Internship Report on Habib Metropolitan Limited (HMB) 2014

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INTERNSHIP REPORT OF HABIB METROPOLITAN BANK LIMITED

By

Your Name Roll No

Submitted in Partial Fulfillment of Requirements for the Degree of Master of Commerce

To Department of Management Sciences

National University of Modern Languages Faisalabad, Campus.

August, 2014

National University of Modern Languages Faculty of Information Technology and Management Sciences

It is hereby certified that the report has been thoroughly and carefully read and recommended to the faculty of management sciences. For acceptance of final internship report by Name, roll#, Session (Sep 2012 to June 2014) morning, in partial fulfillment of the requirements for the degree of (name of Degree of) National University of Modern Languages Faisalabad.

Dated

Supervisor Supervisor signature Panel member name Panel member signature

Head of department

TABLE OF CONTENT

Chapter

Page

TABLE OF CONTENTS ………………………………………………… EXECUTIVE SUMMERY …………………….………………………… ACKNOWLEDGEMENT…...…………………………………………… DEDICATION…...………………………………………………………. I

Commercial Banking in Pakistan And Origin of Islamic Banking ................ 1 1.1

II

i v vi vii

Background Of Pakistani Banking .................................................................. 1

1.1.1

Scheduled Banks and NBFIs ................................................................... 1

1.1.2

Studies Conducted ................................................................................... 2

1.2

Regulations Of Commercial Banking In Pakistan .......................................... 2

1.3

Technology Used By Commercial Banks In Pakistan .................................... 3

1.4

Structure Of Commercial Banks In Pakistan .................................................. 3

1.5

Challenges Faced By Commercial Banks In Pakistan .................................... 4

1.6

Commercial Banks Operating In Pakistan ...................................................... 5

1.7

Introduction Of Islamic Banking..................................................................... 7

1.7.1

Re-launching of Islamic banking ............................................................. 8

1.7.2

Departments and divisions ....................................................................... 8

1.8

Vision Statement Of Islamic Banking ............................................................. 9

1.9

Mission Statement Of Islamic Banking .......................................................... 9

1.10

Objectives Of Islamic Banking ..................................................................... 10

1.11

Islamic Modes Of Financing ......................................................................... 11

1.11.1

Musharakah ............................................................................................ 11

1.11.2

Mudarabah ............................................................................................. 11

1.11.3

Murabaha ............................................................................................... 11

1.11.4

Salam...................................................................................................... 12

1.11.5

Istisna ..................................................................................................... 12

1.11.6

Ijaraha .................................................................................................... 12

Introduction of Habib Metropolitan Bank Limited ........................................ 13 2.1

Introduction ................................................................................................... 13

2.1.1

HBZ Group ............................................................................................ 13 i

2.2

Company Profile ........................................................................................... 14

2.2.1

Vision Statement .................................................................................... 14

2.2.2

Company Registration Number ............................................................. 14

2.2.3

Company National Tax Number ............................................................ 14

2.2.4

Registered Office ................................................................................... 14

2.2.5

Website .................................................................................................. 14

2.3

Habibmetro Organization Chart .................................................................... 15

2.3.1

Habibmetro Code of Conduct for Directors of the Bank ....................... 15

2.4

Habibmetro Memberships ............................................................................. 17

2.5

Product .......................................................................................................... 17

2.5.1

Current Account ..................................................................................... 17

2.5.2

Saving .................................................................................................... 18

2.5.3

Term Deposit ......................................................................................... 23

2.6

Services ......................................................................................................... 25

2.6.1

Habibmetro Home Remittance .............................................................. 25

2.6.2

Habibmetro Money Gram International................................................. 25

2.6.3

Habibmetro Cash Management Services ............................................... 26

2.6.4

Habibmetro E-Salary ............................................................................. 26

2.6.5

Habibmetro Rent Free Lockers .............................................................. 26

2.6.6

Habibmetro Short Term and Long Term Finance.................................. 26

2.6.7

Habibmetro Shares Subscription Desk (Services) ................................. 26

2.6.8

Habibmetro 24 Hours Call Center ......................................................... 27

2.6.9

Habibmetro Web Banking ..................................................................... 27

2.6.10

Habibmetro SMS Banking ..................................................................... 28

2.6.11

Habibmetro POS (Point of Sale) Services ............................................. 28

2.6.12

Habibmetro E-Statement ........................................................................ 29

2.6.13

Habibmetro Visa (ATM / Debit Card) ................................................... 29

2.7

Habibmetro Islamic Banking ........................................................................ 30

2.7.1

Mission................................................................................................... 30

2.7.2

Introduction ............................................................................................ 30

2.8

Islamic Product .............................................................................................. 31

2.8.1

Habibmetro Islamic Current Account .................................................... 31

2.8.2

Habibmetro Islamic Saving Account ..................................................... 31

ii

2.8.3

Habibmetro Islamic Investment Certificates (HIIC).............................. 32

2.8.4

Habibmetro Murabaha ........................................................................... 33

2.8.5

Habibmetro Ijarah .................................................................................. 33

2.8.6

Habibmetro Diminishing Musharakah ................................................... 33

2.8.7

Habibmetro Trade Services.................................................................... 34

III Structure and Departments of Habibmerto ..................................................... 36 3.1

Hierarchy Chart ............................................................................................. 36

3.2

Brief Introduction Of All The Departments .................................................. 37

3.2.1

Business development department ......................................................... 37

3.2.2

Cash management department ............................................................... 37

3.2.3

Account opening department ................................................................. 37

3.2.4

Credit department................................................................................... 37

3.2.5

Dispatch department .............................................................................. 38

3.2.6

Clearing department ............................................................................... 38

3.2.7

Account department ............................................................................... 38

3.2.8

Finance department ................................................................................ 38

3.3

Comment On The Organizational Structure.................................................. 39

3.4

Future Prospects Of The Organization .......................................................... 39

IV Learning in Six Week Internship ...................................................................... 41 4.1

A Brief Introduction Of The Branch ............................................................. 41

4.1.1

Starting and the ending dates of my internship ...................................... 41

4.1.2

Names of the departments in which I got training ................................. 41

4.2

Training Program .......................................................................................... 42

4.2.1

Account opening department ................................................................. 42

4.2.2

Cash department..................................................................................... 43

4.2.3

Credit department................................................................................... 44

4.2.4

Cleaning department .............................................................................. 45

4.2.5

Inward clearing ...................................................................................... 46

4.2.6

Outward Clearing ................................................................................... 46

4.2.7

Remittances Department ........................................................................ 47

4.2.8

Western Union ....................................................................................... 48 iii

4.2.9

Telegraphic transfer (TT) ....................................................................... 49

4.2.10

Demand draft (DD) ................................................................................ 49

4.3

V

Ratio Analysis ............................................................................................... 50

4.3.1

Gross spread ratio .................................................................................. 50

4.3.2

Noninterest income to total income ratio ............................................... 51

4.3.3

Spread ratio ............................................................................................ 52

4.3.4

Return on Asset ROA Formula .............................................................. 53

4.3.5

Return on Total Equity(ROE) ................................................................ 54

4.3.6

Debt Ratio .............................................................................................. 55

4.3.7

Debt / Equity Ratio ................................................................................ 56

4.3.8

Times Interest Earned ............................................................................ 57

4.3.9

Advance /deposit ratio ........................................................................... 58

4.3.10

Operating cash flow ratio ....................................................................... 59

4.3.11

Dividend Per share ................................................................................. 60

4.3.12

Earning per share ................................................................................... 61

Analytical Analysis ............................................................................................. 62 5.1

Swot Analysis ................................................................................................ 62

5.1.1

Strengths ................................................................................................ 62

5.1.2

Weaknesses ............................................................................................ 63

5.1.3

Opportunities.......................................................................................... 63

5.1.4

Threats.................................................................................................... 64

VI Conclusion and Recommendation..................................................................... 65 6.1

Conclusions ................................................................................................... 65

6.2

Recommendations For Improvement ............................................................ 66

6.2.1

Security cameras .................................................................................... 66

6.2.2

Proper reception ..................................................................................... 67

6.2.3

Token system ......................................................................................... 67

6.2.4

Behavioral and professional training ..................................................... 67

References ................................................................................................................... 68

iv

EXECUTIVE SUMMARY

This report is about HabibMetro. In October 1992, HabibMetro was established under HabibMetro Ordinance 1949. National bank is owned by the government and act as an agent of the State bank of Pakistan. It‟s headquarter is situated in Karachi. It has its national and international level branches i.e. 51 national. HabibMetro maintains its positions as a pakistan‟s premier bank for higher achievements. Its subsidiaries include HMB Capital, HMB Modaraba Management Company, HMB Exchange Company, Taurus Securities, HMB Almaty and others. It offers its unique products that are affordable for all classes. During my internship, I learn a lot about working in different departments that are account opening, clearing and remittance. The main department of any bank is finance department and the main function of any bank is to deal with finance. Any bank secures the resources of general public and offers them a good profit. HMB also provides services for government employees. One portion of bank is reserve for government employees‟ dealings only. After complete analysis of HabibMetro, I come to this conclusion that the HabibMetro plays an important part in financial sector and it can gain highest success.

v

DEDICATION

To My Loving Teachers, Friends, and family members who have been steadfast supporters throughout myM.com with their invaluable love and understanding

T

H

A

N

K

S

T

vi

O

A

L

L !

ACKNOWLEDGEMENT

First of all I am thankful to ALLAH who always helped me in all of the ways in my life and always gave me courage and patience to do all of my internship in a good manner and secondly I am thankful to my teacher and all of the staff of the bank that also helped me to do my internship.

YOUR NAME

vii

1 CHAPTER NO 1 COMMERCIAL BANKING IN PAKISTAN AND ORIGIN OF ISLAMIC BANKING 1.1 BACKGROUND OF PAKISTANI BANKING Banking in Pakistan first formally started in Pakistan during the period of British colonialism in the South Asia. After independence from British Raj in 1947, and the emergence of Pakistan as a country in the globe, the scope of banking in Pakistan has been increasing and expanding continuously. Pakistan's oldest bank is the State Bank of Pakistan, which is also the central bank of the nation. Before independence on August 14, 1947, the Reserve Bank of India was the central bank of what is now Pakistan. After independence, Muhammad Ali Jinnah took actions to establish a central bank in Pakistan, which resulted in the new founding of the State bank of Pakistan, with its headquarters to be based in Karachi. Only 7% of the population uses the banks, has tremendous potential but this needs to be pushed a little further. Pakistan‟s financial sector consists of Scheduled Commercial Banks which include nationalized, foreign, and private banks; and Non-banking Financial Institutions (NBFIs) which include Development Finance Institutions (DFIs), Investment Banks, leasing companies, modarabas, and housing finance companies tan under structure, conduct and performance paradigm of industrial organization.

1.1.1

Scheduled Banks and NBFIs

Scheduled Banks and NBFIs (excluding Moradabad and leasing companies) are both regulated by the State Bank of Pakistan‟s Prudential Regulations, albeit through different wings, and are subject to different SBP regulatory requirements such as CapitaLand liquidity reserve requirements. Modaraba and leasing companies are being regulated by the Securities and Exchange Commission of Pakistan (formerly Corporate Law Authority), which is a body corporate. Compared to commercial banks which cater mostly to short-term working capital requirements, NBFIs cater to medium and long term financing needs and, thus, are barred from engaging in any commercial banking activities including trade business and issuing cheques. 1

However, the SBP allowed commercial banks to undertake long term project lending. Among the scheduled banks, only Pakistani commercial banks are listed.

1.1.2

Studies Conducted

Although there are number of studies on market structure, conduct and performance in the banking sector conducted since 1960s for a number of countries (for a survey see Swank 1996, Berger 1995, & Gilbert 1984), there is hardly such a study in the context of Pakistan. However, there exist some studies with limited scope like Qureshi, et al (1998) on cost structure of five commercial banks and one specialized bank1, Malik, et al (1989 & 1991), Qureshi et al (1984) and Qureshi & Shah (1992) on the rural finance and Siddique & Siddiqui (1998) on overall profitability of the banking sector in Pakistan. Recently SBP (2002) evaluated commercial banks‟ performance under traditional framework of financial analysis, but it also excluded an analysis of the market structure and conduct of the banking sector. Thus, one is still unable to find a study on the NBP, HBL, UBL, and ABL, MCB & ADBP commercial banks of Pakistan.

1.2 REGULATIONS OF COMMERCIAL BANKING IN PAKISTAN Regulations of Pakistan‟s commercial Banks 

Limit on Exposure to a Single Person/Group



Limit on Exposure against Contingent Liabilities



Minimum Conditions for Taking Exposure



Limit on Exposure against Unsecured Financing Facilities



Linkage between Financial Indicators of the Borrower and Total Exposure From Financial Institutions



Exposure against Shares/TFCS and Acquisition of Shares



Guarantees



Classification and Provisioning For Assets



Assuming Obligations On Behalf Of NBFCS



Facilities to Private Limited Company

2



Payment of Dividend



Monitoring



Margin Requirements

1.3 TECHNOLOGY USED BY COMMERCIAL BANKS IN PAKISTAN

Technological advances are quickly changing the face of the Pakistani banking industry. Alternative channels are growing quickly and represent a sizable portion of banks‟ revenue streams as all banks as well as mobile network operators are jumping on the „branchless banking‟ bandwagon. As I discussed in the previous piece about shrinking spreads, published on November 4, the business model utilized by commercial banks of collecting deposits and investing in treasury bills is not sustainable. No single additional revenue stream can completely compensate for the declining interest income, so banks will have to aggressively pursue revenue expansion from several diversified streams. Competition is also expected to intensify in smaller cities as there are many underserved affluent customers in Hyderabad, Multan, Sukkur, etc. Aggressively growing mid-sized banks such as Bank Alfalah and Meezan Bank are looking to expand their branch network to these cities. Given the intense competition and increasingly price-sensitive customers, price increase for standard banking services, such as cheque book issuance, is unlikely. To generate additional income, banks will have to develop new and innovative products and cross-sell to increase products per customer.

1.4 STRUCTURE OF COMMERCIAL BANKS IN PAKISTAN We will discuss structure of banks in Pakistan, first in terms of number of banks and size of banks (as measured by assets, deposits, etc), then in terms of concentration ratios(Lorenz curve, Gini co-efficient, Herfindahl index and Concentration Ratio).In 1990, seven domestic banks and seventeen foreign banks were doing business in Pakistan. All the domestic banks were owned by the government. Entry of domestic 3

private sector in the banking business had been banned since the promulgation of Banks. Nationalization Act 1974 However, as a part of financial liberalization strategy of 1990s, Private sector was allowed to open commercial banks in 1991. At that time fifteen banks were opened. During the next ten years the process of entering of new banks and exiting of inefficient banks continued. Moreover, in order to go some step further to make the banking sector competitive, the government also denationalized a couple of commercial banks. In 1999, there were 19 domestic banks and seventeen foreign banks in Pakistan (see Annex for list). Of the domestic banks, four were owned by the federal government, two were privatized, two were owned by the provincial governments and the rest were in the private sector. The government has also minimized its interventions in the business of its own banks in order to ensure that a competitive environment prevails in the industry. Along with the growth of banks in numbers, their business also shows a reasonable growth during 1990s. Total assets of commercial banks grew at a compound annual growth rate of 15 percent, from Rs 419 billion at the beginning of decade to Rs 1,469 billion by the end of 1999. Amongst different groups, assets of private banks showed fastest growth during 1990s, followed by foreign banks. A similar trend is witnessed in the advances and deposits of the banks.

1.5 CHALLENGES FACED BY COMMERCIAL BANKS IN PAKISTAN

The banking sector in Pakistan has been going through a comprehensive but complex and painful process of restructuring since 1997. It is aimed at making these institutions financially sound and forging their links firmly with the real sector for promotion of savings, investment, and growth. Although a complete turnaround in banking sector performance is not expected until the completion of reforms, signs of improvement are visible. The almost simultaneous nature of various factors makes it difficult to disentangle signs of improvement and deterioration. Commercial banks have been exposed and withstood several types of pressure since 1997. Some of these are

4



Multipronged reforms introduced by the central bank,



Freezing of foreign currency accounts,



Continued stagnation in economic activities and low growth and



Drive for accountability and loan recovery. All these have brought a behavioral change both among the borrowers as well as among the lenders. The risk aversion has been more pronounced than warranted.

1.6 COMMERCIAL BANKS OPERATING IN PAKISTAN According to (SBP, 2014) followings are the commercial banks currently operating in Pakistan classified into seven different types.

1.6.1

Public Sector Banks



First Women Bank Limited



National Bank of Pakistan



Sindh Bank Limited



The Bank of Khyber



The Bank of Punjab

1.6.2

Specialized Banks



Industrial Development Bank Limited



SME Bank Limited



The Punjab Provincial Cooperative Bank Ltd



Zarai Taraqiati Bank Limited

1.6.3 Private Banks 

Allied Bank Limited



Askari Bank Limited



Bank Alfalah Limited



Bank Al Habib Limited



Faysal Bank Limited



Habib Bank Limited 5



Habib Metropolitan Bank Limited



JS Bank Limited



KASB Bank Limited



MCB Bank Limited



NIB Bank Limited



SAMBA Bank Limited



SILKBANK Limited



Soneri Bank Limited



Standard Chartered Bank (Pakistan) Limited



Summit Bank Limited



United Bank Limited

1.6.4

Islamic Banks



AlBaraka Bank (Pakistan) Limited



BankIslami Pakistan Limited



Burj Bank Limited



Dubai Islamic Bank Pakistan Limited]



Meezan Bank Limited

1.6.5

Foreign Banks



Barclays Bank PLC



Citibank N.A. - Pakistan Operations



Deutsche Bank AG - Pakistan Operations



HSBC Bank Middle East Limited - Pakistan Operations



Industrial and Commercial Bank of China Limited – Pakistan Branches



HSBC Bank Oman S.A.O.G - Pakistan Operations



The Bank of Tokyo-Mitsubishi UFJ Limited - Pakistan Operations

1.6.6 Micro Finance Banks / Institutions 

FINCA Microfinance Bank Limited



Khushhali Bank Limited



APNA Microfinance Bank Limited

6



NRSP Microfinance Bank Limited



Pak Oman Microfinance Bank Limited



U Microfinance Bank Limited



Tameer Micro Finance Bank Limited



The First Micro Finance Bank Limited



Waseela Microfinance Bank Limited



ADVANS Pakistan Microfinance Bank Limited

1.6.7

Development Finance Institutions



House Building Finance Company Limited



Pak Brunei investment Company Limited



Pak-China Investment Company Limited



PAIR Investment Company Limited



Pakistan Kuwait Investment Company Limited



Pak Libya Holding Company Limited



Pak Oman Investment Company Limited



Saudi Pak Industrial & Agricultural Investment Company Limited

1.7 INTRODUCTION OF ISLAMIC BANKING Islamic Banking has been defined as banking in consonance with the ethos and value system of Islam and governed under the principles, laid down by Islamic Shariah, in addition to the conventional good governance and risk management rules. The steps for Islamization of banking and financial system of Pakistan were initiated in 1977. Pakistan was among the first three countries of the world that had been trying to implement interest-free banking at national level. In early 1980s numerous measures were taken to introduce interest-free banking in Pakistan. Banking and other relevant laws viz. SBP Act 1956, BCO 1962, Companies Ordinance 1984, Recovery Laws, Negotiable Instruments Act 1881, etc. were amended to facilitate interest free banking system in Pakistan whereas the industry was given a specific timeline to convert to the Islamic banking system. However, these efforts could not produce desired results due to absence of Shariah compliance mechanism in place, lacking

7

proper homework at the level of central bank as well as that of the financial institutions to enable such a sudden shift.

1.7.1

Re-launching of Islamic banking

Considering the lessons learnt from the earlier efforts, Islamic Banking in Pakistan was re-launched in 2001 when the Government decided to promote Islamic Banking in a gradual manner and as a parallel and compatible system in line with the best international practices. Accordingly, Islamic Banking Department was established at SBP on 15th September 2003 with the mandate of developing and strengthening regulatory and Shariah compliance framework for Islamic banking industry and taking initiatives for the promotion of Islamic Banking as a parallel and compatible banking system in line with the best international practices. Since its re-launch in 2001, the progress of Islamic Banking industry in Pakistan has been tremendous yielding the growth of more than 30% on yearly basis in terms of assets. Currently there are five licensed full-fledged Islamic banks and fourteen conventional banks with standalone Islamic Banking Branches operating in the country. Various steps have been taken to make Islamic banking industry in Pakistan a viable alternative to conventional banking.

1.7.2

Departments and divisions

The department has been working hard to develop a progressive, sound, and stable Shariah-complaint banking system in line with the best international practices. In order to strengthen the regulatory and Shariah compliance framework for Islamic banking industry, the department is interalia working on the adoption of prudential standards issued by IFSB, and Shariah and Accounting standards issued by AAOIFI. The department comprises of four divisions 

Policy Division



Promotion and Development Division



Sharia Division



Market Analysis and Research Division

The department has a „Business Support Unit‟ to carry out support function for the department.

8

Islamic Banking brings economic empowerment to Muslims in the areas of operation. It helps Muslim businesspersons, through financial aid, to remain competitive. It also leads towards the creation of job opportunities for Muslims as well as Non-Muslims. It is a basis for expansion into the Islamic Economic System since the establishment of each Islamic Bank is also the creation of another bank to co-operate with others in the International web of Islamic Banks. Thus also creating a link for international interests. It provides investors with flexibility in the types of accounts within which they could channel their investment. It thus links capital to labour and reduces expenditure, to levels, related with the type of investment, the value thereof and its period. Islamic Banks enable the saving of monetary resources for the future as shown by the Yusuf(A.S.) and in a methodology approved by Allah. This thus leads to the protection of wealth. Sponsoring Islamic activity & the mobilization of resources for International Islamic Support not only investment, but moral as well, i.e. relief towards Muslim refugees and victims of war, etc. Islamic Banks facilitate international and local trade, provide foreign exchange services and profitably invest the Muslim fraternity's surplus wealth in conformity to Islamic principles through economically acceptable development and social projects indispensable for the Muslim Ummah.

1.8 VISION STATEMENT OF ISLAMIC BANKING To evolve a stable and distinct Islamic banking system based on Sharia principles that create value for all stakeholders particularly the users and providers of Islamic financial services.

1.9 MISSION STATEMENT OF ISLAMIC BANKING To facilitate and catalyze development of Islamic banking industry in the country through a) enabling legal, regulatory and Sharia compliance framework, b) promotion of Islamic finance as a distinct and competitive system to serve to the financial services needs of the masses, c) targeted research initiatives to better explore market dynamics and d) collaboration with the local and international stakeholders for

9

development of competitive and innovative solutions for the diverse financing needs of the real economy.

1.10 OBJECTIVES OF ISLAMIC BANKING 

To strengthen the regulatory and Shariah compliance framework for Islamic banking industry



To adopt/adapt prudential standards issued by IFSB



To adopt/adapt Shariah standards issued by AAOIFI to harmonize the Shariah practices in Pakistan.



To steer/facilitate the SBP Shariah Board meetings, and Shariah Advisors‟ Forum



To facilitate Shariah compliance inspection conducted by BID



To review products offered by Islamic banking institutions and develop products for liquidity management of Islamic banking industry.



To coordinate with BPRD on the matters related to licensing, and FPT of the Heads of Islamic banking institutions.



To collaborate with ICAP for the adoption of accounting standards issued by AAOIFI



To leverage support from international infrastructure institutions dealing with Islamic finance i.e. IFSB, IDB/IRTI, AAOIFI and IIFM for promotion of Islamic banking in Pakistan.



To facilitate research studies conducted by various international institutions dealing with Islamic finance like IFS, IDB/IRTI, IIFM, AAOIFI etc.



To develop/implement capacity building programs for the promotion of Islamic banking



To conduct awareness programs



To undertake focused research initiatives by conducting empirical and theoretical studies



To prepare issue based policy notes on Islamic banking



To create and maintain repository of domestic and international developments regarding IBIs.



To prepare Islamic Banking Bulletin and provide feedback related to Islamic Banking on various in house publications. 10



To manage/analyze data related to Islamic banking industry in Pakistan



To develop Guidelines for broadening the access of Islamic financial services to underserved areas



To prepare annual departmental business plan and budget by incorporating the developmental initiatives undertaken by the department



To enhance the intellect level of the department by providing the staff various training opportunities.

1.11 ISLAMIC MODES OF FINANCING

1.11.1 Musharakah Musharakah means a relationship established under a contract by the mutual consent of the parties for sharing of profits and losses in the joint business. It is an agreement under which the Islamic bank provides funds, which are mixed with the funds of the business enterprise and others. All providers of capital are entitled to participate in management, but not necessarily required to do so. The profit is distributed among the partners in pre-agreed ratios, while the loss is borne by each partner strictly in proportion to respective capital contributions. A form of partnership where one party provides the funds while the other provides expertise and management. The latter is referred to as the Mudarib. Any profits accrued are shared between the two parties on a pre-agreed basis, while loss is borne by the provider of the capital.

1.11.2 Mudarabah Qirad meaning 'surrender' is used to refer to the surrender of capital, hence the alternative name for mudarabah which is muqaradah. The term mudarib, a user of the capital of an investor (the investor being the rabb al-mal), gives rise to the alternative description of this form of finance, hence mudarabah. The mudarib, regarded as an entrepreneur, contributes management input, itself viewed as a form of capital

1.11.3 Murabaha Literally it means a sale on mutually agreed profit. Technically, it is a contract of sale in which the seller declares his cost and profit. Islamic banks have adopted this as a 11

mode of financing. As a financing technique, it involves a request by the client to the bank to purchase a certain item for him. The bank does that for a definite profit over the cost, which is settled in advance.

1.11.4 Salam Salam means a contract in which advance payment is made for goods to be delivered later on. The seller undertakes to supply some specific goods to the buyer at a future date in exchange of an advance price fully paid at the time of contract. It is necessary that the quality of the commodity intended to be purchased is fully specified leaving no ambiguity leading to dispute. The objects of this sale are goods and cannot be gold, silver or currencies. Barring this, ′Salam covers almost everything, which is capable of being definitely described as to quantity, quality and workmanship.

1.11.5 Istisna It is a contractual agreement for manufacturing goods and commodities, allowing cash payment in advance and future delivery or a future payment and future delivery. Is tisnacanbe used for providing the facility of financing the manufacture or construction of houses ,plants, projects, building of bridges, roads and highways.

1.11.6 Ijaraha A contract under which an Islamic bank finances equipment, building or other facilities for the client against an agreed rental together with a unilateral undertaking by the bank or the client that at the end of the lease period, the ownership in the asset would be transferred to the lessee. The undertaking or the promise does not become an integral part of the lease contract to make it conditional. The rentals as well as the purchase price are fixed in such manner that the bank gets back its principal sum along with profit, which is usually determined in advance.

12

1 CHAPTER NO 2 INTRODUCTION OF HABIB METROPOLITAN BANK LIMITED

1.1 INTRODUCTION HabibMetro was incorporated in Pakistan as a Public Listed Company in 1992 under the name, Metropolitan Bank Limited. The Bank commenced, duly licensed, full scheduled commercial-banking operations in October 1992. Metropolitan Bank, from October 1992 to September 2006, remained a highly rated bank and, vide it‟s nationwide 51-branch on-line network, established as a distinguished provider of trade finance services.On October 26, 2006 Habib Bank A G Zurich`s Pakistan Operations merged into Metropolitan Bank Limited and the merged entity was named Habib Metropolitan Bank Limited. Demonstrating a strong commitment to Pakistan economy, HBZ is the principal shareholder of Habibmetro. Habibmetro operates in all major cities of the country. The Bank ranks within Top 10 in Pakistan with a strong vision to be the most respected Financial Institution. HABIBMETRO has its primary focus on retail banking and trade finance and also offers highly innovative E-Banking solutions and Consumer Banking to its customers. The Bank‟s Islamic Banking Division is fully capable of catering to customers seeking Shariah compliant products.

1.1.1

HBZ Group

The HBZ Group is heir to a rich tradition of banking and commerce dating back to more than 160 years. The group‟s flagship and HABIBMETRO‟s principal, HBZ (incorporated 1967) enjoys International ranking of 687 in terms of capital. With Headquarters in Switzerland, the HBZ Group also operates in Hong Kong, Singapore, United Arab Emirates, Kenya, South Africa, United Kingdom and North America. The Pakistan Credit Rating Agency (PACRA) has allotted both long-term and shortterm ratings of HabibMetro Limited at “AA+” (Double A plus) and “A1+” (A one plus), respectively. These ratings, being the highest amongst the local sector Private

13

Banks, denote a very low expectation of credit risk emanating from a very strong capacity for timely payment of financial commitments.

1.2 COMPANY PROFILE 1.2.1

Vision Statement

Based on a foundation of trust, to be the most respected financial institution, delighting customers with excellence, enjoying the loyalty of a dedicated team, meeting the expectations of regulators and participating in social causes while providing superior returns to shareholders

1.2.2

Company Registration Number

K-03892 (CUIN 0028018)

1.2.3

Company National Tax Number

0711167-3

1.2.4

Registered Office

Ground Floor, Spencer‟s Building, I.I.Chundrigar Road, Karachi–74200,Pakistan Phone (92-21)111-14-14-14 Fax (92-21) 3263 0404 – 05

1.2.5

Website

Parent Company Habib Bank AG Zurich (www.habibbank.com) Subsidiary Company HabibMetro Financial Services (www.hmfs.com.pk)

14

1.3 HABIBMETRO ORGANIZATION CHART

1.3.1

Habibmetro Code of Conduct for Directors of the Bank

The members of Board of Director of HabibMetro Ltd, hereinafter called HabibMetro, are expected to uphold the core values of the Bank relating to lawful and ethical conduct of business, Key aspects of the Bank‟s Code of Conduct include the following

15



Integrity and honesty

The directors shall discharge their responsibilities with the highest standards of ethics and professional honesty and integrity in all dealings with the public, clients, investors and employees. The directors are also required to comply with the regulations of the Bank in letter and spirit in order to protect the interest of the Bank and to inform the Board if he became aware of any irregularity that might affect the interest of the Bank. 

Professionalism

The directors shall serve the Bank honestly, faithfully, ethically and with utmost competence, and shall use their best endeavor to promote and uphold the interest and goodwill of the Bank. 

Fidelity and secrecy

The directors shall not disclose to any person any information as to the practice, dealings and affairs of the Bank, or to divulge any information relating to the affairs of its customers, except in circumstances in which it is in accordance with law, practice and usage customary among banks, necessary or appropriate to divulge such information as director of the Bank. 

Conflict of interest

The directors shall ensure that their personal interests do not conflict with the responsibilities they owe to the bank. In particular, they shall not become personally involved in any transaction, negotiation or contract on behalf the bank, with an entity in which they or any of their relative/friend has an interest, without full written disclosure and prior written consent of the Board of Directors. 

Insider dealing

The directors shall abide by the terms and conditions contained in all applicable laws and regulations on subscribing and/or acquiring the shares/securities of the Bank.

16

1.4 HABIBMETRO MEMBERSHIPS 

International Chamber Of Commerce.



Karachi Bankers Club.



Management Association of Pakistan.



Overseas Investors Chamber of Commerce & Industry.



Pakistan Banks‟ Association.



Swiss Business Council.



The Institute of Bankers Pakistan.

1.5 PRODUCT

1.5.1

Current Account

1.5.1.1 Habibmetro Basic Banking Account Your basic banking requirements do not require multiple monthly cheque transactions, then Basic Banking account may fulfill your day to day banking needs with no minimum balance requirement or restrictions on ATM withdrawals.

Features & Benefits 

No minimum amount requirement for opening the account.



No requirement for maintaining minimum balance.



Non-remunerative account.



No limit on number of ATM / Deposit transactions.



Two cheque transactions will be allowed free per calendar month. Charge of Rs. 25/- per cheque will be applied from the third cheque onwards.

Free Services 

Free Payment Orders.



Free HABIBMETRO ATM/Debit Card.



Free Funds Transfer within HABIBMETRO.



Free Web banking services.



Yearly Statements. 17



Rent Free lockers.

1.5.1.2 Habibmetro Current Account Enjoy your everyday banking needs with absolute ease through our non-interest bearing Current Account.

Features & Benefits 

The minimum amount required to open the account is Rs 5,000/-



This is a checking account with no limit on the number of transactions.

Free Services 

Cheque Book(s)



Free Payment Orders



Free HABIB METRO ATM/Debit Card



Free Funds Transfer within HABIBMETRO



Free Web banking services



Free Half-yearly Statements



Rent Free lockers

1.5.2

Saving

1.5.2.1 Habibmetro PLS Saving Account Offers you the simplest way to save and manage your savings with high rate of return.

Eligibility 

Individuals / Companies

Amount Requirements 

No minimum amount requirement.

Profit Payment 

Profit Calculated on Average Balance & paid on Half Yearly Basis.

18

Exclusive Free Life Insurance Cover 

Min Qualifying Balance Rs 15,000/-



Maximum claim Rs 1,000,000/-



Basis Average credit balance of previous 6-months

Zakat, Withholding Tax & Other Levies 

Zakat / Taxes will be applicable as per law/rules from time to time.

Free Services 

Cheque Book(s)



Free Payment Orders



Free HABIB METRO ATM/Debit Card



Free Funds Transfer within HABIBMETRO



Free Web banking services



Free Half-yearly Statements



Rent Free lockers

1.5.2.2 Habibmetro Saving Plus Account Earn monthly profits and access your growing savings at all times

Eligibility 

Individuals Only

Amount Requirements 

Minimum Average Deposit Rs. 100, 000/-



Maximum Average Deposit Rs. 25, 000, 000/-



*If the amount falls behind the minimum requirement or exceeds the maximum required deposit; profit will be paid on prescribed SBP rate.

Profit Payment 

Monthly Profit Payment on Average Balance

Exclusive Free Life Insurance Cover 

Min Qualifying Balance Rs 15,000/19



Maximum claim Rs 1,000,000/-



Basis Average credit balance of previous 6-months

Zakat, Withholding Tax & Other Levies 

Zakat / Taxes will be applicable as per law/rules from time to time.

Free Services 

Cheque Book(s)



Free Payment Orders



Free HABIB METRO ATM/Debit Card



Free Funds Transfer within HABIBMETRO



Free Web banking services



Free Half-yearly Statements



Rent Free lockers

1.5.2.3 Habibmetro Privilege 55+ Savings Deposit Considering the Need of HABIBMETRO‟s privilege Customer HABIBMETRO Now Offer‟s “Privilege 55+”, a saving account with unique features. As HABIBMETRO‟s Privilege customers you now enjoy,

Eligibility 

Individuals



Age Requirement 55 years & above

Amount requirement* 

Minimum Average Deposit Rs. 25, 000/-



Maximum Average Deposit Rs. 25, 000, 000/*If the amount falls behind the minimum requirement or exceeds the maximum required deposit; profit will be paid on prescribed SBP rate.

Profit Payment 

Monthly Profit Payment on Average Balance

Anniversary Bonus 20



Upon maintaining a minimum balance of Rs. 1,000,000/- or more for the year, the account holder will be eligible to receive an anniversary Bonus Exclusive Free Life Insurance Cover



In case of joint account, primary account holder will be covered up to 65 years of age.



Maximum Age 65 years. In case of joint account, 1st person will be covered if under 65 years.



Min Qualifying Balance Rs 50,000/-



Maximum claim Rs 2,000,000/-



Basis Average credit balance of previous 6-months

Zakat, Withholding Tax & Other Levies 

Zakat / Taxes will be applicable as per law/rules from time to time.

Free Services 

Cheque Book(s)



Free Payment Orders



Free HABIB METRO ATM/Debit Card



Free Funds Transfer within HABIBMETRO



Free Web banking services



Free Half-yearly Statements



Rent Free lockers

1.5.2.4 Habibmetro Multiplier Account Enjoy the facility of making transactions while earning profit on daily basis

Eligibility 

Individuals / Companies

Profit payment 

Profit calculated on daily basis and paid on monthly basis

Zakat, Withholding Tax & Other Levies 

Zakat / Taxes will be applicable as per law/rules from time to time. 21

Free Features 

Cheque Book(s)*



Free Payment Orders



Free HABIBMETRO ATM/Debit Card



Free Funds Transfer within HABIBMETRO



Free Web banking services



Free Half-yearly Statements



Rent Free lockers

1.5.2.5 Habibmetro Foreign Currency Saving Plus ($, £, €) Considering the Need of HABIBMETRO‟s Customer, HABIBMETRO Now Offer‟s “Foreign Currency Saving Account with unique features

Eligibility 

Individuals

Currency Type 

US Dollar



Pound Sterling



Euro

Profit Payment 

Monthly Profit Payment on Minimum Balance.

Anniversary Bonus 

Upon maintaining a minimum balance of 100,000/- or more in respective currency for the year, the account holder will be eligible to receive an anniversary Bonus

Withholding Tax & Other Levies 

Taxes & other levies will be applicable as per law/rules from time to time.

Free Services 

Issuance of FTTs* 22



Outward Remittances (2 per month)*



Cheque Books



Collection of Outward Foreign Cheques



SMS Alerts & Internet Banking

1.5.3

Term Deposit

1.5.3.1 Habibmetro Mahana Scheme Habib Metro Mahana Scheme offers high rate of returns on your fixed deposits with the benefit of monthly profits

Eligibility 

This Scheme is open for Individuals

Amount Requirements 

Minimum Investment Rs 25,000/-

Tenure & Investment Details 

Funds may be deposited for 1, 3 & 5 years

Profit Payment 

Profit will be paid on monthly basis.

Maturity 

Upon maturity principal will be automatically rolled over at the rate applicable on the date of maturity.

Zakat, Withholding Tax & Other Levies 

Zakat / Taxes will be applicable as per law/rules from time to time.

Premature Encashment 

A premature encashment fee will be levied for premature withdrawal of funds from the scheme. 23



The rate of the fee will be 2% of the deposit amount or the amount of profit already paid until the date of premature withdrawal, whichever is lower.

1.5.3.2 Habibmetro Premium Deposit Scheme You can now enjoy the facility of quarterly or half yearly profit payments at your convenience

Eligibility The scheme is open for any 

Individuals

Amount Requirement 

Minimum deposit requirement is Rs. 25,000/-,

Tenure 

Funds may be deposited for 1, 3 & 5 years

Profit Payment 

Profit will be paid on Quarterly or Half Yearly basis as per customer‟s preference at the time of booking the deposit.

Maturity 

Upon maturity principal will be automatically rolled over at the rate applicable on on the date of maturity.

Zakat, Withholding Tax & Other Levies 

All payments will be subject to Zakat (as per rules), withholding tax and other government levies as applicable from time to time.

Premature Encashment 

A premature encashment fee will be levied for premature withdrawal of funds from the scheme.



The rate of the fee will be 2% of the deposit amount or the amount of profit already paid until the date of premature withdrawal, whichever is lower. 24

1.5.3.3 Habibmetro Izafa Certificates Earn higher returns by investing it in Certificate of Deposit for 07 Years.

Eligibility 

Individuals

Amount Requirement 

Minimum Rs. 10,000/-

Tenure 

Certificates are offered for 7 years with Profit Paid on Maturity.

Early Encashment 

Encashable anytime, no penalties

Zakat, Withholding Tax & Other Levies 

Zakat / Taxes will be applicable as per law/rules from time to time.

1.6 SERVICES 1.6.1

Habibmetro Home Remittance

Habibmetro Home Remittance Division is facilitating overseas Pakistanis under the guidance and patronage of Pakistan Remittance Initiative (PRI), a joint initiative of State Bank of Pakistan, Ministry of Overseas Pakistanis and Ministry of Finance. Through this service loved ones, families, friends & remitters can send money back to Pakistan.

1.6.2

Habibmetro Money Gram International

Money Gram has a global reach through its network of over 334,000 local agents in more than 200 countries and territories, providing customers with convenience and flexibility. Money Gram is a fast, trusted and secure service to receive money all over the world from your loved ones in a few minutes.

25

1.6.3

Habibmetro Cash Management Services

Cash Management department provides high quality solutions and services to its Corporate Clients. The client can be benefited in the form of efficient liquidity management to increase their profitability

1.6.4

Habibmetro E-Salary

Comprehensive system through which salary disbursement to the employees of our valued corporate customers with ease & efficiency.

1.6.5

Habibmetro Rent Free Lockers



Secure



Rent Free Lockers



Refundable security deposit



Available in,

1.6.6

SIZE

Security Deposits

SMALL

Rs. 20,000

MEDIUM

Rs. 35,000

LARGE

Rs. 60,000

EXTRA LARGE

Rs. 100,000

Habibmetro Short Term and Long Term Finance

The bank also offers short term working capital financing including under sharia compliant

modes,

exports/import

financing

and

long-term

finances

to

Corporate/Commercial customers as well as SMEs trade & industry. It also extends Agricultural credit, specialized financing tailored to customer‟s needs and is also a regular member of Syndicated financing club.

1.6.7

Habibmetro Shares Subscription Desk (Services)

We provide following services to our valued customers. 

Initial Public Offering –IPO



Right Shares – RS



Term Finance Certificate – TFC



Dividend Warrant – DW 26

1.6.8

Habibmetro 24 Hours Call Center

Now you can access your account without going to the bank, 24 hours a day, 7 days a week absolutely free. Thismeans all you need is a touch-tone telephone at home, at work or on the go to access all the information you needwithout making a trip to the branch Dial 0800-42242 (Habib) and reach our Customer Services Representative 

Get your account Balance



Short Statement



Cheques in Clearing



Lodge a complaint in case of any inconvenience



Cash dispense issue complaints



ATM/VISA Prepaid Card Blockage



Inquire about the daily accounts related profit rates and currency exchange rates



VISA Card internet activation



VISA Card Transaction details



Lead(s) Generation



Inquire about our product offerings



Habib Metro Network Information

1.6.9

Habibmetro Web Banking

Web Banking Access your account from your home or office or anywhere in the world. 

Login through web banking username and password.

Following services can be accessed 24/7 

Up-to-date Account Balance.



Cheques in Clearing



Account statement



Beneficiary Management (Local Fund Transfer, Outside Fund Transfer)



Debit / Credit Advice

Fund Transfer 

Internal Fund Transfer ( HabibMetro To HabibMetro) 27



Inter Bank Fund Transfer (HabibMetro To Other Bank)

Utility Bill Payment Services 

Electricity



Sui Gas



PTCL



Internet Service Providers (ISP)



PTCL Evo Prepaid



PTCL Evo Postpaid



Wateen



WiTribe

Mobile Top Up/Airtime Purchase (Easy Load) 

TELENOR



UFONE



WARID



ZONG



QUBEE DISTRIBUTOR



MOBILINK

1.6.10 Habibmetro SMS Banking HabibMetro SMS Banking utilizes SMS channel to conduct various financial as well as non financial transactions. The simple to use service facilitates HabibMetro customers to conduct transactions from the location of their convenience. A simple structured SMS will land the required information on your fingertips.

1.6.11 Habibmetro POS (Point of Sale) Services 

Now you can withdraw cash from all HMB branches cash counters easily and without any delay.



Each HabibMetro branch is now equipped with a POS machine available on their Cash Counters.



No need to issue cash cheques and no need to wait .



Cash can be withdrawn up to Rs. 400,000/- via HMB VISA (ATM / Debit card). 28



Cash can be withdrawn up to Rs. 250,000/- via HMB ACCESS (ATM / Debit card). (Subject to availability of funds in the account )

1.6.12 Habibmetro E-Statement You can get your account statement electronically and avoid use of paper based statements. E-statement will be delivered at your designated email address and the same will arrive in no time as compared to courier. In addition E-Statement is a more secure mode of transmission. Just fill up the attached subscription form and visit your branch to avail this free service and make Pakistan a Green State.

1.6.13 Habibmetro Visa (ATM / Debit Card) 

HABIBMETRO VISA Debit Cards are available to our valued clients at all HABIBMETRO branches.



Make transactions up to the credit balance available in your account



Withdraw cash through convenient POS terminals at all HABIBMETRO branches.



Daily ATM Withdrawal Limit Rs 100,000/-



Daily Branch cash counter POS Limit Rs 400,000/-



Local Purchase and Online Shopping Limit Rs 200,000/-

HABIBMETRO Access (ATM / Debit Card) 

HABIBMETRO Debit Cards are FREE, and available to our valued clients at all HABIBMETRO branches.



Make transactions up to the credit balance available in your account



Withdraw cash through convenient POS terminals at all HABIBMETRO branches



Daily ATM Withdrawal Limit Rs 30,000/-



Daily Branch cash counter POS Limit Rs 250,000/-

29

1.7 HABIBMETRO ISLAMIC BANKING

1.7.1

Mission

“Building on our legacy of trust, HABIBMETRO brings to you Shari‟ah compliant banking solutions. Driven by our promise of service with security and strong ethical standards, we ensure that you remain close to your beliefs and stay ahead of the competition.”

1.7.2

Introduction

HABIBMETRO Islamic have been a constituent of the successful Islamic banking model in Pakistan. Following its formal launch in March 2002, when the first Islamic Banking license was granted, HabibMetro opened its first Islamic banking branch in 2004. At present, we provide Islamic banking services through 6 dedicated branches in Karachi, Lahore and Islamabad, along with 198 desks located in the different branches across the country. We intend to increase our market penetration and access more customers by opening new Islamic Banking branches in other cities of Pakistan in the near future and wish to bring our core strength and expertise of Trade Finance to this cross section of customers. Our Islamic Banking window lays emphasis upon trade product offerings, and innovation therein, designed according to customer needs. Habibmetro Islamic is also keen to structure suitable financing arrangements where risk and rewards are aligned in a participation model. The Bank has been a front leader in technological innovation and has witnessed exceptional results in adopting IT as a strategy driver. Islamic banking in Pakistan in particular and the world in general, has to embrace this paradigm of change and strategically focus upon Information Technology, as it is the way forward. We at Habibmetro, are fully cognizant of this fact and are working on further developing and fine-tuning our IT platform. We expect this to streamline the Bank‟s operations and performance, while lending support to the Islamic banking industry development efforts in Pakistan.

30

1.8 ISLAMIC PRODUCT

1.8.1

Habibmetro Islamic Current Account

Islamic Current Account is opened on the basis of “Qard” (i.e. debt) whereby the customer is a lender and the Bank is the borrower.

Features 

Initial deposit required to open the account is Rs 1,000/-.



The funds are payable to the customer on demand as and when required with neither any addition nor penalty.



Joint account facility up to four joint account holders.



No restrictions or limits on transactions.



Habibmetro Islamic current account can also be opened in USD, Pound Sterling & Euro.



No deduction of Zakat on the account.

Free Services 

Cheque Book(s)



HABIBMETRO ATM / Debit Card



Pay Order



Statement of Account



Webinfo & Teleinfo Services

1.8.2

Habibmetro Islamic Saving Account

Savings account opened on the basis of “Modarabah”, where the bank acts as “Modarib”(i.e Manager) and the Depositors are considered as “Rab-ul-Maal” (i.e. Depositor) Features 

Initial deposit required to open the account is Rs 1,000/-.



All deposits in PLS saving account shall be invested by the bank strictly in accordance with the Shari‟ah compliant principles.



Profit is shared between the PLS depositors and the Bank on the basis of predetermined profit sharing ratio. 31



Depositors and the Bank will bear the same ratio of their respective investment in the event of loss.



Six Monthly profit/loss payment on daily product basis.



Profit rates are announced on monthly basis.



Habibmetro Islamic savings account can also be opened in USD.



Up to Rs. 1 million Free Takaful is also provided.

Free Services 

Cheque Book(s)



HABIBMETRO ATM / Debit Card



Pay Order



Statement of Account



Webinfo & Teleinfo Services

1.8.3

Habibmetro Islamic Investment Certificates (HIIC)

The relation of the HIIC holder and the bank is Mudarib / Investor, the bank is Modarib (i.e Manager) and the depositors are Rab-ul-Maal (i.e Depositor).

Features 

Minimum amount of investment is Rs.25,000/-.



All the principles and rules pertaining to HIIC are based strictly on the Islamic principle of Modarabah, Therefore, profits and losses are shared by the partners according to the rules of Islamic Shari‟ah.



HIIC are available in tenures of 1, 3, 6 months & 1, 2, 3, & 5 years.



Monthly , Quarterly, Six Monthly profit payment is available for investment of 12 months and above.



Monthly profit credit to linked account automatically.



Profit is distributed as per predetermined weight ages after deducting management fee.



Habibmetro Islamic Investment Certificates can also be obtained in USD.

32

Free Services 

Cheque Book(s)



HABIBMETRO ATM / Debit Card



Pay Order



Statement of Account



Webinfo & Teleinfo Services

1.8.4

Habibmetro Murabaha

Murabaha is a financing arrangement which is based on sales transaction where HABIBMETRO Islamic banking purchases the commodity and sells it after adding an agreed profit. Murabaha involves the purchase of a commodity by HABIBMETRO Islamic banking on behalf of a customer and subsequent sale to the customer on costplus-profit basis. The cost and profit margin to the bank is expressly disclosed to the customer. Simply put, HABIBMETRO Islamic banking buys the commodity from a third party and sells it to the customer at an agreed price. For more information please visit our nearest HABIBMETRO Islamic banking branch.

1.8.5

Habibmetro Ijarah

IJARAH is “to give something on rent. It is a Shariah compliant alternative to Conventional leasing where Bank acts as a Lessor and you act as a Lessee. HABIBMETRO Islamic banking requires customers to pay a monthly rent for the use of the Vehicle. In this while, the ownership of the vehicle remains with the Bank, only the rights of use is transferred to customer. At the end of the Ijarah Agreement, customer will be given a choice whether to return the vehicle to the Bank and receive back the security deposit paid at the beginning or to purchase it at a price as low as the security deposit. For more information please visit our nearest HABIBMETRO Islamic banking branch.

1.8.6

Habibmetro Diminishing Musharakah

Diminishing Musharakah is commonly used for the purpose of financing of fixed assets i.e. House Financing, Car Financing, Plant and Machinery Financing and all 33

other fixed assets. In Diminishing Musharakah the financer and the client participate either in joint ownership of a property or equipment or a commercial enterprise. Diminishing Musharakah is basically joint ownership of the Bank and customer where customer as a lessee uses the share of the bank and pays the rentals, and as a partner redeems the share of the Bank. As and when the repayments are made by the customer the Bank share decreases to Zero gradually and customer‟s share is increased proportionately to 100%. For more information please visit our nearest HABIBMETRO Islamic banking branch.

1.8.7

Habibmetro Trade Services

HABIBMETRO Islamic banking offer a wide range of trade services designed to meet a range of our corporate clients‟ needs. HABIBMETRO Islamic banking have Industry specialists who are professional and seasoned to make sure that all your trade finance requirements are taken care of with precision and skill. Our team of specialists goes the extra mile to ensure that our customer‟s experience with below mentioned services is nothing but extraordinary.

Imports 

Letter of Credit



Import Financing (by way of Murabaha/Ijarah)



Registration of Import Contracts



Advance Payment against Imports



Shipping Guarantees

Export 

Export Bills for Collection



L/C Advising & Confirmation services



Islamic Export Refinance facility



Financing against Export Sight and Usance Bills (Shariah-compliant alternative for Bill Discounting)



Pre-Shipment and Post-Shipment financing on Islamic modes of financing

34

Letter of Guarantee 

A guarantee is issued by HABIBMETRO Islamic banking (the guarantor) on behalf of its customer (the applicant) in favor of a third party (the beneficiary), for fulfillment of specifically defined contractual and/or financial obligations of the applicant.

35

2 CHAPTER NO 3 STRUCTURE AND DEPARTMENTS OF HABIBMERTO

2.1 HIERARCHY CHART

General Manager

Regional Manager

Branch Manager Branch Credit Committee Credit Department

Internal Auditor

Customer Service Department

General Banking

Account Opening Department Cash Deposit Department Foreign Exchange Department

Bills Remittances Department

Clearing Department

36

2.2 BRIEF INTRODUCTION OF ALL THE DEPARTMENTS There is brief introduction of all the departments of the HABIB METRO bank

2.2.1

Business development department

The business department promotes or selling the product to the customers, products like ATM account opening forms etc .this department work as set the target strategies according the current circumstances this department work with the three strategic objectives. 

customer satisfaction



employee satisfaction



Business results.

2.2.2

Cash management department

In this department the teller are the casher person receive the deposited and the give the cash to the account holder on their demand and also maintained the online etc. in cash department there is three type of sector . Token issuance 

Cash receipt



Cash payments



Bill receives or fees received etc.

2.2.3

Account opening department

The account opening department is the department which deals with the account opening open of new account or the verifying the account this department is necessary as par the order of the state bank of Pakistan in this department I come to know how to open the account by filling the account opening form and also attached the NIC card copy and it is verify by the NADRA

2.2.4

Credit department

In this department the bank granted the loan to the customer and there are the different type of the credit which is provided to its customer during my internship I learned that if some individual request for the loan then bank granted him a loan 37

according to limit and some requirement for different kind of loan for example if the organization request for the loan then bank granted the loan according to some requirement and limits which apply on the organization.

2.2.5

Dispatch department

Dispatch department is the very important sector in the bank because all inward and outward mails in which ordinary and sensitive as well, routed or transfer to this department as the mail in the branches consists of documents covering title to goods, cheques, inter branch Dr. Cr. Advices, letter of credit in international banking apart from other routine letters. So it is important to handle dispatch carefully and make sure there is not wrong devilry

2.2.6

Clearing department

There are two type of clearing in the bank and during my internship me doing both type of the clearing. 

Inward clearing



Outward clearing

2.2.7

Account department

This is important department in which the account are maintained and also the voucher and the books and the all the expenses or expenditure of the bank are maintained so it is the most important department of the bank maintain all the account of the bank is the duty of this department and this department is working well.

2.2.8

Finance department

Financing department is the important department because bank finance in various ways like advancing the loan and make the profit as a excess amount in the way of interest the HABIB METRO finance in such a way giving the loan to the customer and also buy the share of the private organization also finance in the agriculture sector and the private sector as well.

38

2.3 COMMENT ON THE ORGANIZATIONAL STRUCTURE The success of the organization is based on organizational structure the HABIB METRO organizational structure is very smooth and efficient .for the convenience of work the work is divided to department according to the type of the work and no bank or organization can be run if their employee not doing their assign work or duties the during my internship in the bank I observed that at the department doing their assign duties and there is no discrepancy between the bottom line employees and the top level management .all the communication between the employees and the department is efficient whither it is horizontal or vertical communication .there is a harmony among the horizontal and vertical line of management .every employee know his duty and authority for doing the retain job I like the structure of the bank due to it clear and who reports whom transparency method. In my opinion that HABIB METRO bank of Pakistan doing the clear ,transparent and the exceptional work which make the HABIB METRO bank (Ltd) a leading bank in the banking sector of the Pakistan.

2.4 FUTURE PROSPECTS OF THE ORGANIZATION The future prospectus of HABIB METRO bank(Ltd) for the convenience of the customer the bank install the ATMs machines all the big cities and make all the branches online these steps takes more technology in the banking sectors and make the business more profitable. HABIB METRO team loyal to takes the Banking to the top level of success. Key features for the future prospectus are given below. In future the HABIB METRO bank work on the customer satisfaction and make the new rules and launching new products to the valuable customer to attain the major share in the market locally as well as globally like remittances , payroll and the trade policy and making the cash management more effective. The HABIB METRO bank makes the all branches online for the customer, the customer can make the transaction with more ease at home and on his computer and make the payments of the all type of utility bill by using online banking service and the other online facilities too. The HABIB METRO management invests in his branches and franchise to make them 39

more business oriented and effective. HABIB METRO bank introduces the new financial product and service to take the leading position as compare to its competitors and positively traveling to achieve it goal. HABIB METRO bank taken the steps to reduce the expenditure and invest in those things and business to make sure to maximize its profitability. HABIB METRO bank focuses on the expansion of its customer oriented franchises and especially in Islamic and SME segments. The HABIB METRO bank is taking the steps and investment on the employees and focus on their training because if there is no talented and professional employees in the organization the organization not make effective progress. And the final thing is that control and command by the central management so the top management develops the strong culture and invest on their franchises and also in other business activities and HABIB METRO doing a great gob for the purpose of the attainment of the goal.

40

3 CHAPTER NO 4 LEARNING IN SIX WEEK INTERNSHIP 3.1

A BRIEF INTRODUCTION OF THE BRANCH

Thank fully I did my internship from HABIB METRO bank (Ltd) Allied hospital branch. This Branch is online branch so I leaned that the working of the management is very smooth and the efficient. In this branch I observed that this branch doing a great business and the management and the staff of the branch is efficient and the professional and the manage handle all the working of the branch and this branch have the very good contact and the relation with the shops business entities and the other sound parties as well to increase the deposit of the branch and maintain the efficiency of the work and enhance the organization. The manager guided to the different functions operating within the organization and the sub manager makes sure and takes the responsibility that staff doing work efficiently in the entire department. And also the branch is well maintained and decorated and the entire department have separate place within the organization to doing there assign duties and the environment of the organization attract the customer as well which is good for the organization.

3.1.1

Starting and the ending dates of my internship

Starting and the ending dates of my internship program in the HABIB METRO bank (Ltd)

Allied hospital branch

Starting Date 1st July 2014 Ending Date 20th August 2014

3.1.2

Names of the departments in which I got training

During my internship I work almost in the all department and my internship duration is 6 week I learnt the working of the following department

41



Account opening department



Cash department



Credit department



Clearing department



Remittances department

3.2 TRAINING PROGRAM Detailed description of the tasks assigned to me during the internship program Duration of my internship six week in a HABIB METRO bank (Ltd) Allied hospital branch I learned the detail work of the different department I work in the various department but I explain those department in which I got full command during my learning process . The detail of the function which I perform is mention as under

3.2.1

Account opening department

In my first two weeks I‟ll work in the account opening departments. It is important department of the bank because all the working of the bank base on account and the bank account shows the deposit of the bank if any person working with the bank or the organization then first step is the account opening and my work is in the department is to open the new account for a valuable customer and I learned that there is few many document which is use in the opening of new account. There are many type of accounts the HABIB METRO bank (Ltd) is offered to its customer in which include Current account, Saving account, (PLS) Profit and loss account, these have different specification of the customer which will gave benefit of him. For account opening the minimum amount required is 1000 Rs. The document which is used in the opening a new account is as under 

Account opening form



The name of person who request for opening the new account



The type of the account



Computerized Copy of national identification card



Check the expiry date



Filled the opening form



Signature of the person 42



SS Card (Specimen Signature Card)



Mother name



Father name



Present address



Permanent address



KYC Foam (Know your Customer)



CNIC Required for KIN

The most important in account opening is SS Card signature because we grudge it may which customer withdraw the money is original customer or not, and other step is KYC Form in this form we collect all secret information like client Father and mother name, income of the business, his email address, postal address, and content number. The last one is CNIC required of KIN for those person who have a blood relation of client like father, mother, brother, sister, in this there is no required for friend or other person NIC only for those who have a blood relation of the client.

3.2.2

Cash department

During my internship I spent my 3rd week in the cash department and cash department is totally deals with the cash whether the cash comes in the bank or out from the bank during the learning in the cash department I learn the all the activities which is perform in the cash department .in the cash department there is various sub department according to the categories which are performing by the different persons in the department in the cash department there are four to five counters in which include 

The issuance the token



Receipt counter or the cash deposit counter



Payment of cash and checks



Verification and clearance the check and account counter



Bill and fee receive counter

During my learning process I learned that first of all issue the token to the customer and then in the receipt counter receive the cash and maintained the account and then if a customer have a check then the cheque is verifies by the verification person and 43

then the casher makes the payment against the cheque and also transfer the money online and maintained the all activities which is casher duties i.e. give the cash to the valuable customer and the bill and the fees receive counter receive the bill payment and the fees and maintain all the activities related to bill and fees collection. The activities of the cash department of HABIB METRO bank (Ltd) is as under 

Source of cash



Management of cash



Deposits



Demand draft and the online maintains



Treatment of surplus cash



Treatment of the cash deficit



Cash transit



Issuance of cash



Security arrangements



Verification of cheque



Receive the bill and the fees collection

This is the most important department of the bank I leaned while working in this department that there is all about maintains of the cash in this department in the staff work very carefully make sure there is no mistake and in the closing at evening both the sides of the cash account is balanced or equal then the banks makes the profit.

3.2.3

Credit department th

My 4 week during my internship in the credit department the credit department is the one of the most important department of the bank. The credit department is works with maintain the loan and credit and also issue the credit after necessary verification and the security and the guarantee to the desire limit and there is the rule and the regulation to issue the credit and loan to the customers. Credit department of HABIB METRO bank (Ltd) deals with different type of running finance and the type of loan is as under 

Cash finance



Demand finance



Term finance 44



Short term and loan term loan Etc.

I learned in this department that the basic information that I entered for the issuance of credit or loan is as under 

Name of the customer



Copy of CINC



Expiry date of the CNIC



Date of birth



Complete address



Income of the customer

If the individual wants to take the loan from the bank then there is the limits of the loan which provided by the bank to any person or the organization. I leaned that for the purpose of loan giving by the bank there is few many document and the guarantee required by the bank according to the loan type the requirements is as under 

Account number of the borrower and the account type



Nature of the business and the main products



Name of the borrower



Purpose of the loan whether it is for partnership or proprietor business



Type of the business



Details in case of firm and companies associated with the loan



And the current financial position of the business



And the accurate financial statement of the business last two years or more



And the detail of the borrowers bank account with other banks

The purpose of the credit is for the starting the new business or the expansion of the existing business or the purchase of the stock

3.2.4

Cleaning department

My 5th week is all about the clearing department. I learned the work and the function which is performed in the clearing department. This department the important department of the bank I learn that clearing is the process in which bankers settle their 45

mutual accounts by the claming the arising account of various instruments presented by one bank drawn on the other banks in a same city or the outside the city through NIFT (National Institutional Facilitation Technologies). NIFT is the department of collection of clearing cheques of each branch, these plays middlemen of the bank and client. There are two types of clearing going in the bank Inward clearing and the Outward clearing .we can say that the clearing is clear those cheque which cannot be cash at the cash counter of the bank . the representative of the respective bank collect all the cheque and the instrument which drawn on there and settle the account and doing the clearing function this assembly of the representative of the bank is called Clearing house NIFT perform the clearing on the behalf of the commercial banks in all the cities throughout the country. The type of the clearing is as under 

Inward clearing/ Local clearing



Outward clearing/ Intercity clearing

3.2.5

Inward clearing

The instrument and the settlement or the claim by the other banks or the other branches of HABIB METRO on our branch of HABIB METRO bank in which include the cheque draft and etc, are drawn by the other bank customer or by the HABIB METRO bank branches in clearing in the inward clearing process there is few thing include which is mentioned as under 

Cross stamp on the face



Clearing stamp on the front and the back



The clearing stamp bearing the date of the next working day



Payees account is credited and the stamp on the cheque and signature of the operational manager



And before entering the cheque into the computer the stamp and the signature is to be verified and the cheque is posted and drafted.

3.2.6

Outward Clearing

I leant about outward clearing in HABIB METRO bank clearing department. out ward clearing is that the settle of claims of our branch of HABIB METRO bank or the other branches of HABIB METRO bank drawn of other banks or other branches of HABIB 46

METRO bank deposited by our customer in our branches of the bank , presented by our branch of HABIB METRO bank in out ward clearing . When the cheques of outward clearing is received then it is entered into the clearing registered

Following detail are entered is in the both registered is as follow 

Serial No.



Account no. of the depositor



Depositor name



Drawer



Drawee



Cheque No.



Amount of the cheque



Cross stamp on the face of the cheque



And the clearing stamp



And the stamp on the back of the check payee account will be credited

The local clearing, a bundle cover is arranged manner the branch code stamp, total amount and number of instruments. This amount should match the one that is kept in the Clearing Register. The cheques or the instrument with bundle cover and outline are packed in NIFT bag. Before putting these items in the bag, a plastic seal number is required and should be written on the bundle cover and the same seal should be used to close the NIFT bag. This is to ensure additional safety as when the seal is opened, it is non-replaceable. If the seal number on the bag and on the bundle cover does not match, it is a suggestion that the bag has been tamper with. Strict action can be taken by NIFT and the Bank consequently. In clearing process there s also include intercity clearness

3.2.7

Remittances Department

My last week is about working in the remittances department. It is very important department in the current scenario in this department the bank deals with transfer money and different type of fund and also receive fund from abroad form the Pakistani community and others as well which is called remittances 47

The HABIB METRO bank transfer different type of fund through the different services in which the some is mentioned below

I learnt that the money transfer and remittances have following features 

Quick and hassle free transfer



There is little charges of transfer



And same day devilry to HABIB METRO account holder



SMS alert facility



And for non account holders the funds transfers online or via bank draft.

And also when the nonresident person sends the fund to their family the bank is takes the following steps; 

Alert with a phone call or SMS to customer



No charges or no deduction to the recipient.



Received the 8 digit PIN from receiver and then check it whether the remittance is received and fill the form



Then check the copy original national ID card



And then received the CNIC copy from the person



Then the verification Seal or stamp placed on the form



And the last step is that the person received the cash from the casher

3.2.8

Western Union

During my work in this department I deals with the customer which transfer their money through the western union. Through the use of the western union one can get money from all cities in the Pakistan from western union branches or any bank or post office or the money changer. When person sent the money, the concerned company or bank give the PIN number to the person against the name of the person and the cell number who received the money through western union. When the receiver go to bank for receiving of money the bank takes the PIN number and the original CNIC copy from the receive and give him money

48

3.2.9

Telegraphic transfer (TT)

Telegraphic transfer is that after filling the application form the concerned officer fills the telegraphic transfer form after that it is sent to the required bank and then the concerned bank makes the payment immediately to the customer and after that the voucher sent to the bank by the mail.

3.2.10 Demand draft (DD) Demand draft is like an instrument as issue on the will of the customer because avoid the extra burden of the currency and it is payable on the demand when the customer want it its issue by the one branch of the bank a payable by another branch of the same bank.

49

3.3 RATIO ANALYSIS 3.3.1

Gross spread ratio

Formula Net interest margin / mark-up earned Year 2011

Year 2012

Year 2013

7,727,231/ 27,263,385

8,912,537/ 28,566,583

9,071,907/ 24,641,671

=0.27 times

=0.31 times

=0.37 times

Working 2011 Net income margin = mark-up earned – mark-up expanses = 27263385-19536154=7727231 (Page#117 2012 profit and loss account –consolidated) 2012L Net income margin = mark-up earned – mark-up expanses = 28566583-19654046=8912537 (Page#122 2013 profit and loss account –consolidated) 2013 Net income margin = mark-up earned – mark-up expanses = 24641671-15569764=9071907 (Page#122 2013 profit and loss account –consolidated)

Graphical presentation of Gross Spread Ratio Gross Spread Ratio 0.4 0.3 0.2

Gross Spread Ratio

0.1 0 2011

2012

2013

Interpretation Gross spread ratio is increased in every year in its value. 50

3.3.2

Noninterest income to total income ratio

Formula Noninterest income / total income Year 2011

Year 2012

Year 2013

10,172,092 / 37,435,477

11097039 / 39,663,622

11,782,402 / 36,424,073

=0.27times

=0.28 times

=0.32 times

Working 2011 Total income=interest earned + non mark-up income =27,263,385+10,172,092=37,435,477 (Page # 117 of 2012 profit and loss account consolidated)

2012 Total income=interest earned + non mark-up income =28566583+ 11097039= 39,663,622 (Page # 122 of 2013 profit and loss account consolidated)

2013 Total income=interest earned + non mark-up income =24,641,671 + 11,782,402 = 36,424,073 (Page # 122 of 2013 profit and loss account consolidated) Graphical presentation of Non Interest Income to Total Income Ratio Noninterest income to total income ratio

0.33 0.32 0.31 0.3 0.29 0.28 0.27 0.26 0.25 0.24 2011

2012

2013

Interpretation Non interest income to total Income ratio is increased gradually.

51

3.3.3

Spread ratio

Formula Interest earned / interest expenses Year 2011

Year 2012

Year 2013

27263385 / 19536154

28566583 / 19654046

24641671 / 15569764

=1.39 times

=1.45 times

=1.59times

Working 2011 Page # 117 of 2012 profit and loss account consolidated 2012,2013 Page # 122 of 2013 profit and loss account consolidated

Graphical presentation of Spread Ratio

Spread Ratio

1.6 1.55 1.5 1.45 Spread Ratio

1.4 1.35 1.3 1.25 2011

2012

2013

Interpretation Spread ratio increased every year. 52

3.3.4

Return on Asset ROA Formula

(Earning before income tax / total assets) * 100 Year 2011

Year 2012

Year 2013

24,180,960

24,695,367

20,687,058

/288,200,657 *100

/304,310,087*100

/311,395,637 *100

=8.39 %

=8.12 %

=6.64 %

Working 2011

EBIT = profit before tax + interest expenses =4,644,806 + 19,536,154=24,180,960 (page#117 2012 profit and loss account consolidated) Total assets =288,200,657 (page#116 2012 balance sheet -consolidated)

2012

EBIT = profit before tax + interest expenses =5,041,324 + 19,654,043=24,695,367 (page#122 2012 profit and loss account consolidated) Total assets =304,310,087(page#121 2012 balance sheet consolidated)

2013

EBIT = profit before tax + interest expenses =51,17,294 + 15,569,764=20,687,058 (page#122 2013 profit and loss accounts -consolidated) Total assets =311,395,637 (page#121 2013 balance sheet -consolidated)

Graphical Presentation of Return on Assets Return on Assets 10 8 6 Return on Assets

4 2 0 2011

2012

2013

Interpretation Return on asset is decrease over the year and it is not a good sign for the organization.

53

3.3.5

Return on Total Equity(ROE)

Formula (Net income / total equity) * 100 Year 2011

Year 2012

Year 2013

7,362,729 /24,581,369 *100

8,310,500/28,188,611*100

9,562,533/ 27,985,283*100

= 29.95 %

=29.49%

=34.16%

Working 2011 Net income 7,362,729 (page#117 2012 profit and loss account -unconsolidated) Total equity 24,581,369 (page #116 2012 balance sheet unconsolidated) 2012 Net income 8,310,500(page#122 2013 profit and loss account -unconsolidated) Total equity 28,188,611(page #121 2013 balance sheet unconsolidated) 2013 Net income 9,562,533(page#122 2013 profit and loss account -unconsolidated) Total equity 27,985,283(page#121 2013 balance sheet -unconsolidated)

Graphical Presentation of Total Equity Return on Total Equity 35 34 33 32 31

Return on Total Equity

30 29 28 27 2011

2012

2013

Interpretation Return on total equity is decrease over the year this in not worthy for the organization and it is increase by profit by saving more and more taxes.

54

3.3.6

Debt Ratio

Formula Total Liabilities / Total Assets Year 2011

Year 2012

Year 2013

263,619,288 / 288,206,517

263,619,288 / 304,310,087

283,410,354/ 311,395,637

= 0.914 Times

= 0.907Times

= 0.91 Times

Working 2011 Total liabilities 263,619,288 (page#116 2012 balance sheet -consolidated) Total assets 288,206,517 (page#116 2012 balance sheet –consolidated) 2012 Total liabilities 263,619,288 (page#121 2012 balance sheet -consolidated) Total assets 304,310,087 (page#121 2012 balance sheet –consolidated) 2013 Total liabilities 28,3410,354 (page#121 2013 balance sheet -consolidated) Total assets 311,395,637 (page#121 2013 balance sheet –consolidated)

Graphical Presented of Debt Ratio Debt Ratio 0.914

0.912 0.91 0.908

Debt Ratio

0.906 0.904 0.902 2011

2012

2013

Interpretation Debit ratio has been decrease in 2012 and relatively stable 2013 55

3.3.7

Debt / Equity Ratio

Formula Total liabilities / total share holder Equity

Year 2011

Year 2012

Year 2013

263,619,288/ 24,581,369

263,619,288/ 28,188,611

283,410,354/ 27,985,283

=10.72 Times

=9..79 times

=10.12 times

Working 2011 Total liabilities 263,619,288 Total shareholders‟ equity 24,581,369 (page#116 2012 balance sheet –consolidated) 2012 Total liabilities 263,619,288 Total shareholders‟ equity 28,188,611 (page#121 2013 balance sheet –consolidated) 2013 Total liabilities 283,410,354 Total shareholders‟ equity 27,985,283 (page #121 2013 balance sheet –consolidated)

Graphical Presentation of Debt / Equity Ratio Debt to Equity Ratio 10.8 10.6 10.4 10.2 10 9.8 9.6 9.4 9.2

Debt to Equity Ratio

2011

2012

2013

Interpretation Debt/ equity ratio has been decrease over the years. 56

3.3.8

Times Interest Earned

Formula Earning before Income Tax (EBIT) / Interest Expenses Year 2011

Year 2012

Year 2013

24,180,960/ 19,536,154

24,695,367/ 19,650,443

20,687,058/ 15,569,764

=1.24times

=1.26times

=1.32 times

Working 2011

EBIT = profit before tax + interest expenses =4,644,806 + 19,536,154=24,180,960 Interest expenses =19,536,154 (Page#117 2012 profit and loss account consolidated)

2012

EBIT = profit before tax + interest expenses =5,041,324+ 19,650,443=24,695,367 Interest expenses =19,650,443 (Page#122 2013 profit and loss account -consolidated)

2013

2013- EBIT = profit before tax + interest expenses =5,117,294+ 15,569,764=20,687,058 Interest expense = 15,569,764 (Page#122 2013 profit and loss account –consolidated)

Graphical Presentation of Time Interest Earned Ratio Times Interest Earned 1.32 1.3 1.28 1.26

Times Interest Earned

1.24 1.22 1.2 2011

2012

2013

Interpretation Time interest has increased gragually.

57

3.3.9

Advance /deposit ratio

Formula Advance / deposit

Year 2011

Year 2012

Year 2013

109656714/185281624

110444198/217670932

129833937/247507718

=0.59 times

=0.567 times

=0.52 times

Working 2011, Page #116 of 2012 balance sheet –unconsolidated 2012, 2013 Page # 121 of 2013 balance sheet -unconsolidated

Graphical presentation of Advance to Deposit Ratio

Advance to Deposit Ratio

0.6 0.58 0.56 Advance to Deposit Ratio

0.54 0.52 0.5 0.48 2011

2012

2013

Interpretation Advance to deposit ratio is decrease over the period.

58

3.3.10 Operating cash flow ratio Formula Operating cash flow / current liabilities Year 2011

Year 2012

Year 2013

3,457,088/263,619,288

4,409,215/263,619,288

5,072,700/28,3410,354

=0.013times

=0.0159 times

=0.0178 times

Working 2011 Current liabilities = bill payable + borrowing + deposit +other liabilities =263,619,288 (Page#116 2012 balance sheet consolidated) 2012 Current liabilities = bill payable + borrowing + deposit +other liabilities =263,619,288 (Page#121 2012 balance sheet consolidated) 2013 Current liabilities = bill payable + borrowing + deposit +other liabilities =28,3410,354 (Page#121 2013 balance sheet consolidated) Graphical presentation of Operating Cash Flow Ratio

Operating cash flow ratio

0.018 0.016 0.014 0.012 0.01 0.008 0.006 0.004 0.002 0 2011

2012

2013

Interpretation Operating cash flow increase every year 59

3.3.11 Dividend Per share Formula Total dividend / no. of outstanding shares Year 2011

Year 2012

Year 2013

1,062/2,344,818.1

1,569,822/ 2,564,969.1

2,893,214/2,837,546.8

=0.004 5Rs.

=0.61 Rs.

=1.019 Rs.

Working 2011 Dividend paid = 1,062(page120 2012 cash flow –consolidated) No. of outstanding shares = 2,344,818.1 2012 Dividend paid = 1,569,822(page124 2012 cash flow –consolidated) No. of outstanding shares = 2,564,969.1 2013 Dividend paid = 2,893,214 (page124 2013 cash flow –consolidated) No. of outstanding shares = 2,837,546.8

Graphical Presentation of Dividend per Share Dividend per Share

1.2 1 0.8 0.6

Dividend per Share

0.4 0.2 0 2011

2012

2013

Interpretation Dividend per share of the company is fluctuation over the years. It depend upon the company‟s policy how much dividend it likes to share with its share holder.

60

3.3.12 Earning per share Formula Net income / number of outstanding Year 2011

Year 2012

Year 2013

7,362,729/ 2,344,818.1

8,310,500/2,564,969.1

9,562,533/ 2,837,546.8

=3.14 Rs.

=3.24 Rs.

=3.37 Rs.

Working 2011 Net income = 7,362,729 Number of shares outstanding = 2,344,818.1 2012 Net income =8,310,500 Number of shares outstanding = 2,564,969.1 2013 Net income = 9,562,533 Number of shares outstanding = 2,837,546.8 Graphical Presentation of Earning Per Share Earning per Share

3.4 3.35 3.3 3.25 3.2

Earning per Share

3.15 3.1 3.05 3 2011

2012

2013

Interpretation Earning per share has decreased over the years; it is need to be increasing it by increasing the net income.

61

4 CHAPTER NO. 5 ANALYTICAL ANALYSIS 4.1 SWOT ANALYSIS 4.1.1

Strengths

Habibmetro Limited has certain strengths which are different from the other Banks. 

Habibmetro is one of the first Muslim Bank of the world, which is owned and managed by its own employs. This is the biggest strength of the Bank. A feeling of ownership is present in every employ, which not only helps in increasing the productivity of employs but also creates sincerity with the Bank in them.



Strength is the high motivation of employees to their work because they know that what so ever they do, it will be in their own benefit. They know that the profit, which they will earn, will be distributed among all the employees. So they work with high motivation and concentration.



Salaries are very reasonable, so the employees are not financially disturbed and they devote their selves fully to their work.



They have wide area network in all over the Pakistan, so that they cover a lot of portion of cash transactions and make customer satisfied.



The Bank has very strict rules and regulations about the customer‟s complaints. The customers are treated as very special persons in the Bank.



Conservative and sustainable business policy



Flat hierarchies, high degree of flexibility and lean decision-making



Highly qualified and experienced staff



Customized products packages and services, high level of client service and close contacts to manufacturers and leasing companies



Extensive market and asset expertise



Credit portfolio diversified by multiple criteria and categories



Advanced risk management and pricing systems



Maturity matched funding



Strong capital base due to own funds

62



Unique business model with a clear focus, cycle-neutral business approach and global presence in all key transport markets

4.1.2

Weaknesses



Relatively high sector exposure



Global presence requires high staff resources



High staff costs due to high levels of employee qualification in terms of academic expertise and experience



No material client deposits



Dependence on the money and capital markets



Exposure to the Euro/US dollar exchange rate, with an impact on growth and results



No entertainment facilities are available in the Bank when customer goes to the Bank and wait for a longer time. These facilities can be the newspaper, magazines, etc.



Advertisement of Habibmetro is not such goods as of other banks.



Out look of the Habibmetro branches is not attractive to the people.



As compare to other private commercial banks the limited branches of Habibmetro are computerized.

4.1.3

Opportunities



Realization of margins in line with risks taken



Expansion of anti-cyclical Investment Management activities



Building new client relationships



Expanding the advisory and other services offered to clients, investors, and banks



Boosting our reputation as a reliable partner to the international transport industry



The policies of the new government to uplift the economy and pursue financial sector reforms are expected to yield positive results in the banking industry of the country. The Habibmetro is very well praised to avail promising opportunities.



As a result of the different steps taken by the Government regarding the betterment of the economy, small borrowers are attracted to get the financing and start small businesses. So, the Habibmetro has an opportunity to attract the customers by giving them attractive schemes. 63



They have wide area network in all over the Pakistan, if Habibmetro can make it possible the fast delivery of fund from abroad through online banking, it can cover the major market of Pakistan which still is capturing by „Hundi‟.

4.1.4

Threats



Distortions on the money and capital markets, in the broadest sense.



Decline in transport asset values in the various transport market segments.



Impact of the global financial markets crisis and the sovereign debt crisis in Europe.



Increasing debt levels in some industrial countries and emerging markets.



Unanticipated rise of the US dollar against the Euro.



Further government support for Habibmetro's bank competitors growing regulatory requirements.



Spikes in crude oil prices.



First threat is that of political influence. Three boards of directors are of government. So that they can influence on the decisions of the Habibmetro.



The biggest threat in the banking sector is the continuous downfall of the country economy since the last few years. If this downfall remains for more few years then it may be the great hindrance in achieving the Bank‟s objectives.



New Privates Bank coped with emerging new Technology of IT.

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5 CHAPTER NO 6 CONCLUSION AND RECOMMENDATION 5.1

CONCLUSIONS

During my internship in HABIB METRO bank (Ltd) it has a good experience of 6 weeks and I learn so much about the banking and the working and I also observe many thing in which some thing are good for the banking business and I observe some weakness in the HABIB METRO branches. the good thing is that most of the branches are online and connected with the main Bank and the online system which I like and observe is secure and time saving and there is less chances of the mistake as compare to non-online bank branches there is also facility of ATM machine almost all the branches of HABIB METRO bank which is good for bank and the customer too and the working and the functioning of the HABIB METRO bank is smooth and customer oriented and the management is good but there is also the drawback is that some employees has not professional degree which makes the difference as compare to the work of the professional degree holder some employee not paid full attention to the customer and not use the proper business language with the customer but the professional have the very good manner and they give proper attention to their customer. I experienced that the management is hesitate to give internee chance of working in the cash department because they are not take any risk. Also some branches have not full decorated and in some branches there is no installation of rotation camera which is not good for the security. I conclude through the study and perpetration of the ratio analysis I conclude that the Net profit margin of the company decrease and it is need to be improved and Gross spread ratio also decrease need to be improved, non interest income to total income is relatively increase which is good sign for organization . Debt ratio of the company decreased over the years. Return on asset (ROA) increasing on the year base it‟s good because the organization uses its asset effectively and efficiently and there is also

65

need to improve the return on equity. Price earn ratio is stabilizing over the period of time and the return of equity has been decreased.

Finally I conclude that by keep the entire thing in mind that organization doing good business overall but the need to make the policies of the organization is more effective and stabilized which makes the organization more sound reliable and strong.

5.2 RECOMMENDATIONS FOR IMPROVEMENT The HABIB METRO bank (Ltd) doing good gob over the years that way the deposit of the organization increase and the profitability also increase. The recommendation for the improvement is as follow Recommendation as the basis of the ratio analysis 

Gross spread ratio of the organization is steady decreasing and need to be improved.



Noninterest income to total income ratio is improving and need to be continued.



Spread ratio is good but organization must decrease the interest expenses which help in improving in the interest income which is very good for the organization.



Debt ratio is decrease over the period of the time and its thing need to be continued.



Return on assets is improving over the year and make sure this is continued.



Organization takes the necessary step to stabilize the net profit margin.



Return on asset is increasing and this trend need to be continue



Gross profit margin and return on equity is not satisfactory need to be improved



And also the earning per share of organization needed to be improved.

And the other recommendation on the bank management for improvement is as follow

5.2.1

Security cameras

In some branches there is not the proper installation of the security cameras so I suggest that in every branch there is the installation of the rotation security cameras which is necessary for the security of the organization

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5.2.2

Proper reception

There is no proper reception in the bank branches so the people have no proper information no guide line so the organization takes a measure for the reception so that it is good for the customer because every customer is valuable for the bank.

5.2.3

Token system

I observed that the token system has many problem because if there is lot of customer and after the break or the closing of the bank and some time people have no time so that they bring token with them it creates a problem for the bank and the customer too so there is chance to loss the customer in my suggestion the organization doing the measure no to loss the value able customer and increase the staff such as if there is one casher counter increase it to two so that customer is treated hurry and there is time saving both for the bank and the customer .

5.2.4

Behavioral and professional training

Last suggestion is that there is proper education and training of the staff of the organization and also the work on the behavior of the staff. If there is proper training and behavior it is good of the organization and this step hold the customer for long period of time

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References http //habibmetro.com/ http //www.google.com http //www.sbp.com http //www.finance.gov.pk/ http //www.wikipedia.com

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APPENDIX

i

ii

iii

iv