in the
morning cheques collected from the drop box simply flood over my table. According to all I
learnt through listening, viewing and questioning is summarized below.
3.2.2 Documentation of Consumer Cheques:
All the cheques collected are first categorized into
Credit Cards
Auto Loans
Personal Loans
Cash Line
Verified cheques are then validated before being documented into the drop box collection
sheet for our daily drop box collections record. To anticipate the approval of cheques, we need to
validate some important specifications of all the cheques. They are:
Date: Cheque should not be post dated or out of date.
Figures: Amount in words and figures should match.
Signature: Drawers signature must be clear.
Intercity: Cheques must not be of other cities. Intercity clearing cheques
for consumer departments are not entertained
Payee’s Name: Payee’s name should be written, and endorsement should
be as per the beneficiary of the cheque.
There should be no over writing in everything penned.
31
All the filtered cheques are then entered into the collection sheet in which
following information is entered.
Cheque No.
Name of bank
Name of Customer
Loan No.
Amount
Document No.
All the documented consumer cheques are then posted into the system. Which I
can not learn due to there security reasons.
3.2.3 Cleared Cheques:
Now the next day when clearing is confirmed by NIFT, respected accounts are
debited. We go into the banking option and in transfer, we debit all the respected
accounts. Same is the case with intercity and OBC cheques.
In documentation, debit and credit vouchers are made, which show total amount
of clearing as per day.
3.2.4 Returned Cheques:
All the cheques which are returned, due to any reason, are then reversed. They are
debited back in the clearing schedule. All the returned cheques are documented in the
cheque return registers and all the account holders of returned cheques are charged with
service penalty.
*All the vouchers are signed by the designated officer and all the entries over
50,000 are supervised.
32
3.3 Remittances:
3.3.1 Demand Draft:
DDs are always a secure way of paying remittances in other cities. Both account
holders and walk in customers can avail the facility of DDs. Charges tend to differ for
both customers but the advantage tend to be same. DDs are made in the favor of
beneficiary and remitter either pays in cash or through cheque.
Charges for DDs are
Up to Rs. 100,000/-
0.10%, Min Rs. 100 for A/C
holders
0.20%, Min Rs. 200 for Non
A/C holders
Over Rs. 100,000/-
0.05%, Min Rs. 150 for A/C
holders
0.15%, Min Rs. 250 for Non
A/.C holders
Issuance of duplicate DDRs. 150 for A/C holders
Rs. 250 for Non A/.C holders
When DDs are issued, head office account is debited and remitters account is
credited, on presentation, head office account is credited and beneficiary’s account is
debited.
33
4. FINSNCIAL STATEMENTS, VERTICAL AND TREND ANALYSIS
34
4.1 Vertical and Trend Analysis
Assets 2013 (Millions)
2012 (Millions)
2011 (Millions)
2010 (Millions)
2009 (Millions)
Cash and balances with treasury and other banks 114,389 109,398 100,600 86,104 66,878
Lending to financial institutions 28,835 21,953 11,890 11,935 23,162
investments-gross 425,253 351,002 297,137 227,237 138,398
Advances-gross 436,749 409,090 366,307 368,692 382,478
Operating fixed assets 24,608 24,431 22,982 22,424 21,926
Other assets 27,317 26,800 23,976 21,044 17,851
Total assets – gross 1,057,151 942,674 822,892 737,436 650,693
Provisions against non-performing advances (45,936) (44,727) (40,959) (34,960) (28,387)Provisions against diminution in value of investment (1,476) (1,412) (2,726) (2,658) (2,253)
Total assets -net of provision 1,009,739 896,535 779,207 699,818 620,053
Liabilities & Equity
Deposits & other Accounts 827,848 698,430 612,980 550,646 492,036
Borrowing from financial institutions 40,574 68,720 49,953 45,105 34,145
Sub-ordinate loans 665 9,319 11,317 11,986 11,990
Bills payable 16,591 7,601 5,879 5,046 5,147
Other liabilities 23,147 20,226 18,650 18,620 14,799
Total Liabilities 908,825 804,296 698,779 631,403 558,117
Net Assets / Liabilities 100,914 92,239 80,428 68,415 61,936
Share capital 12,242 12,242 12,242 12,242 11,129
Reserves 33,681 29,044 24,847 21,689 18,960
Inappropriate profit 42,635 37,416 34,809 26,250 22,188
Equity -Tier 1 88,558 78,702 71,898 60,181 52,276
Surplus on revaluation of assets 12,356 13,537 8,530 8,234 8,660
Equity 100,914 92,239 80,428 68,415 60,936
Total liabilities & equity 1,009,739 896,535 779,207 699,818 619,053
35
BALANCE SHEETFor the period Ended Dec, 31st
Profitability 2013(Millions)
2012(Millions)
2011(Millions)
2010 (Millions)
2009 (Millions)
Markup/return/interest earned 72,846 73,507 70,453 59,277 61,107
Less: Markup/return/interest expensed (34,910) (34,948) (31,026) (24,997) (28,164)
Net Markup/Interest income 37,936 38,560 39,427 34,280 32,943
Fee, commission, brokerage and exchange income 12,205 10,025 9,027 7,992 7,139
Capital gain & dividend income 4,845 3,131 1,261 712 1,233
Other income 1,064 3,975 2,429 1,387 3,048
Noninterest income 18,114 17,131 12,717 10,091 11,420
Gross income 56,050 55,691 52,144 44,371 44,363
Less: Administrative expenses and other charges (26,718) (24,306) (20,349) (18,476) (17,015)
Profit before provisions 29,332 31,385 31,795 25,895 27,348
Less: Donations (77) (35) (54) (84) (56)
Less: Provisions (1,448) (4,499) (7,518) (8,068) (13,258)
Profit before taxation 27,807 26,851 24,223 17,743 14,034
Less: Taxation (9,193) (8,960) (8,723) (6,582) (4,842)
Profit after taxation 18,614 17,891 15,500 11,161 9,192
Total Income 90,960 90,638 83,170 69,368 72,527
Total Expense 72,346 72,748 67,670 58,207 63,335
36
PROFIT & LOSS ACCOUNTFor the period Ended Dec, 31st
Assets 2013 %
2012 %
2011 %
2010 %
2009 %
Cash and balances with treasury and other banks 11.3 12.2 12.9 12.3 10.8Lending to financial institutions 2.9 2.4 1.5 1.7 3.7lnvestments-gross 42.1 39.2 38.1 32.5 22.3Advances-gross 43.3 45.6 47.0 52.7 61.7Operating fixed assets 2.4 2.7 2.9 3.2 3.5Other assets 2.7 3.0 3.1 3.0 2.9Total assets – gross 104.7 105.1 105.6 105.4 104.9Provisions against non-performing advances 4.5 5.0 5.3 5.0 4.6Provisions against diminution in value of investment 0.1 0.2 0.3 0.4 0.4
Total assets -net of provision 100.0 100.0 100.0 100.0 100.0
Liabilities & EquityDeposits & other Accounts 82.0 77.9 78.7 78.7 79.5Borrowing frome financial institutions 4.0 7.7 6.4 6.4 5.5Sub-ordinated loans 0.1 1.0 1.5 1.7 1.9Bills payable 1.6 0.8 0.8 0.7 0.8Other liabilities 2.3 2.3 2.4 2.7 2.4Total Liabilities 90.0 89.7 89.7 90.2 90.2
Equity SectionShare capital 1.2 1.4 1.6 1.7 1.8Reserves 3.3 3.2 3.2 3.1 3.1Unappropriated profit 4.2 4.2 4.5 3.8 3.6Equity -Tier 1 8.8 8.8 9.2 8.6 8.4Surplus on revaluation of assets 1.2 1.5 1.1 1.2 1.4Equity 10.0 10.3 10.3 9.8 9.8Total liabilities & equity 100.0 100.0 100.0 100.0 100.0
37
BALANCE SHEETVertical Analysis
Assets 12 Vs 13%
11 Vs 12%
10 Vs 11%
9 Vs 10%
Cash and balances with treasury and other banks 4.6 8.7 16.8 28.7
Lending to financial institutions 31.3 84.6 -0.4 -48.5lnvestments-gross 21.2 18.1 30.8 64.2Advances-gross 6.8 11.7 -0.6 -3.6Operating fixed assets 0.7 6.3 2.5 2.3Other assets 1.9 11.8 13.9 17.9Total assets – gross 12.1 14.6 11.6 13.3Provisions against non-performing advances 2.7 9.2 17.2 23.2Provisions against diminution in value of investment 4.5 -48.2 2.6 18.0
Total assets -net of provision 12.6 15.1 11.3 12.9
Liabilities & EquityDeposits & other Accounts 18.5 13.9 11.3 11.9Borrowing frome financial institutions -41.0 37.6 10.7 32.1Sub-ordinated loans -92.9 -17.7 -5.6 0.0Bills payable 118.3 29.3 16.5 -2.0Other liabilities 14.4 8.5 0.2 25.8Total Liabilities 13.0 15.1 10.7 13.1
Net Assets / Liabilities 9.4 14.7 17.6 10.5
Share capital 0.0 0.0 0.0 10.0Reserves 16.0 16.9 14.6 14.4Unappropriated profit 13.9 7.5 32.6 18.3Equity -Tier 1 12.5 9.5 19.5 15.1Surplus on revaluation of assets -8.7 58.7 3.6 -4.9Equity 9.4 14.7 17.6 12.3Total liabilities & equity 12.6 15.1 11.3 13.0
38
BALANCE SHEETTrend Analysis
Profitability 2013%
2012%
2011%
2010%
2009%
Markup/return/interest earned 80.09 81.10 84.71 85.45 84.25
Markup/return/interest expensed 48.25 48.04 45.85 42.95 44.47
Net Markup/Interest income 32 33 39 43 40
Fee, commision, brokerage and exchange income 13.42 11.06 10.85 11.52 9.84
Capital gain & dividend income 5.33 3.45 1.52 1.03 1.70
Other income 1.17 4.39 2.92 2.00 4.20
Noninterest income 20 19 15 15 16
Gross income 52 52 54 57 56
Administrative expenses and other charges 36.93 33.41 30.07 31.74 26.87
Profit before provisions 15 19 24 25 29
Donations 0.11 0.05 0.08 0.14 0.09
Provisions 2.00 6.18 11.11 13.86 20.93
Profit before taxation 13 12 13 11 8
Taxtation 12.71 12.32 12.89 11.31 7.65
Profit after taxation 26 25 23 19 15
Total Income 100 100 100 100 100
Total Expense 100 100 100 100 100
39
Profit & Loss AccountsVertical Analysis
Profitability 12 Vs 13%
11 Vs 12%
10 Vs 11%
09 Vs 10%
Markup/return/interest earned -0.9 4.3 18.9 -3.0
Markup/return/interest expensed -0.1 12.6 24.1 -11.2
Net Markup/Interest income -1.6 -2.2 15.0 4.1
Fee, commision, brokerage and exchange income 21.7 11.1 13.0 11.9
Capital gain & dividend income 54.7 148.3 77.1 -42.3
Other income -73.2 63.6 75.1 -54.5
Noninterest income 5.7 34.7 26.0 -11.6
Gross income 0.6 6.8 17.5 0.0
Administrative expenses and other charges 9.9 19.4 10.1 8.6
Profit before provisions -6.5 -1.3 22.8 -5.3
Donations 120.0 -35.2 -35.7 50.0
Provisions -67.8 -40.2 -6.8 -39.1
Profit before taxation 3.6 10.8 36.5 26.4
Taxtation 2.6 2.7 32.5 35.9
Profit after taxation 4.0 15.4 38.9 21.4
Total Income 0.4 9.0 19.9 -4.4
Total Expense -0.6 7.5 16.3 -8.1
40
Profit & Loss AccountsTrend Analysis
5. RATIO ANALYSISRatio analysis is very helpful to the management of the organization as well as for the
investors and creditors. Investors keep an eye on the bank’s financial statement and make decisions whether to invest funds in that bank or not. Similarly a creditor also analysis the financial statements and makes decisions whether to grant loan or not.
Financial statements for the last three years from 2011 to 2013 are given above:
5.1. Liquidity Ratios:
Liquidity ratios means to measure short term solvency of the company. Ability of the company to pay off its short term debt. Following ratios are calculated in order to measure the short term solvency of the company
Current Ratio Acid Test Ratio Working Capital
5.1.1Current Ratio:
Current Assets: Cash and balances with treasury and other banks + lending to financial institutions + Investment + Advances
Current Liabilities: Deposits & other Accounts + Borrowings from financial institutions + Sub-ordinate loans + Bills Payable
Current Ratio = Current Assets / Current liabilitiesYear 2009 Year 2010 Year 2011 Year 2012 Year 2013610,916 / 543,318= 1.12%
693,968 / 612,783 = 1.13%
775,934 / 680,129= 1.14%
891,443 / 784,070= 1.14%
1005,226 / 885,678 = 1.13%
Graphical Representation
41
42
2009 2010 2011 2012 20131.10
1.12
1.14
1.16
Current Ratio
Current Ratio
Interpretation:
As the current ratio in the year 2009 is 1.12, and in the year 2013 it is 1.13. This shows the constant increase in the current assets and liability of the United Bank. The current ratio of 1.0 is considered acceptable for a public utility.
Acid test Ratio of the Allied Bank can’t be calculated because inventory is required, so bank is a service organization.
5.1.2Working capital:
Current Assets: Cash and balances with treasury and other banks + lending to financial institutions + Investment + Advances
Current Liabilities: Deposits & other Accounts + Borrowings from financial institutions + Sub-ordinate loans + Bills Payable
Working Capital = Current Assets – Current LiabilitiesYear 2009 Year 2010 Year 2011 Year 2012 Year 2013
610,916 - 543,318 = 67,598
693,968 - 612,783 = 81,185
775,934 - 680,129 = 95,805
891,443 - 784,070 = 107,373
1005,226 - 885,678 = 119,548
Graphical Representation
2009 2010 2011 2012 2013 -
20,000
40,000
60,000
80,000
100,000
120,000
Working Capital
Working Capital
43
Interpretation:
Working Capital in the year 2009 is 67,595, and in 2010 is 81,185, 2011 is Rs. 95,805. Working capital in the years 2012 is Rs. 107,373 which indicates that in the year 2012 working capital is to reasonable extent because of 12% increase in current assets. And again in the year 2013 working capital is Rs. 119,548 has been increased, which shows increasing trend in the working capital of the United Bank limited.
5.2 Leverage Ratios
Any ratio used to calculate the financial leverage of a company to get an idea of the company’s methods of financing or to measure its ability to meet financial obligations. Following ratios are calculated in order to measure the long term solvency of the firm:
Debt Ratio Debt / Equity Ratio
9.2.1 Debt Ratio
Debt Ratio= ( Total Debt/ Total Assets )Year 2009 Year 2010 Year 2011 Year 2012 Year 2013558,117 /
620,053 × 100= 90.01%
631,403 / 699,818 × 100
= 90.22%
698,779 / 779,207 × 100
= 89.68%
804,296 / 896,535× 100
= 89.71%
908,825 / 1,009,739 × 100
= 90.01%
Graphical Representation
2009 2010 2011 2012 201389.4089.5089.6089.7089.8089.9090.0090.1090.2090.30
Debt Ratio
Debt Ratio
44
Interpretation:
Bank’s Debt ratio in the years 2009, 2010, 2011, 2012 and 2013 is 90.01%, 90.22%, 84.92%, 85.32% and 85.97%. Debt Ratio indicates that bank’s Debt is on higher side in all the five years as compare to its assets which indicates that the bank is highly levered and its fixed financial cost is much higher which may decrease the operating profit of the company with the result of decrease in earnings per share.
5.2.2 Debt / equity Ratio
Debt to Equity Ratio = Total liabilities / Total Equity Year 2009 Year 2010 Year 2011 Year 2012 Year 2013
558,117 / 60,936 = 9.16
631,403 / 68,415 = 9.23
698,779 / 80,428 = 8.69
804,296 / 92,239 = 8.72
908,825 / 100,914 = 9.01
Graphical Representation
2009 2010 2011 2012 20138.40
8.50
8.60
8.70
8.80
8.90
9.00
9.10
9.20
9.30
Debt to Equity Ratio
Debt to Equity Ratio
Interpretation:
United Bank Limited in all the five years debt ratio is 9.16, 9.23, 8.69, 8.72 and 9.01 respectively which indicates that the creditors were providing Rs.9.16, Rs. 9.23, Rs.8.69, Rs,8.72, and Rs.9.01 respectively each year of financing for each Rs.100 being provided by shareholders. Debt portion in the total financing is much higher, that means lower the level of the bank financing that is being provided by the shareholders.
45
5.3 Profitability Ratios
Profitability ratios measure the earning ability of the firm. Following ratios are calculated:
Net Profit Margin Return on Assets DuPont Return on Assets Return on Total Equity Operating Income Margin Gross Profit Margin
5.3.1 Net Profit Margin
Net Profit Margin = Net Profit / Total Revenue × 100 Year 2009 Year 2010 Year 2011 Year 2012 Year 2013
9,192 / 61,107 × 100 = 15.04%
11,161 / 59,277 × 100 = 18.83%
15,500 / 70,453 × 100 = 22.00%
17,891 / 73,507 × 100 = 24.34%
18,614 / 72,846 × 100 = 25.55%
Net Profit = profit after taxation Total Revenue = Markup/Return/interest earned
Graphical Representation
46
2009 2010 2011 2012 20130.00
5.00
10.00
15.00
20.00
25.00
30.00
Net Profit Margin
Net Profit Margin
Interpretation:
Net Profit margin in the Year 2009 is 15.04% and 2013 is 25.55% respectively which shows 41% increases in Net Profit margin in the following five year. Net Profit Margin is to a reasonable extent i.e. return on sales after payment of tax.
5.3.2 Return on Assets:
Return on Assets =Earnings Available for shareholders / Total Assets × 100Year 2009 Year 2010 Year 2011 Year 2012 Year 2013
9,192 / 620,053 × 100 = 0.91%
11,161 / 699,818 × 100 = 1.11%
15,500 / 779,207× 100 = 1.54%
17,891 / 896,535 × 100 = 1.77%
18,614 / 1,009,739 × 100 = 1.84%
Graphical Representation
Interpretation:
In the year 2009 it is 0.91%, and in the year 2013 is 1.76% which indicates United Bank was earned Rs.0.91, and Rs.1.76 respectively in past year on each Rs.100 of assets investment, which return on total assets is increasing year by year. It is hope based on previous year progress in future united bank will get greater return on their assets.
47
2009 2010 2011 2012 2013 -
0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 1.80 2.00
Return on Assets
Return on Assets
5.3.3 Du Pont Return on Assets
Du-Pont ROA= (Net Income ÷ Total Revenue) x (Total Revenue ÷ Total Assets ) Year 2009 Year 2010 Year 2011 Year 2012 Year 2013
(9,192 / 61,107) x (61,107 / 620,053)
= 0.91%
(11,161 / 59,277) x (59,277 / 699,818)
= 1.11%
(15,500 / 70,453) x (70,453 / 779,207)
= 1.54%
(17,891/ 73,507) x (73,507 / 896,535)
= 1.77%
(18,614 / 72,846) x(72,846 / 1,009,739)
= 1.84%Graphical Representation
Interpretation:
As for as Return on total Assets is concerned, in the year 2009 it is 0.91%, and in the year 2013 is 1.76% which depicts that return on total assets is much lesser as compare to banking standard. Although it has an increasing trend in the year but in 2012 it is pertinent to mention here that assets of the bank are not used properly.
5.3.4 Return on Total Equity
Return on total Equity = (Net Income / Total Equity ) × 100 Year 2009 Year 2010 Year 2011 Year 2012 Year 2013
(9,192 / 60,936) × 100
= 15.08%
(11,161 / 68,415)× 100
= 16.31%
(15,500 /80,428 ) × 100
= 19.27%
(17,891 / 92,239) × 100
= 19.40%
(18,614 / 100,914) × 100
= 18.45%
48
2009 2010 2011 2012 2013 -
0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 1.80 2.00
Du Pont Return on Assets
Du Pont Return on Assets
Graphical Representation
2009 2010 2011 2012 20130.002.004.006.008.00
10.0012.0014.0016.0018.0020.00
Return on Total Equity
Return on Total Equity
Interpretation:
Return on Equity mean’s how much earn on Equity in the year 2009 is 15.08%, and in the year 2013 is 18.45% which shows an increasing trend in previous year but unlucky in 2013 despite increase in Net income and Equity, return on Equity is lesser than previous years.
5.3.5 Operating Income Margin
Operating Income Margin = Earnings Before interest and tax (EBIT)(EBT) / Total Revenue
Year 2009 Year 2010 Year 2011 Year 2012 Year 201314,034 / 61,107
= 22.97%17,743 / 59,277
= 29.93%24,223 / 70,453
=34.38% 26,851 / 73,507
= 36.53%27,807 / 72,846
= 38.17%
49
Graphical Representation:
2009 2010 2011 2012 20130.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
Operating Income Margin
Operating Income Margin
Interpretation:
Operating income means income from operation i.e. earnings before Tax (EBT). Income from operation in the year 2009 is 22.97% and in the year 2013 is 38.17% which is showing that Operating income of the Bank is increasing on the year to year bases.
5.3.6 Gross Profit Margin
Gross Profit Margin = (Gross income / Total Revenue ) × 100Year 2009 Year 2010 Year 2011 Year 2012 Year 2013
(44,363 / 61,107) × 100 = 72.60%
(44,371 / 59,277) × 100 = 74.85%
(52,144 / 70,453) × 100 = 74.01%
(55,691/ 73,507) × 100 = 75.76%
(56,050 / 72,846) × 100 = 76.94%
Interpretation:
Gross profit margin on year to year basis is increasing, but in the year 2011 there is little bit fluctuation in gross profit margin, and very next year it show increasing trend. It also shows that United Bank also expending his business that’s why its gross income is increases.
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Graphical Representation
5.4 Activity Ratios
Activity ratios measure a firm’s ability to convert different accounts within their balance sheets into cash or sales.
Total Assets Turnover Fixed Assets Turnover
9.4.1 Total Assets Turnover
Total Assets Turnover = Total Revenue / Total Assets Year 2009 Year 2010 Year 2011 Year 2012 Year 2013
61,107 / 620,053 = 0.12 Times
59,277 / 699,818 = 0.10 Times
70,453/ 779,209= 0.09 Times
73,507/ 896,535= 0.08 Times
72,846/ 1,00,9739= 0.07 Times
Interpretation:
Turnover means how many times we make the sales during the year as compare to our total assets. This trend of decreasing is in the year 2009 up to 2013 .These ratios determine that revenue is lowdown the turnover their assets year by year.
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2009 2010 2011 2012 201370.00
71.00
72.00
73.00
74.00
75.00
76.00
77.00
Gross Profit Margin
Gross Profit Margin
Graphical Representation
5.4.2 Fixed Assets Turnover
Fixed Assets Turnover = Total Revenue / Fixed Assets Year 2009 Year 2010 Year 2011 Year 2012 Year 2013
61,107 / 21,926 = 3.32 Times
59,277 / 22,424 = 3.25 Times
70,453 / 22,982= 3.17 Times
73,507/ 24,431= 2.98 Times
72,848 / 24,608= 2.96 Times
Interpretation:
From year on year basis fixed assets turnover has been a decreasing trend in the year 2009 up to 2013. As the total assets turnover having decreasing trend in that year that’s why fixed assets show decreasing trend.
Graphical Representation:
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2009 2010 2011 2012 20130.00
0.02
0.04
0.06
0.08
0.10
0.12
Total Assets Turnover
Total Assets Turnover
5.5. Market Ratios
Market ratios are commonly used by the investors to access the performance of a business as an investment and also the cost of issuing stock.
Earning per Share Book Value per Share
6.5.1 Earnings Per Share
Earning Per Share = Net income after tax / No. of Shares Outstanding(Million)Year 2009 Year 2010 Year 2011 Year 2012 Year 2013
9,192 / 1,113 = 8.26 EPS
11,161 / 1,224 = 9.12 EPS
15,500 / 1,224 = 12.66 EPS
17,891 / 12,24 = 14.62 EPS
18,614 / 1,224 = 15.21 EPS
Graphical Representation
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2009 2010 2011 2012 20132.70
2.80
2.90
3.00
3.10
3.20
3.30
3.40
Fixed Assets Turnover
Fixed Assets Turnover
Interpretation:
Earning per Share from the year 2009 to 2013 is increasing that show the expending business of the United Bank. On year to year basis earning per share is increasing; this is healthy sign for bank to progress. It is also good for bank shareholders.
Book Value per share= Total Shareholder Equity / Number of Share OutstandingYear 2009 Year 2010 Year 2011 Year 2012 Year 2013
60,936 / 1,113 = 54.75
68,415 / 1,224 = 55.89
80,428 / 1,224 = 65.71
92,239 / 1,224 = 75.36
100,914 / 1,224 = 82.45
5.5.2 Book Value Per Share
Interpretation:
Book Value means how much the value of the share in the record of the Bank, in the year 2009 to 2013 the book value of the United Bank share is increasing, that show the strength of United Bank share in the share market. That is also beneficial for shareholder.
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2009 2010 2011 2012 2013 -
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
Earnings Per Share
Earnings Per Share
Graphical Representation
2009 2010 2011 2012 20130.00
10.0020.0030.0040.0050.0060.0070.0080.0090.00
Book Vaule Per Share
Book Vaule Per Share
NOTE:
All the ratios are calculated on the basis of data published in United Bank annual reports 2009 to 2013. Balance sheet, profit & loss account (Income statement) are taken as it is as published in annual reports. All the amounts of these statements are taken into Millions. Errors and omissions can be omitted.
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6. SWOT ANALYSIS:SWOT is useful tool for providing a framework for analysis of an organization. SWOT
stands for Strengths, Weaknesses, Opportunities and Threats. It is a common approach to make
assessments in terms of internal and external environment of the organization, and to formulate
strategies analyzing its internal strengths and weaknesses, external opportunities and threats,
coming up is the SWOT analysis for the UBL.
6.1 STRENGTHS:
It is one of the largest private banks with a deposit base of Rs. 94883/- millions showing
constant growth over the period from 1999 till the day.
It has a well-knitted and adequately equipped branch networking system that efficiently
covers both the domestic and international markets.
It is involved in both corporate and retail banking.
The bank is actively emerging and is engaged in international trade and foreign exchange
transactions. Foreign trade volume showed an increase of 17% over the previous year.
Advances investment of the bank shows a constant growth pattern. The current year’s
growth rate is 32%.
The overall efficiency of the bank operations and management ability can be noticed by
looking at to its income pattern and provisions/write off practices.
Net revenue from funds increased by 18% for the current period.
Provisions decreased by 14%.
Total income increased by 16%.
UBL is actively participating in international markets and has recently introduced credit
cards in UAE, Bahrain, and Qatar, being backed up by 24 hours call center out of UAE.
The bank is owned by parties of financial repute and credit worthiness like, SBP with
48.69% interest, Best Way group and Abu Dubai group with 25.50% of interest each.
Others are GOP, NBP Trustee Department, State Life Insurance Corporation etc.
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The bank is run by highly professional recruited from and trained by foreign banks like
City Bank.
6.2 WEAKNESSES:
Due to risks such as political, economic and legal etc the bank has suffered losses the
main reason was that of piling up of large amount of unrecoverable loans and debts
which have adversely affected the image of the UBL.
Accumulated losses pushed the bank to cut down its promotional activities in order to
reduce expenses for last few years.
During the nationalization life span of the bank political lords used influence in bank
business and selection of employee at each level and thus adversely affected the bank’s
efficiency and effectiveness.
Administrative expenses are 51% of the mark up revenue.
Promotions are carried out on annual basis ignoring the importance of capabilities and
performance outputs.
The bank has large number of employees who are simple graduates with no banking
knowledge.
Ineffective system of recruiting and selection.
Lengthy credit processing and documentation procedures.
Unsatisfactory working conditions.
6.3 OPPERTUNITIES:
Growing policies of the GOP on business and economic sectors provide UBL an
opportunity to efficiently meet with the business people requirements of instant cash
facilities e.g. the government intentions of developing housing and agriculture sectors.
The efficiency of stock market and sound exchange reserve level is providing a good
opportunity for effective investment decisions.
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Foreign remittances are another area as present worldwide control systems over transfer
of currencies through illegal channels has facilitated the area for the banks.
Reconstruction of Afghanistan is a golden opportunity where the bank can effectively
participate.
Interest of businesses in leasing facilities provides a healthy opportunity for banks.
There is a large pool of unemployed MBAs who can be hired to achieve professionalism
on its organizational culture.
Outsourcing of promotional companies or use of available excellent promotional
facilities.
Entering new market segments.
Increase the product range to meet the broader range of customers’ needs.
6.4 THREATS:
Increase in competition due to increasing number of foreign and domestic private banks
offering highly specialized and attractive services.
Growing global technological advancements and adaptation of modern style of
management in banking sectors.
Extensive promotion campaigns run by competitors.
Unemployment, lower level of income and prices like problems in the motherland
coupled with low rate of industrialization, geo political adverse conditions, religious
factor, lack of consistency in policies due to political instability are some of the other
major threats.
This SWOT analysis is a mirror image of the bank’s present conditions. Some efforts are
made and others are still required to be made in order to improve the situation. The
management can develop elaborate strategic plans for capitalizing the available
opportunities. The bank should maintain principal of professional management and adhere to
sound and sophisticated banking rules and regulations so that confidence and trust of the
public in the institutions could be re earned.
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7. PEST ANALYSIS
7.1 POLITICAL
Pakistan despite all international and public perceptions, today is a functioning
democracy and gradually there is a change in complexion and composition of legislatures
with more educated people and women (27% of National Assembly and17% of Senate)
entering into politics Similarly it helps in designing best strategies to implement that
could support the revival of bank industry. Like in the era of nationalization banks had to
suffer as other industries that’s why that impact is still found in the performance of this
industry.
7.2 ECONOMICAL
Although banking sector development is important at the early stage of economic
growth, general liberalization presuming a homogeneous bank role may not necessarily
promote growth. The estimated cost structure indicates that state-owned commercial
banks are large enough, while development financial institutions and private banks can
expect to obtain cost-saving advantages by expanding their operations. Since scope
economies are significant, portfolio diversification generally increases bank profits. In
addition, privatized banks are the most efficient, followed by foreign and
private banks. Public banks are the least efficient.
7.3 SOCIAL
Banks always helped people in improvement of living condition of poor people in
various forms like giving loans to poor for starting business or directly providing them
the instruments that could enhance their living conditions. Similarly UBL always tried
to provide the needy people loans on soft terms and helped also to decrease
unemployment by providing job opportunities.
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7.4 TECHNOLOGY
The Banking sector in Pakistan has experienced a rapid transformation. Just about
a decade back this sector was limited to the Sarkari (nationalized) and co-operative
banks. Then
came the multi-national banks, but these were confined to serving an elite few. One could regard
the past as the medieval ages in the banking industry, wherein every branch of the same bank
acted as an independent information and multi-channel banking (ATMs, Net banking, Tele-
banking, etc) was almost non-existent. Today banks have to look much beyond just providing a
multi-channel service platform for its customers.
8. RECOMMENDATIONSRecommendations are considered to be the most important part of an internship
report, without which no report is considered complete and meaningful. This part of the
report is based on the previous sections i.e. review and analysis. Moreover, for bringing
suggestions, discussions have been conducted with the staff of UBL officers, who not
only provided the basis for recommendations but also pointed out some areas, where the
change for the development is utmost important. Realizing the importance of this section,
efforts have been made to give feasible recommendations, which are categorized under
the following headings.
8.1 HUMAN RESOURCE DEPARTMENT:
The importance of manpower cannot be denied in any organization. In case of
banks it is the most valuable asset, because the bank is very sensitive organization and to
be in harmony with this sensitivity, need for proper human resource is felt badly. Critical
analysis of UBL necessities recommending suggestions that would increase bank’s
efficiency and effectiveness.
Development of Managerial Leadership:
In services industries like banks the need of managerial skill is much more important.
It makes positive contribution towards higher effective results. Without development of
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managerial leadership, the effective utilization of the human resource will be impossible.
UBL should also focus on this area and should avoid deficiencies in managerial
leadership, by applying the modern styles of management.
Political interference:
The political intervention in the bank needs to be stopped so that the top hierarchy as
well as the personnel placed at other important levels of the institution is not changed Just
on political grounds and the ongoing developmental work is not obstructed. It will enable
the management to formulate long term strategies and their proper implementation
because the long term policies, accurately based on calculated risk, have proved the
pivotal role players for organizational sustainable development.
Basis for Promotion:
A sizeable portion of the officers of UBL, are promoted in without test and interviews
to officers cadre. The promotion policy must be too tight and transparent that no one may
have the chance to be promoted on criteria other than the required qualification,
experience and performance. As for the present excess staff, those not found up to the
required criteria, may be given GHS etc .
Management Changes on Merit:
In UBL, though vary rare fresh recruitments are made, and the bank faces saturation in personnel, now clipping will be more helpful. This downsizing will leave the bank with the staff, to be retained on the basis of ultimate meritocracy with zero tolerance of incompetence. Now in this remaining workforce, a cultural change right from the top management down to the front line, that better suits to the present day needs of banking environment could be included through proper discipline and training.
Needs of change in Recruitment Policy:
It is important to say that the external level market is full of the required talent like
MBA, M. Com etc,. But on the country only graduation with simple subjects is still the
requisite qualification for officer’s cadre, which has already worked amply in the
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devastation of UBL. Therefore the recruitment qualification to the officer’s framework
should be enhanced for simple graduation, to professionally qualify preferably Masters in
their respective fields.
Refresher Courses:
The Human of the bank should frequently conduct meaningful refresher courses,
seminars and workshops with a view to improve the knowledge of the staff. Due to
severe competition and technological developments, the banking business is experiencing
rapid changes therefore the HRD should have arrangements for staff trainings to cope
with the new changes that may become threats for the interest of the bank.
Computer Trainings:
The present conventional and orthodox training programmes need to be made more
comprehensive and reinforced with inclusion of computer training courses.
Training for Credit Management:
Special trainings on credit management should be imparted to the finance dealing
staff. Financing is main fountain bank’s income. Sound finance is extremely necessary
for opening of springs of the smooth inflow of the income.
Training with Clear Objectives:
Training needs assessment is necessary so that only the relevant staff is sent for the
training courses.
Change in Appraisal System:
The present performance appraisal system is good. However, it needs to be
implemented in true sense. The drawbacks that are obvious like nepotism and favoritism
etc. need to rooted out and the culture of ultimate meritocracy in appraising needs be
inculcated.
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Introduction of New Courses:
The human recourses division of the bank should focus on the restoration of the
corporate image of the bank by floating programmes such as, marketing excellence,
courses on corporate culture and others. Usually in businesses the wholesalers, retailers
and other intermediaries are finished by opening a network of the business own outlets. It
works as profit maximization
devise. In my opinion the above two programmes marketing excellence and corporate culture,
added with the best counter service and outdoor informal relationship with the potential
customers by the line managers will save the sum of money spent on various media of
advertisement.
Cheaper means for Postings etc.
The culture of attachment of hopes with the elements outside UBL, for promotion,
transfers, postings, and other benefits requires eradication from the roots.
Customers Orientation:
Every entrepreneur if concerned about the success of his business has to
understand, recognize, carefully and appropriately that his customer is “The King” of the
business system and the original spring of the business revenue. UBL should recognize
its customers as the
mainstream of the bank’s revenue. They need to be provided the deserved respect, quality and in
time service and to be politely dealt with.
Career Development:
As a matter of personnel policy HRD of UBL should prepare a plan showing the
future growth potential of employees on the job performance and evaluation and it should
be made known to the employees. In this regard, employees should be given
opportunities to show their performances, which would help in their career development.
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8.2 CREDITS AND ADVANCES DEPARTMENT:
The defaulted loans have showered the process of development of banking sectors in
Pakistan and have reduced the lending capacities of banks. In result of which economic
growth has reduced and rate of industrialization has become lowered. Defaulted loans
being the major cause for this depression, various suggestions and recommendations have
been given with focus on UBL to overcome the drawbacks of this department.
Fake financial presentation:
The bank should confirm that the provided figures by the borrowing organization
are fairly audited and that the auditors are on the approved list of the bank and they have
clear opinion about the affairs of company and nothing has been made secret. The bank
should have expert to examine various changes and developments for years in areas of
the borrowing corporation like;
i. Financial condition
ii. Cash generation
iii. Ability to pay back
iv. Operational performance
The focus should be on identifying and explaining significant changes and developments in
payback of loans, profit maximization, capital flow and operating expenses etc. the bank should
take critical view of the financial and should assess changes occurred during the favorable and
slack reason for the company.
Poor Management:
A large number of industrial units and projects become sick because of poor
management. When a business becomes sick or fails it is unable to return the loans, it has
taken, and as a result such loans become bad debts, to avoid this, it is the responsibility of
UBL, to ensure that the company to which loan is sanctioned enjoys good management
skills and reputation.
Proper Documentation:
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Loans become irrecoverable through court of law in case of default when the bank
fails to prove their claims against the delinquent borrower. If documents are obtained
properly as per terms of the loan it is not difficult for the counsel of the bank to get
decree against the defaulter. For proper and valid documentation the following aspects
must be kept in mind.
I. The bank should confirm that standard loan documentation is in place for each credit
facility prior to disbursement. If the documents required are different from the bank’s
standard approved format, arrangement for vetting of the legal counsel.
II. Bank should ensure that the documentation are correct, complete and correspond with the
approved facilities. Also to ensure that blank spaces are filled, documents are dated,
signed and stamped, the signer is authorized to execute such documents and signatures
are verified.
III. Maintain documentation checklist, updating it properly each time new documentation
received.
IV. Maintaining computerized record of documentation.
V. Division of documentation on the basis of sector, to which loan is given.
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9. ANNAXURE
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10. REFERENCES
Annual Report of the United Bank, limited 2012.
Annual Report of the United Bank, limited 2013.
www.ubl.com.pkJames C. Van Horne, 2000. Financial Management
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